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P133811

 ‫‪AB7144‬‬ ‫ع‬‫وثيقة معلومات المشرو‬ ‫مرحلة تحديد المÙ?اهيم‬ ‫رقم التقرير‪AB7144:‬‬ ‫ئ للتعاÙ?ي من األزمات‬‫ع الØار‬‫المشرو‬ ‫ع‬‫اسم المشرو‬ ‫منØقة الشرق Ø§Ø£Ù„ÙˆØ³Ø ÙˆØ´Ù…Ø§Ù„ Ø£Ù?ريقيا‬ ‫المنØقة‬ ‫ى (‪ )%08‬؛ الصحة (‪ )%08‬؛ قØاع التعليم العام (‪)%08‬‬‫خدمات اجتماعية أخر‬ ‫القØاع‬ ‫‪P133811‬‬ ‫ع‬‫رقم تعريÙ? المشرو‬ ‫الحكومة اليمنية‬ ‫المقترض (المقترضون)‬ ‫عاية االجتماعية‬‫صندوق الر‬ ‫الهيئة المنÙ?ذة‬ ‫]] [ ‪[ ] A [] B [X ] C [ ] FI‬‬ ‫التصنيÙ? البيئي‬ ‫‪ 01‬يناير‪/‬كانون الثاني‪3802 ،‬‬ ‫تاريخ إعداد وثيقة معلومات‬ ‫ع‬‫المشرو‬ ‫‪ 01‬ديسمبر‪/‬كانون األول‪3802 ،‬‬ ‫ي إلجاز‬ ‫ة التقييم‬ ‫التاريخ التقدير‬ ‫المسبق‪:‬‬ ‫‪ 01‬Ù?بر‬ ‫اير‪/‬شباØ‪3802 ،‬‬ ‫ي لمواÙ?قة مجلس‬‫التاريخ التقدير‬ ‫المديرين التنÙ?يذيين‬ ‫‪ \.1‬أهم قضايا التنمية ودواعي مشاركة البنك الدولي‬ ‫Ù?ي عام ‪ ،3800‬شهد اليمن احتجاجات حاشدة‪ ،‬واشتباكات عنيÙ?ة‪ ،‬وصر‬ ‫اع مسلح ما أسÙ?ر عن انتخاب رئيس جديد وتشكيل‬ ‫حكومة انتقالية‪ \.‬وتسببت حالة الصر‬ ‫اع Ù?ي تعØيل سالسل اإلمداد واإلنتاج ما أسÙ?ر عن انكماش االقتصاد وارتÙ?اع معدل‬ ‫البØالة‪ \.‬وتشير التقدير‬ ‫ات إلى ارتÙ?اع معدالت الÙ?قر من ‪ 13‬بالمائة مع السكان عام ‪ 3881‬إلى ‪ 51\.5‬Ù?ي المائة عام ‪\.3803‬‬ ‫كما تشير إلى أن نحو ‪ 15‬Ù?ي المائة من السكان (حوالي عشر‬ ‫ة ماليين شخص) كانوا ال يتمتعون باألمن الغذائي Ù?ي‬ ‫مارس‪/‬آذار ‪ ، 3803‬بزيادة كبير‬ ‫ة عن عددهم عام ‪ 3881‬حين سجل نحو ‪ 23‬Ù?ي المائة‪ \.‬ويعد ارتÙ?اع معدل الÙ?قر من أهم‬ ‫التحديات التي يواجهها اليمن وشعبه‪ ،‬ومن المهم تقديم المساندة للÙ?ئات األشد Ù?ق ا‬ ‫ر واألكثر ضعÙ?ا Ù?ي هذه األوقات العصيبة‬ ‫لتخÙ?يÙ? أثر األزمة وتحقيق االستقر‬ ‫ار Ù?ي البالد‪\.‬‬ ‫ة االستر‬ ‫اتيجية اليمنية‬ ‫ح واحدا من األدوات األساسية المخØØ Ù„Ù‡Ø§ بموجب مذكر‬‫ئ للتعاÙ?ي من األزمة المقتر‬‫ع الØار‬‫ويعد المشرو‬ ‫المؤقتة‪ ،‬التي أعدها البنك Ù?ي نوÙ?مبر‪/‬تشرين الثاني ‪ ، 2112‬والتي تستهدÙ? الÙ?ئات الضعيÙ?Ø© من الÙ?قر‬ ‫اء والمهمشين Ù?ي األجل‬  ‫‪1‬‬ ‫ي Ù?ي األجل‬‫بحماية اإلنÙ?اق االجتماعي الضرور‬ ‫القصير‪ \.‬ويأتي متمشيا مع توصية التقييم االقتصادي واالجتماعي المشترك‬ ‫القصير‪ ،‬ومع هدÙ? الحكومة االنتقالية المتمثل Ù?ي الحÙ?اظ على مستويات الدخل والخدمات األساسية الضرورية‪ ،‬خاصة للÙ?قر‬ ‫اء‪\.‬‬ ‫ار الÙ?تر‬ ‫ة االنتقالية عن Øريق مساعدة حكومة اليمن على تقديم مساعدات مالية‬ ‫ع Ù?ي استقر‬‫ومن المتوقع أن يسهم هذا المشرو‬ ‫عاية االجتماعية‪\.‬‬ ‫Ù?ورية لألسر الÙ?قير‬ ‫ة عبر برنامج التحويالت النقدية التابع لصندوق الر‬ ‫ع المقترحة‬‫‪ \.2‬أهداÙ? المشرو‬ ‫ايا نقدية لألسر الÙ?قير‬ ‫ة‬ ‫ع هو مساعدة المتلقي على تخÙ?يÙ? أثر أزمة عام ‪ 3800‬عن Øريق تقديم مز‬‫إن الهدÙ? الرئيسي للمشرو‬ ‫المستحقة‪\.‬‬ ‫‪ \.3‬الوصÙ? المبدئي‬ ‫ة Ù?قير‬ ‫ة Ù?ي اليمن تمت إضاÙ?تها إلى قائمة المستÙ?يدين من صندوق‬ ‫ح تقديم منح نقدية لنحو ‪ 188‬ألÙ? أسر‬‫ع المقتر‬‫يمول المشرو‬ ‫عاية االجتماعية عام ‪ \.3800‬واعتبرت هذه األسر مستحقة للحصول على المنح بعد تØبيق عملية االستهداÙ? على أساس‬‫الر‬ ‫واضاÙ?Ø© إلى ذلك‪،‬‬ ‫ي عام ‪\.3880‬‬‫الÙ?قر (اختبار قياس مستوى الدخل الÙ?علي) استنادا إلى مسح قومي لألسر المعيشية أجر‬ ‫ع‪\.‬‬‫ع الخدمات االستشارية الضرورية لرصد وتقييم تنÙ?يذ المشرو‬‫سيمول المشرو‬ ‫‪ \.4‬السياسات الوقائية التي قد تÙ? ّ‬ ‫Ù?عل‬ ‫ع ضمن‬ ‫ع – المز‬ ‫ايا النقدية والتكاليÙ? المتعلقة بها ‪ -‬ال تتØلب أي سياسات وقائية لذلك Ù?إن هذا المشرو‬ ‫أنشØØ© المشرو‬ ‫التصنيÙ? (ج) ‪\.‬‬ ‫‪ \.5‬التمويل المبدئي‬ ‫المصدر‪:‬‬ ‫(مليون دو‬ ‫الر)‬ ‫المقترض‪/‬المستÙ?يد‬ ‫‪2‬‬ ‫منحة من المؤسسة الدولية للتنمية‬ ‫‪100‬‬ ‫ع‬‫المجمو‬ ‫‪102‬‬ ‫‪ 1‬تقييم أعده البنك الدولي بالتعاون مع االمم المتحدة ‪ ،‬واالتحاد األوروبي والبنك اإلسالمي للتنمية عام ‪ 3803‬لتقييم أثر األزمة وتحديد اجر‬ ‫اءات التعاÙ?ي‬ ‫منها‬  ‫‪ \.6‬مسؤول االتصال‬ ‫لالتصال‪ :‬كامل بر‬ ‫هام‬ ‫المنصب‪ :‬خبير أول شؤون التعليم‬ ‫هاتÙ?‪+ 1 (202) 473-5863 (202) 473-2454 :‬‬ ‫Ù?اكس‪(202) 477-0036 :‬‬ ‫بريد إلكتروني‪kbraham@worldbank\.org:‬‬

APPROVAL

P049723

Document of The World Bank Report No: ICR0000866 IMPLEMENTATION COMPLETION AND RESULTS REPORT (IDA-33690) ON A CREDIT IN THE AMOUNT OF SDR 14\.9 MILLION (US$20\.0 MILLION EQUIVALENT) TO THE KYRGYZ REPUBLIC FOR AN ON-FARM IRRIGATION PROJECT November 26, 2008 Sustainable Development Department Central Asia Country Unit Europe and Central Asia Region  CURRENCY EQUIVALENTS (Exchange Rate Effective 09/01/2008) Currency Unit = KGS KGS 1\.00 = US$0\.028 US$1\.00 = KGS 36\.0 SDR 1\.00 = US$0\.64 FISCAL YEAR JANUARY 1 ­ DECEMBER 31 ABBREVIATIONS AND ACRONYMS APL Adaptable Program Lending ADB Asian Development Bank CAS Country Assistance Strategy CDS Country Development Strategy CSU Central Support Unit DWR Department of Water Resources ERR Economic Rate of Return FAO Food and Agriculture Organization I&D Irrigation and Drainage IDA International Development Association IRP Irrigation Rehabilitation Project ISF Irrigation Service Fee MOAWRPI Ministry of Agriculture, Water Resources, and Processing Industry M&E Monitoring and Evaluation MOF Ministry of Finance MOM Management, Operation and Maintenance NIRSAP National Irrigation Rehabilitation Strategy and Action Plan O&M Operation and Maintenance OIP On-Farm Irrigation Project ORT Oblast Rehabilitation Team OSU Oblast Support Unit PAD Project Appraisal Document PDO Project Development Objective PIU Project Implementation Unit RSU Raion Support Unit SDR Special Drawing Rights SU Support Unit USAID US Agency for International Development WB World Bank WMIP Water Management Improvement Project WUA Water Users Association Vice President: Shigeo Katsu Country Director: Annette Dixon Sector Manager (acting): Holger Kray Project Team Leader: Joop Stoutjesdijk ICR Team Leader: Benoist Veillerette (FAO)  KYRGYZ REPUBLIC On-Farm Irrigation Project CONTENTS Data Sheet A\. Basic Information B\. Key Dates C\. Ratings Summary D\. Sector and Theme Codes E\. Bank Staff F\. Results Framework Analysis G\. Ratings of Project Performance in ISRs H\. Restructuring I\. Disbursement Graph 1\. Project Context, Development Objectives and Design\. 1 2\. Key Factors Affecting Implementation and Outcomes \. 4 3\. Assessment of Outcomes\. 8 4\. Assessment of Risk to Development Outcome\. 14 5\. Assessment of Bank and Borrower Performance \. 18 6\. Lessons Learned \. 20 7\. Comments on Issues Raised by Borrower/Implementing Agencies/Partners \. 21 Annex 1\. Project Costs and Financing\. 23 Annex 2\. Outputs by Component \. 24 Annex 3\. Economic and Financial Analysis\. 41 Annex 4\. Bank Lending and Implementation Support/Supervision Processes \. 45 Annex 5\. Beneficiary Survey Results\. 47 Annex 6\. Stakeholder Workshop Report and Results\. 56 Annex 7\. Summary of Borrower's ICR and/or Comments on Draft ICR\. 57 Annex 8\. Comments of Cofinanciers and Other Partners/Stakeholders\. 59 Annex 9\. List of Supporting Documents \. 60 MAP  A\. Basic Information On-Farm Irrigation Country: Kyrgyz Republic Project Name: Project Project ID: P049723 L/C/TF Number(s): IDA-33690 ICR Date: 11/27/2008 ICR Type: Core ICR Lending Instrument: SIL Borrower: KYRGYZ REPUBLIC Original Total XDR 14\.9M Disbursed Amount: XDR 14\.9M Commitment: Environmental Category: B Implementing Agencies: Department of Water Resources Cofinanciers and Other External Partners: B\. Key Dates Process Date Process Original Date Revised / Actual Date(s) Concept Review: 01/24/2002 Effectiveness: 04/08/2003 04/08/2003 Appraisal: 03/25/2002 Restructuring(s): Approval: 05/30/2002 Mid-term Review: 05/03/2004 Closing: 03/31/2007 05/31/2008 C\. Ratings Summary C\.1 Performance Rating by ICR Outcomes: Satisfactory Risk to Development Outcome: Substantial Bank Performance: Satisfactory Borrower Performance: Satisfactory C\.2 Detailed Ratings of Bank and Borrower Performance (by ICR) Bank Ratings Borrower Ratings Quality at Entry: Satisfactory Government: Satisfactory Quality of Supervision: Satisfactory Implementing Agency/Agencies: Satisfactory Overall Bank Overall Borrower Performance: Satisfactory Performance: Satisfactory C\.3 Quality at Entry and Implementation Performance Indicators Implementation QAG Assessments Performance Indicators (if any) Rating Potential Problem Project No Quality at Entry Satisfactory at any time (Yes/No): (QEA): i  Problem Project at any Quality of Yes Unsatisfactory time (Yes/No): Supervision (QSA): DO rating before Satisfactory Closing/Inactive status: D\. Sector and Theme Codes Original Actual Sector Code (as % of total Bank financing) Central government administration 25 25 Irrigation and drainage 75 75 Theme Code (Primary/Secondary) Other rural development Secondary Secondary Rural services and infrastructure Primary Primary E\. Bank Staff Positions At ICR At Approval Vice President: Shigeo Katsu Johannes F\. Linn Country Director: Annette Dixon Kiyoshi Kodera Sector Manager: Holger A\. Kray Joseph R\. Goldberg Project Team Leader: Joop Stoutjesdijk Joop Stoutjesdijk ICR Team Leader: Joop Stoutjesdijk ICR Primary Author: Benoist Veillerette F\. Results Framework Analysis Project Development Objectives (from Project Appraisal Document) The development objective of the On-farm Irrigation Project is to achieve increased crop production through reliable and sustainable water distribution on about 160,000 ha of irrigated land across the country's seven oblasts\. Revised Project Development Objectives (as approved by original approving authority) ii  (a) PDO Indicator(s) Original Target Formally Actual Value Indicator Baseline Value Values (from Revised Achieved at approval Target Completion or documents) Values Target Years Indicator 1 : Increase crop yields in the project farms by ten percent within two years after rehabilitation works have been completed\. No conclusive evidence as yet, as collected data not Yields of crops depressed 10% yield increase sufficiently reliable Value by at least 10 percent, two years after to fully assess quantitative or because of inadequate andcompletion of changes in crop Qualitative) untimely water rehabilitation yields and distribution within farms\. works\. insufficient time between completion of rehabilitation and end-of-project\. Date achieved 12/31/2001 12/31/2007 05/31/2008 Comments A comparison between groups that received different assistance showed that (incl\. % yields tend to be better (almost 12% on average) in WUAs that received achievement) assistance for training and rehabilitation, compared to WUAs that did not receive any assistance\. Indicator 2 : On-farm irrigation systems properly operated and maintained after completion of rehabilitation work Operation of systems well WUAs working organized\. ISF Value No formal operational towards increasing and quantitative or regime of systems and sustainable O&M substantial in-kind Qualitative) negligible maintenance\. (as per annual maintenance\. More O&M plan)\. than 75% of farmers satisfied with O&M\. Date achieved 12/31/2001 12/31/2007 05/31/2008 Comments Encouraging signs found in relation to system O&M in rehabilitation schemes\. (incl\. % Water management staff, processes and procedures in place and functioning; achievement) well established institutional base\. Equity of water distribution found to be satisfactory\. Indicator 3 : Distribution within project farms of adequate irrigation water in a timely manner, in line with irrigation water requirements\. Distribution Significant Distribution efficiency improvements for Value depressed by 10 percent, efficiency rehabilitated WUAs quantitative or and water distribution not improved, with 75 (121,000 ha) in Qualitative) in line with irrigation percent of farmers water users' water requirements\. receiving required water\. assessment of the reliability, iii  adequacy, timeliness and equity of water delivery\. Date achieved 12/31/2001 12/31/2007 05/31/2008 Comments Difficult so far to measure actual efficiency percentages\. Majority of farmers (incl\. % pleased with WUA performance and the improvement in water distribution (see achievement) Annex 5)\. (b) Intermediate Outcome Indicator(s) Original Target Formally Actual Value Indicator Baseline Value Values (from Achieved at approval Revised Completion or documents) Target Values Target Years Indicator 1 : Number of O&M plans developed in detail, fully costed and implemented each year after completion of rehabilitation works\. 375 WUAs have Value achieved milestone (quantitative Zero\. All rehabilitated 3, well in excess of or Qualitative) WUAs (about 80)\. the target set, i\.e\. O&M plans have been prepared\. Date achieved 12/31/2001 12/31/2007 05/31/2008 Comments (incl\. % Milestone 3 -- O&M plan prepared taking into account ISF requirements to cover achievement) O&M\. Not all plans are related to optimum O&M, but trend is towards this\. Indicator 2 : At least 160 WUAs established and legally registered, training program started that will lead to sustainable WUAs\. A total of 160 454 WUAs have WUAs established been established and legally Value Zero WUAs established and registered and registered, over (quantitative according to the new 20,000 individuals 50,000 individuals or Qualitative) WUA law\. have participated in awareness have participated in seminars and awareness seminars training courses\. and training courses\. Date achieved 12/31/2001 12/31/2007 05/31/2008 Comments Achievement much higher than expected\. WUA support without rehabilitation is (incl\. % also showing positive impact, which shows the importance of WUAs for O&M, achievement) even without having a fully operational irrigation system in place\. Indicator 3 : Collection rates at least 90 percent of estimated tariff within two years after completion of rehabilitated works\. Very low collection rates, At least 90% on Average ISR Value with nothing collected for rehabilitated collection ratio for (quantitative use by WUAs\. Whatever WUAs 2 years rehabilitated WUAs or Qualitative) was collected was for after rehabilitation is 73% (16 WUAs DWR\. (approx\. 80) > 90%, 22 WUAs > iv  80%)\. Date achieved 12/31/2001 12/31/2007 05/31/2008 Comments (incl\. % Rehabilitation works have been completed over 2 years ago on 17 WUAs, which achievement) have among the highest collection rates\. G\. Ratings of Project Performance in ISRs Actual No\. Date ISR Archived DO IP Disbursements (USD millions) 1 06/29/2000 Satisfactory Satisfactory 0\.00 2 12/27/2000 Satisfactory Satisfactory 0\.00 3 06/26/2001 Satisfactory Satisfactory 0\.26 4 11/30/2001 Satisfactory Satisfactory 0\.32 5 01/16/2002 Satisfactory Satisfactory 0\.38 6 08/16/2002 Satisfactory Satisfactory 0\.97 7 01/21/2003 Satisfactory Satisfactory 1\.31 8 07/16/2003 Satisfactory Satisfactory 2\.38 9 12/29/2003 Satisfactory Unsatisfactory 3\.02 10 06/16/2004 Satisfactory Unsatisfactory 4\.43 11 07/16/2004 Unsatisfactory Unsatisfactory 4\.43 12 01/18/2005 Moderately Moderately Unsatisfactory Unsatisfactory 6\.01 13 06/27/2005 Satisfactory Satisfactory 8\.11 14 07/21/2005 Satisfactory Satisfactory 8\.57 15 01/19/2006 Satisfactory Satisfactory 11\.86 16 09/22/2006 Satisfactory Satisfactory 16\.48 17 01/23/2007 Satisfactory Satisfactory 18\.21 18 10/04/2007 Satisfactory Satisfactory 20\.71 19 05/29/2008 Satisfactory Satisfactory 21\.86 H\. Restructuring (if any) Not Applicable v  I\. Disbursement Profile vi  1\. Project Context, Development Objectives and Design 1\.1 Context at Appraisal The agricultural sector in the Kyrgyz Republic went through a sharp recession during the 1990s as a result of major changes in the macro-economic environment, including changes in terms of trade and large reductions of subsidies, as well as the rapid deterioration of the former production system based on collective and state farms\. Considering that agriculture was (and still is) the mainstay of the Kyrgyz economy, the government placed high priority to the agriculture sector in its strategy for economic recovery\. The World Bank (WB) Country Assistance Strategy (CAS) prepared in 1998 was also in line with this priority, considering the attainment of long-term sustainable growth in agriculture as one of the pillars to solve many of the social and economic issues in the rural areas\. One of the major reforms during the second half of the 1990s was a comprehensive and largely equitable land distribution, resulting in multiple small individual farms\. These newly established private farms faced a number of issues, including lack of access to inputs, markets, credit, machinery and technical services\. The transition process during the 1990s led to a vacuum in the management, operation and maintenance (MOM) of on-farm systems and the rapid deterioration of irrigation and drainage (I&D) infrastructure covering about 1\.07 million ha, equivalent to 80 percent of arable land in the country\.1 Irrigation is a critical input into agricultural production and government realized that it could not allow I&D systems to collapse\. In 1995, government introduced an irrigation service fees (ISF) to charge farmers for water received from the Department of Water Resources (DWR)\. The ISF was set by Parliament at a rate of KGS 15 per 1,000 m3, but was doubled in 1999\. A 1997 Government Resolution allowed the legal establishment of Water Users Associations (WUA) and set the basis for the transfer of on-farm irrigation infrastructure to WUAs\. The On-farm Irrigation Project (OIP) was designed to assist government with the reversal of the deterioration of on-farm I&D infrastructure and the development of WUAs\. 1\.2 Original Project Development Objectives (PDO) and Key Indicators (as approved) The development objective of the On-farm Irrigation Project was to achieve increased crop production through reliable and sustainable water distribution on about 160,000 ha of irrigated land across the country's seven oblasts\. The Project Appraisal Document (PAD) set three main impact indicators: percentage of operation and maintenance (O&M) needs of on-farm irrigation systems covered; distribution of adequate irrigation water in a timely manner, in line with crop water requirements; and increase in crop yields by 10 percent\. 1 On-farm systems refer to the irrigation and drainage infrastructure that used to be part of the state or collective farms\. 1  In addition, three output indicators were provided: number of well-functioning WUAs, with users representation and participation; number of O&M plans developed, fully costed, and implemented; and level and collection rate of irrigation services fees\. 1\.3 Revised PDO (as approved by original approving authority) and Key Indicators, and reasons/justification There was no formal revision of the PDO, but in late 2006 it became clear that the expected project command area could not be achieved for various reasons as explained in Section 1\.7\. The total command area covered was about 122,000 ha\. The PDO was formulated specifically around increased crop production on a certain project area\. It is now clear that this was of too high an order, as achievement of agricultural production is not only impacted by irrigation inputs, while it often takes time for farmers to adapt to changing circumstances\. The PDO will be measured again a few years from now, as part of the monitoring and evaluation (M&E) of the IDA-funded Second On-farm Irrigation Project (OIP-2)\. 1\.4 Main Beneficiaries The primary beneficiaries of the project were expected to be farm families (water users) in all seven oblasts of the country through strengthening of as many as 160 WUAs\. Out of these, 80 WUAs were also expected to benefit from rehabilitation and O&M improvement of their on- farm systems servicing 150,000 farm families on 160,000 ha\. The project was also expected to strengthen the capacity of DWR at central and field level (oblasts and raions), in particular to promote WUAs both through the development of Support Units (SU) as well as by introducing a client-driven approach in the dealing of public authorities with WUAs\. 1\.5 Original Components The project consisted of three components: (i) WUA Strengthening Services\. This component included support for the establishment and training of WUA Support Units at the central DWR office, in the seven oblasts, and in an estimated 19 raions\. This new support function and the SUs were expected to progressively be integrated in DWR\. Technical assistance was financed to provide training and knowledge transfer to the staff of the SUs\. These, in turn, would provide promotion and awareness seminars to a minimum of 160 WUAs and strengthen them through an estimated 100 training courses in such topics as governance, administration, financial management, and irrigation system O&M\. On a demand basis, small equipment and motor cycles would also be provided to WUAs on a 100 percent cost recovery basis; (ii) Infrastructure Rehabilitation and Operation and Maintenance\. This component included: (i) rehabilitation of on-farm irrigation systems commanding up to 160,000 ha 2  under the management of about 80 WUAs where there was strong interest in WUA development and readiness to fulfill agreed selection criteria and milestones, as well as limited rehabilitation of selective off-farm irrigation infrastructure where the supply of water to WUA-managed systems was a constraint; (ii) design and construction supervision services; and (iii) implementation of O&M plans to be financed by WUAs; and (iii) Project Implementation Support\. A Project Implementation Unit (PIU) that had been established for the implementation of the Irrigation Rehabilitation Project (IRP) was strengthened with staff and equipment to implement OIP as well\. 1\.6 Revised Components Project components were not formally revised\. 1\.7 Other significant changes In order to overcome the persistent lack of counterpart funding while ensuring a satisfactory implementation of the second project component, the financing rule of civil works was modified in March 2005 with the share of IDA increasing from 75 to 85 percent\. The project followed a programmatic approach and therefore could easily adapt its scope to changing needs and constraints arising during implementation\. At appraisal, the first component (capacity building of WUAs) was expected to benefit an estimated 160 WUAs while the second component (rehabilitation) was expected to cover half of these, i\.e\. 80 of those 160 WUAs after reaching a sufficient level of institutional development\. In view of the high demand for supporting the establishment of WUAs, the number of WUAs established during the project life eventually reached about 455 WUAs which is much higher than the target\. This required an increase in the number of SUs from 19 originally planned to a total of 40, covering all main irrigation raions of the country\. Nevertheless, the budget actually spent for Component 1 at project completion was lower than foreseen: US$4\.56 million versus US$6\.2 million planned\. The number of WUAs which benefited from rehabilitation had to be reduced from the original 80 to 63\. The irrigated area benefiting from rehabilitation was about 122,000 ha, which represents about 76 percent of the initial target of 160,000 ha\. This was due to a combination of factors: (i) unforeseen high price increases of civil works during implementation; (ii) the above- mentioned change in disbursement percentage for civil works; (iii) the appreciation of the KGS compared to the US Dollar, which was only partly compensated by the appreciation of the SDR compared to the US Dollar; and (iv) increased costs due to the replacement of some contractors who failed\. The funding for the third component was also substantially increased during implementation\. The project was originally implemented by the PIU of the IRP which was strengthened\. However, during implementation, the Bank and the government jointly agreed to establish a separate PIU in view of the workload of both projects and the need to increase implementation efficiency, although fiduciary tasks (procurement and financial management) continued to be shared among the IRP and OIP\. Also, contrary to what was originally planned and in order to 3  compensate for the lack of capacity of engineers in the rural areas, oblast rehabilitation teams were established to assist local engineers in designing on-farm rehabilitation works in collaboration with the concerned WUAs\. Finally the project completion date was extended from March 31, 2007 to May 31, 2008, in order to enable the completion of a number of contracts for on-farm system rehabilitation\. 2\. Key Factors Affecting Implementation and Outcomes 2\.1 Project Preparation, Design and Quality at Entry The quality at entry is considered satisfactory, with a good analysis of the sectoral issues and with the project responding to priorities identified\. The project had a simple design, addressing immediate needs while aiming to ensure long-term sustainability\. It also adopted a demand- driven programmatic approach, rejecting to select project WUAs upfront\. The project was designed to complement the IRP (satisfactorily implemented from September 21, 1998 to May 31, 2006), which addressed the rapid deterioration of a number of existing main and secondary irrigation systems by rehabilitation of their most critical sections\. The project was logically articulated around two components addressing institutional development and irrigation system rehabilitation and modernization\. The project proposed an innovative approach to support the institutional strengthening of WUAs responsible for O&M of I&D systems within the former state and collective farms as a critical pre-requisite for rehabilitation of the on-farm infrastructure (second component)\. This reflected a worldwide lesson that in order to achieve long-term sustainability, institutional aspects are often more important than physical rehabilitation\. The institutional development component emphasized the importance of developing an internal capacity within the DWR in order to sustain the support to WUA development in the long run, i\.e\. after project completion\. This was done through the establishment of WUA Support Units at different levels (central, oblast, raion) and the appropriate training of their staff\. Given the limited experience in WUA development, technical assistance was provided by international experts during the first years of the project\. The institutional development progress of each WUA was measured through seven well-defined milestones2 and WUAs had to reach milestone 4 before being eligible for infrastructure rehabilitation under the second component\. Based on demand from the qualified WUAs, the second component was designed to focus on priority works, rather than comprehensive rehabilitation and modernization, so that the project's impact could be maximized over as many WUAs as possible\. Two risks were underestimated during project preparation\. The "full O&M for the command areas managed by the WUAs that have received support from the OIP is not adequately financed 2 Milestone 1 (Formally established); Milestone 2 (Staff hired and training started); Milestone 3 (O&M plan prepared taking into account ISF increase to cover O&M); Milestone 4 (ISF paid); Milestone 5 (Rehabilitation alternatives developed); Milestone 6 (Rehabilitation alternative selected, 25 percent Repayment Agreement agreed); Milestone 7 (WUA ready for cooperation with the rehabilitation of the on-farm irrigation system)\. 4  by the water users" was considered moderate at project preparation, while this risk was repeatedly highlighted as a substantial one during implementation and remains a concern at the time of completion despite major achievements (see Section 4 below)\. Although positive trends are observed, it became clear during project implementation that the achievement of sustainable O&M is a process that takes longer than the duration of a typical project\. The risk of "cost overruns during project implementation" was rated negligible because OIP followed a program approach with flexibility in the number of WUAs to be covered\. This is correct, but rapid cost increases and other reasons as explained later led to a reduction in project area covered from 160,000 ha initially planned to be rehabilitated to about 122,000 ha at project completion\. Finally, the risk that "DWR would not be able to absorb WUA Support Units and its structure" was rightfully rated as substantial in the PAD and therefore given full attention during implementation\. 2\.2 Implementation Throughout implementation and especially as a result of the mid-term review, the project went through important changes both on the institutional and physical rehabilitation fronts\. These changes aimed to adapt the project to changing needs (e\.g\. with design capacity and number of WUAs to be supported) and to substantial difficulties resulting from the lack of experience with the implementation of projects such as the OIP in the country\. On the institutional side, while the establishment of WUAs was faster than foreseen, the institutional process aiming to strengthen them and bring them to a sufficient level of maturity was more difficult and time-consuming than foreseen\. The project spent considerable efforts to strengthen this process, including training, technical assistance, and more intensive coaching activities by the SUs which eventually resulted in the satisfactory achievement of the institutional component\. Moreover, in view of the widespread demand throughout the country for the development of WUAs, government and IDA decided to increase the number of SUs at raion level from 19 originally planned to a total of 27, complemented by 13 individuals in other raions, thus covering all 40 raions where irrigation is a major activity\. This resulted in the establishment and training of 455 WUAs by the project against an initial target of 160 WUAs in the PAD, which has been a major achievement\. The project team made efforts and showed creativity in trying to establish real participatory decision-making mechanisms for O&M of the on-farm systems\. In terms of physical construction, the project faced a number of difficult conditions: (i) harsh weather conditions and the obligation to ensure continuous water supply during the irrigation season, which left only a short period available for construction; (ii) most of the local contractors at the initial stage of project implementation lacked experience with work planning and implementation of this type of extensive rehabilitation and faced some difficulty with applying international standards and specifications in bidding documents; (iii) lack of experienced design companies resulting in inadequate design work at the beginning of the component implementation, which resulted in delays during the initial years as well as the cancellation of some of the 63 civil works contracts; and (iv) high inflation during implementation\. Between December 2003 and June 2005, both the PDO and Implementation Performance (IP) ratings were (moderately) unsatisfactory, mainly as a result of slow project implementation and very low disbursements\. However, considerable efforts have been made by both PIU and IDA supervision 5  teams during project implementation to adapt the project in order to ensure acceptable quality of both design and civil works\. These included: (i) the establishment of oblast rehabilitation teams (not foreseen at appraisal) to compensate for the low capacity at raion level; (ii) various amendments and improvement in the contracting arrangement (e\.g\. price adjustment clause); (iii) a change in disbursement percentage for works; (iv) training of contractors; and (v) the recruitment of full-time field-based supervision engineers\. 2\.3 Monitoring and Evaluation (M&E) Design, Implementation and Utilization An M&E system was put in place that was well structured and maintained, and which contains a wealth of information largely based on a comprehensive WUA database (in MS Access) by aggregating information from a systematic reporting system of WUAs to the Central Support Unit (CSU)\. It allows numerous analyses and monitoring of the development process of the WUAs\. Different Bank review missions and consultants reports developed in-depth analysis of a series of indicators based on the system\. The M&E system was instrumental in monitoring the institutional development of WUAs thereby constantly feeding project management and staff in the CSU and in selecting those WUAs eligible to benefit from the second project component\. A more systematic and accurate collection of crop yields to better monitor the project impact on agricultural performance would have been desirable, but this would have involved much additional cost and time spent at field level, not just by project staff but also by other agencies that are involved in the agricultural sector\. The M&E system will continue to operate under OIP-2\. It could be further improved by adding the following features: (i) monitor more systematically crop yields and cropping patterns between various groups of WUAs tracked by the system in order to evaluate the impact on crop performances of various project activities; (ii) undertake comparative analyses of the rehabilitated WUAs with other WUAs in order to better assess the impact of rehabilitation on ISF, recovery rate, O&M expenses, etc\.; (iii) automatically generate key indicators of project performances and impact such as the annual WUA expenses on maintenance, the recovery rate of the ISF, the total cropped area; (iv) include in the M&E a more systematic means to monitor the implementation of the O&M plans of the WUAs; and (v) qualitative monitoring mechanisms could be added such as rapid water user surveys to collect their assessment of changes in their farm performances, and their level of satisfaction with the delivery of irrigation water (reliability, timeliness, adequacy of ISF, etc\.)\. 2\.4 Safeguard and Fiduciary Compliance Procurement was generally compliant with rules and procedures\. The works were executed through a single civil works contract for each WUA selected for inclusion in the rehabilitation program\. A total of eight contracts were cancelled, especially for reasons of non-performance by contractors\. The affected contractors had typically quoted a low bid price and because of rapidly rising construction costs were not able to complete the works\. The early contracts did not have price adjustment included, which was another reason why several of the contracts failed\. When rapidly increasing prices for materials and construction became an issue, IDA agreed to incorporate price adjustment for each contract, independent of the contract duration\. 6  The project faced some financial management issues, especially related to contractual obligations, including lack of committing expected price adjustment\. During the second part of the project, the PIU set up a full complement of financial management staff serving both OIP and the IDA-funded Water Management Improvement Project (WMIP), including an experienced financial manager\. Moreover, the accounting system was upgraded and all former data was entered into the new system\. The financial manager introduced a separate schedule for each contract detailing all financial transactions relating to that contract, including advance payments, invoice payments for works accomplished, advance recovery, and two-stage repayment of retention funds\. The staff, aided by the new financial management system, was also able to properly reconcile all the payments made to contractors, including advance payments, price adjustment, and retention payments\. On the environmental side, OIP was classified as category B\. Each design report of a sub-project included an environmental impact assessment\. There was no negative environmental impact observed from the project activities as the implemented works were only rehabilitative in nature and did not change the general layout and operation of the existing irrigation systems\. Since October 2005, water management specialists of raion WUA Support Units (RSU) gathered environmental data from 189 sampling points throughout the project area using monitoring equipment supplied by the project\. The sampling points are located at sites where some impact from rehabilitation activities could be expected, and data on soils, surface water, ground water levels, and mineralization were collected and submitted to the PIU on a regular basis\. Water monitoring parameters included acidity, mineral content (including salinity), temperature and turbidity of water flows from water sources selected by the environmental specialist\. The frequency of measurements was between 3-9 times annually\. Samples were sent for chemical analysis to a national laboratory, contracted by the project\. A short-term environmental specialist was periodically engaged to analyze and report on the environmental monitoring program, recommending appropriate mitigation measures as needed\. Very few pollution problems were found, except some unrelated to project activities, such as the presence of heavy metals in some areas\. 2\.5 Post-completion Operation/Next Phase The progressive integration of the WUA SUs in the DWR was agreed upon during the design of the project in order to ensure sustainability of the WUA support process\. This involved a gradual financing by government budget of the costs of operating them, complemented by a formal integration of their staff as civil servants of the DWR\. At project completion, the SUs were 100 percent financed by the Government (from counterpart funds) and the integration of staff is now complete after a Government Decree that waived Government's hiring freeze of civil servants in the country for the Ministry of Agriculture, Water Resources and Processing Industry (MOAWRPI) so that DWR could increase its staffing numbers in order to integrate the WUA Support Units\. At the beginning of 2009, with the start of the new budget cycle, the SUs will be financed from DWR's budget\. IDA is financing a second phase of the project (Second On-farm Irrigation Project; OIP-2)\. This five-year project was approved in June 2007 for a total cost of about US$20\.5 million and aims at sustaining and further expanding the activities of OIP\. It will further strengthen the WUAs, with a focus on financial and technical sustainability through support in water management, 7  O&M, and agricultural production\. OIP-2 has the same components as the first project, i\.e\. besides the WUA strengthening component, an infrastructure rehabilitation and modernization component targeting those mature WUAs that could not benefit from the first project although they have reached a sufficient level of institutional development\. Finally an IDA-funded Water Management Improvement Project, partly conceived as a follow up of the IRP, is inter alia working on the transfer of off-farm works to federation of WUAs and the financial sustainability of DWR\. 3\. Assessment of Outcomes 3\.1 Relevance of Objectives, Design and Implementation At the time of completion, the project objective and design remain highly relevant\. For the past 10 years, agriculture has remained the main contributor to the country's economic development, consistently representing 35-40 percent of the GDP and providing employment for around 50 percent of the population\. Therefore, the Country Development Strategy (CDS) for 2006-2010 considers that agriculture will continue to be among the main sectors of the economy\. Irrigated crops are a major source of farm income and therefore a powerful tool for reducing poverty\. As recognized by the CDS, one of the most effective ways of increasing labor productivity in agriculture is a reliable and effective irrigation of agricultural lands\. The CDS sees a major role for WUAs, and a need to increase ISF and to transfer on-farm systems to WUAs, all activities that have been promoted by the project\. During implementation, while the above circumstances and priorities did not change, the project was able to adapt to the fact that the development of WUAs became a national priority promoted by the government so that the project had to extend its coverage to the entire territory while it initially intended to only cover a fraction of on-farm schemes\. 3\.2 Achievement of Project Development Objectives The PDO was to "achieve increased crop production through reliable and sustainable water distribution on about 160,000 ha of irrigated land across the country's seven oblasts"\. The project had set as a target to increase crop yields by 10 percent (in comparison with the project area before investments) and to support the development of 160 WUAs, including up to 80 of them that would benefit from rehabilitation services (on 160,000 ha)\. In addition to yield increase, the PAD had set two other impact indicators: (i) percentage of O&M needs of on-farm irrigation systems covered; and (ii) distribution of adequate irrigation water in a timely manner, in line with crop water requirements\. At the time of project completion, it still appears difficult to obtain solid data to demonstrate the full impact of the project on crop performance for the following reasons: (i) most rehabilitation took place during the last years of project implementation, i\.e\. between 2005 and 2007 ­ only 5 WUAs benefited from rehabilitation in or before 2005; (ii) it is too early to witness full benefits from rehabilitation which are expected to take a few years to materialize; (iii) at the time of ICR field work, the latest full set of data available in the WUA database was from 2006; and 8  (iv) there is no systematic comparative analysis in the WUA database between WUAs having benefited from rehabilitation and those that did not\. Difficulties with the method of measurement of crop yields - relying much on average scheme data rather than data broken down by zones that are performing differently - have meant that it has not been easy to quantify the anticipated yield and crop production improvement in the rehabilitated WUAs\. A set of data collected from 33 WUAs in April 2007 ("Case Study on On- farm Rehabilitation Impact under OIP" by the local NGO M-Vector ­ see Section 3\.6 below for more details) allowed an impression of yield data and an analysis of the changes in average crop yields between 2005 and 2006 in WUAs interviewed during the survey\. These WUAs were grouped in three categories: (i) 13 WUAs having benefited from support from SUs and from rehabilitation (Group 1); (ii) 10 WUAs only having received support from the SUs (Group 2); and (iii) 10 recently established WUAs had not yet benefited from the project (Group 3)\. In addition, an assessment of the 2005/06 seasons in 13 WUAs where rehabilitation works had been completed (not the same as the Group 1 WUAs) showed that yield levels have fluctuated, with yields of many crops increasing often more that 10 percent, but other crops had reduced yields\. It was found that water users are still conservative in selecting crops, and cropping patterns have not changed much until now\. Data collected found that the yields of the main crops in irrigation systems that have benefited from rehabilitation (Group 1) were higher than the yields in the WUAs that have received little or no project support (Group 3)\. The average yield for winter wheat was 2\.8 ton/ha for Group 1 and 1\.6 ton/ha for Group 3\. Similarly, for maize the yields were 3\.0 ton/ha and 1\.7 ton/ha, for kidney beans 1\.7 ton/ha and 1\.2 ton/ha, for cotton 2\.5 ton/ha and 1\.7 ton/ha, and for permanent grasses 3\.1 ton/ha and 2\.8 ton/ha\. The comparison of crop yields in 2005 and 2006 showed that on average crop yields have remained the same in rehabilitated WUAs (-0\.4 percent difference), they decreased by 12\.2 percent in the control group, and decreased by 4\.9 percent in the WUAs which only benefited from the SUs\. In other terms, rehabilitation appears to have maintained yields while these have decreased in other WUAs: the net yield impact from the project would be 11\.8 percent (which is in line with the assumptions made at appraisal; two years of agricultural data is of course not conclusive for trends, but at least a comparison can be made for WUAs that received different level of assistance) from the combination of the two project components and 7\.3 percent from the first component\. More agricultural benefits are expected to materialize in the future beyond these preliminary trends\. In addition, in several WUAs some land could be reclaimed as a result of the project, but this could not be captured by the M&E system as the changing WUA area in the database does not distinguish between what resulted from improved irrigation and what simply resulted from an increased number of WUA members\. Yet, it can be assumed that in a number of WUAs the actual irrigated area increased by a small percentage, which is an important net benefit from the project\. While the PDO in the PAD only considered the agricultural impact on the rehabilitated WUAs, the project is also likely having an impact on agricultural performances of WUAs which have only benefited from support and training\. The project has exceeded its institutional development target\. By project completion, 455 WUAs (managing about 70 percent of the country's irrigated land) had been established with the support 9  of the project, versus 160 envisaged by the PAD\. However, these 455 WUAs have reached different levels of development\. The M&E database shows that 305 of them can be considered as having reached a level which ensures their development towards sustainability\. They have reached milestone 4 (out of 7), i\.e\. they are operational with trained staff, they have prepared O&M plans taking into account needed ISF increases to cover O&M cost, and they are already collecting increasing amounts of ISF\. This figure (305) represents 190 percent of the target in the PAD\. Field investigations show that these 305 WUAs: (i) have an adequate institutional framework for management (management board, functional meeting schedules, minutes recorded for meetings, etc\.); (ii) allow adequate representation for water users through Representative Assemblies and Representative Zones; (iii) have at least basic office facilities (often in Ayil Okmotu offices); (iv) are adequately staffed with both administrative and technical personnel; (v) have accounting and financial control procedures; and (vi) have developed operation procedures, including those for water management\. Other achievements of the project include: (i) effectively filling the gap left in on-farm irrigation management after the dissolution of the collective and state farms\. In the absence of the project, the deterioration of on-farm schemes would have certainly worsened considerably with serious negative impacts on crop performances; and (ii) establishing a sustainable process to support the development and future strengthening of WUAs which is now embodied in the DWR (see Section 3\.5 (b) on institutional strengthening)\. Extensive field visits during Bank review missions and the ICR mission showed that the reliability and timeliness of water delivery has greatly improved, leading to more efficient water use by crops\. This is confirmed by the earlier mentioned case study which found significant improvements for rehabilitated WUAs in water users' assessment of the reliability, adequacy, timeliness, and equity of water delivery (see Section 3\.6 below)\. The project has also led to a better organization in water distribution and a sharp decrease in conflicts over water and in time spent by farmers on irrigation\. Even in WUAs where the actual rehabilitation did not cover the entire scheme, the improvement in water efficiency in the area concerned by the rehabilitation indirectly impacts on areas that did not benefit from rehabilitation, since more water will be available in those areas as well\. Finally, a sufficient percentage of operation and maintenance (O&M) needs of on-farm irrigation system covered has not yet been achieved, which is a concern in relation to sustainability (see Section 4 below)\. While the M&E system accurately captures the actual expenses on O&M per WUA, O&M plans are not yet fully based on actual assessment of the scheme requirements\. The PAD mentions the figure of US$10 per ha as a typical on-farm ISF, about 70 percent of which would have to be spent on actual O&M\. The ISF that was collected by the 63 WUAs between 2003 and 2007 was KGS 105 million (about US$3 million) or about US$5 per ha on average\. In 2007, the average amount of the ISF spent on O&M was KGS 109 (US$3) per ha\. This figure does not take into account the considerable amount of maintenance carried out by the farmers through self-help\. Considering the positive trends, it is expected that during the next years many WUAs, with the assistance of OIP-2, can reach the needed level of ISF to provide adequate O&M of their managed systems\. 10  3\.3 Efficiency The PAD included a cost-benefit analysis based on quantifying projected agricultural benefits by assuming: (i) average yield increases by 10 percent at full development in rehabilitated WUAs; (ii) average yield decreases by 1 percent per year in the without-project scenario\. In April 2007 and February 2008, respectively, the PIU undertook two field surveys to complement the data available in the M&E unit in order to quantify the impact of the project on WUAs and crop performances\. One of the purposes was to be able to perform a cost-benefit economic analysis\. However, neither during these two attempts nor during the ICR mission was it possible to formally re-run the economic analysis included in the PAD, with the main reasons listed above\. A recalculation of the economic rate of return (ERR) could be performed by assuming that: (i) the above-mentioned results from the survey with 33 WUAs are extrapolated to the entire project, i\.e\. an average increase by 11\.8 percent in rehabilitated WUAs compared to non- beneficiary WUAs; and (ii) compared to the PAD, benefits can be discounted by 24 percent as the WUAs that eventually benefited from rehabilitation was only 76 percent of what was planned at appraisal (121,000 ha instead of 160,000 ha)\. Based on these assumptions, the Economic Rate of Return of the project would be reduced to about 20 percent\. However, this is very conservative considering that: (i) the above yield increases were measured for one year only while full benefit would materialize after a few years; and (ii) other substantial benefits were not incorporated in the calculation as explained below\. Cost Effectiveness\. The project is considered cost effective\. Despite sharp increases in construction materials during the project implementation period, the average cost per hectare of on-farm I&D rehabilitation was contained at US$166/ha, which was only 20 percent higher than what was planned at appraisal\. The WUA development component was even more cost-effective as 455 WUAs were strengthened by the project against 160 foreseen at appraisal for a similar cost\. This means that the actual cost of strengthening one WUA was slightly over US$10,000, which is only 26 percent of the about US$39,000 projected at appraisal\. Finally, other benefits have not been quantified in the economic analysis which might be substantial\. They include: (i) some changes in cropping patterns, in particular an increase in areas in vegetables, potato, and peas at the expense of cotton and cereals; (ii) the potential downstream economic use of water saved as a result of better scheme efficiency; (iii) the benefits from institutional strengthening as the economic analysis focused on the benefits from physical rehabilitation on 160,000 ha; and (iv) social benefits such as a reduction in conflicts and in time spent by users on irrigation\. As a conclusion, although it is too early to fully document project impact on agricultural performances, the above partial analyses show that the project is likely to reach its development objectives and therefore an economic performance close to the one projected at appraisal\. 3\.4 Justification of Overall Outcome Rating Rating: Satisfactory In light of the above and of the definition of rating criteria ("the extent to which the project's objective were achieved, or are expected to be achieved, efficiently"), the overall outcome rating 11  is satisfactory\. Even if agricultural improvements have yet to fully materialize and be adequately documented, the PDO is likely to be achieved as demonstrated by the above data analysis and cost-benefit analysis\. The efficiency of the project is illustrated by the cost effectiveness which shows a low cost per WUA strengthened and a low rehabilitation cost per hectare\. 3\.5 Overarching Themes, Other Outcomes and Impacts a) Poverty Impacts, Gender Aspects, and Social Development An improved performance of the agricultural sector, being the main source of income in the rural areas, will have an impact on poverty alleviation\. On the social side, through the establishment of WUAs the occurrence of conflicts related to the use and distribution of water was reduced leading to more favorable social conditions\. As a result of the nature of the project, almost all land owners within the command area of the established WUAs benefited from the better water management and delivery regardless of their ethnic origin and socio-economic conditions\. Further conclusions regarding poverty, gender and social development are difficult to draw since during the project lifespan there was no assessment of the socio-economic conditions of water users within the WUAs, and how different socio-economic groups benefitted from the project's institution strengthening and rehabilitation activities\. During OIP-2, it would be useful to carry out farm-level surveys in order to better monitor and understand possible changes and impact of migration trends on farming systems and irrigation\. Such surveys should include the changes in local governance of water resulting from the mechanisms set up by the project to ensure that water users have a major role in decision-making in the O&M of the on-farm system\. (b) Institutional Change/Strengthening An institutional framework for management of the on-farm systems has been established, including mechanisms to ensure that water users are involved in decision-making\. This comprises clearly defined procedures, election of WUA Councils, and promotes the adequate representation of water users through assemblies\. The creation of Zonal Representatives allows an adequate and operational representation of the water users\. Moreover, the usefulness and efficiency of WUAs for management, operation and maintenance of on-farm systems is recognized by authorities at different levels\. This is indeed a tremendous change towards a system of local management of water by the users\. However, it is important that WUA representatives continue to represent all water users in the future\. It will be important to keep water users informed about WUA activities and decisions made by the WUA Council\. The project is leaving behind a much strengthened DWR with improved capacity in assisting the development of WUAs thanks to a comprehensive network of SUs which are integrated in and financed by the Department\. At project completion raion SUs are operational in all main irrigation raions of the country and are supported by seven oblast support units (OSU) and one CSU\. At the end of the project, a total of 121 Support Unit staff was in place, six in the CSU, 21 in the OSUs, and 94 in the RSUs\. More qualitatively, these WUA SU staff acquired abilities in a wide variety of fields, including general administration and financial management, water management, engineering, WUA formation and development, legal aspects of WUA activities, how to hold meetings, community development, conflict resolution, monitoring and evaluation, 12  and computer operations\. This achievement represents a positive change in the approach to irrigation management, initiating a shift from an irrigation mono-oriented approach to a multidisciplinary and comprehensive vision\. Finally, a new WUA law was prepared with the assistance of the project\. Passing this law in 2002 was a major early accomplishment of the project as the law ensured a clear separation between WUA governance by an elected Council and day-to-day management by hired staff for implementation of decisions made by the governing WUA Council and approved by the membership\. (c) Other Unintended Outcomes and Impacts (positive or negative) There were no unintended negative impacts of the project\. On the positive side, the project has contributed to a sense of ownership of and responsibility for the on-farm network\. In addition, the diminishing number of conflicts over water is expected to have a positive impact on social relations in the rural areas\. 3\.6 Summary of Findings of Beneficiary Survey and/or Stakeholder Workshops There was no beneficiary survey or stakeholder workshop undertaken\. However, a qualitative study was commissioned by the PIU to a local surveying company (M-Vector) to assess the perception of project impact by beneficiaries\. It interviewed a total of 496 farmers belonging to 33 WUAs, including 13 WUAs where rehabilitation works had been carried out by the project (Group 1), 10 WUAs which had received support from WUA Support Units (Group 2), and a further 10 WUAs where no or very little support had been provided until the time of the survey (Group 3; typically newly established WUAs)\. Useful information was collected, summarized as follows: There was a clear difference in the perception of availability of water among the three groups\. For Group 1, 38 percent of WUA staff said water supply was always enough or more than enough, while for Groups 2 and 3 the figures were 30 percent and 0 percent respectively; For Group 1 there was a noticeable change in the assessment of indicators on water delivery by WUA staff, as shown in Table 1 below: Table 1: Assessment of Indicators on Water Delivery by WUA Staff (Comparison between 2004 and 2007) Indicator Good Good (Before rehabilitation; 2004) (After rehabilitation; 2007) N = 13 N = 13 Reliability of irrigation 0% 54% Volume of water delivered 0% 62% Timeliness of water delivery 0% 62% Equity of water delivery 23% 46% 13  The perception among Group 1 farmers for the indicators of reliability, delivered volume, timeliness and equity before and after rehabilitation shows positive results, as indicated in Table 2 below: Table 2: Perception among Group 1 Farmers Indicator Rehabilitation Very good Good Medium Bad Very bad status* % % % % % Reliability Before 0 19 48 30 3 n = 121 After 11 66 19 3 1 Delivered Before 1 15 53 29 2 volume After 10 64 22 4 0 n = 119 Timeliness Before 2 20 54 21 3 n = 109 After 12 62 20 6 0 Equity Before 3 34 48 14 1 n = 88 After 12 70 16 2 0 Very low Low Medium High Very high Disputes Before 13 7 48 28 4 n = 59 After 17 30 30 21 2 * Before ­ 2004; After ­ 2007\. 4\. Assessment of Risk to Development Outcome Rating: Substantial At the time of project completion, the risk that development outcomes will not be maintained is still substantial\. The risk relates to the ability of the WUAs to adequately maintain the on-farm system linked with their financial sustainability\. While the WUAs that have reached milestone 4 have acquired the skills and organizational features to adequately distribute water and manage their systems, their capacity to maintain the scheme in the long run critically depends on their ability to collect enough financial resources for maintenance work\. This is to be achieved through the collection of ISF, hence the importance given by both the PIU and the Bank to carefully monitor ISF levels and their collection rates\. It is expected that OIP-2 will mitigate some of these risks\. It is noted that a second project was not planned at the time of preparation of OIP\. It was already envisaged at project preparation that WUA development and financial sustainability would be a long-term process that would go beyond the project duration, which is why there was so much emphasis on Support Unit development and transfer of these Units to DWR during the project, so that assistance to WUAs could continue after OIP\. Even without OIP-2 the support to WUAs would have continued and the risks mentioned above would likely be mitigated and result in a lower risk to development outcome\. Continuous monitoring shows the important improvements throughout the project life as shown by the following indicators: the ISF actually collected by WUAs to finance their operations and maintenance work has increased by 71 percent between 2001 and 2007, from an average of 2\.74 tyin/m3 to an average of 4\.68 tyin/m3; 14  Actual Collection of ISFin WUAs supported by the project 5 4\.18 4\.68 3\.8 3\.92 4 3\.24 3 2\.74 2\.82 m3 m/oS2 1 0 2001 2002 2003 2004 2005 2006 2007 Year the collection rate of ISF (i\.e\. the percentage of ISF collected from water users either in cash or kind at the end of the year compared to the expected collection fixed at the beginning of the year) increased from 81 percent in 2002 to 107 percent in 2007 (WUAs were reducing their debt to DWR); the payment of ISF3 from WUAs to the DWR has substantially increased from a total of KGS 19\.8 million in 2001 to KGS 43\.6 million in 2007; in addition, this payment which was mostly in-kind at the beginning of the project is now mostly in cash at completion: the cash proportion has increased from 19 percent to 58 percent; and as a result, the level of WUA debt with DWR has reduced over time from KGS 64 million in 2002 to KGS 8\.96 million in December 2007 with "surplus" payments during 2005-2007 paying off outstanding debts\. However, in absolute terms, the ISF remains low at project completion as shown by the following Table 3 which aggregates national figures between 2005 and 2007\. In 2007, the average ISF was equivalent to US$4\.50/ha, a slight increase compared to 2005 (average for all WUAs that received support from SUs)\. About half of it was destined to the payment of water tariff to DWR, with only the equivalent of US$2\.34/ha remaining in the WUAs for O&M activities\. 3The ISF is the total fee paid by water users to the WUAs\. It includes two shares: the water tariff paid by the WUA to the DWR to pay for bulk water received at the boundary of the WUA; and the remaining being used by the WUAs to cover its own O&M expenditures\. 15  Table 3: Actual Collected ISF per Hectare (2005-2007) Remaining in Total ISF Tariff to DWR WUA KGS/ha 170 67 103 2005 US$/ha 4\.15 1\.63 2\.51 % 39% 61% KGS/ha 164 61 103 2006 US$/ha 4\.00 1\.49 2\.51 % 37% 63% KGS/ha 186 90 96 2007 US$/ha 4\.54 2\.20 2\.34 % 48% 52% (Exchange rate assumed at US$1 = KGS 41 during the period considered) The actual maintenance work is not systematically monitored by the M&E system\. The budgets prepared by the WUAs primarily aim to cover the expenditures for salaries of the WUA staff and the payment of tariff to the DWR\. The following graphs summarize the budgets of two representative WUAs\. The salaries (including the contribution to the social fund) accounts for about half of the total\. The second most important expense is the payment of tariff to the DWR for the first one while the second has its own supply of water independent from the DWR\. Expenses on actual maintenance and repairs of the scheme represent 17 percent and 29 percent for these two WUAs respectively\. At the national level, it is estimated to represent an average of 24 percent of the WUA budgets\. This means that in 2007, an estimated US$1\.09 (24 percent of US$4\.54) was spent by the WUAs on actual maintenance and repairs (excluding considerable self-help tasks, estimated at 57 percent of the cash payments, almost all of which is for maintenance works within the WUAs)\. Most WUAs are aware of this low budget and seem to be committed to increase the fee level now that the systems have been rehabilitated and the ability to provide timely water has improved, and this will be supported under OIP-2\. Budget Breakdown of one representative WUA - Budget Breakdown of one representative WUA - Koshgor Koshgor Raion - Issyk Kul Oblast (2007 Raion - Naryn Oblast (2007) Other Expenses Transport (office\.) Repair of 6% 6% Irrigation Scheme 29% Maintenanc Salaries Salaries e / repairs (including social 41% fund) 17% 46% Field Expenses (horse) 12% Transportation Travel Expenses payment to be vehicle in Office Expenses 2% RVH Social Fund WUA 3% 19% 8% 11% While the M&E system captures the actual expenses of on scheme O&M per WUA, the calculations undertaken by the WUAs in preparing their 5-year O&M plans still need to be 16  improved as they are not fully based on actual assessment of the scheme requirements (asset management), while the considerable in-kind member contributions are not adequately captured in the budgets\. During OIP-2 these aspects will receive more attention and the actual financial needs for sustainable maintenance and repairs of the schemes on the basis of actual physical status and requirements will be determined in order to develop realistic ISF development plans\. In addition, the possibility and potential cost savings derived from different institutional options such as possible merging of WUAs will be worked on as this could lead to economies of scale by reducing the fixed expenditures such as salaries, operating expenses of maintaining the office, etc\. Possible further scheme deterioration of the WUAs that have not benefited from rehabilitation under OIP or OIP-2, i\.e\. about 75 percent of the legally established WUAs, is another concern\. The WUAs that have been strengthened institutionally by the project could face difficulties in sustaining their activities if the on-farm schemes are not rehabilitated\. So far, they manage to cope with most urgent repairs but more substantial work is required which is not yet affordable to the WUAs without support from government\. The PAD identified the lack of sufficient maintenance work in the off-farm scheme as a concern\. This issue is dealt with by the IDA-financed WMIP, which will provide assistance to determine the actually needed budget for proper O&M of off-farm infrastructure and gradually require water users to pay more, as allowed by the Water Code (until now, ISF levels are set by Parliament)\. The budget for DWR has gradually increased since 2000 and during the last two years was about 2\.5 times higher than in 2000 (see Table 4)\. It is also good to note that an increasing part of the budget is used for maintenance\. Although the budget still has to increase further, these are positive budgetary developments\. DWR also received an allocation of KGS330 million for their recently established Planning, Design and Construction Unit\. These funds are proposed to be used for major rehabilitation and completion of irrigation schemes\. Table 4: O&M Budget for DWR (2000-2008) (million KGS) 2008 2000 2001 2002 2003 2004 2005 2006 2007 (plan) for 5 months Operational Costs planned 172\.33 188\.86 259\.11 263\.20 317\.61 286\.08 336\.73 437\.28 410\.14 actual 173\.30 205\.50 258\.07 256\.39 288\.20 299\.63 325\.16 443\.99 145\.25 % completion 101% 109% 100% 97% 91% 105% 97% 102% 35% Portion for Maintenance planned 20\.60 22\.98 43\.92 38\.55 48\.50 56\.47 103\.15 177\.38 118\.88 actual 20\.43 22\.98 48\.92 29\.48 38\.26 55\.29 86\.60 168\.38 85\.5 % completion 99% 100% 111% 76% 79% 98% 84% 95% 72% 17  5\. Assessment of Bank and Borrower Performance 5\.1 Bank Performance (a) Bank Performance in Ensuring Quality at Entry Rating: Satisfactory This project was very timely for several reasons, particularly: (i) this was the first attempt after the collapse of collective or state-managed farming systems to create owners of the on-farm level irrigation and drainage systems; (ii) after the rehabilitation of the major deteriorated parts and ensure the secure water flow in the main system under the IRP, the next and very important step was to rehabilitate and improve the on-farm irrigation and drainage systems; and (iii) there was an urgent need to provide technical assistance and support to WUAs\. As earlier mentioned, both the project objective and activities were highly relevant and responded to the most critical needs that were well identified by the project design team\. The PAD was well written, to the point, and informative\. Project design was simple and practical\. The approach to place institutional development in the first place and as a pre-requisite to physical rehabilitation works proved to be the correct approach and is a necessary condition for sustainability\. Indeed, the institutional and policy aspects were at the core of the analysis and activities designed at appraisal\. Much attention was given to establish and sustain after project completion an institutional capacity that can support the future development needs of WUAs\. There were no major environmental or fiduciary issues at appraisal\. The project implementation modalities were relatively clear and simple, and aimed to incorporate the fact that local capacities and experience with projects like OIP were very weak at project inception\. (b) Quality of Supervision Rating: Satisfactory DWR and its PIU greatly appreciated the IDA implementation review missions which were regular, consistent (continuity of team members), and very supportive in sorting out problems arising during implementation\. IDA missions not only played a review role but also an advisory one through expertise in both institutional development of WUAs and irrigation rehabilitation\. Guidance and recommendations were always appreciated by DWR and the PIU as a constructive contribution to move forward\. Review teams always based their advice on field visits and thorough discussions with primary project stakeholders (DWR, Ministry of Finance (MOF), PIU, Oblast Rehabilitation Teams, SUs, WUAs, and water users)\. The quality and commitment of the implementation review team was particularly critical towards the end of 2004 when, for about one year, the project was rated unsatisfactory due to the deficient implementation of the second component\. The team was pro-active in agreeing with the Government on a number of actions which eventually put the project on the right track again\. These included: the change in financing arrangement; the establishment of oblast rehabilitation teams to improve and speed up design work; and the introduction of price adjustments in contracts with civil work contractors\. 18  IDA's aide-memoires were well written, informative, and practical\. They contained both accurate assessment of implementation progress, transparent and critical analysis of problems encountered, and pragmatic responses, recommendations, and solutions to further improve implementation\. (c) Justification of Rating for Overall Bank Performance Rating: Satisfactory Both quality at entry and implementation review are considered fully satisfactory\. 5\.2 Borrower Performance (a) Government Performance Rating: Satisfactory The project was located in the Department of Water Resources under MOAWRPI\. The project received good support from the DWR\. Throughout the project life, DWR remained fully supportive to the idea of transferring management and ownership of the on-farm systems\. The project also led to a change in the attitude of DWR which progressively became more client- oriented towards water users and WUAs\. The central Government has been supportive of promoting the development of WUAs in terms of pro-active policy and legal framework\. The project also received good support from the Ministry of Finance\. In particular, in line with the Development Credit Agreement, financing of the SUs was progressively transferred from project funds to the regular budget so that at project completion the SUs were entirely financed by the budget\. There were, however, financial restrictions during the first three years of project implementation as sufficient counterpart funds were lacking\. As a result of updated financing arrangements agreed upon during the mid-term review (change in disbursement percentages), the project did not face any more financing difficulties\. (b) Implementing Agency or Agencies Performance Rating: Satisfactory DWR and its PIU have satisfactorily implemented the project\. Throughout the project, the PIU was staffed with up to 11 professionals to deal with the day-to-day management of the project, including coordination of activities with the Government and the Bank\. The PIU was always responsive to recommendations of the Bank on ways to improve implementation and resolve problems\. The PIU maintained good relationships with other stakeholders such as various government institutions, the Asian Development Bank (ADB; involved in Chui Oblast), US Agency for International Development (USAID; involved with WUA development in the Ferghana Valley), and local administrations\. Monitoring and evaluation activities were maintained at a satisfactory level with readily available data for analysis\. Quarterly and annual reports were regularly produced and of satisfactory quality\. 19  (c) Justification of Rating for Overall Borrower Performance Rating: Satisfactory, as both implementing agency and Government performed well and were always fully supportive of the project activities\. 6\. Lessons Learned The establishment of WUA Support Units played a key role in the registration and development of WUAs\. The efforts made by the project in capacity building of SUs (and indirectly of the DWR), in development of legal aspects (WUA Law, Water Code), and in elaboration of mechanisms for decision making within the WUAs (governance system including a Council, General Assembly, and Zonal Representatives) were essential to ensure the development of legally empowered institutions\. Institution-building and strengthening followed appropriate and efficient timing and sequences: technical assistance, creation of WUAs support units, awareness creation, establishment of WUAs, and training and support to WUAs\. Most projects involved in I&D improvement focus on rehabilitation works and then, in order to ensure the maintenance of the infrastructure, provide some assistance to water users in water and scheme management\. This usually causes sustainability concerns for a number of reasons: lack of participation of water users in rehabilitation works; lack of capacity of these water users in managing the schemes; and eventual deterioration of the newly rehabilitated structures\. In contrast, the OIP first built and strengthened WUAs as solid institutions, sometimes for several years, as a pre-requisite before starting a rehabilitation process with those WUAs that had demonstrated their institutional capacity\. This innovative approach was carefully designed and implemented and appears to be important for long-term sustainability of the scheme management\. Another lesson is that institution strengthening is a long process and should be given enough resources, regular coaching, expertise, and, above all, time\. It also requires institutional support to the WUA process to be embodied in government institutions (here the DWR) in order to secure its sustainability\. WUA command areas should be seen as a single unit from the water management improvement point-of-view\. Much attention should be paid to requirements of regulatory structures such as intakes, division boxes, culverts, outlets, cross regulators, energy dissipaters, and flow meters, which will allow WUAs to distribute water among member farmers in a more reliable and timely manner\. On-farm canal lining, which is expensive, should be used only for those sections of the system where it would be technically required to reduce high seepage losses\. Good construction supervision work is essential for satisfactory outcome\. In particular, strict supervision for quality of works is required and disqualification of non-performing contractors should be applied\. The intention of using the distribution efficiency as a measure of project performance was to measure the improvement of on-farm water distribution\. However, this is an indicator that is difficult to measure, and does not capture all the possible improvements that might be brought about by the project\. A more comprehensive measure is to look for a reduction in the quantity of water abstracted, on the basis that improvements in distribution efficiency, scheduling, level of 20  control over water, on-farm application, and water management in general will result in a reduction of water used\. The project evaluation identified reduced water consumption as a key economic benefit of the project\. Further work is required, however, to measure water abstraction against water demand based on crop type, area and irrigation norms\. This has already been incorporated in and will be done under OIP-2\. In order to take full advantage of irrigation rehabilitation and improved water management, there is need to provide additional support to the farmers\. Required services are related to: (i) field- level water management techniques applied by individual farmers on their parcels in order to optimize the use by crops of irrigation water; (ii) agricultural techniques such as crop varieties, seeds and plant protection with special attention to be given to management of soil fertility and crop rotation; and (iii) access to markets of high value crops such as vegetables, potato, and beans\. As this kind of support can be concluded only after the rehabilitation of the irrigation system, a PDO formulated specifically around increased crop production on a certain project area is of too high an order for an irrigation project\. It usually takes time for farmers to adapt to changing circumstances and when the engineering works are usually completed towards the end of a project this time is not available within the project duration\. Implementing agencies should be encouraged to measure the agricultural impact in rehabilitated systems a few years after the end of the project\. 7\. Comments on Issues Raised by Borrower/Implementing Agencies/Partners (a) Borrower/implementing agencies The recipient prepared a final report which builds on the annual reports and aggregates project outputs\. It represents a good source of information, and is particularly useful to recall the history of project progress over time\. The report provides descriptive data by year and/or by oblast on: disbursements, formation of WUAs, sizes of WUAs, ISF amount and recovery, rehabilitation works, and contract costs\. The report also provides information on how rehabilitation processes were improved during the project life\. While the report documents very well the development of WUAs resulting from the project, it also frankly acknowledges that more work is needed, and proposes various solutions, including further institutional development in the form of WUA federations and water councils, and further training of WUAs and their members\. The Borrower, through the Ministry of Finance, reviewed the draft ICR and provided a set of comments\. It agreed with the satisfactory ratings of the project and was satisfied with the number of WUAs that was established and trained\. It proposed that DWR continues the evaluation of the outcomes, a point with which the Bank agrees, so that the project's impact on agricultural yields and production becomes clear\. The Ministry of Finance would have liked to see transfer of some higher-order irrigation infrastructure from DWR to WUAs in order to decrease the burden to the republican budget\. OIP paid little attention to the development of federations of WUAs, as it was felt that WUAs managing lower-level infrastructure has to be strong before it can be given responsibility for the management of higher-order infrastructure that is currently under the management of DWR\. OIP-2 and WMIP have sub-components on the development and training of federations of WUAs\. 21  (b) Cofinanciers The ADB was not a co-financier, but close coordination was required in Chui Oblast where the ADB-financed the Chui Area Agricultural Development Project\. OIP was only implementing its first component in Chui Oblast as rehabilitation works were covered by ADB\. SUs in Chui Oblast were thus financed and equipped by OIP and government, but were working with WUAs that received support for rehabilitation from the ADB project\. This allowed for consistent approaches and methodologies towards WUA development to be applied throughout the country\. (c) Other partners and stakeholders (e\.g\. NGOs/private sector/civil society) Not applicable 22  Annex 1\. Project Costs and Financing (a) Project Cost by Component (in USD Million equivalent) Actual/Latest Components Appraisal Estimate Percentage of (USD millions) Estimate (USD millions) Appraisal WUA STRENGTHENING SERVICES 5\.23 4\.60 88 INFRASTRUCTURE REHABILITATION AND O&M 18\.26 24\.10 132 PROJECT IMPLEMENTATION SUPPORT 0\.53 1\.40 264 12 Total Baseline Cost 24\.02 30\.10 125 Physical Contingencies 2\.38 0\.00 Price Contingencies 2\.60 0\.00 Total Project Costs 29\.00 30\.10 104 Front-end fee PPF 0\.00 0\.00 Front-end fee IBRD 0\.00 0\.00 Total Financing Required 0\.00 0\.00 (b) Financing Appraisal Actual/Latest Source of Funds Type of Percentage of Cofinancing Estimate Estimate (USD millions)(USD millions) Appraisal Borrower 6\.30 5\.20 83 International Development Association (IDA) 20\.00 21\.90 110 LOCAL: BENEFICIARIES 2\.70 3\.00 111 23  Annex 2\. Outputs by Component (a) Component 1: Water Users' Associations Development Services A summary of the main results of the main indicators is as follows: Indicator 1 - Number of O&M plans developed in detail, fully costed and implemented each year after completion of rehabilitation works ­ moderately satisfactory, but trend is towards fully satisfactory outcome as WUAs mature\. Data collected by the project shows that 375 WUAs out of a total of 455 established prepared O&M plans taking into account ISF increase to cover O&M of the on-farm infrastructure (milestone 3)\. As explained in the main text, there is still a concern that the level of ISF set in many of these plans is not yet adequate to ensure long-term sustainability of the on-farm systems\. The amount allocated to maintenance represents generally less than 30 percent of the total WUA budget, which is typically insufficient in the long run to provide the needed maintenance (in well-developed WUAs this percentage normally exceeds 60-70 percent)\. More work will be done under OIP-2 to achieve increases in maintenance budgets\. Indicator 2 - Representation and participation of users in WUAs ­ satisfactory Seventy-eight percent of the WUAs established have a Representative Assembly and have organized Representative Zones in order to facilitate the involvement of members in the decision-making process\. In each WUA, at least one meeting of the Representative Assembly is held annually, as stipulated by law, with participation of at least two-third of the members\. Many WUAs conduct more than one assembly meeting per year\. The majority of the water users (84\.7 percent) get information about the WUA activities through zonal representatives, neighbors, water masters, etc\. Indicator 3 - Timely repairs to on-farm irrigation infrastructure ­ too early to be assessed, by trend is towards satisfactory outcome\. Most WUAs had their rehabilitation completed within the last year of the project, and the need for repairs is still limited\. Few WUAs have started to provide repairs in a systematic way\. This will also be one of the main activities under OIP-2\. WUAs Support Units\. As the organization responsible for irrigation development and water delivery, DWR was considered as the best candidate to develop internal capacity to support the development of WUAs to become organizations that are capable of operating and maintaining on-farm irrigation systems in a sustainable way\. In order to assist the DWR, the PAD envisaged the creation within the DWR central office of a support unit responsible for all coordination aspects related to WUA development\. After the creation of a support unit at central level, oblast and raion level support units were created in turn\. The support units have the responsibility for WUA promotion, assistance with WUA establishment, training, technical advice, backstopping, and monitoring and evaluation\. 24  The WUA Support Units' creation was rapid and their coverage exceeded project expectations\. Given the limited internal expertise and experience in WUA development and operation, the PAD envisaged an approach phased over three years for the creation of WUA SUs\. The concern was the need for SUs to be established in a manageable set of raions where there was a reasonable number of former state or collective farms that could be developed into WUAs, and the need to establish WUAs in areas where agriculture was productive enough that they could become financially sustainable\. WUA support units were created at a more intensive pace than expected\. Around mid-2001, about six months after OIP started, the CSU and the OSUs in all seven oblasts had been established\. RSUs were formed in four batches: eleven in March 2002, fourteen in December 2002, one in March 2003, and fourteen in November 2004\. The number of SUs established and trained at raion level largely exceeded the 19 raions foreseen in the PAD\. During the project, the government requested further RSUs to be formed which led to the establishment of SUs in almost all irrigation raions in the country\. Two-third (27) benefited from a fully staffed SU composed of three trained persons, and one-third (13) from one coordinator (Table 5)\. These latter benefited from the support of their neighboring fully staffed Support Units\. Table 5: WUAs Support Units established and personnel against plan Description Planned in PAD Actual by April 2008 Central Support Unit Number: 1 1 Staff Number/Unit: 4 persons: 6 persons: - WUA Development Specialist - WUA Development Specialist - Training Specialist - Training Specialist - Engineer - Engineer - Financial Specialist - Financial Specialist - Information management Specialist - Training Center Specialist Oblast Support Units Number: 7 7 Staff Number/Unit: 3 persons: 3 persons: - Coordinator/WUA Support Sp\. - Coordinator/WUA Support Specialist - Engineer - Engineer - Water Management Specialist - Water Management Specialist Raion Support Units:: Number: 19 40 Staff Number/Unit: 3 persons: 3 persons in 27 RSU: - WUA Support Technician - Coordinator/WUA Support Specialist - Engineer - Engineer - Water Management Technician - Water Management Specialist 1 in 13 RSU; Coordinator Source: (1) Project Appraisal Document; (2) Regulatory Office, WUAs database, 2008, and WB Final Implementation Review Mission, April 2008\. The WUA Support Units perform well\. The SUs played a key role in the project's success\. The development of professional SUs was supported by efficient input during the early project years of an international technical assistance team and a well-designed training program\. In turn, the SU staff implemented a training program delivering courses for WUA Councils and staff all over 25  the country, covering a wide range of subjects (details about training are presented in the following section)\. All SU offices (except in the 13 raions with only one coordinator) are fully equipped with furniture, office equipment, and vehicles\. A training center has been established under the DWR in 2003, with branches in all oblast and raion support units, also fully equipped and operational to organize training courses and workshops\. The motivated and well-trained SU staff provided close support to WUAs throughout the creation and registration process, and continue to date coaching the daily operation and management activities, providing advice as needed in technical matters as well as in legislation, financial matters, conflict resolution, and community development\. The WUA SUs acquired professional and legal recognition and built up a reputation as trustworthy institutions\. Integration of the Support Units into DWR\. The SUs became fully part of the DWR organizational structure by the end of the project\. WB funding progressively decreased while funding by the Government increased\. At project completion, the SUs were indeed 100 percent financed by the Government and they were integrated and institutionalized within DWR\. The integration of SU staff in DWR was possible based on a government decree that waived the decision to reduce the number of civil servants within government, including DWR\. Technical Assistance\. International individual consultants were recruited to assist in the establishment and training of WUA SUs and provide expertise in institutional/WUA development, promotion and training, financial management, monitoring and evaluation, engineering and water use, and legal issues\. The capacity and expertise of the consultants was adequately adapted to the needs expressed by the SUs and DWR\. The consultants made an efficient and significant contribution and supported the Kyrgyz specialists to develop new capacities and skills, working closely with SU staff at all levels\. Staff recruited to work in the SUs mostly came from the DWR and had a background in the field of irrigation engineering\. Through formal training and on-the-job training while working closely with the consultant team, their field of competencies was broadened\. In line with the project objectives, the team assisted the CSU in developing a well-defined training approach as well as proper training manuals, curricula and schedules, and in becoming fully responsible for the overall training activities regarding WUAs\. A major achievement is the thorough understanding SU staff acquired of WUA formation and development, and of the role WUAs can play in sustainable irrigation development\. Training\. The deployment of regular training sessions resulted in major achievements in capacity building\. With the assistance of the international training consultant, the CSU developed a well-defined training approach\. With a training strategy and content elaborated, capacity was built on-the-job and in "cascade": CSU staff and international consultants trained OSU staff, who thereafter took the lead in RSU staff training\. During the first two years of the project, the project started with many awareness sessions, attended by 1,079 persons in 2001 and 4,052 persons in 2002\. From 2003 onwards, oblast and raion SUs selected the three most advanced WUAs in a raion to receive comprehensive training\. The graph below shows the pace of training delivery\. In parallel, SUs provided continuous advisory services to the other WUAs\. Once all WUA staff had received basic training courses, SUs started to carry out refreshing 26  courses and more focused training\. Tools were developed for evaluation of the training courses by the trainees which was used for improvement of the quality of training sessions and teaching methods\. Number of Personnel Trained 2003-2008 (Quarter I) 14 000 500 ses 450 12 000 d 400 hesi ourC 10 000 350 ng blatsE niiarT 8 000 300 sAU Number of Trainings Delivered ehtta 250 W Number of WUAs established 6 000 200 e ofreb nc 4 000 150 ndaettA 100 muNla 2 000 50 Tot 0 0 2003 2004 2005 2006 2007 2008 Source: WUA monitoring system, Regulatory Office\. The WUA Council members, management, and staff attendance at the training courses has been over 54,000 person days from the beginning of 2003 to the end of the first quarter of 2008\. Training was held during autumn, winter and spring, when farmers were less busy in the field\. All the WUA staff received training related to his/her functions\. The graph below shows the attendance at different training courses according to their subjects\. Attendance at the different training courses 2003-2008 quarter I Computer Skills and Internet Community Development How to hold meetings Conflict Resolution se 2003 M&E 2004 ursoC 2005 gnini WUA Formation and Develop-ment 2006 Legal Aspects of WUA Activity 2007 Tra 2008 Quarter I Engineering General Administration and Financial Management Water Management Training of zone representatives 0 000 000 000 000 000 000 000 000 000 000 1 2 3 4 5 6 7 8 9 10 Number of Participants Source: WUA monitoring system, Regulatory Office, June 2008\. 27  A large training room including facilities for simultaneous translation has been established in the premises of the DWR where the CSU offices are located\. Training rooms with basic equipment including tables, chairs, overhead projector, and white boards have also been established in each oblast and raion SU\. These equipped rooms are real assets to conduct proper training\. Under OIP-2, there is still a need for strengthening staff capacities especially at raion level, and to include in the training program further consideration of other factors impacting the project such as agro-technical aspects, marketing, agricultural and economic aspects, and GIS, in addition to water management and O&M planning\. Study Tours\. The project supported study tours aimed at exposing DWR staff and WUA Council Board members to a range of successful examples of WUA development in other countries (Table 6)\. Four study tours have been organized to Turkey, USA/Mexico, and Armenia, with a total of 33 participants\. PIU staff participated in three workshops, including two on procurement procedures and the seventh workshop on Involvement of Water Users in Irrigation Management organized by the International Network of Participatory Irrigation Management (INPIM)\. These activities have contributed to the understanding of PIU staff, SU staff, DWR staff and others of WUA establishment, development and role, and to share their experiences\. Table 6: Study Tours Organized during the OIP Year Destination Participants Content 2002 Turkey 8 - Central, Oblasts and Raion SU staff WUA establishment, Turkey 12 - Central, Oblasts and Raion SU staff, development and activities\. - Heads of Raion DWR, - WUA directors; and - MOF representative\. 2003 Italy 2 - PIU procurement specialist; and Workshop on procurement\. - MOF representative USA 8 - OIP staff; and WUA strengthening and (California) - DWR staff achievement of economic and Mexico viability\. 2004 Albania 2 - CSU specialists Seventh INPIM workshop on Involvement of Water Users in Irrigation Management\. 2005 Italy 1 - PIU staff Workshop on procurement\. Armenia 5 - CSU staff; and Water distribution and fees\. - MOF representative\. Source: PIU, June 2008\. WUA promotion seminars and awareness campaign\. Seminars were held at oblast and raion levels\. The purpose of the seminars was to introduce the OIP objectives, the concept of WUAs, and the role the WUA would play in the management, maintenance and operation of irrigation systems to the local stakeholders in order to ensure their understanding of the WUAs and their cooperation\. Starting in 2005, PIU staff and SU specialists at all levels were very active in organizing awareness campaigns through media: TV, radio, and national, oblast, and raion press\. A dedicated WUA bulletin was also published since 2006\. The objective was to widely inform the 28  population and to continue to familiarize the decision-makers and specialists about the status of WUA establishment and development, the successes and the encountered difficulties and measures to be taken to solve them\. Communication campaigns gni 180 160 Suu-Jer-El-Water-Earth-People castdaorb 140 WUA Bulletin 120 Agro Journal dna 100 Agro Newspaper 80 Raion Press sno 60 Oblast Press 40 National Press catilibup 20 Radio 0 TV 2005 2006 2007 2008 Source: PIU, June 2008\. During the project lifespan, specialists from projects in Kazakhstan, Georgia, Azerbaijan, and Tajikistan came to visit the OIP in order to exchange experience about WUAs establishment and development\. These visits were opportunities to enhance the OIP successes and to develop the project's reputation\. WUA Establishment and Development The number of WUAs established largely exceeds the plans\. At the start of project activities, in May 2001, there were 121 WUAs registered in the Kyrgyz Republic according to the old Decree, with a command area of 196,000 ha\. At project completion, 455 WUAs have been registered and supported, with a command area of 716,684 ha, covering 70 percent of the total irrigated area in the country (Table 7 below)\. Table 7: WUAs establishment and development figures: plan and project completion Description Before project Project May 2001 Planned in PAD* completion** Number of WUAs established 121 160 455 Total serviced area 196,000 ha 716,684 ha Number of WUAs with rehabilitated on-farm 0 80 63 works Total area of rehabilitated WUAs 160,000 ha 121,418 ha Sources: * Project Appraisal Document; **Regulatory Office, WUAs data base, 2008, and WB Final Implementation Review Mission, April 2008\. WUA development has been very rapid in the country in the first years of the project\. In 2001, the project had already exceeded the original target of establishing and working with 160 WUAs\. 29  All WUAs have been legally re-registered\. The PAD highlighted the fact that WUAs need to be in areas where agriculture is productive enough for WUAs to be able to become financially sustainable\. Mountain areas with small parcels of irrigated land can be managed by household units or groups of households\. This suggests that the feasible target for the total number of WUAs to be formed in the Kyrgyz Republic was more or less achieved\. WUAs registration and command area (1999-June 2008) 500 800 450 700 400 600 UAs 350 Wforeb 300 500 aH Number of WUAs registered 250 400 0 Command area under registered 200 300 '00 WUAs m 150 Nu 100 200 50 100 0 0 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 A framework for shared decision-making is in place\. It was foreseen in the PAD that the project would incorporate mechanisms to ensure that water users have a major role in decision-making concerning rehabilitation requirements and setting fees for the O&M of the I&D infrastructure\. A major achievement of the OIP was the restructuring of WUAs with a proper structure that separates governance and management\. In each WUA, a Council is elected by the WUA members during the general or representative assembly\. A team recruited by the Council and typically comprising a director, an accountant, a technician, and one or more water masters manage the WUA\. During the mid-term review in 2004, observations showed that water users were not sufficiently informed about both project and WUA activities and decisions made by the WUA Council\. A system of WUA representative zones was therefore organized, with the WUA service area divided into zones and with a representative in each of them\. This system is expected to better ensure that all members are involved in the decision process through a more relevant representation\. Table 8 shows that, at project completion, 78 percent of WUAs have a Representative Assembly system\. 30  Table 8: Progress of the Reorganization of WUAs into Representative Zones Number of WUAs with Representatives Oblast WUAs Assembly Number % of Total Batken 31 31 100% Jalalabat 66 50 76% Issyk-Kul 59 54 92% Naryn 48 38 79% Osh 85 68 80% Talas 65 52 80% Chui 101 63 62% Total 455 356 78% Source: PIU, June 2008\. Data provided by the Regulatory Authority office and compiled in the graph below shows that on average, at least one annual assembly meeting was held, with the participation of more than two- thirds of the members\. Other positive signs of the involvement of members in WUA affairs were observed, e\.g\. voting out of Council members because of dissatisfaction of the WUA members\. WUA assembly meetings 500 450 400 350 reb 300 WUA established m 250 Nu200 WUA assembly meetings 150 100 50 0 2000 2001 2002 2003 2004 2005 2006 Source: PIU, June 2008\. The influence of local culture on the WUA process is apparent\. The first priority for a WUA is to organize the water distribution such that everyone in the community has access to irrigation water\. After satisfying this priority the WUA can focus on other issues, such as fee collection and maintenance\. Rural communities in Kyrgyzstan are tightly knit, and strongly community orientated\. If a member of the community is experiencing some difficulties other members will try to assist, provided that the cause is genuine and the individual is trying his or her best to resolve the situation\. This explains why in many communities the irrigation service fee for some of the poorer families is covered by the whole community\. However, if a community member is found to be dishonest in their dealings, he or she will be ostracized by the community, and can suffer a rather unpleasant existence\. Values of honesty, dignity, openness, respect, and hospitality are the cornerstone of the Kyrgyz culture\. Dignity is linked to a dislike of being in 31  debt, and to paying one's dues to others, individuals do not borrow more than they can repay, to do so is considered irresponsible\. This set of values helps to explain to a certain extent the manner in which the irrigation communities have taken to the formation of WUAs\. It appears that the project and the actions of the WUA Support Units have been a catalyst which has given the communities the mechanism and confidence to form associations to manage an important communal process, that of water management\. Sixty-three WUAs benefited from OIP support for rehabilitation versus 80 WUAs envisaged in the PAD\. The main limiting factor for WUA rehabilitation was a lack of funds rather than the eligibility of WUAs\. A ranking system based on seven milestones was used for selection of WUAs for rehabilitation, with WUAs having achieved milestone 4 being eligible for entering the planning and design process for on-farm work rehabilitation\. Among 455 established WUAs, 305 achieved milestone 4, 97 WUAs achieved milestone 7, while only 63 WUAs were included into the rehabilitation program\. There will be funds for about 29 WUAs under OIP-2\. Formation of Water Councils and WUA Federations\. During the course of the project, the DWR expressed its interest in forming federations of WUAs in order to allow WUAs to take over the responsibility of O&M of some of the off-farm infrastructure\. The Bank's mid-term review considered that federations of WUAs could have benefits in the long-term, but that their establishment requires first of all the development of strong WUAs\. Therefore, a progressive approach was recommended\. The first step was the creation of water councils, representing WUAs sharing a common water source, as well as DWR and local government\. The purpose of establishing such councils was to acquire experience of what is required to jointly operate off- farm systems\. At project completion, 35 water councils were formed covering 229,408 ha\. Presently, activities of the water councils have mainly consisted of resolution of conflicts regarding water distribution, agreement upon water turns, and supply schedules, and consideration of off-farm system O&M\. Water councils are also involved in applying for funds for canal cleaning and structure repairs\. By project completion 14 federations of WUAs were also formed and legally established on a pilot basis, covering 121,683 ha\. Further development of federations of WUAs will be taken up by WMIP, while OIP-2 will support further training of such federations\. Technical credits\. About half of the established WUAs, or 226 WUAs, have taken technical credits from the project to purchase office equipment, furniture, field equipment, communication facilities, and transportation means\. The credit is subject to 100 percent repayment during seven years, with a four year grace period\. The total amount of credit provided is KGS 36\.45 million, out of which 59 percent has been allocated to WUAs included in the rehabilitation program\. Priority was given to those WUAs who benefited from the OIP rehabilitation program and 59 of them (94 percent) received credit\. This prioritization was also reflected in the average amount of credit allocated per WUA which was much higher for WUAs with rehabilitation (KGS 367,500 per WUA) than for WUAs without rehabilitation (KGS 88,500 per WUA)\. 32  The analysis of data shows the following (Table 9): The uptake of credit by WUAs where rehabilitation works had been carried out was significantly greater than WUAs where rehabilitation had not been carried out ­ generally from 3 to 5 times greater in terms of vehicles and equipment purchased, and 4 times greater in terms of amount borrowed; A significant number (>85 percent) of rehabilitated WUAs purchased vehicles, compared to only 17 percent of non-rehabilitated WUAs; A significant number (>93 percent) of rehabilitated WUAs purchased bicycles, compared to 44 percent of non-rehabilitated WUAs, emphasizing the importance by the rehabilitated WUAs placed on mobility and communication; A significant number (>85 percent) of rehabilitated WUAs purchased computers, compared to 24 percent of non-rehabilitated WUAs; and Almost double the number of rehabilitated WUAs purchased water measuring devices, showing a keener interest in discharge measurement\. 33  Table 9: Vehicles and equipment purchased by WUAs under the technical credit scheme ) ks t gniru Total Oblast forebm Cost, '000 sA elcih elcycrot ecl retup reipo xaF/ re KGS( ne iltf dere noi ne utp biac s KGS Nu WU Ve Mo cyiB m ocot retni phoel S Co Ph Pr Te UP lyppuS draob )m4\.1(ks )m2\.1(ks ilef De De moC ria Ch attsoidaR ngiliF asemreta ceiv W de All WUAs Osh 64 15 16 70 17 12 17 9 17 16 14 18 5 10 48 11 0 149 8,241 Jalal-Abad 28 23 3 27 24 18 24 14 24 24 29 22 10 11 83 9 0 184 9,938 Batken 23 10 6 7 9 5 9 5 9 9 9 11 5 4 25 2 0 108 4,471 Talas 36 4 0 0 3 0 3 0 3 3 2 3 0 2 9 0 0 108 1,080 Naryn 31 11 3 11 18 13 18 11 18 18 16 13 5 14 51 3 0 134 5,619 Issy-Kul 17 14 1 14 16 12 16 9 16 16 14 16 7 9 55 5 2 95 6,102 Chui 27 3 0 0 4 0 4 0 4 4 0 1 3 0 4 0 0 28 1,006 Total 226 80 29 129 91 60 91 48 91 90 84 84 35 50 275 30 2 806 36,458 Average per 10 WUA 10\.00 3\.54 1\.28 5\.71 4\.03 2\.65 4\.03 2\.12 4\.03 3\.98 3\.72 3\.72 1\.55 2\.21 12\.17 1\.33 0\.09 35\.66 1613 Rehabilitated WUAs only Osh 14 11 5 18 11 8 11 6 11 10 9 14 4 7 37 2 0 56 4,837 Jalal-Abad 12 12 2 24 11 11 11 7 11 11 13 11 3 6 52 6 0 78 5,430 Batken 7 7 6 7 6 4 6 2 6 6 6 8 2 4 19 2 0 30 3,328 Talas 7 4 0 0 3 0 3 0 3 3 2 3 0 2 9 0 0 28 944 Naryn 11 9 0 3 11 9 11 7 11 11 10 12 4 9 42 1 0 67 3,738 Issy-Kul 9 8 1 4 9 6 9 4 9 9 7 8 3 6 35 3 2 63 3,406 Chui 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 Total 60 51 14 56 51 38 51 26 51 50 47 56 16 34 194 14 2 322 21,684 Average per 10 WUA 10\.00 8\.50 2\.33 9\.33 8\.50 6\.33 8\.50 4\.33 8\.50 8\.33 7\.83 9\.33 2\.67 5\.67 32\.33 2\.33 0\.33 53\.67 3614 Non-rehabilitated WUAs only Osh 50 4 11 52 6 4 6 3 6 6 5 4 1 3 11 9 0 93 3404 Jalal-Abad 16 11 1 3 13 7 13 7 13 13 16 11 7 5 31 3 0 106 4507 Batken 16 3 0 0 3 1 3 3 3 3 3 3 3 0 6 0 0 78 1143 Talas 29 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 80 136 Naryn 20 2 3 8 7 4 7 4 7 7 6 1 1 5 9 2 0 67 1881 Issy-Kul 8 6 0 10 7 6 7 5 7 7 7 8 4 3 20 2 0 32 2697 Chui 27 3 0 0 4 0 4 0 4 4 0 1 3 0 4 0 0 28 1006 Total 166 29 15 73 40 22 40 22 40 40 37 28 19 16 81 16 0 484 14775 Average per 10 WUA 10\.00 1\.75 0\.90 4\.40 2\.41 1\.33 2\.41 1\.33 2\.41 2\.41 2\.23 1\.69 1\.14 0\.96 4\.88 0\.96 0\.00 29\.16 890 Rehab/Non-rehab ratio 0\.36 4\.87 2\.58 2\.12 3\.53 4\.78 3\.53 3\.27 3\.53 3\.46 3\.51 5\.53 2\.33 5\.88 6\.63 2\.42 0\.00 1\.84 4\.06 34  (b) Component 2: Infrastructure Rehabilitation and O&M Component Selection\. The Component was designed to support rehabilitation of on-farm I&D systems under the management of WUAs that met certain pre-defined criteria and milestones\. Overall seven milestones were used, with WUAs achieving milestone 4 being eligible to enter into the planning and design process for rehabilitation\. Although many WUAs achieved the advanced milestones, it was possible to complete rehabilitation for only 63 WUAs\. According to the M&E database, out of the 455 registered WUAs, a total of 305 WUAs achieved milestone 4, and 97 WUAs achieved milestone 7, 63 of which have received support for rehabilitation under the project\. The availability of funds was the limiting factor, rather than the availability of eligible WUAs\. All the required milestones for 63 WUAs selected for rehabilitation are justified and reasonably documented\. Rehabilitation works were carried out in 63 WUAs with a total command area of 121,436 ha, of which 51,608 ha (total investment of US$7\.4 million) is in the North and 69,828 ha (total investment of US$12\.92 million) is in the South (Tables 10 and 11)\. Out of 63 rehabilitated contracts, 35 are in the South (Osh ­ 15, Jalalabat ­ 13, and Batken ­ 7) and 28 in the North (Talas ­ 8, Issyk-Kul ­ 9, and Naryn ­ 11)\. Average per hectare investment cost is US$153/ha (in the North ­ US$157/ha, and US$151/ha in the South) or some US$166/ha including some limited off-farm infrastructure rehabilitation cost\. The final cost of the component is US$21\.06 million including IDA Credit of US$17\.47 million and Government contribution of US$3\.59 million\. The total cost of committed civil works contracts is US$20\.3 million of which 25 percent or about US$5\.08 million would be repaid by WUAs\. The repayment conditions include a four-year grace period, followed by a three-year repayment period with semi-annual installments\. The interest rate equals the annual inflation rate, but cannot exceed 10 percent\. 35  Table 10: Status of Rehabilitation Contracts - Summary Status of Rehabilitation Sub-Projects (Final, April 2008) CW Area '000 ha Cost % CW Area '000 ha Cost % Contr Incl Cancel $ mn a/ $/ha b/ total Contr Incl Cancel $ mn a/$/hab/total South North/Center Osh 128\.4 Talas 113\.2 cancelled 3 - 8\.2 0\.4 47 cancelled - - - - - complete 15 28\.4 - 4\.0 141 complete 8 15\.5 - 1\.7 110 ongoing - ongoing - - - - - Osh 18 28\.4 8\.2 4\.4 155 22% Talas 8 15\.5 - 1\.7 110 9% Jalal-Abad 124\.7 Issyk-Kul 154\.3 cancelled 2 - 4\.1 0\.4 90 cancelled 1 - 2\.2 0\.2 79 complete 13 27\.7 - 4\.7 170 complete 9 21\.0 - 2\.5 119 ongoing - ongoing - J-abad 15 27\.7 4\.1 5\.1 183 25% Issyk-Kul 10 21\.0 2\.2 2\.7 128 13% Batken 57\.5 Naryn 119\.8 cancelled 2 - 2\.9 0\.8 285 cancelled - - - - - complete 7 13\.9 - 2\.6 187 complete 11 15\.1 - 3\.0 195 ongoing - ongoing - Batken 9 13\.9 2\.9 3\.4 245 17% Naryn 11 15\.1 - 3\.0 195 15% South 310\.6 North/Center 387\.3 cancelled 7 - 15\.2 1\.6 104 cancelled 1 - 2\.2 0\.2 79 complete 35 70\.0 - 11\.3 161 complete 28 51\.6 - 7\.2 139 ongoing - ongoing - South 42 70\.0 15\.2 12\.7 182 63% North/Center 29 51\.6 2\.2 7\.4 143 37% Project TOTAL c/ 642\.2 cancelled 8 - 17\.4 1\.8 101 complete 63 121\.6 - 18\.5 152 ongoing - Project 71 121\.6 17\.4 20\.2 166 100% Notes a/ actual costs for completed contracts (best estimates as final payments to be made for few remaining contracts)\. b/ overall cost/ha including off-farm works\. c/ whole country excluding Chui oblast\. Table 11: Rehabilitation Works carried out in the 63 WUAs Command Investment Investment Oblast/WUA area Cost('000 per ha (ha) KGS) (KGS/ha) SOUTH I Batken 1 Kulundu-Razzakov 2,899 37,902\.19 13,074\.23 2 Too-Jailoo 1,616 11,294\.05 6,988\.89 3 Ak-Suu-Halmion 3,080 20,856\.41 6,771\.56 4 Kayindy-Okhna 1,250 13,332\.04 10,665\.63 5 Besh-Batir 1,450 13,255\.85 9,141\.97 6 Ak-Suu-Kara-Bak 1,849 16,967\.96 9,176\.83 7 Kyzyl-Kyr 1,750 20,773\.29 11,870\.45 Sub-total Batken 13,894 134,381\.79 9,671\.93 II Jalalabat 1 Aral-Sai 2,238 16,513\.08 7,378\.50 2 Murat-Murap 2,424 7,764\.60 3,203\.22 3 Kyla 2,118 21,245\.92 10,031\.12 4 Sarcha 1,454 6,708\.96 4,614\.14 5 Sary-Tala-Suu 1,805 18,904\.25 10,473\.27 6 Tushum-Suu 1,455 17,204\.02 11,824\.07 7 Shabnam 1,831 8,969\.52 4,898\.70 8 Choko 1,450 5,969\.41 4,116\.83 9 Murap 1,293 12,480\.74 9,652\.55 10 Kenehs-Suu 3,542 28,444\.64 8,030\.67 36  Command Investment Investment Oblast/WUA area Cost('000 per ha (ha) KGS) (KGS/ha) 11 Kerben-Suu 2,496 8,637\.03 3,460\.35 12 Bozbu-Ata-Suu 1,729 24,700\.72 14,286\.13 13 Naryn-Suu 3,620 24,565\.49 6,786\.05 Sub-total Jalalabat 27,455 202,108\.36 7,361\.44 III Osh 1 Rakhmat 3,261 10,317\.67 3,163\.96 2 Japalak 1,867 8,107\.99 4,342\.79 3 Jany-Arik 1,037 22,744\.72 21,933\.19 4 Chomo 1,593 8,812\.02 5,531\.71 5 Jaloldinov 1,734 14,686\.15 8,469\.52 6 Maz-Aikal 1,830 17,992\.15 9,831\.78 7 Sahy-Darie 1,570 7,189\.85 4,579\.52 8 Obu-Hayat 1,803 5,330\.69 2,956\.56 9 Kashka-Suu 1,708 6,838\.43 4,003\.76 10 Mangyt-Hydro 2,047 13,507\.96 6,598\.90 11 Toolos-Nookat 3,365 16,942\.00 5,034\.77 12 Asir 1,446 13,093\.91 9,055\.26 13 Kyrk-Kungey 1,538 4,398\.32 2,859\.76 14 Altyn-Kol-Bakhmal 2,138 11,678\.31 5,462\.26 15 Karaol-Dostuk 1,542 13,124\.75 8,511\.51 Sub-total Osh 28,479 174,764\.90 6,136\.62 SUB-TOTAL SOUTH 69,828 511,255\.05 7,321\.63 NORTH IV Issyk-Kul 1 Chyrpykty 1,100 6,541\.92 5,947\.20 2 Temirdegi-Chon-Ak-Suu 2,148 8,491\.23 3,953\.09 3 Toru-Aigyr 1,249 6,871\.99 5,501\.99 4 Sual 690 7,934\.09 11,498\.69 5 Kardy-Jaryk 1,447 9,813\.05 6,781\.65 6 Darkhan-Juuku 2,879 9,425\.22 3,273\.78 7 Saruu-Juuku 3,056 26,515\.18 8,676\.43 8 Shatyly 6,251 12,262\.29 1,961\.65 9 Burma-Suu 2,247 19,964\.05 8,884\.76 Sub-total Issyk-Kul 21,067 107,819\.03 5,117\.91 V Naryn 1 Kyzyl-Zoo-Dostuk 1,480 3,072\.74 2,076\.18 2 Teshik-Suu 1,125 8,932\.74 7,940\.21 3 Chagaldak 1,280 12,287\.41 9,599\.54 4 Medet-Datkha 1,530 28,834\.80 18,846\.27 5 Min-Teke-Emel 1,127 6,358\.75 5,642\.19 6 Jon 1,156 12,389\.46 10,717\.53 7 Senkilta-Too-Bulagy 1,078 7,276\.84 6,750\.32 8 Shish-Choku 1,527 10,575\.41 6,925\.61 9 Orton 2,010 9,504\.99 4,728\.85 10 Jogorku-Mai 1,058 3,895\.13 3,681\.59 11 Kolmo 1,649 5,995\.25 3,635\.69 Sub-total Naryn 15,020 109,123\.52 7,265\.21 VI Talas 1 Suu-Omur 2,914 3,797\.87 1,303\.32 2 Ogotur-Chon 3,983 16,596\.89 4,166\.93 3 Bak-Bar 2,385 12,245\.04 5,134\.19 4 Sary-Kuurai 373 2,428\.93 6,511\.86 5 Joon-Dobo 1,542 7,158\.33 4,642\.23 6 Bel 1,242 4,990\.98 4,018\.50 7 Chyrkanak ­ 4 987 7,745\.81 7,847\.83 8 Jorgo 2,095 14,139\.63 6,749\.23 Sub-total Talas 15,521 69,103\.47 4,452\.26 SUB-TOTAL NORTH 51,608 286,046\.01 5,542\.67 GRAND TOTAL 121,436 797,301\.06 6,565\.61 37  The main works accomplished include 1,138 km of irrigation canals rehabilitated, including cleaning, reshaping or lining, 142 km of drains cleaned, 32 night storage reservoirs cleaned of sediment and structures repaired, 527 flow measuring structures constructed, and 2,758 hydraulic and other structures installed on canals (Table 12)\. Table 12: Rehabilitated Structures Night Hydraulic Oblast/WUA Canal Collectors storage Hydropost and other (km) (km) reservoirs (nos\.) structures (no\.) (no\.) SOUTH I Batken 1 Kulundu-Razzakov 42\.80 0\.00 0 14 50 2 Too-Jailoo 9\.20 0\.00 0 4 30 3 Ak-Suu-Halmion 20\.90 0\.00 0 43 72 4 Kayindy-Okhna 20\.80 0\.00 0 2 33 5 Besh-Batir 11\.70 3\.43 0 2 26 6 Ak-Suu-Kara-Bak 9\.40 0\.00 0 13 43 7 Kyzyl-Kyr 10\.50 0\.00 0 10 42 Sub-total Batken 125\.30 3\.43 0 88 296 II Jalalabat 1 Aral-Sai 25\.04 0\.00 0 5 103 2 Murat-Murap 21\.60 0\.00 0 37 72 3 Kyla 8\.50 0\.00 0 26 62 4 Sarcha 16\.60 12\.80 0 3 70 5 Sary-Tala-Suu 31\.00 0\.00 0 0 93 6 Tushum-Suu 9\.40 0\.00 0 3 54 7 Shabnam 16\.00 36\.00 0 5 52 8 Choko 6\.10 0\.00 0 4 9 9 Murap 6\.90 0\.00 0 4 57 10 Kenehs-Suu 32\.00 0\.00 0 26 122 11 Kerben-Suu 3\.10 0\.00 0 0 4 12 Bozbu-Ata-Suu 9\.40 0\.00 0 0 37 13 Naryn-Suu 5\.20 0\.00 0 4 14 Sub-total Jalalabat 190\.84 48\.80 0 117 749 III Osh 1 Rakhmat 8\.40 0\.00 0 13 33 2 Japalak 31\.60 0\.00 0 66 48 3 Jany-Arik 25\.60 0\.00 0 9 80 4 Chomo 15\.66 0\.00 0 4 38 5 Jaloldinov 13\.98 0\.00 0 15 28 6 Maz-Aikal 16\.09 0\.00 0 8 82 7 Sahy-Darie 10\.50 0\.00 0 9 18 8 Obu-Hayat 26\.46 0\.00 0 11 63 9 Kashka-Suu 8\.80 0\.00 0 11 61 10 Mangyt-Hydro 3\.10 0\.00 0 3 64 11 Toolos-Nookat 8\.25 35\.45 0 17 89 12 Asir 1\.88 0\.00 0 13 34 13 Kyrk-Kungey 5\.80 0\.00 0 5 26 14 Altyn-Kol-Bakhmal 9\.47 39\.93 0 22 41 15 Karaol-Dostuk 30\.69 14\.01 0 9 94 Sub-total Osh 216\.28 89\.39 0 215 799 SUB-TOTAL SOUTH 532\.42 141\.62 0 420 1,844 NORTH IV Issyk-Kul 1 Chyrpykty 5\.80 0\.00 1 15 19 2 Temirdegi-Chon-Ak- Suu 24\.30 0\.00 1 7 36 3 Toru-Aigyr 16\.20 0\.00 1 5 14 4 Sual 2\.60 0\.00 1 3 35 5 Kardy-Jaryk 37\.20 0\.00 0 11 72 38  Night Hydraulic Oblast/WUA Canal Collectors storage Hydropost and other (km) (km) reservoirs (nos\.) structures (no\.) (no\.) 6 Darkhan-Juuku 75\.00 0\.00 1 5 23 7 Saruu-Juuku 13\.70 0\.00 1 6 97 8 Shatyly 17\.50 0\.00 1 4 49 9 Burma-Suu 54\.60 0\.00 0 8 76 Sub-total Issyk-Kul 246\.90 0\.00 7 64 421 V Naryn 1 Kyzyl-Zoo-Dostuk 23\.60 0\.00 0 3 25 2 Teshik-Suu 22\.56 0\.00 0 5 77 3 Chagaldak 20\.50 0\.00 0 2 21 4 Medet-Datkha 13\.79 0\.32 0 1 21 5 Min-Teke-Emel 14\.35 0\.00 0 7 70 6 Jon 10\.00 0\.00 1 1 6 7 Senkilta-Too-Bulagy 11\.00 0\.00 0 2 14 8 Shish-Choku 30\.30 0\.00 2 6 10 9 Orton 37\.55 0\.00 4 3 39 10 Jogorku-Mai 12\.35 0\.00 3 2 7 11 Kolmo 3\.50 0\.00 0 5 18 Sub-total Naryn 199\.50 0\.32 10 37 308 VI Talas 1 Suu-Omur 29\.20 0\.00 2 0 60 2 Ogotur-Chon 41\.20 0\.00 5 0 5 3 Bak-Bar 36\.15 0\.00 1 3 45 4 Sary-Kuurai 6\.00 0\.00 0 0 11 5 Joon-Dobo 18\.92 0\.00 3 2 41 6 Bel 16\.00 0\.00 0 0 4 7 Chyrkanak - 4 0\.60 0\.00 4 1 6 8 Jorgo 11\.09 0\.00 0 0 13 Sub-total Talas 159\.16 0\.00 15 6 185 SUB-TOTAL NORTH 605\.56 0\.32 32 107 914 GRAND TOTAL 1,138\.00 141\.94 32 527 2,758 Engineering design\. Despite the relatively simple nature of most of the rehabilitation works, there were initially some issues with poor design quality and drawings\. IDA implementation review reports indicated that OIP initially faced difficulties in finding suitable design engineers\. With the technical assistance provided by the engineers of the IDA review missions, an obvious positive improvement was achieved, as later design works covered more detailed information and were presented with improved quality drawings\. The review of some of the later design works showed that they were adequate for the type of works under consideration\. The project envisaged that RSU staff would have an important function in the development of the rehabilitation requirements and designs\. During the early stage of implementation of the rehabilitation program it became clear that the staff could not focus both on WUA development and rehabilitation of infrastructure\. At a certain stage, there was too much focus on design work as there was a need to get the rehabilitation component up and running\. Therefore organizational arrangements for the rehabilitation component were revised in October 2003 with the introduction of more technical field staff dedicated to rehabilitation works through Oblast Rehabilitation Teams and a clear allocation of responsibilities for all engineering staff\. Each ORT comprised a design engineer, a construction engineer, and a draftsman\. These arrangements worked well, 39  with good on-site collaboration for both design and construction supervision\. Contractors also expressed satisfaction with the arrangements\. Two design consulting companies recruited under the project (one for the north was recruited in June 2002 and one for the south recruited in July 2003) had important tasks under the project, not only to design more complicated works, but also to sign off on ORT designs\. The design companies were holding the license required to certify design work, while not all ORT engineers had this authority\. The result was that the design companies scrutinized all the ORT designs before certifying the product\. It can be concluded that the project adapted well to the needs and made necessary changes to achieve satisfactory design and construction supervision services\. Many WUAs opted for concrete lining of canals, but IDA review missions often stressed that more attention needed to be paid to the requirements of regulatory structures such as intakes, division boxes, culverts, outlets, cross regulators, energy dissipaters, flow meters, etc\., which will allow WUAs to distribute water among member farmers in a more reliable and timely manner\. IDA used a Bank-Netherlands Water Partnership Program (BNWPP) Trust Fund to bring in international hydraulic specialists from California Polytechnic to introduce modern structure design\. On-farm canal lining should be used only for limited sections of the system which are technically required to reduce or combat seepage losses\. At project completion more than 3,000 structures were constructed\. Quality of works implemented\. In general the construction works were undertaken under difficult conditions because of the harsh weather conditions and the obligation to ensure continuous water supply during the irrigation season, which left only a short period available for construction\. Besides this, most of the local contractors at the initial stage of project implementation lacked experience with work planning and implementation of this type of extensive rehabilitation, and were not aware of the international standards and how to prepare tender proposals\. Considerable efforts were made by both the PIU and IDA review teams during project implementation to ensure acceptable quality of both design and civil works\. Supervision of Works\. Sub-projects files are kept in WUAs, and at raion and oblast level support units\. Available information includes design files, daily activity reports of site supervisors, monthly bills of completed quantities and bills of cumulative quantities, certificates of used materials and equipment, certificates of concrete and soil compaction works quality, "as-built" drawings, hand-over documentation, etc\. It shows that the overall supervision procedures were organized and carried out in an acceptable manner\. Repayment of Capital Investment by WUAs\. None of the WUAs has reached the end of the four-year grace period\. From information provided, one WUA has started repaying its share of the capital costs and some other WUAs are planning to start the repayment ahead of agreed schedule\. 40  Annex 3\. Economic and Financial Analysis Problems of Data Availability\. The economic analysis in the PAD is based on quantifying projected agricultural benefits by applying the following assumptions: (i) average yields increased by 10 percent at full development in rehabilitated WUAs; and (ii) average yields decreased by 1 percent per year in the without-project scenario\. During the latter stage of project implementation, two exercises took place aimed at quantifying project impacts and benefits, in particular on crop performance: a case study on on-farm rehabilitation impact was undertaken by M-Vector in April 2007\. The study was based on field interviews with 496 farmers in 33 WUAs in three groups: 13 WUAs having benefited from rehabilitation; 10 WUAs having received only support from the SUs; 10 WUAs not having benefited from the project; and an in-depth analysis of 15 WUAs selected by the PIU M&E unit, mainly those that were among the first ones that had rehabilitation contracts completed\. It has proven difficult to quantify agricultural benefits and therefore conduct an economic analysis for a number of reasons: (i) most rehabilitation was completed during the last years of project implementation, i\.e\. in 2006 and 2007 and only 5 WUAs benefited from rehabilitation in or before 2005; (ii) it is too early to witness benefits from rehabilitation which are expected to take a few years to materialize at full benefit; (iii) there is no systematic comparative analysis in the WUA database between WUAs having benefited from rehabilitation and the other ones; (iv) the WUA reporting system and its yield data collection system does not allow refined analysis of limited yield increases of the order of 10 percent; and (v) the M&E system did not collect field-based data on crop production costs enabling the preparation of crop budgets for evaluation purposes\. Three analyses are prepared in the next paragraphs which appear to confirm that the project is likely to achieve its development objective and to eventually yield a good Economic Internal Rate of Return (EIRR), similar to the 36 percent calculated at appraisal\. Cost Efficiency\. One of the most important parameters applied for I&D rehabilitation projects is the rehabilitation cost per hectare\. The average of the project was US$153 per hectare (see Annex 2 for more details), considering the 121,436 ha benefiting from rehabilitation in the 63 selected WUAs\. If the limited rehabilitation cost of off-farm network rehabilitation is added, the average cost per hectare of the project reaches US$166 per hectare\. This is about 20 percent higher than the cost per hectare of US$138 foreseen at appraisal, including price and physical contingencies\. This increase is partly due to higher than expected increases in prices of construction material during the implementation period\. Yet, as a result of PIU efforts to contain costs, the absolute value of US$166/ha remains low compared to the majority of rehabilitation projects in other 41  countries, hence the efficiency of the proposed rehabilitation method (focus on priority works) promoted by the project\. In terms of WUA strengthening, the cost effectiveness of the project is much higher than was foreseen at appraisal\. In the PAD, the base cost was US$5\.23 million, corresponding to a total cost of US$6\.33 million (including 21 percent of price and physical contingencies)\. At completion, the total direct cost for WUA development was US$4\.60 million\. This budget was also used to strengthen 455 WUAs, rather than the estimated 160 WUAs\. Yield Increases and Revised Cost Benefit Analysis\. As mentioned earlier, the data contained in the WUA database and collected through surveys cannot be used to fully demonstrate project impact on yields\. Yet, the data collected shows overall positive trends even if it is not consistent for all crops (Table 13)\. Table 13: Yields of Major Crops per Category of WUAs (tons per hectare) 2005 2006 No SU No SU Support Rehabilitated Support Support Rehabilitated Support Winter Wheat 2\.0 2\.8 2\.3 1\.6 2\.8 2\.2 Spring Wheat 2\.1 2\.0 2\.5 2\.0 1\.7 2\.2 Barley 1\.5 3\.4 1\.6 1\.5 2\.0 1\.0 Corn 2\.0 2\.7 2\.6 1\.7 3\.0 2\.2 Kidney-Bean 1\.3 1\.3 1\.6 1\.2 1\.7 1\.4 Cotton 1\.8 2\.5 1\.9 1\.7 2\.5 1\.7 Potato 18\.8 8\.3 9\.6 17\.4 6\.8 15\.3 Vegetables 25\.0 29\.4 10\.3 30\.0 27\.3 10\.4 Permanent Grasses 3\.6 2\.9 3\.2 2\.8 3\.1 2\.9 The following Table 14 summarizes the percentage of yield changes for the three groups\. The average is weighted by the average cropping pattern observed throughout the country\. On average, while crop yields did stagnate between 2005 and 2006 in rehabilitated WUAs, it has decreased by 12\.2 percent in the control group and has decreased by 4\.9 percent in the WUAs which only benefited from the SUs\. Rehabilitation appears to have maintained yields while these have decreased in other WUAs: the net yield impact from the project would be 11\.8 percent from the combination of the two components and 7\.3 percent from the first component\. The first figure is very similar to the figure assumed at appraisal, i\.e\. a net yield increase by 11 percent, corresponding to an increase by 10 percent with-project and a decrease by 1 percent per year without-project\. An attempt to re-calculate the Economic Rate of Return could be performed by assuming that: (i) the above partial results from the survey with 33 WUAs are extrapolated to the entire project, i\.e\. an average increase by 11\.8 percent in rehabilitated WUAs compared to non-beneficiary WUAs\. This is very close to the assumption used in the PAD analysis on a per hectare basis; (ii) compared to the PAD, benefits can be discounted by 24 percent as the area eventually benefiting from rehabilitation is only 76 percent of what was planned at appraisal (122,000 ha instead of 160,000 ha); and (iii) the total cost of the 42  project in US Dollars is the one estimated at appraisal\. Based on these assumptions, the ERR of the project would be reduced to about 20 percent\. However, this is very conservative considering that: (i) the above yield changes were measured for one year only, while full benefit should materialize after a few years; and (ii) other substantial benefits were not incorporated in the calculation as explained below\. Table 14: Yield Changes of Major Crops per Category of WUAs (2005-2006) No Support Rehabilitated SU Support Winter Wheat -20% 0% -4% Spring Wheat -5% -15% -12% Barley 0% -41% -38% Corn -15% 11% -15% Kidney-Bean -8% 31% -13% Cotton -6% 0% -11% Potato -7% -18% 59% Vegetables 20% -7% 1% Permanent Grasses -22% 7% -9% Weighted Average -12\.2% -0\.4% -4\.9% Net Change (compared to No Support) 11\.8% 7\.3% Other Economic Benefits\. The following are believed to be substantial benefits from the project though they were not incorporated in the PAD economic analysis: (i) Crop intensity\. Field visits have shown that some specific sections of the command areas have been reclaimed as a result of increased water availability\. This is particularly true in 2008, in connection with the improvement of agricultural prices which motivates farmers to maximize land use\. Although price improvement might be a major driver, this could not have happened without a secured supply of water, hence the contribution of the project to this improvement\. (ii) Changes in cropping patterns\. An aggregation of the WUA M&E data between 2001 and 2006 shows some trend in cropping patterns which are summarized in the following Table 15 and graph\. In summary, if the average of 2005-2006 is compared to the average of 2001-2002 (to mitigate the risk of comparing years with particular climatic conditions), the share of vegetables and beans substantially increased in the cropping pattern mostly at the expense of cotton, cereals, and other crops\. Table 15: Changes in cropping patterns (2001-2006) 2001-2002 2005-2006 Change Wheat and Barley 38\.5% 36\.1% -6% Maize 7\.1% 7\.1% 1% Bean 3\.7% 6\.3% 67% Cotton 11\.7% 7\.1% -39% Vegetables, potato, gardens 10\.7% 16\.1% 50% Forage Crops 14\.4% 15\.2% 6% Others 13\.9% 12\.1% -13% 43  Cropping Pattern in WUAs monitored by the Project (2001-2006) 100% 90% 80% 70% Others Forage Crops 60% Vegetables, potato, gardens 50% Cotton Bean 40% Maize 30% Wheat and Barley 20% 10% 0% 2001 2002 2003 2004 2005 2006 (iii) The economic benefits from decreased abstraction of water from the main system due to increased scheme efficiency have not been quantified\. These result from possible economic use of the saved water downstream for agricultural or other purposes\. (iv) The economic analysis focuses on the benefits from the second project component, i\.e\. increased crop production on the 160,000 ha benefiting from rehabilitation\. However, the first institutional component alone has also brought substantial benefits to water users which were not quantified in the analysis, in particular as a result of improved organization water distribution and water availability and reliability\. The yield figures analyzed above show that the WUA group 2 (only benefiting from the first component, i\.e\. SU support) saw a net average yield increase of 7\.3 percent compared to the control group\. (v) Social benefits such as time saved by water users due to better organization of water distribution\. Besides the benefits related to water availability and timeliness which have been incorporated in the benefits from yield increases, the WUA study has shown substantial social benefits from the project such as considerable savings in time spent on irrigation as well as a reduction of conflicts over water between water users\. As a conclusion, although it is too early to fully document project impact on agricultural performance, the above partial analysis shows that the project is likely to reach its development objective and therefore an economic performance close to the one projected at appraisal\. 44  Annex 4\. Bank Lending and Implementation Support/Supervision Processes (a) Task Team members Names Title Unit Responsibility/ Specialty Lending Joop Stoutjesdijk Lead Irrigation Engineer ECSSD Task Team Leader Joseph Goldberg Sector Leader ECSSD Sector Leader Goetz Schreiber Lead Agricultural Economist ECSSD Program Team Leader Naushad Khan Lead Procurement Specialist ECSPS Procurement Stan Peabody Lead Social Scientist ECSSD Social Orunbek Smamkanov Operations Officer ECSSD Institutions Ranjan Ganguly Financial Management Specialist ECSPS Financial management Nikolai Soubbotin Legal Counsel LEGEM Legal Rohan Selvaratnam Financial Analyst ECSSD Processing Hannah Koilpillai Disbursement Officer LOA1 Disbursement Jenny Corso Project Assistant ECSSD Task Team support Nirmala Saraswat Environmental Specialist ECSSD Environment Tom Ward Consultant ECSSD Costab, economics Supervision/ICR Joop Stoutjesdijk Lead Irrigation Engineer ECSSD TTL and Engineering Ainura Kupueva Operations Officer ECSSD Operations, Agric\. Janna Ryssakova Social Development Specialist\. ECSSD Social Nurbek Kurmanaliev Procurement Specialist\. ECSPS Procurement John Otieno Ogallo Sr Financial Management Specialist ECSPS Financial management Norval Stanley Peabody Consultant ECSSD Social, WUAs Lynette Alemar Senior Program Assistant ECSSD Task team support Nurjamal Asanova Team Assistant ECCKG Task team support Martin Burton Consultant ECSSD Inst\. Dev\./M&E Timothy Robert Jackson Consultant ECSSD Engineering/Env\. Sam H\. Johnson Consultant ECSSD WUA Development Benoist Veillerette Agricultural Economist FAO ICR preparation Samvel Ghazaryan Irrigation Engineer FAO ICR preparation Sylvie Dideron Rural Sociologist FAO ICR preparation 45  b) Staff Time and Cost Staff Time and Cost (Bank Budget Only) Stage of Project Cycle No\. of staff weeks USD Thousands (including travel and consultant costs) Lending FY98 259\.75 FY99 137\.27 FY00 153\.47 Total: 35 550\.49 Supervision/ICR FY00 1 5\.15 FY01 20 70\.92 FY02 17 97\.28 FY03 18 89\.39 FY04 21 143\.37 FY05 17 111\.64 FY06 19 74\.28 FY07 20 86\.23 FY08 11 54\.48 Total: 144 732\.74 46  Annex 5\. Beneficiary Survey Results There was no specific beneficiary survey at the end of the project, but the following data was compiled from various sources of information that was available in the Department of Water Resources\. M-Vector Impact Study (2007)\. The impact study carried out by M-Vector looked at 13 WUAs where rehabilitation works had been carried out by the project (Group 1), 10 WUAs which had received support from WUA Support Units (Group 2), and a further 10 WUAs where no or very little support had been provided until the time of the survey (Group 3; typically newly established WUAs)\. A total of 496 farmers were interviewed, 66 WUA staff, 43 local government personnel, and 16 raion and oblast DWR staff\. The study sought to assess the impact of the project on WUA and water user performance\. Key indicators used were the irrigated area, the crop yield, the cropping pattern, the volume of water used, the level of the ISF and the collection rate, and the cost of O&M\. Awareness of the role of the project was high (91 percent, n=212) among farmers in the rehabilitated WUAs (Group 1) and also in Group 2 WUAs (80 percent, n=143); For Group 1 there was a noticeable change in the assessment of indicators on water delivery by WUA staff, as shown in the table below: Indicator Good Good (Before rehabilitation) (After rehabilitation) N = 13 n = 13 Reliability of irrigation 0% 54% Volume of water delivered 0% 62% Timeliness of water delivery 0% 62% Equity of water delivery 23% 46% The perception among Group 1 for the indicators of reliability, delivered volume, timeliness and equity before and after rehabilitation show positive results, as indicated in the table below: Indicator Rehabilitation Very good Good Medium Bad Very bad status* % % % % % Reliability Before 0 19 48 30 3 n = 121 After 11 66 19 3 1 Delivered Before 1 15 53 29 2 volume After 10 64 22 4 0 n = 119 Timeliness Before 2 20 54 21 3 n = 109 After 12 62 20 6 0 Equity Before 3 34 48 14 1 n = 88 After 12 70 16 2 0 Very low Low Medium High Very high Disputes Before 13 7 48 28 4 n = 59 After 17 30 30 21 2 * Before ­ 2004; After ­ 2007 47  Reliability and water volume delivered are reported by farmers as being due to repairs and maintenance to the canals; and timeliness and equity due to observance of the delivery schedule prepared by the WUA management\. Assessment of Project Performance\. The project development objective for OIP-1 is to achieve increased agricultural production through reliable and sustainable water distribution\. The project's outcome/impact indicators were stated as: i) Increase crop yields in the project farms that have benefitted from system rehabilitation by 10 percent (to be measured in a number of representative farmers' fields); ii) On-farm irrigation systems properly operated and maintained after completion of rehabilitation works; and iii) Supply and distribution within the project farms of adequate irrigation water in a timely manner, in line with crop water requirements\. In the hierarchy of objectives the following outputs from each component are stated: Reliable and high quality management of rehabilitated irrigation systems: o Number of O&M plans developed in detail, fully costed and implemented each year after completion of rehabilitation works; o Representation and participation of users in WUAs; o Collection rates at least 90 percent of estimated tariff within two years after completion of rehabilitation works; and o Timely repairs to on-farm irrigation infrastructure\. Adequate irrigation water is received by farmers in the project farms: o Distribution efficiency of 80 percent achieved\. The data for these indicators was to come from WUA reports, annual reports prepared by the WUA Support Units, PIU progress reports, Ministry of Agriculture, Water Resources and Processing Industry statistics, DWR reports on water diversions, and IDA progress and supervision reports\. Table 16 summarizes the outcome/impact and output indicators given above, together with other relevant indicators and outlines how these have been used to assess the outcomes and impacts of the project\. Table 16: Summary table of project and other indicators Level/indicator Target value Actual Outcome/Output Outcome/impact Crop yields Increase of 10% Data not sufficiently conclusive as yet to assess changes in crop yields\. More time is needed and recommendations made for improving data collection for OIP-2\. On-farm irrigation Not expressly Encouraging signs found in relation to system O&M\. systems properly stated Water management staff, processes and procedures in operated and place and functioning; well established institutional base\. maintained Equity of water distribution found to be satisfactory\. 48  Level/indicator Target value Actual Outcome/Output Supply of adequate Not expressly M-Vector study found significant improvements for and timely irrigation stated rehabilitated WUAs in water users' assessment of the water supplies reliability, adequacy, timeliness and equity of water delivery\. Outputs Number of fully All rehabilitated 375 WUAs have achieved Milestone 3, well in excess of costed O&M plans WUAs (approx\. 80 the target set\. implemented No\.) Representation and 160 WUAs Significant achievement under the project, with 455 WUAs participation of users formed, 356 of which have Representative Assemblies\. in WUAs Nearly 9,000 Zonal Representatives have received training under the project\. Collection rates of At least 90% on The average ISF Collection Ratio for the rehabilitated ISF rehabilitated WUAs is 73% (16 No\.>90%, 22 No\. >80%)\. WUAs two years Rehabilitation works has been completed over 2 yrs ago on after rehabilitation 17 No\. of these WUAs, who all have among the higher (approx\. 80 No\.) collection rates\. Timely repairs of on- Rehabilitated Difficult indicator to measure\. Monitoring expenditure on farm irrigation WUAs (approx\. 80 maintenance, average expenditure per unit area is 93 infrastructure No\.) KGS/ha, with a range 11-312 KGS/ha\. Very dependent on the location (oblast and raion), but it seems that many WUAs are working towards increased maintenance of infrastructure\. Distribution Rehabilitated Not measured, as it is not an appropriate indicator for a efficiency WUAs (approx\. 80 number of reasons, the main one being that it takes No\.) extensive field work to measure efficiencies accurately\. Other indicators Payment of ISF to Not stated in PAD\. Payment to DWR has increased over the duration of the DWR ­ rehabilitated project over the country as a whole, from KGS 19\.8 and non-rehabilitated million in 2001 to over KGS 43\.5 million in 2007\. The contribution of the ISF to the total DWR budget (excluding electricity costs for pumped irrigation schemes) during this period has risen from 15% to 25%\. Payment in cash Not stated in PAD\. Payment in cash rather than in kind has improved rather than in kind Ultimate target: significantly over the duration of the project\. In 2002, the 100% payments were 64% in kind, 19% in cash, and 17% in labor\. In 2007, the payments were 33% in kind, 58% in cash, and 12% in labor\. Level of WUA debt Not stated in PAD\. The level of debt by water users to DWR has reduced with DWR - Target: Zero significantly over the duration of the project, from over rehabilitated and non- KGS 64 million in 2002 down to KGS 8\.96 million in rehabilitated 2007\. Reduction of volume Not stated in PAD\. The 2008 economic study identified reduced water of water abstracted by Target: Measure consumption as a key economic benefit of the project\. rehabilitated and non- against norms for Further work required to measure water abstraction against rehabilitated WUAs crop demand water demand based on crop type, area and irrigation norms\. Crop Yields\. Efforts were made at various stages of the project to monitor the crop yields\. Initially the crop yield data collected by the Regulatory Authority from the WUA Annual Report and the WUA Annual Survey was used, but these data were found to be unreliable and as they were figures reported by the WUA that were not necessarily statistically valid as averages for their command areas\. In general, the data is not as yet 49  sufficiently conclusive to assess definite changes in crop yields and more time is needed for farmers to adapt\. Given the number of landholdings and the variation of crop types grown within the WUA command area improvements need to be made to the measurement of yields and production\. At present the crop yield data are generally taken from the Ayil Okmotu's office\. Improvements in the estimation of crop yield and production can only be done with the support of the WUAs, and discussions should be held with WUA management to see if they are interested in improving the accuracy of crop yield measurements and crop production estimates\. Rather than collect information from all farmers a sampling approach is required which takes account of the mix of crop types, landholding sizes, location, soil type, etc\. On-farm Irrigation Systems Properly Operated and Maintained\. There are encouraging signs in relation to system operation and maintenance in the southern oblasts\. During IDA review missions dedicated efforts were made to better understand how WUAs and farmers manage and use irrigation water\. The questions to which answers were sought focused on the following areas of interest: How farmers decide when to irrigate, and with how much water; How well farmers manage the application of irrigation water on their fields; How water demands are made, processed and managed; How the WUA organizes itself for water management (staffing, procedures, rules, etc\.); How irrigation scheduling is organized and managed (turns, rotations, degree of control and measurement, etc\.); How volumes of water required and delivered are quantified; and Are there water shortages and how are these managed\. Management of the distribution of irrigation water by WUAs, and its application to the field by farmers, was generally adequate to good\. All WUAs had systems in place for taking requests from farmers, processing them and then delivering water\. Where water was in short supply WUAs had procedures for rotation of the available supplies\. In applying water to their plots farmers were observed to be controlling the flow to provide uniform flow to each furrow, using header ditches to split the flow coming from the quaternary canal\. Furrows were well-formed and stream sizes in the furrows seemed appropriate\. In general the crops looked well irrigated and of uniform growth across the fields, indicating uniform irrigation\. A key point observed during the field work was that the institutional base for water management is now well established in many WUAs\. There are well-equipped offices with adequate levels of staffing and management processes\. This is fundamental to good water management where large numbers of smallholder farmers are involved\. From this base improvements can be made in the technical aspects, such as field application, without it little would be possible\. Through this institutional base one of the key criteria 50  for good water management is satisfied, namely that distribution of water should be equitable to all farmers\. An area where there may still be inefficiencies lies in the duration and thus the depth of application of water\. It has not been possible during field visits to ascertain if the duration of irrigation was appropriate to the soil type and rooting depth of the crop\. This is an area where it has been recommended that further work is carried out by the WUA SUs to find out the actual situation in the field, and if problems are found, to initiate a program to make improvements\. A further possible area identified for improvement in irrigation water use efficiency was to look at refining the duration of the flow allocation to farmers\. During the field visits the minimum time unit was found to be half a day (6 hours), but more commonly water was allocated to farmers in units of 1 day\. This is a very broad time frame, and probably results in farmers using more water than they require\. Supply of Adequate and Timely Irrigation Supplies\. This is a difficult indicator to measure as there are few measuring structures within the WUA command area, other than at the intake from the off-farm system\. A proxy indicator for irrigation supplies at the on-farm level would be the number of complaints from water users, and the level of the irrigation service fee and its collection (on the assumption that unsatisfied water users are less likely to pay their service fee than satisfied ones)\. Monitoring the volume of water entering the WUA command area (each decade/month and total volume per year) is a useful related indicator as it gives an indication of the water supply available, and can be compared with previous years and with the cropping pattern to see if water abstraction has reduced/increased and whether the cropping and crop area have changed\. There are possible mixed messages here as after rehabilitation the volume of water abstracted may (should) decrease as the on-farm system should be more efficient, however with better water supplies farmers may change their cropping pattern which may result in increased demand\. Number of Fully-Costed O&M Plans\. Data for this indicator have been collected by the project, and are represented by Milestone 3\. By end-March 2008, 375 WUAs had achieved Milestone 3, well in excess of the 160 target set at the start of the project\. There is some concern that the level of the ISF set in some of these plans is not adequate for sustainable MOM; this is a key area for WMIP and OIP-2 where studies will be carried out to ascertain target values for different locations and systems, particularly in relation to maintenance works\. Representation and Participation of Users in WUAs\. The project has been very successful in establishing WUAs, and has then moved on to establishing Zonal Representatives in order to increase the level of participation by water users in the management of the WUA\. The majority of WUAs now have a Representative Assembly (356 from 455), with 267 WUAs already having maps showing the Representative Zones and zonal members and 8,964 meetings having been held\. A significant amount of 51  training has been carried out to support this process, growing from zero in 2004 to a total of nearly 9,000 by the end of 2007\. Collection Rates of ISF\. This is a key indicator for a number of processes: (i) it is a proxy for the level of satisfaction of the water users with the level of service they are receiving; (ii) it is a measure of the sustainability of the WUA over time; and (iii) it is a measure of the sustainability of the main (off-farm) system service provider and main system maintenance\. Two key indicators are of interest here: The collection rate of the ISF (%); and The total value of the ISF collected per unit area (KGS/ha)\. As expected, there is significant variation between each oblast in the total amount collected per unit area for all WUAs\. For Naryn and Issyk-Kul Oblasts the maximum figures are around 160 KGS/ha, with the average for Naryn Oblast around 50 KGS/ha and for Issyk-Kul Oblast around 100 KGS/ha\. In contrast, for Osh Oblast the maximum figures are around 600 KGS/ha and the average around 300 KGS/ha\. For the collection ratio there is no such variation between the oblasts, and the average collection rate among all WUAs is around 70 percent\. The total ISF (including the DWR payment) has been gradually increasing over the duration of the project\. The figure below shows the trend with the average fee level being 4\.68 tyin/m3 in 2007 compared with 2\.74 tyin/m3 in 2001\. Change in total ISF rate, 2001-2007 ) 3 7 m/n yi 6 (T et ra e 5 Fe ecivr 4 Se noitag 3 2 rriI lat 1 To 0 2001 2002 2003 2004 2005 2006 2007 Osh 3\.14 3\.24 3\.57 3\.72 3\.44 3\.75 3\.94 JalalAbad 3\.72 3\.32 3\.56 4\.56 4\.14 3\.39 3\.93 Batken 2\.29 2\.56 2\.88 3\.36 4\.17 4\.95 6\.31 IssykKul 2\.07 2\.33 3\.7 4\.38 4\.93 4\.21 5\.85 Naryn 0\.96 1\.1 1\.17 2\.58 2\.11 3\.03 3\.31 Talas 3\.29 3\.34 3\.45 3\.51 3\.79 4\.16 4\.48 Chui 3\.69 3\.83 4\.39 4\.48 4\.83 4\.95 4\.96 Source: 2007 Annual Report and Quarter IV, 2007 Progress Report, OIP\. 52  Timely Repairs of On-farm Irrigation Infrastructure\. This is a difficult indicator to measure without detailed field work\. A possible proxy indicator is the amount of expenditure on maintenance, but this indicator does not pick up if the maintenance work is timely or not\. The timeliness of repairs to on-farm infrastructure will affect the water delivery which in turn may affect the crop yields and the payment of the ISF\. Distribution Efficiency\. This is an ambitious indicator to measure, but also not a good indicator as it only measures the efficiency while the water is flowing in the canal, and does not take any account of whether the volume delivered to the field matches the irrigation demand\. Knowing the distribution efficiency is of no consequence if the canal flows at night and no-one uses the water\. It is better to look at the total volume of water delivered to the WUA command area and then compare this with the total seasonal demand estimated from the crop norms or using CROPWAT\. It is better to compare the supply each week or decade against the weekly or decade irrigation demand\. Payment of ISF to DWR\. This is an important indicator of: (i) the ability and willingness to pay; (ii) the status of the WUA and its ability to collect service fees, both for itself and the DWR; and (iii) the level of service provision by the WUA and the DWR\. As shown in the figure above, there has been a steady increase in the ISF paid by all WUAs\. Equally importantly, the percentage payment of the fee due has increased, resulting in a significant reduction of the level of debt to the DWR since the start of the project\. The contribution of the ISF to the DWR budget rose from KGS 19\.8 million to KGS 43\.6 million during the project\. Payment in Cash Rather than in Kind\. The break-up of the Soviet Union caused massive disruption to agricultural goods marketing and trading systems\. Virtually overnight the established systems were redundant, and new systems were needed\. As a consequence, in the 1990s the service fee due to DWR was paid in kind rather than in cash\. An important emerging objective of the project has been to improve the payment in cash, as this reduces the transaction costs\. The figure below shows that this has been achieved over the duration of the project, with the payment in cash increasing significantly from KGS 7\.2 million (19 percent of total paid) in 2002 to KGS 25\.3 million (58 percent) in 2007, with a corresponding reduction in the payment in kind (crops) from KGS 23\.7 million (64 percent) to KGS 14\.3 million (33 percent), and in labor from KGS 6\.3 million (17 percent) to KGS 4\.0 million (9 percent) 53  Forms of payment of ISF, 2002-2007 50,000 120% )S 40,000 100% KG 30,000 000'( tne 80% 20,000 my 60% pa 10,000 of eul 40% 0 Va 10,000 20% 20,000 0% 2002 2003 2004 2005 2006 2007 Amount due 45,707 43,336 47,199 41,497 43,163 40,673 Total paid 37,251 35,900 39,941 42,170 45,571 43,719 Payment in kind 23,669 22,898 23,302 21,338 21,874 14,342 Cash 7,217 9,238 11,834 14,850 18,228 25,341 Labor services 6,365 3,761 4,717 5,982 5,468 4,035 Debt to RDWR 8,456 7,436 7,258 673 2,408 3,046 Percentage paid 81% 83% 85% 102% 106% 107% Source: OIP Annual and quarterly reports, 2002-2007 Level of WUA Debt with DWR\. The level of water user debt with DWR is a key indicator of stability and productivity at the on-farm level\. Though the amount due has decreased by about 11 percent (from KGS 45\.7 to 40\.7 million) over the period 2002-2007 (see figure above) the total amount paid has increased significantly as a result of an increase in payment levels, from 81 percent (KGS 37\.2 million) in 2002 to 107 percent (KGS 43\.7 million) in 2007\. The level of annual debt to DWR was noticeably reduced, with "surplus" payments during 2005-2007 paying off outstanding debts\. In 2002 the debt to DWR was KGS 64 million, and in December 2007 the WUA debt to the DWR was KGS 8\.96 million\. Account needs to be taken of the fact that KGS 6\.9 million of bad debt to DWR by water users was written-off in a government resolution dated September 19, 2007\. Even with this write-off the level of debt has decreased markedly over the period of the project\. Reduction of Volume of Water Abstracted\. The intention of using the distribution efficiency as a measure of project performance was to measure the improvement of on- farm water distribution\. As explained in the section above it is rather a limited indicator, difficult to measure and does not capture all the possible improvements that might be brought about by the project\. A more comprehensive measure is to look for a reduction in the quantity of water abstracted, on the basis that improvements in distribution efficiency, scheduling, level of control over water, on-farm application, and water management in general will result in a reduction of water used\. In water-short locations this is an important factor, with more water being made available by top-end water users to bottom-end users\. Another study carried out by the PIU identified reduced water consumption as a key economic benefit of the project\. Further work is required, 54  however, to measure water abstraction against water demand based on crop type, area and irrigation norms\. This will be done under OIP-2\. 55  Annex 6\. Stakeholder Workshop Report and Results There was no end-of-project stakeholder workshop\. 56  Annex 7\. Summary of Borrower's ICR and/or Comments on Draft ICR The Borrower, through the Ministry of Finance, reviewed the draft ICR and provided the following comments\. To: World Bank Country Office in the Kyrgyz Republic From: Ministry of Finance of the Kyrgyz Republic Date: November 13, 2008 Having reviewed the final Report on the On-farm Irrigation Project the Ministry of Finance of the Kyrgyz Republic has the following comments: 1\. Results of the project have shown that it was impossible to implement physical rehabilitation of on-farm irrigation facilities in full (only 122,000 ha of the projected 160,000 ha were rehabilitated)\. 2\. An apparent achievement of the project is the establishment of 455 Water User Associations (WUA) in the country, while 160 WUAs were projected\. 3\. The main purpose of the project - increase in agricultural crop yields by 10 percent on the rehabilitated areas ­ has not yet been fully achieved\. Based on the Report, this is mainly because little time has passed after rehabilitation works on the facilities\. In the years to come the WUA Support Units and the Department of Water Resources (DWR) should carry out additional assessment of the project results in terms of the yield\. 4\. The Ministry of Finance would have liked to see transfer of some higher-order irrigation infrastructure from DWR to WUAs in order to decrease the burden to the republican budget\. The Project has placed little emphasis on this\. On the contrary, according to the Report, due to financial inability of some WUAs, the Government is expected to continue financing the rehabilitation of WUA- managed infrastructure by allocation of funds from the national budget or from donors\. 5\. However, there are many positive things, and "satisfactory" rating for the results of the On-farm Irrigation Project is acceptable\. Ms\. T\. Kalimbetova Minister Ministry of Finance 57  Unofficial translation November 13, 2008 Acting Country Manager World Bank Country Office in the Kyrgyz Republic Djoldosheva D\. Dear Dinara Sabatbekovna, The Ministry of Agriculture, Water Facilities and Processing Industry having reviewed the Implementation Completion Report for On-farm Irrigation Project (OIP) together with the Department of Water Resources is noting that this report summarizes achiviements and overall results of OIP undertakings\. In reality the implementation of this project was very timely and important for the agricultural sector of the country as it helped to solve the occurred problems of on-farm level by means of formation and development of Water Users Associations (WUAs)\. At that moment there was no prior experience of instituational development i\.e\. formation of such organizations as WUAs that could have taken the responsibility of managing the irrigation infrastructure\. Nevertheless, 455 WUAs covering more than 70 % of all irrigated lands of the republic were created at the time of project's completion thanks to the good design and successful implementation of OIP, which envisaged the creation and training of WUA support units, and regular technical assistance from the side of the World Bank, supervision mission members\. We believe that strong foundation for creation of water users' organizations has been established and the process of their development has become of irreversible manner due to the achievements of OIP implementation\. I would like to mention the high quality of work done under supervision missions led by Mr\. Joop Stoutjesdijk, clear, concise and explicit replies of the WB to letters and good and constant assistance of the World Bank Country Office\. A\. Nogoev Minister of Agriculture, Water Resources and Processing Industry 58  Annex 8\. Comments of Cofinanciers and Other Partners/Stakeholders None\. 59  Annex 9\. List of Supporting Documents 1\. Various pieces of relevant legislation, including the WUA law and the Water Code; 2\. Various preparation reports by consultants and Bank staff; 3\. Project Appraisal Document for OIP ­ World Bank, May 10, 2000; 4\. Development Credit Agreement (On-Farm Irrigation Project) ­ June 29, 2000; 5\. Project Implementation Manual ­ OIP PIU, 2000; 6\. Case Study of On-farm Rehabilitation Impact under OIP ­ M-Vector Consulting Agency, April 2007; 7\. Various Project Status Reports prepared by PIU; 8\. Various Annual Report prepared by PIU; 9\. Environmental monitoring program (final report, Russian), January 2008 (K\. Karpachev); 10\. Various IDA implementation review Aide Memoires, including IDA 8th Supervision Mission ­ Mid Term Review (May 2004) and IDA 16th and Final IDA Implementation Review Mission (April 2008) 11\. Various working papers prepared by IDA review staff; 12\. Economic and Financial Assessment of OIP Water Use Association (WUA) Rehabilitation Activities, for OIP-2 Guidance ­ Final Report ­ Chris Finney, April 2008; 13\. OIP-1 Final report (Russian) ­ Completion Project Report (English), OIP PIU, May 2008; 14\. Various design reports; 15\. Sample contracts for repayment of 25 percent of the investment costs (Russian); 16\. Data from the National WUA Monitoring and Evaluation System (NAWMES) ­ June 2008\. 60

APPROVAL

P040642

 ICRR 12438 Report Number : ICRR12438 IEG ICR Review Independent Evaluation Group 1\. Project Data: Date Posted : 07/14/2006 PROJ ID :P040642 Appraisal Actual Project Name :Zm-eripta (fy96) Project Costs 45\.2 43\.5 US$M ) (US$M) Country :Zambia Loan/ US$M ) Loan /Credit (US$M) 40\.5 38\.5 Sector (s):Board: ): PSD - Central US$M ) Cofinancing (US$M) government administration (68%), Mining and other extractive (30%), Law and justice (2%) L/C Number :C2875 FY ) Board Approval (FY) 96 Partners involved : Closing Date 12/31/2001 09/30/2005 Evaluator : Panel Reviewer : Division Manager : Division : Elliott Hurwitz Chad Leechor Kyle Peters IEGCR 2\. Project Objectives and Components a\. Objectives The objective of the Credit (ERIPTA) was to support implementation of the ERIP Reform Program and continue implementation of reforms that were the focus of previous adjustment operations, i \.e\., privatization of parastatals and reform of the legal framework governing business activity \. The project also aimed to provide technical assistance, training and related assistance to the Government to implement policy, institutional and regulatory reforms associated with the economic reform program, especially the privatization of Zambia Consolidated Copper Mines (ZCCM) and other commercial parastatals, including some utilities, and the strengthening of the Ministry of Mines and Minerals Development (MMMD) and the Ministry of Legal Affairs (MOLA)\. b\. Components (or Key Conditions in the case of Adjustment Loans ): 1\. Assistance for ZCCM Privatization: A\. in formulation of a privatization plan using investment banking, legal and other specialist advisory services to the Government of Zambia (GRZ) to assist in the preparation and implementation of the ZCCM Privatization Plan; assist in the joint-venturing of the Konkola Deep project as a majority privately-owned and privately- managed joint venture; B\. strengthening ZCCM's technical capacity to implement and monitor its Emergency Plan in the interim period prior to privatization\. (Appraisal, US$23\.6 million; actual, US$26\.0 million)\. 2\. Strengthening Zambia Privatization Agency (ZPA) in: A\. Program of privatization of parastatal enterprises and provision of technical services to enterprises selected for privatization through the employment of qualified and experienced managers, carrying out of pre -privatization studies, publicizing proposals for privatization, public relations campaign, and acquisition of office equipment \. B\. Provision of office space, equipment, supplies and operating costs for the Government Mining Privatization Team (GMPT)\. (Appraisal, US$14\.2 million, actual, US$11\.6 million)\. 3\. Mining Sector Reform Program: A\. Strengthening Ministry of Mines and Minerals Development to administer and regulate mining sector under new Mining Act and promote new private exploration and investment; B \. Preparing promotional materials and conducting activities to encourage private investment in the mining sector; C \. Strengthening regulatory and procedural capabilities of the MMMD; D \. Establishment, operation, and maintenance of regional mining bureaus; E\. Monitoring of sulfur dioxide emissions at mineral processing plants \. (Appraisal US$6\.2 million, actual US$5\.0 million)\. 4\. Commercial Law Reform: Strengthening the capacity of the Department of Legal Drafting (DLD) in MOLA to support economic reform by reviewing and drafting commercial laws, preparing legislative texts, subsidiary legislation and other legal drafts through the employment of experts and the provision of the long - and short-term training of staff in legislative drafting\. (Appraisal US$1\.2 million, actual US$0\.9 million)\. c\. Comments on Project Cost, Financing, Borrower Contribution, and Dates The original cost of the project was US$ 27\.2 million, with US$23 million of IDA financing\. A first supplemental credit in the amount of US$7\.5 million was approved in October, 2002, to allow ZPA to complete remaining non- copper privatizations\. While ZCCM was successfully privatized in 2000, the buyer--Anglo American Corporation-- pulled out of its investments in Zambia 2 years later due to heavy losses \. Consequently, in 2002 additional financing was required to provide technical assistance for a ) restructuring ZCCM to make it more salable; b ) negotiation of the exit agreement with Anglo American; c) a search for a new strategic partner \. A second supplemental credit of US$10 million was approved in July, 2003 for this purpose\. The closing date was extended three times \. The original September 30, 2001 date was extended to June 30, 2002 to allow time to advance work on non -mining privatizations and assess the commitment to privatization of the new government which took office in January 2002\. Under the first supplemental credit the closing date was set at September 30, 2004, and under the second supplemental credit the closing date was set at September 30, 2005\. 3\. Relevance of Objectives & Design : Relevance was overall substantial \. ERIPTA formed an effective complement to the ERIP adjustment credit \.* The objectives and design are consistent with the GRZ current Transitional National Development Plan and 2002 PRSP\. They are also supportive of the 2004 CAS, which focuses on establishing a diversified, export -oriented economy, and on creating a favorable enabling environment for facilitating private investment \. The project tackled privatization of ZCCM, which had been incurring large losses (nearly 5% of GDP in 1997 and 1998)\. In the 1990s, ZCCM faced deep-rooted problems, including under -maintained plant and equipment, aging technology, and declining ore reserves and competitiveness \. ZCCM’s copper production fell from 403,000 tons in 1993 to 307,000 tons in 1995\. The rationale for the project was that if the company could be privatized, the fiscal drain would cease and the firm’s productivity and exports would increase \. Effective support—including investment bankers and legal advisors —was provided, and the capacity of ZCCM to move through the privatization process was strengthened\. In parallel, support for privatization of non -mining firms was provided to ZPA in the form of technical advisory services, pre-privatization studies, and other key services and equipment \. ERIPTA’s approach was appropriate for the vast majority of state -owned firms\. However, a weakness in the relevance of the objectives and design was its application to utilities, most notably the electric and telecom firms \. The project approach showed insufficient understanding of the complexity of privatizing such firms, and the critical importance of building regulatory capacity in parallel \. Despite this weakness, however, relevance was, on balance, substantial\. *A 2003 OED PPAR found the ERIP adjustment credit moderately unsatisfactory on outcome, with modest relevance and modest efficacy\. Bank Performance was rated unsatisfactory, and Borrower Performance highly unsatisfactory \. 4\. Achievement of Objectives (Efficacy) : Efficacy was modest, overall, with the benefits reduced, in some cases, by the circumstances surrounding the activities supported by ERIPTA \. The first component was weighted most heavily \. Privatization of ZCCM: Achievement was modest\. ZCCM was eventually sold—producing significant benefits for the country—but the manner in which it was sold reduced the magnitude of those benefits \. The Government announced its intention to divest ZCCM in 1995, prior to approval of ERIPTA\. Advisors were appointed, and by May 1996, a privatization plan had been prepared by the Government Mining Privatization Team (GMPT), which consisted of consultants selected under procedures acceptable to the World Bank and was funded by ERIPTA Project Preparation Facility funds\. The GMPT, which reported to the CEO of ZPA, was created because of the belief that ZPA did not have the specialized expertise needed to undertake an activity of this scale and political sensitivity \. (ZPA’s expertise grew steadily during ERPITA ) ZCCM was divided into 9 parcels and bidding was completed on schedule in early 1997\. But just before an award was to be announced, the GRZ removed control of the process from ZPA, which had legal authority, and transferred it to an ex -CEO of ZCCM who was known to be critical of ZCCM privatization\. The GMPT was re-staffed with privatization opponents, and the leading bidder was rejected, leaving only the Anglo American Corporation (AAC) as a potential buyer\. These changes to GMPT meant that ZPA no longer had a supervisory role, and it was not clear to whom the GMPT reported \. In addition, the legal and financial advisors' recommendations were seldom heeded and transparency suffered \. ZCCM losses continued, and public confidence in the privatization process declined \. In 2000, ZCCM was privatized, after a prolonged search by AAC for partners \. By this time, declining copper prices and ZCCM's losses weakened Government's negotiating position \. The agreement with AAC was considerably less advantageous than the one that had almost been consummated earlier, and the sale to AAC was perceived by the public as unfavorable for Zambia \. Unfortunately, in 2002 AAC announced that it would pull out of its investments in Zambia due to heavy losses (in part due to low copper prices)\. The Bank responded quickly and constructively to this crisis and supported establishment of a team to : (1) restructure ZCCM as a viable company; (2) assist the GRZ in negotiating an AAC exit; and (3) assist in finding a new strategic partner \. These efforts were successful, and in 2004, ZCCM was finally bought by a large mining and investment firm\. While the process of divesting ZCCM was lengthy, convoluted, and costly to the country, the eventual outcome contributed to a 65% increase in copper production from 2000 to 2004 (to 400,000 tons), and a commitment by the new owners to invest US$900 million over the period 2002-2007\. The privatization of the firm (twice) coincided with a significant increase in private investment, a modest increase in FDI as a percent of GDP, and a substantial improvement in GDP growth; the government's fiscal balance, however, did not improve during the ERIPTA period (ICR, Annex 1, and IMF, "Zambia, Selected Issues and Statistical Appendix, " March, 2006, Tables 1 and 12)\. Strengthening ZPA: Achievement was substantial\. ZPA was a highly-professional organization whose performance improved during the project period \. Of 284 state-owned non-mining companies (not including utilities), 261, or 92\.2%, were privatized from 1992-2005, of which around a third occurred after ERIPTA became effective \. These sales were done in a largely transparent manner, with the most common methods being competitive tender or sale to the original owner who had pre-emptive rights\. The effectiveness of the privatization program was in large measure due to the competence and professionalism of the ZPA , which after 1996 benefited from ERIPTA support\. ZPA was less successful with utilities, which remain state -owned but which at GRZ request moved toward "commercialization\." Mining Sector Reform: Achievement was modest\. Databases on mineral deposits were established successfully, but the impact of efforts to promote mining investment (other then ZCCM) was not evident\. Regional Mines Bureaus were successfully established, which brought information and services closer to smaller miners, and a monitoring system was established to monitor sulphur dioxide emissions at mineral processing plants \. However, the effort under the credit to bolster the regulatory framework was only modestly successful, and the enabling environment for attracting new investors in the mining sector remained less than satisfactory \. Commercial Law Reform: Achievement was substantial: The capacity of the DLD in MOLA was strengthened by the employment of experts and provision of long -term and short-term training to staff\. This enhanced the country's ability to support economic reform; MOLA wrote a new Mines and Minerals Act; National Pension Scheme Authority Act (the 2003 OED PPAR credits ERIPTA with a major contribution to pension reform ), Small Enterprise Development Act, as well as new laws on Insurance, Customs and Excises, and VAT \. 5\. Efficiency : No measures of efficiency were calculated in either the appraisal or the ICR \. 6\. M&E Design, Implementation, & Utilization: M&E in the original project design was poor \. During the 1999 mid-term review, new indicators were developed (Annex 1)\. While improved, these new indicators are still inadequate as measures of project progress \. 7\. Other (Safeguards, Fiduciary, Unintended Impacts--Positive & Negative): 8\. Ratings : ICR ICR Review Reason for Disagreement /Comments Outcome : Satisfactory Moderately Shortcomings in efficacy, described in Unsatisfactory section 4, detracted significantly from the benefits created by in the critical first component\. (The narrative section of the ICR rated outcome as "moderately satisfactory", which at the time the ICR was prepared was not an option allowed by the software application\.) Institutional Dev \.: Modest Modest Sustainability : Likely Likely Bank Performance : Unsatisfactory Unsatisfactory Performance in Lending was largely satisfactory, but with shortcomings in M&E\. Supervision was unsatisfactory \. When the government interfered with the first  privatization of ZCCM, the Bank did not escalate this very important issue to  management so it could intervene at an appropriate level of government \. Had this succeeded, the benefits created by the project would have been much greater than they eventually were\. Another factor contributing to unsatisfactory supervision was inaccurate PDO and IP ratings when the government interfered with the first privatization of ZCCM (PDO and IP were never rated less than satisfactory)\. It is difficult to understand how the Bank could rate the ZCCM privatization component as highly satisfactory in June, 1997, after the negotiating process had been taken over by known opponents of ZCCM privatization\. Borrower Perf \.: Unsatisfactory Unsatisfactory Quality of ICR : Exemplary NOTES: NOTES - When insufficient information is provided by the Bank for IEG to arrive at a clear rating, IEG will downgrade the relevant ratings as warranted beginning July 1, 2006\. - ICR rating values flagged with ' * ' don't comply with OP/BP 13\.55, but are listed for completeness \. 9\. Lessons: The privatization of utilities is very complex, and should generally be considered separately from privatization of other enterprises\. Provision should be made for development of adequate regulatory capacity \. Lack of transparency can seriously erode public support for privatization \. In a project supporting privatization, greater account needs to be taken of the Political Economy of Reform \. 10\. Assessment Recommended? Yes No 11\. Comments on Quality of ICR: The ICR is exemplary\. Despite the disconnect in the outcome ratings, its candor and the wealth of substantiating information it provides are rare in ICRs, and its lessons are excellent \. Especially noteworthy are: Table 5 in Additional Annex 8, which details privatizations by year, and thus allows the reader to make a rough attribution to the project; Table 6, which compares privatization regimes; and section 10\.1 (Additional Information) which provides detail on the process by which ZCCM was privatized and allows the treatment in the main text to be more streamlined--a goal of the revised ICR FY07 Guidelines\. The ICR compensates for the project's poor M&E data by providing a wealth of relevant information (especially Tables 1-6 and figures 1-4 in Additional Annex 8)\. The difference in the IEG rating of outcome and the ICR rating is small and is greatly outweighed by the superlative qualities noted above\. Also, it would have been useful to include an estimated ERR or FRR --even if only an approximation--which would have been informative since the benefits included privatization proceeds and an end to subsidies in addition to the benefits listed in the ICR \.

APPROVAL

P008420

Document of The World Bank FOR OFFICIAL USE ONLY Repot No\. 5093 PROJECT PEIRFRMANCE AUDIT REPORT GREECE GROUNDWATER DEVELIMENT PROJECT (LOAN 754-GR) May 24, 1984 Operations Evaluation Department This document has a restricted distribution and may be used by recipients only in the performance of their official duties\. Its contents may not otherwise be disclosed without World Bank authorization\. ABBREVIATIONS LRS Land Reclamation Service OED Operations Evaluation Department PCR Project Completion Report PPAN Project Performance Audit Memorandum PPAR Project Performance Audit Report TOEV Farmers' Water Users Association WEIGTS AND 1EASURES The Metric System FOR OFFICIAL USE ONLY PROJECT PERFORNANCE AUDIT REPORT GREECE GROUNDWATER DEVELOPMENT PROJECT (LOAN 754-GR) TABLE OF CONTENTS Page No\. Preface \. \. \. t i Basic Data Sheet \. iii Highlights \.*\.************ * iv PROJECT PERFORMANCE AUDIT MEMORANDUM I\. SMMARY \. 1 Technical Services \. \. \. 2 II\. MAIN ISSUES \.ft\.****************************** 4 A\. Choice of Appropriate Technologies \. 4 B\. Project Completion \. \. \. 8 C\. Groundwater Monitoring \. \.,\.*\. 11 D\. Supervision by the Bank \. 11 Annex 1 Comment from the Ministry of Agriculture \. 13 IBRD Overview of Project Completion Report \. 15 IBRD No\. 3298 This document has a restricted distribution and may be used by recipients only in the performance of their official duties\. Its contents may not otherwise be disclosed without World Bank authorization\. PROJECT PERFORMANCE AUDIT REPORT GREECE GROUNDWATER DEVELOPMENT PROJECT (LOAN 754-GR) PREFACE This is a Performance Audit of a Groundwater Development Project in Greece, for which Loan 754-GR was approved by the Bank in June 1971\. The amount of the loan was US$25 million\. The closing date, after one extension, was November 30, 1982, by which date the loan was fully disbursed\. The Audit Report consists of an Audit Memorandum (PPAM), prepared by the Operations Evaluation Department and an overview of the Project Completion Report (PCR), dated June 28, 1983, prepared by the Europe, Middle East and North Africa Regional Office based on a draft PCR prepared by the Greek Ministry of Agriculture\. Because of the length and the draft form of the Borrower's PCR it has been omitted from the PPAR, but is available in OED files\. The Audit Memorandum is based on a review of the Appraisal Report (PA-83a), dated May 5, 1971, the President's Report (P-951 dated May 28, 1971), the Loan Agreement (dated June 21, 1971), the PCR and the Region's Overview Report\. Internal Bank memoranda on project issues, as contained in Bank files, have beev consulted and Bank staff associated with the Project interviewed\. An OED mission visited Greece in September 1983\. The mission held discussions with the staff of the Project Executing Agency-the Land Reclama- tion Service (LRS) of the Ministry of Agriculture, the Director of Special Financing in the Ministry of National Economy and the Chairman and members of several farmers' Water Users Associations\. A field trip was made to the project area, during which the mission inspected operating wells and various types of water distribution systems\. During the field trip the mission discussed the monitoring of the aquifers in the project area, with the senior staff of the LRS in Larissa, as well as problems of operation and maintenance of the various types of distri- bution systems\. The information obtained during the mission was used to test the validity of the conclusions of the PCR and of the Bank's Overview Report\. The audit finds that the PCI covers the main features of the proj- ect and adequately describes the project implementation period and its problems\. In addition to summarizing the objectives and results of the proj- ect so far, the PPAM examines the performance of the Bank in guiding and supervising the project and the activities of the project consultants\. Specifically it reviews the Bank's decision early in the implementation period to change the design specifications of the water distribution systems\. Because of its effect on project cost the decision eventually contributed to the need to reformulate the project\. The PFAM A1so reviews the monitoring of the project aquifers by the Groundwater Department of the LRS, and other issues\. - In view of the fact that only some 60% of the project area has at present operating wells and some sort of water distribution system, the PPAM reviews alternative ways to bring the project to a speedy completion and discusses the required administrative action by the Bank\. The draft report was sent to the Borrower for their comment on February 2, 1984\. Comments from the Ministry of Agriculture are attached as Annex 1\. The valuable assistance given by the staff of LRS to the mission is gratefully acknowledged\. PEa\.wC? PER0m= ADrr USI DIA SuE GREEC= C*OgmEravm Og~EdEMT PROJEC <(\.0A1 756-Cg) EET ROJECT DATA Appralal Actual ar Attual as a of Estimata etited Actual Appraisal Estimate Total Project Coats (US$ mt~a 50 110 220 Loan Anat (USS million) 25 25 100 Date Board Approval 06/06/71 Date Effectiveeas 11115/71 Date hysical Componeats Completød Not Competed - 12/84 Proportion then corwleted (Z) 75 Closing Date 11/30/8 Ec~mamic Rate of Ietra (Z) 18 24 * Y7inefil erformte Sattefaetory Inatltutionul Prformne Maø Mectaio-w CUIEILATIVE DISURSEHEUTS PT72 173 1174 n75 1176 1777 1178 1179 M8 "81 _2 1783 Appraial Eatimate (US million) 5\.1 9\.8 16\.5 22\.0 24\.8 25\.0 - - - - - - Actua (US$ Million) 0\.0 3\.6 8\.8 11\.0 L3\.7 15\.6 18\.2 19\.0 21\.6 23\.2 24\.5 25\.0 Actual a* Z of Eutimat* 0\.0 37\.0 53\.0 50\.0 55\.0 62\.0 73\.0 76\.0 86\.0 93\.0 96\.0 100\.0 Date af Paal Daisbor~euet: 05/15/82 MISSION DATA Maath/ No\. of ameek Speialimtiom Perforeasce Types of Niasiom Year Persona in Field Repreoented la Rattnab Trend/c Proble~ald Identification Preparation Apprai*øl 11/70 4 19\.2 Subtotal 19\.2 Supervision I 1 0\.4 Eg - - m Supervion II 1 0\.6 E,Eg - - m Supervisio0 III 2 1\.6 ZI,g 2 3 m Supervision IV 1 2\.0 A 2 3 \.t Supervision V 1 2\.2 A 2 2 T Supervilion VI 2 2\.0 A 2 2 T Supervisioa VII 3 3\.0 A\.E,Eg 2 1 I Supervisiou VIII 1 0\.6 k 2 3 T Supervialon IX 3 2\.2 E\.Eg\.A 2 2 T Supervion X 4 2\.0 E,Eg\.A 3 1 F,P Supervision XI 3 2\.1 E,Eg,A 3 3 r Supervisiou XII 3 3\.0 A,E,Eg 3 3 T\.P Supervisioe XIII 3 2\.0 A,E,Eg 2 2 TJF Supervision XIV 2 2\.4 E\.Eg\. 2 2 T,F\.K Supervision XV 3 3\.0 Z\.Eg\.8 2 2 T,F Supervision XVI 3 1\.2 Eg 2 2 T,0 Supervision XVII 2 1\.5 E,Eg 2 1 T,M Supervision XVIII 1 0\.8 Eg 2 1 T\.M Supervision XIX 2 0\.8 Eg 2 1 T,K Supervision XX 2 1\.0 Eg 2 1 K\.F Supe~ ion XXI 2 1\.0 Eg 2 1 K\.F Total 49 54\.6 OTHEL PROJECT DATA Borrower Coverment of Greece Executing Agency land Raclamatiom Service (LRS) Fihcal Tear January I - December 31 Xae af Currency (Abbrevlation) Drachma (DR) Currency Exch~age Rate: Appralsal Tear Average, 1970 USS1\.00 - 30\.0 Intervening Teara Average\. 1971-80 - USS1\.00 - 39\.25 Complatilon ear Average, 1981 USS1\.00 - 84\.00 /a E - Ecoomist; Eg - ~niceer; A - Agriclturaliat; E - 1ydrologiat\. 7b I - problem free; 2 - moderate problema; 3 - major problem\. 7c 1 - laproving; 2 - staticoary; and 3 - deteriorating\. 7- 7 - Y\.na1cial; K - Kaagerial; P - Political; T - Tachnical; 0 - Other\. -iv- PROJECT PERFORMANCE AUDIT REPORT GREECE GROUNDWATER DEVELOPMENT PROJECT (LOAN 754-GR) HIGHLIGHTS The Groundwater Development Project was the first large-scale public tubewell program in Greece\. It was part of the Borrower's program for utilizing the groundwater resource of the Thessaly Plain, and was to provide irrigation for about 40,000 ha of cultivable land\. The project consisted of drilling 1,635 wells; installing pumps, electric motors, irrigation pipes and sprinkler units; constructing a drainage and road system; purchasing equip- ment for construction and maintenance of wells and providing consultant services\. Soon after drilling began, it became apparent that the yields of a large number of wells were greater than anticipated\. Therefore the consul- tants recommended changing the planned irrigation surface system to a buried distribution system, including interconnecting of wells for about 60% of the project area\. Since the change in the project design resulted in a 338% cost increase, the Bank and the Government agreed to phase the project, using the Bank loan to finance only Phase I, consisting of 12,750 ha of permanent buried distribution system (of which 1,700 ha would be equipped with an interconnected system) and 18,500 ha of temporary surface system\. Project implementation was considerably delayed by the lack of experience of the Land Reclamation Service with a project of this size and complexity, inadequate studies on network design and operation, poor per- formance of some of the well-drilling contractors and by sand intrusion in many wells\. When the loan closed on May 1982, four years later than originally planned, the revised construction program, was only partially coar- pleted\. About 4,000 ha had been equipped with the underground systems which had not yet been operated\. The rest of the project area had either canal or surface pipe systems (23,000 ha) or no distribution system at all\. Despite the large cost overruns and delays in project implemen- tation, the direct and indirect benefits from the project are considerable\. Although only 65% of the original project area is now irrigated, the change from dryfarming to irrigation with high yields and high value crops has had a positive impact both on farm incomes and on the economy of the Thessaly region\. The project ERR is expected to be over 20% (18% appraisal esti- mate)\. The project was also useful in providing experience for new irriga- tion technologies\. The project illustrated the need for supplementing the data avail- able at the time of appraising a groundwater development project by drilling early in the implementation stage pilot wells in hydrogeological zones delineated at preparation and to have design of wells based on a better appreciation of aquifer qualifications\. The audit questions, the con- sultant's recommendations on, and the Bank's agreement to, changing from a surface pipe, flexible network, to a permanent and sophisticated underground network which is difficult to operate and maintain by the Water Users Associ- ations\. The Audit also questions the capability, at present staff levels, of the Groundwater Department of LRS to monitor adequately the exploitation of the aquifers in the Thessaly Plain\. The experience with this type of project shows the obvious need and importance of closely supervising the consultant's work, both in technical and economic aspects, by the Borrower and the Bank, and the value of continu- ity in Bank staff supervising the project\. * Other points of interest and lessons to be learned are: - the way a project is likely to be eventually operated and main- tained should be an important consideration when project designs are chosen (PPAM, paras\. 26-28); - the Bank could have reacted in time, when agreements reached during the reformulation of the project in 1977 were apparently ignored by the Borrower\. Over the five-year period, between reformulation and final loan closure in 1982, none of the changes agreed during the reformulation have been implemented (PPAM, paras\. 34-40); and - the Bank could have exerted a moderating influence on the enthusi- asm of the Borrower and possibly also the consultants, with regard to the introduction of oversophisticated designs (PPAM, paras\. 42- 44)\. PROJECT PERFORMANCE AUDIT MEMORANDUM GREECE GROUNDWATER DEVELOPMENT PROJECT (LOAN 754-GR) I\. SUMMARY Background 1\. Agricultural output in Greece grew at about 4\.5% annually in value terms during the 1960s, and increased output was achieved for most major crops and livestock products\. Significant growth also occurred in exports, especially tobacco, fruit and olive oil, and the total value of agricultural exports during the same period increased by more than 6% per year\. 2\. Public investment in agriculture in the late sixties has been largely concentrated on irrigation, which accounted for over 70% of the 1968-72 development plan allocations for agriculture\. Most of the investment in irrigation for this period was, however, made for surface irrigation, with relatively little attention paid to groundwater development, despite its lower capital cost and shorter development period\. With investments spread over a large number of projects, the actual rate at which new areas were being brought under irrigation was disappointing\. In addition, many projects suffered from inadequate preparation and the absence of coordination during implementation\. The Government was trying to rectify this situation by con- centrating investments on high priority projects\. On the production side the development plans gave high priority to raising output of feed grains, fodder crops, and livestock products, with a view to import substitution, while emphasis for export crops was given to those with better market prospects, namely cotton, vegetables, and fruits\. The Groundwater Development Project was the first of the new high priority projects in the Agricultural Sector\. Project Design 3\. A reconnaissance-type water balance study, prepared for the Thessaly Plain in Central Greece in 1968, indicated groundwater resources sufficient to irrigate over 165,000 ha compared with a utilization, at that time, of less than 60,000 ha\. To make use of this unutilized water resource the Government requested the Bank to assist with the financing of a ground- water development project in the Thessaly Plain\. In addition to irrigating some 40,000 ha, mostly by sprinkler system, the project was to serve as a large-scale pilot operation for the development of public tubewell projects in the country, especially for their design and operation\. 4\. Originally the project consisted of the following components: -2- Water Development (a) Drilling of about 1,600 production wells; about 80Z of the wells to serve sprinkler irrigated areas and 20Z, gravity systems\. Also the drilling of about 35 exploratory wells in Thessaly, Macedonia and Thrace; (b) installing pumps and electrical motors, including construction and wiring of the pump houses; (c) installing irrigation pipes and sprinkler units and constructing distribution canals as required for (a) above; and (d) construction of about 1,500 km of surface drains and 1,500 km of farm roads to serve the irrigated lands\. Equipment (a) Purchase and utilization of 10 drilling rigs; (b) purchase and utilization of well equipment (casings, screens, pumps and motors), irrigation pipes and sprinkler units; and (c) purchase and utilization of equipment for maintenance of project works\. Technical Services Services of an experienced consulting firm to assist in defining, directing and coordinating overall hydrogeological studies in the project area and in Macedonia and Thrace (the terms of reference of the consultants were broadened during project implementation)\. 5\. The well capacities were estimated at 80-120m3 /hr to irrigate areas of between 15 and 30 ha each\. Irrigation pipes, referred to in the appraisal report, were to be surface main lines (150 mm diameter) of steel or asbestos cement and submasns and portable lateral pipes made of aluminum\. A well discharge of 100 m /ha was to enable the simultaneous operation of two lateral sprinkler lines\. Project Implementation 6\. Soon after drilling began it became apparent that the3yields of a large number of wells were greater than anticipated (200 m /hr), which required a review of the distribution system layouts\. Although the larger than anticipated well yields had been identified as early as 1973, it was not until three years later than the consultants finished their study and recom- mended a buried pipe alternative\. By this time nearly 1,000 production wells had been drilled, and some 8,500 ha were under irrigation using a surface pipe system\. -3- 7\. The consultants recommended changing the surface system to a buried main distribution system using surface portable pipes for secondary and lateral lines\. In view of the large well flows, they also recommended, for about 60% of the project area, that the distribution systems be intercon- nected\. There is not documentation available in the Bank files that staff reviewed these recommendations or checked the consultants' calculations and data base\. The recommended new designs were much more expensive than the designs agreed to at negotiations, eventually requiring the reformulation of the project\. 8\. Total cost incurred to the end of December 1976 (the original closing date) was about US$38 million (against the original estimate of US$50 \. million) with about US$14 million of the Bank loan (of US$25 million) dis- bursed\. The result of moving to a buried pipe system, combined with the delays already incurred, was an increase in total project costs to some US$169 million with a foreign component of US$71 million\. 9\. In order to accommodate this large increase, the Bank and the Government agreed to phase the project, using the original loan to finance only Phase I\. In comparison with the original 40,000 ha to be irrigated with a surface system, Phase I was to be as follows: Permanent buried distribution system - 11,050 ha Pilot buried pipe interconnected system - 1,700 ha Temporary surface system - 18,500 ha Total 31,250 ha 10\. Phase II was to support the extension of the buried pipe system to the full 40,000 ha\. Phase I was expected to be completed by December 31, 1980 at a total cost of US$72 million\. Phase II was to be completed by December 31, 1984 at an additional cost of US$97 million\. Total project cost would thus be US$169 million compared with the original estimate of US$50 million\. 11\. When the loan finally closed on May 19, 1982, the achievements at that time were: Permanent buried distribution system served from single wells 2,000 ha Pilot buried pipe, interconnected well system 2,050 ha Permanent system in open canal areas 2,450 ha "Temporary" surface system 252000 ha Total 31,500 ha 4 12\. Designs had been completed for some 6,400 ha of buried, intercon- nected pipe systems In areas of high well discharge, where the construction of elevated, surface storage reservoirs is possible on the hill-sides, with- out the need to rely, for operational control, on pressure tanks, relays, etc\. The systems, however, are extremely costly and the Government has delayed their implementation\. 13\. The cost to completion of the project is obviously dependent on whether the project will be completed as reformulated in 1977, with a per- manent buried pipe system in most of the areas or whether a further change in project content is made\. 14\. The Audit contends that a further change is needed\. The project should be completed as originally appraised with not more than 15-25% of the area in buried pipe systems\. These areas would include the existing 4,000 ha pilot areas and some of the high well discharge areas in the Karstic forma- tions, where reservoir storage construction, although expensive, is eco- nomically justified\. 15\. The estimated cost to completion following such a change would be about Dr 2 billion (1983 prices), or, at the current exchange rate, about US$22 million\. Total project cost, in 1983 prices, would reach over Dr 14 billion, which, converted at current exchange rates, is about US$156 million (see para\. 2, Main Issues)\. 16\. One other major issue that developed during project implementation was that of some 300-400 wells drilled mostly in fine sand formations and wells pumping excessive amounts of sand\. In December 1976 the Government of Greece advised the Bank that a number of wells were pumping sand considerably above acceptable limits\. They requested the Bank's technical advice on the problem\. The Bank engaged an expert to review practices both in the design and construction of wells\. He found that, while the well locations and over- all designs of the wells were made by the consulting firm SOGREAH, the loca- tion of well screens and other details of well design and all construction supervision of wells were handled by LRS\. He found that some of the con- struction practices used by LRS, such as not using alignment centralizers to hold the screens in the center of the boreholes, were a deviation from common well construction practices; also that the field supervision provided by LRS during the construction of the wells was intermittent and not professionally adequate; and that, although the consultants had written numerous memoranda to LRS suggesting certain changes in well construction practices, many of the consultants' recommendations were not followed\. 17\. While three things contributed to pumping amounts of sand, the third proved to be the most serious: (i) the method of well construction might have lead to crooked wells, causing gaps in the gravel pack and thus allowed sand to enter; (ii) the lack of centralizers to hold the screen in the center of the borehole could have resulted in inadequate gravel pack throughout the source length; and -5- (iii) the lack of electric logging meant that improper screens were used, particularly in the fine sand layers\. 18\. To remedy this situation, LRS supervision of drilling was strength- ened; also the 900 wells already drilled were tested, and those pumping ex- cessive sand were rehabilitated at considerable cost, or had to be abandoned\. Project Impact * 19\. Despite the large cost overruns, and the considerable delays in project completion, the direct and indirect benefits from the project are considerable\. Direct production benefits to the farmers resulted from a * change from dry farming to irrigation with high yields and high-value crops\. A short journey through the project area is sufficient to see the impact of the project on this backward area in the form of indirect benefits\. Agro- industries have sprung up in the r4ral towns spreading prosperity also to the urban population\. The project serves also as a large-scale experiment for new irrigation technologies\. It is providing guidance for the future on design criteria and has identified a number of operational constraints\. 20\. Even though only some 65% of the project area is irrigated to date, the results are excellent, and the impact of the project, both on farm in- comes and on the economy of the Thessaly Plain, is very significant\. At appraisal it was expected that the cropping intensity would rise to 130%\. This assumption may have been overly optimistic, and at present it would seem that cropping intensities will peak at 110% with irrigation (in summer) or not more than 70% of the cropped area\. Nevertheless, the ERR at project com- pletion is expected to be over 20% (18% appraisal estimate) mostly because yields are above appraisal expectations\. - 21\. The Audit discussed its findings with the LRS, stressing the urgency for completing the project\. It was advised that the necessary funding has been made available to complete all work by the end of next year\. II\. MAIN ISSUES A\. Choice of Appropriate Technologies 22\. When the projSct was appraised in 1971, well capacities were esti- mated at around 100 m /hr, each well to irrigate an area of some 20-30 ha\. Project wells and their distribution systems, including farm roads and open drains, were to be owned and operated by Farmers' Water Users Associa- tions or TOEVs, which were to be established in the project area\. At present there are 28 TOEVs which cover the entire project area of 40,000 ha\. They control varying sizes of irrigable areas\. The smallest, some 102 ha, is the Prinos TOEV; the largest covers an area of 5,700 ha (Enipefs TOEV)\. All TOEVs operate and maintain the irrigation systems in their jurisdiction\. -6- 23\. The Audit visited the Dendron TOEV, which operates an irrigable area of 2,400 ha\. Average landholdings are 4 ha; the irrigation intensity is about 70% in the four-and-a-half month irrigation season from mid-May to mid-Sept aber\. The TOEV controls 28 wells with a combined discharge of some 2,000 a /hr\. The entire primary network is made of galvanized steel pipes of 5" and 6- diameter, laid with flexible couplings above ground\. The TOEV owns about 90 km of such main lines, sufficient to irrigate 1,700 ha, or 70% of the irrigable area controlled by the TOEV\. The main lines are shifted from year to year to follow the farmers' crop rotations\. Water is supplied at a rate of some 4,000 m per ha per year on the average\. All laterals are aluminum pipes with sprinklers\. 24\. The TOEV is well capable of operating and maintaining this type of well and network\. However, pumping in these schemes is not always at optimum efficiency of the equipment\. Irrigation schedules for the individual wells are prepared by the staff of the TOEV, which operate the wells 14-16 hour3 in the peak season\. Usually two farmers will irrigate from a 100 m /ha well\. Larger wells will have more than two farmers irrigating simultane- ously\. No well is operated if water demand is less than half the well discharge\. 25\. The pipes, laid on the ground, are occasionally damaged by farmer carelessness\. Last year the TOEV had to repair 1\.5% of its pipe stock of 5" and 6" pipes and had to replace about 500 m, or 0\.5% of its main line pipes\. 26\. The Audit also visited the Fiki TOEV, where a sophisticated inter- connected underground network was built\. The TOEV controls an area of some 730 ha, which is supplied from 15 wells with a discharge of over 2,000 m /ha\. To date, the TOEV is both unable and unwilling to operate the pneumatically controlled network\. It has irrigated this summer an area of 600 ha, using the wells as individual waterpoints, closing the underground network and joining 5- and 6- galvanized steel pipes to the pump outlets\. These pipes are laid on the ground in the traditional way\. The TOEV is totally ignorant of the performance characteristics of the interconnected system and would like to continue using the traditional surface pipe system\. The sensitive pressure relays are not maintained, and even though the equip- ment was tested by the consultants some six months ago it is not yet commissioned, as some defects have been identified\. The consultants have prepared operating instructions which are clearly beyond the capabilities of the TOEV to understand and carry out\. 27\. When well discharge, in the mid seventies, turned out to be more than the carrying capacity of a 6- main line laid on the surface (6- is the largest diameter pipe of this type available), the consultants looked for other alternatives for the distribution system\. The most obvious solution was to increase the diameter of the main pipe and put it underground or divide the command area into two or more sectors, each supplied by its separate main pipe\. Such alternatives are more difficult to operate as they require more complex water scheduling\. The Audit contends that this is well within the managerial competence of the farmers\. Experience in the Dendron TOEV confirms this assumption\. The alternatives are, however, more wasteful in electric energy in the off-peak seasons\. \. - 7- 28\. Instead of experimenting with various main pipe configurations and water scheduLing alternatives, the consultants, strongly supported apparently by the Borrower, opted to try a high technology solution\. As surface storage at proper elevations was not available in most of the area, they designed an airtank-controlled, interconnected system, which reduces wate: scheduling problems, optimizes energy consumption, but totally disregards the operation and maintenance problems of such a sophisticated system, especially when the equipment is to be operated by newly established farmers' organizations, which do not have the technical know-how or cannot afford to buy it\. The TOEV at Fiki employs a part-time electrician, who barely manages to supervise the pumping equipment and does not have the expertise to run the inter- connected networks\. 29\. The consultants must have also overlooked the water demand pattern in the project area, which requires not more than 2,500 pumping hours per year\. The sophisticated equipment, to make it economically attractive, has to operate many more hours per year\. 30\. When preparing the economic comparison between surface and under- ground systems, the consultants must have grossly overestimated the replace- ment needs of the surface pipes\. A rough economic comparison of the two systems made by the Audit clearly indicates a preference for the surface system, even with a pipe replacement factor four times as high as observed in the field\. 31\. A partially buried main line system, operationally not connected to neighboring wells3 is probably the best solution for wells with discharges in excess of 250 m /hr\. In the Karstic areas, where well discharges are very large and storage sites for reservoirs at the right elevations are available, an interconnected system may be feasible, as it can be built with- out the sophisticated control equipment at the pumphouse\. It is, however, very expensive\. 32\.- The Audit reviewed some of the existing designs for the Karstic areas and is of the opinion that in exceptional cases this solution is justi- fied\. However, before implementing any one of these systems, the Borrower should carefully investigate alternative solutions (possibly conveyance by open channels)\. Under such an alternative the large discharge wells would discharge into concrete-lined channels from which the farmers would irrigate either by gravity or by using mobile pumping equipment\. Such a delivery system exists today on some 2,500 ha and seems to operate very well\. Lessons Learned 33\. (a) Sophisticated water delivery systems which provide on-demand water supply and minimize pumping costs require good maintenance and a high level of understanding from the operators\. Their introduction into areas where operation and maintenance is the responsibility of newly established Farmers' Organizations is bound to fail\. (b) If a field experiment is required to test this assumption, its size and cost should be kept to a minimum (200 ha instead of 2,000 ha)\. -8- (c) Economic comparisons, especially to change agreed design criteria, must be very carefully done, using factual information\. The Audit contends that the project replacement factor of surface pipes (0\.5% per year) can be further reduced through an educational campaign by the TOEV, by a better choice of pipe alignments and by clearly marking the pipe alignment in the field\. Water losses through pipe joints can be reduced to insignificant values by careful laying and periodic inspections\. B\. Project Completion 34\. Further delays in project completion are clearly unacceptable\. At present one-third of the command area, some 12,500 ha, are still without water, although well drilling has been completed in the entire command, and the required groundwater potential is ready for exploitation\. 35\. The reformulated project (1977) commits the Borrower to an under- ground system over the entire project area, except for the 2,450 ha of permanent open canal system which was in existence even before the project stated\. This would entail the exchange of surface pipes for a new under- ground delivery system on some 18,700 ha and the construction of a new underground system on some 15,000 additional hectares\. As the salvage value of used galvanized steel pipes on 18,700 ha is negligible, the estimated cost to completion, for this alternative, would be US$46\.0 million (in 1983 prices)\. 36\. The existing situation in the field is as follows: (a) 4,050 ha are equipped with a buried pipe network\. In some 50% of this area the networks are interconnected and operation is cow- trolled by air tanks at the pumphouses\. (b) 2,450 ha are equipped with an old canal system which conveys water from the rivers\. Groundwater is pumped directly into the network\. The farmers withdraw the water from the canals for gravity irriga- tion or use mobile pumps for sprinkler systems\. (c) 18,700 ha have a surface pipe system, which operates satisfac- torily\. (d) 4,300 ha have a surface pipe system which covers the area only partially\. Because of the large wells, situated excentrically to the project area, one solution for the full development of the groundwater would be through an interconnected underground system, controlled by surface reservoirs at elevations sufficient to provide pressure for the sprinkler systems\. (However, this solu- tion is very expensive-over US$4,000/ha, not including the cost of the wells\.) (e) 10,500 ha have no distribution system at all, even though wells have been drilled to provide water for the entire area\. The wells are not yet equipped\. -9- 37\. After reviewing the performance of the surface networks, the Audit discussed with the Borrower alternative proposals to complete the project\. The Government proposed the following program to complete the project: Areas (a) (b) and (c) should be considered completed\. The 2,000 ha, interconnected plot area (pneumatically controlled), should be commissioned and operated on an experimental basis by LRS, for at least two seasons\. If at the end of this period it becomes evident that the TOEVs are unable to operate the sys- tem on their own and LRS is unwilling to continue to provide the technical services for operation, the system will have to be changed\. The change will require redesign of the network\. It will involve the disconnection of the various wells from each other and the installation of additional valves\. The wells will then be operated as individual water supply points (in emergencies the connecting valves can be reopened)\. The change will involve some addi- tional costs\. 38\. Area (d) has been designed for interconnected buried pipe networks with storage reservoirs constructed on the hillsides at suitable elevations\. These systems can minimize pumping costs and provide almost full "on-demand- services\. Before deciding on the construction of these systems, which are very expensive, other designs should be investigated for each individual area\. 39\. Area (e) will be equipped by surface pipe systems except in those areas which have large discharge wells located outside the irrigated areas\. For these areas, estimated at present to cover not more than 1,000 ha, a partially-buried pipe system will be constructed\. The difference in cost between a full-surface pipe system and a partially-buried pipe system for these areas is some US$200/ha\. For this program the estimated cost to completion is as indicated on the following page\. 40\. Dn December 1983, discussions took place in Athens between a Bank mission and personnel of the Ministry of Agriculture and LRS\. An under- standing was reached that: (i) LRS would make modifications, if required, commission and operate, in conjunction with the TOEVs, the Pilot Irrigation Scheme covering some 2,050 ha for two or three years\. During this period, the TOEVs would gain the necessazy experience to operate the project; and (ii) during the period of operation of the pilot irrigation scheme by LRS and the TOEVs, LRS and concerned officials in the Ministry of Agriculture would evaluate the economic viability of extending the same type of system to the remainder of the project\. Concurrently, LRS would install a portable system in the remaining area of the project (for which wells have already been drilled and for which it was agreed in Phase I to construct a buried pipe system)\. -10- Table 1: DIFFERENCE IN COST BETWEEN THE FULL-SURFACE AND THE BURIED-PIPE SYSTEMS (in Dr millions) Area (d) 4,300 ha of interconnected, underground pipe system at Dr 450,000/ha = Dr 1,935\.0 Ia Area (e) 1,000 ha at Dr 61,000/ha (1982 prices) or 73,200 (1983 prices) 73\.2 9,050 ha at Dr 43,700/ha (1982 prices) or 52,440 (1983 prices) 474\.5 Pumping equipment for existing wells (1983 prices) 163\.8 Electrical connections to existing wells (1983 prics) 39\.0 Total cost to completion (1983 prices) = Dr 2,145\.5 Existing project cost in 1983 prices = Dr 12,248\.7 /b Total Cost to completion in 1983 prices = Dr 14,394\.3 or at the exchange rate of US$1\.00=Dr 92 = US$ 156\.5 million Details of the unit cost calculations are available in the project file\. /a Most of the areas in this category may have other, cheaper solutions, based on a canal system and individual farmer pumping\. This maxium estimate is drawn up on the assumption that the entire area will be equipped with an underground interconnected pipe system\. The actual cost for this area will probably be reduced by at least 50%\. lb -This is the sum of the following amounts: (i) Actual investment in current prices till the end of 1982, Dr 3,473,866,000 or Dr 8,389,084 in 1981 constant prices (Greek PCR, Table 15) or 12,080,280,000 in 1983 prices (4th trimester) taking as rounded figures for inflation 20% in 1982 and 20% in 1983\. (ii) Equipment and electrification of 94 existing wells from September 31, 1983 which cost Dr 118,440,000 in 1983 prices\. (iii) Other cost incurred during the first three trimesters of 1983, estimated at Dr 50,000 (1983 pric,-s)\. s- 11 - C\. Groundwater Monitoring 41\. The Audit contends that groundwater monitoring is not adequately done\. A reliance on an insufficiently calibrated mathematical model is not prudent\. To exploit fully the potential of the aquifers requires calibration of the models ca the basis of available information and improving it as more information becomes available by closely monitoring pumping, recharge and depths to the water table\. The professional staff of the Groundwater Depart- ment should be strengthened to enable proper monitoring of the groundwater and further controlled exploitation\. D\. Supervision by the Bank 42\. The project was the first large-scale public tubewell operation in Greece\. It was and remains the Borrower's policy that the operation and maintenance of the completed subprojects be done by the farmer beneficiaries; this policy was supported by the appraisal mission\. It strongly influenced the design of the water distribution systems agreed on in the appraisal report\. However, it is doubtful whether sufficient actual experience with such farmer involvement in operation was available at that time\. 43\. The project was appraised on the basis of available hydrogeological data which should have been firmed up by drilling pilot wells early in the implementation stage, specifically to determine well yields and aquifer characteristics in the various geologic formations\. 44\. In fact, the main purpose of the consultant services, (to be pro- vided under Category 3/Schedule 1 of the Loan Agreement) was to assist the Borrower in defining, directing and coordinating overall hydrogeologic studies in the project area and in other parts of the country\. 45\. It is against this background that the Bank's performance on super- vision should be assessed\. At appraisal, the project still had an unusually large measure of "uncertainty" in major areas which could have and eventually have influenced implementation\. In the 20 or so supervision missions that the Bank mounted over the ten-year period (1971-1981), staff continuity was not good, with mission leaders and mission members changing from mission to mission\. This lack of continuity was largely due to the several Bank re- organizations and changes in country assignments (three different project divisions) which took place during the 1975-78 period\. The result was that too much trust had to be placed on the recommendations of the consultants and too little attention was paid by the missions to overall project concepts\. Lessons of Experience 46\. (a) Projects which are appraised early, and with large measures of uncertainty on important technological issues (well yields, aquifer characteristics) and on the performance of yet untried organiza- tional concepts need a larger than normal amount of supervision by Bank staff, who should be well experienced on the problems at issue\. During implementation, when more data becomes available and -12- experience accumulates, concepts agreed during appraisal and nego- tiations must sometimes be changed\. The changes require a continuing dialogue, over a long period, between experienced and knowledgeable Bank staff and the Borrower\. (b) Project consultants cannot replace Bank staff in guiding the proj- ect, especially when major changes become necessary in project con- cepts\. The consultants' primary task is to assist the Borrower in design and construction supervision and in the preparation of studies and design options, based on experience from the field\. Their advice to the Borrower and recommendations for changes in basic design of the project must be carefully checked by Bank staff, following an independent assessment of the situation\. ZCZC DIST2371 RCA8443 - 13 - DIST ANNEX 1 REF : TCP HC OEDOD RCA8443 248423 MORLDBANK DIRECTORATE OF PROGRAMMING ATHENS AND ASRO-TECHNO-ECONOMIC REF,N 114370 4\.4\.84 STUDIES MINISTRY 06 AGRICULTURE MR\.SHIV\.S\.KAPUR CHALCHOKONDILYP 46 OPERATIONS EVALUATION ATHENS-GREECE DEPARTMENT WORLD BANK WASHINGTON DC, U\.S\.A\. RE LOAN 754-GR\.YOUR LETTER FEBRUARY 2,1984 TO MYSEL\.F AND MESSRS J\.DINOS AND N\.GEORGIADISFMINISTRY OF AGRICULTURE\. ME AGREE ON THE BASICS OF GROUND MATER DEVELOPMENT PROJECT PERFORMANC E AUDIT REPORT DATED FEBRUARY 2, 1984\. BEST REGARDS P\.VEKOS DIRECTOR OF PROGRAMMING 248423 MORLDBANK 221734 YDAG GR =04100859 =04100631 NNNN ，一’一‘ :J 、V I俗 騖 弋 搜 支 15 - GREECE GROUNDWATER DEVELOPIMENT PROJECT IBRD overview of Project Completion Report Highlights 1\. This was the first agricultural project in Greece receiving Bank support\. Heavy public investment in agriculture in the sixties had largely been concentrated on surface irrigation schemes\. This had been spread over a large number of projects, the rate at which new areas were being brought into production was disappointing, and implementation suffered from inadequate preparation and absence of coordination\. Little attention had been paid to groundwater development, despite its lower capital cost and shorter development period\. In an attempt to rectify this situation and concentrate investments on high priority projects, a plan to develop the groundwater resources of northern Greece was developed\. A water balance study, prepared in 1968 by Electro-Watt, for the Central Thessaly plain, indicated that groundwaLer resources there were adequate to irrigate over 165,000 ha compared with the currently irrigated area of less than 60,000 ha\. In 1969 on the basis of this study the FAO/IBRD Cooperative Program identified a number of possible groundwater projects\. After further study a project covering 54,500 ha in these areas to be irrigated by 2,200 wells was prepared jointly by the Government and the FAO/IBRD CP in mid 1970\. It was appraised at the end of 1970\. At that time it was decided to limit the project to one area covering 40,000 ha to be irrigated by 1,600 wells, 802 of the wells using a sprinkler irrigation system and 20Z using a gravity system\. 2\. The project was implemented by the Land Reclamation Service URS) of the Ministry of Agriculture, with assistance in additional hydrogeologic studies being provided by the Institute of Geology and Subsurface Research UGSR)\. In addition, the services of an experienced consulting firm were retained to assist LRS\. They carried out a general hydrogeological study of the 7hessaly plain, finally completed in 1975; a feasibility study concerning the relative merits of a surface versus a buried pipe system (in conjunction with a local firm) besides providing general technical advice throughout particularly after it was decided to use buried pipe system rather than surface system - a technology new to Greece - and in helping to solve the problem of wells pumping excessive sand\. - 16 - 3\. Very soon after implementation began the project ran into trouble because the yield of the wells proved to be much greater than anticipated (200 m 3 per hour or more against 80 m3 per hour expected at approval)\. Instead of a sprinkler system consisting of steel or asbestos - cement main pipes of 156 m diameter and portable aluminium laterals of 89 mm diameter, much larger laterals of up to 250 mm were required\. Much greater lengths of laterals were also needed\. The result of this was that both the main supply lines and the laterals, placed as they were on the surface, began to suffer unacceptably high damage rates with large water losses\. Alternative solutions to the surface pipe system were examined by the project consultants who concluded that a buried main distribution system with surface portable pipe for secondary on-farm distribution would be the most economical solution\. They also recommended that in view of the larger flows, for about 60% of the project area the wells be interconnected\. However, the buried pipe system, while economically and technically superior to the surface pipe system, was more costly\. 4\. Although the problem of well yields had been identified as early as 1973, it was not until February 1976 that the consultants finished their study of a buried pipe alternative and early 1977 that the Bank agreed to change the project description to meet the changed circumstances\. By this time nearly 1,000 production and exploration wells had been drilled and about 8,600 ha of land was under irrigation using a temporary surface distribution system\. Total cost incurred to the end of December 1976 (the original closing date) was about US$ 38 million (against the original estimate of US$ 50 million) with about US$ 14 million of the Bank loan of USi 25 million disbursed\. The implication of moving to a buried pipe system, combined with the delays already incurred, was an increase in total project costs to US$ 169 million with a foreign exchange component of US$ 71 million\. 5\. In order to accomodate this large increase, the Bank and the Government agreed to phase the project using the original loan to finance only Phase I\. In comparison with the original 40,000 ha to be irrigated with a surface system Phase I would be as follows: Permanent buried distribution system - 11,050 ha Pilot buried pipe interconnected system - 1,700 ha Temporary surface system - 18,500 ha Total 31,250 ha Phase II would support the extension of the buried pipe system to the full 40,000 ha\. Phase I was expected to be completed by December 31, 1980 at a total cost of US$ 72 million\. Phase II would be completed by December 31, 1984 at an additional cost of US$ 97 million\. Total project cost would thus be US$ 169 million compared with the original estimate of Ust 50 million\. 6\. In the event the loan finally closed on May 19, 1982 and Phase I is not expected to be completed until at least December 31, 1984, the achievements at the time of loan closing were: Permanent buried distribution system served from single wells 2,000 ha Pilot buried pipe interconnected well system 2,050 ha Permanent system in open canal areas 2,450 ha Temporary surface system 25,000 ha 31,500 ha - 17 - Designs have been completed on another 6,430 ha hf buried pipe system, that would approximately complete Phase\.I as originally conceived\. However, the government has not yet made up its mind on whether to proceed with this area because of the high cost, i\.e\. about US$ 3,500 per ha, of converting to a buried system\. Thus, while the planned area for irrigation in Phase I has been met, a large proportion of the buried pipe system, that was one of the major reasons for delay during implementation, has not yet been carried out\. 7\. The real increase in total costs is difficult to estimate because of the major depreciation in the drachma after 1979\. In 1977, when the project was split into two phases, total costs had risen from US$ 50 million (Dr 1,500 million) at appraisal to US$ 169 million (Dr 6,200 million), an increase of slightly more than three times in dollar costs and of about four r times in terms ot drachma\. Between 1977 and May 1980 the costs juat for Phase I rose from an estimated US$ 72 million (Dr 2,620 million) to US$ 110 million (Dr 5,385 million), an increase of about 50% in dollar terms but, because of the continued depreciation of the drachma, the increase in local currency terms was almost 100%\. By loan closing it is estimated that to complete the whole of Phase I as envisaged at the time the project was modified in 1977, would cost approximately the same in dollar terms but Dr 7,000 million in local currency\. Assuming Phase II costs have escalated in similar proportions, the total cost of implementing the whole project as revised in 1977 would be in excess of Dr 16,000 million, in 1983 prices an increase in local currency of more than twelvefold from the original appraisal estimate\. The increase in dollar terms would be about fivefold to US$ 250 million\. 8\. Despite the problems associated with changes in project design and the massive increases in project costs, the impact of the project, both directly on farmers receiving water and indirectly on the whole economy of Thessaly, has been very considerable\. At appraisal it was expected that the full 40,000 ha would be under irrigation at 130% intensity by 1982\. The actual area irrigated by the project in that year was 27,500 ha\. While the area under cotton, one of the main cash crops, is about double that expected at appraisal (14,000 ha versus 7,000 ha), the area under maize has not grown as expected and the increases in fruit and vegetables are lower than estimates\. Almost without exception, however, yield levels are above appraisal expectations\. As a result the recalculated ERR prepared in the Government's PCR is 24% compared with the appraisal estimate oZ 18%\. In order to arrive at this comparison a number of assumptions have had to be made about how to treat the change in project concept that took place with the adoption of a buried pipe system and it is possible that the true ERR may be somewhat lower\. However, even assuming a 20% reduction in benefits, the ERR is still 19%\. 9\. One other major issue that developed during project implementation was that of wells pumping excessive amounts of sand\. In December 1976 the Government of Greece advised the Bank that a number of wells in the Kappadokikon Area of the project were pumping sand considerably above acceptable limits\. They requested the Bank's technical advice on the problem\. The Bank engaged a hydrogeologist to review practices both in the - 18 - design and construction of wells\. He found that, while the well locations and overall designs of the wells were made by the consulting firm SOGREAH who had been engaged by LRS, the location of well screens and other details of well design and all construction supervision of wells were handled by LRS\. He also found that some of the construction practices used by LRS such as not using alignment centralizers to hold the screens in the center of the boreholes, were a gross deviation from common well construction practices, that the field supervision provided by LRS during the construction of the wells was intermittent and not highly competent, and that, although the consultant (SOGREAH) had written numerous memorandum to LRS suggesting certain changes in well construction practices, many of the consultant's recommendations were not followed\. He concluded that because the personnel supervising drilling and logging wells were inadequate both in experience and number, and the drilling crews of both contractors and LRS lacked sufficient training and experience with respect to construction of wells, placing of well screens and gravel, and of testing, three things had gone wrong: (1) the method of well construction, by leading to crooked wells, caused gaps in the gravel pack and thus allowed sand to enter; (2) the lack of centralizers to hold the screen in the center of the borehole also resulted in gaps in the gravel pack; and (3) the lack of electric logging meant that improper screens were used, particularly in the coarser sand layers\. 10\. To remedy this situation, two steps were needed\. First, LRS supervision of drilling had to be strengthened and improved\. Second, the 900 wells already drilled had to be tested and those pumping excessive sand had to be rehabilitated or abandoned\. Despite the estimate that between 150 and 300 wells were probably affected, LRS continued for almost two years to continue to drill wells using the old methods and without electric logging\. Meanwhile, with intensive supervision from the LRS consultants and the Bank, tests to find the most suitable method of rehabilitation continued\. Three different methods were eventually used, each of which had its own cost in terms of reduced well discharge: (i) placing blinding pipes in horizons producing excessive sand; (b) using foot valves to reduce discharge; and (iii) using automatic control devices\. In the end, out of the 1,415 wells drilled, 425 experienced sand pumping problems, 284 were rehabilitated at considerable expense, and 141 had to be abandoned\. At the time of the closing of the loan, there were 1,050 operating wells, since another 108 wells were either exploratory or had to be abandoned due to insufficient discharge and 166 were piezometer wells\. Government Performance 11\. Considerable difficulties had been experienced in implementing this project, the most serious of which concerned technical problems requiring several modifications in the project's design\. The Government did not have sufficient qualified experts to respond quickly to these problems, but was willing to hire foreign experts to help remedy the problem\. The Government also sought the Bank's advice and was receptive to its recommendations\. The considerable delay in implementing the project, and the associated significant cost overruns were caused mainly by technical problems\. - 19 - 12\. Since the project was the first of its kind in Greece, it took some time before project staff got used to the Bank's procurement procedures\. But, once they got used to the procedures, th-\.y had no difficulty in following through\. The lessons from their experience were useful for procurement under the follow-up projects\. Performance of Consultants 13\. The technical feasibility studies of the project were prepared by the Greek Ministry of Coordination and Land Reclamation Service (LRS) of the Ministry of Agriculture, with the assistan:e from the FAD/IB1D Cooperative Program, and based on studies by the consulting firm Electro-Watt Engineering Services of Zurich, Switzerland\. The hydrogeological studies conducted at this time were not as extensive as required to accurately identify sand problems which later arose\. Many of the problems would have been avoided if zoning had been carried out in the project area on the basis of available geological information, if pilot holes had been drilled and pump tested in each zone to firm up area information, and if the designs of wells had been conditioned by additional information and improved as the work progressed\. 14\. In the execution of the project, two consulting firms were hired to assist the Government\. The firm SOGREAR, of Grenoble, France, was originally employed to carry out a detailed hydrogeological study of the Thessaly plain\. The firm prepared a computer model of the Thessaly plain from which they designated the places where wells were to be drilled\. The firm's duties were later enlarged when the pumping of excessive amounts of sand from wells became evident, to directly supervise the drilling, logging, placing of screens and testing of wells\. In addition, SOGREAH entered into an agreement with the Greek consulting firm TH\. C\. GOEAS and Hydrodomiki-TI, Mantziaras - C\. Stasinopoulos, to study the economics of a pressurized underground distribution system versus an above-ground distribution system\. On the basis of the study, a decision was made to construct an underground pressurized distribution system in certain areas of the project\. SOGREAR, GOFAS, etc\. were retained to design the underground pressurized system for the pilot areas\. The general performance of SOGREAR in location of wells, design of wells and preparation of acquifier model was satisfactory\. The designs of the underground pressurized distribution by GOFAS, SOGREAH, etc\. is also considered satisfactory\. The relations of both firms with LRS throughout the project were excellent\. Bank Performance 15\. Although there were changes in project design not contemplated at time of appraisal, i\.e\. changing from an above-ground pressurized distribution system to a buried pressurized distribution system, the appraisal report served as the basis for the implementation of the project\. The Bank was cooperative in agreeing to changes required after a thorough review of facts; in particular in requiring a detailed study of the economics of the buried pipe system versus the surface system with its much cheaper initial capital cost\. - 20 - 16\. The Bank supervision missions provided a more than normal level of advice and guidance in a number of highly technical areas\. Particularly when the pumping of excessive amounts of sand was brought to Bank attention, the Bank employed a renowned hydrogeologist to assist in proposing remedial acti-ons required\. The Bank sent twenty supervision missions to the project during its construction\. Due to the complexities of the project the later superqision missions consisted for the most part, of individuals having experience in technical areas\. The frequency of missions was also increased particularly when work was being done to remedy the sand problem\. Lessons Learned and Issues 17\. Organization\. The Thessaly Groundwater Project was the first of three 3 irrigation projects appraised in Greece\. Since all of the three irrigation projects were being constructed concurrently, it was not possible to use the Lessons being learned on this project in the design of the other two irrigation projects\. However, on the Evros Rural Development Project, the Bank did insist on the setting up of Centralized Management in the Nomos\. This has resulted in a much better organizational setup and more efficiently run project\. 18\. One of the major problems in the execution of the project was the appropriateness of the project management\. The arrangements were quite defuse, with no clear lines of authority or responsibility, particularily in the case of drilling, testing and rehabilitation of the wells\. The Project Coordinator in Athens and the Director of Land Development in Thessaly, respectively, were responsible under the Loan Agreement for coordinating and implementing the project\. However, in the earlier phase of the project, neither had direct control over the field hydrogeologists responsible for the critical drilling work\. In 1978 after the Bank brought this formally to the attention of the Government, the Minister of Coordination advised the Bank that the Director of the Organization for Land Development of Thessaly, located in Larissa, was the person responsible on the spot for the execution of the works and that he had authority to act, as necessary\. He also had the responsibility to address himself to the Central Organization in Athens, when he needed technical advice for which his office was not adequately staffed\. The Project Coordinator who was located in Athens, was only responsible to coordinate the work between the field and those in the Central Organization who were administering overall construction of the project which came under the auspices of the civil and mechanical engineers, geologists and agriculturalists\. Re in turn made recommendations to General Director of LRS who had the final responsibility in making decisions\.On future projects of this type, it should be spelled out in the loan documents as to the type of project management required and the responsibilities of the Project Manager\. It seems highly probable that if the responsibilities of the Larissa office had been adequately identified and had the office been sufficiently staffed from the beginning, many of the problems associated with the drilling, placing of screens, testing and the rehabilitation of wells pumping excessive amounts of sand could have been substantially reduced\. - 21 - 19\. Need for Faster Remedial Action\. In groundwater development projects of this type, it is generally not possible to have such detailed studies of the aquifer characteristics at appraisal that final well-field designs can be prepared\. However, by suitable planning of the initial drilling program, it is possible to develop critical parameters relatively quickly\. Although such a program was carried out and it quickly became evident that well discharges were greater than expected, the inexperience of the contractors and supervisory staff meant that it was not until over 300 production wells had been drilled that any firm remedial actions were proposed\. Inadequate pumping tests also led to a failure to appreciate fully the magnitude of the sand-pumping problem\. It was not until 900 production wells had been drilled that this problem was brought to the Bank's attention\. Even after remedial measures had been proposed LRS was slow to rehabilitate the sand pumping ( wells\. Nor did the construction of new wells using correct procedures appear to get the priority of IRS\. It was nearly a year after recommendations were made that LRS hired additional geologists to oversee both the rehabilitation of sand producing wells and the construction of new wells; and it was not until 1978 that, with the assistance of full time consultants and the hiring of additional hydrogeologists, that both the rehabilitation of sand pumping wells, and the drilling of new wells progressed satisfactorily\. 20\. Project Delays\. Not all the delays encountered by the project can be attributed to the changes in design or the sand-pumping problem\. Two other significant causes, which have also been significant in the other irrigation projects, can be identified\. One of those is the cumbersome national procedures for land acquisition which in this case delayed the construction of the main drainage works by up to two years\. The other cause of delay relates to problems with contractors or consultants\. The Bank required ICB for the drilling of 1,000 wells which, because LRS was unfamiliar with Bank procedures, delayed the letting of tenders\. In addition, some of the contractors performed badly and had to be replaced\. Selection of consultants for the design of the buried pipe system was also a long drawn out process and a major reason why these were never completed\. 21\. Extension of Buried Pipe System\. The pilot buried pipe system for interconnected wells is supposed to be extended to the whole of the 18,500 ha of temporary surface distribution system in Phase II, after careful evaluation by LRS\. Because of delays in completion of the pilot area it was not until October-November 1982 that the pilot projects were complete and were being tested\. It was indicated to the last Bank mission supervising the project at that time thet a decision would probably be made not to proceed further with the construction of underground distribution system due to high costs\. After this last supervision mission the Bank brought to Government's attention that, at the time the decision was made to go to an underground system or continue with surface distribution system, extensive studies comparing the costs of the two systems had been carried out by their consultants\. These studies showed that the initial investment cost for a permanent underground system was considerably higher than a surface system\. However, the studies also demonstrated that the O&M cost would be substantislly less and that over the life of the project, the underground system would be more economic than a surface system\. In view of the extensive analysis carried out at the time when the decision for a buried - 22 - system was made, the Bank informed the Government that decision would have to be based on a very careful analysis, taking into consideration any new developments that might have occurred subsequently\. The Bank also requested that when the Government had completed its study, and if they so desired, the Bank would be willing to send an expert having wide experience in designs and estimates of underground and surface distribution systems to Greece to review the study with LRS and its consultants\. Nothing further was heard from the Government of the study nor was Bank's offer of sending an expert to Greece accepted\. - 23 - ANNEX 1 GREECE GROUNDWATER DEVELOPMENT PROJECT (Loan 754-GR) Schedule of Disbursements Appraisal Estimate Actual --(Us$ Million) 1971 2\.3 - 1972 11\.4 0\.24 1973 11\.3 5\.06 1974 12\.8 4\.43 1975 10\.0 1\.35 1976 2\.2 2\.62 1977 - 2\.70 1978 - 2\.24 1979 - 1\.76 1980 - 1\.55 1981 - 2\.34 1982 0\.70 c Total 25\.0 24\.99 BULGARIA GREECE LBANIA GROUNDWATER DEVELOPMENT PROJECT ~IV THESSALY IURKEY Regional boundories i - -- -- Nomos boundaries \ Rodas S Eleviolin over 200 meters _\.2 40 SO o oElasson See of CrUi \al mbol, <A Aeg e a n rikkolo e a voos Kafdhilso Sofadhe E P l R U S 5\.» P Koslpos Alniros PROJECT AREA 1\. TRIKKALA 2\. KARDHITSA - ENIPEVS 3\. TIRNAVOS 4\. SIKOURION -a'aoC E N T R A L G R E E C E 2°3 làoWQ$30 To blimi a Å Ath hnir 23,o JANUARY 1971 IBRD-3298

APPROVAL

P052315

Document of The World Bank Report No: 21737-ET PROJECT APPRAISAL DOCUMENT ONA PROPOSED LEARNING AND INNOVATION LENDING (CREDIT) IN THE AMOUNT OF SDR 2\.0 MILLION (US$ 2\.597 MILLION EQUIVALENT) AND A PROPOSED GRANT FROM THE GLOBAL ENVIRONMENT FACILITY IN THE AMOUNT OF SDR 1\.4 MILLION (US $ 1\.802 MILLION EQUIVALENT) TO THE FEDERAL DEMOCRATIC REPUBLIC OF ETHIOPIA FOR CONSERVATION AND SUSTAINABLE USE OF MEDICINAL PLANTS January 22, 2001 Rural Development 2 (AFTR2) Country Department 6 (AFCO6) Africa Region  CURRENCY EQUIVALENTS (Exchange Rate Effective September 30, 2000) Currency Unit = Birr LC = US$ US$1\.00 = EthiopiaBirr 8\.1 FISCAL YEAR July 8 -July 7 Vice President Callisto E\. Madavo Country Director Oey Astra Meesook Sector Manager Joseph Baah-Dwomoh Team Leader Berhane Manna  ABBREVIATIONS AND ACRONYMS AAU Addis Ababa University BDI Biodiversity Institute CAS Country Assistance Strategy CBD Convention on Biological Diversity CIDA Canadian International Development Agency COP Conference of Parties CSE Conservation Strategy of Ethiopia DANIDA Danish International Development Authority DCA Development Credit Agreement DDR Department of Drug Research DOB Department of Biology EA Environmental Assessment EARO Ethiopian Agricultural Research Organization EHNRI Ethiopian Health and Nutrition Research Institute EISC Ethiopian Islamic Supreme Council ENDA Environmental Development Action EOC Ethiopian Orthodox Church EORC Essentials Oils Research Center EPA Environmental Protection Authority ESTC Ethiopian Science & Technology Commission EWCO Ethiopian Wildlife Conservation Organization FOM Faculty of Medicine FVM Faculty of Veterinary Medicine GEF Global Environment Facility GEFSEC Global Environment Facility Secretariat GOE Government of Ethiopia GSBA Globally Significant Biodiversity Area HSDP Health Sector Development Program lBCR Institute of Biodiversity Conservation and Research IBRD Intemational Bank for Reconstruction and Development ICB International Competitive Bidding ICDP Integrated Conservation and Development Project ICR Implementation Completion Report IDA Intermational Development Association IDR Institute of Development Research IPR Intellectual Property Rights IUCN The World Conservafion Union LIL Learming and hinovation Lending MEDAC Ministry of Economic Development and Cooperation MOA Ministry of Agriculture MOH Ministry of fHealth MOU Memorandum of Understanding MTR Mid-Term Review NCB National Competitive Bidding NPC Natural Products Chemistry NGO Non-Governmental Organization NH National Herbarium ii  PCMU Project Coordinating & Monitoring Unit PCP Project Concept Paper PDF Project Development Fund PIC Project Implementation Committee PIM Project Implementation Manual PIP Project Implementation Plan PC Project Coordinator PPTC Project Preparation Technical Committee QAG World Bank's Quality Assurance Group SIDA Swedish International Development Agency SOE Statements of Expenditure SOP School of Pharmacy STAP Scientific and Technical Advisory Panel THA Traditional Healers Association THP Traditional Health Practitioner UNDP United Nations Development Programme WCMC World Conservation Monitoring Centre WHO World Health Organization WWF Worldwide Fund for Nature iii  ETHIOPIA CONSERVATION AND SUSTAINABLE USE OF MEDICINAL PLANTS CONTENTS A Project Development Objective \.2 L\.a\. Project development objective \.2 l\.b\. Project Global objectives \.2 1 \.c\. Follow-up project objectives \. \.2 2\. Key performance indicators \.2 B Strategic Context \.3 l\.a\. Sector-related Interim Support Strategy (ISS) goal supported by the project \. 3 l \.b\. GEF operational strategy/program objective addressed by the project \.3 2\. Main sector issues and Govemment strategy \. 4 3\. Learning and development issues to be addressed by the project \.5 4\. Leaming and innovation expectations \.6 C Project Description Summary \.6 1\. Project components \.7 2\. Key policy and institutional reforms supported by the project \. \.9 3\. Benefits and target population \.9 4\. Implementation and institutional arrangements \. 10 5\. Monitoring and evaluation arrangements \. 10 D Project Rationale \. 10 1\. Project alternatives considered and reasons for rejection \. 10 2\. Major related projects financed by the Bank and/or other development agencies \.1 1 3\. Lessons leamed and reflected in the project design \.1 1 4\. Indications of borrower commitment and ownership \. \. 14 5\. Value added of Bank and GEF support in this project \. 14 E Summary Project Analysis \. 15 1\. Economic \. 15 2\. Financial \. 15 3\. Technical \. 16 4\. Institutional \. 16 5\. Social \. 17 6\. Environmental assessment \. 18 7\. Participatory approach \. 18 iv  F Sustainability and Risks \. 19 1\. Sustainability \. 19 2\. Critical Risks \. 20 3\. Possible Controversial Aspects \. 20 G Main Loan Conditions \. 21 1\. Effectiveness Conditions \. 21 2\. Other \. 21 H Readiness for Implementation \. 21 I Compliance with Bank Policies \. 22 Annexes Annex 1\. Project Design Summary Annex 2\. Detailed Project Description Annex 3\. Estimated Project Costs Annex 4\. Incremental Costs and Global Environmental Benefits Annex 5\. Financial Summary Annex 6\. Procurement, Disbursement and Financial Management Arrangements Table A\. Project Costs by Procurement Arrangements Table B\. Thresholds for Procurement Methods and Prior Review Table C\. Allocation of IDA Credit Proceeds Annex 7\. Project Processing Budget and Schedule Annex 8\. Documents in Project File Annex 9\. Status of Bank Group Operations in Ethiopia (Statement of Loans and Credits) Annex 10\. Ethiopia at a Glance Map v  ProJctc Appraisal Doctiment I thiiopiai Conservation & Sustainable Use of Medicinal Plants Project Ethiopia Conservation and Sustainable Use of Medicinal Plants Project Appraisal Document Africa Regional Office Rural Development 2 (AFTR2) Date: May 2000 Team Leader: Berhane Manna Country Director: Oey Astra Meesook Sector Manager: Joseph Baah-Dwomoh Project ID: ET-PE-52315 Sector: Rural Development/Agriculture GEF Supplement ID: ET-GE-35147 Theme(s): PA/EN l,ending Instrument: LIL Poverty Targeted Intervention: [X] Yes [] No Project Financing Data [ ] Loan [X] Credit (IDA) [X] Grant (GEF) [ Guarantee [] Other [Specify] For Loans/Credits/Others: Amount (US$M): Proposed terms: [ ] To be defined [ ] Multicurrency [ ] Single currency [ ] Standard Variable [X] Fixed [ ] LIBOR-based Grace period (years): 10 Years to maturity: 40 Commitment fee: 0\.5% Service charge: 0\.75% Government 0\.768* 0\.009 0\.777 IDA 0\.893 1\.614 2\.597** GEF 1\.029 0\.773 1\.802 Total: 2\.690 2\.396 5\.176 Borrower: Federal Democratic Republic of Ethiopia Guarantor: Not Applicable Responsible agency: Institute of Biodiversity Conservation and Research (IBCR) * of which US$0\.503 million in taxes\. Including PPF amount of US$90,000 Estimated disbursements (Bank FY/US$M): Fy ,9\.,2OP \. \., f S \.'<XE9 Annual 2\.431 1\.108 0\.723 0\.558 0\.265 Cumulative 2\.431 3\.539 4\.262 4\.821 5\.086 Project implementation period: IDA: 4 years; GEF: 5 years Expected effectiveness date: July 2001 Expected closing date: IDA: June 30, 2005 GEF: December 31, 2006 Implementing agency: Institute of Biodiversity Conservation and Research (IBCR) Contact person: Dr\. Abebe Demissie/Dr\. Medhin Zewdu Address: P\. 0\. Box 30726, Addis Ababa, Ethiopia Tel: (251-1) 61-2244 or 61-5607 Fax: (251-1) 61-3722 E-mail: biod-eta telecom\.net\.et ()CS PAD Form: October 9, 1998  Page 2 Project Appraisal Document Ethiopia: Conservation & Sustainable Use of Medicinal Plants Project A: Project Development Objective l\.a\. Project development objective: (see Annex 1) Medicinal plants provide a vital contribution to human and livestock health needs throughout Ethiopia, and are especially important to the rural poor\. Many medicinal plants are coming under increasing threat in the country due to agricultural expansion, deforestation, overgrazing, drought, fire and over- harvesting\. Also, the traditional health care knowledge is not being disseminated and is likely to be lost due to lack of preservation and documentation\. The overall objective of this project is to initiate support for conservation, management and sustainable utilization of medicinal plants for human and livestock healthcare in Ethiopia\. The project's specific objectives are to: (i) strengthen institutional capacity; (ii) identify and document selected commonly used/indigenous medicinal plants used for the treatment of major human diseases with emphasis on the following three namely tapeworm infections, bronchopneumonia and hypertension and livestock diseases with emphasis on the following three namely tapeworm infections, mastitis and dermatophilosis; (iii) initiate studies for the safe utilization of effective medicinal plant remedies for these three major human diseases and three livestock diseases; (iv) assess the economic benefits derived from medicinal plants in human and livestock healthcare on a national level and for possible export potential; (v) develop a national medicinal plant database; and (vi) support in-situ conservation and management and initiate ex-situ cultivation of medicinal plants\. The lessons and benefits derived from the project are applicable throughout Ethiopia and elsewhere in Africa where there is a high dependency on medicinal plants and traditional health systems\. l\.b\. Project Global objectives (see Annex 1): The global environmental objective of the project is to promote in-situ conservation and sustainable use of medicinal plants in and around a site of global significance - the Bale Mountains National Park\. The project would support: (i) on-site management including zoning of key areas, and detailed socio- economic and biological surveys to assess the status of medicinal plant species used, their distribution, mnanagement status and volumes harvested; (ii) identify and implement appropriate management options including preparation of guidelines for sustainable harvesting of medicinal plants; (iii) monitoring and evaluation to assess impact of harvesting guidelines and management interventions; (iv) initiate pilot, farmer-based cultivation trials for selected threatened species in available lands including home gardens, boundary and buffer zones of the national park; (v) training of appropriate personnel of the national park staff, and local communities; and (vi) public education and awareness activities\. l\.c\. Follow-up project objectives If the project objectives are achieved, follow-up project activities will focus on: (i) in-situ and ex-situ cultivation of selected medicinal plants; (ii) integration of selected phytomedicines into MOH primary health care system; and (iii) expanding the GEF conservation activities in relevant sites\. 2\. Key performance indicators: (see Annex 1) The success of the project will be evaluated based on the following key indicators: (i) Medicinal plants effective for the treatment of 3 major human diseases and 3 major livestock diseases confirmed and documented by end PY1; (ii) Assessment of economic benefits derived from use of medicinal plants in human and livestock healthcare on a national level and export potential completed by end PY2; (iii) Medicinal plants tested for safety and efficacy, and dosage and fornulation determined by end PY4; (iv) National Medicinal Plant and Indigenous Knowledge Practices Database established by mid PY3 building upon the medicinal plants for common diseases identified under (iii) and from Bale  Page 3 Project Appraisal Document Ethiopia: Conservation & Sustainable Use of Medicinal Plants Project Mountains survey; (v) Farmer-based pilot cultivation trials of the selected common medicinal plants important for the 6 major diseases (under i) established by end PY4; (vi) Socio-economic and biological surveys in Bale Mountains National Park to identify protected core zones and harvesting zones completed by end PY2; and (vii) Guidelines developed (by PY3) and implemented (by PY4) for management and sustainable harvesting of medicinal plants in the Bale Mountains National Park\. B: Strategic Context 1\. a\. Sector-related Interim Support Strategy (ISS) goal supported by the project: (see Annex 1) ISS report number: 21189-ET Date of latest ISS discussion: November 9, 2000 One of Ethiopia's major development objectives is sustained rapid growth with poverty reduction\. The Bank's Interim Support Strategy focuses on: food security and agricultural inputs, HIV/AIDS and weak institutions/inadequate human capacity\. The proposed project will contribute to poverty alleviation and human development with important links to health and environment\. The project will strengthen the foundation for conservation and management of medicinal plants, as well as integrating selected phytomedicines and traditional healthcare systems into the MOH primary healthcare system\. 1\.b\. GEF operational strategy/program objective addressed by the project Ethiopia signed the Convention on Biological Diversity in July 1994\. The Institute of Biodiversity Conservation and Research (IBCR) has overall responsibility for biodiversity conservation and management\. The project is consistent with the GEF Operational Strategy for Biodiversity especially the Operations Programs for Forest and Mountain Ecosystems, as well as Article 8(j) of the Convention of Biological Diversity (CBD) regarding the protection and conservation of medicinal plants, benefit sharing and protecting indigenous knowledge\. The project responds to Conference of Parties (COP) guidance on eligibility of projects that strengthen conservation, management, and sustainable use of ecosystems and habitats, particularly environmentally vulnerable and threatened habitats and species\. Specifically, it responds to COP3 and COP4 guidance through promoting economic incentives and alternative livelihood opportunities for local communities\. The site chosen for in situ conservation activities, the Bale Mountains massif, is one of the most important conservation areas in Ethiopia and recognized as such in the World Conservation Union (IUCN) Review of Protected Areas of the Afrotropical Realm as globally important\. It also lies within the Global 200 Ecoregions\. It supports the most extensive Afro-alpine ecosystem on the continent and has the most extensive altitudinal continuum of natural vegetation in the country, mostly comprising forests\. Local diversity and endemism are also high\. The massif is an Important Bird Area (IBA), recognized as one of the Global 200 Ecoregions, and a refuge for many endemic and threatened plants and animals including the Ethiopian wolf and also endemic Afroalpine plants\. Activities to be tested under the GEF project, including development of sustainable use guidelines and propagation of indigenous and threatened medicinal plants will provide useful lessons for replication elsewhere in Ethiopia and eastern Africa\. Work on intellectual property issues, documentation of traditional knowledge and benefit sharing will provide best practice guidelines, relevant to other GEF and Bank projects\.  Page 4 Project Appraisal Document Ethiopia: Conservation & Sustainable Use of Medicinal Plants Project 2\. Main sector issues and Government strategy: The key issues associated with the sector are as follows: (a) Limited institutional capacity for the development of medicinal plant-based traditional healthcare systems for human and livestock and their integration with modern medicine\. Currently, 80% of the human population and 90% of livestock rely on some form of traditional healthcare systems (IBCR Project Proposal, 1999)\. The Bank supported Health Sector Development Program (HSDP) focuses on modem medicine and at completion in 2003 aims to increase primary health care access from 45 to 55-60%\. Therefore, a large segment of the rural population will still remain without access to modem medicine and will continue to depend on medicinal plants and traditional healthcare practices\. At the same time a significant proportion of the urban population, while benefiting from the improvements in modem medicine, will also continue to rely on traditional medicines\. The proposed project is expected to strengthen the foundation for filling in this gap\. (b) Limited research and information regarding extraction, standardization, safety, efficacy, dosage and formulation of medicinal plant remedies\. The World Health Organization (WHO) is providing limited support (which will end June 1999) for the Department of Drug Research (DDR) of the EHNRI to conduct extraction, standardization and formulation studies of five common cosmopolitan plant species (Allium sativa, Datura sp\., Carica papaya, Osmium sp\., and Eucalyptus sp\.) using information published in the Indian Pharmacopoeia\. The WHO supported project has been useful for the DDR scientists in understanding the basic methodologies utilized in Formulation Studies\. The School of Pharmacy (SOP), Addis Ababa University (AAU) is able to undertake the processes of extraction, standardization, safety and efficacy, and dosage and drug formulation\. DDR lacks the technical expertise and equipment to complete the formulation phase\. The Faculty of Veterinary Medicine (FVM), AAU lacks the technical and laboratory capacity to carry out any of the above steps\. However, they will collaborate closely with SOP to develop the necessary expertise to formulate livestock phytomedicines\. The Faculty of Medicine (FOM) and Natural Products Chemistry (NPC) of the AAU can play a role in certain aspects of the phytomedicine development process\. The project will significantly enhance the capacity of the laboratories to produce safe and efficacious phytomedicines by providing specific research equipment and technical training\. Each of the laboratories is already collaborating with laboratories outside of Ethiopia\. It is recommended that the Ethiopian laboratories utilize that linkage to verify extraction, standardization, safety and efficacy, and dosage and formulation studies, where warranted, and upgrade technical training where appropriate\. In addition, it is also recommended that WHO Traditional Drug Guidelines be followed and linkages with WHO be maintained\. The proposed project will build on the experience gained and give support for the development of additional approved formulations of important high-demand local phytomedicines\. (c) Inadequate quantitative data on economic benefits derived and long-term sustainability of supply of medicinal plants\. At present, there is no formally documented information on the number of people (rural/urban) dependent on medicinal plants\. Similarly, no data are available on source of supply, volumes and values purchased, under what conditions people use plant medicines, and if the present level of supply is sustainable\. The proposed socio-economic assessment in selected regions will provide such baseline data\. The PDF Block B Grant provides funding to initiate biological and socio-economic studies in the Bale Mountains that will facilitate the regional baseline studies proposed under the project\. The Institute of Development Research (IDR), AAU among others has the expertise necessary to carry out such quantitative studies and analyses\. (d) Habitat degradation, inadequate in-situ conservation programs and unsustainable collection practices of medicinal plants\. The present knowledge on Ethiopia's plant biological diversity is being recorded in a Modem Flora of Ethiopia\. However, the limited conservation and management measures  Page 5 Project Appraisal Document Ethiopia: Conservation & Sustainable Use of Medicinal Plants Project being undertaken do not adequately deal with the ever-advancing factors of genetic erosion\. Several sources report the accelerated loss of medicinal plants due to habitat degradation, and probable over- harvesting of wild populations of medicinal plant species\. More than 600 medicinal plants are known to be used in herbal preparations of which at least 18 species (WCMC, 1998) are considered under threat of extinction in Ethiopia - probably an underestimate\. The successful conservation and management of medicinal plant resources will require the active participation of communities and their close collaboration with the public sector\. Attention should be given to the capturing of local health traditions - many of which are oral in nature and therefore largely undocumented\. Recognition must be given to the need to acknowledge the rights of THPs, communities and religious organizations to the benefits accruing from this knowledge by clearly defining Intellectual Property Rights (IPRs)\. Support will be provided to Ethiopian Science and Technology Commission (ESTC) and Traditional Healers Association (THA) for developing guidelines for IPRs for sharing the traditional medicinal knowledge\. Government Strategy: In 1993 the GOE promulgated Health and National Drug Policies\. Priority 4 of the Health Policy reads: "Due attention shall be given to the development of the beneficial aspects of Traditional Medicine including related research and its gradual integration into Modern Medicine"\. Article 3 of the Drug Policy reads: "Facilitate the gradual integration of traditional drugs with modern medicine by giving due attention to traditional practices and identfying the benefiial and harmful aspects through investigation and research "\. Ethiopia's commitment to the sector is high, however its ability to provide increased resources for the study and sustainable use of medicinal plants is limited\. Strengthening of DDR, and collaborating research institutes (SOP, FVM), to carry out a program to deterrnine the safety, efficacy, and dosage levels of commonly used medicinal plants for the treatment of major human and livestock diseases would offer the health services sector additional ways and means of fulfilling the terms of reference of the Health and Drug Policies to provide affordable healthcare\. The Minister of Health's letter endorsing the important contribution the project will make to improved healthcare is evidence of the government's commitment to facilitate and integrate traditional and modern health systems\. Ethiopia has now in place a Conservation Strategy and an Environmental Policy\. The Conservation Strategy of Ethiopia (CSE) has 11 sectoral and 11 cross-sectoral policies, and many of these are relevant to the conservation and sustainable use of medicinal plants\. A Biodiversity Conservation and Development Strategy and Action Plan is being developed\. Medicinal plants are explicitly recognized as important components of the natural heritage of Ethiopia\. A medicinal plant inventory and better protection of habitats constitutes one of the highest priorities\. Community-based approaches with the full participation of women in the management of natural resources are also given high priority\. Agricultural research is guided by a National Science and Technology Policy (December, 1993) which has specific sections on agriculture and natural resource development and environmental protection\. The government has identified the IBCR, under the IBCR Board (IBCRB), as the lead agency in identifying a medicinal plant R&D strategy and action plan for conservation and sustainable utilization\. IBCR has established a working link with the THA by providing land at regional stations where local healers can cultivate selected medicinal plants\. Close collaboration is required between IBCR, collaborating institutions, farmers, communities, religious groups, and THAlTHPs, for medicinal plant R&D\. 3\. Learning and development issues to be addressed by the project: Limited institutional capacity\. The project will: (i) strengthen the lead institute (IBCR) by establishing a Project Coordinating Monitoring Unit (PCMU) within IBCR; (ii) strengthen research, technical and human resources' capacity of collaborating institutes/agencies; (iii) support ESTC for developing IPR guidelines with inputs from THA; and (iv) ex-situ cultivation trials of selected medicinal plants\. In addition, the project will support establishment of a central database on usage, distribution and status that  Page 6 Project Appraisal Document Ethiopia: Conservation & Sustainable Use of Medicinal Plants Project would include medicinal plants used for the control of 3 major human diseases (tapeworm infections, bronchopneumonia, hypertension) and 3 livestock diseases (tapeworm infections, mastitis, dermatophilosis)\. The database will draw together information from oral, traditional, modem literature, and herbarium collections, with emphasis on medicinal plants species identified from Bale Mountains National Park area\. This systematic documentation and evaluation of threat, rarity and demand will be unparalleled in the East African region in terms of its scope and comprehensiveness and will have global and regional, as well as national benefits\. Lack of quantitative data on economic benefits and safety issues\. The project will support studies to assess current levels of usage of medicinal plants (used for 3 human and 3 livestock diseases), including market and field surveys to assess pressures on wild plant populations and habitats at selected sites\. And, to better understand local community and national dependence on medicinal plants for human and livestock health care\. This information will provide input to the national database and priority setting for in-situ conservation activities\. The project will support testing for safety, efficacy and dosage levels for selected commonly used remedies derived from native plant species\. The project will also support studies to identify methods for the propagation and cultivation practices for a small number of selected medicinal plants for cultivation in home gardens, farms and degraded habitats\. Conservation of medicinal plants\. In view of the probable over-harvesting and loss of medicinal plants, inventory, surveys of distribution and status are highest priorities\. The project, through GEF funding, will support activities to promote in-situ conservation and sustainable use of medicinal plants at sites of global significance; the Bale Mountains National Park and surrounding forests which have been identified as a priority pilot site\. Methodologies for the sustainable harvesting of in-situ medicinal plants will be identified that recognize the unique biological and physical characteristics of protected areas\. It is expected that such methodologies and practices involving the participation of local communities in management, decision making and monitoring developed under the project can be replicated in and around other national parks and other relevant sites in Ethiopia\. 4\. Learning and innovation expectations: [ X] Economic [ ] Financial [X] Technical [X] Institutional [X] Social [X] Environmental [X] Participation [X] Other (IPR) The learning and innovation expectations by the end of the project are that we would have: (i) established the institutional capacity for determining safety and efficacy, dosage testing and formulation of phytomedicines; (ii) confirmed and tested six medicinal plants effective for the treatment of 3 human diseases and 3 livestock diseases and determined their safety, efficacy and dosage levels; (iii) identified effective harvesting guidelines to sustainably improve the supply of, and access to, wild medicinal plants; (iv) in collaboration with farmers identified sustainable cultivation methodologies and an institutional framework for identifying endangered medicinal plants; and (v) strengthened on-site management of medicinal plants in protected areas\. C: Project Description Summary The project will be co-financed by IDA and GEF\. The IDA credit will support: development of a national database of medicinal plants including the plants used for the control of the 3 major human diseases and 3 livestock diseases, as well as an inventory of plants identified from the Bale Mountains; assessment of current levels of usage and economic benefits derived in the country from use of medicinal plants; training and institutional strengthening; developing IPR guidelines for sharing traditional medicinal knowledge; determining safety and efficacy, and identifying dosage levels for selected commonly used remedies derived from plant species; initiate studies for the propagation and cultivation methods for the  Page 7 Project Appraisal Document Ethiopia: Conservation & Sustainable Use of Medicinal Plants Project selected medicinal plants; and project implementation, monitoring and evaluation\. The GEF grant will support biodiversity conservation and sustainable management of in-situ medicinal plant resources in and around the Bale Mountains National Park as a means of reducing harvesting pressure on wild plants\. The GEF grant will also cover the costs of education and mass awareness campaigns, local training, and pilot farmer-based cultivation trials of selected threatened medicinal plants in home and community gardens and boundary and buffer zones of the national park\. 1\. Project components: (see Annex 2 for a detailed description and Annex 3 for a detailed cost breakdown) (a) Institutional Strengthening, Human Resource Development, and Project Monitoring & Evaluation - US$1\.134 million (IDA US $0\.821 million, GOE US$0\.313 million)\. Under this component, the project will support: (i) strengthening institutional capacity of IBCR - lead implementing agency; (ii) developing human resource capacity of collaborating institutions for implementing project activities; (iii) (a) 1BCR in collaboration with relevant bodies including traditional healers and other collaborating institutions to establish a medicinal plant field gene bank and for organizing a national workshop for same; and (iii) (b) ESTC to develop IPRs policy and guidelines for sharing traditional knowledge; and (iv) establishment and functioning of PCMU\. (b) Studies, Research and Data Base Development - US$1\.949 million (IDA US $1\.686 million, GOE US$0\.263 million)\. This component will support: (i) development of methods to collect, analyze and interpret quantitative data on socio-economic benefits derived from medicinal plants used in human and livestock healthcare on a national level, (ii) ethnomedical survey to explore utilization of medicinal plants and traditional healthcare practices for prevention of HIV and mitigation of adverse impact of AIDS; (iii) research on propagation and cultivation methods of selected commonly used medicinal plants for human and livestock diseases, (iv) Formulation Studies: extraction, standardization, safety and efficacy, and dosage testing and formulation of phytomedicines for 3 human diseases and 3 livestock diseases; and (v) development of a National Medicinal Plant Database\. (c) In-situ Conservation and Sustainable Use in the Bale Mountains Area - US$2\.003 (GEF US$1\.802 million, GOE US$0\.201 million)\. Many medicinal plants are coming under increasing threat in Ethiopia due to agricultural expansion, deforestation and over-harvesting that can be directly related to rapid human and livestock population growth\. GEF funding will support in-situ conservation, management and sustainable use of medicinal plants in the Bale Mountains National Park and surrounding forests\. These activities will be implemented by IBCR and Oromya Regional Government and in collaboration with the Ethiopian Wildlife Conservation Organization (EWCO), and other relevant NGOs and farm communities\. By addressing issues such as sustainable methods and levels of harvesting and ex-situ propagation and cultivation of medicinal plants the project contributes to managed use of biodiversity, sustainable development, poverty alleviation, and rural health\. In particular, the project evaluates the biodiversity of medicinal plants in Bale Mountains and assesses the distribution and status of threatened or rare species\. In addition, through a participatory process involving local communities, THPs and local/regional institutions, the project will assist in developing a program for conservation and sustainable use of medicinal plant resources\. This information will be used to identify key park areas for zoning for appropriate use and harvesting levels with the option, where appropriate, of controlled harvesting of highly threatened species\. The inventory of medicinal plants and their abundancy status in the Bale Mountains National Park will be an important contribution to the National Medicinal Plant Database being initiated under the IDA component\. More specifically, this component will support: (i) On-site management including: (a) in-depth socio-economic survey and assessment (building upon the preliminary survey conducted under the PDF B phase) to: (i) identify villages/users having the greatest impact on wild populations of medicinal plants through harvesting and other activities, (ii) identify villagers/farmers for on-farm pilot propagation and cultivation trials of medicinal plants to remove pressure on wild populations; (b) in-depth biological survey and assessment of in-situ and ex-situ  Page 8 Project Appraisal Document Ethiopia: Conservation & Sustainable Use of Medicinal Plants Project conservation (building upon the preliminary survey conducted under the PDF B phase); zoning of key areas within the Park and strengthening park management in collaboration with the EWCOlWWF-Dutch project\. (ii) Development and implementation of appropriate management policy options and guidelines for sustainable levels of harvesting of medicinal plants and/or their products, including development of a comprehensive biodiversity monitoring and evaluation system\. The findings of the in-depth biological and socio-economic surveys completed in PY 2 will form the basis for the development and implementation of appropriate management options and guidelines for sustainable levels of harvesting in PY 3 and PY 4\. (iii) Monitoring to assess: (a) impact of harvesting of medicinal plants in permit areas; (b) preliminary impact of harvesting guidelines/management interventions in the park; (c) project interventions in protecting threatened/rare medicinal plant species; (d) market and threatened/rare medicinal plant species; and (e) market and THP surveys to determine levels of use locally, and nationally of plants harvested from Bale Mountains National Park\. (iv) Pilot farmer-based cultivation trials for a selected number of threatened and indigenous species in home gardens and boundary and buffer zones of the national park to: (a) supply local needs; and (b) provide alternative income generation\. Micropropagation techniques will be used where appropriate (v) Training of: (a) relevant personnel in the conservation, management and monitoring of medicinal plants within the park and adjacent forests; and (b) farmers for pilot propagation and cultivation trials and management\. (vi) Education and mass awareness campaigns of the relevance of conservation and management programs of medicinal plants and importance to Ethiopia's biodiversity and long-term healthcare needs\. a\. Institutional Institutional 134 22\.3 0\.821 32\.7 0\.313 Strengthening, Human building & Resource Development, and Project Project Monitoring & management Evaluation b\. Studies, Research and Research/ 1\.949 38\.3 1\.686 67\.3 0\.263 Data Base Development Info\.Mgmt c\. In-situ Conservation Biodiversity 2\.003 39\.4 1\.802 0\.201 and Sustainable Use in conservation Bale Mountains Area Total 5\.086 100 2\.507 100 1\.802 0\.777 * Includes Contingencies\.  Page 9 Project Appraisal Document Ethiopia: Conservation & Sustainable Use of Medicinal Plants Project 2\. Key policy and institutional reforms supported by the project: The project supports Ethiopia's Health Policy (1993) in relation to traditional medicine: (i) Strengthening the sector through research and development of traditional drugs which are in wide use (Health Policy: Traditional Drugs, 9\.1); (ii) Facilitate the gradual integration of traditional drugs with modem medicine by giving due attention to traditional practices and identifying the beneficial and harmful aspects through investigation and research (Health Policy: General Policy, No\. 3); and (iii) Enhancing conditions for the application of traditional drugs ascertained to be safe and effective for treatment (Health Policy: Traditional Drugs, 9\.2)\. The project also supports strengthening of IBCR in its new role as lead biodiversity institution responsible for all aspects of biodiversity conservation\. 3\. Benefits and target population: The principal beneficiary population would be the majority of the country's rural and urban poor that depend on medicinal plants and herbal remedies for healthcare\. These groups will benefit through the dissemination of reliable information on safety, efficacy and dosage levels of selected herbal formulations through education public awareness programs\. Communities, including women, poor households, farmers and THPs, will participate in the decision-making process by contributing to the identification and implementation of medicinal plant conservation, management, cultivation and harvesting strategies\. Local benefits to Bale Mountains communities would include: implementation of a managed harvesting regime with improved protection of park biodiversity; wider availability of safe and efficacious herbal remedies; and an additional source of income\. Women involved in home healthcare using medicinal plants and THPs will also benefit through formal recognition of their roles\. National benefits will occur through identification, documentation and determination of safety, efficacy and dosage levels of selected indigenous medicinal plants commonly used for the treatment of 3 major human diseases (tapeworm infections, bronchopneumonia, hypertension) and 3 livestock diseases (tapeworm infections, mastitis, dermatophilosis)\. These activities will significantly contribute to improved supply of phytomedicines for human and livestock healthcare in the future\. In addition, development and utilization of a medicinal plant national database will help the government formulate and implement national programs for conservation, cultivation, management and sustainable utilization of medicinal plants, and maximize national benefits from these resources\. The project will strengthen institutional capacity and collaboration through the provision of technical training, workshops, research facilities, and increase public awareness on conservation and management of medicinal plants\. Global benefits will occur through the conservation and management of endemic and threatened species of medicinal plants within the Bale Mountains National Park - a Globally Significant Biodiversity Area (GSBA)\. Such actions will help to secure continued existence of these valuable resources and their potential, future medicinal, as well as other values\. Specifically, the development of park zoning and management guidelines for sustainable levels of harvesting will enhance biodiversity protection\. Furthernore, the project will document and underscore the important role traditional knowledge and cultural heritage can play in global biodiversity conservation and medicinal plant management programs\.  Page 10 Project Appraisal Document Ethiopia: Conservation & Sustainable Use of Medicinal Plants Project 4\. Implementation and institutional arrangements: Implementation period: A four-year project period is planned for IDA supported (LIL) activities, and a five-year period for GEF-funded conservation activities\. A longer implementation period is required for the conservation activities, due to time required to complete biodiversity surveys, develop and implement medicinal plant management guidelines, and determine and monitor sustainable harvesting levels for medicinal plants from the Bale Mountains National Park\. If this project succeeds, a follow-up project will be developed\. Implementation agencies: A Project Coordinating and Monitoring Unit (PCMU) will be established at IBCR, which has been identified as the lead agency by the government\. The PCMU will facilitate achievement of project objectives, and be coordinated by a Project Coordinator (PC)\. The PM will have adequate control regarding budgetary matters, be responsible for coordinating project activities between collaborating institutions, and monitor and report project progress\. Furthermore, the PM will be supported by one Accounting and Disbursement Specialist, one Monitoring and Evaluation Specialist, one Procurement Specialist and adequate administrative staff\. The PCMU will be guided by a Project Implementation Committee (PIC)\. The Chairperson of PIC would be the General Manager of the IBCR, and Secretary of PIC would be the Project Manager of PCMU\. The other members will be designates from the collaborating institutes/agencies, including one representative from EPA\. 5\. Monitoring and evaluation arrangements: The PCMU would implement a systematic and detailed monitoring and reporting system focusing on both the output and outcome of the project\. The system should allow an effective evaluation of (i) the effectiveness of the project's delivery mechanisms and procedures; (ii) the impact of the laboratory and field activities on the basis of the stated objectives, and input, output and impact indicators identified in the Project Design Summary (Annex 1); and (iii) the replicability of the in-situ and ex-situ activities at a wider national scale\. The progress towards project outcomes would be evaluated during project supervision and an in-depth review 18 months after the project becomes effective; followed by a Mid- Term Review at the 30 months stage\. The in-depth review after 18 months would determine the extent to which the project is performing vis-a-vis its development objectives\. The Mid-Term Review at the 30 months stage would determine the possibility of developing a full-scale project\. An Implementation Completion Report would be prepared at least six months prior to final disbursement of the Credit\. The Government would prepare its own evaluation of the project, including a plan for a full-scale project\. D: Project Rationale 1\. Project alternatives considered and reasons for rejection: Initially, a full-scale project was planned\. In November 1998, an identification mission identified several issues (e\.g\. lack of adequate capacity of the lead agency-IBCR, institutional complexity of the project, lack of data on medicinal plants used for the treatment of major human and livestock diseases, lack of information on economic benefits derived in the country by the use of medicinal plants, etc\.) that needed to be addressed before a full-scale project could be launched on medicinal plants\. Based on the findings of the mission, it was decided that a LIL would be a better instrument, and was communicated to GOE on December 21, 1998\. A Project Proposal was received by the Bank on February 4, 1999, and a Pre- Appraisal mission was undertaken in May 1999\.  Page I I Project Appraisal Document Ethiopia: Conservation & Sustainable Use of Medicinal Plants Project 2\. Major related projects financed by the Bank and/or other development agencies: Agricultural Productivity * Agricultural Research Proj ect (Cr\. 15 2 1 - and economic growth ET), closed in 1994 * Fourth Livestock Development Project S S (Cr\. 1782-ET), closed in 1994 I Peasant Agricultural Development Project S S (Cr\. 1956-ET), closed in June 1997 on2oinme: * Agricultural Research and Training S S Project (Cr\. 17794-ET) * National Seeds Project (Cr\. 274 1-ET) S S Forestry, and Biodiversity! Ongoing: Medicinal Plants * Kerala Forestry Project (Cr\. 30530-IN) S S Conservation * Sri Lanka: Conservation and Sustainable Use of Medicinal Plants Project (GEF TF-Grant 17160-CE) Health Sector On2oins * Ethiopia Health Sector Development S S Program (Cr\. 3140-ET) Other development aaencies WHO * Support to Dept\. of Traditional Medicine now DDR\. Closing June, 1999 UNDP/GEF * A Dynamic Farmer-based Approach to the Conservation of African Plant Genetic Resources\. Closing June, 1999 WWF-Dutch ICDP * Bale Mountains Project (On-going) Germany Supported * Integrated Forest Management Project, Adaba/Dodola (IFMP-A-D) (1990-2000) Germany Supported * Forestry Genetic Resources Project (1992-2001) SIDA/SAREC-National * Flora of Ethiopia (contributing agencies: Herbarium NPC, ESRC) IP/DO Ratings: HS (Highly Satisfactory), S (Satisfactory), U (Unsatisfactory), HU (Highly Unsatisfactory)  Page 12 Project Appraisal Document Ethiopia: Conservation & Sustainable Use of Medicinal Plants Project 3\. Lessons learned and reflected in the project design: From the Bank supported Agricultural Research Project in Ethiopia\. (Cr\. 1521-ET)\. completed in 1994: (i) in order to optimize the integration and collaboration of the different public institutions and agencies and private sector, implementing institutions/agencies should be familiar with IDA's procurement and disbursement procedures; towards this end, training should be provided to implementing agencies; (ii) project implementing institutions/agencies should be given the financial authority to manage resources allocated for the components; and (iii) adequate systems/resources for financial recording, reporting and accounting must be in place for efficient functioning of any institution and agency\. From WHO proiect in Ethiopia implemented by DDR: As a first step, the project was designed to familiarize and build some capacity of DDR to initiate basic Formulation Studies\. The project essentially worked in isolation with only limited collaborative links with international laboratories\. However, recently collaborative links have been developed with international laboratories\. In the design of the proposed project, assurance will be obtained that the DDR continues collaboration with the advanced laboratories from within and outside the country\. From UNDP/GEF project - Dynamic Farmer-Based Approach to the Conservation of Ethiopia's Plant Genetic Resources implemented by IBCR: Farmer participation is essential in germplasm conservation programs and women are key elements in community-based conservation and management strategies\. Successful collaboration between farmers and researchers is enhanced by good agricultural extension services\. The documentation of germplasm/farmers' varieties can play an important role in biodiversity conservation and sustainable use\. From WWF-Dutch ICDP proiect in the Bale Mountains\. Bale\. Ethiopia implemented by EWCO: The WWF-Dutch ICDP supported project aims to: (i) strengthen institutional capacity to manage the country's important protected areas, with an emphasis on forests; and (ii) conserve and sustainably manage the Bale Mountains and the Harenna Forest\. This proposed medicinal plant project will emphasize on conservation and sustainable management of medicinal plants in Bale Mountains\. A collaborative link with the WWF-Dutch ICDP project will also be established\. From the German Government supported Integrated Forest Management Project (IFMP) -Adaba/Dodola: The IFMP working area covers the Adaba -Dodala Regional Forestry Priority Area, located in the North- Western part of the Bale Mountains\. IFMP concept is mainly based on joint forest management of the Adaba-Dodola forest, i\.e\. usufructury rights of communities for utilization of wood products and grazing rights\. The objective of the proposed medicinal plant project will be complementary to the efforts of IFMP since it might open up a new avenue for income generation for local communities from sustainable utilization of forest resources, thus increasing the value attached to the forests by communities\. The proposed medicinal plant project will establish collaborative ties with IFMP\. One of the important lessons learned from the IFMP project is that stakeholder involvement is essential for successful development and implementation of natural resources management project and the proposed medicinal plants project has reflected this aspect in the project design\. From the German Government supported Forestry Genetic Resources Project (Assistance to the Institute of Biodiversity Conservation and Research (IBCR): This project aims at building capacity for conserving forest genetic resources\. The focus of the project is on woody plants\. Herbal species, which play an important role for medicinal applications are not planned to be inventorised and collected under this project\. For field activities, this project has given high priority for forest genetic resources conservation in the Harenna forest on the southern escarpment of the Bale Massive\. This project could benefit from the data that will be gathered through an in-depth biological survey planned under the proposed  Page 13 Project Appraisal Document Ethiopia: Conservation & Sustainable Use of Medicinal Plants Project medicinal plant project in the Bale Mountains area\. The proposed medicinal plant project will seek possible cooperation from the Forestry Genetic Resources project being implemented by IBCR\. From the GEF supported Sri Lanka Conservation and Sustainable Use of Medicinal Plants Project (Project ID: LK-GE-35828): questions have been raised by two local NGOs regarding the lack of protection of information related to the distribution and uses of medicinal plants, and information collected from practitioners of indigenous medicine\. Because this information is not presently protected from Property Rights regimes the data will be available to anyone who may seek to privatize and profit from the indigenous knowledge of the Sri Lanka people\. Public consultation was missing and legislative protection of medicinal plant information has not been secured\. The proposed project will support ESTC develop IPR guidelines for sharing traditional medicinal knowledge with the full participation of THA\. From the Bank supported Kerala Forestry Project\. in India: Recognizing the fact that open access to medicinal plants in the wild is one of the main reasons for the current unsustainable levels of harvesting and the trend of harvesting too much and growing and protecting too little is contributing to unsustainability\. The Kerala Forestry Project is supporting a pilot program that involves tribal and other forest-dependent communities in the inventory, conservation, and sustainable development of medicinal plants\. The project supports technological improvements for artificial propagation of endangared plant species; research and training in better harvesting and processing techniques; community management of plant propagation, harvesting, and marketing; establishment of community-managed, forest-based enterprises for income generation; and monitoring and evaluation of the status of these natural resources with the assistance of local communities\. The proposed medicinal plant project in Ethiopia also identifies some of the similar concems and has included in the project design a detailed biological survey to evaluate the biodiversity of medicinal plants in Bale Mountains (GSBA) and assess the distribution and status of threatened or rare species\. In addition, through a participatory process involving local communities, THPs and local/regional institutions, the project will assist in developing a program for conservation and sustainable use of medicinal plant resources\. It will support development, implementation and, monitoring of guidelines for sustainable levels of harvesting of medicinal plants and/or their products in the Bale Mountains area\. The proposed project will also support farmer-based cultivation trials for a selected number of threatened and indigenous species in home gardens and boundary and buffer zones of the national park to supply local needs, and provide alternative income generation\. From QAG review of GEF-supported biodiversity projects in Africa: (i) biodiversity projects need to deal effectively with the economic and social pressures on ecosystems; (ii) integration of biodiversity conservation agenda into the broader national development agenda is essential; (iii) "ownership" of a biodiversity conservation agenda should be at both the local and national levels; (iv) clearly defined goals and objectives are essential to focus on project efforts, monitor progress and demonstrate impact; (v) government commitment and funding are essential for the success of biodiversity conservation projects; and (vi) the problems of biodiversity loss among "abundant" and cultivated species is a growing concern and need to be addressed\. The proposed project supports socio-economic studies for effective implementation; has well focussed goals to support medicinal plant conservation; and has both local and government support through the development of Conservation Strategy and Environmental Policy\. Further a Biodiversity Conservation and Development Strategy and Action Plan is being prepared by IBCR which explicitly recognizes the importance of medicinal plants\. GEF STAP review carried out on March 4, 1999 acknowledges that this is an innovative project and with successful implementation would yield many global benefits\. It could serve as a desperately needed model for other areas of the world where populations depend on wild plants for primary health care needs\. The review indicates that: details regarding methodologies for medicinal plant species selection  Page 14 Project Appraisal Document Ethiopia: Conservation & Sustainable Use of Medicinal Plants Project and cultivation trials need to be identified during the project development; greater emphasis should be placed on identification of sustainable harvesting practices; role of community involvement in project management is crucial; and a committee of outside experts could add value to the implementation and management of the project once it is underway\. 4\. Indications of borrower commitment and ownership: Following the request of the Minister of Agriculture to fast track a project for the conservation and sustainable use of medicinal plants, a GEF-PDF A grant was provided for a workshop to identify an Action Plan\. A Project Preparation Technical Committee (PPTC), with representatives from ESTC, MOA, IBCR, ORG, EARO, DDR, EORC, AAU (SOP, NII, Institute of Pathobiology, IDR, FVM) THA, EOC, EISC, ENDA and EWCO was established to identify an agenda and organize the workshop\. Based on the unanimous recommendations of all workshop participants, the PPTC produced a Project Concept Paper (PCP) that was formally submitted to Bank in August 1998\. The PPTC has been meeting regularly since its inception, and has been working as the Steering Committee for the development of this project\. During the Bank identification mission in November 1998, the Minister of Health and the Director General of EARO provided letters of endorsement and strongly supported the development of the project\. In addition, for the GEF related project preparation activities, a PDF B grant proposal was prepared and submitted by the government to Global Environment Facility Secretariat (GEFSEC) in December 1998\. The GEFSEC has approved the PDF B grant and it is currently being implemented\. Under the PDF B grant the IBCR will initiate socio-economic and biological surveys of medicinal plants in the Bale Mountains National Park; identify indicators for biodiversity monitoring and evaluation; review database systems in place for medicinal plants\. A letter of endorsement from the Environmental Protection Authority (EPA) (GEF focal point) for the project was received on February 26, 1999\. 5\. Value added of Bank and GEF support in this project: The Bank involvement would allow valuable lessons and initiatives tested by the project to be scaled up into a larger program in the future\. The project implementation experience could be utilized by the GOE to potentially develop a comprehensive program enhancing in-situ and ex-situ conservation and management of medicinal plants, as well as integrating selected phytomedicines and traditional health systems into the MOH primary healthcare system, including a potential for exports\. More specifically, Bank collaboration is expected to make a significant contribution in: (i) gathering comprehensive and authoritative information (e\.g\. on economic benefits derived, use of biological resources as part of a national sustainable development strategy, related socio-economic issues, etc\.) on medicinal plants and their uses; (ii) initiating research on medical efficacy of traditional pharmacopoeia in relation to quality control, dosage and safety; (iii) recognizing, formalizing, and promoting the important role medicinal plants and traditional healers play in providing affordable healthcare; and (iv) assessing and improving the collaborating institutions/agencies capacity to coordinate and implement initiatives on conservation, management and sustainable utilization of medicinal plants for human and livestock healthcare in the country\. The project would also help in securing future coordination with other relevant donor agencies, harmonizing various approaches to the development of medicinal plant conservation, management and sustainable harvesting from natural ecosystems, and development of ex-situ medicinal plants cultivation research\. The GEF value added comes from its global experience on the design, implementation and financing of biodiversity projects\. The GEF support is justified by the Bale Mountains biodiversity and by the unique opportunity to focus on conservation, management and sustainable utilization of medicinal plants many of which are rare and endemic\. GEF funding will enable the project to target globally valued and  Page 15 Project Appraisal Document Ethiopia: Conservation & Sustainable Use of Medicinal Plants Project threatened plants and habitats\. The Bank's suite of GEF and biodiversity and medicinal plants projects in the region provides opportunities for promotion of exchange of ideas, cross-fertilization with other GEF projects, and strengthened biodiversity monitoring and evaluation, review and scientific oversight\. E: Summary Project Analysis: (detailed assessments are in the project file, see Annex 8) 1\. Economic: (supported by Annex 4) [ ] Cost-Benefit Analysis: NPV= n/a million; ERR= n/a [ ] Cost Effectiveness Analysis [X] Other (Incremental Cost Analysis) At present, there are no quantitative data available on the supply of or consumer demand for medicinal plants, and on economic benefits derived in the country by the use of medicinal plants and their contribution to healthcare\. Socio-economic surveys (including market surveys) to be conducted during preparation and under this project will help to fill such data gaps\. The IDA-LIL components are basically aimed at innovative studies/research and capacity building (studies/surveys, identification of medicinal plants and database development, training, safety and efficacy testing, and dosage and formulation of selected medicinal plants) and do not focus on actual production (other than few pilot propagation and cultivation trails) and consumption of medicinal plants\. The LIL components of this project will form the basis for initiating large-scale production and use of selected medicinal plants in the future (presumably during the next project phase) producing clear tangible benefits (e\.g\. better health, more income etc\.)\. Therefore, given the capacity building and innovative character of the project at this LIL phase, it does not readily lend itself to standard cost-benefit and financial analyses\. For the GEF component of the project, incremental cost analysis has been considered as the principal economic evaluation criterion as presented below: Incremental Cost Analysis: Under the baseline conditions GOE's expenditure on conservation and management of medicinal plants forms a small percentage of the budgetary allocation for environment and scientific research\. The project's scope to conserve medicinal plants yields global and domestic benefits\. Global incremental benefits will include the conservation and sustainable use of medicinal plants not being targeted by current activities\. Increased information and awareness on the properties and uses of medicinal plants is another global incremental benefit from the project\. Domestic incremental benefits from the project will include less expensive healthcare and in the long run locally produced and patented phytopharmaceuticals\. Incremental costs of the GEF component total US$ 1\.8 million and cover the costs of financing the GEF alternative (see Annex 4)\. 2\. Financial: (see Annex 5) NPV=n/a FRR= n/a (Given the capacity building and innovative character of the project, a standard financial analysis is not readily possible)\. The estimated project cost is US$ 5\.086 million (Birr 40\.179 million equivalent), of which US$ 0\.777 million or 15\.3 percent will be funded by the government, US$ 1\.802 million or 35\.4 percent will be funded by GEF, and the remaining US$ 2\.507 million or 49\.3 percent will be funded by IDA\. The breakdown of investment costs and recurrent costs and project financing plan are presented in Annex 5\. Fiscal impact: As the project at this LIL phase does not include commercial production of phytomedicines derived, the likely fiscal impact will be insignificant\. Only in the long-run (presumably during the next project phase) when (and if) large-scale production of effective phytomedicines occur, government spending could change in the following manner: (i) increased use of medicinal plant-based  Page 16 Project Appraisal Document Ethiopia: Conservation & Sustainable Use of Medicinal Plants Project herbal remedies in the country would help reduce costly imports of pharmaceuticals thus freeing up resources for other applications in the sector; (ii) if substantial health benefits (due to increased supply and use of affordable and locally available herbal remedies) result, then presumably government would have to spend less on the national health system; and (iii) if production of medicinal plants increases, and can be taxed, then this would have an effect on government revenues\. 3\. Technical: The technical capacity and training needs of the collaborating institutions will be assessed during preparation through PDF-B grant and during the first year of the project\. The project will scale up the technical capacity of such institutions to facilitate appropriate analytical requirements, technology generation and transfer, and training\. The main technical contributions of this project would be: (i) establishment of a medicinal plant inventory and national database; (ii) identification of sustainable cultivation practices; (iii) establishment of management guidelines and sustainable harvesting levels for medicinal plants in protected areas; (iv) identification of standard processes for evaluating extraction, standardization, safety and efficacy, and dosage and formulations for 6 selected medicinal plants\. 4\. Institutional: Executing Agencies: IBCR with overall responsibility for the conservation and management of the nation's genetic resources has been designated as the lead agency\. IBCR's main responsibilities include: (a) initiate policy and legislative proposals on conservation, research and utilization of biodiversity and, upon approval, enforce as well as ensure their implementation; (b) explore and survey the diversity and distribution of the country's plant, animal and microbial genetic resources; collect samples for ex-situ conservation and facilitate utilization of these genetic resources for research and development; (c) conserve the country's biological resources using ex-situ and in-situ conservation methods; (d) devise a strategy to harmonize biodiversity conservation and research programs with federal and regional agricultural, industrial and health development strategies and plans; and (e) work in cooperation with the concerned federal and regional bodies with respect to protection, research, conservation and utilization of biodiversity resources (refer Proclamation No\. 120/1998 dated June 25, 1998 for details)\. Following the Proclamation, the mandate and the organizational structure of IBCR was revised in April 1999\. The revised structure provides for 56 scientific staff members including a General Manager, a Deputy General Manager, a Director for Plant Genetic Resources Center, five Heads of Departments (Ecosystem Conservation and Research, Biotechnology and Biosafety, Animal Genetic Resources, Microbial Genetic Resources, and Ethnobiology) and two Heads of Services\. The earlier structure of IBCR had only 15 scientific staff\. In addition, a new Department for Policy and Legal Matters has been created\. The responsibility of this department is to review and streamline the various international conventions on biodiversity (such as the Convention of Biological Diversity (CBD) to which Ethiopia is a signatory) in the context of Ethiopia's national interest; and to develop policy for management and sustainable harvesting of medicinal plants in Ethiopia and develop national legislation on appropriate biodiversity conservation and sustainable utilization issues\. The planned increase in staff will build the institutional capacity of IBCR for project implementation\. The planned increase in staff of IBCR is independent of the project\. The planned increase in staff will build the institutional capacity of lBCR for project implementation\. IBCR will be responsible for the overall project management, and project monitoring and evaluation\. To facilitate overall project management and coordination and ensure timely implementation of project activities, IBCR will create a Project Coordinating and Monitoring Unit (PCMU)\. The PCMU will be guided by a Project Implementation Committee (PIC)\. The PCMU will coordinate day-to-day project  Page 17 Project Appraisal Document Ethiopia: Conservation & Sustainable Use of Medicinal Plants Project planning, procurement, disbursement, monitoring and reporting of all project activities\. The basis of the interactions between 1BCR and the collaborating agencies will be a Memorandum of Understanding (MOU)\. IBCR would sign an MOU with each collaborating agency not directly under its control\. Submission of these MOUs would be a condition of Credit Effectiveness\. IBCR will have to work closely and support the activities of the collaborating institutes, THA and other relevant agencies\. ESTC and MOH need to play a more active role in integrating into their programs research related to sustainable production and utilization of medicinal plants\. The Bale Mountains National Park authorities fall administratively under the ORG, but technical advice is provided by Ethiopian Wildlife Conservation Organization (EWCO)\. One reason for doing the institutional assessment of IBCR is to see if/how IBCR can cope with its extended mandate and responsibility for all biodiversity matters in Ethiopia\. Project Management: IBCR currently has limited capacity to manage the project\. There is a need to support a PCMU in IBCR\. PCMU will need a full time Project Coordinator (PC) to coordinate project activities\. The PC will be assisted by one Accounting and Disbursement Specialist, one Monitoring and Evaluation Specialist, one Procurement Specialist and adequate administrative staff\. The PC should have sufficient authority to take timely decisions\. A Project Implementation Plan (PIP) was prepared by 13CR in consultation with collaborating agencies and was finalized and submitted during Technical Discussions\. Establishment of a fully staffed PCMU and an acceptable PIP will be a condition for Credit Effectiveness\. During pre-appraisal, an agreement was reached on the Project Implementation Manual (PIM) including design and implementation of accounting system which would enable the project to prepare and operate the simplified model for the Project Management Report (PMR)Ibased disbursement\. 5\. Social: The project is likely to have a positive social impact because it aims to help evaluate the therapeutic value of six traditionally used medicinal plants with the ultimate objective of improved health status of human and livestock populations\. It will work closely with THPs, and women who use medicinal plants on a daily basis for home healthcare needs\. As the majority of rural THPs and women are also farmers they will play an important role in identifying cultivation practices, as well as sustainable harvesting practices for wild medicinal plants\. It seeks to raise the status of traditional medicine and promote its integration with modem medicine\. As medicinal plants and traditional health systems are a major source of healthcare for the majority of the rural and urban poor, any effort to improve and standardize the safety and efficacy of commonly used herbal remedies will benefit the population\. Coverage of primary healthcare services will increase with the production of affordable phytomedicines\. Socio-economic factors that affect the Bale Mountains component of the project will be monitored continuously\. To the extent possible the project will take these factors into account, thereby minimizing individual and community concerns regarding knowledge rights, and maximizing its effects on improved healthcare and the social fabric\. Gender, as well as different cultural groups within Ethiopia, view the ownership and practices of traditional healthcare knowledge in different ways\. Care will be taken to ensure that individuals, especially women, and Traditional Health Practitioners (THPs) are involved as co-partners in the development and knowledge transfer process\. 6\. Environmental assessment: Environmental Category [ I A [ ] B [X] C The project will focus on documenting the distribution, availability, safety and efficacy of 6 medicinal plants used for the treatment of 3 major human diseases and 3 livestock diseases\. Every effort will be made to focus on commonly used and available medicinal plants so as to take the pressure off endemic  Page 18 Project Appraisal Document Ethiopia: Conservation & Sustainable Use of Medicinal Plants Project and threatened/rare species found in protected areas\. Policy and guidelines will be developed for the sustainable management and harvesting of threatened/rare medicinal plants in protected areas\. The negative environmental impact is therefore considered to be insignificant\. The project activities focus on documentation and strengthening conservation and management programs of medicinal plants in the Bale Mountains National Park\. Other activities, such as identification of demonstrable cultivation practices are small-scale and narrowly focused, and are not likely to cause major soil disturbance or degradation\. Activities will not involve the use of agro-chemicals or pesticides\. The implementation of the proposed project is not expected to have any adverse environmental impact\. All pilot community-based trials in the Bale Mountains area will be carried out in collaboration with farmers\. If rare plants are being utilized (as discovered from surveys) then under the project there are resources for their protection and management, as well as to attempt cultivation in available lands\. There is also under the project a real opportunity through the planned public awareness and education programs to get people to use more commonly available plant remedies\. 7\. Participatory approach: A National Workshop on Biodiversity Conservation and Sustainable Use of Medicinal Plants was held in Addis Ababa in April 1998\. The stakeholders included the Traditional Healers Association, Traditional Health Practitioners, government research scientists, policy makers, technical specialists, private sector, Addis Ababa University, and NGOs including EOC and EISC\. Representatives of these stakeholders make up the PPTC\. The unanimously approved recommendations of the workshop identified a consensus and an Action Plan from which the objectives of the proposed project and proposed interventions have been identified\. The project design requires a participatory approach in project implementation\. It is anticipated that local level, site-specific planning will provide the basis for identifying conservation, management and sustainable harvesting guidelines for all medicinal plants (threatened and ubiquitous) in the Bale Mountains National Park\. Local communities, park officials, researchers, local government agencies, NGOs, and line agencies will collaborate in the implementation of the project at the local level\. Participation of various stakeholders at different stages of project preparation, implementation and operation can be summarized as follows:  Page 19 Project Appraisal Document Ethiopia: Conservation & Sustainable Use of Medicinal Plants Project Ident/Prep Implement O eration a\. Primary beneficiaries and other affected groups: ESTC, IBCR, DDR/EHNRI, AAU (NH, FVM, SOP, IS/CON/COL IS/CON/COL IS/CON/COL IDR, DOB, FOM), ORG Farm Conmnunities and THPs IS/CON/COL IS/CON/COL IS/CON/COL b\. Other key stakeholders: EARO, MEDAC, EORC, EWCO COL COL COL Donors is is is IS - Information Sharing; CON - Consultation; COL - Collaboration\. Both the socio-economic and the biological surveys to be conducted in Bale Mountains area under the GEF component will include apart from the Subject Matter Specialists, local THPs and farmers as survey team members\. Before conducting these field surveys, two introductory local workshops will be organized in Bale Mountains area involving local community members (farmers, women), THPs, local NGOs, National Park Administration, and local government officials to discuss the purpose and expected benefits of the surveys and to secure local participation and cooperation\. Development of sustainable harvesting guidelines will be based on participatory approach and will seek active participation of and inputs from local communities and THPs This activity will include 2 local workshops (I in PY3 and 1 in PY4) and 1 regional workshop (in PY4) involving local farmers (both men and women), THPs, women involved in home healthcare, and other local stakeholders\. Local community outreach and farmers training are also included in the project activities to secure their active collaboration\. A series of training workshops will be organized during PY 3 and PY4\. F: Sustainability and Risks 1\. Sustainability: The project has the potential to be sustainable if the following are given sufficient attention: * The GOE provides sufficient resources to support the project's priorities such as upgrading of the DDR's technical capacity, quality control mechanisms are attained, and there is an improvement in availability and affordability of herbal drugs for the treatment of the corresponding human and livestock diseases\. Financial sustainability could be improved through successful cost recovery measures, increased community participation, and improved efficiency in the use of available natural resources\. * Participatory approaches are designed to reinforce a sense of ownership at all levels and enhance the efficiency of resource management and contribute to sustainability\. In terms of outcomes, sustainability will depend on replicability\. The full collaboration of THPs and communities in this pilot phase is required to create the right conditions for later replication in other regions\. * Dissemination of information regarding safe dosages and use of low-cost phytomedicines in appropriate local languages and media\. * Financed research will verify within the project period the direct applicability of technical options for implementation at the laboratory, farm, and protected area levels\. * Well-trained and well-motivated DDR, SOP and FVM staff are crucial to the development of safety and efficacy standards and dosage levels of traditional herbal medicines and their integration into  Page 20 Project Appraisal Document Ethiopia: Conservation & Sustainable Use of Medicinal Plants Project modem medicine\. * Institutional capacity building under the project will develop in-country expertise to manage and implement project activities and plan for future expansion\. * A well functioning monitoring and evaluation system to help keep the project on track\. * The active involvement of rural communities in resource conservation and management programs will play a major role in project success, particularly in the protection and sustainable use of Ethiopia's medicinal plant biodiversity\. 2\. Critical Risks: (reflecting assumptions in the fourth column of Annex 1) From Outputs to Objective Lack of institutional capacity and collaboration for Modest Funds will be provided to strengthen capacity of medicinal plants conservation, mnanagement and collaborating institutions\. utilization\. Delays in the development of project mnanagement Modest Establishment of a Project Coordinating and capacity of IBCR\. Monitoring Unit at IBCR with adequate staff and authority as a condition of Credit Effectiveness\. Inadequate research capacity for deternining safety, Modest Funds will be provided to upgrade the DDR, SOP efficacy, dosage testing and formulation of herbal and FVM's research facilities and to imnprove medicines in huran and animal healthcare\. technical skills of their staff\. Traditional medicine practitioners will not share Substantial Support will be provided to ESTC for developing knowledge\. policy and guidelines for IPRs in collaboration with THA for sharing the traditional medicinal knowledge\. Lack of motivation and collaboration of local Substantial Local community outreach and farmers training are conimunities to adopt sustainable medicinal plants included in the project activities to secure their management and harvesting practices in the Bale active collaboration\. Mountains area\. MOH will not acknowledge/accept locally produced Modest Establishment of safety, efficacy, and dosage levels phytomedicine healthcare\. of phytomedicine and affordability\. Overall Risk Rating Modest I Risk Rating - H (High Risk), S (Substantial Risk), M (Modest Risk), and N (Negligible or Low Risk)\. 3\. Possible Controversial Aspects Rural populations are very much aware of the importance of medicinal plants, and their use in healthcare is generally guarded information by THPs\. Socio-cultural differences can be expected\. The knowledge that THPs, religious organizations, women and farmers can bring to identifying, implementing and managing medicinal-plant conservation and cultivation programs is seldom sought or utilized\. The first step in developing a successful strategy to conserve, enhance and sustainably utilize medicinal-plant resources is to include those knowledgeable individuals as equal partners and collaborators\. If such recognition is not given the project will have difficulty achieving its goals and objectives\. The project includes provision to support ESTC and THA for developing IPRs policy and guidelines and incentive mechanism for THPs, women, farmers and communities for sharing their knowledge and experience about medicinal plants\.  Page 21 Project Appraisal Document Ethiopia: Conservation & Sustainable Use of Medicinal Plants Project The project is sensitive to the risk of foreign access to medicinal plant genetic material and loss of ownership\. Many individuals treat with skepticism the outsiders' interest in their plants and therapies, believing they will receive no credit or royalties for any future drug discoveries derived from their knowledge\. The policy and guidelines that would be developed by ESTC will address these concerns\. The project is sensitive to the concerns likely to be raised regarding regulatory measures relating to the safety, efficacy, quality and dosage levels of marketed traditional herbal medicines\. To manage this concern the project will assist in the preparation of pharmacopoeial monographs for the initial herbal medicines\. G: Main Loan Conditions 1\. Effectiveness Conditions: (i) Borrower will provide a letter confirming that two Project Accounts one for IDA and one for GEF are opened and the initial deposits of US$60,000 and US$30,000 are made by the borrower into the said IDA and GEF Accounts respectively; (ii) Financial auditors, acceptable to the IDA, have been contracted by IBCR; (iii) PCMU is staffed with the appropriate personnel satisfactory to the Bank (Project Coordinator, Accounting and Disbursement Specialist, Procurement Specialist, Monitoring and Evaluation Specialist and adequate administrative/support staff); (iv) PCMU has established an accounting and financial management system for the project satisfactory to the IDA; (v) The Borrower has adopted the Project Implementation Plan (PIP) and the Project Implementation Manual (PIM) in form and substance satisfactory to the IDA; (vi) Signed Memorandum of Understandings between IBCR and the collaborating institutions have been submitted; (vii) The Borrower has appointed a conmmittee of experts with qualifications and experience satisfactory to the IDA to review the implementation and management of the GEF component; and (viii) The Borrower shall prepare and furnish to the IDA the annual work program for the first Fiscal Year of project implementation\. 2\. Other: (classify according to covenant types used in the Legal Agreements) IBCR will submit annual audit reports within six months after closing of each FY\. H: Readiness for Implementation [ ] 1\. a) The engineering design documents for the first year's activities are complete and ready for the start of project implementation\. [X] 1\. b) Not applicable\.  Page 22 Project Appraisal Document Ethiopia: Conservation & Sustainable Use of Medicinal Plants Project [X] 2\. The procurement documents for the first year's activities are complete and ready for the start of project implementation\. [XI 3\. The Project Implementation Plan has been appraised and found to be realistic and of satisfactory quality\. [ ] 4\. The following items are lacking and are discussed under loan conditions (Section G): 1: Compliance with Bank Policies [Xj 1\. This project complies with all applicable Bank policies\. ] 2\. The following exceptions to Bank policies are recommended for approval\. The project complies with all other applicable Bank policies\. [signature] Team Leader: Berhane Manna [signature] Sector Manager: Joseph Baah-Dwomoh [signature] Country Director: Oey Astra Meesook JG  Page 23 Project Appraisal Document Ethiopia: Conservation & Sustainable Use of Medicinal Plants Project Annex 1: Project Design Summary Ethiopia: Conservation and Sustainable Use of Medicinal Plants A\. Sector-related CAS Goal: Sector Indicators: Sector Country Reports: (from Goal to Bank Mission) I\. To improve human and livestock A\. I Improved availability and A\. I Government hcalthcare utilization of medicinal plants for publications Improved management of human and livestock healthcare medicinal plants and B\. GEF Operational Program Goal: enhanced sustainable social B\. I In-situ conservation and B\. I IBCR Biodiversity and economic development - To secure globally significant biological management in Bale Mountains Conservation Report through improvement in resources National Park health care B\.2 GEF-Project Progress Report Project Development Objective: Outcome / Impact Indicators: Project Reports: (from Objective to Goal) 1\. To initiate support for conservation, 1\.1 3 medicinal plant species for 3 1 \. I Published Reports GOE commitment to management and sustainable use of major human diseases medicinal plants medicinal plants for human and livestock conservation, management healthcare 1\.2 3 medicinal plant species for 3 1\.2 Published Reports and utilization remains major livestock diseases strong 1\.3 Zoning of areas for harvesting 1\.3 Baseline Survey & Continued GOE medicinal plants in Bale Mountains Project Progress Report commitment for integration of phytomedicines into the MOH national primary health care system, would be a condition for a follow- \.___________________________________________________________________ I up project Output from each component: Output Indicators: Project Reports: (From Output to PDO) 1\. Institutional Strenethenine, Human Resource Development, & Project Monitorine & Evaluation I I PCMU fully operational, and project 1\.1\. I PCMU fully operational by 1\.1 Project Supervision Commitment by IBCR to monitoring and evaluation system end PY I Reports fully operationalize the developed and implemented PCMU and implement the 1\.1\.2 M&E System operational by project end PY I 1 2 IBCR, DDR\. AAU (SOP, FVM, NH and 1\.2\.1 Institutional assessment 1\.2\.1 Project Supervision DOB), ESTC and THA capacity for conducted & training needs Reports implementing project activities strengthened identified by end PY I and institutional collaboration established 1\.2\.2 Training Completed by end 1\.2\.2 Project Supervision PY 2 Reports 1\.2\.3 Professional Assessment of 1\.2\.3 Implementation Status after Training by end PY 4 Completion Report (ICR) [HS, S, U, HU- Criteria to be developed] 1\.3 THA organized workshop and 1\.3 Workshop in PYI and field gene 1\.3 Project Supervision established medicinal plant field gene bank bank in PY2 Reports 1\.4 ESTC developed IPR policy and 1\.4 IPR policy and guidelines 1\.4 Project Supervision  Page 24 Project Appraisal Document Ethiopia: Conservation & Sustainable Use of Medicinal Plants Project guidelines for sharing traditional knowledge developed by end PY2 Reports 2 Studies\. Research and Data Base Development 2\.1\. Assessments of current levels of usage, 2\.1 Assessments completed by end 2\.1\.1 IDR published Reports national dependence and economic benefits PY I derived in the country by the use of 2\.1\.2 Project Supervision medicinal plants conducted and reports Reports and National prepared publications 2\.2 Ethnomedical survey to explore 2\.2 Survey completed by end PY3 2\.2 Published Survey Report utilization of medicinal plants and traditional healthcare practices for prevention of HIV and mitigation of adverse impact of AIDS 2\.3 National medicinal plant database 2\.3\.1 Number of plants identified 2\.3\.1 Project Implementation The 3 medicinal plants will established identifying and documenting all for the three human diseases by PY Progress & Supervision be effective and affordable plants commonly used for the control of the I, and Reports for human healthcare 3 major human diseases and 3 livestock database developed by PY 3 diseases, including the medicinal plants identified (from biological survey) in the 2\.3\.2 Number of plants identified 2\.3\.2 Project Implementation The 3 medicinal plants will Bale Mountains National Park for the three livestock diseases by Progress & Supervision be effective and affordable PY 1, and database developed by Reports for livestock healthcare PY 3 2\.3\.3 Medicinal plants identified in 2\.3\.3 Project Implementation Bale Mountains entered into the Progress national database by PY3 & Supervision Reports 2\.4\. Safety, efficacy, dosage and 2\.4 Formulation Studies completed 2\.4 DDR, SOP, FVM, formulation determined for commonly used by end PY 4 FOM, NPC Published herbal remedies for 3 Human and 3 Technical Reports Livestock diseases 2\.5\.Propagation and cultivation methods for 2\.5 Methodologies prepared by end 2\.5 Extension Bulletins/ selected medicinal plants developed PY 4 Annual Technical Reports 3\. In situ Conservation and Sustainable Use in Bale Mountains area 3\.1 On-site management including detailed 3\.1 Surveys completed by end PY 2\. 3\.1 Baseline Survey and socio-economic and biological surveys and Changes in community cooperation IBCR Progress Report zoning conducted in the Bale Mountains with Park staff area 3\.2 Guidelines for sustainable management 3\.2 Guidelines developed by PY3 3\.2 Guideline Document Communities will not and harvesting of threatened/rare medicinal and implemented by end PY 4 published by IBCR encroach on protected areas plants from Bale Mountains and and will collaborate in surrounding forests developed sustainable management of medicine plants 3\.3 Impact of harvesting guidelines and 3\.3 Monitoring & evaluation 3\.3 PCMU Monitoring and management interventions monitored and initiated by PY 5\. Impact of Evaluation Progress Reports Can provide early waming evaluated harvesting reduced of impacts on species before changes in numbers 3\.4\. Fx-situ pilot cultivation trials of 3\.4 Number of pilot cultivation trials 3\.4 Project Supervision become obvious threatened and rare medicinal plants initiated by end PY 4, including Reports and PCMU Reports initiated number of people engaged 3\.5\. Training for park staff, rangers and 3\.5 Training programs implemented 3\.5 Training Manuals local communities conducted by PY 3\. Change in number of trained Park staff  Page 25 Project Appraisal Document Ethiopia: Conservation & Sustainable Use of Medicinal Plants Project 3\.6\. Public education and mass awareness 3\.6 Pilot programs developed by PY 3\.6 Education and Mass Public interest and support campaigns implemented 2\. Number of awareness programs Awareness Documents of communities and undertaken commitment to sustainable resource use/conservation activities Project Components/Sub-components: Inputs: (budget for each Project Reports: (from components to component) Outputs) 1\. Institutional Strengthening, Human US $0\.134 million Project Reports and GOE commitment to Resource Development, and Project (IDA: $0\.821 mil\.; GOE: $0\.313 Disbursement Reports project remains strong Monitoring & Evaluation mil\.) Timely execution of key 2\. Studies, Research and Data Base US $1\.949 million Project Reports and studies, and completion of Development (IDA: $1\.686 mil\.; GOE: $0\.263 Disbursement Reports Formulation Studies mil\.) Timely procurement of 3\. In situ Conservation and Sustainable Use US $2\.003 million Project Reports and goods and services in Bale Mountains area (GEF: $1\.802 mil\.; GOE: $0\.201 Disbursement Reports mil\.)  Page 26 Project Appraisal Document Ethiopia: Conservation & Sustainable Use of Medicinal Plants Project Annex 2: Project Description Ethiopia: Conservation and Sustainable Use of Medicinal Plants By Component: Project Component 1: Institutional Strengthening, Human Resource Development, and Project Monitoring & Evaluation - US$1\.134 million 1\.i\. Strengthening Institutional Capacity of the Institute of Biodiversity Conservation and Research (1BCR) - Lead Implementing Agency - US$94,700 l\.ii\. Develop Human Resource Capacity of Collaborating Institutions for Implementing Project Activities (DDR, SOP, FVM, NH, DOB, ESTC and THA) - US$356,300 Liii\. Establishment of Medicinal Plant Field Gene Bank and Development of Intellectual Property Rights (IPR) Policy and Guidelines -US$81,400 (a) Support to IBCR, EORC and Traditional Healersand other collaborating institutions for Establishing Medicinal Plant Field Gene Bank- US$23,700 (Cost for organizing National THA Workshop to provide inputs to ESTC for the development of IPR guidelines is included under item l\.ii above) (b) Support to Ethiopian Science and Technology Conmmission (ESTC) for Developing IPR Policy and Guidelines (with Participation of THA) for Sharing the Traditional Medicinal Knowledge - US$57,700 l\.iv\. Establishment and Functioning of Project Coordinating and Monitoring Unit (PCMU) - US$601,200 Project Component 2: Studies, Research and Data Base Development - US$1\.949 million 2\.i\. Develop methods to Collect, Analyze and Interpret Quantitative Data on Socio-Economic Benefits Derived from Medicinal Plants in Human & Livestock Health Care on National Level (IDR, AAU) - US$384,700 2\.ii\. Ethnomedical survey to explore utilization of medicinal plants and traditional health practices for preventio) of HlV and mitigation of adverse impact of AIDS - US$55,500 (DDR, AAU Facultty of Medicine in collaboration with THA) 2\.iii\. Research on Propagation and Cultivation Methods of Selected Indigenous Medicinal Plants for Human and Livestock Diseases - US$256,400 (AAU Department of Biology in collaboration with EARO) 2\.iv\. Formulation Studies: Phytomedicine Extraction, Standardization, Safety, and Efficacy Testing, Dosage Determination and Formulation - US$1,083,200 (a) Faculty of Veterinary Medicine (FVM), AAU - US$271,000 (FVM in collaboration with NPC, AAU (b) Department of Drug Research (DDR), Ethiopian Health and Nutrition Research Institute (EHNRI) - US$305,100 (DDR in collaboration with AAU Faculty of Medicine) (c) School of Pharmacy (SOP), AAU - US$507,100 (SOP in collaboration with NPC, AAU)  Page 27 Project Appraisal Document Ethiopia: Conservation & Sustainable Use of Medicinal Plants Project 2\.v\. Development of National Medicinal Plant Database - US$169,400 Project Component 3: In-situ Conservation and Sustainable Use of Medicinal Plants in Bale Mountains Area - US$2\.003 million (IBCR lead implementing agency) 3\.i\. On-Site Management - US$674,000 (a) In-depth Socio Economic Survey and Assessment to: (i) identify villagers/users having greatest impact on wild populations of medicinal plants through harvesting and other activities; and (ii) identify villagers/farmers for on-farm pilot propagation and cultivation trials of medicinal plants to remove pressure on wild populations - US$274,200 (b) In-depth Biological Survey and Assessment of In-situ and Ex-situ Conservation, Zoning of Key Areas Within the Park and Strengthening Park Management in Collaboration with WWF-Dutch Project - US$399,800 3\.ii\. Development and Implementation of Appropriate Management Options and Guidelines for Sustainable Harvesting of Medicinal Plants and Their Products - US$376,300 3\.iii\. Monitoring to Asses: (a) preliminary impact of harvesting of medicinal plants in permit areas; (b) impact of management interventions & harvesting guidelines in the park; (c) project interventions in protecting threatened/rare medicinal species; (d) market and threatened/rare medicinal plant species; (e) market and THP surveys to determine levels of use: (i) locally; and (ii) nationally of plants harvested from Bale Mountains National Park - US$215,300 3\.iv\. Piloting of Farmer Based Cultivation Trials for a Selected Number of Threatened and Indigenous Medicinal Plant Species in Home Gardens, and Boundary and Buffer Zones of the National Park - US$319,000 3\.v\. Training of: (a) relevant personnel in the Conservation and Management of Medicinal Plants in the Park and Adjacent Forests; and (b) Farmers for Pilot Propagation and Cultivation and Management - US$206,700 3\.vi Public Education and Mass Awareness Campaigns of the Relevance of Conservation and Management Programs of Medicinal Plants and Importance in Ethiopia's Bio-diversity and Long Term Health Care Needs - US$212,100  Page 28 Project Appraisal Document Ethiopia: Conservation & Sustainable Use of Medicinal Plants Project Annex 3: Estimated Project Costs Ethiopia: Conservation and Sustainable Use of Medicinal Plants 1\. Institutional Strengthening, Human Resource 564\.2 421\.4 985\.5 Development, and Project Monitoring and Evaluation 2\. Studies, Research and Data Base Development 712\.4 1,010\.1 1,722\.5 3\. In-situ Conservation and Sustainable Use in Bale 1,079\.0 675\.9 1,755\.0 Mountains Area Total Baseline Costs 2,355\.6 2,107\.4 4,463\.0 Physical Contingencies 184\.1 187\.2 371\.3 Price Contingencies 150\.8 101\.0 251\.9 Total Project Costs 2,690\.5 2,395\.6 5,086\.1 1\. Goods: Vehicle 265\.5 217\.3 482\.8 Equipment 197\.6 750\.5 948\.0 2\. Consultant Services: National Consultants 340\.2 37\.8 378\.0 International Consultants 8\.5 76\.4 84\.8 3\. Training and Workshops: Local Training 193\.1 21\.5 214\.5 Overseas Training 34\.5 310\.2 344\.6 Workshops 108\.3 27\.1 135\.3 4\. Studies and Research: Surveys/Studies 416\.9 278\.0 694\.9 Research 183\.8 183\.8 367\.6 Publication & Documentation 84\.5 36\.2 120\.7 5\. Incremental Operating Costs\a* 522\.8 168\.8 691\.6 Total Baseline Costs 2,355\.6 2,107\.4 4,463\.0 Physical Contingencies 184\.1 187\.2 371\.3 Price contingencies 150\.8 101\.0 251\.9 Total Project Costs 2,690\.5 2,395\.6 5,086\.1 Includes costs for: vehicles & equipment operation and maintenance, incremental salaries, perdiem & allowances, office & laboratory supplies, utilities, telephone and conmmunication\.  Page 29 Project Appraisal Document Ethiopia: Conservation & Sustainable Use of Medicinal Plants Project Annex 4: Incremental Costs and Global Environmental Benefits Ethiopia: Conservation and Sustainable Use of Medicinal Plants Overview: 1\. In Ethiopia the per capita share of public expenditure on health is approximately US $0\.16, one of the lowest in the world\. This figure only takes into account the formal market for conventional healthcare and does not consider the informal market that accounts for the traditional healthcare administered\. If the majority of the rural population were to lose their culturally viable and affordable source of healthcare, it would be impossible for the MOH to provide a comparable service at affordable prices\. The situation is no different for livestock healthcare\. The majority of rural stockholders are far from veterinary stations, and those that have access may not be able to pay for services\. Exploitation of traditional animal health services is regarded by veterinarians as a possible alternative or complementary option\. Ethiopia has committed to protect its natural resources and to preserve its biodiversity under its 1997 Conservation Strategy\. At the same time, the MOH is committed to the integration of traditional and modern health systems and strengthening research priorities that ensure the safety and efficacy of traditional herbal remedies\. The IBCR is embarked on a program of ensuring that the use of medicinal plant genetic resources is scientifically sound and ecological sustainable\. This project aims to provide safe and efficacious healthcare relying on traditional medicin es and medicinal plants while protecting the resource base\. The Country Context and Broad Development Goal: 2\. One of Ethiopia's major development objectives is sustained rapid growth with poverty reduction\. The Government has a strong rural support base and a keen sense of the importance of improving the welfare of rural residents\. Nevertheless, the bulk of the rural poor that are most vulnerable in terms of health live in remote areas isolated by the difficulty of access to roads\. The Government is aware that more than 80% of the rural population depend on medicinal plants for their basic healthcare needs and that many of these plants are being harvested on an unsustainable basis from natural and protected areas\. Medicinal plants will continue to have an important role to play in the health and productivity of the rural population\. The conservation, management and sustainable use of medicinal plants is crucial to achieving natural resource, food security and health development goals\. Baseline 3 At present several government agencies implement activities that can be regarded as contributing to the conservation of medicinal plants and to their sustainable use\. They include: the Environmental Protection Agency, the Institute of Biodiversity Conservation and Research (IBCR)\. The National Herbarium, Department of Biology and the Faculty of Veterinary Medicine of Addis Ababa University\. In the absence of GEF facilities, GOE would be expected to allocate approximately US $1\.0 million to cover capital expenditures for medicinal plant conservation and management through the govemment agencies\. However, the commitment of resources would continue to be low, in view of the more pressing environmental priorities of drought, deforestation, and agricultural expansion throughout the country\. 4\. The National Herbarium (NH) is the primary source of information regarding the identification, distribution and possible status of Ethiopia's medicinal flora\. The national medicinal plant database will be centered at the NH\. NH research funds are estimated to be US $60,000\. The Faculty of Veterinary Medicine (FVM) has recently initiated a program to cultivate three medicinal plants used by pastoralists for the control of endoparasites\. They have also started a program to document ethnoveterinary medicinal plants used in the Oromya Region\. FVM's research funds are approximately US $21,700\.  Page 30 Project Appraisal Document Ethiopia: Conservation & Sustainable Use of Medicinal Plants Project 5\. IDA's commitment to the conservation, management and sustainable use of medicinal plants is through institutional strengthening, human resource development and project monitoring and evaluation\. In addition, support will be provided for the identification of 6 medicinal plants, for the treatment 3 human diseases and 3 livestock diseases; testing of safety and efficacy, formulation studies and registration; the development of cultivation methods; and establishment of a national medicinal plant database\. The cost of these initiatives is estimated to be US $4\.7 million\. The IDA components are not specifically focused on Bale Mountains National Park needs, however both the IDA and GEF initiatives complement, and will benefit from each others activities\. 6\. The WWF-Dutch ICDP project in the Bale Mountains/Harenna Forest has two major objectives: (i) to strengthen institutional capacity to manage the country's important protected areas, with an emphasis on forests; and (ii) to conserve and sustainably manage the Bale Mountains National Park and the adjacent Harenna Forest\. The park is under significant threat from settlement, forest clearance, livestock and coffee cultivation\. The project will work with the national park authorities to strengthen their capacity to conserve key areas within the park management zone\. The project will also work in the buffer zones to achieve consensus-based agreements with local people to conserve remaining intact ecosystem areas within the forests\. The Dutch commitment to the Bale Mountains project is US $2\.0 million over 5 years\. This work will complement the proposed GEF project\. The Park Administrative commitment is estimated to be US $200,000 over 5 years for a total US $2\.2 million 7\. The Baseline Scenario is therefore estimated to cost US $7\.98 million\. It is based on a realistic assessment of available resources and is consistent with the existing institutional capacity and national development goals\. Global Environmental Objective 8\. The global environmental goal of the project is to conserve the medicinal flora of the Bale Mountains through achieving the following objectives over and above the Baseline Scenario: (i) support on-site management, including zoning for appropriate use, protection and traditional harvesting; (ii) develop management guidelines for sustainable harvesting of medicinal plants; (iii) monitoring and evaluation of harvesting and management interventions; (iv) on-farm pilot cultivation trials to grow medicinal plants to take the pressure off wild populations; (v) training of park staff and farmers; and (vi) education and mass awareness campaigns for medicinal plant conservation and sustainable use\. GEF Alternative 9\. As part of the GEF in-situ conservation and sustainable use component the GEF alternative will build on the Baseline Scenario by strengthening on-site management, including support for the socio-economic and biological assessment of medicinal plants harvested, status (threatened, rare), and their habitats in the Bale Mountains National Park\. This information will be used to derive appropriate zoning and management regimes within the park and will complement park protection activities initiated by WWF-Dutch ICDP\. The cost of implementing GEF alternative over the five year period is estimated to US $0\.5 million\. 10\. In an effort to regulate the harvesting of medicinal plants and/or parts thereof, the GEF altemative would actively link the development of sustainable management guidelines for harvesting with community demand for such products\. Communities would identify management and enforcement criteria and be expected to play a major role in protecting in-situ medicinal plant resources\. Estimated cost is US $0\.4 million\. 11\. Monitoring and evaluating the status of key threatened/rare medicinal plants as indicators of ecosystem health and human demand in the Bale Mountains National Park is estimated at US $0\.2 million\.  Page 31 Project Appraisal Document Ethiopia: Conservation & Sustainable Use of Medicinal Plants Project 12\. The establishment of pilot farmer-based cultivation trials outside the Bale Mountain National Park would utilize farmer and medicinal plant user knowledge to ensure a sustainable supply of medicinal plants and/or parts\. The GEF alternative would also intensify current efforts to capture traditional knowledge, and expand knowledge of the botany of medicinal plants and their use in Ethiopia\. Estimated cost is US $0\.3 million\. 13 The project will support the development of training programs that focus on park conservation and management and identification and application of cultivation methods by farmers\. Estimated cost is US $0\.2 million\. 14\. The project will finance education and public awareness to generate public support for the management and sustainable use of the importance of medicinal plants in human and livestock healthcare\. And, to encourage the acceptance of management guidelines which would aid the sustainability of the conservation efforts\. Estimated cost is US $0\.2 million\. Incremental Costs 15\. Total financing of the GEF alternative is US $9\.78 million over the period 1999-2003\. The GEF is requested to fund US $1\.8 million which is the incremental cost or difference between the Baseline Scenario (US $7\.98) and the GEF alternative (US $9\.78)\. The details of the Baseline and the GEF alternative are presented in the attached Incremental Cost Matrix\.  Page 32 Project Appraisal Document Ethiopia: Conservation & Sustainable Use of Medicinal Plants Project Incremental Cost Matrix: Component Cost US$ | Domestic Benefit Global Benefit l Category Million 1\. Institutional Baseline Strengthening, Human Resource Development, and Project Monitoring and Evaluation: 1\. a\. Institutional 1\.75 Increased institufional capacity of the Increased public sector capacity strengthening Institute of Biodiversity Conservation and to manage biodiversity\. Research (IBCR) (Lead national institute) Increased technical and research capacity of relevant institutes - Department of Drug Research (DDR), School of Pharmacy (SOP) and Faculty of Veterinary Medicine (FVM) for phytomedicine related scientific research\. l With GEF 1\.75 Same as above\. Same as above\. Altemative l Incremental 0\.0 1\.b\. Human Resource Baseline 2\.46 Increased efficiency and long-term Development effectiveness of the implementation of biodiversity conservabon and management, and medicinal plants utilization initiatives\. With GEF 2\.46 Same as above\. Altemative Incremental 0\.0 \. l 1 \.c\. Project Baseline 0\.68 Increased capacity to coordinate, implement, Coordination, Monitoring monitor and evaluate project activities aimed and Evaluation at long-term conservation and sustainable use of medicinal plants\. l With GEF 0\.68 Same as above\. Altemative l Incremental 0\.0 2\. Studies, Research Baseline and Data Base Development: l\.a\. Studies 0\.2 Increased understanding of the role (Medicinal Plants medicinal plants play in national human and Related Socio-Economic livestock healthcare (e\.g\. through collection Studies) and analysis of information on utilization of medicinal plants, economic benefits derived in the country)\. With GEF 0\.2 Same as above Alternative Incremental 0\.0 2\.b\. Research Baseline 1\.48 Establishment of safety, efficacy and dosage (Research on Safety, levels of the 6 commonly used remedies Efficacy and Dosage (used for the control of 3 major human Levels; and Research diseases and 3 livestock diseases) derived on Propagation and from nafive plants species\. Cultivation Methods) Improved scope for popularizing phytomedicines and integrating them into national healthcare system\. Development of propagation and cultivation methods and piloting of ex-situ cultivation of selected medicinal plants used for the treatment of 3 major human diseases  Page 33 Project Appraisal Document Ethiopia: Conservation & Sustainable Use of Medicinal Plants Project (tapeworm infections, bronchopneumonia, hypertension) and three livestock diseases (tapeworm infections, mastitis, l ______________________ _____________ _________ derm atophilosis)\. With GEF 1\.48 l _____________________ Altemative Incremental 0\.0 2\.c\. Database Baseline 0\.74 Identification, documentation and Development development of a national database of indigenous medicinal plants including the plants used for the control of 3 major human and three livestock diseases, as well as the medicinal plants identified (from biological survey) in the Bale Mountains National Park\. With GEF 0\.74 Same as above\. Altemative l Incremental 0\.0 3\. In-Situ Conservation Baseline and Sustainable Use in Bale Mountains Area: 3\.a\. On Site 2\.2 Strengthen conservation and management Management of protected areas with emphasis on large l___________ mammal conservation\. With GEF 2\.7 Documentation of status and usage of Improved conservation of rare Altemative medicinal plant species, including and threatened medicinal plants threatened/rare species from Bale and sustainable management in Mountains National Park areas\. Improved unique Afromontane \._________________ ___________ park management and zoning\. ecosystems\. Incremental 0\.5 3\.b\. Preparation and Baseline 0\.0 Implementation of Management Plans and Sustainable Harvesting Guidelines With GEF Development of management regimes for Best practice guidelines for Altemative 0\.4 sustainable harvesting of medicinal plants in management and sustainable appropriate zones in and around Bale harvesting of medicinal plants Mountains areas\. and their products\. Participatory schemes for sustainable management and harvesting of medicinal |~ ~ ~ ~~~______ ____ plant resources\.I Incremental 0\.4 3\.c\. Monitoring and Baseline 0\.0 Evaluation With GEF 0\.2 Effective management and harvesting of Effective management of Altemative medicinal plants in Bale Mountains area\. investments aimed at conserving globally significant biodiversity in protected areas and promoting sustainable use of plant resources\. Incremental 0\.2 3\.d\. Piloting of Farmer- Baseline 0\.0 Based Ex-Situ Cultivation Trails With GEF 0\.3 Development of propagation and cultivation Reduced collection of Altemative methods and piloting of ex-situ cultivation of threatened/rare medicinal plants medicinal plants around Bale Mountains from the wild including l _____________________ area\. protected areas\. Incremental 0\.3 3\.e\. Training Baseline 0\.0 With GEF 0\.2 Increased knowledge and management Long-term sustainability of Altemative skills of Park staff, rangers and local conservation efforts through communities- for biodiversity conservation increased local capacity for and management activities in Bale biodiversity conservation and l Mountains area\. management\. l __________________ Incremental 0\.2 I I  Page 34 Project Appraisal Document Ethiopia: Conservation & Sustainable Use of Medicinal Plants Project 3\.f\. Public Awareness Baseline 0\.0 and Education With GEF 0\.2 Increased public awareness of issues Sustainability of conservation Altemative related to biodiversity and medicinal plants efforts related to globally conservation\. important biodiversity\. Increased understanding of the role biodiversity plays in l ___________________ ____________ ________ _____________________________________ sustainable developm ent\. Incremental 0\.2 Total Baseline 9\.51 With GEF 11\.31 Alternative Incremental 1\.8  Page 35 Project Appraisal Documnent Ethiopia: Conservation & Sustainable Use of Medicinal Plants Project Annex 5: Financial Summary (US$ '000) Ethiopia: Conservation and Sustainable Use of Medicinal Plants Year I Year 2 I Year 3 Year 4 Year 5* Total Project Costs Investment Costs 2256\.6 922\.8 553\.7 379\.4 155\.6 4268\.1 Recurrent Costs 174\.8 185\.5 169\.2 179\.1 109\.3 817\.9 Total Project Costs 2431\.4 1108\.3 722\.9 558\.5 264\.9 5086\.0 * For GEF component only\. Financing Sources IDA 1402\.4 771\.4 176\.2 157\.0 0 2507\.0 GEF 688\.6 211\.2 394\.0 338\.6 169\.6 1802\.0 Government 340\.4 125\.7 152\.7 62\.9 95\.3 777\.0 Total Project Financing 2431\.4 11083 722\.9 558\.5 264\.9 5086\.0  Page 36 Project Appraisal Document Ethiopia: Conservation & Sustainable Use of Medicinal Plants Project Annex 6: Procurement, Disbursement and Financial Management Arrangements Ethiopia: Conservation and Sustainable Use of Medicinal Plants Procurement 1\. All goods and services financed under the IDA Credit and GEF Grant would be procured in accordance with IDA guidelines of goods and services [Guidelines: Procurement under IBRD Loans and IDA Credits, January 1995 as revised in January and August 1996 and September 1997 (Goods and Works Guidelines), and Guidelines: Selection and Employment of Consultant by World Bank Borrowers, January 1997 (Consultants Guidelines)]\. Contracts to supply goods and equipment, vehicles and consulting services would be processed and awarded by the project management\. The Project Coordinating and Monitoring Unit (PCMU) which would be staffed with procurement proficient staff would carry out all procurement\. Procurement of Goods and Equipment 2\. Goods (including vehicles) estimated to cost equal or more than US$ 100,000 equivalent per contract will be procured by International Competitive Bidding\. Goods and Services estimated to cost US$50,000 equivalent per contract, up to an aggregate amount not to exceed US$600,000 equivalent may be procured by National Competitive Bidding (NCB) procedures, acceptable to IDA\. Contracts under US$50,000 for the procurement of items that cannot be grouped into bulk procurement and for readily available off-the-shelf goods would be procured by comparing price quotations obtained from at least three local suppliers\. Procurement by this methods should not exceed the total sum of US$300,000 over the project's life\. The PCMU would be required to prepare a computer-based system to monitor that the aggregate amounts agreed upon would not be exceeded during project implementation\. IDA's prior review procedures would apply to all purchases for which the contract value is equivalent or in excess of US$50,000 for goods and services\. Consultants' Services 3\. Consultants' services shall be procured in accordance with the provisions of the Introduction and Section IV of the guidelines: "Selection and Employment of Consultants by World Bank Borrowers" published by the Bank in January 1997 (the Consultant Guidelines) and the following provisions of this Section I\. 3\.1 Qualitv- and Cost-based Selection Except as otherwise provided in paragraph 3\.2 below, consultants' services shall be procured under contracts awarded in accordance with the provisions of section II of the Consultant Guidelines, paragraph 3 of Appendix I thereto, Appendix 2 thereto, and the provisions of paragraphs 3\.13 through 3\.18 thereof applicable to quality- and cost-based selection of consultants\. The following provisions shall apply to consultants' services to be procured under contracts awarded with the provisions of the preceding paragraph\. The short list of consultants for services such as technical assistance, studies, support for local communities to promote biodiversity conservation, training of beneficiaries, public education and awareness activities, and preparation of technical documents estimated to cost less than US$50,000 equivalent per contract, may comprise entirely national consultants in accordance with the provisions of paragraph 2\.7 of the Consultants Guidelines\. 3\.2\. Other Procedures for the Selection of Consultants a) Least-cost Selection\. Services for audit and advisory services estimated to cost less than US$50,000 equivalent per contract may be procured under contracts awarded in accordance with the provisions of  Page 37 Project Appraisal Document Ethiopia: Conservation & Sustainable Use of Medicinal Plants Project paragraphs 3\.1 and 3\.6 of the Consultant Guidelines\. b) Selection Based on Consultants' Qualifications\. Services for technical and logistical support to producers groups for propagation and multiplication/cultivation trails of medicinal plants, biodiversity conservation, feasibility studies, and extension estimated to cost less than US$50,000 equivalent per contract, may be procured under contract awarded in accordance with provisions of paragraphs 3\.1 and 3\.7 of the Consultant Guidelines\. c) Individual Consultants\. Services for tasks that meet the requirements set forth in paragraph 5\.01 of the Consultant Guidelines shall be procured under contracts awarded to individual consultants in accordance with the provisions of paragraphs 5\.1 through 5\.3 of the Consultant Guidelines\. 3\.3 Review by the Bank of selection of Consultant a) Selection Planning Prior to the issuance to consultants of any requests for proposals, the proposed plan for the selection of consultants under the Activities shall be furnished to the Bank for its review and approval, in accordance with the provisions of paragraph I of Appendix 1 to the Consultant Guidelines\. Selection of all consultants' services shall be undertaken in accordance with the provisions of said paragraph 1\. b) Prior Review (i) With respect to each contract for the employment of consulting firms estimated to cost the equivalent of US$100,000 or more, the procedures set forth in paragraphs 1, 2 (other than the third subparagraph 2 (a)) and 5 of the Appendix 1 to the Consultant Guidelines shall apply\. (ii) With respect to each contract for the employment of individual consultants estimated to cost the equivalent of US$50,000 or more, the qualifications, experience, terms of reference and terms of employment of the consultants shall be furnished to the Bank for its prior review and approval\. The contract shall be awarded only after said approval shall have been given\. 3\.4 Post Review With respect to each contract not governed by paragraph I of this Part, the procedures set forth in paragraph 4 of Appendix 1 to the Consultant Guidelines shall apply\. Disbursement Disbursements would be made against standard IDA documentation using traditional disbursement procedures during the first 18 months after effectiveness of the project\. The IDA-LIL support for the project is expected to be completed over a four-year period and the credit is expected to be closed by June 30, 2005; and GEF component is expected to be completed over a five-year period and the Grant is expected to be closed by December 31, 2006\. Use of Statements of Expenditures (SOEs): 1\. Disbursements would be fully documented except for contracts below the equivalent of US$50,000 for individual consultants and US$100,000 for goods and consulting firms as well as for all operating costs including local and foreign training\. For such contracts borrower would be allowed to submit withdrawal applications based on Statement of Expenditures (SOEs)\. All supporting documents for such applications would be retained by the PCMU and made readily available for review by periodic IDA supervision missions and external auditors\. All expenditures related to contracts above the equivalent of US50,000 for individual consultants, and US$100,000 for goods and consulting firms would be fully documented (no SOE use)\.  Page 38 Project Appraisal Document Ethiopia: Conservation & Sustainable Use of Medicinal Plants Project Special Account: 2\. To facilitate payment of expenditures by the project, Special Accounts (separate accounts for IDA and GEF) in US dollars would be established in the National Bank of Ethiopia or in a commercial bank acceptable to IDA\. The Authorized Allocation to the Special Account is US$ 350,000\. IDA would make initial estimated deposit of US$175,000 from Credit immediately after effectiveness\. Flow of funds\. 3 All expenditures would be paid from the Special Account, except for expenditures greater than 20% of the outstanding Special Account advance which could be made directly by IDA\. Project Accounts/Counterpart Account\. 4\. Project Accounts (separate accounts for IDA and GEF) and Counterpart Accounts would be both opened at the National Bank of Ethiopia or at a commercial bank under terms and conditions satisfactory to IDA\. PCMU would ensure that disbursements are effected in accordance with Bank procedures\. PCMU would have financial monitoring responsibility\. The counterpart funds received from the advance payments would be credited to the account open by the GOE at the National Bank of Ethiopia or at a commercial bank\. The account would operate under the responsibility of the Ministry of Economic Development and Cooperation (MEDAC)\. Financial Management Existing Financial Management System of the Institute The implementing agency IBCR, like other ministries and commissions, obtain its annual budget from the Federal Government of Ethiopia, Ministry of Finance (MOF)\. The cash basis of accounting is used by the Institute\. The receipts of cash and withdrawals are recorded in standardized journal\. No annual accounts are prepared by the Institute\. The Ministry of Finance is responsible for the compilation of annual accounts\. Currently, the Institute is administering a Global Environment Facility (GEF) Fund amounting to US$2\.4 million\. The institute quarterly reports to the financier on a standardized format in a very simplified way\. The Institute has a finance division comprising of 7 staff, some of them are diploma holders from the Commercial College\. The practical experience for most of them is the cash basis of accounting based on the MOF standard formats\. Internal Control The institute has an Internal Audit Division consisting two staff who are diploma holders\. The division usually conducts pre-audit activities\. There is a strong push from the MOF to engage the internal auditors in the post audit activities\. This department could perform some post audit activities on the project financial transaction in the future\. LACI Capability The capacity of the Institute to handle LACI procedures as outlined in the LACI handbook is limited as discussed above and a decision has been reached between the Bank and the Institute to establish a Project Coordinating and Monitoring Unit (PCMU) to undertake the day to day activities of the project\. In the unit an Accounting and Disbursement Specialist will be employed to look after the financial affairs\. Thus, as the establishment of the PCMU is at its very early stage, the IBCR is not ready for PMR based disbursement based on the LACI guidelines of the Bank\. Disbursements will begin using the traditional disbursement procedures which is currently in place in the Bank and will continue upto approximately 18 months\. Under the existing disbursement procedures, payments could be made by direct payments special commitments and SOE procedures\. Detailed guidance could be obtained from the Disbursement Handbook and  Page 39 Project Appraisal Document Ethiopia: Conservation & Sustainable Use of Medicinal Plants Project training will be given at the project launch workshop\. The following steps should be undertaken before the IBCR is able to meet PMR based disbursements: -Appointment of a Project Accountant (Before effectiveness) -Development of a financial manual (within 6 months of effectiveness) -Development of a financial reporting format acceptable to the Bank (within 6 months of effectiveness) -Definition of a clear cut flow of funds (by negotiation) -Evaluation of the IBCR capacity by the Bank staff to determine compliance with the LACI guidelines (12 months of effectiveness) -Preparation of draft PMR for initial review (15 months of effectiveness) -Production of PMRs (21 months of effectiveness) Amendment of the DCA in line with LACI Requirements (18 months of effectiveness) Provided these steps are taken, it is expected that the IBCR should be LACI capable 18 months from the date of effectiveness\. Once the IBCR and the PCMU are assessed to be LACI compliance, the Credit Agreement will be amended to reflect that disbursements will be made on the basis of PMR\. A detailed note on LACI is included in the PIP\.  Project Appraisal Document Page 40 Ethiopia\. ConseTvation & Sustainable Use of Medicinal Plants Project Annex 6, Table A: Project Costs by Procurement Arrangements' (in US$'000 equivalent) 1\. Goods: Vehicle 550\.5 550\.5 \. ~~~~~~(302\.8) (302\.8) Equipment 1,077\.9 1,077\.9 (965\.6) (956\.6) 2\. Consultant Services: National Consultants 395\.7 395\.7 (395\.7) (395\.7) International Consultants 87\.3 87\.3 (87\.3) (87\.3) 3\. Training and Workshops: Local Training 252\.0 252\.0 (252\.0) (252\.0) Overseas Training 398\.2 398\.2 (398\.2) (398\.2) Workshops 160\.2 160\.2 (160\.2) (160\.2) 4\. Studies and Research: Surveys/Studies 757\.8 757\.8 (757\.8) (757\.8) Research 436\.6 436\.6 (436\.6) (436\.6) Publication & Documentation 151\.8 151\.8 (151\.8) (151\.8) 5\. Incremental Operating Costs\a: 818\.8 818\.0 (401\.5) (401\.5) Total 1,628\.4 3,457\.7 5,086\.1 (1,268\.4) (3,041\.1) (4,309\.5) Note: N\.B\.F\. = Not Bank-financed (includes elements procured under parallel cofinancing procedures, consultancies under trust funds, any reserved procurement, and any other miscellaneous items)\. The procurement arrangement for the items listed under "Other" and details of the items listed as "N\.B\.F\." need to be explained in footnotes to the table or in the text\. Figures in parenthesis are the amounts to be financed by the IDA credit and GEF grant\. For details on presentation of Procurement Methods refer to OD 11\.02, "Procurement Arrangements for Investment Operations\." Details on Consultant Services can be shown more easily in the Table Al format (additional to Table A, where applicable)\. Includes costs for: vehicles & equipment operation and maintenance, incremental salaries, perdiem & allowances, office & laboratory supplies, utilities, telephone and communication\.  Project Appraisal Document Page 41 Ethiopia: Conservation & Sustainable Use of Medicinal Plants Project Annex 6, Table B: Thresholds for Procurement Methods and Prior Review2 US $ thousands US $ millions 1\. Goods Equal or more than ICB Equal or more than US$100,000 US$100,000 Up to US$100,000 NCB Less than US$50,000 Shopping 2\. Services Equal or more than US$50,000 for individuals and equal or more than US$100,000 for firms All TORs (firms and individuals) 3\. Miscellaneous Overall Procurement Risk Assessment: High Average Low Frequency of procurement supervision missions proposed: One every 12 months (includes special procurement supervision for post-review/audits) 2 Thresholds generally differ by country and project\. Consult OD 11\.04 "Review of Procurement Documentation" and contact the Regional Procurement Adviser for guidance\.  Project Appraisal Document Page 42 Ethiopia: Conservation & Sustainable Use of Medicinal Plants Project Annex 6, Table C: Allocation of IDA Credit and GEF Grant Proceeds 1\. Goods: * Vehicles 140,000 100% FC, 85%LC * Equipment 800,000 100% FC, 85%LC * Furniture & Materials 5,000 100% FC, 85%LC Sub Total Goods: 945,000 2\. Specialist Services: \. Consultants 300,00 100% of total * Training 440,000 100% of total \. Studies 320,000 100% of total Sub Total Specialist Services: 1,060,000 3\. Incremental Operating Costs: 270,000 80% of total 4\. Unallocated: 232,000 Total 2,507,000 1\. Goods: * Vehicles 130,000 100% FC, 85%LC \. Equipment 60,000 100% FC, 85%LC Sub Total Goods: 190,000 2\. Specialist Services: * Consultants 615,000 100% of total * Training 240,000 100% of total * Studies 480,000 100% of total Sub Total Specialist Services: 1335,000 3\. Incremental Operating Costs: 95,000 80% of total 4\. Unallocated: 182,000 Total 1,802,000  Project Appraisal Document Page 43 I thiopia: Conservation & Sustainable Use of Medic[nal Plants Project Annex 7: Project Processing Budget and Schedule Ethiopia: Conservation and Sustainable Use of Medicinal Plants Time taken to prepare the project (months) 4 4 First Bank mission (identification) 11/02/1998 11/07/1998 Pre-appraisal mission departure 05/05/1999 05/05/1999 Negotiations 09/10/2000 10/12/2000 Planned Date of Effectiveness 12/01/2000 07/01/2001 Prepared by: Institute of Biodiversity Conservation and Research (IBCR) Preparation assistance: GEF PDF (A & B) grant: US$ 0\.11 million Bank staff who worked on the project included: Project Team: Berhane Manna Task Team Leader AFTR2 Devendra Baj gain Agricultural/Natural Resources Management Specialist AFTR2 John Lambert Medicinal Plant Specialist AFTR2 Kathy MacKinnon Senior Biodiversity Specialist ENV Palitha M\. Wijesinghe Senior Disbursement Officer LOAAF Solange Alliali Senior Counsel LEGOP Lucie Houng-Giang Tran Operations Analyst AFTR3 Soulemane Fofana Operations Analyst AFTR2 Samuel Haile Selassie Procurement Officer AFMET Eshetu Yimer Financial Officer AFMET Remi Kini Environmental Economist AFTEI Shimwaayi Muntemba Social Scientist AFTEI Zenobia Raghunandan Team Assistant AFTR2 Ouality Assurance Team: Joseph Baah-Dwomoh Sector Manager AFTR2 Jaime M\. Biderman Lead Specialist AFTQK Francesco Samo Principal Procurement Specialist AFTQK Elizabeth Otubea Adu Principal Counsel, Operations LEGOP Peer-Reviewers: Jan Bojo Senior Environmental Economist AFTEl Nadim Khouri Senior Agriculturist SASRD  Project Appraisal Document Page 44 Ethiopia: Conservation & Sustainable Use of Medicinal Plants Project Annex 8: Documents in the Project File* Ethiopia: Conservation and Sustainable Use of Medicinal Plants A\. Project Implementation Manual - October 5, 2000 B\. Bank Staff Assessments 1\. Bank Identification Mission Aide-Memoire, dated December 21, 1998 2\. Environmental Data Sheet 3\. Bank Pre-Appraisal Mission Aide-Memoire, dated June 1, 1999 4\. Technical Discussions, Minutes, dated March 17, 2000 5\. Negotiations, Minutes, October 12, 2000 C\. Other *Including electronic files\.  Project Appraisal Document Page 45 Ethiopia: Conservation & Sustainable Use of Medicinal Plants Project Annex 9: Status of Bank Group Operations In Ethiopia (Operations Portfolio) As Of January 8, 2001 Closed Projects 62 Acive Difference Projeds iB3tween Last PSR Expected and Actual Supetvision Rating bI Oriqinal Amount In USS Disbursements Milions Project Project Name Develoomen Imlementat Fiscal IBRD IDA GRANT Cancel\. Undisb\. Orig\. Frm ID tObieie ion Prvs~s Year Revd P000733 AG\. RESEARC & HS S 1998 0 60 0 0 46\.6 9\.7 0 TRAIN P000758 CALU8 ENERGY U U 1994 0 0 0 0 0 0 0 DEV\. PROJECT P073196 DemobiiizatIon and # 2001 0 170\.6 0 0 172\.7 0 0 Reintegramtion Project P000732 EDUCATION S U 1998 0 100 0 0 67\.6 22\.6 0 SECTOR INVESTMENT P067084 EMERGENCY 2001 0 230 0 0 232\.8 0 0 RECOVERY PROJECT P000736 ENERGYII S S 1998 0 200 0 0 142\.1 36\.1 0 P000771 ESRF I S S 1996 0 120 0 11\.5 46\.5 63\.2 36\.9 P069886 MULTISECTORAL # 2001 0 60 0 0 60 0 0 HIVWAIDS PROJECT P000756 HEALTH SECTOR S U 1999 0 100 0 0 76\.2 27\.3 0 P000753 NAT\. FERTILIZER S S 1995 0 120 0 0\.1 19\.9 26\.7 0 PROJ P000752 NATIONAL SEEDS S S 1995 0 22 0 0 10\.5 12\.3 0 PROJECT P000734 ROAD S S 1993 0 96 0 0 28\.6 34\.4 0 REHABILITATION P000755 ROAD SEC\. DEV\. S S 1998 0 309\.2 0 0 231\.8 130\.5 0 PROG\. P000764 WATER SUPPLY S S 1996 0 35\.7 0 0 17\.2 21 0 DEV&REH P050342 WOMEN'S 2001 0 5 0 0 5 0 0 DEVELOPMENT INITIATIVES PROJECT TOTAL 0 1628\.5 0 11\.6 1157\.5 383\.9 36\.9  Project Appraisal Document Page 46 Ethiopia: Conservation & Sustainable Use of Medicinal Plants Project Annex 10: Ethiopia at a Glance Ethiopia at a glance 8,21/00 Sub- POVERTY and SOCIAL Saharan Low- Ethiopia Africa income Development diamond' 1999 Population, mid-year (millions) 62\.8 642 2,417 Life expectancy GNP per capita (Atlas method, US$) 100 500 410 GNP (Atlas method\. US$ billions) 6\.5 321 988 Average annual growth, 1993-99 l Population (%) 2\.7 2\.6 1\.9 \. Labor force (%) 2\.3 2\.6 2\.3 GNP Gross per I , primary Most recent estimate (latest year available, 1993-99) capita enrollment Poverty (% of population below national poverty line) 45 Urban population (% of total population) 17 34 31 Life expectancy at birth (years) 43 50 60 fr nitmortality(per1,000livebirths) 107 92 77 Cniiid malnutrition (% of children under 5) \. 32 43 Access to safe water Access to improved water source (%6 of population) 27 43 64 Illiteracy (% of population age 1+) 63 39 39 Gross primary enrollment (% ofschool-age population) 43 78 96 Ethiopia Male 55 85 102 Low-income group Female 31 71 86 - - - - - - - KEY ECONOMIC RATIOS and LONG-TERM TRENDS 1979 1989 1998 1999 Economic ratios* GDP (US$ billions) \. 8 1 6\.6 6 5 Gross domestic investment/GDP \. 13\.5 17\.2 17 8 Trade Exports of goods and services/GDP \. 9\.2 15\.8 13\.7 Gross domestic savingsJGDP \. 7\.9 5\.3 2\.7 Gross national savings/GDP \. 9\.8 9\.3 7\.1 Current account balance/GDP \. -3\.6 -7\.9 -10\.4 Do tic Interest payments/GDP \. 0\.9 1\.6 1\.2 Investment Total debUGDP \. 96\.8 149\.5 141\.9 Savings Total debt servicelexports 6\.2 40\.2 3\.1 17\.6 Present value of debt/GDP \. 120\.5 Present value of debt/exports \. \. 751\.5 Indebtedness 1979-89 1989-99 1998 1999 1999-03 (average annual growth) GDP 0\.9 4\.2 -1\.0 5\.8 5\.6 Ethiopia GNP per capita -1\.9 0\.9 -4\.2 3\.3 3\.1 -\.Low-income group Exports of goods and services 2\.8 5\.6 -7\.8 -9 3 7\.0 STRUCTURE of the ECONOMY 1979 1989 1998 1999 Growth of Investment and GDP I%) (% of GDP) Agriculture \. 48\.5 52\.3 52\.3 0 Industry \. 14\.2 11\.1 11\.1 - Manufacturing \. 8\.5 7\.0 7\.0 20 Services \. 37\.3 36\.5 36\.5 o Private consumption \., 73\.5 80\.4 81\.3 -20 54 s 05 e 9 a 98 99 General government consumption ,\. 18\.7 14\.2 16\.0 -GDI --GOP Imports of goods and services \., 14\.8 27\.7 28\.8 1979-89 1989-99 1998 1999 Growth of exports and Imports (%) (average annual growth) Agriculture -0\.4 2\.5 -10\.3 4\.2 100 Industry 1\.2 4\.6 6\.3 7\.6 ts Manufacturing -0\.9 4\.8 5\.8 4\.9 50 Services 2\.8 5\.8 10\.4 8\.2 25 Private consumption -0\.3 3\.4 -2\.4 4\.7 Generalgovernmentconsumption 4\.4 2\.7 30\.6 18\.5 \. sr 9a 5 Gross domestic investment 3\.4 9\.9 0\.1 9\.5 \.25 Imports of goods and services 2\.5 4\.0 11\.7 6\.2 Exports 0nports Gross national product 0\.7 4\.2 -1\.8 5\.9 Note: 1999 data are preliminary estimates\. The diamonds show four key indicators in the country (in bold) compared with its income-group average\. If data are missing, the diamond will be incomplete\.  Project Appraisal Document Page 47 Ethiopia: Conservation & Sustainable Use of Medicinal Plants Project Ethiopia PRICES and GOVERNMENT FINANCE 1979_1989_199__1999__'_nf____ 1979 1989 1998 1999 I nflation l%) Domestic pHces (% change) Consumer prices 16\.0 9\.6 3 7 4\.2 10 Implicit GDP deflator \. 4\.3 9\.7 3\.3 5 Government finance (% of GDP, includes current grants) -s 94 95 96 97 99 Current revenue \. 23\.2 18\.0 17\.5 -10 Current budget balance \. 0\.6 2\.3 -0\.1 - GDP defator CPl Overall surplus/deficit \. -10\.9 -6\.5 -7\.3 TRADE (USS millions) 1989 1998 1999 Export and import levels (US$ mill\.) Total exports (fob) 360 444 602 484 2,000 Coffee \. 303 -420 281 Hides \. 60 51 57 1,500 Manufactures \. Total imports (cif) 589 1,020 1,519 1,570 1\.000 Food \. 186 172 172 I*Jj Fuel and energy \. 103 246 194 Capital goods \. 397 569 651 0 Export price index (1995=100) 82 97 79 93 94 95 9b 97 98 99 Import price index (1995=100) \., 117 104 101 aEvports alImports Terms of trade (1995=100) \. 70 93 79 BALANCE of PAYMENTS 1979 1989 1998 1999 _- (US$ millions) Current account balance to GDP (%) Exports of goods and services 455 752 1,037 894 0 Imports of goods and services 660 1,201 1,815 1,866 -2 Resource balance -205 -449 -778 -972 21 Net income -83 -91 -85 Net current transfers 83 238 349 374 Current account balance -124 -294 -520 -683 -aj Financing items (net) 79 284 650 633 -t Changesin net reserves 45 10 -129 4 2 Memo: Reserves including gold (US$ millions) 319 123 412 434 Conversion rate (DEC, local/US$) 2\.1 2\.1 6\.9 7\.5 EXTERNAL DEBT and RESOURCE FLOWS _1_979___ ___1998_i___ 1979 1989 1998 1999 r-- (USS millions) I Composition of 1999 debt (US$ mill\.) Total debt outstanding and disbursed 740 7,842 9,612 9,286 IBRD 59 31 0 0 G 619 IDA 221 718 1,586 1,948 F 333 B 1\.948 Total debt service 29 304 33 160 IBRD 9 13 0 0 IDA 2 9 28 31 C 127 Composition of net resource flows Official grants \. \. 418 Official creditors 95 402 -209 -267 Private creditors 6 -70 -6 -10 Foreign direct investment \. \. 4 E 4,727 Portfolio equity \. \. 0 World Bank program Commitments 0 72 609 160 A - IBRD E - Bilateral Disbursements 47 70 72 148 B - IDA D - Other mulil,aleral F - Private Principal repayments 4 14 17 19 C-IMF G-Short-term Net flows 43 56 56 129 Interest payments 7 8 11 12 Net transfers 36 48 44 117 World Bank 8/21/00   3'50 40' ETHIOPIA CONSERVATION AND 0 ' -/ \ R d- SUSTAINABLE USE R-' ' ed i 0 /OF MEDICINAL PLANTS / ERITREA\ e 5 e a i\.__\. GEF PROJECT SITE lKhartoum Asmara,* BALE MOUNTAINS NATIONAL PARK 1\. / ' 2 , X X * NATIONAL CAPITALS 15° z ' / | -X<0 j15- STATE/REGION BOUNDARIES ---------- ZONE BOUNDARIES --- INTERNATIONAL BOUNDARIES 0 100 200 300 400 500 KILOMETERS S U D A N / |' ' IOS ' z~~~~~~~~~~~~ Gulf of Aden X ~~BE?qf NGULt t<{\. -100 IR West4 ~< Ja WeUeRo in S =R 'R | 7 wa SOMALIA hI ~~~~~T _ - iXJ' " 0, *Oa 7fv Fike , Warder BSle I \ / NDIAN- Go\. X - ,/ >ocEA N 50 50~~~~~~~ae V U0 1= 2 /~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~h bo g (\. - \. _\. mS,deo-- - - ,- S° Turkana Iad t y'ar iafrmoaoa shownon > ~ ~ ~ ~ ~ ~ ~ ~ ~~~~~-\.f/the WnddBan*GWp, orwjdg,MOnt 4 { ( UGANDA y\.t KENYA 4 0 / p of 1> i > )a 1ta tv v A/ 2 / ,n35o 5'sh*csa O 1 1 < } 40° j <12 450 X X : 0xyoiraf 0 O

APPROVAL

P007198

Report No\. PIC4579 Project Name Guatemala-Public Sector Modernization Technical Assistance Region Latin America and Caribbean Sector Public Sector Management Project ID GTPA7198 Borrower Republic of Guatemala Implementing Agency Commission for the Modernization of the Executive Branch Guatemala City, Guatemala Tel: 502-3-9276 Fax: 502-3-0801 Date PID Prepared December 19, 1996 Projected Appraisal February 10, 1997 Projected Board Date March 30, 1997 1\. Country and Sector Background Guatemala has the largest economy in Central America, with a 1995 GDP estimated at $14\.9 billion and reported per capita income of $1,310\. The economy is predominantly agricultural, with more than half of the country's labor force engaged in farming, forestry, and fishing\. Since 1990 annual growth has averaged 3\.9 percent, led by the private sector, and inflation fell to 8\.4 percent in 1995 from 60 percent in 1990\. Guatemalan social indicators are among the lowest in the Latin American region and show only slow improvement, reflecting, among other things, persistent under-investment in social services and basic rural infrastructure\. Attempts by the Government to promote poverty alleviation and increase social spending targeted on the poor have been frustrated by serious institutional weaknesses within the public sector\. Inadequate human resources and personnel management policies, traditionally weak tax administration, and antiquated financial management practices have resulted in an inability to fully deliver basic services, efficiently manage financial resources, or properly implement investment programs\. Consequently, tax compliance is undermined, external donor funding is foregone, and ad hoc organizations and mechanisms must often substitute, if inadequately, in service delivery\. The Government has initiated a comprehensive program of public sector reform with the goal of increasing revenues, transferring to the private sector wherever appropriate the delivery of public services, and improving the institutional capacity of the central government and decentralized institutions\. These reforms are considered vital to enhance investment and sustained economic growth, promote social development and poverty alleviation, and to support the implementation of the Peace Accords ending years of civil conflict\. 2\. Objectives  The objective of the PSM-TAL is to modernize Guatemala's central public administration to improve its efficiency and effectiveness in supporting economic and social development\. To this end the projects seeks to: (i) reform the policies and procedures of the civil service; (ii) restructure up to six priority ministries; and (iii) promote understanding and support for public sector reform initiatives through improved social communication\. 3\. Description The project's components would include: Civil Service Reform: Reform of the legal framework, personnel policies and procedures, incentive systems, and rector institutions of the civil service, including: (i) design and installation of a human resources information system; (ii) creation of new management structures; (iii) design of staffing procedures; (iv) rationalization of the occupational structure; (v) modernization of personnel administration and strengthening of institutional human resources departments and National Civil Service Commission; (vi) preparation of a competitive salary system; (vii) design and implementation of procedures for salary administration; and (viii) provision of training\. Institutional Restructuring: Institutional diagnosis, negotiation, and implementation of institutional restructuring agreements (AMIs-Acuerdos de Modernizacion Institucional) in six priority ministries (Finance, Communications, Education, and three more to be determined)\. The agreements will aim at adjusting the structure and function of the institutions to eliminate duplication and fragmentation, contract out or privatize functions wherever appropriate, and strengthen programming and human resource capacity, financial management, and business processes in order to improve the institution's ability to execute a well defined, service oriented mission\. TA would: (i) assist the Commission for the Modernization of the Executive Branch establish and operate the AMI process in all participating institutions; and (ii) provide direct assistance (both change management and sector specific) to the institutions implementing AMIs\. Social Communications: Preparation and execution of a social communications effort to raise awareness about the public sector reform effort with the aim of increasing citizens' appreciation of their rights with regard to public service delivery and reinforcing public servants' understanding of, and commitment to, the comprehensive reform program\. 4\. Financing The World Bank loan of approximately $20 million would finance an estimated 80 percent of the total project costs of $ million\. The loan would be used to fund technical assistance, training, equipment purchases, and technical and professional staff for the project coordination unit\. Training for civil servants, including formal courses and observational travel would be a major focus of the project\. Government resources would finance infrastructure and logistical expenses\. 5\. Implementation The proposed project would be implemented over a three-year period, -2 -  beginning in the second quarter of 1997\. Political direction would be provided by the Vice President of the Republic\. A Commissioner for the Modernization of the Executive Branch, with the support of a small unit, with highly qualified national consultants, will oversee project execution\. The Commissioner, working with the National Civil Service Agency, would oversee the reform of the civil service\. The Commissioner would also oversee with the relevant ministries the institutional restructuring efforts in priority institutions through the design, negotiation, and implementation of Institutional Modernization Agreements (AMIs)\. 6\. Sustainability Sustainability would be enhanced through: (i) the government's strong and institutionalized commitment to PSM reform; (ii) by "locking in" proposed reforms through legislation and new administrative practices; (iii) de-facto improvements in services that would be monitored by customer surveys; (iv) by widespread training and social communications efforts; and (v) new incentive structures within public sector entities, in particular for managers and technical staff\. 7\. Lessons learned from past operations in the country/sector Lessons learned from previous PSM projects and included in the project aim at: (i) ensuring commitment and ownership of the overall reform through extensive and deep dialogue with the authorities in all aspects of project design and implementation plus the presentation of the project to a wide audience of senior Executive Branch and Congressional leaders, and key staff to encourage "buy-in" and commitment; (ii) ensuring that major political parties participate in decision-making through their inclusion in project launch activities; and (iii) creation of an experienced, highly skilled project coordination unit reporting directly to the Vice President\. In addition the project will benefit from lessons learned in previous Technical Assistance operations including: (i) specific yet flexible action plans are being developed for each component focusing on outputs and defining evaluation criteria and performance indicators; and (ii) criteria will be established to ensure careful project supervision, especially with respect to procurement and supervision of consultants so as to prevent inadequate budget control and weak management\. Lessons learned from other operations in Guatemala to be addressed include: (i) the need for close project supervision which will be facilitated in this case by close overlap with the integrated financial management project, the opening of a resident representative office, and frequent project reviews; (ii) the need to assure adequate counterpart funding; and (iii) the need for permanency in counterpart staff which will be encouraged by the Bank as a critical issue in its project supervision\. 8\. Poverty Category Not applicable 9\. Environmental Aspects -3-  The project (category C) will have no adverse environmental impact\. 10\. Program Objective Categories The proposed project addresses the issue of economic management by increasing the public sector's institutional capacity through strengthening of human resource base and management, as well as the organizational structure of the government\. To the extent that it strengthens the public sector's ability to increase social spending and investment, it would ultimate support poverty alleviation\. Contact Point: Public Information Center The World Bank 1818 H Street N\.W\. Washington D\.C\. 20433 Telephone No\.: (202)458-5454 Fax No\.: (202)522-1500 Note: This is information on an evolving project\. Certain components may not necessarily be included in the final project\. Processed by the Public Information Center week ending December 27, 1996\. - 4 -

APPROVAL

P010176

Document of The World Bank FOR OFmFCIAL USE ONLY Report No\. 7181 PROJECT COMPLETION REPORT SRI LANKA EIGHTH (DIESEL) POWER PROJECT (LOAN 2187-CE) April 4, 1988 Industry and Energy Operations Division Country Department 1 Asia Region T lbi documient bas a westricted distribution and may be used by recipients only In the performance of |their offidal duties\. Its contents may not otherwise be disclosed witbout World Bank authorization\.  * 101 M OfAL U ONLY TO* WOtLD SANK WasIwlon\. D\.C\. 2133 Gi\. ii OtwGUW April 4, 1988 mEORANDUN TO THE EXECUTIVB DIRECTORS AND THi PRESIDENT 3UBJECT: Project Completion Report on Sri Lanka Ziahth (Diesel) Power Project (Loan 2187-CE) Attached, for information, La a copy of a report entitled "Project Completion Report on Sri Lanka Eighth (Diesel) Project (Loan 2187-CE)" prepared by the Asia Regional Office\. Purther svaluation of this projeat by the Operations Evaluation Department has not been made\. Attachment d p oW d_ it conu o o_ b dbc bo_ W _1 I  eOIVIcAL 0 WINLY SRI EIGHTH (DIESRLT POWER PROJECT CLOMN 2187-cf PROJECT COMPLETION REPORT TABLE Or CONTENTS Preface \. \. \. I Blsic Data Shoet \.I\.I\.* \.** Highlights \.* I\. INTRODUCTION \. \.e*\. \. \.oe\. 1 The Power Subsector \. 1 Bank Group Investment \. 2 TI\. PROJECT IDENTIFICATION, PREPARATION AND APPRAISAL e\. 3 Project Origin, Preparatong, Appraisal, Negotiation and Approval \. \. \.*\.** 3 Project Objectives \. 4 Project Description \. \. \. \. \. 4 III\. IMPlEMENTION \.*\.*\.* \.*\.*\. 4 Loan Effectiveness \.*\. \.*\. \.*\. 4 Project Design and Engineering \. 4 Project Executlon \.5 Project Cost \. \. \. 6 Disbursements \. \. \. \.o\. \. 7 rv\. OPERATING PERFORMANCE *\.*\.*\.* \. 7 V\. FINANCIAL PERFORMANCE a Accountlng Systems, Organization and Audit a\. Tariffs \.e\.s\.e\.s\.e\.e\.ee*eeeeeeeee 8 F4inancal Performance *\.ee\.e\. \. \. 9 Present Financial Position \. 11 Accounts Receivable \. 12 VI\. INSTITUTIONAL DEVELOPMENT 13 VII\. ECONOMIC JUSTIFICATION \. \. 14 VIII\. PERFORMANCE OF THE BORROWER AND THE BANK \.1\. 15 IX\. CONCLUSIONS \. *\. \. \.16 Thisdocum -ha aresuti distdbutoendmy boe db y gipmsw ns peumaM of their ofcl dutieml t contentsanmy not otmwiM be witb od W Bank latbodwmtl  TAW\.L OF CONTENTS (Cont'd) Pe RO LO 1\. Outstanding tem to Complete the Turnkey Contract \. 17 2\. stimated and Actual Project Cost \. 18 3\. Cumulative forecast and Actual Disbursements \. 19 4\. Forecast & Actual Demand for Electricity - 1981-85 \. 20 S\. InCOm Statements - Projcetions and Actual \.* 21 6\. Balance Sheet* - Projections and Actual \. 22 7\. Sources and Applications of Fundsa Statment - Projections and Actual \. \. \. 23 8\. Es-Post Economic Costs end Benefits \.24 ATYAC tMENT Comments from the Borrower \.e\. *e\. 2S I~~~  PROJICT CCMPLETION NIPORT B1I0TB (DIESEL) PORE PROJECT - (LOAN 2187-CE) PREACE j 1\. The project Involved the turnkey construcetLn of an 80 MN diesel power station at Sapug k nan near Colombo, the capiutl of S8l Lanka\. It covered all civil, mechanical and electrical works and technical services, includiog engineerting, supervision and training of personnel\. A project loan of USS42\.7 lillion vas approved on June 6, 1982, with full comercial opera- tion of the plant (4 a 20 MN) schaduled for March 1984, and loan closure for March 31, 1985\. iowever, slower-than-expected procureent and civil dlitur- bances delayed full comLisioning until September 1, 1984\. Since, however, any lt_ms were outstanding, the closing dato wa extended by one year and the loan actually closed on August 8, 1986\. 2\. The total project cost wa US$51\.3 mlllion, 951 of the original estimate of US$54\.0 million; hoever, net of port duties and tazes, the project ws completd at 811 of the estimted cost, or US$41\.0 million com- pared to US$50\.5 million\. Local costs, includin Import duties and taxe of US$10\.3 million (almost triple the estimted US$3\.5 million), were US$15\.0 capared wth the SA estimate of US$12 millon, and foreign costs were US$36\.3 illion compard with the estimated US$42\.0 million\. Favorable mrket conditions In 1982 led to bids for below the orignal estimate, causing con- sid*eable savings In the turkey contract\. As a reslt, only US$34\.2 mllion wa disbursed from the loan US$6 million of the original nunt wa canclled on December 1, 1985, and the remaining US$2\.5 amllion was cacelled on Augut o, 1986, following loan closure\. 3\. This Project Completion aport wa prepared by the South Asia legion on the basis of the Staff Appraisal Report 3891b-Cl dated May 20, 1982, the Loan and Project Agrements, dated Augut 8, 1982, a completion report sub- mitted by the borrower, docuents In Bank files, and a mission to Srl Lanka in October 1986\. 4\. In accordance wlth the ?evised procedures for project performance audit reporting, ths Project Completion Report wa read by the Operations Evaluation Departent O(OED), but the project wll not be audited by OlD staff\. OD sent copies of the draft report to the Borrwer and Executing Agecy for coute\. The comAnts received jve boon taken Into account In preparin the fiml report and tlhy are reproduced as an Attachment to rbe Report\.  -'ii- SRI LANKA CEYLON ELw'TRICITY BOAD (CBS) EIGCTH (DIESEL) POWER PROJECT - Loan 2187-CE BASIC DATA SUEET Key Project IDcat (in US$ Millioin) Appraisal Estimate Actual Project Cost 54\.0 51\.3 Loan Amount 42\.7 34\.2 /1 Disbursed 42\.7 34\.2 Cancelled - 8\.5 12 Repaid - 2\.4 Outstanding - 31\.8 Date for Completion of Physical Components 03/84 09/84 Proportion Completed by Target Date (C) 100 90 Economic Rate of Return (Z) 14 18 Institutional Performance Mixed Improving Cumulative Estimated and Actual Disbursements (US$ Kill'ion)- 1983 1984 1985 1986 Appraisal Estimate 13\.5 41\.6 42\.7 Actual 5\.2 29\.1 34\.0 34\.2 Actual as Z of Eastimate 39 70 79 80 /1 The interest rate was 11\.6Z\. /2 Disbursement was extended to May 31, 1986, to enable payment of the money withheld on the main contract under the Performance Guarantee\. However, because no final settlement was reached on outstanding contract issu e, the remaining funds in the loan were cancelled after closing\. CUM is to meet outstanding payments of about US$3 million from its own funds\. -r~\.,\.rr _R - _r - \. W *w--I-I  Other Project Data Appraisal Item Estimate Revision Actual Concept in the Bank - - 10-19-81 Negotiations 05-12 to 14-82 -- Board Approval 06-22-82 06-24-82 06-24-82 Signing - - 08-18-82 Effectiveness 11-16-82 - 11-11-82 Closing Date 03-31-85 03-31-86 08-08-86 Borrower, Executive Agency Ceylon Electricity Board (CEB) Fiscal Year of Borrower January-December Follow-up Project Ninth Power Project (CEB - Distribution Expansion and Rehabilitation) mission Data /1 Month/ No\. of No\. of man Date of Year Weeks persons Week Report Preparation 11/12/81 /2 Appraisal 01182 1-1/2 3 3 05/20/82 /3 Supervision 1 10/82 1 2 1 01/10/83 Il Supervision 2 03/83 1/2 1 1/2 04/06/83 Supervision 3 06/83 1-1/2 1 1-1/2 08/05/83 Supervision 6 02/84 1 1 1 03/22/84 Supervision 5 09/84 3 4 10 11/12/84 /5 supervision 6 01/85 1 1 1 02/27/85 /6 Supervision 7 06/85 2 3 6 08/12/85 Supervision 8 10/85 1 1 1 11/18/85 /7 t  i, -iv- Country Exchange Rates Name of Currency Rupee (SLRs) Appraisal year average USRI - Rs 20\.50 Intervening years average US$1 - Ra 25\.04 Completion year average US$1 - Rs 28\.36 /1 Al missions were combined covering supervision of all on-going projects, collection of sectoral information for a power subsector report, and preparation of the Ninth Power Project\. Of the 25 total manweeks stated, about four can be considered as exclusive for supervising the lighta\. Power Project\. /2 The project was developed in 1981, in the course of supervising the ongoing Sixth Power Project (1048-CE) and preparation/appraisal of the Seventh Power Project (1210-CE), during which CBS urgently requested an increase in thermal capacity following extensive power shortages in 1979 and 1980\. In addition, projected delays in hydro plant commissioning dates were expected to cause further shortages during 1983-1985\. A first project brief was issued on November 12, 1981\. Shortly thereafter during negotiations for the Seventh Power Project, the main technical elements were discussed\. /3 The contents of the appraisal report for the Eighth Power Project, except for the chapters pertaining to project information and justification, were substantially the same as those in the appraisal report for the Seventh Power Project\. /4 A full supervision report was not issued; memoranda dated November 11, 1982 and January 10, 1983 covered all three ongoing projects\. /S Supervision of the Sixth, Seventh and Eighth Power Projects, and identification of the Ninth Power Project\. /6 No full supervision report of this (consultant's) visit was issued\. See memorandum of this date\. / The three ongoing projects were supervised at the time when the Ninth Power Project was appraised\.  SRI LANKA CEYLON ELECTRICITY BOARD EIGHIH (DIESEL) POWER PROJECT s Loan 2187-CE PROJECT COMPLETION REPORT Highlights 1\. Delays in several hydro stations under construction by the Mahaweli Authority of Sri Lanka, and the need for the-'al back-up to the hydro system in case of below-average rrinfall, prompted the Bank in 1981 to take 1uick action to assist CEB in financing a diesel power station of up to 120 MW\. Subsequently, the station's size was reduced to 80 MW following lower load forecasts which were prepared to take account of a slow-down in economic activity (para\. 2\.01)\. 2\. In view of the need for early completion, bid documents were issued in January 1982\. Commissioning of the power station was initially targeted by CEB for late 1983, but delays in finalizing financing arrangements and project preparation, including Bank review of bid documents, necessitated a revision of the commissioning date to March 1984 (para\. 3\.03)\. Because of this delay, interruptions in power supply, totalling about 37 GWh (1\.7X of total sales), occurred from November 1983 through February 1984\. 3\. The objective of speedy physical completion of the project was sub- stantially met (para\. 3\.03)\. The project was appraised in January 1982 and approved by the Board in July 1982\. A contract for a 4 x 20 MV plant was awarded on October 12, 1982 with a target completion date of mid-July 1984\. In the event the fourth and final unit was coummissioned in September 1984 (para\. 3\.03)\. The principal reason for the delay was slower than expected procurement and civil disturbances in mid-1983\. Although all the units were commissioned by September 1984, final acceptance was delayed because of numerous outstanding items which the contractor had not completed (para\. 3\.04)\. 4\. The project achieved its technical objectives, although CBS has had considerably lower requirements for thermal generation than were forecast\. This was due to favorable hydrological conditions and to lower demand for electricity because of slower economic growth\. Consequently, through end-1986, energy generation by the new plant was minimal\. Its main function has been as a back-up plant to meet demand during maintenance and periods of technical supply difficulties\. For example, in 1986, the 3 x 67 KW Kotmale hydro statrion developed penstock difficulties and was taken out of service until 1988\. Thus, compared to the SAR forecast, the benefit of the Sapugas- kanda power station as a reserve and peaking plant has increased and its energy function has decreased substantially (para\. 4\.01)\.  -vi- 5\. 1U primary project objective was to provide additional generating capacity to meet forecast demand at least cost\. The institutional objectives were generally those agreed under previous lending operations, particularly the Sixth (Cr\. 1048-CE) and Seventh (Cr\. 1210-CE) Power Projects\. Institu- tional objectives and actual performance are not discussed in detail ih the present report, but will be addressed in the forthcoming completion report for the Sixth and Seventh Power Projects\. Although CEB's financial perfor- mance was generally satisfactory (paras\. 5\.03-5\.07) during the period when the project was constructed, 1982-85, its wider institutional performance was mixed\. The principal issue was inadequate staffing, as a result of low remuneration and the exodus of expert staff to work in tLa Middle East countries (para\. 6\.01)\. In early 1985 CEB had only 300 qualified engineers, of whom fewer than 102 had more than five years' experience with CEB\. Since job opportunities elsewhere, particularly in the Gulf countries, are now severely restricted the staffing of CEB appears to be improving\. An accelerated program for the implementation of institutional changes is under- way, and agreement was reached under the Ninth Power Project (Cr\. 1736-CE) that CEB would prepare, and put into effect by December 31, 1987, a scheme of incentives and a promotion policy based on merit to assist it in the reten- tion and recruitment of suitable staff\. p~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~  SRI LANKA CEYLON ELECTRICITY BOARD (CEB) EIGHTH (DIESEL) POWER PROJECT - Loan 2187-CE PROJECT COMPLETION REPORT I\. INTRODUCTION 1\.01 Csa's electricity sales increased annually about 9\.5Z during 1961-80, includirsg about 11\.51 in 1978-80\. During the latter years, the Government decided to accelerate the construction of large multipurpose projects, prin- cipally in the Mahaweli basin, including hydro power components for transfer to CEB upon completion\. In this context, CUB required the accelerated expan- sion of its transmission system, both at the existing 132-kV level and at a higher voltage level (220-kV), to allow for more extensive transmission of electricity and to connect the new hydro stations to the national grid for supply to the main demand centers\. Although CEB was restructured in the early 1970s to cope with this rapid growth, the need for further restructur- ing became apparent at the end of the decade in order to assure its efficient operation in 180s\. The Bank Group addressed the technical and institutional problems that arose as a result of this rapid growtb under the Sixth and Seventh Power Projects\. The _ower Subsector 1\.02 Electricity supply in Sri Lanka began as a private sector operation in 1905\. It ceased as a private business in 1927, when the Covernment bought the utility and created a government department for electricity supply\. CEB was created as a statutory corporation in 1969 to take over that department's cesponsibilities for the generation and transmission of electricity throughout the country and distribution in the networks which had been operated by its predecessor\. Remaining distribution networks were operated by local authorities, and during the project period, 1982-1985, CEB supplied electricity in bulk to 214 local authorities which accounted for about Ote-fourth of total supply\. These local authorities (licensees) were mainly Orgnized on a municipal basis servicing relatively small load centers which "eTe dominated by domestic consumers\. Due to their perennial financial PrOblems ant high distribution losses (25-30X being common), the Covernment in 1984 created the Lanka Electric Company (LECO) under the Companies Act to take over licensees gradually\. The Asian Development Bank is assisting LECO n thbe organizational aspects of this endeavor and in renovating networks\. 1\.03 In 1982, CUB's total installed capacity was 55' KW, all intercon- nected in one system\. The hydro/thermal capacity mix was 66:34, 369 NW and 190 MI respectivelyt including 120 MW gas turbine capacity\. The main trans- QSision voltages were at 132-kV (915 km) and 66-kV (344 km)\. Distribution was served by a system of 33-kV (5,230 km) and 11-kV (1,205 km) overhead lines- The lengths of the licensees' distribution facilities are not on record\.  -2- 1\.04 The CEB statutes allow it a reasonable measure of autonomy, which has not been realized, particularly since it was brought under the super- vioory responsibility of the Ministry of Power and Energy that was created in the early 19800 to rationalize the energy sector\. For economic and political reasons, the Government has reserved to itself a substantial role in policy mac\.ers and appoints both CUB's Chairman, who is also Secretary of State of * the Ministry of Power and Energy, and the Ceneral Manager\. The conditions of service for all CUB staff are subject to Covernment regulations which allow midnimal room for incentives\. The loss of experienced staff to the private sector and overseas has been exacerbated by a promotion system based on seniority rather than merit\. In early 1985, of the 300 engineers in CEB less than 10 has more than five years' experience with CEB\. LEC0, by contrast, i is substantially free from Government interference and allowed to set inde- pendent service conditions\. However, a agreement with CEB, which is the principal shareholder, prohAibits employment of CEB personnel and, thus, the formation of LECO has not contributed to the exodus of experienced personnel from CUB\. 1\.05 During project execution, the power subsector encountered many difficulties, reflecting economic and political problems in the country\. It is, therefore, satisfactory to note that CEB's financial viability was generally maintained by adequate tariff rate adjustments (para\. 5\.03)\. Even so, owing to structural deficiencies, some financial problems were experienced, particularly with regard to accounts receivable (para\. 5\.09)\. e This issue was addreased under the Ninth Power Project (Cr\.1736-CE)\. 1\.06 Although the execution of works (including Bank Croup financed projects) suffered from many delays, CEB's installed cspacity increased from 559 MW in 1982 to 949 MW in 1985, an increase of 701\. In December 1985, the plant mix was 679 MS hydro (increase of 85x) and 270 MW thermal (increase of 42Z)\. The 220-kV system was substantially completed by mid-1986--about two years late\. The delays in most works, including the project, did not cause any difficulties of substance, because growth in demand was slower than originally projected (paras\. 4\.01 and 5\.05)\. lank Group Involvement 1\.07 To date, rhe Bank Group has supported the power subsector through nine projects, excluding the Ukuwela power station (1976, which is a part of a multipurpose Mahaweli Development Project)\. Up to and including the Seventh Power Project, loans amounted to US$58\.4 million equivalent and credits to US$61\.5 million equivalent (Fifth, Sixth and Seventh Power projecte), excluding Ukuwela\. The loan for the Eighth Power Project was US$42\.7 million\. Total original commitments (including the recently approved Ninth Power Project) were US$209\.9 million equivalent, about 20X of Bank Group lending to Sri Lanka (as of September 30, 1986)\.  -3- II\. PROJECT IDENTIFICATION, PPREPARATION AND APPRAISAL ePrjct Origin, Preparation\. Appraisal, Negotiation and Approval 2\.01 An electricity demand forecast for 1981-90 was prepared under the Seventh Power project (CL81)\. The projected growth rate was 24Z for 1981, 9\.1Z for 1982, 21\.6X for 1983 and 14\.9Z for 1985\. On this basis, and assum- ing that the 120 KW of existing gas turbine capacity would operate at a 70S plant factor from 1982 onwards, the energy deficit was projected to be about s 200 GWh (71) in 1984 and 100 GWh (31) in 1985 under normal hydro conditions after allowing for the commissioning of the Victoria 3 X 70 MU hydro plant\. In 1980 CEB, assisted by consultants, initiated studies for additional ther- mal capacity and in 1981, prepared a long-term least cost generation planning study in cooperation with the Bank Croup, using the Wien Automatic System Planning Package (WASP)\. As a result of the study, the originally envisaged need for a 120 MW thermal plant was reduced to 80 KW\. The project was developed in the course of supervising the Sixth Power Project and develop- ment of the Seventh Power Project\. During preparation of the latter project, the Bank Group decided to pursue the Eighth Power Project as soon as possible and agreed in November 1981 to initiate its processing\. 2\.02 Project appraisal occurred in January 1982, focusing only on techni- cal and economic aspects\. Except for the chapters pertaining to the project and justification, the appraisal reports of the Seventh and Eighth Power Projects were almost identical\. 2\.03 - Partial financing through an IDA credit was considered but the project did not form part of IDA's long-term lending program\. Upon request of IDA, the Government investigated the possibilities of other financing\. No additional financing could be realized in view of the requirements for the rapid completion requiring a single construction responsibility (turnkey contract), consequently in April 1982 the Bank decided on a loan to cover the full foreign exchange requirements\. 2\.04 The Loan was neigotiated in May 1982, approved by the Board oan June 24, 1982, and became effective November 11, 1982\. Because the project's objectives were primarily technical and economic (para\. 2\.06), its institu- tional objectives repeated those of the Seventh Power Project\. Other objec- tives I/ were defined under the Sixth and Seventh Power Projects, and will be discussed in the forthcoming combined project completion report for those projects; the present report discusses institutional objectives in general terms only (Chapter VI), but provides details on financial performance (Chapter V)\. J 1/ Rain objectives: improvements in (a) organizational structure, (b) management information, control and performance, (c) planning, including long-term planning and annual updating, (d) budgeting, account- ing procedures, internal and external audits, (e) annual review of tariff structure and rates, (f) lowering of inventory levels, (g) reduction in accounts receivable, (hJ staff training, and Ci) coordination with Government on joint development schemes\. _ ~-~,--\.- -\.-~ -- - - -\.  -4- 2\.05 Tariff revisions were implemented in accordance with long-run marginal cost (LRNC) principles, based on CEB tariff studies in 1981 and 1984 (para\. 5\.03)\. While CEB's tariff rates were unchanged between 1972 and 1977, the average rate, excluding the fuel adjustment charge was increased by about 75Z in 1979, about 232 in 1980, 60X in 1981 and about 32Z in 1982\. Based on the 1984 LRMC study, a further rate increase of about 80X was introduced in 1985\. Project Objectives 2\.06 The major objective of the project was to prevent electricity shortages by providing additional capacity through a type of plant that would remain economically justified throughout its normal life span\. It was forecast that without the project, even if all hydra stations under construc- tion were completed on time, Sri Lanka could experience both capacity and energy shortages through 1985, when maximum demand was expected to be 698 MW and firm capacity (after reserves) only 653 MW (giving a shortfall of about 6Z)\. Energy demand for 1985 was forecast at 3,313 GWh, while total plant generating capability during an average hydrological year would be 3,193 GWh (shortfall of about 41)\. Although not specifically stated, the project was to continue efforts toward CZB's institutional improvement that were agreed to under the Sixth and Seventh Power Projects\. Project Description 2\.07 The project comprised the turnkey construction of an 80-MW diesel power station at Sapugaskanda in the northern suburbs of Colombo near the refinery and a new pot&ble water plant' a 132-kV substation, and consulting services for final design preparation of bid documents and supervision of construction\. III\. IMPLIEMENTATION Loan Effectiveness 3\.01 Except for the standard legal provisions, there were no conditions of effectiveness and, following compliance, the loan became effective, within the 90-day provision after signing on govember 11, 1982\. Project Design and Enginecering 3\.02 The power station was originally designed to be executed with radiator cooling\. In the bidding documents, however, CEB sought bids for alternative cooling towers which would use water from a new treatment plant under construction by the Potable Water Authority, which welSomed the prospect of CEB as a consumer with a demand of about 1,800 m per day, or about 15X of the treatment plant's capacity\. CEB selected the cooling tower system, due to its lower capital (about one-fourth) and operational costs, compared to a radiator cooling system\. In hindsight, this choice is ques- tionable, since the use of potable water for power station cooling would not have high priority in times of technical problems or severe drought\. Some  technical problems at the gotable water plant have caused rationing to CEB\. A storage tank for 3,000 m (less than two days of full power plant opera- tion) is expected to be contracted soon to cover some fluctuation in supply\. Therefore, CEB should initiate a study to ascertain if and when a partial or complete replacement of the potable water supply, using a closed system cooling, would be required\. However, reverting to river water would not be an acceptable solution, since the heavy pollution would adversely affect the thermal system and the engines would have to be derated\. Project Execution 3\.03 The project was executed reasonably satisfactorily\. Bid documents were opened in April 1982, and CEB planned to award the contract immediately after loan signing\. Bid evaluation, however, was extremely difficult 1/, causing a four-month delay\. The award was made in October, and the contract signed on November 12, 1982\. Initially agreed dates for completion were April through June 1984\. Under a bonus provision, the first two (20 NW each) units were to be completed in February 1984 and the two remaining units (20 MW each) in July 1984\. However, in July 1983, civil disturbances interrupted work and personnel subsequently returned to the site more slowly than expected\. The revised target date for the first two units, late April 1984, was met, as was August 15, for the third unit; however, the fourth unit started operations two weeks late on September 1, 1984\. 3\.04 Although the units were ready for commercial operation, work not directly connected to the running of the machines\. remain to be completed\. Numerous important items were missing e\.g\., most tools and spares had not arrived and much outstanding work was pending, such as fire pcotection facilities, repair of unreliable control circuitry, and installation of workshop facilities\. Some teething problems were experienced, such as gas leakages in the cylinder heads of one engine and turbo-blower problems for all engines\. The manufacturer was investigating the causes in late 1986 and had returned one blower to the factory for tests in order to remedy the defects\. CE8's main difficulties with the contractor, however, are not qualitative, but quantitative, with respect to contract completion\. "As built" drawings are still to be completed, and spares used by the contractor prior to preliminary takeover have not been replaced (see Annex 1)\. As a result, final acceptance certificates have not been issued\. The contractor disputed a penalty applied to the late completion of the fourth unit and final payment of retention monies had not been made in October 1986\. 1/ The question arose whether the lowest evaluated bidder was to be considered "responsive" in the light of the requirement of proven opera- tional experience with the machine offered\. Three different committees in Sri Lanka had different opinions and opinions in IDA were similarly divided\. Representations by the various manufacturers further aggravated the situation until consensus was reached on non-acceptability of the diesels because, although based on a well known design, they had never operated commercially at the required speed, capacity and number of cylinders, while diesels offered by competitors had proven operational experience, despite a slightly older design (diesel manufacturers upgrade designs and performance almost continuously)\.  -6- 3\.05 In view of the outstanding issues between CEB and the contractor, the Bank extended the original closing date of March 31, 1985 by one year\. During supervision, CEB was repeatedly requested to take measures to solve the outstanding problems and disburse the required funds\. CEB was not in a position to issue the Taking Over Certificate although the plant was commis- sioned, due to the Contractor not meeting the contractual requirements in regard to supply of spares to issue the certificate for payment by July 1986 and the Bank finally informed CEB that it would only disburse against requests reiching the Bank before August 1, 1986\. The Bank informed CEB, on March 10, 1986, of the closing procedure\. The remaining funds were cancelled from the loan account on August 9, 1986\. Amounts due to the contractor (excluding disputed amounts) at the end of August 1986 amounted to about US$3 million equivalent\. 3\.06 CEB reporting to the Bank during project execution did not civer all aspects of the project\. Although the consultants reported monthly to CEB, the condensed information sent to the Bank as quarterly reports (also prepared by the consultants) was inadequate since they only contained infor- mation on the "contract" work\. Only seven quarterly reports were received by the Bank, the first dated June 30, 1983 and the seventh, June 1986\. No reports were submitted between September 1984 and June 1985\. The reports were not supplemented by a separate CEB report giving its views on project execution and supervision, progress on project work e-ecated by CEB, and providing full project accounting information\. The same problems were apparent for the Sixth and Seventh Power Projects\. This issue was addressed by a supervision mission in 1985\. CEB now submits comprehensive quarterly reports to the Bank, including project accounts which have been computerized\. CEB's unsatisfactory reporting performance was apparently due to lack of experienced staff, who were already overburdened with day-to-day work\. Project Cost 3\.07 The project was completed at a cost of about US$51\.3 million, includ- ing a front-end fee of about US$0\.6 million, compared with an original estimate of US$54 million\. The estimate was prepared on the basis of actual bids for the diesel engines which had been opened prior to preparation of the final SAR\. As the bids were invited on firm price basis, no provision was included for price contingencies\. Although the overall cost was 95% of the estimate, the actual foreign cost (US$36\.3 million) was only 862 of the estimate (US$42 million)\. However, the actual local cost (at US$15 million equivalent) was 125% of the original estimate (US$i2 million), largely because import duties, estimated at US$3\.5 million, were US$10\.3 million\. The contractors' actual local costs were only about half the estimate, US$3\.9 million versus US$7\.4 million\. CEB did not keep detailed records of its own costs, particularly supervision and overhead costs\. Consequently CEB's own costs have been estimated in this report\. This defect has been rectified under the new system of accounts and improved project accounting system (para\. 3\.06)\. 3\.08 As is usual, variation orders were issued\. They amounted to about 5\.6% of the original foreign portion of the contract price and 11\.0% of the local portion, and were thus roughly in line with the estimated physical contingencies of 5% and 10% respectively\. However, in 1985 it was apparent  that considerable sums would remain undisbursed and US$6 million was can- celled on December 1, 1985\. At the closing date, only US$34\.2 million (801) of the original loan amount of US$42\.7 million had been disbursed; thus, a further US$2\.5 million was cancelled on August 9, 1986, following the closing of the loan\. 3\.09 Before the first cancellation, CEB had sought Bank agreement to use the savings to purchase equipment for a new training school\. This request was outside the description and scope of the project; subsequently IDA agreed to consider financing the equipment under the Sixth and Seventh Power projects, which included specific training provisions\. Disbursements 3\.10 The estimated and actual disbursements are shown in Annex 3\. The actual disbursements were both lower than had been estimated and occurred at a slower rate because: (i) the contract was signed later than expected; (ii) the foreign cost was below the estimate; (iii) civil disturbances delayed completion; and (iv) outstanding technical problems were not resolved expeditiously by the contractor, and retention monies could not be released because the final completion certificate had not been issued\. IV\. OPERATING PERFORMANCE 4\.01 - When the project became operational in 1984 the demand conditions were very different to those projected in the SAR, The growth rates of peak demand and energy consumption in the period 1981-1984 were much lower than had been projected\. The comparison of forecast and actual demand for elec- tricity is shown in Annex 4\. Except in 1983, just prior to the Project's completion in 1984, hydro conditions were good\. In 1984 peak demand, at 487 MW, was 201 (123 MW) below the SAR estimate\. Similarly, energy demand, at 2,261 GWh, was 22X lower than the projected level\. This trend and favorable hydro conditions continued in 1985 and 1986 and, as a consequence, in the period 1984-86, the new plant's role, as a prospective provider of energy and capacity, was changed to that of standby plant\. Without the project, the capacity deficit would f-ave been about 20 MW in 1984 and 1986, and the 1985 surplus would have been 50 KW\. In practice, the plant was only required for energy purposes during March through May 1985, when production was only about 47 CWh\. 4\.02 These events and changes in demand do not constitute an argument that the plant should have been postponed\. CE8's management acted expeditiously when the worsening capacity and energy capabilities showed the possibility of large power shortages which had persisted from 1979 through 1983\. Sub- sequently, the physical condition of the Kelanitissa steam plant steadily worsened and it was taken out of service in 1985 for rehabilitation and hydro plapt construction delays have occurred due to penstock problems at Kotmale\. The present benefit of the plant, as standby capacity, is only temporary; it is expected to generate significant quantities of energy in the period 1989-1996\. An additional benefit of the plant is that of cost savings resulting from the postponement of new thermal plant by at least a year (the aunual growth of peak demand is in the order of the plant's capacity)\.  -8- V\. FINANCIAL PERFORMANCE Accounting Systems, Organization and Audit 5\.01 CEB made substantial progress in improving its financial management practices during project implementation\. Modern accounting systems and procedures for better financial reporting and control were implemented, based on the recommendations of the consultants recruited under the Sixth Power Project (Cr\. 1048-CE)\. Accounting activities, with the exception of revenue accounting, were decentralized, billing was automated and steps taken to automate other areas of accounting and financial reporting, and an internal audit unit was established\. These changes have resulted in streamlined financial reporting procedures and have improved CEB's control over its finances by providing management with detailed and timely information\. Furthermore, in order to rationalize the values of assets and to establish proper depreciation schedules the Board engaged consultants under the Sixth Power Project (Cr\. 1048-CE) to carry out a Fixed Asset Accounting Study\. The final report was issued in February 1987\. 5\.02 As with other public corporations, the external audit of CEB's accounts is carried out by the Auditor General of Sri Lanka, which is accept- able to the Bank Group\. Although the quality of audits has been satisfac- tory, until FY85 \.they were often submitted late to the Bank\. This was a result of the lengthy tima required for CEB to finalize the accounts because of its complex internal reporting procedures\. However, following CEB's reorganization and improvements in reporting procedures (para\. 5\.01) in 1984, the 1985 audited accounts were submitted within the covenanted period\. Tariffs 5\.03 CEB's tariffs have been increased regularly to ensure compliance with the financial performance covenant agreed with the Bank Croup (para\. 5\.06)\. As agreed under the Sixth Power Project (Cr\. 1048-CE), tariff studies based on long-run marginal cost were undertaken in 1981 and 1984 and formed the basis for significant changes in CEB's tariff structures\. The tariff revi- sion in March 1985 changed the tariff structure to allow for separate energy and demand charges for hotel, industrial and general purpose consumers with contract demands exceeding 40 kVA, and optional time of day energy rates for industrial and hotel consumers\. As shown in Table 1, the average revenue per kWh (excluding fuel surcharge) increased from Rs 0\.78 in 1982 to Rs 1\.36 in 1985, i\.e\., at an average annual rate of about 26%\. In contrast, the SAR ,forecast increases in average revenue from Rs 0\.71/kWh to Rs 0\.98/kWh, or about 12\.5% a year\.  -9- Table 1 Average Tariff Revenue per kWh Sold, 1982-1985 (Excluding Fuel Surcharge) - - SAR Estimate- --- -------Actual--- 2 z Rs/kWh Increase Rs/kWh rncrease 1982 0\.710 22\.4 0\.776 32\.4 1983 0\.790 11\.3 0\.845 8\.9 1984 0\.790 - 0\.780 (7\.7) 1985 0\.976 23\.5 1\.362 74\.6 Financial Performaiee 5\.04 CEB's income statements, balance sheets and sources and applications of funds statements, comparing the SAR forecasts with actual results for the period 1982-85 (and current estimates for 1986), are presented in Annexes 5, 6 and 7 and summarized in Table 2\.  - -S- -\.- -~ - '1 ~~~~~~~~~~~-10- Table 2 CEB's Operating Results 1982-85 Comparison of SAR Estimates with Actual Results ----1982 -- -----1983-- --- 1984---- SAR SAR SAR SAR Esti- Esti- Esti- Esti- mates Actual mates Actual mates Actual mates Actua Electricity Generation 2,354 2,066 2,585 2,114 2,884 2,261 3,313 2,46\. (CWh) Electricity Sales (CWh) 2,001 1,679 2,196 1,792 2,451 1,876 2,816 2,06\.0 Electricity Losses (X) 1S 19 LS 15 15 17 15 lr Average Rate (RsWkWh) 0\.71 0\.78 0\.19 0\.84 0\.79 0\.78 0\.98 1\.3f … --------- Rs million Operating Revenues 3,317 2,442 4,090 4,021 4,495 2,254 4,745 3,234 Operating Expenses 2,393 1,628 2,991 3,190 3,433 1,444 3,223 1,35: Operating I'\.come (After Tax) 739 532 149 393 1,057 764 1,522 1,71 Operating Ratio (2) 72\.1 66\.7 73\.1 79\.3 76\.5 64\.1 67\.9 44\. Average Rate Base 6,411 6,137 8,532 6,963 13,312 10,351 19,027 16,06 Rate of Return on Average Net Fixed Assets in Operation (S) 11\.9 8\.7 8\.8 5\.6 7\.9 7\.4 8\.0 10\. lnternal Cash a Generation (X) 35 72 22 24 21 21 17 - 5\.05 CEB's financial performance during the project implementation period was satisfactory, despite adverse conditions that prevented it from achieving the level of electricity generation and saLes projected in the SAR\. Gener- ation increased from 2,066 GWh in 1982 to 2,464 GWh in 1985, i\.e\., an average annual increase of 6\.4X compared to the SAR forecast of 13\.6X\. The principal reason was the much slower growth of electricity sales than had been projected in the SAR (para\. 4\.01)\. Actual sales increased from 1,679 GWh in 1982 to 2,061 GWh in 1985, representing an average annual growth rate of 7\.6Z, compared to the SAB projection of 13\.62 Although electricity losse- remained higher than the estimated level of 152 (due to a overloaded system and metering and billing problems), they improved from a high of 192 in 1982 ,to 16% in 1985\. 'Although the lower sales resulted in a lower level of total revenue, average revenue exceeded the SAR forecasts (except for 1983) due to the periodic tariff increases (para\. 5\.03) and activation of the fuel sur- charge\. This enabled CEB to achieve a more favorable operating ratio than the SAR projections and show a distinct improvement in all years except 1983\. In 1983, this ratio was 79\.3 (compared to the SAR estimate of 73\.1), mainly because of a 1302 increase in administration costs, stemming from (i) wage and salary increases, and (ii) interest payments on overdrafts necessitated by cash flow problems resulting from the acute accounts receivable situation (para\. 5\.09)\. The operating ratio improved during the fOllowing two years, reaching 44\.12 in 1985, compared to the SAR estimate of 67,9%, mainly because - fil I h1;t I nd ntenance costs\.  5\.06 CEB's agreed measure of financial performance is an after tax minimum rate of return of 8% on revalued average net fixed assets in operation\. This rate of return was 11\.4Z in 1981 and 8\.7% in 1982\. In 1983, however, the rate of return was 5\.6Z due to the heavy income tax liability which was underestimated by CEB in setting the tariff rates for that year\. The tab ;s levied on operating income, after deducting a depreciation allowance of 12\.52 for newly commissioned assets, and based on the straight line method for all other assets\. A smaller depreciation expense for income tax purposes, caused by delays (from the planned 1983 to 1984) in the transfer of Mahaweli assets to CEB, resulted in a larger taxable income and, therefore, in a greater tax liability than had been estimated for 1983\. Excluding this tax liability, the rate of return would have been 11\.2% in 1983\. Moreover, as a result of the delays the asset base in 1984 was higher than projected, and conse- quently, the rate of return was 7\.4%\. Audited accounts for 1985 show that primarily due to the 75% increase in the average tariff rate in March 1985, CEB achieved a rate of return of 10\.72\. 5\.07 The significant tariff increase of 42% in mid-1982 resulted in rela- tively high levels of resource availability for investment in 1982\. However, in that year, CEBS's investments were re\.atively low, since major generation projects were being undertaken directly by Government under the Accelerated Mahaweli Project (AMP) for transfer to CEB upon completion\. These factors resulted in a high self-financing ratio of 722 for 1982, measured as the ratio of net internally generated cash available for investments to average of investments made in the preceding, current and succeeding years\. In contrast, the underestimation of CEB's income tax Liability in 1983 and consequent inadequate resource mobilization through tariff increases, resulted in a lower self-financing ratio of 242 for the year\. In 1984 and 1985, CEB achieved self-financing ratios of 21% and 14%, respectively\. These comparatively low levels of self-financing should be viewed in the light of Government's practice in treating the transfer of Mahaweli assets to CEB\. The current practice is to transfer, at cost, the power component of the scheme as equity or part equity/part loan, and concurrently treat that cost as a part of CEB's investment for the year of transfer\. This overstates the utility's investment for the year and understates its level of self-financing\. If CEB's investments, net of Mahaweli transfers for 1984 and 1985 are considered, the self-financing ratio would have been 49% and 43X, respectively\. Present Financial Position 5\.08 CEB's balance sheets reflect fixed assets revalued annually as per agreement with the Association under the Fifth Power Project (Cr\. 372-CE)\. CEB's balance sheet as of December 31, 1985, is presented in Annex 6 and summarized in Table 3\.  -12- Table 3 CEB's Balance Sheet (As of December 31, 1985) (in Rs Million) Assets Gross Fixed Assets 27,276 Less: Accumulated Depreciation 6,306 Net Fixed Assets 20,970 Work-in-Progress 1,800 22,770 Other Assets Current Assets 4t987 Less: Current Liabilities 1,156 3,831 Total Assets 26,684 Equity and Liabilities Equity Government of Sri Lanka 7,035 Consumer Contributions 1,776 Revaluation Surplus 8,931 Retained Earnings 4,033 Total Equity 21,775 Long-term Debt 4,909 Total Equity and Liabilities 26,684 Debt/Equity Ratio 18/82 Government's equity contribution, primarily in the form of transfer of Nahaweli assets (para\. 5\.07) to CEBS, increased from 11Z of total equity as of December 31, 1982 to 32Z as of December 31, 1985 and was a major reason for CEB's strong capitalization position with a debt/equity ratio of 18/82\. In addition, the coverage of debt service by gross funds generated internally was satisfactory at 3\.1\. Accounts Receivable 5\.09 Under this and preceding Bank Croup power projects, CEBS is required to'ensure that its accounts receivable do not exceei\. three months' billings\. Although it has made considerable efforts to satisfy this covenant, CEB's - accounts receivable have persistently exceeded the agreed level\. The result- ing cash flow problem necessitated extensive use of overdraft facilities, which in turn resulted in increased operating costs, particularly in 1983 (para\. 5\.05)\. The three categories of consumers which were responsible for most of the accounts receivable as of December 31, 1985 were: local authorities (402 of total accounts receivable and 11\.6 months' billings);  -13- private consumers (37Z of total accounts receivable and 4\.1 months' bill- ings); and Government departments (9Z of total accounts receivable and 7\.9 months' billing)\. Therefore, in order to ease cash flow problems, CUB initiated in 1985 a number of measures to reduce accounts receivable\. Addi- tionally, in September 1985, the Government aessumed responsibility for the payment of arrears and future accounts for street lighting, the accounts receivable for which had exceeded 48 months in mid-1985, but which have now been settled\. By end-August 1986, receivables from local authorities were reduced to 4\.65 months billing, primarily because of a revenue grant of Re 450 million from the Covernment to CES, which was used to write off an equiv- alent amount from local authority receivables\. With these measures, CBS has beQn able to reduce its total receivables from 4\.5 months' billings in Hay 1985 to 3\.3 months in August 1986\. VI\. INSTITUTIONAL DBVEWPMENT 6\.01 As indicated above (para\. 2\.04)2 the details on CUB's institutional development will be discussed in the forthcoming joint completion report for the Sixth (Cr\. 1048-CE) and Seventh (Cr\. 1210-C8) Power Projecte\. The siZua- tion during the project period (1982 to early 1986) can be summarized as follows: (a) in 1982 CEB's autonomy was not appropriate for the requirements of a rapidly growing power utility, and it did not improve materially during project execution; * - (b) the exodus of experienced personnel due to low remuneration peaked in 1984 and thereafter leveled off, due to the decrease in employment opportunities overseas, particularly in the Gulf countries\. The situation was exacerbated by CES's promotion policy emphasizing seniority rather than merit\. A scheme is being developed under the Ninth Power Project to address this issue; (c) CgB, during the project period, suffered continuously from a number of manpower problems\. It was simultaneously overstaffed in some departments and deficient in key personnel in many important func- tional areas\. The lack of experienced middle-level staff to improve productivitj and maintain efficient professional discipline was the main cause\. The situation can be expected to improve through a comprehensive strategy which is being developed under the Ninth Power Project; (d) under the Sixth (Cr\. 1048-CE), Seventh (Cr\. 1210-C8) and Eighth Power Projects, CEB's organization was regionalized and redefined\. New systems of operation procedures (including accounting and administra- tion) were introduced\. During execution of the project, however, systems design and implementation proceeded at a slower pace than was expected and were operating only partially at the end of 1986; and  -14- (a) nevertheless, the changes in td) above have already markedly improved financial reporting, control of finances and the timely provision of information to management\. Effective streamlining of the lower levels of CEB's organization, however, cannot be expected to be completed before the early 1990s and will depend largely on the recruitment, training and retention of middle management and higher level staff\. VII\. ECONOMIC JUSTIFICATION 7\.01 Project justification was based on the least cost approach\. However, the lack of a well-defined investment program forced the final comparison to be made in terms of three thermal planting alternatives operating in isola- tion from the supply system: operation of (i) 120 MN existing gas turbines plus 80 NW new diesel capacity; (ii) 40 NW existing gas turbines, plus a new combined cycle of the remaining 80 MS of gas turbines and 40 NW of ezhaust-fired steam units; or (iii) 120 NW of existing gas turbines only\. At all discount rates, alternative (i) was the least-cost option\. The re-evaluation of the project using 1986 prices confirms that it was the least-cost option\. 7\.02 The SAR calculated the economic internal rate of return (EICR) on the project in isolation from the supply system\. Benefits were estimated in terms of consumers' willingness to pay for electricity, and costs in terms of border prices\. The SAR did not discuss the rationale for the chosen methodology\. Since the operation of the 80 mw thermal plant is highly sensi- tive to hydrological conditions and hydro plant completion, the EIRR should have been e\.stinated using a total system, time slice, analysis, in terms of both the plant's projected energy and power outputs and its contribution to improving reliability of supply\. The station was forecast to generate about 1,600 GWh in its first three years of operation, but in the event, generated less than 10 of this aount\. 7\.03 The ERl has been recalculated in accordance with the SAR method, but using 1986 constant prices (Annex 8)\. Projected thermal generation for 1986-2002 was assessed, using the WASP III system planning model\. Benefits were measured in terms of consumers' willingness to pay for electricity; Rs 2\.44/kWh using 1986 prices compared with Rs 2\.09/kWh in the SAR\. On this basis, the ex-ante internal economic rate of return is about 18Z, compared with 14S in the SAM\. The principal reason for the increase is the con- siderably lower economic cost of fuel\. 7:04 The SAR estimated the cost of transmission and distribution facilities attributable to the project at 30% of its capital cost\. This was an underestimate\. 1/ In addition, the plant is operating, and is expected to operate, below the projected plant factor\. Assuming a "worst case" scenario 1/ Power Subsector Review, Report No\. 5713-CE, dated July 25, 1986, Table 7\.2, page 70 shows that investments in transmission and distribution 1 'st - 11I' ;nvotst *&ts 4n *"nerat;on\.  -1S- of a plant factor of 0\.40 and an increase in capital cost for transmission and distribution to 45X of the project's own capital cost, the ex-ante eIRR would decline to about 121, compared to the opportunity cost of capital of 10x\. VIII\. PERFORKANCE OF THE BORROWER AND THE BANK 8\.01 CEB's performance regarding project execution was generally satisfac- tory\. In recognition of its lack of experienced personnel, day-to-day super- vision of construction was entrusted to consultants, assisted by some CBS engineers who thereby gained considerable experience\. However, the following observations appear relevant: (a) in anticipation of restricted access to unpolluted and sufficient sources of natural cooling water, C8B should assess the feasibility of installing radiator cooling; (b) the timely amendment of the performance bond clause of the contract would have avoided the accrual of the large amount of retention monies, and would have allowed the remaining funds in the loan account to be largely disbursed\. However, the amendment of the Performance Bond would have required seeking approval of the Cabinet as the contract was awarded on the recommendations of the Cabinet Tender Board\. (c) the-diesels are being run sparingly which: (i) reduces the possibility of overcoming teething problems before the plant is required to run at a high-load factor; (ii) limits training oppor- tunities and, thus, increases the risk factor in future operation at high load; and (d) reporting on project execution and accounting was inadequate, except for the main contract during project implementation and improved in 1986\. 8\.02 The Bank Group maintained good relations with the borrower, consider- ing the difficult institutional problems during project execution resulting from economic problems and civil disturbances in the country\. Such difficul- ties had little effect on project completion\. 8\.03 The possibility of future problems stem_ing from the use of potable water for cooling should have been anticipated and alternatives explored\. A  -16- IX\. CONCLUSIONS 9\.01 The project was satisfactorily executed except for the contractor's non-performance regarding outstanding items\. The plant has, since commis- sioning, been required to operate at low capacity which constitutes a considerable financial and economic benefit since less oil was imported and used, but this operating situation has precluded CEB staff from gaining necessary experience\. 9\.02 The project did not, and was not expected to, contribute materially to institutional improvements\. Institutional issues were addressed under the Sixtb and Seventh Power Projects\. The primary objective of the project was to assure additional thermal capacity to meet forecast demand for electricity at least cost\. 9\.03 The period of project execution (1982-85) was a difficult one for CEB\. Although the situation is improving, fundamental problems remain to be resolved; especially the recruitment and retention of experienced staff\.  -17A- SRI LANKA - ~ CEYLON ELECTRICITY BOARD (CEB) EIGHTH (DIESEL) POWER PROJECT - Loan 2187-CE PROJECT COXPLETION REPORT Outstanding Items to Complete the Turnkey Contract Diesel Units - temperature test 'of gentsdixes not made - "as built" drawings of diesel and generator control missing - field suppression switches cannot be locked - turbo charge failures (seizures, shafts bending) - electronic overspeed protection to be replaced - viscosimeters to be modified Emergency Set - no individual starting batteries, separate from 110-V general supply Control Desk, etc\. - 25 deviations from specs to be corrected 400 V Switchgear - 5 deviations from specs to be corrected DC Equipment - "as built" drawings missing 132-kV Facilities - detailed wiring diagrams missing - failed current transformers have not been replaced Civil Works - 25 various corrections outstanding Telephone - 7 digressions and repairs to be corrected Spares - spares used during the trial runs before comaissioning have not been replaced  -18\. ANNEX 2 SRI LANKA CEYLON ELECTRICITY BOARD (CEB) EIGHT! (DIESEL) POWER PROJECT - Loan 2187-CE PROJECT COMPLETION REPORT Estimated and Actual Project Cost Actual as Portion of Estimate Actual Estimate -US$ Million-- (Z) Land - 0\.2 - Civil, Electrical and Mechanical Work under Turnkey Contract 47\.7 39\.1 82 CEB's Work: Network Connection, Cabling Water Supply 0\.6) Storage ) 0\.6 71 Water Tank ) Fuel Pipeline 0\.1) Consulting Services 2\.0 1\.0 50 CEB's Supervision 0\.1 0\.1 100 Customs Duties and Taxes 3\.5 10\.3 291 Total 54\.0 51\.3 95 === == Main Contract Complete Power Station Awarded to : Alsthom Atlantique, France Release of Bid Documents : January 11, 1982 A Date of Order : November 12, 1982 Contract Amount : Fr\.F\. 268,001,358 + SLRs 93,660,640 Final Contract Amount : Fr\.F\. 283,024,084 + SLRs 103,993,192 Contract Date of Completion : February-July 1984 Actual Completion : April-August 1984  -19- i ANNEX 3 SRI LANKA CEYLON ELECTRICITY BOARD (CEU) EICHTH (DIESEL) POWER PROJECT - Loan 2187-CE PROJECT COMPLETION REPORT Cumulative Forecast and Actual Disbursements Actual as a Proportion FY Estimate Actual /1 of Estimate ----US$ Million---- (…) 1983 13\.5 5\.20 39 1 ,984 41\.6 29\.12 70 19as 42\.7 33\.90 79 1986 34\.16 80 1987 34\.17 80 11 Disbursement was extended from March 31, 1985 to March 31, 1986 to enable payment of retention monies, and then to July 31, 1986\. The loan closed on August 8, 1986\. A total of US$8\.5 million was cancelled (US$6 million on December 1, 1985 and US$2\.5 million on August 9, 1986)\.  ~~~~~~~~~~SS -20- ANNEX 4 SRI LANKA CEYLON ELECTRICITY BOARD (CBS) BIGHTH(DIESEL) POWER PROJECT - Loan 2187-CE PROJECT COMPLETION REPORT Forecast and Actual Demand for Electricity 1981-85 1981 Ii 1982 1983 1984 1985 Peak Demand (MW) Forecast 447 498 546 610 698 Actual 413 431 437 487 515 Capacity Surplus (Deficit) (Mw) Forecast (14) (35) (43) (63) (19) Actual 0 (28) (94) 60 136 Energy Demand (GHh) Forecast 2,112 2,354 2,584 2,884 3,313 Actual /2 1,958 2,083 2,134 2,261 2,461 Energy Surplus (Deficit) (CVh) Forecast (102) 0 (130) (470) (15) Actual (86) (12) (20) 474 564 /1 At appraisal, a forecast ("unaudited" data)\. 7i Includes deficits not met through 1983\.  set LANA -21- CEYLON 5IECTrIctT NM EIGHTH (SIISlL) PON4l POQJEC? LoWn 2187-C POJET COLMIT *EPCmR \. Ino Stitefnts sat Projections VS\. ACtuaL \. \.-\. \. \. \. \. \.-\. \. \. \. \.--\. \. \. \. \. (in Rupe Niltlions) 192 "1983 1984 1985 '956 SAN SAN SA UR SAM Projection Actual Projection Actual Projcetfon Actuat Projection Actual Projection AcratL CO GERATED (1tLItONS) 2354 to0 2583 2114 284 2261 3313 246 38 2315 KW NO (NILLIONfl 2001 1679 2196 l 245t 1s7 a231 2061 3101 ace KW mS 0 G/NmG tIDRXU(2) a 1 as a a as a es a Avg\. TAMIFFAW IOLOCCEHTS) 71 75 79 84 79 75 96 134 '1051 149 TIGU RiEVIM OF lUCTRICiT? 1431 1303 13 1514 1934 14 4? 2807 32U 339 SJCNAu 1894 1140 2355 2507 2559 5 199 114 2080 41 OP1`TIhOR1 VEE O Os 0 0 0 4 14 0 153 - FRO # CASN a 0 0 0 0 0 0 24 \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. TOTAL OEATING usVmS 3317 2442 400 4021 449 2254 4745 3236 54 3877 OPERATING I2IPNEE uw wCT `1820 9?1 2270 2n11 2470 489 1920 III 2000 40 OPwATIOII AUAIIMANCU 169 1n7 211 20o 285 423 341 547 479 iWIOURTAX 46 51 83 46 n9 20 94 u 104 104 AOUIHISTIRI 4A1 OTHER 76 l11 86 255 3 t8r 100 Im 109 189 O_RCIATICO 22 39 341 371 43 4o0 66 "61 us "9 \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. ; TOTAL OPTtNG WE S 9 16 299 3190 343 144 3W 13 355 1 77 of OPEATING IH tI 924 514 1099 31 l5 610 1522 1NS 1759 2107 I I TAX 5 a82 330 43 0 46 0 1"9 0 31 MET INCOe AVAILAIL n9 532 749 393 ti 74 152 1714 1759 2074 INTEREST 78 9 19 18 392 33 T4 409 109 W\. IT ST CRUM O TIOHS 78 95 a 108 39 321 7 409 1093 64r NuT SURpLUS "I1 436 684 2515 668 443 77a 1305 664 1469 LESERSEmim"aICN4\.LWPURT 0 0 0 0 0 0 40 0 I!-- Z~~~~~i \. \. \. \. \. \. \. \. \., \. \. ,,\.,\. \. \. NiT PROIT 661 434 696 28 65q ~ 36 "7a 1265 666 M3'5 RtAT Cf RlTURN OH AVER NE HT FIXED ASStt IH OPERATICN 1'1\.9 8\.7 8\.8 S\.6 7\.9 7\.4 5\.0 10\.? 8\.0 \.* OPErATING tATIoP 2\.1 6\. 73\.1 79\.3 74\.5 64\.1 67\.9 o \.I 7\.1I \. - AvERAGE RATE 8A*5 1 613? 3532 6963 1312 *:351 *M27 1S6;4 Zie87  -22- AlNKX 6 S31I LANKA- CgYLN ELECTEICITY WMI ElSIEN (01E1EL) POW163 PROCJECT Lout 2187-Ct PRtojECT CUEPLETION RIPOIT Islamc iste \. so Projections Vs\. Actual (in R\.peas Mhillions) 1962 1963 1984 1985 1986 Projection Actual Profection Actuat Projection Actual ProjectIon Actua Projection Actual FINEDSS 3 13 I OPIRATIW 1low 1100 1424\.6 1297 21971 1972 2790 27M7 30507 36559 LESStCLUM\.OPRICIATION 255 3310 3511 3947, 436 5009 5391 6306 4630 784 NIT FINE A$SST9 IN OPERATIN 774 69 1073 903 17611 1471 2251 2097 2367 28665 CONTUMCION to P1OG1t$ 1655 1033 1966 179 140 246 162 1800 a30 3082 TOTAL\. FINED ASSET 9559 am2 1270 10821 1777 17175 22673 227 26177 31747 1VE3C311 \. \.6 \. 13 \. 0 \.9 CASM 56 159 107 -3 338 777 60 2444 940 2312 INvENTIEU 346 776 374 104\.6 402 82 430 922 456 1626 ACwuvTS UcElIVU& UP 1317 1023 1545 1124 1604 M8 1169 1336 1305 OINER AfCIEYAK1[$ 435 576 446 1319 462 346 477 452 493 497 TOTAL 0\.5*33 £3313 16 am2 1951 390 2325 3549 297 493 322 5942 TOfAL A3315 ns 115465144 14736 20096 2073 25646 276O 29402 37M4 CAPITAL AND LIISILITIES EQUITY1 145 909 1655 1063 1375 2496 169 703 1895 1 1992 0O161 CON?II6TISt 516 75 641 1400 746 1521 891 1776 1016 1972 IEVALUATIOU UNFISS 4202 5067 5050c 5871 614 7352 *7532 8931 9333 11029 RETAINED IANINSS 212 1999 273 2614 3396 3687 4176 403 84 5339 \. \. \. \. \. \. \. \. \. \. TOTAL EQUITY a32 a76 10275 11150 12162 15058 14494 2177 1708 30332 \. \. \. \. \. \. \. \. \. \. LONG T61K 081' 230 139 3650 2259 696 4820 10001 4909 11111 5777 CURRENT LIA3ILITIIS 597 1237, 726 1327 948 859 1152 1156 1205 15'5 T*TAL CAPITAIC ANO LIA8ILITIES I122 1156 1654 14736 20096 27n7 2566 27840 29402 3M2\. ma\. \.asaaa *as\. *as\. us\. assura,e sinuss\. sense"u assuagel - 33333 OEBT AS I OF 0121`91WITY 22 is 26 I? 36 24 \.1 18 3; !OUITY AS IOF OEBT4SJtY 76 as 74 a3 64 76 SI) 52 61 0EIT AS I OF EGUITY 27\.6 171\.5 35\.5 20\.3 57\.4 32\.3 69\.0 22\.5 65\.0 CURRENT RtATIO 2\.5 2\.3 2\.7 2\.9 2\.5 A\.1 2\.6 4\.3 2\.?  SMI LANA -23- CEYLCO ELECTRIICITY BOARDO Et:GNTN (OISL)G PWlt PROJECT Loa 21U7-CC PROJECT COCALETION REPORT f ~~~~~~~~~~~\. soef Aid AplICations Of Fundi Statmnts - SAM PrOjctions Vs\. Actual \. Cm" Rupe Milblon) 1982 1963 1984 1985 198U SA SAm SAM SA so Projection Actuat Pro jection Actual Projectfon Actual Projection Actual Projection Actual CINTEA 801353 \. iIgttUL nkten NET ItNCE AVAILALI 924 814 1099 831 lOSr 810 1522 183 179 21C8 OVPRCIATION 242 329 341 371 498 460 684 641 803 958 LES:REUEAC & O tVOLOPOENT 0 0 0 a a 7 0 40 0 164 ~~~~~~~\. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. TOTAL INTERNL Fnm ATED 1186 142 1440 1202 1555 1263 2206 28 2 2902 EOtit? CUnTRIUTIOUS 315 238 427 95 20 1438 20 453 a 49? OTHE CUTRIUUTI0I 115 285 125 64? 125 121 125 ns 125 9 13 LOWM (USO Vill) 277 107 576 599 23 139 6 \.wiU LOAN 1005 65 0 2000 FOREIGN LOAN 94 1260 1264 3117 349 3O 433 1425 1221 TOTAL O111015 1\.005 161 1537 1371 3693 27 2 572 1625 12 \. \. \. \. \. \. \. \. \. \. \. TOTAL SOUR SOF 2661 1824 S29 3315 593 S74 Sam 7709 4312 9282 _3333 wasua **_auuu _uuauuu 3383333 uu 3333 \._33g\. *a\.auu APPUICATIS OF FoS TNE PRJECT 87 0 251 702 0 406 74 0 10 CSTI CTIIn mm 1134 982 2380 95 485 472? 4173 65S 2500 7837 TOTAL CSX1011T1 PMM 2004 982 2631 1660 448 5133 4173 4729 2soo 7? OUST SEVICE IltERST 78 9n 198 108 392 321 74\. 409 512 acr ANUTIZATION 6s 84 ll2 120 188 15 356 344 1093 S39 \. ~~~~\. I\. \. \. \. \. \.,\. \. \. \. \. \. \. \. \. \. tOTAL KIET tIC1 143 181 310 228 580 76 1100 753 1605 94 INCS TAX 185 282 350 43 4 19 31 iNs\.1eCROe 142 CNANGES IN RESERv 917, vAIAtIONtN tIO UING CAPITAL CASN INCREAS \.3 95 so \.13 231 7S1 524 1667 60 -32 oTERI ?NAN CASII t52C 332 253 18 1152 97 o7? 84 S 525 I\.? -Zs \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. T ItNCEASE 329 380 238 969 328 1'0 XS 1111 IC? t;: \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. TOTAL APLItCATIO, O FUN 2661 !326 3129 3315 5393 M575 5ao0 7'09 4\.312 2:t *8sen *|se- 8687 *-Bass- \. \. SaWROWN soon"\. \. \.a s\. \. \. \. ame: OElt SE\.VICI COVERA \. \. 3\.9 5 2\.? 2\.0 3\.3 1\.t 3\.: INTERNAL CASN CENERATION 35 n 2 22 24 21 21 I? 94 39 \. s\.5 tI dmtft{", retwion rtw(as 38 mi t*4 o i schoduzto fir ditmremen in 193?  CEvLON ELECTRICITY BOARO (CEO) EIGHTH (DIESEL) POWER PROJECT - LOAN 2107-CE PROJECT COMPLETION REPORT EX-POST ECONHWIC COSTS AoD SENEFITS 1900 lHRU " ~ ~ ~ ~ ~ 19 1_98_t§4 t9t 1U6_ ,l°W 1O" U M IMF 1§ 0 1 I=O 199 993 1094 tO99 Costs (Sisi omerat son CIF 497 279 50 9 73 Local 4l 6 - It vote t 50 * 15 1 g tronselblon and Distribution CIF 42 I"0 Locos 3 l 62 Total 5 in Intel invesl _ nts (t\.onumitc S90 541 S5 9 aS upart son and uinten nco CEi\.eratlon 2\.4 6\.0 7 27 69 114 122 124 13S OS 133 77 77 Iea,,bmisslon and Distribution 40 6\.0 a a a 8 a 8 6 0 e a lass lOAM -14\.05 11 11 -7 m122 i- i 6 143 93 seT Ir tugs Se e6 4 48 139 243 260 2 6 312 189 319 176 *4%1a ttyruitProducea GMn 39\.3 80\.4 7\.1 91 265 455 469 491 140 333 534 300 300 1:11oul\.atd COh 30\.2 4t\.5 5\.4 71 210 361 393 401 441 273 439 240 246 8b061etutb Illillb) eSect is -at avurdle * testam tol tar iff etc 'lb I\.bltkWhII 23\.6 6J\.2 S\.2 107 317 545 S93 606 666 412 662 374 374 - ot average f\."Oumic * ^# i ff 6\.810 "SI l\.a4IbWts 73\.6\.113\.4 13\.2 173 512 881 9519 978 1076 666 1071 60S 605 Halw ut -ua Uril Finncial 1I Economic "A abue as\. (above) 16 1\.5\. i\. bbbs Case *50S CapPtal and operatIonol 14\.S 17 tubs tfo transmission and adstrIbution 3\. babe eob *S0 Capitol nd opepatitonal cost 11 12\.5 for iIfsdbitbbion and distribution ari -251 for cetereaiwn and Geles and maIntenance cost\. P4 of lSStdtubb lotlb vacl%es the fuel cost recovery charge for tho financial rate of roturn calculationt s\.ee Gusbt bliuld be escluced\. In 1983 and 1904 sveroge rates eret Rs 0\.18I/iWh and Rs 1\.361W51 I4 \.W4ee IiweIy\. ts IlI IkWh appiIes eron 1931 onwarO\. p - *1 , j  !U 0342 16 22 194-1-649672 KILAI C L goW1 T - 2s - 2\. of 2 a°o~t& Papa I@ Of # ^ -~~~~~~~~~~~~~e w i, los 9-\. -" to" 2 woo* "ulb gq &ua*4b ~\.605 fteAo\. Ott\. 540 *sUSS e L il\.& CEYLON ELECTRICITY BOARD *o suo fto\. eism e *-\.6-w Mawa *PhiWe6 D AN fIP5mgMN s\. Wofim \.0\.Bx 30 eat2\.5 L "s429@SSOd" MO "5Ssi4me_ T\.TI FX\.: U-1-54W72 Tehge_ I "AWAY' WN - 0' IR sl\.1 "tcZl 331~~J20163 ~~\.amM) :'= fl LA-I DGM/PR/4/9 ; E J284 Marc 'IS In: M\.'asnigt e 40\. ' 39 Mr\. Rene A\. Ribi Acting Chief Jolicy-Based Lending energy Industry and Urban Sectors Division Operations Evaluation Department The World Bank 1818 H Street, N\.W\. Washington D\.C\. 20433 U\.S\.A\. CO Dear Sir\. I% Project Completion Report - C- Sri Lankes Eighth (Diesel) Power Project (Loan 2187-CE) 1 wish to refer to your letLer dated January 26\. 1988 and wish to indicate the following observations with regard to the draft Project Completion Report on the above mentioned project\. 1\. Page v - 3rd Para - 4th Line The target completion date was Mid July 1964 and not Mid June 1984\. 2\. Page v - 3rd Para - 8th Line 'until November 1986' has to be 4oleted since final acceptance has not beon issued up-to-date\. 3\. Page 0 - Para 3\.04 We request correction of the Cirst *entence as *Although the units were ready for cusmerical operation, work not directly connected to t\e running of the machines riuain to be completed'\. (Contd/\. 2)  26 - &~~~~TTAC9NEKT - 26 - ~~~~~Page 2 of2 26 4\. Page-6 - Para 3\.05 We wish you to delete the word *No action was taken* and amplify the sentence as follows\. CBD was not in a position to issue the Taking Over Certificate although the plant was commissioned, due to the Contractor not meeting the contractual requirements in regard to supply of apares to iisue the certificate for payment by July 1986' and bank finally informed CEB \. 5\. Paie 16 - Para 8\.01 I wish to make the following with regard to amendment of the Performance Bond\. "The amendment of the Periormance Bond would have required seeking approval of the Cabinet as the * contract was awardad on the reccammndations of the Cabinet Tender Board"\. ( Yours faithfully Ceneral Manager CEYLON ELECTRICITY BOARD\. / I'

APPROVAL

P110317

Documentof The World Bank FOR OFFICIAL USE ONLY ReportNo: 42879-LK INTERNATIONAL DEVELOPMENT ASSOCIATION PROJECTPAPER FORA PROPOSEDADDITIONAL FINANCINGCREDIT INTHE AMOUNT OFSDR26\.2 MILLION (US$43 MILLIONEQUIVALENT) TO THE DEMOCRATICSOCIALIST REPUBLICOF S R I LANKA FORTHE NORTHEASTHOUSINGRECONSTRUCTIONPROGRAM May 5,2008 SustainableDevelopmentUnit SouthAsia RegionalOffice This document has a restricted distribution and may be used by recipients only in the performance of their official duties\. Its contents may not otherwise be disclosed without World Bank authorization\.  CURRENCY EQUIVALENTS (Exchange Rate Effective March 31,2008) Currency Unit = Sri LankanRupee 107\.4 Rupees (Rs\.) = US$1 US$ 1\.64 = SDR 1 FISCAL YEAR January 1 - December 3 1 ABBREVIATIONS AND ACRONYMS CAS Country Assistance Strategy CSIA Continuous Social Impact Assessment EIQ Environmental Information Questionnaire GAC Governance and Anti Corruption IDA InternationalDevelopment Association NB&EID Nation Building& Estate Infrastructure Development NEHRP North East Housing Reconstruction Project NEHRU North East Housing Reconstruction Unit UN United Nations Vice President: Praful C\. Pate1 Country Director: Naoko Ishii Sector Manager: Junaid Kamal Ahmad Task Team Leader: Naresha Duraiswamy  FOROFFICIAL USE ONLY S R I LANKA NORTHEASTHOUSINGRECONSTRUCTIONPROGRAM TABLE OFCONTENTS Page INTRODUCTION \. 3 RATIONALE FORADDITIONAL FINANCING \. 4 KEY COMPONENTS OF THE ADDITIONAL FINANCING OPERATION \. 5 PROPOSEDCHANGES \. 6 CONSISTENCYWITH COUNTRY ASSISTANCESTRATEGY(CAS \. 8 APPRAISAL OF SCALED-UPACTIVITIES \. 8 EXPECTEDOUTCOMES \. 10 RISKS \. 10 RESULTSFRAMEWORK \. 13 FINANCIAL TERMS AND CONDITIONSFORADDITIONAL FINANCING \.13 Annex 1: ResultsFramework \. 14 Annex 2: Performanceto date ofParentProject \. 16 This document has a restricted distribution and may be used by recipients only in the performance o f their official duties\.Its contents may not be otherwise disclosed without World Bank authorization\. 1   S R I LANKA ADDITIONAL FINANCINGFORTHENORTHEASTHOUSING RECONSTRUCTIONPRGRAM Project Paper Data Sheet Country: Sri Lanka Sector DirectorManager: Junaid K\.Ahmad Project Name: North East Reconstruction Country Director: Naoko Ishii Prorgam, Additional Financing Environmental Category: B Borrower: Sri Lanka Responsible agency: Ministry o fNation Buildingand Estate Infrastructure Development Revised program development objectives/outcomes: The Project Development Objectives remain unchanged from the original Project Appraisal Document\. A Joint Donor Needs Assessment in 2003 estimated that 290,615 houses, destroyed duringthe conflict inthe North and East prior to 2002, neededrepair\. 25,300 more houses inthe Batticaloa and Trincomalee districts were badly damaged in 2006\. The destruction to housing at different times coincided with significant levels o f population displacement and economic deprivation as armed hostilities erupted\. 206,995 conflict-damaged houses of the pre-2002 caseload still remain unrepaired\. 23,398 houses destroyed in 2006 are yet to be rebuilt\. The North East Housing Reconstruction Program (NEHRP) is the only program in Sri Lanka intended to rebuild conflict-damaged houses on the scale envisaged\. The parent project was intended to rebuild 34,784 houses\. IDA rated progress towards achieving NEHRP's Development Objective and its Implementation Performance as satisfactory\. Implementation complied with IDA fiduciary, social and environment safeguards\. The Government o f Sri Lanka was keen to scale-up the program given its results in a challenging security environment\. The Ministry of Finance requested additional IDA funds for NEHRP on November 27, 2007\. The Government wanted to reconstruct more conflict-damaged houses\. It was keen that IDA resources finance the repair of an added 13,615 houses that would include both those destroyed prior to 2002 and those damaged with the resumption o f hostilities in 2006\. It hopes to facilitate housing repair in areas where the conflict has since subsided and would be unlikely to interrupt civil works\. The proposedrepair o f more houses i s part o f a broader strategy to support the return o f the displaced to areas where the security environment has improved and restart economic  There are no available funds under NEHRP to meet the requested extra caseload\. IDA reviewed different options\. This included a new stand alone project, a repeater project and Additional Financing\. Additional Financing offered the simplest, quickest and most direct way to respond to the Government's desire to scale-up the parent project\. It would retain the design and Development Objective o f NEHRP\. It would maintain the existing village selection and beneficiary identification criteria\. It would retain current safeguards to ensure compliance with IDA social and environment guidelines\. The implementation and fund flow mechanisms would remain unchanged\. The latest IDA Consultant and Procurement Guidelines would apply\. Does the scaled-up or restructured project trigger any new safeguard policies: No - c For Additional Financing [ ] Loan [X 3 Credit [ ] Grant For Loans/Credits/Grants: Total Bank financing (USSm): US$43\.0 Million Equivalent Proposed terms (IDA): The financial terms o f the additional financing will be those currently offered to Sri Lanka, being IDA hardened lendingterms for "IDA gap" countries, specifically a ten year grace period and twenty year maturity, with principal repayable at ten percent per year for years 11-20, and zero interest payments\. FinancingPlan (US$m\.) Source Local Foreign Total Borrower/Governmento f Sri Lanka 0\.7 IDAadditional financing 43  INTRODUCTION 1\. Sri Lanka has witnessed a conflict since 1981\. Most hostilities were centered in the island's North and East\. A formal cease-fire was in effect from February, 2002 to January, 2008 despite renewed fighting in 2006\. As at September 2007, 503,381 persons were internally displaced in Sri Lanka while 131,160 persons were registered as refugees overseas\. Among the 152,000 who returned to their villages last year, many had no place to live in due to widespread destruction\. The formal abrogation o f the cease-fire in January 2008 led to a further intensificationo fthe conflict inparts o f Sri Lanka's North and East\. 2\. A Joint Donor Needs Assessment in 2003 estimated that 290,615 houses, destroyed duringthe conflict in the North and East prior to 2002, were unrepaired'\. 25,300 more houses in the Batticaloaand Trincomalee districts were badly damaged in20062\.The destruction to housing at different times coincided with significant levels o f population displacement and economic deprivation\. 3\. IDA had approved the SDR 51\.1 million (equivalent today to US$ 84 million3) North East Housing Reconstruction Program (NEHRP) on December 14, 2004 and declared it effective on March 15, 2005\. NEHRP was intended to rebuild conflict-damaged houses in areas where reconstruction was possible and to facilitate the return o f the war-affected poor\. It was a commitment to support development where feasible and strengthen the economic preconditions for a durable peace\. The European Commission provided Euros 15\.6 million (US$ 24\.6 million equivalent4) in two separate tranches o f parallel-financing given robust implementation in an otherwise uncertain environment\. 4\. NEHRP' continues to demonstrate results onthe grounddespite shiftinghostilities\. Itwas intended to rebuild 34,784 houses in 2,712 villages6\. The reconstructionhepair o f 14,530 houses was complete as at March 2008\. The reconstruction of another 14,671 houses i s ongoing with completion o f most anticipated in June\. 84% o f the entire project caseload i s therefore either complete or nearing completion\. Work on 5,597 houses i s yet to start\. These are largely located in two districts i\.e\. Kilinochchi and Mullaitivu where NEHRPi s temporarily on hold due to the non- availability o f construction materials\. The two districts are on the front line o f direct hostilities\. 5\. The home-owner-driven approach o f NEHRP was a best practice response to address the housing needs o f the conflict-affected poor with minimal intermediation costs\. The community review o f beneficiary selection and participation in construction empowered villagers, reduced grievances and strengthened transparency\. The success o f NEHRP led to the replication o f the home-owner driven strategy to other IDA-financed projects in Sri Lanka i\.e\. the Tsunami Emergency Recovery Credit (TERC) and the Puttalam Housing Project\. 83,620 housesof the original 290,615 have since beenor are beingrepaired under donor-financedprojects\. This leaves a remainder of 206,995 today\. * An added 9,000 houseswere further damaged in2006 but are not included here since they hadalready been enumerated under the pre-2002 caseload\. Ofthe 25,300 housesdestroyedin2006, 1,900 have beenrepaired using other donor funds\. As at March 31,2008 5 , As at March 31,2008 1\.e\. the IDA Credit and first tranche of European Commissionparallel-financing There are 5,012 villages inthe North and East\. The 34,784 housesinclude the 3,514 houses rebuilt underthe first tranche of European Commissionparallel-financing\. 3  6\. US$ 64\.2 million o f the IDA Credit was disbursed as at April 28, 2008\. This represented 77% o f the IDA Credit\. Another US$ 3 million is expected to be disbursed by the end o f FY 08 and US$ 6 million in the first half of FY 09\. The remaining US$ 10 million i s kept inreserve for the Kilinochchi and Mullaitivu districts to finance future civil works when construction materials are available and the security environment feasible\. In short, all remaining IDA funds under NEHRPare fully committed\. RATIONALE FORADDITIONAL FINANCING 7\. 206,995 houses destroyed before the 2002 cease-fire needto be repairedtoday\. An added 23,398 houses destroyed in 2006' also need to be reconstructed\. NEHRP is the only program in Sri Lanka intended to rebuild conflict-damaged houses on the scale envisaged\. IDA rates NEHRP's progress towards achieving its Development Objective and its Implementation Performance as satisfactory\. Implementation complied with IDA fiduciary, social and environment safeguards\. The Government o f Sri Lanka was keen to scale up the program given the results\. 8\. The Ministry o f Finance requested supplemental funds for NEHRP inNovember 2007\. It sought IDA resources to finance the repair o f an added 13,615 conflict-damaged houses that would include both those destroyed prior to 2002 and those damaged with the resumption o f hostilities in 20068\. The Government intends to facilitate housing repair in areas where the conflict has subsided and would be unlikely to interrupt civil works\. The proposed repair o f more houses i s part o f a broader strategy to support the return o f the displaced to areas where the security environmenthas improved and restart economic activity\. 9\. There are no available funds under the parent projectgto meet the requested caseload\. IDA reviewed different options\. This included a new stand alone project, a repeater project and Additional Financing\. Additional Financing offered the simplest, quickest and most direct way to respond to the Government's desire to scale-up the parent project\. It would retain the design and Development Objective o fNEHRP\.It would keep intact existing village selection and beneficiary identification criteria\. It would retain current fiduciary, social and environment safeguards to comply with IDA requirements\. The implementation and fund flow mechanisms would remain unchanged\. The latest IDA Consultant and Procurement Guidelineswould apply\. 10\. There are eight districts in Sri Lanka's North and East, six o f which are Government- held"\. The NEHRP funds allocated for four o f these districts" have either been disbursed or would be used up shortly\. The Government had targeted more houses for repair in the four districts using some NEHRP resources allocated for the Kilinochchi and Mullaitivu districts where disbursement i s temporarily on hold\. The construction o f houses in the four districts would be completed and all NEHRP funds utilized inFY08\. 11\. Security-related transport bottlenecks led to a relatively slower pace o f housing construction in two other Government-held districts\.'*\. However, implementation progress in the '*The 1,900 o f the 2006 caseload have already beenrepaired using other donor funds\. Euros 9\.8 million second tranche o f the European Commissionparallel-financing would support the reconstruction o f an added 7,742 houses over and above the 13,615\. 9 The Parent Project here refers to the original IDA Credit i\.e\. NEHRP\. lo eightdistrictsareAmparai, Batticaloa,Jaffna,Kilinochchi, Mannar,Mullaitivu,TrincomaleeandVavuniya\.The The LTTE currently controls the Kilinochchi andMullaitivu districts\. The remainder is Government-held\. Amparai, Batticaloa, Trincomalee and Vavuniya l2Jaffna and Mannar 4  two districts is still rated satisfactory with construction expected to be completed between June and August 2008 with all NEHRP funds disbursed soon thereafter\. 12\. As mentioned, project implementation in the Kilinochchi and Mullaitivu is temporarily on hold due to the non-availability o f construction materials\. 1,224 houses were earlier completed under the parent project\. While some resources have been redirected for construction elsewhere, IDA, in consultation with the Government, has since decided not to divert any further funds and to keep US$ 10 million on hold should the possibility o f construction resume\. This would ensure geographic equity in light o f the 49,010 conflict-damaged houses that remain unrepaired in the two districts\. IDA and the Government would revisit the situation in FY 09 and decide at that time whether to reallocate the amount to other districts\. 13\. The proposed Additional Financing fits in with the Government strategy to reduce acute poverty in the conflict-affected districts and to mitigate the impact o f the conflict through development\. It would have economic spin-offs such as the increased employment for construction workers, secure title to land, expanded retail activity and improved living conditions\. Restored habitat i s often a precursor to renewed livelihood\. Anticipated Disbursementof Parent Project Estimated IDA Disbursement (IDA FY/US$m) Fiscal Year IFYO8 IFYO9 IFYlO *Disbursement 167 16 110* US$ 10 million is on hold for Kilinochchi and Mullaitivu once construction i s possible there KEY COMPONENTSOF THE ADDITIONAL FINANCINGOPERATION 14\. An additional 13,615 houses would be rebuilt inthe North and East under the proposed IDA Additional Financing\. This would include houses both from the pre-2002 caseload o f 206,995 conflict-damaged units13;and the 2006 caseload o f 23,398 that need to be repaired\. The houses to be rebuilt under the parent project, European Commission parallel-financing and supplemental IDA funds covers 18% o f the original caseload\. The houses to be reconstructed would be distributed across the eight districts in proportion to the incidence o f conflict-damage\. The most vulnerable households would be identified\. 15\. The first tranche o f Euros 5\.8 million in European Commission resources currently supports the reconstruction o f 3,514 houses under the parent project\. The second tranche o f Euros 9\.8 million would support the reconstruction o f 4,900 houses to complement the IDA Additional Financing\. The 13,615 houses to be covered under IDA and the 7,742 to be rebuilt under the second tranche o f the European Commissionparallel-financingadd up to a total o f 21,357 houses\. 16\. The Additional Financingwould support the three components o f the parent project 1\.e\. (i)Housing Assistance; (ii) Housing Technical Support and Monitoring; and (iii) Program Management\. The Government would provide counterpart funds for the third component\. 17\. Housing Assistance (IDA: US$ 40\.2 million): As mentioned before, 13,615 houses would be rebuilt\. A housing support cash grant o f Rs 325,000 would be provided in five tranches to recipients selected on housing damage and vulnerability criteria\. The cash grant would be transferred, where relevant, to joint bank accounts in the names o f both husband and wife o f the 1383,620 houses of the original 290,615 houses have either been or are beingrepaired\. NEHRPand TERC financed the repair o f most\. There was a considerable over lap between the conflict-damaged and tsunami-damaged caseload\. 5  identified household\. The pace o f installments would be performance-based and the recipient household would have five months to complete construction\. The village and beneficiary identification criteria would be identical to that inNEHRPI4\.IDA would finance this component infull\. 18\. Housing Technical Support and Monitoring(IDA: US$ 2\.1 million): The Additional Financing would include comprehensive technical support to ensure smooth implementation and protect against fiduciary and reputational risks\. The technical support would consist o f the Training o f Construction Workers, a Communications Campaign, a Continuous Social Impact Assessment, Environment Assessment, Technical Audit and Beneficiary Eligibility Audit\. A Risk Mitigation Action Plan was prepared by the Government outlining measures to address operational, fiduciary or reputational risks\. 19\. Program Management (IDA: 0\.7 million and Government: US$ 0\.7 million): This component would support project administration\. It would finance the operational expenditure o f the North East Housing Reconstruction Unit (NEHRU), the NEHRUDistrict ProgramUnits and NEHRUstaff at the divisional level\. Itwould cover staff costs, operational expenditure including goods, the grievance redressal mechanism, land dispute resolution and the internal audit\. The Government would provide US$700,000 incounterpart funds\. 20\. The Government o f Sri Lanka counterpart contribution would total US$ 700,000\. The Results Framework has been updatedI5 with revised performance indicators and targets in-line withthe IDAAdditional Financingand Europeanparallel-financing\. PROPOSED CHANGES 21\. As noted above, the proposed Additional Financing would retain the NEHRP Project Development Objective\. It would retain NEHRP financial management, procurement, environment and social safeguards\. The project components would not change\. The Additional Financing would only scale-up the original project\. The activities to be supported with supplemental IDA funds and the indicative financing are given below: ProjectCostsby Total Project NEHRP Additional IDA Government Components costs Funds CounterpartFunds HousingAssistance 109 68\.8 40\.2 0\.0 HousingTechnical 4\.80 2\.7 2\.1 0\.0 Support/Monitoring ProjectManagement 6\.10 2\.70 0\.7 2\.7 UnallocatedCategory 0\.8 0\.8 0\.0 0\.0 Total" 120\.7 75 43\.0 2\.7 22\. Impact on ImplementationTimeline: IDA would extend the project closing date for NEHRPby two and a halfyears from June 30, 2009 to December 31, 2011to accommodate the activities under the Additional Financing\. This would be implemented in all eight districts over 30 months\. l4 For a fuller discussion, see the Project AuDraisal Document for NEHRP dated November 9, 2004 i\.e\. Report No: 30436-LK -pages 3-6 and Annex 4 o f that document\. Please see Annex 1 for updated ResultsFramework\. l6 This FinancingPlan covers the parent project, the Additional Financing and the total thereof\. "Thetotalshavebeenroundeduptothenearestdecimal\. 6  ProjectedDisbursement of IDA AdditionalFinancing Projected Disbursement (IDA FY/US$ m) FiscalYear IFYO9 IFYlO IFY11 Disbursement 114 115 114 23\. Disbursement Arrangements: The designated dollar account for the parent project would be retained for the Additional Financing\. This would relieve the client from the administrative burden o f operating two accounts\. The transaction-based method o f disbursement would continue\. US$ 40\.2 Mn would be allocated for the housing cash grants with 100% o f expenditure financed by IDA\.This would be inkeeping with the parent credit\. 24\. The table below presents the category o f items, the allocation o f the amounts under each category and percentage o f expenditure to be financed ineach category\. Indicative AllocationBy ExpenditureCategory Expenditurecategory Additional Financing IDA Balance from Parent Percentage of Amount in US$(millions) Projectas at December Expenditureto be 31,2008 Financed -Additional Financing" Sub-grants 40\.2 15\.86 100% Goods 0\.29 0\.27 100% Consultants services 2\.30 0\.45 100% Training 0\.21 0\.06 100% Incremental Operating 0\.00 0\.82 0 costs Refunding o fProject 0\.00 0\.52 Refinanced pursuantto \.PreparationAdvance Section 2\.02 (b) o f D C A Unallocated 0\.00 0\.50 -Total 43\.00 18\.48 25, ImplementationSchedule:The anticipated Additional Financing would be effective in September 2008\. Activities financed by it would be completed by June 30, 2011 while the credit itself would close on December 31,20 11\. 26\. Other ProposedChanges:The Additional Financingwould no longer cover the repair of partly-damaged houses as did the parent project\. Most houses that were partly-damaged before 2002 have already been repaired\. The Government and UN agencies had likewise financed the repair o f the partly-damaged caseload o f 2006\. The supplemental IDA funds would only finance the reconstruction o f fully-destroyed houses\. The Additional Financing would not include the Housing Finance Study and the establishment o f the Management Information System, both o f which had been completed under the parent project\. There would be no provision for NGO Partner Organizations as this had been dropped under the parent project with the home-owner choosing not to avail o f such a facility\. The mandate of the Grievance Redressal Mechanism has been expanded to include any complaint pertaining to project implementation, not just those pertaining to the selection o f villages and beneficiaries\. The composition o f the Grievance Redressal Committee at the divisional level would be expanded to include civil society participation and where needed multi-ethnic representation\. The risk mitigation measures have been expanded"\. Government counterpart funds would finance incremental operating costs l9 afullerdiscussion,pleaseseetheSectiononRisks\. For 7  CONSISTENCYWITH COUNTRY ASSISTANCE STRATEGY (CAS) 27\. The upcoming CAS highlights the need to invest in development where IDA i s better positioned to address the causes and consequences o f Sri Lanka's conflict\. IDA would use the economic instruments at its disposal to enable an end to the economic causes o f the conflict to the extent that it can\. It would do so with an emphasis on reconciliation and development in the conflict-affected areas\. While a political resolution to the conflict i s not within IDA'Smandate, IDA would still endeavor to strengthen the economic pre-conditions for peace\. Peace would be a precursor to sustained growth and poverty alleviation in Sri Lanka\. The proposed Additional Financingwould be inkeeping with the conflict mitigation thrust o f the upcoming CAS\. 28\. NEHRP Performance to Date: Please see Annex 2 for more information on the development impact o f the parent project\. APPRAISAL OF SCALED-UPACTIVITIES 29\. Economic and Financial: Direct Benefits refer to the new housing stock worth US$ 40\.2 million with over 1,200 employment opportunities during construction\. The NEHRP experience indicates that on average labor cost i s 35 percent o f total construction cost o f a housing unit\. In other words, for every US$1 spent on the housing, US$0\.35 would be plugged back to the community\. US$ 40\.2 million investment would generate US$ 14 million o f wage income\. Indirect Benefits include spin-off economic activities related to suppliers o f goods and services, employment opportunities inthe services sector (transport, sales etc) and skills training\. 30\. The housing units would be the primary asset o f beneficiaries given their poverty\. Housing can leverage resources as homeowners borrow at improved rates against home equity\. With increased economic activity due to the Additional Financing and service provision under other donor-funded projects, the value o f land and housing would likely appreciate inthe coming years\. 31\. The training o f construction workers would generate spin-off effects on wage income in an area with large scale unemployment\. Skills training would ensure an increase inincome o f an individual trainee (incremental income level) by an average o f about US$ 1,150 per annum or a net present value o f income differential o f US$ 7,020 over the course o f their productive life (15 years)\. This benefit would far exceed the training cost o f about US$400 per individual under the Additional Financing\. 32\. The Government would contribute US$ 700,000 in counterpart funds\. The short term fiscal impact o f the Additional Financing i s neutral\. The cash grant i s for housing, a private good, the maintenance o f which would not contribute to a future fiscal burden on the Government\. 33\. The long term fiscal impact i s not significant\. The US$ 43 million IDA credit i s a concessional loan with a 10-year grace period, a maturity o f 20 years, zero interest and a 0\.75% service charge on the outstanding amount\. The grant element of IDA credit would be 77 percent with disbursement spread over three years (32%, 36%, and 32%) under IDAterms, discountingat a conservative 14 percent\. The debt service payment (of US$ 4 million per year on average) i s not significant as a percentage o f GDP\. 34\. Institutional:The line agency responsible for the Additional Credit is the Ministry o f Nation Buildingand Estate Infrastructure Development\. The North East Housing Reconstruction Unit (NEHRU), mapped to this Ministry but based in Trincomalee, implements the project\. 8  Project administration i s otherwise carried out at the district and divisional levels\. NEHRU's eight District Program Units supervise project activities on the ground\. A National Steering Committee oversees the overall program\. The institutional and administration arrangements for the Additional Financing are the same as inthe parent project2'\. 35\. Procurement:The procurement methods and thresholds under the parent project would be retained\. The guidelines applicable to all procurement under the Additional Financing would be in accordance with Guidelines, Procurement Under IBRD Loans and Credits dated May 2004 (revised October 2006) and Guidelines: Selection and Emuloyment o f Consultants by World Bank Borrowers dated M a y 2004 (revised October 2006)\. IDA would review and approve the bid documents in use under the parent project\. NEHRU submitted a new procurement plan for IDA review\. Although IDA did not identify significant capacity issues during earlier supervision, it carried out a capacity assessment\. Refresher training would be conducted ifrequired to reinforce compliance with IDA procurement guidelines\. NEHRP would adhere to the Financial Authority level for procurement decisions as set forth in the Government o f Sri Lanka's Procurement Manual dated 2006\. Procurement Committees would likewise be set up to evaluate bids under the respective financial thresholds\. 36\. Financial Management: The Additional Financing would retain the financial management (FM) and disbursement arrangements o f the parent project\. The project has a ModerateFM risk rating\. NEHRU has a proven track record o f sound financial management arrangements and compliance with financial covenants\. There i s a commitment by Government to submit the external audit reports on time after the last audit was received four months late\. NEHRP would continue with on-going risk mitigation measures that include: (i) internal robust control procedures with adequate technical certification o f construction progress and quality before making payments; (ii)continuous and comprehensive internal audit including a desk review o f beneficiary eligibility on a sample basis; (iii) independent technical audit and follow-up on findings; (iv) independent fixed asset verification;'l and (v) a communications campaign to enhance awareness o f project activities\. IDA would carry out a risk-based review o f selected FM activities\. Given the deteriorating security situation, the assistance o f independent third parties would be sought to undertake reviews such as the physical existence o f assets (including houses)\. A RiskMitigationAction Planis inplace to ensure fiduciary safeguards\. 37\. Environment: Environmental issues that pertain to the proposed Additional Financing are the same as in the parent project\. Minimal on-site environmental impact is anticipated given that the proposed sites are on existing housing plots\. The foremost environmental impact i s associated with the increased demand for construction material\. The need for large quantities o f sand, timber, rubble and clay to build an additional 13,615 houses would intensify mining and extraction\. This can cause serious environmental damage unless adequate precautions are taken to ensure that naturalresources are not exploited inan unsustainablemanner\. 38\. NEHRU undertook numerous environmental assessments under the parent project to appraise the extent o f environment impact\. It operationalised procedures and guidelines to minimize unsustainable natural resource extraction\. The Additional Credit would retain these measures and strengthen where possible existing mechanisms to regulate the supply and use o f 2oThe Ministryo f Local Government and Provincial Council's National Policv Declaration for Local Government issued inJuly 2007 makes local authorities responsible for service provision\. The two provincial council chief secretaries would represent the decentralized administration inthe National Steering Committee\. 2'O f equipment and vehicles 9  natural building material\. This would minimize the impact o f sand mining, clay mining and timber harvesting\. 39\. The environmental safeguards relevant to NEHRP would be retained\. The Environmental Assessment and Management Framework developed for the parent project would also be retained\. Each new village included would be assessed using the Environmental Information Questionnaire (EIQs)\. The EIQhad been drafted based on the findings o f a pilot EIA carried out during the preparation o f the parent project\. Each EIQ would include an Environmental Management Plan\. Institutional and implementation arrangements relevant to environmental safeguards would be carried over from the parent project\. Should the scaled-up housing program require additional staff to implement environmental safeguards, they would be hired\. 40\. Social: The Additional Financing i s expected to have limitednegative impact\. It would in fact have positive social impact\. A CSIA i s in place to identify potential negative impact for the duration o f the Additional Finance\. This social assessment i s intended to ensure proper beneficiary selection, a robust Grievance Redressal Mechanism and a functioning Land Task Force\. The CSIA would ensure that social concerns identified during implementation are promptly addressed\. 41\. IDA'SOperational Policy (OPBP) 4\.12 that governs involuntary resettlement is not triggered\. There would not be any land acquisition or involuntary resettlement under the Additional Finance\. NEHRP entails on-site home owner-reconstruction\. The beneficiary identification criteria require proof o f ownership o f the land upon which the house would be rebuilt\. The land task force would be revivedto regularize beneficiary title deeds and resolve land disputes\. OP 4\.10 that governs indigenous peoples may be triggered\. Given that the selection o f beneficiaries would be an ongoing process, it i s not yet clear whether indigenous communities would be involved as beneficiaries or not\. Should these communities be included in the Additional Financing, a diagnostic consultation would be carried out with the communities in question at that point\. The consultation would be undertaken by a qualified social scientisthstitution, with knowledge o f the traditions and culture o f the indigenous people, to ascertain their specific wishes and minimize the possibility that project interventions inadvertently create adverse effects\. Based on the consultation report, NEHRUwould introduce specific interventions vis-a-vis these communitieszz\. EXPECTEDOUTCOMES 42\.The Additional Financingi s intended to scale-up the development interventions and reinforce the outcomes achieved under the parent project\. Itwould strengthen fragile conflict-affected communities through improved housing, secure land tenure, enhanced construction standards and slulls training\. These outcomes would be demonstratedby quantifiable outputs\. Specifically over the implementation period, the Additional Financing would (i) support the reconstruction o f an added 13,615 houses; (ii) train 500 construction workers; and (iii) regularize land title for 10,000 home owners\. RISKS 43\. Please see table below for a discussion on risks\. 22 For a broader discussion on the subject, please see the Project Appraisal Document for NEHRP -page 72\. 10  Riskto DevelopmentObjectives RiskRating RiskMitigationMeasure The first risk is the political\. Sri H The upcoming IDA Country Lanka's North and East faces an Assistance Strategy includes uncertain security situation\. This safeguard measures to address such increases the risk o f political risks\. The proposed measures have interference by outside stakeholders beenoperationalized underthe and armed groups\. The Additional Financing\. Activities implementation environment is underthe Additional Financing strained with potential weakened would be screened through a 'conflict financial safeguards\. Further, the filter' to ensure that (i) NEHRP perceived attempts at demographic benefits continue to be transparently re-engineering increases the distributed solely in accordance with reputational risk to IDA\. established vulnerability criteria; (ii) operational decisions reflect the development needs o f communities; and (iii) the housing program is used to promote ethnic reconciliation where applicable, thereby endeavoring to address causes and consequences o f the conflict\. Measures have been introduced to strengthen the Grievance Redressal Mechanism established under the parentproject to go beyond complaints that pertainto the identification o f villages and beneficiaries to include any complaint pertainingto project implementation\. The Grievance Redressal Committee at the Divisional Level would also be expanded to include NGO, CBO and ethnic stakeholders (where the divisions are multi-ethnic) to ensure greater civil society supervision\. A stipulated number of structured focal group discussions indifferent districts and ethnicitiesheligions would be minuted under the CSIA and shared with IDA to strengthen avenues for increased stakeholder feedback\. The CSIA would identify opportunities to support reconciliation and inter-ethnic trust\. An example here would be the training o fmasons and carpenters from one community to helpthose from another communitybuildtheir houses\. Project management would be more :xplicitly sensitized on inter-ethnic issues through structured briefings with Buddhist clergy, Hindusocial work organizations, Mosque federations and church groups inthe \.egion every six months\. 11  The ongoing Communication Campaign under the parent project would be strengthened further to reach out to and disclose accurate and timely project information across a broader array o f political stakeholders, public fora and media\. It is conceivable that the houses S IDA resources would be allocated rebuilt in certain areas could be across districts and divisions on subject to renewed damage due to the established criteria such as the conflict or abandoned due to general caseload o f conflict-damaged housing insecurity\. stock, the number of IDP returnees and vulnerability\. Once allocated, they would not easily be transferred across districts\. This would ensure geographic equity\. Actual reconstruction however would only commence inthose divisions where the conflict i s unlikely to resume and the houses rebuilt likely to remain intact\. Indicatorshave been developed to help identify divisions and villages where it would be safe to commence construction on a sustainable basis\. The division- specific indicators include the (i) number of displaced who have returned, (ii) restoration o f civil administration, (iii) extent o f de- mining and (iv) reduction o f 'security incidents' as recorded by the United Nations High Commissioner for Refugees\. Shouldhousing reconstruction not be possible incertain districts due prolonged conflict, the funds allocated would not be transferred without prior IDA concurrence\. IDA no-objection would only be granted inthe case ofanacute and compelling housingneed inother 'safer' districts\. The objective i s to ensure geographic equity given its salience to the conflict\. Misappropriation o f resources inthe S The Additional Financing retains context o f the uncertain Governance adequate fiduciary, risk mitigation environment given the resumed measures and social safeguards to conflict\. guard against the misappropriation o f resources\. A Risk Mitigation Action Plan is annexed to the Operational Manual\. NEHRPaudits are up-to- date\. NEHRP has robust internal control systems\. The technical certification o f construction by technical officers precedes actual payment o f the cash grant\. There i s a continuous and comprehensive Internal Audit\. The audit reviews payment to beneficiaries\. There is an 12  independentTechnicalAudit, not to mentionan independentfixed asset verification of vehicles and equipment\. The Communication CamDaimstrengthens transparency\. IDA supervisionwould continueto ensure that funds reachthe intended beneficiariesandthat physical progressis alignedwith payment\. The UnitedNationsHigh Commissionfor Refugeeswould help monitor complaintsby returning IDPspertainingto the misuseof IDA funds\. There is the risk that IDA supervision H Insuchascenario, IDAwould seek may not bepossible\.The volatile regularupdatesfrom the North East environment couldimpede IDA HousingReconstructionUniton missions\. Security-related conflict-relateddamage to newly impedimentscouldprevent hands-on rebuilt houses andrebuilt houses supervision\. abandoneddue to resumed displacement\.It would assign reputed NGOsto cross check andundertake asset verification, ifneeded\.The verification would cover the (i) physicalexistence of the asset (this includeshousing); (ii) usageof the asset by the intendeduser; and (iii) quality ofthe asset inlinewith its specification\.A Risk Mitigation Action Planoutlinesthe fiduciary and operationalsafeguards inplace\. Risk Rating-H(High Risk), S (SubstantialRisk), M(Modest Risk), N(Neg1igi Eor Low Risk)\. RESULTSFRAMEWORK 44\. The Results Framework o f the parent project was revised in light o f European Commission parallel-financing and the proposed IDA Additional Financing\. The updated Results Framework i s provided inAnnex 1\. FINANCIAL TERMS AND CONDITIONSFORADDITIONAL FINANCING 45\. The financial terms o f the Additional Financing would be those currently offered to Sri Lanka, being hardened IDA lending terms for IDA gap countries, specifically a ten year grace period and twenty year maturity, with principal repayable at ten percent per year for years 11-20, and zero interest payments\. The financial, environment and social safeguards would remain the same as in the original credit\. The latest IDA Consultant and Procurement Guidelines would apply - 13  Annex 1 RESULTS FRAMEWORK Project DevelopmentObjective Outcome Indicators Use of OutcomeIndicators NEHRP (Le\. the parentIDA Credit, 56,141 beneficiarieshave arebuilt Informationon the pace of the Additional Financingand habitablehome\. implementationandachievementof EuropeanCommissionParallel- outcomeswould be usedto align Financing)is intendedto providethe NEHRPwith other development poorestconflict-affectedfamilies initiativesinthe conflict-affected with improvedandaffordable regioninan integratedand seamless housingunitsin Sri Lanka's North mannerto improveoverallliving andEast\. This would help improve standards\. living conditions,aprecursorto the resumptionof economic activity\. IntermediateResults ResultsIndicatorsFor Each Use of ResultsMonitoring Component Component One-Housing ComponentOne ComponentOne Assistance Identified beneficiariesbuildhouses 56,141 housingunitsreconstructed Low levelspoint either to capacity inthe allottedamountoftime andto within specifiedtime andallocated constraintsor security-related specifiedtechnicalstandards\. budget over a six year period\. impediments andthe needto design ameliorationproceduresfor identified Percentageof grantsdisbursedwithin constraints\.The latter couldinclude the five monthperiodandwithin human,physicalor institutional each disbursementphase (i\.e\. capacity\. purchaseofmaterial,constructionof foundation, superstructureand completion)\. Percentageof identified beneficiaries Lowpercentageflags ineffective that are amongst the most vulnerable, targetingmechanismsandwould be includingwomen-headedhouseholds, usedfor its redesignwherepossible the disabled, those who hadlost immediate family members to the war, those subject to multiple displacementetc (as apercentageof total beneficiaries and % of total most vulnerable) ComponentTwo - Capacity ComponentTwo ComponentTwo Building andMonitoring Adequate capacity available to 1,900 trainedconstructionworkers Low levelsflag discrepancies in support andmonitorhousing assistinginNEHRP construction demand for andsupplyof skilled reconstruction labor\.Datawill be usedto refine 62,000 landdisputesresolved subcomponent\. through re-establishedmobile land task forces at the District level Numberofperceived complaints capturedby the Continuous Social ImpactAssessment Percentageof Technicaldefects Highnumber of technicaldefects reportedout ofsampleby the point to the lack of engineering independentTechnicalAudit oversight andinsufficient technical support to the home-owner\. Component Three -Program Component Three ComponentThree Management 14  I I All actors (NEHRU, district program Percentageof home-owner Low levels could flag inappropriate units, divisional officers) aware of compliancewith technicalstandards standards or poor communication roles andresponsibilitiesandcomply with homeownerbuilders\. accordingly\. Percentage of grievancesresolved Delaysflag ineffective systemor overambitioustime periodspecified for grievanceredressal\.Datato be usedto revisesystemwhere possible\. 15  Annex 2 Performanceto date of Parent Project 1\. NEHRP was intended to rebuild 34,78423 houses in 2,712 villages\. The development impact o f the parent project has been documented through regular IDA supervision, the Continuous Social Impact Assessment (CSIA), the Technical Audit and other reports\. One survey revealed that over 80% o f the rebuilt houses remained occupied despite continuing displacement elsewhere inthe North and East\. All beneficiaries had secure legal title to their land\. The reliance on the money lender had declined by 40% as debts, earlier incurred for housing repair, were no longer needed\. Transport services to NEHRP villages increased by 11% in response to renewed demand by the returnee population\. All beneficiaries reportedimproved self- esteem and social standing inthe broader community\. 2\. Over 70% o f beneficiaries reported that restored housing facilitated the resumption o f livelihood\. The NEHRP home-owner often relied upon the security o f a rebuilt house to invest in home gardening, livestock, poultry farming, home-based retail trade and tailoring\. The CSIA indicated that beneficiary household income had increased in seven o f the eight districts due to such activity\. The beneficiary savings rate increased four-fold reflecting improved income\. NEHRP trained 1,100 masons and carpenters to provide construction labor, stabilize wages and help beneficiaries save\. The home-owner was able to save 14% on labor with the increased availability o f skilled construction workers\. The training also provided recipients with non-farm employment in project areas and beyond\. The Technical Audit revealed that the structural stability, quality o f materials used and quality o f workmanship had improved each successive year o fthe project\. North and East - to regularize title to land\. This had become an issue due to pervasive conflict- 3\. Eight mobile land task forces were set up under NEHRP - one in each district of the related displacement and encroachment\. The mobile land task forces had registered 96,385 land disputes, investigated 73,475 cases and resolved 52,72 1 instances o f disputedunclear land title\. They issued 44,279 valid land right documents, serviced thousands o f beneficiary and non- beneficiary households alike and provided considerable social benefits to the wider population o f the affected districts\. NEW facilitateda tree replantingcampaign to compensate for the timber used\. This included approx\. 49,000 coconut, teak, jak and mango saplings planted in 2006 and 2007\. *'Thisnumber includesthe 3,5 14 housesrebuilt underthe EuropeanCommissionparallel-financing\. 16

APPROVAL

P004225

Z0o+A1 61 6W L\.Optv I RESTRICTED Report No\. PA-31a This report was prepared for use within the Bank and its affiliated organizations\. They do not accept responsibility for its accuracy or completeness\. The report may not be published nor may it be quoted as representing their views\. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT INTERNATIONAL DEVELOPMENT ASSOCIATION SECOND JENGKA TRIANGLE PROJECT MALAYSIA April 29, 1970 Agriculture Projects Department  CURRENCY EQUIVALENTS US$1\.00 = Malaysian $3\.06 M$l = 100 cents = US$0\.33 M$1,000,000 = US$327,000 Can$1\.00 = M$2\.85 M$1 = Can$0\.35 M$14,000,000 = Can$350,000 WEIGHTS AND MEASURES Ehglish System 1 acre (ac) = o\.4o5 ha 1 square mile = 259 ha 1 mile (mi) = 1\.609 m = 1\.6 km 1 long ton = 2,2240 pounds (lbs) = 1,020 kg 1 timber ton = 50 cubic feet = 1\.4 cu m ABBREVIATIONS FLDA = Federal Land Development Authority MARA = Majlis Amanah Ralayat SJSB = Sharikat Jengka Sendirian Berhad RRIM = Rubber Research Institute of Malaya MARDI = Malaysian Agriculture Research and Development Institute ADB = Asian Development Bank PAS = Public Administration Service CDC = Commonwealth Development Corporation  MALAYSIA SECOND JENGKA TRIANGLE PROJECT TABLE OF CONTENTS Page No\. SUMMARY AND CONCLUSIONS - - - - - - - - - - - - - - i I\. INTRODUCTION - - - - - - - - - - - - - - - - - - - - - 1 II\. BACKGROUND - - - - - - - - - - - - - - - - - - - - - - 2 A\. General - - - - - - - - - - - - - - - - - - - 2 B\. Land Settlement - - - - - - - - - - - - - - - 4 The Federal Land Development Authority (FLDA) - - - - - - - - - - - - - - - - 4 The Jengka Triangle Program - - - - - - 4 C\. Forestry - - - - - - - - - - - - - - - - - - 5 Majlis Amanah Ra'ayat (MARA) - - - - - - 6 D\. First Jengka Triangle Project (Loan 533-MA) - 6 The Project - - - - - - - - - - - - - - 6 Comparison of Forecast with Actual Performance - - - - - - - - - - - - - 6 Costs, Loan Disbursements and Financing- 7 Project Administration - - - - - - - - - 7 General - - - - - - - - - - - - - - - - 7 III\. THE PROJECT AREA - - - - - - - - - - - - - - - - - - - 7 IV\. THE PROJECT - - - - - - - - - - - - - - - - - - - - - - 8 A\. Project Definition - - - - - - - - - - - - - 8 B\. Detailed Features - - - - - - - - - - - - - - 10 Regional Center and Other Towns - - - - 11 Processing Facilities - - - - - - - - - 11 Planting Material - - - - - - - - - - - 12 Crop Diversification - - - - - - - - - - 12 (Continued) This report is based on the findings of an appraisal mission comprising Messrs\. Whyte, Gold and Willems (Bank) and Rowe (FAO) which visited Malaysia in August/September 1969\.  Table of Contents (Continued) Page No\. C\. Cost Zstimates and Proposed Financing - - - 13 Cost Estimates - 13 Pro-poesd winascing -15 Procuremaent - - - - - - - - - - - - - 17 Di buzSement - - - - - - - - - - - - - 17 V\. ORGANIZATION AND MNAGEEMNT - - - - - - - - 18 A\. Land\. 1Se tlement Project - - - - 18 FMIAt - - 1 8 Jiekngka Division - - - - - - 18 Research and Training - - - - - - - - 19 Settlement Procedures - - - - - - - - 20 LDA's Finances and Accounts 22 Audit - - - - - - - - - - 23 B\. Forestry Proect - - 2 - - - - - - - - - - 23 Finances, Accounts and Audit - - - - - 25 VI\. PRODUCTION, MARKETS, PRICES AND OPERATING RESULTS - - 26 A\. Yields and Production - - - - - - - - - - - 26 Land Settlement - - - - - 26 Forestry - - - - - - - 26 B\. Markets a,na Prices - - 26 Oil al - - - - - 26 Rubber - - - - - - - - - - - - - - 27 Forest Products - - - - - - - - - - 28 C\. Settlers Income - - - - - - - - - - - - - 29 D\. Government Revenues - - - - - - - - - - - - 30 VII\. BENEFITS AND JUSTIFICATION - - - - - - - - - - - - - 30 Land Settlement - - - - - - - - - - - 30 Forestry - - - - - - - - - - - - - - 31 'VIII\. RECOMMENDATIONS - - - - - - - - - - - - 32 (Continued)  -3- Table of Contents (Continued) ANNEXES Land Settlement 1\. The Federal Land Development Authority (FLDA) 2\. The Jengka Triangle Master Plan 3\. Project Development Charts - Stage 1 4\. Schedule of Forest Clearing and Planting - Stage 2 5\. Schedule of Village and Infrastructure Development - Stage 2 6\. Unit Development Cost Estimates 7\. Project Cost and Disbursement Estimates 8\. Jengka Division Organization Chart 9\. Settlement Operation and Administration 10\. Jengka Balance Sheet 11\. FLDA Sources and Application of Funds re Jengka 12\. Yield Estimates 13\. Market Prospects for Palm Oil and Palm Kernels 14\. Market Prospects for Rubber 15\. Settlers' Income 16\. Government Sources and Application of Funds 17\. Economic Rate of Return Forestry 18\. Log Removal, Export and Area Statistics 19\. Majlis Amanah Ra'ayat (MARA) 20\. Equipment Schedule 21\. Project Cost and Disbursement Estimates 22\. Project Organization Chart 23\. Project Personnel 24\. Income Statements 25\. Sources and Applications of Funds and Economic Rate of Return 26\. Balance Sheets 27\. Market Prospects for Forest Products MAPS 1\. Second Jengka Triangle Project 2\. Forestry Project   MALAYS IA SECOND JENGKA TRIANGLE PROJECT SUMMARY AND CONCLUSIONS i\. This report appraises a project for the further development of land settlement, and the creation of a forest industries complex in the Jengka Triangle\. Loars totalling US$21\.5 million equivalent are proposed, of which US$13 million equivalent would be for land settlement and US$8\.5 million for forestry\. The Jengka Triangle, which lies approximately in the center of West Malaysia, is the subject of Malaysia's first regional devel- opment program\. Under this program about 93,000 acres would be cleared of forest, planted with crops - mainly oil palms and rubber, divided into holdings of about ten acres each, and allotted to some 9,000 families\. A full physical and social infrastructure would be established in the Triangle, including three urban centers\. A forest Industries complex would be created to utilize timber removed in the course of land clearing, and the timber in those areas that would remain under forest in the Triangle and adjacent forest reserves\. A Bank loan of US$14 million equivalent (533-MA) was made to Malaysia in 1968 to finance the first stage of land settlement in the Triangle; this project, which covered 33,000 acres, is being carried out efficiently and its target of settling 2,800 families by 1972 should be achieved\. In the agriculture sector two other Bank loans have been made to Malaysia, of US$45 million and US$10 million equivalent; these were for irrigation development, principally for rice production\. Progress on these projects has been satisfactory\. ii\. The Second Jengka Triangle project consists of two sub-projects - the Second Jengka Land Settlement Project and the Jengka Forestry Project\. A forest industries complex was not included in the First Jengka Triangle project since arrangements for logging had already been made\. The complex is required now for the best use of the forest resources located on land to be developed under both the Second Jengka Triangle project and the envisaged third and final stage\. iii\. The proposed land settlement project includes the clearing of about 32,000 acres of forest and the planting of about 16,800 acres of oil palms, 13,600 acres of rubber and 700 acres of other crops, and the settlement of some 3,000 settlers with their families\. The proposed forestry project would be the first to be financed by the Bank group in Asia\. It would also be the first integrated forest industries operation in Malaysia\. The project would consist of the establishment of a modern logging and timber processing complex\. Besides itself providing valuable economic benefits and employment opportunities, it could lead, by its ex- ample, to better utilization of Malaysia's large forest resources\. iv\. Total project costs are estimated at US$41\.0 million equivalent, including interest, of which US$28\.6 million would be for land settlement  - ii - and US$12\.4 million for forestry\. The proposed loan of US$13 million equiv- alent for land settlement would assist in financing costs during the period 1970 through 1976 and disbursements would amount to about 45% of total project costs including interest during the disbursement period\. Remaining costs would be met by the Government\. The loan would include some US$5\.8 mil- lion of local costs\. The proposed loan of US$8\.5 million for forestry would finance the foreign exchange costs excluding interest\. Remaining forestry project costs would be met by equity contributions by Majlis Amanah Ra'ayat (MARA), a statutory corporation, and out of earnings\. Procurement for both land settlement and forestry would be on the basis of international competitive bidding, although it is anticipated that local suppliers and contractors would be the successful bidders for land settlement supplies and works\. v\. The land settlement project would be implemented, apart from Government infrastructure works, by the Federal Land Development Authority (FLDA) a statutory Government corporation\. FLDA is satisfactorily manag- ing both the first stage Jengka project and some 80 other smaller settle- ment schemes\. Its financial management has not, however, kept pace with its rapid expansion and certain steps will be taken, including the appoint- ment of a Finance Director, to improve financial administration and procedures\. vi\. The forestry project would be carried out by Sharikat Jengka Sendirian Berhad (SJSB), a subsidiary of MARA and would be managed by Cantrans Services (1965) Limited under a four-year management agreement\. vii\. The project as a whole should make a significant contribution to Malaysia's economy, to its foreign exchange earnings and to alleviating unemployment\. All production from the land settlement project and a sub- stantial proportion of that from the forestry project would be exported\. Net foreign exchange earnings are estimated at about US$160 million from the land settlement project and US$32 million from the forestry project\. Annual foreign exchange earnings would be about US$6 million from the land settlement project, and about US$3 million from the forestry project\. The economic rate of return on the land settlement project, based on current estimates of long-term commodity prices, would be over 18% from oil palms and over 11% from rubber\. A sensitivity analysis shows that it is unlikely that these returns would fall to below 9% for each crop\. The rate of re- turn on the forestry project is estimated at about 29%\. The two projects would provide employment for over 4,000 persons\. viii\. The project is suitable for two Bank loans to Malaysia totalling US$21\.5 million\. The Land Settlement loan would be for a period of 25 years including 7 years grace and the Forestry loan for 12 years including 4 years grace\. Malaysia would on-lend the loans to FLDA and SJSB on the same terms\.  MALAYSIA SECOND JENGKA TRIANGLE PROJECT I\. INTRODUCTION 1\.01 The project appraised in this report consists of two sub-projects, the Second Jengka Land Settlement Project and the Jengka Forestry Project\. The first would be the second stage of the Jengka Triangle Land Settlement Program and would be carried out by the Federal Land Development Authority (FLDA)\. The second would be the establishment of a modern forest indus- tries complex in the Jengka Triangle\. It would be carried out by Sharikat Jengka Sendirian Berhad (SJSB), a subsidiary of Majlis Amanah Ra'ayat (MARA), and would be managed by Cantrans Services (1965) Limited (Cantrans)\. 1\.02 The Jengka Triangle Program is based on a comprehensive study of the region by consultants (Tippetts-Abbett-McCarthy-Stratton and Hunting Technical Services Ltd\.)\. This was completed in 1967 and was financed partly by a Bank technical assistance grant\. The Master Plan prepared by the consultants recommended the exploitation of the Triangle's forest resources through a modern logging system and the establishment of timber processing facilities, the planting of about 93,000 acres of oil palms and rubber and the settlement of some 9,000 settlers with their families\. 1\.03 In April 1968 the Bank approved a loan of US$14 million to finance the first stage of the settlement program (Loan 533-MA)\. Progress on this project has been generally satisfactory\. Exploitation of the Triangle's forestry potential was, on the other hand, poor but in September 1969 an agreement was signed between MARA and Cantrans providing for the manage- ment and operation by Cantrans of logging and timber processing in the Triangle\. In April, 1970 SJSB was incorporated to carry out the project\. In future the forestry and land settlement projects combined should produce substantial economic and social benefits\. 1\.04 This report is based on the findings of a mission in August/ September 1969, consisting of Messrs\. Whyte, Gold and Willems of the Bank and Rowe of the FAO/IBRD Cooperative Program\. 1\.05 The Bank has made two loans for Malaysian agriculture besides that for the first Jengka Triangle Project\. They were of US$45 million in 1965 for the Muda irrigation scheme (434-MA) and of US$10 million in 1967 for the Kemubu irrigation scheme (500-MA)\. Progress on these projects has been satisfactory\.  - 2 - II\. BACKGROUND A\. General 2\.01 Malaysia's economy depends heavily on agriculture -- a sector which generates about 30% of GDP, gives employment to over 50% of the population in West Malaysia (and over 75% in East Malaysia) and provides about 60% of export earnings\. The dominant commodity in agriculture is rubber, which alone provides 15% of total GDP, 55% of all agricultural output and about 40% of total export earnings\. Despite the importance of the agricultural sector, agricultural products still make up nearly one- quarter of the country's imports\. Rice is now the major agricultural import, and an average of 380,000 tons annually were imported in the period 1964-1967\. Annual production had reached 700,000 tons by 1967 and devel- opments in drainage, irrigation, double-cropping and new varieties may eliminate imports by the early 1970's\. Agricultural production as a whole has been growing at an annual average rate of around 5\.5%, which compares with a population growth rate in Malaysia of about 3% per year\. 2\.02 The present area under rubber is some 4\.4 million acres, of which about 1\.7 million acres are commercial estates, 2\.6 million acres are owned by smallholders and 130,000 acres are in FLDA settlement schemes\. Projections up to the year 1975 indicate there will be an increase in rub- ber acreage of some 200,000 acres, which would raise the total area under rubber cultivation to 4\.6 million acres by that date\. This change will take place mainly as a result of increases in FLDA and smallholder culti- vation\. Because higher-yielding clones 1/ are now being planted, total production is estimated to increase from the level of about 1\.1 million tons of rubber at the present time to about 1\.5 million tons by 1975\. Of the latter figure, estates are expected to produce about 725,000 tons, smallholders about 710,000 tons and FLDA schemes about 65,000 tons\. 2\.03 Malaysia's heavy commitment to rubber production has led to increasing efforts to bring about diversification of production within the agricultural sector\. Diversification into crops other than rubber was emphasized in the First Malaysia Plan (1966-1970), in which the major agricultural targets were identified as follows: (a) an expansion of crops whose production would increase foreign exchange earnings; 1/ High yielding rubber trees possessing other satisfactory character- istics are selected and reproduced vegetatively\. Consequently the planting material, the clone, produced in this way possesses the characteristics of its single parent, unlike seedling material which inherits the characteristics of both a male and a female parent in combinations not controllable by the plant breeder\.  -3- (b) an expansion of rice production in order to reduce rice imports; (c) the diversification of agriculture through the establishment of new crop and livestock enterprises; (d) the opening up of virgin land, now in jungle, which could serve the joint purposes of adding to productive land and reducing current levels of unemployment\. 2\.04 Current estimates of future agricultural production begin to show the effects of this interest in diversified agriculture\. For ex- ample, there will be a significant increase in oil palm acreage and pro- duction - total acreage under oil palm is expected to increase from about 500,000 acres at present (of which FLDA schemes have 125,000 acres) to over 800,000 acres by 1975, when FLDA schemes would account for about 307,000 acres, or 38% of the total\. Production of palm oil is expected to increase from 300,000 tons annually at present to over 750,000 tons per year by 1975\. FLDA schemes should be producing about 300,000 tons by the latter date, which would make FLDA and its settlers the largest single source of oil palm produce in the world\. 2\.05 The Plan authorities estimate that the value of agricultural output as a whole has been growing at an annual average rate of 5\.5% during the First Plan period 1966-1970, although trends for individual products have been appreciably different from those envisaged in the Plan\. For example, production of palm oil, fish and timber are ahead of Plan proj- ections, while production of rice, copra and tobacco have fallen behind the projections\. 2\.06 Although the dependence of the Malaysian economy on rubber and increasingly on oil palms is recognized, a significant degree of diversi- fication has not been achieved\. The main reason is that Malaysia has the skills and growing conditions to produce these two crops more efficiently than other countries and should, therefore, continue to produce them in sub- stantial quantities\. Also, tree crops, which protect the soil from ero- sion and facilitate the maintenance of soil fertility, are well suited to the high rainfall and broken topography in West Malaysia\. However, extensive studies and experimentation are being carried out by various bodies in Malaysia such as the Department of Agriculture, the Rubber Research Institute of Malaya (RRIM), the Malaysian Agricultural Research and Development Institute (MARDI), the Economic Planning Unit, commercial firms and FLDA\. Substantial yield increases have been achieved in maize, sorghum, soya bean and tapioca but only on small scale experiments\. Some plantation companies have diversified successfully on a commercial scale, particularly into cocoa inter-cropped with coconuts on the west coast of Malaysia\. 2\.07 The element of diversification in the proposed project, while of considerable importance, is not large in the physical sense (para 4\.15), but Bank assistance to diversified agricultural projects in Malaysia is  -4- increasing\. In 1965 and 1967 Bank loans of US$45 million and US$10 mil- lion were made for the Muda and Kemubu irrigation schemes\. These two proj- ects should eventually increase rice production by over 500,000 tons a year\. The Bank is assisting the Government in developing a short term credit system to provide production credit facilities for the Muda and Kemubu projects and this could lead to assistance for longer term agricul- tural credits in Malaysia generally\. In addition, a livestock project is now being prepared under the FAO/IBRD Cooperative Program\. B\. Land Settlement 2\.08 Unemployment is estimated to be as high as 13% in the urban areas of West Malaysia, and an unestimated but very high level of underemployment exists in rural areas\. With population increasing at an estimated 3% annually, the need to create employment, bring about a more equitable dis- tribution of incomes and promote economic growth has led to increasing emphasis on agricultural development through land settlement schemes\. These schemes are carried out both by State Governments and by the Federal Government through FLDA; in the period since it was established in 1956, FLDA has been the main instrument for land settlement in West Malaysia\. The Federal Land Development Authority (FLDA) 2\.09 FLDA was established in 1956 as an independent statutory corporation with the duty and powers to "\. promote and assist the in- vestigation, formulation and carrying out of projects for the development and settlement of land within the Federation\." FLDA in practice enjoys a fairly high degree of autonomy in the implementation of land settlement schemes\. A full description of the Authority is contained in Annex 1\. 2\.10 Table 1 of Annex 1 shows that up to 1963 FLDA developed 80,000 acres of rubber and oil palm and that over the next six years the acreage tripled to some 257,000 acres, comprising 130,000 acres of rubber and 127,000 acres of oil palm\. To date some 16,000 families have been settled and the settler population on FLDA schemes is now over 100,000\. Future plans call for continuous expansion and Table 1 shows the estimated increase in FLDA's planted acreage up to 1975\. The JenRka Triangle Program 2\.11 As shown in Map 1 the Jengka Triangle is in the State of Pahang, about 120 miles northeast of Kuala Lumpur and close to the geographical center of West Malaysia\. It covers some 300,000 acres of which 160,000 acres are being or will be developed, the remainder being occupied or re- served for other uses\. 2\.12 The Bank has been closely involved with the development of the Triangle since the plans were first conceived\. In 1963 a Bank mission re- viewed the potential and development plans of the Triangle and in 1965 the  Bank made a technical assistance grant of US$507,000 to the Federal Gov- ernment to help finance the preparation of an integrated regional develop- ment plan\. The plan, published in 1967, is described more fully in Annex 2\. In April 1968 the Bank made a loan of US$14 million (533-MA) to help fi- nance the first stage of the program covering some 33,000 acres\. Progress under the loan is described in paras 2\.18 to 2\.24\. 2\.13 The second stage of the Program would bring the total planted acreage in Jengka to about 58,000 acres leaving some 35,000 acres for the third and last stage which is expected to begin in 1972\. C\. Forestry 2\.14 The total forested area in West Malaysia is nearly 33,000 sq mi, or 65% of the total land area\. Man-made plantations have not as yet been established on a commercial scale\. In recent years there has been a rapid increase in the demand for logs, sawn timber and plywood in both domestic and export markets\. Log removals from forest reserves and state lands increased from 1\.2 million tons in 1958 to 3\.6 million tons in 1968, and exports of logs amounted to Just under 960,000 tons in that year\. By mid- 1968 there were 449 sawmills in operation which produced 1\.4 million tons of sawn timber in 1968; nearly 600,000 tons of this was exported\. In the same year 16 plywood mills produced nearly 225 million sq ft of which 150 million sq ft was exported\. Details of production and export of logs sawn timber and plywood are shown in Annex 18\. 2\.15 Despite its importance and potential, development of forestry,and forest industries is still being carried out haphazardly and inefficiently without regard for the sustained yield management of the forests or the country's future timber needs\. The Federal Forest Department has no executive control over the exploitation of forests and State Governments do not adequately supervise logging and processing activities\. Much of the merchantable timber (between 60 and 80 percent in many cases) has been wasted in lands cleared for settlement; the issue of annual licenses to individual loggers without relation to the processing industry has led to a proliferation of undercapitalized and inefficient wood process- ing operations and there have been substantial losses to the economy through the export of logs and unmanufactured forest products instead of processed timber\. 2\.16 The Federal Government has recently shown, however, that it is aware of the need to improve the exploitation of forest resources\. The Government has asked States to prepare plans for forest exploitation and these plans will be reviewed by the Government\. The Federal Government played a large part in concluding the agreement between MARA and Cantrans for management of the forest resources of the Jengka Triangle (para 5\.28)\.  - 6- Mailis Amanah Ra'avat (MARA) 1/ 2\.17 MARA was established in 1966 as an independent statutory corporation with the duty and power to "\. promote, stimulate, facilitate and undertake economic and social development in the Federation and more particularly in the rural areas\." It is run by a council and executive committee appointed by the Minister of National Rural Development, who at present is also the Chairman of the Committee\. It is organized into divi- sions, each of which is under the control of an Executive Director\. As shown in Annex 19 MARA's activities are diverse\. Their general aim is to bring about greater participation of the Malay section of the community in commerce and industry, but many of its activities are non-commercial (e\.g\. training)\. MARA was made responsible for developing the Jengka Triangle's timber resources in 1966\. No formal agreement with the State Government was signed, however, and the MARA subsidiary 2/ responsible for the operation until Cantrans took over logging in early 1970, worked on annual licenses\. D\. First Jengka Triangle Project (Loan 533-MA) The Proiect 2\.18 The project financed by Loan 533-MA was the first stage of land development in the Jengka Triangle, and is confined to land settlement only\. The loan provides funds for the clearing of some 33,000 acres of tropical rain forest, the planting of 23,000 acres of oil palms and 4,200 acres of rubber, the settlement of 2,800 families, and the provision of a physical and social infrastructure for the project area together with the necessary crop processing facilities\. The project is being developed over the period 1967 through 1974 and is being carried out by FLDA\. Comparison of Forecast with Actual Performance 2\.19 Bar charts in Annex 3 compare actual performance with forecasts at the time of appraisal\. Although delays have occurred in a number of schemes, the problems which caused these delays have been largely overcome\. 'In Scheme V, the one scheme where felling and clearing operations suffered more serious delays due to a poor contractor, planting began in April and is expected to be completed before the end of 1970\. 2\.20 Delays in village, settler housing and infrastructural develop- ment have followed the delays in planting\. This lag has not created prob- lems but efforts are being made to avoid such delays in the future and supervision missions are checking progress carefully\. Settlers began to arrive on the project in April, 1970\. :L/ This cannot be translated literally\. It means, however, an organiza- tion devoted to the economic improvement of the people\. In practice MARA's activities are aimed at the economic development of the Malay people, who, in contrast with the Chinese people have played, so far, a minor role in the business and industrial sectors of Malaysia\. _/ Sharikat Kebangsaan Kayu Kanan Berhad\.  Costs, Loan Disbursements and Financing 2\.21 Unit costs have proved to be within estimates, despite a general slight rise in costs in Malaysia\. Loan disbursements totaled M$5\.3 million (US$1\.8 million equivalent) at March 31, 1970\. Disbursements against fur- ther expenditures to December 31, 1969 are estimated at about M$2 million thus bringing total disbursements in respect of the period to the end of 1969 to about M$7\.3 million\. This compares with M$9\.4 million estimated at the time of appraisal\. Lower than forecast disbursement reflects the delay in non-agricultural works\. FLDA has experienced no problems in obtaining funds from the Government for project purposes\. Project Administration 2\.22 FLDA has appointed adequate numbers of qualified staff to carry out the project\. The last senior position, that of Settler Development Officer, was filled in April 1970 to coincide with arrival of the first settlers\. 2\.23 Project accounts are satisfacorily maintained and are audited by independent auditors (Peat, Marwick, Mitchell & Co\.) acceptable to the Bank\. The audited balance sheet for 1968 is shown in Annex 1, Table 2\. General 2\.24 The project is proceeding satisfactorily, no problems have arisen in reporting and procurement, and the cooperation of the project authori- ties with the Bank has been excellent\. It was envisaged, however, that the Bank would use the opportunities provided by loan 533-MA to effect improve- ments in FLDA's overall administration, particularly in financial affairs, and settlers lease and loan arrangements\. Progress has been slow in these matters and the proposed loan provides for further and quicker improvement\. These are explained in Chapter V\. III\. THE PROJECT AREA 3\.01 The project area comprises the northwest section of the Jengka Triangle, and the Tekam, Tekai and Berkelah forest reserves lying to the north and northeast of the Triangle respectively (see Maps)\. 3\.02 Land settlement would be carried out in the northwest section of the Triangle\. This area is undulating and the distribution of its soils complex, thus requiring careful selection of the crop to be planted\. Cli- mate, with uniform temperature and plentiful and well-distributed rainfall, is well suited to both rubber and oil palms, and these would be the main crops established under the project\. 3\.03 Forest exploitation would take place in some 70,000 acres of permanent forest in the Triangle itself, 65,000 acres of Tekam, 96,000 acres of Tekai, and 139,000 acres of Berkelah Reserve forests, and on  land to be cleared for settlement (see Map 2)\. Detailed inventories have been made of the Jengka forests, and the remaining reserves are being in- ventoried under the FAO/UNDP Forestry and Forest Industries Development Project\. Inventory results are expected to be similar to those of Jengka\. The Jengka inventories show the presence of hundreds of timber producing species, including more than 120 species considered to be of commerical importance\. About 50% of the tree counted consist of species currently used in the Malaysian timber industry\. The remainder, mainly the medium and heavier hardwoods, comprises tree species whose timber is not at present generally used by the local industry but which, if processed, is considered to have a high commercial value in the world market\. With full utilization of commercial species under the project, yields of about 18 tons of timber/acre are expected, and the total commercial timber content of the project area is estimated at more than 7\.0 million tons\. 3\.04 The project area has good access to the national road and rail system with connections to Kuala Lumpur, Port Swettenham Kuantan and Singapore\. However, as stated in para 6\.04, expansion of port and trans- portation facilities will have to keep pace with development in the region and elsewhere\. IV\. THE PROJECT A\. Project Definition 4\.01 The project would comprise two interrelated sub-projects - a land settlement project and a forestry project\. It would be carried out within the framework of a program for the integrated regional development of the 470 sq mi of land which form the Jengka Triangle\. The forestry project would utilize timber in permanent forests in the Triangle and adjacent forest reserves, and would also enable the most economic use of timber standing on land to be cleared for the land settlement project\. Conse- quently such land clearing operations would be coordinated with the devel- opment of the logging and timber processing units which would form part of the forestry project\. 4\.02 Land Settlement\. The land settlement project would comprise the clearing of about 32,000 acres of land and its settlement by about 3,000 families\. The project includes: - the clearing of about 32,000 acres of forest and the planting and maintenance until 1979 of about 16,800 acres of oil palms, and about 13,600 acres of rubber; - the reservation of approximately 1,400 acres for the development of a Regional Center;  - 9 - - the provision of villages, houses, offices and stores to accommodate settler families and management and support staff, together with appropriate roads, water systems and educational, health and other social services; and - the construction of a palm oil mill with an initial capacity of 24 tons ffb (fresh fruit bunches) per hour and the expansion of this capacity to 42 tons ffb per hour; - the use of about 700 acres of the FLDA Research Center, Tekam, for crop diversification trials on a commercial scale\. 4\.03 Each settler would be provided with 10 acres of planted oil palms or rubber, a house and a house lot of one-quarter acre\. Settlers would repay the costs of development as explained in para 5\.14\. The project would be developed as seven schemes numbered 8 through 14 (schemes 1 through 7 being those in the first Jengka Project)\. Each scheme would have a village containing some 430 settler families together with a small number of FLDA and government officials and would be supplied with treated water, roads, health clinic, primary school, etc\. Each village would also have a postal agency, police post and telephone communication\. Secondary schools would be provided for every two or three villages\. 4\.04 Forestry\. The forestry project would comprise a forest industries complex adequate to efficiently extract, process, and market timber from the Triangle, and the Tekam, Tekai and Berkelah forest reserves\. The complex, further details of which appear in Annex 20, would be established on 150 acres at the Regional Centers, and would include: - a mechanized logging unit with an annual extractive capacity of 175,000 tons of logs; - a sawmill with an annual capacity of about 42,000 tons of sawn timber (68,000 tons of roundwood equivalent), and ancillary drying kilns, planer mill and impregna- tion plant; - a plywood mill with an annual capacity of about 60 million sq ft (41,000 tons of roundwood equivalent); - steam generating plant, machine shop equipment, water supply and other necessary facilities, and the construc- tion of houses, offices and other buildings for manage- ment and labor\.  - 10 - B\. Detailed Features 4\.05 Land Clearing and Crop Establishment\. The table below summarizes the proposed schedule of clearing and planting which is detailed in Annex 4\. Mlarketable timber totaling some 430,000 tons would be extracted from all areas prior to clearing\. Of this the logging unit to be set up under the project would handle about 330,000 tons, the remainder having been logged by other contractors\. Land Clearing and Planting (Rubber and Oil Palm) 1969 1970 1971 1972 Total …Acres - - - - - - - - Forest Clearing 4,830 14,020 13,570 - 32,420 Oi\.l Palm Planting - - 13,130 3,650 16,780 Rubber Planting - 4,540 - 9,070 13,610 4\.06 Clearing of Scheme 8 of 4,800 acres, which would be planted with rubber in 1970, has begun\. FLDA's standard, and well-proved practice of using contractors to clear the land, plant the rubber and oil palms and maintain the plantings for up to twelve months after planting, would con- tinue\. Sufficient private contracting capacity exists for project purposes\. 4\.07 Development of Villages and Infrastructure\. A schedule of village and infrastructure development is given in Annex 5\. Settlers would arrive oni the schemes 12 to 18 months after planting and would be used as labor on immature areas until the plantings come into bearing\. Village areas would be cleared and houses constructed by contractors employed by FLDA\. Provi- slon of water supplies and construction of roads would be the responsibility of the Public Works Department of the State of Pahang\. Adequate private contracting capacity is available for the clearing and building programs and with assistance from the Federal Department of Public Works, the State Gov- ernment of Pahang would be able to execute its part of the program\. Fol- lowing the initial phase of village development, other departments of both Federal and State Governments would be responsible for providing the educa- tional, health, postal, police and other community facilities and social services\. 4\.08 Forestry\. The logging unit of the forestry project is now being established\. It will be able to handle 90,000 tons in the first year of operation ending October 1970 and 175,000 tons in the second year\. The unit will be established and operated by Charnell International Consultants Ltd\., a Canadian firm of forestry consultants with overseas experience in Taiwan, Peru, Fiji, and Guyana, under the terms of the management agreement between MARA and Cantrans (para 5\.29)\.  - 11 - 4\.09 The processing facilities would be established over the next four years by S\.G\. Gardiner Engineering Ltd\., a Canadian forest engineer- ing firm, under the Cantrans agreement\. The saw mill would have an output of 20,800 tons in 1970/71, 33,300 tons in 1971/72 ,and 41,700 tons in 1972/73\. The plywood mill would have an output of 36 million sq ft (1/4 inch basis) in 1971/72 and 60 million sq ft in 1972/73\. 4\.10 Initially the raw material needs of the forest industries complex would be met from timber extracted from land required for the land settle- ment project\. Forest exploitation schedules have been prepared which are geared to land clearing schedules\. Following utilization of timber re- quired for both second and third (and final) stage land settlement proj- ects, the complex would be supplied for two or three years from an area of about 52,000 acres which would be retained as protective forests in the Triangle\. Thereafter these forests would be managed on a sustained yield basis\. The timber resources of the Triangle itself would be depleted by thelate 1970's, and subsequently the complex would depend upon log sup- plies from the nearby Tekam, Tekai and Berkelah reserves\. The arrangements for ensuring such supplies are discussed in para 5\.27\. The reserves should be able to provide the complex's raw material needs for 20 to 30 years\. Regional Center and Other Towns 4\.11 Under the first Jengka Triangle loan assurances were received that a site for a Southeast town, one of the three towns (Southeast and Southwest towns and a Regional Center) proposed in the Master Plan, would be identified and reserved\. Land has been reserved but no further devel- opment has taken place since no demand has yet arisen\. Meanwhile, it has been decided that FLDA should be responsible for the development of a Regional Center which would be situated in a central position at the inter- section of the north-south and east-west highways (Map 1)\. About 1,400 acres have been reserved for the Regional Center; the forest industries complex, Jengka Division headquarters, light industries and commercial services would be established there in due course\. Cantrans has earmarked 150 acres on which it would establish the forest industrial complex\. In the meantime, progress so far in the development of the Jengka Triangle has already stimulated commercial activities in the villages and towns on the perimeter of the project area\. Processing Facilities 4\.12 Oil Palm\. A single mill would be constructed near the Regional Center\. This would open at a capacity of 24 tons of ffb 1/ per hour in 1974 and would be expanded to a capacity of 42 tons per hour in 1977\. This 1/ ffb - the product of the oil palm, is a cluster of individual fruits\. Each fruit consists of a nut, which contains the palm kernel, sur- rounded by oily flesh from which palm oil is extracted\.  - 12 - would be sufficient to meet the processing requirements of the project\. Any ffb produced prior to 1974 would be processed at the Ulu Jempol Mill close to the project area\. This is already in operation\. 4\.13 Rubber\. Rubber processing facilities for the second stage of the project would not be required until 1977 and are not included in the project\. Until 1977 the small amount of rubber produced by the project would be pro- cessed by other FLDA factories near the project area\. 4\.14 As required under Loan 533-MA, FLDA engaged a palm oil mill con- sultant to advise on mill designs and specifications and to supervise con- struction and operation of project mills\. Assurances were obtained during Regotiations that FLDA would employ consultants acceptable to the Bank to design and construct the rubber factories required in 1977 and to advise on their operation, as well as to carry out construction of the oil mill required for the project\. Planting Material 4\.15 FLDA will begin producing its own oil palm planting material in 1970\. However, breeding experts on the FLDA Research Committee, and elsewhere, consider that further investigation into the yield potential of this material is necessary before it can be accepted for planting on a large scale\. Consequently, assurances were obtainted during negotiations that this material would not be used for the project planting unless it has been proven under adequate field trials\. Rubber planting material used for the project would be Clonal material approved by the RRIM\. Crop Diversification 4\.16 Since successful diversification is essential for the future agri- cultural development of Malaysia and for FLDA settlement plans (paras 2\.06 and 2\.07), the project would include the establishment of 700 acres for com- mercial scale diversification trials at the Sungei Tekam Research Centre\. These trials would be administered by FLDA, which would receive technical assistance from such bodies as MARDI, RRIM and others who have been working on crop diversification\. A feature of the trials would be the use of mlnimum soil disturbance techniques on which development work has been done recently in Malaysia by a Louisiana State University team sponsored by the Ford Foundation\. The use of these techniques would be the key to achieving diversification into non-tree crops, other than rice, in West Kalaysia\. It is anticipated that the crop rotations used over 50 acres and upwards for any one planting would begin with a legume, such as soybean, and be followed by a grain crop, either maize or sorghum\. Other crops tested would include groundnuts and cassava\. All these crops are in domestic demand\.  - 13 - C\. Cost Estimates and Proposed FinancinR Cost Estimates 4\.17 Land settlement project costs over the full period of development, 1969-1979, are estimated at M$77\.8 million (US$25\.4 million) excluding interest\. About 51% of project costs are for agricultural development; and are calculated on the unit cost estimates shown in Annex 6\. These are based on maximum costs for representative conditions which allow between 5 and 10 percent contingencies\. Therefore no specific contingency has been included in project costs other than for palm oil mills and staff salaries for which 10 percent has been allowed\. 4\.18 Excluding social infrastructure, but including project area roads, total development costs per settler family would be approximately M$25,000\. This compares with an estimated average cost of approximately M$22,000 of providing similar employment opportunities on commercial oil palm and rubber estates\. While FLDA's development and procurement policies result in relatively low costs in clearing, planting and crop establishment, its costs of upkeep of immature areas are rather higher than on commercial estates due to the need to pay subsistence to a larger number of settler labor than would be needed on a commercial estate where the labor force is more closely related to upkeep requirements\. 4\.19 Forestry project costs are estimated at M$38\.1 million (US$12\.4 million)\. The costs are based on estimates supplied by Cantrans and in- clude a contingency allowance of 15 percent on plant, equipment and build- ings\. 4\.20 The following table summarizes the local currency, foreign ex- change and total costs for the settlement and forestry projects\. Further details are given in Annexes 7 and 21 respectively\.  - 14 - SUMMARY PROJECT COST ESTIMATES \.M$(million) \. \. \. US$(million) \. X Local Foreign Total Local Foreign Total Foreign ___\.__\._ Exchange Land Settlement FLDA Agricultural Development 35\.4 4\.6 40\.0 11\.6 1\.5 13\.1 11\.5 Settlers Housing 4\.9 - 4\.9 1\.6 - 1\.6 - Processing Facilities 1\.4 3\.5 4\.9 0\.4 1\.2 1\.6 75\.0 Management 10\.7 0\.4 11\.1 3\.5 0\.1 3\.6 2\.8 Contingencies 0\.9 0\.3 1\.2 0\.3 0\.1 0\.4 25\.0 Sub-total 53\.3 8\.8 62\.1 17\.4 2\.9 20\.3 14\.3 Government Roads and Water 7\.0 3\.3 10\.3 2\.3 1\.0 3\.3 30\.3 Social Infrastructure 4\.8 0\.6 5\.4 1\.6 0\.2 1\.8 11\.1 Sub-total 11\.8 3\.9 15\.7 3\.9 1\.2 5\.1 24\.8 Technical Services 0\.4 0\.2 0\.6 0\.1 0\.1 0\.2 33\.3 (Finance Director) _ _ _ _ Total Land Settlement 65\.5 12\.9 78\.4 21\.4 4\.2 25\.6 16\.5 Forestly Logging and road construc- tion equipment, build- ings and vehicles 1\.1 5\.9 7\.0 0\.4 1\.9 2\.3 84\.3 Processing equipment, buildings, power plant 6\.3 12\.5 18\.8 2\.0 4\.1 6\.1 67\.2 Working Capital /1 3\.1 - 3\.1 1\.0 - 1\.0 - Management Fee - 4\.8 4\.8 - 1\.6 1\.6 100\.0 Contingencies 1\.6 2\.8 4\.4 0\.5 0\.9 1\.4 63\.6 Total Forestry 12\.1 26\.0 38\.1 3\.9 8\.5 12\.4 68\.2 Total Project 77\.6 38\.9 116\.5 25\.3 12\.7 38\.0 30\.0 Interest on Bank Loan (Land Settlement Project) 9\.2 9\.2 - 3\.0 3\.0 100\.0 Total Foreign Exchange Costs 48\.1 15\.7 /L Working capital consists of inventories of raw materials, goods and supplies required for the initial level of operations and subsequent expansion\.  - 15 - Proposed Financing 4\.21 Because of the different nature of the two projects, the dif- ferent terms proposed for the two loans, and because they would be carried out by different authorities, a separate Bank loan would be made for each\. This would also facilitate disbursements and project supervision\. It is proposed that the two loans would be made to the Government rather than directly to FlDA and SJSB\. The grounds for this are that, in the case of FLDA, it is not financially autonomous and requires Government subsidies for its operations; it is not possible therefore to establish conclusively that it would be able to directly repay the proposed Bank loan\. In the case of SJSB, the forestry operations should be profitable and enable SJSB to build up a strong financial position\. But considering the newness of the industry and the fact that SJSB is a subsidiary of MARA, which is financed mostly by Government appropriation, it is preferable for the loan to be made to Government\. Both loans would be on-lent to FLDA and SJSB on the same terms and conditions as the Bank loan\. 4\.22 Land Settlement_Proiect\. A Bank loan of US$13 million (M$39\.8 mil- lion) would be made to the Government for the settlement project to assist in financing project costs in the period 1970-76\. About M$17\.7 million (US$5\.8 million) would be for local currency costs\. The loan, equivalent to about 45% of total project cost, would be sufficient to bring about necessary im- provements in project organization and management\. The loan would be for a period of 25 years including a grace period of seven years, during which l interest estimated at M$9\.2 million (US$3\.0 million) would be financed by the loan\. The Government would on-lend to FLDA on the same terms\. The period of the loan is based on the settler's loan repayment periods, which would end 22 years after clearing in the case of oil palms and 24 years after clearing in that of rubber\. 4\.23 The remaining project costs would be met by the Government\. Man- agement costs would be met by Government grants unless, as explained in para 5\.18, produce prices are at a level which would permit settlers to contribute to scheme management costs\. Development costs, which are repayable by set- tlers, would be met by Government loans to FLDA on the terms set out in Annex 1, para 11\. The Government would also meet the costs of roads, water supply and social infrastructure, such as schools and health centers\. 4\.24 The following table summarizes the contribution to project finan- cing to be made by the Bank and the Government:  - 16 - Summary of Land Settlement Prolect Financing (M$ million) \. \.Government \. Bank Z Loans % Grants % Total FLDA Expenditures 30\.3 49 21\.7 35 10\.2 16 62\.1 Government Expenditures - - - - 15\.7 100 15\.7 Technical Services 0\.3 50 _ 0\.3 50 0\.6 Sub-total 30\.6 39 21\.7 27 26\.2 34 77\.4 Interest on Bank loan 9\.2 100 9\.2 Total 39\.8 45 21\.7 25 25\.9 30 87\.6 4\.25 Forestry Project\. A Bank loan of US$8\.5 million (M$26\.0 million) would be made to the Government for the forestry project\. Because the management contract had to be concluded and work begun on procuring equip- ment for the project without delay if valuable timber were not to be lost in land settlement clearing operations, an estimated total of US$450,000 will have been paid in management fees and some US$3 million committed on equipment contracts, of which some US$300,000 will have been paid, before the loan is signed\. Retroactive financing of these amounts is included in the proposed Bank loan\. This equipment is being procured according to Bank Guidelines\. Since the project should generate sufficient cash to repay the loan over a short period, the loan would be for a term of 12 years including a grace period of four years to cover the period of disbursement\. The Gov- ernment would on-lend to SJSB on the same terms\. The proposed Bank loan would finance the foreign exchange costs of the forestry project amounting to 68 percent of total project costs\. Interest on the loan would not be financed by the Bank as cash earnings from the project should be sufficient to meet interest payments from the first year of operation\. The statement of sources and application of funds in Annex 25 shows that because of the heavy incidence of expenditure in the first two years, additional financing estimated at M$10\.0 million would be required\. This would be provided by equity from MARA and Pahang State Government (para 5\.33) and the remainder would be met out of earnings\. The following table shows the proportions to be met by the Bank loan, equity, and earnings: Summary of Forestry Project Financing M$ million % Proposed Bank Loan 26\.0 68 Equity 10\.0 26 Earnings 2\.1 6 38\.1 100  - 17 - Procurement 4\.26 Land Settlement\. Tendering for contracts for land clearing and planting, buildings and housing construction would be on the basis of inter- national competitive bidding\. It is probable that, as in the first stage project, local contractors would be the successful bidders for these works\. Palm oil mill machinery and construction and other equipment and materials would also be procured through international bidding\. Much of the palm oil mill machinery and other goods are produced in Malaysia and a margin of protection of 15% or the customs duty, whichever is less, would be allowed to local industry\. 4\.27 Forestry\. Tendering for equipment and buildings for the forestry project would also be on the basis of international competitive bidding\. Cantrans would be responsible for preparing specifications, tender documents and contracts and for evaluating bids\. Apart from buildings and smaller machinery items which could be manufactured locally, most of the equipment would be imported\. Disbursement\. 4\.28 Land Settlement\. A schedule of estimated Bank disbursements is given in Annex 7\. Disbursements would be made against FLDA expenditures only and would follow the same procedures as Under Loan 533-MA\. Thus, for administrative convenience disbursements of 100% would be made against pay- ments to contractors for land clearing and planting, planting and other materials, buildings and house construction and palm oil mill construction\. The total is estimated at about M$25\.4 million (US$8\.3 million) including contingencies\. Disbursement would be made against shipping documents for equipment, materials and supplies or, if procured locally, against 70% of the on-site cost\. The total is estimated at about M$4\.8 million (US$1\.6 million)\. Disbursements would also be made against recruitment costs and salary for a minimum of two years of a Finance Director estimated at M$300,000 (US$100,000)\. Any surplus funds remaining in the loan account should be cancelled\. 4\.29 Forestry\. A schedule of estimated disbursements for the forestry project is given in Annex 21\. The Bank would disburse 100% of the cif cost of imported equipment and vehicles against normal documentation, i\.e\. suppliers invoices and evidence of payment and shipment\. Disbursements would also be made against the foreign exchange cost of the management fee paid to Cantrans\. Any surplus funds remaining in the loan account should be cancelled\.  - 18 - V\. ORGANIZATION AND MANAGEMENT A\. Land Settlement Project FLDA 5\.01 FLDA's organization chart is shown in Annex 1\. The Authority has a Board of thirteen directors including representatives of Ministries, private concerns and the Commonwealth Development Corporation\. The Chair- man of the Board is the Chief Executive Officer\. The next in line is the General Manager\. Since these are key positions, assurances were obtained during negotiations that the Bank would be informed and given an opportunity to comment prior to any changes in them\. 5D02 Recently FLDA has undergone reorganization\. This included the establishment of eight departments including a Finance Department\. Pre- viously the Authority's financial affairs were combined with general admin- istration under the then Deputy Chairman (Finance and Administration)\. As explained in paras 5\.21 to 5\.25, the financial administration has been deficient in certain respects and as a result both of FLDA's own recognition of the need to improve its financial management, and of the Bank's continued emphasis on this need, FLDA is to recruit a suitably qualified and experi- enced Finance Director\. UNDP agreed to help find a candidate and finance \.Lis salary but responses to UNDP's advertisements were unsatisfactory\. FLDA is therefore trying to recruit a candidate by other means and the costs of recruitment and salary for a minimum of two years are provided for under the proposed loan\. The initial appointment would be a condition of effec- t\.Lveness of the loan and would be subject to the Bank's agreement\. Assur- ances were obtained during negotiations that subsequent appointments would be made in consultation with the Bank\. While FLDA is experiencing problems in its administration and financial management, largely due to its rapid growth, the standards of its field operations remain satisfactory both in terms of quality and cost control\. Jengka Division 5\.03 The Jengka Division was created to implement the Jengka Triangle Program and has a large measure of autonomy and maintains its own accounts\. It has been responsible for carrying out the first stage project and it will also carry out the second stage project\. An organization chart of the Jengka Division is shown in Annex 8\. 5\.04 The Jengka Division is headed by a Director who is responsible to the Jengka Management Comwittee\. The latter comprises the Chairman and General Manager of FLDA, representatives of the Ministry of Finance, Minis- try of National and Rural Development, MARA, the Pahang State Government and the Public Works Department\. The Division Director is also a member\. The Management Committee is responsible for policy decisions concerning the Triangle's development and for implementation of the project agreements between FLDA and the Bank\.  - 19 - 5\.05 The Director is supported by a Senior Administration Officer and a staff of specialists at Division headquarters\. They are organized in five departments - Administration, Lands, Planting, Settler Development and Engineering\. The Division also draws on specialist staff and advisers at FLDA headquarters\. The Senior Planting Officer is responsible for manage- ment of the first stage of Jengka and a Second Senior Planting Officer will be appointed in 1971 to manage the second stage\. Assurances were obtained during negotiations that the initial appointment of the second Senior Planting Officer would be satisfactory to the Bank and that the Bank would be consulted before any subsequent changes in the appointment\. 5\.06 At scheme level a similar system of organization is employed, as has proved very effective on other FLDA schemes with the difference that a Settler Development Officer is attached to each scheme\. These officers and the Division's settler development department will train settlers in agricultural and community development and operation\. 5\.07 At present Jengka Division headquarters are in Temerloh where office accommodations and temporary housing have been obtained\. Permanent headquarters are being constructed over the period 1969-1972 at Sungei Tekam, on the northern boundary of the project area\. Research and Training 5\.08 The FLDA Research Center is located at Sungei Tekam\. The main research priority at present is the development and production of oil palm planting material (para 4\.15)\. Experiments are being carried out on crop diversification, and the project provides for commercial scale trials (para 4\.16)\. The Research Center will provide FLDA with soil and foliar analyses and other technical services\. In March 1970 there were six full time re- search officers and this number will be increased as the center develops\. 5\.09 FLDA recruits cadet managers direct from university, trainee assis- tant managers from Serdang Agricultural College, and field assistants at secondary school certificate level\. The latter receive training at the FLDA training centre\. There are ample recruits at all levels and no diffi- culties are foreseen in keeping up with future expansion\. However, the rate of development of FLDA has strained its sources of experienced manage- ment\. Cadet managers require a minimum of two years of in-job training and assistant managers about five years before they are considered qualified to become managers\. For its program of 50,000 acres development each year, FLDA requires 10 managers, 20 assistant managers, and 100 field assistants\. Potential managers for the next five years, therefore, should already be in employment\. Over the next two or three years, experienced managers are likely to be in short supply, but steps are being taken to gear recruitment to long term requirements\. Current plans are based on a 1969 report by an FAO consultant on FLDA's training needs\. 1/ FLDA has a training division which is responsible for running the Authority's existing training center\. 1/ Assessment of Staff and Settler Training Needs of FLDA (FAO ref\. TA 2724) by Dr\. M\. M\. Elgabaly\.  - 20 - It will shortly establish two more centers\. The Jengka project has been assigned staff of satisfactory calibre\. 5\.10 In addition to project management training there is also a need to improve settler training\. FLDA has experienced difficulties in main- taining husbandry standards in cases where settlers, with little or no agricultural experience, take over the running of their individual rubber holdings\. The greatest danger to the project from inexperienced settlers ;is in the exploitation of rubber bark reserves\. This problem is receiving close attention from FLDA management and is watched carefully by Bank supervision missions\. Its solution is the training of settlers to appre- ,ciate the dangers of uncontrolled exploitation of bark reserves, and this would be done by the Settler Development Officers\. Settlement Procedures 5\.11 A full description of settlement operation and administration is given in Annex 9\. 5\.12 Settler Selection\. Settlers are selected from all parts of M4alaysia though 50% of Jengka settlers must come from the State of Pahang provided they have the minimum qualifications which include being a Malaysian citizen, married, healthy, between the ages of 18 and 35 and the owner of less than two acres of land\. Selection is in two stages - settlers are Eirst interviewed in their home district and a final selection is then made at FLDA headquarters on the basis given in Annex 9\. 5\.13 Settlers' Agreements\. On arrival at a scheme, the settler signs the first part of his agreement under which he agrees to work under the direction of FLDA on the development of the scheme\. At the end of the fEifth year after palm planting, or the seventh year after rubber planting, the settler, provided his performance is satisfactory, signs the second part of his agreement, which changes his status from, in effect, an employee of the Authority to a smallholder\. In the case of rubber, he is allocated a specific 10 acre lot and is registered as an occupier in expectation of title\. In the case of oil palms, the settler is allocated a specific 10 acre lot after five years of production, and he may then choose whether to work individually or participate in a number of lots on a cooperative or communal basis\. When a rubber or oil palm settler has paid off his loan, the State will alienate the holding to the settler on a 99-year lease, less the period elapsed\. 5\.14 While the settler's loan is outstanding, his holding is adminis- tered by FLDA\.- The settler must sell all latex or ffb to factories or mills specified by the authority and he receives payment from the Authority after deductions have been made for transport and processing costs, his loan and other charges\. Each settler's loan account is debited with the cost of his house, the development of his holding and any subsistence payments or other charges, e\.g\., for tools\. Interest at 6-1/4%, the standard rate on all FLDA schemes, is charged and capitalized during the development period\.  - 21 - This interest rate, which falls between the interest charged by the Gov- ernment at 5-1/2% and the current interest rate on Bank loans, is lower than the present commercial cost of money in Malaysia of about 8%\. The loans are repayable over fifteen years commencing in the sixth year after palm planting and the eighth year after rubber planting\. Tables 1 and 2 of Annex 9 show the buildup of typical loan accounts\. Other charges in- clude land rents which are transmitted to the State Government, a replant- ing cess and a management charge\. 5\.15 The settlers' agreements which were approved under Loan 533-M4A required that Jengka settlers bear the full management costs incurred by FLDA in both the development and operating phases of the project even though incremental export duties and cesses would more than cover management costs\. Wlen these arrangements were agreed between the Bank, FLDA, and the Government, price projections then being used indicated that Jengka settlers would be able to meet these costs in full and retain adequate incomes\. Since that time, forecast palm produce prices have weakened, and indications are that if Jengka oil palm settlers pay manage- ment costs in full, resulting incomes would give inadequate incentives\. Rubber settlers could not directly pay full managenent costs if the prices for rubber forecast by the Bank obtain, and if duties and levies are main- tained at present levels\. 5\.16 Because of the new circumstances, the method of recovery of management costs has been changed\. Instead of a fixed charge on settlers' production, which was to be levied on Jengka settlers only, assurances were obtained during negotiations that FLDA would, by September 30, 1970, levy a cess at a level acceptable to the Bank on all settlers\. This cess will be geared to settlers' incomes and will vary with produce prices and the size of settlers' holdings\. It will also take into account the Govern- ment's policy that settlers should receive an average annual income of not less than M$3,600 after meeting all charges and loan repayments\. 5\.17 The method of applying the cess and the rates to be charged were agreed during negotiations\. For settlers on 10-acre holdings, the oil palm levy would start at M$1/ton of ffb at a palm oil price of M$440/ton FOB (M$498 or US$166/ton CIF) and would increase by M$1/ton up to a maximum of M$9\.34/ton of ffb\. The rubber levy would start at 1 M cent/lb at a rubber price of 65\.4 M cents/lb FOB (69\.4 M cents or 23\.1 US cents/lb CIF) and would increase by 1 M cent up to a maximum of 6 M cents/lb\. 5\.18 With the future prices for palm products and rubber assumed in this report, no cess will be payable (at present prices, oil palm but not rubber settlers would pay the cess)\. However, as Annex 16 shows, the Gov- ernment would indirectly recover all project costs, including management but excluding social infrastructure, through export duties and cesses on project production, loan repayments and import duties and other taxes\.  - 22 - FLDA's Finances and Accounts 5\.19 Jengka\. The arrangements under Loan 533-MA included the estab- lishment of separate accounts for Jengka and the preparation of quarterly and annual accounts for the project\. These accounts are satisfactory and Annex 10 shows the audited balance sheet as at December 31, 1968\. FLDA's estimated sources and applications of funds for the second Jengka project are shown in Annex 11\. At the end of the period from the commencement of the project until settlers' loans are repaid, 1969-1995, there should be a cash surplus from the project of about M$7\.8 million, which is the approx- imate amount required to meet repayments after 1995 on Government loans\. 5\.20 FLDA\. FLDA's overall financial position is described in Annex 1 in which Table 2 shows the summarized balance sheets for 1964 through 1968\. FLDA's expenditures are financed in two ways - by Government loans (in- cluding relending of Bank loans) for settlement development and by Govern- ment grants for administration costs\. The terms of current loans, which vary between oil palm and rubber schemes, are given in Annex 1, para 11\. FLDA accounts to the Government for its expenditures on loan and admin- istration accounts and the Government provides funds for both by way of budget allocations\. No difficulties have been met in obtaining funds from the Government promptly\. 5\.21 Two balance sheets are prepared, one for administration account (grants from Government for FLDA administration) and one for loan account (loans from Government for settler development which eventually will be repaid by settlers)\. Separate balance sheets are prepared for each scheme\. The form of FLDA's annual accounts hitherto has not clearly shown either its financial position or expenditure on its activities\. Expenses have not been allocated properly and amounts recoverable from settlers have not been separated from other development expenditures\. The delay, discussed below, in completing settlers' loan accounts has prevented showing the loans made to settlers, and these will be shown when settlers' accounts are completed\. 5\.22 So that FLDA's annual accounts show clearly its financial position and operating results, assurances were obtained during negotiations that FLDA accounts would be prepared in a form satisfactory to the Bank\. In future: (a) An annual consolidated balance sheet will be prepared showing FLDA's overall financial position; (b) Amounts due from settlers will be shown when settlers' ac- counts are completed; (c) The annual accounts will show the results of FLDA's activi- ties for the year, including proper allocation of expenses and the profit or loss on self-contained operations such as palm oil mills, rubber factories, and retail shops\.  - 23 - 5\.23 There have been prolonged delays in preparing settlers' accounts for schemes other than Jengka and only a few are completed although a nunmber of schemes are in production\. This has been due in part to delays in complet- ing the scheme accounts on which settlers' accounts are based\. The annual accounts for FLDA have also been late in preparation\. To bring settlers' accounts up-to-date as quickly as possible, FLDA is employing its auditors to assist in accounting and clerical work, and assurances were obtained during negotiations that settlers' accounts for all areas for which settlers had begun loan repayments by December 31, 1968, would be completed according to a timetable agreed with the Bank, and that other settlers' accounts would be completed promptly thereafter\. 5\.24 A further important deficiency in ELDA's accounting system is the absence of management accounting and budgetary control procedures\. One of the first duties of the new Finance Director (para 5\.02) would be to in- troduce such procedures and then, on the basis of expenditure budgets and estimated receipts from settlers, prepare cash flow forecasts so as to assess FLDA's future financial position\. Assurances were obtained during negotiations that such forecasts will be submitted to the Bank by June 30, 1971\. 5\.25 Although as indicated above, much remains to be done to improve FLDA's financial management, the Authority has made progress in this respect since the last loan was appraised\. Early in 1968 FLDA appointed Public Administration Service (PAS) of Chicago to review its financial and general administration\. As a result of the PAS recommendations, the accounts de- partment was reorganized and with assistance from PAS computerized processing of settlers' accounts has been introduced\. These measures together with the appointment of a Finance Director, and the emphasis now laid by FLDA's senior management on improving the financial administration, should lead to considerable improvement\. Audit 5\.26 The FLDA audit is carried out by Azman, Wong, Salleh & Co\., a Kuala Lumpur firm\. The audit arrangements are satisfactory but the scope of the work carried out has been limited in the past in that it did not include some of FLDA's activities such as mill, factory and shop operations, and included only a short form of report\. These activities are now being audited by Peat, Marwick, Mitchell & Co\., and assurances were obtained during negotiations that the audit report would be in a form satisfactory to the Bank\. Assurances were also obtained that the auditors would be acceptable to the Bank\. Under Loan 533-MA independent auditors satisfactory to the Bank were required to be appointed for the Jengka project and Peat, Marwick, Mitchell & Co\. were appointed in September 1969\. B\. Forestry Project 5\.27 A new company, Sharikat Jengka Sendirian Berhad (SJSB), has been formed to carry out and operate the forestry project\. Annex 22 shows SJSB's  - 24 - organization chart\. The Board of Directors will have not less than 3 or more than 15 members\. Fourteen directors have been appointed; they include representatives of MARA, Ministry of Rural Development, Treasury, Pahang State Government, Pahang Development Corporation, and FLDA\. A former MARA official has been appointed Managing Director\. An Executive Committee has been formed to manage the day-to-day affairs of the company; it has 7 mem- bers including the Deputy Chairman and Managing Director of SJSB, and re- presentatives of the Treasury, Pahang State, MARA and FLDA\. 5\.28 The project will be carried out and operated initially by Cantrans under a management agreement with MARA which was signed in September 1969 after two years of negotiations\. In return for a management fee of Can$1\.7 million (M$4\.8 million), Cantrans will supply for a period of four years starting October 1, 1969, consulting engineers, project management, purchas- ing, financial and other technical services, and in general establish and operate logging and timber processing in the project area\. Cantrans will also train Malaysians locally and in Canada with a view to their being able to take over at the end of the four years\. 5\.29 As the organization chart shows, Cantrans personnel will fill the important executive posts below Managing Director including Project Manager, Financial Controller, Purchasing Officer, and heads of the Logging and Pro- cessing divisions, who will be supplied by Charnell International Consult- ants Ltd\. and S\. G\. Gardiner Engineering Services Ltd\., both Vancouver firms associated with Cantrans\. Cantrans and its associates have carried out similar operations in other parts of the world, including Guyana and China, and are well qualified\. They have made good progress already in establish- ing the industry\. Because of the importance of experienced management, assurances were obtained during negotiations that SJSB would employ consult- ants acceptable to the Bank to carry out and manage the project and that the Bank would be consulted before any changes in the positions of Managing Director, Project Manager, and Financial Controller\. 5\.30 As explained in para 2\.17, previous forestry operations in the Jengka Triangle were on annual timber extraction licenses from the Pahang State Government\. In order to ensure an adequate supply of timber for the project, the State Government gave the following undertakings: (a) No licenses will be issued in the Jengka Triangle other than to MARA or SJSB and licenses will be issued to SJSB as and when required; (b) About 300,000 acres in the Tekam, Tekai and Berkelah Forest Reserves would be set aside for logging operations by SJSB\. Licenses for these areas would be issued to SJSB on comple- tion of logging operations in the Triangle\. (c) The forest areas will be adequately policed and supervised by the Pahang Forest Department\.  - 25 - Finances, Accounts and Audit 5\.31 SJSB's authorized capital is M$20 million of which up to M$13 million will be issued for cash subscriptions by MARA (M$10 million) and Pahang State Development Corporation (M$3 million)\. Should the amount required be less, the subscribers' cash contributions will be reduced pro- portionately\. An additional M$4\.5 million will be issued in non-voting shares to 1,800 timber license holders in the Triangle in exchange for logging rights\. These shares will be redeemed at par when SJSB has com- pleted logging operations over 90,000 acres\. 5\.32 SJSB's estimated operating results, sources and applications of funds and balance sheets for 1970 to 1974 are shown in Annexes 24-26\. The project is estimated to show an operating profit in the third year and a profit of M$7 million in 1974\. No provision has been made for income taxes in the period since, although SJSB will be liable to tax, the availability of tax depreciation allowances and possible pioneer status relief would eliminate any tax charge\. 5\.33 The statement of sources and applications of funds shows an estimated cash surplus of M$24 million by the end of 1974; annual debt service on the proposed Bank loan would be covered 2\.7 times by cash earnings\. The estimated balance sheet at the end of 1974 shows that the debt/equity ratio would be 43:57\. These forecasts assume equity contri- butions of M$10 million in cash as this is the estimated amount needed rather than the full M$13 million allowed by MARA and the Pahang State Development Corporation\. 5\.34 The act which established MARA, provided that all monies earned from any project financed from funds provided by Government shall be re- tained in a fund to be administered and controlled by MARA\. Apart from a general provision that MARA shall ensure that its total resources are sufficient to meet all sums properly chargeable to its revenue account, in- cluding depreciation and interest, MARA can dispose of the fund in any manner consistent with its purposes under the Act\. Therefore, in order to ensure that sufficient funds are retained from the operations of the forestry project to finance the construction of the project and meet debt service obligations, assurances were received during negotiations that SJSB would not distribute any profits before the Closing Date of the Bank loan without the prior approval of the Bank, and thereafter unless adequate provision has been made for meeting SJSB's obligations including debt service\. Assurances were also obtained that SJSB would not incur any in- debtedness over US$100,000 in the aggregate without the prior approval of the Bank\. 5\.35 Under the agreement between Cantrans and MARA, Cantrans has appointed a project controller to set up, control and supervise all accounts of the project, control all expenditures, manage all bank accounts, and in general undertake financial direction of the project\. He will also prepare, not less than quarterly, comprehensive financial reports on the project\. Assurances were obtained during negotiations that copies of such accounts would be transmitted to the Bank\. Assurances were  - 26 - also obtained that the accounts would be audited annually by a firm of auditors satisfactory to the Bank and that copies of the accounts and auditors' report would be sent to the Bank not later than four months after the close of each financial year\. VI\. PRODUCTION\. MARKETS, PRICES AND OPERATING RESULTS A\. Yields and Production Land Settlement 6\.01 Project yield estimates are based on current FLDA and commercial experience\. Annex 12 shows the estimated annual yields per acre from oil palms and rubber\. At full production the project would yield some 36,000 tons of palm oil, 8,000 tons of palm kernels and 9,000 tons of rubber a year\. These figures compare with estimated total Malaysian production in 1975 of 750,000 tons of palm oil and 1\.5 million tons of rubber\. Forestry 6\.02 The logging unit would have an annual output of 175,000 tons by 1970/71 when it would reach full production\. Of this approximately 108,000 tons would be utilized by the sawmill and plywood mill the remainder being sold locally or exported\. The annual output of the sawmill at full produc- tion would be 41,700 tons and that of the plywood mill 60 million sq ft, 1/4 inch basis\. B\. Markets and Prices Oil Palm 6\.03 Present FLDA oil palm production is marketed through existing commercial channels\. However, by the time FLDA's current oil palm devel- opment plans come to fruition, it will be the largest producer of palm oil and kernels in Malaysia and the world, and the Authority considers that for commercial and economic reasons it should market its palm produce indepen- dently\. Under Loan 533-MA, it was agreed that FLDA should engage consult- ants to study its palm oil marketing needs and that decisions on marketing policy would be taken only following consultation with the Bank on the consultants' and FLDA's recommendations\. The Asian Development Bank (ADB) has agreed to finance the study\. 6\.04 The ADB is also assisting in the finance of two palm oil mills and the loan agreement with ADB stipulates that FLDA will develop its own bulk installations and handling facilities at Port Swettenham\. Construc- tion is to start in 1970\. Port Swettenham is experiencing considerable congestion problems, and expansion of the port, financed in part by German  - 27 - bilateral assistance, is under way\. Since the development of transportation to port and port facilities are most important to the project, assurances were obtained during negotiations that the Government would consult with the Bank on any plans for meeting the project's transport and storage requirements\. Similar assurances were obtained for the forestry project\. 6\.05 The market prospects and expected price trends for palm oil and kernels are discussed in Annex 13\. Until recently the growth in supply rate of palm oil was low compared with other fats and oils amounting to only 1\.3% per annum between 1954/56 and 1965/67\. However, current ex- pansion plans are expected to increase the annual growth rate to over 5% between 1965/67 and 1980, and to raise the share of palm oil production in total fats and oils from about 3% in 1965/67 to 5%\. Much of the addi- tional world supplies of palm oil will be exported and absorbed by the international market\. In the light of expected declining world market prices for nearly all major fats and oils and the need for palm oil to increase its share of total usage, it is estimated that palm oil prices will fall by the mid-1970's from the average 1969 price of US$179 per ton into a price range of US$155 - US$165 per ton cif\. For cal- culation of project earnings a price of US$160 per ton cif (equivalent to M$480) has been used but returns from the project have been tested for sensitivity at prices ranging from US$110 (M$330) to US$185 (M$555) per ton cif, see Annex 17 Chart 1\. The demand for palm kernel oil is more inelastic than for most other fats and oils and although prices will prob- ably fall they are not expected to fluctuate widely\. A price of US$136 (M$408) per ton cif for palm kernels has been used in this report; this compares with an average 1969 price of US$181 per ton\. Rubber 6\.06 Present arrangements for marketing rubber through commercial channels are satisfactory\. FLDA is considering the possibilities of directly marketing its rubber produce but in view of the already heavy commitments of FLDA's management resources and the need to evaluate fully any change in the present arrangements, assurances were obtained during negotiations that the Bank would be consulted before any change is made\. 6\.07 The market prospects and price trends for rubber are reviewed in Annex 14\. In the period to 1975, consumption of rubber, natural and synthetic, outside the Communist countries is expected to grow at 6\.5% per annum compared with a rate of 6% per annum from 1950/52 to 1968\. If natural rubber is to retain its share of total consumption, prices for natural rubber will have to become more competitive with prices of syn- thetic rubber\. The present cost of producing polyisoprene, which is highly competitive with natural rubber, is around 21 US cents per pound but tech- nical developments might result in a reduction in cost to around 12 US cents per pound\. It is expected that, based on assessments of future cost prices of synthetics, the price of natural rubber could fall to about 16 US cents per pound by the mid-1970's from the 1969 average price  - 28 - level of 26\.2 US cents\. Over the longer term the price may continue at about 16 US cents or fall further to about 12 US cents per pound, but the latter appears to have low probability\. For this report a constant price of 16 US cents per pound cif (equivalent to 48 M cents per pound) is used but returns from the project have also been calculated at prices ranging from 12 US cents (36 M cents) to 20 US cents (60 M cents) per pound, see Annex 17 Chart 2\. :Forest Products 6\.08 Jengka forest products are currently being marketed by East Asiatic Company (the Malaysian subsidiary of a Danish company) under an interim agency agreement concluded in March 1970 with MARA\. This agree- ment will remain in force until a long-term agreement is concluded\. MARA iLssued invitations in March 1970 for provision of long-term marketing services and MARA's Board of Directors is considering several submissions\. Based on the recommendations of a UNIDO expert and Cantrans, the Directors- designate of SJSB have proposed the appointment of East Asiatic\. The agree- ment would be for 10 years (with termination earlier on prior notice by either party) and would provide for the establishment of a Joint Marketing Corporation owned equally by SJSB and East Asiatic\. The Marketing Corpora- tion would handle all local sales and East Asiatic itself all export sales on 5% commission\. Arrangements satisfactory to the Bank, such as the fore- going, are required to be concluded prior to effectiveness of the Loan\. 6\.09 The market prospects for Jengka forest products are examined in Annex 27\. Surveys and studies by FAO and other qualified agencies, in- cluding the Bank, indicate an increasing world deficit in industrial wood, particularly of broad leaved tropical hardwoods such as would be produced under the project\. The shortage is expected to result in higher average prices since it could be met only by exploiting reserves of hardwoods distant from convenient shipping points, and by the increased use of species not commonly utilized at present\. The Jengka project would benefit from this since it would be located close to the national road and rail network providing transportation to Port Swettenham and Singapore\. An ongoing UNDP financed study of forestry and forest industries development in Malaysia concludes that the demand for West Malaysian timber, in both log and processed form, from both the domestic market and export markets in North America, the United Kingdom, Japan and Australia will outstrip supply by 1972\. Thereafter exports, which are expected to increase by 10% annually to 1972, should decline sharply due to increasing domestic demand, and a basic shortage of timber\. 61\.10 In project projections an initial price of M$45/ton and a long- term price of M$48lton have been used for log sales\. These are based on existing prices for Jengka species and are conservative since they take no account of the almost inevitable future rise in tropical hardwood prices\. EIt is anticipated that disposal in log form will decline as the world deficit in broad leaved hardwoods develops and that the bulk of project sales will be in the form of sawn wood and plywood\. Almost any species yielding satis- factory lumber can be exported as sawn wood provided that volumes are suffi- ciently large, and that steady supplies are available to accustom users to  - 29 - the characteristics peculiar to the species\. Project operations covering large areas of forest annualy should make even scarce species available in adequate quantity, and some 50% of timber available would be of well accepted species such as Keruing and Red Meranti which now make up about 80% of all Malaysian exports\. A broad range of ex-mill prices is anticipated for the species found in the project area, and an average ex-mill price of M$196/ton for both export and domestic markets is used in project calculations\. This is in line with prices now being obtained for a comparable range of species and grades\. 6\.11 The United States is the largest potential customer for Malaysian plywood and veneer\. Canada and the US are the only large customers for veneer at present, but restricted log exports from Southeast Asia could bring Japan, Taiwan and Korea into the veneer market\. A comparatively large domestic market, anticipated to run at about 100 million sq ft by 1975, the availability of species with adequate technical qualities for plywood and species with the attractive appearance necessary for facing export plywood should facilitate the disposal of project produced plywood\. In this report an estimated ex-mill price for plywood of all grades of M$200/thousand sq ft has been used\. Prices as high as M$260/thousand sq ft are obtained currently\. C\. Settlers' Income 6\.12 Because of fluctuating commodity prices and the difficulty of projecting prices over the long lifetimes of the two crops, it is hard to estimate what settlers will actually earn\. Settlers' incomes are also deter- mined by the size of holding that the average family can manage efficiently\. The maximum size of holdings of either crop that the average family can manage is about 10 acres and thus there is little scope for improving in- comes by increasing holding size without the employment of non-family labor\. 6\.13 Statements of estimated settlers income from oil palm and rubber holdings are shown in Annex 15\. At the prices assumed of M$480 (US$160) per ton cif for oil palm and 48 M cents (16 US cents) per pound cif for rubber, the settler's income from rubber would be considerably lower than that from oil palm, and because of the longer development period, the rubber settler's loan repayments would be higher\. Nevertheless, the annual net income from rubber of over M$1,600 in years 11-19 compares with about M$1,500 earned by the average estate worker\. The estimated income from oil palms would be much higher, with a maximum of M$4,400 and an average over the loan repayment period of about M$3,500\. 6\.14 While the difference between estimated settlers' incomes from the two crops appears extreme, quite minor price changes could change the pic- ture radically\. Thus an increase in the rubber price and a drop in palm oil price of 12\.5% in each case from Bank forecast levels would result  - 30 - in approximate equality of incomes from oil palms and rubber\. At the cur- rent rubber price, a settler's income would be about M$4,200 a year at full production and settlers are as keen to settle on rubber as on oil palm schemes\. In Malaysia the planting industry, which is vitally concerned with investment profitablity, considers that a fall in the price of rubber to 16 US cents per pound is less likely than a drop in palm oil price to below US$160 per ton\. For this reason FLDA and the Government is continuing to include rubber in its settlement programs and the plantation industry is still undertaking the replanting and new planting of rubber\. D\. Government Revenues 6\.15 Annex 16 shows that revenues to the Government from the land settlement project would exceed government outgoings on loans for develop- ment, grants for administration and management, and road construction and maintenance\. Government revenues would mainly comprise loan repayments from FLDA and export duties and cesses on oil palm and rubber\. 6\.16 Most of the cash earnings from the forestry project, which are estimated at over M$7\.0 million a year after debt service from 1974, would accrue to the Government through MARA\. The Pahang State Government would receive revenues through dividends on the Pahang State Development Corpor- ation's holding, and in royalties and premiums which by 1974 would amount to about M$1\.8 million a year\. VII\. BENEFITS AND JUSTIFICATION Land Settlement 7\.01 The project would produce substantial economic and social bene- fits through the settlement of some 3,000 families and the establishment of high-yielding crops\. It would provide employment and satisfactory in- comes for settlers who would be drawn from the large number of unemployed or underemployed peoples of Malaysia, and would utilize unexploited forest lands\. All production would be exported and the total value of exports over the life of the project is estimated at about US$160 million\. After all plantings come into bearing the average annual value of production based on the prices assumed for the report would be about US$7\.2 million - sufficient to cover debt service on the proposed Bank loan over five times\. 7\.02 Annex 17 shows the calculation of the economic rate of return on typical oil palm and rubber schemes\. Using CIF prices of M$480 per ton for palm oil, M$408 per ton for palm kernels and 48 N cents for rubber, the returns are estimated at 18\.3Z for oil palm and 11\.1% for rubber\. The financial rates of return are about 16% and 9% respectively\. The difference between the two returns appears high but the decision to plant rubber is justified by the following considerations:  - 31 - - sub-optimum yields would be obtained from oil palms planted on the areas scheduled for rubber since the soils of these areas are not suited to oil palms, and the consequent rate of return from oil palms would be about the same as that from rubber; - while the rubber areas could be left under forest, no returns would be obtained from this land during the next 50 years or so - the time needed for the forest to regenerate a commercial volume of timber following the exploitation envisaged under the forestry project; - Government plans for settling large numbers of un- employed or underemployed persons on the land could not be achieved if rubber were excluded from settle- ment programs; - experience on other FLDA schemes has shown that rubber is well suited to the capabilities of settlers and method of settlement\. 7\.03 To test the sensitivity of the rates of return to variations in prices, the returns have been calculated at prices ranging from US$110 (M$330) to US$185 (M$555) per ton for palm oil and from 12 US cents (36 M cents) to 20 US cents (60 M cents) per pound for rubber\. The returns are plotted in the charts to Annex 17 and are summarized below: Oil Palm Rubber US$/ton % US cents/lb Z 110 9\.8 12 7\.8 135 14\.4 14 9\.3 160 18\.3 16 11\.1 185 21\.2 18 12\.7 20 14\.0 Forestry 7\.04 The forestry project would yield substantial economic benefits, would provide employment for about 1,200 people, would systematically and efficiently exploit the forest resources in the project area and would provide net foreign exchange earnings estimated at US$32 million over the period to 1980\. Furthermore, the establishment of an efficient and profit- able forestry complex in the Jengka Triangle together with the development of markets for Malaysian forest products could lead through its demonstra- tion effect to better utilization in future of Malaysia's other forest resources\.  - 32 - 7\.05 The calculation of the economic rate of return on the project, which is similar to the financial rate of return is shown in Annex 25\. It is based on project earnings for the period to 1980, by which time the processing machinery would be near the end of its useful life, and on the price assumptions given in paras 6\.10 and 6\.11\. The rate of return is estimated at 29\.2%\. VIII\. RECOMMENDATIONS 8\.01 The project is technically, economically and financially sound and suitable for Bank loans totalling US$21\.5 million, US$13 million being for the Second Jengka Land Settlement Project for a period of 25 years including 7 years grace, and US$8\.5 million for the Jengka Forestry Project for 12 years including 4 years grace\. The main assurances obtained during negotia- tions were: (a) Land Settlement Project (i) that the Bank would be informed prior to any changes in positions of Chairman and General Manager (para 5\.01) and Finance Director (para 5\.02); (ii) that FLDA would, by September 30, 1970, levy a cess on all settlers at a level acceptable to the Bank for re- covery of scheme management costs (para 5\.16); (iii) that FLDA would prepare and submit to the Bank a forecast of its cash flows by June 30, 1971 (para 5\.24)\. (b) Forestry Project (i) that SJSB would employ consultants acceptable to the Bank and inform the Bank before any changes in the positions of Managing Director, Project Manager and Financial Con- troller (para 5\.29); (ii) that SJSB would not distribute any profits before the Clos- ing Date without the prior approval of the Bank and there- after unless adequate provision has been made to meet its obligations; also that SJSB would not incur debt over $US100,000 in aggregate without the prior approval of the Bank (para 5\.35); 8\.02 The following would be conditions of effectiveness of the Bank loans: (i) Land Settlement Project\. Appointment of a Finance Director satisfactory to the Bank (para 5\.02); (ii) Forestry Project\. Conclusion of long-term marketing arrangments satisfactory to the Bank (para 6\.08)\.  AflXEX 1 Page 1 MALAYS IA SECOND JETIG11h TRIAITGLE PROJECT THE FEDERAL LAND DEVELOPmENT AUTHORITY BACKGROUND 1\. The Federal Land Development Authority (FLDA) was established under the Land Development Ordinance of 1956 with the duty to "promote and assist the investigation, formulation and carrying out of projects for the develop- ment and settlement of land within the Federation\." 2\. From 1957 through 1960 FLDA's functions were twofold\. First, it made available Federal resources, principally financial, to State Governments for approved land development schemes, of which 114 were financed by FLDA in this period\. Second, the Authority itself undertook the development of 15 schemes totalling some 15,000 acres on which 2,900 settler families had been settled by the end of 1960\. 3\. Partly because of difficulties of coordination between the many State and Federal departments and agencies responsible to their several ministries, progress was slow\. However, many important lessons were learned and, when in 1961 the Federal Government launched its development program under the 1961-1965 five-year plan, in which the highest priority was given to rural development, FLDA was chosen as the chief agency for planning and implementing settlement schemes\. Thus FLDA abandoned the role of "loans board" for State Corporations and became directly responsible for the planning, development, financing, and administration of schemes and for coordinating the work of all Government agencies associated with it in settlement develop- ment\. The FLDA organization was strengthened by the addition of technical and administrative staff, the reorganization of head office sections and the establishment of a regional office in each of the States of West Malaysia\. 4\. FLDA's performance since its reorganization has been impressive and Table 1 shows the rapid increase in planted acreage to a total of 257,000 at the end of 1969\. The Authority's administration, particularly financial, has not kept pace with this growth, but a recent reorganization together with the appointment of a Finance Director and the attention now being paid by FLDA's top management to its administrative and financial problems should lead to an early improvement\. In all the FLDA is fulfilling a vital role in agricultural development, the settlement of people, and the creation of jobs\. ORGANIZATION 5\. FLDA's new organization is shown in Chart 1\. Previously there were two Deputy Chairmen, one responsible for Development and the other for Administration (including Finance), who reported to the Chairman\. In practice, however, some departments tended to report directly to the Chairman\. The new   ANNEX 1 Page 2 organization should be more efficient through increased delegation, and more clearly defined functions and functional responsibility\. 6\. The Ministry of National and Rural Development is responsible for FIDA\. The Board of FLDA numbers 13 and includes representatives of appropriate ministries, private concerns and the Commonwealth Development Corporation\. There are three committees which help guide the Board: (a) technical in- vestigation and planning, (b) finance and (c) establishment\. 7\. The Chairman is the chief executive officer\. The present Chairman has been in the post for over 10 years\. NIext in line to him is the General Manager under whom there are nine departments - Finance, Administration, Projects, Settlement, Planting, Processing, Marketing, Research, and the Jengka Division\. Directors have been or will be appointed to all but Admin- tration, Projects, and Processing, which in the meantime work to the General Manager\. 8\. Also reporting to the General Manager are the Regional Offices, of which there are eight\. N6minally the Regional Secretaries, assisted by Group Managers, are responsible for the schemes in their regions but in practice the schemes are controlled by FLDA headquarters\. FIDA intends to increase the powers and responsibilities of the regional offices in future, probably on the pattern established for Jengka\. FINANICE 9\. Finance for FLDA is obtained, except for the on-lending of Loan 533-MA and an initial loan from CDC, from Governmient budget allocations\. In addition, funds are allocated, for roads and water supply for example, which are not within FLDA's accounting but which are expended by the Government agency concerned wsith the agreement of FIDA\. The Government budget allo- cations to FIDA are made in two forms - grants for Administration and loans for Settlement Development\. 10\. Summarized audited balance sheets for the five years 1964-68 are shown in Table 2\. As at December 31, 1968, the Government loan account totalled M$185\.7 million and the administration account M$52\.1 million\. FIDA's total capital, accumulated net income and reserves were M$277\.8 million, nearly three and a half times the total at the end of fiscal year 196k\. 11\. The terms of Government loans are as follows: (a) Schemes in existence at December 31, 1968: - Interest at 5%; - Interest free for first four years after drawing; - Simple interest for next six years; - Repayment over next 15 years\. (b) Nlew oil palm schemes after January 1, 1968: - Interest at 5 1/2%; - Interest free for first fcur years after drawing; - Simple interest for next two years; - Repayment over next fourteen years\.  ANNEX 1 Page 3 (c) New 'rubber schexis after January 1, 1968: - Interest at 5-1/2%; - Interest free for first four years after drawing; - Simple interest for next six years; - Repayment over next fifteen years\. 12\. The loan from CDC was signed in 1958 for an amount of M$5\.1 million\. Interest is at 6-3/4% and repayment is over 25 years commencing in March 1970\. 13\. M$ 5\.3 million was drawn under Loan 533-MA up to March 31, 1970\. Interest is at 6-1/41O and repayment is over 12 years after 5 years grace\. 14\. The terms of loans to settlers are detailed in Annex 9\. Interest is at 6-1/4% and repayment is over 15 years from the 6th year after planting of oil palms and the 8th year after planting of rubber\. ACCOUNTING ORGANIZATION AND SYSTEX 15\. FLDA's accounts are split between administration and loan items, the basic difference being that administration is paid for by Government grants while loan items, which include the costs of clearing, planting, upkeep, house-lot clearing, house construction and subsistence loans, are financed by Government loan and are repayable by the settlers\. The loan account is a consolidation of all development costs charged to schemes, and separate accounts are kept for each scheme\. 16\. FLDA's accounting organization and procedures failed to keep pace with its rapid expansion and it was not until recently that FLDA began to appreciate the need for a proper system of accounting and financial control\. Early in 1968 FIDA appointed Public Administration Service (PAS) of Chicago to carry out a "General Reconnaissance of the Financial and General Adminis- tration of FLDA\." The PAS report, subrni-\.ted in January 1969, concluded that the financial administration was inadequate to handle SPLDA's present and future financial and accounting problems\. The principal shortcomings were: (a) the breakdovm of bookkeeping procedures for current work on settlerst accounts, e\.g\., loans for housing and subsistence and loan repayments; (b) the lack of progress in allocating development costs to settlers and in establishing settlers loan accounts; (c) the delay in preparation of scheme accounts; (d) the lack of a costing and budgetary control system for FIDA as a whole, mills and factories, development, etc\.  ANNEX 1 Page 4 17\. As a result of the PAS report, FIDA's own growing awareness of the problem and successive reports and recommendations from Bank missions5 FLDA has taken the following steps to improve its financial administration and accounting system: (a) With the assistance of a member of PAS staff, it developed a system for computerization of the accounts\. The accounts will be processed by International Computer Leasing Kuala Lumpur\. (b) The financial functions were separated from administration and placed under the responsibility of anewly created position of Finance Director\. (c) The accounts department was reorganized along the functional lines recommended by PAS\. (d) A timetable was drawn up and agreed with the survey department and the auditors for completion of FLDA schemes and settlers' accounts\. According to this timetable, the audited FLDA accounts for 1969 will be completed by the end of August, 1970\. The audited scheme accounts for 1968 will be ready by July 1, 1970\. FIDA has also undertaken that settlers accounts for areas in respect of which settlers had by December 31, 1968 begun loan repayments will be completed according to a timetable agreed with the Bank and that settlers accounts will be completed promptly thereafter\. 18\. These steps should lead to a considerable improvement in FIDA's financial administration and accounting, but much will depend on the appoint- ment of the Financial Director\. The Finance Director will be responsible not only for bringing the financial accounting, including settlers' accounts, up-to-date but for developing and implementing a management accounting system and financial planning procedures\. Audit 19\. The accounts of FIDA and schemes other than Jengka are audited by Azman, Wong, Salleh & Co\., a local firm\. The Jengka accounts are audited by Peat, Marwick, Mitchell & Co\. Hitherto, the FLDA audit was not sufficiently comprehensive in either the work carried out or the scope of the report and the form of the final audited accounts could be improved considerably\. How- ever, all FLDA's activities, are now being audited and the scope of the audit report has been improved\.  ANNEX 1 Table 1 MALAYSIA 2ND JENGKA TRIANGLE PROJECT FLDA PLANTED ACREAGE Year Oil Palm Rubber Total 1957-1963 9,000 71,087 80,087 196b 17,000 93,b85 110,485 1965 27,000 101,960 128,960 1966 b1,000 116,402 157,b02 1967 59,000 125,5h16 18h,546 1968 90,000 127,890 217,890 1969 127,000 129,890 256,890 PLANNED 1970 157,000 1b9,090 316,090 1971 186,000 166,090 352,090 1972 217,000 185,232 tb02,232 1973 207,000 210,232 457,232 1974 277,000 235,232 512,232 1975 307,000 260,232 567,232 April 15, 1970  ANNEX 1 Table 2 MALAYSIA SECOND JENGKA TRIANGLE PROJECT FEDERAL LAND DEVELOPMENT AUTHORITY Summarized Balance Sheets (M$ million) As at December 31 1964 1965 1966 1967 1968 (at June 30) ASSETS Development Schemes: Loan Account 45\.4 72\.0 106\.4 138\.9 180\.6 Administration Account-/ 16\.7 25\.7 - - _ Interest Capitalized 8\.7 18\.2 17\.8 26\.5 38\.1 Total 70\.8 115\.9 124\.2 165\.4 218\.7 Fixed Assets (Net) o\.6 0\.9 4\.9 5\.1 5\.7 Accumulated Administration Expenditure 1/ 3\.5 5\.8 26\.3 36\.6 47\.2 Current Assets (Net) 6\.5 5\.8 9\.8 7\.8 6\.2 TOTAL ASSETS 81\.4 128\.4 165\.2 214\.9 277\.8 LIABILITIES Capital: Government Loan Account 43\.9 69\.6 107\.9 139\.0 185\.7 Government Administration Account I/ 23\.9 36\.2 37\.7 47\.1 52\.1 Comm\. Dev\. Corp\. Loan 5\.1 5\.1 5\.1 5\.1 5\.1 Government Loan (ex IBRD Loan 533-MA) - - - - 0\.7 Total 72\.9 110\.9 150\.7 191\.2 243\.6 Sundry Funds 0\.8 0\.5 0\.2 1\.9 2\.3 Accumulated Net Interest 7\.7 17\.0 14\.0 21\.1 30\.5 Unappropriated Revenue - - 0\.3 0\.7 1\.4 TOTAL LIABILITIES 81\.4 128\.4 165\.2 214\.9 277\.8 2/ As from 1966 Administration a'xpenditure was consolidated as one item\. April 8, 1970  MALAYSIA: SECOND JENGKA TRIANGLE PROJECT FEDERAL LAND DEVELOPMENT AUTHORITY ORGANIZATION CHART MINISTER OF NATIONAL AND RURAL DEVELOPMENT| TECNICL IVETIGATION AND PLANNIGCMMTE FINANC COMMITEE F L D A 3 0 A R D ESTABLISHMENTDCOMMITTEE \. JENGKA MANAGEMENT COMMITTEE |C H A I R M A N i ~~~~~~~AUDIT INSPECTORATE PERSONNEL AND MANA- SETYPROCESSING MGARKETING GEERONTDELPANTMENT FINANCE DEPARTMENT PROJECTS DEPARTMENT DEPARTMENT PLANTING DEPARTMENT DEPARTMENT DEPARTMENT FLDA RESEARCH CENTER JENGKA DIVISION PERSONNEL AND MANA- FINANCE DIRECTOR SETTLEMENT DIRECTOR PLANTING / PLANTING HEAD OF MARKETING RESEARCH DIRECTOR JENGKA DIRECTOR PEERSNN ELCAND FAN-DIRECTOR /ADVISER PLANNING RUBBER DIVISION RUIBrB FAg-o\.o\.y & Soils -Ad\. i\.Dept\. M'MENT DIVISION ACCOUNTS DIVISION PLANNING UNIT LANDS DIVISION RUSSER DIVISION SURUEE DIVISION RUBBER DIVISION P|thology - L-d Dept\. IT E~~~~~~~~ ~ ~~~~~~~~~~~~~~~~~~~~~~t-trcpj\.y Rop~i-ee;ng Dept\. Ag,i-olku,oI Ecocorics -Plcsotiep Dept\. | I \. l | Livestock l_ Settle, Dept\. P|_FLDA Etd Sect\. - Geerl Accosnting Sect\. SURVEY UNIT SETTLEMENT DIVISION OIL PALM DIVISION OIL PALM DIVISION -OIL PALM DIVISION MSls Gec\. Admin\.Sect\. -Cost Accoo\.tict\. G '- d Pub\. Relations Sect\. Fi-oociol Analysis Sect\. - Pytol Icd Settlers' ENGINEERING UNI eEt e Affoirs Sect\. Mi Sect\. A \. * nting Sect* I I I Settle, Dev\. Sect\. Bulkiog Iostolloticos\. - SpecaIl Accoucting Sect\. World Food Pnogram Sect\. III Field Accountin Sect\. I '1 PERSONNEL DIVISION PROCUREMENT UNIT SHOPS DIVISION LPetsoonel Sect\. l-Contract Sect\. LTroiciog Sect\. LFPrchosing Soot\. | KEDAH l l PERAK l l SELANGOR NGR MA MACLA N JOHORE |SOUTH JOHORE WEST PAHANG EAST PAHANG TRENGGANU REGIONAL REGIONAL REGIONAL REGIONAL REGIONAL REGIONAL REGIONAL REGIONAL SECRETARY SECRETARY REGIONAL SECRETARY SECRETARY SECRETARY SECRETARY SECRETARY SECRETARY VISITING VISITING SECRETARY VISITING VISITING VISITING VISITING VISITING VISITING MANAGER MANAGER VISITING MANAGER MANAGER MANAGER MANAGER MANAGER MANAGER SETTLER DEV\. SETTLER DEV\. MANAGER SETTLER DEV\. SETTLER DEV\. SETTLER DEV\. SETTLER DEV\. SETTLER DEV\. SETTLER DEV\. OFFICER OFFICER SETTLER DEV\. OFFICER OFFICER OFFICER OFFICER OFFICER OFFICER ENGINEER ENGINEER OFFICER ___________________________________________________________________________________ SURVEYOR SURVEYOR t > - Zs 'E x IBRD-4625 |  AT19IFX 2 Page 1 MALAYSIA SBCOND JENGKA TRIANGLE PROJECT The Jengka Triangle Master Plan 1\. The project proposed for Bank financing is the second sta\.e of a program for the development of the Jengka Triangle, the Master Plan for which was completed by Tippetts-Abbett-McCarthy-Stratton and Hunting Technical Ser- vices (TAMS3-Hunting) and was partly financed by a technical assistance grant from the Bank\. The first stage of the program is being financed in part by a Bank loan of US$14 million which was signed in April 1968\. 2\. The Jengka Triangle is in the State of Pahang, about 120 miles north- east of Kuala Lumpur in West Malaysia\. It lies between the towns of Jerantut- Maran-Temerloh near the Pahang River and near the railway from Kota Bahru to Singapore (see Map)\. It covers some 300,000 acres (470 square miles) of which about 136,500 acres are occupied or reserved in some way\. The remaining 163,500 acres available for development and being developed consist largely of undulating land divided by many streams and valleys\. The climate is typical of West Malaysia with an abundant and evenly distributed rainfall of about 90 inches per annum and mean daily temperature between 77°F and 800F\. 3\. The undeveloped part of the Triangle is mainly under natural rain forest which has been exploited haphazardly and inef'ficiently (para 2\.15 of main report)\. Rubber is produced on the periphery by smallholders and four rubber schemes are being developed by FLDA near the Triangle\. Oil palms are grown on the east side of the Triangle at an FLDA scheme and on an adjacent estate\. 4\. Limited commercial and social services are provided at the towns of Jerantut in the fioZth and Maran in the southeast\. Temerloh in the southwest is larger and is a centre of local government and urban services\. Prior to its development, the Triangle itself had no settled population\. 5\. The land capability assessments made by TAMS-Hunting indicated that about 93,000 acres would be suitable for either oil palms or rubber\. Some 71,000 acres are definitely suitable for oil palm and the remainder, because it has poorer soil and steeper slopes, would be more suitable to rubber\. The decision on which crop to plant also takes into account the price forecasts for each\. The consultants' study and the appraisal for the first Bank loan were based on considerably higher prices for palm oil than are now ccsidered likely (Annex 13), and the original land use recommendations will not now be followed\. In addition to the main tree crops, fish ponds, rice, orchard and garden crops will be developed by the settlers with technical assistance from FLDA and as part of the Stage II Project about 700 acres will be used at the Research Center, Tekam, for commercial scale trials of other crops, including\. animal foodstuffs such as maize and sorghum\.s 6\. The Master Plan provides for the phased development of the Jengca Triangle during the 12-year period 1966 to 1977 by means of FLDA supervised smallholder development supported by the provision of rural and urban infra- structure and services\. Under Stage I, a total of 33,110 acres have been cleared of which some 23,800 acres will be oil palms and 4,200 acres will be rubber (the original project consisted entirely of oil palms but on soil, topographic and price considerations, the last scheme consisting of 4,200  ANNEX 2 - p\. 2 acres was changed to rubber)\. The develcpment of 30, 390 acres under the proposed Stage II Project would leave some 35,000 acres for a further stage or stages\. 7\. It is estimated in the Master Plan that the population of the Jengka Triangle would total some 105,000 people distributed by occupation as follows: (a) Settlers and families on new land 59,000 (b) Settlers and families on existing FLDA schemes being developed and which could eventually be administered as part of the Triangle Program 13,000 (c) Rural support (FLDA staff, health) etc\.) 12,500 (d) Towns (Government and FLDA staff, commer- cial, forest industry workers, etc\.) 20,00 104l500 8\. Proposed educational and medical facilities were based on the Con- sultants recommended village size of 100 family units, whereas the Government and FLDA decided that, in conformity with other FLDA schemes, the villages would be of 400 family units\. Each village will contain a primary school, midwife clinic, community centre, religious building, recreation field, health sub-centre and police post\. There will be a secondary school for groups of two to three villages and it is also expected that upper secondary schools, a teachers' training college and a hospital will be added\. There will also be a full range of public services and utilities, including water supplies, sani- tation systems, power, telecommunications, and government administration in support of planned development\. 9\. Full development of the Triangle as specified in the Master Plan would require capital expenditure of about M$345 million (US$115 million) of which FLDA's share would be about M$240 million (US$80 million)\. Experience on the first two stages indicates that actual expenditure should approximate to these totals\. April 15, 1970  MALAYSIA SECOND JENGKA TRIANGLE PROJECT JENGKA STAGE I AGRICULTURAL DEVELOPMENT SCHEDULE 1966 1967 1968 1969 1970 J|A|S|O|N|D J|F|M|A|M|J|J|A|S|O N|D JjF!M|A M J J A S|O|N D J F MIA M J J|A SON D J|F|MAM|J|J|A|S|ON 1i77 ~PLANNED | SCHEME I PHASE I (3600 Ac\.) ,t:\.ACTUAL SCHEME 11 PHASE I (940 Ac\.) PN SCHEME I PHASE 11 PLANNED Felling 2135 Ac\. Planting 1935 Ac\. SCHEME II PHASE 11 777777/ PLANNED Pelling 3718 Ac\. PL\.LA\.L= Planting 3448 Ac\. SCHEME Il PHASE I P77 / PLANNED Felling 1153 Ac\. Planting 1153 Ac\. ACTTu SCHEME IV PHASE I PLANNED I Felling 1026 Ac\. JLAL_ Planting 1026 Ac\. SCHEME IIl PHASE 11 PLANNED Felling 2575 Ac\. Planting 2275 Ac\. SCHEME IV PHASE 11 PLANNED Felling 3002 Ac\. PLANNED Planting 2702 Ac\. - SCHEME Il PHASE III PLANNED Felling 1110 Ac\. -5f/tS sACTUAL:\. Planting 1000 Ac\. SCHEME V PHASE 1LANNED Fellinig 4132 Ac\. PLANNED\.CUL! \.- _ __ _ _ __ _ __ _ _ Plcanting 3832 Ac\. SCHEME VI PHASE I Felling 1206 Ac\.PLNE Plainting 1206 Ac\. ZM OA SCHEME VI I (Felling 4230 Ac\.) SCHEME Ill PHASE III 960 Ac, PLANNED SCHEME VI PHASE 11 2490 Ac\. I x Z FELLING OTHER WORKS __IR-42(R -ix PLANTING ESTIMATED IBRD- 4623 (2R)  MALAYSIA SECOND JENGKA TRIANGLE PROJECT JENGKA STAGE I VILLAGE DEVELOPMENT SCHEDULE SCHEME 161981969 1970 17 SCHEME___ J F FM|A|M|J|J|A!S|O|N|0 D|J FI MJ A|M|J| JAISJ O J FI MA|M| JA|SON D J F|MA|M|JA|SON SF|M| J|J|AlSON ACCESS ROAD VILLAGE ROAD 1 WATER SUPPLY \. \. SETTLERS HOUSES STAFF QUARTERS ACCESS ROAD VILLAGE ROAD 11 WATER SUPPLY , { SETTLERS HOUSES STAFF QUARTERS \. r ACCESS ROAD 00 \. j VILLAGE ROAD IV WATER SUPPLY SETTLERS HOUSES L STAFF QUARTERS* ACCESS ROAD j VILLAGE ROAD VI WATER SUPPLY SETTLERS HOUSES L STAFF QUARTERS PLANNED > ACTUAL ESTIMATED \. IBRD - 4612 (R) I w  ANNEX 4 MALAYSIA N SECOND JENGKA TRIANGLE PROJECT SCHEDULE OF LAND CLEARING AND PLANTING PROGRAMME SCHEME 1969 1]970 1971 1972 Felling VTilTAL Pqanting ----------acres---------------------- No\. 8 Clearing 1827 - - - 4827 - Village 292 - - - 292 - Planting (Rubber) - 4535 - - - - 4535 No- 9 Clearing - 3979 - 3979 - - Village - - 272 - - 272 - Planting (Oil Palm) - - 3707 - - - 3707 No\. 10 Clearing - 4359 - - 359 - - Village - - 281 - - 281 - Planting (Oil Palm) - - 1078 - - - 078 No\. 11 Clearing - 5681 - - 5681 - - Village - - 335 - 335 - Planting (Oil Palm) - - 5349- - - 5349 No\. 12 Clearing - - 729 - 1729 - - Village - - - 290 - 290 - Z7lanting (Rubber) - - - 1439 - - 1439 No\. 13 Clearing - - 3916 - 3916 - - Village - - - 271 - 271 _ Planting (Oil Palm) - - - 3645 _ - 3615 No\. 14 Clearing - - 932 - 1932 - _ Village - - - 300 - 300 - Planting (Rubber) - - - 4632 - 4632 Total Clearing 14827 14022 13577 - 32421 Village - 292 888 861 - 2041 - Planting - 1535 1313h 12716 - - 30385 Total Planting Oil Palm - - 131314 3645 - 16779 Rubber - 4535 - 9071 - 13606 30385 October 23, 1969  MALAYSIA SECOND JENGKA TRIANGLE PROJECT JENGKA STAGE II AGRICULTURAL DEVELOPMENT SCHEDULE 1969 1970 1971 1972 O|N|D J F M A M J J A S O|N D J F M A M J J A S 0 N D J F M A M J J A S 0 N D SCHEME VIII Felling 4827 Ac\. Planting 4535 Ac\. SCHEME IX 1 1 1 Felling 3979 Ac\. Planting 3707 Ac\. SCHEME X Felling 4359 Ac\. Planting 4078 Ac\. SCHEME XI 7 / *I** 1 FellIing 5684 Ac\. Planting 5349 Ac\. SCHEME XII \. P\.TN Felling 4729 Ac\. Planting 4439 Ac\. SCHEME XIIIlll * lfffff Felling 3916 Ac\. Planting 3645 Ac\. SCHEME XIV Felling 4932 Ac\. Planting 4632 Ac\. REFERENCE:-FELLING OTHER WORKS PLANTING IBRD - 4639(R)  ANNEX 5 MALAYSIA 2ND JENGKA TRIANGLE PROJECT SCHEDULE OF VILLAGE AND INFRASTRUCTURE DEVELOPMENT 1970 1971 1972 1973 SCH]ME 8 Settlerst houses 430 Wvater supply (reservoir 143,800 capacity) gallons Store 1 Office-cum-store 1 Staff quarters 6 23 ;Village roads (miles) 6\.80 SCHEVIE 9 Settlerst houses 370 Water supply (reservoir 111,100 capacity) gallons Store 1 Office-cum-store 1 Staff quarters 6 20 Village roads (miles) 6\.34 SCH3ME 10 Settlers' houses 407 Water supply (reservoir 121,000 capacity) gallons Store 1 Office-cum-store 1 Staff quarters 6 21 Village roads (miles) 6\.55 SCHEI 11 Settlers' houses 534 Water supply (reservoir 164,800 capacity) g6llons Store 1 Office-cum-store 1 Staff quarters 6 26 Village roads (miles) 7\.80  ANNEX 5 Page 2 1970 1971 1972 1973 1974 1975 SCHEIE 12 Settlers' houses 420 Water supply (reservoir 1h5,000 capacity) gallons Store 1 Office-cum-store 1 Staff quarters 6 23 Village roads (miles) 6\.76 SCHEME 13 Settlers' houses 364 Water supply (reservoir 110,000 capacity) gallons Store 1 Office-cum-store 1 Staff quarters 6 23 Village roads (miles) 5\.31 SCHEIE 14 Settlerst houses 440 Water supply (reservoir 120,000 capacity) gallons Store 1 Office-cum-store 1 Staff quarters 6 23 Village roads (miles) 6\.83 SCHEDULE OF PRIMARY AND SECONDARY ROADS Primary roads (miles) 2\.5 2\.5 2\.5 2\.5 2\.5 Secondary roads (miles) 1 2\.5 4 4 3 2\.5 April 15, 1970  MALAYSIA SECOND JENGKA TRIANGLE PROJECT JENGKA STAGE II VILLAGE DEVELOPMENT SCHEDULE SCHEME _________ 1970 1971 1972 1973 J FM A M J J A S O N D J F M A M J J A SON D J F MA MJJ ASON D J F MTAM J JASON ACCESS ROAD VILLAGE ROADS 6\.8 MIs\. Vill WATER SUPPLY SETTLERS HOUSES 430 Units STAFF QUARTERS " ACCESS ROAD VILLAGE ROADS 20\.6 MIs\. X WATER SUPPLY SETTLERS HOUSES 1311 Units STAFF QUARTERS ACCESS ROAD VILLAGE ROADS 18\.9 Mis\. xi] XIll WATER SUPPLY SETTLERS HOUSES 1224 Units STAFF QUARTERS > z IBRD-4614  ANNX 6 Table 1 2ND JENGKA TRIANGLE PROJECT Oil Palm Development Costs Per Acre (N) Year I1/ Year 2 Year 3 Year Total - (9 months) - Clearing 168 - - - 168 Planting 2/ 12b 30 5 - 159 Legume Cover Crop Establishment In- cluding Fertilizer 58 13 7 - 78 Terracing/Draining 29 - - 1 30 Roads/Bridges 29 2 77 6 U1t Upkeep Including Pests and Diseases - 83 8b 60 227 Fertilizing - 23 43 40 106 Total 408 151 216 107 882 NOTE: The above amounts cover labor and materials but exclude settler subsistence payments which would add M$ 36 per acre to the total\. This amount is included in FLDA's total development costs\. 1/ The years are the agricultural years from October through September\. In the bth year, harvesting begins in the 10th month\. 2/ Planting costs include nursery costs and replacing of failures in the field\. October 23, 1969  TAAL1AY3TA 2\D J_UGTA TRIANGLE PROJECT Rubber Development Costs Per Acre Year 1 1/ Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 1/ Total _2TVrmonths -- Clear ng I-9 - - $N)---1nT Planting 2/ 37 62 2 2 2 _ _ 105 Legume Cover Crop Establishment Including Fertilizer 82 18 100 Terracing/Draining 44 - 8 4 3 2 1 62 Roads/Bridges 9 1 _ - 20 - - 30 Upkeep Including Pests and Diseases - 94 101 122 98 64 45 524 Fertilizing - 9 25 26 32 31 31 154 Total 331 208 136 154 155 97 77 12158 Note: The above amounts cover labor and materials but exclude settler subsistence payments which would add M$ 106 per acre to the total\. This amount is included in FlDAts total development costs\. 1/ The years are the agricultural years from October through September\. In the 7th years tapping begins around the 10th month\. 2/ Planting costs include nursery and budding costs and replacing failures in rhe field\. October 23, 1969  ANNEX 7 XUALASIA 2UD JE£1K01 TRImIE PDJE0CT Project Cost ard D1eab ent Estimates PIoJECT COST E8TIMATES 1969 1970 1971 1972 1973 1974 1975 1976 2977 1978 1979 Total F1DA EXPENDITRES Agricultural Developmeat Land clearing - payments to contractors 354 2,4994 4,19 3,811c - - - - - - - io,,oo6 Fertiliers and paest cides 18 176 680 1,258 1,330 1,551 1,342 647 304 272 7,578 Planting materials 4 499 1,047 274 28 9 4 3 - - - 1,864 Other FLDA expenditnres - - 1,053 1,790 4,402 3,576 3,554 3,078 1,268 790 225 19,736 Total 354 3\.011 6,420 6l558 5,688 4\.915 5,109 h,423 1\.915 1,094 497 39,984 \.o\.naing and Eouselots Land clearing 9 51 108 98 25 - - - - 291 House copstruction - - 680 1L967 1,905 - - - - 4,552 Total 9 51 788 2,065 1,930 - - - _ - _ 4\.S43 Processing Facilities Palm oil dll- - - - 1,000 2,091 545 1,000 91 _ _ 4,727 A-osing for mill staff - - - - - 100 - 100 _ _ _ 2CO Tctal - - - - 1,000 2\.191 545 1,100 91 - _ 4,927 Management Vehicles end equipmct 10 122 154 298 326 205 215 249 122 91 24 1,b26 Housing and offices - 48 246 592 576 67 67 60 30 21 7 1,71_ Salaries and other current costs during development 13 160 542 965 1,131 1,131 1,131 1,038 637 519 330 7,5S7 23 330 942 18595 2\.033 1,403 1,413 1,347 789 631 361 i1,27 Contingencies 1/ _ 17 55 96 213 322 168 204 73 52 33 1,233 TOTAL PLDA EXCID1ING 21TEREST- 386 3,409 8,205 10,574 10,864 8,831 7,235 7,074 2,868 1,777 891 62,114 Interest and comedtm,nt charges financed by Bank loan - 400 600 1,000 1,500 1,700 1,900 2,100 - - - 9\.2C TOTAL FLDA I113C13DIN IUTEBEST / 386 3,809 8,805 11,579 12,36 10,532 9\.135 9,174 2,868 1,777 892 71,314 GO TE2NRUET EXPENiTrTUREJS \.rads 30 680 1,050 1,647 1,898 1,208 300 - - - - 6,913 Xater supply - 120 540 1,000 940 600 300 - - - - 3,-o Social infrastrecture 14 84 795 1,507 1,930 469 611 - - - _ 5\.41C TOTAL GOVERNOtNT 44 889 2,385 4\.159 9,768 2,277 1,211 - - - 15,723 TOAL FIDA AND G0VE-OMT 430 49693 11,190 159728 17\.132 _12808 10,346 9,174 2\.868 1,777 691 _ 7\._37 -3RD DISB1RSE¶ENT ESTlA\.TES (including contingencies) 100% of: Agri\.nItural development - land clearing, payxents to contractors 2,494 4,144 3,814 - - - _ 10,452 Planting materials 499 1,047 274 - - - - 1,320 other materiala - - 23 1,047 398 45 136 1,649 Housing and houselots 51 788 2,065 1,930 - - - 9,834 Processing facilities - - - 1,100 2,400 600 1,200 5,300 ,anagement hoosing and offices 48 222 550 509 - - - 1,329 Total 3\.092 6,201 6,726 4,586 2\.798 695 1\.336 25,38a 70g of: Fertilizers and pestIcides 13 123 476 881 931 1,086 939 Vehicles and equipment 68 57 103 189 - - - 117 Total 81 180 _9579 1,070 931 1,086 939 \.,ZL Recruitment and Salary of Finance Director 106 100 100 - - - - 306 Interest and commitment charges 400 600 1lo0 1\.500 1,700 9 2,1009,200 TOTAL DISBURSMEtTNS 3,679 7\.081 8,405 7\.16 5,429 3\.631 4375 39,756 1/ Comprise: Oil 8ll M$473,000; Salaribs $760,000\. 2/ Macldaing Technical Services (Fimnee mrector)\. April 10, 1970  MALAYSIA: SECOND JENGKA TRIANGLE PROJECT JENGKA DIVISION O R G A N I Z A T I O N C H A R T MINISTER OF NATIONAL AND RURAL DEVELOPMENT |F L D A B O A R Dl C H A I R M A N JENGKA MANAGEMENT COMMITTEE Chairman FLDA General Manager FLDA DEPUTY CHAIRMAN / GENERAL MANAGER Ministry of National and Rural Development Representative Treasury Representative Pahang Government Representative Mara Representative F L D A HEADQUARTERS… Director JKR Jengka Development Director TECHNICAL COMMITTEE ON PROCESSING JENGKA DEVELOPMENT DIRECTOR SENIOR ADMINISTRATION OFFICER ENGINEERING DEPARTMENT PLANTING DEPARTMENT SETTLER DEVELOPMENT DEPARTMENT LANDS DEPARTMENT ADMINISTRATION DEPARTMENT Senior Engineer Administration Officer 3/ Surveyor Accountant Engineer 1/ 2 Accounts Supervisers Plant Superintendent 2/ 2 Senior Planting Officers 6/ Senior Settler Development Officer 4/ Senior Lands Administrator 4/ 11 Clerks 2 Technicians 5/ Agricultural Officer 1/ Settler Development Officer 1/ Land Administrator Stenographer Draftsman 3 Typists 2 Survey mandores 2 Drivers 6 Survey laborers Office Boy SCHEMES I - XIV ULU JEMPOL MILL, 2nd and 3rd MILLS Per Scheme, Approx: NOTES: Manager Settler Development Assistant Per Mill: 1/ To be appointed 1970 2 Assistant Managers SeniorMill Engineer 2/ To be appointed 1971 6 Senior Supervisers Mill Engineer 3/ To be appointed 1972 11 Field Assistants Other Staff z 4/ To be appointed 1973 2 Clerks z 5/ One to be appointed 1970 4 Drivers x 6/ One to be appointed 1971 B  NIiTEX 9 Page 1 MAELAYS IA 2ND JENGKA TRIANGTE PROJECT SETTLE=ENT OPERATION AND ADmINISTRATION Settler Selection 1\. FLDA schemes are intended mainly for rural people who either possess no land or have insufficient land to obtain an adequat'e standard of living\. Selection of Jengka settlers would conform to this policy\. 2\. The Federal Government stipulates that 20% of places in all FLDA schemes will be available to ex-members of the security forces posses- sing the minimum qualifications\. In the case of the Jengka Project, the State of Pahang requires that 50% of the settlers (others than ex-service- men) should be from the State of Pahang, provided they possess the minimum qualifications\. 3\. Selection is in two stages\. First, applicants are interviewed in their home districts throughout Ialaysia by FLDA staff and local offi- cials who hnow the district and its people\. At this stage the candidates' general suitability is determined and the basic minimum criteria for selec- tion applied\. These are that the candidate:- - is a Nfialaysian citizen; - is married; - has no serious criminal record; - is physically and mentally fit; - is prepared to abide by therules and regulations established by FLDA; - has less than two acres of land; and - is over 18 and under 35 (formerly over 21 and under 45)\. 4\. Following the interview, points are awarded to each candidate, up to a maximum of 30, on the following scales:- Age Points Age Points Age Points 18 4 24 10 30 6 19 5 25 10 31 5 20 6 26 10 32 4 21 7 27 9 33 3 22 8 28 8 34 2 23 9 29 7 35 1 \./\. \.  ANNEX 9 Page 2 Number of Points Ownership Points Children of land 5 and above 5 Under 1/2 acre 5 4 3 l/2 acre 4 2 2 1 acre 3 1 1 1-1/2 acres 2 O 0 2 acres 1 Bonus Points - Agricultural Background Points Rubber 4 Oil Palm 4 Dusun or vegetable cultivation 1 Animal husbandry 1 5\. The final selection is made by FIDA Headquarters on the above points system and the required allotment of places to servicemen\. Development Period 6\. On arrival at a scheme - some 2 years after clearing - the settler signs the first part of the settlers agreement\. This provides that in return for being permitted to settle on the scheme, the settler works under the direction of the Authority on the development of the scheme\. The settler is paid a minimum of M$ 2\.90 per day, about M$ 70 a month, for his iwork and if no work is available, he receives a subsisb\. ence loan at the same rate\. The settler is required to abide by all rules and regulations of the Authority and if he breaks them, or if he is considered unsuitable in conduct or behaviofr, he may be required to leave the scheme\. Post Development 7\. At the end of the 5th year after palm planting and the 7th year after rubber planting the nettler, assuming his performance is satisfactory, signs the second part of his agreement - the Supplement Agreement\. This changes the status of the settler from, in effect, an employee of the Authority to that of a smallholder\. He is registered as an occupier in expectation of title of approximately 10 acres of rubber or oil palm and a 1/4 acreihouse lot\. In the case of rubber, the settler is allotted a specific area but in the case of oil palm, because it is not practical to cultivate oil palms initially as small- holdings, on schemes other than Jengka he is not allocated a specific area\. Once the settler has paid off his loan (see below) the Authority will recommend to the State Govern4nent that the State alienate to the settler, in the case of rubber, tht 10 acre rubber area and 1/4 acre house lot, and in the case of oil palm the 1/4 house lot, on a 99-year lease\. The 10 acre oil palm area will be %lienated to a Co-operative Society \./\. \.  ANNEX 9 Page 3 of which the settler is a member\. In the case of Jengka, however, it is provided that after five years of production, the settler would be allotted a specific 10 acre lot and he would then choose whether to work his lot individually or participate in a number of lots on a co-operative basis\. 8\. During the period when any loan repayments or charges are due by the settler to the Authority or the State, the area is managed and administered by the Authority\. At all times the settler is required to sell all latex or ffb to factories or mills specified by the Authority for which he shall receive the average price received by the Authority (during the current month for rubber but over the preceding three months for palm oil) after deducting transport, processing, distribution, mill amortization, etc\. In the case Af oil palm, further deductions are made for upkeep costs and a replanting reserve fund; for rubber the upkeep costs are borne directly by the settler and a replanting reserve cess is recovered at export\. 9\. Under Loan 533-MA, it was also provided that Jengka settlers would bear the project headquarters and scheme managements costs during the development and operating periods\. This arrangement has since been altered and instead FLDA and the Government will introduce arrangements to recover FLDA's administration costs from settlers as a who;e (pafa 5\.16 of main report)\. The amount of the levy for 10-acre oil palm and rubber holaings is showin in Table 5\. Settlers Loans 10\. A loan account would be opened for each settler which would be charged with the cost of his house, including clearing the house lot and of developing 10 acres of oil palms or his specific 10 acre rubber lot\. At the end of the fifth year after oil palm planting and the seventh year after rubber planting, settlers would be issued with a statement showing the amount of the loan and the repayment due\. The statements would also include any loans for subsistence, tools, etc\. 11\. Interest would be charged at 6-1/4% on the loan and would be capitalized over the development period\. The attached tables show the accumulation of the loan account of typical oil palm and rubber settlers\. 12\. Loans would be repaid by equal annual installments of princi- pal\. and interest over a period of 15 years commencing on the first day of the sixth year after palm planting and the eighth year after rubber planting\. However, during the first two years of repayment on rubber schemes, loan deductions shall be made only in small amounts as will leave the settler with a monthly income of i!$ 100\. Loan repayments would be deducted at source from payments made by the FLDA owned and operated mills and rubber factories to settlers for their production\. The costs of fertilizers and other inputs would also be recovered in this way\.  MALAYSIA 2ND JENGKA TRIANGLE PROJECT Loan Account of Trical Oil Palm Settler Years from Clearing 1 2 3 4 5 6 Total Field Development Costs 4,080 1,510 2,160 1460 1,730 1,790 12,730 House and Houselot 61 1,535 - - - 1,596 Subsistence Credits - - 31 117 73 142 363 Total 4,141, 3,045- 2,191' 1,577' 1,803 1,932' 14,689 Interest @ 61 259\. 465- 631' 769- 922 999\. 4,045 Less FFB Sales - - - 135 1,619 3,260 5,,014 Total a,400O 3,510- 2,822\. 2,211' 1,106\. (329)' 13,720' Accumulative Total 4,hoo\. 7,910' 10,732- 12,943- i4,o4\. 13\.720' 13,720 October 23, 1969 -3L  MA\.LAYSIA 2ND JENGKA TRIANGLE PROJECT Loan Account of a Typical Rubber Settler (N$) Years from Clearing 1 2 3 4 5 6 7 8 Total Field Development Costs 3,310 2,080 1,360 1,540 1,550 970 920 448 12,178 House and Houselot 61 1,535 - - - - - - 1,596 Subsistence Credits - - - 147 37 242 301 337 1,064 Total 3,371 3,615 1,360 1,687 1,587 1,212 1,221 785 14,838\. Interest @ 6V 211 450 563 704 847 975 1,112 1,669 6,531 Total 3,582 4,o65 1,923 2,391 2,434 2,187 2,333 2,45L 21,369 Accummlative Total 3,582 7,647 9,570 11,961 114,395 16,582 18,915 21,369 21,369 November 3, 1969  ANNEX 9 Table 3 MALAYSIA 2ND JENGKA TRIANGLE PROJECT Summaary Timetable of Settler Position Oil Palm Schemes - Jengka Year from Legal Loan Clearing Status Rep aet 1\. -) Loan amount increas- 2\. -) ing with various 3\. ) ) development expendi- 4\. ) Works under direction ) tures\. 5\.) of FLDA ) 6\.) ) 7\. During year,signs settler Loan repayments agreement becomes occupier commence\. in expectation of title to a share in a large block of oil palms in common with a group of other settlers\. 8/10 Continues as in Year 7\. ) ) 11 During year, becomes ) occupier in expectation of ) Loan repayments title to a specific 10- ) continue\. acre block of oil palms\. ) I ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~) 12/21 Continues as in Year 11\. ) 22 Lease granted to settler Loan repayments by State\. terminate\. Note: On schemes other than Jengka, the settler continues as occupier in expectation of title to a share in a block of oil palms until Year 22 when the lease is granted to a co-operative society of which the settler is a member\. October 23, 1969  ANNEX Table 4 MALAYSIA 2ND JENGKA TRIANGLE PROJECT Sunmary Timetable of Settler Position Rubber Schemes Years from Legal Loan Status Repayment 1\. - ) Loan 2\. -) 3\. ) ) amounit 4\. ) Works under ) 5\. ) FLDA direction ) increasing 6\.) ) with 7/8 Signs settler agreement ) becomes occupier in ) various expectation of title to ) development a specific 10-acre lot ) of rubber\. ) expenditures 9\. Continues as in Year 7\. Loan repayments commence\. 10/23 Continues as in Year 7\. Loan repayments continue\. 24\. Lease granted to settler Loan repayments by State Government\. terminate\. October 23, 1969  MALAYSIA SECOND JENGKA TRIANGLE PROJECT MAIL 1 NT LEVIES FOR 10-ACRE HOLDINGS Average Management Management Net Price Level Income Increase Annual Income Levy Rate Ley Amount Annual Income Oil Palm Oil Price (M$/ton FOB) (1$/ton FFB) (M$) (M$/ton FFB) (M$) (M$) 424\.80 - 3,600\.00 - 3,600\.00 439\.68 3 3,866\.58 1 88\.86 3,777\.72 454\.59 6 4,133\.16 2 177\.72 3,955\.44 469\.50 9 4,399\.74 3 266\.58 4,133\.16 484\.41- 12 4,666\.32 4 355\.44 4,310\.88 499\.32 15 4,s932\.90 5 444\.30 4,488\.60 5i14\.23 18 5,199\.48 6 533\.16 4,666\.32 529\.13 21 5,466\.o6 7 622\.02 4,844\.o4 544\.04 24 5,732\.64 8 710\.88 5,021\.76 558\.95 27 5,999\.22 9 799\.74 5,199\.48 564\.02 28\.02 6,089\.85 9\.34 829\.95 5,259\.90 Rubber RSS 1 Price (M cents/lb FOB) (M cents/ib) (M$) (M cents/lb) (M$) (M$) 65\.41 - 3,600\. oo - 3,600\.00 70\.30 3 4,013\.40 1 137\.80 3,875\.60 72;78 6 4,426\.80 2 275\.60 4,151\.20 76\.47 9 4,840\.20 3 413\.40 4,426\.80 80\.16 12 5,253\.60 4 551\.20 4,702\.40 85\.05 15 5,667\.00 5 689\.00 4,978\.00 ' I :90\.05 18 6,080\.40 6 826\.80 5,253\.60  ANNEX 10 MALAYSIA SECOND JNiGKA TRIANGLE PROJECT JENGKA BALANCE SHEET AS AT DECEMB3 31\. 1968 (M$s 000) S C H E M E S Total Head Office I II III IV V VI ASSETS Fixed Assets: Oil Palm Development 3,621 - 2,274 980 182 185 1 _ Nursery 694 - 224 394 33 41 1 1 Village Areas 45 - 44 1 - - 4,360 - 2,542 1,375 215 226 2 1 Building (site preparation) 30 30 - - - - - - Temporary Staff Quarters 33 - 9 11 6 6 - - Vehicles 47 - 15 17 7 7 - - Furniture and Fittings 18 1 5 6 3 3 1 1 Equipment 11 1 5 2 1 1 1 1 Total 4,499 32 2,576 1,41 232 243 4 3 Current Assets: Inventories 12 - 6 5 1 - - - Receivables 8 - 6 2 - - - - Cash 31 - 13 10 6 1 1 - Current Account with FLDA 42 - 71 (29) (6) - 1 5 Total 93 - 96 (12) 1 1 2 Other Development Expenditure: Salaries, etc\. 383 37 70 55 21 20 \.5 3 Interest on IBRD funds - 171 - - - - - - TOTAL ASSETS 4,975 240 2,742 1,454 254 264 11 11 IABILITIES Government Loan 4,227 66 2,481 1,217 228 215 10 10 Government Loan (ex IBRD) 642 171 219 188 17 47 - - Total Loans 4,869 237 2,700 1,405 245 262 10 10 Payables 106 3 42 49 9 2 1 1 4,975 240 2,742 1,454 254 264 11 11 April 6, 1970  MALAYSIA 2PID JENGKA TRIANGLE PROJECT FLDA Estimated Sources and Applications of Funds Total Years Total Years 1969 1970 1971 1372 1973 1974 1975 1976 1977 1978 1979 1969 - 1979 1980 - 1995 SOURCE Loans: Government 363 5 1,106 1,971 3,760 3,586 3,978 3,348 2,015 1,094 497 21,723 IBRD - 3,173 6,381 7,305 5,556 3,729 1,731 2,275 - - - 30,150 - Interest Capitalized!/ Government - - - - - 20 20 111 299 463 590 1,503 3,993 IBRD - 400 600 1,100 1,600 1,800 2,000 2,100 - - - 9,600 Settlers: Loan Repayments - - - - - 282 2,503 4,531 3,003 2,912 3, 475 16,705 72,065 Processing Charge Capital element - - - - - - 452 882 1,238 1,373 1,450 5,395 16,587 Government Administration Grants: Development Period 23 231 718 1,298 1,548 1,516 1,526 1,451 853 683 394 10,241 - Post Development Period - - - - - - - 113 692 858 1,122 2,785 19,937 TOTAL SOURCES 386 3,409 8,205 10,574 10,864 9,113 10,190 12,599 7,801 6,920 6,938 86,999 108,589 APPLICATI0NS Project Costs: Development 386 3,409 8,205 10,574 10,864 8,831 7,235 7,074 2,868 1,777 891 62,114 ! _ Post Development - - - - - 113 692 858 1,122 2,785 19,937 Loan Repayments: Government2/ - - 50 212 262 31,497 IBRD - - 1,978 3,957 3,957 9,892 61,334 TOTAL APPLICATIOE 386 3,403 8,205 10,574 10,864 8,831 7,235 7,187 5,538 6,642 6,182 75,053 112,768 Cash Surplus (Deficiency) Annual - - - - - 282 2,955 5,412 2,263 278 756 11,946 (4,179) Cash Surplus (Deficiency) Cumulative _ - - - - 282 3\.237 8,649 19,912 11,10 11,9146 11,146 7,767 1/ These are non-cash items and not included in the 7otals\. 2/ Approximat3ly 1MS7\.7 million will remain to b- repaid to the GCveronqent from 1936 - 2004\. November 14, 1969  A1NFEX 12 I!ab1e 1 MALAYIA! 2ND JENGKA TRIANGLE PROJECT Oil Palm Yield Estimates Years from Year of FFB/Acre % Oil- Ol/Acre % Kernel KernelAcre Clearing / Harvesting tons to F?B tons to FFB tons 14 1 O\.5 16 0\.08 4\.0 0\.02 5 2 3\.6 18 0\.65 1\.4 o016 6 3 6\.3 19 1\.2 14\.5 0\.28 7 14 8\.5 21 1\.79 14\.8 0\.141 8 5 9\.O 22 1\.98 5\.0 0,45 9 6 9\.5 22 2\.09 5\.0 0\.47 10 7 9\.8 22 2\.15 5\.0 0\.149 11 8 10\.0 22 2\.20 5\.0 0\.50 12 9 9\.7 22 2413 5-0 0\.48 13 10 9\.5 22 2\.09 5\.0 0\.47 114 11 9\.3 22 2\.04 5\.0 0\.46 15 12 9\.0 22 1\.98 5\.0 0\.45 16 13 8\.8 22 1\.94 5\.0 0\.44 17 i14 8\.6 22 1\.89 5\.0 0\.143 18 15 8\.4 22 1\.84 5\.0 0\.42 19 16 8\.2 22 1\.80 5\.0 0\.41 20 17 8\.0 22 1\.76 5\.0 0\.40 21 18 7\.8 22 1\.72 5\.0 0\.39 22 19 7\.6 22 1\.68 5\.0 0\.38 23 20 7\.4 22 1\.63 5\.0 0\.37 24 21 7\.2 22 1\.58 5\.0 0\.36 25-30 22-27 7\.0 22 1\.54 5\.0 0\.35 1/ Planting takes place one year after clearing\. November 14, 1969  ANNEX 12 Table 2 MAIAYSIA 2ND JENGKA TRIANGILE PROJECT Rubber Yield Estimates Years from Tapping Yield per Acre Clearing/ Year Pounds 8 1 650 9 2 1,000 10 3 1,400 11-19 14 -12 1, 500 20-22 13-15 1,14oo 23-25 16-18 1,300 26-28 19-21 1,200 29-31 22-24 1,100 32 25 1 ,000 1/ Budding takes place one and a half years after clearing\. November 114, 1969  Al3W 13 MALAYSIA SvCOND JENGKA I1RIU0LE PROJECT MARKET PROSPECTS FOR PAUII OIL AND PALM ERNELS Palm Oil 1\. Trends in supply and demand for individual fats and oils are far more difficult to judge than those for the total market, particularly since most of the major oil products are produced either as joint products or by-products\. Thus, as in the case of soybeans, the production of specific oils may be determined, not only by trends in the oils and fats market, but also by the demand for the joint or related products\. Another feature which also has to be considered in reviewing the market for a particular oil product is the amount of substitution possible between different fats and oils\. IJithin a broad range, on technical considerations, one oil can be substituted for another\. Currently, the bulk of palm oil is used in the food industry\. Here it meets its strongest competition from soybean, oil, and fish oil and lard\. Fish oils are at a disadvantage compared with palm oil, owing to the high processing costs involved in making them usable for this purpose\. 2, Usually, the associated product of the marine and vegetable oils is a protein-rich cake or meal\. The oil palm, however, compared with some of its competitors, produces a very low proportion of protein cake to oil and the cake is the by-product of palm kernel oil, rather than palm oil\. The overall ratio of palm and palm kernel oils to cake is about 9:1\. In comparison, the soybean produces oil to meal in the ratio of 1:4 in terms of weight\. 3\. Palm oil is produced almost entirely in four developing countries: Nigeria, democratic Republic of the Congo, Indonesia and Malaysia\. Table I indicates the production situation in these and other countries in recent years\. Compared iLth other major fats and oils (Table 2) the growth rate for world palm oil production has been low, up to recent years amounting to only 1\.3% per annum\. The only really significant expansion took place in Malaysia\. However, in a number of countries, particularly Milalaysia, a considerable further expansion in production is planned for the future\. Some of these plans have already been put into operation\. If these developments go according to schedule, total world production will amount to approximately 2\.5 million tons between 1975 and 1980\. This would represent a growth rate of slightly more than 5,, between 1965-67 and 1980, compared with a yearly rate of increase of 1\.3% between 1954-56 and 1965-67\. The share of palm oil production on total fats and oils production would increase to approxi- mately 5%, compared with about 3%0 in 1965-67\.  A\.TTIX 13 Page 2 4\. lMany of the developments are export-oriented and a considerable share of the additional supplies will have to be absorbed by the international market\. Oil palm exports increased very slowly during the last decade, largely owing to the slow growth in production rather than marketing difficulties\. Actually, in the period from 1954-56 to 1965-67, palm oil exports declined slightly (Table 3)\. It is estimated that by 1975 palm oil exports will amount to approximately 1\.2 million tons, compared with 550,000 tons in 1965-67\. Consequently, the share of palm oil exports on total trade will probably increase to 9% in 1975, compared with 5\.4% in the earlier period\. 5\. The palm oil economy thus faces two major problems in the future\. Firstly, it will have to face declining world market prices, a phenomenon that is shared by nearly all major fats and oils\. Secondly, it will have to increase its share as an ingredient in the total usage of fats and oils\. Considering the fact that palm oil does not have all the quality characteristic3 enjoyed by some of the other oils (e\.g\., coconut oil), this could only be achieved through price declines larger than those expected for some other oils\. 6\. It is in food uses where palm oil will have to increase its market share\. In the past, this was only possible to a certain degree, mainly because of limitation in availabilities\. Among other factors, this apparently prevented processors from undertaking the necessary research into the technical and economic difficulcies which would have to be overcome if palm oil is to be incorporated as a major ingredient in food produhicts\. One major difficulty, particularly at the relatively high palm oil prices of the past, appears to have been the disposal at remunerative prices of the inedible portion resulting from palm oil processing, which would make large-scale processing feasible\. 17\. The Chart (IBRD-4905) indicates that palm oil prices have generally followed the trend of all fats and oils prices, declining to a low level in 1962 and experiencing a sharp fall after the high 1965 prices\. Of particulai' importance is the narrowing of the large price difference between soybean oil and palm oil which prevailed in the 1950's\. Since 1963, prices for both products have moved closely together, which indicates that their future fortunes will also be tightly knit\. 8\. In the second half of 1968, palm oil prices dropped sharply reaching a low point of approximately $140 per ton, compared with $222 per ton in 1967\. The steep decline was caused by large shipments of soybeans and soybean oil and unusually large exports of sunflower seed and fish oil\. This Tras a relatively short term situation and prices recovered tolwards the end of 1968\. The average for the whole of 1968 was $172 per ton and for the first six months of 1969, the price averaged nearly $171 per ton\. In view of the large anticipated exports and the technical difficulties mentioned previously, it, is estimated that paIm oil prices will fall Icy the mid-1970's into a price range 115§-165 per ton cri\.f\. 7%rnpe\.  Page 3 9\. These projections have to be seen in the light of the uncertainties which surround any price forecast and of fats and oils in particular\. For example, if soybean exports under P\.L\. 480 are reduced or cease altogether without compensating changes in U\.S\. production policy, the above price forecast may prove to be optimistic\. On the other hand, if only part of the large requirements that would be needed to meet the needs of fat deficit develop:n, countries could be turned into effective demand, the forecast may be pessimistlic Palm Kernels 10\. The fruits of the oil palm contain two separate sources of oil: t'\.- fleshy and fibrous mesocarp (pulp) from which paLm oil is obtained and a nut kernel in a hard shell from wdhich palm kernel is extracted\. The pulp of the fruits deteriorates rapidly after harvest and extraction has to be carried out in producing areas\. Palm kernels, in contrast, deteriorate very slowly and their processing into oils is usually performed un large crushing mills, in the importing industrialized countries\. Only in the Democratic Republic of the Congo have palm kernels have crushed on a large scale and the country's exports consist almost entirely of oil, rather than kernels\. 11\. Wild palm fruits have a low proportion of pulp and a high proportilor\. of kernels\. In plantations now in the process of developmient, however, the ratio of pulp to Iernel is expected to increase\. Thus; the future expansion in palm oil output wTill not be matched by a crmlensurate increase in palm kernel oil output\. 12\. Palr,m kernel oil, unlike palm oil, is a lauric oil and as such clesel resembles coconut oil\. These types of oils are regarded in many coantries as a desirable ingredient of iaiargarine and shortening, and for use in confectionanry and bakery products\. Lauric oils also possess special qualities which make then an essential constituent up to a certain minim Lun in soap manufacture; they also have a w^ide variety of other industrial uses, such as in the manufacture of synthetic detergents\. 13\. All these factors account for a more inelastic demand greater than for most other fats and oils\. This became very apparent in 1967-68 wThen prices of nearly all major fats and oils decreased\. Prices of lauric oils, including palm kernel oil, renmined high, mostly because of short supplies, but also because of the limited degree of substitutability\. Presently, there are some indications that new industrial processes will make it possible to produce synthetically the special component of the lauric acid oils which are the caluwe of the inelastic demand\. This, of course, would limit the special role these oils play in the market\. However, so far no definite information is availab` which indicates that industrial manufacture of lauric oils wfill be undertaken ot a large scale\. 14\. The price, production and trade situation for palm kernels and pn Im kernel oil are indicated in the Chart and Table 4\. It is assumed that palrm kernel oil, in line with other fats and oils, will follow a downward trend fci:- the future, and it is estimated that a price range of $134v-138 per m ton for palm kernels will prevail in the mrid-1970Is\.  ANNEI 13 Table 1 WORLD PRODUCTION, EXPORTS AND IMPORTS OF PALM OIL BY MAJOR PRODUCING EXPORTING AND IMPORTING COUNTRIES AVERAGE 1955-59, ANNUALLY 1963-68 (thousand metric tons) Average 1964 1965 1966 1967 1968 1955-59 Production Nigeria 5]5 530 508 325 350]1 Congo, Dem\. Rep\. - 161 125 147 179 2101 Indonesia - 161 165 175 174 180i/ Malaysia - 123 150 190 225 280 Others - 232 249 255 256 285 World total 1,265 1,196 1,219 1,275 1,159 1,307 E:xports Nigeria 180 136 152 146 17 4 Congo, Dem\. Rep\. 160 124 79 78 115 159 Indonesia 121 133 126 177 131 160 Malaysia 62 / 125 141 181 180 267 Others 33 53 52 44 52 98 World total 571m 7 MT I9 Retained Imports EEC 226 279 249 267 252 United Kingdom 198 116 117 150 98 United States 13 3 3 34 29 Japan 20 18 16 20 22 Iraq 4 29 50 36 47 Others 92 107 76 91 72 World total IT _ LJ Estimated ?/ Excluding trade with Singapore\. Source: U,S\.D\.A\. - Fats and Oils Situation, June 1969; FAO September 1969  ANNEX 13 Table 2 WORLD PRODUCTION BY TYPE OF OIL OR FAT AVERAGE 1954-56 AND 1965-67, OIL oQUIVALENT Average 1954-56 Average 1965-67 Output as Output as Percent Change Type of Oil Output Percent Output Percent P\.A\. in Output (1,000 of total (1,000 of total 1954-56 to 1965-67 m\. tons) Output m\.tons) Output Edible soft oils 10 889 40\.3 17 421 45\.8 4\.4 Cottonseed 17\.1 2\.6 Groundnut 2,084 7\.7 3,037 8\.0 3\.5 Soybean 2,451 9\.1 5,200 13\.7 7\.1 Sunflower 1,118 4\.1 2,860 7\.5 8\.9 Olive 1,044 3\.9 1,238 3\.3 1\.5 Sesame 541 2\.0 582 1\.5 0\.7 Rapeseed 1,601 5\.9 1,562 4\.1 - 0\.2 Others V 144 0\.5 435 1\.1 10\.6 Industrial soft oils 1 521 5\.6 1 868 4\.9 1\.9 Linseed '97 5 0 Castor bean 213 0\.8 307 o\.8 3\.4 Tung 103 0\.4 112 0\.3 0\.8 Others 250 0\.9 407 1\.1 4\.5 Hard oils 3 479 12\.9 3 922 10\.3 1\.1 Coconut 7\.4 Palm kernel 422 1\.6 455 1\.2 0\.7 Palm oil 1,001 3 7 1,157 3\.0 1\.3 Babassu 42 0\.2 58 0\.2 3\.0 Animal fats 10 298 38\.0 13,638 35\.8 2\.6 Butter 3 v893 5,063 13\.3 v Lard 3,549 13\.1 4,163 10\.9 1\.5 Tallow 2,856 10\.5 4,412 11\.6 4\.0 Marine oils 857 3\.2 1,186 3\.2 3\.0 Whale 4M - 7 47 Fish 373 1\.4 898 2\.4 8\.3 World Total 27,044 100\.0 38,035 100\.0 3\.2 J Mainly safflower and maize oils\. Source: Based on Unilever statistics\. September 3, 1969  An, EX 13 Table 3 Table 3: WO31LD EXPORTS OF FATS AND OILS BY GHOUkPS AND TYPE OF OIL, AVEaqAUJ 1954-56 AND 1965-67_ OIL WUIVALENT Ave:rage ) 56 _2Averae 965-:6 Exports as Exports as Percent Change E&ports Percent Exports Percent Per Annum (1,000 of Total (1,000 of Total in Exports Groups & Type of Oil m\. tons) E&ports m\. tons) j ports 1954-56 to 1965-67 Soft Oils 2 7 374 50\.0 6 Edible ,219 41o5 7:9 Cottonseed 367 1/ 5,3 263 1/ 2\.6 - 3\.0 Groundnut 754 11\.0 1,029 10\.1 2\.9 Soybeans 506 1/ 7\.4 10485 l/ 18\.1 12\.5 Sunflower 26 0\.4 509 5\.0 31\.0 Olive 101 1\.5 158 1\.6 4\.2 Sesame 140 o\.6 74 0\.7 5\.8 Rapeseed 47 0,7 341 3\.4 19\.7 Industrial 623 9\.0 674 6\.6 0\.7 Linseed 470 6\.8 446 4\.4 0\. 5 Castor bean 108 1\.6 183 1\.8 4\.9 Tung 45 o\.6 45 0\.4 - Others, n\.e\.s\. 1o6 1\.5 188 2/ 1\.9 3\.5 Hard Oils 2,164 31\.4 2 183 21\.4 0\.1 Coconut 1,209 17\.6 \.I 12\.5 0\.5 Palm kernel 394 5,7 345 3\.4 - 1\.2 valm oil 558 8\.1 550 5\.4 _ 0\.1 rabassu 3 - 7 0\.1 8\.0 Total vegetable 4,734 68\.8 7,264 71\.4 4\.0 Animal fats 12473 21\.4 2093 20\.6 2 Butter L30 6\.2 529 1/ 5\.2 1\.9 Lard 320 4\.7 288 2\.8 _ 1\.0 Tallow 723 10\.5 1,276 12\.6 5\.3 Marine oils 67 9\.8 821 8\.0 1\.8 Whale 484 7\.0 2- 1 K\. _ IT7 Piish 190 2\.8 533 5\.2 9\.8 Total animal 2,147 31\.2 2,914 28\.6 2\.8 World Total 6,881 100\.0 10,178 100\.0 3\.6 1/ Includes U\.S\. donations, 2/ Of which 63,000 tons safflower oil\. Source: Based on Unilever statistics\.  ANNEX 13 Table 4 WORLD PRODUCTION, EXPORTS AND IMPORTS OF PALM KERNEL AND PALM KERNEL OIL BY MAJOR PRODUCING; EXPORTING AND IMPORTING COUNTRIES, AVERAGE 1955-59, ANNUALLY 1963 (thousand metric tons) Average 1963 1964 1965 1966 1955- 1959 Production :V Nigeria 442 420 407 450 422 Sierra Leone 57 54 54 51 56 Congo, Dem\. Rep\. 142 91 122 97 102 Dahomey 53 51 55 66 49 Indonesia 38 33 35 36 36 Malaysia 17 31 31 35 \.42 Others 157 159 144 158 152 World total 906 839 848 893 859 Palm Kernel Eaports Nigeria 439 404 400 420 400 Sierra Leone 57 54 53 50 56 Congo, Dem\. Rep\. 41 3 1 - - Dahomey 50 51 55 25 6 Indonesia 38 31 32 30 32 Malaysia 16 16 12 13 23 Others 129 120 109 117 155 World total 770 679 662 655 622 Palm Kernel Oil Ecports CongcDem\. Rep\. 50 32 W4 34 32 Others 2 10 5 22 28 World total 52 42 49 56 60 Retained Imports of Palm Ke EEG 371 356 381 336 331 United Kingdom 301 211 194 307 168 Japan 28 26 25 22 23 Others 57 71 77 80 6 World total 757 664 677 645 528 Retained Imports of Palm K'ernel Oil -EEC-' 13 7 - 3 32 United States 23 38 39 38 50 Others 14 8 8 10 7 World total 50 53 47 51 89 / Commercial Production\. Source: FAO\.  IMPORT PRICES FOR PALM, SOYBEAN, COCONUT OILS AND PALM KERNELS, AND INDEX OF PRICES FOR EDIBLE AND SOAP OILS (U\.S\. DOLLARS PER LONG TON AND INDEX NUMBERS) 500 I I I I I 1 500 ,\vZCEYLON COCONUT OIL, WHITE,\. % BULK (C\. \. F\. EUROPE) 400 400 J/~~~~ 300 - - ~~~~~~~~~~~~~~~*U\. S\.SOYBEAN OIL (C\.1\. F\.rUROPE) 30 MALAYSIAN PALM OIL 5% (C\. 1\. F\. U\. K\.) 200 _ 200 I00 \. \. \. \. * \. \. _ (JAN\.- Nov\.) 100 FAO INDEX OF EDIBLE AND SOAP OILS AND FATS (EXCLUDING BUTTER) 0 I I I I I I I I 0 1954 '55 '56 '57 '58 '59 '60 '61 '62 '63 '64 '65 '66 '67 '68 '69 1970 o IBRD- 4905 w  ANNEX 14 MALAYSIA SECOND JENGKI TRIANGLE PROJECT MARKET PROSPECTS FOR NATURAL RUBBER I\. INTRODUCTION 1\. Natural rubber (NR) is traditionally one of the major primary com- modities traded between developed countries and LDC's\. Generating average earnings of approximately one billion U\.S\. dollars per annum in the period be- tween 1955 and 1967, it has ranked between fourth and sixth position in impor- tance in foreign trade among all primary commodities traded\. 2\. Concentration is particularly high in the export trade in natural rubber compared to other commodities\. In the postwar period more than 90% of all exports have been shipped from four countries in Southeast Asia, i\.e\., Malaysia, Indonesia, Thailand and Ceylon\. The remainder is exported by a group of some 15 relatively minor exporting countries, among which the leaders are Viet-Nam and Liberia\. The market share of the major exporter group as a whole has changed remarkably little in the postwar period\. There has, how- ever, been one rather striking change in market shares within this group in- volving a declining market share for Indonesia which has been taken over al- most entirely by Malaysia, with almost no gain by the other two countries\. As a result, as of 1967 nearly 50 percent of all of natural rubber supplies were exported from Malaysia (Table 1)\. 3\. Ironically, the countries that benefitted most or suffered least from this change in market shares also made the most progress in reducing their dependence on rubber exports\. Despite the remarkable increase in its share of the market, dependence on foreign exchange earnings from natural rubber exports has been continuously reduced in the case of Malaysia\. Earnings from natural rubber have also declined in importance for Thailand\. In Viet- Nam, Indonesia and Cambodia, on the othBr hand, dependence on natural rubber was not reduced to any significant extent in the postwar period (Tables 2 and 3)\. Trends and Prospects 4\. Natural rubber is a case of a commodity, whose share in the world market has dropped in the past as a result of substitution by a synthetic rubber and whose price is likely to decline in the future\. From 1950-52 to 1968 consumption of new rubber (as distinguished from regenerated rubber) in the non-Communist world rose by an average annual rate of around 6%, but the consumption of natural rubber increased at the rate of only 2\.3%\. In this same period, accordingly, the share of natural rubber in the world market de- clined from 65% to 35% while that of synthetic rubber increased from 35% to 65%\. Initially this relative drop in natural rubber was due at least partly to the inelastic supply of rubber in the postwar period, but increasingly it has been attributable to the ability of industry to produce a wide range of  ANNEX 1h synthetics at qualities and prices that proved attractlve as compared with natural rubber\. 5\. The sirgle most important market for rubber is the transportation equipment industry\. Approximately 50$' of all new rubber is utilized in tires and tire products\. Also, aside from tires, automobiles average more than 100 lb of rubber per car\. Other 'Fnon'tire" uses include a wide variety of indus- trial and consumer goods\. Since end products of rubber have a high income elasticity of demand, future wJorld denand for rubber should a Priori depend to a large extent on the future rate of income growth and esTecially of growth in manufacturing output\. This reasoning is supported by cor-relation analysis betueen world manufacturing output and world rubber consumption which yields a coefficient (referred to hereafter as elasticity of deauand) of 1\.1 for the period 1951-1967\. 6\. Table 4 presents a view of the probable course of iworld demand for new rubber to 1985 based on projections made in the Economics Department\. On the basis of pro ections of GNP and projections of industrial output in the OECD countries I total world consumption outside the centrally planned countries is expected to grow at just over 6\.5,\.; per annum reaching a level of 8\.7 million long tons per year arcund 1975\. Tn addition, net imports of natural rubber into the centrally planned countries are projected to reach 700,000 long tons as of 1975\. Of course, deviations in the grow\.th rate of GM%P in GECD countries from the assumed grow\.7th rates as projected would have an effect on the above picture, as would, too, a change in the amount of imports into the centrally planned countries, or a chan-e in the assumed elasticity coefficient of demand 2/\. The implications of a more pessinistic assumption in tlhese determinants can be quantified by taldng as the growth rate of GIJP in CECD countries, the lowver lItit indicated above, i\.e\., 4\.3j1 p\.a\. (rounded from 4\.25Z), for the period of 1967 to 1975\. The corresponding gr-owth rate of total newv rubber consumption of 5\.5,' p\.a\. w-ould then yield an estim,ate of total new rubber consumption in the wJorld as of 1975 of about 8\.4 million long tons\. Estimates of natural rubber imports into the centrally planned countries range from 600,000 long tons, i;lying that any increase in consumption in these countries could be met by expanding output of their synthetic rubber industry to 850,000 long tons, which would reflect a technical relationship between tire production and natural rubber consumption similar to that in the rest of the world\. A\. medium projection of total ne-T rubber consum-ption in the Free 7world, representing a grwJth rate of 6\.$% p\.a\. would result in 8\.7 million long tons as of 1975\. Imports into the centrally planned countries could be assumed at 700,000 long tons as of 1975\. 1/ It was assumed on the basis of available projections by OECD, that GNP in all developed countries would groT at a range betwYeen 4\.3 to 4\.6 p\.a\. and industrial production at a range betwreen 4\.8 and 5\.8 p\.a\. 2/ It should be noted, however, that the elasticity coefficient of 1\.1 held remarkably strong over the last 16 years\.  ANNXE 14 ranc 3 7\. Potential production from already existing rubber plantings is expected to increase to 3\.5 million long tons in the mid-1970's (wfith further increases to approximately 4\.0 millicn long tons in 1980 and 1985 in the absence of replantings as of 1969)\. Since it is expected that the centrally planned countries would import abcut 700,000 long tons as of 1975, approximately 2\.8 million long tons of natural rubber would be left for sale in the free world market in the 1970's\. If output proceeded at capacity level, therefore, natural rubber would have to retain its share of the grouth in demand\. In essence, this means that between now and the mid-1970's natural rubber's share of total rubber demand would have to decline more slowly than in the period before 1967\. As a consequence it is expected that prices for natural rubber would have to becormie more competitive Mith prices of synthetic ribber\. 8\. I1latural rubber prices are likely to decline to about 16 U\.S\. cents per pound as of the nid-1970's (see chart)\. This forecast is based on our assessment of wvhat will happen to the cost price of synthetic rubber\. The major develomment foreseen in synthetic rubber is ccmnercial production of the highly competitive stereo-regular rubbers (i\.e\. polyisoprene and poly-butadiene) besides the more traditional SBR, and a decline in the price of raw>J material inputs of such rubbers, except for polyisoprene\. In assessing the prospective price for butadiene-based synthetic rubber (SBR and PB) the major development anticipated is the change in the status of butadiene from being a product primarily produced for synthetic rubber conversion to a by-product of another major chemical product, ethylene\. In the case of polyisoprene, cost reduction in the raw material input is also foreseen, although as a result of expected economies of scale rather than a change in status from major product to by- product\. The projected Drice of natural rubber is based on the assumption thlat the cost/price of PI w,,ill serve as a ceiling since protracted movements of natural rubber above that ceiling would lead to an acceleration of capacity in polyisoprene\. 9\. Over the longer run-and in particular for the period 1975-85 during which new and replanted rubber would be maturin--it is believed that the price of natural rubber may either decline somewhato more, to a level say, of approxi- mately 12 U\.S\. cents per pound, c\.i\.f\. NJew York or stay at 16 U\.S\. cents per pound\. This prognosis is based on the assumption of further technological pro- gress in the synthetic rubber industry\. In making a longer term forecast for natural rubber, the key question is the possible further price developments in polyisoprene, which fromri the standpoint of quality is the synthetic most likely to m\.ake progress at the expense of natural rubber\. There are presently research efforts by the industry to adjust the petro-chemical production stream so as to derive isoprene, the major raT\. material inputs, as a by-product\. The history of success in butadiene-based rubbers suggests that this aim may be achieved\. HoTv- ever, the present position is that an approach to such a technical breakthrough has not yet been fcund\. If a breakthrough were to be achieved, it is conceiva- ble that the price of polyisoprene would fall belowT 15 U\.S\. cents per pound, compared to 21 U\.S\. cents as of 1968, and both oolyisoprene and natural rubber might be selling at a level in the order of 12 U\.S\. cents per pound\. A situa- tion such a3 this is within the realrn of possibilities sometimie between 1975 and 1985\. If isoprene cannot be produced as a by-product, however, prices for polyisoprene and natural rubber might continue at the projected 1975 level, in real terms, for the period i975 -1985\. According to repeated industry statements at IRSG meetings, howJever, efficient producers of natural rubber operatinc on replanted high-yielding acreage should be able to produce rubber profitably at prices as lou as 12 U\.S\. cents per pound c\.i\.f\. consuwinig countries\.  ANNEX 14 10\. The foregoing im-licitly assumes that in the late 1970's and the 1980's all natural rubber produced at the suggested prices will be absorbed, i\.e\., that price ccnsiterations will outwyeigh any possible additional tech- nical advantages that synthetic rubber may present to consumers\. On thse other hand, if this assumption \.wrere considered to be too optimistic, the question would arise whether it would be desirable to improve or even main- tain the existing natural rubber capacity\. 11\. To test this proposition, prospective demand for new rubber in the 1980's was compared wi^th natural rubber output that would materialize from a global 3,; replanting program in the natural rubber industry (see Table 4)\. The production implications of such an ambitious program is shovn in line 6 of Table 4, indicating that the resulting output of natural rubber would in fact be substantially absorbed even if technical substitution against natural rubber continued regardless of price\. Of course, if low prices for natural rubber, especially any w^zell belowx the future cost price of synthetic rubber resulting from new- plantings with high yielding trees were to halt, or even reverse substitution, then foreseeable supplies of natural rubber might not be sufficient to meet demand even with an accelerated global rate in replanting\. The probable magnitude of the deficit is illustrated in line 5 of Table 4\. In other words, the implicit natural rubber shortage seen in the 1950's w-Tould be repeated\. 12\. In this case new planting in addition to the prograam to improve the cost competitiveness of natural rubber against synthetic rubber by replant- ing would be reouired\. iJoreover, it may be noted that it is far from certain at this point in time that a replanting rate of 3% per annum could be achieved on a global basis\. Even if it is achieved, completion of the program would require between 13 to 29 years\. Such a long-term program would be subject to adjustment if the prospects for rubber change over time\. The case for newJ planting is further strengthened by the prospects for improvement in the competitive position of natural rubber through better preparation of the raw material which w>ould proceed alongside a planting program\. Such improvements involving production of new fonas of crude natural rubber such as "block rubber", raise the technical standards of natural rubber and malce possible a reduction in the processing costs of the rubber products manufacturer who is the decisive factor in deciding the issues of substitution between natural and synthetic rubbers\.  AN N :14 Table 1 NET EXPORTS OF NATURVIL RUBB:R 1950-19682- 7T1000 long tons) Years Wolrldli PIalaysia Indonesia Thailand Ceylon Others 1950-52 1,808 656 745 106 103 197 1955-57 1,822 690 686 132 93 221 1960-62 1,956 772 631 180 98 275 1962-64 2,067 884 606 196 103 278 1965 2, 270 983 684 213 122 274 1966 2,34o0 1,065 680 199 123 274 1967 2,558 1,237 726 206 134 255 1968 2,452 2/ 1,097 2/ 717 248 143 282 Percentage Share 1950-52 100\.0 36\.3 141\.2 5\.9 5\.7 10\.9 1955-57 100\.0 37\.9 37\.6 7\.2 5\.2 12\.1 1960-62 100\.0 39\.5 32\.3 9\.2 5\.0 14\.1 1962-64 100\.0 42\.8 29\.3 9\.5 5\.0 13\.5 1965 100\.0 143\.3 30\.0 9\.4 5\.4 12\.1 1966 100\.0 45\.5 29\.1 8\.5 5\.3 11\.7 1967 100\.0 148\.4 28\.14 8\.1 5\.2 10\.0 1963 100\.0 44\.7 29\.2 5\.8 5\.8 11\.5 1/ Totals may not add due to rounding\. Source: IRSG, Statistical Bulletin\. 2/ Revised basis, not comparable to previous years  Aa-l2 Tables 2 & 3 NATURTTAL RUBB]R: VALUE OF =EXPORTS, 1950-1967 (US mllion Other De- Rep\. of veloping Years Malaysia Indonesia Thailand Ceylon Viet-Nam Liberia Countries Total 1950-52 614 681 72 94 49 25 35 1,583 1955-57 477 397 76 66 43 30 46 1,153 1962-64 497 280 97 57 33 24 49 1,070 1965 498 332 86 64 26 25 44 1,116 1966 479 310 90 70 18 26 49 l,o74 1967 415 276 75 59 13 25 42 923 NATURAL RUBBER: SMARE OF EXPORTS IN TOTAL EXPORT EAENINGS, 1950-1967 (Percentage) Rep\. of Years Malaysia Indonesia Thailand Ceylon Viet-Nam Liberia Cambodia 1950-52 -63\.9 29\.8 27\.5 27\.4 44h5 21\.4 n\.a\. 1955-57 65\.7 42\.1 23\.7 17\.6 66\.2 19\.2 39\.3 1962-64 43\.6 40\.7 19\.2 15\.4 54\.9 8\.7 27\.1 1965 38\.7 46\.8 15\.0 16\.0 72\.0 21\.0 33\.3 1966 38\.3 45\.6 13\.0 20\.0 76\.0 18\.0 37\.0 1967 34\.3 43\.1 11\.0 22\.0 81\.0 17\.0 n\.a\. Source: IRSG, Statistical Bulletin\. FA-Q, Trade Yearbook, 196\. FAO, Commodity Review, 1967 and 1968\. IFS, International Financial Statistics, various issues\.  wSC 14 Table 1 CONSTY12TION i?R0JECTI01S 4'VD rLXLICA\.TICUTS OF RPPLAITING P,ROGRA;S IN 'ORLD _ \.TZTU,IJ PtBBEF IDUSTRY (1,000 long tons) Actual P r o j e c t e d 13r7- 1970 1975 1950 19d5 I\. Production of NJatural Rabber (1) 3'\. Replanting Program 2,454 2,800 3,500 14,500 5,300 (2) iodified Program 2,454 2,800 3,500 4,100 4,50Q II\. Exports to Soviet Bloc - 575 - 650 - 700 - 700 - 700 III\. "!orld (ex Soviet) ConquMption of Total iew P-ubber --b - 5,176 6,200 8,700 11,900 16,300 IV\. J1orld (ex Soviet) Comsumtion of ITatural \.iber - M3) t3% eplonti\.ng Program 1,893 2,150 2,800 3,800 4,600 V\. Share of INatural Rubber in T\.-orld Consunption M1 377 Replanting Progran 37 34 32 32 28 VI\. Surplus (+) or Deficit (-) of i7,aturil Rubber if Share in Consumption Lemained a' 1967 Level (37A~ (5) 32, Replanting Program - 230 - 420 - 610 -1,1420 VTII\. 3urplus (+) or Deficit (-) of iatural hiMbber Assu-1wing Share to Decline btr -, per year (6) 3 epni Proram - 90 - 70 + 180 + 130 1/ Excluding centr -1Ir planned ccuntries\. 2/ Projections result in the following gro-tih rates: 1967-75: 6\.7 percent per annim\.;\. 1975-85: 6\.5 percent per annuma\. 3/ 1xcept for 1967, equal to production linus exports to Zoviet Bloc\.  ANNEX 14 CHART PRICES FOR NATURAL AND SYNTHETIC RUBBER, BY TYPES, 1960-1975 (U\.S\. CENTS PER POUND) 40 I I I I40 35 \.35 NATURAL RUBBER (Rss ) 30 30 4 tY BPOLYBUTADIENE 25 lst*s--- A 1- 25 20 POLYISOPRENE E 20 20 N,,-' _ _\. 20 4~~~~4N 15 5 ' SBR-(OIL-EXTENDED) (E ST I MATE) J 10 I I l~~~~~~~~~~~~~~~~~~~~~~~~~~~ 10 Ia1 of I I I I I _ IIL 60 61 62 63 64 65 66 67 68 69 70 71 72 73 74 75 Y E A R S IBRD-491 5  ANNEX 15 Table 1 MALAYSIA 2ND JENGKA TRIANGLE PROJECT Estimated Income - Oil Palm Settl,r (10-Acre Holding) in M$ Years from Clearing 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Production: FFB 85 90 95 98 100 97 95 93 90 88 86 84 82 80 78 76 74 72 70 Oil 18 20 21 21 22 21 21 20 20 19 19 18 18 18 17 17 16 16 15 Kernels 4 4 5 5 5 5 5 5 4 4 4 4 4 4 4 4 4 3 3 Value at c\.i\.f\. prices: Oil at M$480 per ton 8,640 9,600 10,080 10,080 10,560 10,080 10,080 9,600 9,600 9,120- 9,120- 8,640 8,640 8,640- 8,160 8,160 7,680 7,680 7,200 Kernels at Mi408 per ton 1,632 1,632 2,040 2,040- 2,040 2,040 2,040 2,040 1,632 1,632 1,632 1,632 1,632 1,632 1,632 1,632 1,632 1\.224 1\.224 Total 10,272 11,232 12,120 12,120 12,600 12,120 12,120 11,640 11,232 10,752 10,752 10,272 10,272 10,272 9,792 9,792 9,312 8,904 8\.424 Less c\.i\.f\. costs at *2G58 per ton 1,276- 1,392- 1,508- 1,508 1,566 1,508 1,508 1,450 1,392 1,334 1,334 1,276' 1,276- 1,276- 1,218\. 1,218- 1,160o 1,102- 1,044- Value f\.o\.b\. 8,996 9,840 10,612 10,612 11,034 10,612 10,612 10,190 9,840 9,418 9,418 8,996 8,996 8,996 8,574 8,574 8,152 7,802 7,380 Less: Duty at 71'% f\.o\.b\. value 675- 738- 796- 796 828- 796 796 764- 738- 706 706 675- 675- 675 643- 643 611- 585 554 FFB transport and processing charge at M$12\.72 per ton FFB 1,081- 1,145- 1,208 1,247- 1,272- 1,234- 1,208- 1,183- 1,145- 1,119- 1,094 1,068- 1,043- 1,018- 992- 967- 941 916- 890\. \.1ill amortization at 14$9\.20 per ton FFB 7q2- 828- 874- 902- 920 892- 874- 856- 828 810- 791- 773- 754- 736- 718 699- 681- 662- 644 Distribution: Oil - M$25\.87/ton 466- 517- 543 543 569 543 543 517 517 492 492- 466 466- 466 440 440- 414- 414 388 Kernels - MM\.47\.50/ton 190- 190- 238- 238\. 238 238 238 238 190 190 190 190 190 190 190 190 190- 143- 143 Sales Revenue to Settler 5,802 6,422 6,953 6,886 7,207 6,Q09 6,953 6,632 6,422 6,101 6,145 5,824 5\.868 5,911 5,591 5,635 5,315 5,082 4,761 Less: Upkeep costs at 14$77/- p3r acre 770 770 770 770 770 770 770 770 770 770 770 770 770 770 770 770 770 770 770 CAC to State Governmert 107 107 107 107 107 107 107 107 107 107 1D7 107 107 107 107 66 66 66 66 Replantirg reserve charge at L45\.06/ton FFB 430 455- 481- 496- 506 491- 481- 471 455- 445 435- 425- 415- 405- 395- 385- 374 364 354- Neb Income Before Loan Repayment 4,495 5,090 5,595 5,513 5,824 5,54h 5,595 5,2B4 5,090 4,779 4,833 4,522 4,576 4,629 4,319 4,414 4,105 3,882 3,571 Loan Repayment 1,436 1,436 1,436 1,436 1,436 1,436 1,436 1,36 1,436 1,436 1,436 1,436 1,436 1,436 1,436 - - - - Balance to Settler 3,059 3,654 4,159 4,077 4,388 4,1-05 4,159 3,848 3,654 3,343 3,397 3,o86 3,140 3,193 2,883 4,414 4,105 3,882 3,571 November 14, 1969  ANN:EX 15 Table 2\. MALAYSIA 2ND JENGKA TRIANGLE PROJECT Sstimrated Income - Rubber Settler (10-Acrs Holding) in P$ Years from Clearing 8 9 10 11-19 20 21 22 23 24 25 Production - lbs\. 6,500 10,000 14,000 15,000 14,000 14,000 14,000 13,000 13,000 13,000 Value § 48 M d/lb\. C\.I\.F\. 3,120 4,800 6,720 7,200 6,720 6,720 6,720 6,2140 6,240 6,240 Less C\.I\.F\. costs @ 4 M d/lb\. 260 400 560 600 560 56, 560 520 520 520 Value F\.O\.B\. 2,860 4,400 6,160 6,60o) 6,160 6,160 6\.160 5,720 5,720 5,720 Less: Duty @ 4% F\.O\.B\. value 114 176 246 264 246 246 2146 229 229 229 Research and replanting cesses @ 1 M v & 4½5 M , lb\. 358 550 770 825 770 770 770 715 715 715 Processing and distribution o 7 M ,/lb\. 455 700 980 1,050 980 980 980 910 910 910 Sales Revenue to Settler 1,933 2,974 4,164 4,461 4,164 4,164 4,164 3,866 3,866 3,866 Less: Upkeep and collection 290 290 290 290 290 290 290 290 290 290 CAC to State Governent 111 111 111 111 111 111 111 66 66 66 Net Income before loan repayment 1,532 2,573 3,763 4,o60 3,763 3,763 3,763 3,510 3,510 3,510 Loan Repaymsnt 2,236 - - - - - - Balance to Settler - 337 _ _ _ _ _ _ _ Additional Loan to Settlar to provide M$ 1,200/- inin \. income - &63 - - - - - - Loan repayrent adjusted - 1,373 2,427 2,427 2,427 2,427 2,427 2,1427 - Balance to Settler 1,532 1,200 1,336 1,633 1,336 1,336 1,336 1,083 3,519 3,510 November 14, 1969  ANNEX 16 1tTALA'TSA SECOND JENGYA TRINLtOIE PNDJECT (LOND SETTLEMENT) Gu,er-unt2re and ApplI-tiouo of Fund (M$'0DUO 1995- 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1963 19814 1985 1986 1997 1988 1989 1990 1992\. 1992 1993 19914 1995 2003 Total SOURCES Loan Repyments frm\. 9LDl - - - - - - - - - 50 212 1462 687 1030 1319 1661 1880 2117 2316 21497 26142 2708 2708 2658 21496 22914 2022 7679 391438 Duaties and Ceasoes, Exportt Oi1 and Kernels \. 3D 317 6146 990 11514 1228 1271 1302 1275 1247 1218 1285 1199 1131 1102 1026 1052 1028 10014 976 9147 921 4779 270146 Robber duty) Rubber cess) - - - - - - - - 161 301 7149 1087 1350 11465 31482 1182 11482 t1482 11482 Th482 1\.457 11449 1399 1358 1350 1301 1259 8378 31956 Import, Vehicles, Fertilizers &Pesaticides I/ 1 14 14, 414 78 60 914 97 99 97 90 87 88 90 91 90 90 87 88 90 91 90 90 87 87 87 ~87 501 2619 Terse; Persoonl - 1 2 8 15 12 13 12 12 12 12 12 12 12 12 12 12 12 12 12 1\.2 12 12 12 12 12 12 - 291 Land - - - - - 33 186 230 305 330 330 330 330 330 330 330 330 330 330 330 330 3214 257 241 206 200 1800 7742 Vehicle\. BLDA& 2 6 9 12 17 17 17 17 17 17 17 17 17 17 17 17 17 17 17 17 17 17 17 17 17 17 17 - 1420 -Other s 9\. - - - - - 5 55 105 150 175 195 205 21\.0 210 210 200 200 190 190 180 180 175 170 165 160 160 155 875 14520 3 11 25 614 13\.0 152 529 1063 1659 2111 2833 31471 3996 14429 14708 5010 5196 53914 5566 5710 5805 5833 57148 5558 5339 50214 14673 214012 1114032 APFLTCATIONS Loa 363 5110621971 376013586 3978 3348 201510914 1497 - - - - - - - - - 21723 Adolnistration Grants 23 231 718 1298 15148 1516 1\.526 15614 15145 15141 1516 1516 1516 1516 156 1516 1516 1516 1516 1516 1516 1516 1i386 8214 658 393 - - 32963 Road Constructioni 30 680 1050 16147 1898 1208 300 - - - - - - - - - - - - - - - - - - - - - 6813 Rood 1Mintem-ne - - 9 21 71 l35 171\. 177 177 177 177 177 177 177 177 177 177 177 177 177 177 177 177 177 177 177 177 1593 55140 1416 916 2883 14937 7277 614145 5975 5089 3737 2812 2190 1693 1693 1693 1693 1693 1693 1693 1693 1693 1693 1693 1563 1001 835 570 177 1593 67039 Cash Surplus (Deficit) Annual - dnol (1413) (96,5) (2858) (14873) (7167) (6293) (5446) (14026) (2078) (701) 6143 1778 2303 2736 3015 3317 3503 3701 3873 14017 1432 141140 14185 14557 145014 144514 14496 221419 146993 Cash S-apl\. (Deficit) (43 11)(16 99)(81)(72 38 66 12 5242082474169 1/ 6% of total cuterla1 noot\. 2/ 1485000/- par trunk\. APril 10, 1970  ANNEX 17 Table 1 2ND JENG1A TRIANIGLE PROJECT Galculation of Economic Rate of Returr - Typial Oil Palm Scheae (No\. 9 of 3707 Acres) 1970 1971 1972 1973 1974 2975 1976 1977 1978 1979 1980-2000 cosirs CAPITAL - ELDA Agricultural Development 430 1,262 472 829 615 668 557 Settlers' Housing 7 21 562 - - - - \.flnage ment: Scheme bo 110 351 160 160 160 4) Headquarte rs 11 20 31 37 36 36 9 CAPIrAL - GCOVRNMENT Roads 94 108 115 141 118 9 9 Water Supply - 120 180 100 100 - - TOTAL GAPlTAL 582 1,661 1,711 1,267 1,029 873 615 CURRcNT - FLDA AND GOVERNMENT ŽManagement - Scheme and Headquartera 147 196 196 196 4,116 Upkeep Costs - including roads 285 29L 294 29L 6,174 Transport, processing and mill amortization 41 293 512 691 731 772 13, 918 Distribution 11 91 164 244 269 283 5,118 C\.1I\.E\. Costs 22 174 318 473 522 550 9,938 TOTAL CURR3NT 74 558 1,126 1,898 2,012 2,0)5 39,264 BNEFrr s Production - FFB - tons 1,853 13\.345 23,356 31,510 33,363 35,217 63L,461 Oil - tons 297 2,410 L \.L8 6\.636 7,360 7,748 139,6L6\. Kernels - tons 74 5'3 1,038 1,52) 1,668 1,762 31\.6?3 Value - Oil (9 4480 per ton 143 1,157 2,135 3,185 3,523 3,71) 67,023 Kernels C M$40L0 per ton 30 242 42L 620 681 711 12,231 TOTAL 173 1,399 2,559 3,805 L,20L 46, 30 73,960 NiT BENIFITS (582) (1,661) (1,711) (1,267) (930) ( 32) 518 1,907 2,192 2,335 60,696 ZCONO2IIC RAIT OF RErURN: 18\.3% NOl3: 1\. Government social infrastructure costs (e\.g\. schools, police, sedical centers) have been excluded, since these would be provided as a matter of course for any development of this nature\. 2\. Settlers' labor daring the production period has been eamluded\. November 14, 1969  ANNEX 17 I4ALAYS IA Table 2 2ND J3NGKA TRIANGLE PROJECT Calculation of Economic Rate Of Return - Typ1cal Rubber Scheme (No\. 12 of 4439 Acres) ('Mf ' 000 ) 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981-2004 COSTS CAPITAL - FLDA Agricultural Developmnt 346 1,1h56 732 635 773 609 547 535 243 Settlers' Housing 9 25 673 - _ - - - - Management: Scheme 40 297 215 176 176 176 176 176 44 Headquarters 24 37 iU4 1 44 44 44 44 44 11 CAPIrAL - GOVEIRNMENT Roads 108 135 165 156 57 9 9 9 9 Water Supply - 120 180 100 100 - - - - TOTAL CAPITAL 527 2,070 2,009 1,111 1,150 838 776 764 307 CURRENT - FLDA AND GOVERNMENT Management - Scheme and Headquarters 165 220 5,o60 Upkeep Costs including roads 98 137 3,151 Processing and Distribution 152 284 9,967 C\.I\.F\. Costs 87 162 5,695 TOTAL CURR3Nr 502 803 23,873 BENEFITS Production - '000 pounds 2,166 4,053 142,381 Value @ 48 M cents per pound 1,040 1,945 68,343 NEr BENSFITS (527) (2,070) (2,009) (1,111) (1,150) (838) (776) (764) 231 1,142 44,470 ECONOMIC RATE OF RETURN: U\.1% NOTES: 1\. Government social infrastructure costs (3\.g\. schools, police, medical centers) have been excluded\. 2\. Settl3rs' labor during the production p4riod has been excluded\. November 14, 1969  ANNEX 17 CHART I MALAYSIA: SECOND JENGKA TRIANGLE PROJECT ECONOMIC RATE OF RETURN CALCULATIONS -OIL PALM SCHEME *8 RATES OF RETURN AT VARYING c\.i\.f\. PALM OIL PRICES 555 z i480- i- Lii a\., w 0~ uJ 0 33 O 5 10 15 20 25 ECONOMIC RATE OF RETURN-PERCENT PER ANNUM * Price used for calculations of Project earnings\. ** Prices used for testing sensitivity of returns from the Project\. IBRD - 4615(2R)  ANNEX 17 CHART 2 MALAYSIA: SECOND JENGKA TRIANGLE PROJECT ECONOMIC RATE OF RETURN CALCULATIONS - RUBBER SCHEME ** RATES OF RETURN AT VARYING c\.i\.f\. RUBBER PRICES 60 54 z m 0 a- w z w 48 w 6 0 42 36 O 5 10 15 ECONOMIC RATE OF RETURN- PERCENT PER ANNUM fPrice used for calculations of Project earnings\. ** Prices used for testing sensitivity of returns from the Project\. IBRD - 4616(2R)  ARNRI 1 8 MALAYSIA SECoND JFRGA TRIAMiLE PROECT Log, Processed Timber and Area Statistics - West Malysia 1958 1959 1960 1961 1962 1963 1964 1965 1966 1967 196d LOG RESOVALS AND TII8ER PSODUCrION Log Removals: ('000 tons of 50 cu\.ft) Fores\. reserves Forest Reserves 600 675 720 782 857 955 921 1,157 1,614 S:ate Lands 989 888 913 1,123 1,248 1,323 1,771 1,908 1,972 Total 1,152 1,177 1,589 1,563 1,633 1,903 2,105 2,278 2,692 2,965 3,586 3awn Timbar (C000 tons of 50 cu\. ft) 502 544 727 710 755 830 934 946 1,07h 1,219 1,116 Plywood and Veneer (million sq ft 3/16" basis) 4\.90 4\.25 4\.59 6\.38 11\.41 15\.94 26\.91 59\.92 116\.66 123\.37 22L\.77 SXPORrS Logs: Singapore - Quantity ( 002 tons of 50 cs\. ft) 268 282 305 408 456 574 7L2 737 956 - Value (millions of 141) 1L\.9 15\.4 16\.9 23\.3 26\.5 30\.L 10\.0 52\.9 68\.3 Overseas - Quantity ('000 tons of 50 cu\. ft) 7 - - 9 7 _ 35 S6 103 -Value (millions of i ) o\.6 - - 1\.0 0\.3 - 3\.2 6\.1 7\.6 Total - Quantity ('000 tons of 50 cu\. ft) 275 282 305 417 163 574 777 816 259 - Value (millions of M4$) 15\.5 15\.4 16\.9 24\.3 26\.8 30\.4 L3\.2 59\.o 75\.9 Sawn Timber: Singapore - Quantity ('000 tons of 50 ou\. ft) 49 38 47 62 77 76 86 91 12L - Value (millions of M$) 6\.6 5\.1 6\.1 8\.3 12\.1 13\.6 11\.1 12\.3 13\.6 Overseas - Quantity ('000 tomn of 50 cu\. ft) 169 133 155 187 246 259 263 320 \.71 - Value (millions of y4) 33\.2 23\.9 25\.1 33\.0 h9\.5 50\.6 1I\.9 59\.4 95\.1 fotal - Quantity ( 000 torn of 50 cu\. ft) 218 171 202 251 323 335 346 411 595 - Value (millions oE A4$) 39\.8 26\.0 31\.5 41\.3 59\.6 61\.2 56\.0 71\., 11\.7 lywood and Veneer: "uantity - (million sq\. ft 3/16' basis) 0\.34 0\.92 2\.74 4\.87 13\.94 29\.92 51\.39 71\.73 131\.39 Value (milliomn of Yj$) 0\.1 2\.2 2\.6 1\.1 2\.2 3\.9 7\.3 12\.1 22\.5 AR iS (square miles) Total Area: ,est zM1aslsia - 50,700 Pahang State - 13,873 Forested Land: West :4alaysia - 33,000 Panang State - 11,700 November 14, 1969  ANNEX 19 Page 1 MALA-ISIA SECOND JENGKA TRIANGLE PROJECT MAJLIS AHANAH RA'AYAT (1ARA) General 1\. Majlis Amanah Ra'ayat (MARA) was established following a resolution of the Konggeres Ekonomi Bumiputeras (Economic Congress of the Indigenous People) held in June, 1965\. 2\. Section 6 (1) of the Majlis Amanah Ratayat Act provides that it is the duty of the WIjLis to promote, stimulate, facilitate and undertake economic and social development in Malaysia and more particularly in the rural areas\. 3\. The Hajlis shall have powers: (1) To carry on all activities, particularly the development of comnercial and industrial enterprises, including the manu- facturing, assemblying, processing, packing, grading and marketing of products, research and training\. (2) To promote the carrying on of any such activities by other bodies or persons, and for that purpose to establish or expand, or promote the establishment or expansion of, other bodies to carry on any such activities either under the control or partial control of IAERA independently\. (3) To give assistance to such bodies or persons appearing to !ARA to have facilities for the carrying on of any such activities including financial assistance by the taking up of shares or loan capital or by loan or otherwise\. (4) To carry on any such activities in association with other bodies or persons (including departments or authorities of the Government of the E-ederation of Ialaysia) or as managing agent or o-therwise on its behalf\. (5) To purchase, underwrite or otherwise acquire any stock and shares in any public or private company and to dispose of the same on such terms and conditions as 1MRA may determine\. (6) To establish and maintain training institutions\. 4\. MARA is organized into seven Divisions, each of which is headed by a Director\.  AMMEX 19 Page 2 5\. MLARA's activities are confined to bringing about greater parti- cipation of the people, particularly the Bumiputeras, in the commercial and industrial life of the country and it is now in the process of implementing an elaborate plan of activities which can be classified into the following categories: (i) Provision of Training (ii) Provision of supervised credit facilities (iii) KIanagement and advisory services (iv) Carrying out directly managed projects and participating in joint ventures, and (v) Purchasing of shares reserved for Bumiputeras\. Training Facilities 6\. MAA is now undertaking an extensive training programme to provide training opportunities and facilities for Bumiputera entrepreneurs, students and youth desiring to prepare themselves for careers in commerce and industry and also for careers for its own staff\. HiAA 's largest single training project at present is the 4RA College of Business and Professional Studies in Petaling Jaya, near Xuala Lumpur\. This is a post-secondary residential College offering between 2 and 3 years courses in business and professional subjects to young Bumiputeras\. Those students selected for admission into the College will be given financial aids covering free tuition, full board and lodging, and travelling expenses to and from their home-towns\. Credit Finance 7\. One important activity of 1MARA is its credit finance programme which provides credit facilities for enterprises in the industrial and commercial sectors, to assist in their expansion and modernization\. iYIARA operates its credit finance programme very much on similar lines as a development bank and the principal objectives of the programme is to aid economic development by making capital, enterprises and managerial and technical advice available to the private sector, more particularly the Bumiputera sector of the economy\. Within this framework, the credit finance programme of MARA is intended to be an important instrument in promoting, stimulating and facilitating greater part- icipation of the Bumiputera in commerce and industry\. Directly Managed Projects, Joint Ventures and Purchase of Shares 8\. MARA will aslo participate directly in commerce and industry and take part in joint ventures with local and overseas groups in commercial and industrial activities and buy shares reserved for Bumiputera in private and other companies, with a view to handing over ultimately such ventures or shares to Bumiputera entrepreneurs\.  ANNEX 19 Page 3 Industry and Commerce 9\. Specifically, the objectives and the activities of the Industry and Commerce Division are as follows: (1) To provide centres for the display and sale of the products of the cottage and other small scale industries; (2) To undertake the establishment of pilot projects in order to test the commercial viability of any undertaking; (3) To purchase raw materials or finished products for sale to producers, where such bulk purchases can lower cost and assure regular supplies; (k) To build shophouses which can be rented out to Bumiputera businessmen; (5) To participate directly in commerce and industry and to take part in joint ventures with local and/or overseas groups in commercial and industrial activities, where ncessary and desirable, with a view to handing over ultimately such ventures, or IHRA's shares in them, to Bumiputera; (6) To collect statistical data pertaining to Bumiputera enterprises in commerce and industry for planning purposes; (7) To collect technical information which can be published perio- dically in iuhlay and English for general dissemination; (8) To undertake market surveys of parLicular products and feasi- bility studies of specific industries, either on its own or with the assistance of professional firms, where there is a need for such surveys and studies\. Advisory Services 10\. The objective of the Advisory Service Division is: To provide free or for a small fee the technical and professional advisory services that will make Bumiputera enterprises viable, and to assist in modernization and expansion programmes, with particular emphasis, initially, or enterprises which are receiving I&RA loans\.  ANIEX 20 Page 1 IMA LAY IA SECOND JENGKA TRIANGLE PROJECT FORESTRY PROJECT PRINCIPAL EQUIPMENT ITEMS LOGGING UNIT logging 40 power saws; 6 crawler tractors; 12 wheel skidders; 2 front-end loaders; yearder-loader; 6 logging trucks; sundry vehicles\. Road Construction Large and medium bulldozers; grader; hydraulic how; 2 compaction rollers; crusher, compressor and drill; front-end loader; h dump trucks; 2 power saws; sundry vehicles\. Support and Viscellaneous Sundry vehicles; fixed and mobile radios; low bed trailer; generating set; shop equipment; buildings\. PPOCESSING Sawmill Log bucking equipment including log deck and loader; infeed rolls; bucking saw system; transfers and conveyors\. Saw mill equipment including 7 ft band mill; pony rig band mill and equip- ment; edger; two-saw trimmer; compressor; conveyors; weigh scales; 3 log handling machines; lumber carrier; lift truck\. Drying Facilities Pre-dry equipment including electronically controlled heating system; air ventilation system; automatic electronic controller-recorder for ventilation and humidity control system\. Dry kiln equipment including heavy duty fans; electronic automatic temp- erature and humidity recording and controlling; kiln doors and hardware; steam spray and air supply pipes; portable band saw; triple beam balance; automatic electronic drying oven; hygrometers\.  ANNEX 20 Page 2 Planer-sticker mill equipmenL including planer; treating chamber, two-saw trinmmer assembly; trim saw; lift trucks; lumber carriers\. Impregnation plant equipment including vacuum tanks; mixing tank; storage tank; pumps, pressure controls and valves\. Plywood I-Till Veneer equipment including lift trucks; steam vats; 8 ft lathe; two-line continuous dryer; veneer and core clippers; dollies; conveyors; waste disposal system\. Preparation and Gluing equipment including core and face stock jointers and gluers; hot presses; lift trucks; patcher; dollies\. Finishing equipment including skin and trim saw, pressure system and conveyors; lift truck panel packaging; test equipment\. Other Plant, Buildings\. etc\. Steam generating plant; machine shop equipment; water supply; buildings for plant, offices, garage/warehouses; rail siding\.  ANNEX 21 MALAYSIA SECOND JENGKA TRIANGLE PROJECT (FORESTRY) COST AND DISBURSEMENT ESTIMATES (Ms$' 000) Year ending September 30 1970 1971 1972 1973 Total PROJECT COST ESTUVATES Logging Logging Equipment 3,100 1,030 720 - 4,850 Road Construction Equipment 1,650 - - - 1,650 Spares 22 22 - - 44 Buildings, Vehicles and Other Equipment 450 48 _ - 498 Working Capital - Materials 1,300 900 - - 2,200 Management Fees 673 566 425 1o6 1,770 Contingencies 978 300 108 - 1,386 Sub-total 8,173 2,866 1,253 106 12,398 Processing Manufacturing Equipment 2,527 8,813 1,281 - 12,621 Buildings and Site preparation 1,970 2,836 - - 4,806 Power Plant 1,364 - - - 1,364 Working Capital - Materials - 555 305 - 860 Management Fees 1,170 985 740 185 3,080 Contingencies 879 1,831 238 - 2,948 Sub-total 7,910 15,020 2,564 185 25,679 TOTAL PROJECT COST 16,083 17,886 3,817 291 38,077 IBRD £DISBURSEMENT LSTD4IkATES 100 of Foreign &cchange Costs: Logging Logging and Road Construction 3quipment, Buildings and Vehicles 4,200 l,0OO 680 - 5,880 Management Fees 673 566 425 106 1,770 Contingencies 630 150 100 - 880 Sub-total 5,503 1,716 1,205 106 8,530 Processing Processing Equipment, Buildings and Power Plant 3,574 7,803 1,136 _ 12,513 Management Fees 1,170 985 740 185 3,080 Contingencies 536 14170 171 - 1,877 Sub-total 5\.280 9,958 2,047 185 17,470 TOTAL DISBURSEMINT 10o783 11, 674 3\.252 291 262ooo April 6, 1970  MALAYSIA SECOND JENGKA TRIANGLE PROJECT (FORESTRY) ORGANIZATION CHART SHARIKAT JENGKA SENDIRIAN BERHAD MARKETING COMPANY BOARD OF DIRECTORS _ BOARD OF DIRECTORS EXECUTIVE COMMITTEE GENERAL MANAGER MANAGING DIRECTOR ff | ~~~~~~~~~~~COORDINATOR|| SAE FINANCIAL CONTROLLER PROJECT MANAGER (CANTRANS) (CANTRANS) MARA COUNTERPART MARA COUNTERPART _ FOREST MANAGER PURCHASING OFFICER PROCESSING MANAGER L--\. PRODUCTION COORDINATOR (CHARNELL INTERNATIONAL) (CANTRANS) (GARDINER ENGINEERING) MARA COUNTERPART MARA COUNTERPART MARA COUNTERPART MARA COUNTERPART LOGGING SUPERINTENDENT PROCESSING SUPERVISOR MARA TRAINEES MARA TRAINEES Z x IBRD 4914  ANNEX 23 MA LAYS IA 2ND JENGKA TRIANGLE PROJtMT (FORESTRY) PERSONNEL TO BE SUPPLIED BY CANTRANS FOR CARRYING OUT THE FORESTRY PROJECT Months OV ERALL MNWNAGEMENT Proj ect ;anager 48 par"OSiIlg Representative 36 Instaallation Supervisor 24 Controller - Accountant 36 Book-keeper 36 Secretary 36 Clerk 36 LOGGING DIVISION acecutive Forester 20 Forest Manager 48 Forest Engineer 30 Mechanical Superintendent 24 Logging Superintendent 20 Logging Foreman 18 PROCESSING DIVISION Resident Manager 24 Accountant 12 Production Superintendent - Sawmill 24 Production Foreman - Sawmill 12 Dry Kiln Foreman 12 Production Superintendent, Plywood 2 Green &nd Foreman 12 Reparation and Glue Foreman 12 Finish End Foreman 12 Mechanical Engineer 12 m ectrical Engineer 12 November l4, 1969  M 2EX4 MALAYsIA SECOND JENlK TRIANiBLE PROJECT (FORESTRY) SHARILAT JEGKA SDDIRIAN BERAD (SJSB) FORECAST INCOME AND EIPINDITURE STATEMENT 1970-74 (IRtOOO) Year ending September 30 1970 1971 1972 1973 1974 Logging Division: Production - tons log 90,000 175,000 175,000 175,000 175,000 Sales - FOB Yard 1/ 4,eso 7,875 ,'ONO ,400 ,400 Less: Direct and Indirect Costs 2/ 2,700 4,725 4,375 4,375 4,375 Royalties and premia 3/ 922 1,795 1,795 1,795 1,795 Profit before depreciation and interest 428 1,355 2,230 2,230 2,230 Manufacturing Division: Production - tons lumber 20,850 33,350 41,700 41,700 Sales - FOB Yard @ N#196/ton 4,087 6,537 8,173 8,173 Less: Cost of Logs @148/ton 1,620 2,591 3,240 3,240 Sawmill costs: tonnage as above Labor 300 500 600 600 Maintenance and supplies 46 78 92 92 Power 136 180 192 192 Overhead 114 160 170 170 Total 596 918 1,054 1,054 Dry Kiln costs: tonnage as above Labor 142 212 242 242 Maintenance and supplies 28 42 59 59 Power 40 40 40 40 Total 210 294 341 341 Planer Mill - production 10,000 18,000 25,OO 25,000 Labor 55 114 158 158 Maintenance and supplies 14 22 30 30 Power 28 42 45 45 Total 127 178 233 233 Impregnation Plant - production 3,000 8,000 12,000 12,000 Labor 20 45 53 93- Maintenance and supplies 17 51 79 79 Pas er 11 11 12 12 Total 48 107 144 144 Total Costs 2\.601 4,088 5,012 5,012 Profit before depreciation, taxes, etc\. 1,486 2,449 3,161 3,161 Plywood Division: Production - K sq ft 36,00o 60\.000 60,o03 Sales - FOB Yard @ ?t20O/sq ft 7\.200 12,000 12,000 Less: Cost of logs @1M48/ton 1\.166 1 94 1,944 Labor 1,312 1,8S4 1,854 Maintenance and supplies 810 1,299 1,299 Power 231 288 288 Overhead 170 170 170 Total 2,523 3,611 3,611 Total Costs 3\.689 5,555 5,555 Profit before depreciation, interest, etc\. 3\.511 6,445 6,445 Total profit before depreciation, interest, etc\. 428 2,841 8,190 11,836 11,836 Less: Depreciation i/ 700 2,800 3,000 3,000 3\.000 Net Profit (Loss) before interest (272) 41 5,190 8,836 8,836 Interest 190 1,160 1,690 1\.810 1,810 Net Profit (Loss) after interest (462) (1,119) 3,500 7,026 7,026 1/ 145/ton for 1970/71 and M$48/ton afterwards\. 2/ 1*30/ton for 1970, N$27/ton 1971, M$25/ton afterwards\. 3/ 0110\.25/ton\. i/ Average of 10% per annum on buildings, equipment, and plant on straight-line basis\. NOTE: It is assumed that no taxes would be payable in the first five years because of tax allowance for capital expenditure and depreciation\. Furthermore, the industries may be eligible for Pioneer Status relief\. April 6, 1970  amI 25 3100lD MU " ROaCT MITu ) StUZa J'1 81 UXA IID tB1 FaWAST SOtRC A=D APF0IOI O F0M 1970-T4 Total Year ending September 30 1970 1971 192 13 1974 1970-74 SOUJRCES Net Profit (loss) befcre interest per income and ecpenditure statement (272) 41 5,190 8,236 8,836 22,631 Add: Depreciation 700 2\.800 3\.000 3\.000 3\.000 12\.500 Ca\.h inoce b928 2,Sbl ,190 4I,o36 l,S36 35,131 Equity 5,500 4,5O0 - 1 - 0,00 Borrowing: QGovernment (ex proposed IBED) loan 10\.783 11\.674 3\.252 291 - 26,000 TOTAL SDCNCYS 16\.711 19\.015 u\. 442 12\.127 11,836 7113 APPLICATION8 Project Costs per Annew 21 Logging 8,173 2,866 1,253 106 _ 12,398 Processing 7,910 15\.020 256 185 - 25\.679 Total 16\.083 17\.886 3\.817 291 - 38,077 Debt Service, Interest on Government (e- IB8D) loan 190 1,160 1,690 1,810 1,810 6,660 A-oortisation on Govereusnt (ex IBEW) lean - - \. - 2\.544 2\.544 Total Debt Service 190 \.160 i 169 1\.810 4,35\. 9\.20k TOTAL APPLICATIOS 16\.2T3 19\.01\.6 5\.507 2,101 W4,354 \.7\.281 Cash surplus (deficit) 1 - anual (438) (31) 5,935 10,026 7,482 23,850 Cash surplws (deficit) - cualative (438) (407) 6,342 16,368 23,850 1/ The deficit in the first two years would be oevered by cshrt ters borrowngs\. ECONOMIC RATE RElUER CAILCULATIONf (in' 000) 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 BENEFrIS Cash income 428 841 8,190 11,836 11,836 11,836 11,836 11,836 11,836 11,836 11,836 Add: Royalties and presl 922 1,795 1,795 1,795 1,795 1\.795 1,795 1,795 1,795 1,795 1,795 Total 1,350 2\.636 9,985 13,631 13,631 13,631 13,631 13,631 13,631 13,631 13,631 COSTS Proiect costs and replacement 16\.083 17,886 3\.817 291 _ 5\.200 1\.100 700 - NIET BE1EFITS (4,733) t15\.250) 6\.168 13\.,340 13\.631 13\.631 8,431 12\.531 12,931 12,621 13,631 Rate 0r Returan 29 \.2 April 6, 1973  'NNEX 26 MALAYSIA SECOND JENGKA TRIANGLE P\.ROJECT (FORESTRY) SHARIKAT JENGKA SENDIRIAN BERHAD (SJSB) FORECAST BALANCE SHEETS 1970-74 (M$ t000) Year ending September 30 1970 1971 72 1973 1974 ASSETS Fixed Assets: Timber Rights 4,500 h,500 4,500 4,500 4,500 Buildings, Plant and Equipment 14','761 31,170 34,682 34,973 31t1973 Less: Depreciation 700 3,500 6,500 92500 12,500 Net Fixed Assets 18,561 32,170 32,682 29,973 26,973 Current Assets: Materials and Spares 1,322 2,799 3,104 3,10h ,3,]04 Cash 438 407 6,342 16,368 23,850 Net Current Assets 1,760 3,206 9,446 19,9472 26, 54 TOTAL ASSETS 20,321 35\.376 42,128 49,445 53,927 LIABILITIES Share Capital 1/ 14,000 14,500 14,500 14,500 14,500 Surplus (Deficit) (462) (1,581) 1,919 8,945 15,971 Total Equity 9,538 12,919 16,419 23,445 30,471 Debt: Government (ex IBRD) oan 10,783 22,457 25,709 26,000 23,456 TOTAL LIABILITIES 2021 35,376 42,128 53,927 -L -L7 -22 -944 -53,2 1/ M$10 million for cash subscribed by MARA and Pahang State Government; M$4\.5 million for timber rights to Pahang Development Corporation on behalf of 1,800 licensees in Jengka Triangle\. April 6, 1970  ANNEX 27 Page 1 MALAYSIA 2ND JENGK\. TRIANGLE PROJECT MARKET PROSPECTS FOR FOREST PRODUCTS A\. West Malaysia Log SuMply and Demand 1\. Over the past few years there has been a rapid increase in West Mlalaysia demand for logs\. The demand stems from the needs of sawmilling, plywood and veneer industries in export and domestic markets, and from log exporters\. 2\. Log removal increased from 1\.2 million tons in 1958, to 3\.6 million tons in 1968\. Exports of logs, mainly to Singapore and Japan increased from about 276,000 tons in 1960 to just under 960,000 tons in 1968\. 3\. In 1968 about 449 West M1alaysian sawmills produced some 1\.4 million tons of sawn timber, consuming some 2\.4 million tons of logs in the process\. 4\. In 1968 about 16 plywood mills produced nearly 225 million square ft of plywood and veneer (3/16 inch basis) and accounted for the balance of the countryts log production\. 5\. 4Marketing studies carried out as part of the ongoing UNDP/FAO Forestry and Forest Industries Development Project (Malaysia) indicate that demand, particularly in North America, the United Kingdom, Japan and Australia for Malaysian logs, sawn timber and plywood will continue to outstrip supply\. The quantity of processed timber available for export will probably be restricbd after 1972 by log shortages and by increasing local demand\. Projections indicate that to 1972 the annual increases in exports are likely to be at the rate of 10 percent for logs and 5 percent for sawn timber, plywood and veneer; and that thereafter exports will decline sharply\. 6\. In the light of an anticipated deficit in log supplies an efficient forest industries complex established in the Jengka triangle with its assured supply of logs would be in a highly competitive position\. 7\. Prices\. The weighted average price for Jengka Triangle logs is expected to be M$ 48 per cubic tons at Jengka, based on representative ranges of existing prices for Jengka species\. \./\.  ANNEX 27 Page 2 B\. Sawn Timber MHarkets 8\. ERports* Exports of sawn timber from West Malaysia amounted to nearly 600,000 tons in 1968\. Keruing and Red Meranti currently make up about 80 percent of all exports, although many other species are exported\. Prospects for future exports are excellent; European, United States and Japanese imports are expected to increase rapidly\. West Malaysia's parti- cipation in world markets for sawn timber will be restricted after 1972, mostly by a shortage of logs and to a certain extent by domestic needs\. Total exports are expected to increase by 5 percent annually to 1972 (reaching a maximum of about 750,000 tons) and then to decline sharply\. 9\. Almost any species yielding satisfactory lumber can be exported\. It is essential, however, to have a fairly large volume available and a steady supply, so that users can become accustomed to characteristics peculiar to various species\. Operations in the Jengka Triangle and Tekam and Berkeleh reserves, covering very large areas annually, should make even scarce species available in adequate quantity\. 10\. There are opportunities for increasing exports of kiln-dried timber and for applying further processing such as planing and moulding (most exports are rough, air-dry lumber)\. I1\. The most important customers for sawn timber are expected to be Australia, the United Kingdom, Western Europe and the United States\. Japan is expected to become a major importer of MIalaysian hardwoods\. 12\. Domestic\. The domestic market for lumber accepts a wider range of species, sizes and grades, and a higher moisture content than does the export market\. MAuch of the lumber used locally must either be naturally durable or be treated with preservatives\. 13\. The prefabrication of housing components is growing, and current- ly uses about 8,000 tons per year\. Building components are used domesti- cally and in East Malaysia, and are exported to other Southeast Asia destinations\. There is an opportunity in this field to use species and grades that are not readily saleable as lumber\. 14\. Total domestic consumption is now estimated at about 800,000 tons; it is expected to rise to about 1,000,000 tons in 1975\. 15\. Prices\. A broad range of ex-mill prices for the species found in the Jengka Triangle is expected and average export and domestic sales prices and forecast at M$ 196 per ton (1N$ 226 fob for export timber)\. \.1\. \.  JINEX 27 Page 3 C\. Plywood and Veneer I4arkets 16\. Exports\. Plywood and veneer exports reached 150 million square feet m S\. Substantial future increases are expected in the import requirements of the industrial areas of the world (the United States, Europe, Japan)\. 17\. Exploitation of potential export markets by West Malaysia will be restricted by log shortages and by increasing local plywood demands\. It is estimated that West Malaysian exports will increase to a maximum of about 210 million square feet per year by\. 1972 and then decline gradually\. 18\. The United States is by far the largest potential customer for Malaysian plywood and veneer\. Canada and the United States are the only large customers for veneer at present, but restricted log exports from Southeast Asia could bring Japan, Taiwan and Korea into the veneer markets\. 19\. Quarter inch and 3/16-inch plywood face increasing competition in the world market; they are supplied in large quantities by Japan, Korea, Taiwan and the Philippines, as well as by a few West African countries\. Better opportunities may lie in manufacturing thicker panels for export and selling thinner panels locally\. 20\. Species are relatively unimportant in finished plywood, provided that technical qualities are adequate\. Panels faced with species resembling Red, White or Yellow M4eranti should have no market resistance; panels faced with other species will have to present an attractive appear- ance (e\.g\.Sepetri); otherwise they will have to be used where appearance is unimportant (e\.g\. concrete forming)\. 21\. Veneer exports may initially have to be restricted to accept- able species such as IMengkulang or Meranti\. New species can be intro- duced, but for export it is necessary to ensure consistent quality and adequate and dependable supply so that users do not have to vary produc- tion techniques frequently\. 22\. Domestic\. Plywood-is used locally for interior panelling, concrete forming and furniture\. Total domestic consumption of locally produced plywood was 74 million square feet (3/16-inch basis) in 1968\. Tentative forecast domestic consumption is 100 million square feet by 1975\. 23\. Prices\. Plywood prices vary with thickness, colour, type of glue used, and grade of face and back veneers\. A conservative price range, based on white species and on a low-grade face, is given below\. \./\. \.  ADNEX 27 Page 4 Expected Plywood and Veneer Prices1 FOB Port (M$ per Thousand Square Feet) Thickness (inches) Interior Glue Exterior Glue Panels: 3/16 126 153 1/4 149 162 3/8 280 306 1/2 298 298 1-1/8 687 810 Veneer: i 1/6 90; / Concrete forming material\. D\. Other Forest Products 24\. Present market conditions, economies of plant size, and char- acteristics of the Jengka timber indicates that it would not be practical to consider the manufacture of pulp, fibreboard or particle board in the Jengka Triangle\. Other products such as poles, charcoal, and fuel wood would consume only small quantities of logs and sales for these uses are not included in the estimates of this report\. E\. Conclusion 25\. Markets exist that could readily absorb Jengka's forest products\. However, their disposal to these markets particularly in the early years of operation will necessitate a carefully planned sales programme under the direction of experienced marketing managers\. Satis- factory marketing arrangements wuld be provided under the project\.  MAP 1 '- = -'Nf AM!>~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~7f TRIANGLE 2~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~Pn KUALA w$ < ThG\. NEREK14SG = STAGE_ RMR RA5 TAE 1 , 0,! PaI, 17 7 cr PLSNM C ~ MILES -\., - FthEsT COMPLEXSINGAPORE MALAYSIA ~>SECOND JENGKA ULU JEMF TRIANGLE PROJECT PHASING OF CLEARING: OCT-E 1966 O\.-\.-O 1969 r, ~~~~~OrTO\. 1970 3 \. \. \. \. \. \. ~~*o\.oS-TAE 05, SC-EMES I TO 7 \.STA\.E T-O\. SCHEMS 8 T\.14 V\.~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~K Oil P,1~~~~~ 23, 500 A ces~~M RA - P-IA- ROA-, STASES I S I op O\.L PAL S'CH\.EM 0 I 2 3 4 -FO\.ES\. I I\.-OTR C--LE MILES OCTOBER 1965 ISRO 2715  MAP 2 FORESTFOESRY g~~~ ~H JENGK TRINGL ~~~~~~~~~~~Foet r Eserves Jerantut 2 t 5 f~~~~~~~~~~~~~Mra xuazJ z FOREST (FO ESTRY APRIL 170 THEJENGKATRIANGLE APRI 1970 IB 23

APPROVAL

P120110

Page 1 DOCUMENT d’INFORMATION DU PROJET (PID) STADE D’EVALUATION Rapport No\.: AB6149 Nom du Projet Projet de Réponse d'Urgence au Choléra Région Amérique Latin et Caribe Pays Haïti Secteur Santé (100%) Outil Subvention de reconstruction d'urgence No du Projet P120110 Emprunteur Ministère de l’Economie et des Finances Agence de Mise en Œuvre Fonds d’Assistance Economique et Social (FAES) Catégorie environnemental { }A {X}B { }C { }FI Date de la Préparation du PID le 14 décembre, 2010 Date de l’Evaluation du Projet Le 6 décembre, 2010 Date estimé d’Approbation du Conseil Le 18 janvier, 2011 Décision Projet est autorisé à procéder aux négociations suite à un accord sur les conditions restantes I\. Contexte du Pays Haïti est le pays le plus pauvre d'Amérique latine et des Caraïbes et est parmi les plus pauvres dans le monde\. Plus de la moitié des 10 millions de la population vit dans la pauvreté absolue (moins de 1 dollar par jour) et 78% avec moins de 2 dollars par jour\. Le nombre de gens démunis est estimé à 4\.5 millions, dont la plupart vit dans les zones rurales et le reste dans la capitale et d'autres zones urbaines\. L'inégalité des revenus est parmi les plus élevés en Amérique latine et les Caraïbes, avec un coefficient de Gini de 0,65\. Depuis 2008, le pays a connu une forte hausse des prix des produits alimentaires de base et du prix du carburant, des conditions météorologiques exceptionnellement défavorables (quatre cyclones consécutifs en un an), une baisse importante des devises envoyés par les émigrés et du commerce international en raison de la crise économique mondiale, et le tremblement de terre dévastateur en Janvier 2010\. Les multiples facettes de la pauvreté sont de grande envergure comme témoigné par les indicateurs sociaux médiocres tels que l'alphabétisation, l'espérance de vie, la mortalité infantile et maternelle, avec Haïti classé 148 sur 179 dans indice de développement humain de l'Organisation des Nations Unies en 2008\. Les conditions de pauvret é et sociales ont été fortement détériorées par la situation humanitaire précaire qui a suivie le tremblement de terre à Haïti survenu le 12 janvier 2010\. Le tremblement de terre a dépouillé les zones de Port-au-Prince, Léogane et Jacmel de leurs infrastructures les plus importantes, y compris les écoles, les hôpitaux, le logement, l'électricité, l'eau et les télécommunications, et a causé d'énormes pertes de vies humaines\. Les estimations indiquent que près de 3 millions de personnes ont été touchées par le tremblement de terre et plus de 200\.000 personnes ont été tuées, tandis que 300\.000 Page 2 personnes ont été blessées et 1 million de personnes se sont retrouvées sans abri et vivent dans des camps à travers Port-au-Prince et d'autres villes\. Le cyclone Thomas a frappé Haïti le 5 novembre 2010 et a provoqué des inondations, des glissements de terrain, la destruction structurale et la perte de récoltes dans les régions à l’ouest de la ville, qui a aggravé les conditions de vie déjà précaires\. Le 19 octobre 2010, une épidémie de choléra grave a été confirmée en Haïti, causant 2\.193 morts et 46\.749 hospitalisations au 6 décembre, et en mettant 200\.000 personnes à risque d'infection et de 10\.000 à risque de mort dans les six prochains mois\. Haïti est confronté à l'une des épidémies de choléra les plus graves, la première en cinquante ans, et le pays entier est à risque parce que la population n'a aucune immunité contre le choléra\. Au 6 décembre, le Ministère de la Santé Publique et de la Population (MSPP) a rapporté 97,595 visites à l'hôpital, 46,749 hospitalisations et 2,193 décès dus au choléra à l'échelle nationale\. Le taux de fatalité dans les hôpitaux est actuellement estimé à 3\.2% et le taux de mortalité à 14,16 pour 100\.000 habitants\. Des cas de choléra ont été confirmés dans tous les dix départements\. À Port-au-Prince, les quartiers qui ont enregistré des cas inclus Carrefour, Cité Soleil, Delmas, Kenscoff, Pétion Ville, Port-au-Prince et Tabarre\. Le nombre total des hospitalisations et de décès dus au choléra à Port-au-Prince ont été de 4\.904 et 186, respectivement du 6 décembre 2010\. Si le taux de mortalité continue au niveau actuel d'environ quatre à 5%, l'épidémie de choléra pourrait tuer 10 000 personnes et causer 200\.000 infections au cours des six prochains mois, selon l'Organisation Panaméricaine de la Santé (OPS) et le Centre pour le Contrôle des maladies (CDC)\. L’OPS est également préoccupé par l'épidémie se propage à d'autres pays pauvres de la région, comme l'épidémie de 1991 au Pérou étendre à plus de 16 pays des Amériques dans les deux ans\. II\. Contexte Sectoriel et Institutionnel Les mauvaises conditions de vie, un système de santé publique fragile et la manque d’infrastructure approprié d’eau et assainissement peuvent entraîner de la mortalité importante et dans la possibilité que le cholera devient endémique\. Les conditions de vie en Haïti, en particulier celles dans les camps et dans les bidonvilles, rendent le pays encore plus vulnérable à la propagation du choléra\. Ces communautés ont presque plus d'eau et d'assainissement, des connaissances en santé limitées et souvent n’ont pas accès aux soins de santé\. Le système de santé publique déjà fragile, qui devrait fournir des soins préventifs, des services de promotion de la santé, des soins, des services de réhabilitation et de référence, a été encore affaibli par le tremblement de terre qui rend plus difficiles les conditions pour traiter les patients avec des agents de santé qui manquent d'expérience dans la gestion des cas de choléra\. L'expérience de l'épidémie au Pérou dans les années 1990 et d'autres pays en Amérique latine suggère que des cas de choléra continuent de réapparaître pendant plusieurs mois à venir et peut-être pour plusieurs années\. Un appui à la réponse urgente, compréhensive et multisectorielle du Gouvernement à cette crise dans la santé, l'eau et l'assainissement est nécessaire\. Ne pas le faire, avec le début de la saison des pluies, pourrait avoir comme résultat que le choléra devient endémique\. Le Gouvernement d'Haïti, en partenariat avec un certain nombre d'organismes, a crée un Comité de coordination d'urgence pour le choléra\. Le MSPP a dirigé la réponse Page 3 humanitaire, avec l'appui technique de l'OPS, en mobilisant des partenaires de tous les secteurs y compris la santé, l'éducation et la communication\. Un Comité de coordination d'urgence pour le choléra, composé de la Direction nationale de l'Eau Potable et l'Assainissement (DINEPA), les agences des Nations Unis et les ONG, a été rapidement mis en place par la Direction de la protection civile, en collaboration avec le MSPP au niveau central et des comités correspondant aux niveaux départemental et communal\. En outre, un système de coordination inter-cluster a été mis en place - avec un rôle particulier pour la santé, de l'Eau Assainissement et Santé, Camp de la coordination et la gestion de camp et de la logistique Clusters - d'assurer une réponse rapide et synchronisée sur le terrain\. III\. Objectifs de développement du projet L'objectif du Projet est d'améliorer les pratiques de santé et d'hygiène afin de réduire la propagation du choléra et de renforcer les capacités institutionnelles pour répondre aux épidémies\. IV\. Description du Projet Le Projet proposé permettrait de financer deux composantes: (i) Appui à la réponse du Gouvernement au choléra au niveau décentralisé ; et (ii) Renforcement de la capacité de réponse urgente\. Les composants sont décrits ci-dessous: (i) Composante 1: Appui à la réponse du Gouvernement au choléra au niveau décentralisé (11,0 millions de dollars): L'objectif de cette composante est de réaliser un programme d'activités pour une réponse immédiate au choléra, comme indiqué dans la Stratégie Nationale de la Réponse à l’Epidémie de Cholera et défini au niveau départemental, pour appuyer la réponse urgente du Gouvernement au cholera\. Cette Composante vise à répondre aux besoins du niveau départemental par un soutien à tous les prestataires de service, qu'ils soient publics, mixtes ou privées, qui entreprennent des interventions à tous les niveaux de la lutte contre le choléra\. À cette fin, ce volet permettra de financer deux sous- composantes: Sous- composante 1\.1: Soutien à une approche multisectorielle aux soins de santé primaires publiques\. Cette sous- composante vise à soutenir une approche multisectorielle aux soins de santé primaires publiques, par (i) la conception, à travers la participation communautaire et la mobilisation sociale, des plans départementaux de gestion de choléra avec l'identification complète des besoins du ministère pour une riposte efficace contre le choléra au cours d'une période de six mois, y compris les ressources humaines, l'équipement et les véhicules, les fournitures médicales, les biens et les matériaux, y compris pour la gestion des déchets médicaux, et l'assistance technique, et (ii) la mise en œuvre des priorités les plus urgentes de ces plans\. Sous- composante 1\.2: Appui à la Réponse du secteur santé, de l’eau et de l'assainissement des prestataires non-publiques\. Cette sous-composante financera des activités de la santé, l'eau et d'assainissement effectués par les prestataires de service non-public, à travers la réalisation d'un programme d'activités pour une réponse immédiate au choléra, y compris en fournissant un Page 4 accès immédiat aux services de santé de base pour les populations affectées et les groupes vulnérables, accroissant la promotion de la santé et de sensibilisation à l'hygiène et améliorant l'accès à l'eau potable et d'assainissement\. (ii) Composante 2: Renforcement de la capacité de réponse urgente (4,0 millions de dollars): Cette Composante financera des activités pour appuyer la mise en œuvre réussite de la Composante 1 et assurer pour le MSPP et DINEPA sont prêts pour faire face au cholera and d’autres maladies d’origine hydriques non seulement dans le court terme mais aussi dans le longue terme comme cette épidémie peut durer de plusieurs mois à plusieurs années\. Dans ce contexte, cette Composante appuie un certain nombre d'activités d'intervention d'urgence de renforcement des capacités pour le MSPP et DINEPA ainsi que la gestion globale du projet et la supervision, à travers deux sous composantes : Sous-composante 2\.1: Renforcement de la capacité du gouvernement à gérer et répondre aux épidémies , y compris (i) renforcer la surveillance, le rapport et le suivi des cas de choléra, et le renforcement de la capacité de gestion global et de la gestion des déchets médicaux du MSPP au niveau central et départemental ; et (ii) renforcement de la capacité de DINEPA pour la mise en œuvre de sa stratégie de prévention du choléra et de contrôle\. Sous- composante 2\.2: Réalisation d’un programme d'activités pour appuyer la gestion du projet, y compris la surveillance, la supervision et des audits \. V\. Financement Source: ($m\.) Emprunteur/Bénéficiaire 0\.0 Subvention de l IDA 15\.0 Total 15\.0 VI\. Modalités d’Exécution Le Projet sera mis en œuvre par FAES compte tenu de sa capacité et son expérience avec des projets financés par la Banque\. Le Projet proposé sera géré par la FAES, au nom de et en partenariat avec DINEPA et MSPP\. FAES est une entité haïtienne, autonome et gouvernementale sous la supervision du Ministère de l'Economie et des Finances et un conseil d'administration composé de neuf membres (trois ministres, cinq représentants de la société civile et le directeur général FAES)\. FAES a plus de vingt ans d'expérience dans la gestion de projets multisectoriels et communautaires\. FAES a cinq bureaux régionaux et un bureau national à Port-au-Prince avec un effectif d'environ 130\. Une équipe de projet, dirigé par un responsable de programme qui est un spécialiste de la santé, sera responsable pour la supervision des équipes au niveau départemental et pour la gestion au jour le jour des contrats des prestataires de service non-public ainsi que le suivi des activités d’assistance technique sous la Composante 2\. En particulier, FAES sera responsable pour (i) la préparation des rapports trimestriels sur l'avancement du projet qui sera soumis à l'équipe de la Banque; (ii) le suivi de la conformité avec les politiques de sauvegarde environnementales de la Banque mondiale; (iii) la tenue des registres et des comptes distincts pour toutes les Page 5 transactions liées au projet, et (vi) l'élaboration, la consolidation et la production des états financiers du projet et d'autres informations financières\. FAES a déjà du personnel expérimentés dans les marchés, la gestion financière, les sauvegardes environnementales et de suivi ; cependant le projet permettra de financer le recrutement de personnel supplémentaire, au besoin, y compris le responsable de programme\. FAES fera régulièrement rapport au MSPP et le Cluster de santé chargé de la surveillance de l'effort de réponse\. Les coordinateurs du programme seront désignés au sein des deux organismes pour être responsable de la supervision technique et la supervision des activités des prestataires publiques et non-publiques et pour les rapports trimestriels aux ministres respectifs et les clusters sectoriels sur les résultats et les bénéficiaires\. VII\. Politiques de Sauvegardes (y compris la consultation publique) Politiques de sauvegarde déclenchées par le projet Oui Non Evaluation environnementale (OP / BP 4\.01) [X] [ ] Habitats naturels (OP / BP 4\.04) [ ] [X] De la lutte antiparasitaire (OP 4\.09) [ ] [X] Ressources culturelles physiques (OP / BP 4\.11) [ ] [X] Réinstallation involontaire (OP / BP 4\.12) [ ] [X] Peuples autochtones (OP / BP 4\.10) [ ] [X] Les forêts (OP / BP 4\.36) [ ] [X] Sécurité des barrages (OP / BP 4\.37) [ ] [X] Projets dans les zones contestées (OP / BP 7\.60) * [ ] [X] Projets sur les voies internationales (OP / BP 7\.50) [ ] [X] VIII\. Contact à la Banque et pour l’Emprunteur Banque mondiale Contact: Maryanne Sharp Titre: Chargée des opérations principale Tel: (202) 458-5560 Email: Msharp@worldbank\.org Agence de Mise en Œuvre Agence : Fonds d’Assistance Economique et Social (FAES) Contact Person: Harry Adam, Directeur Exécutif Email: faes@faes\.gouv\.ht IX\. Pour plus d’information, veuillez contacter: The InfoShop The World Bank 1818 H Street, NW Washington, D\.C\. 20433 Telephone: (202) 458-4500 Fax: (202) 522-1500 Page 6 Web: http://www\.worldbank\.org/infoshop

APPROVAL

P173716

 The World Bank Vietnam: Binh Duong Water Environment Improvement Project (P173716) Project Information Document (PID) Concept Stage | Date Prepared/Updated: 11-May-2020 | Report No: PIDC29247 May 10, 2020 Page 1 of 12  The World Bank Vietnam: Binh Duong Water Environment Improvement Project (P173716) BASIC INFORMATION A\. Basic Project Data OPS TABLE Country Project ID Parent Project ID (if any) Project Name Vietnam P173716 Vietnam: Binh Duong Water Environment Improvement Project (P173716) Region Estimated Appraisal Date Estimated Board Date Practice Area (Lead) EAST ASIA AND PACIFIC Nov 15, 2020 Mar 25, 2021 Water Financing Instrument Borrower(s) Implementing Agency Investment Project Financing Socialist Republic of Vietnam Binh Duong Provincial Wastewater and Drainage Management Board (WDMB) Proposed Development Objective(s) The project development objectives are to improve municipal wastewater services and manage rainwater inundation risks in selected areas of the South Binh Duong region\. PROJECT FINANCING DATA (US$, Millions) SUMMARY-NewFin1 Total Project Cost 293\.00 Total Financing 293\.00 of which IBRD/IDA 235\.00 Financing Gap 0\.00 DETAILS -NewFinEnh1 World Bank Group Financing International Bank for Reconstruction and Development (IBRD) 235\.00 Non-World Bank Group Financing Counterpart Funding 58\.00 Local Govts\. (Prov\., District, City) of Borrowing Country 58\.00 May 10, 2020 Page 2 of 12  The World Bank Vietnam: Binh Duong Water Environment Improvement Project (P173716) Environmental and Social Risk Classification Concept Review Decision Substantial Track II-The review did authorize the preparation to continue B\. Introduction and Context Country Context 1\. Vietnam has combined rapid economic growth with remarkable success in poverty alleviation but risks remain\. The Government of Vietnam (GoV) launched a sustained period of growth in 1986 with its national economic liberalization and integration program – Doi Moi (Renovation)\. The national Gross Domestic Production (GDP) of Vietnam then was US$ 26\.34 billion whereas it reached US$ 245\.21 billion in 2018\. Since 2005, annual growth in GDP (constant) has steadily averaged over 6 percent and has not once fallen below 5 percent\. Similarly, economic opportunities have been broadly felt as indicated by a decline in poverty rates between 2002 and 2018, from over 70 percent to below 6 percent (US$3\.2/day PPP)\. Although these trends are positive overall, about 17 percent of near poor people in 2010 fell back into poverty in 2014, 1 partly induced by climate change shocks that are mainly associated with flooding\.2 2\. Recent rates of economic growth has been driven by a growing labor force and population, urbanization, economic sector transition, and underpinned by improved policies and infrastructure investment\. Vietnam is a country of over 90 million people with more than 31\.3 percent3 living in urban areas\. Urban population has grown annually by 3 percent in the last ten years which exceeds overall population growth by around 2% and these trends are likely to continue\. Consistent with these changes, the economic structure of key sectors (as a percentage of GDP) has been in a steady process of transformation from agriculture to higher valued sectors of industry (including construction) and services\. These changes have been enabled by increasing openness and encouragement of private business\.4 A World Bank assessment attributes Vietnam’s economic rise to trade liberalization, domestic reforms and deregulation, and investments in human and physical capital\.5 Vietnam has greatly expanded its investments in electricity, water, and other services that improve livelihoods and sustain its modernizing economy\. Vietnam's public and private sector infrastructure investment averaged 5\.7 percent6 of its gross domestic product in recent years, the highest in Southeast Asia and compares with 6\.8 percent in China\. 3\. Vietnam recognizes future needs and has identified six transformation areas of focus to realize its vision for 2035\. The GoV recognizes that gaps in infrastructure investment are large and projected to grow, especially in urban water and sanitation\.7 To address this, it has identified transformations8 in critical areas that relate to: (i) reshape urban policies and investments for more dynamic cities and urban centers; (ii) chart an environmentally sustainable development path with increasing adaptation and resilience to changing climate patterns\. 1 Country Partnership Framework for the Socialist Republic of Vietnam for the Period FY18-FY22 (World Bank 2017, Report No\. 111771-VN)\. 2 In 2010-2014 floods affected nearly 5 million people in Vietnam (source: Climate Change Knowledge Portal) 3 Per VHLSS survey of 2018\. 4 See World Bank’s increased ranking of Vietnam in its Doing Business assessment report 5 Eckardt, S\., Mishra, D\., and Dinh, V\.T\., 2018\. “Vietnam’s manufacturing miracleâ€?\. Brookings Institute\. https://www\.brookings\.edu/blog/future- development/2018/04/17/vietnams-manufacturing-miracle-lessons-for-developing-countries/ 6 Asian Development Bank (2017) Meeting Asia’s Infrastructure Needs\. Manila, the Philippines\. 7 ADB\. Vietnam Urban Environment Program\. City Sanitation Strategies in the Mekong Delta\. Oct 2015\. 8 World Bank; Ministry of Planning and Investment of Vietnam (2016) Vietnam 2035: Toward Prosperity, Creativity, Equity, and Democracy\. Washington, DC: World Bank\. May 10, 2020 Page 3 of 12  The World Bank Vietnam: Binh Duong Water Environment Improvement Project (P173716) 4\. The recent COVID-19 crisis has created setbacks for Vietnam and led the government to take short turn actions in addition to long term plans\. Uncertainties surrounding the spread of COVID-19 led the government to initiate community and business closures that caused fiscal and external accounts to deteriorate\. More widely, foreign investment in Vietnam is forecasted to decline US$ 2\.46 billion or 6\.8 percent from pre-virus forecasts\. Altogether, COVID-19 and the government response exposed the vulnerability of poor people to such external unforeseen events\. In response to COVID- 19, the government is developing spending plans to create jobs and ensure equitable growth that will help return the country to previous plans for economic expansion while reestablishing resilience against COVID19 and future shocks\. Sectoral and Institutional Context 5\. Vietnam is rich in water resources but subject to increasing water stress and risks\. Vietnam annually receives almost 2,000 millimeters (mm) of rain each year across 16 major basins\. Four river basins in particular (i\.e\. Red-Thai Binh, Mekong, Dong Nai, and South East River Cluster (SERC)) are fundamental to Vietnam’s livelihoods and economy since 80 percent of its GDP is produced there\. While water resources often appear plentiful, rapid socio-economic development has increased demand and in the dry season, supply constraints are already emerging in those four key basins, due to reasons such as changing rainfall patterns under climate change as well as overexploitation of groundwater resources, and could extend to 11 basins out of 16 major basins by 2030\.9 6\. In addition to water shortages, during rainy seasons Vietnam is also at risk of seasonal flooding\. About 70 percent of the population is at risk from water-related natural disasters\.10 Annual losses due to all forms of water-related natural disasters averaged 1–1\.5 percent of National GDP over the last two decades but are predicted to rise to 3 percent by 2050 due to increasing impact of climate change\.11 To put this in a broader context, Vietnam has been ranked among the five countries overall to be most likely affected by climate change\.12 In response, the GoV has initiated several national policies and measures to address climate change and adapt to water-related risks\.13 7\. In cities, rapid industrialization and population growth have increased water pollution costs and exposed the need for improved wastewater and drainage management\. Currently, only 46% of urban households are connected to drainage systems and only 12\.5% of wastewater is treated\. Over the next 15 years, wastewater is expected to account for the largest share of effluents (about 60 percent) and contribute to water-related problems that combined could reduce Vietnam’s annual GDP by 4\.3 percent\.14 Water pollution is estimated to lead to US$12\.4 to US$18\.6 million in costs per day by 2030 if treatment measures are not implemented\. 8\. Binh Duong Province faces critical challenges in improving urban wastewater and drainage\. Binh Duong Province has 2\.4 million people and is the seventh largest populated province in Vietnam\. Overall, 77\.2 percent of Binh Duong population lives in urban areas, more than double the national average of 31\.3%, due to fast economic growth and high rates of immigration\. Urbanization has grown 41\.4 percent in the 2014-18 period compared to a national urban growth of 9\.8 percent\. The province is an employment hub for the region that attracts many immigrant workers for its thriving industrial economy\. The annual budget revenue of the province is the fourth largest in the country\. Binh Duong wastewater generation is increasing rapidly with its continued rates of urbanization\. 15 In 2019, wastewater treatment 9 This forecast of water stress assumes a business-as-usual level of investment\. World Bank (2019) Vietnam: Toward a safe, clean and resilient water system\. Washington\. D\.C\., US\. 10 Eckstein, D\., M\.L\. Hutfils and M\. Winges (2018) Global Climate Risk Index 2019\. Germanwatch, Berlin, Germany\. 11 World Bank (2019) Vietnam: Toward a safe, clean and resilient water system\. Washington\. D\.C\., US\. 12 Arndt, C\., Tarp, F\. and Thurlow, J\. (2015) The economic costs of climate change: a multi-sector impact assessment for Vietnam\. Sustainability 7(4): 4131-4145\. 13 For example, the Ministry of Natural Resources and Environment (MoNRE) announced the National Climate Change Strategy, in 2011; the National Green Growth Strategy was adopted in 2012 to attract financing for climate change risks; the Law on Natural Disaster Prevention and Control was enacted in 2013; and in 2016, Vietnam ratified the Paris Agreement\. 14 World Bank (2019) Vietnam: Toward a safe, clean and resilient water system\. Washington\. D\.C\., US\. 15 The Viet Nam Provincial Governance and Public Administration Performance Index May 10, 2020 Page 4 of 12  The World Bank Vietnam: Binh Duong Water Environment Improvement Project (P173716) capacity in the South Binh Duong region is only able to meet 50 percent of the total wastewater treatment demand\. Currently, drainage is inadequate in several areas and even relatively low levels of rainfall can cause urban flooding, an impact that disproportionately affects poor people\. Furthermore, a rapid assessment of Binh Duong Province's exposure to climate change and disaster risks shows that Binh Duong faces high levels of river and urban flood risks under future climate change16\. To continue its successes, Binh Duong must address its gaps in wastewater and drainage coverage, not only in terms of investment in infrastructure but also in handwashing and hygiene education\. This is particularly important to reduce the incidence of diseases, such as COVID 19 and other waterborne diseases\. 9\. Innovative and financially viable investments in wastewater and drainage infrastructure and services will be required to meet current needs and reduce exposure to high long-term costs\. Binh Duong province can establish itself as a “lighthouseâ€? for demonstrating innovations that the rest of the country could emulate\. For example, water improvements could adapt concepts such as a circular economy (CE) to identify opportunities for water reuse that could include recycling wastewater for irrigation, which could not only save farming costs but also reduce freshwater and groundwater demand and benefit downstream users\. Also, nature-based solutions (NBS), including constructed retention ponds and urban infiltration systems, not only attenuate stormwater runoff, can also generate co-benefits in water quality, climate resilience, water storage, and urban aesthetics\. In addition, performance-based financing approaches and other financing instruments could offer opportunities to more rapidly expand solutions at reasonable costs to areas of critical need\. Last but not least, innovative financing models can be explored to improve the participation of private sector in managing urban wastewater and drainage issues, such as Public Private Partnership (PPP)\. All these types of innovations are being explored in cities worldwide and are worth consideration for Vietnam provided that appropriate and fit-for- purpose designs and operation and management (O&M) arrangements can be established\. In so doing, it would not only offer valuable insights for other Vietnamese provinces but building on its recognition, Binh Duong’s experience could become a beacon for other cities around Vietnam and the region that are in similar stages of development\. 10\. While solution options exist, decentralized decision-making has created complexities in identifying sound investments for improving integrated urban wastewater and drainage\. Provincial governments are responsible for determining how to achieve sustainable development with investments and services based on local conditions\. However, complexities arise because several different governmental agencies influence urban wastewater and drainage management, including Department of Construction, Department and Agricultural and Rural Development and others\. As such, competing and potentially conflicting mandates can hinder the process of identifying the best solutions to urban wastewater and inundation issues\. Relationship to CPF 11\. The proposed Project is aligned with the World Bank’s Country Partnership Framework (CPF) (FY2018-2022 Report No\. 111771-VN)\. It contributes to the World Bank Group’s dual goals in reducing poverty and boosting shared prosperity by providing key infrastructure for development and developing resilience to disasters\. The operation underpins a core strategic thrust of CPF for strengthening resilience to climate change, environmental protection, and improved management of natural assets\. Specifically, it supports the following objectives: Objective #4 to improve planning, management, and delivery of infrastructure and land in cities; Objective #10 to increase climate resilience and strengthen disaster risk management; and Objective #11 to strengthen natural resource management and improve water security\. The proposed projects consider emerging lessons and strategic shifts proposed in the Performance and Learning Review (PLR) of the CPF (134020-VN) as it aims to deepen engagement at sub-national level with borrowing capacity\. 12\. While the focus of the operation will be on expanding municipal services to three cities, it also responds to COVID-19 priorities\. There is a direct link between access to improved water services, sanitation and hygiene (including 16 World Bank Climate and Disaster Risk Screening (https://climatescreeningtools\.worldbank\.org/about-the-tools) May 10, 2020 Page 5 of 12  The World Bank Vietnam: Binh Duong Water Environment Improvement Project (P173716) handwashing) and the incidence of water-borne diseases and public health including viruses like COVID-19 for which handwashing is an important barrier to infection\. The project will reduce pollution to water resources from domestic wastewater and improve drainage systems to reduce exposure to floods\. Both wastewater and drainage management aim at protecting water sources by reducing the pollution load, improving hygienic and handwashing practices and sanitary living conditions which serve as essential barriers to human-to-human and surface-to-human transmission of the COVID- 19 virus in communities, homes, health care facilities, schools, and other public spaces\. 13\. The long-term growth potential of the project for human, natural, and physical capital development is significant\. The proposed project will help to build resilience to future shocks, with interventions to build capacity for Binh Duong communities and local economy to cope with and recover from external shocks (e\.g\. COVID-19 today, as well as future natural disasters, such as floods, that are expected to increase in frequency and intensity with climate change)\. Reliability of water infrastructure services is a key factor affecting industrial productivity, efficiency and competitiveness\. The implementation of the physical interventions will extend employment opportunities in the Province for construction elements involving earthwork, wastewater network expansion and drainage, as well as tree planting programs in support of nature-based solutions – a particularly relevant dimension since significant declines in forest coverage has increase erosion risks along streams and channels\. The implementation arrangement is simple and the likelihood to start disbursement and support employment generation in the next 12-24 months is high\. C\. Proposed Development Objective(s) The project development objectives are to improve municipal wastewater services and manage rainwater inundation risks in selected areas of the South Binh Duong region\. Key Results (From PCN) 14\. The progress in meeting the PDO will be measured through the following indicators: - Households provided with access to wastewater systems and new or improved drainage services (total number, percentage of which female) - Annual reduction of domestic wastewater pollution discharged to Rivers (tons/year reduction of COD/TN/TP) - Reduction in the areas exposed to regular flooding (hectares) - Increased capacity to manage floods (e\.g\. issuance of flood risk maps, monitoring equipment, # of drainage master plans) - Increase in awareness of handwashing and hygiene practices (# of people) 15\. Intermediary indicators include: Private sector participation in O&M through (# of management contracts signed for provision of sanitation and drainage O&M); and Recycled water (volume) for irrigation or equivalent uses\. The final indicators will be developed and presented in the results framework to measure progress against contributing infrastructure and institutional activities under each Component\. D\. Concept Description 16\. Fast economic growth, due to high rates of immigration into the Southern Binh Duong Region, strains urban infrastructure capacity and degrades water quality in the Dong Nai and Sai Gon River\. The province is situated upstream of the confluence of Saigon and Dong Nai rivers that supply water to millions of inhabitants of Binh Duong, Dong Nai provinces and Ho Chi Minh City\. The project aims to support Binh Duong in protecting these rivers from pollution caused May 10, 2020 Page 6 of 12  The World Bank Vietnam: Binh Duong Water Environment Improvement Project (P173716) by high rate of industrialization and urbanization as a major priority\. All industrial parks in Binh Duong are already equipped with wastewater collection and treatment facilities to meet the required standards prior discharging to the environment\. Operation of these wastewater treatment plants, and quality of the effluent treated wastewater are closely monitored by local DONRE\. However, stormwater runoff and domestic wastewater generated from cities and towns are discharged into the Dong Nai River and Sai Gon River with limited to no treatment\. 17\. This project builds upon previous collaboration between the Bank and South Binh Duong region in developing wastewater and drainage services\. The World Bank has supported Di An town, the most densely populated town in South Binh Duong region, with constructing and operating a WWTP of 20,000 m³/day from 2016 to 2018\. By mid-2019, with support from the World Bank and other financing institutions, the South Binh Duong region has built four operating WWTPs with a combined capacity of 70,000 m³/day\. However, this capacity only meets about 50% of the wastewater generation of the region’s 2\.1-million population\. 18\. The project intends to expand the wastewater treatment capacity in South Binh Duong region to meet the increasing demand and reduce water pollution in the Dong Nai River System\. It is estimated that by 2030, a population of 2\.6 to 3 million in the South Binh Duong region will generate 180,000m3/day to 200,000m3/day\. The current sewage collection and treatment systems of Thu Dau Mot, Thuan An and Di An will operate at full capacity in a few short years\. Accordingly, there is a critical need to build and expand the current system with additional collection and treatment units\. 19\. Equally, the urban drainage systems in South Binh Duong region need to be upgraded to reduce inundation and enhance resilience to climate change\. The current stormwater drainage is unable to deal with frequent flooding, which is expected to increase in frequency and intensity\. With the region’s rapid urbanization, impervious surface areas have grown and led to faster stormwater runoff flows that can overwhelm major roads and residential areas\. When flooded, stormwater gets mixed with domestic wastewater and other sources of waste and exacerbates pollution to the Dong Nai river system—a major source of freshwater to HCMC\. 20\. In order to improve wastewater services and reduce urban flood risks in South Binh Duong region, the project intends to strengthen relevant institutions by increasing private sector participation and developing integrated urban water/flood management systems\. Implementing financially sustainable wastewater tariff to generate sustainable revenue stream is vital to the sustainable development of wastewater sector and to leveraging financial resources from the private sector and community resources\. Furthermore, risk-based integrated urban flood management approach that combines both structural and non-structural measures and increasingly leverages nature-based solutions offer potentials to address urban water issues, including both water pollution and inundation risks, in a holistic way and often at lower costs\. 21\. The proposed project will focus in on three towns in the South Binh Duong region, namely Thuan An, Di An and Tan Uyen\. These towns cover an area of more than 33,000 hectares with a total population of nearly 1,400,000\. The total investment is estimated at US$ 293M, of which loans from the World Bank will finance to US$ 235M\. 22\. The project will be implemented through two components, namely component 1 focused on expansion of municipal wastewater and drainage services and component 2 focused on capacity and institutional development and implementation support\. Component 1: Expanding municipal services for wastewater and drainage management (IBRD Loan: US$217\.44 million; Counterpart Fund: US$21\.73 million)\. This component will scale up wastewater treatment facilities and improve household connections to increase the overall percentage of municipal wastewater being collected and treated in South Binh Duong region\. It will also finance Information, Education and Communication (IEC) activities to raise awareness on handwashing and hygienic practices to increase resilience to COVID-19\. Moreover, it aims to improve urban drainage systems by combining both grey and green infrastructure to mitigate current urban inundation risks and strengthen future resilience to climate change in the form of May 10, 2020 Page 7 of 12  The World Bank Vietnam: Binh Duong Water Environment Improvement Project (P173716) increased flooding\. This component includes: Sub-component 1A: Constructing the domestic wastewater collection and treatment systems (IBRD Loan: US$173\.52 million; Counterpart Fund: US$17\.35 million)\. This component will improve access to wastewater systems in Binh Duong and reduce pollution load to Dong Nai River system and downstream communities in HCMC\. The specific investments include: - Constructing a sewage collection and network and sewage pumping stations for Tan Uyen town, Thuan An, and Di An cities that can increase the coverage for more than 38,000 households\. Total primary and secondary wastewater collection and transmission network is 88,800m; and - Constructing a WWTP with 1st stage capacity of 20,000 m³/ day for Tan Uyen town; Upgrading the existing WWTPs for Thuan An and Di An cities with additional treatment capacity of 17,000 m³/day and 20,000 m³/day respectively\. Sub-component 1B: Improving urban flood resilience under climate change (IBRD Loan: US$33\.34 million; Counterpart Fund: US$3\.33 million)\. This subcomponent aims to reduce incidence of urban flooding and it will include elements of nature-based solutions as part of the envisaged drainage works\. This includes: - Development of stormwater drainage systems different key flood prone area of a total length of 9,000 m mainly in Tan Uyen town and Thuan An city\.; and - Maintaining and enhancing the use of green space, water space (ponds, lakes) with natural ground to store water and accumulation of groundwater through rainwater infiltration, planting trees to increase the soil water carrying capacity, which provides co-benefits such as creating environmentally friendly landscapes, improved people's wellbeing, water resources protection and climate change mitigation etc\.; Sub-component 1C: Results-Based Financing for sustainable wastewater and drainage management (IBRD Loan: US$10\.58million; Counterpart Fund: US$1\.06 million)\. Disbursement under this component will be based on Performance Based Conditions (PBC)\. While disbursements under Components 1A and 1B will be triggered by the execution of expenditures, disbursements in Component 1C will depend on achieving the target levels of pre-defined indicators (e\.g\. household connections to WWTP)\. The use of PBCs is intended to strengthen a project’s results orientation towards increasing utilization of wastewater treatment capacity in the Province, sustaining O&M, water reuse, and strengthen the institutional capacity to improve flood management\. The PBC related to household connection is related to the construction of service network, house connection points and house connection for about 38,000 households in the project cities\. This subcomponent will also incentivize water reuse and the participation of private section in O&M for wastewater systems, and to improve tariff collection for wastewater services\. The preliminary specific PBC for this are: i\. Households connected to the WWTP (#)\. ii\. Volume of water reused in support of circular economy (cubic meter treated and reused for irrigation or any equivalent use) iii\. Signed management contracts for O&M for wastewater and drainage improvement (#) iv\. Flood hazard risk maps and approval of Integrated Urban Flood Management masterplan 23\. The “pricingâ€? of a PBC will directly match the cost of the associated activities required to achieve all the PBC as well as a share of expenditure allocated to wastewater network and treatment plants (e\.g\. in the form of procurable contracts)\. The allocation, however, may differ depending on the weight of each PBC to achievement of the PDO\. May 10, 2020 Page 8 of 12  The World Bank Vietnam: Binh Duong Water Environment Improvement Project (P173716) Verification will be undertaken by independent M&E consultancy\. Component 2: Implementation support, capacity and institutional development (IBRD Loan: US$17\.09 million; Counterpart Fund: US$36\.24 million)\. 24\. The proposed investments and activities focus on building capacity of the Binh Duong Provincial Wastewater and Drainage Management Board (WDMB)\. This WDMB has been established in December 2019 with a mandate for implementing asset development, management, and maintenance for wastewater infrastructure through Private Sector Participation (PSP)\. The WDMB is responsible for developing and implementing investment plans, maintaining the invested assets\. Currently a management contract is in place with Binh Duong Water Supply Sewerage Environment Limited Company (BIWASE) for the operation and management drainage and wastewater assets\. To fulfill its mandates, the Board proposes to invest in several measures, including the development of: (i) a road-map for long-term/medium investment needs (i\.e\. development and financing); (ii) operational procedures and guidelines for wastewater and drainage asset management; and, (iii) an institutional capacity improvement plan\. The WDMB will also be supported to advance measures in the water sector to respond to COVID19 crisis\. These will include allocation for employment generation for household connections and allocation for intensive tree planting and earth work related to nature-based solutions in the Province\. These activities are critical as the Province hosts many small enterprises and labor-intensive enterprises (leather and garment industries) that are expected to suffer from the economic downturn due to COVID19\. Gender equality will be an important consideration in these activities\. 25\. The proposed project will support the implementation of these measures through the following measures: Sub-component 2A: Developing integrated urban water management in the project areas (IBRD loan: US$ 1\.87 million; Counterpart Fund: US$ 0\.19 million)\. This includes: - Assisting the newly established WDMB under the Provincial People’s Committee to develop integrated urban water management strategies of the South Binh Duong region, that manages urban water issues, including both water pollution and urban flooding risks, in a holistic manner, and defining strategic areas and directions for the regions’ future sustainable, inclusive and resilient urban development vision\. - Assisting the newly established WDMB develop risk-based integrated flood management approach based on a flood risks map that would be developed in consideration of increasing exposure and vulnerability to rapid urbanization and climate change threats\. This approach would account for potential structural and non-structural measures with community and citizen engagement and emphasis will be placed on women participation\. - Conducting a series of trainings on integrated urban water management and nature-based solutions to enhance both technical and official persons’ capacity\. Female participation will be required in all training activities, which would lead to increased participation of women in flood control and prevention related activities\. Sub-component 2B: Implementation support, capacity building, and coordination for COVID-19 response (IBRD loan: US$ 15\.22 million; Counterpart Fund: US$ 25\.32 million)\. The activities under this sub-component include: (i) M&E and technical support to achieving the PBC, and (ii) construction supervision and contract management\. This sub-component 2B will be financed by both counterpart funds (surveys, designs, appraisal etc\.) and IBRD (i\.e\. for construction supervision, safeguard monitoring, financial audit and project M&E)\. The expected consultancies are: surveys, detailed design and bidding document; construction supervision and contract management; preparation and supervising the implementation of the environmental management planning; verification of detailed design documents and cost estimates; procurement and contract management support, financial audit; monitoring and evaluating the implementation process and project results and independent verification of PBC’s implementation; clearance of UXO, mines and explosive materials in the project area; and fee and interests during project implementation\. May 10, 2020 Page 9 of 12  The World Bank Vietnam: Binh Duong Water Environment Improvement Project (P173716) The component will also coordinate the COVID-19 response in the province as pertains to conducting IEC activities to raise awareness on handwashing and hygienic practices to increase resilience to COVID-19 and other waterborne communicable diseases as well as employment generation opportunities in the province\. This component will emphasize female participation in both design and implementation of these activities\. The IEC activities will also encourage household connections and increase their willingness to pay tariffs for wastewater services Sub-component 2C: Site clearance, Land Acquisition and compensation (Counterpart Fund: US$ 10\.73 million)\. The activities carried out under this sub-component are directly related to the compensation, land acquisition and site clearance that required for project implementation\. These include: Consultancies on preparation of compensation, land acquisition and resettlement planning; Implementing compensation, support and site clearance; and Consultancies to supervise the implementation of compensation, land acquisition, and site clearance activities\. Legal Operational Policies Triggered? Projects on International Waterways OP 7\.50 Yes Projects in Disputed Areas OP 7\.60 No Summary of Screening of Environmental and Social Risks and Impacts \. 26\. The Binh Duong Water Environment Improvement Project (P173716) consists of localized infrastructure developments in three towns involving expanding the domestic wastewater collection and treatment systems including household connections, constructing stormwater drainage systems as well as developing government management capacity\. Initial screening shows that the main environmental risks and impacts during construction would be degradation of the local air, soil, and water environment due to exhaust gas emission and waste generation and disposal; water quality degradation and impacts to aquatic species and irrigation activities due to moderate scale dredging and generation of considerable amount of dredging materials; traffic safety and business disturbance; worker and community health and safety; damages to existing weak structures and local houses due to dredging or piling; and safety risk due to unexploded ordnances (UXO) left from the war\. The main environmental risks during operation would be water pollution, especially to Dong Nai river, due to failure or malfunction of the WWTPs; environmental pollution due to emissions, odors, and generation of substantial amount of sludge from the WWTPs and maintenance of the sewerage collection system; and worker health and safety risks due to exposure to hazardous chemicals and pathogens\. Social risks and impacts related to the project are localized and limited\. The project will acquire about 12ha of agricultural land from 46 households for the construction of Tan Uyen WWTP and for dredging of about 1\.5 km of Suoi Tre drainage canal in Tan Uyen, the outlet of Tan Uyen WWTP to the Dong Nai river, while wastewater drainage system and rainwater routes will be constructed in the existing roads? bed, and will not require land acquisition\. No households will be significantly affected or relocated due to land acquisition\. There are additional social risks and impacts to community health and safety related to labor influx such as sexual exploitation abuse, sexual harassments, and communicable diseases\. The other potential adverse social impacts will relate to the temporary disruption or limitation of traffic and utilities during the construction phase, but the client in question has demonstrated their capacity to mitigate such impacts in previous projects\. May 10, 2020 Page 10 of 12  The World Bank Vietnam: Binh Duong Water Environment Improvement Project (P173716) \. CONTACT POINT World Bank Abedalrazq F\. Khalil, Vinh Quang Nguyen Sr Water Resources Mgmt\. Spec\. Borrower/Client/Recipient Socialist Republic of Vietnam Implementing Agencies Binh Duong Provincial Wastewater and Drainage Management Board (WDMB) Nguyen Thi Thu Van Ms\. bdspmu2019@gmail\.com FOR MORE INFORMATION CONTACT The World Bank 1818 H Street, NW Washington, D\.C\. 20433 Telephone: (202) 473-1000 Web: http://www\.worldbank\.org/projects APPROVAL Task Team Leader(s): Abedalrazq F\. Khalil, Vinh Quang Nguyen Approved By APPROVALTBL Environmental and Social Standards Linh Thi Thuy Tran 12-May-2020 Advisor: Practice Manager/Manager: Sudipto Sarkar 12-May-2020 Country Director: Ousmane Dione 26-May-2020 May 10, 2020 Page 11 of 12  The World Bank Vietnam: Binh Duong Water Environment Improvement Project (P173716) May 10, 2020 Page 12 of 12

APPROVAL

P056522

Document of The World Bank FOR OFFICIAL USE ONLY Report No: 23276 IMPLEMENTATION COMPLETION REPORT (SCL-45150; TF-26106) ON A LOAN/CREDIT/GRANT IN THE AMOUNT OF US$ 400 MILLION TO THE KINGDOM OF THAILAND FOR A PUBLIC SECTOR REFORM LOAN January 31, 2002 Poverty Reduction and Economic Management Unit East Asia and Pacific Regional Office This document has a restricted distribution and may be used by recipients only in the performance of their official duties\. Its contents may not otherwise be disclosed without World Bank authorization\.  CURRENCY EQUIVALENTS (Exchange Rate Effective as of January 31, 2002) Currency Unit = Thai Baht B 1\.00 = US$ 0\.022 US$ 1\.00 = 44\.18B FISCAL YEAR October I to September 30 ABBREVIATIONS AND ACRONYMS ADB - Asian Development Bank APO - Autonomous Public Organizations AUSAID - Australian Agency for International Development BOB - Bureau of the Budget CAS - Country Assistance Strategy CGD - Comptroller General's Department CIDA - Canadian International Development Agency EPC - Ethics Promotion Center GDP - Gross Domestic Project GFMIS - Government Financial Management Information System ICR - Implementation Completion Report LTO - Large Taxpayer Organization MOE - Ministry of Education MOF - Ministry of Finance MOP - Memorandum of the President MOPH - Ministry of Public Health MOU - Memorandum of Understanding NCCC - National Counter Corruption Commission NDC - National Decentralization Committee NESDB - National Economic and Social Development Board NZODA - New Zealand Office of Development Assistance OCSC - Office of the Civil Service Commission PINTHIP - Integrated Taxpayer Information Services PMO - Project Management Office PSAL - Programmatic Structural Adjustment Loan PSMRP - Public Sector Management Reform Plan PSRC - Public Sector Reform Committee PSRL - Public Sector Reform Loan QAG - Quality Assurance Group RD - Revenue Deparment VAT - Value Added Tax Vice President: Jemal-ud-din Kassum Country Manager/Director: Ian C\. Porter Sector Manager/Director: Homi Kharas Task Team Leader/Task Manager: Dana Weist  FOR OFFICIAL USE ONLY THAILAND Public Sector Reform CONTENTS Page No\. 1\. Project Data I 2\. Principal Performance Ratings 1 3\. Assessment of Development Objective and Design, and of Quality at Entry 1 4\. Achievement of Objective and Outputs 4 5\. Major Factors Affecting Implementation and Outcome 6 6\. Sustainability 7 7\. Bank and Borrower Performance 8 8\. Lessons Learned 9 9\. Partner Comments 10 10\. Additional Information 10 Annex 1\. Key Performance Indicators/Log Frame Matrix 11 Annex 2\. Project Costs and Financing 12 Annex 3\. Economic Costs and Benefits 13 Annex 4\. Bank Inputs 14 Annex 5\. Ratings for Achievement of Objectives/Outputs of Components 16 Annex 6\. Ratings of Bank and Borrower Performance 17 Annex 7\. List of Supporting Documents 18 Annex 8\. Beneficiary Survey Results 19 Annex 9\. Stakeholder Workshop Results 20 Annex 10\. Govemment's Policy Objectives and Implementation Benchmarks 21 Attachment: Letter from MOF This document has a restricted distribution and may be used by recipients only in the perforrnance of their official duties\. Its contents may not otherwise be disclosed without World Bank authorization\.   Introduction In Thailand's history, 1997 will be a watershed year, both because of the economic crisis and the passage of the new Constitution\. The economic crisis highlighted the need for broad- based, public-sector reforms, and the Constitution mandated a new role for the state\. Both of these developments created a window of opportunity for public sector reform\. The sudden end of the economic boom severely strained the Government's ability to manage its economic and financial affairs and its ability to deliver public services\. The combination of recession-induced lower revenues, rising expenditures to meet the social needs of the crisis, and the public costs of restructuring the financial system created large fiscal deficits that required significant external financing\. Public debt as a share of GDP more than doubled\. Thailand's highly developed "tiger" economy stood in stark contrast to its antiquated administrative apparatus\.' Many public institutions had not changed materially from their establishment\.2 Unstable coalition governments and limited coordination among public agencies weakened the Government's ability to formulate and implement its policies\. Frequent complaints about corruption eroded the Thais' confidence in the public administration\. Public officials and citizens alike realized that substantial changes were required both to overcome the crisis and to prepare the public administration to manage in a global environment\. The new Constitution was drafted in a highly participatory manner, and provides for increased citizen participation, enhanced transparency and accountability, and decentralization\. It mandated the establishment of accountability institutions such as the Administrative Courts, Office of the Ombudsman, and National Counter Corruption Commission, and promulgated new standards for transparency and guidelines for decentralizing authority and resources to local administrations\. In response to these pressures, the Thai Government launched an ambitious program to reform the public sector\. In May 1999, the Cabinet issued its Public Sector Management Reform Plan (PSMRP) which provided its vision for institutional change over the medium-term\. A high- level, Public Sector Reform Committee was tasked with overseeing the reforms\. The Public Sector Reform Loan (PSRL) provided critical support to the Government's reform program\. 1 The last comprehensive reform of the public sector occurred in 1892\. 2 For example, the civil service was established in 1928 and the Bureau of the Budget was established in 1951\.   Project ID: P056522 Project Name: Thailand Public Sector Reform Team Leader: Dana Weist TL Unit: EASPR ICR Type: Intensive Learning Model (ILM) of ICR Report Date: Januaty 30, 2002 1\. Project Data Name: Thailand Public Sector Reform L/C/TF Nunber: SCL-45150; TF-26106 Country/Department: THAILAND Region: East Asia and Pacific Region Sector/subsector: BB - Public Sector Management Adjustrnent KEY DATES Original Revised/Actual PCD: 02/12/1999 Effective: 02/22/2000 02/18/2000 Appraisal: 06/18/1999 MTR: Approval: 10/14/1999 Closing: 01/31/2000 07/31/2001 Borrower/lImplementing Agency: THAILAND/MINISTRY OF FINANCE Other Partners: STAFF Current At Appraisal Vice President: Jemal-ud-din Kassum Jean-Michel Severino Country Manager: Ian C\. Porter Jayasankar Shivakumar Sector Manager: Homi Kharas Homi Kharas Team Leader at ICR: Dana Weist Stefan Koeberle ICR Primary Author: Dana Weist; Alexander Mutebi 2\. Principal Performance Ratings (HS=Highly Satisfactory, S=Satisfactory, U=Unsatisfactory, HL=Highly Likely, L=Likely, UN=Unlikely, HUN=Highly Unlikely, HU=Highly Unsatisfactory, H=High, SU=Substantial, M=Modest, N=Negligible) Outcome: S Sustainability: L Institutional Development Impact: SU Bank Performance: S Borrower Performance: S QAG (if available) ICR Quality at Entry: S Project at Risk at Any Time: No 3\. Assessment of Development Objective and Design, and of Quality at Entry 3\.1 Original Objective: Thailand's Public Sector Management Reform Program (PSMRP) seeks to improve public sector governance in central agencies and line ministries, and to enhance the efficiency, effectiveness, equity, and transparency of public resource management and service delivery\. The program has three main objectives:  * Enhance resource management by creating incentives for finance, budget, revenue and civil service agencies to improve performance, and by focusing on outcomes in managing financial and human resources\. * Improve service delivery by restructuring the way the central Government delivers services and, for selected line ministries, by outsourcing, restructuring, or decentralizing goverrnent activities and enhancing public sector responsiveness to communities\. * Strengthen accountability and transparency and restore confidence in government by strengthening accountability institutions, improving transparency in budgeting, refocusing the civil service toward client service, and establishing effective mechanisms to promote accountability and transparency\. The PSRL was envisioned as critical support to launch a multi-year program of reforms that would achieve these objectives\. The program design recognized that institutional reforms occur over several years at an uneven pace\. Hence the project did not anticipate that the objectives listed above would be fully achieved during the course of the PSRL\. 3\.2 Revised Objective: No revisions were made to the above-mentioned objectives\. 3\.3 Original Components: Single Tranche: $400,000,000 Thailand's public sector reform objectives are implemented through specific action plans, which define implementation benchmarks in: (i) expenditure management; (ii) human resource management; (iii) revenue administration; (iv) decentralization; and (v) cross-government accountability and transparency\. * Expenditure management reforms are designed to: (i) link Thailand's planning, sector policy making and budgeting processes; (ii) measure outputs and outcomes instead of controlling inputs; (iii) improve the quality of fiscal adjustment; and (iv) improve financial transparency\. * Human resource management reforms are intended to: (i) modernize the role, organization, and processes of key line ministries to enhance their service delivery; (ii) introduce performance-based human resource management systems for the civil service; and (iii) strengthen the caliber of cross-government, senior staff by developing a Senior Executive Service\. * Revenue administration reforms are designed to: (i) ensure adequate and sustainable revenue; (ii) improve revenue collection, widen the tax base, and achieve a more equitable distribution of the tax burden; and (iii) strengthen the managerial capacity of the Revenue Department to perform its functions efficiently and effectively on a sustainable and transparent basis\. * Decentralization reforms are intended to: (i) increase the share of local government expenditures; (ii) assign more revenue sources to local governments; (iii) revise the system of intergovernmental transfers to provide grants in a more transparent and predictable way; (iv) promote mechanisms for local accountability; and (v) build local government capacity\. * Cross government accountability and transparency reforms are designed to: (i) strengthen accountability institutions; (ii) improve access to, and use of, public information by individual citizens and civil society, including improving responsiveness by Government in - 2 -  providing this access; (iii) increase probity among civil servants; and (iv) enhance civil society participation in improving transparency\. 3\.4 Revised Components: The components were not revised\. 3\.5 Quality at Entry: Quality at Entry is assessed as Satisfactory\. The project's objectives were clear and realistic, and the design was appropriate and based on extensive consultation and technical assistance\. The project concept was built in part on work initiated under the Economic Management Assistance Loan, which provided technical assistance to improve the Government's capacity to manage Thailand's economy\. Taking advantage of its presence in the field, the Bank team provided intensive policy dialogue, technical assistance and knowledge sharing throughout the preparation of the project\. The PSRL was explicitly envisioned in the 1998 CAS, which focused on: (i) renewed competitiveness of Thailand's productive capacity, financial sector, and labor force; (ii) better governance of public and private institutions; and (iii) more equitable distribution of the benefits of growth across social lines\. The risks associated with the project were manageable\. The overall approach of designing a comprehensive reform, using incentives to improve performance, and promoting demand for reform beyond central agencies was developed based on international experience, and with the advice of leading experts who had implemented similar public sector reforms in other countries (e\.g\., New Zealand, Australia, etc\.) QAG did not assess Quality at Entry\. Quality of the Design: The overall design of the reform program integrates international experience with Thai circumstances\. It provides an integrated framework for reforming the core public management systems (i\.e\., public expenditure management, human resource management, and revenue mobilization)\. Importantly, these core reforms were designed to create strong incentives for cooperation (e\.g\., greater autonomy and flexibility) among the agencies participating in the reforms\. Perhaps the clearest illustration of this is the "hurdle" approach to the public expenditure management reform which gives line agencies freedom to manage more effectively while also holding them accountable for producing better results\. The "hurdle" approach grants flexibility in expenditure management to line agencies once they prove that they have core competencies (i\.e\., meet "hurdle standards") in seven aspects of financial and performance management\. Ministry-specific reforms were targeted to a limited number of pilot ministries and agencies at the outset of the reform process, with expansion of pilots over time\. This sequencing recognizes the importance of concentrating limited human and financial resources on a few, vertical reform efforts during the initial stages, as well as promoting learning from experience\. The project design includes measures aimed at enhancing accountability and transparency by strengthening independent organizations (e\.g\., the National Counter Corruption Commission, the - 3 -  Administrative Courts) and taking steps to ensure consultations with civil society\. The PSRL was the first Programmatic Structural Adjustment Loan (PSAL) to be approved by the Board, hence there was no previous experience to draw upon\. It's appropriateness to support the institutional reforms envisioned by the PSRL was based on its program structure, flexibility, and potential for sustained engagement\. Reforming public institutions typically requires coordinated leadership across several complementary and mutually reinforcing areas, which are best managed as a reform program\. Successful implementation also requires incremental improvements that take advantage of rapidly opening and closing political and bureaucratic windows of opportunity\. The PSRL included defined but flexible benchmarks that can be adjusted as necessary to accommodate the pace of implementation of Thailand's PSMRP\. Finally, the PSAL structure can help sustain the momentum for reforms, and provide a platform for structured dialogue on implementation progress\. Memorandum of the President (MOP) Risk Assessment (1999) The MOP identified three major risks at project entry, which were manageable\. First, although civil society demand for public sector reform was strong, it was not necessarily well articulated\. Civil society organizations have been engaged in monitoring and providing policy advice on the reform through public announcements, an awareness campaign, and oversight from distinguished citizens, community-based organizations and think tanks\. Second was the risk that project implementation could suffer if coordination among agencies were blocked by turf fights or lengthy, consensus-oriented decision making\. To enhance coordination and monitoring, and to provide day-to-day support to the reform program, the Government appointed a Project Management Office (PMO) that reports to the PSRC\. The PMO plays a critical role in managing the day-to-day aspects of the reform for the Governmnent: drafting policy papers; monitoring progress and disseminating results; identifying specific reform activities to be funded by $100 million of the PSRL proceeds that were allocated for the reform; integrating reform activities across components; and coordinating efforts across agencies\. In contrast to other Bank-funded Project Implementation Units, the PMO was established by the Government to support its reform needs rather that the Bank's project needs\. Through regular workshops and sustained dialogue the Bank also played a significant role in breaking down established "turf' divisions and promoting coordination across agencies\. Third, political commnitment to reform risked being weakened due to political resistance to institutional reform or a change in administration\. Sustained support for public sector reform is reflected both in the 9th Plan, which notes improved governance as a key element of Thailand's development agenda from 2002 through 2007, and the new Government's support for the reforn program\. It has specified an action plan for public sector reform, and expects to implement a substantial re-engineering of the public administration by October 2002 (the beginning of FY03\.)\. 4\. Achievement of Objective and Outputs 4\.1 Outcome/achievement of objective: PSRL's outcomes have been Satisfactory\. The project achieved its major objective of launching a comprehensive reform process and is expected to achieve relevant development results without significant shortcomings\. It mobilized $400 million in budgetary support for the -4 -  Government, that contributed to its efforts to stimulate the economy during the financial crisis\. All Board conditions were fulfilled before the PSRL was declared effective in February 2000, and significant progress has been achieved in the program benchmarks\. Major achievement include: widespread acceptance of the need for public sector reform; political commitment to solve it; leadership from the top of the bureaucracy to empower change agents below; a vision of the reform's outcomes and plan to achieve them; and efforts to build awareness of the reform among participants and stakeholders\. Outputs by program component are summarized below and described in greater detail in Annex 10 (which presents the original PSRL Implementation Benchmarks and assesses progress achieved)\. Because the project emphasized laying the foundation for a steady and strategic program of reforms over a multi-year period, few of the outputs noted have measurable impacts\. 4\.2 Outputs by componenits: (i) Expenditure Management * Signed Memoranda of Understanding (MOU) between BOB and MOE, as well as BOB and MOPH to govern their reforn programs * Developed the "hurdle approach" to implement performance budgeting reforms and began granting pilot agencies greater budget flexibility * Initiated work in the Comptroller General's Department to establish an integrated financial management information system and adopt uniform accounting standards governnent-wide * Initiated work to revise the government's procurement system (ii) Human Resource Management * Conducted Functional Reviews relating to the allocation of activities within and between the six Economic Ministries; initiated Functional Reviews in other ministries * Piloted a Results-Based Management System in the Ministry of Commerce * Established a voluntary Early Retirement Program that is expected to result in a gross reduction of about 42,000 employees a Cabinet approved a Senior Executive Service proposal and an initial cadre of eligible candidates was identified * Introduced lateral recruitment measures, variable performance pay, and redundancy provisions (iii) Revenue Management * Improved taxpayer compliance by increasing the number of VAT taxpayers, enhancing revenue collected through audits, and began developing an audit case selection system * Established the Large T axpayer Organization (LTO), which has over 2,100 taxpayers and accounts for over 60 percent of total taxes collected * Redeveloped the taxpayer identification number system (PINTHIP) and implemented it country-wide (iv) Decentralization * Established the National Decentralization Cormmittee * Drafted a Decentralization and Sectoral Action Plans * Devolved additional financing to local administrations beg miing in the FY01 budget - 5 -  (vi) Accountability and Transparency * Established, staffed and funded the accountability institutions mandated in the Constitution (e\.g\., National Counter Corruption Commission, the Office of the Ombudsman, the Administrative Courts, etc\.) * Conducted corruption perception surveys among households, business enterprises and government employees as inputs to develop an Anti-Corruption Strategy; developed and implemented anti-corruption awareness campaign 4\.3 Net Present Value/Economic rate of return: Not applicable\. 4\.4 Financial rate of return: Not applicable\. 4\.5 Institutional development impact: Institutional Development Impact is assessed as Substantial\. The PSRL has contributed significantly to Thailand's institutional capability to use its financial and human resources more effectively, to strengthen service delivery, and to promote accountability and transparency\. New institutions like the Large Taxpayer's Office, Senior Executive Service, Office of the National Decentralization Committee, National Counter-Corruption Commission, Office of the Ombudsman, and Administrative Courts have been created, and strategic plans for their operation have been developed\. Over time, these institutions will change the way in which the Government provides, finances and monitors public service delivery\. In addition, incentives to sustain reform are being put in place; laws and regulations that constitute the enabling environment for reform are being drafted and implemented; and the systems that govern organizations and their interactions are being reformed\. 5\. Major Factors Affecting Implementation and Outcome 5\.1 Factors outside the control of government or implementing agency: The unanticipated shocks associated with the economic and financial crisis diverted the attention of some government officials, which in turn delayed the achievement of some PSRL benchmarks\. As the effects of the crisis abated, significant effort was devoted to the reform and progress was achieved\. 5\.2 Factors generally subject to government control: In accordance with project conditionality, Thailand maintained a sound macroeconomic framework during the period of the PSRL\. The Government chose to withdraw the PSRL proceeds in two installments ($200 million in July 2000, and the remaining $196 million in July 2001), despite the facts that the loan was a single-tranche operation, and that all conditions of effectiveness were met in February 2000\. The Government wanted flexibility in matching PSRL withdrawals with its needs for budgetary support\. Political unwillingness to provide funding during the crisis slowed the pace of some reform tasks\. Because Thailand's FY00 Budget did not allocate resources to the reform (and was itself - 6 -  sharply reduced in response to the crisis), some tasks were delayed (e\.g\., implementation of the accounting and financial management system for BOB reform pilots)\. These delays were subsequently overcome, by the inclusion of reforin costs in the FY0 1 budget and Cabinet approval of $100 million of the PSRL proceeds to finance reform tasks\. 5\.3 Factors generally subject to implementing agency control: From the outset, the reform process was managed by a series of committees, which is common in Thailand\. These committees met infrequently and had other responsibilities\. As a result, cross-cutting issues and broad policy frameworks were not fully addressed\. In contrast, counterparts from central agencies (e\.g\., OCSC, BOB, MOF, RD, NESDB) maintained a consistent focus on the PSRL, and provided a high-quality team, throughout the project period\. In addition, good cooperation was received from line ministries and independent organizations, whose assistance was important to project success within their reform areas\. In summary, the outcome is assessed as Satisfactory, with all relevant development objectives achieved, and no significant shortcomings\. A major achievement of the project was in establishing a comprehensive approach and in generating momentum for reform\. Half of the respondents surveyed as part of the Intensive ICR workshop felt that the program would have strong or very strong impacts on establishing incentives for better performance\. 5\.4 Costs andfinancing: There were no cost changes\. 6\. Sustainability 6\.1 Rationale for sustainability rating: Sustainability of the Government's reform is assessed as Likely\. Government commitment is codified in the Cabinet resolution and has been maintained across changes in administration and among numerous agencies\. The reform is well designed and resourced; as noted earlier, the Cabinet dedicated $100 million of the PSRL proceeds to finance reform tasks\. A structure to manage the reform process is in place, and many senior officials have become pro-active agents of change\. Competition among reform agencies has sustained reform momentum, and new agencies have expressed interest in participating as pilots in the reform program\. Promoting demand for well-defined results from key stakeholders has not been fully achieved, and could affect sustainability over time\. Two areas meriting improvement in monitoring reform progress are: (i) overcoming the tendency to focus on reform actions rather than impacts; and (ii) inadequate attention to assuring that the impacts that potential stakeholders care most about are actually monitored\. Initial efforts to promote external demand for reform through regular monitoring by civil society and the media, and strengthening the Parliament in its watchdog role, should be enhanced\. To date, much of the monitoring and evaluation has been performed by the World Bank, although the PMO is now playing a key role\. Enhanced monitoring can help to build and reinforce commitment to real improvements in service delivery on the ground and can provide the basis for further institutional learning\. 6\.2 Transition arrangement to regular operations: The Government is continuing, and in some ways accelerating, its public sector reforms\. 7 -  At present, it's needs for external financing are limited and it is unlikely that the Government would request Bank financing for PSRL-II\. The Bank will help mobilize grant funds through the Country Development Partnership in Governance, which focuses on technical assistance and capacity building in support of the reform program\. 7\. Bank and Borrower Performance Bank 7\.1 Lending: Lending is assessed as Satisfactory\. The PSRL was prepared almost entirely in the field, and built from extensive technical assistance provided as part of the Economic Management Assistance Loan\. For example, the Government prepared its first Public Expenditure Review, which provided a diagnostic of needed reforms in expenditure management, as part of this technical assistance\. Cooperation and coordination with donors was very strong, (especially with AUSAID, ADB and NZODA) and donor support was provided in complementary ways\. Extensive effort was devoted to managing relationships among many counterparts and stakeholders: in building awareness of the need for change, identifying options for structuring the reform design, and building capacity to implement those reforms\. 7\.2 Supervision: Supervision is assessed as Highly Satisfactory\. The tenure of the PSRL was relatively short, and supervision was correspondingly intensive\. While the project was formally operational for around 18 months (February 2000 - July 2001), three supervision missions were mounted from headquarters, Resident Mission staff had frequent contact with project participants, and an ICR workshop was held\. The composition of missions was appropriate, PSRL team continuity was excellent, and reporting was good\. The missions provided detailed and systematic feedback on project implementation and suggested how to address identified problems\. The PSRL team worked closely with the PMO and participating agencies to provide technical advice, as required, and workshops were frequently held to share the lessons learned throughout the supervision period\. The supervision budget ($35,000) for this task was insufficient to fund the extensive time in the field that was required to monitor progress and support the ongoing reform\. Additional resources were leveraged via fimding for an intensive learning ICR, and developing the Country Development Partnership in Governance\. 7\.3 Overall Bankperformance: Overall Bank performance is assessed as Satisfactory\. Borrower 7\.4 Preparation: Overall Borrower performance is considered Satisfactory\. As noted earlier, the Borrower drafted the strategy for public sector reform, and then refined the implementation plan in consultation with the Bank\. 7\.5 Government implernentation performance: Borrower commitment was strong, and its technical and practical contribution to the - 8 -  project was considerable\. The project team was excellent, and, as noted earlier, a sound macroeconomic framework was maintained\. Government implementation performance was Satisfactory\. 7\.6 Inmplementing Agency: Implementation of the reformns was steady, and officials worked hard at overcoming obstacles\. Performance of the implementing agencies was Satisfactory\. 7\.7 Overall Borrower performance: Overall borrower performance is considered to be Satisfactory\. 8\. Lessons Learned * The program structure of the PSAL was appropriate for Thailand, but leverage from financing was limited\. The program structure supported institutional reforms over the medium term that were mandated by the new Constitution\. The program structure assisted counterparts in defining reform areas and sequencing activities over a three-year period; established regular dialogue and monitoring; and emphasized flexibility and sustained momentum in managing the reform\. The Government's financing needs diminished as the economic recovery gained strength, and the final, $196 million withdrawal of the PSRL occurred in July 2001\. Besides providing $400 million in budget support, the Bank's main contributions were in providing knowledge, and monitoring and evaluating reform progress\. Allocating the loan to budget support reinforced the flexibility in managing the reform process\. If the loan had been allocated in advance to specific institutions, it would have been more difficult to reward those agencies that achieved progress, which in turn promoted competition among agencies to reform\. * The PSMRP Cabinet Paper established commitment to reform and defined its strategy; the PSRL benchmnarks provided work plans for implementing the reform\. * High-quality and intensive technical assistance was critically important in building awareness, designing the reform program and supporting implementation\. Many of the diagnostic studies that were used in designing the reform were financed by the Economic Management Assistance Loan\. Without this preparatory work, the reform program would have been less comprehensive and deep\. * Coordination across reform areas was a challenge, and was enhanced with the establishment of the PMO, which provided full-time support to the reform process\. The Bank played an important role in building awareness of the need for coordinated and comprehensive approaches to reform, and over time, was able to break down some of the narrow "silo" approaches that historically characterized agency interactions\. * The expected integration of sectoral reform plans in health, education and commerce (as originally envisioned in the project design) within the overall public sector reform was overly ambitious\. In part, this was because the magnitude of changes needed in institutions, processes and culture was not fullv -understood until the reform was underway\. Once the proper incentives for managing performance are implemented, sectoral reforms could be integrated more effectively into the overall public sector reform\. * Independent organizations (e\.g\., the Administrative Courts, the National Counter Corruption Commission, etc\.) play an important role in strengthening accountability and transparency\. As newly established organizations, they faced challenges in receiving adequate resources from the executive branch\. In designing the project's oversight structure (through the -9-  executive branch vis a vis the Prime Minister's Office) the potential conflicts between independent organizations and the executive were underestimated\. The project might have considered defining a role for the Parliament, which oversees the independent organizations, in supporting the independent agencies in their reforms\. X The Thais value the Bank's global knowledge, technical assistance and supervision; subsequent stages of the reform will require enhanced monitoring and evaluation from the Thai government and civil society\. * A consistent project team of Bank staff and technical counterparts, and dedicated resources were necessary to develop and support the reform process\. Government ownership was strengthened through the strong personal relationships that were developed and sustained over many years\. * It is too soon to "declare victory" in public sector reform; however, a strong foundation has been laid\. 9\. Partner Comments (a) Borrower/implententing agency: See attachment: Letter from MOF (b) Cofinanciers: Not applicable\. (c) Other partners (NGOs/private sector): 10\. Additional Information - 10-  Annex 1\. Key Performance Indicators/Log Frame Matrix Outcome / Impact Indicators: Indicator/Matrix Projected in last PSR Actual/Latest Estimate Refer to Schedule 2 in Annex 10 Output Indicators: Indicator/Matrix Projected in last PSR Actual/Latest Estimate Refer to Schedule 2 in Annex 10 End of project  Annex 2\. Project Costs and Financing Project Cost by Component (in US$ million equivalent) Appraisal Actual/Latest Percentage of Estimate Estimate Appraisal Project Cost By Component US$ million US$ million Budget support 400\.00 400\.00 100 Total Baseline Cost 400\.00 400\.00 Total Project Costs 400\.00 400\.00 Total Financing Required 400\.00 400\.00 - 12-  Annex 3\. Economic Costs and Benefits NA - 13-  Annex 4\. Bank Inputs (a) Missions: Stage of Project Cycle No\. of Persons and Specialty Performance Rating (e\.g\. 2 Economists, 1 FMS, etc\.) Implementation Development Month/Year Count Specialty Progress Objective identification/Preparation March-April I Economist S S 1999 1 Decentralization & Ministerial I Budget Management I Legal I Civil Society I Anti-corruption 3 Tax Administration I Economist I Public Sector Appraisal/Negotiation June-July 1999 1 Economist S S I Human Resource Mgt\. I Expenditure Mgt\. 1 Decentralization I Civil Society I Education I Health I Commerce 3 Tax Administration I Legal Supervision January- I Public Sector S S February 2000 1 Human Resource Mgt\. 1 Expenditure Management I Education I Health 1 Commerce 2 Accountability I Tax Administration May-June 2000 1 Public Sector S S 1 Human Resource Management I Expenditure Management I Tax Administration I Health I Line Ministries I Accountability ICR April 2001 1 Public Sector Specialist S S I Public Sector I Social Development I Accountability Mgt\. - Managemnent - 14 -  (1) Staff: Stage of Project Cycle Actual/Latest Estimate No\. Staff weeks US$ ('000) Identification/Preparation Appraisal/Negotiation * 156\.0 *546\.3 Supervision 71\.0 249\.1 ICR 12\.0 40\.0 Total 239\.0 835\.4 Includes Identification/Preparation - 15-  Annex 5\. Ratings for Achievement of Objectives/Outputs of Components (H=High, SU=Substantial, M=Modest, N=Negligible, NA=Not Applicable) Rating El Macro policies O H OSUOM O N O NA El Sector Policies O H OSU*M O N O NA O Physical OH OSUOM ON *NA a Financial O H O SU * M O N O NA O Institutional Development O H * SU O M O N 0 NA L Environmental O H OSU*M O N O NA Social El Poverty Reduction O H OSU*M O N O NA Li Gender O H OSUOM O N * NA rI Other (Please specify) O H OSUOM O N O NA Fi Private sector development 0 H 0 SU 0 M 0 N 0 NA El Public sector management 0 H 0 SU 0 M 0 N 0 NA O Other (Please specify) O H OSUOM O N O NA - 16-  Annex 6\. Ratings of Bank and Borrower Performance (HS=Highly Satisfactory, S=Satisfactory, U=Unsatisfactory, HU=Highly Unsatisfactory) 6\.1 Bankperformance Rating E Lending OHSOS OU OHU O Supervision OHS OS O U O HU O Overall OHS OS O u O HU 6\.2 Borrower performance Rating E Preparation OHS OS O u O HU O Government implementation performance O HS * S 0 U 0 HU 3I Implementation agency performance OHS * s O U O HU E Overall OHS OS K u O HU - 17-  Annex 7\. List of Supporting Documents 1\. Thailand Public Finance in Transition (in project files) 2\. ICR Report submitted by Project Management Office (in project files) 3\. Letter from Ministry of Finance - 18 -  Annex 8\. Beneficiary Survey Results The PSRL ICR workshop was held on 25 April 2001 and was attended by over 40 government counterparts from various agencies, including the Bureau of the Budget, the Comptroller-General's Department, the Office of the Civil Service Commission, the National Economic and Social Development Board, the Revenue Department, the Office of the National Decentralization Committee, the Ministry of Education, the Administrative Courts, the Ombudsman, and the National Counter-Corruption Commission\. Following welcome remarks by the World Bank's Country Director for Thailand, Mr\. Jayasankar Shivakumar, the Task Manager for the PSRL, Dr\. Dana Weist, gave an overview of the Thai Public Sector Reform Program\. Dr\. Orapin Sopchokchai, Director of the Public Sector Reform Project Management Office, summarized a survey of 68 public officials regarding the reform program: * 88 percent of respondents felt that the PSRL design was appropriate * 92 percent of respondents felt that the potential impacts of the reform would be positive * 75 percent of respondents felt that resources to accomplish reform objectives were abundant * 50 percent of respondents felt that the reform would strongly establish the proper incentives * 68 percent of respondents felt that the reform would strongly support institution building\. In sustaining the reform, several speakers emphasized the need for additional effort to include more public participation; prioritize action in areas where there are frequent public complaints; and maintain Government commitment and ownership, and talented reform drivers\. With regard to the role of the World Bank, workshop participants noted that the Bank's support in providing global experience in designing and supporting the reform was very valuable; that monitoring reform progress, and focusing the attention of the Government on critical issues was important; and it is hoped that additional Bank cooperation and support for the reform will be provided in the future\. - 19-  Annex 9\. Stakeholder Workshop Results The PSRL ICR workshop was held on 25 April 2001 and was attended by over 40 government counterparts from various agencies, including the Bureau of the Budget, the Comptroller-General's Department, the Office of the Civil Service Commission, the National Economic and Social Development Board, the Revenue Department, the Office of the National Decentralization Committee, the Ministry of Education, the Administrative Courts, the Ombudsman, and the National Counter-Corruption Commission\. Following welcome remarks by the World Bank's Country Director for Thailand, Mr\. Jayasankar Shivakumar, the Task Manager for the PSRL, Dr\. Dana Weist, gave an overview of the Thai Public Sector Reform Program\. Dr\. Orapin Sopchokchai, Director of the Public Sector Reform Project Management Office, summarized a survey of 68 public officials regarding the reform program: * 88 percent of respondents felt that the PSRL design was appropriate * 92 percent of respondents felt that the potential impacts of the reform would be positive * 75 percent of respondents felt that resources to accomplish reform objectives were abundant * 50 percent of respondents felt that the reform would strongly establish the proper incentives * 68 percent of respondents felt that the reform would strongly support institution building\. In sustaining the reform, several speakers emphasized the need for additional effort to include more public participation; prioritize action in areas where there are frequent public complaints; and maintain Government commitment and ownership, and talented reform drivers\. With regard to the role of the World Bank, workshop participants noted that the Bank's support in providing global experience in designing and supporting the reform was very valuable; that monitoring reform progress, and focusing the attention of the Government on critical issues was important; and it is hoped that additional Bank cooperation and support for the reform will be provided in the future\. - 20 -  Annex 10\. SCHEDULE 2: GOVERNMENT'S POLICY OBJECTIVES AND IMPLEMENTATION BENCHMARKS' O0 ER-ILL RLFORl) PROGR-i 1 I,IIPLF\.IE\.%T- T1O\.V__ BENCHNIARKS _ OIIJECTiVEfIS _S__E B~ September 1999 BvSeptember 2000 _-y Sgptember 001 ASSESSMENT Public Sector Management Objective: Develop and Cabinet has approved and Reform Program was approved implement comprehensive publicly announced a 3-year by the Cabinet in May 1999 and public sector reform Public Sector Management announced publicly program\. Reform Program\. Cabinet-approved $100 million of Public Sector Reform Loan proceeds for reform program Issue: Thailand's public Public Sector Reform Public Sector Reform Public Sector Reform Project Management Office sector reform agenda must be Committee (PSRC) has Secretariat reports regularly Secretariat reports regularly reports regularly to the PSRC well coordinated at the been given responsibility for on reform progress against on reform progress against on reform progress highest level and integrated managing the reform benchmarks\. benchmarks\. with line ministries\. program, supported by a Secretariat, and has established five interagency subcommittees with Carry out public relations Public relations campaign is representatives from plan to engage civil society in underway, including regular counterpart reform units in reform process\. television and radio BoB, OCSC, MOF, Council programming on public sector of State, MOPH, MOE, reform MOC, NESDB and other Under PSRC guidance, relevant agencies\. complete and coordinate central agency strategic plans\. Central agency strategic plans Internal working groups have are underway been formed to prepare strategic plans for BoB, MOF, NESDB and OCSC, redefining their respective roles in a modernized public sector\. As drawn from the Memorandum of the President; benchmarks in bold are benchmarks that have been achieved prior to presentation of the PSRL to the Board by September 1999; benchmarks for September 2000 and September 2001 are indicative\. -21 -  EXPENVDITURE \.IANAGEMENT BENCH NIARKS OBJECTIVE/ISSUE By September 1999 Bfy September 2000 By Seplember 2001 ASSESSMENT Objective: Implement Pilot departments have been Benchmark pilot entity Pilot departments and Seven pilot departments were performance-based identified in the areas of performance against local ministries review their originally identified; pilot budgeting for line education (MOE, MOUA), best practice and set annual achievements relative to program was then extended to ministries\. health (MOPH), commerce quantitative performance benchmarks and set improved 14 agencies; in FY03, budget (MOC), civil service (OCSC) targets (e\.g\., re-infection targets\. will be broad banded for all and foreign affairs (MOFA) rates, drop-out rates, etc\.)\. agencies and have begun developing Pilot departments publish performance indicators\. Pilot departments improve annual reports including Improvement in agency Issue: Increased flexibility of their financial management corporate plans, performance financial management systems resource use at the service BoB has signed at least two systems following guidelines statements and financial is underway level combined with Memoranda of developed by BoB and CGD\. statements\. improved financial and Understanding (MoU) with Resource Agreements were performance management at pilot departments in the BoB concludes first Resource BoB concludes Resource concluded with Department of service delivery\. education and health Agreements with pilot Agreements with additional Commercial Registration sectors that identify steps departments granting pilot ministries\. (MOC) and Department of for increasing resource resource flexibility for the Provincial Hospitals (MOPH) flexibility in exchange for 2001 budget\. improved financial control and performance reporting BoB drafts at least four BoB establishes a program to BOB signed 14 MOUs in pilot departments\. additional MoUs for scale up performance economic and social management reforms to BoB and CGD are developing ministries\. remaining ministries\. APO framework has not been a financial management developed framework for autonomous Pilot departments undertake public organizations (APOs); customer satisfaction surveys BoB and CGD sit on several BoB is developing APO to evaluate service delivery committees together and have performance reporting and publish service charters\. developed guidelines, framework in consultation standards and principles to with CGD and interagency reform expenditure working group on APO management\. governance\. New Budget Act drafted BoB and CGD have begun BoB and CGD jointly CGD, BoB and pilot Work underway to develop preparing principles, announce reporting standards departments implement Handbook on 7 hurdle standards and guidelines for for ministries and agencies integrated financial standards to improve financial implementing sound financial and set principles, standards management system\. management systems management systems\. and guidelines for sound financial management systems\. - 22 -  EXPE\.V\DITI\._RE \.L1, EE_\.4G_E_lfE,VT BENCHMI ARKS OBJECTIVE/ISSUE B~ September 1999 | B September 2000 B3 September 2001 ASSESSNIENT Ohjecti%c Strengthen the BoB has completed RoB pubhhshes the edited and BoB publishe& a Public BO)R pubhsihed PLublic capability of central Government's first Public refined version of the Public Expenditure Assessment with Expenditure Assessment in agencies to review and Expenditure Assessment of Expenditure Assessment of enhanced scope and content, June 1999 evaluate sector policies and major expenditure major expenditure programs including poverty alleviation performance\. programs (including health (including health and programs\. and education)\. education)\. NSO carries out a NESDB and BoB develop NSO conducts Socio-Economic Issue: Result oriented public BoB initiates the multipurpose household recommendations for better Surveys but none specifically management requires central development of key survey on utilization of public targeting of services and targeted to the utilization of agencies to review and objectives, success factors services in health and subsidies in health and public services in health and evaluate results\. and performance indicators education\. education sectors\. education\. for inter-ministerial programs in poverty alleviation\. NESDB utilizes multipurpose NESDB and BoB review Performance indicators for household survey data to results of poverty alleviation poverty alleviation have not analyze the impact/ programs\. been developed yet effectiveness of public services in health and education on the poor and disadvantaged groups\. BoB, along with MoPH and BOB has developed standards MoE, implement a sample for output costing and is survey of unit costs, prices applying this methodology in and subsidies of public line agencies services in pilot departments\. OAG and BoB have NESDB and BoB develop a BoB includes evaluation plan Not done yet coordinated evaluation joint evaluation work in resource agreements\. processes across sector program with MoE and ministries and central MoPH\. agencies\. - 23 -  EXPENDITURE MNAAGEMIENT BENCHMARKS OBJECTIVEfISSUE By September 1999 By September 2000 By September 2001 ASSESSMENT Objective: Improve fiscal OAG has conducted a In process transparency\. diagnostic review of fiscal transparency based on international experience\. Issue: Low levels of fiscal transparency distort prioritization and allocation CGD has begun reviewing CGD identifies government CGD publishes new CGD is developing of public resources, diminish IFAC guidelines on financial reporting standards Government-wide reporting government wide and agency public accountability, lessen government financial at the whole of government, and accounting standards\. accounting standards investors' confidence and reporting requirements\. ministry and department diminish public trust in level\. government\. CGD, BoB and FPO have CGD and BoB identify CGD and BoB include off- Off-budget revolving funds are begun compiling information standards for reporting off- budget fiscal operations in being reviewed and on off-budget fiscal budget fiscal operations in budget and financial streamlined and reporting operations (i\.e\., foreign budget and financial statements\. standards developed by CGD\. financed activities, contingent statements\. liabilities, quasi-fiscal CGD has drafted Fiscal operations, extra-budgetary Accountability Act funds, revolving funds and government guarantees)\. BoB, FPO and NESDB have BoB, FPO and NESDB Cabinet issues a Medium Handbook chapters on begun reviewing international develop the form and content Term Fiscal Strategy\. financial and performance good practices for reporting for government's reports reporting are in process\. Fiscal government's fiscal plans and fiscal plans and strategies\. Policy Office is working on strategies\. medium-term outlook\. Organic Law on State Audit Organic Law was passed; has been submitted to Independent Supreme Audit Parliament\. Institution was established and staffed; it's Board was also established\. - 24 -  Hil V RESOURCE ,I\.4IN4GEJIE_VT__ BENCHMIARKS OBJECT1V'E,1SSUTE Bv September 1999 B! September 2000 _ B1 Seplember 2001 ASSESSNIENT Objective: Develop detailed Through process of Economic and social Complete restructuring in Functional reviews completed programs to align Functional Review and other ministries (MOind, MOF and economic and social for 6 economic ministries organizational structures of policy initiatives (e\.g\., review MoPH) complete Functional ministries, based on (including MOC) and line ministries with their of outsourcing), OCSC and Review and initiate Functional Review\. submitted to Cabinet new functional objectives\. pilot ministries have restructuring\. identified areas where Ministerial restructuring for Issue: Line ministries need to functions can be devolved to Prepare and submit 20 ministries to be completed be restructured to provide local administrations, contracting out, devolution, by October 2002 better services\. contracted to private sector, rightsizing and other abolished or transferred to reorganization plans to Results-Based Management APOs\. Cabinet based on Functional System is being piloted in all Reviews (MOPH, MOC, seven departments of the Functional Review of MOC MOF and MOInd)\. MOC has been completed; Royal Decrees on restructuring take effect and restructuring has been initiated\. Objective: Match staffing Cabinet has approved Establish Transition Center Continue rightsizing, A voluntary Early Retirement profiles and numbers to Government-wide guidelines and Outplacement Center to including through transfers of Program was established; two new functional for rightsizing program support manpower transition\. staff from central to local rounds of the program requirements of civil service (including approved early administration\. generated a gross reduction of and contain cost of retirement scheme for civil Commence rightsizing; about 42,000 public government\. service, identification and 30,000 government officials employees; third round is payment of departing civil elect early retirement\. underway servants, and retraining and outplacement rules)\. Cabinet approves policy and Transition Center is being mechanisms for transferring designed staff from central to local administration\. Transfer of central staff to local administrations being piloted Issue: Skills and staffing levels must be adjusted to future demands\. - 25 -  HUMAN RESOUIRCE 1iL4NAAGEMIENT BENCHMARKS _ OBJECTIVE/ISSUE By September 1999 By September 2000 By September 2001 ASSESSIMlENT Objective: Develop modern Conceptual framework and Approve necessary regulatory Introduce new human OCSC has developed performance-based human action blueprints for revisions and draft laws to resource management frameworks for position resource management performance-based human support performance-based systems in economic and classification, performance systems for civil service\. resource management management system social ministries\. appraisal, and a new pay systems have been drafted, implementation\. system Issue: Current organizational (i\.e\., individual job Introduce broad banding of culture deters professional description and classification OCSC devolves HR salary and widen differential OCSC introduced variable performance\. systems, greater flexibility in responsibility to pilot agencies among public sector pay performance pay and employment system, to complement performnance- grades\. redundancy provisions performance appraisal and based budgeting\. remuneration, career Implement performance- In FY03, OCSC will devolve development and based pay and promotion\. selected HR responsibility to advancement, and Deliver training in new agencies disciplinary and complaint systems to ministry personnel\. systems)\. Objective: Develop well- Senior Executive Service Create database of SES Implement SES Cabinet approved a Senior motivated, politically (SES) system has been candidates\. compensation system\. Executive Service (SES) neutral, cross-governmental designed\. program covering levels C9 senior cadre to lead civil Cabinet has approved the Implement first selections (or through ClI 1; 317 civil service renewal program\. creation of a merit-based SES merit-based recruitment servants have passed cadre\. mechanisms) for SES cadre\. competency tests and are Issue: Inter-agency listed as eligible candidates coordination across Induct and assign first senior for the first 65 SES positions government is weak\. executive group\. Objective: Develop Law on Autonomous Public Identify performance With the assistance of central Law on Autonomous Public regulatory framework for Organizations has been measures and targets, agencies, operationalize Organizations (APOs) was autonomous public promulgated\. reporting requirements, best selected APOs based on a enacted organizations (APOs)\. practice financial and human detailed APO work-plan that Under PSRC, a technical resource management is consistent with the APO governance framework Issue: The Law on working group consisting of standards, salary and established APO governance has not yet been developed Autonomous Public representatives from BoB, incentive structure for APOs\. framework\. Organizations must be OCSC, CGD, OAG and complemented by governance parent ministries of APOs has Assess financial and arrangements for APOs\. been formed to develop performance management governance framework\. capability as precondition to establish initial APOs\. - 26 -  RE I'EA VE \.14,X\. 4GEMEVT _ BENCHMARKS OB,JEC:Tl\E/lSStiE B% Seplember 1999 Bs Seplember 2000 Bs September 2001 ASSESS-ENT Objeeti%e lmpro%e A ne%' Large TaxpaNer Office has been liicrelse tile \ 1 liicreawe the \V\.AT VA r regiotraitonv i at the taxpayer compliance\. established to manage at least 500 of the registrations (at the end registrations (at the end of end of 1998) are increased largest taxpayers\. of 1998) by 3% 1998) by 6% by 10%\. Issue: Low taxpayer compliance decreases A 3-year strategic plan for audit activities has Audit revenue exceeds 2\.5% government revenues and been prepared\. Increase audit revenue of total collections in increases tax collection collected to 1\.5% of Increase audit revenue previous year\. costs\. A working group to prepare proposals to total collections in the collected to 1\.8% of total reduce taxpayers' compliance costs has been previous year (1998: collections in the previous Large Taxpayer Office set up\. 0\.7%)\. year\. manages 60% of total tax collections and includes Conduct feasibility Design an automated audit 2,135 taxpayers\. study to develop an case selection system\. automated audit case Automated audit case selection system\. selection system is being Implement procedures to developed\. Design new procedures collect tax payments Banking system used for tax to collect tax payments through the banking system collections through the banking system\. Internet tax filing being implemented Objective: Strengthen A 3-year strategic plan to reduce the level of Reduce the percentage Reduce the percentage of Percentage of collectible collection enforcement\. tax arrears has been prepared\. of collectible debt to collectible debt to 7% of debt reduced to % of total 8% of total tax total tax collections for the tax collections for the same Issue: Fiscal policies and collections for the same same year year revenue collection are year (1998: 9%) Taxpayer Identification weakened by ineffective Number System (PINTHIP) enforcement\.NubrSse(PTH) redeveloped and rolled out to all districts Objective: Balance A new 3-year IT Strategic Plan coordinated Develop data entry, Develop audit case selection Draft IT Master plan and business and with the 3-year Strategic Plan for audit\. processing and modules\. specifications for Information Technology A new IT Masterplan has been prepared\. reporting modules for developing modules of the (IT) priorities\. Corporate Income Tax\. Transfer VAT and Specific new IT tax administration Taxpayer registration data have been Business Tax data to new system completed Issue: Existing IT system transferred to new system\. system\. does not support the Develop data entry and business processes\. Procedures for testing the existing IT system for reports modules for Year 2000 problems have been prepared\. personal income tax\. - 27 -  DECENTRALIZATION _________________ BENCHMARKS OBJECTIVEIISSUE By September 1999 By September 2000 By September 2001 ASSESSMENT Objective: Establish Draft Legislation has been NDC is fully staffed, with Develop benchmarks of local National Decentralization capability to support and submitted to Parliament to adequate resources\. finance\. Committee and its supporting monitor decentralization\. establish National Office have been established; Decentralization Committee Promulgate administrative Establish standards for local staffing and resources are (NDC) as an independent regulations for local financial reporting\. increasing Issue: It is difficult to entity to support and administrative organizations\. monitor status of monitor decentralization\. Analyze structure of local Local financial standards decentralization reforms Strengthen analytical capacity administrations in Thailand defined in Fiscal because responsibilities are of NDC\. and recommend options for Accountability Act shared among numerous reducing fragmentation\. ministries and agencies\. Develop and implement local fiscal performance measures; disseminate results\. Objective: Devolve Determine processes for "Reengineer" central role to Action plans for sectoral appropriate expenditure devolving selected functions policy and regulation\. devolution completed in functions\. (e\.g\., transferring central November 2001 government personnel) in a Devolve civil functions mandatory manner\. nationwide\. Local share of total Issue: Clarity in expenditure government expenditures assignnent and roles is Estimate costs of devolution Pilot experiments in inter- increases to 22% (budgeted)\. required to eliminate of functions\. local cooperation\. duplication and enhance Decentralization of service effectiveness\. Four functions jointly Develop and implement local delivery has begun; in FY01, identified by the NDC and performance indicators for 22 agencies transferred selected local administration devolved functions\. functions to local councils, are devolved on an administrations; 59 agencies experimental basis\. will have transferred functions by end FY02 Provide training in local budgeting\. Performance indicators are being developed - 28 -  DECENTRA LIZ,lI TION' BENCHMARKS OBJECTrI'E/ISStIE By September 1999 By September 2000 BN Seplember 2001 ASSESSMENT Objective: Enhance local Strengthen Central Valuation Grant more local discretion in Local share of total revenues revenues/resources\. Agency (CVA)\. setting rates for locally increased to 22% in FY03 collected and retained Issue: Local revenue Expand locally administered revenues\. Regulations for local mobilization must be tax bases in phased manner\. borrowing and debt enhanced to fund new Establish regulations for local management specified in responsibilities and assure Pilot revenue collection borrowing, debt management, draft Public Debt accountability\. improvements in selected and municipal bankruptcy\. Management Act local administrations\. Little progress in enhancing Provide training in local local revenue mobilization financial management\. Objective: Revise Revise grant formulae toward Develop local revenue effort Intergovernmental grant intergovernmental grant more general purpose grants\. measures and incorporate in system is being revised; (subsidy) system\. grant formulae\. specific project grants Develop local income eliminated in FY03 budget; measures\. Publish annual reports on the proposals for improving Issue: Current system distributional impact of targeting and equalization are allocates subsidies in ad hoc Improve targeting central subsidies to local under consideration\. and politicized manner\. /equalization of grants\. administrations\. Objective: Enhance local Distribute copies of local Local administrators are Local administrative accountability\. administrative organization elected\. organization acts acts (outlining local disseminated; website Issue: Local accountability is responsibilities) to all local established to disseminate necessary for high-quality administration officials\. Publish reports on local fiscal materials from the Office of local decisions and successful condition\. the National Decentralization decentralization\. Enhance local accounting and Committee (ONDC) to local financial reporting\. administrations Promote civic fora as a means to provide community input into budget and investment decisions\. - 29 -  CROSS-GO 'ERNM11ENT ACCOUNTA BIL IT)' \.4ND TRANSPARENCY BENCHMARKS OBJECTIVE/ISSUE By September 1999 By September 2000 By September 2001 ASSESSMENT Objecti%e: Increase Mlembers of the National Go% emment pro% ides suppon Go% emment pro% ides support Organic La% on Counter institutional accountability\. Counter Corruption for NCCC to train at least 450 for NCCC to complete Corruption enacted in Commission (NCCC) have staff to carry out its investigation and submits November 1999; NCCC Issue: Formal mechanisms been appointed and a draft examination and investigative reports on 80% of cases officially established; it must be created to allow organic law on counter- functions\. referred to it by the Senate established five sub- citizens to voice grievances corruption has been submitted and petitions received\. committees and has drafted a and hold public sector to Parliament\. three-year plan officials accountable\. Government provides support for NCCC to carry out a NCCC has begun program of anti-corruption anticorruption training education for local program administrations, reaching to the tambon level\. NCCC is handling increasing case load of asset declarations Government provides support Government provides support for NCCC to carry out a for NCCC to carry out a Corruption perception review of all declarations of review of all declarations of surveys among households, assets and liabilities which assets and liabilities which business enterprises and are required to be submitted are required to be submitted government employees were in accordance with the law\. in accordance with the law\. conducted as inputs to develop an Anti-Corruption Parliament has approved the Ombudsman is appointed\. Office of Ombudsman is Strategy laws on Ombudsman and on established in Administrative Courts\. Office of Ombudsman in 4 regional centers\. Organic Law establishing Bangkok is established with Office of Ombudsman was adequate budget and well- Office of Ombudsman passed; Office established in trained staff\. recommends administrative April 2000, and is improvements\. investigating more than 60 complaints Supreme Administrative Establish at least 16 regional Court and the central Administrative Courts\. Administrative Courts were Administrative Court are established, funded, and established in Bangkok\. staffed; Office of Administrative Courts drafted Judicial Commission of a five-year strategic plan; Administrative Court is Supreme Administrative established\. Court and central Administrative Court inaugurated in March 2001 - 30 -  CROSS-GOI ER\.',MIE\.VT\.4CCOti"\.T\.-IBILIT)_-I_ND TR_FINSPA4REXC) Y BENCHNMARKS OBJECTIVE/ISSLIE By September 1999 B! September 2000 Bs Seplember 201)1 ASSESSMENT Objective: Enhance public Responsible government Under guidelines from Office access to information\. Office of the Official agencies have issued or of the Official Information Information Commission revised rules, regulations and Commission, almost two- Issue: Transparency requires (OOIC) has carried out an procedures relevant to the thirds of government agencies free and public access to education campaign for the OIA and OIC's guideline have established regulations information\. public and government and procedures to enhance agencies regarding Official Government agencies have responsiveness to public Information Act (OIA)\. trained their staff on the demands for information Official Information Act\. Objective: Promote probity Cabinet has adopted measures OCSC has established an OCSC established Ethics among civil servants\. to protect civil servants who ethics promotion center\. Promotion Center to provide evidence coordinate and assist Issue: Civil servants are not ("whistleblowers")\. government and non- held accountable for ethical government agencies; behavior nor are they conduct research and protected from political development; train civil pressures and corrupting servants, and disseminate influences\. information Objective: Enhance Civil A task force has been The Task force completes a NESC has been established; Society Participation\. established within the comprehensive review of the plan for strengthening National Social Policy enabling environment for participation of civil society Issue: Institutionalized Committee attached to the civil society participation\. is being developed mechanisms must be created Office of the Prime Minister to support public participation (NSPC) to develop a in policy formulation and comprehensive plan for the monitoring of public sector strengthening of civil society\. performance\. -31 -  Attachment Publc [L*\. Manen vm ¢ - 0-c MiMstsy of lkuac RaIC isny 294 low ra No: 144 No of Pagcis 3 To: Ms Dom Wcit Frrnr M Sm Vithc,cpangwe T?c* Tea t L/Md Deputy Dwcr\.(icncrui 1he wow Bank Puhblc Debt Mapmcrn Office Tel,: (1-r256-1792 Tdt\.: ,'-fl73-9QZ0 ext\. 3491 0a: 0225s 79 fasx 0227 3-t 44 Swhuern Ir\.w'ri CeonnihdeA the ipdksneutkpn C\.spkrri Rcpcnfiar the Pubk Lear RojitM Lam (PSIL): 1n WN iS/ rT Dar Ms, Weist, We an pleasd tc east wyu the B r*#'s Coiwifio t othe Irlcnwrim Compicikm Rcpon kw the P uli6: tar Reft Lon (MR4: Lean No\. 431 5 VI lVar yriur \.onsideration\. Yourr aincowlv,\. S\. Vidamponiw -pu Vronuh  Thr I-ublic Steitrr kcWrurirt IJni (PSR1IJ: luau No\. 41515 Tl WI IVIL S t\.lUr I LIt1f`l rn I ,:l\.indl h31 *i\.n an impsF runt p>iI\.- \. da hiar t%cl : daadcs\. 11' ';\.v r sul'wtaniiz % 1hrgtV\.C\. &aaid tImIp)rt0%crnxltzl1 h 1 oot beerl rcorlliti lvet 1rnc It wtq liA irml' I Ln;i jd, citt Ž1 Lic IiiaL tli a1ti1 c'Lorr'fi '*: *\. Vih il 1 U')? 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With regrd to the role of the Wokld BanI, iwksb7p ptrticapaitioted that thO RnVk's suport in prsoiding glohal expeTictwce i icsigning and 'upporting tE rfonnrm was very valuable; o nmonitonng reform prugress\. ad lkic g teattnion of she Govcntrs on critical issas was inpwilant\. Asad it is hopcd hiw additionml Rio* ocoperalon nd suppurt fo thw reonm will bc pmvideid in th (Ulrt

APPROVAL

P172434

 The World Bank Somalia Education for Human Capital Development Project (P172434) Project Information Document (PID) Concept Stage | Date Prepared/Updated: 02-Mar-2020 | Report No: PIDC28113 Jan 13, 2020 Page 1 of 8  The World Bank Somalia Education for Human Capital Development Project (P172434) BASIC INFORMATION A\. Basic Project Data OPS TABLE Country Project ID Parent Project ID (if any) Project Name Somalia P172434 Somalia Education for Human Capital Development Project (P172434) Region Estimated Appraisal Date Estimated Board Date Practice Area (Lead) AFRICA Jun 01, 2020 Sep 15, 2020 Education Financing Instrument Borrower(s) Implementing Agency Investment Project Financing Ministry of Finance Ministry of Education, Culture and Higher Education Proposed Development Objective(s) In unserved areas of selected Federal Member States, increase access to grades 1-4 with a focus on girls and improve quality of instruction\. PROJECT FINANCING DATA (US$, Millions) SUMMARY-NewFin1 Total Project Cost 40\.00 Total Financing 40\.00 of which IBRD/IDA 40\.00 Financing Gap 0\.00 DETAILS -NewFinEnh1 World Bank Group Financing International Development Association (IDA) 40\.00 IDA Grant 40\.00 Environmental and Social Risk Classification Concept Review Decision Jan 13, 2020 Page 2 of 8  The World Bank Somalia Education for Human Capital Development Project (P172434) Substantial Track II-The review did authorize the preparation to continue B\. Introduction and Context Country Context 1\. Somalia remains one of the most fragile countries in the world\.1 With an estimated per capita gross domestic product (GDP) of US$511 in 2017, it is also one of the poorest countries\. Despite the substantial challenges the country faces due to conflict, instability and environmental risk, the economy has grown at a moderate pace, averaging 2\.5 percent between 2013–17\. Somalia’s population is estimated at 14 million — about 40 percent between the ages of 6 and 18 years\. It is growing rapidly, with a fertility rate of 6\.6 children per woman, and is likely to double in 23 years\. Nearly 8 out of 10 live in poverty and many live just above the poverty line, vulnerable to shocks and even modest changes in consumption levels\. Poverty is most acute in rural areas and among Internally Displaced Populations (IDPs)\. 2\. Since 2011, Somalia has had a sustained period of political, economic, and security-related progress\. Consequently, the country has a unique opportunity to escape from decades of conflict and fragility, and the Government is demonstrating a strong commitment to wide-ranging institutional and economic reforms\. Yet, substantial challenges remain, including access barriers to services enabling economic opportunities, reconciliation, security sector reform, widespread malnutrition, recurrent drought, and poverty\. Limited fiscal space constrains service delivery by the Federal Government of Somalia (FGS) leading to low trust in the state\. 3\. With 75 percent of the population under the age of 30, the lack of educational attainment not only constrains future economic growth and poverty reduction but also puts youth at risk\. Two generations of Somali children have missed out on education\. Only 55 percent of Somalis can read and write; only 16 percent of Somalis have completed primary school (compared to 34 percent in low-income Sub-Saharan countries), and only 7 percent have finished secondary school (compared to 19 percent in Somalia’s regional peers)\. Given very low or non-existent public funding, the private sector and Non-Governmental Organizations (NGOs) have provided most primary education supplemented by household income, remittances, and foreign grants\. Sectoral and Institutional Context 4\. School enrolment rates in Somalia are among the lowest in the world\. The share of children of primary school age (6–13) enrolled in school is 33 percent, which is less than half the unweighted average of low-income sub-Saharan countries (74 percent)\. The number of outâ€?ofâ€?school children and youth (aged 6–18 years) is estimated to be around 3 million,2 most of whom are located in states in the less wealthy and secure southern and central parts of the country\. 5\. Factor impacting participation in education: • Conflict in states in the southern and central parts of the country has impacted enrolment levels\. There is a strong correlation between the Composite Security Indicator3 and levels of enrolment across the regions: Enrolment rates are higher in Somaliland where the security index is higher (48 percent with an index of 44 percent) and lower in states in the southern and central part of the country, where the security index is lower (18 percent primary net enrolment with an index of 32 percent)\. 1 Ranked among the most fragile states by the Organization for Economic Cooperation and Development (OECD) 2 Data from the United Nations Population Fund (UNFPA) 3 The Composite Security Index is a measure provided in the UNDP Human Development Report of 2012 regarding the attainment of physical, mental and spiritual peace and security of individuals and communities at home and in the world\. Jan 13, 2020 Page 3 of 8  The World Bank Somalia Education for Human Capital Development Project (P172434) • Girls face critical barriers to achieving equity in education due to social pressures for early marriage, expectations that girls support households and rearing of younger siblings\. The Gender Parity Index (GPI) at primary school level across states in the Southern and Central part of the country, Puntland and Somaliland range from \.72 to \.79 at primary level and even lower at the secondary level, ranging from \.53 to \.66\. • There are significantly fewer educational opportunities for rural children\. The extent of the discrepancy at the primary level is nearly 2 to 1: 65 percent of students are enrolled in urban schools, while only 35 percent of students are enrolled in rural areas\. This discrepancy points to significant inequities in the distribution of educational resources (e\.g\. schools, teachers, learning materials, water facilities) between rural and urban areas\. • Children from internally displaced persons (IDP) populations are at a distinct disadvantage\. Primary school Gross Enrolment Rate (GER) for IDP children is roughly half the national average, while the secondary school GER for IDPs is only 12 percent\.4 • Distance from schools and costs are significant factors affecting enrolment\. For one out of three Somali households, school is at least 30 minutes walking distance\. Being more than 30 minutes away from school is negatively associated with enrolment for primary school-aged children\. • Provision of education depends heavily on fee-paying schools, particularly in the central and southern states, putting poor students at a disadvantage\. Poor households are twice as likely to report lack of resources as the main reason for not sending their children to primary and secondary school\. 6\. Years of conflict and weak government have given rise to a patchwork of educational institutions\. The share of students enrolled in government-managed primary schools across all of Somalia is 47\.9 percent\. In Banadir and the four FMS, only 7\.4 percent of primary students are enrolled in government schools with the remainder in some form of private or community schools\. The limited availability of public schools handicaps those who cannot afford private fees\. Often private schools are not even an option since operators do not find it viable to run schools in poor and disadvantaged areas\. This has resulted in highly unequal access rates for the disadvantaged, who are served neither by state nor nonstate schools\. 7\. More than 75 percent of schools that existed before the civil war were destroyed and those that remain are not of a high-quality construction\. In Banadir and Federal Member States (FMS), 55\.9 percent across all types of infrastructure, are regarded as being in ‘poor’ condition, 40\.7 percent in ‘fair’ condition, and only 3\.4 percent in ‘good’ condition\. In order to accommodate more students many schools operate on a double-shift system\. 8\. The teaching force is largely uncertified and predominantly male\. Only 37\.9 percent of primary teachers across all Somalia are qualified, with the lowest number qualified in Banadir and FMS (20\.8 percent) and less than 15 percent of primary teachers are female\. A teacher proficiency test administered to over 800 teachers in Banadir5 shows that pedagogical knowledge of teachers is extremely low and content knowledge is not much better\. Over 70 percent of teachers could not correctly answer at least half of the questions in their subject areas including English and Math\. There is an inequitable distribution of teachers between rural and urban areas, particularly in the central southern states\. In the central southern states 86 percent of all primary school teachers are in urban areas\. This is clearly a misallocation given the population distribution between rural and urban areas, with rural and nomads combined at 51\.7 percent compared to urban and IDPs combined at 48\.3 percent\.6 4 ESSP, p\. 32\. 5 A Teacher Proficiency Test of teachers in Banadir was undertaken under the Recurrent Cost and Reform Financing project in 2019\. 6 ESA, p\. 125\. Jan 13, 2020 Page 4 of 8  The World Bank Somalia Education for Human Capital Development Project (P172434) 9\. Accountability and quality assurance mechanisms are nonexistent or weak\. The low level of resources available to regional and district officers limits their ability to systematically supervise schools\. The difficulty of quality assurance is complicated by the large number of nonstate and informal schools\. In the absence of meaningful government funding for education, School Management Committees and Community Education Committees have emerged as important actors in school monitoring and accountability\. 10\. Financing of Education\. National revenue in Somalia is low, and what revenue is available is often prioritized away from education, which accounts for less than 5 percent of total government spending\. This is well below the 20 percent recommended by the Global Partnership for Education, and below neighboring countries (as well as the 7 percent allocated by the Government of Somaliland)\. However, Government revenue has increased in recent years and the National Development Plan (NDP) 8: 2017–2019 commits to increasing the national budget allocation to the education sector by 3 percent per year\. The current budget allocation, however, is insufficient to support core functions of an effective public education system including payment of teachers and school construction\. Government efforts 11\. An Education Sector Plan has been developed by the government following a consultative process\. In order to address the above challenges, MoECHE with financial and technical support from DPs has developed a three-year education sector plan (ESSP 2018-2020)\. The ESSP is aligned with the recently approved Somalia NDP-9 (2020-2024) which serves as the Interim Poverty Reduction Strategy Paper\. Both the NDP-9 and the ESSP, identify equitable access to quality education, effective and accountable public service delivery and oversight institutions and establishment of partnerships to reach the most vulnerable groups and communities as key priority areas\. Somaliland and Puntland have prepared separate Education Sector Strategic Plans with no specific coordination process or harmonization\. 12\. A new National Education Curriculum Framework is being phased in\. The Government launched a multiyear effort to develop a new national competency-based curriculum which integrates notions of conflict-sensitivity and peace building\. Importantly, the new curriculum also introduces a consistent use of languages\. In primary school, this will be Somali, while Arabic and English will be used in secondary school, which could have a positive impact on textbook production and the examination system\. 13\. Progress has been made in establishing an annual school census, particularly in terms of coverage \. The current system involves visits to schools in accessible areas by trained data collectors supervised by regional personnel\. This data is now published in the MoECHE annual report of education statistics\. C\. Proposed Development Objective(s) 14\. In unserved areas, increase access to grades 1-4 with a focus on girls and improve quality of instruction\. Key Results (From PCN) a\. Girls enrolled in project supported schools (number); b\. Teachers using the technology-based learning platform for classroom instruction (number); c\. Baseline for learning achievement across Somalia established (yes/no); and d\. Students benefiting from direct interventions to enhance learning (boys and girls) D\. Concept Description 15\. The proposed project will focus on establishing and strengthening systems at the FGS MoECHE and the FMS level, to successfully implement the government’s ESSP\. A key focus area will be to strengthen the stewardship role of the Jan 13, 2020 Page 5 of 8  The World Bank Somalia Education for Human Capital Development Project (P172434) federal government, specifically as it relates to standard and policy setting in relation to teachers and school management and strengthening its role in monitoring of the sector\. It will also focus on strengthening government capacity to coordinate sector activities through stronger intergovernmental engagement in the sector and to coordinate external support\. To enable the federal government to effectively play a stewardship role for the sector, the project will invest in building the capacity of MoECHE to monitor sector outcomes effectively and strengthen education system governance and accountability\. The support will be fully aligned with other efforts in the sector\. 16\. The project will also support implementation of high potential, short term interventions that can rapidly increase schooling opportunities with a focus on the most disadvantaged communities in Somalia, specifically girls\. The project proposes to leverage Somalia’s strengths, including its high mobile penetration to test innovative approaches to enhancing teaching quality and provide effective teaching and learning material to students using digital technology\. The project will also support development of essential foundations for the system, i\.e\. a robust system for regularly and reliably collecting data on sector outcomes, specifically student learning, and enhanced institutional capacity for service delivery\. 17\. The proposed project would have a specific focus on improving girls’ participation in schooling\. This will be integrated throughout project design, for instance by introducing incentives for increasing and maintaining girls’ enrolment in school, encouraging recruitment of female teachers and prioritizing support for female teachers and schools\. 18\. The use of digital technologies will be an important cornerstone of project design\. The expansion of affordable mobile phone and internet connectivity provide a unique advantage to Somalia\. Mobile penetration is high and continues to increase\. Approximately 90 percent of Somalis above the age of 16 years have a phone with 30\.8 percent being smartphones\.7 19\. The proposed project will focus on increasing supply of schools through partnerships, with a focus on accessible, rural communities\. In localities that have low school coverage, the project will support establishment of new schools where the community is able to meet minimum enrollment requirements, and there is no girls’ school in the vicinity\. The establishment of schools will follow a partnership model with communities playing an active role in management and supervision of the school\. 20\. The project proposes to leverage the high levels of connectivity in Somalia to provide a low marginal-cost, blended instructional model that enables teachers to deliver learner-focused education\. This will include continuous training for teachers while in service using a digital platform designed to improve their ability to teach at the right level and to systematically build their qualifications while in service\. It will also be used to provide teaching resources such as scripted lesson plans (based on the curriculum) to teachers which have proven to be successful at improving education quality\. The digital platform is also proposed to provide complementary learning modules for students\. Legal Operational Policies Triggered? Projects on International Waterways OP 7\.50 No Projects in Disputed Areas OP 7\.60 No 7 Altai Consulting, “Mobile Money Ecosystem in Somalia,â€? June 2017\. Jan 13, 2020 Page 6 of 8  The World Bank Somalia Education for Human Capital Development Project (P172434) Summary of Screening of Environmental and Social Risks and Impacts \. 21\. The envisaged environmental risks and impacts include solid waste generation and disposal issues, air and noise pollution, fire hazards, spread of communicable diseases among children, and outbreak of pests and vermin\. The project is designed to have a positive social impact, purposely targeting poor and vulnerable population including IDPs, rural, pastoralists communities\. On a preliminary assessment of potential social risks and impacts; direct risks from project activities relate to civil works from construction and rehabilitation of classrooms which could lead to land acquisition, restrictions on land use, resettlement and labor influx\. In addition, the use of local labor and the reliance on community partnerships and management could lead to cases of child labor\. The risks of gender-based violence (GBV) including sexual exploitation and abuse (SEA) is assessed as substantial based on the predominantly rural sites, proposed scope of works, weaker mitigation systems and lower absorption capacity\. \. CONTACT POINT World Bank Huma Ali Waheed Senior Education Specialist Borrower/Client/Recipient Ministry of Finance Implementing Agencies Ministry of Education, Culture and Higher Education Ahmed Yusuf Director General dg@moe\.gov\.so FOR MORE INFORMATION CONTACT The World Bank 1818 H Street, NW Washington, D\.C\. 20433 Telephone: (202) 473-1000 Web: http://www\.worldbank\.org/projects Jan 13, 2020 Page 7 of 8  The World Bank Somalia Education for Human Capital Development Project (P172434) APPROVAL Task Team Leader(s): Huma Ali Waheed Approved By APPROVALTBL Practice Manager/Manager: Country Director: Jan 13, 2020 Page 8 of 8

APPROVAL

P176402

 The World Bank Additional Financing for Malawi COVID-19 Emergency Response and Health Systems Preparedness Project (P176402) Project Information Document (PID) Appraisal Stage | Date Prepared/Updated: 25-May-2021 | Report No: PIDA31651 April 22, 2021 Page 1 of 10  The World Bank Additional Financing for Malawi COVID-19 Emergency Response and Health Systems Preparedness Project (P176402) BASIC INFORMATION OPS_TABLE_BASIC_DATA A\. Basic Project Data Country Project ID Project Name Parent Project ID (if any) Malawi P176402 Additional Financing for P173806 Malawi COVID-19 Emergency Response and Health Systems Preparedness Project Parent Project Name Region Estimated Appraisal Date Estimated Board Date Malawi COVID-19 Emergency AFRICA EAST 26-May-2021 18-Jun-2021 Response and Health Systems Preparedness Project Practice Area (Lead) Financing Instrument Borrower(s) Implementing Agency Health, Nutrition & Population Investment Project Republic of Malawi Ministry of Health Financing Proposed Development Objective(s) Parent To prevent, detect and respond to the threat posed by COVID-19 in Malawi and strengthen national systems for public health preparedness\. Components Emergency COVID-19 Response Supporting National and Sub-national, Prevention and Preparedness Implementation Management and Monitoring and Evaluation PROJECT FINANCING DATA (US$, Millions) SUMMARY -NewFin1 Total Project Cost 30\.00 Total Financing 30\.00 of which IBRD/IDA 30\.00 Financing Gap 0\.00 DETAILS -NewFinEnh1 World Bank Group Financing April 22, 2021 Page 2 of 10  The World Bank Additional Financing for Malawi COVID-19 Emergency Response and Health Systems Preparedness Project (P176402) International Development Association (IDA) 30\.00 IDA Grant 30\.00 Environmental and Social Risk Classification Substantial Other Decision (as needed) B\. Introduction and Context Country Context 1\. Malawi is a landlocked country in south-eastern Africa and one of the poorest countries in the world\. Around 85 percent of Malawi’s population is estimated to live in rural areas and rely on rainfed agriculture for employment\. Malawi’s real per-capita GDP has remained largely flat over the last two decades and now lags behind regional peers\. Malawi has one of the lowest rates of total investment in Sub-Saharan Africa, averaging 14\.9 percent of GDP since 2000 compared to neighboring Tanzania at 24\.5 percent and Zambia at 34\.7 percent\. Growth and investment have historically been undermined by macroeconomic instability\. From 2011 to 2016 Malawi saw its exchange rate depreciate rapidly and inflation rise above 20 percent, which led to some of the highest interest rates in the region, depressing investment and impeding structural transformation\. 2\. Malawi’s development challenges are significant\. Despite being among the 15 most agriculture-dependent countries in the world, Malawi’s economy has been defined by an underproductive and predominantly rainfed agriculture sector\. Malawi’s natural assets are increasingly under pressure from population growth and climate shocks\. Meanwhile, job creation is restricted by market distortions and unreliable access to information and communication technology (ICT), electricity, and finance\. While Malawi has made impressive gains on the Human Capital Index (HCI), rising from 0\.36 to 0\.41 over the last 10 years, population growth reinforces the exclusion of women from opportunities, outstrips job creation, strains rural land, and puts unsustainable pressure on classroom capacity and learning outcomes\. 3\. Malawi’s economy has been heavily impacted by the COVID-19 pandemic\. Growth is estimated at 1\.0 percent for 2020, compared with earlier projections of 4\.8 percent, but is projected to rebound in 2021 to 2\.8 percent, although the nature of the recovery will depend on the evolution of the COVID-19 pandemic and government’s policy actions\. The COVID-19 crisis is increasing poverty, particularly in urban areas, where the services and industry sectors have been hit hard\. The pandemic is also disproportionally affecting human capital investment in poor households, reducing future intergenerational income mobility\. April 22, 2021 Page 3 of 10  The World Bank Additional Financing for Malawi COVID-19 Emergency Response and Health Systems Preparedness Project (P176402) Sectoral and Institutional Context 4\. Status of the COVID-19 situation: Malawi’s first confirmed case was registered on April 2, 2020 with the first wave between June and August 2020\. Between mid-December 2020 and March 2021, Malawi experienced the second wave\. In less than four months since the beginning of the second wave, the cumulative number of confirmed cases increased fivefold from 6,070 on December 19, 2020 to 33,551 on March 31, 2021\. Similarly, a sixfold increase in the cumulative number of deaths (from 187 to 1,117) was recorded during the same period\. As of April 20, 2021, the cumulative number of cases and deaths stand at 33, 986 and 1,142, respectively\. Genomic sequencing of 24 COVID- 19 positive samples collected between mid-December 2020 and mid-January 2021 found that 18 samples (75 percent) were the South African B\.1\.351 variant\. As of April 20, 2021, Malawi has received 510,000 doses of AstraZeneca vaccines and vaccinated 260,614 people\. Malawi remains at risk given: (i) the COVID-19 variant B\.1\.351, which has greater transmissibility, has been detected in the country since mid-December 2020; (ii) slow roll out of the vaccine due to challenges in global supply chain compounded by vaccine hesitancy; and (iii) the COVID-19 situation in its neighboring region remains fluid\. 5\. Government of Malawi (GoM) response: The GoM has responded to the COVID-19 pandemic to minimize cases and deaths\. In March 2020, the country developed in collaboration with technical partners a costed contingency plan focusing on critical priorities and immediately committed MWK 2\.5 billion (US$3\.4 million) towards the COVID-19 response\. This plan was updated as the situation evolved, and more funding became available\. The GoM gradually intensified its efforts, initially focusing on measures such as screening at airports and other points of entry (PoE)\. The measures were enhanced after the President declared a “State of Disasterâ€? (March 20, 2020) including: (i) redeployment of health personnel to border and PoE; (ii) travel suspension; (iii) closing of all schools and colleges; (iv) restricting public gatherings to less than 100 people; and (v) banning travel of foreign nationals from countries highly affected by COVID-19\. In response to the second wave, the President declared a second “State of Disasterâ€? on January 12, 2021 and identified priority needs: (i) testing and contact tracing; (ii) recruitment of additional medical personnel; (iii) procurement of medical equipment (e\.g\. oxygen); and (iv) increasing hospital space or infrastructure as priority needs\. The country also requires urgent access to vaccination to contain the number of COVID-19 infections and deaths\. 6\. Malawi has conducted a vaccine readiness assessment to identify gaps and options to address them , as well as to estimate the cost of vaccine deployment, with the support of international organizations (i\.e\., WHO, UNICEF)\. This assessment, updated on March 4, 2021, is informed by the government’s vaccine deployment strategy\. Considering the uncertainties related to the COVID-19 vaccine market, including testing, approval, availability and pricing, which require flexibility and close monitoring and strong World Bank support during implementation, the assessment will continue to be an evolving process and will be dynamically revised and updated as necessary to continue to improve project implementation\. Vaccine deployment will leverage the existing Expanded Program for Immunization structures with enhancements to cover the expanded scope\. In preparation for vaccine deployment, Malawi has: • Identified specific target groups (Phase 1: health and social workers, people with co-morbidities, the elderly and refugees and internally displaced populations (IDPs)) to vaccinate, including coverage of vulnerable populations in line with WHO recommendations • Designed a COVID-19 vaccine social mobilization, risk and crisis communication strategy and initiated routine surveys to track knowledge and attitudes • Agreed to use the Vaccine Approval Criteria (VAC) for vaccines procured through the proposed Additional Financing (AF), in line with World Bank requirements April 22, 2021 Page 4 of 10  The World Bank Additional Financing for Malawi COVID-19 Emergency Response and Health Systems Preparedness Project (P176402) • Made provisions for performance monitoring, oversight, and surveillance at different levels of the health system to track coverage, acceptability, and adverse events following immunization (AEFIs) • Elaborated a National Vaccine Coverage and Purchase Plan • Rolled out a digital solution for registration that also includes stock monitoring, reporting, and monitoring of AEFIs and an SMS system for sending vaccine reminders for 2nd dose 16\. The GoM has prepared a National Vaccine Deployment Plan which draws on the findings of the initial Vaccine Introduction Readiness Assessment and gap analysis\. The National Vaccine Deployment Plan (NVDP) was approved on February 6th, 2021 by the MoH and subsequently by the COVAX Committee on February 18th, 2021\. The NVDP has been integrated into the broader revised COVID-19 Response and Preparedness Plan\. The NVDP is a living document that envisages a phased approach with the target of vaccinating 20 percent of the population during the first phase and 60 percent overall in three phases\. The proposed targeting is inclusive, equitable, and aligned to the WHO SAGE Roadmap for Prioritizing Uses of COVID-19 Vaccines in the Context of Limited Supply\. 17\. Malawi has already received and is deploying COVID-19 vaccines\. According to the COVAX Facility distribution letter dated January 29, 2021, Malawi expects to receive 1,476,000 doses from the COVAX Facility by the end of June 2021\. These doses could be supplied by either Serum Institute of India (SII) and SK Bioscience (SKBio)\. The first batch of COVAX delivery of 360,000 doses of the AstraZeneca vaccine supplied by SII arrived on March 6, 2021\. In addition to the COVAX Facility, the Government of India donated 50,000 doses and the African Union donated 100,000 doses of AstraZeneca which have arrived in Malawi\. The GoM is seeking other support from partners for the purchase of additional vaccine doses to reach the NVDP overall target of 60 percent\. C\. Proposed Development Objective(s) Original PDO To prevent, detect and respond to the threat posed by COVID-19 in Malawi and strengthen national systems for public health preparedness\. Current PDO The PDO remains the same with the additional financing (AF)\. Key Results 7\. The parent project’s progress towards achievement of the PDO and overall implementation progress are rated Satisfactory and Moderately Satisfactory respectively in the last Implementation Status and Results Report (ISR) of November 1, 2020, and the project continues to make good progress\. As of April 21, 2021, disbursements amount to US$5\.5 million or 74\.0 percent of commitments\. The project has strengthened Malawi’s capacity to prevent, diagnose and treat COVID-19 through (i) procurement of critical medical and diagnostic supplies and equipment; (ii) training of health surveillance assistants (HSAs), health workers and lab technicians/technologists; and (iii) support to rapid response teams\. By June 30, 2021, expenditures amounting to about US$6\.0 million are estimated to be disbursed\. The undisbursed amount is committed\. D\. Project Description Component 1: Emergency COVID-19 Response (parent project US$5\.3 million equivalent; proposed AF April 22, 2021 Page 5 of 10  The World Bank Additional Financing for Malawi COVID-19 Emergency Response and Health Systems Preparedness Project (P176402) US$28\.8 million equivalent) New Subcomponent Subcomponent 1\.3: Vaccine Procurement and Deployment (parent project US$0\.00 million equivalent; proposed AF US$26\.0 million equivalent) 8\. To support the Government’s vaccination planning, the proposed AF will finance upfront technical assistance to support Malawi to establish institutional frameworks for the safe and effective deployment of vaccines\. These include: (i) guidelines for intra-country vaccination allocation; (ii) guidelines/protocols related to ensuring that there is no forced vaccination and that any mandatory vaccination program (such as entry to schools) is well designed including regarding consent and follows due process for those who choose to opt out; and (iii) the strengthening of accountability, grievances, and citizen and community engagement mechanisms\. 9\. The proposed AF will support investments to bring immunization systems and service delivery capacity to the level required to successfully deliver COVID-19 vaccines at scale\. To this end, the proposed AF is geared to assist the GoM, working with the World Bank, WHO, UNICEF and other development partners, to overcome bottlenecks as identified in the COVID-19 vaccine readiness assessment in the country\. While most support under this subcomponent 1\.3 is allocated towards vaccine procurement (71\.0 percent), 16\.0 percent will provide complimentary support to deployment priorities identified in the NVDP\. These include support to: (i) logistics along the supply chain; (ii) the rollout/strengthening of digital platforms linked to One Health Surveillance Platform and the HMIS including the e-Vaccination platform and openLMIS; (iii) monitoring and investigation of adverse events following immunization; and (iv) enhancing waste management capacity including trainings with modules on health care waste management in flood prone areas\. The AF will also support demand creation and Risk Communication and Community Engagement interventions that are critical to the success of the COVID-19 vaccination efforts\. Revised Subcomponents Subcomponent 1\.1: Case Detection, Confirmation, Contact Tracing, Recording, Reporting (parent project US$4\.1 million equivalent; proposed AF US$1\.0 million equivalent) 10\. Although diagnostic testing is part of Malawi’s comprehensive strategy to control COVID -19, limited laboratory capacity (e\.g\. shortage of test kits, reagents, suboptimal testing performance) poses a challenge in the diagnosis of cases\. COVID-19 testing in Malawi is being conducted in 15 molecular testing sites using reverse transcription-polymerase chain reaction (RT-PCR) and GeneXpert platforms as well as 206 sites using antigen rapid diagnostic tests\. The MoH aims to establish the origin and variants of COVID-19 by building in- country SARS-CoV-2 genomic sequencing capacity which will contribute to the understanding of the dynamics of the pandemic\. 11\. The proposed AF will scale up and support: (i) optimization of existing RT-PCR platforms including service contracts and calibration of Abbott platforms to accommodate multiple COVID-19 test kits (e\.g\. Daangen); (ii) procurement of reagents for RT-PCR test; (iii) procurement of genomic sequencing equipment and reagents; and (iv) the LIMS which is linked to OHSP and provides real time data on COVID-19 diagnosis\. April 22, 2021 Page 6 of 10  The World Bank Additional Financing for Malawi COVID-19 Emergency Response and Health Systems Preparedness Project (P176402) Subcomponent 1\.2: Health System Strengthening (parent project US$1\.2 million equivalent; proposed AF US$1\.8 million equivalent) 12\. COVID-19 patients require two to six times more oxygen than the average non-COVID-19 intensive care unit patient\. A January 2021 biomedical equipment survey1 conducted in health facilities across Malawi found a significant scarcity of oxygen production and delivery equipment and supplies, limited health facility capacity and infrastructure to treat patients, and inequitable distribution of resources for respiratory care in the country\. Of the four central hospitals (major referral) in Malawi, only two have oxygen plants, and the country has a total of six pressure swing absorption (PSA) plants\. The proposed AF will support: (i) procurement and installation of a PSA plant and oxygen supply system at a central hospital as well as supply of oxygen cylinders to an estimated five neighboring district hospitals; (ii) procurement of oxygen therapy equipment that will use climate smart technologies; (iii) operations and management including maintenance of the PSA plant; (iv) development of training materials; and (v) training of biomedical technicians/engineers on production and management of the PSA plant and health workers on the proper provision of oxygen therapy\. Component 3: Implementation Management and Monitoring and Evaluation (parent project US$\.75 million equivalent; proposed AF US$1\.2 million equivalent) 13\. To ensure equitable access to vaccines, especially by targeted vulnerable populations, there is need for close monitoring of the vaccine administration process and putting in place mechanisms to prevent some segments of the population taking advantage of others; in this regard, this component will support: (i) strengthen monitoring and reporting of adverse occurrences such as elite capture, Grievance Redress Mechanism (GRM) and citizen engagement activities; (ii) implementation of the Environmental and Social Commitment Plan (ESPC); (iii) project coordination and supervision of project activities including use of Geo-Enabling Monitoring and Supervision (GEMS); and (iv) an independent assessment of the implementation of the Malawi COVID-19 response\. \. Legal Operational Policies Triggered? No Projects on International Waterways OP 7\.50 No Projects in Disputed Areas OP 7\.60 Summary of Assessment of Environmental and Social Risks and Impacts \. 1 PATH\. Biomedical Equipment for COVID-19 Case Management Malawi Facility Survey Report\. Seattle: PATH; 2021\. April 22, 2021 Page 7 of 10  The World Bank Additional Financing for Malawi COVID-19 Emergency Response and Health Systems Preparedness Project (P176402) E\. Implementation Institutional and Implementation Arrangements 14\. Stewardship and oversight\. The Presidential Task Force (PTF) on COVID-19 will provide oversight to the implementation of the vaccine deployment plan aided by the National Disaster Preparedness and Relief Committee (NDPRC) and MoH’s Health Cluster Committee (HCC)\. The PTF is the high-level coordination structure overseeing cross-Government preparedness and response activities of the COVID-19 outbreak and is co-chaired by the MoH\. The NDPRC provides policy guidance and leadership in implementation of the COVID-19 response under the chairmanship of the Secretary to the President and Cabinet and includes Permanent Secretaries from all government ministries\. The Department of Disaster Management Affairs (DoDMA) facilitate appropriate coordination arrangements and communication between Government, UN, and NGOs in responding to emergencies and during Preparedness and Response planning process\. The MoH is the technical lead institution for implementing COVID-19 preparedness and response activities and provides all the necessary technical support and expertise through the HCC chaired by the Chief of Health Services\. 15\. Implementation and monitoring arrangements\. The Public Health Institute of Malawi (PHIM), with support of the Project Implementation Unit (PIU), coordinates implementation and monitoring of the parent project\. Three changes will be made to this arrangement to reflect the expanded scope of the AF\. First, the EPI program under the Directorate of Preventive Health Services (PHS) will be responsible for implementation of vaccine-related activities and the EPI program manager will be designated to interface between the EPI program and the PHIM/PIU\. Secondly, the Clinical Directorate will be responsible for implementing oxygen- related activities under Subcomponent 1\.2 and will designate the program manager for the Acute Respiratory Tract Infection Control Program to interface with the PHIM/PIU\. Lastly, the Health Technical Support Services (HTSS) Directorate will be responsible for implementing the activities under Subcomponent 1\.1 and part of subcomponent 1\.2\. A diagnostics division lead and a biomedical engineer will be designated from HTSS to interface with the PHIM/PIU\. The designated officials will be expected to actively participate in the regular project implementation meetings and missions\. 16\. Project management\. The PIU, housed in PHIM, will continue to be responsible for the day-to-day management of the project\. The PIU was enhanced with additional assistants\. The PIU is responsible for M&E, supervision and fiduciary activities including preparation and consolidation of annual workplans and a consolidated activity and financial report for the project\. Refer to the parent project PAD for more details\. \. CONTACT POINT World Bank Toni Lee Kuguru Health Specialist John Bosco Makumba Senior Operations Officer April 22, 2021 Page 8 of 10  The World Bank Additional Financing for Malawi COVID-19 Emergency Response and Health Systems Preparedness Project (P176402) Borrower/Client/Recipient Republic of Malawi Chauncy Simwaka Secretary to the Treasury chauncy\.simwaka@finance\.gov\.mw Implementing Agencies Ministry of Health Charles Mwansambo Secretary for Health cmwansambo@gmail\.com FOR MORE INFORMATION CONTACT The World Bank 1818 H Street, NW Washington, D\.C\. 20433 Telephone: (202) 473-1000 Web: http://www\.worldbank\.org/projects APPROVAL Toni Lee Kuguru Task Team Leader(s): John Bosco Makumba Approved By Practice Manager/Manager: Country Director: Hugh Riddell 26-May-2021 April 22, 2021 Page 9 of 10  The World Bank Additional Financing for Malawi COVID-19 Emergency Response and Health Systems Preparedness Project (P176402) April 22, 2021 Page 10 of 10

APPROVAL

P121514

Document of The World Bank FOR OFFICIAL USE ONLY Report No: ICR00004410 IMPLEMENTATION COMPLETION AND RESULTS REPORT (IDA-H6620) ON A GRANT IN THE AMOUNT OF SDR 2\.6 MILLION (US$ 4 MILLION EQUIVALENT) TO THE Ministry of Finance and Economic Development FOR A SIERRA LEONE - FINANCIAL SECTOR DEVELOPMENT PLAN SUPPORT PROJECT ( P121514 ) May 31, 2018 Finance, Competitiveness and Innovation Global Practice Africa Region  CURRENCY EQUIVALENTS (Exchange Rate Effective {November 30, 2017) Currency Unit = SLL SLL 7665\.8888742571 = US$1 US$1\.415420 = SDR 1 FISCAL YEAR July 1 - June 30 ABBREVIATIONS AND ACRONYMS ACH Automated Clearing House AfDB African Development Bank AIR African Institute for Remittances AML/CFT Anti-Money Laundering/Countering the Financing of Terrorism BCP Basel Core Principles BSL Bank of Sierra Leone CAS Country Assistance Strategy CMU Country Management Unit CORDAID Catholic Organization for Relief and Development Aid CPSS Committee on Payment and Settlement Systems ERP Enterprise Resource Planning EU European Union FCV Fragile, Conflict and Violence FIRST Financial Sector Reform and Strengthening Initiative FM Financial Management FSAP Financial Sector Assessment Program FSCF Financial Sector Consultative Forum FSDP Financial Sector Development Plan, but FSDP refers to the Financial Sector Development Plan Support Project (FSDPSP) in ICR FSSC Financial Sector Steering Committee GDP Gross Domestic Product GIZ Gesellschaft fuer Internationale Zusammenarbeit HR Human Resources ICR Implementation Completion and Results Report IDA International Development Agency IFC International Finance Corporation IMF International Monetary Fund IPAU Integrated Project Administration Unit IPF Investment Project Financing ISR Implementation Status and Results Report IT Information Technology KfW Kreditanstalt fuer Wiederaufbau M&E Monitoring and Evaluation MITAF Microfinance Investment and Technical Assistance Facility MoFED Ministry of Finance and Economic Development MSME Micro, Small, and Medium Enterprises MTR Mid-Term Review NASSIT National Social Security Investment Trust NPLs Non-Performing Loans PAD Project Appraisal Document PCN Project Concept Note PDO Project Development Objective QER Quality Enhancement Review RCB Rokel Commercial Bank RFP Request for Proposal RTGS Real Time Gross Settlement System SCD Systematic Country Diagnostic SDR Special Drawing Rights SLCB Sierra Leone Commercial Bank SLICOM Sierra Leone Insurance Commission SLSE Sierra Leone Stock Exchange SME Small and Medium Enterprises SSA Sub-Saharan Africa SSS Securities Settlement System STC Short-Term Consultant TA Technical Assistance TOR Terms of Reference TTL Task Team Leader UNCDF United Nations Capital Development Fund UNDP United Nations Development Program US$ United States Dollar WAMZ West African Monetary Zone WB The World Bank Regional Vice President: Makhtar Diop Country Director: Henry G\. R\. Kerali Senior Global Practice Director: Ceyla Pazarbasioglu-Dutz Practice Manager: Douglas Pearce Task Team Leader(s): Michael Corlett ICR Main Contributor: Nicholas Timothy Smith  TABLE OF CONTENTS DATA SHEET \.1 I\. PROJECT CONTEXT AND DEVELOPMENT OBJECTIVES \. 5 A\. CONTEXT AT APPRAISAL \.5 B\. SIGNIFICANT CHANGES DURING IMPLEMENTATION (IF APPLICABLE) \. 10 II\. OUTCOME \. 14 A\. RELEVANCE OF PDOs \. 14 B\. ACHIEVEMENT OF PDOs (EFFICACY) \. 15 C\. EFFICIENCY \. 20 D\. JUSTIFICATION OF OVERALL OUTCOME RATING \. 22 E\. OTHER OUTCOMES AND IMPACTS (IF ANY) \. 22 III\. KEY FACTORS THAT AFFECTED IMPLEMENTATION AND OUTCOME \. 23 A\. KEY FACTORS DURING PREPARATION \. 23 B\. KEY FACTORS DURING IMPLEMENTATION \. 24 IV\. BANK PERFORMANCE, COMPLIANCE ISSUES, AND RISK TO DEVELOPMENT OUTCOME \. 25 A\. QUALITY OF MONITORING AND EVALUATION (M&E) \. 25 B\. ENVIRONMENTAL, SOCIAL, AND FIDUCIARY COMPLIANCE \. 26 C\. BANK PERFORMANCE \. 26 D\. RISK TO DEVELOPMENT OUTCOME \. 28 IV\. LESSONS AND RECOMMENDATIONS \. 29 ANNEX 1\. RESULTS FRAMEWORK AND KEY OUTPUTS \. 31 ANNEX 2\. BANK LENDING AND IMPLEMENTATION SUPPORT/SUPERVISION \. 38 ANNEX 3\. PROJECT COST BY COMPONENT \. 40 ANNEX 4\. EFFICIENCY ANALYSIS \. 41 ANNEX 5\. BORROWER, CO-FINANCIER AND OTHER PARTNER/STAKEHOLDER COMMENTS \. 42 ANNEX 6\. SUPPORTING DOCUMENTS (IF ANY) \. 48  The World Bank Sierra Leone - Financial Sector Development Plan Support Project ( P121514 ) DATA SHEET BASIC INFORMATION Product Information Project ID Project Name Sierra Leone - Financial Sector Development Plan Support P121514 Project Country Financing Instrument Sierra Leone Investment Project Financing Original EA Category Revised EA Category Not Required (C) Not Required (C) Organizations Borrower Implementing Agency Ministry of Finance and economic development Bank of Sierra Leone (central bank) Project Development Objective (PDO) Original PDO The project development objective is to strengthen the capacity of the Bank of Sierra Leone and contribute to improve efficiency infinancial intermediation, safeguard financial sector stability, reduce transaction costs of money transfer and expand access to financial services\. PDO as stated in the legal agreement The objective of the Project is to strengthen the capacity of the Bank of Sierra Leone and contribute to improving efficiency in financial intermediation, safeguarding financial sector stability, reducing transaction costs of money transfer and expanding access to financial services\. Page 1 of 48  The World Bank Sierra Leone - Financial Sector Development Plan Support Project ( P121514 ) FINANCING Original Amount (US$) Revised Amount (US$) Actual Disbursed (US$) World Bank Financing 4,000,000 2,516,595 2,235,426 IDA-H6620 Total 4,000,000 2,516,595 2,235,426 Non-World Bank Financing Borrower 0 0 0 Total 0 0 0 Total Project Cost 4,000,000 2,516,595 2,235,426 KEY DATES Approval Effectiveness MTR Review Original Closing Actual Closing 07-Apr-2011 20-Jul-2011 31-Jul-2015 31-Dec-2015 30-Nov-2017 RESTRUCTURING AND/OR ADDITIONAL FINANCING Date(s) Amount Disbursed (US$M) Key Revisions 28-Dec-2015 \.79 Change in Loan Closing Date(s) 17-Oct-2016 1\.14 Change in Results Framework Change in Loan Closing Date(s) KEY RATINGS Outcome Bank Performance M&E Quality Moderately Unsatisfactory Moderately Satisfactory Modest RATINGS OF PROJECT PERFORMANCE IN ISRs Actual No\. Date ISR Archived DO Rating IP Rating Disbursements (US$M) 01 21-Sep-2011 Satisfactory Satisfactory 0 Page 2 of 48  The World Bank Sierra Leone - Financial Sector Development Plan Support Project ( P121514 ) 02 10-Jul-2012 Moderately Satisfactory Moderately Satisfactory \.40 03 31-Dec-2012 Moderately Satisfactory Moderately Satisfactory \.40 04 28-Jun-2013 Moderately Satisfactory Moderately Satisfactory \.40 05 31-Dec-2013 Moderately Satisfactory Moderately Unsatisfactory \.44 06 29-Jun-2014 Moderately Satisfactory Moderately Unsatisfactory \.44 07 28-Jan-2015 Moderately Satisfactory Moderately Unsatisfactory \.79 Moderately 08 23-Dec-2015 Moderately Unsatisfactory \.79 Unsatisfactory Moderately 09 14-Jul-2016 Moderately Unsatisfactory 1\.14 Unsatisfactory Moderately 10 04-Feb-2017 Moderately Unsatisfactory 1\.27 Unsatisfactory Moderately 11 31-Aug-2017 Moderately Unsatisfactory 1\.83 Unsatisfactory SECTORS AND THEMES Sectors Major Sector/Sector (%) Financial Sector 97 Banking Institutions 26 Other Non-bank Financial Institutions 16 Public Administration - Financial Sector 55 Industry, Trade and Services 3 Services 3 Themes Major Theme/ Theme (Level 2)/ Theme (Level 3) (%) Page 3 of 48  The World Bank Sierra Leone - Financial Sector Development Plan Support Project ( P121514 ) Private Sector Development 57 Business Enabling Environment 51 Investment and Business Climate 6 Regulation and Competition Policy 45 Jobs 2 Job Creation 2 Enterprise Development 4 MSME Development 4 Finance 39 Financial Stability 35 Financial Sector oversight and policy/banking 35 regulation & restructuring Financial Infrastructure and Access 4 MSME Finance 4 Urban and Rural Development 4 Urban Development 2 Urban Infrastructure and Service Delivery 2 Rural Development 2 Rural Infrastructure and service delivery 2 ADM STAFF Role At Approval At ICR Regional Vice President: Obiageli Katryn Ezekwesili Makhtar Diop Country Director: Ishac Diwan Henry G\. R\. Kerali Senior Global Practice Director: Marilou Jane D\. Uy Ceyla Pazarbasioglu-Dutz Practice Manager: Paul Noumba Um Douglas Pearce Task Team Leader(s): Thomas Losse-Mueller Michael Corlett ICR Contributing Author: Nicholas Timothy Smith Page 4 of 48  The World Bank Sierra Leone - Financial Sector Development Plan Support Project ( P121514 ) I\. PROJECT CONTEXT AND DEVELOPMENT OBJECTIVES A\. CONTEXT AT APPRAISAL Context Emerging from a decade long civil war in 2002, Sierra Leone’s economy initially saw significant economic growth, but this slowed to four percent in 2009 as the global financial crisis triggered a decrease in demand for its resources\. In this context, there was a need to diversify the economy away from its dependence on mineral exports and promote sustainable growth and employment, so as to promote economic prosperity and maintain peace\. Key to supporting these objectives, was and is a well-functioning, sound, efficient, and stable financial sector capable of facilitating financial intermediation and providing access to affordable financial services to help meet businesses’ and households’ financial needs\. Yet, the post-civil war financial sector did not function in a manner to sufficiently fulfill these needs\. At the end of the civil war in 2002, the financial sector was in disarray, but it experienced significant growth in the following years\. Between 2006 and 2011 bank branches per 100,000 adults doubled from 1\.5 to 3, marginally behind the Sub-Saharan Africa (SSA) median of 1\.6\. and 3\.6, respectively\. As of 2010, there were 13 banks with approximately 75 branches, which marked a significant increase from 57 branches in 2009\. The microfinance sector also experienced significant growth with international MFIs entering the market and The Microfinance Investment and Technical Assistance Facility (MITAF – who supported the majority of institutions), reporting an increase from 13,000 to 120,000 clients since 2003\. Private credit to Gross Domestic Project (GDP) averaged 4 percent between 2004 and 2008, compared to the SSA median of 10\.7, eventually reaching 7\.5 by 2011, which still lagged the SSA median of 15\.3\.1 In terms of intermediation, the loans to deposit ratio, averaged 38\.7 between 2004 and 2008 and increased to 46\.5 in 2011\.2 The loan to deposit ratio also lagged behind the 2004-2008 SSA median of 65\.6 and the 2011 median of 73\.5\. Yet, despite such growth, access to financial services remained limited primarily to urban areas and with only 15\.3 percent of adults with an account at a formal financial institution in 2011, just below the SSA median of 16\.9\.3 Additionally, financial services were not meeting the needs of key market segments like Small and Medium Enterprises (SMEs) and agriculture, respectively\. The post-civil war growth saw credit to the urban and small number of firms’ segments became excessive, resulting in the growing absolute value of Non-Performing Loans (NPLs) increasing, while profitability as measured by returns on assets and equity decreased significantly between 2007 and 2009\. A 2008 study from EU BizClim (European Union) also noted that money transfers were the most common form of financial service used\. This growth in the financial sector, limited inclusion of small segments of consumers, and concerns about overheating in credit to certain segments, highlighted the need to steer the sector in the right direction through innovation, policy, and capacity building to promote stability, development, and access\. At the same time, the Bank of Sierra Leone (BSL) was in need of significant capacity building to support its mandate to maintain stability 1 IMF Regional Outlook 2 Ibid\. 3 Finstats Page 5 of 48  The World Bank Sierra Leone - Financial Sector Development Plan Support Project ( P121514 ) and facilitate growth through regulation and supervision and provide the requisite infrastructure to support a developing financial system\. To address such challenges and shortcomings in the financial sector and to more broadly support financial sector development, BSL developed the Financial Sector Development Plan in 2009, financed by Financial Sector Reform and Strengthening Initiative (FIRST), to guide sectoral reform\. Championed by BSL, the FSDP is a long-term strategic plan for broad-based financial sector reform in post-civil war Sierra Leone\. The FSDP envisioned critical high-level support from a robust governance framework (comprised of a high-level Financial Sector Consultative Forum (FSCF), Financial Sector Steering Committee (FSSC), and Financial Sector Reform Secretariat) to support project coordination and implementation across actors and had critical political support as it was approved by Cabinet\. To support the implementation of the Financial Sector Development Plan, the Government requested World Bank to develop the Financial Sector Development Plan Support Project (FSDPSP, hereafter referred to as FSDP)\. The FSDP builds off a wealth of analytical work, including: the Financial Sector Development Plan (2009), the World Bank/ International Monetary Fund (IMF) Financial Sector Assessment Program (FSAP) in 2006, a Growth Diagnostic from Harvard (2006), an assessment of the demand for microfinance (2008), a Ministry of Trade and Industry private sector diagnostic(2008), a Microfinance Technical Assistance Facility Evaluation Report (2009), and various others International Finance Corporation (IFC), IMF, and Kreditanstalt fuer Wiederaufbau (KfW)\. All of this work, highlights the key role of the financial sector in promoting growth\. FSDP is an extension of the government’s prioritization of financial sector development as pillar of their economic strategy\. Additionally, FSDP complemented efforts by various donors, including the IMF, African Development Bank (AfDB), IFC, and a joint KfW, United Nations Capital Development Fund (UNCDF), United Nations Development Program (UNDP), and Catholic Organization for Relief and Development Aid (Cordaid) project, while Gesellschaft fuer Internationale Zusammenarbeit (GIZ) also made plans to support the FSDP plan and project through the provision of a long-term consultant to the FSDP Secretariat and funding an evaluation of compliance with Basel Core Principles (BCP)\. FSDP also has synergies with the joint Country Assistance Strategy (CAS; 2010-2013) which identified job creation and private sector development as priority areas, within which it advocated support to the financial sector to bolster private sector development, improve the ease of doing business and enabling environment, and promote growth\. Theory of Change (Results Chain) The Project Appraisal Document (PAD) has a results framework, but does not have an explicit theory of change or results chain\. The following theory of change is constructed from the PAD\. Activities  Outputs  Outcome  Impact 1a) Credit Information Infrastructure i) Bad debtor database Increased ability i) Develop bad debtor database ii) Credit information to assess ii) Develop credit information bureau bureau customers’ risk Enhanced profile access to 1b) Payment Systems and Remittances Policy i) Payment systems Regulations and financial Framework regulations and policies policies in place services i) Draft payment systems regulations and policies ii) BSL trained on to facilitate ii) TA and capacity development for payment supervision of payment payment system systems and mobile money supervision systems and mobile and mobile Page 6 of 48  The World Bank Sierra Leone - Financial Sector Development Plan Support Project ( P121514 ) iii) Draft mobile payment regulation and money money designing oversight mechanisms iii) Mobile money development, regulations and oversight along with BSL mechanisms capacity to supervise 1c) MSME/Value Chain Finance Capacity i) Analysis of product Greater Development of Commercial Banks development needs and understanding of i) Analysis of product development needs and enabling environment product needs enabling environment constraints for MSME and constraints for MSME and potential, and agricultural finance and agriculture finance enabling ii) Develop policies and support dialogue to ii) Sector policies and environment enhance access to financial services dialogue on financial constraints\. iii) Pilot product development and capacity services Secured lending development for banks iii) Bank pilot products supporting iv) Draft secured lending law and regulations to and capacity responsible support MSME finance development conducted lending iv) Secured lending law and regulations 2a) Financial Sector Legal Environment i) Updated financial Improved i) Review and update sector legal framework sector legal framework financial sector ii) Support drafting, amending and implementing ii) Sector legislation reform and BSL revised sector legislation drafted and implemented capacity to drive iii) Fund training and capacity development for iii) BSL Legal Department this process BSL Legal Department trained 2b) Implementation of Institutional i) HR review and new BSL has capacity Development Plan policy to meet its central i) Review of HR policies and practice and drafting ii) Capacity needs bank obligations new policy assessment and Financial ii) Staff capacity needs assessment and development plan sector preparation of development plan iii) BSL staff trained reform iii) Broad-based training program for BSL iv) Review of business with iv) Review functional and business processes and and functional processes adequate support for their re-engineering and support their re- sectoral v) Review and develop IT strategy and engineering oversight implementation plan, along with the purchase of v) IT Strategy and IT equipment Implementation Plan, vi) TA for implementing AML/CFT framework and equipment vii) Design and implement efficient supervisory vi) AML/CFT framework processes vii) Supervisory processes designed and implemented 2c) Support to the FSDP Secretariat i) FSDP provided capacity BSL has in house i) Project management, M&E, and capacity to to coordinate reforms capacity to drive enable FSDP to coordinate sector reforms ii) FM and procurement and manage Page 7 of 48  The World Bank Sierra Leone - Financial Sector Development Plan Support Project ( P121514 ) (ii) Develop FM and procurement capacity capacity developed financial sector (iii) Purchase FSDP equipment iii) Equipment purchased reform 2d) Strategy and analytical support for BSL i) Support provided for BSL has increased i) Support BSL in developing financial sector developing sector capacity to development strategies development strategies develop sector reforms Project Development Objectives (PDOs) The objective of the Project is to strengthen the capacity of the Bank of Sierra Leone and contribute to improving efficiency in financial intermediation, safeguarding financial sector stability, reducing transaction costs of money transfer and expanding access to financial services\. Key Expected Outcomes and Outcome Indicators Objective 1: Strengthen the capacity of the Bank of Sierra Leone Objective 2: Contribute to improving efficiency in financial intermediation Objective 3: Safeguarding financial sector stability Objective 4: Reducing Transaction cost of money transfer Objective 5: Expanding access to financial services The following four indicators aimed to measure achievement of the PDO: 1\. The Doing Business Depth of Credit Information Index is in line with Sub-Saharan Africa average (Baseline: No credit information infrastructure; Doing Business Depth of Credit Information Index = 0) 2\. 25 percent increase in outstanding MSME loan portfolio of commercial banks supported through capacity development activities of the project and stable portfolio-at-risk\. (Baseline: To be established once commercial banks have been identified) 3\. A comprehensive payment system policy and regulatory framework has been established\. (Baseline: No payment system policy and regulatory framework in place; Implementation of electronic payment system initiated) 4\. Compliance with Basel Core Principles (BCPs) for Banking Supervision for 10 out of 25 BCPs has improved (Baseline: BCP compliance to be established through BCP assessment by the end of end of 2011)\. The PAD notes that the achievement of the PDO is predicated on implementation of other donor projects,4 which raises a question of the attributability of observed changes in PDO indicators to the Project\. More broadly, this highlights that FSDP was envisioned as supporting a few key areas of the 2009 Financial Sector Development Plan that were deemed to be a comparative advantage for the World Bank (WB) within the context of broad donor support\. That said, the PDO was too broad, reflecting the broader Financial Sector Development Plan and envisioned donor support, and not limited to FSDP-supported activities\. In hindsight, the PDO should have focused on two objectives, strengthening BSL oversight capacity and improving efficiency for financial intermediation, not five\. 4 In particular, the AfDB WAMZ payment system project, MITAF activities in the MFI sector, GIZ and IMF TA for banking supervision and IFC TA for MSME finance\. Page 8 of 48  The World Bank Sierra Leone - Financial Sector Development Plan Support Project ( P121514 ) Components Component 1: Enhancing access to financial services A\. Credit information infrastructure: i) development of a basic bad debtor database operated by the BSL, and ii) development of comprehensive credit information bureau funded either entirely by the private sector or in a public-private partnership model, along with supporting regulation and capacity development for BSL oversight Estimated Cost: US$ 250,0000 Actual Cost: US$0 B\. Implementation of payment systems and remittances policy framework: i) draft payment systems regulation and policies, (ii) training, TA and capacity development for payment system and mobile payment supervision, and (iii) draft mobile payment regulation and designing oversight mechanisms Estimated Cost: US$ 850,000 Actual Costs: US$ 341,839\.15 C\. SME/value chain finance capacity development of commercial banks: (i) analysis of product development needs and enabling environment constraints to support Micro, Small, and Medium Enterprises (MSME) and agricultural finance, (ii) development of sector policies and support for sector dialogue on enhancing access to financial services, (iii) pilot product development and capacity development for selected commercial banks, and (iv) draft secured lending law and regulation to support MSME finance Estimated Cost: US$ 400,000 Actual Costs: US$ 0 Component 2: Building financial sector reform and oversight capacity of the BSL A\. Financial Sector Legal Environment: i) review and update the financial sector legal framework, including the Other Financial Services (Amendment) Act, Banking Act and BSL Act; ii) support the drafting, amending and implementation of revised sector legislation, including potentially a Microfinance Law, and iii) fund training and capacity development for the BSL legal department Estimated Cost: US$ 250,000 Actual Costs: US$0 B\. Implementation of Institutional Development Plan: i) review of Human Resources (HR) policies and practice and drafting new HR policy, ii) assessment of staff capacity needs and preparation of a staff capacity development plan as a framework for training and capacity development program, iii) broad-based training program for BSL staff, iv) review of functional and business process and support for business and functional process re-engineering, v) review and development of IT strategy and implementation plan, along with the purchase of IT equipment, vi) TA support for the implementation of the Anti-Money Laundering/Countering the Financing of Terrorism (AML/CFT) framework, and vii) design and implement efficient supervisory processes\. Estimated Cost: US$ 1,000,000 Actual Costs: US$ 561,771\.73 Page 9 of 48  The World Bank Sierra Leone - Financial Sector Development Plan Support Project ( P121514 ) C\. Support to the FSDP Secretariat: i) project management, monitoring and evaluation (M&E) and implementation capacity to enable the FSDP Secretariat to coordinate financial sector reforms under the FSDP, (ii) the development of financial management and procurement capacity, and (iii) the purchase of select equipment for the FSDP Secretariat\. Estimated Cost: US$ 220,000 Actual Costs: US$ 261,585\.23 D\. Strategy and analytical support for BSL: i) support BSL in developing financial sector development strategies Estimated Cost: US$ 200,000 Actual Costs: US$ 0 Note: The total estimated cost provided in the PAD procurement plan is US$ 3,170,000\. B\. SIGNIFICANT CHANGES DURING IMPLEMENTATION (IF APPLICABLE) The project was restructured twice, first in December 2015 to extend the closing date to account for lost implementation time as a result of the Ebola crisis, and a second time in October 2016, to reorient project activities around new BSL priorities and to extend the closing date to provide time to complete new activities\. The PDO indicators were revised in the second restructuring to better reflect project activities\. It should be noted that during this period, the World Bank provided and attempted other support to the Sierra Leonean financial sector, which were outside the scope of FSDP\. This support included, support to set up payments to Ebola health workers, conducting an assessment on remittances, and developing a Financial Sector Reform and Strengthening Initiative (FIRST) proposal to support payment systems, the latter of which was ultimately unsuccessful\. Outside donor support did not materialize to support implementation of the FSDP plan and project\. Of particulate note, the GIZ consultant to support the FSDP unit in implementing this project did not materialize\. Following the October 2016 restructuring, the Government decided to finance the following activities with its own or other donor resources: i) modern credit registry; and ii) collateral registry\. Furthermore, the activity to support implementation of the national switch was subsequently dropped after BSL’s unsuccessful procurement of the switch hardware\. Given limited implementation time following the restructuring, the funds could not be reallocated to new activities and the project closed with a large undisbursed balance\. Revised PDOs and Outcome Targets No revision was made to the PDO under the project restructuring\. Thus, the objectives remained the same\. As the ensuing report makes the case, the PDO should have been revised under the project restructuring to ensure the “unpacked” objectives were more in line with the restructured project components\. Revised PDO Indicators The PDO Indicators were revised under the October 2016 project restructuring as follows: • Maintained: PDO indicators 1 (developing a credit information system) and 3 (comprehensive payment system policy and regulatory framework 3) Page 10 of 48  The World Bank Sierra Leone - Financial Sector Development Plan Support Project ( P121514 ) • Dropped: PDO indicators 2 (25 percent increase in outstanding MSME loan portfolio of commercial banks) and 4 (Compliance with Basel Core Principles (BCPs) for Banking Supervision for 10 out of 25 BCPs has improved) from the PAD were both dropped\. • Added: as new PDO indicator 2: “effective implementation of the collateral registry supporting MSME finance\.” Thus under the restructured project, the PDO indicators were: 1\. The Doing Business Depth of Credit Information Index is in line with Sub-Sahara Africa average 2\. Effective implementation of the collateral registry supporting MSME finance 3\. A comprehensive payment system policy and regulatory framework has been established As with the original project, the revised PDO indicators broadly support the PDO and the five “unpacked” PDO objectives\. The restructured FSDP did not support a modern credit registry or a collateral registry, thus PDO indicators 1 and 3 should have been dropped, as any observed impact in these areas would not be directly attributable to the project\. Hence, more appropriate indicators could have been developed which reflected project components and assessed the project’s impact thereon\. Per the Implementation Completion Report (ICR) guidelines, the following PDO indicators have been selected to assess achievement of the five “unpacked” PDO indicators\. The original project design also had PDO indicators on: i) 25 percent increase in outstanding MSME loan portfolio of commercial banks (Original PDO indicator 2) and ii) Compliance with BCPs for Banking Supervision for 10 out of 25 BCPs has improved (Original PDO Indicator 4); however, these were dropped during the restructuring\. That said, these can still be used to assess achievement of the PDO prior to restructuring\. Thus, the original PDO indicators 2 and 4, will also be used to gauge the impact of the project and henceforth referenced as indicators A and B in the ensuing analysis\. PDO PDO Objectives Indicators Used to Assess Achievement of PDO Objective 1 2 3 A B 1 X X X X 2 X X X X 3 X 4 X 5 X X X X Revised Components Under the restructured project, the four new components were introduced: 1\. Special diagnostics of two state-owned banks Page 11 of 48  The World Bank Sierra Leone - Financial Sector Development Plan Support Project ( P121514 ) Conduct special diagnostics of two state-owned banks, Sierra Leone Commercial Bank (SLCB) and Rokel Commercial Bank (RCB)\. Estimated Cost: US$ 200,000 Actual Costs: US$ 768,025\.79 2\. Collateral registry Support the establishment of a collateral registry by financing the hardware to operate the registry (IFC- funded the software) and, where needed, provide capacity building\. Estimated Cost: US$200,000 Actual Costs: US$0 3\. Switch infrastructure Provide project management support through a consultant to facilitate the successful implementation of the national switch infrastructure\. Estimated Cost: US$ 200,000 Actual Costs: US$ 0 4\. Financial inclusion Support: i) the preparation of a financial inclusion strategy, ii) conducting a baseline financial inclusion survey, and iii) as well as other relevant financial inclusion activities to facilitate the definition and implementation of structured activities to foster financial inclusion\. Estimated Cost: US$ 850,000 (not including financial inclusion strategy) Actual Costs: US$ 313,766 Justification for New Components 1\. Special diagnostics of two state-owned banks: The purpose of the diagnostics was to develop a better understanding of the challenges faced by these institutions (which combined had 28 percent of banking sector assets in 2015) and advance efforts to take decisive measures to promote financial stability and foster sound financial intermediation\. 2\. Collateral registry: A collateral registry would make it possible to easily and rapidly register and execute movable collateral, thereby facilitating MSME finance\. A collateral registry could also contribute to reducing defaults on credit\. 3\. Switch infrastructure: The restructured FSDP also included funding for a long-term resident advisor to support implementation of a National Switch to be funded by BSL\. 4\. Financial Inclusion: Under financial inclusion, the restructured project aimed to support financial inclusion efforts in Sierra Leone by financing the development of a National Financial Inclusion Strategy, baseline financial inclusion survey, and other related activities; the latter later ultimately resulted in the financing of a geospatial mapping survey on financial inclusion\. Page 12 of 48  The World Bank Sierra Leone - Financial Sector Development Plan Support Project ( P121514 ) Other Changes Note: As the original project had no theory of change, no changes could be made thereto\. Rationale for Changes and Their Implication on the Original Theory of Change After five years of implementation and minimal impact, the FSDP project was restructured in October 2016 in an attempt to better reflect BSL’s current priorities in the project, its implementation capacity constraints, and focus efforts\. FSDP had only disbursed 11 percent of available funds by Q4 2014\. Slow implementation was due to an array of challenges, including the outbreak of Ebola, which prevented consultants from visiting Sierra Leone for approximately a year, capacity constraints at BSL (e\.g\., FSDP unit had only one staff member for approximately the first three years of its existence and other donor support to the Unit and broader FSDP Plan, did not materialize), and project components did not reflect new senior BSL management’s priorities\. While implementation began to pick up in 2015, the World Bank and BSL agreed to restructure the project during the mid-term review that same year with the objective to narrow the focus of project activities\. As previously noted, the original project objectives were too broad reflecting overall FSDP priorities\. Additionally, there were too many project activities, yet they were still insufficient to meet the ambitious PDO\. In October 2016, after approximately 18 months of deciding on new project components, restructuring was completed with the four new focused components\. In light of the more focused scope of the restructured project, a level one restructuring should have taken place to narrow the PDO\. Lastly, the new components also reflected up to date CBL priorities and that were relevant to the country’s needs\. Moreover, the diagnostics of the two state-owned banks aimed to provide BSL a better understanding their financial state so that it could take appropriate actions to safeguard financial stability and promote financial inclusion\. Given the negative impact these institutions posed to the health of the financial sector in terms of NPLs and limited intermediation of deposits into credit, the financial sector was contributing little to private sector growth and job creation\. Similarly, a key constraint to providing individuals and firms credit had been the absence of the collateral registry to promote secure lending\. Support for a long-term consultant to help with the operationalization of the switch aimed to complement investments under West African Monetary Zone (WAMZ) project to modernize payments infrastructure and promote interoperability among financial services providers, and thus access to financial services\. As financial inclusion was a key objective among the restructured project components and BSL demand, the project aimed to support financial inclusion policy and diagnostics through support of a financial inclusion strategy and baseline financial inclusion survey, and other related activities; ultimately the latter entailed a geospatial mapping of financial service access points\. Page 13 of 48  The World Bank Sierra Leone - Financial Sector Development Plan Support Project ( P121514 ) II\. OUTCOME A\. RELEVANCE OF PDOs Assessment of Relevance of PDOs and Rating Rating: High The relevance of the project’s PDOs to the Systematic Country Diagnostic (SCD) is rated as high given the alignment of the PDOs with the SCD (the Country Partnership Framework is under development as of March 2018), and the broader challenges to the financial sector\. Moreover, the SCD identifies access to credit as a binding constraint to the entry of new entrepreneurs into the market and for preexisting businesses\. Additionally, the SCD notes that economic diversification requires access to credit and other financial services\. To bolster financial intermediation, the SCD noted the need to bolster financial sector supervision and address impediments to the growth in credit\. Among issues that impede credit growth are the excel-based credit registry and the underutilized collateral registry, which was launched in 2016\. The SCD notes how such infrastructure and enhanced supervision should aid market expansion, such as branches and community banks\. It also highlights the need to address weak performance of the two state-owned banks (RCB and SLCB), which despite their large market share, do not adequately convert deposits into credit, all the while posing stability concerns\. Additionally, the SCD discusses the potential of digital financial services to promote financial inclusion, as it notes this market is underdeveloped and has high communication costs\. Developing payment systems is critical given the role it can and has played in social transfers\. The SCD storyline mirrors the project’s PDOs\. Moreover, the need to enhance BSL’s capacity (PDO 1) is captured in the SCD’s argument to enhance financial sector supervision\. PDO 2 (Contribute to improving efficiency in financial intermediation) is aligned with the issue of addressing the two state-owned banks and putting in place a modern credit registry to more effectively link Sierra Leoneans to their credit history\. PDO 3 (Safeguarding financial sector stability) is found in the need to address the two state-owned banks\. It should be noted that the weak financial position of the two state-owned banks lies at the heart of the financial sector challenges\. With the inclusion of the diagnostics of the two state-owned banks in the restructured project the project has remained critically relevant and responsive to the country’s needs\. PDO 4 (Reducing Transaction cost of money transfer) is tangentially captured in the SCD, as it notes the high cost of communication and the critical role of social transfers\. PDO 5 (Expanding access to financial service) is captured in the binding constraints, economic diversification and job creation\. Given FSDP is in line with the SCD and that the restructuring also helped the project remain relevant to the country, it is clear that the World Bank’s implementation support was responsive to the client’s needs throughout its lifecycle\. Page 14 of 48  The World Bank Sierra Leone - Financial Sector Development Plan Support Project ( P121514 ) B\. ACHIEVEMENT OF PDOs (EFFICACY) Assessment of Achievement of Each Objective/Outcome Objective 1: Strengthen the capacity of the Bank of Sierra Leone Efficacy Rating: Modest The project had a modest impact on strengthening BSL’s capacity\. The project supported improved capacity in BSL, particularly as related to its function as a steward of payment systems, which have been substantially modernized with project support, and a HR strategy and Information Technology (IT) strategy have also made tangible impacts\. As regards to the BSL’s critical function in ensuring financial sector stability, despite important contributions – mainly the diagnosis of the insolvent state-owned banks – the project accomplished little in terms of building BSL supervision capacity\. The FDSP project contributed to the substantial strengthening of the BSL’s capacity in payment systems\. The contributions were in 3 areas: 1) institutional building, 2) regulatory framework, and 3) critical implementation support of modern payments infrastructure (Real Time Gross Settlement (RTGS), Automated Clearing House (ACH), and Securities Settlement System (SSS))\.5 PDO indicator 3, supporting the development of the payment systems regulatory framework, is considered to be partially achieved\. • Organizational building\. The project supported the development of an organizational chart for the establishment of payment systems department, which is currently a unit under the Banking Supervision Department\. The unit has been staffed with dedicated staff\. The project supported several consultancies (see point 2 and 3) which contributed to capacity building of this unit\. At the time of this work, BSL was acquiring modern payments systems infrastructure, financed by AFDB\. Hence, it was critical to establish, staff, and train a dedicated unit to successfully implement this infrastructure\. • Regulatory framework\. The project conducted a comprehensive review of the regulatory framework surrounding payment systems and then provided recommendations for the Payment Systems Act (2009), but these were never incorporated into the Act, as the consultant for this deliverable’s contract ultimately expired and the Ebola outbreak precluded visits to Sierra Leone, despite efforts to remedy the situation to complete the task\. Lastly, the project also provided capacity building for the payment systems unit staff\. • Implementation support for new payments infrastructure\. The project provided implementation support to AfDB-funded BSL acquisition of RTGS, ACH, SSS, and core banking application systems by helping BSL acquire the right systems and helping the systems to go live by conducting site visits to financial institutions and telecommunication systems\. The RTGS and ACH, in particular, help clear and settle interbank transfers, such as the RTGS for large sums in real time and ACH, which has the potential to facilitate direct deposits/credits, respectively\. FSDP implementation support proved instrumental in the successful launch and operation of this payment infrastructure\. It should be highlighted that planned AfDB implementation support was cancelled, and FSDP stepped in to ensure that these large infrastructure investments, and essential building blocks for developing 5 The infrastructure was financed by AfDB funded Infrastructure under the WAMZ project\. Page 15 of 48  The World Bank Sierra Leone - Financial Sector Development Plan Support Project ( P121514 ) a robust payment ecosystem, were successfully implemented\. As the project did not fund the development of a bad debtor base nor the development of a comprehensive information bureau as planned (related to PDO indicator 1)\. Additionally, the project did not fund the collateral registry (PDO Indicator 2), thus the launch of the collateral registry with support from the IFC, is also not attributable to this project\. While the restructured project aimed to finance the hardware for the collateral registry, the component was dropped due to BSL’s desire to procure the hardware in a time frame that was not consistent with World Bank procurement procedures\. It is important to note that as a result of the collateral registry and national switch being dropped after restructuring was finalized in late 2016, the project was unable to allocate the remaining project funds\. Between the inability to reallocate these funds and overall low implementation, the project ultimately only disbursed US$ 2,408,590\.72 million (63\.62 percent of project funds)\. That said, the project’s role in helping implement the FSDP and build the capacity of BSL staff may have indirectly facilitated the adoption of the credit registry and the collateral registry\. Lastly, the project did not fund any activities related to compliance with BCPs for banking supervision (related to PDO indicator B and in support of BSL capacity to promote financial stability), hence any observed changes thereto are not attributable to the project\. Additionally, other non-payment system activities helped to strengthen the capacity of the Bank of Sierra Leone\. First, the development of the human resource review helped identify a number of changes that BSL needed to undertake with respect to human resources and with many of the recommendations being adopted in a phased approach\. HR department views the review, which was approved by the BSL executive board, in a positive light and many recommended actions that are being implemented will make BSL a more efficient and a more effective institution; such as, the establishment of a Risk Management Unit, while other recommendations such as separating core and support functions, has helped streamline decision-making such as the establishment of a second Deputy Governor and Financial Stability Department in 2018\. The project also funded a stocktaking exercise on the implementation of FSDP, which provides BSL an update on the status of the reform agenda\. Additionally, the project funded the development of an IT Strategy with recommendations\. The Strategy was adopted by the Executive Board, disseminated at a management retreat, and BSL has begun actions to begin implementation, such as hiring six new staff and updating their Enterprise Resource Planning (ERP) systems\. The restructured project also supported various trainings and study tours for the FSDP unit and others, including, but not limited to on the following areas: financial inclusion, Leading change: Strategy through implementation, Project and Program Management, Cash and Treasury Management, Leadership and Strategy for Senior Managers, and Development Finance, Microinsurance & Microfinance for Business Development\. While such short-term projects may not have the same impact as long-term trainings, they can provide key sensitization of issues in critical areas of BSL’s purview\. In total, the project spent US$ 346,779\.74 on such trainings and study tours, or 14\.4 percent of the total funds disbursed in the project (US$ 2,408,590\.72)\. Objective 2: Contribute to improving efficiency in financial intermediation Efficacy Rating: Modest The project had a modest impact on improving efficiency in financial intermediation\. Improvements in payments systems infrastructure, supported by the project in coordination with the AfDB WAMZ payment system support project, support efficiency in financial intermediation, but key activities to support this outcome, such as the credit registry and technical assistance (TA) to banks were never implemented, or are not attributed to the project Page 16 of 48  The World Bank Sierra Leone - Financial Sector Development Plan Support Project ( P121514 ) (collateral registry)\. Furthermore, there is little evidence that financial intermediation has improved in Sierra Leone during project implementation, as interest rate spreads, a standard measure of efficiency in financial intermediation, actually increased overall\. With its initial sub-component on payment systems, the project modestly contributed to improving the efficiency in financial intermediation by providing support around the ACH, RTGS, and SSS\. As noted under Objective 1, the project did not support the development of a bad debtor base nor the development of a comprehensive credit information bureau (credit registry) as planned (related to PDO indicator 1), or a collateral registry (PDO indicator 2), so the establishment of a manual a credit registry and a collateral registry are not attributable to this project; see also the possible indirect influence of the project on the adoption of the credit registry and collateral registry under the efficacy analysis for component 1\. The project did, however, have a significant impact on improving the efficiency in financial intermediation by helping establish the rules and procedures for the ACH, RTGS, and SSS systems, while also helping these systems go live\. In doing so the project helped reduce settlement risk with the RTGS, facilitating growth in interbank transactions, and provided a platform for the digitization of direct debits and credits; these specific activities are noted in detail under the assessment of achieving objective 1\. Additionally, the original project did not end up providing TA to commercial banks to help increase MSME lending, which would have been captured in PDO indicator A and could have helped improve the efficiency of financial intermediation\. The activity was never fully implemented due to limited cooperation among the commercial banks in the diagnostic phase, despite the World Bank team’s efforts to jump-start the activity\.6 As a result, the original proposed project activities were not implemented,7 and any changes observed in banks’ MSME lending portfolio are not attributable to project’s goal of contributing to improving efficiency in financial intermediation\. However, the IFC took the lead on the proposed activity of drafting the secured lending law and regulation to support MSME finance\. Outside of the PDO indicators, no other project outputs (from the original or the restructured project) appear to have had an impact on improving efficiency in financial intermediation\. Objective 3: Safeguarding financial sector stability Efficacy Rating: Modest The project made important contributions to safeguarding financial sector stability\. The main output under this objective, added in the October 2016 project restructuring, was the diagnostics (including audits) for the two state-owned banks, RCB and SLCB\. The diagnostics provide the analytical basis for Authorities to take decisive measures and “forcefully restructure the two-state owned banks”\. The terms of the reference for the diagnostics were jointly agreed with the IMF, and included as a structural benchmark in the IMF Extended Credit facility\.8 The banks, which have significant market share (28\.6 percent of assets, 36\.2 percent of deposits, and 23\.8 of credit, 6 The World Bank team developed a questionnaire on MSME finance, which was distributed to banks\. The response rate and quality of data, however, was poor, even after the World Bank developed and conducted a more simplified questionnaire\. 7 i) analysis of product development needs and enabling environment constraints to support MSME finance and agricultural finance, (ii) development of sector policies and support for sector dialogue on enhancing access to financial services, and (iii) pilot product development in cooperation with selected commercial banks (secured lending, leasing, value chain finance) and capacity development for selected commercial banks\. 8 IMF (2017), IMF Country Report No\. 17/154\. Page 17 of 48  The World Bank Sierra Leone - Financial Sector Development Plan Support Project ( P121514 ) as of September 2017), had suffered significant losses for several years, prompting BSL intervention in 2014\. Prior to the diagnostics, BSL actions to address the distressed situation of the banks, including recapitalization, had failed to improve performance, and weak governance of the banks was not adequately addressed\. The intervention involved BSL joint management of the institutions, rather than outright resolution\. The diagnostics revealed a worsening situation, RCB had 83 percent NPLs and SLCB 76 percent as of June 2016\. It appears that these diagnostics helped escalate the severity of the issue to policymakers and financial sector stakeholders including donors\. Subsequently, BSL took further actions, including instituting a lending freeze and increased efforts to recover NPLs\. With TA from the IMF, BSL is working to enhance banking supervision capacity by migrating to risk-based supervision and building up top-down stress testing capacity\.9 Given that high NPLs are the biggest challenge to financial sector stability, it appears the diagnostics have been instrumental in spurring action to address the issue\. While critical actions remain, the project had a significant impact in spurring action to address this critical issue\. While other intended activities meant to contribute to achieving the objective were limited, the World Bank/BSL worked with the IMF to ensure that critical activities, such as strengthening banking supervisory function were covered under IMF TA program\. The PAD stated that this objective would be supported by the implementation of the Institutional Development Plan of the BSL, including banking supervision, strengthening the legal environment of the financial sector, and building BSL capacity to lead implementation of the FSDP activities\. The project did undertake relevant TA to contribute to objective, such as the HR review and the IT strategy, and attempted to hire a long-term banking supervision resident advisor,10 but limited actions have been taken to strengthen BSL’s capacity to safeguard financial sector stability\. The relevant PDO Indicator B (improvement in compliance with BCPs for Banking Supervision) was a good measure for the objective; however, no project activities surrounding BCP were implemented prior to the project restructuring, nor was the baseline or follow up BCP conducted\.11 In coordination with the World Bank and BSL, however, the IMF did step in to initiate a TA program to enhance banking supervision capacity by migrating to risk-based supervision and building up top-down stress testing capacity (IMF, 2017)\. \. Objective 4: Reducing transaction cost of money transfer Efficacy Rating: Negligible The FSDP project had a negligible impact on reducing the transaction cost of money transfers\. While no project deliverable supported any work on mobile money transfers or remittances to help facilitate such an impact, in January 2012, the World Bank, under the framework of the African Institute for Remittances (AIR) project, undertook an assessment of the market for remittances in Sierra Leone against the WB-Committee on Payment and Settlement Systems (CPSS) General Principles for International Remittances Services\. The assessment provided the BSL and the other relevant authorities in the country with a set of recommendations on how to improve the market for remittances and increase the efficiency, safety, and reliability of these flows, ultimately aiming at reducing the cost of receiving remittances in Sierra Leone\. It is important to note that the project did 9 IMF (2017)\. 10 Prior to the October 2016 restructuring, the project did attempt to bring in a long-term resident advisor on banking supervision, but no qualified applicants applied\. At the time of the preparation of the ICR, the IMF was supporting enhance banking supervision capacity through its TA program\. 11 According to the PAD, GIZ was to finance the BCP under a banking supervision TA, but it never materialized\. BSL intended to undertake a self-assessment, but this also did not take place\. Page 18 of 48  The World Bank Sierra Leone - Financial Sector Development Plan Support Project ( P121514 ) fund a review of the Payment Systems Act and provided recommendations to improve it\. However, the consultant did not return to Sierra Leone after the Ebola Outbreak to conduct consultations and the amendments were never incorporated into the Act\. Objective 5: Expanding access to financial services Efficacy Rating: Negligible Financial intermediation declined in recent years, while risks accumulated\. Credit to GDP is very low and declined in recent years\. Between 2010 and 2017, the ratio of credit to the private sector to GDP declined from 7\.7 to 5\.6\. The project had a negligible impact in expanding access to financial services, and credit to the private sector declined during the project implementation\. The project did not fund the implementation of credit information systems or a collateral registry, thus PDO indicators 1 and 2, respectively, do not provide any insight as to whether the project supported increased access to financial services; see also the possible indirect influence of the project on the adoption of the credit registry and collateral registry under the efficacy analysis for component 1\. As the only area of the project’s support in payment systems that was completed was for developing the rules and procedures for the ACH, RTGS, and SSS, and to helping them go live, there is not much of a case that PDO indicator 3 was achieved in support of promoting the PDO objective\. Under the original project design, PDO Indicator A would have helped capture any of the original project’s impact, or lack thereof, on expanding access to financial services; however, as previously noted, no activities surrounding MSMEs were implemented, thus any changes observed in banks’ MSMEs lending portfolio are not attributable to the project and its goal of expanding access to financial services\. While no project deliverable had a tangible impact on promoting access to financial services, the project did support some valuable diagnostic activities that will support the government’s efforts to increase access to financial services\. The restructured project aimed to support access to financial services with the inclusion of a new component on financial inclusion, which had activities of a financial inclusion strategy, a baseline financial inclusion survey, and a left some flexibility for related activities\. Ultimately, the project funded a baseline survey and a geospatial mapping of financial service access points\. The survey, however, did not employ the proper methodology to have a national representative sample\.12 Conversely, the geospatial mapping exercise was conducted in a rigorous and comprehensive manner, yielding rich insights into the geographical dimensions of access to financial services in Sierra Leone, including the service types\. The geospatial mapping study was formally launched at a public event by the BSL Governor and Deputy Governor and it critically informs BSL’s understanding of the state of financial inclusion\. Additionally, the mapping will serve as a public good to assist the private sector and international development partners in determining areas lacking financial services and possible opportunities to provide these services\. The project also funded the mapping to be publicly available on an interactive online platform, which can be updated by BSL to help track progress in expanding access to financial services overtime\. Lastly, the mapping is also being used to inform the design of a planned World Bank financial sector project, which will have a focus on financial inclusion\. 12An in-depth World Bank review of the survey’s methods determined that the survey was flawed and could not be used to inform policy on financial inclusion\. Page 19 of 48  The World Bank Sierra Leone - Financial Sector Development Plan Support Project ( P121514 ) Justification of Overall Efficacy Rating Pre-Restructuring Efficacy Rating: Modest Per the analysis in the prior section, “Assessment of Achievement of Each Objective/Outcome,” it is clear that the project had a modest impact on the five unpacked objectives from the PDO over the life of the project\. Prior to the October 2016 restructuring, the project saw very little implementation and thus little disbursement\. In fact, only 30\.01 percent, or US$ 1,138,000, was disbursed between project effectiveness (July 2011) and restructuring (October 2016)\. However, the project clearly made significant contributions to BSLs capacity to manage payment systems, which played a critical role in the successful launch and continued operation of the new payments infrastructure financed by AfDB\. It should be noted that while the above outputs are not development outcomes, many of them are paving the way to achieve them, such as the HR review and IT Strategy, the impact of which is discussed more in the section “Achievement of PDOs\.” Post-Restructuring Efficacy Rating: Modest Between project restructuring in October 2016 and closure in November 2017, implementation picked up significantly, with disbursement slightly more than doubling to 63\.6 percent in total\. During this period, the outputs included the diagnostic of two state-owned banks (related to Objective 3: Safeguarding financial sector stability), and the geospatial mapping of financial service access points (supporting Objective 5: Expanding access to financial services)\. While these are critical outputs, they have yet to contribute to any development outcomes\. At the same time, the restructured project had planned to support the hardware for a collateral registry, national switch, a financial inclusion strategy, and a baseline financial inclusion survey, but the former three were dropped, while the financial inclusion survey did not yield nationally representative results\. Despite challenges in implementation post restructuring, the ability to double disbursement in approximately one year, which resulted in key outputs in support of the Project Objectives, facilitates a post-restructuring rating listed as modest\. Overall, three objectives are rated as Modest and two are rated negligible\. Overall Efficacy Rating: Modest C\. EFFICIENCY Assessment of Efficiency and Rating Efficiency Rating: Modest The PAD does not include an economic analysis, but notes that a substantial body of empirical evidence that successful financial sector reforms that result in a deepening of financial sector development and increased access to financial services can be expected to have a high impact on growth and poverty eradication\. The 2006 growth diagnostic suggested that alleviating the binding constraint of access to credit would support growth and poverty reduction\. However, the project produced few results, suffered lengthy delays in implementation notwithstanding exogenous shocks (Ebola), and in the end, did not fully utilize available resources (approximately US$1\.4 million or 36\.4 percent, was undisbursed at closing)\. As a result, there is a large unfinished agenda, and the BSL has Page 20 of 48  The World Bank Sierra Leone - Financial Sector Development Plan Support Project ( P121514 ) requested a new project to address needed reforms and investments, which if FSDP had been more efficient, many of the items on the unfinished agenda would not be necessary\. As an example, the national switch infrastructure was never procured, and hence the supported TA was cancelled at a late stage in the project such that resources could not be reallocated for other productive purposes\. However, despite a large amount of undisbursed funds, project expenditures in critical areas are considered to be highly cost effective\. In particular, support to the Payment Systems unit was instrumental in providing necessary capacity to successfully implement the AfDB funded payments infrastructure\. While this work accounted for a small amount of expenditures, without this support, AfDB’s large investments may not have been successfully implemented\. In addition, the project’s support of the Bank diagnostics has been critical in spurring action to address the most pressing challenge to a stable and efficient financial sector\. Without project support, the financial system’s vulnerabilities would likely have increased\. Though the cost of the bank diagnostics was four time higher than budgeted, the higher expense is warranted based on the absolute necessity of the activity as providing the analytical basis upon which to address the most critical vulnerability in the financial sector\. Time- overruns (total of 23-month extension) were largely attributed to the Ebola crisis, and thus outside the control of the project\. The frequent change of Task Team Leaders (TTLs), which the client noted as a problem, is found to have had a marginally negative impact on economic efficiency, as the impact was mitigated by smooth handovers and strong documentation of project implementation through the MTR, Aide Memoires, and others\. On this basis, the rating for efficiency is Modest\. Design and Implementation Project design and implementation capacity played a significant role in impacting project efficiency\. As is documented in the MTR and the restructuring paper, the ambitious design of the original project, supporting a myriad of unprioritized interventions, played a key part in slowing down project implementation as the long list of activities to implement was not manageable\. In terms of implementation, multiple challenges diminished efficient project implementation\. As previously noted, with just one FSDP full time staff for approximately the first three years of the project and rotating support staff, and little institutional knowledge at BSL on how to manage a World Bank project, implementation was slow\. Additionally, the envisioned governance structures to support implementation either never became operational or met only a few times, despite their importance\. The FSSC met just twice (prior to restructuring), and the high-level FSCF never met\. In lieu of the FSSC, the FSDP Unit reported directly to the Governor and the heads of department\. The lack of an effective governance structure, compounded with frequent changes in BSL leadership, slowed down project implementation through long delays in determining, and shifting, priorities\. For example, the efficiency of the October 2016 restructuring was diminished by BSL’s decision to drop multiple activities immediately after the restructuring\. The outbreak of Ebola also significantly disrupted project implementation\. As the restructuring paper correctly notes, project implementation slowed and effectively stalled out for approximately a period of one year between 2014 and 2015\. During this period, consultants could not visit Sierra Leone to provide implementation support\. After Ebola, multiple consultants providing support to payment systems did not return, leaving some activities unfinished, despite efforts to have them return\. Page 21 of 48  The World Bank Sierra Leone - Financial Sector Development Plan Support Project ( P121514 ) While Ebola undoubtedly played a significant part in impacting the project’s efficiency and outcomes, challenges to implementation persisted before and after the Ebola outbreak\. After the crisis, the project was extended for 23 months in December 2015\. Ultimately, the project was restructured in October 2016 by at which time only 30\.01 percent or US$1,138,000 of funds had been disbursed\. Between restructuring and project closure, disbursement approximately doubled 63\.62 percent\. D\. JUSTIFICATION OF OVERALL OUTCOME RATING Overall Outcome Rating: Moderately Unsatisfactory The ICR Guidelines state a project is “moderately unsatisfactory” if “There were significant shortcomings in the operation’s achievement of its objectives, in its efficiency, or in its relevance\.” The previous sections highlight that the project received a PDO relevance rating of high, while its marginal achievement of objectives (efficacy) and low efficiency in doing so, were both rated as marginal\. While the Project’s Objectives were highly relevant, the project had few successes relative to the money, time, and flexibility of project design (i\.e\., restructuring process), and project efficiency was diminished by a complex design, and BSL capacity, project ownership, and implementation structures\. It is also clear that Ebola impacted efficiency and finishing some project outputs where there was traction, but the other aforementioned challenges impacting efficiency appear to have persisted throughout the project cycle before and after Ebola\. The combination of the high PDO relevance and negligible efficacy and efficiency ratings, with consideration for the impact of Ebola on project implementation, justify the overall outcome rating as moderately unsatisfactory\. E\. OTHER OUTCOMES AND IMPACTS (IF ANY) Gender No project component directly provided targeted funding to support women or had an observable outcome or impact on women\. While the project ultimately hoped to analyze the “benefit to the ultimate beneficiaries of the project” by examining the change in number of women borrowers belonging to MFIs, it would be imprudent to attribute any observed impact on women given the project design, even after restructuring\. Institutional Strengthening Note: this is covered under the analysis of PDO Objective 1: Strengthen the capacity of the Bank of Sierra Leone\. Page 22 of 48  The World Bank Sierra Leone - Financial Sector Development Plan Support Project ( P121514 ) Mobilizing Private Sector Financing No private sector financing was mobilized as a result of this project to knowledge of the team\. Poverty Reduction and Shared Prosperity In general, the activities financed under this project supported policy work and capacity building for BSL, both of which are prerequisites for financial sector intermediation and stability, which support poverty reduction and shared prosperity\. The economic analysis section discussing the benefits of this project in reference to the PAD correctly note this importance of such financing\. Other Unintended Outcomes and Impacts None III\. KEY FACTORS THAT AFFECTED IMPLEMENTATION AND OUTCOME A\. KEY FACTORS DURING PREPARATION The impetus for the project emerged from the 2006 FSAP, which identified a number of weaknesses in the financial sector, and 2009 FSDP plan, which aimed to create a framework to address those weaknesses to promote a sound and well-functioning financial sector\. Given this background, project preparation was based on solid diagnostics, and involved close consultation with the BSL Governor, Deputy Governor, the broader BSL team, and development partners\. The key challenge during project preparation was to operationalize the solid diagnostics through a World Bank project and other development partners’ interventions, given the known capacity constraints\. The preparation process was robust and focused significant attention on designing robust implementation arrangements to manage the World Bank project and coordinate other donor interventions\. Prior to the development of the Project Concept Note (PCN), at least two missions were undertaken to develop the project, in addition to missions related to preparation of the FIRST funded FSDP\. Of note, the project TTL changed prior to the PCN review\. Also, of note, the project changed substantially from the pre-PCN Aide Memoire, which had the following components: i) enhancing access to financial services; ii) building financial sector reform and oversight capacity; iii) expanding the provision of long-term financing; and iv) a component that was not allocated, but meant to allow the project to be flexible to new priorities or “back-up or substitute implementation activities planned to be undertaken by other donors…” The Quality Enhancement Review (QER) Meeting for the PAD noted two important points for the purpose of the ICR: 1) that Integrated Project Administration Unit (IPAU) at MoF could support BSL if needed, this however, does not appear to have materialized\. 2) A key recommendation of the QER was to reduce the number of activities, which highlights that at this advanced stage and post review, the project still had an array of activities, and reviewers noted this\. Page 23 of 48  The World Bank Sierra Leone - Financial Sector Development Plan Support Project ( P121514 ) B\. KEY FACTORS DURING IMPLEMENTATION Factors subject to government and/or implementing entities control -FSDP Coordination Mechanisms and Leadership: A previously noted, the FSDP Governance structures never fully materialized, stripping the project of key project coordination and implementation mechanisms\. The FSSC met twice and the high-level FSCF never met\. In the absence of the FSSC, the FSDP unit reported directly to the Governor, during which time there were multiple changes in this leadership position, including gaps between\. This structure also resulted in the FSDP unit needing to coordinate with individual department heads\. In one case, this resulted in another department requesting and receiving support from UNCDF for a financial inclusion strategy, while it was also included in the restructured project; as previously noted, this resulted in the activity being dropped after project restructuring and the inability to reallocate funds\. Overall, it appears that this context made determining priorities a challenge for BSL and may have contributed to the prolonged period of the restructuring (almost 18 months) in which priorities for the project were not laid out by BSL despite WB efforts\. Lastly, there were significant delays in the signing of the IT Strategy contract\. -Human Resources and Organization Capacity: A key challenge to project implementation was the limited capacity to implement a World Bank project\. The FSDP unit was created to provide support to the broader FSDP Plan and this project and had one senior staff member for approximately the first three years of the project, then a rotation of supporting staff thereafter\. While the original project design envisioned providing a consultant for the unit, this never materialized\. The lack of the consultant is a critical part to the project commencing activities late (the first disbursement was not until over 10 months after the project began), as the unit did not have capacity and experience in implementing World Bank projects\. -Fiduciary There were two critical fiduciary challenges with BSL implementing the project\. First, payments to project consultants were consistently delayed\. For example, despite the consultants having completed the audits of the two state-owned banks and subsequently incorporating feedback of the banks into the annex of the report in early 2017, the final payment was not made until February 2018\. Procurement presented challenges throughout project implementation, from the design of Terms of Reference (TORs), to the issuance of Requests for Proposals (RFP), to attracting qualified consultants\. On the latter point, the project was unable to attract a qualified candidate for the long-term banking supervision consultant\. Furthermore, the procurement selection committee selected a firm for the baseline financial inclusion survey, which lacked the capacity to design and conduct a national representative household survey, resulting in money being spent without a useable survey\. Factors subject to World Bank control -Adequacy of Supervision: The various TTLs throughout the life of the project fielded a multitude of missions, held frequent video conferences, and were in regular correspondence via email to help supervise the project, yet missions were less frequent\. Additionally, a Short-Term Consultant (STC) was hired soon after project implementation to help support implementation\. In reviewing the project, it appears that the project could have benefited from additional supervision missions and discussing the project with the Country Management Unit (CMU); however, given issues like delays on procurement, BSL deciding on components of the restructuring, and others, it is clear that additional implementation support missions would have helped advance project implementation, but would have also had limits\. Page 24 of 48  The World Bank Sierra Leone - Financial Sector Development Plan Support Project ( P121514 ) -Adequacy of Reporting: The Implementation Status and Results Reports (ISRs) adequately and accurately report the key challenges to project implementation to the extent they are expected to\. -Changes in TTL: Throughout the project, including preparation, there were five TTLs, which may have disrupted implementation, due to time required for new TTLs to get up to speed on project opportunities and hurdles and build relationships with clients\. During the ICR mission, BSL noted that this presented a challenge for project implementation\. Factors outside the control of government and/or implementing entities -Ebola: As noted throughout this ISR, the outbreak of Ebola completed stalled project implementation for at least one year, as it precluded the ability to get consultants in country to facilitate implementation and the ability to sign contracts for future implementation with such uncertainty as to the severity and duration of the outbreak\. IV\. BANK PERFORMANCE, COMPLIANCE ISSUES, AND RISK TO DEVELOPMENT OUTCOME A\. QUALITY OF MONITORING AND EVALUATION (M&E) M&E Design The original project’s M&E Framework lacked clear linkages between activities, intermediate results, PDOs/ PDO indicators, and ultimately does not properly assess progress towards the achievement of the PDOs as they are not linked to the Framework\. As previously noted, there is no explicit theory of change, which traces the causal relationship between project activities, project outputs, and PDOs (unpacked from the PDO) as captured by PDO indicators\. In the case of the original project design, the lack of a theory of change appears to have impacted the construction of a results framework whereby the PDO indicators do not accurately capture or serve as accurate proxies for the PDOs\. Furthermore, some indicators (e\.g\., Compliance with BCPs and increase in MSME finance) were clearly dependent on activities to be supported by other donors\. As a consequence, the M&E design does not have the proper PDO indicators, which made it difficult to use them to assess progress on the achievement of the PDOs\. Second, there is no articulated connection between the PDO indicators and the multitude of intermediate results\. While this connection can be inferred to some extent, this relationship should be clearly articulated to accurately assess whether achievement of intermediate indicators ultimately helped achieve the PDOs as captured by the proxy variable PDO indicators (which themselves were not robust as noted above)\. Furthermore, there is no articulated connection between all project activities and the intermediate indicators, and it appears not all project activities are captured in the intermediate indicators\. For example, many of the critical activities of the project that relate to strengthening of the capacity of BSL which would have had direct implications for implementing the project (e\.g\., project management and procurement) do not appear to be captured in the Results Framework’s intermediate results\. With the project restructuring, the new project activities supported the PDO, but the linkages between intermediate results and PDO indicators remained unclear\. Additionally, given that the project ultimately did not Page 25 of 48  The World Bank Sierra Leone - Financial Sector Development Plan Support Project ( P121514 ) support the development of a credit registry or bad debtor base nor a collateral registry, these two PDOs should have been dropped, as any observed changes to them, is not attributable to the project\. M&E Implementation M&E data was collected throughout the life of the project and appears to accurately capture updates, where possible (see previous section)\. It should be noted, however, that some updates such as the implementation of a bad debtor database, collateral registry, or legislation such as the New Central Bank Act being signed in law are not attributable to the project, as these were not supported by the project\. M&E Utilization Slow progress on project implementation is clearly noted throughout the project’s ISRs in the M&E section\. Generally, there appears to be a strong correlation between the M&E framework inputs, the analysis in the ISRs on project implementation, and the project ratings\. The combination of these three factors appears to have been instrumental in supporting the case for project restructuring\. Justification of Overall Rating of Quality of M&E Rating: Modest Per the ICR guidelines, this overall quality rating of the project’s M&E Framework is rated as modest given the Framework’s significant design shortcomings, but its regular updating and correlation with ISR analysis and project implementation\. B\. ENVIRONMENTAL, SOCIAL, AND FIDUCIARY COMPLIANCE As noted and explained in greater detail in section 3, there were fiduciary challenges with BSL implementing the project, delay in payments to consultants, and excessive time on procurement for project activities\. C\. BANK PERFORMANCE The project was developed in close consultation with counterparts\. While the project targeted the key issues in Sierra Leonean financial sector after the civil war, the project design was too ambitious given key issues like capacity, frequent changes in BSL leadership, and the extent of challenges in the sector, among others\. While the project theoretically had adequate risk mitigation efforts, successful project implementation was too heavily conditional on these, and as many appear to have never panned out such as those on building BSL capacity to implement the project, implementation suffered greatly\. In this context, a number of fiduciary issues resulted, including payment and procurement delays\. Ebola did delay project implementation for a year, but it appears that the aforementioned challenges largely influenced project implementation\. At the same time, World Bank supervision of the project was robust and without which the project would most likely not even have accomplished what it was even able to\. Yet, more supervision missions may have helped advance implementation\. Page 26 of 48  The World Bank Sierra Leone - Financial Sector Development Plan Support Project ( P121514 ) Quality at Entry Post conflict, the Sierra Leonean financial sector was in dire need of broad and far reaching reforms, infrastructure, and capacity building of the supervisors (BSL) and private sector\. In this respect, the project proposed to address such issues and many of its unimplemented actions are still very relevant and needed in the financial sector\. Given the challenges in the sector, the proposed activities represented straight forward World Bank interventions that had the potential to achieve the desired results and for reasonable values\. While this project did not contain components to directly impact poverty alleviation and key groups like women or the poorest of the poor, its proposed interventions are critical prerequisites to a sound and stable financial sector and intermediation, which are critical to flourishing businesses, the ability to save, and consumption, among others; all of which ultimately have critical implications for poverty alleviation and promoting socio-economic well-being\. From the fiduciary standpoint, the PAD correctly notes that BSL did not have the requisite capacity to manage procurement on the project\. The initial approach was to have the procurement led by the respective departments in BSL, have Ministry of Finance and Economic Development (MOFED) provide back up support, and to have BSL staff trained in procurement\. As previously noted, procurement was a challenge in the project despite training, and significantly delayed project implementation throughout the course of the project\. Similarly, the PAD notes that BSL had limited capacity to implement the project\. The plans to contract a long-term resident consultant, funded by GIZ, to support implementation, never materialized\. Additionally, project-funded short-term trainings and study tours did not necessarily facilitate implementation on a day to day basis\. Hence, while risks related to project implementation (including procurement) capacity were well documented in the PAD, mitigation measures were insufficient, nor were adequate adjustments made to provide capacity in project management\. Finally, as noted in the M&E assessment, the M&E framework before and after project restructuring needed to be bolstered\. Quality of Supervision As previously noted, World Bank supervision of the project was robust, with TTLs fielding regular missions and maintaining frequent contact with BSL through regular video conference calls and email; however, additional supervision, including more missions and mobilizing local staff to support implementation between missions, may have helped advance implementation\. In its supervision work, the various teams carried out extensive due diligence of fiduciary aspects, ranging from reviewing procurement plans, updating the M&E Framework and completing ISRs, updating project financials, urging BSL to speed up the payment of consultants and procurement process, and reviewing the relevancy of capacity building efforts\. In this process and the status of project implementation, the team was very candid with the client on these issues, which at time caused some tension\. The World Bank continued this close cooperation with the client leading up to project closure and immediately after, such as following up with the payments to consultants, helping BSL launch the geospatial mapping study, and helping BSL to begin thinking about the contents of a new investment project that builds off the lessons learned from this project\. While frequent changes in TTLs did present challenges to the client, the ICR finds that the changes were managed effectively through handover and strong documentation of project implementation\. Page 27 of 48  The World Bank Sierra Leone - Financial Sector Development Plan Support Project ( P121514 ) Bank supervision played an instrumental role in the project’s main achievements, including mobilizing implementation support for the modern payment systems financed by AfDB and forging agreement with authorities to include the diagnostics of the two state-owned banks in the October 2016 restructuring\. While both of these activities were not planned in the PAD, they emerged as opportunities during implementation\. Mobilizing support for these activities ensured that the project remained relevant to the changing context in the financial sector\. Without strong Bank engagement and dialogue with client to identify solutions and mobilize project support in a timely manner, these project achievements may have been missed opportunities\. Justification of Overall Rating of Bank Performance Rating: Moderately Satisfactory In summary, while the project rightfully aimed to address the key issues facing the financial sector with technical interventions, its design was overambitious given the number of risks identified in the design and others in a post conflict context\. At the same time, it is clear that the World Bank’s supervision efforts contributed to many of the project achievements and ensuring continued relevance of the project despite significant changes in context\. In short, the project had key design flaws and many risks identified in the PAD did materialize, but robust supervision efforts contributed to the project’s achievements\. D\. RISK TO DEVELOPMENT OUTCOME While the project achieved limited successes, these appear to stand to have a lasting impact in bolstering the financial sector\. In payment systems, the project helped operationalize and develop the rules and procedures for RTGS, ACH, and SSS, which will continue to play an important part in facilitating the settlement of interbank transfers, payments, and possibly even more so if the Government moves to digitize government payments\. Additionally, the various studies/strategy conducted under the project are having a significant impact on financial sector development\. The IT Strategy is guiding BSL’s IT department’s efforts, while the HR Review is helping BSL refine its structure, promoting key policies like the establishment of a second Deputy Governor\. Similarly, while the diagnostics faced some challenges in being mainstreamed into BSL’s policy efforts, it is clear that they helped elevate the dialogue surrounding these institutions’ risk to financial stability, and ultimately addressing these institutions challenges was adopted as a structural benchmark in the IMF Program during the time of project closure\. The FSDP assessment has also provided a critical reflection on the progress made on implementing the broader Financial Sector Development Plan\. Lastly, the geospatial mapping study was recently launched by the Governor and Deputy Governor and serves not only to inform BSL policy, but it is a public good that lays out the business case for financial institutions to serve non- or underserved areas\. Furthermore, the mapping is helping to inform the development of a new World Bank investment project\. Conversely, the major output that faces risk of not having a lasting development impact is that of the array of the short-term trainings and study tours, for which 14\.4 percent of disbursed project funds were used\. Page 28 of 48  The World Bank Sierra Leone - Financial Sector Development Plan Support Project ( P121514 ) V\. LESSONS AND RECOMMENDATIONS The project offers a number of valuable lessons not just for future projects in Sierra Leone, but elsewhere\. In terms of design, the project demonstrated the importance of having a strong champion and an effective governance structure\. It is clear that the lack of a FSDP governance structure and frequent changes in BSL leadership had a significant impact on implementation\. Particularly, for projects with components across multiple BSL departments, but also with multiple financial sector stakeholders, there is a need to have an effective governance structure with an FSSC with direct lines of communication to decision makers, who in turn provide timely direction during project design and implementation\. The absence of an effective governance structure contributed to slow implementation and failure to correct course post mid-term review\. Second, project design should take into account client capacity\. FSDP was overly ambitious and should have focused on a narrower set of objectives\. Despite the country’s vast needs in the financial sector at appraisal, better prioritization and sequencing of reforms would have contributed to more effective implementation\. Future projects could consider tackling broad reform efforts through a series of projects, instead of trying to accomplish too much in a single project\. Further, support should be focused on areas where the World Bank has the relevant expertise and government ownership is strong\. Third, the project had a need for robust implementation capacity in the implementing unit, which largely seems to not have occurred beyond some short trainings\. Ultimately, making successful project implementation conditional on capacity building of a new unit within the scope of the project itself was risky and resulted in limited implementation\. Moving forward, priority should be given to utilizing units with project management experience in implementing such projects, especially World Bank projects, and capacity building should have a sustained focus on or around implementation support, such as procurement and financial management, not only building technical capacity or funding short-term technical trainings and study tours\. Fourth, the project highlighted that traditional project supervision can only help advance implementation so much, when client capacity is weak, there is no effective governance structure to oversee implementation, and client leadership over the project is missing or frequently changing\. That said, the project highlights the need for staff working on Fragile, Conflict, and Violence (FCV) affected states to have sufficient budget and time to work on supervising such projects to advance implementation to the extent possible\. This argument also lends credence to the need for having in-country staff responsible for such projects and to ensure there are not frequent changes in the TTLs, which can diminish momentum\. Fifth, the project highlights the need for the World Bank and clients to consider a broader set of instruments to accompany an Investment Project Financing (IPF) to accomplish financial sector reform\. Long procurement delays and slow decision-making contributed to weak performance, and ultimately the failure to fully utilize available resources\. The World Bank has other instruments at its disposal, which are more appropriate in such contexts, including World Bank executed Trust Funds to help implement TA programs that can provide support in critical areas like banking supervision, regulatory frameworks, and capacity building\. Development Policy operations can also be effective in addressing key policy issues that can be challenging to address through an IPF\. Page 29 of 48  The World Bank Sierra Leone - Financial Sector Development Plan Support Project ( P121514 ) Lastly, this project highlights the need for projects to be adaptable to the changing priorities of countries, key challenges in implementation, and unexpected shocks, such as Ebola\. In any of these cases, the restructuring process should be streamlined to ensure it is done in a timely manner, so as to not become outdated or incapable of being successfully implemented\. \. Page 30 of 48  The World Bank Sierra Leone - Financial Sector Development Plan Support Project ( P121514 ) ANNEX 1\. RESULTS FRAMEWORK AND KEY OUTPUTS A\. RESULTS INDICATORS A\.1 PDO Indicators Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Indicator One: The Doing Text 0 In line with SSA In line with SSA 0 Business Depth of Credit average (yr\. 4) Average InformationIndex is in line (DB 2015 4\.5 percent ) with Sub-Sahara Africa average SSA Average = 3 (Source: DB 2018) 14-Apr-2011 30-Nov-2017 17-Oct-2017 30-Nov-2017 Indicator Two: effective Text No collateral regisrry 15% (yr\. 4) Collateral registry is Collateral registry implementation of the operational launched in Dec\. 2016 Page 31 of 48  The World Bank Sierra Leone - Financial Sector Development Plan Support Project ( P121514 ) collateral registry (demonstrated by the supporting MSME finance registration of at least five security interests (since its inception) and the receipt of at least five inquiries from financial institutions (since its inception)\. 14-Apr-2011 30-Nov-2017 17-Oct-2017 30-Nov-2017 Indicator Three: Text No framework Yes Yes No Acomprehensivepayment system policyand 14-Apr-2011 30-Nov-2017 17-Oct-2017 30-Nov-2017 regulatoryframework has beenestablished\. Comments (achievements against targets): Not achieved\. The project did not fund a bad debtor base or an information bureau, so any observed impact is not attributable to the project\. A\.2 Intermediate Results Indicators Component: Component 1: Enhancing access to financial services Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion indicator One: Text 0 0 In line with SSA 0 CreditInformation average Infrastructure Page 32 of 48  The World Bank Sierra Leone - Financial Sector Development Plan Support Project ( P121514 ) SSA Average = 3 (Source: DB 2018) 14-Apr-2011 30-Nov-2017 30-Nov-2017 30-Nov-2017 Intermediate Text 0 0 at least five 5 security 107 Resultindicator Two: interests (since its security interests registered inception) with the collateral registry (MSME finance) 14-Apr-2011 30-Nov-2017 30-Nov-2017 30-Nov-2017 indicator Three: inquiries Text US$0 0 receipt of at least five 62 to the collateral registry inquiries to the received from financial collateral registry institutions (MSME from financial finance) institutions (since its inception) 14-Apr-2011 30-Nov-2017 30-Nov-2017 30-Nov-2017 Comments (achievements against targets): Not achieved\. The project did not fund a bad debtor base or an information bureau, so any observed impact is not attributable to the project\. Component: Component 1: Enhancing access to financial services Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion indicator One: Text 0 0 In line with SSA 0 Page 33 of 48  The World Bank Sierra Leone - Financial Sector Development Plan Support Project ( P121514 ) CreditInformation average Infrastructure SSA Average = 3 (Source: DB 2018) 14-Apr-2011 30-Nov-2017 30-Nov-2017 30-Nov-2017 Intermediate Text 0 0 at least five 5 security 107 Resultindicator Two: interests (since its security interests registered inception) with the collateral registry (MSME finance) 14-Apr-2011 30-Nov-2017 30-Nov-2017 30-Nov-2017 indicator Three: inquiries Text US$0 0 receipt of at least five 62 to the collateral registry inquiries to the received from financial collateral registry institutions (MSME from financial finance) institutions (since its inception) 14-Apr-2011 30-Nov-2017 30-Nov-2017 30-Nov-2017 Comments (achievements against targets): Not achieved\. The project did not fund a bad debtor base or an information bureau, so any observed impact is not attributable to the project\. Unlinked Indicators Indicator Name Unit of Measure Baseline Original Target Formally Revised Actual Achieved at Page 34 of 48  The World Bank Sierra Leone - Financial Sector Development Plan Support Project ( P121514 ) Target Completion Special diagnostics of two Text No diagnostic 0 Two reports Draft report delivered, state-owned banks shared with WB in (completion of special June 2017\. diagnostic reports on two state-owned banks (Sierra 28-Sep-2016 30-Nov-2017 30-Nov-2017 30-Nov-2017 Leone Commercial Bank and Rokel Commercial Bank) and their submission to BS) Comments (achievements against targets): As noted in the ICR proper, these diagnostics appeared critical to elevating the dialogue surrounding these two institutions\. Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion adoption of the financial Text no strategy 0 adopted strat financial inclusion inclusion strategy by cabinet strategy adopted by BSL in Dec\. 2016 28-Sep-2016 30-Nov-2017 30-Nov-2017 23-Jan-2017 Comments (achievements against targets): : Achieved, but not attributable to the project\. The strategy was dropped after the project restructuring as another BSL unit (not FSDP) requested and received support from UNCDF for a financial inclusion strategy\. Note to Task Teams: End of system generated content, document is editable from here\. Please delete this note when finalizing the document\. Page 35 of 48  The World Bank Sierra Leone - Financial Sector Development Plan Support Project ( P121514 ) B\. KEY OUTPUTS BY COMPONENT Note to Task Teams: Organize the indicators and outputs around each Objective/Outcome captured in the PDO statement\. Please delete this note when finalizing the document\. Objective/Outcome 1 Enhancing access to financial services 1\. The Doing Business Depth of Credit Information Index is in line with Sub-Sahara Africa average Outcome Indicators 2\. Effective implementation of the collateral registry supporting MSME finance 1\. Credit Information Infrastructure 2\. Security interests registered with the collateral registry 3\. Inquiries to the collateral registry received from financial Intermediate Results Indicators institutions\. 4\. Adoption of the financial inclusion strategy by cabinet\. 1\. Implementation support for Real Time Gross Settlement System (RTGS), Automated Clearing House (ACH), and Securities Key Outputs by Component Settlement System (SSS), and core banking application systems (linked to the achievement of the Objective/Outcome 1) 2\. Geospatial mapping of financial service access points Objective/Outcome 2 – Building financial sector reform and oversight capacity of the BSL 1\. A comprehensive payment system policy and regulatory framework has been established Outcome Indicators Page 36 of 48  The World Bank Sierra Leone - Financial Sector Development Plan Support Project ( P121514 ) 1\. Special diagnostics of two state-owned banks (completion of special diagnostic reports on two state-owned banks (Sierra Intermediate Results Indicators Leone Commercial Bank and Rokel Commercial Bank) and their submission to BS) 1\. Capacity Building for BSL and FSDP unit, plus FSDP unit assets 2\. HR Review Key Outputs by Component 3\. IT Strategy (linked to the achievement of the Objective/Outcome 2) 4\. Diagnostics of 2 state-owned banks Page 37 of 48  The World Bank Sierra Leone - Financial Sector Development Plan Support Project ( P121514 ) ANNEX 2\. BANK LENDING AND IMPLEMENTATION SUPPORT/SUPERVISION Note to Task Teams: The data in this section has been pre-populated for the first time for your convenience, but it is completely editable\. Please delete this note when finalizing the document\. A\. TASK TEAM MEMBERS Name Role Preparation Supervision/ICR Michael Corlett Task Team Leader(s) Innocent Kamugisha Procurement Specialist(s) Sydney Augustus Olorunfe Godwin Financial Management Specialist Magalie Pradel Team Member Salieu Jalloh Team Member Demba Balde Social Safeguards Specialist Daniel Rikichi Kajang Team Member Cedric Mousset Team Member Alice Dubiwa Zanza Team Member Sheikh Alhaji Yayah Sesay Team Member Nicholas Timothy Smith Team Member Balakrishnan Mahadevan Team Member Anita Bimunka Takura Tingbani Environmental Safeguards Specialist Page 38 of 48  The World Bank Sierra Leone - Financial Sector Development Plan Support Project ( P121514 ) B\. STAFF TIME AND COST Staff Time and Cost Stage of Project Cycle No\. of staff weeks US$ (including travel and consultant costs) Preparation FY10 1\.250 62,866\.25 FY11 24\.556 146,447\.26 FY12 0 4,442\.67 FY13 0 741\.63 Total 25\.81 214,497\.81 Supervision/ICR FY11 0 14\.25 FY12 26\.376 123,168\.63 FY13 23\.183 118,621\.51 FY14 32\.632 106,903\.51 FY15 19\.715 88,557\.26 FY16 20\.545 125,120\.75 FY17 15\.034 98,915\.61 FY18 15\.548 110,861\.24 Total 153\.03 772,162\.76 Page 39 of 48  The World Bank Sierra Leone - Financial Sector Development Plan Support Project ( P121514 ) ANNEX 3\. PROJECT COST BY COMPONENT Amount at Approval Actual at Project Percentage of Approval Components (US$M) Closing (US$M) (US$M) Component 1: Enhancing 1\.6 655,605\.15 16\.39% access to financial services Component 2: Building financial sector reform and 2\.4 0 1,591,382\.75 39\.78% oversight capacity of the BSL Total 4\.00 2,246,987\.9 56\.17% Page 40 of 48  The World Bank Sierra Leone - Financial Sector Development Plan Support Project ( P121514 ) ANNEX 4\. EFFICIENCY ANALYSIS N/A Page 41 of 48  The World Bank Sierra Leone - Financial Sector Development Plan Support Project ( P121514 ) ANNEX 5\. BORROWER, CO-FINANCIER AND OTHER PARTNER/STAKEHOLDER COMMENTS The Borrower produced a report entitled “Comprehensive Stock-Taking of The Implementation and Impact of The Financial Sector Development Plan (FSDP) and FSDP Implementation Program” and was carried out by A2F Consulting\. Below are relevant passages from the Executive Summary, the Highlights and Key Achievements, and Assessment of Project Management Structure, from BSL’s stocktaking of progress made on the Financial Sector Development Plan, including its implementation, which was the aim of the World Bank FSDP project, and which is also discussed\. Executive Summary13 The Financial Sector Development Plan (FSDP) is a comprehensive multi-year, interagency program approved in late 2009 with the aim of providing a framework for creating a sound, diversified, responsive and well- functioning financial system that would provide appropriate support to productive activities, thereby contributing to economic growth and poverty alleviation\. It was designed under the leadership of the Bank of Sierra Leone with the support of the FIRST Initiative, The World Bank Group, The German Development Cooperation and in collaboration with the Sierra Leone Business Forum\. The objective was to address the issues identified by FSAP diagnostic carried out by the IMF and World Bank in 2006\. The World Bank was the lead sponsor, but other development partners included the German Development Cooperation, the African Development Bank, CordAID, UNCDF, UNDP and IFAD\. This report takes stock and presents an assessment of progress made on implementing the FSDP\. Recommendations outlined by the FSDP have been categorized under 21 subgroups that describe the intended outcome\. The stock-taking exercise aims to assess the effectiveness, relevance, and associated impacts of work carried out under the FSDP in meeting the intended outcomes\. The assessment is based on insights from a field visit carried out by A2F Consulting from September 18-29th, during which semi-structured interviews were carried out with key stakeholders at BSL and all other agencies in charge of implementing project components such as SLICOM, NASSIT and the Stock Exchange, as well as other stakeholders such as The Sierra Leone Bankers’ Association and SLAMFI\. Extensive data analysis was also carried out as well as secondary research\. The evaluation team is grateful for critical logistical support provided by BSL, in particular the FSDP Secretariat\. Twin external shocks in the form of the Ebola epidemic and a collapse in iron ore prices weakened Sierra Leone’s economy over the implementation period further exposing the fragility of the financial system\. During the design and early implementation stages, the Sierra Leone economy was enjoying robust economic activity on the back of its iron ore deposits and foreign investment\. The onset of the Ebola epidemic in 2014 and the commodity price bust led to negative growth and pullback in already low credit to the private sector\. Lower growth and foreign receipts resulted in twin deficits (current account and fiscal), filtering through the financial sector\. The large role of the state in the financial sector combined with weak governance structures of state-owned institutions, domestic financing of government budgets, and depreciation of the Leone have led to rampant inflation, crowding out in bank lending, and exacerbated stability risks\. Against this backdrop, the FSDP has made significant achievements\. Overall, activities geared towards updating regulatory framework, payment systems, and improving financial infrastructure have been the most effective, 13 Note, FSDP is in reference to the FSDP Plan and not the project\. Page 42 of 48  The World Bank Sierra Leone - Financial Sector Development Plan Support Project ( P121514 ) relevant, and impactful\. Significant achievements have been made on the legislative front improving the regulatory and enabling environment\. Several acts were passed over the implementation period, including the Borrowers and Lenders Act which, among others, established updated framework for credit agreements including collateral registry for moveable properties and updates to use of credit information\. Critical elements of the national payment system were launched and now operating including the ACH and RTGs\. New credit information structures and collateral registry are seeing increasing usage by lenders\. Some improvements have also been made to BSL supervision in terms of software upgrades and implementing updated prudential standards Despite these achievements, overall objectives of the FSDP have gone largely unmet\. Interventions to develop capacity in the banking sector as well as BSL’s financial stability division have been negligible which is evident in the negative real growth rates of private sector credit and poor portfolio quality of the banking sector\. Meaningful progress on increasing efficiency of the two struggling government-controlled commercial banks (RCB and SLCB), a key initiative of building banking system capacity, has proved elusive\. Similarly, there has not been much movement on building capacity in the MFI sector following termination of the MITAF and strategies to leverage community banks and MFIs for agriculture lending seem misplaced\. An APEX Bank has been set up to supervise community banks but supervision capacity is limited\. Elsewhere, supervision capacity of the SLICOM, the insurance supervisor, has not been strengthened by FSDP nor has there been much activity on strategies supporting remaining objectives\. A more effective project management structure would have ensured closer monitoring and forward-looking views on potential risks\. Broadly, implementation has suffered from capacity issues and lack of robust project management framework\. None of the governance instances proved effective in carrying out their roles and did not meet regularly\. The project had foreseen the elaboration of a Change Management component to facilitate project implementation\. This also failed to materialize\. The World Bank explicitly foresaw several risks, but the subsequent support on implementation was inconsistent, leading to spotty monitoring of FSDP activities and poor reporting and tracking against the results’ framework\. FSDP strategies that encompassed coordination and management of intervention activities across jurisdictions outside the direct influence of the BSL, involving political uncertainty for advancing reforms, and coordination with other donor projects were more difficult to implement\. Looking ahead, a future FSDP II should focus on a select few areas to achieve the original objectives and simplify institutional requirements to support implementation\. An overarching theory of change should be elaborated to clearly describe the vertical logic or causal chain from inputs to outputs and outcomes to long-term impact, and it should ensure that the activities selected are those likely to lead to expected outputs, outcomes, and impacts\. Among the recommended areas of focus, the next phase of the FSDP should develop targeted interventions on women MSMEs and leveraging digital finance, addressing the role of the state in the financial sector, and utilizing PPPs with external support to mobilize long-term finance\. An in-depth functional review of BSL is also strongly recommended to be an integral part of any future program\. Highlights & Key Achievements FSDP has supported important updates to the national payment system setting the foundation for growth in interbank transactions and digital finance\. Over the implementation period, two key components of the NPS, the RTGS and ACH, were installed and operational\. The RTGS will be critical to reducing settlement risks, facilitating growth in interbank transactions\. Key informant interviews indicate that the ACH is having a positive effect on Page 43 of 48  The World Bank Sierra Leone - Financial Sector Development Plan Support Project ( P121514 ) electronic-based transactions, particularly in processing local bank payments, and should support increases in innovative e-finance products\. These are essential building blocks for developing a robust payment ecosystem, and one of the intervention objectives of GoSL’s recently launched Financial Inclusion Strategy 2017- 2020\. Further work is needed on developing a framework for international, local electronic and mobile payments systems and providing effective oversight and enabling environment for new technologies\. Significant achievements have also been made on the legislative front improving the regulatory and enabling environment\. Several acts were passed over the implementation period, including Borrowers and Lenders Act, which among others, established an updated framework for credit agreements including collateral registry for moveable properties and updates to use of credit information\. Additionally, the Act led to the creation of an autonomous financial intelligence unit (FIU), charged with oversight on AML/CFT issues including enforcement powers\. A credit reference act was passed in 2011 and the BSL has operationalized an interim credit bureau which is seeing increasing usage by banks for large borrowers\. Credit information may serve as a useful additional data set for the BSL to augment supervision analysis\. Further work on consolidating data of all collateral registries under one roof was mentioned as a strong desire by the banking community\. Some improvements have been made to BSL supervision in terms of software upgrades and implementing updated prudential standards\. BSL adopted and updated prudential norms such as liquidity and capital requirements, improved off-site technical capacity by upgrading reporting via software installation, and developed new reporting tools and formats\. The BSL has reallocated resources and oversight capabilities on deposit-taking institutions\. Additional work is needed to improve the interface between off-site and onsite, including feedback loops and sound intervention strategies\. An overarching risk assessment framework with risk- rating techniques and tools will be needed to increase effectiveness of supervision\. This is particularly important as BSL moves towards risk-based supervision\. Signs of growth in outreach by the MFI sector may have more to do with international backing of a select few market leaders, but BSL licensing of deposit-taking has been a positive development\. The BSL updated operating guidelines, began licensing deposit-taking institutions, and refocused supervision efforts on deposit-taking MFIs\. Broadly, these efforts appear to be catalyzing further development in the sector in terms of formalization and transparency\. There has not been much movement on building capacity in the MFI sector following the termination of the MITAF, but international partners have stepped in for a select few of the market leaders\. Loan portfolios, borrowers, and savers have increased over the implementation period\. An APEX Bank has been set up to supervise community banks, but supervision capacity is limited\. BSL is building capacity in terms of monitoring of systemic risks, but the impact on the financial system has so far been negligible\. Performance of the banking sector over the implementation period suggests a weak correlation between intervention activities and bank sector capacity\. Banks have struggled to grow loan portfolios, remained concentrated in a few sectors, and currently hold a substantial amount of assets in government treasuries, the yields of which are crowding out private sector credit\. The composition of assets held in investments has grown suggesting high liquidity; however, most of this consist of illiquid government securities\. NPLs remain high and the sector has required recapitalization plans in 2014\. Efforts to develop capacity to oversee and analyze financial stability risks failed to take root as interest and commitment waned\. While information sharing between NASSIT, SLICOM, and BSL exist, these arrangements are not sufficiently formalized nor is there frequent coordination to assess systemic risks\. Page 44 of 48  The World Bank Sierra Leone - Financial Sector Development Plan Support Project ( P121514 ) Meaningful progress on increasing efficiency of the two government-controlled commercial banks (RCB and SLCB), a key initiative of building banking system capacity, has proven elusive\. These two banks, representing approximately 28% of the total banking sector assets, have been weighed down by rising non-performing loans and poor financials\. Capital adequacy, asset quality, profitability, and efficiency indicators of the government- owned banks pale in comparison to the averages of the next top 5 banks by assets (Table 8)\. The real risk, however, is in potential contagion given interconnectedness with other banks and financial institutions and the real sector\. Financial stability, a key component of the FSDP, has not been adequately addressed by activities carried out thus far, and capacity building is very much needed to operationalize the financial stability unit\. Minimal work has been carried out on strengthening contractual savings, mobilizing long-term finance, and other enabling environment enhancements\. This objective received minimal focus, as several strategies have yet to be initiated\. SLICOM has not been a recipient of much technical assistance which has left it with only internal resources to meet the stated objectives\. Key areas that have not been sufficiently addressed are updates to supervision methodology and framework, IT infrastructure, software, and lack of resources to redesign and implement relevant prudential norms and regulations\. External developments have affected the insurance sector, which has been battered by mudslides, Ebola outbreak, and slowdown in economic growth\. Recommended strategies to strengthen links between MFIs, community banks, and rural and agriculture lending have not been fully pursued\. While these institutions continue to have a significant presence in rural areas (compared to commercial banks), there has not been a large push to build capacity nor to coordinate with stakeholders on effective strategies to offer suitable financial services in these areas\. There has not been much movement on building capacity in the MFI sector following termination of the MITAF\. Expertise supported by the MITAF was not institutionalized to ensure continuity of learning and knowledge transfer\. Similarly, there has not been any movement on the recommended use of a guarantee facility to extend loans to the rural and agriculture sectors\. Links between commercial banks and MFIs remain elusive within the context of long-term borrowings\. Overall, results of the FSDP are mixed, whereas project implementation has suffered from capacity issues and a lack of robust project management framework\. Despite the FSDP SP, resources have remained constrained and funding delayed affecting coordination of all FSDP strategies and carrying out proper monitoring and evaluation procedures and processes\. The project had foreseen several risks, but support on implementation was inconsistent and inadequate leading to spotty monitoring of FSDP activities and poor reporting and tracking against the results framework\. FSDP strategies that encompassed coordination and management of intervention Page 45 of 48  The World Bank Sierra Leone - Financial Sector Development Plan Support Project ( P121514 ) activities across jurisdictions outside the direct influence of the BSL, involving political uncertainty for advancing reforms, and coordination with other donor projects were more difficult to implement\. Furthermore, there have been issues with regards to disbursement of FSDP SP funds to advance the work\. Assessment of Project Management Structure The governance structure of the FSDP is as follows: The Financial Sector Consultative Forum (FSCF) was set-up and included representatives from the Bank of Sierra Leone, the Ministry of Finance and Economic Development, Ministry of Trade & Industry, AGO, Ministry of Agriculture, and Chief Executive Officers of other stakeholder institutions and representatives of the Development Partners\. It is chaired by the Governor of the BSL and is responsible for the overall strategic direction and oversight of the program\. The role of the FSCF was to review policy and legislative proposals under the FSDP and submit them to the government for consideration\. It is also tasked to advise the government on potential implementation issues of the FSDP, as well as the main interface between the Government and the Development Partners\. The direct oversight of project implementation was entrusted to a Financial Sector Steering Committee (FSSC)\. The FSCC is made up of the Governor of BSL (Chair), the Deputy Governor, Head of the FSDP Secretariat, Heads of Departments of the BSL, Heads of Technical Teams from all Implementing Agencies and representatives of the donors to the multi-donor fund\. The FSDP Secretariat houses the team in charge of day to day project management, including project coordination, financial management, and procurement\. The Secretariat Head is responsible to the FSSC for overall implementation of the FSDP and in particular ensuring that technical teams are established and have clear terms of reference, that consultant are mobilized and work effectively and efficiently, and that the FSSC and FSCF function effectively\. This project management structure did unfortunately not work as originally intended\. Neither the FSCF nor the FSCC did meet in a regular manner\. The FSCC was created in 2011, but held only two meetings, the last being in 2013\. The meetings were discontinued, since it proved difficult to bring the relevant people together for such meetings on a regular basis\. The project had foreseen the elaboration of a Change Management component to facilitate project implementation\. This also failed to materialize\. The monitoring and evaluation function has been Page 46 of 48  The World Bank Sierra Leone - Financial Sector Development Plan Support Project ( P121514 ) very spotty and focused almost exclusively on BSL activities\. Quarterly FSDP progress reports were supposed to be produced and reviewed during Steering Committee meetings\. The last such report shared with the evaluator was completed in December 2012\. The World Bank recognized the limited capacity of BSL to implement the project and financed the FSDP SP to aid in building capacity\. Furthermore, the potential political obstacles in some of the reforms were highlighted as was the interdependency of recommended strategies on other donor projects including AfDB WAMZ payment system project, MITAF activities in the MFI sector, GIZ and IMF TA for banking supervision and IFC TA for MSME finance\. BSL reportedly made a request to the World Bank to hire a consultant to build-capacity in project management as foreseen in the original project design\. Unfortunately, this support never materialized in the wake of two changes of task managers from the side of the World Bank\. The need for such technical support was clearly identified in the project appraisal document of the World Bank support project\. At that time, the World Team team indicates that “the broad, complex reform undertaking of the FSDP considerably challenges BSL capacity and limited resources”\. As mitigation measure, it was recommended that the World Bank project supports the strengthening [sic] of reform governance and invests in BSL capacity\. While the first World Bank task manager agreed with such a need, the second did apparently not see it as necessary\. The World Bank offered some clinics and training workshops, but these have clearly been insufficient\. It is also worth noticing that the request is not reported in any project document availed to the evaluator\. It however should have been noticed during project monitoring visits by the World Bank Team\. Another project management issue is the fact that disbursement from donor funds have also reportedly lagged behind forecasts in spite of significant progress on a number of components\. The AfDB project closed in 2015, and the financial data could not be seen by the evaluator\. In the case on the World Bank, the financial reporting seems to have been done in a regular manner probably by the World Bank Team itself\. The project status reports available online indicate that a significant chunk of the grant resources provided by the World Bank to support the FSDP remain unused\. Discussions with stakeholders suggest that BSL used internal resources to fund most initiatives instead of going through the “complex” administrative processes of the World Bank\. Page 47 of 48  The World Bank Sierra Leone - Financial Sector Development Plan Support Project ( P121514 ) ANNEX 6\. SUPPORTING DOCUMENTS (IF ANY) A2F Consulting, Comprehensive Stock-Taking of the Implementation and Impact of the Financial Sector Development Plan (FSDP) and FSDP Implementation Program, 2017\. Bank of Sierra Leone, Strategy for National Financial Inclusion 2017-2020, 2016\. Republic of Sierra Leone, Financial Sector Development Plan, 2009\. World Bank, Financial Sector Development Plan Support Project (FSDPSP), Project Appraisal Document, 2011\. World Bank, Restructuring Paper on a Proposed Project Restructuring of Sierra Leone - Financial Sector Development Plan Support Project, 2016\. Page 48 of 48

APPROVAL

P174778

 The World Bank The Resilient Kerala Program for Results (P174778) Program Information Document (PID) Concept Stage | Date Prepared/Updated: 27-Oct-2020 | Report No: PIDC234662 Oct 12, 2020 Page 1 of 12  The World Bank The Resilient Kerala Program for Results (P174778) BASIC INFORMATION A\. Basic Program Data OPS TABLE Country Project ID Parent Project ID (if any) Program Name India P174778 The Resilient Kerala Program for Results Does this operation Region Estimated Appraisal Date Estimated Board Date have an IPF component? SOUTH ASIA 10-Dec-2020 17-Mar-2021 No Financing Instrument Borrower(s) Implementing Agency Practice Area (Lead) Program-for-Results Republic of India State of Kerala Urban, Resilience and Financing Land Proposed Program Development Objective(s) To enhance the State of Kerala’s resilience against the impacts of climate change and natural disasters, including disease outbreaks and pandemics\. COST & FINANCING FIN_SRC_TABLE1 SUMMARY (USD Millions) Government program Cost 2,977\.00 Total Operation Cost 250\.00 Total Program Cost 250\.00 Total Financing 250\.00 Financing Gap 0\.00 FINANCING (USD Millions) Total World Bank Group Financing 125\.00 World Bank Lending 125\.00 Total Non-World Bank Group and Non-Client Government Financing 125\.00 Multilateral and Bilateral Financing (Concessional) 125\.00 Oct 12, 2020 Page 2 of 12  The World Bank The Resilient Kerala Program for Results (P174778) Concept Review Decision The review did authorize the preparation to continue B\. Introduction and Context Country Context 1\. India’s Gross Domestic Product (GDP) growth has slowed in the past three years, and the COVID -19 outbreak is expected to have a significant impact\. Growth has moderated from an average of 7\.4 percent during FY15/16-FY18/19 to an estimated 4\.2 percent in FY19/20\. The growth deceleration was due mostly to unresolved domestic issues (impaired balance sheets in the banking and corporate sectors), which were compounded by stress in the non-banking segment of the financial sector, and a marked decline in consumption on the back of weak rural income growth\. Against this backdrop, the outbreak of COVID-19 and the public health responses adopted to counter it have significantly altered the growth trajectory of the economy, which is now expected to contract sharply in FY20/21\. On the fiscal side, the general government deficit is expected to widen significantly in FY20/21, owing to weak activity and revenues as well as higher spending needs\. However, the current account balance is expected to improve in FY20/21, reflecting mostly a sizeable contraction in imports and a large decline in oil prices\. Given this, India’s foreign exchange reserves are expected to remain comfortable\. 2\. Although India has made remarkable progress in reducing absolute poverty, the Covid-19 outbreak has reversed the course of poverty reduction\. Between 2011-12 and 2017, India’s poverty rate is estimated to have declined from 22\.5 percent to values ranging from 8\.1 to 11\.3 percent\. Recent projections of GDP per capita growth rate indicate that as result of the pandemic, poverty rates in 2020 have likely reverted to estimated levels in 2016\. The extent of vulnerability is reflected in labor market indicators from high frequency surveys\. Data from the Centre for Monitoring Indian Economy (CMIE), shows urban households are facing greater vulnerabilities: between September-December 2019 and May-August 2020, the proportion of people working in urban and rural areas has fallen by 4\.2 and 3\.8 percentage points respectively\. Approximately, 11 and 7 percent of urban and rural individuals, identifying themselves to be employed in the recent period, have performed zero hours of work in the past week\. Short-term employment outlook is contingent on whether these temporarily unemployed workers can fully re-enter the labor force\. Overall, the pandemic is estimated to have raised urban poverty, creating a set of new poor that are likely to be engaged in non-farm sector and receive at least secondary or tertiary education, as compared to existing poorer households who are predominantly rural with lower levels of education\. 3\. Kerala has enjoyed robust economic growth, albeit below Indian average in recent years but has recorded high fiscal deficits with its public debt increasing gradually as a percent of GSDP\. Real Gross State Domestic Product (GSDP) grew by approximately 6\.3 percent on average between FY11/12 and FY18/19 (below the 7\.0 percent average for Indian states), although it has risen to 7\.4 percent in FY15/16-FY18/19\. However, due to the COVID-19 outbreak and the subsequent nationwide lockdown, the state’s economy will contract in FY20/21 and only recover gradually thereafter\. Increase in deficit and deterioration in fiscal performance was primarily driven by gradual increases in committed expenditure, especially on salaries and subsidies\. Kerala stands out, among comparable states, in terms of both (i) low Oct 12, 2020 Page 3 of 12  The World Bank The Resilient Kerala Program for Results (P174778) own-tax revenues,1 and (ii) high committed expenditures2 to GSDP\. Although the State adopted a Fiscal Responsibility and Budget Management (FRBM) Act in 2003 (including an amendment in 2017, mandating the State to maintain a fiscal deficit of no more than 3 percent of GSDP during the period from FY17/18 to FY19/20), this was of little practical effect\. Sectoral (or multi-sectoral) and Institutional Context of the Program 4\. The State of Kerala (or the State) is highly vulnerable to natural disasters and the changing climatic dynamics given its location along the coast and steep gradient along the slopes of the Western Ghats\. It is prone to a host of natural hazards such as cyclones, monsoon storm surges, coastal erosion, sea level rise, tsunami, flood, drought, lightning, landslides, land subsidence and earthquakes\. Kerala’s State Disaster Management Plan assesses 39 types of known and reported hazard types in the GoK that may turn disastrous in the event of lack of proper preparedness and risk reduction planning3\. With Cyclone Ockhi in 2017, floods and landslides in 2018, 2019 and 2020, and now the COVID-19 pandemic, Kerala has been experiencing major disaster events for four consecutive years\. The 2018 flood — the worst in nearly a century — led to widespread loss of life, property, and habitats in Kerala, causing 498 casualties with over 5\.4 million people affected with loss of assets and property and 1\.4 million people displaced, apart from financial losses of approximately US$ 3\.74 billion (Rs\. 26,720 crores)\. The impacts of the disaster highlighted the level of under-preparedness in the GoK to address natural disasters and climate change shocks\. 5\. The main vulnerabilities associated with the floods — emblematically — follow the course of the river, starting from the basins and reservoirs upstream, to the intense developments in the cities and towns midstream, through to farms and livelihoods downstream\. Addressing the underlying drivers of floods and landslides and better preparing the GoK for future disasters, therefore, follows the course of the river: upstream, through integrated water resources and reservoir management; midstream, through improved land use planning and management, infrastructure and services; and downstream, through ecologically sound agriculture and irrigation practices\. Addressing these require systemically building the capability of the GoK to carry out an integrated and coordinated set of policy, institutional and budgetary changes, over time\. They demand political will, institutional capacities, public support, and a continuous and iterative change process\. Recognizing this, the GoK sought to use the 2018 floods as “a challenge and an opportunity to rebuild the State to ensure better standards of living to all sections of the society\.â€?4 6\. The WB’s support to GoK commenced in the immediate aftermath of the 2018 floods and landslides through a strategic engagement to build multidimensional resilience in Kerala\. The foundation of the engagement was set by the First Resilient Kerala Development Policy Operation (DPO 1, US$250 million), approved in June 2019, supporting the Rebuild Kerala Development Programme (RKDP) — the GoK’s strategic and integrated roadmap for recovery, rebuilding and resilience, developed with support from the Bank\. The DPO 1 set the course for centering resilience-related policy and institutional reforms in key crosscutting areas and sectors of the economy\. It supported GoK’s efforts to improve fiscal sustainability through a variety of approaches, including levying a flood cess5 and mobilizing private finances via a masala bond\. Key policy and institutional reforms were triggered in the water-agriculture nexus to engender holistic river basin management, shift agriculture to sustainable and climate-resilient models and strengthen agriculture value chains\. 1 The main sources of own-tax revenue include the state goods and services tax, state excise, value-added tax, motor vehicles tax, stamps and registration duty, land tax and taxes on utilities\. 2 Committed expenditure includes expenditure on salaries and wages, pensions and interest\. 3 Kerala State Disaster Management Authority: Government of Kerala, State Disaster Management Plan 2016, http://sdma\.kerala\.gov\.in/publications/DMP/Kerala%20State%20Disaster%20Management%20Plan%202016\.pdf 4 The policy statement of GoK, as per Government Order G\.O\.(P)No\.16/2018/P&EA, dated November 9, 2018\. 5 A one percent ‘Kerala flood cess’ is levied on goods coming within the GST tax bracket of 12 percent, 18 percent, and 28 percent im posed on the value of supply\. A 0\.25 percent flood cess is levied on all goods coming under the fifth schedule, including gold, silver, and platinum ornaments, on the value of supply\. All services attract 1 percent cess\. Oct 12, 2020 Page 4 of 12  The World Bank The Resilient Kerala Program for Results (P174778) Increased protections were afforded to human settlements by requiring risk-informed land use planning and updating disaster management plans at various levels\. Reforms were also initiated to strengthen the resilience of critical infrastructure through multi-year capital planning, improved standards and mobilization of private sector expertise\. Finally, a dedicated institutional modality, the Rebuild Kerala Initiative (RKI), was set up to coordinate, manage and monitor the roll out of the RKDP and the DPO 1 across various government departments and agencies, and with the civil society and the private sector\. These efforts have improved the GoK’s capacity to respond to disasters and other extreme events\. In part, they allowed the GoK to tackle the 2019 and 2020 floods and landslides with much reduced loss of lives, assets and livelihoods\. 7\. The State experienced the first confirmed cases of COVID-19 in India on January 30, 2020\. High levels of urbanization and population density, tourist inflows, regular inward and outward travel of non-residents, and an aging population with co-morbidities made Kerala susceptible to infection and spread\. The GoK responded proactively through a robust response plan at the early onset of the disease, based on learnings from the Nipah virus outbreak experience in 2018 and building on the institutional and policy actions carried out under the DPO 1\. An initial spike of new COVID-19 cases occurred, beginning in late March, declining to zero daily cases by mid-May\. A second spike occurred in mid-May, primarily due to returning expatriates and migrants from other States, as the lockdown eased\. As of October 8, 2020, there have been 258,850 cases and 930 deaths\. Of this, 167,256 (64\.6 percent) cases have recovered\. Although Kerala is one of the top three States in terms of new case rate and has a high test-positivity rate (14 percent vs\. national average of 8 percent), its mortality rate (0\.4) and transmission rate (1\.55) still are on the lower side\. To deal with the COVID-19 and other disease outbreaks in the future, the GoK needs to further strengthen its disease outbreak warning and response systems, and commence recovery from the current crisis amidst serious economic and fiscal constraints\. 8\. Building on the RKDP and the DPO 1, concurrently, the engagement between the GoK and the WB in the State has both expanded and deepened\. Among the highlights of the partnership are first subnational ‘masala bond’ that raised approximately US$300 million to finance rebuilding; the RKDP Development Partners Conclave in July 2019, which elicited pledges from development partners, the private sector, and civil society; a dialog between the GoK and the International Finance Corporation (IFC) and scoping of potential IFC support to the State for climate resilient infrastructure; and advanced sector engagements in areas such as agriculture, roads, solid waste management (SWM) and water resource management (WRM) — all built around the core theme of strengthening resilience\. The close working relationship between the GoK and the Bank at multiple levels has influenced the State’s policy, institutional, and investment agenda to advance resilience to climate change impacts and natural disasters, as well as, now, disease outbreaks\. 9\. With deepened WB engagement in Kerala woven around the theme of multidimensional resilience, it has become imperative to move away from the model of standalone sector projects\. The SPF aims to provide a cohesive and strategic approach to the GoK-WB partnership in strengthening institutional, economic and social resilience of the State to the impacts of natural disasters and climate change\. The Framework is founded on Government priorities and programs outlined in the RKDP and the ‘Nava Keralam’ (New Kerala) and supports the strategic priorities of the Bank’s India Country Partnership Framework (CPF) as well as the Operational Framework for South Asia Region (SAR)\. Future Bank engagements in Kerala would be vetted against the framework of engagement\. The SPF forms the basis for collaboration with development partners and civil society, as well as to leverage resources across the WBG and to mobilize market-based resources to finance resilient development in the State\. 10\. The GoK has further deepened the institutional reforms initiated through the DPO 1, as well as including the emerging foundational and crosscutting priorities that address multidimensional resilience, such as fiscal sustainability, disaster risk financing, and public health emergency preparedness\. The COVID-19 outbreak and the State’s response further reinforced the importance of this policy and institutional agenda on resilience\. The Bank support for the second Oct 12, 2020 Page 5 of 12  The World Bank The Resilient Kerala Program for Results (P174778) phase of State Partnership is proposed as a Resilient Kerala Program for Results (PforR) operation\. 11\. The proposed Resilient Kerala PforR builds on the foundations of policy and institutional reforms initiated under the Resilient Kerala DPO 1, as well as draws on a strong TA program that lends analytical underpinnings and capacity support, all aimed at making the State more resilient to shocks of climate change, natural disasters and disease outbreaks in the longer term\. The proposed Program will be pivoted on three Results Areas (RAs): (1) building institutional capacities and systems for managing shocks from climate change, natural disasters and disease outbreaks; (2) supporting effective COVID-19 response and disease outbreak preparedness; and (3) demonstrating integrated approaches to multidimensional resilience at local level\. It will provide resources for the State to better respond to the pandemic crisis — both current episode and any future events, embed the reforms currently underway within key institutions of the Government, and — following the course of the river — pilot the roll out of an integrated resilience agenda across a major river basin\. The PforR is proposed be co-financed by the WB (US$125 million) and the AIIB (US$125 million) and complemented by the KfW through TA support and parallel financing of DPO 1\. Relationship to CAS/CPF 12\. The proposed PforR is fully aligned with the World Bank Group’s Country Partnership Framework (CPF) for India for FY18–22\. The CPF recognizes that improving DRM and resilience to climate change and improving living conditions and sustainability of cities are critical for facilitating resource-efficient growth and poverty reduction\. To enhance India’s competitiveness and enable job creation, the CPF supports enablers such as increasing resilience of the financial sector and financial inclusion and improving connectivity and logistics by making the transport systems more climate and disaster resilient\. To invest in human capital, the CPF highlights the need for improving access to rural water supply and sanitation services and the coverage and coordination of social protection systems\. As a cross-cutting theme, the CPF pursues climate smart engagement to support India’s climate change mitigation and adaptation efforts across the portfolio\. The CPF notes that addressing complex challenges requires reforms and engagement in multiple sectors to achieve success\. The proposed PforR contributes to achieving the above objectives through policy and institutional reforms as well as sectoral investments in an integrated fashion\. The proposed operation adopts the four catalytic approaches outlined in the CPF to achieve the objectives: (i) leveraging the private sector, (ii) engaging a Federal India, (iii) strengthening public sector institutions, and (iv) supporting a Lighthouse India by leveraging experience and lessons learned from other states where the World Bank has supported post-disaster recovery and reconstruction\. 13\. The proposed Program builds on the Bank’s existing and pipeline engagement in the State and catalyzes the first of its kind State Partnership\. The ongoing Kerala State Transport Project II has been restructured to support initial recovery efforts and provide TA to the RKDP\. The financing for the National Dam Rehabilitation and Improvement Project’s Phase-1 & 2, aims to improve the safety and operational performance of selected dams in participating states, including Kerala\. The National Hydrology Project aims to improve the extent, quality, and accessibility of water resources information and the capacity of WRM institutions in India, including Kerala\. The National Cyclone Risk Mitigation Project Phase II aims to reduce vulnerability to cyclone and other hydrometeorological hazards of coastal communities, including in Kerala, and increase the capacity of State entities to effectively plan for and respond to disasters\. The National Dam Safety Program, currently under preparation, aims to enhance dam safety by supporting the establishment of a robust institutional structure for dam safety at the Central and State levels, including Kerala\. The proposed Kerala Solid Waste Management Project, currently in the final stages of preparation, aims to integrate resilience principles into it and undertake investments in critical urban infrastructure\. The health reforms supported by the PforR complement the India COVID-19 Emergency Response and Health Systems Preparedness Project\. 14\. The Program is strategically linked to the adaptation commitments under India’s first Nationally Determined Oct 12, 2020 Page 6 of 12  The World Bank The Resilient Kerala Program for Results (P174778) Contributions (NDC, 2016) and the Kerala State Action Plan on Climate Change (KSAPCC, 2014)\. India has committed to better adapt to climate change by enhancing investments in development programs in sectors vulnerable to climate change, particularly agriculture, water resources, coastal regions, health and disaster management\. The NDC emphasizes the importance of the State Action Plan on Climate Change (SAPCC) put in place by 32 States and Union Territories, which attempt to mainstream climate change considerations in States’ planning process\. The KSAPCC was endorsed by the Government of India in 2014\. It aims to mainstream climate change strategies into State level planning and development processes\. The KSAPCC identifies State-specific climate change vulnerabilities, and appropriate adaptation and mitigation options\. Apart from various sectoral interventions, the KSAPCC highlights the need to have an implementation, monitoring and evaluation framework for measuring the effectiveness of its implementation\. 15\. Finally, the proposed PforR Program is designed in line with the WBG COVID-19 Crisis Response Approach Paper on Saving Lives, Scaling-up Impact and Getting Back on Track\. Operating across the three stages of Relief, Restructuring and Resilient Recovery, four thematic pillars anchor a selective WBG crisis response\. The Program will play a vital role in supporting the GoK in its Restructuring and Resilient Recovery stages, as part of the pandemic response\. Specifically, the Program will focus on strengthening health systems for pandemic readiness (RA 2) and restructuring, debt resolution and recapitalization of firms and financial institutions (RA 1) to ensure sustainable business growth and job creation (Pillar 3)\. In addition, the Program will support strengthening policies, institutions (RA 1) and investments (RA 3) for resilient, inclusive and sustainable recovery by rebuilding better in a world transformed by the pandemic (Pillar 4)\. Rationale for Bank Engagement and Choice of Financing Instrument 16\. The World Bank has been engaged with Kerala since 2018\. The first phase of engagement to strengthen transversal government systems and sector approaches at the State level to tackle natural disasters and other exogenous shocks has been successful to a notable degree, thanks to the policy and institutional shifts engendered through DPO1 and follow up GoK actions and the capacities built through a programmatic TA that is underway since 2018\. This was partly evident in the improved State level response mechanisms during the 2019 and 2020 floods and landslides and the ongoing pandemic crisis\. The next operational phase of this engagement now requires testing these shifts at the local level through an integrated approach, while continuing to consolidate and deepen the policy and institutional agenda at the State level in the most strategic and transformational areas of resilience\. This is what is being pursued through the proposed Program\. 17\. The PforR was determined to be the most appropriate financing instrument to deliver this agenda because it enables linking policy and institutional shifts at the top with real expenditures and verifiable results on the ground\. The PfR allows the Bank to recognize the GOK’s strong ownership of the Resilient Kerala reform agenda and support the Government’s own commitments on the ground through the RKDP and other ongoing sector programs\. It provides disbursement linked incentives for a range of stakeholders at multiple levels, from State level departments and technical agencies to local level institutions and communities, to converge on an integrated and multi-sectoral resilience framework and platform and collaborate towards achieving an agreed set of results\. Finally, the PforR as an instrument will also help factoring overall enabling environment, local context and institutional capacity considerations over time\. C\. Program Development Objective(s) (PDO) and PDO Level Results Indicators Program Development Objective(s) 18\. The development objective of the Program is to enhance the State of Kerala’s resilience against the impacts of climate change and natural disasters, including disease outbreaks and pandemics\. PDO Level Results Indicators Oct 12, 2020 Page 7 of 12  The World Bank The Resilient Kerala Program for Results (P174778) 19\. PDO level results indicators tentatively include the following: • DRM and CC risk management capacity strengthened • Enhanced capacity of Finance Department for debt management • Effective disease surveillance system for humans, including zoonotic diseases, linked with the Integrated Disease Surveillance Plan, used for monitoring and tracking disease outbreaks • Integrated river basin management approach adopted in the districts along Pamba Basin • Climate modelling capacity is enhanced at the State level • Management information systems improved for urban development processes and select services including transport and WSS for effective representation and participation of women D\. Program Description PforR Program Boundary 20\. The Government Program underpinning the Resilient Kerala PforR consists of two main government programs – the RKDP and the Annual Plan of the State Health Mission (SHM) as part of the National Health Mission (NHM)\. The NHM aims to improve availability of and access to quality health care by people, especially for those residing in rural areas, the poor, women and children\. The main programmatic components include Health System Strengthening, Reproductive- Maternal- Neonatal-Child and Adolescent Health (RMNCH+A), and Communicable and Non-Communicable Diseases\. Within the broad national parameters and priorities, states would have the flexibility to plan and implement state specific action plans\. Program Implementation Plans (PIPs) would spell out the key strategies, activities undertaken, budgetary requirements and key health outputs and outcomes\. State PIPs would be an aggregate of the district/city health action plans and include activities to be carried out at the state level\. The State Record of Proceedings for Kerala SHM in FY 2020- 2021 sets out to enhance the State’s surveillance and response systems for communicable diseases in view of the COVID- 19 outbreak\. The overall resource envelope of the State PIP amounts to approximately US$ 167 million (Rs 1226\.32 Crore)\. 21\. The RKDP constitutes the GoK’s medium-term roadmap for a Green and Resilient Nava Keralam (New Kerala)\. It serves as the Government’s overarching framework and principal vehicle to operationalize a resilient recovery programme and mainstream resilience in development\. The RKDP is to be implemented over a period of 8 years\. It supports “the creation of a society that has sustainable livelihoods for its inhabitants and a land with modern infrastructure that cannot be undone by natural disastersâ€?\. The RKDP encompasses policy, regulatory, institutional and investment actions and programs across four crosscutting and twelve sector-based areas that are critical for resilient and sustainable recovery and rebuilding\. Further, the RKDP outlines partnership, financing, and implementation modalities\. The final RKDP, incorporating stakeholder feedback from statewide consultations, was approved by the Council of Ministers in May 2019 and launched Statewide in July 2019\. The GoK has advanced reforms laid out in the RKDP in areas such as local disaster risk mapping, performance-based contracting of roads, shifting agricultural and river basin management practices to align with agroclimatic conditions and introducing risk-informed master planning for cities and towns\. It has also initiated other critical steps beyond the scope of initial Bank engagement, towards addressing climate vulnerability and enhancing resilience\. 22\. The RKI is the institutional modality or framework for the entire rebuilding process and acts as a vehicle to operationalize the RKDP, by coordinating, facilitating and driving policy shifts, institutional renewal and investment on- the-ground required for a resilient rebuilding of Kerala\. Through establishing RKI, the GoK aims to put in place a streamlined and transparent process of decision making for comprehensive and resilient recovery and rebuilding from the Oct 12, 2020 Page 8 of 12  The World Bank The Resilient Kerala Program for Results (P174778) 2018 floods\. The RKI aims to catalyze the State’s transformational shift towards risk-informed sustainable development by putting in place policies, institutions and systems for enhancing resilience to disasters and impacts of climate change, by ensuring higher standards of infrastructure, assets and livelihoods for resilience, and by fostering equitable, inclusive and participatory reconstruction for building back better\. 23\. The proposed Program will support the implementation of the Government Program by adopting an integrated framework to enhancing GoK’s fiscal and institutional resilience against the impacts of climate change and natural disasters, including disease outbreaks at the State level and testing the on-the-ground feasibility of this integrated approach at the local level\. As a subset of the Government program, the boundaries of the PforR Program have been defined as follows: • Sectors: Agriculture, Disaster Risk Financing & Insurance (DRFI), DRM, Fiscal & Governance, Health, Road, Urban, Water Resource Management (WRM), Water Supply and Sanitation (WSS) • Duration: The Program will be implemented over a period of 4 years from FY21 to FY25\. • Financing Support: The Program is proposed to be US$ 250 million (US$ 125 million IBRD loan and US$ 125 million AIIB co-financing loan)\. In addition, KfW will provide a potential budget support of €100 million as a bridge from the first phase of the State Partnership to the second together with, €2 million of recipient executed grant to the RKI for technical assistance and capacity building to implement the Program\. • Geographical Coverage: The Program will support state-wide systems and institutions development, and pilot sectoral investments in selected districts along the Pamba river basin\. 24\. Descriptions of the Program RAs: The Program will support the three RAs to contribute to the overall outcomes of the Government Program\. The description of the activities and proposed Disbursement-Linked Indicators (DLIs) are provided below for each RA\. • RA 1: Building systems and institutional capacities for managing shocks from climate change, natural disasters and disease outbreaks: The policy and institutional reforms advanced through DPO 1 are rolled out in key GoK departments and agencies at the state and local levels through developing plans and establishing norms, building systems and capacities, and mobilizing resources\. Key focus areas of this RA are (1) enhancing sustainability of the State’s public finances to cope with exogenous shocks; (2) establishing the foundations of a comprehensive disaster risk financing system that is efficient, transparent and responsive; and (3) strengthening planning systems and institutional capacities of Local Self-Government Institutions (LSGIs) to tackle climate change impacts, natural disasters and disease outbreaks\. The scope of actions under this RA covers the entire State\. • RA 2: Supporting effective COVID-19 response and disease outbreak preparedness: As COVID-19 caseloads increase in the State, this RA aims to further bolster health systems across the State by upgrading and equipping district health centers and hospitals with adequate equipment and trained staff\. Further, the RA will support the alignment of the statewide disease surveillance system plan with local DRM plans in selected LSGIs\. • RA 3: Demonstrating integrated approaches to multidimensional resilience at the local level: Building on the policy and institutional reforms achieved through RKP DPO 1 in key economic and climate-sensitive sectors (e\.g\. agriculture, roads, water resource management, water supply and sanitation), this RA will test an integrated approach basin-based multidimensional resilience through (1) undertaking integrated water resources and reservoir management (upstream); (2) putting in place climate-proofed infrastructure and services in cities, towns and villages (midstream); and (3) implementing agroecological zone (AEZ) based agricultural practices (downstream)\. Oct 12, 2020 Page 9 of 12  The World Bank The Resilient Kerala Program for Results (P174778) E\. Initial Environmental and Social Screening Environmental Assessment 25\. The Program’s environmental impacts are expected to be positive considering that it aims strengthening resilience through interventions on health systems, institutional capacity, fiscal capacity, and climate-resilient development in different sectors that include water resources management, water supply, agriculture / food systems and roads\. The institutional strengthening will result in an overall positive environmental contribution, the direct environmental impacts related to the physical infrastructure activities will have to be effectively managed\. These are expected to have only minor, reversible impacts\. The environmental risk screening considered the physical risks, contextual risks, institutional capacity risks and political and reputation risk\. The screening revealed that the Program will have a few physical risks due to the environmental impacts of activities, particularly related to physical road infrastructure and other investments to be supported through co-financing\. The contextual risks are limited as these are within the existing, well-established environmental regulatory agencies in Kerala\. There are risks arising from institutional capacity as the state’s environmental capacity needs to be substantively strengthened\. And, political and reputation risks arising from environmental issues are not envisaged from the institutional development aimed under the Program\. The risk screening also confirmed that Program activities do not include those not eligible for financing using the PforR instrument\. The environmental risk rating is presently rated as ‘Substantial’\. On examining the portfolio of interventions, this risk rating will be reviewed\. 26\. During the Environment and Social Systems Assessment (ESSA) study, the following environmental aspects will be studied with a focus on systems: (i) environmental risks including direct, indirect, induced, and cumulative environmental impacts/risks that may affect achievement of the proposed development outcomes; (ii) the state’s capacity (all GoK agencies involved) to manage the identified environmental impacts including the respective agency’s environmental performance till date; given that the environmental capacity of GoK agencies is recognized to be weak, this will be focused upon; and (iii) the prevailing systems with respect to laws, regulations, standards, procedures, and implementation performance against the core principles to identify any significant differences between them that could affect Program performance\. Social Assessment 27\. The Program is likely to have overall positive social impacts specially the areas where interventions are planned to be made\. Fiscal reform and consolidation for improved risk preparedness and financing (RA 1) aimed at improved safety nets and prompt post disaster recovery would help to insulate vulnerable groups from disaster or pandemic related shocks\. Investments in the health sector for improved COVID 19 response and pandemic preparedness (RA 2) is likely to help the poor and vulnerable who are largely dependent on public health services\. Targeted investments in key sectors- agriculture, water resource & sanitation and roads (RA 3) are also expected to have beneficial impacts in improving access to basic services and in community level resilience\. 28\. Kerala has a large number of vulnerable social and demographic groups (viz\. elderly; women impacted by intersectionality including migrants, old-aged, single, those with disabilities, self-employed/ workers, women from tribal and other marginalized communities; Scheduled Tribes (STs), Scheduled Castes (SCs), migrant workers and fisher folk whose special requirements would need to be taken into account in the sectoral investment plans under the program\. In a situation that social issues are not managed well, there is likely risk of exclusion for a set of vulnerable groups: (i) small and marginal farmers as they have limited resources for farm innovations (or insurance) promoted through agroecological zones approach and access to water is disproportionately skewed in favor of those owning larger Oct 12, 2020 Page 10 of 12  The World Bank The Resilient Kerala Program for Results (P174778) lands; (ii) tribal and women farmers who are mostly landless tenants or agricultural laborer and are denied agricultural incentives that usually go to landowners; (iii) poor and socially marginalized from ULB led development or DRR plans that fail to recognize their peculiar vulnerabilities; (iv) poor and economically vulnerable from private water supply and sanitation services for which willingness or ability to pay may compete with other basic needs\.; (v) tribal communities whose habitations are remote and upland and are usually the last to receive road access\. However, none of these are irreversible risks that cannot be mitigated using effective social management practices of participation, community engagement, accountability and transparency\. 29\. The physical investment, if it is to take place especially in a densely crowded areas, may raise issues relating to land acquisition, displacement and livelihood impacts on both formal and informal occupants, occupational and community health and safety, labor influx, etc\. At this stage scale of physical investments is not yet known\. As a PforR operation, the project will have to exclude activities that have large-scale adverse, land related impacts, including investments planned for road construction or water sector infrastructure\. Even if such activities are limited to Right of Way (RoW), they could have likely impact on the encroachers, which needs to be avoided\. Since the program intends to beam programmatic resources using a ‘basin-wide approach’ on Pamba River Basin, which is also home to several indigenous communities, activities with significant adverse impacts on such communities would need to be excluded and measures put in place for effective screening of activities proposed in the basin\. Considering the risks of social exclusion and adverse impacts on vulnerable groups, Social Risk rating of the Program is ‘Substantial’ based on the existing information about the scope of the PforR\. 30\. The Social Systems Assessment will look at the state’s institutional capacities to manage the identified social risks in similar contexts, and the systems and processes in place for handling such risks in similar contexts\. Since RKDP forms the base program on which the RKP PforR operations are to be anchored, apart from other state-based institutions, the social assessment will assess adequacy of RKDP’s management capabilities to manage risks and enhance benefits emerging from the program investments\. Based on an assessment of robustness of social systems as well as review of prevailing legal policy environment, the assessment will recommend program actions for addressing all/ any unmitigated or residual impacts\. Social systems assessment will be informed by large scale consultations with stakeholder institutions (line agencies, local bodies, training institutions) and communities, while ensuring that all relevant social constituencies are effectively engaged and represented in such consultations\. 31\. Considering that social and environment risk at this stage are envisaged to be ‘Substantial’ , a comprehensive assessment with a suitable level of stakeholder engagement will be carried out during the preparation to inform Program design\. A series of stakeholder consultations will be conducted at the state level for each of the sectors\. These will be common to both environmental and social aspects, and the findings will inform the ESSA and the Program design\. Grievance management mechanisms relevant to the Program will also be considered for its appropriateness across various agencies\. The ESSA study will necessarily include a Program Action Plan comprising capacity strengthening and management measures as needed to manage the risks\. Once the draft ESSA report is ready, it shall be disseminated through a State-Level Disclosure and Consultation Workshop before project appraisal\. Once finalized, the ESSA report will be publicly disclosed\. \. Oct 12, 2020 Page 11 of 12  The World Bank The Resilient Kerala Program for Results (P174778) CONTACT POINT World Bank Name : Elif Ayhan Senior Disaster Risk Management Designation : Role : Team Leader(ADM Responsible) Specialist Telephone No : 5220+33455 / Email : eayhan@worldbank\.org Name : Balakrishna Menon Parameswaran Designation : Lead Urban Specialist Role : Team Leader Telephone No : 5220+85850 / Email : bmenonparameswar@worldbank\.org Name : Deepak Singh Lead Disaster Risk Management Designation : Role : Team Leader Specialist Telephone No : 5785+47663 Email : dsingh2@worldbank\.org Borrower/Client/Recipient Borrower : Republic of India Director, Department of Economic Contact : Hanish Chhabra Title : Affairs Telephone No : 911123092883 Email : hanish\.ias@ias\.nic\.in Implementing Agencies Implementing State of Kerala Agency : Additional Chief Secretary, Finance, Contact : R\. K\. Singh Title : Planning and Economic A Telephone No : 914712327586 Email : acs\.finance@kerala\.gov\.in FOR MORE INFORMATION CONTACT The World Bank 1818 H Street, NW Washington, D\.C\. 20433 Telephone: (202) 473-1000 Web: http://www\.worldbank\.org/projects Oct 12, 2020 Page 12 of 12

APPROVAL

P105092

Document of The World Bank Report No: ICR00002710 IMPLEMENTATION COMPLETION AND RESULTS REPORT (IDA-43460) ON A CREDIT IN THE AMOUNT OF SDR 16\.4 MILLION (US$ 25\.0 MILLION EQUIVALENT) TO THE REPUBLIC OF GHANA FOR A NUTRITION AND MALARIA CONTROL FOR CHILD SURVIVAL PROJECT January 27, 2014 Human Development II AFCW1 Africa Region  CURRENCY EQUIVALENTS (Exchange Rate Effective March 31, 2013) Currency Unit = New Ghanaian Cedi (GHS) GHS 1\.00 = US$ 0\.515 US$ 1\.00 = GHS 1\.94 US$ 1\.49 = SDR 1 FISCAL YEAR January 1 – December 31 ABBREVIATIONS AND ACRONYMS 5YPOW Five Year Program of Work AM Aide Memoire ANC Antenatal Care BMC Budget Management Centers CAS Country Assistance Strategy CBGP Community-based growth promotion CBNFSP Community-based Nutrition and Food Security Component CD Department of Community Development CHC Community Health Committees CHN Community Health Nurses CHO Community Health Officer CHW/CHN Community Health Workers and Nurses CIC Community Implementation Committee CMA Common Management Arrangements CMU Country Management Unit CPS Country Partnership Strategy CSPG Cross-Sectoral Planning Group DA District Assembly DAC District Advisory Committee DFID Department for International Development of the United Kingdom DHMT District Health Management Team DHS Demographic and Health Survey DPs Development Partners eRegister Electronic Register System FM Financial Management GES Ghana Education Service GHS Ghana Health Service GHS-N Ghana Health Service – Nutrition Department GHS-NMCP Ghana Health Service – National Malaria Control Program GHS-PPME Ghana Health Service – Policy, Planning, Monitoring and Evaluation Department GOG Government of Ghana HMT Health Management Team ICR Implementation Completion and Results Report ISR Implementation Status Report ii IDA International Development Association IP Implementation Progress IRR Internal Rate of Return ITN Insecticide-treated bed nets LGA Local Government Authorities LIL Learning and Innovation Loan LLIN Long Lasting Insecticide-treated Net LQAS Low Quality Assurance Sampling M&E Monitoring and Evaluation MICS Multiple Indicator Cluster Survey MLGRDE Ministry of Local Government, Rural Development, and Environment MOFA Ministry of Food and Agriculture MOFEP Ministry of Finance and Economic Planning MOH Ministry of Health MOH-PPME Ministry of Health – Policy, Planning, Monitoring and Evaluation Department MOU Memorandum of Understanding MOWAC Ministry of Women and Children’s Affairs N/A Not available NID National Immunization Day NMCCSP Nutrition and Malaria Control for Child Survival Project NMCP National Malaria Control Program NPV Net Present Value ORT Oral Rehydration Therapy PAD Project Appraisal Document PDO Project Development Outcome POW Program of Work PMI President’s Malaria Initiative (PMI) PPME Policy Planning, Monitoring and Evaluation RAC Regional Advisory Committees RCC Regional Coordination Council SUN Scaling Up Nutrition SWAp Sector Wide Approach TC Technical Committee TOR Terms of Reference TTL Task Team Leader UN United Nations UNICEF United Nations Children’s Fund USD United States Dollar WB World Bank WHO World Health Organization Vice President: Makhtar Diop Country Director: Yusupha B\. Crookes Sector Manager: Trina S\. Haque Project Team Leader: Evelyn Awittor ICR Team Leader: Evelyn Awittor ICR Main Author: Janneke H\. Blomberg iii  GHANA Nutrition and Malaria Control for Child Survival Project CONTENTS Data Sheet A\. Basic Information B\. Key Dates C\. Ratings Summary D\. Sector and Theme Codes E\. Bank Staff F\. Results Framework Analysis G\. Ratings of Project Performance in ISRs H\. Restructuring I\. Disbursement Graph 1\. Project Context, Development Objectives and Design \. 1 2\. Key Factors Affecting Implementation and Outcomes \. 6 3\. Assessment of Outcomes \. 10 4\. Assessment of Risk to Development Outcome \. 19 5\. Assessment of Bank and Borrower Performance \. 20 6\. Lessons Learned\. 23 7\. Comments on Issues Raised by Borrower/Implementing Agencies/Partners\. 24 Annex 1\. Project Costs and Financing \. 25 Annex 2\. Outputs by Component\. 26 Annex 3\. Analysis of the PDO and intermediate indicators \. 34 Annex 4\. Economic and Financial Analysis \. 43 Annex 5\. Bank Lending and Implementation Support/Supervision Processes\. 48 Annex 6\. Beneficiary Survey Results \. 50 Annex 7\. Summary of Borrower's ICR and/or Comments on Draft ICR \. 51 Annex 8\. List of Supporting Documents \. 52 MAP \. 57 iv A\. Basic Information Nutrition and Malaria Country: Ghana Project Name: Control for Child Survival Project ID: P105092 L/C/TF Number(s): IDA-43460 ICR Date: 09/05/2013 ICR Type: Core ICR REPUBLIC OF Lending Instrument: SIL Borrower: GHANA Original Total XDR 16\.40M Disbursed Amount: XDR 16\.40M Commitment: Revised Amount: XDR 16\.40M Environmental Category: C Implementing Agencies: Ministry of Health Cofinanciers and Other External Partners: B\. Key Dates Revised / Actual Process Date Process Original Date Date(s) Concept Review: 02/28/2007 Effectiveness: 09/07/2007 09/07/2007 Appraisal: 04/25/2007 Restructuring(s): 06/23/2010 Approval: 07/03/2007 Mid-term Review: 12/07/2009 Closing: 03/31/2012 03/31/2013 C\. Ratings Summary C\.1 Performance Rating by ICR Outcomes: Moderately Satisfactory Risk to Development Outcome: Moderate Bank Performance: Moderately Satisfactory Borrower Performance: Moderately Satisfactory C\.2 Detailed Ratings of Bank and Borrower Performance (by ICR) Bank Ratings Borrower Ratings Quality at Entry: Moderately Satisfactory Government: Moderately Satisfactory Implementing Quality of Supervision: Satisfactory Satisfactory Agency/Agencies: Overall Bank Overall Borrower Moderately Satisfactory Moderately Satisfactory Performance: Performance: v C\.3 Quality at Entry and Implementation Performance Indicators Implementation QAG Assessments Indicators Rating Performance (if any) Potential Problem Project Quality at Entry Yes None at any time (Yes/No): (QEA): Problem Project at any Quality of Yes None time (Yes/No): Supervision (QSA): DO rating before Satisfactory Closing/Inactive status: D\. Sector and Theme Codes Original Actual Sector Code (as % of total Bank financing) Central government administration 10 10 Health 75 75 Sub-national government administration 15 15 Theme Code (as % of total Bank financing) Child health 29 29 Health system performance 14 14 Malaria 28 28 Nutrition and food security 29 29 E\. Bank Staff Positions At ICR At Approval Vice President: Makhtar Diop Obiageli Katryn Ezekwesili Country Director: Yusupha B\. Crookes Mats Karlsson Sector Manager: Trina S\. Haque Eva Jarawan Project Team Leader: Evelyn Awittor Evelyn Awittor/Yi-Kyoung Lee ICR Team Leader: Evelyn Awittor ICR Primary Author: Janneke Hartvig Blomberg F\. Results Framework Analysis Project Development Objectives (from Project Appraisal Document) The Project Development Objective (PDO) is to improve utilization of selected community-based health and nutrition services for children under the age of two and pregnant women in the selected districts\. vi Revised Project Development Objectives (as approved by original approving authority) Although the PDO remained the same during restructuring, all PDO indicator targets were revised based on updated information about baseline levels\. In addition the intermediate outcome indicators were revised, in that some were added, others dropped or their targets revised, in accordance with the actual implementation status, modified implementation arrangements and to reflect changes in the prioritization of activities\. (See Annex 2 for more details) (a) PDO Indicator(s) Original Target Formally Actual Value Values (from Revised Achieved at Indicator Baseline Value approval Target Completion or documents) Values Target Years Proportion of infants under six months of age who are exclusively breastfed in Indicator 1 : the past 24 hours Value 72\.9% quantitative or (DHS 2008 5 target 69% 80% 84\.5% Qualitative) region average) Date achieved 07/01/2008 03/31/2012 03/31/2013 03/31/2013 Original baseline: 54% (MICS 2006) Comments Original target exceeded (122%); Revised target exceeded (106%) (based on (incl\. % program data for 5 regions weighted according to number of communities) achievement) Proportion of infants between six and nine months of age who receive semi- Indicator 2 : solid/solid foods in addition to breast milk in the past 24 hours Value 67\.3% quantitative or (DHS 2008 5 target 73% 74% 93\.5% Qualitative) region average) Date achieved 07/01/2008 03/31/2012 03/31/2013 03/31/2013 Comments Original baseline: 58% (MICS 2006) (incl\. % Original target exceeded (128%); Revised target exceeded (126%) (based on achievement) program data for 5 regions weighted according to number of communities Proportion of children under two years of age with diarrhea who receive oral re- Indicator 3 : hydration therapy Value 51\.0% quantitative or (DHS 2008 5 target 78% 59% 73\.3% Qualitative) region average) Date achieved 07/01/2003 03/31/2012 03/31/2013 03/31/2013 Comments Original baseline: 63% (DHS 2003) (incl\. % Original target nearly met (94%); Revised target exceeded (124%) achievement) (based on data for 5 regions weighted according to number of communities) Proportion of pregnant women and children under five years who sleep under Indicator 4 : LLINs the night preceding the survey is carried out Value PW:18\.6% PW:60% PW:25% PW:42\.0% quantitative or U5: 23\.6% U5:40% U5:30% U5:44\.6% Qualitative) (DHS 2008 5 target vii  region average) Date achieved 07/01/2008 03/31/2012 03/31/2013 09/01/2011 Comments Original baseline: PW: 46% (NMCP 2006), U5: 22% (MICS 2006) (incl\. % Original targets substantially achieved (86\.6%); revised targets exceeded (157%) achievement) (based on MICS (2011) 5 region weighted average) (b) Intermediate Outcome Indicator(s) Original Target Actual Value Formally Values (from Achieved at Indicator Baseline Value Revised approval Completion or Target Values documents) Target Years Proportion (%) of planned supervision and support activities by District Health Indicator 1 : Management Teams (DHMTs) in the intervention areas having been conducted Value (quantitative 0% 75% 75% 100% or Qualitative) Date achieved 09/07/2007 03/31/2012 03/31/2013 03/31/2013 Original target exceeded (133%) Comments (based on program data for 5 regions weighted according to number of (incl\. % communities) achievement) Proportion (%) of communities in target areas with a functional community Indicator 2 : health committee Value (quantitative No data available N/A 50% 23\.1% or Qualitative) Date achieved 09/07/2007 09/07/2007 03/31/2013 03/31/2013 Comments Target not fully achieved (46%) (incl\. % (based on program data for 5 regions weighted according to number of achievement) communities) Indicator 3 : Number (#) of health personnel receiving training\. Value (quantitative 0 N/A 500 3853 or Qualitative) Date achieved 06/23/2010 03/31/2012 03/31/2013 03/31/2013 Comments Target significantly exceeded (701%)\. Source is MoH data\. The scale up of (incl\. % project implementation increased during the second half of project leading to the achievement) need for more trained health officials\. Indicator 4 : Development of the National Nutrition Policy Value (quantitative Not available Policy available Policy available or Qualitative) Date achieved 06/23/2010 03/31/2012 03/31/2013 Comments (incl\. % Original target achieved achievement) viii  Proportion (%) of mothers of children under two years of age who had at least 4 Indicator 5 : pregnancy care visits during their most recent pregnancy Value 70\.8% (DHS 2008 target (quantitative 79% 78% 81\.7% region average) or Qualitative) Date achieved 07/01/2008 03/31/2012 03/31/2013 09/01/2011 Comments Original baseline: 69% (DHS 2003) (incl\. % Original target exceeded (103%); Revised target exceeded (105%) (based on achievement) MICS (2011) 5 region weighted average) Proportion (%) of children 6-59 months of age who have received at least one Indicator 6 : vitamin A supplement in the last six months Value 58\.3% (DHS 2008 target (quantitative 80% 70% 51\.6% region average) or Qualitative) Date achieved 07/01/2008 03/31/2012 03/31/2013 03/31/2013 Comments Original baseline: 78% (DHS 2003) (incl\. % Original target not achieved (65%); Revised target not achieved (74%) (based on achievement) program data for 5 regions weighted according to number of communities) Proportion (%) of new mothers who receive high-dosage vitamin A supplements Indicator 7 : within 8 weeks of delivery Value 60\.3% (quantitative (DHS 2008 target region 53% 69% 74\.9% or Qualitative) average) Date achieved 07/01/2008 03/31/2012 03/31/2013 03/31/2013 Comments Original baseline: 43% (DHS 2003) (incl\. % Original target exceeded (141%); Revised target exceeded (109%) (based on achievement) program data for 5 regions weighted according to number of communities) Proportion (%) of households with children under five having at least one LLIN Indicator 8 : (revised) Value 46\.2% (DHS 2008 target (quantitative 80% 51% 57\.6% region average) or Qualitative) Date achieved 07/01/2008 03/31/2012 03/31/2013 09/01/2011 Original baseline: Not available Original target not met (72%) Comments Revised target exceeded (113%) (incl\. % (based on MICS (2011) 5 region weighted average) achievement) NOTE: indicator measures proportion of all households as proxy for proportion of households with children under 5 Indicator 9 : Number (#) of LLIN purchased and/or distributed Value (quantitative 0 N/A 1\.55 million 1\.55 million or Qualitative) Date achieved 09/07/2007 03/31/2012 03/31/2013 03/31/2013 Comments (incl\. % Target achieved (100%) achievement) Indicator 10 : Direct project beneficiaries ix  300,000 children 309,531 children Value (0-2 years of age) (0-2 years of age) (quantitative 0 N/A 65,000 pregnant 81,667 pregnant or Qualitative) women women Date achieved 09/07/2007 03/31/2012 03/31/2013 03/31/2013 Comments Targets for children and pregnant women substantially exceeded (107%) (incl\. % achievement) Indicator 11 : Proportion of female beneficiaries Value (quantitative 0% 50% N/A 61% or Qualitative) Date achieved 09/07/2007 03/31/2012 03/31/2013 03/31/2013 Comments Target substantially exceeded (122%) (incl\. % achievement) G\. Ratings of Project Performance in ISRs Actual Date ISR No\. DO IP Disbursements Archived (USD millions) 1 10/02/2007 Satisfactory Satisfactory 0\.00 2 03/31/2008 Satisfactory Satisfactory 4\.89 3 06/01/2008 Satisfactory Moderately Satisfactory 4\.98 4 10/30/2008 Satisfactory Moderately Satisfactory 6\.10 5 12/30/2008 Satisfactory Moderately Satisfactory 6\.10 6 02/04/2009 Satisfactory Moderately Satisfactory 6\.64 Moderately 7 06/24/2009 Moderately Satisfactory 6\.91 Unsatisfactory Moderately Moderately 8 11/23/2009 7\.92 Unsatisfactory Unsatisfactory Moderately 9 02/09/2010 Unsatisfactory 7\.92 Unsatisfactory Moderately Moderately 10 08/29/2010 9\.16 Unsatisfactory Unsatisfactory Moderately Moderately 11 12/28/2010 9\.60 Unsatisfactory Unsatisfactory 12 04/19/2011 Moderately Satisfactory Moderately Satisfactory 11\.00 13 12/12/2011 Moderately Satisfactory Moderately Satisfactory 11\.50 14 04/18/2012 Satisfactory Moderately Satisfactory 12\.85 15 12/17/2012 Satisfactory Satisfactory 20\.43 H\. Restructuring (if any) x  ISR Ratings at Amount Board Restructuring Disbursed at Restructuring Reason for Restructuring & Approved Restructuring Date(s) Key Changes Made PDO Change DO IP in USD millions Restructuring was necessitated by three factors: (i) sub-optimal implementation progress; (ii) weak ownership of the project; (iii) sub-optimal management capacity\. Key changes made during restructuring were: (i) limited 06/23/2010 N MU U 9\.07 modification of scope (activities); (ii) modification of the project indicators; (iii) adjustment of institutional and implementation arrangements including flow of funds; and (iv) extension of closing date from March 31, 2012 to March 31, 2013\. I\. Disbursement Profile xi 1\. Project Context, Development Objectives and Design 1\.1 Context at Appraisal 1\. Country context\. At the time of preparation Ghana had sustained economic growth at almost 6%, combined with progress in reducing income poverty, a decline in the poverty headcount by 7 percentage points since 1997, as well as improved food security measures\. However despite this, socio-economic and regional disparities remained\. This was seen in the strong urban-rural differential in poverty indicators and substantially higher severity and depth of poverty in three northern regions, which were also victim of the 2007 floods, and parts of the rural coastal zones\. Insufficient investment in human and social development, indicated by the gap between Ghana's Human Development Index (HDI) rank (138 in 2003) and its gradually increasing GDP per capita rank (121 in the same year), resulted in the stagnation of health and nutritional outcomes, such as infant and under five mortality rates, despite a continual expansion of health service delivery\. The Government of Ghana (GOG) had identified decentralization as essential to achieve better service delivery, but had still only made limited progress, due to challenges such as local capacity issues and the high complexity of managing such decentralized services, as well as the poor state of transport, especially rural roads, and communications infrastructure\. 2\. Nutritional situation\. Undernutrition in children under five in Ghana was unacceptably high at the time of appraisal with 22% stunted, 18% underweight and more than three quarters of children suffering from anemia\. The prevalence of stunting was significantly higher among children from rural areas, from poorer households, and whose mothers were less educated\. Regional variation was also considerable with children from the Northern Region being almost three times more likely to be stunted than those from the Greater Accra region\. 3\. Relationship between child mortality, malaria and undernutrition\. Malaria remains the most common cause of childhood deaths in Ghana (26%), of which undernutrition contribute to about half of these deaths\. There is a significant, negative symbiosis between malaria and nutritional status\. Undernutrition in children under 5 is highly prevalent in areas where there is a high malaria burden\. Micronutrient deficiencies maybe contribute to a significant portion of such morbidity/mortality\. Conversely, malaria negatively affects the nutritional status of children as well as pregnant and lactating women\. Malaria infection has been associated with anemia, underweight and stunting, especially among children under two, and therefore, in order to break the vicious cycle, preventative actions for both undernutrition and malaria were needed to reduce the persistent high levels of infant and young child mortality\. 4\. Malaria control efforts\. The National Malaria Control Strategy (2008-15) in Ghana, albeit still in draft at appraisal, recognized insecticide treated net (ITN) utilization as one of the most effective measures for preventing malaria\. Despite efforts of ITN distribution in 2003 and the first large scale long-lasting insecticide treated nets (LLINs) distribution in late 2006, coverage remained low and hence poor availability and 1 utilization of LLINs was identified as a key bottleneck in the fight against malaria and associated child mortality in Ghana\. 5\. Institutional arrangements of the Health Sector\. In Ghana the responsibilities for the health sector, resulting from a purchaser-provider split enacted in 1996 and implemented in 2002, are divided with Ministry of Health (MOH) responsible for the oversight and control of policy formulation and monitoring and evaluation of progress in achieving targets, and the Ghana Health Service (GHS) responsible for the delivery of services through its operations at four levels: national, regional, district and sub-district\. The National Health Insurance Authority (NHIA), established under the National Health Insurance Act in 2003, is responsible for the implementation of the national health insurance policy which ensures access to basic healthcare services to all residents\. 6\. At lower government levels, the District Assembly (DA) is the primary provider of public services, including primary and community-based health care\. Whereas the District Health Management Teams (DHMT) are responsible for organizing and managing the local provision of health services including the preparations of annual plans and budgets according to guidelines and budgetary ceilings with fiduciary management by Budget Management Centers (BMC), the principal forum for planning, coordination and review of action is through the DA Social Services sub- Committees\. The DMHTs are represented in the DA committees to coordinate and provide technical support and advice on health issues in the District\. The Regional Health Management Teams (RHMT) plays an intermediary role between the central GHS and the DHMTs, providing technical support, supervision, and referral services\. 7\. Policy and program environment\. Beginning in the 1990s a number of cooperating partners, including the United Kingdom, Denmark, the Netherlands, and the European Commission joined with IDA in a sector-wide approach (SWAp) which included: (i) pooling resources in a common health account managed by the MOH parallel to GOG budget resources, and (ii) using Common Management Arrangements for planning, budgeting, institutional arrangements, procedures for procurement, financial management, and M&E\. The project supported priority areas in the MOH program of work\. Other partners also contributed to the project including UN agencies (UNICEF, WHO, WFP) as well as the Micronutrient Initiative\. In recognition of the significant impact of the nutritional situation on development and economic growth GOG, through the Ministry of Health (MOH) and the Ghana Health Service (GHS), spearheaded the launch of ‘Imagine Ghana Free of Malnutrition’\. This multi-sectoral strategy addressed malnutrition as a developmental problem in the context of the Ghana Poverty Reduction Strategy and the second Five Year Program of Work (5YPOW II) of MOH\. The National Malaria Control Strategy (2008-15) identified improved coverage of INT as a strategic goal, and the importance of both nutrition and malaria was underscored in both the 2006 National Health Policy, the 2007 POW and the draft 5YPOW III (2007- 2011)\. 8\. Rationale for World Bank involvement\. The World Bank had provided a Learning and Innovation Loan (LIL) to the GOG for a Community-based Poverty Reduction Project consisting of 3 components including a Community Based Nutrition 2 and Food Security Component (CBNFSC)\. The CBNFSC identified innovative ways to improve the nutritional status of children in the beneficiary communities through an integrated community-based approach for basic health and nutrition service delivery\. This approach included the use of community volunteers, community committees and growth promotion platforms, efforts which were sustained by the communities even after closing of the project\. 9\. When the time limited IDA 14 Supplementary Funding for Africa became available in early 2007, this presented a unique opportunity for the World Bank to provide earmarked support to the nutrition and malaria related priority areas in 5YPOW III\. This further enabled the World Bank to continue its support of the SWAp while capitalizing on the experience and lessons learned from CBFSNC and thereby ensuring an increased focus on the delivery of key nutrition and health services in agreement with the Human Development and Service Delivery pillar of the Country Assistance Strategy (CAS)\. 1\.2 Original Project Development Objectives (PDO) and Key Indicators (as approved) 10\. The Project Development Objective (PDO) is “to improve utilization of selected community-based health and nutrition services for children under the age of two and pregnant women in the selected districts” (Source: Financial Agreement)\. 11\. Progress toward attainment of PDO was measured by the following PDO indicators: (i) Proportion of infants under six months in the intervention areas exclusively breastfed in the past 24 hours; (ii) Proportion of infants 6-9 months in the intervention areas receiving semi-solid and/or solid foods in addition to breast milk in the past 24 hours; (iii)Proportion of children under 2 years in the intervention areas with diarrhea who received oral rehydration therapy; and (iv) Proportion of pregnant women and children under 5 years in the intervention areas who slept under a LLIN the night preceding the survey\. 1\.3 Revised PDO and Key Indicators 12\. During restructuring it was determined that the 2008 Demographic and Health Survey (DHS) for Ghana better reflected the actual baseline of the project\. Subsequently, while the PDO remained the same, all PDO indicator targets were revised accordingly\. This, in particular, affected PDO3 and 4 given that initial estimates of baseline values were based on old data (DHS 2003) or data not representing the entire population (NMCP 2006)\. For Component 1 (% of communities in the target area with functioning community health committees) there had not been a baseline original target value, with information subsequently developed to provide a cumulative target value\. For Component 2 (enhanced care of pregnant women, lactating mothers, and improved micronutrient intake in target group), the original baseline target was modified as a result of the project restructuring\. For Component 3 (reduced burden of and damage due to 3 malaria infection), there was no baseline available at the origination of the project, but one was developed as part of the project restructuring\. Table 1: PDO indicator baseline and targets before and after restructuring Project Development Outcome Action Baseline Baseline Original Revised Indicators taken (Original) (Restructuring) Target Value Target Value (Cumulative) (Cumulative) Project Development Objective: To improve utilization of selected community-based health and nutrition services for children under the age of two and pregnant women in selected districts\. Proportion of infants under six months Revised 54%1 72\.9%4 69% 80% of age who are exclusively breastfed in target the past 24 hours (PDO1) Proportion of infants between six and Revised 58%1 67\.3%4 73% 74% nine months of age who receive semi- target solid/solid foods in addition to breast milk in the past 24 hours (PDO2) Proportion of children under two years Revised 63%2 51\.0%4 78% 59% of age with diarrhea who receive oral target re-hydration therapy (PDO3) Proportion of pregnant women and Revised Preg Preg women: Preg women: Preg women: children under five years of age who target women: 18\.6%4 60% 25% sleep under LLINs the night preceding 46%3 Children <5y: Children <5y: Children <5y: the survey is carried out (PDO4) Children 23\.6%4 40% 30% 1 <5y: 22% Source: 1 MICS 2006 (national averages); 2 DHS 2003 (national averages); 3 NMCP 2006; 4 DHS2008 (target region average) 1\.4 Main Beneficiaries 13\. The project targeted pregnant women and children less than two years of age in all districts in the Northern, Upper West, Upper East, Volta and Central Regions and in one area each (district or sub-metro) in Western Region, Accra and Kumasi\. The aim was to reach a minimum of 65,000 pregnant women and 300,000 children under two\. The project also targeted children aged two to five years through the support for selected child survival interventions such as vitamin A supplementation, deworming and LLINs, while the general population, initially expected to benefit through support for salt iodation and food fortification, benefitted from LLINs based on a change in the bed net distribution policy in late 2009 from targeted to universal distribution\. 1\.5 Original Components (as approved) 14\. The PAD listed three components and their specific objectives, all of which were fully integrated into the 5YPOW III and in agreement with the human development and service delivery pillar of the Country Assistance Strategy (CAS)\. Table 2: Original program components and specific objectives Components Specific Objectives Component 1: Institutional (i) to develop effective inter-sectoral coordination, ownership and accountability for strengthening for nutrition towards the establishment of a coherent national program; coordination, implementation (ii) to strengthen the Ministry of Health and Ghana Health Services to effectively and outcomes coordinate implementation of the community based health and nutrition program 4 (US$2\.22 million) supported by the project Component 2: Community (i) to scale up community based health and nutrition services for children under two health and nutrition service and pregnant women based on a community-level package of Essential Nutrition delivery (US$12\.98 million) Actions Component 3: Malaria (i) to increase utilization of long lasting insecticide treated nets in order to reduce prevention (US$9\.80 million) malaria related morbidity and mortality among children under five and pregnant women 1\.6 Revised Components N/A 1\.7 Other significant changes 15\. Modification of scope and funding allocations\. During restructuring the scope of the project was slightly modified to improve the effectiveness and sustainability of the investment\. Changes primarily included the expansion of monitoring and evaluation of community based services at the expense of activities supported by other DPs or considered to be less central for the attainment of the DPO (see table 3)\. Based on these changes, funding allocations changed slightly, with increased allocation for Component 1 from US$2\.2 to US$4 million\. Table 3: Modification of scope and activities during restructuring Activities Change Rational for change Component 1 Establishment of inter-ministerial coordination Dropped Beyond the control of MOH and not essential committee for PDO achievement Development of school health and nutrition curriculum Dropped Activity is not central to PDO achievement Development and testing of small scale food Dropped Supported by others, diverting attention from fortification core activities Support for salt iodization law enforcement Dropped Supported by others Support for the M&E capacity building for community Expanded Will also include the M&E for district-level health and nutrition strategies sub-projects (moved from Component 2) Building implementation capacity for community- Added To streamline and coordinate multiple capacity based services building activities Component 2 Building capacity to plan, manage and supervise Moved Integrated into M&E capacity building under community- based services Component 1 Scaling up plan to implement community-based health Revised Scale up slowed down to control the quality of and nutrition services community based interventions Component 3 Improving the M&E of the national malaria program Revised To increase responsibility towards PDO and intermediate outcome indicators Insecticide resistance monitoring Dropped Supported by others Strategic partnership and harmonization Added To improve LLIN planning, distribution & safeguards management 16\. Adjustment of institutional and disbursement arrangements\. In order to improve ownership and accountability of the project, coordination and day-to-day management responsibilities of the project were taken over by GHS\. The oversight of the activities continued to be provided by the Technical Committee (TC), however now under the guidance of the Director General of the GHS and with membership limited to technical staff\. The GHS Department of Policy, Planning, Monitoring and Evaluation (GHS-PPME) became the secretariat of the TC while the director of GHS-PPME became 5 the day to day manager\. The flow of funds was revised in line with the changes in the institutional arrangements\. These changes further allowed GHS to designate project funds as earmarked funds and thus ease the tracking of expenditures at district level for more effective reporting\. 17\. Implementation schedule and extension of closing date\. The implementation schedule was changed several times\. First after the 2007 floods, in which implementation of affected regions were prioritized, and later during restructuring, in order to allow for catch up of delays before further scale up in the other regions was pursued\. Further, in February 2008 the GOG changed the second-level administrative sub-divisions which resulted in the creation of 32 new districts nationally including 12 additional districts in the project regions\. Although these changes were merely administrative and did not affect the total target population of this project, restructuring did provide the opportunity to include these administrative changes into the implementation schedule\. Finally, in order to provide sufficient time for “catching up” the project was extended by one year, hence the new closing dates of March 31, 2013\. 2\. Key Factors Affecting Implementation and Outcomes 2\.1 Project Preparation, Design and Quality at Entry 18\. Large existing base of knowledge\. Global consensus based on a strong evidence base emphasizes the importance of delivering a comprehensive package of direct nutrition interventions, called Essential Nutrition Actions, rather than tackling individual aspects of the conceptual framework for nutrition in isolation\. Therefore the project focused on improving the utilization of community-based health and nutrition service provision of such proven cost-effective interventions to prevent malnutrition and malaria\. Specific evidence was also available from Ghana and from comparable country settings, including the experience and lessons learned from the CBNFSC, together with best practices in community nutrition\. Although more detailed analysis of the barriers to accessing such services and/or impacting the behavioral outcomes of receiving such services could have been useful, it was assessed by both the team and by senior management that the evidence base available was sufficient for undertaking the investment\. 19\. Readiness to implement\. To a large extent the systems, methodology and materials which had been developed for the CBNFSC were utilized to ensure readiness to implement including the use of regional and district committees to coordinate, provide clearance, technical assistance and review performance\. The approach taken was for project start-up to begin slowly with additional time for the project to mature in the first year as reflected in the initial implementation plan however the potential need for additional GHS Nutrition Department (GHS-N) staffing to implement the project was not addressed at the outset\. 20\. Implementation arrangements\. Based on broad consensus it was decided for the project to utilize and strengthen the existing institutional arrangements for health in Ghana at all levels\. This meant that the overall oversight at national level would fall 6 under MOH-PPME leadership, who at the time also happened to be the strongest senior level champions of nutrition in the GOG, with day-to-day support from a multisectoral Technical Committee (TC), while GHS was overall responsible for service delivery, in accordance with the existing CMS and MOU for the sector\. 21\. Below the national level, the existing Regional and District Advisory Committees (RAC, DAC) including the Social Services sub-Committees, would be utilized while existing Community Heath Committees (CHC) or the newly formed Community Implementation Committees (CIC) would be responsible for the implementation at community level\. 2\.2 Implementation 22\. Project management\. With the departure of the director for MOH-PPME shortly after effectiveness, the overall leadership of the project at national level suffered, resulting in a lack of proactivity, insufficient accountability for meeting the project schedule and sub-optimal communication channels between MOH and GHS\. Whereas initial efforts to address these shortcomings had little effect on downstream implementation, the more comprehensive Rapid Results Approach undertaken in April 2009 was successful in building leadership and program management skills needed to accelerate the achievement of results\. More specifically, based on the deliberations emanating from this process the GOG team identified the following needs for change in their management of the project: (i) project management style, from a nutrition-centric to a more operations centric style with a focus on leveraging the existing processes and resources; and (ii) a separate political versus strategic leader, including clear roles and responsibilities for both\. The identified change in implementation arrangements needed at central level was subsequently addressed during restructuring, and a rapid acceleration in the implementation of activities and subsequent achievement of results was seen\. No change in project management at regional, district or community level was required at any point of the project\. 23\. Implementation roll-out\. According to the initial implementation plan, roll out of the activities at district level was envisioned to commence in only the 4 districts which had previously implemented activities under CBNFSC in order to allow the project team to fully utilize the lessons learned\. However, based on serious flooding at the very beginning of the project in the three northern and less accessible regions, the implementation plan was changed and 19 districts in the worst affected areas, with increased needs for health and nutrition service delivery, were decided to be reached within the first year\. Given the dependence on a cascade system of support from central to district level, the decision to reach three regions outside of the CBNFSC meant that additional support to local governments was required from central level simultaneously with technical inputs for the procurement of key goods and services\. The high workload caused a delay in timely delivery of technical specifications by GHS-N, which subsequently resulted in a lack of sufficient commodities (registers, weighing scales and communication materials), an obstacle to both initiate and maintain implementation of activities at community level\. This was partially resolved by temporary solutions such as borrowing supplies from UNICEF, and fully resolved with the additional technical and 7 contract management support for GHS-N shortly after restructuring\. Issues with poor logistics management and the subsequent inability to account for LLINs procured in 2007/8 and 2009 resulted in a decision to hold any further distribution of nets\. The completion of a technical audit and the development of an improved LLIN tracking system completely identified and resolved all such issues\. 24\. Implementation at community level\. The delivery of services at community level was influenced by several factors: (i) physical access especially during raining seasons; (ii) extent of ownership/involvement of district and sub-district staff; and (iii) the commitment of communities especially community volunteers\. The issue of poor physical access is inherent to most community based projects as they generally aim to reach the most underserved communities\. Similarly one of the community selection criteria used by district officials in this project was “hard to reach”\. The project mitigated the impact of physical assess through the provision of vehicles and motorcycles for district and sub-district levels respectively, however some areas remained very difficult to reach nonetheless, even with 4 wheel drive vehicles, during raining season however this was due to lack of paved roads and hence outside the scope of this project\. Strong supportive supervision of community services by district and sub-district level was ensured through repeated sensitization of district level staff, the provision of vehicles and the inclusion of a specific supervision budget in the district plans\. Some of the best performing communities were endowed with Community Health Nurses (CHNs) who were able to draw in additional support from colleagues across sectors such as the agriculture extension officers\. At community level, the enthusiasm and commitment of volunteers was essential for the delivery of services\. While limited funding of inputs and incentives were found to be insufficient by volunteers, this was managed well by introducing creative solutions for rewarding volunteers by the districts and communities themselves\. For example, some districts spend the limited “transport” funds available to enroll volunteers into the National Health Insurance Schemes, rather than paying them directly and thereby providing better value for money\. Other districts requested additional funding from the DAs to support the volunteers with t-shirts or by instituting awards for the best performing communities\. Similarly some communities rewarded volunteers for their work by exempting them from communal labor and levies\. 2\.3 Monitoring and Evaluation (M&E) Design, Implementation and Utilization 25\. Design\. The M&E system design was strong, and well aligned with the strategic priorities of the sector\. It consisted of the following components: (i) baseline and endline surveys conducted at district level; (ii) routine data collection at community level, collated at district levels, and monitored at regional level; and (iii) standard quarterly, semi-annual and annual reviews; and a midterm review\. Overall the methodological soundness of the arrangement was good, relatively easy to implement and allowed for the existing systems to be utilized and strengthen, hence also ensuring long term sustainability\. The PDO indicators chosen were relevant and independently verifiable\. 26\. Implementation\. An electronic register (eRegister) database system, able to capture a broad range of transactional data from community level and link such outputs to the outcomes captured in the District Health Information System, was developed and 8 piloted and is currently being implemented by the GHS\. The project also hired several data entry clerks at district level and purchased servers for the storage and centralization of data, as well as supported post campaign survey on LLINs distribution thereby further strengthening the overall M&E system for the delivery of community-based services\. Challenges with respect to the timely communication of routine collected data and monitoring reports featured throughout the project, due to suboptimal communication structures and challenges with transport and other logistics especially at district and sub- district levels\. Measures taken included the use of centrally dispatched data collection teams to ensure availability of essential data for decision making; continual sensitization of local government authorities regarding the need for improved monitoring and supervision; and refresher training to district health management teams and community volunteers\. The system became widely used, found reliable, and relied on by the GOG and Development Partners to monitor the Millennium Acceleration Framework (MAF) on MDG5 currently being implemented to speed up the achievement of the maternal mortality target by 2015\. 27\. Utilization\. The aggregation of routine collected data at sub-district levels made it initially difficult for the districts to identify individual poor performing communities, thereby the utilization of routine collected data for decision making at district level was somewhat reduced\. However this problem was fully overcome through the development of the eRegister system which allows district to tease out the performance of individual communities from the sub-district averages, thereby significantly improving the ability of Local Government Authorities (LGAs) to make informed decisions in the future once the system is implemented across the country\. Further the routine collected data was fully utilized at central and regional level to evaluate district performance and improvements made and assess the need for additional support in order to improve the delivery of community-based health and nutrition services\. This level of data management is being taken on board by other partners such as UNICEF, a sign of increasing confidence in and reliability of the system\. 2\.4 Safeguard and Fiduciary Compliance 28\. Safeguards\. The project was classified as category C and triggered only one safeguard triggered namely Pest Management (OP4\.09) due to the use of insecticide treated bed nets, however no separate pest management plan was required given that the national medical waste management plan followed the WHO guidelines for medical waste disposal and use of insecticides\. LLINs safeguard measures were implemented by GHS-NMCP in collaboration with the Environmental Protection Agency (EPA) and other agencies including a strategy on safe disposal or recycling of nets\. No social safeguards were triggered by the project\. The project was pro-poor as its focus was on the regions where poverty and poor health status is highest\. 29\. Financial Management\. An in depth financial management (FM) report at the end of the project concluded that the FM systems in place provides the necessary assurance that the Bank loan proceeds has been used for the intended purposes and the quarterly progress reports including procurement, physical and financial progress, and annual audit reports can be relied on\. Throughout the project FM arrangements were 9 rated satisfactory or moderately satisfactory with only minor issues identified; no qualified issues or accountability issued were raised in audit reports\. Issues with slow disbursement were resolved with the change in implementation and project management arrangements and the subsequent enhanced overall project implementation as well as by the above measures for more speedy replenishment\. 30\. Procurement\. The initial procurement plan signed during negotiations was revised and cleared during the restructuring phase\. Procurement arrangements were slightly downgraded to moderately satisfactory eight times\. Issues with procurement were resolved through a range of actions including the change in project management, frequent procurement clinics for both procurement and technical staff on the write up of TORs and the consultant selection process, addition of project staff in GHS-N and the revision of activities during restructuring and as a result the project closed with one of the most exemplary procurement records in the World Bank’s portfolio in Ghana\. 2\.5 Post-completion Operation/Next Phase 31\. Continued WB support\. The Government has already addressed the post- completion next phase with a Bank-financed US$68 million follow-on operation to be negotiated in the coming months\. This new operation, which aims to improve the utilization of community-based health and nutrition services for women of reproductive age, especially pregnant women, and children under the age of two in the entire country, builds on the lessons from this project by utilizing identical implementation structures while further enhancing the focus on results by utilizing financial incentive for performance\. More specifically the proposed follow-up project will: (i) increase the availability of high impact health and nutrition interventions; and (ii) address access barriers using the existing community-based health service delivery strategies and communications channels to inform, sensitize and motivate care-givers, community leaders and other key audiences\. This next World Bank operation will continue to strengthen the delivery mechanisms for community health and nutrition services established under the project; further enhance multi-sectoral coordination and collaboration; and continue to improve ownership and accountability of all stakeholder efforts towards improved maternal and child health outcomes\. 3\. Assessment of Outcomes 3\.1 Relevance of Objectives, Design and Implementation Overall Rating: Substantial The project is highly relevant to the country’s development objectives, global priorities and the Bank’s Country Partnership Strategy\. The overall relevance is rated Substantial\. 32\. The relevance of the objectives of the project is rated High\. Ghana signaled its commitment to scaling up nutrition services in March 2011 by joining the global Scaling Up Nutrition (SUN) movement and establishing a Cross Sectoral Planning Group on Nutrition under the National Development Planning Commission, Office of the President\. The current National Malaria Control Strategy (2008-15) identifies improved access and 10 utilization of ITN as a key national strategy for malaria reduction and outlines clear targets for universal coverage\. Further the new 2013 -2017 strategic plan for the health sector currently under preparation is expected to include emphasis on maternal and child health including nutrition and malaria prevention\. The project is highly relevant to the Bank’s priorities and development objectives\. Its Health, Nutrition and Population strategy aims to support country efforts to control priority health aspects, such as nutrition and malaria, through health systems strengthening and strong results focus\. In June 2013 it was announced that the Bank would triple the direct financing commitments for maternal and early childhood nutrition in FY13-14 and provide additional funding for technical and analytical support to countries with a high burden of undernutrition\. Further, the Bank new Ghana Country Partnership Strategy (CPS) seeks to address the multiple challenges to improve the delivery of basic services and hence the objective remains relative\. 33\. The relevance of the design is rated Substantial\. The strengths of the design include: (i) an appropriate choice of interventions based on sound technical priorities fully consistent with global recommendations for scaling up nutrition and the Ghana application of it to the country situation; (ii) a strong results chain with appropriate indicators plausibly connecting the development objective with the planned activities/inputs, outputs, processes and outcomes; (iii) the use of existing structures for implementation at regional, district, sub-district and community level; and (iv) good anticipation and mitigation of any exogenous factors which could potentially interfere with the results chain\. In addition the project supported strong partnerships with other development partners supporting Ghana’s nutrition and malaria efforts\. 34\. The relevance of implementation is rated Substantial\. The project was implemented using the existing structures for delivery of health services in Ghana with delivery of services through the regional and district health management teams, and local government authorities as the primary provider of services\. At sub-district and community level the project utilized and strengthened existing structures, namely the use of Community Health Workers and Nurses (CHW/CHN), community authorities including Community Health Committees (CHC) and community-based volunteers\. 3\.2 Achievement of Project Development Objectives Rating: Substantial 35\. Achievement of the PDO is rated Substantial, as measured against both the original and revised targets in accordance with the ICR guidelines\. The achievements seen under this project against the revised targets are summarize in table 4 and detailed in the sections below\. For final outcome ratings, separate outcome ratings against original and revised PDO indicators’ associated targets are weighted in proportion to the share of actual disbursements made in the periods before and after the approval of the revision\. In this case such a revision was made as part of the July 2010 restructuring, at which time 36% of the project funds had been disbursed\. 11  Table 4: Summary of achievements of project indicators against revised targets Outcomes No Intermediate Outcomes No Total % Achieved Achieved 1,2,3,4 4 1,3,4,5,7,8,9,10,11 9 13 87% Partially achieved 0 0 0 0 0% Not achieved 0 0 2,6 2 2 13% Not measured 0 0 Total 4 11 11 15 100% 36\. The MOH/Ghana Health Service developed a robust data management system that responded to the data needs at community level (see paragraph 25-27 on M&E)\. The Lot Quality Assurance Sampling (LQAS) survey was used to strengthen district-level monitoring and add evidence for decision making to improve implementation\. In addition, a summary end line survey was added to the design when it became clear that the next DHS initially scheduled for 2013 was no longer going to take place\. The end line survey findings are consistent with the program monitoring data findings\. It should be noted that the MICS (2011) could not be used because: (i) different sampling methodologies hamper comparison of data; and (ii) MICS data look at district level aggregates, not project intervention areas\. The causal relationship between the four PDO indicators and the intermediate outcome (IO) indicators is described in Annex 3 together with a more detailed analysis\. 37\. PDO 1: Proportion (%) of infants under six months exclusively breastfed in the past 24 hours\. According to the project administrative data, weighted according to number of communities of the 5 regions which implemented the community-based health and nutrition services in all districts namely Northern, Upper East, Upper West, Central and Volta regions 1 , 84\.5% of children under the age of six months were exclusively breastfed\. This surpasses the original target by 69% and the revised target by 80%\. While improvements were seen in all regions the target was not met by in the Central region, principally because they did not implement activities in some districts until very late in the project and hence had limited time for impact\. Given the relative limited number of Central Region communities then this has little impact on the significant achievements seen in the other regions and hence the overall impact\. 38\. PDO 2: Proportion (%) of infants 6-9 months receiving semi-solid and/or solid foods in addition to breast milk in the past 24 hours\. According to the project programme data, targets were surpassed in all regions, on average 93\.5% of children aged 6-9 months received appropriate complementary feeding and continued breastfeeding\. 1 Also, although the project was also implemented/piloted in one district/sub-metro area each in the Western, Greater Accra and Ashanti regions, then given the low geographical coverage of the project in these regions combined with the lack of project administrative data from two out of the three regions, then these districts are not included in the analysis\. However given the relative limited number of communities/beneficiaries targeted in these areas then their omission from the analysis should have limited effect on the overall results\. 12 39\. PDO 3: Proportion (%) of children under 2 years with diarrhea who received oral rehydration therapy\. The use of ORT in children under two years of age during diarrhea was significantly improved during the span of the project with the targets surpassed in all regions\. On average 73\.5% of children less than 2 years of age receive ORT when they have diarrhea\. 40\. PDO 4: Proportion (%) of pregnant women and children under five years of age who sleep under LLINs the night preceding the survey is carried out\. Over the life of the project the utilization of LLIN significantly increased\. According to MICS 2011 36% of pregnant women and 46% children under the age of five were utilizing LLINs in the project regions, surpassing the targets by more than 50%\. Given that the data used to access progress on this indicator (MICS 2011) was collected prior to the completion of 7 out of the 10 planned regional mass-distribution campaigns it can be assumed that overall impact is likely even higher\. This is because in the 3 regions which had completed the campaigns prior to the data collection, namely Northern, Eastern and Volta, an average improvement in LLIN utilization of 53% and 68% was observed in children and pregnant women respectively, whereas the same improvement was only 20% and 26% respectively in the project regions overall\. 41\. Improvements in infant feeding and uptake of health services likely attributable to the project\. It is very likely that progress on the first three outcome indicators is to some extent attributable to the project\. Although overall improvements in infant feeding and use of ORTs have been seen in the years prior to the project, there are indications that progress at a national level has been stagnating during the lifespan of the project (see Annex 3, figure 5), hence less likely that achievements seen in the project targeted regions are due to overall nationwide progress\. Second, over the lifetime of the project relatively more pregnant women and young children received health services, as indicated by the proxy indicators IO 5, 6, 7\. Although the administrative data at the end of the project records very low levels of vitamin A supplementation in children these levels were likely caused by supply issues during the last campaign rather decreases in the demand for the service\. Recorded levels of antenatal and child vitamin A supplementation in 2012 were significantly higher, as well as vitamin A supplementation post-partum delivered through routine services continued to increase during the last year of the project (see Annex 3 figure A3\.6)\. 42\. To establish if the increase in utilization of services in the project regions over the lifetime of the project (2007-2013) could be attributable to the project, an analysis using comparable survey data (DHS 2008, MICS 2011) was conducted in the three northern regions, which had started implementing sub projects by the time the data collection for MICS 2011 started in August 2011, compared to national averages\. Given that MICS 2011 did not include an indicator for vitamin A supplementation postpartum (IO7), only analysis of antenatal service delivery (IO5) and vitamin A supplementation of children (IO6) was done\. The analysis revealed that the increase in the proportion of women who had received 4+ antenatal visits was higher on a national basis than in the 3 northern regions (see Annex 3 figure A3\.7)\. However this indicator is not very sensitive to change as it captures a 2 year period, and it is quite likely that any potential improvements in 13 project regions would not be seen given that by the beginning of that time period only a very limited number of communities had started implementing community based interventions2\. The same analysis also revealed that the relative improvements in the proportion of children aged 6-59 months who received one or more vitamin A supplements in the past six months was significantly higher in the project regions versus at national level\. This is good indication that the achievements related to PDO indicators 1, 2, 3, and the related intermediate outcome indicators were attributable to the project\. 43\. Improvements in utilization of LLINs likely attributable to the project\. The evidence for improved utilization of LLINs is supported by the significant improved access to LLIN (IO8) seen over the lifetime of the project\. Given that data was not available specific for households with children under five the data for all households were used as a proxy and the progress on this indicator, combined with the knowledge that the majority of regions had not yet started or completed their campaigns by the time the survey was collected, gives sufficient evidence to conclude that the intermediate indicator (IO8) for access to LLIN was also met\. This is further substantiated by the results of the post hang-up survey conducted for the project which reported that 66\.2% of all households interviewed had received LLINs between 2010 and 2012\. Improved access was possible because of the increase of LLIN supplies available nationally to which the 1\.5 million nets contributed by the project (IO9)\. While an estimated 5 million nets were needed to ensure universal coverage in the project regions, given that women of childbearing age (14-49 years) and children under the age of five make up about half of the population in Ghana, it is reasonable to assume that the project financed LLIN correspond to approximately two thirds of the needs for pregnant women and children under five in the targeted regions\. This combined with the fact that LLIN use was also promoted by the community volunteers in the project areas provides assurance that achievement of PDO 4 can, to a great extent, be attributable to the project\. This analysis on attribution takes cognizance of the contribution of other malaria partners involved in the LLIN hang up campaign for universal coverage\. 44\. Other achievements\. The project reached a total of 391,198 direct beneficiaries 61% of whom were women (IO11) with key health and nutrition services, including 81,667 pregnant women (IO10) and 309,531 children under the age of two years of age (IO10), in a total of 55394 communities\. Improvements in community-based service delivery was aided by the improved supervision and support provided by the DHMTs (IO1), improved technical capacity of health workers (IO3) and community mobilization including the identification and training of 20,496 community volunteers and the establishment of community committees (CIC/CHC) (IO2)\. Further, through the development of the National Nutrition Policy (IO4) the necessary direction on the way forward for nutrition in the country is provided together with the evidence to build case 2 According to the Midterm Review annex 3 and compared to the fact that 2843 communities in the three northern regions implemented activities at the end of the project, only 138 communities, equivalent to 4\.85%, had started implementing interventions by September 2009, corresponding to ~2 year prior to the collection of MICS 2011\. 14 for food security and nutrition, communication, advocacy and policy discourse at the national and community levels\. In addition, the project, which targeted the most affected districts, contributed to mitigating the impact of malaria and nutrition deficiencies, thereby improving the health profile of these districts\. 45\. Overall achievement result\. Given that the project PDO targets were revised during restructuring, in order to rate the achievement of the project an aggregated achievement of the PDO was calculated in accordance with the ICR guidelines\. Achievement of the original objective, based on the weighted achievement of each element is ¼* (1\.22+1\.28+0\.94+0\.87) = 1\.08 or 108 percent\. The progress was therefore rated Substantial against the original PDO\. Achievement against the revised objective, based on the weighted achievement of each element is ¼* (1\.06+1\.26+1\.24+1\.57) = 1\.28 or 128 percent\. The progress was therefore rated High against the revised PDO using the revised targets\. 46\. The aggregated achievement of the PDO, based on the separate outcome ratings against the original and revised project targets weighted in proportion to the share of actual disbursements made in the periods before and after approval of the revisions (36 percent and 64 percent respectively) is calculated as (0\.36*108) + (0\.64*128) = 38\.88 + 81\.92 = 120\.8 percent, which represents a full achievement of the aggregated targets\. Therefore the project’s overall efficacy is rated as being Substantial (see table 5)\. Restructuring of the project contributed significantly to the overall eventual contribution of the PDO through the changes in implementation arrangements and subsequent improved project management and the revision of targets while the tightening of the scope and the extension of the project by one year to allow for “catch up” also significantly contributed to the project’s success\. Table 5\. Aggregated assessment for achievement of PDO targets Against Original PDO Against Revised PDO Overall targets targets Rating Substantial High Rating value (out of 4) 3 4 Weight 36% 64% 100% (% disbursed before /after restructuring) Weighted Value 1\.08 2\.56 3\.64 Final rating Substantial 3\.3 Efficiency Rating: Substantial 47\. This project contributed to Ghana’s development through the following mechanisms\. First, it improved child survival by decreasing the incidence of stunting, anemia, and malaria\. Second, it generated long-term economic benefit by increasing the size of active and productive labor force who can potentially contribute to economic growth and poverty elimination\. Third, it promoted equity by targeting areas that suffered 15 from malnutrition problems\. Fourth, the project contributed to improving the health system efficiency in Ghana by strengthening institutional capacity to make evidence- based decisions\. Finally, it helped prevent unnecessary use of health care and reduced needed care for people with less cognitive development as a result of childhood stunting\. 48\. Evidence is available on the significant economic benefit of investment in types of health and nutrition interventions financed by the project\. The most recent empirical estimates of the negative effects of stunting on worker productivity and adult earnings range from about 10 percent per year3, to as high as 20 percent per year4\. Anemia is associated with a 2\.5 percent of reduction in wages\. Productivity losses at the individual level are estimated to be more than 10 percent of life time earnings, which at the macro level can lead to a 2‐3 percent loss in GDP\. 49\. Results from the economic analysis during restructuring concluded that this project is a sound investment\. Benefits estimated for the analysis included increased lifetime earnings from reduced stunting, anemia, and iodine deficiency and Vitamin A deficiency\. Other benefits included those from lives saved through use of LLINs and exclusive breast-feeding\. Wage information was used to estimate future income flows of children who were saved through this project 5 \. The net present value of the project investments was estimated to be about US40 million even with a discount rate of 5 percent\. The benefit-cost ratio was estimated to be 2\.81, meaning US$1 investment will yield US$2\.81 benefit (See Annex 4 for details)\. 50\. The conclusion from previous analysis remains valid, and indeed, is likely to be an underestimate\. The analysis used standard methodology for economic evaluation, comparing cost and benefit taking into consideration time effect\. The assumptions (summarized in Annex 4) used are based on global literature and are commonly accepted\. The results may have underestimated the real benefit and efficiency of the project for two reasons\. First, conservative assumptions were chosen when the evidence presents a range\. Second, the analysis did not include benefits that cannot be easily translated to monetary values, e\.g\., system efficiency\. 3 Hoddinott 2003, World Bank 2006, Quisumbing, Gillespie and Haddad 2003, Alderman Hoddinott and Kinsey 2002, Ross and Horton 2003 4 Granthan-McGregor\.S et al 2007 5 Human capital methodology has been commonly used to estimate economic benefit related to human development\. Although there are concerns about whether all the saved lives will have been employed, it is also worth noting that children saved through current investment will only enter the labor market after more than 10 years\. Prospect of job market may be promising given the strong growth of economy in Africa continent\. More importantly, average wage also reflects the situation of unemployment, which to the extent makes the concern less of an issue\. 16 51\. Although it is ideal to use recent outcome data to confirm the previous conclusion, it remains a challenge for many developing countries where routine data system is weak\. With the absence of reliable administrative data, Demographic and Health Surveys (DHS) are commonly considered the gold standard for measuring child health outcomes (e\.g\., under-5 child mortality)\. Ghana DHS 2008 was conducted after project approval and the results were used to update project baseline values\. The 2013 DHS has been delayed and it is possible that the survey will be withdrawn\. Outcome data is available from two Multiple Indicator Cluster Surveys (MICS) for 2006 and 2010, however, the period between 2006 and 2010 is not sufficient to capture the full effect of the project, in particular the significant achievements made through the later stage\. In addition, project effect cannot be accurately estimated using the MICS results, since there is no aggregate estimate available for the project areas\. 52\. The data at output level indicates that outcome may have improved more than expected, because many indicators measuring coverage of essential health and nutrition interventions have exceeded their targets\. For example, the proportion of infants under six months who are exclusively breastfed in the 24 hours has increased from 72\. 9 to 84\.5 percent, exceeding the target of 80 percent\. More than 90 percent of infants between six and nine months received semi-solid foods, exceeding the target of 74 percent\. About 1\.55 million bed nets (1\.3 million estimated at appraisal) have been distributed through the project, accounting for approximately two-thirds of the needs for pregnant women and children under five in the targeted regions\. Consequently, the proportion of under- five having slept under treated bed nets almost doubled during the project period, with the target exceeded by 50 percent\. 53\. Despite a one-year extension of project implementation, the project has been implemented efficiently\. It has successfully expanded coverage of key health interventions at a large scale, achieving more than expected without additional resources\. Implementation challenges were addressed in a timely manner to avoid any subsequent negative consequences\. The Bank team responded to the government’s requests to change implementation arrangements, which caused rapid acceleration in the implementation of activities\. Following restructuring, technical and contract management support were provided to GHS-N for them to deliver technical specifications of procured goods in a timely manner, ensuring availability of commodities in facilities\. 54\. In conclusion, despite constraints of outcome level data, the efficiency of this project is substantial based on: i) the results from previous economic analysis that remains valid, ii) the results from output data analysis, and iii) the efficient project implementation, achieving more than expected results without additional resources\. 3\.4 Justification of Overall Outcome Rating Rating: Moderately Satisfactory Relevance Efficacy Efficiency (Achievement of PDO) Substantial Substantial Substantial 17 Overall outcome rating: Moderately Satisfactory 55\. As discussed in section 3\.1 the projective objective, design and implementation were relevant both before and after restructuring\. A change in senior management within the MOH PPME department resulted in poor project management and poor implementation which ultimately led to the restructuring of the project to change the implementation arrangement, reassess the targets and allow for additional time\. Ultimately the project overcame the initial implementation issues and surpassed all of the four PDO indicator targets\. It also achieved most intermediate outcome indicators and surpassed the number of beneficiaries of the project\. Lastly, the objective of the project was achieved at the cost assumed at appraisal with an estimated 2\.3 fold return on the investment\. 3\.5 Overarching Themes, Other Outcomes and Impacts (a) Poverty Impacts, Gender Aspects, and Social Development 56\. The project improved the capacity of local governments and communities to plan, budget and implement community based nutrition interventions and reached 5,394 communities with selected interventions\. Though pregnant women were obvious project beneficiaries of the project, the role of community volunteers/growth promoters gave preference to women and ensured a minimum of 50% female participation\. Also gender balance was specified in the sub-project manual for the formation of the community implementation committees\. (b) Institutional Change/Strengthening 57\. The most significant institutional contributions were at levels below the central level, namely the capacity of local governments to plan, administer and supervise community based interventions both within and outside of the health sector\. While coordination for nutrition across sectors could have been improved further, e\.g\. through more effective engagement of the District Assemblies, and improved mobilization of community leaders and the Community Assemblies, the use of community committees for coordination was to some extend effective while the identification, training and mobilization of community-based volunteers for service delivery significantly enhanced the capacity of communities to improve their nutritional situation\. (c) Other Unintended Outcomes and Impacts (positive or negative) N/A 3\.6 Summary of Findings of Beneficiary Survey and/or Stakeholder Workshops 58\. A beneficiary survey was conducted using a combination of qualitative and quantitative data collection in a total of 2,520 households across project areas\. The perceptions and experiences of beneficiaries were very positive although limited awareness was found in Kumasi metro in Ashanti Region given late implementation of the project only 3 months prior to the survey\. The survey highlighted that the project 18 significantly benefitted the target populations with: (i) improved utilization of antenatal services, bed nets, growth monitoring and health education; and (ii) perceived improved health and pregnancy outcomes; as well as (ii) improvement in related skills, such as hygiene practices and ability to identify danger signs in young children during illness\. 59\. The survey indicated that in most project areas community participation, mainly through the use of community volunteers, was good and specifically mentioned activities included the dissemination of health education, distribution of health commodities (such as LLINs, anthelmintic drugs and vitamin A supplements), and growth monitoring\. However the survey also found that some barriers to access and utilization of services existed\. These include high attrition rates; illiteracy and lack of motivation by the volunteers; financial constraints of families to implement newly gained knowledge on optimal feeding and care of young children and pregnant women; commodity supply issues including vitamin A capsules; and the fact that not all communities within a district were covered by the services\. Other issues raised include the impact of certain social and cultural beliefs and practices; poor communication skills (e\.g\. scolding) by health facility staff; and issues of access especially in the most rural communities in the raining season\. 4\. Assessment of Risk to Development Outcome Rating: Moderate 60\. Capacity and ownership\. Technical improvements in approaches to community services are likely to be sustained\. Although the project suffered to some extend from issues of limited ownership by local government and communities, indicating a risk that the momentum gained and efforts achieved could be lost if efforts are not sustained, given the focus and high levels of political support on decentralization in Ghana and an ever increasing recognition of the importance of nutrition, the risk to the development outcomes is moderate\. This is further substantiated through the declared interests of the GOG to invest further within this area and the fact that a follow-on investment with the World Bank for US$68 million will be negotiated in the coming months, coupled with other donor partners continued commitment to support nutrition and malaria efforts in Ghana\. 61\. Leadership of community based interventions\. Given the diverse determinants, both indirect and direct, of malnutrition going forward there may be uncertainty as to which sector or entity should lead on the implementation of a comprehensive package of community services\. While greater clarity exists with respect to malaria, and the importance of multisectoral action for nutrition is critical, there is need to ensure that sectoral roles and responsibilities are not lost as more and more sectors get involved in the scale up of nutrition interventions\. 62\. Fiscal space\. Although the commitments for nutrition and malaria interventions in Ghana have been stated in various policies, strategies and events, limited funding for such activities remain\. However, despite limiting fiscal space within the health sector, there is sufficient awareness within Ghana, the Ghana Government and health sector 19 entities, reflected in the new health 2013-2017 strategy being prepared, to advocate for, and obtain significant funding for nutrition and malaria prevention\. Further the budgetary demands for the recurrent costs of the project were estimated to be modest (~1% of the overall health budget) ensuring long term sustainability of the investment\. Therefore the risks to development outcomes in future are considered to be moderate\. 5\. Assessment of Bank and Borrower Performance 5\.1 Bank Performance (a) Bank Performance in Ensuring Quality at Entry Rating: Moderately Satisfactory 63\. The Bank team was comprised of staff with a range of skills and knowledge, operational experience, nutrition and malaria technical expertise, and country specific knowledge\. It effectively capitalized on the relevant knowledge and lessons learned from the previous CBFSNC, discussions with relevant stakeholders at all levels, and the sound relationship with the MOH and GHS based on the previous HSPS project\. While a more in-depth analysis of the factors influencing the utilization and access to key nutrition and health services as well as the impact of barriers to behavior change might have been desirable, the decentralized arrangements were sufficiently well suited to deal with implementation flexibility needed to accommodate contextual and cultural differences across regions and districts\. While the team should have been more aware of and address the challenges in establishing a formal institutional arrangement for the coordination of nutrition such as the proposed Inter-Ministerial Steering Committee on Nutrition and Child Survival, a multi-stakeholder platform, the Cross-Sectoral Planning Group (CSPG), has now been established, thanks in part to the project, under the National Development Planning Commission\. (b) Quality of Supervision Rating: Satisfactory 64\. The Task Team managed to use preparatory and supervisory resources to great effect, including proactively accessing trust funds from different sources\. With regular supervision missions together with the strong day-to-day engagement of the co-TTL based in the country office, the team was able to provide extensive support and timely inputs to the client\. For instance, when the flooding crisis happened shortly after the project effectiveness mission, the team quickly responded to a GOG request and assisted with the development of an operational strategy to assist the flood affected districts\. The team noted the delays in implementation immediately and worked to support the client to resolve the issues, urging intensive remedial action on the part of the government project team\. Although the team had its reservations, it agreed to scale up flood affected regions based on a detailed action plan with clearly established responsibilities and timelines\. When it became clear that that the change in implementation strategy was not functioning, with major delays in getting data from the flood affected areas, the co-TTL met weekly with the newly formed GOG Implementation Task Force to assist in getting implementation back on track\. The team further encouraged government to contract out 20 some of the activities including the preparation of the sub-project manual, to speed up implementation\. 65\. The team sought to improve project implementation by facilitating the Rapid Results Approach to build leadership and program management skills and thereby accelerate the achievement of results\. This process led to the identification of the GHS- PPME director as the new overall project manager as well as more defined roles and responsibilities of the individuals in the government project team\. Although the expectation was that this would expedite the implementation of various pending activities at national level and lead to a faster pace of downstream implementation, this was not the case\. When implementation had still not improved two years into the project, the team conducted the Mid-Term Review early to pursue project restructuring\. Continuous Task Team supervision resulted in quick identification and resolution of any misunderstandings regarding the restructuring process by the new project manager\. The Bank team also decided to employ a field based implementation consultant to provide intensive support to the government team on a daily basis and the TTL conducted monthly follow up meetings with the client beyond the regular scheduled missions until the project closed\. (c) Justification of Rating for Overall Bank Performance Overall Rating: Moderately Satisfactory Overall the Bank team provided a Moderately Satisfactory level of support and supervision during the design and implementation of the project\. 5\.2 Borrower Performance (a) Government Performance Rating: Moderately Satisfactory 66\. Government involvement and political commitment to the project was extremely good during preparations - when the initial project manager departed shortly after project effectiveness momentum and staff commitment suffered\. The management of the project remained weak until after restructuring\. Although various measures were taken, including increased frequency of technical and management review meetings, measures for improved accountability; and increased flexibility in the utilization of district allocations, implementation continued to be slow\. Even the reassignment of day-to-day project management from MOH to GHS did not result in immediate improved implementation\. Significant improvement of ownership was seen during the last half of the project (2011- 2013)\. The GHS-PPME led the government team and improved performance dramatically and ensured better technical and management support was provided to the relevant technical departments\. The leadership, dedication and ownership shown by GHS-PPME together with improved provisions for supervision to the government team also influenced ownership at regional and district level including the active involvement 21 of the Regional Coordination Committees and the District Assemblies in the project besides the Regional and District 67\. Health Management Teams, sometimes planned but remained very limited in the first half of the project life\. GHS-PPME also took action resolving issues hindering implementation such as the limited supply of commodities identified earlier in the project\. As a result project performance improved significantly and a considerable scale up of community-based health and nutrition services was seen in the two final years of the project\. For instance, in June 2010 only 10% of the targeted communities provided such services, by March 2011 the proportion had increased to 51% and by the end of the project 97% of the targeted communities implemented the key health and nutrition services supported under this project\. (b) Implementing Agency or Agencies Performance Rating: Satisfactory 68\. The performance of the implementing agencies under GHS was in general influenced by great dedication by the core team but constrained by insufficient human resources and capacities, especially within the area of contract and project management\. This resulted in delays in delivering planned actions and activities\. The strong dedication and strong sense of ownership of the project by key staff meant that they themselves were reluctant to request assistance for various tasks, such as the development of the public education materials which were done without input from the health promotion officers (despite the fact that these staff were experts in communication)\. While the need for additional technical support should have been identified by the technical staff themselves, this should have been a GHS-N project management responsibility\. 69\. After the decision was made to provide additional administrative and technical support especially to GHS-N, the development of key policies and strategies also moved forward\. The technical team under the NMCP also ensured the strengthening of the coordination mechanisms and distribution channels for LLINs and ensured that the required safeguard measures were finally taken through the development of a national strategy for the safe disposal/recycling of nets in collaboration with the Department of Occupational Health, GHS and the implementation of this strategy in collaboration with EPA and other agencies\. 70\. No major issues with respect to procurement or financial management were encountered although contract management remained suboptimal through the life of the project resulting in delayed submissions by consultants\. 71\. While the government team ensured that basically all of the targeted communities (97%) and more than the targeted number of beneficiaries were reached, initial delays in implementation left the team scrambling during the latter part of the project to reach the final communities only a few months before closing\. Implementation became more focused on the achievement of specific targets rather than achieving integration of activities under the project with that of other projects or initiatives\. That said, overall integration of the project was good such as in contributing to development of the various 22 strategies/policies, development of the national monitoring system for community based health and nutrition services and the development of the eRegister to name a few, contributed significantly to the sector overall\. (c) Justification of Rating for Overall Borrower Performance Rating: Moderately Satisfactory 72\. The Government maintained strong political commitment to address nutrition and malaria concerns at community level, and made regular and timely counterpart contributions to support the project\. Ultimately all PDO indicators were met, despite poor project management in the first half of the project which resulted in many communities not receiving services as early as might have been planned or possible,\. Based on these considerations, the overall performance is rated moderately satisfactory\. 6\. Lessons Learned 73\. Support for specific priority areas alongside overall SWAp contribution\. The project was innovative in the use of an existing financing modality to direct more attention to neglected areas in the POW while still fully entrenched in the broader SWAp, thereby building upon the progress of using national systems and procedures and strengthening institutional capacity to achieve health outcomes, without regressing to project specific funding\. Similarly, the use of Lot Quality Assurance Sampling (LQAS), a random sampling methodology to identify whether supervision areas (districts, sub- districts) were meeting project specific targets, combined with overall strengthening the M&E system at all levels, highlights how it is possible for earmarked funding to introduce innovation while contributing to the SWAp as a whole\. 74\. Effective use of incentives for community volunteers\. One of the lessons learned under this project is the need to effectively utilize limited funding of inputs and incentives for volunteers to deliver community-based services given the overall high cost of providing incentives to such a large cadre of people\. While as the financial inputs on their own were found to be insufficient by most volunteers, examples of more effective use of these funds and other incentives was seen across districts and communities such as the enrollment of volunteers into the National Health Insurance Schemes, the exemption from communal activities and levies and priority treatment at health facilities\. However, in order to further optimize the inputs for community volunteers in the future links to performance should also be considered\. 75\. Timely Restructuring\. The initial implementation arrangements for the project constrained its progress\. The restructuring greatly improved the management arrangements and helped move the project forward\. Because of the implementation constraints, the task team moved the anticipated date for the mid-term review forward in order to get to the restructuring earlier\. Proactive supervision clearly led to improved project performance\. In hindsight, this restructuring could even have been done earlier\. 76\. Importance of local ownership\. The leadership, dedication and ownership shown by GHS-PPME together with improved provisions for supervision to the 23 government team positively influenced ownership at regional and district level\. This also facilitated improved data management through the strengthening of e register\. Community based health is now a cornerstone of health delivery system in Ghana\. 77\. Other\. It should be mentioned that while the addition of a sub-metro areas of Accra and Kumasi in the Great Accra and Ashanti regions to the project was done especially to draw on lessons learned based on implementation in urban settings, late implementation of community-based health and nutrition services in these areas means that such lessons have still not been identified at this time\. 7\. Comments on Issues Raised by Borrower/Implementing Agencies/Partners (a) Borrower/implementing agencies 78\. The Government team appreciates the efforts by the WB team from the proposal development through to the end of the project, including the preparation of the ICR\. Throughout the project, the task team leaders and the team of consultants provided guidance and advice indicating the wealth of experience in handling such projects\. For example guidance on early planning for the preparation of the ICR was very helpful\. 79\. The scheduled missions, though seemed disruptive at the time, sometimes helped shape the progress in implementation especially for the initial part of the project when performance started declining\. Both task team leaders who worked on the project provided much support but were also firm on deliverables\. The CPPR workshop, held in 2012, was also very educative and a good opportunity to share experience with other WB project staff\. 80\. The Government team appreciates the efforts in completing the ICR\. Government team was very involved throughout the preparation\. The main comments from Government team on the ICR were that: (i) the end line survey be used to inform the project performance evaluation; and (ii) program data play a key role in the analysis to guide continuous improvements in the quality and completeness of program data collection and management\. \. (b) Cofinanciers N/A (c) Other partners and stakeholders N/A 24 Annex 1\. Project Costs and Financing (a) Project Cost by Component (in USD Million equivalent) Actual/Latest Appraisal Estimate Percentage of Components Estimate (USD (USD millions) Appraisal millions) 1\. Institutional strengthening for coordination, implementation and 2\.2 4\.0 9 outcomes 2\. Community-based health and 13\.0 11\.9 52 nutrition service delivery 3\. Malaria prevention 9\.8 9\.1 39 Total Baseline Cost 25\.00 25\.00 Physical Contingencies 0\.00 0\.00 0 Price Contingencies 0\.00 0\.00 0 Total Project Costs 0\.00 0\.00 Front-end fee PPF 0\.00 0\.00 0 Front-end fee IBRD 0\.00 0\.00 0 Total Financing Required 25\.00 25\.30 100 (b) Financing Appraisal Actual/Latest Type of Estimate Estimate Percentage of Source of Funds Cofinancing (USD (USD Appraisal millions) millions) Borrower 0\.50 0\.50 100 International Development 25\.00 25\.30 100 Association (IDA) 25 Annex 2\. Outputs by Component 2\.1\. The project was organized around three components and the following presents the outputs from each component\. Component 1: Institutional Strengthening for Coordination, Implementation and Outcomes (US$ 4\.0 million) 2\.2 The specific objectives of this component were: (i) to develop effective inter- sectoral coordination, ownership, and accountability for nutrition towards the establishment of a coherent national program; and (ii) to strengthen the MOH and GHS to effectively coordinate implementation of the community-based health and nutrition program supported by the project\. (Source: PAD) 2\.3\. The intermediate outcomes for component 1: (i) improved health sector ownership, leadership and accountability for nutrition and child survival outcomes; and (ii) nutrition mainstreamed in cross-sectoral operations; are shown in table A2\.1 together with the associated intermediate results indicators\. Table A2\.1: Intermediate results for Component 1 Intermediate Intermediate Outcome Baseline Baseline Original Revised Achieved Outcomes Indicators (Original) (Restructuring) Target Value Target Value (Cumulative) (Cumulative) Proportion (%) of 0 No data available 75% 75% 100% Improved planned supervision and health sector support activities by ownership, District Health leadership and Management Teams accountability (DHMTs) in the for nutrition intervention areas having and child been conducted (IO1) survival Proportion (%) of new No data available new 50% 23\.1% outcomes communities in target areas with a functional community health committee (IO@) Number (#) of health (not in 159 (500) 500 3,853 personnel receiving original health training (IO3) results workers framework and 20,496 although volunteers mentioned) Nutrition Development of the National Procurement Policy Policy mainstreamed National Nutrition Policy Nutrition process has available available in cross- (IO4) Policy not begun sectoral available operations 2\.4 Establishment of coordination mechanisms at all levels\. Although the establishment of a formal national inter-ministerial coordination committee was dropped as an activity during restructuring, multiple coordination mechanisms were established both at national level and across sub-national levels\. At the national level the Technical Committee (TC), functioned throughout the project life, frequently meeting with active participation and productive inputs from members\. It was initially chaired by PPME- 26 MOH and subsequently by PPME-GHS after restructuring with members from Ghana Education Service (GES); Ministry of Food and Agriculture (MOFA); Department of Community Development (CD) under Ministry of Local Government, Rural Development and Environment (MLGRDE); Ministry of Women and Children’s Affairs (MOWAC); and Ministry of Finance and Economic Planning (MOFEP)\. 2\.5 In each of the 5 project regions Regional Advisory Committees (RAC) were established, based on existing social sector sub-committees and chaired by the Regional Coordinating Director of the Regional Coordination Council (RCC)\. They were composed of regional directors from GHS, Ministry of Food and Agriculture (MOFA), Ghana Education Service (GES), Child Health Department under Ministry of Women and Children’s Affairs (MOWAC), Department of Community Development under Ministry of Local Government, Rural Development and Environment (MLGRDE), as well as the Regional Planning Officer from Ministry of Finance and Economic Planning (MOFEP) and a regional focal person for the project\. These committees coordinated the district sub- projects, provided technical assistance and reviewed all of the proposals, budgets and performance of the district sub-projects\. 2\.6 Similarly, in each of the 77 project districts a District Advisory Committee (DAC) was established, based on existing social sector sub-committees, and chaired by the District Chief Executive\. Members included the various heads of Ministries, Departments and Agencies drawn from the Social Services Sub-committee of the District Assembly (DA), namely health, agriculture, education and community development\. The DACs were responsible for planning, budgeting and overseeing the sub-projects including the development of annual district plans of action\. In order to provide additional support to the district, GHS also developed together with key stakeholders specific guidelines for community level planning and budgeting which were subsequently included in the overall planning guidelines provided to all districts from MOFEP\. 2\.7 The project reached 5394 (97%) of the targeted 5584 communities, 23\.1% of which managed to have functional Community Implementation Committees (CIC), many of which were established based on existing community health committees\. These CICs facilitated the identification of the community volunteers, also known as the “community growth promoters”\. The CICs hosted regular meetings with sub-district staff such as the community health officers (CHO) and nurses (CHN), to whom they also provided monthly progress reports to, and organized periodic community dunbars (meetings), to discuss progress and any pertinent issues\. 2\.8 Development of key strategies to mainstream nutrition across sectors\. To mainstream nutrition into the multisectoral development agenda, key strategies and guidelines were developed\. This included preparation of the milestone National Nutrition Policy which will guide planning and implementation of future nutrition activities in Ghana and is currently awaiting adoption as a cabinet paper\. A companion document, the national Nutrition Advocacy Strategy was designed to guide activities for improved awareness and responsibility across sectors and at all levels has been implemented in part under this project\. Preparation of the school health and nutrition curriculum was dropped 27 during restructuring however the project instead significantly contributed to the development of a comprehensive Community Service Delivery Strategy which addresses three major challenges: multiple service delivery mechanisms, volunteer standards and a data collection system at community level\. 2\.9 Development of a national Vitamin A Supplementation Strategy\. Vitamin A is recognized as one of the highest priority micronutrients for child survival\. The very important Ghana national strategy, on how to ensure twice-yearly distribution of vitamin A supplements in a post- National Immunization Days (NID) era, was one of the key outcomes of this component\. 2\.10 Development of a broad electronic monitoring system for a range of community based health and nutrition services\. In order to develop a monitoring system which could capture relevant information at community level and make it accessible to a range of stakeholders, GHS developed an electronic register database system (eRegister) which captures a wide range of program data from community level and links the outputs to the outcomes captured in the District Health Information System\. The project thus produced a means to provide critical information to benefit the broader health sector\. This mechanism has been adopted and is being used by a broad range of health partners in the country 2\.11 Improved project management capacity of GHS\. The project enhanced the GHS working environment, an element with a bearing on staff productivity\. Before project support GHS-N facilities were extremely poorly equipped making it very difficult for the staff to work efficiently\. Project inputs improved internet connectivity and provided for printers, scanners and computers\. Additional skilled contracting and technical personnel were provided as well as project financing participation of key staff in relevant management training and courses\. Component 2: Community-Based Health and Nutrition Service Delivery (US$11\.9 mill) 2\.12 The specific objective of this component was: to scale up community based health and nutrition services for children under two and pregnant women based on a community-level package of Essential Nutrition Actions\. (Source: PAD) 2\.13 The intermediate outcomes for component 2: (i) enhanced care of pregnant women, lactating mothers and young children; and (ii) improved micronutrient intake in target group; are shown in table A2\.2 together with the associated intermediate results indicators\. 28 Table A2\.2: Intermediate results for Component 2 Intermediate Intermediate Baseline Baseline Original Revised Achieved Outcomes Outcome Indicators (Original) (Restructuring) Target Value Target Value (Cumulative) (Cumulative) Proportion (%) of Enhanced care mothers of children 69* 70\.8** 79 78 83 of pregnant under two years of age women, who had at least 4 lactating pregnancy care visits mothers and during their most young children recent pregnancy (IO5) Proportion (%) of Improved children 6-59 months 78* 58\.3** 80 70 51\.6 micronutrient of age who have intake in target received at least one group vitamin A supplement (Note: revised in the last six months during (IO6) restructuring\. Proportion (%) of new Original: mothers who receive 43* 60\.3** 53 69 74\.9 Improved high-dosage vitamin A status in supplements within 8 targeted weeks of delivery children aged (IO7) under two) Source: * DHS 2003 (national averages), **DHS2008 (target region average) 2\.14 Delivery of community based health and nutrition services to 391,198 beneficiaries\. As can be seen from table A2\.3 the project was implemented in 97% (5,394) out of the targeted 5,584 communities reaching 309,531 children under the age of two and 81,667 pregnant women with key community based health and nutrition services\. Table A2\.3: Project coverage data Regions Districts Communities Beneficiaries Children under 2 Pregnant Women Target Covered (%) Target Covered (%) Target Covered Target Covered (%) (%) Northern 20 20 (100%) 1928 1738 (90\.1%) 119,163 33,218 Upper East 9 9 (100%) 584 584 (100%) 43,052 9,950 Upper West 9 9 (100%) 521 521 (100%) 23,590 13,798 Central 17 17 (100%) 961 961 (100%) 40,328 6,295 Volta 18 18 (100%) 1436 1436 (100%) 72,031 17,010 Western 2 2 (100%) 49 49 (100%) 5,192 1396 Ashanti 1 1 (100%) 60 60 (100%) 6,175 0 Greater Accra 1 1 (100%) 45 45 (100%) N/A* N/A* Total 77 77 (100%) 54 5394 (97%) 300,000 309,531 65,000 81,667 (126%) (103%) Total number (%) of beneficiaries 391,198 (107%) *Coverage data from the selected sub-metro district in Greater Accra was not yet available given late implementation and reporting on activities 2\.15 Improved community level capacity for delivering nutrition and health services\. Each of the 5,394 communities had a minimum of one community volunteer identified for a maximum of 25 children under the age of two who was trained to become a “community growth promoter”\. In total 20,946 volunteers were trained, equivalent to 29 one volunteer per every 15 children\. The reason for the increased number trained was due to the fact that not all community children participated given the distances covered by some communities, and the inaccessibility of such services, for example during raining season, in some communities\. In some other cases volunteers dropped out, some because of low morale, others because of relocation, resulting in the need to identify and train new volunteers as community growth promoters\. 2\.16 Regular growth monitoring\. In each of the communities the trained growth promoters organized regular child growth promotion sessions\. During these sessions children were weighted and their progress (or lack thereof) discussed with mothers/caretakers\. The sessions also included counseling on good infant and young child feeding practices, promotion of vitamin A supplementation, importance of adequate iron intake and iodized salt, deworming, LLIN use as well as hygiene and environmental sanitation practices\. Caretakers of children who were ill or overdue for vaccinations were encouraged to take their children to the nearest health facility for appropriate action\. Similarly pregnant women were strongly encouraged to attend antenatal care services and in doing so the project increased demand for health services and utilization of health facilities\. Home visits were conducted especially to follow up on children who were growth faltering or not attending growth promotion session\. By the end of the project more than three quarters (76%) of participating children and their caretakers attended the community based growth promotion sessions regularly, defined as attending a minimum of two sessions in the last three months, according to administrative data collected\. 2\.17 Improved uptake of antenatal care services\. During growth promotion sessions, mothers and caretakers were informed about the importance of regular attendance of antenatal care to help ensure improved future pregnancy outcomes\. During the course of the project the utilization of such services increased in the project areas; at the end of the project an estimated 83% of women with children under the age of two had attended a minimum of four antenatal care visits in her last pregnancy\. 2\.18 Improved demand for vitamin A supplementation\. Over the lifetime of the project the demand, as indicated by the increased uptake, of twice yearly vitamin A supplementation for children age 6-59 months improved, as well as increased demand and uptake of post-partum supplementation for mothers\. However, at the first few months issues of stock outs, and hence unavailability of supplies, resulted in a marked drop in the proportion of children under five years of age who had received a dose of vitamin A in the last six months, as seen in annex 3 table A3\.6, despite the increased demand for the service from communities\. Nonetheless, the proportion of women who received vitamin A supplements post-partum improved steadily throughout the life of the project and remained high\. This indicator is a longer-term measure and hence is less influenced by the stock-outs experienced at the end of the project\. In sum, the project resulted in improved demand for vitamin A supplementation\. 2\.19 Implementation of advocacy and communication activities\. As part of the activities undertaken by each district, various advocacy and communication activities were undertaken\. These included sensitization sessions at community level with the aim 30 of creating better awareness of the importance and impact of such community based nutrition and health services, and enhanced ownership and community engagement in the project\. Activities also included group education on selected key messages based on the national package of Essential Nutrition Actions (ENA) 6 , such as the importance of exclusive breast feeding, directed at community and household decision makers such as fathers, grandmothers, mothers in- law, and religious leaders, in addition to mothers\. At national level a video highlighting the experiences and success of the project was also developed to generate understanding and knowledge of the importance of community based nutrition and health services and their potential impact on key health outcomes\. Component 3: Malaria Prevention (US$9\.1 million) 2\.20 The specific objective of this component was: to increase utilization of long lasting insecticide treated nets in order to reduce malaria related morbidity and mortality among children under five and pregnant women\. (Source: PAD) 2\.21 The intermediate outcome for component 3: (i) reduced burden of and damage due to malaria infection; is shown in table A2\.3 together with the associated intermediate results indicators\. Table A2\.3: Intermediate results for Component 3 Intermediate Intermediate Outcome Baseline Baseline Original Revised Achieved Outcomes Indicators (Original) (Restructuring) Target Value Target Value (Cumulative) (Cumulative) Reduced Proportion (%) of Not 46\.2** 80 51 57\.6 burden of and households with children available damage due to under five having at least malaria one LLIN (revised) infection (Original: proportion of households in the intervention areas who have at least 2 LLINs reaches 80% by 2011) Number (#) of LLIN 0\.9million 1\.55 mill 1\.55 mill purchased and/or distributed Source: * DHS 2003 (national averages), **DHS2008 (target region average) 2\.22 Distribution of 1\.55 million long lasting insecticide-treated nets (LLINs)\. The project supported the National Malaria Control Program (NMCP) to procure and distribute a total of 1\.55 million LLINs over the 5 year life span of the project, as part of 6 ENA is a set of affordable and highly effective nutrition interventions delivered at health facilities and in communities to improve the growth and micronutrient status of children\. These essential actions protect, promote and support the achievement of six priority nutrition behaviors: (i) exclusive breastfeeding for six months; (ii) adequate complementary feeding starting at about six months with continued breastfeeding for two years; (iii) appropriate nutritional care of sick and severely malnourished children; (iv) adequate intake of vitamin A for women and children; (v) adequate intake of iron for women and children; (vi) adequate intake of iodine by all members of the household\. 31 the overall national program\. The NMCP was also supported by other donors including the President’s Malaria Initiative, UNICEF and the Global Fund\. During the first years of the project bed nets were distributed, according to the national distribution policy, at a subsidized cost to pregnant women and children under two through campaigns and/or through various community outreach programs, antenatal clinics and Child Welfare Clinics or other routine public health services\. The oversight and overall responsibilities of the activities fell under the GHS National Malaria Control Program (GHS-NMCP) while implementation was done through the decentralized Health Management Teams (HMT) at regional, district and sub-district levels\. 2\.23 As agreed the LLINs funded through the project were included in the larger pool of nets managed under NMCP together with inputs from other donors with distribution based on needs rather than geographical limitations\. This meant that project regions already supplied with nets did not receive direct support from this project, but that nets instead were diverted to other regions\. Due to procurement delays the 700,000 nets were procured for the 2007 National Maternal and Child Campaign were distributed as vouchers of which 84% were exchanged for nets in early 2008\. (see table A2\.4)\. Table A2\.4 Distribution of LLINs during the 2007 campaign Region Total number Number (%) of Use of remaining balance of nets of nets coupons delivered to exchanged for the region nets Remaining 59,408 nets were distributed free of charge to Greater Accra 260,000 200,592 children age 0-11 months during the 2008 campaign Remaining 15,961 nets were distributed to children under Ashanti 302,000 286,039 5 and pregnant women at community durbars and outreach programs Remaining 30,548 nets were distributed to children <5 Central 122,000 91,452 years at the child welfare clinics Remaining 5,926 nets were given to hospital wards in the Volta 15,120 9,194 region Total nets distributed for 699,120 587,277 (84%) 2007 campaign Remaining nets carried over 880 into 2008 distribution Overall number procured 700,000 2\.24 In 2009 an additional 200,000 nets were distributed through the regular health delivery system\. Neither staff from NMCP nor any of the Regional nor District HMTs were able to provide any information on the number of nets sold, versus LLINs still available or whether intended beneficiaries were reached\. Although additional nets were procured in 2010, then these did not get distributed until all of the previous nets had been accounted for through a technical audit\. 2\.25 Around the time of the midterm review of the project and the preparations for restructuring, GHS changed the ITN distribution model from subsidized distribution to free mass distribution through regional door-to-door hang-up campaigns, as a means to achieve the national target universal ITN coverage\. Therefore the subsequent 450,000 32 LLIN purchased with funds from this project, were distributed through successful universal hang-up campaigns, carried out by community volunteers through a door-to- door hang-up exercise\. 2\.26 Revision of the routine LLIN distribution system\. The change in distribution policy led to the inclusion of a new activity under the malaria control component one designed to ensure more long term plans for LLIN distribution in Ghana\. This was accomplished with project support in the development of a revised and enhanced routine LLINs distribution system\. This system, consisting of distribution of LLINs during the first ANC visit, with the second measles vaccination (at ~18 months of age) during the expanded program of immunization and through schools when entering grades 2 and 6, will allow GHS to better monitor and sustain progress in achieving universal coverage through the door-to-door hang up campaigns, and to allow LLIN promotion at community and health facility level to build on improved, and sustained LLIN access\. 2\.27 Improved tracking of the distribution of bed nets\. In the early stages of the program, the lack of information on the amount and utilization of funds collected and bed net distribution, led to the expansion of the M&E component for the NMCP during restructuring of the project\. The project gave support to the development of an improved LLIN tracking system to address weaknesses in the existing logistics management system\. While the initially planned insecticide resistance monitoring was dropped as it was supported by others and fell outside the main focus of the project\. Staff from the Regional Medical Stores and the District Health Management Teams (DHMT) was trained on how to use the new system as well as trained in general logistical management\. 2\.28 Improved utilization of LLINs in Ghana\. Over the life of the project the utilization of LLINs improved in general in Ghana\. Because national data (MICS 2011) was collected before the regional Universal Coverage Campaigns were initiated or fully completed in the majority of regions including Northern, Upper East, Upper West, Central and Western regions, it is not possible to accurately assess whether there was increased utilization was seen as a result of the promotion of bed nets by the project- supported community growth promoters and community health workers\. 2\.29 Improved safeguards management for bed nets\. With support from the project the Occupational Health Department under GHS developed a national strategy on the safe disposal or recycling of insecticide treated bed nets\. 33 Annex 3\. Analysis of the PDO and intermediate indicators 3\.1 The relationship between the various PDO and intermediate indicators, also known as the results chain, is depicted in figure 1 below\. Given the causal relationships between PDO indicators 1,2,3, and intermediate outcome (IO) indicators 1,2,3,4,5,6,7,10,11 and similarly the relationship between PDO 4 and IO 8,9 indicators, then these will be discussed in that order\. Figure A3\.1 The relationship between the various PDO and Intermediate Outcome (IO) indicators Project Development Objective 1: “Proportion (%) of infants under six months exclusively breastfed in the past 24 hours”\. (Achievement of revised target: 84\.5/80 = 106%) – Achieved 3\.2\. Improvement in exclusive breastfeeding rates\. According to the project administrative data, weighted according to number of communities of the 5 regions which implemented the community-based health and nutrition services in all districts namely Northern, Upper East, Upper West, Central and Volta regions, 84\.5% of children under the age of six months were exclusively breastfed\. This surpasses the original target by 69% and the revised target by 80% (see figure A3\.2 below)\. 34  Figure A3\.2: Exclusive breastfeeding prevalence (%) in project regions at start and end of project 3\.1 While improvements were seen in all regions the target was not met by in the Central region, principally because they did not implement activities in some districts until very late in the project and hence had limited time for impact\. Given the relative limited number of communities in this region this has little impact on the significant achievements seen in the other regions and hence the overall impact\. 3\.2 The planned DHS 2013 did not take place and given issues with the quality of the endline survey, project administrative data was used instead for this as well as for the other outcome indicators\. Also, although the project was also implemented/piloted in one district/sub-metro area each in the Western, Greater Accra and Ashanti regions, given the limited project geographical coverage in these regions combined with the lack of project administrative data from two out of the three aforementioned regions, these districts were not included in the analysis\. However given the relative limited number of communities/beneficiaries targeted in these areas their omission from the analysis should have limited effect on the overall results\. Project Development Objective 2: “Proportion of infants 6-9 months receiving semi- solid and/or solid foods in addition to breast milk in the past 24 hours” (Achievement of revised target: 93\.5/74 = 126%) - Achieved 3\.3 Improvement in appropriate feeding practices of children age 6-9 months\. According to project administrative data the targets were surpassed in all regions, on average 93\.5% of children aged 6-9 months received appropriate complementary feeding and continued breastfeeding (figure A3\.3 below)\. 35  Figure A3\.3: Prevalence (%) of appropriate complementary feeding and continued breastfeeding at age 6-9 months at start and end of project Project Development Objective 3: “Proportion of children under 2 years with diarrhea who received oral rehydration therapy” (Achievement of revised target: 73\.3/59 = 124%) – Achieved 3\.4 Improvement in use of Oral Rehydration Therapy (ORT)\. The use of ORT in children under two years of age during diarrhea was significantly improved during the span of the project with the targets were surpassed in all regions\. On average 73\.5% of children less than 2 years of age receive ORT when they have diarrhea\. Figure A3\.4: Proportion (%) of children under 2 years of age with diarrhoea who receive oral re- hydration therapy at start and end of project 36 3\.5 Progress seen likely attributable to the project\. First, while other factors might also have had impact, significant progress on the first three project outcome indicators is attributable to the project\. For example, while improvements in infant feeding and use of ORTs occurred in the years prior to the project, national level progress stagnated during the lifespan of the project (see figure A3\.5 below)\. It was therefore unlikely achievements seen in the project regions were due to overall nationwide progress, but rather due to efforts of the project\. Figure A3\.5: Trends in prevalence of exclusive breastfeeding, timely complementary feeding practices and use of ORT in Ghana (1988-2011) 3\.6 Secondly, over the lifetime of the project relatively more pregnant women and young children received health services, as indicated by the proxy indicators IO 5, 6, 7\. Although the administrative data at the end of the project reflect very low levels of vitamin A supplementation in children, this was likely caused by supply issues during the last campaign rather than any permanent decrease in the demand for the service\. In fact levels recorded in 2012 were significantly higher and the levels of vitamin A supplementation post-partum delivered through routine services continued to increase during the last year of the project (see figure A3\.6 below)\. 37  Figure A3\.6: Proportion (%) of pregnant women, new mothers and children under five receiving key health and nutrition services at start and end of project 3\.7 To determine if the increase in utilization of services in the project regions over the lifetime of the project (2007-2013) could be attributable to the project, an analysis using comparable survey data (DHS 2008, MICS 2011) was conducted\. The three northern regions were chosen because they had started implementing sub projects by the time the data collection for MICS 2011 started (August 2011), versus overall national averages\. Given that MICS 2011 did not include an indicator for vitamin A supplementation postpartum (IO7), only analysis of antenatal service delivery (IO5) and vitamin A supplementation of children (IO6) was done\. 3\.8 The analysis revealed that the increase in the proportion of women who made 4+ antenatal visits was higher on a national basis than in the 3 northern regions (see figure A3\.7)\. However this indicator is not very sensitive to interventions made recently because it captures a 2 year period\. As a result it is quite likely that any potential improvements in project regions would not be reflected given that at the beginning of that time period only a very limited number of communities had started implementing community based interventions7\. The same analysis also revealed that the relative improvements in the proportion of children aged 6-59 months who received one or more vitamin A supplements in the past six months was significantly higher in the project regions versus at national level\. 7 According to the Midterm Review annex 3 and compared to the fact that 2843 communities in the three northern regions implemented activities at the end of the project, only 138 communities, equivalent to 4\.85%, had started implementing interventions by September 2009, corresponding to ~2 year prior to the collection of MICS 2011\. 38  Figure A3\.7: Proportion (%) of pregnant women and children under five receiving key health and nutrition services (IO 5,6) at start (DHS 2008) and end of project (MICS 2011) 3\.9 Therefore there is good indication that the achievements related to PDO indicators 1,2,3 and the related intermediate outcome indicators were attributable to the project\. Project Development Objective 4: “Proportion of pregnant women and children under five years of age who sleep under LLINs the night preceding the survey is carried out” (Achievement of revised target for pregnant women: 36/25 = 144%) (Achievement of revised target for children: 46/30 = 153%) - Achieved 3\.10 Usage of LLINs has significantly improved\. Over the life of the project the utilization of LLINs significantly increased\. According to MICS 2011 36% of pregnant women and 46% children under the age of five were utilizing LLINs in the project regions, surpassing the targets by more than 50% (see figure A3\.8 below)\. 39  Figure A3\.8: Progress on the use of LLIN and ITN by pregnant women and children under five 3\.11 The data used to access progress on this indicator (MICS 2011) was collected prior to the completion of seven out of the 10 planned regional mass-distribution campaigns and it can be assumed that overall impact is likely even higher\. This is because in the 3 regions which completed the campaigns prior to the data collection, namely Northern, Eastern and Volta, an average improvement in bed net utilization of 53% and 68% was observed in children and pregnant women respectively, whereas the same improvement was only 20% and 26% respectively in the project regions overall (see figure A3\.9 below)\. 40  Figure A3\.9: Improvements in use of ITN by pregnant women (PW) and children (<5 years) 3\.12 The evidence for improved utilization of LLINs is supported by significant improved access to LLIN (IO8) seen over the lifetime of the project (figure A3\.10)\. Data was not available specific for households with children under five and therefore data for all households were used as a proxy\. The progress made on this indicator, especially given that the majority of regions had not yet started or completed their campaigns by the time the survey was collected, gives sufficient evidence to conclude that the intermediate indicator (IO8) for access to LLIN was also met\. This is further substantiated by the results of the post hang-up survey conducted for the project which reported that 66\.2% of all households interviewed had received LLINs between 2010 and 2012\. 41  Figure A3\.10: Trend in utilization and ownership of ITNs in project regions versus national averages 3\.13 Improvement in access was made possible through the increase of LLIN supplies available nationally to which 1\.5 million nets were contributed by the project (IO9)\. While an estimated 5 million nets were needed to ensure universal coverage in the project regions, then given that women of childbearing age (14-49 years) and children under the age of five make up about half of the population in Ghana, it is reasonable to assume that the nets financed under this project correspond to approximately two thirds of the needs for pregnant women and children under five in the targeted regions\. This combined with the fact that LLIN use was also promoted by the community volunteers in the project areas, provides assurance that achievement of PDO 4, to a great extent, is attributable to the project\. 3\.14 Other achievements\. The project reached a total of 391,198 direct beneficiaries 61% of whom were women (IO11) with key health and nutrition services, including 81,667 pregnant women (IO10) and 309,531 children under the age of two years of age (IO10), in a total of 55394 communities\. The improvements in community-based service delivery was aided by the improved supervision and support provided by the DHMTs (IO1), improved technical capacity of health workers (IO3) and community mobilization including the identification and training of 20,496 community volunteers and the establishment of community committees (CIC/CHC) (IO2)\. Further, through the development of the National Nutrition Policy (IO4), the Ghana roadmap for nutrition improvement in the country is provided, along with the underlying evidence to make the case for food security and nutrition, communication, advocacy and policy discourse at national, regional, district and community levels\. 42 Annex 4\. Economic and Financial Analysis 4\.1\. The World Bank (IDA) financed Nutrition and Malaria Control for Child Survival Project (MCCSP) aimed to improve utilization of selected community-based health and nutrition services for children under the age of two and pregnant women in selected districts\. It supported: (i) strengthening institutional capacity of relevant central, regional and district governments to bring cross-sectoral coordination and collaboration for effective and efficient management of results; (ii) creating demand for and expanding community-based delivery of selected health and nutrition services directly related to health and nutrition outcomes; and (iii) accelerating provision and promoting the utilization of LLINs for malaria prevention\. The Bank financed the project in the amount of $25million during the period between 2007 and 2013\. It is estimated that about 91 percent was spent directly planning and delivery of community-based health and nutrition services\. Project Development Impact 4\.2\.This project contributed to Ghana’s development through the following pathways\. o First, it contributed to improving child survival by decreasing the incidence of stunting, anemia and malaria\. According to WHO, malnutrition is the underlying contributing factor in about 45 percent of all child deaths and this can be prevented through improved nutrition practices\. A recent World Bank study in Kenya demonstrated that increased ownership of insecticide-treated bed nets in endemic malaria zones explained 58 percent of the decline in infant mortality\. o Second, it generated long-term economic benefit by increasing active and productive labor force who can potentially contribute to economic growth and poverty elimination\. With improved nutrition status, more children will survive into adulthood and work more productively as a result of better cognitive development\. The most recent empirical estimates of the negative effects of stunting on worker productivity and adult earnings range from about 10 percent per year8, to as high as 20 percent per year9\. Anemia is associated with a 2\.5 percent of reduction in wages\. Productivity losses at the individual level are estimated to be more than 10 percent of life time earnings, which at the macro level can lead to a 2‐3 percent loss in GDP\. o Third, it promoted equity by targeting areas where malnutrition is more prevalent\. In all the five fully-covered provinces, the prevalence of 8 Hoddinott 2003, World Bank 2006, Quisumbing, Gillespie and Haddad 2003, Alderman Hoddinott and Kinsey 2002, Ross and Horton 2003 9 Granthan-McGregor\.S et al 2007 43  stunting was higher than national average\. This is a proxy measure for targeting poor population as poor people are more likely to have malnutrition and malaria\. The project was also timely adjusted to cover the districts in the areas worst affected by serious flooding\. o Fourth, the project contributed to improving the efficiency of program implementation in Ghana by strengthening institutional capacity to take large-scale outcome improvement actions\. For example, the MOH /Ghana Health Service developed a robust data management system that responded to the data needs at community level\. Although not quantified, this greatly helps the country’s capacity in making evidence-based decisions and realizing potential efficiency gains\. o Fifth, the project is also associated with other benefits such as prevented downstream losses from high use of health resources, required extra care for people with less cognitive development as a result of childhood stunting\. Justification for pubic intervention 4\.3\.Working with the public sector through this project is economically justified since: (i) it focused on high impact and cost effective nutrition and malaria interventions which are a public good, enabling better use of the finite resources; (ii) the presence of positive externalities through the consumption and/or production of goods and services that would otherwise not have been consumed; (iii) addressing market failures arising from imbalance between the knowledge of the supplier and the knowledge available to the consumer (information asymmetry); and (iv) having partnership with private sector is not practical in the target areas given their limited availability\. Cost-benefit Analysis 4\.4\.Although it is ideal to use recent outcome data to confirm the previous conclusion, it remains a challenge for many developing countries where routine data system is weak\. With the absence of reliable administrative data, Demographic and Health Surveys (DHS) are commonly considered the gold standard for measuring child health outcomes (e\.g\., under-5 child mortality)\. Ghana DHS 2008 was conducted after project approval and the results were used to update project baseline values\. The 2013 DHS has been delayed and it is possible that the survey will be withdrawn\. There are data available from two Multiple Indicator Cluster Surveys (MICS) for 2006 and 2010\. This period is not enough to capture the full effect of the project, in particular the significant achievements made through the later stage\. In addition, project effect cannot be accurately estimated using the MICS results, since there is no aggregate estimate available for the project areas\. 44 4\.5\.The results at output level, however, indicates that the outcome may have improved more than expected, because many indicators measuring coverage of essential health and nutrition interventions have exceeded their targets\. For example, the proportion of infants under six months who are exclusively breastfed in the 24 hours has increased from 72\. 9 to 84\.5 percent, exceeding the target of 80 percent\. More than 90 percent of infants between six and nine months received semi-solid foods, exceeding the target of 74 percent\. About 1\.55 million bed nets (1\.3 million estimated at appraisal) have been distributed through the project, accounting for approximately two-thirds of the needs for pregnant women and children under five in the targeted regions\. Consequently, the proportion of under-five having slept under treated bed nets almost doubled during the project period, with the target exceeded by 50 percent\. 4\.6\.Despite a one-year extension of project implementation, the project has been implemented efficiently\. It has successfully expanded coverage of key health interventions at a large scale, achieving more than expected without additional resources\. Implementation challenges were addressed in a timely manner to avoid any subsequent negative consequences\. The Bank team responded to the government’s requests to change implementation arrangements, which caused rapid acceleration in the implementation of activities\. Technical and contract management support were provided to GHS-N for them to deliver technical specifications of procured goods in a timely manner, ensuring availability of commodities in facilities\. 4\.7\.The results from previous economic analysis remain valid based on the following ground\. o The previous analysis used the standard World Bank methods for evaluating projects where investment costs of resources used are compared with the stream of economic benefits, where stream of benefits and costs are discounted to present values using a discount rate to represent the opportunity cost of capital in the country\. o The assumptions used by the previous economic analysis were either based on Ghana specific health parameter or global scientific literature, with average or conservative estimate chosen when there is a range\. o Although not being quantified, it is expected that similar or even stronger results may come out of the analysis if data were available\. The previous analysis was based on the target results specified in the project design\. As the report shows in other sections, many indicators have exceeded original targets\. It is therefore possible that the project has achieved greater benefits than being estimated previously\. In addition, the analysis did not include some benefits that cannot be easily translated to monetary values, e\.g\., system efficiency\. Summary of previous cost-benefit analysis 4\.8\.At appraisal, the cost-benefit analysis concluded that, at 5 percent discount rate, the net present value of the project investments was estimated at about US32\.3 million 45  with an internal rate of return estimated at 22 percent and a high benefit-cost ratio of 2\.4\. The results were robust to changing discount rate as 10 percent, halving the assumed effect of controlling anemia, iodine deficiency and malaria, or halving the assumed effect of exclusive breast feeding\. 4\.9\.The analysis was updated at restructuring to reflect changes in flow of benefits due to implementation delay\. The analysis showed that the benefit-cost ratio as 2\.81 with a net present value of close to US$40 million\. Table A4\.1 Cost-Benefit Analysis of the Ghana NMCCSP conducted during restructuring (in US$) COSTS PRESENT VALUE---PROJECT COST At 5% discount rate US$21\.9 million Present Value (PV) increased lifetime earnings US$6\.7 million arising from reduced stunting Present Value (PV) savings from exclusive US$21\.3 million breastfeeding and complementary feeding Present Value (PV) increased lifetime earnings US$26\.4 with reduction in anemia, and iodine deficiency million Present Value (PV) associated with saved lives US$7\.2 million BENEFITS from vitamin A and ITN coverage and lifetime productivity of family members PRESENT VALUE---ALL BENEFITS US$61\.5 million At 5% discount rate NET PRESENT VALUE US$39\.6 million 4\.10\. The methodology used in this project analysis was the standard World Bank methods for evaluating projects where investment costs of resources used are compared with the stream of economic benefits\. This was the standard cost-benefit analysis, in which the stream of benefits and costs were discounted to present values using a discount rate to represent the opportunity cost of capital in the country\. This analysis used 5 percent discount rate, but a sensitivity analysis using 10 percent is also estimated to assess the impact of higher opportunity cost of capital\. 4\.11\. The direct beneficiaries of the project included about 50 percent children under 24 months (about 600,000) in the Northern, Upper West, Upper East, Volta and Central Regions, totaling 300,000\. Pregnant and lactating women in these areas were also beneficiaries of the project\. Likewise the 1\.3 million LLINs financed by the project were distributed to all regions in the country, as part of the NMCP\. 46 4\.12\. Benefits estimated for the analysis included increased lifetime earnings from reduced stunting, anemia, and iodine deficiency, reduced vitamin A deficiency, and lives saved from malaria intervention using LLINs, and economic benefits from exclusive breastfeeding derived from increased child survival\. Human capital methodology was used to estimate future income flows of children who were saved through this project and will survive to adulthood10\. 4\.13\. Key assumptions used by previous economic analysis: o An earnings premium of roughly 10% (for stunting avoidance), and 4% (for anemia avoidance) was applied as the effect of increased productivity potential\. o Based on Levin et al (1993), severely impaired persons due to iodine deficiency were 25% less productive compared to unaffected individuals\. o The relative risk of diarrhea mortality of partial versus exclusive breastfeeding for infants between 0-5 months was 3\.011 and the relative risk for morbidity was 18\.0\. o Daily production of breast milk for exclusively breastfeeding mothers was 0\.750 liters per day and 0\.51 liters for those partially breastfeeding12\. The value of breast milk was estimated using the value of substitutes— artificial formula---at about $1 per liter\. o Given that contributions under this project was only for a small part of the overall vitamin A supplementation program in Ghana, the benefits estimated for purposes of this analysis was assumed at only a fraction of the overall benefits of the vitamin A supplementation program\. o For benefits of the malaria control, this analysis used the value of the reduction in the number of deaths of children under five as a result of the distribution of the ITNs in the areas covered by the project\. A mortality prevention rate of half accounted for by this project in the targeted areas is assumed\. 10 Human capital methodology has been commonly used to estimate economic benefit related to human development\. Although there are concerns about whether all the saved lives will have been employed, it is also worth noting that children saved through current investment will only enter the labor market after more than 10 years\. Prospect of job market may be promising given the strong growth of economy in Africa continent\. More importantly, average wage also reflects the situation of unemployment, which to the extent makes the concern less of an issue\. 11 Victora 1987 12 Hatloy and Oshaug 1997 47 Annex 5\. Bank Lending and Implementation Support/Supervision Processes (a) Task Team members Responsibility/ Names Title Unit Specialty Lending Modupe A\. Adebowale Consultant AFTME Johanne Angers Senior Operations Officer ECSH1 Ferdinand Tsri Apronti Consultant AFTA1 Evelyn Awittor Senior Operations Officer AFTHW Gregoria Dawson-Amoah Program Assistant AFCW1 Mohamed I\. Diaw Operations Assistant CFPTO Edward Felix Dwumfour Senior Environmental Specialist AFTN1 Marito H\. Garcia Lead Human Development Economist AFTEW Manush A\. Hristov Senior Counsel LEGEN Yi-Kyoung Lee Senior Health Specialist EASHH Bernhard H\. Liese Consultant IEGCC Menno Mulder-Sibanda Sr Nutrition Spec\. AFTHW Jonathan Nyamukapa Sr Financial Management Specialist AFTME Laura L\. Rose Sr Economist (Health) AFTHD Kristine Schwebach Social Development Specialist AFTCS Supervision/ICR Adu-Gyamfi Abunyewa Senior Procurement Specialist AFTPW Ferdinand Tsri Apronti Consultant AFTA1 Evelyn Awittor Senior Operations Officer AFTHW Samuel Bruce-Smith Consultant AFTDE Aissatou Chipkaou Senior Program Assistant AFTHW Noel Chisaka Sr Public Health Spec\. AFTHW Gregoria Dawson-Amoah Program Assistant AFCW1 Robert Wallace DeGraft-Hanson Financial Management Specialist AFTMW Mohamed I\. Diaw Operations Assistant CFPTO Anders Jensen Senior Monitoring & Evaluation AFTDE Yi-Kyoung Lee Senior Health Specialist EASHH Ruth Afandi Mulahi Senior Program Assistant AFRSC Menno Mulder-Sibanda Sr Nutrition Spec\. AFTHW Laura L\. Rose Sr Economist (Health) AFTHD Elizabeth Alluah Vaah E T Consultant AFTME Joseph J\. Valadez Consultant SASHD Janneke H\. Blomberg Nutrition Specialist AFTHE Richard Seifman Consultant AFTHW Dominic S\. Haazen Lead Health Specialist AFTHW Francisca Ayodeji Akala Senior Health Specialist AFTHW Yvette M\. Atkins Senior Program Assistant AFTHE Gabriel Dedu Governance Specialist AFTP3 Stephen Tetevie Team Assistant AFCW1 Monica Bleboo Consultant AFTHW 48 (b) Staff Time and Cost Staff Time and Cost (Bank Budget Only) Stage of Project Cycle USD Thousands (including No\. of staff weeks travel and consultant costs) Lending FY07 27\.71 115\.87 FY08 0\.00 Total: 115\.87 Supervision/ICR FY07 0\.0 0\.00 FY08 46\.93 119\.83 FY09 33\.77 182\.34 FY10 35\.85 166\.21 FY11 42\.05 164\.58 FY12 20\.79 65\.56 FY13 23\.43 177\.00 Total: 202\.80 895\.52 49 Annex 6\. Beneficiary Survey Results 6\.1 In order to assess the views and perceptions of the direct beneficiaries in the intervention areas and the institutional stakeholders of the NMCCSP to provide feedback for project improvements, a Beneficiary Survey was conducted in March 2013 in 2 district each from the Northern, Upper East, Upper West, Central, and Volta regions as well in the district/sub-metro area in the Western, Ashanti and Greater Accra regions\. 6\.2 This was done through focus group discussions, key informant interviews and a questionnaire administered to the target direct beneficiaries based on the random sampling of 30 clusters from each district, from which 7 households were randomly selected\. A total of 2,483 caregivers responded to administered questionnaires and 632 individuals were sampled and included in the focus group discussions while a total of 120 key stakeholders were interviewed as key informants\. 6\.3\. Key findings – in general\. In general the project was very well received and beneficiaries reported satisfaction and gratitude for the services provided directly in their community\. The intervention with the highest perceived benefit was the distribution of LLINs while deworming was seen as being the least beneficial service delivered\. The overall conclusion of the survey was that the project should be scaled up to cover all districts and regions in Ghana and sustained over a long period to help significantly improve the nutritional & malaria situation\. 6\.4\. Key findings – behaviors\. The survey reported that 73\.6% of women had attended 4+ antenatal visits during their last pregnancy and 73% of the child growth cards examined were reported as “being up to date” indicating a good utilization of services provided\. Further 62\.3% of mothers and 60\.8% of children were reported as having slept under a bednet the previous night, while 77% of all households visited were reported as to having bednets hangings based on observations\. 6\.5 Key findings – barriers\. The following barriers were reported as contributing to a reduced access and utilization of services: (i) high attrition rate, illiteracy and lack of motivation by volunteers; (ii) financial constraints by families to provide the more nutrient dense foods to the pregnant women and children; (iii) issues of stock-outs resulting in insufficient supply of LLINs and vitamin A capsules; (iv) limited coverage, in that not all communities were implementing the project, access issues related to poor roads and long distances to health facilities; (v) project vehicles not always available as being utilized for other operational activities; and lastly (vi) impact of cultural and traditional practices e\.g\. in a district in Upper East region it was reported that pregnant women should hide their pregnancy while mothers with children under two years of age should not be brought out in public\. 6\.6 Lessons learned\. The following was mentioned as lessons learned: (i) project benefitted the selected communities; (ii) importance of using implementation strategies which are responsive to varying to socio-economic contexts; and (iii) strong influence of traditional authorities and male household heads especially in the three northern regions\. 50 Annex 7\. Summary of Borrower's ICR and/or Comments on Draft ICR 51 Annex 8\. List of Supporting Documents Key project documents: PAD: World Bank\. 2007\. Ghana - Nutrition and Malaria Control for Child Survival Project\. http://documents\.worldbank\.org/curated/en/2007/05/7721884/ghana-nutrition-malaria- control-child-survival-project Restructuring paper: World Bank\. 2010\. Main report\. Vol\. 1 of Ghana - Nutrition and Malaria Control for Child Survival Project : restructuring\. http://documents\.worldbank\.org/curated/en/2010/06/12576473/ghana-nutrition-malaria- control-child-survival-project-restructuring-vol-1-2-main-report World Bank\. 2010\. Data sheet\. Vol\. 2 of Ghana - Nutrition and Malaria Control for Child Survival Project : restructuring\. http://documents\.worldbank\.org/curated/en/2010/06/12576474/ghana-nutrition-malaria- control-child-survival-project-restructuring-vol-2-2-data-sheet Financing agreements: Hristov,Manush A\. 2007\. Financing Agreement, C4346-GH Conformed\. http://documents\.worldbank\.org/curated/en/2007/08/8188556/financing-agreement- c4346-gh-conformed Molle,Anthony\. 2010\. Amendment to the Financing Agreement Credit 4346 Conformed\. http://documents\.worldbank\.org/curated/en/2010/07/12703058/amendment-financing- agreement-credit-4346-conformed Other project documents: Awittor,Evelyn\. 2012\. Ghana - Nutrition and Malaria Control for Child Survival : P105092 - Implementation Status Results Report : Sequence 15\. http://documents\.worldbank\.org/curated/en/2012/12/17085916/ghana-nutrition-malaria- control-child-survival-p105092-implementation-status-results-report-sequence-15 Awittor,Evelyn\. 2012\. Ghana - Nutrition and Malaria Control for Child Survival : P105092 - Implementation Status Results Report : Sequence 14\. http://documents\.worldbank\.org/curated/en/2012/04/16231258/ghana-nutrition-malaria- control-child-survival-p105092-implementation-status-results-report-sequence-14 Bonsu Victor B, Atuik, William\. (draft 2013)\. Financial Management In-depth Review Report - Nutrition and Malaria Control for Child Survival Project\. 52 World Bank\. 2013\. Ghana - Nutrition and Malaria Control for Child Survival Project : procurement plan\. http://documents\.worldbank\.org/curated/en/2013/01/17278695/ghana- nutrition-malaria-control-child-survival-project-procurement-plan In addition: various Aide Memoires, Implementation Supervision Reports (ISRs), Procurement reports, Financial Management reports Policy, Strategy, and Program Documents from the Government of Ghana Ghana Health Services (2013 draft)\. Preliminary report on consulting services to document best practices in the Nutrition and Malaria Control for Child Survival Project Ghana Health Services\. 2013(draft) National Nutrition Policy Ghana Health Services\. 2013\. Strategies for Strengthening Vitamin A Supplementation in Ghana Ghana Health Services\. 201? National Nutrition Advocacy Strategy - Report on development and production of nutrition advocacy materials and strategy for nutrition and malaria control for child survival project Ghana Health Services\. 2008\. Nutrition and Malaria Control for Child Survival Project\. Sub-Project Manual Ghana Health Services\. 2008\. The National Malaria Control Strategy (2008-13) Ghana Health Services\. 2005\. Imagine Ghana Free of Malnutrition\. A Concept Paper for Addressing nutrition in Ghana as a Development Problem, Using Health as an Entry Point Government of Ghana\. 2011\. MDG Acceleration Framework and Country Plan: Maternal Health\. Ministry of Health\. 2013(draft)\. Health Sector Medium Term Development Plan (2014- 18) Ministry of Health\. 2013\. Endline Survey for the Nutrition and Malaria Control for Child Survival Project\. Ministry of Health\. 2013\. Final report of the Beneficiary survey for the Nutrition and Malaria Control for Child Survival Project\. Ministry of Health\. 2013\. Final report on Long Lasting Insecticide treated Nets (LLINS) Post Hang-Up Survey for the Nutrition and Malaria Control for Child Survival Project\. 53 Ministry of Health\. 2011\. Nutrition and Malaria Control for Child Survival Project\. 2011 Baseline Report Ministry of Health\. 2010\. Nutrition and Malaria Control for Child Survival Project\. 2008 Baseline Report Ministry of Health\. 2010\. Nutrition and Malaria Control for Child Survival Project\. 2009 Baseline Report Ministry of Health\. 2008\. The Ghana Health Sector 5 Year Programme of Work (2007- 2011), Theme: Creating Wealth Through Health Ministry of Health\. 2006\. National Health Policy\. Population and Health Data Ghana Statistical Service, Noguchi Memorial, ORC MACRO (2008)\. Ghana Demographic and Health Survey 2008\. http://www\.measuredhs\.com/publications/publication-FR221-DHS-Final-Reports\.cfm Ghana Statistical Service, Noguchi Memorial, ORC MACRO (2003)\. Ghana Demographic and Health Survey 2003 http://www\.measuredhs\.com/publications/publication-FR152-DHS-Final-Reports\.cfm Ghana Statistical Service, Noguchi Memorial, ORC MACRO (1998)\. Ghana Demographic and Health Survey 1998 http://www\.measuredhs\.com/publications/publication-FR106-DHS-Final-Reports\.cfm Ghana Statistical Service, Noguchi Memorial, ORC MACRO (1993)\. Ghana Demographic and Health Survey 1993\. http://www\.measuredhs\.com/publications/publication-FR59-DHS-Final-Reports\.cfm MICS\. 2012\. Ghana Multiple Indicator Cluster Survey 2011\. http://www\.measuredhs\.com/publications/publication-FR262-Other-Final-Reports\.cfm MICS\.2007\. Ghana Multiple Indicator Cluster Survey 2006\. http://www\.measuredhs\.com/publications/publication-FR226-Other-Final-Reports\.cfm MICS 2006\. Ghana – High Impact Rapid Delivery (HIRD) Supplementary Survey, 2007/2008 (District MICS) http://www\.childinfo\.org/files/MICS3_GhanaDistrict_FinalReport_2007_Eng\.pdf\.pdf PROFILES\. 2005\. Profiles calculator of the consequences of malnutrition in Ghana 54 World Bank\. Open Data\. http://data\.worldbank\.org/country/ghana Other: Adom Baisie Ghartey\. 2008\. “Case Study of the Political Economy of nutrition Policies in Ghana” http://siteresources\.worldbank\.org/HEALTHNUTRITIONANDPOPULATION/Resource s/281627-1095698140167/GhanaNutritionPolicyDPMenno\.pdf Asante FA and Asenso-Okyere K \. 2001\. Economic Burden of Malaria in Ghana; A Technical Report Submitted to the World Health Organisation (WHO), African Regional Office (AFRO)\. Basics II\. 2004\. Using ‘Essential Nutrition Actions (ENA)’ to Accelerate Coverage with Nutrition Interventions in High Mortality Settings\. http://www\.basics\.org/documents/pdf/Using%20ENA\.pdf#search="ena" Black, R\.E\., Allen L\.H\., Bhutta Z\.A\., Caulfield L\.E\., de Onis M\., Ezzati M\., Mathers C\., and Rivera J\., for the Maternal and Child Undernutrition Study Group\. 2008\. “Maternal and Child Undernutrition: Global and Regional Exposures and Health Consequences\. Lancet 371: 243-60\. Bleichrodt N, Born MP\. 1994\. A meta analysis of research on iodine and its relationship to cognitive development\. In J\.B\. Stanbury (ed\.) The Damaged Brain of Iodine Deficiency\. Caulfield LE, Stephanie A\. Richard, and Robert E\. Black\. 2004\. Undernutrition as an underlying cause of malaria morbidity and mortality in children less than five years old\. Am J Trop Med Hyg\. 71(Suppl2): 55-63 Ehrhardt S\. et a1\. 2006\. Malaria, Anemia, and Malnutrition in African Children – Defining Intervention Priorities\. JID\. 194: 108-14 Engle, P et a1\. 2007\. Strategies to avoid the loss of developmental potential in more than 200 million children in the developing world\. Lancet 2007; 369: 229-42 Granthan-McGregor S et a1\. 2007\. Developmental potential in the first 5 years for children in developing countries\. Lancet 2007; 369:60-70 Haddad LJ, Bouis HE\. 1991\. The impact of nutritional status on agricultural productivity: Wage evidence from the Philippines\. Oxford Bull Economics and Stat, 1991; 53(1): 45- 68\. 55 Lancet\. 2013\. Maternal and Child Nutrition series\. http://www\.thelancet\.com/series/maternal-and-child-nutrition Ross J, Horton S\. 1998\. Economic consequences of iron deficiency\. Ottawa: Micronutrient Initiative\. 1998\. Ross JS\. 1996\. Relative Risk of Child Mortality Due to Vitamin A Deficiency\. PROFILES 3 Working Notes Series, No\. 2\. 1996 Scaling Up Nutrition\. 2013\. (accessed 04/09/2013) http://scalingupnutrition\.org/sun- countries/ghana) The World Bank\. 2006\. Directions in Development: Repositioning Nutrition as Central to Development, A Strategy for Large-Scale Action, Overview\. http://siteresources\.worldbank\.org/NUTRITION/Resources/281846- 1131636806329/NutritionStrategy\.pdf World Bank\. 2006\. Ghana - Community-Based Poverty Reduction Project\. http://documents\.worldbank\.org/curated/en/2006/05/6849132/ghana-community-based- poverty-reduction-project World Bank\. 1999\. Ghana - Community-based Poverty Reduction Project\. http://documents\.worldbank\.org/curated/en/1999/05/440637/ghana-community-based- poverty-reduction-project World Bank\. 2007\. Ghana - Country Assistance Strategy\. http://documents\.worldbank\.org/curated/en/2007/05/7667201/ghana-country-assistance- strategy World Bank\. 2003\. Ghana - Poverty Reduction Strategy Paper (PRSP) and joint assessment\. http://documents\.worldbank\.org/curated/en/2003/03/2166828/ghana-poverty- reduction-strategy-paper-prsp-joint-assessment World Bank 2013 (draft) Project Appraisal Document: Maternal and Child Health and Nutrition Improvement Project (P145792)\. World Bank 2013\. Country Partnership Strategy for the Republic of Ghana (FY13-16)\. http://imagebank\.worldbank\.org/servlet/WDSContentServer/IW3P/IB/2013/08/29/00035 6161_20130829110704/Rendered/PDF/763690CAS0Ghan0400OUO0900Box379816B\.p df World Health Organisation\. 2013\. Essential Nutrition Actions: improving maternal, newborn, infant and young child health and nutrition\. http://www\.who\.int/nutrition/publications/infantfeeding/essential_nutrition_actions/en/ 56  IBRD 33411 2° W 0° 2° E To Tenkodogo B U R K I NA FAS O Hamale Navrongo To Bobo- UPPER EAST WalewaleTumu Diolasso Bolgatanga GHANA Nakpanduri UPPER WEST Walewale To Dapaong Ko lpa Black Vo wn Wa 10° N 10° N Gushiegu lta e Volta h it To W Djougou N O R T H E R N Yendi To Tamale Ferkéssédougou Sawla BENIN Fufulsu Bole To a ak D Djougou Oti C ÔT E Nakpayili T O GO D ' IV O IRE a ol t B l a ck V Salaga To Bouna Makongo Yeji Kintampo Dambai 8° N 8° N Jema V O LTA B R O N G -A H A F O Atebubu Kwadwokurom Tain ru Techiman P Berekum To Sokodé Sunyani Mount Afadjato (880 m) K w go Ranges Af r a a h m Lake Bi a To Agboville u Volta Kpandu To P l Abomey a t Agogo Goaso e a u Kumasi Ho a p i m - To Bibiani EASTERN Krokosue ASHANTI Anu To Porto- im m Novo Obuasi Bi r Diaso Tano Kade Vol ta kw Koforidua Aflao 6° N Oda A 6° N W E S T E R N Dunkwa Enchi GREATER 2° E To Abidjan ACCRA Tema Twifo Praso Prestea CENTRAL ACCRA GH A N A P ra Tarkwa Winneba a SELECTED CITIES AND TOWNS obr Ank Cape Coast REGION CAPITALS Newtown NATIONAL CAPITAL This map was produced by Sekondi Axim the Map Design Unit of The World Bank\. The boundaries, Takoradi Gulf of G uinea RIVERS colors, denominations and any other information shown MAIN ROADS on this map do not imply, on the part of The World Bank 0 20 40 60 80 Kilometers RAILROADS Group, any judgment on the legal status of any territory, REGION BOUNDARIES or any endorsement or 0 20 40 60 Miles acceptance of such boundaries\. 2° W 0° INTERNATIONAL BOUNDARIES SEPTEMBER 2004

APPROVAL

P088624

Page 1 INTEGRATED SAFEGUARDS DATA SHEET CONCEPT STAGE Report No\.: AC853 Date ISDS Prepared/Updated: May 13, 2004 I\. BASIC INFORMATION A\. Basic Project Data Country: Argentina Project ID: P088624 Project Name: AR Buenos Aires City Infrastructure Task Team Leader: Maryse Gautier Estimated Appraisal Date: September 15, 2004 Estimated Board Date: December 14, 2004 Managing Unit: LCSFU Lending Instrument: Specific Investment Loan Sector: Flood protection (100%) Theme: Other urban development (P);Access to urban services for the poor (P);Infrastructure services for private sector development (S) Safeguard Policies Specialists in the task team: Juan Schnack Loan/Credit amount ($m\.): IBRD: 140 Other financing amounts by source: ($m) B\. Project Objectives [from section 3 of PCN] The project would increase the City resilience to floods through the protection of its critical infrastructure and the introduction of a risk management approach in the investments of the City Government\. The project will focus on the issue of risk reduction\. It will also contribute to risk identification\. To achieve this, the project will: (a) improve water draining from the Maldonado basin to the Rio de la Plata for 10 year return period floods, and (b) develop a program to reduce vulnerability to flood, with land use planning, building codes, construction practices, urban environment management, and increase information through hazard maps, contingency plans and vulnerability analysis\. C\. Project Description [from section 4 of PCN] Component 1\. Non-structural Measures (US$17M) \. This component would finance actions aimed at providing institutional improvements of the City Government in flood emergency times and in flood prevention\. It would include (a) the Page 2 installation of a meteorological warning system, (b) the preparation and diffusion of contingency and emergency plans, with a communication program aimed at increasing awareness, (c) adjustments of the legal and regulatory environment, such as land use plans, building codes, environmental standards, (d) actions of public management, such as improvement of green areas, and tree plantation program, (e) improvement of solid waste management with higher flexibility of collection and increased public awareness, and (f) project management\. With regards to the sustainability aspects of the institutions, the Municipality is committed to lead the necessary studies for, and take the decisions to, set up an institutional framework for flood prevention, emergency situation, and infrastructure maintenance\. Component 2\. Structural Measures (US$163M) The structural measures component has an estimated cost of US$163 million\. It will finance the construction of two drainage tunnels running parallel to the Maldonado underground channel\. In addition, the construction of the additional connectors that will link the two tunnels to the existing drainage network has been estimated to cost US$ 22,6 millions\. The hydraulic master plan identified and evaluated a significant number of existing alternative projects and of spontaneous proposals coming from different stakeholders\. The consultant has selected alternatives based on various criteria, such as pipe and water storage technology, localization of water discharge, construction methodology of pipes and tunnels, and rate of flood frequency\. The evaluation process concluded with the recommendation for the construction of two parallel tunnels supporting the existing channel of the Maldonado\. The tunnels have been designed so that they will avoid the flooding of the City with rain events that have a frequency of up to 10 years\. In order to confirm the pertinence of the choice, the Bank has contracted with an international hydrological consultant to provide his expertise on the selection process of the technology\. The review should be completed by June, 2004\. D\. Project location Buenos Aires the Capital City of Argentina, is located at the right margin of the Río de la Plata in the “ Pampa Ondulada”\. Its surface is of about 200 km 2 , its population of approximately 3 million inhabitants\. Due to the fact that within the area likely to be affected by the project the preexisting natural habitats have been totally replaced by urban components, it is not expected any impact on the natural environment\. Therefore, the major effects of the project are related to the social and economic components, as well on safety and health\. The water gathered by the tunnels will be discharged into the Río de la Plata\. E\. Borrower’s Institutional Capacity for Safeguard Policies [from PCN] The project implementation unit (SUPCE) has been supervising the consultant’s work during the production of the hydraulic master plan in the context of the Flood Protection project\. This Unit will continue in its role and be the implementing agency of the new project\. Page 3 II\. SAFEGUARD POLICIES THAT MIGHT APPLY Applicable? Safeguard Policy If Applicable, How Might It Apply?[OPCS4] [X] Environmental Assessment (OP/BP 4\.01) [ ] Natural Habitats (OP/BP 4\.04) [ ] Pest Management (OP 4\.09) [ ] Involuntary Resettlement (OP/BP 4\.12) [ ] Indigenous Peoples (OD 4\.20) [ ] Forests (OP/BP 4\.36) [ ] Safety of Dams (OP/BP 4\.37) [ ] Cultural Property (draft OP 4\.11 - OPN 11\.03) [ ] Projects in Disputed Areas (OP/BP/GP 7\.60)* [ ] Projects on International Waterways (OP/BP/GP 7\.50) Environmental Assessment Category[w5]: [X] A [ ] B [ ] C [ ] FI [ ] TBD (to be determined) The Most significant environmental issues are associated with the construction management of the two tunnel\. This type of works, unprecedented in Buenos Aires, will require careful environmental planning of construction activities\. The management, transportation, and disposal will require careful sitting of disposal sites, site restoration practices, detailed and traffic management\. Interference with public service lines will need to be programmed way in advance and communicated to the communities\. The management of urban impacts during construction will require a comprehensive set of environmental technical specification for construction and strong supervision\. Reporting Schedule\. According to the World Bank Operational Policies there must be a separate EIA report Law 123 of the “Ciudad Autónoma de Buenos Aires” also requires that infrastructure works carried out by public or private entities providing public services, as well as related * By supporting the proposed project, the Bank does not intend to prejudice the final determination of the parties' claims on the disputed areas Page 4 activities, projects, and programs, are analyzed in terms of environmental impact with relevant effect\. III\. SAFEGUARD PREPARATION PLAN A\. Target date for the Quality Enhancement Review (QER), at which time the PAD-stage ISDS would be prepared\. The EIA will be completed by the pre-appraisal mission in early August\. It will be reviewed on September 8, 2004 during the QER meeting and disclosed by September 15 the latest\. The EIA is part of the feasibility study, financed by the Bank under the current Flood Protection project\. The TORs were revised by the Bank, and the study implementation is followed by the Bank team on a regular basis\. B\. Time frame for launching and completing the safeguard-related studies that may be needed\. The specific studies and their timing 1 should be specified in the PAD-stage ISDS\. IV\. APPROVALS Signed and submitted by: Task Team Leader: Maryse Gautier Date Approved by: Regional Safeguards Coordinator: Juan David Quintero Date Comments Sector Manager: John Henry Stein Date Comments 1 Reminder: The Bank's Disclosure Policy requires that safeguard-related documents be disclosed before appraisal (i) at the InfoShop and (ii) in-country, at publicly accessible locations and in a form and language that are accessible to potentially affected persons\. Page 5

APPROVAL

P160395

DOCUMENT OF THE WORLD BANK FOR OFFICIAL USE ONLY Report No: 119032-ET INTERNATIONAL DEVELOPMENT ASSOCIATION PROGRAM APPRAISAL DOCUMENT ON A PROPOSED REGULAR CREDIT IN THE AMOUNT OF SDR 176\.9 MILLION (US$250 MILLION EQUIVALENT) AND A PROPOSED SCALE-UP FACILITY CREDIT IN THE AMOUNT OF US$125 MILLION TO THE FEDERAL DEMOCRATIC REPUBLIC OF ETHIOPIA FOR THE ETHIOPIA ELECTRIFICATION PROGRAM February 7, 2018 Energy and Extractives Global Practice Africa Region This document has a restricted distribution and may be used by recipients only in the performance of their official duties\. Its contents may not otherwise be disclosed without World Bank authorization\.  CURRENCY EQUIVALENTS (Exchange Rate Effective Date: August 31, 2017) Currency Unit = Ethiopian Birr (ETB) ETB 23\.42 = US$1 SDR 0\.70751880 = US$1 FISCAL YEAR Government of Ethiopia July 8 – July 7 ABBREVIATIONS AND ACRONYMS AF Additional Financing AfDB African Development Bank AWPB Annual Work Plan and Budget BoFED Bureau of Finance and Economic Development BoQ Bill of Quantities BPR Business Process Reengineering CE Citizen Engagement CEO Chief Executive Officer CMS Customer Management System CPAR Country Procurement Assessment Report CPF Country Partnership Framework CSA Central Statistics Agency DBE Development Bank of Ethiopia DLI Disbursement Linked Indicator DoE Department of Electrification DP Development Partner EAPP East African Power Pool EBITDA Earnings before Interest, Tax, Depreciation, and Amortization EEA Ethiopian Energy Authority EEU Ethiopian Electric Utility EEP Ethiopian Electric Power EEPCo Ethiopian Electric Power Corporation EFY Ethiopian Fiscal Year EHS Environmental, Social Safeguard, Health and Safety EIRR Economic Internal Rate of Return ELEAP Ethiopia Electrification Program ENREP Electricity Network Reinforcement and Expansion Project ERP Enterprise Resource Planning ESSA Environmental and Social System Assessment ESMAP Energy Sector Management Assistance Program ESRSP Energy Sector Review and Strategy Program ESMS Environmental and Social Management System ETB Ethiopian Birr F&C Fraud and Corruption FEACC Federal Ethics and Anti-Corruption Commission ii FHH Female-headed Household FM Financial Management FPPA Federal Public Procurement Agency FY Fiscal Year GBV Gender-based Violence GDP Gross Domestic Product GFDP General and Financial Delegation of Power GHG Greenhouse Gas GIS Geographic Information System GoE Government of Ethiopia GRM Grievance Redress Mechanism GRS Grievance Redress Service GTP Growth and Transformation Plan GWh Gigawatt Hour IBEX Integrated Budget and Expenditure ICB International Competitive Bidding IFA Integrated Fiduciary Assessment IFC International Finance Corporation IFRS International Financial Reporting Standards IPP Independent Power Producer IRM Implementation Road Map IVA Independent Verification Agency KPI Key Performance Indicator kWh Kilowatt hour LV Low Voltage M&E Monitoring and Evaluation MFI Microfinance Institution MHH Male-headed Household MoEFCC Ministry of Environment, Forest, and Climate Change MoFEC Ministry of Finance and Economic Cooperation MoWIE Ministry of Water, Irrigation, and Electricity MSE Medium and Small Enterprise MTF Multi-Tier Framework MV Medium Voltage MW Megawatt NCB National Competitive Bidding NEP National Electrification Program NES National Electrification Strategy NPV Net Present Value O&M Operations and Maintenance OFAG Office of the Federal Auditor General PAP Program Affected Person PDO Program Development Objective PEC Procurement Endorsing Committee PEFA Public Expenditure and Financial Accountability PFM Public Financial Management PforR Program-for-Results iii POM Program Operational Manual PP Procurement Planning PPE Personal Protective Equipment PPP Public-Private Partnership PSE Private Sector Enterprise PV Photovoltaic REACC Regional Ethics and Anti-Corruption Commission REB Regional Energy Bureau REF Rural Electrification Fund RVR Results Verification Report SAS Stand-alone Solar Systems SBD Standard Bidding Document SDR Special Drawing Rights SNNPR Southern Nations, Nationalities, and Peoples’ Region SOE State-Owned Entity SORT Systematic Operations Risk-Rating Tool SUF Scale-up Facility STEM Science, Technology, Engineering, and Math ToR Terms of Reference TVET Technical and Vocational Education and Training UEAP Universal Electricity Access Program USAID United States Agency for International Development WIP Work in Progress WMEB Water, Mines, and Energy Bureau WPPP Works and Procurement Policy and Procedure Regional Vice President: Makhtar Diop Global Practice Vice President: Laura Tuck Country Director: Carolyn Turk Senior Global Practice Director: Riccardo Puliti Practice Manager Sudeshna Ghosh Banerjee Task Team Leaders: Rahul Kitchlu, Karen Bazex iv  FEDERAL DEMOCRATIC REPUBLIC OF ETHIOPIA Ethiopia Electrification Program Table of Contents I\.  STRATEGIC CONTEXT \. 1  A\.  Country Context \. 1  B\.  Sectoral and Institutional Context \. 2  C\.  Relationship to the CPF and Rationale for Use of the Instrument \. 8  II\.  PROGRAM DESCRIPTION \. 9  A\.  The Government’s Program - NEP \. 9  B\.  Program Development Objectives and Key Results \. 11  C\.  PforR Program Scope \. 14  D\.  Disbursement Linked Indicators and Verification Protocols \. 16  E\.  Capacity Building and Institutional Strengthening \. 18  III\.  PROGRAM IMPLEMENTATION \. 19  A\.  Institutional and Implementation Arrangements \. 19  B\.  Results Monitoring, Evaluation, and Verification Agencies \. 19  C\.  Disbursement Arrangements \. 20  IV\.  ASSESSMENT SUMMARY \. 20  A\.  Technical \. 20  B\.  Fiduciary \. 25  C\.  Environmental and Social \. 28  D\.  Integrated Risk Assessment \. 30  E\.  Program Action Plan \. 31  Annex 1: Detailed Program Description \. 33  Annex 2: Results Framework Matrix \. 51  Annex 3: Disbursement Linked Indicators and Verification Protocols \. 56  Annex 4: Summary of Technical Assessment \. 73  Annex 5: Summary of the Integrated Fiduciary Assessment \. 98  Annex 6: Summary of the Environmental and Social Systems Assessment\. 125  Annex 7: Systematic Operations Risk Rating (SORT) \. 133  Annex 8: Program Action Plan \. 136  Annex 9: Implementation Support Plan \. 139  Annex 10: Map of Ethiopia\. 143  v  PAD DATA SHEET Federal Democratic Republic of Ethiopia Ethiopia Electrification Program PROGRAM APPRAISAL DOCUMENT AFRICA Energy and Extractives Global Practice \. Basic Information Date: February 7, 2018 Sectors: Energy and Extractives Country Director: Carolyn Turk Themes: Rural services and infrastructure (70%), Other rural development (30%) Practice Manager: Sudeshna Ghosh Banerjee Global Practice Vice Laura Tuck President: Program ID: P160395 Team Leaders: Rahul Kitchlu, Karen Bazex Program Implementation Start Date: 03/01/2018 End Date: 07/07/2023 Period: Expected Financing 06/01/2018 Effectiveness Date: Expected Financing 07/07/2023 Closing Date: \. Program Financing Data [ ] Loan [ ] Grant [ ] Other [x] Credit For Loans/Credits/Others (US$M): Total Program 676\.5 Total Bank 375 Cost: Financing: Total n\.a\. Financing Gap: n\.a\. Cofinancing: \. Financing Source (US$, million) Amount BORROWER/RECIPIENT 247\.50 IBRD/IDA 375\.00 CONNECTION FEES 54\.00 Total 676\.50 \. vi Borrower: Federal Democratic Republic of Ethiopia Responsible Agency: Ethiopian Electric Utility (EEU) Contact: Ato Gosaye Mengiste Title: Chief Executive Officer (CEO) Telephone No\.: +251 111 560 041 Email: gosayea@gmail\.com \. Expected Disbursements (in US$ Million) Fiscal Year 2018 2019 2020 2021 2022 2023 2024 Annual 35\.2 56\.5 71\.2 70\.0 66\.8 75\.0 0\.3 Cumulative 35\.2 91\.7 162\.9 232\.9 299\.7 374\.7 375\.0 \. Program Development Objective(s) The Program Development Objective (PDO) is to increase access to electricity in Ethiopia and to enhance institutional capacity for planning and implementation of the Government’s electrification program\. \. Compliance Policy Does the program depart from the CAS in content or in Yes [ ] No [ X ] other significant respects? \. Does the program require any waivers of Bank policies Yes [ ] No [ X ] applicable to Program-for-Results operations? Have these been approved by Bank management? Yes [ ] No [ ] Is approval for any policy waiver sought from the Board? Yes [ ] No [ X ] Overall Risk Rating: Substantial Legal Covenants Name Recurrent Due Date Frequency Adoption of Program August 01, 2018 Operational Manual (POM) by MoWIE\. Schedule 2, Section I, C, 1 (a) and (b) of Financing Agreements and Section I, C, 1 of the Program Agreement\. Description of Covenant The Recipient shall: (a) prepare and furnish to the Association for its review, a draft POM setting out detailed institutional, administrative, financial, technical and operational guidelines and procedures for the implementation of the Program and Program Action Plan, and including: (i) detailed safeguards (including Environmental and Social vii Management System guidelines prepared in accordance with Section I\.D\.2 of the Financial Agreement), financial management (including funds flow and budgeting) and procurement arrangements; and (ii) a monitoring and verification system for the Program; and (b) within one (1) month after the Effective Date, adopt (through MoWIE) and cause EEU to adopt, such POM as shall have been approved by the Association (“Program Operational Manual”) and thereafter, implement the Program in accordance with the POM\. Establishment of the August 01, 2018 Environmental and Social Management Systems for national and regional levels\. Schedule 2, Section I, D, 2 of the Financing Agreements\. Description of Covenant Within one (1) month from the Effective Date, the Recipient shall cause EEU to establish at the national and regional level, and thereafter maintain, a system for environmental and social management (“ESMS”) of Program-related activities, including: (a) policy and procedural guidelines, prepared in accordance with terms of reference (ToR) acceptable to the Association, and finalized taking into account the Association’s comments thereon (finalized guidelines to be annexed to the POM); and (b) having in place staff, and other resources, satisfactory to the Association\. Legal Conditions Name Type Subsidiary Agreement\. Article V, 5\.01 of the Financing Effectiveness Agreements\. The Subsidiary Agreement has been executed on behalf of the Recipient and the Program Implementing Entity\. \. Team Composition Bank Staff Name Title Specialization Unit Rahul Kitchlu Senior Energy Specialist Team Leader GEE01 Karen Bazex Senior Energy Specialist Co-Team Leader GEE01 Lara Born Energy Specialist Technical assessment GEE01 Rhonda Lenai Jordan Young Professional Power Engineer GEE01 Olayinka Bisiriyu Energy Finance Analyst Financial analysis GEE07 Arsh Sharma Energy Finance Analyst Financial analysis GEE08 Zijun Li Carbon Finance Specialist Economic analysis GCCFM Inka Ivette Schomer Operations Officer Gender and citizen GTGDR engagement Abiy Demissie Belay Senior Financial Management Financial management GG025 Specialist Ayalew Kebede Belew Senior Procurement Specialist Procurement GG001 viii Chukwudi H\. Okafor Senior Social Development Social safeguards GSU07 Specialist Samuel L\. Demsash Social Development Specialist Social safeguards GSU07 Yalemzewud Social Development Specialist Social safeguards GSU07 Simachew Tiruneh Edward Felix Senior Environmental Specialist Environmental GEN01 Dwumfour safeguards Yacob Wondimkun Environmental Specialist Environmental GEN01 Endaylalu safeguards Berhanu Legesse Senior Public Sector Specialist Governance GG027 Ayane Chita Obinwa Senior Program Assistant Program assistant GEE01 Hanna Ketselamaryam Program Assistant Program assistant AFCE3 Hailu Non-Bank Staff Name Title Unit Arun Sanghvi Electrification Specialist GEE01 Chiara Odetta Rogate Electrification Specialist GEE01 Anna Elisabeth Electrification Specialist GEE01 Wikman Abdulhakim Electrification Specialist GEE01 Mohammed Eyob Ayana Electrification Specialist GEE01 Bogalech Admasu Financial Management Specialist GG025 Berhane Bedilu Reta Environmental Specialist GEN01 Feben Demissie Social Development Specialist GSU07 ix I\. STRATEGIC CONTEXT A\. Country Context 1\. Ethiopia is a large, land-locked, and diverse country\. Located in the Horn of Africa, Ethiopia extends over an area of 1\.1 million km2 - about the size of France and Spain combined\. With an estimated population of about 100 million in 2015, out of which 80\.5 percent are rural dwellers, Ethiopia is the second most populous country in Sub-Saharan Africa\. The country is a land of diverse nationalities and peoples, and its biophysical environment includes a variety of ecosystems, with significant differences with regard to climate, soil properties, vegetation types, agriculture potential, biodiversity, and water resources\. The natural resources base remains the foundation for most livelihoods and is subject to considerable climate risks\. Despite past progress, a historic legacy of underinvestment still bears its mark as more than half of the adult population is illiterate, and the country’s infrastructure deficit remains one of the largest in the world\. Ethiopia is undergoing a faster demographic transition than the rest of Africa, with a rapidly rising working- age population that presents both opportunities and challenges (more than 60 percent of the population is below 25 years of age)\. 2\. Ethiopia is one of the world’s poorest countries but has achieved substantial progress in economic, social, and human development over the past decade\. With a per capita income of US$619 (2015), Ethiopia remains the 15th poorest country in the world\. Nonetheless, growth averaged nearly 11 percent per year since 2004 and extreme poverty1 fell from 55 percent in 2000 to 34 percent in 2011, which is one of the most impressive poverty reduction results recorded internationally (within Sub-Saharan Africa, only Uganda reduced poverty faster)\. Low levels of inequality have largely been maintained\. With a few exceptions, Ethiopia attained the Millennium Development Goals\. Yet, vulnerability to return to poverty remains high, especially for those engaged in rural livelihoods depending on rain-fed agriculture\. Addressing gender gaps between men and women in access to education and decision making, rights, employment, unpaid labor, land, and productive resources is essential for economic growth in the country\. World Bank (2009)2 estimates indicate that reducing basic gender inequalities in education and the labor market could increase the annual gross domestic product (GDP) growth in Ethiopia by around 1\.9 percentage points\.3 3\. The Government of Ethiopia (GoE) has embarked on a structural transformation of the economy and society\. The GoE has completed its first phase of the Growth and Transformation Plan (GTP-I) (2010–2015), which set a long-term goal for Ethiopia to become a middle-income country by 2025, with a growth rate of at least 11 percent per year during the plan period\. During 2011–2015, Ethiopia grew at a rate of 10 percent\. A second phase of the GTP (GTP-II) is under implementation for 2015–2020\. GTP-II puts a strong emphasis on structural transformation, industrialization, urbanization, and export promotion\. Public infrastructure investment has been at the center of the country’s economic strategy\. Ethiopia was able to achieve a substantial expansion of energy, road, railway, and telecom infrastructure, financed by domestic and external public borrowing\. However, the investment climate for private sector remains suppressed (in 2017, Ethiopia’s ‘Doing Business’ ranking was 159)\. Public investments in basic service provision, such as education and health, have contributed to poverty reduction, as did the 1 Extreme poverty in measured as consuming less than US$1\.90 (2011 Purchasing Power Parity) a day\. 2 Unleashing the Potential of Ethiopian Women Trends and Options for Economic Empowerment, June 2009\. 3 An important contribution to poverty reduction given the elasticity of growth to poverty reduction\. 1 introduction of rural safety nets\. GTP-II continues to commit that women and youth benefit from and participate in the overall economic, political, and decision-making processes in Ethiopia\. In the electricity sector, GTP-II priority is to provide sufficient power for both domestic consumption and export while significantly increasing households’ access\. B\. Sectoral and Institutional Context 4\. Ethiopia has vast and largely unharnessed clean energy resources\. Ethiopia is endowed with significant renewable energy resources, with massive potential for hydro, solar, wind, and geothermal power\. It is one of the few countries in Sub-Saharan Africa, if not the world, which generates all its electricity from renewable resources\. Already, the available generation capacity, mostly based on hydropower, has reached 4,256 MW\.4 Other large-scale hydropower projects (with capacity exceeding 6,000 MW) are now under construction\. Ongoing and future expansion of generation capacity will continue to rely exclusively on renewable resources\. However, the actual energy supplied from these hydropower plants is subject to uncertainty and fluctuations due to variations in seasonal and annual rainfall amounts, as well as climate change (for example, impact of the El Niño in 2015–2016 led to countrywide blackouts)\. Given the expected strong growth in demand for electricity (nearly 10 percent, annually), complementary energy resources must be developed to mitigate the risk of overreliance on and variability of hydropower\. 5\. A diversified mix of supply resources (including solar, wind, and geothermal power) would not only ensure continued sufficiency of supply, but also act as a mitigant to climate change\. In line with Pillar 3 of Ethiopia’s ‘Climate Resilience Green Economy Strategy’ (2011), the GoE targets to have about 15–20 percent of its energy supply from non-hydropower-based renewable resources (during GTP-II)\. Based on these planned additions to generation capacity, including that provided by solar, wind, and geothermal sources, Ethiopia is expected to have over 9,000 MW of installed capacity by 2020, which would provide sufficient energy (over 25,000 GWh) to supply the expected demand (see Figure 1, which includes domestic and export demand estimates)\. 6\. Ethiopia’s electrification rate is at odds with its huge energy resources\. In addition to the abundant electricity generation capacity, the grid network has also expanded substantially under GTP-I (covering nearly 60 percent of towns and villages, representing about 80 percent of the population)\. Despite major strides in the past decade, Ethiopia’s electricity sector continues to fall short of the promise of effective service delivery, with the second highest energy access deficit in Africa (over 60 million people without access)\. Currently, the on-grid access rate is about 20 percent and the off-grid access rate is about 10 percent\.5 The last-mile connections have not kept pace with infrastructure expansion due to lack of financial resources and inadequate utility capacity (see Annex 4), posing a binding constraint to economic growth and social development\. There are over 350,000 registered customers who have been waiting for a connection for the past many years, of which, about 50,000 have already paid the full connection fee\. Currently, it is estimated that of the 14\.4 million unelectrified households, about 5 million live within connection-viable vicinity of the grid network\. 4 Currently, the second highest available generation capacity in Sub-Saharan Africa\. 5 Electricity access in urban areas is estimated to be 94 percent and in rural areas 12 percent\. 2  Figure 1\. Electricity Supply-Demand Balance in Ethiopia (2016–2024) Source: World Bank estimates based on available information on progress of various projects\. 7\. Ethiopia’s cost of supplying electricity, and the electricity tariffs, are among the lowest in Sub-Saharan Africa, presenting some unique opportunities and challenges\. The Ethiopian electricity sector is an outlier in the region in that the ongoing power generation costs (based on low-cost, low-carbon sources) are fairly low (no recurrent fuel costs)\. Furthermore, compared to regional peers, the aggregate technical and commercial losses are not very large (about 23 percent) and the bill collection rate is reasonably high (85–90 percent)\. The average domestic tariff rate, last revised in 2006, sits at US$0\.03 per kWh, one of the lowest in Sub-Saharan Africa\.6 The low tariff rate, on the one hand, has driven robust average energy consumption at the household level (on average, about 120 kWh per month) but, on the other hand, has created financial challenges for the sector\. In addition, currently, the cost of connection and the associated fees are proportional to the distance of the households from the grid\. This means that while several hundred thousand households within immediate proximity of the grid network could easily afford a connection, the increasing cost of connection could be a concern as more and more distant and rural household are connected to the network\. 8\. The electricity sector maintains a slim operating profit but its debt profile is compromised\. While the sector can currently maintain a slender operating profit margin, the sector revenue has not kept pace with rising borrowing costs\. Public borrowing by the utilities in recent years (primarily, domestic bonds purchased by citizens) has created a growing future debt service obligation, which is anticipated to hit the sector finances in the coming years as these short- term loans (nearly US$5 billion) will create a cash flow problem for the sector (see Figure 2)\. While any direct internationally held debt service obligations of the utilities are met on time, most of the domestically held debt is routinely rolled forward\. 9\. To continue the growth path of the sector, a long-term financial sustainability plan is being devised and implemented\. After many years of inaction on this front, the sector utilities have prepared a revised tariff framework (January 2017) which reflects full cost of service\. Under the new framework, the proposed average domestic tariff rate would be set at US$0\.06 per kWh 6 In 2006, the tariff was set at the cost-reflective level of US$0\.6 per kWh (currency devaluation impact has since been observed)\. Before 2006, the tariff was last revised in 1997\. 3 (cost-reflective level)\. The proposed tariff framework is being reviewed by the utilities and the Ethiopian Energy Authority (EEA)\. It is expected to be presented to the Ministry of Water, Irrigation, and Electricity (MoWIE) and then to Parliament for review during the fiscal year 2018\. While the domestic tariff regime forms an important element of financial sustainability, the GoE is also considering additional actions, such as augmenting domestic revenue with revenue from power exports, systematic restructuring and/or refinancing of existing debt, and finding innovative ways of reducing the public investment burden and introducing sustainable financing mechanisms (for example, increased private participation)\. Figure 2\. Projected Financial Position - Income/Costs and Profit/Loss at Current Tariff Source: World Bank estimates based on progress of project pipeline\. 10\. In the coming years, Ethiopia could become a regional energy superpower, which would also provide additional revenues to the sector\. Given its massive clean energy reserves, Ethiopia can become a cornerstone of the regional power market and of the East African Power Pool (EAPP)\. While the GoE is aggressively expanding the base of domestic connections, in parallel, it is also focused on becoming a power export hub in East Africa\. In the coming years, power exports to Sudan, Djibouti, Kenya, and Tanzania could boost the country’s export revenue potential, estimated to be as much as US$600 million, per year, by the end of the decade\.7 In addition, planned EAPP interconnection to the Southern African Power Pool could further open the market for Ethiopian exports to Southern African countries\. By 2020, Ethiopia could achieve as much revenue from power export as it does domestically\. The export revenue could be used for domestic investments and cross-subsidies for consumers, reducing the need for large tariff increases in the future\. 11\. The GoE is undertaking far-reaching restructuring of the electricity sector, focusing on service delivery\. In 2013, the vertically integrated utility, Ethiopian Electric Power Corporation (EEPCo), was unbundled into two public enterprises: (a) the Ethiopian Electric Power (EEP) Company, responsible for the generation and transmission sub-sectors; and (b) the Ethiopian 7 Based on current plans, sale of about 1,000 MW of generation capacity externally by 2020 (roughly 10 percent)\. 4 Electric Utility (EEU), responsible for power distribution and sales\. The MoWIE continues to be responsible for coordination and oversight of the electricity sector\. The Universal Electricity Access Program (UEAP), which drove the grid network expansion program under GTP-I, resulting in one of the most significant grid expansion programs in recent years in Sub-Saharan Africa, moved from EEP to the EEU in January 2016\. The GoE also established an independent regulatory agency EEA, responsible for developing effective rules, directives, and standards for sector\. 12\. Efforts are also under way to improve the implementation capacity of the sector utilities which has, thus far, constrained the scaling-up of electrification programs\. The fast- paced growth of the sector infrastructure in the past decade created capacity challenges for EEP and the EEU\. To address this, a management contractor was brought in for two years (Power Grid Corporation of India) after the unbundling process\. However, significant improvements were not observed due to the limited scope of the engagement (there was limited delegated authority provided for some key management areas)\. Capacity constraints of the utilities has hampered access expansion in Ethiopia, as the utilities lack coordinated technical and planning functions (for example, least-cost, nationwide connections rollout program), streamlined workflow and supply chain networks, and efficient commercial processes that can support electrification\. In the past years, while strategic focus on various segments of the electricity sector’s value chain has improved, as new agencies, EEP and the EEU are continuing to encounter significant challenges related to implementation of large-scale projects\. Many efforts are now under way to address internal administrative and operational issues (for example, complete overhaul of the systems and tools; business process reengineering [BPR]; separation of financial accounts; upgrading the billing, accounting, and related management systems; and so on)\. Going forward, the GoE plans to continue the process of internal reform and capacity development of the utilities\. 13\. With GTP-II, the GoE’s focus is on last-mile connectivity and not just infrastructure growth\. The GoE recognizes the need to focus on connecting households and has put strong emphasis on the rapid scale-up of electricity connections, particularly in areas that are already within the immediate and short-term reach of the network\. Under the new leadership and institutional arrangements of the electricity sector, rolling out household connections has become a top priority\. Such access expansion will rely on existing and future renewable energy plants\. The GoE considers on-grid electrification to be a high-impact, low-hanging fruit, which can significantly improve service delivery\. Based on these priorities, EEU, responsible for operating the distribution network and expanding the rate of on-grid electrification, is now going through a process of departmental reorganization to streamline its business processes\. 14\. GTP-II has also put forward ambitious off-grid targets, which would continue the success achieved under ongoing programs\. Currently, the off-grid expansion is implemented through two channels: (a) Rural Electrification Fund (REF), with focus on the installation of stand- alone solar systems (SAS) facilitated by Regional Energy Bureaus (REBs), and public facilities program working with the Ministries of Health and Education both with geographical focus on un- electrified rural areas; and (b) credit facilities administered by the Development Bank of Ethiopia (DBE) (under the IDA-financed projects, Electricity Network Reinforcement and Expansion Project [ENREP, P119893] and ENREP-Additional Financing [AF, P155563]), which are successfully channeling finances to support private sector enterprises (PSEs) and microfinance institutions (MFIs) for deployment of off-grid renewable energy systems and energy-efficient products\. While over a million households have benefited from these programs, the GoE is 5 reviewing the current institutional arrangements to enable further scale-up of off-grid programs in the coming years\. 15\. Ethiopia aims to reach universal electricity access by 2025 in accordance with the National Electrification Program (NEP)\. The GoE launched its ‘National Electrification Strategy’ (NES) in June 2016\. The NES defined the strategic priorities for sustainable energy sector development and scaling up electrification\. The GoE’s ‘NEP, launched in November 2017, will support the implementation of the electrification program and will be carried out in phases based on a least-cost, spatial-proximity targeting methodology\. The NEP takes a comprehensive approach to electrification through a balance of on-grid and off-grid service provisioning (see Table 1), as well as public and private sector-led interventions\. Moreover, the NEP also aims to address the institutional and technical bottlenecks through a comprehensive set of program implementation support activities to be carried out in the near term to ensure the achievement of the targets\. Projections, which will be updated regularly based on the geospatial least cost plan and general progress, indicate that on-grid service will remain the primary delivery modality, while off-grid penetration is expected to peak by 2025, serving 35 percent of the population and then tapering off to be a relatively marginal solution by 2030\. Table 1\. Electricity Access Expansion Targets under the NEP Cumulative New On-grid On-Grid Off-Grid Total Households On-grid Period Connections Access Access Access (millions) Connections (millions) Rate (%) Rate (%) Rate (%) (millions) 2016 18\.0 0\.1 3\.6 20 11 31 2017 18\.5 0\.2 3\.8 21 11 33 GTP-II 2018 19\.0 0\.5 4\.3 23 11 34 2019 19\.5 0\.7 5\.0 26 11 37 2020 20\.0 0\.8 5\.8 29 13 42 2021 20\.4 1\.0 6\.8 33 16 49 2022 20\.8 1\.5 8\.3 40 20 60 GTP-III 2023 21\.2 2\.0 10\.3 49 24 73 2024 21\.6 2\.0 12\.3 57 29 86 2025 22\.0 2\.0 14\.3 65 35 100 2026 22\.6 2\.0 16\.3 72 28 100 2027 23\.2 2\.0 18\.3 79 21 100 GTP-IV 2028 23\.8 2\.0 20\.3 85 15 100 2029 24\.4 2\.0 22\.3 91 9 100 2030 25\.0 2\.0 24\.3 97 3 100 Source: NEP Implementation Road Map (IRM)\. 16\. Following decades of self-managed and self-financed investments in the electricity sector, the GoE is looking to aggressively crowd-in the private sector\. Historically, all electricity infrastructure development has been centrally planned and publicly financed\. This has caused significant macro-financial constraints which are widely seen as unsustainable in the long term\. In addition, the utilities have struggled to keep up with the upgrades required (systems, tools, and human resources) to match the sector growth\. While the utilities have generally performed well on technical aspects of designing and executing large-scale infrastructure development projects, much more needs to be done to develop skills for upcoming technologies\. Consequently, the GoE is looking to invite the private sector to participate in the power generation segment (independent power producers [IPPs]), to crowd in commercial financing, augment technical know-how, and improve the implementation speed of the electricity sector\. Globally, newer 6 technologies such as solar and wind are largely privately financed, unlike hydro, which is primarily public financed\. 17\. The GoE is also implementing investment climate reforms to attract a diverse group of financiers\. The GoE is taking several steps to ensure that key legal and regulatory changes, adequate commercial and procurement frameworks, and institutional arrangements are put in place to prepare for private participation\. The GoE has prepared an umbrella regulation which paves the way for public-private partnerships (PPPs)\. The new ‘PPP Proclamation’ was passed by the Parliament on January 25, 2018\. The GoE is preparing a transparent and competitive procurement framework (auction-based bidding procedures, as feasible), which is expected to become the default methodology for procuring IPPs\. The GoE is working closely with key sector stakeholders to review existing commercial and banking regulations that may affect development of IPPs in the country\. Finally, a dedicated IPP unit has been established at EEP, which would become the primary counterparty to the IPPs\. The scale and scope of the ongoing reforms will require continued support from high-level authorities, as well as international expertise and experience\. 18\. The World Bank Group has been providing comprehensive policy advice, technical support, and financing for sector development\. The NES was supported under Phase 1 of the World Bank’s three-year programmatic technical assistance, the Energy Sector Management Assistance Program (ESMAP)-funded Ethiopia Energy Sector Review and Strategy Program (ESRSP, P146616)\. The NEP-Implementation Roadmap (NEP-IRM) has been developed as part of Phase 2 of the ongoing ESRSP, while Phase 3 activities will support the development of a nationwide geographic information system (GIS) platform for least-cost planning\. The World Bank Group has also prepared a ‘Joint Implementation Plan’ to coordinate support for the NEP and for IPP development\. Specifically, the International Finance Corporation (IFC) is supporting the development of the private sector-led SAS market through the World Bank Group/IFC ‘Lighting Africa Program’, as well as supporting the development of the mini-grid market through advisory activities\. The World Bank Group has also been leading the coordination efforts with other development partners (DPs) and assisting the GoE in coordinating and developing the electrification program in the country\. Given the pace of the ongoing reform program and the increased engagement of the DPs with the GoE in the electricity sector, the World Bank has supported close coordination of the DPs through an Energy Sector Roundtable\. This roundtable is proposed to be included as a subgroup under the official Donor Assistance Group of Ethiopia, which is chaired by the World Bank\. 19\. The proposed ELEAP supports the NEP, by financing the first phase of grid intensification activities, building implementation capacity, and creating a blueprint for scaling up electrification\. The proposed ELEAP is also designed to create the framework for crowding in resources from other DPs\. Using a Program-for-Results (PforR) instrument, ELEAP would help establish a sectorwide programmatic approach for financing electrification by demonstrating the viability of the NEP and ensuring good practices for access expansion\. The GoE is expected to launch the road map for the NEP and syndicate financing from interested DPs in the coming months\. Further description of ongoing and possible additional support from the DPs to the NEP is presented in Annex 9\. The proposed ELEAP is also well-aligned with the objectives of the IDA Scale-Up Facility (SUF) to prioritize projects with potentially transformational impact, given the significant increase in access to electricity that will be supported under a programmatic framework by ELEAP (as outlined in sections below)\. 7  C\. Relationship to the CPF and Rationale for Use of the Instrument 20\. The proposed ELEAP is aligned with the World Bank’s Country Partnership Framework (CPF) for FY18–FY228\. It supports Focus Area 2 (‘Building Resilience and Inclusiveness’), by providing access to electricity for the citizens of Ethiopia\. It directly supports Objective 1\.2 ‘Increased Access to Reliable Energy Supply’ by providing financing for the implementation of the NEP to significantly scale up energy access in the country and assist the GoE in reaching universal electrification\. The operation also supports the CPF focus on building resilience and inclusiveness (including gender equality)\. 21\. The proposed ELEAP supports the World Bank’s twin goals of poverty reduction and shared prosperity and is aligned with Sustainable Development Goal 7, Sustainable Energy for All, and the World Bank’s Energy Sector Directions Paper\. Provision of last-mile electrification under the proposed ELEAP will increase access to electricity services for poor households, particularly in rural areas, creating opportunities to study and work, contributing to raising the quality of life, improving safety at night and stimulating off-farm activity and economic interaction\. Increased access to reliable electricity supply will not only lower costs and improve the profitability of business enterprises9 but is also key to enabling the setup of new private sector- led enterprises which stimulate GDP growth\. In addition, the Program will contribute to the cross- cutting issues such as gender and climate change by supporting expansion of low-emission renewable energy, which reduces women’s exposure to indoor air pollution and time burden associated with obtaining alternative energy sources\.10 Improved electricity access for social services such as health clinics will also promote gender equality through gains in maternal health outcomes\. 22\. The World Bank is well placed to support the GoE’s NEP\. There is a strong development rationale for the public-sector support to the proposed ELEAP\. The World Bank has broad experience supporting the design and implementation of access programs around the world, such as in Vietnam, Bangladesh, Kenya, Tanzania, and Rwanda\. Under these programs, the World Bank has provided support for the establishment of an adequate framework and financing for investments, to ensure sustainability of investments\. Such experiences have allowed the World Bank to identify lessons learned and best practices at the technical, institutional, and financial levels, factoring in the specific context of each country\. 23\. The proposed ELEAP will build on the World Bank’s ongoing support to the Ethiopian electricity sector value chain\. The World Bank’s support to the energy sector includes over US$1 billion of IDA-financed projects under implementation, which include energy resource development, network rehabilitation and expansion, and access enhancement\. The World Bank’s comprehensive engagement has allowed it to gain deep understanding of the electricity sector and enables it to effectively support the implementation of the NEP, from the strategic perspective of overall universal electrification\. Through its technical assistance engagements (for example, ESMAP-funded Africa Renewable Energy Access [AFREA], the Gender and Energy Program, and the State and Peacebuilding Fund), the World Bank is already supporting the GoE to fine-tune a comprehensive and coordinated electrification program\. The proposed ELEAP will also help 8 Report No\. 115135-ET\. 9 The report Revisiting What Works: Women, Economic Empowerment and Smart Design (2016) indicates that rural electrification is ‘proven’ to be beneficial in encouraging women’s entrepreneurial activities if gender inequalities in the family and local economy are accounted for\. 10 In Ethiopia, cooking with electric (injera) cookstoves is common (when access to electricity is made available)\. 8 strengthen the institutional and technical capacity to define, implement, and oversee the NEP, optimizing the allocation of financial, technical, and institutional resources and mobilizing investments from DPs\. 24\. The World Bank’s portfolio is also well aligned with principles of ‘Maximizing Finance for Development’ under IDA-18\. This includes supporting increased commercial financial flows to the electricity sector in power generation (development of IPPs), as well as supporting increased private sector participation in off-grid service delivery (under ENREP and NEP)\. The proposed ELEAP provides public sector financing for electrification initiatives where commercial financing is not considered viable while also supporting utility reforms and institutional strengthening which can further support increased commercial financial flows to the sector in the future\. 25\. The PforR instrument is well suited to support the NEP\. The PforR instrument rewards achievement of and accountability for results\. The NEP’s primary objective is to expand electrification through measurable targets, with clear outputs, and beneficiaries\. In addition, the instrument provides the World Bank with leverage to inform and influence key strategic and policy orientations necessary to implement a viable electrification program\. The PforR instrument allows the establishment of high-level, programmatic targets, compared with the traditional investment approach, with focus on project-based implementation\. As such, the PforR instrument provides a unique opportunity to influence system wide improvements by supporting the GoE’s flagship engagement in the electricity sector, that is, the NEP\. The results-based financing approach can drive momentum behind these objectives by incentivizing key outcomes that usually do not get sufficient attention\. The PforR approach would allow the World Bank’s intervention to better align with the GoE’s goals\. The improvements expected as part of the proposed ELEAP at the institutional level will strengthen the sector\. In this context, the sector institutions would also be incentivized to address the challenges of a growing sector, by focusing on improving their technical and operational performance\. The PforR allows the GoE to use and strengthen its own systems, which not only ensures longer-term sustainability of the NEP but also provides a unique window of dialogue on core issues (for example, utility reform, institutional capacity development, and so on)\. The implementation of the proposed ELEAP as a PforR, can also create a compelling vehicle for syndication of funds from other DPs\. II\. PROGRAM DESCRIPTION A\. The Government’s Program - NEP 26\. The NEP aims to achieve universal electrification by 2025\. The NEP will be carried out in phases, with the immediate focus being on the early years of the Program (2018–2023)\. The NEP is organized into three pillars addressing the dominant challenges of the sector: (a) Pillar 1: On- grid electrification; (b) Pillar 2: Off-grid service provisioning; and (c) Pillar 3: Sector capacity and institutional reform\. Each of the pillars provides a specific menu of activities to be carried out to reach universal electrification (see Figure 3; details in Annex 1)\. The phased focus under the NEP also allows for enhanced technical planning and coordinated fund mobilization\. 27\. Pillar 1 - On-grid electrification\. Given the unique situation of the electricity sector in Ethiopia (sufficiency of supply and vast grid network footprint), the core focus of the NEP in the early years will be around on-grid access provision, taking advantage of renewable energy based supply\. The execution will be carried out as follows: 9  (a) Densification\. In the early years, NEP will target last-mile connections to households that are near the existing network infrastructure of the EEU (estimated to be nearly 5 million households)\. These connections mostly require short low voltage (LV) expansion, service drops, and meters\. (b) Expansion\. The second phase of the NEP will target connecting new customers who are not proximate to the existing grid\. These connections will require both medium voltage (MV) and LV extensions (as well as possible reinforcement of the transmission network and energy generation)\. Detailed network design for grid expansion will be informed by completion of the comprehensive geospatial least-cost rollout plan (under development)\. 28\. Pillar 2 - Off-grid service provisioning\. The on-grid connection expansion will be a multi-decade undertaking\. Therefore, support for sustainable and affordable off-grid service provision (for example, SAS or mini-grid systems) will be implemented under the NEP alongside the on-grid connection program\. Pillar 2 of the NEP targets communities where the grid would not reach within the next 5–10 years (pre-electrification) as well as communities for which the grid is not the least-cost solution (permanent off-grid)\. This includes the following: (a) Stand-alone solar system\. Targeting the rollout of solar photovoltaic (PV) systems through a combination of public and private sector-led approaches\. The private sector would be supported by a combination of market development support and access to finance programs (such as credit facilities provided by the DBE)\. In remote areas of the country, where the private sector has not established distribution channels, public programs will be implemented (for instance, through the EEU or the MoWIE)\. The implementation modalities for public and private provision of SAS will be defined in the planned off-grid strategy (under development as part of the NEP)\. (b) Mini-grids\. Targeting the rollout of micro-/mini-grids with local LV networks and powered by appropriate renewable energy resources (solar or hybrid), implemented through a combination of public and private sector-led approaches\. Deployment of a nationwide mini-grid program in remote areas will require clarity on tariffs, grid integration protocol, quality of service, and so on\. These issues will be addressed in the planned off-grid strategy\. 29\. In addition, the NEP targets to achieve universal access for social services delivery institutions, especially in the health and education sectors, as well as ensure adequate and reliable services for newly established ones\. Under the NEP, secondary schools and health centers are expected to achieve universal access by 2022, and primary schools and remote health posts by 2025\. 30\. Pillar 3 - Sector capacity and institutional reform\. This pillar focuses on providing the necessary technical assistance and capacity-building support required by the sector institutions to achieve the ambitious targets set under Pillars 1 and 2 by directly supporting the achievement of outcomes from the first two pillars\. This includes a comprehensive program with a focus on utility reform and skill development in the following areas: (a) planning capabilities; (b) technical and commercial capacities; (c) financial management (FM) functions; (d) streamlining procurement; (e) transparency, accountability, and governance; (f) safeguarding the environment and society; (g) gender equity; and (h) long-term sector financial viability\. 10 31\. The GoE has prepared an IRM for the NEP (NEP-IRM)\. It provides an action plan and a timetable, and estimates yearly connections (grid and off-grid) for targeting universal access by 2025\. The NEP-IRM also includes a bankable investment prospectus, which can be used for syndication of funds for electrification\. Furthermore, the NEP-IRM identifies roles and responsibilities of sector institutions and stakeholders (for example, local communities, private sector, and others), as well as technical assistance and capacity building required for the implementation of the NEP\. It constitutes the foundational programmatic document that the GoE will use to promote the coordination and alignment of relevant Government agencies and DPs toward the achievement of the goals\. Under the NEP, the MoWIE will coordinate and provide oversight for the effective and timely execution of all components of the NEP through the Development of Electrification (DoE), with guidance from a Steering Committee\. While the DoE will support the day-to-day coordination and oversight of the NEP, the Steering Committee, comprising cross-sectoral leaders and other experts, will provide high-level strategic direction and policy guidance; facilitate effective coordination across the GoE’s ministries, departments, and agencies; and monitor the sector-level ‘dashboard’ of key indicators of progress and performance\. Figure 3\. Comprehensive Electrification Approach under the Three Pillars of the NEP Source: NEP-IRM\. B\. Program Development Objectives and Key Results 32\. The Program development objective (PDO) is to increase access to electricity in Ethiopia and to enhance institutional capacity for planning and implementation of the Government’s electrification program\. 11 33\. The following outcome indicators will be used to measure achievement of the PDO: ï‚ PDO Indicator 1: Number of people provided with on-grid electricity services ï‚ PDO Indicator 2: Number of people provided with off-grid electricity services ï‚ PDO Indicator 3: Improved planning and implementation capacity of the electricity sector11 34\. The Program includes three Results Areas: (1) increase access to on-grid electricity in areas covered by the power grid; (2) increase access to off-grid electricity; and (3) strengthen sector capacity and institutional reform\. The Results Chain (Table 2) includes a description of activities within each of the Results Areas which are necessary for achieving the PDO\. Indicators and outcomes within each of the Results Areas have been defined to monitor the progress of the Program\. A subset of these indicators will be used as Disbursement Linked Indicators (DLIs,) bolded in Table 2) of the Program; the remaining will be monitored through the Program Results Framework\. Technical requirements for achieving the outcomes have been included in the Program Action Plan\. A detailed description is presented in the following paragraphs as well as in Annexes 2, 3, and 8\. Table 2\. Program Results Chain Results Activities Intermediate Indicators/Outputs Outcomes Area Results Area ï‚ Service drops, including ï‚ Cumulative number of ï‚ Increased number 1: Increase meters, and ready-boards residential grid electricity of people provided access to on- ï‚ LV and MV lines connections under the with on-grid grid constructed or rehabilitated Program [DLI1] electricity services electricity in ï‚ Cumulative number of non- areas residential grid connections covered by under the Program the power ï‚ Households connected to the grid grid under the Program that are female-headed Results Area ï‚ Preparation of feasibility ï‚ Households provided with ï‚ Increased number 2: Increase studies and implementation electricity through mini-grids of people provided access to off- plans for mini-grids and and SAS with off-grid grid SAS ï‚ Cumulative number of mini- electricity services electricity ï‚ Installation of renewable grids installed [DLI2a] energy/hybrid mini-grids ï‚ Cumulative capacity of ï‚ Installment of SAS renewable energy installed through mini-grid projects under the Program ï‚ Cumulative number of stand-alone solar PV systems installed [DLI2b] Results Area ï‚ Staff training and annual ï‚ DoE is established and has ï‚ Strengthen sector 3: Strengthen capacity-building activities put in place integrated M&E institutional sector ï‚ Preparation of studies on: system, that is maintained capacity capacity and o Affordable customer throughout the Program connection policy [DLI3] 11 The target (‘Yes’) for PDO Indicator 3 is achieved upon achievement of all Intermediate Results Indicators on institutional capacity, planning, fiduciary management, gender and citizen engagement, and safeguards systems described in detail in Annex 2\. 12  Results Activities Intermediate Indicators/Outputs Outcomes Area institutional o Low-cost ï‚ Finalization and ï‚ Improved cost- reform electrification/technical implementation of affordable effectiveness of standards connections study and long- Program o Long-term financial term financial sustainability ï‚ Strengthen sector sustainability study planning capacity o Power system ï‚ Annual connection rollout ï‚ Improve gender rehabilitation plans adopted by EEU and CE systems ï‚ Establishment of minimum [DLI4] ï‚ Strengthen entry conditions for ï‚ Audited financial statements safeguards system procurement (compliant with ï‚ Preparation of off-grid International Financial strategy Reporting Standards ï‚ Establishment of a gender and citizen engagement [IFRS]) submitted [DLI5a] (CE) framework ï‚ Acceptable performance of procurement processes and (internal and external) audit system maintained [DLI5b] ï‚ Reports on fraud and corruption (F&C) verified by the Federal Ethics and Anti-Corruption Commission (FEACC [DLI5c] ï‚ Gender and CE work program approved in first year of Program and Gender and CE reports updated annually; [DLI6a] ï‚ Annual customer satisfaction in key aspects of the Program was equal or higher than last year’s, as per annual surveys (between July 8, 2019 through July 7, 2022) [DLI6b] ï‚ Women in STEM: Increase women’s employment at EEU ï‚ ESMS established and operational according to the adopted guidelines [DLI7] ï‚ Cumulative number of staff in EEU and MoWIE receiving training under the Program 13  C\. PforR Program Scope 35\. The proposed ELEAP is designed as a subset of the NEP\. It will support significant scale- up in electricity connections under Pillar 1 (densification)\. It will also support pilot programs for off-grid service delivery (public sector-led programs supporting SAS and mini-grids) under Pillar 2\. The proposed Program will provide strong emphasis on Pillar 3 (sector capacity and institutional reform), being an essential precondition for success of the activities under the first two pillars\. The proposed ELEAP will finance the activities of the NEP’s three pillars in three results areas on a countrywide eligibility basis\. Figure 4\. Program Boundaries for the Proposed ELEAP Source: NEP-IRM\. 36\. Activities under Results Area 1: Increase access to on-grid electricity in areas covered by the power grid through large scale and programmatic densification of electricity connections, including installation of LV extensions, service drops, metering and limited installations or rehabilitation of MV lines\. While Ethiopia’s geospatial least-cost access expansion plan is under development,12 substantial progress can be made on an immediate basis by implementing densification activities in areas where the network can support new connections (a significant waiting list already exists)\. Densification of consumer connections in areas that have been recently electrified through the UEAP will enable electrification at a rapid pace, subject to improvements in sector capacity (as described in paragraph 38 below)\. Large-scale and programmatic densification activities will result in improved cost-efficiency of the electrification program and significantly increased economic benefits in the targeted areas\. Activities for densification connections will mostly include installation of short LV extensions, service drops, and metering, while a few connections might require limited MV extensions\. As part of the NEP, the proposed ELEAP will directly support 1,080,000 new connections\. 12 The World Bank and other DPs are supporting the GoE with technical assistance activities to establish a data-driven planning framework through the development of a nationwide geospatial least-cost plan, which will further detail cost of connection and guide the optimal strategy for sequencing the rollout of on- and off-grid connections to achieve universal access\. 14 37\. Activities under Results Area 2: Increase access to off-grid electricity through provision of support for pilot-scale off-grid service delivery activities, including off -grid electrification of communities using renewable energy mini-grids (such as solar and hybrid), as well as installation of SAS for beneficiaries in these communities\. The ongoing private sector-led market development activities and off-grid service delivery will be continued through the DBE credit facilities under the ENREP\. The NEP also envisions scaling up public sector-led off-grid programs\. This includes mini-grids and SAS for remote areas of the country where neither the grid nor the private sector distribution channels will reach in the near term\. While the comprehensive off-grid strategy of the NEP is under development, the proposed ELEAP will support pilot-scale off-grid service delivery activities, that is, off-grid electrification of up to five communities using renewable energy mini-grids (solar or hybrid) and 50,000 SAS for households in these communities\. 38\. Activities under Results Area 3: Strengthen sector capacity and institutional reform\. Support under ELEAP will address the key elements of Pillar 3 of the NEP, which focuses on supporting sector capacity and institutional reform in the Government's electrification program, specifically improving the capacity of EEU and MoWIE to plan and implement the Program through, inter alia, (a) preparation of annual connection and roll-out plans; (b) establishment of the DoE and an integrated M&E system; (c) production of International Financial Reporting Standards Compliant Audited Financial Statements (without disclaimer opinion); (d) performance improvements of procurement processes; (e) production of reports on F&C allegations; (f) preparation of reports on CE and gender; (g) improvement of customer satisfaction; and (h) establishment and maintenance of an ESMS\. 39\. Program beneficiaries\. The beneficiaries of the Program will include the following: (a) Households\. Given that the majority of the unelectrified households in Ethiopia are in rural areas, the Program activities are substantially geared toward being ‘pro-poor’\. Access to electricity contributes to an improvement in the quality of life by enabling newly connected consumers to undertake productive and income-generating activities (less time spent on fetching traditional sources of energy and clean water) and enhanced access to information/communication (through phone, radio, television, and so on)\. Empirical evidence also points to health benefits owing to the reduction of indoor air pollution due to reduced kerosene consumption\. (b) Social institutions\. Improvements in the quality of public service delivery are expected through increased electricity connections, especially of public facilities such as schools; clinics; hospitals (for example, for cold chain, vaccine and medicine refrigeration, lighting, sterilization); and water pumping stations (for example, for safe drinking water) used by poor and vulnerable households\. (c) Productive enterprises\. Improved access to electricity supply will contribute to increased productivity and income of enterprises (particularly for micro/small/medium enterprises) and will assist them in reducing their dependency on expensive diesel generation that has a substantially higher per unit cost\. In addition, increased access to electricity can boost productivity and reduce sales and equipment losses\. (d) Electricity sector institutions\. The sector institutions, especially the MoWIE and EEU, are expected to benefit from the strengthening of planning and implementation 15  capacity of the NEP, which could translate into improved institutional performance as well as cost-effectiveness, efficiency, transparency, and accountability of the sector\. (e) Gender-differentiated benefits\. Providing rural households, social services, and enterprises with improved electricity services has the potential to promote gender equality, create employment and business opportunities for women, and improve development outcomes regarding, for example, education\. Under the Program, gender-differentiated considerations will be mainstreamed as part of the utility operations\. 40\. Excluded activities\. The Program will not support activities that are likely to have significant adverse impacts that are sensitive, diverse or unprecedented on the environment and/or affected people\. The Program will also exclude activities that involve the procurement of (a) works, estimated to cost US$50,000,000 equivalent or more per contract; (b) goods estimated to cost US$30,000,000 equivalent or more per contract; (c) non-consulting services, estimated to cost US$20,000,000 equivalent or more per contract; and (d) consulting services, estimated to cost US$15,000,000 equivalent or more per contract\. 41\. Program financing\. The Program financing consists of funding from the Government’s own resources in the amount of US$247\.5 million over 66 months, or approximately US$45 million per year, connection fees from new customers in the amount of US$50 per customer,13 and the World Bank’s contribution of US$375 million (US$250 million in IDA Regular Credit and US$125 million in IDA Scale-Up Facility (SUF) Credit) totaling US$676\.5 million over 2018– 2023 (see Table 3)\.14 Table 3\. Program Financing for ELEAP (US$, millions) Source Amount Percentage of Total GoE 247\.5 37 Connection fees 54\.0 8 IDA 375\.0 55 Total Program Financing 676\.5 100 Source: NEP-IRM\. D\. Disbursement Linked Indicators and Verification Protocols 42\. The disbursement under the proposed ELEAP will be governed by a set of seven DLIs\. The selection of the DLIs was guided by the following: (a) consideration of how the selected DLIs would directly provide the incentives for meeting Program goals and (b) feasibility of measuring, monitoring, and verifying the Disbursement Linked Results (DLRs)\. The choice of DLIs is based on the most relevant output indicators, which signal progress toward achieving the planned outcomes under the Program\. (a) DLI 1: Establish on-grid electricity connections\. This DLI relates to the outcome envisioned under Results Area 1 of increasing access to grid connections within the 13 Connection fees are expected to increase over the course of the Program; however, conservative estimates were considered for Program financing calculations\. The number of new connections was calculated as 1,080,000\. 14 The Program financing framework presented here constitutes the first stage of funds mobilized as part of the NEP\. In the coming years, it is expected that AF will be mobilized to support the NEP targets\. NEP-IRM estimates financing need of about US$1,400 million in the first five years of the NEP\. 16  existing network (that is, up to 3 km from the grid) and measures the cumulative number of residential and non-residential grid connections under ELEAP\. (b) DLI 2: Establish off-grid electricity access\. This DLI relates to Results Area 2 and will be triggered upon commissioning of renewable energy mini-grids and installations of stand-alone solar (SAS) system, following the preparation of related feasibility studies and implementation plans\. (c) DLI 3: Strengthen sector institutional capacity\. This DLI relates to Results Area 3 and will be triggered upon establishment of the DoE within the MoWIE to ensure coordination of activities under the NEP and putting in place an integrated M&E system that is maintained throughout the Program\. The DoE will include staff with technical, procurement, FM, safeguards, and M&E capacity\. (d) DLI 4: Strengthen sector planning capacity\. This DLI relates to Results Area 3 and will be triggered upon adoption by the EEU Board of the annual EEU connection rollout plans, necessary to identify resources, staffing, and material needs, as well as modus operandi in rolling out the envisioned connections for each year\. (e) DLI 5: Strengthen fiduciary systems\. This DLI is intended to strengthen FM, procurement, and governance systems to address critical risks noted in the Integrated Fiduciary Assessment (IFA)\. It is related to Results Area 3 and will be triggered upon achievements of the following milestones: ï‚ FM\. Delivery of IFRS-compliant audited financial statements by the EEU on time and with audit opinion other than adverse or disclaimer in the later years of the Program, as capacity improves\. ï‚ Procurement\. (1) Minimum Conditions established and maintained: These entry conditions will include: (i) deployment of the required procurement staff; (ii) establishment of a well-functioning contract award committee and complaints handling and debarment mechanisms, which shall follow the Federal Public Procurement Rules; (iii) strengthening internal and using external procurement audit systems; (iv) establishment of a procedure for advance orientation of staff in procurement and contract management; and (v) establishment of procurement and contract management and monitoring system\. (2) Performance Measures: MoWIE and EEU will be required to achieve acceptable performance (as defined in the POM) of procurement processes and internal and external audit systems\. Such audits should be accompanied by MoWIE and EEU management response (accountability)\. The procurement DLI will measure both performance of the procurement auditor (based on time line and quality of the audit) and procurement performance of EEU (including EEU’s UEAP unit) and MoWIE (based on the findings of the Independent Verification Agent)\. ï‚ Governance\. The: MoWIE will submit a yearly report on F&C allegations and responses related to the Program for verification by the FEACC\. The report will include a review of staffing (ethics and anticorruption officers or vigilance officers in all relevant offices at all levels) and disclosure of responses (including timing) to grievances of complainants related to power drop/interruption and line 17  connection/meter)\. FEACC verification will be evidenced by a cover letter from FEACC attached to the report\. An independent verification agent will verify the satisfaction of DLI 5, including that FEACC had carried out the required verification under this DLI\. (f) DLI 6: Improve gender and CE systems\. This DLI encompasses efforts to mainstream CE and gender activities at the EEU\. The EEU will publish an annual report summarizing CE and gender activities each year for the duration of the proposed ELEAP\. This DLI is related to Results Area 3 and will be triggered upon (i) the design and adoption of CE and gender work program (as defined in the POM) in the first year and publication of a report on CE engagement and gender activities for subsequent years of the Program and (ii) the annual customer satisfaction survey showing equal or increased customer satisfaction in key aspects (service, grievance, transparency, dialogue, or others, and so on) in the later years of the Program\. (g) DLI 7: Strengthen safeguards systems\. This DLI responds to the critical need to strengthen capacity to supervise and monitor the social and environmental impacts of the Program\. The existing ESMS in the EEU needs to be improved and implemented at the regional and national levels\. During the first year of implementation, the EEU will establish the ESMS, including recruitment/assignment of safeguards personnel at the regional and national levels and the adoption of safeguards guidelines\. In subsequent years, the MoWIE and EEU will ensure adequate implementation of the ESMS, focusing on the adequate screening of subprojects, the implementation of recommended safeguards measures, and the functioning of the complaint-handling mechanism\. E\. Capacity Building and Institutional Strengthening 43\. Skill development within the sector institutions is a core aspect of the sustainability of the NEP, and is therefore, a key focus of ELEAP\. The continual and rapid expansion of electrification in Ethiopia will require extensive capacity-building support not only for the electricity sector institutions, the MoWIE and EEU, but also for the broader sector participants such as academic institutions (universities and vocational training centers) and community and other local stakeholders\. 44\. Selected NEP activities related to skill development will be supported by ELEAP and/or related World Bank operations\. Additional details are provided in Annex 1\. (a) Sector institutions (EEU and MoWIE)\. Comprehensive training, technical assistance, and capacity-building support will be provided for sector institutions for technical and planning skills development, program management, M&E, fiduciary systems and safeguards management, as well as for transition to customer-oriented business processes\. These activities not only aim to strengthen the technical capacity of the utility and its staff but also target improving commercial operations and utility performance\. (b) Academic institutions\. The EEU has an ongoing program to recruit and train recent university graduates, as well as technical and vocational education and training (TVET) program graduates\. Deeper interlinks will be supported with relevant local 18  universities and TVET institutions to prepare a pipeline of skilled labor force for the electricity sector\. (c) Community and local stakeholders\. Capacity development support will also be provided to broader stakeholders in the electricity sector, such as community groups, local industry participants, women, and civil society organizations\. III\. PROGRAM IMPLEMENTATION A\. Institutional and Implementation Arrangements 45\. The MoWIE will be responsible for achieving the targets of the ELEAP\. Under the MoWIE, the DoE will be responsible for Program oversight and monitoring progress\. The DoE will rely on other sector agencies, including the EEU, to facilitate successful implementation of the goals and objectives of the ELEAP\. In addition, a Steering Committee will provide high-level strategic direction and policy guidance to the DoE\. 46\. The main implementing agency for majority of the ELEAP activities will be the EEU\. For Results Area 1 (on-grid access), activities will be implemented by the EEU’s Retail and Wiring unit (under the Distribution Department), as well as the UEAP unit\. Results Area 2 (off-grid access) will be implemented by the EEU’s UEAP unit (with technical support from the relevant MoWIE departments)\. Activities under Results Area 3 will be implemented either by the EEU or by the MoWIE, as relevant\. The POM will be prepared to provide detailed implementation procedures\. In addition, MoFEC will sign a subsidiary agreement with EEU that will include terms of proceeds of the financing made available to EEU and EEU’s responsibility in carrying out activities under the Program\. Detailed institutional and implementation arrangements are in Annex 1\. B\. Results Monitoring, Evaluation, and Verification Agencies 47\. While the MoWIE (through the DoE) will be tasked with the overall Program coordination and reporting, the EEU will report achievements of its tasked activities through the DoE\. The EEU’s Planning Department already monitors the utility’s key performance indicators (KPIs), while the Quality Control and Process Excellence Department monitors KPIs from each of its regional departments\. The EEU prepares quarterly and monthly reports for its Board and MoWIE\. The EEU also has a grievance-handling mechanism in place and carries out routine customer satisfaction surveys\. However, the technical assessment highlighted the need to improve capacity of M&E systems\. Capacity to monitor results will be key to ensure the Program’s success and effectiveness\. The proposed ELEAP will support strengthening of the existing M&E system which is needed to track and monitor progress against the NEP targets\. The M&E system will be linked to the GIS planning tool, leading to a comprehensive management information system\. The MoWIE will be incentivized to establish an independent M&E unit, including staff, resources, and provision of training (DLI 3)\. 48\. In line with the World Bank’s policy for PforR, the MoWIE will retain independent verification agencies (IVAs) under ToRs acceptable to the World Bank to verify the achievement of DLI results\. The MoWIE will engage the Central Statistics Agency (CSA) as the IVA to conduct surveys with an agreeable sample size for connections to be verified under DLIs 1 and 2\. The CSA will verify that connections comply with acceptable quality standards, as established by the EEU, as well as conduct site visits of the commissioned mini-grids and deployed SAS\. An IVA (most likely a consulting firm) will be hired to verify achievements of all remaining DLIs 3, 4, 5, 6, and 19 7\. Verification will be carried out on an annual basis\. DLI 3 will also further strengthen the verification capacity of the CSA, including by allowing for additional technical expertise needed to verify the quality of electricity connection provided under the Program\. During implementation, the World Bank and the MoWIE will carry out periodic reviews of the CSA and IVA reports, as necessary, and evaluate the overall appropriateness of the verification arrangements, taking mitigation measures, as needed\. C\. Disbursement Arrangements 49\. Disbursements\. IDA Credit proceeds will be disbursed against submission, to the World Bank, of the IVAs’ Program Results Verification Report (RVR) on the achievement of the DLIs\. The DoE will present the Program RVR to the World Bank within three months of the end of each fiscal year\. The World Bank will use the Program Report to determine the amount of the eligible disbursements to be made based on the results achieved\. The MoWIE, the EEU, and the Ministry of Finance and Economic Cooperation (MoFEC) understands that if after the IDA Credit closing date, the World Bank establishes that the withdrawn financing balance exceeds the total amount paid for Program expenditures, exclusive of any such amounts financed by any other financier or by the World Bank under any credit or grant, the Borrower shall promptly, upon notice from the World Bank, refund such excess amount of the withdrawn financing balance\. 50\. Advances\. An advance of up to 24 percent of the IDA Credit (not applicable to IDA SUF Credit) in the amount of SDR 42\.9 million (equivalent to US$60\.5 million) is available upon effectiveness of the Financing Agreement of the IDA Regular Credit, of which (i) SDR 42\.5 million (equivalent to US$60 million) is available for EEU for all DLRs except DLRs 3\.1 through 3\.6 and 5\.12 through 5\.16; and (ii) SDR 0\.4 million (equivalent to US$0\.5 million) is available for MoWIE for DLRs 3\.1 through 3\.6 and 5\.12 through 5\.16 only\. There will be no advance under the SUF Credit\. 51\. When the DLRs, against which the advance is disbursed, are achieved, the amount of the advance will be deducted (recovered) from the total amount due to be disbursed under such DLIs\. The advance amount recovered by the World Bank is then available for additional advances (‘revolving advance’)\. The World Bank requires the Borrower to refund any advances (or portion of advances) if the DLIs have not been met (or have only been partially met) by the IDA Credit closing date\. 52\. Prior results\. An amount of up to SDR 22\.7 million (equivalent to US$32 million) will be allocated for prior results from the IDA Regular Credit\.15 Disbursements for prior results will be made against the verification of the results following the effectiveness of the credit\. IV\. ASSESSMENT SUMMARY A\. Technical 53\. Technical soundness\. The proposed ELEAP will target an estimated 1,080,000 on-grid connections as its main technical activity\. Carrying out connections is a routine engagement for the EEU and does not include major departure from the existing technical approaches nor does it include implementation of untested technologies\. However, the main challenges are related to 15 Of this amount, it is expected that US$30 million would be linked to DLI 1 (on-grid connections), US$1 million to DLI 3 (DLR 3\.1 Establishment of the DoE), and US$1 million to DLI 4 (DLR 4\.1 Adoption of the FY18 connection rollout plan)\. 20 technical bottlenecks that have emerged in the past years and are preventing the EEU from scaling up its connection program (in the past, the EEU was connecting nearly five times as many customers as today)\. To support successful implementation, the following bottlenecks need to be addressed: (a) limited planning capacity of the implementation agency, EEU; (b) limited load capacity of the existing network; (c) ineffective coordination among the various units in charge of connections within the EEU; (d) affordability issues of the connections and revising the connection policy; and (e) lack of a systematic approach and strategy toward achieving the off-grid targets under the NEP\. Based on the context and the possibility of addressing these bottlenecks through careful preparation, the overall technical risk is rated Moderate\. Assistance for supporting enhanced technical capacity will be mobilized under ELEAP (see Annex 4 for details)\. 54\. Planning and operational preparation\. In preparation for the implementation of the grid connection rollout component of ELEAP, the EEU has already launched several initiatives ensuring that adequate planning, technical, procurement, and operational measures are put in place by effectiveness of the Program, including (a) establishment of a ‘Modernization Team’ led by the office of the Chief Executive Officer (CEO), with the mandate to improve the pace of connections, identify key bottlenecks for scaling up implementation, and enable effective coordination across the EEU; (b) completion of a nationwide MV feeder-level technical network analysis, including estimation of the maximum number of customers that can be connected in the first year of the Program without overloading the transformers beyond 90 percent of their rated capacity; and (c) development of the next year’s connection rollout plan\. 55\. Institutional arrangements\. For the proposed ELEAP, the EEU will be mandated to implement the main activities related to capital expenditures (on-grid and off-grid electrification)\. In this context, the EEU’s Distribution Department has had extensive experience in the task of designing and rolling out the LV lines from the distribution transformers to connect households, shops, and social institutions\. The EEU’s UEAP unit has demonstrated its expertise of MV and LV extensions to towns and villages by undertaking an extensive grid expansion plan in the past years\. The MoWIE/DoE will provide coordination, reporting, and Program oversight for the NEP\. The technical assessment of the MoWIE and EEU concurred with the appropriateness of incorporating this arrangement under the proposed ELEAP and recommended capacity enhancement support, which has been incorporated in Results Area 3 (see annexes 1 and 4)\. 56\. Program expenditure framework\. The planned expenditures for the proposed ELEAP include on-grid (that is, LV/MV extensions and service drops but not upstream investments such as generation/transmission) and off-grid service delivery expenditures (SAS and mini-grids)\. The expenditures are estimated to be US$676\.5 million\. Table 4 provides a list of expenditures eligible under the Program\. Expenditure categories are aligned with the chart of accounts at the agencies\. On average, the cost per on-grid connection is calculated as US$300 (to provide sufficient support under the Program for related LV/MV extension and rehabilitation)\. There is no disaggregation between works and material expenditures for LV/MV lines and mini-grids\. Since the upstream costs of generating and transmission fall under EEP’s chart of accounts, this joint expenditure category will include only LV/MV lines and mini-grids\. The expenditures related to SAS will be added as a new category to the chart of accounts (see details in Annex 4)\. The MoWIE will treat the expenditures related to the Program as separate budget line items and disaggregation is not seen as a risk\. 21  Table 4\. Program Expenditures under ELEAP (US$, millions) Allocation for 2018–2023 Cost Items (corresponding account codes) Amount Service drops (i) Material for customer connection (5118) 300\.0 (ii) Salaries, wages, and other allowances (5200–5299) 24\.5 LV/MV extension/rehabilitation and mini-grids (i) Material and equipment (1500–1519) 300\.0 (ii) Salaries and wages (1520–1529) 20\.0 (iii) Training (5302) 5\.0 (iv) Other costs (1530–1539) 10\.0 Stand-alone solar systems (new) 7\.0 Operating expenditures (MoWIE) (i) Operational and consultancy costs 10\.0 Total 676\.5 Source: World Bank\. Note: a\. Includes materials and equipment\. 57\. Funding predictability\. Infrastructure investments in Ethiopia have totaled more than US$127 billion over the last 15 years, where US$33 billion was spent on social infrastructure, US$27 billion on water, US$23 billion on electricity, and US$21 billion on roads\. From the total investment budget of US$13 billion for 2016–2017, priority is given to road development as well as rural electrification and diversification of the energy mix\.16 Overall, the GoE’s GTP-II-related sector investments called for US$11 billion worth of new projects out of which over US$8 billion have already been raised and committed\. The financing plan for these public-sector projects includes a mix of funding sources, part of it coming from the GoE’s self-financing and customer contributions but most of it coming from new loans/bonds\. Borrowing is sought from multilateral and bilateral partners, international DPs, and commercial banks, as well as domestic and diaspora bonds issued directly by the sector\. The Government share of financing of the Program (US$247\.5 million over 66 months, or approximately US$45 million per year) is in line with the financing allocated over the past years, which averaged US$50–100 million per year\.17 58\. Adherence to budgeted Program expenditure and execution of the NEP priorities\. As indicated in the ongoing Public Expenditure and Financial Accountability (PEFA) assessments, the GoE has a well-functioning planning and budgeting system and the MoWIE prepares its plan and budget in line with this system\. It follows the Federal Government budget calendar and manuals\. On the other hand, the EEU uses the former EEPCo’s planning and budgeting procedure manual\. Physical plans are adequately costed and the annual work plan and budget (AWPB) is sufficiently detailed\. The sources of funds of the EEU include budget from the Federal Government, sales of electricity (including connection fees), loans and grants, customer contributions, and other miscellaneous income\. The Federal Government budget partly covers the cost borne by the UEAP to extend lines to new areas, while the customer contributions include connection fees collected from new customers and tariffs\. The GoE’s contribution to the UEAP is 16 http://www\.business-sweden\.se/globalassets/energy-report-ethiopia\.pdf\. 17 Based on the UEAP/EEU contributions received under GTP-I and GTP-II per the financial statements of the utilities\. 22 included as part of the MoWIE’s budget and proclaimed at the federal level\. The EEU’s consolidated AWPB is required to be approved by the Board of the EEU\. Budget preparation and review by the executive management adheres to the EEU’s budget calendar and is concluded before the start of any fiscal year\. The Program budget will be proclaimed within the MoWIE following the GoE’s budget calendar and the MoWIE will ensure that this is completed for the Program period\. The MoWIE and EEU will also ensure that there is recording, accounting, and reporting on the NEP and ELEAP sources and expenditures\. 59\. Efficiency of Program expenditures\. The Program targets densification of connections that are proximate to the existing network (typically within one pole length of the existing network)\. Technical assessment estimates that there are nearly a million such customers whose cost for connections, on average, is US$150\. Under the current policy, the EEU’s contribution to the cost is capped at about US$100 and the remainder is paid by the end users (on average, US$50 for these connections)\. While affordability is not expected to be a challenge for such connections, a comprehensive connection study is being planned under the Program to assess the costs and propose mechanisms to ensure affordability of connections as the program targets households farther away from the grid in future years\. A least-cost GIS planning is also being undertaken, which will help ensure that all connections under the Program are made with maximum efficiency\. The selection of densification areas (clusters of households proximate to the existing grid) will be determined by overlay of the following criteria: (a) geographic spread and diversity; (b) network capacity; and (c) connection affordability\. The villages and communities recently, or soon to be, provided with network coverage by the UEAP in rural areas, have relatively newer network systems and are not expected to have overloaded transformers\. Table 5\. Typical Cost of Connections (Last-mile Service Drop) Distance from Average Cost of Customer EEU Contribution MV Line Connection (US$) Contribution (US$) (US$) One pole 150 50 100 Two poles 300 200 100 Three poles 450 350 100 Source: EEU Connection Cost Estimation Manual\. 60\. Economic evaluation\. The World Bank carried out an economic assessment of the proposed Program using a standard cost-benefit analysis for Results Areas 1 and 2\. The detailed analysis, including sensitivity and background of assumptions used, are in Annex 4\. ï‚ Economic benefits\. Program benefits, including grid densification, SAS, and mini- grids, are assessed by calculating the avoided costs that would occur in the ‘without project’ scenario\. The estimated economic benefits for households are conservatively estimated by current expenditures of non-electrified households for electricity services that can be substituted by electricity\. Total cost for lighting, mobile phone charging, and radio combined is estimated to be US$7\.31 per month for non- connected households\. Additional economic benefits from grid connections include improved health services and education, improved communications and connectivity, increase in income-generating opportunities, and so on\. These benefits are commonly recognized but are difficult to quantify\. ï‚ Program costs\. The costs include capital expenditures consisting of material and related costs for erecting 1,080,000 on-grid connections, five mini-grids, and 50,000 23  SAS, in addition to operation and maintenance (O&M) expenditures for the three core Program activities\. Value added taxes and other transferable costs were excluded\. ï‚ Results\. At a discount rate of 6 percent, the economic net present value (NPV) of the Program is US$372\.9 million and the benefit-cost ratio is 1\.5\. The economic internal rate of return (EIRR) is estimated at 18\.3 percent (see Table 6)\. The Program is assessed as economically viable\. The discounted payback period is 10 years\. Table 6\. NPV and EIRR for the Program EIRR 18\.3% NPV US$372\.9 million Source: World Bank\. 61\. Financial viability of the sector\. As described in the earlier sections, the sector will continue to recover its operating costs in the coming years propelled by rising trends in export revenues and revenues from increased domestic energy sales\. At the current tariff levels (average across categories of around US$0\.03 per kWh), domestic revenues are expected to rise from US$128 million in 2016 to around US$649 million in 2025\. Export revenues are expected to be the anchor revenues for the sector, due to significant growth in export volumes (increasing by a factor of 12 from 2016 to 2025) and a relatively high export tariff (average export tariff is about US$0\.07 per kWh) when compared to domestic tariff, rising from around US$100 million annually in 2016–2018 to around US$1,200 million by 2025\. As Ethiopia shifts toward procuring power from IPPs in the future, the sector will face significantly higher operating costs (due to dollar- denominated power purchase agreements with IPPs)\. To be financially sustainable in its day-to- day operations, the sector needs to generate sufficient revenues to cover its operating costs\. Based on current plans, the combined domestic and export revenues between 2016 and 2025 are expected to offset the operating costs incurred during this period\. 62\. The key challenge for the sector’s financial viability is related to the accumulated debt from past capital expenditures\. Currently, the sector carries nearly US$5 billion of outstanding debt (mostly birr denominated and domestically held), which will affect the financial sustainability of the sector in coming years\. While international debt service obligations are prioritized and regularly met, at current tariff levels, the sector will be unable to honor all its domestic debt obligations (especially, principal/face value payments)\. The sector would have to continue to either incur net losses in the foreseeable future or choose to roll forward the domestic debt\. Assuming that a cost-reflective tariff (US$0\.06 per kWh) is enacted in the coming years, the sector’s cash flow would be sufficient to cover even the past obligations in the medium-term scenario (see Annex 4 for details)\. 63\. Program financial evaluation\. The Program’s financial assessment concluded that the core activities under ELEAP (connection densification) would support long-term financial viability of the sector\. Each additional household connection provides overall net positive revenue to the utility (as the financial costs are only limited to last-mile connections)\. At current tariff levels and connection costs, the Program has a positive NPV at US$4\.96 million\. Assuming payback from the time after all the 1,080,000 new consumers are connected, the Program breaks even in the next seven years at the current tariff levels (see Annex 4 for details)\. 64\. It is important to point out that as the connection program extends into future expansion phase (under the NEP), requiring the utility to reach customers farther away from the grid, leading to an increase in average costs (that is, incurring transmission and other upstream costs), the current 24 tariff levels will not be able to sustain positive returns\. As discussed earlier, the GoE is already preparing a long-term financial viability plan, with the objective of increasing domestic tariffs, improving cost efficiency of the sector, and ensuring financial sustainability of the sector\. 65\. Gender\. Ethiopia suffers from some of lowest gender equality performance indicators in Sub-Saharan Africa\. The GoE is committed to the achievement of gender equality\. Women’s Affairs Directorates have been established at the MoWIE and EEU and various gender-specific targets and goals have been set\. In GTP-I, bold measures were undertaken to ensure gender equity and GTP-II envisages increasing the economic benefit for women; increasing women’s decision making; growing the crop productivity of female-headed households (FHHs); and increasing women’s participation in building good governance, democratization, and development\. To gain insights into key gender gaps, a detailed sector-wide analysis was conducted for the electricity sector, showing gender disparities at various levels\.18 Based on the findings of the analysis and other country-level targets, the NEP will incorporate several key gender actions, which will form a core part of ELEAP, incentivized through DLIs and a Program Action Plan\. These include (a) capacity building for gender equity; (b) promoting women’s interest in science, technology, engineering, and math (STEM) careers; (c) a baseline assessment and recommendation of child care provision; (d) gender-sensitive analysis of provision of connection cost subsidy; (e) increasing productive uses of energy that benefit women; (f) implementing gender-based violence (GBV) clinics and other related activities focused on enhancing prevention and response to GBV; and (g) incorporating sex-disaggregated data in the M&E systems (see Annex 1 for details)\. 66\. CE\. Long-term development of the electricity sector requires effective and transparent public-sector institutions\. The centrality of customer service is among the top four priorities of the EEU’s strategic themes, and customer engagement is important for new connections, billing and collection, maintenance, and complaints management\. The EEU has adopted a Citizen Charter which outlines the understanding between citizens and the EEU on the quality of service and the provision of grievance redress\. The utility has also established various mechanism for customers to voice input and grievances, including public forums, suggestion boxes, customer satisfaction surveys, call centers, and a vigilance office\. Customer feedback is currently received through surveys, face-to-face feedback, feedback forms, public fora and posts, fax, and telephone\. The following CE engagement measures will become part of ELEAP, incentivized through DLIs and Program Action Plan: (a) strengthening of community-level CE activities; (b) community-based electricity education program; (c) consumer awareness media campaigns; (d) consumer-centric capacity building for the EEU staff; and (e) commercial performance improvement training (see Annex 1 for details)\. B\. Fiduciary 67\. An IFA for ELEAP was carried out for the MoWIE and EEU and a sample of participating regions and districts under the EEU, including the UEAP (see Annex 5 for details), consistent with ‘Operational Policy, World Bank Procedure and Directives; and Guidance for Program-for-Results Financing’\. The IFA assessed FM; procurement system rules and procedures and their application, including oversight mechanisms at the Program implementing entities; F&C and complaint- handling mechanisms\. 18 Welfare Monitoring Survey (2011), Demographic and Health Survey (2011), Enterprise Survey (2015), and Household Consumption and Expenditure Survey (2011)\. 25 68\. The IFA entailed a review of the capacity of the sample participating entities to (a) record, control, and manage all Program resources and produce timely, understandable, relevant, and reliable information for the Borrower and the World Bank; (b) follow procurement rules and procedures, capacity, and performance focusing on procurement performance indicators and the extent to which the capacity and performance support the PDOs and risks associated with the Program and the implementing agency; and (c) ensure that the implementation arrangements are adequate and risks related to F&C, as well as complaint-handling mechanism, are reasonably mitigated by the existing framework\. 69\. Financial management\. The 2014 PEFA assessment for the Federal Government notes the major improvements that have been made\. Ethiopia has significantly improved its performance over the last three years\. However, the ratings for regional administrations that had PEFA assessments, while showing improvements, were, on average, lower than those of the Federal Government\. Several of these issues are being addressed through the Expenditure Management and Control Program, the GoE’s flagship Public Financial Management (PFM) reform program\. 70\. The FM assessment of the MoWIE concluded that there are staffing constraints both in numbers and capacity (at finance and internal audit) and that there are some internal control inadequacies\. Budget preparations and control are of reasonable capacity, but the utilization of budget is lagging\. At the EEU, the main concerns noted were external financial audits, staffing constraints, and financial systems issues\. The entity’s financial audit (year ended July 7, 2016) has not been carried out\. The last available audit report (year ended July 7, 2015) was issued with a disclaimer of opinion and contains significant internal control findings\. Action plans were prepared to address issues and a high-level task force comprising MoFEC and the MoWIE and the utility was established to ensure a credible follow-up of the implementation of the FM actions plans\. However, the progress in resolving the issues has been slow\. The EEU’s financial statements are not compliant with IFRS\. The EEU has established a project office comprising staff from relevant units, which will work with a consulting firm, to be appointed, to help transition to IFRS, perform asset valuation, and develop/update FM policies and procedures\. The EEU has also contracted an international firm for the supply and installation of Enterprise Resource Planning (ERP), which would further enhance automation of its billing and accounting systems\. Other challenges noted in the assessment revealed that although the physical plans are adequately costed and the AWPB is sufficiently detailed, budget approval by the EEU Board is usually delayed, and budget executions are low\. Based on these observations, the FM risk assessed for this operation is rated High\. To mitigate the risks and weaknesses, specific actions are identified in the Program Action Plans and DLIs (for example, providing incentive for preparation and submission of audited financial statements with opinion other than disclaimer and adverse)\. 71\. Procurement\. A Country Procurement Assessment Report (CPAR) was carried out in 2002 and updated in 2010\. Though some improvements were achieved since the 2002 CPAR, the 2010 CPAR highlighted several risk areas and inadequacies in the legal, institutional setup, and procurement practices\. These inadequacies or situations may affect the implementation of the proposed ELEAP\. 26 72\. The World Bank carried out a procurement system assessment as part of the IFA for the proposed ELEAP\.19 The review included applicable procurement systems, rules, and procedures, including oversight mechanisms at the Program implementing agencies, the EEU and MoWIE\. The EEU is a state-owned enterprise and is an entity whose procurement is not regulated under Ethiopia’s Federal Government Public Procurement Proclamation of 649/2009\. The MoWIE follows the Federal Government Public Procurement Rules\. The EEU has prepared its own procurement guidelines and manuals based on the Federal Procurement law, World Bank procedures, and other best practices\. The EEU’s Board of Directors gives both oversight and operational function to the procurement activities of the EEU\. Program procurement and contracts administration risks identified during the assessment include (a) the EEU is not governed by national procurement proclamation and directives; (b) inadequate procurement capacity at the EEU, including the UEAP unit; (c) transparency and fairness issues related to the procurement process as the result of not implementing the applicable procedures available; (d) competitiveness issues as the result of other state-owned entities’ involvement in tenders and application of direct contracting and different preferential treatment to medium and small enterprises (MSEs); (e) inadequate accountability, integrity, and oversight arrangements and complaint-handling and debarment setup and mechanism; and (f) inadequate contracts administration and the inefficient resolution of contractual disputes\. Consequently, the procurement management risk is rated High\. To mitigate the risks, specific actions have been included in DLIs and Program Action Plan\. 73\. F&C and complaint-handling mechanism\. Ethiopia has a robust legal framework for addressing F&C risks\. The principal institutions responsible for the fight against corruption are the FEACC and the Federal Attorney General’s office\.20 74\. The F&C assessment revealed that despite the progress made in tackling challenges at the EEU, petty corruption is still widespread\. Petty corruption is largely expressed in the form of bribery, fraud, theft, and embezzlement\. However, the incidents are not systematically tracked, especially at the regional and district levels\. The main complaints in the sector relate to power drop or interruption and inaccessibility and delay of maintenance, delay of line connection/installation of transformers for customers who pay, dwellers associations, firms, and Government projects in their order of priority\. There are systems and procedures for handling bidders’ enquiries and complaints at the federal level and remedial actions are taken by the Complaint Review Board\. At the EEU, procurement complaints are received from a very small number of the bidders partly as a large portion of the procurement is through direct purchase\. There is a need to ensure competitiveness for adequate and timely delivery of goods\. The F&C complaint-handling system has gaps that hinder adequate functioning and it is necessary to strengthen the structure and capacity of complaint-handling staff and improve the tracking, recording, and reporting of F&C at the MoWIE and EEU\. The F&C management risk is rated High\. To mitigate the risks and inadequacies noted, carefully selected actions, as shown in the Program Action Plan and DLIs, seek to address these challenges\. 19 The implementing agencies are the federal MoWIE and Ethiopia Electric Utility (EEU)\. Because substantial amount of program funds will be used by the EEU, including the UEAP, the key focus of the procurement assessment was on the EEU, including the UEAP\. In addition to the EEU headquarters, among 19 EEU regional offices and 8 UAEP branches participating in the Program, 4 from the EEU and 2 from the UEAP have been visited and assessed\. 20 Federal Attorney General Establishment Proclamation No\. 943/2016 and Federal Ethics and Anti-Corruption Commission Proclamation No\. 880/2015\. 27 75\. Conclusion of the IFA\. Overall, the IFA concludes that the FM and procurement systems provide reasonable assurance that the financing proceeds will be used for the intended purposes, with due attention to the principles of economy, efficiency, effectiveness, transparency, and accountability and for safeguarding the Program assets once the proposed mitigation measures have been implemented\. Appropriate systems to handle the risks of F&C, including effective complaint-handling mechanisms, have been agreed and established\. The risk mitigation measures, including specific DLIs, are identified for critical issues\. Actions have been proposed that will support the DLIs and help improve efficiency and performance monitoring, which are indicated in the Program Action Plan\. These actions will be implemented in accordance with IDA’s “Guidelines on Preventing and Combating Fraud and Corruption in Program-for-Results Financing," dated February 1, 2012, and revised July 10, 2015\. Other interventions include using result indicators for the Program, using other programs that are addressing the issues, and so on\. The details of the assessment, including main risk areas and the mitigation measures, are presented in Annex 5\. C\. Environmental and Social 76\. The proposed ELEAP supports last-mile electricity service delivery through on-grid and off-grid electrification activities, which are likely to have manageable environmental and social impacts during the construction and operation phases\. An Environmental and Social System Assessment (ESSA) was carried out to assess the institutional capacity of the implementing agencies (EEU and MoWIE) as well as the respective regional and local level counterparts, to plan, monitor, and report on environmental and social management measures and address social and environmental issues associated with the Program (see Annex 6 for details)\. 77\. Both positive and negative impacts could result from the Program activities\. Environmental and social benefits will be derived from the substitution of hydrocarbon-based fuels (for example, kerosene) of electricity for household and business electricity sources and increased reliance on renewable energy sources and access to electricity\. However, poor planning and implementation of the proposed ELEAP could adversely affect the biophysical and social environment, on which the population relies\. The potential adverse environmental and social impacts of the Program are likely to be associated with the construction and rehabilitation of MV and LV distribution lines, upgrade of substations, installation of transformers, construction of mini-grids, and disposal and replacement of spent lead-acid batteries from SAS\. The potential adverse social impacts are likely to be associated with land acquisition for mini-grids and possible acquisition of way leaves (rights- of-way) for MV and LV distribution lines\. 78\. The anticipated impacts of the proposed ELEAP are expected to be manageable and most of them may stem from ground disturbance due to vegetation clearance and excavation/digging for pole erection, masonry activities to reinforce the electric pole, on-site concrete mixing, transportation and distribution of solar systems, installation of equipment, and waste management within and around the core activities area\. These are also not anticipated to be of large scale but could affect individual Program Affected Persons (PAPs) who may lose assets, including structures, crops and trees, and the use of portions of their land\. It is anticipated that most of the adverse effects associated with the construction and operation will be reversible in nature and there are no impacts that will lead to irreversible negative permanent change\. 79\. The overall risk rating for the environmental and social safeguards under this Program is Moderate, reflecting primarily the limited technical personnel, knowledge, budget, and other 28 facilities for overall safeguards management, particularly at the local and regional levels of the EEU and REBs\. The ESMS to be established at each Woreda, the EEU district offices, and REBs will ensure sufficient staffing, capacity, financial, and other resources are in place during Program implementation\. The ESSA has identified additional key measures to help the implementing agencies overcome gaps related to environment, social, and safety aspects and improvements of the implementing agencies system on safeguards management\. To mitigate the risks and inadequacies noted, carefully selected actions, as shown in the Program Action Plan and DLIs, seek to address these challenges\. 80\. Activities that could have significant adverse impacts, are sensitive, diverse, irreversible, or unprecedented on the environment, and/or affected people are not eligible for ELEAP financing and are excluded from the Program\. Screening of risk will be part of the implementation of the ESMS for which training will be provided\. The draft ESSA was disclosed in-country and on the World Bank’s external website on June 23, 2017\. Public consultations on the draft ESSA took place on July 6, 2017\. Following incorporation of the feedback received, the revised ESSA was disclosed in-country and on the World Bank’s external website on August 22, 2017\. 81\. Climate disaster risk screening\. The Program has been screened for risks related to climate change and disaster risk management\. Recurrent drought and floods pose the greatest threat to the country’s environment and its local population\. Hydroelectricity is the main source of energy in Ethiopia, which makes the energy sector vulnerable to increasing droughts\. The GoE is keen to diversify the energy mix through the exploitation of other renewable energy resources, including geothermal, wind, and solar\. The climate risks have limited impact on the distribution and off-grid investments made under the Program\. The team has confirmed that the technical specifications for equipment will take into consideration the climate risks, especially with regard to future increases in droughts and floods\. Activities under Results Area 2 support the Government’s agenda of diversifying energy resources through the promotion of SAS and mini- grids\. At the same time, the use of renewable energy products will lead to greenhouse gas (GHG) reductions that are expected to alleviate climate and disaster risks in the long term\.21 82\. Grievance redress\. Communities and individuals who believe that they are adversely affected because of a World Bank supported PforR operation, as defined by the applicable policy and procedures, may submit complaints to the existing program grievance redress mechanism or the Bank’s Grievance Redress Service (GRS)\. The GRS ensures that complaints received are promptly reviewed to address pertinent concerns\. Affected communities and individuals may submit their complaint to the World Bank’s independent Inspection Panel which determines whether harm occurred, or could occur, because of World Bank’s non-compliance with its policies and procedures\. Complaints may be submitted at any time after concerns have been brought directly to the World Bank's attention, and World Bank Management has been given an opportunity to respond\. For information on how to submit complaints to the World Bank’s corporate Grievance Redress Service (GRS), please visit http://www\.worldbank\.org/GRS\. For information on how to submit complaints to the World Bank Inspection Panel, please visit www\.inspectionpanel\.org\. 21 The analysis on avoided GHG emissions is included in Annex 4\. 29  D\. Integrated Risk Assessment 83\. The overall risk rating for the proposed ELEAP is Substantial\. The detailed risk assessment and corresponding mitigation measures under the Systematic Operations Risk-Rating Tool (SORT) template is presented in Annex 7\. 84\. The following are the risks rated High or Substantial: ï‚ Political and governance: Substantial\. Ethiopia will hold its next general elections in 2020\. Following demonstrations and unrest, the Government declared a state of emergency on October 9, 2016, which was lifted on August 4, 2017\. Despite the respite, there is a risk that further tensions between the Government and civil society could negatively affect implementation of the Program due to lack of accessibility to rural areas, the Government’s capacity to take strategic decisions on time, and civil society’s acceptance of Program objectives\. Mitigation Measures: To mitigate this risk, the team developed a comprehensive CE strategy, with a focus on sharing information with the public on the Program design, including its objectives, selection criteria, and roles and responsibilities of national and regional entities in implementation\. Consultations took place on July 6, 2017, to that effect\. However, increased country risk mitigation is beyond the scope of the proposed Program\. Another risk concerns the selection of beneficiaries: the EEU has selected subprojects based on geographical quotas after receiving proposals from the regional offices\. This will be addressed through the distribution plan prepared under the NEP, which will lay out the investments for the Program time frame and the grid rollout connections plan, which will identify households to be connected based on established criteria\. ï‚ Institutional capacity for implementation and sustainability: Substantial\. Key sector institutions, such as, the MoWIE and EEU will have major key responsibilities for implementing the proposed Program, under the MoWIE’s supervision\. While EEU is experienced in implementing activities under the operation, i\.e\. connection of households, its capacity may be stretched with the ambitious electrification expansion planned under the NEP\. Mitigation Measures: The Program supports the strengthening of the MoWIE’s capacity to design and oversee implementation and improve the EEU’s technical, financial, and operational capacity by enhancing planning and M&E capacity, cost effectiveness, and safeguards mitigation\. Technical assistance provided under World Bank-executed trust funds will help complement efforts to enhance the capacity of both institutions\. ï‚ Fiduciary: High\. The entity’s financial audit (year ended July 7, 2016) has not been carried out\. The last available audit report (year ended July 7, 2015) was issued with a disclaimer of opinion and contains significant internal control findings\. On the procurement side, there are competitiveness, transparency and fairness issues and inadequate accountability, integrity, and oversight\. In addition, there is a general lack of adequate fiduciary capacity at the EEU and MoWIE that could undermine implementation of the Program\. Mitigation measures: This will include (a) the ongoing implementation of an FM action plan; (b) technical assistance to support comprehensive improvement on procurement and FM capacity; (c) the implementation of the recommendations of the Program’s IFA for enhancing fiduciary capacity (FM and procurement), whose costs were integrated in the 30  expenditure program; and (d) update of bidding documents and procurement procedures to ensure transparency, fairness and competitiveness\. Key actions are included in the Program Action Plan and the DLIs\. ï‚ Other - Financial viability of the sector: Substantial\. The current domestic electricity tariff (US$0\.03 per kWh), which is among the lowest in Sub-Saharan Africa, could represent a constraint to sector development as well as for scaling up electricity access, particularly regarding repayment of domestic debt obligations, as well as for raising new financing\. Mitigation measures: This risk will be partly mitigated through the ongoing efforts of the GoE to revise the tariff structure\. While domestic tariff regime forms an important element of financial sustainability, the GoE is also considering additional actions, such as, augmenting domestic revenue with revenue from power exports, possible restructuring and/or refinancing of existing debt, and finding innovative ways of reducing the public investment burden, and introducing sustainable financing mechanisms (for example, increased private participation through IPPs)\. It is also important to highlight that the proposed ELEAP supports improved financial viability of the sector—each new connection provides positive financial returns to the utility\. E\. Program Action Plan 85\. Based on key areas of improvements highlighted in the Program assessments, the World Bank identified actions that will strengthen the country systems; enhance the capacity and performance of the implementing agencies, to improve preparedness; and mitigate risks for the Program to deliver its results\. 86\. A Program Action Plan has been prepared which relates to technical aspects, fiduciary aspects, and environmental and social safeguards management aspects of the Program\. A detailed presentation of the actions to be taken are in Annex 8\. ï‚ Technical aspects\. The technical assessment concluded that together with improving the capacity of the utility to undertake the scale-up of the connections and the expected load growth to be experienced over the next few years due to increased domestic demand as well as exports, the sector would also need to plan for the reinforcement of the network in the future years\. In this regard, the technical assessment recommended a nation-wide distribution network strengthening plan and costing be carried out (at the individual feeder level) such that there is no impediment to enable the rapid scale-up of densification of customer connections (2018–2023)\. The technical assessment also recommended that the sector prepare a comprehensive off- grid strategy to further enhance the off-grid service provision in the future years\. The technical assessment also recommended that a low-cost standards study and a connection policy study be carried out, which would support the scaling-up of electrification programs\. ï‚ Fiduciary aspects\. Key actions to augment fiduciary capacity of EEU are included in the Program Action Plan and the DLIs\. These actions focus on strengthening EEU’s capacity for improved planning and budgeting processes, ensuring transparency and improved corporate governance, efficient treasury management and flow of funds, establishing and maintaining high standards of accounting and financial reporting, as well as strengthening internal and external audit functions, improving capacity of 31  procurement staff and transparency, fairness and competitiveness of procurement processes\. ï‚ Environmental and social aspects\. The ESSA findings indicated that Ethiopia has an adequate legal framework for managing safeguards risks, including associated environmental and social regulations\. However, implementation of existing provisions of the environmental, social, and safety regulations varies among agencies and from region to region\. The ESSA recommended (a) maintaining key environmental, social, and safety personnel in the EEU at the corporate and the regional levels; (b) conducting annual performance reviews, including social and safety audits, which would confirm sound implementation of agreed guidelines and procedures; (c) including safety and protection material and tools in all contractual agreements under subprojects of the Program and its implementation; (d) conducting briefings and awareness campaigns for communities related to environmental, social, and safety impacts in subprojects areas; (e) establishing GRM and associated guidelines; and (f) providing timely and appropriate consultation, compensation, and resettlement of PAPs\. Further details for the recommended actions are outlined in the ESSA summary (see Annex 6)\. 87\. While these risk mitigation measures will help strengthen country systems, key institutional and technical elements are already in place that will allow for the timely implementation of the NEP\. An interim ‘Task Force’ comprising the MoWIE and EEU representatives is already in place and is leading the preparation, planning, coordination, and launching activities of the NEP and ELEAP\. The interim Task Force will be amalgamated into the DoE upon effectiveness of the Program\. 88\. The EEU’s Modernization Team has prepared the Program’s first-year (2018) grid connection rollout plan\. The EEU has also identified a set of KPIs, which integrate the Program indicators\. The Task Force is overseeing the development of the GIS platform (launched in July 2017) for the sector, which would form the basis of the least-cost expansion plan as well as the sector M&E framework (incorporating the EEU’s KPIs)\. The Task Force has also reached preliminary agreements with the CSA with regard to the Program verification protocols, and draft ToRs have been prepared\. 89\. The Task Force is preparing draft ToRs for the development of key analytical studies identified in the Program Action Plan, such as the off-grid strategy, low-cost standards study, and the connection policy and affordability study\. 90\. FM and procurement specialists have been hired to strengthen the fiduciary capacity of the implementing agencies\. With support from the World Bank experts, as well as the FM and procurement specialists, the Task Force is already preparing the POM, which would include details for implementing the Program Action Plan and related activities (draft version was submitted in January 2018)\. 32  Annex 1: Detailed Program Description Background and Context 1\. The past decade has witnessed a major turnaround in Ethiopia’s electricity sector\. In 2005, the GoE launched the UEAP, which constitutes one of the most significant grid expansion programs in Sub-Saharan Africa\. Under the UEAP, between 2005 and 2015, electricity grid was spread to about 6,000 towns and villages from the initial 667 and grid coverage reached 60 percent of the towns in the country (see Box 1\.1)\. The GoE significantly expanded power generation capacity to respond to a growing energy demand (10 percent on average per year)\. As a result, generation capacity nearly quintupled within a decade, from about 850 MW in 2005 to 4,256 MW at the end of 2016\. However, the on-grid household electrification rate remains quite low at less than 20 percent\. Box 1\.1\. The Universal Electricity Access Program The focus of the GoE’s electrification efforts has been mainly in expanding the country’s network outreach\. To do so, the GoE established the UEAP in 2005 with the mandate to electrify rural towns and villages through extension of the grid\. The initial objective of the UEAP was to electrify approximately 50 percent of rural towns within five years, with a long-term goal of connecting virtually all towns and villages to the grid within ten years\. The rural villages and towns range in size from about 300 to 15,000 inhabitants\. The estimated budget for the first five-year period starting in 2005 was ETB 8\.8 billion (about US$1\.0 billion)\. The joint GoE and EEPCo financing plan declared that 80 percent would be contributed by the GoE and the remaining by EEPCo\. The GoE successfully raised funds from other DPs to finance its rural electricity access expansion program through the UEAP\. Some of the prominent financiers included the African Development Bank (AfDB), the Saudi Fund, the Organization of the Petroleum Exporting Countries Fund for International Development, the Islamic Development Bank, and the Kuwait Fund\. The World Bank has supported the ambitious plans of the GoE with two IDA operations: (a) the US$133\.4 million Accelerated Electricity Access (Rural) Expansion (EAREP, P097271) approved in FY06, which expanded electricity access to 452 villages (exceeding its target of 382 villages by 18 percent); and (b) the US$130 million Electricity Access (Rural) Expansion Project Phase II (EAREP II, P101556), approved in FY08, which nearly achieved the town electrification target of 365 with 304 towns being reached\. In addition, two operations under implementation, the ENREP and the ENREP-AF, are supporting the UEAP in rehabilitation of the existing network to improve the network reliability in 13 towns and provide electricity connections to 150,000 customers\. However, while impressive results have been achieved in a short time in terms of infrastructure development with the expansion of the transmission infrastructure (MV lines) across the country, last-mile connections to households, businesses, schools, and clinics and connections for service delivery to end beneficiaries have not kept pace with the network expansion and the corresponding targets set by GTP-I for connectivity were, unfortunately, not met as expected\. Household connections have lagged for several reasons, including the absence of (a) adequate coordination between the UEAP and EEU for related planning, procurement, and construction works; (b) a programmatic approach to service delivery; and (c) financial resources proportional to the new customers’ targets sought and earmarked for social institutions such as schools and clinics\. 2\. The sector also went through a significant institutional restructuring\. In 2013, the GoE unbundled the vertically integrated utility, EEPCo into two public enterprises: (a) EEP, responsible for the generation and transmission sub-sectors; and (b) the EEU responsible for power distribution and sales\. The implementation of the UEAP moved from EEP to the EEU in January 2016\. In addition, the GoE established an independent regulator, the EEA\. While strategic focus on various 33 segments of the electricity sector’s value chain has improved, as new agencies, EEP and the EEU are continuing to encounter significant challenges related to implementation of numerous large- scale projects, as well as ongoing internal administrative and operational issues\. 3\. Despite major strides in the past decade, Ethiopia’s electricity sector continues to fall short of the promise of effective service delivery, with the second highest energy access deficit in Africa\. GTP-I (2010-2015) included clear sector targets, most notably that of doubling the number of household electricity connections from 2 million connections to 4 million\. While significant improvements have been achieved under GTP-I in transmission infrastructure, last-mile connections to households have not kept pace with the rapid network expansion, posing a binding constraint to economic and social growth\. Expanded, affordable, and reliable access to electricity is instrumental to the structural transformation of Ethiopia’s economy and society, including massive poverty reduction and a shift toward higher productivity rates and industrialization\. 4\. Access expansion has lagged for several reasons, including the absence of a least-cost, nationwide, and comprehensive connections rollout program\. In addition, there is a severe lack of dedicated resources to provide electricity access to all households, economic centers, schools, and health centers\. There are also capacity constraints at the utility level in planning for access expansion and handling a growing customer base\. 5\. Rolling out household connections is a top priority; it is also a high-impact, low-hanging fruit to be reaped in areas already served by the network, given that Ethiopia now has enough generation capacity to support domestic access expansion to complement its regional aspirations\. Customers’ capacity to pay for the connection charges has not been a significant impediment to expansion until now, as the constraints have been mostly on the supply side, as explained earlier\. 6\. With GTP-II (2016-2020), the GoE has shifted the country’s energy access paradigm from network access to actual connectivity\. The GoE now recognizes the need to focus on connecting households\. Under GTP-II, the GoE has put strong emphasis on the need of a rapid scale-up of electricity connections in areas that are already within the immediate and short-term reach of the network and increasing connections to almost 7 million\. 7\. GTP-II has also put forward ambitious off-grid targets, which would continue the success achieved in the distribution of SAS under a program of the REF and a credit line of the DBE\. The GoE intends to achieve universal electrification in Ethiopia by 2025 (see Table 1\.1)\. 34  Table 1\.1\. Energy Sector Related GTP-II Targets (2016–2020) Unit of Indicator Baseline (2015) GTP-II Targets (by 2020) Measurement Electricity service coverage Percent 60 90 (towns/villages) Installed power generating MW 2,386 17,347 capacity Length of power transmission Km 16,018 21,728 system Number of customers Number 2,310,000 6,955,000 connected to grid power Annual per capita electricity kWh 86 1,269 consumption Improved cookstoves and Number 8\.9 million stoves and 11\.45 million (including biogas plants 11,618 biogas plants 31,400 improved biogas digesters, 20,000 households’ biofuel stoves) Solar appliances Number 2 million 3\.6 million Household solar systems Number 40,000 400,000 The National Electrification Program 8\. Despite tangible results in other segments of the electricity sector, the household electrification rate remains quite low at about 20 percent, with over 60 million people left without access to electricity (second highest access deficit in Africa), posing a binding constraint to economic and social growth\. 9\. In this context, the GoE initiated the NEP, which supports the GTP-II electrification expansion/connection targets\. The NEP is based on the Government’s NES, endorsed by the GoE in June 2016, which defined the strategic priorities for sustainable energy sector development and scaling up electrification\. The NES was supported under Phase 1 of the World Bank’s three- year programmatic technical assistance, the ESMAP-funded ESRSP\. 10\. The NEP-Implementation Roadmap (IRM), launched in November 2017, is the centerpiece for the physical implementation of the connections rollout—a comprehensive and coordinated program of grid and off-grid rollout—in an effective, efficient, and sustainable manner\. The IRM also includes a prospectus for mobilizing financing (syndication) of investments and technical assistance needs for grid and off-grid access scale-up for the first phase of the program\. The least- cost NEP-IRM is based on the best technical information available\. The Government is currently launching a nationwide GIS least-cost rollout plan, which will accurately geo-locate demographic and economic load centers as well as the existing distribution network to inform the optimal connections sequencing, whether grid or off-grid\. The NEP-IRM will be updated based on the findings of the geospatial analysis, as well as the inputs and policy decisions stemming from the Program implementation support provided under the Program, including studies for the adoption of a connection policy, lowering network design and construction standards, adoption of demand- side management measures, and a detailed distribution technical design investment program\. 35  Figure 1\.1\. Delivery of Electricity Services - From Plans to Implementation 11\. The NEP is organized into three pillars addressing the dominant challenges and needs in the sector: (a) Pillar 1: On-grid electrification; (b) Pillar 2: Off-grid service provisioning; and (c) Pillar 3: Sector capacity and institutional reform\. The IRM also outlines a detailed financing prospectus for the next five years, from 2018 to 2023 to support these three pillars\. 12\. Overall, the estimated financing requirements for the first phase implementation of the program mentioned earlier, grid and off-grid together, is about US$1\.4 billion; of which, slightly over 3 percent is for Program implementation support and technical assistance directly related to accomplishing the target objectives and outcomes\. 13\. For the first phase of NEP—target of 4\.5 million connections—connection costs range from US$150 to US$300\. These cost variations represent professionally informed estimates broadly consistent with the technical experience of many other countries with similar spatial settlement patterns in respect of densification\. The total capex estimates for nearly 5 new million connections is about US$1 billion\. Table 1\.2\. Summary of NEP Financing Requirements Immediate Technical Investment Subtotal Implementation Support (US$, millions) (US$, millions) (US$, millions) On-grid 975\.0 42\.0 1,017\.0 Off-grid 382\.5 6\.0 388\.5 Total 1,357\.5 48\.0 1,404\.5 36  Figure 1\.2\. Comprehensive Electrification Approach under the Three Pillars of the NEP Source: NEP-IRM\. 14\. Pillar 1\. Given the unique situation of the electricity sector in Ethiopia (sufficiency of supply, relying on renewable sources, and vast network footprint), the core of the NEP in the early years will be around on-grid access expansion entailing a fast-paced ambitious grid connections rollout program implemented by the EEU starting in 2018 and designed for scaling up household connectivity nearly fivefold from today to over 14 million households by 2025 (equivalent to about 65 percent of the population in 2025 of about 22 million households)\. Pillar 1 is underpinned by a two-phase least-cost rollout strategy for implementation, comprising the following: ï‚ Densification\. Targeting last-mile connections to nearly 5 million households that are in the vicinity of the existing network infrastructure of the EEU\. The initial connections mostly require short LV service drops and metering\. The densification program will target connections in a balanced manner across the 15 regions of the EEU, to the extent technically feasible\. Specifically, the connections will be selected not only in the proximate urban and peri-urban areas—where a substantial waiting list of paid customers exists and expectations are that this list can be readily augmented with promotion—but will in particular accord priority as well to densification in the vicinity of the outer reaches of the UEAP program network, in communities where the MV network has been extended but connectivity still remains limited after several years of waiting and the network can support new connections (and/or require limited upgrading)\. It is estimated that, overall, about 350,000 households are currently waiting for electricity services to be delivered\. In addition, to immediate ‘low- hanging’ fruits of electricity connections, the first phase of the NEP also targets to achieve universal access for all social services delivery institutions, especially in the health and education sector\. 37  ï‚ Expansion\. Targeting connection of new customers outside of the existing vicinity of the network (about 8 million households not proximate to the grid), which will require both MV and LV extensions (as well as possible reinforcement of the transmission network and energy generation)\. Detailed design and preparation of the implementation of program will be informed by completion of the geospatial least- cost rollout plan\. Table 1\.3\. Grid and Off-Grid Connections Program and Electricity Access Targets (2018–2025) Cumulative Total On-Grid Off-Grid Households New On-grid On-grid Access Period Access Rate Access Rate (millions) Connections (millions)a Connections Rate (%) (%) (millions) (%) 2016 18\.0 0\.1 3\.6 20b 11c 31 2017 18\.5 0\.2 3\.8 21 11 33 GTP-II 2018 19\.0 0\.5 4\.3 23 11 34 2019 19\.5 0\.7 5\.0 26 11 37 2020 20\.0 0\.8 5\.8 29 13 42 2021 20\.4 1\.0 6\.8 33 16 49 2022 20\.8 1\.5 8\.3 40 20 60 GTP-III 2023 21\.2 2\.0 10\.3 49 24 73 2024 21\.6 2\.0 12\.3 57 29 86 2025 22\.0 2\.0 14\.3 65d 35 100 2026 22\.6 2\.0 16\.3 72 28 100 2027 23\.2 2\.0 18\.3 79 21 100 GTP-IV 2028 23\.8 2\.0 20\.3 85 15 100 2029 24\.4 2\.0 22\.3 91 9 100 2030 25\.0 2\.0 24\.3 97e 3 100 Note: a\. Population estimates: United Nations Statistical Office, Ethiopia\. Assumes 5\.5 people per household (Source: CSA)\. 2016 population (estimate): 100 million (18 million households); 2020 population (estimate): 110 million (20 million households); 2025 population (estimate): 120 million (22 million households); 2030 population (estimate): 140 million (25 million households) b\. The 20 percent grid connection indicated for 2016 is representative of the estimates reported in other reports, which include meter lords, which by inference implies about 3\.6 million grid connections (instead of the 2\.4 million figure recorded in the EEU’s customer account records)\. The following rows in this table are projected on the baseline of 20 percent\. c\. The baseline for 2016 is based on about 2,046,000 stand-alone solar (including lanterns) and 8,000 mini-grid customer connections\. For subsequent years (2017, 2018, and 2019) the rate for off-grid does not change because increases in off-grid solutions are not expected to greater than population growth\. d\. To achieve the NEP’s goal of universal access by 2025, the off-grid rollout program will target the remaining 5\.7 million households not grid connected in 2025\. The off-grid strategy and the IRM will further detail the targets for off-grid technologies and the institutional and implementation arrangements\. e\. The table reflects the expectation, pending confirmation by the detailed geospatial planning study, that the grid is expected to be a least-cost solution for the overwhelming majority of Ethiopia’s population (of the order of 97 percent)\. Depending upon the implementation rates achieved beyond 2020 and availability of financing, least-grid connectivity can be achieved even before that\. The residual 4 percent reflects the share of population for which the grid is not projected to be the least-cost solution\. 15\. Pillar 2\. Understanding that the expansion of on-grid service is a multi-decade undertaking, support for sustainable and affordable off-grid service provision (SAS for homes and institutions or mini-grid system for remote communities) will be carried out under the NEP, to be developed concurrently with on-grid expansion\. Pillar 2 of the NEP targets the off-grid segments that are not included in Pillar 1 and cannot be reached by the grid within the next 5–10 years\. The two main sub-programs are the following: 38  ï‚ Stand-alone solar systems\. Targeting the rollout of stand-alone systems through a combination of public and private sector-led approaches\. The private sector would be supported by a combination of market development support and access to finance programs (such as credit facilities provided by the DBE)\. In remote areas of the country where the private sector has not established distribution networks, public modalities (for instance, through the MoWIE and EEU) will be incorporated\. Box 1\.2\. Private Sector Initiatives Supported by the DBE MFIs and PSEs have been important players in the provision of solar lighting and charging products and solar home systems\. Through credit lines at the DBE (serving as a financial intermediary for funding provided by the World Bank), over 1,000 solar home systems and 779,514 Lighting Global certified solar lanterns have been distributed to the Ethiopian population\. Training was provided to ensure proper appraisal of technologies, products, and services, as well as to set and adhere to quality standards of the sector\. Supplemental capacity-building activities to strengthen the capacity of MFIs in administering their credit line as well as their coordination with other stakeholders (that is, REBs), business development, and community engagement are ongoing\. Approved MFIs provide affordable financing to rural communities entering tripartite agreements with the REBs and selected PSEs to procure and install off-grid products for the customer\. The DBE has been mostly working with 5 MFIs, within a network\. The eight PSEs involved are approved retailers who can access credit and foreign exchange to import and commercialize products\. The enterprises have already sold about 530,000 units, out of which 600 solar home systems (6–12 Wp) and the remaining are lanterns and mobile charging units\. About 100 technicians have been trained to provide after-sales services in support to PSEs\. ï‚ Mini-grids\. Targeting the rollout of micro-/mini-grids with local LV networks and powered by appropriate renewable energy resource, implemented through a combination of public and private sector-led approaches\. The private sector would participate using the new PPP concession framework which will be established under revised Energy Regulation\. There would also be areas in the country, to a limited extent, which would be prioritized for public sector-led implementation (for instance, through the MoWIE and EEU)\. 39  Box 1\.3\. Isolated Mini-grids: Achievements to Date The EEU operates a number of isolated diesel generation-distribution systems where grid power is not yet available\. Out of 37 mini-grids constructed, five have been successfully connected to the grid and the remaining are mostly located in the Somali region\. About 35 percent of the mini-grids have an installed capacity of 100 kW, with one site at 520 kW and the remaining between 150 kW and 360 kW, and about 8,000 connections are estimated to be currently provided through these existing installations\. Table 1\.4\. Installed Capacity and Number of Connections Provided by the EEU Diesel Mini-grids Source: NRECA, EEU 2016\. The Government is also collaborating with DPs for the piloting of mini-grids powered by renewable energy sources\. The United States Agency for International Development (USAID) is conducting a feasibility analysis for the conversion of the EEU’s diesel mini-grids to renewable energy power, five hydroelectric sites identified by Water Works Enterprise, and several clusters of un-electrified villages to evaluate mini-grid solutions for access provision\. The European Union is financing five hydro mini-grids implemented by Deutsche Gesellschaft für Internationale Zusammenarbeit, testing a model for renewable energy distributed generation that is currently based on cooperatives, but aims at scaling up the market for private or public agencies, as well as by a combination of both\. In collaboration with the Korean International Agency Cooperation, the UEAP will also launch two hydro mini- grids in 2017\. 16\. Table 1\.5 depicts an illustrative rollout trajectory of the two main technical delivery modalities for off-grid access scale-up\. The investment requirements are based on available information on the average cost for stand-alone solar solutions (US$250, for systems up to 130 Wp) and mini-grids unit cost per connection (averaged at US$1,500)\. 17\. These numbers are not intended to pre-allocate targets by technology or delivery modality or by sub-program, but they only serve as initial guides for undertaking a detailed operational design of the four operational subcomponents outlined in the following paragraphs\. With unfolding implementation experience and results achieved in the field in relation to the target expectations, adjustments in the Program’s subcomponent design along the way, as and when warranted, will be proposed to the Government for review, guidance, and, as necessary, approvals\. Table 1\.5\. Indicative Off-grid Connections Rollout Year SAS Mini-grids Total 2019 250,000 100,000 350,000 2020 400,000 250,000 650,000 2021 550,000 250,000 800,000 2022 750,000 350,000 1,100,000 Sub-total 1,950,000 950,000 2,900,000 Financing requirements 97\.5 285 382\.5 (US$, millions) 18\. Pillar 3\. This pillar focuses on providing the necessary technical assistance and capacity- building support that is required for sector institutions to achieve the ambitious targets set under 40 Pillars 1 and 2\. This includes a comprehensive program with a focus on utility reform and improvements in the following areas: (a) planning capabilities; (b) technical capacities (including commercial efficiency, see Box 1\.4); (c) FM functions; (d) streamlining procurement; (e) transparency, accountability, and governance; (f) environmental and social safeguards; (g) gender equity; (h) overall skill development of the sector; and (i) long-term sector financial viability\. The Government recognizes that capital investments alone will not be sufficient to enable effective implementation of the NEP-IRM program\. Table 1\.6 provides summary highlights of the immediate priority technical assistance support components—studies, directly supporting the detailed design of operational implementation plans on-grid, off-grid, and related capacity strengthening\. Table 1\.6\. NEP - Implementation Support Activities, To Be Completed by End-2018 Leading Activity Scope US$, millions Agency 1\. Technical, Detailed network design and costing of 4\.5 million operational, and connections, staged across regions and feeders by management plan for quarter for each year; corresponding procurement, 5\.0 EEU the 4\.5 million warehousing and logistics plan, construction works, and customer connection technical services mobilization program (2018–2022) Distribution network technical design and investment 2\. Distribution program—feeder level—for all 15 regions to support rehabilitation master the NEP connections rollout; assess adequacy of 4\.0 EEU plan (2018–2025) demand-supply power balance at each bulk power delivery substation via the transmission grid 3\. GIS least-cost rollout Optimal modality (grid and off-grid) for access plan for grid and off- provision, taking into account technical and economic grid and high-level viability, geo-referenced demand centers, and load 1\.5 EEU investment financing forecasts; anchoring yearly rollout plans and targets, as prospectus well as the financing prospectus and financing gap 4\. Off-grid operational Operational strategy for off-grid pre-electrification program strategy and program for scale-up of stand-alone solutions and mini- design for stand-alone grids through public, private, and PPP delivery systems 6\.0 DoE solar systems and mini- (complementing grid rollout); informed by the GIS grids (2018–2025) least-cost plan 5\. Comprehensive Monitoring of KPIs for efficiency, effectiveness, and NEP-IRM performance progress against NEP-IRM targets and for course 5\.5 DoE monitoring and adjustments as and when appropriate tracking system 6\. Cost of connection Design of an affordable connection policy for achieving DoE/ 1\.0 study universal access EEU Detailed assessment of numbers and types of facilities (including water points), mapping, and dimensioning of key end uses requiring electricity for service delivery 7\. Social institutions (cold chain, simple vaccine and medicine refrigeration, priority connection lighting, and sterilization); for off-grid solar powered 2\.0 DoE implementation facilities, assessment of service quality, reliability, program design power equipment, and maintenance standards; detailed design of targeted implementation rollout to achieve Program targets Analysis of sector revenues and cost structures with 8\. Sector financial ongoing and planned revenues allocation to the 1\.5 DoE viability study Program 41  Leading Activity Scope US$, millions Agency 9\. Special topical studies: a\. Lowering of network design and construction and a\. Low-cost technical demand-side management measures a\. EEU standards b\. Development of local manufacturing for network and 1\.5 b\. DoE b\. Manufacturing service equipment c\. DoE capacity c\. Design of a program for productive uses of electricity c\. Productive uses services Capacity building and financial support to sector stakeholders for the NEP implementation, informed, 10\. Sector-wide DoE/ among others, by the immediate and key needs 20\.0 capacity building EEU identified for the successful ramp-up of grid connections and pre-electrification program Total 48\.0 Program Boundaries 19\. The Program will support the implementation of the NEP, with focus on scaling up electricity connections in areas within the network reach under Pillar 1 (densification) as well as increasing access to specific targeted off-grid technologies under Pillar 2 (public programs supporting SAS and mini-grids)\. Strong emphasis will be given to Pillar 3 (sector capacity and institutional reform) as this pillar plays a crucial role in achieving the ambitious targets with regard to grid electrification and off-grid\. Figure 1\.3\. Program Boundaries Source: NEP-IRM\. 42  Figure 1\.4\. Program Financing (in US$) NEP "P" (GoE + ELEAP) 1\.4 billion ELEAP million 676\.5  375 million 20\. Activities under Results Area 1: Increase access to electricity connections to households in areas covered by the power grid through large scale and programmatic densification of electricity connections, including installation of LV extensions, service drops, metering and limited installations or rehabilitation of MV lines\. Densification of consumer connections in areas that have been recently electrified will allow to increase connection rates at a more rapid pace and maximize the impact of the ongoing process of geographic expansion of distribution coverage\. Densification will result in improved cost-efficiency of the electrification program and significantly increased economic benefits in the targeted areas\. While a comprehensive access program over the medium term and beyond will be more systematically defined with geospatial planning resources, substantial progress can be made on an immediate basis by implementing densification activities in areas where the network can support new connections (expected to be over a million connections per year) and a significant waiting list already exists\. The World Bank and other DPs are also supporting the GoE with technical assistance activities to develop a nationwide geospatial least-cost plan, which will guide the optimal strategy for sequencing the rollout of on- and off-grid connections to achieve universal access\. Activities for the initial connections will mostly include installation of service drops (that is, short LV and metering), while a few connections might require limited MV extensions\. 21\. Activities under Results Area 2: Increase access to off-grid electricity through provision of support for pilot-scale off-grid service delivery activities, including off -grid electrification of communities using renewable energy mini-grids (such as solar and hybrid), as well as installation of SAS for beneficiaries in these communities\. While the ongoing private sector-led off-grid market development activities and off-grid service delivery will continue (and be scaled up), the GoE, under the NEP, is also planning on scaling up public sector-led off-grid programs\. This includes mini-grids and SAS for remote areas of the country, where the grid will not reach in the near term and where the private sector will not serve\. While the comprehensive off-grid strategy is under development, the proposed ELEAP will support pilot-scale off-grid service delivery activities, that is, off-grid electrification of up to five communities using renewable energy mini-grids (solar or hybrid), as well as SAS for households in these communities which cannot be viably connected through mini-grids\. 22\. Activities under Results Area 3: Strengthen sector capacity and institutional reform\. Support under ELEAP will address the key elements of Pillar 3 of the NEP, which focuses on supporting sector capacity and institutional reform in the Government's electrification program, specifically improving the planning capacity of EEU and MoWIE to implement the Program through, inter alia, (a) preparation of annual connection and roll-out plans; (b) establishment of the DoE and an integrated M&E system; (c) production of International Financial Reporting Standards Compliant Audited Financial Statements (without disclaimer opinion); (d) performance 43 improvements of procurement processes; (e) production of reports on F&C allegations; (f) preparation of reports on CE and gender; (g) improvement of customer satisfaction; and (h) establishment and maintenance of an ESMS\. 23\. Excluded activities\. The Program will not support activities that are likely to have significant adverse impacts that are sensitive, diverse or unprecedented on the environment and/or affected people\. The Program will also exclude activities that involve the procurement of (a) works, estimated to cost US$50,000,000 equivalent or more per contract; (b) goods estimated to cost US$30,000,000 equivalent or more per contract; (c) non-consulting services, estimated to cost US$20,000,000 equivalent or more per contract; and (d) consulting services, estimated to cost US$15,000,000 equivalent or more per contract\. 24\. Program Development Objective\. The objective of the Program is to increase access to electricity in Ethiopia and to enhance institutional capacity for planning and implementation of the Government’s electrification program\. 25\. The following outcome indicators will be used to measure the achievement of the PDO: ï‚ PDO Indicator 1: Number of people provided with on-grid electricity services ï‚ PDO Indicator 2: Number of people provided with off-grid electricity services ï‚ PDO Indicator 3: Improved planning and implementation capacity of the electricity sector Implementation Arrangements 26\. As illustrated in Figure 1\.5, the line ministry for achieving the targets under the NEP will be the MoWIE\. The DoE, to be established under the MoWIE, will be the entity responsible for Program oversight and monitoring progress\. The DoE will oversee the electrification program and facilitate successful implementation of the goals and objectives of the NEP through the implementation agencies, including the UEAP, EEU, and REF\. In addition, the MoWIE (through the DoE) will be an implementing agency under Results Area 3 and will be responsible in achieving some of the policy-related results\. Because the overall burden of Program oversight will fall to the DoE, the Program, through a DLI under Results Area 3, incentivizes the strengthening of the DoE’s capacity with regard to FM, procurement, M&E, and verification\. In addition, a Steering Committee comprising cross-sectoral members and other experts will be formed to provide sector oversight and interagency coordination\. The implementing agency for activities under Results Area 1 and 2 will be the EEU\. For Results Area 1, activities will be implemented jointly by the Retail and Wiring Unit (under the Distribution Department), as well as the UEAP Unit\. The Retail Unit is very well presented across the country on a district level\. Results Area 2 will be implemented by the UEAP\. As the technical assessment pointed out, close coordination between these three entities within the EEU will be required to facilitate a smooth transition from building the infrastructure to taking over additional customer base\. The connection procedures are currently being reviewed and simplified\. 27\. To facilitate the carrying out of the Program implementing agency’s respective parts of the Program, MoFEC will sign a subsidiary agreement with EEU, which will include the following: (a) the principal amount of the financing made available under the subsidiary agreement; and (b) EEU’s responsibility in (i) carrying out the Program Action Plan; (ii) implementing EEU related activities under the Program; (iii) ensuring that none of the excluded activities mentioned in 44 paragraph 23 are carried out under the Program; (iv) providing necessary information to GoE to comply with reporting requirements; (v) taking actions necessary to achieve DLIs\. 28\. Technical aspects, FM, procurement, and environmental and social aspects of the proposed operation fall under the responsibility of both implementing agencies—MoWIE and EEU—while program monitoring and audits lie with the MoWIE, that is, the DoE\. 29\. A POM will be developed setting out detailed institutional, administrative, financial, technical and operational guidelines and procedures for the implementation of the Program and Program Action Plan, including (i) detailed safeguards (including ESMS guidelines prepared in accordance with the legal agreements), (ii) FM (including fund flow and budgeting) and procurement arrangements; and (iii) a monitoring and verification system for the Program\. The adoption of the POM is a dated covenant under the Program and will have to be adopted by EEU one month after the Effective Date\. Any changes to the POM are subject to no-objection from the World Bank\. 30\. Skill development within the sector institutions is a core aspect of the sustainability of the NEP and is, therefore, a key focus of ELEAP\. The continual and rapid expansion of electrification in Ethiopia will require extensive capacity-building support not only for the electricity sector institutions, MoWIE and EEU, but also for the broader sector participants such as academic institutions (universities and vocational training center) and community and other local stakeholders\. The NEP activities will be supported by ELEAP or associated World Bank operations\. (a) Sector institutions (EEU and MoWIE)\. Currently, EEP is conducting on-the-job trainings for newly recruited staff of both utilities\. In the near future, the EEU will be setting up a training center of excellence providing necessary additional industry- specific trainings to university, college, and TVET graduates\. Under ELEAP, comprehensive training, technical assistance, and capacity-building support will be provided for sector institutions for technical and planning skills development, program management, M&E, and fiduciary systems and safeguards management, as well as for transition to customer-oriented business processes\. (b) Academic institutions\. Twice a year, the EEU offers two- and four-month apprenticeships, providing on-the-job training for up to 100 college and university students, respectively\. Graduate students in electrical engineering and information and communication technologies are provided with a six-month training before being placed in remote areas for two years, mainly being responsible for maintenance of the existing mini-grids\. In addition, the EEU has established collaboration with TVET institutions across the country that shall attract more technicians\. However, quality of the university, college, and TVET education and the limited number of graduates provide a challenge in meeting the utility’s demand for both high-skilled labor and technicians\. Deeper interlinks will be supported (under the pipeline regional IDA skills development project) with relevant local universities and TVET programs to prepare a pipeline of skilled labor force for the electricity sector\. (c) Community and local stakeholders\. Capacity development support will also be provided (under ELEAP) to broader stakeholders in the electricity sector, such as community groups, local industry participants, women, and civil society organizations\. 45 Support for Sector Institutions (EEU and MoWIE) (i) Sector-wide capacity-building activities for sector institutions\. Training and capacity building will be provided across sector institutions, including the MoWIE (DoE and REF), REBs, Woreda administrations, EEU, and EEA, for the successful implementation of the NEP and establishment of an enabling environment for grid and off-grid connections rollout\. Capacity-building activities for the DoE will include FM, procurement, M&E, and verification and will strengthen the capacity of the new staff in the DoE to effectively administer the Program on a day-to-day basis and support the work of the Steering Committee\. With the shift in focus toward electricity service delivery, concerted efforts are also under way at the EEU to optimize its commercial processes through (i) upgrading of systems and tools (installation of a comprehensive ERP system and implementation of a GIS); (ii) review of organizational structure (departmental reorganization, revaluation of the EEU- regulated asset base and shifting from Generally Accepted Accounting Principles (GAAP) to IFRS, and so on); and (iii) reengineering of policies and business process with a focus on service quality (see Box 1\.4)\. (ii) Establishment of a comprehensive performance monitoring and tracking system for the NEP-IRM\. Establishment and monitoring of KPIs for efficiency, effectiveness, and progress against grid and off-grid targets and for course adjustments as and when appropriate by relevant actors (for example, the EEU, DoE)\. The system will include regular reporting (for example, quarterly and annual) of program progress, analysis of impacts, and the creation of a performance-based dashboard with inputs from relevant ministries (for example, Health and Education) and will appropriately interface with GIS information and the management information system\. (iii) Detailed technical design and operational management plan for the implementation of the connections program (2018–2022) in synergy with the EEU’s Modernization Team\.22 The technical network and operational design will also support the EEU’s procurement, warehousing, logistics, construction works, and retail\. The plan will be prepared by distribution engineers and consultants supporting and building planning capacity for the EEU and will be characterized by different time coverages, reflecting a realistic and grounded approach to implementation opportunities and challenges (prioritizing the current waiting list where the network can support new connections and move further informed by the results of the distribution rehabilitation master plan, connection policy, and results of the GIS least- cost plan)\. (iv) Nationwide power system distribution master plan, including the update of the already existing plan for the four Addis Ababa area regions\. Led by the EEU, a nationwide distribution network strengthening plan and costing plan will be devised (at the individual feeder level) to enable the rapid scale-up of densification of 22 The Modernization Team has been recently established as the focal point to assess and address current bottlenecks for connections rollout and work with DPs\. It is composed of the Chief Technical Adviser to the EEU CEO, the heads of the UEAP, as well as of the EEU Corporate Planning, Corporate Retail, and Information and Communication Technology Departments\. Most members of the team previously worked on the BPR that led to the unbundling of the sector\. 46  customer connections in the next five years\. This technical and investment plan should be largely completed by mid-2018 and no later than July 2019 to inform, in sufficient detail, the preparation of the business and implementation plan for 2020, 2021, 2022, and beyond\. This will enable preparation of procurement specifications and bidding documents for major categories of equipment and materials required to undertake the physical program of connections rollout and secure adequate investment financing\. (v) Off-grid strategy and implementation plan\. The GoE will adopt an off-grid operational program design for 2019–2022 and beyond to be implemented alongside and complement grid developments for the achievement of universal access by 2025\. The off-grid program will target rural and deep rural beneficiaries, incrementally shifting the geographic focus from current peri-urban beneficiaries\. The program will serve (i) pre-electrification—transitional—needs and (ii) where the grid is not projected to be the least-cost solution due to remoteness, isolation and scattered household patterns\. The program will have two main drivers: public sector and private sector-led efforts, to ensure scale and speed of program delivery and comprehensive geographic outreach of electricity services (deep rural areas)\. (vi) Affordable connections study\. Led by the DoE, the study should be conducted in 2017–2018 with recommendations drafted by the end of 2018 to allow for the GoE’s consideration and adoption of a connections policy by early 2019\. The policy will provide a key input for access provision for 2020 onwards, when the electrification program will start providing connections beyond the paid and unpaid waiting list (for whom the connection is affordable)\. The study will focus on front-end affordability measures (for example, connection payment through installments) and demand-side management mechanisms and will be informed by the Multi-Tier Framework (MTF) analysis, the geospatial least-cost plan, and other best information available (leveraging on triangulation of sources) to provide recommendations to the GoE for the design of a connection cost policy\.23 (vii) Social institutions connection program\. A detailed design and operational implementation plan for the achievement of the NEP targets for the priority social facilities connection program\. The study will include a geo-referencing of social facilities (schools and clinics); a detailed dimensioning of key end uses that require electricity for service delivery (cold chain, simple vaccine and medicine refrigeration, lighting, sterilization); and an assessment of the current performance of electricity services provided, whether grid or off-grid, and the upgrading required at existing facilities classified as having some access\. For off-grid solar powered facilities, the assessment will include power equipment and maintenance standards and provide options for standardized solar packages appropriate for supporting service delivery and informed by the United Nations Children's Fund, the World Health Organization and other appropriate guidelines\. The consultant will also assess the 10,000 water supply points identified for the development of for example, water pumps\. Finally, the consultant will work with counterparts in the Federal Ministries of Education and 23 The study could identify information gaps (that cannot be filled by triangulation of available sources) that might require conducting further surveys in the frontier areas of the rollout to geospatially detail the affordability of connection fees and energy consumption by decile\. This effort would constitute a separate analysis\. 47  Health, as well as with the MoWIE and EEU\. The study should be completed by the end of 2018 for implementation to be launched at the beginning of 2019\. (viii) Long-term sector financial viability study\. Analysis of sector revenues and cost structures (inflows and outflows) with ongoing and planned revenues allocation to the Program, including export revenues, and cost reduction resulting from private sector engagement in the sector\. More specifically, the study will include (i) power supply costs, reflecting future shifts in the bulk power supply generation mix and cost structure; (ii) revenue generation projected from regulated cost recovery-based electricity tariffs on the basis of commercial principles and best practices of the sector to encourage competition, efficiency, and economical use and maintain reliability and system security; and (iii) the growing stream of revenue inflows from projected power surplus export revenues in the coming years\. The study will provide recommendations for the Government’s consideration on choices to ensure the long-term financial viability of the sector\. (ix) Special topical studies: low-cost technical standards, manufacturing capacity, and productive uses\. The analysis will inform the adoption of efficient network design and development of the local manufacturing capacity to produce low-cost materials and conduct a rapid appraisal of entrepreneurship in Ethiopia and current challenges encountered with the arrival of the grid to inform the scope and design of a specific program\. The study will be conducted in 2018 for the rapid adoption of low- cost construction standards and improved construction works efficiency and the productive uses program to start implementation in 2019\. Box 1\.4\. Optimizing Commercial Processes of the EEU With the shift in focus toward electricity service delivery rather than just electricity infrastructure development, concerted efforts are now under way at the EEU to optimize its commercial processes and become a world-class, customer-centric utility\. This process was started with unbundling of the vertically integrated utility, EEPCo, into EEU and EEP, to allow for greater strategic and operational control over different segments of the power sector value chain\. On its part, the EEU has been planning to improve the commercial processes in three buckets of interrelated activities: (i) Upgrading systems and tools\. The EEU has embarked on a multiyear, multifaceted process of comprehensively modernizing its back-office information technology (IT) systems, tools, and resources, to allow it to become a much more efficient corporation\. Under this effort, a US$50 million flagship program, supported by the World Bank (ongoing ENREP), is preparing to install a state-of-the art Enterprise Resource Planning (ERP) system at the EEU\. This Oracle- and SAP-based ERP system will not only allow automation of the EEU’s day-to-day workflow (corporate functions, such as, finance and internal controls, human resources, payroll, procurement, inventory, quality management, project management, asset management) but will also include commercial processes and activities (Customer Relationship Management) and will allow for integration of billing, accounting, and maintenance systems (customer care, meter, and device management)\. In addition, these systems will allow the EEU to improve its strategic planning and management activities through business intelligence and data warehouse applications\. A comprehensive GIS is also under development, supported by the World Bank (ongoing ESMAP technical assessment), which will allow for digitization of the EEU’s network and assets under management\. This will not only revolutionize the EEU’s technical planning capabilities but will also improve the reliability of information on customers and the infrastructure used to serve them\. (ii) Reviewing organizational structures and policies\. The EEU is not only upgrading its systems and tools but is also carrying out a deep diagnostic exercise to isolate bottlenecks in its organizations structure and policies which may be preventing it from scaling up electrification rates significantly\. This includes a detailed process of departmental reorganization, as well as revaluation of its regulated asset base, which will take a complete inventory of the EEU’s assets for the first time since its unbundling\. Furthermore, the 48  EEU is also reviewing its policies in handling financial and accounting functions, which would assist it in preparing for more globally accepted benchmarks, such as shifting from Generally Accepted Accounting Principles (GAAP) to IFRS\. Overall, the motivation behind this exercise is to provide focus to its core business processes and activities, such as registering new users in its customer database; conducting regular activities of the revenue cycle (metering, billing, collection, management of unpaid bills, and so on); and attending to customers both in aspects related to electricity supply and commercial issues\. (iii) Business Process Reengineering\. Finally, based on the outcomes of the above two steps, the EEU is undergoing a BPR exercise to improve and streamline delivery functions, improve the supply chain, and address past delivery delays related to planning, procurement, warehousing, and so on\. One of the major outcomes of the BPR exercise has been the EEU’s focus on further strengthening its quality of service delivery to its customers\. The utility is currently in the process of improving its complaint-handling mechanisms—the national rollout of the ‘905 Call Center’ is ongoing and is being complemented by ‘integrated utility kiosks’ at a Woreda level across the country\. These kiosks are designed for customers to pay their bills and submit complaints\. These actions being undertaken by the EEU will have a substantial impact on the utility, requiring strong continued support from the leadership; customization of these tools, processes, and practices for local context; and intensive training of staff and eventually focusing on behavior changes in the organization to adapt to the new functionalities\. The optimized commercial processes and activities will ensure efficient, transparent, and accountable execution of all commercial functions with the support of the EEU leadership\. 49  Figure 1\.5\. Implementation Arrangements Note: HH = Household\. 50  Annex 2: Results Framework Matrix Results Areas Intermediate Results (IR) DLI Unit of Baseline End Target PDO/Outcome Indicators Supported by the PforR Indicators # Measurement (Year) (Year) Results Area 1: Increase PDO Indicator 1: Number of Number 0 5,400,000 access to on-grid people provided with on-grid (2017) (2023) electricity in areas electricity services covered by the power IR Indicator 1\.1: Cumulative 1 Number 0 1,080,000 grid number of residential grid (2017) (2023) electricity connections made under the Program IR Indicator 1\.2: Cumulative Number 0 54,000 number of non-residential grid (2017) (2023) electricity connections made under the Program IR Indicator 1\.3: Households Percentage n\.a\. 24 connected to the grid under the (2017) (2023) Program that are female-headed Results Area 2: Increase PDO Indicator 2: Number of Number 0 255,000 access to off-grid people provided with off-grid (2017) (2023) electricity electricity services IR Indicator 2\.1: Households Number 0 51,100 provided with electricity through (2017) (2023) mini-grids and SAS IR Indicator 2\.2: Cumulative 2 Number 0 5 number of mini-grids installed (2017) (2023) IR Indicator 2\.3: Cumulative kW 0 300 capacity of renewable energy (2017) (2023) installed through mini-grid projects under the Program IR Indicator 2\.4: Cumulative 2 Number 0 50,000 number of stand-alone solar PV (2017) (2023) systems installed Results Area 3: PDO Indicator 3: Improved Yes/Noa No Yes Strengthen sector planning and implementation (2017) (2023) capacity and capacity of the electricity institutional reform sector 51  Results Areas Intermediate Results (IR) DLI Unit of Baseline End Target PDO/Outcome Indicators Supported by the PforR Indicators # Measurement (Year) (Year) IR Indicator 3\.1: Strengthen sector 3 Milestones a No milestone All milestones institutional capacity achieved achieved (2017) (2023) IR Indicator 3\.2: Improved cost- Milestones a No milestone All milestones effectiveness of Program achieved achieved (2017) (2023) IR Indicator 3\.3: Strengthen sector 4 Milestones a No milestone All milestones planning capacity achieved achieved (2017) (2023) IR Indicator 3\.4: Strengthen 5 Milestones No milestone All milestones fiduciary systems achieved achieved (2017) (2023) IR Indicator 3\.5: Improve gender 6 Milestones a No milestone All milestones and CE systems achieved achieved (2017) (2023) IR Indicator 3\.6: Women in STEM: Percentage 20 30 Percentage women’s employment (2017) (2023) at EEU IR Indicator 3\.7: Strengthen 7 Milestones a No milestone All milestones safeguards systems achieved achieved (2017) (2023) IR Indicator 3\.8: Number of EEU Number and MoWIE staff trained under the 0 (2017) 200 (2023) Program Note: a\. Milestones for indicators are described in the ‘Indicator Description’ table\. 52  Indicator Description Indicator Description Frequency Data Source Methodology for Responsibility for Responsibility for Name (#) data collection Data Collection Data Verification ͨ Results Area 1: Increase access to on-grid electricity in areas covered by the power grid 1\.0 PDO Indicator 1: Number Annual EEU monitoring reports EEU customer EEU of people provided with on- database grid electricity services Í£ 1\.1 Cumulative number of Annual EEU monitoring reports EEU CSA residential grid electricity EEU customer connections made under the database Program 1\.2 Cumulative number of non- Annual EEU monitoring reports EEU customer EEU residential grid electricity database connections made under the Program 1\.3 Households connected to the Annual EEU monitoring reports EEU customer EEU grid under the Program that database are female-headed Results Area 2: Increase access to off-grid electricity 2\.0 PDO Indicator 2: Number Annual EEU monitoring reports EEU database EEU of people provided with off- grid electricity services 2\.1 Households provided with Annual EEU monitoring reports EEU database EEU electricity through mini-grids and SAS 2\.2 Cumulative number of mini- Annual EEU monitoring reports EEU database EEU CSA grids installed 2\.3 Cumulative capacity of Annual EEU monitoring reports EEU database EEU renewable energy installed through mini-grid projects under the Program 2\.4 Cumulative number of stand- Annual EEU monitoring reports EEU database EEU CSA alone solar PV systems installed Results Area 3: Strengthen sector capacity and institutional reform 3\.0 PDO Indicator 3: Annual EEU/MoWIE EEU and MoWIE MoWIE/EEU Improved planning and monitoring reports databases implementation capacity of 53 Indicator Description Frequency Data Source Methodology for Responsibility for Responsibility for Name (#) data collection Data Collection Data Verification ͨ the electricity sector, as per achievement of below indicators\. 3\.1 Strengthen sector Annual EEU/MoWIE EEU and MoWIE MoWIE/EEU IVA institutional capacity: monitoring reports databases DoE is established and has put in place integrated M&E system, that is maintained throughout the Program\. 3\.2 Improved cost-effectiveness Annual EEU/MoWIE EEU and MoWIE MoWIE/EEU of Program: monitoring reports databases Finalization and implementation of affordable connections study and long- term financial sustainability study 3\.3 Strengthen sector planning Annual EEU/MoWIE EEU and MoWIE MoWIE/EEU IVA capacity: monitoring reports databases Annual connection rollout plans adopted by EEU 3\.4 Strengthen fiduciary systems Annual EEU/MoWIE EEU and MoWIE MoWIE/EEU IVA monitoring reports databases 3\.5 Improve gender and CE Annual EEU/MoWIE EEU and MoWIE MoWIE/EEU IVA systems: monitoring reports databases Gender and CE work program approved in first year of Program; Gender and CE report updated annually; Annual customer satisfaction in key aspects of the Program was equal or higher than last year's, as per annual surveys (between July 8, 2019 through July 7, 2022) 3\.6 Women in STEM: Increase Annual EEU monitoring reports EEU EEU women’s employment at EEU 54  Indicator Description Frequency Data Source Methodology for Responsibility for Responsibility for Name (#) data collection Data Collection Data Verification ͨ 3\.7 Strengthen safeguards Annual EEU/MoWIE EEU and MoWIE MoWIE/EEU IVA system: monitoring reports databases ESMS established and operational according to the adopted guidelines\. ESMS being established includes (a) environmental and social safeguards guidelines (in compliance with Ministry of Environment, Forest, and Climate Change, MoEFCC) are prepared; and (b) environmental and social safeguards specialist (minimum 1) as well as occupational health and safety specialist (minimum 1) are recruited at national level and EEU’s regional offices\. ESMS being operational means: (a) screening of subprojects; (b) systematic preparation of safeguards documents and measures; (c) systematic and timely implementation of recommendations; and (d) GRM operational 3\.8\. Number of EEU and MoWIE Annual EEU/MoWIE EEU and MoWIE MoWIE/EEU staff trained under the monitoring reports databases Program: Cumulative number of staff in EEU and MoWIE receiving training under the Program Note: a\. The target (‘Yes’) for PDO Indicator 3 is achieved upon achievement of IR Indicators 3\.1 through 3\.8\. b\. Improved fiduciary systems: achievement of FM, procurement, and governance milestones, as described in DLI 5 and Program Action Plan\. c\. Only applicable for DLIs\. 55  Annex 3: Disbursement Linked Indicators and Verification Protocols Total Indicative Timeline for DLI Achievement Financing As % of DLI Year or Year or Year or Year or Year or Year or Allocated Total Base Period 1 Period 2 Period 3 Period 4 Period 5 Period 6 to DLI Financing line (January 8– (July 8, 2018– (July 8, 2019– (July 8, 2020 (July 8, 2021 (July 8, 2022– (in US$, Amount July 7, 2018) July 7, 2019)24 July 7, 2020) –July 7, 2021) –July 7, 2022) -July 7, 2023) millions) DLI 1: 150,000 300,000 500,000 750,000 1,080,000 Establish on- On-Grid On-Grid On-Grid On-Grid On-Grid grid electricity 50,000 Electricity Electricity Electricity Electricity Electricity 0 connections Connections connections connections Connections Connections established established established established established (cumulative) (cumulative) (cumulative) (cumulative) (cumulative) Allocated cumulative 324\.0 86\.40 30\.0 80\.0 140\.0 200\.0 258\.0 324\.0 amount (US$, millions) DLI 2: 0 0 0 2\.1\. Two mini- 2\.1\. Three 2\.1\. Four mini- 2\.1\. Five mini- Establish off- grids installed mini-grids grids installed grids installed grid electricity (cumulative) installed (US$1\.5 (US$1\.5 access (US$1\.5 (cumulative) million per million per million per (US$1\.5 mini-grid) mini-grid) mini-grid) million per mini-grid) 2\.2\. 20,000 2\.2\. 30,000 2\.2\. 40,000 2\.2\. 50,000 SAS installed SAS installed SAS installed SAS installed (cumulative) (cumulative) (cumulative) (cumulative) (US$140 per (US$140 per (US$140 per (US$140 per SAS) SAS) SAS) SAS) Allocated cumulative 14\.5 3\.87 0 0 5\.8 8\.7 11\.6 14\.5 amount (US$, millions) DLI 3: 0 3\.1\. DoE is 3\.2\. DoE and 3\.3\. DoE and 3\.4\. DoE and 3\.5\. DoE and 3\.6\. DoE and Strengthen established, the Integrated the Integrated the Integrated the Integrated the Integrated 24 Fiscal Year (FY): July 8 through July 7 of the following year\. Stand Alone Systems (SAS) 56  Total Indicative Timeline for DLI Achievement Financing As % of DLI Year or Year or Year or Year or Year or Year or Allocated Total Base Period 1 Period 2 Period 3 Period 4 Period 5 Period 6 to DLI Financing line (January 8– (July 8, 2018– (July 8, 2019– (July 8, 2020 (July 8, 2021 (July 8, 2022– (in US$, Amount July 7, 2018) July 7, 2019)24 July 7, 2020) –July 7, 2021) –July 7, 2022) -July 7, 2023) millions) sector and has in M&E System M&E System M&E System M&E System M&E System institutional place an are maintained are maintained are maintained are maintained are maintained capacity integrated through July 8, through July 8, through July 8, through July 8, through July 8, M&E system 2018 – July 7, 2019 – July 7, 2020 – July 7, 2021 – July 7, 2022 – July 7, (US$1 million) 2019 2020 2021 2022 2023 (US$900,000) (US$900,000) (US$900,000) (US$900,000) (US$400,000) Allocated cumulative 5\.0 1\.33 0 1\.0 1\.9 2\.8 3\.7 4\.6 5\.0 amount (US$, millions) DLI 4: 0 4\.1\. Annual 4\.2\. Annual 4\.3\. Annual 4\.4 Annual 4\.5\. Annual 4\.6\. Annual Strengthen connection connection connection connection connection connection sector planning rollout plan for rollout plan for rollout plan for rollout plan for rollout plan for rollout plan for capacity July 8, 2017 – July 8, 2018 – July 8, 2019 – July 8, 2020 – July 8, 2021 – July 8, 2022 – July 7, 2018 July 7, 2019 July 7, 2020 July 7, 2021 1 July 7, 2022 July 7, 2023 adopted a adopted by adopted by adopted by adopted by adopted by (US$1 million) July 7, 2018 July 7, 2019 July 7, 2020 July 7, 2021 July 7, 2022 (US$1 million) (US$1 million) (US$1 million) (US$1 million) (US$687,500) Allocated cumulative 5\.7 1\.50 1\.0 2\.0 3\.0 4\.0 5\.0 5\.7 amount (US$, millions) DLI 5: 5\.1\. 5\.2\. 5\.3\. 5\.4\. 5\.5\. Strengthen Submission of Submission of Submission of Submission of Submission of fiduciary EEU audited EEU IFRS- EEU IFRS- EEU IFRS- EEU IFRS- systems financial compliant compliant, compliant compliant statements for audited audited audited audited Financial the period of financial financial financial financial Management July 8, 2017- statements for statements for statements for statements for July 7, 2018 the period of the period of the period of the period of by January 7, July 8, 2018- July 8, 2019- July 8, 2020- July 8, 2021- 2019 July 7, 2019 July 7, 2020 July 7, 2021 July 7, 2022 (US$1\.2 by January 7, with no with no with no million) 2020 disclaimer by disclaimer by disclaimer by 57  Total Indicative Timeline for DLI Achievement Financing As % of DLI Year or Year or Year or Year or Year or Year or Allocated Total Base Period 1 Period 2 Period 3 Period 4 Period 5 Period 6 to DLI Financing line (January 8– (July 8, 2018– (July 8, 2019– (July 8, 2020 (July 8, 2021 (July 8, 2022– (in US$, Amount July 7, 2018) July 7, 2019)24 July 7, 2020) –July 7, 2021) –July 7, 2022) -July 7, 2023) millions) (US$1\.2 January 7, January 7, January 7, million) 2021, 2022\. 2023\. (1\.2 million) (US$1\.2 (US$1\.2 million) million) Procurement 5\.6\. 5\.7\. Minimum 5\.8\. 5\.9\. 5\.10\. 5\.11\. Establishment entry Acceptable Acceptable Acceptable Acceptable of ‘minimum conditions b performance b performance b performance b performance b entry maintained of of of of conditions’ by during July 8, procurement procurement procurement procurement July 7, 2018 b 2017-July 7, processes and processes and processes and processes and (US$1 million) 2018 and (internal and (internal and (internal and (internal and internal and external) audit external) audit external) audit external) audit external system during system during system during system during procurement July 8, 2018- July 8, 2019- July 8, 2020- July 8, 2021- audits July 7, 2019 July 7, 2020 July 7, 2021 July 7, 2022 completed by (US$0\.8 (US$0\.8 (US$0\.8 (US$0\.8 January 7, million) million) million) million) 2019\. (US$0\.8 million) Governance 5\.12\. MoWIE 5\.13\. MoWIE 5\.14\. MoWIE 5\.15\. MoWIE 5\.16\. MoWIE provides, and provides, and provides, and provides, and provides and FEACC FEACC FEACC FEACC FEACC verifies, report verifies, report verifies, report verifies, report verifies report on F&C on F&C on F&C on F&C on F&C allegations allegations allegations allegations allegations related to the related to the related to the related to the related to the Program for Program for Program for Program for Program for the period of the period of the period of the period of the period of July 8, 2017- July 8, 2018- July 8, 2019- July 8, 2020- July 8, 2021- July 7, 2018 July 7, 2019 July 7, 2020 July 7, 2021by July 7, 2022 by January 7, by January 7, by January 7, January 7, by January 7, 2019 2020 2021\. 2022 2023 (US$1 million) (US$1 million) (US$1 million) (US$1 million) (US$1 million) 58  Total Indicative Timeline for DLI Achievement Financing As % of DLI Year or Year or Year or Year or Year or Year or Allocated Total Base Period 1 Period 2 Period 3 Period 4 Period 5 Period 6 to DLI Financing line (January 8– (July 8, 2018– (July 8, 2019– (July 8, 2020 (July 8, 2021 (July 8, 2022– (in US$, Amount July 7, 2018) July 7, 2019)24 July 7, 2020) –July 7, 2021) –July 7, 2022) -July 7, 2023) millions) Allocated cumulative 16\.0 4\.27 1\.0 4\.0 7\.0 10\.0 13\.0 16\.0 amount (US$, millions) DLI 6: Improve 6\.1\. EEU 6\.2\. EEU 6\.3\. EEU 6\.4\. EEU 6\.5\. EEU 6\.6\. EEU gender and CE adopts a 5-year publishes a publishes a publishes a publishes a publishes a CE and gender report on CE report on CE report on CE report on CE report on CE work program and gender for and gender for and gender for and gender for and gender for in priority the period of period July 8, period of July period of July period of July areas ͨ July 8, 2017- 2018 through 8, 2019 8, 2020 8, 2021 identified July 7, 2018 in July 7, 2019 in through July 7, through July 7, through July 7, under the priority areas priority areas 2020 in 2021 in 2022 in Program by identified identified priority areas priority areas priority areas July 7, 2018 under the under the identified identified identified (US$500,000) Program and Program and under the under the under the conducts conducts Program by Program by Program by customer customer January 7, January 7, January 7, satisfaction satisfaction 2021 2022 2023 survey in key survey in key (US$500,000) (US$500,000) (US$500,000 aspects Í© by aspects January 7, by January 7, 2019 2020 6\.7\. During 6\.8\. During 6\.9\. During (US$500,000) (US$500,00) period July 8, period July 8, period July 8, 2019 through 2020 through 2021 through July 7, 2020, July 7, 2021, July 7, 2022, customer customer customer satisfaction in satisfaction in satisfaction in key aspects key aspects key aspects was equal or was equal or was equal or higher than higher than higher than last year’s, as last year’s, as last year’s, as per survey per survey per survey completed by completed by completed by 59  Total Indicative Timeline for DLI Achievement Financing As % of DLI Year or Year or Year or Year or Year or Year or Allocated Total Base Period 1 Period 2 Period 3 Period 4 Period 5 Period 6 to DLI Financing line (January 8– (July 8, 2018– (July 8, 2019– (July 8, 2020 (July 8, 2021 (July 8, 2022– (in US$, Amount July 7, 2018) July 7, 2019)24 July 7, 2020) –July 7, 2021) –July 7, 2022) -July 7, 2023) millions) January 7, January 7, January 7, 2021 2022 2023 (US$500,000) (US$500,000) (US$500,00) Allocated cumulative 4\.5 1\.20 0\.5 1\.0 1\.5 2\.5 3\.5 4\.5 amount (US$, millions) DLI 7: 7\.1\. ESMS 7\.2\. ESMS 7\.3\. ESMS 7\.4\. ESMS Strengthen established at maintained maintained maintained safeguards the national during period during period period July 8, systems and regional July 8, 2018 July 8, 2019 2021 through levels not later through July 7, through July 7, July 7, 2023, than one 2019, as per 2021, as per as per adopted month after the adopted adopted guidelines effective date guidelines guidelines (US$1\.0 (US$1\.4 (US$1\.4 (US$1\.2 million) million) million) million) Allocated cumulative 5\.0 1\.33 1\.4 2\.8 2\.8 4\.0 4\.0 5\.0 amount (US$, millions) Capitalized 0\.3 front end fee Total 375 100 a\. Prior Results\. b\. Procurement: Minimum entry conditions and performance criteria: as defined in POM\. c\. Priority areas set out in the POM, including employment, training, sex-disaggregated data collection, customer grievances, media and communication\. d\. Key aspects set out in the POM, including the areas of service provision, handling of grievances, and transparency and dialogue\. 60  DLI Verification Protocol Table # DLI Definition/Description Scalability of Protocol to Evaluate Achievement of the DLI and Data/Result Verification of Achievement Disbursements Data Source/Agency Verification Entity Procedure (Yes/No) 1 Establish on-grid Number of new grid Yes EEU CSA Program Verification electricity electricity connections Report prepared by CSA connections (at quality standards after completion of survey acceptable to the World with sample size agreeable Bank) within 3 to the World Bank kilometers of the existing grid 2 Establish off-grid 2\.1\. Number of mini- Yes EEU CSA Program Verification electricity access grids commissioned Report prepared by CSA after completion of site 2\.2\. Number of SAS visits to all commissioned installed mini-grids and a sample size (agreeable to the World Bank) of installed SAS\. 3 Strengthen sector 3\.1\. DoE is established No - MoWIE IVA Program Verification institutional (designate team with Disbursements Report prepared by the capacity technical, FM, made on IVA procurement, and M&E achievement of skills), and has in place each annual integrated M&E system deliverable described 3\.2–3\.6\. DoE and the integrated M&E system maintained from July 8, 2018 through July 7, 2023\. 4 Strengthen sector 4\.1\. Annual connection No - MoWIE IVA Program Verification planning capacity rollout plan for period Disbursements Report prepared by the July 8, 2017 through made on IVA July 7, 2018 adopted by achievement of EEU Board\. each annual deliverable 4\.2-4\.6: Annual described connection rollout plans 61 # DLI Definition/Description Scalability of Protocol to Evaluate Achievement of the DLI and Data/Result Verification of Achievement Disbursements Data Source/Agency Verification Entity Procedure (Yes/No) for subsequent years, starting July 8, adopted by July 7, of the same calendar year (for the period July 8, 2018 through July 7, 2023)\. 5 Strengthen 5\.1\. Submission of EEU No - EEU IVA based on audit Program Verification fiduciary systems audited financial Disbursements prepared by Report prepared by the statements for period made on independent auditor IVA July 8, 2017 through achievement of July 7, 2018 by January each annual 7, 2019 deliverable described 5\.2\. Submission of EEU IFRS-compliant audited financial statements for period July 8, 2018 through July 7, 2019 by January 7, 2020 5\.3–5\.5\. Submission of EEU IFRS–compliant annual audited financial statements with no disclaimer from July 8, 2019 through July 7, 2022 by January 7 of the following year of audited period\. 5\.6\. Establishment of ‘minimum entry conditions’ by July 7, 2018: Minimum entry conditions will be established in the POM to ensure satisfactory 62 # DLI Definition/Description Scalability of Protocol to Evaluate Achievement of the DLI and Data/Result Verification of Achievement Disbursements Data Source/Agency Verification Entity Procedure (Yes/No) performance of the procurement system (including award committees, complaint- handling mechanism, monitoring system operational) 5\.7\. Minimum entry conditions maintained during period July 8, 2017 through July 7, 2018 and internal and external procurement audits completed by January 7, 2019 5\.8–5\.11\. Acceptable annual performance (according to criteria set out in POM) of procurement processes and (internal and external) audit system maintained through July 7, 2022\. 5\.12\. MoWIE, provides and FEACC verifies, annual report on F&C allegations related to the Program for period July 8, 2017 through July 7, 2018 by January 7, 2019 5\.13–5\.16\. MoWIE provides and FEACC 63 # DLI Definition/Description Scalability of Protocol to Evaluate Achievement of the DLI and Data/Result Verification of Achievement Disbursements Data Source/Agency Verification Entity Procedure (Yes/No) verifies annual reports for the period of July 8, 2018 through July 7, 2021 on F&C allegations related to the Program by January 7 of the following year 6 Improve gender 6\.1\. EEU adopts 5-year No - EEU IVA Program Verification and CE systems CE and gender work Disbursements Report prepared by the program in priority areas made on IVA identified under Program achievement of (employment, training, each annual customer grievances, deliverable and so on), by July 7, described 2018 as indicated in EEU Board meeting minutes 6\.2–6\.3\. EEU publishes annual reports for the period of July 8, 2017 through July 7, 2019on CE and gender in priority areas identified under the Program (employment, training, GBV, sex-disaggregated data collection, customer grievances, media and communication, and so on) and conducts customer satisfaction survey in key aspects (service, grievance, transparency, and dialogue) by January 7 of the following year 64 # DLI Definition/Description Scalability of Protocol to Evaluate Achievement of the DLI and Data/Result Verification of Achievement Disbursements Data Source/Agency Verification Entity Procedure (Yes/No) 6\.4–6\.6\. EEU publishes a report on CE and gender reports for the period of July 8, 2019 through July 7, 2022 in priority areas identified under Program by January 7 of the following year\. 6\.7–6\.9\. Between July 8, 2019 and July 7, 2022 annual customer satisfaction in key aspects of the Program was equal or higher than last year’s according to annual surveys completed by January 7 of the following year\. 7 Strengthen 7\.1\. ESMSa established safeguards at the national and systems regional levels not later than one month after the effective date 7\.2\. ESMS maintained during period July 8, 2018 through July 7, 2019, as per adopted guidelines 7\.3\. ESMS maintained during period July 8, 2019 through July 7, 65  # DLI Definition/Description Scalability of Protocol to Evaluate Achievement of the DLI and Data/Result Verification of Achievement Disbursements Data Source/Agency Verification Entity Procedure (Yes/No) 2021, as per adopted guidelines 7\.4\. ESMS operational during period July 8, 2021 through July 7, 2023, as per adopted guidelines Note: a) ESMS includes: (i) policy and procedural guidelines, prepared in accordance with terms of reference (ToR) acceptable to the Association, and finalized taking into account the Association’s comments thereon (finalized guidelines to be annexed to the POM); and (ii) having in place staff, and other resources, satisfactory to the Association\. 66  World Bank Disbursement Table Minimum DLI Maximum DLI Value to be World Bank Value(s) Expected to Determination of Financing Achieved to Financing Deadline for DLI be Achieved for Amount to be Disbursed Against # DLI Trigger Allocated to Achievement World Bank Achieved and Verified DLI Disbursements of the DLI Disbursements Value(s) World Bank Purposes Financing 1 Establish on-grid US$324 July 7, 2023 n\.a\. 1,080,000 connections On average: US$300 per connection electricity million US$600 for first 50,000 connections connections US$500 for next 100,000 connections US$400 for next 150,000 connections US$300 for next 200,000 connections US$232 for next 250,000 connections US$200 for final 330,000 connections 2 Establish off-grid US$14\.5 July 7, 2023 n\.a\. 2\.1\. 5 mini-grids US$1\.5 million per mini-grid electricity access million commissioned 2\.2\. 50,000 SAS US$140 per SAS installed 3 Strengthen sector US$5 million July 7, 2023 n\.a\. 3\.1\. DoE is established US$1 million institutional and has in place an capacity integrated M&E system 3\.2–-3\.5\. DoE and US$0\.9 million per year integrated M&E system maintained annually from July 8, 2018 through July 7, 2022 3\.6 DoE and integrated M&E system US$0\.4 million maintained from July 8, 67  Minimum DLI Maximum DLI Value to be World Bank Value(s) Expected to Determination of Financing Achieved to Financing Deadline for DLI be Achieved for Amount to be Disbursed Against # DLI Trigger Allocated to Achievement World Bank Achieved and Verified DLI Disbursements of the DLI Disbursements Value(s) World Bank Purposes Financing 20222 through July 7, 2023\. 4 Strengthen sector US$5\.7 July 7, 2023 n\.a\. 4\.1\. EEU annual US$1 million for plan planning capacity million connection rollout plan for July 8, 2017 through July 7, 2018 prepared and adopted by EEU Board* 4\.2-4\.6\. Annual US$1 million per annual plan for connection rollout plans the period July 8, 2018 through July for subsequent years, 7, 2022, US$687,500 for Plan for starting July 8, 2018 period July 8, 2022 through July 7, through July 7, 2023, 2023 adopted by July 7 of the same calendar year 5 Strengthen US$16 July 7, 2023 n\.a\. 5\.1\. Submission of EEU US$1\.2 million per annual audit fiduciary systems million audited financial statements for the period July 8, 2017 through July 7, 2018 by January 7, 2019 5\.2\. Submission of EEU US$1\.2 million per annual audit IFRS-compliant audited financial statements for the period July 8, 2018 through July 7, 2019 by January 7, 2020 5\.3–-5\.5\. Submission of EEU annual IFRS- 68  Minimum DLI Maximum DLI Value to be World Bank Value(s) Expected to Determination of Financing Achieved to Financing Deadline for DLI be Achieved for Amount to be Disbursed Against # DLI Trigger Allocated to Achievement World Bank Achieved and Verified DLI Disbursements of the DLI Disbursements Value(s) World Bank Purposes Financing compliant audited US$1\.2 million per annual audit financial statements with no disclaimer for the period July 8, 2019 through July 7, 2022 by January 7 of the following year 5\.6\. Establishment of US$1 million ‘minimum entry conditions’ by July 7, 2018 5\.7\. Minimum entry US$0\.8 million conditions maintained during period July 8, 2017 through July 7, 2018 and internal and external procurement audits completed by January 7, 2019\. US$0\.8 million/year 5\.8–5\.11\. Acceptable annual performance (according to criteria set out in the POM) of procurement processes and (internal and external) audit system maintained from July 8, 2018 through July 7, 2022\. by January 7 of the following year 69  Minimum DLI Maximum DLI Value to be World Bank Value(s) Expected to Determination of Financing Achieved to Financing Deadline for DLI be Achieved for Amount to be Disbursed Against # DLI Trigger Allocated to Achievement World Bank Achieved and Verified DLI Disbursements of the DLI Disbursements Value(s) World Bank Purposes Financing US$1 million for FEACC verified 5\.12\. MoWIE provides, report\. FEACC verification will be and FEACC verifies, evidenced by a cover letter from EFY18 annual report on FEACC attached to the report\. F&C allegations related to the Program by January 7, 2019 US$1 million for FEACC verified 5\.13–5\.16\. MoWIE, report\. FEACC verification will be provides and FEACC evidenced by a cover letter from verifies, annual reports FEACC attached to the report\. for the period of July 8, 2018 through July 7, 2022 on F&C allegations related to the Program by January 7 of the following year\. 6 Improve gender US$4\.5 July 7, 2023 n\.a\. 6\.1\. EEU adopts 5-year US$0\.5 million for adoption of and CE systems million CE and gender work work program program in priority areas identified under the Program by July 7, 2018 (employment, training, customer grievances, and so on) 6\.2–6\.3\. EEU publishes US$0\.5 million for publication and annual reports on CE completion of customer satisfaction and gender for the survey per year period of July 8, 2017 through July 7, 2019 in priority areas identified under the Program and 70  Minimum DLI Maximum DLI Value to be World Bank Value(s) Expected to Determination of Financing Achieved to Financing Deadline for DLI be Achieved for Amount to be Disbursed Against # DLI Trigger Allocated to Achievement World Bank Achieved and Verified DLI Disbursements of the DLI Disbursements Value(s) World Bank Purposes Financing conducts customer satisfaction survey in key aspects by January 7, 2019 and January 7, 2020\. 6\.4–6\.6\. EEU publishes US$0\.5 million/annual report over annual reports on CE the period and gender the period of July 8, 2019 through July 7, 2022 in priority areas identified under the Program 6\.7–6\.9\. Between July US$0\.5 million/annual customer 8, 2019 and July 7, survey over the period 2022, customer satisfaction in key aspects was equal or higher than last year’s according to annual surveys\. 7 Strengthen US$5 million July 7, 2023 n\.a\. 7\.1\. ESMS established US$1\.4 million for establishment of safeguards system for national and the system regional levels one month after the effective date of the Program 7\.2\. ESMS maintained during the period of US1\.4 million July 8, 2018 through 71  Minimum DLI Maximum DLI Value to be World Bank Value(s) Expected to Determination of Financing Achieved to Financing Deadline for DLI be Achieved for Amount to be Disbursed Against # DLI Trigger Allocated to Achievement World Bank Achieved and Verified DLI Disbursements of the DLI Disbursements Value(s) World Bank Purposes Financing July 7, 2019, as per adopted guidelines\. 7\.3\. ESMS maintained US$1\.2 million during the period of July 8, 2019 through July 7, 2021, as per adopted guidelines\. 7\.4\. ESMS maintained US$1\.0 million during the period of July 8, 2021 through July 7, 2023 as per adopted guidelines\. Total US$375 million* Note: * Includes US$312,500 for front-end fee\. 72  Annex 4: Summary of Technical Assessment 1\. Strategic relevance\. Despite tangible results in other segments of the electricity sector, the household electrification rate remains quite low with about 20 percent, with over 60 million people left without access to electricity (second highest access deficit in Africa), posing a binding constraint to economic and social growth\. While significant improvements have been achieved in the past in transmission infrastructure, last-mile connections to households have not kept pace with the rapid network expansion\. In the coming years, the GoE intends to place last-mile electrification at the core of its development agenda\. 2\. In this context, the GoE prepared the NES to identify persistent challenges and define and implement a road map for sustainable energy sector development and scaling up electrification in Ethiopia\. Based on the NES, the GoE initiated the NEP, which is the centerpiece of the implementation of the electrification expansion strategy in a more effective and sustainable manner\. Overall, the NEP supports the GTP-II electrification expansion/connection targets with a revised, more realistic timeline of 2017–2022\. The NEP is organized into three pillars addressing the dominant challenges and needs in the sector: (a) Pillar 1: On-grid electrification; (b) Pillar 2: Off-grid service provisioning; and (c) Pillar 3: Sector capacity and institutional reform\. 3\. The proposed ELEAP is fully aligned with the GoE’s NEP in scaling up electricity connections in areas within the network reach under Pillar 1, as well as increasing access to off- grid technologies in areas outside of the network under Pillar 2\. Strong emphasis will be put on Pillar 3 as strengthening the capacity of the sector institutions will be crucial to achieve the ambitious targets with regard to grid electrification and off-grid\. 4\. Technical soundness\. The Program features are not unique nor does the technical design include new or untested technology\. The proposed operation will target an estimated 1,080,000 connections under the time frame of the Program\. There is a total of 46,782 customers waiting for a connection, who have already paid the connection fee, as well as an additional 280,046 registered customers\. In total, 5,296,350 customers reside in the vicinity of the existing network immediately available for receiving a connection\. Clearance of the waiting list has been declared as a priority by the GoE\. As Figure 4\.1 highlights, the utility was able to connect a much higher number of customers (up to 300,000 per year) before GTP-II, which draws the focus more on infrastructure development instead of service delivery and leads to significantly lower annual connection results (50,000 per year)\.25 25 The relatively lower connections in 2009 and 2010 are due to the introduction of two regulations: (a) the moratorium on connections in response to the electricity supply crises and (b) the requirement of single source procurement for meters\. The detailed description is included in the technical assessment\. 73  Figure 4\.1\. Past Connection Achievements (2006–2016) 3 1 0\.9 2\.5 0\.8 0\.7 Annual  (in million) Total (in million) 2 0\.6 1\.5 0\.5 0\.4 1 0\.3 0\.2 0\.5 0\.1 0 0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Total customers Annual connections Source: EEU\. 5\. Building on the UEAP’s proven experience, targeted support for planning will be needed in the immediate term to ensure the successful clearance of both the paid and unpaid waiting list, as well as the densification of proximate prospective customers through adequate network design (conducted at the feeder level) and analysis, ensuring that new connections are added where network capacity can support new consumption\. In fact, as access to electricity services has been seen as a social issue, new connections have been so far provided without network analysis, with negative consequences for the reliability of services, as well as their availability, through an overloaded network\. 6\. The following major bottlenecks need to be addressed in the proposed operation to reach the envisioned targets: a\. Planning\. The current annual connection rollout plans are aligned to the GTP-II targets; however, they are not aligned to the existing funding\. Hence, all relevant information such as staffing requirements, material requirements, procurements, and so on are not based on realistic grounds and require continuous revisions\. Furthermore, a project-by-project approach prevents benefiting from economies of scale\. Under the operation, it is proposed to significantly revise these plans to a programmatic approach aligned with confirmed funding\. b\. The need to rehabilitate the existing network\. The Addis Ababa network is being rehabilitated based on an existing Addis Ababa distribution master plan\. Although the utility has prepared a preliminary rehabilitation plan for the remaining 11 regions in the country, the plan needs to be further expanded to ensure that additional connections made under the Program do not put further burden on the network\. c\. Coordination\. The current electrification model includes three different units in the EEU mandated to connect customers: the UEAP, Retail, and Wiring Units, with bulk of the connections falling under the responsibility of the Retail Unit\. This arrangement leads to delay in connecting the households\. The EEU is in the process of revising the 74  implementation procedures and might task the UEAP in the future to also make the final service drop to households while building the LV infrastructure in its town electrification program\. Coordination amongst various departments involved in handling connection needs to be strengthened\. A proposed business development firm under the operation will assist in improving coordination among these units to speed up the connectivity rate\. d\. Affordability\. The backlog of customers on the waiting list who have already paid the connection fee and those who can afford the connection fee are sufficient for the targeted connections envisioned under the proposed operation\. However, in the medium term, the utility needs to put a connection policy in place that allows for different payment schemes to cover the high up-front connection fee, for example, installment payments, subsidies, and so on\. This will be included in an Affordable Customer Connection Study to be completed in the first year of the proposed operation\. 7\. Planning and operational readiness for the Program\. In preparation for the implementation of the grid connections rollout component of ELEAP, especially connectivity targets for 2018 program, the EEU has already launched several initiatives ensuring that adequate planning, technical procurement, and operations measures are put in place by effectiveness of the Program, including the following: a\. Establishment of a team devoted to connections’ scale-up, including integrating the UEAP expertise\. The Modernization Team was established in the fall of 2016 with the mandate to improve the pace of connections and identify key bottlenecks to scaling up implementation, including effective coordination across the EEU\. It is led by the technical advisor to the CEO and members representing both the EEU and recently folded-in UEAP, including Planning, Retail, and Information and Communication Technology\. The Modernization Team is also represented in the task force established by the MoWIE for launching of the NEP\. b\. A nationwide MV feeder-level technical network analysis has been completed\. In early-2017, the Modernization Team launched a rapid technical and potential demand assessment of all MV feeders in the country—over 550—with active participation of the regional and district offices\. For each feeder, data on the number of current customers, paid waiting list, registered customers, and potential new customers have been identified (household and commercial), as well as average energy demand per customer\. Further, a simplified technical analysis has been completed to estimate the maximum number of customers that can be connected in the first year of the sector program (2018) without overloading transformers beyond 90 percent of their rated capacity and reflecting other technical design considerations that can otherwise limit the network carrying capability and reliability\. The analysis was conducted through primary (surveys) and secondary information on energy demand collected at the EEU district office level\.26 The output of this rapid assessment of each MV feeder nationwide—customer demand and technical considerations—has led to an initial determination of the number of new connections that can added on each feeder\. 26 Such a comprehensive data collection, validation, and harmonization from the decentralized office was conducted for the first time by the EEU in preparation for ELEAP\. 75  c\. Development of the 2018 Technical and Procurement Plan for the rollout of 500,000 connections\. Based on the analysis conducted, the EEU has identified the towns and villages to be targeted in 2018, mostly second- and third-tier cities and rural areas recently ‘energized’ by the UEAP\. The available interim results indicate that about 500,000 new connections can be undertaken in 2018, provided adequate financing is made available, of which 78 percent of new connections will be in rural areas whereas 24 percent in urban areas\. Additionally, the team has prepared the corresponding Procurement Plan for the 500,000 connections (by major equipment category), identifying the number of items (i) available in warehouses; (ii) to be procured in-country; and (iii) to be imported with related costing in foreign currency)\. The EEU has estimated MV, LV, and service drop material requirements in accordance with rural and urban standards, to be procured though the list of preselected vendors developed in 2017\. The EEU is also drafting a plan for the number of connections to be rolled out on a daily basis for the identification of overall staff requirements, as well as detailing of workforce to be (i) trained through the EEU Academy (training modules are already available) or (ii) outsourced to the list of preselected contractors\. 8\. With the funding provided under ENREP and ENREP-AF, the DBE is currently sufficiently funded to provide loans to MFIs and PSEs under the two credit lines\. With additional support, the DBE will be able to upscale the provision of solar systems\. Additionally, revenue from certified emission reduction (US$20\.17 million) will be used for incentives for training of more technicians, introducing of a warranty tracking system, and proper battery replacement\. A marketing campaign (US$300,000), technical assistance for MFIs (US$50,000), and a collateral support facility (US$4\.5 million) are included in the ENREP-AF to stimulate the renewable energy and energy efficiency market\. The recent market introduction of pay-as-you-go systems (for example, Azuri Technologies) will further advance the sector and address some of the challenges mentioned earlier\. These systems do not require SIM cards and hence contractual agreements with Ethiopian Telecom are not needed\. 9\. With regard to SAS provided under REF, the MoWIE initiative will have to identify more sustainable modalities to serve the deep rural areas according to its mandate\. Currently, the grant and direct procurement-based system does not lead to the numbers required to achieve the ambitious GTP-II targets\. The mini-grid program is promising given the UEAP’s experience of building and operating mini-grids in the past\. Yet the program will require detailed countrywide feasibility studies and concrete implementation modalities\. 10\. Apart from the off-grid investments to be financed under the proposed operation, ELEAP will strengthen the enabling environment\. The most urgent requirement is the definition of an off- grid strategy that lays out the modalities of implementing SAS and mini-grids targeted under the NEP\. 11\. Institutional arrangements\. The UEAP is responsible for town electrification\. Toward the end of GTP-I, the UEAP was decentralized into eight regional offices to improve coordination with the regional administrations and better tailor procurement of materials and workforce to local expansion plans\. The UEAP has also supported the creation of 81 associations (mostly in the Addis Ababa regions) providing construction workers for the connection of condominiums\. To counter the constraint posed by an inadequate size of the workforce, the UEAP has launched a training program for recent graduates of technical universities and technical vocational schools in January 76 2014, and about 2,000 workers have joined the existing 200 cooperatives for the extension of network coverage\. To expand the production of LV concrete poles, the UEAP has supported the creation of 122 associations (cooperatives) and training of about 320 individuals since mid-2015\. At the time of unbundling, the UEAP was initially based in EEP, but it was transferred to the EEU three years later, in 2016, to facilitate coordination on access expansion\. Following the handover of the network extension, the EEU distribution department has the responsibility to undertake the downstream task of designing and rolling out the LV lines from the distribution transformer to connect households, shops, and social institutions, while the UEAP maintains its mandate of MV and LV extensions to towns\. For the proposed operation, the EEU will be mandated to implement all grid-related and mini-grid-related capital expenditures, while the MoWIE has the overall oversight of the NEP and responsibility for M&E\. 12\. Program expenditure framework\. The planned expenditures for on-grid and off-grid rollout (medium and LV lines and final connections, excluding upstream costs of generating and transmission, as well as off-grid expenditures for SAS and mini-grids) are estimated at about US$676\.5 million\. Table 4\.1 provides the detailed list of expenditures eligible under the Program\. Expenditure categories are aligned to the EEU’s chart of accounts\. Under the Program, ‘service drops’ are fully embedded in the budget line item 5118 of the EEU’s chart of account ‘Material for customer connection’, which includes all expenditures for meters, poles, and other immediate service drop material\. The technical assessment concluded that, on average, the connection cost under this category will be around US$300\. The later connections under the Program may also require a certain level of MV extension and rehabilitation included under budget line items 1500– 151927 of the EEU’s chart of accounts\. This line item includes the EEU’s expenditures for the remaining works in progress, which after completion will be moved to assets in the utility’s accounting system\. There is no disaggregation between works and material expenditures for MV lines extension/rehabilitation and mini-grids\. Because the upstream costs of generating and transmission fall under EEP’s chart of accounts, there is no risk connected to this joint expenditure category as expenditures will include only MV lines and mini-grids\. The operating expenditures for ‘service drops’ and ‘MV extension/rehabilitation and mini-grids’ were estimated based on international experience: 8 percent of capital expenditures for ‘service drops’ and 7 percent of capital expenditures of ‘MV extension/rehabilitation and mini-grids’\. Because the utility has not yet engaged in the distribution of SAS, this will be a new category that will be added to its chart of accounts\. The MoWIE will treat expenditures related to the Program as separate budget line items and disaggregation is not seen as a risk\. Table 4\.1\. Program Expenditures Under ELEAP (US$, millions) Allocation for 2018–2023 Cost Items (corresponding account codes) Amount Service drops (i) Material for customer connection (5118) 300\.0 (ii) Salaries, wages, and other allowances (5200–5299) 24\.5 LV/MV extension/rehabilitation and mini-grids 27 Expenditures can include (a) Local Purchases - Direct Purchases (1501), (b) Foreign Purchases - Direct Issues and Goods held by Central Stores for Project (1502), (c) Stores Issues - Stock Items (1503), (d) Freight - local transport (1504), (e) Vehicle Rentals (1505), (f) Contracted construction and services (1506), and (g) Benzine/Gasoil/Oil/Grease (1507)\. 77  (i) Material and equipment (1500–1519) 300\.0 (ii) Salaries and wages (1520–1529) 20\.0 (iii) Training (5302) 5\.0 (iv) Other costs (1530–1539) 10\.0 Stand-alone solar systems (new) 7\.0 Operating expenditures (MoWIE) (i) Operational and consultancy costsa 10\.0 Total 676\.5 Source: World Bank task team\. Note: a\. Includes material and equipment\. 13\. Funding predictability\. Infrastructure investments in Ethiopia have totaled more than US$127 billion over the last 15 years, where US$33 billion was spent on social infrastructure, US$27 billion on water, US$23 billion on electricity, and US$21 billion on roads\. From the total investment budget of US$13 billion for 2016–2017, priority is given to road development, as well as rural electrification and diversification of the energy sector\. Overall, the GoE’s GTP-II-related sector investments called for US$11 billion worth of new projects, out of which over US$8 billion has already been raised and committed\. The financing plan for these public-sector projects includes a mix of funding sources, part of it coming from the GoE’s self-financing and customer contributions, but most of it coming from new loans/bonds\. Borrowing is sought from multilateral and bilateral partners, international donor agencies, and commercial banks, as well as domestic and diaspora bonds issued directly by the sector\. The Government share of financing of the five- year Program (US$247\.5 million) is in line with financing allocated over the past years, which averaged US$50–100 million per year\. 14\. Adherence to budgeted Program expenditure and execution of NEP priorities\. As indicated in the PEFA assessments, the GoE has a well-functioning planning and budgeting system and the MoWIE prepares its plan and budget in line with this system\. It follows the Federal Government budget calendar and manuals\. On the other hand, the EEU uses the former EEPCo’s planning and budgeting procedure manual\. Physical plans are adequately costed and AWPBs are sufficiently detailed\. The sources of funds of the EEU include budget from the Federal Government, sales of electricity (including connection fees), loans and grants, customer contributions, and other miscellaneous income\. The Federal Government budget partly covers the cost of providing access to towns under the UEAP, while the customer contributions are charges collected from the customers for new connections\. The GoE’s contribution to the UEAP is included as part of the MoWIE’s budget and proclaimed at the federal level\. The EEU’s consolidated AWPB, including UEAP’s, is required to be approved by the Board of the EEU\. Budget preparation by each process, consolidation of the EEU’s AWPB, and review by the executive management usually adheres to the EEU’s budget calendar and is concluded before the start of a fiscal year\. However, approval by the Board of the EEU and subsequent notification to each process are delayed and usually provided after two to three months of the start of a fiscal year, which should be improved\. The budget execution of the EEU is quite low, especially for capital budgets, due to shortage of finance, low supply of materials, and ambitious planning\. The annual budget of the NEP as well as of this PforR program will have to be prepared on the basis of the realistic absorption capacity of the system and the capacities of the implementing entities\. The annual Program budget will be prepared by both the MoWIE and EEU and consolidated by the MoWIE/DoE\. The consolidated Program budget will be proclaimed at the MoWIE following 78 the Government budget calendar\. The MoWIE/DoE and EEU will ensure that there is recording, accounting, and reporting on ELEAP sources and expenditures\. 15\. Efficiency of Program expenditures\. The Program targets the ‘very low-cost hanging fruits’, which are the connections very proximate to the existing network infrastructure\. As the Table 4\.1 outlines, these connections require mostly LV network-related capital expenditure— such as service drops, household metering, and possibly shared pole top transformers\. It has been estimated that the connection cost for these connections is, on average, US$300 if some MV extensions are involved\. This is in line with international prices\. The least-cost geospatial planning that will be undertaken in the first year of the operation helps ensure that all connections under the program are made at least cost\. 16\. M&E\. The capacity to monitor results will be key to ensure Program success and effectiveness\. Sector utilities have already put into place frameworks to monitor connections and distribution of off-grid products under their existing activities\. The Results Framework has been established, with the MoWIE in charge of monitoring results at the national level through collection of data inputs on key tracking indicators of progress and performance of the implementing agents and intermediaries accountable for the NEP connection rollout\. 17\. The ongoing implementation of a new ERP system for the EEU and tracking framework for off-grid products will strengthen considerably monitoring capacity of the EEU in time for Program implementation\. Specific support will be provided to build institutional capacity to track and report on sex-disaggregated data in the Program\. Because there is no entity formally in charge of independently monitoring the results of the GoE-supported programs, the implementing agency will hire a third-party entity (e\.g\. CSA) to verify Program results during implementation\. Economic Analysis 18\. Program economic evaluation\. The World Bank team has carried out an economic assessment of the proposed operation\. The rationale for public sector financing and World Bank value added are presented through a quantitative and qualitative assessment\. 19\. Rationale for public provision and financing\. There is a strong rationale for public financing and provision of the activities supported by the NEP\. Aside from providing increased connections and access to electricity for citizens at a more rapid pace (including low-income households), the Program maximizes the impact of the ongoing process of geographic expansion of distribution coverage\. Densification will result in improved cost efficiency of the electrification program and significantly increased economic benefits in the targeted areas\. 20\. World Bank added value\. World Bank financing in support of the NEP would add comparative value given the World Bank’s position to draw upon a wealth of global experience and expertise in areas directly related to Program investment and technical assistance\. Achievements from the successful implementation of the ongoing World Bank-supported operations focused on energy access also provide a strong background for the proposed ELEAP operation\. 21\. Background\. Although having high rates of grid expansion under the UEAP over the past decade, Ethiopia’s electricity sector has not provided an equal focus on increasing household 79 connectivity\. An MTF survey28 was launched in 2017, which aims to provide information about the prevailing status of energy access in Ethiopia\. 22\. Access in Ethiopia is mostly a rural challenge\. The vast majority of tier 0 households29 live in rural areas\. Rural households also tend to have lower-tier access, suggesting mostly that the grid is likely not accessible in rural areas, and therefore, as an alternative, rural households are adopting off-grid solutions\. According to the MTF survey preliminary data, about 80 percent of rural households rely on fuel-based light sources, predominantly kerosene used with wick lamps or hurricane lamps\. Nearly 22 percent of the Ethiopian households use off-grid solar products (solar lantern, solar lighting system, or solar home system) as their main light source\. Other sources of electricity such as mini-grids and individual diesel systems are insignificant\. 23\. Affordability analysis\. While detailed current consumer data from the MTF survey are under finalization, data from the Ethiopia Market Intelligence Report conducted by World Bank Lighting Africa Program show that rural households30 spend 4\.5 percent on lighting from all sources, including kerosene and dry-cell batteries\. Households in the highest expenditure quintile spend 2\.5 percent of their total expenditure on purchased electricity for lighting against 7\.2 percent for households in the lowest expenditure quintile\. Thus, the share of household expenditures spent for lighting declined as household income rose\. Rural households in the lowest expenditure quintile spend an average of US$2\.35 per month on lighting and those in the top quintile spend US$3\.29 per month on lighting\. 24\. Affordability of electricity service does not appear to be an issue in Ethiopia, with 99 percent affordability under the assumption that the cost of standard consumption package of 365 kWh per year is equal to 5 percent of disposable expenditure, according to the preliminary results of the MTF survey\. The preliminary data also show that the weighted-average monthly disposable expenditure is about US$107 per household\. Grid-connected households spend, on average, US$2\.61 per month on electricity (US$3\.21 for 149\.69 kWh per month in urban areas and US$1\.05 for 45\.13 kWh per month in rural areas), about 2\.4 percent of monthly expenditure\. From a ‘subsistence consumption’ point of view, under the current tariff structure in Ethiopia,31 US$2\.61 would allow approximately a level of consumption of 136 kWh per month for a household, higher than the ‘subsistence’ level of 30 kWh per month\. The amount of US$2\.61 is also lower than the average monthly expenditure on lighting by all rural households\. This suggests that the expected monthly payment is affordable to non-connected households\. 28 The survey includes 4,292 households from 300 analytical domains evenly distributed across urban and rural areas in Ethiopia\. 29 According to MTF definition, tier 0 refers to no electricity being available or being available for less than four hours per day (or less than one hour every evening)\. Households use various coping mechanisms such as using candles, kerosene lamps, or dry-cell battery powered devices (flashlight or radio)\. 30 Nearly 92 percent of the sample households was smallholder farmers with landholdings of 1\.3 ha and 3\.2 cattle, on average\. 31 The first 50 kWh usage is charged at ETB 0\.273 per kWh (roughly 1\.2 cents) and the next 50 kWh at ETB 0\.3564 per kWh (about 1\.6 cents) and a monthly fixed charge of 14\.8 cents\. For this analysis, the current tariff structure was used with no tariff increases assumed in the whole project period\. 80  Table 4\.2\. Monthly Values (US$) Monthly Disposable Expenditure Monthly Bill Paid Electricity/Monthly Expenditure (%) Total 107 2\.61 2\.4 Rural 95 1\.05 1\.1 Urban 144 3\.21 2\.2 25\. However, if household affordability of the connection fee is considered, a one-time payment of US$50 remains as a key challenge for non-connected households\. The backlog of customers on the waiting list who have already paid the connection fee and those who can afford the connection fee is sufficient for the targeted connections envisioned under the proposed operation\. In the medium term, the utility needs to put a connection policy in place that allows for different payment schemes to cover the up-front connection fee, for example, installment payments, subsidies, and so on\. This will be included in an Affordable Customer Connection Study to be completed in the first year of the proposed operation\. Box 4\.1\. Mechanisms to Address Affordability Issues Overcoming the affordability problem has been partially achieved in different countries using a variety of approaches, including the following: (i) Subsidy programs, such as the World Bank Output-based Aid program in Uganda, where connections are essentially subsidized in their entirety\. (ii) Bundling the connection cost with the tariff\. This option can be found in countries such as Bangladesh and the Philippines, where connection charges are included in the overall distribution system development costs; except for a modest service connection fee, the actual capital costs of providing a new electricity service are expected to be recovered through the price of electricity\. (iii) Financing schemes that provide loans to pay for the connection, which can be made available through a revolving fund\. (iv) Including a rural electrification component in the tariff of all consumers, which can be channeled toward financing connections (among other possibilities); examples of rural electrification charges can be found in Benin, Côte d’Ivoire, Ghana, Kenya, Lesotho, and Tanzania\. Deciding on a particular scheme will depend on factors such as resource availability, access objectives, fairness considerations, and the responsibilities allocated to different participants in the process\. The subsidy approach is probably the most effective in getting large numbers of homes connected, but it is also a burden on public finances\. Recovering the connection costs through the power tariff is a feasible option when electricity prices are regulated in such a way as to focus on cost recovery\. The question of fairness comes into play when cost recovery is introduced through tariffs that favor some consumers at the presumed expense of others\. In the case of connections, such a situation could arise if the cost is recovered through a tariff that is also paid by consumers who paid for their own connection, and who end up paying twice for it\. Source: World Bank report: Rural Electrification Connections Fund in Uganda, June 2016\. 26\. Cost benefit analysis\. Based on the analysis of available documentations (power sector master plans, data from Ethiopia Electricity Utility, MTF survey, and so on) and technical working sessions with program’s stakeholders, a model was built to carry out the economic evaluation (or standard cost-benefit analysis) for Results Area 1 which includes 1,080,000 grid connections and for Results Area 2 which includes off-grid investment for 50,000 solar home systems and 5 PV/diesel mini-grids\. The results are presented to demonstrate the economic impacts in a medium- case scenario, which totals US$335 million in a five-year period between 2018 and 2023\. 81 27\. The capital costs considered in the analysis are Program costs associated with grid densification and household solar systems and mini-grids—amounting to US$335 million\.32 The associated O&M costs are also accounted for\. Other costs associated with grid densification are the cost of generation of the additional electricity needed to supply the new connections, estimated to be US$0\.084 per kWh\. 28\. The economic benefits of grid densification and SAS are assessed by calculating the avoided costs that would occur in the ‘without project’ scenario\. The estimated economic benefits for households are conservatively defined by the amount that they actually pay today for electricity services that can be substituted by electricity\. The total cost for lighting, mobile phone charging, and radio combined is estimated to be US$7\.31 per month33 among non-connected households\. 29\. The additional economic benefits from grid connections include improved health services and education, improved communications and connectivity, better lifestyle and reduced gap in quality of life between city and rural residents, potentially more business and income-generating opportunities, and so on\. These benefits are commonly recognized and yet difficult to quantify\. A World Bank Impact Evaluation34 on worldwide electrification programs suggests that including these benefits would raise total consumer benefits of electrification for an average household consuming 30–40 kWh a month to about US$60 a month\.35 Table 4\.3\. Key Assumptions for the Economic Analysis Variable Unit Value Household Grid Connections Number 1,080,000 Average grid consumption kWh/month 45\.1 Avoided cost of electricity service (on-grid) US$/household/month 7\.31 O&M cost %/year 2% Average cost of generation US$/kWh 0\.084 SAS Number 50,000 Average system size and cost Wp / US$ 10 / 190 Battery replacement Cost (%)/4 years 30% Mini-grid (60 kW) Number 5 Unit capital cost US$/kW 4,500 OPEX Cost (%)/year 5 Households connected #/unit 220 Other CO2 value US$/tCO2 30 30\. Avoided GHG emissions\. GHG accounting is undertaken for different results areas\. Results Area 1 of 1,080,000 grid connections are projected to reduce GHG emissions by an estimated net total of 10,633,383 tCO2e over 30 years (2018–2047) or 0\.38 tCO2e per household 32 Expenditures under the Program related to strengthening and rehabilitating the MV network were not included because these activities will not directly lead to the connections made under the Program but will potentially further increase connection results\. 33 The expenditure is calculated following guidance from the Independent Evaluation Group’s welfare impact assessment of rural electrification, with data reference from the 2013 Ethiopia Market Intelligence Report conducted by the World Bank Lighting Africa Program\. 34 The Welfare Impact of Rural Electrification: A Reassessment of the Costs and Benefits\. An Independent Evaluation Group Impact Evaluation, Washington, 2008\. 35 The additional assumptions made for the analysis are outlined in the main technical assessment document\. 82 per year\. This estimate is based on the following assumptions: (a) 1,080,000 household connections by 2023; (b) a service level of 586 kWh per year per household; (c) Program emissions associated with grid connections of 1,507,013 tCO2e from generation and associated distribution loss over 30 years;36 and (d) avoidance of diesel-based generator emissions of 12,140,396 tCO2e over 30 years, which are assumed would occur without grid densification\. SAS under Results Area 2 will not generate GHG emissions in the Program scenario given the use of solar technology\. Therefore, total avoided GHG emissions from 50,000 SAS are estimated to be 62,546 tCO2e from 2020 to 2032, with assumption of avoided emissions of 0\.13 tCO2e per system per year\. This assumes (a) 50,000 household SAS; (b) 10 watt-peak rated capacity of solar panels per system; and (c) 21 percent availability (equivalent to five hours of operation per day)\. Table 4\.4\. GHG Impact over Program Lifetime Component Period of Impact Emissions Avoided Grid densification 2018–2047 10\.6 MtCO2e Household solar home systems 2020–2032 62,546 tCO2e Mini-grid 2020–2039 6,617 tCO2e 31\. Economic rate of return\. At a discount rate of 6 percent, the economic NPV of the Program is US$372\.9 million and the benefit-cost ratio is 1\.5\. The EIRR is estimated at 18\.3 percent\. The Program is economically viable\. The discounted payback period is 10 years\. Figure 4\.2\. Program’s Net Economic Benefits (Including CO2) Grid Densification Present Value of Accumulated Net benefit (US$million) 500\.0 400\.0 300\.0 200\.0 100\.0 - 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 2041 2042 2043 2044 2045 2046 2047 (100\.0) (200\.0) NPV Table 4\.5\. Program NPV and EIRR EIRR 18\.3 percent NPV 372\.9 US$, millions 36 Grid-related emissions are calculated based on a national grid emission factor of 0\.118 tCO2e per MWh reflecting Ethiopia’s energy source mix for power generation (primarily hydropower)\. 83 32\. Sensitivity analysis\. A sensitivity analysis is performed to test the robustness of economic returns to the changes in underlying parameters\. A switching value analysis shows the sensitivity of economic returns to capital cost and total Program costs and benefits\. The switching value of capital cost is estimated at US$687 million (205 percent increase), above which the investment would not be economically viable\. The analysis also shows that economic return remains at or above 6 percent until a 33 percent decrease in total Program benefits or a 150 percent increase in total Program costs\. The economic viability is also preserved under a scenario of two-year delays of grid connections (EIRR of 21\.6 percent) and excluding CO2 benefits (EIRR of 14\.4 percent)\. Table 4\.6\. Sensitivity Analysis Scenario EIRR or Switch Value (so NPV = 0) Scenario 1: Decrease in overall benefits Switching value at 67% of original benefits Scenario 2: Increase in overall project cost Switching value at 150% increase Switching value at US$687 million (205% Scenario 3: Increase in capital cost increase) Scenario 4: 2-year delay in start of connections EIRR: 21\.6%, NPV: US$447 million Scenario 5: Excluding GHG benefits EIRR: 14\.4%, NPV: US$244 million Financial Analysis 33\. The generation capacity is sufficient to meet domestic demand and exports\. The Ethiopian power sector is expected to witness robust demand growth both on the domestic and export fronts (see Figure 4\.3)\. Under the moderate growth scenario37 assumed, the residential demand is expected to increase almost threefold from the baseline (2016) value of 4,000 GWh to 11,368 GWh by 2025\. A major source of future demand growth, and also a key financial driver for the sector in the future, is the unprecedented growth in exports expected over the next decade (expected to rise over tenfold from 1,445 GWh in 2016 to 15,968 GWh by 2025)\. 34\. Projection of financial performance of the sector\. Financial performance of the sector can be broken down into operational performance and investment program and debt service\. Details on their future projections and key drivers for both are provided in the following paragraphs: Operational Performance 35\. The sector is expected to witness a strong growth in revenues driven both by exports and domestic demand\. Revenues from sales of electricity are the only source of income for the sector and hence can make or break the sector’s finances\. Sector revenues could see a huge boost due to increase in domestic residential consumers38 and rising domestic (industrial) and export demand\. The following are the main drivers for future growth in revenues: 37 The financial model assumes that 80 percent of new connections every year take place in rural areas and 20 percent in urban centers\. Number of rural electrified households increases from 509,741 in 2015 to 7\.7 million in 2025\. The number of urban electrified households is assumed to increase from 2\.03 million in 2015 to 3\.83 million in 2025\. An average monthly consumption rate of 149 kWh per urban household and 45 kWh per rural household is assumed with a moderate growth of around 1 percent till 2021\. 38 Average reported official collection rates in Ethiopia have been over 90 percent historically\. If this trend holds, it could lead to a significant boost to sector revenue if the tariff charged is cost-reflective\. 84  (a) Export revenues are expected to be the anchor revenues for the sector and rise from around US$100 million annually in 2016–2018 to around US$1,200 million by 2025\. Export tariffs are assumed to be equivalent to US$0\.07 per kWh\. (b) Domestic industrial revenues are expected to rise significantly, but the actual revenue growth depends significantly on the domestic tariff rate\. At the current tariff levels (average across categories of around US$0\.03 per kWh) the domestic industrial revenues are expected to rise from US$128 million in 2016 to around US$649 million in 2025\. (c) Domestic residential revenues are expected to rise significantly but the actual revenue growth depends significantly on the domestic tariff rate, the consumption rate of the consumers, and the ability of the EEU to collect all the billed revenue\. At the current tariff levels (average across categories of around US$0\.03 per kWh) the domestic residential revenues are expected to rise from US$84 million in 2016 to around US$316 million in 2025\. (d) Domestic tariff levels in Ethiopia have remain unchanged since 2006 and remain significantly lower than most countries in the world (more detail on revenues in later sections)\. However, tariff levels can significantly affect future sector revenues as the industrial demand is expected to rise substantially\. The impact of tariffs on sector revenues can be seen in Figure 4\.5\. (e) Exchange rate fluctuations causing the U\.S\. dollar to become stronger against the ETB can result in higher export revenues (denominated in U\.S\. dollar)\. Figure 4\.3\. Projected Domestic and Export Revenues at Different Tariff Levels 36\. The sector will face significantly higher operating costs in the future as more power is procured through IPPs\. As Ethiopia shifts toward procuring power from IPPs in the future, the sector will face significantly higher operating costs (due to dollar-denominated power purchase costs of take-or-pay contracts with IPPs)\. However, to be financially sustainable in day-to-day 85 operations, the sector needs to generate sufficient revenues to cover their operating costs\. Operating expenditures of the sector are expected to rise from US$278 million in 2016 to around US$1,758 million in 2025, with substantial increase in 2020 due to commissioning of IPP plants\. Operating costs related to maintaining distribution network will largely be stable (around US$35 million annually)\. Operating costs related to maintaining the transmission network will range between US$30 million and US$70 million annually\. Operating costs related to generation plants will increase from US$77 million in 2015 to about US$194 million in 2020 (due to commissioning of new hydro and wind plants) and then plateau\. 37\. Even at the current tariff levels, the sector is projected to cover operating costs through operating revenues but the net income (profit/loss) of the sector is dependent on domestic tariffs\. Figure 4\.5 captures the sector’s financial position at the current tariff levels\. Bars in various shades of green capture the different revenue segments, whereas bars in various shades of red capture the costs associated with the same years\. The main takeaways for the sector financial projections are as follows: a\. Expected revenues from exports between 2016 and 2025 are expected to offset costs incurred in purchase of power through IPPs (see Figure 4\.4)\. b\. Earnings before interest, tax, depreciation, and amortization (EBITDA) for the sector is positive for the entire projection period (that is, the sector can manage to cover operating costs through electricity sales even at the current tariff levels) (see Figure 4\.4)\. c\. At the current tariff levels, the sector incurs net loss in all years except 2025 (due to increased export revenues due to Egypt/Sudan interconnector)\. Costs due to IPPs increase in 2020 and then in 2023 due to expected commissioning of plants\. d\. However, the sector can break even and record profit much earlier depending on the tariffs (simulation of net income/profit/[loss] in the sector at different tariff levels are presented in Figure 4\.5)\. e\. An increase in reduction of losses from 0\.25 percent per year to 1 percent per year can result in an extra revenue of around US$80 million over the next decade\. 86  Figure 4\.4\. Projected Financial Position of the Sector - Income and Costs Figure 4\.5\. Net Income of the Sector at Various Tariff Levels 38\. Tariff levels and projected export revenues have a significant impact on the cumulative income that the sector earns\. With a significant rise in projected operating costs due to purchase of power anticipated from IPPs in the future, rise in revenues due to projected growth, domestic demand, and exports provide the balancing act for the sector revenues\. At the current domestic tariff levels, the sector cumulatively loses around US$4\.05 billion despite the inclusion of export revenues at US$0\.07 per kWh tariff levels (left side of Figure 4\.6)\. However, if the domestic tariff levels are at US$0\.05 per kWh (and keeping the export tariff levels at the same level of US$0\.07 per kWh), the sector makes a net profit of US$1\.9 billion (right side of Figure 4\.6)\. For both these scenarios, 100 percent of all interest payments for outstanding bond and loan obligations were considered to be made\. 87  Figure 4\.6\. Cumulative Operating Performance of the Sector Investment Program 39\. The sector with US$11 billion of identified sector investments has already raised and committed over US$8 billion, especially in the generation sector (mostly due to large hydro projects)\. There also has been new investment in access expansion (network backbone), sector modernization, and other related projects\. Overall, the GoE’s GTP-related sector investments called for US$11 billion worth of new projects, out of which over US$8 billion has already been raised and committed\. The financing plan for these public-sector projects includes a mix of funding sources, part of it coming from the GoE’s self-financing and customer contributions, but most of it coming from new loans/bonds\. Borrowing is sought from multilateral and bilateral partners, international donor agencies, and commercial banks, as well as domestic and diaspora bonds issued directly by the sector\. 40\. The current long-term liabilities (US$8\.2 billion) which sits on the sector’s balance sheets can be summarized in the following categories: a\. Government to sector institutions on-lending\. The GoE (through MoFEC) signs loans with international finance institutions (such as IDA, AfDB, European Investment Bank, and so on) on concessional financing terms and on-lends them to the sector\. Typically, these loans have a 20-year maturity with a 5-year grace period and charge interest rates of 3–6 percent to the sector\. The current estimated portfolio of such loans is over US$1\.3 billion\. b\. Commercial bank loans\. The sector has also been able to raise significant amount of money from commercial sources (mostly Chinese banks) for financing of large projects, especially hydropower\. Typically, these loans have a 10-year maturity with a 3-year grace period and charge interest rates of around 6 percent to the sector\. The current estimated portfolio of such loans is US$1\.9 billion\. c\. Bonds issued by the sector\. The sector has been highly successful in raising financing from domestic and diaspora bonds\. Many Ethiopians (nationally and internationally) have spent a month’s worth of their salaries to purchase these bonds as part of the Government’s campaign to promote sector investments\. Typically, these bonds have a seven-year maturity with a 5 percent interest rate\. The current estimated portfolio of these bonds is over US$4\.7 billion\. 88  d\. Supplier’s credits\. The sector also has long-term agreements with many suppliers for providing credit\. Typically, these loans tend to be for two to four years with a one- year grace period and carry interest rates of 4–6 percent\. The current estimated portfolio of these supplier’s credit is around US$240 million\. Table 4\.7\. Long-term Liabilities Repayment Grace Interest Borrowing Source Loan Amount Period Period Rate US$, millions Years Years % International financial institutions/Government 1,316 20 5 5\.00 On-lending Commercial banks 1,909 10 3 6\.00 Bonds 4,777 7 0 5\.00 Supplier’s credits 240 4 1 5\.00 Total current estimate 8,242 [averages of categories used] 41\. The sector still has approximately US$2\.5 billion in investment needs to meet GTP targets (2018)\. The sector would need an additional US$2\.5 billion in investments till 2025\. Most of the investment needs till 2019 are needed to complete the ongoing hydro and wind power generation projects\. Because most new power will be procured through IPPs, no further investments in the generation sector will be required post 2019–2020\. Relatively stable volume of investments (US$50 to US$75 million per year) will be needed for transmission lines within Ethiopia to connect to regional interconnectors\. Relatively stable investments in the distribution network will be needed as 80 percent of the MV and LV backbone has already been constructed in Ethiopia\. Around US$200 million per year of investments will be required for densification activities and last-mile connections (see Figure 4\.7)\. Figure 4\.7\. Sector Investment Needs Debt Service 42\. Outstanding debt’s repayment may be unsustainable at the current tariff levels, but at the cost-reflective tariff (US$0\.06/kWh), the sector cash flow may be sufficient to start breaking even by 2025 (see figures 4\.8 and 4\.9)\. As many of these loans/bonds were taken on in 89 the recent past, the repayments have now started to become due and the repayment will significantly ramp up post-2016 and the sector at the existing tariff will be unable to generate enough cash to service future debt obligations (especially on principal/face value payments)\. Shown in Figure 4\.9 is also simulation of two cases where only 50 percent and 0 percent of the bond obligations remain in the sector\. This is reflected in the different debt service coverage ratio lines in the figure depicting scenarios of reduced bond obligations\. Figure 4\.8\. Outstanding Debt Repayment Schedule Figure 4\.9\. Cash Flow Required for Debt Service and Debt Service Coverage Ratio Financial Viability of the Program 43\. Densification activities under Results Area 1 (86 percent of Program funds) are not expected to negatively affect the EEU’s financial situation\. At the current tariff rate (US$0\.03 per kWh), the NPV of the on-grid activities is positive at US$4\.96 million\. Assuming payback from the time after all the 1\.08 million new consumers are connected in 2023, the Program breaks even in the next seven years at the current tariff levels and within one year if the tariff were to increase to US$0\.05 per kWh\. 44\. The model assumes that the first 360,000 connections (one-third of the total) would cost the EEU an average of US$150 per connection\. The next one-third of the connections are assumed to cost the EEU an average of US$300 per connection and the final one-third would cost the EEU an average of US$450 per connection\. Hence the average cost of connection for the EEU to connect the total 1\.08 million consumers is US$300 per connection\. The EEU is assumed (based on its current operating model) to incur no more than US$100 per connection, and the difference 90 is paid by the consumer through an up-front connection cost (scaled up in the order of the connection cost incurred by the EEU) and the tariff paid over the lifetime of the connection\. 45\. There will be no material impact of the Program’s operating expenditures on the overall sector’s operations\. Activities covered under the program include densification activities (last-mile household connections, community facilities electrifications, and LV network expansion) and MV expansion activities\. Operating expenses related to these activities amount to US$36 million per year and are, on average, around 5 percent of the total operating costs\. Figure 4\.10 depicts the impact of the Program’s operating expenditures on the sector’s operating expenses\. The biggest operating expenditures relate to IPP costs (post-2019) and operating costs related to generation and transmission\. Program costs are depicted in red in the figure\. Figure 4\.10\. Impact of Electrification Program on Sector Operating Expenditures Cash Position of the Sector 46\. The Ethiopian power sector is expected to have weak cash position due to their outstanding debt obligations\. Tariff reform and policy interventions from the GoE might be required to address it\. Some pending capital expenditures in generation and outstanding debt obligations (both bonds and loans) will result in significant cash outflow in the next three to five years that will not be matched by dollar-denominated export revenues (which starts ramping up post-2019) and increased domestic residential revenue\. Historically, the EEU/EEP have received the GoE budgetary support for such shortfall, but the exact quantity is undisclosed\. A combination of tariff revision and the GoE policy action (restructuring of the short-term debt on books that was used to finance the long-term infrastructure) can address the issue, with positive cash flow as early as 2020–2021 and a net cash positive position by 2024–2025\. Fiscal Impact 47\. There could be significant fiscal challenges to the Government ahead in sectorwide issues (which are not essentially Program related)\. To a lesser significant level, there may be loss of revenue to the Government if the sector appropriates all proceeds from customers added as part of the Program and is not required to pay taxes or dividends to the Government based on the benefits from the Program\. On the other hand, the Government budget could benefit from the differential 91 between the concessional terms upon which the IDA Credit and other soft loans will be extended to the Government and the near-commercial terms on which part of the credit will be on lent to the sector\. 48\. Ethiopia is in a unique position as over 63 percent of investments in the power sector have been financed through seven-year local and diaspora bonds issued in context of national development\. At present, the sector is directly responsible for the implementation of the Government’s public policy goals for the sector\. The financial health of the sector would be better served with assistance from the Government with regard to bearing the burden of some of the capital costs of the investment program\. Policy makers in the Government could take the outstanding bond debt outside the sector and under the National Government to tackle the issue of US$2,000–3,000 million a year in-debt service obligation and potential shortfall that the sector faces in the future\. The debt could also be restructured by pooling the short-term debt together and spreading it over a much longer (20+ year) horizon\. Tariff Structure Revision 49\. Increasing the average tariff rate to be able to recover costs would be the most financially prudent way to balance the investment program needs with the operational reality of the sector\. This would help ensure that there is adequate coverage for servicing the debt obligations\. However, it is recognized that there are several sociopolitical challenges associated with tariff structure revisions, especially for a country where a significant portion of the population lives below the poverty line\. The solution could lie in achieving the desired average tariff level using a tiered tariff structure that represents the economic reality of the various segments of the population\. GoE’s Sector Financial Analysis 50\. The financial analysis described earlier considers conservative assumptions related to demand growth, supply availability, and capital expenditure\. Official assumptions used by the GoE in their estimates may vary related to these fields, which may result in a slightly different projected financial position of the sector\. The following are the key differences in assumptions and the resulting differences in the sectorwide financial position: ï‚ Demand/supply\. Demand outpaces supply in 2019, but due to the IPPs coming online by end of 2019, the demand stays met till 2021\. However, due to assumed growth in export demand (below), demand outpaces supply post-2021\. The GoE might need substantially more generation to meet its assumed export target—which might put significant capital burden if done through public finance and significant operating cost burden if procured through IPPs\. According to the GoE’s estimates, export demand grows from 200 MW firm currently to 5,800 MW firm by 2025 (as opposed to 3,212 MW firm in the World Bank scenario)\. This difference is due to assumed exports to Somalia, Saudi Arabia/Yemen, South Sudan, and Eritrea\. ï‚ Financial position\. Even at the current tariff levels, due to increased dollar-dominated exports revenue, EBITDA remains positive for the entire projected period (2017– 2025) and net income becomes positive by 2020\. With increase in tariff to US$0\.05 per kWh equivalent, net income becomes positive by 2019\. The utility also remains in a net cash positive position even at the current tariff levels, with full interest and loan payments—due to significantly increased exports revenues\. Cumulatively, the 92  sector earns an income of US$5\.25 billion (loses US$1\.3 billion between 2016 and 2020 and makes US$6\.5 billion between 2021 and 2025)\. Conclusion of the Financial Analysis 51\. In conclusion, it should be reiterated that the sector is able to control and meet its operating expenses from its operating revenues and will experience significant growth over the coming years through export-related revenues (balancing out IPP power purchase costs)\. The financial challenges related to the sector are more structural in nature (cash flow management of debt service obligation) than project oriented\. Some fundamental reforms could be carried out by policy makers to ensure the financial health of the sector\. Gender 52\. The GoE is explicitly committed to the achievement of gender equality\. The Constitution clearly stipulates the rights of women and the Women’s Policy of Ethiopia reiterates the Government’s commitment to gender equality\. The Ministry of Women, Children, and Youth Affairs contributes to policy development and supports gender mainstreaming in all Government ministries and bureaus\. 53\. To date, the Women’s Affairs Directorates have been established in the EEU, EEA, EEP, and MoWIE and various gender-specific targets and goals have been set\. However, Ethiopia suffers from some of lowest gender equality performance indicators in Sub-Saharan Africa, with the Global Gender Gap report of 2016 ranking Ethiopia at 109 out of 143 countries in the magnitude and scope of gender disparities\. For example, in Ethiopia, 80 percent of the population resides in rural areas and women provide the majority of the agriculture labor in these communities\. 54\. However, women’s access to resources and community participation are usually mediated through men, either their fathers or husbands, and their agricultural contributions often go largely unrecognized which limits productivity gains\.39 The median revenue of rural, female-owned enterprises is 3\.5 times lower than that of female-owned enterprises in urban areas and 5\.6 times lower than male-owned enterprises in rural areas\.40 55\. In GTP-I, bold measures were undertaken to ensure gender equity and GTP-II envisages increasing the economic benefit for women, growing the crop productivity of FHHs, increasing women’s decision making, and increasing women’s participation in building good governance, democratization, and development\. Key targets which align with ELEAP include the following, among others: ï‚ Average crop productivity of FHHs (quintal/ha): Target41 38\.22 (baseline 1942) ï‚ Number of women who benefited from vocational adult education program: Target 1,311,658 (baseline 2,972,192) 39 Head, Sara K\., Sally Zweimueller, Claudia Marchena, and Elliott Hoel\. 2014\. Women’s Lives and Challenges: Equality and Empowerment since 2000\. Rockville, Maryland, USA: ICF International\. 40 Ethiopia\. Unleashing the Potential of Ethiopian Women Trends and Options for Economic Empowerment\. June 2009\. 41 For 2019–2020 (annual target)\. 42 For 2014–2015\. 93  ï‚ Number of institutions/organizations that institutionalized women's affairs: Target 22 (baseline 8) ï‚ Number of women involved in building democratic system, development, and good governance: Target 8,263,939 (baseline 4,466,994) ï‚ Decision-making role of women at the Federal Executive bodies (%): Target 40 percent by 2019–2020 (baseline 9\.2) ï‚ Number of women who benefited from micro and small enterprises: Target 826,004 for 2019–2020 (baseline 2,188,567) 56\. To gain insights into key gender gaps in the electricity sector, an analysis was conducted for the overall electricity sector\.43 The aim was to summarize gender gaps in the electricity sector across multiple data sources available for Ethiopia and investigate the existence of a link between the gender of the head of the household and access to electricity and energy technologies\. Likewise, the report outlines inequalities between men and women across other sectors such as education, income, employment, access to finance, entrepreneurship, and so on\. Key findings include the following: ï‚ Men are more literate than women\. Overall, 71 percent of young male and 57 percent of adult males are literate versus 67 percent young female and 40 percent adult females\. Male heads of households are more literate (41 percent) than female heads of households (21 percent)\. ï‚ Low levels of women in STEM\. Only 12 percent of women pursue research in natural sciences, 7 percent in engineering and technology, 26 percent in medical sciences, and 8 percent in agricultural sciences\. ï‚ Varied gender gaps exist in connection rates with wealth being one proxy for access rates\. Overall 30 percent of FHHs versus 20 percent of male-headed households (MHH) have an electricity account (85 percent urban households have electricity versus 5 percent of rural households) and 85 percent of those with electricity are concentrated in the highest wealth quintile\. Recent MTF data also show that in urban areas, electrification rates among FHH are higher than for MHH\. On average, rural households are poorer than urban households and rural FHH are poorer then rural MHH (with a reverse difference in urban areas but not statistically significant)\. This points to a need to pay attention to varied gender gaps that may develop in rural areas and as poorer households are targeted for household connections, for example, through densification\. ï‚ FHH rely on less clean off-grid energy sources\. Regarding off-grid alternative sources, MHH rely more on solar energy, lanterns, and electrical battery and FHH rely on biogas, kerosene, and firewood\. ï‚ Women are the primary firewood and water collectors\. Rural female heads of households spend, on average, 39 minutes a day collecting water and 32 minutes collecting firewood or other fuel material and male heads of households spend, on 43 Data Sources: Census, 2007, Welfare Monitoring Survey (2011), Demographic and Health Survey (2011), Enterprise Survey (2015), and Household Consumption and Expenditure Survey (2011) and other complementary data sources\. 94  average, 5 minutes collecting water and 11 minutes collecting firewood\. Spouses living in MHH, spend 50 minutes collecting water and 41 minutes collecting firewood\. ï‚ Female-owned firm’s experience and adoption of electricity services is different\. Female participation in entrepreneurship is lower than for men and female entrepreneurs seem to face more obstacles than male entrepreneurs to run their business (less access to credit, more delays to connect to the grid, and so on)\. Female- owned firms rely less on an alternative source of electricity to run their business: only 38 percent of firms with female owners own a generator versus 44 percent of firms with male owners\. ï‚ Female employment low in electricity sector\. Within the EEU, women’s participation is currently still low, with 80 percent of staff being male and only 20 percent of all positions held by women (target 30 percent by 2019)\. Female workers are more involved in the retail, general service, finance, and administration departments than male workers\. 57\. Based on the findings of the gender gap analysis and other country-level targets, the following key gender actions will form a core part of ELEAP: ï‚ Gender capacity building\. Capacity building will be undertaken in the EEU jointly by the World Bank and USAID/Power Africa with a focus on (a) gender mainstreaming capacity building for the EEU senior management; (b) a review of current and annual training plans and recommend gender-related content; and (c) training on gender-related concepts and the relevance in the workplace for 15 regional gender focal points\. ï‚ Women in STEM\. A targeted initiative will be developed to foster women’s interest in careers in the electricity sector and actions undertaken to help close gender gaps in employment in the sector through, for example, affirmative action measures and internships and so on in partnership with key educational institutions\. Additional actions will focus on the gender gaps in management-level positions and showcasing women’s careers and contributions to the electricity sector\. ï‚ Childcare\. Provision of childcare has been identified as a competitive advantage and a strategic priority to attract and retain female staff\. Technical assistance will be provided to do an initial baseline assessment for the EEU to provide child care\. ï‚ Connection cost/assistance\. Attention will be paid to ensuring that the analysis conducted for the connection costs scenarios takes into consideration MHHs’ and FHHs’ ability to connect to the grid, especially in the context of rural areas where a gender gap could possibly arise as the grid is rolled out\. ï‚ Productive uses of energy\. In the studies related to demand-side management mechanisms and productive uses of energy, specific focus will be placed on exploring how electricity services (off-grid and on-grid) can reduce the time and labor burden of women and how to enhance and create income-generating opportunities for women, for example, through entrepreneurship or enhanced productivity and agro- processing\. 95  ï‚ GBV\. The GBV-related risks under the Program are not expected to be substantial but the EEU staff capacity will be increased through a GBV clinic and other related activities focused on enhancing prevention and response to violence both at the Program and institutional level\.44 ï‚ M&E\. Sex-disaggregated data will be collected and designated officers will be trained to collect and analyze data at regular intervals enabling verification of predicted gendered impacts, examination of the effectiveness of mitigation measures, and real‐ time course correction\. ELEAP progress reports will include gender disaggregated data\. Citizen engagement 58\. The centrality of customer service is among the top four priorities of the EEU’s strategic themes, as customer engagement is key for (a) new connections; (b) billing and collection; (c) maintenance; and (d) complaints management\. The EEU has adopted a Citizen Charter which outlines the understanding between citizens and the EEU on the quality of service and the provision of grievance redress\. The utility has also established various mechanisms for customers to voice input and grievances, including public forums, suggestion boxes, customer satisfaction surveys, call centers (recently doubled in size from 30 to 60 employees), and a vigilance office\. In 2016, it hosted 408 public forums across the country with 48,000 participants,45 mainly focused on access and reliability to electricity services\. 59\. The regional grievance readdress forum has been established in all the 15 business regions to handle customer complaints and escalate to various levels, that is, from the regional forum to the central grievance redress handling\. The EEU has also been focused on public relations and communications activities through its Corporate Public Relations Department which has been working on mainly addressing concerns and questions related to service interruptions\. 60\. Based on consumer feedback, the EEU has mapped the following five key areas of customer dissatisfaction: ï‚ Power outage and quality ï‚ Delays in new connections ï‚ Rent-seeking attitude and behavior ï‚ Wrong billing ï‚ Employee capabilities to deal with consumer complaints and customer interface 61\. A workshop on CE was held, together with the EEU, in February 2017 to identify entry points for the sector\. Based on in-country dialogue and sector analysis, the following CE engagement mechanism will be undertaken under the Program: ï‚ Establish/strengthen CE (community level)\. Program activities will build on the CE mechanism in existence, outlined earlier\. As a first step a comprehensive CE work program will be developed by the EEU under the Program, focused on ensuring that citizens and new customers are participants in electricity sector activities, against 44 State and Peacebuilding Fund grant supporting initiation of these activities\. 45 Public forums are organized at each region and district level in collaboration with local government administrations\. 96  annual reporting\. The CE activities will include tracking the number of customer grievances received and the percentage addressed, an annual customer satisfaction survey, piloting community score cards in selected Program areas, and strengthening the social accountability aspects of existing public forums\. ï‚ Community-based energy education program\. A community-based energy education program will be developed that will support community-based organizations to reach out to households and enterprises before electrification to educate them about electricity, its benefits, costs, safety issues, and productive uses of energy\. The program will target both MHHs and FHHs but will pay particular attention to the poorer community members who may be reluctant to take advantage of the electrification opportunity or face barriers to access information\. ï‚ Media campaign\. The success of achieving the overarching goals of ELEAP will rely on a well-planned public communication and outreach program\. Communication will be multidimensional, ranging from sharing technical information to engaging stakeholders to raising awareness among communities and the public as a whole\. This will help create an enabling environment for modernizing the electricity sector in the country through effective engagement with citizens, new customers (households and businesses), and existing customers\. ï‚ Capacity building customer-centric approach EEU\. The focus on last-mile electrification for the EEU will require capacity building on customer-centric approaches which focus on the user’s experience from the awareness stage, through the connection, and finally through the post-connection process, for example, bill payment\. Capacity building will focus on staff from relevant departments and various levels of management\. 97  Annex 5: Summary of the Integrated Fiduciary Assessment 1\. An IFA of program fiduciary systems for the proposed Program—ELEAP was carried out on the MoWIE, EEU, UEAP, and a sample of participating regions and districts under the EEU, including the UEAP that will implement ELEAP consistent with ‘Operational Policy, Bank Procedure, and Bank Directives and Guidance for Program-for-Results Financing’\. 2\. The IFA used the results of the 2014 PEFA reports that covered the Federal Government and six regions, CPAR that was carried out in 2002 and updated in 2010, the results of the entity audit reports, the lessons of the current operations of ENREP and ENREP-AF (IPF projects), including the FM and procurement management supervisions conducted for these operations, and the results of the field visits conducted for the Program\. Teams of FM, procurement, and governance experts travelled to the main and selected regional offices between March and May 2017 for this assignment\. The review assessed FM, procurement system rules and procedures and their application, and governance, including oversight mechanisms at the Program implementing entities, as well as F&C combating and complaint-handling mechanisms\. 3\. The fiduciary assessment entailed a review of the capacity of the sampled participating entities on their ability to (a) record, control, and manage all Program resources and produce timely, understandable, relevant, and reliable information for the Borrower and the World Bank; (b) follow procurement rules and procedures, capacity, and performance focusing on procurement performance indicators and the extent to which the capacity and performance support the PDO and risks associated with the Program and the implementing agency; and (c) ensure that implementation arrangements are adequate and risks related to F&C, as well as complaint-handling mechanism are reasonably mitigated by the existing framework\. A\. FM 4\. PFM reform in Ethiopia has registered satisfactory progress\. The GoE has been implementing comprehensive PFM reform with support from DPs, including the World Bank, for quite some time through the Expenditure Management and Control sub-program of the Government’s civil service reform program\. This has been supported by the closed IDA-financed Public Sector Capacity Building Support Program, the ongoing Promoting Basic Services program, Enhancing Shared Prosperity through Equitable Services program, and other donor financing as well as the Government’s own financing\. These programs have focused on strengthening the basics of PFM systems, including budget preparation, revenue administration, budget execution, internal controls, cash management, accounting, reporting, and auditing\. Recently, the Ethiopian financial proclamation was issued and the Accounting and Audit Board of Ethiopia was established\. Institutionalized training has been implemented and to enhance internal auditors’ independence, internal auditors at the federal and region levels will report to MoFEC and Bureau of Finance and Economic Development (BoFED), respectively\. The 2014 PEFA assessment has been completed for the Federal Government, as well as for Tigray, Amhara, Southern Nations, Nationalities, and Peoples’ Region (SNNPR), Oromia, Somali regions, and Addis Ababa City Administration\. Improvement was noted in most of the Federal Government overall ratings although the rating differs among regions\. Generally, the country’s budget credibility remained good and was supported with continuing robust budget execution and internal control systems\. Budget transparency and comprehensiveness has also been strengthened since the 2010 assessment\. Good performances were noted on arrears management, access by public to fiscal information, and revenue administration\. The tax audit function is gradually increasing focus 98 on risk assessment but capacity constraints remain\. Budget execution systems appear to continue to work well\. Robust internal control systems remain\. Procurement systems have been strengthened since the 2010 assessment although publication of procurement information has not progressed as much\. Furthermore, scrutiny has been strengthened given that the medium-term expenditure framework is being reviewed by the relevant legislation unit and procedure for the review of the draft budget strengthened\. Legislative scrutiny of audit reports improved performance on depth of hearing and monitoring of implementation of recommendations\. Although improvements are noted, strengthening internal audit function has proceeded at a slower pace than expected\. The provision of electronic links between the Integrated Budget and Expenditure (IBEX) systems in BoFED and those in sector bureaus, where IBEX was being established on a stand-alone basis remains a constraint affecting the ratings on accounting and reporting\. In addition, timeliness of the preparation of statements and coverage has progressed although regional reports are submitted to the federal level with delay\. 5\. Based on the assessment which has drawn results or inputs from the 2014 PEFA, the lessons of the current operations of ENREP, ENREP-AF in the electricity sector; current operations being led by the MoWIE; and the results of the FM assessment conducted for the Program, the following key findings/performance FM issues and risks are detailed in the following paragraphs\. 6\. Planning and budgeting\. As indicated in the PEFA assessments, the GoE has a well- functioning planning and budgeting system\. MoWIE prepares plan and budget annually in sufficient detail for its programs and units following the GoE’s budgeting procedure and calendar\. The consolidated budget, after consideration by the management and recommendation by MoFEC, is proclaimed as part of the federal budget\. The budget preparation to approval processes of the MoWIE, including notification of the approved budget are usually performed on time\. The consolidated budget includes sources from treasury, loans, and assistance\. On the other hand, the EEU, including the UEAP, uses the former EEPCo’s planning and budgeting procedure manual\. Although, the same fiscal year (July 8 to July 7) is being followed, the budget calendar of the EEU does not strictly match that of the Federal Government\. The EEU uses top-down and bottom-up approaches in preparing its AWPB where targets are provided from the head office and are subsequently matched with the implementation capacity and realities at the region/district and each working unit level\. The targets are based the five-year plan (GTP)\. Physical plans are adequately costed and AWPBs are sufficiently detailed\. The Government’s contribution to the UEAP is included as part of the MoWIE’s budget and proclaimed at the federal level\. The EEU’s consolidated AWPB, including the UEAP’s, is required to be approved by the EEU Board\. However, approval by the EEU Board and subsequent notification to each process are delayed and usually provided after two to three months of the start of a fiscal year, which should be improved\. So, while the MoWIE budget preparation follows the budget calendar and is approved and proclaimed on time, there is approval delay on the EEU budget\. 7\. Budget credibility/execution\. Budget credibility is an issue both at the MoWIE and EEU\. Shortage of finance, low supply of materials, and ambitious planning are the key justifications attributed for the low level of budget execution\. 8\. Transparency\. The budget breakdown by chart of accounts or Program activities, as well as in-year budget execution reports, and audit reports were not disclosed on the MoWIE’s website or through other means of communications\. Districts under the EEU posted their physical plans on their notice boards and performed public forums to discuss performances\. Detailed customer 99 waiting lists are also posted at regions and districts\. However, the EEU’s consolidated annual plan and budgets, budget execution, and audit report were not disclosed on its websites or through other means of communication\. To enhance transparency, the NEP budget and financial information need to be disclosed to the public through the MoWIE and EEU’s website or through other means\. 9\. Budget monitoring and control\. The MoWIE has a budget control section within the Finance Directorate responsible for monitoring budget both at the transaction processing and a reporting level\. The unit uses the budget control module of IBEX and every payment passes through the unit to ensure budget availability\. Monthly reports also include comparison of budget and actuals\. At the EEU, approved budget data for both operating and capital budgets are entered in the Agresso accounting system\. However, budget execution reports are extracted from the Excel spreadsheet where approved budget figures and subsequent disbursements are tracked\. This practice is prone to errors\. Budget execution reports are produced and submitted to the management, Board, and the MoWIE on a quarterly, semiannual, and annual basis\. These reports are based on disbursements rather than actual expenditures and constitute estimated inventory consumption data, which adversely affect the quality and completeness of the budget execution reports\. In addition, the budget execution reports are not according to planned activities (for example, meter reading, collections, maintenance, new connections, rehabilitation and upgrading, and so on) but rather per expenditure line item (expenditure types for example, material, salary, fuel and lubricant, and so on) as the basis for capturing the expenditures is by line item and the system is not able to produce reporting on major Program implementation activities/components\. Hence, such practices must be amended, which may entail changes to the usage of the current chart of accounts structure as well as clearing of backlogs and resolving staffing issues for the EEU to be able to report according to the Program activities\. 10\. Program budgeting arrangements\. The Program will use normal budget procedures of the GoE to prepare budgets\. Implementing agencies (EEU/UEAP, MoWIE’s REF/DoE) will prepare the annual program budget with sufficient detail and the program budget will be consolidated at the MoWIE/DoE\. The Program budget will be reviewed/discussed with the Director of the DoE, the National Steering Committee for Electrification, and the sector working groups comprising DPs\. The ELEAP budget will be reviewed by the management of the EEU and MoWIE, MoFEC, and then by the Council of Ministers\. The final recommended draft federal budget which specifically shows the activities to be funded by ELEAP is sent to Parliament in early June and is expected to be cleared, at the latest, by the end of the Ethiopian fiscal year (EFY)\. The MoWIE’s and EEU’s chart of accounts will be enabled to accommodate budgets and expenditures for the Program by Program effectiveness\. With regard to budget monitoring aspects, the implementing agencies (both the EEU and MoWIE) are expected to maintain a system-based budget control mechanism\. The normal Government system requires monthly reporting from lower to higher levels\. However, for this Program, quarterly interim financial reports to the management, EEU Board, World Bank, and other DPs will also incorporate budget monitoring reports where actual performances will be compared with the budget and explanations will be provided for significant or major variances\. 11\. Treasury management and fund flow\. PEFA notes robust systems of treasury management and flow of funds\. Funds flow from MoFEC to the MoWIE is based on cash flow forecast prepared and approved and daily zero balance account withdrawal limit\. At the EEU there is a reasonable flow of funds\. The EEU’s source of fund constitutes the budget from the Federal Government for contribution toward the UEAP’s capital budget to provide access to mainly rural 100 towns, sales of electricity, loans and grants, customer contributions, and other miscellaneous income\. Funds from the Federal Government are released to the UEAP based on cash flow forecast and utilization reports and the assessment noted that the Government usually disburses the full annual budgeted amount in a fiscal period\. Projects funded by DPs also usually obtain the allocated fund according to the specific agreements\. Collections from sales of electricity, customer contributions, and miscellaneous income from each district and region are transferred from their respective accounts to the central main account at the head office on a daily/weekly basis according to the standing instruction provided to the banks\. Disbursements to regions and project/program offices for operating and capital expenditures are usually made monthly based on the approved budget and utilization reports\. The 15 regions under the EEU provide petty cash to the districts under them based on the approved budget and utilization reports\. Similarly, the UEAP disburses monthly to its eight regions based on the approved budget and utilization reports\. The system of treasury management and flow of funds are robust\. However, the assessment revealed instances of unpredictability of funds\. The total capital and operating expenditure planned for EFY 2009 was ETB 20\.34 billion\. From this amount, ETB 9\.19 billion was identified as the financing gap to be filled by local loans through treasury bills\. The EEU is unable to obtain these funds up to now, although the intended loan of ETB 9\.19 billion was approved by MoFEC\. It was also noted that the EEU has faced a challenge in contributing its major share of financing toward the implementation of the ERP system, IT infrastructure, and information security\. 12\. The Program funds flow and disbursement arrangements\. The IDA funds of the Program will be channeled to the MoWIE and EEU from IDA\. According to the consultations with the Government, it was agreed that separate foreign currency accounts denominated in U\.S\. dollars will be opened for both the MoWIE and EEU at the National Bank of Ethiopia\. Separate local currency accounts can be opened to receive transfer from the U\.S\. dollar account and to also receive funds for the Program from other sources\. Request for disbursement from IDA will be made by the MoWIE only and IDA funds will be deposited to the MoWIE and EEU foreign currency accounts upon the achievement of their respective DLIs\. The MoWIE and EEU will use the resources to finance eligible expenditures under the Program\. Upon achievement of the indicators, the MoWIE/DoE will present the Program RVR to the World Bank within three months of the end of each fiscal year\. The World Bank will use the Program RVR to determine the amount of the eligible disbursements to be made based on the results achieved\. In case of a scalable DLI, the task team will determine the amount to be disbursed based on the Program’s progress report and DLI verification protocol\. A notification will be sent to the Borrower to inform the amount to be disbursed against progress achieved toward the results of the scalable DLI\. An advance of up to 24 percent of the total PforR is available for disbursement should the Government require one\. It will be disbursed following the effectiveness of the Legal Agreement for the financing\. When the DLIs against which the advance is disbursed are achieved (up to US$0\.5 million equivalent for DLI 3 and DLRs 5\.12–5\.16 to be achieved by the MoWIE and up to US$60\.5 million equivalent for DLIs to be achieved by the EEU), the amount of the advance will be deducted (recovered) from the total amount due to be disbursed under such DLIs\. The advance amount recovered by the World Bank is then available for additional advances (‘revolving advance’)\. The World Bank requires that the Borrower refund any advances (or portion of advances) if the DLIs have not been met (or have only been partially met) by the closing date\. Disbursements for prior results will be made against the verification of the results following the effectiveness of the Credit\. Details of the key disbursement issues will be spelt out in the Disbursement Letter\. It is important to note that although PforR operations do not link disbursements to individual expenditure transactions, the 101 aggregate disbursements under such operations should not exceed the total expenditures by the Borrower under the Program over its implementation period\. If, by Program completion, IDA financing disbursed exceeds the total amount of Program expenditures, then MoFEC is required to refund the difference to the World Bank\. The World Bank shall then cancel the refunded amount of the withdrawn financing balance\. 13\. Accounting\. PEFA notes a strong accounting and reporting system in the country, but performance is an issue especially on the links between BoFED and sector offices (despite good progress on rollout), delays in clearing suspense accounts, and failures in reporting commitments and incorporating reporting on/accounting for DP-financed Programs into IBEX\. Capacity constraints caused by high staff turnover rates were a major root cause for the challenges in accounting and reporting\. The MoWIE follows the Government’s accounting policies and procedures under a double-entry bookkeeping system and modified cash basis of accounting, as documented in the Government’s accounting manual\. It uses IBEX for its treasury transactions while project transactions (financed from loan and assistance sources) are captured and reported using Peachtree accounting software\. Budget control, Treasury, Capital Project Finance, Procurement, and Property Administration are the five subunits of Procurement, Finance and Property Administration Directorate of the MoWIE\. The directorate is currently understaffed and capacity building/trainings provided to the existing staff are also noted to be limited\. The MoWIE should resolve its staffing issue by filling the vacant posts and providing adequate trainings to build staff capacity\. With regard to the EEU, including the UEAP, it follows its own manual\. The Program will be required to use the Government’s modified basis of accounting to report on sources and utilization of funds, while the EEU follows the accrual basis of accounting\. The EEU’s system should be enabled to report for both\. The EEU is using the former EEPCo’s FM procedure manuals based on approval from the EEU Board\. These procedure manuals were available at the visited offices and appropriately used\. The EEU planned to revise these manuals as part of preparation to transition to IFRS\. The current chart of account (CoA) is not used to report major activities of the EEU and does not identify tariff (meter reading, collection, maintenance, and so on) and non-tariff costs/expenditures (new connections, investments, and so on)\. This could be challenging when a reporting by activities and or Program components is required\. The EEU maintains the Agresso accounting system for general ledger, AS400 for inventory and payroll, Excel spreadsheet for fixed asset, and customer management system (CMS) for billing and customer-related transactions\. The Agresso accounting system does not interface and has mapping problems with the ancillary systems maintained for billing, stock, payroll, and fixed asset\. To resolve its system issues, the EEU has contracted an international firm to roll out the ERP system which is being financed by the World Bank (ENREP and ENREP-AF projects)\. Good progress has been made on the ERP system for the past year mainly in preparing the blueprint document; however, it is now lagging and the system is far from being operational\. In general, it is important for the EEU to identify key bottlenecks and resolve them in due time\. The assessment notes significant number of vacant posts at the EEU\. The existence of vacant posts may create workload and dissatisfaction among the existing employees, which in turn may bring the risk of reducing quality of work and timely reporting\. This is a critical problem which requires immediate solution from the EEU’s management\. 14\. Program accounting policies, systems, and procedures\. The Program will follow modified cash basis of accounting\. The EEU will continue to use the accrual basis of accounting for reporting for their own purpose\. However, the EEU will enable its system to be able to report by modified cash basis of accounting as well\. A computerized accounting system will be used at 102 the MoWIE while Agresso accounting system will be used for the EEU (Upon successful roll out or implementation of ERP-SAP, the accounting system of the program will be migrated to the new ERP-SAP\. However, the new system will be well tested to ensure that the program accounting, recording, and reporting will not be affected)\. The CoA of the EEU primarily (and the CoA of the MoWIE if needed) will be amended to accommodate the sources and expenditures of the Program activities\. Both the MoWIE and EEU will account for Program sources and expenditures incurred at their respective entity, retain documentation, and produce reports\. The MoWIE will recruit/assign adequate staff to oversee the FM functions of the Program\. The EEU including the UEAP will also fill their vacant posts according to the structure to be able to manage the Program funds and the EEU will also dedicate a team to coordinate, report, and act as a point of contact for the Program activities\. The MoWIE and EEU will monitor their level of staffing and ensure that there is adequate staff to manage ELEAP\. 15\. Internal controls\. PEFA clearly acknowledges the internal control to be reasonably strong\. The MoWIE uses the Government’s internal control procedures while, as stated earlier, the EEU, including the UEAP, uses the former EEPCo’s FM procedure manuals based on approval from the EEU Board\. The MoWIE’s internal control system was found to be satisfactory\. There is proper segregation of duties on the payment approval cycle\. The control over payroll process is good\. Payroll is prepared on an Excel spreadsheet by the accountant assigned to the task\. The MoWIE should consider applying software for processing payroll\. Instruction to prepare payroll is issued monthly by the Human Resource Directorate based on staff attendance information\. In addition, the directorate notifies the Finance Unit of any change that affects payroll as they occur\. Employees are paid through the bank\. Although the assessment did not reveal many problems in the internal controls at the ministry, there were internal control issues reported by the auditor of the ministry with regard to the EFY 2008 audit in long outstanding balances in appropriate payment to terminated staff and internal control issues in property management\. The assessment also confirmed that a fixed asset register is not yet set up and depreciation computation is not yet commenced\. The assessment also revealed a delay in preparing bank reconciliation for treasury bank accounts\. The MoWIE should address all these findings in a systematic manner\. With regard to the EEU, key internal control assessment summary issues for the EEU, including the UEAP, notes good controls on non-salary payment controls, including authorization, recording, and custody controls\. However, delay in preparing bank reconciliation and failure to conduct regular cash count were noted at the head office and at most of the visited regions\. Bank reconciliation for the EFY 2009 has not yet started at all the offices that were visited\. There is a trend to perform bank reconciliations on an annual basis as part of the account closing tasks\. Backlog transactions should be posted and backlog reconciliations should be immediately cleared\. With regard to salary (payroll) controls, there is a robust control on payroll and payroll data are maintained and processed using the AS400 system maintained at the head office and at regional offices\. With regard to property management, the assessment revealed inadequate property management control, including significant delay in recording stock transactions in the AS400\. The assessment noted that the UEAP uses an Excel spreadsheet instead of the AS400 and the inventory data are updated\. However, the Excel spreadsheet is prone to error and may lead to incorrect costing\. The fixed asset register maintained by the EEU is incomplete and the physical count of fixed assets has not been performed for the past 15 years\. Receivables and payables are also one of the repeated control inadequacies in the EEU’s entity audit report and the former EEPCo relates to the receivable and payable balances which include unreconciling balances on suspense accounts, long outstanding balances, and various abnormal balances\. In addition, the subsidiary ledgers were not maintained 103 for receivable and payable balances (except for customer data in CMS and staff data in the AS400) which led to extra work at the year-end trying to prepare detailed schedules, including age of the balances\. 16\. Internal audit\. This is an area that is generally considered to be the weakest link in the PFM system\. The MoWIE has an Internal Audit Directorate to conduct financial and property audit as well as performance audit\. The directorate suffers from severe understaffing\. The directorate conducts quarterly audit and report findings\. There is a follow-up of audit findings using action plan though there is interruption\. Issues raised include presence of unsettled advances, instances of wage payments without an attendance sheet, presence of payments that have no adequate legal supporting documentation, and presence of expired guarantees in connection of terminated contractors\. For the EEU, its internal audit unit is accountable to the Board\. Its audit charter is approved by the Board and working manuals are prepared by the chief auditor and distributed to staff\. The oversight role of the Board is not strong (the previous Board had a Finance, Property, and Internal Audit subcommittee which was expected to provide oversight and was considered as an audit committee\. However, the new Board does not have subcommittees yet)\. In addition, the audit unit is understaffed and has suffered from staff turnover\. The assessment team noted that the EFY 2009 nine months’ reports were compiled and submitted to the management\. The unit was able to perform a total of 157 audit assignments and the report summarizes the key issues noted, actions taken, and remaining key issues that require management attention\. The report identifies several issues and the key issues include instances of cash shortages mainly by dishonest cashiers, failure to strictly follow the estimation manual resulting in a significant amount of uncollected new connection fee and misappropriation of property, registering customers in an incorrect tariff category leading to understated billing, and existence of uncollected amounts from re-billing, wrong data from tariff change, wrong data of power improvement in the system, terminated customers, damaged meters, and other billing-related issues\. The report noted a significant delay by management in taking corrective action\. The EEU needs to strengthen staff capacity and improve audit coverage\. The management needs to strengthen its implementation of recommendations of internal auditors\. 17\. Program internal control and internal auditing\. The MoWIE will use Government FM systems and procedures for the Program, which are adequate to ensure that satisfactory internal controls are in place while the EEU/UEAP will use the FM manual that will be updated about the transition to IFRS, which is also expected to take account of the reporting requirements of the Program\. The FM of the MoWIE and EEU have sufficient controls to ensure authorization, recording, and custody controls\. Delay in preparing bank reconciliations, lack of a fixed asset register, and lack of a system for its payroll were noted as the MoWIE’s inadequacies\. For the EEU, the noted inadequacies were an incomplete fixed asset register, failure to conduct physical count of fixed assets, delay in recording inventory transactions, delay in preparing bank reconciliations and conducting regular cash count, unreconciling balances on suspense accounts; long outstanding balances in receivables and payables; long outstanding assets in transit, cash management issues, and various abnormal balances\. The task force and the MoWIE will regularly follow the outstanding FM issues to resolve the challenges\. The internal audit unit of the MoWIE and EEU/UEAP will develop separate annual risk-based audit plans that are the basis of their internal audit work\. For any inadequacies in the operation of ELEAP, a report will be sent to the MoWIE within 30 days of completion of the audit together with a proposed action plan to deal with the identified risk\. The EEU’s internal audit reports are sent to the CEO of EEU and its Board\. Strengthening the capacity of the internal auditors at all levels is required\. 104 18\. Financial reporting\. The MoWIE follows Government reporting protocols and arrangements\. According to the Government requirement, the MoWIE is required to prepare and submit to MoFEC monthly reports within 15 days after end of the relevant month and annual financial statements within three months after the end of the budget year\. The content of the reports includes the trial balance, revenue details, receivable/payable details, transfer details, expenditure details, bank reconciliation with the bank statement, and monthly transaction details\. Delay has been noted in submitting monthly reports to MoFEC\. The MoWIE has finalized and submitted report for the month of February 2017 on April 18, 2017 (10/07/2009 E\.C) with a two-month delay\. The EEU is producing quarterly, semiannual, and annual reports for the management, Board, and the MoWIE from the data maintained in an Excel spreadsheet (cash transferred to regions based on approved budgets is maintained in an Excel spreadsheet and updated based on monthly utilization reports)\. The report basis the monthly utilization reports received from regions and uses past trends to estimate material consumptions (material/inventory is maintained in the AS400 and actual consumptions can only be identified upon recording the store issue vouchers in the system)\. Hence, the reports to the management may not show the EEU’s actual status\. Comprehensive reports based on actual data are produced at the year-end after closing all accounts and preparing the related schedules\. Currently, the EEU has not closed and prepared financial statements for EFY 2008\. The mission noted that the revenue data from CMS are not fully transferred to the Agresso accounting system (only three months’ sales data were not yet transferred), which also adversely affects reconciliation tasks of other accounts\. The key justification provided for the delay is a problem in the server, which is not yet resolved\. This was discussed and will be given a high priority by the management because it also affects the timeliness of subsequent period reports\. The assessment also noted that the EEU has not started recording/posting the EFY 2009 budget utilization reports from the districts and has not fully updated its inventory consumption records in the AS400 and has not transferred the revenue data from the CMS\. The quarterly reports will be required to be produced for the Program\. Materials/inventory items will constitute the major part of the Program expenditure and unless the EEU clears its backlog before the commencement of the Program, obtaining actual data on sources, uses, and financial positions (reconciled cash, receivable and payable accounts) will be a challenge and consequently, the EEU may be unable to issue quarterly reports\. 19\. Financial reporting arrangements\. Both the MoWIE and EEU will submit quarterly consolidated unaudited interim financial reports, prepared based on actual expenditures for the Program within 60 days of end of the quarter\. The formats of these interim financial reports will be produced from the accounting system of the MoWIE and EEU\. Annual financial statements will also be prepared within three months of end of the fiscal year and will use a similar format as the quarterly reports\. The annual financial statements need not be sent to IDA\. 20\. External audit and oversight\. Audit at the MoWIE is up to date in that the Office of the Federal Auditor General (OFAG) has concluded an audit of the MoWIE’s account for EFY 2008 (July 7, 2016)\. The OFAG has expressed an unqualified opinion on the financial statements of the MoWIE for the year ended July 7, 2016\. Review of past audit reports notes some audit findings including presence of unutilized budget, late transfer at the end of the budget year of internal revenue, presence of long outstanding advance balances, and presence of payments that are not supported adequately and overpayments\. The year ended July 7, 2016 audit report also notes weaknesses in internal controls noted in the Internal Control section above\. On the other hand, the EEU has an audit backlog of one year (year ended July 7, 2016)\. The recent audit report for the year ended July 7, 2015 was issued with a disclaimer of opinion and contains significant internal 105 control findings similar to the previous report for the year ended July 7, 2014\. Action plans were prepared to address issues of the July 7, 2014 report, and a high-level task force comprising MoFEC, the MoWIE, the EEU and EEP was established to ensure a credible follow-up of the implementation of FM actions plans\. Despite this, the progress in resolving the issues has been slow and the majority of the issues were repeated in the July 7, 2015 report\. The disclaimer issues noted on the July 7, 2015 audit report include weak internal control over revenue,46 weak control over work in progress (WIP),47 long outstanding advances for which the auditors could not ascertain whether their recovery is assured or should be considered doubtful, lack of policy/procedure to account for a reduction of stock to its net realizable value, existence of significant balance as a miscellaneous debtor,48 wrong classification/representation of projects handled by the UEAP on behalf of EEP, weak internal control over advances received from customers for new connections,49 and failure to comply with generally accepted accounting principles\. The auditors also noted several areas of weaknesses in the internal control system, of which the majority of the findings relate to unresolved issues identified in the previous period report\. While there are many internal control weaknesses reported, some of the key internal control weaknesses raised include unreconciling balances on suspense accounts, poor property (stock and fixed asset) management issues, long outstanding balances in receivables and payables, long outstanding assets in transit, cash management issues, and various abnormal balances\. The EEU has prepared an action plan to address the disclaimer as well as the internal control issues noted in the July 7, 2015 reports, which it is implementing\. In addition, it has established a project office comprising staff from relevant units, which will work with a consulting firm to be appointed to help transition to IFRS, perform asset valuation, and develop/update FM policies and procedures\. The task force is not meeting regularly (quarterly) to review the implementation status of the planned actions\. However, it has met recently after its November 2016 meeting on August 18, 2017 and had discussed the status of the planned actions\. In general, the progress in resolving issues has been slow\. Although the EEU entity audit reports are not required to be submitted under the World Bank-financed ENREP/ENREP-AF projects, the entity audit report for the year ended July 7, 2016 is overdue for several months and the assessment noted that the accounts are not yet closed and financial statements are not yet prepared\. The delay in closing accounts is mainly attributable to the problem on the billing system (CMS) server and a staffing constraint\. The mission was informed that the hardware problem of the server is under recovery and the EEU is currently waiting to obtain the outstanding three months’ sales data of EFY 2008 to transfer to the accounting system (Agresso)\. Detailed action plans are prepared to close and audit the entity accounts of the EEU for the year ended July 7, 2016 (EFY 2008) and for the year ended July 7, 46 The key issues raised by the auditors with regard to revenue include (a) existence of differences between income amount in CMS and Agresso accounting system as a result of system-related issues; (b) failure to reconcile the amounts of electric energy received from EEP against the amount of waste and the amount sold to customers; (c) instances of failure to bill customers who are connected to power line; and (d) errors in recording income accounts\. 47 The key issues raised in connection with the WIP include (a) incorrect recording of job completion resulting in abnormal balances; (b) several job accounts showing no movement; and (c) delays in transferring completed jobs to the proper accounts which may lead to understatement of depreciation\. 48 The miscellaneous debtor account represents the abnormal balance in the cash-on-hand account accumulated since the implementation of the current billing system (CMS) since EFY 1998\. 49 This account is expected to be settled when services are provided to customers\. Such balances constitute long outstanding balances brought forward from previous years that need to be analyzed to identify whether service was rendered or not and to take appropriate action\. 106 2017 (EFY 2009) and shared with the World Bank along with a status update of other FM issues\. The EEU should resolve bottlenecks on time and adhere to these dates\. In addition, the OFAG conducted performance audit for the year ended July 7, 2016 (EFY 2008) and the report revealed a number of issues with regard to the efficiency and effectiveness of service provisions to customers\. 21\. Program external audit arrangements\. Both the MoWIE and EEU will be responsible for having their respective Program financial statements audited annually and submitting the audit report (audited annual Program financial statements and Management Letter)\. Annual audited financial statements of this Program will be submitted by the MoWIE and EEU to the World Bank within six months of the end of the Government fiscal year\. The World Bank, in accordance with its Access to Information Policy, will request for public disclosure of the audit report\. The audit will be carried out by an auditor50 acceptable to the World Bank\. The auditors will be appointed within six months of effectiveness\. The auditor will express an opinion on the Program financial statements\. The auditor will also issue a Management Letter highlighting internal control, compliance, and other inadequacies\. In addition to the Program audits, the EEU’s entity audit report remains essential given that most resources of the Program will be managed by the enterprise\. The submission of EEU entity audit report backlog is proposed as a DLI against which disbursement will be made for its achievement\. 22\. Conclusion\. The conclusion of the FM assessment was that at the MoWIE there are staff constraints both in numbers and capacity (at finance and internal audit), some internal control inadequacies are also noted at the MoWIE, budget preparations and control are reasonable, but there is lagging budget utilization\. At the EEU, the main concerns are external financial audits, staffing constraints, and system issues\. Although the EEU entity audit reports are not required to be submitted under the World Bank-financed ENREP/ENREP-AF projects, there is a backlog of one year for the entity financial audit (year ended July 7, 2016)\. The recent audit report for the year ended July 7, 2015 was issued with a disclaimer of opinion and contains significant internal control findings like the previous report for the year ended July 7, 2014\. Action plans were prepared to address issues of the July 7, 2014 report and a high-level task force comprising MoFEC, MoWIE, the utility, and EEP was established to ensure a credible follow-up of the implementation of FM actions plans\. However, the progress in resolving the issues has been slow, and the majority of the issues were repeated in the July 7, 2015 report\. The disclaimer issues noted in the July 7, 2015 audit report include weak internal control over revenue, weak control over WIP, long outstanding advances for which the auditors could not ascertain whether their recovery is assured or should be considered doubtful, lack of policy/procedure to account for a reduction of stock to its net realizable value, existence of significant balance as a miscellaneous debtor, wrong classification/representation of projects handled by the UEAP on behalf of EEP, weak internal control over advances received from customers for new connections, and failure to comply with generally accepted accounting principles\. The EEU has prepared an action plan to address the disclaimer as well as the internal control issues noted in the July 7, 2015 reports, which is being implemented\. In addition, it has established a project office comprising staff from relevant units, which will work with a consulting firm to be appointed to help transition to IFRS, perform asset valuation, and develop/update FM policies and procedures\. The assessment also noted that at the 50 According to the Ethiopian Constitution, the OFAG is responsible for auditing all the financial transactions of the Federal Government and subsidies to the regions\. The OFAG has regional offices\. Each of the regions has a Regional Auditor General, who is responsible for the audit of Government financial transactions in the region\. 107 EEU, the Finance and Control Unit at the head office and regions are highly understaffed, which may have contributed to significant backlogs in recording material consumptions in the AS400 and posting utilization reports from districts into the accounting system (Agresso)\. It was also noted that the Agresso accounting system is not interfacing/or has mapping problems with the systems maintained for billing, stock, payroll; and fixed asset\. The EEU is also facing a problem on the billing system (CMS) server and as a result, three months’ sales data of EFY 2008 are not yet transferred to the accounting system (Agresso)\. This is adversely affecting the time it takes to close entity accounts for EFY 2008 and will have a roll-on effect on subsequent periods’ and will require the management’s urgent attention\. To resolve its system issues, some time ago, the EEU contracted an international firm for the supply and installation of an ERP system\. This project is fully financed by the World Bank\. Good progress has been made mainly in preparing the blueprint document, but the system is far from being operational\. The existence of considerable backlogs and staffing constraints may hamper a successful implementation of the ERP project\. With regard to other challenges noted, the assessment revealed that although the physical plans are adequately costed and AWPBs are sufficiently detailed, the budget approval by the EEU Board is usually delayed\. Budget controls are not performed using the Agresso accounting system, but are done off the system\. Low budget executions were observed, raising concerns as to the credibility of the budget\. In addition, the current chart of accounts is not set up to capture expenditures by activity in general and for this Program in particular\. Despite the existence of robust treasury management and segregation of duty in the payment approval cycle, there are backlogs in the preparation of bank reconciliations\. Rolling action plans are prepared to address issues and a task force is established to ensure a credible follow-up in the implementation of these action plans\. However, it is important to note that the resolution of actions takes considerable time due to many reasons\. Based on these observations, the FM risk assessed for this operation is classified as High\. To mitigate the risks and inadequacies noted, specific actions are identified as shown in Program Action Plans and DLIs to target these challenges\. B\. Procurement 23\. Country procurement assessment\. The Federal Procurement proclamation applicable is Proclamation No\. 649/2009 issued on September 9, 2009\. There are initiatives under way to amend the proclamation\. A CPAR was carried out in 2002 and updated in 2010 mainly to respond to Ethiopia’s progress in decentralization since 2002 and to also address the gaps identified during the 2002 CPAR\. Though some improvements were achieved since the 2002 CPAR, the 2010 CPAR highlighted several risk areas and inadequacies in the legal, institutional setups, and procurement practices that include the following: (a) The Federal Public Procurement Agency (FPPA) does not have regulatory and monitoring responsibility over Government-owned enterprises\. (b) The FPPA reports to MoFEC and the Regional Public Procurement Agencies report to their respective BoFED and cannot be considered independent of the executive bodies though it seems they have some level of management autonomy\. (c) The capacity of the FPPA and Regional Public Procurement Agencies to monitor procurement activities and carry out comprehensive procurement audits is inadequate\. (d) There are no formal oversight or complaint mechanisms at some regional states levels\. 108  (e) There is lack of adequate recognition for the procurement profession and a shortage of capacity to effectively enforce and implement the procurement law\. (f) Procurement staff skills in understanding the procurement process management requirements of the Government’s own system is low and the private sector is not organized and mature\. 24\. The 2010 CPAR also highlighted concerns with (a) the minimum time provided to bidders to prepare meaningful bids; (b) the local preferences given to MSEs; and (c) the legal framework allows a merit point system to be used for both goods and works procurement, and this may lead to diminished transparency in award of contracts\. These inadequacies or situations may affect the implementation of the planned Program\. 25\. Program procurement capacity assessment\. The World Bank carried out a fiduciary (procurement) system assessment for the proposed ELEAP PforR operation between March and May 2017\. The review included applicable procurement systems, rules, and procedures, including oversight mechanisms at the program implementing agencies, MoWIE, and EEU\. Since substantial amount of Program funds will be utilized by the EEU including the UEAP unit, the key focus of the procurement assessment was on the EEU\. In addition to the MoWIE, and the EEU headquarters, out of the 19 regional offices of the EEU and 8 branches of the UEAP participating in the Program, 4 from the EEU and 2 from the UEAP were visited and assessed\. 26\. Procurement organization\. The EEU is a Government-owned enterprise and is an entity whose procurement is not regulated under Ethiopia’s Federal Government Public Procurement Proclamation of 2009\. The EEU has prepared its own procurement guidelines and manuals based on the federal procurement law, World Bank procurement procedures, and other best practices\. In the EEU, major procurements are managed by the head office, and the remaining are procured by the regional offices through their respective procurement units\. 27\. Under the MoWIE, there are three state ministers: irrigation and drainage sector, electricity sector, and water supply and sanitation sector\. The state ministers’ offices are responsible for managing 23 directorates\. In addition, EEP, EEU, and EEA are positioned under the electricity sector state minister\. For the Program, the DoE will be established directly under one of the state ministries, to coordinate and supervise the overall performance of the Program\. In the MoWIE, the procurement function is decentralized, that is, each of the departments has its own procurement unit\. It is, however, noted that approvals for proposed award of contracts from all departments are issued from a centralized Procurement Endorsing Committee (PEC)\. Thus, the new department will have a separate procurement unit to procure its own expenditures\. Procurement Manuals and Standard Bidding Documents 28\. The EEU including the UEAP follows the procurement procedural manual Works and Procurement Policy and Procedure (WPPP), Volume I (Pre-Award) - OP/EEU/04-026, Volume II (Post Award) - OP/EEU/04-027 and the General and Financial Delegation of Power (GFDP) - OP/EEU/04-028, which provide the procedures of the decision-making process and controlling of procurement transactions\. The manual was formally approved by the EEU Board of Directors\. Volume I of the document covers precontract award activities, whereas Volume II covers post- contract activities\. These procurement policies and procedures govern all projects and non-project goods, services, and works supported by the business plan of the EEU; however, some regional UEAP offices still use old versions of EEPCo’s procurement manual\. The procurement policies 109 and procedures also have a provision according to which these may follow the Federal Government directive issued on proclamation No: 649/2009, whenever required\. 29\. The WPPP procedural manual was prepared based on previous procurement documents, regulations, governing laws, and guidelines, including the following: (a) Ethiopian Electric power corporation procurement regulation and directives 1992 and 1996 (b) The World Bank Procurement of Goods 2001, January 2004/May 2007 (c) The Federal Public Procurement Proclamation and Directive 430/2005 and 649/2009 (d) Public Enterprise Proclamation No: 25/1992 (e) Ethiopian Electric Utility Regulation No: 303/2013 30\. Through the WPPP, the EEU is mandated to blacklist a firm indefinitely or for a stated period after determining that the firm is engaged in corrupt or fraudulent practices during tendering or execution of the EEU contracts or after determining that the firm has repeatedly failed to perform in previously awarded contracts by the EEU or after determining that either during the construction stage or O&M stage the material supplied or the works executed are of substandard quality\. The WPPP further stipulated that declaring a firm ineligible will be executed according to the EEU procedures and the communication in this regard shall be circulated within the EEU by the Planning and Wiring departments after approval by the competent authority\. The CEO shall be the competent authority to approve such proposals\. However, there is no independent due process in place for debarment\. Furthermore, there is no provision in the procedures to consider the World Bank’s debarment list or not\. ï‚ Recommendation: Debarment under the Program shall be done following the Federal Public Procurement Rules and the firms debarred by the World Bank shall be ineligible to participate\. 31\. The GFDP centralizes the National Competitive Bidding (NCB) and International Competitive Bidding (ICB) procurement transaction to the EEU headquarters\. The reason for the centralization of the procurement to the head office was indicated to be economy of scale from packaging\. The GFDP has a requirement for open competition and the conditions when other methods of procurement will be used\. 32\. The Procurement, Logistics, and Warehousing Department at the headquarter reports to the CEO\. The procurement units in the regional offices fall under the respective regional managers\. In implementing agencies, the Procurement, Logistics, and Warehousing office has four processes, namely, Internal Audit, Procurement, Logistics, and Warehousing Processes\. Among these, the unit that is responsible for day-to-day procurement operation is the Procurement Process\. 33\. Procurement in the MoWIE is processed in accordance with the FPPA directives and standard bidding documents (SBDs)\. 34\. Staffing\. A review of the staffing levels in the agencies has shown that there are shortages of staff at the senior positions, those currently assigned have been there for less than three years on average, and there is high staff turnover\. In most cases, the qualification for those in position was found to be a diploma level in accounting or purchasing\. It was observed that the job level for procurement staff is much lower in general when compared to similar professions like technical 110 management and FM\. In most cases, there are no established career structures for procurement experts\. The team structure of regional procurement units shows differences across regions\. Staff positions are not filled according to the structure in the headquarter and most regional offices\. Given the work load and the number of sector offices these units serve, it is important to recruit and assign the required staffs\. ï‚ Recommendation: The MoWIE and EEU should review the job level for procurement staff\. Procurement Cycle Management 35\. Procurement Planning (PP)\. Similar to the Federal Public Procurement Directive provisions, the WPPP procedural manual requires the preparation of annual procurement plans\. The procurement plans are required to be prepared by each procuring unit and have to be approved by the CEO\. The policy and procedures also indicate that no procurement shall be made if not included in the procurement plans, except for some exceptional cases; procurement in such circumstance shall be made after the approval of the CEO\. The manual also includes a procurement plan template similar to that of FPPA\. However, preparation and approval of the annual procurement plans are given inadequate consideration in all procuring units, including the federal EEU and UEAP offices\. No information/evidence has been found that indicates that the procuring units use annually approved procurement plans by the CEO\. Procurement is being carried out based on demand from the divisions and regions and financed by a pool budget\. In practice, the implementing units have no approved procurement plans in their offices\. PP has been a challenge with the EEU, and there is a lack of use of PP as a procurement management and project implementation monitoring tool\. Lack of regular updating of project plans and record of actual information in the project plans as well as keeping contract registers/information has been noticed as weaknesses\. Regarding the MoWIE, a procurement plan is prepared by each directorate and consolidated by the M&E unit of the ministry and approved by the PEC\. Normally, a procurement plan is prepared using FPPA’s template, and it was noted that the plan is not being updated regularly and also it is not being used as a procurement and implementation management tool\. ï‚ Recommendation: The MoWIE, EEU, and UEAP unit shall ensure that procurements are handled according to approved annual procurement plans\. The preparation of a realistic procurement plan and its update as required is critical for successful monitoring and implementation of projects\. In addition, procurement plans should be used as a monitoring tool of all the procurement processes and cycles to achieve the milestones in the procurement plans\. 36\. Procurement methods and thresholds\. The EEU policy and procedures provide the applicable procurement thresholds for various procurement methods\. 37\. The most frequently used procurement method at the regional level is shopping\. When an estimate is high and above threshold, the use of NCB is mandatory\. However, instead of consolidating requests and going for an open bid method, most of the assessed regional offices conduct procurement activities frequently through the shopping method\. Use of direct contracting is widely applied in regional UEAP offices, where transmission infrastructure procurement activities are directly outsourced to regional MSEs with fixed unit rates categorized under project site, weather condition, terrain, and availability of laborers\. ICB method is not conducted in any of the assessed regional offices so far\. Moreover, due to limited procurement capacity of regional offices, a single contract at a region is unlikely to reach the ICB threshold\. Though there is a lack 111 of data in most regions visited; the maximum contract amount observed by the assessment is around ETB 7\.7 million (US$320,000)\. Selection of consultants was also not observed at the regional office level\. Consultants’ selection, when required, is usually handled from the central EEU\. ï‚ Recommendation: The impact on transparency, fairness, and value for money of awarding direct contracts to state-owned entities (SOEs) and MSEs should be revisited, and procedures should be agreed with the EEU in the POM\. 38\. Procurement notices\. For contracts procured through ICB and NCB procedures, it is noted that invitation for bids by all procuring units, including the MoWIE and EEU are issued on a national newspaper such as Addis Zemen and The Ethiopian Herald, which are widely circulated newspapers; the MoWIE in addition uses its website\. It is also noted that for procurement under shopping procedures, notices are posted on the regional office notice board\. Local and regional competitive biddings are not practiced in all the EEU and UEAP regional bureaus\. ï‚ Recommendation: ICB contracts should also be published in international media like UNDB online\. 39\. Bidding documents\. The EEU has developed its own customized SBD using the FPPA’s SBDs with minor modification for all procurements being made at the head office, whereas sample SBDs prepared in Amharic for the procurement of goods and works along with specifications are distributed from the EEU and UEAP head offices to all regional offices\. Minor changes and adjustments as required are done at the regional level on the SBDs and specifications\. Bidding document preparation takes one week to one month\. For non-consulting services contracts, the main problem while preparing bidding documents is obtaining the right specifications of all machineries\. The MoWIE uses the FPPA’s SBDs for projects financed by the Government, and for those projects financed by DPs, the respective financier’s SBDs are used\. Apart from the use of SBDs, the critical challenge during the preparation of the bidding document is access to comprehensive specifications\. ï‚ Recommendation: There is need to support the EEU through technical assistance in the preparation of bidding documents with basic information required to implement the procurement process, including provision of instructions to bidders, preparation of bid data sheet, evaluation and qualification criteria, and general and special conditions of contracts\. In addition, the EEU requires support in the preparation of bidding documents and use of standardized documents and requests for quotation\. 40\. Evaluation and award\. Evaluation is done by the tender (bid evaluation) committee\. Generally, the evaluation committee is composed of five members chaired by the Finance Head and the Procurement Officer as Secretary\. When evaluating bids for goods, determining quality compliance of goods is a challenge\. It is observed that there is no standard evaluation format to be used at the regional office level\. All regions use different formats, which are below the standard required\. Extracting information from the evaluation reports is time-consuming as the formats are not standardized\. It is expected that the simplified directive and procedure will address this gap\. At the EEU, including the UEAP head office level, evaluation reports are approved by the Board of Directors or CEO or relevant officers in line with the threshold limits specified in the GFDP document\. However, at the EEU regions, approval is issued by the head of the regional office for procurements only up to ETB 350,000, and UEAP regional office heads are able to approve works 112 contracts up to ETB 8\.0 million\. The ministry follows the approval procedures stipulated in the directives of the FPPA, where the PEC gives the final approval for award of contracts\. ï‚ Recommendation: All procuring units shall ensure that the necessary training is provided for staff engaged in the evaluation process on the use of standardized bid evaluation format\. The EEU including the UEAP unit shall establish a contract award committee, which shall follow the Federal Public Procurement Rules\. 41\. Complaint handling\. The assessment revealed that procurement complaint mechanisms have not been addressed in the WPPP manual\. Complaint handling requires proper organization, capacity, working procedure, and most of all trust from the bidding community\. To improve the situation, the bidding community needs to be made aware of the mechanism, and the independence of the entities receiving complaints needs to be ensured\. Whereas the MoWIE follows the complaint-handling mechanisms of the FPPA, it has been observed that complaints have not been properly recorded\. ï‚ Recommendation: The EEU including the UEAP unit shall establish a clear complaint-handling mechanism, which shall follow the Federal Public Procurement Rules\. 42\. Contract management\. There is significant capacity limitation on contract document preparation and contract administration of both works and goods contracts\. In most of the selected cases, there is no proper contract agreement document\. The contract document lacks major sections of a standard contract format such as general conditions and special conditions of contracts\. 43\. The procurement units are responsible for administering all goods contracts\. Inspection and acceptance of goods are done by the regional procurement units\. All goods are expected to be checked and verified against the specifications in the contract or purchase order sent from the Finance Office\. Particularly, the shopping method puts much of the responsibility and risk on the staff of the procurement unit\. There are cases where procurement officers had to make payments at the stores of suppliers before delivery of goods\. When doing so, cash or checks are carried by the procurement officers\. Goods are then carried and delivered by the procurement staff\. ï‚ Recommendation: To the extent practicable, payment to suppliers should be done through World Bank transfers\. 44\. Works and engineering consultancy services are managed through the head office\. The EEU’s WPPP (Volume II - post award) has adequate guidance on basic contracts administration procedures\. However, the awareness and implementation of the contract administration procedures is very low\. The actual practice is haphazard, and this makes the contract administration unreliable and risky\. It is noted that staff are not aware of what is provided in the policy and procedures manual, and most have no experience of contract administration\. The signed agreements of most contracts are incomplete, and this again originates from incompleteness of the issued bidding documents that do not contain the correct and complete model contracts to be entered\. In most cases, the bidding documents contain only Invitation for Bid and Bill of Quantities (BoQ)\. In addition, the contract agreements contain only the form of contracts and priced BoQs\. As the result, there is no agreement-based formal contract administration practice, and all subsequent actions (monitoring and control of contracts’ timeliness, quality delivery, and cost controls) are based on traditions and perceptions or unwritten understandings between the parties\. This is a critical area to be addressed through the Program Action Plan\. 113  ï‚ Recommendation: The EEU through the technical assistance to be engaged shall ensure that the necessary training is provided for staff engaged in the contract management process\. 45\. Contractual dispute handling\. During the assessment, it was noted that contractual disputes are not dealt consistently with the provision of the contract or acceptable standards\. The practice to resolve disputes contractually is low\. In some cases, where there is a contractual provision in the contract agreement for disputes resolutions, contractual disputes are resolved following the mechanisms stipulated in the contract agreement\. However, in most cases, the contract agreements do lack detailed contractual clauses and provisions, not only a dispute resolution mechanism, but also basic obligations and rights of the parties\. Therefore, most cases are resolved following traditions and perceptions or unwritten understandings between the parties\. For instance, one of the signed contracts with a supplier of a cargo crane has been cancelled after it has given four months’ service with the reason that the company has no legal construction machinery rental trade license\. ï‚ Recommendations: In this respect, all contract and procurement staff shall be given trainings on contract management and administrations through the technical assistance, regional public procurement agency, and other institutions, on the preparation of contract document and contract management\. It is also recommended that contract management and administration manuals be prepared toward assisting staff engaged in contract management\. 46\. Facilities for procurement function\. While carrying out these activities, the assessment revealed that the basic facilities are not fulfilled to the units\. Vehicles are not assigned to the procurement officers when travelling to do shopping, and officers use public transport to do the job\. Not all regions have allocated office space to each procurement staff\. At more than half of the visited regional offices, tables and chairs are not allocated for procurement staff\. Regional offices do not provide adequate space for procurement record keeping\. Unless basic facilities such as office space, chairs, computers, and printers are available, the procurement staff cannot prepare the required procurement plans, bidding documents, evaluation reports, contract agreements, and so on\. Recognition should be given to the procurement function, and the basic required facilities should be fulfilled\. ï‚ Recommendation: Facilities to procurement staff, such as office space, chairs, computers, and printers, and secured space for procurement records shall be provided\. 47\. Procurement oversight\. According to the country’s public procurement law, the public procurement oversight and auditing function is supposed to be done by FPPA, but EEP is not governed under the federal procurement law and, therefore, FPPA has no jurisdiction over EEP\. However, EEP’s own internal technical and administrative controls system in the areas of performance audit and quality control and the oversight role of its Board of Directors on high- value contracts may reduce the risk expected in this regard\. However, this will remain as a high- risk area\. The Internal Audit units of some regional offices raised and addressed few issues on procurement and provided recommendations for better performance as part of the quarterly financial audit\. On the other hand, involvement of internal auditors in most regional offices with regard to procurement is limited to an observance role of bid openings\. Most regional offices do 114 not conduct procurement audit as part of the regular financial audit\. Overall procurement oversight at the regional EEU is weak\. ï‚ Recommendation: Internal and independent external procurement audit systems of the EEU and MoWIE shall be strengthened\. 48\. The program procurement and contracts administration risks identified during the assessment include (a) the EEU not governed by national procurement proclamation and directives; (b) weak procurement capacity at the MoWIE and EEU, including the UEAP unit; (c) transparency and fairness issues related to the procurement process as the result of not implementing the applicable procedures available; (d) competitiveness issues as the result of direct contracting to the Government-owned enterprises’ involvement in tenders and application of direct contracting and different preferential treatment to MSEs; (e) weak accountability, integrity, and oversight arrangements and complaint-handling and debarment setups and mechanisms; and (f) weak contracts administration and the inefficient resolution of contractual disputes\. 49\. There are three sets of risk mitigation measures that have been defined and proposed to be carried out\. These measures are inherent in the design of the Program and will be part of DLIs and the Program Action Plan\. These risk mitigation measures include the following: ï‚ Minimum conditions\. These will be entry conditions for the first year, which include (a) deployment of the required procurement staff, (b) establishment of well- functioning contract award committee and complaint-handling and debarment mechanisms, which shall follow the Federal Public procurement Rules, (c) strengthening internal and using external procurement audit systems, () establishment of a procedure for advance orientation of staff in procurement and contract management, and (e) establishment of procurement and contract management and monitoring system\. ï‚ Performance measures\. An annual procurement and audit performance assessment will be carried out by an independent verification agent\. The assessment will evaluate performance and compliance\. The audit should be accompanied by the EEU and MoWIE management response (accountability), The procurement DLRs (5\.6-5\.11) will measure both performance of the internal and external procurement auditors (based on the time line and quality of the audit) and procurement performance of the EEU (including the UEAP unit) and MoWIE\. ï‚ In addition, the Program Action Plan includes activities that key stakeholders will carry out to prepare for implementation and during implementation C\. F&C Compliant-handling Mechanism 50\. Ethiopia has a robust legal framework for addressing F&C risks\. The principal institutions responsible for the fight against corruption are the FEACC established in 2001 and the Federal Attorney General formed in 2016\.51 The FEACC focuses on prevention, by expanding and promoting ethics and anticorruption education, while the Federal Attorney General is responsible for investigation and prosecution of allegations\. Since 2007, all the nine regional governments have established their own Regional Ethics and Anti-Corruption Commissions (REACCs) 51 Federal Attorney General Establishment Proclamation No\. 943/2016, Federal Ethics and Anti-Corruption Commission Proclamation No\. 880/2015\. 115 according to the regional laws\. However, the FEACC is responsible for coordinating efforts of anticorruption across regions and sectors and preparing a country report\. Encouraging results have been witnessed in the performance of the FEACC and REACCs in the fight against corruption in all sectors at the country level\. 51\. The assessment revealed that despite the progress made in tackling F&C in the electricity utility, petty corruption is still widespread\. Petty corruption is largely expressed in the form of bribery, fraud, theft, and embezzlement\. However, the incidents are not systematically tracked, especially at the regional and district levels\. No independent survey has been carried out on the extent of corruption since the formation of the EEU\. During the past, EEPCo was labeled as one of the first five most corrupt service-providing intuitions\.52 This image, which prevailed long in the past, should change in ELEAP\. Similarly, customer grievances on service are not addressed on time and many of the customers are threatened into not disclosing corruption\. Thus, many become complacent and tend to choose other means for getting service\. 52\. The major grievances or complaints in the sector relate to (a) power drop or interruption, inaccessibility and delay of maintenance; (b) delay of line connection/installation of transformer for customers who pay, under the EEU wiring and retail businesses; and (c) delay of line connection for households or entity groups such as dwellers associations, firms, and Government projects in Kebele administration and towns covered under the UEAP and complaints of individuals or groups not included\. In Addis Ababa, for example, the average calls received on power drop out of the 20,184 calls in queue in 24 hours is 66\.1 percent\. The rest of the calls are abandoned or not received\. At the same time, the percentage of customers satisfied (that got response actions, maintenances) in a specific month was very low (9\.8 percent)\. Similarly, the number of customers who lodged complaints on delay of installation of line connection per kWh meter was high and varied by region\. Based on the data of the EEU and three regions, the share of complaints resolved to the total complaints filed on delay of installation of line connection per kWh reached 58\.4 percent on average\. More often the technical- and service delivery-related complaints are resolved\. Maintenance, new connection, or installation of meter are not satisfactorily resolved\. 53\. There is a system and procedure for handling bidder’s enquiries and complaints at the federal level for procurement in ELEAP and remedial actions are taken on Complaint Review Board decisions and observations made following appeals\. The MoWIE follows up complaints and misconducts reaching the Board for Review and Resolution of Complaints in Public Procurement\. At the same time, the EEU Board provides resolution to complaints\. At the EEU, complaints were internally received from very small number of the bidders, partly because the larger portion is direct purchase\. There is a need to ensure competitiveness for adequate and timely delivery of package of goods\. 54\. At the country level, systems to handle the risks of F&C, customer grievance-handling system, including checks and balances, have been established\. The FEACC’s Proclamation and Operational Regulation provides for the establishment and functioning of Ethics Liaison Units across public offices and public enterprises in the country with the objectives of preventing 52 Survey on Perception of the Level of Corruption by Foreign Investors in Ethiopia, Federal Ethics and Anti- Corruption Commission in Collaboration with donors of the Joint Governance Assessment and Measurement, 2014\. According to the survey conducted in 2014, among the service providers identified as the most corrupt, 18\.9 percent of the respondents responded Ethiopian Revenues and Customs Authority, 8\.3 percent responded Transport Authority, 7\.4 percent responded land administration, 6\.9 percent responded tax regulation, and 6\.5 percent responded EEPCo\. 116 corruption and impropriety and exposing and investigating offences for appropriate actions against the perpetrators\. As required by the Proclamation and Operational Regulation, the scope of the FEACC and REACCs covers all sectors, including ELEAP from the EEU/UEAP Corporate to EEU Regional Center and District Service Center/District Coordination levels\. 55\. On the other hand, the F&C complaint-handling system has gaps that hinder adequate functioning, and it is necessary to strengthen the structure and capacity of complaint-handling staff and improve the tracking, recording, and reporting of F&C at the federal, ministry, EEU, and regional center and local levels\. The gaps include the absence of a specifically assigned ethics and anticorruption officer in each EEU regional center/UEAP and the absence of a strong relationship in tracking and reporting allegations and grievances between the MoWIE and EEU, EEU, and Regional Centers\. 56\. The governance management risk is rated High\. To mitigate the risks and inadequacies noted, carefully selected actions, as shown in the Program Action Plan and DLIs, seek to address these challenges\. Three sets of risk mitigation measures have been defined and proposed to be carried out: ï‚ Staffing\. Increase the number of ethics and anticorruption staff in the EEU/UEAP and the MoWIE during the first year of implementation\. ï‚ Reporting\. The MoWIE provides the FEACC a biannual report on F&C allegations related to the Program and conducts joint semiannual forum, which shows that the conviction rates of F&C allegations have increased\. FEACC verification of the report is included as DLRs 5\.12-5\.16\. ï‚ Complaint mechanism\. Responsiveness to the grievances of clients related to power drop/interruption are systematically tracked and disclosed to complainants\. The CE DLI should help ensure that this action is implemented\. D\. Fiduciary Risk Summary and Mitigation Measures 57\. Based on the abovementioned reasons, the fiduciary risk assessed for this operation is classified as High\. Overall, the fiduciary assessment concludes that the examined Program FM and procurement systems are adequate to provide reasonable assurance that the financing proceeds will be used for intended purposes, with due attention to principles of economy, efficiency, effectiveness, transparency, and accountability, and for safeguarding Program assets once the proposed mitigation measures have been implemented\. Appropriate systems to handle fiduciary risks including the F&C and effective complaint-handling mechanisms, have been agreed on and established\. Risk mitigation measures for the identified risks have been discussed and agreed with the Government\. The risk mitigation measures have the following three approaches: i\. First, a DLI will be provided in the Financing Agreement to support the transparency aspects of the Program\. ii\. Second, specific actions have been proposed that will support the DLI and help improve efficiency and performance monitoring as indicated in the Program Action Plan\. iii\. Third, other interventions will be used\. These include result indicators of the Program, use of other programs that are addressing the issues, and so on\. 117 58\. The summary of risks, mitigation measures, and action plan is presented in Table 5\.1: Table 5\.1\. Summary of Risks and Proposed Mitigation Measures DLI/Program Proposed Mitigation Risk Description Significance Action Measures Plan/Other FM Planning and budgeting Approval by the EEU Board and Align the budget calendar of Substantial Program Action subsequent notification to each process EEU and Board regular Plan are delayed and usually provided after meeting dates with that of the two to three months of the start of a Federal Government fiscal year\. Budget execution reports are based on Clear backlogs and issue Substantial Program Action disbursements rather than actual reports based on data from Plan expenditures and constitute estimated Agresso accounting system\. inventory consumption data which Amend the CoA structure to adversely affects the quality and capture expenditures completeness of the budget execution according to Program reports\. In addition, the budget execution activities and control/track reports are not according to planned budget using the Agresso activities\. accounting system\. Budget controls are not performed using the Agresso accounting system, rather an Excel spreadsheet is used\. Transparency The EEU’s and MoWIE’s consolidated Disclose own and ELEAP Substantial Program Action annual plan and budgets, budget budget and financial Plan execution, and entity audit report were information to the public not disclosed on its websites or through through the EEU’s and other means of communication\. The MoWIE’s website\. MoWIE’s reports are also not disclosed\. Treasury management and fund flow Unpredictability of funds financing the MoFEC continues to commit Substantial Program Action annual budget of the EEU was noted: on funding the EEU’s funding Plan EFY 2009 budget constituting ETB 9\.19 gaps through various means billion financing gap to be filled by local In general, the unpredictable loans through treasury bills has not yet nature of the finances from the materialized\. EEU under the Program should be carefully considered and addressed by the Government/MoFEC\. Accounting and financial reporting Lack of updated FM manuals Engage a consultant firm to Medium Program Action assist the transition to IFRS Plan and update the procedure manuals\. Lak of an integrated accounting system For the short run, recruit Substantial Program Action at the EEU: The Agresso accounting temporary accountants to help Plan system does not interface and has in clearing the backlogs\. mapping problems with the ancillary 118  DLI/Program Proposed Mitigation Risk Description Significance Action Measures Plan/Other systems maintained for billing, stock, For the medium to long run, payroll, and fixed asset\. This has identify key bottlenecks and resulted in considerable backlogs\. The resolve them in due time to EEU is currently installing ERP-SAP to avoid delays in the ‘go live’ resolve its system issues but staffing and successful rollout of ERP- constraints, lack of financing SAP\. contribution from the EEU, and existence of backlogs are causing delays in finalizing and operationalizing the system\. Staffing: Finance units at both the Fill the vacant posts and Substantial Program Action MoWIE and EEU are highly design a capacity-building Plan understaffed and adequate capacity mechanism\. building is not provided to the existing staff\. Internal controls and internal audit The recent audit report of the EEU for (a) Engage a consultant firm High Program Action the year ended July 7, 2015 contains as planned to assist on Plan significant internal control issues, and fixed asset count and there are significant backlogs in valuation\. Clear backlog recording material consumption in the of reconciliations\. AS400; there are delays in bank (b) Clear recording backlogs reconciliations, incomplete fixed asset of material consumption register, and failure to conduct physical data and bank count of assets\. reconciliations by The OFAG reports on the MoWIE program effectiveness and revealed internal control inadequacies in resolve issues noted in the property management, long outstanding audit report and report the receivables, and appropriate payments\. status to the World Bank on a quarterly basis\. Staffing: Internal audit units at both the MoWIE and EEU are highly (c) The MoWIE resolves the understaffed\. issues raised by the OFAG report and reports to the World Bank on its resolution\. (d) Resolve staffing issues\. External audit There is external audit backlog for one (a) The clearance of the High DLI 5 year at the EEU\. Accounts are not backlog is essential to closed, and statements are not yet become up to date\. produced\. 119  DLI/Program Proposed Mitigation Risk Description Significance Action Measures Plan/Other Financial statements do not comply with (b) Detailed and time-bound High Program Action IFRS\. action plan should be Plan prepared to clear backlog and address disclaimer issues and internal control weaknesses\. Implementation should be closely followed up by the management and the task force to ensure issues are addressed according to the dates stated in the action plan\. Procurement Weaknesses in the procurement legal framework and procedures There are weaknesses in the procurement The EEU will update its High Program Action policy and procedures of the EEU\. procurement policy and Plan procedures\. Debarment under the Program High DLI 5/Program shall be done following the Action Plan Federal Public Procurement Procedures, and the firms debarred by the World Bank shall be ineligible to participate\. Procurement capacity There are capacity limitations in skilled Ensure the availability of the High DLI 5 staff to handle procurement and contract minimum number of skilled administration (incomplete procurement procurement staffing\. plans, bidding documents, and bid evaluations and poor contract The program will provide Substantial Program Action management system)\. intensive procurement Plan contracts management training to the staffs of the regional offices as in the Program Action Plan\. Ensure the preparation of a High Program Action comprehensive POM for day Plan and dated to day guidance of staff\. covenant EEU should review the job Substantial Program Action level for procurement staff\. Plan Ensure the establishment of a Substantial DLI 5 procedure for advance orientation of staff in procurement and contract management\. Ensure the establishment of High DLI 5 procurement and contract 120  DLI/Program Proposed Mitigation Risk Description Significance Action Measures Plan/Other management and monitoring systems\. Provide technical assistance to High Program Action support comprehensive Plan improvement on procurement and FM issues\. Transparency and Fairness Limited advertisement of invitation to ICB contracts should also be High Program Action bids, use of incomplete bidding published in international Plan documents without preset qualification media like UNDB online\. and evaluation criteria and complete conditions of contract for the tender The EEU will use bidding Substantial Program Action which would affect transparency and documents, adapted from the Plan SBDs of FPPA, with preset fairness in bid evaluation and contract evaluation and qualification administration\. criteria\. Use of direct contracting without sufficient justifications and appropriate No direct procurement High Program Action safeguards including MSEs and SOEs Plan and dated will be used without adequate covenant justifications and safeguards as provided in the POM and the approval of the contract award committee\. Competitiveness There are some Government-owned (a) The impact on High Program Action enterprises in sectors of supply of goods, transparency, fairness, and Plan and dated works, and services, and there have been value for money of awarding covenant observed preference to use them on direct contracts to SOEs and direct contracting basis\. High margin of MSEs should be investigated preference is applied in bids evaluation, and procedures agreed with and in many regional offices, there are the EEU and MoWIE and mandatory provisions to support MSEs included in the POM\. through direct contracting and (b) The agreed procedures will reservations or preferences\. Though it be part of the POM\. was argued that this approach has a strategic benefit in sustainability, it has to be balanced with the principle of fairness to non-SOE and non-MSE competitors as well\. Accountability, integrity, and oversight ï‚ There is a lack of use of committee The EEU will have a contract High DLI 5 systems for approval/endorsement award committee\. of contract award\. ï‚ Do not have independent and The EEU will have an High DLI 5 effective institutional setup for independent complaint- handling of complaints\. handling system, which shall follow the Federal Public Procurement Rules\. 121  DLI/Program Proposed Mitigation Risk Description Significance Action Measures Plan/Other ï‚ Contract management, including Provide technical assistance to High Program Action contracts delivery quality and cost prepare Contract Management Plan controls, and resolution of Guidelines\. contractual disputes are not adequate\. ï‚ Procurement facilities and record The Program Action Plan will High Program Action keeping are poor\. address the need to provide Plan facilities for procurement staff and secured space for procurement records\. ï‚ There is a lack of internal and Strengthen internal and High DLI 5 external audits for procurement\. establish external procurement audit systems\. ï‚ World Bank debarred firms are The EEU will establish a High DLI 5/Program operating locally and may system to exclude World Bank Action Plan participate in bidding processes debarred firms from locally\. participating in the program\. Bidding documents will include provisions on exclusion due to World Bank debarment\. Framework and structural arrangement There is a lack of specifically assigned Assign ethics and Medium Program Action ethics and anticorruption liaison officer anticorruption officers or Plan in the 15 EEU regional centers\. for vigilance officers in the 15 tracking, reviewing, and reporting of EEU regional centers, regional F&C allegations effectively\. and state levels and UEAP and additional two experts at the The structure for control of F&C at the MoWIE’s Ethics Follow-up MoWIE Ethics Follow-up Office, and Office\. the EEU Vigilance Office requires strengthening\. Capacity of recording/reporting/data and information sharing (a) Gaps related to low level of tracking, (a) The MoWIE provides and High DLI 5 recording, investigating, prosecution, FEACC verifies and submits and reporting of F&C incidents; to the World Bank quality and arrangement for reporting of F&C and timely biannual report on F&C customer grievance not streamlined allegations and conviction rates related to the Program (b) Low level of responsiveness to and conducts joint forum customer grievances related to power discussions semiannually\. drop/interruption, installation of connection line/meter and transformer (b) Systematically track and damages; specifically lack of a system disclose the responses to for recording and responding to grievances of complainants complaints/requests of power drops in related to power the EEU regions (except in Addis Ababa drop/interruption, line regions) connection/meter; the recording of the responses of complaint is the initial action\. 122  DLI/Program Proposed Mitigation Risk Description Significance Action Measures Plan/Other Lack of clarity on F&C management Introduce guideline on the Medium Program Action functional relationship and reporting F&C functional adjustment, Plan arrangement of the EEU, regional relationship, and reporting centers, and lower levels (district servicearrangement from lower level centers, district coordinators, and the to the EEU and MoWIE\. MoWIE) There is also a need to distinguish the functional task The task of tracking, recording, of managing F&C from the investigating, and reporting of F&C is task of customer grievance and not clearly distinguished from the task of reorganize the functional customer grievance handling within the process within the vigilance vigilance office\. office and regions\. Lack of information technology Align the F&C template of Medium Program Action supported software module for tracking, recording, Plan systematic accessing, tracking, organizing, and reporting of recording, organizing, and reporting of F&C incidents and complaints F&C incidents and grievances to the ERP software modules and strengthen capacities\. Internal Control Nonexistence of accountable, Ensure the formation of Medium Program Action independent focal person/committee for primary procurement Plan reviewing primary complaints at complaint receiving expert different levels in the EEU and UEAP unit/committee to control leakages\. Lack of transparency of procurement complaint-handling system Establish the entry/website for Medium Program Action the exchange of debarment Plan lists and disclosure of complaint-handling and update data\. Public understanding and transparency/disclosure of complaint handling Low level of understanding on the Provide awareness to the Medium Program Action systems of lodging F&C, complacency public through regular air Plan in disclosing F&C, and low level of media\. understanding on execution of laws by the public Lack of understanding and Develop adapted training Medium Program Action accountability of fiduciary personnel and module and provide cascaded Plan employees on ethics and anticorruption training for the concerned staff and related technical skills at the ministry level, EEU, region, district, and satellite levels\. Proposed Fiduciary Inputs to the Program Action Plan 59\. Refer to Annex 8 for the Proposed Fiduciary inputs to the Program Action Plan\. Implementation Support Plan 60\. Reviewing implementation progress\. The World Bank fiduciary team will review the implementation progress of the Program in the following areas: 123  (a) Review of reports\. This can be quarterly financial reports, annual Program financial reports, and relevant progress reports on the implementation of the Program Action Plan and DLIs, and so on\. (b) Conducting field visits\. A fiduciary specialist will participate in missions or supervision/implementation support field visits\. 61\. The objective is to understand the achievement of agreed actions and DLIs and the continuing adequacy of systems, to monitor risks and mitigation measures, to monitor covenants and agreements, and to understand the status of capacity\. 62\. Monitoring fiduciary risk\. Building initiatives and devising ways to support in challenging areas\. The frequency and breadth of fiduciary systems implementation support may be varied in accordance with changes in the risks to the Program\. Given the risk profile shown above, this Program will be reviewed twice per year\. With regard to fiduciary aspects, it is expected that as implementation progresses, substantial improvements in procurement and FM capacities will reduce the risk profile and may afford a reduced supervision schedule\. This will be determined by the World Bank’s fiduciary systems team in consultation with other pooling partners to monitor compliance with the Financing Arrangement and fiduciary provisions of legal covenants\. Implementation Support 63\. The management structure and staffing at the MoWIE/EEU/UEAP assigned/recruited for the Program will manage the implementation of the PforR operation\. The World Bank will provide support to the Program in addressing emerging implementation issues pertaining to fiduciary aspects\. If needed, the World Bank will support the Program with technical assistance to develop long-term capacity\. E\. Conclusion of the IFA 64\. Overall, the fiduciary assessment for this Program concludes that the examined Program FM and procurement systems are adequate to provide reasonable assurance that the financing proceeds will be used for intended purposes, with due attention to principles of economy, efficiency, effectiveness, transparency, and accountability, and for safeguarding Program assets once the proposed mitigation measures have been implemented\. Appropriate systems to handle the risks of F&C, including effective complaint-handling mechanisms, have been agreed on and established\. The overall fiduciary risk for this Program is rated ‘High’\. The risk mitigation measures, including specific DLIs are identified for critical issues\. Actions have been proposed, and detailed in the Program Action Plan, that will support the DLIs and help improve efficiency and performance monitoring\. Other interventions include using result indicators for the Program, using other programs that are addressing the issues, and so on\. 124  Annex 6: Summary of the Environmental and Social Systems Assessment 1\. An ESSA of the proposed Program was undertaken by the World Bank to assess environmental, social, and safety management policies and practices in the field and identify potential environmental and social benefits, risks, impacts, and opportunities in the electricity sector\. 2\. The following methods were employed during the assessment period of February 13 to April 1, 2017: (a) A comprehensive review of Government policies, legal frameworks and Program documents, and ESSA reports prepared for other PforR World Bank-financed projects was conducted\. (b) Interviews and consultations were carried out with relevant experts and officials from Addis Ababa, Oromia, Tigray, Amhara, SNNPR, Benishangul Gumuz regional and district-level EEUs’ offices, and other regional-, zonal-, and Woreda-level bureaus, authorities, and offices, including water, mines and energy bureau, environment, forest, and climate change authority, land administration and use bureau, labor and social affairs bureau, municipalities, and MFIs\. The ESSA team also conducted consultations with community members and beneficiaries from SNNPR and Benishangul Gumuz and Amhara regions\. (c) Site supervisions were conducted at specific sample construction and material storage areas\. 3\. The status, as observed in each region, focuses on the quality and performance of the existing capacity of the implementing institutions on environmental, social, and safety management practices in the electricity sector\. The details are discussed in the following sections\. ESSA 4\. The institutional arrangements for Program implementation will be with clear division of tasks and responsibilities from the Federal Government to local level according to the GoE structure and consistent with existing legal provisions, regulations, and guidelines\. Centrally, the MoWIE will be responsible for the overall Program management and operations\. The EEU will be responsible for implementing on-grid as well as most on-grid activities\. 5\. The regional energy and mines offices will be involved in providing support for the implementation of both on-grid and off-grid components of the Program\. Regarding the management of environmental and social safeguards, regional environmental authorities and bureaus53 will be responsible to supervise the safeguards management, review and clearance of all instruments prepared for projects at the regional level\. At the local level, the zonal- and Woreda- level environmental authorities and bureaus will be responsible to monitor and provide support to the EEU district offices and energy and mines offices\. The EEU and the energy and mines offices will implement the Program safeguards instruments and recommended environmental, social, and safety management actions with close support from regional and Woreda safeguards teams and 53 Institutional arrangements for environmental management are different for each region\. 125 land administration entities\. The division of tasks will be clearly outlined in the POM to be prepared for the Program\. 6\. The country has legislative and regulatory basis and institutions to ensure consistency with the six core principles of the PforR as outlined in the World Bank Policy: Program-for-Results Financing guidelines: (a) Core Principle 1: General Principle of Environmental and Social Management; (b) Core Principle 2: Natural Habitats and Physical Cultural Resources; (c) Core Principle 3: Public and Worker Safety; (d) Core Principle 4: Land Acquisition; (e) Core Principle 5: Indigenous Peoples and Vulnerable Groups, and (f) Core Principle 6: Social Conflict\. The ESSA provides an assessment of the current conditions of this system and proposes measures that are built into the Program to strengthen them\. 7\. An assessment of environmental and social regulations, policies, and procedures, including institutional capacity and practices indicate moderate environmental and social risks associated with Program implementation\. Ethiopia has adequate legal framework, including environmental and social regulations\. However, the implementation of existing provisions of the environmental and social regulations varies from region to region and is generally low\. Albeit the legal basis are strongly established, the implementations are not consistently effective in the areas of environmental and social impact assessment preparation, review, and approval; Environmental and Social Management Plan implementation; preparation and implementation of safety management plan applicable to the respective activities of the Program; preparation and implementation of resettlement action plan, field supervision, monitoring, and enforcement on safeguards management; and stakeholder consultation, as required at all levels\. The overall risk rating for the proposed ELEAP on the environmental and social safeguards and safety management perspective is Moderate\. 8\. The ESSA recommendations and actions seek to ensure that the risks identified in this assessment are mitigated adequately to deliver the results under ELEAP\. The current gaps in the system will be addressed through a set of agreed actions to be adopted by the Government to strengthen the environmental, social, and safety management capacity and performance at the national, regional, and local levels\. Based on the findings, the ESSA identified the following key actions to be proposed for the Program Action Plan (Table 6\.1) necessary to strengthen the ESMS at the MoWIE and EEU, respectively\. Establishing the ESMS 9\. A sound ESMS is needed during construction and operation of Program subprojects to ensure that the required environmental, social safeguard, health and safety (EHS) measures are applied and that the related EHS risks are mitigated under the Program\. The MoWIE and EEU shall strengthen and establish this system through preparation and implementation of the required safeguards instruments, procedures, manuals, and guidelines54 with support from the MoEFCC at the national level\. At the regional, zonal, and Woreda levels, the implementing agencies would seek support from regional-, zonal-, and Woreda-level environmental authorities and offices and land use and administration bureaus to implement the required environmental and social safeguards and safety management measures, as applicable\. All instruments, procedures, and guidelines shall be prepared and made available at the national-, regional-, and district-level EEU offices and relevant regional, zonal, and Woreda government offices to ensure sound 54 Guidelines in compliance with the MoEFCC regulations are being prepared and will be attached to the POM\. 126 implementation of the applicable instruments\. The regional and Woreda environmental authorities and bureaus are responsible for providing regular support, and monitoring the compliance and effectiveness of the system on safeguards management\. The ESMS will include procedures for due diligence, identification of potential environmental and social benefits and impacts, recommendation of the respective mitigation and enhancement measures, and implementation and monitoring plan, including an annual performance assessment, and so on\. These will help the zonal and Woreda staff screen projects for their environmental and social effects and monitor the implementation of any mitigation and enhancement measure\. Capacity Building and Technical Assistance 10\. The following capacity-building and technical assistance activities are required during Program preparation and implementation to ensure the implementing agencies’ compliance with environmental and social safeguards and safety management practices: ï‚ Human resources\. Environmental, social, and safety experts are expected to be positioned at the EEU and MoWIE\. As the implementing agency of main activities (on- grid electrification) under the Program, the EEU is required to have sufficient staff with expertise in environmental and social safeguards and safety at the national level\. At the regional EEU offices, environmental, social, and safety units with relevant specialists (including at least one environmental and social development specialist and one health and safety specialist, who will be working with the existing regional EHS coordinators) shall be established\. The specialists and EHS coordinator will work in close collaboration with the MoWIE’s Environment and Climate Change Directorate and the MoEFCC at the national level and with regional- and local-level safeguards teams under environmental authorities and offices and other Government organizations\. The unit shall also be equipped with all facilities, including logistics, budget, and safeguards monitoring tools and instruments\. ï‚ Trainings\. During the assessment period, the ESSA team identified that the existing technical capacity with regard to environmental and social safeguards and safety management and implementation of related instruments in the EEU, energy bureaus, and environmental authorities and offices is limited\. Therefore, it is proposed that a detailed training plan on environmental, social, and safety management be prepared by Program effectiveness\. Based on the training plan, provision of an induction training will be conducted before commencement of each activity and consecutive on-the-job training will be provided throughout the Program implementation period for staff at all levels\. Annual Performance Review and Audit on Environmental, Social, and Safety Management 11\. Annual performance review and assessment on environmental and social safeguards and safety management activities is essential to minimize and avoid the potential impacts anticipated during Program preparation, as well as to confirm sound implementation of safety management, environmental, and social safeguards practices\. In this regard, the EEU and MoWIE shall take full responsibility of ensuring the completion of the annual performance review and biannual technical review meetings that will be conducted with the participation of Program stakeholders, including the MoWIE; EEU; water, mines, and energy bureaus (WMEBs); World Bank; and other DPs\. 127 Use of Safety Protection Material and Tools and Personal Protective Equipment 12\. One of the potential concerns during the Program implementation period is the inadequate availability and use of safety protection material and personal protective equipment (PPE)\. The ESSA recommends that all contract documents and agreements include detailed health and safety articles\. The Program should provide high priority to the availability of safety materials and tools and PPE for all staff and laborers at all levels before the beginning of the construction to ensure no or minimum safety impacts during Program implementation\. Increase Community Awareness on Social, Environmental, and Safety Impacts of ELEAP subprojects 13\. The ESSA identified limited community awareness on environmental, social, and safety matters\. The EEU will conduct trainings and briefings for communities affected by the Program’s subproject activities on social, environmental, and safety impacts at all levels, throughout the Program implementation period\. Strengthen the Grievance Redress System 14\. The GRM committee will be established at all levels to receive, review, and address complaints in line with the loss of livelihood, income, or assets; dissatisfaction of the services; and so on\. In addition, GRM guidelines, in line with the EEU’s customer service manual, will be developed for the off-grid activities and updated for the on-grid activities followed by orientation for implementers\. Timely and Appropriate Consultation, Compensation, and Resettlement of PAPs 15\. The program is dedicated to conduct timely consultation with PAPs and ensure timely and appropriate compensation and resettlement handling of PAPs during the entire Program implementation period\. In addition, the EEU and MoWIE will develop/adopt guidelines on resettlement that include grievance handling, protocol on voluntary contributions, mechanisms to accommodate squatters/illegal settlers, and consultation procedures before the commencement of the Program by Program effectiveness\. Consultations and Disclosure 16\. The ESSA preparation involved extensive stakeholder consultations and disclosure of the ESSA report following the guidelines of the World Bank’s Access to Information Policy\. The World Bank safeguards team undertook meetings and consultations with different stakeholders, including relevant Government institutions at the national, regional, and Woreda level, EEU public forums, civil society organizations, nongovernmental organizations, MFIs, and local communities, PAPs, and beneficiaries likely to be affected or benefited from the Program activities\. Stakeholder meetings and consultations were held in the form of one-on-one discussions, focus group discussions, and public meetings at all levels\. The consultations with stakeholders identified existing knowledge and capacity associated with environmental and social safeguards and safety management and ensures that the proposed ELEAP has taken full account of the priority concerns of PAPs and other relevant stakeholders\. 17\. In addition to these meetings and consultations, a stakeholder consultation workshop was organized by the World Bank, MoWIE, and EEU held at the Capital Hotel, Addis Ababa, Ethiopia, on July 6, 2017\. Fifty-six participants from the MoWIE, EEU, REBs, the Environmental Authority, MFIs, ETHIOSOP (customer society), public forum representatives, and other nongovernmental 128 organizations attended the consultation workshop to collect additional information and obtain feedback on the draft ESSA\. 18\. The draft ESSA was disclosed on June 23, 2017, before the stakeholders’ consultation held at the national level on July 6, 2017\. The World Bank disclosed the final ESSA on the World Bank’s external website on August 22, 2017\. 129  Table 6\.1\. Recommended Program Action Plan on Environment, Social Safeguards, and Safety Management Level of Schedule/Time No\. Action Items Activities Progress Indicator Responsibility Output Application Frame Environmental, Social, and Safety Management System (ESMS) - ELEAP-ESSA Disbursement Linked Indicator (DLI) 1 ESMS ESMS will be established at the Percentage (100%) of At all levels MoWIE, EEU The ESMS will ESMS regional and Woreda levels and subprojects under the (national, be established established and strengthened at the national level Program screened to regional, and and functioning strengthened (EEU and MoWIE) identify Woreda one month environmental and levels) after the social safeguards Program’s documentation effectiveness requirements; The ESMS will Percentage (100%) of be strengthened safeguards throughout the documentation Program completed; implementation Percentage (100%) of period\. actions according to prepared safeguards documents prepared 2 Maintain Environmental and social Minimum 1 National and EEU During Staff in place positions on safeguards specialist and environment and regional level Program environment, occupational health and safety social safeguards implementation social specialist at the national level specialist and (starting safeguards, and and in each EEU regional office minimum 1 effectiveness of safety at will be recruited and maintained\. occupational health the Program) national and and safety specialist regional levels is maintained at the national level and in EEU’s regional offices\. 3 Performance 1\. Conduct biannual technical 1\. Number of At all levels MoWIE, EEU, 1\. Biannual 1\. Biannual review and review biannual technical (national and WMEB 2\. Annually at performance environment, review meetings regional the end of each review report social, and 2\. Undertake performance review 2\. Reviewed and levels) fiscal year 2\. Annual safety audit and environment, social, and cleared performance environmental safety audit review and audit and social report safeguards and 130  Level of Schedule/Time No\. Action Items Activities Progress Indicator Responsibility Output Application Frame safety audit report 4 Use of safety Detail health and safety 1\. Percentage (100%) At all levels EEU, MoWIE During 1\. Contract protection considerations/articles will be of contract agreement (national, Program agreement with material and considered in Program with full consideration regional, and implementation EHS tools; implementation and in the of health and safety Woreda consideration PPE contact agreements, if any regulation or articles levels) 2\. Annual contract is procured\. inventory and 2\. Percentage (0%) of procurement Safety materials and tools and incidents reported of reports PPE will be available to ensure lack of PPE and safety 3\. Safety no or minimum safety impacts materials and tools in notification during the Program subprojects report implementation period\. 4\. Safety audit report 5 Increase EEU will conduct trainings and Percentage of At EEU During Briefing note community briefings for communities communities briefed kebele/Woreda Program awareness of affected by the Program’s on social, level Implementation social, subprojects on social, environmental, and environmental, environmental, and safety safety impact of the and safety impacts of the subprojects\. subprojects impacts of subprojects 6 Strengthen the GRM committee will be 1\. Established GRM At all levels MoWIE, EEU, 1\. The first year 1\. Developed GRM established to receive, review, committee (regional, and Regional of the program and updated and address complaints in line 2\. GRM guidelines Woreda level) WMEB GRM with loss of livelihood, income prepared 2\. The first year guidelines or assets, dissatisfaction of the 3\. Percentage (100%) of the program services, and so on\. of complaints 2\. Report on addressed 3\. Throughout GRM process Additional GRM guidelines in the program line with customer services will be developed for the off-grid component and updated for the on-grid component followed by orientation for implementers\. 131  Level of Schedule/Time No\. Action Items Activities Progress Indicator Responsibility Output Application Frame 7 Timely and 1\. Develop/adopt guidelines on At all levels EEU, MoWIE Guidelines will 1\. Guidelines appropriate resettlement that includes (regional and be developed developed consultation, grievance handling, protocol on 3\. Percentage (100%) Woreda level) by Program compensation, voluntary contributions, of people effectiveness\. 2\. Reports on and resettlement mechanisms to accommodate compensated safeguards for PAPs squatters/illegal settlers, and Instruments consultation procedures\. will be prepared before 2\. Annual review of performance commencement of the subproject\. 132  Annex 7: Systematic Operations Risk Rating (SORT) Risk Category Rating 1\. Political and Governance Substantial 2\. Macroeconomic Moderate 3\. Sector Strategies and Policies Low 4\. Technical Design of Project or Program Moderate 5\. Institutional Capacity for Implementation and Sustainability Substantial 6\. Fiduciary High 7\. Environment and Social Moderate 8\. Stakeholders Moderate 9\. Other - Financial Viability Substantial Overall Substantial 1\. The overall risk rating for the proposed operation is Substantial\. 2\. Political and Governance: Substantial\. Ethiopia will hold its next general elections in 2020\. Following demonstrations and unrest, the Government declared a state of emergency on October 9, 2016, which was lifted on August 4, 2017\. Despite the respite, there is a risk that further tensions between the Government and civil society could negatively affect implementation of the Program due to lack of accessibility to rural areas, the Government’s capacity to take strategic decisions on time, and civil society’s acceptation of Program objectives\. To mitigate this risk, the team developed a comprehensive CE strategy, with a focus on sharing information with the public on the Program design, including its objectives, selection criteria, and roles and responsibilities of national and regional entities in implementation\. Consultations took place on July 6, 2017, to that effect\. However, increased country risk mitigation is beyond the scope of the proposed Program\. Another risk concerns the selection of beneficiaries: the EEU has selected subprojects based on geographical quotas after receiving proposals from the regional offices\. This may lead to favoring some regions over others\. This will be addressed through the distribution plan prepared under the Program, which will lay out the investments for the Program time frame\. 3\. Macroeconomic: Moderate\. Ethiopia has experienced strong economic growth over the past decade, which helped reduce poverty substantially\. As a commodity exporter, the country is subject to global price volatility and is vulnerable to external economic shocks\. The country has also relied heavily on public borrowing to finance infrastructure\. This poses a risk to the sustainability of economic growth in Ethiopia, particularly as the Government seeks to achieve middle-income status by 2025\. In the context of the Program, this means that there is a risk to the availability of Government funds to support the Program and the electricity sector as a whole\. 4\. Sector strategies and policies: Low\. The GoE continues to place electrification and service delivery as the core of its sector policies\. The NES has defined the implementation of a densification program, the provision of off-grid service, increased support to utility capacity as three of its strategic elements\. In addition, GTP-II includes targets for households’ connections, and the Government will launch its IRM and financing prospectus for the NEP before the end of 133 the calendar year\. The risk of a lack of consistency between sector policies and Program design is therefore low\. 5\. Technical design: Moderate\. The Program features are not unique nor does the technical design include new or untested technology\. The activities under Results Area 1 involve last-mile drop-off connections in the already electrified areas; this does not require any specialized technical capacity and can be done by in-house teams in the EEU or by contractors\. Technical design will be informed by the ongoing on-grid and off-grid electrification activities in Ethiopia and around the world\. The main risks lie in inadequate capacity and resources to adequately plan for and roll out new connections, ensure maintenance and quality services, and lack of customers’ resources to afford connections costs\. Mitigation measures include (a) continued capacity strengthening of sector utilities in fiduciary and technical aspects; (b) definition of uniform technical standards for equipment and monitoring of service quality; and (c) establishing a sustainable mechanism to ensure affordability of connections and financial viability of the sector\. In addition, there may be technical risks related to the reliability of the existing network, including overloaded substations and feeders and high outage frequency, which may lead to inability to connect new customers and will increase the resources for technicians and maintenance\. The Program supports the development of a power system rehabilitation plan (to include costing at the individual feeder level) to enable the rapid scale-up of densification of customer connections in the next five years\. This technical and investment plan should be largely completed by mid-2018 and no later than July 2019 to inform, in sufficient detail, the preparation of the business and implementation plan for 2020, 2021, 2022, and beyond\. 6\. Institutional capacity for implementation and sustainability: Substantial\. Key sector institutions, such as, the MoWIE and EEU will have major key responsibilities for implementing the proposed Program, under the MoWIE’s supervision\. While EEU is experienced in implementing activities under the operation, i\.e\. connection of households, its capacity may be stretched with the ambitious electrification expansion planned under the NEP\. The Program supports the strengthening of the MoWIE’s capacity to design and oversee implementation and improve the EEU’s technical, financial, and operational capacity by enhancing planning and M&E capacity, cost effectiveness, and safeguards mitigation\. Technical assistance provided under ongoing projects will help complement efforts to enhance the capacity of both institutions\. 7\. Fiduciary: High\. The entity financial audit (year ended July 7, 2016) has not been carried out\. The last available audit report (year ended July 7, 2015) was issued with a disclaimer of opinion and contains significant internal control findings\. In addition, there is a general lack of adequate fiduciary capacity at the EEU and MoWIE could undermine implementation of the Program\. Mitigation measures include (a) the ongoing implementation of an FM action plan, (b) technical assessment to support comprehensive improvement on procurement and FM issues, and (c) the implementation of the recommendations of the Program’s IFA for enhancing fiduciary capacity (including FM and procurement), whose costs were integrated in the expenditure program\. Key actions are included in the Program Action Plan and the DLIs\. 8\. Environmental and social: Moderate\. Despite the anticipated limited social and environmental impacts of the Program and the country’s experience in designing and implementing mitigation measures, the safeguards-related risks attributable to the Program activities are considered moderate, to take into account (a) inadequate staffing and technical capacity for management of environmental and social safeguards, especially at the regional, zonal, and Woreda levels; (b) lack of awareness and enforcement of health and safety standards during 134 the construction and operation; and (c) risk of loss of income and livelihood for the project affected people linked to land acquisition and resettlement\. These risks will be mitigated through the strengthening (e\.g\. additional staffing, developing guidelines, and training) of the ESMS, including grievance mechanisms, at the federal, regional, and local levels\. 9\. Stakeholders: Moderate\. The design of the proposed Program is being informed by consultations with various GoE entities, DPs, the private sector, and beneficiaries, to enhance ownership\. Nevertheless, the risk remains that some constituencies may feel insufficiently consulted and those included may have higher expectations for ELEAP outcomes than can be supported\. To mitigate this risk, transparent communication/grievance mechanisms will be strengthened (as described in the CE section), the NEP-IRM will include the requirements, procedures, and processes for accessing Program funds, as well as various stakeholders’ roles and responsibilities, and a communication strategy will be designed to be implemented during implementation\. 10\. Other - financial viability of the sector: Substantial\. The current domestic electricity tariff (US$0\.03 per kWh), which is among the lowest in Sub-Saharan Africa, could represent a constraint to scaling up electricity access, particularly with regard to repayment of domestic debt obligations, as well as for raising new financing\. This risk will be partly mitigated through ongoing efforts of the GoE to revise the tariff structure\. While the domestic tariff regime forms an important element of financial sustainability, the GoE is also considering additional actions, such as, augmenting domestic revenue with revenue from power exports, possible restructuring and/or refinancing of existing debt, and finding innovative ways of reducing the public investment burden and introducing sustainable financing mechanisms (for example, increased private participation through IPPs)\. It is also important to highlight that the proposed ELEAP supports financial viability of the sector (that is, yielding positive financial investment returns for the utility)\. 135  Annex 8: Program Action Plan Responsible Action Description Due Date Completion Measurement Party Technical aspects Power system rehabilitation plan January 7, 2019 EEU Plan adopted by EEU Board Off-grid strategy MoWIE Strategy adopted by Minister July 7, 2019 MoWIE Low-cost standards and affordability EEU Policy adopted by EEU July 7, 2019 policy and Customer connections policy Board Fiduciary aspects Planning and Budgeting Continuous EEU Annual budgets are approved ï‚ Address the delay of annual and disseminated on time; budget approval by EEU Board - Budget execution reports and align the budget calendar of the amended CoA structure EEU and Board regular meeting dates with that of the Federal Government\. ï‚ Produce budget execution reports based on actual expenditure data and according to planned physical activities from the system regularly addressing current backlogs; ï‚ Amend the CoA structure to capture expenditures according to Program activities\. Transparency: Continuous EEU and Disclosure of annual budget Disclose entity and ELEAP budget and MoWIE and financial statements financial statements to the public through including budget execution the MoWIE and EEU’s website (this reports and audit reports includes budgets, yearly budget execution reports, and audit reports)\. Treasury management and fund flow: Continuous MoWIE and TBD Í£ Unpredictability of Program funds should MoFEC be addressed - financing gap should be carefully considered and addressed by the Government/MoFEC\. Accounting and financial reporting: June 30, 2018 EEU TBD Í£ ï‚ Resolve lack of updated FM manual - engage a consultant firm to assist transition to IFRS and update the procedure manuals\. ï‚ Engage a consultant firm as planned to assist on fixed asset count and EEU valuation\. Clear backlog reconciliations\. ï‚ Fill the vacant posts and design a capacity-building mechanism\. EEU/MoWIE Internal controls: EEU/MoWIE TBD Í£ ï‚ The MoWIE and EEU resolve internal Continuous control inadequacies as reported in external audit reports and internal audit findings\. 136  Responsible Action Description Due Date Completion Measurement Party ï‚ Clear recording backlogs of material As per dates consumption data and bank stated in action reconciliations by program plans effectiveness and resolve issues noted in the audit report and report the status to the World Bank on a quarterly basis\. ï‚ Internal auditors conduct internal Continuous audits on the entity and on the Program and report to management on findings and follow up to have them resolved\. Legal Framework: End of Year 1 EEU Preparation and distribution ï‚ Update of the EEU’s procurement of the revised version of the policy and procedures Policy to all regional offices ï‚ Debarment under the Program shall be Continuous EEU The updated procurement done following the FPPA’s debarment policy and procedures and all procedures, and the firms debarred by bidding documents include the World Bank shall be ineligible to provisions of the World participate in a tender\. Bank’s and FPPA’s debarment procedures\. Procurement Capacity: Continuous MoWIE, EEU Minimum three procurement ï‚ Maintaining the minimum number of managers, two senior skilled procurement staffing procurement officers, and ten junior procurement officers in the procurement sections of the MoWIE, EEU, and UEAP unit headquarters and minimum two procurement officers in regional offices are available\. ï‚ Technical assessment to support Year 1 MoWIE Signing of contract with the comprehensive improvement on technical assessment, and all procurement and FM issues and to staffs engaged in provide intensive procurement procurement and contract contracts management training to the management processes are staffs of the regional offices trained\. ï‚ Preparation of a comprehensive POM One month after MoWIE Preparation and distribution for day-to-day guidance of staff effectiveness of the manual to regional offices ï‚ The EEU should review the job level Year 2 EEU Reviewed job level for for procurement staff\. procurement staff\. Transparency and fairness: ï‚ The EEU will use bidding documents, Year 1 EEU Preparation of customized adapted from the SBDs of FPPA, with bidding documents preset evaluation and qualification criteria\. ï‚ No direct procurement including Continuous MoWIE/EEU Submission of adequate MSEs and SOEs will be used without justification for the proposed adequate justifications and safeguards direct procurement and and the approval of the contract award signing of contract committee\. 137  Responsible Action Description Due Date Completion Measurement Party ï‚ ICB contracts should also be Continuous EEU Disclosures published on published in the international media UNDB online like UNDB online\. Competitiveness: ï‚ The procedures to ensure Beginning of MoWIE/EEU The percentage of contracts transparency, fairness, and value for Year 1 to be tendered out to new- money of awarding direct contracts to entrant MSEs will be SOEs and MSEs should be agreed determined; non-MSEs with with the MoWIE and EEU and be same level of capital and included in the POM\. qualification with the existing MSEs will be allowed to participate in tenders along with the existing MSEs; Submission of impact assessment report; and inclusion of agreed procedures in the POM\. Accountability, integrity, and oversight: ï‚ Provide facilities for procurement Year 1 EEU Facilities are provided\. staff and secured space for procurement record\. Governance: July 7, 2018 MoWIE, EEU Contracts signed 15 ethics and anticorruption officers or vigilance officers assigned in the 15 EEU regional centers, regional and state levels, UEAP, and MoWIE\. Additional two experts are recruited at the MoWIE’s ethics follow-up office\. Introduce guidelines on the F&C control July 7, 2018 MoWIE, EEU Guideline issued and grievance-handling functional adjustment, relationship, and reporting arrangement from the lower level to the EEU and MoWIE\. Establish the entry/website for exchange May 15, 2018 MoWIE, EEU Website established of debarment lists and disclosure of complaint handling and update data\. Develop adapted training module on F&C January 7, 2019 MoWIE, EEU Training manual and report and complaint handling recording and on training provided follow-up and subsequently provide cascaded training for the concerned staff at the ministry level, EEU, region, district, and satellite levels\. Improve recording and increase Continuous EEU As part of annual complaint responsiveness to complaints/requests report related to power drop/interruptions, installation of connection line/meter, and transformer damages, and so on\. Safeguards aspects Maintain positions on environment, social Continuous EEU Minimum 1 environmental safeguards, and safety at the national level (starting and social safeguards and regional level\. effectiveness of specialist and minimum 1 the Program) occupational health and safety specialist is maintained 138  Responsible Action Description Due Date Completion Measurement Party in EEU headquarters and regional offices\. Performance review and environment, July 7 of each EEU Annual performance review social, and safety audit year of Program and environment, social, and operation safety audit completed\. Use of safety protection material and Continuous EEU (a) 100 percent of contract tools; agreements include full PPE consideration of health and safety regulation or articles; and (b) 0 percent of incidents reported of lack of PPE and safety materials and tools in subprojects Increase community awareness of social, Continuous EEU Percentage of communities environmental, and safety impacts of briefed on social, subprojects\. environmental, and safety impact of the subprojects Establish GRM\. July 7, 2018 EEU GRM committee is established and guidelines have been prepared\. Timely and appropriate consultation, Continuous EEU All PAP-related actions compensation, and resettlement for PAPs according to prepared safeguards documents have been completed\. Note: a\. To be agreed in the POM\. 139  Annex 9: Implementation Support Plan 1\. Implementation support will include (a) reviewing implementation progress and achievement of Program Results and DLIs; (b) supporting the client in resolving implementation issues, (c) carrying out institutional capacity-building activities; (d) monitoring performance of the Program system and implementation of the actions agreed in the Program Action Plan; and (e) monitoring changes in Program risks, as well as compliance with the provisions of the legal covenants, as required\. 2\. In addition, an annual fiduciary review will be conducted for the Program\. Adequate budget will need to be allocated for this review\. This review will be supplemented by on-site visits done by the World Bank’s fiduciary staff at least once a year\. Reliance will also be placed on the annual audit reports\. In addition, desk reviews will be done for audit, financial, procurement, and any other reports received during the financial year\. In-depth reviews may also be commissioned by the World Bank, whenever deemed necessary\. 3\. The proposed implementation plan is consistent with the PforR operational guidelines\. Program implementation rests under the responsibility of the EEU, with targeted and continuous implementation support and technical advice from the World Bank and DPs\. Table 9\.1\. Implementation Support Plan Time Focus Skills Needed Resource Estimate First 12 ï‚ Institutional capacity Technical, fiduciary, ï‚ Three implementation support visits by months enhancement at the environment, and technical specialists focused on capacity national level to social building, continued technical assistance, strengthen country and monitoring systems ï‚ Two implementation support visits by ï‚ Technical advice to fiduciary specialists focused on capacity support Program building implementation ï‚ One implementation support visit by environment and social specialists focused on capacity building and reviewing/strengthening effectiveness of the redress mechanism 12–48 ï‚ Institutional capacity Technical (including ï‚ Two implementation support visits by months enhancement at the local M&E), fiduciary, technical and fiduciary specialists focused levels to strengthen environment, and on fiduciary support and implementation implementation capacity social support ï‚ Implementation ï‚ One implementation support visit by social monitoring and environmental specialists focused on ï‚ Technical advice to strengthening local capacity and support Program implementation support implementation Midterm ï‚ Implementation progress Technical (including ï‚ One implementation support visit including review review and identification M&E), fiduciary, technical, fiduciary, social, environment, of necessary midcourse environment, social, M&E, and operational specialists adjustments and operational 48–72 ï‚ Implementation Technical (including ï‚ Two implementation support visits by months monitoring M&E), fiduciary, technical and fiduciary specialists focused ï‚ Technical advice to environment, and on fiduciary support and implementation 140  Time Focus Skills Needed Resource Estimate support Program social support implementation ï‚ One implementation support visit by social and environmental specialists focused on strengthening local capacity and implementation support Table 9\.2\. Task Team Skills Mix Requirements for Implementation Support Skills Needed Number of Staff Weeks Number of Trips Comments Project management Addis Ababa Ongoing n\.a\. (Task team leader) Project management Washington, D\.C\. 24 12 (Co-task team leader) Technical specialists Addis Ababa, with support 24 12 from Washington, D\.C\. FM specialist Addis Ababa, with support 12 6 from Washington, D\.C\. Procurement specialist Addis Ababa, with support 12 6 from Washington, D\.C\. Environmental specialist Addis Ababa, with support 12 6 from Washington, D\.C\. Social specialist Addis Ababa, with support 12 6 from Washington, D\.C\. Administrative support Ongoing n\.a\. Addis Ababa Role of Partners in Program Implementation 4\. The World Bank Group has already been providing comprehensive policy advice and technical support for the development of the NEP, as well as providing DP coordination support to the GoE\. The NES was supported under Phase 1 of the World Bank’s three-year programmatic technical assistance, the ESMAP-funded ESRSP\. The NEP-IRM has been developed as part of Phase 2 of the ongoing ESRSP, while Phase 3 activities will support the development of a nationwide GIS platform for least-cost expansion planning\. The World Bank Group has also prepared a Joint Implementation Plan to coordinate support to the NEP as well as the IPP development programs of the GoE\. Specifically, the IFC is supporting the development of private sector-led SAS market development through the World Bank Group/IFC ‘Lighting Africa Program’, as well as supporting the development of the mini-grid market through advisory activities\. 5\. The World Bank Group has also been leading the coordination efforts with other DPs and assisting the GoE in coordinating and developing the electrification program in the country\. Given the pace of the ongoing reform program and the increased engagement of the DPs with the GoE in the electricity sector, the World Bank has supported close coordination of the DPs through an Energy Sector Roundtable\. This roundtable is proposed to be included as a subgroup under the official Donor Assistance Group of Ethiopia which is chaired by the World Bank\. 6\. The proposed ELEAP supports the NEP, by financing the first phase of grid intensification activities, building implementation capacity and creating a blueprint for scaling up electrification\. The proposed ELEAP is also designed to create the framework for crowding in resources from other DPs\. Using a PforR instrument, ELEAP would help establish a sectorwide programmatic 141 approach for financing electrification by demonstrating the viability of the NEP and ensuring good practices for access expansion\. The GoE launched NEP-IRM on November 27, 2017\. 7\. Many DPs have expressed strong interest in supporting the NEP and becoming part of syndicated financial mobilization\. The GoE is in discussions with many of the DPs and it is likely that in the coming years, the investment gap identified in the NEP-IRM would be, in part, financed by the DPs\. The preliminary list of DPs is presented in Table 9\.3\. Table 9\.3\. Possible DPs Support for the NEP Institution Role AfDB ï‚ Ongoing technical assistance support ï‚ Ongoing financing for on-grid connections ï‚ Ongoing financing for MV/LV expansion and rehabilitation ï‚ Possible future financing as part of NEP (for example, MV/LV expansion and rehabilitation, on-grid connections, and off-grid electrification) Agence Française de Développement (AFD) ï‚ Ongoing technical assistance support ï‚ Possible future technical assistance and/or financing as part of the NEP (for example, off-grid electrification) China (China Development Bank, Export- ï‚ Ongoing financing for MV/LV expansion and rehabilitation Import Bank of China, or others) ï‚ Possible future financing as part of the NEP (for example, MV/LV expansion and rehabilitation, on-grid connections) Danish International Development Agency ï‚ Possible future technical assistance and/or financing as part of the NEP (for example, off-grid electrification) Department for International Development, ï‚ Ongoing technical assistance support United Kingdom ï‚ Possible future technical assistance and/or financing as part of the NEP (for example, off-grid electrification) European Union/European Investment ï‚ Ongoing technical assistance support Bank/Deutsche Gesellschaft für Internationale ï‚ Possible future financing as part of the NEP (for example, Zusammenarbeit MV/LV expansion and rehabilitation, on-grid connections, and off-grid electrification) Korean International Cooperation Agency ï‚ Possible future technical assistance and/or financing as part of the NEP (for example, off-grid electrification) Organization of the Petroleum Exporting ï‚ Possible future financing as part of the NEP (for example, Countries Fund for International MV/LV expansion and rehabilitation, and on-grid Development/Arab Bank for Economic connections) Development in Africa/Kuwait Fund USAID/Power Africa ï‚ Ongoing technical assistance support ï‚ Possible future technical assistance as part of the NEP (for example, on-grid connections or off-grid electrification) 142 Annex 10: Map of Ethiopia 143

APPROVAL

P004703

Document of The World Bank iz FOR OFFICIAL USE ONLY Report No\. P-2511-TH REPORT AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN TO THE ELECTRICITY GENERATING AUTHORITY OF THAILAND WITH THE GUARANTEE OF THE KINGDOM OF THAILAND FOR THE BANG PAKONG THERMAL POWER PROJECT April 12, 1979 This document has a restricted distribution ad my be ued by recipients only in the performance of their offcial duties\. Its cotents may not otherwise be dised withowt World Bank authoriztIon\.  GLOSSARY CURRENCY EQUIVALENTS Currency unit - Thai Baht (B) US$1\.00 - B 20\.25 B 1\.00 - US$0\.0494 WEIGHTS AND MEASURES 1 meter (m) = 3\.281 feet (ft) 1 cubic meter (cu m) 35\.315 cubic feet (cu ft) 1 kilometer (kg) = 0\.621 miles (mi) 1 square kilometer (sq km) = 0\.386 square miles (sq mi) 1 hectare (ha) 3 2\.471 acres (ac) 1 kilogram (kg) = 2\.206 pounds (lb) 1 metric ton = 1,000 kilograms (kg) 1 cubic meter per second (cms) = 35\.315 cubic feet per second (cfs) 1 kilovolt (kV) = 1,000 volts (V) 1 kilovolt-ampere (kVA) - 1,000 volt-amperes (VA) 1 megavolt-ampere (MVA) = 1,000 kilovolt-amperes (kVA) 1 kilowatt (kW) = 1,000 watts (W) 1 megawatt (MW) = 1,000 kilowatts (kW) 1 gigawatt (GWh) = 1 million kilowatt hours (kWh) 1 kilocalorie (kcal) 3\.968 British thermal units (Btu) ABBREVIATIONS AND ACRONYMS ADB = Asian Development Bank BVI = Black & Veatch International CPPD = Committee for Power Policy and Development EGAT = Electricity Generating Authority of Thailand IEAT = Industrial Estates Authority of Thailand IFCT = Industrial Finance Corporation of Thailand KFAED Kuwait Fund for Arab Economic Development MEA Metropolitan Electricity Authority MWWA = Metropolitan Water Works Authority NGOT = Natural Gas Organization of Thailand PEA - Provincial Electricity Authority RTG = Royal Thai Government TOT = Telephone Organization of Thailand THAI FISCAL YEAR October 1 - September 30  FOR OFFICIAL USE ONLY THAILAND BANG PAKONG POWER PROJECT LOAN AND PROJECT SUMMARY Borrower: The Electricity Generating Authority of Thailand (EGAT) Guarantor: Kingdom of Thailand Amount: $80\.0 million Terms: 20 years, including five years of grace, with interest at 7\.9% per annum\. Project Description: The project is part of EGAT's 1978-85 expansion program and comprises: (a) land procurement and site development of a power station that will liltimately consist of four units of 500 MW capacity each; (b) construction of civil works including power plant structures and buildings, fuel supply handlinR and storage systems, water cooling systems, make-up water, etc\.; (c) supply and installation of the boiler, turbo- generator, auxiliary electrical, mechanical and miscel- laneous equipment for the first 500 MW generating unit; (d) construction of 230 kV switchyard at Bang Pakong and substations at Rangsit and Bang Kapi and 110 km of 230 kV transmission lines linking Bang Pakong power station to the EGAT grid; (e) supply of construction equipment (hoists, cranes, welding equipment, earth movers, con- crete mixers, etc\.); (f) engineering services; and (g) a study of future generation and transmission projects\. The project will help meet the country's growing elec- tricity demand including that of the accelerated rural electrification program\. There are no risks considered significant enough to preclude proceeding with the project\. I This document has a restricted distribution and may be used by recipients only in the performance of their official duties\. Its contents may not otherwise be disclosed without World Bank authorization\.  Estimated Cost: ------ $ million ------ Local Foreign Total Land 0\.4 - 0\.4 Civil works 31\.8 6\.0 37\.8 Boiler plant 11\.0 51\.0 62\.0 Turbo-generator plant 9\.0 34\.8 43\.8 Other electrical and mechanical equipment 5\.8 25\.8 31\.6 Transmission lines and substations 8\.0 16\.5 24\.5 Engineering, consultancy services and supervision 7\.3 9\.0 16\.3 Construction equipment 0\.2 6\.2 6\.4 Duties and taxes 17\.5 - 17\.5 Contingencies Price 15\.5 27\.6 43\.1 Physical 6\.5 7\.1 13\.6 Total Project Costs 113\.0 184\.0 297\.0 Financing Plan: EGAT 113\.0 - 113\.0 KFAED - 22\.0 22\.0 Suppliers' credits and commercial banks - 82\.0 82\.0 IBRD - 80\.0 80\.0 Total 113\.0 184\.0 297\.0 Estimated Disbursements from Bank Loan: ------------- $ million ------------ Bank FY 1980 1981 1982 1983 1984 Annual 1\.5 13\.0 57\.0 1\.0 7\.5 Cumulative 1\.5 14\.5 71\.5 72\.5 80\.0 Rate of Return: 13% Appraisal Report: No\. 2271-TH dated April 5, 1979  REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN TO THE ELECTRICITY GENERATING AUTHORITY OF THAILAND WITH THE GUARANTEE OF THE KINGDOM OF THAILAND FOR THE BANG PAKONG THERMAL POWER PROJECT 1\. I submit the foilowing report and recommendation on a proposed loan to the Electricity Generating Authority of Thailand (EGAT), with the guarantee of the Kingdom of Thailand, for the equivalent of $80 million to help finance the Bang Pakong Thermal Power eroject\. The loan would have a term of 20 years including five years grace with interest at 7\.9% per annum\. The Kuwait Fund for Arab Economic Development is considering co-financing the project with a loan of $22\.0 million equivalent on terms of 25 years, including 7 years of grace with interest at 3-1/2% per annum\. EGAT is also seeking $19 million from commerical banks and suppliers' credit financing of about $63 million\. PART I - THE ECONOMY /1 2\. A Basic Economic Report entitled "Thailand - Toward a Strategy of Full Participation" (2059-TH) was distributed to the Executive Directors on September 18, 1978\. The Report forges a iink between the overall development of the economy and the extent and incidence of poverty\. It concludes that Thailand's rapid economic growth over the past 15 years has led to a signifi- cant reduction in absolute poverty, but that nevertheless important groups have lagged behind\. It identifies the essential characteristics of these groups and points to the need for continued rapid overall development as well as the initiation of specific measures to deal with the poverty problem, particularly in rural areas\. It further discusses the constraints that will have to be faced if these policies are to be successfully implemented\. Country data are given in Annex I\. Recent Political Developments 3\. Despite frequent changes at the top levels of government, there is a fundamental stability in Thai society and the bureaucracy\. Recent changes in governments have mainly reflected differences in view about Thailand's external relations and on the political decision-making process within the country and not fundamental differences about the social or economic system\. The civilian government formed in November 1977 under the Prime Ministership of General Kriangsak Chomanan, then Commander in Chief of the Army, has moved successfully to consolidate Thailand's external position by improving and stabilizing relations with Thailand's Indochinese neighbors and by strengthen- ing relations among its ASEAN partners\. The constitutional assembly under the interim constitution completed its work and a new constitution was promulgated in December 1978\. Elections are scheduled for April 22, 1979\. Because of the structure of the selection process, it is expected that Kriangsak will be /I Parts I and II are essentially the same as in the recent President's Report (No\. 2471-TH) dated February 22, 1979 for the Fifth Railway Project in Thailand, distributed to the Executive Directors on March 6, 1979\.  nominated Prime Minister\. The relative strengths of the political parties in the election will determine the exact makeup and orientation of the new Government\. It is unlikely, however, that the results of the election will impair the country's political stability or reduce its commitment to poverty alleviation and reduction of income disparities\. 4\. A broad concensus has been developing over the last several years on the priorities for socioeconomic development, and all recent governments have endorsed the objectives and major strategies of the country's Fourth Five-Year National Economic and Social Development Plan (1977-81)\. There is now increas- ing concern to achieve a widespread distribution of the benefits from growth\. In the past several years the Government has initiated efforts to increase the flow of public resources to the poor rural areas, including the Tambon program of direct transfers to villages in 1976, the drought relief program in 1977, and the flood relief program in 1978\. All these programs have been designed to produce quick and visible results, the latter two in response to specific crises, but they were also aimed at increasing production capacity in rural areas and demonstrating the concern of the Central Government for the plight of the rural population\. When the new Government is installed for a four-year term after the April elections, it will be in a better position to pursue more long-term solutions as well\. There is an increasing realization that an improvement in the conditions of the poorest farmers and those living in the more remote areas is not only desirable in itself, but would also counteract insurgency in the long run\. Past Socioeconomic Trends and Recent Changes 5\. Thailand's economic performance since 1960 has been good\. Although there was some deceleration in recent years, the average annual real GDP growth rate from 1960 to 1978 was 7\.5%, or about 4\.4% per capita\. Real agricultural growth of 5% was a leading factor sustaining this expansion\. The cultivated area increased by about 4% per year, water control was improved, irrigation expanded and the cultivation of relatively new crops including maize, cassava, kenaf, sugar and rubber grew rapidly\. As a result, agriculture has also been a major contributor to export growth\. The Government maintained economic and price stability throughout the period and encouraged private savings and investment\. As a share of GDP, domestic savings fluctuated between 19% and 24%, and total investment between 20% and 27%\. The high level of private investment contributed to a real industrial growth of 10% and a real growth of manufactured exports of 30% per year since 1970\. All this was achieved with a limited inflow of foreign resources; until recently the resource gap remained below 5% of GDP, and in most years it was considerably smaller\. 6\. The growth in incomes has, however, not been evenly distributed throughout the country and at present there are very significant regional differentials in incomes and access to economic and social infrastructure\. While the regions are very different in terms of topography, climate, soils, urbanization, etc\., and present quite distinct problems for future development, there appears to be a close correlation between development and proximity to the center\. The Central Region, including Bangkok, has the highest average per capita income and is better served by roads, telecommunications, schools, public health and other services than the other three regions, the North,  Northeast and South\. The incidence of poverty is estimated at only around 10% in the Center, around 25% in the North and South, and around 35% in the Northeast\. Within the regions there is also considerable variation: farmers who have diversified into cash crops have generally enjoyed substantial growth in real incomes while the incomes of those who have been unable or unwilling to shift out of subsistence rice culture have stagnated\. This is most conspicuously the case of the rainfed rice farmers in the Northeast and North\. Given a well-functioning labor market, the low incomes of this large group have tended to depress unskilled wages throughout the economy\. 7\. Overall, the rate of GDP growth declined in the 1970s to 7\.1% p\.a\. compared to 8\.3% in the 1960s\. In addition to external factors (the oil price increase and its aftermath), the major domestic factor responsible for this deceleration is the increasing scarcity of land\. Production has been pushed into less fertile soils causing a decline in the rate of agricultural growth to about 4\.6% p\.a\. since 1970 compared to 5\.7% in the 1960s\. During 1973 and part of 1974, this secular deceleration was hidden by very high prices for Thailand's main export products and a domestic investment boom\. This was accompanied by rapid domestic inflation, which led the Government to curtail sharply the public investment program in 1974 and 1975\. Price stability has largely been restored and private domestic investment remains high at 17-18% of GDP\. The economy expanded rapidly in 1978 and inflation again threatens to become a serious problem\. The economy has demonstrated considerable resiliency in the face of external shocks and the political uncertainty that has existed in Southeast Asia for the past decade\. The real GDP growth rate never fell below 5% and exceeded 7% since 1975\. 8\. Thailand's terms of trade and agricultural export prospects are now less favorable than in the early 1970s\. It is facing severe restrictions on two of its major exports to the European Economic Community, cassava and canned pinapple, and its sugar exports are limited by the International Sugar Agreement\. The balance of payments, which recorded surpluses in 1973-74, has since been running large deficits\. The current account deficit reached $1,241 million, or 6% of GDP in 1978\. The Government has significantly increased its foreign borrowing from traditional sources, from the Eurodollar market and from the IMF to finance these deficits\. Foreign exchange reserves have also been used extensively\. To contain the balance of payments deficit, the Government, in March 1978, raised tariffs on 141 "nonessential" imports and increased excise taxes on a number of items, most notably gasoline\. It raised the gasoline price again in February 1979 and started an energy conservation program to try to contain the oil import bill\. Objectives, Constraints and Prospects 9\. Thailand is currently in the second year of its Fourth Five-Year Development Plan (1977-81)\. The first two Plans concentrated on providing necessary economic infrastructure to facilitate and accommodate the rapid growth that was taking place in the economy\. The strategy proposed in the Third Plan moved beyond the previous Plans to "alleviate problems related to the widening income gap and inequitable distribution of social services\." However, actual budgetary allocations have not always reflected these priori- ties, and there has not been a major shift in expenditure patterns\. The  -4- concentration of senior staff of the ministries in Bangkok and the high degree of centralization of authority at the departmental level has been a major factor impeding reallocation of resources\. There is little regional delegation of authority, and the close cooperation within and among ministries necessary to implement new-style integrated development projects has been lacking\. These problems have been recognized and the Government is implementing a number of long- and short-term measures to modernize its development adminis- tration and expedite project execution, including a major reform in 1976 of the civil service personnel, planning and staffing procedures, establishment of special project committees, and implemen3tation of a revolving fund scheme to speed implementation of Bank-funded projects\. Continued improvement in development management is one of the principal objectives of our policy dialogue with the Government\. 10\. The Fourth Plan continues the shift in emphasis started in the Third Plan\. Its principal objectives are achieving 7% real growth, equitable distribution of income, reduction in the rate of population growth, faster generation of employment opportunities and balanced regional development\. Projected public sector development expenditures amount to $12\.5 billion for the Plan period, a 90% increase in real terms over the Third Plan\. However, the Plan addresses sectoral issues and strategies only in broad terms, and concrete policies and programs to meet the Plan's economic and social objectives remain largely to be defined\. The Bank and agencies of the Government are undertaking a number of studies to help the Govern2nt dzfine policies and programs to help achieve the Fourth Plan objectives\. These studies are focusing on problems of employment, income distribution, industrial policy, and regional development\. The Bank will be supporting a Provincial Planning program, and NESDB has just initiated a New Village Development Program designed to involve all levels in the determination and implementation of small-scale projects, initially in the poorest villages\. Japan has committed some $70 million to support the first two years of this program\. 11\. In looking ahead towards the 1980s, it is clear that many of the positive features which helped sustain a rapid rate of economic growth over the past two decades will continue to contribute to future growth: a relatively equitable distribution of rural land, responsiveness of Thai farmers to improved technology, extensive, albeit uneven, provision of infrastructure by the Thai Government, and the dynamism of the private sector in both industry and agriculture\. Also major gains have been made in family planning in recent years, slowing the annual rate of population growth from 3% during the 1960s to 2\.5% in 1977\./l The target for 1981 is 2\.1%\. 12\. However, some less favorable domestic factors are emerging\. As a result of very rapid population growth in the recent past, the labor force is expected to grow at 3% over the next decade, necessitating a very high rate of job creation\. Past growth has benefited some households a great deal and others not at all, creating increasingly obvious income disparities that could threaten the social cohesion of the country\. At the same time, additional fertile land, which has provided a livelihood for new entrants into the labor /1 This is a further decline from the 2\.9% average growth recorded in Annex I for the period 1970-76\.  force and has supported agricultural export growth in the past, is becoming increasingly scarce\. In view of these factors, continued reliance on the past pattern of development would lead to a deceleration of agricultural and overall growth in the next decade, resulting in persistently large balance of payments deficits, higher rates of unemployment or underemployment, and stagnating or declining real incomes of the poorer segments of the population, especially in rural areas and among unskilled workers\. Thus, a shift in the development pattern is necessary not only for social, but also for economic reasons\. 13\. The key development issue in Thailand is how to shift the economy from a pattern of growth based on the extension of land under cultivation and on import-substitution industries to one based on increasingly intensive use of land and on industries producing for domestic and export markets under competitive conditions\. Effective policies and programs will be necessary to ensure that economic growth is maintained and income disparities reduced, or at least not widened during this period of transition\. In the past, the Government's role has been confined to largely short-term economic management, where its performance has been good, and to the provision of basic economic and social services\. In order to achieve a relatively smooth transition, the Government will now have to undertake more coordinated and longer-term actions\. 14\. Agriculture will continue to be a crucial sector since it directly generates 30% of GDP, provides about 65% of exports, employs 70% of the labor force, and provides a livelihood for 90% of Thailand's poor\. Future growth of the sector will have to be based on more intensive utilization of cultivated areas, improvement in yields, continued diversification of crops, improved cropping patterns and farming practices, and the availability of agricultural credit\. All of these imply an increased goverament role in the rural sector\. As a matter of high priority, special programs will have to be employed to accelerate income growth for those who have not fully participated in the recent growth in rural income\. These programs should aid the development of upland and rainfed lowland areas through research, extension services and rural infrastructure development\. In addition, wherever technically feasible, irrigation development, with the associated introduction of high-yielding varieties, greater use of fertilizers and other commercial inputs should be continued\. The Bank's lending program is being reoriented to support these efforts (see para\. 22)\. 15\. While growth in the agricultural sector may be expected to remain fairly rapid for some time to come, the burden of sustaining future growth will have to shift progressively to the industrial sector\. Industry, construc- tion and services will have to provide an increasing share of employment for the growing population\. This will require modifications of industrial policy and programs with the prime objective of creating jobs for the rapidly growing labor force at rising levels of productivity and wages\. Greater effort will be required to encourage the location of industries outside Bangkok and to promote small-scale and rural industries\. While continued rapid growth of manufactured exports is essential, the large domestic rural population also offers market opportunities for a balanced industrial growth strategy based on production of low-income consumer goods, agricultural inputs and equipment for local use, and processed agricultural products for urban consumption and  - 6 - export\. Our policy dialogue will concentrate on efforts to reduce price distortions, increase the availability of credit, and eliminate impediments to efficient production for domestic and foreign markets so that the dynamic private sector can realize its potential for spurring growth and creating jobs\. 16\. The Consultative Group for Thailand met in Paris on December 5 and 6, 1978 under the chairmanship of the Regional Vice President for East Asia and the Pacific\. The Group noted with satisfaction the positive results of past development efforts in Thailand as summarized in the recently issued economic report (2059-TH)\. The Group also supported the conclusions of the report and of the analysis of the Thai delegation, led by the Minister of Finance, that major new efforts were needed to reduce the incidence of poverty and to maintain the past rates of growth\. Programs to accelerate rural development, raise productivity, and thereby accelerate poverty alleviation were called for as the first priority\. In addition, it was recognized that expanding industrial production along the lines of Thailand's comparative advantage was essential to the country's long-term prospects\. The Thai delegation presented the New Village Development Program to the donors and it was favorably received\. Resource Requirements 17\. The implementation of policies needed for a satisfactory rate of economic and social progress will necessitate a steady increase in public expenditures over the next few years\. This will require much greater efforts to mobilize both domestic and external resources than in the past\. Government domestic revenue as a percentage of GDP (15\.5% for 1974-78) is low compared to other developing countries at similar levels of development due to low tax rates, high exemptions and a somewhat below-average rate of compliance\. The Government has achieved a modest improvement in resource mobilization through revision of the tax structure and income and better collection efforts\. It is currently investigating other more efficient tax systems, such as the value added tax\. Such changes would also make it feasible to reduce taxation of foreign trade, particularly on rice and other exports, which has inhibited agricultural growth\. 18\. During the coming 5-10 years, there will be significantly greater demands on external resources than has been the case in the past as the cost of any attempt to reduce the presently existing resource deficit rapidly would be high in terms of growth and employment opportunities foregone\. Despite an average real growth of exports in excess of 8% and a modest improvement in the terms of trade, large trade and current account deficits are expected through the mid-1980s\. The needs for capital goods imports for industry and for modern inputs to raise agricultural productivity are such that the current deficit is not expected to decline rapidly\. In the longer term, the exploita- tion of the natural gas fields in the Gulf of Thailand, further development of its lignite resources, the continued growth of manufactured exports and the development of Thai industries should restore external equilibrium and sig- nificantly reduce the current account deficits in the second half of the 1980s\. Although the levels of foreign borrowing needed to finance these deficits are high in relation to Thailand's past experience, they are not high in relation to the current needs of the Thai economy or in comparison to other  countries at similar stages of development\. With a dynamic private sector and a long history of conservative monetary and fiscal policy, Thailand should be able to use the resources effectively and service the debt\. 19\. Official donors, particularly Japan and the development banks, have been expanding their programs to meet a part of the rising requirements\. The rest has been financed in the Eurodollar market and bond markets, and by the utilization of IMff resources for 1978/79 totalling about $200 million\. The Government has established a Foreign Loan Policy Committee to coordinate and approve all foreign borrowinR bv the Government and public sector\. The Bank of Thailand is establishing procedures for recording private borrowing abroad in order to keep track of total foreign debt\. Thailand's external public borrowing requirements to the end of the Fourth Plan period (1981) and the level of concessionality were reviewed at the last Consultative Group meeting\. It was agreed that, although high, the aid requirements were consis- tent with Thailand's development strategy and sustainable for the economy\. The need for continued substantial support on concessional terms was emphasized\. 20\. It is likely that by 1985, net disbursements will more than double in current terms for both public and publicly guaranteed borrowing and private borrowing, although in real terms the growth is much less\. Even with this increase in borrowing, the debt service ratio on public debt (3\.8% in 1977) should remain below 10% through 1985 and decline thereafter\. The debt service ratio on total civilian borrowing, currently about 15%, should not exceed 20%\. IBRD exposure in Thailand will fall as other donors increase their programs\. Given the diversification of Thai commodity exports and the rapid expansion of manufactured exports, these debt service requirements will be within Thailand's capacity and will not endanger its credit standing\. It should be noted, however, that these projections assume a significant level of conces- sional assistance from other donors, particularly Japan, in view of that country's announced intention to expand its foreign aid program\. PART II - WORLD BANK OPERATIONS IN THAILAND 21\. Thailand first borrowed from the Bank in 1950 and has received 48 loans amounting to $1,274\.7 million, net of cancellations\. Most of these have been for transportation ($295\.5 million), irrigation ($236\.3 million) and power/energy and rural electrification ($245\.4 million) with, in addition, one for a dual-purpose power and irrigation project ($65\.8 million)\. The remaining loans have been for telecommunications ($153 million); other agri- culture and rural development ($104 million); urban development ($79\.6 million); education ($52\.3 million); and industry ($42\.8 million); two loans were made under the terms of the Interest Subsidy Fund\. Thailand has also received four IDA credits! one for $19\.5 million for an education project; two credits totaling $12\.5 million for irrigation improvement; and one credit of $33\.1 mil- lion for a population project\. In general, Bank Group-financed projects have been carried out satisfactorily and in accordance with expectations\. Annex II contains a summary statement of Bank loans, IDA credits and IFC investments as well as notes on the execution of ongoing projects as of February 28, 1979\.  - 8 - 22\. Over the past five years, the Bank has shifted its lending to Thailand from a program dominated by investments in traditional infrastructure projects (accounting for over 80% of the lending through FY74) to a program which places increasing emphasis on assisting the Government's efforts to reach the poorer segments of its population more directly\. Since FY75, investments in transportation, power, water supply, telecommunications and industry have accounted for only about 40% of Bank Group lending and more than half of these, in dollar terms, were for projects specifically designed to benefit the rural population\. The proportion of Bank lending to the agricultural/rural development sector has trebled, accounting for about 45% of lending operations since FY75\. The design of projects in this sector has also changed, from exclusively large irrigation projects to a program balanced between irrigation (including land development and support services to the farmer) and a variety of innovative projects to assist farmers outside the central flood plain (rubber replanting; livestock, agriculture extension, research and rural development)\. Projects in the social sectors - which prior to FY75 were limited to three in education accounting for 6% of the program - have both diversified and grown; such projects have in recent years included education, population and low-income housing for about 13% of the program\. 23\. The findings of the recent Basic Economic Report not only verify the appropriateness of the shift mentioned above, but also underscore the need to move even further to design programs which help the rural population, particularly those farmers in rainfed areas who have so far been largely bypassed by recent economic growth\. In the agricultural sector, therefore, the Bank is redoubling its\.efforts to develop a package of supporting activi- ties which will help to lift the rainfed farmers out of a subsistence existence\. A combination of education, agricultural research and extension, credit and improved infrastructure is foreseen, though a viable package for the poorest and most remote farmers has yet to be developed\. Expansion and improvement of irrigation systems will continue, with increased emphasis on reaching those farmers with irrigation potential in the northern, northeastern and southern regions\. The program of transportation, electrification, water supply and telecommunications projects will also continue to have a rural focus\. A key element of the strategy outined in the Basic Economic Report is the creation of jobs and stimulation of increased economic activity away from Bangkok\. The bulk of the Bank Group's urban and industrial lending is, therefore, being directed to the provinces as well as to assist the Government in the preparation of projects to enhance the attractiveness of regional urban centers\. Selected projects in Bangkok will be aimed at strengthening agencies providing services to the urban populace and the development of low-cost, replicable programs to meet the demands of the dynamic urban sector, particularly the urban poor, without diverting scarce resources from other high-priority development needs\. 24\. The Bank's strategy of placing an increasing share of its program into projects alleviating poverty and promoting rural development will be difficult to execute without considerable technical assistance toward project preparation\. The Bank's regional mission in Bangkok will continue to play a vital role in helping to identify and prepare such projects\. Promoting overall growth also has a high priority in Thailand and is a necessary element in the poverty alleviation strategy\. The resource requirements for infrastruc- ture development are large and the Bank is concentrating its remaining funds in projects where it can have a catalytic role in effecting policy changes,  - 9 - mobilizing other resources, and directly facilitating growth in rural areas\. The Bank is also expanding its support of the industrial sector through its economic and sector work as well as selected projects in order to help promote industrial policy which favors more labor-intensive and dispersed activities to complement Thailand's efforts in poverty alleviation and in reducing income differentials in rural areas\. 25\. Bank loans and IDA credits, disbursed and outstanding, amounted to $365 million, as of December 31, 1977, representing about 38% of public external debt (disbursed and outstanding)\. This is not excessive in view of Thailand's modest overall public external debt (5\.2% of GDP in 1976)\. In addition, although the level of Bank commitments is expected to increase over the next five years, the Bank Group's share is projected to decline below 30% of total public external debt by 1982\. The Bank Group's share in total debt outstanding would remain at about 20%, and its share of debt service is not expected to exceed 10%\. 26\. As of February 28, 1979, IFC has made commitments totalling $83 mil- lion in 10 projects in Thailand\. IFC's activities have been primarily in industry and in financial institutions development aimed at mobilizing domestic resources and providing financing to smaller enterprises\. Prospects for increased IFC operations in Thailand have been enhanced by expanding private sector investment activity\. In addition, consultations with the Government have identified several areas where IFC's assistance may be needed\. These areas include very large and complex projects such as a proposed sponge iron project and a soda ash project to serve the ASEAN community; projects in the petroleum and downstream petrochemical sector; and projects in the agricultural sector\. In addition, the Corporation expects to continue to help traditional manufac- turing projects and to assist in financial institutions and money market developments\. PART III - THE POWER SECTOR Energy Consumption and Resources 27\. Total energy consumption in Thailand has increased from 5\.31 million tons of oil equivalent in 1970 to over 11 million tons in 1977, an average annual growth rate of 10%\. Petroleum products account for about 82% of total energy and hydro for another 8%\. 28\. Thailand's energy resources consist of hydro-power, petroleum, lignite (low-grade coal), oil shale deposits, and natural gas\. Hydro potential (excluding that of two international rivers, the Mekong and the Salween) totals about 9,900 MW, of which about 3,600 MW or 36% are being exploited or are under study\. Interest has been expressed in developing the considerable hydroelectric potential of the Mekong River, but political and resettlement problems make such development unlikely in the near term\.  - 10 - 29\. Proven petroleum reserves total about one million barrels with pro- duction currently at about 100,000 barrels annually (less than 0\.2% of annual consumption)\. The total lignite reserves were estimated at about 235 million tons, of which about 110-130 million tons are proven reserves\. Production was about 520,000 tons in 1977\. EGAT has plans to utilize the known reserves for power generation by adding two units of 150 MfW each at the Mae Moh thermal plant\. A recent estimate made by the Bank indicated that lignite reserves might be as high as 650 million tons in total and may ultimately be capable of supporting 2,000 MW of electricity generating capacity\. There are extensive oil shale reserves estimated at 2\.700 million tons but oil troduction from shale is still uneconomic\. The two most promising natural gas finds so far discovered in the Gulf of Thailand indicate a proven reserve of at least 1\.1 trillion cubic feet (capable of producing about 27,000-43,000 barrels/day oil equivalent for 20 years) from one field area and probably reserves of about 3\.5 trillion cubic feet of somewhat inferior quality gas from the other field area\. Recently, the Bank made a loan (S-10-TH) to help finance the engineering and related studies required prior to the construction of a pipeline which would carry the natural gas from the off-shore production areas to the principal market areas, including the Bang Pakong power station which is the subject of this report\. The substitution of gas for imported fuel oil in electricity generation will considerably reduce demand for fuel oil and result in foreign exchange savings estimated to rise from about $50 million a year to about $400 million a year in the mid-1990s in current prices, an average of about $150 million per year\. The realized foreign exchange savings will depend on the level of gas used and the final production costs\. 30\. An Energy Master Plan study is being undertaken by the National Energy Authority (NEA) financed by the United Nations Development Program (UNDP), with the Asian Development Bank as the executing agency\. The Plan will define a program for meeting Thailand's energy requirements up to the year 2000\. It is expected that the study will begin in August 1979 and be concluded in January 1981\. A study of the refinery expansion will be under- taken as the first stage and results will be available by January/February 1980\. During the second stage of the study, apart from looking into various issues relating to the energy sector in Thailand, ADB will: (a) review the present structure of energy demand in Thailand, and forecast future energy demand by energy type in the major sectors of the economy; (b) develop an energy supply scenario and the optimum mix between the various sources of energy; and (c) set out a detailed energy conservation program sector by sector with targeted savings and operational procedures\. Sector Utilities 31\. The three state enterprises comprising the sector are operated efficiently as separate autonomous entities\. However, overall macro policy planning and coordination need strengthening as mentioned in paragraph 32\. The Electricity Generating Authority of Thailand (EGAT), to which the proposed loan would be made, has major responsibility for generation and transmission; it sells energy in bulk to large industrial consumers and to the two power distribution authorities\. The Metropolitan Electrical Authority (MEA) is responsible for supplying electricity in the Bangkok metropolitan area, and the Provincial Electricity Authority (PEA) supplies electricity to the rest of  - 11 - the country\. EGAT accounts for 94% of all electricity generated, the balance being generated by PEA in areas not yet connected to the grid and by several self-generating industries\. The three utilities' conservative commercial out- look needs to be changed in view of the Government's accelerated rural electri- fication program\. Sector Coordination 32\. In its 1976 Sector Report (No\. 1794-TH) the Bank recommended that planning and coordination among the three power utilities and the various Government agencies concerned with energy production and distribution should be strengthened to enable the sector to meet efficiently the country's demand for energy\. In 1977, the Committee on Power Policy and Development (CPPD) was formed to oversee the functioning and development of the power sector and to provide overall sector control\. However, since its formation, CPPD has not yet developed into an operating entity capable of coordinating planning activities, reviewing the utilities' development programs and projects or determining the adequacy of tariffs to maintain the sector's financial via- bility\. Currently six ministries and other government agencies besides CPPD, EGAT, MEA and PEA have a say in sector decision making\. Recently the cabinet proposed legislation for the establishment of a Ministry of Science, Energy and Technology, but it has not been decided whether the proposed ministry would have overall responsibility for the energy sector in place of the various ministries and government agencies\. During negotiations RTG repre- sentatives concurred that there was a need to study the issue of sector planning and coordination and it was agreed that by December 31, 1979, RTG would submit to the Bank for its review and comment proposals for a study to improve sector coordination (Section 3\.04 of the draft Guarantee Agreement)\. Further discussion on the sector coordination issue would take place within the context of the ongoing Power Sector loan appraisal\. It was also agreed that for the purpose of determining the optimal sequence of its system develop- ment, EGAT would, not later than January 1, 1980, undertake a study of future generation and transmission projects which shall include an in-depth review of the load forecast\. The findings of the study will be submitted to the Govern- ment and to the Bank by December 31, 1981 (Section 3\.06(a) and (b) of the draft Loan Agreement)\. Sector Financing and Tariffs 33\. Tariff policies proved adequate throughout the late 1960s and early 1970s, and the financial position of the sector remained strong; in fact, all three agencies were able to reduce their tariffs periodically due to conserva- tive financial management, economies of scale and consequent reduction in unit costs\. However, following the fuel crisis, the sector's financial position deteriorated\. The Government took various steps to cushion the effect of the fuel crisis (removing fuel taxes and duties and subsidizing the cost of fuel to EGAT) but these tended to distort the financial position\. Bank staff, after their review of the sector in 1976, recommended: (i) restoration of fuel taxes and customs duties; (ii) removal of the fuel oil subsidy to EGAT; (iii) provision of a fuel adjustment clause in the tariff schedules so that variations in fuel prices would be passed on to consumers; and (iv) an increase in tariffs for FY77-79 to cover the sector's financial gap between cash generation and borrowings, and construction costs as well as to compensate for  - 12 - increased operating costs\. The staff also recommended that a tariff study be undertaken to establish a simplified tariff system which would reflect the costs to the economy of meeting demand for electricity\. The tariff levels and structure would also ensure that sector revenues would be adequate to meet the sector's financial objectives and to provide for any income distribution objectives (subsidizing poor consumers)\. 34\. The Government has acted upon all the above-mentioned recommendations\. An increase in sector tariffs averaging about 29% was implemented on August 1, 1977; fuel subsidies were discontinued; taxes on fuel were restored; and a fuel adjustment clause was introduced\. The tariff study, whose recommendations were to be implemented by October 1, 1978, was delayed because of changes in load forecasts in the utilities development programs, and is still being carried out; those recommendations that will be agreed between Government and the Bank are expected to be implemented by December 31, 1979\. 35\. The steps taken by RTG restored the financial viability of the utilities and largely removed the need for further budgetary assistance\. However, the large financial requirements for PEA's accelerated rural electri- fication program called for cross-funding within the sector to ensure that adequate funds would be available for PEA's program\. The appropriate level of tariffs and cross-funding are among the issues being studied under the tariff study referred to above (paragraph 33)\. Under Loan 1527-TH (Accelerated Rural Electrification Project) it was agreed that the sector as a whole would earn an annual rate of return on revalued net fixed assets in operation of 7% for FY78 and FY79 and 9% in FY80 and thereafter\. A drought in 1977-78 and problems in the supply of fuel oil caused hydro reservoirs to be drawn down below normal operating levels\. Consequently, fuel oil based generation was higher than forecast for FY77-79, increasing EGAT's operating costs substantially\. The effect of the increased fuel consumption, coupled with increased costs due to wage awards, reduced EGAT's and the sector's rates of return to 3\.2% and 5\.3%, respectively, for FY78\. During negotiations, it was agreed that a tariff increase of approximately 30% is now required to restore the sector's financial viability, and it was agreed that a rate of return of not less than 7% would be targetted for both EGAT and the sector as a whole during FY80 and FY81 and of not less than 8% thereafter (Section 5\.04 of the draft Loan Agreement and Section 3\.02 of the draft Guarantee Agreement)\. Implementation of the tariff increase required to achieve a 7% rate of return in FY80 is a condition of effectiveness of the proposed loan (Section 7\.01 of the draft Loan Agreement)\. Bank Participation in the Sector 36\. Sector growth has been considerable\. Electricity demand and energy generation grew annually on average by 14% and 16%, respectively, since 1970 reaching 2,138 MW and 12,493 GWh in 1978\. The Bank has helped finance nine projects with 8 loans to EGAT, totaling $282 million, and one loan to PEA of $25 million\. EGAT's projects have included dam construction, equipment for hydro and thermal power generation, transmission and substation facilities\. Six projects have been completed and are operating satisfactorily; two are under construction\.  - 13 - 37\. The most recent loan (No\. 1527-TH), the first to PEA, is helping finance the rural electrification program\. The project is still in an early stage and some delays have arisen due to difficulties over procurement\. At present only about 27% of all households in Thailand have electricity, an increase from about 25% in 1976, and although the largest proportion of households connected are situated in Bangkok and its environs, the greatest growth rate is now taking place in the provinces\. The Bank intends to continue its role in assisting the rural electrification program and it is expected that by 1983 about 45% of the population will have access to electricity\. The proposed loan will enable EGAT to meet the country's increasing electricity demand including that of the rural electrification program\. 38\. The last power project performance audit report made in March 1978 for the South Bangkok Thermal Unit No\. 4 Project (Loan 790-TH) indicated that the main objectives of the project had been met\. The project was completed on time and within the original cost estimate\. PART IV - THE PROJECT Project History 39\. In 1976, EGAT approached the Bank for assistance in financing the project which had been demonstrated as necessary to meet the increasing load growth during the Bank's review of the sector earlier that year\. EGAT commis- sioned Black & Veatch International (BVI), consulting engineers from the USA, to carry out a feasibility study and assist EGAT in the preparation of the proposed project\. The project was appraised in August/September 1978\. Negotiations were held in Bangkok, Thailand from February 14 to February 28, 1979\. The Thai delegation was led by Mr\. Suphat Sutatum, Minister of Finance and Mr\. Kasame Chatikavanij, General Manager of EGAT and Minister of Industry\. Project Description and Objectives 40\. The project includes: (a) land procurement and site development of a thermal power station at Bang Pakong which would ultimately have four units of 500 MW capacity each; (b) construction of civil works including power plant structures and buildings, fuel supply handling and storage systems; water cooling systems, make-up water, etc\.; (c) supply and installation of the boiler, turbo-generator, auxiliary electrical, mechanical and miscellaneous equipment for the first 500 MW generating unit; (d) construction of a 230 kV switchyard at Bang Pakong, and substations at Rangsit and Bang Kapi and 110 km of the 230 kV transmission lines linking Bang Pakong power station to the EGAT grid; (e) supply of construction equipment; (f) engineering services; and (g) a study of future generating and transmission projects\. The project will help meet the country's growing electricity demand including that of the accelerated rural electrification program\.  - 14 - Location and Size 41\. The Bang Pakong thermal plant will be located about 60 km southeast of Bangkok at the mouth of the Bang Pakong River on the northern side of the Gulf of Thailand\. The project is a noteworthy step in the development of EGAT's power system in that the 500 MW units to be installed are 200 MW larger than the largest units currently in operation in EGAT's power stations\. On a least cost evaluation basis, the 500 MW unit is justified in relation to the number and size of existing generating units and an estimated maximum demand of about 4,000 MW when the Bang Pakong station starts operating in 1983\. The Borrower, EGAT 42\. EGAT was established in 1968 by the merger of three public power utilities (the Yanhee Electricity Authority, the Northeast Electricity Authority and the Lignite Authority) for the purpose of increasing the efficiency of the electricity supply throughout the country and to coordinate the generation and transmission systems\. It is a well-organized and well-operated utility with a considerable degree of autonomy\. Staff are well trained and competent\. EGAT has an able, energetic and highly regarded General Manager\. Future Investments, Sector Plans and Financial Planning 43\. EGAT's energy sales are forecast to increase at an average annual rate of 11\.5% through 1986\. The capital expenditures, including interest during construction, for the constructiuLn uf Lile piUnL aLii equipment required to meet such growth are estimated at $5\.5 billion at current prices through the period FY78-86\. EGAT's generation will continue to be based mainly on the use of fuel oil but natural gas and lignite-based generation is being developed\. The Bang Pakong and South Bangkok plants are likely to be fueled by natural gas now being developed, and the Mae Moh plant, being constructed with financial assistance from the Asian Development Bank, will be fired with nearby reserves of lignite\. To meet the construction program, EGAT plans to borrow about 56% abroad to cover foreign costs, 16% locally, obtain 6% from the Government as equity and provide 22% from internal cash generation\. 44\. EGAT's financial position has been sound although a tariff increase is now required to offset the effects of adverse weather and increased fuel costs (see paragraph 35)\. In addition to earning a satisfactory rate of return o\. \.ually revalued assets which should enable EG^T to contribute an average of about 21% towards the costs of its construction program during the period 1980-1983, EGAT has agreed to maintain a debt/equity ratio of no more than 60:40, the maximum being 58:42 in 1981 (Section 5\.05 of the draft Loan Agreement)\. Debt-service coverage will range between 1\.3 and 3\.0 times on an annual basis between 1978 and 1986; EGAT will limit its short- and medium-term debt to 15% of total debt (Section 5\.06 of the draft Loan Agreement)\. Cost Estimates 45\. The total cost of the project is estimated at $297 million, excluding interest during construction, and includes $17\.5 million equivalent in duties and taxes and a foreign exchange component of $184 million\. Estimates are  - 15 - based on recent bid prices for similar works and equipment in the region\. Total contingencies amount to $57 million, about 24% of base cost at mid-1978 prices, and were calculated on the basis of assumed annual rates of escalation of 8% for 1978, 7\.5% for 1979 and 7% thereafter for civil works; and 7% for 1978, 6\.5% for 1979 and 6% thereafter for plant and equipment and transmission facilities\. Costs are summarized in the Loan and Project Summary\. Financing 46\. Project costs will be met by the proposed Bank loan of $80 million (about 29% of total project costs net of taxes and duties); a loan of $22 mil- lion equivalent from KFAED, suppliers' credits amounting to about $63 million, commercial bank loans of about $19 million and a mixture of EGAT's self-generated funds, local borrowing and equity of $113 million equivalent\. The KFAED loan was negotiated in March 1979, and is expected to be considered by the KFAED Board in May 1979\. The financing arrangements with suppliers and commercial banks are still provisional; EGAT has asked for cash and credit terms in its bid documents for the equipment to be financed by suppliers' credits but may resort to commercial bank financing if better terms can be obtained than those offered by suppliers\. Most of the major items would be financed by more than one of the four co-lenders\. The Bank loan would be used to finance the foreign exchange cost of the turbo-generator package, auxiliary electrical, mechanical and miscellaneous equipment and part of the engineering services\. The KFAED loan would finance part of the foreign exchange cost of the boiler plant package, transmission lines and substations\. Commercial bank loans would finance the foreign exc1idLIi1 cost of conoLructLl\.o Z civil works, part of engineering and consultancy services\. The remaining foreign cost required for the boiler plant package, transmission lines and substations would be financed by suppliers' credits\. The Borrower and the Guarantor gave their assurances that financing arrangements with KFAED, suppliers and commer- cial banks would be finalized no later than dates specified by the Bank (Section 6\.01(c)(i) of the draft Loan Agreement)\. Implementation and Construction 47\. EGAT will be responsible for implementing the project\. The consul- tants, BVI, will provide engineering services and construction supervision\. Installation of equipment in the power plant and substations will be undertaken by EGAT's own workforce supervised by manufacturers' field engineers\. The 230 KV transmission line will be c3natructed by thc suppli_rz _\. a supply and erect basis\. The target date for completion of construction work is December 1983\. EGAT will also employ consultants, not yet selected, to undertake a study of future generation and transmission projects\. EGAT possesses adequate experience in construction of thermal power plants and its record in project implementation has been good\. Procurement 48\. Materials and equipment financed by the Bank will be procured under international competitive bidding in accordance with Bank guidelines with preference of 15% (or the custom duties, if less) being granted to local manufacturers\. Contracts for the purchase of minor equipment items not exceeding the equivalent of $150,000 each and not exceeding, in the aggregate,  - 16 - the equivalent of $2\.0 million will be awarded in accordance with local procurement procedures acceptable to the Bank\. Procurement of items financed by KFAED will follow its normal procedures\. Disbursements 49\. Disbursements from the proposed Bank loan would be made at the rate of 100% of foreign exchange cost of the turbo-generator package; 100% of the foreign exchange cost of directly imported equipment and material; 100% of the ex-factory cost of equipment manufacture2 l^cally; and 65% of total expendi- tures for equipment and materials procured locally off-the-shelf\. Disburse- ments for the engineering services would be at 50% of the foreign exchange costs\. Disbursements by the Bank are expected to be completed by June 30, 1984\. Justification and Benefits 50\. EGAT has sufficient installed capacity to meet its energy and capacity requirements until FY82\. However, the expected increase in energy requirements in EGAT's system, by FY83, would be around 2,000 GWh a year, equivalent to about 270 MW in capacity at a plant factor of 0\.85\. This will be difficult to provide from hydro projects\. With the commissioning of Unit No\. 5 at South Bangkok Thermal Plant, that site has been fully developed\. EGAT also plans to utilize fully the known lignite reserves for power genera- tion by adding two units of 150 MW each at the Mae Moh Thermal Plant; however, any further development would require additional drilling, siting and other studies\. Similarly, nuclear power could not be installed before 1987-88 due to the long gestation period required for the first unit\. A thermal plant fueled by gas and/or fuel oil is, therefore, the only alternative and the 500 MW size was chosen after a comparison with alternative planting up sequences using 300 MW units\. The sequence, including a 500 MW unit at Bang Pakong followed by the Khao Laem hydroproject, was found to be the least cost solution at discount rates up to 11\.4%\. The boiler's capability of being dual-fired is an additional attribute of the project because it will allow EGAT flexibility to utilize either natural gas or oil\. 51\. Using the average consumer tariff revenues for FY82 required to earn 8% on revalued net fixed assets of the sector, adjusted to 1978 price levels, as a proxy for the benefits of the project, the internal economic rate of return is estimated at 13%\. Ecology 52\. The proposed power station will be located in an area with little development and very few inhabitants\. The site is virtually uninhabited; consequently, there are no resettlement problems\. The nearest town is about 4 km distant, outside the track of the prevailing wind from the site\. Products from the combustion of natural gas are harmless and burning gas, therefore, poses no hazard\. In view of possible future use of fuel oil, if alternative uses for the natural gas are developed, consultants have conducted a study on the effects of stack emmission, and on the basis of their recommend- ations, the stack will be built to a height of 122 m in order to keep the maximum ground level concentration of sulfur dioxide concentrations below the standards prescribed by the US Environmental Protection Agency\.  - 17 - Risks 53\. EGAT possesses adequate experience in the construction of thermal power plants and its record in project implementation has been very good\. The consultants, BVI, are well known internationally and have had long experience in Thailand\. No risks due to typhoon, earthquake or flood are expected\. One possible uncertainty would have been the bearing capacity of the soil foundation\. However, tests conducted have indicated satisfactory results\. PART V - LEGAL INSTRUMENTS AND AUTHORITY 54\. The draft Loan Agreement between the Bank and the Electricity Generating Authority of Thailand, the draft Guarantee Agreement between the Kingdom of Thailand and the Bank, and the report of the Committee provided for in Article III, Section 4(iii) of the Articles of Agreement are being distributed to the Executive Directors separately\. In addition to the features of the proposed project which are referred to in the text and listed in Section III of Annex III, another feature of particular interest is that the implementation of a tariff increase to enable EGAT and the electricity sector to earn a rate of return of not less than 7% in FY80 is a condition of loan effectiveness (Section 7\.01 of the draft Loan Agreement)\. 55\. I am satisfied that the proposed loan would comply with the Articles of Agreement of the Bank\. PART VI - RECOIMENDATIONS 56\. I recommend that the Executive Directors approve the proposed loan\. Robert S\. McNamara President Attachments April 12, 1979 Washington, D\.C\.  - 18 - Annex I P\.g\. Iof 5 TABLE 3A ThAILAND - SOCIAL INDICATORS DATA SHEET REFERENCE GROUPS (ADJUSTED AERAGES LAND AREA (THOUSAND SQ\. KM\.) THAILAD - MOST RECENT ESTIMATE) TOTAL 514\.0 SAME SAME NEXT HIGHER AGRICULTURAL 238\.5 MOST RECENT GEOGRAPHIC INCOME INCOME 1960 /b 1970 /b ESTIMATE lb REGION Ic GROUP /d GROUP GNP PER CAPITA (US$) 100\.0 200\.0 410\.0 616\.0 432\.3 867\.2 ENERGY CONSUMPTION PER CAPITA (KILOGRAMS OF COAL EQUIVALENT) 64\.0 247\.0 284\.0 522\.0 251\.7 578\.3 POPULATION AND VITAL STATISTICS TOTAL POPULATION, MID-YTAR (MILLIONS) 26\.6 36\.3 44\.1 URBAN POPULATION (PERCENT OF TOTAL) 12\.7 15\.0 16\.8 30\.1 24\.2 46\.2 POPULATION DENSITY PER SQ\. KK\. 52\.0 71\.0 86\.0 156\.8 42\.7 50\.8 PER SQ\. E4\. AGRICULTUJ\. LAND 112\.0 152\.0 185\.0 794\.8 95\.0 93\.3 POPULATION AGE STRUCTURE (PERCENT) 0-14 YRS\. 45\.1 44\.8 43\.7 40\.8 44\.9 42\.9 15-64 YRS\. 52\.9 52\.3 53\.2 55\.4 52\.8 53\.5 65 YTS\. AND ABOVE 2\.6 2\.9 3\.1 3\.2 3\.0 3\.5 POPULATION GRONYH RATS (PERCENT) TOTAL 3\.2 3\.0 2\.9 2\.3 2\.7 2\.5 URBAN 5\.1 5\.0 4\.6 5\.1 8\.8 4\.7 CRUDE BIRTH RATE (PER THOUSAND) 44\.9 41\.4 34\.9 34\.6 42\.2 37\.8 CRUDE DEATH RATE (PER THOUSAND) 13\.8 10\.7 8\.9 8\.7 12\.4 10\.8 GROSS REPRODUCTION RATE \. 3\.2 3\.1 2\.6 3\.2 2\.5 FAMILY PLANNING ACCEPTORS, ANNUAL (THOUSANDS) \. 405\.6 2680\.2 USERS (PERCENT OF HARRIED WOMEN) \. 14\.0 37\.0 22\.1 14\.2 20\.0 FOOD AND NUTRITION INDEX OF FOOD PRODUCTION PER CAPITA (1970-100) 68\.0 100\.0 104\.7 106\.8 104\.3 107\.3 PER CAPITA SUPPLY OF CALORIgS (PERCENT OF REQUIREIENTS) 96\.0 103\.0 107\.0 108\.7 99\.5 105\.3 PROTEINS (GRAMS PER DAY) 47\.0 52\.2 50\.0 57\.7 56\.8 63\.0 OF WHICH ANIMAL AND PULSE 8\.4 *- 14\.6 17\.0 17\.5 21\.7 CHILD (AGES 1-4) MORTALITY RATE 10\.4 5\.3 \. 4\.0 7\.5 8\.0 HEALTH LIFE EXPECTANCY AT BIRTH (YEARS) 49\.0 55\.5 58\.0 59\.0 53\.3 57\.2 INFANT MORTALITY RATE (PER THOUSAND) \. 80\.0 56\.3 44\.0 82\.5 53\.9 ACCESS TO SAFE WATER (PERCENT OF POPULATION) TOTAL \. 17\.0 25\.0 21\.9 31\.1 56\.8 URBAN \. 60\.0 69\.0 58\.3 68\.5 79\.0 RURAL '' 10\.0 16\.0 9\.8 18\.2 31\.8 ACCESS TO EXCRETA DISPOSAL (PERCENT OF POPULATION) IOTAL \. 17\.0 40\.0 28\.6 37\.5 30\.9 URBAN \. 65\.0 58\.0 66\.6 69\.5 45\.4 RURAL \. 8\.0 36\.0 14\.8 25\.4 16\.1 POPULATION PER PHYSICIAN 7800\.0 7070\.0 6750\.0 4103\.1 9359\.2 2706\.8 POPULATION PER NURSING PERSON \. 6650\.0 4330\.0 1520\.2 2762\.5 1462\.0 POPULATION PER HOSPITAL BED TOTAL 1340\.0 \.fL 890\.0 770\.0 657\.1 786\.5 493\.9 URBAN ,, 280\.0 290\.0 145\.5 278\.4 229\.6 RURAL '' 1380\.0 1140\.0 1011\.8 1358\.4 2947\.9 ADMISSIONS PER HOSPITAL BED \. 31\.0 19\.0 19\.0 19\.2 22\.1 HOUSING AVERAGE SIZE OF HOUSEHOLD TOTAL 5\.5 jf 5\.8 5\.5 5\.2 X 5\.2 URBAN 5X3f 5-9 5-5 5\.2 5\.0 RURAL 5\.6 5\.8 5\.5 5\.4 5 4 AVERAGE NUMBER OF PERSONS PER ROOM TOTAL \. \. \. \. \. 2\.0 URBAN 2\.3 RURAL 2 \.3 27 kCCESS TO ELECTRICITY (PERCENT OF DWELLINGS) TOTAL 24\.6 39\.1 28\.3 64\.1 URBAN \. 63\.0 XL \. \. \. 67\.8 RURAL \. 13\.0 10\.3 34\.1  - 19- Annex I PFee 2 of 5 TEAILIID - SOCIAL INDICATOR8 DATA SBtET RERnnlCE 01o0ps (ADJUSTED AVERACES TRAILAND - IIOST UCET ESTIMATE)S SAlll SABlE NEXt HIGHER NDOST RECr GCOGCRAPIC INCOME INCOME 1960 /b 1970 /b IESTIMATE U RCION Lc GROUP Id GROUP L EDUCATION ADJUSTED ENROLLMENT RATIOS PRIMARY: TOTAL 136\.0 81\.0 78\.0 95\.6 75\.8 99\.8 FiALE 128\.0 77\.0 75\.0 93\.7 67\.9 93\.3 SECONDARY: TOTAL 8\.0 17\.0 25\.0 43\.3 17\.7 33\.8 FEMALE 6\.0 14\.0 21\.0 38\.6 12\.9 29\.8 VOCATIONAL (PERCENT Of SECONDARY) 19\.0 24\.0 13\.0 11\.3 7\.4 12\.8 PUPIL-TEACHER RATIO PRIMARY 36\.0 35\.0 30\.0 30\.0 34\.3 34\.9 SECONDARY 20\.0 16\.0 21\.0 25\.4 23\.5 22\.2 ADULT LITERACY RATE (PERCENT) 68\.0 79\.0 82\.0 84\.0 63\.7 71\.8 CONSUMPTION PASSENGER CARS PER THOUSAND POPULATION 2\.0 5\.0 7\.0 9\.3 7\.2 12\.4 RADIO RECEIVERS PER THOUSAND POPULATION 6\.0 78\.0 135\.0 97\.6 71\.1 104\.5 TV RECEIVERS PER TWOUSANED POPULATION 2\.3 7\.0 17\.0 21\.8 14\.1 28\.1 NEWSPAPER ("DAILY GENERAL INTEREST") CIRCULATION PER THOUSAND POPULATION 11\.0 24\.0 \. 25\.9 16\.3 45\.2 CINEMA ANNUAL ATTENDANCE PER CAPITA \. \. 1\.7 4\.6 1\.6 4\.6 EMPLOYMENT TOTAL LABOR FORCE (THOUSANDS) 12757\.0 16163\.0 18514\.0 FEMALE (PERCENT) 48\.3 47\.3 46\.9 33\.2 28\.0 25\.7 AGRICULTURE (PERCENT) 82\.0 '8\.0 76\.0 48\.4 54\.1 46\.2 INDUSTRY (PERCENT) 5\.7 7\.4 ** PARTICIPATION RATE (PERCENT) TOTAL 51\.3 46\.6 45\.6 38\.9 37\.8 33\.8 KALE 52\.7 49\.3 48\.6 48\.6 50\.3 48\.1 FEMALE 49\.8 43\.9 42\.6 28\.4 20\.9 17\.3 ECONOKIC DEPENDENCY RATIO 1\.0 1\.1 1\.2 1\.2 1\.3 1\.4 INCOME DISTRIBUTION PERCENT OF PRIVATE INCOME RECEIVED BY HIGHEST 5 PERCENT OF HOUSEHOLDS 21\.8 A 23\.8 i 14\.0 17\.3 19\.5 23\.6 HIGHEST 20 PERCENT OF HOUSEHOLDS 50\.9 h 49\.7 E 42\.2 45\.6 48\.9 52\.3 LOWEST 20 PERCENT OP HOUSEHOLDS 6\.2 /b 6\.1 Li 7\.6 6\.5 5\.9 4\.3 LOWEST 40 PERCENT OF HOUSEHOLDS 14\.9 /h 15\.9 L 19\.1 17\.3 15\.7 13\.1 POVERTY TARGET GROUPS ESTIMATED ABSOLUTE POVERTY INCOlE LEVEL (USS PER CAPITA) URBAN \. \. 120\.0 140\.8 155\.9 191\.9 RURAL \. \. 90\.0 112\.8 97\.9 193\.1 ESTIMATED RELATIVE POVERTY INCOME LEVEL (US$ PER CAPITA) URBAN \. \. \. \. 143\.7 319\.8 RURAL \. \. 93\.0 76\.8 87\.3 197\.7 ESTIMATED POPULATION BELOW POVERTY INCOME LEVEL (PERCENT) URBAN \. \. 11\.0 27\.7 22\.9 19\.8 RURAL \. \. 28\.0 40\.4 36\.7 35\.1 Not available Not applicable\. NOTES la The adjusted group averages for each indicator are population-weighted geometric means, excluding the extreme values of the Indicator and the most populated country in each group\. Coverage of countries among the indicators depends on availability of data and is not uniform\. /b Unless otherwise noted, data for 1960 refer to any year between 1959 and 1961; for 1970, between 1969 and 1971; and for Most Recent Estimate, between 1973 and 1977\. Ic East Asia & Pacific; Id Lower Middle Income ($281-550 per capita 1976); /e Intermediate Middle Income ($551-1135) per capita\. 1976); /f 1962; LE Percent of population in Bangkok ietropolitan area; /h 1962-63, rural only; L Rural only\. September 1978  - 20 - Annex I DEFINITIONS OF SOCIAL INDICATORS Page 3 of 5 N=g: The adjusted group averages for each indicator are population-weighted geometric means\., excluding the extreme values of the indicator and the most populated country it each group\. Coverage of countries among the indicators depends on availability of data and is not uniform\. Due to lack of data, group averages for Capital Surplus Oil Exporters and indicators of access to water and excreta disposal, housing, income distribution and poverty are simple papulation-weighted geometric means without the exclusion of extreme values\. LAND AREA (thousand sq\. km) Population per hospital bed - total, urban, and rural - Population (total, Total - Total surface area comprising land area and inland waters\. urban, and rural) divided by their respective number of hospital beds Agricultural - Mast crcent estimate of agricultural area used temporarily available in public and private general and specialized hospital and re- or pernanently for crops, pastures, market and kitchen gardens or to habilitation centers\. Hospitals are establishoents permanently staffed by lIe fallow\. at least one physician\. Establishments providing principally custodial care are not included\. Rural hospitals, however, include health and nedi- NP PER CAPITA (US0) - GNP per capita estimates at current market prices, cal centers not permanently staffed by a physician (but by a medical as- calculated by sane conversion method as World Bank Atlas (1975-77 basis); sistant, nurse, midwife, etc\.) which offer in-patient accommodation and 1960, 1970, and 1977 data\. provide a limited range of medical facilities\. Admissionspejpp hospital bed - Total number of adnissions to or discharges ENERGY CONSUMPTION PER CAPITA - Annual consumption of commercial energy from hospitals divided by the nanumber of beds\. (coal and lignite, petroleum, natural gas and hydro-, nuclear and geo- thermal electricity) in kilograms of coal equivalent per capita\. HOUSING Average size of household (per\. pra houeol)-\.oal ran, and caal P5PULATION AND VITAL STATISTICS A household consists of a group of individuals who share living quartets Total population, mid-year (millions) - As of July 1; if not available, and their main meals\. A boarder or lodger may or may not be iscluded in average of two end-year estimates; 1960, 1970, and 1977 data\. the household for statistical purposes\. Statistical definitions of house- Urban population (percent of total) - Ratio of urban to total popola- hold vary\. tion; different definitions of u\.ban areas may affect comparability Average number of persons per room - total, urban, sod rural - Average nun\.- cf data among countries\. ber of persons per roam in all, urban, and rural occupied conventional Population density dwellings, respectively\. Dwellings ex-lude non-permanent structures and Pen sq\. kb\. - Mid-your population per square kiln\.eter (100 hectares) unoccapied parts\. of total area\. Access to electricity (Percent of dwellings) - total, urban, and rural - Per sq\. kh\. agriculture land - Computed as above for agricultural land Conventional dwellings with electricity in living quarters as percentage only\. of total, urban, and rural dwellings respectively\. Population age structure (percent) - Children (0-1 years), working-age (15-64 years), and retired (65 years and over) as percentages of mid- EDUCATION year population\. Ad'usted enrollment ratios Population growth rate (percent) - total, and urban - Compound annual Primary school - total, and female - Total and female enrollment of all ages growth rat-s of total and urban mid-year populatioss for 1950-60, at the primary level as percentages of respectively primary schoal-age 1960-70, and 1970-75\. populations; normally includes children aged 6-11 years but adjusted for Crude birth rate (per thousand) - Annual live births per thousand of different lengths of primary education; for countries with universal edo- mid-year population; ten-year arithmetic averages ending in 1960 and cation enrollment may esceed 100 percent since some pupils are below or 1970 and five-year average eding in 1975 for moot recent estimate\. sbove the official school age\. Crude death taco (per thousand) - innual deaths per thousand of mid- Secondary school - total\. and female - Computed as above; secondary educa- tear population; ten-year arithmetic averages ending in 1960 and 1970 tion requires at least four years of approved primary instruction; pro- and five-year average ending in 1975 for most recent estimate\. vides general vocational\., or teacher training instructions for pupils ross repr-ductio raLe - Average number of daughters a unman will bear usually of 12 to 17 years of age; correspondence courses are generally in her normal reproductive period if she experiences present age- excluded\. specific fertility rates; usually five-year averages ending in 1960, Vocational enrollment (percent of secondary) - Vocational institutions in- 1970, and 1975\. elude technical, industrial, or other programs which operate independently rac\.ily plaroing - acceptors, annual (thousands) - Annual number of or as departments of secondary institutions\. acceptors of birth-contrul devices under auspices of national family Pupil-teacher ratio - primary, and secondary - Total students enrolled in planning program\. primary and secondary levels divided by numbers of teachers in the corre- Family planning - users (percent of married women) - Percentage of sponding levels\. marrced \.onen of child-bearing age (15-44 years) who use blrth-contrrl Adult literacy rate (percent) - Literate adults (able to read and write) as de-i-es to all married women in same age group\. a percentage of total adult population aged 15 years and over\. FOOD A14D NUTRITION CONsUMPTION Inden or food prodoction per capita (l-9ll=ii) - Inden number of per Passenger cars (per thousand population) - Pansenger oars comprise motor cars capita annual production of all food commodities\. seating less than eight persons; excludes ambulances, hearses and military Per capita supply of calories (percent of requirements) - Computed from vehicles\. energy equivalent of net food supplies available in country per capita Radio receivers (per thousand population) - All types of receivers for radio per day\. Available supplies comprise domestic production, imports less b-oadcasts to general public per thousand of population; emcludes unlicensed exporrt, and changes in stock\. Net supplies exclude animal feed, seeds, receivers in countries and in yearo when registration of radio sets was in quantities used in food processing, and losses in distribution\. Re- effect; data for recent years ma' not be comparable since noet countries quirements were estimated by FAO based on physiological needs for sor- abolished licensing\. ral acticity and health considering envirormental temperature, body TV receivers (per thousand population) - TV receivers for broadcast tb gener& s-eights, age and sex distributions of population, and allowing 10 per- public per thousand population; excludes unlicensed TV receivers in coun- cent for waste at household level\. tries and in years when registration of TV sets was in effect\. Per capIta supply of protein (grams per day) - Protein content of per Ne\.ssaser circulation (per chusand population) - Shows the average circula- capita net supply of food per day\. Net supply of food is defined as tion of "daily general interest newspaper", defined as a periodical publi- above\. Rfquirenents for all countries established by IISDA provide for cation devoted primarily to recording general newo\. It is considered to a miniomum allowance of 60 grams of total protein per day and 20 grams be "daily" if it appears at least four times a veek\. of aninal and pulse protein, of which 10 grams should be animal protein\. Cinema annual attendance per capita per eear - Based on the number of tickets These standards are lower than those of 75 grams of total protein and sold during the year, including admissions to drive-in cinemas and mobile 23 grams of animal protein as an average for the world, proposed by units\. FAO in the Third World Food Sunvey\. Per capita prtein supply itom animal and ulse - Protein supply of food EMPLOYMiENT derived from animals and pulses in grams per day\. Total labor force (thousands) - Econonica-ly active persons, including armed Child (ages 1-4) mortality rate (per thousand) - Annual deaths per thoun- forces and unemployed but excluding housewives, students, etc\. Defini- und in age group 1-4 years, to children in this age group\. tions in various countries are not comparable\. Female (percent) - Female labor force as percentaga nf total labor fence\. fEALTH Agriculture (percent) - Labor force in tarning, forestry, hunting and fishing Life eop-vta-cv at birth (years) - Average ounher Pf years of life as percentage of total labor force\. renaining at birth; usually five-year averages ending in 1960, 1971, Industry (percent) - Labor force in mining, construction, oafuring and and 1975\. electricity, water and gas as percentage of total labor force\. nfant mortality rate (per thousand) - Annual deaths of infants under Participation rate (percent) - total, male, and female - Total, male, and one year of age per thousand live birhts\. 'emale labor force as percentages of their respective populations\. Acc-s_to safe wtr (percen ofpplto)-toa,ubn n ural - Chose are T170 adjusted participotico rates reflecting ne-se Numbe- of people (total, urban\. and rural) with reasonable access to rr-r of rho pnpulatioo\. ed tip -n -rend\. alfe water supply (includes treated surface waters or untreated but -conomic dependency ratio - Ratio of population under 15 srd 65 and over to uncootaminated water such an that from protected boreholes, sprilng, the lab\.r force in age group of 15-64 pears\. and sanitary wells) as percentages of their respective populations\. is uc orbar area a pobl ir f-ontai or orandpost located not more INCCME DISTRIBUTTON shut 200 voters from a house may be considered as being within rea- Percentage of private income (both in cash and kind) received by richest 5 tonable access of that house\. In rural areas reasonable access Iould percent, richest 20 percent, poorest 20 percent, and poorest \.0 percent imply that rho hoasewife or memhers of the household do cot have to of households\. cp-cd a disproportiorute part of the day in fetching the family's tarts noeds POVERTY TARCET GROUPS Ac--eon to Eccreta dusposal (percent of poynlation) - total, urb a Estimated absolute poverty income level (USS per capita) - urban and rural - ro l - itbeo nf poople (total, urban, and rural) served by encreta Absolute poverty income level is that income level belos which a minimal dist\.o\.l at percentages of their rospeotive populutions\. Excrrta nutrition\.ally adequate diet pi-s essential mom-fend requi-remets us not … p _ -c\.C, - i \. h\._o '\.<C iori s, th orl§\.a: af for\.a\. treatment, of hu\.an excreta und saste-wat-r by \.water-borne systems Estimated relative poverty income level (1$ per capita) - urban and rural - rtthe \. cf p\.t prsii-s and sci\.lat i-sta\.lations\. Relative poverty income level is that income lev leeles than one-third PcPu ariorpeth u-ian- Population divided bh nauber of cra-tfcina per capita personal income of the roantry\. ci ro on', qua-ified ona -edioa- u-f\.vol at un---ruity level\. Estimated po pI l er vel (percent) - orban and tonal - Po-nsatio- per curt un&ptor fo\. i ulattio n li-_ded by number of p\.c-no p-apurtion (urban and rural) who ar either "absclute poor" or pra-t-icng \.ale and toale grucadtc curaes, practical nurses, and "relative port" whichever is greater\. Pconooic and Sociau auta Dicisi-O Cenvene atnAv-in und1 P-riections Department  - 21- ANNEX I P?R\. 4 of 5 ECONOMIC DEVELOPMENT DATA SHEET Actual ____Projected - Growth rates (%) ___ 1975 share 1965 1970 1976 1977 1978 /a 1979 1980 1985 1965-77 1977-79 1979-85 1985-90 of GDP (%) A\. National Acouts (Million US$ at 1975 pri-ro) 1\. Gross d-ostic product 6,843\.8 10,323\.0 15,712\.6 16,685 5 18,138\.9 19,395\.2 20,692\.9 29,256\.7 7\.7 7\.8 7\.1 7\.0 100\.0 2\. Gains from terms of trade -44\.3 42\.8 -507\.7 -978 1 -704\.3 -572\.9 -533\.8 -518\.2 -3\.2 3\. Gross domestic income 6,799\.5 10,365\.8 15,204\.9 15,707 4 17,434\.6 18,822\.3 20,159\.1 28,738\.5 7\.2 9\.5 7\.3 7\.0 96\.8 4\. Imports 1,659\.9 2,989\.4 3,699\.1 4,460 8 4,896\.8 5,082\.8 5,440\.4 7,507\.8 8\.6 6\.7 6\.7 6\.8 23\.5 5\. Exports - volume -1,593\.2 -2,274\.8 -3,808\.4 -4,506 9 -4,641\.3 -4,481\.1 -4,862\.1 -7,448\.5 9\.1 -0\.3 8\.8 8\.7 24\.2 6\. Exports - adjusted for TOT -1,548\.9 -2,317\.5 -3,300\.7 -3,528 8 -3,937\.0 -3,908\.1 -4,328\.3 -6,930\.3 7\.1 5\.2 10\.0 8\.8 21\.0 7\. Resoorre gap - adjusted for TOT 111\.0 671\.9 398\.4 932\.1 959\.8 1,174\.7 1,112\.1 577\.5 2\.5 8\. Total consumption 5,302\.3 8,007\.0 11,709\.5 12,370\.3 13,579\.1 14,809\.7 15,740\.4 21,253\.9 7\.3 9\.4 6\.2 6\.1 74\.5 9\. Investment 1,608\.2 3,030\.6 3,893\.8 4,269\.2 4,815\.3 5,187\.2 5,530\.8 8,062\.0 8\.5 10\.2 7\.6 7\.5 24\.8 10\. National savings 1,576\.4 2,500\.8 3,477\.7 3,312\.5 3,794\.2 3,970\.7 4,300\.3 7,037\.7 6\.4 9\.5 10\.0 9\.6 22\.1 11\. Domestic savings adjusted for TOT 1,497\.2 2,358\.7 3,495\.5 3,337\.1 3,855\.5 4,012\.6 4,418\.7 7,484\.6 6\.9 9\.7 10\.9 9\.3 22\.2 12\. GDP at current TJS$ 4,052\.9 6,543\.3 16,284\.3 18,156\.9 21,881\.8 24,093\.0 27,401\.6 55,355\.9 13\.3 15\.2 14\.9 13\.4 8\. Sector Outout (Share of GDP) 4,052\.9 6,543\.3 16,284\.3 18,156\.9 21,881\.8 24,093\.0 27,401\.6 55,355\.9 13\.3 15\.2 14\.9 13\.4 1\. Agricolture 0\.391 0\.346 0\.301 0\.281 0\.271 0\.264 0\.258 0\.229 2\. Industry 0\.208 0\.227 0\.269 0\.2118 0\.299 0\.304 0\.309 0\.335 3\. Services 0\.401 0\.427 0\.430 0\.4'i1 0\.430 0\.432 0\.432 0\.437 C\. Prices (1975 - 100) 1\. Export price iides 46\.43 48\.04 91\.65 89\.15 103\.13 113\.40 123\.48 172\.32 5\.6 12\.7 7\.2 5\.1 2\. Import price i,des 47\.76 47\.15 105\.75 114\.12 121\.58 130\.03 138\.71 185\.20 7\.5 6\.7 6\.1 5\.0 3\. Terms of trade ilden 97\.22 101\.88 86\.67 78\.10 84\.83 87\.21 89\.02 93\.04 -1\.8 5\.5 1\.1 0\.1 4\. GDP deflator ( 15S) 59\.22 63\.39 103\.64 108\.12 116\.07 124\.22 132\.42 189\.21 5\.2 6\.8 7\.3 6\.0 5\. Annal verage exchange rate 20\.80 20\.80 20\.40 20\. 0 D\. Selected Indic i,rbm 1965-77 1977-79 1979-85 1985-90 1\. ICOR 3\.56 3\.32 3\.80 3\.97 2\. Import eta ticity 1\.09 0\.87 0\.95 0\.97 3\. Average no lonal savings rate 0\.24 0\.20 0\.23 0\.26 4\. Marginal stiiou-l savings rote 0\.18 0\.25 0\.32 0\.35 5\. Isports/GD0 0\.27 0\.26 0\.26 0\.26 6\. Tnvestment GDP 0\.27 0\.26 0\.27 0\.28 7\. Resource gEp/GDP 0\.04 0\.06 0\.04 0\.01 Valus added /b _ Labor force /c V\.A\. ser worker lb Ic - 9ut\.tabor ne and Pro dctivity in1975 _Stml1is Z nillion X U f averaee 1\. Agr-cultor 4,559 31\.3 13\.4 75\.7 340 41\.5 2\. Industry 4,442 30\.4 1\.4 7\.9 3,170 356\.7 3\. Services 5,588 38\.3 2\.9 16\.4 1,930 235\.4 Total/average 14_ 89 100\.0 17\.7 100\.0 820 100\.0 P\. PublIc Pinanre (Z ot GDP) 1965 1970 1974 1975 1976 1977/a (Central Government) 1\. Current revenue 13\.5 13\.8 14\.5 13\.6 13\.4 14\.6 2\. Tax revenue 12\.3 12\.5 13\.5 12\.0 12\.1 13\.3 3\. Current expenditures 10\.5 12\.6 10\.7 12\.1 13\.0 12\.5 4\. Budgetary savings 2\.9 1\.2 3\.7 1\.5 0\.4 1\.1 5\. Total public investment 6\.5 7\.7 3\.8 4\.9 5\.3 5\.4 C\. Puoel spQorts (Current_ SLmillions) 65\.0 112\.0 628\.6 711\.7 833\.7 923\.0 (X of total imports intl\. NFS) 8\.3 8\.0 18\.4 20\.0 21\.1 19\.7 /a Preliminary\. Jb At current market prices\. cr Estimate\.  a a *a - C a 50 Ca C a Ca -o-aaao'aaaa CCC-'- 'a a'-aaan- aCCOY -0---o 'aa4aCa'aa'a-a\.a-SC -oClozonee a 0 On-a C a C C,--CS naaanna'C aao-a na aaanae\.a aana Can Caaaa aaaan 0 nan a nan-n ,-\. an a 0 sawS a\.aCaaaC a an-aoan a Ca nCn00nC  aaaja C aaaa\.-n-n-a\.naaa-C Care'- nin an- aa 'a,-< 0 OaO<, en -a aCe C nOCO on-Coon-a aa al-a anon a COO C aaaaa C an Ca ma a' aC 'OCO a aOOaa a -0-0,\. n-an-CO -nanan a nC Cna nan a aanna a-n- aCC,n n-a 0-\.-anan C 0- C-' naa- OOan C lOan Ca,aOoCO,aL CC a naaa an 2- ,aanaia-a'---a C aaa-aan aanaaacaaaeaaaanaaa0,\.an a  an- a anaa Ca-na aaaaaaaa,- aanOO Ca- aaan\. an a J aV n-n-na aC aa-aan an aa-auCa[a' a naaaa a 2n-;';2aaz,2sxma  C n-a a ag0\.g nSa anon - at' n-a-,a ja' a Caan- a'- ala an a-a,-- a C a 0-na'-- -an ,-aaa C a aO C ala anIon- 00O"Caa" ma Via nan aan,a a anna <a an I- anna 'l n -a an an a '-51- nan -Ia aana-, ana a a a n-,\.,a,aa aaa,oa 0,-a no a aanaH a\.a a an a anna a a-\.-0 aaar' ara a aaaC,an -aaa- SC n'C an aaaan-a\.aa a'ana'aonx ma- a a-a 2  On  naa aa a ana nib naa Ca anal, aa an a ,- , -\. --a,an nan, a an-an- aaa -P aaan a a aa-aa-aaaaaaCa a a o- a CC a-an a a 0 a -a a sag no- n-an a,a a a a oC naaaa,- anal-a a\.- -,a-\. aa\.a a n a a a p -a no-as n 0, a a ,--a a an0,-sa a an -Ca a a n aa,Cnn naoa a aaaanan a a-\.aa pa - -- a no an a n a a a <anna-an 00CC I an- -a-a -0 a,- aa saa a-a ani\. -an a a ann-n Co-\.n a a 0a n a n 0, a aiD -\.aaCs 00 ann ' na C -a an no,-- 500 n-n-a aC a\. a\. a a,- oar' Ca -C - 5 a 'an an a a as a-a- CC an a a no -a 'ma - -C CC CO C a CaC a a 0- - a i a "a a sPa- 0,0, '5'5OO an a a -a <IC aaC an n-ag aa C a Ca a - ao a a a a Ca - - Baa an22 C a- 5C an na C an a a C 0, an - a a a u,an no a a-aa r "SC 'a a a a naanna a a 'aa a an a a a a an on n nos p p H--' a ' 'a aaar'aa a C C a a C o - a a- a as nae n-C a aa a a-aC na a C a a a r''m- In Ca a 2 C ann C-a a nr2  a 2 a a a I;- a a CC C aaa ag  a a 2 na a H aa a aCala a n-n a ,- a-a- an a a' anna' in a an' s a- a a a a CC a a a a n 0 C aaa na a CO C nah a an a C 0, a' a 2 C Ca n - a CC a C C Ca' 0 C 5 no aa a a n a a an 0, 0, 00 nic n-C S Z Em P C F -i C CCCCC aaaCaa-CCC-C,na-a a- CCC CCCCC-a C C C0-\.CCCC C n-CC C-a CCCCCCCaaCC C - - -- CCCC'aa- C-n Cl  t-CC C 0,C CC'C no i Cj C a , CCCCCCCa'CC,n-C Il-a'- I -r a -a aa - - - -- Ca'a'aa ' ' Ca' CC 'CC C C'aC C-n'C'-OC C C C Ca0C CCC C a ,\.CCC 00 a - - - - - - I I , j -00 In-a- CCa' Ca' -aa C IIa CC -, C C II I CCC f C WOO CC-nCCC a-n-Cl CC -nCa'C CCCCCC CCC CCCOOCCC CCC C' a\.aa-CCC C Ca' CC C CCa-a\.C an\. C CC-na-Ca C C-nO a'C CCC C C-CC-aC-C C,C CCCCCaCCCOC C CCC'- C CC -na-a Ca'CCaC0a'C-n CC a CCCCCCC - - - CC CC -n-n n0-aa0Cn-C\.'-CCa- C C C CCI a-CC I § C C C C CCC-C\.aC aJCC a'a an-CC CCCCC CC C CCCCCCCCCC C CaCao'- CC Can\. CCC -aCCC Con -0,C0, I -l Ca' C C CCCCa'aO 0--a-a J - a a' - 2--aa- ] I 0\. l - I l1 Co a' al-a CC CC C a -a '-'-CCC C CIa0 C CCCC \.0 CC Ca C C C'-CCCC &a- a\.-ac I-a' 0-I a-Ca'ICC-n-n a--C C CaC-a C CCC C C CCCC C C CCC C a-CCCCCCa\. -CCC C CCaCCC Can- CC aa CCC'- CC CCC a - I I - - - - I C Ca Ca'C a-Ca- C a aCaC-n CC CI CCCCCCa'a CCC C-n C CC aCaCaCC C C-na-C C CC CC CCCC C CCC CCC  - 23 - ANNEX II Page 1 of 11 THE STATUS OF BANK GROUP OPERATIONS IN THAILAND A\. STATEMENT OF BANK LOANS AND IDA CREDITS (As of February 28, 1979) Loan or Amounts ($ million) Credit Less Cancellations Number Year Borrower Purpose Bank IDA Undisbursed Twenty-four loans and one credit fully disbursed 388\.9 5\.5 - 822 1972 RTG Education 15\.4 - 5\.9 864 1972 TOT Telecomm 37\.0 - 3\.2 870 1972 RTG Highways 28\.6 - 0\.9 369 1973 RTG Education - 19\.5 5\.3 461 1974 RTG Irrigation - 7\.0 1\.2 977 1974 EGAT Power 75\.0 - 17\.9 992 1974 IFCT Industry 12\.0 - 0\.7 1021 1974 MWWA Water 55\.0 - 12\.6 1149 1975 RTG Irrigation 95\.0 - 76\.1 1198 1976 RTG Rural Dev\. 21\.0 (TW) - 11\.6 1199 1976 RTG Livestock 5\.0 (TW) - 3\.5 1243 1976 RTG Rubber 50\.0 - 41\.4 1253 1976 TOT Telecomm 26\.0 - 9\.8 1271 1976 RTG Education 31\.0 - 25\.2 1327 1976 IFCT Industry 25\.0 - 20\.1 1393 1977 RTG Agriculture 28\.0 - 24\.7 1468 1977 RTG Irrigation 55\.0 - 46\.8 1485 1977 EGAT Power 50\.0 - 41\.8 1492 1977 IEAT Industry 4\.8 - 4\.5 767 1978 RTG Population - 33\.1/a 33\.1 1519 1978 RTG Highways 110\.0 - 100\.8 1527 1978 PEA Power 25\.0 - 25\.0 1556 1978 RTG Housing 8\.6 - 8\.5 S-10 1978 NGOT Energy 4\.9 - 3\.8 1620 1978 TOT Telecom 90\.0 - 90\.0 1630 1978 RTG Irrigation /b 17\.5 - 17\.5 1638 1979 RTG Urban /b 16\.0 - 16\.0 Total 1,274\.7 65\.1 647\.9 of which has been repaid 189\.6 - Total now outstanding 1,085\.1 65\.1 Amount sold /c 68\.6 of which has been repaid 37\.1 31\.5 Total now held by Bank and IDA 1,053\.6 65\.1 Total undisbursed 608\.3 39\.6 /a Of which $3\.1 is Norway grant participation\. lb Not yet effective\. Ic Of which $43\.3 million sold to the Bank of Thailand\.  -24 - ANNEX II Page 2 of 11 B\. STATEMENT OF IFC INVESTMENTS (As of February 28, 1979) Amounts ($ million) Year Company Type of Business Loan Equity Total 1959 Concrete Products and Cement and Construc- Aggregate Co\. Ltd\. tion Materials 0\.30 - 0\.30 1964/ Industrial Development - 0\.38 0\.38 1970 Finance Corporation Finance Company of Thailand (IFCT) 1969/ Siam Cement Group Cement and 1975 Construction Materials 28\.33 3\.75 32\.08 1977 Mutual Fund Money and Capital Company Limited Market - 0\.30 0\.30 1977 United Sugar Food and Food Terminal Limited Processing 2\.50 0\.20 2\.70 1978 Siam Commercial Bank Small and Medium Scale Industries 2\.00 - 2\.00 1978 Siam Cement Group Cement and Construc- tion Materials - 0\.09 0\.09 1979 Bangkok Glass Industry Company, Limited Glass Containers 4\.85 0\.25 5\.10 1979 Siam City Cement Cement and Construc- Company, Limited tion Materials 36\.00 4\.00 40\.00 1979 Thai Orient Leasing Co\. Ltd\. Capital Market - 0\.15 0\.15 Total gross commitments 73\.98 9\.12 83\.10 Less cancellations, terminations, repayments and sales 48\.51 2\.56 51\.07 Net held by the Corporation 25\.47 6\.56 32\.03 Total undisbursed 42\.85 0\.25 43\.10  - 25 - ANNEX II Page 3 of 11 C\. STATUS OF PROJECTS IN EXECUTION _1 (As of February 28, 1979) Loan No\. 822 Second Education Project (Kasetsart University); $15\.4 Million Loan of May 24, 1972; Effective Date: August 22, 1972; Original Closing Date: June 30, 1978; Current Closing Date: July 31, 1980 Although the technical assistance and educational aspects of the project are largely on schedule, civil works are about three years behind schedule with consequent delays in furniture and equipment procurement\. The delays in civil works result from delays in contracting architectural consul- tants, completing tender documents, and awarding contracts\. The specialist services program under the project is nearly completed\. Out of 26 experts, 21 have completed their assignment, two are in post and three are being recruited\. Recommendations of experts for improvement of teaching, research and extension activities are considered worthwhile and have been implemented by the university staff\. All the fellowships have been awarded; 94 recipients have completed their training\. Total project cost will exceed appraisal estimates by about 35%\. Credit No\. 369 Third Education Project; $19\.5 Million Credit of April 11, 1973; Effective Date: August 8, 1973; Original Closing Date: June 30, 1978; Current Closing Date: June 30, 1979 Project implementation is about 20 months behind schedule partly due to cumbersome review of procurement and shortage of budget funds\. However, substantial progress has been made during the last three years\. Contracting has reached 98% of civil works and 77% of equipment\. Almost 75% of the construction at project institutions has been completed\. All project schools have started operation\. The National Curriculum Development Center constructed and equipped under the project is playing a key role in the development of new curricula at primary and secondary levels as part of a comprehensive educational reform program\. An in-depth evaluation of rural secondary schools is being carried out, but preliminary indications are that the new curriculum for diversified secondary education is working well in them\. The expert services program is virtually completed and ninety-five percent of fellowship funds have been committed\. The component of the project with greatest problems is that involving the construction and equipping of ten teacher training colleges\. /1 These notes are designed to inform the Executive Directors regarding the progress of projects in execution, and in particular to report any problems which are being encountered, and the action being taken to remedy them\. They should be read in this sense, and with the under- standing that they do not purport to present a balanced evaluation of strengths and weaknesses in project execution\.  - 26 - ANNEX II Page 4 of 11 Physical execution of this component is slow and the status of the colleges is in a state of flux, as teacher training is being upgraded from secondary to postsecondary level\. The Government is likely to submit to IDA a request for a postponement of the Closing Date by about nine months\. Loan No\. 1271 Fourth Education Project; $31 Million Loan of September 13, 1976; Effective Date: February 9, 1977; Closing Date: June 30, 1982 Progress in project implementation follows the appraisal estimate with minor delays (3-6 months), mainly related to the adult education system (AES) component\. Of the civil works, which are being carried out in three phases; the first phase is almost completed, the second is under construction and the third is still to be awarded\. Equipment contracts have been awarded as follows: 70% for diversified secondary schools and 25% for the AES\. Con- struction at four secondary schools has been completed\. Technical assistance contracts have been signed for both project components\. Out of 100 DSS principals and assistant principals, 52 have completed an overseas training program on education and 24 are being trained\. Out of 46 fellowships for AES, 11 have been concluded and 13 are ongoing\. Loan No\. 864 First Telecommunications Project; $37 Million Loan of December 5, 1972; Effective Date: March 1, 1973; Original Closing Date: December 31, 1977; Current Closing Date: December 31, 1979 The project is generally maintaining the revised time schedule established in 1975, following initial delays\. The Bank loan is fully committed and $33\.4 million (90%) had been disbursed up to February 28, 1979\. Over 90% of the local telephone network expansion has been completed; the balance is expected to be completed by June 1979\. After a year's delay in procurement under a bilateral loan, the installation of the long distance transmission equipment is now progressing satisfactorily\. The project is expected to be completed by the end of September 1979, two years and nine months behind schedule\. Loan No\. 1253 Second Telecommunications Project; $26 Million Loan of June 11, 1976; Effective Date: August 25, 1976; Closing Date: December 31, 1980 The project is progressing satisfactorily\. Procurement action on all Bank-financed items is complete\. The Bank loan is fully committed and $16\.2 million (62%) had been disbursed up to February 28, 1979\. Local telephone network expansion is expected to be completed on schedule by mid-1979\. After a year's delay in procurement under a bilateral loan, the installation of long distance transmission equipment is progressing satisfactorily\. The project is now expected to be completed by the end of September 1980, nine months behind schedule\.  - 27 - ANNEX II Page 5 of 11 Loan No\. 1620 Third Telecommunications Project; $90 Million Loan of October 4, 1978; Effective Date: January 3, 1979; Closing Date: September 30, 1983 Bid documents for procurement of all project items are expected to be issued by mid-1979\. Action has been initiated on the following items as required under institutional covenanEs in Lie Loan Agreement: (a) maintenance of waiting lists for potential telephone subscribers, (b) better utilization of installed capacity in local telephone networks, and (c) the Economic Study of Telecommunications in Thailand\. Loan No\. 870 Fifth Highway Project; $28\.6 Million Loan of December 26, 1972; Effective Date: March 26, 1973; Original Closing Date: December 31, 1977; Current Closing Date: December 31, 1978 The project is almost complete and the loan is expected to be disbursed in full within the next two months\. LoaLl NiU\. 119 Sixth Highway (PruviLL;LL Rvad) Project: $110 Million Loan of March 23, 1978; Effective Date: June 22, 1978; Closing Date: December 31, 1982 Progress is satisfactory\. Procurement of maintenance equipment is under way, and most contracts have been awarded\. Construction of project roads is well under way, with most contracts on schedule\. Bids for the final group of road contracts are being evaluated and awards are expected to be made during the first quarter of 1979\. Credit No\. 461 Northeast Irrigation Improvement Project; $7 Million Credit of February 19, 1974; Effective Date: October 7, 1974; Closing Date: June 30, 1979 The project will be completed two years behind schedule as a result of initial delays in appointing consultants and in procuring earthmoving equip- ment\. During the 1977/78 working season there was a marked improvement in the pace of construction, especially on the tertiary canals\. Work on rehabilitation of main canal systems has been satisfactory and will be completed in 1979\. The estimated project cost is $30\.3 million, compared with $12\.5 million at appraisal\. In part, the increased cost is due to price inflation being higher than foreseen at appraisal\. Also, a large part of the increase is due to a decision to provide new tertiary canals over an area of 34,700 ha rather than the 21,500 ha assumed at appraisal, and the adoption of higher standards for tertiary development than envisioned at appraisal\. The higher costs are  - 28 - ANNEX II Page 6 of 11 compensated for by increases in projected commodity prices and the economic rate of return is now estimated at 24% compared to 22% at appraisal\. Progress on the rainfed rice component continues to be satisfactory\. The breeding program continues to be the strongest element while the agronomic program remains weak\. Loan No\. 1630 Second Northeast Thailand Irrigation Improvement Project: $17\.5 Million of December 4, 1978; Closing Date: September 30, 1985 This loan is not yet effective\. Loan No\. 1149 Phitsanulok Irrigation Project; $95 Million Loan of July 25, 1975; Effective Date: October 31, 1975; Closing Date: June 30, 1983 Although the start of major construction was delayed by about a year, prospects are good that the project can be completed on schedule in 1984\. A contract for the diversion dam was awarded in October 1977 and the first of three contracts for canal construction was signed in April 1978\. Most of the equipment for the project is now delivered or on order\. The on-farm works are proceeding on schedule, with four pilot projects in operation and construction of the first large block under way\. The consulting services for the project were recently reorganized to provide a nucleus of resident staff and a greater level of assistance in project management\. Systems for monitoring project benefits and water-associated diseases are being established and the reporting of project progress has improved\. The first phase of the Chao Phya Basin Study, also financed from the loan, has been completed and the next phase is continuing\. Consultants appointed in August 1978 for the RID Administration and Organization Study will shortly complete their first phase reports\. Loan No\. 1468 Second Chao Phya Irrigation Improvement Project; $55 Million Loan of September 23, 1977; Effective Date: December 23, 1977; Closing Date: June 30, 1983 Equipment procurement is progressing satisfactorily\. Rehabilitation and on-farm development works on about 5,300 ha were completed in the 1978 construction season\. Project preparation for about 40,000 ha in the Stage II area of Maeklong should be completed by January 1979\. A project monitoring system is being set up and the Chao Phya Project area is now served by the National Agricultural Extension Project\.  - 29 - ANNEX II Page 7 of 11 Loan No\. 1198 Northeast Thailand Rural Development Project; $21 Million Loan of February 27, 1976; Effective Date: June 29, 1976; Closing Date: June 30, 1981 After a delay of one year in appointing consultants good progress is being made on the engineering of the village roads\. The first contract for construction cf 1' 1m' h's been completed and work has begun on two contracts for a total of some 250 km\. Procurement problems have delayed the water supply components, but most of the drilling equipment has now been delivered, drilling crews have been recruited and are being trained\. Progress on rural electrification is excellent and this component will be completed in June 1979\. Progress on agricultural extension and land settlements is satis- factory\. After a slow start-up, the Upland Crop Improvement Component is progressing satisfactorily\. The program management, with the assistance of a recently appointed program advisor, has undertaken a critical review of past work and is gradually introducing an innovative program of research investiga- tions of great problem-solving relevance to upland crop farmers in the Northeast\. Loan No\. 1199T Livestock Development Project; $5\.0 Million Loan of February 27, 1a7\. Fff'active Date: May 25, 1976; Closing Date: June 30, 1981 The seed production and pasture development programs are progressing reasonably well and the loaned-bull and artificial insemination programs, hitherto hindered by the delay in importation of cattle, are expected to improve with the delivery of 400 imported Brahman cattle\. Furthermore, the number of permanent project staff has been increased from the initially approved 121 to 223, and the New Zealand Government has agreed in principle to provide additional technical assistance for the remaining project period\. Disbursements are still considerably behind schedule but are expected to increase with improvement in the preparation of procurement documents and the importation of cattle\. The Department of Livestock Development has agreed to conduct a livestock sector review to prepare an integrated development plan\. Loan No\. 1243 Rubber Replanting Project; $50 Million Loan of September 13, 1976; Effective Date: January 14, 1977; Closing Date: June 30, 1981 The project is about one year behind schedule as a result of a corresponding delay in loan effectiveness\. Otherwise, progress on the project is satisfactory\.  - 30 - ANNEX II Page 8 of 11 Loan No\. 1393 National Agricultural Extension Project; $28 Million Loan of May 17, 1977; Effective Date: September 1, 1977; Closing Date: December 31, 1982 Project implementation in the field is progressing well with almost all staff appointments completed in fifteen provinces\. There continues to be encouraging evidence of adoption of -q technology by farmers as a result of improved extension services\. Procurement is on schedule, but the civil works program is now more than one year late because bids for the revised civil works program were excessively high or unresponsive\. Retendering is in progress, using simplified tender procedures agreed to for one Regional Training Center and eight provincial construction packages\. Tendering has commenced for the 1979 construction program\. Disbursements are also behind schedule because of the delays in the civil works program, but both the civil works program and disbursements are expected to progress as scheduled during 1979\. Extension and civil works consultants continue to provide DAE with excellent assistance\. Loan No\. 977 Srinagarind (Ban Chao Nen) Hydroelectric Project; $75 Mlillion Loan of April 19 IP7&L 'ffective Date: June 14, 1974; Closing Date: December 31, 1980 Civil works under the project have been about 85% completed\. Construction of the dam embankment was completed on May 14, 1978 and all other works are being carried out satisfactorily\. The installation of the turbine generating units is expected to be completed on schedule\. Although the reservoir did not reach the level anticipated during the first wet season, 1978 has been a good hydro year and the water situation in the reservoir has improved\. Project costs are likely to be about 20% over estimates, due mainly to additional grouting work required beneath the main embankment\. Project costs will probably increase further as a result of the recent devaluation of the US dollar against the Japanese yen\. The progress on resettlement has been satisfactory, and almost all of the 814 families affected have now been moved into their new homes\. Loan No\. 1485 Pattani Hydroelectric Project; $50 Million Loan of September 23, 1977; Effective Date: December 20, 1977; Closing Date: December 31, 1982 The construction of the main civil works is proceeding satisfactorily\. Implementation is about one month behind schedule\. The initial delay was caused by slow mobilization of the contractor and poorer than expected rock conditions at the downstream ends of the diversion tunnels\. Orders for all major equipment (financed by the Kuwait Fund) have been placed\. Construction of the resettle- ment project is progressing according to schedule\. Disbursements are generally in line with appraisal estimates\.  - 31 - ANNEX II Page 9 of 11 Loan No\. 1527 The Accelerated Rural Electrification Project; $25 Million Loan of March 9, 1978; Effective Date: June 7, 1978; Closing Date: June 30, 1983\. The project is in the early stages of implementation\. There was an initial delay of about four months in the preparation of bid documents but procurement is now under way and should present no further problems\. Field construction crews have been organizea ana nave oeen worKing on pole setting and conductor stringing since the middle of 1978, utilizing materials available in stock\. Loan S-10 Natural Gas Development Engineering Project, $4\.9 Million Loan of July 28, 1978; Effective Date: September 25, 1978; Closing Date: June 30, 1980 The engineering work is proceeding on schedule\. The follow-up project loan is at the appraisal stage\. Loan No\. 1021 Bangkok Water Supply Project; $55 Million Loan of June 28, 1974; EffecLive Dace; DecemDer 2, i uu4; \.iosing Hate: June 30, 1979 Physical work on the project is proceeding satisfactorily\. The quality of construction and the performance of consultants on supervision of construction of the IBRD portion of the project is good\. The quality of work on the ADB portion of the project - the transmission and distribution of pipes - has not been satisfactory, but MWWA is taking corrective measures\. Because of the initial delays in contract awards, the project is expected to be completed in late 1979, about 20-21 months behind the original schedule\. Extension of the June 30, 1979 Closing Date by about 9-12 months will be required for full disbursement of the loan\. Due to inadequate tariffs, which were last revised in May 1972, MWWA's financial performance continues to be poor\. MWWA's proposals for raising the water tariffs in line with increased operating costs were reviewed recently Dy cne Gaoinec wnicn nas approved in principle a substantial increase in water tariffs, beginning July 1, 1979 (when some water benefits from the project are expected to materialize)\. MWWA has also received approval to increase tariffs every two years following the initial increase so as to enable MWWA to achieve its covenanted rate of return of 8%\. Loan No\. 1556-TH Bangkok Sites and Services Project; $8\.6 Million Loan of June 15, 1978- Effective Date: September 22, 1978; Closing Date: December 31 1981 Progress is generally good with only minor delays in implementation\. Current cost estimates for civil works are below appraisal estimates\. Initial i-teragency problems in improv'ia waLei supply a\.ud ;,\. Lransfer of project land at King Petch are being resolved\. In order to minimize resistance to benefi- ciary charges, cost recovery in improved slums will be introduced as physical works are completed - starting in early 1980\.  - 32 - ANNEX II Page 10 of 11 Loan No\. 1638 Bangkok Traffic Management Project; $16 Million Loan of January 25, 1979; Closing Date: September 30, 1982 The Loan has not yet been declared effective\. However, implementa- tion of the project is generally ahead of schedule\. Signal equipment will be installed this spring, some two years earlier than had been expected, as a result of the consulting and procurement work done under contracts for which the Bank provided retroactive financing\. Loan No\. 1492 The Minburi (Lat Krabang) Industrial Estate Project; $4\.75 Million Loan of December 5, 1977; Effective Date: March 24, 1978; Closing Date: December 31, 1981 Project implementation is progressing satisfactorily\. Construction of on-site infrastructure is proceeding on schedule and land sales are well ahead of the appraisal estimate\. Loan No\. 992 Second Industrial Finance Corporation of Thailand (IFCT) Project; $12\.0 Million Loan of June 4, 1974; Effective Date: September 4, 1974; Original Closing Date: September 30,, 1978; Current Closing Date: September 30, 1979 The full amount of the $12 million loan has been committed\. The commitment was more rapid than originally estimated\. Disbursements have also been very satisfactory\. Since June 1974 when the loan was made, IFCT's financial condition has continued to be good\. Loan No\. 1327 Third IFCT Project; $25 Million Loan of December 8, 1976; Effective Date: March 14, 1977; Closing Date: December 31, 1980 The loan commitment rate has been slower than expected because of the sharply depressed investment climate in 1976\. The IFCT's capital structure and liquidity position have improved, however, with successful share capital increases\. Satisfactory progress has been made on the institution-building aspects of project\. Credit No\. 767 Population Project; $33\.1 Million Credit of February 27, 1978; Effective Date: July 6, 1978; Closing Date: December 31, 1981 RTG has, in accordance with the Credit Agreement: (a) established and staffed the Project Coordinating Committee, which has met frequently; (b) established and staffed the Project Administration and Financing Unit (PAFU); (c) appointed a project director, deputy director and two assistant project directors and a health planner/economist; and (d) initiated most of the key project activities at the national level and in the 20 Accelerated  - 33 - ANNEX II Page 11 of 11 Family Planning and Health Provinces\. With regard to the civil works, furn- iture and equipment, vehicle and special equipment components of the project, satisfactory progress has been made in completing design work, preparing vehicle and equipment lists/specifications and in selecting and acquiring sites\. However, due to delays in staffing PAFU, the high turnover of staff in the Construction and Design Division, and delays in securing Budget Bureau approval for the supplementary budget for FY1978, key project activities were held up initially and major elements of the project are about six months behind schedule\. The principal factors contributing to the problems faced by the project have been weak project management and insufficient attention to project coordination and to the removal of impediments to speedy implementation\. The Ministry of Public Health is aware of this situation and is taking appro- priate action to ensure that the Project Director and his Deputy are more directly involved in project execution\.  - 34 - ANNEX III Page I THAILAND BANG PAKONG THERMAL POWER PROJECT Supplementary Data Sheet Section I: Timetable of Key Events (a) The Project was prepared over a period of about 2-1/2 years (early 1976 to September/October 1978)\. (b) The project was prepared by EGAT and its consultants, Black and Veatch International\. (c) The project was first proposed to the Bank in early 1976; the first Bank mission to consider the project visited Thailand in October 1977\. (d) Departure of Appraisal Mission: August 1978 (e) Completion of Negotiations: March 1979 (f) Planned Date of Effectiveness: October 1979 Section II: Special Implementation Action: None Section III: Special Conditions (a) The Borrower has agreed to: (i) not later than January 1, 1980, undertake a study of the future generation and transmission projects including an in-depth review of the load forecast (paragraph 32); (ii) as a conditon of effectiveness, take all measures, including adjustment of tariffs, necessary to improve EGAT's financial position and the sector to earn a rate of return of not less than 7% in FY80 and 81 and of not less than 8% as of FY82 and in each fiscal year thereafter (paragraph 35); (iii) maintain a debt/equity ratio of no more than 60:40\.  - 35 - ANNEX III Page 2 (b) The Government has agreed to: (i) not later than December 31, 1979, submit to the Bank for its review and comment a proposal for a study aimed at improving coordination in the electricity sector (paragraph 32); and (ii) take all measures, including adjustment of tariffs, necessary to enable the electricity sector as a whole to earn a rate of return of not less than 7% in FY80 and FY81 and of not less than 8% as of FY82 and in each fiscal year thereafter (para- graph 35)\. (c) An additional condition of effectiveness will be an increase in sector tariffs sufficient for EGAT and the sector as a whole to earn a rate of return of at least 7% in FY80 (paragraph 35)\.   B U R M A CcplOO 140DDAMW' A-\. | \o LAO PEOPLE'S DEMOCRATIC IAILAN 16Pooc ,W REPUBLIC f Mae Hooggon ~~~Ch-nnn,2M Di-sI 7 MWO/ ' 1 \. M O Th_rn Nan NAM NGUM DAM 6 \.F i N n 'Jo MWHMSLDM t)/i/Dt GsTlm 5M ona 30M Itt,Noho Chiangoal 7 (unit/% APwad3 UtI k--AtM C 135 MW a x 2a1SMWQ~~~~~~~~~~~~~~\.nl30M Ph-\ <e J \ DA NnKh i Ph= 'DA IA HUMtRGi DAM Ga;i Tu,hire 15MW= No40onphMWotn /A D-NGAPORE l) C' nSA0MW XL>PhaU h Kn/n haka\. l !>- X M=n=ron 9 < brmm~~~~~~~~~~~~~~~~~~' 1\.k 5'N\.h\. \. 8 420 W P N \khoho SAM fUND DAM Tho h5o- UBOLRATASA DAM Cop W a son Karophoang --5M-- ooo vUtSov=\.~~~~~~~~~~~~~~~~~hnke' Muidohann 0411HILN DA CHum Po, _ c R N \. R=+ch=burl fr SsmtSgvi:Cop 0MWbr j\.y Ih\.atm CIonsirurhon Prec aPo\.c AndamanEC=pl9GMWt 44 PO*ER PLANTi Ch=nthoburn 0M /WiJ T4s Disorhng Lnres REGION I AREGIO M Nnorons khon - 1i) h\.,' '>n Pltoa R '1 YA REGION is' -- iS MWO Eurnran Sisakas J~ ~ ~ ~ ~~~Ta',~t6 SaLoo Rarohairo 2 Sorn Ca 20 MW \. SRINAGARfND DAM A6 tJStOhOti malrrt\. Cap, 720= MW \. Initia 36DM Ayt 5hoo Phh 20 PROJECT ' ~ K\.Ph\.,' u R=n=ng ^ / LNGS N |||THAILAND /' 4niD5MW Nana~bt- |__|______ /SUATTAN ;Prhi,br /ELECTRICITY GENERATING AUTHORITY OF THAILAND REG/ ~ i5li( --h--ANG PAKONG THERMAL POWER PROJECT Tokuo ~ ~ ~ ~ ~ ~~Chc BAN PAKONGng ll Tem= N R\.th\.b\., Th\., \.1 P\., 1-1 C, ~~~~~Under Futute Eanting Constnuctijn Projeci Project Andlamon KANG KRACHAN GAM PLetho-g --230 KV Transm,issioa Lines Phuk t ~~~Cai M -O ULPW tan Lanniing PIANO ah i 115KV Trnmiso Lie D-P 19) 13- POERr69 KV Trnsmission Lines - - - ~~~~~~~230 KV Substations seo ~~~~~~~~~Sat aip 115 KV Substations P-r- t 69 KV Substations 0 0 0) Thermal Power Plants P,\.,h\.p Kh,,, Kh\.n E3 ~~~~~~~~~~~~Hydro Power Planst Prachuap REin, IGnan N Nuclear Power Plant /~~~~~~~~~~~~~~~~~~~~~~OMM Regional Boundaries / - \.-- - ~~~~~~~~~~~~~~~~~~International Boundaries bo 55 ish 200 300 Gulf of Thalanel I \. 1 KILOMETERS 1 ~~~ ~~~~~~~~~~~~~~~~~~~~~~~~~~50 00o 200 or~~~~~~~o MiLESr sws pndrst 11l I ~~~~~~~~~~~~~~~~~~I anong i& ^ ALANG SUAN I A 4045MW I I N Ipht0 tago AT0 iHAtNI N\.r iT CWQ 30 Phoophin Sooth Canton ThNkharmhat,t -5 197M Thog S-no, 0 Krh, REGION 3"D-t'\. lh Phuket Ca 60M Cantra D-\.1 10 ni65W 4Wa ChntB Trgas Tur,na anthba Ptz; oonaian of h eden of M\.r\. *J gk Oaotida,taa aoosno an Sb nap ,' ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~~~~2-200& ~3o/ jonoat -0 ita iepaiotatoaf G- %rKbi-at3ns1 nrW aThapan ono itoo-ndann iC ' FCi n'Ta/o To Iol ~ MALAY S I A fhd-

APPROVAL

P123704

Page 1 INTEGRATED SAFEGUARDS DATA SHEET CONCEPT STAGE Report No\.: AC5651 Date ISDS Prepared/Updated: 12/17/2010 I\. BASIC INFORMATION A\. Basic Project Data Country: Tajikistan Project ID: P123704 Project Name: Tajikistan Government-implemented grant for targeting and payment of social assistance Task Team Leader: Menahem M\. Prywes Estimated Appraisal Date: Estimated Board Date: September 30, 2010 Managing Unit: ECSHD Lending Instrument: Technical Assistance Loan Sector: Other social services (100%) Theme: Social safety nets (100%) SPF Amount (US$m\.): 0\.00 GEF Amount (US$m\.): 0\.00 PCF Amount (US$m\.): 0\.00 Other financing amounts by source: Borrower 1\.19 EC: European Commission 1\.14 Rapid Social Response Program 2\.20 4\.53 B\. Project Objectives [from section 2 of PCN] The development objectives of the RSR grant are to help the GoT to launch a reform that: (a) Targets the poor more accurately (with lower leakages to the non-poor); (b) Protects the poor more effectively in times of crisis and beyond; and (c) Becomes a vehicle through which donors can channel additional benefits and services to the poor (particularly in times of crisis)\. C\. Project Description [from section 3 of PCN] The RSR grant is divided into a government-implemented part (USD 2\.2 million) and a Bank- implemented part (USD 300,000)\. This ISDS concerns the government-implemented part, the Bank-implemented part concerns studies and is already active\. The government-implemented part will support: --Piloting of poverty-targeted social assistance in two districts (rayons), to start in January 2011; and Page 2 --Building the capacity of the Ministry of Labor and Social Protection (MLSP) to roll-out a national reform through training, provision of equipment, and minor refurbishment of offices\. This refurbishment will not include reconstruction or rehabilitation of a scale which would warrant requiring preparation of an Environmental Management Plan\. There will be no new construction or any activities requiring land acquisition\. D\. Project location (if known) The project will be located in the Republic of Tajikistan\. The pilot of poverty-targeting of social assistance will be in Istarafshan and Yavan rayons (districts)\. E\. Borrower’s Institutional Capacity for Safeguard Policies [from PCN] The Project Coordinatoin Group (PCG) at the Executive Office of the President will implement all procurement of goods and services (USD 1\.7 million of the grant) and will monitor outcomes\. At present, this PCG implements the Civil Service Reform Project\. This PIU successfully implements the procurement, financial management, and safeguards aspects of that project, according to rules defined in its Operations Manual\. F\. Environmental and Social Safeguards Specialists II\. SAFEGUARD POLICIES THAT MIGHT APPLY Safeguard Policies Triggered Yes No TBD Environmental Assessment (OP/BP 4\.01) X Natural Habitats (OP/BP 4\.04) X Forests (OP/BP 4\.36) X Pest Management (OP 4\.09) X Physical Cultural Resources (OP/BP 4\.11) X Indigenous Peoples (OP/BP 4\.10) X Involuntary Resettlement (OP/BP 4\.12) X Safety of Dams (OP/BP 4\.37) X Projects on International Waterways (OP/BP 7\.50) X Projects in Disputed Areas (OP/BP 7\.60) X Environmental Category: C - Not Required III\. SAFEGUARD PREPARATION PLAN A\. Target date for the Quality Enhancement Review (QER), at which time the PAD-stage ISDS would be prepared: N/A B\. For simple projects that will not require a QER, the target date for preparing the PAD-stage ISDS: 11/05/2010 Page 3 C\. Time frame for launching and completing the safeguard-related studies that may be needed\. The specific studies and their timing 1 should be specified in the PAD-stage ISDS\. No safeguard-related studies are required\. IV\. APPROVALS Signed and submitted by: Task Team Leader: Mr Menahem M\. Prywes 08/30/2010 Approved by: Regional Safeguards Coordinator: Ms Agnes I\. Kiss 08/31/2010 Comments: Sector Manager: Ms Kathy A\. Lindert 12/17/2010 Comments: 1 Reminder: The Bank's Disclosure Policy requires that safeguard-related documents be disclosed before appraisal (i) at the InfoShop and (ii) in-country, at publicly accessible locations and in a form and language that are accessible to potentially affected persons\. Page 4

APPROVAL

P103080

Page 1 INTEGRATED SAFEGUARDS DATASHEET APPRAISAL STAGE I\. Basic Information Date prepared/updated: 04/23/2007 Report No\.: AC2815 1\. Basic Project Data Country: Pakistan Project ID: P103080 Project Name: KARACHI DOCK LABOR PROJECT Task Team Leader: Jean-Noel Guillossou Estimated Appraisal Date: April 16, 2007 Estimated Board Date: July 3, 2007 Managing Unit: SASEI Lending Instrument: Specific Investment Loan Sector: Ports, waterways and shipping (100%) Theme: Corporate governance (P);State enterprise/bank restructuring and privatization (P) IBRD Amount (US$m\.): 79\.00 IDA Amount (US$m\.): 0\.00 GEF Amount (US$m\.): 0\.00 PCF Amount (US$m\.): 0\.00 Other financing amounts by source: Borrower 0\.00 0\.00 Environmental Category: C - Not Required Simplified Processing Simple [] Repeater [] Is this project processed under OP 8\.50 (Emergency Recovery) Yes [ ] No [X] 2\. Project Objectives (a) to increase productivity of the port of Karachi by streamlining labor working practices and reducing labor costs related to the Karachi Dock Labor Board (KDLB); and (b) to facilitate the reentry of former KDLB registered workers and employees into the labor market\. 3\. Project Description The project will have three components: a\. Job Benefits Loss Compensation: The objective of this component is to provide job benefits loss compensation and related payments to up to 4,000 KDLB registered dock workers and employees\. The component will include the following activities: (a) Public Information and Communication : prepare public information materials on the project rationale and on the job loss compensation program, provide formal briefing to KDLB dock workers, employees and families, and assist workers and employees in making informed decisions with respect to job benefits loss compensation payments; (b) Administrative Procedures: prepare administrative procedures and materials to process job benefits loss compensation payments for individual workers; and (c) Job Loss Compensation Payments: make payments to up to 4,000 workers and staff following fiduciary procedures agreed with the World Bank\. Page 2 b\. Labor Redeployment Program: The objective of this component is to provide labor redeployment services to KDLB registered dock workers and employees who have received job benefits loss compensation payments, to assist them in reentering the labor market quickly, and to their immediate family members with a special focus on employability/income generation of women\. This component will include the following activities: (a) Develop Information and Procedures: develop and maintain information and procedures to promote and deliver labor redeployment services to KDLB workers and staff; (b) Assess Demand for Labor Services: provide information to KDLB dock workers and employees on the availability of labor redeployment services to assess and determine the demand for these services based on profile of workers requesting services; (c) Deliver Labor Redeployment Services: deliver labor redeployment services to KDLB workers, employees and immediate family members, via sub-contracts with service providers; and (d) Evaluate Labor Redeployment Services: determine the net impact of labor redeployment services\. c\. Social Assessment and Project Management : The objective of this component is to provide support for: (a) Social Assessment: to identify issues related to the socio- economic impact of discontinuation of KDLB scheme on KDLB workers, employees and families, and the status of labor relations and working conditions of similar workers at the Karachi Port, especially in the post-KDLB scenario, and develop recommendations to provide improved working conditions; (b) Social Monitoring: evaluate the socio- economic impact of terminating the KDLB scheme on KDLB registered dock workers, employees and their immediate families; (c) Project Management Unit (PMU): to coordinate project execution, and manage the resources of the project\. 4\. Project Location and salient physical characteristics relevant to the safeguard analysis Location : Port of Karachi 5\. Environmental and Social Safeguards Specialists Mr Javaid Afzal (SASES) 6\. Safeguard Policies Triggered Yes No Environmental Assessment (OP/BP 4\.01) X Natural Habitats (OP/BP 4\.04) X Forests (OP/BP 4\.36) X Pest Management (OP 4\.09) X Physical Cultural Resources (OP/BP 4\.11) X Indigenous Peoples (OP/BP 4\.10) X Involuntary Resettlement (OP/BP 4\.12) X Safety of Dams (OP/BP 4\.37) X Projects on International Waterways (OP/BP 7\.50) X Projects in Disputed Areas (OP/BP 7\.60) X Page 3 II\. Key Safeguard Policy Issues and Their Management A\. Summary of Key Safeguard Issues 1\. Describe any safeguard issues and impacts associated with the proposed project\. Identify and describe any potential large scale, significant and/or irreversible impacts: A review of social characteristics of KDLB staff and registered dock workers was carried out during project preparation to assess the number of families and dependents that will be impacted by the termination of the KDLB scheme\. Information was collected on their region of origin to determine whether labor redeployment services need to be offered outside of Karachi\. Data on age provided an estimate of the number of workers that may find a new job more easily, have the potential to learn new skills or may require counseling\. Conditions of employment and access to social benefits for dock workers not registered with KDLB were reviewed during project preparation\. Stevedores have increasingly hired dockworkers from the market instead of using the KDLB dock workers\. The review found that employment conditions do not comply with the relevant labor and social security laws\. 2\. Describe any potential indirect and/or long term impacts due to anticipated future activities in the project area: N/A 3\. Describe any project alternatives (if relevant) considered to help avoid or minimize adverse impacts\. N/A 4\. Describe measures taken by the borrower to address safeguard policy issues\. Provide an assessment of borrower capacity to plan and implement the measures described\. Licensing agreements between KPT and stevedores are being revised to require employment contracts, health insurance and pension coverage for dock workers in Karachi Port\. As soon as the social assessment/monitoring specialist is recruited in the PMU, (s)he will launch an additional social assessment, in parallel with the pre-layoff briefing of KDLB registered workers and employees, aiming at: (a) reassessing issues related to the socio-economic impact of job benefits loss on KDLB registered workers and families and the status of labor relations and working conditions of similar workers at the Karachi Port; and (b) developing recommendations to address these issues and confirm institutional mechanisms and instruments so that the dock workers continue to get basic benefits\. This in-depth social assessment will help better characterize the population affected by the retrenchment and identify the most vulnerable groups\. It will also help identify and incorporate effective social safeguards and demand-driven labor redeployment services to help the households find alternative income sources including re-employment, small family business, business incubator services and community work \. This includes not only the workers themselves but their families as well as possibly the surrounding community\. Page 4 Subsequent social monitoring surveys will monitor the demographic and socio- economic characteristics, employment conditions and access to pension and health benefits of KDLB registered workers and employees who have received job benefits loss compensation by conducting four cycles of survey every six months starting 3 to 4 months after the initial group of KDLB workers depart\. This continuous social impact assessment conducted on semi-annual basis will provide an independent assessment of the social mitigation measures in place, their equitable distribution and the targeting of vulnerable groups and their re-entering the employment market\. It will help monitor the social dimensions of the proposed project and in doing so highlight the risks, challenges, opportunities and problems in the project\. An evaluation of labor redeployment services will be carried out about 18 months after the initial group of KDLB workers and employees depart\. The objective is to evaluate the net impact of labor redeployment services by implementing a quasi-experimental design net impact study of a sample of KDLB workers and employees who have participated in the labor redeployment program\. The study will identify the usage and impact of services for different demographic groups and indicate whether benefits were used by the KDLB workers, employees or by other household members since the services are to be available to immediate family members as well as the actual KDLB workers themselves\. The Karachi Port Trust (KPT) will be responsible for managing and implementing the project through a dedicated Project Management Unit (PMU) and will coordinate all the activities with the Karachi Dock Labor Board\. One full-time long-term local job loss compensation specialist, as part of PMU, will administer implementation of the Job Loss Compensation Program\. One full-time long-term local labor redeployment specialist and one short-term international labor redeployment specialist will develop, administer and evaluate the Labor Redeployment Program\. Labor redeployment services will be delivered by sub-contractors procured by PMU following procedures agreed with the World Bank\. The Social Assessment and Project Management Component will be supported by one full time local social assessment consultant, and two full time local project management consultants (i\.e\. administration, finance)\. A reporting/communication specialist will manage the communication campaign about the project rationale, its content and achievement of its objectives and will advise the other specialist in PMU on information and communication activities\. 5\. Identify the key stakeholders and describe the mechanisms for consultation and disclosure on safeguard policies, with an emphasis on potentially affected people\. Key stakeholders include the general public, political representatives, the federal and provincial governments and the municipality of Karachi, the affected workers and their families, and the KPT and its clients -- ship owners and agents\. B\. Disclosure Requirements Date Page 5 * If the project triggers the Pest Management and/or Physical Cultural Resources, the respective issues are to be addressed and disclosed as part of the Environmental Assessment/Audit/or EMP\. If in-country disclosure of any of the above documents is not expected, please explain why: The project is not expected to have an environmental impact\. No document needs to be disclosed\. C\. Compliance Monitoring Indicators at the Corporate Level (to be filled in when the ISDS is finalized by the project decision meeting) The World Bank Policy on Disclosure of Information Have relevant safeguard policies documents been sent to the World Bank's Infoshop? N/A Have relevant documents been disclosed in-country in a public place in a form and language that are understandable and accessible to project-affected groups and local NGOs? N/A All Safeguard Policies Have satisfactory calendar, budget and clear institutional responsibilities been prepared for the implementation of measures related to safeguard policies? N/A Have costs related to safeguard policy measures been included in the project cost? N/A Does the Monitoring and Evaluation system of the project include the monitoring of safeguard impacts and measures related to safeguard policies? N/A Have satisfactory implementation arrangements been agreed with the borrower and the same been adequately reflected in the project legal documents? N/A D\. Approvals Signed and submitted by: Name Date Task Team Leader: Mr Jean-Noel Guillossou 04/16/2007 Environmental Specialist: Mr Javaid Afzal Social Development Specialist Mr Mohammad Imtiaz Akhtar Alvi Additional Environmental and/or Social Development Specialist(s): Approved by: Regional Safeguards Coordinator: Mr Frederick Edmund Brusberg 04/23/2007 Comments: No safeguard policies are triggered\. There is significant social risk from labour redeployment\. SAR Safeguards requests review of documents and plans for management of labour redeployment\. Sector Manager: Mr Simon Thomas 04/16/2007 Comments: This is fine with me Page 6

APPROVAL

P008710

Domauozit of The World Ban 10R OFFICtAL USE ONLY Report No\. 6664 PROJECT COMPLETION REPORT ROMANIA CRAIOVA CHEMICAL PROJECT (LOAN 1634-RO) February 26 1987 Industry Department This document has a restricted distribution and may be used by recipients only in the performance of their official duties\. Its contents may not otherwise be disclosed without World Bank authorization\.  FOE OFm CLAL USE ONLY THE WORLD BANK Washington DC 20411 USA Opefatumn 1b11U6614* February 2b, 1987 MEMORANDUM TO THE EXECUTIVE DIRECTORS AND THE PRESIDENT SUBJECT: Project Completion Report: Romania - Craiova Chemical Project (Loan 1634-RO) Attached, for information, is a copy of a report entitled "Project Completion Report: Romania - Craiova Chemical Project (Loan 1634-RO)" prepared by the Industry Department\. Under the modified system for project performance auditing, further evaluation of this project by the Operations Evaluation Department has not been made\. Attachment This document has a restncted distribution and may be used by recipients only in the performance of their official duties\. Its contents may not otherwise be disclosed without World Sank authonzatkon\.  FOR OFfCIL US ONLY PROJECT COMPLETION REPORT ROMANIA - CRAIOVA CHEMICAL PROJECT (LOAN 1634-RO) Table of Contents Page No\. Preface *\.*\. *\.ooo o\.,o\.o* oeX-o**e *oooo e*oo***o \. \.*,,o i Basic Data Sheet oooo**e*v****vvv+v**00***00**0*00000ot ii Highlights 000000040 00*0000000 *00OO0 00004 000000040***** iv I\. INTRODUCTION I\. **\.** \.0000*4* 4040004 \.00\.1 II\. PROJECT BACKGROUND \.o\.o\. \. 2 A\. Project Preparation and Appraisal, Loan Approval and Effectiveness 2\.*\. 2 Be Project Description and Technologies \.2\. 2 III\. PROJECT IMPLEMENTATION AND MAANAGEMENT \.3\. 3 A\. Achievement of Project Objectives \. 3 B\. Project Implementation Schedule \. 4 Co Project Management \.o 5 D\. Employment and Training \. 6 E\. Sources of Procurement \.,\.e\. 6 F\. Performance of Consultants, Contractors and Suppliers *\.eo\.e\.40404***eoo\.44 6 G\. Capital Costs, Financing and Disbursements \. 7 H\. Bank Loan Utilization \., \. 8 IV\. OPERATING PERFORMANCE o\.o\.*,eo*\.eeeo,o\.eeoooeee 9 A\. Commissioning and Production Buildup \.6\. 9 B\. Market Information *4\. \. \.44\. o 9 C\. Environmental Aspects \. 10 V\. FINANCIAL AND ECONOMIC PERFORMANCE \., \. 10 VI\. LESSONS LEARNT \. \. 14 VII\. ROLE OF THE BANK AND RECOMMENDATIONS * \. 14 This document has a restricted distribution and may be used by recipients only in the peforance of their official duties\. Its contents may not otherwise be disclosed without World Bank authorization\.  TABLE OF CONTENTS (Cont'd) Pseie No\. ANNEXES 1 - Flowsheet of the Craiova Production Process \. 16 2 - Financial Return Calculations and Assumptions \. 17 3 - Economic Return Calculations and Assumptions \.,\., 20 ATTACHMENT I: Project Completion Report prepared by the Borrower 25 ATTACHMENT II: Comments Received from the Borrower \. 63  - i - PROJECT COMPLETION REPORT ROMANIA - CRAIOVA CHEMICAL PROJECT (LOAN 1634-RO) PREFACE The Bank approved a loan of US$40 million equivalent in December 1978, to Banca de Investitii of Romania (Borrower) to assist in the financing of the Craiova Chemical Project implemented by the Craiova Enterprise (Beneficiary)\. The Project was part of Romania's plans for increasing rapidly the domestic chemical capacity, for both local consumption and exports, by putting to more economic use its natural gas resources\. The individual constituent plants included in t1\.e Project were commissioned over a period of time from 1983 to 1985\. After the commissioning of the major production plants, Bank staff visited Romania in November 1984 to initiate preparation of the Project Completion Report (PCR)\. A further mission visited Romania in February 1986 to finalize the preparation of the PCR with Banca de Investitii\. The Borrower's PCR is also attached\. Further comments from the Borrower were received in December 1986 and have been taken account of in the preparation of this report\. This project has not been audited by the Operations Evaluation Department\.  - Ii - CRA1OVA CHEMICAL PROJECT MLAE 00\. 1634-RO) Basic Data Shoet KEY PROJECT DATA (Amountsin 115 mlion) Loan Position -- Loan No\. 1634 RtO OIgnal Disbursed Cancelled Repaid&/ Outstanding 40\.0 40\.0 13\.3 26\.7 a/ As of Apr,l 30, 1986\. An amount of US$2\.2 to cover exchange adjustment is also due, making the Borrower's obligation US$30\.8 million in total, Cumulative Loan Disbursement FY79 FY80 FY81 FY82 FY83,1 (1) Planned 11\.00 37\.50 40\.00 40\.00 40\.00 (ii) Actual 6\.81 16\.80 36\.20 39\.80 \.2 (iii) (ii) as X of (i) 62 45 91 99 100 GM= 3P2j5C DM Oriinal Actual Board Approval - December 1978 Loan Signature - January 1979 Effectiveness - May 1979 Closing Dec\. 31, 1982 March 31, 1983 Date of Physical Completion Dec\. 1981 December 1985 Completion Time (Months) 51 99 Time Overrun (%) - 94% Date of Start of Full operations Jan, 1982 Dec\. 1985 Total Project Cost ($ mil\.) 151\.5 183\.6 Cost Overrun (2) - 21% Financial Rate of Return 212 15% Economic Rate of Return 16% 7%  - iii - MISSION DATA No\. of No\. of Date of Month, Year Weeks Persons Manweeks Report Identification 05/76 2 3 6\.0 04/06/76 Preparation 06/77 2 3 6\.0 06/27/77 Preappraisal 10/77 1 1 1\.0 12/08/77 Appraisal 03/78 3 2 6\.0 04/03/78 Supervision 09/79 1 2 2\.0 10/12/79 Supervision 07/80 1 2 2\.0 07/30/80 Supervision 10/82 1 2 2\.0 10/24/82 Supervision/Completion 11/84 \.50 2 1\.0 12/13/84 Completion 02/86 2 2 4\.0 04/86 OTHER DATA Borrower Banca de Investitli Executing Agency Craiova Enterprise Fiscal Year of Borrower January 1 - December 31 CURRENCY EXCHANGE RATES Currency: Lei Project Appraisal 1 US$ - 18 Lei January 1, 1981 - December 31, 1982 1 US$ - 15 Lei January 1, 1983 - June 30, 1983 1 US$ - 16\.50 Lei July 1, 1983 - December 31, 1983 1 US$ - 17\.50 Lei January 1, 1984 - October 30, 1984 1 US$ - 21\.50 Lei November 1, 1984 - March\.31, 1986 1 US$ = 17\.50 Lei  - iv - HIGHLIGHTS 1\. The project is a part of the overall Romanian strategy for more economic use of its natural gas resources\. It is an extension and modernization of the preexisting Craiova Chemical complex and includes facilities to produce methanol, acetic acid, acetic anhydride, vinyl acetate, polyvinyl acetate and ethyl acetate (paras\. 1\.01-1\.02, 2\.02-2\.04)\. 2\. The Bank loan of US$40 million financed roughly 57% of the total foreign exchange cost ard covered 21% of the total financing needs for the project (para\.1\.03)\. 3\. The project was completed in December 1985, four years later than planned\. The most important reasons for the delays were: the lack of manpower in construction due to a switching in national priorities in favor of power projects; late delivery of locally supplied goods; technical problems with machines leading to a need for their replacement; modifications of construction technologies halfway through implementation; difficulties in making Romanian procurement procedures conform to the Bank's guidelines; and the problems of integrating new facilities in an existing crowdee site (paras\.3\.01-3\.17)\. 4\. The commissioning of the units has been undertaken successfully with the exception of the carbon monoxide (CO) separation and the acetic acid units, where technical problems still persist (paras\. 3\.14-3\.17, ¶ 4\.01-4\.03)\. 5\. The financial and economic rates of return are significantly lower than estimated at appraisal\. The financial rate of return (FRR) is re-estimated at 15% compared to 212 at appraisal and the economic rate of return at 72 compared to the original 16%\. The declines are due to the implementation delays, persisting technical problems in some of the units and input and output price changes (paras\. 5\.01-5\.09)\. 6\. Lessons to be learnt include: (i) being more realistic in the future in assessing implementation schedules of projects in the Romanian planning system (il\.) the need for early missions after loan approval to explain and speed up procurement procedures; and (iII) making explicit provision in the Bank loan for post-startup technical assistance (paras\. 6\.01-6\.03)\.  I\. INTRODUCTION 1\.01 Romania has had an established petroleum and gas-based industry based on its vast hydrocarbon resources since the 19th century\. In the early 1960s, as gas production was levelling off, the Government began restricting new gas connections solely to the chemical Industry, while converting utilities and Industries using methane gas as fuel to other energy forms, in a policy effort to increase the value added in the use of methane gas\. Throughout the 1960s, much of the methane gas was used by the chemical industry to produce nitrogenous fertilizers and carbon black; beginning in the late '609 the country's various five-year plans placed emphasis on use of methane gas for the production of methanol, acetylene and a wide variety of specialized chemical products\. The Craiova Chemical Project, part of the Government's 1976-80 five-year plan, was among such new investments* 1\.02 The Project was designed to absorb about 360 million cubic meters of methane gas being di7erted from fuel to chemical feedstock use, thus increasing the amount of gas processed into chemica's by 11%\. The Project consisted of the installation of an acetylene unit, a unit for the separation of carbon monoxide (CO), the expansion of existing vinyl acetate and polyvinyl acetate units, and the construction of several new plants for chemical products including methanol, acetic acid, acetic anhydride and ethyl acetate\. The project's output was primarily designed for import substitution, although some exports were envisaged during the initial years of operation to permit early full utilization of the project's facilities\. Of total production in the first three years of operation, about 30 percent was expected to be exported; as local demand increased the percentage of output destined for export was expected to decline to about 8 percent by 1985\. 1\.03 The project scope was unchanged during implementation\. Actual project cost was US$183\.6 million compared to US$151\.5 million estimated at appraisal\. Total financing required, including interest during construc- tion, was US$192\.7 mil'lion compared to US$156\.6 million at appraisal\. Actual foreign exchange cost was US$70 million compared to the appraisal estimate of US$60 million\. The Bank loan of US$40 million financed 57% of the actual foreign exchange cost (compared to the appraisal estimate of 67%) and 22% of the total project cost, in comparison with 26% as estimated at appraisal\. 1\.04 The project was completed during the fourth quarter of 1985, four years later than planned\. Serious and as yet unresolved technical problems remain in the carbon monoxide separation unit and in the acetic acid plant, resulting in low capacity utilization in these units and in downstream units which depend on them for feedstocks\. Early assessment of the persisting problems and quick solutions to them will be necessary to permit full realization of the project's benefits\.  II\. PROJECT BACKGROUND A\. Project Preparation and Appraisal, Loan Approval and Effectivenees 2\.01 The project was identified by a Batak mission in May 1976\. During preparation, the Bank recommended changes of scope to eliminate a polyvinyl alcohol plant and a butyl acetate plant which preliminary assessment had shown were uneconomic\. The project was appraised in March 1978\. The Bank loan of US$40 million was approved in December 1978 and signed in January 1979\. The original loan closing date was December 31 1982; disbursement started in the third quarter of 1979 and was completed in the first quarter of 1983\. The loan was made to Banca de Investitii, as the the borrower, with the guarantee of the Government of Romania; the loan proceeds were channelled to the Craiova Enterprise as the beneficiary\. The Bank loan had a maturity of 14 years, including four years of grace, at an interest rate of 7\.35X per annum (p\.a\.) plus a commitment charge of \.75% p\.a\. B\. Project Description and Technologies 2\.02 The Project was designed to divert about 360 million m3 of methane gas from fuel to chemical feedstock uses, thuis increasing the amount of gas processed in Romania into higher value chemicals by 11%\. It was designed so as to achieve the best possible utilization of the feedstock by existing and new facilities incorporated in the Project\. About half of the methane stream is directed to a new acetylene unit which replaced a pre-existing acetylene plant based on the now non-competitive carbide technology\. One-third of the carbon contained in this stream of gas is thus transformed into acetylene and thence into a variety of high value organic chemicals\. The remaining two-thirds of the carbon is transferred in the form of off gas to other units, mainly to existing ammonia/urea facilities; the composition of the offgas permits direct use by the ammonia reactor and thus allows the replacement of pure methane gas\. The other half of the original methane stream is used for the production of methanol\. Existing capacities of vinyl acetate and poly- vinyl acetate were expanded correspondingly, and new plants for the production of acetic acid, acetic anhydride, ethyl acetate and methanol were built as part of the project\. A new plant for the separation of carbon-monoxide (CO) provides CO to the acetic acid plant and hydrogen to the already existing butanol plant\. 2\.03 The annual production capacities of the units in the project and the percentages of output transferred to other units in the Craiova complex or sold outside the complex are shown below:  -3 - Project Unit Capacities and Net Prod,,:tion Capacities for Sale (tpy) Net Production Sales Capacities as Product Capacity for Sale a/ % of Unit Capacities Acetylene 30,000 14,331 47 Carbon Monoxide (m3/h) 5,000 - - Methanol 210,000 172,000 82 Acetic Acid 60,000 27,946 47 Acetic Anhydride 10,000 10,000 100 Vinyl Acetate 20,000 18,825 94 Polyvinyl Acetate 13,000 13,000 100 Ethyl Acetate 8,025 7,965 99 a/ Net production for transfer to other units of the Craiova Complex or for sale; the balance is internally consumed in the Project\. A flowsheet of the integrated production structure showing the various process stages and the use of the methane gas, including its by-products and the various downstream uses, is shown in Annex 1\. 2\.04 The project location was chosen so as to make the best possible use of pre-existing investments in the complex, especially the existing methane pipeline from the Transylvanian fields to Craiova, and other infrastructure facilities\. The technologies for the CO-purification, the acetic acid and the acetic anhydride plants were imported under licenses of firms in USA, the Federal Republic of Germany (FRG) and the German Democratic Republic (GDR)\. The other technologies were obtained domestically\. III\. PROJECT IMPLEMENTATION SCHEDULE AND MANAGEMENT A\. Achievement of Project Objectives 3\.01 Inasmuch as the project is enabling Romania to divert 360 million cubic meters of methane gas from fuel uses to production of higher-value chemicals, the project can be said to have met its principal objective\. However with the delay of four years in project completion, and the persistent technical problems in the CO separation unit and the acetic acid plant, resulting in low capacity utilization of these units and in downstream units whxich depend on raw materials from there, the project cannot be said to have achieved its full economic benefit potential\. Only when the technical problems in the two units are resolved, permitting full capacity utilization, can the project be considered to have successfully achieved its objectives\.  - 4- B\. Project Implementation Schedule 3\.02 The table below compares the planned implementation schedule with the actual achieved under the project\. Romania - Craiova Chemical Project Project Implementation Sehedule - Planned Versus Actual Appraisal Actual Start of Start Start of Start Erection UR Erection Up Acetic Acid IV\. 1977 IV\. 1979 III\.1978 I\. 1983 Methanol I\. 1978 111\.1979 IV\. 1978 IV\. 1984 Acetylene IV\. 1978 I11\.1981 IV\. 1979 IV\. 1985 Acetic Anhydride a/ IV\. 1978 I\. 1980 II\. 1979 I11\.1983/ 1II\.1985 Ethyl Acetate 111\.1979 IV\. 1981 I\. 1984 II\. 1985 Vinyl Acetate I\. 1979 TII\.1981 IV\. 1979 IV\. 1985 Polyvinyl Acetate II\. 1979 IV\. 1981 I11\.1980 IV\. 1985 Utilities II\. 1978 IV\. 1981 III\.1978 I\. 1982/ IVe 1984 a/ The unit was started up in 1983 with the reactor coils originally supplied; these, due to technical problems, had to be replaced later, leeding to the new start-up in 1985 (para\.3\.06)\. 3\.03 The project was completed during the fourth quarter of 1985, four years later than planned\. Among the major reasons for the delay were (i) organization of procurement and conclusion of contracts, due to the complexity of the project; (ii) technical problems with some items of equipment leading to their replacement, the major liability for which is still in dispute; (iii) modifications in domestically-procured technology midway through implementation; and (iv) problems of integrating new facilities in existing units, which affected procurement and installation schedules\. Other factota contributing to the delay were (i) lack of skilled construction manpower, particularly in 1982, due to the switching of national priorities; and (ii) late delivery of some items of domestically procured equipment\. 3\.04 Dela in Procurement: Shortly after loan approval, the Bank organized a supervision mission to work with the Romanian authorities responsible for project procurement on preparation of instructions to bidders, bid invitations, specifications and evaluation procedures\. The Bank also carried out procurement seminars in Romania, while supervision missions focussed on procurement issues\. Nonetheless, procurement difficulties, attributed by the Borrower to the technical complexity of the  - 5 - project and to the large quantities of equipment and materials required for implementation, resulted in an estimated delay impact (compared with appraisal estimates) on the project of about 18-24 months\. There were several main causes for this overall delay as described below\. 3\.05 Technical Problems with Delivered Equipment: Technical problems were experienced with some of the equipment for two of the units\. These problems, according to the beneficiary, were observed after delivery\. The steel coils for the acetic anhydride unit were reportedly defective upon delivery, necessitating their replacement and resulting in an estimated 30-month delay in the start-up of this unit\. Technical difficulties have also been experienced with the CO-separation unit and the carbon monoxitde compressors in the acetic acid plant; these difficulties have yet to be corrected and are affecting the capacity utilization of the above-mentioned plants, and consequently downstream units depending on them for their feedstocks\. 3\.06 Modifications in Technology Mid-way Throh Implementation: The technology for the ethyl acetate unit was procured locally from Romanian sources\. Mid-way through the unit's construction, the technology was substantially modified, resulting in delays in the commissioning of the unit by more than 2 years beyond the planned schedule\. 3\.07 Problems of Integration of New Facilities with Existing Units: The integration of new facilities into an existing site, chosen to make the most use of existing infrastructzre, turned out to be cost-intensive and time-consuming; the possibilities of using heavy construction equipment in an already crowded site were very limited, necessitating a high degree of manual work in construction\. 3\.08 Lack of Construction Manpower: After the second energy crisis, and in particular during 1981/82, skilled construction manpower throughout Romania, by Government directive, was drafted to the construction of electric power projects to the detriment of other construction projects\. The Craiova Chemical project was no exception\. Although it has not been possible to estimate its impact on the project, this lack of sufficient construction manpower was a contributing factor to the overall delay\. C\. etaneent < s, The Industrial Central for Chemical Fertilizers (CIICH), a holding company structure under the Ministry of Chemical Industry, had the general responsibility for project implementation\. The Craiova Chemical Complex, the beneficiary, was in charge of the day to day implementation supervision\. Technological design arrangements were handled centrally by the Technical Engineering and Design Institute (IITPIC), the engineering institute of the Ministry of Chemical Industry\. ROMCHWIM, and since 1980, Industrialimportexport, the agencies organized under the Ministry of Chemical Industry were responsible for procurement\. Physical construction of the project was the responsibility of various construction enterprises under the Ministry of Industrial Construction\. Although in the course of  - 6 - project implementation the Ministry of Chemical Industry was split into the Ministry of Chemical Industry and the M4inistry of Petrochemical Industries, this did not materially affect the project implementation management arrangements\. D\. Employment and Training 3\.10 The project is estimated to require about 1,040 people at full capacity (600 operators, 400 auxiliary workers and about 40 engineers)\. This is slightly less than estimated at appraisal\. Nine workers and 8 engineers were trained in the FRG, GDR and USA, in the licensor companies\. Although only about 50% of the Bank loan funds assigned to training were used, (10 million lei), the Craiova management is satisfied that the training received abroad and in other Romanian plants is adequate for its needs\. E\. Sources of Procurement 3\.11 Out of the total cost of equipment and services financed by the Bank, foreign suppliers accounted for roughly 52% and Romanian deliveries for 48%\. Detailed sources of procurement by country and amounts in US$ equivalent are shown in the following table\. In iOOQs US$ % of Equivalent Loan Amount Federal Republic of Germany 8,956 22\.39 Japan 3,192 7\.98 Netherlands 2,603 6\.51 Italy 1,512 3\.78 Austria 1,040 2\.60 Belgium 810 2\.03 United Kingdom 660 1\.65 USA 577 1\.44 France 569 1\.42 Sweden 530 1\.33 Other Foreign Suppliers 210 0\.53 Total Foreign Suppliers 20,659 5165 Romania 19,341 48\.35 40,000 100\.00 F\. Performance of Consultants, Contractors and Suppliers 3\.'2 With the exception of (i) the steel coils for the acetic anhydride plant and (ii) the carbon monoxide compressors for the acetic acid plant and the CO-separation unit, the borrower and the beneficiary were satisfied with the performance of equipment, consultants, contractors and suppliers\.  - 7 - 3\.13 The steel coils for the acetic anhydride plant were delivered by a foreign 3upplier in 1980 and installed two years later\. Prior to installation, severe cracks in all coils were discovered\. The supplier and the enterprise could not agree on the responsibility and the liability of the necessary coil replacement\. The coils were later replaced by spare parts purchased from other external sources, resulting in a satisfactory plant start-up in 1985\. The dispute between the original P"pplier and the Romanian authorities is awaiting international arbitration\. 3\.14 The CO-purification technology was procured under a license from a foreign firm\. Due to the unresolved technical problems, the unit has been operating well below nameplate capacity\. The resulting shortfall in the supply of carbon monoxide to the downstream acetic acid plant contributes to the latter's low capacity utilization and is affecting flexibility in operating downstream facilities (vinyl acetate, polyvinyl acetate and acetic anhydride plants)\. 3\.15 The acetic acid plant, working with foreign technology and equipment, has never worked satisfactorily since its commissioning\. Both the licensor's and the equipment supplier's businesses have been subsequently taken over by other firms\. Negotiations between the Romanian authorities and the firms involved, aiming at technical assistance and remedying the technical problems, had failed by November 1984\. In March 1985, the Bank tried, in the interest of the project, to encourage the Romanians and the licensor/supplier to solve the technical problems urgently while reserving their position as to the corresponding legal liability\. However, in February 1986 the Bank was informed that no new negotiations had taken place\. G\. Capital Costs\. Financing and Disbursements 3\.16 As shown below, the actual total capital costs of $192\.7 million is $35\.9 million or 23% above the appraisal cost estimate\. The project cost overrun, excluding interest during construction, represented 21%\. Comparison of appraised and actual capital costs in Lei yields a project cost overrun of 19% and a total cost overrun of 20%\.  - 8 - Estimated and Actual Capital Costs USS Million Estimate Actual Overrun (%) Land \.2 \.2 - Engineering, Licenses, Technical Assistance 5\.4 7\.0 30 Equipment, Material, Spares, Including Duties 88\.9 125\.5 22 Erection 6\.6 9\.8 48 Building and Civil Works 24\.9 26\.3 6 Training 1\.1 \.6 -45 Administrative and Preoperating Expenses 3\.2 4\.7 47 Base Cost 130\.3 174\.1 34 Physical Contingencies 4\.2 -- Price Escalation 8\.5 - _ Total Installed Costs 143\.0 174\.1 10 Working Capital 8\.5 9\.5 12 Project Cost 151\.5 183\.6 21 Interest During Construction 5\.1 9\.1 78 Total Financing 156\.6 192\.7 23 3\.17 For engineering, license, and technical assistance, the overrun of 30X is explained by the technology modifications in the locally-procured ethyl acetate plant and additional safety measures in the acetylene plant\. The high overrun in erection cost is due to price increases in materials and to wage increases, in addition to supplementary work in the acetylene and acetic acid units\. The overruns in administrative and preoperational expenses and interest during construction reflect the implementation time overruns and price increases\. 3\.18 In the original financing plan given in the appraisal report, US$40 million equivalent was to be financed by the Bank loan and US$12\.9 million equivalent by a FRG supplier's credit\. Except for a slight chaage to $11\.5 million equivalent in the supplier's credit, the only change in the actual financing compared to the plan is that the cost overruns of $36 million were met from Romanian sources, increasing the Romanian financing contribution from the appraisal estimate of 66% to about 72%\. H\. Bank Loan Utilization 3\.19 The following table summarizes the appraisal estimate and actual allocation of the Bank loan, by categories\.  - 9 - Allocation of Funds Loan Agreement Actual % of Total X of Total US$ million Loan US$ million Loan 1\. Imported Equipment and Services 22\.0 55 17\.6 44 2\. Imported Equipment and Services With a Contract Cost Lower Than 100,000 Dollar Equivalent 2\.0 5 3\.1 8 3\. Imported Equipment or Local Supply 16\.0 40 19\.3 48 Instead of 40% of the total loan, actual disbursement under category "Imported Equipment or Local Supply" was 48% as a result of Romanian suppliers winning more supply contracts than expected\. IV\. OPERATING PER70RMANCE A\. Commissioning and Production Build-up 4\.01 The table on page 17 shows the appraisal estimate of the production build-up by products in the first years after commissioning of the plants until full capacity is reached, and compares this estimate with the current Romanian estimate and the current Bank estimate (for 1986 onwards)\. The Romanian estimate assumes full capacity production for all products for 1986 and onwards\. However, in the light of the persisting technical problems in late February 1986 in the CO-separation and acetic acid units, it seems highly unlikely that full capacity can be reached in 1986 and 1987 in the production of acetic acid and the offgases (hydrogen from the CO-separation unit, residual methane in hydrogen and purge gas from acetic acid)\. It is therefore conservatively assumed in the Bank estimate that full capacity will not be reached until 1988; the capacity utilization of the acetic acid plant in 1986 and 1987 is estimated to be 68% and 83%, respectively\. It is furthermore assumed that out of thhe total acetic acid production in 1986 and 1987, the complete feedstock needs of the vinyl acetate, polyvinyl acetate and acetic anhydride plants are met, so that their production for sale is not affected by the problems in the acetic acid plant\. This acetic acid feedstock supply to downstream units reduces the acetic acid production available for sale as shown in the table on the following page\. B\. Market Information 4\.02 Section 3\.02 of the Loan Agreement contained the obligation of the Borrower to carry out and submit to the Bank a study on domestic and export market potential for methanol and export strategies for the products  - 10 - of the Craiova Chemical Complex by December 1979\. After extension of the deadline, the study was received by the Bank in September 1980, reviewed and found to be satisfactory\. During the Bank completion mission, meetings with representatives of the foreign trade enterprise Industrialimportexport were requested to review the latest developments in the market for these products, especially in the export market, but the meetings could not be arranged\. Historical current and forecast information about the relevant markets was promised but has not yet been received\. Discussions with representatives of the Banca de Investitii, the Ministry of Chemical Industries and the Craiova Central provided only limited insight\. Verbal statements indicate that the domestic offtake of products from the project is assured by contracts and current plan targets\. Supporting details, however, have not been received to verify the local market demand\. The export market for methanol, acetic acid and polyvinyl acetate are thin and prices depressed\. Methanol is the only significant export product (80,000 tons out of 172,000 tons production for sale), while acetic acid (6,000 tons out of 28,000) and polyvinyl acetate (4,000 tons out of 13,000 tons) are relatively minor\. C\. Environmental Aspects 4\.03 The Romanian authorities have stated that all the project's production units comply with the Romanian standards of environment protection, and also comply with west European standards\. The results of an analysis of a Craiova-based pollution control center carried out by a Bank engineer in 1981 were satisfactory\. Pollution control sample results in Craiova are routinely sent to WHO\. V\. FINANCIAL AND ECONOMIC PERFORMANCE A\. Financial Performance 1\. Financial Situation of the Craiova Enterprise 5\.01 Table 2, Annex 2 shows balance sheets of the Craiova Enterprise from 1978 to 1980, and Table 3, Annex 2 gives Project-related income statements for 1983-1997, based on Romanian indications and downscaled production assumptions for 1986 and 1987 (para 4\.01 above)\. The State finances, through the Banca de Investitii, the investment program of the Craiova Central and its enterprises\. Since the introduction of the "New Economic Measures" in 1979 each enterprise is now expected to cover its operating costs out of its revenues and to repay investment funds provided by the Central and the State Budget\. In addition, the new measures require enterprises to build-up equity, a development fund for modernization and debottlenecking, a worker's benefit participation fund and other uses from their revenues\. 5\.02 The Borrower has pointed out that the new measures have increased the competence of enterprises is self-management and self financing, leading to a closer relationship between the efforts of the enterprise and its financial results\. Nonetheless, domestic output prices are normally set on a cost-plus basis and domestic market consumption is ensured by  - 11 - RDOIAIL4At CAIOVA CHEMICAL PRJECT Build-up of Production for Sale By Product and Years After Start-up a| Cutreat Current Appraisal Romanian Bank Production Unit litigate Estimate t/ Estimate ] methanol C First year after start-up 1 9 149,550 149,550 Second year after start-up 168,662 172,000 172,000 Third year after start-up 172,200 172,000 172,000 Fourth year after start-up and onwards 172,200 172,000 172,000 Acetic Acid t First year after start-up 20,960 8,278 8,278 Second year after start-up 26,549 17,020 17,020 Third year after start-up 27,946 31,290 31,290 Fourth year after start-up 27,946 27,946 8,350 Fifth year after start-up 27,946 27,946 17,350 Sixth year after start-up and onwards 27,946 27,946 27,946 Vinyl Acetate t First year after start-up 10,354 1,400 1,400 Second year after start-up 15,625 17,825 17,825 Third year after start-up 18,449 18,825 18,825 Fourth year after start-u? and onwards 18,825 18,825 18,825 Polyvinyl Acetate First year after start-up 9,750 10,800 10\.800 Second year after start-up 12,350 13,000 13,000 Third year after start-up 13,000 13,000 13,000 Fourth year after start-up and onwards 13,000 13,000 13,000 Acetic Anhydride t First year after start-up 5,600 1,800 1,800 Second year after start-up 8,300 3,200 3,200 Third year after start-up 9,800 6,800 6,800 fourth year after start-up and onwards 10,000 10,000 10,000 Ethyl Acetate t first year after start-up 5,974 3,490 3,490 Second year after start-up 7,567 7,740 7,740 Third year after start-up 7,965 7,950 7,950 Fourth year after scart-up and onwards 7,965 7,950 7,950 Acetylene t First year after start-up 3,583 14,300 14,300 Secoad year after start-up 11,751 14,331 14,331 Third year after start-up 13,901 14,331 14,331 Fourth year after start-up and onwards 14,331 14,331 14,331 Purge Gas from Acetic Acidc/ of000 Vm3 First year after start-up 10,000 2,440 2,5S0 Second year after start-up 13,680 5,100 5,100 Third year after start-up 14,400 9 820 9,820 Fourth year after start-up 14,400 14,400 9,840 Fifth year after start-up 14,400 14,400 12,000 Sixth year after start-up and onwards 14,400 14,400 14,400 822 Hysdrogen c/ '000 Nm3 1,0 First year after start-up 20,216 750 750 Second year after start-up 85,120 1,500 1,500 Third year after start-up 102,144 3,000 3,000 Fourth year after start-up 106,400 106,400 72,350 Fifth year after start-up 106,400 106,400 88,310 Sixth year after start-up and onwards 106,400 106,400 106,400 Residual Methane in Hydrogen c|/000 Me3 First year after start-up 2,014 2,700 2,700 Second year after start-up 8,480 7,200 7,200 Third year after start-up 10,176 10,600 7,740 Fourth year after start-up 10,600 10,600 8,800 lf tt, year after start-up !0,600 10,600 10,600 Sixth year after start-up and onwards IC,600 10,600 10,600 Acetylene Off-Gas 000 Nm3 First year after start-up 410,850 19 ,100 19,100 Second year after start-up 113,988 152,600 151 00 Third year after start-up 158,498 163,400 16i,400 Fourtb year after start-up and onwards 163,400 163,400 163,400 a/ Reported actual figures until 1985, estimates from 1986 onwards\. For comparison of calendar years, see Annex 3, table 2\. b/ This is one of the units where technical problems perstst\. The plant is projected to operate at less than full capacity tlll 1988; and tt is assumed that most of the production in 1986/87 will first be used in downatream facilities before outside sale\. c/ The off-gas volumeas have been scaled down according to the production levels of the units from where they come\.  - 12 - official decisions in the national planning syetem\. It is therefore difficult to assess the project and enterprise performance in the normal manner ae in other Bank industrial projects\. As in previous completion reports, therefore, financial ratios for the enterprise have not been calculated and additional financial analysis has not been carried out since this would have little meaning in the context described above\. 2\. Financial Rate of Return and Sensitivity Analysis 5\.03 The estimated financial rate of return has been calculated as 151, compared with 21% at appraisal; sensitivity analysis shows the rate of return fluctuates between 12% and 17% when sales revenues and operating costs (in 1986 US constant dollars) are assumed to vary by 10% up and down for the period 1986 to 1997\. The corresponding sensitivity range at appraisal was 17% to 241\. Assumptions used in the calculations and results are detailed in Annex 2\. The lower than expected financial rate of return and sensitivity results are due to implementation delays and the persisting technical problems leading to a slower capacity build-up\. B\. Economic Performance 5\.04 The economic rate of return of the project is calculated at 7% as compared to 161 at the time of appraisal\. Sensitivity tests were carried out assuming that the operating costs and sales revenues vary by 10% from 1986 onwards, yielding a range of 31 to 10% for the economic rate of return\. Again, the lower than expected economic rate of return is due to implementation delays and low capacity utilization in the acetic acid plant, as detailed in Table 2, Annex 3\. 5\.05 Although some of the financial prices in 1986 have been brought closer to the economic prices since 1978, comparison between financial and economic prices as of 1986 shows persisting differentials especially for vinyl acetate, ethyl acetate, acetylene, methane, diesel oil, power and industrial water, contributing to the difference of 8 percentage points between the financial and economic rates of return\. Financial and economic prices are given in Table 1\. of Annex 3\. 5\.06 It has been difficult to arrive at accurate long term economic prices for the project's outputs in view of the depressed market and the range of products, for which price forecasts are infrequent\. Prices are based on current prices obtained from the Craiova Central, published sources and consultants\. Prices at the time of appraisal were obtained from three stuzdies specifically prepared for the Bank\. The table below compares economic prices as of 1978 and 1986:  - 13 - Appraisal Estimate Prevailing Prices Delivered Europe Delivered Europe -- -- - (in 1986 US$) -----…----- Methanol 160 145 Acetic Acid 480 400 Vinyl Acetate 615 750 Polyvinyl Acetate 650 900 Acetic Anhydride 765 630 Ethyl Acetate 650 550 Ex-factory prices have been derived as follows: Product Prices Used in Eoxvmic Anlysis (inUS$ pr ton) Averags Ioga1rm &-factory Perenote to be Intern\. Price Cost of/ Cost of Price _:erted ^/ (Deliverd) Y2wxrm Evxt wrtb "ttu/o lethawl 47 145 7 14 131 152 AceticAcid 21 400 20 41 359 420 Vinyl Acetate -750 40 - - 790 Fblyvinyl Acetate 31 900 45 90 810 945 Acetic Aihytridpr - 630 35 - - 665 Ethyl Acetate 550 30 - 580 a/ At full apacity, and asafn that acordifg to Ra,\.nia plans, a sales production in excess of the projected domstic market wil be expoted\. Lirg-term International prices in the target Western European mriet haw ben obtained from disissiu In the hik and fram various consultants\. b/ Frelt plus insurance\. _' Freight, insurance plus EW tariffs\. 5\.07 Economic prices of power, feedstock and transportation are Bank staff estimates\. Financial prices have been used for labor and chemicals as these items are of lesser significance in the build-up of costs; financial prices for these items are not believed to differ significantly from economic prices\. 5\.08 A key assumption in the estimated economic return is the value of methane, the most important input accounting for about half of the project's variable costs\. As stated in the appraisal report, the most attractive alterrative use of methane in Romania is still as fuel in power plants\. Due to lack of current data on the economic cost of lignite, which  - 14 - could be the alternative fuel in power plants replacable by methane, fuel oil price was retained as the basis for the methane value\. A crude oil price per barrel of US$15 over the life of the project has been aS sumed, leading to a methane value in calorific terms of US$69 per 1000 m \. 5\.09 The assumptions used in the economic analysis, including the detailed price assumptions, are given in Annex 3e VI\. LESSONS LEARNED 6\.01 Like many Romanian projects initiated in the late 1970s, including other Bank assisted projects in Romania, the Craiova project took long to complete\. This was so despite the advanced stage of preparation at the time of appraisal, the considerable prior experience of the enterprise in similar projects, and the high priority given to the project by the planning authorities\. The appraisal team anticipated the problems which were foreseeable but, in retrospect, more time contingency should have been allowed by estimating longer delays in the implementation of this complex project\. 6\.02 The length of time required for the implementation of procurement procedures was a major reason for delay\. The priority given after the second oil crisis to energy production projects at the expense of the Craiova project was a further cause, but other factors, including modification of technology midway through completion, technical problems with some equipment after delivery and difficulties of integrating new facilities in existing units, were major causes for delay\. 6\.03 In summary, the lessons learned are essentially three: (i) the importance of assessing the impact of the national planning goals, in situations of capacity shortage, on the implementation schedules for individual projects, (ii) the importance of starting procurement/implemen- tation arrangeirents as early as appraisal and continuing with intensive supervision efforts during the initial project stages, to work with the newly established project team, particularly in expediting procurement, and (iii) the need to ensure that foreign exchange funds can be made available to correct technical problems which might arise after start-up\. Providing a portion of future Bank loans for post-start-up technical assistance, equipment required for repairs or replacement might be considered in this context\. VII\. ROLE OF THE BANK AND RECOMMENDATIONS 7\.01 The Bank's economic analysis of the project at appraisal assisted the Romanians in understanding the use of economic prices\. During the preparation of the project, however, differences of opinion on project scope caused some delay in project appraisal\. In the end some components that were not economic were dropped from the project,  - 15 - 7\.02 The Bank's continuing efforts to help the enterprise overcome technical problems are hampered by the fact that the loan is fully disbursed, no new loans or technical assistance funds are currently available and both the World Bank and the borrower, Banca de Investitli, do not normally continue active supervision after the loan is fully disbursed and the Completion Report issued\. Until the current technical problems are resolved, the Bank should continue to follow up on the situation\. Industry Department June 1986 Revised: October 1986 Revised: January 198T  BIOMANIA - CRASOVA ClHEtICAL PROJECT PROCESS fPOW SHEET *ctIv\.D ao ZJ ltfe aCa 0o0 bOWed Ga~ ~ ~~~~~~~~~~~4 kV "or\. *\.V\.b "alwagen &Aft~~~~~~~ean 9sob\. we WV \. WV It660 eIrv*1Yb tt DI_ fAVA"I~~~~~~~~~~~ no*ufta Wm wem \.|5\. VW _- _ \._ , \. \. _ , \. \. -- -- e,,> \ Fe|"F _ ~~~~to " e Irvt -_ 6*we \Z4*  - 17 - AMN=X 2 ROMANIA - CRAIOVA CHEMICAL PROJECT ASSUMPTIONS USED IN THE FINANCIAL ANALYSIS A\. General 1\. All price projections were carried out in 1986 US dollar terms\. B\. Product Mix 2\. The product mix at full capacity is given in Table 1, Annex 2 and the production build-up in Table 2, Annex 3\. C\. Product Prices 3\. Romanian prices prevailing in February 1986 have been used for all products\. Table 1, Annex 3 gives a summary of the product prices at full capacity; for comparison purposes, the table also shows economic prices\. D\. Production Costs 4\. Table 1, Annex 3 gives the bzeakdown of the production costs\. Again, for comparison, economic costs are given in the same table\. E\. Producticn and Income Statements 5\. Table 1, Annex 2 shows the projected income statements for the project from 1983 to 1997\. Revenues aia production costs have been calculated in accordance with the assumptions stated above\. F\. Financial Rate of Return 6\. Financial rates of return are calculated for the expansion project as a whole\. The cash flows and results are given in Table 2, Annex 2\. Industry Department June 1986  ANNEX 2 - 18 - Table l ROMANIA - CRAIOVA CHEMICAL PROJECT Craiova Enterprise Balance Sheet (Million lei) 1978 1979 1980 1981 1982 1983 1984 1985 Assets Current Assets Cash 22 72 121 141 6 5 8 182 Receivables 48 3 5 10 4 23 2 2 Others 608 648 701 B83 1,224 1,110 1,082 1,250 Suh-total 678 723 827 1,034 1,234 1,138 1,148 1,442 Construction in Process 499 1,332 1,926 2,722 2,923 2,634 2,203 2,171 Other Assets 684 271 137 160 125 296 469 235 Fixed Assets Gross Fixed Assets 6,108 6,250 6,269 6,361 6,777 7,646 8,959 9,124 Less: Accumulated Depreciation 2,167 2,429 2,650 2,846 3,086 3,323 3,607 3,897 Net Fixed Assets 3,941 3,821 3,619 3,515 3,691 4,323 5,352 5,227 Total Assets 5,802 6,147 6,509 7,431 7,973 8,391 9,171 9,075 Liabilities Current Liabilities Payables 54 41 59 38 77 73 125 68 Short Term Credits 205 215 230 327 542 495 482 727 Other Liabilities 415 478 549 650 557 581 612 632 Sub-Total 674 734 838 1,025 1,176 1,149 1,219 1,427 Long-Term Funds IBRD Loans - 110 303 542 590 632 580 500 Investment Bank Credit 204 290 181 95 80 72 32 7 Other Long-Term 4,236 4,753 5,060 5,599 5,944 6,942 6,942 6,891 Sub-Total 4,440 5,153 5,544 6,236 6,614 6,957 7,554 7,398 Benefits Total Liabilities Source: Investment Bank\. Industry Department June 1986  - 19 - ~~~~~ANNEX 2 Table 2 ROMANIA - CRAIOVA CHEMICAL PROJECT Projected Income Statement (million le) Financial Values a/ Revenues with Financial Prices 1983 1984 1985 1986 1987 1988-1997 Methanol - - 335\.7 386\.1 386\.1 386\.1 Acetic Acid 59\.6 122\.54 225\.3 60\.1 124\.9 201\.2 Vinyl Acetate - - 25\.2 320\.8 338\.8 338\.8 Polyvinyl Acetate - - - 135\.7 163\.3 163\.3 Acetic Anhydride 28\.8 51\.2 108\.8 160\.0 160\.0 160\.0 Ethyl Acetate - - 93\.2 206\.6 212\.2 212\.2 Acetylene - - - 358\.9 359\.7 359\.7 Hydrogen 82% 0\.97 1\.9 3\.9 94\.06 114\.8 138\.3 Purge gas from acetic acid 0\.95 1\.9 3\.7 3\.6 4\.5 5\.4 Residual Methane in Hydrogen - 1\.3 3\.6 3\.9 4\.4 5\.3 Acetylene Off-gas - _ 7\.2 57\.2 61\.3 61\.3 Subtotal 90\.32 178\.84 806\.6 1,793\.4 1,787\.0 2,031\.6 Variable Costs 55\.5 98\.1 457\.9 748\.7 823\.7 866\.9 Fixed Costs 37\.4 53\.6 108\.7 125\.0 127\.3 127\.3 Depreciation 26\.6 47\.9 97\.9 152\.0 152\.0 152\.0 Gross Benefits (29\.2) (15\.8) 142\.1 761\.3 827\.0 885\.4 3/ Production build-up given in Table 2, Annex 2\. Variable Costs in 198S and 1987 have been scaled down according to Romanian indications, to take into account that the slower production build-up also implies savings in the operating costs\.  -20 - ANMEX 3 ROMANIA: CRA;OVA CHEMICAL PROJECT Assu!Mtions Used in the Economic Analysis A\. General 1\. All prices used in the economic rates of return for the project have been calculated in constant 1986 dollars\. All benefits and costs for tradeable items have been determined by using prevailing international prices (Western Europe) with the assumption that these prices will remain stable in 1986 dollars in the foreseeable future\. For non-tradeable items, domestic prices have been adjusted to reflect the international price levels or production costs in comparator countries\. Labor, which accounts for only 4X of total operating costs, has not been shadow priced and its financial cost has been used\. Prices used are summarized in Table 1 of this annex\. B\. Capital Costs 2\. The capital costs for calculating the financial rate of return have been used in the economic analyses, after deducting Lei 39\.6 million of duties\. C\. Operating Costs 3\. About half of the total variable cost of the project comes from methane\. The economic price of methane has been determined by assuming the use of the gas as a fuel in power plants\. Methane replaces either locally available lignite or fuel oils from crude oil refining\. The appraisal report used the lignite equivalent production cost as the basis for one of the sensitivity cases\. However, current information about lignite production costs in Romamia are not available to the Bank and comparisons with other countries give only a rough approximation\. The fuel oil price was thus retained as for calculating the base case\. In the light of the current uncertainties in o'l price projections, a crude oil price of US$15 per barrel over the life of the project has been assumed, leading to a methane value in calorific terms of US$69 per 1000 i3\. 4\. The economic costs of electricity have been assumed as U345\.5 per kwh, which is in line with Bank experience with power production from lignite and hydroelectric sources in comparator countries\. 5\. The economic cost of the input polyvinyl alcohol has been assumed as US$1,700 per ton as compared to US$1,500 at appraisal, based on the present international price level\. This is significantly lower than the Romanian financial price equivalent of US$3,919 per ton of polyvinyl alcohol\. Other chemicals, labor, maintenance and other operating costs have been priced according to Romanian financial prices\.  - 21 - ANNEX 3 Page 2-of 2 D\. Benefits 6\. With the exception of methanol, only minor quantities of the project's output are destined for export, the bulk being Import substitution\. The economic (ex-factory) prices are shown in Table 1 of this annex\. As stated in para 3\.06, eo-factory prices have been derived from West Europe delivered prices by taking Into account transportation costs and EEC tariffs\. E\. Project Life 7\. It has been assumed that units which were started up before 1985, will produce until 1997 together with the units commissioned in 1985\. Industry Department June 1986  -22 - AN=E 3 Table I ROMANLA - CRAIOVA CHEMICAL PROJECT Product Mix\. Prices sad Operating Costs at Full Capacity Quamtities Pinancial Economic Revenue Unit (Units/wear) LeI/Unit Million Lei USS/Uoit Lei/UAit Mlllion US Methanol t 172,000 2,245 386\.1 140 2,450 24\.08 Acetic Acld t 27,946 7,200 201\.2 410 7,175 11\.46 Vinyl Acetate t 18,825 18,000 338\.9 790 13,825 14\.87 Polyvinyl Acetate t 13,000 12,565 163\.3 905 15,837 11\.76 Acetic Anhydride t 10,000 16,000 160\.0 665 16,637 6\.65 Ethyl Acetate t 7,950 26,698 212*2 580 10,150 4\.61 Acetylene t 14,331 25,100 359\.7 800 14,000 11\.46 Purge gas from Acetic acid '000 Nb3 14,400 375 5\.4 26\.3 460 0\.38 821 Hydrogen '000 ft3 106,400 1,300 138\.3 83\.1 1,454 8\.84 Residual Methane in Hydrogen '000 Na3 10,600 500 5\.3 69\.0 1,207 0\.73 Acetylene off-gas '000 am3 163,400 375 61\.3 36\.8 644 6\.01 Total Revenues 2,032\.1 100\.85 Production Cost Variable Cost Methane '000 XN3 439,440 1,000 439\.1 69\.0 1,207 30\.32 Fuel Oil t 9,000 2,910 26\.2 75\.0 1,312 0\.67 Diesel Oil t 25,500 1,890 48\.2 132\.0 2,310 3\.36 Power Mvb 286,930 410 118\.8 55 962 15\.78 8 Ata Steam t 1,106,548 106 117\.3 6\.33 111 7\.00 13 Ata Steam t 164,940 116 19\.1 7\.48 131 1\.23 Industrial Wate:: '000 a3 14,601 460 6\.7 44 770 0\.64 Polyvinyl Alcobol t 497 68,585 34\.1 1,700 29,750 0\.84 Other Chemicals - - 57\.1 - - 3\.26 Subtotal - - 866\.9 - - 63\.10 Fixed Costs Labor - - 52\.8 3\.02 Maintenance and General - - 74\.5 4\.26 Subtotal - - 127\.3 7\.28 Total Operatlng Costs - 994\.2 70\.38  AM= 3 - 23 - Table 2 ROMANIA - CRAIOVA CHEMICAL PROJBCT Table 2 - Projected Production and Income Statements (million USS)\. economie Values Production Unit Start-up Date 1983 1984 1985 1986 1987 1988-1997 Methanol t 10/84 - - 149,550 172,000 172,000 172,000 Acetic Acid t 1/83 8,278 17,020 31,290 8,350 17,350 27,946 Vinyl Acetate t 11/85 - - 1,400 17,825 18,825 18,825 Polyvinyl Acetate t 12/85 - - - 10,800 13,000 13,000 Acetic Anhydride t 8/83 1,800 3,200 6,800 10,000 10,000 10,000 Ethyl Acetate t 6/85 - - 3,490 7,740 7,950 7,950 Acetylene t 10/85 - - - 14,300 14,331 14,331 Hydrogen 821 '000 Nm3 1/83 750 1,500 3,000 72,350 88,310 106,400 Purge gas fro Acetid Acid '000 NO3 1/83 2,550 5,100 9,820 9,840 12,000 14,400 Residual Methane in Hydrogen '000 Nm3 1/83 2,700 7,200 7,740 8,800 10,600 Acetylene off-ges '000 Nl3 10/85 - - 19,100 152,600 163,400 163,400 Revenues methanol t - - 20\.94 24\.08 24\.08 24\.08 Acetic Acid t 3\.39 6\.98 12\.83 3\.42 7\.11 11\.46 Vinyl Acetate t - - 1\.11 14\.08 14\.87 14\.87 Polyvinyl Acetate t - - - 9\.77 11\.76 11\.76 Acetic Anhydride t 1\.20 2\.13 4\.52 6\.65 6\.65 6\.65 Ethyl Acetate t - - 2\.02 4\.49 4\.61 4\.61 Acetylene t - - - 11\.44 11\.46 11\.46 iydrogen 82S '000 NoR 0\.06 0\.12 0\.25 6\.01 7\.34 8\.84 rurge g8a from Acetic Acid '000 No3 0\.07 0\.13 0\.26 0\.26 0\.31 0\.38 Residual Methane in Hydrogen '000 N3 - 0\.19 0\.50 0\.53 0\.61 0\.73 Acetylene Off-gas '000 Nm3 - - 0\.70 5\.6 6\.01 6\.01 Subtotal 4\.72 9\.55 43\.13 86\.33 94\.81 100\.85 Variable Costs Million US$ 4\.03 7\.12 33\.24 54\.33 59\.78 62\.92 fixed Costs Million U8$ 2\.14 3\.06 6\.21 7\.14 7\.27 7\.27 sl The attached Romanian report assumes a full capacity production for all products in 1986 and onwards\. In the light of persisting technical problems in late February 1986, it seems highly unprobable that full capacity in the acetic acid unit can be achieved in 1986\. It is thus conservatively assumed that full capacity cannot be reached before 1988\. Since the downstream units vinyl acetate, polyvinyl acetate and acetic anhydride plants are assumed to reach their full capacity in 1987, the full acetic acid int-\.-\.ediate needs are to be delivered out of the acetic acid production, which reduces the acetic acid production available for sale as shown above\. b/ The off-gas volumes have been scaled doun according to the production level of the units from where they come\. e According to indications from Craiova Enterprise engineers, 601 of the foregone finaneial acetic acid production value in 1986-1987 corresponds to the value of saved inputs (variable operating costs) because of the gradual production build-up In the acetic acid unit\. The variable operating costs have been reduced correspondingly\. -f\. !  - 24 - ANNE 3 Table 3 ROMANIA - CRAIOVA CHEMICAL PROJECT Cash Plow for Economic Rate of Return (in million US$) Investment Operating Cots b/ Sales Cash Year Costs Variable Fixed Revenues b/ Flow 1977 1\.85 - - _ (1\.85) 1978 8\.52 - - (8\.52) 1979 25\.65 - - - (25\.65) 1980 28\.86 - - - (28\.86) 1981 36\.66 - - - (36,66) 1982 35\.69 - - - (35\.69) 1983 23\.82 4\.31 2\.29 5\.05 (25\.37) 1984 16\.32 7\.76 3\.34 10\.41 (17\.01) 1985 16\.36 35\.57 6\.64 46\.15 (12\.42) 1986 - 54\.33 7\.14 86\.33 24\.86 1987 - 59\.78 7\.27 94e81 27\.76 1988 - 62\.92 7\.27 100\.85 30\.66 1989 - 62\.92 7\.27 100\.85 30\.66 1990 - 62\.92 7\.27 100\.85 30\.66 1991 - 62\.92 7\.27 100\.85 30\.66 1992 - 62\.92 7\.27 100\.85 30\.66 1993 - 62e92 7\.27 100\.85 30\.66 1994 - 62\.92 7\.27 100\.85 30\.66 1995 - 62\.92 7\.27 100\.85 30\.66 1996 - 62\.92 7\.27 100\.85 30\.66 1997 (9\.54)0/ 62\.92 7\.27 100\.85 40\.20 a/ Investment costs less duties of US$39\.6 million, converted into US$ with the current exchange rate and brought to 1986 dollars\. b/ Operating costs and sales revenues, see table 2 of this Annex; brought to 1986 dollars\. c/ Residual value is net working capital, valued at Lei 167 million or US$9\.54 million\. Sensitivity Analysis Base Case 6\.7Z Operating Costs up to 102 3\.92 Operating Costs down 102 8\.9% Sales Revenues up 10 9\.8% Sales Revenues down 101 2\.6%  - 25 - ~ATTA%~NN I -25- (I"n Too 163A IRO) U\. no0set main o ;~~~ OF C|WeR11f Z\. Intzoduabtio rlo Iffs ufabtion Cons\.e2snt the 0ojet APtepeation eand estimate of the Plos pzo$ AppSM, a eoasig Lato force of the 1oae BDGaozipbton of the pzo \.et III\. lm9Intfatton and m sagement of tts pojeet AeAohievement of th projectb scope P1oLocatton and utlities C o P 0oeet management DaInstrt:ction sad tzeticng of the b taf 1, EPtoeotemon 7,P!o0eot *e*sztnt out eshedale GeAdvtises ,ootreaoton and m uppltezupet"fozmaeo E\.Captbal oosagb9poject ftnunotng asd ttIliSatton of ths lon 1V\. Oorat tor Pftrovatnae A\. Commtustoninug sad poduaotSon bul&'aup Do A urvoe on the Cezket and marketing C\. FantRonmental aspeats V\. Neonomtoe sed Rtnecaal Perfozmnesn  - 26 - lo sb L a/ Projet Coat 1 1742 Czeulattvs apItal 8,5 9, Interest paid during uxeiation period 503 I 9,2\. Tbotal eosts 15,6,8 192,8 b/ 2inonetn (Wle$) 12569 192,d - Own fund I 105,3 241,3 o IMvitment funds 102,9 131,8 * ?tds for ctrculating means 2,4 9,5 - Credits a 51,5 51,5 , D credits - 40,0 40,0 C redits to equitpmlent ,Uppli,I 1195 11,5 o/ Execution eshedule _ _ start of Start Start of stat election up ertofl Io acetic sold 1V\.1977 M1979 11, IWO978 I11903 methanol 1h197d 111\.1979 IV*197d 17\.1984 * acetylene IV* 197d ZIL 1901 IV* 1979 IVo 1905 acetic anbydride 1761978 1*1980 11\.1979 m01983/ 111\.1945 - etbVl acetate 1X1\.1979 rVv1981 1s954 17\.19d5 -vinl acetate 1\.1979 I1U*,191 IY\.1979 17\.19d5 - polvin-yl eoetate IL1979 Y\. 1981 1\.980 IV\. 19o5 - utilitiee IL 197d 17\.1901 117 197t I 19d2/ IR\. 1984 d/ luther data concerning the pzojeet ProJoot Identiftcstion - June 1977 mE1utiona - December 1977 June 197d Negotiation - 09tobi 197d Bank loan approva1 - Decemb 1970 Signing of the loan agreement - January 15 1979 Coming into force _ V8a 2 1q79 Dote of loen closing - December 31 1902  - 27 - 3orrower ~ Investment Bank Loas beneficiar Cratoiv Chemical Comlex Fiscal :\.eZ of tbe loon - 01\. - 31eXITo Value of the TI= Credit 40\.00000004S Interest rate 7,35% / 7ea o/ Abbreviations useds C\.I*I,Ch\.PCrsiova The Industrial Central for Chemical or the central Festilizers The Bozower Investment Bank fTlPTC Technological Engineering and Design Institute for Chemceal lndustr7 Industrialexpoztimport - Foreign Trade Enterprise tP7 - 'Aetric Tons per Year Z/ Rate of rvohang\. Prom the project estimate until Dbcember 31 19d0 -1 1$ a 1a let Jonuary 1 19d1 - December 31 19o2 1 188 M a 15 lot January 1 19d3 - June 30 L9d3 1 MS u 16,50 1lt Ju17 1 193 - December 31 1983 1 1783 u 17,50 lei January 1 19d4 October 30 19o4 - 1 8M a 21950 let November 1 1984 up to now I 1S$ a 17950 let To% 11 T1 R 0 D UJ C T! I 0 N1 1\.TOlThe superioir vlorlfication of the domestic raw materials resouxces,the utilization as efficient as possible of the manpower as well as making the best of the productive capecitie; existtng within the Cratova Chemical Complex were decisive gumeats in adopting the resolution to develop and modernize the Complex\. Within this framework can we insctib the p2ojost "Development of the Chemical Complex" which consists of moderniza- tion and divezstfication of the production,the project oomprising several plants for the execution of which a loan of $ 40 million was obtained from I29RDe 1902*The project was prepared,located and achieved under the manarement and gurlPance of MIChbCITCh Cratove and Crelova Chemical Complex*  l*03*The start-up of the plants executed ais part of the projeot will finllV d,tegmine,when reaching the designed params ters,the achievement of the bellow shoztlI presented pgoductiona Product Pvoduotlve Net pvoduction Procontage for sale eapeaitT for sale from the total capacity Acot7leno 306000 140300 47% Carbon oxide(r/h) 5O0 - o Methenol 210\.000 172o200 d2% Acetic said 600000 27\.9y 4#7% Acetic an dride 10\.000 10\.000 100% Vin7l1 Acetate 20\.000 ldtd25 94% PolvWnyl acetate 130000 130000 l0ow Ethyl acetate 10 0025 7,950 99% x (including 450 t secondsr7 production) '39t Productive ocpactties for sale\.,\., mentioned above, zr6pesent the ideal ratio between market demands and internal needs -fo plants operation within the Complrs\.The projeot is£aevrtbeless adjustable aeording to the market demands and the impeat of the price variation\.For inetanccgthe acetic anh7drtde production ma7 be reduced or elinlneted,by ineeasing the sale of acetic acid, le\.4Io Location of the plants snd technological conception were established ti view of making the best of the prea4xisting plants within the Complec,the methen gas pipe and the other utilities alread7 exiating itthin the Cocplexzthe old and the now production pl3nts were integrated in the general production flow of the Complex\. IIe\.ASIC IFOIF\.SAT!IOI CONCE\.NfZG T!TM rIROJECT A\.PR\.oMrLAto and Estimateof the PJo1oatAonroMa and Cn In~nto Wurc of- the LBkLoayn 2\.0l\.The project was identified and checkod up b7 a representative delefgation of the Bank that visitod Romania In !La7 1976\. The Bank dele-at ion that took pertain_bt ovkIar out  - 29 - of the ePzoaeet in Une W7r xoe onendad soos aban;oa in the pgojoet stzoctuz9,changes v3hich aimed t givting up the construet;on of thb2 but7l acetate and the po1?viW sla@hol plants and the reduotion of the investment cost fzom aproxe S dOul90 milo to $ 151 Milo They also adviecd the tnerese of productioni fop soel from 30325 tons to ovrr 15,300 tone vin7l soetato and from 167o5dO tons to 1729200 tons mthenoalThese oiaoges were operated befoxe the project estimate hloh Was pQ2forced ia Merah 197do The bank loan negoctation took plaee La Otobov 1978 and the approval in December 1978\. 2\.02\. The psoject consisted of the eXpansiongmodertsation and diversification of the production within Czalova Chemical C omplex* 2e03\. The project comprised the following olementet installation and atext-up of a 30\.000 t97 acet7lene unit based on methane vas which replaced the formez aeot71one plant based on carbide\.so that the new plant supplies both the scet7len necesaser for running of the plants provided ti the project and the asC17ene neoesssr7 for xunning of the pro-existing plants within the Complexa At the some time the acetylene plant supplies the off' \.ran necessary for the preoexisting ammonia reactor operatioa and for the acetic acid operation,plant which was built within the \.rojq t and (determines the complete aso of the exist tiap cpecit7 of scetaldehyde\. expansion of the existing caaacities of vinyl acetate and^ polvinyl acetate units bty the execution of nev plantse - construction of new p2oduaction cepecities,such ass acetic anhydxide plent,ethwl acetate plant\.methanol plant and acetic said plant\. in the project -\.vas also pzovided and it was built the *azbna sonoxide separation plant so that It provides the carbon z:nY!d4e -e,d for the acetic asid plant operationo 2*04oWith coming Into operatIon of the projeat9when the plants will run at the designed capecit7vit will be used foR chemicalization about 400 mil cubic metres of methane geasthus  - 30 - leading to the inroesee Of the aMount of the pto0eesed meGtsan gas used to msnufaetuae high value chemitcls\. 2\.05\.Aboat half of the nece0sQSe amount of methanea s to used b7 the new seet7lene plant which operates thsough paxtial oxtdation of tbh methane gas\. The transfer of the new technologies from abroad was perf ormed fort l)tbhe asbon monoxide spearation plant and the stacet said plant 2) the aseeo enhtdrtid plant Pox the msnufsaturing of seetie acid a high pressure corbon7lation process based on BASP ('-eat Gezna4)ucobhcnlog7 was adopted\. The manufacturing of seette snhqdrido ti based on the technolog7 supplied b' compa8n Banna Schkopau from Bast Ge\.rm0n Poz the carbon monoxide sep8ratton plant an absorbtion- desozbtion prooess was adopted,prooess based on the tehoholofq coneeived b7 TENCO - U*S*Ao and offered bsy the company R! - Holland\. The manufacturtng of vin1l aoetate,pol7vin7l acetate, eth:l acetate sed methanol are based on Romanian technologies desg-' nod bZj Romanian sjpocalieta from IITPIC and CIICh Craim\. U\.I MdL 1\. W\. AA'ICN AND UANAO'AMN'T OF THE eROJECT 3501\. The project scope lIes In inereasing and diversi- fication of thie production of organtc chemicals manufactu!ed withtn Czaiova Chemical Complex\. ' ht start-up of the aeet7lene lent whioh operates through Partiel oxidatton of the methane geo determtned the extension of vtnyl acetate and poJL:vin7l acetate production b7 @ommisuionagn of the now plants,At the same time this led to the utiltzation at designed capacpit' of the alread: existing setaoldehyde plant tithin the Complex\.The offr-ao coming out from the aset,7lene unit ate psrtiall7 used for operetion of the new CO separation plant and acetic acid planteAlso,dependong on the achievement and operation of the aecet7lene plant,the eth7l acetate and saettc  -31- oamhddrld eate as3o executed\. Out of the eau17 production of m'ethanol which to goin0 to be achteved, aboati 37J300 tons are used fox manufecturing of acetic said and 1729200 tpy wetianol reprosents pmodaction for salse 34\.2o The project woo planned to come Into operation at tntervalG,between 1979-1982, Compared to the target dates decided to the project osti- mte,ttheS ast*tup of the plants within the pzo,eat was perfozmed an Acettc maid IVO 979 JanGax7 1983 VethanoL TV\.1979 Ontobex 1984 Acetic unbdride Is 19UO Aago1963aAul4965 Aeet7lene ml1981 Ostabex 195 VtnA7 acetete I 1981 loasobor 1985 0o17vitol cette t IV\.191 D"eebsi 19d5 Mtb1l acetate IV61961 June 1965 Utilitt0e and auxilleriees I19d0- Doaeebos 19U2w IV\.1901 August 1903 The ressons for dela in achieving the project and commtsutoving of the plants takin into account the antiotpated dates in eattmate,ere treated tn detail in setion 1I1 I and Go The ree1 coat of tho project is about UdK higher than than the entlciiated costs when evaluation Wso done - 2,d21J mil lei,gmtnl' as a result of the internal priose incresee in 1902, (details in section IIIff 3\.03, After the om1istioning of the plants,the did not ran at the designed pearameteszxon one bhnd becouse of shostage of raw matmriolstthe acet7lene and methanol plants being started up after the acetic saidl plant, and on the other hand because ot the tecbnolos7 deficiencies at carbon monoxide separation plant (it rans at 50 of oepacit7) and the frequent disturbances of the casbon monoxide ctmpressors at the valve plates and at the high pressure druomsahoxtcomtngs which the muppl7ing companies have not remedied\.  - 32 - 36(4,6? Project west ea91tsed to the Sexsttig eveIlsblo 2oos between tho plants to operation within t\.1e Crgeova Chemical Coapler,thst to located at 10 km vast of Crstove at th eonfluene, of the Jim end AXinardia rivers,st about 360 km west of Buohaest esSpOctivOl79 The Project was roelised on the rietiag platform of the Cratova Chemtial Compler,svoiding the additional sxpenas fog placing out of o0pration the foaming ares and la7ing oat of omw sommunioetion ways,making at the same time the bent possible as of the avatlable zoom and utilities pzt-existing within the Comples\. 3*05* The noceseea% raw matezials and utilities wll be ptovided to the following wae % Methane to delivered frori the natural gas fields in the noxth poet of Oltenia through the 250 km pipline which esanests the Chemisal Complex to the Cos field\. Oei is aveallable from the national grtio Frocess steam is provided b7 the plsats within the Complex as well sn b7 the thermoolectute power station of I9alMite which is ID the immediate neighbourhood of the Complex* Industtrol water ti available from the asorb Jim river\. There are no difficulttes ta provtding the othe: vaw materials and uttlitie,9which with the exception of a few somsti vale are locall7 supplied\. 3\.06\.The Industrial Central for Chemical fertilizers (COUCh) had the general respoasobtlit' for the earr7ing out of the project and Cratova Checaiel Complex aoted as the benefotaez of the psroject The Central had this responssbiltt7 from the first stage of project preparation up to the commissioning of the plants stipulated by the project and will uncessingly have ti view and provide all the conditions for the pPopOe operation of the plants\. The Central as well as the ComtAe have a significant experience in zealizing plojects for the chemical induatry\. Cretova Chemical Complez,as the boneftctnar of tie projeat had the duty to supervtse da the wes io which the psoject is accomplishod\.The Complex concluded\. contrats with conatructios  - 33 - orgsninationa specielized to aoeoap1lshment of @onautUtiLOf* tinstlletion and erection Wofka and with the soppliors of eqitp- sent and 1aq=at financed from internal resouzces4he *oupl e01o paetWipStOd 1n eutimetion of the Offerts for goods and setivittee finansed from the B*nk loan, Soeveal inotitutioni took Pert ia wosking out esd aehism veoment of the pzoje@ttas follows I 307aThe Teohologisol laetneeving angsd 1tLn Ititt@s for the Chemteal Induati7 (TIITPC)9specialised istitute of engiaee\.ing and toehoolog within VIECNhsd the responeeabiltW fOE the geneoatl destg,hoi\.ce of poduaetion toehnologlea@#helS@ of *quipmenta,doeign of constsuction and Inotallettoo worke, detail ewn flesng,rWespoet lve1a I21?lC lent teohateil asesttnsne to OClh Cratiovahe Complex end Porotga Trade BNterpriee tn view of procuring the necesser' lyout end equipmet\. * 3,08\.tn@ ] lZl2 destri2leXpottimUQoitthe lozotgn Tzde Ruteptpi1s11 organized and earried out the procuement of imported goods and * ~services\. 3\.09\.Construotion end erection wer'Asmid oult bW enterprises of construotion-ere*tion sed instaelAtia uubuadinte fhe Vr n\.estz of !Adustrisl ButwIding\. The locel eoterptises and the forseig companies whith supplied the 1esmoute,equipmente and know-how took Vert to the checking up of the ereotton for the supolied leouts and equtipents\. The permnent coordination of the work wes perfozmed 1 CUTCh Crsiove,while NICh eansured the general superviston and the contast with the othep economic ministries involved, De2 Staff Tnduaklatin Ind\. Tranint 3\.104 When the 1\.ilants within tha pobj;et will operate fs full cepacit79the total number of the personnel will be Of about 1100 peopleouot of whom 600 operstorx,0O0 awiliar7 wolkr"s and about 40 engineers and toehnbatens,being according to the appsoed numbtr at the date of worktai out the tecbnicalmeooaiote donmen- tat4un(ll40 total persotnel,out of whom 600 operatovs,O45 esmiliau7 workers sad 60 engineers and technIians)e  - 34 - 3-1\.0TIaLaing of the personnel,was aohieved mLA1n to GOreLove Chemical Complex,as well as in the chewAntZ7 high schools in reLve\. The training progzammes have been presented at the projst estimation and have been aeepted b7 the Banke During the accomplishment period ot the projeot,ttheo hae been trained b7 the equipment and know-how suppl7tng compgnies a number of 17 People out of whom 9 wofrers and foremen and 8 engineers and technicians at s:r-TIJNNECO USA,BASP-Webt Germen7gBuna SblkopSa- East German7e 3\.12*The procurement of goods and services finaneod by internal resouresa(equtpment,umterials,know-how,eto) noluding eoonstzu -tion and erection was oarried out 7 CICh Cralove and the Complex, as benefioiar7,and with technical assistance from IVPICf The goods and the services financed b7 external means were procured through the foretgn trade eatrprise Industrialexpoztiapoet with technical assistance from CIICh Csatova and IITPtC*AS to the goods and services finaneod bh IBRD there have been applied th B3ank's guidelines with regasd to the pooursment,o'ganiaiag international auctions\. 3*13#The goods and the services pzovided to be proseued within the IBRD loan have been divided into three oategorionas foLlows s IARd 4210dA1a lotcategor7,Imported equip- ments and services(equipments 229o 16,9 1796 technical asuistance,know- how,engineeingl,etc\. ) 2ndeategorz\.Imported equip\. ment and services vith en contract cost lower than 290 3,8 301 100 000 dollar equivalent 3rdostagor7\.Imported equip- ment or local sapPl 16,0 19,3 19,3 4090 40,0 4090 3\.l*or the equipment and sexviesa mentioned ia the  - 35 - ooeond catego271With a value of 3\.1 mtledollatezeepweaenttng eqAipmenta01s7r4ut,sotmentals end spare parts with a contreat valae lower thsn 100,000 dolUa,nth\. prosurement was sehieVed by direct cont2ttaggsedtagges ng to TBRD psocedures requests of bid to gevesal potential suppliers lot the t and 32d%atgortes of goods there were orga- nized International biddinga for each proourement peaket being prequaltfied at least 3 firmsttaking into ascount the technical psobilibg of the competitive firma\.1ov the 3 deatego& of goods vOre proqualified Romanian supplitezetooo The pxocurement of teshnolog7 and equipmat came up against a uancesion of dtficulties which de1a7ed the general sahtevement of the project with more thsn 9 montba\.The diffisul\. ties were determined by the technical compoexitl of the probl\.mo which had to be clartfied in a relettvely short poriod of time, as well as bt the ltmited number of poteattis) inteteted uupglAexs\. 301\.o Tho emot taportent forelga 8suppliers were f:\.ms West Ge2msnay#JYsnFollmnd,Itsl7 sad Austria (annax 2) Out of the total cost of equipments and servtces finsnsed by flRD,the fereign suppliers delivered 51,66% and the Romanian enterprises 4Jd,35,* The delays to achievtig the project were mostly determined b7 the lateness in organizing the international oomptitive biMiuge ll these beinS conditioned by the negotiation and the loon epproveleBut in genersl there were no dela7s having tn view the contrectual dete,on the part of the suppliers an,' at the same time the layoats and thc equipments had the adequate qualit7e An exoeption were the sichxomal-steel cotls for the aeetic anhxdride plant which cracked before the mouatitag,due to the tnadequate quality of the steeoleor this reseon the acetic anhydride nit wee started up with a dela7 of over 30 montha\. Another exception from the above stated are the sexbon monoxide compressors where come out defects at the valve\. end the high pressure damue,defects whish have not 7et been remedied\. 3\.16*The projeat carrying out schedule is presented in the annwex 1\. Coompser to the esttmtod target dates of plants start u'  - 36 - the 4thquartet 1979 - the 204qu,Xter 1981,the etual @ouimigiei@1n too?i pseae at intemla in the period the 1\. qusater 193 the 4h qsarter 19050with an avetage deoa7 of 3 to 4 7e085\. The dols were main1 determined b7 the follovig se*asons 3\.17\. Dsls7ed beginning of\. the *onstwuetion vorks and leteness in organizing the iaternetionel auotionosthe preparation of which being conditioned b7 the signing of the loan agreement\. The late organizing of the suetions and the approval of the contracts determined dela8s in earx7ing out of the projects of over Id months\.Compared to the estimated target dates0impoxtant dela7s occured In organiting the auctions for the goods from the 3IdoeteG017(egst imatetarget dateithe rVth q,ater 1978 - the I quarter 1979aohioved target dates the nIrdquestex 19W0)lgfo the gas com0resaors In acet7lene unit(ostimrted target dates the i!d quarter 19760actual target dateathe liedquaster 19d00, The technical compl=xit of the pRoj\.et,aa well ea the great amber aZd volme of equpent,1e*\.ot, rala end spave parts which were to be parxoesed,reated uajos dtfiemoltiY in contracting and cavrring, out In due tin of the respettiv pflem\. rementa\.The oana:se1 Lng of the equipmetss arid ervieOs war perfor- wed over a period of 50 months (the 1Vtiquarte,l97d - the IYh quarter 1982) compared to the estimated period of 24 months (the Wthquarter 1977 - the ledquarter 1979)o 3\.18\.Closel7 relsted to the organistig of the auctions and the equipments and services contracting as well ea to th\.iz respective dellver7 datea,the oocstruction and t,r,@tion began with a ('e91a of over 6 months,most of the operation being achie- ved during 19o2 and 1903 at the same time with the delivor7 and mounting of the main equipment\. 3\.19oThe construction organizationstfailUre to assure the manpower necesear7 for carr7ing out the works of onostrtUztion and erection of the equip-ent,oepecial11 during 19d29when the construotion labour were mainly employed to finish and start up the units fron the enerCetical seotoreaelso oontributed to certain delais in e\.ecutione 3\.20\.The modification of the manufactuse tocnolop7 fox the eth71 acetate unit determined the beginning of the operation at this unit with a delay of over 24 monthasthis fact tinal7 determining a delay of ovex 20 months in cOlmtmssioning the Plante  - 37 - 3\.21\.The deliuvei of dfeeted imported equipmate and 1a7t outs led to delasy both in the period of equipments'ereotion sad in the period of teohnologicel tests(the gas oompressors from the CO seperation and aoetic a@id unitalthe uichiomal steel coils from the acetio aondzide uniteto\.9) The deliverl from the Oompaa0 WOlders-elgium of 12 steel coils of inadequate qualit7 finally determined the delay of the acetic anh7dride plant 00mmission\.ng with over 30 months snd the uce of additional funds it order to procure the especltive equip\. ments from other suppliers\. 3\.224Certain dels in deliveEg og bthe measuroment and control units,of the equipments fo: Safe operation of the iethanol and aoet-$lene lants (safet:7 velves,messuzement and control instzumentation,stainleusrsteel pipes,electrioal motove with antic execution,etc\.)bl local suppliers contributed to the lagging of commissioning of the methanol and aeotilene units with ovex 6 monthes which also influenced the ch4\.tevment and the commissioning of the vingl acetate and pol7vin7l acetate plant8s(usiug acet7lene as raw material)e 3o23eWhen cLonsidering the length of tisi of achieving the project,the reel circumstances under which the project was carried out must also be taken into account, As already known,the pxojest represented a modernization and an expansion of the old Complaes tho new units being located in the available room in-between the pre- existing plants,This is wh7 the opexations could not alwa7s be carri- ed on on a large area,part of the construction works whioh were expected to be carried out mechanically (diggingasdithhes,exection pipes\.etc) were carried out manually with a low productivity, because of the pre-existing pipeing system and of the pie-eisting _lanta3ll8sothe transport inside the Complex and mounting of over-sized technological oquipment as well as of constxurtion equiPment(oranes) was conditioned by the shut-down of some operating plants,dismounting of some pipes and of aerial equipment\.etot) ;o\.24o\.,ith the exception of designers and equipment and license supiers,who were oalled upon to aesure technical am tance duraing 'he erection and technological teats peziodnas wel as  - 38 - aies the start up of some planta(aoetie aeid,CO seprastion)vOl6Ch Crasove did not find It Aecessar7 to consult other adviseae The companies NA87 and espeoiully B!l-Iolland postopued the consulta'\.ioos In the start up period and afterwards the7 requested verb high\.onerous tariff s\. i\.CaittAl Coat\.PW291 ct ?nnei adTYIizt 3*25\.The Project coat represents 3 047\.7 utl ll($ 174\.2 PA1\.) about 18% uoze than the cost estimated in tbe ovslultioo4 repoxt (2574\.0 ail lei,i\.e\. # 14 \.e0 mil)o The exaeeding of the projected *oat wes datermined by the failure to oarrw out in time the constrtuetion worksand b7 the influence of the internal prise increases at the main low matolxhls used in construction-erection,as well as at prefabs,equipsont,maehinea, sarze parts,whose prices increased durozng 193 b7 about 20\. 3o26\. The project cost was matif seeeoded to the following domeains t \. enginserlng,liene and technical assistene b7 26% an a result of additional research and work conneoted with the itncrese of safety in operation at the scetylene plantses well as a result of changing the manufacture technolog7 for the etb7l sootate plant, - equipmentesmaterialssparoe parts(includiug customs duties and insurance by aproxe19% as a result of the price inerease\. - erectiom costs by aprox\. 43%,as a result of prtoe tgeresse at erection materials and prefabricated ports,of increoitng the wages in t:e construction field,as well as performing some additional erection woSk for increasing the safety in operation at the acet7lene unit and execution of some remedy and additional work in the aeetic acid unit\. administrative and postoperational expenses by 43% muinly determined by the failure to carry out the eecuotion in time and by onice increaseeThe3e influences also explainthe xceeeding of the projected costs at the chapters I overheada(stazt up) by 2905 and working capital by 11%\. The project coat is shown in annex 3a and 3b\. 3\.27\.The I9RD loan was expected to be entizely used util the Ivhquarter l9dl\.As a result of delays in contracting the equipment  - 39 - and in beesnning of erectiongthe loal was entively nod until Zanuor7 19830 The schedule of the loan utllization is shown in anne 4\. Until pember 31 1985 from the ThRD loan of 8 40 Mile the amount of 11,4 n1i have been repaid\. or financtng the pzojeaoIlI,Ch Crtaim mots7 telied on the own interal zesoutRes(sinking and qvofits)qwhtih reproseo- ted 66\.3% out of the total demandedAatonsl11 tt also relied on etestal resousces out of which 2o,7% foa the total am mand ti rexoesented by the ZBRD loon($ 40 mile) and I33\. credit offexed b7 the German muppliera(BASP) to ICE Indnstrtolexpozt- import\. Compared to the estimates in the evaluatton repoxt, the proJeot financing was ashieved as follows: million sulion ERD loon 720\.0 40\.0 700Q0 40\.0 Suppliersordit 207\.Q0 1\.5 201\.0 l1\. Own fundst 109500 105\.3 2489\.0 -fixed funds 175700 97*6 Li 4G\.0 _ 73i -circulating funds 43\.0 (4q4 147\.0 \. -intxrest eauting constructton 95\.0 5\.3 160\.0 9o1 Total funds 282290 15;6,d 339000 193\.7 \.Co,nuuopn \.nd fta_\.io Th \.Un 4\.01a\.,?oduetion was not achieved according to the eatim- ted sohodules,as a aondsquence of the dela7 in the projeet eazi7ing out and start-up of the plants\. The carbon monoxide sepeartion and the aeette said planat after commissioning in Januae 1983,operated ande, the designed  , 40 - e*\.oaltt both 09 @i i8ilX Ot fftlure t@ OWS?@ tbe nes"8Get ro nUX|tehtela(Jljthesdl,f6 tfom seetv@l00 uniti) old o\. the tault0 opoatson of s0o0 equtipont(o68bof monoxide eouIproOfloos) and bSecaSe of the teeh@alog deficteneatea whitc he not been remedied ret\.o The msctt\. *sh7dvtde piant was@ommitsitooed it Autist l903,opoetiU at he\.t the designed copeott- as a result of the inadequate oqutpcimt delivered bt WeldersaBelSugwwhich bhd to be r@plaeed with other equipmae With the ooamisuioata6 of the methaol plent(OtobW l9*4) end of the ecet7lene plant(Octobez 19*5)9have heen resated all the matesial condttions fax operation at the designed capecitb o8 all the lants foxnoeXr starto&Up0 Produettoo,eosts sad the achteved proftiages well as the estimates until 1993 are showa in annex 5 Chmial ffianfokIe ahnltg?z t\.Poe\. 4ao2a vast of the produotion to be sohiswd esordtng to the projoet,whon the olants operste at the designed capasitV, is meant to satt sf the taternal need of iuch chemicals of tho units belonging to CflChCratovs end of other shemteal eon p1eses tn the chemical industr7a About 505 of the soet71en production (14300 tpy) *ep2Os\. seats available scet7lene withta the aew project end will be delivered to pleants prexisting within the CompleK#b7 replatcng the old ocet7lete plant based on oarbide, The whole vinl acet7te,etb\.l aoet7te and acetti enbdride production to delivesed to the enterprises from the chemical and petroceimical ldumtz7 for manufacturing of paints and lacquers, artiftcial fibres sad d2uVse Over 75% of the aoetic said production and about ?\.O of the pol7avinyl 'estate vroduction ts deliveted to the consumers from the chemical iadustv7 fot mnufectuoing of the ozoatse cheiicals(but7l aeotst,aodiuam seetate,otba oeetateespiguenti, uzugs,eto)sfrom the patnts indust,ufrnl1tuze tindoetx7eand ta the light indastz7 fox testile feb2ic,The reaining 30'25% will be expoted\. out of the nethanol pzo4ucttoa(172000tg7) about 50, is deltiered to the consurmers ti the cheateal and ?etrobsnic\.al  - 41 - iadustry fof Mnanu\.factuaring the a7nthetie zubboe0?p1astsos,drg paints and laequ@rf,0tcO it is estimated that about 5C% of the methanol produotioa will be exported\. Produotion,consumption and product marketing achieved within the project are shown in annex 5aem5* I&XV=1 Oninetal Asnects 4\.03\. The project was carried out according to the Romeni\. an standards regarding the protection of the environment9which arei\.n some respects,more strict than those used in West European countries and in USA\. The moat polluting substanoes within the Complex are the otgento compounds,which -\.re wsshed eava in the methanol and acetylene plants\. In order to prevent the wvter pollution there Ws been installed bio-treatement outfit\. Due to the manufacture tecimolog7 used,there have been eliminated the pollution problems*The two siz admission ways to the air separation plantsare placed at 3 k1m fom one another, thus eliminating the risk of hydrocarbon presence\. Also,the acetylene plant is provided with an adequate ventilation and automatic shut-off devices aCcor41ng to the safety standerds\.The high ecetylene are diluted in gesoil and licuid aimmonte,sefely,without exceeding the maximum conoentration allowed In si "ilaz plants\. The medium and the high pressure devices used within the project were designed,built and started up taking into account the ecological standards and the safet7 in operation\. V\. FlIANCIAL ?MI OMMANCES cot===-==i relation %0 l\.The cost-pr ieQ relat ion  _42- Eoteo podauettoa Avizg,e pvgttt Sale pRod ttio _ _ Plosese Catz0nt Px040Z° Cal8X^ ft0jeo Covent t@d estima0te tou stint tocL antist methanol 1060 2245 #95 1ui* 560*5 #41 ai d 580 7200 4254 2d78 15g6 022 9300 1d000- -8500 10335 1200 7"6 9o17vi\.nvw dO5 12565 6609 906 1596 3479 asetate RooUN aeetiC 9000 16000 o 6725 9279 onh7dnide 0000 p7 etiql dQ2St1M 17960 26696--?272-- " 1801M 106d8 d6" $ee ~ 79 et 9 7 acet7low 3ooootp7 10490 25100 4539 12700 5951 1200 Gross prof it per ton of piodnet In high\.! than the1974 egtimateasThis is due to the increase of prioes it the final p*o@deti which is higher bhan the price tianeases of the aw inaterialaq utilities asd noinaol wages\. Benefit per product ton to lower at the ethl acetate soopased to the estimates fzoo 197d,es a oonsequonce of the unfuvoc\. table prios ond cost evolutim foo this product\. 5,32elt t3 erpeoted that the direct production costiatt the designed cepacit7will be 262!\.-o highev ther\. those estimatedpthust  - 43- aA mount Value Coat Amount Value Cost nil1 let/ il let/ lot vU\. l8 U\.N methane for checizattin 357500 21,5; 60\.0 357500 307\.5 10o0 166¶ thousandoubio mattes methane fuel thousand come 81940 li\.e4 200\. d1940 81\.9 100 504 Black ol4-ton 25500 15\.3 599 25500 46\.2 1890 32! G08ol\.1ton 9000 6\.9 985 9000 26,2 2910 292 lectric powez-W M 286930 77*2 269 286930 Ud* 414 15 Steam d bar-ton 1106548 33\.2 30 1106548 117,3 106 353 Prooess steam 13 be- ton 164940 5\.d 35 164940 19\.2 136 32¶ Industrial water thousand come 14601 7\. 500 14601 697 U60 9* alcohol 497 33\.3 67000 497 34,1 68585 lo Othez chemicels t 50\.9 ° 37a _1 t lip Labour - 45\.0 # 52,8 11! Overheads 640d - 74\.5 It-* Total expenses - 379\.6 994\.2 c 263 This inozease wse s &toszned b the iaoUae\. of pricos at aW Matsrislase,o0w@! end utilittes to 1982\. The Most speoteculOr tuonessee ooused at; methane gas fRau 60 les/1000Q to 1000 let/lOOQuIaOm9oo0s steam 13 bas from 35 lt6t toll6 lei/toPzoGeas steam d bar from 30 lie/t to 106 let/toot black oll from 599 let/t to 1s90 let/to,ted At the sene time with the *rS,e iuerees aSt SW etoetel\.s po-\.or and utilities took place an increase of the Selling prices of ths ozgantasl chestoals 6eaufectured aeordiNg to the pro3eotb  - 44 - ;tmhno 1tl soconta of the Pioe4r\. *we piesented in annex 6e and 6be 5,011 in vtew of egl@ulattfs the flnsnclal rate of 2etuxn the followll asguW9tions haVe been made s g/ the pzojeot soat p 8eivoed to US dollars was obtained tr tranfo?mLaS the "spective now to lei on the beuis of the of0t\.al iato of eaohge at the date of Payment ii/ the ftnal productu and saw mSteraels prties wee assumed to "Main mnhanged in the ittewvl foflowlsg the goas 1965\. 1t1/it was assumed tht the project will o*eute at the designed oapettO beginanW w'ith Mah 1g86\. t,v the sinkin taken into eceount Is IC htgho than the 7ea17 stLnktng of the projecet 5\.05 besad on the above essumPttonoths tinancial rate of return was decided to be % cogazed to 2X% as it was established it th,e dase of pwojeot estiaete(sane j),  ROMANIA CRAIOVA CHEMICAL pR t \.I \. \. \. \. : CONSTRUCTION SCHEDULE- Projected dates 1977 1978 1979 1980 1981 1982 1983 1984 1985 Methanoi _ - - - - - _ _ _ __ Detail Engineering - - - _ - - - _ - - Long Delivery Items Contracfng _ - L _ = - \. \. _ _ - _ \. \. _ _ _ Civil Works - _ Min Equipment 4s4iverY - _ - - _ \. _\. \. - 1- Erection _ __ I_ - - - _ _\. _ _ _ _ Start Up Tests* Cv\.jA\.szfng s Acetic Acid------ Detail Enginee|ri_g - - Long Delivery Iter\.b Contracting _ _ _ - - \. Civil Works --4__=_I Main Equipment D4L overy - 1 Erection \. _ - 1 _ … … … … … … … … - Acetic Anhydride - - _ _ _ _ _ _ - - - - _ _ _ - Detail Engineering - Long delivery Ite Contracting Civil Works 4_ ___ _ - - - I Main Equipment Delivery 7 _ - _ _ - - - _ …- - - - Erection - - Start Up Tests& CEtimisslonig _ Acetylene Detail Encineering _ Lona Delivery ftems Eontractina- plai-Equipment Detivery -1 _ _ - - - Erectioio-\. Stdrt' Up Te-\.tst Colmmissioning Original schedule \. - - - ----- Actucit schedule - -  *MOMANIh -RAIOVA-7CHEMICAL PROJECT tONSTRUCTION SCHEOULE Projected dates 1977 1978 1979 1980 1981 1982 1983 1984 1985 Vinl acetate ' - - _ _ T - - Deftai enfineerig--- Lorg delivery items contracting _ - - - - _ _ - - _ _ _ _ _ _ _ _ - Civil works- -- -- Main equipment d4livery -- - - | Erection _____ _ _ _ _ _ - _ _ _ - _ - - \.… Start up testes comonessioning ____1 \. Polyvinyl cetate _ _ _ _ Detail engineering ___ __ __ __ __ __ __…_ Long delivery items contracting……_ \.… \. _ Civil works _______ - _ _ _ -- Moin equipment di very __ Erection - Y _ Start up testes & commissioninn _ _ Ethyl acetate Detail enaineerinq Long delivery iteims;-contractin _ _ Civil works Main equipment detiverlI … A Erection - Start up testes &' *mmlsslonlna __ __ Utilities & auxiliaries …--…- Details- engineering _____-__ … …… …… ----- - _ _ Lonq deivery items contractina g _ - _ c4vitworks - Moin equipment delivery ' trectios~~ -\. _ - _ _ - _ _ - IT - _ _ _ - - -\. - _ _ _ _ - \.'\. - - -A - St rt,up testes c commissionfng _ a a a a a …_ - - OriginaI schedute Actual schedule  -47 -\. D8sbuis* ta M8t ft the ems ot4 m oan t ot w2 1h: (thowV 8 ,qulve A,)t Wvst 8,9236 a39 3\. 192 7,*S NetbOrlands 29603 6\.31 le512 3\.78 1,o0Io 2\.60 Gweat 8i1tain \.663 vAu 577 1044 1zICE 569 le42 thwe ivE 530 1\.33 ostal Pomgtp1 1i3plews 20o,659 53163  -48 CArIAL COST (ta UlLon Le) Toand 306 3\.6 3\.1 - 3\. ftd A*T* 63\. 34\.2 9702 89\.4 33\.1 122\.5 3qai~\.t ,h1torals apas( laslng r6gbt, lateas \.a Otkrs) 8sue 7n8\.2 16 o92 9o99\. 992\.2 19\.12 irgtla 11560 306 118s8 17X 6 171\.6 3BLng am Cl1 lefts 43704 1o\.B 4 48\. 46o4 Twe- w ge 19\.8 e 1 i9\.8 9\.e 0\.2 lo*o Ripeasem 57\.6 57\.6 029 as29 Plc\.e Iodalation 19\.8 133\.2 153\.0o - OntLxWe*n*ea 48\.6 27\.o 75*6 27904 16\.6 296*o of whi*ho -co£dselool 4m - do 2 w\. o 251\. Otkars _ 28\.4 1606 28\.4 Total rnstalled cot 1647\.0 927,, 2574oo 2oo\.S6 lo42\.l 347,7 Woa*kng Capital 109\.3 43,7 153\.0 167\.0 167\. Interest during Cmtiton V 94o8 94\.8 @ OS Total 3FLnaa izg F\.equLz\.d, 1756\.3 1o65\.3 2821,8 2172\.6 1202\.L 33\.74  - 49 - mm-wn ",~~5\. 118 ae *~~~ 3u2AnaM01 a ~~~~~~004 0\.l02 oJ Waft 24\.3 eG 24\.09 26\.3 a6\. * raini La i as9 1\.01 o\.6 '*,1 0\.6 A s an 09 Jvom\. opmatng xxon"s3,2 m 3\.2 4\.7 -4 Price BRsaueati 1\.1 7*0 8e\.5 as Pb7siwl Cout1uMeoea 2\.7 1\.5 4,2 16\. , 16\.9 of ibiobs - - -g14,4 - 14\.4 tkespa"s 1* - 1\.6 e0\.9 2,5 Total Iusoa1aed gOst\. \.91,5 31\.3 143,\. 114c6 39,3 174\.1 Woakins Capital 6\.1 2,4 8\.5 9_5 - 9-3 Xft\.i'at During C asm twtion - 3 \.3 - 901 9\.1 lequired 97\.6 59o2 14608 124, 1 S !6b 1\.,?  CRAIOVA CHW\.'MICAL PROJECT IROJ1CT COST AND FINANCING RW-,UIRED ( in US 4 million) Direct Imports F\.Rx\.Costs of Total F\. Total local Total Equipment Special Materi\. Local Suppliers Exchange Currency Costs Costs and als Instruments and Other F'\.Rx\. Costs Technology and Suppliers Costs Land and Site Improvement - - - - o\.2 Oe2 Equipment and Materials - Proces 2 9\.6 18\.3 51\.7 41\.9 93\.6 -Utilities 2\.o 1\.5 0\.5 403 5\.4 \.947 -Spares 0\.5 - - 0\.5 1\.0 1\.5 Freight and Insurance - - 0\.5 Q\.5 1\.1 1\.6 Erection - - \. - 9\.8 9\.8 Duties and Other Expenses - - - 2\.5 2\.5 Buildings and Civil Works - - - - 26\.3 26\.5 Enginsering,Licenses and T\.A\. 1\.9 - - 1\.9 5\.1 7,O Training o\.ol - 0\.01 o\.6 o\.6 Adminuitrative and Preoperating - - - _4\.7 4\.7 Base Cost 28,2 11\.1 19\.3 58\.6 98\.6 157\.2 Contingencies -Pysical(Start Up Tests and Others) 0o9 - - o\.9 16\.o 16\.9 Total Installed Cost 29\.1 11\.1 19\.3 59\.5 114\.6 174\.1 Working Capital - 9 _ _ 9 5 9 5 Interest during Construction - - 901\. 9\.1 _ 9\.1 total Financing 29\.1 28\.4 6tS\.61 X 11\.1 28\.4 68*6 ~~~~~ ~ ~~~~124\.1 192\.7  -51- M Wi d C&AI2 OV CgUL4 PROJICT WORKING CA\.PITAL R3QUIBMHTS (in M±lihn Lai) Operating Cash 600 Accounts Receivable 115\.0 Inventory(15 days) Raw Materyals: -Domestic 35o? -Imported o\.3 Work in Progress(1o days) 55*O i inished Good(5 das) 38\.0 T &l 25o\.o Current Liabilities -Account Payables(15 days) o3\.0 Net Working Caital 167\.0 of which: -Local 167\.0  - 52- Sqhodule of Disblwo o6 n 4000 4000~~-MllonUS8\. an ai'be1 Ratmt mmua*e\. 3ibu fa u1a4 L~~~~~-4 - _ U 4,\.0 4,oo v _ - UK 1\.53 3,3 * 3\.85 385 ? 35047 11\. 2\.96 6\.8l 198 26MOO 33,30 9,99 16,8o X 6o6 1706o 1,2 800\. U 7670 25*33 IOU 9412 KU 7,20 32\.30 2322 12a3* I 3,00 37\.30 4\.4 16,8 198 2\.3\. 4\.o\.o 1904\. , 36\.2a I; 1,25 38075 6003 22,83 -U 1\.25 40\.00 4,93 27\.76 all am 6\.3i 34013 IV 2,o7 36\.2o 1982 - 3*6o 39,80 X - - 1\.oo 37\.2o U -x -D ,090 38\.1\. m? e - 04* 538,50 IV - - o13\. 39,80 1983 0 \. o\.2o 400o0 I o - o02o 4gOOO Cl1oai Date 12/31/1982 12/3l1982  - 53- P\.-odustloa,CUuUup*i@ and 8sa oNtha AO sd ]~~than101;08i Ma8 die kid 1983 1984 198 1986 19a\. 1983 1 \.98\.1985 196 1 fotal Production 27oo 18O83e 21lS 12 an" 9Wo 60000 Of which, 1Ztma ~ 7o 3,00 36\. f2o\. 971\. 32%5' 3265A* 2,fe~iniz tw Sale -14 50 72\. 8278 172 312 7~ 7~ -salesto dometats ouppUewa X 9"50 920" 92\. 8276 17\.20 23290 21496 21,96 ax_0 _ 535oo 8so* 80000 o 80* 6** 6oeo  - 54- iPw*wt-m ,a tia na d Bas C TtWI Asgeate man Po27jWl Aewate VlWI Moatae ^ 12 vMaO TOUL 4 b timn _ * sun* 2ot* 10o e of wubteh a - _ 17\.5 1175 w loaterd I"o1 S ° 2*PA*dft~ti\. fa )@14 17625 3M662 M" 1mgalgs to dato s'wpi\.is do 1a 1co35 ID - at f ~~~-= - -D e - - - _ awo \.@  - 55 - Proditaotions,ommptlon n4 Sales of WIb AMtate gad Aoeti,At )di4 wez~tri a¢a2ab u e 0e stgiae Aaayt IM 19" M5 19" 198 198\." M G a Tota ftOd=tIo 3530 780 Sb25 100o 32-"\. 1 3*0 of uhieha ~~~~~~6 Go Xo 6e 75 - - - Z,heodtia on tonr ale - °3 1740 10 32 GBo loeo lUs"o of wheuh seles to dstis suppltws 3119o 7740 7950 lOoe 32*1000 1** LO" do l - o t  - 56 - TSmI Aaqtatoa,qwat$\.ado@t m 3 la Bta\.t ,1, (Milt Zet) Y2 B*a90\.q 193 192 Goa" 1 1 s 9e Aeo"lo x AM d9 174-,oo 1720\.4 AQtIG Aold 2,1983 8278 17020 9129 24 7L%4, 27,96 Reidl Metbte in \.198 m 1$o 97,8 17X Hydne a ZV" 2j?O 70Oass eet TotaReenu 92,198 1996e\. 1 03,ff I A\.tato VL1985 9 349e 8 7r74 7,95 emeth 1 ,1983 2A g3 2oo 144,31 *1 2\.1983 175 1,e3\. \.0\.2 1O699 18 02 Baa~~~~~~~~~~~~~~~~~~~ teA*t" e183 23,"4 5,1008 12504 W 2\.1dL923 2G72 729 12o 1 00 ,\.et*1eao OS 1\.1963 - (19,0 152 , E Kbbul 111141 - 3 35fq 386,1 3664& Ae0t9,eue plat " 88,4 17347 l36,5 1o23\.8 ¾,§7S\.8 Ohu S 2,e 5\.2 18, 555\.1 57e\.4 glolbal ll@_l ~9\.,4> 176\.9 '95O,i 1,965,0 2,03g2\.1 _,o 8 lahl^$ ~55\.5 98,1 457,9 830\.83 lbthll81114el 15\.@ 4\.6o1 249\. 433,7 #9\.4 ~tl1t1*L8 2\.o0 3147 166\.7 31\.02 3564 0b±oala 17\.5 RoeS 1\.02 86\.9 91,2 X#L " ~~~37\.4 53\.6 1o8,7 125,o 127,3 5 "~I 92\.9 151\.5 %{6,6 955,8 9x n ~~2616 42,9 97,9 152\.o\. So @ (29\.1) (13\.3) r 85\.0 B7,2 885,9  - 57 - Pseuctmixsciss d ouvtt esJmto flil es mi,i -otbal lto\. 172,o0 29243 38 A60^X1= -A"to, 279946 o aei,a T1W1 Aetat\. Pe 18,825 lot" 339 Pe 1UW iAstatOs too 13,oo - 12,%53 3\. AMtotAWdtdo tolgm1%\.o 600 Rb' -la too 7,9150 269698 232\.* Aee3ano too 14,331 491ee 359\.7 P Gas f As at e Asia Osas 140i@ 37\.5 5 G" ea 146040 3,1,30, 101,3 Acetylene Oft-\.pz ooo ea 16344oo 375 61\.3 T@> eot l-t4v4m20 52oo l Ut"211I 11 0 \. >05A etbhane ooom 439,440 1 000 439\.4 Juol 0i1 t** 9,000 2,91o 26o2 Diesel Ol too 259,5oo 1,89o 48,2 POw Ykle 286,93o 410 118\. 8 Atfteam tO\. l,1969548 1e6 117\.3 13 AtSteam too 164,94\. 116 19\.1 Industria1 WUat 000 ea 10,j6o 460 6\.7 P\.ly W1 Alsohol too 497 686540 34*1 Othw Giadels co o 57\.1 Sub-Total -6669 ?ixd Costsa of wbic 1W7O3 Labow 52\.8 MaSAao and Gonezl - co74,5 _ 59JA m M L 2  -58 - A*CaOh lUIW tot P12UMO±8 RAte Of PAt=w(1u MWOUlmI 19? a\. - S 22\.e 1978 118\. \. 199 4o1, 0 e - - (44\.e 1980 495,\.* 1981 636-0 - - * (b\.ow 1982 6oO - - -\. (609\.) 1983 3530o *a@ 37q* 9044 (3v44 -1984 267,@ 98\., P4o 179a (296\. 9 985 146\.0 45700 1690 791 7\. 1986 - 830\.o IVA L616* 1l4*o 1_99 - 867os Inae 20o32  CRAIOVA C1MlICAL PR\.OJBCT BALANCh' SHI13qT OF CRAIOVA CHUMICAL COMIBINh (Million Lei) 1978 1979 1980 1981 1982 1914 198 ASSETS 5,do2 6,147 6,509 7,431 7,973 b,391 9,171 9eO75 Fixed assets 3,941 3,821 3t619 3,515 3,691 4,323 5,352 59e27 Gross Value 6,1o8 6,25o 6,269 6,361 6,777 7,646 8,959 9,124 Depreciation 2,167 2,429 2,650 2,o46 3,o\.6 3,323 3,607 3,897 Current Assets 678 723 827 1,o34 1,254 1,138 1,148 1,442 Cash 22 72 121 141 6 5 8 lo2 Receivables 48 3 5 lo 4 23 2 2 Deposits and expenses 485 511 666 6k3 1,o35 1,llo 1,o82 19250 Other Assets 123 137 35 - 189 - 56 12 Assets and Expenditures for Investments 499 1,332 1,926 2*722 2,923 2,634 2,203 2,171 Investment in progress 370 965 1,525 2,000 2,498 2,079 1,725 1,136 Equlpmest and Materials 94 2d3 3o7 316 165 112 49 15 Others 35 t4 94 4o6 26o 443 429 1,o2o Other Assets 684 271 137 160 125 296 469 235 IJABILITIES 5\.8o2 6,147 6,509 7,431 79973 89391 9,171 9,075 Fixed Assets Fund 3,941 3,820 3,619 3,515 3,691 4,323 5,352 5\.!27 Current Libilities 674 734 838 1,o024 1,176 11A9l 1,219 1,427 Fund for Working Capital 326 338 345 393 436 436 436 559 Short Term Credits 205 215 230 327 495 462 727 \.; 'o  1978 1979 _19\. 0 1981 1 198 1904 1985 Payables 54 41 59 38 '77 '73 125 68 Other iablilities 89 139 204 266 121 145 176 73 Sources for Inveements 499 19332 1,926 2,722 2,923 2,634 2,203 2,171 IBRD Loan - llo 303 542 590 632 58o 500 IB Credits i ,1c\. -JAI 00) 204 290 181 95 dO 72 32 7 Combine8s Fund 295 912 1,418 1,9"7 1,%8 16 1,583 1,559 Other Sources - 2o 24 Ž37 )35 634 8 5 BenefLts -lob 260 125 170 183 285 398 250 0 1/ estimxate to\.  CRAIOVA CHSMCAL PROJW*C Actual Cbsh Flow (In lillion Let) 1977\. 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 :ash Generation: -GrIpse Beief:its - - - ' (29\.1) (15\.5) 126 857 885 -Dej)recia 0on \. - - - - - - 26\.6 42\.9 97\.9 152 152 unds made available by ne Cantral(for Investment) 22 118 4o1 495 '32 609 396\. 2±67\. 270\. - \.- \.- "-E r debit service duritig \. * - 2 - ap4tact construction -\. -; - 2 14 22 42 98 -86\. 6\.9 \. _ ;tate Funds -:or Fixed Assets - \. 199 252 397 454\.5 :349\.5 \.267 146 _ ' _ -\.or Working Capital - - - 43 124 ijRDI LOAN - llo 193 239 154\.5 3\.5 _ _ * _ applier's Credit for JE Industrialexpoot 22 2 -92 \.5o \. - - Lib-TOtal ; 22\. 1:18'\. 4i 4\.95 636 609 396 269 270 - - wids f io Intti1" \.t during - \. \. onstructionl - \.2 \. 14 2t 42-; : \.9 349, 6p9' _ 'ub-\.-'otal\.Ccas \.-ailab1l - \.22 1'18 403 509 658 - 65g A35 301\.o 2'/6\.9 - _ '>apLE7~ew\. ,,e ' \.- \. 1- ed -\.A\.11& \.Io4L\. 4x 6 \. 609r, 353 262 1K \.1- } *- -; -12942 - -9 04 \.L_~\. 92 24\.  1977 1978 1979 198o 1981\. 1982 1983 i9811 1985 1986 1i9 Repayment - - - - - - 59\.o 52\.6 8o\.o 66\.5 66" Alocation of Funa s- Pay back of Funds Received\. \. \. for Investment -\. - : - \.- - -- \.27\.4 93\.7 126 126 Development Fund of, \.- \. - -t Enterprise - -, - \. : - - - 119\.3 392 4o4 \. Other Equsty of the Aterprise o - - _ _ _ _ -, lo\.9 361 372\. fayments to tha State Budget- \. - - - \.30\. - \. - -- - 13o 135 \.t1 L\.WE \. M  BANCA DE INVESTITII 1 - uchare t INotber l86 - 63 -_(LeeaUttatea 91 data) Unltate Porein Relations ,,4~~~~~\.,,,,\.me,,,\.,,\. V 1, \. Ue O<C{ Servictul \. \. I \. \. (A se repeta In risp\. dv\.) ATTACHMENT II No\.12,458 Page I of 4 COMbENTS RECEIVED FROM THE BORROWER Mr\. Otto Maiss Division Chief Operations Evaluation Department WORLiD BANK Re: Draft Completion Report for the Expalsion of tka Oraiova Chemical Plant (Loan 1634\.-Q)) Dear Mr\. Maiss: To your letter of September the 23rd 1986 and in addition of out telex of November the 1st 1986, we confirm that we have carefully analysed the draft of the Completion Report for the Oraiova Chemical Projeoct and which was drawn up by the World Bank\. On tb basis of the respective analyses we send you below some comments and suggestions we present having the wish to show as real possible the conditions of the implementation of the Project the reasons for delays and also other aspects concerning the achie- vement of the Project, and which we kindly ask you to consider in drawing up the final form of the Completion Report, 1\. As concerns the reasons for delays in implementing the Project and commissioning the Project facilities, showed in the Bank's Report in Chapter I,para\.l104 and Chapter III B, para, 3\.03, 3\.04 and 3\.05, we oonsider that the main reasons have been showed in the Draft Report of the Investment Bank in Chapter III P and have been largely discussed with the Bank misston in February 1986, We also consider that the delays in organizing the IOB and concluding the contracts, have been determined by the technical complexity of the Project, by the great volume and number of equip- ment and materials required for the implementation of the Project and not because of the difficulties caused by aligning the procu- rement Guidelines of the Bank with the Romanian procurement practi- ces or by different opinions concerning the matter of proaurement\.  ATTACHMENT II - 64 - Page 2 Of 4 Under these circumstances, the projections at the time of Appraisal concerning the procurement have been too optimistic (estimated - 24 months, actual - 5o months), As a result, we would request to delete the respective comments included in Chapter I, pare lO4, Chapter III B, pare 3\.03 and Chapter III S, para 3\.12, Also, the delayed delivery of some items by the local suppliers, can not be considered as one of the major reasons of the delayed implementation of the Project, because such cases occured for a small amount of materials for errection and small value equipment and which had impact only upon two facilities\. The major cause which has to be emphasized within the Report, and which unfortunately created much problems in the implementation of the Project, in commtssioning and even at present in operating some facilities, was the wrong delivery by the foreign suppliers, from the point of view of construction or concept of some equipment, of which we can mention: - the delivery by welders company of Belgium of 12 steel coils of poor quality which determined the delayed commis- sioning of the acetic anhydride plant with over 30 months and the additional expense for the procurement of the respective equipment from other suppliers; - the delivery with construction and concept defaults of the low pressure compressors of the acetic acid and CO sepa- ration facilities\. After the commiusioning of the acetic acid and CO separation facilities, besides the repeated broke of the equip- ment supplied by the foreign suppliers, have occured also very serious technological cocept defaults which have detenmined the under capacity operating of these facilities and additional costs for materials and for the correction of the defaults\. The defaults which occured in some imported equipment and also the conceptual default of the technology of acetic acid  - 65 - ATTACHMENT I1 Page 3 of 4 plant, have created signi- ficant difficulties in the commissioning of the Project and in achieving the provided benefits\. Some of these problems, 88 you are aware, have not been settled even now\. As concerns the influence of non ensuring the labor for thu works requested, it is necessary to note that such gap existed only in some periods, especially in 1982 and,even they contributed in some way at the delays, it can not be considered that this was a major fact in delaying the Project\. 2\. In connection with solving the technical problems of the acetic acid plant, Chapter III F,para 3\.17, we request to delete the last phrase ("although Craiova Central, the bene- ficiary is interested in solving the technical problems, the Borrower \. \. \. \. up to the end of the paragraph), taking into consideration that the Investment Bank is not directly included in the contractual relations between the foreign suppliers and the beneficiary\. 3\. The statement of Chapter V A, pare 5\.02 according with the fact that the financial results of the Enterprises are the direct result of the official regulations is not according to the real facts,As it was explained to the other missions of the Bank too, the measures which have been taken after 1980 to improve the economic mechanism, of the planning and price system, have determined the increased competences and self-management of the Enterprises in self-financing and self-management\. Also, these measures have determined a close connection between the efforts of the Enterprise and their financial results\. The domestic market consumtions are established on the basis of annual plans, taking into consideration the real requirements of the Enterprise and the possibilities to cover these from domestic production and in addition from imports, x x x In accordance with the comments and suggestion pre- sented above, we would kindly ask you to review also the con- clusions of Chapter IV "Lessons to be learned", esepecially those of para 6\.02\.  - 66 - ATTACHMENT II Page 4 of 4 On tlhis occasion, we would like to ask you to modify a small error of Annex 2 - Table 2, respetively to write 42\.9 instead of 47\.9 for depreciation for 1984\. With best regards, Alexandry Olteenu Dir4etor

APPROVAL

P158951

COMBINED PROJECT INFORMATION DOCUMENTS / INTEGRATED SAFEGUARDS DATA SHEET (PID/ISDS) ADDITIONAL FINANCING Report No\.: PIDISDSA19192 Date Prepared/Updated: 12-Jul-2016 I\. BASIC INFORMATION A\. Basic Project Data Country: West Bank and Gaza Project ID: P158951 Parent P129861 Project ID (if any): Project Name: Education to Work Transition Project Additional Financing (P158951) Parent Project West Bank and Gaza: Education-to-Work Transition (P129861) Name: Region: MIDDLE EAST AND NORTH AFRICA Estimated 17-Aug-2016 Estimated 15-Dec-2016 Appraisal Date: Board Date: Practice Area Education Lending Investment Project Financing (Lead): Instrument: Borrower(s): Implementing Ministry of Education and Higher Education Agency: Financing (in USD Million) Financing Source Amount Borrower 0\.00 Special Financing 5\.00 Total Project Cost 5\.00 Environmental C - Not Required Category: Appraisal The review did authorize the team to appraise and negotiate Review Decision (from Decision Note): Other Decision: Is this a No Repeater project? B\. Introduction and Context Page 1 of 8 Country Context The Palestinian economy is not growing enough to raise living standards and reduce high unemployment\. The economy has witnessed a sharp deceleration in economic growth, from over 8 percent during 2007-11 to 3 percent during 2012-15\. The sharp decline in growth has stifled the economy➢❨ s ability to create jobs for a growing youth population\. Successful reform efforts and strong economic growth helped bring the relative size of the Palestinian overall fiscal deficit down from 24\.6 percent of GDP in 2008 to 13 percent in 2010\. However, despite these efforts at fiscal consolidation, the deficit to GDP ratio has remained stuck in the 10 - 13 percent range since 2010 -- on the back of a large wage bill and weak revenue performance\. The economy has long suffered from the restrictions and political instability that continue to constrain private sector activity\. In addition, the decline in donor funding from 32 percent of GDP in 2008 to 6 percent in 2015 has significantly contributed to the recent economic weakening\. The internal divide between the West Bank and Gaza (WB&G), which has created a dual regulatory framework, has also negatively affected economic activity and the tax base\. In 2015, the economy bounced back from the 2014 recession but economic growth was barely enough to keep up with population growth\. The 2014 Gaza war pushed the Palestinian economy into recession due to the devastating impact it had on economic activity and the livelihood of Gazans\. From a very low base, economic growth was 6\.8 percent in Gaza in 2015 ➢❨ with the reconstruction, wholesale and retail trade sectors being the main drivers\. While it is positive that Gaza returned to economic growth, with the current pace of reconstruction, and with a lingering internal divide between Gaza and the West Bank, the Gaza economy is not expected to rebound to prewar levels before 2018\. Overall growth in the Palestinian economy was limited to 3\.5 percent due to a growth slowdown in the West Bank from 5\.3 percent in 2014 to an anemic 2\.5 percent in 2015 in the face of a significant decline in foreign aid and the liquidity squeeze caused by the Israeli decision to suspend the transfer of the Palestinian Authority➢❨ s (PA) taxes during the first four months of 2015\. Given that population growth in the Palestinian territories is around 3 percent, economic growth witnessed in 2015 was not enough to increase per capita incomes\. Even though only a political resolution would allow the Palestinian economy to reach its full potential, easing the restrictions and implementing existing agreements could significantly improve the economic outlook\. In general, granting Palestinians access to production inputs and external markets and enabling unimpeded movement of goods, labor and capital, as anticipated in the political agreements, would drastically improve growth prospects of the Palestinian economy\. For example, the Oslo Accords envisioned a gradual transfer of Area C to the PA➢❨ s control\. This has not happened yet, and the World Bank estimates that granting Palestinian businesses access to Area C would increase Palestinian GDP by a third\. Also, the Paris Protocol allows for the expansion of the quota of goods that the PA can apply its own import and customs policy to and import from third countries, depending on the Palestinian market➢❨ s needs\. These quotas, however, have not been revised since 1994 even though Palestinian needs have significantly increased over the years, resulting in supply shortages\. The blockade imposed on Gaza since 2007 continues to weigh on the economy\. Also, the closure of the Rafah crossing has further exacerbated the situation\. Israeli measures to allow more goods out of Gaza have expanded since September 2015 and are a step in the right direction\. However, more needs to be done as only 11 percent of what left Gaza prior to the blockade is currently being allowed out\. Freeing up movement of people and goods in a way that meets legitimate security concerns of neighboring countries is essential to improve Gaza➢❨ s growth prospects\. Page 2 of 8 Sectoral and institutional Context A quarter of the Palestinian labor force remains unemployed\. After skyrocketing to more than 47 percent during the 2014 war, unemployment in Gaza declined to 38 percent by the end of 2015, as the reconstruction process started to pick up and private firms were beginning to rebuild their capacity\. Unemployment in Gaza was twice as high as that in the West Bank\. The Palestine Central Bureau of Statistics (PCBS) labor force data indicates that unemployment amongst Palestinian youth was very high in 2015, particularly in Gaza where more than half of those aged between 15 and 29 were out of work\. In addition to low labor demand, females continue to face challenges to join the labor force and therefore, female participation rate in the labor market is very low at around 19 percent, with a high unemployment rate of almost 40 percent\. The economic outlook continues to be highly uncertain\. Assuming that the current restrictions remain in place and that the recent surge in violence does not further escalate, the real GDP growth rate of the Palestinian economy is projected to hover around 3\.5 percent in the medium term\. This sluggish growth implies a stagnation in real per capita income and an increase in unemployment\. Notably, downside risks remain significant\. First, the pace of reconstruction and recovery in Gaza has been slower than anticipated and despite some acceleration in recent months, additional setbacks are possible\. Second, the outcome in the West Bank may be worse than expected if tensions continue to escalate\. This will result in elevated security risks that may eventually weaken consumer and investor confidence, and hence, negatively impact economic activity\. Conflict and mobility constraints have had a deep impact on the labor market, resulting in sluggish labor demand and insufficient employment growth in the last decade to absorb new entrants into the job market\. The experienced economic contractions and the rise in unemployment happened right after the outbreak of the second intifada, and then peaked following the formation of the Hamas-led government in Gaza and the three conflicts with Israel in 2008, 2012, and 2014\. The labor force grew at a rate of 6\.3 percent from 2002-2003 and continued to grow in the following years, but at a slower rate\. However, this was not accompanied with commensurate growth in jobs\. Private investment has averaged only 15 percent of GDP over the last 7 years, while foreign direct investment (FDI) has averaged only 1 percent of GDP (World Bank, 2015)\. Employment of Palestinians in Israel declined, whereas public sector employment grew by 5 percent per year, in the absence of private sector investment and restrictions on movement, access, and trade (IMF, 2012)\. Declining private sector activity has remained concentrated in low productivity sub-sectors with weak employment growth in a difficult investment climate\. The manufacturing sector, expected to be a key driver of job generation and growth, has stagnated since 1994 and its contribution to GDP declined by 26 percent in the last decade\. At the same time, high value-added sectors, such as IT and tourism, have not grown at sufficient pace to compensate for the decline in the manufacturing sector share of employment\. Moreover, most of the jobs created in the private sector have been in retail and non-traded services, which do not generate sufficient quality employment (World Bank 2015)\. The private sector faces a difficult investment climate, as evidenced by the position of West Bank & Gaza (ranked 129 out of 189 economies) in the 2016 Doing Business Report\. Most formal enterprises remain small (only 1 percent of establishments had 100 or more workers in 2013), together with a significant level of informality involving up to 140,000 workers (World Bank Enterprise Survey 2013; World Bank 2015)\. Page 3 of 8  Marked gender differences exist in labor market participation, suggesting that women face extra ob stacles in an increasingly difficult climate\. The gap between working-age male and female labor market participation rates over the last decade has widened and reached 54 percentage points in 2015\. While the probability of labor force participation for young and older women increases as their years of education increase, the overall rate has remained around 18\.7 percent\. This is remarkably low even when compared to the MENA average of 21\.8 percent in 2014, one of the lowest regional rates in the developing world\. In addition to the same constraints and societal preferences faced by other women in MENA on working outside the home, restrictions on mobility and concerns of safety have made it even more difficult for Palestinian women to participate in the labor market (World Bank, 2011; World Bank, 2010)\. Equipping the workforce with job-relevant skills is a key priority and challenge in WB&G\. Although past investments in education and training mean that the labor force is now more educated, mismatches remain in the supply of skills relative to their demand\. The World Bank➢❨ s 2013 SABER ➢❨ Systems Approach for Better Education Results➢❨ Report on ➢❨ Work force Development➢❨ (WfD) reached the following conclusions about the key aspects of education outcomes: (i) WB&G has experienced a doubling of students every 15 years, and although the labor force is becoming more educated, student achievement is low relative to comparators; (ii) labor force participation is low at 43 percent, largely due to low female participation and high unemployment, particularly among highly skilled women (36 percent); and (iii) across the three key SABER categories in the WfD assessment➢❨ strategic framework, system oversight, and service delivery➢❨ WB&G ranked as ➢❨ emerging➢❨ against a four-scale measurement, which spans from latent to emerging, to established and advanced scores\. C\. Proposed Development Objective(s) Original Project Development Objective(s) - Parent The Education to Work Transition Project seeks to improve education to work transition of young Palestinians attending participating tertiary education institutions (TEIs) by: (i) fostering partnerships between TEIs and employers in order to make TEIs’ study programs more relevant to the needs of the labor market; and (ii) enhancing the capacity of the MOEHE and TEIs to collect, analyze and disseminate data collected through the TEIs’ graduate tracking system to monitor the outcomes of TEIs’ study programs, and to informeducation policy formulation and implementation\. Key Results Nine months after graduation from the tertiary education institutions participating in E2WTP, graduates have a 10 percent lower unemployment rate than for the 20 - 24 percent age-group\. D\. Project Description The AF would sustain the parent project achievements and expand the opportunities for TEIs and private sector companies to establish successful partnerships and increase the number of student beneficiaries\. In particular, the AF would strengthen the next QIF cycles➢❨ selected sub-projects in the following dimensions: Page 4 of 8 (i) Establishment of sustainable international partnerships, both with tertiary institutions and with the private sector abroad\. The experience of the current E2WTP has demonstrated that an exchange with projects and institutions abroad has had a significantly positive impact on partnerships and teaching and learning methodologies\. Thus, this dimension will be encouraged and considered a plus in the applications to the next Cycles\. (ii) Establishment of research partnerships with international educational institutions, to support the development of research capacities in WB&G, assuming that research can open new markets and thus create jobs in WB&G\. The research dimension of international partnerships will also be encouraged and therefore particularly valued\. (iii) Encouraging partnerships between the private sector and several Palestinian TEIs providing educational programs in the same sector, particularly partnerships between stronger and weaker TEIs that can be promoted through additional QIF cycles\. On one hand, this will increase the chances of Colleges to be successful in accessing QIF financing; on the other hand, a cluster approach to partnerships across institutions in the same sector will help mainstreaming innovation in the whole sector and obviously making a difference in terms of sustainability, cultural change and long-term impact\. (iv) Systematic emphasis on employment and self-employment promotion in TEIs to support the transition to work for graduates\. Only selected QIF projects have so far included elements to systematically link graduates with jobs and market opportunities\. Such elements are to be strengthened, thus becoming a routine activity in future project designs\. (v) Encouraging and strengthening activities to develop capacities of supervisors and mentors in companies that provide internships for students and/or participate in graduation projects\. (vi) Strengthening of activities to raise awareness among relevant private sector companies about possibilities and benefits of collaborating with TEIs in education\. Current QIF projects show that educational programs that target labor market segments dominated by small family businesses face considerable problems in attracting a sufficient number of companies to cooperate in training through internships\. Component Name Education to Work Transition Innovation Grant Facility Comments (optional) Component Name Higher Education Graduate Tracking System Comments (optional) Component Name Project Management and Coordination Comments (optional) Page 5 of 8  E\. Project location and salient physical characteristics relevant to the safeguard analysis (if known) F\. Environmental and Social Safeguards Specialists Mariana T\. Felicio (GSU05) II\. Implementation Institutional and Implementation Arrangements Project oversight and management\. The AF will follow to a great extent the same implementation arrangements as in the ongoing parent project as follows: i) the MOEHE will be remain the agency responsible for project implementation and will continue to be assisted by the existing Project Coordination Unit (PCU) - established at MOEHE - for the monitoring, implementation support and coordination of project fiduciary aspects\. ii) Participating Tertiary Education Institutions (TEIs) will be responsible for implementing the QIF sub-projects\. They will be assisted by the PCU and its QIF Team for the technical support, management and monitoring of QIF sub-projects\. iii) The QIF Board, appointed by MOEHE, will continue to play its role as an oversight and advisory body to QIF\. The QIF Board is composed of members from MOEHEAQAC, universities and the private sector, as specified in the QIF manual\. III\.Safeguard Policies that might apply Safeguard Policies Triggered? Explanation (Optional) Environmental Assessment No n/a OP/BP 4\.01 Natural Habitats OP/BP 4\.04 No n/a Forests OP/BP 4\.36 No n/a Pest Management OP 4\.09 No n/a Physical Cultural Resources No n/a OP/BP 4\.11 Indigenous Peoples OP/BP No n/a 4\.10 Involuntary Resettlement OP/ No n/a BP 4\.12 Safety of Dams OP/BP 4\.37 No n/a Projects on International No n/a Waterways OP/BP 7\.50 Projects in Disputed Areas OP/ No n/a BP 7\.60 IV\. Key Safeguard Policy Issues and Their Management Page 6 of 8 A\. Summary of Key Safeguard Issues 1\. Describe any safeguard issues and impacts associated with the proposed project\. Identify and describe any potential large scale, significant and/or irreversible impacts: The proposed Additional Financing does not introduce new environmental and/or social risks\. The parent project (P129861) was classified as Category C and the proposed AF will sustain the same safeguards classification of Category C\. 2\. Describe any potential indirect and/or long term impacts due to anticipated future activities in the project area: None 3\. Describe any project alternatives (if relevant) considered to help avoid or minimize adverse impacts\. n/a 4\. Describe measures taken by the borrower to address safeguard policy issues\. Provide an assessment of borrower capacity to plan and implement the measures described\. n/a 5\. Identify the key stakeholders and describe the mechanisms for consultation and disclosure on safeguard policies, with an emphasis on potentially affected people\. n/a B\. Disclosure Requirements If the project triggers the Pest Management and/or Physical Cultural Resources policies, the respective issues are to be addressed and disclosed as part of the Environmental Assessment/ Audit/or EMP\. If in-country disclosure of any of the above documents is not expected, please explain why: No social or environmental impacts or risks are expected in this Additional Financing\. C\. Compliance Monitoring Indicators at the Corporate Level The World Bank Policy on Disclosure of Information Have relevant safeguard policies documents been sent to the Yes [ ] No [ ] NA [ ] World Bank's Infoshop? Have relevant documents been disclosed in-country in a public Yes [ ] No [ ] NA [ ] place in a form and language that are understandable and accessible to project-affected groups and local NGOs? All Safeguard Policies Have satisfactory calendar, budget and clear institutional Yes [ ] No [ ] NA [ ] responsibilities been prepared for the implementation of measures related to safeguard policies? Have costs related to safeguard policy measures been included Yes [ ] No [ ] NA [ ] in the project cost? Does the Monitoring and Evaluation system of the project Yes [ ] No [ ] NA [ ] include the monitoring of safeguard impacts and measures related to safeguard policies? Have satisfactory implementation arrangements been agreed Yes [ ] No [ ] NA [ ] Page 7 of 8  with the borrower and the same been adequately reflected in the project legal documents? V\. Contact point World Bank Contact: Juan Manuel Moreno Olmedilla Title: Lead Education Specialist Borrower/Client/Recipient Name: Contact: Title: Email: Implementing Agencies Name: Ministry of Education and Higher Education Contact: Suha Khalili Title: Director PCU Email: VI\. For more information contact: The InfoShop The World Bank 1818 H Street, NW Washington, D\.C\. 20433 Telephone: (202) 458-4500 Fax: (202) 522-1500 Web: http://www\.worldbank\.org/infoshop VII\. Approval Task Team Leader(s): Name: Juan Manuel Moreno Olmedilla Approved By Safeguards Advisor: Name: Nina Chee (SA) Date: 09-Aug-2016 Practice Manager/ Name: Safaa El Tayeb El-Kogali (PMGR) Date: 09-Aug-2016 Manager: Country Director: Name: Ranjana Mukherjee (CD) Date: 16-Aug-2016 Page 8 of 8

APPROVAL

P113596

Page 1 PROJECT INFORMATION DOCUMENT (PID) CONCEPT STAGE Report No\.: AB5332 Project Name China: Guangxi Yujiang Laokou Navigation and Hydropower Project Region EAST ASIA AND PACIFIC Sector Ports, waterways and shipping (60%);Power (40%) Project ID P113596 Borrower(s) P\.R\.CHINA Implementing Agency Nanning Transport and Water Conservancy Investment Co\. Ltd\. Jiangbeidadao Hediduan 20# Nanning China 530021 Tel: 86-771-5689260 Fax: 86-771-5689389 laokoupmo@163\.com Environment Category [X] A [ ] B [ ] C [ ] FI [ ] TBD (to be determined) Date PID Prepared February 26, 2010 Estimated Date of Appraisal Authorization September 15, 2010 Estimated Date of Board Approval February 23, 2011 A\. Key development issues and rationale for Bank involvement 1\. IWT Development in China \. China has 123,000 km of navigable waterway, of which 61,000 km is officially classified for commercial navigation purposes\. Most of the commercial waterways are well positioned to connect the nation’s prosperous eastern coastal regions, which have an increasing demand for raw materials, with the resource-rich but less-developed inland and western regions\. This mutually beneficial relationship helps to achieve the nation’s central and western development strategies\. China’s inland waterway transport (IWT) industry already handles about the same volume of freight tonnes as the USA and the EU combined\. Accelerated economic growth in China is generating a greater demand for the transport of coal, construction materials and other materials/goods\. Accordingly, IWT has been increasing rapidly in recent years with an annual average growth rate in tonnes of 8\.8 percent during the period 2000-2006 (13\.1 percent p\.a\. in tonne-kms)\. An analysis carried out for the National Inland Waterways and Ports Plan to 2020 (NIWPP2020) estimated that the total of cargo traffic in China will increase from 1\.16 billion tonnes in 2006 to 1\.6 billion tonnes in 2010 and to 2\.35 billion tonnes in 2020\. 2\. Despite the fast growth in past years, IWT in China is still under-developed, compared with other transport modes\. Its share in the total freight of the four main inland transport modes (i\.e\., road, rail, air and IWT) was only 8\.7 percent in tonne-kms in 2006\. Given its nature of low transport cost and high efficiency of energy and land utilization, IWT has significant potential to expand and capture a higher portion of the increasing transport demand\. Currently its main Page 2 constraint is weak infrastructure and therefore decisions regarding investments in IWT infr astructure are therefore critical to realize the mode’s major development potential\. 3\. The Government of China (GOC), recognizing the higher energy efficiency, lower greenhouse gas emissions, and lower use of scarce land resources associated with water transport, plans to increase the contribution of China’s waterways to its transport needs\. The GOC, through the improvement of IWT, seeks to spread the benefits of development from the richer coastal belt to the poorer central and western areas\. In 2007, China adopted the NIWPP2020 that aims to develop a ‘high-class’ waterway network (Class IV to Class I) of around 19,100 km\. This waterway network will extend to twenty provinces and serve a catchment area that contains approximately a quarter of the population of China\. 4\. IWT Development in Guangxi\. The Guangxi Zhuang Autonomous Region (GZAR or Guangxi) is located in south China, with approximate 48 million of population and 236,700 square kilometers of land\. Guangxi’s per capita GDP ranks it one of the lowest provinces in China\. It is one of the twelve economically underdeveloped southern and western provinces supported by the China Western Development Strategy\. Guangxi aims to optimize its agriculture dominated industrial structure through enhancing development of its second and third industries\. Transport is one of priorities of the economical development of Guangxi\. This region has rich water and mineral resources that have great potential for IWT development\. Guangxi government has recently given high priority to the development of IWT through a series of plans and supporting policies\. 5\. The Yujiang River, the biggest river in Guangxi, is part of the Xijiang River which is in turn a main tributary of the Pearl River (China’s second busiest river system after the Yangtze River) in Guangdong, one of the most prosperous and economically dynamic provinces in China\. The Yujiang River flows from west to east in GZAR and runs through a number of major cities including Nanning, the capital of Guangxi\. The Yujiang River has a long history of waterway transport\. Its hinterland is rich in raw materials like coal and construction materials which are in high demand in lower reaches such as Guangdong Province\. However, the current waterway transport volume is very low (2 million tons reported in 2005) due to the constraints caused by insufficient navigation facilities along the River\. 6\. Proposed Laokou Dam Complex\. The proposed project—the Laokou Dam Complex—is one of the priority projects under various national and regional development strategies and plans, including the NIWPP2020, the 11th Five-Year Plan of Guangxi, the Pearl River Basin Comprehensive Development Plan, the Guangxi IWT Development Plan, and the Yujiang Waterway System Comprehensive Utilization Plan\. The Laokou Dam is one of ten cascade dams (seven have been completed already) planned for navigation and hydropower development in the plans\. In addition, the Laokou Complex is also one of eighteen major projects listed in the recent national implementation plan under the China Western Development Strategy\. It is projected that the IWT demand from the hinterland upstream of the Laokou Dam for exporting coal, cement, and other mineral and construction raw materials could be as high as over 40 million tons by 2010 and over 70 million tons by 2020\. 7\. Improvement of Flood Protection \. The Laokou Dam will improve the flood protection capacity of Nanning downstream of the Yujiang River\. The Laokou Dam is an important project for Yujiang River flood protection under the Pearl River Basin Flood Prevention Plan approved by the State Council in 2002\. After a serious flood in Nanning in the early 2000s, the City has Page 3 invested heavily in its flood protection systems in high intensity urban areas to upgrade protection capacity from 1:20-year-floods to 1:50-year-floods\. The recent commissioning of the Baise Dam in the upper reaches of the Yujiang River has further raised Nanning’s flood control to 1:80-year-flood protection, but this is still below the standard required in national and regional flood control plans\. The Laokou Dam will upgrade the protection capacity to 1:200-year-flood through a joint regulation with the Baise Dam\. 8\. Increase of Hydropower Generation \. Guangxi, benefitting from the China Western Development Strategy, has experienced rapid economic development\. This has resulted in a fast increasing demand for electricity\. In addition, Guangxi is also part of the supply base for the West-to-East Electricity Transmission Program\. It is forecast that electricity demand in Guangxi will be 124,000 GWh and 180,000 GWh by 2015 and 2020, respectively\. The Laokou Complex will generate annually about 663 GWh of clean and renewable hydro electricity, which will contribute to meeting the growing demand for electricity in Guangxi\. 9\. Rationale for Bank involvement \. The World Bank has given financial and technical support to China’s inland waterway development in seven provinces over the past twelve years, including two other important dam complexes on the Yujiang, the Naji and Guigang rivers\. The Bank has also recently completed a major sector review of IWT in China with the objective of identifying impediments to its sustainable development\. The outcomes of the study are used to direct the Bank in helping develop IWT in China\. Through its involvement in strategic review and project development, the Bank is the leader among international financial institutions in supporting China’s IWT sector\. In Nanning City, the Bank has been investing in urban and environmental infrastructure through the Guangxi Urban Environment Project and, more recently, through the Nanning Urban Environment Project (a FY10 project)\. The Bank, through financing the proposed Laokou Dam Complex Project, will help strengthen Nanning City’s capacity of implementing, operating and managing the waterway infrastructure assets\. In addition, the Project can further strengthen the cooperation between the Bank, the GZAR and Nanning City\. 10\. The Bank’s involvement in the Laokou Dam Complex Project will support two of the five pillars of the Bank’s FY06-10 China Country Partnership Strategy (CPS)\. It addresses the pillar of ‘reducing poverty, inequality, and social exclusion’ , by improving inter-regional transport access and link for the remote and poor north-western areas of the GZAR with the capital city of Nanning, as well as the cities and ports in the dynamic Pearl River Delta areas\. It addresses the pillar of ‘managing resource scarcity and environmental challenge, through reducing air pollution, conserving water resources, and optimizing energy use’ , by improving flood control capacity, and generating clean and renewable hydro energy to meet the demand for electricity in Guangxi\. It also facilitates the use of IWT, a transport mode that is more energy efficient, generates lower greenhouse gases and uses less land area than other transport alternatives\. B\. Proposed objective(s) 11\. The development objectives of the proposed project would be: (a) to upgrade the navigation standards on the Yujiang River; (b) to increase the capacity to control flooding on the Page 4 middle and lower reaches of the Yujiang River, particularly as it affects the city of Nanning; and (c) to generate clean and renewable hydro-electrical energy\. 12\. The main economic benefits of the Project will be the avoidance of flood damage as a result of the enhancement of flood control capacity in Nanning, transport cost savings and energy efficiency due to IWT development, and economic benefits of increased electricity production and reduced greenhouse gases (GHG) emission associated with the renewable hydro-electricity generation\. Performance indicators for measuring the achievement of the development objectives will be devised during project preparation and appraisal\. C\. Preliminary description 13\. The Laokou Dam Complex Project is located approximately 30 km west and upstream of Nanning City\. It is one of the projects to upgrade the Nanning-Baise waterway section from its current Class VI (year-round navigable for 100 dwt vessel) to Class III (year-round navigable for 1,000 dwt vessel)\. The Project is provisionally proposed to include the following components: Component A – Construction of the Laokou Dam Complex\. This is a single integral infrastructure unit consisting of one Grade III lock accommodating 1,000 dwt vessels, one powerhouse of about 170 MW installation capacity, 19 sets of sluice gates, one fish passage ladder and connection dams\. Component B – Treatment works such as dredging and bedrock blasting for a total length of about 157 km of water channel\. Component C – Flood protection works\. This includes the construction of dikes and bank protection, and restoration of existing structures and facilities\. Component D – Institutional capacity building\. This consists of a well-tailored training program which is aimed at strengthening the institutional, management and technical capacities of the project implementing entity and Nanning government agencies\. 14\. The Feasibility Study estimates that the total project investment is RMB 3\.92 billion (US$ 577 million)\. The Nanning Municipal Government has requested a US$ 100 million World Bank loan which accounts for about 17\.3 percent of the total investment\. D\. Institutional Arrangement for Preparation and Implementation 15\. The Nanning Municipal Government (NMG) is responsible for financing and implementing the Project\. The NMG has established a Leading Group (LG) for the development of flood control and inland waterway transport projects along the Yujiang River in Nanning\. The Laokou Dam Complex Project is currently the main project of the LG\. The LG is headed by the Executive Vice-Mayor of Nanning and consists of the heads of all relevant municipal government agencies such as the Development and Reform Commission, Finance Bureau, Construction Commission, Communication Bureau, and Water Resources Bureau\. The LG will play a leading role in coordinating with the GZAR and neighboring cities on the cross-boundary issues associated with the Laokou Dam Complex Project\. 16\. A Project Management Office (NPMO) has been established under the LG for the preparation and implementation of the Project\. The Nanning Transport and Water Conservancy Investment Company (NTWCIC), a construction investment company solely owned by NMG, has been designated the Project Implementing Entity (PIE) responsible for the construction of the Page 5 Laokou Complex\. The NPMO, led by a Deputy Secretary General of the NMG, has been formed by representatives of all relevant Nanning government agencies and some senior staff of NTWCIC\. It has five units: general affairs, project preparation, financial management and procurement, environment, and resettlement\. E\. Safeguard policies that might apply 17\. The Bank task team proposes the Project to be classified as Category A\. The initial assessment proposes that Environmental Assessment (OP 4\.01), Natural Habitats (OP 4\.04), Physical Cultural Resources (OP 4\.11), Involuntary Resettlement (OP 4\.12), and Dam Safety (OP 4\.37) will be triggered by this Project\. With regard to the Indigenous Peoples (OP 4\.10), the initial assessment found no minority groups other than the Zhuang Nationality\. However, it is noted that the Zhuang Nationality has not been defined as an IP group in other WB-financed projects in Guangxi\. IP related identification and socioeconomic investigation will be further conducted and reflected in the resettlement planning process\. F\. Tentative financing Source: ($mil\.) Borrower 477 International Bank for Reconstruction and Development 100 Total 577 G\. Contact point Contact: Wenlai Zhang Title: Sr Transport\. Spec\. Tel: +86-10-5861-7737 Fax: +86-10-5861-7800 Email: wzhang2@worldbank\.org Location: Beijing, China (IBRD)

APPROVAL

P035761

 ICRR 11760 Report Number : ICRR11760 ICR Review Operations Evaluation Department 1\. Project Data: Date Posted : 05/18/2004 PROJ ID : P035761 Appraisal Actual Project Name : Community Social Project Costs 288\.15 176\.56 Infrastructure Project US$M ) (US$M) Country : Russian Federation Loan /Credit (US$M) Loan/ US$M ) 200 140\.24 Sector (s): Board: ED - Health (36%), Cofinancing na na General education sector US$M ) (US$M) (32%), General water sanitation and flood protection sec (22%), Sub-national government administration (7%), Central government administration (3%) L/C Number : L4009; LP275 Board Approval 96 FY ) (FY) Partners involved : None Closing Date 12/31/2002 09/30/2003 Prepared by : Reviewed by : Group Manager : Group : Nalini B\. Kumar Roy Gilbert Alain A\. Barbu OEDST 2\. Project Objectives and Components a\. Objectives The principal goals of the project were to (i) Reduce the deterioration of social infrastructure by financing the rehabilitation and limited replacement of high priority facilities for providing health care, education, water supply and sanitation; (ii) Improve the efficiency of managing public resources by ensuring that the selection of subprojects is based on sound criteria; raising facility design standards and improving the incentives to observe them; improving the quality and sustainability of construction by improved site supervision, and by encouraging beneficiaries to take a more active role as clients during the design and the construction process; introducing competitive procurement practices; introducing improved methods of expenditure programming and budgetary management by public authorities; strengthening environmental management practices through a program of studies and training linked to the health, water supply and sanitation components; (iii) Promote private sector development through encouraging the break -up and commercialization of existing design institutes into independent engineering and architectural firms; providing training in procurement processes for engineers, architects, local construction firms, and public bid evaluation committees; and providing an environment that can facilitate the emergence of private providers of medical care \. (iv) Contribute to the Government's policy of decentralization by promoting broad participation, including non-governmental participation, in project decision -making\. (v) Monitor the effectiveness of new practices, and disseminate the results, to promote their use in similar activities elsewhere in the Russian Federation \. It was expected that the project design would be replicated across the country \. As designed, the project was ambitious and complex \. It had to be downsized during implementation \. Objective (iii) to promote private development was dropped when the loan agreement was amended in September 1999\. Other aspects of the project were also modified, for example the SAR had envisioned substantial institutional development of health systems in both regions and also expected loan repayment for the health component by health providers \. These expectations were overly optimistic and were dropped \. Further, an institutional study for the water sector reform options in the two regions was not acceptable to authorities in the two regions and was replaced by a TA on energy efficiency and conservation in the water sector \. b\. Components The project had five components (with appraisal estimates and actual costs in parenthesis )\. (a) Education (app\. US$ 64\.1m\., act\. US$ 38\.9 m\.); The component rehabilitated 29 schools in the two oblasts\. In both oblasts the project assisted the Department of Education in various aspects of facility management, including identification, preparation and implementation of education subprojects \. (b) Health (app\. US$ 72\.1m\., act\. US$54\.1 m\.); The component financed the rehabilitation and upgrading of selected city and rayon hospitals and polyclinics \. Two sites, one in each oblast, were chosen as pilots prior to full project implementation\. (c) Water and Sanitation (app\. US$44\.5 m\., act\. US $ 34\.8 m\.); The component was targeted at rehabilitation, refurbishment and renewal of the existing infrastructure, including rehabilitation of water mains to reduce leakage, refurbishment of chlorination installations to provide better security in drinking water disinfection and renewal of electrical and mechanical pumping \. (d) Budget and Expenditure Management (app\.US $3\.3 m\., act\.US$ 3\.6 m\.); The component was to provide support for identification of sources of local revenue, budget formulation and expenditure management \. It was transferred to another PIU (see section 3 below)\. (e) Monitoring and Management (app\.US$16 m\., act\.US$ 11 m\.) The component focused on lessons for project replication and assistance in preparation of future projects \. c\. Comments on Project Cost, Financing and Dates The project was approved in April 1996 and became effective in January 1997 but actual start up was only in January 1998\. US$45\.5 million of the loan was cancelled in 1999 at the request of the Borrower including a part that was not specified in detail during preparation and was intended to be identified during implementation \. At the request of the Ministry of Finance, the Budget and Expenditure Management component was transferred to another project implementation unit (PIU) to become an independent World Bank project \. In July 2001, another US$6\.5 million was cancelled from the Novosibirsk part of the Loan program due to inadequate local counterpart funds \. The Loan closing date was extended from the original date of 12/31/2002 to 09/30/2003 to complete the investment program as construction works could be completed only during the warm season in both regions and also because of some delays in procurement of medical equipment for the Novosibirsk oblast \. 3\. Achievement of Relevant Objectives: The achievement on the five objectives was as follows : (i) Achieved \. The project was successful in rehabilitating social infrastructure in the two pilot regions --though the number of facilities to be rehabilitated was reduced after the restructuring \. (The number of schools to be rehabilitated was reduced from 36 to 29, hospitals from 11 to 9 and water and sanitation sub -projects from 61 to 53\.) Improvement in facilities like oblast hospitals that served the entire region and water utilities benefited a high proportion of the population\. (ii) Partially achieved \. The Budget and Expenditure Management component was transferred to another PIU and it is not clear from the ICR whether it left behind any improved methods of expenditure programming and budgetary management\. In addition, schools and hospitals did not have clear incentives for achieving cost saving and hence project supported energy and cost saving programs were of little use \. However, the project created a transparent mechanism for government tenders for public works and established sound criteria for the selection of socially important investment projects at the regional level \. It also helped raise facility design standards and improved the incentives to apply them in the future \. (iii) Objective dropped through amendment to the Loan Agreement \. (iv) Partially Achieved \. The project included beneficiary participation at all stages of sub -project selection, design and implementation\. In both oblasts, local municipalities, administrators of health, education and communal services were fully involved in selection of project sites, in discussion and approval of the design, contract award and in supervision of the contract implementation \. However the ICR reports that some components were not discussed in sufficient detail with Russian counterparts with consequent delays and difficulty in achieving objectives \. (v) Partially Achieved \. Monitoring reports were produced twice a year and presented to the Bank and to all involved parties in the Government\. Monitoring included surveys of beneficiaries, public discussions of the project outcomes and participation in sector development programs \. The project results were well publicized among authorities in other regions but the project experience could not be replicated as the project approach became outdated after regional finance reform took place in 1998\. 4\. Significant Outcomes/Impacts: The project helped raise the local priority of social investment programs \. Before 1997 most social investment programs received the lowest priority \. The project also resulted in the attraction of substantial additional funds into social infrastructure in both regions \. The project provided oblast and municipal authorities with tools for broader participation including participation of NGOs and groups protecting public interests through a set of hearings and public discussion of the project priorities and outcome\. A significant number of schools and hospitals were rehabilitated \. Organizational reforms in the hospital sector were promoted through the development and implementation of a new organizational concept for a rayon (district) hospital\. Significant number of workshops and seminars provided training to a large number of professionals in various aspects of sector reform and project implementation \.  A transparent mechanism for government tenders for public works was created \. 5\. Significant Shortcomings (including non-compliance with safeguard policies): Over ambitious project design out of tune with reality on the ground : little strengthening of the capacity of regional and municipal administrations; Several institutional reforms visualized under the project were dependent upon changes in the Federal legislation and policies in health, education and water and sanitation sectors \. As a result several specific sectoral goals were not met, such as health reform and tariff regulation for the municipal water sector \. Economic validity and priority of some sub -projects is questionable\. Many sub-projects were not part of the investment plans of the local utilities \. Misprocurement of a major contract despite improvements in procurement procedures \. 6\. Ratings : ICR OED Review Reason for Disagreement /Comments Outcome : Satisfactory Moderately Satisfactory Achievement of most project objectives was partial at best\.Weak Bank and Borrower performance prevented the project from attaining a fully satisfactory outcome\. The option of rating a project moderately satisfactory is not available under the ICR four point rating scale \. Institutional Dev \.: Substantial Substantial Sustainability : Likely Non-evaluable Several critical policy reforms could not be implemented\. These have bearing on the sustainability of efforts to reduce deterioration of social infrastructure \. The Budget and Expenditure management component was transferred to another unit and it is not clear how much success was achieved in introducing improved methods of expenditure programming and budgetary management by public authorities within activities undertaken under the project\. Bank Performance : Satisfactory Unsatisfactory Quality at entry was highly unsatisfactory \. The Bank should have used its vast international experience to make an assessment of what could and could not be realistically implemented\. The borrower was not sufficiently involved in project preparation\. The project was largely prepared by international consultants who overestimated the project's capacity to influence the social infrastructure management reform at the federal level\. Bank action in resolving the issue of counterpart funds was also inadequate\. There was also lack of continuity in Bank task management \. Borrower Perf \.: Satisfactory Unsatisfactory Project implementation was negatively affected by several reorganizations of the federal implementing agency, lack of stability in project management at the regional level, inadequate provision of counterpart funds in Novosibirsk and misprocurement\. Quality of ICR : Satisfactory NOTE: NOTE ICR rating values flagged with ' * ' don't comply with OP/BP 13\.55, but are listed for completeness\. 7\. Lessons of Broad Applicability: Based on the ICR the key lessons are : (i) A multi sectoral project can be complex and challenging to implement \. Designing of such projects requires a thorough assessment of the institutional capacity in the country \. Where capacity is limited, there may be a strong advantage in limiting an investment that aims at infrastructure development and significant institutional change to just one sector\. (ii) The demonstration effect of Bank projects on the government, particularly in terms of quality of construction and rehabilitation of infrastructure can be immense \. The improved architecture, design and materials brought by the Bank project helped develop an understanding among local officials of the importance of quality and the linkage between quality, durability and consequent cost savings \. (iii) The importance of making the design of regional projects consistent with the federal government reform agenda cannot be underestimated\. In the current project, several critical institutional reforms could not take place as they were dependent upon changes in the Federal legislation and policies in health, education and water and sanitation sectors that did not take place \. (iv) Instability of the project implementing and executing agencies can undermine project outcomes \. In the current operation the federal implementing agency went through several reorganizations and the administration in the Novosibirsk oblast also changed twice \. 8\. Assessment Recommended? Yes No Why? For several reasons: (i) To verify the outcome, sustainability and institutional development impact; (ii) The operation was the first multi-sectoral project and the first World Bank project with investments in any type of social infrastructure in Russia managed and implemented at the regional level, and its experience would provide important lessons for the implementation of other similar operations in the country; (iii) To draw lessons of experience for other transition economies which are facing similar problems of deterioration of social infrastructure \. 9\. Comments on Quality of ICR: The ICR is satisfactory but for four shortcomings : (i) The Budget and Expenditure Management component was transferred to another PIU and the ICR does not clarify whether the project was able to bring about any improvement in methods of expenditure programming and budgetary management which were critical to improving the efficiency of managing public resources; (ii) There are some contradictions in the report --for example, para 4\.1 notes that the project financed the rehabilitation of high priority facilities \. Whereas, under para 3\.5 the report notes "many sub-projects were not part of the investment plans of the local utilities, and thus their priority was considered questionable\." (iii) It does not explain why the objective to promote private sector development was dropped \. This is particularly puzzling since the report provides substantial evidence on how the project supported private sector development\. (iv) Target figures of performance indicators are reported as being exactly what was achieved \. The ICR should have explained why and how there was a perfect match \. The exact match otherwise raises credibility concerns (ICR pages 10 and 29)\.

APPROVAL

P003156

1A44 sqa-z4 40,4A1 5-1q2- Z4~ ~~~~~in-- fiiL COPY REST V Report No\. PE-Za This report wcis prepared for use within the Bank and its affiliated organizations\. Thoy do not accept responsibility for its accuracy or completeness\. The report may not be published nor may it be quoted as representing their views\. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT INTERNATIONAL DEVELOPMENT ASSOCIATION A ThllA -C A I ,I-% AN EDUCATION PROJECT IN ZAM]3IA March 20, 1969 Education Projects Department  C-TT1PP 7\T(\.JV 17'C'TTTV ATTP~MT'q GURRENGY~~ E-QUIVALENT US$1\.00 = Kwacha 0\. 714 Kwacha 1\. 00 = US$1\. 40 Kwacha 1, 000, 000 = JTS$1, 400, 000  TABLE OF CONTENTS Para\. BAS:LC DATA SUMIARY (iY I INTRODUCTION 1\.01 II THE EDUCATION SYSTEM Administration and Organization \. 2\.01 Primary Education \. \.*\.*\. \. \. \. \. \. 2\.05 Secondary Education \. *, \. \.*** *\. 2\.06 Teacher Training \.*\.*\.* \.*\.**\. \. 2\.12 Technical Education and Training \. \. 2\.19 Agricultural Education and Training \.,\. 2\.25 Higher Education \. \.0 \. **\. 2\.28 IiI COSTr AND FINANCING OF EDUCATION \. 3\.01 IV EDUCATION ANfD TRAINING NEEDS Existing manpo-wer situation \. 4\.01 Future dlevelooments \. \. 4\.03 Educational development needs \.of\. 4\.o8 V THE PROJECT A\. Technical features \. \. \. \. \. \. \. 5\.01 B= Gflt of the Project±\. =\.= === =751 C\. Execiution of the Project \. - 5\.24 VI CONCLUSIONS AND RECOMMENDATIONS *\. \. *\. \. \. 6\.01 This report is based on the findings of a mission to Zambia in Ar:-l4'I aX, I''8 colo -- -- -of Messrs\. P\. P\.- T)-n D4k (eoois,n C\. A\. C\. Hammerschmidt (architect) of the Bank and Messrs\. J\. C\. Jones tecUhnlcal ed-ULLcation) Iand O\. ±1arkgLrL6Ien (gL,eneal UAUedUctVLJj, LJbUII JU LCL kl- ants to the Banlc\.  A N N E X E S Annex No\. 1 Oroanizatirn of education administration, 1967 'Af PrIii t-n+- of n) lo:x\. A s 1 C A7 23 tutueo Edu\.cationa amid, 1967 A~ -- -- --- - 1147 1 nA7 )G^roTwth of the Zam\.bian educatic:n system \. , ioAn=1968 5 EnroLJ\.JILlIre UCr\.gLUet LU[ for ULi\.ArUCL eLidUcion, L7IJ -9L7JV0 67 Enrolmn -aOt - o -eo\.a, -chos -196,-1980 --- 7 Tea\.chers in s ecoUnaIUCy sucioul - Uemandlu\. aniu sUpJpJ±ly 8 Nortvher-n Technical College 9 Total National Expenditure on Education and\. Traini±ng, 16UU 10 Recurrent expenditure,L96L/65 - i9c8 11 Recurrent expenditure by Ministry of Education 12 Projected recurrent expenditure,IvIinistry of Education,i900-1974 13 Capital expenditure,1964-1968 1i Educational attainment of Zambian labor force 15 Employment by industrial sectors,l954-1966 16 Proposed secondary schools - enrollments and class groups 17 Estimated, total cost of proposed\. project 18 Average cost per square foot 19 Estimated Schedule of Construction and\. Total Expenditures Map of the Republic of Zambia - Location of project schools  ZAT3IA BASIC DA'TA - 19D8 Ceneral Size off rnIntrr 29gOOnn sqnu2re miles Total nponnpu\.lion (est in ate) )flfCnooo Ainnual rate of population go+:3 ,f As,rera densit,y V of population: i ln Lr s Graross domestic 4 Cpronf' (n19 $\.? 1,056 44\.,\.,+n GIM per iLLLhabitat UJ U(196): Go-vernmIJent, c-urren X re-reniue as percent,L of GDP: 0 Education Population aged 7-13 715,000 Enrollment, in primary schools: 84% of 7-13 age group Plopulation aged 14-18: 371,000 Enrollment in secondary schools: 10\.5% of 14-18 age group Education expenditure financed by Government: as proportion of GDP: 6\.2% as proportion of budget: recurrent 17\.7co capital 9\. 4% Total education expenditure (including non-government): as proportion of GDP: 7% per capita $21  APPRAISAL OF AN EDUCATION PROJECT IN ZAMBIA Summary i\. The Government of Zambia has requested Bank assistance in financing an education project\. The! proposed project, as modified during appraisal, would consist of: the construction, furnishing and equipping of: (a) nine new secondary schools;and the improvement, extension, furnishing and equipping of: (b) 56 existing secondary schools, (c) two primary teacher training colleges, (d) two higher teacher training colleges, and (e) a technical college\. ii\. The educational attainment of the Zambian labor force is very low; most middle and high level positions are held by foreign staff\. Present output from secondary and post-secondary institutions is insuf- ficient to meet the manpower demand of a growing economy and to assure a gradual replacement of foreign staff\. The proposed project is directed towards quantitative expansion and qualitative improvement of those parts of the education system where manpower shortages are severe\. In accordance with government policy, the project provides also for a gradual upgrading of the rural labcr force\. iii\. In quantitative terms-the proposed Drolect would constitute the major part of a projected expansion of secondary school enrollments from 39\.000 niioils in 1968 to ahont \.;0-000 in 197h\. which onuld raise the percentage of the age group l4-18 years enrolled in secondary schools irom 1n0 5 to 17%= The proposed project would contribute to this exp2nsiunfl by providing 35,700 new places in secondary schools; 28,800 of these wtould derive frOm better 11tiJiJAtion of existing school faMilities with little acdditional investment\. iv\. The teaching of science would be strengthened by providing equ\.iipmen+t for 8n0§ of- all Qarcrn8r1yir% onenrclrma\.ezt; practircal couirses~ woul\.dr be introcluced for all students in the junior cycle and diversified cur- ricula in the senlor cycle , where lh3% of the students will be enrollecl in the general arts and science sections and 57% in the pre-vocational 4ynd-ti, \.,+,4 ~, fn-lp\.i (-III 4-i,vOM - cJ ni r In~- ,t-\.mo n,-nlriJr -~, - og \.r)nQ -_- 4rr1io+; o' or; ril +ltnl\.commeti --1 and} I-_m reonr-mics seto+\._ oe qoon ary schools, therefore, would prepare rnot only for further education but al9 for A' an rct,n er\.ploynt v\. Thb~Tie prose extension of 4\.t-;w,o primav,rn teachnner training CnollenE1e1 V \. ~ -/ Jj\."\.JOO'-A aJ ~IJSlJ WJ £Ia V~LU U 4J\.A S \.~I would double the existing capacity from 400 to 800 places and permit the ~UV~fILIJL1U U L~L,id±J IIU~ I Uj\. iAi jJJ\.-11IICJ±1-' iU ± _L VV0 0;\.C LJ%VW LLi OULVA goverr\.meritu to retrain most, of th \.iayschool ecer O 4- sr-,,4Cp\. -vi\. TIhe proposed exvtensions of the higher teacher training colleges by 625 places wLould greatly increase the output of secondary school  teachers and assist the government in meeting the total demaLod for secondary school teachers by Zambians in the later seventies\. Until then secondary education will rely on foreign teachers, mainly from the U\.K\.; the government is taking st;eps to assure that an adequate member of such teachers will be available\. vii\. The proposed extension of thie technical college would provide training, in close cooperation with private industry, for about 210 engineering technicians a year at certificate and diploma level\. viii\. I'he annual recurrent budget of the Ministry of Education can be expected to increase from K 34\.7 million in 1968 to K 71\.5 million in 1974 of which K 7\.6 million would result from the proposed project\. It is not expected that the Government will encounter difficulties in meeting the capital cost not financecd by the Bank nor the recurrent costs of the project\. ix\. School dptsipn would be austere and consistent with functional needs\. Estimated costs of construction, furniture and equipment are reasonnh1e Procume1nt\. wunildl 'h bhy intenatrona]\. competitive bidding in accordance with the Bank's "Guidelines Relating to Procurement", eXCC-!nt fOr Gonqt-iwetion ContrG be] OW K hClOAnOnOn wbhiCh wl,, d be awarded on the basis of domestic competitive bidding\. x\. I'he total cost of the project is estimated at $36\.2 million, of *w\.hich 1 is for site dev elopment, h)3% for f ost ritn (27% for acadermic buildings and 16% for dormitories and staff housing), 22% for furniture and equi-p-ent, 6forpofsioa feeg andA -I8% for" cnti+ngenciesQ and price increase allowances\. The foreign exchange component is estimatec! a+~~~m -1\. miTLo, or4 I8 of 4h t+L C) - AL\. \.The1 ViniLLLzj\.iJ ofL £EOUducat\.ion wouJLLd LIU IeIV the ULxL"cu agency for the project; a project unit with a full-time project director, project arciUte ctLju a UnJd\.Vrt LU\.L sta ffL,\.±L WUld Le estabLJ\.is\.Lshed iDL thIJe i-LLL\.yV\. The employment of private architects would also be required\. xii\. The project provides a suitable basis for a loan of $17\.4 ililO (t8Ud to- L he est\.L\.e Xoreg exhnec\.,\.oet o prUIiodof\.LULJ 25 U yeLar\. ilu L a ga pro of ten years\. period of 25 years including a grace period of ten years\.  A YT~T AT(~A? ^" A IT T' 'TTPi A Mr ^WV IT%n\. TTrim M -rT T7 A W VT A Art IuLRAI UO EuCAT1JUUIONUiLJ r\.UOAEA, INUJ L\.RUYDIA I - Intruouction 1\.01 A Unesco project identification mission visited Zambia in Feb:rua- ryblrarch 1966 and identified priority needs for education\. In February/ March 1968 a Unesco project preparation mission assisted the Government to prepare an education project based on tnose needs\. Tnis was appraised by ia Bank mission, composed of Messrs\. C\. P\. van Dijk (economist), C\. A\. C\. Hammerschnidt (architect), 0\. Markgren (education specialist, consultant) and J\. C\. Jones (technical education specialist, consultant) in April/May, 1968\. 1\.020 The project, as submitted to the Bank, comprised the construction of :20 new and the expansion of 56 existing secondary schools, the construc- tion of three new primary teacher training colleges and a new secondary technical school, the expansion of a technical -ollege and the higher teacher training college, and the expansion of the University of Zambia's School of Natural Sciences, School of Engineering, School of Education and student hostels\. 1\.03 During appraisal it was found that, (a) not all of the 20 proposed new secondary schools could be justified by projected manpower needs and that the location of eleven of these schools was not in accordance with demographic and economic development patterns; the number of new schoo:Ls in the project was, therefore, reduced to nine; (b) there was insufficient justification for three additional primary teacher training colleges but two existing colleges should be expanded; (c) a new secondary technicaL school could be provided more economically by converting one of the 56 existing secondary schools to a multilateral secondary school with teclni- cal bias; (d) the need for an expansion of the University's School of Natural Sciences was not clear and the preparation of the other items in the University sub-project was insufficiently advanced and would have -to await the results of a comprehensive master plan for the University\. 1\.04 The remaining items were acceptable and, together with the expansion of the two primary teacher training colleges mentioned at para\. 1\.03 (b) above, constituted the proposed project\. After appraisal, the government ac- quired an existiniz private school which was found suitable for the training of secondary school teachers\. The expansion and equipping of this school was subseauentlv added to the Droposed Drolect\. Social and economic background 1\.Q5 The Renublic of Zambia occunies a land-locked tsrritorv of about 290,000 square mi:Les on a plateau in the southern half of Africa\. Population and economncm activity are ronnentrated Along the only rnilwav line tiwhierh runs from Rhodesia via Livingstone in the south through Lusaka in the centre to the Gopperbelt, centred -around Kitwe and eidola, in the north (See Map) Most of the main towns are situated along this line of rail\. The industria:L centei of the country is at present the copper mining region in the North but a new industrial township is being constructed near Kafue\. 1\.06 The population in 1968 is estimated at 4\.1 million\. Approximately  55 o\.L the African po-ito 9blo 0yaso ge b\.^2%i Lii L\.LL JI L \.L YUJLCLUL4U 1UJ L\.J L\.tU\.LLW CIJ Yt r UL ti gO\. AUQIOL 4::/o Lb living in urban centers\. The rural population is extremely scattered, 'I-;-\. V ; _ S_ J L_ - - - 11\.J\. r\. J4j s L L kkJi S\.J±'\.,- dO- _ -1\.4L A l UU in 1966 of which a'bout 500,000 was in the rural subsistence sector\. 1\.07 Copper mining is the mainstay of the Zambian economy, accounting for about 1ulJo ofL OIA GDP, over 970% ofl totual exp Ur earnJlngs adtU LJ;d\.ir-LLy 70% of government revenue\. Development of other sectors, particularly the rural tcUVJonrWq is urgenbly needed to reduce Zambia' s economic vuiner- ability and expand employment opportunities for a rapidly rising supply oLf laboU\. II - The Education System Administration and Organization 2\.01 The Minister of Education is responsible for policy, control and supervision of primary and secondary schools and teacher training colleles\. A newly created Directorate for Technical Education under a Mlnister of State controls all technical education outside the secondary schools\. TChe Minister of AgricuLture is responsible for agricultural education except for agricultural courses in secondary schools\. Control and supervision of the University of Zambia is vested in a Provisional Council\. 2\.02 The organization of the Ministry of Education is shown in Annex 1\. The Minister and his Permanent Secretary are assisted by an advisory Na- tional Council of 'Education and by four main divisions of the ministry: Administration, Professional matters, Planning and the Inspectorate\. Staff posi-tions in the Ministry are filled by competent officials but most are non-Zambians (main:Ly from the U\.K\.) and the turnover is high\. 2\.03 T'here is urgent need for a formulation of planning objectives and criteria, particularly as regards finance and manpower development, for the introduction of modern statistical methods and for integration between ministries\. The Planning Unit is, however\. under-staffed; it has not begun to flnction effectively and needs strengthening\. The Inspectorate needs broader expertise in pre-vocational education\. A specialist in agricultural education has been appointed recently; there will be need for specialists in technical secondary education\. During negotiations assurances have been ob- tained that these two units will be expanded\.The National Council of Educa- tion would be more effective if representatives of the private sector were added\. 2\.o4 There are nine administrative regions, each with a Chief Education Offiner and his staff of eduication officers\. who are responsible for general supervision of policy implementation\. Training of the regional staff is ur- gent:ly needed; assurances to that effeet have been obtained during negotiations\. Primary Ediui +i 1 on 2\.05 Pr4mawr eAi,n+4a n 4 not "iO wpr\., 44\. eit a c is+\.t of' leower tf-7le of 4 years and an ulpper cycle of 3 years (Annex 2)\. Enrollment has more  thfan doubled from 279,780 pupils in 196O to 598,198 pupils in 1968 or about 84% of the 7-13 years age group (Annexes 3 and 4)\. Government projections show enrollment growing to 857,300 in 1975 and 974,900 in 1980\. This latter figure approximates to universal primary education (Annex 5)\. Of the 10,655 primary school teachers in service in 1967, 92% are qualified\. Many of these latter, however, had only one year of training after two years of secondary education and require further training (para\. 2\.14)\. Secondary Education 2\.06 The secondary course comprises a 2-year junior section, leading to the junior secondary school leaving examination and a 3-year senior section which prepares for the Cambridge University Overseas School Certificate examinations giving access to the University of Zambia and other institutions of post-secondar:y education\. 2\.07 Present policy is to admit one-third of primarv school leavers to secondary education (which is high in comparison with other African coun- tries and to maintain a progression rate from junior into senior cycle of secondary education of two-thirds of the pupils\. In 1968, the respec- tive percentages were 3Lt% and 57%\. The prozression from junior to senior cycle is too high to provide the required proportion of manpower educated to these t-wo levels\. The length of the iunior cycle of two years\. moreover\. is too short\. The government therefore intends to convert the present structure\. in which a 2-year iniior c;ycle is followed by a 3-year senior cycle (2:3 structure), into a 3:2 structure and to reduce the progression rate mid-way from two-thirds to one half\. This will lead to an output of more matures and beitter educated young people at the end of the junior cycle and *to a sunply of mnnpower more in line with the pronictAd require- ments at both junior and senior level as shown in para\. 1X\.07\. 2\.08 The present curriculum is almos't entirely academic\. During ap-- praisal y agIeement was reached on a new curriculum\., %hirh wrull include 8 periods a week of practical work for all pupils in the junior cycle and, in +he senior cycle, would create prevocationa sections, wJith 10 periods a week allocated to industria'l subjects, agriculture, conmmerce or home economics, for 55e\.6% of the s+udents\. \.4ttenAnce at these pre- vocational courses would not deny pupils access to higher education\. 2\.09 Eirollmentis in general secondary schools have increased sharply: fror\., CO,5L3 Jn 1904 4to '38,997 4n 1'768 (A---- 4)\. TV 4the govern\.,ent shto ldd \. Al ,\.$C\. A\.L \.L7\.JSJ UI _JVJ7 77 f ±1 \.LL 'J _L V yLLJIJV\.A 414 * ± JL 4 wvz; LUJL V \.lAJA continue its present achission policy, total enrollment would rise to near]\.y- 7 90,)0 4ui] -in ,1\.7 -an __near:Ly ri0O in 1980n\. G-iventh l,, L!\. L 7lJJ\.I u F±± LLJ L7 j14 cdLIU LJt7,L1\.LJY ±J4V' VJ,JJ\.J Li±0 * UV I1,I \.iI\. tation of the aciniistrative capacity to provide new places and the conra-nits:L1LJUJ VIo \.inJcLLJLe aLJU UatetLIcIh sUJJ;J3ly, itU Ls ULJ,ke\.l± Ly Uly ULIthtths increases will be realized\. The output of secondary school graduates, moreover, w*ould exceed estimated manpojwer requi\.rements\. 2\.10 ine government woulad be weli advised to reduce the admission rate to ab(ot 30% along with the reduction of mid-way progression to 50%\. Enroliment would then reach about 80,000 pupils in 1974\. Provided the  - 4 - necessary teachers can be recruited, this figure is a reasonable target for 1974 (Annex 6)\. 2\.11 Schoos are generally well staffed, the teacher-pupil ratio being 1:22, but almost 90% of the teaching force of 1776 is foreign, mostly from the United Kingdom\. At the projected rate of growth in secondary school enrollments, the need for teachers would increase to 3160 in 1974 (Annex 7)\. Many headmasters are inexperienced\. The Institute of Education of the University of Zambia\. in cooperation with the Ministry of Education, is developing an urgently needed program for the training of headmasters\. Teacher Training 2\.12 Primary school teachers are trained in 1 and 2 year courses after the first\. qpondarv eyele (Form 2?); after 1970 all courses will be two years with a common curriculum and an examination controlled by the Ministry of R\.rtlc-ati en\. 2\.13 Enrollments in the n colleges 2072 students\. The teacher- pupil ratio of 1:15 is to be increased to 1:20 as soon as possible\. Seventy eibgh\.t of !\.)-- teacher trainers- aree Zeambians\. 2\.11T Vsting capaciVy is -vfcxn +o\.e-eurmens radtoa primary school teachers\. There is, however, an urgent need to retrair the maUloity o theteachers now in se-ce~ and- +he -"isr -> -eie - to-- extend twzo existing colleges for this purpose (para\. 5\.09-5\.10)\. 2\.15 Secondary teacher training is provided at the Higher Teacher Tranin\.g Cf'Uo±l±lege in KnabUwe andU 4A1l 0JLL±VU± U!JUUi\.LULJ Uf the Ulm o Loe n ,y U\.f Zambia\. A second Higher Teacher Training College in Kitwe will start oper- ati,\.ng sooi\. St ,cadentUs are a&U±litUed hlaving COIJlJOLetLed second^aJL duy cluca- tion\. The 3-year diploma courses, started at Kabwe in 1967 for teachers in junior secondr,y classes, and t,o start in Xitwin n the near fut,ure, will be reduced to 2 years in 1969 to meet the urgent need for teachers\. The colleges will also traIn teachers oL home economn\.ics, co\.,gmrerce, indust,rial arts and agriculture for both the junior and senior classes (para\. 5\.12)\. Present, nrollment at Rabwe is 124 but will increase to 750 in both colleges with an annual ouLtput of 325 teachers from 1974\. 2\.16 The School of Education of the University of Zambia provides teacher training courses for students enrolied in Humanities and Natural Sciences\. The first group of 40 teachers will leave the University in 1971\. The School plans an output of 500 teachers a year by 1975\. 2\. L7 The combined efforts of the two colleges and the University of Zambia should be able to meet the total demand for secondary school teachers by 1979, including the replacement of foreign teachers, if- expanded as planned (para\. 4\.13)\. For a number of years to come, however, secondary education wi:Ll reLy on foreign teachers (Annex 7)\. 2\.18 During 1L968-1971 650 more foreign teachers will be needed than are now in service\. The main source of supply has been the United Kingdom but the Ministry of Overseas Development has indicated that financial limitations wouild not allow further growth\. The Zambian government is launching a recruit  ment campaign amongst overseas sources of teacher supply, including continental 4European countries,L U\.S0 T CA `- Cnad an' Austra`lic\. This '-'J~ VLJ~J U\.L ~LJJ JydAiLAJL \.L) \. \.M I , C\. L J dLUd cIU ZiLi 1\.L * i- campaign is meeting with an initial measure of success\. Technical Education and Training 2\.19 Organized technical education and training exists only to a lim,ited extent but considderable grotr h 9i to be expected consequent upon the recent creation of a separate Directorate of Technical and Vocational Eduuation and Traiining under a Minister Of State directly responsible to the office of the Vice-President,and the proposal to establish National Advisory Councils at technician and craft levels\. 2\.20 At the pre-vocational level, the David Kaunda Secondary Techn- ical School (under the Ministry of Education) offers four-year courses preparing for apprenticeship in the engineering and building industries or for admission to full-time diploma and degree courses at the Northern Technical College and the University of Zambia, respectively\. The school, the only one of its kind in Zambia, has an intake of 120 pupils per year\. 2\.21 Full-time courses in brickwork and carpentry are given in govern- ment Trade Schoolsat Livingstone, Lukashya, and M4ukobeko\. Entry is re- stricted to trainees who are sponsored by industrial firms with whom they spend three months before entering upon the one-year trade school course\. Selected trainees may return for an advanced course after completion of a minimum of one year in industry\. A UNDP/ILO project presently has under conmd eration a revision of apprenticeship arrangements and the construction of 7-2 new vocational training centres,raising the output from the existing total of 272 to approximately 2,000 per year\. The centres will also train selected craftsmen for supervisory posts\. 2\.22 Training at technician level is carried out at the Evelyn Hone College of Further Education (Lusaka) and the Northern Technical College (Ndola)\. The latter is concerned mainly with the engineering and building industries but is associated with "feeder" institutions at Kitwe and Luanshya where commercial and general education courses are offered (Annex 8)\. At Ndola a majority of the students are already in employment as apprentices or learners and are released by employers to attend full- time courses of six week's duration three times a year\. Recently,full- time courses of two years' duration have been introduced at certificate technician level together with more advanced courses of four years' dura- tion at diploma technician level\. The demand for these full-time courses is expected to increase with the economic development of the country and some of the craft training will eventually be transferred to other centres (Annex 8)\. At present the intake of new students is of the order of 250 to 300 per year; enrollment in 1967 was 636 full-time and 934 part-time stndents A feature of the work of the College is its close co-operation with industry in the conduct of block-release and full-time courses\. 2\.23 The Evelyn Hone College is responsible for work at a similar var -e-y nf levels bu+ malnly ln the fields of corum-ece, home cn\.is the social services, and general and social education\. In addition to a full=tlme enrol'ent of som,e 350 stu,dents, the College and its associQar ted  institutions have an evening enrollment of about 2,000 students\. 2\.24 The University of Zambia is responsible for the traininq of technologists and engineers\. Engineering students follow afive-year course, the first year being common with science courses\. Agricultural education and training 2\.25 Post-secondary courses in agriculture are conducted by the Natr-'l 'Resources 0-11-l,en Colg-f 4e, Ministry\. oflgrclur\.A - - ~ ~-J\. Ui'U- \. V LUYJJIIILI U V\.JL LIU 1 L J\.L0JOU1\. JJ\. \.''L ~ S~ a lower level the Zambia College of Agriculture in Monze has a Junior Techn-4cal1 Offcers course for studet riQ 4-- year 4of 4ecodar educa=,-\.,- 1\.1111aj I J± VIIIC \.1 COAUAa 1 JL7 a U eLJU%l V\.a \.LALI IJWV YtJ CK 'JJ- OC; ~J tion and an Agricultural Assistants course for primary school leavers\. 1z: L1 4- 1 _ Tr _2\.- \. 4\. - \.__ A\._ - _4\. -: __4- -4- L &Ll U Darm d1 L LULX ( I UU UL bU5JUUU U _IIULi UIRLJ IUUU UDUn c ours'sao \.LUr UAJIJmJoLJ CL UOv\. r and shorter in-service courses for students with primary education; the institutes also train farmers\. TvUelve Farmer Training Centers give short courses to farmers and farmers' wives\. Twelve other centers are under constructi 'on\. 2\.2< The University has established a School of Acriculture which hab neither sufficient staff nor accommodation\. Seven students were enrolled this year to the School of Natural 5ciences but it seems likely that they will be sent abroad for further stucly\. 2\.27 Government plans for a rapid development of the agricultural sector would indicate that agricultural education and training should be expanded\. The need for such expansion is not yet fully reflected in educational planning and in the proposed project, except for the introduc- tion of pre-vocational agricultural courses in secondary schools\. An assessment of existin, agricultural training facilities and of the need for further expansion at all levels will be undertaken\. Identified needs for further investment in agricultural training institutions could form part of a second education project in the near future\. Higher Education 2\.28 The University of Zambia was opened in temporary accommodation in October, 1965 and permanent buildings are now being built some five miles from the center of Lusaka\. When completed in the middle seventies,the new campus will offer teaching facilities and residential accommodaticn for 5,000 students at a total capital cost of K 27\.3 million (US$39 million)\. 2\.29 Admission requires appropriate credits in the Cambridge University School Certificate Examination (or its equivalent)\. Enrollment increased frc,m 312 in 1966 to 767 in 1968\. Expansion is retarded by the shortage of qualified secondary school leavers, especially in science\. Productivity is further affecte!d by the large number of "drop-outs"\. 2\.30 The University is attempting to provide courses in too many fields affter only t,wo vears of existence\. It has alreadv established eight fac-  - 7 - ulties and two departments for extra-mural and correspondence studies\. Enrollments in many -f 4-the facul -+ are s-+- very lI j+In- lowstuden-t- staff ratios and high costs\. _ School Students Staff Staff ratio Administration 59 12 4\.9 Agricultural Sciences 0 5 Education 101 15 6\.7 Engineering 10 6 1\.7 Humanities _48 41 8\.5 Law 55 8 6\.9 Medicine 12 6 2\.0 Natural Sciences 182 26 7\.0 TOTALS 767 119 6\.5 2\.31 Planning of the University's further development is deficient\. There has been a series of master plans but none is now considered valid\. Projections of student enrollments are virtually non-existent; actual numbers of qualified entrants have often been lower than expectations; projections made by various faculties are often inconsistent\. Physical construction, consequently, cannot be accurately related to projected accommodation requirement\. The utilization of present facilities is low; there appears to be an excess of smaller teaching spaces and a shortage of larger lecture theatres\. Government is concerned about the high recur- rent cost of the University\. 2\.32 A major planning effort is needed to assure rational development of further expansion\. Such a plan should be comprehensive and make real- istic projections of future enrollments in accordance with secondary school output and manpower requirements\. It should assure maximum utilization of existing and new accommodation and recommend more functional and less -ost- ly construction standards\. It should aim at a higher student-staff ratio and a corresponding reduction in recurrent expenditure\. III - COST ATD FThAN,7CIM OF EDUCATION Fin: nrinc fEc\.to 3\.01 Finance for education is centralized in the budget of' the central government\. The role played by private schools is negligible\. Mission schDols, wnzhich are grant-=aided for 100% of recurrent and 75% of capital costs, are considered part of the public sector\.  - 8- 3\.02 Income f-rom school fees is very low: for primarv and secondarr schools it is est:imated at K 300,000, or only 1% of government expendi-- ture on nrimarv and secondarv education\. Tiition fees of K 36 p\.a\. and boarding fees of IC 162 p\.a\. are only charged in the small group of ex-1federal ghrbn1!s knn-&m ag "qrhPA,iPH1" schools\. No fees are charged in the majority g:roup of "unscheduled" primary and secondary schools, the trade schools and secondary tech+\.ical school (except for some small board- ing fees :in primary schools)\. Education is also free at the teacher t\.ra:Ln4i nv o o nl leae* -s in - AM +dn4-t\. student --rpott-+\. moneg and tra-ee allowances\. 3\.0\.3 The Northern Technical College and Evelyn Hone College of Further Education are financed through a rgovernlment grant to +th-e Boards Of Gove-r nors and, to a small extent, throuah income from fees and donations\. The Uni-ersl+\.y of 7Iamlb\.ia Js financed through a +iennial governmen' Vran;', which in 1968 covered nearly 90% of all recurrent expenditure; the rest 4~± ~iJ 4a,LULLJ \.1\. ,\.-;o fee o Tr 2 p\. O\. an _'4 tJar"i JL- 4\. Ioe 44\. e S 4o 4181n frt \. 1± (wh:ich are indirectly financed through government bursaries to students,) anA o+1-,\. - andoter income\. 3-01 Pwcu1rr -t exp-endture orn education by other Miitls sol * 144 ~~currenJ L ~AJLUJ\. Li UU UL Ul U-L LJ ,) U UL±1I PiLIi\.L0 L5± LU ~0 _LCiUJILLJ K 2\.4 million or slightly over 7% of the recurrent expenditures by the A!: _ \.:_L _-_ -X T _L__A_\.L: __ I A __ ___ nN n _ _:1 -\.__ _ _1 - - _3 _ - _\. a 1 1_: L: _ _ - -44 1-1 lJ\.L;i U'\.Vy U1 ZUU1dUtUIII \.k JU:7 7 \. J ntUS -'LU1LRL dLIU ±LUA\.;L atU\.IVLJ \.LI±t0 l t --jJt:;LiL- ture on education is negligible; local communities assRst in the construc- tion of primary school buildings bDUt even here the major partv of the costs is borne by the central government\. 3\.05 The contribution of private industry is important although the exact amount is unknown\. Participation comes in many forms, such as vocational training directly organized and financed by inclustry (partic- ularly the mining industry), the sponsoring of students in public schools, scholarships and donations\. The total financial contribution of the mining industry is estimated at K 6 million in 196D8\. 3\.06 In aggregate it is estimated that in 1968 K 61\.5 million or some 7% of GDP was spent on education (Annex 9): in K million Recurrent Capital Total Ministry of Education (net) 34\.0 15\.3 49\.3 Other MIinistries 2\.5 2\.9 5-4 Private sector 6\.8 - 6\.8 IT' OY A T\. )In 4iR 9 I r 3\.07 Gross recurrent eenditure by the Ministr of Education rose from KlJ4\. million in 196L4/55 to K 34\.7 million in 1968, a growth rate of more +t,an 28%u per ann m,\. T1Jth; - t -overmn,+v re rnt o,rnditure increasing at a rate of 19% per annum, the percentage share of education in the 4- u t 4-ro1 1,,A,-\.-44- - - 12-- 4 4--o 17 7% I, w1h4 4i a relativl \.Lo w \. VO\.L U LIALUIC 0 \.L I IA\. J \./0 Vp roori n(Annex I 0 L\. V low propcrtion (Annex 10)\.  - 9 - 3\.08 No major changes have occurred in the distribution pattern of recurrent e mrenditure during the last four years excepnt for the Univer- sity whose share has nearly doubled from 4\.2% to 8% of the education brudget\. Prima,ry P ntin…n elaims neanrlyir 50df ca-nn"r, edcaion s h or 25% (Annex 11)\. Projections of future recurrent expenditure 3\.09 On the basis of present expansion plans and assuming that salaries r\.-\.lill riss by abo,ut 2c5% over the next sJ yers gt i esti -tled that recurrent expenditure by the Ministry of Education (in constant 10A p will ri-se f\.rom 11 3l 4 m X-Ij±±±±on in 1 tK1\.56 O LCJ 1\. f L * ) m-13il"Lion in 1974, of which K 7\.6 million would result from the proposed project\. This incLLJeIase J\.L \.UVO 4,V CtLJLU2IJ prBJwould ue considterl-abbly lowter UthaLJnC i Ll e last few years (Annex 12)\. 3\.10 Without estimates of future government revenue and total recur- r Apend"iLures, it is not poUsibe bo ±L]UiLat what prUopt o the 197L budget would be devoted to education\. The projected increase in education expenditure does not appear out of line with expected increases in other sectors of government expenditure, however, and can be considered feasIble\. Capital expenditure 3\.11 The first National Development Plan 1966-1970 devoted K 79\.5 million to education, accounting for more than 1h% of total public capital investment planned for the period\. K 29\.5 million (37j) was earmarked for secondary education, K 3\.1 million (4%) for teacher train- ing, K 6\.6 million (8)0j for technical and further education and K 16 million (200) for the University\. 3\.12 Realization of the planned rate of investment in education, at around K 20 million per year, has fallen short so far\. Capital expendi- ture data for the first years of the plan are not yet available; but, judging from the budget estimates, capital expenditure by the Ministry of Education for the 21½ year period June 1966-December 1968 can be estimated at K 35 million\. Annex 13 gives the annual capital expendi- ture figures since 1964 and a breakdown by level of education\. The emphasis given to the development of secondary education and to the University is clearly shown\. IV - EDUCATION AN) TRAINING NEEDS Existing manpower situation 4\.Ol The total working population in 1965/66 was estimated at 805,900 persons wxith 305,900 in the modern sector of the economy and 500,000 in the rural subsistence sector\. The educational level of the African labour force is low\. Only a very small number of Africans havre  1- 0i - a University degree or a post-secondary diploma; even those who have finished secondary education constitute only 0\.2% of the African labor force\. In 1966, of 56,l50 positions requiring 2 years of secondary education or more, only 17% were filled by qualified ALfricans\. That most; middle and high level positions are filled by non-Africans is shown at Annex 14\. 4\.02 Crucial shortages of qualified manpower exist in nearly every sector of the economy\. Private enternris e e3nerienes sperious difficu1l- ties in recruiting trainable personnel with secondary or higher educa- tioni since most thool leapvers u re dir Heci\.tedi into t1he onhli c seetor\. R\.- fic:iency and produictivity in industry and commerce are low and further oront\.h iq inhihifoedi hv t\.his lack of' q+\.tff andby the +h w level of educa- tioll of those who are available\. The public sector, after filling 838 existing c-ivil service vacancies with newly reerui ted ePnatriates in January 1968 - most of them in the professional, administrative and executi'+r\.T "rankc - s+t11 had L,6010 u nfilledi post in Mavy 1968 Frn 2100 of these posts, a completed secondary education or equivalent is required and foro )142 posts, n TTanivesity+dr egrnee Ilearly all tec\.ners at+\. connndAn,-r and post-secondary level are expatriates\. Future developments 4\.03 The numb(er of young Zambians entering the labor market will poaL\.J dobl bi en 196 and l98; -er 4to" n--,\.br can tie esti-4 proL`JJ,y dOuLOAULke UoleWIt UWe -L7!J dCLJU ±7QULj IAit,\.L\.V ULA) UL LJ\.LIiLJU'z Ld\.A I- mated at 800,000 for the 15-year period\. It is unlikely that more than L\.L) 5-7,'Q o\.f Ulem wi±L J\. ±LJU f MployVV,y1t::LJ U Ln tUhie moU'Ueni sector, eVenL ULJUner very optimistic growth expectations\. The remainder will fall back on opporr-uui-ituS for usefui employmrenvt in th-te rural UeutLUr of IA1 eco y, that is, small scale agriculture and closely related services\. Unless employment outlets are greatly increased, the absorption oI the rapidly growing numbers of new entrants to the labor market could form the crux of the numan resource development problem in the near future\. In the long run this problem might become more important than the severe shortage of qualified manpower at present\. 4\.04 In the rural sector, there is urgent need to increase production and raise income levels for several reasons, including the creation of additional employment, as is stressed in the First National Development Plan 1966-1970\. MLanpower projections should therefore make provision for a gradual up-grading of the rural working population\. Tne primary and secondary school system should adjust its orientation and offer better preparation for rural employment by teaching practical subjects, particu- larly agricultural science and industrial arts\. Agreement has been reached with Government that steps to that effect would be taken (para\. 5\.U6)\. 4\.05 In the modern sector, the demand for educated Zarnbians depends mainly upon (i) the rate of replacement of foreign personnel and (ii) the growth of total employment as a result of economic expansion\. Govern- ment pressure to speed up the process of Zambianisation is strong and non-Zambians are being replaced at a faster rate than the supply of qualified Zambian manpower permits\. Positions are frequently filled with  - 11 - personnel of inadequate education or experience and there is a danger that such unqualified incumbents will block the way for more highly qualified Zambians as these become available\. To avoid long-lasting damage to labor productivity, the output of the education and training system should be increased without delay\. 1\.06 The growth of total employment in the modern sector of the economy has been considerable\. Between 1964 and 1966, total employment rose from 268,700 to 332,900 or by 24%\. mainly, in manufacturing, construction, trans- port and communications (Annex 15)\. The rate of expansion has probably decreased recently and present conditions, including uncertainty as to the future price of copper, on which the greater part of the economy depends, make it difficult to estimate future emplovment\. It is believed that the rate of expansion is less than originally foreseen in the official manpower projections\. the nresently estimated annual growth being 8% for the period 1965-1970 compared with original expectations of 11%\. For the purposes of this appraisal\. the 1966 governmcint manpower foreeasts have therefore been reduced correspondingly\. 4\.07 Projections of manpower requirements for the period 1966-198C, revised by the- mnission as i nated in pnras\. c l\.c and )4\.fn6 hrnvr incdicnte a demand for the following numbers of new entrants to the labor market: Degree-level 10,000 Diploma level 18,000 including: teachers 2,3 _J0 technicians 1,500 Secondary (Form 5) level 52,000 incLuding: technicians 1,500 Junior secondary level 106,000 TOTAL 186,000 Educational DeveLopment Needs 4\.08 The present output of the Zambian education system is insufficient ton meet+\. +\.'he mnrower needs oiu-tli-nedrI abrove\. rAwi t\.1 a 'Form-t I evel t-noutput of only 1,600 graduates in 1967, the secondary school system is unable to feed institutions of post-secondary education and to meet labor market demands= Expansion of the University and other post-secondary institutions is hampered by a lack of quiei d f4 canA \. A 4raid in-rease n the out-ut\. from secondary schools in the next few years - which can level off at a later stage is therefore requ-ired\. In addition, h\.e q,ality of the secondary school output, especially in science, should be improved\. 4\.09 Total enrollments in secondary schools should be increased from or00 nrr in4 1968 to\.4 abou 80,00 in ]7;this wou"ld ra-ise the oupu fo the junior cycle! to 9,800 and from the senior cycle to 7,300 a year by 1974\. T'his sub,stantial increase over the next six years should Se fCol owed  - 12 - by a levelline off in the rate of expansion bevond 197h (Annex 6)\. Fo- reasons given in paras\. 4\.05 and 4\.08 above, this rapid increase over the next fem years should be nreferred to a more even Prouth oath\. 4\.10 At this irate of g7rowth\. the total outnut to the anhor market of students Leaving school at the end of the junior cycle or dropping out half way through 1he senior cvcle tduring the period 1966-1980 would be about 105,,300\. The output of students with completed secondary education in +\.7hp ,-:io rnir irarmlto1 h 1 7P 000n These ri+\.-l+\. e+simatne nare oroughlylr inY accordance with the requirement figures given above (para\. 4\.07)\. 4\.1:L The secondary school program should be diversified to include pnrac",tical'\. a bo^+th a lt junio n and j si 'leve\. To q rpr sdl not only for further education but also for direct entry to the labor \.arketsaconda wry ,chools soueld n provide n ,, pr-vocatlonal cnrsn,\.en Vfln 4 r A, trial subjects, agriculture, comnmerce and home economics\. Agreement on t-he int-rodu c tion ofP suchu courses was reachleCd withb t1he G-overnment (p-Fa r a \. 6 L4LL- \.LLA 74± SIn±LLS\., UL1 flel of priJary teacher ta\.Ln1i ro new invest 4J-en 4 -i;\. L4 -L\.C\. In uiie eL ±t± U\.J kJ±1J\.L\.y bedLU , ISl \.JiJ Liu L JtL ±L JV I~JJU1Is LJ\.J regular pre-service courses are necessary but provision should be made for in-ser-v-ice cuarses to -up-grade the~ I\.jar±uy of teachers now in post\. 4 \. 13) As detailed in paras\. 2\.17-2\.18 and 4\.07, there is a considerable shortage of secondary school teachers\. The training of secondary school teachers, botn at tne Higner Teacher Training Colleges at Kabwe and Kitwe and at the School of Education of the University of Zambia should therefore be greatly expanded to provide the number of teachers required for expansion of secondary education and to replace expatriates now in service before 1980\. 4\.14 Of high economic priority is the training of technicians and engi- neers, which has only recently started\. Estimated requirements of tech- nicians are specified in para\. 4\.07\. The Northern Technical College program to train engineering technicians at certificate and diploma level will assure an annual output of some 210 technicians, which is still below the country's requirements\. V - THE PROJECT A\. Technical features General 5\.01 The proposed project consists of: the construction, furnishing and equipping of (a) nine new secondary schools; the 'rprovement, exter\.sLon, furnishing and equipping of (b) 56 existing secondary schools of which one school will be a multilateral school with technical bias;  - 13 - (c) two primary teacher training colleges; (d) two Higher Teacher Training Colleges; (e) the Northern Technical College in Ndola; 5\.02 The total number of new places to be provided in the project is 37,037 as follows: - Enrollments -- - Maximum Project Schools No\. 1968 1974 increase Annual Output New secondary schools 9 - 6890 6890 805 Existing secondayr schools 56 27722 e6505 28783 7035 Primary teacher training 2 407 825 418 115( Higher Teacher training 2 125 750 625 325 Northern Technical College 1 339 660 321 350 TOTAL 69 28593 65630 37037 9665 Secondary Schools 5\.03 The proposed construction of nine new secondary schools and exten- sion of 56 existing secondary schools form the major part of a school ex- pansion program which will raise total enrollments in all secondary schools from 39,000 in 1968 to about 80,000 in 1974 (see para\. 2\.10); 35,600 new places would be provided by the project, and 5,600 places will accrue from 7 new schools at present under construction from government funds\. 5\.04 The 56 extensions would permit a major rationalization of the sec- ondary school system through more intensive use of existing accommodation\. By changing from form-room to a subjiect-room operation, enrollments will be greatly increased with only minor additions to buildings\. In most cases, only a limited number of snecial facilities;such as workshops and laborato- ries, will be added\. Standards of equipment will be greatly improved for all nunils in the schools Cl1ass sizes will be raised to l40 pLupils in the junior and\. 35 pupils in the senior cycle, leading to a redLction in teacher requirements and recurrent cost per rppil\. 5\.05 n i nf theaA' 63LnO situdeni-s ton 'be evnrolled i n t\.he Al< pnr% oje_t scoolsn 28,400 will be boarding students but, by introducing double bunking, exist- ing f ities would be better utilized and the -nmber new bo-di places to be provided is only 2,070\. In a number of rural schools, staff housing i9 essential- to a,s4re thle avail\.ab-ilitk\.,y of teach\.eros,; the project would provide for a minimum requirement of 124 teacher's houses and 15 other st-aff quarters\. _ \.o\J LL\. PI pJJeI It WouL"Ul Ld LJb CaUoU a d Asut -antial div er i f ion oLf secondary education\. The new secondary school curriculum, adopted by the gUVernmeJliul UULrn LJ0 a d_\. Ul> \.L_ Wtl-l ULd\._\.LLILtU dlJU UJX\.LUiAJIUU LAUWd% U0 ij\.JiALUy ment opportunities of school leavers as well as further education\. In the junior cycle, curric-ula for all students wlll incl-ude one ur more of the following practical subjects: industrial arts, agriculture, commerce and home economics\. In rural schools the stress will be on agriculture, iln urban areas on industrial arts\. The senior cycle will have industrial,  - 14 - agricultural, commercial and home economic sections in addition to arts and science\. The distribution of students among these sections is to be as follows: PROJECT SCHOOLS Upper cycle enrollment Maximum annual output % Arts 3360 1680 21\.5 0-I ni\. on -1 '7'1 ~^ e A, A, A, LJU '-1SULJ FZ: LX4l)U J_ f L _) C4:eV r Technology 2940 1470 19\.0 Agric-ul-iUUe -L4(UI0 7-° Comnerce 1750 875 11\.0 nT fl mne,n' C- - i _ r'\. nuo'nc E~conomics 23 351\. TOTAL 15680 7840 ILOOeG% 5\.07 The enro:LLment structure of each of the schools is given in Annex 16\. In one of the schools to be expanded under the project, the technical studies will be more advanced and equipment more sonhisticated than in the industrial sections of the other secondary schools; the curriculum wil:L be that of a technical secondary school\. Students will be a'p -itted from all regions of the country, giving the school the character of a national 5\.08 The 65 project schools will need 2388 teachers and 65 headmasters and will at first rely on expatriate teachers\. A rapidly growing number of Zambian teLachers 1s now1 being trained and the fi rst of thesJ e will" b*eome available before the project schools start operating\. Before 1980 teacher dAnand and , rul y cn, ek bklancedA b-u,4- 4-bridge 44- - Jn 4-t-,-,her - y until then, the government has given assurance that adequate numbers of xF _ e;gA 4e c,r A-U V- A_ _ - 4 ;5 AA MU-; 4-4\., ; _So P 4-1-X oen r -r\. i La L~OIJ \. L\. _LJ LJ~ IU 'ZJ U J\.L L LLL\.L V A J\.I LL\.U_LCL_L IJ\.I ULI~ r W ' f~',* ~I 1968 recruitment campaign would indicate that the government will be able +n-\.n\.44- ,,44\.1- ---- A P- 4,\. 4-;-\. to recru44t 4the re-qured \.-\.,\.er ofL teachr\.Apoa\. o terin;,f V I % \.LLLU UL±Z- L1IWIISU \. L IJ~ LItZ±1- \. M jP\.JL 'J I JfJ U\.L- VL UL VIL LA '- school principals will be started before 1970\. Primary Teacher Training 5\.09 A request for the financing of three new primary teacher training colleges was inclu,ded in the project proposal\. During appraisal it was found that the existing colleges are uneconomically small and could be expanded without Tmuch additionai cost\. However, there is io apparent need for a further expansion of regular courses in this field, since the total output of teachers from the existing colleges between 19008 and 1979 will be sufficient to meet the demand\. There is, however, an urgent need to retrain the majority of teachers now in service\. 5el0 hne proposed project item has been therefore amended\. To meet the latter need, two existing teacher training colleges would be extended\. One (in Chalimbana) would annually re-train 900 teachers in three 12-week courses for groups of 300, requiring the college to be extended to 300 places\. This would enable the government, in the next decade, to retrain the majority of the 10,000 primary teachers now in service\. The second college (n  - 1i) - Kitwe) would be extended to 525 places to replace the regular 2-year pre-service courses of the college in Chalimbana\. Tne output from the 2-year course will be 250 primary school teachers a year\. 5\.11 The proposed project would provide nine classrooms, 15 laborato- ries and special rooms and boarding facilities for 340 students\. Both colleges are fully boarding\. No difficulties are foreseen in staffing the two colleges\. Teacher training colleges are generally overstaffed at present and, with better utilization of the available teachers, little increase in staffing would be required for the modest expansion provided by the project\. Secondary Teacher Training 5\.12 The two Higher Teacher Training Colleges at Kabwe and Kitwe will train teachers of academic subjects for the junior cycle of secondary schools and teachersof practical subjects for both the junior and senior cycles\. The project would provide for an extension of the Colleges from 125 to 750 students\. Teachers of industrial arts and agriculture for the senior cycle would receive additional training at the Northern Technical College and at the Natural Resources Development College of the Ministry of Agriculture\. The maximum output of the 2-year course would be 325 teachers a year\. 5\.13 The proposed project would provide 13 classrooms and special workshops, boarding facilities for 3h0 students and five staff houses\. All students will be boarders\. The colleges would have to add about 4o teach- ers to their present \.taf f of 13\. The IT\.K\. Ministrv of Overseas Development has expressed interest in providing these teacher trainers\. The (GnvPrnmPnt\. is mnkingar rrnngnmentsn fnr thP recruiitment of' t\.hP reniii rp-d number of teachers\. Technical Education 5\.14 The project would provide for the extension of the Northern Techni- rnl Conllega frnm a n tenronn+\. lnt a ofn 60n fu%ll-tm - hi -krelea?selns students to about 1000 such students in 1974\. Output of technicians, both at certificate an\.d diploma level, would be increased from about 85 in 1968 to about 210 in 1974\. The output of skilled craftsi5en will probably fall slihtly frmn 16, to 14t0 in the same peio_--- x ) 5\.1 A+ pre)sent th'e college h;as a staff of 32 teachers wh-ich would -' * flU ~ OL&- Id Id*I 1100 UCL\.L\. A J\. \.JC_\.'C \. t1 ± 0, ULtlt\. I Nt'L\.L have to be increased to 56 in the next five years (Annex 8)\. The U\.K\. Gounci -- for" T eechn i c al- E-duiccattion and Irra in ingr- for >- er,"se Coutre has +-J 1 ('~~rr4 'v, P~d\.v4 ~ 1~i,~, 4,, n\. '1~ ,,,, f 4, - UO AU I S 1_ expressed interest in assisting the Northern Technical College in recruit- ing aditioJa teaching stf\.Assurances h1ave bDeen 0btained~-% tb\.at theA7 college has taken the necessary steps to recruit the required number of 4teachers\. 16 J ~ ~propose' projecJ wo-uld proVidLUe UteDL ULUUoUIL, 20 labrtL,U- ries and workshops, together with boarding facilities for 80 students\.  - 16 - \.B\. UL\.L1 OF' UIL t'U PROJECT 5\.17 The total cost of the project, is estimated at K 25\.9 million of about, US$36\.2 million\. Annex 17 gives further details\. Estimated Estimated No\. of Stuclent Cost Foreign exchange schools enrollment (US$ million) (US$ million) % I Secondary Schools -- new schools 9 6890 7\.95 3\.L9 hL% extensicins 56 56505 24\.17 11\.88 49cv II Primary teacher training - extensions 2 825 1\.13 0\.50 _1_ TTT TRitgher teacher training - extensions 2 750 1\.16 0\.53 46% I\.V Technical college -- ex+ensions 1 6I0 1\.82 1\.00 55 Tot\.al 70 65,630 36\.23 17\.1X0 48 A breakdown of the costs by major categories of expenditure for each of the items I-IV above is as follows: (in US$ million) I II III IV TOTAL % A\. Construction A - , \.c buildi\.ngs 8 0\.7 0 \.2 0\.72 98 2)7 Student hostels 3\.61 0\.28 0\.32 0\.09 4\.30 12 C4\.Lt'\.o I\. - I\.Z r% r% - It l \. SJ,d1J\. L1hous\.LJ9 -\.4u - \. UL4 - 1\.50 L4 Site development 3\.77 0\.12 0\.07 0\.07 4\.03 11 ~~~~~~- P _ '711 n AlA -in I')A 11 ( Prole s,slna 4ee - 01 vl 0\.3 \.9 5 I J IUL _,LJcL4\.± L1~ V=U I\.LL -JLI J\.J L\.7U Sub-Total 19\.25 0\.77 0\.77 1\.01 21\.80 60 B\. Furniture 3\.09 0\.05 0\.04 0\.03 3\.21 9 C\. Equipment 4\.12 O\.LO 0\.13 0\.50 4\.85 13 'Sub-Total 7\.21 0\.:L5 0\.17 0\.53 8\.06 22 Unforeseen expenditures and price increase allowance 5\.66 0\.21 0\.22 0\.28 6\.37 18 TOTAL COST OF PROJECT 32\.12 1\.:L3 1\.16 1\.82 36\.23 100 5__ 18±('\. estim\.ates have bhpen bh sd on nprent buil dinn prices *in Zambia\. These are somewhat high due to difficulties with transport of materials-, the limited nnmlber of craft\.men and inperrvinrs in 7\.bmhiq andi a r elining output by building workers coupled with an expanding building activity during the last three years\. Avera-e costs per square&a foot vtr T)l+ary bh+\.etenen +\.tmyp nof b,1m'd_ -z -\.Z -~ e,~~Sr~* o^ - ~~"~V^  17 - ings and\. , als bet an region of the counry,+ due Ati + nadequate,i+ trnFra tion, poor supplies and absence of skilled manpower in remote areas (A\.unex _/* %LI UJ\. U S ~ \.L \. \.A JLI%l\.4 y\. \.L\.AJ J\.fl CJaLILi\.L -_L\.z tI'4 ,\.-\. - -13 must be considered as reasonable\. 5\.19 Most of the existing schools to be extended and altered are in needZ; of r epacIir s \.In Som,e schoo-ls t\.,\.ere are rno ceilings iri thL'e classrooms and laboratories, and some workshops are not enclosed\. Provision for these iIr,jprouvemr,eri's been included in the proposed prujecL\. ±L1 cos oe sions and alterat:ions is included in the estimate and is acceptable\. 5\.20 The size of classrooms, laboratories and workshops has been reviewed ana standaras are austere\. Estimates of furniture ana equipment costs assure satisfactory provision of these ite:\.s at realistic costs\. Boarding accommodation in secondary schools is based on double bunking; in the teacher training and technical colleges two students would share a bedroom\. Agreement with the Government was reached on utmost economy in calculating circulation spaces and lay-out of buildings\. 5\.21 Site development costs have been estimated on the basis of austere standards, include external works and, where necessary, connection to ;nain services\. In a number of existing schools which would be extended under the proposed project, the government has not constructed surface drains, roads and footpaths\. Erosion is threatening the buildings\. In a number of cases, the supply of water and electricity from the main supply is inad- equate for the proper functioning of the schools\. Provision for site improve- ment and for electricity supply has been included in the proposed project\. During negotiations assurances have been obtained from the government that schools will be provided with the necessary utilities\. 5\.22 The project cost estimate includes 12%o for physical contingencies and 15% for anticipated price increa\.ses during the execution period\. rhe latter percentage is based on actual price increases in the last three years\. The former percentage is to cover normal contingencies and to account for extraordinary expenses which might arise from alterations of existing build- ings and transportation problems\. 5\.23 The foreign exchange component of the construction cost is about 37%\. Clay and cement products are locally made but most other building materials\. electric eauipment and sanitary fixtures are imported\. Locally manufactured furniture has an indirect foreign exchange component of 60%\. All instructional eouinment and books are imnorted\. The foreign exchange component of professional services is estimated at 40%\. C\. EXECUTION OF THE PROJECT 5\.24 Site ac uisition\. Sites for the nine new schools have been selected\. Most are goverrnment oned but apnproval hy +he regional nnd town planning authorities and reservation by the Commissioner of Land will be required at least one ypear before constraction starts\. A to this effect have been obtained during negotiations\. Available sites of the existing schools are large enough for the ~ planAned ex\.nsos\. e\.2 S iQte plans ,ha-ve bn - - 4 received frA 8 new a\.A e  - ]8 - ary schools and for the Northern Technical College\. Site plans for the remaining schools have been requested\. 5\.26 Project Unit\. To coordinate, administer and supervise the execution of the project, a Project Unit woulcd be established in the Ministry of Edu- cation, headed by a full-time Projec:t Director, who would be acceptable to the Bank, assisted by an architect and supporting staff for equipment pro- curement and accounting\. The architect, who would also be acceptable to the Bank, would be appointed by the Ministry of Public Works to form part of the Project Unit and would maintain close liaison between his Ministry and the Project Unit\. 5\.27 Properly qualified clerks of works would be engaged by the Project Unit and stationed in the provincial centers to supervise (under the direc- tion of the responsible architecturELl firms) the day-to-day construction work on a number of project items within range of their offices\. 5\.28 Architectural services\. The Ministry of Works is understaffed and private firms of architects\. engineeirs and quantity surveyors would there- fore, be engaged to execute the project\. Such firms would be responsible for design, contract documents\. contract arrangements and sunervision\. To achieve eConomy through standardization, one firm of architects would be in charge of all seconndarv qe\.hono\.q new nnci pwtP\. nq i on\.q - Othpr firms could be employed for the three teacher training colleges and for the Northern Tech- nical College\. OWf the local firm9 cqf a in 7Ambia2 only those with overseas affiliation would have the manpower to carry out the work\. A suf- ficient nrmber of such firms are establiseidA in 7Zmhia +\.o assuire proper execution of the project\. 5\.29 Building industry\. Expansion of the building industry has been rapid4 ui6 the past few yea\. - J P- -- ik-4\. Ue+ \.1\.a t ----+-A +1-+ wtaill be slower\. To counteract cost increases, the Government has accepted assist- ance fromi 4JLDIhe vLugooslav Government iri seting Up, a largeLl cLUkOL conLs ct firm and this is in part the reason for the keen bidding lately on both civil nan UiLJLU\.LL1\.g works\. 111te UcpecULUbV 0\. oll £>e ZaI,U,bia UL1L±±UJAI inLJdUstry isU s J\. fl cient to handle the proposed volume of construction within the time period blased oU the proppos\.ed tJu mletabdle atJ 'lInneX 19\.7 LU iL ULJikeLJythavLI eru WV a contractors would wish to be employed on the project\. 5\.-E All contracts for construction of K 100,000 and above and f\.u ±urniLL,u-re aniU UuLipmeutL wouulU be awarded orn tue Ua9is of LnternaticonLal competitive bidding\. 5\.31 For the execution of the project, contractors should be givern an overall government permit enabling them to recruit skilled expatriate per son- nel in key positions\. Assurances to that effect have been obtained during negotiations\. 5\.32 Construction period\. To keep annual construction work within the capacity of the building industry and to avoid inflationary pressures, it is recommended that the implementation of the project would be spread over 5 years including a preparation period of 15 months and a defects and lia- bility period of 12 months (Annex 1l)Y\. As an incentive to builders, the pheLsing of construction should allow a continuous flow of work to be carried out in each region during the project period\.  - 19 - 5\.33 :Disbursernents\. The proposed loan of $17\.4 million would fi7anrce: (a) 100% of the direct foreign exchange costs of the project, which are presently estimated at $ 4\.9 million (instructional and other equipment and books), as well as (b) 40% of the remaining costs of the project, which is equivalent to the estiLmated foreign exchange component of these costs\. Thus, the total amount of Bank financing would amount to 48% of the total cost of t:he project\. The r4rccntape referred t\.o at (b) above would be adjusted as necessary to ensure that disbursement vinuld be spread throughcut the neriod Af oxypmtion\. Undinbursed amounts would he availahle for cancel- lation\. In the event that expenditure ahreuld *xceed the rresr;nt estimaited nrneipret Gost 'if -\.3\.'2 rn1llion- any xces\.s wnould 'e met by the Zambian fzovern- merit\. VT - GNrTT\.TT\.STnA,T_ A_,TM pWrflTrn\.TTION The proposed project is directed towards quantitative rmnsion and qualitative inprovement of the education system at levels where manpower shortags are sr!ere\. Th pro"^A-+ is therefore _a high\. pr\.ori_tr needl for yl achievement of the country's development objectives\. 6\.02 The secondary school expansion program, to which the proposed projsct would mke r\.a __4 co 4ribution would assure a better ev-catcd supyof ~ ~ 0\. ~U0\.JW\.L 1\.W&UXLAVI\. \.LVJ UAIJ, _JJ L O\.A LA\. 0\. \.' VI'\.I "1 graduates in numbers sufficient to feed the expansion of higher education andUJ to VU r\.et JUabr 1marketU Uder,ladsU (pL\.r\. %4oO L-4\. JL4 j\. 6\.03 The proposed project, moreover, would contribute to qualitati'v improvement of secondary education by assuring a fully qualified Zambian teaching force before 1980, by providing better equipment for uu0 ol all secondary enrollments, by strengthening the teaching of science and by contributing towards a properly trained staff of school headmasters, edu- cation officers and inspectors\. In addition, the project would bring abou-t a greater diversification of the secondary school curriculum and an orienta- tion towards more practical work\. It would also lead to a better utilizaticl! of existing school facilities (paras\. 5\.04 - 5\.06, 5\.12)\. 6\.04 in the field of teacher training, the proposed project would enau\.le the government to re-train the majority of insufficiently trained primary school teachers now in service\. At a higher level, the project would enacile the higher teacher training colleges to attain an adequate output of Eeccrt:n\.;iY school teachers (paras\. 5\.10-5\.13)\. 6\.05 In technical education the proposed project would expand the traxi ing of industrial technicians at the Northern Technical College\. Training would still remain below the country's estimated requirements and further invest\.ment would be needed at a later stage (paras\. 4\.14, 5\.14-5\.16)\. 6\.06 The suppily of candidates for admission to the schools is ample (paras\. 2\.07, 2\.10 and Annex 6), but the supply of qualified entrants to the higher teacher training colleges and the NIorthern Technical College iS dcpend- ent on thie further expansion and improvement of secondary education (para\.i\.Oa) 6\.07 The accommodation schedules are acceptable and, given the present level of building prices in Zambia, reasonable in cost (paras\. 5\.18-5\.22)\.  - to0 - 6\.C'8 The Ministry of Education is drawing up equipment lists for the secondary schools and teacher training colleges\. Equipment lists for the other institutions included in the project have been prepared\. Estimates of equipmient costs included in the project cost estimate assure reasonable provision of eauipment at realistic cost (para\. 5\.20)\. 6\.09 Contracts for civil works cf K100;000 and above and for furniture and equipment will be awarded in accordance with procedures of international comnetitivph biddino (-nqra- 530' Arnhit turl, pnainp,nrina nc a blib dinz contracting services of satisfactory quality are available (para\. 5\.28 and 5\.29) 6 lo The share of the capital cost of the project which will be borne by the Zambian government and the recurrent costs generated by the project wnou'ld 'ha mit\.Mri +-he fP;inaneial capaci~+vy of +hef- ^on+ paras 3\.103\.1')\. 6-\.*11 To en- -the - eessf ' ;I,plementation of the project, gover,lmen assurances were obtained that the educational planning services will be strengthened 'and thle training ofJ1 pr0ofessi\.on\.A\.lJ\. st0 lJO\., 4ncluA,1in e-ab-,s, wil:L be expanded\. To meet the shortfall in available Zambian teachers, --AA\., AVA\. F 04 D 0Q L W \.L A LAWJ1J~01 VJJ\. JU\.± 0 L$J LAJIJI, OVt 110\. LCV U LJUU1J U0\.XI n to recruit foreign personnel in sufficient numbers\. For the execution of +h1e Irje-, the government ,1 erploy nceW areh±U-tecu-ral P-iIn and qualified clerks of works and will permit contractors to hire expatriate S U,Lf\. Le-she need'ed' £ -1 l A ~ fl I 2 fl- 1*D - - - 1 -±t --- I --- 6 \.-L \.12 A conuiujun lur efUc \. eclUiveness of the proposed loan will Ub Liht establishment of a project unit in the Ministry of Education consisting of a full-timTe project director a full-time project architect and supporting staf'f for administration, equipment procurement and accounts\. 6\.1:3 The project provides a suitable basis for a proposed loan of 'uS±L\.4 million for 25 years, incluCting a grace period of ten years\. March 20, 1969\.  ZAMBIA: ORGANIZATION OF EDUCATION ADMINISTRATION, 1967 MINISTER _ _ I__ _ _ _ PARLIAMENTARY PERMANENT c NAT[ONAL COUNCIL SECRETARIES (2) E SECRETARY tOF EDUCATION UNDER SECRETARY UNDE:R SECRETARY PLANNItIG CHIEF INSPECTOR ADMINISTRATION PROFESSIONAL L LN _GOF SCHOOLS _~ _- _ -- _ _ _URTHEXAhtNATIONS RTHER EDUCATI _OFESEARC:H AND X INSPECTORS L ADMINISTRATrION K XMNTOSTCHNICAL AND A~1 PLAN1NING ISETR [ } FINANCI PUBL-ICATIONS BURSARIES DEVRLOAMENT PiYCHOLOGIST AOACCOUNTS KPROGRAMMES-j r ET^BSH\.*T 1 r CIL Iii F ROAOCAETING AN l _MAPWE1 ESTAPL:SHIVENT \.EGISLATiON I-U -VSA MEQUINEMENT L AND STAFFING AND REGULATIONS EDUCATION REQUIREMENTS LICY FOR CIVIL AND L\.M\.A\.T\. AND GRANT LIBRARIES CAP'ITAL ESTIMATE3 TEACHIING SERVI,CE LIRRISCDEINDTR LAND RECRUITMENT AIDED STAFFIING - _ N X E DT R S-___ REGIONAL TEACHING REGIONAL COUNCIL REGIONAL CHIEf REGIONAL TECHNICAL: COLLE\.GES AND RVICE COMMITT f EUCATION EDUCATION OFFICERS (91 INSPECTOFRATE LGOVERNMENT SCHOOLS] _ _ -_ I I I I L EDUA\.O SEVCEl OF'DCATO CATIOTACERTNINN OUCIS ADL'-OVE=PMN OF ANAGERS CF ATO MANAATEOS OF 1 LC ASSSNANT A IICHOOLS L SCrIOULD j BJLSINS SUIOERVIUSRUj F~~~~~~~~~~~A IN A( N\.I A tIDE D SCHOOLS LC I UNAIOEI S C HOOLS SCNS ARY 1 bS repO nsO ble for techn "I d an d tro\.n\.n| I~~~~~~~ Ilz | iOURCE: Ministry oF EducobnIAR Zonbio | I AJULY 1968 (R)18RD-3971 | X I _ _ _ _ _ J _~~~~~~~~~~~~-  ZAMBIA: STRUCTURE\. OF EDUCATION, 1967 - PRIMARY LEVEL- \. -SECONDARY LEVEL- -HIGHER EDUCATION -_ _ - DEGREE LEVEL- \.-VPOSTGRADUATE PRIMARY SCHOOLS SECONDARY SCHOOLS UNIVERSITY OF ZAMBIA JUNIOR LEVEL SENIOR LEVEL JUNIOR CYCLE SENIOR CYCLE __9 __mt { 0 t 9 e t [ eSARTS AND SCIENCE[Sj h96 ~~ENGINEERINGS PRIMARY TEACHER 11GHER TEACHIER I} 9® ENIERN TRADE SCHOOLS TRAINING COLLIEGE TRAININGi COLLIEGES FARM INSTITUT ES 1-Li (J IJUpper Prr\.oary School Leaving Certificate (Grode 7)\. _ ~~~~~~~~~~~~~~~~~~~~~~NATURAL RESOURCES 2 Junior Secondary School Leaving Certificate (Form 1)\. ZAMIBIA COLLEGE OF AGRICULTURE DEVELOPMENT COLLEGE O Cambridge Overseas School Leaving Certificate\. Teochers' Certificate (tor Teachers in Primary Schools)\. () Degreesi, Humanities and Social Sciences (B\.A\.), Naturall Sciences (B\.Sc\.), Education, Administration, Low\. COLLEGE FOR FURTHER EDUCATION ® Degree in Engineering\. - [ -F ODegree in Medicine\. ® Teachers' Certificate (for Teachers in Secmndary Schools)\. T Technical Certificate\. NOFtTHERN TECHNI1CAL COLLEG3E @) Postgroduiate Cerlificate olf Education\. 0 t Certifcote in Agriculture\. @ Oiplomas in Agrculture, Acimal Management and Agricultural Commerce\. AGE 7 a 9 i ) I 12 13 14 15 16 17 18 19 20 21 22 23 24 25 z rrz SOURCE: MiMistry of Education, Zambia (2R) IBRD)- 3972t  ZAMBIA: E DUCATIONAL PYRAMID, 1967 HIGHER 3 I 2 i ] ] ] j 1 237 39 SECONDARY1 5 1,4413 328 44 21081 \. 1,121 :3 IBOYS 4,74 1622 GIRLS 2 76 678 \.*3,073 PRIN:ARY l | 9,83361E9 5,522 PRIMAARY *7 27 781 4,192 6 35,388 21,324 36,795 24,806 4 43,076 *\. \. 34,723 ;3 4 5, 2 15 39,087 ;2 1 1 Si2,635 \.*\. 48,375 \.59 \.44 ___ t\. \. , 56,159 70,000 60,000 !50,000 40,000 3i0,000 20,000 10,000 0 10,000 20,0010 30,000 40,0010 50,000 60,000 130YS GIRLS SOURCE: Ministry of Education, Zambia l rr! (R)18RI)-397'0 | _ _ _ _ _ o'~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~C,  ANNEX !s GRCWTH OF THE ZAMBIAN EDUCATION SYSTEM 1l960 - 1968 SE CO N D A R Y L E V E L P O S T -S E C O N D A R Y 1, E V E L Total Teacher Trade Northern College University Kabwe YEAR Primary General Training Schools Total Technical of further of Higher Total College Education Zambia TT( 1960 27978() 2543 1156 i445 5144 - - - 1961 296264 3724 1211 i!28 6363 - - - 1962 3290883 5187 1203 1381 7771 223 - - 22\.3 1963 337961 6922 1251 628 8801 184 - - -18 1964 365565 13250 1283 841 15374 519 848 - 1367 1965 397110 16738 1429 L486 18653 14h4 - 1272 - 271\.6 1966 47333L 23799 1510 621 25930 1239 1727 312 3278 1967 53930() 34i139 1857 287 36283 1570 1/ 2000 1/ 536 5)6 4162 1968 598198 38997 2072 302 41371 n\.a\. n\.a\. 767 124 n\.a\. 1/ Includes evening-class,s, 1967 figures for College of Further Education estimated by Min\. of Ed\. Source: Ministry of Education, Zambia  A NNEX 5 ENROLLMENT TAHRETS FOR PRIMARY EDUCATION - 1967-1980 TOTAL TOTAL ITOTALJ TOTAL | PRIMARY G R A D E GLAER D E | UPPER BOTH AGE-ROUP ENROLLMENTS YEA R ~GE6 'V 1 I(V ! 7 1 ' VDQ AI PRC" 2 l 3 l 4 l CVCLE l 5 1 6 1 7 1 1 | | ~~~~~OF 7-13 YRS\.| I_____ __________ _____ _ |_ ] AGE-G ROUP 1967 1 115,903 101,010 8LI,3102 77,799 397,014 61,6011 56,712 I 41,973 160,286 539,3001 683,000 79\.0 1968 - 121,801 114,083 98,'20 83,735 d18,139 64,165 60,676 1 55,218 1180,059 598,198 715,000 83\.7 1969 122M\.000 )20600 1 97\.A00 )i3\.10I 67\.000 A3\.OO 60\.100 190\.600 61,1\.700 753,000 85\.5 1970 112>,000 120,800119,OO 111,900 h 481,100 78,000 66,300 62,900 207,200 688,300 794i,OOO 86\.7 1971 13(,000 1O27,700 119,600 118,200 1 495,5001 89,5001 77,200 65,600 1232,3001727,8001 832,000 1 87\.5 1972 1 u32,000 128,700126,7001 118,400u I ,5 9L4,600 93,600! 76,700 259,6001765,100 865,000 R88\.3 1973 l13L,000 130,700 127,600 125,100 517,200 96,700 93,700 87,700 276,100 793,300 899,000 88\.3 197TL 136)OOO 132,700 129,L600 126,100 524,200 112,600 193,800 92,800 1299,200 823,400 925,000 89\.0 1975 139,000 134,600 131,400 128,100 533,1001 119,8001111,500 92,900 324,2001857,300 950,000 90\.2 1980 15,00151,500 144,000 139,800 59L,300 I 130,900 126,800 1122,900 380,600 976,90011,051,)O0 1 92\.7 1/ Actual figures\. Source: Mi:\.ist\.J y of Educatior\., Zambia  ANNEx 6 RPOILLKENT TARCETS FOR SECONDARYP2 SCHOOTLS IN 1000 ' S FROU"I OF OTOTPUT M TOTAL EKIROLL:;\.:TS YEAR PRI FRO;I PR14\. F 0 R M TOTAI, AGE-GROUP A3 PERCE7ih-> SCIIOOLS SCHOOLS TO 14 - Lti Ati GROUF SEC\. SCHOOLS 1 2 3 4 5 YEARS__ 1967, 1t2\.0 - 1\.7 15\.0 10\.7 4\.2 2\.6 1\.6 J 34\.1 357 9\.6 1968 55\.2 34\.0 14\.3 1 3\.L4 b6\.2 J \.2 1\.9 J3\.0 3i\. 1969 60\.1 30\.0 I 16\.6 I 13\.6 8\.8 5\.6 2\.9 47\.5 387 1]2\.3 1970 62\.9 30\.0 18\.0 15\.8 9\.0 7\.9 5\.0 f 55\.7 1402 13\.9 1971 6(5\.6 30\.0 18\.9 17\.1 15\.0 8\.1 7\.1' 66\.2 4 430 15\.4 1972 6\. - 30 0 19\.7 18\. \. 7\. 5 f 7\.3 683\.7 L50 f 1-5\. 3 1973 f37\.7 30\.0 22\.9 18\.7 1\.7\.1 8\.1 6\.8 73\.6 1459 16\.9 197IM 92\.8 30\.0 26\.3 21\.7 1\.7\.8 8\.6 7\.3 81\.7 1481 17\.0 __1 - I 't - ~~~z ~~ " - - Z ,\. O I\. IOn1' I 1975 | 92\.9 280v\. 26\.0 25\.o c:Zo\.6 K1 8\.9 1 7\.5 8208 1 1\. 40\.u eu\.v If~ ~~ mA ~ 1976 lLO\.14 [ 28\.0 26\.0 14\.7 23\.7 0\.3 \.u j 9 536 17\.3 1977 117\.14 25 30\.9 24\.7 23\.5 11\.9 9\.3 100\.3 569 17\.6 1978 119\.3 25 32\.8 29\.4 2 23\.5 11\.8 10\.7 J 108\.2 595 18\.2 1979 121\.2 I 25 33\.4 31\.2 27\.9 11\.8 10\.6 1114\.9 618 18\.6 19e0f 122\.9 25 33\.9 31\.7 2?9\.6 14\.0 10\.6 119\.8 638 i8\.8 1/ Enrollment in Form 4 equivalent to 50% of the output frorn Form 3 (Junior cycle) Source: Bank Mission oo r -  ANNEX 7 ZAMBIA TEACHERS IN SECC21DARY SCHOOLS DEMAND AND SUPPLY YEAR ENROLLMENTS | i Z A M B I A N T E A C H E R S NUMBER OF EXPATRIATES |YEAR I PENROROJLECTMIENOTNSS |I'EACHERS 1 | OUTPUT FROM [ TOTAL BY EXPATRIAT + increase [j O °°° IO NEEDED IN POST 1 HT\.TT \.C\. 7 UNIVERSIY END OF YEAR REQUIRED - decrease 194 -o 1~ 39\. ''4C 177A 19o 1578 I I ± ~~~~~~~~~~~~~~~~~~~~~~61 1969 47\.5 1837 198 1639 I + ~~~~~~~~~~~~~~~~~~~~~~~~~~~318 1970 55\.7 2155 198 1 137 335 1957 1971 66\.2 2561 335 _8 240 463 2226 32 1972 1 68\.7 2658 463 150 80 693 2195 1973 73\.6 28h7 693 1',0 120 983 2152 1974 81\.7 3160 o 983 325 230 1538 2177 + - 1975 88\.2 3412 1538 32,5 360 2223 1874 1 1 1 ~~~~~~~~~~~~~-511 1976 92\.7 3586 2223 325 500 3048 1 363 00- 0 0" ~~~~~~~~~~~~~~-531 1977 2 00\.3 3880 3048 325 50 3873 83 -L\.uu - uu~~~~~~~~~~~~~~~~~ 519 1978 108\.2 4186 I 3873 325 500 24698 313 1979 1 14\.9 24445 24698 32)5 500 5523 - 1980 -129\.8 b63h 5523 f 325 j 500 J 63 2B 8- _________ __ Source: Bank Mission estimates  ANNEX 8\. Page 1 NO1'EnNEf TECHNICAL CULLr\.E Table "A" Enrolments at the Northern Technical College\. and associated institutions, 1967 Courses~1 Full-time & block release Art-tme cday & evening Course\.s ~ ~ A_ I IG I P\. I F I r\. A I B I C I D I F, I FI Automobile engineering 110 Electrical engineering 147 Fabrication engineering 81 H MIechanical eng,ineering `40 i Te2ecoTmmunication engin\. JL39 I Commercial & pen\. edc\. I 2 I I I I Ri 126 117311381 I Apprentice introuctory 75 | 30 517 99 1 20 1 1 1 1 1 96 1409 11731166 63 1 12 115 U)~~~~~~~~~~) ~~~~~7 )L4J Key: A=Ndola; B=Kitwe; C=Chingola; D=Mufulira E=Luanshya; F=Kabwe; G=Lusaka\. Table "B" Projections of Future Enrollments |_____ Enrollments _ 3rTpe of course 1968 '69 '70 1'71 '72 j73 | '74 F I I I I I I 0 |Block--release|526|570 |610 660 4 680 680 Part-time day/evening I I I e ate t Total enrcllment 6 631 !704! 805 880 945 !990 ! 0oi0 |Maximum day load 339 | 419 | 500 | 560 |615 |650 |6  ANNEX 8 Page 2 Table C Projected Output of Craftsmen and Technicians fr0alif ietion II Annrox\. Annual Output 1 | | e 1968 1 1974 Craft H 165 | 140 Technician 85 210 Note\.- It is ver;y difficult to estimate the "output" of the Northern Technical College, a majority of whose students will be industry-based and may leave at any point in a caarse of from one to four years duration\. Moreover, a course may commence with a craft bias and terminate at the technician level\. In the following approximation it has been assumed that, for most courses, stuldents who leave at a "half-way" stage can be included in the craft output\. Table D Present Teaching Staff _- Teacher training L Qualification Trained _JUntrained__ otal l Degree or equivalent qualification | 7 | 2 9 National diploma or certificate (TTJK=) 2 7 9 City & Guilds of London Institute 1 5 TOTALS 11 21 32 Table E Staff Requirements { | tAR | tAq § t~~~~~~7n 1 t71 1 ,79 1 7 1 7)\. I ~~ TT~~1T-I -7 I -7 ' ; If | Max\. day loading |45 500 560 615 | 50 | 6 Equi-v\. no\. of classes 23 27 32 399 No\. of teaching staff 32 38 45 51 55 56 56 ~~~ 0 - 7 i~~~~~~~~~~ \.!!lab \. &L WffSshop L,ec \. La I 01 6 6 Student/teacher ratio 10\.6 11\.4 11\.1 11\.0 11\.2 11\.8 11\.8 Source: Ncrthern Technical Gollege, Ndola  ANNEX 9 TOTAL NATIONAL EXPENDITURE ON EIIUCATION AND TRAINING - 1968 (in K loon) ------------------ PUBLIC SECTOR-------------------------------- --PRIVATE SECrOR--- Mirnistry of Civil Ser-vice Ministry of MInistr\. of Other Private Private Education Training Agriculture Health Ministries Companies Persons Total tfee3) Recurrent, expenditure Administration, etc\. 2210\.4 2210\.l Primary education 16571\.6 16571\.6 Second\. education 8727\.4 8727\.L Teacher training 1320\.4 1320\.Lt Technical & further 1266\.4 336\.0 1168\.4 257\.6 673\.5 6000\.0 151\.0 9852\.9 Adult education 920\.6 920\.6 University of Zambia 1968 grant 1ibOO\.O l400\.0 transfe rq 1 _88 2 388\.2 bursaries 600\.0 ,600\.0 Other expenditure 283\.2 283\.2 Total Ministry of Education 34688\.2 Fees 660\.0 _ 660\.0 -- Total recurrent 34028\.2 336\.0 1168\.4 257\.6 673\.5 6000\.0 811\.0 43274\.7 Cpital expenditure 15868\.5 100\.0 550\.0 770\.0 1510\.0 \. 18798\.5 kminus bursaries,) - 600\.0 _ _ , - 600\.0 Total 49296\.7 436\.o 1718\.4 1027\.6 2183\.5 6000\.0 811\.0 61L73\.2 Source: Estimates of Revenue and Expenditure, 1968  AMTh1W\.Y 10 RECURRENT EXPENDITURE 1964/65 - 1968 (ln K 000) 1964/65 1965/6S6 1966/67 1967 I, L968 1\. Total recurrent government account/budget * 152,074\.6 214,383\.0 244,474\.2 124,169\.0 249,790\.7 2\. Minus: Ancronriations from general revenue to capital 46,472\.0 75,000\.0 80,000\.0 24,000\.0 54,000\.0 3\. Net recurrent expenditure 105,602\.6 139,383\.0 164,474\.2 100,169\.0 19,,790\.7 4\. Budget Min\. of Edacation 14,148\.4 19,583\.8 25,166\.2 15,650\.00 32,700\.0 5\. add: Bursaries *** 212\.4 569\.6 732\.0 270\.0 600\.0 6\. Transfer Univ\. grant + 69\.4 p80\.6 770 + 1,388\.2 7\. Rernirrmnt exnenditure Min\. of Eclucation 14,360\.8 20,222\.8 25,017\.6 15,343\.0 34,688\.2 =do - as a % of 3 13\.6% T-T1\.-2%T 15\.3% 17\.7% *t Including "Constitutional and Statutory expenditure" **s Six months' period July - December 1967 iHp* Bursar:les are included in the capital budget of the Ministry of Education\. Source: Financial Reports 1964/65 and 1965/66 Estimates of Revenue and Expenditure 1966/67, 1967II and 1968  ANNEX 11 RECURRENT EXPENDITIJRE BY MINISTRY OF EDUCATION (budget estimates) 1966/67 1967 II 1968 K'OOO K'OOO % K'O% Administration, etc\. 1967\.6 7\.9 1078\.2 7\.0 2210\.4 6\.3 Primary education 11937\.2 1X7\.7 7097\.L 46\.3 16571\.6 47\.8 Secondary education 6497\.6 26\.0 4257\.0 27\.7 8727\.4 25\.2 Teacher training 866\.2 3\.' 476\.2 3\.1 1320\.4 3\.9 Technical & further edluc\. 1015\.6 4\.0 760\.0 4\.9 1266\.4 3\.6 Adult education 715\.8 2\.8 495\.8 3\.2 920\.6 2\.7 Univers:Lty 1043\.4 4\.2 775\.0 5\.1 2788\.2 8\.0 Bursaries to students 732\.0 2\.9 270\.0 1\.8 60o\.0 1\.7 Other expenditure 242\.2 1\.0 133\.4 0\.9 283\.2 0\.8 TOTAL 25017\.6 100\.0 15343\.0 100\.0 3h688\.2 100\.0 IJNIT COSTS IN KWACHAS DA(1968 J ) iuLi\. I uS± Boarding Total per Staff Other Total Cost boarding student Primary education 20\.6 L\.L 25\.0 10\.7 5 7 Secondary education ' 139\.0 23\.0 162\.0 59\.0 221\.0 Teacher training 301\.7 195\.2 L96\.9 10h\.2 601\.1 University 1912\.7 1185\.7 3098\.4 378\.4 3476\.8 (197)4) Primary education 32\.0 10-7 1027 Secondary education 180\.0 59\.0 239\.0 Teacher training i76n1 6F; -6 7 University 2170\.0 300\.0 2)470\.0 * Un-scheduled schools only\. Source: EstL mtes of P\.ovonue -d Exenditure 1966/67, 1967TT and 1968 Ministry of Education, Zambia Uni'Lve rstL Uy ofL' Za\.bia, Rlecurr-entL Dudgeet' \.L79)  PROJECTED RECURRENT EXPENDITURE MINISTRY OF EDUCATION 1\.968 - 1974 K'ooo (in constant 1968 prices) 1968 % 1974 % Adainistration, etc 2210\.4 6\.3 4000\.0 5\.6 Primary education 16571\.6 47\.8 28792\.3 40\.2 Secondary education 8727\.4 25\.2 18512\.8 25\.9 Teacher training 1320\.4 3\.9 1847\.9 2\.6 Technica\.l and further education 1266\.4 3\.6 2218\.7 3\.1 Adult education 920\.6 2\.7 1500\.0 2\.1 University of Zambia 1400\.0 - - 2788\.2 8\.0 12760\.5 17\.8 Bursaries ( 600\.o)* 1\.7 1500\.0 2\.1 Other expenditure 283\.2 0\.8 400\.0 0\.6 Total budget 'Kin\. of Education 32700\.0 100\.0 71532\.2 100\.0 Adjustments ( 1988\.2)* - - - AdAj;sted A-- ' A\.-\.A-\. \. '1 7 -^ , & 0A\. n \\\. V-J U>: US: V %, XJVU L |VV \. W_) UV Source: Bank Mission estimate * Adjustments to correct 1968 budget figures by the addition of recurrent expenditures not shown in the budget\.  ANJ N J!¢A 13 /CADTrPAT LYflWIMfTr 19TD 4 - 1968 tv 1 oonn (V : vvv ---Actual Expenditure--- ----Budget Estimates ----- - uuly De\. 1964/65 1965/66 1966 - 1967, 1968 1\. Total government capital expen,144-re 3530 66941n7\. 6)2\. 2\. CutajL d± expendu4 L IUre Min\. of Education 4285\.2 16440\.8 19161\.3 15868\.5 -do- as a % of 1 14% 25% 12% 9\.4% 3\. of which for: ------ ------- Primary education 1333\.6 2493\.4 7957\.5 Secondary eduhcation 2038\.4 10252\.2 153R34\.6 Teacher training 16\.2 923\.6 1052\.0 Technical, adult, etc\. 660\.8 693\.2 1984\.0 University --- 2000\.0 5150\.0 Other 23\.6 78\.4 1949\.7 Bursaries (recurrent) 212\.4 569\.6 1602\.0 Source: Financial Reports 1964/65 and 1965/66 Estimates of Revenue and Expenditure 1966/67 and 1968  ANEX 14 EDUCATIONAL ATTAINMENT OF ZAMBIAN LABOUR FORCE 1965/1966 (percentages show educational attainment as percentage of total labour force) Africans % Non-Africans % Total % DegreEt i50- 3,499 iu\.5 O,Ly U\. Diploma or 517 0\.1 5,944 17\.0 6,1461 0\.8 A-level Secondary 1,516 0\.2 11,965 34\.3 13,1481 1\.7 Lower secondary 7,282 0\.9 11,409 32\.7 18,691 2\.3 Below Form 2 261,681 33\.9 1,944 5\.5 263,625 32\.7 Total Modern 271,1 46 35\.1 34,761 100\.0 305,5;07 38\.0 Sector Be'low F'or-i- 2 (subsistence) 500,000 64\.9 - 500,000 62\.0 Total labour 771,146 100\.0 34,761 100\.0 805,5907 100\.0 force (percentages show proportion African Non-African for each educational level) Ara 'Al Non-Afrlcas % Tota\.i %_ Degree 150 4\.0 3,499 96\.o 3,6149 100\.0 Diploma or 517 8\.0 5,944 92\.0 6,1461 1oo\.o A-level Secondary 1,516 11\.0 11,965 89\.0 13,4i31 100\.0 (O-level) Tower ,secondary 7,282 397\.0 W7 0\.L\. U 0l,609l iO\.O (F2) Below Form 2 25 6\. I 99\.0 Il914 1\.0 263,62- 100\.0 Total Modern 271,146 34,761 305,907 100\.0 Sector Below Form 2 k subsi s'sen ce) 5U10JjoW 100\.0 - -500,020 100\.0 Total 'labour f'orces 771,146 96\.0 34,761 4\.0 805,907 100\.0 Source: Manpower Report, Zambia Government 1965/66  ANND 15 EMPLOYMENT BY INDUSTRIAL SECTORS\. 1954 - 1966 (EXGTJUDTNr, RURAT\. SUBSTSTENCE SECTOR) 1954 % 1964 % 1966 % 1\. Agriculture, forzestry and Il I N a fishing 39,500 15 35,500 13 || 33,500 j 10 2\. Mining and quarrying 50,900 19 || 50,600 19 || 55,000 17 3- Ma\.nufacturing 17,800 7 7| 20,900 8 || 31,600 9 14\. Construction 59,200 22 || 31,000 11 || 70,3(0 21 15\. Electricity, water and K\. sanitary services 2,400 1 1 f 2,200 1f 3,4)00 1 6\. Commerce! a 17,100 y7f 20,900 8 27,1(0 8 T\. ransport and3 1140 4 240 6 communications 9,000 3 11,1400 4 21,4(0 6 8\. Private domestic service 29,600 | 11 | 35,500 | 13 || 35,0(0 11 19\. Other services 39,600 | 15i 61,300 23 || 55,7(0 17 TOTAL 0 100 ||_268,700 100 332,900 |100 of whom: LI i - ll A f,- r i cL4 I ' L4r ~ )\./ -L II _') I ,V' I%J 7 iV \.tv I A-rian 12olo 91 1l 23,000JS |~ 88 |l3380|9 L Non-^tricion |1\. 2770 | 9 l 31,7I0' I 12 || 29,, 9 I IrcJUJ Enomic Report, R c I 7 _ambia 19 _7 Source: Economic Report, Republic of Zambia 1967  000000ED SF0CC10087 S021D01 - 00001L280TS AND CLASS 000UP0 0000112408 000000 F0RIM I 000 2 200 3 001000 0001 0 70o 5 \. : 40 02 000- ART S,\. 1 \. I 010 a0822 0 - 2oo/5 200/5 20/5 T-0 105/3 100/3 ½1 ½~ I 102 00HINSA\.1 620 1\.80 160/4 10/6b 16o/b 0-80 70/2 70/2½ ½ - ½ ½ io, Bio ~ ~ ~~~~~- 20015 2lw5 200/5 T\.0-H0 005/3 105/3 ½ o 01o2 67Y0A 620 460 160A1 160/b 160/b T-HE 70/2 70/2½ ½ ½ - ½ - 005 KlIVE 930 - 21\.0/A 210/6 2h0/6 T-C-HE 1005/3 105/3 ½ 106 01H0001\.0 030 \. '10/6 210/A 21\.0/6 T-C-H0 105/3 105/3 ½5 ½I 007 800I\. 620 - 60/A 160/4 060/L 2-0 00/2 20/2½ ½ ½ ½ - - 100 KW1A 620 100 160/1\. 060h 060/4\. T-HE 70/2 il/S ½l ½ 105, KABW0 930 - 210/6 21\.0/6 21\.0/6 T--HE 1000/3 105/3 ½I 200 50018 930 \.665 21\.0/6 200/6 240/6 T-A 105/S 105/S ½2 ½9 I - 1 202 lOOIOA 030 11\.0 21\.0/6 21\.0/6 210/6 T-A 1006/3 1005/3 ½I - 0 203 COINSAo2 530 700 21\.0/6 210/6 21\.0/6 T-A 105/3 105/3 ½I - I 201\. 06080 930 665 200/6 260/6 01\.0/A 0-00 205/3 105/3 I 1 206 -000 002 930 080/7 260/7 200/2 T\.H-A 1\.0/1\. 11\.0/1\. 0 1 ½5 - I 206 1PO200010 1020 930 280/7 280/7 280/7 T\.00\.0 510/A 01\.0/1\. 0 0 ½I 207 L0 'I0 00 120 930 080/7 280/7 280/7 T-0E-A 14o/b mo/b 1 0 ½I 208 C012E00 735 595 075/S 025/5 175/5 T-A 1005/3 005/3 ½ 1 209 LIVIN800108E 930 - 21\.0/6 21\.0/A 210/A T-0H-0 005/3 105/3 I 20 H0\.2CR\.T0, 1070 528 21\.0/A 240/6 200/6 T-0 075/S 175/5 - 3 0 1 211 06100 0020 030 200/7 280/7 280/7 5-0-0 1\./1 "1\./1 0 1 ½\. - 0 ½~ 212 8829461A 1020 930 280/7 280/7 260/7 7-30E\.0 I10/4 1WA/1 0 1 ½ - 0 213 MN650 735 595 175/5 075/5 175/5 5\.A 105/3 105/3 ½ 210\. CH8210A 1120 930 280/7 280/2 280/7 T-HE-A 11\.0/1 mbo/b I I I ½\. 205 09110010 735 595 175/5 175/5 175/5 T-A 105/3 005/3 ½ 1 206 1LUN0AZI 1020 930 280/7 280/7 280/7 T-HE-6, 1400/ mho/b 1 1 ½I 207 PETA0KE 1020 730 200/7 280/7 280/7 T-00-0 mbo/b m0/L\. I 1 ½I ½ 208 MAS I\. 1005 - 215/7 215/7 245/7 T-0-H0 01\.0/1\. 01\.0/1 0 0 ½ 215 C05in0DU 930 - 240/6 210/6 24\.0/6 5-1-lE 105/3 105/3 ½I ½~ - 220 68210002 J1 11002 280/7 5180/7 250/7 T-0-50 01\.0/1\. 1\.0/4 0 0 ½ ½ I - 220 CHIWA10A 930 735 240/6 21\./6 210/6 T-A 005/3 105/3 ½ - - 222 0/7AN018A (BOY05 1120 - 280/7 280/7 280/7 T-C 13\.0/1\. mS0/I 0 0 0 0 - 223 00028210U 930 -- 210/6 21\.0/6 210/0 T-0-H0 105/3 105/3 ½ ½ ½ 1 ½ - 221\. 008A1 A2TE06PE 930 - 24C0/6 210/6 240/A T-C 105/3 105/3 I 225 LUANSHTA5 930 - 21\.0/6 240/6 24\.0/6 0-90 105/3 1005/3 ½I I 226 01T0 0350S) 1102- 280/7 280/7 250/7 T-C 14\.0/1 mO/1\. I 0 0 0 1 227 01I00 (01IRI07 1010 21\.0/7 205/7 21\.8/7 1-00 1\.0/1\. mo/b I I - 0 228 018*8701\. 530 - 210/6 21\.0/6 27,0/6 5-0-80 105/3 105/3 ½1 It ½1 0 227 000770 235 1 75/0 175/5 175/5 T-C 105/7 105/3 ½1 ½, 1 1 2 30 000001\.0 620 - 160/1\. 160/A 160/I 0-50 70/2 70/2 ½ ½ - i 230 M00UL\.280 31\.0 - 320/8 320/0 720/8 T-0-00 010/1 mo0/I o 0 ½ ½ 0 232 00782A5051 1120 - 20/7 090/7 I60/8¶ TC01071n01\. 1,0 2 233 0-5001 1210 320/0 320/8 320/0 0-0-0 1L0/1\. mo/b I 231\. CH5021\. 0120 - 280,'7 280/7 250/7 T-C-86 1\.0/1\. mbo/I oI 1 - 235 0818L10081 1120 - 280/7 280/7 280/0 T-C-80 IL0/1\. mLo/1 1 1 ½I 236 C811L01\.007800 1120C 200/7 280/7 280/7 T-C-H0 i1\.o/4 000/b 0 5 1 - 237 0*102 1020 970 280/7 280/7 260/7 T-0H- mo\./I mo/I 0 I ½I 230 8880008 0020 930 280/7 280/7 2805/7 T-H0-8 1W0/ mo/ I I ½I 239 0K2M01L0 800 895 200/S 200/5 200/5 T-A 1005/3 105/3 ½ - 0 210 SENAN80 0120 930 280/2 200/7 200/7 T-80-8 01\.0/1\. mo0/4 0 1 ½s 241 0000000 0120 930 280/7 280/7 200/7 T-8E-A mho/I 01\.0/1 1 0 ½s I 2o2 0\.8WAM4WA 730 595 175/5 175/5 ' 750/5 T\.A 100/8 1o05/ 0\. 2\. 1 - 213 K0020S81 810 630 200/5 200/7 200/5 0-00 1005/3 1000/3 ½ 1 0 211\. 19483 930 330 21\.0/6 210/6 21\.0/6 T-A 105/3 105/3 ½ ½ 0 - - 1 21 87703382 0020 970 260/7 280/7 280/2 2-80-A mbo/I 11\./110 0 1 ½ 21\.6 080010 1120 970 280/7 205/7 280/7 T-K10- mo\./b 100/1\.0 0 1 ½ 21\. 0010861 1120 90o 2000/ 200/1? 2/ THEA I 1', CO W 'on '2o,I\.,0\.I 2 21\.8 MW081120811 1120 970 280/7 280/7 ;80/7 2-80-0 mLo/b mo/b 21\.9 10D020Z1 735 595 58/ 175/5 175/5 275/505/7 005/3 105113- 250 0S0021E 930 665 MAb 20/6 2 40/6 T1/ -A 005/3 105/3½ ½ 0 - - 0 251 ~IOJUM3WA 0128 970 280/7 200/7 280/7 5-H1-A mo0/I mho/4h 0 ½j - 253 1\.00AL8 930 - 2b0/6 24,0/6 010/A 2-0 105/3 10513 ½ 0 201 16A1U0008 0020 - 280/8 280/8 280/8 T-C 1110/0 010/b I 0 I I 255 087'iA 01120 - 280/8 280/5 760/8 T-C-so mho/I 110/1\. I 0 1 256 289AL1 0015 770 21\./7 205/7 215/S T-C mho/I moa/b I 1 0I enroOtusoto ~~~63395 28908 15905 05905 15905 201\.0 7840 \.l\.s poop\. 1\.07 1\.07 107 221\. 224 08 1\.9 2 25 39 20 *Flior\. h-oo In col do 02 Polo 0-5 hOo noabr oT stdents/cl\.ss V0900 -oPs-tO-4\.  o2vDRNmr OF ZAM~BIA M)UCkTION PROJECT ANN EX 17 (pars W_ SUM(ART OF ESTThATE PRO3JECT COSTS ( in 'O0OJ 1 2 3, 4 5 6 7 89 10 U1 12 13 14\. 35 1\.6 17 Site Develop- ,et and Teaching & Co=asMa3 Staff Pro- Total, coat Total, coat Sob-Total Incmease External Niild- 2'umi- Equip- Boarding Houaing fessional\. of of 3 to 10 in 2/ Unforesaean Total costa I/ Cods Nm\.s Places BDxrdera Works ng ture sct Daldngs iture Buld Servlcea Bildn Furnitu:re _ ___ coat expnttures K~acha\. j\. K\. K\. K\. K\. K\. K\. K\. K\. K\. K\. K\. K\. lot\. Kaa sma 810 - 58\.0 234\.4 33\.3 50\.9 - - - 34\.6 234\.41 33\.3 4\.07\.2 53\.4\. 38\.8 4\.99\.1\. 108 Chbm,sali 620 1\.60 116\.6 207\.3 20\.6 1\.1\.6 151\.1\. 28\.0 14\.8\.2 2,\.8 506\.9 4\.8\.6 791\.5 112\.0 83\.8 987\.3 103 Cbi7,ata 810 - 38\.3 255\.3 36\.1\. 56\.3 - - - 35\.2 255\.3 36\.4\. 421\.5 54\.8 39\.!\. 515\.7 101\. Nylisba 620 4\.80 125\.0 223\.9 20\.6 1\.9\.4\. 165\.6 30\.0 154\.1 80\.2 54\.3\.6 50\.6 81\.8\.8 119\.9 89\.9 1058\.6 105 KiWe 930 - 31\.8 211\.8 30\.1 56\.6 - -- 29\.2 211\.8 30\.1 359\.5 1\.5\. 32\.7 4\.37\.6 1065 Chlnagola 930 - 31\.8 21-1\.8 30\.1 56\.6 - --29\.2 211\.8 30\.1 359\.5 4\.5\.4\. 32\.7 4\.37\.6 1017 Ndola 620 - 22\.1\. 019\.6 20\.4\. 39\.1\. - - - 20\.6 17,9\.6 20\.1\. 252\.1\. 32\.0 23\.1 307\.5 108 Mm\.,sa 620 1\.80 115\.1 206\.7 19\.0 1\.9\.1\. 152\.9 27\.7 14\.2\.3 74\.1 501\.9 1\.6\.7 787\.5 110\.7 83\.0 981\.2 1019 Kahn, - 930 33\.1\. 222\.1\. 31\.6 56 - -6 30\.7 222\.1\. 31\.6 3 4\.7 4\.7\.7 31\.41 456 _____ Sob-rotals 6890 1\.1\.0 568\.7 1923\.2 21\.2\.i 1\.59\.8 1\.69\.9 85\.7 444\.1\.6 108\.6 2037\.7 327\.8 4\.6o2\.6 621\.3 4\.57\.8 5681\.7 7951\.! Exteaiso,,a ofSeodr Sholal 201 Isooa 930 665 1\.3\.6 116\.3 6\.6 32\.8 28\.7 4\.3\.8 1\.7\.0 28\.3 192\.0 50\.4\. 31\.1 1\.7\.2 31\.7 1\.26\.0' 20:2 Imngvi 930 71\.0 36\.5 95\.1 5\.2 35\.5 55\.7 1\.2\.1 7\.8 23\.!\. 158\.6 1\.7\.3 301\.3 39\.9 26\.2 367\.1 203 Chinsali 930 71\.0 1\.6\.7 61\.8 4\.1 37\.9 86\.1\. 1\.3\.1\. 54\.8 30\.0 203\.0 1\.7\.5 365\.1 1\.9\.1 33\.6 WA17\. 20!, Kaa\.-a 930 665 36\.6 71\.1\. 7\.0 28\.0 25\.0 4\.2\.6 62\.6 23\.5 159\.G 1\.9\.6 296\.7 1\.0\.3 26\.3 363\.3 20!5 4ba,la 1120 930 7\.8 21\.3 1\.2 38\.0 23\.6 52\.2 - 6\.7 4\.7\.9 53\.1\. 153\.8 17\.1 7\.5 178\.7 2065 Mparoakoo 1120 930 7\.8 21\.3 1\.2 38\.1\. 23\.6 52\.2 -6\.7 4\.7\.9 53\.1\. 151\.2 17\.1\. 7\.5 179\.1 2017 l\.r\.irg 1120 930 7\.8 21\.3 1\.2 4\.0\.6 23\.6 52\.2 - 6\.7 4\.7\.9 53\.1\. 156\.1\. 17\.1\. 7\.5 181\.3 2013 Cbi~pspo 735 595 1\.2\.4\. 98\.1 8\.5 41\.o 31\.1\. 36\.6 51\.8 27\.2 181\.3 4\.5\.1 31O\.0O 1\.4\.9 30\.5 1\.15\.1 209? LfrLngstoo 930 - 8\.1 80\.9 32\.3 4\.0\.4\. - - - 10\.7 80\.9 U2\.3 152\.!\. 16\.8 1\.2\.0 181\.2 21\.2 NilLoret 2070 528 23\.8 167\.3 10\.7 1\.2\.5 86\.0 l1\.0 - 33\.3 253\.1\. 24\.7 377\.7 50\.3 473165\., 211 Kalan 1320 930 6\.6 20\.1\. 0\.0 38\.0 19\.8 1\.3\.9 - 5\.6 4\.0\.2 1\.1\.9 135\.3 14\.6 6\.3 156\.2' 212 Nanaoala 1320 930 7\.8 20\.3 1\.2 37\.7 23\.6 52\.2 - 6\.7 4\.7\.9 53\.1\. 153\.5 17\.1\. 7\.5 178\.1\. 21\.3 Nmone 735 595 19\.5 58\.2 2\.9 27\.6 32\.6 30\.0 19\.7 12\.7 86\.5 32\.9 179\.2 22\.7 11\.2 216\.i 27,4 Chalize\. 1120 930 8\.0 25\.3 1\.2 1\.0\.2 21\.5 54\.3 - 6\.9 4\.9\.8 55\.5 160\.5 18\.0 7\.8 186\.3 2115 Chtzongse 735 595 31\.6 80\.1 4\.5 36\.8 23\.7 38\.0 32\.6 20\.3 137\.1\. 42\.5 268\.6 31\.8 22\.7 326\.3 216 lamlazi 1120 930 8\.1 25\.3 1\.2 39\.0 20\.5 51\.3 - 6\.9 4\.9\.8 55\.5 159\.3 18\.0 7\.8 185\.1 21`7 retsoke 1120 930 8\.0 25\.3 0\.2 39\.7 24\.5 54\.3 - 6\.9 1\.9\.8 55\.5 160\.0 18\.0 7\.8 185\.8 2113 Macala 1015 - 21\.0 91\.1 11\.7 1\.0\.0 - - - 13\.5 91\.1 11\.7 177\.3 20\.6 15\.1 213\.C 219~ Chitubu 930 - 1-1\.0 73\.6 32\.5 37\.3 - - - 10\.2 73\.6 12\.5 11\.1\.6 16\.1 11\.1 172\.1 -221) K-se"Ai1120 - 6\.3 1\.2\.3 5\.2 23\.6 - - - 5\.8 1\.2\.3 5\.2 83\.2 6\. - 6\.5 ____ 8_____ Sub-Totals 19950 12563 389\.2 3226\.7 100\.6 735\.0 537\.3 706\.1 279\.3 2912\.0 2043\.3 806\.7 4\.266\.2 529\.8 32 '7\.2 5123\.2 7171\.9 0/ Total 3tolo0plos l1andl15\. Z/ 12% of3, 1\., 7, 9, 10\. 3/ 151 of 3 to 5plus 7tolo,\.  '0A)flfl0)VHJ) C''S0 C'C'C' 00 000000)000000000 Ii I 00000000000000000000000000000000ft300 l 0WO*1mC' -b o p\.r 0\. 04 04op\. n b'1ffhV 0 - C  St 0 \. *0 3401-'o C ' 0 0 6 S S, a A)-' C I\. U 00000 )\.noOOOO 00 000000000no 000 00 1w 0' -J 'C'O '004'C'C)A'C'O -J -4 "31 I ,-i-Ju\--3--3--J--3'0'C00'C00l I I',ISIIlI*I*i 0  Ii ' 0) 0 00") 0000 0 '0oO'"Oo '0 I- - 0 ICOtlO 0 0 )-'H)' ''"''-''"' '0 '0ooo-g--g a-o-j  ''oooUoKi, 'a  10 '0-4'000H440)'0 0 0'0C'-H0V4O'al" r)000'4-'00--J-4 - j' E1 j g\. C' F 0"000000 0000 0W00J'0 -J fl 0 a- '0 '0 -- IgH o- '0O"CHH)0)-½-'Hl-'0-oC-'*-'CH0C0-J 0 0 '0 -4 0' 0)'aO)-400-JC)0400000cC00)CO 0'0'00\.'CC'aOHO0)\.4C'-4l-')-'0 0' '0 F 0)'0'0 J)C)C'0 C''4C'440' 0)O'00'00)'0'0 OJ0-4C'0'\.J0)fr'0'0 HO' 0 V -Wa I * 0 f J! '0 I 6mg,tdo0X0U&dP&S-F'O'b6'fr'iggug,ggggs,gg, o '0 0' IH0)-')'H')')' O03000000 C vj  F  _ _ 0' H - - p\. '0  H0'HC)C'C'UC'C'C'C'HV)'0 C''0C'C' I 'C C"C000'-OO,'0'0'0 C' 0 '0 '0 'JC)-O'00'00)'00'000'O)O00))0I' - '0H30000O' "JC) 0-40)0 0 I H H I- F 0 0 0'0000J000000'0'a'000000)C'C''0'00'0)C0J0  52 2 21 * '0 a- P1 '0 C"0VIC"0'0I-½-' "'I")-' I a HCJH-"0'0'0'0V))0-O a-o'o-'o1-o'c0W4t  I - 00'C0I)-)0O'00000'0'a4-''0'00'0A'0'C'0C''aC0l-JC\.Jl--' H"J  S S - I Co 0 C' 10 ____ __ _ _ I A "I '0 3bb--Z4-Z,  I * r '0HOO'J0'0" '0-4C'0Co00'000C'hJ0'a0)C0)0'0'0H0'0 0' 0 '0 Ztrat 00)0'0t0 " r ft: '0 '00 0C"0'00 '0OCAOOO'0'000'0'C'0'0'0)-0000'00'C''J'0'0H'C'0'C' 0 '00 -4 0' AI"3'00 22WSt2Z 0'40"J0'0'0 '00'0'0'0'0'0C"0'J'000''0I""3 P'0O'0"ZO C'00'O0"4 0 0' 0 '00 )-\.0 400) OH' 0'0 CC'0'0 '00 0-3 -40 0'0 '0000)0)00400')-' 0'0'0 -40 0 0' 0' IAkI 0! C icz  03VERDEBNT OF ZAMBIA EDUCATION PNOJECT r4AwEx 17 OUSIARY OF ESTIXLTED PROIJECT OOSTS ( in '000 p 1 2 3 4* 1 '5~3 7 8 oi 215 40 15 16 Site Develop- sent aid Teaching & Co=ur nal Staff Pro- Total cost Total cost Sub-Total Increase Code Nenle Placss Boarders ternL build- FuirnLp- Boarig Housing fesseLla of of 3 to 1S Ln 3/ Unforeseen 2/ Total coots Code Nree Pacen r WOrks - ings tBure iit Buildings Furniture Buildigs Services Buildings Furntare cost exnedLibres K\.ach US K\. K\. K\. K\. K\. K\. K\. K\. K\. K\. K\. K\. K\. Exteionms Or Prisar Ter Tra feges 401 Kitve 525 5'25 56\.5 139\.5 10\.0 42\.1 106\.0 12\.2 - h2\.3 215\.5 22\.2 108\.9 55\.0 b1\.3 505\.2 402 Chalibabna, Ntitcol\. 300 3100 30\.5 _ 5\.8 h\.6 :27\.0 96\.3 7\.5 - 25\.4 L51\.1 12\.1 216\.1 32\.9 2L\.8 _ 303\.8 1\.3b-Tota1s 825 825 87\.0 19h\.3 Lh\.6 69\.h 202\.3 19\.7 - 67\.7 396\.6 3h\.3 655\.0 57\.9 66\.1 1309\.0 1132\.6 Extnsi-ns of HiLhar Teacher TrairnRg collee!S 501 K\.b-o b5o LSO 26\.6 90\.1 5\.6 17\.9 87\.3 8\.8 - 28\.6 177\.1 b l\.b 29h\.5 '7\.1 27\.9 359\.9 502 Kit-, St\. Fra-cio 300 300 25\.5 79\.6 6\.2 12\.1 11b\.I 11\.3 31\.3 39\.3 255\.0 17\.5 379\.b 5o\.6 38\.1 168\.b Sub-Totals 750 750 52\.1 169\.7 11\.8 90\.0 231\.1 20\.1 31\.3 67\.9 132\.h 31\.9 67b\.3 87\.7 66\.3 828\.3 1159\.6 Extersion of the Northern TechrLcal Collegs 601 North Technical NdoLa 660 100 52\.5 516\.2 11\.7 359\.3 65\.8 5\.3 - 88\.8 582\.0 17\.,0 1099\.6 lJl\.1 86\.8 1297\.5 1816\.5 Grand Totls 6563C 310893 2883\.1 7C61\.7 631\.8 3158\.9 3080\.5 1656\.6 1075\.7 1178\.9 11217\.9 2291\.4 21330\.2 26EO\.9 1669\.8 2''860\.9 J6233\.3 37% 37% 60% 100% 37% 60% 37% Lo% 37% 6o% - _ Foreign Exchange 1066\.7 2612\.8 380\.9 3h58\.9 1139\.8 991\.0 398\.0 591\.6 b150\.6 1371\.9 106b2\.7 1077\.6 697\.1 12b17\.1 1738b\.1 1/ Total 3 to 10 ploo 11 and 15\. 2/ 12% of 3, h, 7, 9, 10\. ,/ 15% of 3 to 5 plus 7 to 10\.  ANNEX 18 CONSTRUCTION COST ESTIMATES A \. _ \. - - aiverage cost per sq\. fi'\. kgru,;j Kwacha US$ Secondary schools and teacher training colleges teaching accommodation 4\.5 6\.4 dormitory buildings 4\.4 6\.1 staff housing 5\.8 8\.1 Northern Technical College teaching accommodation 8\.5 11\.9 hostels 7\.0 9\.8 Note: The above nrices do not include nrofessional fees: built-in furniture is inclucded, other furniture is shown separately\. Prices apply to Lusaka and other major cities along the railway line, excluding TjirnErton\. For Linrvtone nnri nt\.her +town- ships nlnna the railway line 5% has been added\. Prices for the rural areas (expressed as n pntage o?f Takiac nriGe) are as fonl I ^ws Central province 110% Wester provnce 100% Southern province 125% Northern province 125% Eastern province TLiTua-upula 120% Barotseland 130% Kabwe region 120% flWfl¶Te provn 12 of0% T'h A4 ffP---n-- - "i un4t costs i8 e=F1'ainedA bky the tv\.ries of canSr4-\.,ac 4- 4 n tL*~ \.J~4\. ~A~LJ~ LAJ LAL\. U %\.i\. i i J4L \.LJi i 1 \.4 U \. U W U jJ employed, one-storied rural and suburban type buildings for the schools c A\.LUr," UUU 1lI'\.JV Lj LiV \.1 I'U - uJ LV kU\. ULLUULre for'J tL~Le\.LJ, %andclee u otyD eo fu-soried structursfrteTcica Co:Llege\. Furthermore, the magnitude and complexity of built-in furniture aJnd O;L V\.V\.:WO VCL\.FLQ r U-L\.y UUUWCLJ ULitZ 6 *UU\. L1s ±UW I\.UD Vi UVL11_LLUO, buildings is accounted for by dormitories being large empty spaces and corce-iinraUted toilet, facLlitiee9\. ILIe h1UUtels are sImaLL LUrIRIJ With bui\.Lt-in furniture and grouped toilet\.  Annex 19 Page 1 Governmnt of Zambia fdnca:ion Project Eetinated Schedule of Conatruction and Tot& E3penditurea (US$ in 1000)\. Construction Phla* Nonthe 3 9 15 21 27 | 33 39 14 b 1 157 63 | 69 75 178 Luavula Region 246Smfya -------- -_ --1 108 Mansa \.I 1 - -----------1 242 Klawa \. \. ----------r 245 Nchola*lge /it - ==== 243 !bereshi \.| //P - -- - - ~ 2414 Mwense \. ---------6- Total Radon L260\.8 30\.5 125\.6 1229\.0 1212\.3 1302\.2 205\.6 155\.6 Norther Region 205 fr'; a * - - V/ - ------ 206 Mporokos,D \.i| /zx|-------------- 207 Luwingu \. 202 Munga\. \. ------------- \.U4 n8aamG uxrl\.s ----- 101 Kasama B2ys \. - ------ 201 Ieoka ----- 203 Chineali Boys30 ------------- 102 Ubhiwns Girls \. I'''' ''F''- ~ --1- ------------ Total Region 6316\.5 35\.9 167\.1 1326\.b 1752\.3 24b6\.o 347\.7 2bl\.1 FAstern Region 215 ChIzongwe \. -///||---------… 1| 216 Lenda2i \. / ' [… 103 rhipata \. - ------- 214 Chadiza| // ---t--- IIII 217 Petauke - - …------------- 104 Nyiba *- ----------__ Sub-ToLals 4b982\.7 97\.7 1432\.0 3918\.2 1 h102\.1 9 5117\.2 747\.7 1 567\.8 Legend: \. -\. Survey\. - Deign wvki- drains, spciictin bi- of crwn is, contract documents, prequalification of contractors, internatinal tender\. ro m Construction\. ------------ Guarantee period\. /// Ipnrovement to baildings and sites ahead of constraction\.  Goverrnmet of Zainbia E(dlcation Project Anne:c 19 rage 2 EstLmated Schedule of Construction and Total xpernditiwes (US$ in 000)\. Constructioni Phase Monthn 3| 9 15 | 21 27 j 33 39 j 45 5 |57 63 | 69 75f 178 Balance Foreard 14982\.7 97\.7 432\.0 3918\.2 4102\.1 5117\.2 747\.4 567\. j Southern Region | 4 - 212 Nasiwala \. */f 213 Monze _-_----_ 208 Chipepo \.| 209 Livingstone Day \. ------------- 210 Hillcreat Tech\. 1/j 211 Kalomo **- ---------___ Total Rlegion 3039\.h 11\.9f 56\.1 j 706\.4 1243\.2 | 858\.3 123\.2 40\.3 r Barptas Rarg ll| 239 Ksarbale \. ------------- 240 Son8nga *--I ------t---- I- 241 Setsheke \.i-1 238 Mankoya *----------- - -- Total Region 2450\.8 12\.2 62\.8 1217\.8 1008\.1 139\.5 10\.4 North Western Region L 247 Balovale s// 248 Mwinilunga ------//-------~~~4 4l 249 Solwezi - * 3 -----------1 Total Region 14W4l\.7 7\.7 45\.1 o6o\.o 64t\.7 99\.1 29\.1 Chingola Area - Western Reglon 236 Chililaobw--e \. \.- 234 Chikola \.[ | |\./// /--__,______ 233 Chigola *' ~ || //mt_______ 106 Chingola **4- , xjcx ------------- Total 151\.0\.9 11\.9 47\.6 353\.4 420\.7 528\.2 105\.8 43\.3 Sub-Totals 231468\.5 141\.4 643\.6 6851\.8 7421\.8 67h2\.3 | 1016\.2 651\.4 Legend: \. \. Survey\. -D Design, working drawings, specification, bills of quantities, contract documoerts, prequalification of contractors, international tender\. jc Dmcy\. Construction\. ------------- &aarantee period\. m'// I\. rovement to buildings and s; tes ahead of construction\.  Government of Zambia Fducation Project Ainfex 19 P-g\. 3 \.tiaated Schecole of Construction and Total Upenditures (US$ in '000)\. Construction Ph-\.- M,-,t,\. 3 I 9 1S 121 27 3A1 39 I hS l O 57 63 | 69 75 1 78 Balance For\.ard 23468\.5 1Jd\.1L 643\.6 6851 8 7421\.0 6742\.3 I0UI6\. 6 51\. 4 Mufulira and Kitwe Area-W\.atern Rogion | j1 232 Kantanshi \. ------ 226 Kitve (Boys) \. - -------- 227 Kitwe (GirLa) \. \.-----… 105 Kitwe 502 Kitne; St\. Franets 235 Kaliilusht \.- 228 Chanboli// 228 Chanboli \. \. \. 1L | /// -~------ ------ | 229 ukIuba \. i/i I 230 Mindolo \. / 401 Kitme \./ ----- ------- Total 1104\.0 35\. 156\.8 1094\.9 | 163\.2 | 1262\.3 294\.0 | 97\.0 Lunb and hdola Area-Western Begionl I I 222 Luanshyn (Boys) \. ------ 223 1tpatamalu \.* 221 Roan AnteloDpe _7_ --\. \. *~ ~ ~ ~ ~ ~~~~~~~~~~~~~xx3 --1------- l 225 Luanahya \. | | / x m j\.] 218 Masai\. \. _----- 220 Kansenji -|- --- 219 Chifubu'v 221 ChiwaLa ______a___I * * *1 1 1 /// xxl ~~~----- -------II 107 Ndola rz2 1 x Lj *--1 1 1 ~ ~ ~~~~ ~ ~ ~~~1- --- - ---- 601 Norta Technical Ndola * * *| |------- ----i-- |--- Total b5l42\.6 36\.9 160\.1 1324\.5 2107\.41 664\.2 219\.0 Total WaZt\. Region I1157 5 8h -6 36h ' 5 2772\.8 3691\.3 2h511\.7 61\. A 170\.8 Sub-Totals 32115\.1 2 L4\.1 960\.5 9271\.2 10692\.4 8668\.8 1529\.2 778\.9 Legend: \. \. Survey\. - Design, working drawings, specifcation, bius of quantities, contract documonts, prequalification of contractors, international tender\. _ -A= Cons truction\. ___-_--t----__ tbuilding a t h f tc //Improvem4t -t-o-b'uildings and sites ahead of constructi^n\.  Govermiment of Zamibia Education Prolect ----\. 10 Rstimated Schedule of Construction and Total Ezpenditares (US$ in '000)\. Construction Phase mont1s 3 | 9 15 |21 27 33 39 45 51 | 57 63 569 75 78 Balance Forward 32115\.1 211r\.1 960\.5 9271\.2 l0692\.4 8668\.8 1529\.2 778\.9 Kabwe Area-Central Region 251 Mumbwa \. 252 rLAshi \. 250 Serenje -------- - j/'_ ----| 109 Kabwe \.I ---- ---------l- 501 Zabve * * * \. , -- _ ___ \. Total 2552\.7 17\.5 8h\.l 778\.0 872\.9 591\.5 163\.2 [5\.5 Lusaka Area-Central Region | 1 _ 1\. 253 Libala \. /// x …------ ------- 25h iabulonga \. I x // 255 Keaiwala * ------- 256 HmaLi \. Lo2 Ch-Lin)mns, Ni,stc2,1 \. ------- I\. _\. |[======= Total 1565\.5 1 2 ' 562 1 q1 1 SL2 1 ,716 02\. Total Central Region I,118\.2 30\.7 | O\.3 1127\.1 lL15\.li 1063\.1 263\.8 77\.8 10o% 1% 3% 29% 33% 27% 5% 2% Grand Totals 36233\.3 2bhr\.8 1100\.8 10398\.3 12107\.8 9731\.9 1793\.0 856\.7 36233\.3 I I t - t 33583 1 f6 ! | La Mldl3ion6 I/ 1 11-20 Mill 117ti3\.9 321 0 13h5 ,6 10 Mi_llion Legend: \. \. Survey\. Design, working drawings, snecification, bills of quantities, -ontract docmeents\. creoualification of cont,ractors, international tender\. xxxxxxxcxxxxxxn: Construction ----------- Guarantee neri od\. ///' Emorovermnt to bu4\.ldings and sites ahead of construction\.  | THE REPUBLIC OF ZAMBIA E-DUCATION PROJECT ,\.GE , P>lCUp\ 220 ~~~~~~~~~~~~~~~~~~~~~~IA~~~~~0-- ALULUSHI 4 - N O R T H < ! , \. \. ' X! f 2243 A N 8~~~~~~~ ~~~~ 0 L A ( ~ Z ~ ~ ~ '~tra\. I 49S:C'41Z | \ > < j R H D -WE S T E P N - ! N s\. L A FOOr - 1 as 3C 50 50 ~~ 50 a 0 00 A

APPROVAL

P157898

COMBINED PROJECT INFORMATION DOCUMENTS / INTEGRATED SAFEGUARDS DATA SHEET (PID/ISDS) ADDITIONAL FINANCING Report No\.: PIDISDSA17495 Date Prepared/Updated: 02-May-2016 I\. BASIC INFORMATION A\. Basic Project Data Country: Nigeria Project ID: P157898 Parent P090644 Project ID (if any): Project Name: Community and Social Development AF-2 (P157898) Parent Project Community and Social Development Project (P090644) Name: Region: AFRICA Estimated 20-Apr-2016 Estimated 07-Jun-2016 Appraisal Date: Board Date: Practice Area Social Protection & Labor Lending Investment Project Financing (Lead): Instrument: Sector(s): Other social services (56%), Public administration- Other social services (25%), General education sector (7%), General water, sanit ation and flood protection sector (6%), Rural and Inter-Urban Roads and Highways (6%) Theme(s): Other social protection and risk management (50%), Social Protection and Labor Policy & Systems (25%), Participation and civic engag ement (13%), Rural services and infrastructure (12%) Borrower(s): Coordinating Ministry of Finance and Economy Implementing Federal Ministry of Finance Agency: Is this project processed under OP 8\.50 (Emergency Recovery) or OP Yes 8\.00 (Rapid Response to Crises and Emergencies)? Financing (in USD Million) Financing Source Amount BORROWER/RECIPIENT 0\.00 International Development Association (IDA) 75\.00 Total Project Cost 75\.00 Environmental B - Partial Assessment Category: Appraisal The review did authorize to proceed with Negotiations, in principle Review Page 1 of 13  Decision (from Decision Note): Other Decision: Is this a No Repeater project? B\. Introduction and Context Country Context Nigeria is of central importance to achieving political stability and sustained economic growth in West Africa and the African continent\. Despite healthy economic growth over the past decade, the recent oil price shock and the Boko Haram (BH) insurgency in the Northeast have contributed to a slow-down in the Nigerian economy\. GDP growth averaged 5\.3 percent during 2011-2014, and was recorded at 6\.2 percent in 2014, with most contributions coming from manufacturing, construction, trade, and services\. Nigeria?s economy grew at only 2\.8 percent in 2015\. States in Nigeria have been adversely affected by the combination of the recent oil price shock and the Boko Haram insurgency\. Nigerian states are heavily dependent on Federation Account (mostly oil) allocations where almost 85 percent of their revenues come from Federation Account allocations\. Most states have had to reduce the size of their budgets and a total of 25 out of 36 states passed 2015 budgets that were on average 10 percent below those approved in 2014\. This situation resulted in a number of states accumulating salary arears, prompting the Federal Government to put together a financial bailout package\. In the conflict-affected Northeast of Nigeria, this situation has severely curtailed the ability of the 6 states of Borno, Yobe, Adamawa, Taraba, Bauchi and Gombe to meet the large humanitarian demand from Internally Displaced Persons (IDPs) and to deliver basic social such education, health and to restore essential infrastructure\. The Boko Haram insurgency in Northeast Nigeria is affecting the poor and the vulnerable population in the Northeast\. The BH insurgency which unfolded at a time of severe fiscal crisis and a decline in the Nigerian economy has disrupted economic and social activities and has negatively affected the productive capacity, employment, and livelihoods of over 6 million people\. The Northeast states were unevenly affected with Borno, Yobe and Adamawa severely impacted while Bauchi, Gombe and Taraba mainly bearing the humanitarian and economic burden of the spill-over of IDPs into their administrative boundaries\. Furthermore, the economic impact of the insurgency has also transcended the geographic borders of the country, impairing cross-border trade with Niger, Chad and Cameroon which has long been strong in the Northeast region\. Also, regional trade between Lake Chad Basin countries and Nigeria has been largely affected leading in some areas to shortages of food items and other commodities and variability in prices\. The Nigerian military has recently recorded several key counter-insurgency successes recapturing all the territories occupied by Boko Haram\. A regional offensive in late 2015 led by joint forces from Nigeria, Niger, Chad and Cameroun drove Boko Haram from much of the territory it held in Northeast Nigeria\. However, the militants have since struck back with suicide bombings and hit and run attacks on civilians, threatening livelihoods and hindering aid agencies? efforts to deliver Page 2 of 13  food\. Sectoral and institutional Context The human, social and economic losses resulting from the BH insurgency are overwhelming\. The insurgency has led to the loss of over 20,000 lives, the displacement of over 1\.8 million people (nearly 80 percent were women, children and youth), and the complete destruction of entire towns and villages\. The conflict has disrupted economic and social activities and has negatively affected the productive capacity, employment, and livelihoods of over 6 million people\. This situation has exacerbated the existing socio-economic disparities in the Northeast and has further added a burden on a population already considered among the most vulnerable in the country\. The conflict has also triggered a humanitarian crisis with displacement increasing the population?s vulnerability to sexual and gender based violence\. A number of areas in the Northeast remain fragile experiencing sporadic terrorist attacks, thus discouraging the return of IDPs and refugees\. Also, the severe damage to infrastructure and social facilities added to the protracted disruption of educational and health services has negatively affected the developmental outcomes of an entire generation\. The region has witnessed a 20-30 percent decrease in crop yields and declining livestock productivity\. The amount of land being used to grow food has dropped by almost 70 per cent over the past year as violence disrupted farming activities\. Livestock was significantly reduced following major thefts by Boko Haram insurgents as well as through displacement loss where cattle had to be left behind\. Limited food availability and restricted access to farms and markets in Borno, Yobe and Adamawa have generated acute food insecurity in a number of localities during the lean period\. As a result, food insecurity has increased dramatically among the IDPs but also within the host communities, according to FAO\. An increasing number of IDPs in the northeast living with host families are moving to camps as food becomes increasingly scarce\. It is estimated that the region suffered from an accumulated output loss of US$ 8\.3 billion between 2011 and 2015\. Borno State alone suffered from the largest loss as output fell by US$ 3\.5 billion between 2011 and 2015, while food prices rose by nearly 7\.5 percent\. The combination of output loss and increase in prices implies a significant reduction in welfare of the people\. Poverty rates rose from 47\.3 percent in 2011 to 50\.4 percent in 2013\. The recently completed Northeast Nigeria Recovery and Peace Building Assessment (RPBA) estimates nearly US$ 9\.0 billion in damages across all six states\. Two-thirds of the damages are in Borno (US$ 5\.9 billion), the most affected state, followed by Adamawa (US$ 1\.6 billion) and Yobe (US$ 1\.2 billion)\. The impacts on agriculture (US$ 3\.5 billion) and housing (US$ 3\.3 billion) make up three-quarters of the overall impacts\. C\. Proposed Development Objective(s) Original Project Development Objective(s) - Parent Development objectives\. The project development objective is to sustainably increase access of poor people to social and natural resource infrastructure services\. The key performance indicators are: - Increased number of poor people (of which 70% are women) with access to social services\. - Increased number of poor people with access to natural resources infrastructure services\. - Increased percentage of participating Local Governments that are incorporating Community development plans in their budget\. Current Project Development Objective(s) - Parent Page 3 of 13  The project development objective is to increase access by the poor to improved social and natural resource infrastructure servicesin a sustainable manner throughout Nigeria\. Proposed Project Development Objective(s) - Additional Financing The new PDO is to increase access by the poor to improved social and natural resource infrastructure services in a sustainable manner throughout Nigeria and particularly by internally displaced people and vulnerable individuals and communities in the North East of Nigeria\. Key Results Development objective indicators: 1\. Poor communities with access to social services (of which IDPs constitute more than 10% of residents) 2\. Poor communities with access to natural resource management services (of which IDPs constitute more than 10% of residents) 3\. Annual Local Government budget in participating States incorporating community development plans increases yearly 4\. Direct project beneficiaries, including IDPs (measured by the number of poor people with access to social services) D\. Project Description The proposed additional credit would will support the provision of public goods, social and economic infrastructure, as well as natural resource management infrastructure services and the utilization of such services by all community members, as well as special considerations for groups of the poor and vulnerable including settlers such as IDPs in host communities and the poor in host communities themselves\. The ongoing project has four components\. Component 1 involves Federal coordination with a continued focus on CDD policy and strategy assessment and formulation, technical support, monitoring and impact evaluation\. Components 2 (State level coordination), 3 (Community Driven Investment) and 4 (Support to the vulnerable groups) will remain as in the current project, however, the additional resources will go only to the North East States mainly for Components 3 and 4 and the focus will be on the communities mostly affected by the recent conflict and terrorist attacks, targeted vulnerable groups of households (IDPs, returnees and host families) in the poor communities\. The use of local support groups to assist the targeted groups and communities in articulation and implementation of the interventions will also be explored\. Component Name Component 1: Overall Project Support and Coordination Comments (optional) Component Name Component 2: Capacity Building and Partnerships Development in State Ministries and LGAs Comments (optional) Component Name Page 4 of 13  Component 3: Community-Driven Investments Facility Comments (optional) Component Name Component 4: Vulnerable IDP Groups Investments Facility Comments (optional) E\. Project location and salient physical characteristics relevant to the safeguard analysis (if known) One Federal unit and about 28 States Agencies in Nigeria: in Abia, Adamawa, Anambra, Bayelsa, Bauchi, Benue, Borno, Cross River, Ebonyi, Ekiti, Enugu, Gombe, Imo, Jigawa, Kaduna, Katsina, Kebbi, Kogi, Kwara, Nasarawa, Niger, Ondo, Ogun, Osun, Oyo, Plateau, Taraba, Yobe and Zamfara\. Sub-projects are expected to be small in size and site-specific\. F\. Environmental and Social Safeguards Specialists Joseph Ese Akpokodje (GEN07) Michael Gboyega Ilesanmi (GSU01) II\. Implementation Institutional and Implementation Arrangements The CSDP additional finance would operate at two levels: Federal, and State\. At the Federal level, the Coordination and Program Support Component 1 - will be supervised by Federal Ministry of Finance through a restructured Federal Project Support Unit\. The restructured Federal Project support unit (FPSU), reporting to the FMF, will be responsible for implementation of the activities at the Federal level of the project\. There is also a multisectoral Program Advisory Committee chaired by the FMF and serviced by the FPSU\. The FPSU will be the collaboration point for the various Federal Sectoral Ministries to mainstream support for the CDD agenda, such as NAPEP, National Bureau of Statistics, National Planning Commission, Ministries of Women Affairs, Environment, Intergovernmental affairs (for Local Govt\.), Education, Health, Water Resources\. At the State level, the State Government Agency set up by law, or any act of the Government in agreement with the World Bank is responsible for implementing the capacity building and partnership, community investment and vulnerable groups investment components (Component 2, 3, & 4)\. The State Agency will continue to work in collaboration with the FPSU/FMF, but operate independently\. As in the parent project the State Agency will have an advisory board or a technical committee and a Management Unit\. The Board will include representatives from civil society and the government\. The management unit headed by a General Manager who will supervise activities of staff within 3 major departments of the Agency: via: Operations, Finance and Administration, and Monitoring and Evaluation\. The law or agreement used in establishing the agency will insulate the agency and specifically the management unit from undue political or administrative interference\. III\.Safeguard Policies that might apply Page 5 of 13 Safeguard Policies Triggered? Explanation (Optional) Environmental Assessment Yes Eligible activities in the CDPs include, among OP/BP 4\.01 others, rehabilitation, extension or construction of primary schools, health centers, water points, water reservoirs; drifts and stock routes, boreholes; and small socio-economic infrastructure for community use (public goods) such as markets and storage; vocational training centers (skill development centers); and natural resource management facilities such as community reforestation, woodlots or community-managed measures for firewood utilization or planting of windbreaks, physical and biological measures for lowering soil erosion and environmental degradation, community sanitation, including treatment of human and livestock waste, agro-forestry, water catchments systems, drainage systems or local management of solid wastes; and community energy efficiency, including promotion of equitable access to energy-efficient stoves or biogas pits\. Due to the anticipated potential environmental and social impacts that may result from the implementation of the above project activities, OP/ BP 4\.01 is triggered\. However, the exact locations of the proposed projects are not known in sufficient details at the time of project preparation\. The project?s original Environmental and Social Management Framework (ESMF) has been updated\. Natural Habitats OP/BP 4\.04 Yes The conservation of natural habitats, like other measures that protect and enhance the environment, is essential for long-term sustainable development\. The Bank does not support projects involving the significant conversion of natural habitats unless there are no feasible alternatives for the project and its sitting, and comprehensive analysis demonstrates that overall benefits from the project substantially outweigh the environmental costs\. If the environmental assessment indicates that a project would significantly convert or degrade natural habitats, the project includes mitigation measures acceptable to the Bank\. Such mitigation measures include, as appropriate, minimizing habitat loss (e\.g\. strategic habitat retention and post-development restoration) and establishing and maintaining an ecologically similar protected area\. The Bank accepts other forms of mitigation measures only when they Page 6 of 13  are technically justified\. Should the sub-project- specific ESMPs indicate that natural habitats might be affected negatively by the proposed sub-project activities with suitable mitigation measures, such sub-projects will not be funded under the CSDP AF\. The ESMF includes preliminary measures for avoiding or mitigating impacts on natural habitats\. Forests OP/BP 4\.36 Yes This policy applies to the following types of Bank- financed investment projects: (a) projects that have or may have impacts on the health and quality of forests; (b) projects that affect the rights and welfare of people and their level of dependence upon or interaction with forests; and (c) projects that aim to bring about changes in the management, protection, or utilization of natural forests or plantations, whether they are publicly, privately, or communally owned\. The Bank does not finance projects that, in its opinion, would involve significant conversion or degradation of critical forest areas or related critical habitats\. If a project involves the significant conversion or degradation of natural forests or related natural habitats that the Bank determines are not critical, and the Bank determines that there are no feasible alternatives to the project and its siting, and comprehensive analysis demonstrates that overall benefits from the project substantially outweigh the environmental costs, the Bank may finance the project provided that it incorporates appropriate mitigation measures\. Sub-projects that are likely to have negative impacts on forests will not be funded under CSDP AF project\. As the AF is financing some community forestry sub-projects, the ESMF includes measures for managing forests sustainable\. Pest Management OP 4\.09 No The project does not raise potential pest management issues or finance the development the procurement of pesticides, pesticide application equipment or the use of pest management practices\. Physical Cultural Resources No The project does not trigger this policy as there are OP/BP 4\.11 no physical cultural assets in the project area and the project will not finance works that affect or involve them\. Indigenous Peoples OP/BP No There are no indigenous peoples in the project area\. 4\.10 Involuntary Resettlement OP/ Yes The project interventions will avoid where possible BP 4\.12 adverse impacts on people, land and other economic resources and livelihoods\. In situations where this Page 7 of 13  cannot be avoided, the borrower will, based upon the principles and objectives spelt out in the updated Resettlement Policy Framework (RPF), prepare site specific Resettlement Action Plans (RAPs) to address the needs of persons who will be affected by loss of economic activities, land acquisition and/or relocation\. The preparation of these safeguards documents will be inclusive and participatory, promoting community ownership and social accountability\. The RAPs will be reviewed and cleared by both the project safeguards team and the Bank\. The RPF of CSDP was revised for the Additional Financing 1 to address potential adverse social and environmental impacts of the new component 4l\. The RPF has been revised and updated to cover the interventions of and states in which the proposed AF 2 will be implemented\. Safety of Dams OP/BP 4\.37 No NA Projects on International No NA Waterways OP/BP 7\.50 Projects in Disputed Areas OP/ No NA BP 7\.60 IV\. Key Safeguard Policy Issues and Their Management A\. Summary of Key Safeguard Issues 1\. Describe any safeguard issues and impacts associated with the proposed project\. Identify and describe any potential large scale, significant and/or irreversible impacts: The project is categorized as B and OP 4\.01 ? Environmental Assessment and OP 4\.12 on Involuntary Resettlement are triggered\. The type of activities to be supported under Components 3 and 4 include, among others, rehabilitation, extension or construction of primary schools, health centers, water points, water reservoirs; drifts and stock routes, boreholes; and small socio- economic infrastructure for community use (public goods) such as markets and storage; vocational training centers (skill development centers); and natural resource management facilities\. None of these activities are expected to generate substantial adverse social and environmental impacts\. To date, the vast majority of sub-projects have been micro-projects for which environmental and social measures have been prepared, based on the ESMF, however no Resettlement Plan been prepared till date\. In the meantime, since the range, scale, locations and number of micro-projects will emerge from the participatory process, the environmental and social impacts of the micro projects, as well as possible negative impacts in terms of environmental degradation, land acquisition, loss of economic activities and/or possible displacement are not known\. Therefore, the Environmental and Social Management Framework (ESMF) and Resettlement Policy Framework (RPF) for the Additional Financing have been updated\. 2\. Describe any potential indirect and/or long term impacts due to anticipated future activities in the project area: Page 8 of 13  No long term or cumulative negative environmental and social impacts of sub-projects are envisaged\. 3\. Describe any project alternatives (if relevant) considered to help avoid or minimize adverse impacts\. No alternatives have been considered\. 4\. Describe measures taken by the borrower to address safeguard policy issues\. Provide an assessment of borrower capacity to plan and implement the measures described\. As with the parent project and the AF1, the exact locations and the types of activities that will be funded under the AF 2 project are not yet known in sufficient details\. To this end, the existing ESMF has been updated to include the geographic coverage of the NE and the improved livelihood aspect of the AF project\. Two instruments namely: (i) An Environmental Management Framework (ESMF ) and a (ii) Resettlement Policy Framework (RPF) have been updated to include the geographic coverage of the NE\. a) Environmental Assessment (OP/BP 4\.01): Safeguards policy OP 4\.01 is triggered, in component 3 and 4, and since the exact locations and impacts of the sub-projects have not been identified; the original ESMF has been updated\. The ESMF ensures that the principles and procedures for the development of in-country capacity and compliance with local regulations are established and it serves as the basis for environmental assessment of all micro-projects to be carried out under the CSDP ?AF project\. The ESMF provides guidance for preparation of ESIAs, ESMPs, and environmental audits\. It includes a screening process that is consistent with both World Bank operational policies and Nigeria Environmental regulations, and a chapter on project processing that describes the responsibilities\. As in the parent project, the additional financing is a Category B project, resulting from the site specific environmental and social impacts associated with small infrastructure projects associated with the CDD micro-projects\. The micro-projects have been implementing environmental and social measures, based on the ESMF\. For the AF, the environmental and social micro-projects are expected to be minimal, site specific and manageable to an accepted level\. However, in those cases where environmental impacts are more substantial, ESIAs and/or ESMPs will be prepared, consulted upon and disclosed\. An environmental safeguards audit was prepared for the parent project to ascertain how well the ESMF and RPF instruments have been complied with and to identify recent challenges in safeguards implementation with the aim of proffering solutions to such challenges and providing guidance for improvement where necessary\. This audit carried out in the 26 CSDP rated the project?s performance with respect to environmental safeguards compliance as credible and satisfactory\. In the audit, reference was made reference to the use of a limited safeguard instrument used to assess the development of a CDD project for the Bemi Bridge in Cross River State that attracted criticism from some stakeholders because of concerns about induced impacts (e\.g\. logging, poaching) on two parks\. However, the appropriate instrument, an ESIA, has been prepared for the CDD project with an ESMP that prescribed appropriate mitigation measures that are now been implemented\. The ESIA, following consultation with stakeholders, has been disclosed\. The environmental audit has also been disclosed\. The audit also recommended the following: (i) Two additional safeguard policies namely, OP 4\.36 ? Forests, and OP 4\.04 ? Natural Habitat should be included to the already triggered safeguard instruments - OP 4\.01 ? Environmental Assessment and OP 4\.12 ? Involuntary Resettlement; (ii) Page 9 of 13  Adequate provision should be made for the implementation of safeguards instruments in the various states though such capacity-building measures as training; and (iii) Adequate site visits to administer the adequate safeguards instrument for each CDD project\. (b) Involuntary Resettlement (OP/BP 4\.12): OP 4\.12 on Involuntary Resettlement is triggered\. To date, no RAPs have been prepared; the safeguards audit of CSDP (parent project) implementation confirmed that there have been no instances of Involuntary Resettlement\. Most micro-projects have not involved land take; in some cases, communities have voluntarily donated community land for the micro- projects\. However, since the range, scale, locations and number of micro- projects will emerge from the participatory process, the social impacts of the micro projects, as well as possible negative impacts in terms of land acquisition, loss of economic activities and/or possible displacement are not known\. Therefore, the borrower has updated the Resettlement Policy Framework (RPF), in line with national and World Bank policies\. This instrument will guide implementation under the project\. RAPs will be prepared, consulted upon and disclosed as and when necessary\. The environmental audit has confirmed the adequacy of the safeguards instruments and approach\. The safeguards implementation capacity for the project states and LGAs will be reinforced and strengthened in both existing and new project sites while any new state joining the project will be required to set up a safeguards unit in the PIU\. Consultation Process: Stakeholder consultation was carried out during project preparation, however, additional consultations and more detailed assessment will be carried out as needed in the course of the selection of specific project sites\. The safeguards instruments (ESMF and RPF) for the parent project and AF1 has been updated by the Borrower according to National and World Bank policies and disclosed in-country in Nigeria and in the World Bank?s InfoShop\. The Environmental Safeguards Audit for the parent project has also been disclosed in-country and in the World Bank?s Infoshop 5\. Identify the key stakeholders and describe the mechanisms for consultation and disclosure on safeguard policies, with an emphasis on potentially affected people\. The key stakeholders are the Federal Project Support Unit, State Agencies of the 28 states that will implement the project, LGAs, NGOs, other relevant institutions and participating communities\. All the relevant stakeholders have been adequately informed of the project\. There are no major concerns raised during the consultations\. Public consultation will be an on-going activity taking place throughout the entire project process\. Community participation and consultation are an integral part of CDP planning process and sub- project identification and screening process B\. Disclosure Requirements Environmental Assessment/Audit/Management Plan/Other Date of receipt by the Bank 31-Jan-2014 Date of submission to InfoShop 20-Feb-2014 For category A projects, date of distributing the Executive Summary of the EA to the Executive Directors "In country" Disclosure Page 10 of 13  Nigeria 19-Feb-2014 Comments: The ESMF was disclosed in 2 newspapers: "The Guardian" and "Leadership" Resettlement Action Plan/Framework/Policy Process Date of receipt by the Bank 31-Jan-2014 Date of submission to InfoShop 20-Feb-2014 "In country" Disclosure Nigeria 19-Feb-2014 Comments: The RPF was disclosed in 2 newspapers: "The Guardian" and "Leadership" If the project triggers the Pest Management and/or Physical Cultural Resources policies, the respective issues are to be addressed and disclosed as part of the Environmental Assessment/ Audit/or EMP\. If in-country disclosure of any of the above documents is not expected, please explain why: C\. Compliance Monitoring Indicators at the Corporate Level OP/BP/GP 4\.01 - Environment Assessment Does the project require a stand-alone EA (including EMP) Yes [ ] No [ ] NA [ ] report? OP/BP 4\.04 - Natural Habitats Would the project result in any significant conversion or Yes [ ] No [ ] NA [ ] degradation of critical natural habitats? If the project would result in significant conversion or Yes [ ] No [ ] NA [ ] degradation of other (non-critical) natural habitats, does the project include mitigation measures acceptable to the Bank? OP/BP 4\.12 - Involuntary Resettlement Has a resettlement plan/abbreviated plan/policy framework/ Yes [ ] No [ ] NA [ ] process framework (as appropriate) been prepared? If yes, then did the Regional unit responsible for safeguards or Yes [ ] No [ ] NA [ ] Practice Manager review the plan? Is physical displacement/relocation expected? Yes [ ] No [ ] TBD [ ] Provided estimated number of people to be affected Is economic displacement expected? (loss of assets or access to Yes [ ] No [ ] TBD [ ] assets that leads to loss of income sources or other means of livelihoods) Provided estimated number of people to be affected OP/BP 4\.36 - Forests Has the sector-wide analysis of policy and institutional issues Yes [ ] No [ ] NA [ ] and constraints been carried out? Page 11 of 13  Does the project design include satisfactory measures to Yes [ ] No [ ] NA [ ] overcome these constraints? Does the project finance commercial harvesting, and if so, Yes [ ] No [ ] NA [ ] does it include provisions for certification system? The World Bank Policy on Disclosure of Information Have relevant safeguard policies documents been sent to the Yes [ ] No [ ] NA [ ] World Bank's Infoshop? Have relevant documents been disclosed in-country in a public Yes [ ] No [ ] NA [ ] place in a form and language that are understandable and accessible to project-affected groups and local NGOs? All Safeguard Policies Have satisfactory calendar, budget and clear institutional Yes [ ] No [ ] NA [ ] responsibilities been prepared for the implementation of measures related to safeguard policies? Have costs related to safeguard policy measures been included Yes [ ] No [ ] NA [ ] in the project cost? Does the Monitoring and Evaluation system of the project Yes [ ] No [ ] NA [ ] include the monitoring of safeguard impacts and measures related to safeguard policies? Have satisfactory implementation arrangements been agreed Yes [ ] No [ ] NA [ ] with the borrower and the same been adequately reflected in the project legal documents? V\. Contact point World Bank Contact: Foluso Okunmadewa Title: Lead Specialist Contact: Antonia T\. Koleva Title: Social Protection Specialist Borrower/Client/Recipient Name: Coordinating Ministry of Finance and Economy Contact: Haruna Mohammed Title: Director, IERD Email: ishay2k2006@yahoo\.com Implementing Agencies Name: Federal Ministry of Finance Contact: Abdul Karim Obaje Title: National Coordinator, CSDP Email: obaje@mail\.ru Page 12 of 13 VI\. For more information contact: The InfoShop The World Bank 1818 H Street, NW Washington, D\.C\. 20433 Telephone: (202) 458-4500 Fax: (202) 522-1500 Web: http://www\.worldbank\.org/infoshop VII\. Approval Task Team Leader(s): Name: Foluso Okunmadewa,Antonia T\. Koleva Approved By Safeguards Advisor: Name: Johanna van Tilburg (SA) Date: 03-May-2016 Practice Manager/ Name: Stefano Paternostro (PMGR) Date: 03-May-2016 Manager: Country Director: Name: Rachid Benmessaoud (CD) Date: 05-May-2016 Page 13 of 13

APPROVAL

P106689

Document of The World Bank FOR OFFICIAL USE ONLY ReportNo: 41931-HA PROJECTPAPER ONA PROPOSEDADDITIONAL FINANCING(GRANT) INTHE AMOUNT OF SDR 4\.7 MILLION (US$7\.4 MILLIONEQUIVALENT) TO THE REPUBLIC OF HAITI FOR AN EMERGENCY RECOVERYAND DISASTERMANAGEMENT PROJECT January 16,2008 SustainableDevelopmentDepartment CaribbeanCountryManagementUnit Latin America and the CaribbeanRegion This document has a restricteddistributionand may be usedby recipientsonly inthe performanceoftheir official duties\. Its contents may not otherwisebe disclosedwithout World Bank authorization\.  CURRENCY EQUIVALENTS (Exchange Rate Effective January, 8 2008) Currency Unit = Haitian Gourdes U S 1 = GDES36\.26 GDES 1 = US$0\.0276 FISCAL YEAR October 1 - September30 ABBREVIATIONS AND ACRONYMS IAF I Additional Financing: 1 CDD Community Driven Development CRS Catholic Relief Services CNGDR National Committee for Disaster Risk Management (Comite' Nationale de Gestion des Risques et De'sastres) Consultant Qualification \.CQ CCPC Community Civil ProtectionCommittee (Comite' Communal de Protection Civile) CDPC DepartmentalCivil ProtectionCommittee (Comite' De'partementale de Protection Civile) DPC Directorat of Civile Protection (Direction de la Protection Civile) EA Environmental Assessment EMP Environmental MananementPlan EOC EmergencyOperations Center EU EuropeanUnion FMR FinancialManagementReport GOH Government of Haiti ICB International Competitive Bidding IDA International DeveloDment Association IDB Inter-AmericanDevelopment Bank MINUSTAH UnitedNations Mission for the Stabilization of Haiti NCB National Competitive Bidding OCHA UNOffice for the Coordination ofHumanitarianAffairs PADF Pan-American Development Foundation PCU Project Coordination Unit PL-480 BureauProgrammed'Alimentation PL-480 Titre I11 PNGRD National Disaster RiskManagementPlan (Plan National de Gestion des Risaues et des De'sastres) PRSP Poverty Reduction Strategy Paper QCBS Quality Cost Based Selection SA Special Account  FOROFFICIAL USE ONLY Vice President: Pamela Cox Country Director: Yvonne Tsikata Sector Director: Laura Tuck Sector Manager: Anna Wellenstein (Acting) Task Team Leader: Catherine Tovey This document has a restricted distribution and may be used by recipients only in the performance of their official duties\. Its contents may not be otherwise disclosed without World Bank authorization\.   REPUBLIC OF HAITI EMERGENCY RECOVERY AND DISASTER MANAGEMENT PROJECT PAPER Table of Contents I\.Introduction\. 1 I1 \.Backgroundand Rationalefor Additional Financing\. 1 I11\. ProposedChanges\. 4 IV \.Consistencywith CAS or CPS\. 5 V Appraisal of Restructuredor Scaled-upProject\. \. 5 VI\.ExpectedOutcomes \. 14 VI1\.Benefits and RisksBenefits \. 17 VI11\.FinancialTerms and Conditions for the Additional Financing\. 18 Annex 1: DisbursementAllocations ofAdditional Financingand Reallocation\.18 Annex 2: Additional FinancingProcurementPlan\. -20 Annex 3: ProcurementThresholds\. 21 Annex 4: FinancialManagementRisks\. 22 Annex 5: Arrangementsfor ResultsMonitoring\. 23 Annex 6: Project ProcessingSchedule and Team Composition\. 26   PROJECTPAPERDATA SHEET Sector Director: Laura Tuck EnvironmentalCategory:B Borrower:The Republic ofHaiti Responsibleagency:The Ministry ofthe Interior and Collective Territories - Revisedestimateddisbursements(BankFY/US$m) FY 2008 2009 2010 2011 Annual 1\.5 4\.0 1\.5 0\.4 Cumulative 1\.5 5\.5 7\.0 7\.4 Current closingdate: December31,2008 oYes XNo Revisedproject development objectives/outcomes: Not applicable Does the scaled-upor restructuredproject trigger any new safeguardpolicies? No For Additional Financing [ 3 Loan [ 3 Credit [XI Grant For Loans/Credits/Grants: Total Bank financing (US$m\.): 7\.4 million Proposedterms: 100%IDA Grant FinancingPlan(US$m\.) Source Local Foreign Total Borrower 0\.0 0\.0 0\.0 IBRD/IDA 7\.4 0\.0 7\.4 Others 0\.0 0\.0 0\.0 Total 7\.4 0\.0 7\.4   I\.Introduction 1\. This Project Paper seeks the approval o f the Executive Directors to provide an additional grant in an amount o f US$7\.4 million equivalent (SDR 4\.7 million) to the Republic o f Haiti for the Emergency Recovery and Disaster Management Project (P090159) H-1430-HA\. 2\. The proposed additional grant to the Emergency Recovery and Disaster Management Project's (ERDMP) would scale up investmentsin Component I: Reconstruction and Risk Reduction in Areas Affected and Component 3: Local Risk Management as part o f the World Bank's disaster recovery assistance to the Republic o f Haiti in the aftermath o f Tropical Storm (TS) Noel, which over the period o f October 28 - 30, 2007 caused severe flooding resulting in significant loss o f life and damage to the country's public and private infrastructure\. Additional financing (AF) would support (i) worksconsistingmainlyofrehabilitationofaffecteddrainageandirrigation small systems, schools, health clinics and community centers, and (ii)the expansion o f the local risk management activities to ensure full coverage within the 5 Departments where the project is engaged, including the creation and implementation o f additional training modules and the financing o f additional local risk mitigation micro-projects for each operational Communal Civil Protection Committee\. 3\. The AF would not entail any change to the ERDMP development objectives\. The operational manual will be updated to reflect current circumstances, building on lessons learned from successful implementation o f the ERDMP to date\. 4\. The expected outcomes from the investments through AF would be consistent with those o f the ERDMP and would include: (i)the successful rehabilitation o f the selected local public infrastructure benefitingfrom the small works activities, (ii)the activation and training o f an additional 19 Communal Civil Protection Committees (CCPC), (iii)the execution o f an additional 73 local risk reduction projects by the newly formed and existing CCPC\. 11\. Backgroundand Rationalefor AdditionalFinancing Project Background 5\. The ERDMP was prepared in response to the Government of Haiti's (GoH) request for post Tropical Storm Jeanne (2004) disaster recovery assistance\. The project was prepared within the context o f the environmental pillar o f the Interim Cooperation Framework, and was financed through an IDA Grant o f US$12 million\. The Development Grant Agreement (H-1430-HA) was signed on January 6, 2005 and the project became effective on June 1, 2005\. The closing date i s scheduled for December 31,2008\. 1  6\. The project development objective o f the ERDMP, as stated in the Development Grant Agreement is to support the GoH in the (i) rehabilitation o f areas affected by recent adverse natural events, (ii) strengtheningo f the country's capacity to manage natural disaster risks and to better respond to emergencies resulting from adverse natural events; and (iii)reduction o f the vulnerability o f communities through risk mitigation activities\. Project Status 7\. Despite the difficult political and security context in which the project is being implemented, the ERDMP continues to meet it development objectives, with most performance indicators on target\. The ISR ratings, including those for implementation progress (IP) and development objectives (DOs) have been consistently satisfactory over the past 12 months\. The ERDMP has disbursed US$7,255,633\.10 with a total commitment of US$8,630,000 representing 60\.5% and 72% respectively o f the original Grant amounts\. To date, nine rehabilitation subprojects (global value o f US$1\.95 million) have beencontracted under Component 1, five o f which have been completed\. Fifty-four CCPC have been created, training and equipped and each o f these CCPC have, or are in the process of, executing local risk mitigation micro project (US$25,000 to US$50,000/each)\. The CCPC are supported by Departmental Civil Protection Committees (DCPC) that have benefited from financing under Component 2: Institutional Strengthening through the construction and equipping o f Departmental Emergency Operation Centers (EOC) and administrative and technical training\. The Directorate of Civil Protection (DPC), the National System for Disaster and Risk Management's (SNGRD) technical body i s better able to coordinate the system and its components (of which the DCPC and CCPC play an integral role) vis- a-vis their improved communication, administration and technical capabilities, as financed by the ERDMP\. 8\. The ERDMP i s in full compliance with the Grant Agreement covenants and the fiduciary management system i s satisfactory and there are no pending audit reports\. There are no unresolved environmental, social or other safeguard problems\. Rationalefor additionalfinancing 9\. The GoH officially requested the World Bank for financial support following the damages caused by TS Noel which hit Haiti on October 28-30, 2007\. The tropical storm resulted in flash floods and mudslides which caused a reported 66 deaths and over 15,000 destroyed or damaged houses and widespread damage to the country's public and private infrastructure' (see paragraph 20)\. In response to this appeal, the World Bank regional management provided US$7\.4 million from FY-08 IDA allocations on a priority basis for Post-TS Noel disaster recovery assistance\. `SNGRD (2007) Passage de la Tempite Tropicale Noel sur la Rkpublique d'Hai`ti du 28 au 30 Octobre, 2007 -Bilan et Perspectives\. 2  10\. The humanitarianresponse was well coordinated by the GoH and OCHA\. Most of the immediate relief needs have been met\. The UN (MINUSTAH, UNICEF, WHO etc), some donors, and many NGOs provided food relief; health care; emergency water and sanitation; child protection and shelter, The GoH disbursed US$3 million o f its own funds to support the initial response, and i s seeking to earmark a further US$3 million for reliefhehabilitation\. Although a number o f donors (UNDP, IDB and EU) are also working closely with the World Bank to support to the National Strategy for Disaster and Risk Management, to date no donors are explicitly engaged inpost- Noel mediumterm re-habilitation activities\. 11\. Based on the current country portfolio, the AF through the ERDMP provides a more viable option for disbursing disaster recovery funds rapidly, effectively and sustainably than through project restructuring or the design o f an Emergency Recovery Grant (ERG)\. As per its original design, the ERDMP has well-performing institutional mechanisms in place to finance investments in rehabilitation works o f local public infrastructure damaged by adverse natural events and the creation, training and equipping o f local and communal civil protection committees, who in turn, would identify, prepare and execute local risk mitigation micro-projects\. The two components through which these activities are financed are Component 1: Reconstruction and Risk Reduction in Areas Recently Affected by Floods (USS3\.5 million) and Component 3: Local Risk Management (USS3\.9 million)\. The components could readily be scaled-up in the affected areas where the ERDMP i s already operating, thereby supporting the disaster recovery operation within the overall framework o f the GOH's Poverty Reduction Strategy Paper (PRSP) and SNGRD\. 12\. Inlight of the preliminary post-TS Noel GoH damage assessments which highlighted the damages to the country's public infrastructure and the need to increase the resilience o f communities to future events, the AF will support: (i) rehabilitation the o f drainage and irrigation systems, schools, health clinics and community centers; (ii) the expansion o f the current community driven local risk management activities to cover ever community inthe Departments where the ERDMP i s currently active; and (iii) increaseinthescopeof thelocalriskmitigationprojects\. an 13\. Since the activities and objectives o f the AF to the ERDMP are in line with the original project, all the safeguard issues of the original ERDMP also apply in this case\. Therefore the AF, like its original ERDMP, i s not expected to trigger any major environmental impacts due to the nature of the interventions which consist mainly o f the rehabilitation of damaged public infrastructure and the execution of small local risk mitigation activities\. Accordingly, given that works deal with the rehabilitationof existing infrastructure and local risk mitigation, and given that the projects are small (less that US$250,000) and will not involve land acquisition or resettlement, the project has been placed under environmental category "B" in accordance with OP 4\.01 which requires the preparation o f an Environmental ManagementPlan\. This plan has been prepared by the GoH and cleared by the Bank for the original ERMDP\. 3  Copies have been made available in the Infoshop\. An updated Environmental Management Plan (EMP) will be incorporated into the updated Operational Manual prior to AF project effectiveness\. 111\. ProposedChanges 14\. The proposed AF would support the original objectives o f the ERDMP\. The AF will increase the scope o f the project, by scaling up the activities undertaken under Component 1: Reconstruction and Risk Reduction in Areas Recently Affected by Floods and Component 3: Local Risk Management\. Inaddition, existing project funds will be re-allocated2 to Component 2: Institutional Strengthening to reinforce the institutional linkages and reposition existing activities to better respond to the revised operationalization strategy for the National Plan for Disaster and Risk Management (PNGRD)\. 15\. The AF will be implementedusing the same institutional framework, procurement, and disbursement arrangements currently employed since these systems are performing well, remain appropriate, and have the capacity to absorb the additional funds\. Social and environmental issues will be dealt with as inthe original project, in accordance with the World Bank's guidelines and in compliance with safeguard requirements\. 16\. The project's original closing date is December 31, 2008\. A two year project extension is proposed, bringing the closing date to December 31, 2010\. Although most activities are expected to be executed within 18 months, additional time will help consolidate the sustainability o f ERDMP investments - particularly the institutional strengthening o f the DPC and the Permanent Secretariat for Disaster and Risk Reduction(SPGRD) by building up the vertical linkages between the DPC, the Departments and the local emergency committees\. The two year extension being sought i s also consistent with the project team experience to date in implementing activities ina challenging operating environment\. This reallocation process is separatefrom this proposed additional financing, but will be carried out in parallel\. 4  Detailed Project Costs and Deviations 17\. Below i s a breakdown o f the original cost estimates along with the new cost estimates o f the scaled-up project with AF, including reallocation\. Table 1: DetailedProjectCosts (in millions) ' Inorder to cover the additional audit cost associated with the project extension, funds will be reallocated from the original project\. This reallocation process is separate from this proposed additional financing, but will be carried out in parallel\. IV\. Consistency with CAS or CPS 18\. Economic recovery remains a central axis of the 2006 Haiti Interim Strategy Note, o f which the management o f natural disasters and risks remains a key component\. The strategic importance o f disaster risk management for economic growth i s well recognized by the GoH, who featured risk management as one o f the major cross- cutting themes in their draft PRSP (November 2007)\. The project itself i s pro-poor since (i) the poor are usually the most vulnerable to natural disasters; (ii) worst areas affected by TS Noel are being targeted; and (iii) risk mitigation micro-projects local undertaken by local communities explicitly prioritize the poor's vulnerability reduction needs\. V\. Appraisal of Restructured or Scaled-upProject 19\. In November 2007, a team visited Haiti on an emergency basis to undertake the identification and appraisal o f the proposed AF\. The Team met extensively with the project coordinating units, the Ministry o f the Interior, the Ministry o f Planning, the DPC, the SPGRD, donors including the UNDP, EU, IDB, and sub-project executing agencies (CRS, OXFAM, and PADF) to (i)review the damage and needs assessments, (ii)evaluate the performance o f local and national disaster response systems for TS Noel and draw lessons; and (iii)identify and appraise the proposed scaling-up o f the project\. 5  20\. Identification, selection and implementation o f activities under component 1 and 3 will be based on procedures identified in the updated ERDMP operational manual whose revisions will reflect the points raised inthe following paragraphs\. Needs assessment 21\. Although TS Noel affected all 10 o f Haiti's Departments, the Departments o f the Ouest, Sud-Est, Sud, Grande-Anse, Nippes, Artibonite and North were most affected (including all 5 Departments where the project i s active)\. TS Noel particularly affected agricultural livelihoods: including losses o f 24,000 ha of crops and 10,000 heads o f cattle; 18,000 m o f irrigation systems and drains; and 70,000 m o f new ravines formed in the watersheds\. Information regarding other damaged public infrastructure, including schools, health clinics, and community centers are still being compiled\. Table 2: Preliminaryestimateof loss of lifeand propertyby Department* (*) Departmentswhere ERDMP is active are highlighted Source: SNGRD (November 2007) Lessons learned 22\. CCPC helped play an important role in limiting loss of life from TS Noel in communities and departmentswhere it was active\. The 5 DCPC and 54 CCPC, which were re-activated/created, trained and equippedthrough the project, played an integral role in disaster preparation following the storm alert (through the dissemination o f public warnings and the evacuation o f 14,000 people from households at high risk) as well as the immediate relief efforts, through the distribution o f humanitarian relief and the compilation o f damage and needs data\. By all accounts, the CCPC performed well, helping minimize the number o f casualties\. Risk mitigation activities implemented by these committees (including slope 6  stabilization, river bank reinforcement, drainage and structural hardening activities) also served to lessen the impact of TS Noel\. On the other hand, in communes or Departments where these committees were absent, disaster preparedness was often weaker, and the number o f casualties higher\. Damage assessments for Departmentsin the Northof Haiti -where CCPC have yet to be activated-are taking much longer\. 23\. Care must be taken to reduce the vulnerability of rehabilitatedworks to future floods\. One of the "passage a gut?' (concrete river ford) inthe South-East Department financed under Component 1 was washed away during TS Noel, representing an investment loss of US$64,000, or 0\.005% of the project's value\. Due to the scope of works required to render bridge and roads resilient to floods, and the limited funds available under component 1, it has been decided that the AF will focus on rehabilitation o f small-scale local infrastructure\. Other complimentary intervention are being considered for the financing o f larger-scale rehabilitation works, included the restructuring of the Haiti Transport and Territorial Development Project which would make US$8 million available to the GoH to finance bridge rehabilitation\. The rehabilitation o f small-scale public infrastructure i s fundamental to strengthening the resilience o f local communities and civil protection systems\. Objective, description and cost 24\. Component 1: Reconstructionand RiskReductionin Areas Recently affectedby TS Noel (Additional US$3\.5 million equivalent)\. The additional funds allocated to this component would support the scaling up of rehabilitation works by targeting key local infrastructure affected by TS Noel\. The DPC, with the assistance o f an Inter- Ministerial Task Force and the SPGRD i s inthe process of finalizing a multi-sectoral damage assessment and recovery plan to support the reconstruction o f areas affected by the recent floods associated with TS Noel\. Based on the needs identified in this plan, the proposed allocation will support the rehabilitation o f small-scale public infrastructure including the rehabilitation o f drainage and irrigation systems, public buildings (including schools and health clinics) and community centers affected by the disaster\. The selection criteria identified for the small-scale rehabilitation projects to be financed i s listed inparagraph 27 were agreedupon with the GoH\. 25\. Component 2: Institutional Strengthening for the DPC and the SPGRD (Reallocation US$0\.5 million equivalent)\. No AF is being requested for this component; however US$0\.5 million will be reallocated from the original project funds to cover the additional audit and operational costs associated with the project extension3\. This component will be able to achieve the original PDO objective\. Rather than scaling-up, a number o f activities in this component will be repositioned to better respond to the new operationalization strategy o f the PNGRD\. The proposed project extension associated with the AF request will provide an opportunity to progressively deepen the institutional strengtheningo f both the DPC and the SPGRD This reallocation will be processed separately in parallelwith the proposedAdditional Financing\. 7  over-time\. Particular attention will be paid to strengthening vertical institutional linkages from the local to the national level, betweenCCPC, DCPC and the DPC and SPGRD through the continued (i)strengthening o f management systems, (ii) institutional and technical support activities such as the creation o f a formal national training program and the continued execution o f national simulation exercises; and (iii) completionofanumberoftechnicalstudies\. the 26\. Component 3: Local Risk Management(Additional $3\.9 millionequivalent)\. The additional funds allocated to this component would support the scaling up o f local risk management activities implementedby NGOs inkey areas affected by TS Noel\. The proposed allocation will support the following: (i)Expansion o f local risk reduction activities to ensure full coverage within the 5 Departments where the ERDMP is active (Artibonite, Grand Anse, Nippes, Ouest and the Sud)\. This would extend coverage to at least 19 communes in the Ouest and Nippes Departments, which were all affected by TS Noel, but were not covered by the original component\. (ii)Creation and implementation o f additional training modules for each operational CCPC; (iii) Increase the impact o f these local risk management activities\. Inresponse to consistently highcommunity demand, the level o f financing available to each local committee for the execution o f local risk mitigation micro-projects will be increased from US$25,000 to US$50,000, in order to better meet community demands and needs whilst remaining inline with the original PDO\. 27\. Investment selection criteria - Component 1\.The short-listing o f rehabilitation activities to be financed under this component will be undertaken based on the following selection criteriajointly agreed with GoH: Projects must directly fit into, and support, GoH's National Strategy for Disaster and Risk Management; 0 Projects must be located in priority areas affected by recent disasters (within the 5 Departments where the ERDMP is active); 0 Projects are limitedto the rehabilitation o f small-scale public infrastructure (as per the original PDO); Rehabilitatedsmall-scale public infrastructure i s resilient to recurring floods; 0 Institutional structures, whether they are community based organization or state associations, are in place to take over ownership and management o f rehabilitated infrastructure\. 28\. Eligibility Criteria: Component 1\. The AF will focus on rehabilitation o f small- scale public infrastructure in areas and sectors in which the ERDMP i s currently active\. Therefore it will not finance agricultural capitalization micro projects which require different decision making mechanisms and fall outside o f the scope of the ERDMP\. Institutional arrangements 29\. The institutional arrangements under the original ERDMP will all remain in place\. Overall project implementation will continue to be managed by the DPC's Project 8  Coordination Unit (PCU)\. A second PCU housed within the PL-480 Management Office (a national-level government office), will continue to implementcomponents 1 and 3 on behalf o f the DPC who will be directly involved in the supervision and integration of CCPC within the national system\. NGOs will continue to play an important role in implementing sub-projects at the community level (component 3)\. BothPCUs have beensatisfactorily implementingthe project to date\. 30\. Since the PL-480 will be in charge o f the implementation o f the two components benefiting from the AF, and considering that it i s also managing three other World Bank projects, staffing will need to be increased to maintain the overall capacity\. In particular, an additional civil engineer and financial management specialist will be recruited\. Economic appraisal 31\. Given the high levels o f poverty, weak public infrastructure, serious fiscal problems and degraded environment, adverse natural events o f small magnitude that occur on a frequent basis have a significant impact both the population's well-being and economic assets\. The ERDMP rehabilitation and local risk mitigation micro-projects focus on activities with a high visibility and impact that utilize local labor and materials when available to provide for the quickest and most resilient economic and social recovery available within the financing limitations o f the project\. 32\. It i s important to note that all activities financed under components 1 and 3 are demand-driven activities, which by definition do not lend themselves to formal ex- ante analysis\. Nevertheless, well established mechanisms exist to ensure that the best alternatives are chosen (low cost-high impact)\. Both sets o f activities benefit from established screening mechanisms which ensure that the most appropriate workdactivities are selected, based on their relative benefitdimpacts\. The mechanisms are described inthe following paragraphs\. 33\. Component 1\. Rehabilitation works (up to US$250,000) are first selected by the SPGRD based on criteria outlined in paragraph 27\. The permanent secretariat i s an Inter-Ministerial committee composed o f representatives from the Ministries o f Interior, Public Works, Agriculture, Environment, Health, Education etc\. This ensures that the identified and selected works are prioritized at the national level, permitting greater coordination and synergy within the GoH and in turn a greater return on investment interms o f sustainable infrastructure rehabilitation and contribution to the social and economic recovery o f the affected regions\. The proposed works, including their technical specifications, are then reviewedby two engineers within the PL-480 to ensure that the type o f activity and selected methodology are appropriate, before being submitted to the World Bank for no objection\. It is important to note that the scope for analyzing design alternatives i s limited since the focus i s on rehabilitating existing infrastructure\. 9  34\. Component 3\. Local risk mitigation activities (up to US$50,000) are selected through an extensive screening process designed to ensure that the selected chosen activities help reduce extensive losses caused by adverse natural events by maximizing the number of beneficiaries and the value o f the social and economic assets protected\. After committees have selected their project(s) they are reviewed in turn by the NGOs, the CDPC Technical Coordination Units, the PL-48O/PCU, the DPC and the World Bank\. Moreover, community driven local risk management activities benefit from their demand drivenand community lednature, which permits the most efficient and effective allocation o f limited resources\. A recent ex-post evaluation o f a Community Driven Development (CDD) project in the Brazilian state o f Paraiba, found that small scale infrastructure was 30-40% cheaper than publicly financed works o f similar type and quality4\. 35\. Finally, an interim ex-post evaluation o f the local risk mitigation activities executed to date under the ERDMP will be carried out under component 3 and will include a basic cost-benefit analysis, including communities' perceptions o f these benefits\.This evaluation will help inform ongoing activities within this project, as well as contribute to the emerging body o f knowledge specific to community driven local disaster risk mitigation activities\. Technicalappraisal 36\. The AF will exclusively support sub-projects\. None o f these specific sub-projects have been identified at present\. The mechanisms to identify the appropriate rehabilitation works and local risk mitigation micro-projects are described in the updated operational manual (which reflects recent lessons learned - see paragraph 23)\. Each small-works project (up to US$250,000) identified by the SPGRD as part o f the rehabilitation o f public works component will be subject to a detailed technical feasibility assessment, with oversight from the PL-480 PCU civil engineers\. Local risk management activities to be financed under the AF (up to US$50,000) as identifiedby local communities will also require a technical feasibility analysis (with oversight from both by the NGO operators and the PL-480 PCU civil engineers)\. 37\. An additional civil engineer i s being recruited within the PL-480 to ensure there i s sufficient capacity within the team to deal with the additional workload\. Financial Management and DisbursementArrangements 38\. FinancialManagementArrangements\.AF will use the same financial management and disbursement frameworks\. The last financial management supervision mission found the overall capacity satisfactory\. Components 1 and 3 (to be increased with the AF) will be implementedby PL-480 whereas component 2 would remainunder DPC\. World Bank, 2007, Implementation CompletionReport: Rural Poverty Alleviation Project, State of Paraiba, Brazil 10  A desk review of the financial management arrangements was carried out as part o f the preparation of the project, The conclusion o f the Financial Management Assessment (FMA) is that the overall project arrangements are adequate and satisfy the Bank's requirements under OPA3P10\.02 to provide, with reasonable assurance, accurate and timely information on the status o f the execution o f the project\. Details o f the financial management arrangements are describedbelow\. 39\. Financial Management Risk\. The financial management risk at the country level is high as outlined in the last Country Financial Accountability Assessment (CFAA), which i s summarized in Annex 3\. Although Haiti has made significant progress over the last years, the public financial management system remains weak with significant challenges particularly with regards to budget execution and controls\. However the overall public financial management weaknesses are not expected to impact the project because it will be implementedthrough a government agency that has strong fiduciary capacity\. Thus, at the project level, the overall financial management risk would remain Moderate\. 40\. PL-480 Staffing\. PL-480 i s managing two other World Bank projects and the financial management team i s reaching its absorption capacity\. The team needs to be expanded in order to be in a better position to meet all the accounting and financial reporting requirements\. PL-480 needs to recruit a new financial management specialist\. 41\. Operational Manual\. The operational manual will be updatedto reflect changes that have taken place since project effectiveness particularly, the management o f the Imprestaccount, the local currency account and the environmental management plan\. 42\. Accounting and Reporting\. The accounting system of PL-480 will be updated to reflect the increase o f the categories\. Financial reporting will remain the same\. Consolidated Financial Monitoring Reports (FMR) will be prepared every six months and submitted to the Bank no latter than 45 days after the end o f the quarter\. The FMRto be transmittedto the World Bank, following the effectiveness of the AF, will include the new categories\. The FMR format and content will be updated by negotiations\. 43 Auditing\. Since the performance o f the existing auditor i s satisfactory, the contract a will be amended to cover the project extension associated with the AF\. Annual audit reports would be transmitted to the World Bank no latter than four months after the end o f each fiscal year\. 44\. Reallocation between Categories: In order to cover the additional auditing costs associated with a 2 year extension, and to cover the higher than expected operating costs, funds will be reallocated from the original project5\.For this purpose, Category I O - Unallocated,with a value o f US$500,000 will be reallocated as follows: This reallocationwill be processedseparately inparallelwith the proposedAdditional Financing, 11  Initial Amount to be Total IDA Increase Disbursement Categories Amount Reallocated Amount O!O Audit Fees(category 8) 0\.05 0\.05 0\.1 100 OperatingCosts 0\.45 800 (category 9) 0\.05 0\.40 Non-allocated (category 10) 0\.45 (0\.45) 45\. Disbursement Arrangements\. The flow o f funds would remain the same: two designated accounts A and B managed respectively by DPC and PL-480\. Allocation o f the designated account B which i s US$600,000 would be increased to US$800,000\. Annex 1presents the disbursementallocations o fthe AF\. ProcurementArrangements 46\. General: Activities financed by the AF will use the same procurement arrangements and management framework as under the initial Grant\. Procurement for the proposed activities will be carried out in accordance with the World Bank's Procurement and Consultant Guidelines dated May 2004, updated in October 2006, and the provisions stipulated inthe Legal Agreement\. For each contract to be financed by the Grant, the different procurement or consultant selection methods, the need for prequalification, estimated costs, prior review requirements, and time frame are agreed between the Borrower and the Bank inthe Procurement Plan\. 47\. Assessment of the Agency's Capacity to Implement Procurement: The bulk of procurementactivities will be carried out by the PL-480 Management Office which is already managing procurement under Components 1 and 3 o f ERDMP and the Bank's CDD project, as well as the community-based components o f other Bank projects and small grants\. The Bank's assessment o f the capacity o f PL-480 to implement procurement actions for these projects is based on PL-480's satisfactory performance to date in implementingthese ongoing projects\. While the procurement teams in PL- 480 and DPC are well-equipped to execute procurement according to Bank Guidelines, the overall public procurement system in Haiti remains relatively weak\. Despite recent reforms inthe legal and institutional framework for procurement, there i s still a lack o f skilled personnel with knowledge o f international norms, limited planning and follow-up capacity and insufficient use of standard documents and procedures\. Consequently, the overall project risk for procurement remains high\. 48\. Procurement of Works\. Works procured under this project will consist o f small scale rehabilitation works targeting key public infrastructure affected by TS Noel, including the rehabilitation o f drainage and irrigation systems, public buildings (including schools and clinics) and community centers\. For these and other works 12  contracts identified during project implementation procurement will be carried out usingstandardbiddingdocuments(SBD) either issuedby or agreed with the Bank\. 49\. Selection of Consultants: The expanded local risk management activities under component 3 to be financed by the AF will be executed by NGOs\. The NGOs that were competitively selected under ERDMP and have been performing well in their respective Departmentswill be contractedthrough single source selection to execute the scaled-up local risk management activities in those departments\. In areas into which ERDMP will be expanding (namely the rural areas of the Department of the Ouest), consultants or NGOs will be selectedcompetitively in accordancewith Bank Guidelines\. 50\. ProcurementPlan and Thresholdsfor ProcurementMethods and Prior Review: The Borrower, at appraisal, developeda procurementplanfor project implementation which providesthe basis for the procurementmethods\.This planwas agreed between the Borrower and the Project Team on November 28, 2007 and is included inAnnex 2\. The plan will be updated in agreement with the Project Team annually or as required to reflect the actual project implementation needs and improvements in institutional capacity\. The recommended thresholds for the use of the procurement methods specified in the Legal Agreement are identified in the table in Annex 3\. These thresholds, as well as the requirement for Bank prior review of all but the smallest contracts, are common to all World Bank projects in Haiti and have served as the basis for the agreed ProcurementPlan\. 5 1\. Frequency of Procurement Supervision: Supervisionwill be carried out primarily through the prior review by the Bank of virtually all procurement actions by PL-480 or DPC\. In addition, day-to-day procurement supervision will be supplemented by supervisionmissionsat least twice a year\. Environment & Social Safeguards 52\. General\. The same environmental and social safeguards will apply to the AF as to the original Grant financed activities and the same management frameworks will be utilized\. As with the ERDMP, the AF rehabilitation activities will be primarily upgradingof existingstructures and will work entirelywithin existingpublic lands\. 53\. Scope and coverage\. This AF will only support activities in the Departments in which the ERDMP is already present (Le Sud, Grande Anse, Nippes, Ouest and Artibonite)\. These Departments were already covered by the projects original EMP\. In addition to operating in the same zones, the scope and type of activities remains unchanged\.As a result, no new safeguards will be triggered\. 54\. Institutional capacity\. The implementingagency, the PL-480 PCU, has engaged an environmental specialist who is responsiblefor assuring that those policies laid out in the Environment Safeguard Manual are respected\. The project has also financed 13  numerous environmental safeguard and environmental training sessions for the specialist\. A communications expert was also engaged based on the need observed during implementation to improve the quality o f communications/ public consultations prior to undertaking small rehabilitation works\. 55\. Lessons Learned: The ERDMP's initial Environmental Assessment (EA) has been reviewed and cleared by the Bank\. The PL-480 PCU will now produce an updated version o f the Environmental Management Plan (EMP)\. Taking into account the lessons learned, the goal i s to bolster the environmental and social decision making framework so that the selected rehabilitation and risk mitigation micro-projects are environmentally sustainable\. The updated EMP will define (where needed) the means o f improving the impact o f the sub-projects on the environment\. The following changes are proposed to the EMP to reflect the lesson learned to date: Invest in an intensive communication campaign (including training and environmental sensitization program) directed at local and regional authorities, as well as the CCPC and the CDPC, to mainstream the process of vetting the proposed rehabilitation and mitigation works\. This should further enhance the efficacy o f the environmental and social management framework operating under the ERDMP; 0 Insupport of this training and sensitization program, the EMP will be updated to provide for the need for stronger oversight and follow-up during and after project execution\. The "ground-truthing" o f the accuracy o f the initial environmental impact evaluation i s critical towards assessing the effectiveness o f this evaluation and the need to adapt the mitigation micro-projects to better respond to critical long term needs o f the at-risk populations; 0 Strengthen the Monitoring and Evaluation activities that are covered by the Project and improve the communication o f these data with other actors who are working on flood control inHaiti\. VI\. Expected Outcomes 56\. There are no changes to the expected project outcomes which include (i)the rehabilitation o f areas affected by recent adverse natural disasters; (ii) strengthened country capacity to manage natural disaster risks and better respond to emergencies resulting from adverse natural events; and (iii) reduced vulnerability o f communities through risk identification and risk mitigation activities\. 57\. The project's outcome indicator also continues to be the establishment o f CCPC validated by the DPC\. However the target value will be increased from 54 CCPCs to 73 CCPCs to reflect the scaling up o f the project\. 14  Table 4: ExpectedOutcomes PDO Original Project Additional Outcome New Project Outcome Outcome Indicators Indicators Indicators (i) To support the (i) Satisfactory planning (i)Satisfactory planning (i)Satisfactoryplanning rehabilitationof areas and completion of a and completion of and completion of a affected by recent rehabilitationscheme for rehabilitationschemes rehabilitationscheme adverse natural events\. affected settlements in in areas affected by TS for affected settlements the regions of Belle- Noel\. inthe regions of, Fonds Anse, Fonds Verrettes Verrettes those affected and Gonaives by TS Dean, and those affected by TS Noel\. (ii) To strengthenthe (ii) Capacity established (ii) Capacity established country's capacity to within the DPCto (ii) No change within the DPC to manage natural disaster prepare for, and respond preparefor, and respond risks and to better to, natural disaster events to, natural disaster respondto emergencies which includes a events which includesa resultingfrom adverse validated legal system, validated legal system, natural events\. stronger management stronger management systems, improved systems, improved technical capacity and an technical capacity and operationalNational an operationalNational Response Plan\. Response Plan\. (iii) To reducethe (iii) Functioningdisaster (iii) 19 CCPC fully (iii) 73 CCPC fully vulnerability of committees, including operational, validated operational, validated communitiesthrough 54 CCPC fully by the DPC, and by the DPC, and risk identificationand operational, validated by incorporated into incorporatedinto Haiti's risk mitigationactivities\. the DPC, and Haiti's national disaster national disaster incorporatedinto Haiti's response system response system nationaldisaster responsesystem Intermediate Outcomes Original Intermediate Additional New Intermediate Outcome Indicators Intermediate Outcome Outcome Indicators Indicators Component 1 RehabiIitation and/or Rehabilitationworks (to Rehabilitationworks Rehabilitationworks in reconstruction of public be determinedbasedon post-TS Noel (to be Fonds Verrettes, post infrastructure in areas sub-projectsto be determined basedon TS Deanand post-TS affectedby natural approved) in Fonds sub-projectsto be Noel (to be determined disastersidentifiedand Verrettes, Belle Anse approved) identified based on sub-projects to completed\. and Gonaives identified and completed be approved) identified and completed and completed 15  Component2 Institutionaland Establishmentof 3 technical structures Thematic Committees Thematic Committees supportingthe DPC and within the SPGRD within the SPGRD SPGRD reinforced Additional Vehicles providedto the No change Vehicles providedto the infrastructure and DPC, at the nationaland DPC, at the nationaland equipment strengthen departmentallevelto departmentallevelto disaster management assist in disaster assist in disaster response and management response management response coordination and coordination\. and coordination\. Renovationand Renovationand equipment of OPDES equipmentof OPDES Buildingto serve as the Building to serve as the DPC's nationaltraining DPC's nationaltraining and archivescentre and archivescentre DPC management Institutionalanalysis of No change Institutionalanalysis of systems reinforced the DPC and SPCRD the DPC and SPCRD completedand key completed and key recommendationsfor recommendationsfor DPC administrative and DPC administrative and technical training technical training implemented\. implemented\. Component 3 Creation, Reactivation, Creation, Reactivation Creation, Reactivation Creation, Reactivation Training of Community and Training of 54 and Training of 19 and Trainingof 73 Civil Protection CommunityCivil CCPC developmentof CCPC ,development of Committees ProtectionCommittees, local risk maps and local risks maps, developmentof local identification& identification& risk maps, and execution of at least 19 executionof at least 73 identification& additionalsmall small mitigation executionof at least 54 mitigationprojects\. projects\. small mitigation projects\. Additionaltraining Validationo f all modules developedand committees by DPC\. deliveryto 54 existing CCPC\. Additional small mitigationproject executedby each existingCCPC Validationof all committeesbv DPC\. 16  VII\. Benefitsand RisksBenefits Benefits 58\. The principle beneficiaries o f the scaled-up project will be the inhabitants o f the areas most affected by TS Noel; including often remote and highly vulnerable communities as well as large urban community sections\. Benefits stemming from the rehabilitation o f small-scale public infrastructure include; (i) economic recovery in areas devastated by TS Noel through the rehabilitation of key productive infrastructure (eg irrigation and drainage systems) and opportunities for paid local labor, and (ii) social services (e\.g\., rehabilitation o f schools, community areas, clinics) which double up as shelters in case of future disasters\. Benefits from the strengthening o f the CDPC and CCPC include; (i) reduced loss of life through improved disaster preparedness and response (alerts, evacuation and immediate post-disaster relief, and (ii) reduced vulnerability o f life and property to disasters through local risk mitigation activities\. AF will also provide broader benefits to the 5 Departments and the SNGRD by strengthening disaster risk management systems\. Risks Risk Critical Risks Risk-Mitigation Measures Rating Post Mitigation Measures Governmentallocationof human H Government is committed to the additional resources to the DPC / SPGRD is human resourcesneeds as recommendedinthe inadequate InstitutionalAnalysis report preparedunderthe ERDMP\.Effectivemeasures have beentakento insulateactual project implementation from this risk, includingthe creationof separate project coordinationunitswhose staff are financed by the project\.Thus, the residual risk refersto projectsustainability\. Absence of budget allocationto H Need to follow through with Government's support DPC operations weakens commitmentto set up 3 new budget lines for the sustainability of the entire system DPC\. Senior Bank management will raisethe issue with the GoH if lines not included in the rectificationbudget\. Effectivemeasureshave beentakento insulateactual project implementation from this risk, with the project directlyfinancing all essential implementation costs\. Thus, the residualrisk refers to project sustainability\. Governmentcommitment to M Activities inthe project are included inthe disaster risk management is diverted government investment program\. GoHhasjust by other critical issues placeddisaster risk management as major cross- cutting issue in PRSP\. 17  The DPC's institutionalcapacity is being fundingfor risk management strengthened\.Regular supervisionand support remains weak meetingswill continueto be carried out\. Disparityin NGO proceduresand M All NGOs (includingthose financed by other execution methodsthreatens donors) will employ a unifiedmethodology and integrity o f work throughout training content - which is currently being differentregions synthesizedand validated by DPC as per the SNGRD framework\. I Rehabilitatedinfrastructure S Selectioncriteriafor rehabilitationof works will vulnerable to future disasters precludefinancing o f any infrastructurehighly (especially floods)\. vulnerable to floods\. Overall Risk Rating S Preparationshould include actions mentioned above\. Risks will be re-assessedon a regular basis\. 1 I Risk Rating(including mitigatingactions): H=High Ris S=Substantial Risk, M=Modest Risk, N=Negligible or Low Risk\. VIII\. FinancialTerms and Conditionsfor the AdditionalFinancing 59\. The AF to the ERDMP would be provided as an SDR 4\.7 million IDA Grant\. These funds were drawn from the FY08 IDA-14 regional allocations on a priority basis to assist with disaster recovery and risk reduction in Haiti, following GoH's official request for financial support\. Annex 1: DisbursementAllocationsof AdditionalFinancingand Reallocation 1 Original Additional Reallocation Total Amount Amount financing amount in allocated in allocated in SDR amount in SDR* SDR Category SDR (1) Works under PartA and C 100,000 100,000 ofthe Project(other than Subprojects ) (2) Goods under Part A and C 20,000 20,000 of the Project(other than 1 Subprojects) (3) Consultants' servicesand 535,000 535,000 Training under Part A and C of the Project(other than Subprojects ) (4) Works under Part B ofthe 555,000 Project 18  ng under Part B of the * Inorder to cover the additional audit cost associatedwith the project extension, funds will be reallocated from the original project\. The reallocation process is separate from this proposed additional financing, but will be carried out in parallel\. 19  Annex 2: Additional FinancingProcurementPlan Number Review Preparation opening Bid- Descriptionof Contract of Procurement Estimated by Bank of Bidding / Contracts Method cost (Prior / Proposal Post) Docs Date Irrigationand Drainage Rehabilitation 4 NCB 1,000,000\.00 Prior 0412008 07106 SchoolRehabilitation 2 NCB 500,000\.00 Prior 0412008 12106 Health Clinic Prior Rehabilitation 2 NCB 500,000\.00 0412008 Community Center / Prior Shelter Rehabilitation 2 NCB 1,000,000\.00 0412008 Expansionof Community Prior Driven Local Risk Managementin Sud & GrandeAnse (CRS) 1 Single Source 1,329,000\.00 0512008 0512008 Expansionof Community Prior Driven Local Risk ManagementinNippes (OXFAM) 1 Single Source 1,218,000\.00 0512008 0512008 Expansionof Community Prior DrivenLocal Risk Managementin Artibonite (PADF) 1 Single Source 742,500\.00 0512008 0512008 Expansionof Community Prior DrivenLocal Risk Managementto Ouest 1 QCBS 1,100,000\.00 0412008 0712008 Total 7,400,000\.00 Note: ICB = InternationalCompetitiveBidding NCB = NationalCompetitiveBidding QCBS = Quality- and Cost-BasedSelection QBS = Quality-Based Selection FBS = FixedBudget Selection LCS = Least-CostSelection CQS = Selection Basedon Consultants' Qualifications 20  Annex 3: Thresholdsfor ProcurementMethodsand Prior Review Expenditure Contract Value Procurement ContractsSubject to Category (Threshold) Method Prior Review US $ thousands 1\. Works >1,000 ICB All 100-1,000 NCB All <150 Shopping All Regardlessof value Direct Contracting All 2\. Goods >loo ICB All 25-100 NCB All I I 5-25 I Shouuing I All I I <5 Shopping - - 1 None I ~~ Regardlessof value Direct Contracting All 3\. ConsultingServices -3\.A Firms Regardlessof value QCBS,QBS,FBS,LCS All <loo QCBS,QBS,FBS,LCS, and All CQS Regardlessof value Single Source All -3\.B Individuals Regardlessof value Comparison o f 3 CVs in All accordancewith Chapter V of the Guidelines 4\. Works, Goods and <50 CommunityParticipation None Services under procedures detailed in Subprojects OperationalManual Note: Consulting Services: Short lists of consultants for services estimated to cost less than $100,000 equivalentper contract may be composedentirely of nationalconsultants in accordance with the provisions of paragraph2\.7 ofthe Consultant Guidelines ICB = InternationalCompetitiveBidding NCB =NationalCompetitiveBidding QCBS = Quality- and Cost-Based Selection QBS = Quality-BasedSelection FBS = FixedBudgetSelection LCS = Least-Cost Selection CQS = SelectionBasedon Consultants' Qualifications 21  Annex 4: Financial Management Risks RiskAssessment RiskMitigations measures Residual H I S I M I L Risk IInherent Risk Country Level\. Quality of X The integratedfiduciary assessment S PFM institutions(see PEFA- (PEMFAR) was conductedby the Bank in PMF,CFAA, CPAR, CPIA & 2007\. Basedon the findings, an action plan other diagnostics), standard of was elaboratedby the Government\. The Bank financial accounting, reporting and the IDB are assistingthe institutionsinthe and auditing, quality of FM implementationof this action planthrough profession technical assistance grants (EGTAG I&II) and a DPL (EGRO I& 11)\. Entity level\. Independenceo f The AF will be implementedby PL-480which M entity's management, is an autonomousagency with strong fiduciary appropriatenessofthe capacity\. organizational structure, impact o f civil service rules Program level\. Relative size of The fiduciary arrangementsand the different M the Bank loan, type of lending actions to be implemented as identifiedinthe instrument, complexityof the Audit will help mitigatethe risks\.Close APG (e\.g\. sectors involved, financial management supervisionwill also be number of implementing and undertaken\. sub-implementingentities, multi-donor etc\.) Overall Rating Inherent Risk M Control Risk Budget The detailed cost table ofthe AF and the L procurementplan will be adoptedprior to negotiations\. Accounting PL480 has a sound accountingsystem\. The L software will be updatedto reflectthe increase inthe allocations\. InternalControls PL480 has a sound internalcontrol system\. An L internalauditor hasjust been recruitedand needsto be trained and will need to develop an audit plan\. Funds Flow The flow of funds will remainthe same\. L FinancialReporting 1The format and content of all the FMR will be L Auditing L Overall ControlRisk Low Residual Risk Ratinp Moderate 22  i! P 3 m  (A G 0 c b d (A s 0 c b P CQ 0 0b (A G e, u b - 5 >3 0 m ac0-0 (A G M c b (A G e, c b  v1g VIB I- v) e, c)E  Project Schedule Planned Actual FirstBank mission 11/12/07 11/12/07 Time takento prepareproject 3 weeks 12/12/07 Appraisal 12113/07 12113107 Negotiations 01/07/08 1/07/08 Approval 01/29/08 PlannedDateof Effectiveness 02/10/08 Name Specialty CatherineTovey Task Team Leader Fily Sissoko Sr\. FinancialManagement Specialist Yao Wottor ProcurementSpecialist Solange Alliali Sr\. Counsel Hilarion Burneau Sr\. FinanceOfficer NadimKhouri Sr\. Technical Specialist Ross Gartley ExtendedTerm Consultant Anita Daza LanguageProgramAssistant Liliana Vendeuvre Team Assistant 26

APPROVAL

P159302

 The World Bank Tajikistan Railways Project (P159302) Project Information Document/ Integrated Safeguards Data Sheet (PID/ISDS) Concept Stage | Date Prepared/Updated: 16-Dec-2016 | Report No: PIDISDSC18094 Jun 27, 2017 Page 1 of 15  The World Bank Tajikistan Railways Project (P159302) BASIC INFORMATION A\. Basic Project Data Country Project ID Parent Project ID (if any) Project Name Tajikistan P159302 Tajikistan Railways Project (P159302) Region Estimated Appraisal Date Estimated Board Date Practice Area (Lead) EUROPE AND CENTRAL ASIA Sep 10, 2018 Mar 20, 2019 Transport & ICT Financing Instrument Borrower(s) Implementing Agency Investment Project Financing Ministry of Energy and Tajikistan Railways Water Resources Financing (in USD Million) Financing Source Amount International Development Association (IDA) 30\.00 Total Project Cost 30\.00 Environmental Assessment Category Concept Review Decision B-Partial Assessment Track II-The review did authorize the preparation to continue Other Decision (as needed) Type here to enter text B\. Introduction and Context Country Context 1\. With a population of 8\.4 million and a GNI per capita of $1,080 in 2014, Tajikistan is the poorest country in Central Asia\. Tajikistan’s economic transition was delayed in part due to the civil war that followed the independence of the country in the early 1990s\. The geopolitical context is still complicated by tensions at its southern borders with Afghanistan, and an unstable relationship with neighboring Uzbekistan which regularly affects border crossings\. Tajikistan’s economy is dominated by agriculture, mining, aluminum processing\. It is also one of the world’s most remittance-dependent countries, with overseas workers remittances constituting 49 percent of GDP in 2013 but dropping to 28 percent in 2015 due to the economic slowdown in Russia\. In 2015, Tajikistan’s real GDP growth slowed to 4\.2 percent from 6\.7 percent one year earlier due to Russia's economic slowdown, weak global prices for key export commodities, low expansion of services and agriculture\. This translated into lower incomes for the population and lower domestic demand\. The main engines for growth are agro-processing and mining industries\. Economic diversification has become a priority since demand for commodities dropped in recent years, but it requires Jun 27, 2017 Page 2 of 15  The World Bank Tajikistan Railways Project (P159302) enhanced human capital, improvements of public services, institutions, and in the quality of infrastructure\. While the national poverty rate fell from over 72 percent in 2003 to 32 in 2014, most of the poor living in rural areas have limited access to basic public services such as transportation, electricity, clean water and sanitation\. 40 percent of Tajikistan’s poor population is concentrated in the Southern province of Khatlon\. 2\. As a landlocked country, Tajikistan needs to enhance connectivity in order to facilitate its economic transition and economic diversification\. Presently private investment accounts for 20 percent of total investments in the country, or 3 percent of GDP\. It is much lower than Europe and Central Asia countries’ average\. Private investors are discouraged by the environment for doing business in Tajikistan\. Averaging about 15 percent of GDP annually since 2008, total investment is low by regional and international standards (in 2015 Tajikistan’s Doing Business ranking was 138 out of 189 economies)\. The transition from state oriented to private investments is hampered by the lack of connectivity both domestically and with international markets\. Local and foreign entrepreneurs cite inadequate transport networks as a main obstacle for doing business\. Tajikistan’s transport network remains inadequate both in quality and capacity, limiting access to markets and services, and hampering economic and social development\. Projections by the government describe an annual economic growth of 7-8 percent accompanied by an annual increase in the volume of cargo of 9 percent\. To accompany that forecast, the Government has developed a 2030 National Development Strategy, which includes targets in terms of physical connectivity\. Sectoral and Institutional Context 3\. Railway transport plays a vital role in Tajikistan\. Tajik Railways (TR) carried about 80 percent of all freight transported in and out of Tajikistan in 2015\. In 2015, import traffic represented 65 percent of the business of TR, and transit traffic on Northern Line (see map annex 1) represented 25 percent\. Imports and exports involve transporting goods such as mining, metals products and containers for agro-products over long distances\. This reliance on long distant markets has been reinforced over the past six years, with sharp rise in the shares of Turkey and China in exports, and of Russia in imports increasing calls for a greater role for the railway in the country’s economic development\. The railway transportation system also constitutes a climate friendly and an energy efficient way of moving people and freight\. Tajikistan’s 14,000 km of roads are essential to carry goods at the domestic level, however 75 percent is in poor condition\. Average vehicle speeds across the road network are about 30 km per hour\. The national road network carries 92 percent of the domestic freight volumes of all transport modes, and 98 percent of total passengers\. Air transport and civil aviation services remain underdeveloped\. The share of road transportation is strong for short-distance and intra-regional movements\. However trucking services do not present a reliable alternative as they are onerous due to high operational costs, including the cost of fuel that needs to be imported from Russia\. Also trucking services are prone to random and unpredictable checks at international borders\. A 2015 World Bank study analyzing domestic costs of shipping a 20 feet container by road among the largest urban areas in Tajikistan, showed that transportation costs were higher than between Eastern Europe and the United States\. 4\. Although demand is high, TR is losing market share\. Although the important role of the railways is acknowledged by the Government, the share of road transport in overall traffic flows has been continually increasing, while railways decreased from 55 percent in 2008 to 45 percent in 2015\. The current declining market share of TR is in sharp contrast with the country’s economic growth during the recent years, illustrating the untapped potential of freight transportation by railways\. TR used to transport 10-12 million Jun 27, 2017 Page 3 of 15  The World Bank Tajikistan Railways Project (P159302) tons until 2010, when Uzbekistan closed the border with the Southern Line of Tajikistan (see map - annex 1), leading to a gradual decrease of cargo traffic\. Currently, TR transports only half the traffic transported before the abandonment of the Southern Line\. Over the recent years, TR’s response has been to compensate the financial losses from declining traffic by an increase in tariffs, which convinced a number of freight customers to shift to trucking\. TR will also need to adjust its business model to address the losses of some transit traffic operated along the Northern Line following the opening of the Uzbekistan Pap-Angren railway line in June 2016 which allows bypassing of the territory of Tajikistan\. In the long term the railway market share may decrease further, as it is still higher today than in most other countries\. Despite the challenges, TR increased its import traffic by 6 percent in 2014, confirming that railways could still play an important role for imports and exports from/to long distance partners\. 5\. Tajikistan needs to address the fragmentation of its railway network\. The railway infrastructure in Tajikistan (about 660 km, one of the lowest track densities in the former Soviet Union) is composed of two geographically separated segments\. Until September 2016 there were three disconnected segments, one covering the South, one the Center (connected with the South only in September 2016), and one the North of the country (see map - annex 1)\. All international interconnections transit via Uzbekistan’s territory\. The Southern Line’s crossing to Uzbekistan was closed unilaterally by Uzbekistan in 2009 due to perceived security risks along the border with Afghanistan\. As a result, the Southern Line, which accounted for two thirds of the Tajik network length, became inoperable\. Similarly the transit of Uzbek goods along the Northern line has substantially decreased since the early 2010s\. On the other hand, the Central Line connection to international markets is unlikely to be affected by a unilateral reduction of traffic or closure by Uzbekistan, because the Central Line is not located close to the border with Afghanistan\. In September 2016, Tajik Railways (TR) managed to open a 40km green field new line from Yahvan (in Khatlon province) to Vahdat South of Dushanbe which now connects the South and Center segments\. The completion of this new line is a major development for the railway network as it provides an opportunity for the network to serve domestic demand and addresses the legacy of not having a unified national railway system stemming from the Soviet Union’s fragmented network by national borders at independence\. That connection (between Vahdat and Yavan) was built through a very challenging topography on a missing link between the Southern and Central Lines in an effort to revitalize rail transport and serve the Southern province’s markets\. This major breakthrough provides a paradigm shift for an enhanced policy dialogue between the Bank and the government\. The Southern region is fertile and densely populated\. Cotton (Tajikistan’s second-largest export after aluminum products) and other agricultural or agro-industrial products exported via onerous and convoluted truck services since the closure of the southern border connection could now be transported by rail\. The Southern Line traffic lost since 2009, equivalent to about half of the current traffic, might be recaptured and exported again over longer distances\. It is also anticipated that for the origins/destinations of traffic made over 250-300km, rail services will have a competitive advantage against trucking at domestic level\. The Khatlon population will also be allowed to travel by train to the capital Dushanbe\. The proposed project design is offering to help TR optimize the new configuration of the rail network\. 6\. Tajikistan will still need to improve the connectivity of its railway network further at both domestic and international levels\. At the domestic level, the new 40km interconnection from Yahvan to Vahdat will not be sufficient for achieving the full potential of the rail network\. While the overall physical condition of the network is fairly good and safe relative to regional standards, the Southern line (423 km of track as well as rolling stock), has been neglected since its closure in 2009\. The rehabilitation of tracks is necessary along the severely deteriorated section Qurghonteppa–Yavan of the Southern Line, further South Jun 27, 2017 Page 4 of 15  The World Bank Tajikistan Railways Project (P159302) from the new line Yahvan-Vahdat (see map under annex 1)\. The modernization of the obsolete telecommunication links will also be necessary to enhance reliability and safety and allow higher connectivity of the railway stations with the dispatching center in Dushanbe\. Moreover, the Vahdat bridge requires repairs and this could be addressed with additional investment - financing for the bridge is being sought (a different channel than IDA or parallel financing with IFIs) although the project remains viable without the bridge rehabilitation\. At the international level, the government is trying to unlock TR network further and reduce the current dependence on Uzbekistan for the transit via the Central Line\. This is why the government is planning the development of the Tajikistan-Afghanistan-Turkmenistan (TAT) project in addition to the recent new connection between the Southern and Central segments\. The project would consist in constructing a missing link in the Tajik territory, between Kolkhozabad and Nijnii Pyanj at the border with Afghanistan\. The TAT would provide Tajikistan with a new opportunity to connect with international routes from the South\. This project requires major investments as well as longer term coordination with Afghanistan and Turkmenistan\. 7\. Beyond physical connectivity, TR should focus its business strategy on international demand\. Constraints and risks faced by the sector could be remedied\. TR is a state enterprise which operates under the Ministry of Transport\. It is largely a freight railway—96 percent of its traffic units are freight units\. TR still does not seek subsidies from the government, and is able to cover its operating costs\. However, serious risks of irreversible worsening of the operational and financial situation of TR exist (as described in the Regional Railway Policy Note prepared by the Bank in 2015)\. The high dependency on international market conditions makes the financial sustainability of the Tajik Railways fragile\. TR must act vigorously to protect and extend its share of international transport, which may generate important revenues; it requires flexibility in negotiation with other participants in international transport, and quality of services\. During the assessment of the status of the TR in 2015, the World Bank provided a number of specific recommendations: (i) as a large component of TR’s operating expenses is fixed and cannot be easily reduced without restructuring, TR should further implement a restructuring program that will effectively address its financial and operating performance and prepare it to meet future market demands, (ii) the development of TR’s marketing capacity is necessary to retain and develop its market shares, (iii) enhanced coordination with other stakeholders such as customs, taxes etc is needed to reduce costs, (iv) methodologies for setting tariffs and prices including for transit should be modernized, (v) TR needs to focus on productivity starting with an assessment of transaction costs and over time develop asset management procedures and systems, and (vi) improve interoperability with neighbouring countries\. 8\. The government is committed to restructure the railways and is seeking assistance from the Bank to do so\. The government supports railways as a strategic mode to respond to the import/export needs of the country, and enhance Tajikistan’s regional connectivity\. But the government also expects TR to become more market and service oriented and cost efficient\. TR presently faces a surplus of assets (locomotives, wagons) and staff inducing negative effects on operational and financial performance\. Assessing the necessary assets and staff, modernization of indispensable assets and resolution of the problem of surplus fleet and staff would reduce operating costs and increase performance of TR\. The government agreed to use the key recommendations formulated as part of the Bank-prepared Regional Railway Policy Note (2015) to scope out a restructuring roadmap for TR\. An inter-governmental Railway Restructuring Committee has been established in 2016, chaired by the Minister of Transport to review and further expand upon the Regional Railway Policy Note’s findings, and discuss implementation plans\. As part of the ongoing policy dialogue, the government requested support from the Bank through a PPIAF study to provide Jun 27, 2017 Page 5 of 15  The World Bank Tajikistan Railways Project (P159302) guidelines in facilitating TR’s transition from an administrative entity under MoT’s oversight, to a corporatized and market oriented organization\. Relationship to CPF 9\. The proposed project is well aligned with the World Bank Country Partnership Strategy (CPS) for Tajikistan for the period FY15-18, pillar 3 – promoting regional connectivity\. The project contributes to meeting the objective of enhancing reliability and reducing the cost of transport services and to strengthening the efficiency of service delivery\. The CPS notes that investing in railways has great potential to alleviate poverty, and boost macro and micro economic activity\. Enhanced connectivity would increase productivity, reduce transport cost and travel time and facilitate access to markets\. In addition, this activity supports closer regional integration with neighboring countries through enhanced regional connectivity\. 10\. The project will support achieving the twin goals which were set by the World Bank to end extreme poverty and to promote shared prosperity\. The project will enhance connectivity with the province of Khatlon which concentrates 40percent of all the country’s poor population\. Access to infrastructure will allow producers in the Khatlon province to reach new customers, modernize and diversify their production, gain new technologies and skills with the ultimate objective of increasing wages and revenues\. It will also allow the poor to gain all year long access to health and education facilities in Dushanbe thanks to the development of safe and reliable rail passenger services\. C\. Proposed Development Objective(s) To enhance the connectivity between the Central and Southern Lines of Tajikistan Railways and to improve TR’s operational and financial efficiency\. Key Results (From PCN) 11\. The main outcome indicators of the project include: ï‚ Increased capacity to handle freight traffic expressed in TU-km (ton-km + passenger-km) per km of track (number); ï‚ Increase of number of beneficiaries having access to rail transport through the interconnection of Southern and Central Lines: passenger (number) and freight (number); ï‚ Reduced operating costs on the railway network expressed in US$/TU-km/year (percentage)\. 12\. The main output indicators of the project include: ï‚ Rehabilitation of 35 km of track (railway line Qurghonteppa-Yavan); ï‚ Rehabilitation of the Vahdat bridge; Jun 27, 2017 Page 6 of 15  The World Bank Tajikistan Railways Project (P159302) ï‚ Modernization of the telecommunication system of Tajik Railways along the Central and Southern lines; ï‚ Implementation of an action plan for TR restructuring; ï‚ A Feasibility Study for the Kolkhozabad to Nijnii Pyanj new railway line, part of the TAT project\. D\. Concept Description 13\. The proposed project is meant to accompany TR in their effort to maximize the benefit of the recently opened Vahdat-Yavan railway line connecting the Southern and Central railway networks\. The project is set as a first engagement with TR, addressing some of their infrastructure development and institutional strengthening objectives: a\. Improving the quality of services on the interconnected Southern and Central Lines by financing the rehabilitation of a worn out section Qurghonteppa–Yavan and the rehabilitation of the Vahdat bridge\. b\. Modernizing the telecommunication network of TR’s network for increasing traffic safety and enhancing the performance of the traffic management system\. c\. Studying the economic efficiency of the potential extension of the Southern Line up to the free economic zone close to Panji Poyon at the border with Afghanistan\. d\. Carry out a PPIAF study while taking steps to implement the project\. The scope of the proposed PPIAF is to: reduce operating costs including the: (i) examining restructuring options and enhanced financial performance of TR in human resources development, rolling stock and infrastructure maintenance; (ii) implementing a time-bound plan for restructuring\. This plan will require: (i) implementing tools to analyze the costs of services; (ii) scoping out tariff strategies applicable to market segments; and (iii) training to give staff the business culture and skills needed to support TR’s commercialization\. 14\. As the first Bank-financed railway project in Tajikistan, the project will be limited to achieving immediate and short term objectives (necessary for the revitalization of the TR) and for the preparation for approaching longer term objectives, as follows: a\. Short term objective: Supporting the interconnection between the Southern and central lines through the rehabilitation of the Vahdat bridge and the rehabilitation of the worn-out railway section Qurghonteppa– Yavan\. It will allow TR to access new market and thereby support an increase in freight volumes\. b\. Short term objective: Modernization of TR’s telecommunication network as a vital component of the safety of railway traffic, offering also the potential for increasing revenues from commercialization of surplus telecommunication capacities\. c\. Short term objective: Definition of the strategy for restructuring of the TR on a commercial basis and identification of specific steps for the restructuring\. Jun 27, 2017 Page 7 of 15  The World Bank Tajikistan Railways Project (P159302) d\. Longer term objective: Evaluation of the feasibility of the development of the TAT extension to the border with Afghanistan\. The evaluation will assess whether the line could serve the domestic and export needs of TR network, even before the longer term finalization of the international corridors\. 15\. The proposed project will contribute to improving the efficiency of the railway transport system and will facilitate regional integration and international connectivity\. The project will enhance connectivity in the country and facilitate transport of goods from the South to Dushanbe and to export\. The modernization of the telecommunication network of TR’s network will contribute to the increase of traffic safety and better performance of the traffic management system\. Simultaneously, considering the high capacity of the modern fiber optic cables installed by TR, the surplus telecommunication capacity would be leased to third parties (telephone, data transmission, internet services, etc\.) generating revenues for TR and improving telecommunication capabilities\. The feasibility study for the extension of the Southern line up to the free economic zone close to the Panji Poyon border with Afghanistan will be prepared in response to the government’s longer term interest in developing new routes to connect Tajikistan with trade partners (TAT project)\. Project Components 16\. The project includes three components: (i) targeted investments for rehabilitation of the Vahdat bridge, the Qurghonteppa-Yavan rail section and telecommunication improvements, (ii) a strategy for restructuring TR, and (iii) a feasibility study for the rail line connecting the Southern line to the border with Afghanistan\. Component 1\. Targeted investments to support TR modernization 17\. The Component will support procurement of necessary goods, works and services to ensure the safety and reliability of key railway lines\. a\. Rehabilitation works (about $7 million confirmed, 23 percent of total cost)\. (i) The section Qurghonteppa – Yavan (35 km, see map) is part of the Southern Line which was connected with the Central Line\. Rails and sleepers are in poor condition on this section and need to be replaced\. The investment cost will cover single track rail and fixings, base plates and pads\. (ii) The rehabilitation of the railway bridge in Vahdat and river flows control constructions along the Kafirnigan River are needed to increase the operational speed and safety\. The investment is estimated at $20 million\. Financing for the bridge component is being sought (through alternative WBG financing Jun 27, 2017 Page 8 of 15  The World Bank Tajikistan Railways Project (P159302) source, or through parallel financing by another IFI)\. In the event that financing does not materialize, the project economic viability would not be affected\. b\. Railway safety modernization (about $15 million, 50 percent of total costs): Connection of the newly built Vakhdat-Yavan section (see map under annex 1) to the optic fiber network and thereby to the central server in Dushanbe is critical to ensure safe and reliable train operations\. Investment in the modernization of telecommunication systems is a preferred option given the forecast traffic during the first years following the re-opening of the Southern line\. This component will include installation of fiber optic ducts and cable along the track, installation of modern radio and telephonic connections for the traffic management, CCTV for supervision of the critical parts of the railway infrastructure, and transmission of any information relevant for railway traffic and safety\. The expected excess telecommunications capacity would be leased by TR to other users in Tajikistan, generating additional revenues to the company\. International experience shows that such an option requires straight-forward institutional arrangements\. The telecoms package could include the central line, the Vahdat-Yavan new line and part of the southern line connecting the main population centres and their stations\. The estimated cost of would at least cover the Central line, the new line, and 100 km of the Southern line – a reassessment of the traffic forecasts for the Northern Line will be carried out at a separate stage\. Component 2\. Strategy for restructuring TR ($4\.75 million, 16 percent of total cost) including implementation support\. 18\. The following activities are planned inter alia to be carried under the PPIAF TA in parallel with the project preparation: (i) Examination of restructuring options to improve governance structure of TR, such as through corporatization of TR and enhanced financial performance of TR in the areas of human resource development, rolling stock and infrastructure maintenance\. The government aims to revisit its restructuring program approved in 2010 and seeks support from the Bank to do so\. (ii) Development of a restructuring plan including a time-bound plan for the implementation of restructuring\. Support to TR in capacity building will be provided, including staff training on state of the art commercial rules for operation of international freight and passenger transportation services\. The training will focus on staff working in the Southern Line, as their knowledge and skills need updating because the line was closed for the last 7 years\. A study tour in other railways in the region or in other parts of the world will also help the members of the Railway Restructuring Committee to have direct contact with successfully reformed railways and to develop a grasp of modern management practice\. (iii) A rapid assessment of TR’s safety organization and procedures/operational manuals\. Jun 27, 2017 Page 9 of 15  The World Bank Tajikistan Railways Project (P159302) 19\. Further institutional activities for the project implementation phase would include: support for financial and accounting modernization, in-house support during the implementation of the reforms, staff training as part of a comprehensive capacity building effort, implementation of human resources strategies, revised safety procedures, commercial management practices and tools, and asset management systems\. 20\. Project Management Activities will finance activities including management of social and environmental safeguards and fiduciary, procurement activities, and impact assessment\. The component will cover operational costs, external consultants, logistics, office equipment etc\. Financing will be provided for technical advice to review and implement an outreach strategy, the collection of baseline and monitoring data, and capacity building for relevant staff\. These efforts will adopt a gender lens ensuring that adequate attention is paid to gender differences while dealing with customers\. Depending on data available, this would reflect analysis showing the gendered nature of information access in Tajikistan\. Training on environmental and social safeguards will also be provided\. 21\. Gender\. The project will include the following gender activities\. The preparation will assess the gender- specific needs in railway services and related facilities’ design through consultations (surveys, interviews, fora)\. Gender-disaggregated data on railway passengers and personnel would enable better planning and design of physical facilities (e\.g\., design of stations), services, and safety provisions that meet wo men’s and men’s specific needs\. The project preparation will include an assessment of the potential impact of the railway development on women’s economic opportunities, including trade and tourism-related activities\. Opportunities for promoting women’s employment in the railway operations will be explored (i\.e\. setting targets for female employment in new railway jobs and providing women with equal access to on-the-job training, for example, as railway station attendants, ticket booth operators, station managers, train drivers, ticket collectors, and in railway operations and maintenance)\. 22\. Citizen engagement\. Further preparation work will assess (i) whether feedback provided by beneficiaries is used and/or whether actions taken based on their feedback are communicated back to them; (ii) the degree of involvement in decision-making that beneficiaries have in the design, implementation, or oversight of the project\. Component 3\. Feasibility for the rail line expansion from Kolkhozabad to Nijnii Pyanj free economic zone (about $1 million) 23\. The extension of the railway network up to the border of Tajikistan is part of Tajikistan-Afghanistan- Turkmenistan (TAT) corridor, which already involves various donors in considering of financing various activities, and this shall be further discussed and coordinated by MOT with donors, including parallel co- financing option with the Bank\. The TAT would give Tajikistan a competitive alternative to the transit via Uzbekistan\. There is a need to prepare a Feasibility Study (FS) for this section to assess economic viability of the project\. The main emphasis is to enhance connectivity of the railway network with Jun 27, 2017 Page 10 of 15  The World Bank Tajikistan Railways Project (P159302) existing and future customers, including agro-business private industries and cement factories\. The terms of reference of the feasibility study will include appropriate social and environmental studies\. While the preparation of FS can be carried out during the proposed project implementation, the civil works will be carried out separately if the project is deemed economically feasible\. SAFEGUARDS A\. Project location and salient physical characteristics relevant to the safeguard analysis (if known) The project is located within the bounds of Districts of Republican subordination and Khatlon Region\. Dushanbe, the capital of the country and Vahdat are amongst the larger districts in the Districts of Republican subordination\. Dushanbe inhibits around 800,000 people\. Khatlon Region on the other hand is located in the southwest and is the most populous Region in the country\. Khatlon borders Afghanistan in the south and southeast and Uzbekistan in the west\. The population in Khatlon is over 2\.5 million and is predominantly engaged in agriculture\. Approximately 45 percent of the country’s irrigated land is located in this Region\. Cotton is the major crop grown in the area and accounts for 60 percent of the cotton harvest in the country\. The proposed project, the southern line, passes through a mix of plain and mountainous terrain and will help improve Dushanbe-Vahdat, and Qurghonteppa-Yavan corridor\. Considering the proposed project scope, environmental risks are limited to the typical impacts associated with infrastructure rehabilitation projects\. The severity of potential impacts is expected to be moderate and is mostly limited to the construction period\. B\. Borrower’s Institutional Capacity for Safeguard Policies Tajikistan Railways (TR) does not have experience in implementing World Bank financed projects\. The Project will be implemented through a Project Implementation Unit (PIU) which will be led by a Director from MoT and a Deputy Director from TR in charge of coordinating with IFIs and coordinating with decentralized government agencies, and comprising a team of specialists as well as support staff\. No staff are currently assigned to the role of environmental and/or social specialist\. The Bank will recommend that one staff each is assigned to work on social development issues including involuntary resettlement and on environmental safeguards\. Additional support may be required, in the form of consultants, to prepare relevant resettlement instruments\. However, it will be critical for PIU staff and relevant local authorities to be an integral part of the process of preparing any relevant resettlement instruments\. The World Bank will carry out a detailed capacity assessment during project preparation to inform training activities\. In addition, the PIU will be trained by the World Bank to acquire a good understanding of project management and project safeguards as required by IFIs\. The World Bank will also provide upfront training to the PIU on international best practices on involuntary land acquisition and preparation of environmental and social impact assessments\. C\. Environmental and Social Safeguards Specialists on the Team Javaid Afzal, Angela Nyawira Khaminwa, Gulru Azamova Jun 27, 2017 Page 11 of 15  The World Bank Tajikistan Railways Project (P159302) D\. Policies that might apply Safeguard Policies Triggered? Explanation (Optional) The proposed project scope includes rehabilitation of the (i) existing bridge over Kafirnigan River in Vahdat, (ii) the 35 km long Qurghonteppa-Yavan rail section and (iii) installation of modern telecommunication infrastructure that includes fiber optics ducts and cable along the Southern Line track, installation of modern radio and telephonic connections for the traffic management, and CCTV for supervision of the critical parts of the railway infrastructure\. The team assessed the safeguards category B considering that the proposed works are of rehabilitation and are to be carried out within the existing right of way\. An environmental and social impact assessment (ESIA) is to be carried out for the proposed works to be financed by the Bank\. Government of Tajikistan Environmental Assessment OP/BP 4\.01 Yes with the help of Chinese Government has constructed a new rail link between Vahdat and Yavan, and construction of this section is already complete and track is functional\. The ESIA will include a due diligence for Vahdat-Yavan section (constructed with the help of Chinese Government) to ensure that obligations required under the national law for environmental protection were considered and implemented\. The ESIA will be prepared and disclosed prior to the project appraisal\. Under component 3, the World Bank will be funding feasibility studies for rail expansion from Kolkhozabad to Nijnii Pyanj\. The TORs for the studies will need to reflect relevant environmental and social impacts, with reference to the World Bank’s OP 4\.01\. The project activities are confined within the existing right of way, and the alignments do not pass through any critical natural habitat\. However, associated facilities include recently constructed Vahdat-Yavan Natural Habitats OP/BP 4\.04 TBD new rail section and therefore require an assessment whether any critical habitats have been impacted\. Any impacts on critical natural habitat will be studies as part of due diligence under the ESIA\. The project activities are confined within the existing Forests OP/BP 4\.36 No right of way, and the alignment does not pass through any forest or forested land\. Jun 27, 2017 Page 12 of 15  The World Bank Tajikistan Railways Project (P159302) The project does not promote or increase use of Pest Management OP 4\.09 No pesticides as defined in the Policy\. Land is cleared from vegetation using mechanical means\. There are no sites of physical cultural significance present along the existing alignment - financed under component 1a\. However, associated facilities include recently constructed Vahdat-Yavan new rail section Physical Cultural Resources OP/BP 4\.11 TBD and therefore require an assessment whether any physical cultural resources have been impacted\. This will be studied as part of due diligence under the ESIA\. There are no Indigenous Peoples as per OP 4\.10 in Indigenous Peoples OP/BP 4\.10 No the project area\. In component 1(a), the track and bridge rehabilitation works are expected to be undertaken on the current position of the tracks without any correction of curbs or extension of stations\. There may however, be some involuntary resettlement impacts\. In component 1(b), the laying of the fiber optic network and other telecommunication infrastructure may also involve some involuntary resettlement impacts\. These works could include the central line, the newly-constructed Vahdat-Yavan line and the southern line\. Also under component 1(b), as the laying of the fiber optic network and other telecommunication infrastructure could be undertaken on the newly Involuntary Resettlement OP/BP 4\.12 Yes constructed Vahdat-Yavan line\. An audit will be undertaken on land acquisition related to this line and an action plan prepared to ensure that the relevant land acquisition complies with OP 4\.12\. In component 3, the World Bank is financing feasibility studies for rail expansion from Kolkhozabad to Nijnii Pyanj\. The TORs for the studies will need to reflect relevant environmental and social impacts, with reference to the World Bank’s OP 4\.12\. For the works under Component 1, a Resettlement Action Plan (RAP) may be required for site-specific resettlement that will be known prior to appraisal and a Resettlement Policy Framework (RPF) may be required for involuntary acquisition that will be known after appraisal\. Jun 27, 2017 Page 13 of 15  The World Bank Tajikistan Railways Project (P159302) The project does not involve any activity on any dam Safety of Dams OP/BP 4\.37 No as required under the Policy\. The project involves river flow control measures for the proposed rehabilitation works on a bridge over Kafirnigan River\. The River is a tributary of Amu river Projects on International Waterways TBD which is an international river\. Whether the proposed OP/BP 7\.50 works will alter, change or modify the quantity, quality or flows of international waterways needs to be studied as part of ESIA\. The project is not located in disputed areas as Projects in Disputed Areas OP/BP 7\.60 No defined in this Bank Policy\. E\. Safeguard Preparation Plan Tentative target date for preparing the Appraisal Stage PID/ISDS Apr 17, 2017 Time frame for launching and completing the safeguard-related studies that may be needed\. The specific studies and their timing should be specified in the Appraisal Stage PID/ISDS The ESIA study will be completed and disclosed by April 14th, 2017\. The audit on resettlement required on the Vahdat-Yavan line and the identification of any gaps and/or gap-filling measures (the action plan) will be prepared by April 14th, 2017\. In addition, the TORs for the feasibility studies and the required resettlement instruments (RAP/RPF) will be prepared and disclosed by April 14th, 2017\. CONTACT POINT World Bank Antoine Avedis Kunth Senior Railway Specialist Borrower/Client/Recipient Ministry of Energy and Water Resources Olim Yatimov Head Foreign Department yatimovrt@mail\.ru Jun 27, 2017 Page 14 of 15  The World Bank Tajikistan Railways Project (P159302) Implementing Agencies Tajikistan Railways Olim Yatimov Head Foreign Depatmt at MoT yatimovrt@mail\.ru FOR MORE INFORMATION CONTACT The InfoShop The World Bank 1818 H Street, NW Washington, D\.C\. 20433 Telephone: (202) 458-4500 Fax: (202) 522-1500 Web: http://www\.worldbank\.org/infoshop APPROVAL Task Team Leader(s): Antoine Avedis Kunth Approved By APPROVALTBL Practice Manager/Manager: Binyam Reja 23-Jan-2017 Country Director: Jan-Peter Olters 27-Jun-2017 Jun 27, 2017 Page 15 of 15

APPROVAL

P006073

Document of The World Bank FOR OFFICIAL USE ONLY Report No\. 7140 PROJECT COMPLETION REPORT BARBADOS INDUSTRIAL DEVELOPMENT AND EXPORT PROMOTION PROJECT (LOAN 1813-BAR) February 25, 1988 Industrial Development and Finance Division Latin America and the Caribbean Projects Department This document bas a restricted distribution and may be used by -eMipients onl n the perfonnance of thew official dudes\. its contents may not otherwise be dWosed without World Bank authozaton\.  Acronyms and Abbreviations BDB iarbados Development Bank 'dIJC Barbados Industrial Development Corporation BLIAP Barbados Institute fo\.r Management and Productivity BNB Barbados National Bank CARICOM Caribbean Common Market CUB Caribbean Development BanK CET Common External Tariff EGIS Export Grant a\.d Incentive Scheme !;PC Export Promotion Corporation GDP Gross Domestic Product IDB Interamerican Development Bank NTh National Training Board Currency Equivalent (since July 1975) Currency Unit - Barbados Dollar (BUSS) USS1 - BDS$2  THE WORLD BANK Washington, D\.C\. 20433 U\.S\.A OMice 4i OennMC~\. l Opmatmn IvaUa"aw February 25, 1988 MEMORANDUM TO THE EXECUTIVE DIRECTORS AND THE PRESIDENT SUBJECT: Project Completion Report on Barbados - Industrial Development and Export Promotion Project (Loan 1813-BAR) Attached, for information, is a copy of a report entitled 'Project Completion Report on Barbados - Industrial Development and Exr rt Promotion Project (Loan 1813-BAR)" prepared by the Latin America and the Caribbean Regional Office\. Further evaluation of this project by the Operatious Evaluation Department has not been made\. Attachment This document hus a reficted disuibution and may be used by fecipiat ondh io toe pn borma of their official dutL Its contents may not otborwise be disclosd witbout Wofi O11 a utbhodsioo\.  FOR Oi\.ICIAL Ubi ON&Y BARBADOS PROJECT COMPLETION REPORT IN[AJSTRLAL DEVELOPMENT AND £APORT FfiOMOTION PROJECT Loan 1813-BAR Table of Contents PaEe No\. Preface \.,\. i Basic Data Sheet \. ii Highlights\.iv HIgIgh\. \. 3 B\. ImplemeCnI tion\. 0*0*e*e*00\. 0 B I* \. 1 III\. INSTITUTIONAL PERFORMANCE \. 18 BA a1B Cmliesbren\. 12 5\.ECo\. 15 I DA NTB ana c i ttc 1980-85\. 16 EA Mcai Exors19885\. 18 IV\. AOE CLUSIONS AND oECOrNDATe17 -5\. \. \. 18 LIST OF ANNEXES ANNEX 1 Loan 1F13BAR Cumulative Disbursement8 \. \. 21 ANNEX 2 Significan t National Economic Statstes 1980-85 \. 22 ANNEX 3 Merchandise Exports 197 Y51\.8 5\. 23 ANNEX 4 Direction of Trade 19788 7\. - 8\. 24 ANNEIX 5 BIDC Construction Schedule: Projected vs\. Actual \. 25 ANNEXC 6 BIDC Financial Statements 1980-86 \. 26 ANNE§X 7 BDB Financial Statements 1980-86o \.o \. 28 ANtNE 8 BDB Financial Statistics 1980-86 \. \. \. oo\. 30 ANNEX 9 BDB Portfolio Statistics 1980-86 \. \. 31 ANNEX 10 BDB Subproject Profile \. \. \. 32 ANNEX 11 Comments From the Borrower \. \. 33 This document has a restricted distribution and may be used by recipients only in the performance of their official duties\. Its contents rnay not otherwiso be disclosed witliout World Bank authorization\.  BARBADOS PROJECT COMPLETION REPCRT INDUSTRIAL DEVELOPMENT AND EXP(RT PROMOTION PROJECT Loan 1813-BAR PREFACE This document describes and assesses the design, implementation and impact of a US10 million Wcrld Bank loan extended in 1980 to the Government of Barbados in support of increased industrial output (destined for both domestic and export markets) and efforts to strengthen institutions assisting the Barbadian manufacturing sector\. Loan proceeds 'were allocated among four project participants as follows: USS6\.000 million (USS5\.159 million ultimately disbursed) to the Barbados Industrial Development Corporation (BIDC) for construction of industrial estates, offshore promotional activities and technical assistance; US$3\.200 million (USS3\.139 million ultimately disbursed) to the Barbados Development Bank (BDB) for industrial subprojects and technical assistance; USS0\.300 million (US40\.241 million ultimately disbursed) to the Export Promotion Corporation for establishing a program of directed support to BarbadiRi% exporters and for technical assistance, and US$0\.500 milliorn (US$O\.300 million ultimately disbursed) to the Barbados Institute for Management and Productivity (BLMAP) for developing training materials and technical assistancb and to the National Training Board (NTB)\. The project, which experienced initial implementation delays due to institutional difficulties and, later on, reduced demand due to the 1983-85 regional and local recession, was completed in March 198b, two years later than appraisal projections\. Final disbursements totalled US$8\.849 million and the unused balance ,f US$1\.151 million was cancelled April lb, 1986\. This report is based on research and analysis of Bank documents and information provided by the Borrower and gathered during the project completion mission in March 1987\. In accordance with the revised procedures for project performance audit reporting, this PCR was read by the Operations Evaluation Department (OED), but the project was not audited by OED staff\. Following standard procedures, OED sent copies of the draft report to the Borrower for comments\. These comments have be-en taken into account in finalizing the report and are reproduced in Annex 11\.  - ii - BARBADOS ROJECT COMPLETION REPORT INDUSTRIAL DEVELOPMENT AND MX*PRT PRBOQTION PROJECT Loan 1813-BAR Basic Data I\. PROJECT DATA Projected Actual First Mention - 12/01/78 Negotiations 02/11/80 02J11/80 Board Approval 03/25/80 03/03/80 Loan Agreement - 03/20/80 Effectiveness 04/28/80 08/28/801/ Final Commitment 03/31/84 03/31/8S Closing Date 09/31/64 09/130/853 Amount (US million) (-9\.000 10\.000 of which T\.A\. (\.600) (\.600) Amount Disbursed (US$ million) 10\.000 8\.849 of which T\.A\. (\.600) (\.587)41 Amount Cancelled - 1\.151 Amount Repaid - 2\.080 Amount Outstanding - 7\.930 Borrower Goverment of Barbados Executing Agency BIDC, BDB, EPC\. NTB, MIKAP Fiscal Year of Borrower April-March Follow-on Project Loan No\. Loan 2260-BAR5/ Amount (USS mllilon) 10\.500 Loan Agreement 04/22/83 1/ Loan effectlveness extended by one month apparently due to legal opinion delay\. >/ Original loan closing date extended to 03/31/85, then further extended on 03/26/85 to 09/30/85 to accomodate reduced demand\. On 10/10/85 the Bank advised Implementing agencies that residual disbursements would be effected until 03/31/86\. 3/ Of which USS0\.200 million to BDB and US$0\.400 milliou to BIDC\. 4/ Of which USS0\.447 million disbursed to BIDC (USs0\.400 million initial Loan 1813-BAR allocation) and US$0\.139 milllon disbursed to BDB (USS0\.200 million initial Loan 1813-BAR allocation)\. 5/ Two-tier lending programs which included BDB\.  - iii - II\. MISSION DATA La3n 1813-BAR Staff Date Mo/Yr Weeks Persons Weeks Report Identification 04/79 1 1 1 05/21/79 Preappraisal *06/79 1 3 3 06/26/79 Appraisal 09/04/79 3 4 12 10/14/79 Post Appraisal 12/10/79 1 2 2 - 02/05/80 1 2 2 Subtotal 20 Supervision 04/21/80 1 2 2 05/06/80 10/20/00 1 4 4 12/15/80 06/24/81 1 2 2 07/28/81 05/19/82 2 3 6 07/09/82 olO/30/83 1 2 2 12/08/83 04/22/85 2 2 4 06/04/85 05/0b/86 1 1 1 05/29/86 Subtotal 21 Completion 2 1 2 TOTAL\. 43 * Identification and Preparation Mission\. o Supervision of both Loan 1813-BAR and Loan 2260-BAR\.  - iv - BARBADOS PROJECT COMPLETION REPORT INDUSTRIAL DEVELOPMENT AND EXPORT PROMOTION PROJECT LN\. 1813-BAR Highlights 1\. The Industrial Development and Export Promotion project was the Bank's initial assistance to the industrial sector of Barbados\. The Loan was approved on April 28, 1980 and closed one year after the original Closing Date (September 1984)\. The project included the following four components: financing for the construction of factory buildings\. in new or existing industrial estates managed by Barbados Industrial Development Corporation (BIDC); technical assistance funds for the export promotion activities of BIDC and the Barbados Export Promotion Corporation (BEPC); support for the business management and vocational training activities of the Barbados Institute of Management and Productivity (BIHAP) and the National Trainining Board (NTB); and, finally, a line-of-credit and technical assistance to the Barbados Development Bank (BDB) for onlending to viable import-substituting and exporting industrial firms (para\. 1\.01)\. 2\. The project was designed to provide a much needed boost to the share of the industrial sector in the economy; in 1979, this share stood at only 11\.31 of GDP\. The broad 4evelopment strategy pursued under the proj- ect was to facilitate industrial investment with adequate term financing, readily available physical infrastructure, and improved productivity through vocational training\. However, project implementation was affected adversely by the downturn in the Barbadian economy, caused in the main by the external recession; the collapse of the CARICOM market; and the loss of export competitiveness, owing to the close relationship between the overvalued US and Barbados dollars (para\. 1\.02)\. 3\. Since Ln\. 1813-BAR was the first Bank industrial project in Barbados, fundamental changes to the operating policies of the partici- pating institutions were required\. Above all, the fact that several agen- cies were involved made the implementing arrangements quite complex and difficult to monitor (para\. 2\.05)\. The procedural problems were further complicated by the lack of working capital for the three technical assist- ance entities, namely, BEPC, NITB and BIHAP (para\. 2\.08)\. The net result of the delays was that, two years after implementation, the disbursements lagged appraisal estimates by almost 70Z\. But, just when the project began to pick up momentum, disbursement rates suffered further, due to the effect of the Government's austerity program, which included a budget cut for BIDC's building program\. The Bank supervision missions carried out an in- depth review of the implementation problems and made sound proposals to expedite project execution\. As a result, both the commitment and disburse- ment rates improved rapidly, even though it was becoming quite clear that the factory building program tar6ets would not be achieved because of faltering demand for new industrial space (paras\. 2\.09-2\.11)\.  4\. The project impact on improving the financial operation of the participating institutions, namely, BIDC and BDB, was minimal\. With BIDC, the crucial element was the dounturn in demand for industrial space, but the underlying cause of weak performance was the issue of rental rates\. This issue in fact strained BanklBIDC relations, since there was a diver- gence of views whether BIDC's financial viability and cost recovery were medium- or long-term objectives\. During implementation, BIDC's incentive if any to charge economic rents was further diluted by the slack in eco- nomic activity\. In hindsight, the Bank's appraisal targets about occupancy rates and virtually no rental arrears also proved optimistic\. A major lesson from the BIDC implementation is that a factory construction program should be executed on a phased basis, and expansion undertaken as demand at full price materializes\. BIDC's institution-building aspect developed much better, despite the operating and program implementation problems expe- rienced (paras\. 3\.03-3\.06)\. The project had a salutory effect on BIDC's construction practices, project management skills, and cost-effective use of SSE contractors engaged in constructing standard factory shells\. 5\. There was only marginal success with BDB's financial operations, as well as its institution building objectives (paraf 3\.10-3\.14)\. BDB's financial strength was rapidly eroded by its arrears snd by its losses due to the foreign exchange risk under a previous IDB Loan\. Moreover, its operating spread remained narrow and did not cover any unforeseen financial shocks (para\. 3\.12)\. The impact of BDB's lending at the subproject level has been mixed: while the credits were given to a fairly large number of clients, including SME's, the subloans were concentrated in two major sub- sectors--and more than half were in Bridgetown (para\. 3\.14)\. The employ- ment impact of investments also fell short of appraisal targets, and a high proportion of the loans are now in arrears\. BIDB's institutional capacity to appraise and supervise sound investment projects remained weak; tech- nical assistance under the project was not used to ameliorate these prob- lems (para\. 3\.13)\. An important implementation lesson which emerges from this first experience with BDB is that critical factors affecting project implementation, such as action on arrears and decisions on the treatment of foreign exchange risks in general, need to be discussed up front and, if necessary, be made a condition of Board presentation, instead of being left for resolution during implementation\. 6\. BEPC was a nascent institution at the time of Appraisal\., and took one-and-a-half years after loan effectiveness to become operational (paras\. 3\.16-3\.17)\. Almost half the project resources earmarked for BEPC were spent on activities outside the country, and no statistical evidence is available to evaluate the direct impact of BEPC activities on Barbadian exports\. BEPC's efforts were stymied to some extent by the rigorous per- formance standards of extraregional markets, especially given the rela- tively poor quality of Barbadian exportables and the lack of product range\. While it has taken several years for BEPC to establish its reputation with the local businessmen, it it now equipped to provide more effective assist- ance to Barbadian exporters\. The project's smallest component, namely assistance for the training activities of BIHAP and NTB, was quite success- ful inspite of the severe counterpart funding problems (para\. 3\.20)\. The teaching aids developed by these institutions under the project have had a substantial impact on both the effectiveness and continous growth of BlMAP's training activities (para\. 3\.21)\. In addition, the computer equip-  -vi- ment and related software development financed under the project has enabled BIMAP to introduce very useful training modules\. 7\. Overall, the project achieved its broad objective of assisting in the establishment of a nascent export promotion agency, which widened its operations both within the country and overseas\. Similarly, the financial assistance to BIDC helped lay the foundation for improved tendering proce- dures, development of small contracting industries and management skills\. The limited assistance zo BUMAP also had a positive impact on its training quality and enhanced the image of the institution amongst private sector clients\. The quantitative targets of the project, however, fell substan- tially behind Appraisal estimates, both with regard to industrial buildings and credit components\. Aside from the reasons enumerated above, one major factor affecting project performance wa- the adverse macroeconomic environment in which the project was implemented (para\. 1\.05)\. 8\. The comments of BEPC (Annex 11) to the initial draft of this Report have been reflected in appropriate modifications to paras\. 3\.16 and 3\.18 in pp\. 15 and 16\.  BARBADOS PROJECT COMPLETION REPORT INDUSTRIAL DEVELOPMENT ANu WXPORT tRONOTION HROJECT Loan 1813-BAR I\. Introduction 1\.01 Project Description On April 28, 1980 the World Bank approved a US$10\.0 million loan (Loan 1813-BAK) in support of the Government of Barbados' (GOB) 1978-82 Industrial Development Plan, which focused on expansion and diversification of industrial output and exports, job creation and strengtheniag of the main institutions responsible for promoting industrial development in Barbados\. The interest rate was 8\.25% p\.a\., and the loan was repayable in 15 years, including 3 years grace period\. The foreign exchange component of the US$21\.9 million project was met by the Bank loan and a parallel Caribbean Development Bank (CUB) loan (US$2\.5 million)j/; the GOB financed the remaining local currency costs\. The Bank loan was composed of four components: US$6\.0 million was allocated to the Barbados Industrial Development Corporation (BIDC) for financing factory shell construction in new and existing industrial estates (US$5\.0 million), overseas investment promotion acti\.ities (US$0\.6 million) and technical assistance (US§0\.4 million); US$3\.2 million was allocated to the Barbados Development Bank (BDB) to support its industrial lending program (US43\.000 million) and technical assistance (USS0\.2 million); US$0\.3 million was provided to support the establishment and operations of the Export Promotion Corporation (EPC), and US$0\.5 million was to be shared equally between the Barbados Institute for Management and Productivity (BIMAP) and the National Training Board (NTI) in support of their business management and vocational training activities\. The project, which constituted the bank's initial involvement with the Barbadian industrial sector, was not repeated upon completion: a subsequent Bank Industrial Credit Loan (Loan 2260-BAR), which became effective in July 1983, was a two-tier lending program focused equally on financial and industrial sector issues\. 1\.02 Overall Context Barbados, a small island (431 square kilometers) situated at the south-easternmost extremity of the Caribbean island archipelago, experienced a strong 5% GDP average aumal growth from mid-1960 to the end of the 1970s on the strength of fiscal and industrial policies designed to broaden output from a single traditional crop, sugar, to a more diversified economy based on tourism and manufacturing\. These policies met with success: by the beginning of the 1980s agriculture, tourism and manufacturing together directly contributed some one-third of the national product in roughly equal shares\. Barbados enjoys high levele of literacy, a relatively equitable income distribution and generally &ood standards of health, education, social services and basic infrastructure\. These accomplishments are notable given that the local resource endowment is limited, that political institutions are relatively young (independence from Britain was achieved in 1966) and that rates of natural ji According to CDB records\.  - 2 - increase have created high population densities (584 persons per sq\. km\.)\. Much of Barbados' progress can be traced to its outward-looking economic development strategy, a general reliance on market forces, political and social stability and a judicious balance between the roles of the public (G,OB) and the private sectors\. 1\.03 Manufacturing and Export Sectors The Barbadian manufacturing sector is dominated by consumer goods (food and beverage products, tobacco, clothing and furniture), by its overall small-scale nature (averaging 50 employees per firm in 1977), and by larger, foreign-owned assembly-type plants producing garments and electronic components for export markets\.-9 Industrial development has been shaped by incentive policies enabling virtually all enterprises to import and export duty-free and without restrictions and by tariff protection afforded through Barbados' participation in the CARICOM Common External Tariff (CET)\. Provision of factory buildings in industrial estates, sponsored by the GOB through BIDC, also played a prominent role in Barbados' rapid industrialization throughout the 19609 and 1970s: over this twenty-year period BIDC constructed over 1 million sq\. ft\. of factory space in nine industrial parks where, at the time of Loan 1813-BAR appraisal, more than 5000 workers (one-third of the manufacturing workforce) were employed\. Many foreign-owned firms established productive activities within these industr:\.al estates, motivated by the range of amenities, the convenience and the subsidized rents provided therein\.3/ 1\.04 The industrial sector grew at about 6% per annum between 1970-79, principally througa direct foreign investment in assembly operations: nevertheless, at the time of Loan 1813-BAR appraisal (1979) manufacturing still provided only 11\.3% of GDP (which totalled US$468\.6 million in 1978) and about 16% of total employment\. * lanufactured exports rose more than four-fold between 1970-78 (from BUS$25\.6 million in 1970 to BUS$120 million in 1978), and their share in total domestic merchandise exports increased from 41% to 64Z during this period (Annex 3)\. Most of this dynamic growth was due to rapid expansion within the garment and electronic component industrial subsectors\. The direction of trade for Barbados' manufactured exports is a function of either the home country of foreign enclave industries or Barbados' links to regional markets through CAKICOM, and over the past decade these trade relationships have shifted markedly\. At the time of Loan Appraisal, for example, approximately 3bZ of Barbados' exports went to the United States, 25% was shipped to trading partners within CARICOM and almost 20% went to EEC markets: in 1985, by contrast, CARICOM countries received 23% of Barbados' exports, the United States purchased 18% of the total, and the EEC imported only 7%\.4/ 1\.05 Hacroeconomic Context The overall thrust of the 1978-82 Industrial Development Plan was to strengthen, diversify and expand Barbados' industrial 9f These offshore operations in 1979 provided 70% of industrial employment and generated about 80% of industrial exports\. / Rents and purchase prices of factory space in the industrial estates were, previous to Loan 1813-BAR, lower than or equivalent to market rates for caparable facilities throughout the Caribbean region\. 4 Statistics drawn from revised government figures (Annex 4)\.  -3- sector which would, in turn, ameliorate rising unemployment (which had peaked at 22% in 1975),5/ build upon the existing development strategy, and contribute to gross and per capita output\. Loan 1813-BAR was specifically designed to increase industrial output through new foreign and local investment (BIDC and BDB components) and to address perceived needs6/ within the Barbados industrial sector (EPC, BIMAP and NTB components)\. The outcome of project-related activities initiated under the BIDC and the BDB components depended in substantial part on prevailing macroeconomic conditions, which deteriorated during loan implementation due to (i) the 1981-83 recession in the industrialized economies (which precipitated a domestic recession), (ii) the collapse of the CARICOM market (and the resulting domestic recession that lasted from mid-1983 to 1985), and (iii) the close relationship of the Barbados dollar to the overvalued US dollar (which reduced Barbados' export competitiveness vis-a-vis other countries)\. Between 1980 and 1985 average industrial production per annum fell from BDS$147\.5 million to BDSS100\.6 million (in constant terms), investment as a percentage of GDP fell from 25% to 15%, and unemployment rose from 12X to 19X (Annex 2)\. Merchandise exports leaped from BDS$202 million in 1980 to BDSS502 million in 1984 before falling to BDS$422 million in 1985\. Most of this growth was due to a spectacular rise in electronic components (which rose from 31% of total manufactured exports in 1980 to 72% of manufactured exports in 1985) at the expense of virtually all other domestic manufactured exports\.7/ Incipient structural adjustment in the electronics and garment subsectors (due in part to the oversaturated global semiconductor market and Barbados' escalating real wage rates) is presently creating employment and output attrition and contraction\. II\. The Project A\. Description 2\.01 Loan Objectives The objectives of Loan 1813-BAR were to: (a) expand industrial output and exports; (b) generate increasing levels of employment; and (c) strengthen the main institutions responsible for promoting industrial development in Barbados\. 2\.02 At the outset of project implementation Bank monies were scheduled to finance (i) the construction costs of 35 factory buildings in four (three The manufacturing sector was perceived as a potential source of cost-effective employment (having supplied one-third of the 10,000 additional jobs created between 1970 and 1979)\. 6, Such as helping local manufacturers strengthen financial management, attain more economic plant size, improve product quality and production efficiencies, and broaden both their export product mix and export market reach\. 7/ The garment sector alone fell from 24% to 11% of total manufactured exports over the relevant period (Annex 3)\.  -4- existing and one new) Industrial estates; (ii) promotional expenses related to industrial estate expansion; (iii) approximately 30 industrial subprojects through the BDB; (iv) manufactured exports promotion, design and marketing; (v) business management and vocational training, and (vi) consolidation and strengthening of tth institutions serving the industrial sector\. 2\.03 Special Loan Terms Loan proceeds were distributed according to two arrangements: EPC, BLMAP and NIB were directly reimbursed by the GOB for project-related expenditures approved by the World Bank, while BIDC and BD- established subsidiary loan agreements with GOB against which disbursements were effected once Bank approval had been secured\.!/ Specific terms and conditions of the Loan Agreement governing the operations of BUB and BIDC were as follows: (a) BIDC So as to ensure that BLDC would recover real capital costs and achieve positive net Income by FY 1983-84, a new pricing policy based on actual construction and operating expenditures was established that set (1) anwual rects at 14X of construction costs for new applicants (7X for small-scale enterprises) with step Increases on contract renewals for existing clients uctil parity with new building rental rates was achieved; (1i) annual rentals on leases with option to purchase contracts at 10-151 above the rental level defined above; (iii) the option price for lease purchase contracts as a function of actual replacement cost or fair market value and discounted accordingly, and (iv) rental and lease contracts at three and five year maturities, respectively, with provision for inflation adjustment at the time of renewal\. (b) 5DB Subloans granted by BDB were dot to exceed the maturity of BDB's subsidiary loan agrement and were to be onlent at 1 p\.a\. plus a flat service fee of 1X and a commitment fee of 1Z on undisbursed amounts\. BDB lending rates were to be periodically adjusted to reflect current and projected inflation and changes in the cost of IDB's resources\. 2\.04 Bank review of BIDC and BDB project-related activities was subject to free limits once the first three BIDC construction contzacts and the first five BUB industrial subloans were reviewed and approved\. These limits varied to reflect differences in project sizes, the possibility of conflict of interests and the appraisal and Implementation capabilities of project participants\. Free limits were defined as follows: (a) BIDC All Bank financed construction contracts were subject to prior review and approval by the GOB Tenders Committee and contracts awarded to BIDC's construction division exceeding US$350,000 were also subject to World Bank prior review and approval\. (b) BDB Subproject free limits were set at US$150,000 and economic rate of return calculations were to be calculated on all subprojects above the free limit\. "/ On-lending terms to BIDC were 15 years including 3 years grace at 10% per annum, while BOB on-lending terms were identical to the terms of the Bank loan to the Goverment\. The Borrower was to absorb the foreign exchange risk\.  -5- 2\.05 Loan Covenants/Conditions Due to the fact that Loan 1813-BAR was the first Bank industrial project in Barbados, that fundamental changes to operating policies were required of major project participants, and that the Project was sufficiently complex in terms of scope and institutional arrangements, numerous agreements were reached during negotiations between the Bank and the GOB (acting both for its own account and as fiduciary for EFC, NTB and BI14AP), the Bank and BIDC, and the Bank and BDB\. Specific performance requirements are detailed as follows: (a) GOB The GOB agreed (by the referenced date) to: recruit EPC's airector General (by September 30, 1980); approve a restructuring of BOB's Board and an increase in authorized capital, approve a plan and timetable for increasing BDB staff and revising its salary structure, organize and staff EPC (by December 31, 1980), and carry out a study of the structure of interest rates in Barbados and appropriate policy measures (by August 31, 1980)\. (b) BIDC BIDC agreed to: prepare plans relating to (i) increasing the participation of smaller contractors on construction and engineering contracts and (ii) the utilization of Bank funds for promotion, technical assistance and staff training (by Sept\. 30, 1980); and adopt a revised accounting system (by March 31, 1981)\.9/ (c) BDB BDB agreed to: prepare a plan ard timetable for increasing BDB staff and revising its salary structure (by June 30, 1980); prepare a plan for (i) portfolio recuperation (including exercising guarantees and writing off bad debts) and (ii) staff training programs and use of Bank technical assistance funds (by Sept\. 30, 1980); fill then-vacant positions of Financial Comptroller and Manager of Operations with qualified candidates, and revise BOB's statement of Policies and Procedures (i\.e\. providing for a 5:1 debt/equity ratio, the procedure for reviewing lending rates and on-lending terms for subloans)\. B\. Implementation 2\.06 General Loan 1813-BAR was approved on March 3, 1980 and became effective on August 28, 1980, four months later than originally scheduled due to delayed receipt of relevant legal documents\. The Project's initial hurdle was completion of the interest rate study (stipulated in a side letter to the Loan Agreement), which was to be canpleted by August 1980 and used as the basis for determining BDB on-lending rates: the study (delayed by staff constraints at the Central Bank) was completed by March 1981 and BDB lending and BIDC rental rates were adjusted accordingly\. 2\.U7 Prompt submission of and compliance with the terms of Loan conditions by participating institutions (see para\. 2\.05) proved to be difficult: the Banit agreed in December 1980 to extend final compliance dates to March 31, 1981 for BDB (regarding its plans for reorganization, salary structure adjustments, and reducing arrears), BIDC (concerning its plans for increasing / BIDC's Board approved the new rental pricing policy (see para 2\.03 (a)) on January 17, 1980, approximately one month before loan negotiations took place\.  -6- SSE contractor participation and its staff training ptogram), and GOB (regarding the appointment of a Director General for EPC)\. By December 1980 only BDB had submitted all required programs and documents and the Bank had approved the first five subprojects: thereafter BDB subproject approvals and disbursements proceeded at a rate that exceeded appraisal estimates\. BIDC revised its start-up schedule for Bank-financed construction to February 1981 after experiencing delays caused by (i) unfamiliar and complex prequalification procedures (for construction companies bidding on prospective contracts) and (ii) a change of project managers\. By January 1981 BIDC had devised a plan to disaggregate construction contracts so as to encourage SSE contractor participation, and within three months BIDC had complied with all other outstanding Loan Commitment terms\. BIMAP submitted its technical assistance financing plan to the Bank by December 1980, but NTB and SPC were unable to submit similar documentation until July 1981 due to administrative and procedural inefficiencies (both of these implementing agencies had been created just prior to Loan Appraisal and suffered from inadequate staff, funding, organization and management)\. The Loan disbursement schedule was revised downwards to reflect the slow start experienced by most implementing agencies (BDB constituting the sole exception)\. 2\.U8 Further operational problems surfaced in July 1981 when the Bank notified the GOB that disbursements by EPC, NTB and B1IAP for eligible expenditures under the Project were hampered by working capital constraints, which prevented these agencies from providirg the up-front financirg against which the bank -- through GOB -- disbursed Loan 1813-BAR monies\. The Bank's request for additional budgetary allocations or alternative bridge financirg arrangements was not promptly acted upon by the GOB\. This problem, in conjunction with the aforementioned administrative delays and frequent changes in priorities experienced within BIDC, NTB, BIMAP and EPC, contributed to slower Loan disbursements: by June 30, 1982 disbursements lagged appraisal projections by 69%10/ (USS5\.8 million projected vs\. US$1\.8 million actually disbursed)\. Further disbursement difficulties arose in late 1982, when the CARICOM market's collapse and concomitant regional economic contraction began to affect trade and industry and, in derivative fashion, national liquidity\. The GOB adopted an economic austerity program that forced cutbacks in BIDC's budgetary allocation (which, originally established at BD$9 million for FY 1982/83, was revised to BDS$5 million before it was ultimately raised -- after Bank intervention -- to BUS$7 million), and local demand for factory space began to falter\. By July 1982 BDB had fully committed its credit component, while BIDC had committed only 50% of its allotment and EPC, NTB and BIMAP had yet to register a commitment under the Loan\. 2\.09 EPC and BIMAP succeeded in reversing this trend in mid-1983, when EPC launched its first export promotion project (summer lawn furniture) and BIMAP completed construction of its new headquarters (offices and classrooms)\. BIDC continued its factory shell construction program (substituting the new Spring Garden estate - tailored to the needs of domestic furniture producers - for the proposed Speightstown facility), but working capital constraints (see para\. 2\.08) and weaker domestic demand induced by the local recession (which began to generate higher client arrears and increased inventories of unoccupied space) 10/ Most disbursements as of this date stemmed from BDB industrial lending activities\.  - 7 - began to affect prospects for fully disbursing BIDC's loan component\. In June 1983 the GUB first requested an extension of the loan commitment and closing dates to September 31, 1984 and June 30, 1985, respectively, but the Bank demurred pending review of a November 1983 full supervision report\. This report revealed that only 47% of the loan had been disbursed (vs\. the Appraisal Report's projected 90% profile), and noted (i) that only the BDB component was fully disbursed (as of Oecember 1983) and (ii) that BIDC had disbursed merely 35% of its industrial estates subcomponent and 25% of its industrial promotion and technical assistance subcomponents\. Major problems outlined at this juncture of loan implementation were: (a) BIOC had committed loan proceeds slower than expected due to the initial year-long start-up delay, difficulties in using Bank procurement procedures, reduced funding from GOB and the recessionary environment; (b) EPC had been reluctant to advance monies against its US$0\.3 million Loan allocation for its Export Grant Incentive Scheme due to lack of working capital resources; (c) NTB had decided to use other funding sources (which incurred no cost to the government) to finance the agreed-upon Bank program and had failed to come up with a suitable alternative despite considerable effort from several bank missions, and (d) Loan proceeds were not directly disbursed to participating agencies: they nominally received loan monies through annual budget allocations from the GOB\. Thus, there was no incentive for implementing agencies to provide the documentation required for disbursement to the Bank on a timely basis, further impeding loan disbursement\. In the case of projecttiolders with subsidiary GUB loan agreements, this situation worked to their advantage since, by delaying the paperwork, they could thus delay interest payments\. 2\.10 The November 1983 Bank supervision mission recommended (i) a one-year extension of the then-present March 31, 1984 closing date; (ii) consideration of a proposal to drop NTB from the Vocational and Management Training Component and reallocating its informal allocation to BI\.IAP and BOB, and (iii) that EPC be authorized to request reimbursement directly from the World Bank\. On February X, 1984 the Bank formally agreed to extend the Loan Closing Date to March 31, 1985 and shortly thereafter EPC secured an additional budgetary allotment of US475,U0O from the GOB after its request for direct reimbursement privileges from the World Bank was denied\. 2\.11 Commitments and disbursements for Loan components implemented by EPC and BIMAP accelerated thereafter: EPC expanded its criteria for reimbursement under the Export Grant Incentive Scheme, organized several trade missions and arranged additional sector studies and specialized consultancy services for local manufacturers, while HIMAP used its additional allocation from the now-defunct NTB component to finance the costs of four more training manuals and hardware and software requirements for eleven microcomputers, both of which were used in conjunction with office technology training courses\. BIDC, however, found that its proposed construction schedule was increasingly less viable in view of the protracted business recession\. On March 20, 1985, with 84% of Loan  -8- 1813-BAR committed and 76% of it disbursed, the GOB requested a six-month extension of the Loan Closing Date\. This second extension, from March 31, 1985 to September 30, 1985, was approved by the Bank six days later\. A subsequent supervision mission (June 1985), which assessed prospects for full Loan disbursement, concluded that (i) BIDC would not be able to complete its full construction program due to reduced demand and higher vacancies related to generalized business sector malaise11/ and (ii) that BDMAP would only utilize US$O\.350 million of the USS0\.500 million nominally allocated to the Vocational and Management Training Loan Component\. All other components were expected to be disbursed within the revised project completion timeframe\. On October 1, 1985 the GUB indicated its willngness to cancel undisbursed loan proceeds, and on April 16, 1986, the Bank cancelled the undisbursed balance of Loan 1413-BAR equivalent to US$1,151,241: final disbursement figures among Loan 1813-BAR components are detailed below\. Loan 1813-BAR Final Disbursements (in USS) Loan Loan Loan Participating Component Component Component Institution Category Allocation Disbursed Adjustment SIIC Factory Shells 5,000,000 4,083,135 (916,865) Investment Promotion 600,000 628,876 28,876 Technical Assistance 400,000 447,426 47,426 BDB Subprojects 3,000,000 3,000,000 - Technical Assistance 200,000 139,257 (60,743) EPC Exporters Assistance 300,000 241,493 (58,507) BIMAP Training Materials\./ 500,000 308,569 (191,431) TOMAL 10,00,000 8,848,759b/ (1,151,241)b/ a/ This loan component originally was shared equally by BIMAP arn NTB\. ~5~ Figures do not sum due to rounding\. 1X1\. Institutional Performance A\. ISIDC 3\.01 General Since its creation in 1965 the BIDC has established itself as the key Barbadian institution responsible for stimulating, facilitating and undertaklng industrial development\. In pursuit of this mandate it administers fiscal incentives provided under the Industrial Development and the Fiscal 11/ In mid-April 1985, 21% of a total of 1,113,000 million sq\. ft\. of factory space owned by BLDC was not rented and 28% of the 222,516 sq\. ft\. of factory space financed with World Bank resources was unoccupied\.  - 9 - Incentives Act(s), constructs and maintains industrial estates and factory buildings, stimulates foreign investment promotion through its New York and Brussels offshore offices and undertakes the planning and coordination of national industrial policy\. At the time of Loan 1813-BAR appraisal BIDC had established and was maintaining nine industrial estates located in the island's most populous parishes wherein a total of 109 new industries had been established\.12/ In 1981 the Corporation acquired two sites -- Speightstown and Spring Garden -- for additional industrial estates\. BIDC's current industrial park holdings (which vary in size from 6 acres to 22 acres) total 1,659,616 sq\. ft\. of factory space (composed of basic shells, industrial workshops and special-purpose facilities) constructed on 165\.31 acres\. 3\.02 Delays affecting BIUC's construction activities (para\. 2\.07) threw the project timetable off by nearly two years: by the end of FY 1982/83 41,235 sq\. ft\. of factory space had been completed as opposed to appraisal projections of 49U,000 sq\. ft\., although the following year BIDC completed an additional 127,000 sq\. ft\. and finished 96X of total land development activities initiated under the project (see Annex 5)\. Implementation problems related to the BIDC loan component began to surface soon after construction activities began: (a) by mid-1981 tIDC had demonstrated reluctance to enforce the new rental policy (reflecting a fundamental variance with the Bank's belief that financial viability was a medium-term institutional objective), and (b) sharp increases (4UX)13/ in construction costs in the first year of project implementation resulted in: (i) higher rental rates that exceeded regional rates by a factor of two and, as the implementation period extended further into the local recession, created greater resistance by tenants to rent Bank-financed facilities or to promptly pay rental obligations; (ii) project co-financing constraints due to GOB austerity program limitations; (iii) a reduced number of factory shells actually constructed under the Project, and (iv) BIDC's worsening financial position due to higher expenses and static revenues\. 3\.03 Relations with the Bank grew somewhat strained as the local recession deepened and the existing clients began to cut back on rented space, to fall behind in payments, or (in some instances) to close operations (due to business failures)\. Arrears (as a percentage of collectable rents) steadily grew from 25% in FY 1981/82 to 44% in FY 1983/84 to 47% in 1984/85\. Actual rental revenues began to sharply lag behind appraisal projections in 1983 (i\.e\.BDS$3\.39 12/ Twenty-five being "enclave" foreign-owned enterprises exporting 100% of production to Third Country markets\. 13 According to BIDC officials\.  - 10 - million vs\. ADS$6\.37), while expenses continued to increase in proportion to BIDC's expanded physical assets: in 1984 BIDC registered a loss of BDS$3\.22 million (Annex 6), substantially at variance with the Appraisal Report's BUSSO\.270 million surplus\. The bank found it difficult to agree with BIDC's perception that bank-mandated rent increases were creating hardship for local enterprises and contributing to arrears, default and attrition, in view of the fact that rental costs as a percentage of total costs of firms operating in Barbados averaged a marginal 2\.8Z (BIDC research)\. This impasse -ws pre-empted, in September 1985, by the GOB decision to grant a 20X rent subsidy to all BIDC industrial estate clients\. The fact that this subsidy was awarded indiscriminately (as opposed to solely to those companies experiencing financial difficulties and/or substantial rental arrears), had marginal impact on total costs (see above), and was implemented just prior to the 1985 general election, strongly suggests that this decision was prompted by political concerns\. As a consequence, by the closing date of Loan 1813-BAR iIDC reverted to the rental pricing schedule that had prevailed prior to the Loan\. 3\.04 CDB In December 1983 Cob and GOB signed a US$2\.500 million loan agreement providing co-financing support for 267,589 sq\. ft\. of the 530,000 sq\. ft\. of factory shells designated for development under Loan 1813-BAR\.14/ CDB had financed 400,379 sq\. ft\. of new BIDC factory shells and the rehebilitation of 2,000 sq\. ft\. of factory floor space through two previous loans to BIDC\. When BIDC extended the building construction program and reduced the scope of works to meet immediate and critical needs in 1985, CDB's share of factory shell co-financing was reduced to 181,277 sq\. ft\. (at four industrial estates) and land development co-financing was cut from 1\.841 million sq\. ft to 1\.001 million sq\. ft\. (at five industrial parks)\. On October 25, 1985 CDB officially cancelled the remaining undisbursed loan proceeds, which totaled US$1\.380 million\. 3\.05 Technical Assistance and Investment Promotion BIDC financed three technical assistance studies/projects (carried out by different consulting agencies) with Loan 1813-BAR monies, exceeding its US$\.400 million allocation by US$\.047 million\. The first consbltancy, a study outlining a national industrial sector strategy, provided the basis for the GOB's eventual 1983-87 Industrial Development Plan,L5/ which in turn was followed (in 1985) by direct presentations to five potential foreign investors\. BIDC also arranged for an organizational and financial management study which, not falling within the scope of technical assistance activities defined within the Loan Agreement, necessitated an amendment (whicn was approved by the Bank in December 1981)\. The findings of this study have been selectively and partially implemented\. The third consultancy provided direct diagnostic assistance to eight manufacturing 14/ of this amount, CDB was to assist in the construction of 195,357 sq\. ft\. throughout March 1983-March 1985: the remainiag 72,232 sq\. ft\. of construction were accounted for by three factory shells completed prior to CDB's involvement in tne project\. 15/ This plan affirmed Barbados's private-sector/export led development plan and proposed a strategic shift from 'labor'-intensive to 'skill'-intensive industries as well as targeted support to four industrial subsectors -- electronics, information services, medical supplies and apparel\.  - 11 - firms, followed by asisistance during the subsequent implementation phase and a wrap-up seminar\. Ac\. rding to BIDC statiatics, 55 major recommendations were proposed for the ei,bc participating companies, 6b% of which were fully implemented: all companies reported improved operations and financial performance\.lb/ BI)C utilized US$0\.629 million of the US$\.600 million allocated to investment promotion to cover the costs of maintaining its New York representative office and advertising\. 3\.06 Impact Assessment Due to adverse economic circumstances the scope of the BLDC overall project was reduced from BDS$20 million to BDS$15 million (para\. 3\.08), following BIDC's second project extension request in March 1985\. The original project envisaged construction of 520,000 sq\. ft\. of factory space on some 30 acres of improved land, based on a BDS$33\.75 per sq\. ft construction cost in mid-1979 and price escalation factor of 15% for 1980 and 12% thereafter\. In fact, the average construction costs (usirg competitive bid procedures) were BDS$55\.00 per sq\. ft\. in 1980 (due in part to wage increases): further cost increases were limited to 18% for the years 1981-85 (to BUS$65\.00 per sq\. ft\.)\. Thus, two factors limited implementation of the original program: actual construction costs were some 40% higher than originally anticipated and market demand for space fell mid-way through the program\. The result was that new factory space totalling 222,512 sq\. ft\. was created (22 of the projected 35 buildings) and some 24 acres of land (out of a projected 30 acres) were developed\. Construction cost overruns were moderate (within 10% of estimated costs), and completion delays -- when significant -- were due almost exclusively to inclement weather\. At present, approximately 50% of the factory space financed by Loan 1813-BAR is unoccupied and tnerefore not earning income\. Rents are currently renegotiated at three-year intervals and are structured around the World Bank Loan 1813-BAR terms: the 20% rent subsidy will be effective for the period January 198b to December 1987\. 3\.07 Among the benefits accruing as a consequence of the project, BIDC stressed an overall improvement in construction quality (materials, design ard techniques), greatly enhanced project management skills and the cost effective use of SSE subcontracting which has been widely adopted by similar agencies in the region engaged in factory shell construction\. On the other hand, BIDC felt that the Bank unduly stressed financial viability (i\.e\. the Bank's intransigence regarding a downward revision of the rental rate structure), which they perceived to be secondary to the principal Loan objectives: increasing industrial output, industrial exports and employment\. BIDC is of the opinion that the Bank may have modified its stance had it considered the limited potential of the domestic market and Barbados' manufacturing capabilities (i\.e\. problems BIDC faces in stimulating local industry), stiff regional competition for enclave and local investment in industrial estate projects, and the gravity of the manufacturing sector's distress (i\.e\. heightened sensitivity to cost changes) by 1985, after four consecutive years of global and local recessionary conditions (Annex 2)\. 1/ There appears to be scope for a similar, follow-on project targeted on technology (technology choice, production engineering, factory layout, etc\.)\.  - 12 - i 3\.U8 The final BIDC Project financing figures (in BDS$) are as follows: Funding Source Original Final Allocation World Bank 1\.00 10\.4 CDB 5\.0 1\.4 GOB 5\.0 3\.3 TOTAL 20\.0 15\.1 15\. 15)1 3\.09 General BOB has been 3roviding medium- and long-term financing for private enterprises in the industry, small manufacturing, tourism, and fishing subsectors since its creation in 1969 as an autonomous, Government-owned institution\. At the time of Loan 1813-BAR appraisal, BDB was still very small, having achieved only moderate growth due to high staff turnover and limited interaction with the manufacturing subsector\. It was marginally profitable, its lending was concentrated in the tourism sector (65X), it lacked a financial and lending policy which reflected strategic and financial goals, and its portfolio was of somewhat poor quality and subject to arrears\. Provisions in the Bank Loan (para\.2\.05) addressed these issues and, in conjunction with the Loan's technical assistance subcomponent, laid the foundations for a financially stronger, administratively more capable institution to carry out the ambitious lending program BDB had scheduled involving net loan portfolio growth from USS9\.45 million to U1S36\.79 million between 1979 and 1984\. The BDB Board voted in November 1980 to (i) hire qualified operations staff; (ii) raise salary levels to parity with that of the Central bank and Barbados National Bank; (iii) accept the Loan 1113-BAR staff training program developed by management, and (iv) adopt a plan for portfolio recuperation, thus substantially complying with Loan Agreement commitments\. 3\.10 In Uecember 1980 the World Bank approved the first five subprojects (one exceeding the US$150,000 free limit) which together summed to 20X of BDB's Loan 1513-BAR onlending component\. By March 1981 1DB had increased its lending rate to 12Z (on the basis of the just-completed Central Bank study of interest rates), the Central Bank had approved a USSl million equity contribution as per previous agreement with the Bank, and financing for the first of two subsectoral studies (electronics) had been initiated\. At this stage of loan implementation the following problems had surfaced: (i) in 1981 BDB had accepted the foreign exchange risk on a USS7\.75 million IDB loan; (il) BDB financial results showed strong growth but poorer repayment performance and profitability (in the first instance exacerbated by the somewhat higher salary structure and increased staff levels recommended by the Appraisal Report); and (iii) progress on aggressive portfolio recuperation was stymie\. by political and social pressures\. Despite these difficulties, BDB continued to consolidate the reorientation of its lending operations towards the small manufacturing/industrial sectors and speedily committed Loan 1813-BAM monies: by November 1981, BDB had committed US02\.O million of its USS3\.0 million lending component and disbursed US$0\.814 million; raising the possibility of a follow-on Bank loan\.  - 13 - 3\.11 BDB's portfolio continued to grow vigorously in 198217/ and profits briefly spurted (reaching a 3\.57X return on equity in 1982) due to successive interest rate increases that matched market interest rate adjustments, but by 1983 the impact of regional trade problems and reduced tourist treffic nad begun to affect loan collection levels and BOB's profitability\. In addition, GOB austerity measures precluded acceptance of BDB's revised salary structure or its assumption of MDB's foreign exchange risk\. Nonetheless, BDB disbursed its final subloan under Loan 1813-BAR in December of 1983 and received Bank approval for financing a management information system with the remainder of its technical assistance subcomponent (USS\.171 million), which was fully operational by mid-1984\. BDB's final disbursements under Loan 1813-BAR were USS3\.000 million for subloans and USS\.139 million for technical assistance\.18/ 3\.12 Financial Performance (Annexes 7, 8, 9) BDB's loan portfolio grew from BDSS23\.6 million to BDSS71\.4 million between 1980 and 1984 and its composition shifted towards the manufacturing sector: the relative shares of tourism and manufacturing/industry were BDS$16\.1 million and BDS35\.75 million in M98O and in 1984 these relative shares were BDS$28\.8 million and BDSS36\.7 million\. D Net profits rose from BDS$0\.076 million in 198& to BDS$0\.455 million in 1982, but BDO's performance in terms of invested capital and total assets was not promisiug: return on equity rose between 1980 and 1982 from less than 11 to 3\.57X, but in relation to total assets the return continued low (\.18Z to \.74Z) due to the rapid growth of BDB's total assets (see Annex 15)\. Thereafter BOB's profitability began to decline, principally due to a narrower operating spread (which fell from 4\.81 in 1982 to 3\.89 in 1983, the first of successive years of declining spreads)\. BDB's problems were exacerbated by its increasing inability to collect accounts due: in 1981 67X of principal and interest falling due were collected, while in 1983 this dropped to 57% and in 1985 to 43X\. In 1984 BDB initiated tentative steps towards writing off its bad debt portfolio, which culminated in 1986 with a BDSS8\.082 million charge against income\. By end-February 1987 BDB's doubtful loans in its tourism and industry portfolios totalled BDS$32\.4 million, while provisions amounted to BDSS18\.7 million and equity summed to only BD0$10\.1 million\. A BDS$12 million Interamerican Development Bank (IDS) loan for industrial lending, signed in Harch 19t6, was transferred from the GOB to BDB as equity, which has enabled BDB to begin recognizing substantial loan1 losses\. A technical assistance component attached to the IDB loan provides fo d i) a financial analyst to assist in the x recovery of BOIl's loan portfolio; (i- an industrial engineer to assist in the technical assessment of projects, and (iii) a specialist in cost accounting to assist in setting up standardized accounting systems for small hotels\. In the future BDB will continue restructuring its loan portfolio and extend assistance to ailing projects through the use of outside consultants and advisors\. 7, Commitments grew 27X p\.a\. and disbursements grew 1OO1 p\.a\. during the 1979-82 period, and the manufacturing sector supplanted tourism as the lead sector\. 8/ US*\.100 financed acquisition of a computerized management information system and the rest financed the costs of two studies done on the plastics and electronics/small machine shop industrial subsectors\. 19, The GOB's 1983 decision to Impose credit ceilings on the tourism sector effectively restrained its growth within BDB's portfolio\.  - 14 - 3\.13 Impact Assessment The Bank sought to accomplish specific institutional objectives with BOB through project implementation: (i) improve BOb's financial viability by introducing a fee structure and marLcet-competitive interest rates; (ii) bolster the scope and criteria of subproject appraisal and supervision activities; (iii) implement a decisive action plan for portfolio recuperation (exercising guarantees and writing off aged delinquent accounts); (iv) protect BDB's long-term financial viability by taking appropriate measures to offset its existing foreign exchange risks; (v) upgrading BDB's salary structure so as to attract and retain qualified staff; (vi) hiring new staff, and (vii) establish institutional objectives and revised policies and procedures to protect and sustain BDB's operations\. Marginal progress was achieved in these areas: BDB's profits briefly rose on increased revenues and its revised lending rates appear to have a permanent character, but the industrial recession and BOB's inability to constructively deal with existing portfolio arrears have exacted costs that are only now being recognized\. Barbados' macroeconomic difficulties limited BDi's ability to hedge its foreign excharge risk (currently BOB's foreign exchange ex-posure is US$15\.1 million against which provisions total- US$0\.050 million)\.2U/ Recent developments (para 3\.12) indicate that serious loan appraisal and supervision deficiencies in the past have contributed to BDB's current operating difficulties\. Technical assistance financing under Loan 1813-lAR which was largely used or acquiring a computerized Management Information System, has greatly enhanced BOB's control procedures but not added to the institution's ability to appraise and manage its portfolio\. Secondarily, the sectoral composition ard quality of BDB's loan portfolio suggest that the institution has still not adopted an effective risk-diversified lending strategy\. 3\.14 Subprojects (Annex 10) World bank loan proceeds on-lent by BDl provided expansion and start-up financing for 21 Barbadian enterprises (ore firm received two loans)\. The majority of the subloans went to smaller companies: b3X of the subborrowers accessed merely 12% of the total lending component\. A substantial number of these smaller loans (under US$50,000) financed the purchase of vehicles for the transport and the construction sectors and printing equipment\. The two largest loans (accounting for 4bX of BDB's total loan allocation) supported expansion activities of food processing firms, while the next-largest loans went to enterprises in the construction sector\. Between them, these two industrial subsectors utilized US$2\.526 million of the US$3\.000 million industrial lending component\. Geographically, most of the loans went to firms located in and around Bridgetown (55% by number and 56% by amount); five of the subloan recipients are located in BIOC industrial estates\. 3\.15 The larger loans in the BDB's Bank portfolio were extended to financially viable, well-managed companies, thus creating high prospects of ulttaate loan recovery, provided supervision and collection efforts by the BDB are upgraded and maintained\. A review of a sample of Loan 1813-BAR subborrowers 2L/ 1986 audited financial statements indicated that BDB's debt-equity ratio exceeds 5:1 and that the Manager of Operations staff position is vacant: both of these developments contravene Loan Agreement convenants\.  - 15 - indicated that many loan decigions were based on optimistic forecasts reflecting the 1979-81 business boom, which resulted in substantial excess capacity in the construction and transport subsectors\. BDB post-loan statistics show exceedingly high arrearage (28Z) among Loan 1813-BAR clients\. For smaller loans, 45Z of total number of subborrowers (l1Z of the Bank portfolio) have gone bankrupt, mostly in transport and construction subsectors\. BDB attributes this poor loan servicing performance to the recessionary business environment prevailing from 1983-85 (which created tremendous difficulties for companies just as they began to implement operations), poor financial and administrative management by the enterprises, and project implementation delays\.21 It is also clear that actual employment created through Bank sub-loans was substantially less than tne 1,500 jobs projected at appraisal, due to contractior\. and progressive restructuring within the manufacturing sector, overly optimistic appraisal projections, and financing of more expanston than new investment projects\. C\. EPC 3\.16 General\. EPC was officially established in July 1979 upon passage of the Export Promotion Corporation Act, which provided for its statutory autonomy from the Ministry of Trade and Industry\. The new institution has been explicitly mandated to provide well-focused support to Barbados' manufactured exports sector\. EPC has supplemented its services by developing a comprehensive information center, which provides specific market data for Barbadian manufacturers, such as (i) tariff, licensing and import regulations; (ii) names of manufacturers, importers, and distributors overseas; (iii) fashion trends relating to colors and styles, and (iv) specific product industry journals\. The number of exporting manufacturers in Barbados covered by EPC has risen from 176 to 235 since 1980, and, in the interim, EPC has organized or provided ubstantial assistance to some 23 trade missions overseas\. 3\.17 EPC was neither staffed nor functional at the time of Loan appraisal; more than one-and-one-half years were spent subsequent to loan effectiveness in recruiting staff and developing programs\. Progress was retarded by the institution's inability to find a qualified expatriate executive director, whose initial three-year contract was to be financed by Loan 1813-BAR monies\.22 Soon after EPC's Board appointed a local businessman to thie position in June 1981, the Bank received EPC's financing plan, which proposed to spend a part of loan proceeds to support the newly initiated Export Grant and Iacentive Scheme (EGIS), wherein exporters were reimbursed for up to 75Z of the direct expenses incurred by market research, product design and testing, advertising and promotion, preparation of sales literature, participation in fairs and 21/ A comprehensive 1985 portfolio review of BDB's total loan portfolio found that 27Z of arrearages were caused by marginal enterprise/over-expansion of facilities and 23? were due to a lack of managerial and technical skill/absentee owner or operator\. 22/ Approximately US$\.100 million of the total US$\.300 million allocation was used for consultant services and for a review of the system of export incentives available to Barbadian manufacturers\.  - 16 - exhibitions, and promotion missions to and from Barbados\.23 The substitution of financing the costs of hiring an expatriate executive director for financing EGIS activities did not expedite loan disbursements: EPC'e use of loan proceeds did not really begin until 1984 due to: (i) lack of working capital (para\. 2\.08), and (ii) EPC's inability to quickly gain the confidence and support of the manufacturing sector\. By December 1983, only US$0\.063 million of the US$0\.300 million component had been committed\. Thnde months later, the Ministry of Finance agreed to supplement PEC's operatinv subvention by US$0\.075 million, which effectively reactivated the EGIS\. EPC ultimately disbursed US$0\.241 million of its US$0\.300 million loan component\. 3\.18 Impact Assessment\. EPC channelled approxirmately 53Z of its total US$0\.241 million 1813-BAR disbursements to EGIS activities, most of which were used for outward missions (332), trade fairs and exhibitions (29S), and advertising and promotion (23X)\. In addition, US$0\.114 million (about 47Z) was spent on short-term technical assistance projects\. (principally to firms in the garments and furniture subsectors)\. The EPC was a nascent institution at the time of Loan appraisal: its delayed start-up was prolonged by the fact that its staff had to acquire practical understanding and experience regarding export markets, export requirements (i\.e\., product design and quality, production management, import regulations, etc\.), and exporting k:now-how (i\.e\., documentation and trade requirements, establishing an external market presence, effective distribution arrangements, proper pricing and negotiating strategies, etc\.)\. No hard statistical data is available to quantify EPC's direct impact on manufactured exports\. However, much of EPC's specialized assistance to individual exporters could not be fully effective, due to both the rigorous performance standards required by extra-regional export markets and, to a lesser extent, the institution's lack of experience\. EPC notes that its efforts to increase exports have been frustrated by the decline of the regional export market, difficulties in penetrating Third Country Markets24 (i\.e\., due to the limited range and quality of local export products, serious financial and production management deficiencies in indigenous exporting companies, and high local shipping costs), and the absence of indigenous design capability\. During its short existence, the institution has acquired invaluable experience, and, in the future, will be able to provide more efficient and effective assistnace to Bartadian exporters\. D\. NTB and PBIMAP 3\.19 Vocational and Management Training (NTB and BIMAP)\. BIMAP was established in 1971 through the collaborative efforts of the private sector and the GOB as a private, not-for-profit corporation offering instruction designed to improve management skills in both the public and private sectors and to increase national productivity\. BIMAP offers a range cf covrses in business 231 Later EPC included financing for production of samples and demonstration kits\. 241 The increase in export figures shown in Annex 4 to "other, countries is due to the assembly industry and the INTEL exports (an American electronic company) to Puerto Rico, which is classified separately from the U\.S\.A\.  - 17 - administration and management at its small campus located next to the BOB 25/ and provides as well specialized technical assistance to small-scale enterprises (financed through GOB grant resources and various donor agencies), consulting and research-related services to larger enterprises and in-house training for corporate clients\. Operating revenues are derived from training and consulting fees (comprising 7OZ of total revenues in 1985), grants and donations (20X of total revenues), and membership subscriptions (approximately 195 companies provided 6X of total revenues)\. In 1985 BII4AP completed its tenth consecutive year of profitab' operations, recording a USS83,907 profit on revenues totalling US$863,381\.26/ 3\.20 BIMAP was originaldy allocated USS0\.250 million under Loan 1813-BA to finance the foreign exchange c osi of developing and publishing training manuals and related materials in the areA-s of general and financial management, marketing, personnel and indua\.Llal relations, management of human resources, production management and taxation\. Although BIMAP promptly presented its financing proposal to the bsank (previous to departure of the first supervision mission in October 1980), commitments did not begin until July 1982 due to disruptions caused by ongoing construction activities (para\. 2\.09) and constraints related to working capital (para\. 2\.08) and staff adequacy\. By May 1984 six manuals had beep substantively completed and contracting arrangements for four more manuals ha|d been initiated, requiring a US$0\.018 million increase in Bank financing which was informally agreed to by the Bank\. NTB's inability to define an alternative program for Bank financing under the Vocational and Management Training component of Loan 1813-BAR freed up additional resources for BIMAP activities: BIMP requested two subsequent increases in its resource allocation (to USS0\.315 million in January 1985 and then US$0\.350 million in June 1985) to finance the purchase of a computer training system and 16 computer terminals\. BMP ultimately utilized USS0\.309 million from Loan 1813-BAR, which financed 88Z of the total costs of producing the manuals (accounting for 70Z of BIMAP's Loan 1813-BAR allocation) and computer software and hardware (accounting for 30% of BIHAP's Loan 1813-BAR allocation)\. 3\.21 Impact Assessment Ten manuals were destgned, tested and published under the Bank loan which today constitute the core teaching materials for numerous BIMAP courses: more than 1,094 copies have been reproduced and distributed to students since June 1983\. Each manual has been designed in a modular format, enabling both selective reproduction and continuous revision and development of training materials\. These teaching aids have had substantial impact on both the effectiveness and continuous growth of BIMAP's training activities (in 1985 53 courses were offered by BIMAP to 1,018 participants, exceeding the previous year's performance of 33 courses offered to 756 participants and leading to a 37X increase in revenues arising from training activities)\. In addition, BIMAP acquired personal computers, peripherals and a high speed copier with Bank loan proceeds, all of which are being used as envisaged\. The computer terminals have enabled BIMAP to introduce modules in computer applications within existing course outlines of various business administration courses, which has been enthusiastically received by course participants\. 25/ Construction of this facility was partially financed by a World Bank loan disbursed concurrently to Loan 1813-BAR\. 26/ Kevenues included grants and donations totalling USS172,935\.  - 18 - E\. Bank 3\.22 General The Bank paid scrupulous attention to procurement decisions (i\.e\. factory estates) and bidding procedures (i\.e\. consultancy services), striving to maintain cond&tions (i) fostering competition and selection based on performance and merit; (ii) increasing the participation of small-scale firms; (iii) ensuring the appropriateness of technical assistance (i\.e\. scope and method of sectoral studies, relative cost/benefit of the range of factory shell prototypes developed, selection of computer hardware and software, etc\.), and (iv) establishing and sustaining arms-length relationships (i\.e\. bids awarded to BIDC's construction division were certified as cost competitive by outside consulting engineers)\. BDB supervision and appraisal activities, targeted for focused technical assistance at Loan appraisal, did not receive the level of support the Bank anticipated and that its portfolio quality and past performance required\. Bank supervision missions continually stressed the importance of acquiring this type of technical assistance, but, BDB used minimal amounLs of Bank monies for these purposes\. 3\.23 While Bank major supervision missions were scheduled annually (except for 18 months gap between 11/83 and 05/85), bottlenecks affecting project execution (i\.e\. working capital constraints, BIDC's reduced budgetary allocation, NTB's inability to devise an appropriate program for Bink financing, etc\.) and events leading to non-compliance with the Loan Agreement (i\.e\. BDB foreign exchange risK, BIDC rent subsidy etc\.) were promptly identified by Bank personnel and explored in continuous dialogue with the GOB\. Still, the 18-month hiatus between supervision missions (1983-85) may have fostered an overly-optimistic assessment of BIDC's ability to recover construction costs, considering the duration and depths of the domestic recession\. IV\. Conclusions and Recommendations 4\.U1 General The objectives -- both explicit and implicit -- defined at the outset of project implementation have been largely achieved as envisioned: the nation's stock of developed industrial estates and new/expanded enterprises has increased, export promotion and information/support facilities have been provided to industrial enterprises, industrial productivity and viability has been enhanced by the provision of teaphing materials and computer hardware, and the institutional capabilities of all implementing agencies have been strengthened\. The country's deteriorating economic performance prevented project outputs from achieving appraisal projections: merely 340 net new jobs were created in the manufacturing sector from 1978-81 vs\. 5000 new jobs forecast at appraisal, 27 and manufactured output (as measured by GDP) and exports of manufactured goods grew at an inflation-adjusted rate of 2\.8% and 15% per annum, respectively vs\. 20% growth per annum projected at appraisal\. As well, a subsidiary project objective -- adjusting BIDC rental policies to reflect real costs, thus permitting full cost recovery and ultimately financial and economic viability - has not been accomplished due to the GOB's decision to grant a 20% discount on BLDC rental rates in late 1985\. 27/ Approximately 5000 of the 5340 new jobs created 1978-81 were the consequence of job turnover as structural changes occurred within the manufacturing sector in response to increased wage rates and skill levels\.  - 19 - 4\.02 The relationship between the Bank and BIDC soured during the course of project implementation, exacerbated by differences regarding project objectives, BLDC's role and the relative importance of factory rents in total manufacturing costs\. More frequent supervision missions (para\. 3\.22) might have ameliorated this situation\. 4\.03 Crucial elements affecting the outcome of BIDC's project component were: (i) that at the outset (and throughout project Implementation) BIDC did not share the GOB's and the Bank's view that financial viability and recovery of economic costs were to be achieved in the medium-term; (ii) that a basic difference existed between the GOB's desire to stimulate private sector involvement in the provision of factory space (through increased rental rates) and BIDC's institutional interest to perpetuate its subsidized construction division (accounting for approximately 55X of BIDC's total staf: at Loan Appraisal); (iii) that a basic inconsistency existed between the GOB's sire to maintain exchange rate stability and its planning objective of attracting foreign investors (i\.e\., labor costs in terms of US dollar were not competitive regionally); and (iv) that the Bank's appraisal projections were too optimistic in assuming: (a) BIDC's positive cash flow by 1983-84 based on full occupancy rates and minimal arrears; (b) a rather short payback period and correspondingly high rental rates; and (c) a lower than actual rate of increase in local construction costs\. Moreover, BIDC was hard put to reconcile two Loan objectives -- to establish prices that ensure full construction cost recovery and to attract foreign investors in competition with similar facilities in the Caribbean region\. In view of the overvaluation of BDS dollar, this reconciliation has not been achieved\. 4\.04 Initially, Bank efforts to improve the financial performance of project participants were frustrated by two factors: (i) BIDC was not able to begin to collect increased rental revenue until Bank-financed factory space began to be completed (end-1982) and (ii) BDB's increased lending rates were only gradually extended to its full portfolio and augmented staff levels at higher salaries led to higher operating expenses\. The Bank's efforts to strengthen BDB have met with mixed results: while a computer system acquired with bank technical assistance funds has had a positive impact on portfolio management and financial control, BIDB's supervision and appraisal capabilities did not receive the attention and resources that its worsening performance record called for\. bank missions always discussed supervision and collection efforts and pushed for the necessity of technical assistance in these areas, but there was no will within BI)B to carry out its espoused technical assistance plans, partly because BOB believed its portfolio problems were of a more political nature\. As well, BDB was not able to secure (i) GOB approval for a revised salary schedule; (ii) GOB's assumption of foreign exchange risk on external loans or adequate exchange loss provisions to offset related losses  - 20 - (which should have been a precondition of loan approvals), and (iii) effective Implementation of its action plan to reduce arrears and cleanse its portfolio\. 4,05 Although the technical assistance component of the project relied on the effective performance of institutions that were largely unformed and untested at the outset, the risk proved to be worth taking\. Indeed, ex post discussions with businesses and exporters assisted through the projectTs export promotion and management training components indicate that these activities were, overall, helpful for companies and institutions alike\. Thus, despite the lm'pact that significant trade problems, a prolonged domestic recession and related austerity measures had on project activities, Loan 1813-BAR has achieved, at least in part, its original project objectives\. 4\.06 Lessons Learned (a) Infrastructure and factory shells should be dimensioned on the basis of conservative estimates of demand and expanded only as demand at full price materializes\. While maintaining cost recovery as a long-term objective, (during the life of the factory shells constructed and within the amortization period of the loan) full cost recovery for industrial parks in the short run may not be feasible: i) When due to macro-economic or market conditions firms experience financial difficulties, temporary rent relief should be considered, particularly if the alternative is underutilization of existing capacity\. ii) When the site itself is temporarily uncompetitive vis-a-vis other locations, the objective should be to fill the vacant factory space at the price where demand meets supply in the market place, as long as rents exceed variable costs\. In summary, pricing of existing capacity should be flexible and adapt to market conditions (para 3\.06-07)\. If the temporary conditions last for an extended period of time, the future use and/or disposition of the factory shells should be reexamined\. Capacity should be increased in relatively modest increments as demand is manifested\. (b) The product design, production and marketing challenges faced by manufacturing companies shifting from domestic/regional markets to third country markets call for specialized, highly technical skills and assistance (para 3\.18)\. In similar projects the bank should ensure that exporters and Government agencies huve access to adequate consultant information, and that exporters are receiving the specialized and professional assistance that would help them in reaching their goals\.  -21 - ANNEX I BARBADOS PROJECT COMPLETION REPORT INDUSTRIAL DEVELOPMENT AND EXPORT PROMOTION FROJECT Loan 1813-BAR (i-n -USS)7 Cumulative Disbursements (US$ million) Actual as X Date Projected Actual of ProJected FY 1981 September 30, 1960 \.5 0 December 31,1980 1\.U- 0 March 31, 1981 1\.5 0 June 30, 1981 2\.0 \.5 25 FY 1982 September 30, 1981 2\.8 \.8 29 December 31, 1981 3\.5 1\.5 43 March 31, 1982 4\.5 1\.6 36 June 30, 1982 5\.8 1\.8 31 FY 1983 September 3U, 1982 6\.5 2\.2 34 December 31, 1982 7\.4 3\.2 43 March 31, 1983 8\.2 4\.U 49 June 30, 1983 8\.9 4\.4 49 FY 1984 September 30, 1903 9\.5 4\.6 48 December 31, 1983 9\.8 5\.8 59 March 31, 1984 1O\.U 6\.1 b1 June 30, 1984 10\.0 b\.6 66 FY 1985 September 30, 1984 10\.0 7\.U 70 December 31, 1984 10\.0 7\.1 71 March 31, 1985 10\.0 7\.b 7b June 30, 1985 10\.0 7\.7 77 FY 1986 September 30, 1985 10\.0 8\.2 82 December 31, 1985 10\.0 8\.7 87 March 31, 1986 10\.0 8\.8 88 June 30, 1986 10\.0 8\.81/ 88 _/ Loan 1W13-BAR balance of US$1\.2 cancelled as of April 16, 1986\.  -22 - ANNEX 2 BARBADOS PROJECT CUMPLETION REPORT INDUSIRIAL DUVELOPMENT AND EXPORT PROMOTION PROJECT Loan 1813-BAR Significant National Economic Statistics 1980-85 1980 1981 1982 1983 GDP Growth (% p\.a\.) 4\.4 -1\.9 -4\.9 0\.4 3\.5 0\.3 Agriculture (Z p\.a\.) 5\.5 -17\.2 -2\.7 3\.9 9\.5 0\.5 Manufacturing (Z p\.a\.) 2\.2 -3\.b -5\.4 2\.5 1\.9 -9\.5 Tourism (X p\.a\.) 3\.7 -6\.7 -14\.0 -2\.0 7\.0 -3\.0 GOP (in constant 1974 prices) 184\.9 216\.8 238\.5 252\.7 266\.6 283\.3 Retail Price Index (Annual Avg\.) 103\.5 118\.6 130\.8 137\.7 144\.1 149\.7 Real Effective Exchange Rate (Avg\.) 100\.0 106\.0 112\.1 118\.6 118\.7 131\.8 Wage Rate Index (Avg\. Manu\.) 100\.0 113\.8 129\.1 140\.4 144\.6 151\.0 Merchandise Exports (FOB 3DSS million) Manufactures (total) 201\.8 218\.7 288\.2 448\.2 501\.5 422\.5 Clothing (49\.1) (52\.2) (65\.6) (70\.4) (64\.8) (45\.1) Electronic Components (63\.3) (77\.3) (121\.7) (266\.3) (335\.9) (304\.2) Total Domestic Exports 337\.2 297\.0 372\.5 510\.4 581\.7 496\.5 Unemployment (2 of labor force) 12\.3 10\.7 13\.7 14\.5 17\.1 18\.6 Investment (X of GDP) 25\.3 27\.6 22\.6 19\.9 16\.2 15\.2  BARBADOS PROJECT COMPLETION REPOKT INDUSTRIAL DEVELOPMENT AND EXPORT PROC*OTION PROJECT Loan 1813-BAR Merchandise Exports (F\.O\.B\.) by Major Commodities, 1978-85 (BDS$ million) 1978 1979 1980 1981 1982 1983 1984 1985 A\. Total Domestic Exports 1/ 186\.6 235\.4 337\.2 297\.0 372\.5 510\.4 583\.7 496\.5 Primary Products 66\.4 78\.9 135\.4 78\.3 84\.3 b2\.2 82\.2 74\.0 Sugar 47\.0 58\.0 109\.4 51\.5 b1\.9 37\.6 57\.3 50\.3 Molasses 6\.7 6\.9 11\.9 8\.3 6\.9 7\.1 8\.4 7\.6 Other 12\.7 14\.0 14\.1 18\.5 15\.5 17\.5 16\.5 16\.1 Manufactured Products 120\.2 156\.5 201\.8 Z18\.7 288\.2 488\.2 501\.5 422\.5 Rum 6\.0 2\.6 3\.5 4\.1 5\.5 5\.0 6\.5 8\.0 Clothing 40\.6 45\.9 49\.1 52\.2 65\.6 70\.4 64\.8 45\.1 Chemicals 9\.3 15\.2 21\.7 24\.2 26\.3 27\.2 25\.9 21\.1 Electrical Components 37\.9 45\.1 63\.3 77\.3 121\.7 266\.3 335\.9 304\.2 Margarine and Lard 5\.4 4\.3 6\.1 4\.5 3\.8 4\.1 4\.6 2\.8 Sports Equipment 1\.9 8\.3 10\.3 8\.2 0\.3 - 0\.2 0\.2 Others 19\.1 35\.1 47\.8 48\.2 65\.0 75\.2 63\.6 41\.1 B\. Re-exports 63\.6 71\.3 118\.1 94\.0 144\.9 135\.8 203\.7 211\.3 Petroleum and Products 2/ 38\.7 26\.7 54\.1 46\.5 94\.8 94\.4 146\.0 168\.7 Other 24\.9 44\.6 64\.0 47\.5 50\.1 41\.4 57\.7 42\.6 C\. Total Exports 250\.2 106\.7 455\.3 391\.0 517\.4 646\.2 787\.4 707\.8 D\. Share of Manufacturers in Total Domestic Exports (x) 70\.3 71\.5 65\.2 77\.3 82\.6 92\.1 88\.7 88\.3 1/ Visible trade\. 2/ 1977 and 1978 differs from official figures due to a timing adjustment of BD$1l\.l million of stores and bunkers re-exported in 1977, but reported in 1978\. Sources: Annual Overseas Trade Reports; Statistical Service\.  BARBADOS PROJECT COMPLETION REPORT INDUSTRIAL DEVELOPMENT AND EXPORT PROMOTION PROJECT Loan 1813-BAR Direction of Trade, 1978-85 (BDS$ million) 1978 1979 1980 1981 1982 1983 1984 1985 Imports (c\.i\.f\.) 617\.6 850\.8 1049\.1 1151\.1 1107\.5 1249\.2 1324\.4 1221\.8 EEC 1, 167\.8 202\.6 213\.2 195\.4 158\.2 193\.0 166\.7 190\.9 (United Kingdom) 115\.6 138\.3 157\.3 140\.3 99\.5 112\.4 100\.0 111\.1 US 175\.4 268\.8 356\.8 398\.4 296\.4 578\.7 632\.7 500\.0 CARICOH 92\.0 136\.8 189\.5 183\.2 144\.1 150\.3 154\.7 180\.2 Canada 46\.2 64\.3 76\.8 98\.2 63\.7 68\.0 74\.9 62\.2 Other 136\.2 178\.3 212\.8 275\.9 345\.1 259\.2 295\.4 288\.5 Exports (f\.o\.b\.) 2/ 250\.2 306\.7 455\.3 391\.0 517\.4 646\.2 787\.4 707\.8 ECC 1/ 48\.4 60\.1 70\.7 42\.4 68\.7 35\.9 63\.4 48\.8 (United Kingdom) 32\.5 38\.b 29\.9 26\.8 47\.0 29\.3 54\.4 40\.7 US 65\.6 110\.9 165\.1 143\.0 152\.7 241\.7 217\.2 130\.2 CARICOM 64\.1 76\.2 126\.7 121\.1 141\.3 139\.0 175\.9 160\.5 Canada 12\.1 16\.0\. 18\.3 18\.2 10\.7 9\.8 12\.6 9\.9 Other 60\.0 43\.5 74\.5 66\.3 144\.0 219\.8 318\.3 358\.4 I/ Belgium-Luxembourg, Denmark, France, Germany FR, Ireland, Italy, Netherlands, UK and Greece (since 1981)\. 2/ Ingludes re-exports\. Sources: Overseas Trade reports; Barbados Statistical Service\.  PwIEr G GI RFIW DUMTRAL IEVEST?EXr AND EXEW PWMIfCN PI1aEI1 Laan 1813-B INICO_truction Schdle: Pmodeted vs\. Adtual -- -\. 80/8U 81/82 82/83 1WJ84/85 Ttal itedk PAlPected kAtual Pocted Actual Projee*ed A*cual ProJected Arbual _____F OF LD St\. Peter - - _ _ _ _ _ 13\.9 _- - 13\.9 Newton - - _ _ _ _ _ _ - 0\.2 - 0\.2 WUdey - - _ _ _ 0\.1 _- - - 0\.1 Spring Gaiien 1/ - - _ _ - _ - 7\.5 _ - 7\.5 SpegtStownI7 4\.0 - 4\.0 - 4\.0 -- - 12\.0 - vs Grantley MA 3\.0 - 3\.0 _ 4\.0 - - 0\.6 _ 0\.7 10\.0 1\.3 Six PIods 4\.0 - 4\.0 __ - 0\.6 8\.0 0\.6 TOML 11\.0 - 11\.0 _ 8\.0 0\.7 _ 22\.0 0 0\.9 30\.0 23\.6 FAU UJIIDlNS (ftZ) Sprng Galen 1I / - _ 22,492 _ 53,550 - 76,042 Spelftstm 17 - - 60,000 - 70,000 - 40,000 - _ - 170,000 - Gratle A_s 16,000 - 60,000 - 80,000 9,235 - 41,235 _ - 156,000 50,470 Six Rods 34,000 - 50,000 32,000 50,000 - - 32,000 _ - 134,000 64,000 Newton 30,000 - 30,OW - - - 32,0OD _- 60,OD 32\.I 1IIPL 0D,000 - 210,000 32,000 200,000 9,235 40,000 127,727 - 53,550 520,000 222,512 'n 1/ Sr Gden Estates wre subtiCied for SpefsttsW Estates In BIDC's custuctlon sdwedule follawLzg tle 0OB's dwiS1on rit to promel with deveopmt Of Spleghtstmn Estates\.  BARBADOS PROJECT COMPLETION REPORT INDUSTRIAL DEVELOPMENT AND EXPORT FROMOTION PROJECT Loan 1813-BAR BIDC Financial Statements 1980-86 (in BDS$ millllons) I\. BALANCE SHEET 1980 1981 1982 1983 1984\. 1985 1986 ASSETS Cash and Bank Deposits 2\.491 3\.453 4\.959 4\.798 3\.418 2\.463 2\.052 Accounts Receivable (Net) 0\.248 0\.321 0\.857 0\.974 1\.838 2\.849 3\.233 Investments - - - 0\.037 0\.037 0\.037 1\.037 Inventories 0\.184 0\.293 0\.454 0\.392 0\.388 0\.338 0\.335 Land and Buildings (rented/in construction) 24\.480 29\.622 31\.116 36\.793 43\.271 45\.789 45\.696 Fixed Assets 0\.905 0\.978 1\.386 1\.490 3\.059 4\.242 4\.468 Other Assets 0\.044 0\.104 0\.249 \.994 0\.619 0\.719 0\.658 TOTAL ASSETS 28\.352 34\.771 39\.021 45\.478 52\.630 56\.437 57\.469 TOTAL LIABILITIES Current Llabilities 1\.080 1\.010 0\.750 1\.580 1\.852 2\.372 3\.066 Deferred Lease Rental Income - - 0\.784 0\.955 0\.938 0\.683 0\.738 Deferred Credit - - - 0\.032 0\.043 0\.042 0\.031 Long-Term Liabilities - - - 3\.333 7\.666 10\.873 12\.425 CAPITAL AND SURPLUS BDB Capital Contribution 26\.327 33\.041 38\.835 41\.539 45\.112 46\.787 49\.518 Capital Loss -0\.531 -0\.531 -0\.531 -0\.531 -0\.531 -0\.531 -0\.314 X Accumulated Deficit 1\.476 1\.251 -0\.817 -1\.430 -2\.450 -3\.789 -7\.995 TOTAL LIABILITIES AND CAPITAL 28\.352 34\.771 39\.021 45\.478 52\.630 56\.437 57\.469 -_____ __ _____\. _____ _______ _____  BARBADOS PROJECT COMPLETION REPORT INDUSTRIAL DEVELOPMENT AND EXPORT PROMOTION PROJECT Loan 1813-BAR BIDC Financial Statements 1980-86 (in BDS$ millions) II\. INCOME STATEMENT 1980 1981 1982 1983 1984 1985 1986 REVENUE Net Rental Income 0\.424 1\.010 2\.458 3\.394 3\.783 4\.644 3\.963 Less Estate Maintenance N\.A\. N\.A\. -0\.941 -1\.204 -1\.409 -2\.511 -3\.154 Bad Debts N\.A\. N\.A\. - - - -0\.554 -0\.900 Depreciation N\.A\. N\.A\. -0\.583 -0\.780 -0\.848 -1\.010 -1\.122 Other Income 0\.121 0\.168 0\.360 0\.507 0\.342 0\.201 0\.244 TOTAL REVENUE 0\.545 1\.178 1\.294 1\.917 1\.868 0\.770 -0\.969 EXPENSES Staff 0\.817 1\.474 1\.498 1\.665 2\.209 2\.517 2\.761 Local Promotion 0\.098 0\.222 0\.183 0\.222 0\.744 1\.038 1\.136 Overseas Promotion 0\.914 1\.266 1\.484 1\.455 0\.947 1\.086 1,143 Handicraft Department 0\.245 0\.375 0\.511 0\.589 0\.271 0\.428 0\.377 Other 0\.1,23 0\.507 0\.549 0\.886 0\.914 0\.325 0\.478 TOTAL EXPENSES 2\.397 3\.844 4\.225 4\.817 5\.085 5\.414 5\.895 NET OPERATING DEFICIT -1\.852 -2\.666 -2\.931 -2\.900 -3\.217 -4\.644 -6\.864 Gain On Fixed Asset Sale 0\.247 - - - - 0\.004 0\.014 Development Expenses -0\.201 -0\.459 -0\.250 -0\.208 -0\.248 -0\.394 -0\.241 Revenue Grant (GOB) 1\.700 2\.900 3\.000 2\.495 2\.219 3\.086 3\.010 NET DEFICIT AFTER GRANT -0\.106 -0\.225 -0\.181 -0\.613 -1\.246 -1\.948 -4\.081 0% Extraordinary Gain 0\.292 - 0\.280 - 0\.227 0\.608 - Extraordinary Expense - - - - - - -0\.125 N NET ANNUAL DEFICIT 0\.186 -0\.225 0\.099 -0\.613 -1\.019 -1\.340 -4\.206 ----------------- - - ----------- - - - ----- - - ------------- - -------------__----- - -__-  -28- ^NNEX 7 Page 1 of 2 MARBADOS FROJECr OXIPLSTION REP(RT INDUSIRLAL DEVELOPMENT AND ECPGRT 1iOMOTION PAWEJCT Loan 1813-BAR BDB Financial Stateants 1980-6 Mwch 31 (in 5S$ inilL`ons) I\. BALANCE SWEES 1980 1981 1982 1983 1984 1985 1986 ASSETS Cash 0\.860 1\.000 0\.757 1\.978 0\.104 0\.156 1\.492 Interest Receivable 0\.788 0\.974 1\.497 2\.638 3\.879 5\.230 6\.164 TOTAL CUNRRET ASSETS 1\.648 1\.974 2\.254 4\.616 3\.983 5\.386 7\.656 Loan Portfolio/ 23\.656 31\.002 48\.124 62\.362 71\.474 83\. 03 91\.134 of which World Bank Portfolio 6\.091 5\.908 5\.193 In Arrears (1\.330) (1\.586) (1\.500) Affected by Arrears (3\.399) (5\.805) (4\.429) Funds for Onlendirg 15\.143 15\.432 15\.111 2\.118 2\.042 1\.960 1\.872 Lnvestmnts 1\.488 2\.940 3\.548 3\.923 4\.972 5\.730 4\.593 Deferred Foreign Exchaege - - - - - - 0\.453 Other Assets 1\.39 1\.474 1\.563 1\.608 1\.694 2\.176 2\.127 TOTAL ASSETS 43\.334 52\.822 70\.600 74\.627 84\.165 98\.955 107\.835 LIAILITIES Bank Overdraft - - - - 0\.095 0\.636 - Accounts Payable U\.280 0\.586 1\.342 1\.258 1\.631 2\.037 2\.670 Short-Term Loans 3\.500 6\.100 8\.250 6\.000 10\.100 10\.450 2U\.82;4 Forelgn Ehnge Proision 0\.068 0\.1l1 0\.135 0\.078 0\.197 U\.095 U\.10U Unfunded Pension Obligation 0\.065 0\.054 0\.035 0\.017 - - - Barbados National obligation 0\.155 - - 2\.833 2\.644 2\.644 2\.644 TOTAL CUWRENT LIABILlTIES 4\.068 6\.921 9\.762 10\.186 14\.667 15\.862 26\.238 Long-Teo Debt 30\.633 36\.206 45\.073 46\.800 51\.306 64\.023 70\.105 Deferred Foreign Exchange - - - - - 0\.649 - Faquity Shara Capital 9\.127 10\.127 15\.742 17\.243 17\.743 19\.243 19\.743 Reserve Fund - - 0\.250 0\.344 0\.357 0\.357 0\.356 Accuilated Deficit -0\.494 -0\.432 -0\.227 0\.054 0\.092 -1\.379 -8\.807 Otter Surplus - - - - - 0\.200 0\.200 TOTAL EQUtMT 8\.633 9\.695 15\.765 17\.641 18\.192 18\.421 11\.492 TOTAL LIABILITIES AND F\.QUITY 43\.334 52\.822 70\.600 74\.627 84\.165 98\.955 107\.835 ji Total loan portfolio net of reserve against possible losses  BARBADOS PROJECT COMPLETION REPORT INDUSIRIAL DEVELOPMENT AND EXPORT YROMOTION PROJECT Loan 1813-BAR BDB Financial Statements 1980-86 March 31 (in BDS$ millions) II\. INCOME STATFKENT 1980 1981 1982 1983 1984 1985 1986 REVENUE Interest on Loans 1\.723 2\.278 3\.789 5\.641 6\.864 8\.200 9\.101 Interest on On-Lending 0\.031 0\.028 0\.038 0\.017 0\.011 0\.016 0\.010 Commitment, Evaluation and Legal Fees 0\.056 0\.226 0\.391 0\.253 0\.358 0\.353 0\.393 Interest on Sinking Deposits 0\.120 0\.135 0\.186 0\.306 0\.399 0\.409 0\.376 Other Income 0\.007 0\.043 0\.037 0\.011 0\.008 0\.011 0\.006 TOTAL REVENUE 1\.937 2\.710 4\.441 6\.228 7\.640 8\.989 9\.886 EXPENSES Interest and Related Charges 0\.939 1\.343 2\.326 3\.462 4\.206 5\.130 6\.351 Bad debts 0\.200 0\.066 0\.233 0\.815 1\.168 2\.708 8\.082 Employment Expenses 0\.491 0\.796 0\.919 1\.045 1\.184 1\.506 1\.625 Administrative Expenses 0\.215 0\.319 0\.445 0\.468 0\.581 0\.791 0\.966 Exchange Differences 0\.016 0\.124 -0\.032 -0\.051 0\.130 -0\.021 0\.134 TOTAL EXPENSES 1\.861 2\.648 3\.891 5\.739 7\.269 10\.114 17\.158 OPERATING INCOHE (LOSS) 0\.076 0\.062 0\.550 0\.489 0\.371 -1\.125 -7\.272 EQUITY IN NET LOSS OF SUBSIDItRY - - -0\.095 -0\.114 -0\.320 -0\.347 -0\.156 0 NET INCOME (LOSS) - - 0\.455 0\.375 0\.015 -1\.472 -7\.428  BARBADOS PROJECT ODMPLETION REPORT INDUSTRIAL DEVELOPMENT AND EXPORT PROMOTION PROJECT Loan 1813-BAR BDB Financial Statistics: 198G-1986 1980 1981 1982 1983 1984 1985 1986 I\. Ratios Return on Average Equity (%) 0\.88? 0\.68% 3\.57% 2\.25X 0\.28% -8\.04X -49\.66% Net Return on Average Total Assets (Z) 0\.182 0\.13% 0\.74% 0\.52Z 0\.06% -1\.61% -7\.18% Debt to Equity 4\.02 4\.45 3\.48 3\.23 3\.63 4\.34 8\.38 Liquidity 0\.41 0\.29 0\.23 0\.45 0\.27 0\.34 0\.29 Administrative Expenses/Average Assets (X) 1\.63% 2\.32% 2\.21% 2\.08% 2\.22% 2\.51% 2\.51% Interest Income/Average Loan Portfolio (X) 7\.41% 8\.44% 9\.67% 10\.242 10\.27% 10\.59% 10\.42% Financial Expenses/Average Borrowings (Z) 2\.74% 3\.51% 4\.86% 6\.35% 7\.02% 7\.23% 7\.41% Reserves/Average Earning Assets (X) 5\.11% 2\.30% 1\.84% 2\.21% 2\.87% 4\.40Z 10\.25Z 0 II\. Sectoral Allocation of Loan Approvals (BDS$ millions) Tourism 5\.759 8\.418 2\.862 0\.870 2\.243 3\.380 3\.795 Industry 5\.278 5\.540 7\.598 7\.938 8\.169 10\.713 5\.621 Small Business \.921 3\.049 2\.556 3\.142 3\.542 4\.201 3\.274 Small Manufacturing \.194 \.274 0\.318 0\.360 0\.293 0\.156 0\.327 Fisheries - - - 0\.309 0\.865 1\.076 1\.38 Total Undisbureed Loans 12\.154 17\.281 13\.334 12\.619 15\.112 19\.566 14\.397 III\. Sectoral Allocation of Loan Approvals (Percent) Tourism 47% 49% 21% 7S 15% 17% 26% Industry 43% 32% 57S 63% 542 55Z 39% Small Business 8% 18% 19% 25% 23% 21% 23% Small Manufacturing 2% 1% 2% 3X 2% 1% 2Z Fisheries - - - 2% 6% 5X 10% Total Undisbursed Loans 1002 100% 100% 100% 100% 100% 100% ______________ ______________ --- -______ -_______________ ---- - - _-_-____-_-  BARBADOS PROJFCT COMPLETION REPORT lNDUSTRIAL DEVELOPMENT AND EXPORT PROMOTION PROJECT Loan 1813-BAR *DB Portfolio Statistics: 1980-86 (in BDS$ millions) 1980 1981 1982 1983 1984 1985 1986 1\. Sectoral Allocation Long-Term Loan Portfolio Tourism 16\.178 19\.001 26\.810 28\.647 28\.783 31\.689 37\.400 Industry 4\.428 7\.841 13\.970 22\.311 27\.301 35\.272 40\.795 Small Business 0\.925 2\.445 4\.823 6\.026 8\.344 10\.829 11\.716 Small Manufacturing 0\.397 0\.464 0\.665 0\.741 1\.020 1\.136 0\.831 Agriculture 0\.288 0\.291 0\.292 0\.231 0\.231 0\.260 0\.2bO Fisheries - - - 2\.754 3\.845 4\.123 5\.004 Loans Under Legal Action 2\.224 1\.601 2\.183 2\.632 3\.987 5\.123 3\.852 TOTAL 24\.440 31\.643 48\.743 63\.342 73\.511 88\.432 99\.858 Less Keserve Against Doubtful Loans 1\.249 1\.291 1\.482 2\.217 3\.375 6\.083 10\.233 TOTAL LOANS 1, 23\.191 30\.352 47\.261 61\.125 70\.136 82\.349 89\.625 ll\. Portfolio Arrears Past-Due Installments N\.A N\.A N\.A\. 5\.261 8\.711 12\.728 12\.366 Non-Past-Due lnstallments N\.A N\.A N\.A\. 27\.600 31\.950 48\.031 40\.952 Total Delinquent Portfolio N\.A N\.A N\.A\. 32\.861 40\.661 60\.759 53\.318 Non-Delinquent Portfolio N\.A N\.A N\.A\. 30\.480 32\.850 27\.672 46\.539 Total Portfolio N\.A N\.A N\.A\. 63\.341 73\.511 88\.431 99\.857 x PEKCENT OF PORTFOLIO IN ARREARS N\.A\. N\.A\. N\.A\. 8X 12X 142 122 PSKCENT OF PURTFOLIO AFFECTED N\.A\. N\.A\. N\.A\. 522 55X 692 532 …---------- ---------- ------------…------…---- … 1/ The discrepancy between this figure and loan portfolio totals in 8DB balance sheet (Annex i) s accounted for by staff loans\.  - 32 - ANNE 10 BARBADOS PROJECT COMPLETION REPORT INDUSTRIAL DEVELOPMENT AND EXPORT PROMOTION PROJECT Loan 1813-BAR Barbados Development Bank: Subproject Profile 1/ No\. X Amount (US$) X I\. by Size of Subloan Up to US$10,000 4 18 $22,544 1 US*10,001-US$50,000 10 45 $333,052 11 US$50,001-US4100,000 1 5 $76,821 3 US$100,001-US$250,000 3 14 $423,464 14 USU250,0U1-US0500,000 2 9 $767,435 26 US$500,001-US$750,uUO 2 9 $1,376,784 46 TY o100 $3,000,100 100 1I\. By Sector Food 4 16 $1,549,976 52 Construction 5 23 $975,923 33 Plastics 2 9 $205,653 7 Wood - 1 5 $9,161 - Transport 7 32 $223,073 7 Printing 2 9 $34,569 1 Metal 1 5 $1,545 - $3,000,100 100 III\. By Region Bridgetown 12 55 $1,672,358 56 Christchurch 2 9 $476,983 16 Airport 1 5 $76,821 3 St\. Thomas 2 9 $445,301 15 St\. Phillip 3 14 $282,193 9 St\. George 2 9 $46,444 2 T2 1500 $3,000,100 1 IV\. Location Industrial Estate 5 23 $1,204,408 40 Other 17 77 S1,795,692 60 T2 100 $3,000,100 100 V\. Operating Status Uperating 12 55 $2,b74,490 89 Not Operating 10 45 $325,610 11 22 100 $3,000,100 100 1/ Due to rounding, percentages do not aLways sum to 100\.  - 33 ANNEX 11 BARBADOS COMMENTS FROM THE BORROWER _ It EXPORT PROMOTION CORPORATION ia to392 Pun \. St Sli t - Sabadas\. Wet 1n a Te (8w) -427s575Z'575S TO"~ No 39 2488 CUlN Adds\. AMEPA Ref\. No: 0042/10 1987-12-06 Mr\. Alexander Nowicki Division Chief Operations Evaluation Department The World Bank 1818 H\. Street Washington D\.C\. 20433 U\.S\.A\. Dear Mr\. Nowicki, Ref: Project Completion Report on Barbados - Industrial Development and Export Pro- motion Project (Loan 1813)-BAR) Further to your letter of November 17th, 1987 concerning e-he above, we have the following comments on Section III C of the above report\. 1\. The BEPC has sought from its inception to recruit and train its technical staff to provide a range of appro- priate services to exporters\. The use of consultants is merely in support of and to supplement the range and depth of technical skills existing within the Corpora- tion\. Therefore the third sentence of 3\.16: 'Thus, instead of providing a full range of export promotion services and market surveys, EPC's principal activity is arranging and employing foreign consultants \.', is quite misleading\. 2\. Paragraph 3\.17's reference to 'the institution's inability to find a qualified expatriate executive director' is also inaccurate, since despite the original provisions of the loan, the EPC Board from its inception sought to recruit a Barbadian national as the Corpora- tion's executive director\. 3\. The statement in paragraph 3\.18: 'It took several years for EPC to establish a visible profile within the Barbadian manufacturing community,' is too sweepinq and could be misinterpreted\. The manufacturers were\.aware of  - 34 - Mr\. Alexander Nowicki Page 2 1987-12-06 the EPC from day one because we were the authorised Government body to issue certificates of origin to exporters and by 1981 were providing some export services to manufacturers\. Similarly, references to the lack of fully effectiveness of the Corporation's programmes and "the institution's lack of experience' fail to recognise the use by the EPC of foreign consultants where necessary to augment its lack of experience\. Also, the main problem here, which regrettably persists, is the almost non-existence of export marketing skills amongst the management of the local manufacturing community and the very limited product range immediately available to penetrate extra-regional export markets\. Please let me know if you require any further information\. Yours sincerely BARBADOS EXPORT PROMOTION CORPORATION A A A Philip A\.W\. Williams Executive Director PAWW/sc  NOTES

APPROVAL

P002213

Doawunt of The World Bank FOR OMCIAL USE ONLY Rpo,tNo 12232 PROJECT CONPLETION REPORT RWANDA TECHNICAL ASSISTANCE PROJECT FOR THE DMPROVEMNT OF PUBLIC FINANCE MANAGEKENT (CREDIT 1565-RU) AUGUST 6, 199'\. MICROGRAPHICS Repo' t No: 12232 Type: PCR Country Operations Division South Central and Indian Ocean Department Africa Regional Office This document has a resricted distnibutfon and may be usd bv recipients only in the performance of deir offcial duties Its contents may not othedwise be disdosed without World Bank authorization\.  CURRENCY EQUIVALENTS (period average) Currenvcy Unit - Rwanda Franc (RwF) 1985: USS1\.00 D RwF 101\.26 1986: USS1\.00 - RwF 87\.64 1987: USS1\.00 - RwF 79\.69 1988: USS1\.OO RwF 76\.4S 1989: US$1\.00 RwF 79\.98 1990: US$1\.00 = RwF 82\.60 1991: USSI\.00 RwF 125\.14 1992: US$1\.00 = RwF 1\.32\.04 FISCAL YEAR Januay I - December 31 GLOSSARY / ABBREVIATIONS ADETEF Association pour le D6veloppement des Technologies Economiqas et Financites (Association for the Development of Eoonomic and Fmancial Tecahnologies)\. BNR Banque Nationale du Rwanda (National Bank of Rwanda)\. -C- Comitt Intcrministdriel de Coordination (Interministerial Coordinating Committee)\. EEC - European Economic Community CCI Comite Consultatif Interministeriel (Interministeriai Advioty Committee)\. ISFP Institut Supdrieur des Fmances Publiques (Public Finarce Institute) MWNIFINECO - Minastbre des Finances et de IEconomie (Ministry of Finance and Exonomy)\. MINIFOPE - Miniatere de la Fonction Publique et de Ia Formation Professionnelle (Public Administratlon and Vocational Training Ministry)\. MINIPLAN MinistOre du Plan (Ministry of Planning)\. MINISUPRES Ministere de I'ltnseignement Supericur et de la Recherche (Higher Education and Research Ministry)\. OED Operations Evaluation Department\. PCR - Project Completion Report\. UNDP - United Nations Development Program\. WEIGHTS AND MEASURES Metric BritishAJS Equivalcnts I meter (m) 3\.3 feet I hectare 2\.47 acres I are (100m2) 0\.02 acre 1 kilometer (km) 0\.62 mile 1 square kilometer (km2) 039 square miles (sq\.mi\.) 1 kilogam (kg) 2\.2 pounds (lb) 1 liter (1) 0\.26 US gallons (gal) metric ton (m ton) Z204 pounds b)  FOR OFICIAL USE ONLY THE WORLD BANK Washington, D\.C\. 20433 U\.SA Offico of Dlreotoreonoral Oporators Evaluation August 6, 1993 MEMORANDUM TO THE EXECUTIVE DIRECIORS AND THE PRESIDENT SUBJECR: Project Completion Report on Rwanda Technical Assistance Project for the Improvement of Public Finance Management (Credit 1565-RW) Attached is the Project Completion Report on Rwanda - Technical Assistance Project for the Improvement of Public Finance Management (Credit 1565-RW) prepared by the Africa Regional Office\. The Government of Rwanda did not prepare a Part II of this report, but it did inform the Africa Regional Office that it had no comments and agreed with the report's findings and conclusions\. This report was prepared by the Region in parallel with OED's Performance Audit Report (PAR) which was submitted to the Executive Directors and the President (Report No\. 12099, dated June 29, 1993), along with the PCR and PAR for a preceding technical assistance operation in Rwanda\. The findings, conclusions and ratings of the PCR on Credit 1565-RW are well in line with those reported in the PAR\. Robert Picciotto by H\. Eberhard Kopp Attachment This documet has a restriced diadbution and may be used by redpients only in the performance of their offcial dutie\. Its contents may not otherwie be disclosed without Word Bank authorization\.  FOR OMCIAL USE ONLY PROJECT COMPLETION REPORT RWANDA TECHNICAL ASSISTANCE PROIJE FOMR THE IMPROVEMENT OF PUBLIC FINANCE MANAGEMENT (CREDIT 1565-RW) TABLE OF CONTENTS Page PREFACE \.(i) EVALUATION SUMMLARY \.1 PART I - PROJECT REVIEW FROM THE BANK'S PERSPECWVE \.3 L lytRODUCrION \. \. 3 H\. \.3E SETING 3 m\. THE PROJECr\. 4 Project Objectives\. 4 Project Description\. 4 Project Concept and Design \.5 Benefits and Risks\. 6 IV\. IWLNETTO \. 7 Overal Performance\. 7 Disbursements\. 8 Training of MlNFNTEC and Other Staff\. 8 Improvement of Tax, Customs, Budgetary and Accounting Procedures 9 Improvement of Financial Management of the Parastatal Sector Portfolio 10 Improvement of Economic Policy Making \.10 Government Performance \.11 Bank Performance \.11 Project Documentation and Data \.12 V\. PROJECT RESULTS AND IMPACr \. \. 12 VL CONCLUSIONS AND LESSONS LEARNED \.12 PART II - PROJECT REVIEW FROM BORROWER'S PERSPECTIVE 14 This document has a rstricted distribution and may be used by recipients only in the performance of their official duties\. Its contents may not otherwise be disclosed without World Bank authorization\.  page PART m - STATISTICAL INFORMATION \. 15 1\. Related lDA Credits \. 15 2\. Project Tunetable \. \. 16 3\.Credit Disbursements \. 17 4\. Project Implementation \. \. 18 5\. Project Costs and Financing \. 19 6\. Project Results \. 19 7\. Status of Covenants \. \. 20 8\. Use of Bank Resources \. \. 21  (i) PROJEC' COMPLETION REPORT RWANDA TECHNICAL ASSISTANCE PROJECT FOR THE IMPROVEMENT OF PUBLIC FINANCE MANAGEMENT (CREDIT 1565-RW) PREFACE This is the Project Completion Report (PCR) for the Technic\.l Assistance Project for the Improvement of Public Finance Management in Rwanda, for which Credit 1565-RW in the amount of SDR 4\.9 million was approved on March 21, 1985\. The credit became effective on January 10, 1986 and was closed on June 30, 1992, (except for Category 4 of Schedule I of the Credit Agreement) two and a half years behind schedule\. Category 4 of Schedule I of the Credit Agreement for computers in part C of Project, was closed on September 30, 1992, with disbursement allowed up to December 30, 1992)\. The last disbursement under the Credit was on January 19, 1993\. Only SDR 2\.8 million (or about 58% of the Credit) was disbursed, and the balance was cancelled in February 1993\. The PCR was prepared by the Country Operations Division of the South-Central and Indian Ocean Department (AF3CO)\. There was no completion mission\. The Bank sent the Borrower Parts I and III with the request to prepare Part II\. The Borrower did not have any comments\. The PCR is based on the President's Report, the Credit Agreement, reports by and correspondence between the Bank and the Borrower, internal Bank memoranda, interviews of Bank staff who have been associated with the Project over the years, and two OED reports: Rwanda - Evaluation d'un Projet d'Assistance Technigue (credit 1565-RW) - Etude de Cas - 4 Mai 1989, and Free-Standing Technical Assistance for I-Istitutional Development in Sub- Saharan Africa, Report N° 8573\. dated April 1990\. However\. the preparation of the PCR has been made particularly difficult in the absence of progress reporLs lor the Project, of Project accounts and of satisfactory audit reports\.  PROJECT COMPLETION REPORT RWANDA TECHNICAL ASSISTANCE PROJECT FOR THE IMPROVEMENT OF PUBLIC FINANCE MANAGEMENT (CREDIT 1565-RW) EVALUATION SUMMARY Objectives (i) The Government's main objective was to improve, through the Project, the management of public finances\. To that end, the Project aimed at: (a) training staff in the Ministry of Finance and Economy (MINIFINECO) and financial managers in technical ministries, parastatals and development projects entities; (b) improving procedures for budget preparation and execution; and (c) strengthening Government capacity for economic policy making (paragraph 7)\. Implementation experiencc (ii) Performance on the Project was overall unsatisfactory\. All components experienced substantial delays and some were barely implemented\. The credit became effective after protracted discussions on the role of ADETEF (Association pour le D6veloppement des Techniques Economiques et Financieres) and administrative arrangements for the supervising team\. In any event, the Government failed to allocate the necessary human resources to manage and implement such a complex Project\. There was no implementation Master Plan for the Project as a whole, and the situation was made even more difficult by the Government approach of recruiting long term advisers individually, instead of as a team through a consulting firm, as recommended in the President's Report\. It seems that the Rwandese team in charge of implementing the project was not always convinced of the usefulness and priority of the Project, especially after the civil service reshuffling of 1989\. Obviously, the armed conflict, which started in late 1990 and continued intermittently till the credit closing date, did not provide a fertile ground for carrying out a project of this kind\. With few exceptions, Bank supervision of the Project by Headquarters staff has been superficial\. Despite a two and-a-half year extension of the closing date, 42% of the credit had to be cancelled (paragraphs 18 to 35)\. Results (iii) The Project did not achievc its primary objective of improving public finance management\. The training component had some uscful results\. However, despitc the development of a new budget nomenclature, and the preparation of sector expenditure programs the Project did not substantially improve the procedures for budget preparation and execution, or strengthen Government capacity for economic policy making\. The institutional impact of the Project is negligible (paragraph 36)\.  2 - Sustainability (iv) The sustainability of the limited results achieved is unlikely (paragraphs 18 to 36)\. Findings and lessons learned (v) A number of lessons can ke drawn from the experience of this project: (a) a sound project concept and design need to include a detailed implemcntation and supervision manual, with the definition of a strategy, precise operational objectives, steps to be followed, by whom and by when; (b) a project of such complexity and scope cannot be successful without a strong Government commitment and the assignment of motivated staff who internalize the project objectives; (c) implementation would most likely be facilitated by recruiting experts as a team through a specialized consulting firm; and (d) the Bank should riot finance institutional development projects which by nature are complex unless it is prepared to invest in intensive supernsion, including consultants with the necessary expertise (paragraphs 36 to 39)\.  PROJECT COMPLETION REPORT RWANDA TECHNICAL ASSISTANCE PROJECT FOR THE IMPROVEMENT OF PUBLIC FINANCE MANAGEMENT (Credit 1565-RW) PART I \. PROJECT REVIEW FROM THE BANK'S PERSPECrIVE T - INTRODUCITON 1\. This project, for which an IDA credit of SDR 4\.9 million was approved on March 21, 1985, was the second technical assistance operation supported by the Bank in Rwanda\. II - THE SE2ITING 2\. The May 1983 Country Economic Memorandum (CEM) skowed that the policy framework and instruments of policy which appear to have served Rwandese development in the late 1970s would not be adequate or appropriate to meet the challenges of changed circumstances in the latter part of the 1980s\. Given the importance that the public sector continued to play in the economy, improving public finance management was considered a high priority\. Major weaknesses, including weak linkages between development plans and public investment programs and lack of comprehensiveness of the budgetary process, were attributed to problems and deficiencies in inter-ministerial coordination, budgetary procedures and staffing\. 3\. Partly as a result of the Technical Assistance Project to MINIPLAN (study Fund I - Credit 1217-RW) which included an Interministerial Advisory Committee, the Government acted to improve inter-ministerial coordination by setting up in October 1984, seven Interministerial Coordination Committees (CIC), two of which were expected to be particularly concerned with economic management issues: the CIC on Economic Policy and the CIC on Planning and International Cooperation\. At the same time, the Ministry of Finance and Economy (MINIFINECO) recognized the importance of improving the budgetary process which required changes in policies to increasc the mobilization or domestic resources and improve efficiency of expenditure, as well as in structures and procedures\. Many o lthe existing deficiencies could be traced to the lack of skilled staff in all ministries, exacerbated by inappropriate procedures for hiring, assigning and promoting civil servants\. 4\. The first technical assistance project had focussed on improving the project preparation process and on establishing the foundations for investment programming\. Given the involvement of other donors in some priority areas of resource mobilization and financial management, the government and the Bank agreed that the new project would focus essentially on improving budgetary and expenditure control and place special emphasis on training\.  - 4 - III - THE PROJECT Project Objectives 5\. The Government's main objective was to improve, through the project, the management of public finances\. To that end, the project aimed at: (a) training (i) staff in MINIFINECO and (ii) financial managers i1i technical ministries, parastatals, and development projects; (b) improving procedures for budget preparation and execution; and (c) strengthening Government capabilities for economic policy making\. Project Description 6\. The Project comprised the following components: (a) training for MINIFINECO staff and for financial managers in other ministries and selected parastatal agencies through: (i) establishment of a Training Center in MINIFINECO (detailed accommodation schedules, renovation of existing premises, furniture and equipment, one training specialist for three years, and short backstopping missions); (ii) remedial training for current staff (training modules, study tours, and high level seminars); (b) improvement of tax, customs, budgetary procedures, and accounting practices through: (i) technical assistance (one budgetary procedures and budget management specialist for three years, one public accounting specialist for iwo years, and short backstopping missions); (ii) phased introduction of automated data processing (including appropriate hardware, software, one computer specialist for three years, one programmer for two years, in-service training, two one-year fellowships abroad, and short backstopping missions); (c) improvement ol financial management ol the parastatal sector portfolio through services of one business management specialist for three years; (d) improvement of economic policy-making through provision of short-term consultant services; and (e) vehicles and equipment\.  -5 - Proiect Concept and Design 7\. The Project resulted from discussion of the May 1983 Country Economic Memorandum with the authorities which highlighted the need to improve the management of public finances\. The Project was prepared by a task force composed of MINIFINECO's Directors-General (who made important contributions to thc design of the training component and the preparation of terms of reference for the long term advisers and Bank staff)\. According to Bank internal documents, the Government's initial commitment to the Project was demonstrated by its readiness to proceed expeditiously with securing an IDA credit rather than having to wait for UNDP grant financing\. & The Project was intended to be only one of the building blocks designed to help the Government reach, over the long term, four key objectives: (a) improve the comprehensiveness and transparency of public accoupts; (b) improve and integrate the budgetary and planning processes (preparation of multi-year public expenditure programs); (c) to strengthen the internal coherence of the budget; and (d) hcttcr reconcile the demand for public si -vices with resource constraints\. In a way, it would complement other Bark Group-financed projects (the first technical assistance project, a proposed project to strengthen the Ministry of Agriculture's budgetary and financie! management functions, and the training components of other projects) and other donors' activities (the IMF, Belgium and Switzerland for tax administration, and the EEC for the accounting and management systems of the parastatals)\. 9\. The training component was straightforward in concept and design\. The Training Center was intended both to train national staff, and to introduce objective criteria for the future selection and promotion of personnel in MINIFINECO\. In order to meet immediate staff upgrading needs, the component included also a remedial training program\. The design of the training component was shared and understood by all relevant parties, its scope, scale and timing were appropriate, and it was well prepared (in quite some detail in the case of the remedial training program) with terms of reference, draft curriculum and training modules\. It included financing of one training specialist for 36 months to help steer the detailed studies and start up operations\. It is not clear, however, how the Training Center could in itself help address, even on a limited and experimental scale, the constraints on civil service personnel management\. 10\. Regarding the improvement of budgetary and accounting procedures, the terms of reference for the two long term advisers which were agreed during appraisal focussed on the design and implementation of improved procedures and methods, and training of staff\. It might have been better to also reach agreement at appraisal on detailed work programs, with identification of operationai targets, next steps and deadlines\. Instead, the project called for the long-term advisers to prepare annual work programs which would be approved by their Rwandese supervisors and reviewed by IDA\. The President's Report refers to "a phased Master Plan that had been approved" to permit the automation of data processing and the design of that part of the project included, inter alia, a computer systems analyst for 36 months that would analyze, define and implement a phased plan of action for the introduction of micro-computers in the concerned directorates\. There is no evidence that the Master Plan was used during project implementation\. 11\. The design and concept ol Lhe components for "the Management of Public Sector Portfoiio" and "the Strengthening of Economic Decision-Making" were rather vague, and are unlikely to have been shared and understood by all relevant parties\. The roles and responsibilities of the concerned directorates were not clearly defined and understood\. Moreover, those  -6- components were affected by the reorganization of the Rwandese administration in early 1989\. The responsibility for economic policy formulation was transferred from the Ministrv of Finance to the Ministry of Planning and several of the key technicians of the Ministry of Finance who had been closely associated with the project design were transferred to other departments as part of the widespread civil service reshuffle\. 12\. A particular feature of the design of the Project was a twinning arrangement with the French Ministry of Finance and Economy through the 'Association pour le D6veloppement des Technologies Economiques et Financi6res- ADETEF (a non profit, voluntary association of civil servants in the French Ministry of Finance)\. A Protocol between the French arid the Rwandese Ministry, approved by IDA during negotiations, was signed on March 5, 1985\. Undcr this three- year agreement, ADETEF committed itself to provide short term backstopping missions by its own staff, advice (including assistance for the recruitment of experts) and training seminars\. This general framework was supposed to be complemented by "particular contracts" specifying 12- month work programs\. The Credit would cover travel and subsistence expenses for short term missions, b-it no professional fees would be charged by French officials\. It should be noted that the twinning concept did not apply to the long term advisers or experts who would be selected by the Rwandese Government and who, with the exception of the training specialist, would be "recruited as a team, preferably through a consulting firm", according to the President's Report\. 13\. Regarding Project Implementation and Management, MINIFINECO would appoint a national project coordinator chosen among high level officials having closely followed project preparation and acceptable to IDA\. Originally, the Project included a technical assistance position to help the national coordinator manage the Project, but this was dropped during negotiations of the Credit at the request of the Rwandese delegation\. As a result, there was nobody, either Rwandese or expatriate, assigned full time to facilitate project implementation\. Nor was any particular arrangement made to ensure that project accounts would be kept\. Benefits and Risks 14\. According to the President's Report, at the end of the Project period, Government should have improved control over the budgetary process, front resource constraint identification to monitoring of budget execution\. The introduction of computers should help to produce timely indicators, and improvements in policy-making should help put this inlormation to better use in the adoption of adjustment measures\. Training activities should help to remedy the current lack of skills\. The establishment of the Training Center should help to introduce objective criteria for the recruitment and promotion of staff and to start a dialogue on the management of civil service careers\. Support to the CIC mechanism should help strengthen interministerial coordination\. 15\. The major risks were linked to the speed with which reforms (particularly the introduction of new principles in the selection and promotion of staff) would be appro-ved and implemented\. The President's Report stated that these potential difficulties had been minimized because of the close involvement of Ministry ollicials at all levels in the design of the Project, including preparation of terms of rcfercncc for the long term advisers and the assessment of training needs\. Moreover, twinning arrangements should provide backstopping by a mature entity, with extensive experience in specialized training and in meeting the special needs of sub-Saharan African countries\.  - 7 - IV- IMPLEMENTATION Overall Performance 16\. Performance on the Project was overall unsatisfactory\. The project docs not seem to have achieved its primary objective of improving the management of public finances\. Thc training component had some positive results, but although some useful work was done on public accounting and budget nomcnclature as well as on preparation or sector expcnditurc programs, it cannot be said that the Project substantially improved procedures for budget preparation and execution, or strengthened Government capabilitics for economic policy making\. The sustainability of the Project is unlikely, and its institutional impact is negligible\. Despite a two and-a-half year extension of the closing date, disbursements fell short of appraisal estimates and 42 % of the Credit had to be cancelled\. 17\. The Project got off to a shaky start and never recovered fully due to: a lack of strong government commitment during the implementation phase; an apparent misunderstanding of the role of ADETEF and disagreements over administrative matters (travel arrangement for ADETEF supervisory team); and 1requent changes in the staff assigncd to the Project on the Bank side\. Close supervision by the Bank\. with substantive inputs, would have been required to close the few gaps in project preparation and the detailed implementation programs\. ADETEF did not provide the short term assistance that could have been expected\. At the beginning of the Project, the Government did not try to recruit the \.long term advisers as a team, through a consulting firm]/; there were delays in the recruitment of advisers, some advisers had to be replaced due to unsatisfactory performance; and in the absence of detailed operational objectives and monitorable action programs, the work of the advisers has not been as productive as it could have been\. 18\. The training component met with somc degree ol success\. From the limited information available in the tiles, it appears that the Institut Supericur dcs Finances Publiques (ISFP), which started operation one year laie, traincd an average of 30 people a year, in line with the appraisal estimates\. It seems that the remedial training was also carried out (however, little information is available), and that some money was spent on fellowships; on the other hand, study tours did not materialize although some had been arranged\. Because of the small number of trainees, the cost of the ISFP per trainee has been relatively high\. It does not seem that any progress has been made in terms of introducing objective criteria for the future selection and promotion of personnel in MINIFINECO (one might argue that such an objective was somewhat beyond the scope of this Project)\. 19\. The component on the management ol public sector portfolio was restructured inlto a full fledged Public Enterprise Relorm Project approvcd in 1987\. The component for strengthening economic decision-making did not move during the earlier implementation phase of the project; however, towards the end of the project the component was used to preparc public enterprise studies and sectoral public expenditure programs under the SAL\. In general, these components were negatively affected by the rcorganization of the Rwandesc administration in early 1989 (see para\. 13)\. jj In the last years ol the Project, ADETEF helped recruit a lull team ol long-term experts and operated like a consulting lirm\.  - 8 - 20\. The portion of the Credit that was used was disbursed in accordance with Schedule I of the Development Credit Agreement\. In view of incomplete Project accounts and of unsatisfactory audit reporting, it is not known how much local resources the Government contributed to the Project\. The availability of counterpart funds, however, does not seem to have been a problem (there is some reference in the files to some expenditures, like for the Training Center, being paid directly by Government)\. 21\. The failure of the Project can be attributed in part to the fact that the Project was not properly managed by the Government nor adequately supervised by the Bank\. There seems to have been a lack of continuity of government commitment during project implementation\. The national project coordinator should have been more directly involved in the budget process to be able to exert effective control on the various components, with the assistance of a full time staff for day to day tasks including an accountant\. Despite several attempts by Bank staff (in the context of negotiation and supervision of the Structural Adjustment Credit (SAL) in 1991-92) to seek the intervention of the Minister of Finance to improve project implementation, the Rwandese authorities did not demonstrate a sufficient commitment to the project\. Part of the reason appears to have been the reluctance of the authorities to use non grant financed expatriate staff\. By the time the authorities finally appeared willing to take remedial action in 1992, the Bank had alrcady decided to closc thc credit\. On the Bank side, apart from some attempts in late-1987 and mid-1988 to salvage the Project, supervision of the Project has been superficial\. Disbursements 22\. The Credit became effective on January 10, 1986\. Disbursements got off to a slow start and never picked up appreciably\. Despite an extension of the closing date by two and a half years, 42 % of the Credit amount had to be cancelled in February 1993\. Actual disbursements for equipment, vehicles and operating costs (excluding those for training) were twice the amount allocated in the Disbursement Credit Agreemcnt, but there were substantial shortfalls in all other categories, including the PPF advance (which was not used as iLtended to get the Project going before credit effectiveness)\. Disbursements for training were about 40% of estimates\. The cost of rehabilitating and equipping the training center was much less than estimated, and decreasing percentages were used for the operating costs\. The remedial training was on a somewhat reduced scale, with no study tours\. Disbursements for consultants were less than 60% of the allocated amount, because of a smaller number of persons/months due to delays in the recruitment of long term experts and limited use of short term consultants\. Disbursements for equipment for the computerization program were about 85% of the allocated amount\. Training of' MINIFINECO and othcr stall' 23\. The establishment of a Training Cenier for the stalY of MINIFINECO was a priority of Ministry officials at the time of project preparation\. The enactment of legislation creating the Center and the appointment of a Director, expected by November 1985, were conditions of disbursement for that sub-component\. The Center was supposed to start operations in October 1986\. The Institut Superieur des Finances Publiques (IPFP) was ofricially established by a law of June 20, 1986, its Director was appointed in November 1986, and it started operations in 1987 with 22 students\. During 1987-91, the number of students averaged 29 per year, compared to the President's Report estimate of 30\. Thc 1989 OED case study concluded that the establishment of ISFP was a positive aspect of the Project, but raised a number of unresolved issues: the relatively high cost of the training; the problem of equivalence of diplomas; the linkages or absence thereof  with other training institutions financed by IDA, UNDP, the Federal Republic of Germany, etc\.; whether such a training center would not have been better placed under the authority of the Higher Education and Research Ministry (MINISUPRES) or the Public Administration and Vocational Training Ministry (MINIFOPE); and whether the Government would be able to sustain the cost of operating ISFP\. It claimed that there had not been any real diagnosis of the existing situation for training of financial civil servants and that no strategy had been elaborated\. It pointed out that ISFP in itself cannot solve the problems of career management in MINIFINECO\. While acknowledging that the training had been useful, it recommended a different approach and a reorientation of the sub-component\. Finally, the effectiveness of ISFP suffered from the high staff turnover, a problem that also plagued the remedial training program\. 24\. According to the President's Report, a detailed analysis of the training needs of each MINIFINECO's Directorate-general led to the identification of eight training modules, which were prepared in some detail\. For each, the target population, content and delivery \.node were specified\. That remedial training program which also included high level seminars abroad and 10 study tours of 30 days each, would benefit 70 MINIFINECO staff, as well as staff of other ministries and organizations\. The 1989 OED case study mentioned that: (i) 25 seminars were organized, with an averagc of 22 participants during 6\.2 days, which represent about 3,500 days/participants for the training of about 500 staff; (ii) the study tours did not take place; and (iii) about 15 staff benefitted from fellowships for training abroad\. The contents of the seminars were somewhat different from the training modules that had been prepared, and the participants themselves gave high ratings to seminars that dealt with practical questions of particular relevance for their daily activities\. Improvement of Tax\. Customs\. Budgetary and Accounting Procedurts 25\. The scope of this component goes beyond procedures per se to include also structures and budgetary management as well as tax administration and customs\. The objective of improving procedures for the preparation, management and implementation of the budget would be achieved through technical assistance and the phased introduction of automated data processing\. Although terms of reference for the long term advisers had been prepared during appraisal and agreed during negotiations, the preparation of that component remained incomplete\. While the general objective was clear, there was no strategy on how to achieve it, including detailed operational objectives, an identification of the steps to be followed and the means to be allocated and a timetable for implementation\. 26\. In January 1986, the Rwandese authorities recruited directly, without any assistance from ADETEF, a UNDP expert that had already spent ten years in Rwanda, as long term adviser for budgetary procedures\. For the first 18 months, he continued to serve as adviser to the minister, and it is only in the last five months of his employment (up to November 1987) that he was assigned to work with the Director-general of the Budget\. Basically, his work was not relevant to the objective of the Project\. A new expert was appointed in July 1989, who apparently remained on the job until June 30, 1992\. He made a diagnosis of the main problems with the budget and developed a new budget nomenclature\. The long term adviser on public accounting was in many respects productive and successful\. Recruited in June 1986, he developed a work program related to the Project's objectives, and reported regularly on the progress of his work\. Among his achievements, one might mention the drafting of new accounting regulations and the introduction of the bank transfer method for the payment of civil servants, as well as the training of staff both at the ISFP and at seminars dealing specif-ically with public accounting issues\. However, his work  - 10 - ran against a sequencing problem since he could not proceed any further without a new budget nomenclature\. 27\. The Project aimed at the gradual introduction of computers into MINIFINECO\. and the objective of the new system to be installed was to improve monitoring of the country's external debt and budget execution, and production of timely financial indicators\. Although there are many references in the files on this computerization component, the situation is quite confused\. The President's-Report indicates that a phased master plan had been approved te permit the automation of data processing\. It seems that, with the assistance of ADETEF, a master plan for computerization was prepared in 1986/87, and equipment was purchased in early 1989\. The long term computer adviser mentioned in the President's Report was recruited with considerable delays and his confract was abruptly terminated as a result of a disagreement on his role\. Some technical assistance was provided in the form of short term missions; also, fellowships were used for the training of staff, and a local firm was contracted to assist with bid evaluation, the start up of the new system and the training of staff, but the contract was cancelled before its normal completion\. Additional computers were purchased in 1992 after the newly appointed Minister of Finance became aware of the need to upgrade the work of the ministry and to modernize the existing equipment to be able to better monitor the budgetary aspects of the structural adjustment program\. In this context'it was decided to "cofinance" UNDP's SYDONIA project to computerize the Customs Directorate, and to also use a system developed by the tax advisor in an IMF implemented project to computerize the Tax Directorate\. Improvement of Financial Management of the Parastatal Sector Portfolio 28\. This component consisted ol fonc business management specialist to be assigned for 36 months to the Inspectorate Gencral of Finance, State Investment Control Directorate, to help design control procedures and standardized methods for the analysis of the performance of public enterprises\. Maybe because the profile of the expert to be recruited was not well defined, the first expert recruited by the Rwandese authorities did not perform satisfactorily, and two candidates proposed by ADETEF were not recruited\. It is only in November 1988, that an expert with satisfactory qualifications and experience was finally recruited\. In the meantime, the government proposed to use up to US$450,000 out of the proceeds of the credit to finance studies required for the preparation of a public enterprise reform project\. The proposal made sense and the Bank agreed to the Government's request\. Improvement of Economic Policy Making 29\. This component included short term consulting services to help the Studies and Evaluation Directorate of MINIFINECO, who is acting as the technical secretariat of the Interministerial Coordinating Committee on Economic Policy, prepare papers for submission to the Committee\. No list of topics to be studied and no work program had been prepared, and not much happened during the first years of the project\. Also, in early 1989 a reorganization of the Rwandese administration removed the "economy" function from MINIFINECO which then became MINIFIN\. It is only towards the end of the Project that funds available for financing short term consultants were used for studies on public enterprise reform and the preparation of the public expenditures programs lor the live sectors mentioned in the structural adjustment program\.  - 11 Government Performance 30\. According to the President's Report, officials of MINIFINECO at all levels were very active in the project design and preparation, and had a strong interest in, and commitment to the Project\. Somehow that commitment disappeared quickly, maybe because of difficulties experienced in the early stages of project implementation\. Another determining factor was that most of the successive Ministers of Finance during the project implementation phase did not have the same degree of commitment to the project than the one who was in charge during the preparation phase of the project\. Moreover, the government did not take the necessary measures, including assigning sufficient staff, to ensure that the project was properly managed and implemented\. In retrospect, it is clear that there was a need for a project coordinator or manager more directly involved in the Budget process to exert effective control on the various project components and to check that results were obtained, as well as for a full time civil servant in charge of day-to-day tasks and a project accountant\. Although more costly, it would also have been better to recruit, from the beginning, the long-term advisers as a team through a consulting firm\. In accordance with the terms of the agreement with ADETEF, the authorities could have made more use of backstopping missions and training expertise of ADETEF, which seems to have been quite successful\. The problems with ADETEF (e\.g\. disagreement on travel arrangement for the ADETEF supervisory teams) at one point significantly affected the project and diverted the attention of the project officials\. There are some vague references in the files to these issues being referred to the Interministerial Coordinating Committee on Economic Policy, but it does not seem that full use was made of this potentially important mechanism to resolve the problems associated with ADETEF\. Finally\. the deteriorating general country conditions (i\.e\. intermittent armed conflict in 1990-92) made it difficult for the authorities to conduct normal business\. Country officials were generally preoccupied with the conflict and the senior officials in charge of the project were unable to exert the needed leadership for better project implementation\. Bank Performance 31\. Bank performance on the Project was mixed\. Bank staff played a useful role in project identification and preparation, but should have done more to make detailed plans for the implementation process\. With the exccption of some attempts in late-1987 and mid-1988 and again in 1991 to help the government dcal with the problems in project implementation, Bank supervision of the Project by Headquarters staff has been superficial\. There was a lack of substantive contributions by the Bank during the early stages of project implementation\. Changes in the Bank staff assigned to the Project did not help either\. The Bank Resident Mission has been episodically involved in project supervision; it organized review meetings, made useful suggestions on a number of issues (particularly on monitorable action programs and helped expedite procurement)\. However, the Resident Mission's suggestions were not always accepted by the government and followed up by supervision mission staff\. Although Bank staff made several attempts to get the Minister of Finance to intervene to reinvigorate the project in the context of the preparation and supervision of the structural adjustment program, the Bank should have been more forceful on insisting on compliance with credit covenants, including project accounts, progress reports and audits\. On the basis that some of the problems l:acing the implementation of the project were being resolved (including, for example, the recruitment of a new budgeta\.y adviser in July 1989) in January 1990, the Bank extended the closing date by two and-a-half years, from December 31, 1989 to June 30, 1992\. This period coincided with the preparation of the SAL The Bank staff hoped that the Government would show its commitment to the project if the authorities saw the project as instrumental in financing studies or activities that were important for the adjustment program\. In the event, project implementation did not improve as  - 12 - expected, it would have been better to extend the closing date one year at a time, and to monitor project implementation more closely\. In 1992 the new Minister of Finance submitted a proposal to restructure the project\. As the credit closing date had already been extended by two and-a-half years and since Bank staff were not convinced that the related Government proposal to restructure the project could improve the project implementation, the Bank refused any further extension of the closing date\. Project Documentation and Data 32\. The President's Report and the Development Credit Agreement provided a useful framework for the Government and the Bank, but a detailed implementation and supervision manual would have been a greater help in the carrying out the Project\. The absence of regular progress reports, project accounts and audit reports (for most of the project period) did not facilitate preparation of this PCR\. V - PROJECT RESULTS AND IMPACT 33\. From the limited information available in the files, the Project results are very meager and the impact of the Project is negligible\. No doubt, the Project provided training, upgraded staff capabilities, useful studies were carried out, diagnoses of current problems were refined, some relevant documents were prepared etc, however, there is no evidence that the Project helped Government improve substantially the management of public finances\. It appears that at the end of the Project the government is generally faced with similar problems in public management as it did before the project\. VI - CONCLUSIONS AND LESSONS LEARNED 34\. Performance on the Project was overall unsatisfactory, and the Project did not achieve its primary objective of enabling the Government to improve the management of public finances\. In the course of implementing the project, a few lessons have been learned in terms of project design and preparation, and project management and supervision by the government and the Bank\. 35\. The project's concept was sound, but the design was not detailed enough for some components\. More time should have been spent on project preparation, to elaborate a strategy to reform public finance management, define precise operational objectives and outline the process including the steps to be followed with a timetable\. As a second best solution, this should have been done at the beginning of the project period, possibly with the assistance of ADETEF which is particularly qualified for conceptual work (maybe more so than for implementation)\. Given the shortage of qualified Rwandese financial staff in MINIFINECO and other Ministries, the training provided must have been useful\. However, the institutional climate, including in particular the high turnover of staff and the absence of appropriate personnel management policies and practices, eroded much of the benefits of training\. The lesson learned is that capacity building through training requires staff continuity in key positions and appropriate incentive policies and personnel management practices\.  - 13 - 36\. Another lesson learned is that a project of such complexity and scope cannot be successful without a strong government commitment and the assignment of sufficient staff with reasonable continuity to manage the Project properly\. A twinning arrangement with an organization like ADETEF is no substitute for Government commitment and involvement\. There was a certain logic in Project contents and components were interrelated; in order to ensure consistency in approach, as well as consistency for the recruitment of long term advisers and between their work programs, it would have been more appropriate for the Government at the beginning of the Project to recruit experts as a team through a specialized consulting firm, as envisaged in the President's Report\. 37\. Although close supervision of a project does not necessarily ensure successful implementation, more intense and regular supervision by the Bank was clearly needed\. From time to time, the Bank Resident Mission played a constructive role through day to day contacts, in organizing review meetings, and in assisting the Government in the logistical aspects of the Project\. However, the Resident Mission suggestions were not always followed up by supervision missions\. The supervision of a project of this nature requircs specializcd cxpcrtisc which has to be provided or mobilized by headquarters to help Government address substantive issues that may arise during project implementation\. The lesson learned is that the Bank should not be involved in the financing of institutional development projects which are very difficult to design and implement unless it is prepared invest in intensive supervision with specialized expertise\.  - 14 - PART 11 - PROJECTR EVIEW FROM BJORROWEIt'S IPERSPISEC'IVE REPUBUQUE RWANDAISE hJaaIi\.9 lk No 834Y /j 1001,V/ Aa AaSO MTNTSTItnv\. tE\. FTNANCYHff RF\. N'- : a-ougd f Progm=mm pow 2\.s Sviu M waihlxg%oa DO 20453 , Ae )I\.m_s~w 4\. wsw ue ov quo 3* at e a I 6pWuliqiz Aaiu\. na e \.b *ta pam 4\. la mpport weitlf & 1'autios dun puojet 1565 m7e\. ugsw 4\. ~~~~~~~~ Nirsli 1\. * __-Z1O111061t4 - - Xmo;o le Ilep::o2antt 316odent de w=i vs BMQIdond" Rau 'mf- JuA'W\.*,  - 15 - PART III - STATISTICAL INFORMATION 1\. Related IDA Credits Credit n*/ Purpose Year of Status Comments Project Title Approval 1217-RW 'Io desclop R\.,nJia's ahsorptnc March 1982 UI(tectivcness: The Project successfully First study Fund capacity by increasing the November 1982 introduced a mechanism for SDR 4\.3 million number and improving the making pre-investment quality of projects to be Closing date: studies and improving submitted for external ti\.iancing, June 30 1989 interministerial coordination, strengthening the local project (two and a half but fell short of expectations preparation capabilities and yeats behind in terms of expanding improving the coordination schedule) Rwandese capacity to between technical ministries and prepare projects because of the Ministty of Planning\. some institutional weaknesses, especially the availability of qualified personnel\. Fo give Rwanda the capacity 1796-RW and technical competence May 1987 Effectiveness: This credit was supposed to Second Study necessaty to translate its 08/18/88 pick up where the Study Fund planned priorities into coherent Closing date: Fund I left\. However\., it investment programs\. 06/0/93 suffered from competition from credit 1217-RW, whose disbursements were delayed by two and a half years\. Today, cumulative disbursements of credit 1796-RW are low, and the possibility of restructuring the project is being considered\. Providc technical am\.istance tl 2113-RW the Government to help carry March 1990 Effectiveness: The technical work on the Public Enterprise out its public enterprise refortn 02/26/91 public enterprise law is now Reform program in: (a) a policy reform completed and the work on package covering the whole Closing Date: developing a privatization public enterprise sector; (b) 12/31/94 strategy has been laundced\. restructuring specific enterprises Consultants are also in place\. and (c) development of institutional capacity to design, implement and monitor public enterprise reform\.  - 16 - 2\. Prolect Timetable item D,o Date Date Planned Revised Actual - Identification \.-- \.-- September 1983 - Preparation \._ --- May-June 1984 - Appraisal Mission October 1984 -\.- October 1984 - Credit Negotiations Februaty 25-27, 1985 \. February 25-27, 1985 - Board Approval 03\.21/1985 \. 0\.3/21/1985 - Credit Signature \. 05/17/1985 Credit E(fectiveneaLms t)/tESt1985 01/15/198' 0)/10/t986 - Credit Closing I 31/1s989 WM/3/1 992 WM,/3t)/t992 - Credit Completion 06n20/89 \. L Iast Disbunement - \. 01/19/1993  - 17- 3\. Credit Disbursements Bank Fiscal Year Disbursements (in USS million) and quarter \. Credit 156S-RW Estimatee Actual Actual % of Cumulative Cumulative Estimated 1984/85 4 0\.20 0 1985/86 l 2 3 0\.26 4 1\.40 0\.33 23\.6 1986/87 1 \.47 2 0\.57 3 0\.67 4 2\.90 0\.88 303 1987/88 1 0\.92 2 0\.92 3 0\.97 4 3\.70 1\.00 27\.0 1988189 1 1\.21 2 1\.29 3 1\.47 4 4\.30 1\.65 38\.4 1989/90 1 1\.88 2 2\.13 3 2\.42 4 4\.80 2\.62 54\.6 1990/91 1 2\.74 3 3\.04 4 4\.80 3\.1b) 4)5\.e8 1991/92 1 3\.21 2 3\.29 3 3\.37 4 4\.80 3\.43 71\.5 1992/93 1 3\.47 2 3\.64 3 4\.80 3\.68 76\.7 Note: At the time of the signing of credit 1565-RW, one SDR was equal to about one US dollar\. Since then the value of the SDR has increased, and is at prescnt equal to about US$ 1\.37\. Although actual disbursements in US dollars represent 77% of the dollar value of the credit as included in the President's Report, in terms of SDRs actual disbursements represent o\.Ily 58% of the original credit amount of SDR 4\.9 million\.  - 18 - 4\. ProJect ImRIlementation Indicators President Report Actual /or Estimates PCR estimates 1\. Appointment of National Project Coordinator 09/16/85 2\. Signing of Protocol between Government and ADETEF 03/05/85 03105/85 renewed on 04/29/88 3\. MINIFINECO's Training Centre: \.Start of detailed specifications study 03131/85 \.Enactment of legislation 11/01/85 06R40/86 \.Appointment of Director 1101/85 11t/8 \.Submission of course syllabus to IDA 06/01/8S \.Start of operations 10/86 03/87 4\. Start of remedial training March 1985 S\. Start of recruitment of: \.Budget management specialist 03131/85 01/86 \.Public accounting specialist 03/31/85 06/86 6\. Long term advisors to prepare yearly work programs to Annually be approved by Rwandese supervisors and reviewed by IDA 7\. Phased introduction of automated dat a processing: \.Start of systems analysis and application design for computerizing the tax administration 03/31/85 \.Start of full computerization of budget management March 86 system \.Operation of integrated system June 87  - 19- 5\. Proiect Costs and Financing A\. Project Costs (in US$ thousand equivalent) FPoag tLoca TOWa Talning Ccntx 190 no 910 Reedial TMrAntn 650 S0 7n0 Long tlwm Ad&s OM5 370 1\.8 BaEatoppg Miaona 90 10 too SboWt term Conuttants 310 80 390 Computatization 480 Se3r $30 VeI*e and tquipment lIti t l !30l Total Baa\. Cost- 3\.320 1,400 4720 Corttnhsle 370 200 S70 of whicb: Prbe 320 180 0 l Phok So 20 70 Towa Projee Costa3 3\.690 1\.600 5\.290 B\. Prolect Financing ___________ \. orcin Local \. Totdl IDA 136903 1t10 t 4,00 <ilaemmem \. 490 490 Total S 1\.6Q0 |S\.0 J Note\. There is no information in the President's Report or in the files on the planned distribution af financing between Government and IDA for each component\. Also\. in the absence ol project accounts\. there is no information on the financing that has been actually provided by Government, in total and by component, nor on IDA financing by project component\. 6 Project Results Measurable Output Indicators Appraisal Estimates Estimated at Estimated at full Closing Date Development 1\. Number of people trained 30 per year From 22 to 38 per year, at MINIFINECO's training for a total of 145 for the 5- Centre year period 1987-1992\. 2\. Remedial training: \. number of people trained 70 \. number of study tours 10 Taxes included in the project costs are negligible as all items would be exempt from import duties and local taxes\. \.3/ Including refinancing of the US$450,000 PPF advance\.  - 20 - 7\. Status of Caenants Seco \. In \.eadi - - fot for |\.02 Opertion of Spcial Account N/A Sansi oty |101 Canrng out of Prjct by MINIPINht ' % A I fn&dilvt,w n\.e ath due ddi,tener \.fd fir-t 102 P1,0u"anten N:A Samtfayo | 03b) Bowr to depoit USS1I0l0 equakt Into Projeat Acount 10318S Yct 0410118 yet tlOm186 Yea 0WO A17 Ye 100o/7 Ye 040 Yet lt0O1 No inmation saaita 04089 Ae4 n to dit Meport\. 0 tmnt doted a than USS0XWO0 but the awaibilit 1001/89 f outerpa fonds one been" ptemW (Otsrmnt fiAnd ertain tprject esendora 4DU90 ypaat t1v01/90 0t§L'It No infonaro avabtae l~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~(i ttQl,% wtl4llq! 104(a) Bo to anpbC y I alt times a project coodinat whoe NIA Yes qualllaaooa and apewkn are artepebe to IDA 104(b) BorroWr to ame that Secrery Genweal In charge of Finance N/A No coordlnte TA to MINQIECO\. IO(a) Bo"rr to eatabA traing cerand eply c tb 111/O85 YVs wth omc day t0X(b) Bortower to tbet aa to IDA for alu oeui to be carird N/A No Informatibn a out hn training cener\. lIl\. Borrower to saign quahwld slafl ltlj\.jvs *n \.xic4uI\.a numtwm \A %\. Ai \.\ \. Ist rmn\.-t itk- rdmalaffd B1rrower to preper yearty work programe tw oeiauhanu and 3\.07 tletable for preet actetie N/A No infornauon avaaWl Borowe to maintainjeteua 401(a) N/A Not comped wib BOrrOwa to ha Prect AcOuna ud anuy\. 401(b) and (a) 06m6 NNo 0611t No Om/8 No 06/8 NO 0/ Yes (\.ith 6 months deay) 06191 Yes (with 4 months delay) Ge-te 0/92 Yes (witb 6 mota deay) - 1 progress report Secion 906 ompletln report N A Uinsauiaany, nsa dur yet3 Mme Borrower did not submit any regular Progress Report for the whole projet\. 0/ IDA to ask Government to complete Part 11 of this PCR\.  -21 - & Use of Bank Resources A, Staff Inputs (In staff weck from MIS) Stage of ProtCylea P-lned ReAnsd Fia/Comments Th A ail __4 4\.8 AppI" through Bod Approal \. 60 SUPllo \. \. 41\.1 Project Comption Report 60 i7\.4 Tol B\. Missions Sta\. of perc Ce MontYear Nb of DMy in Prfo rating ssam1 Persona fied Through Appa Sept 83 NA NA May/June 84 NA NA Appraisal tou 8ad OCL 84 Board Appoal thsh Eaectiveaa none OS PDO CU' PMP AOF SUPezvtson:71 N1 Feb \.86 t 5 N! ApN/ 86 2 9 N 3 Sept 86 1 4 Ni4 Nov\. 87 2 4 3 3 3 t N5 AAprl 88 2 4 3 3 \. 3 Ni6 March89 2 10 3 3 3 N'7 Novre\.r- 89 1 10 NV! Sept/Ot\. 90 2 12 N'9 July 91 I 7 2 2 2 2 Records of some missions may be missing and some missions supervised several projects\. 2/ OS O Ovaallf status PDO - Project Development Objectives CLC = Compliance with Legal Covenants PMP - Project Management Performance AOF = Availability of Funds 8/ Supervision N`8 wias abnrted due to ilie ligiiing In Kigali while Mwfne n11eelvrs oi thlc teall were alreadv in ihe

APPROVAL

P037437

R ESTR I CT E D R e p o r t N o\. P-208 FILE COPY This report was prepared for use within the Bank\. In making it available to others, the Bank assumes no responsibility to them for the accuracy or completeness of the information contained herein\. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT REPORT AND RECOMMENDATIONS OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN TO THE JAPAN DEVELOPMENT BANK FOR THE YAWATA IRON AND STEEL GO\., LTD\. TOBATA PROJECT November 3, 1959  INT\. RilATIOIHAL BAi'lK FOR RECO;1STRUCTIO11 A0-D DVTELOfiP LENT RISGET JisE) tvOhi-sTv 1-IS OF T\.-T' !-]-,, |: REPORT 101B RECO1n1rDTYiSO TW -FiZ L\. TO THE EX'ECUTITVE DIRECTORS OL¶1 A PROFOSED LOAN-i TO TH \. JiPU DZITELLOP1LJ1T i-TNK FOR TiHB YAWTATA IRON &c ST-'\.'L CO\.-, LTD\. TOBATA PROJ,CT 1\. I submit the following report and recommendations on a proposal for a loan in various currencies and in an amount equivalent to 020 million to The Japan Development Bank (JDB) to be relent to the Yawata Iron & Steel Co\., Ltd, (Yawata), a private company\. The proceeds of the loan wiould be used to finance a project for the construction of two blast furnaces, a converter plant and a slabbing mill, at the companyis wrorlks at Tobata located in IKyushu, Japan\. PART I - H-ITSTORICAL 2, The Japanese Government indicated in 1957-1958 that the moderni- zation and expansion of iron and steel making facilities had a high priority for Japan's economic development and recom;-ended a number of such projects for the Bank's consideration\. The Baink has already made loans totaling about ;;100 million to five of the big steel companies in Japan for modernization and eXDansion of their facilities; these included a loan of `65\.1 million to Yawata for the construction of a modern plate rmill which was satisfactorily completed and\. put into operation in June 1957\. 3\. The loan, if approved, wzould be the second loan to be made for a Yawata project\. Yatlata is the largest steel company in Japan\. The project was appraised by a Bank iiission which visited Japan in July-August 1959\. 4\. lNegotiations began in W:ashington on October 19, 1959 wjith the representatives of the Government of Japan, the JDB and Yawrata and were ccncluided on October 26, 1959\. 5\. Assuming that the loan for the Fuji steel project is approved (see my Report and Recommendations Pf 59-4C of evenr date) thie proposed loan would be the Bank's eighteenth loan to Japan and would make the total of tie Bank's loans about ,298 million, net of cancellations\. The status of the prevrious sixteen loans is as follow7s: Total net of cancellations i'253, 773,000 Less amount sold 17,132,000 h236,56h1,0CO Am\.ount renaid `6,582,OOO Less repayments to third parties 6,582,00O _ _ _ Net amount held by Bank 0,236,64l,QOOOY 17 Includes 062,797,000 not yet disbursed\. All loans are effective  -2- PAR'IT II - D\. CPIT?-TOI\. O-F' TH2 LOANi 6\. Borrower: The Jpapn Eevelopment Bankl which would relend the proceeds to Yawata\. Guarantor: Jaoan\. kAoumt: The equivalent in various currencies of ,-20 millione Amortization: 27 semi-annual instarnents from January 15, 1962 to January 15, 1975 Interest Rate: 6% per annum3 including 1%S cocrrission\. Commitment Chalrge: 3/4 of l,<, per annum\. Payment Dates: January 15 and July 15\. The amount of' tVe loan ,Tould represent about 17/2 of the project cost which is ex-pected to be the equivalent o-f about :117,6 million\. Approxi,mately the equi-alent of about ',5\.7 million of the loan would be used for payment of imported equipment' and services ancd the balance equixa- lent to OlL13 million for expenditures in yen\. ThYRT III - L1E\.GA_T i'PS1JIREj1TS AYD LI_G-AL !iUr:TortrT1 7\. Drafts of the following loan docLuments are attached: (a) Loan Agreement betwecn the Bank and The Japan Development Bank (1o\.l1)\. (b) Second Subsidiary Loan Agreement, between The Japan Develop- ment Bank anc' YawTata Iron c Steel Co\., Ltd\. (F o\.2)I\. (c) Guarantee Agremaent betweer\. Japan and the Bank (No\.3)\. (d) Letter regarding Expenditures, List of Goods and Currencies (ITOe S\. The Loan Agreement would conform generally to the pattern of previous loan agreements with the JDB in the case of loans for both the fGreign exchanEe costs of imported goods and services and for the financing of local expenditures\. The Loan Agreement wrould containn inter alia, the following provisions: 1/ The first Subsidiary Loan 4-reeient was entered ilnto in connection witlh the Dank's previous loan (Loan iNo\. 133 JA) to JDB for relending to Yawata\.  (a) The JDB would enter into a subsidia-r loan agreerient with Yawata f'or rJlending the moneys withclraurn frorm, the Loan Account\. The term:s of such agreement wzould have to be satisfactor-y to the Bank (Article 5\.o6), Tie draft Second Subsidiary Loan Agreement attached (No\. 2) is considered satisfactory\. (b) JIB iTould receive as security suchl lien as is consistent wTith its establisned practice (Article 5\.06) \. (c) Except for certain stipulations governing itenms of limited or no interest to the Bank, no provision of the Second Subsiciary Loan Agreement rmiay be clanged wiitlhout the consent of the Banr\. (Article 5\.07)\. (d) Should Yawata for an;r reason repay JDr, prior to the normal maturity then, unless otherijise agreed, the JDB would be obliged to repay thle Bank correspondingly (Article 5\.08)\. (e) Additional events of def ault would be any cdefault by Yawata under the First Subsidiiay Loan Agreement or Second Sub- sidiary Loan Agreement (Article 6\.02) 9\. The Second Subsidiary Loen Agreement (to which the Bank is not a signatoxzr), likle prev ious SuCA1 an;reements, would ccntain provisions corres-pondiinc to those in thae Loan Areeien-\. anfJ the Bank Is Loan RegE;llatiolls\. With excen?tioris mentioned below, it provides that the riglhts a\.d obligaticon of YawJata vis-a-vis JUB correspond to those of JI)B tow ard the Banl:\. JDB would char-ge Ya2ata interest at a rate 0,3< per a-ilnoa hig-her than th e rate charced on the Danl-\.' loan (Article 5)\. There will be a debt limitation covenant (Arti-cle 21) and a current ratio covenant (Article 22)\. Before -te loan becomes effective, the Bank will have receivec eviclenice satisfactory to it that Yawata has entered into arran^;ements withi financial institutions in Japan for tho borrowing of additicnal funds needed to meet its financial requirements for the construction program which includes the project (Article 32)\. 10\. The Guarantee Agreement conforms to the normal pattern of guarantee agreemiients between Japan and the Panik in respect of loans to JDB\. 11\. An agreed letter (1To\. 4) regarding withdrawals from th e Loan Accolnt specifies the pro-portion of local expenditures on the project liwhJco *iav be financed from th\.e loan and provides that the Banl may disburse for thl-at purpose dollars, pounds sterling or anr othor currencies freely con- vertible by Japan into 6ollars or poundIs sterling, 12\. Also attached is the Report of the Comimnittee provided for in Article III, Section L4 (iii) of the Articles of Agreem\.ent of thle Bank (No\. 5) -  PFlRT IV - APPAP\.ISAL O0 TH- PUG FOSZ= LOAN 13\. The project and the proposed financial arrangements are described in the attached report, "Appraisal of Blast urnnace Project," No\. Tm0-22ha (I;o\. 6) e 14\. The project includes twro newJ 1500 ton per day blast furnaces with related facilities, a 3500 ton per day sintering plant, three new sixty-ton oxygen top-blowuing converters and a new 48" slabbing mill to be installed at Tobata tocether wjith all ancillary facilities\. 15, The project is part of a construction program wThich was begLln in 1956 and which is expected to be completed br i-arch 31, 1962, This program- is designed to expand andr nocernize the company's iron and steel making facilities located at Tobata and at Yawata in Kyrushu and at Hikari in Southern Honshu\. It will increase the annual pig iron capacity from about 2,100,000 tons to about 3,4hO0,OUO tons, and ingot steel from about 2,800,COO tons to about 5,250,000 tons, with corresponding expansion and modernizatio-o of finishing facilities\. 16\. The total cost of the construction program to be carried out betwc:en April 1, 1959 and larch 31, 1962 is estimated at about '244h2 million equ4va- lent exclusive of interest during construction\. The lat'er will be met from operational revenues\. The proposed loan of ''20 million represents abouLt 8\.35 of the cost of this construction program\. 17\. The cormpanyls total financial requirements (including the cost of construction program, other investment, increase in working capital, repayment of loans, etc\.) for the three-year period ending IMarch 31, 1962 are estimiated at about 8I'h10 mill-ion equivalent which the company plans to meet from the followJing sources: Retained ear-nings and depreciation 38\.1 Share issue 15\.6d Lcng-term loans: World Bank 4 \.9X Bonds 12\.9' Other long-term loans 28\.55J 100\.05 18\. The company expects to raise about s23 billion ("P,6i mi) by issue of new shares, more than half of whic'h will be realized early in 1960 and the balance towards the end of 1960\. Yawata also will obtain satisfactory assurances as to the underwriting of all bonds still to be issued curing the construction period, and as to the total amount of long-term loans wjhiclh have not yet been arran,ed for\. Satisfactory assurances will also be obtained from a group of banlks to provide funids required for wjorking caps ta)\. AdC\.equate funds should therefore be available to carry out the project anld the programri  19\. Of the proposed loan of q20 million equivalent, about '5\.7 million would be used to finance imported equipment and the remaining ;ilL\.3 million would be used to finance expenditures in yen\. Although the rate of capital formation in Japan is among the highest in the world, the available resources will not be sufficient during the next several years to meet all of the in- vestment requirements without inflationary consequences\. During the next few years investment requirements will be high because Japan must modernize and expandc many of its economic facilities in order to improve its competi- tive position and to maintain an adequate level of employment while the labor force is increasing at the rate of 2% per year\. Japan is a highly industrialized country wihich produces most of the goods which it needs for projects of the type usually financed by the Bank\. As a consequence, JapanPs need for external capital considerably exceeds its need for imported equip- ment for such projects\. In these circumstances the Bank can assist in meeting a reasonable share of Japan's need for capital for its essential investment program only by making a substantial part of its loans available to cover local expenditures\. Justification of the Project 20\. The project is part of a substantial expansion and modernizaticn program of the Japanese iron ancd steel industry\. This program has been under way for some time and is continuing in order to kceep pace with tho country's fast growing demand for iron and steel\. The project is designed to increase the proportion of hot metal in steel making, to expand steel production and to produce high quality slabs at Tobata for the strip mills\. Iroduction cost should be substantially reduced\. 21\. A study of thle market prospects of the Japanese steel irdustrzy (TO-22h,a, Annex 4) indicates that the expansion program\., scheduled for completion in 1962 would be justified by the prospective increase in demand\. iarket prospects for Yaw-rata's principal products are generally favorable\. 22\. The construction program of Yawiata is technically sound and has been engineered by Yawatats owm teclnical staff who are competent to supervise the construction and erection of new facilities\. 1Mlethod of Procurement 23, Procurement is by international bidding w,here imported equipment is competitive\. Bids are limited to domestic suppliers only where past experience has shown that it is clearly more advantageous for the company to purchase the goods in Japan\. Economic Situation 24\. A report, "The Economic Position and Prospects of Japan," Moo FE-13a, was distributed on October 16 1959 (R 59I83)\.  - 6 - 25\. Japan has had an impressive record of post-war recovery and ex- pan,ion\. During the years 1951 through 1958 gross national product in real terms increased at an average rate of 7\.55 per year\. HowJever, the pattern of growJth has been uneven\. 26\. Because of the strong expansionary forces, the econory tends to growu at rates which cannot be sustained without creating inflationary pressures and consequent periodic crises in the balance of payments, Economic activity is, howqever, highly sensitive to monetary restraints and these have been effectively applied when necessary to re-establish balance and recoup exchange losses\. Japan has been through two such cycles since 1950, In the most recent one, a rapid upswing in 1956 and 1957 culminated in a current payments deficit in the latter year of about j¢OO million\. in 1958, however, the payments position was reversed with a current surplus of equal magnitude as a result of restrictive monetary policies that indu=ed a heavy drop in imports\. Foreign exchange reserves are now rwell above the peak reached prior to the 1957 crisis\. lionetary restrictions were gradually relaxed after mid-1958, and the economy appears now to be on another marked upswsing in production and trade\. 270 It is likely that average rates on growth in Japan w-ill continuc to be high, although, perhaps, not quite so high as in the 1950's\. It also seems probable that the pattern of expansion in spurts w-ill continue\. If the expansion becomes excessive, howiever, it is reasonable to expect the Government once again to demonstrate its willingness and ability to bring the economy bacik into line and to recoup any losses of foreign ex- change\. Prospects of FulfiLment of Obligations 28\. Yawata is the largest steel company of Japan\. It produces about 325 of Japan's pig iron, more than 245, of steel ingots and imore than 255 of finished rolled carbon products\. The company's production capacity and scles have ;reotiy increase- `n recent -ears\. substantial -oroport½on of sales was for export\. Yawata s production costs are relatively low-v and compare favorably with those of other Japanese producers\. Yawata's manage- ment is competent and owing to its leading position in the steel field, has a proninent voice in shaping the policies of the Japanese steel industry\. Although its financial position is at present somewhat strained, its earn- ing record an; prospects are good\. A large proportion of its profits (after normal depreciation) has been retained in recent years\. 29\. A memorandwu on The Japan Development Banlc, Noo TO-226e(No\. 7), is attached\. The Japoan Development Bank (JDB) is an agency of the Govern+- ment of Japan which is authorized to borrow,i and to make and guarantee loans in both domestic and foreign currencies\. JDB was established in J95? to supplement the credit operations of other financial institutions by supplying long-term funds for reconstruction and development\. The Bank has already made fourteen loans to JDB (excluding the Fuji loan), the proceeds  of wnich were relent to industrial and powfer companies\. JDB has carried out its obligations to the Bank satisfactorily\. JDB's financial position is sound, and it is reasonable to expect that JDE will continue to carry out its obligations to the Bank both under existing loans and the present- ly proposed 102n\. 30\. During the next five years, the estimated annual service on Japants present and prospective external public debt uill range betw^een 4\.0 and 6\.5% of 1958 foreign exchange receipts on current account\. It will decline thereafter\. Japan should be able to service its external debts including the proposed loan without undue strain on the country's balance of payments\. PARim V - COIfPLIk,TC2 WITTH TI{ ATfTICL=S OF hGRE'IBW!T 31\. I am satisfied that the proposed loan complies with the require- ments of the Articles of Agreement of the Bank\. PART VI - RLCOI-l7DATIG'S 32\. I recommuend that the Bank grant a loan to The Japan Development Bank for relending to Yawata in various currencies in an amount equivalent to j'20 million for a term of 15 years including a grace period of two years at a rate of interest of 61, with the guarantee of Japan and on such other terms and conditions as are specified in the draft Loan and Guarantee Agreements attached, and that the Executive Directors adopt a resolution to the effect in the form attached (Nio\. 8)\. AttacYhments Eugene R\. Black Washington, D\. C\. Movember 3, 1959

APPROVAL

P009008

Document of The World Bank FOR OFFICIAL USE ONLY Report No\. 12679 PROJECT COMPLETION REPORT TURKEY FOURTH TEK TRANSMISSION PROJECT (LOAN 2586-TU) JANUARY 4, 1994 Industry and Energy Operations Division Country Department I Europe and Central Asia Regional Office This document has a restricted distribution and may be used bv recipients only in the performance of their official duties\. Its contents mav not otherwise be disclosed without World Bank authorization\.  CURRENCY EQUIVALENTS Currency Unit - Lira (TL) At Appraisal (January 1985): US$1 - TL 450 TL 1000 - US$2\.22 June 1993: US$1 TL 10400 TL 1000 - US$0\.096 WEIGHTS AND MEASURES kW - kilowatt MW - 1,000 kW kWh - kilowatt hour GWh (Gigawatt hour) - 1,000,000 kWh kV (kilovolt) - 1,000 volts One meter (m) - 3\.28 feet One kilometer (km) - 0\.624 miles One kilogram (kg) (1,000 grams) - 2\.2 pounds One ton (metric ton) (1,000 kg) - 2,205 pounds One kilocalorie (kcal) (1,000 calories) - 3,968 BTU Gumecs (m3/second) - 35\.31 cubic feet per second Fiscal Year January 1 to December 31  FOR OFFICLAL USE ONLY THE WORLD BANK Washington, D\.C\. 20433 U\.S\.A\. Office of Director-General Operations Evaluation January 4, 1994 MEMORANDUM TO THE EXECUTIVE DIRECTORS AND THE PRESIDENT SUBJECT: Project Completion Report on Turkey Fourth TEK Transmission Protect (Loan 2586-TU) Attached is the "Project Completion Report on Turkey - Fourth Tek Transmission Project (Loan 2586-TU)" prepared by the Europe and Central Asia Regional Office\. No comments were received from the Borrower\. This project, the sixteenth operation in the power sector, had two stated objectives\. First, to expand the high voltage interconnected system of the Turkish Electricity Authority (TEK) to allow continued supply of the growing electricity demand; and second, to increase TEK's capability in network planning and in transmission lines and substation design\. TEK fully met the first objective but not the second one as it failed to implement the corresponding training program\. Since TEK did not comply with important financial covenants, the rate of return on sector investments based on current prices is only 6%\. The project was completed at a cost of US$ 268 million, i\.e\. 29% above the original cost estimate, and its construction took almost two years longer than the scheduled five years\. The Bank loan financed US$ 136\.8 million, and TEK and the Government, the balance\. The delays in project implementation, caused mainly by poor compliance of TEK with Bank procurement guidelines, concurred with delays in commissioning the power generating plants supplying the TEK interconnected system and did not thwart the project objectives\. The outcome of the project is rated as marginally satisfactory\. TEK's low electricity prices underestimate the important economic benefits of meeting the increased demand on TEK's power interconnected system\. The institutional development impact is rated as negligible\. The project's sustainability is rated as uncertain because TEK's financial position remains precarious for two reasons: first, TEK is burdened by a large debt overhang incurred as a result of the inadequate tariff policy during the implementation of the project; second, the Government and TEK's commitment to improved efficiency in operations, investment planning and financial management has been weak\. The very concise PCR presents a clear picture of the project implementation and its results and lessons\. No audit is planned\. Attachment < II Z This document has a restricted distribution and may be used by recipients onLy in the performance of their officiaL duties\. Its contents may not otherwise be discLosed without WorLd Bank authorization\.   FOR OFFICIAL USE ONLY TURKEY FOURTH TEK TRANSMISSION PROJECT (LOAN 2586-TU) PROJECT COMPLETION REPORT TABLE OF CONTENTS Page Nos\. PREFACE \. i EVALUATION SUMMARY \. ii Part I 1\. Project Identity \. 1 2\. Background \. 1 3\. Project Objectives and Description \. 1 4\. Project Design and Organization \. 2 5\. Project Implementation \. 3 6\. Project Results \. 4 7\. Bank Performance \. 5 8\. Performance of the Borrower and Guarantor \. 5 9\. Consulting Services \. 6 10\. Findings and Lessons \. 6 Part II 7 Part III 1\. Related Bank Loans and Grant \. 8 2\. Project Timetable \. 9 3\. Loan Disbursements \. 9 4\. Project Implementation \. 9 5\. Project Costs and Financing \. 11 6\. Project Results \. 12 7\. Status of Covenants \. 14 8\. Use of Bank Resources \. 15 This document has a restricted distribution and may be used by recipients only in the performance or their official duties\. Its contents may not otherwise be disclosed without World Bank authorization\.   i TURKEY FOURTH TEK TRANSMISSION PROJECT (LOAN 2586-TU) PROJECT COMPLETION REPORT PREFACE This is the Project Completion Report (PCR) for the Fourth TEK Transmission Project in Turkey, for which Loan 2586-TU in the amount of US$142\.0 million was approved on June 18, 1985\. US$136\.8 million equivalent was disbursed from the loan which was closed on December 31, 1991, one year behind the original schedule with the last disbursement in May 1992\. The undisbursed balance of US$5\.2 million was cancelled in December 1992\. The PCR was prepared by the Industry & Energy Operations Division, Country Department I of the Europe & Central Asia Region (Preface, Evaluation Summary, Parts I and III)\. Part II of the PCR, to be prepared by the Borrower (Turkish Electricity Authority - TEK), has not yet been received\. The draft of Parts I and III have been submitted to TEK for comments in March 1993\. Preparation of this PCR is based, inter alia, on the Staff Appraisal Report; the President's Report; the Loan and Guarantee Agreements; supervision reports; project progress reports; correspondence between the Bank and the Borrower; and internal Bank memoranda\.   ii TURKEY FOURTH TEK TRANSMISSION PROJECT (LOAN 2586-TU) PROJECT COMPLETION REPORT EVALUATION SUMMARY Introduction 1\. A loan of US$142 million was made to the Turkish Electricity Authority (TEK) in 1985 for the development of Turkey's high voltage power transmission grid\. The project was the sixteenth Bank group operation in Turkey's power subsector, and was a continuation of the Bank's assistance, started in 1952, for developing the subsector and for increasing utilization of indigenous resources\. The loan was guaranteed by the Republic of Turkey\. Obiectives 2\. The project had two main objectives: (i) to provide major transmission links and transformer substations required to strengthen TEK's power system and to ensure a continued supply of electricity to the growing demand on TEK's interconnected systems; and (ii) to increase TEK's capabilities in network planning and in transmission lines and substation design through a training component\. Implementation Experience 3\. Proj ect implementation proceeded more slowly than originally planned\. The major transmission lines, with one exception, were commissioned some two years later than scheduled\. This was due in large measure to the delays in the power generation plant construction schedules, which required corresponding changes in connecting the high voltage transmission lines to the national grid\. 4\. The other factors affecting project implementation were institutional in nature: (i) TEK's slow and cumbersome bidding and contracting procedures and its reluctance to use standardized bid documents; (ii) the unsatisfactory local cost funding arrangements; and (iii) the institutional weakness of TEK\. 5\. TEK and the Government did not display the hoped for commitment to the institutional aspects of the project\. The training component was never implemented, partly because the Bank did not adequately supervise this component\. Thus, the objective of increasing TEK's technical capability was largely unrealized\. Results 6\. Of the project's two main objectives, only one was fulfilled\. Over 800 km of 380-kV transmission lines and the associated substations were added to  iii TEK's transmission network\. These facilities will enable TEK to service an ever and rapidly increasing electricity demand\. The delay in commissioning facilities was not overly detrimental to system performance, because in most cases the transmission lines were in place when needed to evacuate power from the generation plants\. As mentioned earlier, the institutional objectives of the project were not achieved\. 7\. The financial performance of TEK and its ability to function as a viable economic organization were major concerns\. Financial management continued to be poor, and financial targets were not met\. The major factors affecting TEK's financial performance were inadequate tariff adjustments, increased investments in generation plants due to non-realization of BOT schemes, and accelerating inflation and devaluation of the Turkish Lira against major currencies\. 8\. At project appraisal, the economic rate of return was estimated at 11\.2%\. An analysis of the project cost data reveals a more likely rate of return of 6\.14%, considerably less than originally forecast\. Sustainability 9\. From a technical standpoint, the project can be sustained\. TEK is capable of designing, constructing, and operating modern high-voltage transmission facilities that can reliably deliver electricity to distant demand centers\. TEK has also improved its in-house training facilities and is now able to provide training to its staff in most areas of network operations\. Findings and Lessons 10\. The immediately apparent causes of the problems that beset the project may be summarized as follows: (i) failure to use standardized bidding documents; (ii) lack of coordination among the TEK departments concerned; (iii) lack of local funds; (iv) lack of commitment on the part of TEK's management to the technical assistance objectives of the project; (v) lack of a strategy for the development and deployment of TEK's human resources\. 11\. The lessons to be learned from this lending operation are that project implementation and institution building efforts will not be successful unless the borrower takes charge and there is a firm and continuing commitment on the part of both the borrower and the Government to the agreed goals\. To become a more viable institution in the power subsector, TEK must begin to function more independently from the Government and must conduct its operations on a more commercial and competitive basis\. 12\. The Bank should have worked more closely with the Borrower in the initial project phase to develop a coherent and consistent procurement plan, including standard bidding documents, and should have relied on upfront actions given the less than satisfactory progress of the then ongoing TEK Transmission III Project\.  PART I 1\. Project Identity Project Name Fourth TEK Transmission Project Loan No\. 2586-TU RVP Unit Europe & Central Asia Region Country Turkey Sector Energy Subsector Power Borrower Turkish Electricity Authority (TEK) Guarantor : Republic of Turkey 2\. Background 2\.01 In every year from 1971 through Project Appraisal in 1985, electricity supply was insufficient to meet demand, resulting in high costs to the economy, as imports increased and supply interruptions became more frequent\. During the Five Year Plan of 1985-89, priority was to be given to domestic sources of energy, especially hydro and lignite, in the country's generation expansion program\. The salient feature of the Turkish electricity system is that the largest load centers are located at considerable distances from the main indigenous energy resources of hydro and lignite\. As a result, TEK has had to pay special attention to the development and construction of a high-voltage transmission grid\. 2\.02 Implementation of a least-cost, long-term construction program for the 380-kV transmission grid began in 1974, which was updated regularly to take account of changes in TEK's load growth and generation system requirements\. The Fourth TEK Transmission Project was to be a continuation of the then on-going Third Transmission Project (Loan 2322-TU), constituting the fourth phase of development of the 380-kV transmission network, covering the period 1986-1990\. 3\. Project Objectives and Description 3\.01 The project had two main objectives: (i) to provide major transmission links and transformer substations needed so as to strengthen further TEK's power system and to ensure a continued supply of electricity to the growing demand on TEK's interconnected system; and (ii) to increase TEK's capabilities in network planning and in transmission lines and substation design through a training component\. 3\.02 The project was part of TEK's then current 1986-1990 development plan and included the following components: (a) construction of about 800 km of 380-kV transmission lines to interconnect the Altinkaya and Hamitabat power stations to TEK's bulk supply system and provide two additional links for the Karakaya power station: (b) construction and/or extension of 380/154-kV transformer substations with total installed capacity of about 2,100 MVA;  -2- (c) supply, installation, and commissioning of equipment for the construction and extension of 154-kV substations with about 3,300 MVA of new installed capacity; (d) construction of a tower testing station for towers for transmission lines up to 380-kV, with possibility of extension to the 800-kV range; (e) supply of specialized line stringing equipment and vehicles to be used in the installation of transmission lines; (f) training and supply of devices, such as computer hardware/software to strengthen TEK's capabilities in network engineering and planning, and in transmission lines and substation design; and (g) consulting services to assist TEK in project implementation\. 3\.03 The total cost of the project, including physical and price contingencies, but excluding the interest during construction, was estimated at US$195 million equivalent, of which US$146 million was in foreign exchange\. Interest during construction was estimated at US$13 million equivalent, bringing the total financing required to US$208 million\. 3\.04 The Bank loan of US$142 million was to finance 89 percent of the foreign cost including the $13 million for interest during construction\. The remaining $66 million of total cost were to be covered by TEK's internal cash generation, materials from stock, and Government contributions ($17 million of the foreign exchange cost represent the cost of material and equipment supplied by TEK and the indirect foreign exchange cost for installation and erection to be undertaken by TEK or local contractors)\. 4\. Project Design and Organization 4\.01 Design\. At Project Appraisal, the preparation of detailed design and tender documents for procurement was underway and was expected to be completed by March 30, 1986\. As this project was viewed as an extension of the TEK III Transmission Project, the planning and design had been performed according to the criteria established during previous construction and operation of TEK's transmission system\. Installation and erection of project facilities was to commence in mid-1986, with the project scheduled for completion by June 30, 1990\. 4\.02 Acquisition of rights-of-way for the transmission lines was also underway at Project Appraisal, whereas land acquisition for the new substations had not yet started\. The land acquisition schedule agreed to by TEK and the Bank during negotiations called for all transmission line land acquisition to be completed by September 30, 1986, and at least 50% of the substation land acquisition to be completed by June 30, 1986\. 4\.03 Organization\. As implementing agency for the project, TEK planned to use essentially the same organizational structure that was used for the TEK III Transmission Project\. ELTEM-TEK, a private local engineering consulting firm, would be retained to act as project manager, providing assistance in engineering, project management and coordination, and other technical and administrative services\. The use of ELTEM-TEK was consistent with the condition of effectiveness specified in Article 7\.01 of the Loan Agreement, namely, that engineering consultants must be engaged\. ELTEM-TEK would hire foreign  - 3 - consultants, whenever needed, to assist its own personnel\. The consulting assistance was estimated at 60 man-months, for both ELTEM-TEK and any foreign consultants\. 4\.04 Procurement\. The goods and services to be procured for the project were initially grouped into 10 contract packages for the transmission lines component and into 11 contract packages for the substations component\. The proposed procurement plan called for all contracts for the lines component to awarded by the end of 1986 and all contracts for the substations component to be awarded by the end of May 1987\. By following this schedule project completion should have been achievable by mid-year 1990, as originally planned\. 4\.05 Training\. Training was an important project component to complement the training and manpower development activities under the ongoing TEK Transmission III Project\. At least 90 individuals were to participate with the aim of improving TEK's capabilities in network engineering and planning, and in transmission lines and substations design\. A detailed staff training plan was to be submitted to the Bank no later than June 30, 1986\. 5\. Project Implementation 5\.01 Implementation of the project proceeded more slowly than expected at appraisal\. Through the first four years of the project, disbursements were only 25Z of the planned disbursement curve\. Although the loan closing was only extended by one year, project completion was actually two years later than scheduled\. 5\.02 Land acquisition proceeded more slowly than scheduled because of the governmental approval process, changes in routing and changes in project scope, as well as construction delays\. However, land acquisition was not the main contributing factor to overall project slippage\. Procurement proved to be the biggest obstacle to achieving the project schedule\. 5\.03 At Appraisal it was felt that the design and bid specification preparation for the agreed 21 contract packages was well in-hand, and that the schedule was achievable\. The completion of the preparation of the procurement packages, however, took longer than planned, and this jeopardized the implementation of an otherwise well conceived procurement plan\. 5\.04 The schedule slipped by two years for both the transmission lines and substations components\. A further complication was the vacillation over contracting approach\. Changes in power generation plant construction schedules, due to disappointing experiences with new power plants under BOT arrangements, inevitably resulted in changes to transmission line connection schedules\. Faced with difficulties in implementation of some of the transmission lines on schedule due to the major reorganization of TEK in late-1987 as well as the pressure to complete the ongoing construction of power plants, TEK decided to use the turn- key approach to accelerate implementation\. With the Bank's assistance, TEK prepared standard bidding documents for turn-key procurement of lines and substations in early 1988\. However, towards the end of 1988, TEK decided to use multiple contracts instead of turn-key contracts, largely due to pressure from domestic contractors because domestic preference of 15% was not allowed on turn- key contracts\.  - 4 - 5\.05 In most Bank projects in Turkey, institutional strengthening or training is an important component\. The training component for the TEK IV Transmission Project was to involve at least 90 individuals in network engineering and planning and in transmission lines and substations design\. Although a training program was developed, the actual training was never implemented\. Causes for this include TEK's general lack of commitment to training and human resource development and the overstretching of TEK's management with day-to-day operations\. Inadequate supervision of this component by the Bank contributed to the failure of this component of the project\. 6\. Proiect Results 6\.01 Although the overall project was completed well behind schedule, the construction of the physical facilities can be considered a success\. Apart from the schedule delay, the transmission lines and substations were designed and constructed with a minimum of technical problems\. Over 800 km of 380-kV transmission lines were added to TEK's transmission network\. The associated substations will facilitate electricity distribution to an ever-growing demand\. 6\.02 Out of the four main transmission lines constructed under the project, three are located in remote and relatively sparsely inhabited areas\. Two lines (Karakaya - Osmaniye and Karakaya - Diyarbakir) in the east and one line (Altinkaya - Carsamba) in the Black Sea coast helped transmit power generated from Ataturk, Karakaya and Altinkaya hydropower plants reducing the use of other fuels\. The fourth line (Hamitabat - Alibeykoy) in the northwest enabled transmission of power generated from the new natural gas power station in Hamitabat\. Thus, the project resulted in positive rather than negative environmental impact\. Very limited resettlement resulted from the construction of the lines due to their location\. 6\.03 The institutional objectives of the project, however, were not achieved\. The training program designed to increase TEK's technical and managerial capability was never implemented\. This led to deterioration of TEK's effectiveness and of its financial situation\. The financial performance of TEK and its ability to function as a viable economic organization were major concerns\. Financial management of the operation continued to be poor\. Although accounts receivable collection was improved, the progress was really minimal and targets were not met\. The target ratio 1\.0 for current assets to current liabilities was not met during the life of the loan\. TEK was unable to produce funds from internal sources equal to 35% of the average incurred capital expenditures during the life of the loan\. Inadequate tariff adjustments coupled with the accelerating inflation and devaluation of the Turkish Lira against major currencies forced TEK into insolvency\. Consequently, the estimated 6\.14% rate of return on the (1986-91) time-slice of the power system's investment program of which the project was a part falls short of the 11\.2% rate of return estimated at appraisal\. Further the first audit in 1988 by a private auditor of international repute (Price Waterhouse) revealed major difficulties in TEK's accounts\. 6\.04 TEK and the Government began addressing these issues from 1991 in the context of the TEK Restructuring Project\. The measures include, inter alia, implementation of a comprehensive financial management improvement program in TEK and preparation annually of TEK's corporate performance plan mutually agreed between TEK and the Government\.  -5- 7\. Bank Performance 7\.01 The Bank was involved actively in the preparation as well as the design of the project\. The training of TEK's staff in network operations and management under the project was intended to complement the larger institutional building efforts initiated under the TEK Transmission III Project\. 7\.02 The Bank monitored the project implementation on a very regular basis\. However, even when loan disbursements were well below the planned disbursement curve and the project was behind schedule, the project was rated as having no problems\. During the early phase of implementation, the Bank should have been making recommendations that could have had positive results in the latter phases\. 7\.03 Procurement was a problem in the TEK Transmission III Project, and the procurement plan was not being achieved on the TEK IV project\. Yet it was not until early 1988, some three years into project implementation and one year after all contracts were to have been awarded, that the subject of standardized bid documents was raised\. In the PCR for the TEK III Project, TEK commented that seminars for "Procurement of Works" should be held in the early days of project implementation so that both the Bank and TEK management could better understand each other and the project requirements and restrictions\. 7\.04 Training was considered an important project component\. TEK did not attach much importance to training and was nine months late in submitting its initial training program for Bank review and approval\. However, the Bank was negligent in responding to TEK\. A formal response to TEK's proposed program was sent some eleven months after submittal, and only after five requests from TEK asking for comments\. The Bank must take care that its own internal procedures and staffing reorganizations do not impose untimely, and unacceptable, delays on the Borrower's attempts to maintain schedule 8\. Performance of the Borrower and Guarantor 8\.01 From a technical standpoint, the project was implemented satisfactorily by TEK and its consultant ELTEM-TEK\. Despite the two year delay in project completion, there was little adverse impact on TEK's ability to deliver power from its generation facilities to its load centers\. 8\.02 TEK and the Government did not display the hoped for commitment to the institutional aspects of the project\. Training, which can have positive long term impacts on the organization's capabilities, was never implemented\. With regard to financial aspects of TEK, hopes of improvement were raised from the significant increases to TEK's tariffs and capital prior to release of the second tranche of the Energy Sector Adjustment Loan (ESAL, Ln\.2856-TU) in March 1988\. However, the increase of TEK's tariffs and capital (which was not paid until 1989) was soon eroded by the onset of high inflation in 1988 and 1989\. 8\.03 The financial condition of TEK and the entire power sector was adversely affected by electricity tariffs which did not reflect the economic cost of supply, nor fully cover the financial obligations\. As a result, TEK was unable to meet the agreed financial performance targets at anytime during the project implementation\.  - 6 - 8\.04 Although tariffs are not fully under its direct control, TEK should have taken greater responsibility for those financial decisions that were within its purview, namely, preparation of reasonable investment programs, implementation of financial action plans to address deficiencies in accounts receivables and foreign debt service, and auditing of financial statements\. 9\. Consulting Services 9\.01 The engineering and project management services provided by ELTEM-TEK were satisfactory\. Through the TEK Transmission III Project, ELTEM-TEK gained extensive experience in design and construction supervision of EHV transmission systems\. Foreign consultants were not utilized on this project\. 10\. Findings and Lessons 10\.01 The immediately apparent causes of the problems that beset the project may be summarized as follows: (i) failure to use standardized bid documents; (ii) lack of coordination among the TEK departments concerned; (iii) lack of local funds; (iv) lack of commitment on the part of TEK's management to the technical assistance objectives of the project; (v) lack of a strategy for the development and deployment of TEK's human resources, and for overcoming the problem of freeing TEK's middle managers from their day-to-day tasks to enable them to devote time to improving the structure and organization of their jobs\. 10\.02 The more fundamental reasons for these deficiencies, however, must be sought in the lack of commitment by TEK's top and middle managers to the need to define and take charge of the institutional efforts needed to improve the performance of TEK as a whole and of its administration and financial management in particular\. This in turn may be attributed to TEK's lack of autonomy in establishing its personnel and financial strategies and, in particular, in recruiting and retaining qualified managers and staff on a competitive basis\. It is unlikely that these problems can be overcome without partial or total transfer of TEK's activities to one or several corporations functioning independently from the Government and in accordance with normal commercial principles within a framework of parameters defined by an independent regulatory authority\. 10\.03 The lessons to be learned from this lending operation are that project implementation and institution building efforts will not be successful unless the borrower takes charge and there is a firm and continuing commitment on the part of both the borrower and the Government to the agreed goals\. Also, Bank supervision needs to devote much more attention than was done for this project to the implementation not only of the physical aspects of projects, but also of institution building components\. 10\.04 The Bank should have worked more closely with the Borrower in the initial project phase to develop a coherent and consistent project procurement plan and to develop concise and complete bidding documents, either as standardized bidding documents if the project can be so structured or as individual bidding documents for major contract packages\. The Bank should also have relied more on upfront actions critical to project implementation and on measures such as TEK's annual corporate performance plan (introduced under the ongoing TEK Restructuring Project) requiring TEK's and the Government's acknowledgement of and agreement to their respective responsibilities and obligations towards achieving the targeted performance objectives\.  PROJECT COMPLETION REPORT TURKEY FOURTH TEK TRANSMISSION PROJECT (LOAN 2586-TU) PART II - PROJECT REVIEW FROM THE BORROWER'S PERSPECTIVE No comments were received from the Borrower\.  PART III 1\. Related Bank Loans and Grant Title Purpose Year Status Comments T/A Grant Assistance in reorganizing 1967 Complete Turkey's power industry\. 568-TU Keban 380-kV transmission lines\. 1968 Complete PPAR issued Transmission Nov\. 1981\. 1194-TU TEK Construction of substations 1976 Completed in PCR issued Transmission II and transmission lines, as June 1984 Oct\. 1984\. well as training of TEK staff against Institu- in the design and operation estimated tional of the transmission system, date of objectives and tariff, manpower, and June 1979\. partially power system studies\. achieved\. 1844-TU Construction of hydro dam 1981 Completed in PCR issued Karakaya and 6x300 MW power station\. Feb\. 1989 Dec\. 1991\. against estimated date of Dec\. 1986\. 2322-TU TEK Construction of 1,500 km 1983 Completed in PCR issued Transmission III of 380-kV transmission lines Sept\. 1989 May 1990\. to interconnect various power against Institu- stations to TEK's bulk supply estimated tional system; continue institution date of objectives building activities initiated Dec\. 1986\. only under previous Bank projects partially in the sector\. achieved\. 2602-TU Power Upgrading and improvement 1985 Expected to be System Operations of the efficiency and completed by Assistance availability of TEK's September 1993\. Project electric power facilities\. 2856-TU ESAL Assistance in carrying out 1987 Expected to be an energy sector adjustment completed by program\. Sept\. 30, 1993\. 3345-TU TEK Corporate restructuring and 1991 In progress\. Restructuring implementation of a least- cost investment program for the power subsector in both the public and private sectors during 1990-94\.  -9- 2\. Project Timetable Item Date Planned Date Revised Actual Date Identification September 1984 Preparation Late 1984 Appraisal February 1985 Loan Negotiations Apr\. 30 - May 2, 1985 Board Approval June 18, 1985 Loan Signature June 27, 1985 Loan Effectiveness Sept\. 27, 1985 Oct\. 7, 1985 Project Completion June 30, 1990 Dec\. 31, 1991 Loan Closing Dec\. 31, 1990 Dec\. 7, 1990 Dec\. 31, 1991 3\. Loan Disbursements Cumulative Estimated and Actual Disbursements (US$ Millions) 1986 1987 1988 1989 1990 1991 1992 Appraisal Estimate 4\.4 25\.5 59\.6 92\.3 116\.4 142\.0 Actual 8\.5 10\.3 13\.4 23\.2 58\.8 127\.1 136\.8 Actual as % of Estimate - % 193% 40% 22% 25% 51% 90% 96% 4\. Proiect Implementation Original Actual Schedule Performance Detailed design/tender documents for procurement - Transmission lines March 30, 1986 June 30, 1988 - Substations January 1987 January 1989 Staff training program June 30, 1986 March 1987 - Submission of plan completed\. - Actual training program never implemented\. Land Acquisition - Transmission lines December 31, 1987 December 1987 - Substations (50%) June 30, 1986 - Substations (100%) September 30, 1986 May/June 1987 Commissioning of Facilities - Transmission lines - Karakaya-Osmaniye December 31, 1988 August 17, 1990 - Altinkaya-Carsamba December 31, 1987 November 1, 1990 - Hamitabat-Alibeykoy December 31, 1987 May 29, 1988 - Karakaya-Diyarbakir December 31, 1988 January 29, 1991  - 10 - - Substations - 380 kV - Adapazari (Extension) December 1991 - Balikesir (Extension) March 1992* - Adana (New) March 1992* - Diyarbakir (New) September 1991 - Gaziantep (New) December 1991 - Uzundere (New) March 1992* *Date to be confirmed by TEK  - 11 - 5\. Proiect Costs and Financing A\. PROJECT COSTS (USS MILLIONS) APPRAISAL ESTIMATE ACTUAL Local For\. Total Local For\. Total A\. 380-kV Transmission Lines Karakaya-Osmaniye 7\.6 21\.1 28\.7 15\.4 36\.4 51\.8 Altinkaya-Carsamba 1\.7 4\.2 5\.9 4\.1 9\.6 13\.7 Hamitabat-Alibeykoy 3\.1 8\.8 11\.9 6\.6 15\.0 21\.6 Karakaya-Diyarbakir 1\.5 6\.0 7\.5 4\.3 9\.5 13\.8 Other Connections for New 380-kV Substations 0\.7 2\.0 2\.7 0\.9 0\.9 1\.8 Tower Testing Station 2\.0 2\.5 4\.5 --- --- --- Line Stringing Equipment - 4\.5 4\.5 Total - Component A 16\.6 49\.1 65\.7 31\.3 71\.4 102\.7 B\. Substations Component 380/154-kV Substations 4\.0 20\.5 24\.5 3\.7 14\.6 18\.3 154/30-kV Substations 10\.7 26\.7 37\.4 44\.3 72\.4 116\.7 Total - Component B 14\.7 47\.2 61\.9 48\.0 87\.0 135\.0 C\. Other Computer Hardware/Software 0\.1 2\.2 2\.3 --- --- --- TEK Eng/Adm for A+B 1\.7 - 1\.7 15\.0 --- 15\.0 Consulting Services for A+B 0\.2 0\.3 0\.5 0\.6 1\.9 2\.5 Training 0\.3 0\.7 1\.Q - --- Total - Component C 2\.3 3\.2 5\.5 15\.6 1\.9 17\.5 D\. TOTAL PROJECT COST Base Cost: Components A+B+C 33\.6 99\.5 133\.1 94\.9 160\.3 255\.2 Physical Contingencies 3\.4 9\.9 13\.3 0\.0 0\.0 0\.0 Price Contingencies 12\.0 36,6 48\.6 0\.O O\.0 O\.O TOTAL PROJECT COST 49\.0 146\.0 195\.0 94\.9 160\.3 255\.2 Interest During Construction --- 13\.0 13\.0 --- 13\.0 13\.0 TOTAL FINANCING 49\.0 1590\. 208\.0 94\.9 173\.3 268\.2  - 12 - B\. PROJECT FINANCING (US$ MILLION) Planned - Loan Agreement Final - As Implemented Local Foreign Total Local Foreign Total IBRD --- 142\.0 142\.0 --- 136\.8 136\.8 TEK/Covt 49\.0 17\.0 66\.0 94\.9 36\.5 131\.4 Total 49\.0 159\.0 208\. 94\.9 173\.3 2682\. 6\. Project Results A\. Direct Benefits New physical facilities enabled TEK to evacuate power from new generating plants to the areas of ever increasing demand\. Over 800 km of 380-kV transmission lines were added to the TEK system\. The increase in substation capacity supported power transmission and provided more reliable interconnection capability\. B\. Economic Impact Appraisal Actual Estimate (At Final Development) Economic Rate of Return 11\.2% 6\.14% Underlying Assumptions Capital Expenditure Actual expenditures for the 1986-91 period for the power system (DSI and TEK)\. Deflators Based on wholesale price index from the International Financial Statistics (IMF)\. Electricity Sales Actual for 1986-91 period; estimated for 1992 and TEK's forecast from 1993 onwards\. Electricity Prices Actual for 1986-92 period with the 1992 price expressed in 1991 prices and maintained thereafter\. Revenues and Costs Incremental revenues based on electricity sales compared with 1986 base sales at prices shown above\. Incremental fuel costs based on actual costs with 1986 base\. O&M costs assumed at 2% of capital expenditure\.  T U R K E Y TEK TRANSMISSION IV PROJECT I I I ~ ISALES IINCREMEN\.IELECTRIC\.IINCREMEN\.I FUEL INC\.FUEL O&H INC\.O&M TOTAL INCIPV OF NET |YEAR |POUER SYSTEM INVESTMT\.(TL b) IDEFLATORSI (NET) SALE I PRICE REVENUE COST \. COST \. COST \. COST \. COST BENEFIT I I DSI I TEK \. TOTAL I I (GWh) I (GWh) I(TL/kWh) I (TL b) I (TL b) \. (TL b) \. (TL b) \. (TL b) \. (TL b) I (TL b) 1 1986 384\.4 \. 683\.2 \. 1067\.6 0\.11602 30051\.0 0\.0 43\.0 0\.00 365\.00 \. 0\.0 \. 21\.4 \. 0\.0 \. 0\.0 -9201\.5 2 1987 648\.8 \. 1126\.6 \. 1775\.3 0\.15319 33917\.0 3866\.0 47\.6 184\.18 353\.00 \. -12\.0 \. 35\.5 \. 14\.2 \. 2\.2 -10401\.2 3 1988 922\.2 \. 2454\.2 \. 3376\.4 0\.257m 36787\.0 6736\.0 71\.4 481\.09 395\.00 \. 30\.0 \. 67\.5 \. 46\.2 \. 76\.2 -11529\.3 4 1989 1170\.0 \. 2832\.0 4002\.0 0\.42265 41058\.0 11007\.0 100\.3 1104\.11 1118\.00 \. 753\.0 \. 80\.0 \. 58\.7 \. 811\.7 -8776\.9 5 1990 1537\.7 \. 2776\.4 \. 4314\.1 0\.64392 43997\.0 13946\.0 151\.5 2112\.82 1198\.03 \. 833\.0 \. 86\.3 \. 64\.9 \. 898\.0 -4813\.1 6 1991 2832\.8 \. 4636\.8 \. 7469\.6 1\.00000 47852\.0 17801\.0 254\.6 4532\.13 1303\.00 \. 938\.0 \. 149\.4 \. 128\.0 \. 1066\.0 -4003\.5 7 1992 \. \. 1\.00000 52943\.0 22892\.0 291\.2 6666\.15 1441\.63 \. 1076\.6 \. 160\.1 \. 138\.7 \. 1215\.4 5450\.8 8 1993 \. \. 1\.00000 58576\.0 22892\.0 291\.2 6666\.15 1595\.01 \. 1076\.6 \. 174\.1 \. 138\.7 \. 1215\.4 5450\.8 9 1994 \. \. 1\.00000 64809\.0 22892\.0 291\.2 6666\.15 1764\.73 \. 1076\.6 \. 192\.6 \. 138\.7 \. 1215\.4 5450\.8 10 1995 \. \. 1\.00000 71705\.0 22892\.0 291\.2 6666\.15 1952\.51 \. 1076\.6 \. 213\.1 \. 138\.7 \. 1215\.4 5450\.8 11 1996 \. \. 1\.00000 79334\.0 22892\.0 291\.2 6666\.15 2160\.25 \. 1076\.6 \. 235\.8 \. 138\.7 \. 1215\.4 5450\.8 12 1997 \. \. 1\.00000 87775\.0 22892\.0 291\.2 6666\.15 2390\.09 \. 1076\.6 \. 260\.9 \. 138\.7 \. 1215\.4 5450\.8 13 1998 \. \. 1\.00000 97114\.0 22892\.0 291\.2 6666\.15 2644\.39 \. 1076\.6 \. 288\.7 \. 138\.7 \. 1215\.4 5450\.8 14 1999 1\.00000 107447\.0 22892\.0 291\.2 6666\.15 2925\.76 \. 1076\.6 \. 319\.4 \. 138\.7 \. 1215\.4 5450\.8 15 2000 \. \. 1\.00000 118879\.4 22892\.0 291\.2 6666\.15 3237\.06 \. 1076\.6 \. 353\.4 \. 138\.7 \. 1215\.4 5450\.8 16 2001 \. \. 1\.00000 131528\.3 22892\.0 291\.2 6666\.15 3581\.49 \. 1076\.6 \. 391\.0 \. 138\.7 \. 1215\.4 5450\.8 17 2002 \. 1\.00000 145523\.0 22892\.0 291\.2 6666\.15 3962\.56 \. 1076\.6 \. 432\.5 \. 138\.7 \. 1215\.4 5450\.8 18 2003 \. \. 1\.00000 161006\.8 22892\.0 291\.2 6666\.15 4384\.18 \. 1076\.6 \. 478\.6 \. 138\.7 \. 1215\.4 5450\.8 19 2004 \. \. 1\.00000 178138\.0 22892\.0 291\.2 6666\.15 4850\.66 \. 1076\.6 \. 529\.5 \. 138\.7 \. 1215\.4 5450\.8 20 2005 \. \. 1\.00000 197092\.0 22892\.0 291\.2 6666\.15 5366\.77 \. 1076\.6 \. 585\.8 \. 138\.7 \. 1215\.4 5450\.8 21 2006 \. \. 1\.00000 218062\.7 22892\.0 291\.2 6666\.15 5937\.80 \. 1076\.6 \. 648\.2 \. 138\.7 \. 1215\.4 5450\.8 22 2007 \. \. 1\.00000 241264\.8 22892\.0 291\.2 6666\.15 6569\.58 \. 1076\.6 \. 717\.1 \. 138\.7 \. 1215\.4 5450\.8 23 2008 \. \. 1\.00000 266935\.5 22892\.0 291\.2 6666\.15 7268\.59 \. 1076\.6 \. 793\.4 \. 138\.7 \. 1215\.4 5450\.8 24 2009 \. \. 1\.00000 295337\.6 22892\.0 291\.2 6666\.15 8041\.98 \. 1076\.6 \. 877\.9 \. 138\.7 \. 1215\.4 5450\.8 ERR = 6\.14X  - 14 - 7\. Status of Covenants Loan Deadline Agreement Subiect for Compliance Status 3\.01 Submit to the Bank a detailed staff June 30, 1986 Program received training program, and implement this in March 1987\. program in accordance with an Trainrng program implementation schedule satisfactory never to the Bank\. implemented\. 3\.04 Review with the Bank the proposed October 31 Compliedwith\. annual investment program for the each year\. power subsector for the next succeeding year and the related financing plan, and the required investments and related financing plans for the next succeeding five years\. 3\.05 Completion of land acquisition Sept\. 30, 1986 Deadline mt met proceedings for the new 380-kV but delay did transmission lines and 154-kV not affect over- substations\. all project schedule\. 4\.01 Implement a Financial Action Plan Bill collection: including: necessary steps to improve improved, but collection of customer bills and targets not met\. foreign debt service recording and Foreign debt: management\. compliedwith\. 5\.01 Submit its audited annual financial Auditedstate- statements to the Bank no later than ments received, ten months after the close of FY85, but not within eight months after FY86, and five the specified months thereafter\. time period\. 5\.02 Maintain a ratio of current assets to Ratio not met current liabilities of not less than 1\.0\. during life of loan\. 5\.03 Produce funds from internal sources Not achieved equivalent to not less than 35% of the during life of annual average of the incurred capital loan\. expenditures for each Fiscal Year\. 5\.04 Maintain a fuel adjustment clause in its Partially electricity supply contacts and enforce compliedwith\. a provision that its charges will be increased automatically to take account of increases in its fuel costs\.  - 15 - 5\.04 Reflect all increases affecting bulk Partially (high voltage) tariffs, including fuel compliedwith\. cost adjustments, in retail (low voltage) tariffs\. 8\. Use of Bank Resources A\. Staff Inputs (Staff Weeks) Stage of Planned Revised Final Prolect Cycle HO Field HO Field HO + Field Comments Thru Appraisal 36\.3 Post-Appraisal 9\.7 thru Bd Approval Bd Approval 4\.9 thru Effectiveness Supervision 62\.6 Total 113\.5 B\. Missions Performance Stage of No\. of Days in Specialization Rating Types of Proiect Cycle Month/Year Persons Field Reference a/ Status b/ Problems Identification May 1980 Preparation Appraisal Jan/Feb 1985 4 24 Power EGR (2) ECON, FNA Supervision I\. October 1985 3 24 Power ECR, FNA 1 - Power EGR (PT) II\. March 1986 3 18 Power EGR, FNA (2) 1 III\. Jun/Jul 1986 2 24 Power EGR, FNA 1 - IV\. Oct/Nov 1986 4 33 Power EGR (2) 1 - FNA (2) V\. Mar/Apr 1987 2 27 Power EGR, FNA 1 - VI\. December 1987 5 13 Power ECR (2) 1 - FNA (2), ECON  - 16 - VII\. Jun/Jul 1988 4 24 Power EGR (2) 1 FNA (2) VIII\. November 1988 1 10 FNA IX\. December 1988 3 20 Power EGR (2), FNA 2 M, F X\. September 1989 2 16 Power EGR (2) 2 M, F XI\. August 1990 2 18 Power EGR (2) 2 M, F XII\. July 1991 2 17 Power EGR, ECON a/ Power EGR - Power Engineer k/ 1 - Problem-free ECON - Economist 2 - Moderate problems FNA - Financial Analyst 3 - Major problems NI - Not Indicated c/ M - Managerial T - Technical F - Financial NI - Not Indicated

APPROVAL

P002030

Document of The World Bank FOR OFFICIAL USE ONLY ex Report No\. 8672 PROJECT PERFORMANCE AUDIT REPORT NIGERIA IM0 OIL PALM PROJECT (LOAN 1191-UNI) AND RIVERS OIL PALM PROJECT (LOAN 1591-UNI) MAY 25, 1990 Operations Evaluation Department This document has a restricted distribution and may be used by recipients only In the performance of their officdl duties\. Its contents may not otherwise be disclosed without World Bank authorIdation\. WSITS AND MEASURES Unless otherwise stated all weights and measures used in this report are metric\. I metric ton (a ton) 2205 pounds (Ib) 1 hectare (ha) a 2\.47 acres (sc) 1 kilometer (km) = 0\.82 m 1l (m) 1 meter (0) 8\.28 feet (ft) 1 millimeter (mm) = 0\.64 Inch (in) FISCAL YEAR January 1 - December 31 EX01ANGE RATE Nigerian Pound End-of-Year Values Official Market Year USS/ 1975 1\.52 1\.12 1976 1\.52 1\.12 1977 1\.52 0\.74 1978 1\.52 0\.9 1979 1\.52 1\.02 1980 1\.52 1\.07 1981 1\.52 1\.07 1982 1\.52 0\.81 1988 1\.52 0\.24 1984 1\.52 0\.28 1985 1\.52 9\.27 1986 0\.8 0\.18 Source: Pick's Currency Yearbooks\. ABBREVIATIONS AND ACRONYMS STO a Back-to-Office Report ffa a free fatty acid ffb a fresh fruit bunches ISAR = Iwo State Staff Appraisal Report (Appraisal of Smallholder Oil Palm Project, East Central State, Nigeria) MEU = Tree Crops Monitoring and Evaluation Unit NEU a Nucleus Estate NIFOR = Nigerian Institute for Oil Palm Research OED a Operations Evaluation Department PCR a Project Completion Report PPAM = Project Performance Audit Memorandum PPAR a Project Performance Audit Report RSAR = Rivers State Staff Appraisal Report SA - Supplementary Annexes to the Nigerian Oil Palm Projects Appraisal Reports\. Report No\. 474-UNI SAP = Structural Adjustment Program SAR Staff Appraisal Report SMU a Smallholder Management Unit TSAR = Tree Crops Project Staff Appraisal Report FOR OWICIAL UM ONLY THE WORLD 8ANK Washington, D\.C\. 20433 U\.S"I\.A\. Ofce at Oisectrneruoal Opwa vakatiAn May 25, 1990 MEMORANDUM TO THE EXECUTIVE DIRECTORS AND THE PRESIDENT SUBJECTs Project Performance Audit Report on Nigeria Io Oil Palm Project (Loan 1191-UNI) and Rivers Oil Palm Proiect (Loan 1591-UNI) Attached, for information, is a copy of a report entitled "Project Performance Audit Report on Nigerias Imo Oil Palm Project (Loan 1191-UNI) and Rivers Oil Palm Project (Loan 1591-UNI) prepared by the Operations Evaluation Department\. Attachment This document has a sustrcted distribution and may be used by recipients only in the performance of their ofcw duties\. Its contents may not otherwise be disclosed without World Bank authoriation\. FOR OffeIAL USE ONLY PROJECT PERFORMANCE AUDIT REPORT NIGERIA IMO OIL PALM PROJECT (LOAN 1191-UNI) AND RIVERS OIL PALM PROJECT (LOAN 1591-UNI) TABLE OF CONTENTS Page No\. Preface \. \. i Basie Data Sheets \. iii Evaluation Su~mary \. vii Introduction \. vii Objectivei \. vii Implementation Experience \. \. \. \. \. \. viii Results \.Viii Sustainability \. ix Lessons Learned \. \. 9 \.*\. ix 1\. BACKGROUND \. \. \. \.9\.**\. 1 Context \. \.0\. Objectives \. \.*\. 1 Design \.*\. \.********\. 3 Crop Choice \. 3 Smallholder Participation \. \. 4 Intercropping \. 5 Processing \.,\. \. \. \. 7 Processing Technology \. \. \. \. \. 7 Land Acquisition \. 10 Price Policy Committee \. 11 Smallholder Management Unit \. 11 Monitoring and Evaluation Unit \.*\. 11 Coconut Project Preparation \. 11 Follow-on Project \. 11 Design Faults \. \. \.**\. \.*\. \. 12 Financing Plan \. 12 Pre-Implementation Processing os\. \. 13 Board Concerns \. \. 14 II\. IMPLEMENTATION \.*\.**\. 15 General \. \. 15 Delayed Effectiveness \. \.9\. \. \. \. \. 15 Release of Funds \.***** \. **\.*\. \. 16 This document has a restricted distribution and may be used by recipients only in the performance of their official duties\. Its contents may not otherwise be disc~osed without World Bank authorization\. TABLE OF CONTENTS (Continued) Page No\. Delayed Seed Supply and Preferences to Estates \. 18 Kono-Cropping \. \. 18 Ghost Farmers \. \. \. 19 Estate Management \.4\. 20 Fruit Collection and Marketing \. 21 Supervision \. **\.***\. 24 III\. PROJECT OUTCOME *\. \. \.*\.****\. 26 Achievements \. 26 Land *\. \. \. 26 Estates 0\. 26 Non-Nucleus Estates \. 9\. 27 Service to Smallholders \.*\. 27 Lack of Cost Recovery \. \. 28 Institution Building \. 28 Economic Benefits \. 28 Bank Performance \. \. \. \. \. \. 29 Follow-on Project \. \. 30 Performance of OED \. 32 IV\. LESSONS AND FINDINGS \. \. \. 33 Borrower Responsibility for Preparation \. 33 Farming Systems* \. 33 Enclave Project \. 34 Smallholder Management Unit (SNU) \.**\. 34 Estate Profitability \. *\.0 \. \. \. \. \. 34 Sustainability of Estates \. \. \. 34 Institution Building \. \. \. 35 Land Acquisition \.*\. \. \. 35 Technical Assistance \. **\. 36 Bridging Loan \. \. 36 Sound Varietal Basis \. 36 Annexes 1: Alternative Processing Technologies \. 37 2: Economics of High Versus Low Technology Palm Oil Processing \. 42 3: Loan 1591: Rivers State: Delays in Board Presentation *\. 46 4: Comments from Risonpalm Limited \. 53 5: Coments from Tree Crops/Agricultural Projects Monitoring and Evaluation Unit \. \. \. \.****\. 55 TABLE OF CONTENTS (Continued) Page No\. Appendices 1\.1: Letter from Consultant dated January 19, 1990 \. 57 1\.2: Letter from Consultant dated March 5, 1990 \. 59 Text Tables 1: Comparison of Farmer Returns per ha - East Central State \. 3 2: Experimental Results from Interplanting of Oil Palm with Food Crops \.*\. 6 3: A Comparison of Processing Costs and Returns Per Ton of ffb Processed for Different Mill Types and Sizes \. 8 4: Project Financing \.*\. \. 12 5: Dates of Pre-Implementation Processing \. 13 6: Release of Funds to SMUs \.41\. 17 7: SMU and Wild FFB Deliveries to Risonpalm \. 24 8: ERRs and FRRs for Alternative Mill Capacities and Patterns of FFB Deliveries \. \. \. \. 31 Annex Tables 1\.1: Alternative Estimates of Oil Extraction Rates \. 40 1\.2: Oil Yields Obtained with Kramer Mills \. 41 1\.3: Regression Estimates of Oil Palm Yields \. 41 2\.1: Key Assumptions Used in Bonk Analysis of Alternative Processing Investments \. \. \. 42 MAPS 12590 IBRD 10965R IBRD 10967R IBRD PROJECT PERFORMANCE AUDIT REPORT NIGERIA IMO OIL PALM PROJECT (LOAN 1191-UNI) RIVERS OIL PALM PROJECT (LOAN 1591-UNI) PREFACE This is a Project Performance Audit Report (PPAR) of two Nigerian projects designed to support oil palm production by smallholders and estates, and for the processing of the resulting output in project financed estate mills\. Loan 1191 provided $19\.0 million for Imo State\. It was approved by the Board on June 17, 1975 and was closed in December 1986 having been fully disbursed\. Loan 1591 provided $30\.0 million for Rivers State\. It was approved by the Board on June 6, 1978 and was closed in December 1985 also fully disbursed\. The PPAR is based on a Project Completion Report (PCR) (Report No\. 7833, June 1988) prepared by Tree Crops Monitoring and Evaluation Unit (MEU) of the Ministry of Agriculture and N&tural Resources, of the Federal Government; and SOFINCO, consultants to the Risonpalm estate which was supported by the project, and its Evaluation Summary prepared by the West- ern Africa Agricultural Operations Department\. The PPAR has also examined the Staff Appraisal Reports and President's Reports, and Loan Agreements\. Correspondence with the Borrower and internal Bank memorandum on the proj- eat issues contained in Bank files have been consulted and relevant Bank staff have been interviewed\. An OED mission visited Nigeria in September 1989 and discussed project issues with MEU, Imo and Rivers State Ministries of Agriculture, Adapalm and Risonpalm (parastatals supported under the project) and SOFINCO\. Their kind cooperation and valuable assistance in the preparation of this report and gratefully acknowledged\. The PCR provides an excellent account and assessment of the proj- ects' principal achievements and difficulties\. The points discussed by the PPAR audit have been selected as likely to be of particular importance to the Bank in appraisal of similar smallholder and nucleus estate projects; and to governments in the design of such projects\. The major lessons involve the need to ensure that project inter- ventions are compatible with, or at least more profitable than, existing farming and processing systems\. From project preparation to audit Nigerian real wage rates first increased sharply reflecting the oil boom and then declined as oil revenues fell\. The result has been sharply changing prof- itability of capital-labor substitution over the life of the project; how- ever the basic wisdom of substituting the markedly more productive tenera species for dura within the Nigerian palm belt has remained evident despite these changes in real wages\. As of October 1989, the cost of borrowing for these projects can be estimated to be in the range 10\.6% to 13\.3%\. The draft PPAR was sent to the Borrower for comments\. The comments received from Risonpalm Limited are reproduced as Annex 4 and comments from the Tree Crops/Agricultural Projects Monitoring and Evaluation Unit are reproduced as Annex 5 to the PPAR\. - lft - PROJECT PERFRMANCE AUDIT REPORT KWIEIA Lme OIL PALM PROJECT (Li# 1191-UI)~ 94el Dat\. Sheet KEY PROJECT DATA AppraIsal Actual or Achal es Estimate Esmated % of Projet Cost Nre a million) 27\.7 27\.41 99 Loan Amount (US* alt Ilon) 19\.0 19\.0 Date of Board Approval 08/17/7 06/17176 Dat\. of Effctlvonmss 06/11/7 04/06/77 Closing Date 12/81/84 12/81/6- Economic Rate of Return (Z) 19\.7 6\.78 29 Nuber of Dlrect Beneflclarlies 2,Wo 66, 109 Cos f Funds - Curren5 0\. 18\.8 166 Cost of Funds - Const~nt % NA 7\.9 - D oeflated by Bark's Manufacred Unit Value ~ndex\. CUMULATIVE DISBURSEMENTS Y75 FY76 F77 FY78 Ff?# FYE FYOI FY8l FY88 !FY f FM FG FYW Apprasal Estimate (US* alitlon) 0\.2 1\.0 2\.1 8\.5 6\.0 9\.9 18\.0 18\.1 17\.5 19\.0 - - - A~hal (US*\.laMlen) - - - 1\.4 2\.4 4\.2 6\.0 6\.2 7\.0 8\.9 12\.4 16\.0 19\.0 Achal as 9 of Ee61latl - - - 40\.0 40\.0 42\.0 46\.0 41\.0 47\.8 05\.4 - - - Date of Final DIsbursment July 7, 1980 STAFF INPMTS\. (Staff Weeks) FY78 R74 FY7 FY7Z EY77 FZM FY79 FYCO FYOI FY$2 FYU Fe4 FY8 E [!§ To 11 Appralsal \.7 1\.8 2\.8 Ngo1\.tionm \.4 \.4 Supervlaton \.4 5\.8 9\.1 0\.4 8\.2 6\.0 11\.8 12\.4 6\.9 8\.7 6\.7 2\.9 8\.1 Other \.1 \.2 \.8 TOTAL \.7 \.1 2\.6 8\.8 9\.8 6\.4 8\.2 5\.8 11\.8 12\.4 0\.9 8\.7 5\.7 2\.9 86\.8 * Data from Time Recording System\. PCR estimated Prapprolsal u 27 Staff weeks Approtsel = 64 Staff weeks Nego1atlons u 4 Staff weeks\. - iv - MISSION DATA Dete Number of Staffdays Specializations Perfe nce Trend Types of (molyr) Persons in Field Represented */ Ratina l/ / Problems d Identification ?/ 11/72 Preappraleal 2/78 8 76\.8 a,b,c,d,*,f,g,h * - * Appraisal 11/73 8 89 a,bsc,d,e - * * Supervision 1 1/78 1 8 c - * Supervision 2 7/76 2 12 *,c 2 1 M, T Supervision 8 4/77 8 18 a,b,c 2 1 M, T Supervision 4 2/78 2 12 a,c 2 2 M, F, T Supervision 5 10/78 2 8 a,c 2 1 F Supervision 6 8/79 1 & a 2 1 * Supervision 7 11/79 1 4 a 2 2 F, M Supervision 8 4/80 1 7\.6 a 2 2 - Supervision 9 8/8 1 4\.7 a 2 2 - Supervision 10 11/80 3 12 asc 2 2 F, M Supervision 11 6/81 2 4 b,c 8 8 F, M Supervision 12 10/81 1 8 c 2 3 F, M Supervision 18 12/81 2 4 b,c - - - Supervision 14 5/82 2 a a,c 8 2 F Supervision 15 10/82 2 4 a,c 8 2 F Supervision 18 4/88 1 2 c 8 8 F Supervision 17 9/88 1 8 C 3 8 F, M, 0 Supervision 18 2/84 1 8 c 2 1 F, M, 0 Supervision 19 12/84 2 1s &,c 2 1 F, 0 Supervision 20 4/88 1 8 c 1 1 - * PCR estimates, do not agree with Staff Input estimates page ill\. OTHER PROJECT DATA Borrower - Federal Republic of Nigeria Executing Agency - Imo State Smaltholder Management Unit under the Itm State Ministry of Agriculture and Natural Resources Follow-on Project - Tree Crops Project Fiscal Year of Borrower - January-December a = Agriculturist; b = Economist; ca Financial Analyst; d = Road Engineer; e s Processing Engineer; f = Marketing Consultant; g = Estate Management Specialist; h = Geneticist / 1 a problem free or minor problems; 2 = moderate problems; 8 a major problems\. I/ 1 = Improving; 2 = stationary\. g/ F = Financial; M a Management; T a Technical; 0 = Other\. / No data available\. :Y New Form 590 In use that shows rating for overall status (Year 1985)\. - V - PROJECT PERFORMANCE AUDIT REPORT NIOERIA RIVERS OIL PALM PROJECT (LOAN 1691-UNI) Basic Data Sheet KEY PROJECT DATA Appraisal Actual or Actual as Estimate Estimated X of Project Cost (Nalra million) 54\.9 48\.6 90 Loan Amount (USS million) 89\.9 80\.9 1n Date of Board Approval 08/06/78 86/06/78 Date of Effectveness 10/28/78 07/10/79 Closing Date 12/81/85 12/31/86 - Economic Rate of Return (S) 16\.2 10\.6 29 Number of Direct Beneficiaries 85,0" 10,69 19 Cost of Funds - Current X 7\.5 1C\.G 141 Cost of Funds - Constant Xs NA 6\.8 - e Deflated by the Bank's Manufactured Unit Value Index\. CUMULATIVE DISBURSEMENTS FY79 FY8e FY81 FY82 FY83 FY84 FY85 FY86 FY87 AppraIsal Estimate (US$ mllion) 1\.0 8\.5 8\.5 18\.0 28\.5 89\.9 - - - Actual (US$ mll ion) - 8\.7 4\.6 9\.7 29\.1 25\.9 28\.8 29\.8 89\.9 Actual as X of Estimate - 16\.9 57\. 81\.0 86\.0 88\.9 - - - Date of Final Disbureeme' July 7, 1986 STAFF INPUTS* (Staff Weeks) FY7S FY76 FY77 FY78 FY79 FY89 FY81 FY82 FY88 FY84 FY85 FY8 Total Preapprael 2\.6 \.7 7\.7 11\.9 Appraisal 69\.8 18\.1 192\.4 Negotiations 8\.6 15\.4 19\.2 Supervision \.8 10\.7 5\.8 12\.8 8\.5 8\.1 6\.2 8\.1 2\.8 82\.8 Other \.6 \.7 \.2 1\.5 TOTAL 8\.2 \.7 191\.4 28\.9 10\.7 8\.8 12\.8 8\.5 8\.1 6\.2 8\.1 2\.8 196\.9 * Date from Time Recording System\. PCR estimates Preappraisal = a Staff weeks Appraisal a 69 Staff weeks Negotiations = 19 Staff weeks\. - V;1 - MISSION DATA Date Number of Staffdays Speciallastionq Perform nce Trend Types of (molyr1 Person\. In Fild Repreoented a/ Rat*in* g/ cL Probles d, Identificatlof - - - - - Preappraleal 1- * - - - - Appraisal 10/78 6 159* a,b$c#d$* * * Supervision 1 10/78 2 14* *,c 2 2 0, F Supervision 2 2/79 1 6 a 2 2 F, M Supervision 8 11/79 1 5 a 2 1 M Supervision 4 8/80 1 5 a 1 1 Supervision 5 6/8 1 5 a 1 2 Supervision 6 11/09 2 8 *,c 1 2 Supervision 7 8/81 2 4 bc 8 2 F, T Supervision 8 11/81 2 4 b,c - - Supervision 9 2/82 1 8 b - - Supervision 10 6/82 2 4 *,c 8 8 F, M, 0 Supervision 11 10/82 2 6 a,c 8 2(SMU-8)9 F, M, 0 Supervision 12 4/88 1 3 c 8 2(SUU-8) F, 9, 0 Supervision 18 9/88 1 2 c 2(SMU-8) \.(SMU-8) F, M Supervision 14 2/84 1 8 c 2(SMU-) 2(SMU-8) F, M Supervision 15 11/84 2 12 ac 1(SMU-8) 1(SMU-8) 9(NEU),FT(SMU) Supervision 18 4/86 1 1 c 1(NEU ONLY)h 1(NEU) * PCR estimates, do not agree with Staff Input estimates, page v\. OTHER PROJECT DATA Borrower - Federal Republic of Nigeria Executing Agency - Smallholder Management Unit under the Rivers State Ministry of Agriculture and Natural Resources, and Risonpalm Limited Follow-on Project - Tree Crops Project Fiscal Year of Borrower - January-December g/ a Agriculturist; b a Economist; ca Financial Analyst; d a Rood Engineer; ea Mill Engineer\. / I a problem free or minor problems; 2 a moderate problems; a = major problems\. I/ 1 improving; 2 a stationary\. \./ F a Financial; M a Management T a Technical; 0 a Other\. g/ The project was identified by the Federal Department of Agriculture\. jf Preparation was done by SOCFINCO Limited, a consultant firm hired by the Borrower\. g/ Sallholder Management Unit rated '3'\. g/ Nucleus Estate only\. - vil - PROJECT PERFORMANCE AUDIT REPORT NIGERIA IMO OIL PALM PROJECT (LOAN 1191-UNI) RIVERS OIL PALM PROJECT (LOAN 1591-UNI) EVALUATION SUMMARY Introduction 1\. The Imo and Rivers State Smallholder/Estate Oil Palm Projects were two of four similar Nigerian projects appraised and funded in the period 1975 to 1978\. The Imo State Project was prepared by the Bank, appraised and presented to the Board jointly with oil palm projects for Bendel and Ondo States, (Loans 1183-UNI and 1192-UNI)\. These latter two projects were less successful and were cancelled 30 months ahead of their intended closing dates\. A joint PPAR (OED Report No\. 4783) for these two cancelled projects was submitted to the Board in November 1983\. The Rivers State Project was appraised in 1976 and presented to the Board in 1978\. 2\. The audit report is arranged in parallel with the project cycle of preparation, appraisal an\.d implementation, rather than by "theme"\. How- ever, the reader will find that a number of themes show themselves; unappraised and unsatisfactory land acquisition; and "enclave mentality*, which ignored the existing palm oil producers and processors; inappropriate cultural and processing technology; lack of adjustment to inadequate local funding; and, loss of financial control of the smallholder loan program in Rivers State\. Obiectives 3\. The two projects shared the common objective of ameliorating a projected shortfall in domestic palm oil production relative to consumption of about 275,000 tons by 1985\. This involved replacing sparse "wild" groves of dura palms with pure stands of the improved tenera species\. Tenera is a dwarf palm variety that yields six times the palm oil per hectare of the older variety, and is easier to harvest (para\. 1\.05)\. The project was to plant 10,000 hectares of estate and 10,000 hectares of smallholder palm in Rivers States, and 16,000 hectares of smallholder palm in Imo State; 400 km of roads were to be upgraded in Rivers State and 946 km in Imo; a 20 ton/hour mill, and addition of a further 10 ton/hour capacity for an existing mill were to be supported in Imo State, and a 20 ton/hour mill was to be constructed in Rivers State\. The projects were also to support the establishment of Smallholder Management Units (SMUs) in the State Ministries of Agriculture\. Assistance to the Nigerian Institute for Oil Palm Research (NIFOR) and the Tree Crops Monitoring and Evaluation - viii - Unit (MEU) of the Federal Ministry of Agriculture, were provided by the two other oil palm projects approved by the Board in conjunction with the Imo State project\. The Rivers State project also provided for the establish- ment of 120 ha coconut seed garden and feasibility studies for a coconut project and a follow on oil palm project\. Implementation Experience 4\. There were problems in implementation, as suggested by the cancellation of two sister projects (para\. 1)\. These stemmed in large measure from two design faults (a) the insistence that smallholders not inter-plant their young palms with food crops (para\. 1\.12 to 1\.16), and (b) the assumption that all smallholder production under the project would be sold for processing in the project mills (para\. 1\.17)\. In addition, the separation of production support (in the SMU), from marketing and processing (in the nucleus estate) led to not always constructive tension between these two organizations (para\. 4\.03)\. This fundamental problem was complicated by disbursement delays in Federal and State funds, (para\. 2\.08) and difficulty in acquiring the large block of land required for the estate (para\. 1\.23 to 1\.24)\. 5\. Rejection by the Bank's project preparation and appraisal teams (the same project officer led the preparation and appraisal mission for the Imo State project) of the Nigerian practice of interplanting food crops for three years amongst the young palms led to very slow recruitment of small- holders and, in the case of Rivers State, to the loss of financial control over the distribution of credit (para\. 2\.13 to 2\.15)\. 6\. Under current price ratios (September 1989) there is also some question as to whether the right milling technology was selected (para\. 1\.22)\. These problems should not be allowed to detract from the real achievements of the projects\. Results 7\. The projects were successful in getting 24,223 hectares of palm planted1 (with, in the case of Rivers State, a very important demonstra- tion effect), 30 tons/hour of milling capacity was installed, 384 km of roads were improved, the Imo State SMU continues to provides services to smallholders and the MEU (not directly supported by the present projects, but part of the same investment portfolio) has emerged as a very impressive monitoring unit which is performing well under difficult conditions (paras\. 3\.11 and 4\.06)\. Early cancellation of the projects support to NIFOR and MEU resulted in withdrawal of Sank support for these institutions (Annex 5, para\. 2 and 10)\. Little came of the coconut nursery or study\. 8\. The overall economic rates of return (ERRs) of the projects have been re-estimated in the PCR as 5\.78% and 10\.0% for Imo and Rivers States respectively;tas compared to 19\.7% and 15\.2% estimated at appraisal\. In 1 More precisely this was the area for which inputs and grants were disbursed (para\. 2\.14)\. - ix- the audit's view, these estimates are overly optimistic since they treat land as a free resource, do not take account of private sector milling capacity, and assume that none of the smallholder palms would have been planted in the 'without project situation" (para\. 3\.13)\. Under more reasonable assumptions about the without project scenario, present value of the projects is almost certainly negative (para\. 3\.16)\. However, if the "without project" scenario were to assume that the estates would have been established, but would have used the lower level of management endemic on other parastatal estates, a higher ERR could be infert (para\. 3\.16)\. 9\. The projects have, however, contributed a large but unquantifiable benefit, in keeping a nucleus of people in the public sector interested in promoting the value of oil palm\. Under the government's Structural Adjust- ment Program (SAP) the devaluation of the naira and ban on imports of cooking oil, has made palm oil highly profitable\. The rapidity of small- holder response to these changed price signals can in part be attributed to the efforts by the SMUs to promote palm production in the earlier, and less profitable, period\. Needless to say, this benefit could have been obtained at much lower cost\. Sustainability 10\. At present, SAP, price ratios, there is no doubt as to the sustainability of the palm plantations (smallholder and estate)\. Indeed, private planting and construction of matching processing capacity are proceeding rapidly without project-type subsidies\. There is some question as to the profitability of the two 5-ton/hour mills constructed for Adapalm in Imo State (para\. 4\.04)\. An active program of inservice training for management by the estates, would help ensure their sustainability (para\. 3\.04)\. Lessons Learned 11\. Insofar as there are identifiable design faults (e\.g\., the refusal to allow inter-cropping with food crops during establishment an enclave mentality and possibly an overly capital intensive milling technology), the overlap in staffing of the preparation and appraisal missions (para\. 4\.01) may have jeopardized a truly independent appraisal of the project proposal\. 12\. The Imo State Staff Appraisal Report (ISAR) (paras\. 1\.07 and 1\.08) describes cola nuts and some annual crops as being more profitable than palm oil\. This suggests that there may have been an error in project selection\. Current price ratios may have moved in favor of oil palm (see Annex 5, para\. 5)\. 13\. Project design did not take account of existing cultural practices for oil palm, and clearly imposed a significantly smaller income stream than inter-cropping\. This indicates the need (a) to properly understand existing cropping patterns before proposing changes, and (b) properly budgeting such changes to ensure that they are expected to yield a higher present value than existing practice, (paras\. 1\.07 to 1\.09), always allowing an appropriate discount for risk\. - x - 14\. Whilst the selected milling technology was justified in the SAR analysis, subsequent price changes and reports commissioned by the Bank suggest that a more economically efficient, low technology, milling option could have been selected, (para\. 1\.22)\. 15\. The ISAR was in error in assuming that all smallholder production resulting from the project would be sold to the project mills\. In fact there is a lively market in fresh fruit bunches (ffb) with many competing small processors, and hence no expectation that project smallholders would choose to supply the estate mills, (para\. 1\.10)\. On the other hand, estate mills have attracted considerable volumes of "wild* durs ffb, not planted by the project (paras\. 2\.23 to 2\.26)\. This was not foreseen by the Staff Appraisal Report (SAR), and reflects relative over-pricing of dura (or under-pricing of smallholder tenera) by the mills, (para\. 3\.05)\. The estates have, in a real sense, emerged as "non-nucleus" estates\. 16\. Finally, and perhaps most importantly, where a project is promoting a major technological improvement (making 2\.6 tons of palm oil grow where only 0\.4 tons grew before), it is difficult for other design errors to overcome the basic benefits of the project (para\. 1\.05)\. 17\. Whilst this PPAR is somewhat critical of some aspects of the project design, the documentation in the SAR and the supplement of the basis for design decisions is excellent\. The SARs and supplement could form a model for proper documentation of the appraisal of an agricultural project\. PROJECT PERFORMANCE AUDIT REPORT NIGERIA IMO OIL PALM PROJECT (LOAN 1191-UNI) RIVERS OIL PALM PROJECT (LOAN 1591-UNI) I\. BACKGROUND \. it is obvious that Nigeria, in view of her present resources, does not need Bank money\. However, \. there is a clear need for technical assistance which should provide sufficient justification for continued Bank lending\." Minutes of Meeting on Bank Role in Oil Palm Financing may 24, 1974 Context 1\.01 The first Bank Group loan for agricultural development in Nigeria was the Western State Cocoa Project (Loan 764-UNI) in 1971 which was followed by a Second Cocoa Project (Loan 1045-UNI) in 1974\. Food production was assisted by a rice project and three agricultural development projects (Funtua, Gusan and Gombe) which were approved by the Board in December 1974\. Three palm oil projects were identified in November 1972, prepared by a Bank mission in 1973, and appraised by the Bank mission in December 1974\.1 These projects covered the then Western, Mid-Western and East Central States\. The Western and Mid-Western projects were cancelled prior to completion\.2 The East Central State project was renamed Imo State, following the creation of additional states in 1976\. The Rivers Project was appraised in November 1977, on the basis of a feasibility study carried out for Government by a consulting company\. 1\.02 The projects were identified in the context of a projection that production would fall short of domestic demand by 825,000 tons of palm oil in 1985; and in the aftermath of the civil war, which had resulted in major destruction of oil palms\. Objectives 1\.03 Both projects were conceived as first phases of a multi-phase investment program in oil palm\. Both projects had as their centerpiece, a 1 The preparation and appraisal missions had the same leader, who also led the appraisal team for the Rivers State Palm Oil Project\. 2 See PPAR, Report No\. 4783\. - 2 - substantial expansion of smallholder palm production (16,000 ha in Imo State and 10,000 ha in Rivers State)\. The new plantings were to be in pure stands of hybrid, high-yielding tenera palms\. The increased output was to be collected and processed through large nucleus estate mills to be financed by the project\. Roads were to be upgraded to facilitate fruit collection, smallholders were to be given seed, fertilizer and wire collars (to protect seedlings from rodents) as a grant, and loans of N100 per hectare (spread over four years) were to be advanced towards the cost of hired labor for palm planting and maintenance\. The smallholder expansion was to be managed by a Smallholder Management Unit (SMU) in each state\. In addition, the Rivers State project provided for the planting of an additional 10,000 ha of palms on the nucleus estate\. These activities were projected to produce an extra 82,450 tons of palm oil (35,200 tons in Imo State and 47,250 tons in Rivers State); to raise smallholder incomes, and provide substantial additional employment\. 1\.04 These project components were in support of the basic project thrust, namely to encourage the wider use of "tenera" a high yielding, dwarf, hybrid oil palm introduced to Nigeria by the Nigerian Institute for Oil Palm Research (NIFOR)3 from Yangumbi, in the Congo\. These were predominantly to replace sparsely planted "wild" dura palms,4 or occasionally plantations of improved "composite" dura\. Tenera oil palms have provided the basis for the rapid expansion of oil palm production worldwide; but particularly in Malaysia, Indonesia and Papua New Guinea\. 1\.05 Dura does not occur as a sole crop, hence sole crop equivalent yields can only be estimated, but are usually in the range 3 to 5 tonalhectares of fresh fruit bundles (ffb)\. Composite dura grown on an estate can yield up to 9\.2 tonslhectare; whilst tenera on smallholdings yields 7 to 10 tons/hectare, and on estates 10 to 16 tons/hectare\.5 Not only does tenera yield a higher production of ffb; but the oil extraction rate for tenera (18-22%) is much higher than for dura (9%)\. Oil yield per hectare from wild dura is equivalent to about 0\.36 tons/hectare; for composite dura this can reach 0\.83 tons/hectare; for smallholder tenera about 1\.5 tons/hectare; and for estate tenera up to 2\.6 tons/hectare\. Thus underlying these two projects us a technological revolution involving a five to eight fold increase in oil yield per hectare\. In addition, the tenera can be harvested from ground level, whereas it is necessary to climb dura palms in order to harvest their fruit; and the kernels from tenera are 3 In its earlier incarnation as the West African Institute for Oil Palm Research\. 4 West African rain forests are the native home of the oil palm\. Nigerian dura are native but not truly wild, rather they are the product of selection and cutting competitive vegetation over the centuries; however, the term "wild" is used for scattered smallholder dura palms, which are not planted as a sole crop\. 5 In Malaysia with higher solar radiation yields can reach 25 tons, Nigerian Tree Crops Project Loan 3216-UNI, Staff Appraisal Report (TSAR) para\. 3\.10\. -3- more easily cracked to obtain kernel oil and cake\. Whilst some fault can be found with aspects of the design and implementation of these projects; this should not be allowed to detract from the fact that the projects were backing a highly productive varietal innovation\. The overall objective, to foster more rapid adoption of tenera oil palms, was clearly sound\. Desian 1\.06 Pure stands of tenera were to be planted on 16,000 hectares of smallholder land in Imo State, and in Rivers State on 10,000 hectares of smallholder land and 10,000 hectares of estate\. This would be supported by the upgrading of 571 km of roads in Imo State and 400 km in Rivers State; and two mills (one a 10 ton/hour, the other 20 tonihour) in Imo State and one 20 ton/hour mill in Rivers State\. In addition support would be provided to Smallholder Management Unit (SMU) in both State Ministries of Agriculture\. NIFOR and the Tree Crops Monitoring and Evaluation Unit (MEU) of the Federal Ministry of Agriculture, were not supported by the projects currently being audited, but were supported under the companion Bendel State project (Ln\. 1183-UNI)\. 1\.07 Crop Choice\. The second annex of the Supplemental Annexes to the Nigerian Oil Palm Projects Appraisal Reports, Report No\. 474-UNI (SA), discusses farming systems in the project areas\. The relative profitability of the major crops under traditional and improved management are given in Table 1\. Oil palm and kola n-tt returns refer to annual returns for an established plantation\. Table 1 makes no allowance for costs of Table 1: COMPARISON OF FARMER RETURNS PER NA - EAST CENTRAL STATE Gross Margin Return to Return to Management Manaemt and Lebor (a) (b) (c) i~~:nMnnt058(Nal ra per ha)----- Existing Management(Nieprb)- maize 95\.8 47\.7 -52\.4 45\.1 0\.8e yae 810\.5 165\.8 98\.6 241\.5 1\.10 Cassava 144\.8 72\.4 -8\.2 94\.8 0\.88 Maize/Cassava 184\.0 92\.0 29\.6 188\.5 0\.88 Yam/Maize 820\.8 180\.4 99\.4 255\.4 1\.08 Kola 49\.5 49\.5 -11\.9 24\.5 0\.44 Oil Palm (wild grove) 57\.0 57\.0 11\.8 80\.8 1\.08 Improved Management Mle]" 177\.0 68\.5 -19\.8 120\.5 0\.58 Yam 448\.0 221\.5 204\.8 887\.8 1\.47 Cassava 279\.0 189\.6 98\.9 228\.9 1\.18 Maize/Cammva 814\.6 167\.2 142\.8 268\.1 1\.42 Yam/Maize 427\.8 218\.9 178\.8 857\.8 1\.890 Kola 199\.0 199\.0 128\.5 174\.0 2\.49 Oil Palm (planted) 175\.0 175\.0 129\.7 149\.2 4\.97 Gross Margin: (a) per he of land cultivated (b) per he of total land employed including fallow Return to Management: after deduction of interest on annual capital employed and notional rent on total land-use Return to Management and Labor: (c) per he of land cultivated (d) per manday Sours SA, Supplement 1, page 11\. - 4 - establishment or the delay before returns are obtained\. Two features are worth remarking\. Firstly the insignificant area (i\.e\., not even recorded) devoted to pure stand palm production, as compared to cocoa and kola nuts\. Secondly, the relatively modest return to oil palm (even when fully established) on a per hectare basis\. Oil palm is budgeted to be dramatically the most profitable crop per workday; but for other criteria kola nuts and some annual crops give higher, and markedly higher, returns\. The SARs do not give any estimate of the present value of a palm plantation versus other land use, nor the amortization value of oil palms over the life of the plantation\. 1\.08 The evidence in the SA thus suggests that kola nuts or selected annual crops would have yielded farmers higher returns, than oil palm\. The SARs basis for expecting smallholder participation in the project thus rests on the assumption that smallholders will maximize their return per workday, rather than per hectare; or return to management\. With labor available at 65 kobo per day, it would seem likely that farmers would rely on hired labor so as to maximize overall profit or possibly returns per hectare\. The RSAR asserts, but does not document, that "These returns compare favorably with those obtainable from other tree or food crops", (RSAR, para\. 7\.08)\. Current price ratios appear more favorable to oil palm (see Annex 5, para\. 5)\. 1\.09 The above says nothing about the economic value of palm oil versus other crops, and the relative profitability may have been dictated by an inappropriate exchange rate or price controls; but the fact remains that the SA provides no reason to expect smallholders to participate in the projects; yet alone when subject to restrictions on inter-cropping\. Rather the gap between projected consumption and domestic production is in some not very clear way taken by the SA as an indication of smallholders desire to fill the gap\. The projections of smallholder participation in the project thus rested on tenuous to non-existent logic\. 1\.10 Smallholder Participation\. The SAR assumed that all smallholder production resulting from the project, would be processed through the project mills; and that there would be an excess demand by smallholders to participate in the project\. This is referred to in connection with marketing and processing as an "enclave mentality" in project design\. It meant that the SAR could specify that (a) in any one year smallholders would be enrolled from a relatively small geographic area (thus reducing the travel time of SMU personnel working with participants), (ISAR, para\. 6\.04); (b) that participants would be restricted to members of a cooperative (which could distribute payments for fruit, and ensure repayment of production loans) (ISAR, para\. 4\.09); (c) smallholders would be required to plant a cover crop (but no food or cash crops, paras\. 1\.12 to 1\.15) between the young palms (ISAR, para\. 6\.05); and (d) in any case, smallholder participants would be restricted to a radius of 37 km from the mill (ISAR, para\. 4\.06) thus reducing the cost of collection of ffb\. - 5 - 1\.11 Participants were to be provided with essential inputs (seedlings fertilizer and wire collars) on a grant basis (estimated at N170 per hectare); and a cash loan of N100 per hectare6 (spread over four years) to cover the cost of hired labor for plantation establishment, and maintenance\. This proved to be too little incentive to attract the projected level of smallholder participation\. The RSAR refers to smallholder participation in the other projects (including Imo State) as "good" (SAR, para\. 4\.10), in the case of the Imo State project his "good" performance represented 1002 of revised target plantings in 1976 and 1977; the major qualifications being that this target had been reduced from 5,000 he in the ISAR to 1,260 ha (pars\. 2\.02)\. 1\.12 Intercroping\. The standard spacing between tenera in a pure stand is twenty-nine feet\. An individual palm stands at the center of a sexagon of palms, each at a distance of twenty-nine feet\. For the first three years this leaves a large but diminishing area between the canopies of the growing palms\. Standard (Malaysian) recommendations are (a) to keep the area from the trunk to one foot beyond the drip line from the palm fonds weed free; and (b) to plant the remaining area with a cover crop, preferably leguminous, to prevent weed or forest regrowth\. Standard (Nigerian) practice, is to plant the unweeded area in annual food crops, particularly, maize, cassava, yams and cow peas; often in consortia of crops\.7 Experimental results due to Sparnaaij8 show, Table 2, that palms which were intercropped produced more oil, than those that had a conventional, and well tended, cover crop\. The better palm yield is explained by (a) some leakage of fertilizers intended for the inter-crops, to the oil palm, and (b) the mach better weed control provided by a weeded food crop, whether for home consumption or sale, than by a (neglected) cover-crop\. Comenting on these results the author wrotes "It thus seems likely that, in oil palm extension work, palm planting will nearly always be associated with arable crops in one form or another\." 6 Revised to N300 her hectare in 1980\. 7 "A survey carried out by the State Ministry of Agriculture \. in 1972 \. the average size of plantation was very small, only 0\.6 ha, and in every case was shown as a mixed stand\." SA, Supplement 2, page 2\. 8 L\.D\.S\. Sparnaaij (1957), Mixed Cropping in Oil Palm Cultivation, (Journal of West African Institute for Oil Palm Research, Vol\. III, No\. 7, p\. 244)\. Strangely the researcher was so interested in maximizing oil palm production, that he failed to record the yield of the inter- crops\. - 6 - Table 2: EXPERIMENTAL RESULTS FROM INTERPLANTING OF OIL PALM WITH FOOD CROPS /a (1bsacre of ffb) 1945-1956 Treatment Total Two year intercrop 78,446 Intercrop to exhaustion 83,394 Weed cover slashed regularly 75,858 Weed cover slashed once 67,110 Leguminous cover 79,470 /a Source: L\.D\. Sparnaaij, (1957), Mixed Cropping in Oil Palm Cultivation, Journal of the West African Institute for Oil Palm Research, Vol\. III, No\. 7, p\. 244\. 1\.13 These results were known to the appraisal teams "Although experiments have shown that, on forest soils and if very carefully controlled, food cropping can be practiced for a limited period without reducing yields, on already cultivated or poorer soils yields can be affected\. (Sparnaaij, op\.cit\.)9 Smallholders tend to plant food crops far too near the young palms and under these circmstances they compete for water, nutrients and sometimes for light\. Moreover, with such planting, the smallholder frequently lops off functional green leaves of the growing palms, thus checking their development and reducing their early yield\." (SA, Supplement 1, page 11\.) as was the prevalence of the smallholder practice of interplanting oil palms with food crops\. 1\.14 The rationale for the grant and loan element in the project was justified as follows: 9 The reference should have been cited after "reducing yields", since the paper provides no data on special problems of already cultivated soils; rather it concludes (para\. 1\.12) that future extension for oil palms should include intercropping\. \. nder the proposed projects, all old trees would be removed before planting \. and the practice of inter- cropina during the first two years of planting would be discouraged\. Both o-O these measures would result in a substantial loss of income for which participating smallholders would have to be compensated\.ulu (Document \. prepared for Loan Committee, September 26, 1974, emphasis added\.) 1\.15 It is not clear why the Bank was so adamantly opposed to intercropping\. The Bank's resistance to intercropping led to substantial disagreement with Nigerian policy makers and extension workers\. Despite this the Bank's view prevailed: "(iii) in order to prevent encroachment into the root systems area of the young palms, no intercropping would be permitted in the new plantings of palms\. Assurances were obtained that maintenance of suitable husbandry standards including those specified above would be a condition of smallholder participation in the project\." (ISAR, para\. 6\.05) 1\.16 The Rivers State Project appraised three years later allowed for "controlled intercropping during the first two years", (RSAR, para\. 6\.05)\. This provision was added at negotiation, at the insistence of the Nigerian delegation\. 1\.17 Processing\. The SARs implicitly assumed an enclave and provided for all ffb produced by the project to be processed at large project mills; participants were to agree in writing to supply their ffb to the estate mills (ISAR, para\. 4\.09)\. Detailed proposals are made (RSAR paras\. 4\.08 and 6\.06) as to crop collection and weighing\. No recognition was given to the existence of a small scale, privately owned, milling industry; and no role was projected for this important sub-sector within the project\. 1\.18 Processing Technology\. An analysis of processing costs for a range of alternative mill sizes were presented in the SA\. Table 3 reproduces this data\. In the light cf these data, the SAR missions recommended construction of a few large mills (a 20 ton per hour mill in each of Imo and Rivers States, and extension of a 20 ton per hour mill to 30 tons per hour in Imo State)\. Note that the Rural Oil Palm Kit is credited with an extraction rate of only 17% versus 22% for the large scale mills, and 19\.2% for the Hydraulic Hand Press Mill\. (The MEU has commented that the 17% extraction rate is too high, see Annex 5, para\. 6\.) 10 The files provide no evidence that the amount of the input grant was actually calculated either to compensate for income foregone; or to make oil palm more attractive than other production possibilities\. Rather it was related to the estimated cost of hired labor\. ÂÂ――쟀―-,!---, - 9 - 1\.19 it is difficult to reconcile the data given in the first two columns of Table 3 (Hydraulic Hand Press Mills) with the small scalellow costilow technology mills currently in widespread u3e\. These two mills are described in the SAR supplement &as 066\. Column I &2endix 1 quotes figures given by S\.C\. Nwanze in the Journal of West Africa Institute for Oil Palm Research (1965)\. Costs have been updated to 1973 levels but some cost items such as management and spare parts were not included and so total processing costs would be higher than those quoted\. 67\. Column 2 in Appendix 1 is based on results obtained in the Ilutitun mill (near Okitipupa, Western State) from January to October 1973\. This mill has six Stork hydraulic hand presses, a mechanical digestor with sterilization in boiling water or steam at atmospheric pressure\. A diesel driven altfruator generates the power required by the digestor and nut-cracker\.* (SA, Supplement 5, p\. 15) This is totally inadequate to explain the difference in capital cost of N302*000 for the first system describedp and N4,950,000 for the second system\. No breakdown is provided for Operating Cost (mainly labor?) and Other Costs (mainly fuel?) despite the fact that these two item account for more than 83% of the processing costs of the smaller mills\. 1\.20 Recent studies of a low technology Ghanaian milling system prepared for the Bank, put the cost of a 0\.75 to 1\.00 ton ffb hour mill at between $32,000 and $42,000\.11 Allowing for inflation, this represents about half the capital cost per unit, and twice the throughput of the low capital cost system described in the first column of Table 3\. 1\.21 Whilst the SAR was "right" to recommend large mills in the light of the data presented in Table 3; there is simply no connection between the low technology costs provided in Table 3, and the technology observed in the field, at the time of the audit,, and described in the recent Ghanaian studies\. There is thus a serious question as to whether the preparation/appraisal considered the right alternative technology\. 1\.22 Part of the explanation could be that low technology processing may have made very substantial technical improvements since 1973 (though certainly the NIFOR mill was available)\. Similarly, there are indications that real wages have fallen since the oil boom, with a consequent improvement in the profitability of less capital (and less foreign exchange) intensive technologies\. There may also be significant economies 11 "Project Appraisal Report for the Ghana Tree Crops Project in Respect of Small Scale Palm Oil Milling", April 1989, and *The Establishment of a Palm Oil Processing Training Centre/Service Company and Replication of the Existing Mill at Ntinanko, Ghana", July 1989\. - 10 - of scale within the low technology option, so that a 1 ton/hour mill has (and even had in 1973) substantially lower per unit costs than a 0\.45 ton/hour mill\. To the extent that this latter possibility is valid, the SA may have costed an uneconomically small low technology mills versus mills appropriately adjusted to the scale economies of pressurized steam systems\. Certainly, at the present time, there is a definite question as to whether the large scale mills can compete successfully with low technology mills (Annex I, para\. 3 (iii))\. 1\.23 Land Acquisition\. No estate production was financed in Imo State, thus land acquisition was only required for the Rivers State project\. Of the 10,000 hectare estate proposed, 2,000 hectares were already thought to be available; so that another 8,000 hectares needed to be found\. Any early Bank telex stated that it was "Government Policy to offer landowners ten percent paid up capital share\. Company do not anticipate any major problems in land acquisition"\.12 An audit interview with former landowners showed that they remember that they were to receive a 10% stake in the company\. (Transformed by some optimists into a belief that they should receive 10% of all oil and nuts produced by the estate; quite a different thing!) The ISAR (para\. 7\.11), also makes reference to the mills paying a bonus to smallholders in good years\. 1\.24 In the event, those features were not written into the legal agreements; rather, the government was simply required to acquire 8,000 hectares as a condition of disbursement against estate development\. The Bank took no position as to how this land should be acquired or what, if any, compensation should be paid\. No allowance for the cost of land was included in either the FRR or ERR implying that land was a free resource, (ISAR, Annex 12)\. In the event, land acquisition difficulties engendered involved long delays in project effectiveness (See Annex 3)\. Land was finally acquired under Decree No\. 6, of March 29, 1978 which vested ownership of all land in the Nigerian Military Governor of the relevant state\.13 Rental was to be paid at the rate of N2 per hectare, the real value of which has been almost completely eroded by inflation\. Given the Bank's often-expressed concern with income distribution, it may be inappropriate to require a Government to obtain land from smallholders without paying any attention to the compensation (if any) to be paid, or to any element of duress which might be brought to bear (Annex 3)\. 12 Telex November 3, 1974 and letter from Rivers State Government, June 30, 1977\.See however Annex 4\. 13 At one level, this had little more effect than providing a legal basis for eminent domain\. (And, no government can operate without the ability to acquire land required for essential services\.) For the most part the system of village leaders allocating land on the basis of perceived need, and long or short fallow continued\. In the case of Risonpalm estate, the landowners found their bargaining position dramatically undermined\. - 11 - 1\.25 It to noteworthy that the landowners do not regard thei: !\.d as having been sold to the estate; rather they see it as having been ade available for this joint comanity-Government-World Bank enterprise\. They would strenuously object to privatization of Risonpalm estate, since they would see this, not without reason, as selling "their" land to unknown outsiders without their consent\. 1\.26 Price Policy Committee\. A price policy committee was to be established to decide the price to be paid for smallholder ffb\. Thus "2\.15\. The State shall \. establish \. a Committee, comprising representatives of its ministries responsible for Finance and Agriculture, of the Company, SMU, East- Central State Marketing Board, Nigerian Produce Marketing Company and smallholders, a senior representative of ADA and the Registrar of Cooperative Societies, to establish from time to time, a pricing formula to be used by the Company when purchasing smallholders' Cresh fruit bunches, the said formula to be determined \.'n accordance with principles acceptable to the Bank\." :rroject Agreemeat, East-Central (Imo) State Oil Palm froject, February 12, 1976\.) Understandably, and probably wisely, the "principles acceptable to the Bank" were never spelt out\. From the perspective of the late 1980s it is difficult to Imagine what useful function these Price Policy Committees were expected to performg or why the public officials to be asseabled were thought to have any special insight as to what prices should be\. This would appear to be yet another example of the projects' implicit enclave mentality\. 1\.27 Smallholder Manaxement Unit\. Smallholder production was to be fostered by a semi-autonomous Smallholder Management Unit (SMU) within the State Ministries of Agriculture\. Up to three expatriate staff were to be appointed to the SMUs, plus a complement of Nigerian staff, including extension agents to recruit smallholders, advise on palm cultivation, supervise the distribution of grant inputs and credit; and to assist with the organization of the marketing of ffb\. 1\.28 Monitoring and Evaluation Unit\. The Imo State project provided for the Federal Ministry of Agriculture to establish a Tree Crops Monitoring and Evaluation Unit (MEJ) to monitor ongoing projects, and prepare new ones\. Funds for the MEU were to be provided under the parallel Bendel State project (Loan 1192-UNI)\. 1\.29 Coconut Prolect Preparation\. The Rivers State project provided $0\.8 million for the establishment of a coconut nursery, a study, and the preparation of a coconut project\. 1\.30 Follow-on Project\. The Rivers State project provided funds for the preparation of a successor project\. After a substantial interregnum a - 12 - follow-on (National) Nigerian Tree Crops Project (Loan 3126-UNI) was approved by the Board in October 1989\. \. The reservations about processing technology usvd in the present two projects already expressed in paragraphs 1\.18 to 1\.22 also apply to this new project (see para\. 3\.21 and Annex 2)\. Desixn !"aults 1\.31 It is worth pausing for a moment to emphasize that the design weaknesses identified so far, namely (a) indifference to how the existing landowners would be compensated (para\. 1\.23 to 1\.24), (b) the enclave mentality (para\. 1\.10, 1\.17 and 1\.25), (c) capital intensive processing technology (para\. 1\.18 to 1\.22), and (d) monocropping (paras\. 1\.12 to 1\.16) were built into the project as presented to the Board\. these faults cannot be attributed to "bad luck" or "unforeseeable events"\. The most that could be expected of project management and supervision was that they would reverse these decisions capable of being reversed\. As emphasized later (paras\. 4\.01 to 4\.02), the absence of a truly independent appraisal of the projects militated against the detection of these weaknesses prior to Implementation or evaluation\. 1\.32 It is thus extremely ironic that at one stage the major justification for lending for these projects was the technical assistance that the Bank would provide\. Financing Plan 1\.33 Both projects called for a modest input from smallholders, but whereas the earlier Imo State project involved straight Bank/State sharing of the balance of the expenses, the Rivers State project provided for a much larger role for the Federal Government\. Absolute and percentage project costs as presented in the SARs are given in Table 4\. Table 4: PROJECT FINANCING ---------------------(US$ Million)--------------------- Federal State Proiect Smallholders Government Government Bank Total Imo State 2\.0 0 16\.5 19\.0 37\.5 Rivers State 1\.8 20\.5 30\.9 29\.8 83\.0 - ------------------------- (1)-------------------------- Imo State 5 0 45 50 100 Rivers State 2 25 37 36 100 - 13 - Tabl t : DATES OF PRE-IMPLENTATION PROCESSING Board staff EM3at Identilication Appraisal Presentatlon Effectiveness Missios Weks I* State December 1972 November 1973 June 1975 April 1977 2 158 Rivers State April 1976 October 1976 June 1978 July 1979 1 159 Pre-implementation Processing 1\.34 The key Implementation dates are given in Table 5, both projects were characterized by long delays between appraisal and loan effectiveness (41 months for Imo State and 33 months for Rivers)\. For Rivers State there was a 38 month delay from identification in April 1975 and Board Presentation in June 1978\. The key references to the progress, and barriers, to project processing are summarized in Annex 3\. 1\.35 Several points emerge from a consideration of the chronology in Annex 3: i) Despite the existence of three ongoing oil palm projects, and consultant prepared project proposal, Bank staffing imposed a long delay in getting the project included in the work program\. ii) Whilst constantly reminding the Government of the need to acquire land, Bank staff seem to have mistaken the promise of action for action, itself\. Since promises appear to have been readily forthcoming, Bank staff did not come properly to grips with the required actions, and who would need to be involved\. The Bank having, rightly, recognised land acquisition as being as the critical path for project implementation, and having emphasized this by making it a condition of effectiveness, it would have been helpful to sit down with the relevant officials in December 1976, and draw up a formal PERT chart of what "events* had to take place before land would become available to the project\. In the event, the painfully labored acquisition of 3,000 ha was overtaken by a Federai Government decision to take over all land in Nigeria\. There is no knowing how long negotiations would have dragged on in the absence of this fortuitous event\. iii) The Bank appears to have had little, if any, interest in the equity of the land acquisition process\. Conditionality concentrated on the fact of land acquisition, not the terms on which it was to be acquired\. The Government had clearly committed itself to give the landowners a 10% equity in Risonpalm, as well as schools, pipe-borne water, electricity and good roads, for the affected communities\. It is surprising that the Bank does not seem to have had any concern - 14 - to ensure that the Government would fulfill its side of the stated terms for expropriation\. Especially as much of the delay in acquisition can probably be attributed to some skepticism by the landowners as to whether Government would fulfill its undertakings\. (Annex 4, indicates that any commitments which may have been made with respect to equity in Risonpalm have not been communicated to Risonpalm\.) Board Concerns 1\.36 Board discussion of the Imo State Project reflected the then recent move of Nigeria, in the light of booming oil revenues, into clear foreign exchange and capital surplus\. Nigeria was both lending to the Bank, and borrowing from it; with the objective of achieving net transfer of capital to the Bank, and technical expertise to Nigeria\. Concern was expressed that, In the circumstances, the Bank's share of project costs was too high; however, the Board accepted the staff's explanation that this reflected agreements on project design reached prior to the full impact of the oil boom; which it was felt would be difficult to reverse\. 1\.37 The Rivers State project, probably reflecting these discussions, called for the Bank to pay only 36% of project costs, whilst the Federal Government entered as a new participant contributing 25% of project cost\. In this case the Board focused on the interest rates (91 to the Nucleus estate and 9\.5% to smallholders) which were likely to prove highly negative in the light of then current inflation at 221\. The staff replied "the review of on-lending rates during the period of the Loan \. was felt to be impracticable \. within the framework of a fixed term loan\." The Board accepted this indolent response\. Concern was expressed at the six month gap provided between Board approval, and loan effectiveness\. The staff responded, all too correctly, that simultaneous involvement of both Federal and State Governments had led to substantial delays in several previous projects; and that though steps were in hand to reduce these delays, six months was, unfortunately, probably realistic\. In the event, the staff proved to have underestimated by half, the time it would take for these loans to be made effective\. - 15 - II\. IMPLEMENTATION "Another speaker felt that the Bank's assumption of half the costs involved in the projects was too high in the light of Nigeria's strong foreign exchange position"\. Board Discussion of Imo Oil Palm Project, July 15, 1975, para\. 20\. General 2\.01 The two projects were characterized by very long delays from Board approval to effectiveness, (22 months for the East Central or Imo State project and 13 months for Rivers State)\. Once effective, project implementation experience was dominated by several themes\. Prompt initial staffing of the SMUs was followed by slow and inadequate release of federal and state funds to these two units and Adapalm, which in turn led to delays in planting both by smallholders and Adapalm\. An inadequate and late supply of seed from NIFOR was a recurrent problem in Rivers State, but less so in Imo\. Delays in commissioning the Adapalm mills, and arranging for fruit collection, meant that it was not until eighteen months after the first fruit had been harvested, that Adapalm was ready to process them; by which time smallholders had made a variety of other marketing arrangements\. Delayed Effectiveness 2\.02 For Imo State there was an eight month delay from Board approval to signing, and a further fourteen month delay before project effectiveness\. Whilst "untidy", this did not seriously delay project implementation, the project provided for $100,000 of retroactive financing, and the Government had made additional foreign exchange available for start-up expenses pending effectiveness\. Thus local and expatriate staffing, of the SMU was not itself delayed\. In like manner, the required palm nurseries were established and 410 hectares were planted by smallholders in 1976 and a further 1,853 hectares in 1977, prior to effectiveness on April 6, 1977\. The cumulative target planting area was revised down in 1977, from the SAR target of 5,000 to 1,260 ha, hence when the project was declared effective (April 1977) total planted area corresponded exactly to the revised target (but was only 25% of the SAR projections, PCR, Table 4\.1)\. 2\.03 In the 22 months from Board approval to effectiveness, there was a coup, (February 1976), and subsequently the East Central State was divided into Anambra and Imo States\. The project lay entirely within the new Imo State, and responsibilities and undertakings were transferred in their entirety to the new state; nevertheless very substantial staff turn-over resulted as the first General Manager and other staff from Anambra State opted to move to their home state\. This division also caused the headquarters of the SMU to be shifted to Overri, the new capital of Imo State\. It is also important to remember that since these were State - 16 - projects, not only were signatures (and legal opinions) required from the Federal Government, but alio from the State Government\. This could only lengthen expected processing times, and may not have been fully allowed for in the SA\. 2\.04 The project received two formal supervisions (in January and August 1976) prior to effectiveness; it also received frequent, and crucial, informal supervision from the resident mission by the project officer who had been responsible for project preparation and appraisal\. Much of the credit for achieving eventual effectiveness; and for achieving so much physical progress prior to effectiveness should be attributed to the continuity in Bank staffing and this frequent and informal contact from the resident mission\. 2\.05 Despite the delays in effectiveness, the project was performing quite well on the ground\. Expatriate personnel and senior Nigerian staff for the SMU (and MEU)14 had been hired, but were still preoccupied with the basic logistics of arranging personal and office accommodation, and transport\. The two supervisions ranked the Imo State project "2, 1", (i\.e\., moderate problems, but improving)\. Even with hindsight this seems an appropriate judgment; and a very important judgment since it justified the appraisal of the Rivers State project\. 2\.06 The time from Board approval to effectiveness for the Rivers State project was 13 months; for all the same reasons discussed for Imo State, plus the involvement of both federal and state governments in project financing\. This initial start up period established the pattern of implementation problems and achievements which was to characterize the project in its entirety\. The major implementation problems encountered were (a) slow release of state and federal funds, (b) weak management of the SM, (c) late and incomplete delivery of seedlings by NIFOR, and (d) delays in the provision of land to the estate\. As against this there were (a) few problems placed in the way of hiring expatriate technical assistance, (b) few procurement problems, and (c) good performance by the consultants responsible for the establishment of the nucleus estate\. Both the difficulties and above average performance were self-reinforcing as brought out below\. Release of Funds 2\.07 Lack of counterpart funds was a constant problem for the SMUs, and to a lesser extent for the estates\. Necessary conditions for the SMUs to obtain fund release were (a) authorization of the SMUs budget by its executive committee, (b) inclusion of some portion of these authorized funds in the Federal and State budgets, and (c) a decision by the governments to actually release the funds, after budgetary approval\. The release of approved government funds was far from automatic\. Indeed it was characterized by being only a small fraction of the approved budget, and 14 Though funded from the Bendel State project, the MEU was an integral part of the institutional support to be provided to each of the palm projects\. - 17 - these funds were released erratically and late\. An indication of the extent of the SMUs problem is suggested by Table 6\. In Rivers State funding dropped from V1\.91 in 1981 to 10\.46 million the following year, a similar drop occurred for Imo State from 1983 to 1984\. Table 6: RELEASE OF FUNDS TO SMUe (N mtIlIon) ----------- State - -- - --- Rivers State--- Year Buae GovernAents Bank Total Governments Bank Total 1975/78 0\.69 0\.00 0\.60 1976/77 2\.04 0\.92 2\.06 1977/78 0\.72 0\.81 1\.98 1978/79 1\.05 1\.19 2\.24 0\.98 0\.92 1\.00 1979/80 1\.90 1\.08 2\.98 2\.84 0\.09 2\.48 1980 1\.76 0\.00 1\.78 1\.61 0\.48 2\.04 1981 0\.69 1\.18 1\.92 1\.88 0\.58 1\.91 1082 8\.90 1\.62 0\.98 2\.80 0\.21 0\.25 0\.48 1988 5\.70 1\.89 0\.16 1\.55 0\.77 0 0\.77 1984 1\.8 0\.40 0\.09 0\.49 0\.15 0 0\.15 1985 0\.58 0\.00 0\.68 0\.16 0 0\.18 1986 a\.*\. n\.a\. n\.a\. 0\.05 a e\.05 Source: PCR, Annex 2\.1, and Bank fi les\. 2\.08 A Bank supervision mission in December 1981 reported that the Rivers State SMU11s had outstanding debts of 10\.56 million including farmers' arrears\. A supervision mission to Imo State in December 1984 reported that the SMU had available cash of only 11,000 (one thousand naira), total debts of N1\.6 million, of which N1\.4 million was owed to smallholders\. Not only were there the evident year to year changes in SMO funding, but even within a year the releases were irregular, delayed and bore no apparent relationship to SMU budgets\. Since Bank funds were available on a reimbursement basis, lack of local funds constricted eligible spending and hence reduced the Bank's contribution through reimbursement\. Furthermore, both the Federal contribution and the Bank's reimbursement sometimes were paid to the State treasury, from which they might, or might not, reach the project account under the control of the SMU manager\. The result was maximum financial uncertainty for the SMU; and consequently for the farmers served by the SMU\. A number of supervision missions were made with the primary objective of achieving some acceleration of the release of project funds; but as indicated above, with little success\. 2\.09 The only redeeming feature in the financing of the SMUs was that the majority of SMU staff were on secondment from their parent ministries (usually agriculture) which paid their salaries\. In the absence of this core funding for salaries, the SMUs would have collapsed totally\. Staff seldom received the incentive pay which the SAR had projected, and which they had been led to expect when transferred to the SMU\. - 18 - Delayed Seed Supply and Preferences to Estates 2\.10 There are recurrent references in the files to slow and inadequate deliveries of seed from NIFOR\. Thus in April 1980, only 256,000 seeds had been supplied to the SMU out of an order for 800,000\. By August this had risen to 494,000 seeds, but this is really too late for proper planting in the nursery\. In addition, the Bank had approved preference in deliveries of wilt-tolerant seeds to estates "where losses from wilt would be greater than in disbursed smallholdings" (December 4, 1979\.) In theory a clearly defined delivery schedule could have been agreed, with the importation of any balance in excess of NIFOR's capacity to deliver\. In practice project management appears to have accepted unduly optimistic estimates from NIFOR as to its seed production capacity; and pressure late in the season was found to lead to a counter-productive deterioration in the quality of supplied seed\. In the audit's view, it was a mistake to allow distribution of seed of doubtful quality to smallholders\. Nevertheless the recurrence of essentially the same problem several seasons in succession suggests that more should have been done to attack the root cause of inadequate seed supply\. Mono-Cropping 2\.11 The SAR and Loan Agreement for Imo State specified that palms planted under the project would not be inter-cropped with food crops; but rather a cover-crop of Pueraria would be planted to keep weeds down (SA, Supplement 1, para\. 51)\. In large measure, the SMU managed to prevent inter-cropping through 1978\. SMU management described early Bank missions as being "apostles of mono-cropping" who described inter-cropped palm plantations as "a bloody mess"\. To comply with the resulting Bank pressure, the Imo State SU even required some smallholders to rip out their inter-planted food crops, in preparation for a supervision mission\. 2\.12 Over time, the combination of reported unwillingness of smallholders to comply with the mono-cropping requirement; together with the evidence that in the absence of food crops, and in the absence of promised loans for plantation maintenance, farmers simply neglected their palm plantations led the Bank staff to slowly revise their attitudes to the production benefits of "the bloody mess" represented by mixed inter- cropping\. By the time the Rivers State project came to be negotiated in 1978 and in the face of strong Nigerian resistance to the mono-cropping dogma, the Bank staff were willing to accept provision for "controlled inter-cropping"\. By September 1978, a Bank supervision mission for Imo State was able to argue that the stipulation that no project plot should be inter-cropped had to be modified\. This was attributed primarily to the migration of labor so that with children in school, family labor (i\.e\., women) had to be relied upon for weeding; which they were unwilling to assist with in the absence of an inter-crop\. As the report says: "Even when their husbands have hired labor, women have refused to cook\." - 19 - "This situation, if allowed to continue, is surely going to result in the failure of the project as not many farmers are enthusiastic over the project any * more\." (Back-to-Office Report (BTO), September 1978\.) The apostles had been converted\.15 This conversion would have been more convincing, had it been based upon the explicit recognition that (a) inter- cropping pays, (b) and it pays now, and (c) the farmers (and their wives) realize this\. Ghost Farmers 2\.13 A June 1981 supervision mission to Rivers State reported that the 1980 planting supervised by SMU had had at best a 652 survival rate\. This was ascribed by SMU to "rodent damage,"16 but unsatisfactory field reports suggested that possibly 25% were not planted at all\. A separate survey of likely ffb production put the survival rate of SMU palms at only 30%\. SMU had arrears to farmers of N400,000 which should have been lent to finance the hiring of labor to maintain smallholder plantings\. The mission suggested that "SMU management so weak that serious consideration must be given to turning SMU operations \. over to Risonpalm" (the nucleus estate)\. There was thus ample evidence to supervision missions that all was not well with the smallholder component\. In particular there are repeated reports (a) that current plantings are less than the target, (b) that actual past plantings seem to have fallen short of reported plantings, but (c) that substantially improved experience is expected next year\. 2\.14 In March 1984, a new Project Manager was appointed to the Rivers State SMU\. Figures prepared under the new management showed actual plantings to be 2,071 ha\. (An even lower figure was reported, without comment by the Bank's supervision mission)\. An investigation by the new management showed that inputs, and some loans, had been advanced for 4,134 ha\. The PCR thus refers to ghost farmers, who received N334,080 in cash loans, and 278,400 seedlings between 1978 and 1981, plus fertilizers and wire netting (PCR, para\. 6\.27)\. The same section also notes "that SMU did not keep any meaningful records of financial transactions such as purchases, contract payments, input delivery to project stores, etc\." Though Bank supervision missions noted discrepancies between reported and actual plantings, they do not appear to have recognized the significance of inputs, and possibly cash advances, being provided for non-existent plantings\. 15 The SMU was still faced with a challenge of convincing participants (a) to ring weed their palms, (b) to leave adequate space between the inter-crop and the palms, and (c) not to resort to burning of trash in preparation of inter-cropping\. 16 Wire collars were meant to be provided by SMU to participating farmers to guard against this\. - 20 - 2\.15 Whilst supervision reports flagged that there were serious problems with the SMU, (it was consistently ranked a "3" from June 1982 on) the (unbelievable) extent of the problems was not reported; nor was the state government alerted to the deficiencies, beyond a mild reference to "management problems" and the suggestion that some functions be transferred to the nucleus estate\. It was thus left to the state government and MEU to diagnose and document the extent of embezzlement and break-down of financial control\. The presence of an expatriate Financial Controller and a Controller of Field Operations proved to be no guarantee of proper financial or physical control\. It is not apparent that the activities of the Rivers State SMU component were supervised by the Bank in any meaningful way\.17 Estate Managenent 2\.16 As mentioned earlier (para\. 2\.07) the estates were also plagued with inadequate recurrent budgets\. However, both estates (Adapaim in lo State, and Risonpalm in Rivers State) signed management contracts with an oil palm managementlconsulting company which had operated and developed estates in Nigeria and other countries in West Africa for many years\. Project implementation was delayed more or less in line with delayed funding\. Faced with a cash-flow crunch in Rivers State just as commitments to mill construction contractors greatly exceeded the funds released by the governments, private loans were negotiated18 to bridge the gap until oil sales would produce a reliable revenue stream\. This was a project saving initiative by the consulting/management company and avoided a potential disaster with the abandonment of (or long delays in) mill construction, terminating any possibility of revenue from oil sales\. 2\.17 The severe cash flow problem of the estates, and the reluctance of the governments to release additional funds led to the Imo State project being included in the 1983 Problem Project Review\. This led management to askt Why not have palm processing done by the private sector? The record of discussion says "If it really pays to process the stuff (i\.e\., palm oil), while the State was unable to put up the cash for proper construction, there would appear, prima facie, to be a case to ask the state government to hand the whole thing over to the private sector, in exchange for cash/shares and some cash injection by the private sector"\. A hand written notation says "This was raised by supervision mission\. Reaction was negative\. Too much trouble\. Raised again with Permanent 17 Imo State seed nursery may have suffered from a parallel problem since the auditors report of November 15, 1977, states "The number of people marked present exceeded the number met physically on the farm\." 18 And Bank reimbursement for mill construction was raised from 50 to 75%\. - 21 - Secretary during his visit to Washington - to be discussed with Governor - less than enthusiastic\.f19 2\.18 A year later, a BTO, report shows that this suggestion was beginning to take hold at the working levelt "absolute need to move toward privatization of oil palm production and processing\. The kind of factories being built virtually require continued high quality management and I think the only way to ensure this is through private ownership \. The federal government supports this, but there is reluctance at the state level\. I also have the impression that investable projects in palm oil may far exceed the amounts of money we (the Bank) currently have available\.20 This concern at the capital and management intensity of current palm oil projects, does not seem to have raised any questions to the author of the above note about the need to explore alternative project designs\. 2\.19 Fruit Collection and Marketing\. Fruit collection and marketing were the responsibility of the estates\. A bureaucratic Price Policy Committee was established to set the farmgate price of ffb (para\. 1\.25)\. It is worth quoting the PCR's description of the experience of Imo State: "\. the prices fixed by the committee were unacceptable to farmers because such prices were below the ruling market price and therefore uncompetitive\. Farmers therefore preferred to sell their ffb to other buyers who offered higher prices\. Consequently, Adapalm evolved its own pricing policy which was more competitive and acceptable to farmers\. This rendered the role of the State Price Policy Committee irrelevant\. 19 Problem Project Review June 16, 1983\. The Region notes that "Even if it had been possible to interest the private sector to purchase the plantation and establish its own processing facilities, the handing over of public/community land to a private corporation would still have been an issue and this was exactly the case when as recently as 1988 the Federal Government had to step in to get the Imo government to rescind a privatisation agreement for one of its oil palm estates because of a public uproar\. The lack of response from the Imo government to the idea would not have been unexpected as they had to face everyday political realities\." See also para\. 1\.25\. 20 BTO, April 24, 1984\. - 22 - It is therefore recommended that in future projects, market forces should be allowed to determine prices rather than the use of such price policy committee\." (PCR, para\. 5\.1\.1\.3\.) The audit could not put ft better\. 2\.20 In anticipation of the formation of a Price Policy Committee in Rivers State, Risonpalm commissioned a "Study of Smallholder Fruit Collection and Buying Systems" (September 1981)\. Though involving a great deal of hard work; notably the location of all smallholder project plantings in Rivers State, and physical visits to more than 90% of them; yet the report missed the key issues for Risonpalm in preparing to purchase smallholder ffb: the existence of non-project ffb as a potential source of supply; and of non-project processing facilities as a possible source of competition for the mill\. These factors went beyond the explicit terms of reference of the study, but unfortunately invalidated it, since there was no point in proposing definite collection circuits, when it was not known which farmers will choose to sell to Risonpalm; and the suggested cost based pricing system was of limited appl5cation, in the face of an active market in ffb, driven by consumer demand for oil\.21 2\.21 The study did warn (page 9) that the SMUs assumption that 143 seedlings delivered translated into 1 hectare of plantation was not empirically correct; and that for the 1980 planting, over half the delivered seedlings did not appear to have been planted on project smallholdings (paras\. 2\.13 to 2\.15)\. 2\.22 Delays in mill construction at Adapalm (Imo State) meant that smallholder ffb could not be processed in its own mill until 1983\. Instead arrangements were made to use Old Pioneer Oil Mills and a private mill at Umulcene\. In late 1979 the consultants to Adapalm reported that there were 15,000 tons of smallholder ffb which could not be processed, and larger volumes would be available in later years\. A report on mill size and location was commissioned, and completed in July 1981\. It acknowledges the existence of low technology mills, but disposes of them: "Traditional smallholders' units\. Farmers and villagers are equipped with artisan-type machinery operated by hand pressure for treating Dura fruit\. It is difficult to assess what support should be given to these units which are widely scattered\." ("Eastern Area Palm Oil Mill - Design Stage 1," July 1981, pp\. 67-68\.) Having thus begged the question as to whether additional milling capacity was needed to meet the needs of smallholders, the report recommended extending the Ohaji mill from 20 tonihour to 30 tons/hour with the options of: 21 Ironically, the consultants had been hired because the Bank staff considered MEU to (also) be "incapable of assisting \. with smallholder fruit collection and pricing\." - 23 - 1) a second 20 ton/hour mill (SAR projection) ii) two 10 ton/hout mills iii) four 5 ton/hour mills\. in the latter cases mill construction would be sequenced to meet the expected increase in smallholder production\. Though processing costs per ton would have been lower with the larger mill, transport savings from the disbursed smallholder arrears was shown to more than compensate for the higher processing costs of the smaller mills\. In the event it was decided to go ahead with the expansion of the Ohaji mill to 30 tons/hour, and to build two additional 5 ton/hour mills\. (MEU has reiterated its support for this decision, see Annex 5, paras\. 4 and 6\.) 2\.23 In April 1982 the SMU reported that Adapalin had processed 50,182 tons of ffb from 6,273 hectares of non-project palm (presumably predominantly "w\.ld" dura), which reflects a yield of 8 tons per hectare\. This is the first explicit recognition of the interaction of the project and non-project palm oil economies\. 2\.24 At the time of the audit, Adapalm was paying 290/ton for dura ffb with a yield of 9\.8% and 1320/ton for "tenera"22 ffb with a yield of 12\.1%\. With Adapalm selling palm oil at 33,885 a ton (versus a retail village price per tin of N88, or N5,326 per ton), this was an irrational pricing structure, since, the additional N30 per ton paid for tenera by no means compensated for its higher oil yield\. The price of tenera should have been higher, or the price of dura lower \. not surprisingly 97% of deliveries under this pricing structure were for dura, and thus prima facie, not the product of project plantings\.23 2\.25 A similar problem of project ffb production commencing before the main project mill could be commissioned also confronted Rivers State with production of 649 tons of ffb in 1981, and 5,559 tons of ffb in 1982 prior to planned commissioning of the large mill\. In this case it was decided to build a 1\.5 ton/hour mill to meet the immediate processing needs\. This mill for which tender documents were approved in February 1981 was commissioned in March 1982\. A commendably speedy rate of implementation, which nevertheless forced early project participants to find other markets for their ffb in the year before Risonpalm was ready to accept them\. 22 As noted elsewhere though called tenera, the ffb included (a) improved, "composite", dura; and (b) smallholder tenera from which much of the fruit had been knocked off as "loose fruit" before delivery to Adapalm\. 23 The PCR (para\. 5\.1\.1\.2) notes that in earlier years smallholder deliveries to Adapalm had been less skewed: Year Tenera Dura Dura (tons) % 1985 1,615 3,445 68 1986 9,155 17,505 66\. - 24 - 2\.26 With Risonpaim over-paying for "wild" palm24 deliveries increased dramatically, so that the shortfall in deliveries of project produced fifb was more than made up (though the total oil delivered continued to fall short), as shown in Table 7\. Some of these "wild" palm deliveries will have represented diversion of durs which would otherwise have been sold to small processors, and some will have been harvestings from existing palms which would otherwise have been left unharvested\. The Region has noted that in addition to the price factor, suppliers probably found it easier to contractually harvest dura groves than to harvest or assemble ffb from scattered small individual tenera plantings\. Table 7: SMU AND WILD FFB DELIVERIES TO RISONPALI (tons of ffb) ------ Actual ------ % of Year SAR SM5 * Wild" Total SAR 1982 800 34 34 4 1983 2,500 301 1,596 1,897 76 1984 16,300 21,156 21,156 130 1985 35,800 39,388 39,388 110 Sources PCR, page 168\. 2\.27 Supervision\. These two projects suffered from chronic problems of inadequate and late local funding; and inadequate and late supplies of seed palms from NIFOR\. Supervision missions regularly reported on these problems and urged Government to release project funds in a more timely and adequate way\. Indeed some supervision missions had as their primary objective facilitating the release of governments' counterpart funds\. It can be argued that in this way, the Bank did about everything it could do to assist implementation, short of a full project redesign\. This poses the question: Would a project redesign have been justified? In the view of the audit, the answer has to be "yes"; and, with hindsight, it should have been triggered as soon as it was evident that the governments were unable or unwilling to make their agreed contributions\. Both projects having been appraised on the basis that neither capital nor foreign exchange were limiting resources for Nigeria\. However, in the absence of hindsight, the audit has some sympathy with the effort to continue to try to implement the project as appraised\. This is because management is perceived as less happy with a recommendation to cancel or redesign a project, than with proposal to try to "rescue" it\. In the circumstances it may well have appeared that this mission had relaxed the recurrent resource restraint, or that the next mission would be able to do so\. With an understanding of the projects problems, it must have been extremely difficult to recognize that future supervision missions were unlikely to be able to resolve them\. 24 See footnote 4\. - 25 - 2\.28 The Bank's appraisal team, and presumably the relevant Nigerian officials had misjudged the counterpart funding which would be available, and as such had produced SARs that could not be Implemented as written\. In the circumstances there should have been no occasion for a redesign to be "confrontationalV\. There was a need for consultations and agreement on how the available funds could be employed to best advantage\. The Bank could also have played a more constructive role in achieving agreement on realistic deliveries of seed palms from NIFOR; and ensuring that arrangements were made for the importation of any remaining shortfall (para\. 2\.10)\. 2\.29 Previous paragraphs have already made the point that Bank insistence on mono-cropping of smallholder palms proved to be misplaced; that the whole existence of an active economically competitive small scale milling industry seems to have been missed by the Bank's staff and their consultants;25 and that the Bank's insistence on formation of Price Policy Committees appears simply irrelevant\. 25 The Region has noted that at appraisal cheap vegetable oil imports depressed the price of palm oil, whilst the oil boom had induced high labor costs\. As a result it is thought that the small scale milling industry will have been less active, than when the project came to be audited\. - 26 - III\. PROJECT OUTCOME "In view of Government Policy to offer Landowners Ten Percent Paid Up Capital Share\. Company do not anticipate any major problems in land acquisition", Telex, November 3, 1976\. Achievements 3\.01 The major achievements of the projects were (a) to increase smallholder appreciation for teners oil palm, including 12,400 hectare planted in Imo State, (b) the planting of 9,490 hectares of estate palms, and (c) the construction of large estate mills\. 3\.02 Land\. Traditional land owners (many of them small) have transferred 11,773 hectares of land to the Risonpalm estate\. The Government's avowed intention of giving the landowners a 10% paid up interest in the estate has not been implemented (see, however, Annex 4); nor has the SAR reference to the payment of bonuses (para\. 1\.23) to ffb suppliers in fact been realized\. In the absence of these transfers, the income distribution effects of the estate development have probably been regressive: the compensation paid to former landowners to date, falls well short of the market value for their land\. 3\.03 Estates\. Mill capacity has been expanded on the two estates (20 ton/hour added at Adapalm, 30 ton/hour added at Risonpalm), and 9,490 hectares of the expropriated land have been planted to palms at Risonpalm\. This has been achieved in the face of considerable implementational difficulties, notably unreliable funding, and erratic and late seed deliveries\. The result in both cases is the creation of a "modern" and apparently profitable parastatal estate\. The apparent profitability of the two estates owes a lot to almost free land (due to low levels of compensation) and capital (due to inflation)\.26 If called on to pay the opportunity cost of land and capital, it is doubtful if the estates would remain profitable (Annex 1, para\. 3(iii))\. 3\.04 The Bank prepared evaluation summary of the PCR (paras\. 2 and 3) draws attention to decisions by Risonpalm estate (a) to seal the access road, (b) to purchase a new weighbridge, (c) to manage the State soccer team, and (d) to delay confirming in their positions some senior staff from other states\. The audit discussed these decisions with the management of Risonpalm\. The purchase of the weighbridge responded to serious allegations of "short weight" made by Risonpalm customers and was needed to improve the company's physical controls\. The soccer team was wished upon the company, and managed correctly by the "corporate affairs" department as 26 World Bank loans were passed on to the two estates in Naira; with the Federal Government bearing the foreign exchange, and cross-currency exchange risk\. - 27 - part of the company's public relations activities\. Despite two winning seasons the management of Risonpalm did not appear in any way "soccer crazy"\. The sealed road contributes directly to the "image" of the estate as well run and "modern"\. Expensive perhaps, but contributing importantly to the morale of the staff as working in a company that "does things right"\. By the time of the audit, all out-of-state senior staff had been confirmed in their positions27 (though national policy permits state corporations to give absolute preference to citizens of the state)\. The audit was impressed however with the need for the two estates to train a cadre of oil palm professionals, perhaps by instituting a system of cadetships where young managers would spend two or three seasons on one of the best managed estates in Malaysia or Papua New Guinea\. The estates should aim to develop sufficient "depth of management", that they can afford to provide advisory staff to less well managed public sector estates\. 3\.05 Non-Nucleus Estates\. The relatively high price paid for dura as compared to tenera (Annex 1); and the inherent difficulty of ensuring that complete tenera ffbs are supplied (para\. 2\.24), means that the vast majority (97% for Adapalm) of purchased ffb are dura and ipso facto do not come from project smallholder plantations\. In the event, the estates are providing a market for "wild" palm ffb: whilst project planted improved species are processed predominantly by small scalellow technology village mills\. 3\.06 Either because of their cost structure or because of their pricing policies or because of the difficulty of properly grading smallholder ffb supplies, the estates have not been able to compete for significant supplies of project produced (or other) tenera ffb, (Annex 1)\. 3\.07 Service to Smallholders\. Inadequate funding of the SMUs resulted in poor and delayed service to smallholders; and the accumulation of very substantial arrears in the advance of promised cash loans for maintenance of their plantations (para\. 2\.08)\. 3\.08 The Imo State SMU was markedly more successful in fostering smallholder participation (12,622 hectares in 11 years) than the Rivers State SMU (2,071 hectares in 6 years)\. Less evidently, Imo State farmers are more used to growing palms than the farmers in Rivers State\. Thus the much smaller planted area in Rivers State may nevertheless have a more important "demonstration effect", in interesting farmers in palm growing, than the larger area in Imo State\. It is not possible to quantify this possibility\. Without in any way denigrating the very significant achievement of the Imo State SMU, it may be that the Imo State SMU was "preaching to the converted", while in Rivers the SMU was "preaching to the unconverted"\. 27 If the Bank's comments helped precipitate this decision, this would constitute a direct benefit from the "stock-taking" which is an important function of the PCR\. - 28 - 3\.09 Lack of Cost Recovery\. The funds passed on by the Federal Government to the estates and as loans to smallholders were denominated in naira, leaving the Federal Government to bear the foreign exchange and cross-currency exchange risk\. In the face of high levels of inflation, * this meant that even where repayments were made (Imo State S14U had recovered N2\.8 million lent, a 40% loan recovery rate, at the time of the audit), their real value was trivial\. For all practical purposes, the money borrowed by the Federal Government was passed out to the States, estates and smallholders as a grant\. The project thus in a small way contributed directly to the Federal Government's current international debt problem\. 3\.10 Institution Building\. The Rivers State SMU was disbanded in 1983, leaving no long term improvement in the Ministry of Agriculture's capacity to service smallholder oil palm producers\. In Imo State, the SMU survived as a small, but distinct, service\. The two estates have clearly established themselves as viable modern public sector organizations; their survival is not in doubt\. 3\.11 The projects were not designed to have any effect on NIFOR, nor did they\. The MEU, however, is a "creation" of the oil palm projects, and as witnessed by the PCR, has developed into an effective, knowledgeable and professional organization; despite the withdrawal of Bank support when the Bendel State project was cancelled (see Annex 5, paras 2 and 10)\. Economic Benefits 3\.12 The PCR reports quite attractive economic rates of return in the range 5\.8 to 20\.0% for the SMUs in Rivers and Imo States (PCR, Annex 1\.10 and 2\.6); 7\.6 to 11\.9% for the Risonpalm estate (PCR, para\. 7\.3)\. 3\.13 In neither case is there an adequate discussion of the "without project" situation with which the project is being considered; rather it is implicitly assumed that all costs were net costs, and all benefits net benefits\. 3\.14 We have already seen: I) that there is some question as to whether oil palm is a more profitable land use than other crops (paras\. 1\.07 to 1\.09); ii) that Bank technical assistance clearly reduced the amount of intercropping and hence the profitability of oil palms (paras\. 1\.12 to 1\.15); iii) that the majority of tenera produced by the project are processed in non-project mills (para\. 2\.24); and iv) that there is some question as to whether the project mills are financially viable at market based transfer pricing, and current prices paid for dura (Annex 1, para\. 3 (iii))\. - 29 - 3\.15 Thus a realistic "without project" scenario might well includes i) some small planting of tenera in Imo State, but with higher incomes -lue to inter-planting; the balance of the land being used for equally high value purposes, ii) very modest smallholder palm planting in Rivers State, iii) retention of the Risonpalm estate land by the original land owners, and its utilization for agricultural purposes with a long fallow, and iv) construction of the 20 ton/hour mill by Adapalm with alternative financing,28 but perhaps v) the Adapalm and Risonpalm estates operating at the same low level as the public sector oil palm estates (para\. 4\.07)\. 3\.16 The major project benefits foregone would be the non-development of the MEU, some increased awareness by Rivers State smallholders of the productivity of tenera oil palm and perhaps (i\.e\., perhaps a benefit) the development of the modern, public sector Risonpalm estate\. These modest benefits are clearly not commensurate with project costs; however, if possibility (v) in the last paragraph is given significant weight, a more optimistic view should be taken\. Bank Performance 3\.17 Bank performance left much to be desired; basically the Bank did not deliver the technical expertise on which the project was posited\. Attention has already been drawn to design faults not corrected at appraisal, in particular (a) the prohibition of intercropping of palms, (b) the separation of SMU and estate responsibilities for services to smallholders, (c) requirement that a Price Policy Committee be formed to "set" ffb prices, (d) the enclave mentality which ignored the implications of the existence of a large informal palm oil production and processing industry, and (e) a lack of sensitivity as to the conditions on which land was to be acquired\. Independent appraisal might have allowed some of these faults to be caught (paras\. 4\.01 and 4\.02)\. 3\.18 Project supervision staff did not come properly to grips with the four key problems of (a) land acquisition, (b) misappropriation of project resources in Rivers State, (c) the chronic under-funding of the projects in later years (including the accumulation of large areas of credit due to smallholder project participants), and (d) the inability of NIFOR to deliver the full requirements of wilt-tolerant seed in a timely and reliable fashion\. Substantial, but ineffective, efforts were made to deal 28 The Region has expressed skepticism as to the likely availability of private sector financing given the depressed palm oil prices, resulting from the over-valued Naira\. - 30 - with the latter two problems\. A more active interaction, and Oinstitution building- activity, with NIFOR and MZU could reasonably have been expected\. Support for the research program at NIFOR on farming system and for plant breeding would have been inexpensive and have improved the foundation for ' future expansion of the industry\. MEU's mandate could usefully have been widened to include a study of the informal marketing and processing of ffb\. This would have provided the necessary foundation for improved design of later projects\. 3\.19 On the positive side, Risonpalm estate was established and Adapalm estate processing capacity has been expanded, probably very much in line with the intentions and expectations of project protagonists\. Follow-on Proiect 3\.20 After a considerable interregnum a follow-on Nigerian Tree Crops Project (Loan 3126-UNI) was approved by the Board on November 17, 1989\. This project incorporates many of the lessons pointed to in this audit\. In particular: I) It provides for state extension to independent smallholder palm producers, but for the estates to provide direct services to intended suppliers, through an estate controlled Smallholder Development Unit\. ii) Support will be provided to NIFOR, particularly for seed production, but also supporting plant breeding work\. III) The MEU will be supported both in its regular monitoring work, but also in the conduct of a series of studies which will enhance its (and the Bank's) understanding of the sector\.29 iv) Whilst some subsidization of seed is provided for in the early years, the basic smallholder support will be in the form of (a) extension and (b) substantially increased private sector milling capacity\. v) A major credit component will support private investment in milling, guided by private perceptions of profitability\. vi) Reliability of counterpart funding will be improved (see Annex 5, para\. 1)\. 3\.21 The major concern of the audit with this follow-on project, is that the competitiveness of low technology processing mills documented in the SAR's working papers does not appear to have been analyzed properly when considering investment in estate mills (Annex 2)\. When analyzed with the same pattern of deliveries as the 2 or 20 ton/hour mills, the smaller mill gives dramatically higher ERRs and FRRs, Table 8\. This suggests that 29 A commendable feature of the proposed study program will Involve farmer access to processing\. Hopefully this will provide a definitive understanding of the competitive position of high and low technology processing in Nigeria\. - 31 - within the context of the analysis used to appraise the Tree Crops Project the smaller mill has not been given adequate attention which would result in the project being over-funded\.30 The difficulty of making a correct appraisal of competing oil palm processing technologies, is touched on in Annex I\. Table 8: ERRs AND FRRa FOR ALTERNATIVE MILL CAPACITIES AND PATTERNS OF FFB DELIVERIES ------- Pattern of ffb Deliveries---------- Mill Characteristics For 2 ton/hour mill For 20 ton/hour mill ERRa One 2 tonlhour mill 27* 21\.2 One 20 ton/hour mill 17\.5 22* One 0\.75 ton/hour mill 81\.7 54\.5 FRRs 2 ton/hour mill 26* 22\.7 20 ton/hour mill 27\.0 23* 0\.75 ton/hour mill 92\.9 62\.7 * Situation Examined in Working Paper\. Source: Calculated by audit, see Annex 2\. 30 The Region has commented that the investment in estates mills is based on the following: (a) that the nucleus estate concept is used as a means of transferring technology and viable credit in order to achieve potential oil palm mono-crop yield increases of about 50% over those achieved under an SMU concept\. If it had been possible to design a project that would have the potential to effect these without a nucleus estate involvement this would have been preferred; (b) not being able to find a suitable alternative to the nucleus estate led to the option for a large centralized mill which maximised use of available skilled persons and reduced the risk of mismagement and misappropriation; for Ukwa nucleus estate and smallholders the peak processing capacity required would be for 120,000 tons of ffb (Annex 5-1 Table 1 TSAR) which is 36 tons per hour based on a peak month crop of 15% of annual production and a maximum of 500 operating hours in that month; the concept of running, at least, eighteen 2 ton/hour mills under a parastatal would be a high risk operation, demanding extremely tight management and probably an army of security guards who would still not be able to prevent pilferage of oil and the report rightly states on page 69 that a 2 to 3% can make the difference between profit and loss; experience in the public sector estates could not be ignored; however, there is sufficient flexibility in the project to review, at time of mill design, whether changed circumstances and new developments warrant a different option; the project funds provide for about half the needed capacity to cope with the crop in the initial years leaving about half to be constructed after the project period\. - 32 - Performance of OED 3\.22 This audit is unusual in (a) having access to an earlier PPAR of two cancelled companion oil palm projects (Loans 1183-UNI for Bendel State and 1192-UNI for Ondo State), and (b) the "delinked" PCR which sent to the Board on July 3, 1989\. This raises the question: How useful were these previous documents? 3\.23 As indicated elsewhere in this PPAR, the audit has been favorably impressed with the scope and depth of the PCR itself\. However, the current OED practice of transmitting PCRs to the Board without substantive comment, now appears to represent a poor use of OED resources\. The PCR had been read in OED, and key points noted; particularly the reference to the existence of ghost farmers, and the harmful effects of the Bank's negative attitude to intercropping of palms\. The audit believes that the Board would be better served, if OED routinely included brief substantive comments on the PCR in its transmittal letter\. 3\.24 The PPAR on the cancelled projects (OED Report No\. 4783) identified several of the same problems as this audit; notably the negative impacts of the Bank's insistence on sole cropping, the lack of counterpart funds, and difficulties in land acquisition\. It made no comment on alternative processing technologies, or the existence of a significant and competitive low technology processing sector\. 3\.25 The earlier PPAR shares with this audit the weakness that, though the deleterious effects of delayed and inadequate counterpart funding are identified, neither provides a very convincing explanation as to why this occurred\. - 33 - IV\. LESSONS AND FINDINGS "Since MEU is quite incapable of assisting States with smallholder fruit collection and pricing ***** memo, February 23, 1981\. "NIFOR is not quite the physical shambles I had expected\.", BTO, December 20, 1984\. 4\.01 Borrower Responsibility for Preparation\. The Imo State project was prepared and appraised by the Bank (the same staff member led both the preparation and appraisal teams)\. The Rivers State project was prepared for the Federal Government by a firm of consultants; who also provided staff to serve on the Bank's appraisal mission\. Thus neither project benefitted from an independent appraisal\. Project preparation is specified (OS, para\. 2\.12\.24) as a borrower responsibility with the Bank providing advisory assistance (OMS, para\. 2\.12\.29)\. Project appraisal on the other hand is described as a Bank function, by which the Bank decides whether to fine the project (OMS para\. 2\.20\.5)\. 4\.' 2 The Operational Manual has no explicit reference to possible over- I p in the staffing of project preparation and appraisal and overlap often occurs\.31 Overlap can have cost advantages, as knowledge acquired in preparation is applied at appraisal without having to be relearnt\. It can also be argued that separate staffing of preparation and appraisal does not guarantee the recognition of design faults, and may well require excessive documentation of the project proposal if its strategy is to be fully understood by the appraisal team\. Nevertheless, the overlap in staffing of preparation and appraisal in these two projects mede it likely that design elements (even flawed design elements) would be carried over from preparation to appraisal \.32 Consideration should be given to modification of the Operational Manual to ensure that projects are given an independent appraisal\. 4\.03 Farming Systems\. The Bank staff were curiously indifferent to the existing smallholder farming system\. This led the SARs to propose an oil 31 Despite clear definition of borrower responsibility for preparation, the OMS still makes reference to "upon return of the first preparation mission" (Circular OP\. 87/03 para\. 13), which suggests recognition of more than an advisory role for the Bank\. 32 If preparation were to become a Bank responsibility, then the advantage of the borrower only having to deal with one set of Bank staff, the advantages to the Bank of continuity of staffing, the mutual professional respect which takes time to establish, et-%\., might well argue for a policy of staffing with the same people; but would pose the question: should not this Bank prepared project be independently appraised? - 34 - palm project without properly establishing its profitability to small- holders (paras\. 1\.08 and 1\.09)\. It led to an attempted insistence on mono- cropping of oil palms, when a budget or listening to farmers would have shown this to be sub-optimal (para\. 2\.12)\. And, it led to acquiescence to the transfer of substantial land from the smallholder to the public estate sector, without a serious comparison of the relative profitability of resources in the two sectors\. 4\.04 Enclave Project\. The Bank staff were oblivious to the existing ffb processing and marketing system\. No effort seems to have been made to record prices and volumes of trade in non-project ffb and village produced oil and kernels\. The cost structure which led to the dismissal of small scale processing by the SAR does not seem to have reflected actual practice at the time (para\. 1\.21)\. As a direct result, the Bank staff do not seem to have appreciated that if the estates were able to offer a higher price for ffb than was provided by small scale processors, then the supply of ffb was likely to be highly elastic\. The projects, even the smallholder components, seem to have been envisaged as "enclave" projects without any direct inter-action with the existing oil production industry\. With the advantage of hindsight, it is difficult to see how such a model could ever have appeared plausible\. 4\.05 SMU\. The location of the SMU within the State Ministry of Agriculture, but with responsibility for servicing exclusively future suppliers of the nucleus estate was illogical\. It meant that the vast majority of palm producers in the State had to rely on the general purpose extension service for support\. It left room for considerable friction between the SMU (responsible for production) and the estates (responsible for collection, processing and payment), and it meant that potential suppliers to the estate did not receive their technical support from the estate\. It would have seemed more sensible to allow the estate to provide all services to its suppliers (so that it served as a true w*icleus estate), whilst leaving the Ministry of Agriculture to serve the balance of the smallholders as has been done in the new Tree Crops Project recently submitted to the Board\. 4\.06 Estate Profitability\. Given the changes which have taken place in the exchange rate, real wages and improvements in low technology processing, it is far from clear that estate production is competitive with smallholder production; if the estate pays the full opportunity cost of capital, foreign exchange, and land (Annex 1, para\. 3(iii))\. In particular, Adapalm's two 5 ton/hour mills which rely wholly on the purchase of smallholder fruit only just break-even without any contribution to overhead\. If their closure would save a significant amount of overhead Adapalm's profitability would be improved by shutting them down\. At the very least, this suggests the need for Adapalm to examine carefully the rationale for its current prices of smallholder ffb\. MEU has argued for the retention of these mills on socio-political as well as economic grounds, (see Annex 5, para\. 9)\. 4\.07 Sustainability of Estates\. With access to cheap land and capital, and the constructive guidance of experienced oil palm estate consultants, Adapalm and Risonpalm have emerged as viable, sustainable, parastatal - 35 - estates\. After allowing for the already described delays, it is the audit's view that the estate (but not nucleus estate) component of the project has performed very much as envisaged by the SAR\. The two estates supported by these two projects have much higher yields than the norm for public sector oil palm estates\.33 4\.08 Institution Juilding\. The MEU was established and funded under the Bendel State Project, which was presented to the Board at the same time as the Imo State Project\. As witnessed by the quality of the PCR, and the assistance provided to the audit, the MED has evolved into a respected and effective monitoring unit\. There is surprisingly little evidence in the files of either use of the MZ0, or efforts by Bank staff to assist in its development\. Progress reports from the MEU were consistently acknowledged without comment; and the marketing study was commissioned from consultants (who, as we have seen, para\. 2\.20, missed the basic marketing issue), rather than using the opportunity to build MEU's capacity\. Cancellation of the Bendel State Project, without making provision for the MEU and NIFOR to receive continued funding under the remaining projects, would appear to have been a significant oversight\. (See Annex 5, paras\. 2 and 10\.) 4\.09 NIFOR was not directly or officially supported under the project\.34 This seems to have been a major omission\. As the leading Anglophone African oil palm research center, it should have been at the heart of any African oil palm development strategy\. The direct difficulties for the project stemming from late and incomplete seed deliveries from NIFOR have already been mentioned (para\. 2\.10)\. More significantly, lack of farming systems and breeding work which could have been carried out by NIFOR, has almost certainly adversely affected the rate of improvement of the productivity of oil palms in Nigeria, and West Africa generally\. The project did not assist in the development of the MEU or NIFOR to the extent which might reasonably have been expected\. This too is at least partially remedied in the new Tree Crops Project\. 4\.10 Land Acquisition\. An interesting feature of the project design, was that land acquisition was not a part of the project er se\. Rather acquisition by Government of the land required for the Rivers estate was made a condition of effectiveness\. This meant (a) that the question of the availability of land, and the conditions under which it would be acquired were not appraised by the Bank, and (b) that (it being assumed that the Government had acquired it), the land was treated as a free resource in the ERR and FRR\. (This is wrong, even for Government controlled land, especially since it leads to the analyst failing to think through thoroughly the likely "without project" scenario\.) 33 See Tree Crops Project Staff Appraisal Report (TSAR), Annex 3, Table 1; showing other public sector estates to have yields in the range of 2\.0 to 3\.0 tons of ffb per hectare \. considerably less than smallholders covered by the NEU survey of about 7 tons of ffb per hectare at maturity\. 34 It was receiving help from UNDP on the design and evaluation of low technology processing equipment\. - 36 - 4\.11 In the audit9a view, it is not satisfactory for Bank projects to "wash their hands* of the cost of acquiring land from smallholder for project purposes, (paras\. 1\.23-1\.24; and Annex 4)\. 4\.12 Technical Assistance\. The successful establishment of the estates, has already been noted (para\. 4\.06)\. Beyond this, the Bank*s technical and administrative assistance to the oil palm industry appears to have been minimal\. The Bank found it necessary to reverse itself on intercropping (para\. 2\.12), its understanding of low technology oil palm processing appears to have been, and still to be, incomplete (paras\. 1\.21 and 1\.22), as was its appreciation of the extent of the existing small- scale/smallholder oil palm sector (para\. 2\.23), and the Bank's assistance to the Government in the resolution of the land acquisition problem, and project adjustment to available resources was clearly ineffective (para\. 1\.32(11))\. This said, the very onerous task faced by Bank staff, and the Implementing agencies, in the face of inadequate recurrent funding, and other difficulties noted above, must be recognized\. Given the decisions that these two projects would continue as appraised (para\. 2\.27), it would be unrealistic to have expected them to have performed much better\. 4\.13 For a project primarily justified initially on the basis of Nigeria's need for technical assistance from the Bank, this is disappointing, to say the least\. 4\.14 Bridaini Loan\. In addition to relatively routine responsibilities of supervision of planting and construction of the mills, the consultants played a vital role in Rivers State (para\. 2\.16) in arranging for a private sector loan in the face of inadequate project funds\. This pro-active initiative avoided a debacle\. 4\.15 Sound Varietal Basis\. The above reservations not withstanding, the very much higher yields of tenera over dura palms (para\. 1\.05), the successful estate plantings by Risonpalm and the demonstration effect of the scattered smallholder planting, all point to significant, but hard to quantify, benefits from the project\. - 37 - ANNEM 1 ALTERNATIVE PROCESSING TECHNOLOGIES 1\. The audit has been Impressed with the extreme difficulty of comparing alternative oil palm processing technologies\. There is no shortage of assertions as to how individual units perform; but there is a great dearth of objective operational data, and an even greater dearth of comparative data\. Small-scale boiling water or atmospheric steam, and large-scale presasurised steam processing technologies differ markedly\. They imply (a) different transport costs (lower for small mills), (b) different capacity pay appropriate quality premiums (lower for large mills), (c) different waste disposal problem (lower for small mills),1 (4) different free fatty acid content (lower, therefore better for large mills), (e) different extraction rates (lower, therefore worse, for small mills); not to mention capital costs (lower for small mills) sophistication of managerial and technical staff (lower for small mills) and labor requirements (lower for large mills)\. There are also a number of conceptual "traps" in trying to arrive at a valid comparisons comparing throughput per ton fft will yield a different answer than per ton of oil produced (if the extraction rate differs between systems); and identical hourly throughput may correspond to quite different annual throughput if one system can work longer hours than another, etc\. It is not that objective data cannot be obtained, nor that conceptually correct comparisons cannot be made; but rather that after more than a decade of Bank involvement with oil palm they are not readily available\. 2\. The basic fact, in the context of the two projects under review, is that smallholders are not supplying their tenera ffb to the project mills\. This can be easily documented, as in the case of Adapalm, where 971 of ffh purchased from smallholders in the first four months of 1989 were dura ffb, whereas the project planting were entirely of tenera\. An unknown proportion of the remaining 32 of supplies comes from project plantings; but none of the dura can come from the project\. (See also para\. 2\.24, footnote 9\.) Project smallholders in Imo State apparently prefer to have their tenera fft processed by non-project low technology mills\. 3\. Three explanations can be advanced for the lack of smallholder teners supplies to project mills: 1 The high pressure screw pressured in large mills result in contamination of the oil with crushed cells which have to be washed out with a centrifuge\. The resulting waste water has a high bod content\. - 38 - i) It is possible that "moral hazard" prevents large mills competing effectively for tenera\. The problem is that suppliers may remove a significant proportion of "loose fruit" from their fib, before supplying the ffb to the mill\. This reduces the oil content of the fib supplied and means that extraction rate (oil per ton of ffb) is depressed\. At Adapalm smallholder supplied tenera ffb have an average extraction rate of 12\.1% versus 19\.4% for estate produced tenera ffb\.2 Small mills can overcome this moral hazard problem in two ways; they can act as "custom processors", so that the supplier takes delivery of all oil extracted from his ffb for a flat milling fee, or the processor may buy the ffb on the palm and arrange for harvesting\. In the former case the supplier has no reason to remove "loose fruit", in the latter he cannot\. Even where a small miller is buying ffb delivered to the mill, he can still record the extraction rate from individual suppliers, thus allowing him to warn suppliers that their ffb did not perform well, and to adjust price accordingly\. In the large mill, the ffb from separate smallholders are inevitably mixed before processing, thus leading to a loss of the identity needed to monitor the performance of ffb from different smallholders\.3 1i) There is some evidence that estates do not pay an adequate premium for even the modestly improved extraction rates of smallholder teners as compared to dura\. At the time of the audit, palm oil was selling for X3,885 per ton and Adapalm was paying 1290 per ton for dura ffb yielding 9\.1% oil, and 1320 per ton for smallholder tenera yielding 12\.1% oil per ton\. At N290 per ton for dura, the smallholder tenera would give the same gross margin per hour at a price of 1406 (versus 1320 being paid); conversely, using the 1320 price for smallholder tenera as the criterion, dura ffb were worth only 1203 per ton (versus 1290 being paid)\. Some rationalization of purchase prices would thus appear justifiel in order to try to increase the proportion of tenera purchased\. 2 In part estate produced tenera may have a higher oil content due to better cultural practices; in part some "improved dura" may be included in "smallholder teners"; but the major explanation for this difference is probably the removal of loose fruit before the ffb are supplied\. 3 Estates could still purchase smallholder ffb on the palm, and do their own processing\. This does not seem to be a common practice\. Visual inspection at the mill would permit some correction for stripped fruit; however, this does not have the same impact of giving the producer exactly the oil produced from his fruit\. - 39 - III) Possible lack of competitiveness of the high technology mills\. AdapalmOs 5 tonlhour mills at Umogo and Nbawali, which process exclusively purchased ffbt, only just break-eveng making no net contribution to Adapalm overheads\. Thus they could not afford to pay mo--, for dura\. As we have seen, a higher price for smallholder tenera (if accompanied by a significant increase in supplies) could possibly increase profits (as could a reduction in the price of dura, if not accompanied by a big reduction in supplies)\. Nor is this simply the result of the small scale of the 5 ton/hour mills\. If the 30 ton/hour Ohaji mill achieved its current output, but on the basis of the same ratio of dura and smallholder tenera, as the Umojo mill, then the Ohaji mill would have a gross margin of N-1\.66 million (i\.e\., a loss of 11\.66 million before allowing for depreciation or overheads) rather than a gross margin of 19\.45 million in the period January to April 1989\. At the time of the audit, estate produced ffb were being supplied to the mill at a transfer price of 195\.75 per ton\. This price was sufficient for palm production to just break-even; but was far below the market price for good quality tenera ffb, of about 1600 per ton\. Using this market based transfer price, palm production made a profit of about 17 million, and processing of about 11\.8 million (before overheads) in the first four months of 1989\. There is thus considerable doubt as to whether the high technology project mills can cover the full costs of their operation\. At Adapalm it was palm production, not Processings that was the real profit center\. 4\. Two basic oil processing technologies were identified by the SAR with the oil extraction rates listed in Table 1\.1\. 5\. Since a 22 or 3% change in extraction rate can make all the difference between profit and loss, it is clear that the diversity of the above estimates leaves room for a variety of interpretations\. However, it appears (a) that the theoretical yieles for the pressurized steam process appear to over-estimate actual extraction rates, and (b) the staff view of W 40 - Table 1\.1s ALTERNATIVE ESTINATES OF OIL EXTRACTION RATES (2 oil from tenera ffb) Hydraulic or Pressurized Spindle Press Steam Eatimate SAR 19\.2 22\.0 Large Mill Consultants 21\.4 Adapalm (Records) 19\.4 Bank Staff (Nov\.,1989) a 17\.0 23\.7 FAD Consultant b 18\.5 Small Mill Consultants c { 19\.1 to { 23\.3 a Memo \. subsequently qualified by the observation that "There Is a lack of data relating to continuous operations of low tech mills over an extended period and thus a tendency for conservatism\." (Memo, February 22, 1990)\. b "Project Appraisal Report for the Ghana Tree Crops Project in Respect of Small Scale Palm Oil Milling", April 1989\. c Calculated from data supplied with follow up comments on "The Establishment of a Palm Oil Processing and Training Centre/Service Company and Replication of the Existing Mill in Ntinanko, Ghana,' July 1989\. See Tables 1\.2 and 1\.3\. the loss in going from pressurized steam to a hydraulic or spindle press has doubled from the SAR to the most recent estimate\. The 17% extraction rate for the hydraulic hand press cited by Bank staff in November 1989 corresponds to the extraction rate used in a Bank comissioned report "The Establishment of a Palm Oil Processing Training Centre/Service Company and Replication of the Existing Mill in Ntinanko, Ghana, July 1989\. Audit discussions with the authors of this report revealed that the 17% extraction rate used in the report was simply an assumption without any independent basis\. When actual oil extraction data was submitted, it referred to two mills at different locations, each of which had processed a mixture of species\. The basic data are shown in Table 1\.2\. - 41 - Table 1\.2: OIL YIELDS OBTAINED WITH KRAMER MILLS Weight Oil Composition (%) Location of fib Extracted Yield Tenera Deli Dura kg kg 2 Prestea 2,580 358 13\.8 25 39 36 Prestea 1,140 178 16\.6 44 48 8 Prestea 980 142 14\.4 40 42 18 Prestea 870 158 18\.1 64 31 5 Ntinanko 1,360 228 16\.7 42 46 12 Ntinanko 460 81 17\.6 54 39 7 Ntinanko 200 44 22\.0 85 15 0 Ntinanko 566 99 17\.5 56 37 7 Ntinanko 1,460 244 16\.7 43 47 10 Ntinanko 460 72 15\.7 42 43 15 Source: P\. Waraka, personal communication\. 6\. Apart from possible differences in the oil content at the two locations, the Prestea mill are for one pressing only, using the hydraulic press\. Results from Ntinanko include a first pressing using hydraulic press iamediately followed by sorting and second pressing using a spindle press\. 7\. Regression esimates of the yield for pure tenera are reported in Table 1\.3\. The third observation at Ntinanko was calculated with and without this observation, resulting in yield eatimates of 23\.3% and 19\.1% when the oil from the second pressing is included\. The Prestea data suggested a yield from the first pressing of 22\.91\. Table 1\.3: REGRESSION ESTIMATES OF OIL PALM YIELDS Location SaMgle Yield Prestea Full 22\.9 * Ntinanko Full 23\.3 * Ntinako 5 Lowest 19\.1 * * Statistically highly significant (P(0\.01) 8\. For completeness, and since ther has been some dispute as to the quality of this data, two relevant letters are attached as Appendix 1\.1 and 1\.2\. See also reservations expressed by the MEU, Annex 5, para\. 6\. - 42 - ANNEX 2 ECONOMICS OF HIGH VERSUS LOW TECHNOLOGY PALM OIL PROCESSING 1\. Working Paper 1, Annex A of the SAR for the Nigerian Tree Crops Project (Loan 3126-UNI) provides budgets for some alternative oil palm processing investments\. These investments differ (a) in hourly processing capacity, (b) use of high technology (pressurized steam) or low technology (boiling water or unpressurized steam), and (c) the mix and pattern of ffb to be processed\. All estimates in the Working Paper are based on imported equipment\. Key assumptions are given in Table 2\.1 below (where the 0\.75 ton/hour mill comes from a separate report, as noted, and relies on domestically produced equipment)\. Table 2\.1: KEY ASSUMPTIONS USED IN BANK ANALYSIS OF ALTERNATIVE PROCESSING INVESTMENTS Mill Size (ton/hour) \.5 $\.76c 1\.9 1\.6 2\.9 3\.0 19\.9 29\.0 Technology Low Low Low High Low High High High Extracion Rate ) oI ura 9 9 9 9 9 9 9 9 01I Tenera 18 2d0 18 20 18 29 20 20 Kernels Oura 9 9 9 9 0 5 5 5 Toners 9 9 9 9 9 8\.5 85 8\.5 Capital Cost (N illIon) 9\.64 0\.22 1\.22 3\.6 1\.8 e\.9 24\.0 87\.9 (N ml i Ion/ ton/hour) 1\.98 0\.29 1\.22 2\.88 0\.99 2\.30 2\.49 1\.90 ftb X u6r so so so s so 8 2a g b Tenera 5 B so 79 5 70 89 19 ERR 18 NA 20 25 27 29 20 22 FRR 18 NA 20 25 26 29 29 28 Source: Nigeria: Tree Crope Project\. Project file*, Working Papers, Report 74294Mll\. * 6:101 In year 4\. b 26:74 In years 8 and beyond\. o *The Establishment of a Palm 01i Processing Teatning/Service Company and Replication of the Existing Mill in Ntimanko, Ghana,m July 1989\. d Assumed to be 171 In the eeport, but without any empirical basis, therefore cangW to 25 In IIne with the subsequent date provided by the consultants\. See *Iso *Project Appraisal Report for the Ghana Tree Crops Project In Respect of Small Scale Oil Milling\.' NA a Not calculated In the report\. - 43 - 2\. Though the 2 ton/hour low technology mill has the highest ERR and FRR according to these calculations, this is more a function of the pattern of tenera and dura assumed to be available, than of differences in operating costs\. To get a better idea of relative profitability ceterus paribus, the pattern of ffb were standardized in the following ways: i) The same pattern of deliveries as the 20 tonihour mill shrunk (multiplied by 0\.0946) to meet the processing capacity of the 2 ton/hour mill\. ii) The same pattern of deliveries as the 2 ton/hour mill but expanded (multiplied by 10\.57) so as to utilize the full capacity of the 20 ton/hour mill\. iii) In addition, a domestically produced mill was evaluated for the 2 ton and 20 ton an hour patterns of ffb deliveries\. 3\. To obtain the 'cost structure" of the domestically produced mill, capital cost estimates were taken from the Bank sponsored study "The Establishment of a Palm Oil Processing Training/Service Company and Replication of the Existing Mill in Ntinanko, Ghana", July 1989\. Unfortunately this study has pooled its estimates of mill and training center operations so that meaningful variable costs, even for Ghana, cannot be obtained from the report\. Accordingly the Working Paper operating costs for a 1 ton/hour mill have been used\. This ensure that the same type of staffing standards used for the 2 and 20 ton/hour mills are utilized for the 0\.75 ton/hour mill\. The resulting ERRs and FRRs are given in Table 8 of the main text\. 4\. There can be argument with the assumptions used in the Working Paper, such as whether the smaller mills should have better provision for waste disposal, or would not be able to achieve some income from the sale of kernels, or whether an increased Nigerian content in the low technology mills could not be used to reduce costs, etc\. Nevertheless, the performance postulated in the Working Paper for imported mills (2 and 20 ton/hour) is sufficiently comparable, to destroy the argument that high technology mills enjoy a prima facie advantage, even on large estates\. Both economic and financial rates of return are more dependent on the pattern of ffb deliveries than the type of imported equipment used\. 5\. The domestically produced, low technology mill, on the other hand has a clear advantage over the imported mills on both economLc and financial criteria, and for both patterns of ffb delivery\. 6\. The SAR for the new Nigeria Tree Crops Project (TSAR) is dated February 28, 1989\. Subsequently the Bank has received two commissioned reports on the Ghanian low technology mill: - 44 - i) Project Appraisal Report for the Ghana Tree Crops Project in Respect of Small Scale Palm Oil Milling, April 1989 and ii) The Establishment of a Palm Oil Processing Training Centre/Service Company and Replication of the Existing Mill at Ntimanko, Ghana, July 19, 1989\. On one hand, the TSAR Is consistent with these later reports in that "To encourage local fabrication, provision is made for financing importation of materials and equipment for manufacturing of equipment and spares for sale to oil palm \. processors," (TSAR, Annex 4-2, para\. 4)\. However, at a deeper level, there is a basic problem in the size of the loan\. If the locally produced mills are used, the (major) processing component of the loan could be cut by from two-thirds to five-sixths (conversely the TSAR provides for lending three to six times as much for processing, as locally fabricated plants would require)\. Moreover, if it is argued that estates inherently require large scale processing plants, the higher ERR for small scale technology processing may even place in question the economics of estate development\. The TSAR deals inadequately with these key issues\. It is almost as if the authors had forgotten that the purpose of calculating an ERR is to pick the most beneficial project design (not just to show that the design, chosen by some other method, happens to have an ERR in excess of 10%)\.1 1/ The Region has commented that "the TSAR analyses of alternative processing investments is designed to indicate what type of dura and tenera ratios would be needed for different capacities to provide for an acceptable rate of return for potential credit line investors\. According to data obtained from banks, most applications were from those with plantings of tenera but in many cases proposed mills that would be dependent on additional supply of ffb from other sources which in the Nigerian context would most probably be of the dura type\. As a base case it was assumed that an investor would have access to at least a 50% supply of tenera material given that he had an oil palm plantation/holding of his own\. The basic locally-fabricated low-tec model was a 0\.25 ton/hour mill which was not achieving its rated capacity\. Equipment costs for this mill then (February 1988) were Naira 100,000\. If this is put on an equivalent basis with an imported 0\.5 ton/hour costing N540,000 in total then the additional cost would be: civil works, etc\. 1110,000, and doubling nominal capacity H100,000\. the total cost of N310,000 would be for a mill that would operate only one shift while the imported mill would be on two shifts\. Thus in effective capacity terms there did not appear to be much difference in costs\. In the Ghana case the costs for the 0\.75 ton/hour actually relate to an operating capacity of 0\.5 ton/hour for a single shift\. Thus given this and the dispute over extraction rates for low- tec mills we need to exercise more caution in evaluating investment efficiencies\." - 45 - 7\. In addition to the technological competition discussed above, there may also be major differences in the coat of technically similar equipment purchased from alternative sources\. This is likely to be particularly important as low labor cost palm oil producing countries develop the engineering skills to maintain, and even fabricate, high pressure processing plants\. The TSAR project design does have the flexibility to allow project participants to take advantage of such cost reducing developments as they occur\. - 46 - LOAN 191: RIVERS STATE: DELAYS IN BOARD PRESENTATION Dats Remark May 8 Appraisal alssion might be scheduled for lts second or arly third quarter FY '76, (ie\. December 1975) June 11 No provision for appraisal In FY 76 Suggested Dates - Appraisal 9/76, Negotiation 4/77, Board 0/77, and Effective 12/77\. February 26 Appraisal not included in FY 77 work program; appraisal only possibly by substitution for another project (i\.e\., not before July 1977)\. June 11 Agree to appraisal end October, 1976\. July 8 Project Brief July 8 Notification that dovernment will carry out project without Bank assistance; and arrangements for appraisal should be discontinued\. August 10 Agreement with Government that project will be considered for Bank funding\., with appraisal in mid-October\. August 16 Confirmation of Government desire to have project appraised\. August 19 Appraisal schedule for October 21, through November 18\. October 21 Appraisal mission in fleid\. November 8 Telex states 9In view of Government Policy to offer Landownere Ten Percent Paid Up Capital Share\. Company do not anticipate any major problems in Land acquisition*\. November 26 State Government wrote to the Bank Ithe issue of providing land to the project has been successfully reviewed by the Ministry of Land and Survey*\. • 47 - Oeber 3 Koses\. Pame\. h\.2g Leher to Overnmmnt se~ '1 weuld b\. a cod161\.n of Len nelgollen - carrenly *cheduled for May/June 19v7 - tho% at leagt 3,6a he of land had been acquired\. January 5 Deelsen lemorandum elreulatod, with d«uelen that acqui161tIn and transfer of 8,gg ha to Iiseonpalm, under conditilon aceptAble to the count1e involved, should b*a cnd1iItløn for invltaoøn to ngoltion\. January 6 Sank inform Federal Governmni that 3,g ha of land sheould bo acquired not later than March\. The appraal r ert to b\. elroulated by the wnd of February, with loan negto6tloen around June 1977\. February 17 Th\. Camisionr of Agricultero øgreed *to take appropriate ae6on regarding reaching agreement wIth tb local comæentle involved\. free end of March nthly reporte would b\. subaited en progres In acquiring tb* land*\. March 1g-25 Letterm, ~os6ly hamnd-rien, froe community leaders, indleating agrement In prineaple to providø land for the project\. march 2g C«n tro\. CPS tat land squiitIon may tak* lenger than envisaged in te Yellow Cover Appraial Rert\. Apri 16 Appraisal Reprb Subeltted to Lon Comitte\. April ig Tel«x refer* to Omajor land acquisitton problem havo areien*\. April 26 Tel«x sys OLand equi6Itioe now maklng satlefatry progres\. Anticipate firs6 ,M ha will b* b~undary urveyad and conveyance to Rioenpal drawn up by early June\. Stote a1lI plan to n Ieoato in Waohlngton and to end June\. April 3 Comissioer of Agriculture *Ith Bank project offler over-f ly he project area\. May 11 Green Cover Aealeol Rer% sen to Government; negotløons ~cheduled for ild to end Jun\. - 48- May 23 Memo to VP West Africa Region says that 'since we have heard from the Resident Mission that the (3,60 ha) land selected\. will be made available\. We feel we should not hold up negotiations, but propose not to go to the Board antil the actual transfer has taken place'\. May 24 Presidents Report submitted to Loan Committee\. May 2? In absence of objection free Loan Comeittee, Notice of Intention to Negotiate were sent for distribution to Executive Directors\. May 27 CPS points out the Resident Missions assurances are not specific; and suggests specific progress towards land acquisition be documented prior to Invitations to negotiatione\. June t8 *Acquisliton of Land for Nucleus Esate The perimeter demarcation of the initial 8,i ha Is proceeding more slowly than anticipated\. This is partly due to shortage of labor but also it would seem that contact with heads of local communities Is not always easy to coordinate\. Mr\. Brigs of Rlsonpelm Is responsible for this exercise and the Commissioner Instructed him to put a maximum effort Into getting the perimeter trace completed before the end of June\. Briggs estimates that they are about half-way now after about 8 weeks in the field\. I stressed the fact that the Bank would not lsue the invitation to negotiate the loan unt I there was clear evidence that the 3,00 ha had been scheduled for July 25th there was an urgent need to (a) complete the perimeter trace cutting (b) draw up an agreement with communities concerned which included the monetary term under which the land would be acquired by the Government for conveyance to Risonpalm (c) make payment of the agreed amount to the communities and (d) of acquisition could bo formally gazetted and the land subsequently formally would probably Involve two or three monthe to go through the legal procedures Involved and and wanted to know whether the Bank would accept the completion of (a), (b) and (c) above as sufficient evidence of land acquisition to Issue the Invitation to negotiate\.' June 8o Letor from Rivers State Government confirming that 9l1,00 hectares to be conveyed to Risonpalm Limited for the nucleus Estates using the land lease (over S0 years) rate of 50\.0 per ha and 185 of net profits per annum\.9 July 11 Telex from Bank states I(e), (b) and (c) (i\.*\. no need to have gazetted land acquisition), would constitute sufficient progress and acceptable risk to Issue invitation to negotiation\. however actual progress appears somewhat slower than anticipated\.' - 49 - July 19 On July 19, 1977 four members of the Rivers State Executive Council namely: The Coammissioners for Agriculture, Finance, Lands and Survey; and Health together with the General Manager of Risonpals met with representatives of the communities that own the land to be acquired for the Nucleus Estate\. 2\. It would see that the leaders of the various communities concerned had not fully understood what the project was about\. The Honorable Comissloner for Agriculture outlined the Government's proposal regarding the development of a Nucleus Estate including an investment of N45 million and the need to lease 11,01S he for a period of 60 years\. The conditions for leasing were as followas (a) The annual rental Is to be fixed at M2\.06 per he with five years rent paid in advance\. (b) After 20 year* the rental agreement will be reviewed\. (c) A legal agreement will be drawn up between the Government (Risonpala being the entity concerned) and the communities involved and a copy will submitted to the Bank\. (d) The monies for paying the 5 years rental Ie available in Risonpalm's 1977/78 budget, and will ix paid over as soon as the negotiations with the communities has been completed\. 8\. Some relocation of the nucleus estate may be necessary in order to accommodate the wishes of the local communities\. July 22 Telex says Orequired steps unlikely to be completed before late August\. Negotiations will have to be deferred to early OctoberO\. August 1 Story In Dally Times, reports on the project saying inter alls: He assured the people that appropriate land compensation would be paid to them\. He also enumerated some of the amenitles that would be provided as a result of the project\. These included schools, pipe-borne water, electricity and good roads\. August 11 Telex OSeveral weeks effort by high powered commission consisting of four Commissioners set up by Exco to agree with communities concerned on long-term lease arrangements have proved futile\. State Government therefore decided to require Initial 8,80 he for estate\. Compulsory Gazette notice to that effect to be published this week\. Surveyors to begin trace cutting next week and expected to complete exercise by mid-September\. Negotiation with communities on compensation for acquisition of land underway with Government expecting to settle for N259 to 80 per he but not exceeding this sum Payments to communities to be made first half of Septembers\. August 18 Telex ONow expect negotiations November, Board presentation third quarter*\. - 50 - August 19 Letters from consultants: * 1\. Land aval lability We have noted that: * the Ministry of Lands and Survey* has invited agreed surveyors for bids and Intends to award the surveying contract before end of this month - the Ministry expects the surveying work for the 8S8M hectares boundary to be completed in about four weeks - the gazetting would take place afterwards and require two more weeks\. We must thus already assume that the land, even for the nursery, will not be available until oid-October at the soonest'\. August 26 Memo 'Envisage negotiations not before mld to late November\. At least things have started to move albeit very slowly*\. September 9 Telex ONegotiations Rivers oil palm presently envisaged end November early December'\. October 5 Memo \. pessimistic about land acquisition \. doubtful that loan negotiation could take place in November'\. November 8 Telex 2M1d to late January could be date for negotiation*\. December 9 Meo 'Land acquisition\. There has been little substantive progress to date\. However, on Friday 2nd December, the surveyors went into the Apont Area accempanied by a military escort\. On Saturday 3rd December, we were Informed that they had been well received by the local communities and had manage to start cutting a trace into the North Western area of the project\. The people were apparently quite keen to be employed on trace cutting and if this attitude continues for the next week or too the solution to the problem of land acquisition could well be reached'\. December 15 Letter from Bank President 'oil palm development in Rivers State has been delayed because of problems related to the acquisition of land required\.I am pleased to hear that progress is now being made\.and hope our target date of loan negotiations in March can be mat'\. 1978 January 4 Telex: 'Mot Commissioner of Agriculture and surveyors yesterday\. Land surveying going on unhindered but very slow about half done\. Estimate will be completed before end January'\. January 10 Memo There is reasonable chance negotiations can be held in March 1978'\. - 51 - January 16 Memo *trace cutting has been slower than expected but Intended to lacrese staff to accelerate the process\.proposed loan negotiation In March could be effecteds\. February 2 Tele%: 91ave flown area \.trace cutting quite good expect detailed map end final computation of area within two weeks*\. February 2 Telex: 6Dearcation of Initial 8,009 he nucleus estate now completed and therefore Invitation to negotiate project first week In April could proceed"\. February 19 Telex ORivers 01i Palm Loan negotiations\. In view of time constraints for processing documents to Board of Executive Directors and urgency of project for FY78 lending program, region proposes to pre-segotiate loan In field\.begin Monday February 270\. February 17 Telex\. 'Understand Director of Agriculture and his assistant on tour week comencing Feb\. 27'\. February 29 Telex invites Government to negotiate loan at unspecified date\. February 29 Memo\. 60overnment has agreed to pre-negotiations in field commencing the week of March 0, 1978 \. legal documents sent by pouch on February 17 have not arrived*\. March 2 Memo\. '\.condition of the Invitation to negotiate completion of trace cuttings and turning over of compensation for the land) have not been met \. prenegotiatione should continue but they would not be closed until the conditions have bese fulfil led'\. March 9-14 Pre-negotiation held in Lagos\. March 18 Telex from Government confirming their acceptance of invitation to negotiate begins April 2rd\. March 21 Memo\. *Reported that the land acquisition problem had still not been resolved\. Reportedly 75,009 has been paid into the State Treasury, but the acquisition cannot be gazetted until a map is prepared\. Despite this formal negotiations should take place in Washington, April 8-7, as scheduled\. However, at negotiations It is imperative that Board presentation should be subject to completing all requirements for the Initial land acquisition of 3,60 he, including gazetting\. This procedure should minimize possible delays In processing the loan\.' - 52 - March 29 ~s9 o 6, veui alt Land In the Mi l try Governor øf hM r*løvah% Stat\. April -8 Ne6laIlong In Waashnglon\. April 14 Telex\. Cer1tlfal ef Ocupaey ready for eignature by Stat »overner\. May 1 M~\.o\. The obui lding les~ tubal6td by Rivere Stat\. Governmen acm\.ped aa v*lld Intrumat, aubject to alner revisons\.1l% would b\. polntlesm to deley lan prøee«Ing for essentlally formaeisle detlelenele\. June 8 (1978) ord Presnatln and approval\. - 53- ANNE 4 onori UUEU ---PAL RISQAPAtM UilITID 16A ELECHI BEACH\. P\.M\. 235\. PORT HARCOURT\. NIGERIA TEL: (084) 301100\.4 TELEX: 81369 NO\. RSL/C\.5 3rd April, 1990 The Chief Agriculture, Infrastructure & Human Res Division Operations Evaluation Department World Bank 1818 H Street, NW Washington DC 20433 USA Dear Sir RE: NIGERIA: IMO OIL PALM PROJECT (LOAN 1191-UNI) AND RIVERS OIL PALM PROJECT (LOAN 1591-UNI) PROJECT PERFORMANCE AUDIT REPORT We write to acknowledge receipt of the Project Performance Audit Report under cover of your letter dated 1st March, 1990\. The Report, as it affects our Company is true and fair, except for the following observation - * See footnote *At page 24 of the Report, there was an indication 12, paras\. that Government had clearly committed itself co give 1\.35(iii), landowners a 10% equity in Risonpalm\. 3\.02 and 4\.11\. Risonpalm Limited is 100% Government-owned and there are no available records in the Company indicating that 10% of its equity shareholding will be given to the landlords\. We are suspecting that perhaps, while the land acquisiticn was in progress, the negotiators might have mentioned such promise to the landlords\. The Board and Management of Risonpalm Limited are not aware of any 10% equity shareholding promised to the landlords by the Government, as it would amount to partial privatisation of the Company\. While thanking you for the promptness of your Reports we assure you of our best attention at all times\. Yours faithfully for: RISONPALM LZ A I UCHENDU' MANAGING TOR/CHIEF EXECUTIVE -55- ANNR 5 ASON&Page I of 2 TREE CROPS/AGRICULTURAL PIOJECTS MONITORING & EVALATION WT FEDERAL DEPARTMENT OF AGRICULTURE AND RURAL DEVELOPMENT FEDERAL MIN OF AGRIC\.WATER RESOURCES & RURAL DEVELOPMENT Central Road, G R A Tel: 052-44U8 244 822 PM 1189 Telex: Nigeria\. Ret MEUIADM 171/468 Dateoth April 1990 The World BanV, 1\.B\.R\.D\.# 1818 R Street, Washington D\.c\. 20433, U\.S\.A\., ATTENTION: MR\. GRAHAM DONALSON Dear Sir, TC NEU'S COMMENTS ON THE PROJECT PERFORMANCE AUDIT REPORT FOR THE IMO AND RIVERS STATES IBIRD ASSISTED OIL PALM PROJECT With reference to your letter of March 1, 1990, you will find below, details of our comments on the 'Project Performance Audit Report, Nigeria, lao Oil Palm Project (Loan 1191-UNI) Rivers Oil Palm Project (Loan 1591-UNI)'\. see 1\. TC MEU agrees that the problem of counterpart funding was a major bottle- para\. neck in the oil pals projects reported on except that the estate component 3\.20(vi) of the Rivers State programme faired better\. The new programmes have greatly reduced this burden by substantially increasing the loan components of the project funds and by insisting on either down payments or deduction at source by and from participating States\. These measures will assure that new projects have initial money to spend before qualifying for reimbursements\. 2\. Bank preference for immediate loan cancellation if local funding fails See to come on schedule does not solve any problems\. Take the issue of Bendel para\. 7, State loan cancellation for instance, while the Bank cancelled the loan in 3\.11, June 1982, thereby depriving TC NEU and NIFOR the needed assistance to perform 4\.08 their functions satisfactorily, TC MEU still had to render the necessary technical assistance to both the lao and Rivers States' oil palm projects without funding from the World Bank\. Although these agencies performed credita- bly under very limited circumstances, necessary manpower and infrastructural developments suffered as a result while working equipment were non existent\. 3\. The issue of farmers' resistance to monocropping was real\. Subsequent projects are taking the farmers' farming systems into consideration in designing new projects\. 4\. We believe that the installation of two 5 tonne ffb/hr\. mills was a sound decision, and will stil' support that in future\. Such integrated mills See assure good quality palm oil\. It is true that not much attention is being para\. paid to the level of free fatty acids in palm oil produced by smaller mills 2\.24 but it will amount to short sightedness to assume that this situation will continue in Nigeria indefinitely\. However, we support that in future such mills should have base plantations of between 500 - 1,000 he as a fall back strategy\. We also advise that such future mills should be planned to be in place 3 years from the initiation of planting\. These mills came so late that already the culture of individual procesing had been deeply entrenched in these* ammllholder\. eenC M asstas m no Oran sortS - 56 - ANNEX 5 Page 2 of 2 5\. On crop choice, it will be interesting to look at the profitability levels of all crops that can grow within the same environment as the oil palm\. However, it is our view that the choice of oil palm is a wise one even when gross earnings from oil palm are compared with gross earnings from arable crops\. Let us take tree crops for example\. i\. Oil palm under the smallholder condition will yield about I tonne See para\. of palm oil per ha and this will gross about N5,000 - U6,000\. 12 and 1\.08 ii\. Cocoa under smallholder with a yield of about 700 kg/ha and at the 1990 constant prices will sell for about N4,500 - N6,000/tonne of dry beans\. This means that the gross from cocoa will be between 03,150 - W4,230 per ha\. iii\. Maize, under the smallholder will yield about 2 tonnes of grain/ha and at the 1990 price of N1,200/tonne, will gross V2,400/year\. Like I said earlier, this will be an interesting study\. 6\. On page 13, under processing technology, the extraction rate figures quoted for the rural oil palm kit mill and the hydraulic hand presses are See too high\. Our experieuce shows that at best, 15% extraction can be got from para\. these mills\. Actual practical real life situation suggests 13 - 15% extraction 1\.18 and rate\. Like I said in paragraph 4 above, it will be inappropriate to think Annex 1, that Nigerians don't need high grade special palm oil (SPO) with ffa content of gara\. 8 under 3%\. Nigerians eat a substantial quantity of red/crude palm oil and the issue of quality is gradually becoming a major one\. If one goes to the market to buy crude palm oil today, premium prices are paid for SPO from large integrated mills popularly refered to as "Agric\. Oil"\. The differential can be as high as N1,000/tonne\. 7\. On page 19, we agree that Price Policy Committees are irrelevant more so now that privatisetion is the in-thing\. Market forces are better determinants\. Corrected 8\. On page 27 - 2\.03, the date of December 1978 is incorrect\. I think youir mean February 1976\. See 9\. As suggested on page 61, we do not support the closure of the two para\. 5 tonne/hr\. mills that process smallholder fruits\. They serve a very good 4\.06 socio-politico function and\.will be readily useful when the increased small- holder plantings taking place'these areas start fruiting\. See 10\. On page 62- Institution Building: As was rightly pointed out, there was no effort on the part of the Bank to assist TC MEU either to develop para\. 7, 3,11 its manpower through training or improve its infrastructure\. In fact, the 4\.08 Bank by cancelling the Bendel State oil palm loan in 1982, abandoned MEU to its fate\. MEU only managed to survive entirely through local sourcing of both funds and materials and no staff of MEU benefitted from any needed oversea's training from 1981 - 1989\. It is hoped however that the new Tree Crops loan will redress a lot of these short comings\. Noted 11\. The Audit Report is a good piec of job\. Yours faithfully, X\. 1\.7a National Coordinator, TC MEU - 57 - APPENDIX 1\.1 Page 1 of 2 January 19, 1990 Deer Sir: I attach results of ten extraction trials conducted qver a per4oa of time at two project situ* using the K04mer equipment\. Theoretical oil content was arrived at u4$ng the following percentages on an FF9 besiss Tenera 242 Deli Dura 17% Dura 14% Results from Preotea are for one pressing only using!the hyaraulic press\. This is due to the fact that proce#sors at Prestea, after first pressing and sorting of nuts free the fibre, wait several days before carrying out a second pressing using a spindle press\. Results from Ntinanko include a first pressing using bydralic press immediately followed by sorting and second presing usino spinale pres"\. In all cases the results are for clarified oil\. Anlysis of three samples by Food Research Institute have yielded an average water content of 0\.19%\. Unfortunately we have not made separate measurements for firsV and second pressing at Ntinanko\. Observation indica*es that (he greater the nut: fibre ratio the lower the efficiency of the first presing of the pulp, and the greater the benefits to b realised by sorting and second pressing of the fibre\. In vie: of this the efficiency result for the trial conducted at Prestea on L October, 1989 is higher than we would have expeatc0d\. With resaect to the trials run at Ntinanko the efficiency reI it for 7 July, 1989 appears high\. Although we have included it you may choose to disregard it\. With these caveats we jfel that the results represent a realistic picture of the gener&l efficied y of the Kramer mill under working conditions\. Sincerely, - 58 - APPEDIX 1\.1 Page 2 of 2 velate CLMUsiti 2 L\.06 Simple - Thrtical Nabr 0il Nple 2\. Date Location 109 FFD Tere Doll fora ura k:l Contet tg\. Prsmings g\. tf ficiut UMter 17/10/89 Prustes 250 25 39 36 456 Se e8\.1 78\.3% 15/ 11/89 Preste 1140 44 48 8 226 S 1 78\.7 78\.a 22111/89 PrustMa 980 40 42 1 1e9 U2 U2 75\.1 74\.92 04/12/89 Prutua 870 64 31 5 186 en 188 84\.9 84\.7 17110188 Ntänka 1360 42 12 257 Tuo * 88\.7 88\.0 12/068 Ntinaafto 460 54 39 7 95 Tuo 0\.3 85\.11 07/07/89 Ntinanto 200 85 15 - 46 Ta 84 95\.5 95\.1 23/08189 Ntiaiko 566 56 37 7 117 Tuo 9 84\.6 84\.42 19/09/89 Ntinaako 1460 43 47 10 2U Te 94 84\.7 84\.5 13/10/89 NtInan o 460 42 43 15 89 Tco 72 8W\.8 80\.6: - 59 - APPENDIX 1\.2 March 5, 1990 Dear Sirs I refer to my letter dated 19th January, 1990 regarding the extraction efficiency of the Kramer press under working conditions\. It has come to my attention that the presentation of data could be subject to misinterpretation\. I should therefore, wish to bake the following clarifications: 1\. The stated theoretical oil contents of the fruit samples are purely theoretical and were not verified by laboratory analysis\. Under field conditions variations can and do occur both as regards percentage of fruit to bunch and as regards actual oil content of various types of fruit\. Causes of variation include age of trees, climatological conditions and cultural practices\. 2\. Measuring equipment, both for fruit and oil, was crude resulting in a potentially wide margin for error\. 3\. Composition analysis was carried out on a random sampling basis and cannot be considered precise\. We do believe\. however, that the analysis is better than no analysis at all\. 4\. Variations in extraction efficiency can also occur as a result of variations in fruit preparation and operation of equipment\. Given the above potential sources of variation and error we would not want too much to be read into the results\. We therefore, re-present the data as follows: CoNesite Copsite Sapl Sie Apmedete h oPpsities Oil IteM Oil 1ieN Lestlesi\. flo TeBers katimaur 1g\. us138 frtes() 5116 37\.1 40\.1 22\.3 8 15\.06 Itasubt(l) 4158 41\.2 42\.8 1$\.$ 166 17\.A8 (1) CPilte of 4 sawple betse 11 Odtee sd 4 eaber, 196l\. oe 1restbe only Id"a kidrali a\. (2) Capste of I spe beteu u tot , 1988and13Otober, 198 \. IWlis seoaW presie with splAile pres after separ e u tiue te kml\. The most that should be inferred from the data are that under field working conditions: a) Prestea achieves an extraction rate of app\. 15% with one pressing using the Kramer press and, b) Ntinanko achieves on extraction rate of app\. 17% with one pressing using the Kramer press followed by separation of kernel from fibre and a second pressing using the spindle press\. I apologize for the fact that our previous letter may have given rise to over-optimistic expectations\. We should like to point out that, with the data as re-presented, margin for error is still considerable\. Sincerely, 긱 &45 NIGERIA 7-ba 74,151 7i30\. 1 15 EAST CENTRAL STATE MILES i O il Palm Project 0, \. 19 lp 20 2\.5 KILOMETERS Project area boundary 4~ b~ w~ Prolmed n011 sites Proposed regional units Frult collection polnts Existing moln roads 0 -3& Exlstlng secondary roods ERRI Ezeborgu UMUAHIA Project roads, poved -----Project roads, earth Rallway Stote boundo ä3 i fl- Obinzo Olok mb~M t 7 ^4 j , Oblokab um 0911 RI-NYA e 1\ um Ez!qma 5 0n0 ris, Umuckpu Umuo SIW- MbokoUmu 2 6'1y U U~ ra lkala N l GER 10 8^ skl U Mbe oXoduna R I V ERS nze \.1 3 c 0 Iforin 5 TATE Nka Ala OEnugu ý\.,s S*W 0 cia J,- Map N jobor CAMEROON \.)ý 0 ou 0 71W 7-30- z/2 i IBRO 10中6/R 一訪一

APPROVAL

P005647

Document of FILE COPY The World Bank FQk OFtICIAL USE ONLY Report No\. P-3219-TUN REPORT AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN TO THE REPUBLIC OF TUNISIA FOR A FIFTH HIGHWAY (RURAL ROADS) PROJECT February 26, 1982 This document has a restricted distribution and may be used by recipients only in the performance of | their oflicial duties\. Its contents may not otherwise be disclosed without World Bank authorization\.  CURRENCY EQUIVAtENTS\. Currency Unit = Tunisian Dinar (DT) The exchange rate of the Tunisian Dinar is floating\. The rate which is used in the Staff Appraisal Report approximates the current rate\. It is; US $ 1 = DT 0\.513 DT 1 = US $ 1\.95 DT 1 million = US $ 1\.95 million REPUBLIC OF TUNISIA FISCAL YEAR January 1 through December 31 ACRONYMS AND ABBREVIATIONS BNT - National Bank of Tunisia (Banque Nationale de Tunisie) CRDA - Regional Agricultural Development Commission (Commissariat Regional de Developpement Agricole) CTV - Extension Work Center (Centre Territorial de Vulgarisation Agricole) DPC - Highway Department (Direction des Ponts et Chaussees) GR - Rural Engineering Department (G6nie Rural) MA - Ministry of Agriculture MPF - Ministry of Planning and Finance MPW - Ministry of Public Works MTC - Ministry of Transport and Communications ODA - Official (bilateral) Development Assistance PPAR - Project Performance Audit Report SCM - Mutual Credit Guarantee Society (Societe de Caution Mutuelle)  FOR OFFICIAL USE ONLY Tunisia Fifth Highway (Rural Roads)Project Loan and Project Summary Borrower: Republic of Tunisia Beneficiaries: Ministries of Public Works, Agriculture, and Transport and Communications Amount; US$35\.5 million equivalent, including a capitalized front-end fee\. Terms: 17 years, including four years of grace at interest rate of 11\.6 percent per annum\. Project Description: The project, which is a follow up to the Third Highway (Rural Roads) Project, Loan 1601-TUN of July 24, 1978, is designed to improve the level of access and increase agricultural production in rural areas in Tunisia\. It consists of the following components; (i) a three-year (1983-85) program of rural road improvements; (ii) a program of complementary investments and improvements in agricultural extension and credit services; (iii) a program of improved rural road maintenance; (iv) a program of spot improvements to feeder roads; (v) a road safety component comprising equipping five vehicle inspection stations; and (vi) technical assistance for project preparation, implementation and monitoring; agricultural extension training; research on materials, construction techniques and maintenance for unpaved roads; and a study of the socio-economic, agricultural and transport impact of rural roads\. The main benefits of the project would be in the form of assured and less expensive transport of essential agricultural inputs and crops, and increases in farm income and employment\. The main risk of the project lies in the timely implementation of a variety of investments and activities by a number of agencies and on the pace of farmer response to improved transport infrastructure, extension services and access to credit\. The institutional arrangements and the comprehensive monitoring and evaluation system, which will be introduced under the project, minimize the risk\. This document has a restricted distribution and may be used by recipients only in the performance of their official duties\. Its contents may not otherwise be disclosed without World Bank authorization\.  - ii\. - Project Costs: Local Foreign Total -------------US$ Million---------…--…-- Road works 31\.3 20\.8 52\.1 Buildings for extension services 1\.2 0\.5 1\.7 Equipment for extension services 0\.1 0\.1 0\.2 Irrigation works 2\.7 1\.8 4\.5 Spot improvements 2\.1 1\.0 3\.1 Short-term credit 1\.2 1\.2 2\.4 Medium and long-term credit 3\.6 3\.0 6\.6 Vehicles for extension 0\.5 0\.4 0\.9 Vehicle inspection equipment 0\.2 0\.4 0\.6 Overseas missions -- 0\.1 0\.1 Technical assistance 0\.7 2\.1 2\.8 Subtotal 43\.6 31\.4 75\.0 Contingencies Physical 4\.4 3\.1 7\.5 Price escalation 12\.6 9\.2 21\.8 Total project cost 60\.6 /1 43\.7 104\.3 /1 Front-end fee - 0\.5 0\.5 Total financing required 60\.6 44\.2 104\.8 Financing Plan: Local Foreign Total -------------…US$ Million-------------- Proposed Bank loan - 35\.5 35\.5 Government contribution 55\.3 2\.3 57\.6 BNT 2\.4 6\.4 8\.8 Farmers' contribution 2\.9 __ 2\.9 Total 60\.6 W42 104\.8 Estimated Disbursements: Bank FY 1983 1984 1985 1986 1987 1988 -----------------US$ Million---------------- Annual 0\.6 5\.2 10\.5 11\.0 6\.8 1\.4 Cumulative 0\.6 5\.8 16,3 27\.3 34\.1 35\.5 Rate of Return: 21 percent for first-year investments Staff Appraisal Report: Report No\. 3722-TUN, dated February 18, 1982\. Map Nos\.: IBRD 15916 (North) IBRD 16145 (Center) IBRD 16144 (South) A Including $22\.7 million in taxes and duties\.  INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT REPORT AND RECOMMENDATION OF THE PRESIDENT OF THE IBRD TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN TO THE REPUBLIC OF TUNISIA FOR A FIFTH HIGHWAY (RURAL ROADS) PROJECT 1\. I submit the following report and recommendation on a proposed Bank loan to the Republic of Tunisia for US$35\.5 million equivalent to help finance a Fifth Highway (Rural Roads) Project\. The loan, which includes a capitalized front-end fee of 1\.5 percent on the Bank loan, would be repaid over 17 years, including 4 years of grace, with interest at 11\.6 percent per annum\. \. PART I - THE ECONOMY 2\. The last economic report entitled "Tunisia - Country Economic Memorandum" (No\.3399-TUN) was issued on September 15, 1981\. An economic mission visited Tunisia in October 1981 to review a draft of the Sixth Development Plan (1982-86); this part reflects its preliminary findings\. Country Data sheets are attached in Annex I\. 3\. Much of Tunisia is arid or semi-arid\. Only three percent of arable land is irrigated, and areas where rainfed agriculture is possible are subject to severe year-to-year fluctuation in rainfall\. Tunisia's most important raw materials are phosphates, petroleum, and natural gas; although the known exploitable reserves of oil and gas are approaching depletion, and those of phosphate deposits are of relatively low quality, there are recent promising indications of new reserves, but it is too early to assess their exact poten- tial\. There is also considerable tourism potential, and efforts have been made during the last decade to develop it rapidly\. 4\. Since independence in 1956, Tunisia has undertaken a massive effort towards development of its human resources, paying special attention to family welfare, education, and technical and vocational training\. As a result, the infant mortality rate declined from 150 per thousand in the early 1960s to 90 per thousand at the end of the 1970s, the adult literacy rate increased from under 15 percent to about 62 percent, and average caloric supply per capita increased from about 80 to 112 percent of minimum standard requirements\. The sharp decrease in mortality rates was not fully compensated by the simultaneous decrease in fertility and birth rates, despite an active family planning policy pursued by the Government\. Therefore, the annual demographic growth rate decreased only slightly from 2\.6 percent in the 1960s to 2\.4 percent in the 1970s\. Moreover, after 1976, the net emigration of Tunisians abroad was sharply reduced by restrictive measures taken in the EEC countries and Libya\. As a consequence, the residential population of 6\.57 million by the middle of 1981 exceeds the level projected five years earlier by 130,000\. 5\. Agriculture still occupies nearly one out of every three Tunisians in the labor force\. To accelerate job creation, more than half of total invest- ments of the Fifth Plan (1976-81) was allocated to directly productive sectors, but the direct employment effects of the leading sectors (petroleum, phosphate mining and processing, and tourism) are small\. These sectors, however, make a vital contribution to GDP, public savings, and exports\. They  provided 65 percent of the country's foreign exchange earnings in 1980 while manufacturing activities, except phosphate-based chemicals, provided 17 percent\. 6\. Recent Economic Developments\. During the Fifth Plan the growth performance differed from the impressive growth achieved from 1971 to 1976, not so much in terms of overall growth (6\.3 percent p\.a\. vs\. 8\.6 percent p\.a\.) as in terms of the underlying growth factors; output in agriculture and in food industries has grown on average below the demographic rate since 1976, partially as a result of bad weather conditions; textile production declined in 1978, and tourism development slowed down in 1977, both because of the slump in European markets\. By contrast, industry other than textiles, particularly energy, phosphate processing, construction, and construction materials, expanded at a fast pace\. 7\. In spite of the considerable increase in domestic demand, partic- ularly in investments, the balance of payments situation remained favorable from 1976 to 1981\. Imports in current prices grew at a slower pace than exports, and the terms of trade improved significantly due to sharply higher post-1974 export prices for crude oil\. As a result, the resource gap remained relatively small, and domestic savings financed on average over 76 percent of investment, which increased from an average of 23 percent of GDP for 1972-76 to 30 percent of GDP for 1977-81\. The current account deficit averaged $450 million per year (1977-81), and was easily financed; grant aid and private investments (mainly for oil exploration) provided about 30 percent, while the remainder was mainly covered by long-term foreign borrowing\. Thus, during the 1970s total foreign debt increased little relative to GDP, and the debt service ratio dropped\. 8\. The public sector has played a major role in mobilizing and redistri- buting domestic resources\. Central Government revenues were equivalent to about one-third of GDP on average for the Fifth Plan period, one of the highest shares among middle-income countries\. Over 30 percent of these revenues was saved, and public savings financed close to two-thirds of total Government capital expenditures\. This comfortable public finance situation permitted a rapid increase in subsidy payments to private consumers and public enterprises\. Such tranfers accounted for 16 percent of total current budget outlays and over 4 percent of GDP in 1980\. 9\. Open and hidden unemployment is the most serious problem for the Tunisian economy at present\. During 1977-81, although job creation objectives were achieved in all non-agricultural sectors except construction, these sectors could only absorb 70 percent of new job seekers at a time when migra- tion to Libya and Europe decreased rapidly\. The overall unemployment rate, estimated at about 13 percent of the labor force in 1980, has therefore not declined\. 10\. Medium-term Prospects\. The main objectives of the Fifth Development Plan will probably be achieved, except for the employment target\. It is estimated that the actual GDP growth will fall short by about 1 percent of the planned rate of 7\.3 percent p\.a\., while the investment objective of $9\.8 billion in current prices, or 30 percent of GDP, will be fully met\. Completion of some large projects in the public sector (steel, expansion of the oil refinery) has, however, been delayed\. Private sector investments, both foreign and national, will exceed Plan targets\.  11\. The draft Sixth Development Plan (1982-86) has been prepared and should be discussed by the newly elected Parliament in June 1982\. The main objectives are employment generation, export promotion, and more rapid growth in the three least developed regions of the country (North-West, Center-West, and South)\. Sectoral priority is to be given to agriculture, tourism, and electrical and mechanical industries\. 12\. The outlook for investment and growth during this period and beyond will partly depend upon future developments in the oil and natural gas sector\. Based on known reserves, and with the possible exploitation of smaller fields that recently became profitable, it is generally expected that domestic oil and gas production would at best be stabilized after 1981 at about its present annual level of 5-6 million tons of oil equivalent\. Oil and gas exploration programs under way have been encouraging but do not yet justify a reassessment of proven reserves\. Thus, barring large new oil or gas discoveries, and given the rapid rise in domestic demand for energy, Tunisia will have to face the consequences of a decline in energy revenues over the next five years\. The Government considers that the situation requires imme- diate policy changes and is analyzing the most urgent ones to be included in the Sixth Plan\. By introducing these changes on time, Tunisia expects to reduce the associated economic and social strains, and avoid major balance- of-payments problems\. 13\. The draft Sixth Plan recommends a GDP growth objective in the range of 6\.3 - 6\.7 percent depending on agricultural performance\. This growth rate is in line with recent trends\. Projected growth of traditional exports (tourism, textiles, and phosphates-based chemicals) is insufficient to compen- sate for the projected decline in oil export revenues; these exports would be supplemented by new ones, in particular electrical and mechanical products\. Production diversification and export promotion will, however, take time to bear fruit, given in particular, the depressed world market prospects\. The Plan strategy therefore rightly aims at containing domestic demand in order to control import growth\. The macroeconomic scenario assumes no improvement in terms of trade, as was brought about by oil price rises in 1973-74 and in 1979-80\. This would not only affect the external account but also result in slower growth of domestic savings, particularly public savings\. 14\. Consequently, the draft Sixth Plan projects a drop in the fixed * investment rate from 30 percent of GDP in 1977-81 to about 26 percent for the Plan period\. This would still imply an increase of 24 percent in constant prices relative to the Fifth Plan investment\. A major objective is to correct recent capital intensive biases in projects by appropriate sectoral allocation of investments\. More resources would be allocated to small and medium manu- facturing enterprises in the underdeveloped regions, in order to ease the unemployment problem, and reduce income disparities between rural and urban areas\. Since June 1981, a new set of policy measures has targeted the incen- tive system toward this objective\. The Investment Code was modified to offer free industrial zones and direct subsidies to job creation for new projects in underdeveloped zones, and a Promotion Fund for Handicrafts and Household Workshops was created\. In order to promote a more efficient technical and financial management of the public and private modern sector, the draft Plan assigns a major role in project promotion and supervision to an expanded net- work of new Development Banks (two opened in 1981 and three are planned for  1982); they are to be joint ventures with foreign investors, and should alleviate the pressure on the budget to finance too large a share of public investments\. 15\. Increasing budgetary constraints will require a reassessment of the present policies of subsidies for energy, basic foodstuffs, transportation, and public sector enterprises\. In addition, interest rate policy and a better-adjusted fiscal system should be used to restrain final consumption, and stimulate savings\. As a first encouraging step in 1981, sizeable price increases in energy and animal feed products were Lmplemented, and the whole interest rate structure was revised upward, rates on saving accounts and term deposits being increased by 1\.5 to 2 points\. Wage and salary policies will have to keep labor cost increases (including social costs chargeable to enterprises) in line with productivity increases, particularly since Tunisia wants to stimulate tourism, and improve its international competitiveness\. 16\. Social Issues\. Tunisia's social performance has been impressive since independence, and the country has come a long way towards meeting the basic needs of its population and reducing absolute poverty\. About 16 percent of GDP is now devoted to social programs\. However, unemployment among the young, and regional pockets of poverty still present serious social problems\. 17\. Recently published data show that the continued attention of the Government to poverty oriented social programs resulted in a reduction of the ratio of people under a minimum standard income from 17 percent of the total population in 1975 to 13 percent in 1980\. During this period, the overall number of this group declined in urban areas but increased in some rural zones in the center of the country, as a consequence of poor agricultural perform- ance\. Income differentials between the coast (East) and the interior (West) widened, in part because the system of price controls and subsidies as well as the budgetary expenditures had a weak redistributive impact\. The Government is using the forthcoming Plan to focus on the most deprived zones, with a view to eradicating poverty before the end of this century\. Reducing the demo- graphic growth rate is considered an important factor in this endeavor\. 18\. Education expenditures rank first among budgetary outlays\. The comprehensive education system provides free access to all students, and the gross enrollment rate has reached 100 percent for primary education, and 22 percent for secondary education\. The performance of the system could, how- ever, be improved by expanding vocational training programs, improving their relevance and responsiveness to labor demand, and to the special needs of the poor and rural groups\. 19\. Public health services are second among social expenditures, and their overall beneficial effect is reflected in the improvement of the vital statistics (para\. 4)\. There remain, however, regional disparities in the availability of hospital beds, doctors and nursing personnel; health services have concentrated largely on curative medicine, and the medical referral system is not functioning properly\. As a result, the rural poor are often excluded\. Closely linked to nutritional deficiencies, infant mortality remains high relative to middle-income countries\.  20\. In the draft Sixth Plan, investment in education, health, housing and water supply is focussed more on deprived areas, provided at lower costs (health, shelter), and made more relevant to the needs of the economy (train- ing)\. In education, two reforms are under discussion: the first one would provide a nine-year schooling period for all children, and the second would create polytechnical high schools combining basic and technical education\. In health, the draft Sixth Plan allocates more resources to preventive medicine and nutrition education\. Finally, as regards housing, public sub- sidized programs will be directed to the neediest population groups\. The housing demand from households above the minimum standard income limit could be satisfied by the private sector; to this end, adequate incentives need to be provided\. 21\. External Assistance and Foreign Debt\. As mentioned above, the growth of foreign borrowing was modest during the second half of the 1970s, and a growing share of foreign funds was provided by public sources at relatively soft terms\. During the 1977-80 period, foreign loan commitments averaged about $700 million per annum, 62 percent of which in the form of official development assistance (ODA)\. About 65 percent of ODA commitments came from bilateral sources, chiefly France, the Federal Republic of Germany, Canada, and some oil-surplus countries\. About 24 percent of total ODA was committed by the Bank Group, and some 11 percent by other multilateral sources\. Borrowing terms were favorable, averaging 5\.8 percent interest and 18\.5 years maturity, including a grace period of 5 years\. At the end of 1980, debt outstanding and disbursed was estimated at about $3\.4 billion, or 40 percent of GDP; debt service was 12 percent of exports of goods and services, as compared with 17\.7 percent in 1970\. 22\. The current account deficit may exceed $450 million in 1981, and is projected to grow to about $1 billion in 1986\. New loan commitments from abroad, projected at one billion dollars per year on average (at present dollar exchange rates), should not be difficult to obtain, with ODA providing half of the total\. Leaving aside the possibility of major oil and gas dis- coveries, and assuming oil prices continue to increase modestly in real terms, external debt service could reach 13 percent of total export revenues in 1986\. 23\. These relatively favorable prospects would depend on a timely imple- mentation of the already mentioned policy changes to curb domestic demand, promote exports, and improve public sector savings\. It should be noted, however, that the draft Sixth Plan recommends a low growth scenario in order to preserve the country's relatively high financial stability and credit- worthiness\. This objective is even more crucial if the country is to succeed in mobilizing the large inflows of direct foreign capital assumed in the Plan\. Foreign investments were small during most of the 1970s but have gained momentum during the last three years in line with increased activities in the oil sector, and new incentives offered to foreign investors in manufacturing\. Such investments have increased from $50 million in 1976 to about $200 million in 1981, and have been equivalent to 10 percent of total investments for 1977-81\. The draft Plan's growth scenario estimates that about 15 percent of total investment could be financed by foreign capital, equivalent to an annual inflow of $400 million\. The newly created Development Banks (para\. 14) are expected to play a significant role in this context\.  - 6 - 24\. In conclusion, the balance-of-payments outlook can be considered favorable in the medium term\. In the longer term, much will depend on the policy changes to be initiated during the next few years, and on developments in the hydrocarbon sector\. Considering its long record of prudent and skill- ful balance-of-payments and external debt management, there are good grounds to assume that Tunisia will formulate and implement the necessary policy changes, and will continue to be creditworthy for future Bank lending\. The Bank's close dialogue with the Government on several policy aspects at the macro and micro levels will be pursued in connection with the preparation of the Sixth Development Plan\. PART II - BANK GROUP OPERATIONS IN TIJNISIA 25\. Since 1962, the Bank has committed to Tunisia forty-eight loans and eleven IDA credits amounting respectively to $933\.7 million and $70\.1 million (net of cancellations) of which twenty-one loans and nine credits have been fully disbursed\. Annex II contains a summary statement of Bank loans, IDA credits and IFC investments as of September 30, 1981, and notes on the execution of ongoing projects\. Project implementation is generally satis- factory\. As of June 30, 1981, overall disbursements amounted to 66\.1 percent of appraisal estimates, which is slightly above the regional average\. In a number of sectors, important institutional improvements have been achieved, and autonomous agencies have been created or strengthened to ensure the effi- cient management of the related sectors or subsectors\. 26\. The Bank's lending strategy in Tunisia aims at supporting Government efforts to: (a) increase employment; (b) encourage more balanced growth and distribution of income among regions and income groups with particular emphasis on rural areas; (c) promote export-oriented policies and investments; and (d) provide selective support for the development of basic infrastructure and for institution building in key public services\. An important feature of this strategy is to support the Tunisian authorities in the timely and well- coordinated preparation of projects through missions and advice by Bank staff, the assistance of the IBRD/FAO Cooperative Program, and the use of the Bank's Project Preparation Facility\. The Bank is also supporting the Government in its efforts to increase the mobilization of domestic resources, and to secure cofinancing for the projects it assists\. The latter is particularly important in view of the extent of Tunisia's external resource needs\. 27\. Within this broad framework, past lending emphasized support for long-term investments in infrastructure and social development\. Lending for urban and social development, including water supply, sewerage, education, health, urban development, and the Tunis planning and public transport project has accounted for 25 percent of Bank/IDA commitments in Tunisia since 1971\. Lending for transport, power and tourism infrastructure has accounted for 33 percent\. Agriculture and fisheries have received 25 percent, and industrial and hotel financing, mostly through the Banque de Developpement Economique de Tunisie (BDET), 17 percent of total commitments\. 28\. In line with its lending strategy, the Bank will pursue its efforts in key sectors of the economy that offer prospects for economic and social development\. It will also assist projects which enhance regional integration,  - 7 -1 and help reduce the gap between income groups, and between urban and rural areas\. Particular attention will be paid to employment creation, institution building, and agricultural development\. In addition to the proposed highway project focusing on rural roads and a line of credit to BDET with special emphasis on the development of electrical and mechanical industries, which will be distributed to the Executive Directors shortly, the Bank is actively considering a project in support of the 1984-86 investment programs for rural areas and house connections of the national water supply agency (SONEDE), a project aimed at improving irrigation and marketing facilities in the Medjerda and Nebhana irrigation perimeters, and a project to provide technical assistance for project preparation\. Other projects under consideration would focus on energy, urban development and education\. 29\. The Bank's economic and sector work will continue to focus on strengthening the macroeconomic and sector base for our lending program; it will be more centered in the future on the analysis of economic issues and policies related to the necessary adaptation process from a petroleum export- ing to a petroleum importing country\. A 1980 Bank report on the mechanical and electrical industries (Report No\. 2666-TUN of June 4, 1980) assessed the country's industrial development policies and prospects in these subsectors\. Also in 1980, the Bank report on the social aspects of development (Report No\. 2950-TUN of June 18, 1980) provided a better understanding of income disparities by evaluating the Government's social policies aimed at poverty alleviation\. Future economic and sector work will include a review of pricing and subsidy policies in the rural sector, of the Sixth Plan, and of the agricultural, education and training, urban and energy sectors\. 30\. The Bank and IDA accounted for about 12 percent of total public com- mitments to Tunisia during 1970-1979\. Their share in total debt outstanding and disbursed at the end of 1979 (including loans from private sources) was 10, percent and their share in debt service during 1979 was 11 percent\. The shares of the Bank and IDA in Tunisia's disbursed external debt is expected to decrease to about 7 percent by 1986, and their share in the debt service would increase to about 16 percent\. 31\. IFC has invested in NPK Engrais (a fertilizer plant), in BDET, in Compagnie Financi4re et Touristique (COFIT, a company to promote and invest in tourism projects), in Societe Touristique et Hoteliare RYM (a large hotel development), in Industries Chimiques du Fluor, which produces aluminium fluoride from local fluorspar for export, and in the Sousse-Nord integrated tourism development project\. IFC's net commitments in Tunisia total $12 million, as of September 30, 1981\. PART III - THE TRANSPORT AND AGRICULTURAL SECTORS 32\. Road transport is the dominant mode for both freight and passengers and its share of total transport demand has been increasing steadily over the years\. Efficient road transport is critical to rural and agricultural development, especially for the timely provision of inputs, marketing, communications and improving rural mobility\. Although generally adequate in coverage, much of the primary road network requires rehabilitation and modernization, and in rural areas the road network is in poor condition\. Rural roads are defined as roads outside urban areas carrying predominantly agricultural traffic, irrespective of their administrative classification\. Although many road improvements would be justified on transport cost savings alone, by themselves and without the provision of the complementary agricultural investments and services they would have limited impact on agricultural production\. Support services and credit are needed particularly by lower income farmers, to increase agricultural production\.  -8- Transport 33\. The Transport Sector\. A detailed description of the transport sector is contained in Bank Reports No\. 2641b-TUN of December 1979 and No\. 2810-TUN of April 1980\. Since modes of transport other than road transport have little direct impact on rural development, no reference is made to them in the following sector analysis\. 34\. Public road transport in Tunisia is provided by two national companies, one providing passenger transport, the other freight transport, and by twelve regional companies providing both passenger and freight services\. In addition, many firms and industrial enterprises operate own-account fleets for specific commercial activities\. A large number of private owner-operators, utilizing small trucks--up to 3\.5 ton capacity for general cargo and up to 5 tons for agricultural produce--fall outside restrictive regulatory policies\. These small private truckers provide most of the transport services in rural areas and, where competition is keen, benefits accruing to them through improved roads are passed on in part to users\. 35\. The transport system comprises some 17,000 km of classified roads, of which about one-half are paved, and about 14,000 km of unclassified tracks\. Most of the unpaved network was never properly engineered or constructed and therefore many roads cannot be adequately maintained without improvement to minimum standards\. Many tracks are muddy and impassable during winter\. These conditions provide a major constraint to rural and agricultural development in Tunisia\. Where poor access conditions exist, extension, credit and marketing activities are not carried out effectively, and the timely delivery of critical inputs to farmers is often hindered\. Social welfare is affected by inadequate access to schools, health, and administrative facilities\. 36\. Transport Administration\. The Ministry of Transport and Communications (MTC) is responsible for overall organization of the transport sector, including the coordination and regulation of land transport and the establishment of transport rates\. Subsectoral planning; is the responsibility of the individual modal agencies including the Highway Department (DPC) of the Ministry of Public Works (MPW) which is also in charge of the construction and maintenance of the road network\. It operates through 19 road subdivisions, one for each province\. The subdivisions carry out routine maintenance on force account, while surface dressing of paved roads is carried out by national brigades controlled from headquarters\. DPC uses the services of competent Tunisian consultants on an intermittant basis\. 37\. Construction works and major periodic maintenance are normally carried out under unit price contracts which are awarded after competitive bidding\. Many contractors, both foreign and local, operate in Tunisia and provide effective competition\. Small contracts (up to $5 million) are usually won by Tunisian contractors, while larger contracts are frequently won by joint ventures of foreign and local contractors\. Construction supervision is carried out by DPC engineers with the assistance of its laboratory\. However, in the case of large, special projects, consultants' services are used\. Although supervision is generally satisfactory, experience gained under the Bank-assisted Third Highway (Rural Roads) project has shown that supervision  -9- undertaken by the subdivisions needs reinforcement to provide the flexibility required with rural road construction activities\. This issue is being addressed under the proposed project with the provision of consultants' services to supplement DPC's own supervision capabilities (para\. 60)\. 38\. Inadequate subsectoral capabilities and insufficient overall coordination have resulted in some distortions in the implementation of transport investments in recent years\. High priority has been placed on several major construction projects as well as on the development of air transport and maritime shipping, with corresponding high foreign exchange expenditures and limited short-term benefits\. The overall result has been a delay in urgent programs for rehabilitation and maintenance of road and railway infrastructure, with implementation of only part of the initial rehabilitation plan at a higher cost than envisaged for the entire program\. Although most of the line agencies are aware of these problems, the Ministry of Planning and Finance (MPF) has been unable to allocate the investment budget on a rational basis as there is no prior arbitration of investment proposals by MTC\. For this reason, the Government has recently established a planning unit in MTC with technical assistance financed under the Bank's Fourth Highway Project\. This unit is providing a close investment analysis and continuous monitoring of develoments in the transport sector\. 39\. In order to assure maintenance of roads improved under the Rural Roads project, in 1980 DPC obtained from MPF a new item in the 1981 recurrent budget specifically for the maintenance of roads improved under the program\. Together with the Fourth Highway project, which is addressing improved maintenance of the entire road network, DPC's capability is being developed to maintain both the paved and improved unpaved roads to satisfactory levels of service\. To support these levels, real increases of ten percent annually in the recurrent maintenance budget have been established\. Total road user revenues from vehicle registration fees, various excise taxes and customs duties amount to about $160 million annually, which is more than twice the current level of investment and maintenance expenditures on road infrastructure\. The recurrent maintenance budget, together with allocations for the maintenance of roads improved under the rural roads program is commensurate with the maintenance tasks required for the increasing volume of improved roads each year\. Agriculture 40\. The Agricultural Sector\. During the 1970s, agriculture grew at about 3 percent per year, compared to 1 percent per year in the 1960s\. Nevertheless, the sector's relative share in the economy is declining (from 24 percent of GDP in 1972 to 15 percent in 1980) mainly due to a more rapid expansion of mining, petroleum, and industrial production\. Agriculture now provides about one third of total employment, against about one half in 1972\. Agriculture's share in total investment (public and private) has remained constant at about 14 percent during the 1970s\. About one-third of Tunisia's total land area, or about 5\.2 million ha\., is cultivable; the remainder is range land suitable for grazing, or low-yielding forest and desert\. About 165,000 ha\. are irrigated\. 41\. A primary objective of the Fifth Development Plan (1977-81), which will continue under the Sixth Plan (1982-86), is the achievement of self-sufficiency in major foodstuffs\. Aside from agro-ecological factors and the poor condition of rural roads, the main constraints on agricultural development are; (i) input and output prices and subsidies have little  - 10 - incentive effects; (ii) the organization and management of the sector and its Services are deficient, particularly in relation to research, extension and credit; (iii) soil conservation needs strengthening; (iv) the strategy for i\.vestock development is too narrow; and (v) land tenure issues restrict effective utilization\. 42\. Agricultural Services\. Overall responsibiity for agricultural planning and development lies with the Ministry of Agriculture (MA)\. Agricultural services are organized at the provincial level in Regional Agricultural Development Commissions (CRDAs), which provide agricultural extension to farmers, undertake forest management and planting, assist the National Bank of Tunisia (BNT) in appraising loan applications, collect statistics, and coordinate the work of various public organizations involved in agriculture at the provincial level\. In practice, the CRDAs have been limited by cumbersome administrative procedures and by a lack of autonomy in dealing with investments and project implementation\. Recent legislation, which has given greater autonomy to the CRDAs, is expected to increase their capacity to handle investments and to implement projects\. In addition to the CRDAs, special development authorities (Offices) have been created to handle specific agricultural activities and projects, mainly those concerned with irrigation or with particular development strategies designed for well-defined areas\. This approach offers particular advantages for projects where cost recovery is an important element and where integrated project activities may extend over parts of several provinces\. 43\. Agricultural extension is provided by three departments in the Ministry of Agriculture: The Department of Training, Research and Extension, which is responsible for training, research and mass media communications, the Crop Production Department and the Livestock Production Department\. The latter two departments supervise extension operations\. At the provincial level, agricultural extension agents are attached to the CRDAs\. In addition, extension is provided by the semi-autonomous Cereal Board and by certain project development authorities, particularly on irrigation projects\. Weaknesses in extension services have been partly responsible for the slow growth in agricultural production and for low rates of use of recommended inputs\. The Government is aware of the shortcomings and has begun to reinforce extension activities under the Plan by consolidating them into a new system based on work centers (CTVs) from which a single agent has direct contact with a small group of farmers\. The Rural Roads project is assisting the Government in this program by financing equipment and buildings in those areas served by project roads and by initiating a communications training program for extension agents\. This assistance has been integrated within a broad national scheme for improving agricultural extension, which is expected to be given high priority under the new Sixth Plan\. 44\. The Government-owned National Bank of Tunisia (BNT) is the main supplier of agricultural credit\. BNT provides short-term loans for annual inputs on which guarantees are usually provided by local mutual credit guarantee societies (SCMs) in the case of small farmers, as well as medium-and long-term loans\. The short-term credit program operates effectively and provides critical seasonal inputs to a wide range of farmers\. BNT's medium- and long-term credit program suffers from a number of weaknesses, such as inadequate coverage particularly of small farmers, and low loan recovery\. The  - 11 - Bank-assisted Third Agricultural Credit project addresses some of these weaknesses by strengthening of regional staff and decentralization of credit procedures\. In addition, legislative action simplifying procedures for obtaining land titles for long-term credit have resulted in improvements in the provision of agricultural credit\. The Government is continuing to seek other ways to improve the credit system, including the establishment of a specialized agricultural lending institution\. Previous Bank Involvement in the Transport and Agricultural Sectors 45\. The Third Highway (Rural Roads) project (Loan 1601 of $32 million of July 1978) started an integrated program, with direct benefits for the agricultural sector, by improving about 1,000 km of rural roads\. Implemen- tation of complementary agricultural investments and extension services lagged initially but is now proceeding satisfactorily\. Progress on the road construc- tion component of the project has been excellent with about 800 km of the program committed\. All of the highway maintenance equipment financed under the project has been procured and a special recurrent maintenance budget established\. During 1980/81 construction began on 23 extension centers and agents have been assigned to the respective areas, 50 vehicles and miscellaneous equipment were procured, and a training program was established on techniques of rural communications\. The balance of the extension program will be implemented through 1983 completing the construction and equipment of 50 additional centers\. Extension agents have contacted all farmers for the purposes of the agricultural credit program\. In 1980, some 1,560 short-term loans were made in the areas of Kef, Siliana, Nabeul and Kairouan, representing a three-fold increase over previous levels\. Up to September 30, 1981, some 660 medium- and long-term loans were approved in these areas, representing at least a two-fold increase in credit disbursed\. 46\. The First and Second Highway projects (Loans 746 of $24 million and 1188 of $28 million of June 1971 and January 1976, respectively), and the First Railway project (Loan 606/Credit 150 of $17 million of June 1969) focused on modernization and rehabilitation of primary and secondary roads, and renewal of track and railway equipment\. Although execution of the First Highway project was satisfactory, only about half of the roads were rehabilitated due to cost increases (PPAR No\. 2772, December 26, 1979)\. The First Railway project was completed successfully (PPAR No\. 2109, June 23, 1978)\. Implementation of the Second Highway project is behind schedule due to problems of property acquisition and local financing, but the Government has now developed a satisfactory financing and execution plan for the balance of the project\. A Fourth Highway project (Loan 1841 of $36\.5 million of May 1980) is helping the Government in improving highway planning, maintenance, rehabilitation and safety\. Two loans in the port sub-sector (Loans 380 of $7 million, and 573 of $8\.5 million of June 1964 and November 1968, respectively) provided support facilities for port operations, mainly dredging, maintenance operations and cargo handling equipment\. The Second Port project included the construction of the 30,000-ton bulk port silo at La Goulette\. Both these projects were implemented successfully and had an important institution- building effect (PPAR No\. 1049, February 26, 1979)\. A Third Port project (Loan 1797 of $42\.5 million of February 1980) assists the Government in modernizing berth facilities at the ports of La Goulette and Sfax and in providing support facilities for improved port operations\.  - 12 - 47\. Bank Group lending for agriculture in Tunisia started in 1967 and to date, eleven projects have been approved for a total of $243\.7 million of Bank/IDA funds\. They include three irrigation projects (Irrigation Rehabilitation in the Lower Medjerda and Nebhana Valleys - Loan 1068 of $12\.2 million of December 1974; the Sidi Salem Multipurpose project - Loan 1431 of $42 million of July 1977; and the Southern Irrigation project - Loan 1796 of $25 million of February 1980), two fisheries projects (Credit 270 of $2 million of September 1971, and Loan 1746 of $28\.5 million of July 1979), a Cooperative Farm project (Loan 484/Credit 99 of $18 million of February 1967), three agricultural credit projects (Loan 779/Credit 263 of $8 million of July 1971, and Loans 1340 of $12 million of December 1976, and 1885 of $30 million of August 1980), one rainfed project (Northwest Rural Development Project - Loan 1997 of $24 million of July 1981), and a Grain Distribution and Storage Project (Loan 2052 of $42 million of October 1981)\. 48\. Performance of these projects has been mixed\., Implementation of the irrigation projects has been the most satisfactory\. The First Fisheries project was completed at the end of 1979 with considerable delay and the local institution lending for boats (BNT) experienced low loan recoveries\. The problems were addressed under the Second Fisheries project after agreement was reached on a strategy for improving recoveries\. The Cooperative Farm project, which was designed to develop production cooperatives as part of a 10-year national program of agrarian reform, was delayed by technical, managerial, financial and institutional problems\. It was revised in 1970, and an amount of $8\.8 million cancelled\. At completion in 1973, most of the project objectives, namely those relating to productivity, production, worker incomes, and institutional viability, were attained (Project Performance Audit Report - PPAR - No\. 968, January 8, 1976)\. The First Agricultural Credit project financed BNT-lending for farm machinery, dairy development, date palm plantations, and dairy processing, but was not fully disbursed until 34 months after the original Closing Date, because BNT lent Bank group funds at a higher interest rate than Government funds\. Although the project achieved a good rate of return, livestock development did not yield th,e benefits expected, and dairy processing suffered major cost overruns (PPAR No\. 2497, May 11, 1979)\. Under the Second Agricultural Credit project, emphasis has been on the standardization of credit procedures and conditions and on reinforcing BNT's regional staff\. The need to continue decentralization of credit procedures and to speed up loan processing is being pursued under the Third Agricultural Credit project\. PART IV - THE PROJECT Background 49\. The proposed project is a follow-up to the Third Highway (Rural Roads) Project, Loan 1601-TUN, of July 24, 1978\. It continues the same general approach developed for that project, combining road improvements and complementary agricultural investments in integrated programs for specific rural roads and the agricultural areas they serve\. Mcdifications have been made based on lessons learned during implementation of the ongoing project\. The proposed project was identified in July 1977 and has been prepared by the Highway Department (DPC) and the Ministry of Agriculture (MA) with the  - 13 - assistance of consultants and of Bank preparation missions\. Appraisal took place in June 1981\. Negotiations were held in Washington, D\.C\. in February, 1982\. The Tunisian delegation was led by Mr\. M'hamed Soula, Director General in the Ministry of Public Works, and included Mr\. Benhassine of the Ministry of Planning and Finance\. The Staff Appraisal Report (No\. 3722-TUN of February 18, 1982) is being distributed separately\. The main features of the project are summarized in the Loan and Project Summary and in Annex III\. Maps showing the location of the roads to be improved under the project are also attached\. Project Objectives 50\. The project would improve the level of access and increase agricultural production in rural areas in Tunisia\. Specifically, the project is designed to; (i) raise the level of service provided by project roads to a minimum "all weather" standard, commensurate with forecast traffic; (ii) increase agricultural production within the zones of influence of the project roads; (iii) help improve standards of living in rural areas by providing better access to social and administrative services; (iv) improve the capability of the road maintenance organization so that project roads continue to provide the desired level of service; (v) enhance the benefits of the project roads by improving connecting feeder roads in the zones of influence; and (vi) strengthen the institutional framework by continuing to assist project preparation, implementation and monitoring, together with some applied research\. Project Description 51\. The project would consist of: (i) a three-year program (1983-85) of rural road improvements; (ii) a program of complementary investments, extending over the same period for agricultural extension and over five years for credit services (1983-87); (iii) a program of improved rural road maintenance; (iv) spot improvements to feeder roads; (v) equipment for four vehicle inspection stations in provincial centers and one in Tunis; and (vi) technical assistance for project preparation, supervision and monitoring; agricultural extension training; research on materials, construction techniques and maintenance techniques for unpaved roads; and a study of the socio-economic, agricultural and transport impact of rural roads\. Rural Road Improvement Program 52\. Road improvements would consist of upgrading, particularly drainage and surfacing, generally along existing alignments, to standards which have been developed in the light of experience with the ongoing Rural Roads project\. The overall program would cover about 100 road sections totalling  - 14 - some 1,200 km\. A firm plan of operations has been established for the first year as well as provisional plans for the second and third years\. In defining the overall road program, due attention was given to regional balance as well as to economic priorities\. Annual plans are subject to modification according to needs and priorities during project implementation\., Revised annual plans for rural road improvement will be presented to the Bank for prior review (para\. 69)\. In submitting sub-projects for inclusion under the second and following years of the program, the Government would provide: (i) a feasibility report for each road including preliminary engineering and construction costs, estimates of present and future traffic and an assessment of agricultural development as well as the complementary investments necessary to achieve the forecast production increases; and (ii) extension guidelines, farm budget analyses and implementation data for the agricultural component\. Assurances were obtained during negotiations that the agreed procedures and criteria will be followed in preparing and submitting sub-projects for Bank approval (Loan Agreement, Section 3\.03 (c))\. Assurances were also obtained that all rural roads improved under the project and all other improved rural roads would be maintained at appropriate service levels (Loan Agreement, Section 4\.04)\. Complementary Agricultural Investments 53\. These investments would follow the same general lines as those now being implemented under the ongoing project\. Two closely related elements are required to achieve the goal of increased production in the zones of influence of the project roads, first to improve the extension services to farmers, and second to improve farmers' access to credit\. 54\. Extension\. Detailed extension programs for the zones of influence of each road in the project area have been developed for those roads scheduled for construction in the first year and will be developed for each road to be improved in the subsequent years\. In line with the national program for improving extension services, extension centers serving the project areas would receive priority in the assignment of extension agents\. The Bank will assist by financing the foreign exchange costs of constructing about 55 extension centers and providing the equipment and vehicles required for the new centers\. The program of training in communications, initiated under the ongoing project, will be continued to maintain the impetus developed\. Together with improved accessibility, these activities will improve the timely and proper use of inputs necessary to support increased agricultural production\. 55\. Credit\. Adequate provision of agricultural credit to farmers is essential to the success of the project\. For the ongoing Rural Roads project, credit was included as an integral part of the project\. Short-term credit was wholly financed by the National Bank of Tunisia (BNT), while medium- and long-term credit was financed under the Bank's Second and Third Agricultural Credit Loans to BNT\. For the proposed project, agricultural credit needs have been similarly identified in detail and their satisfaction is an important element of the project\. Agricultural credit would continue to be administered by BNT, but credit financing would not be restricted to any particular credit program or source\. While no credit financing would be included under the loan, assurances were obtained from the Government and BNT that adequate credit would be made available for the project (Loan Agreement, Section 3\.02)\.  - 15 - 56\. Infrastructure\. In addition to on-farm investments which would be suitable for credit financing, project preparation has identified modest rural infrastructure works which could be part of investment packages on certain project roads\. These investments include the construction and rehabilitation of small irrigation schemes as well as small dams for irrigation purposes\. The Ministry of Agriculture's Rural Engineering Department (GR) would be responsible for their preparation and implementation and each scheme would be subject to detailed design and economic assessment\. These works would be included as part of the annual operations plans to be submitted for Bank review (Loan Agreement, Section 3\.03(b))\. Improved Maintenance Program 57\. The proposed project addresses continued development of the capability to maintain unpaved roads\. Improved maintenance operations will be specified as part of the annual operations plans to be reviewed and commented upon by the Bank (Loan Agreement, Section 3\.03(b))\. Spot Improvement Program 58\. The project includes a program of spot improvements on feeder roads located within the zones of influence of the roads improved under the rural roads program\. The proposed improvements, primarily for drainage structures at low points along the roads, would be constructed by small local contractors experienced in masonry and concrete work\. The proposed program for each year would be included in the operations plan to be submitted to the Bank for review and comment\. By implementing a systematic, planned program at DPC subdivision level, an important institution-building effect would be achieved\. Road Safety 59\. The Fourth Highway (Maintenance) project included a small component for improving road safety in Tunisia through a program of improved traffic signs and pavement markings\. The proposed project would continue to contribute to improved safety on highways by equipping four vehicle inspection stations in provincial centers and one heavy commercial vehicle inspection station in Tunis\. Technical Assistance 60\. About 325 man-months of consulting services would be provided under the project to assist; (i) the Highway Department (DPC) with the preparation of feasibility studies, detailed designs and contract documents and supervision of improvements to roads under the project, and with preparation of guidelines for regional engineers for implementing the spot improvement program; (ii) the Ministry of Agriculture (MA) in the preparation of detailed extension programs and credit needs projections for the zones of influence of roads;  - 16 - (iii) DPC and MA in project preparation for the next phase of rural road improvements; (iv) DPC and MA with project auditing and monitoring, and evaluation of the socio-economic, agricultural and transport impacts of the project; (v) MA with training for extension agents, including short training missions overseas; (vi) DPC in carrying out a study of materials, construction and maintenance techniques for unpaved roads in Tunisia; and (vii) DPC in the preparation of a program of road rehabilitation\. In addition, fellowships would be provided to MA and DPC staff for short training missions overseas\. Employment of qualified specialists included under the technical assistance program on terms and conditions satisfactory to the Bank was agreed during negotiations (Loan Agreement, Section 3\.04)\. Cost Estimates and Financing Plan 61\. Total project costs are estimated at $104\.3 million, of which $43\.7 million is in foreign exchange\. The local cost component of $60\.6 million includes $22\.7 million in taxes and duties\. Physical contingencies of ten percent of base cost have been allowed on all project component items\. Contingency allowances for price escalation were calculated for each year of the planned implementation schedule and overall represent 26 percent of base line costs plus physical contingencies\. Price escalation, both for local and foreign costs, is estimated at 8\.5 percent in 1982, 7\.5 percent in each year from 1983 to 1985, and 6 percent in 1986 and 1987\. Estimates for civil works are based on unit prices for recent contracts in Tunisia and experience under the ongoing project, adjusted to January 1982 levels\. Estimates for equipment and agricultural inputs are based on recent Tunisian prices updated to January 1982 levels\. The estimates for spot improvements are based on sample studies on roads included in the ongoing project and updated to January 1982 levels\. The technical assistance cost estimates are based on recent rates for consulting services in Tunisia, considering the likely mix of local and expatriate consultants and experts\. The average man-month costs are expected to be about $8,500, plus local travel, office space, secretarial assistance, etc\. A limited amount of short-term high-level expertise is planned to assist with preparation, monitoring, training and research\. This assistance is estimated to cost about $11,000 per man-month including salary, fees, international travel and subsistence\. The project also provides for about 24 visits overseas by Tunisian officials in connection with the organization of agricultural training courses as well as with visits related to research into unpaved road construction and maintenance; for these missions the cost of international travel and overseas subsistence is included for a total of $94,000\. For the purpose of calculating the foreign component for this project and based on the experience with the ongoing Rural Roads project, it has been assumed that all civil works contracts would be won by Tunisian contractors\. The cost estimates were discussed and confirmed with the Government during negotiations\. 62\. The Government will finance 100 percent of the annual recurrent budget costs of the project\. Recurrent budget requirements for fuel and supplies for rural road maintenance are estimated at $390,000 in 1982, increasing to about $2\.9 million in 1987\. Incremental operating expenditures for agricultural extension services under the project are estimated at  - 17 - $234,000 in 1983, increasing to about $1\.03 million in 1987\. During negotiations assurances were obtained that the Government will provide funds, facilities, services and other resources to operate and maintain the roads and extension services (Loan Agreement, Section 3\.01(a))\. 63\. The Bank loan of $35\.5 million would finance the foreign exchange costs of capital items, except short-, medium- and long-term credit and the minor rural infrastructure works to be constructed by GR as collective investments, and the "front-end" fee estimated at $550,000\. The agricultural credit needs in the zones of influence of the project would be met by BNT\. The Government would finance the cost of the rural infrastructure works and all local costs of the project except those included in the credit component, which would be met by BNT and farmers' contributions supplementing the credit\. Implementation 64\. Overall project implementation would be the responsibility of a Coordination Committee, whose establishment would be a condition of effectiveness of the loan (Loan Agreement, Sections 3\.01(b) and 5\.01)\. It would be chaired by the Minister of Public Works, with representatives of the Ministries of Public Works, Agriculture, Planning and Finance, Transport and Communications and Interior, and BNT as members\. A similar Committee is coordinating effectively the implementation of the ongoing Rural Roads project\. The various agencies in charge of execution report to the Committee\. DPC would be responsible for implementing; (i) rural road improvement works; (ii) rural roads maintenance; (iii) the program of spot improvements on feeder roads; and (iv) technical assistance for road aspects and coordination of project preparation, implementation and monitoring, research on design and maintenance and coordinating the socio-economic impact study\. MA will be responsible for (i) the improvement of extension services, including the training of agents and the procurement of extension buildings, equipment and vehicles; (ii) the minor rural infrastructure works; and (iii) technical assistance for agricultural aspects of project preparation, implementation and monitoring\. BNT will be responsible for administering agricultural credit with the assistance of MA staff in the field\. The Ministry of Transport and Communications would be responsible for equipping the vehicle inspection centers\. 65\. At the regional level DPC responsibilities, including construction supervision, will be carried out through the regional engineers, and MA responsibilities through the regional commissions (CRDAs)\. In order to improve communications and coordination, regional start-up seminars will be organized by DPC and MA to discuss and explain project objectives, scope, authority and responsibilities\. Auditing 66\. The internal accounting systems in the Ministries of Public Works and Agriculture have been reviewed and found adequate for the purpose of certification of accuracy and compilation and control of project-related  - 18 - financial transactions, including those connected with the road maintenance activities and extension service requirements listed in the action program\. However, government control procedures, as presently applied, do not produce audit reports\. During negotiations audit verification of separate project accounts by independent auditors satisfactory to the Bank was discussed and agreed with the Government (Loan Agreement, Section 4\.02)\. An understanding was reached that the Controller General of Finance, wh,o has independent status and is acceptable to the Bank, will fulfill this role\. Procurement\. 67\. Under Tunisian contract law (Decret No\. 74-754 of July 27, 1974 on the reglementation of public tenders) bid opening of tenders is conducted by a Government commission, not open to the public\. However, to conform with the Bank's Guidelines for Procurement which stipulate that bids should normally be opened in public an exclusion from the provisions of the contract law for all tender calls under the project was discussed and agreed during negotations\. Road construction contracts based on unit prices would be awarded after international competitive bidding in accordance with the Bank's Guidelines for Procurement\. Roads would be grouped in lots for bidding\. Contractors would be prequalified to undertake either single or several lots\. Except where it is geographically impracticable to group widely scattered roads, lots would be of at least $1 million, and several lots would be grouped for tender calls to a minimum value of $6 million, so as to make bidding attractive to both smaller and larger contractors who would be allowed to bid for one or more lots, or for a group as a whole\. During negotiations the arrangements concerning lot sizes, grouping for tender calls and bidding for a group as a whole were discussed and confirmed with the Government (Loan Agreement, Schedule 4, Section A para\. 3 (ii))\. Civil works contracts for the construction of agricultural extension centers and for spot improvements to roads would be awarded on the basis of local competitive bidding procedures satisfactory to the Bank (Loan Agreement, Schedule 4, Section C (2))\. Equipment to be procured under the project with Bank financing consists of vehicles for agricultural extension services; agricultural equipment for extension demonstrations; audio visual equipment for training; and equipment for vehicle inspection stations\. For bid evaluation purposes, a 15 percent margin of preference or an amount equal to customs duties, whichever is lower, would be applied in the case of equipment manufactured in Tunisia\. To the extent practical, equipment would be grouped into packages for tendering\. Packages estimated to cost more than $100,000 would be procured under ICB in accordance with Bank guidelines\. Bid packages estimated to cost less than $100,000 each, but not exceeding $500,000 in total, could be procured on the basis of competitive bidding advertised locally and in accordance with satisfactory local procedures\. Specialized vehicle inspection equipment would be purchased locally under negotiated contracts with a view to ensuring good quality, timely delivery and availability of maintenance facilities and spare parts (Loan Agreement, Schedule 4, C)\. Disbursements 68\. The proposed Bank loan of $35\.5 million would be disbursed as follows: (i) 40 percent of total expenditures for rural road works; (ii) 30 percent of total expenditures for construction and rehabilitation of buildings;  - 19 - (iii) 100 percent of foreign expenditures or 63 percent of local expenditures, for extension and motor vehicle inspection equipment; (iv) 33 percent of total expenditures for spot improvements; (v) 100 percent of foreign expenditures or 40 percent of local expenditures, for vehicles; (vi) 75 percent of total expenditures for consultant services; and (vii) 100 percent of total expenditures for overseas missions,and for the "front-end" fee\. Monitoring and Evaluation 69\. An implementation schedule, which is consistent with the overall program proposed for the project, has been developed\. Annual plans of project operations will be submitted to the Bank in preliminary form for review and comment by April 30 and in final form by September 30 each year\. Assurances from the Government that these procedures will be applied were obtained at negotiations (Loan Agreement, Section 3\.03 (a) and (b))\. An understanding on the overall program, the elements of the first-year plan and the procedures and criteria for sub-project review (para\. 73) was also obtained from the Government during negotiations\. 70\. Project monitoring would follow the physical and financial progress of the project and evaluate project impact\. Quarterly progress reports would be prepared by the Ministries of Public Works and Agriculture and submitted to the Bank through the Coordination Committee (Loan Agreement, Section 3\.06(c))\. A central project monitoring and coordination unit has been set up under the supervision of MA's Planning and Statistical Department to handle the flow of data from the ongoing project roads and to assist in preparing detailed action plans for the roads to be improved under the proposed project\. In addition, agricultural extension agents assigned to the ongoing project's zones of influence have undertaken a comprehensive census of agricultural farms within their respective areas of responsibility, which will provide direct feedback for the design and implementation of agricultural action programs, as well as improve MA's capacity to manage program planning\. The system will be expanded to include operational data which will show whether the project is meeting its objectives in the long term\. Basic data on the agricultural impact of the project would be drawn from a socio-economic impact study, which will be carried out on a sample of roads constructed under the Third Highway (Rural Roads) project as well as on selected roads to be improved under the proposed project\. The study will address a full range of rural development effects resulting from the introduction of road improvements and the improvement of agricultural support services, including changes in income levels, consumption patterns, personal mobility, levels of service provision and utilization, and migration patterns\. The Government would also prepare a project completion report within six months of the Loan Closing Date (Loan Agreement, Section 3\.06)\. Environmental Impact 71\. The project would enhance the quality of the rural environment by improving the standard of the existing roads, most of which are earth tracks, thus giving better access to markets and social services\. Most of the improvements would be along existing alignments, and there would be very little need, if any, to displace dwellings for road rights-of-way\.  - 20 - Benefits and Risks 72\. The economic benefits quantified under the proposed project come from two sources; transport cost savings and incremental value added on agricultural production\. Cost savings on passenger transport and on freight traffic will initially accrue to vehicle-owners although savings will be passed on to other users through increased competition following road improvement\. The value added in agriculture will accrue to the population of the impact zone either in the form of a direct consumption increase or in the form of additional income from marketing surplus production\. Most of the anticipated increases will come from the introduction of new or improved technologies to increase yields on presently productive land or from the more timely and appropriate use of agricultural inputs\. For the small farmer, the real benefit is not that the monetary costs of travel and transport decrease, but that services are provided\. Significant time savings and improvements in safety, comfort and convenience enable the farmer to obtain more inputs, market additional products, and have access to services that would otherwise be unavailable\. These gains are particularly significant when all-weather access is provided to communities which would otherwise be isolated for months at a time\. 73\. The provisional program of improvements to 1,200 km of rural roads was selected on the basis of an economic evaluation of over 2,000 km of individual roads\. A minimum acceptable economic return (ER) of 10 percen\.t has been applied for each individual road, the range of ERs being from 10 to 50 percent for roads included in the program\. The overall ER for 33 first-year roads is estimated at 21 percent\. Even under the most conservative assumption of a 25 percent reduction in overall benefits combined with a 25 percent increase in project costs, the overall ER of the first-year program would still be 15 percent\. In serving over 200,000 rural inhabitants, or about 6 percent of the rural population of Tunisia, social benefits would represent a significant addition to the quantified economic benefits\. Through the socio-economic impact study (para\. 70) it is hoped to improve the selection and evaluation of roads by including social criteria on a systematic basis\. 74\. The main area of risk associated with the proposed project is the timely implementation of complementary agricultural investments\. This risk is minimized through the institutional arrangements notably in the form of an interministerial Coordination Committee and the comprehensive monitoring and evaluation system to be introduced under the project\. Moreover, implemen- tation of the ongoing Rural Roads project has done much to familiarize both Government services and the rural population with the objectives and overall concepts of the rural roads program\. Assistance provided for agricultural extension services is now better integrated within national plans and the proposed project would continue within the same institutional framework\. At the same time, the Government is reassessing the institutional arrangements for agricultural credit and the project would benefit from improvements in the system\. Part V - LEGAL INSTRUMENTS AND AUTHORITY 75\. The draft Loan Agreement between the Bank and the Republic of Tunisia, and the Report of the Committee provided for in Article III, Section 4 (iii), of the Articles of Agreement are being distributed separately to the Executive Directors\. Special features of the project are listed in Section  - 21 - III of Annex III\. A special condition of effectiveness would be the establishment of a Project Coordination Committee (draft Loan Agreement, Sections 3\.01 (b) and 5\.01)\. 76\. I am satisfied that the proposed loan would comply with the Articles of Agreement of the Bank\. Part VI - RECOMMENDATION 77\. I recommend that the Executive Directors approve the proposed loan\. A\. W\. Clausen President by Moeen A\. Qureshi Attachments February 26, 1982 Washington, D\.C\.   - 22- ANNEX I TABLE3Pa of TUNISIA - SOCIAL INDICATORS DATA SHEET Page 1 of 6 TUNISIA REFERENCE GROUPS (WEIGHTED *VERAES LAND AREA (THOUSAND IQ\. RM\.) - HDST RECENT ESTTE)\. _~~ ~~~" OKM MIDDLE INCOME TOTAL 164\.MILENCR AGRICULTURAL 76\.7 MST RECENT NORTH AFRICA M MIDDLE INCOHE 1960 Lb 1970 /b ESTIHATE /b MIDDLE EAST LATIN AIERICA 6 CARIIIEA GNP PER CAPITA (US5) 220\.0 370\.0 1120\.0* 865\.5 1616\.2 ENERGY CONSUMPTION PER CAPITA (KILOGRAMS OF COAL EQUIVALENT) 173\.4 304\.2 618\.1 758\.3 1324\.1 POPULATION AND VITAL STATISTICS POPULATION, MID-YEAR (THOUSANDS) 4221\.0 5127\.0 6194\.0* URBAN PUPULATION (PERCENT OF TOTAL) 36\.0 43\.5 50\.9 45\.2 64\.2 PUPULATION PROJECTIONS POPULATION IN YEAR 2000 (MILLIONS) 9\.4 STATIONARY POPULATION (NILLIONS) 16\.0 YEAR STATIONARY POPULATIUN IS REACHED 2070 PUPULATION DENSITY PER SQ\. KM\. 25\.7 31\.3 37\.8 36\.3 34\.3 PER SQ\. EM\. AGRICULTURAL LAND 55\.0 67\.0 78\.7 442\.7 94\.5 POPULATIUN AGE STRUCTURE (PERCENT) U-14 YRS\. 43\.4 46\.2 41\.9 44\.2 40\.7 15-64 YRS\. 52\.5 50\.0 54\.5 52\.4 55\.3 65 YRS\. AND ABOVE 4\.1 3\.8 3\.6 3\.4 4\.0 POPULATIUN GROWTH RATE (PERCENT) TOTAL 1\.8 / \.9/c 2\.1* 2\.7 2\.4 URBAN 3\.2 3\.8 3\.8 4\.6 3\.7 CRUDE BIRTH RATE (PER THOUSAND) 46\.6 38\.4 31\.0 41\.5 31\.4 CRUDE DEATH RATE (PER THOUSAND) 18\.9 13\.8 10\.7 12\.8 8\.4 GROSS REPRUDUCTION RATE 3\.5 3\.2 2\.2 2\.9 2\.3 FAMILY PLANNING ACCEPTORS, ANNUAL (THOUSANDS) \. 29\.2 180\.9 USERS (PERCENT OF MARRIED WOMEN) \. 10\.0 21\.3 FO0D AND NUTRITIUO INDEX UF FOOD PRODUCTION PER CAPITA (1969-71-100) 97\.0 96\.0 112\.0 96\.3 108\.3 PER CAPITA SUPPLY UF CALORIES (PERCENT OF REUUIREHENTS) 80\.0 88\.0 112\.0 110\.4 107\.6 PROTEINS (GRAMS PER DAY) 50\.0 57\.0 73\.0 73\.4 65\.8 UF WHICH ANIMAL AND PULSE 12\.0 14\.0 22\.0 17\.1 34\.0 CHILD (AGES 1-4) MORTALITY RATE 28\.0 18\.4 12\.5 14\.9 7\.6 HEALTH LIFE EXPECTANCY AT BIRTH (YEARS) 47\.6 54\.0 58\.4 55\.9 64\.1 INFANT MORTALITY RATE (PER THUUSAND) 148\.0jL 135\.0 90\.0 *- 70\.9 ACCESS TO SAFE WATER (PERCENT OF POPULATION) TOTAL \. 49\.0 70\.0 59\.4 65\.7 URBAN \. \. \. 83\.9 79\.7 RURAL \. \. \. 40\.8 43\.9 ACCESS TU EXCRETA DISPUSAL (PERCENT OF PUPULATION) TOTAL \. 62\.0 \. \. 59\.9 URBAN \. 100\.0 \. \. 75\.7 RURAL \. 34\.0 60\.0 \. 30\.4 PUPULATION PER PHYSICIAN 10026\.1 5934\.0 3576\.2 4174\.5 1728\.2 PUPULATIUN PER NURSING PERSON \. 727\.5 1167\.8 1780\.5 1288\.2 POPULATION PER HOSPITAL BED TOTAL 373\.0/e 409\.1 427\.2 647\.4 471\.2 URBAN \. 290\.2 341\.4 547\.2 558\.0 RURAL \. 1269\.3 1273\.1 3361\.1 AUMISSIONS PER HOSPITAL BED \. 24\.1 \. 25\.3 HOUSING AVERAGE SIZE OF HOUSEHOLD TUTAL \. 5\.1 L 6\.0 URBAN \. 5\.1 /f 5\.8 RURAL \. 5\.1 L 6\.1 AVERAGE NUMBER UF PERSONS PER ROOM TOTAL \. 3\.2 f URBAN \. 2\.7 \. RURAL \. 3\.6 / ACCESS TU ELECTRICITY (PERCENT UF DWELLINGS) TOTAL \. 24\.0 /f \. URBAN \. \. RURAL \. \.  - 23 - ANNEX I TABLE 3A DT HE ae2o TUNISIA - SOCIAL INDICATORS DTA SHEET Page 2 of 6 TUNISIA REFERENCE GROUPS (WEIGHTED AVE9AGES - MOST RECENT ESTIMATE)- MIDDLE INCOME MOST RECENT NDRTH AFRICA & MIDDLE INCOME 1960 /b 1970 /b ESTIMATE /b MIDDLE EAST LATIN AMERICA & CARIBBEAN EDUCATION ADJUSTED ENROLLMENT RATIOS PRIMARY: TOTAL 66\.0 100\.0 100\.0 85\.1 101\.7 MALE 88\.0 121\.0 116\.0 101\.5 103\.0 FEMALE 43\.0 80\.0 83\.0 67\.5 101\.5 SECONDARY: TOTAL 12\.0 23\.0 30\.0 38\.0 35\.3 MALE 19\.0 33\.0 38\.0 48\.1 34\.9 FEMALE 5\.0 13\.0 22\.0 28\.3 35\.6 VOCATIONAL ENROL\. (1 OF SECONDARY) 24\.0 11\.0 35\.0 11\.3 30\.1 PUPIL-TEACHER RATIO PRIMARY 61\.0 47\.0 39\.0 34\.9 29\.6 SECONDARY 16\.0 28\.0 30\.0 23\.8 15\.7 ADULT LITERACY RATE (PERCENT) 15\.5 24\.0/f 62\.0 43\.0 80\.0 CONSUMPTION PASSENGER CARS PER THOUSAND POPULATION 11\.0 13\.0 18\.3 18\.3 42\.6 RADIO RECEIVERS PER THOUSAND POPULATION 40\.3 75\.7 147\.3 121\.0 215\.0 TV RECEIVERS PER THOUSAND POPULATION 0\.1 9\.9 36\.2 37\.4 89\.0 NEWSPAPER ("DAILY GENERAL INTEREST") CIRCULATION PER THOUSAND POPULATION 19\.0 16\.0 40\.4 35\.9 62\.8 CINEMA ANNUAL ATTENDANCE PER CAPITA 2\.0 \. 1\.5 3\.0 3\.2 LABOR FORCE TOTAL LABOR FORCE (THOUSANDS) 1137\.9 1214\.8 1581\.7 FEMALE (PERCENT) 6\.0 7\.7 8\.2 10\.5 22\.6 AGRICULTURE (PERCENT) 56\.0 49\.8 35\.0 43\.5 35\.0 INDUSTRY (PERCENT) 18\.0 21\.0 32\.0 27\.3 23\.2 PARTICIPATION RATE (PERCENT) TOTAL 27\.0 23\.7 25\.5 26\.4 31\.8 MALE 50\.2 44\.2 46\.1 47\.0 49\.0 FEMALE 3\.3 3\.6 4\.3 5\.7 14\.6 ECONOMIC DEPENDENCY RATIO 1\.8 2\.1 1\.8 1\.8 1\.4 INCOME DISTRIBUTION PERCENT OF PRIVATE INCOME RECEIVED BY HIGHEST 5 PERCENT OF HOUSEHOLDS \. \. 17\.0 HIGHEST 20 PERCENT OF HOUSEHOLDS \. \. 42\.0 LOWEST 20 PERCENT OF HOUSEHOLDS \. \. 6\.0 LOWEST 40 PERCENT OF HOUSEHOLDS \. \. 15\.0 POVERTY TARGET GROUPS ESTIMATED ABSOLUTE POVERTY INCOME LEVEL (US$ PER CAPITA) URBAN \. \. 204\.0 271\.4 RURAL \. \. 97\.0 144\.6 187\.6 ESTIMATED RELATIVE POVERTY INCOME LEVEL (US$ PER CAPITA) URBAN \. \. 193\.0 400\.8 513\.9 RURAL \. \. 193\.0 290\.9 362\.2 ESTIMATED POPULATION BELOW ABSOLUTE POVERTY INCOME LEVEL (PERCENT) URBAN \. \. 20\.0 22\.1 RURAL \. \. 15\.0 29\.2 Not available Not applicable\. NOTES /a The group averages for each indicator are population-weighted arithmetic means\. Coverage of countries among the indicators depends on availability of data and is not uniform\. /b Unless otherwise noted, data for 1960 refer to any year between 1959 and 1961; for 1970, between 1969 and 1971; and for Most Recent Estimate, between 1976 and 1979\. /c Due to exigration population growth rate is lower than rate of natural increase; /d 1960-65 average; /e 1962\. /f 1966\. * The updated 1980 GNP per capita and population estimates to be shown in the 1981 World Bank Atlas are $1310\.0 (at 1978-80 prices) and 6354 thousand, with a population growth rate of 2\.4\.  - 24 - ANNEX I DFNT OPSO SOCIAL INtICATORS Page 3 of 6 Notes: Although the data ore dtaon ftoo \.or* ge \.ea\.l ogd the some auhorlitaIve sod r1iuble, it should also be noed that they ty tt be i-tr- esttooalytosposbie hcoume f the och of taodsrteed dftototoos sod Ito\.ePt\. used by dAlftfello \.ountrile to toisttogi the data\. The date Are, tote- thlesm\. \. usful to d-srtbo odrdet of oStittude, odtiste treed\., lod -tatete cttt maJor ditfer_ace be_tse cottee\. Th tfret \.p\. ore \.I the same\.t\. otury group of the subJ eot --oty asd (2)A atou\.try &roop with soththigher e\.tsg\. iooms that the toootr grup of the ubjeot \.o\.otry)eet fo "attl uplac 011 topooters gtopmheo "Otddle teto= North Afota td Mitddl,E-ls"i!te hoeee heas o\.f sro sou-utrlffttitise)\. to tho Ilifeo\.ot\. group dat the \.voeear po\. puttot¶eihe arthntto m\.m foe math iedtot =odshv toy lbes maoityof the toora=ogophsdt o httdrtr to h oeaeo ooresog the iodl,tator dpeods It rths svt1iahllty of data led Le out -tft, stot- - boe heeerled It roLati!gaeaooSt todioa-r to soother\. eseeogste tyueful tocmaro h vlso ooe\. tdi-at- ata tine snog the --nory sod refereore groope\. LAND ARIA (ohouso\.d sq\.km\.) Pouattpr oprlnd - totAl\. orhat, sod rural - Ppulatioo (total\. Totl - Totl surface apes -prtstog lsd areaao oo sotore\. oh,sad"ruralI) dtolded hy tbise reepe-tte eumbeo of hosPital heds haritltora - ttinut of grttuturm are usd-nostyorpristyaaluble to phllo sod pttioate geoerat-sd spsrtalteed h ta a for ropa,pastues, ste sod htttrho gadeos or toIte !Ifmloe; 1978 dav\. hbhtlttatoueorers fospittals r\. eslsiet emsn tfe tPEppCIIO GoS) per capIta estitsae 't ourret ", ket poleeir dial rae ars Ito ttoldsd\. hotel hospitals\. bosve,iteclda hsalth ouloed b sam tooereio mehod ae World Ieoh Atlas (1977-79 haaeel; 190, sod sdt _teoor 00PotAtetpsafdb hmca htb 1970, \. 99dots\. modtcalu\.t_tut, iue,adotfe, et,\.) sbiob offe A -p--st tte a sod 1979 ~~~~~~~~~~~~~~~~~~~~~~~~~~dattior aed provide litted range of medloel faotlhf ha\.' Fer a\.tatf,- ENER-u CONSUMPfTION PER CAPITA - Ao \.u\.l -oteuptlot of tomastcta\.e\.ecgp (coa ttosl purposes urha hoepitlle toolde 900\. pri-ropsI)geoes1 hospItals, tod ltgitlr, petroleum, osturo1 gum aod hydro-, \. ulel sod g the-later- I'd ruesl hospital" local ortus hopte\.sd adita1 sad -aeemtr trlotty) to kilogrmee of coet qei-loate per c\.pit\.; ShO, 19'7D, sd 1979 Srrs pLetIfteed' hopit\.Alsaetoludd ooly osder toesi data\. Adntetoepei osttl e - Total oumbe o f admledtot to or dtsuhargee from hospitlel dtudsd hp the -ubs fbeds\. MPVPIATION AND VITAL STATISTICS 0 T-l P\.p\.l\.ti\., ~~~~~~StI-Tear (tho\.oeaods) - As of July 1; 1960, 1970, nod 1979 HOUSING data\.Avrgiteo Oumhold 7reaoo ,\.mI househo~ldSl total\. -rba ot ea Irhbt Poulst-o (rer-t of Itotal - hooto od orbao to totl popohalot\.;Ahosolotissfagruofsdvolehoere ttgqaee dlffereot doforloos\. of uha _oa yto ffcta -ops\.hility of duos so\.ht\.aoose hadro ogrsyormysth ntddt -Smg ro-trbog; 1960, 190Io 99dta h oehl for sooala prtet Porularton Prolerotooe Average~~~~~~~~~~~th h\.h\. dfreeneprrom toh,ohe\.sd ool-horgeen mees o frIlIy- at as hvethe levelits osuthg detoe- hr ofttl, urha:t, aod rural I9 deltgrseoadirslp\.-\.tt tr\. terttlify accooIou\. tc bitho i-leve o atfatypaoog isrvomote tach uouty beoheossIgud ou of hesealoetoehtoatior ofit merEf\.toy \. tIdIIIN\. sod , fetit ftreodef P- \.YI i~ II1\. dotprjeoto puh\.es udosed orlletoholos,ibi! y il tots rt ro tulsityt It -sonor h- opulaiot therel\. o\.rlgrothlor\.Prssf echoo -d toalIslea1 feae rins-l o saese eml fthelirthratedia eqolt the- danob rote aud a-lsoo re-ige structueet-srlmo oli gea taPeaylre spretge fr tv It ithepa 200, tod 7 t:thhertofdlom f fettlh -ty rot to b rep ca- todgy sohoolf- tota~ l, saeadftase, -I\. Co-lore as abve mf_oda elohsbetcohd ueodullyyoft 12 to 17 or foe oreodmt nre r eeal Pet eo\. a\. - Oldyear poplstton tr sqoocrhtlonete (hOt hrtaes o Pocathaoa erholme oplfr trhen of~ t 1-r1do -\. Vo_etoso,l iutouf Per eq Am\. artcuturslstd CospThd\.a abiove p foreg ,chtBrs \.ao\. eillura dpadrfrsentsff\.m_toar l_ sthtutef sa\. ool; 160,197 so 190 dot yuel-msherIto rimrv sod meto11et-l\. Tots stoens d 6nel11 h 2alt 9 00 90, sod 1979\.t Ifdutu\.pp\.,\. Ldul li e"srrt forrot-tieasdf he to rsnd\.d sod othe Porulstro Oroub Osr (percet - ttal - osof f_othlI tereto totalj\. mtd aspere--5 ofi- 1 totl1esl ro oto aged\. 15 \. permeo ss\. pear poplotloostoo 19S0h\.,\.96-70, atd1970-79 Crue Ort hooe(rt -hous d - Ota iebrh perthusndof\.i-prtos eayo las thtsgt pfeas nooe mulnAa b\. eeet popLtio; 90 t7, o 97 ot\.eluay ehulee\.1- t \., kooltlt 196,d97y sd 97 dstg\. boadras f to genera pyblir pe\.r Ooo of \.s\.oa eloem \. no- " her uoms reroucIv Per1-iod P: If ehe kspe rtoe presea agespc,\. Ifi fe-si ssI-fet dt o eeo et ap00h opaal ta tIltp tte;g 7ll fv-per1 eoa oigi 9V 91 o 99 otootigetihdlooig Psil Pootn boetrs Otul touooe)-Anua uebrofatepoe V erier (etthnso rpuate) T rotvrsto rod-mat P00,1 \. AS, F7050 to he "dty ti pea olaetu ie ek produrlloc ofdl fo let eod ChIa d- Pr Ddr 14o yocludes eted ,\.g oudfee sadPiloheeslhdro th par tatlnd do _ Idusost rv-nt Is or aleodr (6s \. b \.e \. C \.Indt\. ro erlprtma - gofd (e\.g\. eugo1ote sod sbiis udits 1toste 1d6of gugar) oh Ic sonIYdiblelod cioialobuyrlbnrt of\.tno\.fen no 1970nl veag prdu19e 9 picetIghs 916,17\.sd17 aa oa Ao ot\.(husd)-Ioolal oiapoos nld qunoP tittsneo ofo roooo,adlse III etIhf tito 1 tis d- Aututr\.r1 ati ihrfrei ema\. osty ata o houeeald bot; 11-h5 197, _ d sod19 7 d -o 9 190 td179daa Percapna uhoy o prtrt \. so1g per ay) Proeriocoeto e capha orlol Cfor oo CHer ceh ol -dtoasl\. ae\.sd esl-sriitooo vaIupldodoo e d Iy Oos-pl offo \.df ed as i-,\. abve\.-aoo traeersemueigh ee \. tel, ae,clod\. e fesale - iehe fe teas puleDet pctetrp, ooh\.c 10 Aoose shot thd be thim l pott\.e Teego-rfeooaeeegrdusu h oust\. s odlon Om_ red Woldfod 7u0sy 09165 97 od 1977d daOid\. to \. the \. tool bo ore Pats is mta A,pl from Ifme sdl htle i- Pr toteio orsnpply of foodo do-l Lo Child (ae -h)Ooalt oe ctthuud -Analdsl p 9ouai in Prcersa of Prlvor1 Income F(hoth-ilcshsd ofiad) t- hcio b uhe tries dats derivdfo ueth Ie90 90tod 1979 data, of households 0105\.10 PVvooo't~~~~~~~~~~~~~~~~~~~~~~~~~~~~~PIE nIonoyGitoo1 LIfe fithsctataol ticth todsom - vaaep o o-po oof life\.r\.aiIing Th foltowig esoteoem or very appootenate mau4srem of\. pdet TeVe-e- at btctb;-190,-1970 sodI979 datud an ehoutlid bed totoypret nabl gftuaetdeo ofuTto\.t\. t fft ofe ogfpe thiodaad lIve Ebir15e\. Ahsobiuth _ Ioveroy\.iotose lue'ihha\.om \.lsl o throbo isima peortuIfoged oftabs r ri esttePniato persCpibtosistfP" ohPi" peoolitoeo\.otor radlvll deIve f\. tenth rofa foutrtor r anadpId loatdinti\. mot tat20 metee fs b fleedayb Ievol vrh~l sd:jueeth for- higher dtet of iutg o rs ss consderedo of haSo f\.bi restalstes fthat hos\.Irrlrn etmtdPrito ehsAett oet CA s ILve deri eni\. i-ura ta ofah _ec yogoool uml that the -ootewit oIrimembers\. offthe haesodsorus-Pecnofp uett(rbnado (ohoe'hele doto hr told\.) pAdedteproporlod-ti ort of -,ho day io ftblre th pAOR ORC\. fer -o - of peple (tore,iurso: ad total)- gf_ ved by soorsi C ,disoa am\.rl l; d\. l d\. lj paroeneges f obrroeptrivepopolsthteill\.tooroItI dIposal say- \.io\.o;utudDe Pti,inPtnltprlotel ss19199 Ponolatio ret Pyicist- "PoPula Iur d divde -b ome -ofprciolp- pI\.s\. Puouotio ro onslo Pteo-Fc\. PiPlolp divided by odbe of prarPrt\.loibng ~ eo\. f \.1Lbe \. mal ee fnst gsduneood e d Irctolnuss sdit aseitato e1turses\.Lblf-\.1\.f-i9 ty,hti  - 25 - ANNEX I Page 4 of 6 TUNISIA - ECONOMIC INDICATORS Population: 6\.4 million (mid-1980) GNP per Capita: $1,310 (1980) Amount Annual Growth Rates (million uS$ Actual (at 1972 prtces) Actual/' Projected (at 1979 prices) Indicator at current prices) 1980 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 NATIONAL ACCOUNTS Gross domestic product /2 8,493\.8 7\.4 4\.3 8\.3 7\.6 7\.3 6\.4 6\.4 6\.6 6\.5 6\.3 Agriculture 1,211\.4 5\.2 -7\.5 8\.9 0\.5 8\.6 5\.0 5\.0 4\.5 4\.0 4\.0 Industry 2,579\.8 7\.8 7\.0 9\.2 11\.9 7\.6 6\.8 7\.0 8\.0 8\.0 7\.5 Services 3,512\.6 5\.4 5\.8 7\.7 8\.2 6\.7 6\.5 6\.5 6\.5 6\.5 6\.4 Consumption 6,400\.0 8\.8 9\.5 9\.3 7\.1 6\.9 6\.7 8\.8 6\.9 5\.0 6\.6 Gross investment 2,345\.7 16\.9 5\.8 6\.6 8\.7 0\.5 8\.4 3\.8 6\.1 5\.7 5\.4 Exports of goods and NFS 3,444\.4 9\.6 5\.6 9\.1 18\.8 S\.4 4\.2 3\.1 3\.7 9\.7 8\.9 Imports of goods and NFS 3,696\.3 19\.3 16\.5 9\.6 14\.4 3\.9 6\.4 6\.0 4\.3 5\.6 8\.5 Gross national product 8,437\.0 6\.0 4\.8 9\.2 8\.0 6\.3 6\.5 6\.5 6\.5 6\.4 6\.2 Gross national savings 2,037\.0 -6\.3 -1\.7 21\.2 35\.8 6\.3 4\.9 -2\.0 5\.0 12\.9 5\.9 PRICES GDP deflator 137\.7 151\.4 158\.6 174\.2 190\.3 - - - - - Exchange rate 2\.33 2\.33 2\.40 2\.46 2\.47 - - - - - Share of GDP at market prices (X) Average Annual Tncrease (2) (at current prices) (at constant prices) 1970 1975 1980 1986 1991 1970-75 1975-80 1980-85 1981-86 1986-91 Gross domestic product 100\.0 100\.0 100\.0 100\.0 100\.0 8\.5 7\.0 6\.5 6\.5 5\.8 Agriculture 16\.7 18\.2 14\.3 12\.7 11\.1 8\.8 1\.0 4\.5 4\.2 3\.0 Industry 20\.5 27\.1 29\.5 31\.2 32\.8 9\.0 7\.5 7\.5 7\.7 6\.8 Services 49\.3 42\.7 42\.2 42\.2 42\.2 8\.7 6\.0 6\.5 6\.5 5\.8 Consumption 84\.8 75\.5 70\.0 70\.8 71\.8 8\.6 8\.3 6\.8 6\.6 6\.2 Gross investnent 19\.7 29\.3 28\.3 27\.2 25\.4 11\.8 6\.8 5\.7 5\.4 4\.3 Exports of goods and NFS 21\.9 31\.3 38\.5 35\.9 33\.3 12\.5 9\.7 5\.7 6\.5 5\.1 Imports of goods and NFS 26\.4 36\.1 41\.4 40\.3 38\.7 11\.3 12\.1 5\.9 5\.9 5\.1 Gross national product 97\.9 99\.9 99\.5 99\.3 97\.9 8\.7 7\.0 6\.4 6\.4 5\.5 Net factor income 2\.1 0\.1 0\.5 0\.7 1\.9 - - - - - Gross national savings 13\.2 24\.3 23\.6 21\.8 18\.9 7\.5 5\.9 2\.2 As % GDP (at current prices) 1970 1975 1980 PUBLIC FINANCE Current revenue 23\.5 25\.7 27\.2 Current expenditure 20\.4 19\.9 18\.5 Surplus (e) or deficit (-) 3\.1 5\.9 8\.6 Ctpital expenditure 9\.5 10\.8 14\.8 Foreign financing 5\.0 1\.8 1\.3 1970-75 1975-80 1'980-85 1981-86 1986-91 OTHE'R INDICATORS GNP growth rate (1) 8\.7 7\.0 6\.4 6\.3 5\.5 GNP per capita growth rate (2) 6\.3 4\.4 4\.0 4\.0 3\.1 ICOR 2\.6 3\.6 4\.4 4\.4 4\.6 Marginal savings rate 30\.5 17\.6 20\.1 22\.8 8\.2 Import elasticity 1\.24 1\.81 0\.91 0\.91 0\.89 /1 1980 data at 1979 prices\. 72 GDP at market prices and components, at factor cost\. EMENA ('P 2C December 1981  - 26- ANNEX I Page 5 of 6 TUNISIA - EXTERNAL TRADE Population: 6\.4 million (mid-1980) GNP per Capita: $1,310 (1980) Amount Annual Growth Rates (million USt Actual (at 1972 prices) Actual/l Projected (at 1979 prices) Indicator at current prices) 1980 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 EXTERNAL TRADE MerchandLse exports 2,282\.9 5\.8 -5\.0 16\.0 10\.1 3\.9 1\.5 0\.2 0\.9 10\.8 9\.5 Crude oil 1,168\.5 -15\.0 1\.9 14\.0 91\.3 11\.0 -4\.5 -7\.8 -6\.6 -1\.6 - Other primary 207\.9 21\.8 -17\.9 34\.7 10\.0 \.4 5\.8 2\.7 2\.6 2\.5 2\.5 Manufactures 906\.5 37\.2 -1\.5 21\.9 14\.8 1\.6 7\.3 6\.9 6\.4 20\.9 /2 15\.a /2 Merchandise imports 3,340\.7 13\.6 30\.4 5\.5 11\.7 1\.9 6\.4 6\.0 4\.1 5\.6 8\.7 Food 422\.4 -13\.5 25\.5 11\.1 22\.2 2\.7 6\.0 2\.9 5\.0 3\.3 4\.8 Petroleum 662\.0 -24\.8 -8\.5 -3\.9 25\.7 3\.0 9\.9 14\.2 -3\.5 36\.9 /2 23\.3 /2 Machinery and equipment 765\.7 19\.1 2\.4 5\.2 -11\.0 -1\.3 3\.8 6\.5 6\.1 5\.7 5\.4 Others 1,490\.6 31\.2 36\.0 2\.9 14\.1 3\.2 6\.6 3\.4 6\.1 6\.1 5\.9 Price Index Price Index /3 PRICES Export price index - 181\.2 197\.9 215\.0 267\.9 128\.0 135\.7 148\.1 161\.0 177\.3 193\.9 Import price index - 163\.7 171\.4 180\.6 205\.6 115\.3 128\.2 141\.4 153\.7 166\.8 181\.3 Terms of trade index (1972=100) - 110\.7 115\.5 119\.0 130\.3 139\.0 138\.0 136\.4 136\.6 138\.5 139\.3 (1979=100) - - - - 106\.7 105\.9 104\.7 104\.8 106\.3 106\.9 Composition of Merchandise Trade (%) Average Annual Increase (X) (at current prices) (at constant prices) 1970 1975 1980 1981 1986 1991 1970-75 1975-80 1980-85 1981-86 186-91 Exports 100\.0 100\.0 100\.0 100\.0 100\.0 100\.0 11\.6 9\.4 4\.2 5\.5 2\.9 Crude oil 24\.5 41\.8 51\.1 49\.3 35\.0 29\.0 23\.2 3\.0 -4\.1 -3\.8 -3\.5 Otber primary 21\.2 18\.0 9\.1 9\.2 7\.0 6\.0 6\.7 2\.0 3\.2 3\.0 3\.0 Manufactures 54\.3 40\.2 39\.8 41\.5 58\.0 65\.0 6\.2 14\.3 11\.2 12\.0 5\.5 Imports 100\.0 100\.0 100\.0 100\.0 100\.0 100\.0 13\.4 12\.4 5\.8 5\.9 5\.1 Food 20\.6 15\.8 12\.6 13\.6 13\.6 12\.9 8\.9 7\.5 4\.2 4\.2 4\.4 Petroleum 4\.0 9\.8 19\.7 20\.5 24\.4 25\.2 36\.5 23\.2 8\.0 7\.6 4\.1 Machinery and Equipment 23\.0 30\.2 22\.8 21\.8 20\.7 19\.5 15\.7 8\.3 5\.7 5\.7 4\.4 Others 52\.4 44\.2 44\.8 44\.1 41\.3 42\.4 10\.6 13\.2 5\.5 5\.7 6\.1 Share of Trade with Share of Trade with Share of Trade with Industrial Countries (X) Developing Countries (X) Capital Surplus Oil Exporters (%) 1970 1975 1980 1970 1975 1980 1970 1975 1980 DIRECTION OF TRADE Exports 62\.6 48\.6 74\.1 23\.4 41\.4 n\.a\. 14\.0 10\.0 n\.a\. Imports 62\.9 67\.1 73\.5 33\.7 25\.7 n\.a\. 3\.4 7\.2 n\.a\. /1 1980 data at 1979 prices\. /2 Increase in refining capacity\. /3 For 1981-85, export and import price index is based on 1979=100\. EMENA CP 2C December 1981  - 27 - ANNEX I Page 6 of 6 BALANCE OF PAY=ENTS, EXrERNAL CAPITAI AND DEBT (million US at current prices) Population: 6\.4 million (mid-1980) GNP per Capita\. $1,120 (1979) Actual Projected 1970 1975 1978 1979 1980 1981 1982 1983 1986 1991 BALANCE OF PAYMENTS Net exports of goods & services -104\.5 -208\.8 -599\.7 -478\.5 -296\.5 -463\.6 -718\.9 874\.7 -1,040\.9 -2,728\.0 Exports of goods 6 services 355\.6 1,529\.2 2,090\.6 2,913\.9 3,825\.1 4,363\.4 4,877\.5 5,458\.9 8,440\.5 14,106\.6 Imports of goods & services 460\.1 1,738\.0 2,690\.3 3,392\.4 4,121\.6 4,827\.0 5,596\.4 6,333\.6 9,481\.4 16,838\.6 Net transfers /1 53\.0 47\.4 33\.6 31\.0 25\.6 26\.0 26\.1 26\.1 26\.2 11\.3 Current account balance -51\.5 -161\.4 -566\.1 -447\.5 -270\.9 -437\.6 -692\.8 -848\.6 -1,014\.7 -2,716\.7 Direct private investment 25\.5 50\.2 91\.1 164\.8 95\.0 200\.0 250\.0 300\.0 450\.0 724\.7 MLT loans (net) 43\.4 124\.5 468\.6 438\.0 399\.1 325\.8 539\.0 640\.7 688\.5 2,200\.2 Official 41\.7 102\.9 84\.8 318\.8 436\.0 379\.2 433\.3 375\.3 345\.3 379\.5 Private 1\.7 21\.6 83\.8 162\.2 -36\.9 -53\.4 105\.7 265\.4 343\.2 1,820\.5 Other capital 2\.0 -10\.4 41\.4 -22\.6 -83\.7 - - - - - Change in reserves -19\.4 -2\.9 -35\.0 -132\.7 -139\.9 -90\.6 96\.2 -92\.1 -123\.8 -208\.1 International reserves 15\.4 362\.2 269\.9 402\.3 542\.2 632\.8 728\.9 821\.1 1,214\.6 2,134\.3 Reserves as months of imports 0\.4 2\.4 1\.3 1\.4 1\.6 1\.6 1\.6 1\.6 1\.5 1\.5 Actual Projected 1970 1975 1978 1979 1980 1981 1982 1983 1986 1991 GROSS DISBURSEMENTS Official graats 43\.0 50\.2 32\.7 50\.7 74\.6 25\.0 25\.0 25\.0 25\.0 10\.0 Gross disbursements of MLT loans 86\.8 193\.3 556\.7 746\.1 652\.6 635\.1 865\.7 1,032\.5 1,459\.0 3,358\.0 Concessional 45\.2 100\.1 184\.5 193\.2 407\.2 349\.8 341\.3 288\.4 220\.6 246\.2 Bilateral 41\.3 82\.0 175\.1 179\.0 308\.9 265\.5 271\.B 239\.3 169\.6 186\.6 IDA 2\.9 12\.6 1\.8 0\.2 1\.5 1\.1 \.5 \.2 - - Other multilateral 1\.0 5\.5 7\.6 14\.0 106\.8 83\.2 69\.0 48\.9 50\.9 59\.6 Non-concessional 41\.6 93\.7 372\.2 552\.9 235\.4 285\.3 524\.4 744\.1 1,238\.4 3,739\.8 Private 31\.1 51\.3 321\.3 431\.9 122\.2 112\.8 308\.2 499\.5 856\.0 3,111\.8 Official export credirs 1\.3 15\.0 6\.1 5\.0 15\.8 52\.3 59\.1 67\.7 107\.4 150\.0 IBRD 9\.2 26\.9 33\.0 55\.4 62\.3 98\.1 134\.1 149\.6 145\.8 186\.6 Other multilateral - - 11\.7 60\.6 35\.1 22\.1 23\.0 27\.3 129\.2 291\.4 EXTERNAL DEBT Debt Outstanding and Disbursed 540\.9 1,034\.4 2,409\.2 3,053\.2 3,452\.4 3,778\.2 4,317\.2 4,957\.0 6,763\.6 14,896\.4 Official 367\.0 858\.6 1,583\.4 1,864\.2 2,300\.2 2,679\.4 3,112\.7 3,488\.0 4,473\.9 6,490\.2 IBRD 26\.3 109\.8 189\.4 232\.0 281\.3 361\.4 473\.0 S95\.3 862\.1 1,192\.3 IDA 16\.2 55\.3 67\.4 67\.3 68\.4 69\.0 68\.7 68\.1 65\.3 58\.2 Other 224\.5 693\.5 1,326\.6 1,564\.9 1,950\.5 2,249\.0 2,571\.0 2,824\.6 3,546\.5 5,239\.7 Private 173\.9 175\.8 825\.8 1,189\.0 1,152\.2 1,098\.8 1,204\.5 1,470\.0 2,289\.6 8,406\.2 Undisbursed debt 307\.0 741\.3 1,794\.4 1,773\.8 1,532\.2 1,451\.1 1,372\.8 1,445\.3 2,820\.5 2,925\.3 DEBT SERVICE Total debt service payments 63\.1 101\.3 214\.5 311\.6 460\.4 522\.2 545\.3 635\.4 1,129\.2 2,657\.2 Interest 17\.8 35\.0 96\.1 159\.5 206\.9 212\.9 218\.6 243\.6 358\.7 871\.3 Payments as X experts 17\.7 6\.6 10\.2 9\.9 12\.0 12\.0 11\.2 11\.6 13\.4 18\.8 Payments as X GNP 4\.4 2\.4 3\.6 4\.3 4\.4 4\.3 4\.2 4\.4 4\.5 4\.1 Average interest rate of new Loans (X) 3\.4 3\.9 7\.1 7\.3 5\.6 6\.8 7\.3 7\.7 7\.9 7\.7 Official 2\.7 3\.3 4\.4 5\.6 - - - - - - Private 6\.3 6\.7 8\.9 11\.1 - - - - - - Average maturity of new Loans (years) 26\.6 24\.2 14\.5 17\.0 26\.1 19\.6 15\.6 13\.7 13\.1 9\.8 Official 31\.2 27\.1 21\.0 20\.1 - - - - - - Private 9\.2 9\.1 10\.0 10\.1 - As % of Debt Outstanding at End of Most Recent Year (1980) DEBT STRUCTURE Maturity structure of debt outstanding (%) Amortization due within 5 years 54\.8 Amortization due within 10 years 98\.9 Interest structure of debt outstanding (%) Interest due \.sthin first -ear 6\.8 /1 Including grants\. EMFNA CP 2C December 1981  - 28 - ANNEX II Page 1 of 9 A\. STATEMENT OF BANK LOANS AND IDA CREDITS (As of September 30,1981) US$ Million Loan or Amount (less Credit Cancellation) Number Year Borrower Purpose Bank IDA c/ Undisburaed Twenty-seven Loans and Credits Fully Disbursed 187\.50 60\.47 238 1971 Republic of Tunisia Population 4\.80 0\.65 858 d/ 1972 Republic of Tunisia Tourism Infrastructure 14\.00 0\.10 937 1973 Republic of Tunisia Urban Planning and Public Transportation 11\.00 0\.37 1042 d/ L974 Compagnie des Phosphates et Chemin de Fer de GAFSA Phosphate Development 23\.30 0\.87 1068 1974 Republic of Tunisia Irrigation Rehabilitation 12\.20 3\.30 1088 1975 Republic of Tunisia Urban Sewerage 28\.00 4\.97 1155 1975 Republic of Tunisia Third Education 8\.60 6\.67 1188 1975 Republic of Tunisia Second Highways 28\.00 18\.39 238-1 1976 Republic of Tunisia Population 4\.80 0\.76 1340 1976 Banque Nationale de Tunisie Second Agricultural Credit 12\.00 7\.42 1355 d/ 1976 Societe Tunisienne de l'Electricite et du Gaz Second Power 14\.50 0\.10 1431 1977 Republic of Tunisia Irrigation Development 42\.00 15\.37 1445 1977 SONEDE Fourth Water Supply 21\.00 13\.53 1504 1977 BDET Development Finance Company 30\.00 3\.99 1505 1977 Republic of Tunisia Small-Scale Industrial Project 5\.00 2\.62 1601 1978 Republic of Tunisia Rural Roads (Third Highways) 32\.00 28\.16 1675 1979 Republic of Tunisia Second Urban Sewerage 26\.50 25\.80 1702 1979 Societe Nationale d'Exploitation d'Eau Fifth Water Supply 25\.00 14\.66 1705 1979 Republic of Tunisia Second Urban Development 19\.00 18\.54 1746 1979 Republic of Tunisia Second Fisheries 28\.50 26\.83 1796 1980 Republic of Tunisia Southern Irrigation 25\.00 24\.84 1797 1980 Office des Ports Nationaux Third Port 42\.50 25\.24 1841 1980 Republic of Tunisia Fourth Highways 36\.50 36\.50 1864 1980 Societe Tunis3enne de l'Electricite et du Gaz Second Natural Gas Pipeline 37\.00 37\.00 1885 1980 Banque Nationale de Tunisie Third Agricultural Credit 30\.00 29\.25 1961 1981 Republic of Tunisia Fourth Education 26\.00 26\.00 1969 b/ 1981 Republic of Tunisia Small-Scale Industry Development 30\.00 30\.00 1997 b/ 1981 Republic of Tunisia Northwest Rural Development 24\.00 24\.00 2003 b/ 1981 Republic of Tunisia Third Power 41\.50 41\.50 2005 b/ 1981 Republic of Tunisia Health and Population 12\.50 12\.50 2012 b/ 1981 Republic of Tunisia Textile Rebabilitation 18\.60 18\.60 TOTAL 891\.70 70\.07 493\.53 Of which has been repaid 88\.26 5\.75 Total now outstanding 803\.44 64\.32 Amount Sold 14\.33 of which has been repaid 12\.40 1\.93 Total now held by Bank and IDA b/ 801\.51 64\.32 Total Undisbursed 492\.12 1\.41 493\.53 a/ This list does not include a loan of $42 million for a Grain Storage project approved by the Board on October 6, 1981\. b/ Not yet effective c/ Prior to exchange adjustment d/ Fully disbursed since September 30, 1981\.  - 29 - ANNEX TI Page 2 of 9 B\. STATEMENT OF IFC INVESTMENTS IN TUNISTA (as of September 30, 1981) Amount in lTO\. Million Year Obligator Type of Business Loan Fquity Total 1962 NPK Engrais Fertilizers 2\.0 1\.5 3\.9 1966 Societe Nationale d' Investissement Development Finance Co\. 0\.* n\.6 1969 COFIT (Tourism) Development F-inance Co\. 8\.n 2\.2 10\.2 1970 Soci6t4 Nationale d'Investissement (SNI) now (BDET) Development F-inance ro\. 0\.6 0\.6 1973 Soci6td Touristigue & Hoteliere RYM SA Tourism 1\.6 0\.3 1\.9 1975 Societe d'Etudes & de Developpement de Sousse-Nord Tourism ?\.s 0\.7 3\.? 1974 Industries Chimiques du Fluor Chemicals 0\.6 0\.6 1978 BDET Development Finance Co\. 1\.? 1\.2 Total Gross Commitments 14\.1 7\.7 21\.8 Less cancellations, terminations, repayments and sales 7\.9 1\.9 Q\.8 Total commitments now held by IFC 6\.2 5\.8 19\.0 Total undisbursed 0\.0 0\.0  - 30 - ANNEX II Page 3 of 9 C\. PROJECTS IN EXECUTION 1/ Cr\. 238; Population Project: US$4\.8 million credit of April 5, 1971; Date of Effectiveness: December 29, 1971; Closing Date: December 31, 1981\. Cr\. 238-1: Population Project: US$4\.8 million Supplemental Credit (NORAD grant) of October 13, 1976; Date of Effectiveness: March 21, 1977; Closing Date: December 31, 1981\. The present closing date will not be extended\. The undisbursed loan balance on February 24, 1982 was $110,453\. Payments are being made on amounts committed prior to the closing date\. Ln\. 858\. Tourism Infrastructure Project; US$14 million loan of September 28, 1972; Date of Effectiveness: June 29, 1973; Closing Date: December 31, 1980\. The project is completed and the undisbursed loan balance ($96,940) was cancelled on November 24, 1981\. Ln\. 937; Tunis District Urban Planning and Public Transport Project; Cr\. 432: US$11 million loan and US$7 million credit, both of October 5, 1973; Date of Effectiveness: September 24, 1974; Closing Date: December 31, 1981\. The present closing date will not be extended\. The undisbursed loan balance on February 24, 1982 was $365,575\. Payments are being made on amounts committed prior to the closing date\. Ln\. 1042: Gafsa Phosphate Project; US$23\.3 million loan of October 1, 1974; Date of Effectiveness: March 14, 1975; Closing Date: December 31, 1981\. The project is completed and the undisbursed loan balance ($105,930) was cancelled on February 26, 1982\. Ln\. 1068: Irrigation Rehabilitation Project; US$12\.2 million loan of December 31, 1974; Date of Effectiveness: September 18, 1975; Closing Date: June 30, 1982\. Progress in construction and rehabilitation of irrigation, drainage and road networks in the Medjerda area continues to be satisfactory\. However, 1/ These notes are designed to inform the Executive Directors regarding the progress of projects in execution, and in particular to report any problems which are being encountered, and the action being taken to remedy them\. They should be read in this sense, and with the under- standing that they do not purport to present a balanced evaluation of strengths and weaknesses in project execution\.  - 31 - ANNEX II Page 4 of 9 farmers have not fully used the available facilities due to limited distribution hours, lack of on-farm development and poor extension\. Land reform is progressing and is expected to be completed by the end of 1983\. In the Nebhana area, rehabilitation investments have been satisfactorily completed\. Credit demand for basins and storage facilities was less than originally expected, and a grading and packing station was not built because of lack of capacity on the part of the cooperative which was to construct and manage it, and because drought in the area red[uced production\. Land consolidation in Nebhana is expected to be completed by mid-1982, and production of off-season vegetables under greeenhouses is encouraging\. Ln\. 1088: First Urban Sewerage Project: US$28 million loan of February 18, 1975; Date of Effectiveness: August 15, 1975; Closing Date: December 15, 1982\. The project suffered considerable delay as a result of a number of factors, some beyond the control of the project entity (ONAS)\. As a result, considerable cost escalation occurred, chiefly in local cost components\. However, all components of the project are now under construction and project completion is expected by mid-1982\. One of its major benefits will be release of land for development around the Lake of Tunis, which until now has been impossible because of the pollution of the lake waters by untreated sewerage\. Consultants financed under the project lhave produced a land-use plan for the area, and acquisition of the land by Government is in progress\. Ln\. 1155, Third Education Project; US$8\.9 million loan of August 13, 1975; Date of Effectiveness: March 1, 1976; Closing Date; March 31, 1983 Implementation of this project was delayed following a change in education priorities in Tunisia\. The project was subsequently amended tco reduce the number of ITM centers to be equipped undler the project, increase the facilities to train teachers for ITM, and increase technical assis- tance\. The total cost of the amended project is estimated at $11\.3 million and the Bank loan has been decreased by $0\.3 million to $8\.6 million, rep- resenting the full foreign exchange cost of the amended project\. Imple- mentation of the project is proceeding satisfactorily and as planned in the revised schedule\. There was a slight delay of about three months in construction, but the procurement of furniture and equipment is running ahead of schedule\. The final bid documents for the extension of the five teacher training colleges have been received and are now under awarding procedures\. All major covenants have been met\. Ln\. 1188: Second Highways Project; US$28 million loan of January 26, 1976; Date of Effectiveness: June 16, 1976; Closing Date- December 31, 1982\. Civil works on the Tunis-Bizerte highway have been completed\. Construction is almost complete on the Hammamet-Korba road in Nabeul Mhe  - 32 - ANNEX II Page 5 of 9 remaining construction works on other roads are well-advanced\. The Sfax by-pass under Lot 8 on which there is a difficult problem of expropriation has been deleted from the project\. All studies under the project have been completed and their results are being implemented\. Ln\. 1340: Second Agricultural Credit Project; US$12 million loan of December 17, 1976; Date of Effectiveness: July 19, 1977; Closing Date: December 31, 1982\. About 81 percent of the loan amount is disbursed and more than 100 percent is committed; amounts in excess will have to be financed by the Government or by the Third Agricultural Credit project\. Categories 2 and 4 (subloans to commercial farmers and agro-industrial investors) are fully disbursed\. Category 1 (subloans to small and medium farmers) are expected to be fully disbursed by the end of 1982\. Disbursements for Category 3 (subloans to farmers' associations for the establishment of date palm plantations) have begun\. Construction of irrigation infrastructure is in progress and plantation is also progressing satisfactorily\. However, drilling of artesian wells is suffering some delays\. Ln\. 1355: Second Power Project; US$14\.5 million loan of January 12, 1977; Date ot Ettectiveness: May 4, 1977; Closing Date: June 30, 19,11\. The project is completed and the undisbursed loan balance ($93,349\.98) was cancelled on October 20, 1981\. Ln\. 1431; Sidi Salem Multipurpose Project; US$42 million loan of July 5, 1977; Date of Effectiveness: July 31, 1978; Closing Date: June 30, 1984\. For the project as a whole, progress in implementation con- tinues to be satisfactory\. The land reform and consolidation program is underway\. The Sidi Salem dam is expected to be completed on schedule to catch the 1981/82 flood season\. The new railroad is now completed and in commercial service\. After some initial delays, construction of the Medjerda-Cap Bon interconnection canal is proceeding more rapidly, and completion by end 1983 seems possible\. A 6 kms section was commissioned in June 1981, permitting the supply of additional water to Tunis during the peak consumption period\. First irrigation of the 1,400 ha Testour perimeter is expected in April 1982\. Ln\. 1445: Fourth Water Supply Project; US$21 million loan of July 5, 1977; Date of Effectiveness: January 30, 1978; Closing Date: December 31, 1982\. The procurement process under the fourth project is now completed\. Project execution has accelerated during the last six months and the project is now expected to be completed by end 1982, about six months behind the appraisal schedule\.  - 33 - ANNEX II Page 6 of 9 Ln\. 1504/1505: Industrial Finance Project consisting of a Seventh Loan to Banque de Developpement Economique de Tunisie (BDET) and a Pilot Project for assistance to SSI; Loans of $30\.0 million to BDET and of $5\.0 million to the Government of January 25, 1978; Date of Effectiveness: October 13, 1978; Closing Date: December 31, 1982\. Both loans are fully committed\. Under the project, BDET is giving priority in its financing to projects which are located in the least developed regions, sponsored by new entrepreneurs, characterized by high labor intensity or export-orientation\. Under the SSI pilot project, the commercial banks' initial reluctance to utilize Bank funds for SSI financing has been overcome\. Considerable progress has been madle by the Tunisian authorities toward setting up a comprehensive program of Tunisian and foreign technical assistance experts, specifically catering to the needs of SSI, as agreed under the project\. A new project approved by the Bank in May 1981 supports this program (see below Ln\. 1969)\. Ln\. 1601: Rural Roads Project; US$32\.0 million loan of July 24, 1978; Date of Effectiveness: April 30, 1979; Closing Date: June 30, 1984\. Road construction is now underway in all the eight provinces\. Progress on the complementary agricultural component, after an initial delay, is now proceeding satisfactorily\. The Government wishes to expand the project to cover three additional provinces\. This is under consideration\. Ln\. 1675: Second Urban Sewerage Project; US$26\.5 million loan of April 13, 1979; Date of Effectiveness: August 31, 1979; Closing Date: December 31, 1984\. Consultants have been contracted and detailed design is procee- ding\. Tenders have been called for the first civil works, and construction has started\. Ln\. 1702: Fifth Water Supply Project; US$25\.0 million loan of May 31, 1979; Date of Effectiveness: October 1'9, 1979; Closing Date: December 31, 1982\. The physical execution of the project is progressing well and according to schedule\. SONEDE has already approved eight urban and seventeen rural sub-projects for a total investment cost of $28\.5 million\. Procurement for the project is now completed and works under all project contracts are proceeding rapidly\. Laying of the piping system of the production facilities included in the project has been completed\. Ln\. 1705: Second Urban Development Project; US$19\.0 million loan of May 31, 1979; Date of Effectiveness: December 1, 1980; Closing Date: December 31, 1983\. The physical works of the project both in Tunis and Sfax are progressing satisfactorily, with about 35% of works completed\. Technical studies for  - 34 - ANNEX II Page 7 of 9 the solid waste collection and disposal component is progressing well\. The housing component is progressing slowly and experiencing cost overruns due to technical difficulties associated with the sites in Jebel Lahmar and to slow acquisition of sites in Saida Manoubia and in Cimer Nord\. Ln\. 1746: Second Fisheries Project; US$28\.5 million loan of July 20, 1979; Date of Effectiveness: May 14, 1980; Closing Date\. * June 30, 1985\. All contracts for port infrastructure have been awarded and construction is well underway at most sites and general progress is satisfactory\. Detailed design for the boat hulls has been completed and procurement is underway\. Bid awards for boat engines have been made\. Ln\. 1796: Southern Irrigation Project; US$25\.0 million loan of February 8, 1980; Date of Effectiveness: September 30, 1980; Closing Date: June 30, 1986\. The implementation of the project is proceeding according to schedule\. A contract has been awarded for the sinking of the first 13 deep wells of the project and borings are underway at several sites\. A contract has been awarded for supply of asbestos-cement pipes to be used in rehabilitation of irrigation infrastructure in existing oases\. Ln\. 1797: Third Port Project; US$42\.5 million loan of February 8, 1980; Date ot Ettectiveness: June 25, 1980; Closing Date: June 3U, 19\. The physical execution of the project at La Goulette is now progressing well\. Dredging of the channel and of the new basin area has been completed\. The reclamation at the new port area behind the project quay line is under way\. The casting yard for concrete quay caissons has become operational\. As a result of initial delays in starting the dredging operations, the civil works are about 5 months behind schedule\. At Sfax, the contracts for civil works were awarded in July 1980\. Dredging started in October 1980 but works were delayed on the landward side until the shipyards and the fishing port were removed to their new locations in late February 1981\. Further problems have developed in connection with the innovative casting technique: heated concrete blocks showed cracks through testings and the causes are being investigated by the contractor which has deferred further casting\. This will add to the 9 months delay from which civil works in Sfax have already suffered\. Supervision is working satisfactorily in both ports\. Training programs for port workers have been prepared\. Ln\. 1841; Fourth Highway Project; US$36\.5 million loan of May 22, 1980; Date ot Ettectiveness: November 21, 1980; Closing Date: September 30, 1984\. Project implementation is progressing well; the 1981 construction program is underway\. Elements of the 1982 program for rehabilitation and maintenance have been discussed and agreed with the Government, and the 1982 action plan is being implemented\.  - 35 - ANNEX II Page 8 of 9 Ln\. 1864: Second Natural Gas Pipeline Project; US$37 million loan of October 22, 1980 - amended on July 15, 1981; Date of Effectiveness: December 9, 1981; Closing Date: December 31, 1985\. The original project scope has been modified because of uncertainties related to the purchase of gas from Algeria; the project has been redesigned to utilize royalty gas as a substitute for premium liquid fuel products\. Ln\. 1885: Third Agricultural Credit Project; US$30\.0 million loan of August 6, 1980; Date of Effectiveness: June 24, 1981; Closing Date: December 31, 1983\. The project will finance part of BNT's agricultural three-year lending program for medium and long-term credit to small and medium farmers, production and service cooperatives, commercial farmers and agro-industries\. The loan became effective after one extension of the original date of April 30, 1981\. Disbursements are expected to start immediately for those purposes where Agricultural Credit II is already overcommitted (commercial farmers, producer cooperatives and agro-industries)\. Ln\. 1961: Fourth Education Project; US$26 million loan of May 18, 1981; Date of Effectiveness: November 18, 1981; Closing Date: December 31, 1986\. The implementation of this project, which is entirely devoted to skilled worker training and apprenticeship, is proceeding satisfactorily, with assistance from the ILO\. The first phase of construction has already been tendered\. All the final lists of furniture and equipment have been completed and the programs reviewed\. Technical assistance to aid in reinforcement of the management, logistics and programs of the network of vocational centers is under negotiation\. Ln\. 1969: Small Scale Industry Development Project; US$30\.0 million loan of May 15, 1981; Planned Date of Effectiveness: April 30, 1982; Closing Date: December 31, 1986\. The project supports the Government's comprehensive assistance program for small-scale industries through financial and technical assistance\. $29\.35 million is to be administered by the Central Bank of Tunisia and made available to small entrepreneurs through participating banks\. The remainder of the loan ($0\.65 million) would strengthen the appraisal capacity of the Investment Promotion Agency\.  - 36 - ANNEX II Page 9 of 9 Ln\. 1997: Northwest Rural Development Project; US$24\.0 million loan of July 15, 1981; Planned Date of Effectiveness: April 30, 1982; Closing Date: September 30, 1987\. The project is designed to help finance a five-year time slice of the (,overnment's 15 year development program for the Northwest Region by concentrating on the establishment of institutions which could implement the program, and the extension, research, credit, and livestock development services\. The project would also start up specific agricultural, soil conservation and forestry activities, together with productive infrastructure works\. Ln\. 2003: Third Power Project; US$41\.5 million loan of July 15, 1981; Planned Date of Effectiveness: April 30, 1982; Closing Date: December 31, 1985\. The project will assist Tunisia in implementing the first three years of a five-year program for the development of rural electrification and in rehabilitating the urban distribution systems by connecting about 990 villages in 15 Governorates to the national network and improving the supply of electricity in about 60 towns\. Ln\. 2005: Health and Population Project; US$12\.5 million loan of July 15, 1981; Planned Date of Effectiveness: April 30, 1982; Closing Date: December 31, 1986\. The project is designed to support Government efforts to extend basic health care to the whole population by 1990, through the provision of better and more cost-effective health, family planning and nutrition services to lower income groups in eight selected Governorates\. It would strengthen the Ministry of Public Health's management capacity, improve and expand the basic health care delivery system and health education programs, upgrade the training system, and train project personnel\. Ln\. 2012: Textile Rehabilitation Project; US$18\.6 million loan of October 27, 1981; Planned Date of Effectiveness: February 25, 1982; Closing Date: December 31, 1984\. The project will assist the Government in implementing the first phase of a rehabilitation and modernization program for the public sector textile industry\. It would expand and improve production so as to enhance competitiveness in export markets\. Ln\. 2052: Grain Distribution and Storage Project; US$42\.0 million loan of October 27, 1981; Planned Date of Effectiveness: April 30, 1982; Closing Date: December 31, 1986\. The project is designed to strengthen grain storage capacity; reduce congestion, handling costs, demurrage charges and grain losses at the main Tunisian seaports and the cost of transport and handling of grain; strengthen the technical capacity and financial management of the Office of Cereals; and lay the groundwork for further modernization of the system of collection, storage and transport of domestic grain\.  - 37 - ANNEX III Republic of Tunisia Fifth Highway (Rural Roads) Project Section I; Timetable of Key Events (a) Time taken by the country to prepare the project: 28 months (June 1979 through October 1981) (b) Agency which prepared the project: Highway Department (DPC) and Ministry of Agriculture (MA), with the assistance of consultants (c) Project first identified by Bank: July 1977 (d) Date of appraisal mission; June 1'981 (e) Date of completion of negotiations: February 1982 (f) Planned date of effectiveness: July 1982 Section II: Special Bank Implementation Actions None Section III: Special Conditions 1\. A special condition of effectiveness would be the establishment of a Project Coordination Committee (para\. 64)\. 2\. During negotiations, assurances were obtained: (i) that the Government and BNT would make available adequate short-, medium- and long-term credit for agriculture (para\. 55); (ii) that independent auditors acceptable to the Bank would prepare annual audits of project accounts (para\. 66); (iii) that the Government would provide for pubLic bid openings for tender calls (para\. 67); and (iv) that annual plans of operations, including recurrent budget needs, will be submitted to the Bank in preliminary form by April 30, and in final form by September 30 each year (para\. 69)\.  IBRD 15916 7QJ0' 8001 8:10 492% 030 0t JA' 1OL3O IThOlY ' vNUARV 982 TUNISIA FIFTH HIGHWAY PROJECT '7 Nhr rre\.> Rural Roads NORTH 37TD02 '3 ~~~~\. onrsei ~~~~ FIFTH HIGHWAY PROJECT -36¢30~~~~ 1 ' = 6, S \. d , i p\.i '" 5' t= 'Che t5d s (Skolb 1 ___THIRD HIGH WAY PROJECT (1? Fernemv or anv dmse m c nt -Gt>2S7--{l d , ,-%<y In g 8E , / > )' R < \ VWobEud Lj Provdnclo CopiedlS Try Pr\. beyv,yvy,ydb,~~~~~~~~~~~~~j \. \. ired ,y\.rbyy 5N ITALY'7rd \. N' fTvi3i osar/a ->VA<dbC PaS v 100 Meder RoanuP d R\.ds 1 l D < <<L\. ^m>\.)t / 0 {I 8t rer > -36-30'~~~~~~~~~~~~~~~~~~~~Nt 1 Oeg Other Roads 33 dC t LokesI xrvvvviivv *~Gtixrd \.~' -n\.e Nybeol \. Provincial Capitols eiry rir\. rpv rOe,,\. ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~Provincial B-udar-e El A-- B~~~~~~~~~~~~~heir reeae Iternati-nl Boundaries 7~30 4 Med rx\.ry,\.Oiii~~~~~~~~~~~~~~~~~~~~ Sp, 100 Meter Cantons Intervalo~~~~~~~~~~~~~~~~~~~~10 Mte Cnt\.'I\.erf ;a ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~500 Meter l,e IdxContours toner Sd ovet El -,Oyl" 8\.1 ~ /~Spat EleaI-ons a Oa Ryber 3~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ 0 2 3 0 s AL~~~~~~~~~~~~~~~~~~~~~~~~E~~~~~~~~~~~~~~~~~t~~~~~~~~~~~~~~~~ ~~~~~~~~~~~KLWTR ji, Nj 2~~~" 0N 'v reel OrrolaEll 20~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~00Rb 0 1-/ W30~~~~~~~~~~~~~~~~~~~~~~~~~~~o   '20 u'00 On,nv,a ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~'30 BED 6144~~~~~~~~~~~~~~~~~IBD164 9'JANUARY ?902 "3Meako va- <\\- <__ g -5 \.Malouro \. ¢, <A7> 7 ) 0] vy30 g / 11fit10' TUNISIA -34'30' A R JC Rural Roads :4, 'h = \. SOUTH <sQ (~~~~~~~~~~7 ,~~~~~~~ Dotto A,ho6aa ~~~~~~~~~~~~~~~~~~~~~~FIFTH- HIGH WAY PROJECT / \ 4o_ t -fi / < t= - 5 X ; - / AJsLh\.;r Roads Stadied THIRD HIGHWAY PROJECT Roa--- Rads Constructed 2,, \.jG\.~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~\. Roads Studied j) - ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~Paved Roads OlIver Roads 11 iIi~~~~~~~~~~~~~~~~~~ el ~~~~~~~~~ -f I (hosts (Solteoser vkes)~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ -----Chtt oks -7 ~ ~~~~~~~~PoInv-iol Cap,tols -- ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~500 Mater eden Conmour no3 ; itr - ff ;0 -\. >n<l ------ Ges -\--------- - = A n/ Spot Elevations ------- --- -- -fb ; e / - -- \, - --- -------_---- - (\.-*24 - - - / / \ X33h 2'30 9'00 ' 9' 3 0' \ \.= \. | Hine \- -2 - -0 -33'30' ~~J~ - ~2 '~a Dv' 02~~~~~~~~~~~~~~~0 5 0 10 20 00 40 50~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~30' L3~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~~~' >   IRED 16145 ITALY 800 9~~~~~~~~~~~~~~~~~~~05 vo - Sd ~~~~~~~~~~~~~~~~~~ I1~~~~~~~0Q JANUARY1952~~~~~~~~~ ~3 JNAR 18 08~O0 -' - \~od~ AIA TUNISIA 0 \ o~~~~~~FITHHIGHWAYPRJC 'K0 Juv-0, UPS o~~~~~~~~~~~~~~~~~~~~~~~~~~O~~~5 - o Rural Roads~~~~~~~~~~~~~~5\. u al Ro d -~~~ ( :;' miss0 ~~~~~~~~~~~ - Ens8 ~ ~ ~ ~ ~ ~ ~ ~ /~~~ ~K ousse CENTER ALGERIkh4% oos, - - I -~~~~~~ ~~ Rd~~~ss ]RSiOnr - - Ulsus~~~~~~~5bb\. Mobdi\. FIFTH HIGHWAY PROJECT R\.ods Stvd,ed/ THIRD HIGHWAY PROJECT 9- ---Roads Constructed ~-,-~ Roads Studied I- - Posed Roods Gihe, Roads v~7'Cho ttt( ISotuster ok ii Pr-u,oc,I OCop, tols Pr-un,IRudrs 100 Mter Contour Intervals 235-00 500 Meter edlna Contours 35f 3500 Spot Elevations / \ , On~~~es Be' Abb S-dAhA\. rn~~~~~~~~ 0\. sn ,,s3 s,vo~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ PLOMETOES~~~~~~~~~~~~~~~iOMTR vossvs,ns ,On, s, 58\.5 Mv~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~~ ~ ~ ~~ ~ ~ ~ ~~ ~ ~ ~ ~ ~ ~ ~ ~ ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~3\. 55505 vs ,5,vsAM 9 p

APPROVAL

P088911

Page 1 PROJECT INFORMATION DOCUMENT (PID) APPRAISAL STAGE Report No\.: AB936 Project Name Supplemental Credit to Electricity Market Support Project Region EUROPE AND CENTRAL ASIA Sector Power (100%) Project ID P088911 Borrower(s) GOVERNMENT OF GEORGIA Implementing Agency Project Support Organization Georgia Tel: (995 99) 265539 tjugeli@pso\.ge Environment Category [ ] A [X] B [ ] C [ ] FI [ ] TBD (to be determined) Safeguard Classification [ ] S 1 [X] S 2 [ ] S 3 [ ] S F [ ] TBD (to be determined) Date PID Prepared May 23, 2004 Date of Appraisal Authorization May 25, 2004 Date of Board Approval June 24, 2004 1\. Country and Sector Background See attached Supplemental Credit Document or Electricity Market Support Project (EMSP) parent project information 2\. Objectives See attached Supplemental Credit Document or EMSP parent project information 3\. Rationale for Bank Involvement See attached Supplemental Credit Document or EMSP parent project information 4\. Description See attached Supplemental Credit Document or EMSP parent project information 5\. Financing Source: ($m\.) BORROWER/RECIPIENT 5\.5 INTERNATIONAL DEVELOPMENT ASSOCIATION 3\.6 Total 9\.1 6\. Implementation See attached Supplemental Credit Document or EMSP parent project information 7\. Sustainability See attached Supplemental Credit Document P or EMSP parent project information Page 2 8\. Lessons Learned from Past Operations in the Country/Sector See attached Supplemental Credit Document or EMSP parent project information 9\. Safeguard Policies (including public consultation) See attached Supplemental Credit Document or EMSP parent project information 10\. List of Factual Technical Documents CURRENCY EQUIVALENTS (Exchange Rate Effective April 2004) Currency Unit = Georgian Lari (GEL) GEL 1 = US$ 0\.50 US$ 1 = GEL 2\.00 GOVERNMENT FISCAL YEAR January 1 – December 31 ABBREVIATIONS AND ACRONYMS GSE Georgia State Electro System EMSP Electricity Market Support Project ESBI ESB International (Ireland) PAD Project Appraisal Document SCADA System Control and Data Acquisition UDC Unified Distribution Company of Georgia Vice President: Shigeo Katsu, ECA Country Director: D-M Dowsett-Coirolo, ECCU3 Sector Director: Hossein Razavi, ECSIE Task Team Leader: Bjorn Hamso, ECSIE Page 3 GEORGIA ELECTRICITY MARKET SUPPORT PROJECT SUPPLEMENTAL CREDIT PROJECT SUMMARY Borrower: Georgia Amount: SDR 2\.5 million (US$ 3\.6 million equivalent) Terms: 40 years maturity, including a 10-year grace period on standard IDA terms Commitment Fee: 0\.50% on undisbursed balances, beginning 60 days after signing (less any waivers) Service Charge: 0\.75% of the disbursed amount of the credit Implementing Agency: Electricity Market Support Project, Project Service Organization, 1, V\. Vekua str\. 380005 Tbilisi, Georgia Financing Plan: IDA: Supplemental Credit SDR 2\.5 million (US$ 3\.6 million equivalent); Government: US$ 5\.5 million Poverty: The project is addressing poverty indirectly by its positive impact on electricity service, and thus on economic activity in Georgia\. The project will reduce the cost of electricity supply, sustain professional sector management, and help improve the financial flows in the sector, thereby making improved electricity service more affordable\. Project ID Number: P088911 (supplement); P054886 (parent project) PAD: Project Appraisal Document, Report No: 21317-GE of April 9, 2001 Page 4 SUPPLEMENTAL CREDIT DOCUMENT FOR A PROPOSED SUPPLEMENTAL CREDIT TO GEORGIA FOR THE ELECTRICITY MARKET SUPPORT PROJECT 1\. The proposed Supplemental Credit for SDR2\.5 million (US$3\.6 million equivalent) would help finance the Electricity Market Support Project (EMSP)\. The additional financing is for wholesale electricity metering and related electricity substation equipment for Georgian State Electrosystem (GSE, the national power transmission company), and for extended IDA financing of a management contract for GSE\. The Credit would be on standard IDA terms with a maturity of 40 years\. 2\. Background \. Georgia’s energy infrastructure has deteriorated to the point where it is now in the worst condition of any country of the former Soviet Union\. More critically, the electricity infrastructure has reached the point where, without significant investments, the risk of catastro- phic systemic failure will become unacceptably high within the next few years\. Critically important investments in State-owned hydropower facilities, power transmission, and power distribution could amount to about US$250 million over the coming 5-7 years\. Currently, break- downs of the system are frequent and are expected to escalate and become more destructive unless new investments and major rehabilitation works are undertaken\. 3\. At present, however, the power sector faces severe financial challenges and is incapable of generating all the needed investment funds from its own resources\. Further, Georgia is unlikely to be able to secure all the needed funds from external borrowing sources\. Consequently, Geor- gia will have to make provision for the most critical investment needs from outside the sector while, at the same time, pursuing an aggressive policy to improve financial performance within the sector\. 4\. The primary causes of the poor financial performance of the sector are non-payments and theft of utility services\. These problems, however, are compounded by (i) the need to service a large debt overhang (including tax arrears) that has also led to court approved appropriation of critical assets, (ii) a tax system that does not reflect the actual financial performance of the sector (revenue tax on billings without adequate deductions for bad debt), and (iii) payment failures on the part of budget-funded enterprises caused, in part, by under-funding of these obligations in past State Budgets\. Efforts to address the problems of the power sector have, in part, been made by the appointment of international management contractors to manage some of the remaining State-owned operations in the sector: the transmission system (GSE), the Unified Distribution Company of Georgia (UDC), and the Georgian Wholesale Electricity Market (GWEM)\. Restoring financial viability to the power sector will take time and will not be accomplished soon enough to ensure that the critical near term investment needs will be met from internally gene- rated funds\. 5\. The new Government in Georgia has a strong focus on the problems in the power sector\. It is modestly expanding its financing to the sector in 2004, and contemplates more resources to the sector in 2005\. At the same time, funding for the power sector is high on the agenda in the Gov- Page 5 ernment’s discussions with donors/IFIs about further financial support\. New initiatives totaling about US$50 million are under discussion\. 6\. This Supplemental Credit proposal has been developed in parallel with a new structural adjustment operation (“Reform Support Credit”)\. For both projects, the Bank has required that the Government develop a comprehensive Strategic Action Plan for the Power Sector which will elaborate on, inter alia : (i) the Government’s energy policy priorities; (ii) investment sources and priorities; (iii) planned structural reforms and modifications to relevant legislation; and (iv) simulations of electricity service levels for the 2004/05 winter and implications in the form of electricity imports\. The Government is aware of the fact that a service level in UDC 1 for the winter 2004/05 on a par with 2003/04 would require substantial supplemental financing from outside the sector\. In the coming months, the Government will work out plans for electricity imports, if any, commensurate with available funds\. The Action Plan is not a complete multi- year plan for the sector, as there are large, as yet unfunded, investment needs\. However, it is a step on the path to a comprehensive solution for the sector and demonstrates commitment by the current Government beyond what has been the case in the past\. The Strategic Action Plan will be supported by legislative measures to address the insolvency problems of electricity utilities, as discussed further below\. 7\. The Electricity Market Support Project (EMSP)\. The objectives of the project are to improve reliability and efficiency of electricity supply, and improve financial and corporate management in the wholesale electricity market\. 8\. The credit was approved by the Bank’s Board on May 3, 2001, and was made effective on September 26, 2002\. The project was developed within the framework of a Letter of Electricity Sector Policy, sent to the Bank by the Government on March 27, 2001\. The policies include privatization of all segments of the power system through sale, lease, and management contracts, restructuring the sector’s historic debts, maintaining the regulatory commission’s independence, and maintaining prudent fiscal policies related to the energy sector\. 9\. Options for involving the private sector in high-voltage transmission and dispatch were lim- ited, thus the EMSP project focuses on these segments of the power supply chain\. The EMSP project is managed by an experienced Project Implementation Unit and the sub-borrower, GSE, is under management by the Irish firm ESBI\. GSE was established through a merger of the national dispatch company (Electrodispetcherizatsia) and the national transmission company (Electrogadatsema) shortly before ESBI took over management in December 2002\. The management contractor is improving GSE’s organization, reducing commercial losses, under- taking necessary curtailments of supply within the technical abilities of the system, and operating the transmission network as well as can be expected during a period with very little system reha- bilitation funding available\. Financing of the management contractor is the second largest component in IDA’s EMSP project\. EMSP’s main component, the procurement of a dispatch control system (SCADA, energy management system, metering, and related telecom), is delayed, since it is only in June 2004 that GSE will be in a financially protected position (see further 1 UDC power distribution company services the territory of Georgia with the exception of Tbilisi, Abkhazia, Ajara, South Ossetia, and Kakheti\. Page 6 below) that allows the company to commit to the contract with the consulting firm that will develop that project component\. 10\. The new management of GSE has highlighted the extent of the financial problems of the company\. The debt overhang is not manageable with the low level of payments from the entities that receive transmission and dispatch services from GSE\. Currently GSE receives, on average, about 25% of invoiced amounts from its customers\. UDC is the largest debtor to GSE, and has recently paid less than 15% of invoiced transmission and generation services\. Abkhazia is not paying for its transmission services at all, even though it is currently consuming 16% of all electricity produced in Georgia 2 \. Finally, Telasi, the power distribution company for Tbilisi, contributes only modestly to paying for transmission, since it has a contractual right to offset its debt to the wholesale market against debt that the wholesale market has with a thermal power plant owned by the same company\. The Telasi distribution company and the above mentioned power plant were sold by the U\.S\. firm AES to the Russian firm RAO UES in the fall of 2003\. 11\. Mitigating Actions Taken\. To address the debt overhang of GSE and other State sector entities, the Government submitted to the Parliament on May 20, 2004, proposed amendments to the bankruptcy legislation tailor made for the power sector\. The amendments allow GSE to file for bankruptcy protection from its creditors while solutions to the debt overhang problem and the sector’s other financial problems are developed over the coming 12 to 18 months\. During this period, the Government’s plan is to establish a debt resolution agency, financed by KfW, to seek permanent solutions to the debt overhang as part of a plan for financial recovery of GSE and other State-owned sector entities (including UDC)\. 12\. The new Government has been more effective than the previous one in helping protect sector assets (power stations and substations) from incursions by third parties\. Such incursions resulted in supply being maintained to non-paying customers that should have stayed disconnected\. However, control of power consumption is a major issue notably for UDC, where illegal connections are omnipresent, and where commercial losses and non-payments are exacerbated by apparent internal financial irregularities in the utility\. UDC’s new, international management (PA Government Services) is addressing these major issues, but it is a time and resource consuming process\. GSE are taking similar actions against corruption and theft from the high voltage network\. When the SCADA system and related investments under the EMSP project are in place, GSE’s ability to control the flows on the transmission network, and to expose illegal and non-abiding behavior, will be substantially enhanced\. 13\. The Government has set aside increased funding for the power sector in the 2004 State Budget as compared to the previous year (an 11 percent rise to about US$31 million), and is committed to ensuring that budget organizations and State enterprises pay their electricity bills on time and in full\. In addition, the Government has agreed to provide new funds (US$4 million) for financing a critically needed staff redundancy program in GSE – an essential step towards making GSE’s cost structure more manageable in future\. 2 Abkhazia controls Georgia’s dominant hydropower plant, Enguri\. Disconnection is therefore not an efficient tool to enforce payment\. Financial support from the Georgian State Budget to the electricity wholesale market has sometimes compensated for a part of Abkhazia’s non-payment\. Page 7 14\. One of the keys to financial recovery of the sector is improved performance of the distribution company UDC\. While UDC is currently paying for only about 15 percent of the electricity and transmission services it receives from the wholesale market, the company has a program underway to reach a 40 percent payment level by the spring of 2005 – the first step in a multi-year plan to reach full financial viability 3 \. Justification for Additional IDA Funding 15\. Objective \. The objective of seeking additional IDA funding is to ensure full achievement of the project objectives (see paragraph 7)\. With the benefit of experience gained since the new management was put in place at GSE, a better estimate of the costs of making the Georgian power transmission system reliable, efficient and sustainable has been possible\. In particular, it became apparent that external financing for the GSE management contract would need to be in place longer than originally envisaged, and that the costs of upgrading the control systems for the transmission network, and of undertaking investments to enhance system reliability, would be higher than originally expected\. It would not be possible to hold the cost of achieving these objectives within the original estimate, and there is no other financing available for this set of investments\. 15\. Description\. The supplemental IDA funding is planned to be utilized as follows (US$ equivalents): Wholesale metering and related system upgrade US$2,300,000 ESBI Georgia management fee US$1,300,000 TOTAL US$3,600,000 17\. Benefits\. The first component will finance wholesale meters at the interface with the UDC transmission system at 110kV substations and down to 6kV/10kV feeders, mostly in the Imereti region where UDC is undertaking a concerted effort to improve collections and reduce commer- cial losses\. Used in combination with other system upgrades financed by this Supplemental Credit, GSE will improve system control significantly, reduce “wholesale” commercial losses (high voltage electricity theft), and improve the service level by being better able to undertake rolling blackouts according to predictable, announced schedules\. The system upgrades involve replacement of circuit breakers that are more than 35 years old and which cause excessive risk of failure leading to damage of expensive equipment\. 18\. The management fee for ESBI Georgia, managing GSE, is currently paid from IDA’s EMSP project as well as from KfW’s EMSP project\. However, GSE’s cash flow was planned to fully finance the contract after November 2004\. The supplemental IDA funding would ensure exter- nal financing of ESBI Georgia’s contract through May 2005, after which financing from GSE’s cash flow will take over\. The contract runs to April 2008\. Continuing with this contract will keep a high level of management skills in the GSE at a time when significant changes and improvements in internal discipline will require continued attention in order to achieve improved efficiency\. 3 UDC has been operated under a management contract financed by USAID since May 2003\. Page 8 19\. Risks\. The major risk from an EMSP perspective is that a financial recovery for the Sub- borrower (GSE) does not take place or is severely delayed\. Important in that respect are the developments in UDC, GSE’s largest debtor\. UDC should, according to their consumption and use of transmission facilities, finance about one third of the generation and transmission services\. However, UDC currently only pays the wholesale market (from where funds are distributed upstream) for between 10% and 15% of the electricity and transmission services that it receives and for which it is invoiced\. UDC plans to increase its payments to 40% by April 2005, supported by investment funds from USAID\. UDC management is encouraged by initial indications that the measures it is implementing (replacement of doorstep collections with computerized payment centers, and a geographically focused approach) should deliver positive results\. USAID is preparing an extension of the UDC management contract, which it finances, beyond its current October 2004 closing date\. KfW intends to support UDC with EUR 8 million and EBRD with EUR 5 million\. Some of these funds should help further to increase UDC collections\. The PA management of UDC is introducing measures involving payment centers and computerized billing systems that work effectively, but will take time to roll out on a large scale\. The performance risk of UDC spills over on the upstream companies, including GSE\. 20\. The outcome of the debt restructuring, to be performed by a Debt Resolution Agency, is not yet known, although the target is to alleviate the State sector entities from the financial burden of legacy debt\. EUR 3\.3 million from KfW is secured for establishing and operating the Debt Resolution Agency\. 21\. The Supplemental Credit, combined with other efforts (notably the Debt Resolution Agency, funding and actions to improve UDC’s financial performance, and critically needed staff retrenchments in GSE) is designed to bring GSE out of its financial crisis\. This will allow the EMSP project to continue and meet its objectives\. It will also allow salaries and taxes to be paid, and a minimum of transmission system maintenance to be undertaken\. However, the initiatives proposed under the Supplemental Credit do not directly address the risks of systemic collapse of the transmission grid that could make electricity unavailable for extended periods for large parts of the country\. In such an event, large-scale repair would have to be undertaken\. This would involve a significantly higher cost than would be the case if rehabilitation and maintenance were to be effected before such an emergency occurred 4 \. About US$7 million of unallocated funds under the EMSP project 5 will be used to address the most critical rehabilitation needs, and thus help meet the EMSP objective of improving the reliability and efficiency of electricity supply\. These funds are not adequate to cover the substantial system rehabilitation needs over the coming few years\. Consequently, the Government plans to solicit the donor/IFI community for further financial support, and will consider increased State Budget funding for 2005\. 22\. The new Georgian Government has demonstrated, notably through its development of a Strategic Action Plan for the power sector that it is committed to solving the problems of the sector\. The planned Reform Support Credit was preconditioned upon such a Strategic Action Plan being developed, and has thus contributed to reducing the risks of wavering in the Govern- ment’s performance and commitment\. IDA will also seek to mitigate the risks related to the 4 Such rehabilitation will also require significant levels of funding\. 5 About US$4\.5 million of this amount resulted from a redesign of the SCADA component\. Page 9 Government’s commitment to sector rehabilitation, and thus to the EMSP project, through conditionalities in future structural adjustment operations\. 23\. Although the risks relating to the Supplemental Credit are substantial, the implications of doing nothing are dire\. Without further funding for the ESBI management contract, ESBI would leave Georgia and, in all likelihood, be replaced by inexperienced, local management\. The financial crisis would most likely be perpetuated, and the probability of even more service inter- ruptions would increase\. Under such circumstances, consideration would have to be given by IDA to the possible suspension of the loan for the EMSP project\. 24\. Economic Rate of Return\. The Supplemental Credit will enable the EMSP project to meet its objectives, and thus largely achieve its rate of return\. In the Project Appraisal Document (PAD) The Net Present Value of the EMSP project was calculated at US$27\.8 million (at a discount rate of 12%), with an EIRR of 23\.4% when reliability, loss reduction, and output bene- fits were valued at the then current tariff\. A more optimistic valuation of the benefits would, according to the PAD, yield a significantly higher EIRR of 55\.3% and a Net Present Value of US$124 million\. The analysis showed that the project was robust against increases in capital costs or reductions in benefits\. Since the PAD was written in 2001, tariffs have increased in real terms, and thus caused expected benefits to increase\. The ESBI management contract will be modestly expanded (one extra expatriate employee), causing a small reduction in overall returns\. 25\. The US$2\.3 million component for wholesale metering and replacement/upgrade of switch- gear at substations is estimated to achieve reduced costs/increased earnings at a value for the sector of more than US$1\.5 million a year in the particular high-loss region of Georgia where the equipment would be installed\. 26\. Government Contribution\. GSE is significantly overstaffed and management has not been in a position to address the problem because funds were not available to pay the redundancy bonus and the salary arrears\. Average salary arrears are about 11 months, all of which were accumulated under the previous management\. A redundancy program prepared by GSE would reduce GSE’s staff from about 4,000 people to about 2,500 people and make the remaining organization more efficient\. This staff retrenchment, which is critically important for the finan- cial recovery of GSE, will be financed by the Government, and is planned to take place from July 2004\. Costs are estimated at about US$4 million\. 27\. In the Government’s 2004 State Budget, US$31 million is set aside for the support of the energy sector (investments, subsidies, and energy consumption of State entities)\. Closely related to the Supplemental Credit is a US$1\.5 million transfer to GSE for system rehabilitation\. 28\. Environmental and Social Concerns\. The EMSP is an environmental Category B project and the Supplemental Credit maintains the project within that category\. Installation of wholesale meters and replacement of switchgear takes place at existing substations\. There are no social concerns relating to the new IDA-financed components\. 29\. Disbursement\. The disbursement schedule is provided in Annex 1\. Page 10 30\. Financial Management and Accounting\. The existing financial management and account- ing systems operated by the Project Implementation Unit are satisfactory and will continue to be used\. 31\. Legal Covenants\. Legal covenants of EMSP are met except for critical financial items relat- ing to the problems that the supplemental credit would help remedy\. GSE shall not incur debt unless estimated net revenues of the company are at least 1\.5 times debt services requirements\. However, the company is incurring tax debt while working to remedy the situation through special bankruptcy protection (tantamount to a time-limited debt moratorium) and through the gov ernment’s establishment of a debt resolution agency to address the problems of large legacy debt\. The new bankruptcy legislation will stay any potential legal bankruptcy proceedings against GSE\. As soon as the legislation is in place, GSE will forward a signed audit report for 2002 to the Bank\. The staff redundancy program, and other revenue-enhancing and cost-reducing projects in the electricity supply chain will also address GSE’s financial problems\. 32\. Closing Date\. It is proposed to extend the closing date for credit from December 31, 2005, to December 31, 2007\. This is not caused by the Supplemental Credit, but by the fact that (i) the Credit became effective 17 months after Bank Board approval, mainly due to delays in the Parliamentary approval of the credit; and (ii) the financial condition of GSE, which called for amendments to the bankruptcy law being in place before undertaking new financial commit- ments relating to the SCADA investment\. Parliamentary approval of the Supplemental Credit is expected to be forthcoming without much delay, given the Government’s commitment to the project and the Government’s majority support in the Parliament\. 33\. Proposed Amendments to the Development Credit Agreement\. The following amend- ments to the Development Credit Agreement for the Electricity Market Support Project are proposed to be made at this time, only the first of which is related to the Supplemental Credit: a) Amendments to include the Supplemental Credit; b) Extension of the Closing Date from December 31, 2005 to December 31, 2007, with resulting adjustments to project implementation services (PIU costs); c) Simplification of some of the procurement arrangements in accordance with the new guidelines; d) Substitution of original two sub-borrowers with the merged successor company GSE\. Page 11 Annex 1 A CTIVITIES TO BE F INANCED FROM THE S UPPLEMENTAL C REDIT By Activity SDR Wholesale Metering and Related System Upgrade 1,600,000 ESBI Georgia management fee 900,000 Total 2,500,000 By Expenditure Category SDR Goods and equipment 1,600,000 Management Services 900,000 Total 2,500,000 Disbursement Schedule (SDR) FY05 Total (SDR) 2,500,000 Contact point Contact: Bjorn Hamso Title: Sr Energy Econ\. Tel: (202) 458-1065 Fax: Email: bhamso@worldbank\.org For more information contact: The InfoShop The World Bank 1818 H Street, NW Washington, D\.C\. 20433 Telephone: (202) 458-5454 Fax: (202) 522-1500 Web: http://www\.worldbank\.org/infoshop

APPROVAL

P009335

FILE lt COP a I ZY RESTRICTED Report No\. P-756 This report was prepared for use within the Bank and its affiliated organizations\. They do not accept responsibility for its accuracy or completeness\. The report may not be published nor may it be quoted as representing their views\. INTERNATIONAL DEVELOPMENT ASSOCIATION REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT TO THE ISLAMIC REPUBLIC OF PAKISTAN FOR THE DACCA SOUTHWEST IRRIGATION-ENGINEERING PROJECT November 26, 1969  INTERNATIONAL DEVELOPMENT ASSOCIATION REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT TO THE ISLAMIC REPUBLIC OF PAKISTAN FOR THE DACCA SOUTHWEST IRRIGATION-ENGINEERING PROJECT 1\. I submit the following report and recommendation on a proposed credit in an amount in various currencies equivalent to US$800,000 to the Islamic Republic of Pakistan for consulting engineering services for the Dacca Southwest Irrigation-Engineering Project, situated in East Pakistan\. PART I - HISTORICAL 2\. The Association has so far helped in financing three water development projects in East Pakistan, with credits totaling US$11\.25 million\. The first (Credit No\. 11-PAK) was made in 1961 for the Dacca- Demra project in an amount of $1 million, and construction of the project was completed in 1967\. The second (Credit No\. 39-PAK) for US$5 million, was made in 1963 for the Brahmaputra Embankment Project, which was substantially completed in 1968\. Both projects are now in operation\. A third credit (No\. 40-PAK) of US$9 million was made in 1963 for the Chandpur Project, which was designed to provide irriga- tion and flood protection\. In 1965, because of increased costs and inadequate performance by the executing agency (East Pakistan Wiater and Power Development Authority - EPWAPDA), the irrigation features of the scheme were dropped and the credit was reduced to US$5\.25 million\. Work proceeded on the flood control aspects of the scheme, but because of further increases in costs and other difficulties, the Association agreed that EPWAPDA could stop construction in June 1967\. The undis- bursed balance of the credit has been used to redesign the project on a substantially modified basis\. Appraisal of the revised project, which now includes irrigation as a primary feature, is now being completed and is expected to provide the basis for a new credit proposal in the amount of about US$10 million\. In January 1969, the Association,together with the United Nations Development Programme, contributed US$4 million toward the foreign exchange costs of general consultants to EPWAPDA\. 3\. A fourth water development project in East Pakistan, the Dacca Southwest irrigation project, which is expected to cost well over US$60 million equivalent, is now under consideration for even- tual Bank Group financing\. A feasibility study of this proiect was completed in March 1968 by Engineering Consultants, Inc\. (ECI) and  Associated Consulting Engineers Ltd\. (ACE), which is adequate to demon- strate that this project would enjoy high economic priority\. It is therefore proposed to proceed now with a credit to cover consulting engineering services in connection with the preparation of tender docu- ments and final designs for an initial portion of the project; a small part of the credit would also cover the cost of certain additional staff required by ECI and ACE to carry out an expanded feasibility study, which has been commissioned by the Government of East Pakistan\. The proposal for an engineering credit was appraised by a mission which visited Pakistan in May 1969 and negotiations were held in Washington in October and Novem- ber 1969\. The Borrower and the Government of East Pakistan were repre- sented by Mr\. A\.R\. Bashir, Economic Minister of the Embassy of Pakistan, and Mr\. A\.M\.A\. Muhith, Economic Counselor of the Embassy of Pakistan\. PART II - DESCRIPTION OF THE PROPOSED CREDIT 4\. Borrower: Islamic Republic of Pakistan Beneficiary: East Pakistan Water and Power Development Authority Amount: Various currencies equivalent to US$800,000 Purpose: To finance the foreign exchange costs of consulting engineering services to East Pakistan Water and Power Development Authority\. Amortization: In 10 years, including a 2-year period of grace, through 16 equal semi-annual instalments beginning November 1, 1972 and ending May 1, 1980\. Service Charge: 3/4 of 1% per annum\. PART III - THE PURPOSE 5\. An Appraisal Report entitled "Engineering Services for the Dacca Southwest Irrigation Project, Pakistan" (PA-26a) is attached\. 6\. Water development is vital to East Pakistan\. During about half of the year, the Province is subjected to heavy rainfall and floods which cause extensive damage\. In the other half, there is a period of very little rainfall, during which approximately 60 percent of the cul- tivated land is left fallow because of insufficient water\. Although the economy of the Province is predominantly agricultural, production  - 3 - is not increasing as fast as population, and imports of foodgrain require- ments, especially rice, have been steadily increasing\. 7\. The Dacca Southwest Irrigation Project would provide flood con- trol, drainage, irrigation and internal navigation for an area of about 490,000 acres\. The elimination of flooding and the provision of irriga- tion would enable the use of fertilizer and improved varieties of rice and would therefore contribute to an estimated tripling of present rice yields in the project area\. Construction would proceed in two phases\. The first phase, comprising Polders I and IV, would protect about 400,000 acres\. The second phase, comprising Polders II and III, would be deferred until their main technical features have been established\. 8\. About 90 percent of the proposed credit would be used for the preparation of tender documents and final designs for an initial portion (about 175,000 acres) of the first phase of the project, sufficient to enable the start of construction\. If the proposed engineering credit is made, the construction credit could be appraised in May, 1970 and presented to the Executive Directors before the end of 1970\. The con- struction credit would also provide funds to cover the foreign exchange cost of preparing tender documents and final designs for the rest of the project\. 9\. The remaining 10 per-cent of the proposed credit :ould be used to provide additional staff for the expanded feasibili-ty study being carried out by the consultants, ECI and ACE\. This expanded study is designed to determine four matters: (a) how construction should be phased to maximize interim benefits; (b) the best method of distributing irriga- tion water; (c) how the project should be organized to supply the requisite low-lift pumps and to prepare farmers for the gradual elimi- nation of flooding; and (d) the extent to which construction, operating and maintenance costs can be recovered from the farmers benefitting from the project\. The consultants, at present, have insufficient staff to deal with (c) and (d); the proposed credit would finance the extra staff required\. 10\. The total cost of the engineering project is estimated at US$l,430,000 equivalent\. Of this amount, the local cost would be US$630,000 equivalent and would be financed by the Government of East Pakistan\. 1\. The proposed engineering project would be executed by InWlAPDA, a semi-autonomous body, established under the East Pakistan Water and Power Development Authority Ordinance 1958 and charged with coordinating development and utilization of the water and power resources of the Province\. EPWAPDA has selected ECI as the consultants to carry out the project, in association with ACE, and has negotiated a contract with them\. This arrangement is acceptable to the Association and the negotiated con- tract is under review\. The effectiveness of the credit would be condi- tional on EPWAPDA having entered into a contract acceptable to the Association\.  - 4 - 12\. It is expected that the proposed engineering credit would be refunded out of a construction credit for this project\. PART IV - LEGAL INSTRUMENTS AND AUTHORITY 13\. The draft Development Credit Agreement between the Association and the Islamic Republic of Pakistan and the draft Project Agreement between the Association and the Province of East Pakistan, the Recommend- ation of the Committee provided for in Article V, Section I (d) of the Articles of Agreement, and the text of a draft Resolution approving the proposed Development Credit, are being distributed to the Executive Directors separately\. The documents conform generally to those for pro- jects of this type\. Attention, however, is drawn to Section 2\.04 of the Development Credit Agreement which provides that withdrawals from the Credit Account may be made on account of payments made prior to the date of the Agreement but after November 1, 1969\. PART V - COMPLIANCE WITH ARTICLES OF AGREEMENT 1h\. I am satisfied that the proposed Development Credit would comply with the Articles of Agreement of the Association\. 15\. I recommend that the Executive Directors approve the proposed Development Credit\. Robert S\. McNamara President Attachment November 26, 1969

APPROVAL

P066321

Document of The World Bank Report No\. 22186-ME PROJECT APPRAISAL DOCUJMENT ON A PROPOSED LOAN IN THE AMOUNT OF US$ 350\.0 MILLION TO NACIONAL FINANCIERA, S\.N\.C\. (NAFIN) WITII THE GUARANTEE OF THE UNITED MEXICAN STATES FOR A THIRD 1BASIC HEALTH CARE PROJECT (PROCEDES) May 15, 2001 Colombia, Mexico and Bolivariani Republic of Venezuela Country Management Unit Human Development Sector Management Unit Latin America and the Caribbean Region  CU7RRENCY EQUIV'ALENTS (Exchanzu:e Rate Effective April 2001) Currency Unit = Pesos (P$) US$1\.00 = P$9\.31 FISCAL YEAR January I - December 31 ABBREVIATIONS AND ACRONYMS AIDS Acquired Immunodeficiency Syndrome CAS Country Assistance Strategy COMPRANET Internet Procurement Mechanism CONASIDA National HIV/AIDS Council CONAPO National Population Council DALE Disability-Adjusted Life Expectancy DALYS Disability Adjusted Life Years DGEC Direcci6n General de Extensi6n de Cobertura DGEDS Direcci6n General de Equidady Desarrollo en Salid DRG Diagnostic - Related Groups EEC Strategy for the Expansion of Health Coverage (Estrategia de ELtensi6n de Coberttura) FAEB Basic Education Fund FAETA Technical and Adult Education Fund FAIS Social Infrastructure Fund FAM Multiple Transfer Fund FASP Public Security Fund FASSA Health Services Fund FORTAMUM Municipal Strengthening Fund FUNSALUD Mexican Health Foundation GDP Gross Domestic Product GOM Government of Mexico HCP Health Care Providers HIV Human Immunodeficiency Virus ICB International Competitive Bidding INEGI National Institute of Statistics, Geography & Data Information INI National Indigenous Institute IMSS Mexican Social Security Institute IMSS-SOL Mexican Social Security Institute - Solidarity Program ISA International Standards on Auditing ISSSTE Social Security Institute for Public Employees LAN Local Area Networks LACI Loan Administration Change Initiative LCS Least Cost Selection Vice President David de Ferranti Country Director Olivier Lafourcade Sector Director Xavier Coll Sector Mianager Charles Griffin Sector Leader Eduardo Velez Team Leader Patricio Marquez  LCS Least Cost Selection MASPA Health Services Model for the Uninsured Population MET Memrorandum of Technical Understanding on Auditing MCH Maternal and Child Health Services MIS Management Information System MIDAS Integrated Health Care Model (Modelo Integrado de Atencion a la Salud) NAFIN National Development Bank (Nacional Financiera) NCB National Comoetitive Biddin<2 NPV Net Present Value OECD Organization for Economic Cooperation and Development OPD Decentralized Public Agencies (Organismos Publicos Descentralizados) PABSS Package of Essential Health Services PAHO Pan American Health Organization PAC Second Basic Health Care Project (Programa de Ampliaci6n de Cobertura) PAZI Program for the Support to Indigenous People PCE Mobile Surgery Program PCU Project Coordination Unit PEMEX Mexican Petroleum Company PHRD Program for Human Resources Development PIAJA Intersectoral Program for Peasant Workers PMR Project Management Report PROCEDES Program for Quality, Equity and Development in Health (Programna de Calidad Equidady Desarrollo en Salud) PROGRESA Education, Health and Nutrition Program PROMAP Public Administration Modernization Program PRONAFIDE National Investment Plan for Development 1997-2000 QCBS Quality and Cost Based Selection QUEJANET Internet System for Public Complaints About Health Services RPA Regional Procurement Advisor REDSSA SSA's Management Information Network SBDs Standard Bidding Documents SECODAM Secretariat for Control and Administrative Development SEMARNAT Secretariat of Environment and Natural Resources SESA State Health Secretariat SHCP Federal Secretariat of Finance and Public Credit SIA Adrninistrative Information System SISPA Uninsured Population Health Information System SOEs Statement of Expenses SSA Federal Secretariat of Health STDs Sexually Transmitted Diseases STIs Sexually Transmitted Infections SU IVE Epidemiological Surveillance System SWA Strengths and Weaknesses Analysis TOR Terms of Reference WAN Wide Area Network WHO World Health Organization   Mexico Third Basic Health Care Project CONTENTS A\. Project Development Objective \. \.2 1\. Project development objective and key performance indicators \. \. 2 B\. Strategic Context \.3 1 \. Sector-related CAS goal supported by the project \. 3 2\. Sector progress, issues, and Government strategy \. 3 3\. Strategic sector issues addressed by the project \. \. 1 0 C\. Project Description Summary \. 11 1\. Project components \. I I 2\. Key policy and institutional reforms supported by the project \. \. 1 6 3\. Benefits and target population \. 17 4\. Institutional and implementation arrangements \. 1 8 D\. Project Rationale \. 22 1\. Project alternatives considered and reasons for rejection \. \. 22 2\. Major related projects financed by the Bank and/or other development agencies \. \. 23 3\. Lessons learned and reflected in proposed project design \. \. 24 4\. Indications of Borrower commitrnent and ownership \. 25 5\. Value added of Bank support in this project \. 25 E\. Summary Project Analysis \. 26 I\. Economic \. 26 2\. Financial \. 26 3\. Technical \. 26 4\. Institutional \. 27 5\. Social \. 28 6\. Environmental assessment \. 30 7\. Participatory approach \. 3 ] F\. Sustainability and Risks \. 31 1 \. Sustainability \. 3 1 2\. Critical risks \. 32 3\. Possible controversial aspects \. 33 G\. Main Loan Conditions \. 33 1\. Effectiveness conditions \. 33 2\. Other \. 33 H\. Readiness for Implementation \. 33 I\. Compliance with Bank Policies; \. 34  Annexes Annex I Project Design Summary \. 35 Annex 2a Detailed Project Description \. 41 Annex 2b Annual Project Implementation Plans \. 52 Annex 2c Proposal for the Prevention of HIV Infection in High-Risk and Highly Vulnerable Populations \. 56 Annex 2d Health Care for Mexico's Indigenous Populations \. \. \. 59 Annex 2e Medical Waste Management in Mexico \. 75 Annex 3 Estimated Project Costs \. 8 1 Annex 4 Summary of Cost-Benefit Analysis \. 82 Annex 5 Financial Summary \. 89 Annex 6 Procurement and Disbursement Arrangements \. 90 Table Al Project Costs by Procurement Arrangements \. 93 Table A2 Consultant Selection Arrangements \. 94 Table B Thresholds for Procurement Methods & Prior Review \. \. 95 Table C Allocation and Disbursement of Loan Proceeds \. \. 96 Table D Disbursement Schedule \. 98 Annex 7 Project Processing Budget and Schedule \.99 Annex 8 Documents in Project File \.101 Annex 9 Status of Bank Group Operations in Mexico \.104 Annex 10 Mexico at a Glance \. 108 Map IBRD No\.23547\. 110  Mexico Third Basic Health Care Project (PROCEDES) Project Appraisal Document Latin America and the Caribbean Region Mexico, Colombia and Bolivarian Republic of Venezuela Country Management Unit (LCC I C) Human Development Sector Management Unit (LCSHD) Date: May 15,2001 Task Team Leader: Patricio Marquez Country Director: Olivier Lafourcade Sector Director: Xavier Coll Project ID: P066321 Sector: Health, Nutrition, Pop Lending Instrument: SIL Program of Targeted Intervention: [X] Yes [] No Project Financing Data [X] Loan [ Credit [ ] Guarantee [ Other [Specify] For Loans/Credits/Others: Total Bank Financing: US$350\.0 million Proposed terms: US$ Fixed spread Disbursement linked repayment Grace period for each tranche: 5 years Years to maturity for each tranche: 8 years Commitment fee: 1% Service charge: \.85% first 4 years, \.75% thereafter Financing plan (US$m): Source Local Foreign Total Borrower 231\.2 231\.2 IBRD 350\.0 350\.0 Other (specify) Total 231\.2 350\.0 581\.2 Borrower: Nacional Financiera, S\.N\.C\., (NAFIN) Guarantor: United Mexican States Responsible agencies: Federal Secretariat of Health (SSA) and State Health Secretariats (SESAs) Estimated disbursements (Bank FY/US$M): 2002 2003 2004 2005 2006 2007 Annual 21\.7 56\.9 79\.9 92\.7 73\.5 25\.3 Cumulative 21\.7 78\.6 158\.5 251\.2 324\.7 350\.0 Project implementation period: 2002 - 2007 Expected effectiveness date: Oct\./Nov\. 2001 Expected closing date: June 30, 2007  2 A\. Project Development Objective 1\. Proiect development obiective and key performance indicators (see Annex 1) The development objectives of the proposed Third Basic Health Care Project (PROCEDES) are in line with the social equity objectives of the new Government of Mexico and with its policies for the social sectors\. The development objectives are: * Achieve equity in health services for the people living in undeserved rural and urban areas of Mexico; * Increase access, quality, and equity of health services provided to indigenous populations, and quality of health services provided to people living in municipalities with the lowest national welfare indexes; * Support institutional development of the Federal Secretariat of Health (SSA), State Health Secretariats (SESAs), Health Jurisdictions (Jurisdicciones sanitarias), local health agencies, and service providers; and * Develop innovative health prevention and care models in order to reduce the health gap for underserved and vulnerable populations\. In order to achieve these objectives, the project would do the following: (i) increase and deepen the equity gains of its precursor, the Second Basic Health Care Project (Ln\. 3943-ME, PAC); (ii) expand the content, quality, and geographical coverage of the package of essential health services offered under PAC to underserved and disenfranchised poor people in rural areas; (iii) adapt the essential rural package of services to the urban pathology and develop new approaches for how best to deliver health services to the urban poor; (iv) support the institutionalization of the decentralization process that delegates authority for delivering health services from the federal level to the state entities; (v) support the deconcentration of service delivery from the state level to the health jurisdictions; (vi) strengthen the capacity of service providers to manage their financial, human, and technical resources flexibly and optimally and with full attention to improving the quality of medical treatment; (vii) support the SSA and the SESAs in their efforts to modernize, simplify, and structure with more transparency their roles in the regulation of the health sector, in reaching consensus on national health policy decisions, and in acting as stewards of the health sector; (viii) increase quality of care provided by ambulatory facilities and basic community hospitals located in underserved areas; (ix) increase access to basic community hospitals among underserved rural populations living in the municipalities with the lowest welfare indexes; (x) develop culture-sensitive health prevention and care program for indigenous populations; and (xi) develop an Human Immunodeficiency Virus (HIV)/Acquired Immunodeficiency Syndrome (AIDS) prevention and control program directed towards population groups with high-risk behaviors in cities that have the largest numbers of cumulative HIV/AIDS cases\. Overall, the project would support the government's health sector strategy to decrease social and regional inequities, create an equitable health care delivery system with comparable health outcomes for all population groups, and protect the most vulnerable from adverse financial consequences of catastrophic illnesses that would increase their poverty\. Key performance indicators: (see Annex 1) The impact of the proposed project would measure improvements as follows:  3 * Input Indicators\. Improvements in physical structures, equipment, and stocks of medical supplies; development of management information systems; number, quality and presence of appropriately trained health staff; sustainable budgetary allocations\. * Output Indicators\. Number of underserved rural and urban poor receiving appropriate, comprehensive, and quality health care services provided by trained and motivated health staff on a planned and continuous basis; number of indigenous children (aged 6-24 months) and pregnant women receiving micronutrient supplementation; number of cities receiving HIV/AIDS prevention messages via radio on a regular basis\. * Outcome Indicators\. Increased accessibility to quality health care by indigenous populations; increased awareness among the population of HIV/AIDS prevention; and in the medium term, improvement in the health status of the beneficiary population through decreases in morbidity and mortality from vaccine-preventable diseases, respiratory infections, diarrheal diseases, sexually transmitted infections, and reproductive health related causes, resulting in an increased life expectancy with less disease and disabilities\. B\. Strategic Context 1\. Sector-related Country Assistance Strateirv (CAS) goal sumorted by the proiect (see Annex 1I Document number: 1 9289-MX - Date of latest CAS discussion: June 8, 1999 (CAS Progress Report 22147-ME to be discussed in June 200 1) The proposed project is consistent with the World Bank's Country Assistance Strategy (CAS) which states that continued support would be provided to the Government of Mexico (GOM) for increasing health care access among the poor while reforming and strengthening public health care institutions\. 2\. Sector proeress, issues\. and Government strategv Sectoral Background Health Status\. Mexico's achievements in the health sector over the past several decades have led to significant improvements in the health status of the population as a result of better access to basic services and public health measures\. Life expectancy at birth gained more than 30 years from 1940 to 2000 among men and women: 40-70 and 42\.5-76, respectively\. Infant mortality was more than halved between 1970 and 2000 (from 72 per 1,000 births to 26)\. In the last decade, the mortality rate for children under age five fell by 37% and mortality from pneumonia and diarrhea fell by more than 90%\. Maternal deaths fell by 45% between 1980 and 1997, but still remain high at 61/100,000 live births\. Vaccine preventable diseases have declined drastically, with no cases of polio or diphtheria reported since 1993\. Total fertility rate also declined significantly in the last two decades from an average of seven children per woman of reproductive age to 2\.4\. Like many middle-income countries, Mexico is undergoing an epidemiological transition\. Childhood diseases such as diarrhea, respiratory diseases, and malnutrition continue to be significant causes of illness and death, but cardiovascular diseases, cancer and injuries due to accidents and violence associated with the aging of the population, rapid industrialization and urbanization contribute significantly to the total of potential productive years lost among adults\. HIV/AIDS has experienced a jump in recent years, but this condition is still concentrated in people with high-risk behaviors and  4 growing in marginal urban areas\. The adult HIV prevalence is about 1%\. Organization of Health Services\. The major pillar of Mexico's healthcare system is a mandatory social insurance program funded out of contributions from formal sector employees, employers, and government\. The main institutions are the Mexican Social Security Institute (IMSS) and the Social Security Institute for Public Employees (ISSSTE), but the Mexican Petroleum Company (PEMEX), the Federal District government, the police, the metro, and the armed forces also have their own systems\. In total, social insurance organizations cover just over half of the population\. The remainder of the population (called the "open population") receives healthcare services primarily from SSA (and to a smnall extent by IMSS-Solidaridad)\. Figure I (below) illustrates how the Mexican healthcare system is organized\. It shows how the different consumer groups are distributed among the vertically integrated organizations-each institution assuming responsibility for a specific population, with a specific financing source\. This vertically integrated nature of the system leads to high levels of duplication among providers, excess capacity, and an inefficient and inequitable distribution of resources\. Several studies show that as many as 25 percent of the insured population of the social security institutes use the private sector when seeking care\. In addition, a large percentage of the population has double insurance: social security insurance through their employer and private insurance paid out-of-pocket\. On the provider side, while many people have some type of social insurance coverage, or access to SSA services, they prefer private providers\. The private sector is composed of hospitals, pharmacies, and physicians' offices, most of which are not registered in the official health statistics\. Figure 1\. Overview of the Mexican Healthcare System Mexican Health Care System System [i ubc/SocialSecurityilIl Public/SSA EII Private = l Federlic/,cdividual ~I Fan Federulnmet Employer Emnployee Federal, State, Individual Financing Venea Payroll Payr l Municipal Eployer ut-of-pock Taxes Ta TxTae Oersofpce _ EMEX l ProvidersIMSS _S\.TE pros Social Secrity Providems SSAJDIFI3MSS Solidaridad Private Provi m Traditional Soia Seirt Prvier Medicine Consumers Fonna I n EEnae Setr Reies Po ector Financing of Health Care\. Over the past 10 years the Mexican government has made steady progress in increasing health and social security expenditures\. Between 1995 and 1999 real federal expenditures to all public institutions providing health services increased by 24 percent, despite reductions in spending in  5 other sectors\. Overall, however, public spending remains low\. At just over 50 percent of total spending (2\.8 percent of GDP), it is likely that public financing will have to increase to meet the demands of a universal healthcare system\. Mexico's public spending is less thani half of the average spending in European countries that have achieved universal access through national healthcare systems, including most European OECD countries, and some Latin American countries (Figure 2)\. Figure 2\. Total Health Expenditure 1998, as %GDP Total health expendture 1998, as % GW Argentina 19\.6 Costa IRca $ 9\.0 CGle I _ _80 Brazil 17\.3 OECD G 7\.5 rMxico = 4\.3 0\.0 2\.0 4\.0 6\.0 8\.0 10\.0 12\.0 % of GDP The VWId Ba* 2000 vW Ttineies Notwithstanding the comparisons with other countries, the resources in the system-public and private- are large and growing\. Each year between US$15 billion and US$18 billion is channeled to the sector\. Roughly half, US$8 billion, goes to private sector providers\. To develop sustainable economic growth, improve the equitable distribution of resources, and build human capital, it is imperative to obtain the maximum level of health and satisfaction with the resources available (value-for-money)\. Recent Achievements for Improving the Health of the Uninsured Population Under PAC The Government's 1995-2000 Health Sector Reform Plan targeted expanding health services coverage and facilitating access to basic health services among the uninsured rural poor\. Results achieved by SSA during this period, with the support of PAC and other related programs are: * coverage of the dispersed rural population with basic health services reached 10\.9 million in 2000 out of the 11\.4 million targeted\. PAC covered 874 municipalities, 96 health jurisdictions, and 42,900 rural localities, reaching 8\.1 million persons located in 19 states (Campeche, Chiapas, Chihuahua, Durango, Guanajuato, Guerrero, Hidalgo, Jalisco, Mexico, Michoacan, Nayarit, Oaxaca, Puebla, Queretaro, San Luis Potosi, Sinaloa, Veracruz, Yucatan, and Zacatecas); * health services delivery for the uninsured population has been decentralized by creating 32 decentralized public agencies (OPDs), which are autonomous, have their own assets, and manage the resources needed to operate thie services\. SSA remains responsible for setting national health policies and regulating the health sector; and * women and children have been the main beneficiaries of PAC; 99% of children under the age of five  6 years in the project area now receive a complete vaccination package\. As a result, PAC has helped reduce childhood morbidity and preventable mortality (e\.g\., no reported cases of poliomyelitis and measles over the last three years)\. The emphasis placed on prenatal, child delivery, postpartum, and newborn care has reduced the risk of maternal and perinatal death\. An average of 3\.5 prenatal visits is now provided in project areas\. Innovative activities worth highlighting are as follows: * definition and adaptation of a health care organization and delivery model for the uninsured population (MASPA) in each participating state according to its local characteristics; b design of a Package of Essential Health Services (PABSS) as a universal, minimum, irreducible set of 13 low-cost, high-impact health interventions in response to the health needs in rural areas identified in a national epidemiological survey; * development of a microregionalization methodology as a planning and targeting tool for PAC; and * implementation of a dual strategy to expand health services coverage: (i) a functional expansion strengthening the existing supply of services by rehabilitating and equipping health units, hiring and training personnel, providing drugs, and reorganizing the delivery of the services; and (ii) a geographic expansion augmenting the network of services by using mobile units, involving community personnel, and providing radio-communications equipment and logistical support\. Main Sector Issues Unequal Access to Quality Health Care\. In principle, health care coverage in Mexico is universal\. Only 500,000 people living in scattered and rural communities with less than 100 inhabitants remain without access to basic health care services\. The broadening of health care coverage to most Mexican residents has been achieved by overcoming several daunting obstacles, among them: (i) a population distribution in which about 24 million Mexicans live in 201,138 localities with less than 500 people, and more than 151,000 localities have less than 100 inhabitants; (ii) cultural, ethnic, and linguistic barriers; (iii) difficulties in attracting health personnel to remote areas; and (iv) irregular distribution of pharmaceuticals and medical supplies\. The PAC (Programa de Ampliacion de Cobertura) and the PROGRESA (Programa de Educaci6n, Salud yAlimentaci6n) Programs have been key in broadening marginalized Mexican residents' access to health services\. Other programs that have helped improve the marginalized population's access to health services are the Strategy of Extension of Coverage (EEC), the Mobile Surgery Program (Cirugia Extramuros), the Program of Support to Indigenous Peoples (PAZI), and the IMSS-Solidarity Program (IMSS-SOL)\. Despite the gains, however, the accessibility, quality, completeness, and regularity of health services vary greatly in practice because of the obstacles cited above\. For the poor living in rural and marginal urban areas, access to basic care remains sporadic\. Making a basic health care package of 13 interventions universally available was a key step in closing the access gap for such populations\. The next step is to improve and make access to health care more equal for all citizens and to improve quality standards\. This means ensuring that all rural and urban poor have access to basic health care on a regular basis, ensuring that the package of essential health services includes clinical care in basic community hospitals, and ensuring sustainable financing for these programs\.  7 Differences in Health Status\. Raising the health status of the poor in rural and marginal urban areas would improve the overall health status of the Mexican population\. Health status indicators for Mexico cited earlier are averages for the whole country that hide large variations in health outcomes within the country\. The economically better-off groups in Mexico have health status indicators similar to those found in developed countries, while most of the indigenous communities have indicators closer or even lower than those of low-income countries\. The Disability-Adjusted Life Expectancy (DALE) for all Mexicans is estimated at 64 years, meaning that Mexicans live an average of nine years of their average life expectancy with a disability which is more than in Chile, Cuba, and Jamaica\. This number is higher in rural areas where average life expectancy is 55 years versus 71 years in urban areas\. Mortality and morbidity rates are also higher in rural areas\. In the last seven years, mortality among children under age five decreased by 36% in urban areas but only 1 8% in rural areas\. The incidence of infectious diseases in rural areas is more than double the incidence in urban areas, and malnutrition is four times more frequent in southern poor children than in non-poor northern children\. In the economically better-off northern states, the infant mortality rate is less than 20 deaths per 1,000 live births, but it is more than 50 deaths per 1,000 live births in the poorer southern states\. In 1998, the Disability Adjusted Life Years (DALYS) lost in the poorer states-Chiapas, Guerrero, Hidalgo, Michoacan, Oaxaca, and Puebla-were 178 per 1,000 inhabitants compared to 123 in the better-off states-Baja California Sur, Coahuila, Federal District, Nuevo Le6n, and Tamaulipas\. The Ongoing Challenge of Decentralization\. Mexico is moving toward more autonomy and fiscal responsibility at sub-national levels of government' complementing the economic reforn program\. A significant development has been the transfer of authority, responsibility, and resources from the Federal Government to the states and municipalities, primarily for social development\. The Federal Congress has reinforced this trend by enhancing municipal autonomy and local resources and by strengthening institutional controls\. The 1997 Ramo 332 legislation transfers resources for supporting social expenditures and for administrative and supervisory responsibilities to state and local governments\. In the case of the health sector, Ramo 33 provides resources for the decentralization of health services and helps finance investments and recurrent costs\.3 The Social Infrastructure Fund finances the construction and maintenance of basic health infrastructure and of institutional development programs\. The objective of Ramo 33 is to provide local governrnents with wide latitude and responsibility for the planning and implementation of socially oriented projects for the purpose of being more responsive to their constituencies\. Local entities now know better the amount of their revenues and can better plan their distribution\. States at present spend close to half as much as the federal government\. The municipal share of public expenditure is also growing fast but up-to- date aggregate figures are not available\. Important objectives of the 1995-2000 liealth Sector Reform Program were to strengthen the SSA's role in regulating the health sector and establishing national health policies and to decentralize health budgets and delegate authority for service provision and quality of care to the 32 federal entities\. States, in turn are beginning to deconcentrate service provision responsibilities to the sanitary districts and to health facilities\. Another equally important objective was the use of a resource-allocation formula that includes ' Under the Zedillo Administration, the Government of Mexico embarked upon an ambitious and accelerated decentralization program To this end, three inter-linked programs in which decentralization constituted the central axis were launched: the Public Administration Modernization Program (PROMAP), the National Investment Plan for 1997-2000 (PRONAFIDE), and a program for a New Federalism with the 31 states, the Federal District, and thousand of municipalities across Mexico\. 2Ramo 33 is now composed of seven purpose specific funds for the transfer of fiscal resources to states and municipalities: Basic Education Fund (FAEB), Health Services Fund (FASSA), Social Infrastructure Fund (FAIS), Municipal Strengthening Fund (FORTAMlJM), Multiple Transfers Fund (FAM), Public Security Fund (FASP) and Technical and Adult Education Fund (FAETA)\. 3 Such as salaries of medical personnel and pharmaceutical products\.  8 infant mortality and poverty indicators\. The replacement of historical budgets and negotiating abilities was limited, however, because a big slice of the health budget goes to pay the salaries and benefits of personnel, including both administrative staffs and health professionals\. The states are not fully benefiting from decentralization yet\. They need stronger and more efficient institutions to manage transfers, tax, borrow, and spend\. Better management information systems would help improve fiscal accountability and program monitoring and evaluation\. The health sector is an integral part of these reforms and needs to strengthen the organizational, managerial and operational capacity of the state health secretariats, health districts, and service providers\. Inequitable Distribution of Healthcare Spending\. The distribution of resources and the results obtained vary considerably across institutions and states\. While national per capita spending averages between US$180 and US$225, there is considerable variation among public agencies\.' PEMEX, with a highly sophisticated network of providers, leads all public spending, with a 1999 estimated average spending per insured of over US$500\. At the other end of the spectrum, per capita spending for the open population-those who work as part of the informal economy and the unemployed and indigent-varied between US$19 and US$28 per capita\. It is also worth noting that those states which are poorest and which have the highest burden of disease receive considerably fewer resources per capita than the national average, thus exacerbating the overall inequity in the system\. The poorest people tend to live in the south, while workers in the formal economy live mostly in the north\. Remote areas continue to be underserved compared with national averages in spite of an increase in rural facilities\. The presence of health facilities however does not mean available health services and people must buy services elsewhere paying out of pocket at considerable financial hardship\. The Second National Health Satisfaction Survey found that among those who had a serious health problem in the past 15 days, 52% did not seek care due for financial reasons\. In the future, the tendency will be for overall healthcare costs to increase but this will not resolve the problems of inequity or inefficiency in the system\. First, the population is aging and the proportion of the working population aged 16 to 55 and over is increasing\. This age group grew from 18 million in 1960 to 59 million in 1998\. Moreover, while currently only 4 percent of the population are aged 65 and over, this cohort is growing at an annual rate of 4 percent, compared with the growth rate of 1 \.5 percent of the total population\. Second, the epidemiological profile of the population is shifting to resemble that of developed countries where non-communicable conditions prevail\. In short, it is inevitable that demand for healthcare will rise\. Already, the tendency of higher-cost health problems is surfacing\. From 1987 to 1997, mortality from cardiovascular problems increased by 62\.5 percent\. Deaths due to cancer rose from I percent of total mortality in 1940 to 11 percent in 1995, and the proportion of deaths due to injury rose from 5 percent to 15 percent during the same period (Whitaker 1999)\. Third, as the health sector evolves, more sophisticated equipment is being routinely used-but at higher cost\. Finally, the population is becoming increasingly informed about health and is demanding better medical services from both public and private providers\. Inefficiency and Low Quality in Public Health Services\. During the execution of the 1995-2000 Health Sector Reform Program significant progress was made to improve access, efficiency and quality of public health services and in closing the gap in access to basic health care in rural areas\. The Government is aware that more needs to be done to achieve better quality and higher levels of efficiency '\. There is virtually no consolidated accounting of healthcare expenditures in Mexico and thus total expenditure figures vary among sources\. Valiant efforts by FUNSALUD and the government to create national healthcare accounts in 1995 provided insight to the financing of the system; unfortunately, these efforts have not been sustained and 1996 is the latest year of consolidated spending data\.  9 and wants to continue removing operational deficiencies that constrain quality and effectiveness of public health care\. Long waiting lines in hospitals, inconvenient clinic hours for the working population, underutilized and poorly equipped ambulatory facilities, as well as inoperative referral systems are common problems in urban areas\. At the same time, inappropriate use is made of capital-intensive hospitals with high operating costs\. Horizontally segregated public and private sector facilities in urban settings with excess capacity duplicate expensive services and high tech equipment\. The 1997 and 1999 quality of care surveys have documented low satisfaction of providers and of users in the public health system\. The most recent survey on people's satisfaction with public institutions showed that 62% of respondents were not satisfied with health institutions making such institutions second only to the police (82% were not satisfied with the police) in terms of dissatisfaction\. Weaknesses in Management and Stewardship of the Health System\. In spite of recent improvements, the SSA's role in defining health sector priorities, formulating policies and norms, and regulating health care activity within a decentralized and deconcentrated context requires furthier strengthening\. Most state level health institutions, health districts and health care providers lack the required management systems to administer their resources and services effectively\. Decentralization needs effective leaders and well trained managers able to plan the strategic use of their resources, to use budgets as planning and control tools, to train and develop the healthcare workforce, to manage and use clinical and management information systems and to measure outcomes\. SSA, with support of PAC, has implemented a Management Information Network (REDSSA) for voice and data that integrates 32 state agencies and 23 departments through local area networks (LANs) and a wide area network (WAN)\. REDSSA includes on-line access to Open Population Health Information System (SISPA), Epidemiological Surveillance System (SUIVE), and other statistical, epidemiological and hospital information systems\. The network facilitates access to the Internet, e-mail, file exchanige, virtual health library, voice, and other modes of communication\. Although it reaches the main offices of health districts, it has not yet reached the ambulatory facilities nor most of the public hospitals where technological platforms are needed to be connected to the communication system\. Government Strategy for 2001-2006 The social justice objectives of the new GOM are clearly reflected in its policies for the social sectors\. The health sector is targeting a decrease in social and regional inequities and in creating an equitable healthcare delivery system with comparable results for all population groups\. The health sector intends to achieve these objectives by implementing three strategies: a) Equity\. To decrease social and regional inequities by reducing differences in health status among the Mexican population (e\.g\., there exists a difference of 17 years in life expectancy between the higher social classes and the poor); b) Quality\. To provide quality health care services to the poor, the disenfranchised and the indigenous populations through improved technical and interpersonal medical care; and c) Financial Protection\. To decrease the financial burden incurred through catastrophic illnesses that exacerbates poverty\. To implement these strategic goals, the Government intends to link improvement in health status to social and economic development, to prioritize emerging health problems, to offer financial protection to the whole population, and to increase freeclom of choice and community participation\. A national crusade for improving the quality of health services has already been launched\. As part of the national  to federalization policy, the decentralization process will be deepened and more decision-making authority will be delegated to the states\. In addition, the states will deconcentrate functional and financial authority to the health districts and to the municipal health authorities and promote collaboration between public and private health care providers\. The policy-making and regulatory roles of SSA are to be modernized, simplified, and structured with more transparency\. 3\. Strategic sector issues addressed by the proiect The project development objectives address the sector issues highlighted above and which are of high priority to the Government of Mexico: a) Improve the equity, efficiency, and quality of care by supporting the development of integrated health care networks for delivering public health programs and promoting provision of an expanded package of essential health services in selected poor rural and marginal urban areas\. The successful experience of PAC in rural areas has shown this to be an appropriate and achievable strategy\. At times, however, a complete package of health services has not been available on a regular basis and of adequate quality, and the package has not always met the existing and emerging health needs of poor people in rural and marginal urban areas\. In order to guarantee universal access to quality services provided on a regular basis, it would be necessary to redistribute existing resources and/or increase overall resources\. A special emphasis will be given in the project to a Health Program for indigenous people in rural and marginal urban areas\. b) Strengthen the policy of decentralization, first, by supporting the decentralization of federal level resources and authority to the state level and the deconcentration of management authority from the state level to the health districts, and, second, by promoting the delegation of authority from the health districts to the providers of services (hospitals and health care networks)\. Decentralization should not stop at the political/administrative level (SESAs and health districts) but should help transform public health care facilities into more efficient, effective, and competitive entities\. The project would provide support to help improve the management and the efficiency of public providers in selected poor rural and marginal urban areas where service provider competition does not exist or is not feasible\. In regions where such competition already exists-and could grow as health insurance coverage expands-it would support efforts to help convert public facilities into more autonomous units operating as part of integrated health care delivery networks\. Public entities would enter into service provision agreements with public providers, or in cases were no public providers are available, into contractual arrangements with non-government providers\. c) Supporting decentralization also means strengthening the management capabilities of the SSA, SESAs and of the health districts\. Priority areas would be human resources management, the development of management systems (financial management, information and quality assurance systems, planning and control systems); the training of staff operating in rural health facilities and public health laboratories to enable them to get their quality certification for basic laboratory procedures; and the training of staff in laboratories that provide HIV testing in selected urban areas\. Effective decentralization requires new organizational, financial and legal arrangements, as well as improvements in planning and controlling resources (including financial resources, human resources, technical and logistics resources such as medical supplies, pharmaceuticals, equipment supply and maintenance)\. d) Support studies, pilot innovative models, and perform impact evaluations in order to gain a better understanding of changes in the underserved population's health status and access to health facilities,  II as well as to develop strengthened financial protection models and new approaches to increase efficiency and equity in health\. C\. Project Description Summary 1\. Proiect components (see Annex 2 for a detailed description and Annex 3 for a detailed cost breakdown): The proposed three project components are: Cost Incl\. Bank- % Of Component/Subcomponent Category Contingencies Finan\. Bank- (US$M) Total (US$M) Finan\. Component I\. Quality and Equity Physical, 430\.90 74 220\.38 51 for Rural and Marginal Urban Policy, Areas: Institutiona --Rural areas Building 107\.70 18 --Marginal Urban areas 56\.30 10 --Indigenous Population 100\.45 17 --Basic Community Hospital Care 146\.45 25 --HIV/AIDS 20\.00 4 Component II\. Efficiency, Physical, 70\.00 12 59\.47 85 Institutional Development and Policy, Decentralization Institutiona Building Component HI\. Innovation, Pilot Physical, 76\.80 13 66\.65 87 Models, Policy Studies and Impact Policy, Evaluation Institutiona I Building Loan Fee 3\.50 1 3\.50 100\.00 Total 581\.20 100% 350\.00 60% Component I: Quality and Equity for Rural and Marginal Urban Areas Component I is the main vehicle under the project for helping improve equity and quality of health services\. Rural and marginal-urban poor would have access to a package of cost-effective health interventions and basic hospital care, including emergency medical services, closer to their place of residence (see Annex 2-A)\. At the end of 2000, PAC and other programs were providing a package of essential health services to 10\.9 million rural Mexicans\. The project intends to consolidate PAC gains and expand its functional and geographic coverage\. Functional expansion would ensure that those rural residents for which the PAC program did not yet provide regular access to essential clinical care in community hospitals will continue in the program and receive expanded services\. Geographic expansion  12 means that residents that were not receiving regular services under the PAC program would now be covered\. Taking into account these changes and eliminating the overlap, this program would provide services to 9\.6 million poor rural residents (see Table I in Annex 2-A)\. This number of 9\.6 million rural people includes 6\.6 million rural indigenous people that live in the same municipalities\. An additional 0\.9 million rural indigenous people that live in other communities would also be covered for a total of 7\.5 million indigenous people\. The project would also cover about 2\.6 million poor urban residents\. Total project beneficiaries would therefore number 13\.1 million, or one seventh of Mexico's population\. The rural population is ethnically, linguistically, and culturally diverse, and is geographically dispersed-a situation that presents organizational, cultural, and logistic challenges\. The urban poor are concentrated in marginalized areas where delivering and financing services pose different challenges, associated with safety of health facilities and of health personnel and patients, and with the intersectoral nature of risk factors (e\.g\., lifestyle factors such as alcohol abuse and drug addiction, domestic violence) that are associated with the rising incidence of non-communicable diseases, injuries, violence and mental disorders\. The geographic heterogeneity and the diversity of the beneficiaries in the project area makes it impractical to develop ex-ante a five year detailed blueprint\. Project design for the urban component is based on the selection of subprojects from 23 states and from an initial set of 50 cities (see Tables I and 2 in Annex 2a)\. The 231 health districts at the state level, which are the technical branches responsible for managing primary and secondary levels of care, would be in charge of formulating and implementing subprojects as part of annual implementation plans\. Selection of these states and cities was done by using: (i) "degree of marginalization" criteria-a set of statistics that measure social deprivation and includes socio-economic variables and mortality indicators, developed by National Population Council (CONAPO) [with national census data from 1995]; (ii) the national socio-demographic "urban deprivation index" also developed by CONAPO (with national census data from 1995); and (iii) the welfare index developed by National Institute on Statistic, Geography & Data Information (INEGI) [with national census data from 2000]\. Subprojects would take into consideration the health needs and the supply of health and other social services in each project area\. Subprojects would meet the eligibility criteria specified in Annex 2-B\. The experience with PAC indicates that incremental implementation of subprojects provides an evidence-based approach to expanding the project gradually to additional areas during project implementation\. Service Delivery in Rural Areas\. The project's rural area would be the PAC project area located in 19 states and expanded geographically to include additional municipalities (selected according to INEGI welfare indicators) located in 5 new states for a total of 908 municipalities\. The beneficiary population under PAC will receive with project financing additional public health and essential clinical interventions currently not included in the PAC's PABSS, while the population groups in the new areas will receive the entire package of essential services on a regular basis to reduce the unequal access to basic health services\. To this end, the project would support the improvement of the clinical problem solving capacity at the local level, by adding new cost-effective interventions complemented with hospital services\. In both cases, the operational costs (pharmaceuticals, micronutrient supplements, and other medical supplies) will be financed by loan proceeds on a declining basis\. Health care personnel will not be financed under the project, as these operational costs will be financed by the participating states\. The SSA's MASPA organizational and service delivery model for uninsured population specifies in detail population coverage targets, administrative and health care levels, location of health care facilities, required equipment and medical supplies, composition of health teams (e\.g\. mobile teams comprised of physicians and nurses, auxiliary health workers, community health workers), referral processes, and information needs\. To retain qualified health workers in rural areas, as done under PAC, agreements would be reached with the states to give health workers a permanent contract, with salary and hardship bonuses,  13 provided that they stay in the post specified in their contract\. In addition, specific health-related professionals would be hired to help integrate indigenous culture and beliefs in the special health program for the indigenous population\. Service Delivery in Marginal Urban Areas\. In addition to the 13 interventions, the package of essential health services would include mainly preventive interventions to address specific urban pathology (e\.g\., alcohol abuse and drug addiction, violence, HIV/AIDS)\. Its delivery would require the development of new strategies as health teams need additional skills and safe working environments, and solving health problems require close intersectoral and multi-disciplinary coordination\. The project would first pilot test a basic urban healtlh services delivery model involving public and private providers in the marginal urban areas of three cities: Tijuana (Baja California State), Acapulco (Guerrero State) and Valle del Chalco (Mexico State)\. Ongoing monitoring and rapid assessments of the pilot experience would allow adjustments before replicating it in the initial set of selected 50 cities\. HIV/AIDS Prevention and Control\. Particular emphasis would be placed under the project on the prevention and control of HIV/AIDS in marginal urban areas, as it has become one of the SSA's public health priorities\. The main objective of the HIV/AIDS interventions would be to reduce the incidence of infection in groups of people with high-risk practices: commercial sex workers, men having sex with men, injection drug users, and other patients with sexually transmitted infections (STI), living in the selected marginal urban areas\. The National AIDS Council (CONASIDA) would provide technical assistance and evaluate program execution by state health secretariats in 50 priority cities (municipal based) with the most accumulated HIV/AIDS cases (see Table 3)\. Training would be offered to civil society organizations to allow them to compete for participating in programs that deliver priority health promotion and prevention activities and education by peers\. Specific activities would include information, education and communication, social marketing of condom, use of clean needles and syringes, fighting stigma and discrimination, treating and following up on other STIs, and staff training\. Support would also be provided to a civil society committee to assist in the evaluation of this program\. Organizing Health Care Networks\. The PABSS would be delivered in selected rural and marginal urban areas through an improved network of mobile teams, health centers, basic community hospitals, radiocomunication and emergency medical care services\. The project would also support pilot experiences with tele-medicine in order to link general health care practitioners with specialists in hard to reach dispersed communities\. Public and non-government facilities would be organized into virtual networks at the state level through agreements and contracts\. Universities would be involved to better adapt academic curricula according to the characteristics of the health service delivery model Social Communications\. The project would develop a communications strategy to help achieve project goals including indigenous population health issues, HIV/AIDS prevention, and reducing HIV/AIDS stigmatization\. Piloting this communications strategy for urban areas would take place in Tijuana, Acapulco and Valle de Chalco\. Investments\. Under Component 1, project would finance subprojects prepared by health jurisdictions at the state level that would include: (i) construction, upgrading, expansion and maintenance of health centers and basic community hospitals, following a detailed diagnostic infrastructure review and an assessment of alternative ways of delivering health services (e\.g\., contracting with other public and non- government health care providers); (ii) basic medical equipment (e\.g\., medical instruments, scales, delivery tables, instrument packages for midwives, medical waste management equipment); (iii) essential office equipment; (iv) procurement of essential medical supplies, including access to an essential package of pharmaceuticals and micronutrient supplementation for the indigenous children and pregnant womnen; (v) laboratory equipment; (vi) radio and other communication equipment to improve referrals;  14 (vii) ambulances; (vii) training and supervision; and (viii) on a declining basis, the purchase of health services under agreements and contracts with third party providers\. Component II: Efficiency, Institutional Development and Decentralization With PAC support, the authority for managing health care organization and delivery for the uninsured population at the state level was transferred from the SSA to OPDs in the 31 states of the country and the Federal District\. The OPDs, which are run by a Board of Directors, are responsible for physical, human, financial, and material resources\. The Executive Director of the OPDs is the SESA\. Health programs are implemented by the 231 health jurisdictions in the country (their number vary per state according to population density and geographic extension)\. Under Component II, the project would: a) support the modernization and transparency of this decentralized organizational and operational structure by strengthening the managerial capacity of the OPDs; b) support the OPDs in deconcentrating managerial functions to the health jurisdictions; c) strengthen the management capacity of the health jurisdictions; d) improve the management of the inpatient and outpatient services at the primary and secondary levels of the health care delivery system; e) train central and state level personnel in order to achieve efficiency in their financial and budgetary functions; f) create an indigenous health monitoring system; g) certify the quality of laboratory procedures and HIV testing; and h) support central areas of the SSA in order to achieve transparency and excellence in their administrative procedures\. The National Crusade for Improving the Quality of Health Services, launched by SSA in February 2001, would be supported under this component through the implementation of strategies and models geared to the development of the structures, processes, and skills required to provide quality care, ensure user satisfaction, and support effective organizational performance\. More specifically, it would focus on leadership, strategic planning and management, clinical and managerial processes, human resources management, and management information systems\. Component II would assist in achieving these institutional development objectives through activities that would: a) Strengthen the organizational and management structure at the state level, at the health jurisdiction level, and at the service delivery level by supporting it with the appropriate legal framework, by training health staff, by assuring social participation, and by improving the organization and the  15 management of the services, including the revision and adaptation of the MASPA into an integrated health care model (MIDAS) for the uninsured population; b) improve financial management and resource allocation processes by generalizing the use of uniform accounts; implementing cost accounting; improving programming and budgeting of financial, human and material resources; reallocating resources based on the results of productivity indicators; and diversifying revenue sources by charging public and private institutions for services provided; and c) continuously improving the quality of services provided to the rural and urban poor by providing incentives to health workers for quality work, by promoting efficiency in services delivered by mobile and facility-based health teams, by developing appropriate information systems to plan and control performance, by developing and encouraging the use of clinical protocols, by providing opportunities for continuing medical education, and by accrediting facilities and certifying health workers\. The effectiveness of the above three subcomponents would be enhanced by two crosscutting activities: human resources development and management information systems\. Investments\. Under this component\. the project would finance systems development and technical assistance, equipment, training, and supplies needed for modernizing governance structures, management practices, and quality improvements\. Component III: Innovation, Pilot Models, Policy Studies and Impact Evaluation Component III would support the social objectives and the health sector strategies of the GOM\. It would do so by financing consulting services and technical assistance for testing innovative proposals and alternative health care models, as weel as for carrying out policy studies\. The component would also evaluate the impact of the project and finance project management\. A\. Support the National Crusade for Improving the Quality of Health Services a) adapt quality of care models and instruments to the provision of health services in rural areas, including the develop of models according to indigenous culture and beliefs; b) structure and test valid indicators to measure the quality of care provided to indigenous people; c) evaluate changes in the health status of the rural population; d) evaluate the HIV/AIDS subcomponent; e) review and improve regulations to enhance the quality of care provided in the private sector; f) test and evaluate the efficiency and quality of outsourcing public health services; g) assess the environmental impact of providing basic health services; and h) automate a simplified Epidemiological Surveillance System\.  16 B\. Increase the Quality and Equity of Health Services Provided to Indigenous Populations a) monitor mortality and morbidity changes in indigenous populations; b) pilot test micronutrient program for indigenous populations; and c) evaluate the Indigenous Health Program and MIDAS\. C\. Support Financial Protection Initiatives a) Design and develop prepayment schemes that protect families against financial losses due to illness\. D\. Decrease Social and Regional Inequities a) evaluate, adapt and implement recent experiences in paying providers using diagnostic-related groups (DRG); b) evaluate alternatives for providing emergency health services in rural areas; and c) evaluate equity changes in providing health services, including the evaluationi of the progress of the indigenous health program relative to the overall project\. E\. Yearly, mid-term and ex-post evaluation of PROCEDES Using data and indicators developed under Component 11, the project will evaluate project achievements during implementation as well as doing an ex-post evaluation\. The evaluation would also draw upon indicators developed by WHO in its recent 2000 Health Report\. Base line data would be collected prior to project start to enable carrying out before-after comparisons\. As done under the ongoing PAC project, an independent firm would be contracted for conducting yearly evaluations and the ex-post evaluation at the end of the project\. Monitoring and evaluation activities would be geared to provide coordinated feedback to the developers, implementators, and policy decision makers at the different levels of the system\. During the life of the project, the evaluative information would be used to: (i) improve all phases of the project during its start up phase; (ii) adjust pilot model in the initial marginal urban areas on the basis of experience prior to its replication in areas beyond pilot sites; (iii) continuously improve the project once it enters into its full implementation phase; (iv) help determine if the project has lead to desired end-results/outcomes; and (v) provide measures that can be incorporated into an ex-post economic evaluation that would assess the ultimate viability of the project\. Project Management\. Implementation arrangements are described in Section 4 below\. 2\. Key policy and institutional reforms supported by the project The proposed project would help consolidate the political, administrative and economic decentralization of the public health system while ensuring institutional and financial sustainability through: a) strengthening SSA's policy making and regulatory role;  17 b) strengthening autonomy of public institutions at state, health jurisdiction and service provider levels in using budgets as a planning and control tool, developing and managing human resources, and fostering coordination of health care delivery between public and private providers; c) adjusting, adapting and institutionalizing MASPA in poor rural and marginal urban areas, including outreach strategies, and making emergency, ambulatory and hospital services more accessible; and d) developing reporting systems supported by the MIS to monitor and evaluate project progress and outcomes\. The proposed project would also adapt\. and experiment with lessons generated elsewhere to change the organizational incentive regime of health services as part of decentralization processes (WHO, 2000)\. Four incentives would be considered: * Degree of autonomy (decision rights) that the local organizations and networks have over control of input mix and level, outputs and scope of activities, financial management, clinical and nonclinical administration, strategic management and market strategy; * Degree of accountability; when autonomy increases accountability must be secured by shifting from hierarchical supervision to reliance on monitoring, regulations, and the economic incentives embedded in results agreements; - Degree of market exposure to mobilize additional revenues to complement budgetary allocations; and * Degree of financial responsibility at the service level\. The proposed project would develop an effective virtually integrated health care services system capable of resolving most clinical and surgical problems at the ambulatory and basic community hospital levels\. The virtually integrated health care networks would assure a continuum of care emphasizing community health, preventive, family medical and surgical care, and including endemic and environmental control through community participation and inter-institutional coordination\. Health facilities would be networked by specific agreements (see below) and would include on-line medical records and clinical protocols\. 3\. Benefits and tareet population The proposed project would support Mexico's efforts in combating poverty by expanding and consolidating the delivery of quality basic health services for about 13\.1 million uninsured and underserved poor living in rural and marginal urban areas\. In addition, the project would support the decentralized SSA and its policies and practices of transferring resources and delegating authority from the federal level to state governments; contribute to deconcentrating management authority from the state level to the sanitary jurisdictions and assigning more decision making authority to the point of service (hospitals and health care networks)\. This would result in a more efficient public health system capable of delivering a sustainable and enhanced basic health care package that would include essential clinical interventions\. Expected benefits over the medium term would be: (i) increased spending for cost-effective health care services; (ii) reduced disease burden of rural and urban poor; and (iii) efficiency and equity gains from  18 modernizing health care organization and delivery and from greater resource mobilization\. 4\. Institutional and implementation arran_ements Implementation period: 5 years Executing Agencies\. Institutional and implementation arrangements would benefit from the experience gained with the First and Second Basic Health Care Projects\. As under PAC, responsibility for the project as a whole would rest within the SSA's Direcci6n General de Equidad y Desarrollo en Salud (DGEDS/SSA) acting as the PCU\. The PCU, in conjunctioni with selected state agencies, has been responsible for project preparation\. It has developed significant project management capacity with previous and ongoing projects, and other related programs\. The PCU meets World Bank management requirements, as it has an adequate structure for the procurement of goods and services, internal control, financial reporting, procedures for budget control and a computerized information system which supports accounting processes and transactions\. On October 10, 2000, World Bank specialists certified the Financial Management System and the Procurement/Contract Management System of the PCU\. The PCU would be in charge of overall coordinationi of project planning and operation, resource management, and evaluation\. SESAs would be responsible for supervising resource management, evaluation of program operation and reporting\. Health jurisdictions would be strengthened to accept additional responsibilities\. They would plan, program and budget resources, coordinate and develop healtlh service strategies, and manage primary and secondary health services\. The healtlh jurisdictions would promote active participation of municipalities, nongovernmental organizations and communities\. With assistance of SESAs, the health jurisdictions would be the main executors of subprojects approved Linder the project according to eligibility criteria specified in Annex 2-B\. Private banks in project states would receive authorized subproject funds, transfer them to Health Jurisdictions or make direct payment to contractors\. The PCU would provide technical assistance to strengthen the capacity of state, jurisdictional and health provider entities to prepare, appraise, implement and supervise subprojects\. The PCU would take actions to have a management information system (MIS), which would produce quarterly Project Management Reports (PMRs) and eventually allow for PMR-based disbursements\. Traditional disbursement methods (Statement of Expenses (SOEs), direct payments) would be used until the PCU is ready to adopt the PMR-based disbursement methodology, and until full compliance with the Financial Management (FMI) requirements\. The World Bank and the PCU would agree on the content of PMRs, and PCU shall carry out a time- bound action plan acceptable to the World Bank for improving the MIS in order to enable - not later than July 31, 2002 - to prepare quarterly PMRs acceptable to the World Bank\. These arrangements and resulting procedures would be reflected in the Operations Manual of the project\. Annual Implementation Plans\. Project implementation would be carried out on the basis of annual subprojects plans in each participating state\. They would be prepared, appraised and executed in accordance with the Operations Manual for the Project taking into account the investment framework defined in the project's components and local needs\. Following PAC experience, the Government would sign: (i) Participatory Agreements between SSA and SESAs and other state, municipal, and community entities willing to participate in the project; and (ii) Executing Agreements for specific investments between SESAs and participating state, municipal, autonomous, and nongovernmental entities\. Such agreements would aim at supporting the decentralization process in the health sector, and the participation of public and nongovernment institutions\. The model agreements would be included as part of the project's Operations Manual\.  19 Chart 1: Process of Preparation of Annual Project Implementation Plans Participate in needs assessment for proposal\. Identification Contribute in-kind and/or financial resources Prioritization of needs Help monitor project implementation Community participation Feedback Participate in needs assessment for proposal Identification Contribute in kind or financial contributions Prioritization of needs Implementation of health and social assistance programs Implementation Help monitor project implementation Monitoring Feedback *o- - - Reviews epidermiological and service needs Identification m Ranks municipalities according to priority criteria Implementation Prepares annual subproject implementation proposals and Management submits the to SESAS Monitoring Executes subprojects Technical assistance to health jurisdictions, municipalities Project preparation w P and NGO's Implementation assistance Review annual project implementation proposals according Supervision to eligibility criteria, and submits them to the SSA's PCU Evaluation = +<> t\.g4 ,$0@ ,etX- -Training \.- \. :- g ~~Procurement Technical assistance to SESAs Project supervision Technical and budgetary approval of annual project Monitoring implementation plans Impact Evaluation _________;____\.______:---___\._\. Overall resporsibility of project implementation Auditing Subprojects\. Subproject proposals would include information on the selection of target areas, appraisal of projects, timetable for implementation, flow of funds, financing (community, state and federal), operation and maintenance\. Specifically, such subproject proposals, on the basis of the investment framework defined in each of the project's components and detailed local assessments, would include: (i) overview of demographic and epidemiological profiles of the population; (ii) general objectives of the subproject; (iii) proposed interventions and investments that will be supported to achieve the stated objectives determined on the basis on needs assessments; (iv) identification of the project location, including justification of the priority area; (v) current resources available in the state and the priority jurisdiction, including physical, institutional and financial resources; (f) identification of the executing unit within the state; (vii) estimated benefits, in terms of health impact for the population; (viii) estimated costs, including the incremental recurrent costs; and (ix) mechanisms to ensure commitment and ownership\. Procurement of Works and Goods\. Procurement of works and goods financed by the World Bank under the project would be carried out in accordance with World Bank's Guidelines for Procurement under IBRD Loans and IDA Credits (January 1995, revised in January and August 1996, September 1997 and January 1999)\. The General Procurement Notice to be published in the Development Business shall be updated annually for outstanding procurement\. All invitation to bid shall be published in the "Diary Oficial de la Federaci6n" and in COMPRANET\. In addition, invitation to bid for each contract estimated to cost US$ 10,000,000 equivalent or more shall be advertised in the Development Business\. Works procured under this project could include construction of primary health care units and rehabilitation of First Level hospitals totaling US$89\.30million equivalent\. Contracts for work procured under this project will follow NCB procedures acceptable to the World Bank and agreed Standard Bidding Documents\. Small works, estimated to cost less than US$500,000equivalent per contract, up to an aggregated amount of US$ 10\.0 million equivalent may be procured through price comparison received  20 in response to a written invitation to at least three contractors\. The written invitation would include a detailed description of the works, including basic specifications, the required completion date, and a basic contract form acceptable to the World Bank\. Goods procured under this project would include pharmaceuticals and medical supplies, computers, furniture, ambulances, health printed materials, totaling US$225\.0 million equivalent\. Major contracts for these goods will be procured following International Competitive Bidding procedures (ICB), using Bank Standard Bidding Documents (SBDs)\. Contracts estimated to cost less than US$500,000 million equivalent per contract, up to an aggregated amount of US$9\.24 million equivalent of which World Bank financing amounts to US$6\.16 million equivalent, may be procured using National Competitive Bidding procedures (NCB) and agreed Standard Bidding Documents\. Contracts for goods that cannot be grouped into large bidding packages and estimated to cost less than US$100,000 equivalent per contract, up to an aggregated amount of US$6\.16 million equivalent of which World Bank financing amounts to US$4\.83 million equivalent, may be procured using shopping (National or International) procedures based on a request form for quotations acceptable to the World Bank\. Services\. Consultant services shall be procured in accordance with Guidelines for the use of Consultants by the World Bank Borrowers and the Bank as Executing Agency (January 1997, revised in September 1997 and January 1999)\. Consultant services will be contracted under this project in the following areas of expertise: training, design, construction supervision, and institutionial development\. These services are estimated to cost US$65\.0 million equivalent and would be procured using World Bank Standard Request of Proposals\. All contracts for firms would be procured usin1g Quality and Cost Based Selection (QCBS) procedures except for small contracts for assignments of standard or routing nature and estimated to cost less than US$100,000 equivalent that would be procure using Least Cost Selection (LCS), up to an aggregate amount of US$500,000\. Specialized advisory services would be provided by individuals consultants selected by comparison of qualifications of at least three candidates up to an aggregated amount of US$2,000,000\. The short list of consultants, estimated to cost less than $200,000 equivalent per contract, may comprise entirely national consultants\. Non-Consultant Services\. Non-consultant services would consist of three different types of services: Radio Broadcasting Services, Training, and Health Care Providers (HCP)\. HCP would be hired at the state level financed under the proposed project totaling about US$25\.0 million equivalent\. Because of these services are standard, the selection of the providers would be based on the Least-Cost of the providers that have a minimum qualifications\. A procurement capacity assessment for the project was approved by the Regional Procurement Advisor (RPA) on1 7/10/2000\. The National Development Bank (Nacional Financiera-NAFIN), one of the three financial intermediary institutions of the Mexican Governmenit, will be the Borrower and will be responsible through its Special Financing Unit for: (i) reviewing all procurement procedures and bid evaluation reports submitted by SSA, (ii) give the no-objection for the award of contracts below the agreed threshold for World Bank prior review; and (iii) maintaining all the corresponding records\. NAFIN's performance under previous project was satisfactory\. SSA through its State Delegations will carry out all procurement activities for the project\. The SSA's PCU operating in Mexico City, was in charge of managing previous projects and of preparing the proposed project\. To ensure SSA's staff knowledge of World Bank procurement Guidelines and procedures, several procurement seminars were given by the Mexico Resident Mission to SSA's staff (most of them from the SSA' State Delegations) during the implementation of the Second Basic Health Care Project\.  21 Review by the World Bank\. The proposed threshold for prior review by the World Bank is based on the procurement assessment of the project executive agency and is summarized in Annex 6-Table B\. In addition to this review of individual procurement actions, the annual procurement plan will be reviewed and approved by the Bank, as well as procurement audits to be carried out during the life of the project\. Financial Management\. In order to be in compliance with World Bank requirements per OP/BP 10\.02, an accredited Financial Management Officer (FMO), under the supervision of certified Financial Management Specialist (FMS), carried out an assessment of the project's financial management system\. The assessment covered the project's financial management system (budgeting, accounting, internal control, auditing and reporting) and its equipment and staffing\. A strengths and weaknesses analysis (SWA) was also conducted\. The work was based on applicable World Bank guidelines, which included the "Project Financial Management Manual" (World Bank, February 1999), "The Loan Administration Change Initiative (LACI), Implementation Handbook" (World Bank, September 1998) on the Financial Management guidelines, the FARAH (World Bank, January 1995) and the guidelines and terms of reference (TOR) for World Bank audits\. These reports are included in project file\. The financial management assessment included the project's accounting system; internal control, planning, budget and financial reporting systems; and auditing arrangements and content of the PMRs of the DGEDS/SSA, the unit acting as PCU for this project\. The conclusion of this review is that the financial management system is adequate, the PCU satisfies minimum World Bank's financial management requirements, and it has developed significant project management capacity with previous and ongoing projects, and other related programs\. Therefore a certificate 4-B was issued on October 10, 2000\. Considering that the project currently does not have in place an adequate project financial management system that can provide, with reasonable assurance, accurate and timely information (PMRs) on the status of the project as required by the World Bank, an action plan was agreed on\. Budgeting Process and Flow of Funds\. The annual budgets would be prepared at the SESAs and health jurisdiction levels with the support of the PCU on the basis of annual investment plans\. Financing for the proposed project would be included under the SSA's standard budget category Ramo XII, and funds would be channeled directly to SESAs and in some cases also to health jurisdictions through commercial banks\. Counterpart funds for the project would flow from the Federal Treasury's IDB-IBRD line of credit through NAFIN directly lto a commercial bank in each state\. The release of funds would be authorized by each SESA in accordance with its authorized annual investment plan\. As done under PAC, in order to promote the sustainability of the project, the state and jurisdictional levels would contribute at least 10% of the program costs outside the project's financial plan\. The PCU (DGEDS/SSA) would be responsible for budget consolidation and control and would report in the dates established by the country legislation\. Details on the operation of the above mechanisms would be included in the Operations Manual\. A Special Account would be established at the Banco de Mexico and managed by NAFIN as financial agency\. In order to reimburse eligible project expenditures, instructions and supporting documentation for all transactions affecting the Special Account (i\.e\. disbursements, reimbursements, direct payments) will be provided to NAFIN from the administrative department of the PCU, which will not have direct access to the SA\. The project bank account in local currency would be used to pay project expenditures, which will be pre-financed by the GOM, therefore monthly reimbursements will be processed\. Both NAFIN and the PCU will operate in line with Bank guidelines and procedures\. NAFIN will conserve all supporting documentation and make it available to the Bank or to the auditors if required\. Additionally, NAFIN will prepare and provide to the Bank a monthly reconciliation of all transactions affecting the SA\. Disbursement\. A Special Account in US dollars would be established at the Banco de Mexico\. The authorized allocation is US$30\.0 million, which will be limited at the early stage of the project to an  22 initial deposit of US$10\.0 million\. When the aggregate disbursements under the loan have reached US$20\.0 million, the initial allocation may be increased up to the authorized allocation\. The Special Account will be monthly replenished and will be used for all transactions eligible for financinig from the loan\. Traditional documentation requirements apply for direct payments, special commitments and statements of expenditures (SOEs)\. If the project is converted to PMR-based disbursement methodology, disbursement procedures should be in line with World Bank requirements and, the authorized amount of the Special Account will be increased up to US$50\.million\. Accounts and Audit\. The PCU would maintain records and accounts adequate to reflect, in accordance with sound accounting practices, the resources and expenditures in connection with the execution of the project\. For the execution of the proposed project, the financial and accounting system installed in the PCU for managing the implementation of PAC would be used\. Starting July 31, 2002, the DGEDS/SSA would prepare and submit to the World Bank Quarterly Project Management Reports (PMRs) linking project expenditures to key monitoring indicators of project activities\. The formats, period of submission, and basis to produce those reports would be in accordance with the World Bank's Financial Management Manual and World Bank requirements\. External audits of project financial statements would be required on an annual basis for all expenditures with respect to which withdrawals from both the Loan Account and the Special Account were made\. The PCU would ensure that records, accounts and supporting information are available for review by World Bank supervision missions and for NAFIN to allow timely performance of its obligations, and to the auditors as required\. Annual audits would be carried out in line with the Technical Memorandum of Understanding on Auditing (MET), document that was agreed with SECODAM (local SAI)\. As in the PAC, the auditor acceptable to the World Bank for this project would be the SSA's Internal Control Unit (Contraloria Interna), which is follows national auditing norms, which observe the International Standards on Auditing (ISA)\. The audits would include a full review of records and accounts at federal and state levels\. As required by international standards and best practices, and as done under PAC, audits would include audits of processes\. D\. Project Rationale 1\. Proiect alternatives considered and reasons for rejection The following alternatives were considered: a) A top down fully detailed and managed project would have been too rigid given the experience already gained with prior projects, and the social, economic, and institutional heterogeneity of the country\. Instead, the project is designed as a "broad common fund" with a set of criteria and procedures to finance policy and institutional reforms for the delivery of basic health care to uninsured and underserved populations\. This permits engaging different stakeholders, including potential beneficiaries, select and adopt policy and institutional reform instruments according to needs in different settings, build states implementation capacity through human resources development, and incorporate lessons of experience\. b) Focusing only on general public health interventions is not an effective option, as the epidemiological profile in Mexico needs public health programs and clinical services to improve health status\. Investments in primary health care without effective support of referral levels would run the risk of ineffective interventions in many cases, particularly in view of the difficulty in allocating qualified staff and technology to rural and marginal urban areas\.  23 2\. Maior related proiects financed by the Bank and/or other development agencies (completed\. ongoinz and planned) Sector istse ?roject Latist Supervision (Form 590) Ratings L_____________ I__\.__,___ \. \. (Bank fnanced prjects only) Implem\. Development Objective (DO) Progress (IP) Basic Health I Basic Health Closed in 1996 Improvement and expansion of the delivery of basic health Care/ Project care and nutrition to about 13 million uninsured people in 47 Decentralization Ln\.3272-ME) districts in Oaxaca, Chiapas, Hidalgo, Guerrero, and marginal areas of the Federal District\. Project objectives were accomplished to a great extent\. HiS 11 Basic Health (i) Support equitable access to cost-effective package of Basic Health Care Project quality health services for the uninsured and underserved in 19 Care/ (Ln\. 3943-ME) states; (ii) support institutional development through the Decentralization modernization and decentralization of technical, managerial and financing in the states; and (iii) support modernization and restructuring of the SSA to assume a leadership role in the sector\. The mid-term evaluation indicated that project implementation performance is highly satisfactory\. By the end of 2000, coverage with basic health services to the poorest rural population would reach 8 million\. Total loan amount is US$310\.0 million equivalent\. Still under implementation until June 2002\. Health Sector Health System S The Health System Reform Technical Assistance Loan (TAL) Reform Reform Technical in the amount of US$25 million, and the accompanying Assistance Loan adjustment operation, Health System Reform-IMSS, in the (Ln\.4367-ME) amount of US$700 million, approved in 1998, are supporting the design and implementation of major policy changes in the Health System IMSS\. Among them: (i) improvement of financial Reform structural management of the health insurance system; (ii) strengthening Adjustment Loan of institutional and regulatory frameworks for health (Ln\.4364-ME) insurance; and (iii) improvement of quality and efficiency of the IMSS health delivery system\. Decentralization Decentralization S The Decentralization Adiustment Loan, approved in Adjustment Loan December 1999, in the amount of US$600 million, aims to -DAL move Mexico's decentralization toward an efficient and (Ln\.70020-ME) sustainable path\. It includes a health policy commitment as part of a group of policy commitments for respective tranche disbursements\. The goal in the health sector is to help address one of the main weaknesses in the implementation of the PAC by establishing a one-time grant (pari-passu) to finance training, monitoring, reporting, and institutional development to improve the delivery of the basic package of health services\. Estado de Mexico S Structural The EdoMex Government's Structural Adiustment Loan, Adjustment Loan approved in December 2000, in the amount of US$505 (Ln\.7043 -ME) million, aims to bring the fiscal and financial accounts into a sustainable path, while protecting the social sectors and enhancing their efficiency, and increasing accountability and \._____________ __ __ transparency in management of the public sector\. IP/DO Ratings: HS (Highly Satisfactory), S (Satisfactory), U (Unsatisfactory), HU (Highly Unsatisfactory)  24 3\. Lessons learned and reflected in the proiect design Project design and content build on the experience gained with World Bank supported health projects in Mexico\. Most prominent lessons are: * Targeting\. Under ongoing PAC, targeting the delivery of a cost-effective basic health care package to the most disadvantaged municipalities in 19 states has been successful\. As a result, PAC along with other related programs, with federal and state funding, has been able to reach about 10\.9 million poor, most of them in communities with fewer than 500 inhabitants\. This approach would be extended to consolidate the gains under PAC and to add other rural communities not covered by PAC as well as adjusting the rural methodology to priority marginal urban areas\. * Improve Access to Basic Health Care\. The First Basic Health Project supported infrastructure rehabilitation of first level health centers and second level hospitals in order to provide basic services for the uninsured\. Rehabilitated facilities with adequate medical staff and supplies increased use significantly\. PAC geographic extension through mobile units has been an effective outreach strategy for small, scattered communities without health centers\. Likewise, rehabilitation of primary and secondary care facilities to provide quality services to the uninsured was an effective functional extenision strategy\. The proposed project would consolidate those experiences supporting coordinationi and integration of rural and marginal urban ambulatory centers with local hospitals to better respond to health needs of target populations\. * Role of Health Jurisdictions\. PAC started the strengtheninig of health jurisdictions as the pivot for deconcentrating the operation and supervision of basic health services\. This project would further strengthen the health jurisdictions to allow them to play an expanded role in the organization and management of health care networks and in project monitoring and evaluation\. * Staffing in Hardship Areas\. The First and Second Basic Health Care projects supported the training and recruitment of community health care workers (TAPS)\. TAPS are the only health staff in communities where no medical doctor or nursing personnel are available and they have been instrumental in increasing the use of basic health services\. The proposed project would build on this successful experience and continue financing the training of community workers\. * Build Ownership and Sustainability in the States\. The First and Second Basic Health Care projects supported institution building by decentralizing procurement of essential supplies and improving management capacity and information systems\. The Second Basic Health Care Project required state and community financial contributions outside the project's financing plan to ensure its long-term financial sustainability (participating states increased their financial contributions for project-related activities from 12% of total cost or US$2\.5 million annually in 1996 to 20% or more than US$12 million in 2000)\. Municipal and community contributions, outside the project's financial plan, are estimated at US$4-5 million during the 1996-2000 period\. About 5,128 health care personnel contracted under PAC have become regular federal employees and in 2001 they will become state employees\. This is a key measure to ensure the institutional sustainability of the project\. Additionally, projects have successfully used incentive schemes to retain health personnel in hardship areas\. The proposed project would support and expand on these measures, promoting new organizational structures and arrangements to encourage civil society involvement in the operation of local health systems\.  25 * Decentralization, Deconcentration and Resource Allocation\. PAC supported the development of a resource allocation formula from the federal government to the states via Ramo 33\. The formula represents a transparent, non-discretionary mechanism that promotes equity through a gradual approximation to an adjusted capitated payment\. The Second Basic Health Care Project supported the delegation of authority to states and health jurisdictions for using allocated health-sector funds\. It promoted the transfer of human resources from the federal level to the states and the complete transfer of infrastructure, goods, ancl equipment to states, as well as municipal co-financing of new infrastructure\. PAC also supported ithe establishment of the National Health Council - comprised of federal and state health authorities- to monitor the process of decentralization\. Building upon these achievements, the proposed project would continue to support the decentralization process by further deconcentrating management authority first, from the state level to the sanitary jurisdiction, and, second, from the sanitary jurisdiction to the institutional providers (hospitals and ambulatory health care networks)\. To support decentralized and deconcentrated management, the proposed project would assist in developing a management information system that would use the communication infrastructure already developed under the SSA's REDSSA, and other budgeting and management tools developed under PAC and PROGRESA\. * Monitoring and Evaluation\. The proposed project would take advantage of the monitoring and evaluation system of the ongoing PAC project\. The proposed project would ensure adequate financial and technical support for developing appropriate indicators for monitoring and evaluating project processes, results and impact\. During project preparation, baseline data has been collected and an ex- ante economic and financial evaluation of the project has been conducted on the basis of this information\. 4\. Indications of Borrower commitment and ownership The GOM requested the World Bank to assist in the preparation and financing of a new project to consolidate the successful results obtained under the First and Second Basic Health Care Projects\. The above understanding is included in the initial project concept document for the proposed project that was discussed, agreed upoIn, and signed with representatives of the SSA, NAFIN, and the Federal Secretariat of Finance (SHCP) during a World Bank identification mission held December 2-7, 1999, and during World Bank preparation missions held in April and October, 2000\. Also, in a letter dated December 16, 1999, the SHCP formalized the GOM's request for a Program of Human Resources Development (PHRD) grant to help finance project preparation\. A PHRD Grant in the amount of US$570,000 has been awarded to the GOM\. As indicated by the Secretary of Health of the Fox Administration and the representatives of the SHCP during the closing meeting of a mission held February 7-8, 2001, the incoming Government is deeply committed to the proposed project and its development objectives\. To this end, they requested the mission to proceed with the processing of the project with the goal of presenting it to the Board of Directors of the World Bank in June 2001\. 5\. Value added of World Bank support in this proiect The proposed project, together with the Health System Reforn Technical Assistance and Structural Adjustment Loans for IMSS, the Decentralization Adjustment Loan (DAL), and State of Mexico Adjustment Loan emphasizes poverty reduction, human resource development and institutional development, within a sustainable fiscal environment\. The First and Second Basic Health Care Projects have provided an effective model for improving the health status of the poor in 19 states\. The proposed project would consolidate the health care model successfully developed with support of the Firs and Second Basic Health Care Projects and would extend it to selected marginal urban areas\.  26 World Bank's involvement has been a conduit for exchange of international experience and exposure to best practices, and will continue to provide the country counterpart team with access to relevant international experience in health sector development\. In addition, during project implementation, World Bank's participation would: (i) provide stronger oversight on the use of funds, consistent with World Bank procurement and disbursement guidelines; (ii) permit on-going evaluation of the project during project implementation and adjustments, if necessary; and (iii) facilitate coordination with other health and poverty reduction programs\. E\. Summary Project Analysis (Detailed assessments are in the project file, see Annex 8) 1\. Economic (supported by Annex 4) [X] Cost-Benefit Analysis: NPV US$19 million IERR 15% PROCEDES is expected to contribute to improve the health status of about 13\.1 million people in Mexico's poorest areas\. Under conservative assumptions, the project is expected to save approximately 350,000 DALYS between 2002 and 2006\. The NPV of PROCEDES is about US$19 million and its IRR 15%, figures that indicate that the project would pay back the investments over the five years period of the loan\. The provision of cost-effective health interventions in rural and urban areas and the project success rate in reducing burden of disease in the beneficiary population are critical for high returns\. In addition, the focus of the project on basic health care services for under-served populations in 24 states and among them the special emphasis on indigenous populations living in rural and selected urban areas will improve the equity of governmenit spending in the health sector and ultimately contribute to reduce the large differences in healtlh status between the poor and non-poor in Mexico\. 2\. Financial (see Annex 4) Project financial sustainability depends on the capacity of the Government to cover the operating costs of project investments\. The following project elements will ensure the long-term sustainability of the project: (i) it will refrain from financing health personnel salaries as these expenditures would be cover by the participating states with regular budgetary resources; and (ii) other operating costs, such as pharmaceuticals and medical supplies, will be financed under the loan on a declining basis\. In addition, as done under the PAC, increased financing from state and municipal governments and beneficiary communities outside project's financing plan as laid out in the project participation agreements with the states would help ensure local level ownership and the long-term sustainability of the project activities\. 3\. Technical Recognizing that the living and health conditions of the underserved population residing in marginal rural and urban areas are deficient, as reflected in excess mortality due to avoidable causes and in reduced life expectancy at birth, the proposed project, building on the lessons of experience of the PAC, would support the implementation of two cost-effective programs: (i) public health programs that have a broad impact and generate positive externalities in the community; and (ii) essential health care services\. The delivery of services under the proposed project would adopt and adjust according to the characteristics of the beneficiary communities the successful strategies implemented by PAC for underserved rural areas\. Adjusting the content of the program to local conditions and adapting the activities to the real needs of the beneficiary, with their direct participation, the proposed project would continue to promote the transformation of health system and support the development of alternative models of care, including  27 traditional medicine and research into quality and safety, for indigenous populations within the local health system strategy\. Technical issues to be addressed in the preparation of subprojects in participating localities would include: * Definition of project area and beneficiary population: identification, mapping and targeting rural and marginal urban areas using the national socio-demographic "urban deprivation index" for urban areas, the projections by the national statistics office of the "degree of marginalization" for urban and rural areas, and the "welfare index" for rural areas; * Epidemiological and health services assessment: (i) estimation of the burden of disease in project areas by age, sex, and causes, as well as for major risk factors; (ii) selection of the interventions included in the package of essential health services; and (iii) use results of these assessments, supplemented with studies conducted elsewhere, to adjust public health programs and the package of basic health services delivered under PAC, both in rural and marginal urban areas\. * Assessment of health services in project area\. Assessment of: (i) organizational and managerial structure, geographical location of facilities, personnel/staffing ratios, utilization by level of care, and population served; (ii) available data on the cost and utilization of facilities; (iii) accounting and medical record systems, quality assurance systems, and experience of health care managers; and (iv) constrainits to flexibility of health care reforms that could be found in: regulatory environment, legal and financial systems, payment systems, relationship of hospital to primary care centers and physicians, managerial discretion over financial and investment decisions, management of cost recovery funds, contractual autonomy of procuring supplies for health facilities (e\.g\., pharmaceuticals, food services), autonomy over managerial structure including organizational structure, personnel decision and salary schedules, and interaction of facilities with local governments in the bidding and contracting processes; and * Development options and models\. Policy options and alternative health care organization models would be designed based upon the previous reviews of demand and supply\. Each policy option/model would include: overall objective; proposed method of organization, financing and delivery; data requirements for facilities and local governments; government role; strengths and weaknesses of proposal focusing on total health care spending, spending by level of care, public sector spending, access to care, quality of care, patient satisfaction, relationship and complementarities with other health care providers, degree of competition among providers\. 4\. Institutional Mexico is progressing rapidly toward more autonomy and fiscal responsibility of sub-national governments\. This process is being driven by heightened political competition and the interest of federal authorities in broadening political participation and enhancing fiscal efficiency\. The Federal Congress has reinforced these trends by enhancing municipal autonomy and local resources, and by strengthening control institutions\. The ongoing DAL is supporting the Mexican Government's efforts in instilling accountability in the decentralization process\. The federal government has made significant transfers to states and municipalities\. Some, such as revenue sharing (Ramo 28) are block grants, others are earmarked for specific purposes, such as education and health\. These earmarked transfers are not always supported by effective mechanisms for  28 monitoring and evaluation\. Therefore, the federal government often lacks the necessary information to evaluate and adjust earmarked transfers and transfer mechanisms\. The decentralization of health services in Mexico can be best characterized as a devolution of some revenues and responsibilities to state and municipal governments with continued federal control over policies and programs\. Implementation weaknesses are the institutional capacity of the state healthi system, the sanitary jurisdictions, and the authority given to and the capacity of the institutional providers to manage their financial, technical and human resources\. The project would emphasize capacity building at the SSA, state and sanitary jurisdiction levels, and at the provider level\. Institutional capacity of participating states, sanitary jurisdictions, and institutional providers would be included in the preparation of project activities and each annual implementation plan would include a capacity building plan\. Training in monitoring, evaluating and reporting would enhance the capacity and ownership of the project by communities\. Additionally, the project, in accordance with some general lessons that have been learned elsewhere, would raise efficiency in the project area facilities through improvements in policymaking, governance, management, incentives, and accountability (encouraging decentralization and healthi services integration), and raise the quality of care through the establishment of quality assurance systems and training of personnel\. The project would foster in the medium and long term a more balance participation by local communities, secure adequate levels of financing, improve budgeting practices and allocate resources according to priorities\. Worldwide evidence indicates that improved integration of patient care enhances overall performance of the healthcare organization\. Evidence also exists indicating that coordination and integration of information flows across stages in the patient care process, lowers total system costs, or enhances overall performance in other ways\. The staff of the PCU of the ongoing PAC project helped accelerate project preparation\. The administrative arrangements for the PCU of this project are satisfactory and the staff includes members of the former team assuring continuity in operations\. 5\. Social As detailed in Annex 2-D, the proposed project would target the improvement of health conditionis in municipalities with the highest concentration of indigenous population groups in the country\. To this end, the project would build upon the successful experience generated under PAC and adopt its social participation instruments, which have helped the SSA accomplish the goal of broadening the coverage of basic health services to reach more than 8 million persons in remote and poor rural locations in the country\. Health teams under PAC had to overcome not only difficult roads and terrain, but also cultural and linguistic barriers as more than 60% of the beneficiary communities are indigenous groups who speak more than 36 languages\. In order to accomplish this, PAC developed strategies that allowed health teams to become a part of the life in these communities, learn their native languages, know their customs, and become familiar with ancestral curative practices so as to gain the acceptance of the basic health care interventions offered under the project\. Through the creation of Community Health Committees project beneficiaries found a way to actively participate in the preparation and implementation of project activities\. This has been in part the result of good information, education and communicationi strategy and the project's inclusive character where all actors assume responsibilities\. The SSA is conducting an assessment of the PAC, seeking to derive lessons from the project's performance in providing access to indigenous groups\. The study will (i) ascertain whether specific groups have been adequately served by the PAC project; (ii) diagnose problems that may have affected coverage and health outcomes such as cultural perceptions of the health-care system, or aspects of the behavior of providers; (iii) identify measures to redress any inequities observed\. Presentation of the results of this study and the specific  29 lessons to be applied in the new project would be provided and discussed with the World Bank\. Additionally, SSA has worked with numerous agencies at the federal and state levels to support the implementation of PAC, including the SHCP, NAFIN, SESAs, municipal governments and rural communities and organizations\. Close coordination between all of these actors is at the root of the success of the project\. Furthermore, following methodologies developed under PAC, the proposed project would conduct beneficiary satisfaction surveys as part of annual monitoring and impact evaluation to provide feedback to the developers, implementors, and policy makers\. The proposed project would continue to rely on organizational and participatory arrangements developed under PAC to promote the informed and organized participation of beneficiary communities and local authorities in rural areas\. A communications strategy to be included as part of the project would also be instrumental in helping achieve project objectives\. Achieving universal health care coverage requires knowledge of previous lessons learned, particularly those related to targeting rural communities with fewer than 500 inhabitants; directing the service demand to the rehabilitated infrastructure and mobile units; providing training to the sanitary jurisdictions engaged in the monitoring, supervision and evaluation mechanisms; and recruiting and building up the capacity of community health care workers to staff hardship areas\. These activities would require that the PCU assign a competent group of professionals to design and deliver training modules, and to collect data through feedback mechanisms to help keep the process updated\. Comprehensive multimedia recording and documentation of the piloting interventions in the marginal urban areas of Tijuana, Acapulco and the Valle de Chalco would help monitor the activities for administrative purposes, as well as showcase the methodology to other marginal urban areas that would adopt the health services model to be introduced\. It would be important to continuously survey the reactions and experiences of the served population to guarantee that their expectations are being met, and to secure sustainability in the quality of the service\. Socio-political audits to identify risks and barriers to project implementation would be assessed, as well as the need for strategic communications suited to the sensitive environments where activities would be centered\. Community mobilization would accompany the process to promote participation in the maintenance and long term financing of the service infrastructure through a variety of modalities to be tested\. Similarly, consistent information would be made readily available to participating states and health jurisdictions to assist them in the project preparation, procurement, inplementation, supervision and evaluation activities\. The responsibilities of the Federal Health Secretariat would have to be understood by the society at large to secure political backing and support in times of transition\. In addition, under the proposed project, a Coordinator at the state level would foster the involvement of different social actors in the monitoring and evaluation of project activities\. This arrangement would strengthen the decentralization of project's planning and operation, creating a benchmarking system at the local level\. This would make possible the detection of problems as well as the definition of the pertinent strategies to tackle them\. The local benchmarking system would not only allow the comparison of different indicators at the state and jurisdictional levels but would also generate automatically a system of incentives for improving quality and productivity at the different levels of the system\. The officials in charge of this coordinating function would be the ones in charge of the expansion of health care programs at the state and jurisdictional levels, working in coordination with federal entities and teams\. The objective is to move from a monitoring and evaluation system to a system of continuous quality improvement in which the different social actors have a role in the measurement of quality and efficiency of services delivered\.  30 6\. Environmental assessment\. Environmental Category [] A [x ] B [] C The proposed project will support oversight of the application of environmental regulation NOM-087- ECOL-1993 through basic community hospital committees, as well as the implementation of new methodologies and technologies in the management of hospital waste\. It will also support the strengthening of social action through health committees and community assemblies to ensure that the waste management process inside the hospital is monitored\. As the proposed project will be implemented through subprojects prepared annually by selected health jurisdictions within participating states, assessments of medical waste management inside health facilities will be conducted on a mandatory basis as part of subproject proposal preparation\. To this end, participating health secretariats and health jurisdictions in charge of preparing subproject proposals would receive technical assistance support financed with loan proceeds to carry out this assessment\. On the basis of the assessments of medical waste management in each participating health unlit, investment needs would be determined and included as part of the annual subproject proposal for funding under Component I of the project to help bring participating facilities into compliance with medical waste management regulations in Mexico\. Facilities that would not be under compliance with these regulations even after the requested assistance is provided would be non-eligible for additional project support\. In summary, to strengthen medical waste management in project facilities, the project would finance the following: * Assessment of waste management practices\. The project would support an assessment of medical care waste handling and disposal programs in the selected project health facilities\. * Revision/updating of manuals for handling and disposal of medical waste\. The project would support: (i) revision and updating of the existing norms and guidelines for the handling and disposal of medical waste in participating health health care facilities; and (ii) training of health personnel in the application of these standards to protect high-risk human groups such as patients as well as health staff in the participating facilities\. * Upgrades of equipment\. The project would finance the purchase of new waste management equipment, if none exists, or replace outdated, inefficient, or unsafe equipment with safer, more efficient designs\. The project would rehabilitate malfunctioning or inoperative basic systems for water, electricity, and air conditioning, thus making a healthier environment inside the health facilities\. * Procedures outlined in the project's Operations Manual\. Environmental construction norms, internal waste management in health facilities in accordance with current legislation, personnel health and safety provisions for the handling and disposal of bio-medical waste, and equipment operation will be part of the Operations Manual for the project\. * Updating Mexico's official regulation governing medical waste in health establishments\. Although Mexico's official regulation governing hazardous waste generated in health establishments (NOM-087-ECOL-1993) was set forth in 1995 and is currently in force, revisions to meet changing needs would be supported\.  31 The project's Operational Manual would include standards for medical waste management in participating facilities\. Other Environmental Provisions\. The SSA would prepare and submit to the World Bank prior to loan effectiveness a list of pesticides to be financed by loan proceeds, which shall be manufactured, packaged, labeled, handled, stored, disposed of, and applied according to standards acceptable to the World Bank\. The SSA would not finance with loan proceeds formulated products that fall in Classes IA and IB of the World Health Organization's Recommended Classification of Pesticides by Hazard and Guidelines to Classification (Geneva: WHO 1994-95), or formulations of products in Class 11 of the same guidelines, if the World Bank considers that (a) the SSA lacks restrictions on their distributions and use; or (b) they are likely to be used by, or be accessible to, lay personnel, farmers or others without training, equipment, and facilities to handle, store, and apply these products properly\. This condition will be detailed in the project's Operational Manual and legal agreements\. 7\. Participatory approach The project will support multiple participatory approaches for engaging primary beneficiaries, local, district, State and central stakeholders, and other affected groups-i\.e\., third-party providers\. State government authorities and organized community members are being consulted during project preparation, regarding both the pertinence of the project and the willingness to participate during all the stages of the project with positive responses\. F\. Sustainability and Risks 1\. Sustainability The proposed project would build upon current financial, technical, institutional and social arrangements under ongoing PAC project\. Increased availability of resources for health through Ramo 33's intergovernmental allocations (FASSA and FAIS) would facilitate the transfer of financial responsibilities from the SSA to the states\. A gradual and incremental absorption of technical and financial responsibilities by the participating states would be required for ensuring project's sustainability in the medium and longer terms\.  32 2\. Critical Risks (reflecting assumptions in the fourth column of Annex 1) Risk Risk RatiD2 Risk Minimization Measure Annex 1, cell 'from Outputs to Objective" Startup project implementation M Continued involvement of major stakeholders (e\.g\. coincides with new state level state and municipal authorities, health personnel, Governments, which may affect beneficiaries); pro-active dialogue with new project ownership and delay its authorities prior to and after of change of implementation\. Government\. Annex 1, cell 'from Components to Outputs" Number and variety of actors M Proposed project would build upon institutional and involved (federal level, state and social arrangements for ongoing PAC project\. municipalities, health personnel, Assigning clear project management and community groups), and differences implementation responsibilities to participating across states\. entities\. Flexible project design\. Weak institutional capacity at state M Project implementation would follow a gradual and and facility levels, compounded by incremental approach to allow for institutional the complexity of marginal urban building; and would proceed separately in each state, areas\. diminishing the risk of administrative or financial bottlenecks affecting the project as a whole; technical assistance would support the preparation and implementation of subprojects; periodic monitoring and supervision; SSA's PCU and NAFIN have ample procurement and financial management experience\. Low acceptance by indigenous M Project would take into account cultural beliefs and populations of the new indigenous practices in the preparation of the indigenous health health program care programs Weak NGO institutional capacity to S Project would organize capacity building workshops develop HIV/AIDS prevention for NGOs working on HIV/AIDS proposals Limited funds to finance recurrent M Project would build up on financial arrangements costs\. adopted under ongoing PAC to engage state, municipal governments, and beneficiaries in co- financing project activities\. Financing of recurrent costs would be on a declinin basis Approval of poor-quality subprojects N Using transparent eligibility and evaluation criteria on the basis of political patronage\. for the selection of subprojects; independent monitoring and financial audits\. Overall Risk Rating M Risk Rating - H (High Risk), S (Substantial Risk), M (Modest Risk), N (Negligible or Low Risk)  33 3\. Possible Controversial Aspects None G\. Main Loan Conditions 1\. Effectiveness Conditions (a) The Borrower shall enter into contractual arrangements with the Guarantor, satisfactory to the World Bank, providing, inter alia, for: (i) the transfer to the Guarantor of the proceeds of the Loan; and (ii) the transfer by the Guarantor to the Borrower of such funds as the Borrower shall be required to pay to the World Bank on account of principal, interest and other charges on the Loan\. Except as the World Bank may otherwise agree, the Borrower shall not amend or fail to enforce any provision of such contractual arrangements\. T he Borrower shall exercise its rights and carry out its obligations under such contractual arrangements in such a manner as to protect the interests of the Borrower and the World Bank and to accomplish the purposes of the Loan\. (b) that the Operational Manual has been issued by SSA and put into effect; (c) that a Participatory Framework Agreement has been entered into between the Guarantor and at least three States; and (d) that the Pesticide List and Procedures has been submitted to the World Bank\. 2\. Other [classify according to covenant types used in the Legal Agreements] a) project implementation in accordance with an Operational Manual; and b) undertake project monitoring and impact evaluation\. H\. Readiness for Implementation [ ] The engineering design documents for the first year's activities are complete and ready for the start of project implementation\. [x ] Not applicable\. [x] The procurement documents for the first year's activities are complete and ready for the start of project implementation\. [x] The Project Implementation Plan has been appraised and found to be realistic and of satisfactory quality\. [ I The following items are lacking and are discussed under loan conditions (Section G)  34 I\. Compliance with Bank Policies [x] This project complies with all applicable World Bank policies\. Patricio Marquez, Team Leader - Olivier Lafourcade\. CMIU Director avier Coll\. Sector Director  35 ANNEX 1 Mexico III Basic Health Care Project Project Design Summary Hierarchy of Objectives Key Pe'formaie l, \.datws Moloting and aCratitk Assumptions \.__________ _______ __ Evaluation _ Sector-related CAS Goal: Sector Indicators: Sector / Country (From Goal to Bank Reports: Mission) * Increase equity, quality and efficiency in * Quality on basic health access to health care and prevention services for the uninsured National data, SSA *Management services for the poor, while reforming and underserved population health statistics, SHCP effectiveness\. and strengthening public health care (open population)\. statistics: project institutions\. * Efficiency and transparency monitoring and * Other sector in the Central and State level evaluation\. development advances Areas of the SSA and SESA and human development * Decentralization of resources contribute to sustainable and responsibilities for economic growth and service delivery to states, poverty reduction\. sanitary jurisdictions, and health care facilities\. * New models for health care services provision Project Development Objectives: Outcome/Impact Indicators: Project Reports: (From Objective to Goal) 1\. Achieve equity in the delivery of health Iniput Indicators: DGEC/SAS & services for about 13\.1 million MIDAS model designed and REDSSA records * Government support uninsured people living in underserved approved by National Health State agencies data & continues to rural and urban areas of Mexico Council; presence/absence of MIS reports improve quality of clear lines of authority, written Project monitoring and basic health care 2\. Increase access, quality, and equity of policies, strategic planning, impact evaluation services to health services provided to indigenous budgetary and financial structures reports uninsured populations, and quality of health and processes; number and Special studies underserved services provided to people living in quality of health facilities, number population\. municipalities with the lowest national and quality of health staff; * Macroeconomic welfare indexes volume/adequacy of material stability\. resources; fully developed * Successful 3\. Support institutional development of the management information systems; Government efforts SSA, SESAs, Health Jurisdictions, local iindigenous communities with in bringing market- health agencies and services nutrition supplements driven order and accountability to the 4\. Develop innovative health prevention country's rapidly and care models in order to lower the moving health gap for underserved and decentralization vulnerable populations process\.  36 0 mi - X E E Z t; " 0 y QfOt;0je t ; iY ;Knye PnrEformnce I attws ; \. \. Mornt\.ri ndS; Critcal Asm dpticns Process Indicators: use and monitoring of inputs: human resource turnover, mobile units fully equipped and working, timely supply of drugs and other inputs, equipment maintenance, adequacy of time schedules for users; health care networks organized; new resource allocation mechanisms for the uninsured population developed; management information systems in use\. Basic community hospitals fully equipped, increase on the number of Basic Community Hospitals receiving referrals from rural marginal areas Outcome indicators: reorganization of service provision for the uninsured population according to the MIDAS model; changes in type, number, and location of uninsured rural and urban poor receiving basic health care services; degree of compliance with quality standards, criteria, and protocols; proportion of beneficiaries covered with basic maternal and child care services; proportion of children under two who are fully immunized; average number of health worker contacts per beneficiary, hospitalizations per year and type, proportion of at risk people screened and followed up for cervical and breast cancer, hypertension, diabetes, and HIV/AIDS\. Proportion of selected cities radio-broadcasting HIV/AIDS prevention messages on a regular basis\. Proportion of pregnant indigenous women receiving nutritional supplements\. proportioa of indigenous children aged 6 to 24 months receiving nutritional supplements New policymaking and regulatory structures and processes at SSA\. Impact indicators: in 5-7 year period, changes in health status measured through mortality and morbidity rates; changes in frequency and severity of specific infections and chronic diseases; and changes in beneficiary and provider satisfaction\. Changes in patient satisfaction with MIDAS model in project areas __________________________________________________________________________________ ______________________________________________________________ ______________________________________________ I  37 Hierarchy of Objectives Key Performance Indicators Monitoring and Critical Assumptions I________________________ Evaluation Output from each component: Output Indicators: Project Reports: (From Outputs to Component 1: Quality and Equity for Objective) Rural and Marginal Urban Areas Health jurisdictions, DGEDS/SSA, Risk: weak institutional Health care networks delivering public health municipalities and micro regions DGECISAS, PAC, capacity of some states programs and a package of essential clinical in participating states selected\. PROCEDES Project for undertaking health services to uninsured and underserved poor records and internal care organization, in rural and marginal urban areas: Number of sanitary jurisdictions, audits: financing, and 1\. Increase quality of basic services in 24 municipalities and micro regions managerial reforms\. states, incorporating basic secondary hospital operating with the new health DGEDS/SSA, Change in some states care to rural primary health care\. care delivery model, including DGEC/SAS records, will not come easily\. To 2\. Health care delivery model (MASPA) primary and secondary levels\. State Agencies and reduce risk, strong adapted and developed in rural and marginal Jurisdictions reports, organizational, urban areas for delivering public health Signed contracts organizing related to health programming, and programs and a package of essential clinical retworks and agreements delivery model human resources services to open population: ensuring inter-institutional performance\. Including improvements at a) Redesigned public health programs and coordination for delivering basic referral systems jurisdictional level and package of essential clinical services, health care services\. state would be supported, based on epidemiological and health Contract, agreement along with physical and services studies assessing: (i) burden Signed contracts with NGOs and documents signed technological of disease; (ii) cost and effectiveness of universities or research institutes investments\. health care services and potential new ensuring their participation in REDSSA, SUIVE\. interventions, i\.e\., STI treatment and HIV prevention programs in SISPA\. QUEJANET Weak NGOs and low HIV/AIDS prevention, according to selected urban settings systems, special quality proposals in order disease patterns and risk factors; and surveys, evaluation to undertake HIV (iii) use results, supplemented with <ho of project population with studies\. prevention programs studies and experiences elsewhere, to access to public health programs inform policy debate for health sector and package of essential clinical Jurisdictions Political pressure from reform, particularly priority setting and services, and 2dary hospital care\. production, productivity some states in order to contents review of essential package of and geo referenced change priority towns services for rural and marginal peri- Quality standards met in public epidemiological and municipalities and urban settings\. Ihealth programs and package of surveillance reports health care interventions, b) Health care delivery networks essential clinical services\. generated by MIS or pressures to expand operating under contracting implemented by the the urban component arrangements and/or inter-institutional Number of facilities that meet project\. lowering resources for coordination arrangements: (i) basic medical waste managements rural areas\. To reduce health package delivered through stadandards in participating states risk, project preparation community participation and out-reach has involved federal, strategies; (ii) effective referral % of pregnant women with four state and municipal arrangements between rural and urban prenatal visits before delivery, teams, and dialogue will ambulatory centers and secondary, take place with every general and regional hospitals; (iii) % of pregnant women delivering new State Government or emergency medical care networks for in network facilities\. City Government rural and marginal urban areas, involved after every operating with trained medical and % of children under 2 years of age change of local paramedic staff, communication with complete immunizations\. Administration\. As done equipment and transport systems, under PAC, the adoption NGOs involvement in delivering % families with periodic parasite of transparent criteria for prevention programs for the population treatment setting geographical and with the highest risk of HIV infection\. programmatic priorities c) Rehabilitated and upgraded existing % reduction in hospitalizations by would also help to health infrastructure and equipment, dehydration and pneumonia minimize this risk\. and redeployed staff\. % of pregnant indigenous women d) New health facilities staffed and receiving multiple-vitamins operating with qualified clinical and % of indigenous children under 2 managerial personnel\. years receiving multiple-vitamins e) Micronutrient supplementation Average number of health worker available in indigenous municipalities contacts per beneficiary  38 f) Materials, drugs and medical supplies avial in amuatr an \.ai Proportion of at risk people available n ambulatory and basic screened and followed up for Ca inpatient facilities\. o evx n rat g) Equipment and procedures in place for of cervix, and breast, management of medical waste in HIV/AIDS i Etc e network facilities\. h) Workshops for capacity building and training of HIVIAIDS NGOs Number of HIV/AIDS NGOs i) Complaint system available through involved in delivering HIV/AIDS internet, in basic community hospitals prevention programs and sanitary jurisdictions Number of HIV/AIDS NGOs trained in capacity building workshops % of patients with referrals to higher levels of care according to medical condition User satisfaction with accessibility and quality of health services\. Component 11: Efficiency\. Institutional Development and Decentralization Improved organization, management, Number of Governance DGEDS/SSA, logistics and information systems for health boards/foundations established in DGEC/SSA UCP care delivery networks at state, sanitary project areas\. records with detailed jurisdiction, municipal and micro regional model designs, levels for the delivery of basic health services Number of States, jurisdictions mechanisms, and to underserved and uninsured rural and and municipalities with resource systems adapted and Mfarginal urban populations: allocation mechanisms operating in implemented\. participating entities\. 1\. Redefined organizational and Training contracts\. managerial structure: Number of directors, managers, Courses developed\. a) Decision-making framework in place technical and administrative with greater financial autonomy in the personnel trained\. Assessment reports and delivery of health care services\. indicators of Number of health care networks organizational, b) New governance models in place and facilities with community managerial, financial, allowing health authorities and participation in governance\. technological and communities to share greater functional performance responsibility for managing health care Number of General Directorates of health care networks networks\. at the Central SSA with at state, jurisdictional, certification of quality municipal and micro c) Improved information systems, regional levels management structures and decision- Functioning modular and scalable making processes\. clinical and managerial IS modules acquired from the market d) Trained leaders and managers\. or adapted from REDSSA\. Internet Service for Presenting 2\. Newly developed budgetary allocation Complaints about Health Services criteria and mechanisms in place, for (QUEJANET), PAC, strengthened financial management at PROGRESA and other hospitals state, sanitary jurisdiction, municipal, and or programs including: installed facility levels\. hardware and software for:  39 Hierarchy of Objectives Kty Performane Indicators Monitoring and CriticaI Assumptions t ! - I -__________i____ Evalu\.tion: a) Formal accounting systems and Information management, health financial statements implemented at statistics, indigenous health jurisdictional, municipal and micro monitoring and epidemiological regional levels integrated to PAC's surveillance; budgeting and cost administrative information system (SIA) accounting; medical and drug and other states' developed applications\. supply management; integrated clinical records and ambulatory b) Performance reporting systems, cost and hospital information systems; accounting, budgetary, contracting, billing and collection; human billing and collection systems in place\. resources management\. Number of managers, clinicians, c) Mechanisms to increase funding administrators and network sources, including revised user fee operators and data base structures, in place\. administrators trained in the IT platform and mission critical 3\. Human resource development plans applications\. implemented to strengthen strategic Number of certified laboratories planning, management capacity and for HIV and other tests clinical performance at different levels of the system\. 4\. Clinical and management information systems (MIS) implemented to support decision-making based on those already developed by the SSA for REDSSA, and other budgeting and management tools developed under PAC, PROGRESA and other programs\. 5\. Total quality management processes implemented including: reengineering of central level, state level, jurisdictional and municipal agencies' structures and processes, facilities organization and processes; clinical and managerial protocols and human resources development\. Component III: Innovation, Policy Studies, Pilot Models and Impact Evaluation 1\. Policy Studies and Strategic Projects: Proposals developed by Project implementation DGEDS/SSA (PAC) adapted and monitoring and a) Terms of reference of studies implemented according to project evaluation developed requirements\. Reports, records\. b) IEC strategy developed 2\. Consolidation of PAC monitoring and evaluation system to assess project performance  40 a) Federal, state, jurisdictional, municipal and micro regional level coordination and supervision mechanisms implemented and operational b) Target indicators for the measurement of coverage, outcomes and impact in primary and secondary levels of care developed\. c) Managerial control, monitoring and impact evaluation processes implemented and operational\. Component 1\. Quality and Equity fo; Inputs: (budget for each Project Reports: (From Components to marginal rural and urban Areas component) Outputs) 430\.9 Consensus on policy and Progress Reports institutional issues and --Rural areas 107\.7 proposals with main --Indigenous areas 100\.5 Audit Report sectoral stakeholders --Marginal urban areas 56\.3 --Hospital care 146\.4 Supervision Reports Strong political and --HIV/AIDS 20\.0 financial support at state\. sanitary jurisdictions, and health facilities Component 11\. Efficiency, Institutional 70\.00 Development and Decentralization Consensus building is a long process; it involves requires a multi-faceted Component 111\. Innovation, Policy 76\.8 information-sharing and Studies, Pilot Models and Impact problem solving Evaluation approach involving 3\.5 different stakeholders Front-end fee  41 ANNEX 2-A Mexico III Basic Health Care Project Detailed Project Description The project responds to and supports the social justice objectives of the new Government of Mexico and its policies for the social sectors\. The health sector is targeting a decrease in social and regional inequities and in creating an equitable healthcare delivery system with comparable results for all population groups\. The health sector intends to achieve these objectives through the implementation of three strategies: a) Equity: to decrease social and regional inequities by changing the health profile reducing socially unacceptable differences in health status among the Mexican population (e\.g\. there exists a difference of 17 years in life expectancy between the higher social classes and the poor)\. b) Quality: to provide quality health care services to the poor, the disenfranchised and the indigenous populations through improved technical and interpersonal medical care\. c) Financial Protection: to reduce the financial burden incurred through catastrophic illnesses that exacerbates poverty\. To implement these strategic goals the Ciovernment intends to link improvement in health status to social and economic development, to prioritize emerging health problems, to offer financial protection to the whole population, and to increase freedom of choice and community participation\. A national crusade for improving the quality of health services has already been launched\. The decentralization process would be deepened and more decision-\.making authority will be delegated to the states as part of the national federalization policy\. In addition, the states would deconcentrate functional and financial authority to the sanitary districts and to the health care delivery institutions and promote collaboration between public and private health care providers\. The policy making and regulatory roles of SSA would be strengthened\. The project would include three components: Component I\. Quality and Equity for Rural and Marginal Urban Areas Mexico is one of the few countries in the developing world successfully delivering a cost-effective package of essential health services to populations with difficult access to basic health services\. The provision of this health care package under the ongoing PAC project has become a "social minimum" of the Government health policy\. Component I would build upon this successful experience\. Component I is the main vehicle under the project for helping improve equity and quality of health services\. Rural and marginal-urban poor would be able to have access to a package of cost-effective public health interventions and basic hospital care, including emergency medical services, closer to their place of residence (see Annex 2-A)\. At the end of 2000, PAC and other programs were providing a package of essential health services to 10\.9 million rural Mexicans\. The project intends to consolidate PAC gains and expand its functional and geographic coverage\. Functional expansion would ensure that those rural residents that under the PAC program do not yet have regular access to essential clinical care in community hospitals will remain in the program and continue to receive expanded services\. Geographic expansion would ensure that residents that were not receiving regular services under the  42 PAC program would now be covered\. Taking into account these changes and eliminating the overlap, this program would provide services to 9\.6 million poor rural residents\. (see Table I in Annex 2a)\. This number of 9\.6 million rural people includes 6\.6 million rural indigenous people that live in the same municipalities\. An additional 0\.9 million rural indigenous people that live in other communities would also be covered for a total of 7\.5 million indigenous people\. The project would also cover about 2\.6 million poor urban residents\. Total project beneficiaries would therefore number 13\.1 million, or one seventh of Mexico's population\. The rural population is ethnically, linguistically, and culturally diverse, and is geographically dispersed a situation that presents organizational, cultural, and logistic challenges\. The urban poor are concentrated in marginal areas where delivering and financing services pose different challenges, particularly those associated with security of health facilities and the safety of health personnel and patients, as well as with the intersectoral nature of risk factors (e\.g\., lifestyle factors such as alcohol abuse and drug addiction, domestic violence) that are associated with the rising incidence of non-communicable diseases, injuries, violence and mental disorders\. The geographic heterogeneity and the diversity of the beneficiaries in the project area makes it impractical to develop ex-ante a five year detailed blueprint\. Project design oni its urban component, is based on the selection of subprojects from 23 states and from an initial set of 50 cities (see Tables I and 2 in Annex 2-A)\. The 231 health districts at the state level, which are the technical branches responsible for managing primary and secondary levels of care, would be in charge of formulating and implementing subprojects as part of annual implementation plans\. Selection of these states and cities was done by using: (i) "degree of marginalization" criteria-a set of statistics that measure social deprivation and includes socio-economic variables and mortality indicators, developed by CONAPO (with national census data from 1995); (ii) the national socio-demographic "urban deprivation index" also developed by CONAPO (with national census data from 1995); and (iii) the welfare index developed by INEGI (with national census data from 2000)\. Subprojects would take into consideration the health needs and the supply of health and other social services in each project area\. Subprojects would meet the eligibility criteria specified in Annex 2-B\. The experience with PAC indicates that incremental implementation of subprojects provides an evidence-based approach to expanding the project gradually to additional areas during project implementation\. Service Delivery in Rural Areas\. The project's rural area would be the PAC project area located in 19 states and expanded geographically to include additional municipalities (selected according to INEGI welfare indicators) in 5 new states\. The beneficiary population under PAC will receive with project financing additional public health and essential clinical interventions currently not included in the PAC's Package of Essential Health Services, while the population groups in the new areas will receive the entire package of essential services on a regular basis to reduce the unequal access to basic health services\. To this end, the project would support the improvement of the clinical problem solving capacity at the local level, by adding new cost-effective interventions complemented with hospital services\. In both cases, the operational costs (pharmaceuticals, laboratory tests and x-ray exams, micronutrient supplements, and other medical supplies) will be financed by loan proceeds on a declining basis\. The project would not finance health care personnel as salaries as a general rule are financed by the participating states\. The SSA's MASPA organizational and service delivery model for the uninsured population specifies in detail population coverage targets, administrative and health care levels, location of health care facilities, required equipment and medical supplies, composition of health teams (e\.g\. mobile teams comprised of physicians and nurses, auxiliary health workers, community health workers), referral processes, and information needs\. To retain qualified health workers in rural areas, as done under PAC, agreements would be reached with the states to give health workers a permanent contract, with salary and hardship bonuses,  43 provided that they stay in the post specified in their contract\. In addition, specific health-related professionals would be hired to help integrate indigenous culture and beliefs in the special health program for the indigenous population\. Package of Essential Health Services -Basic household sanitation -Family planning -Home management of diarrhea -Care of pregnaincy, child delivery and post natal -Periodic anti-parasite treatment care -Management of acute respiratory infections -Health education for accident prevention and -Hypertension and diabetes case detection and initial management of injuries control -Case detection and control of cancer of the -Prevention and control of tuberculosis cervix and breast -Immunizations -Community involvement in self-care -Child growth and nutrition monitoring Service Delivery in Marginal Urban Areas\. In addition to the 13 interventions, the package of essential health services would include at least four new interventions to address the urban pathology (e\.g\., alcohol abuse and drug addiction, violence, HIV/AIDS, vector transmitted diseases)\. Its delivery would require the development of new strategies as health teams need additional skills and safe working environments, and solving health problems require close intersectoral and multi-disciplinary coordination\. The project would first pilot test a basic urban health services delivery model involving public and private providers in the marginal urban areas of three cities: Tijuana (Baja California State), Acapulco (Guerrero State) and Valle del Chalco (Mexico State)\. Ongoing monitoring and rapid assessments of the pilot experience would allow adjustments before replicating it in the rest of the selected 50 cities\. HIV/AIDS Prevention and Control\. Particular emphasis would be placed under the project on the prevention and control of HIV/AIDS in marginal urban areas, as it has become one of the SSA's public health priorities\. The main objective of the HIV/AIDS interventions would be to reduce the incidence of infection in groups of people with high-risk practices: commercial sex workers, men having sex with men, injection drug users, and other patients with STI, living in the selected marginal urban areas\. CONASIDA would provide technical assistance and evaluate program execution by state health secretariats in 50 priority cities (municipal based) with the most accumulated HIV/AIDS cases (see Table 3)\. Training would be offered to civil society organizations to allow them to compete for participating in programs that deliver priority health promotion and prevention activities and education by peers\. Specific activities would include information, education and communication, social marketing of condom, use of clean needles and syringes, fighting stigma and discrimination, treating and following up on other STIs, and staff training\. Support would also be provided to a civil society committee to assist in the evaluation of this program\. Organizing Health Care Networks\. The package of essential health services would be delivered in selected rural and marginal urban areas through an improved network of mobile teams, health centers, local hospitals, and emergency medical care services\. Universities would be involved to better adapt academic curricula according to the characteristics of the health service delivery model, train personnel, and assign students as interns in project areas\. The project would also support pilot experiences with tele-medicine in order to link general health care practitioners with specialists in hard to reach dispersed communities\. Public and non-government facilities would be organized into virtual networks at the state  44 level through agreements and contracts\. To this end, the project would allocate funds to contract health care providers from public (e\.g\., IMSS, ISSSTE) and non-government entities in project areas for the delivery of interventions included in the package of essential services\. An Operations Manual, acceptable to the World Bank, would regulate the procurement under these services\. Emergency Medical Care Network\. To increase the effectiveness of health services in the project area, particularly for reducing mortality and morbidity associated with lack of timely and effective emergency medical care, the proposed project would support as part of MASPA the development of an inter- institutional emergency medical care network\. Support would be provided for refurbishing emergency units in project areas; development of an emergency telephone service for the pre-hospital care service and a tracking radio system for connecting the pre-hospital care service with emergency care units in selected referral hospitals; development of an ambulance network to transport patients from the community or and ambulatcey center to emergency wards of referral hospitals; and basic and advance life support training for para-medics, nursing and medical personnel\. Piloting of Telemedicine for lUnderserved Communities\. In line with the new Government's equity and quality goals, and building upon REDSSA, the project would support the development of a pilot telemedicine program for underserved communities\. Following internationial experience, the aim of the pilot program would be to link hospital specialists in selected hospitals and regional medical clinics with local health teams operating in remote area medical centers via video conferencing in order to coach, monitor, and share knowledge\. Social Communications\. The project would develop a communications strategy to help achieve project goals including indigenous population health issues, HIV/AIDS prevention, and reducing HIV/AIDS stigmatization\. Piloting this communications strategy for urban areas would take place in Tijuana, Acapulco and Valle de Chalco\. Investments\. Under Component 1, the project would finance subprojects prepared by sanitary jurisdictions at the sate level that would include: (i) construction, upgrading, expansion and maintenance of health centers and local hospitals, following a detailed diagnostic infrastructure review and an assessment of alternative ways of delivering health services (e\.g\., contracting with other public and non- government health care providers); (ii) basic medical equipment (e\.g\., medical instruments, scales, delivery tables, instrument packages for midwives); (iii) essential office equipment; (iv) procurement of essential medical supplies, including pharmaceuticals; (v) laboratory equipment; (vi) radio and other communication equipment to improve referrals; (vii) ambulances; (viii) training and supervision; and (ix) on a declining basis, the purchase of health services under agreements and contracts with third party providers\. Component II\. Efficiency, Institutional Development and Decentralization With PAC support, the authority for managing health care organization and delivery for the uninsured population at the state level was transferred from the SSA to OPDs in the 31 states of the country and the Federal District\. The OPDs, which run by Boards of Directors, are responsible for physical, human, financial and material resources\. The Executive Directors of the OPDs are the State Secretaries of Health\. Health programs are implemented by the 231 sanitary jurisdictions in the country (the number varies per state according to population density and geographic extension)\.  45 Under Component 11, the project would support the consolidation of this decentralized organizational and institutional structure by: (i) strengthening the managerial capacity of the OPDs; (ii) supporting the OPDs in deconcentrating managerial functions to the sanitary jurisdictions; (iii) strengthening the management capacity of the health jurisdictions; and (iv) improving the management of the inpatient and outpatient services at the primary and secondary levels of the health care delivery system\. The National Crusade for Improving the Quality of Health Services, launched by the SSA in February 2001, would be supported under this comiponent through the implementation of strategies and models like the "Malcom Baldrige Framework" geared to the development of the structures, processes, capacities and skills required to provide quality care, ensure user satisfaction, and support effective organizational performance\. More specifically, it would focus on: leadership, strategic planning and management, clinical and managerial processes, human resources management and management information systems\. Component 1I would assist in achieving these institutional development objectives through activities that would: a) strengthen the organizational and muianagement structure at the state level, at the health jurisdiction level, and at the service delivery level by supporting it with the appropriate legal framework, by training health staff, by assuring social participation, and by improving the organization and the management of the services, including the revision and adaptation of the MASPA into an integrated health care model (MIDAS) for the uninsured population; b) improve financial management ancl the process of resource allocation by generalizing the use of uniform accounts; implementing cost accounting; improving programming and budgeting of financial, human and material resources; reallocating resources based on the results of productivity indicators; and diversifying revenue sources by charging for services to public and private institutions; c) continuously improving the quality of services provided to the rural and urban poor by providing incentives to health workers for qluality work, by promoting efficiency in services delivered by mobile and facility-based health teams, by developing appropriate information systems to plan and control performance, by encouraging the use of clinical protocols, by providing opportunities for continuing medical education, and by accrediting facilities health workers; d) creating an indigenous health monitoring system; e) certifying the quality of basic community laboratory procedures and HIV testing; and f) assisting SSA in achieving transparency and efficiency in administrative procedures\. The effectiveness of the above three subcomponents would be enhanced by two crosscutting activities: human resources development and management information systems\. Staff training is a critical input to build capacity and achieve strengthened managerial, operational and logistic capacity of health care networks\. Modular management training programs would be developed in strategic and operational planning, resource allocation, budgeting, cost accounting, quality assurance, personnel management, information systems management, supervision monitoring and evaluation processes and techniques\. The MIS implemented under the PAC would be reviewed and adjusted to fit project needs, especially for supporting management improvement and the operation of the sanitary jurisdictions and health facilities\. MIS would use the current communication network - REDSSA - and the LAN/networks to ensure telephone, voice and other data comirmunications in sanitary jurisdictions health facilities and mobile  46 teams\. The MIS would collect project baseline data and data for indicators that monitor and evaluate the efficiency, quality and cost-effectiveness\. Other MIS modules would be added gradually, such as for the collection and assessment of demographic and socioeconomic data of target populations, epidemiological surveillance, human resources management, patient medical records, inventory control, and financial data\. The project would support the development of the above systems by: (i) creating during the first half of the project the required infrastructure and designing the management systems; and (ii) in the second half of project implementation, completing the required training and deploying the management systems fully operational\. Investments\. Under this component, the project would finance systems development and technical assistance, equipment, training, and supplies needed for modernizing organizational and governance structures, management practices, and quality improvements\. Component III: Innovation, Pilot Models, Policy Studies and Impact Evaluation Component III would support the social objectives and the health sector strategies of the Government of Mexico\. It would do so by financing consulting services and technical assistance for testing inlovative ideas and alternative models for carrying out policy studies\. The component would also evaluate the impact of the project and finance project management\. A\. Support the National Crusade for Improving the Quality of Health Services a) Adapt quality of care models and instruments to the provision of health services in rural areas, including the development of models according to indigenous culture and beliefs \. b) Structure and test valid indicators to measure the quality of care provided to indigenous people c) Evaluate changes in the health status of the rural population d) Evaluate the HIV/AIDS subcomponent e) Review and improve regulations to enhance the quality of care provided in the private sector f) Test and evaluate the efficiency and quality of outsourcing public health services g) Assess the environmental impact of providing basic health services h) Automate a simplified Epidemiological Surveillance System B\. Increase the Quality and Equity of Health Services Provided to Indigenous Populations i) Monitor mortality and morbidity changes in indigenous populations j) Pilot test micronutrient program for indigenous populations k) Evaluate the Indigenous Health Program and MIDAS  47 C\. Support Financial Protection Initiatives I) Design and develop prepayment schemes that protect famiiies against financial losses due to illness D\. Decrease Social and Regional Inequities m) Evaluate, adapt and implement recent experiences in paying providers using diagnostic-related groups (DRG) n) Evaluate alternatives for providing emergency health services in rural areas o) Evaluate equity changes in providing health services, including the evaluation of the progress of the indigenous health program relative to the overall project\. E\. Yearly, mid-term and ex-post evaluation of PROCEDES Using data and indicators developed under Component 11, the project will evaluate project achievements during project implementation as well as doing an ex-post evaluation\. The evaluation would also draw upon indicators developed by WHO in its recent 2000 Health Report\. Base line data would be collected prior to project start to enable carrying out before-after comparisons\. As done under the ongoing PAC project, an independent firm would be contracted for conducting yearly evaluations and the ex-post evaluation at the end of the project\. Monitoring and evaluation activities would be geared to provide coordinated feedback to the developers, implementators, and policy decision makers at the different levels of the system\. During the life of the project, the evaluative information would be used to: (i) improve all phases of the project during its start up phase; (ii) adjust pilot model in the initial marginal urban areas on the basis of experience prior to its replication in areas beyond pilot sites; (iii) continuously improve the project once it enters into its full implementation phase; (iv) help determine if the project has lead to desired end-results/outcomes; and (v) provide measures that can be incorporated into an ex-post economic evaluation that would assess the ultimate viability of the project\. Project Management The PCU managing the project at the federal SSA level would coordinate and supervise project implementation in close cooperation with staff from the state level, the health jurisdictions and the health care units\. The PCU would be staffed with personnel experienced in technical, financial and administrative matters and would use a standard operational guidebook with operating procedures and processes for project execution\.  48 Table 1\. PAC Rural Area and Population Coverage Number of municipalities, locations and coverage of population 1999 State Municipalities Locations Population Covered l l I (thousands) Campeche 3 340 45\.4 Chiapas 77 9,865 1,310\.0 Chihauhua 13 2,379 178\.0 Durango 6 1,121 72\.9 Guanajuato 6 442 62\.4 Guerrero 40 2,542 829\.0 Hidalgo 52 2,086 664\.1 Jalisco 15 970 46\.1 Mexico 14 1,438 526\.6 Michoacan 12 2,328 92\.0 Nayarit 2 273 33\.9 Oaxaca 317 2,605 1,101\.6 Puebla 77 1,789 739\.1 Queretaro 5 457 91\.0 San Luis Potosi 14 1,239 194\.5 Sinaloa 4 1,289 104\.5 Veracruz 135 4,692 1,100\.0 Yucatan 39 1,342 155\.1 7acatecas 6 261 90\.7 TOTAL 837 37,458 7,436\.7 For the year 2000, the target population of PAC reached 8 million persons residing in 841 municipalities and in 37,567 localities\. Related programs cover an additional 2\.9 million rural poor\. Source: Direcci6n General de Extensi6n de Cobertura, SSA  Table 2 Urban Area and Population Coverage, by State and City _________________ AGEBS OSTRIBUTf0NBy CIT BSTATE POPULATI004 BY AGEBS, 15POPULATION BY AG68S EST)8BTEB'08 2001 POPUJLATION BY ACIEBS ESliMATEB FOR 2005 O ERZ2AIOG OCIOEEAOOI$CC IBRO 000DE REZA52 SOZICI OR8lC0 10 G0ADODE RBZ863O $COE GRFC\.20618 3RAD20OF DE R 6&(ICIDEMO 460\.200B STATE 6865 T074A\. AL0TA WAY ALTA TOTAL ALTA\. 89,29109 TOTAL ALTA9 MUAIP4TA TOTAL ALTA9 ALTA479 CO9JUILA 81s8 1s 02,953 01\.888 1,348 72\.482 20,814 1,188 77\.391 7B\.8678 1 718 SALTILLO 40 30 la 35,907 34 868 1,241 43,150 41,904 1\.251 47\.'094 45\.728 1 305 TORREON 22 19 3 12\.078 11\.018 200 13\.203 12\.978 286 13\.8MG 13,549 298 CHLIkOAS V0A0ONOLOVA 1817 2 14,BO8 14\.920 44 15,979 15,282 51 W1\.452 16\.399 53 20 2uw 1~236 \.8835 38 8\.4 17,268p,8892 04880AHUA 44 41 3 40,868 40,478 133 47,748 47,588 100 52089 588171 05340A 39D06R2 44 41 2 40,600 400470 122 47\.746 47,54 156 52\.009 31088 171 DURANGO 32 ~~~~ ~ ~~~~~~~~28 a 280,4 89\.127 887 22,315 21\.31 1,00 23\.483 22,448 1,882 ________A ____O_____ 2 36 36 \.024 19,127 887, 22\.315 21\.316 1\.000 23\.4B3 2Z441 100S2 60WAXAM so \.8840 NW93 Met \. 00 # -M L0 GUERRERO0 181 151 30 214\.241 18\.0893 17\.5188 347,108 227,815 20\.080 868\.r3 244\.884 21\.571 ACAPUJLCO 110 98 17 153\.735 W40134 13,601 175\.842 160,285 15557 149,752 172,1003 16\.699 IGLUALA 33 27 6 30,214 2,8,74 3,340 34,175 3D\.397 3,776 36,46i 322431 4\.031 0804PA94OL145 32 35 7 30,292 29,875 017 37\.088 30\.332 755 41\.322 40\.481 842 ZAO%WO 43 \.42 I ~~~~~~~~~~~~~~0\.481 4045 983 8293 843 1\.217 ",4S0 1826mf38 0 lo*4 Aw8880447N* \. 188 6,0, \. 589929 08480A \. 39,4\.1 \. \.6\. -VI \.432 i 914 489 4630060 EDO 14 1 4 4 430\.263 422\.257 8B08 518,707 507,318 8,100 871,820 881,82 888 VALLE DECHAI-CO SOL 40 45 1 133\.457 132,440 1,008 175,087 173\.764 1\.324 202\.894 201,300 1\.634 TOLL4CA 29 27 285,870 78,862 6\.408 96,701 89,485 1\.218 102,828 00\.248 7\.881 ECATEPEC 28 27 188,352 87\.783 189 87\.185 98\.538 848 102,182 101,422 So1 CHIMALH62AC84N2 22 70,432 78\.422 89\.80 898,00 \. 96\.483 96\.483 ____________________031AL\.0 UQ 197 44\. 152 57,05 57,82 \. 47\.121 47,212 $K 1 38,412 38\.78 92 358k892 \.43587 49,Jk M080L(00 ~~ ~ ~~~~ ~ ~~~~~~ ~ ~~~~~~23 23 0 1\.04 18,ON 2,263 22\.23 25\.148 OAUJTFPC 21 ________\.040 58\.D40 22\.282 22\.283 \.29,144 25,144 ______ OAXACA 24 33 1 33\.482 31,3184 2\.18B Well 38,413 2`448 41\.68, 38\.189 3,631 DE JUAREZ1 24 33\.492 31,304 2\.108 30\.858 38,413 3,446 41\.8 SOD18zeal3 #87 44141~ ~~ ~~ , 00 9,41 239A,I 602 B,BIRETAAO 22 18 4 ~~~~~~~~~~~~~~~~~~~2 o33,045 27,277 8,188 39,494 32,681 8,894 43\.656 35\.826 7\.420 $Wtm PC"" 044649 1 4205272227830443,6 9884\.8 3,3 \.3 SINA8LOA 85 02 3 a1\.100, 78\.706 1395 88\.02 87,48 1,537 82,81 6\.12 SI807 CUI\.IACAN 44 42 2 63\.085 01\.715 1\.370 08\.530 08\.020 I\.910 72\.710 71\.13l 1\.579 84AZATI\.A4 2i72 1 18,010 17 583 29 55,496 18\.489 27 20\.209 20\.181 28 ________________ _____________________ 24~~~~~~~7 I 2 Am8,, 3~ 10W4-1 83 \.AMAAUUPAS 202 188 1s 20I,227 204\.031 1, 308 241,884 240\.218 1\.039 283,820 M82139 i\.784 ALA4\.0 R\.86 49 44 5 37,707 37,537 230 49,054 48,755 298 58\.'599 56\.254 345 MATAMOROS0 44 30 57,092 50,756 338 65\.752 00,385 307 70,944 70,520 418 REYN00A 22 31 2 27,475 27\.343 132 323569 32\.412 158 35,710 35,538 172 CIUDAD VICTORIA (VICTORIA) 33 30 2 30\.549 30\.005 540 35\.701 35\.070 031 30,830 38\.146 686 MATAMOROS0 23 21 2 17,144 16\.900 155 17,601 17,439 10t2 17\.72 17,\.14 104 l4i\.9b0)1ARPCO 21 21 36,300 36\.300 41\.170 41,178 \. 4,052 44,052 84A4994191 22 I 18,0 am~ 3\.780 AM83 3594 4080 \.2849 AM 4\.300 YUCATAN 52 44 i8\.89 88,18 2\.408 B IS10 88\.3681277 73,838 70\.878 2,881 84662953A 61\.6505,09\.6 9198\.8 70 73,539 70,878 2861 (1) AGEB, 4088 GOo8dI8o 909846 wBisfijS 0\.8) ALTO,Hg 585090910f p0puf\.Io 0n U4,8n SW01d0e06 ph\.4 NOO (A-0000 to CONAPO) MUTY ALTO VelT H9gh 0e9j, 0f 6ppdtlmO On JIB8I Sdod\.mfl1rpS Nwed (AC\.0010g 10 CONAPO)  50 Table 3\. Selected Cities for the HIV/AIDS Subcomponent , , l:0 141: :t|i; 0 X ntidla 311tia1c9 Cote 1995 habl t:antes Ciudad de Mexico DF 9,563 8,288,988 1153\.7 Guadalajara JALISCO 2,151 1,633,053 1317\.2 Puebla PUEBLA 1,268 1,222,569 1037\.2 Nezahualc6yotl MEXICO EDO 812 1,233,681 658\.2 Tijuana BAJA CALIFORNIA 787 966,097 814\.6 Veracruz VERACRUZ 657 425,140 1545\.4 Acapulco CUERRERO 610 582,528 1047\.2 Merida YUCATAN 548 612,261 895\.0 Monterrey NUEVO LEON 523 1,088,023 480\.7 Zapopan JALISCO 396 850,315 465\.7 Naucalpan MEXICO EDO 386 930,634 414\.8 Morelia MICHOACAN 339 512,169 661\.9 Cuernavaca MORELOS 338 311,095 1086\.5 Mexicali BAJA CALIFORNIA 280 505,016 554\.4 lTalnepantla MEXICO EDO 267 708,013 377\.1 Oaxaca de Juarez OAXACA 209 242,247 862\.8 Tlaquepaque JALISCO 195 434,710 448\.6 Torre6n COAHUILA 194 481,493 402\.9 Tepic NAYARIT 186 254,551 730\.7 San Luis Potosi SAN LUIS P 182 586,585 310\.3 Cd\. Juarez CHIHUAHUA 164 995,770 164\.7 MazatlAn SINALOA 162 302,808 535\.0 Ecatepec MEXICO EDO 160 1,455,909 109\.9 Hermosillo SONORA 148 504,009 293\.6 Culiacan SINALOA 142 505,518 280\.9 tizap tn de Zaragoza MEXICO EDO 141 96,244 1465\.0 Le6n GUANAJUATO 132 941,626 140\.2 Queretaro QUERETARO 131 469,542 279\.0 Cuautitlan Izcalli MEXICO EDO 129 401,119 321\.6 Puerto Vallarta ALISCO 117 121,844 960\.2 Tonala IALISCO 116 250,058 463\.9 Aguascalientes AGUASCALIENTES 112 537,523 208\.4 Tampico TAMAULIPAS 109 278,933 390\.8 Reynosa TAMAULIPAS 108 337,053 320\.4 Guadalupe NUEVO LEON 106 618,933 171\.3 Nuevo Laredo TAMAULIPAS 104 275,060 378\.1 Matamoros TAMAULIPAS 102 363,487 280\.6 Chalco MEXICO EDO 100 175,521 569\.7 San Nicolas NUEVO LEON 99 487,924 202\.9 TuxtlaGutierrez CHIAPAS 95 386,135 246\.0 Chihuhua HIHUAHUA 94 627,662 149\.8 Irapuato GUANAJUATO 90 299,604 300\.4 Coacoalco MEXICO EDO 89 204,674 434\.8 Can Cun (B Juarez) QUINTANA ROO 87 311,696 279\.1  51 CAM l'm acqnfidadosF\. e Jh N WI :Tsapor **nde \. \. \. alf3 wr Ctt 19\. habitaates Villahermosa (Centro) TABASCO 87 465,449 186\.9 Ensenada BAJA CALIFORNIA 73 192,550 379\.1 Orizaba VERACRUZ 73 114,341 638\.4 Saltillo OAHUILA 73 510,131 143\.1 Cuautla MORELOS 72 128,781 559\.1 Xalapa VERACRUZ 69 304,281 226\.8  52 ANNEX 2-B Mexico III Basic Health Care Project Annual Project Implementation Plans The Mexican Government has developed a package of essential health services designed to maximize the health impact per dollar spent\. The proposed project would promote the implementation of this package by financing subprojects designed by the jurisdictional level health authorities in the participating states, using the package of essential health services as the framework for investment\. In order to strengthen the deconcentration process, the health jurisdictions, with technical assistance from the SSA's PCU and SESAs, would be responsible for preparing and implementing annual implementation plans eligible for financing under this project\. These plans would be prepared on an annually or bi-annually on the basis of needs assessments at local level\. The plans may involve existing organizations, both public and private, as well as existing facilities, for the delivery of the essential package of services\. Eligibility criteria would be included in the project's Operations Manual, satisfactory to the World Bank\. Signing of Participation Agreements\. Following PAC experience, the Government would sign: (i) Participatory Agreements between SSA and SESAs and other state, municipal, and community entities willing to participate in the project; and (ii) Executing Agreements for specific investments between SESAs and participating state, municipal, autonomous, and nongovernmental entities\. Such agreements would aim at supporting the decentralization process in the health sector, and the participation of public and nongovernmental institutions\. The model agreements would be included as part of the project's Operations Manual\. Identification\. The health authorities at the jurisdictional or micro-regional level, with support of SSA's PCU and SESAs, would define the project activities to be included in the annual plans for financing under the project on the basis of their priority health problems and the cost-effectiveness of the interventions\. The initial analysis necessary for the preparation of the annual plans would begin in March or April of each year\. Preparation\. Providers or groups of providers and health jurisdic\.tions would prepare the annual plan proposals to the SESAs, using the required program of health services as a guideline for investments, which would prioritize them and present to the SSA's PCU for review\. The plans documentation would include a diagnosis of issues to be addressed, proposed solutions, activities to be carried out, estimated cost, and arrangements to ensure sustainability\. The plan's preparation activities would be financed by the project; technical assistance would be provided by the SSA's PCU and SESAs\. Technical issues to be addressed in the preparation of subprojects in participating localities would include: * Definition of project area and beneficiary population: identification, mapping and targeting rural and marginal urban areas using the national socio-demographic "urban deprivation index" for urban areas, the projections by the national statistics office of the "degree of marginalization" for urban and rural areas, and the "welfare index" for rural areas; * Epidemiological and health services assessment: (i) estimation of the burden of disease in project areas by age, sex, and causes, as well as for major risk factors; (ii) selection of the interventions included in the package of essential health services; and (iii) use results of these assessments, supplemented with studies conducted elsewhere, to adjust public health programs and the package of  53 basic health services delivered under PAC, both in rural and marginal urban areas\. * Assessment of health services in project area\. Assessment of: (i) organizational and managerial structure, geographical location of facilities, personnel/staffing ratios, utilization by level of care, and population served; (ii) available data on the cost and utilization of facilities; (iii) accounting and medical record systems, quality assuarance systems, and experience of health care managers; and (iv) constraints to flexibility of health care reforms that could be found in: regulatory environment, legal and financial systems, payment systems, relationship of hospital to primary care centers and physicians, managerial discretion over financial and investment decisions, management of cost recovery funds, contractual autonomy of procuring supplies for health facilities (e\.g\., pharmaceuticals, food services), autonomy over managerial structure including organizational structure, personnel decision an(d salary schedules, and interaction of facilities with local governments in the bidding and contracting processes; and * Development options and models\. Policy options and alternative health care organization models would be designed based upon the previous reviews of demand and supply\. Each policy option/model would include: overall objective; proposed method of organization, financing and delivery; data requirements for facilities and local governments; government role; strengths and weaknesses of proposal focusing on total health care spending, spending by level of care, public sector spending, access to care, quality of care, patient satisfaction, relationship and complementarities with other health care providers, degree of competition among providers\. Technical Review\. SSA's PCU would review and submit to a Federal Advisory Committee all the proposals prepared by the states that meet the eligibility criteria defined in the Operations Manual\. It is estimated that proposals would be submitted in the first half of August of each year\. Approval at the Federal Level\. It would be the responsibility of the Federal Advisory Committee to consider the proposals submitted by each of the participating states and select the plans that would be financed by the available annual resources\. The approval would be based on the selection criteria outlined in the Operations Manual\. Approval by the Federal Advisory Committee would be given by the second half of August, at which point the SSA would authorize the budget resources necessary for their implementation\. Subprojects\. Subproject proposals would include information on the selection of target areas, appraisal of projects, timetable for implementation, flow of funds, financing (community, state and federal), operation and maintenance\. Specifically, such subproject proposals, on the basis of the investment framework defined in each of the project's components and detailed local assessments, would include: (i) overview of demographic and epidemiological profiles of the population; (ii) general objectives of the subproject; (iii) proposed interventions and investments that will be supported to achieve the stated objectives determined on the basis on needs assessments; (iv) identification of the project location, including justification of the priority area; (v) current resources available in the state and the priority jurisdiction, including physical, institutional and financial resources; (vi) identification of the executing unit within the state; (vii) estimated benefits, in terms of health impact for the population; (viii) estimated costs, including the incremental recurrent costs; and (ix) mechanisms to ensure commitment and ownership\. Implementation\. For each annual project implementation plan, the procurement of goods and  54 services would be handled by SESAs with support from the SSA's PCU, following the guidelines and procedures of the World Bank\. Monitoring and Supervision\. Monitoring and supervision of the implementation of annual plans would be carried out by the SSA's PCUs on the basis of project performance indicators\. Evaluation\. Procedures and routines for evaluation would be followed as outlined in the Operations Manual\. Federal and state agencies, as well as independent academic and private institutions would be responsible for evaluating the performance and impact of the project\. Eligibility Criteria Scope\. Annual project implementation plans would be local level in scale, i\.e\., at a minimum they would cover a network of health care facilities and/or arrangements for the provision of the package of essential health services to the target population in selected rural and marginal urban areas\. Targeting\. Plans should cover rural and marginal urban regions selected according to socio-economic criteria (e\.g\., unmet basic needs)\. Organization\. A plan should involve existing organizations, including state, health jurisdiction, and non-governmental organizations, as well as existing facilities\. State and health jurisdiction, as well as health facility arrangements should remain in place for the duration of the plan, and would be responsible for all liaisons with the SESAs and PCU at the federal level\. This involves intersectoral and interjurisdictional coordination of the project relative to carrying out its objectives and establishing and conforming to project norms\. Sustainability\. The SESAs and health jurisdiction authorities and entities should have the political commitment to undertake policy and institutional reforms as well as possess the financial and administrative capability to carry out the subproject, as demonstrated in the analysis undertaken as part of subproject preparation\. The capacity of a local agency to implement a plan would be based on existing capacity in the following areas: (i) types of existing programs similar to the proposed plan; (ii) capacity of local organizations to manage existing programs in the intervention area (quality, number, and experience of management staff of local institutions); and (iii) willingness and ability to cofinance the activities included in the plan\. Exit Criteria\. In case of no compliance by any unit or entity of any of its obligations the PCU may suspend or cancel the financing of any of the activities originally assigned to such unit or entity and reallocate the respective resources to other localities or entities as provided in the project's Operations Manual\. Package of Essential Health Services\. Agreement to implement the package of essential health services, both public health interventions and basic clinical care, as defined by the SSA\. Accounting and Audits\. Establishment of separate project accounts, accounting, and audit\. Counterpart Funds\. Agreement to assign the required resources outside project's financial plan, including annual funding allocations and adequate cash releases to cover incremental recurrent expenditures\. Redeployment of staff or, when required, recruitment of incremental staff\.  55 Performance Monitoring and Evaluation\. Performance monitoring indicators (see Annex 1) would be used to monitor progress in subproject implementation, and evaluate its impact\.  56 Annex 2-C Mexico III Basic Health Care Project Prevention of HIV/AIDS in High-Risk and Highly Vulnerable Populations A\. Overview of the HIV/AIDS Epidemic in Mexico From the start of the HIV/AIDS epidemic in the 1980s to June 30, 2000, Mexico reported 45,134 accumulated AIDS cases\. This number is undoubtedly lower than the number of actual AIDS cases\. Considering delays in notification and underreporting, it is estimated that Mexico may have a total of 64,000 AIDS cases\. The HIV/AIDS epidemic in Mexico is concentrated-i\.e\., it mainly affects population groups that engage in risky practices\. Since 1995, the epidemic has been showing a trend towards stabilization, at around 4,100 new cases per year, mainly affecting the urban population\. An estimated 116,000 to 177,000 people are infected with HIV in Mexico\. The age distribution for of persons infected with HIV in Mexico is as follows: children under age 15, 2\.5% of cases; persons from age 15 to 44, 77\.9%; age 45 and older, 18\.1%; and unknown age, 1\.5%\. About 86% (26,659 cases) of HIV/AIDS cases in Mexico are sexually transmitted: 62% (16,638 cases) occurred in men who have sex with men; and 38% (10,021 cases) occurred in heterosexuals\. 11\.6% (3,588 cases) of HIV/AIDS cases were transmitted via blood exposure\. Of these, 68\.5% (2,458 cases) were due to blood transfusions; 13\.3% (478 cases) were associated with the use of intravenous drugs (this category includes intravenous drug users and men who have sex with men); 10\.5% (377 cases) were associated with blood donors; and 7\.4% (267 cases) were in hemophiliacs\. < 1% (8 cases) fell in the category of occupational exposure; and 2\.0% (605 cases) were due to perinatal transmission from mother to child\. AIDS cases from blood transfusions in Mexico have dropped dramatically over the past decade-from 14\.6% (377 cases) of all reported cases in 1990 to 0\.09% (4 cases) in 1999\. During the first half of the year 2000, no AIDS case due to blood transfusions was reported in Mexico\. Some geographic areas of Mexico have more HIV/AIDS cases than others\. The states with the largest number of accumulated HIV/AIDS cases are Distrito Federal, Jalisco, Morelos, Yucatan and Baja California\. As of December 31, 1997, the five cities with the highest AIDS rates were the following: Veracruz (1,545\.4 AIDS cases per million inhabitants), Guadalajara (1,317\.0 per million), Mexico City  57 (1,153\.7 per million), Cuernavaca (1,067\.0 per million), and Acapulco (1,047 per million)\. STIs greatly increase the risk of acquiring HIV\. The project will support prevention, diagnosis and treatment in groups of people with high-risk practices\. B\. Activities for the Prevention of HIV Infection in High-Risk and Highly Vulnerable Populations Project activities would be carried out as a collaborative initiative involving Mexico's Federal Secretariat of Health (SSA), through the National AIDS Control and Prevention Council (CONASIDA), the state level through the SESAs AIDS councils, and organizations of civil society, which will form a Citizens' HIV/AIDS Surveillance Committee for the purposes of this project\. Project activities are based on epidemiological research, which identifies population groups at high risk and with high vulnerability to HIV/AIDS-men who have sex with men, male and female sex workers, and intravenous drug users and their partners\. A basic premise of prevention is that greater short-term program effectiveness can be achieved through the reduction of the risk and vulnerability to HIV infection among population groups with high-risk behaviors\. The project is also based on an understanding that discrimination and the stigma associated with HIV/AIDS are one of the elements that constitute a barrier for local governments to invest on HIV/AIDS prevention\. In early 2000, the SSA accepted a proposal by civil society organizations and independent experts to assess the feasibility and suitability of Mexico's following the example of other countries in obtaining financing from international organizations to develop specific, highly effective HIV prevention programs and to improve the diagnosis and treatment of other sexually transmitted infections (STIs)\. The project will support activities aiming at: a) Reducing the incidence of HIV infection in specified populations\. The objective of the project is to reduce the incidence of HIV infection among high-risk and vulnerable populations: men who have sex with men, male and female sex workers, and intravenous drug users and their partners\. Prevention projects among these populations are to be carried out in the 50 urban areas with the greatest accumulated number of HIV/AIDS cases\. b) Expanding access to health services for HIV prevention and diagnosis and STI treatment\. The project will expand access to prevention of HIV infection to all at risk population, and prevention, diagnosis and treatment of other STIs among people not included in Mexico's social security systems and who reside in the 50 urban areas with the greatest accumulated number of HIV/AIDS cases\. The specific urban areas will be defined during project implementation as part of annual implementation plans and according to proposals submitted by NGOs and SESAs approved by the ad-hoc sub- committee\. Approximately 300 organizations of civil society in Mexico play a key role in the fight against HIV/AIDS, because they have developed needed skills and services in HIV prevention, the care and monitoring of persons living with HIV/AIDS, the defense and promotion of human rights, and the struggle against discrimination\. Both national and international experience show that at community level, peer interventions can be highly effective in preventing diseases transmitted sexually or by injecting drugs\. For that reason, the operational strategy for the project is to assign its execution to such organizations of civil society through a bidding process, which will be defined by an evaluation sub- committee convened by CONASIDA after consultation with the PCU\. The composition of this sub- committee would be described in the Operations Manual\. This strategy will make it possible to include collaborative proposals between two or more organizations of civil society and associations with  58 academic or other institutions\. If there are no organizations of civil society with sufficient experience in the selected cities, activities undertaken by civil society organizations will be promoted, supported by technical assistance and institutional strengthening\. As a last resort, it will be the responsibility of the entity's government programs to ensure project execution\. At project start-up, HIV/AIDS and STI diagnostic services will be identified in the selected cities\. These services will be strengthened and integrated with the health services system under the State's HIV/AIDS/STI Programs (PES) through quality assurance program\. The objective of the quality assurance program would be to improve user satisfaction, increase coverage, and make operations more efficient, placing emphasis on access by the population at high risk and with greater vulnerability to HIV\. Training and institutional strengthening may be offered to the non-governmental organizations (NGOs) that deal with HIV/AIDS in the 50 selected cities: The process of disease surveillance will be improved by developing high-quality information for public access\. Several research investigations will be vitally important for obtaining information as project inputs, among them a calculation of the level of incidence of HIV among the population, an estimate of coverage of targeted activities, and the development of models based on theory for behavioral change, whereby it is necessary to estimate the sizes of target populations\. Academic institutions, service providers, NGOs, or other civil society associations may undertake these investigations\. Most HIV/AIDS prevention projects are expected to be aimed at specific population groups to be decided according to defined criteria, in which one of the requirements is the active involvement of experienced NGOs\. A program to assess community interventions will provide timely information to orient, and possibly, to adjust the criteria for project selection and financing\. Project's impact will be evaluated at the beginning, mid-term, and end of the project\. CONASIDA will participate in the different phases of implementation of the above activities, both to implement activities and provide technical support to other participating entities\.  59 Annex 2-D Mexico III Basic Health Care Project How PROCEDES Will Address the Health Needs of Mexico's Indigenous Populations Background The term "indigenous people" refers to a diversity of peoples and cultures, without reflecting the special identity and idiosyncrasies of each people in particular\. In order to understand the health of the indigenous peoples in Mexico, it is necessary to recognize their great ethnic and cultural diversity, as well as the complex interrelationships between peoples and cultures, identity and health\. The general tendency among the countries of the Americas has been to use changing definitions, or simply to omit ethnic classification from national population censuses, as well as from the ongoing registration of demographic information such as births, deaths, and migrations\. In Mexico, the vast majority of Mexico's population is mestizo (of mixed European and Indian descent), but it has one of the largest indigenous lpopulations in the Americas\. Of a total population of close to 100 million, between 7\.5 million' and 10 million2 of the Mexico's residents or 10% of the total population, are descendants from the diverse ethnic groups that made up the Aztec empire\. These groups include the Nahua, the Maya, the Zapotecs, the Mixtecs, the Totonacs, and the Tarascos, to name but a few\. Over the years, many of Mexico's indigenous populations have managed to maintain their owIn laniguage, culture, and traditions\. Land is central to life, culture, and history, and determines to a large extent the survival of indigenous peoples, as well as their standards of living, health, and nutrition\. As in the rest of the Americas, the indigenous population is more severely affected by poverty than the rest of society\. Living conditions, per capita income, employment, education, access to basic water, sanitation, and health services, housing conditions, and food availability for these people all fall below the national averages\. Census information from the 1990s indicate that that 96% of the indigenous people live in municipalities with marginality rankings of high and very high, and 41% of these people live in municipalities with rankings of very high marginality\. The seven states with the highest incidence of poverty- Chiapas, Oaxaca, Guerrero, Hidalgo, Veracruz, San Luis Potosi, and Puebla-coincide with the indigenous municipalities of highest marginality\. Indicators of the Economic Status of Mexico's Indigenous Populations Indigenous populations in Mexico and elsewhere have experienced a great lag in economic development for centuries\. Table I below compares the Mexico's national and indigenous population with respect to three basic indicators of well being in 1995\. ' Number taken from the INEGI National Population Census 2000 based upon two criteria: 6\.27 million are speakers of indigenous languages who are over the age of 5, and 1\.3 million are between the ages of o and 5 who live in a home where one of the parents is the speaker of an indigenous language\. 2 Number estimated by the National Indigenous Institute (INI) based upon three criteria: (I) the census registry of speakers of any indigenous language over the age of 5; (2) children under the age of 5 living in a home where one of the parents speaks an indigenous language; and (3) the population of localities serviced by indigenous coordination centers\.  60 Table 1\. Comparison of Mexico's National and Indigenous Population with Respect to Three Basic Indicators of Well-Being (1995) Lz*4i s of well- g National poulatio00 j Jdiko0s population Home without drinking water 15\.71% 58\.12% Home without drainage 24\.98% 88\.53% Home without electricity 6\.48% 35\.06% Source: Representation Office for the Development of Indigenous Peoples, Office of the President of the Republic\. Formal educational programs have not met with wide acceptance and penetration in indigenous communities, as reflected in many indicators\. According to recent estimates, about 800,000 monolingual indigenous persons who do not speak Spanish\. The table below compares the national and indigenous population with respect to indicators of education in 1995\. Table 2\. Comparison of Mexico's National and the Indigenous Population with Respect to Three Basic Indicators of Lack of Education (1995) Rdcaion$ - indicators National population ndigenous population Illiteracy 10\.46% 44\.27% Population who did not complete 36% 75% primary school Terminal efficiency 85% 65\.88% Primary schools with 6 grades 85% 38% 4th grade students who meet reading 25% 8% and writing requirements Source: Representation Office for the Development of Indigenous Peoples, Office of the President of the Republic\. Health Profile of Indigenous Peoples At the international Indigenous Peoples and Health Workshop held in Winnipeg, Canada, in 1993, sponsored by PAHO/WHO, representatives of indigenous organizations emphasized the need to preserve a holistic approach inherent in the different health concepts of the indigenous peoples of the Americas\. A common denominator among otherwise highly diverse perspectives is the belief that health expresses dynamic relationships between inseparable components\. These include the relationship between individual aspects (physical, mental, spiritual, and emotional) and group aspects (political, economic, cultural, and social), and between what is natural and what is social (Dion Stout, 1992; Rozental, 1988)\. In spite of the fact that Mexico can be considered a multi-ethnic and culturally pluralistic country, the official sources as in most countries of the Region have little or no information on the health status and living conditions of their indigenous peoples\. As a rule, the epidemiological information available in the disease registries and the principal indicators of morbidity or mortality, birth rates, and life expectancy at birth are not disaggregated by ethnic or language group\. However data and information are available from secondary sources that provide unmistakable evidence that the levels of health and nutrition of indigenous people are several times below the national average, reaching low figures in some regions  61 when compared with homologous reference populations, reflecting their environmental conditions and widespread poverty\. In short, the indigenous peoples of Mexico have a shorter life expectancy than homologous national groups, a lower standard of living, lower social status, as well as a higher risk of disease and death\. The disease profile that characterizes the indigenous peoples of Mexico features many of the same conditions that plague other socioeconomically disadvantaged groups in the Americas\. Commonly, children before the age of five die often of parasites, malnutrition, lack of quality medical care, and other poverty-related causes\. Viral diseases (influenza, measles, dengue, poliomyelitis, arboviral respiratory diseases, hepatitis B, etc\.) are prevalent, particularly among groups with low levels of immunity\. The prevalence of diseases endemic to tropical and subtropical areas (e\.g\. leishmaniasis, onchocerciasis, cysticercosis, Chagas' disease, etc\.) remains high, and especially affects those human settlements where indigenous people are a majority\. Other communicable diseases such as tuberculosis and malaria are also prevalent\. High incidence rates and lethality of cholera is common among indigenous populations, as well as a considerable increase in the occurrence of sexually transmitted disease\. The spread of HIV/AIDS poses an added and very grave risk for the indigenous people who live in areas with high rates of HIV infection\. Mental disorders and problems are a girowing source of concern\. Stress-related disorders, including violence toward others, depression, and suicide, as well as accidental and violent death, join abuse of alcohol, tobacco, and other substances as problems that show an increasingly high prevalence among young and adult indigenous people of both sexes\. Protein-calorie malnutrition is a persistent problem, along with diseases stemming from deficiiencies of micronutrients, especially ironi, vitamin A, and iodine\. The health profile of indigenous women is largely determined by the subordination they face on two fronts: in their marital relationships and in relation to the dominant sectors of local and national society\. In addition to the illnesses described earlier, women suffer from problems related to reproduction (e\.g\. pregnancy at an early age; complications of pregnancy and delivery; iron-deficiency anemia, etc\.) and others related to mental health (for example, sexual abuse and violence; alcoholism and drug abuse)\. And there are other more specific problems deriving from hazardous working conditions in agriculture, in the informal urban or service sector, and in industry\. Care during childbirth and the puerperium, disposal of the placenta, care of the umbilical cord, breast- feeding, and the care and feeding of indigenous infants are strongly influenced by the culture\. It is in these areas that indigenous communities frequently experience difficulties in accessing the services that are available, and culturally rooted discrepancies appear between the medical services provided in the hospital and the home care that is administered by family members and traditional midwives\. From this perspective, health, health-disease processes, and health systems can be seen as cultural systems\. The purely medical approach in health services delivery, in addition to failing to meet demand, is inadequate to deal with an epidemiological profile that is so complex and difficult to resolve\. Moreover, traditional healing practices\., while known to be efficient for the management of various culture-bound afflictions and syndromes, are ineffective in response to "new" diseases and health problems arising from the contemporary context (for example, the HIV/AIDS threat, non-communicable diseases, stress-related disease, diabetes, drug addiction, injuries, accidents, etc\.)\. When indigenous peoples are exposed to these problems, they are often unable either to produce the appropriate biological response (e\.g\. immunity) or to make the necessary sociocultural adjustment (for example, by following traditional medical practices and avoiding or delaying seeking western medical treatment)\.  62 The localities with the highest proportions of indigenous inhabitants also tend to have the lowest percentages of their population covered by water supply and excreta disposal services (PAHO, 1998)\. Finally, as in the rest of the Americas, there is a lack of sustained initiatives and adequate financinig to support the development of specific policies and programs on traditional medicine and indigenous therapeutic resources (for example, medicinal plants), or research and development of alternative models of care for indigenous populations or particular ethnic groups\. In the 1990s, however, with the support of the Mexico II Basic Health Care Project (PAC) and other related programs, efforts have been made with good results to start addressing this situation\. Mortality Among Mexico's Indigenous Populations The mortality rate among indigenous children under age 5 (26 per thousand LB) is higher than the national average rate among children under age 5 (20 per thousand LB)\. Infant mortality in the indigenous population (48 per thousand LB) than in the national population as a whole (28 per thousand LB)\. In preschoolers, the mortality rate is much higher among the indigenous peoples (13 per thousand) than in the national population (4\.8 per thousand)\. This mortality rate among indigenous preschoolers is even higher (14 per thousand) in the municipalities with an indigenous population of over 70%\. The mortality rates for preschool age cohorts are probably more accurate than those for infants\. The table below compares the national and indigenous population with respect to several indicators of infant and child health in 1995\. Table 3\. Comparison of the National Population and the Indigenous Population in Mexico with Respect to Indicators of Infant and Child Health (1995) bp 7 7p7 Infant mortality rate 28\.2 per 1,000 live 48\.3 per 1,000 live births births Infant mortality due to infectious diseases 27\.3% 83\.6% Low height-for-age 50\.9% 73\.6% Malnutrition in children below age 5 38\.5% 58\.3% Source: Representation Office for the Development of Indigenous Peoples, Office of the President of the Republic\. Among the indigenous peoples, the main causes of mortality are infectious diseases-gastro-intestinal disorders, pneumonia, influenza, and measles\. The overall mortality rate of 83\.6 per 10,000 for those municipalities with a high concentration of indigenous peoples is in sharp contrast to the national average rate of 27\.3 per 10,000 inhabitants\. Among the 20 main causes of death some rank higher among the indigenous population than among the national population as a whole\. For example, deaths related to nutritional deficiencies rank in 6th place among the indigenous population compared to I Ith place nationally; tuberculosis, in 11th place among the indigenous population and 16th place nationally; and anemic disorders, in 13th place among the indigenous population and 17th nationally\. Some causes of death are less important among the indigenous population than among the national population\. Examples are tumors, which occupy 7th place among the indigenous population but 2nd place nationally; diabetes mellitus, which is in 15th place in indigenous populations and 4th at the  63 national level; and cardiovascular diseases, which are in 12th place among the indigenous population but 8th place at the national level\. Overall the mortality profile of the indigenous population is similar to others in less developed countries\. There is a predominance of poverty-related diseases and a lower incidence of diseases common to more developed societies where the incidence of non-communicable chronic disease is higher\. The Challenge The ethnic and cultural heterogeneity oF the indigenous peoples makes it difficult or impossible to adopt single programs or universal health care models\. This diversity, in which ethnic and cultural differences are accentuated, means that each indigenous people must be considered individually and that the emphasis must therefore shift toward the development of local health care strategies\. Given that the morbidity profile of the indigenous population is different from that of other ethnic groups, proposals to provide differential care and actions appear to be the most valid\. (SSA-INI, 1992)\. The strategy of developing local health systems is a valid response, particularly in areas with a diverse ethnic population or a significant proportion of indigenous inhabitants\. The above response should not be used to justify further isolation of indigenous people; rather, joint efforts should be promoted to overcome common obstacles (economic, political, social, cultural) through the forging of interethnic and intercultural ties that are based on reciprocity, mutual respect, and coexistence\. Guidelines for Action An effective response would depend on: * Promotion of joint efforts and shared responsibility between the different levels of the health system and the indigenous organizations and communities\. * The lack of sufficient and adequate knowledge and information on the health of indigenous peoples in the face of a need for immediate action and impact must be met through the establishment of strategies that allow adequate knowledge and information to be generated during project implementation ("learning by doinlg"), as well as making it possible to systematically store up the knowledge and information gained through experience ("learning from both past and present experience") and adjust ongoing programs and activities accordingly\. * Recognizing diversity among the indigenous population means formulating proposals that respond to particular situations and contexts that vary from region to region, and from one people to another\. Accordingly, it is indispensable to place special emphasis oni local experiences and processes where actions of proven impact and concrete viability are required\. In this way it would be possible to generate responses as varied and diverse as the situations and peoples involved, so that these experiences can build up a store of knowledge and conclusions that would form the basis for and help to stimulate numerous other processes and actions\. * Another aspect to be considered is the need to prioritize in terms of priority areas, the neediest populations, and cost-effective interventions\. * The Indigenous Peoples' Health program is in principle a health promotion initiative\. As stated in the Ottawa Charter for Health Promotion, adopted by the First International Conference on Health  64 Promotion, in November 1986 (WHO, 1986), "health promotion is the process of enabling people to increase control over, and to improve, their health\." Health promotion was adopted at the XXIII Pan American Sanitary Conference in 1990 as a strategic orientation for the work of PAHO/WHO in the Americas\. It was defined as "the sum activity of the population, the health services, the health authorities, and other productive and social services, aimed at improving the status of individual and collective health\." Thus health promotion is a strategy for making the concept of health in development a reality (PAHO, 1991)\. Accordingly, the health promotion strategy is a fundamental orientation to support the Indigenous Peoples' Health program\. * The transformation of national health systems and the development of local health systems (Paganini et al\., 1990) are valuable tactical resources to overcome current problems of deficient coverage, lack of access, poor acceptance and low health impact in the health systems and services for indigenous populations\. Community participation is one of the fundamental aspects of the local health system strategy, growing out of the recognition that it is essential to develop horizontal and symmetrical ties with indigenous organizations and communities, and to thus open the door to consensus among the different community actors at the local level\. The effort to increase equity, through decentralization, intersectoral action, and participatory research, is extremely important to the implementation of the Indigenous Peoples' Health program\. Local health systems also provide a place where it is possible to measure the impact of different activities carried out in line with mutually agreed upon goals for concerted health and well being\. The development and strengthening of local health systems is the fundamental practical strategy to achieve health in the face of a diversity of situations and specific needs at the local level\. * In the definition of a new health care model, it should recognize that culture and intercultural factors are key determinants of the living conditions and the health of individuals and communities\. * Innovative strategies and culturally appropriate technologies also need to be developed in order to adapt water supply and basic sanitation programs to indigenous populations\. * The development of health activities and programs in indigenous communities should be based onl culturally appropriate use of local resources and on active and systematic community participation in the process of planning, execution, and evaluation of these activities\. X Activities will be oriented toward: (i) formulating educational strategies to train health professionals and health workers as part of the Indigenous Peoples' Health program\. The countries should make an effort to train non-Indigenous health workers who serve in Indigenous areas to develop favorable attitudes of understanding and respect for the local culture, beliefs, and traditional medical; and (ii) providing support to training centers so that incentives are created to give indigenous people more access to professional careers, and curricula are adapted to help these people preserve their identity and maintain their commitment to their community of origin strategies and incentives that will encourage health workers to work in indigenous communities\. b It is imperative to have basic information along with adequate and low-cost monitoring systems (e\.g\. using sentinel populations or selected samples) that will make it possible to periodically evaluate progress and impact in projects and interventions in indigenous communities\. Strategies and instruments for rapid assessment are also available which could provide a short-term solution to the lack of information on certain sectors and problems\. * Priority to and promotion of research on the field of indigenous health and traditional medical practices should be supported\.  65 * Program activities should be built on respect for the culture, values, and traditions of the indigenous peoples involved and should acknowvledge geographic and social distinctions between communities\. Objective Living and health conditions of the estimated 10 million indigenous persons in Mexico are deficient, as reflected in excess mortality due to avoidable causes and in reduced life expectancy at birth, which demonstrates the persistence and even the aggravation of inequalities among indigenous populations in comparison with other homologous social groups\. The project, building on the lessons of experience of the PAC, would support the expansion of basic health care coverage in locations with the highest concentration of indigenous people with a view to improving their living conditions and health status\. Adjusting the content of the program to local cultures and adapting the activities to the real needs of the communities at the local level, with the direct participation of the indigenous communities, the project would continue to support the developrnent of alternative models of care, including traditional medicine and research into quality and safety, for indigenous populations\. The project would also promote the development of disease prevention and health promotion programs in order to address indigenous health problems in the selected localities\. Additionally, the project would promote the participation of indigenous persons and their communities in all aspects of the project\. The project would support the expansion of the evaluation of living conditions and the health situation to include the indigenous peoples, with a view to gradually overcoming the current lack of information in this area\. Program objectives and scope are in line with the national priorities defined by the Presidential Office for the Development of Indigenous Peoples, as follows: - Proiote the direct participation of indigenous communities in national development; • Ensur that indigenous communities interact with all sectors of society, as well as with the federal, state and municipal governments; and • Contribute towards combating lags and structural causes of marginalization in order to improve the living conditions of indigenous peoples while respecting their ways and customs\. Consultation Process and Community Participation Program design incorporates the views and aspirations voiced by representatives of indigenous organizations in 33 consultative meetings organized by the SSA in 23 states since the change of Government in December 2000 (documentation in project files)\. It is also based the results of operational research conducted in indigenous communities\. Health and educational programs for disadvantaged areas do not necessarily achieve the same penetration in indigenous populations as they do in other populations when they are not adapted to the different indigenous groups' culture or perceptions regarding the health-illness process\. In view of this situation, as noted above the proposed project would replicate the successes achieved under PAC and in earlier programs for indigenous populations, would adjust them according to lessons of experience, and expand the geographic reach of these programs\. As done under PAC, health services delivery mechanisms would incorporate measures to promote the active participation indigenous communities and the incorporation of traditional health workers to ensure that the indigenous peoples take charge of their own institutions and ways of life, assert their own identity, and that their rights with regard to health are respected\.  66 Measures would also be developed to adapt the delivery of health services according to the social, cultural, religious, and spiritual values and practices of indigenous peoples, including those related to health promotion and maintenance and the management of diseases and illnesses\. Approach Reiterating the importance of the strategy supported under PAC for the transformation of the national health system to deal with current problems relating to insufficient coverage, inadequate access, and the lack of acceptability of health services on the part of indigenous populations, the project would: * Adapt and adjust the health care organization and delivery model (MASPA) for marginal rural populations in each participating state according to local characteristics; * Support the delivery of the package of essential health services, comprised of low-cost, high-impact health interventions, including micronutrient supplementation, in response to the health needs in target areas identified in a national epidemiological survey; * Use a microregionalization methodology as a planning and targeting tool; and * Follow a dual strategy to expand health services coverage: (i) a functional expansion, strengthening the existing supply of services by rehabilitating and equipping health units, training personnel, including traditional health workers, midwives, and community health workers selected by local population, providing drugs, and reorganizing the delivery of the services; and (ii) a geographic expansion augmenting the network of services by using mobile units, involving traditional healthi workers and community personnel, and providing radio-communications equipment and logistical support\. Impact of PAC Since the mid-] 990s, PAC has evolved into the Government's main strategy to improve access to basic health services among the II million poorest and unprotected populations living in rural and peri-urban areas of the country\. At the same time, the project has promoted the participation of states, municipalities, and community groups in the organization, financing and delivery of basic health services\. Also PAC has been instrumental in coordinating and integrating at the local level several national programs aimed at the expansion of social service coverage, such as PROGRESA, PAZI, Intersectoral Program for Peasant Workers (PIAJA), and Ambulatory Surgery Program (PCE), among others\. Project implementation performance has been highly satisfactory and is helping to achieve development objectives\. By the end of 2000, overall coverage with basic health services to the poorest rural population reached 8 million\. About 65% of project beneficiaries are indigenous populations living in very high and high marginality dispersed rural locations\. With the addition of the State of Jalisco, 19 states, 841 municipalities, 92 health jurisdictions, and more than 42,000 rural localities are covered by the project\. For achieving this level of coverage, PAC increased by 335% the number of mobile units (from 125 to 544), and incorporated health centers -old and new- which increased by 308% (from 513 to 2,098)\. Likewise, PAC hired 1,355 new physicians, 1343 new nurses, and 8,295 health auxiliaries, who were converted in 2000 into permanent staff in project areas financed with state revenues\. This measure, discussed and agreed during the mid-term evaluation, represents a milestone for ensuring the institutional  67 and financial sustainability of the project\. In terms of health service utilization, between 1998 and June 2000, PAC increased 73% the number of family planning users (from 667,405 to 1'158,834), 53% the number of child deliveries safely attended (from 5,189 to 7,949), 73% the number of anti-parasitic treatments (from 48,795 to 84,508), and 32% the number of tuberculosis treated cases (from 4,380 to 5,776)\. Newborn babies with low weight decreased from 7\.9% to 6\.3%, which is a great achievement\. Institutional Arrangements for Implementation of PROCEDES The implementation of the indigenous health program would be managed by the SSA's Indigenous People Health Coordination Unit, in coordination with Presidential Office for the Development of Indigenous Peoples\. This unit is part of the SSA's Equity and Development General Directorate that is in charge of overall project coordination (documentation on organizational charts and institutional relationships in project files)\. As such, the Indigenous People Health Coordination Unit would be involved in all phases of project implementation, including program design, provision of technical assistance to state health secretariats and health jurisdictions, program supervision and evaluation\. Beneficiary Population under PROCEDES Of the 7\.5 million indigenous people used as the basis for preparing the proposed project, about 4\.1 million (55%) live in 531 municipalities considered indigenous (i\.e\., municipalities where at least 40% of the total population over the age of 5 speaks an indigenous language)\. Of these 531 indigenous municipalities, 360 (68%) were covered by PAC and thus are now considered to have coverage and access to basic health services similar to those of other disadvantaged, non-indigenous municipalities\. PROGRESA also covered 520 of these municipalities\. About 7 of the 531 indigenous municipalities lack coverage by either program\. The 531 indigenous municipalities where the project plans to concentrate most of its efforts are located in 15 states, 14 of which have previously covered under PAC\. The indigenous population as distributed in each state is shown in Table 4 below, the beneficiary indigenous groups are shown in Table 5, and their geographic distribution is presented in Map 1\.  68 Table 4\. Distribution of Indigenous Municipalities and Populations in Mexico where PROCEDES' Health Program for Indigenous Population will concentrate its Efforts TOTAL 531 4,110,450 Campeche 3 66,600 Chiapas 35 731,000 Chihuahua 3 41,000 Durango 1 18,750 Guerrero 17 240,000 Hidalgo 19 324,000 Jalisco 2 10,700 Michoacan 2 24,000 Nayarit 1 20,300 Oaxaca 257 982,500 Puebla 53 399,000 Quintana Roo2 4 90,000 San Lusi Potosi 14 223,600 Veracruz 38 457,000 Yucatan 82 482,000 'Figure estimated from original data of INEGI's 1995 Population Census based on the population who speak an indigenous language and are over the age of 5, multiplied by a factor of 1\.2 which is the overall data calculated for the population below the age of 5 living in an indigenous household based on the same count\. 2Non- PAC state\.  69 Table 5\. The main beneficiary indigenous groups located in the selected 531 municipalities of 15 states ESTADO GRUPO ETNICO INDIGENA* CAMPECHE MAYA, CHOL CHIAPAS TZELTAL, TZOTZIL, CHOL, TOJOLABAL, ZOQUE, KANJOBAL, MAME CHIHUAHUA TARAHUM\.ARA DURANGO TEPEHUAN GUERRERO NAHUATL, MIXTECO, TLAPANECO, AMUZGO HIDALGO NAHUATL, OTOMI JALISCO HUICHOL MICHOACAN PUREPECHA NAYARIT HUICHOL, CORA OAXACA ZAPOTECO, MIXTECO, MAZATECO, CHINANTECO, MIXE CHATINO, TRIQUI, HUAVE, CUICATECO, NAHUATL, ZOQUE PUEBLA NAHUATL, TOTONACA, POPOLOCA, MAZATECO OTOMI, MIXTECO QUINTANA ROO MAYA SAN LUIS POTOSI NAHUATL, HUASTECO, PAME VERACRUZ NAHUATL, TOTONACA, HUASTECO, POPOLUCA, ZAPOTECO, CHINANTECO, OTOMI, MAZATECO, TEPEHUA YUCATAN MAYA *This table shows indigenous groups with a population higher than 5\.000 HLI that live in each of the selected states with indigenous municipalities\. Map 1: Geographical Distribution of the 531 Indigenous Municipalities 4' \ , \. , / _, \. \.  70 Additional support would be provided for other indigenous groups that are not concentrated in indigenous municipalities (over 40% of the population)\. These groups, as listed in Table 6, are concentrated in areas where at least 5% of the total population of the entire state is indigenous or where there are over 1 00,000 speakers of an indigenous language\. Table 6\. Five Additional States with Indigenous Populations (1995) S; :tate CPerc Entagef ,_ indgeou i;ta indi6\. nous L; opula\.: t i:on1 Mexico 4\.77 589,800 Sonora 12% 252,000 Tabasco 6\.52% 114,000 Morelos 7\.5% 108,200 Queretaro 5\.13% 64,200 Essential Package of Health Services To address the health needs of the indigenous people, the proposed project would support the implementation of two strategies: (i) public health programs that have a broad impact and generate positive externalities in the community; and (ii) essential health care services\. Jurisdictions would prepare annual work and investment plans according to criteria, including health priorities\. Public health interventions\. These include: (i) public health education, promoting lifestyle changes to prevent disease, and (ii) public health outreach, covering highly cost-effective interventions in preventive health\. As done under PAC, health education and promotion programs would include topics such as children's health, food hygiene, reproductive health, nutrition education, early detection of cancer, mental health issues, prevention of injuries, prevention of addictions, healthy lifestyle promotion, prevention of vector borne and zoonotic diseases, and promotion of oral health\. Support would be provided for the preparation, printing and distribution of educational pamphlets, posters and air time for spots in electronic media, including native languages spoken by the major ethnic groups in the project area to reach effectively the indigenous population\. Additional support would be provided for health education programs for schools and communities, by financing seminars and teaching materials, as well as the design and implementation of social marketing programs to promote health programs such as immunization, diarrhea control or injury prevention\. The project would strengthen public health outreach programs by supporting prenatal, pregnancy and delivery of care; family planning, and control of sexually transmitted infections, including HIV/AIDS\. Training and equipment for midwives would be provided to address prenatal, pregnancy and delivery of care in remote areas\. Support would be provided for well baby clinics, childcare and immunization against measles, polio, diphtheria, pertussis and tetanus and the immunization of women of childbearing age to prevent neonatal tetanus\. School health and dental programs would be supported with an 1 Quantity of indigenous population estimated by the National Indigenist Institute http://www\.ini\.gob\.mx  71 emphasis on nutrition counseling, ophthalmologic testing, bucodental health programs, deparasitation and school-based reproductive health education programs\. Detection, surveillance, follow-up and controlled treatment of infectious diseases such as tuberculosis and leprosy would be supported, as well as prevention, early detection and treatment of vector borne diseases, such as malaria and dengue, in endemic areas\. The project would also provide for water testing and monitoring of drinking water quality and chlorination, in order to reduce the incidence of waterborne infections, particularly cholera\. It would also support the construction of adequate systems for the disposal of human feces (latrines) in order to reduce the transmission of infectious diseases and the contamination of food and agricultural products\. Micronutrient supplementation would be supplied, particularly to reduce anemia among women and children, and Vitamin A deficiency\. Essential Clinical Care\. According to the health priorities in each locality, the project would support the following interventions: (i) reproductive health, which includes prenatal and delivery care, treatment of gynecological and obstetric emergencies, provision of family planning devices, treatment of sexually transmitted infections and detection of breast and cervical-uterine cancer; (ii) child health and school health, which would treat acute respiratory diseases, diarrhea, rash and fever illnesses and meningitis; (iii) treatment of mycosis, hepatitis, pneumonia, genito-urinary infections, leprosy and where endemic, majaria, dengue, leishmaniasis, Chagas disease and onchocercosis; and (iv) consultations and control of non-communicable conditions such as diabetes, hypertension and asthma, and treatment for traumas and acute abdominal conditions\. Delivery Strategies The delivery of services under the proposed project would adopt and adjust according to the characteristics of the indigenous communities the strategies implemented by PAC for underserved rural areas, considering several essential criteria: Integrating a set of basic health services to be provided in remote regions and localities; Incorporating, training, and motivating medical and nursing professionals, traditional health workers, midwives, and community health workers, and technical and support staff, to perform this task through working groups; - Raising the awareness of the beneficiary population and informing them about the importance of these tasks, as well as training them in order to promote self-care health and their conscious, voluntary, and organized participation; * Setting up, from the community level, a growing network of interconnected services to ensure their linkage and progressive impact, including emergency medical care systems (communication systems and transport of patients); * Strengthening existing infrastructure with human and material resources (rehabilitation of physical facilities, basic equipment, furniture, provision of drugs and other medical supplies), as well as expanding hours and days of service; and * Achieving the commitment of beneficiary communities and local authorities in this effort, along with their technical and economic collaboration, and providing effective coordination among local, municipal, state and federal levels\. Based upon these premises, the proposed project would also adapt the operational strategy established by PAC to expand the coverage of services among underserved rural poor\. The main elements of this strategy are:  72 * Incorporating and training people from the communities themselves to act as health assistants, collaborating especially on health promotion, disease prevention and early detection and treatment, and case referrals to health facilities; * Setting up mobile health teams to visit and assist these localities, in coordination with local communities' health committees, with vehicles equipped for this purpose, and also noin-mnotorized brigades who will make their assigned rounds on foot; * Adapting, with community support, local spaces to serve as clinics, small storage places for materials, and dormitories for teams to stay overnight; * Strengthening existing health infrastructure where the population could go to receive medical care; and * Train medical and nursing staff for the tasks of health care provision, health promotion, training and supervision in indigenous areas\. As done under PAC, the establishment of community health committees would facilitate the provision of services, the acceptance of and the demand of indigenous people for the interventions included in the essential package of health services, ensure health workers safety in distant and dangerous areas, and contribute to the sustainability of project activities in the medium and long terms\. To promote community participation, emphasis would be placed on: - Promoting the acceptance and informed participation of communities, local authorities and stakeholders in social development and well-being; - Promoting the modification of practices and living conditions to prevent illness and death and improve individual and community health; * Strengthening the knowledge and skills of medical and nursing personnel and community health workers in the tasks of health promotion and education; and - Promoting community participation in planning efforts, project implementation, resource use, and collective assessment of project implementation and impact\. Under PAC, during the 1996-2000 period, a total of 10,870 community health workers operating in remote rural areas were trained in the 19 states covered by the project, and more than 15,000 community health committees were established\. The actions described above have been carried out with respect to the culture, beliefs and customs of each community, in close cooperation with the community assembly, local leaders, and traditional authorities\. Monitoring and Evaluation Under Component III of the project, studies would be financed to develop quality of health care indicators for indigenous populations, to assess knowledge, attitudes and practices (KAP), to monitor mortality and morbidity changes in indigenous populations, and to develop models to include indigenous culture and beliefs to the health program for indigenous populations\. The evaluation of program impact would also supported under Component III\. To the extent possible, data on indigenous populations would be disaggregated from the local populations of which they are a part (through sampling or proxies) in order to measure the specific efficacy of the program in each ethnic group\.  73 REFERENCES Coloma, C\. Health Situation of the Indigenous Peoples of Latin America\. (Background document\. Workshop '93, Winnipeg, Canada)\. Dion Stout, M\. Indigenous Peoples and Health in North America\. (Background document\. Workshop '93, Winnipeg, Canada)\. de Koning, H\.W\. (Editor)\. La Salud Ambiental y la Gesti6n de los Recursos de Agua Dulce en las Americas\. Programa de Salud Ambiental, OPS\. Washington, D\.C\., enero de 1992\. OPS/OMS\. Participaci6n Social en la Producci6n de la Salud\. Desarrollo y Fortalecimiento de los Sistemas Locales de Salud\. HSS/SILOS-26\. Washington, D\.C\., 1993\. OPS\. Ministerio de Salud Republica de Colombia, Promoci6n de la Salud y Equidad\. Declaraci6n de la Conferencia Internacional de Promoci6n de la Salud\. Santa Fe de Bogota, Colombia, 9-12 November 1992\. PAHO/WHO\. Resolution V\. Health of Indigenous Peoples\. (Introduction Indigenous Peoples and Health Workshop, Winnipeg, 1993 Basis/Guidelines for Action References Annexes (I, II, III)\. Directing Council, 2000\. PAHO/WHO\. Resolutions and Other Actions of the Fifty-Third World Health Assembly of Interest to the PAHO Executive Committee\. Washiington, D\.C\., 2000\. PAHO/WHO\. Final Report of the 124t' Session of the Executive Committee\. Washington, D\.C\., 1999\. PAHO/HSP\. Health of Indigenous Peoples in the Region of the Americas\. Working Document Washington, D\.C\., April 1993\. PAHO\. 18th Meeting of the Subcommittee on Planning and Programming, Provisional Agenda Item 8, Document SPP 18/7, Washington, D\.C\., 8-10 April 1992\. PAHO\. Health and Development of Women of Indigenous Peoples and Ethnic Groups (Subregional Project)\. Central American Health Initiative, Washington, D\.C\., September 1992\. PAHO\. Strategic Orientations and Progiram Priorities, 1991-1994\. Washington, D\.C\., 1991\. PAHO/WHO\. Resolution XV of the XXXIII Meeting of the Directing Council\. Progress Report\. Development and Strengthening of Local Health Systems in the Transformation of National Health Systems\. HSD/SILOS-10\. Washington, D\.C\., 1991\. PAHO\. Health Conditions in the Americas\. Scientific Publication No\. 524, (Vol\. 1), Washington, D\.C\., 1990\. Paganini, J\.M\. y Capote Mir, R\. (Eds\.)\. Los Sistemas Locales de Salud\. Publicaci6n Cientifica No\. 519\. OPS, Washington, D\.C\., 1990\. Perfiles Indigenas de Mexico, www\.sedesol\.gob\.mx (acronym INI)\.  74 Rozental, M\. Community Health and Development Process\. Northwest Saskatchewan\. Saskatchewan Indian Federated College Journal\. Volume 4, No\. 2, pp\. 1 15-136, 1988\. SSA-INI (Secretaria de Salud-Instituto Nacional Indigenista)\. La Salud de los Pueblos Indigenas en Mexico\. Mexico, D\.F\., 1992\. WHO\. Health and Welfare Canada\. Canadian Public Health Association\. Ottawa Charter for Health Promotion\. International Conference on Health Promotion, Ottawa, Canada, November 1986\. Wolf, E\.R\. Europe and the People without History\. Univerity of California Press\. Berkeley, CA\., 1990\.  75 ANNEX 2-E Mexico III Basic Health Care Project Medical Waste Management in Mexico The solid waste produced in health facilities is potentially hazardous, infectious, contagious, or toxic, posing health risks to staff who handle waste in health facilities and to urban waste collection operators and scavengers in landfills\. Such waste also causes environmental pollution and a high risk to national public health\. Among the infectious diseases that may be spread by medical waste are hepatitis, HIV/AIDS, tuberculosis, cholera, cellulitis, staphylococcemia, meningitis, amoebiasis, and others\. Other diseases may be caused by radiation and toxicity due to metals such as mercury, lead, and cadmium\. In 1995, Mexico set forth a regulation governing the management of hazardous biological and infectious waste under the General Law of Ecological Balance and Environmental Protection, which deals with and affects the provision of health services\. The regulation established in 1995 is still in force; however, revisions to meet changing needs are under consideration\. The following sections of this documenit: * Describe what constitutes medical waste and discuss the management of medical waste; - Provide an overview of Mexico's regulation of hazardous wastes produced in health establishments: * Discuss what has been done under the Mexico II Basic Health Care Project (PAC)-to improve medical waste management from 1996 to 2000; and * Identify steps that will be taken under the proposed PROCEDES Project to further improve medical waste management\. A\. What Constitutes Medical Waste Medical waste is defined as any material disposed of by a health establishment, whether it be in solid, liquid, or gaseous state\. Health establishments are understood to be public hospitals, private centers, clinical laboratories, pharmacies, etc\. According to the international standards dictated by the World Health Organization, medical waste falls into the following categories: * General medical waste\. This category includes paper and byproducts, plastic and glass products, and non-infectious materials\. * Special biomedical waste\. This is infectious or other waste produced by a health establishment that poses health risks both within the health establishment and beyond it\. - Infectious biomedical waste\. This includes blood, secretions, needles, syringes, vaccines, and pointed or sharp materials that may have been contaminated with infectious agents\. Preventive measures in handling and final disposal of such waste are important\.  76 - Chemical waste\. This includes disinfectants and other chemicals used for examinations, research, cleaning, etc\. Special regulations are required for the handling and final disposal of such chemical waste\. - Radioactive waste\. This is waste contaminated with radioactive substances used in diagnostic examinations or special therapeutic procedures\. The elimination of radioactive waste requires specialized procedures because of its hazardous nature\. - Anatomical waste\. This consists of corpses or human remains from births, abortions, mutilations, or surgical operations\. Anatomical waste poses a great risk spreading infection\. Both forensic medicine regulations and ethical considerations are important in the handling of such waste\. Internationally accepted standards establish a total production of medical waste between 3\.3 and I I pounds per bed per day\. Eighty percent of this consists of general medical waste and the remaining 20% consists of special biomedical waste, approximately 14% of which corresponds to infectious waste\. International standards for the percentages of waste produced by various components of health establishments are as follows: food service (50%); hospitalization service (18%); maternity service (8%); emergency service and orthopedics (8%); surgery (5%); and administrative, diagnostic and other services (1 1%)\. B\. Approaches to the Management of Medical Waste The waste management process has several phases that control waste from the poinlt of production to its final disposal, as detailed below: Classification\. Classification of waste at the point of production (i\.e\., separating infectious and hazardous waste from the conventional waste stream with the goal of reducing the amount of waste that needs to be specially treated) makes it possible to reduce the volume of infectious waste and minimize treatment costs\. * Internal collection\. Internal collection refers to the use of special containers, designed for the type of waste to be handled, placed near where the waste is produced and used only once\. * Internal transfer\. The shortest route between the point of production and intermediate storage of waste should be selected for the internal transfer of waste\. Waste containers should be checked to ensure that they are closed\. Special measures should be taken to protect the staff involved in transfers\. * Storage\. The storage place where the containers with waste are held before the treatment and/or final disposal of the waste should be equipped with hermetically sealed containers\. * External transport\. The transport of waste from the point of intermediate storage to the waste treatment point should be done using special vehicles that can be disinfected\. * Treatment\. Waste treatment includes methods, techniques, or procedures that change the characteristics of waste, reducing or eliminating the possibility that the waste will affect people's health or the environment\.  77 The World Health Organization (WHO) has identified several procedures for medical waste treatment: * Incineration\. Incineration involves burning waste in a medium under controlled conditions to oxidize the carbon and hydrogen present in the waste\. This method reduces the volume of solid waste by 80-95%\. Although incineration can produce environmental toxins such as dioxin if adequate controls are not adopted, it is often recommended because it is the only waste treatment method applicable to all types of biomedical waste\. * Steam sterilization\. This method involves submitting the waste to steam inside an Autoclave, at an adequate temperature and pressure and for a determined time\. * Gas sterilization\. This method consists of destroying pathogens present in waste by placing them in a compressed air chamber in which sterilizing agents are introduced, such as ethylene oxide or formaldehyde\. * Chemical disinfection\. This process involves treating waste with liquid chemical disinfectants\. * Other methods of sterilization\. Other methods of waste treatment that are less commonly used are included exposure to ultraviolet radiation or microwaves\. C\. Mexico's Regulation of Medical Wastes An official regulation governing hazardous waste generated in health facilities in Mexico, NOM-087- ECOL-1993, was published in the Official Gazette on November 7, 1995\. This regulation established nationwide requirements for the separation, packaging, storage, collection, transportation, treatment, and final disposal of biological and infectious waste generated in health establishments\. Health facilities-which the regulation defined to include clinics and hospitals, as well as clinical laboratories, laboratories for the production of biological agents, teaching and research centers (both for humans and for small animals), and rabies control centers-must abide by the requirements if they produce more than 25 kg per month or 1 kg per day of hazardous waste encompassed by the regulation\. Key provisions of Mexico's regulation NOM-087-ECOL-1995 include the following: - Classification of hazardous biological and infectious waste\. Hazardous waste and the limits that determine it (due to environmental toxicity) are specified as indicated in the official gazette of the federation on October 22, 1993\. Hazardous biological and infectious waste includes the following: (1) blood; (2) pathogens; (3) non-anatomic waste stemming from patient care and from laboratories; and (4) used and unused sharp/pointed objects\. * Classification of establishments that generate hazardous biological and infectious waste\. Health establishments are classified as follows: - Level I establishments: External consultation clinics, clinical laboratories that perform between one and 20 analyses per day, laboratories that produce biological matter, teaching and research centers and anti-rabies centers; - Level II establishments: Hospitals with one to 50 beds and clinical laboratories that perform up to 100 analyses per day; and - Level III establishments: Hospitals with more than 50 beds and laboratories that perform over 100 analyses per day\.  78 * Handling of hazardous biological and infectious waste\. The phases for waste handling are identified, along with processes to be followed for storage, means of conservation and transfer for final disposal, by type of waste\. * Final disposal of hazardous biological and infectious waste\. The process to be followed for waste treatment or destruction (as the case may be) is specified\. The Secretariat of Environment, Natural Resources, and Fisheries is responsible for overseeiig compliance with regulation NOM-087-ECOL-1995 via the Federal Environmental Protection Agency and with the participation of the Secretariat of Health\. Violations of the regulation are to be sanctioned in accordance with the General Law of Ecological Balance and Environmental Protection, its regulation governing the management of hazardous waste, and other applicable legal provisions\. D\. The Mexico II Basic Health Care Project (PAC): Approaches to the Management of Medical Waste From 1996 to 2000, the Mexico 11 Basic Health Care Project relied on two fuidamental strategies to extend the coverage of health services in Mexico: * Geographic expansion-i\.e\., strengthening of the health services network to cover municipalities and localities without permanent access to services; and * Functional expansion-i\.e\., strengthening of the basic health care service infrastructure to improve the quality of care and expand hours and days of service\. From 1996 to 2000, 266 Health Centers were constructed under the Mexico 11 Basic Health Care Project\. Efforts were made to have these Health Centers, classified as Level I establishments under regulation NOM-087-ECOL-1995, meet the requirements of that regulation for the separation, packaging, storage, collection, transport, treatment and final disposal of hazardous biological and infectious waste they generated\. * Medical waste residue is identified, as well as methods for its packaging, collection, temporary storage, collection, external transport, and final disposal\. * The storage period for this type of waste in medical units is no longer than seven days at room temperature (as the regulation specifies)\. * Medical waste storage areas are separated from the following: patients, visitors, kitchen, dining room, sanitary installations, meeting areas, recreation areas, offices, workshops, and laundry\. * Waste storage areas are under roofs and located where there is no chance of flooding and are easily accessible\. * Finally, signs indicating the hazardous nature of medical waste have been placed in visible places\. Twelve Basic Community Hospitals were also constructed under the Mexico 11 Basic Health Care Project\. Support was provided under the project to apply the requirements of NOM-087-ECOL-1 995 to these institutions, which are classified as Level II establishments under the regulation\.  79 E\. The Proposed Mexico III Basic Health Project (PROCEDES): Approaches to the Manazement of Medical Waste The strengthening of infrastructure under the Mexico III Basic Health Care Project is aimed at Basic Community Hospitals (about 194 units with less than 50 beds each, including 60 Health Centers with beds and 34 Basic Community Hospitals)\. The proposed project will support oversight of the application of regulation NOM-087-ECOL-1995 through basic community hospital committees, as well as the implementation of new methodologies aind technologies in the management of hospital waste\. It will also support the strengtheniing of social action through health committees and community assemblies to ensure that the waste management process is monitored\. As the proposed project will be implennented through subprojects prepared annually by selected health jurisdictions within participating states, assessments of medical waste management in health facilities will be conducted as a prerequisite for as part of subproiect proposal preparation\. To this end, participating health secretariats and health jurisdictions in charge of preparing subproject proposals would receive technical assistance support financed with loan proceeds to carry out this assessment\. Subproject proposals would include information on the selection of target areas, appraisal of projects, timetable for implementation, flow of funds, financing (community, state and federal), operation and maintenance\. Specifically, such subproject proposals, on the basis of detailed local assessments, would include: (i) overview of demographic and epidemiological profiles of the population; (ii) general objectives of the subproject; (iii) proposed interventions and investments that will be supported to achieve the stated objectives determined on the basis on needs assessments; (iv) identification of the project location, including justification of the priority area; (v) current resources available in the state and the priority jurisdiction, including physical, institutional and financial resources; (vi) identification of the executing unit within the state; (vii) estimated benefits, in terms of health impact for the population; (viii) estimated costs, including the incremental recurrent costs; and (ix) mechanisms to ensure commitment and ownership\. On the basis of the assessments of medical waste management in each participating locality, investment needs would be determined and inclucled as part of the annual subproject proposal for funding under Component I of the project to help bring participating facilities into compliance with medical waste management regulations in Mexico\. Facilities that would not be under compliance with these regulations even after the requested assistance is provided would be non-eligible for additional project support\. In summary, to strengtheni medical waste management in project area, the project would finance the following: * Assessment of waste management practices\. The project would support an assessment of medical care waste handling and disposal programs in thc selected project areas\. * Revision/updating of manuals for handling and disposal of medical waste\. The project would support: (i) revision and updating of the existing norms and guidelines for the handling and disposal of medical waste in participating health health care facilities; and (ii) training of health personnel in the application of these standards to protect high-risk human groups such as patients as well as health staff in the participating facilities\. * Upgrades of equipment\. The project would finance the purchase of new waste management equipment, if none exists, or replace outdated, inefficient, or unsafe equipment with safer, more  80 efficient designs\. The project would rehabilitate malfunctioning or inoperative basic systems for water, electricity, and air conditioning, thus making a healthier environment\. * Procedures outlined in the project's Operations Manual\. Environmental construction norms, internal waste management in health facilities in accordance with current legislation, personnel health and safety provisions for the handling and disposal of bio-medical waste, and equipment operation will be part of the Operations Manual for the project\. * Updating Mexico's official regulation governing medical waste in health establishments\. Although Mexico's official regulation governing hazardous waste generated in health establishments (NOM-087-ECOL-1993) was set forth in 1995 and is currently in force, revisions to meet changing needs would be supported\. The project's Operational Manual would include standards for medical waste management in participating facilities\. Other Environmental Provisions\. The SSA would prepare and submit to the World Bank prior to loan effectiveness a list of pesticides to be financed by loan proceeds, which shall be manufactured, packaged, labeled, handled, stored, disposed of, and applied according to standards acceptable to the World Bank\. The SSA would not finance with loan proceeds formulated products that fall in Classes IA and IB of the World Health Organization's Recommended Classification of Pesticides by Hazard and Guidelines to Classification (Geneva: WHO 1994-95), or formulations of products in Class 11 of the same guidelines, if the World Bank considers that (a) the SSA lacks restrictions on their distributions and use; or (b) they are likely to be used by, or be accessible to, lay personnel, farmers or others without training, equipment, and facilities to handle, store, and apply these products properly\. This condition will be detailed in the project's Operational Manual and legal agreements\.  81 ANNEX 3 Mexico III Basic Health Care Project Estimated Projects Costs (US$ million) Project Cost by Component Local Foeign Total Component I\. Quality and Equity for Marginal 210\.52 220\.38 430\.90 Rural and Urban Areas Component II\. Efficiency, Institutional 10\.53 59\.47 70\.00 Development and Decentralization Component III\. Innovation, Pilot Models, Policy 10\.15 66\.65 76\.80 Studies and Impact Evaluation Total Baselie Costs Physical contingencies 0\.00 0\.00 0\.00 Price contingencies 0\.00 0\.00 0\.00 Loan fees 3\.50 3\.50 Totia Proje Cos,t -23L2 MM0R "1I\. Financing Percentages 40% 60% 100% Project Cost by Category LOca Foreign Total Works 80\.20 9\.10 89\.30 Goods 66\.53 158\.47 225\.00 Services 23\.08 128\.62 151\.70 Operation Costs 61\.39 50\.31 111\.70 Front-end-fee -- 3\.50 3\.50 Total Project Costs 2312\. 350\.00 581\.20  82 ANNEX 4 Mexico III Basic Health Care Project Summary of Cost-Benefit Analysis INTRODUCTION The present analysis attempts to quantify the monetary benefits that will be generated by PROCEDES during its implementation and compares them to the projected costs in order to estimate the Net Present Value of the investment and its Internal Rate of Return\. As explained in detail in Annex 2a the project will help improve equity and quality of health services in Mexico\. Health and monetary benefits are assumed to derive entirely from Component I (Quality and Equity for Marginal Rural and Urban Areas)\. Since the activities carried out by Component II (Efficiency) and Component Ill (Innovation, Pilot Models, Policy Studies and Impact Evaluation) are necessary for the efficient implementation of Component 1, the cost of all components are included in the analysis\. Rural and marginal-urban poor would be able to have access to a package of cost-effective public health interventions and basic hospital care, including emergency medical services, closer to their place of residence\. At the end of 2000, PAC was providing a package of essential health services to about 8 million rural Mexicans\. PROCEDES intends to consolidate PAC gains and expand its functional and geographic coverage\. Geographic expansion would add about 1\.6 million uncovered rural poor to reach a total of 9\.6 million (approximately 6\.6 million are indigenous people)\. Functional expansion means ensuring that these 9\.6 million people have regular access to the basic package of essential health services complemented with appropriate clinical services in hospitals\. The project would also cover about 2\.6 million urban poor\. In addition, about 0\.9 million indigenous people (living mostly but not entirely in rural areas) will also receive the expanded package of health services\. Total project beneficiaries will be about 13\.1 million or little less than one seventh of Mexico's population (included in these figures are 7\.5 million indigenous people)\. Beneficiaries of PROCEDES can therefore be grouped into four sub-populations: (1) People in rural areas who are already receiving the 13 PAC health interventions; (2) Uncovered people in rural areas; (3) Uncovered people in marginal-urban areas; and (4) Uncovered indigenous people\. The section is structured as follows\. We start with outlining the methodology used to estimate the economic benefits of each of the three sub-components and the cost of the project\. We then present the spreadsheet used to estimate the Net Present Value (NPV), the Internal Rate of Return (IRR) and the total number of DALYs gained\. In order to estimate a lower bound of the NPV and the IRR\. we make conservative assumptions on the parameters that define the economic benefits of PROCEDES\.' We then present preliminary results suggesting that most of PAC beneficiaries live in the seven poorest states but that these states do not receive (proportionally) as many federal resources as other states with fewer uncovered people\. We then outline the processes through which PROCEDES is expected to have considerable equity impact\. Finally, we list the bibliographic references\. Because of the conservative nature of our model, a sensitivity analysis of the results on the critical assumptions is not necessary\.  83 METHODOLOGY TO ESTIMATE BENEFITS AND COSTS The burden of disease addressed by the project and the health gains are expressed in terms of Disability Adjusted Life Years - DALYs (Jamison et al\. 1993; World Bank 1993; Murray 1996a; 1996b)\. Most of the epidemiological data are taken from an in-depth analysis of the burden of disease for Mexico in 1991 (FUNSALUD 1994)\. For each sub-population of beneficiaries we proceed in several steps: 1\. Beneficiary Population\. The total number of people reached by PAC in 2000 was about 8 million\.' For rural areas, we assume that these 8 million people will eventually benefit of newly-provided basic hospital care services2 (functional expansion) and that an increasing number of people will be covered by PROCEDES (geographical expansion), growing from 100,000 in 2002 to 1,6 million in 2006\.3 For marginal-urban areas, we assume a gradual increment of people benefiting from PROCEDES, growing from 500,000 in 2002 to 2\.6 million in 2006\. Moreover, an additional population of indigenous people, which is expected to grow from 100,000 in 2002 to 900,000 in 2006, will be covered by the expanded package of health services\. 2\. Burden of Disease\. We estimate the total burden of disease (the total number of DALYs lost) in the beneficiary population in the absence of the project\. In 1991, an average of 151 DALYs were estimated to be lost among every thousand people in Mexico (FUNSALUD 1994)\. This figure is estimated to increase to 326 per thousand people in the rural areas of the 19 states of initial PAC intervention\. We assume that in these areas the burden of disease decreased by 10% in 2001 because of socioeconomic development and that the package of 13 basic interventions also reduced the burden of disease by 20% (i\.e\. we assume that PAC interventions were 100% effective)\.4 Therefore, we estimate that the total number of DALYs currently lost among PAC beneficiaries is 235 per thousand people\.5 We assume that the total number of DALYs lost among people in marginal-urban areas is an average between the national average and the PAC average, i\.e\. 193 DALYs per thousand people\.6 We also assume that the burden of disease among the additional uncovered indigenous people who are going to be reached by PROCEDES is 293 per thousand\. 3\. Maximum Amount of Health Gains\. We estimate the maximum number of DALYs that could be saved by the project if the project interventions were 100% effective\. This is done by multiplying the burden of disease by the proportion of the burden of disease addressed by the package of interventions\. The basic package of service developed by PAC addresses 20% of the burden of disease\. We assume that the additional interventions (clinical services in hospitals) in rural areas address an additional 5% of the burden of disease\. The same assumptions apply to the expanded package of services delivered by PROCEDES in marginal-urban areas and among the additional indigenous beneficiary population\.7 PAC is the most important of several government programs that jointly provide health services to 10\.9 million uncovered population in rural areas\. 2 We assume a gradual increment of beneficiaries, from I million in 2002 to 8 million in 2006\. 3 These people will benefit of the expanded package of services, which includes the basic package of 13 interventions and the basic hospital care\. 4 The burden of disease associated with PAC interventions represents 20% of the total burden of disease for the beneficiary populations\. 5235 = 326*(1-0\.1)*(1 - 0\.2) 6 193 = (151 + 235)/2 7 The basic package of services provided by PAC is made of 13 highly cost-effective interventions that address 20% of the burden of disease in Mexico\. PROCEDES will support the delivery of the same 13 interventions in urban areas\. In addition, PROCEDES will support the improvement of the clinical solving capacity at the local level in rural areas and new interventions to address the urban pathology in urban areas\. We estimate that these additional  84 4\. DALYs Saved\. We estimate the total DALYs saved by the project by multiplying the burden of disease addressed by PROCEDES by an estimate of the efficacy of project interventions in reducing the burden of disease\. We assume that the efficacy of all interventions increases from 10% in 2002, to 20% in 2003, to 30% in 2004, to 40% in 2005, to 50% in 2006\. In other words, we assume the implementation success rate starts very low in the first year and increases gradually and evenly to 50%\.' 5\. Economic Benefits\. We convert the estimated number of DALYs saved by PROCEDES into monetary terms using 1 \.5 times the minimum wage as a proxy for the economic value of each DALY gained\. The average minimum wage in Mexico is estimated to be about US$4\.5 in 2001\. Yearly wages are based on a 250 days work year to reflect the fact that many in the beneficiary population 2,3 are in the unemployed, unproductive sector thereby lowering the yearly income\. 6\. Economic Costs\. We estimate the costs of the project using information contained in the Financial Summary of this document (Annex 5)\. In addition to the resources from the federal government (made of the World Bank loan and the national counterpart), we include the states' contribution (estimated to be 20% of the federal government's transfers) and the communities' coiitribution (estimated to be 5% of the federal government's transfers)\. Results from Analitica Consultores (2001) indicate that states' contributions have increased over time, shifting from 6\.4% in 1996 to 18\.0% in 2000 (see figure below)\. By assuming a constant 20% contribution by the states and a 5% conitribution by the communities, we are making conservative estimates of the overall cost of providing health services to the beneficiary population\. EVOLUTION OF PAC BUDGET (Mexican Pesos) $650,000,000 $ 600,000\.000 $550,000,000 $500,000,000 $450,000,000 $400,000,000 $350,000,000 $300,000,000 $250,000,000 $200,000,000, 1996 1997 1998 1999 2000 interventions will address 5% of the burden of disease\. ' Average estimates of the implementation success rate in cost-benefit analysis of health projects are usually 50% or higher during project implementation\. 2 This is also a conservative estimate since in previous cost-benefit analyses of health sector projects, including the ex-ante economic evaluation of PAC, each DALY gained was estimated to be worth twice the value of minimum wage\. The other indicator often used to measure the of economic value of DALYs is GNP per capita\. This is estimated to be US$4,410 in Mexico in year 2000, which would increase the economic value of the project benefits almost three times\. The expected benefits arising from the HIV/AIDS sub-component (US$20 million) are not included in the analysis\.  85 COST-BENEFIT ANALYSIS A\. DATAMASSUMMONS Economic Indicators Daily minimum wage $4\.5 Working days per year 250 Economic value of each DALY = 1\.5 * Daily minimum wage * Working days per year $1,688 Burden of Disease DALYs lost per person - national average 0\.151 DALYs lost per person among non-covered population in rural areas of poor states 0\.293 DALYs lost per person among PAC-covered population in rural areas of poor states 0\.235 DALYs lost per person among non-covered population in marginal-urban areas 0\.193 DALYs lost among uncovered indigenous people 0\.293 Beneficiary Population 2001 2002 2003 2004 2005 2006 Rural areas - PAC Population -- 1,000,000 2,000,000 4,000,000 6,000,000 8,000,000 Rural areas - Uncovered Population -- 100,000 400,000 900,000 1,400,000 1,600,000 Marginal Urban areas - Uncovered Population -- 100,000 400,000 1,000,000 2,000,000 2,600,000 Additional Indigenous Population -- 100,000 300,000 500,000 700,000 900,000 TOTAL BENEFICIARIES -- 1,300,000 3,100,000 6,400,000 10,100,000 13,100,000 B\. ESTMATION Of RENEFITS PAC-COVERED POPULATION IN RURAL AREAS % of the burden of disease addressed by additional interventions (clinical services in hospitals) 5% -- 5% 5% 5% 5% 5% Total DALYs lost among target population from diseases addressed by PROCEDES -- 234,720 469,440 938,880 1,408,320 1,877,760 Potential DALYs saved by PROCEDES (with 1 00% efficacy) 11,736 23,472 46,944 70,416 93,888 Efficacy of PROCEDES in reducing the burden of disease -- 10% 20% 30% 40% 50% Total DALYs saved -- 1,174 4,694 14,083 28,166 46,944 Monetary Benefits -- $1,980,450 $7,921,800 $23765,400 $47,530,800 $79,218,000 UNCOVERED POPULATION IN RURAL AREAS % of the burden of disease addressed by PROCEDES = 25% -- 25% 25% 25% 25% 25% Total DALYs lost among target population from diseases addressed by PROCEDES -- 29,340 117,360 264,060 410,760 469,440 Potential DALYs saved by PROCEDES (with 100% efficacy) -- 7,335 29,340 66,015 102,690 117,360 Efficacy of PROCEDES in reducing the burden of disease -- 10% 20% 30% 40% 50% Total DALYs saved -- 734 5,868 19,805 41,076 58,680 Monetary Benefits -- $1,237,781 $9,902,250 $33,420,094 $69,315,750 $99,022,500  86 UNCOVERED POPULATION IN MARGINAL-URBAN AREAS % of the burden of disease addressed by PROCEDES = 25% -- 25% 25% 25% 25% 25% Total DAl Ys lost among target population from diseases addressed by PROCEDES -- 19,286 77,144 192,860 385,720 501,436 Potential DALYs saved by PROCEDES (with 100% efficacy) -- 4,822 19,286 48,215 96,430 125,359 Efficacy of PROCEDES in reducing the burden of disease -- 10% 20% 30% 40% 50% Total DALYs saved -- 482 3,857 14,465 38,572 62,680 Monetary Benefits -- $813,628 $6,509,025 $24,408,844 $65,090,250 $105,771,656 ADDITIONAL INDIGENOUS POPULATION % of the burden of disease addressed by PROCEDES - 25% -- 25% 25% 25% 25% 25% Total DALYs lost among target population from diseases addressed by PROCEDES -- 29,340 88,020 146,700 205,380 264,060 Potential DALYs saved by PROCEDES (with 100% efficacy) -- 7,335 22,005 36,675 51,345 66,015 Efficay of PROCEDES in reducing BOD -- 10% 20% 30% 40% 50% Total DALYs saved by PROCEDES -- 734 4,401 11,003 20,538 33,008 Monetary Benefits of PROCEDES -- $1,237,781 $7,426,688 $18,566,719 $34,657,875 $55,700,156 TOTAL Monetary Benefits -- $5,269,641 $31,759,763 $100,161,056 $216,594,675 $339,712,313 Bank'Loan and Federal Counterpart $2,000,000 $62,000,000 $103,100,000 $147,400,000 $159,200,000 $107,500,000 State contribution =20% -- $12,400,000 $20,620,000 $29,480,000 $31,840,000 $21,500,000 Community contribution =5% -- $3,100,000 $5,155,000 $7,370,000 $7,960,000 $5,375,000 Total Cost $2,000,000 $77,500,000 $128,875,000 $184,250,000 $199,000,000 $134,375,000 Net Benefits ($2,000,000) ($72,230,359) ($71,340,238) ($47,238,944) $57,394,675 $232,212,313 NPV (10% discount rate) $19,338,870 IRR 15% Total DALYs saved by PROCEDES 341,279  87 Under the assumptions outlined above, the provision of services financed by the five sub-components of PROCEDES (Rural Areas, Marginal Urban Areas, Indigenous Population, Basic Community Hospital Care, and HIV/AIDS) would save approximately than 350,000 DALYs between 2002 and 2006\. The NPV of PROCEDES is approximately US$19 million and its IRR 15%, figures that indicate that the project would pay back the investments over the five years period of the loan, even under the conservative assumptions behind the estiimation of health and monetary benefits\. PRELIMINARY FINDINGS ON ALLOCATION OF FEDERAL RESOURCES TO THE POOREST STATES Given the high correlation between being poor and not being covered by the public health system, it is expected that the Mexican states with the highest concentration of PAC beneficiaries are those with the highest concentration of poor people: Chiapas, Guerrero, Hidalgo, Estado de Mexico, Oaxaca, Puebla y Veracruz\. Indeed, about 84% of the population receiving PAC health services live in these states (Analitica Consultores 2001)\. However, not only the proportion of federal resources allocated to these states between 1996 and 2000 has never been beyond 75% but such proportion has also been declining over time (see figure below)\. i 13T0\.1 0Cts-¢dvP\.,pul\.th\. 0TOI B\.dg\., Comparison between Covered Population and Total Budget in the 7 Poorest States: Chiapas, Guerrero, Puebla, Veracruz Hidalgo, Mexico, Oaxaca 100% 90% 80% 70% ', 80% 50% 40% 30% 20% 10% 0% 1996 1997 1998 1999 2000 In order to improve the allocation of federal transfers, PROCEDES will link more closely the amount of resources transferred to the number of beneficiaries in each state\. EQuITY As explained in Annex 2-A, the activities carried out by PROCEDES target areas with high degrees of marginalization\. Because of its poverty focus, the project is expected to have a large redistributive impact, which will eventually contribute to reduce the large differences in health status between the poor and non-poor in Mexico\. An analysis of the existing distribution of public spending in the health sector across different states is currently being done\. The project will monitor how such distribution is affected by the implementation of the project in order to estimate the extent to which equity of public spending in health can be improved by direct government's interventions in the social sectors\. Moreover, given the project's primary focus on improving access of health services to indigenous people, PROCEDES is also expected to reduce the health status gap between indigenous and non-indigenous people in Mexico\.  88 REFERENCES Analitica Consultores\. 2001\. Primer Informe\. Expost del Programa de Ampliaci6n de Cobertura SSA 1996-2001 y Exante del Programa de Consolidaci6n de Cobertura\. Mexico\. Belli P\., J\. Anderson, H\. Barnum, J\. Dixon, and J-P\. Tan\. 1997\. Handbook of Economic Analysis of Investment Operations\. Operations Policy Department\. Learning Leadership Center\. The World Bank\. Fundaci6n Mexicana para la Salud\. 1994\. Economiay salud: propuestas para el avance del sistema de salud en Mexico:\. informe final\. Hammer, J\.S\. 1993\. "The economics of malaria control\." The World Bank Research Observer 8:1-22\. Jamison, D\.J\., W\.H\. Mosley, A\.R\. Meashem, and J\.L\. Bobadilla\. 1993\. Disease Control Priorities in Developing Countries\. Oxford Medical Publications\. Murray, C\. 1996a\. "Quantifying the burden of disease: the technical basis for disability-adjusted life years\." In Murray, C\. and A\. Lopez (Eds\.), Global Comparative Assessments in the Health Sector: Disease Burden, Expenditures and Intervention Packages\. World health Organization, Geneva, pp\. 3-19\. Murray, C\. 1996b\. "Rethinking DALYs\." In Murray, C\. and A\. Lopez (Eds\.), The Global Burden of Disease\. World health Organization, Geneva, pp\. 1-89\. World Bank\. 1993\. World Development Report 1993: Investing in Health\. Oxford University Press for the World Bank\.  89 ANNEX 5 Mexico III Basic Health Care Project Financial Summary (US$ million) Implementation Period 2001 2002 2003 2004 2005 2006 Total Project Costs Investment Costs 2\.00 35\.00 57\.70 81\.10 88\.40 53\.10 317\.30 Recurrent Costs 0\.00 _ 27\.00 45\.40 66\.30 70\.80 54\.40 263\.90 Total 2\.00 62\.00 103\.10 147\.40 159\.20 107\.50 581\.20 Financing Sources IBRD 0\.00 _ 43\.30 70\.50 89\.30 96\.10 50\.80 350\.00 Government 2\.00 18\.70 32\.60 58\.10 63\.10 56\.70 231\.20 Total Project Financing 2\.00 _ 62\.00 103\.10 147\.40 159\.20 107\.50 581\.20  90 ANNEX 6 Mexico III Basic Health Care Project Procurement and Disbursement Arrangements Procurement of Goods and Works Procurement of works and goods financed by the World Bank under the project would be carried out in accordance with World Bank's Guidelines for Procurement under IBRD Loans and IDA Credits (January 1995, revised in January and August 1996, September 1997 and January 1999) and the following provisions of Section I of this Annex\. Grouping of Contracts\. To the extent practicable contracts for goods and works shall be grouping in bid packages estimated to cost US$1,000,000 equivalent or more each\. Notification and Advertising\. The General Procurement Notice to be published in the Development Business shall be updated annually for outstanding procurement\. All invitation to bid shall be published in the "Diary Oficial de la Federaci6n" and in COMPRANET In addition, invitation to bid for each contract estimated to cost US$10,000,000 equivalent or more shall be advertised in the Development Business in accordance with the procedures applicable to large contracts under paragraph 2\.8 of the Guidelines\. To obtain expressions of interest for large consultant assignments (contracts expected to cost more than US$200,000 equivalent) a specific procurement notice shall be also published in Development Business\. Section I-Procurement Methods The methods to be used for the procurement describe below, and the estimated amounts for each method, are summarized in Table A\. The threshold contract values for the use of each method are fixed in Table B\. Procurement of Works Works procured under this project could include construction of primary health care units and rehabilitation of First Level hospitals totaling US$89\.30million equivalent\. Major contracts for these works will be procured following National Competitive Bidding procedures (NCB), using Bank Standard Bidding Documents (SBDs) agreed with the Bank\. Small works, estimated to cost less than US$500,000equivalent per contract, up to an aggregated amount of US$10\.0 million equivalent may be procured through price comparison received in response to a written invitation to at least three contractors\. The written invitation will include a detailed description of the works, including basic specifications, the required completion date, and a basic contract form acceptable to the Bank\. Procurement of Goods Goods procured under this project will include pharmaceuticals and medical supplies, computers, furniture, ambulances, health printing materials, totaling US$225\.0 million equivalent\. Major contracts for these goods will be procured following International Competitive Bidding procedures (ICB), using World Bank Standard Bidding Documents (SBDs)\. Contracts estimated to cost less than US$500,000 equivalent per contract, up to an aggregated amount of US$10\.0 million equivalent of which World Bank financing amount US$7\.24 million equivalent, may be procured using National Competitive Bidding  91 procedures (NCB) and agreed Standardl Bidding Documents\. Contracts for goods that cannot be grouped into large bidding packages and estimated to cost less than US$100,000 equivalent per contract, up to an aggregated amount of US$7\.0 million equivalent of whicih World Bank fanancing amounts to US$4\.83 million equivalent, may be procured using shopping (National or International) procedures based on a request form for quotations acceptable to the Bank\. Section II-Employment of Consultants Consultant services shall be procured in accordance with Guidelines for the use of Consultants by the World Bank Borrowers and the Bank as Executing Agency (January 1997, revised in September 1997 and January 1999) and the following provisions of Section 11 of this Annex\. Consultant services will be contracted under this project in the following areas of expertise: training, design, construction supervision, and institutional development\. These services are estimated to cost US$65\.0 million equivalent and would be procured using World Bank Standard Request of Proposals\. Firms\. All contracts for firms would be procured using QCBS procedures except for small contracts for assignments of standard or routing nature and estimated to cost less than US$100\.000 equivalent that would be procured using LCS, up to an aggregate amount of US$5,820,000\. Individuals\. Specialized advisory services would be provided by individuals consultants selected by comparison of qualifications of at least three candidates and hired in accordance with the provisions of paragraph 5\.1 to 5\.3 of the Consultant Guidelines, up to an aggregated amount of US$2,000,000\. The following provisions shall apply to consultants' services to be procured under contracts awarded in accordance with the provisions of the preceding paragraphs\. The short list of consultants, estimated to cost less than $200,000 equivalent per contract, may comprise entirely national consultants in accordance with the provisions of paragraph 2\.7 of the Consultant Guidelines\. Non-Consultant Services\. Non-consultant services would consist of three different types of services: Radio Broadcasting Services, Training, and Health Care Providers\. Health care providers (HCP) are public and non-government organizations that would be hired at the state level\. The total amount financed under the proposed project for HCP is about US$25\.0 million equivalent of which the World Bank financing amount to US$17\.20 million equivalent\. Because of these services are standard, the selection of the providers would be based on the Least-Cost of the providers that have a minimum qualifications, and would be completely reviewed when costing more than US$50,000\. Prior Review: The prior review arrangements are presented in Table B\. Procurement Plan\. At appraisal, the Borrower developed a procurement plan for project implementation that provided the basis of the aggregate amounts for the procurement methods\. During the annual review meetings, the Borrower would update the procurement schedule for the following year, including the ICB procedures, the smaller procurement, the consultancy and training services and the number and estimated costs of the subprojects to be financed under the proposed loan following the model procurement plan\. Section III-Procurement Responsibilities and Capacity A procurement capacity assessment for the project was carried out by Ms\. Lea Braslavsky, Country Procurement Specialist, LCOPR, and approved by RPA on 7/10/2000\. The National Development Bank  92 (Nacional Financiera-NAFIN), one of the three financial intermediary institutions of the Mexican Government will be the borrower and will be responsible through its Special Financing Unit for: (i) reviewing all procurement procedures and bid evaluation reports submitted by SSA, (ii) give the no- objection for the award of contracts below the agreed threshold for Bank prior review; and (iii) maintaining all the corresponding records\. NAFIN's performance under previous project was satisfactory\. The World Bank's Implementation Unit in Mexico will provide procurement advice to SSA and NAFIN as required and carry out the World Bank's fiduciary functions delegated to it\. The executing agency for the project would the SSA's DGEDS\. To assess SSA' procurement capabilities and possible risk on the implementation of the proposed project, a World Bank's mission visited three states offices (Mexico, Jalisco and Veracruz) and the PAC's office in Mexico City\. These offices have ample experience in World Bank operation because they satisfactory executed the two previous PAC projects\. SSA through its State Delegations will carry out all procurement activities for the project\. To ensure SSA's staff knowledge of World Bank procurement Guidelines and procedures, several procurement seminars were given by the Mexico Resident Mission to SSA's staff (most of them from the SSA' State Delegations) during the implementation of the Second Basic Health Care Project\. During project preparation, NAFIN and SSA have confirmed their will for ethical behavior and have expressed their commitment to adhere to competitive selection and transparency in all activities\. Based on the above procurement risk for the project is rated as "average"\. Operating Costs\. The loan will finance operational costs including salaries and office materials on declining based\. Section IV: Procurement Monitoring The PCU will prepare annually a Procurement Plan satisfactory to the World Bank and establish procedures for monitoring project execution and impact, procurement implementation, including monitoring of contracts\. The PCU will maintain detailed records of procurement activities\. Review by the World Bank\. The proposed threshold for prior review by the World Bank is based on the procurement assessment of the project executive agency and is summarized in Table B\. In addition to this review of individual procurement actions, the annual procurement plan will be reviewed and approved by the Bank, as well as procurement audits to be carried out during the life of the project\. Frequency of Procurement Supervision\. Based on the overall risk assessment (average) the post- review mission for the project shall be completed every 12 months and shall cover not less than I in 20 contracts signed\.  93 TABLE A-1: Project Costs by Procurement Arrangements (US$ million equivalent) Expending Category ICB' NCB2 Others3 NBF TOTAL I-WORKS 3\.00 10\.00 76\.30 89\.30 _ (2\.10) (7\.00) (9\.10) 2-GOODS Equipment &Furniture 74\.00 4\.00 2\.00 80\.00 (63\.64) _ (3\.44) (1\.72) (68\.80) Pharmaceuticals& 102\.60 3\.24 2\.16 108\.00 Medical Supplies (65\.93) (2\.08) \. (1\.39) (69\.40) Vehicles 19\.80 13\.20 33\.00 (16\.83) _( 16\.83) Printer Materials 2\.00 2\.00 4\.00 _ (1\.72) (1\.72) (3\.44 3-SERVICES Consultants 65\.00 65\.00 (56\.50) (56\.50) Health Care Providers 25\.00 25\.00 _____________ (20\.00) (20\.00) Training 50\.00 50\.00 (44\.86) (44\.86) Radio Broadcasting 11\.70 11\.70 (7\.26) (7\.26) 4-OPERATING COSTS 111\.70 111\.70 ______________________ __ i (50\.31) (50\.31) 5-FRONT-end-Fee 3\.50 _ 3\.50 (3\.50) (3\.50) TOTAL4 196\.40 12\.24 283\.06 89\.50 581\.20 (146\.40) (9\.34) (194\.26) (350\.00) 'ICB= International Competitive Bidding 2NCB=National Competitive Bidding 3 Others=Local and International Shopping; hiring consultant services according Bank Guidelines,non-consultant services by Least Cost Selection\. 4Figures in parentesis are amount to be financed by the Loan  94 TABLE A2: Consultant Selection Arrangements (in US$ million equivalent) Ltedti Categor ' y',0 ,:,lf''' 7 (including Systems Development/Technical Assistance A\. Firns 57\.00 6\.70 63\.70 (49\.55) (5\.82) (55\.37) B\. Individuals 1\.30 1\.30 (1\.13) (1\.13) TOTAL 57\.00 6\.70 1\.30 65\.00 (49\.55) (5\.82) (1\.13) (56\.50) Note: Figures in parenthesis are amount to be financed by the Loan QCBS Quality- and Cost-Based Selection QBS Quality-Based Selection LCS Least Cost Selection Other Selection of individual consultants (per Section V of Consultants Guidelines), Service Delivery, etc\. Non-Consultant Services Non-Consultant Services are the following: "Radio Broadcasting Services" means the cost of media advertising of the information campaign of the Project and transmission rights\. "Health Care Providers" means the reasonable fees charged to the SSA by public and non-governmental health care providers for the provision of the health services under the project\. "Training" means the reasonable costs reiated to the carrying out of workshops, seminars and studies including equipment and facility rental, printed materials, travel and per diems (the latter two wheni not covered under Incremental Operating Costs)\.  95 TABLE B Thresholds for Procurement Methods and Prior Review (US$1,000 equivalent) Ca ory Contract Value Procurement Contracts Subject to UCVO___________ (thresholds) Method Prior Revies by Bank Works >10,000,000 ICB All <10,000,000 NCB Above 3,000,000 <500,000 Shopping at First two contracts per least 3 state contractors Goods >500,000 ICB All <500,000 NCB None <50,000 Shopping at None least 3 suppliers Services Consulting Services: Firms >200,000 QCBS-Short All List International > 1010,000 QCBS All <100,000 QCBS-LCS TORs Individual >501,000 Consultant All Qualifications <50,000 Consultant TORs Qualifications Non-Consultant >50,000 LCS All Services <50,000 LCS None ICB - International Competitive Bidding NCB= National Competitive Bidding QCBS= Quality and Cost Based Selection LCS= Least Cost Selection  96 TABLE C Allocation and Disbursement of Loan Expenditur CategoryAmnounit Financeing (IJSSoy 7 Amilion) ; 0 j 0 Percentage (of total X_____X_____________________ ________________L pro e ct costs) 1\. Works 9\.10 70% 2\. Goods 3\. Equipment & 89\.07 100% of foreign expenditures; 100 % of ex- Furniture; factory cost of local expenditures; 86% of Ambulance; Printed other local expenditures\. Materials 4\. Pharmaceuticals and 69\.40 86% until withdrawals under this Category Medical Supplies have reached an aggregate amount equivalent to $ 29,000,000; 66% until withdrawals under this Category have reached an aggregate amount equivalent $55,000,000; and 33% thereafter\. 5\. Consultants; 108\.62 86% Training; Radio Broadcasting Services' 6\. Health Care 20\.00 80% until expenditures reaches Providers2 US$18,000,000 equivalent and 40% thereafter 86% until withdrawals under this Category 7\. Incremental 50\.31 have reached an aggregate amount equivalent Operational Costs3 to $28,000,000; 66% until withdrawals under this Category have reached an aggregate amount equivalent $44,000,000; and 33% thereafter\. 8\. Front-end-Fee 3\.50 Total 350\.00 Disbursement, Flow of Funds and Special Account\. A Special Account in US dollars would be established at the Banco de Mexico\. The authorized allocation is US$30\.0 million, which will be limited at the early stage of the project to an initial deposit of US$10\.0 million\. Wheni the aggregate disbursements under the loan have reached US$20\.0 million, the initial allocation may be increased up to "Training" means the reasonable costs related to the carrying out of workshops, seminars and studies including equipment and facility rental, printed materials, travel and per diems (the latter two when not covered under Incremental Operating Costs)\. "Radio Broadcasting Services" means the cost of media advertising of the information campaign of the Project and transmission rights\. 2 "Health Care Providers" means the reasonable fees charged to the SSA by public and non-governmental health care providers for the provision of the health services under the project\. 3 "Incremental Operational Cost" means reasonable costs for salaries, office supplies, operation and maintenance of equipment and vehicles, office and equipment rental, courier services and utilities incurred in Project Implementation that would not have been incurred absent the project\.  97 the authorized allocation\. The Special Account will be monthly replenished and will be used for all transactions eligible for financing from the loan\. The financial management assessment focused on the project's accounting system, internal controls, planning, budgeting and financial reporting system, selection of an auditor as well as the format and contents of the Project Management Report (PMR) to be prepared by the executing agency, the DGEDS/SSA, submitted quarterly, by t;he 30t' of January, April, July and October of each year\. This assessment revealed that project does not have in place an adequate project financial management system that can provide, with reasonable assurance, accurate and timely information as required by the World Bank\. Nevertheless, the PCU meets minimum World Bank financial management requirements\. The scope of the action plan is the MIS; this system will include production of quarterly PMRs, which eventually will allow PMRs-based disbursements Financing for the proposed project would be included under the SSA's standard budget, therefore it would be 100% pre-financed by the GOM (specifically by the treasury department of the MOF) through Nafin and commercial banks (including counterpart funds for the project)\. As done under previous projects, in order to promote the sustainability of the project, the state and jurisdictional levels would contribute at least 10% of the program costs\. The DGEDS/SSA would be responsible for budget consolidations and control, and would report in the dates established by the country legislation\. Monthly disbursements and reimbursements will be processed by Nafin and, funds will be transferred to the GOM to reimburse the agreed percentage of eligible expenditures\. Use of Statements of Expenditures\. It is planed that traditional disbursement methods (SOEs, special commitments and direct payments) will be used until the DGEDS/SSA and Nacional Financiera are ready to adopt the PMRs-based disbursement methodology oni July 31, 2002\. Nafin as the financial agency would prepare the necessary documentation for prompt disbursements\. Considering the size of the contracts, all goods, operating expenditures and most of the consultant services, are expected to be disbursed through SOEs\. Full supporting documentation will be required for all contracts for works above US$3,000,000, goods above US$500,000\.00, consultant firm contracts above US$100,000\.00, individual consultant contracts above US$50,000\.00\. All expenditures for training and operating costs will be disbursed by SOE\. The PCU would maintain, for one year after the year in which the last disbursement takes place, all supporting documentations and separate project records, to reflect, in accordance with sound accounting practices, the operations, resources and expenditures of each project activity\. Independent annual audit will be carried out based on: (i) International Standards on Auditing; (ii) current Memorandum of Technical Understanding on Auditing (MET); and (iii) applicable World Bank's guidelines\. This audit review will be carried out by the Contraloria Interna and the report will be submitted to the World Bank within the six months after the end of each year\.  98 TABLE D Disbursement Schedule (US$ Million equivalent) S\. e- : 7r nppraisaltimate Cumultieji FY2002 Dec\. 2001 10\.85 10\.85 June 2002 10\.85 21\.70 FY2003 Dec\.2002 28\.45 50\.15 June 2003 28\.45 78\.50 FY2004 Dec\.2003 39\.95 118\.45 June 2004 39\.95 158\.40 FY2005 Dec\.2004 46\.35 204\.75 June 2005 46\.35 251\.10 FY2006 Dec\. 2005 36\.75 287\.85 June 2006 36\.75 324\.60 FY2007 (a) Dec\. 2006 25\.30 350\.00 (a) Refers to the expected disbursement in the last semester of project implementation\.  99 ANNEX 7 Mexico III Basic Health Care Project Project Processing Budget and Schedule A\. Project Budget (IUS$'000) Actual Preparation, Appraisal and Negotiations B\. Project Schedule Actual Time taken to prepare the project 1 year Identification mission December 1999 Appraisal mission departure May 2001 Negotiations May 2001 Planned date of effectiveness OctoberNovember 2001 Prepared by: Secretariat of Health of Mexico and LCSHD Preparation assistance: PHRD Grant/UNAIDS World Bank Staff and Consultants who worked on the proiect include: Patricio Marquez (Team Leader, LCSHD); Claudia Macias, Lea Braslavski, Victor Ordofiez, Karina Kashiwamoto (LCCIC); Oscar Echeverri, Alberto G6nima\. Willy de Geyndt (Consultants); Michelle Gragnolati, Maria Colchao (LCSHD), Luis Carlos Guerrero (LCOAA); Ernesto Guerrero (UNAIDS); Mariangeles Sabella (LEGLA); Michael Fowler, Issam Abousleiman, Marie Khoury (LOAEL)\. Local Counterpart Team: President Fox Administration Staff and Consultants who worked on the project include: SSA: Julio Frenk, Enrique Ruelas, Cristobal Ruiz Gaytan, Miguel Angel Lezana, Manuel Vazquez, Mauricio Bailon, Octavio Gomez, Francisco Barrera, Agustin Mercado, Enrique Rios, Miguel Romero, Patricia Uribe, Elsa Sarti, Eduardo Jaramillo, Maria del Carmen Rodriguez, Carlos Godinez, Jorge Saavedra, Francisco Bunuelos, and Carlos Magis\. SHCP: Eduardo Escalante, Ricardo Ochoa, Amadeo Romero, Miguel Angel Gonzalez\. NAFIN: Luiz Catan, Aruturo Escobedo, Patricia Grey\. President Zedillo Administration Staff who worked on the pro ject include: SSA: Jose Antonio Gonzalez Fernandez, Manuel Urbina Fuentes, Mario Melgar Adalid, Gabriel R\. Manuell Lee, Miguel Angel Lezana Fernandez, Cesar Martello Diaz, Arturo Mufioz G6mez, Alba Moguel Ancheita, Manuel Vazquez Valdes, Agustin Mercado, Aurea Navarrete Arjona, Jose Sanchez Gaona, Irma Eugenia Gutierrez Mejia, iand Estela Cevallos Ferriz  100 Peer Reviewers: Internal Peer Reviewers: Richard Skolnik (SASHP); Hernan Montenegro (LCSHD); and Feranido Rojas (LCSPS) External Peer Reviewers: Willy de Geyndt (Principal Health Specialist, ret\.); Luiz Loures (UNAIDS)\.  101 ANNEX 8 Mexico 1II Basic Health Care Project Documents in the Project File CONAPO-PROGRESA, Indices de Marginaci6n 1995, Mexico, 1998\. CONAPO, La Situaci6n Demografica de Mexico, 1999\. Tema: Indice de Rezago Sociodemografico Urbano, Mdxico, 1999\. CONASIDA, Base de datos de casos de SIDA registrados acumulados al 31 de diciembre de 1997 por municipio\. INEGI, Indices de Bienestar a nivel Municipal (Mexico 2000) INI, MEMORIA INI, Plan Nacional de Desarrollo, 2001 - 2006\. Foros de Consulta Ciudadana a los Pueblos Indigenas de Mexico, Abril de 2001\. OPS, Desarrollo y Fortalecimniento de los Sistemas Locales de Salud\. Washington, D\.C\. 1989\. SSA, Programa de Armpliaci6n de Cobertura\. Reglas de Operaci6n\. 1999 - 2000, Mexico\. SEDESOL, Reglas de Operaci6n 1999\. Ramo General 26 Desarrollo Social y Productivo en Regiones de Pobreza\. Ramo Administrativo 20 Desarrollo Social, Mexico, Junio de 1999\. AHCP, Plan Nacional de Desarrollo 1995-2000\. Poder Ejecutivo Federal, Mexico, 1995\. SSA, Estudio de Regionalizaci6n Opeirativa, lnformaci6n General, Direccion General de Coordinaci6n Estatal, Mexico 1994\. SSA, Paquete Basico de Servicios de Salud\. Consejo National de Salud, Mexico 1995\. SSA, Ayuda de Memoria Misi6n del Banco Mundial\. Identification del Programa de Consolidation de Cobertura\. Mexico, diciembre 1999\. SSA, Ayuda Memnoria Misi6n Banco Mundial\. Avances del Programa de Consolidaci6n de Cobertura, M6xico, abril del 2000\. SSA, Ayuda Memoria Misi6n Banco Mundial\. Preparaci6n del Prograrna de Consolidaci6n de Cobertura\. Mexico, octubre 2000\. SSA, Ayuda Memoria Mision Banco Mundial\. Pre-Evaluaci6n del Programa de Consolidaci6n de Cobertura\. Mexico, febrero 2001\. SSA, Estudios de Regionalizacion Operativa 2000, PAC y PROGRESA\. Mexico 2000\. SSA, Hacia la Federalizacion de la Salud en Mexico\. Consejo Nacional de Salud\. Mexico, diciembre de 1998\. SSA, Informaci6n sobre Poblaci6n Indigena, Abril 30, 2001\.  102 SSA, La Descentralizaci6n de los Servicios de Salud: Una Responsabilidad Compartida\. Consejo Nacional de Salubridad\. Mexico, 1996\. SSA, Lineamientos de Operacion\. Programa de Ampliaci6n de Cobertura\. Cuadernos Tecnicos\. Mexico, 1997\. SSA, Manual de Organizaci6n del Centro de Uno a Doce Nucleos Basicos de Servicios de Salud\. Mexico, 1997\. SSA, Manual de Organizaci6n del Centro de Salud con Hospitalizaci6n\. Mexico, 1997\. SSA, Manual de Organizaci6n del Hospital Integral\. Mexico, 1998\. SSA, Manual de Procedimnientos para la Referencia y Contrarreferencia de Pacientes\. Mexico, 1997\. SSA, Modelo de Atenci6n a la Salud para Poblaci6n Abierta\. 1985, 1993, 1995, Mexico\. SSA, Paquete Esencial de Servicios de Salud, Abril de 2001\. SSA, Programa de Apoyo a los Servicios de Salud para Poblaci6n Abierta\. Mexico, 1999\. SSA, Programa de Ampliaci6n de Cobertura\. Una experiencia metodol6gica para la extensi6n de Servicios de Salud en Mexico, 1996-2000\. Mexico, 1999\. SSA, Prograrna de Atenci6n Primaria en Areas Marginadas\. Mexico, 1980\. SSA, Programa de Atencion a la Salud a la Poblaci6n Abierta Marginada en Grandes Urbes\. Mexico, 1981\. SSA, Programa de Calidad, Equidad y Desarrollo en Salud (PROCEDES), 2001 -2006\. SSA, Programa de Reforma del Sector Salud 1995-2000\. Poder Ejecutivo Federal, Mexico\. SSA, Programa de Reforna del Sector Salud 1995-2000 (19 estados PAC)\. Mexico, 1998\. SSA, Proyecto de Desarrollo de Jurisdicciones Sanitarias\. Mexico, octubre de 1994\. SSA, Esquema de Operaci6n del PCC, DGEC\. Mexico, Abril de 2000\. SSA/ Reglamento Interior de la Secretaria de Salud\. Mexico, Septiembre de 2000\. SSA, Cruzada Nacional por la Calidad de los Servicios de Salud, Febrero 2001\. World Health Organization\. The World Health Report 2000\. Health Systems: Improving Performance\. Geneva, 2000\. World Bank\. Mexico A Comprehensive Development Agenda for the New Era\. Washington, D\.C\., 2001\.  103 Additional documentation: INSTITUTO NACIONAL INDIGENISTA, Informaci6n Basica sobre los Pueblos Indigenas de Mexico, datos de 1995 http;//wwwjni\.qob\.mx PRESIDENCIA DE LA REPUBLICA, Oficina de Representaci6n para el Desarrollo de los Pueblos Indigenas\. httP://Dresidencia\.gob\.rmx Gobierno de los Estados Unidos Mexicanos/ Diario Oficial de la Federaci6n, Mexico DF 11 de Octubre 1999 Secretaria de Salud: Norma Oficial Mexicana para la Vigilancia Epidemiol6gica NOM-01 7-SSA2- 1994 Gobierno de los Estados Unidos Mexicanos/ Diario Oficial de la Federaci6n, Mexico DF 7 de Noviembre de 1995\. NOM-087-ECOL-1993, Gobierno de los Estados Unidos Mexicanos/ Diario Oficial de la Federaci6n, Mexico DF Secretaria de Salud\. CONASIDA\. MODIFICACION a la Norma Oficial Mexicana NOM-010-SSA2-1993, para la Prevenci6n y Control de la lnfecci6n por Virus de la Inmunodeficiencia Humana\. INEGI, Conteo Nacional de Poblaci6n 1995\. httP://wwwjinegi\.qob\.mx INEGI, Datos preliminares del Censo de Poblaci6n 2000\. http://www\.ineQi\.gob\.mx Oficina de Representacion para el Desarrollo de los Pueblos Indigenas\. Foros de Consulta Ciudadana a los Pueblos Indigenas\. Plan Nacional de Desarrollo 2001-2006, Mexico\. Qrganizaci6n Panamericana de la Salud\. Organizaci6n Mundial de la Salud\. Fortalecimiento de la Planificaci6n de las Actividades de Promnoci6n de Salud en las Americas\. Washington, D\.C\., EUA, 14 de marzo de 2001 Secretaria de Salud\.- Direcci6n General de Extensi6n de Cobertura\. El Programa de Ampliaci6n de Cobertura 1996-2000\. Recuento y Testimonio de un Esfuerzo de Equidad y Extensi6n de Servicios de Salud en Mexico\. Mexico, octubre del 2000\. Saavedra L6pez, Jorge A\. y Carlos Magis Rodriguez\. Costos y gastos en atenci6n medica del SIDA en Mexico\. Mexico: CONASIDA, 1998\. (Serie: Angulos del SIDA, 1) Uribe-Z6fliga, Patricia y Magis Rodriguez, Carlos (editores)\. La respuesta Mexicana al SIDA: mejores practicas\. Mexico: CONASIDA, 2000 (Serie Angulos del SIDA, 3)\. Uribe-Zuniga, Patricia, Carlos Magis Rodriguez y Enrique Bravo Garcia\. Aids in Mexico\. Journal of the International Association of Physician in AIDS Care\. Vol\. 4, no 11 (november 1998)\. World Bank/European Commission\. Confronting AIDS: Evidence from the Developing World: Expenditures on the Treatment and Prevention of HIV/AIDS in Mexico, pp\. 263-272\.  104 ANNEX 9 Status of Bank Group Operations in Mexico Operations Portfolio As of March 1, 2001 Total Undisbursed (Active) 3,009\.08 Total Undisbursed 38\.38 (Closed) Total Undisbursed (Active 3,047\.45 + Closed) Active Proiects Difference Between Last PSR Expected and Actual SPN Rating Oriainal Amount in Disbursements 8 USS Millions Project tD Project Name Development Implemen\. FY IBRD IDA GRANT Cancel\. Undisb\. Orig\. Frrn Obiectives Prooress Rev'd P048505 AGRICULTURAL PRODUCT S S 1999 444\.4 0 0 0 266\.3 47\.6 0 P060718 ALTERNATIVE ENERGY S S 2000 0 0 0 0 7\.5 3\.2 0 P007726 AQUACULTURE U U 1997 0 0 0 0 0 0 0 P007700 COMMUNITY FORESTRY S S 1997 15 0 0 0 7\.3 3\.2 0 P064887 DISASTER MANAGEMENT 2001 404 0 0 0 404 0 0 P070479 Edo de Mexico Structural Adjustment # 2001 505\.1 0 0 0 505\.1 0 0 Loan P065779 FEDERAL HIGHWAY MAINTENANCE S S 2001 218 0 0 0 218 0 0 PROJECT P007610 FOVI RESTRUCTURING S U 1999 505 0 0 0 364\.8 238 1 0 P066674 Indigenous and Community 2001 0 0 0 0 0 0 0 Biodiversity P044531 KNOWLEDGE & INNOV\. S S 1998 300 0 0 0 235\.7 33\.3 0 P007648 MEDIUM CITIES TRANSP S S 1993 200 0 0 23 105\.6 128\.6 105\.6 P060908 MESO AMERICAN CORRID 2001 0 0 0 0 0 0 0 P066938 MX GENDER (LIL) S S 2000 3\.1 0 0 0 3\.1 0 0 P007720 MX: HEALTH SYSTEM REFORM - S S 1998 700 0 0 0 150 150 0 SAL P040199 MX: BASIC EDUC\.DEVELOPMENT S S 1998 115 0 0 0 55\.6 31\.7 0 PHASE I  105 PHASE I P007689 MX: BASIC HEALTH II HS HS 1996 310 0 0 0 77\.6 77\.6 77\.6 P055061 MX: HEALTH SYSTEM REFORM TA S S 1998 25 0 0 0 10\.6 10\.6 0 P049895 MX: HIGHER ED\. FINANCING S S 1998 180\.2 0 0 0 156 37\.1 0 P007725 MX: PRIMARY EDUC\.I1 HS S 1994 412 0 0 40 48\.7 88\.7 48\.7 P034490 MX:TECHNICALEDUC/TRAINING S S 1995 265 0 0 30 111\.1 141\.1 6\.1 P007710 N\. BORDER I ENVIRONM S S 1994 368 0 0 301 36\.2 328\.1 50 P007701 ON-FARM & MINOR IRRI S S 1994 200 0 0 30 39\.3 69\.3 17 P050429 OZONE PROTECTION III S S 1998 0 0 13 0 10\.1 -1\.9 0 P007711 RURAL DEV\. MARG\.AREA S S 1998 47 0 0 0 33\.2 16\.1 0 P057530 RURAL DEV\.MARG\.ARII S S 2000 55 0 0 0 49\.5 0\.5 0 P007713 WATER RESOURCES MANA S S 1996 186\.5 0 0 0 131\.3 76\.2 18\.5 P007707 WATER/SANIT II U U 1994 0 0 0 0 0 0 0 Result Result 5458\.4 0 13 424 3026\.6 1479\.1 323\.4  106 CAS Annex B8 (IFC) for Mexico Mexico Statement of IFC's Held and Disbursed Portfolio As of 11/30/2000 (In US Dollars Millions) Held Disbursed FY Approval Company Loan Equity Quasi Partic Loan Equity Quasi Partic 1997 Grupo Minsa 16 10 0 24 16 10 0 24 1992/93/95/96/99 Grupo Posadas 25 0 10 10 25 0 10 10 1998 Grupo Sanfandila 9\.17 0 0 4\.4 7\.17 0 0 3\.4 1994/96/98/00 Heller Financial 0 0\.32 0 0 0 0\.32 0 0 2000 ITR 14 0 0 4 10\.9 0 0 3\.1 2000 Innopack 0 15 0 0 0 15 0 0 1994 Interceramic 7 0 6 1\.75 7 0 6 1\.75 2000/01 InverCap 0 0\.07 0 0 0 0\.06 0 0 1993 Masterpak 1\.2 0 0 0 1\.2 0 0 0 1998 Merida III 30 0 0 73\.95 28\.31 0 0 69\.79 1995/99 Mexplus Puertos 0 1\.41 0 0 0 1\.41 0 0 1996/99/00 NEMAK 0 0 0\.83 0 0 0 0\.83 0 1998 Punta Langosta 2\.5 1 0 4\.27 2\.5 1 0 4\.27 2000 Rio Bravo 50 0 0 59\.5 31\.96 0 0 38\.04 2000 Saltillo S\.A\. 35 0 0 43 13\.46 0 0 16\.54 1999 Sudamerica 0 15 0 0 0 15 0 0 1997 TMA 2\.77 0 2\.1 9\.6 2\.77 0 2\.1 9\.6 1992 Toluca Toll Road 6\.85 0 0 0 6\.85 0 0 0 1991/92 Vitro 0 0 0 0 0 0 0 0 1991 Vitro Flotado 3\.31 0 0 1\.38 3\.31 0 0 1\.38 1998 ZN Mxc Eqty Fund 0 25\.3 0 0 0 11\.88 0 0 1988/91/92/93/95 Apasco 12\.6 0 0 50\.4 12\.6 0 0 50\.4 1998 Ayvi 10 0 0 0 10 0 0 0 1990/92/96 BANAMEX 88\.21 0 0 27\.04 88\.21 0 0 27\.04 1997 Banco Bilbao MXC 70\.59 0 30 0 70\.59 0 30 0 1992 Banorte-SABROZA 2\.25 0 0 0 2\.25 0 0 0 1995/96 Baring Mex\. FMC 0 0\.02 0 0 0 0\.02 0 0 1995/99 Baring Venture 0 2\.73 0 0 0 1 0 0 1998 CIMA Mexico 0 4\.8 0 0 0 4\.8 0 0 1998 CIMA Puebla 7 0 0 0 3\.5 0 0 0 1994 CTAPV 3\.73 0 2\.32 0 3\.73 0 2\.32 0 0 Chiapas-Propalma 0 0\.8 0 0 0 0\.31 0 0 1997 Comercializadora 3\.06 0 2\.19 6\.25 3\.06 0 2\.19 6\.25 1999 Corsa 13 3 0 0 13 3 0 0 1993 Derivados 1\.1 0 0 0 1\.1 0 0 0 1997 Fondo Chiapas 0 4\.2 0 0 0 0\.43 0 0 1998 Forja Monterrey 13 3 0 13 13 3 0 13 1991/96 GIBSA 21\.64 0 10 72\.76 21\.64 0 10 72\.76  107 1993 GIDESA 6\.25 8 0 4\.25 6\.25 8 0 4\.25 1996/00 GIRSA 45 0 0 60 22\.71 0 0 30\.29 1993 GOTM 0\.82 0 0 0\.22 0\.82 0 0 0\.22 1997/98 Gen\. Hipotecaria 0 1\.2 0 0 0 1\.29 0 0 0 Grupo BBVA 0 2\.67 0 0 0 2\.67 0 0 1998 Grupo Calidra 12 6 0 10 12 6 0 10 1989 Grupo FEMSA 0 0 0 0 0 0 0 0 Total Portfolio: 513\.05 104\.52 63\.44 479\.77 440\.89 85\.19 63\.44 396\.08 Approvals Pending Commitment Loan Equity Quasi Partic 2000 Servicios 10500 2000 0 17700 2000 Teksid Aluminio 25000 0 0 0 2000 Teksid Hierro 15000 0 0 30000 1999 BANAMEX LRF 11 50000 0 0 0 1999 Baring BMPEF FMC 0 60 0 0 1998 Cima Hermosillo 7000 0 0 0 2000 Educacion 9700 0 0 0 2000 Hospital ABC 30000 0 0 14000 2000 Innopack 15000 0 0 0 Total Pending Commitment: 162200 2060 0 61700  108 Annex 10 III Basic Health Care Project Mexico at a glance 8125(00 Latin Upper- POVERTY and SOCIAL America middle- Mexico & Carib\. income Development diamond' 1999 Population, mid-year (millions) 97\.4 509 573 Life expectancy GNP per capita (Atlas method, US$) 4,410 3,840 4,900 GNP (Atlas method, US$ billions) 429\.6 1,955 2,811 Averape annual growth\. 1993-99 Population (%) 1\.7 1\.6 1\.4 Labor force (%) 3\.0 2\.5 2\.1 GpNP Gross per primary Most recent estimate (latest year available, 1993-99) capita enrollment Poverty (% of population below national poverty line) Urban population (% Df total populaton) 74 75 76 Life expectancy at birth (years) 72 70 70 Infant mortality (per 1,000 live births) 30 31 27 Child malnutrition (% of children under 5) 8 7 Access to safe water Access to improved water source (% of populabon) 83 75 78 Illiteracy (% of populahon age 15+) 9 12 10 Gross primary enrollment (%of school-age population) 114 113 109 -Mexico Male 116 \. \. Upper-middle-income group Female 113 KEY ECONOMIC RATIOS and LONG-TERM TRENDS 1979 1989 1998 1999 Economic ratios' GDP (US$ billions) 134\.5 223\.0 416\.3 483\.7 Gross domestic investmenVGDP 26\.0 22\.9 24\.3 23\.2 Trade Exports of goods and services/GOP 11\.2 19\.0 30\.8 30\.8 Gross domestc savingslGDP 24\.7 22\.9 22\.3 21\.9 Gross national savings/GDP 21\.7 20\.3 20\.5 20\.6 Current account balance/GDP -4\.1 -2\.6 -3\.9 -2\.9 Domestic A Interest paymentslGDP 2\.5 3\.5 2\.4 17 7 Investment Total debt/GDP 31\.8 42\.1 38\.4 34\.0 Savings Total debt serce/exports 72\.4 32\.9 19\.2 24\.6 Present value of debVGDP ,, 37\.4 33\.0 Present value of debtlexports 111\.5 100\.4 Indebtedness 1979-89 1989-99 1998 1999 1999-03 (average annual growth) GDP 1\.3 2\.9 4\.8 3\.7 4\.9 -exico GNP per capita -0\.9 1\.1 3,1 2\.5 3\.2 Upper-middle-income group Exports of goods and servces 84 13\.6 12\.0 13\.9 7\.4 STRUCTURE of the ECONOMY 1979 1989 1998 1999 Growth o0 investment and GDP I%) f% of GDP) 40 Agriculture 9\.8 7\.8 5\.3 5\.0 Industry 33\.4 29\.4 28\.5 28\.2 20 Manufacturing 22\.7 21\.9 21\.3 21\.1 0 Services 56\.7 62\.9 66\.3 66\.8 99 97 94 99 Private consumption 64\.4 68\.9 67\.3 68\.0 -40 General govemment consumption 10\.9 8\.3 10\.4 10\.0 _ GD1 - GDP imports of goods and services 12\.5 19\.1 32\.8 32\.0 1979-89 1989-99 1998 1999 Growth of exports and imports (%) (average annual growth) Agriculture 1\.2 1\.7 0\.8 3\.5 30 Industry 0\.9 3\.5 6\.3 3\.8 Is Manufacturing 1\.1 4\.0 7\.3 4\.1 Services 1\.8 2\.7 4\.5 3\.6 0 Private consumption 1\.4 2\.2 5\.5 4\.3 -15 General govemment consumption 3\.1 1\.7 2\.2 1\.0 Gross domestic investment -4\.3 4\.3 9\.5 1\.5 -30 Imports of goods and services -1\.1 11\.9 16\.5 12\.8 - Exports "mlmpols Gross national product 1\.2 2\.9 4\.8 4\.2 Note: 1999 data are preliminary estimates\. The diamonds show four key indicators in the country (in bold) compared with its income-group average\. If data are missing, the diamond will be incomplete\.  109 Mexico PRICES and GOVERNMENT FINANCE 1979 1989 1998 1999 Inflation (%) Domestic prices 4 (% change) Consumer prices \. 20\.0 15\.9 16\.7 30 Implicit GDP deflator 19\.6 26\.5 15\.4 15\.9 20 Government finance 1 0 (% of GOP, includes current grants) o Current revenue 25\.8 20 4 20\.7 94 95 96 97 se 90 Current budget balance -1\.8 2\.1 1 7 <- GDP clefator CPI Overall surplusideficit \. -4\.6 -1\.2 -1\.1 TRADE (US$ millions) 1979 1989 1998 1999 Fxport and import levels (US$ mill\.) Total exports (fob) 35,171 117\.460 136,391 150,000 Oil \. 7,876 7,134 9\.928 Agriculture 1,754 3,797 3,926 000 Manufactures \. 24,936 106\.062 122,085 100000 l - - i Total imports (cif) \. 34,766 125,373 141\.976 * Consumer goods \. 3,499 t1,109 12,175 50 0000 Intermediate goods 26,499 96,935 109,270 Capital goods \. 4,769 17,329 20,530 0 d 93 94 95 00 97 98 99 Export price index (1995=100) \. 96 95 96 Import price index (1995=100) \. 89 100 99 a Exports U imports Terms of trade (1995=100) \. 108 94 99 BALANCE of PAYMENTS (US$ millions) 1979 1989 1998 1999 Current accountbalanceto GDP (%) Exports of goods and services 15,131 42,362 12B\.982 148,083 0 Imports of goods and services 16,704 42,426 137\.801 155,465 l Resource balance -1,573 -63 -8,818 -7,382 -2E Net income -4,111 -6,302 -13,284 -13,083 Net current transfers 131 2\.544 6,012 6,313 -4 Current account balance -5,553 -5,821 -16,090 -14,153 6 Financing items (net) 5,868 6,093 18,227 14,746 Changes in net reserves -315 -272 -2,137 -594 ,3 Memo: Reserves including gold (US$ millions) \. 6,376 29,032 31,829 Conversion rate (DEC, locaWlUS$) 2 3E-02 2\.5 9 2 9 6 EXTERNAL DEBT and RESOURCE FLOWS 1979 1989 1998 1999 (US$ rrslions) Compositlon of 1999 debt (USS mill\.) Total debt outstanding anor disbursed 42,765 93,826 159,962 164,532 IBRD 1,731 7,821 11,514 10,804 A 10,504 5 IDA 0 0 0 0 G 30,006 _\. ___ 1 Total debt service 11,591 15,559 26,778 39,072 E 6,269 IBRD 221 1,245 2,024 2,171 IDA 0 0 0 0 Composition of net resource flows Official grants 27 37 32 Official creditors 284 936 -776 -1,262 Private creditors 3,798 -2,397 12,219 6,308 Foreign direct investment 1,332 3,037 10,238 11,568 Portfolio equity 0 0 730 3,769 World Bank program F: 107\.101 Commitments 527 2,325 2,212 1,616 A - IBRD E - Blateral Disbursements 326 1,297 1,283 839 8 - IDA D - Other multilateral F - Pnvate Principal repayments 76 677 1,257 1,326 c - IMF G - Short-tem Net flows 250 620 26 -487 Interest payments 145 567 767 846 Net transfers 105 52 -741 -1,332 Development Economics 8/25/00   MAP' SECTION   r,o laO, IBRD 23547 awdo ) CX r- -c- ~~~~~~~M E X I C O 9 AJA N\. ' > g \.N 91 e+ u\.i\.u + ~~~~~~~~~~~~- ~ ~ X X S D W iA'U-yS---\.-A\;A l -,,X, , N B/At Na\.g_ )cs ( > , X citi_ \. = S - _w -~ ~ ~~~' X\. Ob-6tfa fU§ : :\., L\.P A Cl> ,\.-fJa, vi, :kay N~T-A4 & pic O P A At 6N\.I V Q,d~ h\.6~- Diie ilw 8~~~y C -" Stty deie IT- ~ Moyoo Ovooco ~~~~~~~~~~~~~BELIZE Oo~~~Owata\. ~~~~eatoro own\. * ~~~~~~~~"y TopoaI~~~~~cIo ~HONDURAS ww~~~~~~~~~~~~~~ Aa*roowo ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~~ERj

APPROVAL

P175081

The World Bank Strengthening Risk Information for Disaster Resilience in Bhutan Project Information Document/ Identification/Concept Stage (PID) Public Disclosure Copy Concept Stage | Date Prepared/Updated: 16-Feb-2021 | Report No: PIDC232511 Feb 17, 2021 Page 1 of 11  The World Bank Strengthening Risk Information for Disaster Resilience in Bhutan BASIC INFORMATION A\. Basic Project Data Environmental and Project ID Parent Project ID (if any) Social Risk Project Name Classification Low Strengthening Risk P175081 Information for Disaster Resilience in Bhutan Region Country Date PID Prepared Estimated Date of Approval SOUTH ASIA Bhutan 16-Feb-2021 Financing Instrument Borrower(s) Implementing Agency Public Disclosure Copy National Center for Hydrology and Meteorology, Investment Project The Kingdom of Bhutan Department of Financing Disaster Management, Ministry of Works and Human Settlements PROJECT FINANCING DATA (US$, Millions) SUMMARY -NewFin1 Total Project Cost 2\.30 Total Financing 2\.30 Financing Gap 0\.00 DETAILS -NewFinEnh1 Non-World Bank Group Financing Trust Funds 2\.30 Climate Investment Funds 2\.30 B\. Introduction and Context Country Context Bhutan has seen rapid development and economic growth in the past decade while preserving its unique geographical, historical, and cultural characteristics through the Gross National Happiness (GNH) concept Feb 17, 2021 Page 2 of 11  The World Bank Strengthening Risk Information for Disaster Resilience in Bhutan as the guiding principle of development\. A small, landlocked country nestled in the Himalayas, Bhutan has steep mountains, deep valleys, and scattered settlements\. Much of the growth has been propelled by hydropower development, which have helped the government create fiscal space for investing in human and physical capital, allowing Bhutan to significantly improve services, education, and health\. Since the early 1980s, real GDP has grown at an average annual rate of 7\.5 percent, making Bhutan one of the fastest- growing countries in the world\. With Gross National Income per capita of US$3,080 in 2018, the country is approaching the threshold for upper-middle-income countries\. From 2007 to 2017, Bhutan reduced poverty by two-thirds, from 36 percent to 12 percent, based on the US$3\.20/day poverty line\. Bhutan is highly vulnerable to hydro-meteorological and seismic hazards, including flooding, landslides, glacial lake outbursts floods (GLOFs), earthquakes, landslides, cloudbursts, flash floods, windstorms and forest fires, a result of its geographical location and varied topography\. Floods and landslides pose major threats to people’s lives, assets, and infrastructure every monsoon season\. Between 1994 and 2016, some Public Disclosure Copy 87,000 people were affected and over 380 deaths occurred due to natural disasters in Bhutan\. In 2009, Cyclone Aila brought unprecedented rainfall and floods, affecting farmland and infrastructure with damages of approximately US$17 million (1\.2 percent of GDP)\. In 2009 and 2011, Bhutan was struck by two high- magnitude earthquakes with a damage and loss of US$52\.6 million (4\.3 percent of GDP) and US$24\.5 million (1\.4 percent of GDP) respectively\. Climate change is increasing Bhutan’s vulnerability, increasing its exposure to GLOFs\. Climate change models indicate that Bhutan will experience rapid changes in weather patterns, with a temperature increase of over 1\.9°C and a precipitation increase of more than 6 percent\. Bhutan’s 2011 Climate Change Vulnerability Assessment predicts a warming trend in annual temperature and high levels of variability and uncertainty in annual precipitation\. These changes are expected to lead to shifts in seasonal stream flows, ecosystems, agricultural practices, and distributions of species, depending on habitat changes\. Climate change will also affect Bhutan’s water resources, which need to be actively managed to meet population and production needs\. As Bhutan’s urban population is projected to increase from 37\.8 percent in 2017 to 56\.8 percent by 2047 driven by rural-urban migration, people, assets, jobs and economic potential will increasingly concentrate in urban areas\. The majority of the country’s infrastructure is located along drainage basins that are highly vulnerable to flooding, particularly riverine flooding caused by heavy monsoon rains and glacial melt\. The country’s urban areas are vulnerable to urban flooding due in part to inadequate planning of drainage systems and weak hydrometeorological information\. Historical trends indicate that flooding is the most frequently occurring hazard and accounts for the largest percentage of mortality\. Continued failure in integrating disaster and climate resilience into the built environment will inevitably pose a catastrophic threat to the country’s ability to sustain growth and undermine the development effort of the Royal Government of Bhutan (RGOB)\. Sectoral and Institutional Context The RGOB has put in place a policy framework for integrating climate and disaster risk management (DRM) in development activities, but its practice and implementation are constrained by limited data, technical Feb 17, 2021 Page 3 of 11  The World Bank Strengthening Risk Information for Disaster Resilience in Bhutan capacity and financing\. Bhutan enacted its Disaster Management (DM) Act in 2013 and has a National DRM Strategy (2017) and a Roadmap for DRM (2019), which were prepared by the Department of Disaster Management (DDM) under the Ministry of Home and Cultural Affairs (MoHCA)\. These strategic documents are guided by the Five-Year Plans (FYP)\. The DRM strategy identifies priority actions for improving the understanding of disaster risks and strengthening risk governance system in accordance with the Sendai Framework for Disaster Risk Reduction\. The roadmap provides a detailed plan for implementing the strategy, including planned activities, outputs, key performance indicators, timeframe and budget\. However, the implementation of the strategy and roadmap has been constrained by the limited technical capacity and financial resources as well as the inadequate attention to sector-specific risk information needs\. A key constraint in this regard has been the lack of institutional mechanisms fostering multi-agency coordination to allow for systematic and common approaches to data sharing and developing risk information and decision support\. Different technical departments and agencies are responsible for Public Disclosure Copy monitoring multiple hazards, assessing risk and vulnerability of communities, critical infrastructure and other assets, and undertaking mitigating actions to reduce their impact\. Data is therefore disaggregated, scattered, not always digitized and not available in formats that allow for analyses\. The absence of a user friendly, accessible, and reliable platform to share information and coordinate among the relevant stakeholders is leading to duplication of efforts and inefficient use of resources\. The RGOB has recognized the urgent need for developing a common platform to bring together concerted efforts for enhancing and sharing risk information as well as a risk-based decision support system for identifying vulnerable communities and integrating risk information in planning and development\. Similarly, with increased demand in meteorological and hydrological services, the National Center for Hydrology and Meteorology (NCHM) is faced with the challenge to regulate its data sharing and provision of services\. Therefore, NCHM is currently formulating a National Hydrology and Meteorology Policy to ensure proper communication of weather, climate and hydrological hazards and to regulate the sharing of information\. Such a policy will also institute the necessary authority and institutional arrangements to ensure follow-up actions after dissemination of information\. Natural disasters could pose significant damage and constraints on essential services, including health systems which can be exacerbated by the absence of adequate risk information\. The pandemic has already revealed the significant stress put on the health systems, other critical infrastructure and public finances, hindering prompt and adequate health emergency response and recovery with risk of a prolonged recession\. Natural disasters of any scale will add to the country’s vulnerabilities further\. Risk-based decision support and weather and climate information can help reduce the risks to vulnerable communities and economic assets and provide critical information for preparedness that can also enhance response in the case of health emergencies such as COVID-19\. With more than half of the country’s workforce remains in agriculture, which is highly vulnerable to climate change impacts, strengthening agrometeorological information is essential\. Agriculture in the country is dominated by rainfed dry land and wetland farming as most of the water sources are dependent on monsoon rainfalls\. About two-thirds of the heads of poor households work in agriculture, compared to only about a third of non-poor household heads\. The impact of climate change on the agriculture sector is Feb 17, 2021 Page 4 of 11  The World Bank Strengthening Risk Information for Disaster Resilience in Bhutan being manifested in the form of shortage of irrigation water, GLOF, flash floods, windstorms, erratic rains, outbreak of new pests and diseases, and increasing incidences of forest fire\. While the reliability of NCHM’s 3-day weather forecasts have improved over the last few years, provision of sector-oriented hydromet services is still limited\. In addition, the rural farmers have limited access to reliable, accurate, and timely early warnings and risk information including COVID-19 outbreaks\. Therefore, it is imperative to deliver adequate agromet advisories for improving and protecting the livelihood of farmers, including the development of effective mechanisms for communicating to the end beneficiaries, especially for high value crops\. The country’s construction industry is facing challenges in integrating risk information into infrastructure development and professionalizing the industry for promoting a quality-built environment\. The industry heavily relies on foreign workers and imported construction materials with an annual remittance of BTN12\.76 billion (US$166\.97 million)\. The 2016 Performance Audit of Disaster Management identified Public Disclosure Copy inadequate application of engineering design standards and lack of proper planning, design, and workmanship in construction works\. To address this challenge, the 12th FYP aims to professionalize the country’s construction sector through the enactment of the Construction Industry Act\. In the interim, a National Construction Industry Policy was endorsed by the RGOB in February 2020\. Under the planned Act, the Ministry of Works and Human Settlements (MoWHS) will establish the Engineering Council of Bhutan for registering, regulating, and professionalizing the country’s 4,000 practitioners\. In addition, the Construction Development Board (CDB) will be reestablished as the Construction Development Authority (CDA) under the planned Act to (i) strengthen the system for registration, certification, and licensing of more than 2,500 contractors; (ii) institute a mechanism to regulate and enforce strict compliance of the regulation, quality and standards; and (iii) carry out capacity building of contractors\. Professionalization of the country's construction industry underpinned by institutional strengthening and capacity building of the Engineering Council and CDA is critical to enhancing the quality and resilience of Bhutan's built environment\. Relationship to CPF The proposed project is closely aligned with the World Bank Group (WBG)’s Bhutan Country Partnership Framework (CPF) for FY20-24\. The CPF presents an integrated framework of WBG support to help Bhutan achieve inclusive and sustainable development through private sector-led job creation\. One of the strategic focus areas is resilience with a cross-cutting foundation on leveraging digital technologies to strengthen governance and implementation capacity\. Reducing the vulnerability to natural disasters and climate change is critical for strengthening the livelihoods of low-income populations dependent on agriculture and competitiveness of affected sectors such as agriculture, roads and construction\. The CPF recognizes that digital technologies and the use of such tools are critical part of DRM\. The proposed activity is also aligned with the Royal Government of Bhutan’s 12th Five-year Plan (FYP) for 2018-2023\. The objective of the 12th FYP is to create a “just, harmonious and sustainable society through enhanced decentralization”\. The proposed project will contribute to achieving the National Key Result Area Feb 17, 2021 Page 5 of 11  The World Bank Strengthening Risk Information for Disaster Resilience in Bhutan #6 on Carbon Neutrality, Climate and Disaster Resilience, #9 on Infrastructure, Communication and Public Services, #14 on Healthy and Caring Society, and #15 on Sustainable Human Settlements\. C\. Project Development Objective(s) Proposed Development Objective(s) To enhance the Royal Government of Bhutan’s capacity in developing and using multi-hazard risk information for development planning in targeted sectors\. Key Results The proposed project is expected to deliver the following key results: ï‚ Multi-Hazard Risk Decision Support System developed and adopted for planning in targeted sectors\. Public Disclosure Copy ï‚ Implementation of Agromet Decision Support System enhanced for service delivery in targeted gewogs\. ï‚ Technical capacity of professionals enhanced for implementing quality construction\. D\. Preliminary Description Activities/Components The proposed project will be financed by the Pilot Program for Climate Resilience of the Climate Investment Fund and has the following components: ï‚ Component A\. Establishment of a Multi-hazard Risk Decision Support System; ï‚ Component B\. Strengthening Hydromet and Agromet Services Delivery; and ï‚ Component C\. Professionalization of the Construction Industry for Green and Resilient Built Environment\. Component A will provide national-level multi-hazard risk information, which will form the foundation for integrating risk information into targeted sectors such as agriculture (Component B) and construction (Component C)\. The project builds on the Bank’s past and ongoing engagement in the country, including the Bhutan Hydromet Services and Disaster Resilience Project (P154477), Preparation of Strategic Program for Climate Resilience (P159600), a TA on Capacity Building for Climate Resilient Infrastructure (P158723), and Development Policy Financing (DPF) with Catastrophe Deferred Drawdown Option (Cat DDO) (P173008)\. Component A\. Development of a Multi-Hazard Risk Decision Support (MHRDS) System (US$1\.7 million) At the request of RGOB and with Bank technical assistance support, DDM is coordinating an activity on stocktaking of existing risk data, identification of design elements, and action planning for conducting a Feb 17, 2021 Page 6 of 11  The World Bank Strengthening Risk Information for Disaster Resilience in Bhutan nation-wide multi-hazard risk assessment\. This component will build on DDM’s effort and provide support on developing and establishing a functional MHRDS platform through the following activities: Development of MHRDS – The project will conduct a nation-wide multi-hazard risk assessment with a focus on high-risk hazards (earthquakes, floods and landslides), priority sectors (e\.g\., agriculture, construction) and vulnerable communities\. It will develop both web-based and mobile applications to better understand the climate and disaster risks that Bhutan faces\. Learning from experiences in the region, the web-based application is expected to have a GIS based decision support system that determines potential impact and empowers policymakers, operational users of Incident Response System, sectoral users and community members with necessary early warning information for decision making during all phases of disaster management\. The mobile application will help communicate alerts to local disaster managers and communities and receive feedback on alerts and actions taken on the ground\. The project will explore a way to synchronize or link the National Statistics Bureau (NSB)’s Data Portal that has been recently developed Public Disclosure Copy with the MHRDS\. Support the formulation of a National Disaster and Climate Risk Information Policy – In order to sustain the efforts to enhance risk information and keep the risk-based decision support system updated and dynamic, the DDM recognizes the need to formulate a National Disaster and Climate Risk Information Policy\. The findings and lessons learned from the MHRDS System development and the national level multi-hazard risk assessment for priority hazards are expected to inform the formulation of this policy\. The policy is expected to guide improvement in collection, reliability and use of risk related data in development activities\. It will also underpin the recent and ongoing investments in improving risk information such as the Disaster Management Information System managed by the DDM and the proposed MHRDS\. Capacity building, advocacy, and implementation of the system at all levels – This activity will support the rolling out of trainings at all levels including policymakers, implementing agencies, sectoral and private sector users, as well as community members on the use of the risk information and the decision support system and ways to respond to the alerts\. Trainings will also be provided to enhance the capacity of the government officials to improve the multi-hazard risk assessment based on which the MHRDS can be further enhanced\. The project will also develop Standard Operating Procedures (SOPs) to improve integration of risk information into plans at the Thromde and district levels and conduct pilots\. The activity will also explore the potential for developing specialized applications for integrating risk information into critical private sector- driven areas (agribusiness, tourism, construction)\. Support from the project will help RGOB (through the National Disaster Management Authority chaired by the Prime Minister) activate the Inter-Ministerial Taskforce (IMT)\. The DM Act defines that the IMT is responsible for reviewing (i) hazard zonation and vulnerability maps, (ii) disaster risk reduction and disaster management activities and (iii) national standards, guidelines, and SOPs for disaster management\. The DDM will lead the formulation of the IMT who will review and approve the risk maps and information generated through the project\. It will consist of technical experts from relevant agencies and ministries and chaired by the Head of the DDM\. Feb 17, 2021 Page 7 of 11  The World Bank Strengthening Risk Information for Disaster Resilience in Bhutan Component B\. Strengthening Hydromet and Climate Services Delivery (US$300,000) This component will support the NCHM in formulating a National Hydrology and Meteorology Policy through organization of stakeholder consultations and workshops and support its implementation\. NCHM is currently developing the National Hydrology and Meteorology Policy with technical support from the World Bank\. It will provide a regulatory framework for the country allowing NCHM to: (i) enhance its provision of hydromet, climate and early warning services; (ii) ensure it retains a primary role in acquisition of such data and information; (iii) provide guidance for data use and sharing by others; (iv) promote quality-controlled methods for hydromet data measurement across agencies; and (v) systematize processes for early warning to ensure their integrity and accuracy\. The policy is expected to ensure that weather forecasts and warnings of hydro-meteorological hazards and climate trends are authoritative, actionable and communicated such that the information is accessible by those at risk and those responsible for the safety and security of the communities\. The policy will also support Bhutan in structuring regional collaboration for strengthening its Public Disclosure Copy capacity to deliver such services\. This component will also develop a technical guidance note to help NCHM prepare design and specifications for the planned dedicated 24/7 National Weather and Flood Warning Center\. This technical note will include specifications for (i) room and space requirements along with minimal sizes required, (ii) electrical and communication outlets, (iii) equipment including on necessary backups, and (iv) internet connectivity and other telecommunication items\. Since a public land is not yet allocated for the construction of the center, the engineering design and drawings will not be supported through the project\. The NCHM will identify a public land in compliance with the development control regulations and avoid the environmentally and culturally protected areas\. In addition, this component will enhance the generation and use of disaster and climate risk information in the agriculture sector, with potential focus on high value crops, through delivery of agromet services at local levels for farm and water users (irrigations points)\. Activities will focus on the implementation of an agromet roadmap that has been prepared through RGOB request with Bank technical assistance\. These will include (i) support for operationalizing the existing Agromet Decision Support System (ADSS [www\.agromet\.gov\.bt/LandingPageInfo/landing_page]) that integrates weather forecasts to enable real-time monitoring and data analysis for enhancing agricultural production and farm management; (ii) design of SMS and mobile applications to share critical weather and COVID-19 information with farmers and farm-level vendors in remote areas (the mobile applications will enable receiving feedback from farmers as the end users, which will also ease the collection and transfer of data from farm levels and research centers into the ADSS); (iii) a targeted roadmap for disseminating these critical information through improved digital connectivity and network coverage in collaboration with the private sector; and (iv) design of a digital geospatial platform for mapping the scattered and fragmented landholdings, agroecological zones and dominant crops grown across the country to identify the priority vulnerable areas for climate services\. Component C\. Professionalization of the Construction Industry for Green and Resilient Built Environment (US$300,000) Feb 17, 2021 Page 8 of 11  The World Bank Strengthening Risk Information for Disaster Resilience in Bhutan This component aims to build the capacity of the construction industry in integrating risk information into buildings and infrastructure designs, construction, and operation & maintenance (O&M)\. The project will mobilize a Bank-executed TA to MoWHS to support its effort in implementing the National Construction Industry Policy 2020 and National Housing Policy 2020, which lay the regulatory and institutional foundation for improving the quality of built environment in Bhutan\. Based on international best practices and lessons learned, the TA will support the MoWHS in formulating (i) the National Construction Bill, (ii) a draft framework for the Engineering Council of Bhutan for registering and certifying professionals, (iii) recommendations on the Construction Quality Compliance Mechanism (CQCM) for regulating and enforcing strict compliance of quality and standards across all types of infrastructure and buildings in the country, (iv) a draft framework for guiding the resilient, green and affordable housing development\. The recipient-executed grant will be used to (i) formulate guidelines on quality infrastructure development to be adopted by the Engineering Council of Bhutan as per the National Construction Act; (ii) develop training Public Disclosure Copy curricula on CQCM and conduct training of trainers (TOT) and targeted training of government officials, practitioners and contractors; (iii) finalize and implement the CQCM through pilots and the development and adoption of a roadmap; (iv) design web-based and mobile applications for adopting CQCM nationwide\. The CQCM is expected to consist of a standard quality assurance and quality control framework including stepwise processes, SOPs and checklists for managing, monitoring and auditing the quality of all types of infrastructure and buildings in the country\. Environmental and Social Standards Relevance E\. Relevant Standards ESS Standards Relevance Assessment and Management of Environmental and Social ESS 1 Relevant Risks and Impacts ESS 10 Stakeholder Engagement and Information Disclosure Relevant ESS 2 Labor and Working Conditions Relevant Resource Efficiency and Pollution Prevention and ESS 3 Not Currently Relevant Management ESS 4 Community Health and Safety Not Currently Relevant Land Acquisition, Restrictions on Land Use and Involuntary ESS 5 Not Currently Relevant Resettlement Biodiversity Conservation and Sustainable Management of ESS 6 Not Currently Relevant Living Natural Resources Indigenous Peoples/Sub-Saharan African Historically ESS 7 Relevant Underserved Traditional Local Communities ESS 8 Cultural Heritage Not Currently Relevant Feb 17, 2021 Page 9 of 11  The World Bank Strengthening Risk Information for Disaster Resilience in Bhutan ESS 9 Financial Intermediaries Not Currently Relevant Legal Operational Policies Safeguard Policies Triggered Explanation (Optional) Projects on International Waterways OP No 7\.50 Projects in Disputed Areas OP 7\.60 No Summary of Screening of Environmental and Social Risks and Impacts This Small Grants project will involve activities such as supporting the formulation of policies, and strengthening borrower capacity\. No construction related activities will be involved in this project\. The Environmental and Social due diligence of the project concluded the E&S risk can be categorized as "Low"\. Public Disclosure Copy CONTACT POINT World Bank Contact : Arati Belle Title : Senior Disaster Risk Managemen Telephone No : 5220+31167 / Email : Contact : Naho Shibuya Title : Disaster Risk Management Speci Telephone No : 5220+33048 Email : Borrower/Client/Recipient Borrower : The Kingdom of Bhutan Implementing Agencies Implementing National Center for Hydrology and Meteorology Agency : Contact : Karma Dupchu Title : Director Telephone No : 975-2-327202 Email : kdupchu@nchm\.gov\.bt Implementing Department of Disaster Management Agency : Contact : Jigme Namgyal Title : Director General Telephone No : 975-2-325035 Email : jtnamgyal@mohca\.gov\.bt Implementing Ministry of Works and Human Settlements Feb 17, 2021 Page 10 of 11  The World Bank Strengthening Risk Information for Disaster Resilience in Bhutan Agency : Contact : Karma Dupchuk Title : Director Telephone No : 975-2-327998 Email : kdupchuk@mowhs\.gov\.bt FOR MORE INFORMATION CONTACT The World Bank 1818 H Street, NW Washington, D\.C\. 20433 Telephone: (202) 473-1000 Web: http://www\.worldbank\.org/projects Public Disclosure Copy Feb 17, 2021 Page 11 of 11

APPROVAL

P099808

 Document of The World Bank Report No: ICR00002046 IMPLEMENTATION COMPLETION AND RESULTS REPORT (IDA-41790 IDA-H2280 TF-56631 TF-57342) ON A CREDIT IN THE AMOUNT OF SDR 2\.5 MILLION (US$ 3\.5 MILLION EQUIVALENT) TO GEORGIA FOR AN AVIAN INFLUENZA CONTROL AND HUMAN PANDEMIC PREPAREDNESS AND RESPONSE PROJECT UNDER THE GLOBAL PROGRAM FOR AVIAN INFLUENZA (GPAI) December 19, 2011 Sustainable Development Department South Caucasus Country Unit Europe and Central Asia Region  CURRENCY EQUIVALENTS (Exchange Rate Effective November 10, 20111) Currency Unit = Lari (GEL) GEL 1\.00 = US$ 0\.60 US$ 1\.00 = GEL 1\.66 SDR 1\.00 = US$ 1\.57 US$ 1\.00 = SDR 0\.64 FISCAL YEAR January 1-December 31 ABBREVIATIONS AND ACRONYMS A/H1N1 Influenza Virus A “Swine Fluâ€?, Strain Associated with recent Human Influenza Pandemic A/H5N1 Influenza Virus A “Bird Influenzaâ€?, Highly Pathogenic Strain of Global Concern AH Animal Health AI Avian Influenza ASF African Swine Flu BIP Border Inspection Post BSL Bio Safety Level BTS Blood Transfusion Services CAS Country Assistance Strategy CF Compensation Fund CRL Central Reference Lab EA Environmental Assessment EMP Environmental Management Plan ERR Economic Rate of Return EU European Union FAO Food and Agriculture Organization FM Financial Management DoD Department of Defense DTRA US Defence Threat Reduction Agency GoG Government of Georgia GPAI Global Program for Avian Influenza GSCAIG Governmental Steering Commission on Avian Influenza in Georgia HPAI Highly Pathogenic Avian Influenza ICR Implementation Completion and Results Report ICU Intensive Care Unit IDA International Development Association ILI Influenza-like- illnesses IMTF Inter-ministerial Task Force ii IPH Institute of Public Health KAP Knowledge, Attitudes, Practice M&E Monitoring and Evaluation MoA Ministry of Agriculture MoLHSA Ministry of Labor, Health &Social Affairs MTR Mid-Term Review NCDC National Center for Disease Control NIPP National Influenza Pandemic Preparedness Plan NPAP National Pandemic Action Plan NPV Net Present Value NSVFS National Service for Veterinary and Food Safety OIE World Animal Health Organization (Office International des Epizooties) OP/BP Operational Policies/Bank Policies PAD Project Appraisal Document PCC Project Coordination Center PHC Primary Health Care PCR Polymerase Chain Reaction PDO Project Development Objective PHRD Japan Policy and Human Resources Development Fund PIT Project Implementation Team PMU Project Management Unit PPE Personal Protection Equipment PR Public Relations PVS Performance of veterinary services SOP Standard Operating Procedures SARS Severe Acute Respiratory Syndrome SRS Structural reforms Support Project UNICEF UN International Children’s Fund USAID United States Agency for International Development WAHIS World Animal Health Information System WHO World Health Organization Vice President: Philippe Le Houérou Country Director: Asad Alam Sector Manager: Dina Umali-Deininger Project Team Leader: Doina Petrescu ICR Lead Author: Nicolas Ahouissoussi iii  GEORGIA AVIAN INFLUENZA CONTROL AND HUMAN PANDEMIC PREPAREDNESS AND RESPONSE PROJECT CONTENTS Data Sheet A\. Basic Information…………………………………………………………………\.v B\. Key Dates…………………………………………………………………………\.v C\. Ratings Summary……………………………………………………\.……………v D\. Sector and Theme Codes…………………………………………………………\.vi E\. Bank Staff………………………………………………………………………\. vi F\. Results Framework Analysis……………………………………………………\.vii G\. Ratings of Project Performance in ISRs………………………………………\.xvii H\. Restructuring……………………………………………………………………xvii I\. Disbursement Graph……………………………………………………………\.xvii Main Report 1\. Project Context, Development Objectives and Design\. …… \.1 2\. Key Factors Affecting Implementation and Outcomes…………………………\.4 3\. Assessment of Outcomes \. …8 4\. Assessment of Risk to Development Outcome \. 14 5\. Assessment of Bank and Borrower Performance \. ……\.15 6\. Lessons Learned \. \.17 7\. Comments on Issues Raised by Borrower/Implementing Agencies/Partners \. …17 Annex 1\. Project Costs and Financing \. 19 Annex 2\. Outputs by Component \. 20 Annex 3\. Economic and Financial Analysis \. 27 Annex 4\. Bank Lending and Implementation Support/Supervision Processes \. 35 Annex 5\. Beneficiary Survey Results \. 37 Annex 6\. Stakeholder Workshop Report and Results \. 38 Annex 7\. Summary of Borrower's ICR and/or Comments on Draft ICR \. 39 Annex 8\. Comments of Cofinanciers and Other Partners/Stakeholders \. 41 Annex 9\. List of Supporting Documents \. \.43 MAP………\.………………………………………………………………………\.44 iv A\. Basic Information Avian Influenza Control & Human Pandemic Country: Georgia Project Name: Preparedness & Response Project IDA-41790,IDA- Project ID: P099808 L/C/TF Number(s): H2280,TF-56631,TF- 57342 ICR Date: 11/17/2011 ICR Type: Core ICR REPUBLIC OF Lending Instrument: ERL Borrower: GEORGIA Original Total XDR 5\.00M Disbursed Amount: XDR 2\.98M Commitment: Revised Amount: XDR 5\.00M Environmental Category: B Implementing Agencies: GHSPIC PCC, Ministry of Agriculture Cofinanciers and Other External Partners: B\. Key Dates Revised / Actual Process Date Process Original Date Date(s) Concept Review: 03/23/2006 Effectiveness: 08/08/2006 08/08/2006 Appraisal: 04/01/2006 Restructuring(s): Approval: 05/31/2006 Mid-term Review: 03/31/2008 03/31/2008 Closing: 08/31/2009 06/30/2011 C\. Ratings Summary C\.1 Performance Rating by ICR Outcomes: Moderately Satisfactory Risk to Development Outcome: Moderate Bank Performance: Moderately Satisfactory Borrower Performance: Moderately Satisfactory C\.2 Detailed Ratings of Bank and Borrower Performance (by ICR) Bank Ratings Borrower Ratings Quality at Entry: Moderately Satisfactory Government: Moderately Satisfactory Implementing Quality of Supervision: Moderately Satisfactory Moderately Satisfactory Agency/Agencies: v Overall Bank Overall Borrower Moderately Satisfactory Moderately Satisfactory Performance: Performance: C\.3 Quality at Entry and Implementation Performance Indicators Implementation QAG Assessments (if Indicators Rating Performance any) Potential Problem Project Quality at Entry Yes None at any time (Yes/No): (QEA): Problem Project at any time Quality of Supervision Yes None (Yes/No): (QSA): DO rating before Moderately Closing/Inactive status: Satisfactory D\. Sector and Theme Codes Original Actual Sector Code (as % of total Bank financing) Agricultural extension and research 20 20 General public administration sector 41 41 Health 34 34 Other social services 5 5 Theme Code (as % of total Bank financing) Health system performance 14 14 Other communicable diseases 29 29 Participation and civic engagement 14 14 Pollution management and environmental health 14 14 Rural services and infrastructure 29 29 E\. Bank Staff Positions At ICR At Approval Vice President: Philippe H\. Le Houerou Shiego Katsu Country Director: Asad Alam D-M Dowsett-Coirolo Sector Manager: Dina Umali-Deininger Juergen Voegele Project Team Leader: Doina Petrescu/Nicolas Ahouissoussi Frauke Jungbluth ICR Team Leader: Nicolas Ahouissoussi ICR Primary Author: Nicolas Ahouissoussi vi F\. Results Framework Analysis Project Development Objectives (from Project Appraisal Document) The overall development objective of the project is to minimize the threat posed to humans and the poultry industry in Georgia by HPAI and other zoonoses in domestic poultry, and to prepare for, control, and respond to influenza pandemics and other infectious disease emergencies in humans\. To achieve this, three areas would be supported by the project: (i) prevention; (ii) preparedness and planning; and (iii) response and containment\. Revised Project Development Objectives (as approved by original approving authority) (a) PDO Indicator(s) Original Target Actual Value Formally Values (from Achieved at Indicator Baseline Value Revised approval Completion or Target Values documents) Target Years Evidence of an effective and intersectoral surveillance system in place for both animals Indicator 1 : and humans for HPAI and other zoonozes While surveillance systems have been improved and an integrated lab system management for Limited surveillance public health and Value Contain spread and conducted - no human AI veterinary services quantitative or number of cases\. No cases and no human under the National Qualitative) human pandemic pandemic Reference Laboratory (NRL) has been designed, the inter- sectoral collaboration has still to be improved Date achieved 03/09/2006 06/30/2011 05/31/2011 Comments (incl\. % achievement) Evidence of institutional mechanisms in place for effective implementation of a Indicator 2 : contingency plan for endemic preparedness An integrated and multi-sectoral Sustainable contingency plan for Value mechanisms in place pandemic No contingency plan quantitative or with demonstrated preparedness has existing Qualitative) capacity to respond been approved by the to outbreak Government\. The response to the Swine Flu pandemic in 2010 vii  was exemplary and demonstrated the capacity to respond to a crisis / outbreak Date achieved 03/09/2006 06/30/2011 05/31/2011 Comments (incl\. % achievement) Contained outbreaks in poultry with no demonstrated transmission from birds to Indicator 3 : humans Surveillance, The animal health and diagnostics and Systems operational\. Value human health systems are containment system No outbreaks in quantitative or only moderately prepared fully operational as poultry during the Qualitative) for an outbreak or a judged by FAO and project life pandemic WHO Date achieved 03/09/2006 06/30/2011 05/31/2011 Comments (incl\. % achievement) (b) Intermediate Outcome Indicator(s) Original Target Actual Value Formally Values (from Achieved at Indicator Baseline Value Revised Target approval Completion or Values documents) Target Years Indicator 1 : National AI strategy developed and adopted by the Government AI strategy developed and Value National AI strategy operational\. (quantitative National AI strategy in draft operational Contingency plan or Qualitative) developed and operational Date achieved 03/09/2006 06/30/2011 05/31/2011 Comments (incl\. % achievement) Indicator 2 : Key regulatory changes agreed Draft PhytoSanitary, Veterinary and Food Veterinary Safety legislation Value Veterinary legislation legislation in line developed and sent to (quantitative inconsistent with newly with international EU for review\. Plan or Qualitative) established structures standards to be finalized and the Food Codex to be issued in fall 2011 Date achieved 03/09/2006 06/30/2011 05/31/2011 Comments viii (incl\. % achievement) Indicator 3 : Capacity of Food Safety Agency strengthened Food Agency Food Safety Agency Value established and Food Safety Agency not established and (quantitative assessed satisfactory\. established system assessed and or Qualitative) Capacity found satisfactory strengthened Date achieved 03/09/2006 06/30/2011 05/31/2011 Comments (incl\. % achievement) Indicator 4 : Procedures and standards upgraded and staff trained Procedures in line Value Procedures upgraded with international (quantitative Procedures inadequate and staff trained in standards and staff or Qualitative) their use trained Date achieved 03/09/2009 06/30/2011 05/31/2011 Comments (incl\. % achievement) Indicator 5 : Certification of readiness rating obtained from WHO/OIE Value PVS Completed; (quantitative Not obtained Fully obtained WHO review of or Qualitative) Contingency Plan Date achieved 03/09/2006 06/30/2011 05/31/2011 Comments (incl\. % achievement) Indicator 6 : Self assessment of the veterinary services executed Value Assessment (quantitative No self assessment PVS conducted completed or Qualitative) Date achieved 03/09/2009 06/30/2011 05/31/2011 Comments (incl\. % achievement) Indicator 7 : Pre-screening capacity at field level strengthened Value 100% of staff able 100% of staff trained (quantitative Inadequate to pre-screen and capable of pre- or Qualitative) adequately screening Date achieved 03/09/2006 06/30/2011 05/31/2011 Comments (incl\. % achievement) Indicator 8 : Strengthening of regional and rayon veterinary service accomplished Value Not well equipped, manual Sustained quality Regional veterinary (quantitative lacking service services strengthened ix or Qualitative) Date achieved 03/09/2009 06/30/2011 05/31/2011 Comments (incl\. % achievement) Compensation Fund established with clear operating modalities and compensation Indicator 9 : funds available for quick disbursement Value Procedures and (quantitative Not established Not established funding in place or Qualitative) Date achieved 03/09/2006 06/30/2011 05/31/2011 Comments Only a compensation manual was developed and the Government expressed its (incl\. % commitment to compensate farmers in case of an outbreak of avian influenza or other achievement) animal diseases which could require culling and compensation Indicator 10 : Public informed about compensation procedures Stakeholders Value informed about (quantitative None Fund not established compensation fund or Qualitative) and its procedures Date achieved 03/09/2006 06/30/2011 05/31/2011 Comments (incl\. % Stakeholders participated in discussion about compensation funds achievement) Indicator 11 : Emergency supplies available at strategic locations 8 regional and 56 Value 8 regional and 56 rayon rayon food agency (quantitative Completed units partially equipped units fully equipped or Qualitative) according to plan Date achieved 03/09/2006 06/30/2011 05/31/2011 Comments (incl\. % achievement) Indicator 12 : Border control and customs service’s capacity for control and protection upgraded System evaluated in Value Effective control of collaboration with (quantitative Partially equipped zoonozes at border EU; design or Qualitative) point ensured completed\. Date achieved 03/09/2006 06/30/2011 05/31/2011 Comments (incl\. % Border posts construction will be financed by the Government\. achievement) Regional lab, rayon veterinary inspection and veterinary local levels sufficiently Indicator 13 : equipped for adequate surveillance Value Upgrades completed Offices well (quantitative Not well equipped in collaboration with equipped or Qualitative) other donors (DTRA) Date achieved 03/09/2006 06/30/2011 05/31/2011 Comments x (incl\. % achievement) National Veterinary Reference Lab linked to WAHIS and maintained by the General Indicator 14 : Directorate for Protection and Control Information system Value Data system linked installed in (quantitative Data system not in place and fully operational collaboration with or Qualitative) and inclusive donors (DTRA) Date achieved 03/09/2006 06/30/2011 05/31/2011 Comments (incl\. % achievement) Indicator 15 : National Pandemic Action Plan developed and adopted by the Government Value NPAP finalized and NPAP developed (quantitative NPAP in draft adopted and and adopted or Qualitative) operational Date achieved 03/09/2006 06/30/2011 05/31/2011 Comments (incl\. % achievement) Indicator 16 : Key regulatory changes agreed Key regulatory Value Legislation in line changes, including Legislation inconsistent (quantitative with international adaptation of with international standards or Qualitative) standards legislation approved and staff trained Date achieved 03/09/2006 06/30/2011 05/31/2011 Comments (incl\. % achievement) Indicator 17 : Procedures and standards upgraded and staff trained Procedures upgraded Procedures and Value and in line with standards in line (quantitative Procedures inadequate international with international or Qualitative) standards and staff standards trained in their use Date achieved 03/09/2006 06/30/2011 05/31/2011 Comments (incl\. % achievement) Indicator 18 : Increased surveillance and outbreak investigation capacity All testing equipment are in place but tests Value 100% of regions not done regionally, (quantitative Not applicable with capacity only by central or Qualitative) enhanced referral laboratory at NCDC Date achieved 03/09/2006 06/30/2011 05/31/2011 xi Comments (incl\. % achievement) Increased laboratory capacity to collect and analyze specimens per day for viral typing Indicator 19 : and sub-typing and isolation in times of surged specimen load All testing equipment is in place but tests Value not done regionally, (quantitative 30/day 100% only by central or Qualitative) referral laboratory at NCDC, including sub-typing Date achieved 03/09/2006 06/30/2011 05/31/2011 Comments (incl\. % achievement) Indicator 20 : % of positive tests confirmed by reference laboratory % of positive tests varies from 15\.5% to Value 100% tests 51% (season 2010)\. (quantitative 15% tests confirmed confirmed Samples sent to or Qualitative) WHO laboratory in London Date achieved 03/09/2006 06/30/2011 05/31/2011 Comments (incl\. % achievement) Number of regional/district public health Indicator 21 : divisions with a computerized information and telecommunications systems in place and operational 70 regional/district public health divisions are Value computerized; 6 (quantitative None 100% complete national sentinel sites or Qualitative) established; the new information system developed by DTRA Date achieved 03/09/2006 06/30/2011 05/31/2011 Comments (incl\. % achievement) Indicator 22 : Number of health personnel trained in influenza virus surveillance and control Two lab specialists participated study Value 100% of staff tour in France/Italy; (quantitative Not defined trained\. 610 PHC staff were or Qualitative) trained; training was organized for xii  gynecologists on pandemic influenza issues in Tbilisi and in Kutaisi\. 94 gynecologists were trained Date achieved 03/09/2006 06/30/2011 05/31/2011 Comments (incl\. % achievement) Indicator 23 : Social Distancing measures defined Recommendation on the Social Distancing measures is part of Value contingency plan; Social measures (quantitative Not defined Georgian Law on defined or Qualitative) emergency situation adapted and approved by the Parliament Date achieved 03/09/2006 06/30/2011 05/31/2011 Comments (incl\. % achievement) Indicator 24 : Enabling legal environment established Key regulatory Value Adequate legal Legal environment changes agreed and (quantitative environment inadequate enabling environment or Qualitative) established established Date achieved 03/09/2006 06/30/2011 05/31/2011 Comments (incl\. % achievement) Indicator 25 : Staff of responsible agencies trained Responsible staffs Value from MoLHSA and (quantitative Lack of training Staff trained MoA have been or Qualitative) trained\. Simulation exercises conducted Date achieved 03/09/2006 06/30/2011 05/31/2011 Comments (incl\. % achievement) Indicator 26 : Strategy for access to human influenza vaccine developed\. Strategy for access to Value human influenza (quantitative No strategy Strategy developed vaccine developed as or Qualitative) a part of contingency plan xiii Date achieved 03/09/2011 06/30/2011 05/31/2011 Comments (incl\. % achievement) Indicator 27 : Strategy for access to and appropriate use of anti-viral developed Strategy for access to Value and appropriate use (quantitative No strategy Strategy developed of anti-viral or Qualitative) developed Date achieved 03/09/2011 06/30/2011 05/31/2011 Comments (incl\. % achievement) Contingency plan for procurement of AI vaccine for humans is developed and should Indicator 28 : become available as needed Strategy developed and 4000 doses in Value 2008 and 5000 doses (quantitative Strategy not in place Strategy developed in 2009 seasonal or Qualitative) anti-viral vaccines provided Date achieved 03/09/2006 06/30/2011 07/30/2011 Comments (incl\. % achievement) Number of staffs trained for active surveillance, diagnosis, treatment and care to contain Indicator 29 : outbreaks and reduce occurrence and case fatality during both pre-epidemic and pan- endemic phases 102 staffs trained for active use of high Value tech equipments; (quantitative None Training complete 4500 medical staff or Qualitative) trained by MoLHSA for active surveillance Date achieved 03/09/2011 06/30/2011 05/31/2011 Comments (incl\. % achievement) Indicator 30 : % change in the AI case fatality No AI outbreak and Value therefore no AI (quantitative Undefined 0% fatality rate, H1N1 or Qualitative) hospital fatality rate 2\.5% and 3\.75% Date achieved 03/09/2011 06/30/2011 05/31/2011 Comments (incl\. % achievement) xiv Indicator 31 : Health facilities constructed, renovated, and/or equipped Value (quantitative 0 50 48 or Qualitative) Date achieved 03/09/2006 06/30/2011 05/31/2011 Comments 45 ventilators and monitors for adults and 30 neonatal ventilators are distributed among (incl\. % 46 hospitals, including 7 pediatric hospitals achievement) Political and civic leadership organized around a national strategic risk communication Indicator 32 : plan Risk communication strategy as a part of contingency plan AI Contingency Plan developed Value revised to include National and recommendation (quantitative Strategic Risk 100% complete made for or Qualitative) Communication implementation of 10%complete comprehensive PR Campaigns (100% complete) Date achieved 03/09/2011 06/30/2011 05/31/2011 Comments (incl\. % achievement) Research-based risk communication strategies and products developed responding to Indicator 33 : the needs of priority audiences National Strategic Risk Risk communication Value Communication Plan and strategy was (quantitative priority audience 100% complete developed as part of or Qualitative) communication needs the Contingency Plan assessment (0% complete) (100% complete) Date achieved 03/09/2011 06/30/2011 05/31/2011 Comments (incl\. % achievement) Awareness-raising and behavior change interventions with population at risk using Indicator 34 : appropriate communications channels consistent Two PR campaigns have been implemented by the Awareness raising video and audio clips, Value KAP studies and design of and behavior change TV and radio talk (quantitative communication products interventions shows on hygiene or Qualitative) (25% implemented) complete and seasonal flu prevention measures for general population Date achieved 03/09/2011 06/30/2011 05/31/2011 Comments xv (incl\. % achievement) Indicator 35 : 50% improvement in reported hygiene and sanitation behaviors The final KAP survey still not completed, but target 90% of surveyed likely to be achieved, Value population report Initial KAP survey since two PR (quantitative hand washing after conducted by UNICEF campaigns have been or Qualitative) toileting and before implemented, target eating populations trained and materials printed and distributed Date achieved 03/09/2006 06/30/2011 05/31/2011 Comments (incl\. % achievement) Communication strategies and products developed and used highlighting the actions and Indicator 36 : investments of participating ministries and the mobilization of group resources to contain the epidemic, generating social trust and credibility Dissemination of information materials on seasonal influenza prevention (posters Value National Strategic Risk 7000 copies; posters (quantitative Communication Plan 10% 100% complete for bus station 30 or Qualitative) complete copies and posters for metro 700 copies) are also conducted (100% complete) Date achieved 03/09/2006 06/30/2011 05/31/2011 Comments (incl\. % achievement) Evidence existent of consistent communication and information technologies to Indicator 37 : promote reporting of outbreaks, fast response and uninterrupted social dialogue Communication and Evidence of information Value Secretariat Information consistent dissemination (quantitative Center operational at 50% communication demonstrated through or Qualitative) of demand technologies H1N1 and ASF outbreaks Date achieved 03/09/2006 06/30/2011 05/31/2011 Comments (incl\. % achievement) Informational products developed and disseminated that educate priority audience about Indicator 38 : possible scenarios and mitigation of pandemic control actions to be undertaken Value National Strategic Risk Informational Donor collaboration xvi (quantitative Communication Plan 10% products developed effectiveness or Qualitative) complete reflected in communication and information Date achieved 03/09/2006 06/30/2011 05/31/2011 Comments (incl\. % achievement) G\. Ratings of Project Performance in ISRs Date ISR Actual Disbursements No\. DO IP Archived (USD millions) 1 08/23/2006 Satisfactory Satisfactory 0\.00 2 01/17/2007 Satisfactory Satisfactory 0\.70 3 03/17/2008 Moderately Satisfactory Moderately Satisfactory 2\.01 4 06/17/2008 Moderately Satisfactory Moderately Satisfactory 2\.17 5 12/15/2008 Moderately Unsatisfactory Moderately Unsatisfactory 2\.17 6 06/29/2009 Moderately Satisfactory Moderately Satisfactory 2\.33 7 03/09/2010 Moderately Satisfactory Moderately Satisfactory 2\.79 8 10/10/2010 Moderately Satisfactory Moderately Satisfactory 3\.56 9 07/09/2011 Moderately Satisfactory Moderately Satisfactory 4\.33 H\. Restructuring (if any) Not Applicable I\. Disbursement Graph xvii 1\. PROJECT CONTEXT, DEVELOPMENT OBJECTIVES AND DESIGN 1\.1 Context at Appraisal 1\. Georgia was considered at extreme risk for the spread of Highly Pathogenic Avian Influenza (HPAI) at the time of appraisal because of its border with eastern Turkey, in which 13 separate outbreaks in domestic poultry were reported as of the end of January 2006\. A major migratory bird flyway crosses from this direction over Georgia\. Another flyway from the north crosses over Georgia’s long border with Russia, where outbreaks in seven regions were reported, with outbreaks in three regions bordering Georgia\. Moreover, the outbreak in wild fowl and domestic birds and the five human deaths from HPAI in Azerbaijan showed the tragic and critical nature of the threat facing Georgia and its neighbors\. 2\. Georgia reported its first case of avian influenza on February 21, 2006 when a dead swan found at a lake in the Ajara region tested positive using real-time PCR testing\. A second migratory bird tested positive the following day, and the Government declared a State of Emergency in Ajara\. 3\. Responsibility for the surveillance and monitoring for HPAI in poultry and migratory fowl and for response in case of outbreak rests with the Ministry of Agriculture (MoA) which undertook a major restructuring in 2006 with the goal of contracting out much of the services provided by the Ministry to private contractors\. On the other hand, the responsibility for preparing for the threat of HPAI to human health rests with the Ministry of Labor, Health and Social Affairs (MoLHSA) which also initiated health sector reforms in 1995\. In both the agricultural and health sectors, there were several IDA and other partner-funded projects under implementation at appraisal that helped finance immediate needs for the avian influenza response\. 4\. The rationale for Bank involvement was the Global Public Goods aspect of the HPAI, one of the many emerging and re-emerging zoonoses, and its strong link to poverty reduction\. The Bank was well placed to build upon its knowledge of multi-disciplinary approaches needed in the proposed project\. Given the Bank’s work with FAO, WHO, OIE, USAID, EU and other partners in the country and at the international level to address both preparedness and outbreaks, the Bank could assist Georgia by bringing its technical assistance and leveraging additional resources from other international and bilateral agencies\. 1\.2 Original Project Development Objectives (PDO) and Key Indicators 5\. The overall development objective of the project was to minimize the threat posed to humans and the poultry industry in Georgia by HPAI and other zoonoses in domestic poultry, and to prepare for, control, and respond to influenza pandemics and other infectious disease emergencies in humans\. To achieve this, three areas would be supported by the project: (i) prevention; (ii) preparedness and planning; and (iii) response and containment\. 6\. The key indicators were: (i) evidence of an effective and inter-sectoral surveillance system in place for both animals and humans for HPAI and other zoonoses; (ii) evidence of 1 institutional mechanisms in place for effective implementation of an integrated and multi- sectoral contingency plan for endemic preparedness; and (iii) contained outbreaks in poultry with no demonstrated transmission from birds to humans\. 1\.3 Revised PDO and Key Indicators, and reasons/Justification 7\. The PDO was not revised\. 1\.4 Main Beneficiaries 8\. The main beneficiaries included humans threatened by HPAI infection and other infectious disease emergencies\. The PAD also refers to smallholders keeping poultry in their backyards and large to medium commercial poultry farms producing both eggs and meat\. Institutional beneficiaries were the National Service for Veterinary and Food Safety Agency of the MoA and its staff, and the National Center for Disease Control (NCDC) of the MoLHSA and its Central Reference Laboratory and staff\. 1\.5 Original Components 9\. The project had three components: (i) animal health; (ii) human health; and (iii) public awareness and communication\. Component 1: Animal Health (US$5\.18 million appraisal estimate, US$2\.75 million actual) 10\. Strengthening the national HPAI preparedness and prevention capability through: (a) strengthening of the regulatory and environment framework by providing technical assistance to MoA for legal, regulatory and institutional review; (b) development of a national action and contingency plan with focus on planning for an outbreak and detailing how a response to it would be managed; and (c) establishment of a national compensation policy and fund\. 11\. Strengthening disease surveillance, diagnosis and containment capacity through: (a) strengthening the disease monitoring and containment system by supporting the public veterinary services to bring them in line with OIE standards; (b) strengthening diagnostic capacity to support the laboratory system; and (c) strengthening animal disease information systems to improve the reporting of animal disease information from the field and the flow of information among relevant agencies\. Component 2: Human Health (US$4\.32 million appraisal estimate, US$4\.95 million actual) 12\. Enhancing public health program planning and coordination through technical assistance and training to MoLHSA to build its institutional capacity\. 13\. Strengthening the national health surveillance systems support to improve the laboratory network capacity and health information systems\. 2 14\. Strengthening the health system response capacity, including the diagnostic and treatment guideline development, purchasing of necessary vaccines, medications, etc\. Component 3: Public Awareness and Communications (US$0\.90 million appraisal estimate, US$0\.53 million actual) 15\. The component included promoting awareness and improving coordination of the execution of the overall GoG’s contingency plan\. 1\.6 Revised Components 16\. Not applicable 1\.7 Other significant changes 17\. Closing date extension\. The closing date was extended twice: the first time for 18 months from August 31, 2009 to February 28, 2011 and the second time for four months from February 28, 2011 to June 30, 2011 in order to allow the completion of planned activities\. 18\. Revised/enhanced activities\. Originally, the Project considered upgrading the existing laboratory, including design and renovation that is required for Bio Safety Level 3 (BSL3) with concomitant physical containment requirements, required for virus isolation and sub-typing to determine various strains\. However, during project implementation, this option was reconsidered and cancelled given that the virus can be detected in a BSL 2 laboratory using PCR equipment that already exists in the laboratories and the US Defense Threat Reduction Agency (DTRA) was building a BSL 3 laboratory that would eventually become available\. The savings were used for procurement of seven ambulance cars distributed to four referral centers throughout the country\. 19\. With regards to the African Swine Flu (ASF) outbreak in 2007, while the FAO ASF project support included specific communication, epidemiology training related to ASF and technical assistance and support for laboratory diagnosis, the AI Project supported the more generic elements of AI and systemic improvements that had a broader application\. Therefore, it was not necessary to restructure the Project, but the ASF issues could be covered under the FAO project\. The project provided urgent international technical assistance for assessment of the ASF risks and recommendations for immediate control programs\. 20\. Furthermore, given the flexibility in the project design, although not originally planned in the project, some serious gaps in health care preparedness and response were discovered during its implementation that were either directly or indirectly linked to the project main objectives\. The additional activities were therefore proposed by the borrower and approved by the Bank to contribute to further improvement of the quality of health care services in Georgia: (i) revision of National Influenza Clinical Guidelines and Protocols by including Health Care Associated Infection Control Strategy 2011-2015; (ii) development of Blood Safety Strategy and Operational Plan for 2011-2015 and; (iii) clinical waste management\. 3 21\. Cancellation of funds\. As no compensation was made to farmers, the allocated amount of US$1\.6 million was finally canceled and reserved for future IDA financing for the Georgia program\. 2\. KEY FACTORS AFFECTING IMPLEMENTATION AND OUTCOMES 2\.1 Project Preparation, Design and Quality at Entry 22\. The project was prepared within the framework of the GPAI and under the provisions of the Bank’s emergency policy guidelines (OP/BP 8\.50)\. At an early stage of outbreak Georgia qualified as a country at risk\. The project by its design was an emergency project, although it did contain many elements aimed at institutional development\. It emphasized preparedness as a key factor to control a possible pandemic and most activities were elaborated along this line\. This project had to contend with the same dichotomy of competing objectives as the other AI projects under the GPAI in that emergency preparedness required investments in longer-term systemic and institution-building interventions\. To prevent the spread of HPAI among birds and humans, the Project contained a two-pronged strategy: (i) the control of HPAI at the source in high-risk regions and (ii) simultaneously preparation of short- and medium-term measures to minimize the risks to humans and prepare for an eventual pandemic\. Project preparation not only included analysis in applying the Bank’s global experience in good practice in HPAI response and mitigation to the specific situation, but also significantly drew on existing initiatives from other donors to assure preparedness in fighting avian influenza\. 23\. Overall, the preparation and design stage could be considered a good example of efficient and effective collaboration among relevant stakeholders in situations of public health threats such as the AI\. WHO and FAO provided rapid assessments of the situation in Georgia, along with technical backstopping in the preparation of contingency plans for AI and for the preparation of a coordinated program for donor assistance\. At the time of preparation, several donors were already supporting the Government’s HPAI strategy\. USAID was providing support for HPAI through technical assistance and equipment for MoLHSA and MoA, as well as for a communication campaign\. EU also provided support for the response to the threat of HPAI through the Multi-Donor Trust Fund of Avian Influenza\. The US DoD DTRA program was concurrently supporting laboratory upgrading that included HPAI diagnosis\. All potential needs for a broad-based avian influenza preparedness program was roughly estimated and the proposed project was designed to meet priority medium term investment needs aimed at strengthening the capacity of both the animal health and human health agencies to respond to the threat of an HPAI outbreak\. 24\. Project design incorporated relevant lessons from implementation of projects in the agricultural and health sectors in Georgia and from design of previous Bank/IDA and FAO- supported emergency recovery projects\. These included: (i) simplicity in project design and taking into account a realistic assessment of country’s absorption capacity; (ii) inclusion of mitigation and prevention measures to minimize impacts of a possible recurrence of the disaster; (iii) effective communication and coordination mechanisms among relevant stakeholders; (iii) compensation framework to obtain cooperation from affected farmers and to ensure the efficacy of the surveillance and diagnosis mechanisms\. Specifically, the design focused on developing a 4 comprehensive multi-sector approach for prevention, treatment, care and support services\. This helped improve capacity to prevent, identify, contain and eradicate HPAI outbreaks and deal with a potential pandemic should that contingency develop\. 25\. The project was prepared and carried out as an emergency response project with flexibility and options to adapt according to changing threats and corresponding needs\. Subsequently, revision/adjustment became justified, as anticipated further HPAI outbreaks did not occur and, therefore, the compensation fund was not drawn upon\. In addition, the risk of an African Swine Flu and the actual H1N1 pandemics that occurred during implementation were addressed with project resources\. The project organization, with both ministries of health and agriculture responsible for specific components, was logical and fitted with their respective mandates\. The project had a comprehensive list of 43 key indicators\. There might have been scope to streamline project supervision, had a more refined list of indicators been defined during project preparation\. 26\. The Government actively participated in project design, through consultation with the inter-ministerial Task Force (IMTF) chaired by the Deputy MoLHSA and included Ministry of Agriculture, Ministry of Education and Science, Ministry of Finance, Ministry of Defense, Ministry of Environmental Protection and Natural Resources, Customs Department, Public Health Department, National Center for Disease Control, Drug Agency and Infectious Disease Hospital, WHO, WB, UNICEF, and USAID\. 27\. Regardless of its design that focused on the key elements for optimizing risk reduction, the complexity of some interventions led to considerable implementation delays for a number of activities, significant redesign of some planned activities (e\.g\. BLS-2 instead of BLS-3) and failure to implement others altogether (e\.g\., establishment of national compensation fund, construction of the border inspection posts (BIP), some laboratory equipment for NCDC)\. 2\.2 Implementation 28\. Implementation benefitted from the fact that both line ministries with a principal stake in the Project, the Ministry of Health and the Ministry of Agriculture, sustained interest in the Project throughout implementation and each had existing and experienced project coordination centers (PCC)\. Counterpart funding was adequate and provided in a timely fashion\. Financial management was satisfactory and all audit reports were provided on time and were found satisfactory\. Procurement, however, was plagued by delays and retendering\. Procurement was further hampered by complex procedures and sometimes unrealistic demands by the Bank that did not match the limited number and capacities of local providers of medical equipment\. Permanently ongoing reforms in both MoA and MoLHSA and subsequent staffing changes, as well as within the project, also led in some cases to delay of decisions on procurement\. 29\. Components I and II were, with some notable exceptions, largely implemented, although the project’s closing date had to be extended twice for 22 months to ensure this\. With regards to Component III (Public Awareness and Communications) most of the originally planned activities had been implemented by other donors, leading to less anticipated spending under this component\. However, overall, adequate support had been provided for the information and 5 communication activities to increase the attention of the government, private sector, and civil society organizations, and to raise awareness, knowledge and understanding among the general population about the risk and potential impact of the different zoonoses\. 30\. The Project Implementation Team (PIT), comprising the two component managers and representatives from the Ministry of Finance and the prime Minister’s office, meant to ensure the overall coordination of project management, was affected by political disruptions and failed to meet for some time during the course of project implementation, leading to significant delays in the decision-making process\. Project implementation also suffered from a number of institutional and organizational decisions due to political and economic reforms that affected both Ministry of Agriculture and Ministry of Health leading to sweeping changes in the system, its financing and its staffing (very high staff turnover)\. Despite these frequent changes of composition because of ongoing changes in the ministries, the implementation team had both the mandate and the committed core permanent staff that allowed making operational decisions and changes as the needs appeared\. 31\. Project management deteriorated somehow towards the end as both line implementation ministries decided to change arrangements for project implementation in their respective sectors\. The PCC under the MoA underwent a liquidation process and no new activities could be undertaken during the last six months, while the PCC under the MoLHSA was transferred to the National Center for Disease Control (NCDC)\. All these changes delayed implementation during a critical period before project closing\. 2\.3 Monitoring and Evaluation (M&E) Design, Implementation and Utilization 32\. Rather inadequate attention was given to the M&E design during project appraisal although the M&E system and the list of key indicators covered the PDO adequately both in quantitative and qualitative terms\. During implementation the M&E activities were carried out by the respective PCCs in the two line ministries\. However, only the Human Health and Communication components had an effective M&E system while the M&E for the Animal Health component was more of an ad-hoc nature, did not keep up-to-date M&E records and did not produce regular project reports\. However, the Bank missions could obtain all needed data/information on a demand basis\. 33\. Project monitoring was complicated by the Results Framework having as many as 43 intermediate outcome indicators, some of which were simply activity indicators\. The M&E design could have been simpler with fewer key indicators\. 2\.4 Safeguard and Fiduciary Compliance 34\. The project was classified as Environmental Category B as its investments in physical works were limited to small construction\. Postmortem (PM) rooms were designed and built in four municipalities of the country\. No land acquisition was required as the PM rooms were constructed within the State-owned land plots already used by the Ministry of Agriculture\. Therefore, OP 4\.12 was not triggered\. 6 35\. Site-specific environmental management plans for the construction of PM rooms were developed according to the requirements of OP/BP 4\.01 prior to inviting construction contractors to bid\. Environmental Management Checklist for Small Construction and Rehabilitation Activities was used for this purpose due to modest scale of works\. EMPs provided mitigation measures for the construction phase as well as necessary arrangements for safe operation of the facilities, such as for: (i) disposal of biological waste, sharps and other laboratory refuse, (ii) waste water treatment, and (iii) personnel safety and biological security\. Construction works were conducted generally in good compliance with the EMPs\. 36\. Overall Safeguard compliance is rated as satisfactory\. Procurement and FM were found to be moderately satisfactory and satisfactory, respectively, by the end of the Project\. There were three FM actions relating to AIP project agreed during the negotiations, of which two on the staffing and on the Financial Management Manual have been implemented, while the third action relating to Compensation Fund was not applicable, as the latter was not established under the Project\. 37\. There were procurement delays in all three components that resulted in some activities not being implemented\. However, most were accomplished though with delays, for example: (i) intra-hospital infection control and bacterial resistance; (ii) zoonotic diseases management; and (iii) crisis communication management\. The Project was regularly supervised by the FM and procurement specialists\. Audit reports for FY 2006 through FY 2010 were delivered on time with clean (unmodified) opinions issued\. 2\.5 Post-completion Operation/Next Phase 38\. The project helped ensure that preparedness and adequate response are in place and both specific target groups and general public are informed about the pandemic and ways to protect themselves from infection\. The system was tested during the ASF outbreaks and again during the moderately severe H1N1 pandemic in 2009 and withstood the challenge\. As a result, both knowledge and experience are now in place, and it can be assumed that it would be able to cope also with future epidemics, pandemics and other natural and even man-made disasters of a limited scope because of the small amount of knowledge, laboratory and medical equipment available at the moment\. 39\. The challenge remains to ensure that the recently acquired knowledge and experience remains intact and/or evolves\. To prevent the loss of accumulated knowledge and experience, periodic training and other activities such as tabletop and field simulation exercises and education of the public concerning pandemic and similar emergencies would be needed\. The Government should commit to maintaining and streamlining the coordination structure such as PIT as it has proven its great value, especially during the pandemic in 2009\. 40\. The ongoing reforms in the health sector aim primarily at privatizing medical services and emphasizing decentralization, by shifting the part of the budget now spent on large administrative structure to increase financing of the primary health care services\. Consequently, it is expected that budgetary allocation for MoLHSA could be reduced over time\. Budgetary sustainability is thus a serious concern\. However, GoG committed to pay for compensation in 7 case of an outbreak of avian influenza or other animal diseases which could require culling and compensation, and various donor agencies show interest in further support to build on the momentum of outcomes achieved in the health sector\. Moreover, the ongoing negotiations for the Free Trade Agreement with EU have put pressure on the Government to adopt a national food safety strategy and undertake necessary institutional changes for animal health and transboundary disease control\. The Government is, therefore, motivated to maintain and continue to upgrade the laboratory network, animal health surveillance and disease control reforms for which the avian influenza project has served as an initial catalyst\. The Performance of Veterinary Services Pathway, which is supported by the World Animal Health Organization (OIE) and was initiated under the avian influenza project, has provided the basis for reform of the veterinary services\. This process would continue as a necessary next step in WTO and EU compliance for animal health and trade\. 3\. ASSESSMENT OF OUTCOMES 3\.1 Relevance of Objectives, Design and Implementation 41\. The PDO reflected a proper diagnosis of Georgia’s priorities and was aligned to the GPAI PDO\. The central element of the PDO, that is, to minimize the threat posed to humans by both avian and human pandemic disease caused by A/H5N1 and HPAI, remains very valid, as the risk of this contingency continues up to and beyond project completion\. The objectives and design are consistent with Georgia’s Country Partnership Strategy (CPS, for the period 2009- 2013)\. 42\. Project objectives, design and implementation remain highly relevant for Georgia today\. The country’s health services and especially its animal health services are today much better prepared and equipped to detect and respond to outbreaks for highly infectious diseases\. The outbreaks of AFS in 2007 and the appearance of the A/H1N1 swine flu virus in 2009 indicate the importance of having in place effective disease surveillance, diagnostic, control, and treatment capabilities\. The investments in communication and multi-sectoral collaboration were beneficial in preparing the ground to swiftly respond to the outbreaks\. 3\.2 Achievement of Project Development Objectives 43\. The two basic elements of the PDO were to: (i) minimize the threat posed to humans and the poultry industry by HPAI infection and other zoonoses; and (ii) prepare for the control and response to influenza pandemics and other infectious disease emergencies in humans\. Project activities/output emphasized three areas: (i) support to animal health; (ii) support to human health; and (iii) strategic communication\. The causal linkage can be summarized as follows: Outputs Intermediate PDO Outcome PDO Elements i) Institutional environment, i) Effective and intersectoral Threat of HPAI & other disease surveillance, diagnostic surveillance system for both zoonoses minimized\. capacity strengthened for animal and humans for HPAI Influenza epidemics & animal health and other zoonoses other infectious disease 8  emergencies in humans prepared for and controlled\. ii) Program planning and ii) Institutional mechanism in coordination, public health place for effective surveillance and care system implementation of a contingency capacity strengthened plan for epidemic preparedness iii) Effective communication iii) Contained outbreaks PDO 1: Minimize the threat posed to humans and the poultry industry by HPAI infection and other zoonoses 44\. Disease control capabilities were not tested for HPAI (but ASF and H1N1 were successfully tested) as there was no outbreak during the project; however, it is reasonable to assume that the interventions in this area have contributed to achieving the PDO of reducing the probability of both contained and widespread outbreaks\. The main outputs and outcomes are listed below, and described further in Annex 2\. Effective and inter-sectoral surveillance system for both animal and humans for HPAI and other zoonoses as well as institutional mechanism for effective implementation of a contingency for epidemic preparedness have been put in place\. These have all contributed to minimizing the threat of HPAI and other zoonoses 45\. National HPIA preparedness and prevention capability strengthened\. The veterinary services regulatory and institutional environment was improved\. The OIE conducted the PVS assessment of veterinary services which provided important guidance on how to direct investments in the veterinary services\. The National Contingency Plan integrating both the human and veterinary aspects, and detailed responsibilities, obligations and measures was finalized and approved by the Government\. Training was provided to the staff of the National Service for Veterinary and Food Safety (NS)\. However, no legal framework and policy for compensating for culling of animals for disease control purposes was enacted, although a compensation manual was developed and the Government expressed its commitment to compensate farmers in case of an outbreak of avian influenza or other animal diseases which could require culling and compensation\. 46\. Disease surveillance, diagnostic and containment capacity strengthened\. A monitoring plan for epidemiological surveillance was developed; emergency supplies (disinfectants, protective gear, masks, and reagents) and Personal Protection Equipment (PPEs) were procured and made available at strategic locations in the field\. Additionally, surgical instruments, multipurpose sprayers, automatic sprayers and eight 4WD vehicles were procured to accommodate the transportation of sprayers\. The capacity of regional laboratories and rayon National Service offices was strengthened for improved surveillance\. For example, the Rustavi regional NS office was rehabilitated and a new regional NS office was constructed in Poti, as well as post mortem / necropsy rooms constructed in the central veterinary laboratory in Tbilisi and three regional laboratories (Gurjaani, Kutaisi and Akhaltsikhe)\. 9 47\. A national disease surveillance and information system integrating the ten key regional centers was developed\. Emergency offices were established in high-risk areas, with a ‘hotline’ for people to call with any suspicious information\. The ability of the emergency centers to respond has been improved through provision of 30 vehicles, which contributed to improve the response time\. DTRA provided the major support for the integrated information system, through provision of software, equipment and training\. However, the inter-sectoral collaboration for an effective surveillance system for both animal and human health still needs to be improved, especially regarding the relations between the laboratories under the different entities (NCDC, MoA and DTRA) need to be clarified\. 48\. Public health program planning, coordination and surveillance systems enhanced\. A comprehensive National Influenza Preparedness Plan was developed and adopted by the Government and training involving medical and non-medical personnel were provided, as well as a table-top simulation exercise for various stakeholders organized\. The preparation, approval and operationalization, together with the first training concluded by October 2009 was timely, just at the onset on H1N1 pandemic in Georgia that started in November 2009 and reached its peak in January 2010\. Because of this Plan and its guidelines, the authorities and health care workers were aware of needed actions and able to contain and control the developing pandemic\. In addition, procedures described in avian influenza Control and Human Pandemic Preparedness and Response Operational Plan stipulated clearly duties and responsibilities of each actor and provided for better coordination among involved agencies\. 49\. Institutional capacities to command and control in a coordinated manner under the contingency plan were developed\. The original plan of upgrading existing laboratory with the purchase of mobile BSL 3 lab was abandoned, given that the virus can be easily detected in a BSL 2 laboratory (under BSL3 equivalent protocols and with appropriate biohazard hoods) using PCR equipment that already exists and, in addition, DTRA was building a BSL 3 laboratory\. It was considered adequate to use strengthened laboratory systems and sufficiently stringent protocols at BSL 2 (Batumi, Kutaisi and Tbilisi)\. Capacity of regional laboratories increased twofold (from 30 to 60 real time tests per day) and that of NRL of NCDC fourfold (from 60 to 240 tests per day)\. Nevertheless, limited amount of reagents has led to decision to do all testing in Tbilisi at NCDC and in the regions, in special cases, to use rapid tests\. NCDC laboratory, at the height of the epidemic, worked around the clock and did up to 300 tests per day\. The project also supported the Central Reference Lab (CRL) to develop its strategy and Standard Operating Procedures (SOPs), as well as certification and accreditation options for the CRL\. Blood/serum bank plans and a five-year operational plan were developed and health information system has been improved through support of hot lines for both veterinary as well as health sectors, alongside other donors such as EU, USAID and DTRA who also supported the information system through the ongoing Health Care Sector Development Project\. 50\. Overall, the National Plan greatly assisted all involved in the 2009 H1N1 pandemic, but was developed with more than 2 years delay (fortunately, no pandemic occurred between 2007 and 2009)\. 10 PDO 2: Prepare for, control, and respond to influenza epidemics and other infectious disease emergencies in humans 51\. Health systems response capacity strengthened\. To respond promptly and adequately, an Emergency Response Unit at MoLHSA was established at the beginning of the project (in 2007) with a broad mandate – to collect all requests from all over the country concerning the outbreak, to arrange transport of patients, containment, provision of antiviral drugs and vaccinations\. This emergency unit has been established for all emergencies where rapid and appropriate response was needed\. The project supported revision of the Georgian law on Emergency Situations (#972) from 1997, which was further elaborated on “social distancing measuresâ€?\. This has given authorities and health system power to take timely and appropriate social distancing action without time-consuming procedures\. As a result, during the H1N1pandemic of 2009, quarantine and isolation were enforced, mostly at home or otherwise at the hospital\. At main borders, visitors were informed about the pandemic and advised about protection and symptoms of possible infection but following the international (and National Plan) guidelines no measures restricting personal freedom were used\. 52\. As preparation for eventual pandemic, in total 610 Primary Health Care (PHC) providers were trained to provide first assistance to the population and village level; 1,245\.000 face masks and 512\.000 pairs of gloves were purchased and distributed among the PHC facilities\. In major hospitals, isolation units were established and during the pandemic in 2009, an additional 400 beds were added to Tbilisi hospitals\. Hospitals were additionally equipped by the project with patient monitors, resuscitation (artificial respirators) and PPE\. The project also procured and distributed 14,000 doses of seasonal trivalent vaccines and 56 kg of Tamiflu\. Also, 7 specialized ambulances with possibility of artificial respiration were purchased and provided to regional and central hospitals\. As a result of the improvements of the health system and the health care workers’ performance, the virtual absence of panic among the population during the 2009 pandemic (especially in comparison to 2006) and relatively low mortality rate (2\.6%) suggest an adequate response of the health care system to the emergency\. 2008-2010 Season Age in years 0-4 5 - 14 15-29 30-64 65+ Unknown Totals % Total confirmed 210 410 405 228 18 16 1287 100 Hospitalization 120 101 144 118 12 11 506 39\.3 Died 0 1 13 17 2 0 33 2\.6 53\. Awareness promoted and overall coordination of GoG’s contingency plan improved\. Public awareness activities were conducted on an ongoing basis supported through the project and different other agencies like UNICEF and USAID\. More specifically, the project contributed to: (i) the development and maintenance of a multilingual AI website (www\.avianflu\.ge); (ii) the preparation and distribution of the pre-outbreak information materials for stakeholders; (iii) generic communication topics that addressed AI prevention and control and at the same time include a broader scope of zoonotic and general health concerns identified by the KAPS survey; (iv) extensive training on how to communicate the key messages related to the pandemic influenza; and (v) behavioral impact campaigns\. In addition, the project established 6 sentinel points at PHC centers across the country that report now weekly to NCDC via a newly 11 established electronic system\. The information was passed also to the European branch of the WHO and can be monitored by outsiders on the WHO website\. During the 2009 pandemic, the information was available daily for timely response by health authorities\. 54\. Overall, the PDO - to minimize the threat in Georgia posed to humans by HPAI infection and other zoonoses and prepare for control and response to an influenza pandemic and other infectious disease emergencies in humans - has been largely achieved\. The human health aspects have been fully achieved\. This was best demonstrated by the Government timely and exemplary response to the H1N1 pandemic in 2009\. The surveillance system was well set up at different levels through Georgia and response mechanism could adequately deal with the 2009 pandemic\. In terms of the animal health system development, the response capacity was tested during the African Swine Fever (ASF) outbreak, when the disease was reported within 48 hours and, once confirmed in the newly refurbished national laboratory, international technical assistance and control program expertise was sought by the Government and provided under the avian influenza project\. All institutional mechanisms are now in place to implement a well-elaborated contingency plan, followed by appropriate training and provision of equipment\. Although during (limited) outbreak in birds in 2006, no human transmission took place, the established system of surveillance, emergency response and communication can be assumed to be in position to deal adequately with any future outbreak of birds or animal-linked pandemic\. Nevertheless, while both animal and human surveillance systems have been improved and an integrated lab management system for public health and veterinary services under the National Reference Laboratory (NRL) has been designed, the inter-sectoral collaboration has still to be further strengthened\. Although the laboratory network has been improved and has the capacity to respond, there is a need to improve the collaboration amongst the laboratories under the different agencies (NCDC, MoA and DTRA)\. Though the institutional and infrastructure aspects have been adequately dealt with to upgrade prevention, and surveillance, there are some moderate shortcomings such as the failure to establish a fully functioning compensation fund which is an important element in the response and control of animal disease outbreaks\. 3\.3 Efficiency 55\. The analysis undertaken at project completion employs a simple model that is based on the assumption that the key impact of the pandemic influenza is going to be the reduction of poultry stock due to mandatory culling and transmission of the disease to humans with possible effects of mortality and morbidity\. It is assumed that an outbreak with a mutated virulent virus would occur every five years, with the first one in 2011, at the project completion\. The project benefits are expressed as the expected value of the economic losses avoided over the period of 2011-2025 in the “With Projectâ€? scenario versus the “Without Project Scenarioâ€?\. 56\. The estimated benefits are the human hospitalizations costs averted, the income losses avoided due to reduced rates of infection, and the production losses of poultry meat and eggs averted\. Other benefits, such as the much improved capacity to detect and respond to other zoonoses and infectious diseases, or the reduction in scale and cost of poultry culling and possible compensation measures due to better surveillance and control are not considered\. Secondary effects, such as the prevention of abrupt and severe changes in poultry prices on farm incomes or consumer incomes and of cross-price elasticity effects on other livestock subsectors, were also ignored\. 12 57\. For the base case, the incidence of HPAI infection among the human population (Gross Attack Rate) was estimated at 5%, with 10% of those affected requiring hospitalization and 3% of those affected dying from the disease (the Without-Project scenario)\. 1 The With-Project scenario estimates are that only 2% of the population would be affected by HPAI infection, with 10% of the affected being hospitalized and a death rate of only 1\.5% among those affected\. 58\. The results of the analysis show a 50 % ERR, a benefit-cost ratio of 2\.54 and a NPV of US$ 22\.9 million\. Assigning only 50% of the human health benefits to the project, the analysis shows a 28% ERR, a benefit-cost ratio of 0\.77 and a NPV of US$6\.9 million\. 59\. The human health benefits substantially outweigh those in the poultry production sector\. The two parameters that drive the economic value of the human health benefits are: (i) the project impact on the percentage of the human population affected by HPAI infection, and (ii) the project effectiveness in reducing the expected mortality rate from HPAI infection\. Project benefits are primarily driven by key assumptions regarding the gross attack rate for the human population and for the mortality rate among those affected as well as by the likely frequency of HPAI outbreaks\. This is to be expected in a project that is intended to prepare for a contingency for which neither timing nor severity can be reliably predicted\. 60\. Another measure of project efficiency is cost effectiveness\. Due to the valuable collaboration with USAID, UNICEF and DTRA (both in terms of funds and human resources) several of the originally planned activities were implemented with financial support from other donors, and additional new activities were undertaken to support the PDO\. 3\.4 Justification of Overall Outcome Rating Rating: Moderately Satisfactory 61\. The project followed a template under GPAI PAD for Bank projects in a number of countries to address the threat of HPAI\. It proved to be relevant for Georgia and was aligned with the CPS\. Flexibility was shown in project implementation when HPAI outbreaks did not occur\. Thus, objectives and design maintained their relevance throughout the project\. The human health aspects have been fully achieved\. However, one of the intermediate PDO indicators - effective inter-sectoral surveillance systems in place for both animals and humans for HPAI and other zoonoses could be further enhanced and the compensation fund has not been established\. Therefore, it is concluded that the project achieved its PDO, but with moderate shortcomings\. 3\.5 Overarching Themes, Other Outcomes and Impacts (a) Poverty Impacts, Gender Aspects, and Social Development 62\. Women and children are key actors in backyard poultry sector and, thus, key beneficiaries of the project\. Backyard poultry is an important contributor to rural livelihoods for 1 We are taking more conservative numbers here\. Similar World Bank projects used, at appraisal, Gross Attack Rates as high as 30%\. 13 poorer people\. The project’s poverty and gender impacts – through the avoidance of losses of livestock and income and the payment of compensation for culling – are potentially significant\. The public awareness campaign specifically targeted school children, amongst others\. (b) Institutional Change/Strengthening 63\. The project has significantly contributed to the strengthening of the beneficiary institutions in both the veterinary and the human health sectors\. Epidemiological surveillance, disease monitoring, laboratory diagnostics, treatment capabilities have been improved through investments in training, equipment, development of strategies/guidelines, and revision/enacting of laws\. These capacities have been successfully tested during the ASF and H1N1 pandemics\. (c) Other Unintended Outcomes and Impacts (positive or negative) 64\. During project implementation, several flaws in existing health service system were identified such as inappropriate hospital waste management, relative high risk of hospital acquired infections and gaps in safe blood collection and transfusion\. Because of the project’s flexibility, appropriate research was carried out and new regulations put in place, along with training of all those involved\. This additional element will have a positive influence on the quality of health care provision after the end of the project\. 65\. The strengthening of the health services and the communication strategies had a positive impact on effective management of human A/H1N1 cases\. In addition to preparing Georgia for A/H1N1, emergency planning has prepared the authorities for other severe emergencies, including floods and major (e\.g\. traffic) accidents\. 3\.6 Summary of Findings of Beneficiary Survey and/or Stakeholder Workshops 66\. Not applicable 4\. ASSESSMENT OF RISK TO DEVELOPMENT OUTCOME Rating: Moderate 67\. Overall, the risk to sustaining the project outcome is moderate, mainly because of the uncertain prospects of adequate future budgetary support for the operation as ongoing reforms in Georgia are strongly affecting the MoLHSA\. The challenge remains to keep the recently acquired knowledge and experience intact\. The risk of project implementing agencies not having sufficient authority, leadership and capacity to take leading role in AI prevention and control rated as substantial at appraisal is now moderate due to the implementation of mitigation measures\. 14 5\. ASSESSMENT OF BANK AND BORROWER PERFORMANCE 5\.1 Bank Performance (a) Bank Performance in Ensuring Quality at Entry Rating: Moderately Satisfactory 68\. The project was very relevant, and its preparation and design stages could be considered a good example of efficient and effective collaboration among relevant stakeholders\. The Bank team brought knowledge of global good practice as defined in the GPAI PAD and applied it according to the specific country scenario, that is, in the context of recent HPAI outbreaks in a diffuse poultry sector with predominantly smallholder, backyard management\. The project was planned at a time of urgency and uncertainty about HPAI\. However, at appraisal a number of important issues were not fully developed\. Some planned activities could not be implemented because they were inadequately prepared and appraised and proved to be unrealistic (e\.g\. BLS3 lab acquisition)\. The Results Framework and the M&E arrangements were overly complex\. (b) Quality of Supervision Rating: Moderately Satisfactory 69\. The Bank team properly understood the design of the project, which was more of an emergency preparedness and response rather than a development project\. This is reflected in their understanding and flexibility during implementation\. Some unnecessary activities were dropped, such as equipment of BSL 3 level laboratory, while others were added, usually on request of MoLHSA such as additional research and training of safe blood supply, medical waste management and nosocomial infections, all having link to possible epidemics in Georgia\. 70\. Throughout the project, supervision missions effectively identified and resolved any threats to achievement of the PDO\. The Bank fielded seven supervision missions between the summer 2006 and summer 2011; they all included health and veterinary specialists, a communication/operations specialist, and procurement and FM specialists\. Other positive aspects of Bank supervision included the proactive approach to collaboration and coordination with other donors and projects\. Safeguards and fiduciary aspects were adequately covered\. 71\. However, overall, the quality of supervision was mixed, satisfactory on financial management, procurement, but less satisfactory on some technical issues\. For example, the Results Framework and M&E arrangements were not refined, and integrated client reports were not developed by the implementation agencies\. Only the MoLHSA-PCC regularly prepared and submitted semi-annual reports as required under the provision of the Financial Agreement, but the MoA-PCC never did\. Progress reporting from the client side therefore took place mostly orally during the supervision missions or by phone and videoconferences\. 15 (c) Justification of Rating for Overall Bank Performance Rating: Moderately Satisfactory 72\. The rating reflects both “MSâ€? rating for Ensuring Quality at Entry and “MSâ€? rating for Quality of Supervision\. 5\.2 Borrower Performance (a) Government Performance Rating: Moderately Satisfactory 73\. The Government was closely engaged in project identification and preparation, and remained fully committed to the project and its objectives\. Adequate counterpart funding was provided\. However, permanently ongoing reforms in Ministry of Agriculture and Ministry of Labor, Health, and Social Affairs, and subsequent staffing changes, led to delays in decision making process and implementation of activities\. Moreover, project management was affected by the decisions of both ministries of changing arrangements for project implementation in their respective sectors during the last six months, a critical period before project closing\. Also, failure to implement the steps required to establish the Compensation Fund was a notable shortcoming\. (b) Implementing Agency or Agencies Performance Rating: Moderately Satisfactory 74\. Overall, the implementing agencies demonstrated strong commitment to achieving the objectives across all components\. Despite the noted constraints, the MoLHSA implemented its project activities effectively, fitting them with other ongoing activities funded by other donors\. 75\. With regards to the animal health component, in spite of the several internal reorganizations and management changes of the NS, coupled with the influence of external factors (the EU taking the lead in the legislative, institutional and strategic orientation of the NS), the component achieved significant results\. However, the establishment of a national compensation policy and fund was not achieved, while the physical upgrading of border control and the development of an animal disease information system were only partially achieved\. 76\. Some procurement processes were delayed and retendering occurred in several instances\. Sometimes the bidding documents did not match interest or capacity of providers, or the allocated contract time was miscalculated and had to be extended\. Procurement was further hampered by complex procedures and sometimes unrealistic demands that were not matching limited number and capacities of local providers of medical equipment\. (c) Justification of Rating for Overall Borrower Performance Rating: Moderately Satisfactory 16 77\. The rating reflects “MSâ€? rating for Government Performance and “MSâ€? rating for Implementing Agencies’ Performance\. 6\. LESSONS LEARNED 78\. Coordination and good strategic communication is key to contain a pandemic\. During the simulation exercise, the threatening pandemic of 2008 and the limited pandemic in 2009-2010, the appropriately established lines of communication among main players have proven to be fundamental to the success of the actions\. The established hot line for the public has proven to be very helpful and prevented panic\. In case of a larger outbreak, coordination will be crucial and will need as short lines of communication as possible\. 79\. Flexibility in the design and implementation of an emergency project is important\. Besides adequate coordination, speed and flexibility plays a dominant role\. The appearance of avian influenza strain mobilized and energized the authorities and sped up the set-up of an adequate and fast tracing of suspected cases and immediate response\. Shift from avian influenza to H1N1 strain in 2009 demanded prompt response\. Fortunately, due to flexibility and quick response of IDA and other donors this was possible, resulting in a more appropriate and targeted approach\. 80\. Development of a contingency plan is beneficial\. Georgian authorities in different sectors have worked closely together to develop a contingency plan\. This multi-sectoral collaboration has proven to be very fruitful and has created synergy – it yielded better results than if different ministries had worked separately\. Especially, MoA and MoLHSA found quickly that they had common interests\. Authorities have now an effective system in place that can be used in other emergency situations such as floods or other major accidents\. 81\. Monitoring and evaluation need to be streamlined\. Too many key indicators for an emergency project can make monitoring and evaluation cumbersome\. Data collection and analysis can be an overwhelming task, particularly when there is no full-time staff responsible for it\. The project’s M&E system could have been simpler, with fewer key indicators\. 7\. COMMENTS ON ISSUES RAISED by BORROWER/IMPLEMENTING AGENCIES/PARTNERS (a) Borrower/implementing agencies See Annex 7 (b) Cofinanciers See Annex 8 (c) Other partners and stakeholders Not applicable 17  Annex 1\. Project Costs and Financing (a) Project Cost by Component (in USD Million equivalent) Actual/Latest Appraisal Estimate Percentage of Components Estimate (USD (USD millions) Appraisal millions) Animal Health 5\.18 2\.75 53 Human Health 4\.32 4\.95 114 Public Awareness and 0\.90 0\.53 59 Information Total Baseline Cost 10\.4 8\.23 79 Physical Contingencies 0\.00 0\.00 0\.00 Price Contingencies 0\.00 0\.00 0\.00 Total Project Costs 10\.4 8\.23 73 Front-end fee PPF 0\.00 0\.00 \.00 Front-end fee IBRD 0\.00 0\.00 \.00 Total Financing Required 10\.4 8\.23 79 (b) Financing Appraisal Actual/Latest Type of Estimate Estimate Percentage of Source of Funds Cofinancing (USD (USD Appraisal millions) millions) Avian and Human Influenza Facility 1\.60 1\.54 96 Borrower 1\.87 1\.48 77 International Development 3\.50 1\.90 54 Association (IDA) IDA Grant 3\.50 2\.67 76 JAPAN: Ministry of Finance - PHRD 1\.40 1\.09 78 Grants 18  Annex 2\. Outputs by Component Component 1: Animal Health 1\. At the beginning of the project the Veterinary Service under the Ministry of Agriculture was transformed into the National Service for Veterinary and Food Safety (NS), an agency under the Ministry of Agriculture\. The starting of discussions with the EU on the Deep and Comprehensive Free Trade Agreement in early 2009 made the EU the main partner for the dialogue on legislative, institutional and strategic orientation of the NS, and consequently the Bank financing thereafter filled mainly the staff training and technical infrastructure gaps\. Frequent changes in the leadership and staffing of the NS, as well as the lack of an adopted Veterinary and Food Safety Strategy made implementation of this component challenging\. The adoption of the Food Safety Strategy, as well as the transformation of the NS into a Legal Entity under the Public Law was achieved in early 2011\. Despite the several internal reorganizations and the influence of external factors, the Animal Health component achieved good results and contributed to minimizing the threat in Georgia posed to humans by HPAI and other zoonoses, and prepare for control and response to an influenza pandemic and other infectious disease emergencies\. However, some of the indicators (e\.g\. the establishment of a national compensation policy and fund) were not achieved, while other indicators (e\.g\. the upgrading of border controls) were only partly achieved\. A\. Strengthening National HPIA Preparedness and Prevention Capability 2\. A1\. Strengthening the Regulatory and Institutional Environment\. The OIE conducted the PVS assessment of veterinary services\. Consultants contracted by USDA and other donors finalized the National Animal Health Program, which was blended with the PVS and Gap Analysis as part of the national strategic plan for reform of veterinary services\. The PVS provided important guidance on how to direct investments in the veterinary services, including private practitioners, and on reviewing and rationalizing the legislative and organizational framework for the veterinary services\. Staff of the National Service for Veterinary and Food Safety (NS) was extensively trained, following a training of trainers approach\. About 30 staff from NS were trained in Latvia in short courses specially designed and which covered the following topics: (i) On-farm quality assurance for raw materials; (ii) Controls of food and animal origin; (iii) Hazard Analysis Critical Control Points (HACCP); (iv) Food and Hygiene Controls; (v) EU Food Standards; (vi) EU Food Legislation; (vii)Animal welfare; (viii) Plant Health Controls; (ix) Risk Analysis (assessment, management and communication); and (x) Control on Food and Feed of animal and non-animal origin\. 3\. A2\. National Action and Contingency Plan\. The national Contingency Plan was finalized and approved by the Government\. The plan integrates both the human and veterinary aspects, and details responsibilities, obligations and measures to be taken by the various institutions involved\. Desktop simulations were conducted and training delivered as part of preparation of the Plan\. 4\. A3\. Establishment of a National Compensation Policy and Fund\. The Project included SDR 1 million (US$ 1\.6 equivalent) for setting up a Compensation Fund, developing clear operating procedures and training key players in conducting compensation payments at the local 19 level\. A Compensation Manual was developed under the Project, but not approved by the Government and a Compensation Fund was not established\. No legal framework and policy for compensating for culling of animals for disease control purposes was enacted\. In 2008, the task team recommended that if a final Government decision to approve the Manual was not made by end of 2008, the financing allocation for the Compensation Fund be cancelled\. However, the Ministry of Finance requested the Bank to retain the compensation allocation under the project, under the condition that any use of proceeds from this allocation will be preceded by joint agreement on the course of action to be applied by the Government\. In a letter addressed to the Bank, the Government expressed its commitment that in case of an outbreak of avian influenza or other animal diseases which could require culling and compensation, it would help affected farmers to bear losses stemming from actions to contain the spread of the disease, taking into account related feasibility and affordability constraints\. Until project end, no compensation was used and the allocated amount was finally canceled and reserved for future IDA financing for the Georgia program\. B\. Strengthening Disease Surveillance, Diagnostic and Containment Capacity 5\. B1\. Strengthening the Disease Monitoring and Containment System\. A monitoring plan for epidemiological surveillance was developed, including establishment of baselines, passive and active surveillance, and regular data collection and analysis\. Emergency supplies (disinfectants, protective gear, masks, and reagents) were procured and made available at strategic locations in the field\. Additionally, surgical instruments, multipurpose sprayers, automatic sprayers and eight 4WD vehicles to accommodate the transportation of sprayers were procured\. Also, based on EU technical requirements, the project provided technical assistance support for the designs of five Border Inspection Posts (BIPs) in Red Bridge, Sarpi, Sadakhlo, Poti and Tbilisi International Airport\. The BIPs are established under the Custom Administration within the Ministry of Finance, and will improve veterinary checks and phytosanitary controls in order to avoid the entry of infectious animal diseases, common animal and human infectious diseases and plant diseases and plant pests from other countries to the territory of Georgia and to ensure the safety of food, fodder and primary products imported into Georgia\. The project should have also supported the construction of the BIPs, as well as essential laboratory testing facilities at the five main border inspection posts\. This was however not achieved\. The Ministry of Finance confirmed its intention to use budgetary resources to follow up with constructing and equipping the BIPs based on technical assistance and detailed designed provided under the Project\. 6\. B2\. Strengthening the Diagnostic Capacity\. Capacity of regional laboratories and rayon National Service offices was strengthened for improved surveillance\. The Rustavi regional NS office has been rehabilitated and a new regional NS office has been constructed in Poti\. Post mortem/necropsy rooms were designed and constructed as part of the regional MoA laboratory network in the central veterinary laboratory in Tbilisi and three regional laboratories (Gurjaani, Kutaisi and Akhaltsikhe)\. Construction of the necropsy rooms were finalized, and meets the principles of biosafety and environmental standards for control of discharges, effluents and infected materials to prevent environmental contamination or exposure to infectious agents\. 7\. B3\. Strengthening the Animal Disease Information System\. The project supported the development of a national disease surveillance and information system integrating the ten key 20 regional centers\. Emergency offices have been established in high-risk areas, with a ‘hotline’ for people to call with any suspicious information\. The ability of the emergency centers to respond has been improved through provision of 30 vehicles, which contributed to improve the response time\. DTRA provided the major support for the integrated information system, through provision of software, equipment and training\. Component 2: Human Health 8\. The implementation of this component was affected by the reforms in the health sector, including large scale hospitals and laboratory system reform, and the staff turnover at the MoLHSA, State Chancellery and implementing agency\. Despite these constraints and the ensuing delays, the component achieved good results, with the key technical assistance assignments tendered, key trainings completed and certain equipment for lab as well as for the hospitals processed, and procurement of seasonal flu vaccines carried out\. Nonetheless, some of the activities envisaged were not carried out (e\.g\. some laboratory equipment and the BSL3 laboratory)\. A\. Enhancing Public Health Program Planning and Coordination\. 9\. In 2005 a National Influenza Preparedness Plan was prepared by the MoLHSA, but not harmonized with other sectors, including animal health\. Under the project a more comprehensive document was prepared and approved by the Governmental Commission on Emergency Situation Management\. In addition, related trainings were provided: (i) for the hospital managers (27 persons), (ii) for journalists, spokespersons and representatives from both ministries (33 persons in total)\. The desk simulation exercise for various stakeholders (32 persons) took place and involved the Ministry of Defense, MoA, MoLHSA, NCDC, and other stakeholders\. In addition, two workshops were organized, in which the WHO and DTRA representatives participated actively\. 10\. Institutional Capacity Development\. The project helped build the institutional capacities to command and control in a coordinated manner the above mentioned contingency plan\. Moreover, the project provided training to both medical and non-medical personnel from Tbilisi as well as from various regions of the country\. Overall, the project succeeded to train 40 medical and non-medical personnel on usage of artificial pulmonary ventilators from regional hospitals, including Tbilisi and Kutaisi\. Around 90 Ob&Gyn, 12 journalists, 17 physicians and engineers from ICUs, and 610 PHC staff members received tailored trainings on pandemic influenza (including swine flu) and communication methods\. The project also supported (i) the participation of a Georgian delegation to the 7th International Bird Influenza Summit organized in Las Vegas, Nevada, USA (November 13-14, 2008) and to the 6th International Ministerial Conference on Avian and Pandemic Influenza that took place in Egypt, (October 24-26, 2008); (ii) a special study tour to Italy and France for the managerial level of the MoLHSA, MoA, NCDC and project administration in 2008 (December 13-21, 2008)\. The study tour was aimed to show the best available international practices in regards to the contingency planning, surveillance, lab systems, etc\. A delegation from Georgia also participated in the International Swine Flu conference in August 19-23, 2009 in USA, for latest knowledge and best practices in crisis management, vaccination strategies, using of antiviral medications, etc\.; and also in the 21 International Swine Flu conference in March 9-14, 2010 in London, UK\. All trainings, workshops, and conferences financed by the Project are documented\. B\. Strengthening of National Public Health Surveillance Systems\. 11\. B1\. Improvement of Laboratory Network\. Originally, the project considered upgrading the existing laboratory, including design and renovation that is required for BSL 3 level with concomitant physical containment requirements, required for virus isolation and sub-typing to determine various strains\. During project implementation, the option of purchasing a mobile BSL 3 was reconsidered and cancelled based on the following reasons: (i) the virus can be easily detected in a BSL 2 laboratory using PCR equipment that already exists in the laboratories and for the final confirmations the specimens should be sent to an UK reference laboratory; (ii) the mobile labs are extremely expensive, including maintenance; (iii) the mobile labs are very dangerous if not handled properly since they would be dealing with live virus; and (iv) DTRA was building a BSL 3 laboratory that would eventually become available\. It was then decided that the funds for this activity would be used for additional needs to strengthen medical services\. The fund was used for procurement of seven ambulance cars distributed to four referral centers throughout the country\. The integrated laboratory network that includes the veterinary laboratory chain has been handed over to the NCDC/MoLHSA 2 in 2008\. Based on this decree on the laboratory network integration, the Central Reference Laboratory (CRL) was exclusively managed by the NCDC while the regional and district level network remained under the respective ministries, i\.e\. MoA and MoLHSA\. The project supported the CRL to develop its strategy and management plan, as well as to develop certification and accreditation options for the CRL as requested by the Government\. In addition, a comprehensive list of laboratory equipment needs for the CRL was developed along with the quality management requirements\. In 2010 the project initiated the procurement of laboratory equipment, however due to the very limited number of the lab equipment suppliers and poor market the bid process on the specific equipment for the NCDC /CRL could not be completed\. 12\. B2\. Development of Blood Strategy and five-year operational plan\. In 2009 it was decided to give project support for development of a blood strategy\. Special technical assignment on blood strategy development as well as operational plan for 2011-2015 was tendered out\. This assignment included the development of the corresponding training curriculum and provided essential ToT trainings for respective personnel\. A consultancy firm was recruited and the scope of its assignment was increased twice – (i) with additional 5-day workshop for key personnel of BTS centers, which was critical for the implementation of the proposed new BTS strategy and the operational plan activities, and (ii) with the preparation of the guidelines and protocols for clinical use of blood products\. The contract for revision/development of clinical guidelines and 2 According to the Governmental Decrees #36 (February 22, 2008) and #160 (July 30, 2008), the new integrated laboratory system has been established in Georgia\. This new system covers human health laboratories that are managed by the MoLHSA and animal health laboratories that are supervised by the MoA\. The Central Reference Laboratory (CRL) will provide services for both health and veterinary sectors and will be supervised and managed by the NCDC/MoLHSA\. Overall, system will be supervised by the special governmental coordination committee on infection diseases detection, surveillance and response 22 protocols on HPAI, ILI, and SARS was signed with local firm\. The objective of the assignment was to contribute to the improvement of the quality of health care services by updating/developing the Treatment Guidelines and Protocols for (a) human influenza disease (HPIA and other pandemic influenza); (b) influenza-like illnesses (ILI) nationwide; and (c) Severe Acute Respiratory Syndrome (SARS) in Georgia\. The contractor presented two deliverables\. To harmonize the contract final deliverables with the MoLHSA requirements specified in the new manual for preparation of guidelines in Georgia, the existed contract was extended until the end of the project\. 13\. B3\. Improvement of Health Information System\. The Bank supported the strengthening of the information system mainly through the ongoing Health Care Sector Development Project, along with other donors such as EU and DTRA\. The project supported hot lines for both veterinary and health sectors\. This support included comprehensive technical assistance and trainings as well as purchasing of equipment\. In 2008 DTRA program delivered the computerized system that is covering regional centers, while the project supported the rolling out of the system to the lower levels, including district level centers\. In addition, the project purchased 70 computers for all district level public health centers, and additional IT equipment (20 computers) to enhance the NCDC information system capacity\. C\. Strengthening Health Systems Response Capacity\. 14\. C1\. Vaccination Support, Anti-viral Therapy, PPE\. Purchasing of seasonal vaccines started in 2007 and repeated each year since then\. Overall, 14,000 doses of seasonal trivalent vaccines were purchased and distributed to the first-contact high-risk persons, including medical and non-medical personnel\. Also, 105 kg of Tamiflu was purchased and stockpiled, out of which 56 kg was purchased by the project and the remaining was financed by the Health Sector Development Project in 2005\. In 2009, in order to enhance country preparedness, the project supported the procurement of PPEs (Gloves: 512,000 pairs; Masks: 1,245,000 items; Mask #95: 5000 items), which was added to the stockpile initially delivered under the WB SRS project in 2006, and was used during the 2009 H1N1 pandemic\. 15\. C2\. Medical services\. Intensive Care Unit (ICU) equipment: Initially the project provided some supplies and equipment for the ICU (45 units of artificial pulmonary ventilators and 50 units of monitors) in 2008, and additional equipment (30 neonatal ventilators) was procured during 2009 – 2011\. In order to further improve the ICU capacities, additional 80 monitors, 60 baby incubators and 230 infusion pumps were purchased by the project\. Ambulance cars: The procurement process for the intensive mobile units (ambulance cars) was successfully completed, and seven ambulances were delivered and distributed to the Emergency Center, Iashvili Pediatric Hospital, Gudushauri Medical Center, Republican Hospital and Akhaltsikhe referral centre\. Technical Assistance for the Medical Waste Management: TA on medical waste management was completed by Grontmij/CarlBro and ETLog Health EnviroTech & Logistics, Denmark and Germany in 2009\. Two large scale workshops were organized; 8 local ToTs were prepared from 23 the MoLHSA and Ministry of Environment\. The final version of the report was discussed on the PIT meeting and submitted to the MoLHSA officially\. Technical Assistance on the Hospital Infection Control\. This assignment was executed under contract with the French consultancy firm, Conseil Sante, with the objective of developing the health care associated infectious control policy and operational plan\. Training of infectionists/epidemiologists was also carried out under the project Component 3: Public Awareness and Communication 16\. This component promoted awareness and helped improve coordination of the execution of the overall GoG’s contingency plan\. Under this component, support was provided for the information and communication activities to increase the attention of the Government, private sector, and civil society organizations, and to raise awareness, knowledge and understanding among the general population about the risk and potential impact of the different zoonoses\. Support was primarily focused on the information and communication activities including advocacy, public information and behavior-change interventions\. 17\. Public awareness activities were carried out in collaboration with different other agencies such as UNICEF and USAID\. Most of the planned activities were taken up by other donors, resulting in less than anticipated spending under this component\. An AI Communication Strategy and a Survey on Knowledge, Attitude and Practice on AI were prepared by UNICEF\. Based on these documents, information materials for different age groups (more than 600,000 copies), TV and radio spots were developed by UNICEF\. Also, the special guidelines and curriculum were prepared for schools\. Informational materials such as booklets, posters, leaflets targeted on specific groups, including medical personnel were developed as well and distributed by various organizations, such as USAID, Red Cross, WHO, Oxfam\. Media training and training for the spokespersons were covered by the USAID funding\. 18\. At the very early stage of the project implementation, the project contributed to the development and maintenance of the multilingual AI website (www\.avianflu\.ge); and the preparation and distribution of the pre-outbreak information materials for households with backyard poultry, farmers, poultry traders, veterinary services staff, small entrepreneurs (80,000 copies)\. These materials were distributed in six regions of the country that were identified as at most risk of HPAI infection\. 19\. The Communication Strategy and KAP Survey were used as a basis for subsequent communication activities under the AIP\. The project also supported more generic communication topics that addressed AI prevention and control and at the same time included a broader scope of zoonotic and general health concerns identified by the KAP survey and using approaches recommended in strategy such as: (i) personal health and hygiene related to AI and other zoonoses; (ii) food safety and food preparation practices including poultry and other foods; (iii) seasonal flu vaccination and health; (iv) backyard livestock production including poultry; (v) brucellosis; and (vi) rabies prevention and control - stray animals, vaccination, etc\. 24 20\. Under each PR campaign, activities included development of the key message, content, scenario and design of TV and radio spots, design of flyers and notebooks for children, training of personnel\. About 123 teachers from various Tbilisi schools were trained on basic hygiene, and journalists were trained on promoting influenza prevention and treatment measures\. 21\. Overall six video and four audio clips were prepared, and designs for talk shows were developed and broadcasted on four topics through main TV and audio channels\. Core areas for TV and audio communication were: (i) personal hygiene behavior, (b) influenza prevention and treatment measures; (c) rabies prevention and treatment; (d) food safety behavior in Georgia\. Based on the materials prepared by the contractor, the project procured media time for broadcasting of media/audio clips and talk shows\. Information materials for various groups of population were produced and distributed throughout the life of the project\. About 15,000 copies of “Calendar – 2010â€? for general population were printed and distributed by the MoLHSA and MoA in 2009\. More than 110 schools received special design notebooks with basic hygiene communication messages\. Dissemination of school notebooks (15,000) and fliers (80,000) started at the World Day on Hand Washing\. The PR action took place on Hand Washing International day (October 15)\. To ensure the implementation of PR campaign on Promoting Influenza Prevention and Treatment Measures, 5,000 copies of Y2011 calendar, 50,000 flyers for general population and 7,000 posters, 700 stickers for bus stations and 30 stickers for subway were produced and distributed\. 22\. Booklets for small size and backyard poultry farmers (80,000 copies) were produced and disseminated in six regions of Georgia; the same booklet was translated in Russian for ethnic minorities and 20,000 copies were produced and disseminated\. As per the request of the MoA, 20,000 information booklets for hunters were produced and disseminated\. Shortly after, based on the subsequent request from the MoA, 20,000 copies of brochures on “Advices on different zoonotic diseasesâ€? (AI, anthrax, brucellosis, rabies, African swine fever, tuberculoses, etc\.) for poultry farmers were also produced and handed over to the MoA\. 23\. Extensive trainings on how to communicate the key messages related to the pandemic influenza for 90 gynecologists in Tbilisi and Kutaisi were completed in July, 2010\. Special training materials focusing on these issues were disseminated during the trainings\. 24\. Behavioral impact campaigns were implemented through the following means: (a) rabies prevention and treatment – 2,500 posters and 60,000 copies of information booklets; (b) food safety behavior -- 60 000 copies of information booklets and 2 500 posters were printed for general population by the end of the project\. 25  Annex 3\. Economic and Financial Analysis A\. Introduction 1\. The analysis at appraisal followed the approach of estimating the economic costs due to impact of avian influenza on the poultry sector\. Notably, the effects of the avian influenza were assumed to be the loss of value added in the poultry sector, the positive externalities in the red meat sectors, capital losses in the poultry sector, as well as Government and private sector costs associated with containment of outbreak and monitoring of poultry stock\. Given that human health effects were not well known at the time of project preparation, the analysis at appraisal did not consider these effects\. 2\. The current analysis employs a simpler model that is based on the assumption that the key impact of the pandemic influenza is going to be the reduction of poultry stock due to mandatory culling and transmission of the disease to humans with possible effects of mortality and morbidity\. 3\. As such, the economic evaluation of the impact of the project calculates the cost of pandemic influenza that has not yet happened with a moderate scenario in the base case and iteration of several expected scenarios\. The calculations assume that the project activities on pandemic preparedness and prevention will have resulted in: (a) a reduction of infection rates in poultry; (b) a reduction of risk of transmission of infection from poultry to humans as represented by the reduction of the infection in humans; and (c) a reduction in mortality in humans\. 4\. It is important to note that the impact of poultry outbreaks includes direct costs (value of destroyed/deceased poultry, disease control costs, consequential on-farm losses), substitution effects (price effects, red meat etc\.), and indirect costs (reduction in tourism, transport freight, trade, etc\.)\. However, this exercise does not attempt to estimate the above mentioned costs per se, and the assumption in the analysis is that the costs such as disease control costs are embedded in the annual operation costs\. The analysis at appraisal indicated that the disease control and monitoring costs were negligible at the time of the project preparation\. Our observation throughout this exercise is that the annual operational costs are going to increase because of the project, since there is amplified attention by Georgian authorities on control of infectious diseases\. 5\. With regards to indirect costs, such as price effects and tourism effects, the calculation of impact of these is beyond the objectives of this exercise\. Though we acknowledge that such costs may have considerable impact on the economy, however, for the purpose of this exercise the estimation of these costs would have been a costly attempt\. B\. Project Costs 6\. Project costs totaled US$8\.94million, comprising US$\.6\.9 million from IDA and IDA- administered Trust Funds and US$2\.04 million equivalent from the Government\. Annual incremental recurrent operation and management costs are assumed at 10% of the project 26  investment costs, which in turn were about 60% of total project expenditures in the human and animal health sectors\. The exchange rate used was US$1 = GEL1\.7\. Conversion factors on project costs were not used in this analysis\. Table 3\.1\. Project Costs 2006 2007 2008 2009 2010 Total IDA from RDP credit 542,608 - - - - 542,608 IDA from ARET credit 283,286 - - - - 283,286 IDA from SRS project credit 92,000 - - - - 92,000 IDA from PHCD project credit 384,000 - - - - 384,000 IDA grant (H2280) 352,493 526,398 84,538 273,439\.26 628,805 1,865,673 IDA credit (Cr\. 41790) - 526,398 84,538 273,439\.26 628,805 1,513,180 PHRD grant (TF056631) - 35,890 51,530 285,642\.96 320,500 693,562 AHI Grant (TF057342) - 247,171 225,195 1,057,224\.85 - 1,529,590 Government 205,718 270,830 72,156 1,066,449\.40 428,112 2,043,266 Total Project Costs 1,860,105 1,606,687 517,957 2,956,195\.74 2,006,222 8,947,165 C\. Project Benefits 7\. The analysis considers that the project activities on pandemic preparedness and prevention will have resulted in: (a) a reduction of infection rates in poultry; (b) a reduction of risk of transmission of infection from poultry to humans as represented by the reduction of the infection in humans; and (c) a reduction in mortality in humans\. 8\. The benefits of the project, therefore, are considered in the form of human and economic losses averted through the activities of the project\. Its estimated benefits are the cost of human hospitalizations averted, the income losses avoided due to reduced rates of infection, hospitalization and deaths, and the production losses of poultry meat and eggs averted\. Other benefits, such as the much improved capacity to detect and respond to other zoonoses and infectious diseases, or the reduction in scale and cost of poultry culling and possible compensation measures due to better surveillance and control are not considered\. Secondary effects, such as the prevention of abrupt and severe changes in poultry prices on farm incomes or consumer incomes and of cross-price elasticity effects on other livestock subsectors were also ignored\. 9\. It is assumed, for the base-case scenario, that a severe HPAI outbreak with a mutated virulent virus would occur every five years, with the first one in 2011, at the project completion\. The time period for the benefits stream being considered is 2011-2025\. A discount rate of 12% per annum and an exchange rate of GEL 1\.7/US$ were used\. 27 a\. Human Health Benefits 10\. The project’s objective with regards to human health is to “prepare for, control, and respond to influenza pandemics and other infectious disease emergencies in humansâ€?\. The project’s main impact on human health thereby is expected to be the decrease in the percentage of the human population infected by HPAI, thereby decreasing the number of hospitalizations required and decreasing the number of deaths attributable to HPAI\. The benefits are therefore expressed in terms of loss avoidance and include: (i) the economic value of hospitalization costs averted: GEL1,782 for an average stay of 11 days per hospitalized person 3; (ii) the economic value of income loss avoidance from days lost due to illness: it is assumed 25% of the affected population would lose 3 days of take-home income and 50% of the hospitalized survivors would lose 30 days of income, at a daily wage of GEL 28; 4 (iii) income loss avoidance from fatal HPAI cases: average take-home income of GEL 557/month over 15 years for all HPAI deaths prevented\. 5 11\. For the base case, the incidence if HPAI infection among the human population (Gross Attack Rate) was estimated at 5%, with 10% of those affected requiring hospitalization and 3% of those affected dying from the disease (the Without-Project scenario)\. 6 The With-Project scenario estimates are that only 2% of the population would be affected by HPAI infection, with 10% of the affected being hospitalized and a death rate of only 1\.5% among those affected\. b\. Poultry Sector Benefits 12\. According to GeoStat, there were close to 6\.6 million poultry in Georgia in 2011, mostly chickens, but also some ducks, geese and turkeys\. About 75% of these birds are kept by medium and small farms and or in household backyards\. It is in these two segments of the poultry that the risk of HPAI outbreaks is highest, since biosecurity at the large commercial poultry farms is considered to be quite good for the purposes of this analysis\. 3 This information was extracted from background reports prepared as part of the Government completion report for the Human health component\. 4 The other 50% are assumed to be children and retirement-age adults\. 5 The number of persons in this group is assumed to decline by 2% annually, reflecting normal mortality rates\. 6 We are taking a more conservative numbers here\. Similar World Bank projects used, at appraisal, Gross Attack Rates as high as 30%\. 28 Table 3\.2: Georgian Poultry Sector (2004-2010) 2004 2005 2006 2007 2008 2009 2010 Poultry meat production, ton 15,181 16,906 11,200 12,400 12,900 12,400 12,400 Egg production, units (‘000) 496,600 504,600 249,200 438,100 437,500 430,600 397,000 Average poultry prices, 4\.84 4\.88 6\.59 6\.59 7\.07 6\.45 6\.71 GEL/kg Average egg prices, GEL/10 2\.36 2\.61 2\.85 2\.49 2\.8 2\.73 2\.93 units Value of poultry meat, GEL 73,476 82,501 73,808 81,716 91,203 79,980 83,204 (‘000) Value of egg production, 117,081 131,816 71,022 109,086 122,500 117,553 116,401 GEL (‘000) Total value of poultry 190,557 214,317 144,830 190,802 213,703 197,534 199,605 production, GEL (‘000) Exchange rate, GEL/USD 1\.92 1\.81 1\.78 1\.67 1\.49 1\.67 1\.78 Total value of poultry 99,249 118,407 81,365 114,253 143,425 118,284 112,138 production, USD (‘000) GDP, USD (‘000) 5,124,700 6,411,000 7,761,700 10,171,900 12,800,500 10,767,100 11,663,400 Agriculture GDP, USD 838,906 948,287 867,584 935,749 1,041,007 872,455 852,978 (‘000) Poultry production as percent 1\.94% 1\.85% 1\.05% 1\.12% 1\.12% 1\.10% 0\.96% of GDP Poultry production as percent 12% 12% 9% 12% 14% 14% 13% of Ag GDP Source: Geostat, FAOSTAT, Staff estimates 13\. The project’s animal health objectives are “to minimize the threat posed to humans and the poultry industry in Georgia by HPAI and other zoonoses in domestic poultryâ€?\. Thereby the project’s main impact on the poultry industry is expected to be the decrease in the number of poultry infected by HPAI and, thus, the number of poultry deaths caused by HPAI\. Economic project benefits arise therefore in terms of loss avoidance\. They include: (i) the economic value of poultry meat production loss avoided: the number of broiler poultry deaths averted at the average live chicken farm-gate price of GEL5 per live chicken, and average weight of 2 kg, and assuming that 50% of the birds killed are broilers to be used for meat; (ii) the economic value of egg production losses avoided: an average of 150 eggs per layer per year at a farm-gate price of GEL0\.285 per egg, assuming that 50% of poultry deaths are layer hens; and (iii) the meat value of the layer hens at the end of their productive lives: assumed to be 75% the value of a broiler\. 14\. For the base scenario, the poultry population affected by an outbreak (Gross Attack Rate) of HPAI was estimated at 5% of the small farm and backyard poultry population -- a “low infection rateâ€? scenario -- with a 100% mortality rate of the birds affected by HPAI (the Without- 29 Project scenario) 7\. In addition, an equal number of birds, in and around the locations where HPAI outbreaks are confirmed, was assumed to be destroyed through culling as a precautionary virus control measure\. 15\. The With-Project scenario assumes that only 2% of the small farm and household poultry would be affected by HPAI and would die, and that an equal number would be destroyed by the eradication program\. The project can only affect the number of poultry that become infected and that need to be culled, but it has no effect of decreasing the mortality rate among the poultry flocks infected\. As in the case of the human health sector, the actual numbers of poultry affected by an HPAI outbreak are difficult to estimate since there is little empirical information and a divergence of opinions within the veterinary profession\. 16\. In the analysis, poultry production in the absence of an HPAI outbreak is assumed to grow at a 2% annual rate\. D\. Economic Rate of Return and Sensitivity Analysis 17\. The base scenario analysis relates the project costs (Table 3\.1) to the benefits from the economic value stream of losses avoided as a result of project activities in human health and in the poultry industry, expressed as the expected value of the economic loss avoided from an outbreak occurrence once in five years during the period from 2011 to 2025\. It is expected that the benefits from the project expenditures on laboratories, equipment, patient care facilities, public awareness programs and increased human capital will continue to accrue over this entire 15-year period\. The project investment costs were incurred from 2006 to 2011\. 18\. The market prices used for poultry and poultry products are considered to be economic prices, because the markets operate freely with no production quota system and no subsidies for poultry or poultry inputs\. Wages and other market prices used in the analysis are also assumed to be economic prices\. 19\. Table 3\.3 presents the results of the economic analysis based on the above base case assumptions and parameters for the combination of both human health and poultry sector losses avoided\. The results for the base scenario are quite robust, with a 50 % ERR, a benefit-cost ratio of 2\.54 and a NPV of US$ 22\.9 million\. 7 Please note that this is a very conservative assumption\. Gross attack rate could be as high as 30%\. The reduction of the poultry stock due to 2006 outbreak was around 28%\. However, taking a 5% Gross Attack Rate with an assumption of that equal number of birds are culled in the vicinity of outbreaks is a realistic assumption\. 30  Table 3\.3: Economic Returns and Sensitivity Analysis Mortality Rate Humans Infection Rate Poultry 2006-2025 NPV Without With Without With Without With Scenario project project project project project project (US$ mill\.) ERR C/B ratio 1 outbreak every five years, first outbreak in 2011 1 (base case) 5 2 3 1\.5 5 2 22,928,862 50% 2\.54 2 3 1\.5 3 1\.5 5 2 10,262,636 34% 1\.14 3 5 2 3 2 5 2 22,928,862 50% 2\.54 4 3 2 3 2 5 2 6,979,592 28% 0\.77 5 3 1\.5 3 1\.5 5 3 8,524,225 31% 0\.94 6 3 2 3 2 5 3 5,241,181 25% 0\.58 Only 50% of human health benefits attributed to the project 7 5 2 3 1\.5 5 2 6,950,747 28% 0\.77 8 3 1\.5 3 1\.5 5 2 617,633 14% 0\.07 9 5 2 3 2 5 2 6,950,747 28% 0\.77 10 3 2 3 2 5 2 -1,023,889 9% -0\.11 11 3 1\.5 3 1\.5 5 3 -251,572 11% -0\.03 12 3 2 3 2 5 3 -1,893,094 6% -0\.21 1 outbreak every three years, first outbreak in 2011 13 5 2 3 1\.5 5 2 40,050,777 57% 4\.44 14 5 2 3 2 5 2 17,260,280 37% 1\.91 15 3 1\.5 3 1\.5 5 2 22,044,259 42% 2\.44 16 3 2 3 2 5 2 17,260,280 37% 1\.91 17 3 1\.5 3 1\.5 5 3 18,298,319 39% 2\.03 18 3 2 3 2 5 3 13,514,340 33% 1\.50 Only 50% of human health benefits attributed to the project 19 5 2 3 1\.5 5 2 15,511,704 36% 1\.72 20 5 2 3 2 5 2 15,511,704 36% 1\.72 21 3 1\.5 3 1\.5 5 2 6,508,445 24% 0\.72 22 3 2 3 2 5 2 4,116,456 20% 0\.46 23 3 1\.5 3 1\.5 5 3 4,635,475 21% 0\.51 24 3 2 3 2 5 3 2,243,486 17% 0\.25 1 outbreak every seven years, first outbreak in 2011 25 5 2 3 2 5 3 17,094,055 44% 1\.89 26 3 1\.5 3 1\.5 5 2 7,519,218 29% 0\.83 27 3 2 3 2 5 3 3,212,535 20% 0\.36 Only 50% of human health benefits attributed to the project 28 5 2 3 2 5 3 4,033,343 21% 0\.45 29 3 1\.5 3 1\.5 5 2 -754,075 10% -0\.08 30 3 2 3 2 5 3 -2,907,417 4% -0\.32 31 20\. The human health benefits substantially outweigh those in the poultry production sector\. The two parameters that drive the economic value of the human health benefits are (i) the project impact on the percentage of the human population affected by HPAI infection, and (ii) the project effectiveness in reducing the expected mortality rate from HPAI infection\. The effects of changes made in these parameters can be significant, as depicted in Table 3\.3\. However, the returns are sensitive to parameter changes, when they change to indicate relatively small improvements in the percentage of the human population affected by HPAI and in the number of human deaths attributable to HPAI\. For example, Scenario 4 with small differences in impacts rates of the project on the percentage of the human population affected and the number of human deaths while renders an ERR of 28% and a NPV of US$\.6\.98 million, but a Benefit/Cost ratio of 0\.77\. 21\. Changes in the key parameters for the poultry industry have also impact on the overall outcomes, and yield the benefit cost ratio of below 1\. As the key parameters get closer the impacts of the project become less economically justified\. The key reason for this could be the slow disbursements over the project period, and overall slow implementation of the project\. 22\. The timing of likely HPAI outbreaks has a significant influence on the results of the analysis, since benefits begin to flow at different times and/or at lesser frequency\. Estimates were therefore made also for scenarios with a new HPAI outbreak only once in three years and only once in every seven years, with the first one occurring in 2011\. As shown in Scenarios 25 through 27, a reduced frequency of HPAI outbreaks considerably reduces the aggregate benefit stream\. By the same token, more frequent outbreaks raise the economic value of project benefits, as Scenarios 13 through 18 illustrate\. 23\. Finally, there is the question of ascribing all human health benefits simply to the AIPP, when there were two parallel projects, including the SRS and the Primary Health Care Development Projects under implementation in Georgia at the time, along with a substantial HPAI preparedness support programs by USAID, WHO, UNICEF and by the Government’s own budget\. The total of these investments is estimated at around US$ 2\.3 million\. It may thus be argued that the project cannot claim the total economic value steam of losses avoided, especially in human health\. Scenarios 7 through 12, 19 through 24 and 28 through 30 reflect the assumption that only half of the human health benefits are attributable to the project\. The returns in this case are sensitive to most coefficients and yield only higher benefit ratios for those scenarios that have higher differences in with and without project coefficients\. 8 8 Separate rates of returns for human health benefits and for benefits to the poultry industry are not presented, because AIPP project activities are an integrated package which would not be undertaken separately\. 32 E\. Conclusion 24\. Project benefits are primarily driven by key assumptions regarding the gross attack rate for the human population and for the mortality rate among those affected as well as by the likely frequency of HPAI outbreaks\. This is to be expected in a project that is intended to prepare for a contingency for which neither timing nor severity can be reliably predicted\. 33  Annex 4\. Bank Lending and Implementation Support/Supervision Processes (a) Task Team members Responsibility/ Names Title Unit Specialty Lending Enis Baris Sr\. Public Health Spec\. MNSHH Human health Tamar Gotsadze Health Specialist ECSHD Animal health Ilia Kvitaishvili Rural Development Spec\. ECSS1 Animal health Gennady Pilch Senior Counsel LEGOP Legal Karl Skansing Consultant AFTSP Operations Frauke Jungbluth Task Team Leader ECSS1 TTL Supervision/ICR Jose-Manuel Bassat Communications Advisor WBIOP Communications Brian G\. Bedard Sr Livestock Spec\. ECSS1Animal health David A\. Bontempo Operations Analyst MNSPS Operations Amy Evans Consultant ECSS1Operations Tamar Gotsadze Health Specialist ECSHD Animal health Nedim Jaganjac Sr Health Spec\. ECSH1 Human health Darejan Kapanadze Sr Environmental Spec\. ECSS3Safeguards Ilia Kvitaishvili Rural Development Spec\. ECSS1Animal health Beatrice Koshie Michel Program Assistant SDNOK Operations Nino V\. Moroshkina Consultant ECSHD Human health Karina Mostipan Senior Procurement Spec\. ECSO2 Procurement Jesus Renzoli Consultant ECSO2 Procurement Karl Skansing Consultant AFTSP Operations Van Roy Southworth Consultant ECCU3 Food Safety Financial Arman Vatyan Sr Financial Management Spec\. ECSO3 Management Frauke Jungbluth Task Team Leader ECSS1 TTL Doina Petrescu Task Team Leader ECSS1 TTL 34 (b) Staff Time and Cost Staff Time and Cost (Bank Budget Only) Stage of Project Cycle USD Thousands (including No\. of staff weeks travel and consultant costs) Lending FY06 29 97\.38 FY07 0\.00 FY08 0\.00 Total: 29 97\.38 Supervision/ICR FY06 0\.98 FY07 22 51\.06 FY08 28 82\.93 FY09 30 0\.00 Total: 80 134\.97 35  Annex 5\. Beneficiary Survey Results Not applicable\. 36  Annex 6\. Stakeholder Workshop Report and Results Not applicable 37  Annex 7\. Summary of Borrower's ICR and/or Comments on Draft ICR 1\. At the start of the project development indicators were determined as: (i) evidence of an effective and inter-sectoral surveillance system in place for both animals and humans for HPAI and other zoonoses; (ii) evidence of institutional mechanisms in place for effective implementation of an integrated and multi-sectoral contingency plan for endemic preparedness and; iii) contained outbreaks in poultry with no demonstrated transmission from birds to humans\. 2\. It can be stated that surveillance system was well set up at different levels through Georgia and response mechanism could adequately deal with both natural disaster such as pandemic in 2009, but emergency preparedness also had a positive spin-off such as in 2008 during the invasion of Russia in Georgia\. All institutional mechanisms are now in place to implement well elaborated contingency plan, following by appropriate training and provision of equipment\. Although during (limited) outbreak in birds in 2006, no human transmission had taken place, the established system of surveillance, emergency response and communication can be assumed to be in position to deal adequately with any future outbreak of birds of animal linked pandemic\. 3\. The project was effective but less efficient than it could be\. Being de facto an emergency project, where timeliness and effectiveness matters more than efficiency this is definitely a very good achievement\. Performance of the Borrower 4\. Following the design of the project, most of project implementation had to be done by procurement, either of goods or services\. As reports and interviews show, the procurement processes were plagued by delays and retendering\. While first 2 years of the project some goods were procured, many planned activities via hiring services were seriously delayed\. Sometimes the terms were offered that were not matching interest or capacity of providers, other time allocated contract time was miscalculated and had to be extended\. Procurement was further hampered by complex procedures and sometimes unrealistic demands that were not matching limited number and capacities of local providers of medical equipment\. Permanently ongoing reforms in both Ministry of Agriculture and MoLHSA and subsequent staffing changes, also within the project, also led in some cases to delay decisions on procurement\. 5\. The overall management and coordination of the project were quite well arranged with the structure set up at the start of the project\. Overall responsibility and ultimate decision concerning pandemic preparedness and response was in hands of GSCAIG\. IMTF coordinated work among involved Ministries and met regularly, overseeing operational work of Project implementation team (PIT)\. The team, despite of frequent changes of composition because of ongoing changes in the Ministries had both the mandate and the committed core more permanent staff that allowed to make operational decisions and changes as the needs appeared\. Finally actual implementing staff (such as NCDC, Emergency Response Team of MoLHSA, health care facilities and laboratories staff) were well trained and equipped to respond timely to the pandemic threat\. That has proved invaluable in time of pandemic in 2009 leading to adequate response\. 38 Performance of World Bank 6\. Local representatives of the World Bank and visiting monitoring team properly understood the design of the project that aimed more at emergency preparedness and response rather than a development project\. It is reflected in their understanding and flexibility during implementation\. Some no more justified activities were dropped, such as equipment of level 3 Bio laboratory, while other were added, usually on request of MoLHSA such as additional research and training of safe blood supply, medical waste management and nosocomial infections, all having link to possible epidemics in Georgia\. Their ongoing monitoring, technical assistance and patience greatly contributed to a positive outcome of the project\. Nevertheless, the rules and regulations of the World Bank directly connected to implementation of the project were consequently enforced\. They were at times helpful, at times seen as unduly strict and cumbersome, especially as borrower was also obliged to follow its own rules\. As the project in the practice was heavily depending on outsourcing of both goods and services, requirements and their complexity coupled with limited local technical capacities were sometimes reason of delays in implementation\. 39  Annex 8\. Comments of Cofinanciers and Other Partners/Stakeholders Comments from UNICEF 1\. The World Bank-supported project on AI was a good and timely continuation of earlier efforts of the Government of Georgia, UNICEF and other partners to fight AI and to strengthen country’s preparedness\. There was a very good coordination between UNICEF and the World Bank to ensure that there was no duplication of efforts and all the interventions were complimentary and needs driven\. UNICEF-supported KAP study and Communication strategy were used as a baseline for the Bank’s project communication activities\. 2\. As the KAP survey conducted by UNICEF identified a lack of knowledge on hygiene norms among children and communities, the World Bank project communication focused on raising awareness on hygiene practices which was highly recommended and aimed to fill the gaps in this regard\. It was also very critical to develop pre-tested and tailored messages to each target group\. It is important to note that all the interventions were based on the strategy and we can consider the whole campaign as well planned and implemented\. 3\. It is extremely important to conduct another KAP and evaluation of the campaign to measure the progress and to learn what has been achieved\. So, the plans in this regard are highly appreciated\. It is critical to learn what is the knowledge of the population at risk on AI and that of the public in general on hygiene practices\. This will create a solid base for any further campaigns/interventions and will become an important roadmap to identify the gaps and actions needed\. 4\. We do think that it is still crucial to further promote the improvement of hygiene practices at family and community level and to focus more on schools - including surveillance, monitoring and hygiene promotion\. Comments from EU Report format/structure 5\. It would be good and helpful to have an executive summary of the report\. Some summarizing tables are provided at the beginning, but this cannot substitute the need of an executive summary\. Report content/accomplishments 6\. Most of indicators used are input not output oriented\. In addition, it is difficult to measure them\. For instance, “information system installedâ€? is not an indicator of improvement, but a statement of an activity that has been developed\. 7\. In assessing the achievements of this project it would be also useful to take into consideration the other projects and activities performed in the very same filed parallel to it\. For some achievements like “Food Agency establishedâ€?- in the establishment of the National Food 40 Agency, apart from this project, there was a large scale EU advocacy in the broader context of EU policy dialogue with the Government\. The same can be said regarding strengthening of its capacity, which was done via various EU-assisted projects (ex\. GEPLAC, many TAIEX, other TA project under different EU instruments)\. The same can apply to the achievement related to the veterinarian legislation\. According to the report “draft legislation developedâ€? is s one of the “actual values achieved at completion of the projectâ€?\. Again, the fact that Georgia has now better vet legislation is something broader that the only this project impact\. The EU efforts in this direction via policy dialogue and other EU TA projects were crucial\. 41  Annex 9\. List of Supporting Documents World Bank Documents Aide Memoires of Implementation Support Missions, 2006 to 2011\. Implementation Status and Results (ISR) Reports, 2006 to 2011\. OPCS: Implementation Completion and Results Report Guidelines, August 2006 (updated 11/10/2010) Project Appraisal Document on a Proposed Credit and a Proposed Grant to Georgia for an Avian Influenza Control and Human Pandemic Preparedness and Response Project under the GPAI, May 4\. 2006 Yearly project reports 2007, 2008, 2009, 2010 Government Documents Development of the Final Evaluation Report on the Human Health and Strategic Communication Components of the Avian Influenza Control and Human Pandemic Preparedness and Response Project, FINAL DRAFT, June 25, 2011 (Borrower’s Report) Development of National Blood Policy and National Blood Transfusion Services (BTS) Plan 2011-2013, Situational Analysis report, 2010, AIHA Georgian National Health Policy, 1999, Tbilisi Georgian Avian Influenza Preparedness and response operational plan, MOLHSA, 2009 Health and Health care, Statistical yearbook Georgia 2009 Quality Assurance Manual, National laboratory guidelines, 2009 Report on communication training on pandemic influenza, Curatio, 2009 Other Documents KAP study to inform the avian influenza prevention and containment communication strategy in Georgia, by Curatio, 2006 WHO statistics 2011 Report, 2011 42  40°E 42°E GEORGIA 44°N 44°N AVIAN INFLUENZA CONTROL AND R U S S I A N HUMAN PANDEMIC PREPAREDNESS F E D E R A T I O N GEORGIA AND RESPONSE PROJECT To Soai SELECTED CITIES AND TOWNS C AUTONOMOUS OBLAST (AO) CENTER Gagra a AUTONOMOUS REPUBLIC (ASSR) CENTERS u NATIONAL CAPITAL c RIVERS a MAIN ROADS ABKHAZIA s RAILROADS Suhumi Mestia u AUTONOMOUS OBLAST (AO) BOUNDARY s AUTONOMOUS REPUBLIC (ASSR) BOUNDARIES Kol Tkvarceli INTERNATIONAL BOUNDARIES k M h h ii 44°E To Vladikavkaz 46°E Ochamchira Dzvari o Mqinvartsveri da (5047 m) Ing uri u Kazbegi Oni n Low L Zugdidi Ambrolauri t ni l land South Sout h a Rio i al Sachkhere Osset ia Ossetia i k d isc Tkibuli ilk Senaki Kvir en Kutaisi n Tsk Black Sea Chinvali Iori Poti Rioni Samtredia s 42°N Akhmeta 42°N Mtkv Gori Telavi Khashuri ari (K Ozurgeti ura) Al Lagodehi Mtskheta a Kobuleti za ni AJARA ADJARA T'BLISI Gurjaani Batumi Iori Akhaltsikhe To Rustavi Zagatala Marneuli Ahalkalaki Tsiteli- Kazreti Tskaro Ninocminda Mt kva ri Io ri To Trabzon (Ku ra) T U R K E Y To Yevlax Mingechevir 0 20 40 60 Kilometers Reservoir AZERBAIJAN NOVEMBER 2011 0 10 20 30 40 50 Miles To To A R M E N I A IBRD 38951 Erzurum Erzurum This map was produced by the Map Design Unit of The World Bank\. To The boundaries, colors, denominations and any other information Armavir Lake shown on this map do not imply, on the part of The World Bank Group, any judgment on the legal status of any territory, or any Sevan 40°E 42°E 44°E 46°E endorsement or acceptance of such boundaries\.

APPROVAL

P037474

T\.O\.-29a RE-TURN TO REST RIC TED REPORTS DESK WITHIN |IL COPY ONE WEEK FI~CP This report is restricted to use within the Bank\. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPME-4T TECHNICAL REPORT on the SOUTH AFRICAN ELECTRICITY SUPPLY COMMISSION PROJECT (ESCOM) August 20, 1953 Technical Operations Department  CURRENCY EQUIVALENTS 1 South African Pound = 1 Pound Sterling S\.A\. £1 a U\.S\. $ 2\.80 S\.A\. £ 1 million a U\.S\. $ 2\.8 million  TECHNICAL REPORT ON THE SOUIH AFRTCAN ELERTCI¶IY SUPPLY COIRIISSION PROJECT (ESCOMvI) Table of Contents Page Introduction 1 The Electricity Supply Commission 1 Organization and Management of ESCON 2 Description of System 2 Present Financial Position of ,,SCOIJ I Past Growth of Powjer Load 5 Future Load Estimates 6 The Previous Loan 7 The Expansion Program 8 Cost and Schedule of Expenditures 9 Adequacy of Estimates 9 Construction Schedule 10 Appraisal of the Program 10 Plans for Financing the Program 11 Fin=ncial Results of Operation 11 Rates 12 Quality of 1Tanagemnent 13 Conclusions 13 Finding 1  TECHNICAL RiPOR?T ON THE SOUTH AFRICAN ELECThICITY SUPPLY COVAISSION PROJECT (Escom) Introduction 1\. This report covers the technical features of the development program of the Electricity Supply Commission of South Africa for the years 1953-1958, both inclusive\. The estimated cost of the program for the period mentioned is approximately iSA 74 million\. The Electricity Supply Commission (hereinafter referred to as ESCOMVI) expects to raise the greater part of this total sum by loans in the South African market, but has requested the Bank to consider a loan of &SA 10\.7 million ($30 million) to assist in meeting the foreign exchange requirements of the program which are estimated to amount to roughly ;SA 31 million\. The Electricity Supply Commission 2\. The proposed borrower, the Electricity Supply Commission (commonly referred to as 3LSCOTl) is a statutory commission established under authority of the Electricity Act of the South African Parliament in 1922\. It consists of three to five members (presently five) appointed by the Governor General\. Its principal function is "the establishment, maintenance and working of undertakings for the efficient supply of electricity, to Government departments, the South African Railways and Harbours Adminis- tration, local authorities, companies and other persons carrying on industrial undertakings or to any persons whatever in the Union\." It is capable of suing and being sued, of expropriating by compulsory purchase such lands as are necessary for generating stations and transmission lines, and of doing generally such other things as bodies corporate may by law do\. 3\. ESCOMi has legal authority under its basic Act to borrow money for carrying out its functions, by the issue of securities either in the Union or elsewhere, after obtaining the approval of the Governor General\. An amending Act to the basic Act, passed in 1952, gives ESCOMi authority to borrow from the IBRI and authorizes the Minister of Finance to guarantee on behalf of the Government any loan obtained from the IBPD\. 4\. ESCOM must obtain a license for supplying electricity to any area from the Electricity Control Board, composed of five members appointed by the MKinister of ilines and Industry\. A schedule of standard Prices chargeable for electricity sold to different classes of consumers is incorporated in each license, and any revision of this schedule changing the relationships of the various prices to each other must be approved by the Control Board\. However, the Electricity Act confers authority on ESCOM to increase or decrease charges, in equal proportion for all consumers, in order to carry out the general principle set forth in the  Act that ESCOM's undertakings shall, as far as practicable, be operated neither at a profit nor at a loss\. Organization and Mtanagement of ESCOM 5\. The activities of ESCOM are directed by the Commissions whose chairman, now a professional electrical engineer, is a full-time member\. The principal executive officer is the General Manager, who is assisted by an adequate technical, administrative and financial staff in the supervision of the undertakings and the control of all major construction work\. The generation and distribution of electricity are carried on by eight undertaidngs: Rand, Witbanks Cape Western, Natal Central, Durban, Border, Cape Northern and Sabie, each with its manager and staff, except that the Natal Central and Durban are under the same management\. A ninth undertaking, called the Swartkops River undertaking, will be established for operating the new Swartkops power station when it g-oes into service\. Each undertaking is treated as a separate commercial entitry being charged with its operating expenses, the interest and redemption fund charges applicable to loans expended for its benefit and its proportion of head- office and general expenses, and being credited with all its revenues\. The aim is to make each undertaking self-supporting, so that no section of the country will have to be subsidized at the expense of other sections\. 6\. Close cooperation is maintained between ESCOI and certain of the larger municipalities which have their own generating plants, such as Cape Town, Pretoria and Johannesburg$ with a view to interchanging power in such a manner as to avoid the need for excessive expansion by one agency or the other\. Many other municipalities buy power in bulk from ESCOM and distribute it themselves in their areas\. Durban and Port Elizabeth are examples of the larger cities which have adopted this plan\. Description of System 7\. At December 31, 1952, ESCO1ii's system had a total effective capacity of 1$624\.6 megawvatts, exclusive of compressed-air stations in the Rand with a capacity equivalent to 74 megawatts\. The following table gives Qhe breakdowAm of the total electric plant capacity by under- tahings and indivLdual electric power stations\.  - 3 - Electric Power Capacity at December 31, 1952 Undertaking Station Station Capacity Total for Undertaking Alice 5 Border King IIilliamts Town \.5 West Bank No\. 1 32\.0 37\.0 Cape Northern Central, Kimberley 20\.0 20\.0 Cape WJestern Salt River No\. 1 90\.3 Hex River 40\.0 130\.3 Durban Congella Nose 1 and 2 206,0 Port Shepstone 3\.4 209\.4 Natal Central Colenso Nos\. 1 and 2 110\.0 Volksrust 0\.5 110\.5 Brakpan 48\.0 Klip 424\.0 Rand Rosherville 60\.5 Simmerpan 40\.o Vaal 278\.0 Vereeniging 157\.5 1,008\.0 Sabie Sabie Gorge 1\.4 1\.1 Witbank Witbank 108\.0 108\.0 GRAND TOTAL 1,624\.6 8\. At the same date transmission lines (overhead and cable) had a total length of 7,692 miles, of Twrhich 267 miles were 132 kv, 2,519 miles 88 kv, 182 miles 66 kv, and the remainder from 40 kv to 220 kv\. The 14itbank and Rand systems are interconnected, and the interconnection betwTeen the Durban and Natal Central systems is being strengthened\. Othenrise the distances between undertakings are so great that inter- connections have not been considered economically feasible to date\.  - 4- Present Financial Position of ESCOM 9\. The following suwmiarized balance sheet shows the financial position of ESCOM at December 31, 1952, with the 1951 totals shown for comparison\. Balance Sheet Assets Liabilities lSA 000 LSA 000 1295- 1952 191-952 Expenditure on Loan Capital 66,968 84,o65 Capital Account 68,641 88,280 Interest Accrued on Movable Plant and Loan Capital 315 490 Equipment (Less Creditors and Credit Depreciation) 6S0 705 Balances 3,296 5,244 Stores and Temporary Advances IMaterials 4,555 5,oo8 Amount due to Debtors and Debit Bankers Less Cash Balances 1,453 1,488 on Hand Advances Investments at Call L4,302 5,728 (Housing Loans) 204 294 Redemption Fund 15,734 18,302 Investment of Amouint Amortized Redemption Fund 15,249 17,661 on Account of Investment of Deferred Lia- Reserve Fund 2,1421 2,407 bilities for Balance on Revenue Assets and Rights Accounts of Acquired 194 217 Undertakings Deferred Liabilities (Deficit) 128 546 for Assets and Rights Acquired 172 150 Reserve Fund 2,271 2,192 Totals 93,251 116,389 93,251 116,389 l0\.(a) The loan capital sholm above at December 31, 1952, consisted of the following: ;SA 000,000 Local registered stocks 76\.82 Amount drawn do-wn from IBRD loan 6\.48 Amount drawn down from E 7 million Exim-Bank loan \.77 (b) The redemption fund is a fund created for the redemption of ESCOM's loans in not more than tlhirty years from their issue, on a sinking fund basis at 3-1/2% compound interest, as required by the Electricity Act\. ESCOMts present practice is to provide for  redemption in twenty-five years\. The fund is built up from the net proceeds of the sale of any fixed property, receipts from the sale of rightsj easementsp etc\., the income from the invest- ments of the fund, and such further appropriations from ESCOMI's revenues as may be necessary to bring the fund to the amount required on the prescribed sinking-fund basis\. Approximately 80% of the fund is invested in ESCOMfs own securitles\.In view of the existence and maintenance of the redemption fund at the required level, there is no depreciation accounting in respect of ESCOIIls fixed assets\. (c) The temporary advances shown on the balance sheet are short-term borrowings in anticipation of the raising of authorized loans, as permitted by the Electricity Act\. (d) The reserve fund is legally available for replacements of obsolete plant and betterments, for exceptional repairs and for emergencies, but not for ordinary maintenance\. The annual amount set aside for the fund cannot exceed 3% of the total of unredeemed loans and the aggregate cannot exceed 15% of that total\. 11\. The financial structure of ESCOH cannot be viewed in the same light as that of a conventional corporate enterprise, and its balance sheet is not susceptible to a conventional analysis\. It pays no income taxes; it is operated in accordance with a law which dictates that its reserves be restricted and that it shall be operated neither at a profit nor a loss; consequently it cannot expand its facilities from earnings but must resort entirely to further borrowing to meet its capital require- ments\. It has legal authority to raise rates on its own motion to avoid deficits, and its credit rating is high\. Past Growth of Power Load 12\. Sales of power by ESCOi'I have increased from 6,911 milWion kwh in 1950 te 7,459mil\. in 1951 and to 8,081 mill\. in 1952, an increase of about 17% in two years and over 8% in the last year\. To meet this increase it has been necessary to keep virtually all equipment in the larger undertakings in operation during peaks, with no reserve for emergencies and in many cases at the expense of fully adequate maintenance\. Mloreover, the increase would have been considerably larger if more generating capacity had been available\. This was particularly true in the Rand undertaking, where the expansion of mining and industrial activities has been creating new and increased demands, necessitating the reduction of peaks by 104, frequent power cuts to mines for periods of several hours amounting at times to as much as 40% of the basic powJer allotment, and the refusal to supply power to numerous new mines and industries\. A number of mine owners have hurriedly purchased and installed used diesel electric units to minimize the serious efeects of the power cuts on their operations, and the Goverrment has permitted certain mining work to be done on Sundays to make up in part for the production lost as a result of the powqer cuts\.  6 Future Load Estimates 13\. ESCOM periodically revises the estimates of future electric power demand in each undertaking, basing the revisions on the estimates submitted by specific industries, mining companies, South African Rail- ways, bulk consumers such as municipalities, etc\., and on the general trend of grawth in the recent past\. In assessing the value of estimates furnished by others, ESCOM endeavors to give proper weight to possible duplications, the probable effect of the current shortage of labor as opposed to the greater mechanization of operations, and other factors tending to lower such estimates\. New load curves are then drawn and previous capacity curves adjusted as far as possible to meet the new demand estimates\. 14\. The most recent general revision of future loads was made in November, 1952\. The greatest increase was showJn by the combined Rand and 'Jitbank estimate, which indicated peak demands in 1958 and 1960 of 1740 and 1,900 megawatts, respectively, as compared with the estimates of 1,380 and l,430 IrY prepared in August, 1950, The main causes of this large increase were the expansion of mining activities in the Transvaal, the development of an extensive new mining area in the northern Orange Free State, and the construction of a substantial number of plants for the recovery of uranium from mine slimes\. Simlarly, the estimated load of the Cape Western undertaking in 1958 wias about 4001tW in 1952 as compared with the 1950 estimate of 300 Mr, because of additional demand by the South African Railways and of general industrial development; and the estimated combined load of the Natal Central and Durban undertakings in 1958 was about 34Q MI in 1952 as compared with the 1950 estimate of 300 N4, due largely to industrial development\. The latest estimates for the other undertakinEs do not vary widely from the 1950 estimates\. 15\. The actual future growth of power demand will depend upon many presently unknoomr factors, both internal and external, and it is not possible to say with any assurance that demand estimates covering a period of five years in the future will be fulfilled, However, considering the great importance of electric powTer to the development of the country and the damaging effects of a shortage of power, ESCO0I4's estirmiate of future demand are regarded as forming a reasonable basis for the current expan- sion program\. 16\. The following table shows the sales of powrer to various types of consumc-rs in 1952\. It is not e::ected that this general pattern of sales will be changed materially in the future, although the proportion sold to mining and industrial consumners may increase somewhat\.  Sales to Various Consumers, 1952 Consumers Electricity % of Total Oil and % of Total Total KrrH 1000 BE! Electricity Steam Oil and 1000 1000 MMH Steam Equivalent Traction 554,830 7\.1 554,830 Bulk 1,459h453 18\.7 2\.,674 1\.0 l,)462,127 Miining 4,332,852 55\.4 252,482 95\.4 43585,334 Industrial 1,337,692 17\.1 9,625 3\.6 10347,317 Domestic and Streetlights 130,953 1\.7 - 130,953 Total 7,815,780 100\.0 264,781 100\.0 8,080,561 The previous loan 17\. In January, 1951, the Bank made a loan to the Electricity Supply Commission (ESCON) of $30 million equivalent to assist 7SCOM in financing 1SA 29\.9 million in foreign exchange payments committed on imports of generating, transmission and distribution equipment for its expansion program estimated to cost a total of \.SA 60,2 million over the seven year period 1949-1955\. The closing date of the loan was fixed at December 31, 1953\. As at July 14, 1953, the balance remaining in the loan account was about $4 million, but it is estimated that 4the loan vill be entirely withdrawn by the end of September, 1953\. The expansion program, partially financed under the previous loan, included the construction of seven new power stations in which 700,000 kT woald be installed initially, the installation of 235,000 kJ of additional capacity in six existing power stations and the construction of additional transmission lines and sub- stations\. The cost of the total program was: 7 New power stations B5A 40\.2 million Extensions to existing stations 9\.4 million Transmission and distribution equipment 10\.6 million Total BSA 60\.2 million About 56% of the total was to be for additional parer facilities for the Rand undertaking and the remainder was to be for expansion in the other territories served by the Commission\. In the three years l150-1952, new generating capacity totaling 193,000 kw was commissioned under the program, although the corresponding new boilers for 106,000 kw of this capacity had not been completely installed by the end of 1952\. In the same period 2,350 circuit miles of high tension transmission line and underground cable were constructed\. Due to delays, principally in the manufacture and delivery of equipment but also to some shortage of skilled labor and unusually heavy rainfall, the original schedules of completion  - 8 - of the various stations were extended from a few months to as much as a year\. All obstacles previously delaying work have been largely overcome and progress is now satisfactory\. The Expansion Program 18, The expansion program ef ESCON for the period 1953 to 1958, both inclusive, as revised following the revision of load estimates in 1952, provides for the completion of eight new power stations with a total capacity of 1,210,000 kw, the addition of approximately 202,000 low to six existing stations, and the construction of about 900 miles of high- tension transmission lines, with necessary substations\. The following table shows the capacities to be installed in each of the new stations and extensions\. Expansion Progran Added Capacities Station Undertaking Location Installed Capacity 1tT New Stations Hex River Cape IWestern 'Torcester 60,oco Salt River No\. 2 Cape Western Cape Town 120,000 Swjartkops Swartkops River Port Elizabeth 40, 000 West Bank Border East London 30,000 Umgeni Durban Pinetown (Durban) 60,000 Vierfontein Rand 0\.F\.S\. 300,000 Taaibos Rand 0\.F\.S\. 420,000 rilge Rand Transvaal 180,000 Total 1,200,000 Extensi(ns Congella Durban Durban 40,C00 Colenso Natal Central Natal 25,coo Vaal Rand 0\.F\.S\. 99,000 Witbank W,Titbank Transvaal 20,000 Vereeniging Rand Transvaal 7sooo 1/ Central (Kimberley) Cape Northern Cape 11,000 Total 202,0C0 19\. The transmission lines to be built include approximately 635 circuit miles of 132 kv line, 62 miles of 88 Xv line, and 194 miles of 66 kv and 33 kv lines, together with the necessary new substations and additions to existing substations&\. / No ne\.w generator is to be installed, but an additional boiler will increase capacity of present generators by approximately 7,000 kw\.  - 9 Cost and Schedule of Expenditures 20\. The total estimated cost of the expansion program for the period January 1, 1953, to December 31, 1958, is MSA 74 million, divided among the principal elements of the program as follows: Cost in iSA 000 New power stations 62,991 Extensions to power stations 5,132 Transmission systems 5,772 Total 73,895 21\. The total cost broken down 'by years and by local and overseas expenditure is shown in the table below\. "Other overseas" costs are largely UoS\. dollars for tne purchase of such items as high-tension switchgear, etc\. Local and Overseas Expenditures by Years (WSA 000) 1953 1954 1955 1956 1957 1958 Total Local Expenditures 16,057 13,497 7,681 3,793 1,280 300 )42,608 U\.ii\. Expenditures 11,468 8,350 6,457 2,742 856 80 29,953 Other Overseas 498 225 411 200 1,334 28,023 22,'072 14,549 6,735 2,136 380 73,895 Equivalent in US$ million 78\.46 61\.80 )40\.74 18\.86 5\.98 1\.06 206\.90 Adequacy of Estimates 22\. It is ESCOMts practice to malce its cost estimates on *he basis of the latest prices for contracts and for departmental work, with small if any allowance for contingencies\. During the past few years actual costs have considerably exceeded the estimates because of rising prices of labor and materials\. The estimated costs of the present programm have been recently revised to bring them into line with current costs, but they may again be exceeded if prices should continue to rise\. ESCOM is aware of this possibility but prefers to increase its loan progr'an later if price increases should take place, rather than to provide nowT for increases which cannot be predicted and may not occur\. The present estimated costs of the new stations vary from about iSA 446 per lct\. installed to about WSA 100, but the higher costs are for the initial installations at stations intended for furt]her expansion and will be very considerably reduced when more capacity is added\.  - 10 - Construction Schedule 23\. All of the new stations and extensions included in the program h have been under construction for some time\. Largely because of delays in the delivery of materials and equipment from the United Kingdom and difficulties in obtaining structural steel either in South Africa or the United Kingdomt the work on practically all of the projects is behind schedule, tlhe delays to date varying from a few months to as much as a year or more in the case of Taaibos, Swartkops and Umgeni\. It appears, howevers that the conditions causing past delays have been largely remedied and that better progress can be expected in the future\. There is no present reason to fear, therefore, that the program cannot be substantially completed within the period allowJed\. Appraisal of the Program 24\. The expansion program is considered to be a realistic and well- planned effort to meet the growing demand for electric power, which has increased bb% since 19h8 and 17% since 1950, and is expected to continue groving, with an accelerated growith in the Rand, Durban and Cape Jestern areas\. The program for new stations and extensions, as approved in 1950 when the previous IBERD loan was under consideration, called for additions of 935,000 kw to the existing capacity, which was then thought to be sufficient to meet the demands for the following six years\. Since that times howeverv revised estimates have shovm the need for increasing the new capacity to be provided by a further 500,000 kw\. The total increase of some 80% over the installed capacity at the end of 1952 is very large, but it appears to be justified by the prospective developments in the mining and industrial areas during the period\. In fact, ESCONi's most recent reviews of probable future loads indicate the possibility tllat still further plant will] have to be ordered soon in order to meet the needs in the Rand and Durban areas in 1956 or soon thereafter; and additional capacity will probably be needed in the Cape To-m area by 1958 although it has not yet been decided wihether ESCOIM or the munici- pality should provide it\. However, these further increases have not yet been sanctioned and do not form a part of the expansion program discussed herein; they are mentioned to indicate that the present large program is not excessive and may in reality not entirely fulfill the needs of the next six years\. 25\. ESCOMI is definitely committed to the projects included in the present expansion program\. All major design work has been completed (by Merz and McClellan, British consulting engineers, for the new Taaibos, Umgeni and Salt River No\. 2 stations, and by ESCOM for the remaining projects) and all major items of equipment have been on order for a long time\. The sites of all new stations -were carefully chosen with relation to the load centers, water and coal requirementsp foundation conditions, etc\. The new stations of the Rand undertaking have all been placed at the coal mines which are to supply their fuel in order to minimize transportation costs, and all new plants have been designed to permit further expansion\. Extensions to existing stations have been preferred\. where feasible, for supplying the additional capacity needed, but in  -11- many cases local limitations of water or coal supplies or of the site have made it necessary to construct new stations\. Steam pressures and temperatures for the new stations (generally 600 psi and 800-6500F) are not as high as are frequently employed in the United States and some other countries, but were adopted after balancing the cheap cost of coal in South Africa against the greater capital cost of using higher pressures and temperatures to give higher thermal efficiencies\. In general, therefore, it is fair to say that the technical planning of the program has been carried out on a high level\. 26\. All of the new stations and extensions in the present program are included in the program being financed under the previous IBRD loan, although the capacities have heen changed in a number of instances\. The Wilge station, which was added to the program after the Bank loan was made, is also being financed in part by a loan from the EXport-Import Bank\. It should be noted t'lat although the Swartkops station near Port aIizabeth has been eligible for participation in the previous loan, no Bank funds have been requested for it because of the possibility that the municipality of Port 2izabeth will ask to purchase the plant, which is being constructed to supply the needs of that city\. 27\. Based on information furnished by £SCO0I officials and others and obtained by numerous inspections, it is concluded that the present expansion program of ESCOM is technically sound and is needed to meet the present and prospective demands for power in the areas served\. Plans for Financing the Program 28\. Since ESCOh¢ is required by law to conduct its operations at neither a profit nor a loss, it must depend upon borrowing for financing its capital requirements\. At January 1, 1953, it had available the unexpended portions of the IBRD loan (approximately -1J\.27 million) and an; Export-Import Bank loan (approximately i6\.23 million), but had short- term borrowings pending the raising of loans amounting to some i5-7 million, Further expenditures will be met by the proceeds of a new IBRD loan, if any, and by other borrowing\. 29\. Except for the two foreign loans just mentioned, all of ESCOM's capital needs have been met by local borrowing and purchasing the necessary foreign exchange from the Government\. It is the practice of ESCOM to go to the local market from one to three times a year, as necessary, for loans, and none of its loan offerings has ever failed to be fully sub- scribed\. An offering of E4,250,000 of 5% 18-year stock has just been fully taken up by the market on the day after the opening of the lists\. ESCOH¶'s credit is of the highest and there is no reason to doubt its ability to raise necessary loans in the future\. An additional loan from the IBRD, if granted, will help to finance the overseas expenditures required for the program, amounting to some 1SA 31 million\. Financial Results of Operation 30\. The following table shows the consolidated revenue accounts of ESCOM for the financial years ending December 31, 1951 and 1952\.  - 12 - Ere ctricity Supply Commission Consolidated Revenue Accounts Dr\. Gr\. 1951 1952 1951 1952 _SA E SA i SA i SA To Generation By Sales of Operation 3,898,505 5,035,459 Electricity Maintenance 873,001 1,037,647 Traction 963,931 1,057,235 Proportion - 559,636 620o288 Bulk 2,272,877 2,778,222 Pooled Costs iviining 4\.,666,895 5,316,327 Industrial 1,7420330 2,092,263 5,331,142 6,693,394 Domestic & Lighting 693,621 696,o35 To Electricity Purchased 240,163 480,100 10,339,654 1, 940,082, To Distribution 751,513 876,t514 By Sales of To General Air and Steam 5520818 645,788 Expenses 969,340 1,109,177 By Other To, Revenue 63*093 69,902 Interest 1,8430265 2,oo9,986 To 10,955,565 12, 655,772 Redemption 1,501,372 1,636,883 By Ele tricity To Interchanged Reserve 465,689 268,000 (Contra) 531,854 5629316 By Excess of 11,102 ,484 13,074,054 Expenditure To Electricity Over Revenue 146,919 418\.,282 Interchanged (Contra) 531,854 56Z9,16 'l,634,338 13,636,370 11,634,338 13636,370 It wl1l be noted that there was a deficit of i SA346,919 in 1951 and another of b SA418,282 in 1952\. Since the law requires that ESCOM shall not operate at a loss, and since it is the fixed policy of both ESCOI:I and the Government that this requirement shall not be changed, ESCOGii intends in the Year future to adjust the rates in its various undertakings to the extent neczessary to erase the existing deficits and to provide the funds to meet all costs, including debt service and all other expenditures\. Further rate adjustments will be made in the Suture when needed\. Rates 31* The Electricity Act reqires that the prices to be charged by ESCOOI for electricity shall be such as to cover: the cost of production, including distribution, maintenarne ard administration; debt service; and the amounts set  - 13 - aside-annually for the reserve fund\. Each undertaking stands on its own feet, and its rates are computed originally, and adjusted from time to time there- after, so as to give effect to these provisions of the law and the provision requiring operation at neither a profit nor a loss\. As has been stated pre- viously, the original schedule of rates for each undertaking must be approved *by the Electricity Control Board, but thereafter ESCOII can on its ovm authority make equal percentage increases or decreases in all the rates of any undertaking\. 32\. The only important rate increases from 1946 to 1952 were in the TJ!itbank, Rand, Durban and Natal Central undertakings\. They amounted to about 33% for Jiitbank, perhaps 20% for Rand, and 10% for both Durban and Natal Central\. As the result of further increases that have been or will be made in 1953, the 1952 rates ill be raised as follows: for Uivitbank, Durban and Natal Central, 10%; for Cape Iiestern, 30% upon approval by the Ccntrol Board of a revised tariff now before it (replacing a temporary 20% surcharge already imposed this year); for Rand, about 6r4 and for Cape Northern, about 15% on the rates to the two principal bulk consumers\. The average price per Kilowatt-hour sold in 1952 was 0\.374d, or only about 1/2 U\.S\. cent; and after the proposed increases become effective, the average price vill still be verJ low\. Quality of Lanagement 33* The management of ESCO\.I appears to be of high quality\. Every effort is made to keep abreast of electrical developments elsevwhere, and qualified engineers are sent to the United States and Europe from time to time to study recent theory and practice\. There can be little doubt of the ability of ESCOI\.i to carry the expansion program to com\.pletion in a thoroughly satisfactory manner\. Conclusions\. 34\. The general conclusions of this report can be summarized as follows: (a) There has been a large increase in the electrical demand on ESCOi"i during the last few years, and further large increases seem assured, particularly in the Rand, Durban and Cape Town areas\. (b) ESCOL is not able to meet even the present demand without using reserve equipment and, in the Rand area, shedding loads and refusing legitimate new demands for power\. (c) A large increase in ESCO01's electrical capacity is necessary to support the continuing economic development of the country, and EiSCOlts expansion program for the years 195,- 958, at an estimated cost of about L SA 74 million, is cons \.Arrd a technically and economically sound program for the purpose\. (d) The funds required for the program, in addition to any new IBED loan, can in all probability be raised by borroving on the local market\.  - 34- (e) The rates charged for electricity by the various undertakings will be adjusted from time to time by ESCOMI so as to meet all costs vwithout deficits\. (f) The management is excellent and entirely capable of carrying the program through to completion\. Finding 35, The provision of adequate electrical power for prospective demands is essential to the continuing healthy development of South Africa's economy, and the expansion program of ESCOIM is regarded as a sound program, both technically and economically, for accomp'lishing this purpose\. The program is considered to be entirely suitable for bank financing in the amount of $30 million\. J\. C\. Lkehaffey  S \.R HO E S I A / ~~~~~~~~~PORTUGUESE ELECTRICITY SUPPLY COMMISSIONS EAST LICENSED AREAS OF SUPPLY IN r R A N S V A A L AFRICA THE UNION OF SOUTH AFRICA ) )RAND BOUNDARIES - BECHUANALAND PROTECTORATE ,UNDERTAKING SABtE TERRITORIAL - - \. (BRITISH) /A-IE WIT'BANK ULNDERTA KING PROVINCIAL -- - IN \.1 fEERUST UNDERTAKING SAIEN LICENSED AREAS G \ J E i I\. I MAFEKING WOST \POETOAIA WITBANE A5 OOB LoUR OF SUPPLY I/\ \ 'MAROOE I I9_<<4> /~ CIC A950} X F TENAU \% d \ t - I -\YOHTHAL \ ~ C~ * A PNG E O F S O OR P ISWAZILANDPy MIL~~S UT EST AF I\.B\.R NE\. D AlTN SETO VBRt195 SOUTH WEST AFRICA G~~APE NORTHERN GOLD BE THLEHEMNTLCETA UNDERTAKING~~~~~~~~HUNERAKN -' ) ~~~~~~~~~(NEW AREA AS OF -w NDRTARN ~~- / U~~A/V /950) AIMBERLY S~~~~~LOEMFONTEINE AL N BASU TOLANID E R BAN \ STATE ~ AR) DURBAN / UNDERTA KING A TL A NTI C GAPE WESTERNEE\.TW UNDERTAKINGI N D I A N 0 C E A~~~ N7jA' OW TOUWS R I VER 0 RTSON ~ ~ ~ ~ ~ BRDER UNDER TA KING SCALE CAPE TOWN 0 50 100 150 200 R LZBT MILES IBSR\.D\. DRAFTING SEGTION NOVEMBER 1950

APPROVAL

P101964

Document of The World Bank Report No: ICR00002749 IMPLEMENTATION COMPLETION AND RESULTS REPORT (IBRD-74310) ON A LOAN IN THE AMOUNT OF US$ 11\.0 MILLION TO THE REPUBLIC OF THE PHILIPPINES FOR A NATIONAL PROGRAM SUPPORT FOR TAX ADMINISTRATION REFORM December 15, 2013 Poverty Reduction and Economic Management Unit PREM-Philippines East Asia and Pacific Region  CURRENCY EQUIVALENTS (Exchange Rate Effective ) Currency Unit = Philippine Peso (PhP) 1\.00 = US$ 0\.0231 US$ 1\.00 = PhP43\.23 FISCAL YEAR ABBREVIATIONS AND ACRONYMS AusAID Australian Agency for International Development ACIR Assistant Commissioner for Internal Revenue AR Accounts Receivable BAC Bids and Awards Committee BIR Bureau of Internal Revenue BoC Bureau of Customs CAS Country Assistance Strategy CIR Commissioner of Internal Revenue COA Commission on Audit CTRP Comprehensive Tax Reform Program DBM Department of Budget and Management DCIR Deputy Commissioner for Internal Revenue DoF Department of Finance eFPS Electronic Filing and Payment System eTIS Electronic Tax Information System GoP Government of the Philippines HR Human Resources HRIS Human Resource Information System ICR Implementation Completion Results IAU Internal Audit Unit IFR Interim Financial Report ISG Information Systems Group IMF International Monetary Fund IP Integrity Plan KPI Key Performance Indicator LTS Large Taxpayers Service MCAP Millennium Challenge Account Philippines MCC Millennium Challenge Corporation MTPDP Medium Term Philippine Development Plan NARA National Authority for Revenue Administration NEDA National Economic and Development Authority NPSTAR National Program Support for Tax Administration Reform NTAP National Tax Administration Program NTRC National Tax Research Center OG Operations Group PAD Project Appraisal Document PDO Project Development Objective PFMCF Public Financial Management Competency Framework PMS Performance Management System PMIS Project Management and Implementation Service PQU Philippine Quarterly Update RATE Run After Tax Evaders RMC Revenue Memorandum Circular RMO Revenue Memorandum Order SMIS Senior Management Information System SWS Social Weather Stations TCP Tax Computerization Program TRAG Tax Reform Administration Group MCAP Millennium Challenge Account Philippines MCC Millennium Challenge Corporation NTAP National Tax Administration Program NTRC National Tax Research Center OG Operations Group PMIS Project Management and Implementation Service PQU Philippine Quarterly Update RATE Run After Tax Evaders SMIS Senior Management Information System SWS Social Weather Stations TCP Tax Computerization Program TRAG Tax Reform Administration Group Vice President: Axel van Trotsenburg Country Director: Motoo Konishi Lead Economist: Rogier van den Brink Project Team Leader: Kai Kaiser ICR Team Leader: Joselito Armovit  COUNTRY National Program Support for Tax Administration Reform CONTENTS Data Sheet A\. Basic Information B\. Key Dates C\. Ratings Summary D\. Sector and Theme Codes E\. Bank Staff F\. Results Framework Analysis G\. Ratings of Project Performance in ISRs H\. Restructuring I\. Disbursement Graph 1\. Project Context, Development Objectives and Design \. 1 2\. Key Factors Affecting Implementation and Outcomes \. 10 3\. Assessment of Outcomes \. 16 4\. Assessment of Risk to Development Outcome\. 21 5\. Assessment of Bank and Borrower Performance \. 21 6\. Lessons Learned \. 25 7\. Comments on Issues Raised by Borrower/Implementing Agencies/Partners \. 27 Annex 1\. Project Costs and Financing \. 27 Annex 2\. Analysis of the PDO Indicators and the Intermediate Outcome Indicators \. 28 Annex 3\. Economic and Financial Analysis \. 45 Annex 4\. Bank Lending and Implementation Support/Supervision Processes \. 46 Annex 5\. Summary of Borrower's draft completion report \. 48 Annex 6\. List of Supporting Documents \. 49 MAP 1\. Project Context, Development Objectives and Design 1\. The National Program Support for Tax Administration Reform (NPSTAR) project, approved in March 2007, was intended to enhance the effectiveness and efficiency of tax administration by the Bureau of Internal Revenue (BIR)\. The BIR, an attached agency of the Department of Finance (DoF), accounts for the bulk of tax revenues in the Philippines\. The project responded to prevailing pressures to increase revenue mobilization and the diagnosis that sustainable improvements in revenue mobilization would require substantial improvements in the organization’s tax administration capabilities (notably improving enforcement/compliance, and implicitly also tackling corruption)\. 2\. NPSTAR’s gambit, along with a DPL series launched in parallel, was that revenue pressures would in effect also drive institutional reforms in the BIR\. However, shortly after NPSTAR implementation commenced in mid-2007, the authorizing governance environment waned, causing support for long-term reforms to quickly deteriorate\. And by the end of 2008, the DPL series lapsed due to insufficient progress in the area of tax collection effort and administration\.1 Moreover, pressures to meet short-term revenue targets, often on a monthly basis, resulted in less focus in meeting the reform targets\. With a weak foundation for accelerating revenue collection, the BIR regularly missed its collection targets, resulting in fast turnover of commissioners for failing to meet the collection targets (there were four commissioners between 2006 and 2010)\. All these contributed to weak ownership of the reform, and hence weak performance\. 3\. A change in administration in 2010 and stable leadership at BIR resulted in progress in advancing organizational reforms and performance\. The new leadership at both BIR and DoF has proactively tackled the challenge of tax compliance/enforcement in the Philippines\. At the same time, BIR’s leadership has sought to drive a more gradual but sustained effort to improve both the integrity and tax administration performance of BIR as an organization\. This transformation remains in progress and will be vulnerable to a change in authorizing environment\. While NPSTAR has served to support this recent positive trajectory, its long-term institutional development impact remains tentative\. On-going reform efforts by BIR, coupled with scaled-up support by other development partners, will need to deepen progress on fundamental organizational change management along with IT systems reforms\. 1\.1 Context at Appraisal 4\. Improving the tax effort has been a perennial challenge\. Between 1998 and 2004, the Philippines tax effort declined from 12\.8 percent to 11\.8 percent of GDP (see 1 A new DPL program was approved in 2011 to also support efforts at enhancing tax policy and administration\. A second operation was approved in February 2012\. For tax administration, the DPL 2 supported the on-line publication of BIR’s agency level Key Performance Indicators (KPI)\. 1 1 World Bank, 2003, DPL 2 PAD, 12:17, Figure 1)\. A new administration came to power in 2001, ending a period of political turmoil, but confronting a fiscal crisis with the consolidated public sector debt reaching over 100 percent of GDP and a deficit of 6 percent in 2003\. Following the enactment of a series of tax measures, tax to GDP ratios rebounded from under 12 percent in 2004 to 13\.7 percent of GDP in 2006 (ICR First DPL, 2009, Figure 1)\. But in July 2005, seven secretaries and three heads of agencies (the “Hyatt 10” incident) – including the Secretary of Finance and Commissioner of BIR – resigned over disputes on the 2004 elections\. In the meantime, reforms in tax administration were clearly lagging as the National Tax Research Center (NTRC) and the Department of Finance (DoF) showed that levels of tax evasion from individuals and the non-issuance of receipts amounted to about 13 percent of total collections by the BIR (or PhP 130 million in FY 2012)\. The tax base was narrow, with an estimated one third of tax payers unregistered\. Further sustained increases in tax effort required improvements, notably in BIR’s compliance and enforcement work\. Figure 1\. Ratio of Revenue, Tax, and BIR to GDP 18\.0% 16\.0% 14\.0% 12\.0% 10\.0% 8\.0% 6\.0% Tax Tax-BIR Revenue 4\.0% Source: Department of Finance, by CY 5\. The period leading up to appraisal underscored the challenges of improving tax effort and associated initiatives to transform BIR\. In the 1990s, the World Bank had already engaged in BIR through its Tax Computerization Project (TCP; World Bank loan approved in 1993) automating most core tax procedures in 41 (out of 124) District offices in 19 Regions and the Large Taxpayers Service\. TCP ICR dated June 2000 rated the project as satisfactory for achievement of objectives\. But while TCP was considered successful, advancements in technology and project delays had quickly rendered the system obsolete shortly after completion\. In the early 2000s, attempts were made to transform the BIR into a semi-autonomous revenue administration through the filing of the Internal Revenue Management Authority (IRMA) and subsequently the National Authority for Revenue Administration (NARA) Bills\. This reform effort did not gain traction due to internal resistance as it proposed that some staff would need to resign and re-apply for their positions as part of the plan to instil competence and greater accountability\. Prevailing knowledge at that time could reasonably show that if top BIR leadership would lead reform management, this was sufficient to ensure political commitment to long term reform planning\. Given the strong internal opposition to radical 2 2 reform, policy makers now opted to advance reforms along a more gradual path lead by the Bureau’s top management\. 6\. However both the GoP and the World Bank continued to articulate the need to substantially and urgently improve tax administration\. The Philippines Medium Term Development Plan (2004 – 2010) and the World Bank’s Country Assistance Strategy for the Republic of the Philippines (CAS, April 19, 2005) clearly recognized this imperative\. A joint Bank/Fund diagnostic mission was carried out in December 2005 (“Critical Priorities in Tax and Customs Administration Reform\.” World Bank & IMF, February 2006), in response to a request from government for assistance in the area of tax administration reform\. The mission determined that a sustainable tax administration reform program should first address fundamental business process improvements and basic managerial, systemic, and human resource issues before any attempt to automate and develop systems solutions\. Given that the Bureau of Internal Revenue accounted for the bulk of tax collections (relative to the Bureau of Customs, another attached agency of the DoF), it naturally emerged as a focus of institutional reform\. 7\. The Bureau of Internal Revenue (BIR) formulated the National Tax Administration Program (NTAP) and submitted this together with a proposed IBRD-financed NPSTAR to the Development Budget Coordination Council (DBCC) in November 2006\. The NTAP, supported by NPSTAR, sought to enhance the efficiency and effectiveness of BIR by engaging in strategy development focused on (i) tax compliance, (ii) tax enforcement and control, (iii) human resource development and management, and (iv) change and project management\. The cost of the overall reform program was USD 24\.1 million, to be collectively supported across several development partners (WB, US MCC, USAID, Swedish SIDA and AusAID, see Section 1\.5)\. NPSTAR was intended to support close to half (46 percent) of this program through loan financing, notably including an emphasis on the last two components\. The other partners provided support through grant funding\.2 For the program to succeed, however, not only progressive implementation of institutional reforms in BIR needed to align to recurrent pressures for meeting revenue targets, but also the reluctance to pursue more fundamental governance reforms in BIR had to be overcome, including around human resource management\. In this context, the Bank’s support for BIR was from the outset risky\. While more fundamental governance and staffing reforms would have significantly accelerated the transformation of BIR’s tax administration, the appetite for more rapid and assertive reforms of the organization at the time was limited\. The project was therefore built on the premise that a strong interest in enhancing BIR tax effort would also drive an adequate prioritization of business process and HR change management actions, rather than short term measures to prop up revenues\. 2 As explained subsequently, the original design for NPSTAR appears to have been as a TA project\. For a number of reasons, the Philippines was reluctant to borrow for TA\. This meant that the project was converted to a broader national support program instrument\. 3 3 8\. BIR institutional transformation remains hinged on the tenure of the current leadership\. The authorizing environment greatly improved for the BIR in the second half of NPSTAR implementation, owing largely to the President’s strong support for governance reforms\. While this significantly improved the reform trajectory towards achieving the PDO, sustaining or institutionalizing these gains beyond the administration remains a challenge that can only be achieved by deeper involvement of oversight agencies and external stakeholders\. 1\.2 Original Project Development Objectives (PDO) and Key Indicators 9\. As BIR’s NTAP, NPSTAR’s Project Development Objective (PDO) focused on a set of twin objectives, namely: ï‚ Increase taxpayer compliance by increasing the Efficiency and Effectiveness of the BIR; and ï‚ Enhance BIR capacity to undertake a Sustainable and long-term reform program\. 10\. The PDO was to be assessed against a set of six key performance and two outcome indicators\. By project component, these were: Component A: Tax Compliance 1\. A unified/integrated and comprehensive registration system with complete and up-to-date taxpayer information 2\. Increase in the number of stop-filer cases arising from erroneous/invalid registration information eliminated from registration database 3\. Increase in the number of taxpayers over estimated potential number of unregistered taxpayers Component B: Tax Enforcement and Control 4\. Increase in the number of accounts receivables (AR) settled and improved settlement process Component C: Human Resource Development and Management 5\. Increase in the use of performance management system (PMS) for office and staff appraisal and development Component D: Management Tools, Change Management and Project/Program Management 6\. Increase in the use of output and outcome indicators in internal management reports Intermediate outcome indicators 1\. Increase in external expectations of reform accomplishments 4 4  2\. Increase in staff awareness and understanding of the need for reform as well as the reform 11\. The indicators were designed to measure not just improvements in the core functions of tax administration (compliance and enforcement) but also the agency’s capability to implement and manage long term reforms, including the effect on stakeholders\. 1\.3 Revised Key Indicators, and reasons/justification 12\. NPSTAR was restructured and extended by the end of 2011\. Originally anticipated to close at the end of 2011, the project was extended to end-June 2013\. The PDO and four components were not altered, but performance indicators were revised\. The justification can be summarized as two-fold: (i) New leadership of BIR in mid-2010, shortly after a new administration came into power in June 2010\. This development provided a significant new impetus to institutional reform efforts at BIR, notably still fully aligned to the PDOs\. At the end of 2010, utilization rate stood at only 16 percent (BIR data)\. During the first three years of NPSTAR, there had been significant turn-over in BIR leadership and apparent limited appetite to drive forward change management reforms in the agency\. The performance of NPSTAR during this period mirrored this weak leadership and was rated as Moderately Unsatisfactory for 18 months until it was upgraded in July 2011 as the renewed reform effort gained momentum\. The extension of the NPSTAR provided for an existing mechanism to advance reform investments in the organization\. In 2011, the US Millennium Challenge Corporation (MCC) also initiated a major new project with a USD 45 million grant commitments for BIR\. The continued engagement of the World Bank through NPSTAR was also seen providing important contributions in the area of change management and human resource reforms\. (ii) The key indicators for NPSTAR were proving problematic for measuring progress with respect to the PDOs\. This was due mostly to the fact that measuring a number of these were difficult because of the lack of accurate data even at the BIR district levels\. Of note are “stop-filer cases arising from erroneous or invalid registration information” and accounts receivables\. Furthermore, effective solutions to these problems will require comprehensive strategies encompassing different BIR functions and perhaps systems enhancements\. Therefore the reformulation of project indicators was done to better align with available data sources\. For instance, the gap in taxpayer base, which was previously measured against a theoretical “potential” tax base, was now compared to the labor force\. While the objective was met for some, other revised indicators remained plagued by inaccurate or unavailable data (e\.g\. filing compliance and arrears)\. Three PDO indicators were revised, 4 were continued while 1 was dropped and 2 were newly introduced (see Table 4)\. For intermediate indicators, 1 was revised, 1 was dropped while 2 were newly introduced\. In 2009, a taxpayer survey had been implemented, but this reported exceptionally high satisfaction with BIR\. The broad measure was now 5 5  seen as credible by the new leadership, although the value of external stakeholder views was seen by both the BIR management and task team to merit continued scrutiny\. 13\. The reformulated project indicators are presented below by project Component\. Component A: Tax Compliance 1\. A unified/integrated and comprehensive registration system with complete and up-to-date taxpayer information 2\. Registered taxpayer as a percentage of the labor force 3\. Percentage of filers over total registered taxpayers for corporate income tax 4\. Percentage of filers over total registered taxpayers for personal income tax 5\. Increase in the number of new registered taxpayers Component B: Tax Enforcement and Control 6\. Increase in the number of accounts receivables (AR) settled and improved settlement process 7\. Amount of arrears collected in year n as a percentage of potentially recoverable arrears in year n-1 Component C: Human Resource Development and Management 8\. Increase in the use of performance management system (PMS) for office and staff appraisal and development Component D: Management Tools, Change Management and Project/Program Management 9\. Use of operational indicators in BIR quarterly reports and of agency-level KPIs in BIR annual report Intermediate outcome indicators 1\. Percent of respondents who said that BIR services have met their expectations in the ease of conducting transactions 2\. Percent of respondents who said that BIR services have met their expectations in generating satisfying results 3\. Percent of BIR staff awareness of the project involved in tax reform 1\.5 Original Project Components 14\. NPSTAR was structured in four components to be implemented over a period of five years with indicative annual costs as follows (in million USD): 6 6  Table 1: Indicative Annual Cost per Component FY 07 FY 08 FY 09 FY ‘10 FY ‘11 Total Tax Compliance 1\.35 0\.86 0\.64 0\.75 -- 3\.59 Tax Enforcement 0\.26 1\.03 0\.41 0\.02 -- 1\.72 HR Development 0\.40 1\.12 0\.71 0\.10 -- 2\.33 Mgmt/CM/Proj 0\.71 1\.07 0\.88 0\.71 -- 3\.36 Total 2\.75 4\.08 2\.62 1\.58 -- 11\.0 Source: NPSTAR PAD 15\. While the first two represent core functions of tax administration (e\.g\. registration, filing, payment including enforcement of collections and audit), the next two represent support functions in HR management, internal audit and project and overall reform management – this spoke to the way BIR operated and reformed institutionally over time to respond to a broader metric of tax administration measures\. Taxpayer service strategy was also limited to support returns filing issues\. NPSTAR was not designed to cover other major functions of tax administration such as rulings/legal, appeals and the development of the core tax administration system as cross-cutting support function\. Below is a description of the four components and sub-components, and planned contributions by other development partners as articulated in the PAD: Component A: Tax Compliance Tax registration and verification: This component was to finance the consulting assistance necessary to develop a cost-benefit based registry verification and clean-up strategy, as well as efforts to identify non-registered taxpayers\. MCC would finance the computerization of the remaining 77 non-computerized BIR district offices\. Stop-filer and e-services: This component was to finance consulting assistance to establish the exact nature and dimensions of the stop-filer problem\. Component B: Tax Enforcement and Control Arrears Management and Accounts Receivable: This sub-component was to support technical assistance to analyse and evaluate the arrears inventory, estimate ease of “collectability” and amount to be collected, design a strategy for collection\. In addition, it would finance the arrears clean-up exercise and the development of an accounts receivable system\. Case preparation and prosecution: Activities under this sub-component were to also include support for tax enforcement efforts by strengthening the ability of the BIR to prepare non-RATE cases for prosecution\. The Run after Tax Evaders (RATE) This component was to provide support in the form of technical assistance for the installation o f a case monitoring system and a workflow/automated archiving system\. MCC was to finance training in case preparation and equipment for RATE\. 7 7  SIDA was to finance the development of and training for risk-based audits, including software and equipment for computer-based audits\. Component C: Human Resource Development and Management Human Resource Development and Management: This component was to finance activities the support the modernization of the Human Resources (HR) function\. MCC was to finance the development of a human resource management information system (HRMIS) Performance Management System: This component was to finance consulting assistance to undertake the review and implementation of the USAID-financed organizational and individual performance management system in the mid 2000’s\. AusAID was to finance training on the use of the PMS\. Component D: BIR Management, Change Management, and Program Management Governance and management: This component aimed to increase management capacity through improved strategic planning and quality assurance, a Senior Management Information System (SMIS), and the strengthening of the Internal Audit Unit (IAU) to increase internal control, including an assessment of major integrity risks and the preparation of an Integrity Plan (IP)\. Change management: 14 percent of Bank financing was to consist of change management activities such as external and internal information dissemination campaigns, workshops, and information dissemination materiel, with staff and user surveys to provide feedback\. Tax reform administration: This component was to finance the strengthening of the TRAG, through training, technical assistance and office equipment\. This component was also meant to finance activities and feasibility studies to prepare the BIR for the next steps in reform, such as a new organization, improved performance indicators, and the introduction of budget programming and cost accounting systems\. 1\.6 Revised Components Unrevised 1\.7 Other significant changes Closing date was extended by 18 months, from December 31, 2011 to June 30, 2013\. 8 8 2\. Key Factors Affecting Implementation and Outcomes 2\.1 Project Preparation, Design and Quality at Entry 16\. In principle, the NTAP, and underlying support through NPSTAR, provided a compelling platform to support the government’s wider objective of fiscal consolidation through enhanced tax effort\. The program/project design drew on a significant body of diagnostic analysis in advance of the preparation (including with the IMF)\. Available evidence suggested that tax compliance (and notably enhancements in the registry base) and improved enforcement would be pivotal to enhancing tax effort\. At the same time, the program recognized the needs for more sustained institutional strengthening in the BIR through HR measures, change management, and systematic reform project management\. In this regard, NPSTAR also deepened wider World Bank support for improved tax administration through a DPL program launched just prior at the end of 2006\. One of the DPL’s initially met prior actions was also that “The Borrower has established a high-level tax reform administration group in the BIR to implement its tax administration and reform agenda\.” This was met with the creation of the Tax Reform Administration Group (TRAG), the BIR’s reform unit, in 2008\. 17\. The World Bank was also able to draw on significant prior operational engagement with BIR\. The experience of the 1993-1999 TCP project and its subsequent institutional development impact highlighted the importance of BIR’s authorizing environment both in terms of meeting revenue targets, the importance of committed leadership to drive BIR institutional reforms, and ensuring that BIR staff across various levels and parts of the organization collaborate in the implementation of reforms\. The lessons would also serve to guide the Bank’s project management scope during supervision\. The TCP experience also highlighted the need to move beyond a primary reliance on IT systems investments\. But while government was clearly focused on enhancing tax effort, the depth of ownership was arguably open to question in BIR for the NTAP or DoF/President’s Office (to drive its implementation)\. 18\. A progressive sequencing of reforms efforts in BIR clearly identified as a requisite path to generating sustained gains in the agency’s tax effort\. Rather than invest heavily on IT systems, NPSTAR placed a premium on providing strategic change management support to prepare the organization for potential future larger systems investments\. The design team of NPSTAR recognized the need to enhance the BIR’s tax collections effectiveness, but moreover, that deeper underpinning systemic changes were needed in the organization to sustain gains in collection performance from a tax administration modernization program\. The previous spectre of having staff disruptions at BIR hold revenue collections hostage, coupled with apparent legislative and legal hurdles, however also underscored the need to promote a gradual but progressive trajectory of reforms\. 19\. There was some ambiguity as to whether NPSTAR was a program or TA operation\. The original design of NPSTAR apparently envisioned the project as a TA operation\. However, government was apparently adverse to borrowing for TA\. 9 9 Consequently, NPSTAR was converted into a national program operation, while retaining much the same focus on activities\. Given a receptive authorizing environment for reforms at the outset of the project, this distinction could have ultimately not been that material\. Given waning strategic reform ownership during the first phase of the project, this meant effectively a weakening of possibly anchor points for the project\. 20\. NPSTAR built on a number of lessons drawn from the Bank’s long-standing engaged with tax administration reforms in the Philippines\. i\. The need for visible, top management support – the organization of a reform Steering Committee composed of senior managers was, at that time, thought to be a reasonable assumption in establishing reform ownership by BIR; ii\. Inadequate change/closure of nonperforming subcomponents – performance indicators were meant to assist in identifying slow performing subcomponents, while a decision on their continuation or modification was to be formally made during supervision missions; iii\. Institutional modernization as an iterative process – encouraging the semi-annual revision/updating of the program action plan during supervision missions; iv\. Need for immediate gains to gain program credibility – understanding that short- term successes are essential to enhance the credibility of the reform and facilitate political support; 2\.2 Implementation 21\. NPSTAR’s cumulative annual disbursement profile provides an initial snapshot of annual implementation progress\. The first two years of implementation were particularly slow, followed by some pick-up through enhanced project management between 2009-2011\. By the end of 2009, utilization was 5\.33% versus an initial plan of 86%\. Implementation accelerated with the appointment of a new Commissioner under a new administration in mid-2010\. While NPSTAR was expected to see a full investment of its resources with its extension at the end of 2011, execution only reached just over 61\.3 percent by closing (see Figure 2)\. Figure 2\. NPSTAR CY Disbursement Profile Source: BIR Reform Unit, by CY 10 10 22\. The following describes key factors that affected NPSTAR implementation: a\. Soon after becoming effective, NPSTAR implementation confronted a significant waning of apparent reform ownership\. While the government’s pre-occupation with fiscal crisis had waned, BIR continued to be confronted with short term pressures fore revenue mobilization\. The DPL ISR, Annex 7, of September 2009 provides a detailed review of waning tax reform efforts during this period\. BIR also made limited effort to advance efforts to enhance its tax payer registry\. Between 2005 to 2010, four (4) Commissioners were successively appointed to the BIR with an average tenure of just 15 months each\. Throughout this period, the BIR cycled through 3 different reform plans/operational plans/priority activities developed between 2 Commissioners, as the last one had yet to release his priority actions in early 2010\. i\. Revenue Memorandum Circular 12-2006 – BIR vision/mission and strategy map, February 2006 ii\. NTAP – overall reform plan, developed in 2006 iii\. Revenue Memorandum Circular 83-2008 – BIR vision/mission, Dec\. 2008 iv\. Revenue Memorandum Order 21-2009 – BIR priority programs, June 2009 b\. The constant shift in priorities meant that implementing long term measures suffered\. Thus the turn-over of Commissioners was accentuated by weak institutional continuity in the BIR reform unit, allowing staff-count to fluctuate between 10-16\. The observed initial portfolio of prioritized activities under NPSTAR underemphasized more strategic and change management oriented initiatives (see Annex 2 Outputs by Component)\. For instance, the project’s procurement plan for 2008 tended towards IT and IT related activities such as the enhancement of electronic filing, registration clean-up and backlog encoding, without any sense of strategy formulation towards the underlying issues surrounding the registration database update issues\. During this period the IT focused support from MCC and SIDA were successfully delivered\. c\. Project implementation activity picked up in 2009, but still in the absence of revitalized or comprehensive reform program\. During this brief period, the reform unit had consolidated operations through increased monitoring of ongoing projects, implementing these and paying the consequent bills\. This caused disbursements to triple to 16% by the end of 2010\. In this period, two Commissioners were appointed, with the last remaining in office for just 7 months\. In February 2010, Revenue Memorandum Circular 10-2010 was issued, now directing the Bureaus attention to 108 priority activities/projects\. This was to remain in effect until it was again replaced with a medium term strategic plan in July 2011\. d\. A change in administration and BIR leadership in 2010 saw renewed attention to reforms in the agency\. The new government came to power on a platform of good governance, but has also seen a fall in tax to GDP ratios 11 11  approaching 12 percent\. A new Commissioner was appointed in end-June 2010 and continues to remain in office more than three years later\. Upon her appointment, the new Commissioner ordered the carrying out of a gap analysis based on best practices\. This signalled the prioritization of and encouraged the development of long term reform planning at the BIR\. In early 2011, the BIR reform and planning units jointly facilitated a session with key BIR officers and staff, producing a medium term strategic plan for 2011-2016 (RMO 23-2011 and RMO 30-2011)\. Subsequent plans that were developed were an IT plan (through the MCC IT tax project) and a reform masterplan (2013) as an operational follow up to the strategic plan\. These developments served to further bolster the move to restructure and extend NPSTAR\. With long term reform planning underway, the BIR’s reform unit has also been able to fully staff its plantilla, which now stands at 42 including local core tax administration experts\. e\. The strengthened reform momentum for BIR also saw significant renewed support from development partners\. The entry of the USD45 million MCC project to the BIR in mid-2011 significantly changed the landscape for NPSTAR\. With the reform focus now on the development of the electronic tax information system (eTIS), NPSTAR funds have been channelled mostly to developing support systems that will eventually be integrated into the core-eTIS\. However, still consistent with NPSTAR project components, notably tax compliance and enforcement, this was supported by the Bank’s supervision teams\. This has allowed the financing of several IT focused activities, funded under NPSTAR (see Annex 2, Table 6)\.3 f\. Given initial lags, the World Bank made a concerted effort to improve notably HR, change and project management initiatives under the project\. Figure 3 suggests, relative investment implementation in HR Development & Management significantly trailed all other components\. While a central rationalization plan had been approved from DBM during this final phase, the regional offices rationalization plan was still pending\. In turn, there seem to be limited traction on major efforts at HR reform, beyond some preparatory investments and facilitating workshops (in part funded through an on-going PER TA)\. While BIR has targeted completed disbursements at 80% in 2012, in the final analysis it was unable to complete about 10 IT projects prior to closing\. Funding for the bulk of these projects will be sourced by the BIR through other means\. 3 Strategic packages include a registration update strategy (this includes enabling taxpayers to update information online, however implementation of this package has not started), a taxpayers service strategy and a competency-based HR mechanism\. Also developed and supported by other development partners, notably the IMF, include a risk-based compliance strategy, audit strategies based on focused (rather than comprehensive) audits and more effective tax arrears management\. 12 12  g\. Full effect of IT packages supported under NPSTAR will be felt upon integration into the MCC eTIS (electronic tax information system)\. Out of a total of 23 packages under Tax Compliance and Tax Enforcement Components, 13 are IT and IT-related packages\. This also represents about 90% of the total value of packages between the two NPSTAR Components\. The full potential of a number of these packages, such as tax registration and filing related projects will be realized once these are integrated into the MCC eTIS project which is scheduled for late 2014 at the earliest\. Figure 3\. Component Implementation 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Component A: Tax Compliance Component B: Tax Enforcement Component C: HR Development & Management Component D: BIR Management, Change Mgmt, and Project/ Program Mgmt Total 2\.3 Monitoring and Evaluation (M&E) Design, Implementation and Utilization 23\. M&E Design\. The TRAG, and subsequently the Project Management and Implementation Service (PMIS), with the assistance of the BIR Policy and Planning Service is responsible for monitoring the project outcomes and results through the project indicators\. The restructuring process sought to address some of the apparent limitations around the first indicator set, although some degree of continuity was apparent (see Annex 2, Table 2 and Table 3)\. The nine project indicators all project components\. The three intermediate outcome indicators also sought to capture progress with respect to BIR broader institutional reform efforts by both external and internal stakeholders\. 24\. The timely and comprehensive preparation of project monitoring reports continue to present a significant challenge for BIR\. The PMIS has been diligent in monitoring the indicators, and submitting these to the Bank during supervision missions\. However, these reports were plagued with significant data problems – either the data could not be produced or was inaccurate\. Annually, the BIR is requested to present voluminous amounts of information for submission to oversight agencies and Congress which it accomplishes by manually gathering information from its field offices, every year\. While BIR is in possession of a sophisticated management dashboard (using SAS), this tool can only generate information on aggregate and field level tax collections\. Even after closing, M&E information has lagged\. Various Aide Memoires have emphasized BIR’s need to improve data provision\. One project indicator remains unmeasured\. Meanwhile, all three Intermediate Results Indicators have not been measured beyond an initial baseline, which itself appear to confront measurement issues (see Annex 2)\. 13 13 25\. Stakeholder response and feedback remains unmeasured\. This was originally measured in a 2009 survey, however the BIR Commissioner instructed to redo the survey for reporting extremely high rates of satisfaction by both internal and external stakeholders\. To date, the BIR has attempted to bid out the service resulting in failure twice and now planned for 2014\. BIR states in its website that it intends to actively pursue this next\. This has delayed original plans to institutionalize stakeholder feedback to help strengthen compliance strategies\. The Millennium Challenge Account Philippines however is currently implementing a contract to measure stakeholder responses, as baseline for a planned public awareness campaign\. In the meantime, independent surveys confirm marked improvements in the BIRs perceived sincerity in fighting corruption\. 2\.4 Safeguard and Fiduciary Compliance 26\. Financial Management\. The project was generally rated with moderately satisfactory financial management performance and with moderate FM risk throughout the life of the project\. There were points where financial management implementation had been rated moderately unsatisfactory and financial management risk was assessed to have become substantial\. Issues raised during these periods included (i) delays in the processing of billings from supplies/consultants, (ii) inadequate control over receipt of supplies/purchases, (iii) delays in the submission of financial reports as required in the loan agreement, (iv) lapses in control particularly in the procurement of goods and timely reconciliation of accounting records and ledgers on property, plant and equipment, and (v) delay in the appointment of consultant for the capacity building of the Internal Audit Division\. Most of the agreed financial management actions arising from FM implementation reviews were properly addressed and resolved before the next review mission\. 27\. The project has substantially complied with the financial covenants which include the submission of the quarterly Interim Financial Reports (IFR) and the annual audited project financial statements, despite some delays\. Out of the six audit reports received on the audit of the project financial statements, four audit opinions were unqualified or clean opinion while two (CY2010 and 2011) have qualified audit opinions\. Among the issues raised by the Commission on Audit (COA), the supreme audit institution mandated to conduct the external audit of the project, included (i) negative cash balance in the 2010 project financial statements due to unrecorded fund transfer, and (ii) uncertainly on the effects of the technical review still being conducted by the Technical Audit Specialists on the systems audit being conducted at the time of audit in 2011\. The issues were subsequently addressed\. Other observations by COA as included in the Management Letter were either fully or partially complied with as reported by COA in the subsequent audit/follow up\. 28\. Total loan disbursement at the end of the disbursement deadline date amounted to US$6\.7 million or 61% of the total loan amount of US$11 million\. Among the reasons for the low disbursements included (i) delays in awarding of contracts which also delayed the implementation of project activities and non-submission of deliverables by the closing date; and (ii) incomplete supporting documents for the billings 14 14 of some consultants resulting to non-payments of the billings by the disbursement deadline date\. 29\. Procurement\. Overall, at project closing date, procurement implementation was rated as moderately satisfactory\. Delays in procurement implementation was experienced during the initial 2-3 years of project life because of: (a) frequent changes in the items to be procured as shown by the a number of revisions in the Procurement Plan; (b) lack of capacity in the preparation, processing and finalization of Terms of Reference or Specifications for the technical assistance needed by various BIR end-user units; (c) multiple reviews of documents; and (d) inadequate knowledge on Bank’s procurement procedures by member of Bids and Awards Committee – Tax Reform Administration (BAC-TRA)\. As remedial measures to address the delays and to increase capacity: (a) trainings were conducted for the BAC-TRA and those involved in the procurement process; (b) a consultant was hired to write terms of references; and (c) procurement steps were streamlined\. 30\. To demonstrate its commitment to improve its agency procurement system, the BIR volunteered to be one of the pilot agencies for the implementation of the Agency Procurement Compliance and Performance Indicator (APCPI) system that is supervised by the Government Procurement Policy Board (GPPB)\. The APCPI objective is to have a continuing process of identifying strengths and weaknesses in the procurement system, and to have an action plan to address the weaknesses\. For a period of 3 years from 2009 to 2011, BIR’s APCPI ratings improved from a low of 1\.23 points (maximum of 3\.00points) in 2009 to 1\.98 points in 2010 to 2\.06 points in 2011\. Starting late 2010 up to 6 months before the final closing date in June 30, 2013, under the leadership of the new Commissioner, the BAC-TRA implemented the Procurement Plan and procured several contracts that resulted to an improvement in project disbursements\. In early 2013, however, the Procurement Plan underwent 3 revisions to accommodate changes in Management policies\. Thus, a number of bidding processes were either delayed or cancelled and not implemented\. This drastically reduced the utilization of the loan proceeds\. 31\. As to compliance to the Procurement requirements of the Loan Agreement, there was substantial compliance in: (a) procurement planning; (b) the implementation of fiduciary requirements for prior review; (c) the use of the bidding documents and forms; and (d) the implementation of the Procurement and Consultant Guidelines\. 2\.5 Post-completion Operation/Next Phase 32\. The major concern remains the institutionalization, or full follow through and implementation of activities under NPSTAR\. No follow-up operation is envisioned, although BIR is taking forward a number of projects, particularly those that could not be completed prior to NPSTAR closing\. The growing number of development partners in the BIR is also supporting further institutionalization of a number of activities\. Four notable outcomes include: 15 15  1\. The Project Monitoring System (PMS)\. Through NPSTAR the PMS was completed in late 2012\. Along with system development, the project provided capacity building for users (PMIS and operations) and managers\. With a functioning PMS the BIR, with assistance from the IMF, is developing a detailed reform master plan containing over 40 reform projects that will be implemented over the next few years\. With the PMS these reform projects will be monitored on a timely and relevant basis\. The simple, systematic, and periodic implementation monitoring of the portfolio of all reform projects, and constituting activities, in BIR likely to be of significant practical benefit going forward\. 2\. The competency-based HR manual\. During the last year of implementation, the WB actively pushed for a strategic approach to HR reforms\. This lead to the development of a modern competency-based HR mechanism for BIR HR management\. However, this output was never fully implemented under the project\. In the meantime, with AusAID support, the government is currently developing a Public Financial Management Competency Framework (PFM- CF)\. The project proposes a framework that will identify, recruit, maintain, develop and manage competencies for PFM related expertise to be applied across the entire government\. Armed with a competency-based HR manual, the BIR is well poised to implement the PFM-Competency Framework (PFM- CF)\. 3\. Tax Payer Assistance Facilitation\. Through NPSTAR BIR has developed 38 eLounge sites around the Philippines\. These sites will be vital in the development and implementation of a future taxpayer assistance strategy\. 4\. Business Process Reengineering\. Now guided by the BIR strategic plan, ongoing business process reengineering, and in-depth IT planning guided by the MCC funded development of the Electronic Tax Information System (eTIS), there are a number of IT projects (e\.g\. database consolidation, audit tracking, case management, etc\.) that were developed/enhanced and awaiting integration into eTIS\. 33\. At a broader policy level, the World Bank continues to support the Department of Budget and Management (DBM) in potential reforms to the rationalization plan framework\. Initiated in 2004, and recently slated for termination, the plan has arguably hampered more timely and fitting efforts to better align BIR organization, staffing, and incentives structures to its overall mandate and performance objectives\. Providing BIR with a more flexible modernization framework, in concert with the DBM, has the potential of advancing some of the HR reform and change management processes that have lagged under NPSTAR implementation\. 3\. Assessment of Outcomes 3\.1 Relevance of Objectives, Design and Implementation 34\. NPSTAR’s objectives were highly relevant to the CASs (2005-9 and 2010-12/3) and the Philippine Development Plan (2011-2016), which are anchored on inclusive 16 16 growth and poverty reduction\. Greater tax administration efficiency and effectiveness through long-term and sustainable reforms is key to achieving inclusive growth and reducing poverty in the long run\. Low tax to GDP ratios remain a perennial challenge for the Philippines, with improvements in BIR tax administration proving to be a significant key to addressing this challenge\. The project design, overall, was effective and also remains relevant\. The emphasis on and prioritization of HR and change management is important in any reform that seeks to implement institutional change\. 3\.2 Achievement of Project Development Objectives 35\. NPSTARs contribution can be gauged by BIR progress on key functions – compliance and enforcement – but also its longer term institutional ability to sustain improvements in tax effort and modernization efforts\. The project indicators/ intermediate outcome indicators suggest that BIR has made some, but only partial progress to these objectives (see Table 2, Table 3 and Table 5)\. A rating of Moderately Unsatisfactory is appropriate whether one assesses the achievement of the PDO based on the original or revised indicators as majority of these remain unmet or unmeasured (see Annex 2)\. But despite a protracted start, the project provided a platform of existent support for BIR leadership notably during the latter part of the project\. The extent to which BIR institutional reforms – reflecting the second part of the PDO – remain vulnerable to changes in individual leadership remains a concern\. 36\. The reform project management structures initiated under the NTAP/NPSTAR are beginning to gain traction\. Advances to the PDO are reflected in the current structure of reform management and the strengthening of reform planning and monitoring, specifically this refers to the organization of both the reform Steering Committee and the tax reform unit (formerly the TRAG, but now known as the PMIS)\. Both were written as covenants to the loan\. The Steering Committee, which continues to meet regularly, has enabled BIR management to meet exclusively on reform matters without the distraction of pressing day-to-day needs\. The reform unit has been officially recognized in the BIR through the approval of its National Office Rationalization Plan in 2010\. Its membership has therefore steadily grown from 10 in 2007 to 42 at present\. The manner in which this unit has been staffed by various tax administration experts has been effective at placing the necessary core expertise needed to design reform specifications and inputs\. NPSTAR has also made significant contributions to tax enforcement, notably to the RATE program, in continuing to build capacity and managing external expectations on the program\. Following a gap analysis in 2010, BIR issued its own medium term reform plan and associated indicator for the medium term\. 37\. Incomplete registration has hampered definitive measurements of improvements in overall tax compliance\. NPSTAR tax compliance measures looked to capture the ratio of actual filers/payers against the population of liable taxpayers\. The main challenge in this regard has been the large degree of historical under-enumeration and updating of a registry of respective taxpayers (e\.g\., corporates, individuals, wage earners)\. Therefore the inability to efficiently update registration information has also meant that the registry is also riddled with inactive taxpayers (see Annex 2, Table 2 and Table 3\.) 17 17 38\. Tax compliance in the Philippines under BIR responsibility continues to confront a number of challenges\. Overall analysis suggests that the tax base for both companies and individuals remains narrow (World Bank 2011, IMF 2011)\. The BIR lacks a comprehensive and up-to date registry of taxpayers\. Given the historical primary emphasis on meeting revenue targets, the tendency has been to focus on capturing mainly large and immediate taxpayers\. The large taxpayers’ office has focused on a more systematic enumeration of bigger corporates\. For example, one emphasis by the BIR over the past few years has been to shift the management of large taxpayers’ accounts from regional to the central office\. The thrust of this move was based on the assumption that the national office would be more professional and effective in managing this tax source\. The number of these transfers was however limited to just over 2,000 in recognition of capacity challenges of the Large Taxpayers Service (LTS), while still accounting for close to two thirds of total tax collections by volume\. Given that the perceived revenue yield to effort of a broader set of individual or corporate taxpayers is more limited relative to the investment of creating and maintaining an up-to-date registry\. 39\. The lack of an up-to-date taxpayer registry also causes problems in filing compliance\. The extremely low filing ratios (number of actual filers against the registered taxpayers for corporations and individuals) is also a manifestation of a registry that has not updated the list according to whether taxpayers are still active or not\. However, given that there is a gap between potential and actual taxpayers, one cannot discount the fact that actual filing compliance is low\. 40\. Managing and measuring tax arrears or accounts receivables have historically been weak in BIR\. This problem was again a symptom of an excessive focus on collecting current revenues, versus investing heavily on potential collections that may or may not generate revenue in the future\. This lack of attention in the past did manifest in the low baseline for the NPSTAR indicator on arrears\. During appraisal, the total arrears of the Bureau was pegged at PhP4\.5 billion\. Due to better account management, the BIR now reveals this to be PhP296 billion\. Since 2 years ago, the IMF has been giving TA to help BIR improve its process and mechanisms in managing arrears\. Since late 2012, a compliance council has been organized to handle, among others, the problem of arrears\. Today in four key field offices of the BIR, a number of teams are tasked to collect from taxpayers with unpaid tax balances\. What has not been completed though, and due to its sheer volume, is a complete inventory of what are still potentially recoverable from the existing stock of arrears\. 41\. BIR has issued its operational performance indicators but shows weakness in monitoring and using this for performance management\. In 2011 and 2012, BIR issued its agency and operational level key performance indicators\. The agency level indicators are published in the BIR website for three years (2010-2012), however it has yet to produce the operational indicators – which is more granular drilling down on more detailed performance indicators at district office and up\. 18 18 3\.3 Efficiency 42\. The NPSTAR PAD mentions that the effective implementation of a “relatively small” reform program (NPSTAR) designed to improve tax administration will yield significant payoffs in terms of more revenues that translate to increased spending in infrastructure and social services, thereby improving the country’s competitiveness and reduce poverty\. 43\. Recent developments show an improving trend in the Philippines’ tax to GDP ratio however, the project remains hard pressed to lay claim to this\. The World Bank (PQU, 2010 to 2013) reports that this improving trend is primarily due to more effective tax enforcement activities, such as the Run After Tax Evaders (RATE) program of the BIR\. In tax enforcement, BIR through NPSTAR invested under 10% of the total NPSTAR loan, less than the programmed 15%\. Moreover, close to 90% was invested in just completed IT projects that have yet to be integrated into the MCC funded eTIS (see Figure 3)\. Until such time, the benefits to having these systems remain limited\. 44\. In a span of three years, the tax effort increased from 12\.1% in 2010, to 12\.4% in 2011 and to 12\.9% in 2012\. This occurred despite a decrease in revenue performance of the Bureau of Customs, whose effort ratio dropped from 2\.9% of GDP in 2010 to 2\.7% in 2012\. Therefore, the BIR improved its collection performance by 1% of GDP in three years\. This improvement translated to a little over PhP100 billion in 2012\. 45\. Through the RATE program, the number of tax evasion cases under the Aquino Administration increased to 153 this year alone, compared to the 23 cases in 2010 (http://perangbayan\.com/)\. Also for 2013, the BIR targets to increase the number of self- employed individual taxpayers (SEIT) from 402,000 to 1\.8 million and to reach a PHP 200,000 average tax collection per SEIT\. However, the number of convictions arising from these cases filed remain limited\. 46\. Implementation of the BIR reform program is underway, and is managed through a reform master plan while monitoring progress of individual packages is possible through its performance management system\. For the BIR, increasing revenues means tackling the need to increase the tax base from which the BIR levies taxes, but more importantly, that this gets translated into comparable improvements in filing compliance and ultimately into payments\. During the span of NPSTAR, filing efficiency ratios for corporate and personal income tax (see revised PDO indicators, Table 2) only marginally improved, reinforcing the argument that the upward trajectory in the tax effort to date results from greater enforcement activities\. 3\.4 Justification of Overall Outcome Rating Rating: Moderately Unsatisfactory 47\. Overall, the PDO was, at best, only partially achieved whether assessed on the original or revised indicators (see Table 2, Table 3, and Table 5 in Annex 2)\. As per revised indicators, of the nine PDO indicators, four were met while four were not, with one yet unmeasured (potentially recoverable arrears remains undefined at BIR)\. 19 19 Meanwhile, all three intermediate outcome indicators, to gather stakeholder feedback on the reforms, remain unmeasured\. Arguments may be made on the quality of support to the RATE program, which further bolstered the BIR’s performance\. However, this as well as other packages under NPSTAR and other development partners currently in BIR, have yet to fully take hold and translate to improvements in filing compliance\. While this may eventually translate to an increase in efficiency, the project team bases its rating on the current status of the indicators\. 3\.5 Overarching Themes, Other Outcomes and Impacts (a) Poverty Impacts, Gender Aspects, and Social Development None (b) Institutional Change/Strengthening 48\. The current institutional reform trajectory in BIR is by all accounts positive\. But most observers would concur that this reform trajectory remains dependent on the current authorizing environment and BIR leadership\. The litmus tests for a consolidation in BIR remains will be how it fares in the context of transitions of either its own leadership or the wider political landscape\. Historically BIR has been prone to political capture and weaknesses in governance\. Building the type of institutional resilience that will make the agency largely immune from these types of pressures remains vulnerable\. 49\. Basic reform project implementation and internal change management remains a challenge\. Achieving technical gains (effectiveness and efficiency in tax compliance and enforcement) requires assistance to core tax administration functions, while introducing institutional change requires a different strategy\. In the BIR prospects for institutional transformation capable of sustaining technical gains over the long term remain moderate for the BIR\. The agency has received assistance in the past to re-design and strengthen its technical capability through tax administration modernization\. This continues to happen in the core areas of tax registration, filing of returns and payment of taxes, audit, enforcement and management of arrears, and legal enforcement\. However, examples of institutional transformation that successfully implemented tax administration reforms had designed programs that also incorporated changes to an agency’s support function, notably HR management (e\.g\. Peru and South Africa)\. The comprehensive approach to reforms enabled an agency to improve its technical capability while complementing this with an effective change management program\. No program at present exists for the BIR that incorporates effective HR management, management and organizational flexibility and change management to complement technical and functional improvements\. Delays in basic project implementation during the final phase of NPSTAR underscored that even with a strong reform unit, actual project implementation can often be delayed across functional units\. 20 20 4\. Assessment of Risk to Development Outcome Rating: High 50\. The greatest risk to the development outcome is a leadership change in BIR to one that is less reform oriented\. As BIR history shows, changes in leadership were often accompanied by consequent changes in both strategic and operational priorities where the succeeding plans had served to completely replace the previous one\. Where continuity is essential to achieving sustained gains, this risk is rated as high\. Experience in tax administration reform efforts, especially where IT systems are involved, show that increase in efficiency and effectiveness is a result of sustained improvements on how entities like the BIR operates, records and makes use of information, usually achieved over a period of time\. With 3 years left for the current administration before national elections are held, there is only enough time for the BIR to build its IT system (eTIS) with institutionalization (e\.g\. capacity building and other change management activities) being left to the succeeding leadership\. Continued emphasis must also be placed on improving the timeliness and integrity of performance indicators that measure BIR’s reform progress, whether by oversight agencies such as the DoF or the broader public\. 5\. Assessment of Bank and Borrower Performance 5\.1 Bank Performance (a) Bank Performance in Ensuring Quality at Entry Rating: Moderately Unsatisfactory\. 51\. At inception, NPSTAR assumed broader ownership for a reform strategy reflected in the NTAP\. Against this backdrop, the project components were sufficiently balanced to deliver assistance to a broad category of core tax administration functions as well as critical support functions, overall risk and identified individual risks, for the most part, accurately depict the situation at that time, lessons learned were considered and successfully incorporated, and, which provided sufficient safeguards against possible deficiencies and weaknesses during implementation\. In ensuring quality at entry, NPSTAR was fully aligned to support the BIR reform plan\. But NPSTAR represented a gambit in the sense that it assumed that efforts to improve tax efforts would be aligned with real ownership around reforming/modernizing BIR\. 52\. The project performance indicators design did not ensure the availability of accurate data\. If this was not entirely possible at the time, or was found deficient during the project duration, then strategic activities to ensure the production of accurate data could have been pursued more actively during execution\. Furthermore, the risk from a “lack of sustained political commitment to the reform and possible change in administration” was severely underestimated – a critical ingredient to implementing an NPS facility\. Even as this was so, a counter-argument may be put forth, in that prevailing knowledge and experience at the time led the design team to reasonably conclude that by allowing the BIR’s top management to lead reforms (via the reform steering committee setup), was sufficient to ensure staff “buy-in” for the reform program\. 21 21 (b) Quality of Supervision Rating: Moderately Unsatisfactory\. 53\. During the first three years of implementation, the Bank supervision teams clearly struggled to strike a balance between taking “quick wins” and achieving long term meaningful gains\. However as pointed out earlier, the authorizing environment at the time, pressured by the need to raise immediate revenue, had shown little interest in pursuing long term reforms through more strategic packages (e\.g\. HR and change management)\. Earlier aide memoires focused on quick wins rather than more strategic packages that take longer to implement\. In this respect, the Bank supervision teams during this period, despite having a clear mandate to review/assess and make strong recommendations on the prevailing reform trajectory then, did not sufficiently exercise this\. As articulated in the aide memoires (i\.e\. Oct 2009, Mar and Apr 2010), the Bank team repeatedly called the attention of the BIR on the slow progress in backlog encoding and data matching exercises\. However, without the benefit of a clear registry clean-up strategy, jumping to such activities may lead to less than efficient outcomes, especially since this would have to be a recurring activity just to maintain “clean” and up to date data\. Although there was a call to form such a strategy (Oct 2009 AM), it must be noted that this was only developed, via Bank assistance, during the gap-analysis exercise in 2011\. The same may be said for arrears management and taxpayer services\. 54\. During the last three years of NPSTAR, the more conducive environment was clearly reflected in the Bank’s supervision missions\. In this period, strategies for taxpayer services (Taxpayer Service Strategy) and registration were developed by the Bank\. The Bank sought to provide more proactive support for advancing HR and change management reforms, including through supplementary TA activities\. At the same time, BIR continued to be subject to lags in reporting notably intermediate indicators even after restructuring\. Arguably the Bank could have been more forthright seeking a more timely resolution of these information gaps, which continue to pose a challenge even for the ICR phase\. While the Bank was not provided with the best conditions in the first phase of the project, it appear to make a best faith effort to advance reforms\. However, given the on- going delays in efforts to resolve the monitoring indicators, a rating of MU for the first phase of the project\. Proactive engagement in the final phase of the project would merit a more satisfactory rating, but is again weighted down by delays in arriving at monitoring indicators in a timely fashion\. Given the longer phase of the initial period, the rating would therefore average to MU rather than MS\. (c) Justification of Rating for Overall Bank Performance Rating: Moderately Unsatisfactory\. 55\. The World Bank was not successful in averting some of the key limitations of implementing NTAP/NPSTAR\. Given the national program support modality inherent in the project, implementation was clearly contingent on continued ownership and support both within BIR and key stakeholders such as DoF\. For a number of years, however, the Bank allowed the program to proceed in the absence of an apparently clear and well sequenced master reform plan\. Moreover, gaps in indicators were dealt with from supervision to supervision mission, rather than taking a more pronounced stance\. It 22 22 should be noted that 2009-10, the overall relationship between the Bank and the government has experienced some strains, including as they related to governance and corruption issues/investigations\. While country management sought to advance the dialogue with the counterpart, more assertive measures specifically with regards to NPSTAR – either through restructuring -- would not have proven especially productive\. 5\.2 Borrower Performance (a) Government Performance Rating: Moderately Unsatisfactory 56\. Government ownership and implementation drive for tax administration reform was weak for much of the projects lifetime\. Following appraisal, apparent government commitment quickly waned as BIR leadership was constantly pressured by DoF/the Presidency and consequently changed for failing to meet headline revenue targets\. This average 15 month tenure of four (4) Commissioners did little to provide guidance, stability and credibility to multi-year comprehensive reform programs such as NPSTAR\. As shown earlier, over the course of six years from 2006 to 2011, five reform/operations/priority plans were developed and implemented during the term of the sitting leadership\. As argued earlier, this created uncertainty and hesitation to the leadership and management of the reform program, and was only corrected midway through the project\. The experience over the past 8 years only highlights the reality that a stable leadership at the helm of BIR is absolutely necessary to sustain the momentum of long term reform programs\. The evaluation of the first phase of NPSTAR would merit an unsatisfactory rating\. Owing to some progress in the second phase of the project meriting potentially a marginally satisfactory rating, a overall rating of MU is proposed\. (b) Implementing Agency or Agencies Performance Rating: Moderately Unsatisfactory 57\. BIR reform implementation for much of NPSTAR proved at best partial\. Especially in the early phase of the project, there was limited commitment or drive to advance a strategic reform plan and implement associated activities accordingly\. Key weaknesses HR management and change management activities, two key packages that would have lent immense credibility to the BIRs reform program then – as well as the pick-up during the latter years\. This pick-up however was cut short by failure of BIR to follow through on key packages that were procured and implemented late\. Although the PMIS has shown immense improvement in project management, it shares this task with other players in the BIR, notably the Information Systems Group for IT projects and the Operations Group for non-IT projects\. 58\. Timely production and disclosure of key performance and management indicators remains a challenge for BIR\. Agency reporting systems have remained fragmented and lacked automation\. While various efforts have been made to establish management dash boards, these have tended to be at best only partially functional\. Ratio measures for taxpayer compliance have been subject to uncertain denominators owing to incomplete firm or individual taxpayer registries\. This has undermined the accurate calculation of respective base-lines and trends\. Moreover there are no established 23 23 mechanisms to gain feedback on perceptions of BIR performance from internal or external stakeholders\. Consequently efforts in this regards have tended to be ad hoc, and not very effective in arriving at trends\. (c) Justification of Rating for Overall Borrower Performance Rating: Moderately Unsatisfactory 59\. While tax administration reforms supported by NPSTAR have accelerated towards closing, overall borrower performance has had a number of limitations\. As per its design, NPSTAR was predicated on a reasonable commitment by BIR to change management and HR reforms\. During the initial phase of implementation this was absent\. The second phase of NPSTAR, following the appointment of a long-standing Commissioner in 2010 was subject to a significant improvement in the reform drive in BIR\. The project management unit also took on an increasingly proactive role in coordinating and following up on project and activities being finance by NPSTAR\. However project execution remained dependent on decentralized implementation across units\. This continued to be associated with delays in project implementation notably for IT packages\. Towards the end of NSTAR the Commissioner and the project management unit have also been making a more systematic use of the reform masterplan in strengthening project accountability, but until late there continues to be challenges with reliable performance indicators\. DoF also took a more proactive role in monitoring BIR collection numbers at a more granular level\. On balance, the rating for the first phase of the project would be unsatisfactory, which is offset by marginally satisfactory for the latter part of the project (owing to continued lags in M&E indicators and implementation lags)\. 24 24 6\. Lessons Learned 60\. IT projects/automation on their own will not deliver institutional reforms\. Potential vested interests inside and outside the agency have historically posed a significant barrier to achieving an authorizing environment for deeper reforms\. While fiscal crises have often provided a call for reforms, implementing these reforms requires a more extensive constellation of factors\. Reforms around BIR have been a balancing act of ensuring continuous revenue flows, while seeking to advance more transformational changes in the organization\. But actually delivering on change management and human resources management, even if acknowledged as being critical, does not come easy\. 61\. NPSTAR proved to be highly dependent on reform leadership within but also outside of BIR\. Reforming the BIR is beyond technical in nature\. Any reform program for the BIR must confront two issues: (i) for the most part BIR, and its people, perform functions the way it does because it is optimal to do so; and therefore (ii) achieving sustainable gains requires behavioural change in BIR\. For instance, the extreme emphasis in meeting collection goals has prevented the organization from undertaking reforms that may disrupt short term performance\. Similarly, audit is treated by auditors as a mechanism for immediate collections and less to strategically encourage compliance in the long run\. 1\. A comprehensive reform program for an institution like the BIR requires the active participation of oversight agencies\. a\. External agencies should hold BIR reforms to account\. In its role as oversight agency, DoF can play a constructive role by seeking to hold BIR to account for not just ad hoc revenue targets\. During implementation, DoF Secretary should ideally monitor BIR performance indicators to help ensure continuity of reform program despite potential changes in Bureau leadership\. For example, aside from the NPSTAR project indicators, BIR also has Agency- Level KPIs which have been published for 2010 and 2011 (www\.bir\.gov\.ph/pgs/bir_pgs_as_acc_report\.htm), and Operational KPIs which it is currently gathering\. This is important in allowing BIR performance to be assessed more broadly, away from just short term collection targets\. b\. As a pre-requisite, DBM to provide sufficient managerial flexibility to BIR in terms of budgeting and human resource arrangements\. Designing such a mechanism may be challenging especially in a rules-based, compliance oriented environment\. But such a mechanism will enable BIR management to reorganize more quickly, and enable the assignment or appointment of competent personnel to full time reform work\. c\. An effective set of project indicators requires ensuring the integrity of the data\. If this is not possible (i\.e\. the set of indicators would not accurately measure progress towards meeting the PDO) then the project could support activities that ensure the credibility of the data\. 25 25  d\. Phasing project implementation with clear pre-requisites to proceed with succeeding phases\. In the case of NPSTAR, the implementation of both HR management related activities and change management during the first 2 years as a condition for the continuity of the project\. e\. Revenue pressures should not be confused with commitment to deeper institutional reforms for tax administration\. Institutional and human resource reforms are often deeply challenging, and often politically contested\. While particularly fiscal crisis can provide an opening of instituting tax administration reforms, they cannot sustain them\. Other sustained drivers such as concerns with good governance or the modernization of the bureaucracy are required to advance more medium to long term reforms\. 2\. Citizens/taxpayers need to become part of the reform agenda at both design and implementation stages\. While tax administration reform leadership and ownership from within BIR has proven critical for progress, external stakeholders within and outside government are critical to reinforcing and sustaining institutional modernization\. Within government, the DoF and the Office of the President continue to be critical stakeholders\. However, a broader popular demand, and appreciation, for modern tax administration is critically interlocked with reform champions in government\. The DoF, in collaboration with BIR, has recently launched a major public campaign around tax compliance and accountability\. The traction of these reforms will also hinge on the wider public acceptance of government responsiveness and integrity, including on the expenditure side\. The experience of NTAP/NPSTAR suggests that close attention should be paid to monitoring and assessing responses from existing tax payers, but also the broader public\. This information should feed into strategies that can reinforce the drive for technical and institutional reforms in tax administration\. 7\. Comments on Issues Raised by Borrower/Implementing Agencies/Partners (a) Borrower/implementing agencies The ICR was presented and discussed with the Commissioner of Internal Revenue and the head of the BIR reform unit (PMIS) on separate occasions on December 16 and 17, 2013, following early briefings on the overarching approach to the report\. While the Commissioner has stated that she has no comments on the report, BIR does not formally object to but neither endorses the findings of the assessments\. The preference has been to take the report as an independent product of the World Bank\. The experience in the first half of NPSTAR implementation only confirms the Commissioner’s sense that reforms in an institution like BIR cannot be driven by external donors, but can only be led by the institution itself\. To quote Commissioner Kim Jacinto-Henares: the result of the first half of the program versus the second half merely confirms what I have been saying from day one, the success of any reform or assistance must be recipient driven and not donor driven\. Reforms that are donor driven will have very little chance of succeeding no matter how much money or effort thrown at it by the donor agency\. 26 26 The BIR recognizes the initial difficulties encountered during the early years of implementation (2007 - early 2010) but notes the significant progress now being made in institutionalizing the reforms envisioned under the NTAP/NPSTAR\. NPSTAR has been able to provide a number of critical building blocks in this reform effort, which is duly noted in Section 2\.5 of the report\. The BIR, in the meantime, plans to continue making use of these to move the reforms and help deepen institutional changes\. (b) Cofinanciers None (c) Other partners and stakeholders (e\.g\. NGOs/private sector/civil society) None 27 27  Annex 1\. Project Costs and Financing by Component (in USD million equivalent) Ratio of Appraisal Actual/Latest Actual to Project Component Estimate (USD Estimate (USD Appraisal millions) million)* Estimate per Component Component A: Tax Compliance 3\.59 3\.28 91\.4% Component B: Tax Enforcement 1\.72 1\.42 82\.5% Component C: HR Development 2\.33 0\.17 7\.3% & Management Component D: BIR Management, Change Mgmt, and Project/ 3\.36 1\.82 54\.2% Program Mgmt Total Required 11\.0 6\.69 61% *Latest available data from BIR, as of 11 November 2013 NPSTAR provided support to 37 activities/projects\. These are analyzed in detail in Annex 2, Table 6, including scored by perceived contribution to the PDO/respective modules\. 28 28 Annex 2\. Results and Analysis of the PDO Indicators and the Intermediate Outcome Indicators This annex is broken down into two sections: (i) a weighted analysis of pre- and post- restructuring PDO indicators and intermediate indicators, (ii) a drill down analysis of packages financing under the respective components\. This is meant to elucidate the way in which the overall PDO/results indicators were supported by individual packages\. A\. Results and Analysis of the PDO Indicators and the Intermediate Outcome Indicators Per ICR guidelines (OPCS August 2006), the overall rating (Table 5) is based on a combination of assessments done against the revised (Table 2) and original (Table 3) PDO indicators, weighted by the relative value of disbursements before and after revision\. Table 4 provides a comparative summary overview of the pre- versus post-restructuring indicators\. Since the last Implementation Status Results (ISR) in April 2013, there has been no progress in these indicators\. Of the nine PDO indicators, 4 have been met, 4 have not been met, and 1 is unmeasured\. Likewise, all three IRIs have not been measured\. Compliance: The two compliance indicators concerning Corporate and Personal Income Tax filling efficiency have not been met\. This low ratio is a symptom of BIR pursuing larger and more “lucrative” tax payers to meet its revenue targets\. To meet revenue targets, the commissioner has continued to focus on revenue mobilization not filing efficiency\. However in October 2012, the Commissioner passed an issuance making filing a part of individual performance appraisal for Regional and District Heads, with data to be collected on a quarterly basis starting at the beginning for 2013\. As of today, this data has not been completely generated\. Enforcement: Comprehensive and timely measurement + reporting of arrears/accounts receivable remains a major concern in BIR\. The IMF continues to provide TA to improve this area, which is beginning to show signs of improvement in terms of collecting from arrears\. However, an accounting of what is potentially recoverable has yet to be completed\. However, progress is evident in other aspects of enforcing tax laws\. In tax fraud, the RATE program continues to deliver on its mandate to file high-profile cases every other week, while IT solutions have recently been developed that will allow BIR access to sales and other transactions directly from taxpayers (i\.e\. eSales, eAccReg, GIS and eORB)\. BIR Management: Operational indicators were issued in October 2012, however BIR has been unable to generate this data for use by management\. An office under the Commissioner, called the Program Management Service is in charge generating the data via submissions from field offices (regions and districts)\. Incomplete submissions from the field have stalled the process\. All three (3) intermediate results indicators have not been measured and are not expected to be available in time for the ICR\. Both taxpayer and BIR staff satisfaction surveys (a baseline in 2009 and a follow up in 2010) were funded under NPSTAR\. In 2011 29 29 Commissioner Kim Henares, who found the results to be exceedingly positive, instructed the BIR to re-do the survey under local funding\. To date no bid has been successfully awarded, but is targeted for bidding in 2014\. In the meantime, the MCC (through its local implementing arm, MCAP) is currently implementing a contract with the Social Weather Station (SWS) to gather feedback from internal and external stakeholders to guide reform activities\. 30 30 Table 2\. Revised PDO Indicators Revised Indicators Baseline Target Actual/Status Remarks Rating Value I\. Tax Comliance 1 A unified/integrated and Registration single database for ITS database comprehensive registration database for clean- all taxpayers consolidation = system with improved up-to- up as of 2006: project in 2011\. date taxpayer information\. 385,000 corporate and 6\.3 million Met since 2011 2 individuals Percentage of filers over total 35% for CIT (2010) 85% of taxpayers in 37\.1% Dec 2012 Does not include information registered taxpayers for database file from data processing divisions ≠ corporate income tax returns the Unmet in Quezon City and Caloocan\. following year Outdated registration information also adds to low filing rate 3 Percentage of filers over total 29% for PIT (2010) 85% of taxpayers in 31% Dec 2012 Does not include information registered taxpayers for database file from data processing divisions ≠ personal income tax returns the Unmet in Quezon City and Caloocan\. MU 3 following year Filing efficiency also suffers due to greater weight given to revenue performance of BIR 4 Increase in the number of new 1\.3 million over 5% annual increase 7\.59% Dec 2012\. 5- registered taxpayers 2004-2005 year average = growth of 12\.5% Met since 2007 (except 2010) 5 Registered taxpayer as a 44\.4% (2010) 47% 51\.6% Dec 2012\. percentage of the labor force 48\.3% in 2011 = Met II\. Tax Enforcement 6 Increase in the number of PhP4\.5 billion from 10% annual Unmet Current BIR estimate of AR is accounts receivable (AR) 2003-Aug 2006 reduction in now PhP296 billion (in BIR ≠ settled and improved outstanding AR website) settlements process\. MU 3 7 Amount of arrears collected in PhP4\.5 billion from 10% annual Unmeasured "Potentially unrecoverable" is year n as a percentage of 2003-Aug 2007 reduction in undefined for BIR\. However, ≠ potentially recoverable outstanding AR ongoing cleanup of arrears arrears in year n-1 data in LTS and 4MM BIR III\. HR Development and Management 8 Increase in the use of PMS developed Institutionalization Met since Oct 2012 BIR issued 2 formal MS 4 performance management and piloted in LTS of PMS for all documents: = system (PMS) for office and and some offices offices and RMO 29-2004 for individuals staff appraisal and individuals (per civil service guidelines) development RMO 24-2012 implementing operational KPIs IV\. BIR Management/Change Management/Project Management 9 Use of operational indicators Limited use Routine use by Unmet Generation of operational MU 3 in BIR quarterly reports and of Management KPIs remain incomplete as of ≠ agency-level KPIs in BIR Committee November 27, 2013 annual report Intermediate Outcome Indicators 1 Percent of respondents who 85\.2% (2010) 87% Unmeasured MU 3 said that BIR services have ≠ met their expectations in the ease of conducting transactions 2 Percent of respondents who 81% (2010) 90% Unmeasured MU 3 said that BIR services have ≠ met their expectations in generating satisfying results 3 Percent of BIR staff awareness 79\.5% (2010) 82% Unmeasured MU 3 of the project involved in tax ≠ reform Overall MU 3\.14 31 31 Table 3\. Original PDO Indicators Original Indicators Original Indicators Baseline Target Actual/Status Remarks Rating Value I\. Tax Comliance 1 Increase in the number of stop Invalid stopfilers 80% of invalid stop- Unmeasured Target value has not been filer cases arising from identified from filers arising from identified, since registration ≠ erroneous registration registration clean- erroneous/invalid clean-up remains incomplete information eliminated from up process registration are registration database identified 2 Increase in the number of new 1\.3 million Annual increase of Met Potential number of registered taxpayers over between 2004 and at least 5% 7\.59% Dec 2012\. unregistered taxpayers have = estimated potential number 2005 5-year average not been measured for the MU 3 of unregistered taxpayers\. growth of 12\.5% project 3 A unified/integrated and 385,000 corporate 80% of taxpayers at Unmeasured Target value has not been comprehensive registration and 6\.3 million anytime have up-to- identified, since registration ≠ system with improved up-to- individuals date and complete clean-up remains incomplete\. date taxpayer information\. profiles in database Altough registration continues to increase between 2009 to 2012 from 15 to 21 million II\. Tax Enforcement 4 Increase in the number of PhP4\.5 billion from 10% annual Unmet Current BIR estimate of AR is MU 3 accounts receivable (AR) 2003-2006 reduction in now PhP296 billion (in BIR ≠ settled and improved accounts receivable website) settlements process\. III\. HR Development and Management 5 Increase in the use of PMS developed Institutionalizatio of Met since Oct 2012 BIR issued 2 formal MS 4 performance management and piloted in LTS PMS for all offices documents: = system (PMS) for office and and some offices and individuals RMO 29-2004 for individuals staff appraisal and (per civil service guidelines) development RMO 24-2012 implementing operational KPIs IV\. BIR Management/Change Management/Project Management 6 Increase in the use of output Routine use by Increased use Unmet Generation of operational MU 3 and outcome indicators in management KPIs remain incomplete as of ≠ internal management reports November 27, 2013 and decisions Intermediate Outcome Indicators 1 Increase in external Results of survey 80% of expectations Unmeasured Taxpayer and employee U 2 expectations of reform to be conducted at are commonly satisfaction surveys were ≠ accomplishments the start of the shared conducted in 2009 and 2010, loan but no follow up survey has 2 Increase in staff awareness Results of survey 70% of staff Unmeasured been carried out\. However U 2 and understanding of the to be conducted at indicates high level through MCAP, stakeholder ≠ need for reform as well as the the start of the awareness and feedback will be measured reform loan understanding of with results later this year the reform Overall MU 2\.83 3232 Table 4: Original versus Revised Indicator Set Original Indicators Baseline Target Revised Indicators Baseline Target Actual/Status Remarks I\. Tax Comliance 1 Increase in the number of stop Invalid stopfilers 80% of invalid stop- Unmeasured Target value has not been filer cases arising from identified from filers arising from identified, since registration erroneous registration registration clean- erroneous/invalid clean-up remains incomplete information eliminated from up process registration are registration database identified 2 Increase in the number of new 1\.3 million Annual increase of Unmeasured Potential number of registered taxpayers over between 2004 and at least 5% unregistered taxpayers have estimated potential number 2005 not been measured for the 3A unregistered taxpayers\. ofunified/integrated and 385,000 corporate 80% of taxpayers at Unmeasured project Target value has not been comprehensive registration and 6\.3 million anytime have up-to- identified, since registration system with improved up-to- individuals date and complete clean-up remains incomplete date taxpayer information\. profiles in database 1 A unified/integrated and Registratio single database for ITS database comprehensive registration database for clean- all taxpayers consolidation system with improved up-to- up as of 2006: project in 2011\. date taxpayer information\. 385,000 corporate and 6\.3 million Met since 2011 2 Percentage of filers over total individuals 35% for CIT (2010) 85% of taxpayers in 37\.1% for CY 2012 Does not include information registered taxpayers for database file from data processing divisions corporate income tax returns the Unmet in Quezon City and Caloocan\. following year Outdated registration information also adds to low filing rate 3 Percentage of filers over total 29% for PIT (2010) 85% of taxpayers in 31% for CY 2012 Does not include information registered taxpayers for database file from data processing divisions personal income tax returns the Unmet in Quezon City and Caloocan\. following year Outdated registration information also adds to low filing rate 4 Increase in the number of new 1\.3 million over 5% annual increase 7\.59% for CY 2012\. 5- registered taxpayers 2004-2005 year average growth of 12\.5% Met since 2007 (except 2010) 5 Registered taxpayer as a 44\.4% (2010) 47% 51\.6% for CY 2012\. percentage of the labor force 48\.3% in 2011 Met 33 33  Original Indicators Baseline Target Revised Indicators Baseline Target Actual/Status Remarks II\. Tax Enforcement 4 Increase in the number of PhP4\.5 billion from 10% annual 6 Increase in the number of PhP4\.5 billion from 10% annual Unmet Current BIR estimate of AR is accounts receivable (AR) 2003-2006 reduction in accounts receivable (AR) 2003-Aug 2006 reduction in now PhP296 billion (in BIR settled and improved accounts receivable settled and improved outstanding AR website) settlements process\. settlements process\. 7 Amount of arrears collected in PhP4\.5 billion from 10% annual Unmeasured "Potentially unrecoverable" is year n as a percentage of 2003-Aug 2007 reduction in undefined for BIR\. However, potentially recoverable outstanding AR ongoing cleanup of arrears arrears in year n-1 data in LTS and 4MM BIR III\. HR Development and Management 5 Increase in the use of PMS developed Institutionalizatio of 8 Increase in the use of PMS developed Institutionalization Met since Oct 2012 BIR issued 2 formal performance management and piloted in LTS PMS for all offices performance management and piloted in LTS of PMS for all documents: system (PMS) for office and and some offices and individuals system (PMS) for office and and some offices offices and RMO 29-2004 for individuals staff appraisal and staff appraisal and individuals (per civil service guidelines) development development RMO 24-2012 implementing operational KPIs IV\. BIR Management/Change Management/Project Management 6 Increase in the use of output Routine use by Increased use 9 Use of operational indicators Limited use Routine use by Unmet Generation of operational and outcome indicators in management in BIR quarterly reports and of Management KPIs remain incomplete as of internal management reports agency-level KPIs in BIR Committee November 27, 2013 and decisions annual report 34 34  Original Indicators Baseline Target Revised Indicators Baseline Target Actual/Status Remarks Intermediate Outcome Indicators 1 Increase in external Results of survey 80% of expectations Unmeasured Taxpayer and employee expectations of reform to be conducted at are commonly satisfaction surveys were accomplishments the start of the shared conducted in 2009 and 2010, loan but no follow up survey has 2 Increase in staff awareness Results of survey 70% of staff Unmeasured been carried out\. However and understanding of the to be conducted at indicates high level through MCAP, stakeholder need for reform as well as the the start of the awareness and feedback will be measured reform loan understanding of with results later this year the reform 1 Percent of respondents who 85\.2% (2010) 87% Unmeasured said that BIR services have met their expectations in the ease of conducting transactions 2 Percent of respondents who 81% (2010) 90% Unmeasured said that BIR services have met their expectations in generating satisfying results 3 Percent of BIR staff awareness 79\.5% (2010) 82% Unmeasured of the project involved in tax reform 35 35 Table 5\. Overall Rating against Original and Revised PDO Indicators Against Original Against Revised Indicators Indicators Overall Comment No significant 1 Rating MU MU - improvement 2 Rating value 2\.83 3\.14 - Weight (% disbursed before/after Indicator 3 change 49% 51% 100% Weighted 4 value (2x3) 1\.39 1\.60 2\.99 Unmeasured indicators keeps Final rating rating "below the 5 (rounded) - - MU line" Assigned value: Highly Satisfactory=6, Satisfactory=5, Moderately Satisfactory=4, Moderately Unsatisfactory=3, Unsatisfactory=2, Highly Unsatisfactory=1 3636 Annex 2 (cont) B\. Outputs by Component The BIR successfully procured 35 packages, including 44 projects, under NPSTAR between June 2007 and June 2013 representing 61 percent or USD6\.75 million of the total USD11 million loan\. Of the 35, 13 completed packages were procured between 2008 and 2010, while 21 were procured between 2011 and 2013 marking greater volume of activity during the second half of implementation\. This increased activity in the second half is only highlighted by the vast difference in the value of completed projects\. Between 2011 and 2013, 89 percent of total value of NPSTAR packages were procured and implemented, majority of which were IT and IT related\. Figure 4\. Volume of Completed Packages 25 20 21 15 10 13 5 0 2008-2010 2011-2013 Figure 5\. Value of Completed Projects 120% 90% 60% 89% 30% 11% 0% 2008-2010 2011-2013 Source: BIR Reform Unit The impact of these packages on the PDO is assessed below, per NPSTAR Component\. Component A: Tax Compliance\. Moderately Unsatisfactory\. NPSTAR did not make a substantial contribution to the efficiency and effectiveness of tax compliance, as majority of the projects supported continue to have at best limited impact or no effect in achieving the PDO\. To support tax 37 37 compliance, NPSTAR funded a total of 12 major projects, 6 directly supported tax registration, while the rest supported filing compliance, stop-filer and the development of the regional data center in Mindanao\. BIR utilized 91% of planned allocation\. This component was designed to support activities that would develop strategies to address issues on the integrity of the taxpayer registry, as well as a cost-benefit based clean-up strategy, and establish the exact nature and dimensions of the stop-filer problem\. NPSTAR supported a number of registration related projects and activities that arguably would have been much more efficiently carried out if such a strategy were in place to guide the overall effect on the registry\. For instance, a comprehensive compliance strategy could identify groups or taxpayer types whose registry could yield the highest returns in terms of revenues\. This could then be followed up through pro-active taxpayer services or tax mapping activities, to register and allow filing and payment of taxes\. Enforcement activities (audit and collections) then ensure that the proper tax is paid\. Throughout it all, a mechanism to ensure easy access to information update is necessary to ensure that the registry remains “clean”\. While activities were pursued to perform data- matching and information update, with no other registration related activities that encouraged the efficient update of information, then these would have to be periodically performed again and again\. And as per aide memoires in 2009 and 2010, though encouraged, the backlog cleansing was never resolved\. The Bank commented in 2009 that, by way of strategy, BIR should focus on the larger taxpayers\. However, it was only in 2011 that an elaborated clean-up strategy was developed, aside from an overall strategic plan an IT plan that supports this, and an operational plan to allow timeline monitoring and management\. It must be noted however that the BIR still has a long way to go before all these activities are accomplished and seamlessly integrated\. The BIR’s filing compliance for companies and individuals remain very low compared to the indicator targets\. This is driven by an excessive focus on current revenues, but also by outdated registration data which does not easily update as inactive or is tagged as “temporarily inactive”\. This has a tendency to understate actual filers when compared to the existing registry\. A more strategic approach now exists at the BIR, a compliance strategy (for registration and filing) that makes use of taxpayer services and enforcement action, and the eventual development of a system that encourages easier updates\. The BIR has also issued its operational indicators (2012) that balances between short term and longer term performance of an office and select individuals (regional and district heads)\. However, stalled data generation has prevented this from being routinely used for management purposes\. There are a number of activities in this component that are anticipated to have substantial impact\. Of note is the database consolidation of the Integrated Tax System (ITS)\. Whereas in the past, the existing seven databases of the BIR were not fully integrated, this project accomplished that in 2011 with now a single login for all databases\. Another is the eTIN enhancement which effectively expanded the coverage of this facility by making its use more efficient\. The benefits of these projects will be fully realized with the development and integration into the eTIS\. 38 38 Component B: Tax Enforcement and Control Moderately Satisfactory\. NPSTAR made substantial contribution in tax enforcement, but limited in internal audit\. There were 11 major projects and activities supported under this component, 4 were IT projects, 4 were focused on the Run After Tax Evaders (RATE) program, 2 were on internal audit (advisory on structure and operations), and 1 to standardize collection enforcement\. BIR utilized 82\.5% of planned allocation\. Most of the progress in this component is highly attributable to the RATE program – its case preparation technique and capacity of staff, its campaign to instill fear of non- compliance and general awareness of the program\. A tax evasion case becomes a RATE case if the intent to evade (criminal) is present\. During the second half of NPSTAR, where 2 RATE cases have been filed each month, visibility has been key as a number of newspaper and television ads were supported under NPSTAR\. These were guided by a communications plan and implemented by a communications consultant\. Capacity of RATE lawyers were also improved, as on-the-job training was provided by a legal consultant that both helped prepare cases and training staff on prosecution techniques\. All in all, there have been 179 RATE cased filed to date since mid-2010\. It must be noted however that the conviction rate lags, as only 5 convictions have been secured since\. The ability of IT projects pursued to help enforcement may also be differentiated from other components in that benefits, though not maximized, may already be achieved even as they remain stand-alone units\. Of note are the Tax Rulings and Case Management System (TRCMS) and the Electronic Letter of Authority Monitoring System (e-LAMS) for audits\. Maximizing the benefits may be achieved once properly integrated into eTIS compliance modules at the least\. Although 2 important projects were carried out to help strengthen the organization and functions of internal audit, recommendations have not yet been presented and discussed thoroughly with the Reform Steering Committee\. Internal audit in BIR remains arguably weak, with only cases for minor offenses being filed against erring employees\. Component C: Human Resource Development and Management Moderately Unsatisfactory\. Only one project was successfully pursued during the entire duration of NPSTAR, even as HR management related projects have been included in the Annual Procurement Plans since 2008\. Utilization rate is only 7\.3% of planned allocation\. It was only after the high-level gap analysis exercise/workshops facilitated by World Bank experts in early 2011 that plans to take HR reform further were more actively pursued\. As the assistance from other development partners (MCC/MCAP and IMF) commenced in 2011, Bank assistance in this area was then focused on complementary projects that would help sustain functional improvements with more efficient placements of competent staff\. Two projects were quickly identified, a reengineering of the HR process and a manpower planning process, to also guide reorganization efforts (Ratplan)\. However, due to time constraints and prolonged procedures, only the first project was 39 39 successfully implemented\. NPSTAR assistance in this area ended with a reengineered HR management process, reflected in a competency-based HR manual, and improved capacity by HR staff to carry out certain HR functions, such as developing job descriptions which are vital in hiring, placements, performance monitoring and career management\. Implementation of this manual will be implemented through the Public Financial Management Competency Framework (PFMCF) project supported under AusAID\. Owing to efforts in the latter phase of the project, the component is rated MS rather than U (as evidence by very low execution levels)\. Component D: BIR Management, Change Management, and Program Management Moderately Unsatisfactory\. It is more accurate to assess this in its 2 sub-components: governance and management, and, change management\. NPSTAR is arguably more successful in its support for the first, than it was for the second\. Utilization rate is only 54\.2% of planned allocation\. Reform management has strengthened since the Tax Reform Administration Group (TRAG then headed by a Deputy Commissioner) was first organized in 2007\. From an average staffing complement of 15, the TRAG (subsequently reorganized as Project Management and Implementation Service, now headed by one level lower Assistant Commissioner) staff has steadily grown since 2010 and at present numbers 42\. Table 6\. Staff Complement of the PMIS Position 2006 2007 2008 2009 2010 2011 2012 Present Manage- Senior 1* 1* 1* 2* 2* 2* 2 2 ment (DCIR/ ACIR/ HREA) Middle 0 0 0 0 0 0 4* 4* Technical (Project 7 10 10 9 8 8 10 10 Officers) Non-Technical 2 4 1 5 5 5 5 5 (Admin/Support) Core Expert/Technical 0 0 0 0 0 5 11 21 Assistant Total 10 15 12 16 15 20 32 42 *OIC Source: BIR-PMIS An important development was the creation of a “core group” of BIR tax administration experts, which has also been expanding in number\. They are a vital component to the PMIS, lending their expertise in the formulation of new ideas for reengineering and policy purposes\. Membership has grown from an initial 5 to 21, and is composed of experienced officers from the field representing all core functions of the BIR\. This group has been vital also to the development of the BIR strategic plan (2011-2016), IT plan (by 40 40 guiding groups think through system specifications for eTIS) and the reform master plan\. Governance and management however is weighed down by yet the absence in the use of operational indicators for management purposes\. While a critical set of well-balanced (for instance the value of audit assessments are balanced by an indicator on actual collections from audit) indicators was developed in late 2012, data generation has so far been incomplete and as a result no reports have yet been generated to guide BIR management\. While the change management contract was implemented for 18 months starting mid 2010 to late 2011, arguably it was less than ideally timed and designed\. Rather than a critical component to manage actual or anticipated change in behaviour, the contract was designed to introduce, train and communicate the principles of change management to a wide BIR audience\. 41 41  Table 7\. Projects by NPSTAR Component Assessed Implementation Component Project Value Remarks impact on Period PDO* A: Tax Compliance eTIN enhancement Nov 2008 - Mar 3,500,000\.00 Increased efficiency on +, limited 2009 registration to be fully achieved with integration into eTIS Engagement of data analysts/ May 2009 - Nov 2,390,000\.00 Initial progress (in early No effect programmers for matching BIR-LGU 2009 2010, 1033 (computerized) reg data out of 1628 LGUs submitted data\. Did not benefit from overall strategy, such as efficient mechanism to maintain up to date reg info\. Engagement of data analysts/ May 2009 - Nov 2,350,000\.00 Encoding continued until No effect programmers for reg cleanup and 2009 2010 but backlog not accounts receivable conversion eliminated; absent of an overall registration clean-up strategy Preparation and production of a Jul 2010 - Oct 2010 500,000\.00 Necessary to standardize reg +, limited comprehensive registration manual process across BIR\. However, need overall strategy to monitor reg information ITS database consolidation Jan 2011 - July 2011 43,159,260\.00 Necessary to consolidate 7 + databases and provide single login\. Can detect multiple TINs 42 42  Assessed Implementation Component Project Value Remarks impact on Period PDO* Systems enhancement and May 2012 - May 1,080,000\.00 Delayed project, not +, limited integration of the electronic 2013 completed under NPSTAR\. accreditation and registration Represents payment for (eAccreg) and electronic sales inception report\. reporting (eSales) systems Information security- May 2012 - Nov 8,400,000\.00 Part of IT integrity\. However, +, limited implementation and capacity 2012 database suffers from non- building clean/non-updated info\. Electronic Official Registration Books May 2012 - Nov 4,480,000\.00 Supports electronic capture +, limited (eORB) 2012 data of tobacco firms; no plans to expand coverage (i\.e\. suppliers) Imaging of archived documents Dec 2012 - Jun 2013 - Commenced but not paid No effect under NPSTAR Development and support for RDC 2008 - 2009 6,076,821\.00 1 Package with 6 projects\. A + Mindanao (various expenses) sub-component of Component A Various goods and equipment 2009 - 2011 68,964,166\.25 1 Package with 3 projects\. IT, +, limited office and other non-IT equipment\. Strategic validation of registration 2008 5,223,440\.32 Tax mapping project that No effect clean-up was not completed due to non-delivery of output\. B: Tax RATE - Media consultant Oct 2009 - Apr 2010 300,000\.00 Improved visibility of the + Enforcement and RATE program Control 43 43  Assessed Implementation Component Project Value Remarks impact on Period PDO* RATE - Legal consultant Oct 2009 - Apr 2010 500,000\.00 Improved internal case + preparation and litigation technique RATE - communications agency Apr 2011 - Mar 2012 1,971,200\.00 Improved visibility of the + RATE program RATE - public information campaign 2011 2,449,033\.44 Improved visibility of the + RATE program Enhancement of e-letter of authority Aug 2011 - Feb 2012 4,995,200\.00 Allows management to track + monitoring system (eLAMS) audit cases\. Will benefit eTIS\. Not completed under NPSTAR Preparation of comprehensive May 2010 - Jun 2011 1,231,570\.00 Necessary to standardize + collection manual (technical writer) collection enforcement practices, however did not benefit from an overall collection strategy Foreign internal audit advisor Sept 2009 - Oct 1,245,660\.00 Recommendation to get local +, limited 2009 advisor carried out Local internal audit advisor Oct 2011 - Oct 2012 5,500,000\.00 Most recommendations have +, limited not been discussed by RSC Tax rulings and case management Feb 2012 - Jun 2013 23,795,597\.00 Improved standardization of + system (TRCMS) tax rulings 44 44  Assessed Implementation Component Project Value Remarks impact on Period PDO* Development of collection Aug 2011 - Aug 2012 8,665,000\.00 Improves reconciliation of +, limited reconciliation system (CRS) tax collections between field offices and the National Government Enhancement of accounts receivable Aug 2011 - Sept 5,080,000\.00 Enhances system to convert +, limited (AR) conversion system 2012 data under old data structure\. However, stock and assessment of AR still incomplete C: Human Strategic review of human resource Dec 2012 - Jun 2013 7,219,823\.10 Modernized HR mechanism, +, limited Resources processes in the BIR through development of Development and competency-based manual\. Management For implementation with PFM-CF by next year D: BIR Reform, BIR technical consultant/advisor Oct 2009 - Oct 2010 1,500,000\.00 Advisor for project +, limited Change management and TRAG Management and functions Project Management TRAG consultant and TOR writer Nov 2010 - Apr 2011 750,000\.00 Advisor for project +, limited management and TRAG functions 45 45  Assessed Implementation Component Project Value Remarks impact on Period PDO* BIR performance evaluation survey Jun 2009 - Dec 2010 6,000,000\.00 Results reported very high No effect rates of satisfaction by both internal and external stakeholders\. A re-survey was ordered BIR financial consultant Jul 2008 - Dec 2008 150,000\.00 Build capacity for BIR + Financial Management Unit Strategic planning workshop Nov 2008 - Dec 2008 610,000\.00 Did not provide stable long +, limited term reform plan Change management of tax reform Jun 2010 - Dec 2011 19,600,351\.68 SOW limited to principles of +, limited agenda CM with limited effect on actual reform changes Project management system (PMS) Feb 2012 - Jun 2012 4,999,811\.13 Allows effective + management through timely monitoring\. Feeds into Reform Masterplan\. Enhancement of PMS Jan 2013 - May 2013 4,880,000\.00 Allows effective + management through timely monitoring\. Feeds into Reform Masterplan\. Technical writer for revenue Dec 2012 - Jun 2013 750,000\.00 Formatted results of + issuances from BPR reengineering into formal revenue issuances 46 46  Assessed Implementation Component Project Value Remarks impact on Period PDO* Various goods and equipment 2008 - 2011 39,221,257\.60 1 Package with 4 Projects\. IT, +, limited office and other non-IT equipment Total PhP 287,538,191\.52 47 47 Annex 3\. Economic and Financial Analysis N\.A\. As an institution-building project, quantitative computations of rates of returns are not applicable\. 48 48 Annex 4\. Bank Lending and Implementation Support/Supervision Process A\. Task Team members Names Title Unit Responsibility/ Specialty Agnes Albert-Loth Sr\. Financial Management Specialist EASFM FM Rosa Maria Alonso-Terme Task Team Leader TTL Eric Le Borgne Lead Economist MNSED Tax Policy/Analysis Karl Kendrick Tiu Chua Senior Economist EASPP Tax Policy/Analysis Ruth Maturan Cruz Program Assistant UDRUR ACS Michael Z\. Figueroa Information Assistant EASFD Necitas B\. Garcia Program Assistant SARDE ACS Swati R\. Gosh Advisor PRMVP Tax Policy/Analysis Chiyo Kanda Manager for Portfolio and Operations EACPF CMU Aisha Lanette N\. De Guzman Financial Management Specialist EASFM FM Kim Sy Jacinto-Henares Senior private sector development TTL specialist Kai-Alexander Kaiser Senior Economist EASPP TTL Ulrich Lachler Consultant EAPCE TTL Rene SD\. Manuel Senior Procurement Specialist EASR1 Procurement Tomas Jr\. Sta\. Maria Financial Management Specialist EASFM FM Joseph G\. Reyes Financial Management Specialist EASFM FM Nenette V\. Santero Program Assistant AFTPM ACS Samuel Haile Selassie Senior Procurement Specialist SARPS FM Ramesh Sivapathasundram Lead Information Officer TWICT IT Vera Songwe Country Director AFCF1 Project Preparation Maria Consuelo Sy Program Assistant EACPF ACS Cecile D\. Vales Senior Procurement Specialist EASR1 Procurement Enrique Fanta Senior Public Sector Specialist Tax Administration Reform Raul Junquera Senior Public Finance Specialist LCSPS Tax Administration Reform B\. Staff Time and Cost Title Stage of Project Cycle USD Thousands (including travel No\. of staff weeks and consulting) Lending FY 07 178,087\.16 FY 08 15\.78 96,227\.64 Total 15\.78 274,314\.80 Supervision/ICR FY 09 29\.24 77,884\.11 49 49 FY2010 46\.28 170,780\.43 FY2011 18\.68 152,688\.15 FY2012 14\.20 79,045\.07 FY2013 13\.17 82,058\.28 Total 121\.57 562,456\.04 50 50 Annex 5\. Summary of Borrower’s Completion Report Below is a summary of a draft “End of Project Report” by the PMIS for the BIR\. This report was prepared using format for the National Economic and Development Authority (NEDA)\. Although dated June 2013, it remains a draft document\. DRAFT END OF PROJECT REPORT OF THE NATIONAL PROGRAM SUPPORT FOR TAX ADMINISTRATION REFORM (NPSTAR) June 2013 The BIR prepared ICR, which remains a draft prepared by the PMIS, shares the same views as this ICR (WB) in a number of critical areas\. These are: 1\. A realization by BIR that its registration database is unclean in 2009\. This was admitted in reports from field offices\. 2\. Lack of personnel (in TRAG) to monitor the tax reform projects in 2009\. 3\. Frequent change in BIR administration and re-shuffle of staff had affected the implementation of reform projects in 2009\. 4\. Lack of standard policies in the Integrated Tax System (ITS-current corporate system of the BIR) to address registration-related errors\. And need for strategy to guide the clean-up effort of the registration database in 2010\. 5\. Although silent on specific projects, the report also admits that some NPSTAR funded projects may not have addressed the “right issues”\. A follow up interview expounded this to mean the achievement of the PDO\. 6\. Shifts in policy directions, owing to the frequent changes in BIR leadership, had caused equivalent revisions to project scope (for ongoing activities) causing delays in implementation\. 7\. That the reform environment had improved drastically with Commissioner Henares\. These points are also at the center of this ICR’s arguments and issues raised\. The agency report remains a draft and as yet does not include recommendations at this time\. 51 51 Annex 6\. List of Supporting Documents Critical Priorities in Tax and Customs Administration Reform\. World Bank and IMF\. February 2006\. End of Project Report\. BIR\. June 2013\. Implementation Completion Report\. First Development Policy Loan\. September 30, 2009 Implementation Completion Report\. Tax Computerization Project (P004599)\. June 29, 2000 Millennium Challenge Compact Grant\. Revenue Administration Reform Project (RARP)\. http://www\.mcap\.ph/rarp-rips Performance Governance System (PGS) Agency Scorecard\. 2011-2013\. ftp://ftp\.bir\.gov\.ph/webadmin1/pdf/pgs_bir_scorecard_2013\.pdf Philippines – Country Assistance Strategy for FY10-12\. Philippines Quarterly Update\. Various dates from 2009 to 2013\. The WBG Professionalizing the PFM Workforce Phase 1 – Development of the PFM Competency Framework\. Project Overview\. Powerpoint Presentation\. 2013 Project Appraisal Document\. National Program Support for Tax Administration Reform\. February 2007 Project Completion Reports for NPSTAR\. BIR\. Various dates from 2009 to 2013\. Reforming the Philippine Tax System: Lessons from Two Tax Reform Programs\. Benjamin Diokno\. UPSE Discussion Paper No\. 0502\. March 2005 Revenue Memorandum Circular 12-2006\. BIR Mission-Vision Statement 2006\. http://www\.bir\.gov\.ph/iss_rul/issuances\.htm Revenue Memorandum Circular 10-2010\. BIR Mission-Vision and Strategic Map 2010\. http://www\.bir\.gov\.ph/iss_rul/issuances\.htm Revenue Memorandum Order 23-2011\. BIR Strategic Map 2011\. http://www\.bir\.gov\.ph/iss_rul/issuances\.htm Revenue Memorandum Order 30-2011\. BIR Strategic Plan 2011-2016\. http://www\.bir\.gov\.ph/iss_rul/issuances\.htm Revenue Memorandum Order 31-2011\. Agency Level Key Performance Indicators for CY 2011-2016\. http://www\.bir\.gov\.ph/iss_rul/issuances\.htm Revenue Memorandum Order 24-2012\. Operational Key Performance Indicators CY 2012\. http://www\.bir\.gov\.ph/iss_rul/issuances\.htm Second Philippines Development Loan\. To Foster More Inclusive Growth\. February 15, 2013\. PREM EAP\. The WBG 52 52 53 53

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CIRCULATING COPY FILEPY ~gpTO BE RETURNED TO REPORTS DESK DOCUMENT OF INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT Not For Public Use Report No\. P-1532-UNI REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN TO NIGERIA FOR THE GUSAU AGRICULTURAL DEVELOPMENT PROJECT November 25, 1974 This report was prepared for official use only by the Bank Group\. It may not be published, quoted or cited without Bank Group authorization\. The Bank Group does not accept responsibility for the accuracy or completeness of the report\.  CURPENCY EQUIVALENTS US$1\.00 Naira (N) 0\.66 N1\.00 US$1\.52 Nl million US$1\.52 million Since April 1, 1974 the Naira has floated independent of the U\.S\. dollar\. Twice weekly, the Central Bank sets buying and selling rates for the U\.S\. dollar and L sterling\. The Naira has appreciated steadily vis-a-vis the U\.S\. dollar, and by July 1, 1974 the average quotation was Nl = US$1\.622 or 6\.7 percent above the previous central rate of Nl = US$1\.52\. The latter has been used for currency conversions throughout this report\. FISCAL YEAR April 1 to March 31  INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN TO NIGERIA FOR THE GUSAU AGRICULTURAL DEVELOPMENT PROJECT 1\. I submit the following report and recommendation on a proposed loan to Nigeria for the equivalent of US$19 million to help finance agricultural development in the Gusau area in the North Western State of Nigeria\. The loan would have a term of 20 years including a five-year grace period with an interest of 8 percent per annum\. The US$19 million Bank loan would be onlent to the North Western State Government (NWS)\. The loan would be onlent on the same terms as the Bank loan\. PART I - THE ECONOMY 2\. A report entitled "Current Economic Position and Prospects of Nigeria" (416a-UNI) dated August 5, 1974 was distributed to the Executive Directors\. The country data sheet is attached as Annex I\. Recent Developments 3\. The most striking feature of Nigeria's economic performance since 1970 is the remarkably rapid recovery from the dislocations and disruptions caused by the civil war\. GDP rose by nearly 50 percent in the two years immediately following the war\. This exceptionally high growth obviously included a large element of "catching-up" as the economy responded to the pent- up demands of the civil war period and as investment and production which had been postponed during the hostilities were rapidly realized\. As this phase came to a close, a decline in the rate of growth to more normal levels was to be expected\. Moreover, during 1972 and 1973, agricultural production was adversely affected by drought in the Northern States, and the output of some manufacturing industries (e\.g\., textiles and footwear) fell as a result of intensified competition from imports, following the policy of liberalization introduced in early 1972\. As a result, GDP at factor cost is estimated to have risen by about 8 percent in 1972/73\. Growth in 1973/74 may be in the range of 6-7 percent\. The country's GDP during 1970/71 through 1972/73 was about 45 percent higher than in the three years immediately preceding the war\. The implied growth rate during the period 1964-66 to 1970-72 (6\.3 percent a year) compares favorably with the 6 percent attained during the fifties and early sixties\. 4\. This rapid economic recovery resulted mainly from expansion of petroleum mining\. Crude oil production rose from around 630,000 barrels per day (bbls/day) in early 1970 to 1\.8 million bbls/day in early 1972 and 2\.0 million bbls/day by mid-1973\. Government services too increased quickly on the basis of considerable growth of revenues from the oil sector\. On the  average, manufactures also grew faster than total output\. However, petro- leum production is an enclave activity, and manufacturing and modern services afford employment for a small share of the labor force\. Nigeria essentially remains an agricultural economy in spite of a substantial shift in the com- position of output since the period immediately before the civil war\. Agri- culture accounted for 46 percent of domestic product in 1971/72 (i\.e\., prior to the increase in oil prices) and employed some 70 percent of the labor force\. Consequently, Nigeria's per capita income (about $130 in 1972) largely reflects the low productivity of its traditional agriculture\. 5\. The considerable growth of domestic product and income in recent years was accompanied by similar increases in all major components of aggre- gate expenditure\. In real terms, exports in the period 1971/72 through 1973/74 averaged about twice the pre-war levels, imports increased by almost 90 per- cent, investment by over 65 percent, and consumption expenditures by about 50 percent\. Per capita real consumption and the rate of investment are well above pre-war levels\. Private sector investments have been high in both oil and non-oil activities, especially manufacturing among the latter\. Public investment (valued at 1970/71 prices) rose from N148 million in 1970/71 to N340 million in 1972/73 and was budgetted at N600 million in 1973/74\. Never- theless, implementation of the public investment program contained in the Second Development Plan is behind schedule, due partly to a delay of ten months in the issuance of the Plan and, more significantly, to inadequate executive capacity for project preparation and implementation\. Recognizing these problems, the Government decided to postpone the start of the next Plan by a year\. The Third Development Plan is now scheduled to start early in 1975, and will cover the five-year period 1975-80\. Provisional guidelines for the Third Plan, issued in July 1973, are currently being reviewed in the light of the new situation brought about by the recent sharp rise in oil revenues\. General Gowan's Independence Day message of October 1, 1974, indicates that the Government is now contemplating a much bigger program of investment than outlined in the July 1973 Guidelines\. 6\. Nigeria's balance of payments and fiscal position have also shown dramatic improvement essentially because of the rapid growth of petroleum exports\. Total exports have risen from N885 million in 1970 to N2,227 million in 1973, with oil accounting for practically all the increase\. Imports have also grown (from N756 million in 1970 to N1,234 million in 1973), but more slowly than exports\. This has enabled the Government to reduce short-term external debt and to progressively relax the restrictions on import payments and repatriation of dividends\. The few remaining licensing and payment controls in respect of goods and factor services have been removed in the last budget\. Foreign exchange reserves have increased dramatically following the recent increases in oil price, and preliminary figures as of early October 1974 indicate that external reserves exceed $4 billion, equivalent to about 15 months' imports\. 7\. The increase in oil revenues from N70 million in 1969/70 to N730 million in 1972/73 was also the major factor in transforming the Government's  -3- fiscal position\. In 1969/70, the Federal and State budgets taken together showed an overall deficit of N349 million; in 1971/72, they showed an overall surplus of N268 million\. Because of a sharp increase in expenditures, 1972/73 recorded a small overall deficit\. But the recent rise in oil prices is likely to result in an unprecedented overall surplus during 1973/74 and the current year despite big increases in budgetted expenditures\. This growing fiscal strength, however, has been largely confined, so far, to the Federal Govern- ment\. In general, the states have been barely able to balance their revenue leaving little resources to finance capital expenditures\. The Federal Govern- ment has made large grants and low interest loans to alleviate the situation\. The picture is likely to change dramatically as a result of the new revenue- sharing arrangement announced by General Gowan in his Independence Day address\. Under the new arrangement, the states as a group are expected to have suffi- cient resources to meet all their current expenditures and about two-thirds of the projected capital expenditures\. 8\. The improved budgetary situation, liberalization of imports and recovery of production in the eastern states have, together, helped abate inflationary pressures\. The Lagos Consumer Price Index rose by less than 3 percent in 1972 and a little over 4 percent in 1973, compared to an average of 13 percent or more per annum between 1968 and 1971\. 9\. Other major developments in the last two years include a far- reaching reform of the Marketing Board System, a substantial increase in producer prices for agricultural products, the acquisition of a 55 percent equity participation in virtually all foreign operations in the oil sector, and the establishment of the Bank for Commerce and Industry to assist in- digenous entrepreneurs\. A population census, conducted in November-December 1973, indicates Nigera's population to be around 80 million\. These results are provisional and subject to review by a Committee of Experts\. The final population figures are not expected before the end of the current year\. At the political level, the most noteworthy event is the announcement of the Federal Military Government's decision to postpone the return to civilian rule, originally set for 1976\. Medium and Long-Term Prospects 10\. Even before the recent rise in oil prices, as pointed out in the Basic Economic Report (Report No\. AW-35a), it was apparent that the resources generated by oil would permit Nigeria to undertake a bold program of public development expenditures and plan for a sustained, rapid growth during the next decade\. The Guidelines for the Third Plan issued in July 1973 visualized total public investment at some 80 percent higher than in the Second Plan with emplasis on agriculture and rural development and on widening and deepen- ing the industrial structure\. With the prospect of vastly larger oil revenues, the Government has decided to further increase the scale of projected invest- ments\. The hlead of State recently announced that the public sector investment program in the Tlhird Plan would be about N20 billion, out of an estimated total investment of N30 billion\. This is expected to generatc a 9 percent annual increase in incomes\. Apart from larger outlays in agriculture, roads,  - 4 - educati6n, health and infrastructure, massive investments in oil-related industries like Lt'G, fertilizers and refineries are visualized\. The need and scope for the projected investments is beyond doubt\. The finance and foreign e:;change necessary to sustaim them are also available\. The Government is aware that shortage of executive capacity poses a serious problem, and efforts are being made to overcome this constraint\. Clearly the fulfillment of the Third Plan targets depends critically on the success in building up the necessary capacity to prepare, imiplement and manage projects\. 11\. The bank's Economic Mission, reviewing Nigeria's medium and long- term growth prospects in the light of the new oil prices, estimated that, with oil prices remaining constant in real terms, oil output rising moderately and public expenditures growing at the rate of 13 percent a year (in real terms), the economy has the potential to sustaiTI an average annual growth of over 9 percent through the mid-eighties, provided the investment program is implemented efficiently\. The potential growth would be somewhat lower (8\.3 percent a year) if oil prices in real terms were to decline moderately, oil output were kept constant and public expenditures grew by only 10-11 percent a year\. Even with such high rates of growth, Nigeria in the mid-eighties would still be a relatively poor country with per capita real income of around $500\. 12\. Under the above assumptions, Nigeria is expected to remain in over- all balance of payments surplus during the remainder of the 1970s\. Accumu- lated reserves at the end of the Third Plan (1980/81) may lie in the vicinity of 18 months' import value, the value of imports having risen by that time to around $13 billion in terms of current prices\. However, the overall balance of payments is likely to be in deficit by the early eighties, and the deficit could rise rapidly\. The range of possible outcomes during the eighties is very wide and will be very sensitive to the behavior of oil pricel, output and public expenditures\. With relatively low growth of public expenditure, constant real oil prices and rising oil output, total reserves in 1985/86 could be equivalent to less than 10 months' imports\. B3ut, with higher growth of government expenditures, lower oil prices and constant oil production, NTigeria could well have exhausted all its reserves by that timne\. External Assistance 13\. Nigeria's need for external assistance to help accelerate invest- ment in the more intractable areas such as agriculture ancl rural development and to increase executive and managerial capacity in the infrastructure sectors is the more urgent as the countryvs resources increase\. The Federal Covernment's attitude towards foreign private capital is that it should com- plement, not compete with domestic capital\. This applies to official exter- nal assistance as well\. Priority is, therefore, being given to multilateral and bilateral projects and programs which act as catalysts to investment efforts in the high-i priority areas and increase indigenous capability to control, manage and promote the growth of the economy efficiently in the future\. Against this background the Federal government and the Bank agree that, at least over the next Plan period (1975-1980), the primary objective  - 5 - of Banlc activities in Nigeria should continue to be to assist Government efforts to increase investment in the high priority areas of agricultural and rural infrastructure development and to improve public sector capability to manage and promote the future growth of the modern sectors, rather than to increase available resources\. During recent discussions with the Govern- ment, it was also agreed that the most efficient and effective means of providing this assistance would be in association with capital projects typically financed by the Bank, such as the projects proposed today\. 14\. Nigeria's creditworthiness for additional borrowing on conventional terms is not in question\. As of December 31, 1972, total external public and publicly guaranteed debt, including undisbursed loans, amounted to an estimated $1,035 million, of which approximately $57 million represented suppliers' credits\. Outstanding but undisbursed commitments of official capital were about $426 million\. Debt service in 1972 was 2\.5 percent of gross exports, or less than 4 percent of exports less factor payments\. In view of the substan- tially improved resource position of the country, and the consequent uncer- tainty as to the level of its future borrowings, it would not be possible to state, at this stage, what the Bank's share of Nigeria's total outstanding debt or debt service will be in the next five years\. The Bank Group's share of total external public debt (including undisbursed) at the end of 1972 was about 45 percent\. This relatively high share essentially reflects Nigeria's low level of external debt ($14 per capita in 1972) rather than substantial lending by the Bank ($6 per capita, including undisbursed, at the end of 1972)\. 15\. The Government of Nigeria is favorably inclined to re-cycle a portion of its accumulating resources for the benefit of the developing world\. During the past six months, Nigeria has increased its subscription to the African Development Bank and announced that it will no longer seek to borrow from that institution; donated $800,000 to the Consultative Group for International Agricultural Research, thus becoming the first developing country to contribute to the Group; and contributed SDR100 million to the IMF Oil Facility\. In addition, Nigeria has recently agreed to make a substantial purchase of Bank bonds, the terms of which are currently under negotiation\. PART II - BANK GROUP OPERATIONS IN NIGERIA 16\. Bank/IDA lending to Nigeria to date amounts to $621\.9 million (net of cancellations) of which $370\.8 million was committed during the period of the Second National Development Plan\. Transport and power together account for $428\.2 million or about 69 percent of the total, and agriculture, educa- tion, industry and the post-war rehabilitation loan account for the remaining 31 percent; excluding the program loan, the respective shares are about 75 percent for transport and power and 25 percent for the other three sectors\. Although disbursements have been lagging, the execution of projects has gen- erally been satisfactory\. Annex II contains a sunmary statement of Bank loans and IFC investments and notes on the execution of ongoing projects\.  - 6 - 17\. Bank activities since 1970 have generally been aimed at assisting Nigeria in the following three broad areas: (a) reconstruction and rehabili- tation of the economy after the civil war; (b) institution-building in the public sector; and (c) extensive economic, sector and project preparation work\. In pursuance of these aims, Bank commitments in FYs 1971, 1972, 1973 and 1974 amounted to $97\.2 million, $119\.6 million, $54 million and $75 million, respectively; during the same period, an economic mission and agri- culture, education and transportation sector missions visited Nigeria, and extensive assistance was provided to the State Governments in identifying and perparing projects designed to raise the production and incomes of small farmers\. 18\. The proposed project, and the four other projects under considera- tion today, reflect the increasing emphasis being given to agriculture and rural development in the Federal Government's plans for investing oil revenues for the benefit of the bulk of the population who live in rural areas\. Nego- tiations with the Bank have been completed for three further agricultural projects directed towards raising the production of palm oil from nucleus estates and snallholdings in the Western, Mid-Western and East Central States\. Other projects in an advanced state of processing will be concerned with small- holder rubber production in the itid-Western State and an irrigation scheme near Kano, and work is underwzay on the preparation of two further rural develop- ment projects, similar to those being presented today, in the Benue Plateau and Klwara States in the center of the country\. These last four projects should be ready for presentation to Executive Directors within the next eighteen months\. Outside agriculture the activities of the Bank Group are being restricted over the next few years to a small number of projects for which the Federal Govern- mient has requested assistance in building up netw institutions required to streng,then essential infrastructure and to provide employment for the rapidly growing urban population\. Work is currently proceeding on the preparation of projects for small-scale industry and water supply and sewerage in small towns and rural areas\. The possibility of Bank assistance in the reorganization of the telecommunications sector has been discussed, but no decision has been taken\. No further lending is presently envisaged for highways, power or education which have been important areas of Bank Group involvement in the past\. However, two education projects are still at an early stage of imple- mentation, and their supervision will make considerable demands on the time of Bank staff\. The work of the Bank's Resident Mission in Lagos is largely concentrated on project preparation in agriculture and public utilities and on the supervision of on-going projects in these and other sectors\. 19\. Since foreign exchange as such is no longer a scarce resource in Nigeria, the extent of the Bank's participation in the financing of individual projects is being determined more by reference to what is considered to be an appropriate share of total costs\. For projects which have high priority in meeting basic economic and social problems such as those in agriculture and rural development, where the direct foreign exchange component may also be relatively low, the Bank has been financing 50% of total costs, and this is the formula proposed for the sharing of costs of the five projects under consideration today and the three other projects for which loans have already  -7 been negotiated\. In the case of four of the five projects under consideration today the foreign exchange component ranges between 47 and 51%; for the Rice project it is 30%\. This cost-sharing formula will be re-examined before further negotiations take place\. 20\. During the five years since the end of the civil war in January 1970, Bank Group commitments to Nigeria have averaged about $80 million a year\. Disbursements on Bank loans to Nigeria have lagged well behind commit- ments\. During the current fiscal year, they are not expected to exceed $54 million on a gross basis, or $18 million net of interest and principal repay- ments to the Bank\. A large increase in the level of lending was discussed with the Nigerian Government two years ago when it was assumed that Nigeria would continue to require a substantial inflow of external capital for financ- ing investments in the power and transport sectors which had absorbed the bulk of previous Bank loans\. Now that these requirements can be met from Nigeria's own resources, the level and direction of Bank lending in future years will have to be reviewed in the context of the country's new Five-Year Plan, and such a review is planned for April or May next year when the Govern- ment expects discussions on the Plan to have been completed\. PART ITT - AGRICULTURAL DEVELOPMENT IN NIGERIA 21\. Agriculture, including livestock, fisheries and forestry is by far the most important source of output and employment: in 1971/72 it contributed about $4 billion or 46 percent of the country's gross domestic product and about 70 percent of the labor force is estimated to be employed in this sector\. 22\. Nigerian agriculture is primarily domestic market oriented\. Nearly 90 percent of her production - comprising all staple food crops and animal products, most palm oil and cotton, and a substantial part of groundnuts - is consumed within the country\. Nigeria is nearly self-sufficient in foods\. In 1971-72, total imports of food and beverages - of which meat, milk and sugar are the main items - were of the order of $145 million or less than 5 percent of estimated total food consumption\. Exports of agricultural products in 1971-72 were valued at $265 million\. Until the mid-sixties, they were the dominant element in Nigeria's export trade, but have since been over- taken by crude oil\. Even so, they are still a significant source of foreign exchange and account for the bulk of the non-oil exports\. 23\. Nigeria can be divided into three major agricultural and ecolog- ical zones; a southern wet forest zone comprising the Western, Mid-Western, East-Central, South-Eastern and Rivers States, characterized by high rainfall and a tropical climate and growing mainly perennial tree crops, namely cocoa, rubber and oil palm; a central dry forest zone known as the middle belt embracing the whole of Kwara State, Benue Plateau, the southern parts of North-Western, North-Central and North-Eastern States which is underpopulated  - 8 - and tsetse infested, but has a high potential for annual food crops and live- stock; and a northern zone which, being free from tsetse has a high population density and a fairly intensive and developed system of agriculture\. This area covers about 50 percent of the country, and in addition to supporting most of Nigeria's cattle population, also produces most of her cereals, beans, ground- nuts and cotton\. 24\. Land holdings are typically small\. The average farmed area per holding for the country as a whole is estimated to be less than three acres\. In some of the more densely populated areas of the south, the average is less than one acre\. There are few farm families with more than 25 acres of cultivated area\. Farmers follow for the most part traditional techniques of which bush fallowing and mixed cropping are characteristic features\. The practice of bush fallowing is essentially a device to main- tain soil fertility\. Mixed cropping permits farmers to get more output per acre with smaller risks of crop failure\. However, since improved seed, fertilizers and other elements of modern technology are used on a very limited scale, average yields are still low\. Small holdings and poor produc- tivity explain the relatively low level of income in the agricultural sector\. There are also considerable disparities in the distribution of land and incomes both between and within regions\. 25\. While reliable data are lacking, it is believed that agricultural production since the early sixties has been growing only slightly faster than population\. Agriculture has certainly been growing much slower than other sectors, and as a result, its share in GDP has been declining\. The relative sluggishness of agriculture is largely attributable to the exist- ing low level of agricultural technology\. The disruption of production in the eastern states during the civil war was an aggravating factor\. Since then, the recovery has been hampered by short-term factors such as drought in parts of the north in 1972-73 and 1973-74, but, more particularly, by a number of underlying long-term influences\. Some of the most important factors among these are the rising age-profile of tree crops, technical and other constraints to accelerated food crop production, e\.g\., the lack of improved crop varieties and adequate credit facilities to finance the pur- chase of modern farm inputs\. Imports of food, though still small, have risen from around $70 million in 1965-66 to $145 million in 1972\. The slow growth of production has also affected exports\. Cocoa and rubber exports have remained stagnant in recent years\. Palm oil exports have dwindled to negligible amounts and palm kernel exports are stagnating at well below pre-war levels\. Groundnut exports in 1972 were some 80 percent below the 1965 level and were even lower in 1973 because of the drought in the north\. In addition the availability of groundnuts for export has been affected by substitution of groundnut for palm oil in domestic consumption and the rela- tively better price offered to farmers by private traders\. A near record groundnut crop is in prospect for 1974\. Cotton, once a major export, is now fully utilized by the local textile industry and local supply cannot meet demand\. 26\. A vigorous effort to step-up the growth of agricultural and live- stock production is essential for viable development of the economy\. The  -9- demand for agricultural products is growing rapidly\. On a rough estimate, the resources generated by the oil sector would be adequate to sustain a growth rate of over 9 percent per annum in real terms over the next decade\. This will generate a 6 percent average annual increase in domestic demand for farm products\. Unless the rate of agricultural growth is accelerated, the economy faces the prospect of' large and increasing food imports\. More importantly, continued slow growth of agricultural production implies a slow improvement in the living conditions of the mass of the population with the attendant risks of further aggravation of rural-urban disparities\. 27\. Nigeria has vast unexploited potential for increasing agricultural production\. The productivity of practically all segments of agriculture - food, export crops, and livestock - are far below levels attainable with modern farming methods\. In addition there are extensive areas of good agri- cultural and grazing land which, if developed along scientific lines, could greatly increase production\. While improved varieties and techniques adapted to local conditions are not available for all crops and regions, much can be done on the basis of existing knowledge\. Significant improvements in pro- ductivity of many of the major export and cereal crops have been demonstrated to be technically and economically feasible\. The main constraints are organi- zational and institutional: until recently Government efforts to help the farmers to learn and apply the known techniques for raising production have not been on a scale commensurate with needs and possibilities\. Extension services in many states are poorly staffed, credit and marketing institutions are few, planning is weak and the expertise needed to implement successfully major agricultural and other rural development projects is in short supply\. There are also complex social and institutional problems to be overcome before the land potential, including the resources of the middle belt, can be effec- tively exploited, and the livestock industry organized along modern lines\. 28\. The Federal and State Governments are conscious of the need for greater attention to agriculture and of the impediments to be overcome before significant progress can be achieved\. Several major new programs initiated within the last year or two bear witness to a heightened Government concern for and interest in agricultural development\. These include the creation of the Nigerian Agricultural Bank, the launching of an accelerated food produc- tion program, larger and better organized projects for replanting/planting of tree crops and integrated agricultural development projects in different parts of the country\. At the request of the Qovernment, the Bank has actively assisted in the preparation of many of these projects\. The Bank economic mission in 1973 made an overall survey of the potential and prospects for food production\. Agriculture and rural development generally are of crucial importance to Nigeria's long-term growth, and the Bank plans to continue assisting Nigeria in preparing and implementing projects in this area\. PART IV r TIIE PROJECT 29\. A Report entitled "Appraisal of Gusau Agricultural Development Project -- Nigeria" dated September 6, 1974 (No\. 354a-UNI) is being distri-  - 10 - buted separately\. A loan and project summary is attached as Annex III; as is map showing the location of the project area\. 30\. The proposed project was identified by a Bank mission in November, 1972 and was subsequently prepared by the Bank in collaboration with the North lWestern State authorities\. The project was appraised by a Bank mission that visited Nigeria in September and October, 1973\. Negotiations were conducted in Washington in July, 1974\. The Nigerian delegation was headed by Alhaji Abubakar Alhaji, Deputy Permanent Secretary, Federal Ministry of Finance\. Project Description 2 31\. The project area covers 3,800 km or about 2 percent of the total area of the North Western State\. It comprises part of the Sokoto Administra- tive Division and is estimated to involve some 68,000 farm families mainly engaged in the growing of cotton, groundnuts, sorghum and maize and supporting a total project area population of 620,000\. 32\. The proposed loan would assist Nigeria's North Western State Govern- ment (NWS) to finance an agricultural development project which would involve the construction of vital crop extraction roads and water supplies, and would provide farmers with the technical, marketing and credit services, and inputs required to increase production and farm incomes\. Currently, the latter are low, about US$220 per family and US$34 per capita\. 33\. The project would be carried out over a five year investment period 1975/76 - 1979/80, and would involve: (a) constructing about 1,000 km of low cost agricultural roads, 85 small and medium size earth dams, 160 tapkis (ponds), and associated soil conservation structures; (b) constructing an administrative centre in Gusau, 4 development unit centres, and 40 farm service centres; (c) expanding Gusau seed multiplication farm and the new development of an additional farm at Kaura-Namoda; (d) expanding training facilities at Gusau and construc- ting a new project training centre at Kaura-Namoda; (e) provision of adequate farmer extension, marketing services, including staff, vehicles and equipment; (f) provision of seasonal and medium-term loans to farmers for the purchase of crop inputs and farm equipment; (g) establishing a project evaluation unit; and  (h) preparation of plans for the continued provision of project services after the investment phase of the project is completed\. 34\. The project is designed on a scale that would have an impact, given the size and population of the country\. There is the added advantage that the project would provide practical training for Nigerian staff in the technical and administrative management of projects of this type, and if successful, the project concept could be applied to many areas of northern Nigeria\. Project Execution 35\. The project would be managed by the Gusau Project Management Unit (GPMU) which would carry out the day-to-day management operations\. GPMU would be responsible to the Cusau Project Executive Committee (GPEC) for budgetary and policy control; the Chairman of GPEC would be the Permanent Secretary of the Ministry of Agriculture (MA) of NWS\. GPMU and GPEC would be established as a condition of loan effectiveness in a form and with membership, functions and responsibilities satisfactory to the Bank\. GPMU would have its head- quarters at Gusau, the main centre of the project area and would enjoy autonomy greater than that afforded to the technical divisions of MA\. GPMU would co- ordinate its activities at a Federal level through a Federal Coordinating Committee\. 36\. The GPMU would be responsible for the procurement, distribution and sale, for cash or credit, of fertilizers, seeds, insecticides, sprayers, ox- drawn equipment, tractors and other necessary farm supplies and would decide on the suitability and composition of any package of inputs offered to farmers\. 37\. The creditworthiness of each loan applicant would be certified by a project approved farmers' association; this would be part of the mutual gua- rantee policy that GPI'U would pursue\. Provision would also be made to extend credit to groups or to village farmers' associations if farmers wish to pool input requirements and assume joint liability for credit\. Before the begin- ning of each planting season, a schedule of proposed lending terms falling within the range of 5 to 9-1/2 percent would be furnished by GPMU to GPEC which would, in consultation with appropriate Nigerian Authorities and the Bank apply the lending terms for the planting season\. 38\. Recognizing the need for considerable improvement in primary market- ing, the project would take various measures to improve marketing in general\. These would include improved weighing and measuring devices and village storage facilities by a number of marketing reforms for statutory crops such as timely announcement in accordance with existing practice at the presentation of the annual Federal Budget; establishment and enforcement of greater discipline of Licensed Buying Agents (LBA) and produce inspection staff\.  - 12 - 39\. Both the Federal and State Government recognize the need for qualified and experienced staff to administer the project and assure high technical stand- ards in its field implementation\. The northern states are generally short of qualified personnel to fill key project management and senior technical posts and the demand for personnel with such expertise remains high\. NWS is fully aware of the problem of staffing the project adequately and is prepared to recruit staff internationally, where qualified Nigerian personnel are not available\. International recruitment is expected to be necessary for the managerial posts of Project Manager, Chief Accountant, Chief Engineer, and Chief Technical Officer, and a condition of loan effectiveness would be that such posts in addition to that of Chief Administrative Officer to be recruited locally, had been filled\. Existing staff in the project area would come under the project and additional staff would be transferred to the project from other areas of the State\. Priority during the first two years would be given to the project for those Agricultural Assistants completing ongoing training courses\. On-this basis, sufficient professional and technical staff would be available\. Retroactive financing of US$150,000 is proposed to cover the appointment of key personnel referred to above with effect from July 25, 1974\. 40\. A degree in Agriculture is offered by the Ahmadu Bello University at Zaria in the North Central State (which also serves all six northern States) and it is expected that some of the graduates would be recruited for the project\. In addition, the Division of Agriculture and Livestock Service Training (DAIST) of ABU also offers both a 3-year diploma and a 2-year certi- ficate course in various aspects of agriculture which could be utilized for middle management training for the project\. The NWS also operates (a) farm training centers for the training of Field Supervisors (FS), the lowest grade of extension worker and (b) farm institutes for farmer training\. Provision has been made under the project for the up-grading of the existing Gusau Farm Institute to a Farm Training Center and for the construction of a new Farm Training Center at Kaura Namoda, both of which would be used, in the initial years of the project, to train project staff particularly FS and Credit Assis- tants (CA)\. Such training would initially consist of simple short courses on specific crops and associated problems\. FS would receive further training after a period of field experience, and thereafter regular refresher courses\. Credit and Marketing staff would be trained in a similar manner through a series of in-service courses\. Later on, the emphasis would be more on farmer training\. It is not anticipated that the recruitment of individuals for training as FS, CA and other junior technical posts under the project would present any serious problems as the basic level of primary education throughout northern Nigeria is relatively good and, as there is an increasing surplus of West African School Certificate holders on the labor market\. 41\. In addition to the training of lower level staff discussed above and the training of higher level staff on an in-service basis, GPMU would also pay particular attention to the training of selected staff to fill managerial functions\. In this respect, internationally recruited staff would, as one of their responsibilities, ensure the adequate training of  w 13 - their subordinates, and would be required to submit to GPEC through the project manager, quarterly reports on the training aspects of their sections\. The project manager would have the overall responsibility for ensuring that an adequate management training program is maintained and would report regu- larly on its progress in order to satisfy both the NWS and the Bank of the adequacy of the program\. Additional funds have been provided under the project for the recruitment of a training specialist in the event the project manager considers this necessary\. Project Costs 42\. Project costs are estimated at US$37\.4 million of which the foreign exchange component would be US$17\.7 million or 47 percent of total costs\. Details of project costs are given in Annex III\. Project costs include a 5 percent physical contingency, and a variable price contingency (7-12 percent compounded) over the proposed five-year loan disbursement period\. Contin- gencies amount to US$9\.3 million or 25 percent of total project costs\. The Bank loan would finance 50 percent of the total project costs which would cover the entire foreign exchange costs and a small percentage (7%) of local costs amounting to approximately $1\.3 million\. A summary of the proposed financing plan for the project is given as follows:  - 14 - Summary of Financing Plan Total IBRD - N'OOO…--------- Investment Costs Vehicles, plant, equipment, buildings, etc\. 5,327\.4 3,475\.5 Operating Costs in Development Period Vehicles and plant, general services and staff 6,969\.5 2,870\.7 Farm Inputs Incremental Farm Inputs 5,712\.3 2,325\.3 Field Evaluation Unit 494\.1 296\.5 Contingencies Physical and Price 6,131\.2 3,532\.0 Total N'000 24,634\.5 12,500\.0 US$'000 37,444\.4 19,000\.0 Distribution % 100 51 Procurement 43\. Procurement of vehicles, plant, equipment, fertilizers, insecticides, farm tractors and implements, where orders or contracts have a value of more than US$25,000 would be through international competitive bidding (ICB) in accor- dance with IBRD guidelines\. Such procurement is estimated to have a value of about US$11\.4 million\. Domestically manufactured goods would be allowed a 15 percent preference when comparing domestic bids with those of foreign manufac- turers\. Contracts for the construction of buildings, staff houses, and the purchase of construction materials and furnishings valued at US$5\.4 million would not be attractive to foreign contractors, due to the dispersed locations of the works and the small size of individual contracts and orders, and would be awarded under locally advertized competitive bidding\. Bona fide domestic contractors would reccive a 7-1/2 percent preference in bid evalua- tion\. Construction of roads, water supplies and soil conservation works estimated at US$6\.7 million would be carried out on force account due to the shortage of suitable medium scale contractors who normally would undertake this work\. However small contractors would be employed to the maximum extent feasible\. A large part of project costs (estimated at US$11\.6 million) would be for labor, staff salaries and allowances, vehicle maintenance and operations, general services, and project evaluation, and, as such, would generally be  - 15 - unsuitable for competitive bidding\. Those items not included specifically under procedures for ICB or advertized locally would be purchased through commercial channels\. Disbursement 44\. The proceeds of the Bank loan (US$19 million) would be disbursed over five years (1975/76 - 1979/80) to cover 50 percent of total project costs and would be expended against the following categories: - 100 percent of the cif cost of directly imported vehicles, heavy plant, and equipment or 76 percent of the cost of these items if locally procured, totalling US$2\.0 million; - 100 percent of the cif cost of directly imported farm tractors and equipment, ox-drawn equipment, spraying machines, fertilizers, insecticides, battery sets and seeds or 71 percent of the cost of these items if procured locally, totalling US$3\.5 million; - 100 percent of the cost of internationally recruited staff amounting to US$1\.6 million; - 60 percent of the cost of buildings, staff housing and construction material and labor for roads, dams and soil conservation works, totalling US$3\.2 million; - 60 percent of local staff costs amounting to US$2\.8 million; - 60 percent of the cost of the field evaluation unit amounting to US$0\.5 million; - an unallocated amount of US$5\.4 million to cover physical and price contingencies\. 45\. Disbursement of the Bank loan would be against import documentation, contracts and certified records of expenditures\. For disbursements made against certified records of expenditures, documentation would not be submitted for review as a matter of course, but would be retained by the project manage- ment unit for scrutiny by Bank supervision missions\. Any of loan funds remaining after the completion of the project would be used to further develop the project area\. Economic Benefits and Justification 46\. The economic rate of return from investment in the project is esti- mated at 16 percent\. The project's principal direct benefit would be the incremental increase in farm production that it would generate, and which would result directly in higher incomes for some 41,000 farm families of about US$220 per family or US$41 per capita and better living standards for a further  - 16 - 27,000 who would benefit through the improved infrastructure and marketing arrangment within the project area\. If the non-farming population, traders, laborers, etc\. are included, then about 620,000 people would in one way or the other, receive primary or secondary benefits through project activities\. Some of the more immediate benefits which would accrue from the project include, (a) a general improvement in communications, and an increase in local trade and employment opportunities for the non-farming population in the project area; (b) a degree of stabilization of the North Western State population in more productive activities; (c) the use of the project by NWS to test new development, credit and marketing techniques that could be quickly applied to other state farmers, and the extended use of the seed multiplication centers for the provision of improved seeds to farmers in other parts of the State; (d) annual net incremental foreign exchange earnings amounting to some US$5\.7 million that will accrue to the FMG coffers once the project attains full production; and, (e) the use of information accumulated by the project evaluation unit in the formulation of future agricultural policy and resource and financial allocation throughout the country by FMG\. In general terms, the project should result in improved farm management practices and some reduction in income disparity while ensuring a more even food supply for Nigeria's urban population and the expanding commercial livestock industry\. Risks 47\. In any agricultural project dealing mainly with smallholders the success of which would largely depend on adequate rainfall as well as the timely staffing of a number of new organizations, involves risks\. However, it is believed that the project would minimize such risks, given the provision of competent management and proven technical innovations; the farmers are hardworking, and the production to be induced by the project is in high demand on both the domestic and export markets\. No serious ecolo- gical risks are envisaged though the possibility would be closely monitored and the necessary corrective action taken\. PART V - LEGAL INSTRUMENT AND AUTHORITY 48\. The draft Loan Agreement between the Federal Republic of Nigeria and the Bank and the draft Project Agreement between the Bank and the North- Western State of Nigeria, the report of the Committee provided for in Article III, Section 4 (iii) of the Articles of Agreement, and the text of a Resolution approving the proposed loan are being distributed to the Executive Directors separately\. 49\. I am satisfied that the proposed loan would comply with the Articles of Agreement of the Bank\.  - 1 7 - PART VI - RECOINS-NDATION 5(\. 1 recommend that the Executive Directors approve the proposed loan\. Robert S\. McNamara I'resident At tachnments November 25, 1974   Algal I Page 1 of 3 Pages COU11TRT DATA - N'IGERIA AREA POPULATION DENSITY 923,768 baD 7§7=ml1ion (sid-19'2) 215 Per k\.ZOf \. bl\. lend SOCIAL INDICATORS Reference Countries 1960 Nl-ri~970 p im ULO 1970 DV? PER CAPITA US$ (ATLAS BASIS) aI 130 130 /a 300 7 50A ~ D0E0RAP)0C Crude birth rot\. (par thousand) 53-57 /b 50 4- 51 Ze-A 17 L3 Caedeeth -at\. (per th-\.nad) \.25 ~ 18 cE 8Tce 1 Infafnt wortelity rote (p\.r thtc,s nd live births) \. 58 a, Life \.otp-ot\.nn at birth (years) 37 LO Le 49 17 61 Oroar reoptu-tim rate 12 \. 3\.3 37 : \. POc,y tolatn growth rot\.in 2\.2 \.32 26 5 PoP-o1ati\.n grow,th \.t\. - nrb\.an 16 Age ettr-c1re (per-et) ic-il 13n 5 /1 53 17 16 15-61 55 ~ 53 526,4\. i0 65 eed -ver 2' 3 4\. Devoodeocy ratio /1 l\.l1 1\.2 1 - 1\.3 1\. Urban popla\.tio, anpretOf tomni Ii un 23 Lj\.j 28 /k 32 /1 59 neAil\.Y plancing, Nu of acrept\.re nomulati,e (thau,s\. ~ \. \. 1\.1 No\. of \.er (Ao are Onlen) \. \.2 , =t -oor force (thic-mend,) 18,300 In 22,500 / ~ 18,000 3,500 13,000 Per-etage nePloyed 1n agicolt-c 71 67 57 55 pj 39 Pe\. \.Ontagn ~neanloyej L\. \. INCOME DISTRIBUTION Percent of n\.ti \.I irc\.e reci,ed by higheet 5% \. \.36 4q, r Percent of ,aioli,co,es r \. ,od by highest 20% 6\. \. \. \. 6 Prcent of national' income received by lonet 20%\. \. Percn fntoC\. Inc-e reci-d by loweat W0%*\. 1 L DMSTRIBUTION OF LAND OAbERSAIP % o,m,d by top 10%ofcnae\. % osnd by moal1eet 10% of \.osur\. Pn0claionperphyinec52,000 /s 20,530 / ~ 380L 2,0 110 Poopulatio per nooseing1peroco \. 1220 ,5 1,070 1,57 Popultion er hopit\.lba 1,860 Iso 1,850 1,660 ~j 760 93C Per -apita calorie supply a ofroieot/5102g 95 105 ~d 86 120 Per capita protoin sapply, tota (grass per d 6yY 66 v 60 / ~ 55 'I 43 / ~ 85 O'f uhich, animal awd puise 17 16 ag 1L 10 28~A Death rats 1-4 years /7 \. 11 Adjustd /8 Prtnry soheo enrollet ratio 37 31 11 ,\. 89 ( Adjos:ted sacondary shobol enxollment ratio 3 1 16 5 23 TeIre ofschooling provided, first end second level 11 ii 10 / ~ 15 12 Voca\.tional sorcil\.ni as % of sen\. school enolet5 8 1 23 2 Adult literacy rte" % Al-arg\. No\. cf pereone per roon (orban) 3\.0 An \. \. 2\.5 Percent of occpied unite without piped eater \. 51 Access to electricity (as % of total population) 81 /oai \.17 60 Percent Of turl\. POPeati, conneted to e1ectricity \. CONSUMP'TION _YG -i-r\.per 1000 popolation 1\. 27a 1 78 276 Passengr cars per 1000 popuation 0\.7 l1 4 25 Elcrcp rconsumption (kwh p\.c\.) y ~ 15/g 321 586 Newsprint consumption p\.c\. kg per year 0\.1 0\.3 0\.3 d shJ 0\.1 3\.1 Notes, Fig-re re- for either in the 1ciest periods or toO account of enviroonvental tem,perature, body weigbt\., en the latest -srs Latest periods refer in principle to diatribotion by age sand sen of national popultions\. the yaaretl1956-60 or 1966-70; the latest yea,rs in pri-Protein st-andard (reqairemnate) for all soutrins as estab- cipl\. in 1960 and 1970\. iSAahd by UNDA Roonoio Rweoaroh Service provide for a 1\.min,o A The Per Capita, GOP eatiata be ot market prices for allow,ano\. of 60 grams of total protein per day, sand 20 grams of Year othr than 1960,\.calulated by the san ooceroin Animald end polo\. protein, of whiah 10 grams should he eninl teohoiquc as the 1972 World Bank Atlas\. protein\. These sterdard\. are soehat l-oer than those of 75 a\.Avrage number of daughters par -oa of reproduotive gram of total protein end 23 gras of animal protein as en age\. average for the word, proposd by FAO in the Third 'rlerd Feed /i P0puIation groth motee are for the dacadee ending in Surrey 1960 and 1970\. /7 Sane stodias have suggested tha\.t crude death rates of children, A Ratio of under 15 and 65 and over age brackets to ages I thsro\.gh 4 may ha used asafirst appremimation inden af those in labor force bracket of gags 15 through 61\. maln\.trition\. Pj AO reference stonwdard repreact pbyaiol1gical ro- / Peroentage enrolled of corresponding popolatlon of school age qui roeatet for nom- a ctivity and health, taking as defined for sach coutry\. 1972; A 1952\.531 /a i965-7d VI; isw tie1ut1ep biengadeeh; i Register\.ed only; 4L 19721 Li1960-72, ; 1953-631 a2 Definition met Aavilible; /j' Estimate; Z Ove 5000 inhabitants, also a few areas havi" orba characteristice but fewer then 5000 Population; a2 Towns vith, a Population of 500C and over; Za Local- ite aef 2500 or sore; /2 1963; /j Ratio of populatAnor under 15 and 65 and over to total labor force; /2 FAO entitate; Z5 1969; /2 Househaldsl /a 1962; A2 Number on the register, not a1l woking io the country; Includes em-North Ocanrsn /226-631 /2 1966-68; /2 Dee through five; Z2 19681 /2 Sim through tea; UP to satriculete (10th grade);` 196L-66; /M 1961; Z24 Percentage of urban dwellings; /2g\. Number of radio licenseeasud 2 1968-9X 2 DetA relate to electricity generated, include station use and trans- mdesnos losses; Lgl Figure does not tooled\. imports by land; /ab 1962-72\. M exico has been selected as an objactive Oommtry because its per capita income, in tLhe early 1970's, is about twice Nigewin's projected par capita inemne, in the mid-1980'o at 1971 prices\. Also, Nsxjco's present level of development is a realistic target for Nigeria through the raeminder of 'his century\. A\.M\. R2 No-enor 26, 197  ANNEX I Page 2 of 3 GROSS NATIONAL PRODllCT IN 1972Z73 ANNUAL RATE OF GROWTH (%, constant 1970/7, Drices) US $ Mln\. % 1965/66-1970/71 1971/72 1972/73 GNP at Market Prices 10690 100\. O4\.2 1\.3 7\.9 Gross Domestic Investment 23L7 22\.0 4\.0 32\.0 -6\.0 Gross National Saving 1912 17\.9 4\.0 57\. 3 15\.L Current Account Balance -44J5 - 4\.1 \. Exports of Goods, NFS 2235 20\.9 10\.2 25\.0 4\.1 Imports of Goods, NFS 2006 18\.8 9\.1 20\.0 -4\.0 OUTPUT, LABOR FORCE AND PRODVCTIVITY IN 1970/71 1/ Value Added Labor Force V\. A\. Per Worker US $ Mln\. % Mln\. e US $ 7 Agriculture 3303 48 16\.8 70 197 69 Industry 1690 25 3\.1 13 545 190 Services 1895 27 4\.1 17 h62 161 Unallocated \. Total/Average 6888 100\.0 24\.0 100\.0 287 10\.0 GOVERNMENT FINANCE General Government Central Government (N8qra Mm\.) 7% of GDP ( Naira Mln\.) 7 of GDP 1972/731969/70 72 1972/73 I92L73 196970l-1971/72 Current Receipts 2/ 1L420 18\.9 17\.4 951 12\.7 11\.0 Current Expenditure- 1102 114\.6 15\.0 652 8\.7 9\.5 Current Surplus 318 4W\.2 2\.4 3 71-° 1\.5 Capital Expenditures 440 5\.3 3\.7 343 4\.6 1\.5 External Assistance (net) 29 \. \. 29 / Total labor force; unemployed are allocated to the sector of their normal occupation\. 2/ Includes capital expenditures for defense\.  ANNEX I Page 3 of 3 COUNTRY DATA - (name) Sentfamber MONEY, CREDIT and PRICES 196c 107r, 197 ,977 197, 1Q7 (Million Naflaoutstanding end period) Money and Quasi Money 965 S'2 1025 11Q6 1129 1785 Bank Credit to Public Sector 18 708 570 5CC, 567 709 Bank Credit to Private Sector 327 )479 59? 757 Q:o 718 (Percentages or Index Numbers) Hfoney and Quasi Money as ¾ of G%/ 16\.6 17\.8i I)J\.8 15\.5 \. 2/ General Price Index (1960 = lO)- 292\.- '50\.6 17';\.? 179\.6 181!\.7 Annual percentage changes in: General Price Index \. l \.8 16\.0C 2\.8 \. 0\.h- Bank credit to Public Sector \.'7 _1\. f 2\.^ \. 25\.0 Bank credit to Private Sector , 86\.2 2L!\.C 77\.A * 12\. BALANCE OF PAYMENTS MERCHANDISE EXPORTS (AVERAGE 1970-72) 197W 1971 1972 1972 US $ lln Z\. (Millions US $) Drel\. Crude oil 128D0 79\.), fCo-ca oroducts 198 11\.2 Exports of Goods, NFS 1335 1991 2327 99'55 Imports of Goods, NFS 1311 1858 1987? 22, c,roundnut products 75 4\.? Resource Gap (deficit = -) 7 -r 0 Palm rroducts ':4 2\.1 Interest Payments (net) -16 - 1 \. \. All other commodities 179 7 Workers' Remittances - - - - Total 1767 1OQ,v1 Other Factor Payments (net) 84? 598 725 87] Net Transfers 69 -29 -53 EXTERNAL DEBT, DECEMBER 31, 1972 Balance on Current Account ; -7 B -36 8 - US $ NWln Direct Foreign Investment 251 338 337 1IOU Net MIT Borrowing Public Debt, incl\. guaranteed 1,095 Disbursements 49 65 117 123 Non-Guaranteed Private Debt Amortization 35 37 32 83 Total outstanding & Disbursed Subtotal T4 H5 3/ Capital Grants - - - - DEBT SERVICE RATIO for 1972- Other Capital (net) 17 1$ 15 - c Other items n\.e\.i 179 260 UZ1 -596 Increase in Reserves (+) R5 178 - 52 +23 4 Public Debt, incl\. guaranteed 2\.5 Non-Guaranteed Private Debt bfn' Ind (elated Y- Total outstanding & Disbursed terin I Imports 31 13 14 18 IBRD/IDP Lendine\. (Octobar 31\. 1974) (!n USt) f'which: Petroleum - - - - LliAedn(coal27d\.Ln\.i Exno'ts 711 1338 1788 2800 Ii3tD f 4 of which: Petrcleum 718 1338 1788 2800 Outstanding & Disbursed 303-3 30\.6 Undisbursed 241\.9 4\. RATF nW RYCHANGE Outstanding incl\. Undisbursed U7U\.T2 T 33 hrouTgDec\. 191 1971 Since Dec\. 20,1971 Since ADril 1978 = O\.71 Floating Central rate; N 1\.0(0 = TlS tI\.L0 N 1\.00 = US $1\.52 US$ 1\.00 = NO\.62 - N 1\.00 = TTP Wi l2 Note: All conversions to dollars in this table are at the average exchange rate rrevailinr' during the peri-od covered\. 1/ Index of Consumer Prices 2/ Average January - June 3/ Ratio of Debt Service to Fxports of Goods and Non-Factor Services\.  ANN'X II TBH0 STATUS OF BANK \.ROUP OPK:A'PAIONS TN Nl'iEFIA A\. STAT-'F2MNT OF liANK CF\.OUP OPEFATIONS IN NIGCYIA ,as at Octoher 31, 197h) Loan or US$ million Credit Amount (less cancellations) Number Year Borrower Purpose Bank IDL Undisbursed Nine loans and one credit fo:lly disbursed 282\.1 15\.3 72 1965 Nigeria Education 20\.0 4\.7 827 1965 Nigeria Roads 1\.5 2\.5 69L 1970 Nineria Transport 25\.0 4\.8 702 1970 Industrial Development Bank Dev\. Fin\. Co\. 10\.0 4\.1 764 1971 Nigeria Cocoa Dev\. 7\.2 5\.3 olb 1972 Nigeria Education II 17\.3 17\.0 838 1972 Nigeria N~oads V 26\.3 18\.O '37 1972 NEPA Power 76\.0 1\.2 92'' 1973 NPA Ports II 55\.0 55\.0 929* 1973 Nigeria 0d'ucation III 54\.0 5h\.0 1O45* 1978 Niceria Cocoa II 20\.0 20\.0 Total 587\.6 35\.3 of which has been repaid 37\.4 Total now outstanding 550\.0 Amount sold 16\.6 of which has now been repaid 13\.8 2\.8 Total now hold by Bank and IDA** 617\.? 35\.3 Total undisbursed 241\.9 4\.7 246\.6 *Not yet effective "Prior to exchange rate adjustments B\. STATEMENT OF IFC INVESTMENTS (as at October 31, 1974) Amount in US$ million Year Obligor Type of Business Loan Ewuity Total 1964, 1967, 1970 Arewa Textiles Ltd\. Textile Mfg\. 0\.9 0\.7 1\.6 1964 Nigerian Industrial Development Bank Ltd\. Dev\. Fin\. Co - 1\.4 1\.4 1973 Funtua Cottonseed Crushing Ltd\. Veg\. Oil Crushing 1\.6 - 1\.6 1974 Lafiagi Sugar Estates Sugar - 0\.1 0\.1 1973 Nigeria Aluminum Extrusion Ltd\. Aluminum processing 1\. 0 3 1\.3 Total Gross Commitments 3\.5 2\.5 6\.0 Less cancellation 0\.3 - 0\.3 Less sold or repaid 1\.1 0\.3 1\.4 Total commitments now held by IFC 2\.1 2\.2 4\.3 Undisbursed 1\.1  ANNEX II Page 2 C\. Projects in Execution Credit 72-UNI, Education Project: US$20\.0 million Credit of March 1, 1965; Revised Closing Date: June 30, 1976 Loan 814-UNI, Second Education Project: US$17\.3 million Loan Of April 18 1972; Closing Date: December 31, 1975 Loan 929-UNI, Third Education Project: US$54\.0 million Loan of_August 16, 1973; Closing Date: December 31, 1978 The first education project (72-UNI) had a late start in implementa- tion, particularly in the three eastern states which were affected by the civil strife between 1967 and 1970\. Execution of project schools in these states is at working drawings stage while the majority of project schools in other states are under construction\. Completion of work in eastern states might take about two more years\. Fxecution of the second education project (814-UTNI) is generally satisfactory, although it is twelve months behind schedule and special implementation assistance would be needed in one state to avoid further delay\. The third education project (929-UNI) has not yet been declared effective pending appointment of consultant- architects and execution of subsidiary loan agreements and legal opinion\. The effectiveness date has been postponed to December 31, 1974\. Action to appoint consultant-architects and to fulfill the other conditions of effectiveness is progressing\. Loan 427-UNI, Western Road Project: US$145\. million Loan of September 26, 1965; Revised Closing Date: March 31, 1975 Loan 694-UNIL Transport Rehabilitation: US$25\.0 million Loan of June 26, 1970; Revised Closing Date: March 31, 1975 Loan 838-UNI, Fifth Highway Project: US$26\.3 million Loan of June 16, 1972; Closing Date: June 30, 1977 There has been a saving of $2\.5 million in Loan 427-UNI, out of which procurement of road machinery and conduct of a photogrammatic survey would be financed and the balance, estimated at approximately $2 million, would likely be cancelled\. Construction work and procurement under the Transport Rehabilitation Loan (694-UNI) have proceeded satisfactorily except for procurement of some railway equipment which has been affected by administra- tive delays as well as delays in delivery schedule due to the energy crisis\. However, deliveries are now proceeding satisfactorily and the loan is expected to be fully disbursed by March 31, 1975\. Loan 705-UNI, Ni erian Industrial Development Bank: US$10e0 million Loan of August 28, 1970; Revised Closing Date: March 31, 1975 This loan is fully committed\. Withdrawals out of this loan in 1973 were slower than expected owing to cancellation of sub-project loan commit- ments\.  ANNEX II Page 3 -3- Loan 76h-UNI, Western Cocoa Project: US$7\.2 million Loan of June 23, 1971; Closing Date: March 31, 1977 Loan 1045-UNI, Second Cocoa Project: US$20 million Loan of October 11, l974; Closing Date: September 30, 1981 Though there was delay under Loan 764-UNI in the establishment of the Cocoa Development Unit and only 65 percent of first year planting was achieved, excellent progress was made and the 1973 planting target and 1972 backlog have been fulfilled\. The Second Cocoa Project (Loan 1045-UNI) is expected to become effective by January 1975\. Loan 847-UNI, Fourth Power Project: US$76\.0 million Loan of June 30, 1972; Closing Date: December 31, 1977 This loan became effective only on June 13, 1973, owing to delay in connection with the Loan Assumption Agreement for the previous Bank loans in this sector\. Progress on the Bank project is considered satis- factory\. Loan 922-UNI, Second Lagos Ports Project: uS$55 million Loan of August 1, 1973; Closing Date: December 31, 1979 This loan became effective on October 29, 1973 and implementation of the project is proceeding satisfactorily\.  ANNEX III Page 1 of 3 NIGERIA Loan and Project Summary Borrower: Federal Republic of Nigeria Amount: US$19 million Terms: Payable in 20 years, including 5 years of grace, at an interest rate of 8 percent per annum Relending Terms: Federal Government would onlend the proceeds of the loan to the North Western State Governme nt (NWS) on identical terms as the IBRD loan\. Project Description The project would be carried out over a five-year investment period 1974/75-1978/79, and would involve constructing about 1,000 km of low cost agricultural roads, 85 small earth dams, 160 tapkis (ponds) and associated soil conservation structures; constructing an administrative center in Gusau, 4 development unit centers, and 40 village service centers; expanding Gusau seed multiplication farm and the new development of an additional farm at Kaura Namoda; expanding training facilities at Gusau and constructing a new project training center at Kaura Namoda; provision of adequate farmer exten- sion, credit and marketing services, including staff, vehicles and equipment; provision of seasonal and medium-term loans to farmers for the purchase of crop inputs and farm equipment; establishing a project evaluation unit; and preparation of plans for the continued provision of project services after the investment phase of the project is completed\.  ANNEX Ill Page 2 of 3 <;u\.ry of Proposed Financin& Total IBRD NWS Farmer - … -- N oo000 Investment Costs Vehicles, plant and equipment 1,752\.7 1,330\.7 422\.0 - Buildings, construction material, houses and furnishings 3,574\.7 2,144\.8 1,429\.9 - Operating Costs in Development Period Vehicle & plant operating 1,611\.9 - 1,611\.9 - General Services 1,265\.7 - 1,265\.7 - Staff: Local 3,052\.9 1,831\.7 1,221\.2 - Expatriate management 784\.0 784\.0 - Expatriate technical 255\.0 255\.0 Farm Inputs Incremental farm inputs 3,275\.0 2,325\.3 23B\.1 711\.6 Fertilizer subsidy 2,437\.3 - 2,437\.3 - Field Evaluation Unit 494\.1 296\.5 197\.6 - Contingencies Physical 925\.1 448\.4 441\.1 35\.6 Price 5,206\.1 3,083\.6 1,923\.2 199\.3 Total N'000 24,634\.5 12,500\.0 11,186\.0 946\.5 US$'000 37,444\.4 19,000\.00 17,005\.7 1,438\.7 Distribution Z 100 51 45 4 Disbursement Scnedule Annual Cumulative (US$ Million) FY 75 1\.0 1\.0 FY 76 5\.0 6\.o FY 77 4\.o 10\.0 FY 78 h\.0 l4\.0 FY 79 3\.0 17\.0 FY 80 2\.0 19\.0  ANINEX III Page 3 of 3 Summary of Project Costs -/ (N'000) Total Foreign Exchange Local Investment Costs 5\.3 2\.4 2\.9 Operating Costs in Development Period 7\.0 2\.2 4\.8 Farm Inputs 5\.7 4\.0 1\.7 Field Evaluation Unit 0\.5 0\.2 0\.3 Physical Contingencies 0\.9 0\.4 0\.5 Plrice Contingencies 5\.2 2\.4 2\.8 Total Project Costs 24\.6 11\.6 13\.0 Procurement Procurement of all items where orders or contracts had a value of more than US$25,000 valued at US$11\.4 million through international competitive bidding (ICB) with domestically manufactured goods being allowed a 15 percent preference in bid comparison\. Contracts for civil works not large enough to attract foreign contractors valued at US$5\.4 million to be awarded under locally advertised competitive bidding though foreign firms would not be precluded from bidding\. Domestic contractors as defined by the borrower and accepted by the Bank would receive a 7-1/2 percent preference in bid evalua- tion\. Construction of roads, water supplies and soil conservation works valued at US$6\.7 million would be carried out on force account though petty contractors would be employed to the maximum extent feasible\. An estimated US*11\.6 million would be for labor, staff salaries and allowances, vehicle maintenance and operation, general services and project evaluation and as such generally be unsuitable for competitive bidding\. Items not qualifying for ICB or local advertisement to be purchased through local commercial channels\. Remainder of project costs of about US$9\.3\.million would be con- tingencies\. Economic Rate of Return The economic rate of return from investment in the project is estimated at 16 percent\. Appraisal Report Report No\. 354a-UNI dated September 6, 1974\. 1/ Project costs include a 5 percent physical contingency and a variable price contingency based on the Bank's Central Projects staff guidelines for treat- ment of project costs over the proposed five-year disbursement period\. Total price contingency equivalent to 32 percent of baseline costs\. Fertilizer costs, which have increased out of proportion to other costs were amended at negotiations to reflect current prices, and because the average current 1980 prices have been projected to be about the same as the current 1974 prices, price contingencies for fertilizer have not been included\.   IBRO 1O49OR To Mrib 6'd M ;RI\.1' 1974 NORTH f NIGERIA NORTH WESTERN STATE i'ftl Y -\. ,-nX GUSAU AGRICULTURAL J ti; )+ ' N in Kuro' DEVELOPMENT PROJECT I 41JRA NAMODA N K ' * 'oect I R _ X_ \ \. ! I j 2 * Projct Headquarters ,/ U ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~Project Boundary I'1 / P P > | x \ t I i t t * 6,% ____- Proposed Agriculturo Roads - - Cv - - --- -- Development Uni Centers \.X / rD / /r #/k - \ \.1 '_<// i-, R on000 Deveiopmeni Ulr Soundares !/ J / t1 K \ i " \ A SfeedMultipicpulron Frm and Treeing Cente, ,-t, ' / 7S ;5z I\ ( >- 1 Existing Bitumen RnadslStareMonmenedl i /\.1, j'&N I \ g, - Existing AgricuruaF Tracks(Local Authrrity Maintained) s ( , v t )Maguru / \. Rivers ; / \ 7 , N + \ t\. $> / >\ reKUXAR JUNGARI I ' f4 -_ | t 1 1 ^ ) s \; CRAZING RI ERVE OjGrnrogiwoi 1 t - \ l t X s ' \ ' o 5 0 _______ oz \shchJchel t \ 'tf-; \ X,I 'I,', , cralkoi >L \ \ \ \' MILES , \ \ ji ,' (l , KILOMETERS > \<n odo 8/ ,t\ / \ * / _ V\t \> f ' / /1 \ 8 Xf J Woni '\ ' s\\r' I \\ | f ~~~~/ Wnee\V R ' :08V\ \ J l \-r~~~~~~^/ II ) u~~~~~~~~~~~~~ A'~~~~~~~~~~~~~~~~m *124 \ '' A (\ \'l \ > gt X2$, 2b12'~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~122 d~~~~~~ ~ ~~~~~~ 'g <\. 8,OORKSH ) 00z it '0\. \\\S / \//X/ \ \__/ SD i |~~~~~~~~~Rkb YakUO d l Koamn> Os~~~~ - Ew s~ c° gbt XtT§iKzi0 \;,~~~~~y ~DcnclQ gko ,S * ~ ~ ~ ~ ~ ~ t° NIGERIA -J \,f \ 4:1\ K;~~~~~~~~~~~~~~~~~~~~Ku 5\.-c,~~~~~~~~~~~~~~~~~~~~~~~~~~~~~T T\. rr FA,,T Funruo and Kad- err K,odna

APPROVAL

P006245

Document of The World Bank FOR OFFICIAL USE ONLY Report No\. 4495 PROJECT COMPLETION REPORT BRAZIL SANTOS PORT PROJECT (LOAN 756-BR) May 16, 1983 Latin America and the Caribbean Regional Office This document has a restricted distribution and may be used by recipients only in the performance of their official duties\. Its contents may not otherwise be disclosed without World Bank authorization\.   FOR OFFICIAL USE ONLY PROJECT COMPLETION REPORT BRAZIL - LOAN 756-BR SANTOS PORT PROJECT TABLE OF CONTENTS Page No\. Preface \. Basic Data Sheet \. 0\. l Highlights \. \. v I\. INTRODUCTION \.1\. \. \. II\. PROJECT PREPARATION AND APPRAISAL \. \. 1 III\. PROJECT IMPLEMENTATION AND COSTS \. \. \. 5 IV\. TRAFFIC AND OPERATIONS \. 16 V\. FINANCIAL PERFORMANCE \. \. \. \. \. \. \. \. \. 19 VI\. INSTITUTIONAL PERFORMANCE AND DEVELOPMENT \. 25 VII\. ECONOMIC REEVALUATION \. 27 VIII\. THE ROLE OF THE BANK \. \. 29 IX\. CONCLUSIONS \. \. \. 30 TABLES 1\. Five Year Development Plan - Items not included in Bank Project 32 2\. Export Corridors Program - Investments at Santos \. 33 3\. Actual and Expected Project Implementation \. \. 34 4\. Actual and Appraisal Estimates of Project Costs \. 35 5\. Santos Port Traffic Statistics \. \. 36 6\. Consolidated Income Statement (1974-1980) in December 1970 Cruzeiros \. \. \. 37 7\. Consolidated Income Statements (1974-1980) in Current Cruzeiros 38 8\. Consolidated Balance Sheets (1974-1980) in December 1970 Cruzeiros \. 39 9\. Consolidated Statements of Resources Invested in the Port of Santos and their Financing in Current Cruzeiros \. \. 40 This document has a restricted distribution and may be used by recipients only in the performance of their official duties\. Its contents may not otherwise be disclosed without World Bank authorization\.  Table of Contents (cont'd\.) TABLES Page No\. 10\. Economic Reevaluation: Left Bank Location \. 41 11\. Economic Reevaluation: Fertilizer Facilities \. \. 42 12\. Economic Reevaluation: Container Berths \. \. 43 13\. Economic Reevaluation: General Cargo Berths \. \. 44 ANNEXES 1\. Government Comments \. 45 2\. PORTOBRAS Comments \. 46 MAP 3271R (PCR) Santos Port Project  PREFACE The following is a Project Completion Report (PCR) for the Santos Port Project for which Loan 756-BR for US$45 million equivalent was approved on May 25, 1971\. The project was financed, in addition to the Bank loan by PORTOBRAS a by the Federal and Sao Paulo State Railways and by Federal Government contributions\. Loan 756-BR was fully disbursed on March 31, 1981\. This Report was prepared by the Latin America and Caribbean Regional Office\. In accordance with the revised procedures for project performance audit reporting, this PCR has been read in the Operations Evaluation Department (OED) but the project was not audited by OED staff\. The report was reviewed by Brazilian Authorities whose comments are attached as an Annex to the Report\.   BASIC DATA SHEET KEY PROJECT DATA Appraisal Actual or Expectation Current Estimate Total Project Cost in Dec\. 1970 (US$ million) 78\.5 146\.5 Oyerrun (%) 173\.0 1/ Loan Amount (US$ million) 45\.0 45\.0 Disbursed 44\.8 Canceled 0\.2 Repaid to June 1981 6\.1 Outstanding to June 1981 38\.9 Date Physical Component Completed 12/75 6/81 Proportion Completed by Above Date 100% 100% Proportion of Time Overrun 112% Economic Rate of Return (Program as a whole) 23% 27% Financial Performance Poor Institutional Performance Fair 1975-1980 Average Return on Fixed Assets 16% 3\.5% OTHER PROJECT DATA Original Actual or Plan Estimated Actual First Mention in Files or Timetable 08/31/67 Government's Application 08/31/67 Negotiations 04/22/71 Board Approval 05/25/71 Loan Agreement Date 06/21/71 Effectiveness Date 10/29/71 Closing Date 09/30/76 09/30/80 2/ Borrower The Federative Republic of Brazil Executing Agency PORTOBRAS 3/ Fiscal Year of Borrower Calendar Year Follow-on Project Name none 1/ See paragraph 3\.30 2/ The Bank continued to disburse until March 31, 1981 3/ The Departamento Nacional de Portos e Vias Navegaveis (DNPVN) was executing agency until the formation of PORTOBRAS in January 1976\.   - iii - MISSION DATA Sent Month No\. of No\. of Man- Date of Item by Year Weeks Persons Weeks Report Identification IBRD 11/68 2 2 4 12/12/68 Preparation IBRD 3/69 1 1 1 4/10/69 Preparation IBRD 5/69 1 2 2 6/30/69 Preparation IBRD 12/69 1 2 2 12/31/69 Appraisal IBRD 9/70 3 2 6 9/16/70 (Grain Silo Subproject) Appraisal IBRD 9/70 4 4 16 10/02/70 Post-Appraisal IBRD 11/70 1 1 1 12/03/70 Followup Appraisal IBRD 12/70 1 4 4 12/29/70 Appraisal IBRD 2/71 2 1 2 2/26/71 (Railway Component) Followup Appraisal IBRD 3/71 3 1 3 4/!8/71 (Hydraulic Study of Santos Estuary) SUB-TOTAL 19 41 Supervision I IBRD 6/71 1 1 1 7/06/71 Supervision II IBRD 1/72 3 2 6 2/22/72 Supervision III IBRD 1/72 1 3 3 2/29/72 (Railway Component) Supervision IV IBRD 6/72 1 4 4 6/30/72 Supervision V IBRD 1/73 2 3 6 2/26/73 Supervision VI IBRD 5/73 1 4 4 6/05/73 SuPervision VII IBRD 10/73 2 4 8 10/26/73 Supervision VIII IBRD 2/74 1 3 3 3/14/74 Supervision IX IBRD 6/74 1 3 3 7/24/74 Supervision X IBRD 1/75 1 3 3 2/28/75 Supervision XI IBRD 7/75 1 2 2 8/19/75 Supervision XII IBRD 1/76 2 4 8 3/16/76 Supervision XIII IBRD 9/76 2 3 6 10/28/76 Supervision XIV IBRD 3/77 2 3 6 5/13/77 Supervision XV IBRD 7/77 2 2 4 \.9/16/77 SuPervision XVI IBRD 1/78 2 2 4 3/15/78 Supervision XVII IBRD 6/78 2 1 2 11/17/78 Supervision XVIII IBRD 12/78 1 2 2 1/24/79 Supervision XIX IBRD 2/79 1 1 1 3/09/79 Supervision XX IBRD 6/79 1 2 2 10/02/79 Supervision XXI 1BRD 12/79 1 ! 1 12/26/79 Supervision XXII IBRD 4/80 1 2 2 5/01/80   - iv - MISSION DATA (Continued) Sent Month No\. of No\. of Man- Date of Item by Year Weeks Persons Weeks Report Supervision XXIII IBRD 11/80 1 3 3 12/05/80 Completion IBRD 5/81 1 3 3 8/ /81 Sub-Total 34 87 Total 53 128 COUNTRY EXCHANGE RATE Name of Currency Cruzeiro (Cr$) Year Exchange Rate Appraisal Year - December 1970 US$1 = Cr$ 4\.85 Appraisal Year Average US$1 = Cr$ 4\.59 Intervening Year Average US$1 = Cr$ 18\.00 Completion Year Average US$1 = Cr$ 91\.00 TIME FACTOR 1/ 1 US$ = CR$ mid-1969 0\.78 4\.06 mid-1970 0\.93 4\.59 Dec\.1970 1\.00 4\.85 mid-1971 1\.13 5\.29 mid-1972 1\.31 5\.93 mid-1973 1\.51 6\.13 mid-1974 1\.98 6\.79 mid-1975 2\.48 8\.13 mid-1976 3\.54 10\.67 mid-1977 5\.09 14\.14 mid-1978 7\.04 18\.08 mid-1979 10\.38 26\.82 mid-1980 21\.48 47\.21 mid-1981 44\.12 91\.00 1/ Fundacao Getulio Vargas "Conjuntura Economica" Column #2 Factors used to convert cruzeiros to different points in time\.   HIGHLIGHTS The project was the first Bank loan for the port subsector in Brazil\. It was intended to support the port of Santos five year, 1971- 1975, Development Plan and consisted of the following main items: a) construction of and equipment for a two berth container terminal; b) construction of rail access to the container terminal on the left bank; c) FEPASA's right bank rail link to the port; d) dredging equipment; e) miscellaneous port related studies\. The construction of the grain terminal which was included in the project was later deleted (para 3\.01)\. The project experienced severe delays\. The appraisal report foresaw completion of the project towards the end of 1975\. Actually, less than 50% of the project works had been completed by September 1978\. This delay was caused by a number of factors, among which the more important ones are changes in decisions during project implementation, financial difficulties, technical problems\. (paras 3\.04 to 3\.16)\. The project also experienced important cost overruns\. The items actually carried out showed a 170% overrun in relation to the estimates at the time of appraisal (para 3\.30)\. The main explanation for the cost over- run is that cost estimates at the time of appraisal were based on preliminary engineering of the project\. The detail engineering design was carried out only after approval of the loan, resulting in substantial cost increases\. Also, the long implementation period contributed to these cost overruns\. (Para 3\.31)\. Overall traffic figures have exceeded those forecast at the time of appraisal by about 10%\. However, traffic composition was markedly different than forecast, with general cargo traffic substantially below the forecast figures, but with dry bulk cargo, mainly fertilizer, being substantially higher\. The annual rate of increase was about 10% as compared to the appraisal forecast of only 5%\. (Paras 4\.01 to 4\.05)\. From 1976 onwards the port's finances deteriorated drastically\. The main reason for this was inadequate tariff increases, considerable cost increases, change of the allocation rules of port taxes\. (Paras 5\.01, 5\.08)\. Thus, the operation surpluses foreseen did not materialize and the   - vi - part of the investment program that was to be financed by these surpluses had to come from PORTOBRAS and direct Federal Government contributions\. (Paras 3\.13, 3\.14)\. On the institutional side, the creation of PORTOBRAS and the transfer of the responsibility for the port of Santos from a private con- cessionary company to a subsidiary of PORTOBRAS have been achieved\. The adoption of cost-based tariffs which was also foreseen in the project, has not been achieved\. (Paras 6\.01, 6\.09)\. Despite the cost overruns, the project is still economically sound, showing an average economic rate of return for the actually carried- out items of close to 30%\. One reason for this is the fact that the pro- gram as actually carried out did not include some of the items with rela- tively low rates of return\. Also, as mentioned, some traffic items were substantially above the appraisal values\. (Paras 7\.01, 7\.07)\.   I\. INTRODUCTION 1\.01 In 1965, the Brazilian Government undertook a general transport sur- vey with the Bank's assistance\. The Government retained consultants to carry out studies of the ports of Santos, Rio de Janeiro and Recife, and of coastal shipping\. In 1968, the Government prepared a strategic Development Plan for 1969-1975 which incorporated recommendations of the 1965 transport survey, including an investment plan and recommendations for institutional reform in the port sector\. The Government subsequently requested Bank financing for expansion and improvement of the three ports studied by the consultants, and, in October 1968, an identification mission visited Brazil\. Preparation of the Santos port project was well under way; however, very little preparation work had been done for the Rio de Janeiro and Recife projects\. The mission recommended that feasibility studies be undertaken for these ports, for possi- ble consideration for a followup project which never materialized, and, in the meanwhile, the Bank would proceed with evaluating the Santos port project\. 1\.02 The Santos port project was finally appraised in August/September 1970, and the Bank approved, on May 25, 1971, a loan for US$45\.0 million equivalent\. This was the first port project to be financed by the Bank in Brazil, and no other port project has been financed since\. 1/ The basis of the project was a Five-Year Development Program (1969-1974) for the port of Santos - the most important general cargo port in Brazil - which included activities and investments to (a) modernize and expand the capacity of the existing congested port on the right bank of the Santos estuary; and (b) develop the largely unused left bank of the estuary\. Dredging equipment and complementary studies were also included\. 1\.03 This PCR is based on the following sources of information: (a) the Appraisal Report (Report No PTR-79a), (b) Supervision Reports, (c) LAC Infor- mation Center, (d) Draft PCR prepared by PORTOBRAS, and (e) information collected during a mission to Brazil in May 1981\. II\. PROJECT PREPARATION AND APPRAISAL A\. Project Preparation 2\.01 An identification mission to Brazil (October/November 1968) found that the preparation of a US$50 million expansion project for the port of Santos was well advanced and estimated that it could be appraised by March/ April 1969 provided that the Government would perform the following additional preparation work satisfactorily: (a) complete preliminary engineering; (b) appoint consultants for detailed engineering and supervision; (c) update traffic and financial data; (d) prepare a financing plan; and (e) reach agree- ment with the Concessionaire of the Port of Santos, the Companhia Docas de 1/ The Carajas iron ore project, which was appraised in October/November 1981, includes the construction of a new port at Ponta da Madeira near the city of Sao Luis in Maranhao province\. The Bank's Board of Directors approved a loan of US$306\. million for the Carajas project, on August 10, 1982\.  -2- Santos (CDS), on the valuation of capital employed and the eventual reversion of properties to the Government when the concession expired\. 2\.02 Project preparation proceeded much slower than originally anticipated\.l/ In July 1969, Boucinhas and Campos (Brazil)/Coopers and Lybrand (USA), account- ing consultants, were retained by the Departamento Nacional de Portos e Vias Navegaveis (DNPVN) to prepare financial forecasts for the Santos port and accounting systems for the Santos, Rio de Janeiro and Recife ports\. An earlier preliminary engineering and feasibility study for the project had been completed in February 1969 by CDS, with the help of Engevix and Planave, Brazilian consultants\. A consortium of consultants OESA (Brazil)/King & Gavaris (USA) (OESA/KG), was selected by DNPVN in November 1969 to carry out an updated feasibility study, including an economic analysis for the project, and to prepare final engineering\. A draft preliminary report was submitted by OESA/KG in April 1970 which proposed extensive development on the right bank of the Santos estuary (the existing port area) involving an investment of about US$90 million in 1970-1975\. This feasibility study was considered by the Bank to be deficient in the following respects: (a) inadequate analysis of port capacity and of improvements in facilities and operations needed to meet future traffic; (b) little consideration given to use of containerization and other handling techniques; and (c) all facilities to be located on the right bank of the Santos estuary, which the Bank believed would exacerbate already intolerable port/city congestion\. The previous Brazilian consultants had taken into account the possibility of using the left bank and had indicated this in their studies\. However, it appears that this plan was rejected since OESA/KG indicated that soils were very difficult and that at least ten years of capital works at prohibitive costs would be necessary\. 2/ B\. Project Appraisal 2\.03 Despite these problems, an appraisal mission (originally scheduled for March/April 1969, then rescheduled for March 1970) visited Brazil in August/September 1970\. The mission was assisted by staff from the Agricul- tural Projects Department which appraised the proposed grain silo subproject\. The appraisal also included the identification of the need for, and scope of, a national maritime sector master plan\. The main issue to emerge from the appraisal was that of the right versus the left bank development\. DNPVN had never fully studied the Engevix/Planave study\. 3/ The mission proposed that 1/ PORTOBRAS has indicated (see Annex) that the delays were caused by the Bank's request for additional studies\. 2/ PORTOBRAS has indicated (see Annex) that this was the Bank's conclusion which was offered to DNPVN as a hypothesis on which to decide between the two alternative options that were available, namely the Engevix/Planave left bank option or the OESA/KG option for the development of the right bank\. The two options were studied thoroughly and a final decision was held back until the Bank's appraisal mission had an opportunity to review the matter\. 3/ PORTOBRAS has indicated that this statement is incorrect as the report was thoroughly assessed before arrival of the Bank's appraisal mission (see note 2 above)\.  -3- certain facilities, including grain loading and storage facilities, and the container berths be located on the left bank\. Since such development would involve attendant investments in rail and road links and preparation of a new physical plan, as well as necessary soil investigations to ensure suita- bility of the sites, the Government deferred its decision on the matter pending further study, which included full soil investigations\. In the following months, the National Transport Planning Agency (GEIPOT) analyzed the 1969 consultants' study, and DNPVN arranged for soil investigations which were successfully carried out by Planave and OESA\. In addition, a Bank railway mission visited the site to evaluate preliminary cost estimates for the rail links, and a Bank-financed hydraulics expert from the U\.K\. visited the Santos port and recommended that hydraulic studies be included as part of the project's technical assistance component\. When the Government eventually agreed to develop the left bank, a post-appraisal mission in December 1970 confirmed the Government's decision to locate the proposed new grain and container facilities on the left bank\. In February 1971, a second railway mission appraised the railway component of the project\. 2\.04 In November 1969, when the Brazilian Government had selected the consortium of King and Gavaris/OESA, consultants for the Santos port project, the wider implications resulting from shifting development to the left bank of the Santos estuary had not been foreseen by DNPVN\. 1/ Following the appraisal mission, DNPVN had discussed with the consultants the added work requirements and related costs of services needed for the preparation of a revised project arising from shifting major project elements to the left bank\. The negative indications that the consultants had then given for the development of the left bank and the very extensive and costly studies that they recommended be done by themselves before any development could proceed, coupled with the high cost of their then existing contract, led to DNPVN's decision to terminate that contract\. By mutual agreement, and with satisfactory settlement, the contract was terminated on December 16, 1970\. C\. Project Content 2\.05 The project, as appraised, supported the port of Santos' Five-Year Development Program 1971-1975 and consisted of the items listed in paragraph 3\.01\. Because the soil conditions on the left bank were considered difficult, and further soil investigations were warranted, a 25% physical contingency allowance was added to the cost estimates for the corn silo and railway component of the project, while a 10% physical contingency was allowed for the other items\. In addition, a 12% price contingency was provided on the basis of an expected 5% average annual increase in world prices for equipment and materials involved\. In accordance with Bank policy for projects in countries with rapid inflation and indexing, the price contingency for local costs was based on anticipated dollar price increases\. The cost estimates were based also on the assumption that the construction would commence in early 1972 and be completed by the end of 1975\. 1/ PORTOBRAS has indicated (see Annex) that the implications were clearly foreseen and that this was the reason for studying also the right bank development option\.  - 4- D\. Loan Negotiations and Particulars 2\.06 Loan negotiations took place in Washington D\.C\. from April 22 through 29, 1971\. The loan was approved by the Board of Executive-Directors on May 25, 1971 and became effective on October 29, 1971\. 2\.07 The loan, amounting to US$45\.0 million, covered the foreign exchange cost of the project (total cost estimated at US$78\.5 million in December 1970 US$)\. The project formed part of the larger Five-Year (1971-1975) Investment Program for the port of Santos, involving an estimated investment of US$143 million for the port and US$16 million for the rail access\. The loan was made to the Government, with DNPVN as executing agency for the port works\. RFFSA and Sorocabana (now FEPASA) were to carry out related railway works, and GEIPOT the maritime Sector Master Plan\.  III\. PROJECT IMPLEMENTATION AND COSTS 3\.01 The Bank-financed project consisted of eight largely independent subprojects listed as follows: (i) Development of the Left Bank (a) construction of, and equipment for, a two-berth container terminal; (b) construction of, and equipment for, a grain terminal, including training for the manager and assistant managers (later deleted from the project); (c) construction of a three-rail track (to serve two different gauges over 24 km) from COSIPA, a steel mill at the head of the Santos Estuary with the nearest federal railway connection, to the two terminals (Rail Access); and, (d) construction of a meter gauge track (21 km) and installation of a third rail on an existing federal track (6 km) to link the state railways to COSIPA and thus to the two terminals (FEPASA Rail Link)\. (ii) Complementary Activities (a) provision of dredging equipment; (b) study on the reorganization of the main executing agency, to be carried out by a management consultant; (c) hydraulic study of the Santos bay and estuary, including the provision of equipment and instruments; and\. (d) overall port planning study\. The project also provided engineering consultant services for engineering design and supervision of construction for the terminals and the rail access\. 3\.02 Although Bank financing was restricted to the project, both the Bank and the Government committed themselves to the full Program\. Therefore, the Loan Agreement included a covenant requiring the Government to "consult with the Bank before undertaking in any one year any project or development at the port of Santos (other than the borrower's 1971-1975 Five-Year Development Program for the port of Santos) involving a capital investment in excess of US$2,000,000 equivalent\." 3\.03 Responsibility for project implementation was entrusted to the National Ports and Waterways Department (DNPVN), reorganized in January 1976 as the Bra- zilian Ports Authority (PORTOBRAS)\. The Federal Railway Authority (RFFSA)  - 6 - undertook the construction of the rail access; a railway of the State of Sao Paulo (SOROCABANA, which was later merged with other State railways into the State of Sao Paulo Railway-FEPASA), the construction of the linking railway; and the Ministry of Transport's Planning Authority (GEIPOT), the overall port study\. The Hydraulic Research Institute (INPH), a subsidiary of DNPVN/PORTOBRAS, carried out the hydraulic studies\. The signing of contracts between DNPVN and the management and engineering consultants and the signing of subsidiary loan agreements by the Government with RFFSA and SOROCABANA for relending from the loan proceeds were made conditions of effectiveness\. A\. Project Implementation (i) General 3\.04 Neither the appraisal report nor the loan agreement contained any schedule for project implementation, except for mentioning the work of the engineering consultants (see Annex 7 of the Appraisal Report)\. However, the Appraisal Report does state that construction was expected to start early in 1972, and that the project was expected to be completed toward the end of 1975\. Actually, project implementation started very slowly\. When compared to appraisal expectations, less than 50% of the project works had been completed by September 1978\. (ii) The Left Bank Subprojects: (a) The Container Terminal and (b) the Rail Access - Factors Affecting Both Subprojects 3\.05 The Appraisal Report indicated that engineering consultants would be appointed in May 1971 and that final engineering would be ready in December 1971\. In actual fact, the contract was not signed until November 1971, and final designs were delivered in December 1972 (overall, a 12-month delay)\. The engineering consultants re-estimated the cost for the subprojects (still inclusive of the Grain Terminal) at US$93 million, almost double the appraisal estimate of US$50 million because the final designs presented were much larger in scope and magnitude than those originally envisaged when the project was appraised\. 3\.06 Meanwhile, the Brazilian Government was preparing and launching the Export Corridors Program, which envisaged Japanese-financed investments in several ports, including Santos, to handle the anticipated increase in the volume of exports\. Under the Program, the Government not only requested that a larger grain terminal be built under the project, which the Bank had earlier agreed to, but also planned investments for temporary grain storage and handling facilities located on the right bank\. Although the Bank followed the develop- ments under the Export Corridors Program closely, and had asked the Government to be kept informed, details were furnished to the Bank only in November 1972, after contracts with Japanese firms had already been signed and construction on the right bank had started\. 3\.07 Although bidding documents for the rail access and both container and grain terminals were substantially ready in early 1973, the Bank concluded, and DNPVN agreed, that the grain facilities duplicated on both banks, plus the  large increase in project cost estimates, cast doubts on the economic justifi- cation of the grain and container terminals and the rail access on the left bank\. At the Bank's request, the Government undertook to reanalyze the project's scope, timing and economic feasibility, and, in January 1973, the calling of bids for the three subprojects was suspended pending the outcome of this review\. 1 3\.08 The review was conducted by consultants (Planave-Brazil) already retained as part of an ongoing GEIPOT study of the Export Corridors investments, under additional terms of reference agreed with the Bank\. Work started in April 1973 and was to be completed in June\. The consultants' draft report, produced in September 1973, concluded that: (a) the construction of the grain terminal should be postponed until 1980; (b) modified and scaled-down rail connections were justified; and (c) the container terminal should be built in three phases (later reduced to two)\. After discussions with DNPVN, GEIPOT, and the consultants in October 1973, the Bank agreed to the deletion of the grain terminal from the project and to the immediate start on the first phase of the container terminal\. It also agreed to the modified rail access, subject to confirmation of some of the assumptions on which traffic forecasts were based\. In February 1974, the Bank withdrew its objections to proceeding with the rail access, and amendments to the loan documents were made accordingly in June 1974\. 3\.09 Immediately following Bank action in June 1974, RFFSA reactivated the rail access subproject, now on a modified scheme, and alignment and bidding procedures started 2\.5 years after effectiveness\. 1/ 3\.10 Three problems seriously delayed the railway earthworks: (a) Because the hydraulic fill from dredging for the earthworks originally scheduled was unexpectedly found to be of fine silts and alluvials (and useless as a fill material), coupled with the fact that the type of dredger used could not perform adequately to required specifications, the more expensive alter- native of stone dykes for the earthwork sections, backfilled with suitable sand-fill hauled in and dumped by trucks, had to be resorted to\. Delay in resolving the problem amounted to nine months\. (b) Because of financial cash flow problems in late 1976, RFFSA ordered a work stoppage throughout 1977 (one-year delay); PORTOBRAS had to rescue RFFSA in early 1978 by providing much needed funds\. (c) The subsequent clearances of the railway alignment due to existing obstructions (houses, small industries in a coastal town near the alignment) took up most of 1978 until August\. 1i PORTOBRAS has indicated (see Annex) that the delay was entirely caused by the Bank's request to reanalyze and redesign the rail access\. PORTOBRAS also indi- cated that work on the rail access did not follow the Bank's action but resumed only once the Bank withdrew its objection to the construction of the access as planned\.  - 8 - The rail access was substantially completed, except for the laying of the third rail to complete the COSIPA-FEPASA link, by October 1979\. Subsequently the line was completed in 1980\. 3\.11 In contrast with the rail access, activities on the container terminal did not start immediately after Bank agreement to the phased construction con- veyed to DNPVN in October 1973\. The consultants, SONDOTECNICA/INTECSA, had demobilized, and the redesign and detailed engineering for the modified scheme represented additional work which resulted in protracted negotiations between DNPVN and the consultants\. This delayed the completion of detailed engineering until April 1975\. Although the Bank approved the bidding documents in July 1975, bidding did not take place until several months later\. Three out of the ten bidders submitting bids in December 1975 were rejected at the first envelope stage; they filed objections that resulted in a three-month delay\. Eventually, construction of the container terminal was awarded in August 1976, 2\.8 years after the Bank had approved the phased construction plan\. 1/ The contract time for construction of the container terminal was 33 months, ending June 1979\. 3\.12 Mobilization of the contractor was slow\. Initially, he had to spend two to three months to obtain authorization from the Forestry Development Institute (IBDF) - the agency in charge of ecological protection in Brazil - to get into the project area\. The contractor then suggested several changes in project design, including adding gabions after detailed soil tests had con- vinced him that the construction method proposed by the consultants was not viable\. He assured a Bank supervision mission that there would be no increase in the cost of construction\. The proposals were accepted by the mission on that basis\. Several months later, however, DNPVN (now PORTOBRAS) informed the Bank that the changes would mean a cost increase of 25%\. 21 Bank staff suggested an alternative design to avoid this cost increase, but PORTOBRAS responded nine months later, reiterating its preference for the gabion solution in spite of the cost increase\. 31 At a meetinR held in Washington\. the Bank acceded to PORTOBRAS on this issue in order to avoid further delays which would probably 1/ PORTOBRAS has indicated (see Annex) that the delay was mostly caused by the Bank's request to review the project and stage it, a process that had the sole purpose of assisting the Bank define what it would finance out of the total works\. To PORTOBRAS the project continued to be one entity; in fact PORTOBRAS did complete the third stage of the project without Bank assistance\. 2/ PORTOBRAS has indicated (see Annex) that the 25% cost increase was not due to the use of gabions; that in fact the gabions cost no more than the works they substituted for and the cost difference, as explained at the time was caused by other works which had to be modified because of site conditions\. 3/ PORTOBRAS has indicated (see Annex) that while it is true that there were unexpected delays most of the delay was caused by the need to convince the Bank that every change required in the project was needed as a result of changed circumstances in the field\. For instance, it savs, this comparatively unimportant change was not easily approved by the Bank\. PORTOBRAS indicates that on similar works of significant complexity not assisted by the Bank delays are substantially smaller\.  have cost more than the expected savings\. The new construction technique required waiting a minimum of five months to permit the settling of the gabions before driving the piles\. In 1980, PORTOBRAS suffered from a serious shortage of funds, which slowed the progress on the project\. The work was still continuing when the loan was closed\. Substantial completion was achieved by May 31, 1981, but Rro^urement of container h4ndling equipment (except for two container cranes) was still pending at the time\. I/ (iii) Rail Works Outside the Left Bank Port Area (FEPASA Rail Link) 3\.13 The FEPASA (formerly SOROCABANA) rail subproject consisted of (a) the construction of a meter-gauge railway line, 21 km long, between Paratinga and Pereque; and (b) the installation of a third rail to the existing meter- gauge line, 6 km long, between Pereque and Piacagura (COSIPA)\. The original purpose of this subproject, begun in 1963, was to connect the State railway network to COSIPA, a steel mill about 10 km from the city of Santos\. Lack of funds had caused work to cease in 1965\. When the left bank project was con- ceived, this rail link acquired enhanced importance, and its completion was included in the project\. FEPASA was entrusted with the task of executing the works\. 3\.14 Several problems slowed implementation, but the most significant delay, affecting the completion of the entire link, was in the start of the construc- tion of the Via Anchieta Viaduct, which would carry the main Sao Paulo-Santos highway over the rail line\. A contract, signed in April 1973, for works to start in July had to be canceled because the State Highway Department objected to the viaduct design\. New bids were opened in September 1974, and works started in April 1975, 21 months after the date previously envisaged\. Work proceeded without problems, and the viaduct was completed in June 1976\. The cost of the viaduct was not financed by the Bank, although it formed part of the project executed by FEPASA\. The rest of the works were completed by mid-1977, and the line was opened to railway traffic in October 1977\. 3\.15 Other major parts of the project, although not involved in the re-evaluation of the left bank works, were also subject to delays\. Specifica- tions and bid documents for the trailing suction hopper dredger included in the project were approved by the Bank in March 1972, but another year was taken to complete the documents and call for bids\. It was found that none of the eight bids received in February 1974 complied with the bidding conditions\. The second bid opening resulted in award of the contract in February 1975; the dredger was delivered ahead of schedule\. 3\.16 The project also included hydraulic studies of the Santos bay and estuary to investigate siltation, sediment, salinity, littoral drift and other phenomena that could affect the expansion of the port of Santos\. A physical model of the Bay was built by the Instituto Nacional de Pesquisas Hidroviarias (INPH, a department of DNPVN), some field studies were carried out, and some hydraulic instruments and measuring equipment were purchased with loan funds\. 1/ PORTOBRAS has indicated (see Annex) that much of the delay was caused by the Bank's slow approval of a reallocation of loan proceeds from civil works to the equipment category of the loan\.  - 10 - (iv) The Overall Port Planning Study 3\.17 The loan included a sum of US$500,000 for consulting assistance to coordinate studies for the development of an overall port plan for Brazil\. Responsibility for the port plan studies was delegated to the National Trans- port Planning Agency (GEIPOT)\. GEIPOT had been established by the Government in the mid-1960s and had been quite effective for several years, but, after 1968, GEIPOT lost staff to the private sector and also lost status because a change in Government had brought a different approach to planning\. Nothing happened during the first nine months after effectiveness, and, in July 1972, the Minister of Transport transferred responsibility for the Study from GEIPOT to DNPVN, which would administer the consultants under the general guidance of GEIPOT; a contract was awarded in May 1973\. The contract allowed 12 months for preparing the study, but the study was not completed until August 1975, a 15-month delay\. 3\.18 The 12-month period envisaged for the study was too short\. Although the consulting firm worked continuously, and without delays, it took twice as long as originally envisaged to complete the study\. Three factors contributed to this unrealistic scheduling: (a) the study aimed at putting together all information and studies available on each of the 16 main Brazilian ports, and it was difficult to forecast the amount of material and the time needed to retrieve, organize and analyze it; (b) the time required for DNPVN and GEIPOT to review, comment on, and approve each of the elements that made up the study was grossly underestimated; and (c) there was some pressure to shorten the time allowed for the study because all the parties involved were rather anxious to make up for the two years which had already elapsed\. (v) The Overall Investment Program of the Port of Santos Outside the Bank-Financed Project 3\.19 Excluding the Bank-financed project, the DNPVN investment program for capital expenditure for the port of Santos, executed during the same time, consisted of: (a) other projects in the Five-Year Development Program, 1971-1975, agreed by the Bank during appraisal (see DNPVN's funding schedule in Table 1); and (b) investments under the Export Corridors Program for Santos (see DNPVN's funding schedule in Table 2)\. 3\.20 The works under (a) preceding were meant to be improvements to the right bank facilities, viz\., extending and widening some quays, converting others into roadways for port traffic, constructing transit sheds, improving rail and road access and other facilities inside the port area, replacing old equipment and acquiring additional equipment, and improving and extending wheat handling\. Most of the program was executed during the Bank-financed project 1971-1981\. The Export Corridors Program was executed in two phases, the first being completed by the end of 1973, and the second largely completed at present\.  - 11 - 3\.21 Delays in implementing the Bank-financed project, in particular those affecting the civil works on the left bank estuary of the port, including the rail accesses, and the procurement of the dredger have been extensively covered in the Operation Evaluation Department's (OED) Report No\. 2946 dated April 11, 1980, entitled "Operational Policy Review - Delays in Project Implementation\." We fully agree with OED's comments\. (vi) Services of Consultants and Contractors (a) Consultants 3\.22 The consortium of Boucinhas and Campos (Brazil)/Coopers Lybrand (USA), Management Consultants (BCCL) was retained by DNPVN between September 1971 and April 1974\. Its assignment consisted of establishing financial and cost accounting, budgetary and financial planning, electronic data processing (EDP) and internal auditing systems at the port of Santos and for DNPVN\. The consortium also reviewed port tariffs at Santos, installed a tariff review section in DNPVN, established an operational planning unit at Santos and made recommendations to re-organize DNPVN\. According to DNPVN, the consultants' work was very satisfactory, and they were on schedule\. 3\.23 Engineering consultants SONDOTECNICA (Brazil) and INTECSA (Spain) were retained for the final engineering and design of the left bank civil works between September 1971 and August 1975\. INTECSA ceased activity there- after, and only SONDOTECNICA was retained for the supervision phase which ended May 1981 with the completion of the container terminal\. Both consultants were reported by DNPVN and PORTOBRAS to have performed their assignments satisfactorily\. 3\.24 The consortium of PLANAVE (Brazil)/Rendel Palmer and Tritton (UK) was retained by GEIPOT/DNPVN for the overall port studies\. Its performance was reported by GEIPOT/DNPVN to be satisfactory\. 3\.25 Professor D\.M\. MacDowell (UK) was retained by DNPVN (PORTOBRAS) as a consultant advisor for the hydraulic studies, training of Brazilian engineers abroad, and establishment of model studies and related equipment and instruments for the hydraulic studies\. His performance was reported by DNPVN to be very satisfactory\. 3\.26 FEPASA had retained the services of a local Brazilian consulting firm, SERETE, for the design engineering involved in its work\. FEPASA reported that the performance of this consultant was satisfactory\. (b) Contractors 3\.27 The list of contractors employed on the various subprojects is as given in Table 3\. All civil works subprojects were undertaken by Brazilian contractors, whose performance and quality of workmanship were reported to be very satisfactory by PORTOBRAS, RFFSA and FEPASA\.  - 12 - B\. Project Costs 3\.28 As of writing this report, PORTOBRAS' estimate of project costs in current Cruzeiroe and U\.S\. dollars, as of May 1981, is as summarized in the following tabulation\. As of that time, some outstanding claims were pending and payment for some container handling equipment not yet delivered, was still due\.  - 13 - Project Item PORTOBRAS Estimate 1/ Project Costs (in current millions) A\. Rail Access (RFFSA) Cr$ US$ (1) Bridge over the Bertioga Canal 432\.7 35\.7 (2) Railway Access (a) Infrastructure works 1,361\.6 70\.3 (b) Superstructure works 156\.3 4\.9\. (c) Rails and accessories 150\.1 2\.4 (d) Track switching equipment 17\.2 0\.2 (e) Signalling equipment 14\.6 0\.4 Sub-total - RFFSA 2,132\.5 113\.9 B\. PORTOBRAS Works (3) Container Terminal (a) Civil Works 2,662\.5 79\.9 (b) Equipment 690\.0 9\.8 Sub-total 3,352\.5 89\.7 (4) Hydraulic Studies (a) Studies 10\.8 0\.46 (b) Consultant Services 0\.9 0\.04 Sub-total 11\.7 0\.5 (5) Consulting Engineer Services (a) Design 11\.3 1\.7 (b) Supervision 145\.2 5\.7 Sub-total 156\.5 7\.4 (6) Management Consultants 22\.1 4\.3 (7) Overall Port Studies 11\.0 1\.7 (8) Dredger 184\.4 16\.6 Sub-total-PORTOBRAS 3,738\.2 120\.2 C\. FEPASA Rail Link 102\.8 19\.4 Project Grand Total 5,973\.5 253\.5 Project Costs (in December 1970 prices) Cr$ US$ Project Grand Total (in millions) 710\.3 146\.5 1/ Includes Actuals up to May 1981, plus pending payments still outstanding (estimated)\.  - 14 - 3\.29 The "Actual and Appraisal Estimates of Project Costs" given in Table 4, differs from the PORTOBRAS' estimate (para 3\.28)\. The "Actual Costs" column in Table 4 provides costs actually incurred on the project up to May 1981; whereas the PORTOBRAS' estimate includes costs actually incurred up to May 1981, as well as estimated pending payments still outstanding after that date\. 3\.30 In order to compare the cost of the project, as now completed, against the Appraisal Cost Estimate, the summarized table below has been pre- pared\. The figures are in Constant December 1970 Cruzeiro values, excluding items not carried out: --------- In 1970 NCR$ Millions ------------------ Particulars Costs to Appraisal % Cost on Completion Estimates of Proportion of (Actual and Estimated) Costs Appraisal Estimates (1) (2) (1) (2) x 100 A\. Civil Works 1\. Container Quay 180\.13 48\.77 369 2\. Railway Works 414\.79 115\.51 359 Sub-total Civil Works 594\.92 164\.28 362 B\. Equipment for Container Berth 14\.65 12\.32 119 C\. Dredging Equipment 49\.00 36\.96 133 D\. Engineering Consultants 30\.35 21\.01 144 E\. Management Consultants 14\.06 22\.02 (64) F\. Hydraulic Studies 1\.25 1\.08 116 G\. Overall Port Studies 6\.07 2\.70 225 Grand Total 710\.3 260\.37 273 3\.31 This cost overrun occurred despite the fact that many of the items included in the project at appraisal were not carried out\. The main explana- tion for the cost overrun is that cost estimates at the time of the appraisal were based on preliminary engineering of the project\. The detailed engineering design was carried out after approval of the loan, and a substantial cost increase compared with appraisal estimates resulted\. Furthermore, the long implementation period and higher prices due to local inflation had a considera- ble impact on the cost overruns for many project items, specifically in the case of civil works\. C\. Disbursements 3\.32 At appraisal, the loan contribution was estimated to cover 57% of the total project costs\. Primarily due to the worldwide price increases in  - 15 - port-related construction, and, to a lesser extent, to cost underestimates at appraisal, total project costs increased almost twofold (in 1970 US dollars) over appraisal estimates, the loan contributed about 30% of total project costs; by the time of the closing of the loan, the rate of disbursement for the civil works had been reduced to 10%\. 1/ 3\.33 Disbursement against the revised list of goods is as follows: Revised List of Goods a/ Loan Category Amount of the Loan Allocated Actual Disbursement b/ (expressed in US$ equivalent) (US$ equivalent) I\. Cost of equipment 9,528,000 9,627,939\.12 (dredger) II\. Civil Works 28,174,500 c/ 28,169,529\.77 III\. Consultant Services and Training (a) Engineering Consultants 3,517,500 d/ 3,244,745\.95 (b) Management Consultants 3,247,000 e/ 3,246,223\.57 (c) Consultants for Part D\.3 of the Project 47,000 f/ 29,559\.69 (d) Consultants for Part D\.4 of the Project 486,000 g/ 485,770\.75 IV\. Unallocated -- Undisbursed 196,231\.15 balance cancelled Total 45,000,000 45,000,000\.00 a/ Reallocation of funds letter dated June 6, 1980\. b/ As of March 31, 1981; the loan was closed December 31, 1980\. c/ Percentage decreased in steps from 40% to 10% of total expenditures\. d/ Percentage: 60% of total expenditures\. e/ Percentage: 80% of total expenditures\. f/ Percentage decreased in steps from 90% to 50% of total expenditures\. 1/ PORTOBRAS has indicated (see Annex) that the Bank's contribution ended up being just 18% of total costs and that this figure will be even less as the proportion of the dredger financed by loan proceeds will be below 60%\. PORTOBRAS has also indicated that the disbursement procedures used by the Bank (which were not explained to them at the time) turned this operation into a means of being reimbursed for expenses incurred rather than a loan to finance the project\. This, according to PORTOBRAS, had not only the effect of generating additional costs but was the source of many delays on which the Bank should share responsibility\.  - 16 - IV\. TRAFFIC AND OPERATIONS A\. Traffic 4\.01 Traffic projections at appraisal showed potential for average growth in port traffic of about 5% per year, from about 12 million tons in 1970 to about 17\.3 million tons in 1980\. Table 5 details the appraisal forecasts and relates these figures to actual data\. A summary is given below: SANTOS PORT TRAFFIC ('000 metric tons) Appraisal Forecast Actual-/ 1970 1975 1980 1970 1975 1980 EXPORTS General Cargo 2,080 2,770 3,585 1,971 2,408 3,724 Corn in Bulk 600 900 1,400 576 464 - Other Dry Bulk 40 50 65 136 2/ 681 2/ 1,304 2/ Liquid Bulk 110 145 180 97 632 1,405 Subtotal-Exports 2,830 3,865 5,230 2,780 4,185 6,433 IMPORTS General Cargo 1,770 2,600 3,530 1,538 2,319 2,044 Wheat in Bulk 1,200 1,420 1,630 843 1,006 1,544 Fertilizers in Bulk 940 1,300 1,970 1,476 2,105 2,933 Other Dry Bulk 470 360 480 158 220 559 Liquid Bulk 2,950 1,715 2,855 1,211 866 1,530 Subtotal-Imports 7,330 7,395 10,465 5,226 6,516 8,610 COASTAL TRADE General Cargo 150 210 250 112 95 136 Salt in Bulk 400 610 820 317 450 548 Other Dry Bulk 120 120 120 192 94 384 Liquid Bulk 1,210 1,700 450 1,845 4,047 2,674 Subtotal Coastal Trade 1,880 2,640 1,640 2,466 4,686 3,742 Total Traffic 12,040 13,900 17,335 10,472 15,387 18,785 General Cargo 4,000 5,580 7,365 3,621 4,822 5,904 Dry Bulk 3,770 4,760 6,485 3,698 5,020 7,272 Liquid Bulk 4,270 3,560 3,485 3,153 5,545 5,609 Total 12,040 13,900 17,335 10,472 15,387 18,785 1/ Does not include Private Terminals\. 2/ Mainly soybean pellets\. Source: CODESP, June 1981  - 17 - 4\.02 It can be seen that the total traffic (tons) predicted in the appraisal has materialized, and was even 8% higher than originally estimated\. However, traffic composition was different than forecast, which had an adverse effect in the finances of the port (paras 5\.02 and 5\.05)\. Actual traffic, excluding private terminals, reached about 18\.8 million tons in 1980, which, through extrapolation, represents an 8% annual average increase since 1970\. General cargo traffic (tons) was about 20% lower in 1980 compared to appraisal estimates\. This was due almost entirely to general cargo imports which were estimated to increase, from 1970, on an annual average rate of 10%, but actually increased by only 3%, largely because of Government restrictions on imports as a part of a program to conserve foreign exchange\. Dry bulk traffic (tons), however, was about 12% higher in 1980, compared to the appraisal forecast, mainly because of fertilizer imports, which increased on an annual average rate of 10% vis-a-vis the appraisal forecast of only 5%\. 4\.03 The largest increase in traffic was attributed to liquid bulk; in 1980, it represented about 30% of the Santos port traffic and reached 5\.6 million metric tons\. Liquid bulk traffic was about 60% higher in 1980 than appraisal estimates, mainly as a result of coastal shipping (exports) of diesel oil and other petroleum products\. During the appraisal, it was estimated that a large portion of crude petroleum imports (about 2,000 million tons) would be discharged at Santos; however, Government policies diverted these imports to the port of Sao Sebastian, which belongs to PETROBRAS\. However, after the crude oil was refined at REPLAN (PETROBRAS' refinery near Sao Paulo), it was shipped back to Santos for domestic consumption and coastal distribution\. The appraisal forecast could not reflect this policy change and, therefore, under-estimated liquid bulk coastal shipping and over estimated liquid bulk imports\. The net result was an increase in liquid bulk traffic\. 4\.04 The appraisal traffic forecast considered only the traffic directly handled by the Santos port concession and did not take into account traffic going through private terminals inside the port boundaries\. The following chart illustrates the volume of this traffic: (In million of metric tons) 1970 1973 1975 1977 1979 1980 Port of Santos 10\.5 14\.7 15\.4 15\.7 16\.7' 18\.8 Private Terminals COSIPA 0\.9 1\.1 1\.6 2\.2 3\.6 3\.9 ULTRAFERTIL 0\.3 0\.6 0\.4 0\.5 0\.3 0\.5 DOW CHEMICAL - 0\.1 0\.1 0\.1 0\.3 0\.3 1\.2 1\.8 2\.1 2\.8 4\.2 4\.7 Total Traffic 11\.7 16\.5 17\.5 18\.5 20\.9 23\.5  - 18 - 4\.05 In 1980, traffic through private terminals represented about 20% of total traffic throughput in Santos\. This traffic provided some badly needed revenues (port dues) to the Santos port which were not forecast in the appraisal\. B\. Operations 4\.06 Port operations at Santos have been handled competently and did not cause any major problem to the project\. The appraisal report did not address this matter in depth, and, therefore, no forecast of port operating statistics was made\. Some of the more significant port operating statistics are given below, representing averages for the period 1974-1980: (1) Ship waiting time Less than 24 hours 78% More than 24 hours but less than 48 hours 12% More than 48 hours but less than 72 hours 7% More than 72 hours 3% (2) Ton-hour per gang 1/ loading 15 tons unloading 12 tons (3) Ton-hour per man 1/ loading 2\.5 tons unloading 3\.0 tons (4) Berth occupancy rate 70% (5) Average stay of vessels 3 to 4 days (6) Average discharge per vessel 5 to 6 thousand tons (7) Containers handled: 2/ 1974 1975 1976 1977 1978 1979 1980 Number 26,348 29,451 37,412 39,657 51,338 69,103 98,714 Tons 250,728 288,454 378,660 395,165 522,909 721,332 976,422 1/ Represents labor at the port appron and in sheds\. Stevedors on the ship, hired by the shipping companies, are not included\. 2/ The Appraisal Report, does not include data regarding container traffic forecast\.  - 19 - The number of containers handled by the Santos port during the last seven years has almost quadrupled\. The cargo handled in containers reached about one million tons in 1980, which represents about 5% of the total cargo through- put during that year\. This is a considerable achievement since the containers were still being handled in the general cargo berths 1/ where the working area is inadequate, particularly at ship side\. With the recently inaugurated container terminal not yet fully operational, container operations will become much more efficient\. At present, containers handled through the right bank of the Santos port have to be trucked through the congested city area of Santos to get to their final destination\. Inland transport to and from the new container facilities on the left bank should suffer from much less congestion since that side of the estuary is only sparsely developed\. V\. FINANCIAL PERFORMANCE A\. Revenues and Expenses 5\.01 Tables 6 and 7 summarize the financial performance of the Santos port for the period 1974-1980 and compare it with appraisal projections\. Results for the period 1970-1973 are not shown since the figures have little value because of the cumbersome accounting procedures used to gather them and the rather unusual form of published financial accounts\. This deficiency had already been pointed out during the appraisal, and management consultants were hired to set up a meaningful accounting system which was fully implemented only in 1974\. 5\.02 The Santos port had been a profitable institution for many years and was in a strong financial position at the time of appraisal\. The overall financial performance was satisfactory until 1975\. From 1976 onward, port finances deteriorated to such a point that the port was taking heavy losses and the reserves it had accumulated in prior years were rapidly depleting\. The main reasons for the deteriorating financial trend are: (a) tariff increases were smaller than the increases in costs; (b) the inflexible and inadequate tariff structure did not permit response to changes in the composition of traffic; and (c) allocation of the proceeds of 40% of the port improvement taxes as part of the ports' revenues was discontinued\. Furthermore, but to a lesser extent, the concessionaire (CDS) did not go out of his way to make a strong effort to obtain tariff increases, largely because CDS knew that the concession was coming to an end in 1980 and, under the concession agreement, it was assured of its fees as well as the repayment of the actual value of its assets\. The preceding matters are discussed more fully in paragraphs 5\.04 to 5\.08\. 1/ The new container facility of the left bank side was inaugurated only in August 1981\.  - 20 - 5\.03 Consolidated revenue accounts for Santos for selected years are shown in the following tabulation: (in December 1970 million of Cr$) 1970 1975 1980 Actual Appraisal Actual Appraisal Actual Financial Results Forecast Forecast Operating Revenues 191\.3 257\.2 397\.4 335\.9 330\.5 40% Port Improvement Taxes 50\.5 59\.8 110\.6 73\.7 - Total Revenues 241\.8 317\.0 508\.0 409\.6 330\.5 Operating Costs (excl\. depreciation) 145\.1 165\.1 347\.8 195\.1 335\.5 Depreciation 3\.4 30\.5 11\.2 40\.2 8\.0 Operating Surplus After Port Improvement Tax 93\.3 121\.4 149\.0 174\.3 (13\.0) Without Port Improvement Tax 42\.8 61\.6 38\.4 100\.6 (13\.0) Other Income 7\.2 9\.2 -- 11\.7 -- Total Net Income 100\.5 130\.6 149\.0 186\.0 (13\.0) Attributable to: CDS - Sinking Fund 4\.7 6\.3 6\.9 8\.4 42\.5 - Concession Compensation 16\.6 15\.7 16\.5 15\.6 10\.0 PORTOBRAS 79\.1 95\.6 117\.9 150\.3 (78\.4) Loan Interest 0\.1 13\.0 7\.7 11\.7 12\.9 100\.5 130\.6 149\.0 186\.0 (13\.0) Financial Rates of Return Average Net Fixed Assets 92\.2% 1/ 16\.3% 16\.7% 18\.8% (5\.8%) Average Capital Employed 31\.1% 13\.5% 12\.6% 11\.8% (5\.3%) Operating Ratio After Port Improvement Tax 61\.4% 61\.7% 70\.6% 57\.4% 103\.9% Without Port Improvement Tax 77\.6% 76\.0% 90\.3% 70\.0% 103\.9% Interest Coverage -- lO\.Ox 19\.4x 15\.9x not covered Debt Service Coverage -- 11\.7x 19\.4x 12\.5x not covered Total Traffic ('000 tons) 11,745 13,900 17,452 17,335 23,493 Average Number of Employees 10,500 N/A 15,418 N/A 13,080 1/ Assets had not been revalued at that time\. 5\.04 As can be seen from the preceding chart, the average operating revenue per ton (in December 1970 Cr$) was Cr$ 16\.3 in 1970, Cr$ 22\.8 in 1975 and Cr$ 14\.1 in 1980\. Tariffs did not increase in relation to much larger increases in port costs during the period 1976-1980; tariff increases authorized by the Government during that period were insufficient to maintain them at the same level of 1975 and, in fact, they decreased by about 38% in real terms\. Furthermore, as of 1977, the Port Improvement Tax, 1/ which is collected by 1/ 2% over ad-valorem on imports until 1976, 3% from 1977 onward\.  - 21 - each port and of which 40% 1/ remained in the port as part of its revenues for port investment purposes, was entirely passed on to PORTOBRAS\. Although the entire transfer of the proceeds of this tax to PORTOBRAS has a logical rationale, because PORTOBRAS should be and is in charge of port investments and investment priorities, it left the ports, specifically Santos, with fewer resources\. For instance, it had to pay, out of its operating revenues, for dredging expenses and the replacement of small equipment from 1977 onward\. Since the operating revenues barely covered the direct labor operating costs, the remaining resources were not sufficient to cover other port costs\. 5\.05 Another reason for the reduced operating revenues can be found in the inflexible and inadequate tariff structure\. In 1975, storage operating revenues represented about 57% of total operating revenues, and the average collected was Cr$ 12\.9 (in December 1970 Cr$) per ton\. In 1980, these revenues represented only 18% of Santos' total operating revenues, and the average revenue collected was only Cr$ 2\.5 per ton\. The main reason for this decrease in revenues is the fact that general cargo imports were considerably less than in prior years because of the restrictions and high deposits imposed on all imports by the Government\. These deposits had a dual impact: (a) they discouraged the importation of all except only urgently needed items; and (b) they encouraged the importers to clear their goods through the ports rapidly in order to recover the import deposits\. 5\.06 Unfortunately, PORTOBRAS and Santos port have not yet been able to change the tariff structure to take into account the changes in traffic compo- sition, and across-the-board tariff increases alone have not allowed the port to generate the required revenues to cover its costs\. In 1976, PORTOBRAS prepared a draft decree introducing changes in the port tariff structure\. This draft decree was presented to the Ministries of Planning, Finance and Transport, but has not yet been enacted\. The main reason for the long delay is the fact that the decree contains many other issues which are politically very sensitive, such as a complete redefinition of responsibilities of the Merchant Marine, Customs Department, and shipping companies, as well as changes in the structure and power of the stevedores' unions\. 5\.07 From 1970 to 1975, operating costs increased dramatically (about 100%, in constant 1970 Cr$) but, after 1975, they leveled off and, in fact, decreased slightly\. This fluctuation can be explained largely by the fact that, by the end of 1973, Santos port absorbed and inherited about 4000 employees from the now defunct "Coordenacao de Servicios Portuarios" (COSEP)\. This organization provided many port services generally given by the Merchant Marine and by the "Capitania Portuaria," but it was dissolved in 1973 and its functions were transferred to the individual ports\. Some other reasons for the sharp increase in operating costs during the 1970-1975 period are: (a) that traffic (excluding private facilities) increased drastically from 10\.5 to 1/ 60% of the tax was passed on to PORTOBRAS until 1976\.  - 22 - 15\.4 million tons per year, at a yearly average rate of about 8% instead of the 3% estimated during appraisal; and (b) that port labor salaries increased by about 5% yearly in real terms (about 3% during 1975-1980) compared to appraisal estimates of only 2%\. From 1975 onward, Santos port slowly divested itself of excess staff: from a one-time peak of 16,300 workers employed at the end of 1974, it reduced its labor force to about 13,000 at the end of 1980\. This represents a considerable achievement because, with fewer staff, it was still able to handle continuous increases in traffic which, in 1980, reached about 18\.8 million tons compared to the 15\.4 million tons handled in 1975\. 5\.08 In general, operating costs increased at the same rate as prices in the economy as a whole, with the exception that salaries increased a little more\. Tariff increases since 1975, however, did not keep pace with these increases in costs; hence, the deterioration of Santos' financial position\. B\. Balance Sheet 5\.09 Tables 8 and 9 show the consolidated Balance Sheet for the port of Santos\. The concession of the port (CDS) terminated on November 7, 1980\. The December 31, 1980 balance sheet reflects the financial position of the newly created (November 8, 1980) "Companhia Docas do Estado do Sao Paulo" (CODESP) at the end of 1980\. The fixed assets belonging to CDS, reserve and investment accounts which had been established and the amount owed to it by the Federal Government are being negotiated by the Ministry of Transport\. The incorporation of those assets into CODESP, as well as the capital contribution from the Federal Government, will take place once negotiations with CDS are completed\. The fixed asset value shown in CODESP's balance sheet represents the net value of PORTOBRAS' assets after revaluation and depreciation\. CDS' assets are not reflected in the December 31, 1980 balance sheet since their value is still being determinated\. Although the fixed asset value increased in current terms, it decreased in real terms since the revaluation was smaller than the overall increase of prices in the economy\. 5\.10 The appraisal figures for long term debt represent the amount of the outstanding portion of the Bank loan\. However, the consolidated Balance Sheet of CDS shows only a long term credit given by PETROBRAS to CDS in return for some portion of land for the oil-handling facilities\. The World Bank loan was not accounted for in CDS' or CODESP's Financial Statements since the Borrower was the Federal Government, not the port\. In fact, the Federal Government, through the Ministry of Transport, has been repaying the Bank loan and charges, and no entry has been made in CDS' Financial Statements, so that a comparison of debt/equity ratios becomes meaningless\. C\. Review of Financial Covenants 5\.11 The principal financial covenants included in the loan agreement are discussed below: (a) Sections 4\.02(a) and 4\.02(b) required that the Borrower main- tain adequate records and have its financial statements audited by the Ministry of Finance\. Recording and auditing were satisfac- tory\.  - 23 - (b) Section 4\.03 required that the Borrower: (1) review the rates charged for port services and the taxes levied against port users with a view toward coordination and simplification of such rates and taxes; (ii) cause such rates and taxes to be reasonably related to costs and to yield such rate of return on capital employed as shall be agreed between the Borrower and the Bank; (iii) introduce such rates and taxes no later than December 31, 1973; (iv) cause such rates and taxes to be applied to any and all port users; and, (v) amend such rates and taxes, if and when required, in order to assure that they continue to yield such a return on capital employed as is specified under (ii) preceding\. Since, until 1975, the Santos port financial position was very good, yielding a rate of return on capital employed of about 13% (28% in 1974), it was not deemed necessary to agree on a specific rate of return although the Bank expressed some concern because tariffs were not related to costs\. In 1976, however, when the traffic composition changed and the port no longer received a share of the port improvement tax, a change in the tariff structure became necessary in order to produce sufficient revenue and relate tariffs to changes in costs\. In November 1976, PORTOBRAS prepared a draft decree changing the tariff structure, but the decree has not yet been enacted (para 5\.06)\. PORTOBRAS did not want to commit itself on a rate of return for 1977 onward until a new tariff structure was introduced\.  - 24 - D\. Project Financing 5\.12 The following chart summarizes and compares the actual sources of finance and project costs with the appraisal forecast of the Bank-financed project: In millions of December 1970 Cr$ and US$ Appraisal Cost Estimates Actual Prolect Costs Cr$ US$ Cr$ US$ Port Components (including studies and 265\.32 1/ 54\.68 1/ 295\.47 60\.93 technical assistance) Railway Components 115\.51 23\.84 414\.79 85\.52 RFFSA ) Distribution not 323\.80 66\.76 FEPASA ) available for appraisal 90\.99 18\.76 Total 380\.83 78\.52 710\.26 146\.45 Financed by Total PORTOBRAS (DNPVN) 80\.24 16\.52 111\.36 22\.97 DNPVN-Excess Earnings from Santos Port 80\.24 16\.52 -- DNPVN-(PORTOBRAS) Direct Contribution from Federal Government (National Port Fund) 2/ -- -- 111\.36 22\.97 Total Railway 82\.34 17\.00 381\.62 78\.68 RFFSA-Federal Government Contribution 82\.34 17\.00 300\.33 61\.92 FEPASA- Sao Paulo State Government Contribution 81\.29 16\.76 World Bank Loan 218\.25 45\.00 217\.28 44\.80 3/ DNPVN-Federal Government 185\.08 38\.16 184\.11 37\.96 RFFSA-Transfer from DNPVN 23\.47 4\.84 23\.47 4\.84 FEPASA-Transfer from DNPVN 9\.70 2\.00 9\.70 2\.00 Grand total 380\.83 78\.52 710\.26 146\.45 1/ Includes building of corn silo and berth facilities, access road to Barnabe Island, corn receiving equipment, drying and head house equipment and ship- loading equipment, which were later dropped from the project\. The appraisal estimated cost for these items was Cr$ 104\.26 million, or US$21\.50 million\. 2/ Port Improvement Tax\. 3/ US$196,000 was canceled\. 5\.13 The appraisal estimated that the Santos port would generate substantial operating surpluses in excess of the remuneration and other reserves to which the concessionaire was entitled\. These surpluses would represent the excess earnings of DNPVN (PORTOBRAS) and its return on capital invested, and would be sufficient  - 23 - (b) Section 4\.03 required that the Borrower: (i) review the rates charged for port services and the taxes levied against port users with a view toward coordination and simplification of such rates and taxes; (ii) cause such rates and taxes to be reasonably related to costs and to yield such rate of return on capital employed as shall be agreed between the Borrower and the Bank; (iii) introduce such rates and taxes no later than December 31, 1973; (iv) cause such rates and taxes to be applied to any and all port users; and, (v) amend such rates and taxes, if and when required, in order to assure that they continue to yield such a return on capital employed as is specified under (ii) preceding\. Since, until 1975, the Santos port financial position was very good, yielding a rate of return on capital employed of about 13% (28% in 1974), it was not deemed necessary to agree on a specific rate of return although the Bank expressed some concern because tariffs were not related to costs\. In 1976, however, when the traffic composition changed and the port no longer received a share of the port improvement tax, a change in the tariff structure became necessary in order to produce sufficient revenue and relate tariffs to changes in costs\. In November 1976, PORTOBRAS prepared a draft decree changing the tariff structure, but the decree has not yet been enacted (para 5\.06)\. PORTOBRAS did not want to commit itself on a rate of return for 1977 onward until a new tariff structure was introduced\.  - 24 - D\. Project Financing 5\.12 The following chart summarizes and compares the actual sources of finance and project costs with the appraisal forecast of the Bank-financed project: In millions of December 1970 Cr$ and US$ Appraisal Cost Estimates Actual Project Costs Cr$ US$ Cr$ US$ Port Components (including studies and 265\.32 1/ 54\.68 1/ 295\.47 60\.93 technical assistance) Railway Components 115\.51 23\.84 414\.79 85\.52 RFFSA ) Distribution not 323\.80 66\.76 FEPASA ) available for appraisal 90\.99 18\.76 Total 380\.83 78\.52 710\.26 146\.45 Financed by Total PORTOBRAS (DNPVN) 80\.24 16\.52 111\.36 22\.97 DNPVN-Excess Earnings from Santos Port 80\.24 16\.52 -- -- DNPVN-(PORTOBRAS) Direct Contribution from Federal Government (National Port Fund) 2/ -- -- 111\.36 22\.97 Total Railway 82\.34 17\.00 381\.62 78\.68 RFFSA-Federal Government Contribution 82\.34 17\.00 300\.33 61\.92 FEPASA- Sao Paulo State Government Contribution 81\.29 16\.76 World Bank Loan 218\.25 45\.00 217\.28 44\.80 3/ DNPVN-Federal Government 185\.08 38\.16 184\.11 37\.96 RFFSA-Transfer from DNPVN 23\.47 4\.84 23\.47 4\.84 FEPASA-Transfer from DNPVN 9\.70 2\.00 9\.70 2\.00 Grand total 380\.83 78\.52 710\.26 146\.45 1/ Includes building of corn silo and berth facilities, access road to Barnabe Island, corn receiving equipment, drying and head house equipment and ship- loading equipment, which were later dropped from the project\. The appraisal estimated cost for these items was Cr$ 104\.26 million, or US$21\.50 million\. 2/ Port Improvement Tax\. 3/ US$196,000 was canceled\. 5\.13 The appraisal estimated that the Santos port would generate substantial operating surpluses in excess of the remuneration and other reserves to which the concessionaire was entitled\. These surpluses would represent the excess earnings of DNPVN (PORTOBRAS) and its return on capital invested, and would be sufficient  - 25 - to finance the development program up to 1975, with the help of the Bank loan and a grant, envisaged at that time, from the Government of Canada\. The ample funds which Santos port was envisaged to generate would also finance further develop- ment beyond 1975 without recourse to other government resources\. In addition, it was said that excess profits earned by the concessionaire could be made available to help finance capital investments at the port\. 5\.14 What, in fact, happened was that Santos port did not generate the fore- cast surpluses of funds, especially after 1975, when the container facilities (the main project item left in the project) were being built\. In addition, actual costs of the port investments made were about 70% higher than forecast; the grant for the wheat handling and storage facilities did not come about, and all the revenues generated by the Pori\. Improvement Tax passed on entirely to PORTOBRAS\. In practice, the project was financed, in addition to the Bank loan, entirely by PORTOBRAS and by the railways (Federal and State) from Federal Government contributions\. The railway investment cost, which was more than three times the forecast, represented a heavy burden on the railway finances\. 5\.15 Other items outside the Bank-financed project, but included in the Santos port Five-Year Development Program (1971-1975, para 3\.19) were also fully funded by PORTOBRAS (DNPVN)\. 5\.16 PORTOBRAS (DNPVN) collected about Cr$ 2\.0 billion (in December 1970 Cr$) in port improvement taxes at Santos port during the period 1970-1980\. These funds were more than sufficient to cover port investments in Santos during that period\. In fact, no borrowings, other than the Bank loan, were required to finance the investments in Santos\. VI\. INSTITUTIONAL PERFORMANCE AND DEVELOPMENT A\. General 6\.01 The Appraisal Report listed three institutional reforms in the port subsector as being of vital interest\. They were: (a) measures to decentralize port administration by reorganizing DNPVN into a planning and policy-making body and gradually trans- ferring ports to mixed economy companies; (b) improvement of Santos port management, operations and accounting; and (c) adoption of cost-based tariffs, initially at Santos, but later in the other ports as well\. 6\.02 The reorganization of DNPVN and Santos port have been carried through and have been partially successful\. The third item, i\.e\., the adoption of cost- based tariffs, has not been implemented\. Tariffs have been raised frequently but inadequately on a case-by-case basis, which has caused financial difficulties for the port of Santos\.  - 26 - B\. Port Administration Decentralization 6\.03 The organization and administration of the Brazilian ports by the time of the appraisal was characterized by a high degree of centralization and administrative inflexibility with respect to salaries, tariffs, and regulations in general\. The hiring of management consultants to study this problem and to propose improvements was therefore made a condition of loan effectiveness\. 6\.04 The management consultants (Boucinhas, Campos, Coopers and Lybrand, BCCL) started their assignment in September 1971 and submitted recommendations in late 1972\. It was proposed by BCCL that DNPVN be transformed into a public corporation, which would help to achieve the required flexibility\. The Government rejected that idea, and the question was left open\. A prolonged period of discussions regarding the future of DNPVN followed, and finally, in mid-1975, the Brazilian Congress passed a law phasing out DNPVN and creating a new public corporation, PORTOBRAS\. PORTOBRAS would supervise, coordinate and control port construction, administration and finances\. The law allowed PORTOBRAS to set up subsidiaries in the form of mixed economy companies or public enterprises to run the ports\. PORTOBRAS opened for business in January 1976\. About 25% of DNPVN's personnel were transferred to PORTOBRAS, and the remaining vacancies were filled by outside recruiting\. 6\.05 The creation of PORTOBRAS also foresaw the organization of the individual ports as subsidiary companies to PORTOBRAS\. This process is now completed and it has enabled PORTOBRAS to get away from the day-to-day manage- ment of port operations and become a holding company which should mainly determine overall policy and investment needs in the port sector\. 6\.06 PORTOBRAS has accomplished most of its objectives; the main organiza- tion is fully staffed, the training program is working and the overall effi- ciency can be considered good\. The one important area where difficulties have been encountered is that of financial and investment planning\. However, most of the difficulty can be ascribed to the general economic situation of Brazil and the tariff issue (para\. 6\.09)\. C\. Improvement of Santos Port 6\.07 The Santos port was, when the loan was made, run as a private com- pany whose concession would expire in 1980\. Therefore, to ensure the orderly transfer of responsibility, DNPVN agreed to have ready the organization and personnel for a new entity to take over the assets and operations at the port\. Additionally, studies were to be carried out with respect to operations, finan- cial and cost accounting systems, budgetary control and management information systems, maintenance, inventory control and data processing\. 6\.08 BCCL Management Consultants were retained for assistance and were engaged in the implementation phase of the proposed systems when a fire, in November 1973, destroyed many of the programs and files\. It was possible, however, to complete the assignment, and, during the first half of 1974, BCCL completed its contract\. The overall impression is that the consultants made good progress and that their recommendations were generally implemented\.  - 27 - Their work was concentrated on developing systems for accounting, budgeting and costing as well as on the training of port staff in these areas\. D\. Tariffs 6\.09 One of BCCL's tasks was to review tariffs at the port of Santos and to install a tariff review section in DNPVN\. The new tariffs were to be reason- bly cost-related and were to be introduced at the port of Santos by the end of 1973\. The proposals of the consultants to achieve this goal were accepted in principle, but could not be implemented without some general changes in port regulations\. A new tariff structure has not yet been enacted; thus, the objec- tive of introducing reasonably cost-related port tariffs was not achieved\. The authority to decide on tariffs remained at the Ministry level and was later even further centralized, with SEPLAN (the Federal Ministry of Planning) introducing tighter controls over the economy and state-controlled enterprises in general\. PORTOBRAS thus was never given the power to modify tariffs in accordance with changes to port operating costs\. VII\. ECONOMIC REEVALUATION 7\.01 The economic evaluation in the Santos Port Appraisal Report was divi- ded into four main groups: (a) development of the left bank compared to continued expansion on the right bank; (b) various items of the proposed works that could be undertaken and evaluated separately from the others; and (c) all the works, including the common works\. (d) the Bank-financed project\. The reevaluation attempts to follow the format as well as the methodology of the Appraisal Report\. This has not been possible throughout because some of the items foreseen were either not carried out or were carried out in a radically different way, which makes a comparison irrelevant\. Furthermore, it has nQt been possible to infer in detail the assumptions that were used in the Appraisal Report\. 7\.02 The economic rates of return calculated at the time of appraisal, as well as their recalculated values, are given in the following table and paragraphs 7\.05-06 (See Tables 10-13 for the cost and benefit streams)\.  - 28 - ITEM Internal Rate of Return, % SAR Reevaluated - Rail and Road Accesses Only 12 21 - Various Items \. Fertilizer Facilities 35 48 \. Corn Silo and Berth 17 not carried out \. Container Berths 32 26 \. Wheat Facilities 14 not carried out \. General Cargo Berths 45 26 \. Dredging Equipment 11 information not available - Average for the above items 23 29 7\.03 The average for the evaluated items is thus presently expected to give a slightly higher return than at appraisal, 29 vs\. 23%\. One reason for this improve- ment is the fact that the program as actually carried out did not include some of the items with a relativelv low rate of return such as the corn silo and the wheat facilities\. Also, the fertilizer traffic, which forms the basis for the evaluation of both the fertilizer facilities and the left Bank location, has been between 50 and 100% above the appraisal value, increasing the rates of return for both the left Bank location and the fertilizer facilities significantly\. 7\.04 Working in the opposite direction have been the lower than expected general cargo volumes, which have reduced the economic rate of return for the general cargo berths\. The considerable delays and cost overruns for the container berths have, of course, influenced the return for this item negatively, although greater-than-forecast container traffic,increases the return\. Therefore, while the reevaluated rates of return for the various items are markedly different from the appraisal estimates, all the items executed are still considered to be feasible, as is the program as a whole\. 7\.05 The Bank-financed items, essentially the left bank access and the container facilities, can be considered to form an entity and evaluated separately\. An evaluation of the project thus defined yields an economic rate of return of 15%\. This excludes, however, the benefits which accrue to the fertilizer facilities on the left bank due to the accesses to the left bank (B\.HAND, Table 10)\. Including this benefit, which is a reasonable thing to do since the accesses serve not only the container but also the fertilizer facilities, raises the rate of return to 21%\. 7\.06 An alternative way of evaluating the left bank investments would be to consider the left bank as a project per se\. This would thus include the costs and benefits of the container facilities and accesses (Table 11) as well as those for the fertilizer facilities\. Since the fertilizer facility, as shown in paragraph 7\.02, is a most viable undertaking the rate of return for the total left bank investments increases to 29%\.  - 29 - 7\.07 The main reason for locating some of the facilities on the left bank was that the right bank was getting congested\. This congestion was evident not only in the port area but also for the access links leading to the port through the city\. The avoidance of further congestion with the accompanying urban problems represent a major benefit attributable to the left bank location\. Data is not available to quantify this, however, and the rates of return above can therefore be construed as lower bounds\. VIII\. THE ROLE OF THE BANK 8\.01 The Bank was involved at an early stage with the identification and preparation of this project, and there is no doubt that it played an important role in those early stages as well as in the actual execution of the project\. Relations between the Bank and the Borrower remained good throughout; during both preparation and implementation, a series of valuable suggestions were made by Bank staff which helped DNPVN (later PORTOBRAS) and its consultants to overcome a number of technical problems and to achieve significant cost savings\. 8\.02 Noteworthy of mentioning are the following areas in which the role of the Bank was important: (a) reorganization of the port system and the creation of PORTOBRAS; (b) improvement of Santos port management, operations and accounting; (c) technical assistance given by Bank staff to determine the loca- tion of the container facilities, resulting in the development of a new area of expansion for the port; (d) technical assistance provided to prepare proper economic feasi- bility studies; and, (e) technical assistance provided by Bank staff to achieve cost savings in the project\. 8\.03 Points (a) and (b) preceding have been dealt with extensively in Chapter VI of this report\. Although the Brazilians were already convinced at the identification and project preparation stages that they needed a specialized container terminal in the port of Santos, the original location was envisaged on the right bank of the estuary of the channel\. However, Bank staff argued that this location would involve high expropriation costs\. Furthermore, all container traffic would have had to be moved through the city area of Santos, which already suffered heavy traffic congestion\. The Bank suggested developing the left bank of the estuary, which was largely virgin land, and which also provided a major area of expansion in the future\. Based on this suggestion, Five-Year Development Plan was drawn up which, in addition to the container terminal, included a corn silo and berthing facilities, a sugar terminal, oil handling facilities, a fertilizer terminal and rail and road accesses\. When the final investment program and preliminary engineering studies (which took a long time to prepare) were available, the Bank proceeded to appraise the project\.  - 30 - 8\.04 In 1972, however, the Federal Government initiated a program of export corridors with specific investment and operating objectives and poli- cies\. In lieu of these new developments, and with the final engineering of the project in hand (which showed that costs were much higher than envisaged), the Bank convinced DNPVN to hire consultants to reassess the economic feasibi- lity of the five-year port development-plan\. The economic analysis indicated that the corn silo and sugar handling facilities on the left bank should be dropped, that the oil terminal should be located at the right bank access (where it was later built) and that the container facilities should be reduced from a 600-meter quay to no more than 400 meters\. Furthermore, the Bank included some urban development features in the container terminal project, i\.e\., sewerage and water supply facilities which were not considered initially\. Bank staff was also involved in further reducing the cost of the project by -eliminating some road and rail connections\. 8\.05 In retrospect, it does appear that the Bank's participation was va- luable to the Brazilians, notwithstanding the long delays in project imple- mentation\. Although the Bank spent about 128 man-weeks in preparation and supervision, the number and frequency of the supervision missions are consi- dered barely adequate because of the complexity of the project and the insti- tutional development required to implement it\. IX\. CONCLUSIONS 9\.01 The construction of the new\.container facility was very timely since its availability enables the Santos port to meet the growing demand for con- tainerization\. 9\.02 Notwithstanding the large increases in costs and long delays in the implementation of the project, the investments are yielding a good economic return\. 9\.03 The institutional performance of the Borrower during the implemen- tation of this project was good, except for the implementation of a cost-rela- ted tariff structure\. Largely because of the prevailing inadequate tariff structure, the Santos port finances deteriorated badly in the last five years\. 9\.04 The cost estimates at the time of the appraisal were based on preliminary engineering of the project\. The detailed engineering design was carried out after approval of the loan, and a substantial cost overrun com- pared with appraisal estimates resulted\. This experience provides further justification for the current policy of the Bank which requires detailed engineering studies to be carried out before Board presentation\. 1/ 1/ PORTOBRAS (see Annex) disagrees with this conclusion and indicates that the events of this project are a good example of the difficulties created by the use of final detailed engineering\. According to PORTOBRAS detailed engineering is not only expensive but locks up schemes that may be difficult to change later when circumstances require modifications\. In particular, interference by the Bank with required modifications create, in PORTOBRAS' opinion, unnecessary delays\.  - 31 - 9\.05 On balance, the results suggest that the size of the project which was finally implemented was appropriate\. However, the time schedule for implementation was optimistic since five years were required (1975-1980) ins- tead of three years as envisaged in the appraisal (1972-1975)\. The main reasons for the delay in implementing the project were (a) cost increases which became apparent after final engineering, which were much higher than forecast; (b) reassessment of the economic feasibility of the project, taking into account new policies issued by the Federal Government regarding export corridors; and (c) a change in the scope of the project due to unforeseen economic developments\.  PROJECT COMPLETION REPORT BRIL SAurns P0o? PROJEC? - wAl 756-_R 1w-Ye\.a Devlopment Plan Item not Included in Beak Proj ct DPNM Fundiong Plan January 21, 1973 US$ mills tot\.1 Soure Milflions of Cruneiros Apprjtsi\. It\. of fuod 1171 1972 1973 1974 1975 Total Jan 19737>/ Report 2/ 1\. Left bank fertiltier terminal 32\.8 7\.1 2\.3 Exprt Corridor 42\.2 6\.b9 5\.17 PR1 (13\.5) (1\.() Ph\.,\. It FO (1\.) (5-3) (2\.3) 2\. v terslite shads 32-35 1\.0 11\.5 2\.9 1S\.b 2\.37 2\.59 VW (1\.0) (11\.5) (1\.9) BNDB (1\.0) 3\. Now VOL factlitlis 1\.3 19\.? 25\.6 5\.0 5\.0 56\.6 8\.n 5\.bl FPV (10\.5) (b\.9) Pr (1\.3) (9\.2) (2\.1) (5\.0) (5\.0) BNDB (18\.6) b\. Cotruction of b70 a q,oy and completion orks on 8bO a of quay at Macgco 1t 16\.1 31\.0 7\.3 5b\.b 8\.37 3\.7\. 5\. Impron-nts to \.ater upply, drnage, *seer, powr and piAm sys tets P 3\.b- 3\.0 3\.0 9\.b 1\.b5 6\.31 6\. Wid2n bC05 a of quay at lutertnhos 0\.2 REport Corridor-Phase 11 0\.2 0\.03 3\.87 7\. wh- t ello and tovr cotension ad eqopont Canda Phbatig Mt d4oteined 65\.o 10\.00 l\.Cbd 8\. Salt shed and oconyor *\.e1 tP 0\.7 0\.7 0\.11 2\.21 W 9\. 8Nv Port Administration Building 0\.51 10\. Tmproi\.ng rail yards, rkoshops, tc\. PI 3\.8 18\.5 12\.1 10\.0 5\.0 49\.b 7\.60 4\.25 11\. Accem road to Alavn &nd Sabon Rport Corridor-Phse II 1\.52 12\. Dredging (Capital Works) (see l*so 6\.2 6\.b 2b\.0 10\.0 10\.0 56\.6 8\.71 18\.5S Export Corridor Progrm, Phas I FM (1\.3) (1\.5) (9\.) IIP (t\.9) (b\.9) (1s\.0) (10\.0) (10\.0) 13\. Installatin of m ys oltri crwe 6\.2 b\.6 11\.0 1\.69 2\.76 ppo ~~~~~~~~(3 \.b PM * (09 0 1) oweI (S\.S (1\.1} 1b\. Cargo handUin equipt at 5\.6 13\.? b\.9 5\.0 5\.0 31\.2 5\.26 10\.54 PP \.} 02 Ptle (S\.b) (13\.5) (b\.9) (5\.0) (5\.0) 15\. I-nd equisttine 17\.0 45\.6 25\.o 107\.6 16\.55 3\.78 PPI g(20\.0) (25 \.0) IMP (17\.0) (15\.0)\. (20\.0) -IID (10\.6) kub-total (Ite s 1-15) 23\.2 130\.2 128\.1 87\.0 28\.0 502;7 17\.33 R1\.45 Items added to progress cootatrr tnmL,al, right bank MP 3\.4 3\.b 0\.52 Access road- Barnabh IdarnA OrIgnall in Buk fnuid project IMP 0\.1 2\.1 8\.6 5\.0 15\.8 2\.433 Other ior items IMP 6\.1 6\.2 6\.o 6\.0 6\.0 30\.3 b\.66 7OUrL 1 8\.7 1\.i 89\.0 3bo 552\.3 5 8125 mF 60 percent national shae of port tproruent tex\. IMP - 20 per-nt local share of port imrnvement tax\. S2R - 3-7 ar loan from ational Demlopsnt Bank\. DVB - SAnXs Port deprectation NMd\. / USS1 Cr 6\.50 L/ P51 *\.E 23\.05  PROJECT COMPLETION REPORT BRAZIL SANTOS PORT PIDJECT - IDAN 756-BR Export Corridors Program - Investments at Santos US$1 - Cr$ 6\.50 --_________________-----__----------Millions of Cruseiros - ------------------- '53 International Cooffe MlUions SOURCRZ OF FUNDS: DNPVN Japanese Loan Orianisation Loan Grand 1972 1973 Total 1973 1974 1975 Total 1972 1973 Total Total _Toa' PHASE I A\. Interim Corn Terminal (right bank) 74\.2 92\.1 7\.2 173\.5 25\.69 1) General cargo transit sheds (two § 50x190 m) 32\.2 and quay (280 m - 13 m depth) 2) Modification of A 1) for handling grain 42\.0 27\.3 3) Grain handling equipment 64\.8 7\.2 B\. Dredging bar and channel 13 to 14 m 12\.7 9\.1 21\.8 21\.8 3\.35 Phase II A\. New quay at Macuco (330 m - 13 m depth) 36\.0 36\.o 36\.0 5\. 4 B\. Widen and deepen quay at Outerinhos (800 m - 13 m depth) 40\.0 25\.0 5\.0 70\.0 70\.0 10\.77 C\. Expand Ferti izer Terminal, left bank including two aheda of 1,200 m each 2\.0 2\.0 24\.O 11\.0 35\.0 37\.0 5\.69 D\. Frosen food installations 29\.0 154\.0 6\.o 159\.0 23\.Ce 1) Meat - 10,000 ton warehouse, quay 375 m - 11 m depth and equipment 29\.0 10\.0 9\.0 14\.0 2\.0 2) Fruit juice - warehouse and equipment 30\.0 26\.0 10\.0 4\.0 3) Land access 30\.0 25\.0 E\. General cargo and container handling installations at A, above\. (3 shads 9,500 m2 each and open storage) 4\.0 4\.0 16\.0 16\.0 20\.0 - 3\.08 TUrAL (Cr4 millions) 15\.9 51\.1 167\.0 242\.1 96\.0 29\.0 367\.1 7\.2 6\.o 13\.2 547\.3 (US$ millions) 25\.69 56\.48 2\.03 81\.2C t-\. Source: DNPVN 1973 r  PROJECT COMIPLETION REPORT BRAZIL: SANTOS PORT PROJECT (LOAN 756-BR) ACTUAL AND EXPECTED PROJECT IMPLMEINTATION Z of Works PROJECT COMPONENT Dates of Co Pleted Beginming Completion of by the Contractor/Consultant Bid Receipt Contract Award of Work Work Expected and Nationality Actual Expected Actual Expected Actual Expected Actual Ezpected Comletion Data 1\. Engineering Consultants (For the Sondotecnica Engenharia de Solos Left-Rank Sub-projects) S/A (Brazil)/Internacional de Ingenharia y Estudios Tecnicos S/A (Spain) Consortium\. (Sondotecnica/intecaa) (a) Design Contract -- -- Nov\.1971 Nay 1971 22 Sept\.1971 May 1971 December 1972 December 1971 N\.A\. (b) Supervision Contract -- -- August 11 August 1975 August 1976 August 1975 May 31, 1981 December 31\. (Sondotecnica only) 1975 1978 2\. Management Consultants Boucinhas & Campos (Brazil)/ -- -- Sept\. 16 July 15\. Septeaber July 1971 April 11, October 1974 100 (Nanagement Studies and Training) Coopers Lybrand (USA) Consortium 1971 t971 1971 1974 CIVIL WORKS CONSTRUCTION 3\. Container Terminal-West bank ECISA Engineering Construction December October August April 1976 December August 1976 May 1981 June 1979 (DNPVN/PORTORRAS) (Contractor) (Brazil) 1975 1975 1976 1976 4\. West Bank Rail Access and Marshalling Yard (RFFSA) (a) Bridge over the Bertioga Canal NORBERBERTO ODEBRECHT (Contrac- October July 1974 June 2, June 2, August 1975 * July 1975 April 1978 September tor) (drazil 1974 1975 1975 1977 (b) Railway Access CETENCO Engineering (-do-) October July 1974 July 9\. June 1975 August 1975 July 1975 February 1981 August 1978 (Brazil) 1974 1975 5\. FEPASA RAIL LINK (a) Farthworks and related works Constran S\.A\. (Brazil) N/A N/A N/A N/A 1973 1971 March 1977 July 1976 N/A (b) Via Anchieta Viaduct Transpavi-Codrasa S\.A\./Constran N/A N/A N/A N/A 1975 N/A December 1976 Nay 1977 -do- (c) Bridge over the Pereque River Badrasa S\.A\. (Brazil) (Brazil) -do- -do- -do- -do- 1975 N/A December 1976 August 1976 -"- (d) Rail track laying Constran S\.A\. (Brazil) -"- -"- -"- -"- 1975 N/A March 1978 August 1976 EQUIPMENT 6\. (a) Supply of two Container Cranes Bardella S\.A\. (Brazil)/Mitsubishi August 1979 August 1979 March 1980 1980 IHI/ (Japan) 1979 (b) Supply of one dredger IHC SMIT BV (Holland) October March 1979 1974 1975 7\. Overall Port Studies (GEIPOT) Planave (Brazil) Rendel, Palmer January January May 1973 May 1973 May 1973 May 1973 August 1975 May 1974 6 Tritton (U\.K\.) 1973 1973  -35 - PROJECT COSISLETOOSN REPORT TABLE 4 BRAZIL, SANTOS PORT PROJECT (LOAN 756-BR) ACTUAL AND APPRAISAL ESTIISATRO OF PROJECT COSTS (NC,$ K6illione) Actual Costs Contratt P\.C Iticl\.r\. Sria E tinta of -L Actual Coats as a P-oportion of __u_____ Cotrato Contract osco-TnI Costs ASSnate- Eati-tac\. Contrac\. A \.nt Currant In 1970 Loc1 Foerign Total of Cost A\. Cvil ork\.and SoORset far ths Port CrS 1f~:r!~ 970 \.3 r A\. Civil ___-k __and _ Equip__ _______(15* (3) o (5 (l)L -(2) 10 S 1\. Containor Qoay\. 400 R long wit~h 13n depth - Civil Works 2,349\.70 (80\.13 ECISA Engg\. 643\.59 267\.57 29\.27 19\.50 48\.77 344 67 2\. Corn Silo (62,000 ton capacity) and berth\. 200R long with 13\. depth\. -------------Dltetd…------------ 36\.85 27\.56 64\.41 -- -- 3\. Road Work end utilitiess (a) A\. AnEr\.i\.d (I Accass Road to Ra\.nabs Island --------------Dst\.d…------------ 1\.44 0\.96 2\.40 (ii) power Sopply to \.ntina- sod Corn bartha ---- Deleted forbi?fR ~ jo Contains …---- 3\.24 2\.16 5\.40 (III) Water Sopply ------------Ditt--------------- 1\.67 1\.11 i 7i8 4\. Sailwork\. Inside Port (a) A\. Appraised MI Rail works 22\.18 14\.70 36\.94 (14) Mfar\.hallina and sorting y-ard 2\.41 1\.40 4\.01 Rob-Total1 24 59 14 38 40 97 S\. Reilo\.ka 0\.oleido Port (a) A, Appraised 44\.72 29\.62 74\.54 Sob-total of Sailwonka 69\.31 46\.20 (15 51 (b) Rsilworke Re enscuted 1\. RPFSA RaiLeo\.rhs (Appraisal Estimats dose not (i) Snid0o over bertioga Canal 432 75 106 73 NSSORBIRRTO 215\.98 109\.00 diatribute neilWorka b\.twoss ODEBRECHT RFPPA and FRPASA) (ii) Railway Ac-an 1,361\.5) 189\.05 COITINCO Hngg\. 364\.44 257 14 (ii)) Railway Sopsr\.tructor 156\.26 19\.13 -do- 77\.92 11\.07 (i) Rails and Accessories 150\.11 5\.76 E\.-RFFSA Stock Itm -- (vI Track Switching Equipment (7\.24 2\.45 RIPA Direct poncho\. -- (vi) Sig-naLin RYstoe 14\.61 5 68 -ditto- (SR-4) -- RPPSA Sob-total 2\.132)52 3)3\.60 II POPASA Rtilworka (a) aaln\., Studies sand Alignoant work 3\.84 3\.40 SIROE 7\.79 3\.20 (b) infrastroctona (0 Earth \.nka and Related Activities 73 07 44 67 CONSTRANS S/A 102\.47 64\.56 (ii) VIa A\.hstat viadoct (Part of P-Jisnt\. hot not TRANSPAVi 29\.09 9\.30 finocns by Bank) 12 67 11 21 CO5DRSAA S/A 11\.2n CONSTRAN S/A 9\.69 1\.90 - (iii) Snidg\. Ovsr th\. P\.reqon River 1\.90 1 68 BODRASA S/A 4\.30 1 60 In,-nr-tnrn, Scb-tota1 87\.6~4 77 5k 228 43 77 44 (C) ScSnratrcctur\. (0 Bellast work 1\.00 5 09 (ii) Rail Tins (PEPASA Sopply) 0\.34 0\.32 (III) Tie Pintonsa (--do---) 0\.26 0\.23 CONSTRAN S/A 3 06 0 69 (iv) Rails and An\.nris (-'- 0\.02 0 02 rank Laying iv) Trac\.k Switching equip-et (--- 02 5 51 (vi) Labor 5 05 4 42 SAR0LUA Ltt\. 0\.34 0\.07 (d) Signalling abd Comoicati\.na (FEPASA) 0\.48 0\.4) - - \.Superstructure Sub-Otoal 7\.14 6 31 3\.40 07 Sub-totai 946 07 27 239 42 SI 48 ()Add Coat of land acquiaition (PEPASA) 4\.20 3 72 FEPASA, Suk-toca1 Costa 102\.82 90\.99 Total for RailWork\. E\.c\.rted 2\.235 34 414 70 359 (hee\.d on Total Rsil- 6\. Rquip-to for Container and Corn Berths (a) 3 pranr of 30T Capacity each 165\.37 6 66J/ 115 97 11\.17 1\.23 II 09 12 32 (b) 6\.Strnddl\. ra-nia\. 0\.56 5 00 5854 (n) I Loading bridg\. 0\.22 I 96 2 14 (d) Co\.- R \.ivi\.g sqoipant ------------Deleted ------------- 1 16 10 35 1I 51 (a) Drying and Read h\. Sqoipont ------------…d-…------------ 1\.32 (1\.80 13 12 (f) Ship-loading aqoipnt -------------d-- ------------- 1 20 II 54 12 0) 7\. Dredging Bonioseon 187\.13 49\.00 I\.H\.C\. SnOt 184\.35 74 34 IS)5 35\.11 36\.96 152 66 S V\. (Holland) 8\. Maoin\. ing Con\.lt\.a 131 26 15 771/ SOODOTECNICA Oniginally'NCr 13 96n4111ion 8 40 12 41 21 01 99 -- - INTECSA Dnsign phase + US$ 76\.950 (Sopervielon phse 9\. fOanonant Con\.ultantS 20 05 14 06 BCCL 23 99 2) 23 4 40 17 42 22 02 64 66 10\. Hyd,aolln Studies (a) SqoipasSt 10\.74 1 09 DirC\.t Pco\.rentn -- (b) Technical Aasiatanna and Stndies I 45 0\.16 Sob-total 12\.19 1\.25 0 II 0\.97 I 08 116 -- 11\. Onerall Port Studise 11 02 6 07 PLANAVE /R P T 10 72 5\.41 0,27 2\.43 2 70 225 112 Grand Total 5,112\.09 6900\.73 162\.60 218 23 380 83 No tes\. 1/App-aleal Co-t\.aea of Dsceeber 1970 CruseSro Valo\. (0\. NCrO 4\.85 - U8$ 1\.00) 0/ Oly 3 \.ntainr cranes orderad\. Total oCd\.rsd includee I nail-nount\.d travelling cron\. and 2 obile cranes-a till nader cnntr\.ction Straddla ares trailars and tractors to ha supplied Still by CODSRP Actual tamn-t h-e C\.pr\.n\.tS a-ount paid frn loan befor- it nraa cloned\. (Not full cost of cran\.a\. 3/R\.pC \.sante only Payncente sad\. -otil D\.n\. 1980 (loa closing) oNC paid in full to coapletion (May 1981)\.  PROJECT COPLETION gEFPORT BRAZIL SAN117S FRT PROJECT - LOAN 756-BR Santos Port Traffic Statistics: Sncloarv ('000 metric tons) APPRAISAL FORECAST 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 Ex\.portr General Cargo 2,080 2,155 2,285 2,435 2,600 2,770 2,930 3,080 3,225 3,390 3,585 Dry Bilk 640 685 735 800 870 950 1,055 1,155 1,260 1,360 1,465 Liqiid Bulk 110 115 120 130 135 145 ISO 160 165 175 180 Subtotal 2,830 2,955 3,140 3,365 3,605 3,865 4,135 4,395 4,650 4,925 5,230 Imports General Cargo 1,770 1,980 2,135 2,290 2,445 2,600 2,760 2,945 3,130 3,325 3,530 Dry B\.Ik 2,610 2,590 2,640 2,730 2,900 3,080 3,290 3,480 3,670 3,870 4,080 Liq\.id Silk 2\.950 4\.670 2\.185 1,440 1,765 1 715 1\.825 1\.985 2\.130 2\.440 2 855 Sobtotal 7,330 9,240 6,960 6,460 7,110 7,395 7,875 8,410 8\.930 9,635 10,465 Coastal General Cargo 150 180 180 190 190 210 210 230 230 240 250 Dry Bilk 520 570 610 690 690 730 780 820 860 900 940 Liquid BSIk 1\.210 710 180 1,350 850 1,700 1\.320 950 920 620 450 Subtotal 1,880 1,460 970 2,190 1,730 2,640 2,310 2,000 2\.010 1,760 1\.640 Total Piblic Port (CDS1 12,040 13\.655 11,070 12,015 12,445 13,900 14\.320 14,805 15,590 16\.320 17\.335 Private Te-rinals (N9 forecast made during appraisal) Total Traffic ACTUAL 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 E\.ports General Cargo 1,971 1,923 2,962 3,831 2,854 2,408 2,262 2,480 2,664 2,682 3,724 Dry BSlk 712 646 416 596 1,225 1,145 1,288 1,219 944 1,126 1,304 Liquid Bilk 97 112 234 373 140 632 18I 358 1,239 951 1\.405 Subtotal 2,780 2,681 3,612 4,800 4,219 4,185 3,731 4,057 4,847 4,759 6,433 Imports General Cargo 1,538 1,912 1,993 2,525 4,590 2,319 2,107 1,984 1,930 2,113 2,044 Dry Silk 2,477 2,565 3,058 3,448 4,144 3,331 4,452 4,677 5,033 4,951 5,036 Liquid Bslk 1,211 1\.651 1\.241 1 206 1 367 866 1\.147 1\.100 946 1\.112 1,530 S\.btotal 5,226 6,128 6,292 7,179 10,101 6,516 7,707 7,761 7,909 8,176 8,610 Coastal General Cargo 112 112 110 131 107 95 268 85 119 99 136 Dry Bilk 509 533 791 699 582 544 867 736 724 864 932 Liq\.id BSlk 1,845 2\.383 1,501 1\.894 2\.39 4,04 4\.165 3,036 2971 2\.844 2,674 Sobtotal 2,466 3,028 2,402 2,724 3,086 4,686 5,299 3,857 3,814 3,807 3,742 Total Public Port (CDS) 10,472 11,837 12,306 14,703 17,406 15,387 16,736 15,675 16\.570 16,742 18,785 Private Terminals 1,273 1,687 1,447 1,759 2,209 2,066 2,069 2,851 3,125 4,222 4,708 Total Traffic 11,745 13,524 13,753 16,462 19,615 17,452 18,805 18,526 19,695 20,964 23,493 Source COOESP Jlne 1981  PROJECT COI4PLLETION REPORT BRAZIL SANTOS PORT PROJECT - LOAN 756-BR Consolidated income Stateaeot Calendar Years 1974 - 1980 (In December 1970 Cr$ millions) 1974 1975 1976 1977 1978 1979 1980 Appraisal Actual Appraisal Actual Appraisal Actual Appraisal Actual Appraisal Actual Appraisal Actual Appraisal Actual Estimates Estimates Estimates Estimates Estimates Estimates Estioates ____ operating Rev\.enue CDS - Tariff Revenues 216\.2 486\.4 233\.8 397 4 245\.9 267\.4 258 8 250 3 273\.1 305\.5 288\.0 369\.5 305\.4 330\.5 PORTOBRAS-40% Port Fund sand Dredging1l Tas (Port Improvemuent Ta\.)-/ 53 4 145 I 59\.8 110\.6 61\.6 88\.3 63\.4 -- 66\.6 -- 69\.5 -- 73 7 -- Revenue for Depreciation 21\.6 -- 23 4 -:- 24 6 -- 25 9 - 27\.3 - 28\.8 - 30 5 -- Total Operat\.ng Revenues 291\.2 631\.5 317\.0 508\.0 332\.1 355\.7 348\.1 250\.3 367\.0 305\.5 386\.3 369\.5 409 6 330\.5 Opertn ot Variable Costs 86\.51 85\.7 90\.6] 96\.2 85\.01 899] 5\.2 pined Conts - Operations 59\.9 309 7 63\.0 347\.8 66 1 280 9 69\.4( 258 7 72\.9 276\.9 796 95 320\.8 8\.3 335\.5 - Adi\.initr\.tios 19\.7J 2 16 4J 18\.2f 18 6J 18\.9j 19 2f 19\.61 Depreciation 24\.4 112 30\.5 11 2 32\.8 -12 3 33\.5 13 3 36\.9 13\.9 39\.7 13\.3 40\.2 8\.0 Total operating Costs 190 5 320\.9 195\.6 359\.0 207\.7 293\.2 217 7 272\.0 213\.7 290\.8 225\.3 334\.1 235\.3 343\.5 Operting Surplus After Port tmprovemet Tax 100\.7 310 6 121\.4 149 0 124 4 62 S 130\.4 (21\.7) 153\.3 14\.7 161\.0 35\.4 174\.3 (13\.0) Without Port improvment Tax 47\.3 165 5 61\.6 38\.4 62 8 (25 8) 67\.0 (21\.7) 86\.7 14\.7 91 5 35\.4 100\.6 (13\.0) other Income\. Less other Expenses 8\.7 -- 9\.2 -- 9 6 -- t0 I -- 10\.6 -- 11\.1 -- 11\.7 -- Total NetInoe After Port improvemen t Ta- 109\.4 310\.6 130\.6 149\.0 134 0 62\.5 140\.5 (21 71 16\. 14AJ 172\.1 3\.42\.l 186\.0 U\.1\.I1) Without Port Improveme\.nt Tax 56\.0 165\.5 70\.8 38\.4 72 4 (25\.8) 77 1 (L21 7) 97\.3 14\.7 102\.6 35\.4 112\.3 (13\.0) Attributable t\.; CDS - Sinking Pond Provision 5\.9 5\.1 6\.3 6\.9 6\.7 5\.8 7\.0 9\.8 7\.5 15\.8 7\.9 22\.5 8\.4 42 5 - Stocbholders' Cnmpensation 15\.7 16\.7 15\.7 16\.5 15 7 13\.8 15\.8 12\.5 15\.8 14\.4 15\.7 14\.0 15\.6 10\.0 _21\.6 21\.8 22\.0 23\.4 22\.4 19\.6 22 8 22\.3 23 3 30\.2 23\.6 36\.5 24\.0 52\.5 PORTOBRAS - Rent for DNPVN/s invetment 35\.1 1\.7 50\.3 1 9 53\.6 1\.7 56 7 12 9 78\.3 10\.1 84\.6 7 0 92\.6 3\.1 PORTOBRAS Operating Surplus/Deficit 41\.3 280 2 45\.3 116 0 44 9 31\.8 48\.2 (69 I) 49\.8 (40\.0) 51 8 (23 5) 57 7 (81\.5) 2/ 76\.4 281\.9 95\.6 17\.9 98\.5 33\.5 9104 95 (-56\.2) -12-8 I (29\.9) 136\.4 (16 5) 15 03 78\.4 Loan Interest 11\.4 6\.9 13\.0 7 7 13\.1 9\.4 12 8 12\.2 12\.5 14\.4 12 1 15\.4 11\.7 12\.9 8-7\.8 288\.-8 108\.6 125\.6 111 6 42\.9 11 7\.7 (44\.8) 140-\.6 (1-5\.5) T4-8\.5 Ci- I) 16-2\.0 (65\.5) 109\.4 310\.6 130\.6 149\.0 134\.0 82\.3 140 5 (21 7) 163\.9 14\.7 172 1 35\.4 186\.0 (i3\.0) Financ\.Ia Rates of Return Average Net Fixed Assets (5) 15\.9 38 7 16\.3 16\.7 15 7 7 0 15\.3 (2\.6) 16\.3 1\.8 17 0 4\.0 18\.8 (5\.8) Average Capital Employed (0) 13\.1 27 7 13\.5 12\.6 12\.4 5\.7 11\.9 (2\.3) 12\.6 1\.7 12\.0 4\.0 11\.8 (5\.3) PORrOBRAS (DNPVNl) - Average Equity Capital(S) 13 2 37\.3 14\.4 14 4 12\.9 4\.2 12\.1 (6\.5) 13\.1 (3\.!) 12\.3 (2 3) 12\.0 (32\.0) Operating Ratio After Port Improvemet Tax 65\.4 50 B 61 7 70\.6 62\.5 82\.4 62\.5 lOB 6 58\.2 95\.2 58\.3 90 4 57 4 103\.9 Without Port Improvemet Tax 80\.1 65\.9 76\.0 90\.3 76\.8 109 6 87 5 108 6 71 I 95 2 71\.1 90 4 70 0 103\.9 Interest C-verge (time) 9\.6 45 0 10\.0 19\.4 10\.2 6\.6 11 0 -- 13\.1 1\.0 14\.2 2 3 15\.9 -- Debt Service Coverage (times)- 10 9 45 0 11\.7 119 4 9 2 5\.3 9 0 -11\. 0\.7 II 7 1 7 12\.5 - I/ Port Improvemet Tax (2% Ad-vlorem on imports until 1976\. 3% Iron 1977 nnwards) until 1976, 40% of the tins gene\.rated in each portwa left in that Port a part ofrveu\. Prom 1977 onwards the ta was e\.ntirely passed-os to the Goveremnt 2/ Actual Isterest Payment is show for cemparison purpose\.s os1y\. Sn fact the Federal Gov-ernet through the MisOstry of Trans\.Port repaid the Bank lo\. sod charges\. It was not accounted for In COO Finaxcial Statements\. 3/ Debt Service Loan 756-BR (in Dec\. 70 Cr0 million) Interest 74 75 76 77 78 79 80 conmit\.F\.s 6\.9 7 7 9 4 12\.2 14 4 15\.4 12 9 principal -- 2\.4 4\.7 6\.4 5\.6 6\.0 6 7\.7 II 8 16\.9 20\.8 21\.0 18\.9 Source\. CODESP and Bask staff June 1981  PROJECT COMPLETION REPORT BRAZIL SANTOS PORT PROJECT - LOAN 756-BR Port of Santos - Consolidated Income Statement - Years Ended December 31 (In current Cr9 million) 1974 1975 1976 1977 1978 1979 1980 Operating Revenues Tariff Table "A" Port Dues 38\.5 43\.7 80\.4 126\.3 229\.5 420\.3 759\.8 Tariff Table "C" Cargo Handling 231\.1 235\.0 431\.0 651\.8 1,223\.7 2,220\.5 3,762\.5 Tariff Table "D" Storage 549\.0 558\.8 282\.3 269\.7 382\.1 587\.1 1,308\.8 Tariff Table "E" Other 57\.8 56\.0 109\.2 163\.8 190\.8 360\.2 653\.7 Special Services 86\.7 92\.0 43\.7 62\.2 124\.5 246\.9 613\.4 Tariff Operating Revenues (accrual basis) 963\.1 985\.5 946\.6 1,273\.8 2,150\.6 3,835\.0 7\.098\.2 Operating Expenses Labor 383\.9 565\.8 722\.8 961\.5 1,409\.7 2,519\.8 5,598\.1 Other 136\.0 177\.1 157\.2 192\.5 304\.1 436\.1 855\.5 519\.9 742\.9 880\.0 1,154\.0 1,713\.8 2,955\.9 6,453\.6 Administration Labor 74\.2 103\.5 99\.9 143\.2 203\.4 334\.5 673\.4 Other 19\.1 16\.1 14\.5 19\.8 32\.4 40\.3 78\.8 93\.3 119\.6 114\.4 163\.0 235\.8 374\.8 752\.2 613\.2 862\.5 994\.4 1,317\.0 1,949\.6 3,330\.7 7\.205\.8 Depreciation 22\.2 27\.7 43\.7 67\.5 97\.6 137\.6 172\.2 ,, Total Operating Expenses 635\.4 890\.2 1,038\.1 1,384\.5 2,047\.2 3,468\.3 7\.378\.0 X Operating SurplusiDefici 327\.7 95\.3 (91\.5) (110\.7) 103\.4 366\.7 (279\.8) Legal and Contractual Charges Rent for DNPVN (PORTOBRAS) investment 3\.3 4\.7 6\.0 65\.8 70\.9 72\.9 65\.8 Sinking fund provision 10\.1 17\.3 20\.7 49\.9 111\.3 233\.9 912\.3 Concessionaire's fees 33\.0 40\.9 48\.8 63\.8 101\.5 145\.2 214\.1 (46\.4) (62\.9) (75\.5) (179\.5) (283\.7) (452\.0) (1,192\.2) Excess Income (Deficit) in Accrual Terms 281\.3 32\.4 (167\.0) (290\.2) (180\.3) (85\.3) (1,472\.0) Prior Years' Income 16\.1 20\.1 48\.0 45\.6 48\.5 44\.4 155\.6 Excess Income (Deficit) in Current Terms 297\.4 52\.5 (119\.0) (244\.6) (131\.8) (40\.9) (1,316\.4) Operating Revenues Accrued but not yet Received 20\.1 48\.0 16\.6 44\.8 79\.9 74\.7 218\.0 Excess Income (Deficit) in Cash Terms 277\.3 4\.5 (135\.6) (289\.4) (211\.7) (115 6) (1,534\.4) Traffic (in million tons) Concessionaires Quay 17\.4 15\.4 16\.7 15\.6 16\.6 16\.7 18\.8 Private Terminals 2\.2 2\.0 2\.1 2\.9 3\.1 4\.2 4\.7 Total 19\.6 17\.4 18\.8 18\.5 19\.7 20\.9 23\.5 Ratios Working 63\.6 87\.5 105\.0 103\.0 90\.6 86\.8 101\.5 Operating 65\.9 90\.3 109\.6 108\.6 95\.2 90\.4 103\.9 Average Number of Employees 14,651 15,418 13,523 12,287 12,200 12,612 13,080 Source: CODESP and Bank staff June 1981  PROJECT COMPLETION REPORT BRAZIt SANTOS PORT PROJECT - LOAN 756-BR Consolidated Balance Sheets as at December 31, 1974-1980 (In December 1970 CRS million) 1974 1975 1976 1977 1978 1979 1980 Appraisal Actual Appraisal Actual Appraisal Actual Appraisal Actual Appraisal Actual Appraisal Actual Appraisal Actual Assets Net Fixed Assets and work in progress 770\.8 854\.4 801\.8 929\.4 877\.4 851\.7 960\.8 827\.5 968\.5 811\.3 945\.4 824\.3 917\.2 223\.9 Net Current Assets 83\.2 40\.8 176\.9 25\.8 199\.4 5\.6 220\.0 (17\.5) 338\.9 3\.9 496\.3 8\.4 672\.0 (0\.4) Investments 18\.0 287\.6 20\.9 230\.8 23\.9 130\.7 27\.1 79\.1 30\.6 51\.6 34\.2 54\.9 38\.0 21\.7 Other 29\.9 -- 29\.9 -- 29\.9 -- 29\.9 -- 29\.9 -- 29\.9 -- 29\.9 -- 901\.9 1,182\.8 1,029\.8 1,186\.0 1,130\.6 988\.0 1\.237\.8 889\.1 1,367\.9 866\.8 1\.505\.8 887\.6 1,657\.1 245\.2 Liabilities and Capital Long Term Debt 157\.0 49\.4 182\.5 18\.4 178\.6 14\.6 174\.4 9\.9 169\.8 -- 164\.9 -- 159\.6 -- Equity Capital Portobras (DNPVN) 568\.8 784\.6 664\.4 858\.4 762\.9 748\.6 867\.8 733\.2 995\.9 713\.9 1,132\.3 731\.2 1,282\.6 245\.2 CDS 127\.6 125\.3 134\.1 119\.8 140\.6 107\.1 147\.1 88\.1 153\.7 100\.6 160\.1 95\.0 166\.4 -- Reserves -- 223\.5 -- 189\.4 -- 117\.7 -- 57\.9 -- 52\.3 -- 61\.4 -- __ Grant from Government of Canada 48\.5 _ 48\.5 -- 48\.5 -- 48\.5 -- 48\.5 -- 48\.5 -- 48\.5 744\.9 1\.133\.4 847\.0 1\.167\.6 952\.0 973\.4 1,063\.4 879\.2 1\.198\.1 866\.8 1,340\.9 887\.6 1,497\.5 245\.2 901\.9 1,182\.8 1,029\.5 1,186\.0 1,130\.6 988\.0 1,237\.8 889\.1 1,367\.9 866,8 1,505\.8 887\.6 1,657\.1 245\.2 Debt/Equity Ratio 17/83 4/96 18/82 2/98 16/84 2/98 14/86 1/99 12/88 0/100 11/89 0/100 10/90 0/100 Average Net Fixed Assets in Use 631\.3 801\.0 743\.2 891\.9 794\.6 890\.1 852\.4 839\.6 940\.7 819\.4 949\.5 817\.8 926\.1 223\.9 Average Capital Employed 837\.1 1,121\.2 965\.7 1,184\.4 1,080\.1 1,087\.0 1,184\.2 938\.6 1\.302\.9 878\.0 1\.436\.9 877\.0 1,581\.5 245\.2 Portobras (DNFVN) Average Equity Capital 579\.1 755\.0 665\.1 821\.5 762\.1 803\.5 863\.9 740\.9 979\.6 723\.6 1,112\.6 722\.6 1,256\.0 245\.2 M Portobras (DNPVN) Share of Equity 81\.7 69\.2 83\.2 73\.5 84\.4 76\.9 85\.5 83\.4 86\.6 82\.4 87\.6 82\.4 88\.5 100 Capital (x) Source: CODESP and Bank staff\. June 1981  PROJECT ORiPLzTloN REPORT BRAZIL SANTOS PORT PROJECT - IOAN 756-BR Santos Port Balance Sheet (Proforma Consolidated Statements of Resources Invested in the Fort of Santos and Their Financing) (In current Cr$ million) Dec\. 31\. 1974 Dec\. 31\. 1975 Dec\. 31, 1976 Dec\. 31, 1977 Dec\. 31\. 1978 Dec\. 31\. 1979 Dec\. 31, 1980 ASSETS Fixed assets and work in progress 2,135\.4 2,776\.6 3,627\.5 5,102\.3 7,148\.4 10,809\.1 Less: Accumulated Depreciation 443\.7 471\.7 612\.5 890\.4 1\.436\.7 2\.252\.4 2 1,691\.7 2,304\.9 3,015\.0 4,211\.9 5,711\.7 8,556\.7 4,808\.9-/ Investments in short term deposits and marketable securities Funds held for investment 223\.3 185\.3 62\.0 79\.6 48\.2 27\.2 465\.2 Excess income fund 286\.4 310\.1 297\.9 163\.1 33\.0 7\.6 -- Sinking fund 59\.8 77\.1 102\.8 159\.8 281\.8 535\.8 -- 569\.5 572\.5 462\.7 402\.5 363\.0 570\.6 465\.2 Current assets 156\.1 140\.7 159\.3 183\.6 596\.5 1,002\.6 955\.8 Less: Current liabilities 75\.3 76\.7 139\.5 272\.8 569\.2 915\.4 965\.0 4 80\.8 64\.0 19\.8 (89\.2) 27\.3 87\.2 (9\.2) 0 2,342\.0 2,941\.4 3,4975\. 4,525\.2 6\.102\.0 9\.214\.5 5,264\.9 FINANCED BY Equity capital contributions Portobras (DNPVN) 1,936\.2 2,542\.7 3,185\.6 4,525\.9 6,285\.7 9,584\.5 5,264\.9 C\.D\.S\. 309\.2 355\.1 455\.8 544\.2 884\.9 1,245\.3 -- 2,245\.4 2,897\.8 3,641\.4 5,070\.1 71ThT 10,829\.8 5,264\.9 Reserves Excess income 353\.5 364\.1 277\.3 70\.1 60\.4 94\.8 Sinking fund (Funded) 59\.8 77\.1 102\.8 159\.8 281\.8 535\.8 Depreciation (Funded) 29\.2 28\.4 36\.8 65\.2 25\.9 6\.5 -- 442\.5 469\.6 416\.9 295\.1 368\.1 637\.1 Sub-Total 2,687\.9 3,367\.4 4,058\.3 5,365\.1 7,538\.7 114466\.9 5,264\.9 Less: Accumulated depreciation 443\.7 471\.7 612\.5 89U\.4 1\.436\.7 2\.252 4 -- 2,244\.2 2,895\.7 3,445\.8 4,474\.7 6,102\.0 9,214\.5 5,264\.9 Long term debt _/ 97\.8 45\.7 51\.7 50\.4 -- 2,342\.0 2,941\.4 3,497\.5 4\.525\.2 6,102\.0 9\.214\.5 5,264\.9 Source: CODESP and Bank staff\. 1/ The concession of the Port of Santos (CDS) terminated on November 7, 1980\. The Dec\. 31, 1980 balance sheet reflects the financial position of the newly created (Nov\. 8, 1980) company ' Companhia Docas do Estado de Sao Paulo" (CODESP) at the end of 1980\. The assets belonging to the concessionaire and the amounts oved to him by the Federal Government are being negotiated by the ninistry of Transport\. 2/ Represents the "actual" fixed assets incorporated by the Federal Government into CODESP\. "Actual means net fixed assets after revaluation and depreciation\. 3/ Represents a long term credit (at no interest charge) given by PETROBRAS to CDS, in return of land given by CDS for the oil handling facilities\.IBRD loan is not accounted for in CDS Financial Statements\.  PROJECT C0I1PLETION REPORT Brazil: Santos Port Project (Loan 756-BR) Economic Reevaluation Left Bank Location (Dec\. 1970 US$1000) PERIODS C\.RAIL C\.ROAD B\.INV B\.HAND B\.OPER C\.TOTAL B\.TOTAL N\.TOTAL B\.INC 1 0\.00 0\.00 0\.00 0\.00 0\.00 0\.00 0\.00 0\.00 0\.00 2 0\.00 9\.00 0\.00 0\.00 0\.00 9\.00 0\.00 -9\.00 0\.00 3 0\.00 287\.00 0\.00 0\.00 0\.00 287\.00 0\.00 -287\.00 0\.00 4 0\.00 90\.00 0\.00 0\.00 0\.00 90\.00 0\.00 90\.00 0\.00 5 0\.00 1\.00 0\.00 0\.00 0\.00 1\.00 0\.00 -1\.00 0\.00 6 1852\.00 0\.00 1000\.00 0\.00 0\.00 1852\.00 1000\.00 -852\.00 0\.00 7 8877\.00 46\.00 1000\.00 0\.00 0\.00 8923\.00 1000\.00 -7923\.00 0\.00 8 5897\.00 0\.00 1000\.00 3887\.00 400\.00 5897\.00 5287\.00 -610\.00 0\.00 9 4933\.00 0\.00 1000\.00 3032\.00 400\.00 4933\.00 4432\.00 -501\.00 0\.00 1 10 1174\.00 0\.00 1000\.00 3196\.00 400\.00 1174\.00 4596\.00 3422\.00 0\.00 11 440\.00 0\.00 1000\.00 2803\.00 400\.00 440\.00 4203\.00 3763\.00 0\.00 12-31 0\.00 0\.00 0\.00 2803\.00 400\.00 0\.00 3203\.00 3203\.00 0\.00 C\.RAIL cost of railway connection C\.ROAD cost of road connection\. B\.I investments not needed on the left bank\. B\.HAND additional handling cost for fertilizer without left bank rail and road connections\. B\.OPER operating cost difference between right and left bank location\. CD  PROJECT COMPLETION REPORT Brazil: Santos Port Project (Loan 756-BR) Economic Reevaluation Fertilizer Facilities (Dec 1970 US$1000) PERIODS C\.INV B\.UNL B\.WAIT B\.LABOR C\.TOTAL B\.TOTAL N\.TOTAL 1 0\.00 0\.00 0\.00 0\.00 0\.00 0\.00 0\.00 2 2469\.00 0\.00 0\.00 0\.00 2469\.00 0\.00 -2469\.00 3 162\.00 0\.00 0\.00 0\.00 162\.00 0\.00 -162\.00 4 566\.00 0\.00 0\.00 0\.00 566\.00 0\.00 -566\.00 5 2174\.00 0\.00 0\.00 0\.00 2174\.00 0\.00 -2174\.00 6 996\.00 0\.00 0\.00 0\.00 996\.00 0\.00 -996\.00 7 189\.00 0\.00 0\.00 0\.00 189\.00 0\.00 -189\.00 8 0\.00 9555\.00 9953\.00 1620\.00 0\.00 21128\.00 21128\.00 9 0\.00 7455\.00 0\.00 1264\.00 0\.00 8719\.00 8719\.00 10 0\.00 7856\.00 0\.00 1332\.00 0\.00 9188\.00 9188\.00 11-31 0\.00 6891\.00 0\.00 1168\.00 0\.00 8059\.00 8059\.00 C\.INV investment cost for fertilizer equipment B\.UNL savings from ship time at berth B\.WAIT savings from ship waiting time for berth B\.LABOR savings from reduced labor costs  PROJECT COMPLETION REPORT Brazil: Santos Port Project (Loan 756-BR) Economic Reevaluation Container Berths (Dec\. 1970 US$1000) PERIODS C\.INV B\.TOT N\.TOTAL 1-6 0\.00 0\.00 0\.00 7 539\.00 0\.00 -539\.00 8 4343\.00 0\.00 -4343\.00 9 9545\.00 0\.00 -9545\.00 10 13009\.00 0\.00 -13009\.00 11 9716\.00 0\.00 -9716\.00 12 2092\.00 14000\.00 11908\.00 13-31 0\.00 14000\.00 14000\.00 C\.INV cost of investments in container facilities\. B\.TOT benefits due to ship time savings at berth and labor cost reductions\.  PROJECT COMPLETION REPORT Brazil: Santos Port Project (Loan 756-BR) Economic Reevaluation General Cargo Berths (Dec 1970 US$ 1000) PERIODS C\.INV B\.UNL B\.WAIT B\.LABOR C\.TOTAL B\.TOTAL N\.TOTAL 1 0\.00 0\.00 0\.00 0\.00 0\.00 0\.00 0\.00 2 41\.00 0\.00 0\.00 0\.00 41\.00 0\.00 -41\.00 3 2434\.00 0\.00 0\.00 0\.00 2434\.00 0\.00 -2434\.00 4 6516\.00 0\.00 0\.00 0\.00 6516\.00 0\.00 -6516\.00 5 704\.00 0\.00 0\.00 0\.00 704\.00 0\.00 -704\.00 6 17\.00 0\.00 0\.00 0\.00 17\.00 0\.00 -17\.00 7 3\.00 814\.00 900\.00 2176\.00 3\.00 3890\.00 3887\.00 8 0\.00 914\.00 800\.00 2443\.00 0\.00 4157\.00 4157\.00 9 0\.00 922\.00 700\.00 2464\.00 0\.00 4086\.00 4086\.00 10 82\.00 918\.00 600\.00 2454\.00 82\.00 3972\.00 3890\.00 11 64\.00 924\.00 500\.00 2470\.00 64\.00 3894\.00 3830\.00 12-31 0\.00 924\.00 500\.00 2470\.00 0\.00 3894\.00 3894\.00 C\.INV cost of general cargo facilities investments B\.UNL savings from ship time at berth B\.WAIT savings from ship waiting time for berth\. B\.LABOR savings from reduced labor costs\. 0 P\.  - 45 - ANNEX I TELEX NR 1523/83 09/03 OP ROCILDO MR SHIV S\. KAPUR DIRECTOR OF THE OPERATIONS EVALUATION DEPARTMENT WORLD BANK WASHINGTON D\.C\. USA IN RELATION WITH YOUR LETTER DATED JANUARY 19, 1983 ON THE SUBJECT OF A PROJECT PERFORMANCE AUDIT REPORT ON THE SANTOS PORT PROJECT LOAN 756-BR, WE INFORM YOU THAT THIS SECRETARIAT IS IN AGREEMENT WITH THE CONTENT OF THE REPORT AND THAT TECHNICAL OPINIONS ON THE MATTER WILL HAVE TO PROVIDED BY PORTOBRAS THE EXECUTING AGENCY FOR THE PROJECT\. BEST REGARDS, JOSE BOTAFOGO GONCALVES, SECRETARY FOR INTERNATIONAL TECHNICAL AND ECONOMIC COOPERATION\. SUBIN/SEPLAN-PR\. TRANS\. AAS:O 10:24 HRS 611146SPPRC BRGGGG 209670 1323 090383 05180057 1320 01890189 346  ANNEX II - 46 - EMPRESA DE PORTOS DO BRASIL S\.A\.-PORTOBRAS PRESIDENCIA PRE - 203/83 Brasilia, March 9 , 1983\. Mr\. SHIV S\. KAPUR Diretor of O\.E\.D\. The World Bank 1818 H Street, N\.W\. WASHINGTON - D\.C\. 20433 - USA Re\.: Project Completion Report on Brazil Santos Project Loan (756- BR)\. Dear Mr\. Kapur, We received your letter of January 19, 1983 and its pertinent annex (draft of the above mentioned report, dated September 25, 1981) and we indebted with the oportunity offered for our comments about a document that, although dealing with PORTOBRAS action in the Project as agent of the Borrower, is an internal paper of the Bank\. With the exception of the commentaries included in the annex of this letter, we consider the draft satisfactory\. We expect the BANK consider our commentaries in the revision of the draft or fully reproduce them in the final text of the report\. Sincerily, Arno Oscar Markuos' Presidente ANNEX: Commentaries referred in the text\.  -47 - ANNEX II EMPRESA DE PORTOS DO BRASIL S/A - PORTOBRAS ANNEX TO PRE-203/83\. OUR COMMENTARIES ABOUT THE DRAFT OF COMPLETION REPORT ON BRAZIL SANTOS PROJECT 1st - Regarding the following phrase "the project preparation proceeded much slower than originally anticipated", with which your draft begins the item 2\.02, we do not agree with your conclusion\. In fact, your Identification Mission of Oct-Nov/78 considered the project well advanced and estimated that it could be appraised by Mar-Apr/69\. However, in that opportunity your mission demanded additional preparation works and these works, by the guide lines of DNPVN,only could be made after different bids (one for each different matter) what represented forced delays\. Concluding: the project preparation phase delay's was consequence of the additional works demanded by the BANK\. 2nd Regarding the following phrase "DNPVN had never fully studied the ENGEVIX/PLANAVE study", included in item 2\.03, we consider it does not proceedand PORTOBRAS does not agree with its inclusion in the definitive text of the completion report\. In fact, in the text of your draft submitted to our appreciation (final phrase of item 2\.02), the BANK writes that" it appears that this plan (ENGEVIX/ PLANAVE of course) was rejected since OESA/KG indicated that the soils were very difficult and at least ten years of capital works at prohibitive costs would be necessary"\. This conclusion is exclusively of the BANK and was presented as hypothesis\. What really ocurred was the fact that DNPVN, having an option between two possibilities of localization, needed a study of the feasibility of the development of the project in the right bank, but this does not means that the study of ENGEVIX/PLANAVE had not been fully studied\. We do not agree, also, with the conclusion inserted in the same item of the draft where is stated that "the mission /1O  - 48 - ANNEX II EMPRESA DE PORTOS DO BRASIL S/A - PORTOBRAS Page 3 proposed that certain facilities be located on the left bank"\. What really ocurred was a delay in the decision because, having received the OESA/KG report in APR/70, when an Appraisal mission was Scheduled since Mar/70, DNPVN postponed its decision till the moment of mission's arrival (what ocurred, finally, in AUG-SEPT/70) because the decision needed the approval of the BANK and the Mission could do this\. So, during the visit of the Appraisal Mission, the option of the left bank was formalized by DNPVN\. 3rd Still regarding item 2\.04, PORTOBRAS does not agree with the inclusion of the following passage of its first phrase, where BANK states that "the wider implications resulting from shifting development to the left bank of the Santos estuary had not been foreseen by DNPVN"\. The reason of this discordance is explained in the 2nd critical commentary and renewed here: "DNPVN aimed to obtain a study of the right bank in order to make a good choice between two possible solutions, what does not entitles BANK to make the criticized commentary"\. 4th Reparding itens 3\.07through 3\.10, PORTOBRAS does not agree with the inherent conclusion that the delay of 2,5 years in the beginning of the bedding procedures of the rail access subproject is due exclusively to RFFSA\. It must be remembered that the tempestive bedding of the end of 1972 was suspended in JAN/73 at the BANK'S request in order to be reanalysed and the most part of the delay pointed by the BANK was consumed in the preparation of the new bids (review of the economic justification) and, subsequently, in the negociations, with the consulting engineers in charge of the project for their modifications; in the preparation of the mentioned economic reanalysis and modification of the civil engineering projects; and finally, in the new bidding procedures\.  - 49 - ANNEX II EMPRESA DE PORTOS DO BRASIL S/A - PORTOBRAS Page 4 PORTOBRAS also does not agree with the conclusionsthat only "following BANK action" the rail access subproject was reactivated\. Really, the reactivation of the subproject followed the withdrawal of the BANK'S restriction, what is very different\. 5th Even agreeing that has been an interval of 2\.8 years between the decision of the execution of the container terminal in three phases and the award of the contract, the simple reference of this figure without mentioning expressly that most part of the time elapsed was necessary to the procedures of the revision of the project decided by the BANK (represented by 1\.7 years in which are included three months of delay in BANK'S approval of the new project)\. Thus PORTOBRAS does not agree with the reference of a delay of 2\.8 years without express mention that this delay is\.related with the revision of project determined by the BANK\. In this opportunity we must express our opinion that the revision made at BANK'S instance was considered an unnecessary precaution of the BANK in order to define the works to be financed\. In fact, the development of the services conducted PORTOBRAS to make no distinctions between the 1st and the 2nd phases and, regarding the 3rd phase, considering the fact that the BANK excluded this phase of theworks financed, its execution followed the exclusive criterion of PORTOBRAS\. 6th Although agreeing that problems related with the revision mentioned in item 3\.12 of draft resulted in delays not expected, PORTOBRAS does not accept the implicit conclusions of the text, unfavourable to this COMPANY\. In fact, in similar works in volume and complexity, not financed by the BANK, with similar problems related to design revision, the delays are substancially smaller due to the fact that PORTOBRAS is not obliged to a ,1'L  - 50 - ANNEX II Page 5 EMPRESA DE PORTOS DO BRASIL S/A - PORTOBRAS labourious work of convince d lender in each opportunity a modification is imposed by new conditions ocurred during the execution of the works\. You can sep inyour draft that an unimportant modification (the use of gabions)wasnoteasily approved by the BANK: we had to spend substancial time that cannot be charged to PORTOBRAS and even the approval was subject to the condition that the prices would not been majoratedd\. Your mention that only"'everal months later" PORTOBRAS informed BANK that the modifications would represent an increase of 25% in the costs,may give the idea of an omission in our answer and PORTOBRAS does not agree with the way the text was written in this point\. In fact, the time elapsed between your approval of gabion's utilization and the presentation of the table of quantities and price (without any influence in the development of the works) is totally justified by the care with which PORTOBRAS prepares the additaments to its contracts\. Regarding the increase mentioned, it covered other services than the gabions\. You must consider, also,that the several modifications introduced, responsible for the increase, were, in due time, communicated to the BANK through the letters PRE-770/77, of December 27, 77 and DIR-063/78, of April 10, 78\. Regarding the alternative design suggested by BANK'S staff, it has been studied carefully by the engineers of PORTOBRAS, of consulting Engineers and Contractor and considered technically inferior to our solution (use of gabion's) and, for this reason, not accepted by PORTOBRAS\. Regarding the assertion that BANK waited 9 months for the answer, the text does not define dates and PORTOBRAS disagree with the inclusion of such not precise information in the final text\. We must add that whatever may be the time elapsed (and the text does not mention the dates as referred above) this does not mean paralization of the works, the only thing really important\.  - 51 - ANNEX II Page 6 EMPRESA DE PORTOS DO BRASIL S/A - PORTOBRAS Regarding the alleged increase of 25% (US$ 92,7 x 106 Cr$ 375,3 x 106), it was not due to use of gabion's so criticized by BANK, beeing not admissible a text that gives this idea\. You must consider that letters DIR-063/78 (delivered in Washington, during the meetings with our Director Mario Rohr) and PRE-770/77 (sent by mail), explaining all the modifications, show clearly that the gabion's are nearly of the same value of the services substituted by them\. 7th PORTOBRAS does not agree with the way the final paragraph of item 3\.12 is written\. There, when is mentioned the container handling equipment, it is said that, except for two container cranes, they are "still pending"\. Certainly you are associating the assertion with the date of May 31, 81\. You must consider, however, that it is possible that the association be done with the date of the final edition of the report, what may give the idea the procurement process'of these equipments has not been initiated in that date, what will be not true\. So, the text must be written "was pending at this moment" instead of "is still pending" It must be cleared in the text that delay in the procurement process'of the handling equipments has had, as main reason, the delay in the decision of BANK in the change of the allocation of US$ 3\.4 x 106 from equipments to civil works\. In fact, having PORTOBRAS communicated, in due time, the impossibility, because of Government's determination, of an international bid (exigency of your guide lines) and having proposed the mentioned allocation change (assuming the compromise of using its own resources to pay, in the national market, the equipments), the agreement of BANK delayed very much\. A2  - 52 - ANNEX II EMPRESA DE PORTOS DO BRASIL S/A - PORTOBRAS Page 7 8th On item 3\.32 the draft does not mention (and PORTOBRAS consider this information necessary) that the real percentage financed reached only 18%, (about 30% of the initial estimation)\. It mustbe understand, also, that this final figure will be a little less if we consider that the value financed for the dredge represented only nearly 60% of its value\. 9th _ PORTOBRAS does not agree with the note in the foot of the table included in item 3\.33, in which is pointed that the percentages of civil works decreased in steps from 40% to 10%\. Really, the maximum amount of reimbursements of civil works was 25% (in the beginning of the services) and you must correct the note\. 10th - PORTOBRAS wishes BANK include in the final text of the completion Report an item regarding the way payments of parcels of the loan were made because this matter was not focused in the draft and we considered of great importance\. In our opinion BANK did not grant really a loan (which is characterized by payments in advance), because we had only reimbursements in the major of part of the PROJECT (civil works)\. In fact, only the payments for foreign contractors were made by the BANK and this can be considered a discrimination against the borrower\. Regarding the transfer of money to PORTOBRAS, we can mention also that even the reimbursement was made normally with a delay of 15 days7and in several occasion with a more remarkable delay, in detriment of the development of the works\. This makes the BANK partially responsible for many delays ocurred in the completion of the PROJECT\. 11th Although PORTOBRAS recognizes the delays in the completion of many subprojects, we do not understand the BANK did not mention its system of payments (mainly in civil works), that transformed the loan in a reimbursement of expenditures of the borrower,created an additional charge and many difficulties, contributing for the delays above mentioned\.  - 53 - ANNEX II EMPRESA DE PORTOS DO BRASIL S/A - PORTOBRAS Page 8 12th - PORTOBRAS does not agree with the conclusion inserted in the item 9\.04 of the draft regarding detailed engineering projects\. In fact, in the Santos Port Project, a detailed engineering project (contracted in this level in order to fulfill BANK'S recommendations), it can be observed the different problems pointed in your draft\. The delays in the corrections of the subpr6Jects were very expressive, not only by itself, but mainly by the interference of the BANK\. PORTOBRAS believes that in any project, even beeing well elaborated, modifications, mainly when related to the methodology of execution (influenced in the majority of the cases by the equipments to be employed by the con- tractors), are normally introduced and the possibility of these modifications does not indicate the detailed engineering project as the better solution due to the greater cost of this type of project if compared with a basic project\. The Santos Port Project is a good example of the inconvenience of a detailed engineering project and leads to a conclusion different of that of draft\.   IBRD-3271R(PCR) AUGUST 1981 BRAZIL SANTOS PORT PROJECT 0 2 C 1 KILOMETERS MILES t/~ ~ ,g ; ~ i i 0gg tD t \ \~~ 2FFSA RA LROAD L 1L1I _ Ct W t \; < \ \ B11 ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~OR NVESTMENT PROGRAM | 'APGO~~~~~~~~~~~~~~~~~~\.ODBIT YGVRMN P- E\. ~ -XSTNROD '/ > \ > 0 0 < - 9 - ? ~~ ~j\. \~4zeeerH CONTAINX \.---\.-\.EXIISTINGRAALOAAD \<L > ~SAO VICENTE - r \ LLZ1 RHILLES CASlS MAIME"os A- RIVERS SARCH 97105EO\.ETEDoR OMENDED \. / j 4 g _~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~T D ND R HEPR JE T ISL WORKS COMPLE~~~~~~~~~~~~~SA~ S ONECAZIH ACER5~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~IIIIIIIIICNANRTRIA MEISESEE IS BAStE MN EECLSOSIR ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ -- EPS LNE(HIDRAL MARES lOST SABRE PROJECT FEATURES ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ML- OR IVETEN POGA HAVE SEEN AELKEED MS AREESEE ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ \. RA BIT YGOENMN /~~~~~~~~~~~~~~~~~OTLmT

APPROVAL

P174097

 The World Bank South Africa: Wildlife Conservation Bond (P174097) Project Information Document (PID) Appraisal Stage | Date Prepared/Updated: 15-Apr-2021 | Report No: PIDISDSA31950 February 16, 2021 Page 1 of 20  The World Bank South Africa: Wildlife Conservation Bond (P174097) BASIC INFORMATION OPS_TABLE_BASIC_DATA A\. Basic Project Data Country Project ID Project Name Parent Project ID (if any) South Africa P174097 South Africa: Wildlife Conservation Bond Region Estimated Appraisal Date Estimated Board Date Practice Area (Lead) AFRICA EAST 08-Dec-2020 06-Jul-2021 Environment, Natural Resources & the Blue Economy Financing Instrument Borrower(s) Implementing Agency GEF Focal Area Investment Project Financing The Eastern Cape Parks South African National Biodiversity and Tourism Agency Parks (SANParks), The (ECPTA), South African Eastern Cape Parks and National Parks (SANParks) Tourism Agency (ECPTA) Proposed Development Objective(s) To increase black rhino populations in target protected areas in South Africa\. Components Improved Rhino Conservation Management National/Regional Enabling Conditions to coordinate shared security and research opportunities Project management and monitoring PROJECT FINANCING DATA (US$, Millions) SUMMARY -NewFin1 Total Project Cost 13\.76 Total Financing 13\.76 of which IBRD/IDA 0\.00 Financing Gap 0\.00 DETAILS -NewFinEnh2 Private Sector Investors/Shareholders February 16, 2021 Page 2 of 20  The World Bank South Africa: Wildlife Conservation Bond (P174097) Equity Amount Debt Amount Non-Government Contributions 13\.76 Trust Funds 13\.76 Total 13\.76 0\.00 Payment/Security Guarantee Total 0\.00 Environmental and Social Risk Classification Substantial Decision The review did authorize the team to appraise and negotiate THE FOLLOWING IS A SUMMARY OF A PROJECT WHICH HAS BEEN APPROVED IN CONCEPT AND IS SUBJECT TO COMPLETION AND AMENDMENT\. IT IS NOT AN OFFER OR INVITATION TO SELL THE NOTES OR A SOLICITATION OF AN OFFER TO BUY THE NOTES, NOR DOES IT CONSTITUTE ANY FORM OF ADVICE\. THIS SUMMARY IS SEPARATE FROM, AND SHOULD NOT BE READ IN COMBINATION WITH, ANY OFFER OR SALE OF THE NOTES, WHICH WILL BE MADE IN COMPLIANCE WITH APPLICABLE LAWS AND UNDER ENTIRELY SEPARATE LEGAL DOCUMENTATION AND OFFERING MATERIALS AT THE TIME OF OFFER\. POTENTIAL INVESTORS SHOULD NOT SUBSCRIBE FOR ANY NOTES REFERRED TO IN THIS SUMMARY EXCEPT ON THE BASIS OF INFORMATION CONTAINED IN SUCH ENTIRELY SEPARATE LEGAL DOCUMENTATION AND OFFERING MATERIALS AT THE TIME OF OFFER\. THIS SUMMARY IS VERY HIGH LEVEL FOR SIMPLICITY AND LEAVES OUT MATERIAL INFORMATION AND DOES NOT INLCUDE ANY LEGAL DOCUMENTATION THAT WOULD GOVERN THE NOTES\. A\. Introduction and Context 1\. The WCB operation is designed to test a new model of conservation finance through the creation of an outcome- driven structured bond that channels funds from bond investors to conservation outcomes – in this case an increase in black rhino populations in target protected areas in South Africa\. The longer-term objective of testing this bond structure is to create a new investment asset class that can widen the investor base, and thus reduce the global financing gap for biodiversity conservation\. The key innovations to be tested with this operation include: a) creation of a new impact investment for investors looking for a market return to fund biodiversity conservation; b) use of global environment facility funds to only pay for successful conservation outcomes; c) deployment of advanced monitoring and verification tools to support transfer of risks of unsuccessful conservation outcomes away from traditional donors to the capital markets that are better equipped to absorb such risks\. The results-based Global Environment Facility (GEF) financed grant makes the product more attractive to traditional donors through de- risking of achieving conservation results\. The GEF financing will only be triggered at the end of the operation upon successful achievement of agreed targets as further described below\. This funding is an additional source of financing South Africa would not have access to and aims to deliver environmental and social benefits, including jobs in a sector that has been significantly impacted by COVID-19\. Bondholders finance conservation activities; GEF finances Conservation Success Payment to investors if targets are met\. Bondholders provide parallel co-financing\. February 16, 2021 Page 3 of 20  The World Bank South Africa: Wildlife Conservation Bond (P174097) Country Context 2\. South Africa is one of the most biodiverse countries in the world, and its biodiversity contributes significantly to the national economy, local livelihoods, and climate change resilience\. With a varied geography ranging from plains and savannas to deserts and high mountains, South Africa’s ecosystems support over 95,000 species, and its rich biodiversity contributes to an estimated 418,000 jobs directly using or protecting biodiversity\.1 The total contribution of travel and tourism to South Africa’s gross domestic product (GDP) in 2018 was about 9 percent,2 a significant portion of which is directly linked to natural assets, particularly protected areas (PAs),3 and abundant wildlife\. Biodiversity also contributes to the livelihoods of the poorest, by providing a range of goods – such as food, biomass fuel, and medicine – and services, such as water\. South Africa’s ecological infrastructure4 also increases resilience to climate shocks, by reducing the impact of extreme weather events, such as drought and floods\. Conservation-related industries have higher economic potential than regular agricultural activities, such as stock farming\.5 It is estimated that income from ecotourism could exceed that derived from pastoralism by as much as four-fold in the Eastern Cape\.6 3\. South Africa’s political transition into a democracy in the mid-1990s is known as one of the most remarkable in the past century, but the country’s economic transformation remains incomplete and hinges on the ability to facilitate inclusive job creation\. With a Gini coefficient of 0\.63, South Africa has one of the highest inequality levels in the world\. Globally it has one of the worst unemployment rates7 at 29 percent\. Only 42 percent of adult South Africans are working, compared to the 61 percent average for middle-income countries\. Youth unemployment exceeds 50 percent\. Poverty fell from 33\.8 percent in 1996 to 16\.9 percent by 2008, but further progress has slowed in recent years due to domestic structural challenges and weak global growth since the 2008 global financial crisis\. In 2019, the country’s poverty rate stood at 19\.4 percent\. The economy grew on average 2\.79 percent from 1994 to 2018\.8 However, overall growth has slowed and is declining: 1\.3 percent in 2017, 0\.8 percent in 2018, and 0\.7 percent in 2019\.9 GDP per capita growth has been stagnant or low since 2014\. Government of South Africa (GoSA) is aware of the challenges that need to be overcome to accelerate progress and build a more inclusive society\. It developed a 2030 National Development Plan (NDP), outlining a vision and priorities, and the strategic goals of eliminating poverty and reducing inequality by 2030\. 4\. The NDP 2030 demonstrates strong commitment to environmental and biodiversity protection as a vehicle to address South Africa’s most crucial development challenge—accelerating growth while reducing inequality\. In support of the NDP, the National Biodiversity Strategy and Action Plan (NBSAP) 2015-2025 promotes the 1 Estimated number of jobs directly using or protecting biodiversity according to SANBI, National Biodiversity Assessment 2018: the Status of South Africa’s ecosystems and biodiversity – Synthesis Report\. 2 World Travel and Tourism Council, 2019; Department of Tourism (2017) National Tourism Sector Strategy, which has as a target to increase the direct contribution of tourism to the GDP from R118bn in 2015 to R302bn in 2026 while increasing direct jobs supported by the sector from 702,824 to one million\. 3 National Parks under SANParks, including the Addo Elephant Park and Kruger National Park (residents of whose buffer zones this project will benefit) have seen visitor numbers rising from 5\.2 million in 2014 to over 7 million in 2018, making nature-based tourism a major economic driver and providing a wide range of value chain development opportunities in support of rural development\. 4 Ecological infrastructure refers to naturally functioning ecosystems that deliver valuable services to people, such as water and climate regulation, soil formation and disaster risk reduction – including healthy mountain catchments, rivers, wetlands, coastal dunes, and nodes and corridors of natural habitat, forming a network of interconnected structural elements in the landscape\. 5 OECD Environmental Performance Reviews: South Africa 2013 6 Kayser, Sobrevila and Ledec, (2011)\. World Bank GEF Report\. https://www\.thegef\.org/sites/default/files/publications/AENP-web_0\.pdf 7 The Economist Pocket World in Figures 2019\. South Africa’s official unemployment rate stood at 29\.1 percent in the third and fourth quarters of 2019 8 World Bank – SA Country Profile, www\.databank\.worldbank\.org\. 9 Africa Development Bank Group\. February 16, 2021 Page 4 of 20  The World Bank South Africa: Wildlife Conservation Bond (P174097) development of a biodiversity economy, defined as “the businesses and economic activities that either directly depend on biodiversity for their core business or that contribute to conservation of biodiversity through their activitiesâ€? including the bioprospecting and wildlife sub-sectors\.10 The biodiversity economy is recognized as a crucial engine for inclusive rural economic development that supports the three goals of the NDP: increase employment, decrease inequality, and reduce poverty\. 5\. The biodiversity economy is central to South Africa’s tourism industry; but more could be done to make it sustainable and inclusive\. Within the NDP, tourism is identified as a highly labor-intensive industry that stimulates the development of small businesses and generates foreign direct investment and significant export earnings\. Still, the rate of transformation in the tourism industry is slow, with few black entrants in the market\.11 The National Tourism Sector Strategy 2017 includes a strategy for People Development, with programs to attract and support more black entrepreneurs\. 6\. The COVID-19 pandemic is causing major disruption in businesses and will severely impact South Africa’ s economy in the near term\. As of February 1, 2021, there are more than 103 million confirmed cases globally and two million deaths\. South Africa has 1,453,761 total cases of COVID-19 cases and 44,164 deaths\.12 The global economic shock that the COVID-19 pandemic delivered and steep recessions many countries are experiencing will leave lasting scars for many countries\. Before the COVID-19 pandemic, South Africa was already in a recession and its debt rating had been lowered by credit agencies\. Due to the COVID-19 pandemic, the economy is projected to have contracted by 3\.5 percent in 2020, after five consecutive years of negative per capita growth\. The impact of COVID-19 on growth operates through two channels\. First, through the external channel impacting both demand and supply through trade, tourism, remittances, a weakening exchange rate, and an anticipated decline of SACU revenues\. Second, domestic policy channels such as lockdowns, social distancing, travel restrictions and health- related measures that are affecting both domestic demand and supply through loss of income, job losses and company closures\. In response, GoSA announced an economic stabilization package of more than US$ 27 billion (~10% of SA’s GDP) in August 2020\. Foreign investors are buying SA bonds in search for higher yields compared to low or negative yields offered by the US and European countries\. The National Treasury’s bond auction in mid-June 2020 saw foreign investors buy R4 billion in local bonds13\. As the COVID situation in SA is still unfolding, it is unclear the long-term impacts on rhino population growth as growth is dependent on the number of rhino calves born and the rhino mortality (natural and due to poaching)\. Fewer tourists and staff to support the industry means less eyes and ears to serve as force multiplier in the parks\. 7\. GoSA’s bold and swift decision in March 2020 to impose a nation-wide lockdown helped to mitigate the health impacts ofCOVID-19 but also brought travel and tourism activities to a stand-still\. For context, in 2019, travel and tourism represented 7% of total GDP (ZAR 354\.9 billion) and 9\.1% of total employment (1\.5 million jobs)14\. International visitors accounted for 8\.6% of total exports (ZAR 129\.9 billion)\. National Parks were closed for nearly five months of the national lockdown, which brought visitors and revenues to a halt and had devastating impacts\. 10 Bioprospecting is research on, or development or application of, indigenous biological/genetic resources for commercial or industrial exploitation\. The Bioprospecting sector is being facilitated the Bio Products Advancement Network South Africa (BioPANZA), a collaborative initiative between DEFF, the Department of Science and Technology and the Department of Trade and Industry, mandated to harness existing initiatives and new opportunities in bioprospecting and address the innovation chasm that exists between early product development and commercialization\. The wildlife subsector includes live sales of indigenous wildlife; sale of game meat and products, and safari hunting\. Department of Environment Affairs, National Biodiversity Economy Strategy, 2016 11 Department of Tourism, 2017\. National Tourism Sector Strategy, p\. 36\. 12 https://coronavirus\.jhu\.edu/map\.html\. Accessed on February 1, 2021\. 13 https://www\.businessinsider\.co\.za/foreigners-buy-sa-bonds-2020-6\. Accessed on September 30, 2020\. 14 https://wttc\.org/Research/Economic-Impact/moduleId/704/itemId/204/controller/DownloadRequest/action/QuickDownload\. Accessed on September 30, 2020\. February 16, 2021 Page 5 of 20  The World Bank South Africa: Wildlife Conservation Bond (P174097) The sector’s income could decrease by 75% in 2020, with 438,000 jobs and R80\.2 billion in foreign receipts at risk15\. In an April 2020 survey16 of the entire tourism industry within South Africa, 83% of respondents reported revenues in March 2020 were down more than 50% compared to March 2019, and 34% of reported revenues were 100% less\. In that same survey, 58% of firms were unable to service their debts and 54% of firms were unable to cover fixed costs in March 2020\. The drop in nature-based tourism limits the number of eyes and ears on the ground (i\.e\. a force multiplier) to help monitor for illegal activity\. AENP, which is one of the top three revenue generating sites in the SanParks system, has experienced a significant drop in number of tourists in 2020 compared to 2019 due to COVID-19\. AENP re-opened for accommodation in August 2020 and has experienced higher occupancies in September and October, although the lack of international conservation fees from international tourists translates to a cumulative drop of revenues from June-October 2020 of nearly 74 percent compared to the same time period in 2019\. Sectoral and Institutional Context 8\. Illegally traded natural resources contribute significantly to the loss of biodiversity and threaten sustainable and inclusive development\. The World Bank estimates that the annual cost of illegal logging, fishing and wildlife trade is a staggering US$1-2 trillion globally\. Illegal activities erode countries’ natural capital and undermine their ability to achieve many of the SDGs\. This is especially the case in low-income countries where livelihoods disproportionately depend on natural capital\. In these countries, the World Bank calculates governments forego an estimated US$7-12 billion in potential fiscal revenues per year\. 9\. South Africa has a robust policy, institutional and regulatory framework for the conservation, management and sustainable use of biodiversity\. South Africa’s Constitution (Act 108 of 1996), Biodiversity Act (Act 10 of 2004) and Protected Areas Act (Act 57 of 2003) provide the main legal framework for the management, protection and conservation of biodiversity\. South Africa’s National Biodiversity Strategy and Action Plan (NBSAP) 2015-2025 aims to conserve, manage and sustainably use biodiversity to ensure equitable benefits to the people of South Africa, including as strategic objectives: the enhanced management of biodiversity assets; investments to enhance resilience of the ecological infrastructure; the adoption of practices that sustain the long-term benefits of biodiversity; and developing effective knowledge foundations to support the management, conservation and sustainable use of biodiversity\. There are various well-established government departments and institutions with mandates that link to the conservation and management of biodiversity and natural resources\. The leading authority for the implementation of the NBSAP is the Department of Environment, Forestry and Fisheries (DEFF)\. South African National Parks (SANParks), was established through the Protected Areas Act as a conservation authority mandated to conserve, protect, control and manage a system of national parks and other defined protected areas and their biodiversity\. In addition, provincial departments of environmental affairs and provincial conservation authorities exist for each of South Africa’s nine provinces\. The Eastern Cape Parks and Tourism Agency (ECPTA) is responsible for provincial protected areas in the Eastern Cape Province\. 10\. Progress has been made in growing and diversifying sources of finance for biodiversity management and conservation, but limited financial resources remain one the sector’s main challenges\. In many cases biodiversity management and conservation is funded through layering of multiple funding sources\. The NBSAP establishes as a key activity the appropriate allocation of resources for effective management of biodiversity, especially in priority areas, highlighting the need to create incentives that encourage private 15 https://www\.businessinsider\.co\.za/when-will-foreign-tourism-local-leisure-travel-be-allowed-2020-7\. Accessed on September 30, 2020\. 16Government of South Africa Department of Tourism, Tourism Business Council of South Africa, and IFC, April 2020\. Tourism Industry Survey of South Africa: COVID-19, Impact, Mitigation and the Future\. February 16, 2021 Page 6 of 20  The World Bank South Africa: Wildlife Conservation Bond (P174097) sector investment\. Funding for biodiversity has been mainly channeled through government expenditure and contributions from international grants\. However, public-private partnerships and cooperative efforts relevant to biodiversity and ecosystem management involving the state, private companies, non- governmental organizations (NGOs) have grown in the country\.17 11\. Rhino poaching pressures have been extremely high since 2008, particularly in South Africa\. The black rhino was the most numerous of the world's five rhino species, and at one stage could have numbered around 850,000\. By 1960, an estimated 100,000 remained, and as poaching intensified and pressure on their habitat increased, their numbers declined to just 5,49518 individuals today\. Black rhinos are listed as Critically Endangered on the IUCN Red List, meaning they are extremely vulnerable to extinction in the wild\. The biggest drivers of this decline remain reduction in habitat and poaching\. Habitat loss is exacerbated by the increasing costs of rhino security as many landowners cannot afford to conserve rhinos on their land\. South Africa’s rhinos have been intensively targeted; rhino poaching in the country increased by 9,000% between 2007 – 2014 with the number of rhinos poached growing from 1319 in 2007 to 1,21520 in 2014\. In 2019, 59421 rhinos were reported poached in South Africa\. Efforts to decrease poaching include improved capability to react to poaching incidents, the deployment of new technology, improved information collection and sharing amongst law enforcement authorities, better regional and national cooperation and more meaningful involvement of private sector, non-governmental organizations and donors22\. However, there is significant concern that the numbers of poached rhinos are declining each year because rhino populations in South Africa have declined in total numbers to 15,625 white rhino and 2,046 black rhinos23, based on data up to the end of 2017\. For instance, the latest SANParks Annual Reports indicate a significant drop in rhino populations in the key biodiversity site of Kruger National Park\. Populations in the Kruger National Park have plummeted to an estimated 3,529 white rhinos and 268 black rhinos, which represents a population reduction of 67% for white rhinos – from 10,621 in 2011 and 35% for black rhinos – from 415 in 201324\. In the first six months of 2020, rhino poaching decreased by almost 53%, with 166 animals killed for their horns across the country25\. On February 1, 2021, Environment, Forestry, and Fisheries Minister Barbara Creecy announced that South Africa saw a marked decline in rhino poaching during 2020, with the killing of rhino declining by 33% (total of 394)26\. 12\. Traditional rhino conservation financing faces challenges associated to short-funding cycles, which limits long-term planning and the ability to adapt\. Traditional conservation funding limits the ability of protected area managers to focus on long-term planning and leverage their knowledge and experience to respond adaptively to changes in-the-field conditions\. In addition, the traditional model is focused on outputs rather than outcomes, where current funders have mixed success based on under- or non-performance of 17 South Africa’s National Biodiversity Strategy and Action Plan 2015-2025\. 18 CITES COP18\. AfRSG Report\. https://www\.researchgate\.net/publication/331988665_CoP18_Doc_831_Annex_2_African_and_Asian_Rhinoceroses- Status_Conservation_and_Trade_A_report_from_the_IUCN_Species_Survival_Commission_IUCN_SSC_African_and_Asian_Rhino_Specialist_Gr oups_and_TRAFFIC_to_/link/5c99e945299bf1116947deb1/download 19 https://www\.traffic\.org/news/south-africa-annual-rhino-poaching-toll-falls-for-second-year-running-but-the-crisis-continues/ 20 https://www\.environment\.gov\.za/mediarelease/molewa_waragainstpoaching2015 21 https://www\.environment\.gov\.za/mediarelease/reportbackon2019_rhinopoachingstatistics 22 https://www\.timeslive\.co\.za/news/south-africa/2020-02-03-rhino-poaching-declined-again-in-2019-says-environment-minister/\. 23 https://www\.researchgate\.net/publication/331988665_CoP18_Doc_831_Annex_2_African_and_Asian_Rhinoceroses- Status_Conservation_and_Trade_A_report_from_the_IUCN_Species_Survival_Commission_IUCN_SSC_African_and_Asian_Rhino_Specialist_Gr oups_and_TRAFFIC_to_/link/5c99e945299bf1116947deb1/download 24 https://africageographic\.com/stories/kruger-rhino-populations-plummet-latest-official-stats/\. Accessed on February 2, 2021\. 25 https://www\.gov\.za/speeches/environment-forestry-and-fisheries-rhino-poaching-decreases-more-half-first-half-2020-31\. Accessed on October 4, 2020\. 26 https://www\.environment\.gov\.za/mediarelease/rhinopoaching_sa\. Accessed on February 2, 2021\. February 16, 2021 Page 7 of 20  The World Bank South Africa: Wildlife Conservation Bond (P174097) implementers as flows are typically for defined, short-term programmes\. Current implementation models are inefficient with large overhead costs to implement conservation projects\. This traditional model of financing conservation has also typically relied on government and philanthropic dollars where funding is drastically inadequate\. 13\. Instruments that can crowd in additional private capital to finance conservation are urgently required\. A new World Bank Group (WBG) report ‘Mobilizing Private Finance for Nature’ highlights the critical role the financial sector can play to address the global biodiversity crisis, and that governments and regulators hold the key to harnessing the power of the financial sector to mobilize private finance at scale to protect nature\. A landmark report by the Paulson Institute found that as of 2019, current spending on biodiversity conservation is between $124 and $143 billion per year, against a total estimated biodiversity protection need of between $722 and $967 billion per year\. This leaves a current biodiversity financing gap of between US$ 598 billion and US$ 824 billion per year\. Private financing for biodiversity remains niche\. ‘Conservation’ represented only 3 percent of the investment portfolio of impact investors, compared to 14 percent for climate in 2018\.27 14\. The Wildlife Conservation Bond to be developed by the project proposes a new model for conservation funding\. It will help change the business as usual of conservation financing and catalyse a new frontier in innovative finance by attracting new risk investment into the conservation field and setting up an outcomes- driven framework to proactively secure and grow the black rhino populations in South Africa\. The launch event for the Paulson Institute report highlighted the WCB Transaction as a type of financial mechanism that offers promise and should be scaled up\. The scale of the bond issuance will allow for institutional investors to participate in a sector not historically considered\. This framework can be replicated for other rhino sites within South Africa and beyond28 and to other species and protected areas\. Current biodiversity conservation expenditures are insufficient29 and there is an urgent need for the private sector to increase its biodiversity conservation contributions, including for wildlife conservation\. This is also the case for funding to combat poaching and illegal wildlife trade, which the World Bank estimated to be US $2\.35 billion30 from 2010-2018\. Institutional investors represent a potential new source of funding as it represents over $100 trillion in assets globally,31 and this investment segment already contributes to environmental sustainability with $579 billion in global climate finance between 2017-2018\.32 The WCB Transaction will help generate awareness amongst this investor segment and fill a knowledge gap on a structured debt instrument linked to conservation outcomes\. This instrument and the lessons that will be learned from project implementation will help promote increased institutional investments for biodiversity conservation\. C\. Proposed Development Objective(s) Development Objective To increase black rhino populations in target protected areas in South Africa\. 27 https://thegiin\.org/assets/2018_GIIN_Annual_Impact_Investor_Survey_webfile\.pdf\. 28 The Rhino Impact Investment (RII) has already screened three sites in Kenya for investment readiness\. 29 In 2012, estimates of global expenditures for biodiversity conservation were around US$52 billion per year\. The High-Level Panel on Global Assessment of Resources for Implementing the CBD Strategic Plan for 2011-2020, estimated that the global investment required amounts to between US$130 and $440 billion annually\. 30 The Global Wildlife Program analyzed 24 international donors (see Table 1), which collectively committed over US $2\.35 billion to combat IWT in Africa and Asia from 2010–2018\. 31 OECD\. 2019\. Pensions at a Glance\. 32 Climate Policy Initiative\. 2019\. Global Landscape of Climate Finance 2019\. February 16, 2021 Page 8 of 20  The World Bank South Africa: Wildlife Conservation Bond (P174097) Key Results The key project expected result is the Percent increase of black rhino population in target sites (CAGR)\. 15\. The operation uses an innovative financing model to tap private finance for conservation of the black rhino in two parks of South Africa\. The operation aims to catalyse and link the world’s first Wildlife Conservation Bond (WCB) - to conservation performance\. This innovative transaction could enable private/institutional bond investors to participate in a market which generally consists of bilateral, multilateral, and philanthropic donors\. The operation total cost is financed by two different sources: (a) bond coupon payments -; and (b) a results-based GEF-financed grant conservation success payment if rhino growth is achieved\. Bondholders finance conservation activities; GEF finances Conservation Success Payment to investors if targets are met\. Bondholders provide parallel co-financing\. The WCB will fully finance conservation activities and the GEF will finance the conservation success payments\. The GEF financing will only be triggered at the end of the operation upon successful achievement of agreed targets as further described below\. 16\. The WCB will channel bond coupon payments - to finance the conservation activities at two priority sites for rhino conservation: Addo Elephant National Park (AENP) and Great Fish River Nature Reserve (GFRNR)\. This parallel co-financing will help AENP and GFRNR enhance management of the protected areas to secure and increase black rhino populations\. It will also generate additional direct benefits for local communities in terms of jobs and indirect benefits related to improved security and induced benefits across value chain investments\. If rhino population growth targets are achieved, A Conservation Success Payment is provided by the GEF, that provides an attractive return to investors\. This Payment is made with - funding from GEF’s non-grant instrument (NGI) window\. 17\. The project builds on existing conservation efforts at the two priority sites, as well as a two-year product development phase33 that included an extensive assessment and stakeholder engagement\. The WCB Transaction product development phase was done under the US $4\.5 million Rhino Impact Investment Project (RIIP) funded by the GEF, The Royal Foundation, the UK DEFRA IWT Challenge Fund, and Zoological Society of London (ZSL)\. This work was implemented under the leadership of ZSL with technical support from Conservation Alpha, Conservation Capital, Credit Suisse, DLA Piper and the International Union for Conservation of Nature (IUCN) Species Survival Commission’s African Rhino Specialist Group (AfRSG)\. The product development phase selected AENP and GFRNR for the WCB Transaction from a list of 134 sites due to the sites’ ecological, managerial and financial capacity to achieve rhino outcomes\. As part of the preparation of the WCB project, the WCB Transaction concept and key operational elements were developed\. The WCB Transaction concept preparation efforts build on prior GEF projects at AENP and other donor funded projects at GFRNR34\. 18\. The WCB Transaction transfers some of the risk of underwriting rhino conservation to private bond investors through a World Bank (Aaa/AAA/AAA (Moody’s/S&P/Fitch) issued bond\. The WCB will involve investors that help to fund the enhanced rhino conservation activities at the two target sites\. If rhino growth outcomes are achieved in year five, the a Conservation Success Payment (using GEF’s NGI funding) is released\. The investor-driven funding 33 WCB Transaction product development phase was completed from 2016-2020 and included US $4\.5 million grant amounts\. The project included the following components: (i) gap analyses of priority rhino sites conducted, shortlist of priority rhino sites identified for inclusion in the live investment and RII investment performance metrics tested and demonstrated in Tsavo West, Kenya; (ii) bring 5-10 rhino sites up to Investment readiness and prepare sites to deliver against the RII; and (iii) Investment Blueprints developed, financial structure built, management, legal, and governance structure developed\. 34 The ICR of the World Bank’s Greater Addo Elephant National Park GEF-funded Project ($5\.5M), implemented from 2004 to 2010, found the projects outcomes were satisfactorily achieved\. This GEF project was implemented mostly before the rhino poaching crisis hit SA in 2008\. The project did not focus specifically on rhino conservation, rather had economic and community development, social ecology, and land incorporation development plans\. February 16, 2021 Page 9 of 20  The World Bank South Africa: Wildlife Conservation Bond (P174097) will be directed to the two project sites to implement conservation activities that seek to maximize net rhino growth rates over five years\. The project follows World Bank policies and procedures applied for Investment Project Financing (IPF) and flow-down to SanParks and ECPTA and project partners35\. SanParks and ECPTA will enter into two grant agreements with the World Bank: (a) one with the WB Treasury in its capacity as the WCB Transaction issuer, for purposes of extending, and regulating the use of, the WCB; and (b) one with WB Operations in its capacity as GEF Implementing Agency, for purposes of extending, and regulating the use of, the Conservation Success Payments\. Financing structure Component 1a – Improving rhino conservation and natural resource management in the Addo Elephant National Park (US$4\.5 M fully funded by foregone coupon payments) 19\. AENP is managed by SANParks\. AENP has a strong track record of black rhino conservation and is a major conservation success story given the large-scale expansion of the Park over the past 30 years, including through funding support from the GEF\. Activities under this component will include: A\. Rhino Population Management\. AENP has three sections that currently hold rhino and will expand into a fourth section during WCB Project implementation\. This includes translocation of rhinos to the new section from existing rhino sections\. This will reduce densities in existing areas and ensure high rhino growth rates in all rhino sections throughout the 5-year investment period\. B\. Habitat Management\. Habitat Management plays a low-cost but critical role\. Access to water is limited in AENP, both in terms of physical water points and due to competition with elephants\. AENP will increase distribution of water in two sections through additional boreholes and secure the supply of water in a third section\. As water attracts elephants which compete with rhino, selected water points will have elephant exclusion fences\. This mimics a natural water gradient, reducing elephant browse pressures across the reserve by only allowing elephants to drink at certain waterholes\. C\. Range Availability\. The new section inside the park will be fenced to the required specifications to contain rhinos with the infrastructure established for an Anti-Poaching Unit\. There is a need for an upgrade to the rhino holding bomas and some rhino capture and transport equipment to facilitate the translocation of rhinos into this new section\. D\. Containment and Counter-Poaching\. Given the predicted increase in poaching in the Eastern Cape and the current law enforcement capacity at AENP, substantial infrastructure security interventions are needed, including recruitment, equipping and training of security staff\. An operations control room will be built to collate information and inform intelligence-led law enforcement\. Access control will be enhanced, fences upgraded, and communications and aerial support improved\. Training and capacity building will be conducted to improve capability to react to poaching incidents, information collection and technology use\. In addition, security staff will receive mandatory annual human rights training and will hold an Environmental Management Inspectorate (EMI) certificate, which provides the necessary knowledge and mandate to enforce the law\. E\. Community\. The sites will work with target communities to engage them in project activities through the established community forum\. The WCB Project sites target a biodiversity economy node identified by the 35\. February 16, 2021 Page 10 of 20  The World Bank South Africa: Wildlife Conservation Bond (P174097) Government of South Africa\. Community engagement will include benefits to staff currently employed on a permanent basis and project staff on the following programs: Working for water, Working on Fire, Working on ecosystems and Environmental monitors\. SANParks will also employ temporary staff that works on an ad hoc basis and for maintenance functions\. Through the project SANParks will appoint staff to work as rangers, monitors, gate guards, joint operations center staff and a project manager\. Furthermore, there will be employment opportunities during the construction phase of new infrastructure as well as maintaining current infrastructure\. The project offers many positive externalities that can benefit wildlife conservation and the livelihoods of local communities\. Component 1b –Securing rhino populations - Great Fish River Nature Reserve (fully funded by investors)\. 20\. The GFRNR is a regional park managed by statute by the ECPTA\. Activities under this component will include: A\. Rhino Population Management\. When black rhino populations are confined, they can suffer from slowing growth rates due to resource limitation and density dependence\. The WCB Project will continue ongoing activities in the GFRNR to remove rhinos to other areas to maintain a density which supports high growth rates\. Rhinos will be moved in collaboration with the WWF-Black Rhino Range Expansion Project (BRREP) to establish new black rhino populations across Southern Africa, an important strategy to spread extinction risk\. In order to retain high growth rates at GFRNR, the density will need to be managed by removing 15% of the rhino population every third year\. B\. Habitat Management\. Activities will support improved water management in the GFRNR including by creating secure water points in parts of the reserve and removing some existing dams (created under the previous livestock farming era) in high-risk poaching areas\. The WCB investor flows will help fund a maintenance team to support maintenance of roads, fences, infrastructure and vehicles on the reserve\. C\. Containment and Counter-Poaching\. Major security interventions are needed at the GFRNR given the predicted increase in poaching in the Eastern Cape and the current law enforcement capacity at the site\. Interventions will include restructuring the security staff under a newly appointed security manager; recruitment, equipment and training of new security personnel; upgrading fences; establishment of an operations room and a communications network; and upgrading access control and aerial support\. Training and capacity building will be conducted to improve capability to react to poaching incidents, information collection and technology use\. Security staff will receive mandatory annual human rights training and will hold an EMI certificate, which provides the necessary knowledge and mandate to enforce the law\. D\. Community\. The sites will work with target communities to engage them in project activities through the established community forum\. The reserve’s neighboring communities, local municipalities, traditional leadership and private landowners are all represented on the Park Forum which meets regularly\. This forum is used effectively to communicate with neighboring communities and to keep them informed about new developments and projects like the Wildlife Conservation Bond\. The WCB Project sites target a biodiversity economy node identified by the Government of South Africa, and direct employment will support growth of these wildlife economy nodes\. The community will also benefit from the project as staff will be hired, including rangers, monitors, administrative staff and other roles that will be employed from the communities\. In addition, ECPTA has a co-management agreement with the Likhayalethu Communal Property Association and February 16, 2021 Page 11 of 20  The World Bank South Africa: Wildlife Conservation Bond (P174097) successfully co-manages the reserve with them and benefits from this project will benefit the community as co- owner of the reserve\. E\. Interventions under range availability are not included in this component as there are no suitable options for range expansion in the GFRNR\. Component 2 – National/Regional Enabling Conditions to coordinate shared security and research opportunities (fully funded by investors) 21\. To complement the site interventions funded by the WCB investors (component 1), component 2 creates national/regional enabling conditions to help catalyse security and research efforts that will benefit both sites\. National engagement will also be funded by the WCB and will help strengthen linkages with other relevant projects (including the 2 GEF-7 South Africa Global Wildlife Program – GWP projects) and engage where feasible in relevant efforts organized by the GWP and ICCWC\. For example, coordination efforts may include activities related to contributions to enforcement coordination, data exchange, sharing of lessons learned and testing of technologies\. In addition, given the geographic proximity of the two South African sites, there are several interventions that will serve to benefit both sites through integrating the workplan and budget\. These activities have been developed with both SANParks and ECPTA\. 22\. Implementation of the national/regional enabling conditions will be implemented by WFA\. This component will include the provision of an experienced Senior Law Enforcement Advisor to work with both sites as they implement and institutionalize the significant changes to law enforcement operations at site to support the civilian staff that will hold an EMI certificate\. This Advisor role will phase out over the course of the 5-years once suitable capacity has been developed at both agencies\. The Senior Advisor will provide technical expertise on rhino law enforcement including the deployment of suitable technologies and help facilitate uptake of technologies at both sites to improve detection of poaching incursions\. This component funded by the WCB facilitates sharing of lessons learnt and building of collaboration between the sites and with other donor-funded efforts\. This component will also include support for research activities to improve the body of knowledge and further optimize chances of achieving the rhino growth rates under an adaptive management framework, as well as knowledge management and systematization of the project’s lessons learned\. 23\. This component will build on the organizational and financial due diligence conducted on each partner site during the project preparation phase (Investment Readiness conducted from 2018-2020) to assess the enabling environment (Table 1) and to understand whether there were any major associated risks to investment\. The enabling conditions categories will be continually assessed during the WCB Project to resolve risks if they arise\. February 16, 2021 Page 12 of 20  The World Bank South Africa: Wildlife Conservation Bond (P174097) Table 1 – Enabling Conditions Categories and Risk Areas Categories Risk Areas 1\. Land A\. Property rights B\. Land ownership C\. Local community and local government 2\. Governance A\. Governance 3\. Management A\. Leadership team B\. Third party management C\. On-the-ground leadership team 4\. Operations A\. Asset management B\. Insurance C\. Litigation D\. Risk management register E\. PR management 5\. Finance A\. Site financial management and controls B\. Balance sheet C\. Financial sustainability 6\. Policy and procedures A\. Procurement B\. Implementation partner C\. Compliance D\. Employment Component 3 – Project management and monitoring (fully funded by investors) 24\. This component will be financed by the WCB investors and will support project management activities to ensure cost-efficient, timely, and quality delivery of project activities and results, including monitoring and evaluation and project reporting\. This includes support for fiduciary management aspects, including procurement and financial management, the World Bank’s Environmental and Social Framework (ESF), and monitoring and evaluation\. It supports the M&E system to report to the GEF, according to its monitoring policies and guidelines on the expected project’s results (disaggregating by gender, where appropriate), informing the Conservation Success Payment\. Component 3 activities will be carried out by staff assigned by SanParks and the ECPTA to carry out these functions\. 25\. The project design includes targeted interventions for generating better jobs at both sites\. The number of direct beneficiaries disaggregated by gender as co-benefit is a key indicator that will be monitored and reported on for the project\. This will provide detail on permanent and temporary employment at both sites, and direct community benefits, disaggregated by gender\. The development of gender-specific interventions will be developed in close consultations with the communities\. Monitoring and Evaluation 26\. Project management support will be financed by the WCB investors and include maintaining monitoring standards to ensure they monitor, report on and meet independent verification standards\. The monitoring standards include February 16, 2021 Page 13 of 20  The World Bank South Africa: Wildlife Conservation Bond (P174097) achieving the requirements of reporting and auditing: A\. Sites must be able to provide a population estimate with confidence intervals B\. Sites must provide evidence of each observed rhino at launch of the WCB Project and once per annum during the investment phase C\. The baseline number of rhinos in each site must be audited and adjudged to be accurate within a confidence interval by the independent verifier 27\. The ROMS will be used by the site to submit approved data and evidence files to the WCB WB Project team for independent verification and to inform the Conservation Success Payment\. Data and evidence gathered from the field will be submitted to a secure online data management system, the ROMS\. ROMS provides an audit trail on all data, estimates population abundance to inform growth rates which are used to guide the Conservation Success Payment, and provides analysis of population indicators to inform management decision making\. The project will use a third-party verifier to conduct impact verification\. 28\. Third Party Verification\. A third party impact verification will be conducted on the calculation of the rhino bond growth rate to: i) verify the audit trail of evidence for each individual rhino within the two site populations and that the data in Rhino OMS is accurate; ii) review the model has accurately reported the abundance of rhinos at the beginning and end of the period and the number of translocations in and out of the sites; and iii) review the model has accurately reported the rhino growth rate in the period\. 29\. The site level monitoring is a continuous process, while the independent evaluation observation date for abundance estimation is a single calendar year\. The rhino estimate will be reported annually (at years 0, 1, 2, 3, 4, 5)\. For each independent evaluation observation date, sites must provide at least one piece of date-stamped photo evidence with an associated GPS location\. A Jolly-Seber model36 to estimate abundance of rhino for each independent evaluation observation date\. These figures will be independently verified at T0, T2, T5\. The Independent Verifier will interrogate the evidence files for each observed rhino\. 30\. Use of Funds\. Proceeds from the WCB Transaction will stay with the WB Treasury and will be used for SDG purposes\. The coupon payments of the WCB Transaction will be deposited in the account of the two SA agencies in dedicated project accounts and will be used for financing components 1, 2 and 3 of the project (i\.e\. conservation activities)\. Assurance of use of the these flows include validation of (but not limited to): i) compliance of the allocation of funds with the planned Theory of Change; ii) review of the policy and adherence to the policy which ensures no contamination of funds for the purposes of the WCB Project; iii) adherence to the framework, the policies, systems and processes, for tracking allocated bond coupon proceeds; iv) adherence to the framework for tracking unallocated bond proceeds; and v) review of the financial structures, including temporary instruments for holding unallocated cash\. \. \. Legal Operational Policies Triggered? Projects on International Waterways OP 7\.50 No Projects in Disputed Areas OP 7\.60 No 36 An independent review and approval of the model was completed in the RIIP preparation phase\. February 16, 2021 Page 14 of 20  The World Bank South Africa: Wildlife Conservation Bond (P174097) Summary of Assessment of Environmental and Social Risks and Impacts \. 31\. The proposed WCB Project is expected to generate significant environmental and social benefits resulting from its focus on conservation and enhanced management of the ecosystems in Addo Elephant National Park (AENP) and Great Fish River Nature Reserve (GFRNR)\. It will also have positive impacts on the black rhino population by addressing major challenges for financing their conservation\. It is expected to have a positive socio-economic impact because it will enhance the management and sustainability of the protected areas and support increased tourism promotion of a greater rhino population\. The local communities will benefit from this increased investment as for GFRNR the local communities are co-owners and the communities around AENP will benefit from direct jobs and value chain indirect and induced impacts\. The enhanced management activities include minor civil works such as installation of boreholes, construction of fences, etc\., which are relatively low to moderate risk with site-specific, localized and short-term impacts\. Such risks could be associated with inadequate siting of infrastructure, inadequate waste management, insufficient measures for safety and security of community and workers, unsupervised or untrained poaching control and risks associated with rhino translocation\. On the social side, the WCB Project activities funded by investors includes incorporation of social inclusion, job creation, increase household income and improve broader social outcomes in the project areas\. However, use of security personnel is a primary social risk of project activities funded by the investors as it will support security interventions to address poaching and law enforcement\. Although the support to security personnel and law enforcement is intended to target and reduce criminal poaching, use of security personnel has potential to result in violent altercations with suspected poachers\. Additionally, minor civil works are likely to result in limited labor influx and potential for Sexual Exploitation and Abuse/ Harassment (SEA/H)\. The communities living alongside these protected areas are fully engaged in their management and conservation through the existing Park Forum and the Community Property Forum\. 32\. The WCB project has prepared an Environment and Social Management Framework (ESMF) which identifies the potential risks and impacts and identifies mitigation measures which the project will need to implement to ensure the activities are being undertaken in an environmentally sound and socially acceptable manner\. The ESMF provides guidelines and templates for implementation of sub-projects, including assessment of risks and development of site-specific Environmental and Social Management Plans (ESMPs)\. Implementation arrangements required for monitoring and supervision, and good practice requirements for occupational health and safety, chance finds, and labor management have also been defined in the ESMF\. 33\. The Stakeholder Engagement Plan (SEP) was developed in accordance with ESS10\. The SEP builds on the existing procedures under the People and Parks program and specific stakeholder and/or communication plans for consultation and citizens engagement will be developed during implementation\. In order to have an effective stakeholders’ engagement plan, SANParks and ECPTA, the executing agencies, and if necessary Wilderness Foundation Africa (WFA) a partner agency supporting this project, will retain the services of qualified personnel responsible with the day to day implementation of project activities including monitoring and evaluation, and project progress reporting\. 34\. During project preparation, several consultations were conducted with key stakeholders, including government agencies and affected and interested parties in the two PA locations\. It is this longstanding and comprehensive consultations that will extend into the project implementation phase, efforts will be made to provide for inclusion of any stakeholders or groups and their concerns or interests that may have been left out and hence update the SEP\. To improve citizen engagement, the project will establish an accessible GRM February 16, 2021 Page 15 of 20  The World Bank South Africa: Wildlife Conservation Bond (P174097) as outlined in the SEP\. Currently, the PAs are primarily receiving comments and feedback through the Park Forum\. Therefore, there already is an understanding amongst interested and affected parties and ability to submit grievances and receive feedback\. All pertinent contact points will be shared with the Park Forum and other communication between communities and PAs to ensure awareness raising as well as procedures for case handing\. 35\. At the beginning of the implementation of project activities funded by investors, a grievance redress committee will be established to ensure the functionality of the GRM\. In consultations with stakeholders the project will ensure that grievance redress mechanisms are accessible, appropriate and acceptable\. 36\. In addition to the grievance mechanism itself, the WCB Project will develop a communication plan to inform the stakeholders about the existence of the GRM and instructions of operation and this will be continuous throughout the project life period\. The project’s SEP include aspects of stakeholder-targeted communication channels, facilitators, multipliers and timelines\. The project will continue with the regular Park Forum as part of stakeholder consultations\. Equal access to information to all stakeholders will be important\. 37\. Citizen Engagement: The sites will work with target communities to engage them in project activities through the established Parks Forum and the Community Property Association\. The WCB project sites target a biodiversity economy node identified by the Government of South Africa\. Community engagement will include benefits to staff currently employed on a permanent basis and project staff on the following programs: Working for water, Working on Fire, Working on ecosystems and Environmental monitors\. SANParks will also employ temporary staff that works on an ad hoc basis and for maintenance functions\. Through the project SANParks will appoint staff to work as rangers, monitors, gate guards, joint operations center staff and a project manager\. Furthermore, there will be employment opportunities during construction phase of new infrastructure as well as maintaining current infrastructure\. 38\. Gender: During project preparation, an analysis of the gender gap and issues in the protected areas was undertaken\. In South Africa women are less likely than men to participate in the labor force and, when they do, they tend to earn lower wages\. A range of constraints explain this situation, including women’s concentration in lower-paid jobs and sectors\. In order to address this, the WCB Project was informed by the World Bank Gender Strategy which emphasizes closing the gender gap through the creation of economic opportunities\. Jobs in the South African conservation sector, such as rangers, trackers, members of anti- poaching units, protected area management and tourism, were traditionally held overwhelmingly by white males\. Deliberate gender equity investment is particularly important in Eastern Cape where there is a higher outmigration of males than women; Eastern Cape has the highest proportion of female headed households in South Africa combined with high levels of unemployment and poverty\. However, significant efforts have been made in the past 20 years to address inequities through deliberate programs and investment to improve representation in conservation jobs\. This reflects both the national efforts, including the South African Equity Act (1998) and institutional efforts in conservation organizations to address past inequities\. SANParks and ECPTA are both equal opportunity employers who formally recognize the benefits of diversity and need to eliminate discrimination\. They therefore have in place affirmative action which include ambitious programs, targets and related investments in place to address equity, including gender which may be implemented in an incremental manner\. 39\. SANParks’ equity targets include increasing female and Black representation as well as persons living with disabilities in management positions\. The aim is to improve Historically disadvantaged individuals’ representation to 70% of management positions; women in management posts to 50%; staff compliment of people with disabilities to 2%\. AENP employs 222 staff of which 31% are female and 69% are male\. 40\. ECPTA requires equitable representation of Historically Disadvantaged Individuals, including women and February 16, 2021 Page 16 of 20  The World Bank South Africa: Wildlife Conservation Bond (P174097) people with disabilities and reports on the status quarterly\. ECPTA employs an Employment Equity Official who oversees the implementation of the Affirmative Action Program\. GFRNR currently employs 62 staff of which 34% are female and 66% male but has achieved gender parity at management level\. 41\. However, within Conservation Services, which covers the increased staffing funded under the Project’s component 1 to enhance the rhino population, there are higher levels of gender inequities\. In GFRNR 69% of current staff are male and 31% are female\. In AENP 84% are male and 16% female\. The Project will therefore contribute to ongoing efforts by increasing gender equity in Conservation Services in the two PAs\. This increase will be facilitated through targeted outreach and recruiting programs in collaboration with the two Park Forum and the local CPAs\. Through these efforts the Project actions aims to: promote and increase women’s advancement in conversation jobs; contribute to increasing women’s incomes and share of benefits from investment; and promote the empowerment of women in conservation\. 42\. GBV/SEA/SH: Gender-based violence (GBV) is widespread in South Africa and inflicts significant economic as well as human costs\. While national estimates of GBV do not exist, regional estimates are available as well as national estimates for intimate partner violence (IPV), the most common type of GBV in South Africa\. Gender norms and unequal power relations between women and men underlie the high rates of GBV seen in South Africa\. One study (UCT, 2016) identifies the following factors associated with the victimization of women: the economic dependency of a woman on a male partner, the extent of the control of the relationship by the man, and the man’s personal norms related to inequitable gender relationships (UCT, 2016)\. These can all be viewed as issues that have unequal gender relations and the social norms that drive them at their root\. Specific risks of GBV/SEA/SH and mitigation measures will be addressed in subsequent ESMPs and measures will be put in place to mitigate and manage any risks of incidents and training and awareness raising on GBV/SEA/SH issues and prevention, as well as a referral pathway for survivors\. Additionally, bidding documents and contractor’s codes of conduct will incorporate GBV/SEA/SH prevention measures\. 43\. Security risk: Security risks are associated with the project activities to support the recruitment, equipping, and training of security personnel to support law enforcement activities for anti-poaching\. The project will prepare a Security Risk Assessment (SRA) as an annex to the ESMF to assess the security context of the project and security risks related to project activities\. The security personnel supported by the project are anticipated to be direct workers of both EPTCA and SANParks, which are government entities\. Although the personnel are expected to be armed, no proceeds of the project will be used to support the procurement of firearms\. Furthermore, the deployment of security personnel will follow the requirements of ESS4, including prior to deploying military or security personnel, the project shall take measures to ensure that security personnel are: (i) screened to confirm that they have not engaged in past unlawful or abusive behavior, including excessive use of force; and (ii) adequately instructed and trained, on a regular basis, on the use of force and appropriate behavior and conduct\. During preparation, project will propose SANParks and EPTCA adopt the Voluntary Principles on Security and Human Rights as the relevant good international industry practice to meet the requirements of ESS4\. The security risk assessment will further be reassessed during implementation and appropriate plan prepared\. E\. Implementation Institutional and Implementation Arrangements 44\. Implementation of the parallel co-financed project activities funded by the WCB and GEF NGI will be led by SANParks and ECPTA\. The successful implementation of the conservation activities may trigger the February 16, 2021 Page 17 of 20  The World Bank South Africa: Wildlife Conservation Bond (P174097) disbursement condition for the Conservation Success Payment that may be made to WCB bond investors by the WBG Treasury using GEF NGI payout\. SanParks and ECPTA are autonomous agencies which are governed by an independent Board of Directors\. The WBG Treasury will transfer the semi-annual coupon flows to the project-specific bank accounts at SanParks for AENP and ECPTA for GFRNR\. Implementation of the activities in the two project sites will be undertaken by the management and staff of AENP and GFRNR\. All conservation activities to be fully financed by these flows are consistent with the agreed management plans of the area and contribute to the overall PDO of the project as well as contributing to the overall objectives of the protected areas\. There is an agreed 5-year implementation plan and budget as well as annual workplans that will be reviewed by the WB task team each year during implementation\. The implementation arrangements rely on the existing strong management and technical capacity at both parks which includes financial, procurement and environmental and social safeguard capacity\. The project implementation will be executed using the existing dedicated park staff and will not require a separate PIU\. Coordination and collaboration across sites will be conducted throughout the project\. 45\. Key staff funded by the project (including security manager, monitoring staff and technical support, and staff that will carry out ESF functions) will have the relevant skills to address issues and part of their jobs will include engagement across the two sites and participation in provincial and national fora where new security developments and management's options are shared and discussed\. This collaboration across geographies and sectors is promoted by allow for dissemination of lessons learned and coordination on project activities\. The project activities are aligned to and contribute to national efforts to address rhino poaching and wildlife crime across the country outlined in the Integrated Strategic Management of Rhinoceros and the principles set out in the draft National Integrated Strategy to Combat Wildlife Trafficking (NISCWT)\. The project resources are a significant infusion for the project sites and greater than current funds dedicated to rhino conservation at both sites\. This project is part of a national effort to enhance rhino conservation and will provide lessons learned and collaboration opportunities which can provide benefits beyond the two parks\. Increased in the management capacity for these protected areas should help South Africa enhance its capabilities in the Eastern Cape Region and beyond\. Coordination and collaboration with other sites through activities that support enhanced regional and national enabling conditions and dissemination of lessons learned can help to positively impact other parks in South Africa\. In addition, replication of this funding model may provide additional revenue opportunities for other parks in South Africa to replicate and apply for their conservation areas\. 46\. The WCB project is using the parallel co-financing modality\. The WCB bondholders indicate their parallel co- financed funds be implemented by the SanParks and ECPTA following IPF rules\. The parallel co-financed funds will be spent as detailed in the TOC and budgeted workplan for each site\. The WBG Treasury agreement with SanParks and ECPTA will outline the terms and conditions of the investor flows available for the sites to support implementation of their approved strategies and workplans\. The project partners SanParks and ECPTA are responsible for delivering on the desired project results and will engage technical service providers to bring in expert services and tools as needed\. WB supervision will be conducted on the implementation of the activities the protected area authorities will implement to trigger the disbursement for the \. conservation success payment that uses the GEF funds\. February 16, 2021 Page 18 of 20  The World Bank South Africa: Wildlife Conservation Bond (P174097) CONTACT POINT World Bank Nathalie Weier Johnson Senior Environmental Specialist Sarah Belle Underwood Moyer Senior Environmental Specialist Borrower/Client/Recipient The Eastern Cape Parks and Tourism Agency (ECPTA) Vuyani Dayimani CEO dean\.peink3@ecpta\.co\.za South African National Parks (SANParks) Fundisile Mketeni CEO Fundisile\.Mketeni@sanparks\.org Implementing Agencies South African National Parks (SANParks) Fundisile Mketeni CEO Fundisile\.Mketeni@sanparks\.org The Eastern Cape Parks and Tourism Agency (ECPTA) Vuyani Dayimani CEO dean\.peink3@ecpta\.co\.za Page 19 of 20  The World Bank South Africa: Wildlife Conservation Bond (P174097) FOR MORE INFORMATION CONTACT The World Bank 1818 H Street, NW Washington, D\.C\. 20433 Telephone: (202) 473-1000 Web: http://www\.worldbank\.org/projects APPROVAL Nathalie Weier Johnson Task Team Leader(s): Sarah Belle Underwood Moyer Approved By Practice Manager/Manager: Country Director: Asmeen M\. Khan 15-Apr-2021 Page 20 of 20

APPROVAL

P106069

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\03”\03ã\03í\03Û\03£\03ß\03? \02ì\03­\03Ø\03Ô\03ß\03? \03å\03ã \03©\03£\03à\03ß \03”\03ó\03©\03Ž\03»\03—\03×\03û\03?\03í \03”\03ó\03Ë\03Ž\03ã\03—\03Ÿ\03û\03? \03”\03ó\03ã\03ç\03—\03ß\03? \03”\03Á\03§ 2006 - 2010 Page 2 \01U\01?\01i\01g\01? \01X\01g\01U\01”\01j 9\.6 \01‡\01U\01w \01h\01Š\01ˆ \01U\01”\01?\01Š\01l \01Y\01S\01U\01ˆ\01…\01T \01“\01~ 2000 \. 2 \01v\01”\01i»\01l\01…\01T ¿\01g\01x\01ˆ\01…\01T \01T\01h\01? \01‰\01L \01‘\01…\01O \01I\01U\01W\01i\01Ž\01„\01†\01… \01Y\01ˆ\01U\01x\01…\01T \01Y\01l\01l\01N\01ˆ\01…\01T \01Z\01T\01i\01”\01g\01‚\01[ \01i\01”\01n\01[\01? \01s\01l\01?\01[\01ˆ\01…\01T \01g\01ˆ\01—\01T \01“\01~ \01i\01ˆ\01[\01l\01” \01}\01?\01l \01?\01ˆ\01Š\01†\01… \. \01T\01h\01? \01Y\01c\01p \01Z\01W\01]\01”\01? \01‰\01ˆ \01g\01c\01…\01T\01? \01g\01U\01p\01[\01?\01›\01T \01v\01”\01?\01Š\01[ \01‘\01…\01O \01Y\01”\01ˆ\01T\01i\01…\01T \01Y\01”\01Š\01ˆ\01”\01…\01T \01Y\01ˆ\01?\01„\01c\01…\01T \01g\01?\01Ž\01` \01i\01”\01g\01‚\01[\01…\01T \01g\01g»\01w \01}\01w\01U»\01r\01[ \01‘»\01…\01O \01’\01g\01N\01”\01l \01’\01h\01…\01T \01}\01”\01i\01…\01T \01Y\01W\01i\01Ž\01„\01… \01a\01?\01ˆ\01s\01…\01T \01U\01Ž\01`\01ˆ\01U\01Š\01i\01W\01? 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APPROVAL

P085851

Page 1 PROJECT INFORMATION DOCUMENT (PID) APPRAISAL STAGE Report No\.: AB617 Project Name MX Basic Education Dev Phase III Region LATIN AMERICA AND CARIBBEAN Sector Primary education (50%); Secondary education (20%);General public administration sector (10%);Pre-primary education (20%) Borrower(s) UNITED MEXICAN STATES Implementing Agency National Council for Education Development (CONAFE) Environment Category [ ] A [X] B [ ] C [ ] FI [ ] TBD (to be determined) Safeguard Classification [ ] S 1 [X] S 2 [X] S 3 [ ] S F [ ] TBD (to be determined) Date PID Prepared February 12,2004 Date of Appraisal Authorization April 2004 Date of Board Approval June 2004 1\. Country and Sector Background Mexico, a member of the OECD, and the world’s ninth largest economy has made significant progress in expanding education access over the past few decades (90 percent of school age children attend primary school with a completion rate of 86%) ; However, universal coverage is yet to be achieved and quality of education is well below international standards\. This is especially the case in the poorer states and among indigenous peoples\. Today a child in Mexico can expect to be in school for up to 12 years, compared to 19 in Australia, Finland and the United Kingdom\. In Mexico, only 7% of 15-year-olds are at the two highest level of performance in reading literacy (OECD average 31%)\. The Mexican government began to address the challenge of educational disadvantage by placing a greater emphasis on compensatory programs that provide extra support to education for disadvantaged groups (children living in rural or marginal urban areas, and handicapped, migrant and indigenous children) and created the Consejo National de Educativo (National Council for Education Development, CONAFE), of the Secretariat of Public Education (SEP)\. The main issues facing the government’s compensatory education programs are as follows: (a) Low readiness of learning among children entering school, (b) inadequate training for teachers working with at-risk-students (c) poor fit between education programs and the needs of the students and of the community, (d) deficient supervisory practices, (e) low secondary education coverage, (f) weak managerial and administrative capacity at the state level, (g) organization fragmentation of compensatory programs by level and type, and (h) lack of critical inputs in schools located in poor, rural, indigenous communities and marginal urban areas\. These issues are being addressed under the Government’s Education Development Program which the World Bank has been supporting since its start\. For the period 2001-2006, CONAFE focuses on improving the quality of education for students in the poorest areas by Page 2 establishing minimum operational standards for all targeted schools, developing innovative programs to address the needs of the students, involving schools and communities in the decision making process at the school level , and developing the institutional capacity of states to design and implement national education policies and compensatory programs\. CONAFE’s compensatory education programs now support more than three million students in pre- primary and primary education, and about one million students in telesecundaria education (secondary education delivered via television to remote communities)\. 2\. Objectives The Basic Education Development Program APL supports the Government's compensatory education program, as outlined in the National Education Program (PNE) 2001-2006 and the Education Development Program 1995-2000\. The Basic Education Development Program (APL), PAREIB, is ending its second of a three-phase program which supports implementation of the Government of Mexico’s compensatory education program\. The program supports the Government’s efforts to raise the level and quality of schooling in Mexico\. Phase II had as its objectives (a) to consolidate and expand quality improvements carried out in APL 1, covering additional targeted communities at initial, preschool, primary and lower secondary levels both in rural and marginal urban areas and (b) further strengthen the management capacity of key sector entities at both federal and state levels\. The program has met most of the benchmarks set for Phase II and the triggers needed to proceed to Phase III have been achieved\. In addition, an impact evaluation of PAREIB, using national achievements tests and a census of schools, was undertaken\. The analysis utilized a robust methodology to create a control group\. The study concluded that CONAFE is effective and well targeted\. Controlling for relevant background levels at the primary and secondary levels, CONAFE significantly improved student performance and decreased inequality between CONAFE and non-CONAFE schools\. Spanish and math scores of CONAFE students increased significantly over the sample period\. CONAFE students gained on non-CONAFE students by 2\.4 to 4\.3 points per year in a math-Spanish composite score\. CONAFE also decreased test score inequality by 9% to 30%\. CONAFE is most effective in eliminating learning inequality for students with the most disadvantaged backgrounds\. PAREIB II is achieving its goal of improving and expanding educational quality\. The objectives of Phase III focus on fine-tuning the delivery mechanisms while extending the successful components of Phase II\. Therefore, the objectives of Phase III are: (a) to consolidate and expand quality improvements in initial and basic education (preschool, primary and lower secondary), covering, inter alia , infrastructure improvements, didactic materials provision, teacher training, school supervision, and implementation of school-based management strategies; (b) to strengthen management of the education system through support for the Government’s ongoing strategy to consolidate the organization and management of basic education (preschool through lower secondary), and to integrate the operation of the compensatory education program; and (c) to continue strengthening states’ institutional capacity to plan, program and evaluate the delivery of basic education services\. Page 3 3\. Rationale for Bank Involvement The Bank has contributed both technically and financially to the evolution of the Mexican compensatory education strategy\. The lessons of each have been incorporated in successive projects and the Bank has been able to share lessons learned from experience sin other countries , many of which have been adapted to the Mexican context within the ongoing program\. The proposed third phase of PAREIB represents a critical step in fine-tuning the delivery mechanisms while extending the successful components of previous phases of the program\. The program fits the overall objectives of the current and proposed Country Assistance Strategy for Mexico\. The program supports the current CAS’s stated objective of human capital development by enhancing the quality of public education, and ensuring the sustainability of ongoing efforts in basic education\. The program also supports the new draft CAS objective of comprehensive assistance to the Government’s efforts to reduce poverty and inequality\. Specifically, PAREIB provides operational support for a targeted program whose focus is to provide access to education for the rural poor\. 4\. Description The project, with a total cost of US$ 521\.50 million ($300 million Bank financing) would include the following components and activities: Component 1—Initial Education ($85\.6 million) \. This component provides out-of-school training for parents and other adults directly involved raising small children, with the objective of contributing to the child’s integral development and to a smooth transition to preschool\. PAREIB III proposes to expand coverage of initial education by 10 percent a year, in line with the recently approved Mexican law that mandates preschool education\. The objectives of this component will be achieved through the following subcomponents: (a) Subcomponent 1\.1— Training for Education Promoters, Module Supervisors and Zone Coordinators ($22\.0 million); (b) Subcomponent 1\.2—Community Participation ($0\.9 million); (c) Subcomponent 1\.3— Sessions with Parents and Young Children ($54\.3 million); (d) Subcomponent 1\.4—Educational and Dissemination Materials ($7\.2 million); (e) Subcomponent 1\.5—Monitoring and Evaluation of the Initial Education Program ($1\.3 million)\. Component 2—Support for Basic Education ($358\.2 million)\. The objective of this component is to help improve basic education indicators in isolated, rural communities, by providing for a package of interventions comprising material, pedagogic and school management actions in selected preschools, and primary and lower-secondary telesecundaria schools\. In addition, support will be provided to rehabilitate and equip teacher’s centers located in isolated rural areas\. The objectives of this component will be achieved through six subcomponents: (a) Subcomponent 2\.1—School infrastructure ($104\.7 million); (b) Subcomponent 2\.2—Didactic Materials ($88\.9 million); (c) Subcomponent 2\.3—Training and Technical Assistance for Technical School Councils (CTE) ($24\.7 million)\.; (d) Subcomponent 2\.4—Training and Support to the Parents Associations (APFs) ($89\.0 million); (e) Subcomponent 2\.5—Teachers’ Page 4 Incentives ($42\.9 million); (f) Subcomponent 2\.6—Support for School Supervision ($8\.0 million)\. Component 3—Institutional Strengthening ($56\.2 million)\. The objective of this component is to continue strengthening the capacity of the SEPEs to plan, program and evaluate basic education service delivery\. This objective will be achieved through the following subcomponents: (a) Subcomponent 3\.1—Strengthening the Pedagogic Capacity of State Secretariats of Public Education (SEPEs) ($2\.0 million); (b) Subcomponent 3\.2—Strengthening of the Administrative Capacity of the State Secretariats of Public Education (SEPEs) ($3\.4 million); (c) Subcomponent 3\.3—Project Monitoring and Evaluation ($4\.1 million); (d) Subcomponent 3\.4—Project Administration ($46\.7 million)\. 5\. Financing Source: ($m\.) BORROWER 200\.00 INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT 303\.00 Total 503\.00 6\. Implementation Nacional Financiera S\.C\.N\. (NAFIN) will continue as the Borrower, with the guarantee of the united Mexican States\. NAFIN is responsible fro submitting withdrawal applications to the World Bank , maintaining, (along with CONAFE) separate records and accounts for all transactions under the loan, and having the deposit accounts audited in accordance with standard world Bank requirements\. The National Council for Education Development (CONAFE), the agency responsible for compensatory programs , will have principal responsibility for implementation and will coordinate all implementation activities on behalf of SEP\. CONAFE has extensive experience implementing World Bank and IDB financed projects\. CONAFE will exercise its project coordination responsibilities through a Compensatory Program Unit (CPU) with participation of SEP’s normative units\. The CPU is adequately organized and staffed to perform the required to perform the required administrative, supervisory and financial management functions\. Its responsibilities include project execution activities; yearly work plan review consolidation and program execution; procurement; annual implementation review information preparation; liaison with state level offices ; and monitoring of project objectives and goals, processes, and deadlines in coordination with SEP and SEPEs\. The states through their SEPEs, plan and execute compensatory education activities according to a set of national guidelines, which specify the targeted schools and communities, menu of supported activities , educational norms to be met, and procedures\. The SEPES prepare annual work plans for the compensatory programs including procurement plans for the coming year, which are consolidated by CONAFE at the federal level\. Procurement is carried out by CONAFE either at the central level or by state level CONAFE Delegations in SEPEs or at the municipal or school level in the case of smaller contracts\. The institutional capacity of CONAFE is deemed Page 5 satisfactory \. Authorized funds are channeled through the borrower, NAFIN, which subsequently transfers allocations to each state on a quarterly basis through commercial banks\. 7\. Sustainability The sustainability of World Bank financed projects in Mexico, including PAREIB I and II , has been demonstrated by the fact that successful interventions introduced by these projects by SEP and sub-national governments at state and municipal levels\. Innovative models tested in PAREIB I and II have been generalized to the entire system\. The SEPES in several states have begun to undertake their own compensatory programs\. There is strong country ownership of the program and the preparation of the third phase\. CONAFE’s capacity is evidenced through the successful implementation of previous phases and the significant achievement results\. In addition, the proposed external evaluation of the entire PAREIB program will ascertain the sustainability of the program upon completion of the third phase\. 8\. Lessons Learned from Past Operations in the Country/Sector This proposal incorporates lessons learned from the Phase I and II of the program and all previous education projects in Mexico as well as those with similar objectives elsewhere in Latin America\. Lessons learned from the first and second phase of the program show that the program is satisfactory, sustainability is highly likely, institutional development impact is substantial, and Bank and borrower performance are satisfactory\. Improvements can still be made in the design of outcome indicators and in promoting more active parental participation\. Thus the improved targeting criteria used in the proposed program establishes a set of poverty and education indicators to identify schools and communities in greatest need of extra assistance\. 9\. Safeguard Policies (including public consultation) Safeguard Policies Triggered by the Project Yes No Environmental Assessment ( OP / BP / GP 4\.01) [ x] [ ] Natural Habitats ( OP / BP 4\.04) [ ] [x ] Pest Management ( OP 4\.09 ) [ ] [ x] Cultural Property ( OPN 11\.03 , being revised as OP 4\.11) [ ] [ x] Involuntary Resettlement ( OP / BP 4\.12) [ ] [ x] Indigenous Peoples ( OD 4\.20 , being revised as OP 4\.10) [x ] [ ] Forests ( OP / BP 4\.36) [ ] [ x] Safety of Dams ( OP / BP 4\.37) [ ] [ x] Projects in Disputed Areas ( OP / BP / GP 7\.60) * [ ] [ x] Projects on International Waterways ( OP / BP / GP 7\.50) [ ] [ x] It was recommended that this project move to new Category B and C projects, system for responsibility and accountability for safeguards oversight and clearance\. * By supporting the proposed project, the Bank does not intend to prejudice the final determination of the parties' claims on the disputed areas Page 6 The proposed project was rated as Category “B” environmental rating\. A Social Assessment has been carried out An Indigenous Peoples Development Plan has been prepared An Environmental framework for civil works has been prepared The above documents will be submitted to the Infoshop as Annex to this PID 10\. List of Factual Technical Documents See Annex to this PID 11\. Contact point Contact: Harry Anthony Patrinos Title: Sr Education Econ\. Tel: (202) 473-5510 Fax: (202) 522-3135 Email: Hpatrinos@worldbank\.org 12\. For more information contact: The InfoShop The World Bank 1818 H Street, NW Washington, D\.C\. 20433 Telephone: (202) 458-5454 Fax: (202) 522-1500 Web: http://www\.worldbank\.org/infoshop

APPROVAL

P176827

 ‫البنك الدولي‬ ‫ع التصدي لجائحة كورونا Ù?ي اليمن (‪)P176827‬‬‫تمويل إضاÙ?ي لمشرو‬ ‫ع‬‫وثيقة معلومات المشرو‬ ‫مرحلة التقييم المسبق | تاريخ اإلعداد‪/‬التحديث‪ 25 :‬مايو‪/‬أيار ‪ | 2021‬تقرير رقم‪PIDA31991 :‬‬ ‫الصÙ?حة ‪ 1‬من ‪9‬‬ ‫‪ 3‬مايو‪/‬أيار ‪2021‬‬  ‫البنك الدولي‬ ‫تمويل إضاÙ?ي لمشروع التصدي لجائحة كورونا Ù?ي اليمن (‪)P176827‬‬ ‫معلومات أساسية‬ ‫‪OPS_TABLE_BASIC_DATA‬‬ ‫ع األساسية‬‫أ‪ \.‬بيانات المشرو‬ ‫ع األصلي (إن وجد)‬ ‫م ّÙ?‬ ‫عرÙ? المشرو‬ ‫Ù?‬ ‫ع‬‫اسم المشرو‬ ‫ع‬‫عرÙ? المشرو‬ ‫م ّÙ?‬ ‫Ù?‬ ‫البلد‬ ‫‪P173862‬‬ ‫ع التصدي‬‫تمويل إضاÙ?ي لمشرو‬ ‫‪P176827‬‬ ‫الجمهورية اليمنية‬ ‫لجائحة كورونا Ù?ي اليمن‬ ‫ي للعرض على‬‫التاريخ التقدير‬ ‫ي للتقييم المسبق‬‫التاريخ التقدير‬ ‫المنØقة‬ ‫ع األصلي‬‫اسم المشرو‬ ‫مجلس المديرين التنÙ?يذيين‬ ‫ان ‪2021‬‬ ‫‪ 11‬يونيو‪/‬حزير‬ ‫‪ 26‬مايو‪/‬أيار ‪2021‬‬ ‫الشرق Ø§Ø£Ù„ÙˆØ³Ø ÙˆØ´Ù…Ø§Ù„ Ø£Ù?ريقيا‬ ‫ع التصدي لجائحة كورونا Ù?ي اليمن‬‫مشرو‬ ‫ة التنÙ?يذ‬ ‫الهيئة المسؤولة عن إدار‬ ‫المقترض‪/‬المقترضون‬ ‫أداة التمويل‬ ‫مجال الممارسة (الرئيسي)‬ ‫منظمة الصحة العالمية‬ ‫منظمة الصحة العالمية‬ ‫ي‬‫ع استثمار‬‫تمويل مشرو‬ ‫الصحة والتغذية والسكان‬ ‫ع األصلي‬‫ح للمشرو‬‫الهدÙ? (األهداÙ?) اإلنمائي المقتر‬ ‫الوقاية من الخØر الذي تشكله جائحة كورونا وكشÙ?ه والتصدي له‬ ‫المكونات‬ ‫ّÙ?‬ ‫االستجابة الØارئة لجائحة كورونا‬ ‫إدار‬ ‫ة التنÙ?يذ والمتابعة والتقييم‬ ‫ع (بماليين الدوالر‬ ‫ات)‬ ‫بيانات تمويل المشرو‬ ‫ملخص‬ ‫‪20\.01‬‬ ‫ع‬‫التكلÙ?Ø© الكلية للمشرو‬ ‫‪20\.01‬‬ ‫ع التمويل‬‫مجمو‬ ‫‪9\.00‬‬ ‫منه تمويل من البنك الدولي لإلنشاء والتعمير‪/‬المؤسسة الدولية للتنمية‬ ‫‪0\.00‬‬ ‫الÙ?جوة التمويلية‬ ‫التÙ?اصيل‬ ‫َّ‬ ‫المقدم من مجموعة البنك الدولي‬ ‫التمويل‬ ‫الصÙ?حة ‪ 2‬من ‪9‬‬ ‫‪ 3‬مايو‪/‬أيار ‪2021‬‬  ‫البنك الدولي‬ ‫تمويل إضاÙ?ي لمشروع التصدي لجائحة كورونا Ù?ي اليمن (‪)P176827‬‬ ‫‪9\.00‬‬ ‫المؤسسة الدولية للتنمية‬ ‫‪9\.00‬‬ ‫منحة من المؤسسة الدولية للتنمية‬ ‫التمويل من خارج مجموعة البنك الدولي‬ ‫‪11\.01‬‬ ‫الصناديق االستئمانية‬ ‫‪7\.76‬‬ ‫صندوق التمويل العالمي‬ ‫‪3\.25‬‬ ‫ئ الصحية‬‫الصندوق االستئماني متعدد المانحين للتأهب واالستجابة للØوار‬ ‫تصنيÙ? المخاØر البيئية واالجتماعية‬ ‫كبير‬ ‫ة‬ ‫ى (حسب الحاجة)‬ ‫رر‬ ‫ات أخر‬ ‫قا‬ ‫ب‪ \.‬المقدمة والسياق العام‬ ‫السياق العام للبالد‬ ‫اع العنيÙ?‪ ،‬الذي دخل اآلن عامه السابع‪ ،‬االقتصاد اليمني بالشلل وخلق أزمة إنسانية لم يسبقها مثيل‪ \.‬وتوقÙ?ت صادر‬ ‫ات النÙ?Ø‪ ،‬وهي‬ ‫أصاب الصر‬ ‫المصدر الرئيسي لإلير‬ ‫ادات الحكومية والصرÙ? األجنبي‪ ،‬من الناحية الÙ?علية Ù?ي عام ‪ 2015‬بسبب التخريب المتكرر الذي تعرضت له منشآت‬ ‫البنية التحتية الحيوية وتÙ?اقم انعدام األمن‪ \.‬ونتيجة لذلك‪ ،‬أدى توقÙ? تقديم الخدمات العامة األساسية ودÙ?ع رواتب موظÙ?ي جهاز الخدمة المدنية‬ ‫على نØاق واسع‪ ،‬والتدهور السريع Ù?ي قيمة الريال اليمني‪ ،‬ونقص الواردات إلى إضعاÙ? القØاع غير النÙ?Øي وحرمان الكثير من سكان اليمن‬ ‫ر وأصبحت أسعار المواد‬ ‫من مصدر منتظم للدخل‪ \.‬وضربت أزمة سيولة البالد Ù?ي عام ‪ ،2018‬حيث انخÙ?ضت قيمة الريال اليمني انخÙ?اضاً كبي اً‬ ‫جية‪ ،‬التي مولت واردات المواد الغذائية والسلع‬ ‫الغذائية Ù?علياً Ù?وق Øاقة العديد من األسر‪ \.‬وبحلول أوائل عام ‪ ،2020‬اÙ?ستنÙ?دت المساعدات الخار‬ ‫اء عدم تجديد موارد احتياØيات النقد األجنبي‪ \.‬وأتاح صندوق‬ ‫ى‪ ،‬وساعدت على استقر‬ ‫ار االقتصاد Ù?ي عام ‪ ،2019‬وذلك من جر‬ ‫الضرورية األخر‬ ‫النقد الدولي Ù?رصة Ù„Ø§Ù„Ù„ØªÙ‚Ø§Ø Ø§Ø£Ù„Ù†Ù?اس Ù?ي أواخر ربيع وصيÙ? عام ‪\.2020‬‬ ‫ات‬ ‫ر‪ ،‬مما Ø£Ù?ضى إلى تÙ?اقم أوضاع الÙ?قر‪ \.‬و َّ‬ ‫أدت التشوهات الناجمة عن تجزؤ القدر‬ ‫وÙ?ي ‪ ،2020‬ازدادت الظروÙ? االجتماعية واالقتصادية تدهو اً‬ ‫ات المتعلقة بالسياسات بين مر‬ ‫اكز السلØØ© إلى مزيد من التعقيد لألزمة االقتصادية واإلنسانية‪ \.‬وأشارت الشواهد والدالئل‬ ‫رر‬‫المؤسسية‪ ،‬وتباين الق ا‬ ‫غير الرسمية إلى احتمال حدوث انكماش اقتصادي من مستوى كان منخÙ?ضا بالÙ?عل Ù?ي عام ‪ \.2020‬وكان أكثر من نصÙ? سكان اليمن الذين‬ ‫هم بين ‪ 18‬و‪ 24‬عاما عاØلين عن العمل Ù?ي عام ‪( 2017‬برنامج األمم المتحدة اإلنمائي ‪ \. )2017‬ونتيجة لهذا التدهور المأساوي‬ ‫ح أعمار‬ ‫تتر‬ ‫او‬ ‫الصÙ?حة ‪ 3‬من ‪9‬‬ ‫‪ 3‬مايو‪/‬أيار ‪2021‬‬  ‫البنك الدولي‬ ‫تمويل إضاÙ?ي لمشروع التصدي لجائحة كورونا Ù?ي اليمن (‪)P176827‬‬ ‫َّر بنسبة ‪ %80‬من السكان (نحو ‪ 24‬مليونا) يعيشون دون Ø®Ø Ø§Ù„Ù?قر حتى قبل األزمة الناجمة عن جائحة Ù?يروس‬ ‫لألحوال Ù?ي اليمن‪ ،‬بات ما Ù?‬ ‫يقد‬ ‫كورونا المستجد (كوÙ?يد‪( )19-‬البنك الدولي ‪ \.)2019‬وباإلضاÙ?Ø© إلى الÙ?قر النقدي‪ ،‬Ù?إن ما يصل إلى ‪ %80‬من األسر تعاني أشكاالً متداخلة من‬ ‫الحرمان النقدي وغير النقدي (برنامج األغذية العالمي ‪\.)2020‬‬ ‫تتسم اآلÙ?اق االقتصادية واالجتماعية لعام ‪ 2021‬وما بعده بقدر كبير من عدم اليقين‪ \.‬ومع استمر‬ ‫ار تدهور األوضاع السياسية واألمنية الصعبة‪،‬‬ ‫Ù?إن األحوال االجتماعية واالقتصادية ال تز‬ ‫ال بالغة الصعوبة‪ \.‬ومن شأن تحقيق تقدم عاجل Ù?ي معالجة القيود الحالية المÙ?روضة على المستلزمات‬ ‫اع المسلح والمصالحة السياسية‬ ‫وواردات الوقود أن يحسن من مستوى ّÙ?‬ ‫توÙ?ر الخدمات العامة والبيئة التشغيلية للعمليات اإلنسانية‪ \.‬ويشكل وقÙ? الصر‬ ‫Ù?ي نهاية المØاÙ?‪ ،‬بما Ù?ي ذلك عودة تنÙ?يذ سياسة االقتصاد الكلي الموحدة‪ ،‬شرØين أساسيين إلعادة بناء االقتصاد واعادة بناء النسيج االجتماعي‪\.‬‬ ‫السياق القØاعي والمؤسسي‬ ‫بعد ست سنوات من الصر‬ ‫اع العنيÙ? Ù?ي اليمن‪ ،‬أصبح النظام الصحي على حاÙ?Ø© االنهيار‪ \.‬وقد بقي الماليين على قيد الحياة بÙ?ضل المعونات‬ ‫ة بسبب الصر‬ ‫اع الذي Øال أمده‪ \.‬ويجد السكان بالكاد قوت‬ ‫الغذائية الØارئة‪ ،‬وأصبح حجم سوء التغذية المزمن Ù?ي صÙ?وÙ? السكان شديد الخØور‬ ‫ح بين‬ ‫اض المعدية Ù?ي وقت واحد من موسم إلى آخر‪ ،‬تتر‬ ‫او‬ ‫يومهم‪ ،‬وقد أصبح ضعÙ?هم أكثر وضوحاً مع ظهور العديد من حاالت تÙ?شي األمر‬ ‫الكولي ا‬ ‫ر وحمى الضنك‪ \.‬وحتى اآلن‪ ،‬Ù?إن أقل من ‪ %50‬من المنشآت الصحية Ù?ي جميع أنحاء اليمن تعمل بكامل Øاقتها‪ ،‬Ù?ي حين تعاني المنشآت‬ ‫الصحية التي تعمل من نقص Ù?ي المتخصصين والمعدات واألدوية‪ \.‬و‬ ‫ال يوجد Ø£Øباء Ù?ي المنشآت الصحية Ù?ي ‪ %18‬من المديريات Ù?ي جميع‬ ‫أنحاء اليمن‪ \.‬وقد انخÙ?ضت تغØية التØعيم بنسبة تصل إلى ‪ %30‬منذ بدء الصر‬ ‫اع‪ ،‬ولم يتلق معظم العاملين Ù?ي القØاع الصحي مرتباتهم لبضع‬ ‫سنوات‪\.‬‬ ‫وحتى منتصÙ? أبريل‪/‬نيسان ‪ ،2021‬كان هناك أكثر من ‪ 5800‬حالة إصابة مؤكدة بÙ?يروس كورونا Ù?ي اليمن‪ ،‬وأكثر من ‪ 1100‬حالة وÙ?اة‬ ‫اؤها Ù?ي اليمن وعدم اإلبالغ‬ ‫رت التي يتم إجر‬ ‫ر لمحدودية االختبا ا‬ ‫مؤكدة‪ \.‬بيد أنه من الممكن أن تكون هذه األرقام الرسمية أقل كثي اً‬ ‫ر من الحقيقة‪ ،‬نظ اً‬ ‫ر كبي اً‬ ‫ر على إمكانية الحصول‬ ‫عن أعداد حاالت اإلصابة بانتظام إال Ù?ي مناØق معينة من البالد‪ \.‬وباإلضاÙ?Ø© إلى ذلك‪ ،‬Ù?قد أثرت جائحة كورونا تأثي اً‬ ‫عاية الصحية غير مجهز‬ ‫ة للتعامل مع االرتÙ?اع الكبير‬ ‫عاية الصحية واالستÙ?ادة من الخدمات على أرض الواقع‪ ،‬كما أن منشآت الر‬‫على خدمات الر‬ ‫Ù?ي حاالت اإلصابة بالÙ?يروس‪ ،‬مما يترك الشعب اليمني أكثر عرضة للمعاناة‪ \.‬عالوة على ذلك‪ ،‬Ù?قد Ø£Ù?عيد استخدام بعض المنشآت الصحية‬ ‫عاية الصحية‬ ‫كوحدات عزل Ù?‬ ‫مخصصة للعناية حصرياً بالمصابين بÙ?يروس كورونا‪ ،‬وهو ما قد يزيد من التحديات التي تواجه تقديم خدمات الر‬ ‫ى‪\.‬‬‫األساسية األخر‬ ‫ج‪ \.‬األهداÙ? اإلنمائية المقترحة‬ ‫ع‬‫الهدÙ? اإلنمائي األصلي للمشرو‬ ‫الوقاية من الخØر الذي تشكله جائحة كورونا واكتشاÙ?ه والتصدي له‬ ‫ع‬‫الهدÙ? اإلنمائي الحالي للمشرو‬ ‫الصÙ?حة ‪ 4‬من ‪9‬‬ ‫‪ 3‬مايو‪/‬أيار ‪2021‬‬  ‫البنك الدولي‬ ‫تمويل إضاÙ?ي لمشروع التصدي لجائحة كورونا Ù?ي اليمن (‪)P176827‬‬ ‫الوقاية من الخØر الذي تشكله جائحة كورونا واكتشاÙ?ه والتصدي له‬ ‫النتائج الرئيسية‬ ‫ح إدخال المؤشر‬ ‫ات التالية‪:‬‬ ‫من خالل التمويل اإلضاÙ?ي‪Ù? ،‬‬ ‫يقتر‬ ‫ع‪:‬‬‫مؤشر الهدÙ? اإلنمائي للمشرو‬ ‫النسبة المئوية لمواقع التØعيم التي تÙ?ي بمعايير التشغيل الوظيÙ?ي‬ ‫•‬ ‫مؤشر‬ ‫ات النتائج الوسيØة‪:‬‬ ‫ة للقاحات ونشر‬ ‫ها‬ ‫وضع مبادئ توجيهية واجر‬ ‫اءات موثقة وأدوات من أجل تخØÙŠØ ÙˆØªÙ†Ù?يذ أنشØØ© ترصد اآلثار الدوائية الضار‬ ‫•‬ ‫عدد األشخاص الذين يشعرون بالرضا عن الخدمة المقدمة Ù?يما يتعلق بÙ?يروس كورونا‬ ‫•‬ ‫ح االستقصائية ورصدها"‬‫عي تكميلي "إعداد Ø®ØØ© عمل لمتابعة نتائج المسو‬‫مؤشر Ù?ر‬ ‫•‬ ‫نسبة اإلناث من األØقم الØبية القائمات بعملية التØعيم‬ ‫•‬ ‫اÙ?ق الصرÙ? الصحي لمنع تÙ?شي األمر‬ ‫اض التي يÙ?اقمها تغير‬ ‫إØالق حملة توعية للتشجيع على الممارسات السليمة للنظاÙ?Ø© الصحية ومر‬ ‫•‬ ‫المناخ‬ ‫ع‬‫د‪ \.‬وصÙ? المشرو‬ ‫ع التصدي لجائحة كورونا Ù?ي اليمن وتعديل تصميمه العام من خالل‬‫ح من توسيع نØاق األنشØØ© Ù?ي Ø¥Øار مشرو‬‫سيمكن التمويل اإلضاÙ?ي المقتر‬ ‫اج الدعم لتوزيع اللقاحات المضادة لÙ?يروس كورونا وأنشØØ© تدعيم النظام الصحي‪ \.‬ونظ اً‬ ‫ر ألن األنشØØ© المقترحة Ù?ي Ø¥Øار التمويل اإلضاÙ?ي‬ ‫إدر‬ ‫ع األصلي‪ ،‬Ù?إن هذا الهدÙ? سيظل كما هو دون تغيير‪\.‬‬‫تتماشى مع الهدÙ? اإلنمائي للمشرو‬ ‫ع األصلي بحيث يعكس النØاق الموسع واألنشØØ© الجديدة المقترحة Ù?ي Ø¥Øار التمويل اإلضاÙ?ي‪\.‬‬‫وسيتم تعديل محتوى المكونات واØار نتائج المشرو‬ ‫ر وذلك حتى ‪ 31‬ديسمبر‪/‬كانون األول ‪\.2022‬‬ ‫ح تمديد تاريخ اإلقÙ?ال لÙ?تر‬ ‫ة ‪ 15‬شه ا‬ ‫عالوة على ذلك‪ ،‬من المقتر‬ ‫ه ‪ 7\.85‬ماليين دوالر من المؤسسة‬ ‫المكون ‪ :1‬االستجابة الØارئة لجائحة كورونا (‪ 41,1610,440‬دوال ا‬ ‫ر‬ ‫ً‪ ،‬بما Ù?ي ذلك مبلغ إضاÙ?ي قدر‬ ‫ّÙ?‬ ‫ة الخارجية وشؤون الكومنولث والتنمية البريØانية‪ ،‬و‬ ‫ر من الصندوق االستئماني التابع لوز‬ ‫ار‬ ‫ا‬ ‫ً‬ ‫ال‬ ‫و‬ ‫د‬ ‫‪6,985,440‬‬ ‫و‬ ‫للتنمية‪،‬‬ ‫الدولية‬ ‫ع األصلي‪ ،‬يهدÙ? هذا المكون إلى‬‫ئ الصحية)‪ \.‬وÙ?ي Ø¥Øار المشرو‬‫‪ 2,925,000‬دوالر من الصندوق متعدد المانحين للتأهب واالستجابة للØوار‬ ‫ي لتعزيز قدر‬ ‫ات اكتشاÙ?‬ ‫منع انتشار Ù?يروس كورونا والحد منه إلى أقصى حد ممكن Ù?ي اليمن من خالل دعم النظام الصحي وتقديم دعم Ù?ور‬ ‫ات‪ ،‬والتدبير العالجي لتلك الحاالت وتسجيلها واإلبالغ عنها‪ ،‬باإلضاÙ?Ø© إلى تتب‬ ‫Ù?ّع المخالØين‪ ،‬وتقييم المخاØر‪\.‬‬ ‫الحاالت المصابة‪ ،‬واجر‬ ‫اء االختبار‬ ‫اقبة انتشار األمر‬ ‫اض‪ ،‬بما Ù?ي ذلك‬ ‫وتشمل األنشØØ© المنÙ?ذة Ù?ي Ø¥Øار هذا المكون‪ )1( :‬االكتشاÙ? السريع لحاالت اإلصابة بÙ?يروس كورونا؛ (‪ )2‬مر‬ ‫ئ وÙ?رق استجابة سريعة؛ (‪ )3‬مر‬ ‫اكز العزل والتدبير العالجي للحاالت المصابة؛ (‪ )4‬دعم الوقاية من العدوى ومكاÙ?حتها‬ ‫إنشاء مر‬ ‫اكز لعمليات الØوار‬ ‫اض‬ ‫ة المختبرية Ù?ي جميع أنحاء البالد من أجل جهود التصدي لتÙ?شي Ù?يروس كورونا واألمر‬ ‫على مستوى المنشآت؛ و(‪ )5‬تعزيز قدر‬ ‫ة االختبار والقدر‬ ‫الصÙ?حة ‪ 5‬من ‪9‬‬ ‫‪ 3‬مايو‪/‬أيار ‪2021‬‬  ‫البنك الدولي‬ ‫تمويل إضاÙ?ي لمشروع التصدي لجائحة كورونا Ù?ي اليمن (‪)P176827‬‬ ‫ى‪\.‬‬‫السارية األخر‬ ‫وسيقدم التمويل اإلضاÙ?ي دعماً إضاÙ?ياً لهذه األنشØØ© الجارية‪ ،‬وسيمول أيضا مجموعة جديدة من األنشØة‪ ،‬وهي‪ :‬دعم نشر اللقاحات المضادة‬ ‫لÙ?يروس كورونا التي توÙ?ر‬ ‫ها آلية كوÙ?اكس (‪)COVAX‬؛ ودعم نظام رصد تواÙ?ر الموارد والخدمات الصحية (‪ )HeRAMS‬الذي يوÙ?ر معلومات‬ ‫أساسية عن الموارد والخدمات الصحية األساسية لمتخذي القر‬ ‫ار على المستويات الوØنية واإلقليمية والعالمية‪ ،‬ويشكل أساساً صلباً لنظم المعلومات‬ ‫الصحية الوØنية‪\.‬‬ ‫ر‪ ،‬بما Ù?ي ذلك ‪ 1\.15‬مليون دوالر إضاÙ?ية من المؤسسة الدولية للتنمية‪،‬‬ ‫ة التنÙ?يذ ومتابعته وتقييمه (‪ 5,751,160‬دوال اً‬ ‫المكون ‪ :2‬إدار‬ ‫ّÙ?‬ ‫ة الخارجية وشؤون الكومنولث والتنمية البريØانية‪ ،‬و‪ 325‬ألÙ? دوالر من الصندوق‬ ‫ر من الصندوق االستئماني التابع لوز‬ ‫ار‬ ‫و‪ 776,160‬دوال اً‬ ‫ع األصلي‪ ،‬يساند هذا المكون أنشØØ© اإلدار‬ ‫ة والمتابعة والتقييم‪ ،‬وهي‪:‬‬ ‫ئ الصحية)‪ \.‬وÙ?ي Ø¥Øار المشرو‬‫متعدد المانحين للتأهب واالستجابة للØوار‬ ‫ع‪ \.‬وتدعم المنح‬ ‫ة للموظÙ?ين وادار‬ ‫ة المشرو‬ ‫بل الغير؛ و (ج) التكلÙ?Ø© المباشر‬ ‫(Ø£) دعم اإلدار‬ ‫ة العامة لمنظمة الصحة العالمية؛ (ب) المتابعة من قَ‬ ‫الثالث اإلضاÙ?ية النشاØين (‪ )1‬و(‪ ،)3‬كما تدعم منحة المؤسسة الدولية للتنمية أنشØØ© (‪ )2‬المتابعة من قَ‬ ‫بل الغير‪\.‬‬ ‫‪\.‬‬ ‫السياسات القانونية الخاصة بالعمليات‬ ‫هل تم تÙ?عيلها؟‬ ‫ال‬ ‫منشور سياسة العمليات (‪ )OP 7\.50‬بشأن المشروعات المقامة على‬ ‫ي المياه الدولية‬‫مجار‬ ‫ال‬ ‫منشور سياسة العمليات (‪ )OP 7\.60‬بشأن المشروعات المقامة Ù?ي‬ ‫المناØق المتناز‬ ‫ع عليها‬ ‫ملخص تقييم المخاØر واآلثار البيئية واالجتماعية‬ ‫‪\.‬‬ ‫تصنيÙ? المخاØر البيئية‬ ‫ع وبعض األنشØØ© المحددة الخاصة به‪ ،‬والصحة‬ ‫ر" بسبب حالة عدم اليقين السائدة حالياً حول موقع المشرو‬ ‫يعد تصنيÙ? المخاØر البيئية "كبي اً‬ ‫Ù?‬ ‫ة النÙ?ايات الØبية‪ \.‬وتتمثل المخاØر البيئية الرئيسية Ù?يما يلي‪ )1( :‬المشكالت المتعلقة بالصحة والسالمة المهنيتين‬‫والسالمة المهنيتين‪ ،‬ومشكلة إدار‬ ‫Ù?يما يتعلق بÙ?حص المستلزمات ومناولتها واحتمال عدم استخدامها بأمان من قبل أخصائيي المختبر‬ ‫ات واألØقم الØبية؛ (‪ )2‬مسائل الصحة والسالمة‬ ‫المهنية المرتبØØ© بعالج المرضى المصابين بÙ?يروس كورونا؛ و (‪ )3‬إدار‬ ‫ة النÙ?ايات الØبية ومشكالت الصحة والسالمة المجتمعية المتصلة بمناولة‬ ‫عاية الصحية ونقلها والتخلص منها‪ \.‬ويشمل ذلك النÙ?ايات الناتجة عن إعØاء اللقاحات مثل أبر المحاقن والتخلص من قوارير اللقاحات‬‫نÙ?ايات الر‬ ‫ع األصلي التخلص من النÙ?ايات الناتجة عن‬‫المستخدمة وذات الصالحية المنتهية نتيجة ألنشØØ© التمويل اإلضاÙ?ي‪ \.‬ومن المقرر أن يدعم المشرو‬ ‫ات ومنشآت الحجر الصحي والÙ?حص والعالج والتØعيم‪ ،‬وسيتØلب التمويل اإلضاÙ?ي مناولة خاصة ورÙ?ع مستوى الوعي‪ ،‬ألنها قد‬ ‫أنشØØ© المختبر‬ ‫الصÙ?حة ‪ 6‬من ‪9‬‬ ‫‪ 3‬مايو‪/‬أيار ‪2021‬‬  ‫البنك الدولي‬ ‫تمويل إضاÙ?ي لمشروع التصدي لجائحة كورونا Ù?ي اليمن (‪)P176827‬‬ ‫اض معدية‪ \.‬وتشمل المخاØر‬ ‫عاية الصحية الذين يالمسون النÙ?ايات أو يتعاملون معها لإلصابة بأمر‬ ‫تشكل Ø®Ø Ø§Ù‹â€¬ ‫ر بتعرض العاملين Ù?ي مجال الر‬ ‫ى المرتبØØ© بأنشØØ© التمويل اإلضاÙ?ي مخاØر الصحة والسالمة المجتمعية المتصلة بالممارسات الخاØئة Ù?ي تخزين وتناول ونقل اللقاحات‪،‬‬ ‫األخر‬ ‫مما يؤدي إلى تدهور جودتها‪\.‬‬ ‫ع األصلي‪ ،‬اللذان واÙ?ق عليهما البنك الدولي‪ ،‬وتم‬ ‫ة البيئية واالجتماعية‪ ،‬وخØØ© مكاÙ?حة العدوى وادار‬ ‫ة النÙ?ايات من أجل المشرو‬ ‫كما Ø£Ù?عد Ø¥Øار اإلدار‬ ‫هما على موقعي البنك الدولي ومنظمة الصحة العالمية على شبكة اإلنترنت‪ ،‬وتÙ?رجما إلى اللغة العربية‪ \.‬وتم تحديث Ø¥Øار اإلدار‬ ‫ة البيئية‬ ‫نشر‬ ‫اعاة األنشØØ© المنÙ?ذة Ù?ي Ø¥Øار التمويل اإلضاÙ?ي وما ÙŠØ±ØªØ¨Ø Ø¨Ù‡Ø§ من مخاØر وتدابير للحد من المخاØر واآلثار‪ \.‬وستÙ?نشر هاتان‬‫واالجتماعية لمر‬ ‫ة البيئية واالجتماعية وخØØ© مكاÙ?حة العدوى‬ ‫الوثيقتان على موقعي البنك الدولي ومنظمة الصحة العالمية على شبكة اإلنترنت‪ \.‬وسيحدد Ø¥Øار اإلدار‬ ‫ة النÙ?ايات المحدثان المخاØر واآلثار البيئية واالجتماعية المحتملة المرتبØØ© باألنشØØ© التي سيتم دعمها Ù?ي Ø¥Øار التمويل اإلضاÙ?ي‪ ،‬ويوجز‬ ‫ان‬ ‫وادار‬ ‫ة البيئية واالجتماعية وخØØ© مكاÙ?حة العدوى وادار‬ ‫ة النÙ?ايات المحدثان جوانب مثل األساس المنØقي‬ ‫التدابير المالئمة للحد منها‪ \.‬وسيغØي Ø¥Øار اإلدار‬ ‫لترتيب األولويات وعملية التخصيص‪ ،‬وتدابير مكاÙ?حة العدوى للحد من تÙ?شي Ù?يروس كورونا خالل أنشØØ© التمويل اإلضاÙ?ي‪ \.‬وقد Ø£Ù?عدت Ø®Øة‬ ‫اير‪/â€¬Ø´Ø¨Ø§Ø â€ª )2020‬بشأن "إرشادات‬ ‫ع األصلي تماشياً مع إرشادات منظمة الصحة العالمية المؤقتة (‪ 12‬Ù?بر‬ ‫مكاÙ?حة العدوى وادار‬ ‫ة النÙ?ايات للمشرو‬ ‫السالمة البيولوجية المختبرية Ù?يما يتعلق بÙ?يروس كورونا المستجد (‪ \.")nCoV-2019‬وتتضمن الخØØ© تدريب الموظÙ?ين ليكونوا على در‬ ‫اية بجميع‬ ‫األخØار التي قد يواجهونها‪ \.‬ويشمل ذلك تØبيق Ø£Ù?ضل الممارسات الدولية Ù?ي االختبار‬ ‫ات التشخيصية الخاصة بÙ?يروس كورونا والتعامل مع‬ ‫المستلزمات الØبية‪ ،‬والتخلص من النÙ?ايات المتولدة‪ ،‬والسالمة على الØرق‪ \.‬وباإلضاÙ?Ø© إلى Ø¥Øار اإلدار‬ ‫ة البيئية واالجتماعية‪ ،‬ستنÙ?Ø° منظمة الصحة‬ ‫ام البيئي واالجتماعي‪ \.‬وسيتضمن التقرير نصÙ? السنوي عن سير العمل معلومات مستكملة عن األداء‬ ‫العالمية األنشØØ© الموضحة Ù?ي Ø®ØØ© االلتز‬ ‫ع‪ ،‬بما Ù?ي ذلك أنشØØ© التمويل اإلضاÙ?ي‪\.‬‬‫البيئي واالجتماعي والصحي وأداء السالمة للمشرو‬ ‫تصنيÙ? المخاØر االجتماعية‬ ‫ة وقد تشمل التÙ?اوت Ù?ي الحصول على اللقاحات واحتمال إقصاء السكان المعرضين للخØر مثل كبار السن‬ ‫تÙ?عد المخاØر االجتماعية المتوقعة كبير‬ ‫ويعد النازحون داخل البالد من بين أكثر‬ ‫اد الØواقم الØبية Ù?ي الخØÙˆØ Ø§Ø£Ù„Ù…Ø§Ù…ÙŠØ©â€ª ،‬والÙ?ئات األكثر احتياجاً‪Ù? \.‬‬ ‫اض مزمنة‪ ،‬وأÙ?ر‬ ‫ممن يعانون من أمر‬ ‫وبناء عليه‪ ،‬يتمثل‬ ‫ً‬ ‫ع‪\.‬‬‫اع الدائر Ù?ي البالد‪ ،‬حيث يتعرضون لإلهمال‪ ،‬وهو ما قد يقوض أهداÙ? المشرو‬ ‫الناس عرضة لإلصابة بالÙ?يروس بسبب الصر‬ ‫التحدي الرئيسي Ù?ي ضمان توزيع اللقاحات بشÙ?اÙ?ية‪ ،‬مما يضمن اإلنصاÙ? والوصول إلى السكان المتضررين‪ \.‬وللحد من هذه المخاØر‪ ،‬تعمل‬ ‫ة كبير‬ ‫ة Ù?ي العمل Ù?ي اليمن‪ \.‬وتعمل منظمة الصحة العالمية والهيئات الصحية‬ ‫الحكومة على نحو وثيق مع منظمة الصحة العالمية التي تتمتع بخبر‬ ‫المحلية على مستوى المحاÙ?ظات لتحديد معايير االختيار الشÙ?اÙ?Ø© وتنÙ?يذها ومتابعتها الستهداÙ? المستÙ?يدين ذوي األولوية‪ \.‬وتأتي هذه المعايير Ù?ي‬ ‫إØار عملية إشر‬ ‫اك أصحاب المصلحة‪ ،‬بما Ù?ي ذلك نشر المعلومات العامة والتواصل Ù?ي Ø¥Øار Ø®ØØ© التØعيم Ù?ي اليمن‪ \.‬ويجب أن يكÙ?ل تنÙ?يذ‬ ‫عاية؛‬ ‫ع إشر‬ ‫اك أصحاب المصلحة المناسبين من أجل‪( :‬أ) بيان مبادئ تحديد أولويات اللقاحات والتواصل مع الÙ?ئات المحرومة واألولى بالر‬ ‫المشرو‬ ‫(ب) نشر المعلومات؛ و(ج) آلية التظلم لمعالجة الشكاوى التي يتلقاها Ø§Ù„Ø®Ø Ø§Ù„Ø³Ø§Ø®Ù† لدى منظمة الصحة العالمية‪ ،‬بما Ù?ي ذلك المتابعة واإلبالغ‪\.‬‬ ‫هـ‪ \.‬التنÙ?يذ‬ ‫الصÙ?حة ‪ 7‬من ‪9‬‬ ‫‪ 3‬مايو‪/‬أيار ‪2021‬‬  ‫البنك الدولي‬ ‫تمويل إضاÙ?ي لمشروع التصدي لجائحة كورونا Ù?ي اليمن (‪)P176827‬‬ ‫الترتيبات المؤسساتية والتنÙ?يذية‬ ‫تساند منظمة الصحة العالمية‪ ،‬إلى جانب اليونيسÙ?‪ ،‬الحكومة اليمنية Ù?ي تنسيق أنشØØ© التصدي لÙ?يروس كورونا Ù?ي اليمن‪ ،‬بما Ù?ي ذلك اØالق‬ ‫ع التصدي لجائحة كورونا Ù?ي‬ ‫حمالت التØعيم ضد Ù?يروس كورونا‪ ،‬وستواصل العمل كهيئة مسؤولة عن إدار‬ ‫ة التنÙ?يذ للتمويل اإلضاÙ?ي لمشرو‬ ‫زر‬ ‫ة الصحة العامة والسكان‪ ،‬ومكاتب الصحة بالمحاÙ?ظات والمديريات)‬ ‫اليمن‪ \.‬وستعمل منظمة الصحة العالمية بصور‬ ‫ة وثيقة مع الهيئات المحلية (و ا‬ ‫ي منظمة الصحة العالمية المعدات الالزمة لمر‬ ‫اكز Ø§Ù„Ø®Ø Ø§Ù„Ø³Ø§Ø®Ù†â€¬ ‫والشركاء اآلخرين كاليونيسÙ?‪ \.‬ومن أجل تقوية نظام مر‬ ‫اقبة األوبئة‪ ،‬ستشتر‬ ‫لمكاÙ?حة Ù?يروس كورونا‪ ،‬وسي تولى برنامج األغذية العالمي إدار‬ ‫ة الخدمات اللوجستية وتركيب تلك المعدات‪ \.‬ولن يتم تحويل أي موارد من التمويل‬ ‫اإلضاÙ?ي إلى برنامج األغذية العالمي‪\.‬‬ ‫‪\.‬‬ ‫مسؤول االتصال‬ ‫البنك الدولي‬ ‫خورخي أ‪ \.‬كوارسا‬ ‫خبير اقتصادي أول متخصص Ù?ي قØاع الصحة‬ ‫المقترض‪/‬البلد (الجهة) المتعامل مع البنك‪/‬الجهة المستÙ?يدة‬ ‫منظمة الصحة العالمية‬ ‫أدهم إسماعيل عبد المنعم‬ ‫ممثل منظمة الصحة العالمية‬ ‫‪ismaila@who\.int‬‬ ‫الهيئات المسؤولة عن إدار‬ ‫ة التنÙ?يذ‬ ‫منظمة الصحة العالمية‬ ‫أدهم إسماعيل عبد المنعم‬ ‫ممثل منظمة الصحة العالمية‬ ‫‪ismaila@who\.int‬‬ ‫الصÙ?حة ‪ 8‬من ‪9‬‬ ‫‪ 3‬مايو‪/‬أيار ‪2021‬‬  ‫البنك الدولي‬ ‫تمويل إضاÙ?ي لمشروع التصدي لجائحة كورونا Ù?ي اليمن (‪)P176827‬‬ ‫للمزيد من المعلومات‪Ù? ،‬‬ ‫يرجى االتصال بـ‪:‬‬ ‫البنك الدولي‬ ‫‪1818 H Street, NW‬‬ ‫‪Washington, D\.C\. 20433‬‬ ‫هاتÙ?‪(202) 473-1000 :‬‬ ‫الموقع اإللكتروني‪http://www\.worldbank\.org/projects :‬‬ ‫المواÙ?قة‬ ‫خورخي أ‪ \.‬كوارسا‬ ‫رئيسا Ù?ريق العمل‪:‬‬ ‫واÙ?ق عليه‪:‬‬ ‫المدير اإلقليمي لقØاع الممارسات العالمية‪:‬‬ ‫‪ 25‬مايو‪/‬أيار ‪2021‬‬ ‫تانيا ماير‬ ‫مدير مكتب البنك الدولي باليمن‪:‬‬ ‫الصÙ?حة ‪ 9‬من ‪9‬‬ ‫‪ 3‬مايو‪/‬أيار ‪2021‬‬

APPROVAL

P083919

Page 1 INTEGRATED SAFEGUARDS DATA SHEET CONCEPT STAGE Report No\.: AC249 Date ISDS Prepared/Updated: July 28, 2003 I\. BASIC INFORMATION A\. Basic Project Data Country: Afghanistan Project ID: P083919 Project Name: Emergency Urban Reconstruction Project Task Team Leader: Richard M\. Beardmore Estimated Appraisal Date: January 28, 2004 Loan/Credit amount ($m\.): IDAC: 25 (blend grant/credit) Estimated Board Date: March 16, 2004 Managing Unit: SASEI Lending Instrument: Emergency Recovery Loan Sector: General water, sanitation and flood protection sector (30%); urban upgrading (40%); capacity building (30%) Theme: Other urban development, municipal governance (73P); access to urban services for the poor (71P) Safeguard Policies Specialists in the task team: Other financing amounts by source: ($m\.) B\. Project Objective The objective of the project is to pilot different ways of improving infrastructure service delivery and shelter in Kabul, Kandahar and Kunduz in order to enhance the quality of life, health status, and welfare of the all segments of the population, especially the disadvantaged, and to support economic growth of the country\. This will be achieved by supporting the integration of selected neighborhoods into the urban fabric of participating towns by carrying out reconstruction and rehabilitation of basic urban services and enhancing the managerial capacity of the Ministry of Urban Development and Housing and the participating towns\. The project would also lay the groundwork for a follow-up project aimed at city-wide infrastructure reconstruction and service delivery\.,\. C\. Project Description The proposed project would consist of the following components: \01\02 Improvement of urban services in participating neighborhoods as per priorities identified by residents in Kabul and at least one other town; \01\02 Granting of some form of tenure security to residents of participating neighborhoods; \01\02 Provision of grants for housing reconstruction to vulnerable households in participating neighborhoods \01\02 Capacity building to improve participating municipalities’ ability for financial management; \01\02 Preparation of a revised structure plan for the city of Kabul to serve as a medium term strategy for city- wide improvement of services and facilities; and Page 2 \01\02 Preparation of a feasibility study for a future urban investment operation covering city-wide services in Kabul and other towns D\. Project location (if known) The Project would be located in Kabul; and possibly Kunduz and Kandahar and Jalalabad\. E\. Borrower’s Institutional Capacity The Borrower’s institutional capacity is very weak\. Considerable local and international technical assistance and training will be required to implement the project\. II\. SAFEGUARD POLICIES THAT MIGHT APPLY Applicable? Safeguard Policy If Applicable, How Might It Apply? [ x] Environmental Assessment (OP/BP 4\.01) [ ] Natural Habitats (OP/BP 4\.04) [ ] Pest Management (OP 4\.09) [ ] Involuntary Resettlement (OP 4\.12) [ ] Indigenous Peoples (OD 4\.20) [ ] Forests (OP 4\.36) [ ] Safety of Dams (OP/BP 4\.37) [ ] Cultural Property (draft OP 4\.11 - OPN 11\.03) [ ] Projects in Disputed Areas (OP/BP 7\.60) * [ ] Projects on International Waterways (OP/BP 7\.50) Environmental Assessment Category: [ ] A [ X] B [ ] C [ ] FI [ ] TBD (to be determined) No significant environmental impacts are anticipated as the project only involves upgrading of existing urban services and limited expansion of services into new areas at the neighborhood level\. Safeguard Policies Classification: [ ] S 1 [ X ] S 2 [ ] S 3 [ ] S F [ ] TBD (to be determined) * By supporting the proposed project, the Bank does not intend to prejudice the final determination of the parties' claims on the disputed areas Page 3 III\. ACTIONS DURING PROJECT PREPARATION [Guideline: Refer to sections 5 and 6 of the PCN] A\. What actions might be needed during project preparation to assess safeguard issues and prepare to mitigate them? The project will use the Environment and Social Safeguards Framework, already agreed to by the Government of Afghanistan, to assess and mitigate safeguards issues In addition, recognizing the emergency nature of the Project, and the related need for providing immediate improvement in local urban services, while at the same time ensuring due diligence in managing potential environmental and social risks and implementing the framework, an Environment and Social Framework Management Plan (E&SSFMP) will be developed\. The project will also be based on the following principles: a) the proposed project will not support Category A investments, nor investments which require land acquisition affecting more than 200 people\. b) activities requiring a more detailed level of assessment will be supported under a subsequent operation B\. How might consultation and disclosure requirements be addressed? Consultation and disclosure requirements will be simplified to meet the special needs of this project\. Prior to approval by the World Bank Board, the E&SSF and the E&SSFMP will be disclosed in Afghanistan in Dari and Pashto and in the World Bank Infoshop\. IV\. AGREEMENTS REACHED ON SAFEGUARDS AT PCN REVIEW The Environment and Social Safeguards Management Plan will be formulated based on the Environmental and Social Safeguards Framework, already agreed by the Government of Afghanistan\. The Plan will include, but not be restricted to, an outline of responsibilities for the implementation of the framework\. Agreed target date for Quality Enhancement Review: TBD

APPROVAL

P174316

 The World Bank Third Village Investment Project COVID-19 Additional Financing (P174316) Combined Project Information Documents / Integrated Safeguards Datasheet (PID/ISDS) Appraisal Stage | Date Prepared/Updated: 10-Aug-2020 | Report No: PIDISDSA29851 Jun 22, 2020 Page 1 of 19  The World Bank Third Village Investment Project COVID-19 Additional Financing (P174316) BASIC INFORMATION OPS_TABLE_BASIC_DATA A\. Basic Project Data Country Project ID Project Name Parent Project ID (if any) Kyrgyz Republic P174316 Third Village Investment P146970 Project (COVID-19 Response) Additional Financing Parent Project Name Region Estimated Appraisal Date Estimated Board Date Third Village Investment Project EUROPE AND CENTRAL 11-Aug-2020 18-Sep-2020 ASIA Practice Area (Lead) Financing Instrument Borrower(s) Implementing Agency Social Investment Project Ministry of Finance Community Development Financing and Investment Agency (ARIS) Proposed Development Objective(s) Parent The Project Development Objectives are (a) to build local capacity for participatory development and (b) improve access to quality community infrastructure services in targeted project areas\. Components Capacity Building of Local Self-Governments and Communities Village Investments Project Management PROJECT FINANCING DATA (US$, Millions) SUMMARY -NewFin1 Total Project Cost 17\.00 Total Financing 17\.00 of which IBRD/IDA 17\.00 Financing Gap 0\.00 DETAILS -NewFinEnh1 World Bank Group Financing International Development Association (IDA) 17\.00 Jun 22, 2020 Page 2 of 19  The World Bank Third Village Investment Project COVID-19 Additional Financing (P174316) IDA Credit 8\.50 IDA Grant 8\.50 Environmental Assessment Category B-Partial Assessment Decision The review did authorize the team to appraise and negotiate B\. Introduction and Context A\. Country and Sector Context 1\. The Kyrgyz Republic, a landlocked, mountainous country, is one of the poorest in the Europe and Central Asia region\. It has an estimated population of more than 6\.3 million and a 2019 per capita gross national income of US$1,240\. Over the past five years (2015–2019), real GDP growth in the country has averaged 4\.2 percent per year\. It has one of the highest COVID-19 infection rates in the region,1 which has disrupted this positive growth trend\. According to World Bank estimates, poverty rates (measured using national standards) are above that of most countries in the region (over 20 percent in 2019), and a further 65 percent of the population is assessed as vulnerable to falling into poverty\. The pandemic has caused the country’s gross domestic product (GDP) to contract by up to 12 percent; inflation is expected to rise to 8\.0 percent, and remittances to decline by 30 percent\. Coupled with widespread job losses and increasing food prices, the poverty rate is estimated to increase to 31 percent by the end of 2020, with a large majority of the population remaining vulnerable to poverty\.2 2\. There are also significant gender gaps\. As of 2019, among those 15 years old and older, only 44\.8 percent of women participated in the formal labor market, compared to 75\.7 percent of men\.3 Women work predominantly in lower-paid sectors, especially the services sector\. For women aged 20–34 years old in formal employment, the norm is to leave work to carry out household duties and care for young children and infants\. 4 Only 18 percent of children under the age of 7 receive a preschool education\.5 3\. In 2008, to strengthen the role of local government in the country’s development, the Kyrgyz Republic adopted an amendment to the legal framework for local governance, which assigned more political, administrative, and fiscal autonomy to local governments\. Local self-governments (LSGs) now have increased responsibilities towards local populations, and there are increased opportunities for Aiyl Okmotus (AO, subdistrict 1 World Bank\. Kyrgyz Republic: Country Program’s Adjustment in Responding to COVID19\. Washington, DC: World Bank, 2020\. 2 Ibid\. 3 World Bank, "World Development Indicators\." Washington, DC: World Bank, 2020\. http://data\.worldbank\.org/data-catalog/world- development-indicators\. 4 UN Women, Beijing+25: National Review on Implementation of the Beijing Declaration and Platform for Action \. Bishkek, Kyrgyz Republic: UN Women, 2019\. 5Asian Development Bank, Kyrgyz Republic Country Gender Assessment\. Manila: Asian Development Bank, 2019\. Jun 22, 2020 Page 3 of 19  The World Bank Third Village Investment Project COVID-19 Additional Financing (P174316) administration) at the Aiyl Aimak (AA, or subdistrict level) to work closely with communities on local development initiatives\.6 However, despite efforts to strengthen AOs’ role in village investment, fiscal transfers to LSGs are extremely limited and these local-level authorities have not yet developed the capacity for accountable and transparent decision making and financial management\. Nevertheless, LSGs carry out local development planning, and community investments form a part of Local Development Strategies (LDSs)\. 4\. More broadly, the Government of the Kyrgyz Republic (GoKR) has long recognized the need to address the lack of services, socioeconomic exclusion, and disempowerment of communities in rural villages by making a series of investments that are responsive to differentiated local needs and opportunities across the country\. Community-driven development (CDD) is thus relatively well established in the Kyrgyz Republic\. For nearly a decade, the World Bank and KfW (German Bank for Reconstruction and Development) have supported a series of Village Investment Projects (VIPs) with the dual objectives of making locally relevant investment decisions and empowering communities\. The Third Village Investment Project (VIP-3) (P146970), a CDD project implemented by the Community Development and Investment Agency (ARIS) with International Development Association (IDA) financing, has been active since February 2016\. The project has been operating in the four oblasts (regions) in the north, Naryn, Issykul, Chui, and Talas, which comprise 266 AAs\. VIP-3 was approved by the World Bank Board of Executive Directors on March 27, 2015 in the amount of US$12\.0 million (including a US$6\.6 million equivalent IDA Credit 56010, and a US$5\.4 million equivalent IDA Grant D0410; after a delay in ratification, it became effective on February 26, 2016\. An institution dedicated to the delivery of CDD projects, ARIS, was established in 2003 to address the need to invest in rural communities by implementing community-based projects\. It works in approximately 455 AAs in rural and peri-urban areas, where almost 70 percent of poor households live\.7 5\. The COVID-19 pandemic is expected to undermine the livelihoods of the rural poor, including in the north of the country\. During the two-month lockdown, in April and May, up to one million people - a third of the labor force - are estimated to have lost their jobs\.8 The country’s pandemic-containment measures, which included lockdowns and limitations on wheat exports, are expected to significantly lower incomes: almost 8 in 10 individuals in the bottom 20 percent of the income distribution are employed in highly impacted sectors (agriculture, trade, and construction)\. Most of the country’s rural poor are in the informal sector and outside formal social safety nets, which increases the importance of community-driven mechanisms to deliver assistance, mitigate the economic impacts of the pandemic, and ensure that assistance is aligned with rural communities’ priorities\. 6\. Epidemics tend to magnify patterns of social and spatial disadvantage\. Thus the economic downturn is expected to disproportionately impact young people, women, and marginalized groups\. Youth (12 percent of whom are not in employment, education, or training9) are likely to be hit hard by unemployment and the loss of livelihoods, with the risk of intensifying patterns of apathy and exclusion, increased distrust in government, and unrest\. Women are less likely to benefit from social assistance programs, since they are more likely to engage in 6 LSG responsibilities include ensuring economic development through adopting development strategies, collecting local taxes, managing local budgets, managing municipal property, ensuring Operations & Maintenance of public facilities and infrastructure, and land use planning and administration\. 7 National Statistics Committee of the Kyrgyz Republic, Integrated Households Survey, 2018\. 8 World Bank\. Kyrgyz Republic: Country Program’s Adjustment in Responding to COVID19 \. Washington, DC: World Bank, 2020\. 9 World Bank, "World Development Indicators\." Washington, DC: World Bank, 2020\. http://data\.worldbank\.org/data-catalog/world- development-indicators\. Jun 22, 2020 Page 4 of 19  The World Bank Third Village Investment Project COVID-19 Additional Financing (P174316) unpaid work or work in the informal sector\. They also have fewer assets to sustain them during shocks: 80 percent of land is registered in men’s names\.10 7\. Remittances are a critical source of income, but are projected to decline sharply due to the COVID-19 pandemic, hurting the rural poor in the target oblasts\. The Kyrgyz Republic is the second most remittance- dependent country in the world: more than one-fifth of the population works in neighboring countries, mostly Russia and Kazakhstan, sending home remittances equivalent to 28 percent of GDP in 2019\. Remittances are expected to drop significantly due to the economic downturn in Russia, which has seen oil prices drop sharply and has the world’s third highest coronavirus caseload\. This fall in remittances is expected to push migrant households into poverty and deepen poverty\. 8\. VIP-3 is particularly well-positioned to mitigate the economic and social impacts of COVID-19 on rural communities, including vulnerable households, given that the project uniquely covers all villages of the four regions in the north\.11 VIP-3’s investments fill vital gaps in basic infrastructure and bring benefits to women and vulnerable groups\. The project has a well-developed platform and network of AOs and Community Development Support Officers (CDSOs) to quickly deliver assistance to communities and vulnerable groups in rural areas\. The project also builds the capacity of local AOs to respond to communities’ needs by building their capacity to procure Microprojects (MPs) (i\.e\., repairing and upgrading facilities) that have been prioritized and selected by communities through a participatory process\. As the project is predicated on community decision-making, it is adaptable to finance investments and activities identified by communities to address their changing needs – during and in the aftermath of the COVID-19 crisis\. 9\. The proposed Additional Financing (AF) will directly improve economic opportunities and enhance access to primary health care and hygiene in villages without services\. It will also empower thousands of vulnerable women, youth, migrants, the elderly, and the disabled, to engage actively in project activities that help reestablish their livelihoods and make vital improvements in village infrastructure, within the higher risk context created by the COVID-19 pandemic\. The AF will also sharpen the focus on climate benefits and energy efficiency, and on closing key gender gaps in access to infrastructure and livelihoods opportunities\. 10\. The World Bank Group’s (WBG’s) response to COVID-19 is aligned with government priorities, and includes emergency financing, policy advice, and technical assistance\. The main elements of the GoKR’s COVID-19 response are focused on saving lives (with increased health expenditure) and supporting the poor (with enhanced social protection and unemployment support) and private sector businesses (with liquidity support through easier access to finance)\. The WBG remains committed to providing a fast and flexible response to the epidemic, utilizing all of its operational and policy instruments and working in close partnership with the GoKR and other agencies\. 11\. WBG support for responding to the pandemic follows the COVID-19 Crisis Response Approach Paper “Saving Lives, Scaling-up Impact and Getting Back on Track\.â€?12 The project is aligned with the paper’s “Protecting Poor and Vulnerable Peopleâ€? pillar, which is designed to help countries protect poor and vulnerable households and communities from the economic and social shocks of the crisis, restore human capital, and promote equity and inclusion during the recovery\. The project’s community-level approach to aiding the recovery of the poor and vulnerable through investments in social and economic infrastructure and livelihoods TA and capacity building 10 Asian Development Bank, Kyrgyz Republic Country Gender Assessment\. Manila: Asian Development Bank, 2019\. 11 The IDA-funded project supports four oblasts (266 AAs) in the north and KfW supports the three southern oblasts\. 12 World Bank\. Saving Lives, Scaling-up Impact and Getting Back on Track\. Washington, DC: World Bank, 2020\. Jun 22, 2020 Page 5 of 19  The World Bank Third Village Investment Project COVID-19 Additional Financing (P174316) complements the household-level social assistance provided under the Social Protection Emergency Response and Delivery Systems for Effective Risk Management project\. This AF is one of a series of similar projects that build on existing instruments to help address the health sector, livelihoods, and broader development impacts of COVID-19\. The project is also aligned with the WBG’s Country Partnership Framework for FY2019–22 for the Kyrgyz Republic (Report No\. 130399-KG, discussed by the Executive Board on November 13, 2018), which includes a strong commitment to human capital development and building resilience, particularly among vulnerable women and men, and the development of livelihoods\.13 In line with corporate mandates, the project prioritizes citizen engagement in implementation; meets gender targets for analysis, activities, and monitoring; and contributes to global and regional commitments to support and scale up climate action and increase the climate- related share of development financing\. C\. Proposed Development Objective(s) Original PDO The Project Development Objectives are (a) to build local capacity for participatory development and (b) improve access to quality community infrastructure services in targeted project areas\. Current PDO The Project Development Objective of the parent project will not change\. Key Results • Number of persons with access to project-built infrastructure and services\. • Percentage of sampled beneficiaries (male/female) who report that community investments funded by the project reflect their priority needs • Percentage of sampled subprojects that result in infrastructure services of a satisfactory quality • Percentage of sampled beneficiaries (male/female) who report that investments in social infrastructure support post-COVID-19 related needs • Percentage of target AAs in which the Livelihoods Support Program (LSP) is implemented • Percentage of sampled beneficiaries (male/female) who report that village investments in livelihoods facilities supported the reestablishment of livelihoods • Percentage of sampled beneficiaries (male/female) who report that their engagement in decision making on project investments was effective • Percentage of subproject investments that were prioritized in women's groups • Number of women able to earn additional income as a result of project investments • Percentage of relevant subprojects that support climate change adaptation or mitigation 13Overall, crisis response in the Kyrgyz Republic has been accommodated within the scope of the Country Partnership Framework (CPF) for FY19-FY22\. However, the pandemic has entailed critical adjustments for more effective emergency response, i\.e\. sequencing of pipeline operations by prioritizing those that may be more relevant in the current circumstances and focusing the portfolio under implementation through restructuring and Additional Financing of existing Investment Project Financing operations to support both the health and economic response to the COVID-19 crisis\. Jun 22, 2020 Page 6 of 19  The World Bank Third Village Investment Project COVID-19 Additional Financing (P174316) D\. Project Description 12\. The project will cover the same four oblasts in the north\. The AF will intensify the support the project provides communities in the project area\. A total of 222 out of 266 rural AAs in the north will be eligible to participate (i\.e\., all AAs except for the 44 that received grants for subprojects under the parent project)\. 13\. Community development activities will be focused on livelihoods development and health-related needs, within the scope of the original project, to address the impacts of COVID-19, specifically: • Component 1: Capacity Building of Local Self-Governments and Communities – will be expanded to ensure that Component 2 investments in livelihoods are supported by the capacity building needed to connect vulnerable groups to viable livelihood opportunities and to sustain their efforts\. In the AF, in addition to continuing the parent project community mobilization and peer-to-peer learning activities, Component 1 will include capacity building of community members in a Livelihoods Support Program (LSP)\. • Component 2: Village Investments – will enable communities in the target AA to prioritize social investments that enhance access to health care, or facilities that directly or indirectly support livelihoods development for vulnerable women and men\. • Component 3: Project Management – will be scaled-up to support Component 1 and 2 investments, and will be adapted to the post-COVID-19 requirements for greater resilience of project implementation\. • Component 4: Contingent Emergency Response Component – The proposed operation will include a new Contingent Emergency Response Component (CERC), which in the event of an urgent need for assistance, will enable the GoKR to reallocate project funds to respond to an eligible crisis or emergency\. 14\. Under Component 1 (parent project US$2\.2 million), an additional US$2\.5 million will be allocated from the AF to support community mobilization activities\. • This component will finance similar community mobilization activities to those under the parent project, tailoring the mobilization and capacity building to the COVID-19 context and the focus on livelihoods development\. To address vulnerabilities through this community-based response, greater emphasis will be placed on mobilization approaches and peer-to-peer learning that are inclusive of vulnerable groups (young women, marginalized young men, the elderly, and the disabled)\. Vulnerability mapping and procedures to ensure inclusion of those not normally reached (outreach to separate women’s groups) will be set out in the updated Project Operations Manual (POM)\. • To help vulnerable men and women to establish or reestablish their livelihoods,, the scope of the capacity building activity will be expanded to include an LSP\. The LSP will comprise technical assistance from qualified organizations to create a support system (market and needs assessment, business proposal development, training and coaching) that promotes viable businesses and ensures the sustainability of livelihoods\. Qualified local economic research firms will work with target communities to identify opportunities, assess markets and communities’ capacities, and formulate value chain action plans\. They will also build the capacity of communities and Community Village Investment Associations (CVIAs) to understand the potential of local livelihoods options and activities supported under the project\. The assessments and value chain action plans will provide a framework for decision-making on the revitalization of existing and new enterprises, and investments in the markets, products and sectors required in a post COVID-19 environment\. This integrated approach to livelihoods support will be based on best practice and experience in the Kyrgyz Republic\. The Jun 22, 2020 Page 7 of 19  The World Bank Third Village Investment Project COVID-19 Additional Financing (P174316) livelihoods support program will target vulnerable members of the community defined as: (i) extremely poor, (ii) disabled, (iii) unemployed elderly of working age, (iv) unemployed women, (v) members of large households (HHs), (vi) single female-headed HHs, (vii) youth-at-risk, and (viii) households susceptible to climate change risk\. At least 50 percent of beneficiaries will be women\. 15\. Under Component 2 (parent project US$8\.6 million), an additional US$13\.3 million will be allocated from the AF to support 222 AAs in the north with health-related and livelihoods-related investments\. To address the severe lack of economic opportunity and loss of livelihoods caused by the COVID-19 crisis and economic downturn, Component 2 investments will be geared more toward economic infrastructure/ livelihoods facilities and enhanced access to health care, than in the parent project\. While the exact types of subprojects will vary to suit local opportunities, value chains that might benefit from investment in small-scale facilities include: (i) dairy production and processing, and supporting sectors such as transport services,14 (ii) crafts and garment production, (iii) digital and new service sectors (including, for instance, recycling or other environmental enterprises), and (iv) new COVID-19-response products and services\. It is thus likely that these livelihoods facilities would include refrigerated storage facilities, warehouses, small-scale manufacturing or diary processing plants, machinery workshops, craft workshops, and multi-purpose work centers\. Investments in economic infrastructure/livelihoods facilities will be linked to the LSP provided under Component 1\. To ensure sustainability, the selection and prioritization of livelihoods facilities SPs will follow similar procedures to those planned for the CASA1000 Community Support Project (CSP) COVID-19 AF project, balancing the need for community decision- making with the information and advice provided by market experts\. 16\. Community Livelihoods Business Partners (CLBPs) will apply to partner with CVIAs and AOs for the development and operationalization of these livelihoods facilities\. 17\. Under Component 3, the AF will help strengthen project management (parent project US$1\.2 million) to implement the expanded scope under Components 1 and 2\. Accordingly, Component 3 will be increased by US$1\.2 million\. Additional funds for increased operating costs will also be provided for project management and monitoring and evaluation, and to ensure that the AF reaches as many communities as quickly as possible\. 18\. A Contingent Emergency Response Component will be added (~US$0)\. In light of the COVID-19 outbreak, this provisional zero value component is designed as a mechanism to allow for rapid access to project funds for response and recovery in the face of a crisis, based on the provisions laid out in the POM\. 19\. The AF project closing date will extend project support to November 30, 2024\. E\. Implementation Institutional and Implementation Arrangements 20\. The overall implementing arrangements will not change\. The AF project will be implemented by ARIS, the same agency that has been implementing the parent project\. ARIS’ dedicated project team will continue to manage and implement the project\. To ensure that the COVID-19 AF can be rapidly implemented, ARIS has prepared an organizational strategy that identifies blockages and puts in place staff, systems and procedures that 14New irrigation canals will not be financed; rehabilitation of canals will be eligible for repairs that reduce losses and rectify other faults\. Jun 22, 2020 Page 8 of 19  The World Bank Third Village Investment Project COVID-19 Additional Financing (P174316) will enable quicker implementation\. AOs will continue to collaborate with communities, to ensure that investments are part of the local development strategies, and will take up ownership of all assets at completion\. 21\. At the local level, communities will continue to be fully engaged in local decision-making processes\. To execute the COVID-19 response, the parent project’s vehicle for community mobilization, the village-level initiative groups, will be combined at the AO level into legally-registered CVIAs to focus on AA-level livelihoods development and business partnerships, following the approach and procedures established and agreed for the CASA1000 CSP COVID-19 AF in the south of the country\. The CVIAs will have representation, partnership/coordination, executive, and oversight functions, and may also be assigned to carry out fiduciary functions for subgrants when they have sufficient fiduciary capacity\. The registration, composition,15 and procedures for the CVIAs will be set out in the updated POM\. \. F\. Project location and Salient physical characteristics relevant to the safeguard analysis (if known) The project will cover four out of seven regions of the country (Naryn, Issyk-Kul, Chui and Talas)\. G\. Environmental and Social Safeguards Specialists on the Team John Bryant Collier, Environmental Specialist Mohamed Ghani Razaak, Social Specialist SAFEGUARD POLICIES THAT MIGHT APPLY SAFEGUARD _TBL Safeguard Policies Triggered? Explanation (Optional) The updated Environmental and Social Management Framework (ESMF) and safeguards instruments will address all relevant environmental and social risks and include mitigation measures also related to: Environmental Assessment OP/BP 4\.01 Yes sexual exploitation, abuse and harassment (SEAH)/gender-based violence (GBV), labor, occupational safety and health (including as tailored to the COVID-19 context), social inclusion and stakeholder engagement\. 15As in the CSP, the head of the AO will be an active member of the CVIA in his/her respective AA, along with nominated representatives (50 percent women, 50 percent youth) from each village in the AA\. Jun 22, 2020 Page 9 of 19  The World Bank Third Village Investment Project COVID-19 Additional Financing (P174316) The potential environmental and social issues are associated with the small-scale investments for local communities\. Effective measures have been put in place under VIP-2 and VIP-3 to address safeguards issues, and these measures were being applied and closely monitored\. They are laid out in the VIP-3 Environmental Guidelines and the Resettlement Policy Framework, and will be updated for the AF project in the ESMF that guides the process of the site-specific environmental screening and risk assessment, public consultations, and the development of site-specific Environmental Management Plan (EMP)/Environmental and Social Management Plan (ESMPs)\. At the same time, the economic downturn associated with COVID-19 is expected to increase the human impact on the environment and reduce the effectiveness of traditional safeguard instruments\. Appropriate training will be provided under the AF project to Project Implementation Unit (PIU) field staff, local level officials, and community members with additional emphasis on medical waste management, integrated pest management and the safety of natural habitats in respective sites\. Under the Additional Financing, Environmental Category A activities and those using coal for power or heat generation will be excluded\. Performance Standards for Private Sector No NA Activities OP/BP 4\.03 Possible project sites under AF will be located within or close to protected areas, especially Issyk-Kul UNESCO biosphere territory and natural reserves in the Naryn and Talas regions\. The updated ESMF will include a section on the regulations for the Natural Habitats OP/BP 4\.04 Yes conservation of natural habitats and the maintenance of ecological functions in critical areas\. It will also contain measures for the rehabilitation of slightly affected and previously degraded natural habitats\. The AF will exclude subprojects with a significant impact on natural habitats\. Forests OP/BP 4\.36 No No forests will be impacted\. The Additional Financing project includes agricultural Pest Management OP 4\.09 Yes investments for fruit production and processing that may involve the use of pesticides\. The updated ESMF Jun 22, 2020 Page 10 of 19  The World Bank Third Village Investment Project COVID-19 Additional Financing (P174316) will include a section on what pesticides are allowed and when a site-specific Integrated Pest Management (IPM) is required as part of the site- specific EMPs/ESMPs\. This policy has not been triggered\. However, as a precaution, the project team will conduct regular screenings (as part of the Environmental Assessment (EA) process) to identify potential physical cultural Physical Cultural Resources OP/BP 4\.11 No resources in project-affected areas\. In case the EA screenings identify new physical and cultural resources in project-affected sites, the project team will require the PIU to adopt measures for avoiding or mitigating negative impacts\. Indigenous Peoples' as per OP 4\.10 are not present Indigenous Peoples OP/BP 4\.10 No in the project area\. Under Component 2, the project will finance grants for community level investments such as first aid points, kindergartens, community centers, sports facilities, and bridges\. The investments will be identified during project implementation based on community demand\. Component 2 activities may result in the involuntary acquisition of land and other resettlement impacts detailed in OP 4\.12\. However such impacts are expected to be minor\. Involuntary Resettlement OP/BP 4\.12 Yes Community-level investments with resettlement costs exceeding 1 percent of the sub-project amount will be excluded from the project\. A Resettlement Policy Framework has been prepared in the unlikely event that community projects require involuntary land acquisition, impact on assets, or cause negative impact on economic resources\. The small-scale subprojects (SPs) supported by the parent project did not involve any resettlement or land acquisition\. Safety of Dams OP/BP 4\.37 No NA As in the parent project, Component 2 will finance activities that may involve the rehabilitation of rural water supply and irrigation infrastructure\. Some of these may draw water from or discharge into international waterways or their tributaries\. Such Projects on International Waterways Yes international waterways include the Chui, Talas and OP/BP 7\.50 Naryn rivers\. For these reasons, OP 7\.50 has been triggered\. However, the proposed activities proposed are very limited and localized, and involve minor additions, renovation, and rehabilitation of existing schemes at the community level\. Jun 22, 2020 Page 11 of 19  The World Bank Third Village Investment Project COVID-19 Additional Financing (P174316) The criteria for selecting subprojects will exclude those that propose rehabilitation or works on new (as opposed to existing) irrigation or water systems which may involve the use or potential pollution of international waterways\. The scope of investments in activities that may use or risk polluting water from international waterways stays the same under the AF as the parent project, since any livelihood investments in irrigation or water supply will be limited to the rehabilitation or improvement of existing schemes\. Therefore this AF falls under the exception to the notification requirement which was approved for the original project in February 2015\. Projects in Disputed Areas OP/BP 7\.60 No NA KEY SAFEGUARD POLICY ISSUES AND THEIR MANAGEMENT OPS_SAFEGUARD_SUMMARY_TBL A\. Summary of Key Safeguard Issues 1\. Describe any safeguard issues and impacts associated with the proposed project\. Identify and describe any potential large scale, significant and/or irreversible impacts: The Additional Financing (AF) project will engage communities in the development of social and economic infrastructure in order to enhance services, livelihoods and inclusion in target Aiyl Aimaks (AAs) in selected northern oblasts\. Subprojects (SPs) to be supported under the project are expected to be small-scale activities that are planned and implemented based on local needs, and the priorities and choices voiced by local communities\. The AF project will target the most vulnerable and poor households to help them cope up with the economic hardships created by COVID-19\. No large scale, significant, or irreversible impacts are expected\. Any SP that would cause large-scale resettlement or significant adverse social or environmental impacts would not be funded under the project\. The AF project will include small activities associated with supporting first aid points (FAP) - as is the case for the parent project\. The AF will not include treatment of COVID-19 patients or the adaption of existing facilities for quarantine\. Nor will the AF involve the purchase of medical supplies\. Even though the AF does not aim to provide any health emergency equipment or facilities for health agencies, it may provide personal protective equipment (PPE) if requested or support proper medical waste management (MWM)at FAPs\. There will be a screening process for identifying the need and type of personal protective equipment (PPE) and MWM plans, if required\. Overall, there are no activities that are expected to result in risks related to the spread of COVID-19 among health care workers or the community at large; however, site-specific EMPs/ESMPs will consider the set of preventive measures\. Most of the small civil works (retrofitting or new construction) are expected to have moderate environmental risks associated with dust and noise, waste generation, as well as operational health and safety\. Improper restoration of construction sites after the works completion also imposes a risk and needs to be handled throughout the project\. Any Jun 22, 2020 Page 12 of 19  The World Bank Third Village Investment Project COVID-19 Additional Financing (P174316) renovation or new construction of heating systems will use an alternative to coal-based boilers\. The original project was assigned environmental category “Bâ€? based on the OP 4\.01 Environmental Assessment\. The assigned category remains unchanged for the AF\. The environmental risks are expected to be site-specific, moderate, and short-lived, with a low to moderate probability and severity of harm, and could be easily mitigated\. The site- specific environmental management and safety measures to be prepared following the project ESMF should be included in the bidding documents and draft contracts\. The project may include agricultural investments for fruit production and processing, which requires measures to prevent the use of harmful and restricted pesticides and chemicals while growing and processing fruits\. The project ESMF will be updated in this respect with a chapter describing the process of preparing the IPM sections in relevant site-specific EMP/ESMPs\. Project sites located within or close to protected areas, especially Issyk-Kul UNESCO biosphere territory and natural reserves in Naryn and Talas regions trigger the OP 4\.04 on Natural Habitats\. The updated ESMF will include a section on the regulations for related to the conservation of natural habitats and the maintenance of ecological functions in critical areas\. 2\. Describe any potential indirect and/or long term impacts due to anticipated future activities in the project area: Project activities will not have long term negative impacts on the environment and social sphere\. The majority of construction works are expected to involve the rehabilitation of existing facilities; thus, the number of subprojects involving land acquisition or temporary/permanent loss of access to land will be minimal\. The project will aim to avoid, minimize, and mitigate impacts from involuntary land acquisition and temporary/permanent loss of access to land\. 3\. Describe any project alternatives (if relevant) considered to help avoid or minimize adverse impacts\. The project will seek to avoid the involuntary acquisition of land and subsequent impacts as detailed in OP 4\.12\. Where the involuntary acquisition of land cannot be avoided, the project will seek to minimize the impacts by adopting changes in technical designs of subprojects such as shifts in alignment, reductions of site footprints, etc\. 4\. Describe measures taken by the borrower to address safeguard policy issues\. Provide an assessment of borrower capacity to plan and implement the measures described\. ARIS, the implementing agency for the parent project, will continue to be responsible for the project's day-to-day management\. The PIU at ARIS has been adequately staffed including with environment and social safeguards specialists to conduct due diligence and prepare and implement mitigation plans in a timely manner\. An ESMF including mitigation measures for most types of construction works is followed by the site-specific ESMPs prepared for each SP, if relevant\. The EMP checklist-type format is used to implement specific mitigation and compliance measures of low-risk SPs\. The implementation of the ESMPs similar to the parent project will be monitored by project staff, community safeguards volunteers and local government officials\. The procedures to be followed are consistent with OP 4\.01 and Government of Kyrgyz Republic national requirements and will ensure compliance with safeguards procedures and issues\. The project supervision missions noted that the PIU has extensive experience in preparing ESMPs, which have been of good quality and have adequately addressed site- specific risks and impacts\. The implementing agency is updating the ESMF and Resettlement Policy Framework (RPF) with consideration of the AF project and experience gained in the parent project\. The environmental and social assessment process included ARIS' Jun 22, 2020 Page 13 of 19  The World Bank Third Village Investment Project COVID-19 Additional Financing (P174316) internal review of the experience of the parent project, a set of consultations with Bank safeguard specialists, and workshops with key stakeholders\. Specific issues to be addressed in the updated ESMF include 1) a section on Pest Management that details what pesticides are allowed and when a site-specific IPM is required as part of the site- specific Environmental and Social Impact Assessments /ESMPs; 2) a section on Medical Waste Management (MWM) and hygiene requirements for SPs related to the COVID-19 response; 3) regulations to address the risks for natural habitats; 4) labor management procedures at the project and SP levels; and 5) detailed guidelines for environmental monitoring of civil works\. The updated ESMF and RPF will be disclosed on or before 30 days post project effectiveness\. The updated ESMF will be compliant with the World Bank Group Environmental Health and Safety Guidelines and World Health Organization COVID-19 Occupational Health and Safety Guidelines\. It will also describe the process of the environmental and social screening of the individual SPs, specific requirements for construction contractors and the involvement of the community in the consultation process\. Screening under the revised ESMF will exclude Environment Category A SPs\. SPs that use coal for power or heat generation will be also excluded\. ARIS is implementing the ESMF effectively in the original project and it is considered an integral part of the project operations manual (POM)\. The POM prepared under the original project will be also applied to the AF, and is being revised by the implementing agency with consideration of the AF\. Site-specific ESMPs based on the overall ESMF should become an integral part of the bidding documentation for construction contractors and should be referred to in the draft contracts, including contractual measures in case of non-compliance with safeguards requirements\. The Borrower has prepared a Resettlement Policy Framework (RPF) to guide the preparation of site-specific Resettlement Action Plans (RAPs) as necessary\. A framework approach adopted for the parent project will be retained, as the SP sites will not be known until project implementation is underway\. The RPF will be updated to reflect changes set in the AF\. No resettlement or land acquisition has taken place in any of the SPs under the parent project\. The Borrower has experience working on World Bank projects\. The PIU has recruited an experienced safeguard specialist for VIP-3, who is responsible for both social and environmental issues\. If relevant, the project will hire a MWM consultant on a temporary basis to assist the environment and social safeguards specialists on specific cases\. The Borrower also has staff working on social mobilization - who will be able to support consultations during implementation - and has recently recruited a gender specialist\. The VIP-3 design includes Community Development and Support Officers in addition to the regional community development officers who will receive training on environmental, social, health, and safety issues on a regular basis\. Together with the Bank, the Borrower will explore opportunities for training project staff and consultants on safeguards during the course of project implementation\. ARIS has carried out a preliminary stakeholder analysis identifying stakeholders and village communities\. A POM will be prepared outlining citizen/stakeholder engagement process/plan that the project will follow during implementation\. Beneficiary dialogues have been held during preparation with women, youth, low-income families, and businessmen and women\. Social accountability mechanisms ensure community engagement in monitoring and semi-annual checks \. ARIS has a functioning grievance redress mechanism (GRM) for the project to capture the concerns of broad stakeholders (established as a part of ARIS’ Beneficiary Feedback Mechanism (BFM))\. The updated ESMF, RPF and the POM include the enhanced methodologies for receiving and resolving grievances by establishing dedicated community platforms in the areas covered under the AFs\. The GRM (BFM) also includes separate codes to record grievances/ complaints to ensure beneficiaries' concerns and priorities are properly addressed in subproject activities\. Jun 22, 2020 Page 14 of 19  The World Bank Third Village Investment Project COVID-19 Additional Financing (P174316) In addition to the updated ESMF and RPF, a Stakeholder Engagement Plan (SEP) will be prepared\. Once these instruments have been consulted on and are acceptable to the Bank, they will be disclosed by the client on the ARIS website and on the World Bank website before any AF activities start\. Efforts will be made to ensure meaningful consultation despite the challenges resulting from the COVID-19 pandemic, will be based on appropriate information, and consider the specific challenges associated with public meetings in the COVID-19 context\. The GRM for the parent project is also being updated to track and respond to specific feedback, complaints and concerns related to COVID-19, SEA/SH/GBV and construction-related issues\. As this emergency Additional Financing is responding to the COVID-19 pandemic, the Bank has granted a waiver for it to be prepared and implemented, like the Parent Project, under the World Bank’s Safeguard Policies rather than the World Bank’s Environment and Social Framework\. 5\. Identify the key stakeholders and describe the mechanisms for consultation and disclosure on safeguard policies, with an emphasis on potentially affected people\. The project is highly participatory and demand-driven\. The village communities in AAs in the northern oblasts of Chui, Naryn, Issyk-Kul, and Talas, which this project targets, are its key stakeholders and beneficiaries\. Other stakeholders include local government authorities and local council members, non-governmental organizations and civil society organizations representing or working on issues related to communities and local development, public/private healthcare workers, local businessmen and women, contractors, and national level ministries providing technical or recurrent support to infrastructure constructed/rehabilitated under the project\. ARIS has carried out a preliminary stakeholder analysis identifying stakeholders and village communities\. A POM will be prepared outlining citizen/stakeholder engagement process/plan that the project will follow during implementation\. Under the parent project, it was agreed that resettlement compensation would be financed out of project funds in response to concerns raised by poorer municipalities that they may not have the needed funding for resettlement compensation\. Resettlement compensation payments have not been necessary in the parent project, and will no longer be eligible from project funds\. The finalized safeguards documents for the parent project were disclosed in Infoshop and in country on December 17, 2014\. A Stakeholder Engagement Plan (SEP) will be prepared based upon meaningful consultation and disclosure of appropriate information, considering the specific challenges associated with public meetings as a result of COVID-19\. The specific activities that the project will undertake to promote meaningful consultations and participation of project affected persons (PAP) and other stakeholders in project design and implementation will be specified in the SEP\. The SEP will include a summary of virtual consultations carried out, key issues raised, and actions proposed to address issues, if any\. The project will also explore various options for engaging stakeholders in this challenging environment, and will draw guidance on the types of communication and stakeholder engagement from the WHO’s COVID-19 Strategic Preparedness and Response Plan Operational Planning Guidelines To Support Country Preparedness and Response (2020)\. The SEP will be disclosed on the ARIS website and on the World Bank website before commencement of any AF activities\. The parent project’s GRM will also be updated to track and respond to specific feedback, complaints and concerns related to COVID-19, SEA/SH/GBV and construction-related issues\. Jun 22, 2020 Page 15 of 19  The World Bank Third Village Investment Project COVID-19 Additional Financing (P174316) OPS_SAFEGUARD_DISCLOSURE_TBL B\. Disclosure Requirements (N\.B\. The sections below appear only if corresponding safeguard policy is triggered) OPS_EA_DISCLOSURE_TABLE Environmental Assessment/Audit/Management Plan/Other OPS_EA_SG_DEFERRED_FCC_TABLE The review of this Safeguards has been Deferred\. Comments As the AF is being prepared as an emergency project, OP 10 Paragraph 12 applies, meaning that the updated ESMF, acceptable to the Bank, will be finalized, consulted on, and disclosed prior to commencement of any activities\. This process is on-going and is expected to be complete shortly after Appraisal\. OPS_RA_D ISCLOSURE_T ABLE Resettlement Action Plan/Framework/Policy Process OPS_RA_SG _DEFERRED_FCC_TABLE The review of this Safeguards has been Deferred\. Comments As the AF is being prepared as an emergency project, OP 10 Paragraph 12 applies, meaning that the updated RPF, acceptable to the Bank, will be finalized, consulted on, and disclosed prior to commencement of any activities\. This process is on-going and is expected to be complete shortly after Appraisal\. OPS_ PM_D ISCLOSURE_TAB LE Pest Management Plan OPS_PM_ PCR_TABLE If the project triggers the Pest Management and/or Physical Cultural Resources policies, the respective issues are to be addressed and disclosed as part of the Environmental Assessment/Audit/or EMP\. If in-country disclosure of any of the above documents is not expected, please explain why: Pest management issues will be included in the updated ESMF rather than a separate Pest Management Plan\. OPS_PM_SG _DEFERRED_FCC_TABLE The review of this Safeguards has been Deferred\. Comments As the AF is being prepared as an emergency project, OP 10 Paragraph 12 applies, meaning that the updated ESMF, which will include a Pest Management Section, acceptable to the Bank, will be finalized, consulted on, and disclosed prior to commencement of any activities\. This process is on-going and is expected to be complete shortly after Appraisal\. OPS_COMPLIANCE_INDICATOR_TBL C\. Compliance Monitoring Indicators at the Corporate Level (to be filled in when the ISDS is finalized by the project decision meeting) (N\.B\. The sections below appear only if corresponding safeguard policy is triggered) OPS_EA_COMP_TABLE OP/BP/GP 4\.01 - Environment Assessment Does the project require a stand-alone EA (including EMP) report? Jun 22, 2020 Page 16 of 19  The World Bank Third Village Investment Project COVID-19 Additional Financing (P174316) Yes If yes, then did the Regional Environment Unit or Practice Manager (PM) review and approve the EA report? No Are the cost and the accountabilities for the EMP incorporated in the credit/loan? Yes OPS_ NH_COM P_TABLE OP/BP 4\.04 - Natural Habitats Would the project result in any significant conversion or degradation of critical natural habitats? No If the project would result in significant conversion or degradation of other (non-critical) natural habitats, does the project include mitigation measures acceptable to the Bank? NA OPS_ PM_COM P_TABLE OP 4\.09 - Pest Management Does the EA adequately address the pest management issues? Yes Is a separate PMP required? No If yes, has the PMP been reviewed and approved by a safeguards specialist or PM? Are PMP requirements included in project design? If yes, does the project team include a Pest Management Specialist? NA OPS_IR_ COMP_TAB LE OP/BP 4\.12 - Involuntary Resettlement Has a resettlement plan/abbreviated plan/policy framework/process framework (as appropriate) been prepared? Yes If yes, then did the Regional unit responsible for safeguards or Practice Manager review the plan? No Is physical displacement/relocation expected? No Is economic displacement expected? (loss of assets or access to assets that leads to loss of income sources or other means of livelihoods) No OPS_ PIW_COMP_ TABLE OP 7\.50 - Projects on International Waterways Have the other riparians been notified of the project? No If the project falls under one of the exceptions to the notification requirement, has this been cleared with the Legal Department, and the memo to the RVP prepared and sent? Jun 22, 2020 Page 17 of 19  The World Bank Third Village Investment Project COVID-19 Additional Financing (P174316) Yes Has the RVP approved such an exception? Yes OPS_ PDI_ COMP_TAB LE The World Bank Policy on Disclosure of Information Have relevant safeguard policies documents been sent to the World Bank for disclosure? No Have relevant documents been disclosed in-country in a public place in a form and language that are understandable and accessible to project-affected groups and local NGOs? No OPS_ALL_COMP_TABLE All Safeguard Policies Have satisfactory calendar, budget and clear institutional responsibilities been prepared for the implementation of measures related to safeguard policies? Yes Have costs related to safeguard policy measures been included in the project cost? Yes Does the Monitoring and Evaluation system of the project include the monitoring of safeguard impacts and measures related to safeguard policies? Yes Have satisfactory implementation arrangements been agreed with the borrower and the same been adequately reflected in the project legal documents? Yes CONTACT POINT World Bank Audrey Sacks Senior Social Development Specialist Janelle Plummer Senior Social Development Specialist Borrower/Client/Recipient Ministry of Finance Baktygul Jeenbaeva Minister of Finance minfin@minfin\.kg Jun 22, 2020 Page 18 of 19  The World Bank Third Village Investment Project COVID-19 Additional Financing (P174316) Implementing Agencies Community Development and Investment Agency (ARIS) Bekjan Supanaliev Executive Director bsupanaliev@aris\.kg FOR MORE INFORMATION CONTACT The World Bank 1818 H Street, NW Washington, D\.C\. 20433 Telephone: (202) 473-1000 Web: http://www\.worldbank\.org/projects APPROVAL Audrey Sacks Task Team Leader(s): Janelle Plummer Approved By Safeguards Advisor: Agnes I\. Kiss 13-Aug-2020 Practice Manager/Manager: Kevin A Tomlinson 14-Aug-2020 Country Director: Naveed Hassan Naqvi 17-Aug-2020 Jun 22, 2020 Page 19 of 19

APPROVAL

P174012

 The World Bank Zambia Early Childhood Learning Enhancement Project (P174012) Project Information Document (PID) Concept Stage | Date Prepared/Updated: 23-Jun-2020 | Report No: PIDC29275 Jun 02, 2020 Page 1 of 15  The World Bank Zambia Early Childhood Learning Enhancement Project (P174012) BASIC INFORMATION A\. Basic Project Data OPS TABLE Country Project ID Parent Project ID (if any) Project Name Zambia P174012 Zambia Early Childhood Learning Enhancement Project (P174012) Region Estimated Appraisal Date Estimated Board Date Practice Area (Lead) AFRICA Sep 07, 2020 Apr 15, 2021 Education Financing Instrument Borrower(s) Implementing Agency Investment Project Financing Ministry of Finance Ministry of General Education Proposed Development Objective(s) To improve access for children of 3-6 years of age to quality early childhood services in targeted areas\. PROJECT FINANCING DATA (US$, Millions) SUMMARY-NewFin1 Total Project Cost 39\.80 Total Financing 39\.80 of which IBRD/IDA 0\.00 Financing Gap 0\.00 DETAILS -NewFinEnh1 Non-World Bank Group Financing Trust Funds 39\.80 Education for All - Fast Track Initiative 39\.80 Environmental and Social Risk Classification Concept Review Decision Substantial Track II-The review did authorize the preparation to continue Jun 02, 2020 Page 2 of 15  The World Bank Zambia Early Childhood Learning Enhancement Project (P174012) B\. Introduction and Context Country Context 1\. Zambia achieved middle-income country status in 2011 during a decade (2004-2014) of impressive economic growth, averaging 7\.4 percent per year\. Yet the country’s poverty and inequality levels are among the highest in the world\. Growth in Zambia has only benefitted a small segment of the urban population and had limited impact on poverty reduction\. Zambia ranks among the countries with the highest level of inequality globally\. As of 2015, 58 percent of Zambians earned less than the international poverty line of US$1\.90 per day (compared to 41 percent across Sub-Saharan Africa)\. Three quarters of the poor lived in rural areas1\. The Zambian economic growth fell to 3\.5 percent in 2017, grew marginally to 3\.7 percent in 2018, and again fell to 1\.9 percent in 2019\. Because of the COVID- 19 pandemic, the growth rate is expected to decline further with the impact on the poor and most vulnerable particularly at risk\. 2\. Economic growth has been accompanied by improved development outcomes in health and education, however significant challenges persist\. Since 2007, many health indicators progressed - child malnutrition, stunting, infant and under-5 mortality, and maternal mortality rates decreased2\. Efforts in combating Human Immunodeficiency Virus Infection/Acquired Immune Deficiency Syndrome (HIV/AIDS), malaria, and other diseases have also shown success\. The Millennium Development Goals (MDGs) linked to the education sector were achieved (although there are still challenges in eliminating gender disparity in secondary education)\. 3\. Zambia remains one of Africa’s youngest countries by median age and its human capital will be key to Zambia’s growth\. The total population of Zambia was estimated at 16\.6 million in 2016, up from just 3\.45 million at independence in 1964\. Zambia is experiencing a major demographic shift with the population growing at a rate of 2\.8 percent per year and a Total Fertility Rate of 4\.7 percent\. Zambia’s population is expected to double every 25 years with a large youth population entering the reproductive age and given high levels of early pregnancy\. According to the latest data, the adolescent fertility rate for Zambia reaches 118 per 1,000; only 10 countries around the world have higher adolescent fertility rates3\. Rapid population growth is placing enormous pressure on the education sector while straining the capacity of the labor market to absorb new workers\. 4\. Zambia’s human capital is very low, it ranks 131 out of 157 countries on the Human Capital Index (HCI )\. Zambia’s HCI score is lower than those of its comparator countries\. An HCI score of 0\.4 indicates that a Zambian child born in 2018 will only be 40 percent as productive as she could have been had she received a complete education and been in full health\. Data show that 40 out of 100 children in Zambia are stunted, and so at risk of cognitive and physical limitations\. Additionally, by age 18, children in Zambia can expect to complete an average of 9\.2 years of education but acquire only 5\.2 years of learning\. Low human capital has significant adverse impact on Zambia’s growth potential 1 Central Statistical Organization, Government of Zambia, Zambia in Figures 2018\. 2 The prevalence of malnutrition reduced from 14\.8 in 2014 to 9\.5 percent in 2018 with a decrease in the proportion of malnourished children\. Stunting reduced from 40 percent in 2007 to 35 percent in 2018; the proportion of underweight children reduced from 15 percent in 2007 to 12 percent in 2018 and wasting reduced from 6 percent in 2014 to 5 percent in 2018\. 3 https://data\.worldbank\.org/indicator/SP\.ADO\.TFRT Jun 02, 2020 Page 3 of 15  The World Bank Zambia Early Childhood Learning Enhancement Project (P174012) and global competitiveness\. It is therefore critical for the country to invest more and more efficiently to quickly move the needle on human capital development, particularly in education, health and social protection\. Holistic investments in young children, including through immunization, nutrition, stimulation, and education interventions, are highly effective means to develop the human capital that is needed to drive economic development\. Sectoral and Institutional Context 5\. The Zambia education sector follows a three-tier system including primary4, secondary and higher education\. It has experienced several changes in the recent past\. In 2015, the sector was reformed, splitting the Ministry of Education into the Ministry of General Education (MoGE) and the Ministry of Higher Education (MoHE)\. MoGE is responsible for Early Childhood Education (ECE), Primary, Secondary Education and Youth and Adult Literacy while MoHE oversees Higher Education, Skills Development, and Science Technology and Innovation\. Subsequently several other reforms followed including the revision of the curriculum, the establishment of a number of statutory bodies to manage and strengthen teacher management, regulate quality and set standards in higher education and the setting benchmarks for qualifications in comparison to international good practices\. 6\. Considerable progress in improving access to education has been recorded however, learning levels are alarmingly low and challenges in gender parity at the secondary level remain\. The country achieved nearly universal primary education in 2015 and gender parity in primary education\. According to latest statistics 5, the gross enrolment rate is over 100 percent and gender parity in primary education is 1\.02\. However, the ratio of girls to boys is 85 percent at the secondary level, with 36 percent of girls in the 14–18 age-group estimated to be out of school, compared to only 19 percent of boys\. In terms of learning performance, Zambia’s recent participation in the PISA-D international assessment revealed low achievements of 15 years old children with only 5 percent of test takers achieving minimum reading proficiency6\. Similarly, the SACMEQ report (2011) indicates that learning achievement levels at Grade 6 especially in reading and mathematics are below the minimum expected grade level standard7\. Results from the most recent SACMEQ III show lower achievement for girls than boys with girls scores 5\.6 points lower in reading and 11\.5 points lower in math 8\. Similar low learning achievement is evident at lower levels of education results on the 2015 Early Grade Reading Assessment (EGRA) and Early Grade Mathematics Assessment (EGMA) show considerable low learning achievements in literacy and numeracy at Grade 29 pointing at the gravity of ‘learning poverty’ in Zambia\. 7\. In terms of Early Childhood Education (ECE) access has only increased marginally, an issue which impacts internal system efficiency\. Although enrollment in public, community and private ECE centers doubled between 2014 and 4 Primary also included Education Childhood Education 5 2018 Education Bulletin 6 KaffenBerg, Michelle, 2019\. Pisa-D Reveals Exceptionally Low Learning\. PISA Web site https://www\.riseprogramme\.org/blog/PISA-D_low_learning 7 Musonda B\., & Kaba, A (2011)\. The SACMEQ III profile in Zambia: A study of the conditions of schooling and the quality of education Report (p\.113)\. 8 Saito, Mioko, 2011 Trends in the Magnitude and Direction of Gender Differences in Learning Outcomes, SACMEQ, Working Paper No 4, 2011\. 9 The average oral reading fluency rate for the local languages ranged from 1\.84 to 8\.40 words per minute, indicating that the typical grade 2 pupil could sight-recognize a few words but struggled to string the words from a passage into a coherent sentence\. While in mathematics, for addition and subtraction tasks, for which a technique other than counting was required (such as borrowing tens), the percentage of pupils scoring zero 49\.5% for addition and 60\.7% for subtraction\. Jun 02, 2020 Page 4 of 15  The World Bank Zambia Early Childhood Learning Enhancement Project (P174012) 2018, this enrollment represents less than 10 percent10 of pre-primary school aged children\. The proportion of grade one entrants with ECE exposure grew from 16 percent in 2004 to 29\.4 percent in 201811\. As a result, Zambia still falls behind some of its peers in the Southern Africa region in terms of access to ECE such as Zimbabwe (32 percent), Malawi (45 percent), South Africa (above 50 percent), and is below the SSA average of 53 percent\. According to the Zambia's 2007 Demographic and Health Survey (ZDHS, 2007) only 31 percent of children are in school by age 6 generating a situation of overage students in classrooms\. This has a significant impact on the effectiveness of teachers, on at grade level students with whom they interact and on the overall environment of the school\. Children who attend pre-school are more likely to enroll on time and are at a lower risk of repeating and to graduate on time\. This reduces the number of years needed to produce a graduate, thus increasing the internal efficiency of the system\. 8\. Zambia has a policy strategy to improve quality and expand equitable access to ECE\. The Government has identified three scale-up models for improving access to ECE: annex centers, standalone centers, and hub-satellite centers\. The annex model was launched in 2013 through annexing of ECE centers to existing primary schools\. As a result, a total of 2,992 ECE centers have been annexed across the ten provinces\. In the Standalone model, the ECE center operates as an independent entity under direct monitoring of the District Education Office\. The hub-satellite model was introduced recently as a low-cost strategy where satellite centers are established at community level and a where a respective primary school annex center acts as a hub providing support for quality assurance and development\. The hub-satellite model has demonstrated feasibility for expanding access to ECE with targeted interventions, including early learning and stimulation, health, nutrition, safety and security through strong partnerships across multiple sectors\. Additionally, Interactive Radio Instruction (IRI) has been piloted with the potential to enhance access and quality of service\. 9\. The enabling legislative and policy framework for the Early Childhood Development (ECD) in Zambia is reasonably sound\. The policy framework draws its mandate from the Directive Policy principles related to the right to health, food security, and education in the Constitution12\. The 7th National Development Plan -2017-2021 (7th NDP) prioritizes human capital development through an integrated multi-sectoral approach which is considered a critical component to drive the country’s developmental agenda towards the attainment of the so -called Vision 2030\. The Education Act of 2011 seeks to ensure provision of accessible, equitable and quality education within the framework of the United Nations Convention on the Rights of the Child\. With regards to ECE, the Education Act, No\. 23 of 2011 sub section 12 acknowledges Early Childhood Care Development and Education (ECCDE) as a foundational stage in the Zambian Education structure\. ECE was integrated into the MoGE education structure in 2011 and only in 2014 the first intake of children was enrolled in government funded ECE centers\. 10\. The Education and Skills Sector Plan (ESSP) 2017- 2021 identifies early childhood education as a key strategic priority\. Several strategies to accelerate access to ECE and improve quality, equity efficiency, and effectiveness13 in service provision have been clearly outlined in the ESSP\. A Directorate for ECE was established in MoGE in 2015\. Deployment of teachers, annexing of ECE centers to existing primary school, establishment of satellite centers at 10 The World Bank School Enrollment Pre-Primary (Gross%)\. Retrieved 5/18/2020 https://data\.worldbank\.org/indicator/SE\.PRE\.ENRR 11 Ministry of General Education (2018), Education statistical Bulletin\. Lusaka: ZEPH 12 Constitution of Zambia, Chap 1 of the Laws of Zambia 13 Ministry of General Education (2018)\. Education Sector Skill Plan 2018-2021\. Lusaka: Ministry of General Education\. Jun 02, 2020 Page 5 of 15  The World Bank Zambia Early Childhood Learning Enhancement Project (P174012) community level, and the development of an ECE regulatory framework have been some of the strategic policy actions undertaken thus far by this new Directorate\. 11\. A multisectoral approach to enhancing children’s school readiness across the Government agencies provides opportunities for synergies\. Given the multisectoral nature of the initiatives to enhance children’s readiness for learning, close collaboration of several government agencies is envisaged including the Ministry of Health (MoH) in areas related to maternal and child health, nutrition, stimulation, safety and security; the Ministry of Community Development and Social Welfare (MoCDSW) in nutrition sensitive interventions, child protection, social protection, and functional literacy; the Ministry of Agriculture (MoA) in nutrition sensitive interventions; and the Ministry of Gender on gender related interventions\. 12\. Along with the strong commitments made in the policies and plans, significant investment and efforts are required to address the following ECE challenges in order to improve human capital of Zambia: a) Effective coordination among various institutions: While the MoGE is responsible for providing ECE, the Ministry of Health, the Ministry of Youth, Sports and Child Development and Ministry of Community Development and Social Welfare are responsible for providing nutrition and health services, and parenting programs\. Inter-agency/Ministerial coordination is gradually improving\. The inter-Ministerial coordination is in a nascent stage, which needs to be institutionalized and strengthened\. The UNICEF supported integrated ECD pilot project in the Katete and Petauke districts of Eastern Province has demonstrated feasibility of effective multisectoral coordination at district level with strong community engagement\. b) Equity gaps\. The geographical reach for ECD services is mainly concentrated in urban provinces14 which leaves children in rural provinces (with a high proportion of children in lowest wealth quintiles) with limited access to ECD services15\. According to the Zambia Demography and Health Survey (2018) only 27\.8 percent and 5\.8 percent of children in the age-group of 0-5 have attended ECE in urban and rural areas respectively\. Additionally, the proportion of children with disabilities accessing ECD is exceptionally low and remains undocumented16\. c) Quality of ECE services\. The regulation for ECE class size is 20 learners per class with five- and six-year- olds\. However, the actual pupil-classroom ration varies from an average 20:1 in Central Province to an average 49:1 in Copperbelt Province\. Finally, inputs critical for quality of ECE are often inadequate due to inappropriate infrastructure and furniture, lack of teaching and learning materials, and inadequate playgrounds and WASH facilities\. Weak curriculum implementation, monitoring, regulation and quality assurance systems17 add to the low quality of service delivery\. d) Trained teacher workforce\. Although the MoGE has embarked on ECE teacher recruitment, there is an under supply of ECE teachers to meet the growing demand for ECE services especially in rural areas\. The majority of qualified ECE teachers tend to be clustered in urban areas with untrained volunteer caregivers comprising a large proportion of the workforce in rural areas\. Most rural centres are managed 14 Similar patterns were found in the UNESCO study conducted in Burkina Faso, Uganda and Ethiopia\. 15 Musonda B\., & Kaba, A (2011)\. The SACMEQ III profile in Zambia: A study of the conditions of schooling and the quality of education Report\. 16 Fink, G\., Matafwali, B\., Moucheraud, C\., & Zuilkowski, S\. S\. (2012)\. The Zambian Early Childhood Development Project: 2010 Assessment Final Report\. Cambridge, MA: Harvard University\. 17 Ministry of General Education (2018)\. Status of Early Childhood Education in Zambia\. Jun 02, 2020 Page 6 of 15  The World Bank Zambia Early Childhood Learning Enhancement Project (P174012) by volunteer caregivers who are recruited from Parent-Teacher Associations (PTA) contributions and most have not received the training needed to improve child development and learning\. e) Public financing for ECE\. There are two main sources of financing of ECE in Zambia: public financing through the government budget and donors and private financing\. Public financing for ECE remains as low as 1 percent of the education sector budget in 2020\. Only 0\.4 percent was allocated towards ECE in the 2020 national budget\. Furthermore, the release of funds by treasury is unpredictable and often below the allocation\. The official allocation is way below the recommended benchmark of 10 percent for low income countries\. Richter et al\., (2018) noted that 2\.7 percent of GDP would be required for a minimum ECD package for low income countries and 1\.2 percent of GDP for low middle-income countries18\. Overall investment on ECE is difficult to estimate because there are no figures on donor financing to ECE and information form the majority of ECE centers in the urban areas that are run by private individuals, non-governmental organizations (NGOs) and the church is not readily available\. f) Data for decision-making\. The ECE sector lacks a comprehensive information management system\. MoGE annually collects education data through a paper-based Education Management Information System (EMIS)\. However, the system does not collect comprehensive data on ECE, which is critical for planning, decision making and budgeting\. The only data on ECE that the EMIS currently collects is the proportion of grade one entrants with ECE exposure\. Additionally, no system exists that systematically measures the quality of ECE service and child developmental outcomes\. 13\. Development partners have significantly contributed to the education sector with the majority of support going towards primary education\. The World Bank is currently supporting the school education sector through a USD180 million Zambia Education Enhancement Project (ZEEP) (P158570 and P174012) with the aim to improve the quality of education, particularly in language arts, mathematics and science at both the primary and secondary level, and access to secondary education\. Support to the ECD sub-sector has been limited and predominantly ECE focused\. The United State Agency for International Development (USAID) is supporting a large-scale intervention on pre-school and early grades implemented in five out of the 10 provinces in Zambia\. UNICEF is implementing an innovative program in two districts in Zambia focusing of ECD\. Additionally, several small-scale interventions supported by non-governmental organizations (NGOs) and international private voluntary organizations (IPVOs) such as Save the Children Fund (UK), Plan International, VVOB (Belgium), World Vision, Child Fund are on-going to support ECE across the country\. These interventions supported by NGOs, IPVOs, bilateral and multi-lateral agencies have generated Zambia-specific knowledge on ECE\. Some of the innovative models that have worked in Zambia may offer potential for scaling up\. The proposed project design incorporates lessons from the on-going interventions in the ECE sub-sector and builds on innovations that are currently showing promising results\. Relationship to CPF 14\. The proposed project is closely aligned with the World Bank’s Country Partnership Framework 2019-2023 (CPF 2019)19 for Zambia, as well as the findings of the recent Systematic Country Diagnostic (SCD) 20\. The CPF’s objectives include improving access to high quality education opportunities, health services, nutrition and social protection, with attention to girls and women in selected rural areas (Objective 2\.1 under Focus Area II)\. The SCD 18 Richter, L\., Black, M\., Britto, P\., Daelmans, B\., Desmond, C\., Devercelli, A\., \. & Lu, C\. (2019)\. Early childhood development: an imperative for action and measurement at scale\. BMJ global health, 4(Suppl 4), e001302\. 19 Report Number: 128467 20 Report Number 124032 Jun 02, 2020 Page 7 of 15  The World Bank Zambia Early Childhood Learning Enhancement Project (P174012) revealed large disparities in education quality and binding constraints on access to quality education\. The current project is designed to directly address Zambia’s human capital challenges by tackling ‘learning poverty’ through the provision of early-childhood development opportunities in terms of quality, equity, and access as identified in the SCD\. 15\. The proposed project deepens supports multi-sectoral human capital development in Zambia\. Zambia recently joined the group of Human Capital Project (HCP) countries, which provides a good platform to initiate high-level dialogue to increase budgetary allocation for education and human development including through early childhood development interventions\. The ongoing World Bank financed Zambia Education Enhancement Project (ZEEP - P158570 and P170513) focuses on improving learning achievements of students attending primary and secondary education\. The proposed project targets early years based on neurological research that shows that the experiences of early years including those around nutrition, early stimulation and preventions from psychological shocks, play a key role in children’s brain development and in the development of their cognitive, emotional, and social development skills\. Learning starts in infancy, long before formal education begins, and continues throughout life\. The competencies and skills fostered through ECD programs help develop competencies and skills that are not limited to cognitive gains, but also include physical, social and emotional gains, all of which play a key role on future learning potentials, employability and civic participation\. Effective ECD systems are characterized by the presence of five central components including: early stimulation and education, sanitation, nutrition, health, and child protection\. All these elements are holistically interconnected requiring the design of programs that are offered in an integrated, inter-sectoral and multi-stakeholder manner\. C\. Proposed Development Objective(s) To improve access for children of 3-6 years of age to quality early childhood services in targeted areas\. 16\. To achieve this objective the project will support the expansion of early childhood education centers and improve quality of ECE services through the introduction of a package of services aimed at enhancing school readiness of 3-6 years old children in targeted areas\. The services will be directed at strengthening the cognitive, socio- emotional and physical development of children in the project’s targeted areas\. The package will encompass interventions to: (a) provide a safe space for children to have structured opportunities to play and learn under the guidance of a qualified adult and quality play-based learning materials so they can develop the socio-emotional and cognitive functions that they will need to succeed in school; (b) build parents’ and caregivers’ skills and capacity to engage children in early stimulation and to ensure proper child’s nutrition and health; and (c) promote continuous assessment of children’s progress to ensure that children have the individualized attention needed to develop their full potential\. Key Results 17\. PDO Level Results Indicators (i) Percentage increase in enrollment in early childhood centers in targeted areas (disaggregated by gender and locality) (access and equity) Jun 02, 2020 Page 8 of 15  The World Bank Zambia Early Childhood Learning Enhancement Project (P174012) (ii) Children beneficiaries of the project improve socio-emotional and cognitive functions needed to succeed in school21 (learning outcomes) (iii) Increase in on-time enrollment in first grade in school located in program targeted areas (internal efficiency) D\. Concept Description 28\. Interventions that promote early cognitive and socio-emotional development, and early learning are critical to ensure children arrive to primary school ready to succeed and are central elements of any effective ECD system\. Accordingly, the proposed program will support three sets of interventions under three components: a\. Improving access to early childhood education and school readiness opportunities; b\. Enhancing quality of services critical to early childhood and school readiness; and c\. System strengthening, project management, and monitoring and evaluation\. 29\. The proposed project is the first-ever externally funded interventions of a scale that will be implemented directly by the MoGE\. Therefore, it is critical that the proposed project also strengthen the systems, policy framework and sets required standards for long-term sustainability\. Hence, under each component, some of the activities will have system wide impact while the intervention itself may be implemented in the project targeted areas\. Component 1: Improving Access to Early Childhood Education and School Readiness Opportunities 30\. The MoGE has articulated a draft strategy for the expansion of ECE services\. The proposed project will support that strategy through the following two sets of interventions: 31\. Sub-component 1\.1\. Expansion of ECE Facilities and Promotion of Healthy ECE environment \. In order to help expand ECE access and to ensure a healthy ECE environment the project will support three types of interventions under this sub-component\. a\. Establishing and validating national ECE standards\. The project will support the development and introduction of infrastructure standards that ensures a safe and healthy learning environment for children, including water, sanitation; and standards for the development of playful teaching and learning materials to support early stimulation, and cognitive and socio-emotional growth\. These standards will be applicable to both public and private ECE centers nation-wide\. The standards will be disseminated nationwide and will be used in the design of the hub-satellite centers to be built under the project and on the equipment and learning materials to be distributed under the project\. b\. Expand ECE access in the project target areas by supporting the expansion of ECE services through two strategies: i\. Establishment of hub ECE centers\. In those targeted areas where the existing primary schools do not provide ECE services the project will support the establishment of an ECE center hub at the primary school\. These centers will serve as a hub to smaller community-based satellites ECE that the project will also support within the catchment area of the respective primary school\. For effective 21 This will be assess using the Zambian Child Assessment Test (ZAMCAT) Jun 02, 2020 Page 9 of 15  The World Bank Zambia Early Childhood Learning Enhancement Project (P174012) management, each hub will establish a maximum of five satellite centers\. It will be a requirement that the hub ECE center is managed by a qualified ECE teacher as this will provide an opportunity for knowledge transfer and on-going technical support to caregivers at the satellite centers\. ii\. Establishment of ECE satellites\. In primary schools where there is an ECE center in operation but that due to its location it is not meeting families’ demand for ECE services within its catchment area, the project will finance the establishment of small community-based satellites ECE that will be supported by the respective existing primary school ECE center22\. The project will support the development of a strategy to promote the participation of local communities and the involvement of local leaders on the establishment of the hub- satellite model using local technologies while at the same time following the national ECE infrastructure standards developed under the project\. c\. Community participation in expansion of access\. Drawing from the ZEEP experience of community-based construction, similar community mobilization strategies will be implemented to involve communities in the building and maintaining the centers using locally available materials and technologies, and also generating demand for ECE services\. These satellite centers will help reduce the distance that children would ordinarily need to cover to access the ECE\. To enhance sustainability, a community driven approach will be applied with the communities taking leadership in the establishment of the hub and satellite centers\. Parent Center Committees (PCCs) will be responsible for center management with support and guidance from the hub center\. d\. Promote ECE healthy environment\. In order to promote safe and healthy environment the project will provide support to the improvement of water and sanitation condition in ECE facilities in the project targeted areas that either lack those facilities or where they are in poor conditions\. Also, in all target ECE centers and satellites, the project will help establish and disseminate a program promoting good hygiene practices following WHO guidelines\. The materials developed under this initiative will be available for national distribution on the MoGE website\. 32\. Sub-component 1\.2\. Expand Access to a Comprehensive Array of ECE Resources and Parenting Support\. To increase the effectiveness of early childhood services, the proposed project will put together a comprehensive system to provide an array of services linking young children and their families to qualified personnel, quality equipment and age relevant cognitive and socio-emotional developmental materials, and parenting support resources as follows: a\. Establishment of Parent Center Committees to assist in recruitment of local caregivers to staff the ECE satellites, including support community mobilization activities to recruit volunteer caregivers and to promote children’s enrollment and regular attendance in the ECE satellite centers\. b\. Provision of furniture and playground equipment for the Core ECD hubs and satellites following the standards developed under sub-component 1\.1\. 22 This satellite-based model for expanding ECE access is currently been supported by UNICEF in selected communities that are not covered by ZEEP Jun 02, 2020 Page 10 of 15  The World Bank Zambia Early Childhood Learning Enhancement Project (P174012) c\. Promotion of parenting behaviors activities to help enhance children developmental growth and to promote practices aimed at promoting child protection, reducing stunting and improved nutrition among children in the areas covered by the project\. This will be done through project support to the: i\. Development and implementation of parenting education programs including aspects related to positive and playful parenting practices, nutrition, health and sanitation, child protection, and early stimulation using locally available produce and materials; ii\. Integrate strategic use of technology such as interactive radio and mobile smart phones to promote playful parenting and caregiver-child engagement in developmentally appropriate activities\. Mobile phones will also provide feasibility for targeted interventions on maternal and child health, nutrition, safety and security through short messaging; iii\. In areas with poor coverage cellular phone and/or internet coverage distance learning technology through Interactive Radio Instruction (IRI) using non-broadcast delivery mediums, will be used to train and educate teachers, care-givers, and to provide direct instruction to parents and community leaders on active child-centered learning activities, playful learning, maternal and child nutrition, playful parenting, safety and security and through guided lessons that engage children socially, cognitively, physically, emotionally and creatively; and iv\. Design and implementation of community-based nutrition sensitive programs to empower parents, community leaders, caregivers and teachers to enhance child feeding practices and maternal nutrition through participatory cooking classes, nutrition training, and door-to-door educational outreach activities\. The communication, dissemination and training materials and strategies developed and validated in the project target areas will be made nationally available through the website of MoGE\. Through synergies with the Ministry of Agriculture (MoG) and active community engagement, backyard gardens will be promoted at the center to ensure sustainability of nutrition sensitive interventions\. Component 2\. Enhancing Quality of Services Critical to Early Childhood Education and School Readiness 33\. In all communities in the targeted areas, the project will support a set of interventions to promote the delivery of quality learning opportunities through the following two sets of activities; 34\. Sub-component 2\.1\. Support Continuous ECE Professional Development\. The project will enhance professional capacity of ECE centers and satellites by: Jun 02, 2020 Page 11 of 15  The World Bank Zambia Early Childhood Learning Enhancement Project (P174012) a\. Delivering continuous and comprehensive ECE professional development\. The proposed project will support the development of an ECE comprehensive continuous professional development (ECE-CPD) framework along with a national implementation strategy, an ECE training program and training materials for training ECE teacher, caregivers, headteachers, parents, community leaders, and local education authorities\. The training program will be implemented in ECE and satellites centers in the project targeted areas\. It will also include the training of schools’ headteacher and PCCs’ on ECE management competences\. The ECE-CPD will be fully aligned and build on activities implemented during the development of the ECE teacher professional development index (TPDI) that will be prepared under the ZEEP-AF23\. The framework, training methodologies and materials will be validated and implemented in the project targeted areas and will be made available to be used by MoGE and local education authorities at the national and local level so they can incorporate them to their own awareness, dissemination campaigns and training events\. b\. Using mobile technology and Interactive Radio Instruction (IRI) for training\. Training using IRI capacities already available in the country will be further developed in ECE to provide access to innovative and flexible technologies in remote areas\. ECE modules will be developed in all seven local languages to deliver IRI-based training to hub and satellite ECE centers targeting community leaders, ECE teachers, caregivers and facilitators\. Mobile phones will also provide feasibility for targeted training through short messaging\. Additionally, a WhatsApp like group for a network of caregivers would be created to encourage a community of practice on improved pedagogical skills and innovations\. 35\. Sub-component 2\.2\. Use of formative and summative assessment\. Under this sub-component, the project will develop tools and instruments to support formative and summative assessment\. ECE teachers and caregivers will be trained on the use of user-friendly formative assessment instruments to carry out continuous assessment to monitor student learning and to provide ongoing feedback that can be used by instructors to improve their teaching and by students to improve their learning\. This will allow teachers and caregivers to plan and implement individualized instructional and developmental activities for children under their care\. Education administrators at the local level in targeted areas and policy makers at the MoGE level will be trained on the use of summative assessment instruments to assess the status of implementation of ECE programs and to design evidence-based programs and policies\. Also, MoGE staff will be trained on strategies and methodologies to disseminate the use of these tools in areas not covered by the project\. 36\. Sub-component 2\.3\. ECE Materials for Early Stimulation and Learning\. The project will support the development and distribution of ECE materials for early stimulation and early learning, including the stimulation of early reading24 and playful tools as well as additional development, production and distribution of ECE guides for teachers, caregivers and facilitators in targeted areas\. Since the project will cover the cost of developing the materials its distribution in the project targeted areas, it is expected that the marginal costs of distributing the materials in the rest of the country will be covered by the MoGE\. To enhance sustainability, the project will integrate capacity development of the PCCs and communities in the development of low-cost teaching and learning materials using locally available materials\. 23 ZEEP-AF will be developing ECE standards and training ECE teachers\. The proposed project will expand the training to cover the target groups mentioned above\. The training will be based on the set of standards develop under ZEEP-AF\. 24 The program will also finance the production and distribution of materials that have been developed and tested with support of development partners Jun 02, 2020 Page 12 of 15  The World Bank Zambia Early Childhood Learning Enhancement Project (P174012) Component 3: System Strengthening, Project Management, Monitoring and Evaluation and Communications 37\. This component will support strengthening MoGE’s capacity to guide and manage the sector, to provide services in COVID-19 like situation, and to implement the proposed project in a timely, effective and efficient manner through the following sub-components\. 38\. Sub-component 3\.1\. System strengthening\. This sub-component will support activities to strengthen the capacity of the MoGE, particularly of ECE Directorate, Provincial and District Education Offices for evidence-based planning, budgeting, managing and monitoring ECD programs\. This will involve: a\. Strengthening governance and accountability systems and mechanism, including fiduciary mechanisms to improve accountability to results and overall system integrity\. b\. Strengthening the monitoring and evaluation systems and the capacity for data collection, analysis, utilization and reporting; c\. Capacity for inter-agency coordination encompassing, among others, joint planning and annual review of nutrition, early learning and stimulation, community involvement, and care-giving and parenting interventions; and 39\. Sub-component 3\.2\. System Capacity for continuity of service delivery\. To strengthen MoGE’s capacity to continue operating under emergency situations the project will support: a\. Capacity development and preparedness to respond and continue delivery of learning during crisis and emergency situations like COVID-19, climate induced emergencies, etc\.; and b\. Capacity development to use of technology and innovative delivery for continuity of learning (e\.g\. training of parents to continue with some of the core activities, use of interactive radio and cell phone for training of teachers/caregivers to manage such situations in collaboration with local communities/parents) 40\. Sub-component 3\.3\. Project Management, Monitoring and Evaluation\. While MoGE will be responsible for overall implementation and monitoring and evaluation of the project, the District Education Boards (DEB) will play a key role in planning, implementing and monitoring the project\. Under the leadership of DEB Secretaries, district level multi-sectoral committees (if does not exist, to be formed) will be constituted involving district health, water, district local body, community development, and gender officials\. These committees will be involved in planning and directly monitoring the program implementation\. At each center, a mothers committee for example, or existing community level body, will be involved in a participatory planning process to plan for their center\. At the national level, while the Directorate of ECE in MoGE will be directly responsible for the project implementation, the project implementation arrangements will dovetail with the ZEEP-AF, which will provide unified oversight and accountability mechanisms reducing project management costs and increasing implementation efficiency\. The detailed implementation arrangements will be developed during project preparation\. Jun 02, 2020 Page 13 of 15  The World Bank Zambia Early Childhood Learning Enhancement Project (P174012) Legal Operational Policies Triggered? Projects on International Waterways OP 7\.50 No Projects in Disputed Areas OP 7\.60 No Summary of Screening of Environmental and Social Risks and Impacts \. The Environmental and Social Risk Classification is substantial is due to the social risk rating of this proposed operation\. The environmental ratings are moderate with potential typical construction related environmental and social impacts emanating from the construction of the hubs and satellite centers\. These impacts along with impacts associated with sanitation related wastes from the Water, Sanitation and Health (WASH) facilities as well as electronic wastes from the use of mobile phones is anticipated but expected to be site specific, reversible and managed through established and proven mitigation measures\. The social risk substantial rating is due to the expected project implementation in rural areas where target communities experience high poverty levels and inequalities are prevalent due to existing social and cultural practices\. Gender disparities are evident, with low participation of women in decision making, high vulnerability to gender-based violence and teenage marriages have contributed to adolescent girls being caregivers at an early age\. Additionally, for construction limited labor influx is expected as a result of the construction activities and may cause a strain on the already stretched services in rural areas, including a possible surge in incidence of communicable diseases and the risk of SEA\. The COVID-19 pandemic also presents a risk as the virus may spread in the community, among teachers and young learners if public health guidelines are not adhered to\. COVID-19 pandemic control measures may increase vulnerability to GBV\. The GBV and SEA risk mitigation measures applied will require appropriate strategies that take into consideration the limitations\. Note: To view the Environmental and Social Risks and Impacts, please refer to the Concept Stage ESRS Document\. \. CONTACT POINT World Bank Nalin Jena Senior Education Specialist Borrower/Client/Recipient Ministry of Finance Implementing Agencies Jun 02, 2020 Page 14 of 15  The World Bank Zambia Early Childhood Learning Enhancement Project (P174012) Ministry of General Education Jabbin Mulwanda Permanent Secretary jabbinmulwanda@gmail\.com FOR MORE INFORMATION CONTACT The World Bank 1818 H Street, NW Washington, D\.C\. 20433 Telephone: (202) 473-1000 Web: http://www\.worldbank\.org/projects APPROVAL Task Team Leader(s): Nalin Jena Approved By APPROVALTBL Practice Manager/Manager: Safaa El Tayeb El-Kogali 08-Jun-2020 Country Director: Sahr John Kpundeh 25-Jun-2020 Jun 02, 2020 Page 15 of 15

APPROVAL

P115837

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APPROVAL

P094513

 ICRR 13995 Report Number : ICRR13995 IEG ICR Review Independent Evaluation Group 1\. Project Data: Date Posted : 05/29/2013 Country : India Project ID : P094513 Appraisal Actual Project Name : India: Emergency US$M ): Project Costs (US$M): 682\.7 186\.5 Tsunami Reconstruction Project L/C Number : C4054 Loan/ US$M ): Loan /Credit (US$M): 465\.0 161\.53 Sector Board : Urban Development US$M): Cofinancing (US$M ): 217\.7 25\.22 Cofinanciers : Government of India Board Approval Date : 05/03/2005 Closing Date : 04/30/2008 12/31/2011 Sector (s): Housing construction (69%); General agriculture fishing and forestry sector (12%); Other social services (10%); General water sanitation and flood protection sector (9%) Theme (s): Natural disaster management (33% - P); Rural services and infrastructure (17% - S); Participation and civic engagement (17% - S); Social safety nets (17% - S); Land administration and management (16% - S) Prepared by : Reviewed by : ICR Review Group : Coordinator : Tomoko Kato Robert Mark Lacey Soniya Carvalho IEGPS1 2\. Project Objectives and Components: a\. Objectives: Original Objectives: The development objective of the project stated in the Memorandum and Recommendation of the President (MRP, page 4) and in the original Development Credit Agreement (DCA, Schedule 2, page 20) was: “to support the efforts of the governments of India, Tamil Nadu and Puducherry to revive livelihood and promote recovery in the tsunami-affected areas"\. Revised Objectives: At the Government’s request the project was restructured (Level 1) in August 2009\. The revised development objectives, as stated in both the Project Restructuring Paper and the amended DCA, were : “to assist the Borrower and the Project States to revive livelihood and promote recovery in the Tsunami Affected Areas in the short-term, and to reduce the vulnerability of coastal communities to a range of natural hazards such as cyclone, storm surge, flood and tsunami over the long -term\." At the time of the restructuring, US$ 77\.17 million of the IDA Credit had been disbursed, representing 47\.8% of the amount disbursed at project closure \. b\.Were the project objectives/key associated outcome targets revised during implementation? Yes  If yes, did the Board approve the revised objectives /key associated outcome targets? Yes Date of Board Approval: 08/13/2009 c\. Components: 1: Housing Reconstruction (appraisal US$596\.8 million; actual US$81\.6 million)\. This component consisted of three sub-components: (a) provision of transit shelter as needed and upgrading of services in temporary shelter sites; (b) repair and reconstruction of existing houses, construction of new houses, and the necessary related services and community infrastructure; and (c) resettlement of families affected by the project \. 2: Restoration of Livelihoods (appraisal US$36\.4 million, actual US$11\.81 million)\. The assistance to fisheries included: (a) restoration of damaged fisheries infrastructure, such as harbors, patrol boats, clearing bar mouth and estuaries to maintain estuarine habitats, and aquaculture infrastructure; and (b) re-establishment of safety-at-sea systems/services; and assistance to agriculture, horticulture and livestock; and (c) promotion of sustainable management of coastal land and water resources \. 3: Public Buildings and Public Works (appraisal US$19\.5 million; actual US$17\.69 million)\. This component provided financing for small public works, such as repair, reconstruction and upgrading of damaged hospitals, public health centers/sub-centers, educational institutions, cyclone shelters and other public buildings, restoration of damaged river and drain banks, and plantation /replanting of mangroves and shelter belts in Tamil Nadu \. 4: Technical Assistance and Training (appraisal US$111 million; actual US$2\.15 million)\. This component financed: (a) technical assistance and capacity building for housing reconstruction; (b) preparation of social and environmental management plans in accordance with the Environmental and Social Management Framework; (c) community participation efforts to ensure involvement of the affected communities; (d) studies to assess the vulnerabilities and longer-term issues associated with coastal zone protection; (e) environmental studies on coastal water quality, ground water quality, pollution of tidal influenced water bodies in urban areas; and (f) capacity building among various stake holders and hazard risk management \. 5: Implementation Support (appraisal US$19\.0 million; actual US$11\.0 million)\. This component financed the project management and incremental operating costs such as : (a) quality assurance and technical audits to ensure adequate quality of reconstruction works; (b) project monitoring and evaluation (M&E), including continuous social and environmental impact assessments as outlined in the environmental and social management framework; (c) project management and incremental operating costs; and (d) project financial audits\. Revised Component : Tamil Nadu - At the time of the level 1 restructuring in 2009, a new component, Vulnerability Reduction of Coastal Communities (VRCC - Vulnerability Reduction Component for Tamil Nadu ) was introduced and financed from the accumulated savings from the other components (US$136\.4 million, ICR page 4)\. The new component included: a) emergency evacuation and early warning facilities (US$39\.1 million); b) reconstruction of risk-prone houses to multi-disaster resistant standards (US$87\.3 million); and c) technical assistance and implementation support (US$10\.1 million)\. At the same time, and for Puducherry only, the Agriculture sub -component under the Livelihood component (2b) was removed from the project because the rehabilitation works were completed using Government of Puducherry’s own funds\. Puducherry - No specific activities were included to attain the long -term objectives in Puducherry\. d\. Comments on Project Cost, Financing, Borrower Contribution, and Dates: Project Cost : Project cost at completion was US$ 186\.5 million, 27% of the appraisal estimate of US$682\.7 million\. During the first two years of project implementation, a significant amount of grant funding through NGOs and assistance from the private sector was mobilized by the Government of India, particularly for housing reconstruction (40,000 houses for Tamil Nadu), and this substituted for about US$ 220 million of the IDA Credit\. In addition, housing reconstruction needs were significantly overestimated during the initial damage assessment (ICR page 6)\. However, some of the reduction in expenditure from the Credit was due to slow implementation and non -completion of expected reconstruction/rehabilitation targets before the project closed \. Thus, in July 2009 the budget for housing reconstruction in Tamil Nadu was reduced from US$ 423\.0 million to US$201\.9 million, and US$136\.4 million was allocated to the new Vulnerability Reduction Component for Tamil Nadu \. Financing : The IDA Credit was only one of several sources of post -disaster relief\. NGOs played an important role in empowering communities to make them disaster resilient by mobilizing them and assisting to form self -help groups\. In addition, other international organizations also assisted tsunami -affected communities with their specific organizational expertise: UN agencies with hazard risk management, health and education; the Asian Development Bank with micro-enterprise development; and the International Fund for Agricultural Development with livelihood support to fishing communities\. Specific financial contributions of these other partners are not provided in the ICR \. The original Credit was for US$465\.0 million\. Over the life of the project this increased to US$ 473\.5 million because of the appreciation against the US dollar of Special Drawing Rights in which the Credit was nominated \. A total of US$304 million of the Credit was cancelled: in November US$69\.0 million (US$67\.6 million from Tamil Nadu and US$1\.4 million from Puducherry) because it was determined that the project could not disburse this amount before closing; and, in December 2011, a further amount of US$235\.0 million remained undisbursed at closure and was cancelled\. Borrower Contributions : The original Borrower contribution was estimated to be US$ 217\.7 million; the actual contribution was US$ 25\.22 million, or 9% of the planned amount\. This was mainly due to the mobilization of grant funds which substituted for Borrower financing\. Dates : The project’s original closing date was extended by three years (from April 30, 2008 to December 31, 2011) to accommodate the restructuring process \. The total project period was 73 months, instead of the original plan of 36 months\. A second request from the Government of India to extend the closing date further so that both state governments could complete the remaining work was not approved by the Bank \. 3\. Relevance of Objectives & Design: a\. Relevance of Objectives: Original Objective - High The tsunami of December 26, 2004 caused extensive damage in the Union Territory (UT) of Andaman & Nicobar Islands and along a 2,260 km stretch of coastline in Andhra Pradesh, Kerala, Tamil Nadu and Union Territory Puducherry\. An estimated 2\.7 million people, especially in the fishing and agriculture communities, were affected by the disaster\. The project was requested by the Government of India, who asked the World Bank and other external partners to put together a joint team to undertake an assessment of the tsunami ’s socioeconomic and environmental impact in the states of Andhra Pradesh, Kerala and Tamil Nadu and the Union Territory of Puducherry \. The project contributed to two of the three pillars of the 2004 Country Assistance Strategy \. It supported improvement of government effectiveness through improved service delivery to the affected coastal communities, and it encouraged their active involvement in project implementation\. It also contributed to the second pillar of the Strategy that focused on development of rural livelihoods\. The project's objectives were also relevant to addressing the cross -cutting environmental and natural hazard issues as recognized in the Strategy \. The objectives of the project remain relevant to the Country Partnership Strategy for Fiscal Years 2009-2012 (Annex 7, page 7): “the disaster management agenda, especially post -disaster recovery and rehabilitation, includes a wide ranging and complex set of issues, which cannot be addressed through one project solely focusing on emergency response\.â€? Under the “ensuring sustainable development â€? pillar, project objectives were relevant to assisting the most vulnerable people to adapt to climate change and natural disasters \. The latest Country Partnership Strategy also emphasizes strengthening country systems to ensure close working partnership with government counterparts (including private sectors and donors ) and strengthening citizen’s’ capacity to demand transparency and accountability\. Revised Objective s - High The revised objectives expanded the scope of the project by adding long -term emergency risk management as well as preventive measures\. The revised objectives were highly relevant based to the Borrower's need for longer -term emergency preventive measures, such as establishing early warning systems \. It was relevant for the Bank to be engaged in the area of building resilience for the natural disasters based on its global knowledge and experiences \.  b\. Relevance of Design: Original Objective - Modest : The statement of project objectives and project description in the MRP and original DCA was straightforward and appropriate for tsunami emergency reconstruction operations \. However, being an emergency project, design lacked a thorough Results Framework\. The Framework consisted largely of outputs and lacked a chain of causal links between project inputs and the expected impacts on restoring livelihoods and promoting recovery in the tsunami-affected areas\. Revised Objective - Modest The revised design, with a long -term goal of attaining the resilience among tsunami -affected communities were laid out clearly with an additional component, “Vulnerability Reduction of Coastal Communities \.â€? The Project Paper of August 2009 notes that this new component was intended to support the construction of about 78 new evacuation shelters, to construct/improve about 150 km of evacuation routes, and to install early warning systems in villages within 1,000 meters of the High Tide Line in Tamil Nadu \. The time frame to complete this additional component, which included the provision of technical assistance and implementation support was about 22 months; implementing a whole new disaster risk reduction management system within such a time frame was highly ambitious \. In addition, design overlooked an important aspect of longer -term post-disaster reconstruction project, namely the psychological support for the affected population who might have lost not only their housing, other assets and employment, but also their families and loved ones \. Design included no activities related to human development aspects which are central to post -disaster recovery and restoration of livelihoods \. 4\. Achievement of Objectives (Efficacy): There were important differences in the degree of achievement of both the original and revised objectives in Tamil Nadu and in Puducherry\. The capacity of project management units was the main cause of these differences (ICR page 15)\. Tamil Nadu showed some achievement in the area of urban housing construction, livelihood support including training on livelihood restoration, and rural housing with water and sanitation systems \. On the other hand, Puducherry had completed the reconstruction of only 550 housing units out of a total of nearly 2,000 by the time of ICR preparation\. Most of the fisheries-related activities in Puducherry were initiated but not completed \. As a result, the project key objective of improving livelihood opportunities for potential beneficiaries was barely attained \. Subsequently, Puducherry requested a follow -up project to complete most of the unfinished work, but the request was not approved by the Bank \. Original Orig inal Objectives : "To support the efforts of the governments of India, Tamil Nadu and Puducherry to revive livelihood and promote recovery in the tsunami -affected areas "\. Modest \. Outputs (a) Housing and related infrastructure construction and reconstruction About 40,000 houses in Tamil Nadu and 4,303 houses in Puducherry (ICR page 52) were constructed/reconstructed with the support of NGOs and private sector \. This was well short of the target number of about 140,000 damaged houses in both areas combined (MRP, page 4)\. While around 44,300 people benefitted from the housing reconstruction, there was no quality control from the Bank team \. The ICR provides a list of outputs, but lacks target values and clear output and outcome indicators (for infrastructure reconstruction, electricity connections, repairs of damaged dwellings etc \.)\. The main outputs delivered with the support of the IDA Credit were (ICR page 39): Tamil Nadu 4,526 ready-built tenements were purchased and installed and 3,948 were allotted to eligible beneficiaries \. 121 public buildings and facilities were repaired or reconstructed for 40,000 beneficiaries in 18 tsunami-affected towns\. These included community halls, bus shelters, cremation sheds, shopping complexes, and library buildings\. 71 health facilities (public health centers, Government hospitals, primary health centers, and health sub-centers), 112 veterinary hospitals, dispensaries, and district extension centers, and 33 Government high schools and higher secondary schools were built or rebuilt \. 31,855 km of roads and 4,257 km of drains, and water supply connection to 1,472 houses, and eight public buildings were built or reconstructed \. Electricity connections were installed for about 23,000 houses and 2,360 street light connections in 200 villages in 50 panchayats in eight tsunami affected coastal districts \. De-silting and strengthening of river banks was completed for 123 km of water ways in Nagapattinam District Shelterbelts were planted for 4,478 ha (+900 ha for private lands) and mangrove plantations covered 2,162 ha\. On the All India Radio site, 3,600 tenements were completed with water supply and sewerage works \.  At Okkiyum Thuraipakkam, newly built tenements were structurally completed in 2010, and infrastructure works (water supply, sewerage, roads and drains ) were scheduled to be completed by December 2012\. Of the 2,468 transit shelters,1,200 shelters were occupied by residents \. Of the planned Marina Reconstruction Schemes, 628 tenements were structurally completed at Nochinagar , and fitted out by June, 2012\. At Nochi Kuppam construction of about 800 tenements did not commence as only 417 out of 780 occupants vacated and moved to the transit houses \. Sanitation infrastructure was rehabilitated \. This included 67\.85 km of collection systems, 3,594 manholes, 1,021 interceptors, 49 pump rooms with 116 pump sets and 47 treatment systems\. Puducherry 300 houses for relocated families were completed by contracted constructors, and a further 550 houses were built/rebuilt through a beneficiary-driven approach\. At project closing 1,200 houses were incomplete so that target achievement was 41%\. There was a one-year delay in housing construction starts in Puducherry due to the need to establish land titles for the beneficiary -driven housing component (ICR page 9)\. (b) Restoration of livelihoods Tamil Nadu Agriculture: 8,175 hectares of sand cast agricultural lands were reclaimed, and agriculture machinery and equipment and drip irrigation sets were supplied \. Training programs and public awareness campaigns were conducted for 13,500 beneficiaries\. Horticulture: About 670 hectares of horticultural land was reclaimed with the participation of 169 self-help groups\. Animal Husbandry: Laboratory equipment for 18,000 livestock were purchased and distributed \. 10,000 farmers were trained on animal rearing, animal feeding and management, and de -worming; and 80 community-based veterinary workers were trained on first aid, artificial insemination, vaccination and de-worming\. Forestry: 5,400 hectares of forest shelter belts and mangroves were established \. Fisheries: The following activities were initiated but had not been completed by project closure : reconstruction and modernization of fishing harbors; provision of permanent stability at river openings; fish landing centers and an ice plant\. Puducherry Agriculture: The agriculture sub-component under the Livelihood component was removed at the time of restructuring since the Government of Puducherry managed to complete the activities with its own funding (ICR page 4)\. Fisheries: According to the ICR (page 15), none of the planned activities (work shelters, fish markets, and fishing harbor) was completed\. Planned fisheries training was dropped due to a delay in identifying appropriate consultants\. Outcomes Housing and related infrastructure : as noted in Section 2d above, practically all the house building and residential reconstruction activity was not financed by the IDA Credit and was not subject to any form of quality control by the Bank; no information is available in the ICR regarding the cost or the quality of construction of these houses\. Agriculture: 90% of restored agricultural and horticultural land and reconstructed animal husbandry infrastructure in Tamil Nadu was being used by project closure, thereby achieving the targets \. For Puducherry, no information is provided\. Fisheries: There were no outcomes recorded since the activities were incomplete at project closure \. Revised Objectives : “To assist the Borrower and the Project States to revive livelihood and promote recovery in the Tsunami Affected Areas in the short -term, and to reduce the vulnerability of coastal communities to a range of natural hazards such as cyclone, storm surge, flood and tsunami over the long -term â€? Negligible \. Activities related to this objective took place only in Tamil Nadu \. Outputs 4,121 houses built to disaster-resistant standards had been completed by project closure compared to an original target (at restructuring) of 17,000 and a revised target (in June, 2010) of 14,370\. According to information provided subsequently by the project team, about 12,000 disaster-resistant houses had been completed by mid-May, 2013, with the balance expected to be finished by December 2013\. Work on the planned multi-purpose evacuation shelters had not been started by project closure \. The project team reports that it was commenced in May 2012, and is scheduled for completion under the follow -on Disaster Risk Reduction Project (as of mid-May, 2013, contracts for 28 shelters had been awarded, and the balance of 93 were at the tendering stage)\. By project closure, only preparatory work had been carried out for evacuation routes and early warning system \. 45 kilometers of evacuation routes were expected to be completed by September 2012 (ICR, page 30)\.  According to the project team, the work on evacuation routes was "nearly complete" as of May, 2013\. The bidding process for the early warning system is ongoing as of May, 2013, and a contract is expected to be awarded in June, 2013\. Outcomes 29% of the target number of disaster -resistant houses were completed \. None of the other disaster preparedness and community resilience activities had been taken beyond the early preparatory stage by project closure, so that there are no outcomes to report \. 5\. Efficiency: As an emergency operation (processed under OP 08\.50), an economic and financial analysis was not required at appraisal\. Given the nature of the infrastructure works financed under the project, and also the fact that there was a major restructuring with reallocation of funds in 2009, an economic analysis could have been prepared before the Level 1 restructuring to determine the most cost -effective ways of using the amount still available under the IDA Credit\. Moreover, an ex-post analysis of the efficiency with which project resources were used could have been carried out for the ICR\. There were major operational and administrative inefficiencies \. There were substantial delays on civil works, many of which were not completed by project closing, and coordination among the agencies was poor \. Even though the project duration was more than doubled, only 34% of the original commitment was disbursed \. Efficiency is assessed as negligible \. ERR )/Financial Rate of Return (FRR) a\. If available, enter the Economic Rate of Return (ERR) FRR ) at appraisal and the re -estimated value at evaluation : re- Rate Available? Point Value Coverage/Scope* Appraisal % % ICR estimate % % * Refers to percent of total project cost for which ERR/FRR was calculated\. 6\. Outcome: Original Objectives : The relevance of project objectives was high, but the design relevance was modest \. The objective of rebuilding houses was achieved to a modest extent, and reconstructing livelihood was achieved to a modest extent in Tamil Nadu, and to a negligible extent in Puducherry \. Efficiency is rated negligible\. The outcome rating against the original project objective is rated Unsatisfactory \. Revised Objectives : The relevance of project objectives was high, but the design relevance was modest \. The longer-term resilience activities did not take place before project closure, and efficacy is therefore rated as negligible \. Efficiency is rated negligible\. The outcome rating against the revised project objective is rated Unsatisfactory \. a\. Outcome Rating : Unsatisfactory 7\. Rationale for Risk to Development Outcome Rating: The ICR provides no evidence of effective quality control over the greater part of housing construction and reconstruction, which was financed by sources other than the IDA Credit, nor of the existence of a clear funding scheme for operations and maintenance to ensure the sustainability of the constructed /reconstructed public buildings and infrastructure without\. However, the project team subsequently informed IEG of the fact that the Governments of Tamil Nadu and the Union Territory of Puducherry have continued investing in housing reconstruction and public works based on the design, financing, and implementation structure utilized in the project \. In addition, a proposed follow-on project, which was successfully negotiated in May 2013 (the Tamil Nadu and Puducherry Coastal Disaster Risk Reduction Project), is intended to reduce the vulnerability of coastal communities to a range of hydro-meteorological and geophysical hazards through the construction of resilient infrastructure, and the enhancement of livelihoods and risk management capacity of stakeholders \. While still to be implemented, these efforts would appear likely to reduce the risks faced by the infrastructure constructed under the project under review \. Firm evidence of adequate funding for maintenance is, however, lacking \.  a\. Risk to Development Outcome Rating : Moderate 8\. Assessment of Bank Performance: a\. Quality at entry: Based on the joint assessment of the socio -economic and environmental impact of the tsunami, the Bank team worked closely with the Government of India and with other external partners to prepare the project in two months\. According to the project team, at the request of the Government of India, the project focused solely on the short-term reconstruction of housing in Tamil Nadu and Puducherry \. Little attempt appears to have been made to situate the Bank more appropriately among the donors responding to the disaster in accordance with its comparative advantage in the area of longer -term disaster risk management\. Implementation arrangements were inadequate \. The decision not to have a central project coordination unit for Tamil Nadu, where thirteen different implementing agencies would operate was inappropriate \. In the case of Puducherry, there was no attempt to establish a solid institutional arrangement with necessary full-time staff to manage the emergency reconstruction process \. Design was over-complex for an emergency operation -- there were too many activities and implementing agencies\. Given the scope and complexity of the different activities planned, an implementation period of 36 months was over-ambitious\. The required time to obtain statutory clearance was not properly incorporated in the planning process, which delayed project implementation, especially for the fishery component \. The different characteristics -- administrative machinery, institutions, level of capacity and experience of project management (particularly of Bank projects ) -- of Tamil Nadu and Puducherry were not taken into account\. The possibility of putting the two areas together under a single project coordination was not fully considered\. The ICR describes the social tensions between those who benefitted from the housing reconstruction/upgrading and those who did not \. While appraisal recognized the importance of grievance mechanisms, more attention should have been given to their practical application \. at -Entry Rating : Quality -at- Unsatisfactory b\. Quality of supervision: The Bank undertook twelve supervision missions between November 2005 and July 2011 The fact that the Bank placed one of the team members in Chennai was not only appreciated by the Borrower but also had a positive impact on coordinating the various stakeholders and managing multi-sectoral issues\. However, given the importance of rehabilitation of the fisheries sector, the absence of an appropriate expert for fishery activities for the first 4 years of the project was a notable shortcoming \. The Borrowers’ ICR (Annex 7 of ICR), as well as the ICR itself, report three major shortcomings of the Bank performance: (i) slow processing of the Level 1 restructuring of 2009 by the Bank team (which was not approved until two years and half after Government of India ’s request submitted in 2007), which contributed to an insufficient implementation period after the restructuring \. While the ICR gave as a reason “the implementation support appeared to have slackened â€? (page 19), the project team later explained that it was rather due to a long discussion on the proposed Output Based Disbursement mechanism, which would not comply with the Bank procurement procedures, and which was not, therefore, adopted; (ii) a delayed decision by the Bank to close the project, which appears to have been unexpected by the Borrower; and (iii) insufficient capacity building for the newly formed project unit for Puducherry, in particular with regard to fiduciary and safeguard issues \. The delay in carrying out the restructuring also meant that the opportunity of utilizing the Bank ’s global expertise for longer-term disaster risk reduction and preparedness under the project was lost \. M&E design deficiencies, notably in the outcome indicators (see Section 10 below), and the lack of baseline data inherited from the preparation stage, were not adequately addressed \. Some safeguards compliance issues (see Section 11 below), especially regarding resettlement, could have been avoided if the Bank had provided for more adequate training to counterpart staff at earlier stage of project implementation\. Quality of Supervision Rating : Unsatisfactory Overall Bank Performance Rating : Unsatisfactory 9\. Assessment of Borrower Performance: a\. Government Performance: The Governments of India, Tamil Nadu and Puducherry demonstrated their commitment and leadership in achieving project objectives during the preparation stage \. In particular, the Government of India and of Tamil Nadu were engaged in: a) parallel-financing of reconstruction of 25,000 vulnerable houses; b) comprehensive preparatory activities; c) completion of beneficiary selection; and d ) advance actions taken with respect to procurement of various outsourced resources (ICR page 20)\. With timely support given by NGOs, private sector as well as international donor community the Government of India treated this project as one of several emergency rehabilitation initiatives rather than as a stand -alone operation\. Nevertheless, the Government of India could have clarified its objectives more clearly, and thought through the appropriate institutional arrangements at state level more thoroughly \. The project closed with most works uncompleted as a result of constant implementation delays \. Arrangements involving two states and fourteen implementing agencies were cumbersome and could have been strengthened through the establishment of an effective central coordination unit \. The Government of Puducherry did not appoint a full time Project Director or other key staff to the project implementation unit, and this, together with high staff turnover, was a source of considerable implementation delay\. According to the ICR (page 20), there was a lack of adequate attention from the Government to the activities of the unit\. Government Performance Rating Unsatisfactory b\. Implementing Agency Performance: Tamil Nadu The implementation agency was the Government of Tamil Nadu, which involved 13 line agencies/departments in project implementation\. Of these, the ICR (page 21) rates the performance of seven agencies as satisfactory and that of two agencies as moderately satisfactory \. Among the identified shortcomings were : Lack of capacity to carry out the assigned activities such as preparation of technical design of sub-components (for example, the Forestry Department )\. Inexperience in procurement which led to implementation delays (for example, the Tamil Nadu Water and Drainage Board)\. Absence of leadership and direction from the state government, resulting in weak coordination of planned activities\. The Rural Development Department with its strong leadership managed a large number of contracts for the planned housing reconstruction \. Similarly, the Departments of Animal Husbandry, Agriculture, Horticulture, Town Panchayats, and the Commission of Municipal Administration completed their activities on schedule \. Puducherry The newly established project implementation unit lacked experience and knowledge of project management, especially in the areas of procurement and statutory clearances, which caused implementation delays \. The lack of full time staff, including the Project Director, led to difficulties in managing and coordinating multiple service consultant contracts, in particular for the fisheries component \. Since the Government of Puducherry's focus was mainly on housing reconstruction, hardly any of the activities related to the objective of improving livelihood opportunities of potential beneficiaries were accomplished \. Implementing Agency Performance Rating : Unsatisfactory Overall Borrower Performance Rating : Unsatisfactory 10\. M&E Design, Implementation, & Utilization: a\. M&E Design: When implementation started, the project did not have an adequate M&E framework or tools in place for monitoring progress in achieving the development objectives \. The preliminary M&E framework developed in the original project design was not sufficiently detailed (ICR page 9 and 19): no baseline or target values were established\. According to the project team, a results framework with the target value included in the ICR Data Sheet was not developed until August 2009\. In January 2011, a Management Information System (MIS) was introduced with some outcome-based indicators\. However, other outcome indicators were still missing, for example, those related to the training activities for the restoration of livelihoods \. b\. M&E Implementation: By the time a partially effective MIS was in place in January 2011, there was only one year left before project closure so that it came too late to be of much practical value \. The issue of M&E quality was not revisited at the mid -term review on March 27, 2007\. When the new longer-term disaster mitigation component was added in 2009, a more thorough revision, including a new set of key indicators (after discussion with implementing agencies and project management units ) would have facilitated better coordination and smoother project implementation \. As it was, the new component lacked outcome indicators that could have measured actual usage and functionality of the project outputs by the communities (though given that very few activities under the additional component were completed, this would have been of purely academic interest)\. The Puducherry project management unit had no M&E system or adequate monitoring capacity to manage the activities of multiple service consultants, and a Project Management Consultant was appointed to oversee the service consultants\. The project team noted that Tamil Nadu was also assisted by the consultant \. c\. M&E Utilization: The ICR does not report on the use of M&E data and analysis to inform project activities or policy development \. M&E Quality Rating : Negligible 11\. Other Issues a\. Safeguards: The project was classified as Category “Bâ€? for Environmental Assessment purposes \. According to the Technical Annex (page 13) to the Memorandum and Recommendation of the President, three safeguards policies were to be triggered: Environmental Assessment (OP 4\.01), Involuntary Resettlement (OP 4\.12), and Cultural Property (OP 4\.11)\. The possible triggering of two further policies – Pest Management (OP 4\.09) and Indigenous Peoples (OP 4\.10) was to be determined during implementation \. Environmental Safeguards The ICR reports (page 9) that the Tamil Nadu Government prepared Environmental Assessment reports that were in full compliance with the Bank safeguard policies and statutory requirements \. An Environmental Management Plan was completed\. However, the ICR also reports (page 10) that the project experienced compliance problems related to construction safety and management; provision of basic facilities in the urban housing sub -project sites; and delays in the preparation of environmental assessment reports for sub -projects\. In Puducherry, the implementing agency was not familiar with the safeguard requirements, and substantive support from the Bank team and consultants was required\. The ICR also reported that it was difficult for the agency to comply with the policy on time \. Social Safeguards Tamil Tam il Nadu According to the project team, the project was in compliance with OP 4\.12 at the time of preparing the ICR, since all affected land owners in Tamil Nadu whose land had been acquired were paid compensation and the 100 families who were subject to physical displacement in Tamil Nadu were either provided alternative housing or expected to be so provided shortly thereafter in accordance with the Resettlement Action Plan \. However, the ICR (page 9) reports mixed experience on land acquisition and the application of social safeguard polices\. While land acquisition took place in what the ICR describes as a "timely and successful manner" to establish resettlement sites for tsunami-affected people, there was a case in Nagapattinam where the local authorities demolished the affected structures without offering compensation and assistance to the displaced families \. The Government of Tamil Nadu was still in the process of paying the grant to the displaced families at project closure \. In addition, there were families in temporary shelters who awaited resettlement to a permanent site (10 families in the All India Radio site and North Chennai )\. Puducherry No information on safeguards compliance in Puducherry was reported in the ICR \. Cultural Property (OP 4\.11)\. The ICR does not report on compliance with this safeguards policy \. Pest Management (OP 4\.09) The Technical Annex states that the proposed livelihoods restoration program, which includes agriculture sector activities, may lead to the use of agricultural chemicals, including pesticides \. However, there is no reference to pesticides or pest management in the ICR \. Indigenous Peoples (OP 4\.10) The Technical Annex does not specify why it was thought that this safeguards policy might be triggered and there is no reference to it in the ICR\. The project team subsequently reported that neither OP 4\.09 nor OP 4\.10 were triggered\. b\. Fiduciary Compliance: Although the ICR does not report on any qualifications to audit reports, the project team reported that project management units in Tamil Nadu and Puducherry "diligently followed up" on obtaining responses on auditors' observations from the various implementing agencies \. Issues were resolved and certification was obtained from the Comptroller & Auditor General\. Tamil Nadu The ICR (page 11) reports that overall procurement and financial management were rated as marginally unsatisfactory in supervision reports \. Delays in procurement were caused by : weak procurement capacity in implementing agencies, lack of eligible and interested bidders, and the scattered nature of the work \. In the absence of an effective Management and Information System, the project management unit could not effectively oversee thirteen different agencies which had varied legal structures as well as a complex financial management arrangement as a whole\. Puducherry The Puducherry implementing agency had no previous experience in procurement policies or in financial management of Bank projects\. This became a serious challenge in what was meant to be a fast -paced emergency operation, and it resulted in implementation delays \. c\. Unintended Impacts (positive or negative): Gender : According to the ICR (page 15), new housing financed by the project introduced the joint title system for both men and women\. Further, there were innovative gender sensitive approaches in the fishery infrastructure design and for grievance cells representation \. Housing with toilets in the fishing communities was also perceived as an important factors leading to improved sanitation and hygiene \. However, no evidence or data on actual impacts on women benefiting from these initiatives was provided in the ICR \. On the negative side, the ICR reported that conflicts occurred between those who benefitted from the newly built or reconstructed disaster - resilient houses and those who did not : Consultation process among all the people who lived in the project area before project implementation (both possible beneficiaries with housing and non - beneficiaries) was insufficient or absent\. d\. Other: 12\. 12\. Ratings : ICR IEG Review Reason for Disagreement /Comments  Outcome : Moderately Unsatisfactory For both Tamil Nadu and Puducherry, Unsatisfactory achievement of the original project objectives was modest, and that of the new objective added at restructuring was negligible\. Efficiency was negligible\. Risk to Development Negligible to Low Moderate There is no information in the ICR on Outcome : the construction quality of the bulk of project-financed housing and no indication of clear technical or financial support for the operation and maintenance of project-supported infrastructure\. However, further construction by the two governments using similar methods as in the project, and a proposed follow-up project supported by IDA would reduce the risks to development outcome, although firm evidence of adequate funding for maintenance is still lacking \. Bank Performance : Moderately Unsatisfactory There were major shortcomings in Unsatisfactory quality at entry and quality of supervision\. Borrower Performance : Moderately Unsatisfactory There were major shortcomings in both Unsatisfactory Government and implementing agency performance\. Quality of ICR : Satisfactory NOTES: NOTES - When insufficient information is provided by the Bank for IEG to arrive at a clear rating, IEG will downgrade the relevant ratings as warranted beginning July 1, 2006\. - The "Reason for Disagreement/Comments" column could cross-reference other sections of the ICR Review, as appropriate\. 13\. Lessons: The ICR offers a useful lesson of wide applicability : Frequent and early reviews of the implementation arrangements for emergency projects can assist implementation : Emergency projects are generally based on a limited amount of data, information and knowledge of local institutions \. To maximize the effectiveness of resources provided soon after the disaster, frequent reviews of implementation arrangements are needed as more and more data become available over time\. IEG also adds the below lessons : Government partnerships with NGOs to address emergency reconstruction can provide a valuable complement to the Bank project : The Government of India successfully coordinated emergency assistance from NGOs, which partly substituted for the use of the IDA Credit \. NGOs not only assisted in the rural housing reconstruction component, but also supported the formation of self -help groups at the grassroots level throughout the tsunami-affected coastal area\. Technical assistance for training may be required during emergency operations : Even emergency projects can benefit from thorough training in strategic planning and procurement followed by frequent supervision and appropriate and timely technical guidance \. Community mobilization through consultation process is essential : In order to mitigate possible friction between those who receive project benefits and those who do not, the Bank and the Borrower should engage with potential beneficiaries (both direct and indirect) to raise awareness of project goals and expected outcomes during the project preparation or initial implementation phase \. The Bank ’s comparative advantage lies in supporting sustainable emergency reconstruction initiatives and disaster management; other donors may have a comparative advantage in short term recovery assistance \. In this project, such a shift in emphasis for the IDA Credit occurred at the restructuring; however, this took place too late to have a significant practical impact \. 14\. Assessment Recommended? Yes No Why? There were a number of emergency projects in India after the Tsunami \. A cluster PPAR could reveal valuable lessons\. 15\. Comments on Quality of ICR: The ICR provides a thorough account of changes in project objectives and a candid assessment of project implementation delays\. However, it provides limited information on the effectiveness of donor coordination, the extent to which participatory processes were taken for the livelihood development, the impact of training provided for the livelihood development component, and the extent to which the infrastructure constructed or reconstructed was of quality and was cost effective \. Most importantly, it is not clear if the shift of project direction following the restructuring provided the project with more positive outcomes by utilizing the housing -related Credit savings in an efficient and strategic manner\. A summary of the cost implications of NGOs /private sector involvement and the series of restructuring for two states was missing in the ICR \. There was no statement as to whether external project audits were qualified\. a\.Quality of ICR Rating : Satisfactory

APPROVAL

P164827

 COMBINED PROJECT INFORMATION DOCUMENTS / INTEGRATED SAFEGUARDS DATA SHEET (PID/ISDS) Additional Financing \. Report No\.: 122262 Date Prepared/Updated: 04-Dec-2017 I\. BASIC INFORMATION A\. Basic Project Data Country: Ghana Project ID: P164827 Parent Project ID: P118858 Project Name: Ghana Statistics Development Program (P164827) Parent Project Name: Ghana Statistical Development Program (P118858) Region: AFRICA Estimated Appraisal Date: 8-Dec-2017 Estimated Approval 26-Jan-2018 Date: Practice Area (Lead): Poverty and Equity Financing Instrument: Investment Project Financing Borrower(s) Republic of Ghana Implementing Agency Ghana Statistical Service Financing (in USD Million) Financing Source Amount Statistics for Results Trust Fund 4\.50 Financing Gap 0\.00 Total Project Cost 4\.50 Environmental Category C-not required Decision The review did authorize the team to appraise and negotiate Other Decision (as needed) Is this a Repeater project? No Is this a Transferred No project? (Will not be disclosed) \. \. B\. Introduction and Context Country Context 1\. Ghana experienced a number of serious external and domestic macroeconomic shocks in 2013/14, which fueled inflation and exacerbated fiscal imbalances\. Lower prices for key exports have persisted with gold prices falling from US$1,600 in 2012 to US$1,200 in 2014 and further to US$1,073 per ounce in 2015, before rising again to $1,300 in mid-2016\. Oil prices declined from US$91 in 2012 to US$54 per barrel in 2014 and further to US$35 per barrel in 2015\. These sharply lower prices for Ghana’s main exports as well as energy rationing due to the shortage of electricity generating capacity relative to demand, weighed heavily on both the supply and demand sides of the economy\. As a result, the GDP growth slowed from 7\.3 percent in 2013 to 4 percent in 2014 and to 3\.8 percent in 2015\. 2\. In 2016, Ghana’s economic growth slowed further, to 3\.5 percent, due largely to contraction in the industry sector, which saw the oil sector under-perform because of the combined effects of production problems and weak oil prices\. However, growth in the non- oil sector remained relatively robust, at 4\.9 percent in 2016 compared to 4\.0 percent in 2015\. The Agriculture sector grew by about 3\.0 percent in 2016, up from 2\.8 percent in 2015\. This growth was driven by a rebound in the cocoa sector in 2016, after a year of contraction\. Growth in the services sector slowed from 6\.3 percent in 2015 to 5\.7 percent in 2016 as a number of the sub-sectors such as Trade and Repairs; Hotels and Restaurants; Transport and Storage; Real Estate and support Services all recorded lower growth compared to 2015, reflecting the generally slow economic activity in 2016, which in turn is attributed to costly credit and other private sector constraints such as costly and unreliable power supply\. Economic data for the first quarter of 2017 showed a recovery as the economy expanded by 6\.6 percent compared to 3\.9 percent in the same period in 2016\. While the services sector growth of 3\.7 percent was slower than the first quarter 2016 performance of 6\.3 percent, the agriculture and the industry sectors showed remarkable expansions of 7\.6 percent and 11\.5 percent, respectively\. 3\. Chronic fiscal deficits and currency depreciation led to increasing debt and higher inflation\. The public debt stock rose from 38\.7 percent of GDP in 2011 to 52 percent in 2013 and further to 71\.7 percent by 2015\. As government increasingly turned to short-term domestic securities, interest rates on 90-day T-bills rose to almost 26 percent\. In addition, credit rating downgrades pushed up the costs of external borrowing\. As a result, total interest payments almost doubled from 3\.2 percent of GDP in 2012 to 6\.5 percent in 2015\. The expansionary fiscal policy also worsened existing inflationary pressures\. As a result, inflation rose sharply, from 8\.8 percent in 2012 to 17 percent in 2014\. It remained above 17 percent for 2015 and most of 2016—well above the Central Bank’s medium-term target (8 ±2 percent)\. 4\. The fiscal consolidation efforts supported by the IMF under an Extended Credit Facility (ECF) began to show some results as revenues improved and some elements of expenditure were better controlled\. The estimated deficit for 2015 was considerably smaller, amounting to 7 percent of GDP\. This consolidation was achieved both through revenue and expenditure measures, including, inter alia, rationalization of the Value-Added Tax (VAT), a new structure for petroleum taxes and special levies for fiscal stabilization and on imports, further actions to control the public-sector wage bill and elimination of petroleum subsidies\. After notable fiscal consolidation efforts in 2015, however, Ghana missed its 2016 fiscal target by a large margin\. The fiscal deficit rose to 9\.3 percent, significantly higher than the target of 5\.2 percent of GDP\. The slippage was due to revenue shortfall and to overspending, ahead of the December 2016 elections and this exacerbated debt situation, as Ghana’s public debt stock reached US$29\.2 billion, or 73\.1 percent of GDP\. The 2017 budget, however, aims to achieve a substantial increase in revenues and a sharper expenditure adjustment towards narrowing the fiscal deficit to 6\.5 percent of GDP\. 5\. Although challenges remain, Ghana is making strong efforts to regain and maintain its economic stabilization program on the back of a return to fiscal consolidation over the medium-term\. The GDP growth is expected to reach 7\.5 percent in 2018 with growth driven by the oil and gas sector with the start of oil production at the TEN field in 2017, followed by oil and gas production at the Sankofa field in 2018\. The gas component of the Sankofa project is expected to bolster domestic energy supply and support growth in the rest of the economy\. However, the outlook is subject to both domestic and external risks\. The downward trend of headline inflation has created room for policy easing evident in the 350- bps cut in policy rate between November, 2016 and May, 2017\. However, Ghana still faces high financing costs in both the domestic and external markets as the debt stock remains high and interest rates remain susceptible to the actions of the US Federal Reserves with the gradual increases in its benchmark interest rate\. In addition, the substantial legacy debt of the energy SOEs, excess capacity issues and ongoing operational losses pose substantial fiscal contingent liability risks over the medium term\. Sectoral and Institutional Context 6\. Ghana's statistical system consists of various Government Ministries, Departments and Agencies (MDAs) with the Ghana Statistical Service (GSS) playing a central and coordinating role\. The GSS has the responsibility to collect, compile, analyze, publish and disseminate official statistics in Ghana for general and administrative purposes and for coordinating developments in statistics outside the GSS\. The GSS is primarily responsible for compiling national accounts and price statistics and conducting large scale household- based and establishment-based surveys, including the decennial population and housing censuses\. Line ministries are responsible for producing administrative data\. 7\. In 2017, a second National Strategy for the Development of Statistics -NSDS (2017- 2021) following the expiration of the previous one, was developed through a consultative process\. The new NSDS (2017-2021) sets out a 5-year strategy for the NSS\. It recognizes this period as a crucial moment in which Ghana’s official statistics needs to be strengthened to become the standard bearer for accuracy, consistency, and credibility in the country\. In particular, the plan seeks to address the underdevelopment of the administrative data system, such that more and better quality data would be collected at a lower cost to the public while maintaining crucial survey activity\. This will be particularly important to fulfil the reporting requirements of both national and international development programs such as the Ghana Shared Growth and Development Agenda, the African Union’s Agenda 2063 and the Sustainable Development Goals\. The new NSDS also plans to venture into new territories  and explore the potential role that Big and Open data could play in the production and dissemination of official statistics\. 8\. This strategy supports 6 goals that together, address the major changes that must occur to ensure a flourishing NSS: (a) a new legal and regulatory environment would increase the coordinating ability of Ghana Statistical Service (GSS); (b) a focus on human resources will ensure that the correct combination of skills exists within the system to deliver the statistics that the country needs in order to make informed decisions; (c) modernizing the physical infrastructure will give the system the practical tools it requires, (d) updating the statistical infrastructure to address the issues of harmonization and keep products and services relevant; (e) a well-coordinated collection and production of data; and (f) effective dissemination of statistics to ensure that they meet the demands of users\. 9\. Based on several institutional assessments of the national statistical system, the Ghana Statistical Development Program was launched in 2014 and undertook institutional reforms at the Ghana Statistical Service\. A new organizational structure was developed and implemented for the GSS\. The project is also building the capacity of staff of the GSS in addition to nine (9) Ministries, Departments and Agencies (MDAs)\. 10\. Notable achievements in recent years include the implementation of the Sixth Round of the Ghana Standards Living Survey (GLSS6) in 2012/13, The 2015 Labor Force Survey(LFS), the 2015/16 Integrated Business Establishment Survey (IBES) and a three- series Annual School Censuses form 2014 to June 2017\. Through the support of the Ghana Statistics Development Project (P118858), the national statistical system is being revamped\. C\. Proposed Development Objective(s) Original Project Development Objective(s) – Parent 11\. To strengthen the National Statistical System in the production and dissemination of timely and robust statistics relevant for evidence-based policy-making and other uses\. Key Results 12\. The main outcome will be improved quality and reliability of statistical information for effective policy making and good governance and the design and monitoring of programs and policies\. This will be measured by the following indicators: ï‚ User satisfaction with statistical products and services of the NSS (disaggregated by GSS, MDA, products); ï‚ Statistical Capacity score of Ghana (WB Statistical Capacity Indicator overall score and disaggregated by the following components: methodology, source data, and periodicity and timeliness); ï‚ Proportion of censuses and surveys implemented by NSS as per the long-term census and survey plan (GLSS, MICS, Labor Force Survey, IBES, Census of Agriculture); and; ï‚ Time between end of data collection and release of main report for household surveys (MICS, GLSS, IBES, and LFS)\.  13\. The activities to be supported under the Additional Financing are geared towards enhancing data production\. These activities are: i\. Conducting the Census of Agriculture, ii\. Conducting the Multiple Indicator Cluster Survey (MICS) iii\. Annual School Census, and iv\. Consultations on the Sustainable Development Goals Component Name: Component 1 – Institutional Reform and Organizational change Comments (optional) No change\. PHCOMP Component Name: Component 2: Statistical Data Development and Management Comments (optional) No change\. COMP Component Name: Component 3- Data Production and Dissemination Comments: There are four main activities under the Additional Financing namely, Census of Agriculture, Multiple Indicator Cluster Survey (MICS), Annual School Census, and training programs on the Sustainable Development Goals\. All the above four activities would be under Component 3 of the original project\. PHCOMP Component Name: Component 4 - Program Management and Monitoring and Evaluation Comments (optional) No change\. E\. Project location and Salient physical characteristics relevant to the safeguard analysis (if known) F\. Environmental and Social Safeguards Specialists on the Team Demba Balde, Social Safeguards Specialist Anita Bimunka Takura Tingbani, Environmental Safeguards Specialist III\. SAFEGUARD POLICIES THAT MIGHT APPLY Safeguard Policies Triggered? Explanation (Optional) Environmental Assessment OP/BP No There are no activities requiring any  4\.01 physical footprint associated with the project\. The project activities are limited to technical assistance in the area of statistic improvement to strengthen its use in policy formulation\. Natural Habitats OP/BP 4\.04 No The project has no physical footprint and hence No natural habitats will be affected by the project\. Forests OP/BP 4\.36 No The project has no physical footprint and hence will not affect any forests or forest related activities\. Pest Management OP 4\.09 No The project does not involve the use or procurement of pesticides\. Physical Cultural Resources OP/BP No No Physical cultural resources will be 4\.11 affected by the project\. Indigenous Peoples OP/BP 4\.10 No No Indigenous people will be affected by the project\. Involuntary Resettlement OP/BP No Project has no physical footprint and 4\.12 unlikely to induce involuntary resettlement or adverse impacts on local livelihoods\. Despite this insignificant social risk profile, borrower will take steps to consult diverse groups of stakeholders and address pertinent gender issues that are relevant to the project\. Safety of Dams OP/BP 4\.37 No Project activities do not involve dams Projects on International No Project will not occur in areas considered Waterways OP/BP 7\.50 as international waterways\. Projects in Disputed Areas OP/BP No Project activities will not occur in disputed 7\.60 areas\. \. IV\. Key Safeguard Policy Issues and Their Management A\. Summary of Key Safeguard Issues 1\. Describe any safeguard issues and impacts associated with the proposed project\. Identify and describe any potential large scale, significant and/or irreversible impacts: NA 2\. Describe any potential indirect and/or long term impacts due to anticipated future activities in the project area: NA  3\. Describe any project alternatives (if relevant) considered to help avoid or minimize adverse impacts\. NA 4\. Describe measures taken by the borrower to address safeguard policy issues\. Provide an assessment of borrower capacity to plan and implement the measures described\. NA 5\. Identify the key stakeholders and describe the mechanisms for consultation and disclosure on safeguard policies, with an emphasis on potentially affected people\. NA B\. Disclosure Requirements (N\.B\. The sections below appear only if corresponding safeguard policy is triggered) Environmental Assessment/Audit/Management Plan/Other Date of receipt by the Bank Date of submission to InfoShop For category A projects, date of distributing the Executive Summary of the EA to the Executive Directors "In country" Disclosure nvCtry If the project triggers the Pest Management and/or Physical Cultural Resources policies, the respective issues are to be addressed and disclosed as part of the Environmental Assessment/Audit/or EMP\. If in-country disclosure of any of the above documents is not expected, please explain why: There are no activities requiring any physical footprint associated with the project\. The project activities are limited to technical assistance in the area of statistic improvement to strengthen its use in policy formulation\. C\. Compliance Monitoring Indicators at the Corporate Level (to be filled in when the ISDS is finalized by the project decision meeting) (N\.B\. The sections below appear only if corresponding safeguard policy is triggered) OP/BP/GP 4\.01 - Environment Assessment Does the project require a stand-alone EA Yes [] No [X] NA [] (including EMP) report? If yes, then did the Regional Environment Unit or Practice Manager (PM) review and approve the EA Yes [] No [] NA [X] report?  Are the cost and the accountabilities for the EMP Yes [] No [] NA [X] incorporated in the credit/loan? The World Bank Policy on Disclosure of Information Have relevant safeguard policies documents been Yes [] No [] NA [X] sent to the World Bank's Infoshop? Have relevant documents been disclosed in-country in a public place in a form and language that are Yes [] No [] NA [X] understandable and accessible to project-affected groups and local NGOs? All Safeguard Policies Have satisfactory calendar, budget and clear institutional responsibilities been prepared for the Yes [] No [] NA [X] implementation of measures related to safeguard policies? Have costs related to safeguard policy measures Yes [] No [] NA [X] been included in the project cost? Does the Monitoring and Evaluation system of the project include the monitoring of safeguard impacts Yes [] No [] NA [X] and measures related to safeguard policies? Have satisfactory implementation arrangements been agreed with the borrower and the same been Yes [] No [] NA [X] adequately reflected in the project legal documents? V\. Contact point World Bank Smile Kwawukume Senior Public Sector Specialist Ayago Esmubancha Wambile Economist/Statistician Borrower/Client/Recipient PHBorr Name: Republic of Ghana Contact: Michael Ayesu Title: Director, External Relations Department Email: MAyesu@mofep\.gov\.gh Implementing Agencies  PHIMP Name: Ghana Statistical Service Contact:Mr\. Baah Wadieh Title: Acting Government Statistician Email: baah\.wadieh@statsghana\.gov\.gh VI\. For more information contact: The World Bank 1818 H Street, NW Washington, D\.C\. 20433 Telephone: (202) 473-1000 Web: http://www\.worldbank\.org/projects VII\. Approval Task Team Leader(s): Name: Smile Kwawukume; Ayago Esmubancha Wambile Approved By: Safeguards Advisor: Name: Maman-Sani Issa Date: December 4, 2017 Practice Manager: Name: Andrew L\. Dabalen Date: December 5, 2017 Country Director: Name: Errol George Graham (Acting Date: December 18, 2017 CD)

APPROVAL

P002047

Document of The World Bank FOR OFFICIAL USE ONLY Report No\. 10986 PROJECT COMPLETION REPORT NIGERIA BAUCHI STATE AGRICULTURAL DEVELOPMENT PROJECT (LOAN 1981-UNI) JULY 31, 1992 Agriculture Operations Division Country Department IV Africa Regional Office This document has a restricted distribution and may be used by recipients only in the performance of their official duties\. Its contents may not otherwise be disclosed without World Bank authorization\.  CURRENCY EQUIVALENTS Currency Unit - Naira (N) Appraisal Exchange Rate - US$1\.00 - NO\.55 Average 1984 Exchange Rate - US$1\.00 - NO\.80 Average 1986 Exchange Rate - US$1\.00 - N1\.20 Average 1988 Exchange Rate - US$1\.00 - N4\.00 Average 1989 Exchange Rate - US$1\.00 - N7\.50 Average 1990 Exchange Rate - US$1\.00 - N8\.00 WEIGHTS AND MEASURES 1 metric ton (mt) - 2,205 pounds (lbs) or 0\.9842 long ton 1 hectare (ha) - 2\.4711 acres (ac) 1 acre (ac) - 0\.4047 hectare (ha) 1 kilometer (km) - 0\.6214 miles (mi) 1 mile (mi) - 1\.6093 kilometers (km) ABBREVIATIONS ADP Agricultural Development Project APMEU Agricultural Projects Monitoring and Evaluation Unit BASAC Bauchi State Agricultural Services Company BASIRDA Bauchi State Integrated Rural Development Authority BSADP Bauchi State Agricultural Development Project BSADPEC Bauchi State Agricultural Development Project Executive Committee BSARDC Bauchi State Agricultural and Rural Development Committee BSG Bauchi State Government CFA Bauchi State Cooperative Financing Agency ERR Economic Rate of Return FACU Federal Agricultural Coordinating Unit FGN Federal Republic of Nigeria FSC Farm Service Centers GDP Gross Domestic Product KNSG State Government LG Local Government LGC Local Government Council OFAR On-Farm Adaptive Research PCR Project Completion Report SAP Structural Adjustment Program SAR Staff Appraisal Report T&V Training and Visit FISCAL YEAR Government of Nigeria - January 1 to December 31 World Bank - July 1 to June 30  FOR OmCIAL USE ONLY THE WORLD BANK Washington, D\.C\. 20433 U\.S\.A\. Office of Director-General Operations Evaluation July 31, 1992 MEMORANDUM TO THE EXECUTIVE DIRECTORS AND THE PRESIDENT SUBJECT: Project Completion Report on Nigeria Bauchi State Agricultural Development Proiect (Loan 1981-UNI) Attached, for information, is a copy of a report entitled "Project Completion Report on Nigeria - Bauchi State Agricultural Development Project (Loan 1981-UNI)" prepared by the Africa Regional Office vith Part II of the report contributed by the Borrower\. No audit of this project has been made by the Operations Evaluation Department at this time\. Attachment This document has a restricted distribution and may be used by recipients only In the performance of their offidal duties\. Its contents may not otherwise be disdosed without World Bank authorization\.  FOR OFCIAL USE ONLY PROJECT COMPLETION REPORT NIGERIA BAUCHI STATE AGRICULTURE DEVELOPMENT PROJECT (LOAN 1981-UNI) _ TABLE OF CONTENTS Page No\. PREFACE \. \. \. \. \. \. \. \. \. EVALUATION SUMMARY \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. ii PART I: PROJECT REVIEW FROM BANK'S PERSPECTIVE \. \. \. \. \. \. \. \. 1 1\. Project Identity \. \. \. \. \. \. \.-1 2\. Background \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. 1 \. \. \. \. 3\. Project Objectives and Description \. \. \. \. \. \. \. \. \. 2 4\. Project Design and Organization \. \. \. \. \. \. \. \. \. \. \.b 5\. Project Implementation \. \. \. \. \. \. \. \. 4 6\. Project Results \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. 6 7\. Sustainability\. \. \. \. \. \. \. \. \. 7 8\. Bank Performance \. \. \. \. \. \.8\. \. \. \. \.8 9\. Borrower's Performance \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. 9 10\. Project Relationship \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. 9 11\. Consulting Services \. \. \. \. \. \. \. \. \. \. \. 9 12\. Project Documentation and Data \. \. \. \. \. \. \. \. \. \. \. 9 13\. Findings and Lessons Learned \. \. \. \. \. \. \. \. \. \. \. \. \. 9 PART II: PROJECT REVIEW FROM BORROWER'S PERSPECTIVE 1 \. \. \. \. 11 PART III: STATISTICAL INFORMATION \. \. \. \. \. \. \. \. \. \. \. \. \. \. 15 Tables 1\. Related Bank Loans and/or Credits \. \. \. \. \. \. \. \. \. 15 2\. Project Timetable \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. 16 3\. Loan Disbursement \. \. 16 4\. Project Implementation \. \. \. \. \. \. \. \. \. \. \. \. \. 17 5\. Project Costs and Financing \. \. \. \. \. \. \. \. \. 18 6\. Status of Covenants \. \. \. \. \. \. \. \. 19 7\. Use of Bank Resources\. \. \. \. \. \. \. \. \. \. \. \. \. \. \. 20 May: IBRD No\. 15109R 1/ Contains the Borrower's comments on Part I of the Draft PCR\. This document has a restricted distribution and may be used by recipients only in the performance of their official duties\. Its contents may not otherwise be disclosed without World Bank authorization\.  PROJECT COMPLETION REPORT NIGERIA BAUCHI STATE AGRICULTURAL DEVELOPMENT PROJECT (LOAN 1981-UNI) PREFACE This is the Project Completion Report (PCR) for the Bauchi State Agricultural Development Project in Nigeria, for which Loan 1981-UNI in the amount of US$132 million was approved on April 30, 1981\. The loan and project agreements are dated September 2, 1981\. The loan was closed on December 31, 1989, after three yearly extensions and the final disbursement was made on July 5, 1990\. US$130\.7 million (99 percent of the loan) was disbursed and US$1\.2 million was canceled\. This report (Parts I and III) is based on the work of a joint mission of the Bank and the Agricultural Projects Monitoring and Evaluation Unit (APMEU) of the Federal Department of Agriculture during the month of March 1991\. The Borrower's comments (see Part II) were submitted in response to a draft of the PCR\. It is also based on a review of the Bank Staff Appraisal Report, the Loan and Project Agreements, the World Bank President's Report, Project Supervision Reports, correspondence between the Bank and the Borrower %nd internal Bank memoranda\.  - ili - PROJECT COMPLETION REPORT NIGERIA BAUCHI STATE AGRICULTURAL DEVELOPMENT PROJECT (LOAN 1981-UNI) EVALUATION SUMMA\.RY Objectives 1\. The Bauchi State Agricultural Development Project (BSADP) was the third of the four State-wide agricultural development projects financed by the World Bank between 1981 and 1984 to support food production in northern Nigeria, many parts of which have low and unreliable rainfall\. 2\. BSADP had two primary objectives: (a) to increase food produc- tion and farm incomes of some 280,000 farm families; and (b) to alle- viate the State's shortage of trained and experienced personnel for agricultural development\. 3\. The project included several components targeted at increasing agricultural and livestock production; improving economic and social infrastructure and enhancing institutional capacity\. 4\. The agricultural production component included activities to increase the production of cereals (millet, sorghum, maize and rice), groundnut and cowpea, a pilot sub-project in the Northern Zone to improve 'fadama' small-scale irrigation agriculture, and a livestock scheme for cattle fattening and training of draft animals\. Activities designed to achieve output increases included an applied research program; dissemination of technical packages for improved cultivation practices through a Training and Visit (T&V) system of extension; establishment of Bauchi State Agricultural Services Company (BASAC) for timely and adequate supply of inputs; strengthening of the Cooperative Financing Agency (CFA) to facilitate adequate crop production credit; ana the establishment of a farm management advisory service to assist the more advanced farmers\. 5\. The major activities intended for improving the economic and social infrastructure were the establishment of a network of rural feeder roads and the provision of village water supplies\. Other activities included improved land-use planning/soil conservation measures, establishment of farm development centers and facilities for staff training, staff housing, offices and workshops\. 6\. Strengthening of institutional capacity was to be achieved through activities that included the establishment of BASAC, support to CFA, integration of local governments into project activity and provi-  - iv - ai\.or of tochnical assititarce for improving managerial and training components of the project\. Implementation Experience 7\. The delayed and slow implementation of the project resulted in the extension of the project by three years\. In spite of the extension of project life, total real expenditures amounted to only US$235\.6 million while the planned total cost was US$350\.6 million\. The Bank disbursed US$130\.7 million (99 percent of its commitment), representing 55 percent of the actual total cost, although the Bank's planned share was 37 percent\. 8\. While the total contributions by FGN and BSG were close to or exceeded the targeted amounts in Naira terms, these were we;'L short of the expected levels in dollar values\. The major factor contributing to the lower level of total expenditures relative to the expected dollar equivalent amount was the sharp decline in the Naira value (from US$1\.00 - Naira 0\.55 in 1981 to US$1\.00 - Naira 8\.00 in 1990)\. FGN and BSG counterpart funding was consequently much lower reflecting an inability to enlarge their revenue base and/or trim low-priority expenditures\. The growth in the public expenditures in the agricultural sector was also slow during this period reflecting, perhaps, a lower commitment to the sector\. 9\. Project implementation was also adversely affected by FGN fertil- izer policy which allowed monopoly distribution rights to the public sector\. Fertilizer supplies were marked by scarcities and other inef- ficiencies\. The observed performance on the demand side indicates that larger agricultural production benefits could have been derived if fertilizer supplies had been orderly and adequate\. 10\. The key implementation agencies required for the project were established but unfortunately the associated main policy-making bodies - BSARDC and BSADDTC - were not very effective\. The integration of the ADP into BASIRDA, led to conflicts of interest over priorities and use of resources since BASIRDA undertook a very wide range of activities\. 11\. Project implementation was most successful in the area of infra- structure development\. The project did not implement the component related to livestock development as it was expected that the newly- formed National Livestock Project Department would undertake that activity\. Project Results 12\. The project was able to reach the expected proportion of the total farm families through its extension activities using a lower-than- expected number of agricultural extension personnel\. According to project data on crop production, the output of all the crops except sorghum registered an upward trend during the project period\. The impact of new technology and the extension service on crop yields cannot, however, be accurately ascertained because of data problems\.  V - v - 13\. The project reached or exceeded the SAR targets for fadama smail- scale irrigation development (reaching 400 percent of t3rget), construc- tion of rural f5eder roadG and the estsblishment of village water sup- plies\. In the area of institutional development, an efficient project organization was put in place, as envisaged in the project design, but this later was integrated with by an over-ambitious program managed by, BASIRDA, a new parastatal\. The CPA was successful in extending produc- tion credit and had a good loan recovery record\. 14\. The economic rate of return (ERR) estimated fo: the agricultural components at appraisal was 18 percent\. At project completion, data available is insufficient to carry out a meaningful assesbnent of project impact on the financial returns for producers\. The cpu,\.tc\.Lion of the ERR has been omitted for the same reasons\. Sustainability 15\. BSADP is now an established institution in the agriculture sector; it has been accepted by the Bauchi State Government as the implementing arm of the State Ministry of Agriculture, an endorsement that enhances sustainability\. The following actions taken by the ADP augur well for project sustainability: (a) the establishment of a program of on-farm adaptive research with strong linkages between the national research insti- tutes and the extension services emphasizing farming systems research; (b) the unification and strengthening of agricultural extension services for more effective coverage of smallholders and to improve cost effectiveness; (c) the increased dependence on the private sector for retail sales of inputs through encouragement of private traders and farmers' cooperatives and on progressive withdrawal of BASAC; and (d) the assistance of BSADP to local governments to develop the capacity for routine maintenance of rural infrastructure while emphasizing increased use of private sector capacity for rehabilitation, new construction and periodic major maintenance\. The State Government has made BSADP a part of BASIRDA, which, although a more permanent institution, has too wide a span of activities which could strain both managerial and financial resources\. BASIRDA should review whether it should continue to be involved in rural electrifi- cation, community development and construction of health facilities\. 16\. The sustainability of the maintenance of infrastructural facilities--feeder roads and water supply--will continue to depend on the availability of adequate maintenance funds which can hardly be guaranteed un0er the present financial situation of FGN and BSG\. There  - vi - is a need to seriously explore the introduction of user fees to at least meet part of the expense\. Findings and Lessons Learned 17\. The main lesMons which could be relevant to the Bank and the Borrower are: (a) experience has shown that complex multi-component projects are difficult to implement and it may be desirable to have projects with fewer components; (b) risks of insufficient counterpart funding need to be assess- ed more carefully at time of project preparation or at least at appraisal; (c) public sector participation in input distribution, particu- larly in fertilizer distribution, should be avoided; the Bank, thus, should not finance state-owned commercial companies and should instead emphasize the role of the private sector; (d) strategies for technology development and dissemination need to give serious consideration to on-going farming practices, farmer objectives and agro-ecological conditions; addi- tionally, the scale and scope of projects involving techno- logy development and dissemination need to make allowance for the relatively long time and resources required to yield results; further, technology promotion cannot function independently of pricing policies as demonstrated in the case of maize where cheap fertilizers favored production at the expense of the less fertilizer-responsive sorghum - a result not envisaged in the SAR; and (e) as a measure of progress evaluation and control, project documents such as SAR should include key indicators and targets to be achieved not only at project completion but also at different stages of project implementation\.  PROJECT COMPLETION REPORT NIGERIA BAUCHI STATE AGRICULTJRAL DEVELOPMENT PROJECT (LOAN 1981-UNI) _ PART I: PROJECT REVIEW YROM BAN'S PERSPECTIVE l\. Pro1ect Identitv Project Name: Bauchi State Agricultural Development Project (BSADP) Loan Number: 1981-UNI RVP Unit: Africa Country: Nigeria Sector: Agriculture and Rural Development Sub-Sector: Area Development 2\. Beckaround 2\.1 This project formed an important element in a strategy developed by FGN to revitalize the agricultural sector, especially its role as a key provider of food supplies and a major source of rural incomes in the Nigerian economy\. During the 1970-1982 oil boom, the performance of the agricultural sector was dismal; its output grew not more than 1 percent per year, far below the 3 percent per year rate of growth of the popula- tion\. This minimal growth largely contributed to the drastic decline in the sector's share in GDP from 45 percent to 27 percent and in exports from 70 percent to 2 percent during this period\. Some of the economic repercussions of the oil boom such as (a) the appreciation of the exchange rate, (b) the enhanced profitability of investments in the non-tradable sector, and (c) rising wages in the public sector that drained labor from rural areas, interacted to undermine profitability in the agricultural sector\. Although in the late 1970s the government provided input subsidies and purchased selected commodities at higher nominal prices to offset higher farm costs, these were insufficient to encourage farmers to invest in increasing production\. 2\.2 In the early 1980s, FGN launched a more concerted effort to revitalize the agricultural sector to achieve food self-sufficiency in the eighties\. It planned for increasing the country's food production by 3\.5 percent during the first half of the decade\. The satisfactory results of Bank-assisted enclave ADPs 1/ launched in the mid to late 1970s, prompted FGN to adopt the ADP concept on a statewide basis\. Hence, the launching of BSADP with a mandate to promote agricultural development in Bauchi State\. 2/ VI Thle sub-ate level ADPn wer tnulti-facted agriculural developmen effos which began in Gombe, Ouau and Funtua in 1974 and sprad to swvod other places in tho second-half of 1970s\. Z/ During the same penod PON launched two other ADPn in the states of Sokoto and Kano, with Bank assistnce\.  -2- 2\.3 During the first few years of operation of the state-wide ADPs, a highly over-valued Naira and administered prices of agricultural commo- ditiss served to severely disadvantage agricultura' production through cheep food imports and unremunerative prices\. However, in September 1986 FGN took measures to launch a Structural Adjustment Program (SAP) which introduced market-determined exchange rates and eliminated commo- dity marketing boards\. These reforms, together with a ban on the impor- tation of major cereals (wheat, rice and maize), were expected to provide a better incentive structure for agricultural production\. There was an immediate positive impact on agricultural export commodities\. However, producer prices for food crops showed a 2-year lag in adjusting to the changed economic incentives structure\. Thus, for most of the project period the incentive environment was quite unfavorable for the major crops targeted for production increases\. 3\. Proiect Obiectives and Description 3\.1 Obiectives: BSADP was designed to achieve the following primary objectives: (a) To increase food production and farm incomes of some 280,000 farm families most of whom were small-holders engaged in upland crop cultivation on about 330,000 ha\. (b) To strengthen a number of state institutions and to alleviate the state's severe shortage of trained and experienced technical staff and development administrators\. 3\.2 Proiect Description: The project included the following components and activities: (a) Crop and Livestock Development This component included a number of activities aimed at increasing the production of major rainfed food crops and livestock, amongst these were the promotion of improved farm practices; development of an input supply organization; support for seed multiplication and applied research; and a cattle fattening scheme\. Also included was a pilot scheme to introduce low-cost intermediate technology 'fadama' 3/ irrigation\. (b) Civil Works The project planned for the construction of about 1200 km of rural feeder roads; drilling of about 1,300 boreholes and rehabilitation of about 200 wells for rural water supply; construction of 25 dams and 50 small reservoirs to improve cattle watering points; and the construction of project Y/ Time am tkaditionally irnigated lands in river basins\.  -3- officea: workshops, stores, staff houses and Parm Service Centers (USC\.)\. (a) Institutional Support Provision for a management structure for efficient project implementation, enhancement of state training institutions, strengthening of the Cooperative Financing Agency (CPA) and *stablishment of the Bauchi State Agricultural Servicoe Company (BASAC), assistance in marketing and on-farm storage and integration of local governments into the project constituted the major activities planned in this project component\. (d) Technical Assistance The project provided for the recruitment of suitable international and local staff and consultancy services to assist in the implementation of technical, training and planning components of the project\. 4\. Proiect Desitn and Oraanizatlon 4\.1 The project preparation was initiated by the Federal Ministry of Agriculture through its Agricultural Projects Monitoring and Evaluation Unit (APNEU) with the assistance of Gombe ADP staff and was finalized in collaboration with Bank staff\. BSADP, for the most part, was to be the state-wide replication of the successfully implemented Gombe ADP\. Hence, its conceptual foundation was clear and shared and understood by all relevant parties\. A key consideration in project design was to include proper tools for ensuring increased productivity in farming\. Towards this, two technical packages were introduced, one beinr a 'basic' package 4/ and the other an 'advanced' package\. 5/ TI - strategy for inducing a shift away from traditional farming, however, was constrained by the absence of technical packages proven and tested under smallholder farming conditions\. On-Farm Adaptive Research (OFAR) was included in the project design to cope with the lack of farmer- tested technology\. The design, however, did not allow for the time required for research to generate the required technical packages and introduce them at the farm level; in that sense, the design was ambitious and led to high expectations in terms of input use\. Additionally, the project design lacked clear criteria for evaluating effectiveness of extension work\. I/ This relatively simplo production package applicable to existing farmning systems was intended for wide coverage; incrasd fetitizer use was the major ingredicnt\. I/ This package supplemented the 'basic' package and was designed for use by more enterprising farmer who have the aptitude to handle more sophistieated tc¢hniques and cropping systems, including pest and weed control, higher ferilizer use and use of hybrid seed\.  -4 4\.2 The project design included a comprehensive organizational set-up with reasonable clarity on policy making and operational responsibi- lities required for proper implementation of the project\. Some imple- mentation failures were largely externally determined rather than the result of poor design\. For example, the inability of Bauchi State Agricultural Supply Company (BASAC) to run as a viable commercial enterprise arose mainly from FGN's fertilizer marketing policy\. The Federal, State and Local Governments, in addition to BSADP and BASAC, had clear roles and responsibilities defined and understood by all parties\. However, the Bauchi State Integrate\. Rural Development Authority (BASIRDA) which was created in 1986 was not envisaged in the project, and had a conflicting mandate with that of BSADP\. This created confusion and overlapping of the two management structures\. 5\. Proiect Implementation 5\.1 Project commencement was delayed and implementation was characterized by slow execution resulting in the extension of the project closing date by three years\. The total project period thus became eight years instead of the planned five years\. 5\.2 Although the project life was extended, a substantial part of the planned level of project expenditures in dollar terms was not achieved\. The planned total project cost was US$350\.6 million but when the project closed total cost amounted to only US$235\.6 million\. Thu Bank's total disbursement of US$130\.7 million accounted fcr 55 percent of the actual project cost (and 99 percent of its commitment) while the intended share at appraisal had been only 37 percent\. Although the contributions by the Bauchi State Government (BSG) and the Federal Government of Nigeria (FGN) were not deficient in nominal terms, they were well below the targets in dollar terms\. The inadequacy and the irregularity of these contributions adversely affected the project's progress\. This critical problem of inadequate counterpart-funding arose mainly because of the sharp devaluation of the Naira (from US$1\.00 - Naira 0\.55 in 1981 to US$1\.00 - Naira 8\.0 in 1990)\. FGN and BSG were unable to enlarge their revenue base or trim lower priority expenditures to support the much larger contributions in Naira terms\. 5\.3 Another factor that proved to be a serious constraint on project activity was the involvement of FGN and BSG in fertilizer distribution\. The public sector monopoly of fertilizer distribution at heavily subsidized prices resulted in inefficiencies in distribution and use\. Scarcities became comlonp'ace and rent-seeking in parallel markets common\. Demand for fertilizer, however, was high\. According to BSADP's Planning and Evaluation Department the total fertilizer use in the state exceeded the official distribution of BASAC, implying some fertilizer had been purchased from other states\. Higher levels of fertilizer use, and hence, higher productivity of crops, may have been possible if fertilizer had been more regularly available\. The average annual distribution of fertilizer was 44,666 tons compared to a target of 50,640 tons\.  -5 5\.4 The key institutions to provide policy direction project manage- ment, i\.e\., BSARDC and BSADPTC, were established as planned but did not play their roles fully\. These policy making bodies met only a few times and had little impact on BSADP operations\. Integration of Local Govern- ment Councils (LGCs) into project operations also did not live up to project expectations firstly because of the proliferation of local governments, and secondly because of inadequacy of LGC financial resources\. When BASIRDA was established in 1986 its wide range of acti- vities in the rural sector included those undertaken by BSADP and created the problem of BSADP management having two masters, that is BSADPEC and the Managing Director and the Board of BASIRDA\. Worse still, the non-agricultural aspects of BSADP with their high profile tended to attract involvement from the BASIRDA management\. There was no representative of the Federal Ministry of Agriculture on the BASIRDA Board unlike BSADPEC\. BSADP management became considerably weakened over time as BASIRDA exerted its authority\. 5\.5 Project components related to livestock development, i\.e\., cattle fattening and training of draft animals, were not implemented on the expectation that the newly-formed National Livestock Project Department would undertake these activities in a separate project\. A Bank-assisted project, Livestock II (Loan No\. 2737-UNI) was approved in July 1986 and until about 1989 did not deliver much to this subsector\. 5\.6 The research component included several activities meant to provide suitable solutions to local farming problems\. Their imple- mentation, however, fell short of expectations in several areas\. Research on animal traction, crop processing and farm mechanization were not systematically conducted\. The usefulness of on-farm research on mixed farming would have been largely enhanced if comparative experi- ments had been conducted over several seasons\. Research on individual crops was implemented with reasonable effectiveness yielding several important results\. However, introduction of hybrid seeds had to contend with farming systems dominated by mixed cropping practices which empha- size compatibility\. Moreover, farmers were reluctant to crop improved sorghum varieties because of taste, short stems which cannot be used in shelter construction, and higher loss to birds through earlier maturity\. 5\.7 In terms of specific quantitative targets for the different activities at appraisal, a large member of these had been achieved at the end of project implementation (see table 4)\. In the crop devel- opment component the SAR expected project extension activities to reach 280,000 families (i\.e\. about 60 percent of the total farm families)\. The number of farm families covered at the end of the project, as estimated by APMEU, was 318,000 representing about 60 percent of the total farm families estimated then at 514,000\. This coverage, however, had been achieved with only about one-third of the estimated requirement of extension agents\. No criteria were developed to assess the effec- tiveness of the coverage and evaluation of the success achieved is, therefore, difficult\. 5\.8 Implementation has been most successful in the components related to infrastructure development\. The project well-exceeded SAR targets  -6- associated with the fadama small lift-pump irrigation schemes, the rural feeder roads program and the rural water supply component\. The area brought under small lift-pump irrigation was 10,000 ha against a target of 2,500 ha\. Feeder roads constructed reached 1,578 km versus a target of 1,200 km\. The number of boreholes drilled for village water supplies was 1,480 against a target of 1,300\. 6\. Proiect Results 6\.1 Notwithstanding numerous operational difficulties experienced during project implementation, BSADP's performance on the whole has been satisfactory\. It has been able to achieve the basic project objective\. of having a positive impact on overall agricultural production and building up the institutional capacity for agricultural development activities\. The estimated number of farm families reached through project extension activity exceeded the number anticipated in SAR\. The project has been very successful in developing fadama agriculture, where 10,000 ha of land have been developed relative to 2,500 ha planned in SAR\. 6\.2 Incremental outputs of crops varied considerably from year to year due to a combination of factors including variations in rainfall, farmer response to price changes and differences in returns to fertilizer use among substitutable crops\. There has been a marked shift from sorghum to maize which may have been due to higher response of maize to fertil- izer use as well as differential water requirements\. The output of major food crops--millet, maize and cowpea--increased by a reasonable degree, while sorghum output declined\. A comprehensive analysis of yield changes during the project period is not possible due to data problems\. 6\.3 The establishment and strengthening of BSADP were major achieve- ments of the project in terms of institutional development\. BSADP has progressed to diversify its extension activities beyond food crops to include all major crops such as groundnut, cotton and vegetables, in the farming systems\. Engagement in these supportive activities has been timely considering the new incentives to commercial crops resulting from the economic reforms in 1986\. The project accelerated low-cost and privately managed small-scale irrigation development by using inex- pensive technology and private contractors for drilling\. BSADP has increasingly contracted out seed production while progressively closing down its seed farms\. The project has moved toward sustaining its trading activities in non-fertilizer items by the selling inputs such as chemicals and implements at prices to recover their full costs\. It has involved beneficiaries in rural water supply by obtaining their contri- bution to capital and maintenance costs\. Finally, BSADP changed the role of technical assistance from an executive to an advisory one, thus building local capacity for project management\. 6\.4 The Bauchi Cooperative Financing Agency has been touted as one of the most successful operations in a country where successes in this area are not easy to find\. The technical assistance provided under the project, the strong support from the Bauchi State Government, and the  -7- effective utilization of local management resources have combined to bring this about\. Linking collection of input credit to marketing of farm produce led to a high recovery rate\. The liberalization of interest rates following SAP has caused a very substantial increase in interest rates and constrained the CFA's credit op'rations especially with the prices of non-export crops responding only slowly to SAP reforms\. 6\.5 The ERR of the project was calculated based on data collected by APMEU, BSADP and the Federal Agriculture Coordinating Unit (FACU)\. At appraisal, the ERR of the project was computed as 18 percent and it took into account only the benefits of the agricultural component\. Inconsis- tencies in the project management records and reporting, and question- able data on agricultural output do not allow a meaningful estimation, at completion, of the farmer's actual financial gains or the economic returns to the overall investment\. (The draft PCR prepared together with the Government had worked out a 10 percent ERR, but this could not be accepted after subsequent review of data and analysis\.) 6\.6 Several aspects of the project are expected to have in the long- run positive impacts on the agricultural economy\. Major gains should arise from the improvement of soil conservation and agroforestry prac- tices and the adoption of proven techniques of extension and research for which the institutional basis has been put in place\. Finally, BSADP has contributed to the development of human resources by enhancing managerial skills of project staff and by offering training to a large number of rural dwellers\. 7\. Sustainability 7\.1 BSADP, whose institutional structure was put in place as proposed during the project period, has now become the implementing arm of the State Ministry of Agriculture\. This development and the core activities that have been established provide strong support for the sustainability of BSADP in the long-run\. The forthcoming Bank-assisted projects such as the National Padama Development Project and the National Agriculture Technology Support Project will also be implemented by BSADP in Bauchi State\. These projects would have to ensure that the core activities of agricultural extension and OPAR are not marginalized by BASIRDA under whose aegis BSADP is nominally operating\. However, despite the proven overall economic viability of project activities, the continued decline of the Naira since the SAP of 1986 has resulted in higher recurrent costs for the project\. In fact, since 1986, FGN and BSG have been experiencing difficulty in funding BSADP\. A serious effort in introducing actions towards sustainability of project investments and institutions began in 1988 reflecting, in part, the findings of the Bank PPARs on Lafia and Ayangba ADPs\. 6/ 7\.2 The actions taken by the ADP towards improving sustainability were: 61 Sec PPAR Report No\. 5972 on Lafi ADP (Loan 1454 - UNI) and Ayangba ADP (Loan 1455 - UNI)\.  - Establishment of a program of on-farm adaptive research with strong linkages to the national research institutes and the extension services\. Unification and strengthening of agricultural extension for more effective coverage of smallholders and to improve its cost effectiveness\. Increasing the dependence on the private sector for retail sales of inputs, and encouraging private traders and farmers cooperatives with the progressive withdrawal of BASAC\. - Assistance to LGCs to develop the capacity for routine maintenance, while emphasizing increased dependence on the private sector for rehabilitation, construction and major annual maintenance work\. - An adequate supply of quality planting material to extend new technologies using contract growers with technical inputs from the National Seed Service which is being assisted by the Bank under a National Program\. 7\.3 Funding problems related to recurrent expenditures appear to have affected infrastructure maintenance programs\. The infrastructure component of the project could be sustained with a minimum of supervision or administrative involvement\. Given the low maintenance cost of the hand pumps for rural water supply, user groups may be willing to contribute to maintain these pumps\. The estimated maintenance cost of ranges from N400 to N600 per year\. On average, this will represent a financial burden of less than N1\.00 per family per month\. A similar scheme can be developed for the project's feeder roads\. According to BSADP engineering staff, the annual maintenance cost of one kilometer of feeder road varies between N2,500 and N5,000\. Based on the traffic recorded a tax of N1\.00 per use each way should suffice to meet the maintenance costs\. The active involvement of LGCs in such processes especially the organization of user groups and the training of LGC staff would be important to develop a sustainable infrastructure maintenance arrangement\. 7\.4 BASAC is unsustainable as a state-owned operation where profitability is seriously affected by non-commercial considerations\. BASAC should progressively withdraw from its activities and cease operations in favor of private operations\. 8\. Bank Performance 8\.1 The Bank had an intensive involvement throughout the project cycle\. The Bank monitoring was extended over the project period, with a total staff input of 241 man-days in the field for a total of 13 supervision missions\. In addition, after 1988 key components such as On-Farm Adaptive Research, Extension, Rural Infrastructure and Commercial Services were each supervised by a specialist group visiting for an intensive review of each component of the ongoing ADPs\.  -9- 9\. Borrower's Performance 9\.1 Borrower's performance, though satisfactory in general, was marked by frequent delays in the fulfillment of the conditions stipulated in the loan agreement, particularly in the areas of providing adequate counterpart funding and recruitment of personnel\. Part of the inade- quacies were the impect of, initially, falling petroleum prices and, subsequently, economic reforms on the Federal and State government budgets\. However, the Borrower was supportive of supervision missions and open to suggestions for improvement\. 10\. Project Relationship 10\.1 The Bank - Borrower relationship was in general satisfactory\. Only after the takeover of the military government in 1983 did some tension occur, and project implementation stagnated for about IS months\. Nonetheless, decisions regarding loan closing date extension and reallocation of proceeds amongst disbursement categories were conducted in an atmosphere of mutual cooperation\. 11\. Consulting Services 11\.1 Several consulting services were contracted to obtain technical assistance\. According to BSADP staff, these services were satisfac- torily performed\. 244 staff years went to internationally recruited long-term consultants while 501 staff months were used for short-term consultants\. The comparative SAR estimates were 290 and 71, respec- tively\. 68 staff months provided for a special road study were not used at all in preference of use of in-house resources\. 12\. Proiect Documentation and Data 12\.1 The project covenants were clearly stipulated\. The SR provided an adequate framework for the Bank and the Borrower to implement the project\. BSADP's Monitoring and Evaluation Department was able to provide relevant data for the preparation of this PCR\. 13\. Findings and Lessons Learned 13\.1 The main lesson learned from this project experience, similar to that of other ADPs, is that the Bank should be more cautious in designing multi-faceted projects for agricultural development\. When projects are complex, involving wide administrative responsibilities, project implementation becomes problematic and week\. A sharp focus on a given aspect of agricultural development may be more desirable in project design\. 13\.2 The inefficiencies and the serious repercussions of public sector managed fertilizer distribution provides strong reasons why Bank projects should not encourage direct public sector involvement in trading activities\. It should also, therefore, refrain from providing finance to state-owned companies for undertaking operations better done by the private sector\.  - 10 - 13\.3 Given the poor record of counterpart funding Bank, staff should at appraisal develop more stringent mechanisms of ensuring timely and adequate counterpart funding and tailor project scope to the Borrower's funding capabilities\. 13\.4 Strategies for technology development and dissemination have to give serious consideration to on-going farming practices and farmer objectives, as well as to the prevailing agro-ecological conditions\. Additionally, the scale and the scope of projects involving technology development and dissemination need to consider the relatively long time required for the development and adaptation of technology\. 13\.5 The project experience also has revealed how important it is to consider the inter-linkages between technology development, technology dissemination, and pricing policies\. For example, there was a substan- tial switch from sorghum, a basic food crop, to maize because of subsidized fertilizer prices and higher responsiveness to fertilizer\. This has implications for both technology development related to food crops suitable for low-rainfall areas and for fertilizer pricing policies\. 13\.6 As a measure of progress evaluation and control, project documents such as SAR should include key indicators and targets to be achieved not only at project completion but also at different stages of project implementation\.  - il - PART II: PROJECT REVIEW FROM BORROWER'S PERSPECTIVE 1\. Introductlon 1\.1 The information contained in Parts I and Part III of this Draft Report submitted to us has been carefully studied\. Both the write up and data are to a very large extent factual, adequate and accurate\. We however feel it is pertinent to make the following observations on Part III of the Draft Report\. 2\. Adequacy and Accuracy of Part III 2\.1 In table 2 of page 12 labelled Project Timetable we observe that since the project was further extended to 1989, the correct Project Completion date should therefore be 31st of December 1989, and the Loan Closing date be 30th June 1990\. (See Table 2 of Part III\.) 2\.2 Table 3 of the same page with the title Disbursement gives the Actual Disbursement as $128\.4 million which according to our record should be $130\.7 million\. The percentage of the actual disbursement should therefore read 99 percent while the Final Disbursement date should be July 12, 1990\. (See Table 3 of Part III\.) 2\.3 We also observe that the Project Implementation figures of table 4 do not contain the figures on consultancy\. We want them reflected in the final report as follows: (a) Internationally recruited Consultants 244 Man/Years (b) Short Term Consultants 501 Man/Months (c) Special Studies by Consultants were not carried out 3\. Bank and Borrower Performance 3\.1 As we have explained in our comments on other PCRs, delays in start-up and the slow execution of Projects is common with all ADPs in the country\. The delay in start-up is mainly due to difficulties in fulfilling the various conditionalities for loan effectiveness\. More than one Ministry, both at Federal and State levels are involved, and to bring all of them to comply with the conditionalities is time-consuming\. Slow project execution is mainly attributed to the procurement procedure in use\. Recently the Bank has taken a positive step in this regard by approving the Standardized Bidding Document drafted by FACU for use of ADPs in an attempt to make the procurement procedure less cumbersome\. 3\.2 Bauchi State ADP, like all others in the country, was tripartitely funded by the World Bank, Federal Government and State Government\. The PCR in paragraph 5\.2 failed to acknowledge Federal Government  - 12 - contributions to the Project\. Although on an annual basis, counterpart funding by the Federal Government often fell short of SAR targets, cumulatively, the Federal Government's contribution to ADPs was generally higher than the SAR provision\. This is so, because the Federal Government maintained its level of funding during periods of project extension\. One lesson to be learnt is the need to design projects with longer term frame, which would make counterpart contribution less burdensome on the annual budget of the borrower\. 3\.3 The SARs provide the representation of FMANR on the Project Executive Committees of all ADPs\. The functions of BSADPEC were performed by the Board of BASIRDA on which FMANR was not represented\. The PCR is silent on this issue\. 3\.4 The PCR in paragraph 6\.2 attributed the decline in sorghum production to rainfall\. When considered against the impressive increase in maize production in the State at the time, this explanation would not be tenable, as sorghum is more tolerant of moisture stress than maize\. The plausible explanation appears to be the shifting of resources to maize production by farmers\. Maize is more responsive to fertilizer, yields higher, has large industrial uses and has higher returns on the farmers' investments\. Government is in agreement with overall assess- ment\. Bauchi State ADP's performance is satisfactory\. 4\. Comments on the Analysis in Part I 4\.1 We generally agree with the analysis in Part I\. However, we point out and add the following: (a) The preparation report of the BSADP was initiated by APMEU and was carried out by the staff of Gombe ADP for and on behalf of Bauchi State Ministry of Agriculture and Natural Resources\. (b) In addition to items listed in 7\.2, the ADP also established a viable Cooperative Finance Agency (CFA)\. (c) We also agree with the analysis on paragraph 8\.2 and emphasize that one of the problems encountered during the project implementation was the complexity of the project\. Had the Management of the BSADP not been flexible enough, there could have been a lot more problems\. (d) The inclusion of benefits from rural water, rural road and fadama components which increased the ERR for the project from 10 percent - 22 percent was commendable\. However, we believe that inclusion of quantifiable social benefit indicators earlier in the appraisal report would be beneficial in arriving at realistic ERR\. Projects should therefore be designed to show benefits from both economic and social activities, clearly setting out key indicators\.  13 - (e) The World Bank supervision mission visited BSADP about twice a year\. Most of the visits, especially the earlier ones, were highly supportive, combining advice with constructive criticisms which we found very useful\. We would, however, suggest that future missions should spend more time and be accompanied by relevant (Federal Agencies) FACU and APMEU who are usually better informed about ADPs in the country\. 5\. Bank and Borrower Relationship 5\.1 The relationship between the Bank and the Borrower has been very cordial with mutual respect and appreciation of each other's role and problems\. The borrower tried to fulfil the covenants of the loan agreement despite the difficulties\. The Bank has always been under- standing and helpful towards efforts made by the borrower to arrive at a workable solution to the problems\. Constructive criticisms and useful advice on how best to achieve success in the implementation of the project was always readily available from the Bank\. Efforts at effecting corrective measures were also promptly implemented by the borrower\. Department of Agriculture Federal Ministry of Agriculture and Natural Resources 28th June\. 1991  - 15 - PART mI: STATISTICAL INFORMATION Table 1: Related Bank Loans and/or Credits | LOSS NO, Prect Name Lean Amount Year or Year of _ _ ______ wr II A___ _O 1092-UNI Funtua Agcultural Development 29\.0 1974 1982 1099-UNI (luau Agricultural Development 19\.0 1974 1982 1164-UNI Gombe Agricultural Development 21\.0 1974 1982 1454-UNI Lafia Agrcultural Development 27\.0 1977 1984 14SS-UNI Ayangba Agricultural Development 35\.0 1977 1983 1667-UNM Bida Agricultural Development 23\.0 1979 1986 1668-UNI orin Agncultual Development 27\.0 1979 1988 1838-UNI Oyo North Agricultural Development 28\.0 1980 1988 18S4-UNI Ekiti Akoko Agricultural rkvelopmcnt 32\.S 1980 1985 2029-UNM Agdoultural Technical Assistance 47\.0 1981 1989 1982-UNI Kano State Agricultural Development 142\.0 1981 1989 2185-UNI Sokoto State Agriultural Development 147\.0 1982 1990 2436-UNI Kaduna State Agricultural Development 122\.0 1984 on-going 2736-UNI Multi-State Agricultuml Development I 162\.0 1986 on-going 2741-UNI South Borno Agricultural Development 25\.0 1986 on-going 2988-UNI Multi-State Agricultural Developmemt H 85\.2 1989 on-going 2035-UN! Multi-State Agrcultural Development m 100\.9 1989 on-going  _ 16 - Table : Project Timetable ldantlfloatioo _______________ 1978 Prepctation 1978 Field Studies, September 1979 Report Appraisl Minion January 1980 Staff Appraial Report July 7 1980 Loan Credit NoverAber 17, 1980 Negotiations Board Approval May 5, 1981 April 30,1981 April 30, 1981 Loan Signture _ September 2, 1981 Loan Effectivenso December 2, 1981 December 23, 1981 December 23, 1981 Implenentation Period Compledon June 30, 1986 December 31, 1989 I/ December 31, 1989 Final Disbursement December 31, 1986 February 22, 1990 July 5, 1990 Takle 3: Loan Disbursement Cumuative Estimated and Actual Dsbwursanm USS Moions EY8¶I FY82 IFY83 Y4 FY845f I FY8, 87 FY88 FY89 FY90 Appraial Estimats Z\.3 34\.8 68\.6 94\.6 120\.0 132\.0 Actual 0\.0 15\.4 38\.9 70\.0 89\.5 106\.3 112\.9 123\.9 126\.3 130\.7 Actual S % of Etimate 0 44 57 74 75 81 86 94 96 99 Date of Final Dsbursbete July 5, 1990 /] Completion date was postponed thde\. tinms\.  - 17 - Table 4: Project hnplementation Indicators praisal Estimale PCR Estimate No\. of Smailholder Families Reached 280,000_/ 317,800 Area of Rainfed Agriculture Covered sha) 330,000 900,000 No\. of Hectares "Fadama" Irrigation 2,500 10,000 Kilometers of Agriculture Feeder Roads 1,200 1,578 No\. of Working Village Boreheles Sunk 1,300 1,480 No\. of Hand Pumps Supplied _ 1,670 No\. of Wells Rehabilitated 200 0 b/ No\. of Dams Constructed 251 _ No\. of Small Reservoirs Constructed 561 63 No\. of Extension Agents (Average) 960 347 No\. of Farm Service Centers 58 126 Q/ No\. of Irrigation Washbores Drilled _ _ 2,827 No\. of Pumps Supplied by BASAC _ 13,036 No\. of Ox-Ploughs Supplied _ 12,156 Quantity of Fertilizers Delivered (tons) d/ 50,640 44,666 Quantity of Herbicides/Pesticides d/ 750 m\.t\. 289,232 (iters) No\. of Mechanical Workshops 8 15 No\. of Staff Houses 290 293 e/ Internationally Recruited Consultants (man-years) 290 244 Short-Term Consultants (man-months) 71 501 Special Road Study Consultants 68 | No\. of Other Buildings Constructed 136 ai/ Appraisal estimate was 60 percent of estimated total rural farms\. hi The PMU of BSADP came to the conclusion that is was more cost-effective to sink boreholes\. c/ The figure of 126 includes stores which are not full-service centers\. d/ Average per year; SAR estimate is for 5 years; PCR estimate is for 8 years\. e/ Of which number of: senior (33); intermediate (73); and other (187)\.  - 18 - Sable Project Costs and Financing A\. Project Costs (US$ Million) AupraI_al_Estimat Al X Local Costs Foreign Costs Total Costs Local Costs Foreign Costs Total Costs 199\.6 151\.0 350\.6 107\.2 130\.7 237\.9 (57%) (43%) (100%) (45%) (55%) (100%) B\. Project Financing (US$ Million) _ Estimated {Percent) Actual (Percent Federal Government 94\.0 (26%) 43\.9 (19\.9%) State Government 97\.8 (29%) 63\.3 (27%) World Bank 132\.0 (37%) 128\.4 (54%) Farmers 26\.8 (8%) (-)* (-)* TOTAL 350\.6 (100%) 235\.6 _(100%) * Data not available\. C\. Allocation of Loan Proceeds (Disbursements in US$ Million) ApprAisal Estimate Re=isd Actual Categzory Item Amount Percentage Amount Amount Percentage 1\. Building, Civil Works 22\.7 17 18\.0 18\.5 14 2\. Vehicles, Equipment, Tractors, Spares 50\.4 38 48\.0 48\.9 37 3\. Borehole Drilling 13\.6 10 24\.0 23\.5 18 4\. International Consultants, Staff Salaries, Overseas Training 30\.3 23 23\.5 21\.8 17 5\. Farm Inputs 14\.9 11 18\.5 17\.9 13 TOTAL 132\.0 100 132\.0 130\.7 100 Note: Figures may not add up because of rounding\.  - 1' - Table : Status of Covenants L\.A\. P\.A\. Covenant Status 1\. Loaw Effetovm \. 6\.01 a Borru)wer to ratify/authorize Subsidibry Loan Agmeement 6\.01 b 2\.03 (i) Borrower to esublish for BAPMU overdRaft facilities of N5 million with a commercial bnk\. 6\.01 _ 6\.01 f Bortower to appoint Progam Manager and Fmancial Conttoller for BAPMU Complied with delay 6\.01 8 BS3 will provide IBRI) with a shost list of conultants and dmft contracta for project recuitment agency, ascounting Auditors enrvice and managing epaecy\. not satisfactory 6\.01 h BS3 to send IBRD first action plan\. Not satisfactory 6\.02 BS3 to satisfy project agreement\. 2\. Funding 2\.01 (b) BSO will implement projecta in conformity with administrative, financial, engineering and agiicultural practice and Not provide promapt/dequate funds/resources required by the project\. satisfactory 3\.02 2\.03 (a)(tin) FGN and BSO will pay quarterly contributions three months in advance, totaling, respectively, N44\.1 million nd Not _______ __ tl57\.7 million over project period, utisfactory 2\.03 (a)(iv) BSO to maintain annual curmnt levels of expenditure of N3\.4 million\. Satisfactory 2\.03 (b) BSG to aend annual action plan to Bank by September 30 Lach year\. Satisfctory 2\.06 (e) Bs3 to provide BASAC N4 million equity, over two years\. Not satisfactory 3\.04 2\.06 (b) Bs3 to teview cost recovery policies/practice of BASAC Not udsfactory 2\.08 BSO to provide CPA it6 million equity over four year\. Not satiactory 2\.09 (b) BS0 to ensure a*U agetnie kesp proper accounts\. Not dastifctory 2\.12 FUN to deduct BS3 quaterly conibution to BSADP to the exte contributions are outsanding\. Not uatisfctory 3\. Pfrcemet_ 3\.04 FPN to ensure BSG reeeives adequate supplies of feniizer\. Not Satisfctory 2\.06 (a) Procurement of loan finalned goods and civil works to be governed by BDnk accepted procedures\. Satifactory 2\.07 (a) BSG to provide insumanee of loan financed Inpoted goods\. Satisfactory 2\.07 (b) 380 to eause loan financed goods nd ervices to be sued exclusivel for the project\. Sauhetoty  - 2n - 4\. Staffing and Consultants 2\.04 (a) BSo to employ a manment agecy acceptable to the Ban to supply BASAC key stff\. Satisfactory 2\.04 (b) BSO to ro uit project Key tAff eatiafactory to the Bank\. Satisfactory 2\.05 (a) 38O to employ coultae wbo qualifications ad corAditioa of employment are acceptable to th eank\. Satisfctory 3\.02 (i Auditors acceptable to the Bank hal be appoited for BSADP and related agencies\. Auditors hired wlo Bk _,___________ approval Otbers 2\.09 (c) SO after project completion to prepare report\. Report _____________ prepared ________ Satissfctory Not done , , _ ~~~~~~~~~~~~~~~~~~~~~~~~~~~~Not done Table 7: Use of Bank Resources A\. Staff Inputs (Staff Weeks) 8NIRPA045 L19810 BAUCHI AGRI\. DEVT 1979 3\.0 \.4 3\.4 1980 4\.5 98\.2 \.1 2\.6 105\.4 1981 10\.4 10\.6 3\.7 8\.4 33\.1 1982 25\.8 25\.8 1983 20\.3 20\.3 1984 21\.0 21\.0 1985 23\.7 23\.7 1986 19\.3 \.2 19\.5 1987 18\.9 18\.9 1988 16\.9 16\.9 1989 10\.7 10\.7 1990 15\.7 15\.7 1991 2\.2 2\.2 1992 \.1 \.1 ___ s 0sns - 1\.S 17 - 3w16\. Total for the ProJect Id 3NIRPAC45 7\.5 108\.6 11\.1 178\.4 11\.2 316\.8  -21 - B\. Mission State of Date No of Staff Days Specializations Performance Rating Type of Project Cycle Month/Year Persons in Field Represented If Rating 2/ Trend _/ Problems 4/ Identification iom 1 3 a Preapprasal I/ 01/80 10 270 a,b\.c,d,e,f,g Supervision 1 09/81 3 IS a,b,d 1 I Supervision 2 11/81 5 20 a,b,d I I Supervision 3 05t82 4 28 a,b,d,f 3 3 F Supervision 4 10/82 2 10 a,b 3 3 P Supervision 5 01/83 2 2 a,b - - Supervision 6 04/83 1 4 d 2 2 P Supervision 7 03184 3 15 a,b 2 1 F Supervidion 8 10/84 3 15 a,b,d 3 3 F,T Supervision 9 07/85 3 10 a,b 3 _/ 3 Supervision 10 06/86 3 21 a,b,d 3 5/ 3 Supervision 11 10/86 2 8 a,b 2 5/ 3 Supervision 12 07/88 1 4 c 2 5/ 2 Supervision 136/ 11/89 1 4 c 3 2 I/ a - Agriculturist; b = Fiancial Analyst; c = Agrieultural iconomist; d = Engineer e = Credit Specialist; f - Training Specialist; g = Marketing Specialist; h = Roads Engineer\. 2t 1 = problem free or minor problems; 2 = moderate problems; 3 = major problems; 4 = critial situation\. 3t 1 - improving; 2 - stationary; 3 - deteriorating\. _I P = Financial; M = Management; T - Technical; P = Political; 0 = Other\. 51 New Form 590 in use that shows rating for overall status\. 61 Since 1988, several thematic wpervisions took place, in addition to regular project supervision nissions\.  IBRD 15109R _,N I G E R dST\. 'A hSupo V pooob IEI *1 \~~~~~~-~~~ Chad 0 N~~~~~~~~~IGERIA end S e\.cJuhseW fo he ,n'enno9 oHhends\.e"onh lol ,BAUCHI STATE AGRICULTURAL Th\.d\._W |do heG\., zBAUCI \ 4ld, / 7 DEVELOPMENT PROJECT CHWI E R I A\CH AD 1 BSADP headquarters/ State capital ~~~~~Iu , ? ~~~~~~~~~~~~~~~~~~~~~* Zone headquarters I S i , !A X f6GamawaS U \. Possible farm service center sites X CAMEROON ki\.A\.R\. 12' GA A WA 48/ty 0 Local governmentheadquarters SvSmpa \d < \. -t2* v0, a---- 1-\.vg -Locol government boundaries \. \. \. \.- -"Zone boundaries _ rof(sTer o~ Kan 2 _-/-rAf-jGUM\.\,/ ,,o' \1 \ *State boundaries "a , - ' afug - Existing federal roads N ~~~~~~~~~~~~~Proposed federal roads Proposed project roads _Rivers Gombe Agricultural Development Project area Game reserves "'NAL SEt ECTfON TO 6E tRADE ODER EE4 tMLEAfENAro77 KILOMTR 20 40 60 80 100 MILESO 20 4b 60 AS\.~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ -\.I 71IbMM urdi FERUR 992t/ l

APPROVAL

P003046

Document of The World Bank FOR OFFICIAL USE ONLY LECOPY Report No\. P-3787-ZR REPORT AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL DEVELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ON A PROPOSED DEVELOPMENT CREDIT IN AN AMOUNT EQUIVALENT TO SDR 25\.2 MILLION TO THE REPUBLIC OF ZAIRE FOR A SECOND RAILWAY PROJECT April 23, 1984 This document has a restricted distribution and may be used by recipients only in the performne their official duties\. Its contents may not otherwise be disclosed without World Bank autheo CURRENCY EQUIVALENTS I Currency Unit = Zaire (Z) September 12, 1983 - February 24, 1984 Zaire 1\.00 = US$0\.04 (0\.03) US$1\.00 Z 26\.93 (29\.93) February 24, 1984 Zaire 1\.00 = US$0\.03 US$1\.00 = Z 33\.0 WEIGHTS AND MEASURES 1 meter (m) = 3\.28 feet 1 kilometer (km) = 0\.62 mile 1 sq kilometer (km2) = 0\.386 square miles 1 metric ton (ton) = 2,204 pounds (1bs) 1/ On September 12, 1983, Zaire introduced a transitional dual exchange rate regime, comprising an official rate and a free market rate shown between brackets above\. The two rates were unified on February 24, 1984; thereafter the rate will float on a weekly basis\. FOR OFFICIAL USE ONLY ACRONYMS AND ABREVIATIONS AfDB = African Development Bank CCCE = Caisse Centrale de Coopgration Economique (France) (Economic Cooperation Fund) CFMK = Chemin de Fer de Matadi A Kinshasa (Matadi to Kinshasa Railway) CMZ = Compagnie Maritime Zairoise (National Shipping Company) Gfcamines = La G6n6rale des Carriares et des Minos (General Mines and Quarries Company) GEEP = Groupe d'Etudes, Economie et Planification (The Economic Studies and Planning -ection of MTC) KfW = Kreditanstalt fUr Wiederaufbau (The Development Credit Organization of the Federal Republic of Germany) MP = Ministry of Planning MPF Ministry of Portfolio (State Holdings) MPW = Ministry of Public Works MTC = Ministry of Transport and Communications OR Office dles Routes (National Highways Bureau) ONATRA = Office National des Transports (National Transport Bureau) PDG = Pr6sident D616gug G6n6ral (Chairman and Managing Director) PIP = Public Investment Program RVA = R6gie des Voies A&riennes (National Airways Authority) RVF = R6gie des Voies Fluviales (National River Authority) RVM = R6gie des Voies Maritimes (National Maritime Authority) SNCZ = Soci6t6 Nationale des Chemins de Fer Zairois (National Railway Company) VN = Voie Nationale (The Rail/River Transport System) FISCAL YEAR January 1 - December 31 This document has a restricted distribution and may be used by recipients only in the performance of their official duties\. Its contents may not otherwise be disclosed without World Bank authorization\.  ZAIRE SECOND RAILWAY PROJECT CREDIT AND PROJECT SUMMARY Borrower: Republic of Zaire Beneficiary: Soci6t4 nationale des Chemins de Fer Zairois (SNCZ) Amount: SDR 25\.2 million, equivalent to US$26\.0 million\. Terms: Standard IDA terms Relending Term: SDR 25\.05 million of the IDA Credit would be on-lent to SNCZ for 15 years, including 4 years of grace, at an annual interest rate of 15 percent per annum\. Co-lenders: Parallel cofinancing is being considered as follows: African Development Bank (AfDB) US$14\.10 million equivalent, for 19 years, including 4 years of grace, at an annual interest rate of 12 percent; Caisse Centrale de Coopgra- tion Economique (CCCE-France) US$6\.25 million, 15 years, including 5 years of grace, at 10 percent per annum; Kingdom of Belgium US$5\.65 million equivalent, 30 years, including 10 years of grace at 1 percent per annum and US$0\.2 million equivalent as a grant\. Project Description: The project is based on an emergency rehabilita- tion program prepared by SNCZ and includes track renewal (about 128 km\.); rehabilitation of about 850 wagons and purchase of another 200; equip- ment, materials and spare parts for improved maintenance of track, locomotives and wagons; consulting services to help strengthen higher management and for studies; equipment and materials for training; staff training abroad; equipment and materials for telecommunications, maintenance of a computer system and replacement of medical equipment\. The project also includes technical assistance to the Government for a review of air transport and to help strengthen the studies and planning unit of the Ministry of Transport\. Project Benefits: The project will help Zaire's processing and export of minerals; transportation of agri- cultural produce to urban areas and of inputs for agriculture, and facilitate commerce between Zaire's regions\. Risks associated with the - ii - Project Benefits: project are that the rehabilitation of SNCZ may (Continued) take longer than envisaged; that traffic forecasts may not materialize as projected, and that insufficient foreign exchange will be available for SNCZ's recurrent costs\. The risks have been taken into account in the design of the project\. Estimated Costs Local Foreign Total (Net of taxes) 1/ ---------US$ Million-------- Track renewal and maintenance 3\.19 15\.36 18\.55 Wagon fleet capacity increases 3\.81 20\.63 24\.44 Locomotive rehabilitation & maintenance 0\.94 9\.40 10\.34 Consulting Services 0\.77 7\.13 7\.90 Training 0\.24 2\.08 2\.32 Medical Equipment and supplies, 0\.13 2\.58 2\.71 computer maintenance, telecommunications equipment\. Consulting Services to Government 0\.03 0\.15 0\.18 Total baseline costs 9\.11 57\.33 66\.44 Price Contingencies 1\.61 5\.25 6\.86 Total project costs 10\.72 62\.58 73\.30 Financing Plan Local Foreign Total ---------US$ Million-------- Reallocations under existing credits African Development Bank 3\.25 3\.25 Kreditanstalt fUr Wiederaufbau - 2\.80 2\.80 IDA - Credit 902-ZR 4\.35 4\.35 Sub-total, Existing Credits 10\.40 10\.40 SNCZ 10\.70 10\.70 Proposed Loans and Credits Belgium 5\.85 5\.85 CCCE (France) 6\.25 6\.25 AfDB 14\.10 14\.10 IDA 26\.00 26\.00 Sub-total, New Loans and Credits 52\.20 52\.20 Grand Total 10\.70 62\.60 73\.30 1/ The Government of Zaire has expressed its intention to exempt the project from customs duties and from the local turnover tax\. - iii - Estimated IDA Disbursements IDA Fiscal Years 1985 1986 1987 --------US$ Million-------- Annual 5\.0 14\.0 7\.0 Cumulative 5\.0 19\.0 26\.0 Economic Rate of Return: 37 percent on the investment component of the project, representing 58 percent of total costs Appraisal Report: No\. 4779-ZR, dated April 12, 1984 Maps: IBRD 16564R, IBRD 17537  REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT TO THE REPUBLIC OF ZAIRE FOR A SECOND RAILWAY (SNCZ) PROJECT 1\. I submit the following report and recommendation on a proposed development credit to the Republic of Zaire in the amount of SDR 25\.2 million equivalent (US$26\.0 million) on standard IDA terms to help finance a Second Railway project\. The proceeds of the credit (except for tae equivalent of SDR 150,000 to be used by the Government for consulting services), would be onlent by the Republic of Zaire to the Soci6t6 NAtionale des Chemins de Fer Zairois (SNCZ) for a period of 15 years, including 4 years of grace, at an interest rate of 15 percent per annum\. Co-financing for the project is being considered by the African Develcoment Bank (AfDB) for the equivalent of US$14\.10 million, by the Caisse Centrale de Coop6ration Economique (CCCE), France, for the equivalent of US$6\.25 million and by the Kingdom of Belgium, for US$5\.85 million equivalent\. PART I - THE ECONOMY 2\. An economic mission visited Zaire in March 1982; its report was distributed in January 1983 (Report No\. 4077-ZR)\. Its major findings and those of a follow-up visit in February-March 1983 are summarized below\. Background 3\. Zaire is the third largest country in Africa in terms of area and the fifth largest in terms of population, but its GNP per capita, estimated at about US$210 in 1981, ranks among the lowest in the continent\. Approximately one-third of its population of about 30 million live in urban areas, and the population density is 12 persons per sq\. km\. Urbanization has been proceeding at a rate of about 7 percent per annum, or more than twice the rate of population growth\. Although agriculture (commercialized and subsistence) normally accounts for 30 percent of GDP, it provides employment and income for more than three-quarters of the population\. Mining and mineral-processing normally account for about 18 percent of GDP; this sector has traditionally been the largest source of public revenue and provides more than two-thirds of the country's export earnings\. 4\. When Zaire gained independence in 1960, it was ill-prepared for the change, both technically and institutionally\. The first six to seven years following independence were marked by violent political strife and a severe disruption of the economy\. But after the - 2 - restoration of political order and stability in 1967, GDP grew by about 7 percent in real terms annually until 1974\. Since then, however, Zaire has been experiencing serious economic difficulties which are attributable to both external and internal factors\. The weakness of world copper prices through most of this period was a major contributor to both the severity and the duration of the crisis\. Evolution of Current Difficulties 5\. Until the late 1970s, Zaire's attempts to cope with the crisis were uneven and uncoordinated\. As a result, by 1978, commercialized GDP contracted to about 10 percent below the pre-crisis (1972-74) level; the overall budgetary deficit attained a record level; and deficit financing, together with the worsening shortage of basic consumer goods, fuel and intermediate products, pushed the annual inflation rate to about 50 percent\. Although the decline of GDP was arrested in 1979, the economy continued to face serious difficulties that year\. The expansion of credit to the Government (to finance the budgetary deficit) and to the rest of the economy continued to exert pressure on prices, which rose by more than 100 percent in the capital city during the year\. The balance of payments also remained under strong pressure, as evidenced by the continued accumulation of external payment arrears -- a trend which had started in 1975\. Although two stabilization programs, supported by the IMF, were adopted and three debt rescheduling agreements under the Paris Club were concluded during the 1975-79 period, these could not be implemented and therefore brought limited relief\. 6\. The year 1979 saw the beginning of more systematic efforts by Zaire and its major donors to deal with the crisis\. These included a new stabilization program supported by the IMF; debt rescheduling agreements with the Paris Club (December 1979) and the syndicated private banks (April 1980); the preparation of a public investment program (PIP) for 1979-81 with the help of the World Bank; the installation of external advisers at the Central Bank and the Ministry of Finance; the revamping of some institutions (the Customs Office, the Ministry of Agriculture, the Investment Commission), and the creation of others (a Central Pay Directorate at the Ministry of Finance)\. These and other efforts produced considerable improvements in 1980\. GDP expanded by 2\.4 percent in real terms, aided by a strong recovery in copper production\. The budgetary deficit was reduced substantially, and the inflation rate was cut by more than half -- to about 44 percent -- despite the devaluation of the zaire by about 30 percent vis-A-vis the SDR early in the year\. At the same time, Zaire observed all the performance criteria under the new IMF-supported stabilization program and complied with the debt rescheduling agreements with the Paris Club and the syndicated private banks\. - 3 - 7\. Largely on the strength of this improved performance, in mid-1981 Zaire adopted a three-year program of economic and financial adjustment supported by an "Extended Fund Facility" (EFF) from the IMF in an amount equivalent to SDR 912 million\. Zaire also concluded (in July 1981) a new debt rescheduling agreement with the Paris Club\. However, economic performance during the year fell below expectations because of external and internal factors\. The weakening of the copper and cobalt markets caused Zaire's merchandise exports to fall by about US$540 million (or 26 percent) in nominal terms\. Real imports were lower than at any year during the crisis and amounted to 40-50 percent of the pre-crisis level\. As a result of these developments as well as a weakening of fiscal discipline, the budgetary deficit expanded four-fold in nominal terms -- to the equivalent of 7 percent of GDP\. Zaire could not comply with either the criteria under the EFF or the July 1981 debt rescheduling agreement; it began accumulating external debt arrears in the third quarter of 1981; and the EFF wgas formally cancelled effective June 21, 1982\. 8\. World copper prices fell sharply in 1982 -- to the lowest level (in real terms) in more than 30 years -- thus accentuating Zaire's economic difficulties\. By year end, external debt arrears totaled about US$940 million, of which US$690 million were on public debt and US$250 million on commercial debt and invisibles\. The budgetary deficit expanded, too, to about twice the level of 1981 (in nominal terms), and was equivalent to about 10 percent of GDP\. After recovering by 2\.4 percent a year in 1980 and 1981, GDP contracted marginally (by about 1 percent) in 1982; the inflation rate edged upward, averaging 37 percent; and the exchange rate came under strong pressure, the spread between the parallel market rate and the official exchange rate of the zaire rising to 3\.5 to 1\. Government Action 9\. In mid-1981, in conjunction with the medium-term program supported by the EFF (paragraph 7), the Zairian authorities took a number of interrelated steps toward stimulating supply, keeping the growth of demand within appropriate limits, and improving foreign exchange management: the zaire was devalued by a further 40 percent vis-A-vis the SDR; interest rates were adjusted upward; and the existing price controls on most goods were removed in order to stimulate the private sector\. In addition to completing a revised PIP for 1981-83, Zaire began preparing an Agricultural Action Plan designed to bring about improvements in the following areas: (i) strengthening of institutions; (ii) policies for pricing, marketing, credit, and foreign exchange allocation; (iii) implementation of on-going projects; (iv) investment programming for the sector; and (v) research, extension and training\. The Action Plan was discussed at a meeting of the Consultative Group\.for Zaire held in June 1982\. The Zairian authorities cooperated with the IMF and the Bank in the preparation of a fiscal study which comprised the budgetary process, (with emphasis on -4- the control over expenditures), tax reform and the tax regime of G6camines (the state-owned company producing most of Zaire's copper and all of its cobalt)\. This study was completed in May 1982, and since then, a number of reforms recommended by the study have been adopted by the Government\. 10\. In 1982, Zaire made additional attempts to improve economic management and institutional performance\. The Ministry of Agriculture was significantly reorganized as part of a broad program of institutional reforms for the sector\. The Government appointed new, more broadly-based Executive Boards for G6camines and SOZACOM (the state-owned company marketing the bulk of G6camines' output); important changes were made in the top management of G6camines; and a new marketing arrangement between the two firms was approved\. Furthermore, the Government announced the decision to "privatize" the ownership and/or management of 37 public enterprises, and it further relaxed the remaining price controls\. The Government proceeded at the same time to implement a policy of "decentralization" whose apparent objective is to give Zaire's regions more autonomy\. 11\. The year 1983 witnessed more systematic efforts to reestablish the conditions for recovery\. First, in order to facilitate the negotiation of a new agreement with the IMF, Zaire implemented a "shadow" program for six months, focused on reducing the budgetary deficit and improving financial management\. Second, as part of a program of major changes affecting the mining sector, the tax regime applying to G6camines was substantially revamped in line with the recommendations of the IMF/Bank study referred to above (paragraph 9)\. Third, in September 1983, Zaire started implementing a series of economic and financial measures as a prelude to a formal agreement with the IMF and a debt rescheduling linked to it\. In support of these measures, in December 1983, the IMF approved a 15-month Stand-by Arrangement in an amount of SDR 228 million (US$246 million), equivalent to 100 percent of quota\. The IMF approved concurrently the purchase of SDR 114\.5 million (US$124 million) under the Compensatory Financing Facility\. This was immediately followed by a meeting of the Paris Club at which the creditors agreed to reschedule outstanding arrears and maturities falling due in 1984 at terms compatible with the IMF agreement\. In the meantime, the authorities prepared an Interim Economic Recovery Program which brought together under the same framework the program of economic and financial adjustment and an updated three-year public investment program\. The Interim Program was presented to a meeting of the Consultative Group which was held on December 21-22, 1983\. The participants concurred with the appropriateness of the measures taken by Zaire as well as with the priorities of the public investment program, and they indicated their willingness to increase their support to Zaire in the medium term\. 12\. The adjustment measures announced in September 1983 and incorporated in the IMF program comprise the following: (i) the immediate devaluation of the zaire by about 80 percent vis-\.-vis the US - 5 - dollar; (ii) the introduction of a transitional dual exchange rate regime consisting of an official rate and a free market rate, leading to the unification of the two rates (i\.e\., a total "float") in February 1984; 1/ (ii4) a substantial liberalization and simplification of the exchange and trade system as a whole; (iv) a comprehensive revision of customs duties involving significant reductions in tariffs on essential foodstuffs, raw materials and intermediate goods and major increases on luxury goods; (v) a considerable adjustment and liberalization of the interest rate structure, including the lifting of all administrative controls on lending rates of commercial banks (except for those applicable to the non-coffee agriculture sector, for which they are 15 percent); (vi) the further decontrol of prices, including producer prices of all agricultural commodities; (vii) the adjustment of petroleum prices to take full account of the change in the exchange rate; and (viii) the decision to limit wage increases in the public sector to abou- 40 percent through 1984, well below the estimated rate of inflation\. The objective of the program is to improve Zaire's balance of payments position and to begin reviving the economy\. On the fiscal side, the program aims at eliminating the budgetary deficit (not counting external debt payments) in 1984, thus bringing down substantially net government borrowing from the domestic banking system\. 13\. Zaire's latest public investment program covers the years 1983-85\. The thrust of the program continues to be rehabilitation of existing capacity and infrastructure\. The new program represents a step forward in several respects\. In particular, it is the product of an attempt for the first time to tailor the program to resource availabilities using a macroeconomic scenario\. It is 13 percent smaller (in real terms) than its predecessor for that reason and the projects have been selected with a view to minimizing foreign exchange requirements\. As a result, the new program's external financing gap (US$290 million over 1983-85) is much smaller than that of the last one in both absolute and relative terms\. Furthermore, the program is consistent with both the stabilization program and the investment budget for 1984\. The program has benefitted from a continued effort by the Zairian authorities since 1979 to identify and either improve or eliminate "problem projects"\. The monitoring effort was strengthened in 1982 and 1983 and is to be intensified with the on-going introduction of a new project control and supervision system and strengthened inter-ministerial coordination\. At the Consultative Group meeting held in December 1983, the participants took two important steps relevant to the execution of the Public Investment Program\. They agreed on the appropriateness of convening co-lender meetings on transport (highways) and G6camines around May/June 1984, and they endorsed Zaire's decision to reactivate the External Resources Coordination Committee (which had not met for about two years) partly in order to review progress in providing Zaire with assistance, financial and technical, required in the crucial and difficult years ahead\. 1/ The two rates were unified on February 24, 1984 at US$1 = Z 33\.0 - 6- Current Situation and Direction 14\. The difficulties experienced by Zaire since 1975 have had a heavy economic and social cost\. Much of the country's productive capacity and infrastructure has deteriorated, and real wages and salaries have declined by more than half\. In the last two years, with the cooperation of the international community, significant progress has been made in defining the policies and actions necessary for recovery, and a number of important decisions have already been taken by Zaire\. The developments of 1983 in particular represent a net gain\. This can be demonstrated by taking stock of the cumulative changes achieved with respect to the liberalization of the economy\. Three years ago, all commodities (industrial and agricultural) were subject to controls at the producer, wholesale and retail levels\. Today controls apply only to petroleum products, public utilities and domestic transport\. Virtually all commercial bank lending rates have been liberalized\. The exchange rate has been brought to its most realistic level in recent years, and a phased program toward a total float has been implemented\. 15\. Overall, Zaire seems in a better position to make progress than two years ago for several reasons\. First, the measures taken recently are more comprehensive, more coherent and better prepared than before\. A case in point is the adoption of the new fiscal regime for G6camines, which enables both the Government and the company to improve resource planning, and the revision of the Customs Code to complement changes in the exchange rate regime\. Second, some of the improvement which has taken place, especially in the budgetary sphere in 1983, is structural in nature: some expenditures have been curtailed for good (e\.g\., through efforts to rationalize the government payroll); and some categories of revenues (e\.g\., customs, tax contributions by G6camines) have received a permanent boost through the exchange rate adjustment\. 16\. Although Zaire's exports are expected to improve in the next three years largely because of the anticipated recovery of copper prices, Zaire's resource constraints will remain severe\. This is partly due to the external public debt burden\. The latest Paris Club agreement affects only arrears and 1984 maturities; although as a result of the agreement the debt service ratio in 1984 has been reduced to 18 percent, the contractual debt service due in 1985-89 is equivalent to nearly 35 percent of projected exports of goods and nonfactor services -- a ratio which would seem incompatible with even a modest economic recovery\. Moreover, as a result of the sharp drop in commitments over the last few years, the undisbursed project pipeline -- the source of future disbursements -- has been reduced to US$670 million, compared to US$1\.2 billion in 1975\. While the donors have indicated their disposition to increase their aid to Zaire progressively, this will take time and depend on the improvement of external confidence\. - 7 - 17\. The Zairian authorities are aware that in tnese circumstances they will need to make a determined and sustained effort to execute the new stabilization program, implement the debt rescheduling agreement, continue to improve economic management and stimulate the private sector\. PART II - BANK GROUP OPERATIONS IN ZAIRE 18\. From 1969 to date, the Association has approved 34 credits totalling about US$498\.0 million for agriculture, transport, develop- ment finance company operations, water supply, power, petroleum techni- cal assistance and education projects\. The Bank Grou' has also extend- ed grants totaling US$400,000 as contributions toward he cost of two planning assistance projects in Zaire\. In 1975, the B,nk made a loan of US$100 million for the Gecamines Mining Expansion Project, which was cofinanced by the European Investment Bank and by the Libyan Arab Foreign Bank, and which provided for special repayment arrangements linked to the project's export earnings\. A Technical Assistance Credit was recently approved to assist Gecamines with its efforts to restruct- ure its organization, improve its manpower and prepare a long-term rehabilitation and expansion program\. The IFC, which has a US$760,000 equity participation in the Societe Financiere de Developpement Econo- mique (SOFIDE), approved a US$4\.1 million loan in 1978 for an offshore oil production project and a US$230,000 loan in 1982 for studies related to the development of an aluminium complex at Banana\. Annex II contains a summary statement of Bank loans, IDA credits and IFC investments as of March 31, 1984\. 19\. A main objective of Bank Group operations in Zaire has been institution building\. The development finance company (SOFIDE) was established in 1970 with assistance from IFC and IDA\. The major transport agencies, ONATRA, Societe Nationale des Chemins de Fer Zairois (SNCZ), Regie des Voies Fluviales (RVF), Regie des Voies Maritimes (RVM) and Office des Routes (OR), have received technical and financial assistance from the Association, which also helped establish the National Livestock Development Authority (ONDE)\. In the case of Gecamines, the Bank loan originated a dialogue, still ongoing and now supported by a technical assistance credit, intended to define ways and means to strengthen the management, financial position and planning of the company\. 20\. In general, project implementation has been difficult due to the country's inadequate manpower and management capability and, in recent years, because of the economic crisis\. In the last two or three years, release of the required budgetary funds has been difficult periodically because of budgetary constraints\. Lack of foreign exchange to finance spare parts and fuel, and the deterioration of the transport network and marketing system have resulted in severe supply - 8 - problems for most projects\. Recruiting and retaining adequate staff has also been difficult\. In January 1980 the Bank undertook with Zairian officials an overall review of Bank Group projects which, for the first time, provided an integrated view of implementation problems; this resulted in an acceleration and improvement in the utilization of Bank Group assistance, particularly in the agricultural sector\. A second overall review, focussing on macro-economic and sectoral issues and on their impact on project implementation, took place in May 1983 and assisted the Government in formulating the important economic measures of September 1983 (para\. 12)\. 21\. Fourteen credits and one loan have been totally disbursed: Credits 152, 292, 536 and 916-ZR (First, Second, Third and Fourth Highway Projects); Credit 255-CK (River Transport Project); Credits 272-CK and 264-ZR (First and Second Education Projects); Credit 398 and 697-ZR (Livestock Development and Ituri Livestock Projects); Credits 190, 271, 463 and 710-ZR (First, Second, Third and Fourth SOFIDE Projects); Credit 625-ZR (Water Supply) and Loan 1090-ZR (Gecamines)\. Completion reports have been issued for all projects except Gecamines\. Performance Audit Reports have been issued for the First SOFIDE, the First, Second and Third Highway Projects, the River Transport Project, the Rail/River Project and the First Education Project\. The conclusion of the audit and completion reports was that the Bank Group's impact on institution building had been mixed\. SOFIDE was evolving as an effective and competent institution, and the Office des Routes, the highway agency, had been able to establish an effective administra- tion\. On the other hand, ONATRA's performance had not improved as a result of the first River Transport Project but did improve under the Rail/River project; implementation by RVF and RVM had disappointing results\. As for education, more attention to institution building activities would have been beneficial; administrative weaknesses in the Department of Education were cited as partly responsible for poor performance under the First Project and the inability to implement investment components under the Second Project which resulted in cancellation of US$18\.8 million in February 1983\. All entities had encountered operating difficulties beyond their control as the economy deteriorated, financial resources grew scarcer and the problems besetting the investment environment were exacerbated by Government's zairianization/radicalization measures\. Bank Group support to SOFIDE and the OR is continuing under the Fourth and Fifth SOFIDE projects (Crs\. 710 and 998-ZR) and Fourth and Fifth Highway Projects (Cr\. 916-ZR and Cr\. 1290-ZR)\. ONATRA will benefit from the ongoing Modernization (Cr\. 1180-ZR) and Matadi/Kinshasa Ports Rehabilitation (Cr\. 1335-ZR) projects\. A proposed Education Technical Assistance and Training Project would strengthen administrative, financial and planning practices in the Department of Primary and Secondary Education\. 22\. The rate of disbursement to Zaire is average for the Eastern Africa Region\. For fiscal years 1981-83, disbursements totalled US$92 million compared with new commitments of US$218\.6 million\. The - 9 - disparity between disbursements and commitments is a result of a significant increase in commitments in FY82 and FY83\. In this same period, the average annual disbursement rate was 20 percent, only slightly lower than the rate for other countries of the region\. While disbursement performance in general is satisfactory, difficulties have arisen in several projects\. In the case of early credits for transport, education and livestock (Credits 255-ZR, 272-ZR and 398-ZR), the lack of a strong project entity caused implementation delays\. Economic con6itions were also a\. factor in slowing project programs in instances where government counterpart funds were not available (Third Highway, Cre6Lt 660-ZR; Second Education, Credit 624-ZR) and where the investment ernvironment experienced slow recovery from the aftermath of abrupt natiorilization (Fourth SOFIDE, Credit 710-ZR)\. Future project implementation should be less affected by the above influences given the strengthenag of institutions under subsequent projects and efforts by the Governint to improve budgetary support of IDA-financed projects\. At the end of 1982, the Bank Group's share of Zaire's total debt disbursed and outstanding was about 10 percent\. 23\. In the past three years, the Bank Group's main efforts have been directed towards assisting in the rehabilitation and development of the agriculture and transport sectors, in part through the design and implementation of appropriate new policies\. Investments in industry were also emphasized through assistance to SOFIDE\. Initial efforts in support of the energy sector include the Shaba Power System Rehabilitation Project (Cr\. 1224-ZR) and the Ruzizi II Regional Hydroelectric Power Project\. Our lending will continue to support the transport sector (in particular the Voie Nationale); to assist the development of the agriculture sector within the framework of the new Agricultural Action Plan (see para\. 9 above); and to promote the development of the industrial and mining sectors\. In addition, further support will be considered for the energy sector to develop power and petroleum resources\. Part III - THE TRANSPORT SECTOR Background 24\. The transport sector is critical to the development of Zaire given the country's size (about 2\.3 million km2) and the uneven distribution of population centers and important economic activities such as agriculture and mining which in some cases are more than 2,000 km from the Atlantic Ocean\. The most significant element in Zaire's transport network is the river/rail system which provides 15,000 km of navigable waterways and about 5,000 km of rail track in several disconnected networks\. Roads were built to provide local access and to feed into the rail and river network\. The country has one main seaport, Matadi, and two major inland ports, Kinshasa and Ilebo which - 10 - connect rail and river transport\. There are about 150 airfields and airstrips in Zaire of which 30 are served by local airlines\. Three airfields can accommodate wide-bodied aircraft\. Two pipelines transport refined petroleum products from Matadi to Kinshasa\. 25\. Zaire's principal traffic corridor is the Voie Nationale (VN), a transport chain (rail-river-rail) stretching nearly 2,700 km from the mineral-rich Shaba Region to the Atlantic Ocean on the estuary of the Zaire River\. The VN is strategically important to Zaire because it is the only transport corridor to the ocean entirely within Zaire\. Minerals from Shaba are the main traffic item on the VN; since 1976, the VN has carried on average about 233,000 tons of minerals per year, or about 50 percent of Zaire's mineral exports\. The remaining 50 percent of mining output was exported by (i) the southern route, via the Zambia/Zimbabwe Railway to ports in the Republic of South Africa (40-45 percent) and (ii) the Kalemie-Kigoma route, via the Tanzanian Railway to Dar es Salaam\. Until its closure in 1975, the Benguela railway through Angola to the port of Lobito was the external route most heavily used by Zaire\. At one time or another most foreign routes have proved unreliable (owing to military or civil strife, interna- tional disputes, railway or port congestion) and their foreign exchange cost is high\. Zaire has, therefore, correctly decided that a major priority should be to improve the capacity of the VN\. 26\. The national railway company, SNCZ, administers a 4,700 km network, including the 1,500 km railway link from the mining region to the river port of Ilebo; this link is the weakest in the VN chain\. In addition to mineral exports, SNCZ also transports agriculture products and inputs and intermediate products to and between the processing facilities of Gecamines, Zaire's major mining company\. For these reasons, SNCZ is of vital importance to the economy of Zaire\. 27\. While the basic transport infrastructure and equipment large- ly exist to meet current transport demand, there are severe limitations on their effectiveness\. Shortages of spare parts have critically im- paired the use of equipment\. Insufficient investment and maintenance over many years have generally resulted in an accumulation of worn out, unreliable and outmoded equipment and facilities that translate into poor service and high transport costs\. Sector Organization 28\. The organization of the sector, largely the result of extensive studies prepared about a decade ago, is basically sound and for the time being does not require major reform\. Three large parastatal agencies dominate the transport sector: (i) the Socigt6 Nationale des Chemins de Fer Zairois (SNCZ), which operates the country's railways (except for the Matadi-Kinshasa line); (ii) the Office National des Transports (ONATRA), which provides transport services on inland waterways, rail services between Matadi and Kinshasa - 11 - and which operates all but one of the principal ports; and (iii) the Office des Routes (OR), which maintains the 40,900 km of main roads\. In addition, five transport agencies or public companies have the following responsibilities: (i) R6gie des Voies Fluviales (RVF) is charged with maintaining and operating navigation aids and services on navigable waterways; (ii) R&gie des Voies Maritimes (RVM) is respon- sible for maintaining and operating the navigational markings and pilotage services on the Zaire estuary from the port of Matadi to the ocean; (iii) R6gie des Voies A6riennes (RVA) builds, maintains and operates airports; (iv) Air Zaire, the state-owned airline; and (v) Compagnie Maritime Zairoise (CMZ), the national shipping company\. Except for OR, which is under the Ministry of Public Works, these agencies are under the technical control of the Miniscry of Transport and Communications (MTC) and the financial control of the Ministry of Portfolio\. In addition to these public agencies, private carriers play an increasingly important role: in river and air transport, as well as in the Matadi-Kinshasa corridor, they now handle about 30 percent of traffic\. Sector Strategy and Issues 29\. The Government's main objectives in the sector over the past few years have been: (i) to focus the limited available resources on rehabilitation and maintenance of the main transport network; (ii) to improve operations through strengthening of management and training; and (iii) to improve the capacity of major routes, essentially the VN\. The Association agrees with this strategy and has designed its assis-- tance to the sector along these lines, which are also supported by other major aid agencies\. 30\. The latest version (1983-85) of Zaire's Public Investment Program (PIP) allocates 42% of total investments to the Transport Sector making it the most important ahead of Mining (22%) and Energy and Water (18%)\. The share of transport is, however, overstated because all of OR's operating costs (and not only its investment costs) have been included and because the implementation schedule for trans- port projects is overly optimistic\. Under more realistic assumptions, the transport sector's share would come down to about 25-30%, the same level as mining, which still reflects the importance of the sector for the country and also the larger part of its activities under public ownership\. Except for the above, the transport part of the PIP is basically sound and correctly identifies medium-term investment priorities\. It includes, however, a few projects, the most important of which is the electrification of Matadi-Kinshasa Railway, which, in our view, require more indepth evaluation\. The Ministry of Planning and GEEP' the planning unit of MTC, which would be provided with technical assistance under the proposed Credit, have the capability to carry out the supplementary work needed; this will be done during the preparation of the 1986-90 economic development plan\. The proposed project will finance the most urgent components of the Plan's railway section\. - 12 - 31\. Although management of the main transport agencies has generally improved (especially at ONATRA and OR), much remains to be done\. Studies will soon start under IDA financing at RVF and RVM to improve their operations and financial management and, at OR to review its specific role within Zaire's road sector and adapt its organization accordingly\. The proposed project will help implement a major reform of SNCZ's management, which, for reasons detailed in para\. 40, has deteriorated seriously over the past two years\. 32\. Given Zaire's financial constraints, the resources available to the main transport agencies have sometimes been inadequate\. The recent expansion of the Road Fund to channel taxes to OR should alleviate this problem for roads\. Following the recent devaluation of Zaire's currency, overall tariff levels were substantially increased at ONATRA and SNCZ\. In addition, the distortion in tariff structures in favor of mineral exports has been corrected (see para\. 73)\. As part of the recent economic reforms, the Government has liberalized access to foreign exchange\. Nevertheless, such access needs to be monitored closely in relation to the sector's needs\. 33\. Investment priorities must also be carefully weighed\. Given the scarcity of resources, it is important that in-depth technical and economic evaluation of all projects be undertaken and that the trans- port capacity of the different sub-sectors be coordinated so that cost- ly imbalances or bottlenecks do not occur\. Each public agency should have the capability to analyze its investment needs in economic as well as technical terms by strengthening or, if necessary, establishing planning units\. At negotiations, SNCZ agreed to create such unit no later than December 31, 1984 and prepare the first version of a five-year rolling investment plan no later than September 30, 1985 (Section 3\.01 (b) of the draft Project Agreement)\. A continual review of priorities by GEEP and monitoring of achievements is also required\. Projects which do not have clear economic returns should be postponed\. Under Credit 1335-ZR (Matadi-Kinshasa Ports Project), the Government has agreed to consult with the Association prior to undertaking any project exceeding US$10 million equivalent in the port and railway sectors\. 34\. GEEP is presently undertaking under IDA financing a broad review of rapidly growing private sector activity in the transport sector\. The study will provide a base for a coherent government policy and, in particular, in correcting existing distortions in the incentive structure\. Bank Group Experience in the Transport Sector 35\. The Bank Group has supported the Government's maintenance and rehabilitation/renewal objectives for the sector through ten credits since independence, five in support of Highways Projects, and five others in support of projects in railways, river transport and ports\. - 13 - 36\. Two Project Performance Audit Reports have been issued, one for the First Highway Project (1976), and the second jointly for the Second and Third Highway Projects and for the River Transport and First Rail/River Projects (October 7, 1983)\. The main conclusions of the latter report are the following: (i) The projects under review were probably too ambitious\. Because of the difficult environment in which they were implemented and of some deficiencies in project design and supervision, only part of the projects' objectives were met; (ii) The projects aided in bringing about major institutional development\. New agencies were launched (OR, RVF and RVM) and an existing one, ONATRA was substantially reorganized\. Large numbers of Zairian employees were trained\. The Audit concluded, however, that there remained serious problems concerning the size, responsibilities and strategies of ONATRA and OR; (iii) Technical assistance still plays a role in the management of ONATRA and OR\. The process of replacement by Zairian staff must be pursued while ensuring the availability of adequate technical resources for management; (iv) The institutions responsible for policy making and control should be strengthened in parallel with the main transport agencies; (v) Investment priorities should be analyzed within the context of the entire transport system, rather than in relation to one major transport corridor such as the VN\. All these questions are being addressed either through ongoing projects - for example by continuation of large training programs and institutional development efforts in ONATRA, OR and SNCZ; a broad review of the organization of the road sector (Fifth Highways Project), analysis of RVF and RVM operations and financial management (Ports Project), and studies designed to help Government address key policy issues such as the price of petroleum products (Fifth Highways Project) and the development of the private sector (Ports Project) - or through a sector dialogue that has been intensified in recent years\. Recent projects (ONATRA Modernization and Ports Rehabilitation Projects) have also focussed on key priorities of the sector as a whole and have not been limited to the VN's requirements\. The proposed project pursues this strategy; whenever possible, its design also incorporates the suggestions made by the audit report\. Rationale for IDA Involvement 37\. IDA is the major source of external finance for Zaire's transport sector\. Given the size of the country, the needs of the - 14 - sector are very substantial\. The sector is vital to economic activity within Zaire, and is its lifeline with regard to the export of minerals, which are Zaire's principal source of foreign exchange\. As stated in paras\. 31 and 32, progress has been made in strengthening two of the main institutions in the sector, and the policy dialogue with the Government is good\. The railway company remains a weak link, however, and being at the head of the intermodal transport chain on the Voie Nationale, its weakness bears directly on the productive use of investments made in ports and river transport and constrains the export of minerals, which are then compelled to use more costly export routes through other countries\. The rationale of IDA's involvement in the sector is to ensure adequate maintenance and rehabilitation of transport sector infrastructure as a means of fostering the growth of economic activity, and is in line with the Government's policy in the sector\. This policy is fully supported by other external aid sources as well, who look to the Association to maintain the policy dialogue with the Government; to foster institution building and to take the lead in financing arrangements\. They have provided substantial assistance and co-financing for the sector\. SNCZ 38\. SNCZ was established in 1974 as an autonomous government agency to operate what had been five separate railway companies\. It reports to the Ministry of Transport and Communications on operational matters and to the Ministry of Portfolio on financial matters\. Its chief executive officer is a managing director (pr6sident dglgu6 g6n6ral-PDG) appointed by the President of the Republic; the PDG also serves as chairman of the board of directors\. 39\. SNCZ is one of the largest organizations in Zaire with a staff of about 22,500\. While Zairians head most departments and a majority of sub-departments, many key management and technical positions are filled by expatriates\. The number of expatriates fell from 400 in 1974 to 140 in 1983, and another 60 are scheduled to leave in the next three years\. Because SNCZ has recruited and trained a substantial number of Zairian engineers in recent years, it will be able to replace most of the departing expatriates\. However, there are a number of higher management and specialized positions that are or will soon be vacant and must be filled rapidly by qualified staff\. Therefore, as a condition of effectiveness, SNCZ will prepare a staffing plan, acceptable to IDA, for higher level positions and has agreed not to change it without the prior approval of IDA (Section 5\.01 (e) of the draft Credit Agreement and 3\.04 of the draft Project Agree- ment)\. Appointment of five key personnel identified during negotia- tions would be an additional condition of effectiveness of the proposed Credit (Section 5\.01 (d) of the draft Development Credit Agreement)\. SNCZ has agreed not to make any modification in the management structure of the company affecting the key positions without prior consultation with IDA (Section 3\.01 (d) of the draft Project Agreement)\. - 15 - 40\. Serious management problems have, in recent years, contributed to SNCZ's poor performance\. The main problems are the following: (i) Overly centralized decision making and little delegation of authority\. Eleven departments and five divisions report directly to the PDG who is therefore constantly involved in routine matters and unable to address critical issues\. In addition, information does not flow between the different units and there is little coordination\. (ii) Ineffective control systems\. The management control and internal audit departments function poorly; accounting is overly decentralized and budgets are not used as management tools; the operational and financial reporting systems are poor and delays are long\. (iii) Personnel problems\. Staff motivation and morale are low\. There is a lack of expertise at some levels, and a number of positions have been vacant for too long\. Finally, there is serious in-fighting between different groups of management staff\. External difficulties such as the scarcity of foreign exchange for recurrent expenditures and investments, have compounded the management problems\. 41\. The Government agrees that fundamental changes in management are required if SNCZ's transport capacity is to be restored\. A newly appointed PDG, who took office in January 1984, has prepared a statement of objectives and strategy, listing the principal measures necessary for reorganization\. This statement was discussed at negotiations and set out in a draft action plan acceptable to IDA\. Formal adoption of this action plan by SNCZ's board and approval by MTC would be an additional condition of effectiveness of the proposed Credit (Section 5\.01 (b) of the draft Development Credit Agreement)\. Deviations from the action plan would require the prior agreement of IDA (Section 3\.04 of the draft Credit Agreement and Section 3\.04 of the draft Project Agreement)\. SNCZ would continue to employ, in key positions, individuals whose qualifications and experience are satisfactory to IDA (Section 3\.01 (c) of the draft Project Agreement)\. 42\. A key factor of SNCZ's long-term recovery is an improvement in the competence of its middle and senior level management\. While mainly on-the-job training has been offered at these levels, SNCZ has begun to conduct management-level courses at headquarters, and prac- tices extensive job rotation between the field and headquarters and between functions\. Bilateral aid provides higher-level training out- side Zaire, and an extensive training program has been implemented under the First Railway Project\. SNCZ has established a list of prior- ity tasks for the next two years and has begun to draft a comprehensive training program for high level staff\. The proposed project will help finance this program\. Facilities Track 43\. SNCZ is responsible for about 4700 km of main-line single track railway in four operating regions\. Some 851 km of track in the - 16 - southern mining region is electrified\. The gauge is 1,067 mm except for the 1,022 km northern region (600 mm) and the 125 km Kisangani- Ubundu line (1,000 mm)\. Rails are generally old and in poor condi- tion\. Steel sleepers, also in poor condition, are used on the entire network except for 200 km with wooden sleepers\. Very little track renewal has taken place in the recent past\. Furthermore, ballasting and maintenance have been carried out irregularly mainly because SNCZ is critically short of equipment, tools, spare parts and material\. As a result, derailments are numerous and turnaround time is unsatisfac- tory\. Signalling and Communications 44\. While the signalling system over much of the network is workable and adequate for present traffic levels, it is old and obsolete\. Since much of the equipment is no longer manufactured, the system will eventually have to be replaced\. Communications between train control offices and stations in the central and eastern regions are by standard telephone connected by lines along the right of way, causing many problems\. Under the proposed project, modern radio communications will be installed\. Communications in the southern region are by telephone connected by cable, a reliable but expensive system\. Between Likasi and Tenke where traffic is heavy, Belgium is financing a centralized traffic control (CTC) system; this is the first phase of a CTC system for the electrified sections, to be expanded as traffic warrants\. Motive Power and Rolling Stock 45\. SNCZ has a fleet of 55 main-line electric and 64 main-line diesel locomotives; it also has an additional 59 diesel shunting loco- motives\. Although most locomotives are relatively recent, their avail- ability is low\. The locomotive fleet requires a planned maintenance program and sufficient spare parts to carry it out\. This would be provided under the proposed project\. The railway operates a fleet of 4,834 wagons plus a number of privately-owned petroleum tank wagons\. Approximately 700 wagons are out of service because SNCZ lack the spare parts and equipment to make repairs\. More than 800 additional wagons are over 50 years old and will have to be retired within the next five years\. As a result, availability is unacceptably low (65 percent)\. To supply its needs, SNCZ has been using wagons belonging to South African Railways (SAR)\. This use, however, contravenes agreements with SAR concerning the number and geographical limits within which they can be operated\. In addition, it is a heavy foreign exchange expense\. The proposed project will help alleviate this problem by providing SNCZ with tools, equipment and spare parts for wagon maintenance and rehabilitation and by procuring 200 new wagons\. - 17 - Ports 46\. SNCZ operates two major ports -- one at Kalemie on Lake Tanganika and the other at Ilebo on the Kasai River\. Kalemie port links SNCZ to Dar es Salaam via the Tanzania railway system\. Ilebo port is a major transshipment point on the Voie Nationale for exports passing through the seaport of Matadi and for agricultural products destined for Kinshasa\. Kalemie has a capacity of 500 tons a day; this will be increased as a result of improvements proposed for financing by the EEC\. The port at Ilebo has a capacity of 2,000 tons a day for non-containerized cargo\. SNCZ is extending a portion of the quay to increase the handling capacity of a new container crane\. When the container facilities are completed, Ilebo port should have enough capacity for five years\. A study is required, however, to determine investment nee?s for the longer term\. SNCZ undertook to complete such a study, and discuss its conclusions with IDA, by September 30, 1985 (Schedule 2 (D) (2) of the draft Development Credit Agreement)\. 47\. Although SNCZ has produced a short to medium-term emergency rehabilitation program that provides a satisfactory presentation of its immediate needs, its investment planning process has generally been weak\. Its current five-year plan dates back to 1980/81 and needs to be updated (see para\. 33)\. Operations 48\. Efficiency indicators have, in general, steadily deteriorated since 1976\. Availability of both mainline and shunting diesel locomo- tives have declined to very poor levels: from 56 and 64 percent in 1976 to 45 and 52 percent in 1982, respectively\. Wagon availability has declined drastically from 82% to 65%\. The shortage of spare parts and inadequate maintenance have resulted in frequent breakdowns which impede effective operations\. As the track structure in many sections is worn beyond acceptable limits, derailments are also a continuing problem\. The poor communications system hampers train control: advanced planning of movements and train priority cannot be carried out in the Central and Eastern regions\. Traffic 49\. Traffic on the SNCZ network grew substantially in the early 1970s, but fell 30 percent between 1974 and 1978 after the closure of the Lobito route and the loss of Zambian transit traffic; since then it has generally stagnated\. The three main reasons for this are: (i) the overall poor economic situation of the country which has adversely affected all sectors of the economy; (ii) the uneven pattern of mineral production between 1975 and 1982\. The-main producer of minerals, Gecamines, accounts for about 70 percent of all SNCZ's freight traffic (generating a substantial volume of imports and domestic traffic as well as mineral traffic); and (iii) the serious drop in SNCZ's - 18 - capacity, due to the poor condition of SNCZ's facilities, locomotives and rolling stock, which has driven customers to seek other means of transport\. The project includes a study of low density lines to help determine their economic costs and benefits; alternatives to their use and related matters\. SNCZ should have this study completed by December 31, 1985, and shall then discuss it with the Association and implement the agreed recommendations (Schedule 2, (D) (6) of the draft Development Credit Agreement and Section 2\.08 of the draft Project Agreement)\. Part IV - THE PROJECT 50\. The proposed project was appraised in June 1983 by a joint mission of IDA and African Development Bank (AfDB) staff assisted by consultants\. Negotiations were held in Washington from February 27 to March 2, 1984\. The Zairian delegation was led by the State Commis- sioner for Transport and Communications, Mr\. Muamba Nduba\. A report entitled "Staff Appraisal Report, Republic of Zaire, Second (SNCZ) Railway Project," No\. 4779-ZR dated April 12, 1984, is being distributed separately\. A supplementary data sheet is attached as Annex III\. Objectives 51\. As designed, the project is a follow-up to the First Railway Project (financed in part by IDA Credit 902-ZR), which aimed at restoring SNCZ to an acceptable level of operating efficiency\. The First Project failed to meet its objectives because of: (a) serious management deficiencies as described in para\. 40; (b) suspension of disbursements by two of the major co-financiers for non-project related reasons; and (c) an acute shortage of foreign exchange required for purchase of spare parts for maintenance and for expatriate salaries\. 52\. The proposed project is based on SNCZ's emergency rehabilitation program (para\. 47) and is conceived as a short-term (two and a half years) interim operation whose main objective is to restore SNCZ to an acceptable level of operational efficiency and to assist its recovery by (i) strengthening SNCZ's management and organization through technical assistance, continuation of training programs and studies; (ii) pursuing the track renewal program begun under the ongoing project; (iii) rehabilitating part of the locomotive and wagon fleet and ensuring normal maintenance of the entire fleet; and (iv) replacing 200 overaged wagons\. The project is consistent with the Government's overall aim of ensuring that transport deficiencies do not hamper economic recovery\. A major effort in achieving this aim is to improve utilization of the Voie Nationale of which SNCZ is an essential link\. This objective has been supported by the Bank Group and the external assistance community\. - 19 - Project Description Track Renewal and Maintenance 53\. Nearly the entire track between Ilebo and Lubumbashi is badly worn and will have to be replaced\. Under the proposed project, about 128 km of this track will be renewed\. These are the sections of highest priority, i\.e\. with sharp curves which pose the greatest danger of derailments\. While a sufficient quantity of sleepers is being supplied under the First Railway Project, the proposed project will provide the necessary rail and fittings\. To increase SNCZ's capacity to maintain track the project will also provide: spare parts and supplies for quarry equipment; hand tools; material; spare parts for mechanized maintenance; tools and equipment; and vehicles and tractor cranes to transport crews and equipment to work sites\. Wagon Fleet Capacity Increase 54\. Wagon availability is low because of the lack of timely maintenance and because many wagons are old and at or approaching the end of their service life\. The proposed project includes the necessary material for the rehabilitation of about 850 wagons; spare parts and materials for the maintenance and unscheduled repairs of the entire wagon fleet for two years; and tools and equipment for SNCZ workshops carrying out wagon rehabilitation\. In addition, the project will assist in procuring 200 new wagons to replace part of those removed from service\. Locomotive Rehabilitation and Maintenance 55\. The reliability of locomotives is extremely low and line failures are frequent (para\. 45)\. Because of the lack of foreign exchange, spare parts are not available for regular parts replacement or for repairs\. The proposed project would provide spare parts to return locomotives to service that are now idle and those spare parts necessary for normal maintenance on most of the locomotive fleet for two years and for major overhaul of 36 main line electric, 30 main line diesel locomotives and 20 shunting locomotives\. Consulting Services to SNCZ 56\. SNCZ is preparing a staffing plan for higher level positions to help coordinate technical assistance in the near and medium term\. Based on present estimates of SNCZ's technical assistance needs, the proposed project would provide 70 man-years of technical assistance to cover the railway's requirements until 1987 and ensure a smooth transi- tion for the following years' programs\. In addition, the project would provide 55 man-months of consulting services to carry out studies to assist SNCZ in improving operations and management (including financial management), defining better its investment needs and analyzing low - 20 - density railway lines\. Cost estimates for technical assistance and consulting services are based on data, provided by SNCZ, which has been reviewed and found acceptable\. They average US$8,750 and US$12,000 per man/month, for technical assistance and consulting services, respectively, and include salary, social costs, overhead, travel, subsistence and, where applicable, company profit\. Training 57\. The proposed project would include some tools, machinery and equipment for SNCZ's training centers\. It also includes training outside Zaire of about 95 railway employees for periods of about six months\. Medical Equipment and Supplies, Computer Maintenance, Telecommunications Equipment 58\. Limited funds are included in the proposed project for three essential items: (i) SNCZ provides its staff with medical services and the project would provide supplies and equipment which are otherwise unavailable; (ii) as the present maintenance contract with the original computer equipment supplier runs out in mid-1985, the project would finance a new maintenance contract through the end of 1986; (iii) poor communications hamper railway operations; the project would provide financing for a radio system on the busy Kamina-Ilebo section together with electricity generating and distribution equipment\. Consulting Services To Government 59\. At negotiations, The Government requested assistance in undertaking a study of the air transport sub-sector, with a view to adopting rational policies for its orderly development and to propose a medium-term investment program\. In addition, consulting assistance will be provided to the economic studies and planning unit of MTC to help it carry out and monitor a work program (10 and 5 man-months, respectively)\. Project Cost 60\. The total cost of the project is estimated at US$73\.30 million equivalent net of taxes and duties with a foreign exchange component of US$62\.6 million or 85 percent\. Cost estimates are based on the latest price estimates updated to January 1984 prices\. Price contingencies, based on Bank Group inflation estimates, are 7\.5 percent for 1984 and 7 percent for 1985 and beyond; the same percentage rate has been used for both local and foreign costs under the assumption that the progressive devaluation of the zaire would compensate for increases in local costs\. During negotiations the Government confirmed its intention of exempting the project from taxes and duties\. - 21 - Financing Plan 61\. The US$62\.6 million foreign exchange cost of the project would be financed by external donors and the US$10\.7 million local cost by SNCZ\. US$10\.4 million foreign exchange is to be provided by reallocation of the remaining balances under the existing AfDB, IDA and KfW loans/credits: these are amounts that have remained undisbursed under the First Project as a result of its interruption\. The remaining foreign costs would be financed by the proposed IDA credit of US$26\.0 million equivalent accounting for 36 percent of total project cost, and by the following agencies which are considering co-financing the project in the amounts shown: AfDB, US$14\.1 million equivalent; CCCE, US$ 6\.25 million equivalent; and Belgian Aid, US$5\.85 million equivalent\. The signing of co-financing agreements by Zaire and the agencies concerned is a condition of effectiveness (Section 5\.01 (c) of the draft Deve\.opment Credit Agreement)\. Implementation 62\. SNCZ would be responsible for implementing the project, except for the study on air transport and the technical assistance to MTC, which would be carried out by the Government\. The track improvement works would be carried out by SNCZ's Track and Civil Works Department\. The rehabilitation and maintenance of wagons and locomo- tives would be carried out in SNCZ's central workshop in Lubumbashi and its electric locomotive workshop in Likasi\. Technical assistance experts would help to strengthen SNCZ's management and assist in the execution of the whole program\. 63\. Relaying of track would begin in 1985 and be completed by mid-1986\. Rehabilitation of wagons and locomotives would start by mid-1984 and take 30 and 24 months, respectively\. Procurement would start early since some project items will be financed under a realloca- tion of existing loans/credits\. SNCZ has begun preparing lists and specifications for spare parts, supplies and materials and, whenever possible, has begun procedures to place orders or to propose liste of equipment and supplies for prior review by IDA\. 64\. In order to monitor improvements in SNCZ's performance, operational targets have been agreed with the Railway at negotiations\. These include targets for locomotive and wagon availability, productivity per available locomotive, turnaround time, average wagons load and staff productivity\. SNCZ agreed to (i) take necessary steps to achieve these targets and (ii) evaluate its progress in accordance with a statistical system satisfactory to the Association (Section 3\.05 and schedule 2 of the draft Project Agreement)\. - 22 - Procurement 65\. Procurement arrangements are summarized in the table below: Table 1\. Procurement Arrangements (US$ Million) Procurement method Total Project Element ICB Other LCB 3/ Spare parts, tools, sup- plies and materials for: Track 9\.75 9\.75 (0\.75) (0\.75) Wagons 3\.50 5\.80 9\.30 (3\.50) (1\.50) (5\.00) Locomotives 6\.50 6\.50 (4\.75) (4\.75) Equipment: Motorcars and tractor-cranes 5\.10 5\.10 (5\.10) (5\.10) New wagons 10\.20 10\.20 Other 1/ 2\.55 2\.55 (2\.55) (2\.55) Services 2/ 8\.80 8\.80 (8\.60) (8\.60) TOTAL 11\.15 41\.05 52\.20 (11\.15) (14\.85) (26\.00) 1/ Includes equipment for training centers\. 2/ Includes computer maintenance contract\. 3/ This includes procurement under the regulations of the co-finan- cing agencies\. For the proposed Credit, it refers to: technical assistance and consulting services; small contracts under limited ICB; computer maintenance and procurement through negotiated contracts with suppliers of original equipment\. Note: Figures in parentheses are the amounts proposed for financing by the IDA Credit\. - 23 - Equipment, spare parts, material and supplies financed by the Associa- tion will be grouped whenever possible into contracts valued at US$50,000 or more and will be procured through international competi-- tive bidding (ICB) in accordance with Bank Group guidelines except for the following: (a) proprietary spare parts for existing machinery or equipment which may be procured through negotiations with original suppliers of such parts, and (b) small orders costing less than US$ 50,000 each and totalling not more than US$ 500,000 which may be procured on the basis of limited international bidding\. Where ICB procedures are used, domestic manufacturers will be accorded a preference of 15 percent, or the existing applicable rate of import duties, whichever is lower, over the c\.i\.f\. price of competing foreign suppliers\. Equipment, spare parts, material and supplies to be financed by AfDB, Belgian Aid and CCCE would be procured in accordance with their respective guidelines\. Technical assistance experts financed under the proposed Credit would be recruited either individu- ally or through specialized agencies\. Terms and conditions of their contracts shall be satisfactory to the Association\. Consulting firms or individual consultants for the studies and short-term missions will be engaged in accordance with the "Guidelines for the Use of Consultants" published by the World Bank in August 1981\. Overseas training of SNCZ staff will be provided by specialized institutions in accordance with a program and under terms and conditions satisfactory to the Association\. Computer maintenance will be procured through limited international bidding from a shortlist of qualified firms\. Contracts below US$50,000 for small orders of spare parts, material and supplies will be subject to selective post-award review\. All other IDA-financed contracts (98% of total contract value) will be subject to prior review\. Disbursements 66\. The proceeds of the credit will be disbursed as follows: (i) for equipment, spare parts, materials and supplies, 100 percent of foreign expenditures; 80 percent of local expenditures for ex-factory cost and 75 percent of local expenditures for other items procured locally; (ii) 100 percent of foreign expenditures or 80 percent of local expenditures for consulting services; (iii) 100 percent of foreign expenditures for training; and (iv) 100 percent of foreign * expenditures for computer maintenance\. All disbursements will be fully documented\. \. Relending Terms 67\. Except for the equivalent of SDR 150,000, the Government of Zaire would onlend the proceeds of the proposed Credit to SNCZ for a period of 15 years, including a grace period of 4 years, at an interest rate of 15 percent per annum, under a subsidiary agreement satisfactory to the Association\. The recommended interest rate is substantially in line with that charged by Zaire' Development Bank for foreign exchange loans\. Signing of the subsidiary agreement would be a condition of - 24 - effectiveness of the proposed credit (Section 5\.01 (a) of the draft Development Credit Agreement)\. The rate of inflation in Zaire is expected to be higher than 15 percent but because Zaire intends to adjust Its exchange rate automatically, (as provided in its new foreign exchange regime), and as SNCZ would bear the foreign exchange risk, the interest rate is positive\. Financial Performance 68\. Although traffic stagnated between 1978 and 1982, SNCZ's revenues have generally increased faster than its working expenses\. In fact, operating performance improved every year except 1981, when revenues were only sufficient to cover working expenses\. This was the combined result of rapidly escalating operating costs, particularly fuel, and of a delay in adjusting tariff levels\. In 1982, however, despite an 8 percent decrease in freight traffic from 1981 and a 34 percent decrease in passenger traffic, revenues increased by 56 percent, while working expenses grew only 32 percent, because of aggressive tariff adjustments\. As a result, working expenses in 1982 were an acceptable 91 percent of revenues\. 69\. Because of the moderate improvements in operating performance discussed above and its ability to generate revenues sufficient to meet or exceed cash expenditures, SNCZ's financial condition is satisfactory\. Its liquidity has improved from 1978 to 1982 and is adequate\. The capital structure is also adequate, as long-term debt stood at less than 10 percent of total capitalization if a revaluation of asets is considered although this has not been done formally since 1976\. SNCZ agreed to revalue its fixed assets annually on a replacement cost basis, beginning in 1984 (Section 4\.01 (b) of the draft Project Agreement)\. SNCZ's financial condition is, however, subject to very rapid deterioration because Zaire's high inflation puts constant pressure on tariffs\. 70\. The management of SNCZ's finances has, in general, been unsatisfactory\. There are several major weaknesses that prevent the financial management system from operating satisfactorily\. They are: (i) poor accounting procedures; (ii) poor operating and capital budgeting policies; (iii) a nearly total lack of internal audit functions; (iv) unreliable output of the data processing system; and (v) a poorly motivated staff and lack of technical competence at executive levels\. The new PDG's action plan (see para\. 41) addresses these issues in detail with a timetable for implementation of measures\. SNCZ agreed to reorganize its internal audit department no later than December 31, 1984 (Schedule 2, D (4) of the draft Develop- ment Credit Agreement)\. 71\. SNCZ's tariff system is complex and obsolete\. Until recently, it showed structural deficiencies, such as the subsidy of mineral exports\. Except for the transport of mineral ore between - 25 - processing facilities, railway tariffs are not clearly related to costs\. Despite external assistance for this purpose, SNCZ has been unable to establish an adequate traffic costing system\. At negotia- tions, SNCZ agreed to set up a proper traffic cost accounting system not later than December 31, 1984 (Schedule 2, D (5) of the draft Development Credit Agreement)\. 72\. The government of Zaire has recently set up an Interminis- terial Tariff Committee to rule on tariff requests for the transport of minerals for export\. The Committee, the members of which are ministers, considers technical submissions presented by G&camines, the principal mining company, SNCZ and ONATRA, the river and ports transport agency, and decides on the structure of tariffs and on adjustments that may be needed\. Tariffs for non-mineral products, on the other hand, are approved by the Government following requests by SNCZ\. Approvals have sometimes been delayed for long periods\. The Government agreed to act within 30 days on any request for a tariff increase by SNCZ, failing which the request will be deemed approved (Section 3\.02 (b) of the draft Development Credit Agreement)\. 73\. The most recent increases in SNCZ's tariffs, in late 1983, were 116 percent for general cargo; 50 percent for agricultural produce and passengers; about 525 percent for mineral exports and 280 percent for mineral ore\. While tariffs had been increased at least annually in the past, the most recent increases practically eliminate previous distortions in the tariff structure which had required both SNCZ and particularly ONATRA to compensate for losses on mineral export traffic by higher tariffs for general cargo and agricultural produce\. The recent increases and an additional increase of about 40 percent (for passengers, agricultural produce and general cargo) that the Government plans to approve in the second quarter of 1984 should allow SNCZ to achieve an operating ratio of 100 percent in 1984\. At negotiations, SNCZ agreed that (a) it would maintain tariffs at levels that would enable it (i) to achieve an operating ratio of 100 percent from 1984 through 1986 and (ii) to earn a 3 percent return on net fixed assets in operation, and (b) it would not carry traffic for which the tariff is insufficient to cover long-term variable costs (Section 4\.04 of the draft Project Agreement)\. The 3 percent rate of return covenant had been included under the First Project\. In addition, SNCZ agreed not to incur additional debt if debt service coverage were to fall below 1\.5 (Section 4\.05 of the draft Project Agreement)\. The capital structure of SNCZ and its liquidity are expected to be satisfactory through the project period; internally generated funds will cover the local cost component of its Investment plan, its working expenses and its debt service\. Foreign Exchange Allocation 74\. Lack of foreign exchange has severely hampered SNCZ's operating efficiency in the past few years\. SNCZ needed about US$1\.3 - 26 - million per month to purchase spare parts for maintenance and repairs, to pay rentals on foreign wagons, and to meet expatriates' payrolls\. In 1982 and 1983, Central Bank allocations of foreign exchange to SNCZ were largely insufficient to cover this amount\. A liberalization of the foreign exchange regime is included in the economic measures recently taken by Zaire\. Under the new regime, SNCZ should be able to purchase the foreign exchange it needs on the open market\. However, to ensure that SNCZ has adequate foreign exchange resources, the Government shall cause to be obtained by SNCZ foreign exchange sufficient to cover the company's recurrent expenditures in amounts of not less than the equivalent of US$1\.0 million per month in constant 1983 terms\. To that end, an exchange of views will be held by October 1 of each year on the foreign exchange needs of the company for the following year and on the arrangements proposed to ensure the availability of the amount required (Section 3\.01 (d) and 3\.03 of the draft Development Credit Agreement)\. Benefits and Risks 75\. The project will significantly improve the transport capacity and efficiency of SNCZ and will benefit the processing and export of minerals; the movement of agricultural produce to markets (with a higher price for producers) and the return flow of agricultural inputs and consumer goods to rural areas\. In addition, the project will have a direct impact on urban areas in the Shaba and the Eastern and Western Kasai provinces by facilitating the transport of goods (such as fuel and construction materials) that have no alternative means of transport\. The internal financial rate of return of the project is 19 percent, and the economic rate of return (ERR) 37 percent; these rates are different because the avoided alternative modes of transport (mostly truck transport or a shift of imports and exports to the Southern Route) are more costly than the loss of revenue to SNCZ if the project is not undertaken\. The main risks are that the project could take longer than expected to implement and that traffic may not increase as expected\. Nevertheless, these risks are acceptable because the project will help implement a major reorganization and improvement in SNCZ's management making it likely that targets will be met\. If the project took 42 months, instead of 30 months to completion, the ERR would be 31 percent\. Moreover, even if traffic remained at the 1977-81 level, the ERR would still be 27 percent\. Other risks that could affect the success of the project are (i) delays in management improvements; (ii) insufficient or delayed tariff increases, and (iii) inadequate availability of foreign exchange for SNCZ's recurrent costs\. The design of the project takes these factors into account\. Part V - LEGAL INSTRUMENTS AND AUTHORITY 76\. The draft Development Credit Agreement between the Republic of Zaire and the Association, the draft Project Agreement between the - 27 - Association and Soci6tg Nationale des Chemins de Fer Zairois, and the Recommendation of the Committee provided for in Article V, Section 1 (d) of the Articles of Agreement of the Association are being distributed separately to the Executive Directors\. 77\. Special conditions of the Project are listed in Section III of Annex III\. Special conditions of Credit effectiveness would be that (i) the Republic of Zaire shall have made the proceeds of the Credit available to SNCZ under Subsidiary Agreement satisfactory to the Association (para\. 67); (ii) the co-financing agreements with the Kingdom of Belgium, the Caisse Centrale de Coop6ration Economique (France) and the African Development Bank shall have been signed (para\. 61); (iii) a staffing plan for higher level personnel, satisfactory to the Association, shall have been completed and key personnel appointed (para\. 39), and (iv) the management reorganization plan shall have been adopted and approved (para\. 41)\. 78\. I am satisfied that the proposed Credit would comply with the Articles of Agreement of the Association\. Part VI - RECOMMENDATIONS 79\. I recommend that the Excutive Directors approve the proposed Credit\. A\. W\. Clausen President Attachments Washington, D\. C\. April 23, 1984 - 28 - ANNEX I TA 8 L E 3A Page 1 of 5 ZAIRE - SOCIAL INDICATORS DATA SHEET ZAIRE OEFLRENCE GROUPS (WEIGHTLO AVERAGES) /a 1OST (ROST RECENT ESTIMATE) lb RECENT LOW INCOME MIDDLE INCOME 196 197 TMAT RCA S\. OF SAHARA AFRICA S\. OF SAHARA AREA (THOUSAND SQ\. KK) TOTAL 2345\.4 2345\.4 2345\.4 AGRICULTURAL 147\.7 151\.2 155\.4 GNP ER CAPITA (US$) 80\.0 130\.0 210\.0 254\.6 1147\.9 EERGY CONSUMPTION PR CAPITA (KILOGRAMS OF COAL EQUIVALENT) 82\.0 117\.0 107\.0 79\.8 724\.2 POPULATION AMD VITAL STATISTICS POPULATION,MIL-YEAR (THOUSANDS) 17756\.0 21638\.0 29777\.0 URBAN POPULATION (% OF TOTAL) 15\.7 21\.6 35\.8 19\.5 28\.5 POPULATION PROJECTIONS POPULATION IN YEAR 2000 (MILL) 54\.0 STATIONARY POPULATION (MILL) 169\.1 YEAR STATIONARY POP\. REACHED 2140 POPULATION DENSITY PER SQ\. lo1\. 7\.6 9\.2 12\.3 29\.5 56\.5 PER SQ\. KM\. AGRI\. LAND 120\.2 143\.1 186\.0 94\.1 131\.8 POPULATION AGE STRUCTURE (1) 0-14 YES 44\.1 44\.3 44\.8 45\.0 45\.9 15-64 YRS 52\.9 52\.9 52\.5 52\.1 51\.2 65 AND ABOVE 3\.0 2\.8 2\.8 2\.9 2\.8 POPULATION GROWTH RATE (%) TOTAL Z\.2 2\.0 2\.9 2\.8 2\.b URBAN \. 5\.2 7\.5 6\.2 5\.3 CRUDE BIRTH RATE (PER THOUS) 48\.0 47\.8 46\.3 47\.9 47\.6 CRUDE DEATH RATE (PER THOUS) 24\.3 20\.8 16\.3 19\.2 15\.2 GROSS REPRODUCTION RATE 3\.0 3\.0 3\.1 3\.2 3\.2 FAMILY PLANNING ACCEPTORS, ANNUAL (TROUS) \. USERS (% OF MARRIED WOMEN) \. \. \. FOOD AND WUrRITION INDEX OF FOOD PROD\. PER CAPITA (1969-71-100) 101\.0 101\.0 87\.0 87\.8 95\.7 PER CAPITA SUPPLY OF CALORIES (% OF REQUIREMENTS) 98\.0 101\.0 94\.0 88\.0 97\.1 PROTEINS (GRAMS PER DAY) 36\.0 37\.0 33\.0 51\.2 56\.0 OF WHICH ANIMAL AND PULSE 13\.0 13\.0 10\.0/c 18\.1 17\.2- CHILD (AGES 1-4) DEATH RATE 32\.7 27\.5 21\.4 25\.7 23\.6 HEALTH LIFE EXPECT\. AT BIRTH (YEARS) 40\.0 43\.9 49\.8 47\.4 51\.9 INFANT HORT\. RATE (PER THOUS) 150\.0 132\.0 110\.1 126\.5 117\.6 ACCESS TO SAFE WATER (%POP) TOTAL \. 11\.0 16\.0/d 24\.7 25\.4 URBAN \. 33\.0 43\.0Td 56\.8 70\.5 RURAL \. 4\.0 5\.0 18\.3 12\.3 ACCESS TO EXCRETA DISPOSAL (% OF POPULATION) TOTAL \. 5\.0 22\.0/e 28\.1 URBAN \. 5\.0 65\.0 65\.7 RURAL \. 5\.0 6\.07 21\.9 POPULATION PER PHYSICIAN 79620\.0 30140\.0 14780\.0 27420\.6 12181\.6 POP\. PER NURSING PERSON 3510\.0 2290\.0 1920\.0 3456\.2 2292\.0 POP\. PER HOSPITAL BED TOTAL 230\.0 320\.0 350\.0/f 1183\.2 1075\.4 URBAN 60\.0 100\.0 i5o\.07r 380\.6 402\.3 RURAL 770\.0 1070\.0 2670\.07r 3177\.5 3926\.7 ADMISSIONS PER HOSPITAL BED mOUSING AVERAGE SIZE OF HOUSEHOLD TOTAL \. \. URBAN \. 6\.1 RURAL \. \. 6\.0 AVERAGE NO\. OF PERSONS/ROOM TOTAL \. \. URBAN \. \. RURAL \. \. ACCESS TO ELECT\. (Z OF DWELLINGS) TOTAL \. \. URBAN \. \. RURAL \. \. - 29 - ANNEX I TABLE 3A Page 2 of 5 ZAIRE - SOCIAL INDICATORS DATA SHEET ZAIRE REFERENCE GROUPS (WEIGHTED AVERAGES) Fa MOST (MOST RECENT ESTIMATE) /b RECENT LOW INCOME MIDDLE INCOME 196 1970 ESTIMATEL/b AFRICA S\. OF SAHARA AFRICA S\. OF SAHARA EDUCATION ADJUSTED ENROLLMENT RATIOS PRIMARY: TOTAL 60\.0 88\.0 90\.0/f 63\.9 97\.2 MALE 88\.0 110\.0 104\.07? 73\.6 103\.1 FEMALE 32\.0 66\.0 75\.07f 51\.6 88\.5 SECONDARY: TOTAL 3\.0 9\.0 23\.0/f 12\.5 17\.2 MALE 4\.0 13\.0 33\.07? 16\.7 23\.5 FEMALE 1\.0 4\.0 13\.0/f 8\.1 14\.2 VOCATIONAL (% OF SECONDARY) 26\.5 9\.6 10\.0/c 7\.3 5\.2 PUPIL-TEACHER RATIO PRIMARY 40\.0 43\.0 30\.0 46\.4 42\.9 SECONDARY 20\.0 20\.0 21\.0 25\.1 23\.) ADULT LITERACY RATE (%) 31 13\.0 54\.5 36\.5 37\.1 CONSUMPTION PASSENGER CARS/THOUSAND POP 2\.5 3\.0 3\.6/h 3\.3 18\.8 RADIO RECEIVERS/THOUSAND POP \. 2\.9 5\.2 45\.3 97\.8 TV RECEIVERS/THOUSAND POP \. 0\.3 0\.3 2\.2 18\.6 NEWSPAPER ("DAILY GENERAL INTEREST") CIRCULATION PER TROUSAND POPULATION 1\.2 9\.2 1\.6 4\.7 18\.2 CINEMA ANNUAL ATTENDANCE/CAPITA 0\.1 0\.1 0\.1/h 1\.0 0\.6 LABOR FORCE TOTAL LABOR FORCE (THOUS) 8216\.0 9465\.0 12177\.0 FEMALE (PERCENT) 46\.4 44\.5 42\.5 34\.5 36\.1 AGRICULTURE (PERCENT) 83\.0 79\.0 75\.0 76\.9 56\.8 INDUSTRY (PERCENT) 9\.0 11\.0 13\.0 9\.8 17\.5 PARTICIPATION RATE (PERCENT) TOTAL 46\.3 43\.7 40\.9 40\.9 37\.0 MALE 51\.9 49\.8 47\.9 53\.0 47\.1 FEMALE 41\.2 38\.0 34\.2 28\.9 27\.0 ECONOMIC DEPENDENCY RATIO 1\.0 1\.1 1\.2 1\.2 1\.3 INCOME DISTRIBUTION PERCENT OF PRIVATE INCOME RECEIVED BY HIGHEST 5% OF HOUSEHOLDS HIGHEST 20% OF HOUSEHOLDS LOWEST 20% OF HOUSEHOLDS LOWEST 40% OF HOUSEHOLDS POVERTY TARGET GROUPS ESTIMATED ABSOLUTE POVERTY INCOME LEVEL (US$ PER CAPITA) URBAN \. \. \. 165\.9 534\.2 RURAL \. \. 80\.0/e 87\.4 255\.9 ESTIMATED RELATIVE POVERTY INCOME LEVEL (US$ PER CAPITA) URBAN \. \. 76\.0/e 100\.8 491\.5 RURAL \. \. 4 \.J 64\.6 188\.1 ESTIMATED POP\. BELOW ABSOLUTE POVERTY INCOME LEVEL (%) URBAN \. \. \. 39\.5 RURAL \. \. 80\.0/e 69\.0 NOT AVAILABLE NOT APPLICABLE NOTES /a The group averages for each indicator are population-weighted arithmetic means\. Coverage of countries among the indicators depends on availability of data and is not uniform\. /b Unless otherwise noted, "Data for 1960" refer to any year between 1959 and 1961; "Data for 1970" between 1969 and 1971; and data for "Most Recent Estimate" between 1979 and 1981\. /c 1977; /d 1976; /e 1975; /f 1978; /a 1962; /b 1974\. May 19S3 - Ðа - �rтгег� � Page З of S DEFINIT10N6 О£ ц1СцL iNDICdOR6 Аогев: AL_M�y;h the data а е дганп from а в Вепегьlйу fudged [М д u[Yюzltettve аМ се11аЪ)е, tt вlюпlд а1и 1и росвд СЪвг they дау eot he �\.nCeгдaCSawlly ырвтеЫе Ьесаиас оЕ (Ъе :ect оЕ всвпдагдггедвдеfгпlt(арв аад с cepta иаед Ър d3f'еггпt с сгlев 1р co2lecCCVg the да<в\. Thв даса в, омсбт)епs, wsEu1 [о двэсгltв отвтв лЕ aagnleuae, идlсагв ггалдв, ааг сnагаг[ег3zв ьеггаtа т�иг d3ftazen¢вв хснгев гоиссnев\. 'L6e гefer е grortpРа е{1) the s ипггу gкоир of che виЛlесС с сху аvд (1} а untry group v1L6 вакиfцс higъer а rage lnсове сЬвп сM1е с тtку qcou9 of УЬв aubJec ггу (ехсерс Еог "41gh Incoma" 611 2храгс¢гв" gкossg vhere 'Т11дд1е lпсо¢е '\.Ютгh AfrLCe апд К1дд1е Рв,ас" iв сtюха Dесвии oF в го,цег юиlо-сиLгитаl вfЕ1п1г1аа:\.� 1п сМ г е greup да<а fhe а eragee в¢ peyulaClon ve1$6ted вrLChsrilc а в 1ог each 1пдlса[ог агд вtnvn пдlу цбао иJогlср of iiu гдиа[г1и 1n а Егаир ias dsta for с[ае tndlcetor\. Stnce Che с rage оЕ с иеСгlев въ�пg the lпдг<всогв дереМа оп <M1е evalLnЫllty д£ даса аод 1в т ип1£ап, е ихlоп вгуС М ttlввд 1п zelatlpq aveeagee оЕ опе 111сагот Со впл:M1ет о tReae aveeegeв аге оаlу ае\.а[и2 1п гпDагlиg с{ге valua of лах iadlutor еС в г1и авлаg иhе саивtху вед геЕегеnс¢ gcouPe\. А4ЕА С[Мивадд вв\.kш,) �Ро и1а[1од_��_ _У__@�hЧвlСlап - Papulaslon дlаlдад Ьу дивЬвУ of puctlclц ZotaI - Тога1 вигЕвсе дгеа ccпpcSsvng lвпд вкеа апд trtland vace ; 1960e рhувlе3адв q Z'iiiЭ`Fron дедl<д1 веlа,аl at ualraeaL,:p 1ave1\. 3970 вдд 19&l двгв\. 1�1вс1од Ргг fЧчвlпа Рвrвоv - Рлриlагlад dlaldsd bT ыевЕах о£ ргевtlвlц игrlгиlсигаl - евитакв оЕ а8г3гицикаl е аве геврогаг3lу лк репмап[1r +а1в ат fад¢1е атюиасв аигв , алlа[але аиг , peкetul аигм аы for гара, pascurea, mrkec and k1[сЛепгgагдепв от го 1[е £а11ли; 1960, ra3ag euaSllaтiea\. l9)Освпд 19$0 длСа\. Ропу3агlом г дип 1га1 Ьвд -[о[а1 икЬаа вод [игаl -?орlвt2лт (ta41, "�Ъв�,`\.дд'�гиг 1 е1У1г<а nr сы3г л\.р•гсгм п т oF Ьоврtсвl Мв CNP P6F CAPITA (С5$) - GNP рег сарlсв вв[iпвсее в еп[ snкkec рrlсев, иvаL2вЫе 1n ри1г11г вМ ➢еlаа[е {е¢втв3 вод врае1а11tад 1nвр1гвl вдФ 1 саlсиlвсвд Ьу а гвlоп аесЬод вв Ча:tд 8впkииlав ([9?9-ВЕ Ъве1а); х<hвЫliцс[аа \.: ibврlсаlг а в<а6[iвЬваса рвпвддацТ вeдtftl [960, (970, впда3981 деса\. � Ьу вt lвлвс а е рhувlеlва, EacaЫlatnюta piovidla; pr1aK:1pa31y етвг¢д1а2 - пос 3осlидед\. Аига1 Ьааргеаkа, Ммv<г, iдиlидв ъгаl[Ь ид 6NEACY CJNSCMPfION PER САР[ТА - Mnua1 аррагед[ с трСlол о1 coemmrtcal дедlсаlвс мt релиергlр вгаЕ£•д by в рЬувlсiвв (bг2 Ьу а ввдlсаl рт3тку емгgу еоаl впд 11gл1ге, реггоlеид, пагvкаl gвв and пудто-, пцсlиr ев3а[вд<enn midv3te, егс\.) иЫс6 оЕfп lrpacE•а[ аесваоллдаеlоа йд вМ geocfieгaal еiесггlсlеу) in kl2agгme of соа\. е�иlvеlеаг рек герlСе, рглvlд! а 11alced Ceeg¢ of дW1са1 fuSltC3и\. 7ог в[а[2в<1и1 prpeu 1960, 19Т0, аад i980 даса, игЪап Ьаар3[а1в 3асlиде 5П(Ов ртlдсlуи2lgваггаl hоврl[а1в, аид rutQ ,� Юв➢1еа1е, 1о\._aI л : tювр3[а1в вМ аид3ее7 атд тгагдцТ с•¢гап\. ЮРц1ц20Н лН1] V1TAi, 5LA2I5T1C5 S,eclaltaad Ьлврltаlдиага 1,ьсlидад оаlу иддег са[в1\. Таса1 Ро ation Кtд-Уеаг гМиваддв) - ав ot Ju1y t; 39Ъд, i470, елд 1981 юаlаоLлпв рег иолр3свl Еад - 2оса1 а[вЬгг of \.ддlиlлдд и ог ддвеЬасби sta\. frca hoapLCals А1ч]дед Ьу the пицЬег of Ьдв\. Uтban Populac3on {�агс о£ toLai) - Aacio of игЬеv [а to(aI рориlдСlап; diffeceec daf3al[1onHlof urbsn а тву а£fecc eмparaЫLlcy аЕ дnц ЧDUSINC оо+ц ио гzlев; 1960, I470, andr1981 десв\. Мегаg¢ S1ц of ВгииИо3д (рагвои раг Ьа Ln�1�d�?� toCat игЬаа ад ц rо�ицсlод гrиlевгlлпв - А Ъливвпоlд'о>м1ас� о\.'Э ьслир o�iod?�ibwГ:�ivra 1\. а утвеип Powt\.[1oп 1п уеат го(ю - ситгел[ рорта[1оп ргоlвгСУоа\. а в ьвввд о 1986 апа [nаlт и3ъ иеа1\. л ьл\.га\.[ лк глд`<к и у от ту аос М 1де1хИСА 2а согаl populatlan Ьу вgе ам в апд tnelr ¢ Ы1[у аМ Еегггliсу а с}к Лowehold for аиС1вСlи1 Ритрона\. Pcojec[1on рагвдехвгвеЕаг аогга'1ty utse сотРгlве л£ Спгее Аваг я wЬет оЕ�апгглл оат - total исри адд гvгаl в<вгц• тадbг аеlв w1o8 11fe ezpeciыncr вс Mrth incгeaaing г+1сЪ с сту'в рег ofaper е рвг lдва игЪл, ыv1 г осеирl амяtlо¢ц са➢1га iисои 1eve1, enA famale 11\.в вхрессвпсу вcab121s1aguaL 1>\.5 dceittagг\. гввргссlvе2у\. ixellings виlиде доа-регадыпе •сгасцгем \.лд реа[в\. 2fie рага в£лт fectillcy с аlво Mve tTree 1<vele cup1N рвгса\. и3ng д<г13пе гпвfагс313[r в огдгпgгсл 3лиои 1аое1 впа равс Енл1lу Ае а\. га 81«п4\.1гу (ра в¢с оЕ а+ешгид) - слсаl игЬво\. \.вд гигц - glanelлg рег[опапса, Gch с у 1в гM1ед аавl8пад о оЕ cheae р1и Слvvвп[iоавl dve121a8a elCh eLactrlcltp 1а 1Sa1vg qивггел и рв<Ч¢tув лвЫаагlллв of аок[а11еу агюоёгс11i2у Сгепдв 4лк pcolect3on ригроиа\. п£ Со[а1, иеЬап, аад гигаl dve111vgв лврасс1vа17\. SсасlолакУ poi+vletloa - Iп а ысlопвrу populetlon theгe 1s ло gгovCh в2дсе cRe ЫгСh Уасе 3в equa2 с 1Ие dtat6 х апд е3ю the вg< EDi;CASION aCiuctuce tеиlпв д,пвСоnс\. lRe1в 1в вch:evedtanly аf[ег EetC111ty tасеп �д Едгоllдепс Wс1ов decllne [ro the герLиадипс 1еое2 о£ valc net гергодис[3оп г , vheя PxLmazY aclwo2 - со[а1, \.а1а аад Еец1е - Сгои 2otaS, ааlв а¢д £аввlr веА g¢neret3on of v п герlасzв 3[ае1Е е вс\.у\. The в агlоовгу гоllаелС of е21 igЧ гЬе pttaary 1вае1 и lмгсеагааев ot МрвеУlп горьlа[ioq ы ге ые eatlmaeed ои 2he\. бaalaxof сМ ркл)ос[ед сhатаг:ег- pclwYy я<Мо1-а;е paWlatlons: аогввllУ taeludaa chlldeaa вsвt 6-11 1в21се of [Ле рпрэlвсlлп 1п сM1а v г 200D, апд tbe гасе а\.' дагllы af рееге Ъис ад)ивгед Еаг д1Е£ггерс 3вцthв af ргlвцТ •duwt3ae: Слг Еве[311[у таСе <о replaceven[ 1eve1, ггги elch ипlиегиl едиисlод в reLlдaqt дву иев•д Iд0 ргевве чваг веасlоа\.гХ Fюр�lагlоп 1в г вгАед - Sne у г vben ,Сагlол\.гу ,гпсе а а рирцв , в Ьвгоv а aDлv\. сЪе лЕЕlекаl ,сЬоо1 ар\. papvlaclon aiie и111 Ье reached\. SьсоМвгувгhоо! - 2�aCaIд �ц�е\.1�<,,,,_г�а7 �£вваl•� - CлputW ав аЬтв; игдддаеу PopuLвt3on 1Упа1[у Mucac3on гвqиlкев ot lиас Еоиг Твал uf врргоrд ргlану 1иtе\.к<ROU; Рег va\. kII\. - Н1д-уаа: рариlас3оя рег вqиаке k2lomexer ;100 heccвres) лЕ рглvlдев gаавгаl, v и[1оаа1, ог С<кМг ttalniap, 1вв[гиеСlо¢в fee [оСа1 л :960, 19]0, апд !980 ддга\. pvplle новllу of 12 [о I7 уадка лЕ аае, согеаврлвдеди слигаи аи ёв_г се• km• вjclcul[ural iaW - Computed ае ebwe Еог agriculcucel lвпд gsмraliy екlшlед\. ая1у; 1960, 1970 апд 1480 да[е\. цдса[3опа1 еасаllаепс (Еегидг f одаrу) - Уоеацотаl 1ыгlеиtLги 4орц(а<3оа дае 5[г (регеедг) - СЫlдгел (0-1д уеага), wrцдg-age (15- 1яеlиде ecMics2, lддивLгl�,-nг о[� М11еЬ 64 уеегг), впд rасlгед д5 уеагв ьпд о ет} еа percencages оЕ т:а-уеег епкl и дв в аеагв о£ мсоМ г ртоекаи орагвге fаlврвв4 у ог у г •еу lпвtlсиеlлnв\. рориlа[1оп; 1960, 197V\. апд 1982 деСе\.ч Pvpi1-uacheг гвс{а[- тlаг вдд вееопдаг - Tota1 в[¢дедСв <агоllвд 1¢ Рориlвtlоп GгоапM1 Aate (регсепгl - о[к1 - Мпиа1 groцCR ratas of Сога1 т1д- ргlигу кпд в атУ виеlа дlьi ад у p,rbвea о£ [авеhегв la tb гег уевг рориlеt3од £от (950-60, L460C7"v, аМ I9J0-81\. responaSng 1evale\. • Pow3вtlon CrantR Аасе (регияС� - игЬап - Млиа1 gтокЛ ra[еа оЕ икЪвп ?бutc lteeтur гаее {цгсУnг) - L1c•га[е вдиlев СаЫе 2а гавд авд К1ее) sв popla[lovn £аг 1950-6�19]р-В3\. е рвтсапгац af 2оСе' вдиТ[ рориlасlла уад 1S уип вW твт\. Lrude Е1ггM1 Rate <осr Chouaaad) - Н[пщ1 13ve ЫкtАа се гhоивепд оЕ mid- уевг populailoa; 1960, l9Т0, дпд 398i дв[е\. CПNSUКPTION Сгидс гlев[h &асе (осг кhowaad) - гдпша2 деегпв рет chovaaM of д1д-уеаг уавааn9ас G (рег сЧоиеат vowlatloa) - nди гв 1и воtег рариlвх3оn; L960, 1970, еад 3981 даса\. •с3-Гви гиап г1 h niac и говук _с�го \.е�а_арΡ\., �од _1�оа еа[е\. - дтегаgе п,®ъеr оЕ ааивnгекя в о\.ап и111 ьааг 3р milzcary vвиn3сlы\. ° с осплпт; <кlиаи атиl\.пси, мвев\. ваа ar аоМ 2ла1 reproducctve ретlод (£ вhе ехресlевсев рсе <п[ agrвpeclfic 8adio [ncalvгn (раг thouaaod popnLSleo) - ц1 (урвг а2 zквLмтв Саг rY1o ег<(11[у кагвв, иеваllу £1ие-уеаг aveгagea ending 1пв1960, I970, алд Ъгоадсввtв го gедега� puбlie рвг сЮиндд оЕ рлрицtlла; вaQndma ,т- 198[• 1lсеавед гасеlоесв tгlав адд 1д уавга вЬеn rqlвtratloa лf [д1о Fи11у У1ам3аА - Ассерхог\., маиаl ([маивапдв7 - Лппивl nи,ьег of в cepxors vав ia efteet; даса tor г адс уеатх двУ not Ъв <адqагаЫв вlасв qc о{ 1tth-cantrol detiCee uпdtr аивр3сея о\. ¢ег3опвl 3an11y рlаппSпg trlea вЬоllвЬвд liсадвlаg\.к ртоgти\. rvсАесеlтеrв (двг С2ииивд populaгLOV) - ТЧ rкаlяаrв far Dглвдлиt to Риг1ч PiannL¢в - пве в{регс о£ ш rrsed ч еп3 - еег<елгв,цв аЕ т ггlеа Аепетеl риы 1с рег chowa` рд цори а�сглп; <к<lиеев иаliыаа\.д тv гее\.ivакв и£ e6t1d-bвaeing aga e15-dL yesrs} vhnпuae Ыc[h-conrsol devlcea се tг, с ипtгlеь апд 3п уев в v6en ceglsr всlоп аЕ 7Ч а•[в иа [¢ гfFв<Е, а11 юicied ью п 1п sаве age gr,\.vp\. liеви г C1rtu1aClott С гtюиалд и1вГlоа) - 51ювв f1к а а[ада fW0 ANU ItOTP?Tt6NФe clrtv etlon о да1 у gеп<ее 1nСегев[ паvдр[ргг"\. двЕlаед и в paгtptltal Ind[д о�одис[1оп рек СарΡ�1Са {1969-7i=tOD) - Irtdex оЕ рег ceplte puбlceclan devoted ргiааг3lу Уо zecording gмегеl п п Lt it tаиl8егдl wl�prodvгtSOл оЕ а11 £лоЭ ecдmoditlee Ртлдиссlоп сасlидев веед впд to Ьг "да11у" 1Е 3< ¢рреал ас 1ив[ fouc t3ви в меk\. ' feed апд 1в on cslendar уевг гавtв\. Глааадl[iee и t ргlаегу gooda {e\.g\. С1деы :lппивl цген[аа е ре[ Са�lta рвг Уи - Wвд тп Ме пивЬвг at виgвгсапе 1ла<евд о{ виgаг) vhleh в edlЫw апд г еаlп п[rlen<я (e\.g\. аеlд Лит(оg СЛе qsac, 1ег1идlч+g адвlввlои ео дгlта-1а аlдввав аМ coffee епд г ксlидед)\. Aggtegare ргодосtlлnпо£ еасM1 с unCry 3а мЫlевипlсе\. Ъавад оп nstlanaleaueгage ггедисвт Рг1се velghcвl 3961-6i, 1970, nnd 1981 двг LAEOP FOACE Рег с,о[Са аи�оЕ саlоrlвН (пLегсвпс пЕ гециlге еп[в) - саади«д Етсе ТлгаТ 4So уоти г[ЬлЧ\.агввР- еслподlааlу в\.сгп< р\.г\.а¢в, 1дл1w1ц де\.г етgУ аqиlявlеn оР пв< faod виррllев avsliвDle in с гку рее сврlга рег �огсев ай4 итдрlоувд ЬЧс еиlидSод iривадlvи, вСидапев, асс\., eMтfq дау\. Аvаl2аЫе аиррllи соарг3ве дадвв[ге ргодос[1ав,иiдроrtв 1еи papulatioa о( 41 аЕи\. afiaictaи (а rвгlow сытегtи вга юt екрогга, аад chaagea 1n aCpct\. КеГ аир➢11ея еиlидв в¢1ве1 Елед, ьседв, оврвт+Ые; [9fA, 1970 апд 1981 data\. 9иаяс1еl<в ывд 1д Еолд рглсоиlпе, впд lлssев 1р аlвгггьисlоя\. вадце ( гпагZ - гаааlе lаьоr еот\. и р•гпдеца лЕ юtц 1aWr югn\. ваqиlгмвелгв vsra е•гiиид Ъу Fю beeed ол рhуаглlоу3сыl тедв Еог аолвl ��lе�иlсигг �\. ге•ас' - лЬаг fогсв iв Еапlоt forиery, hи[[ц аад веtlчl[р адд aaaleh с мlдетlпg envirarmentsl [еврагасиtе, Ълду пlghta, f1s-- io�SaвëCaga of [о[в1 1аЬд[ fotcal l460, 1Л70 avd tN1 Mta\. age апд век distsLbuclav оЕ popula[1on, ам1 s11ov1пg 10 р<гсеие fот veвte Iffiивггу (рагседс� - юbог £агга 1а в3дlдg\. соиСгое2lп, wвlиtвгlвr вг hоиве4юlд 1eve1, 196-b5, 197о епд 19� ддгв, вдд <1ег[г1с1Су, ил г авд {и и рвтсаnгв>;а of tatпl Iaбor fягеа; 1}60, Рег сарlга в ррΡ1 �of р ote�ln �(gги вт дауl - Моее£¢ conCeac af per сарlса 197G агд 19В1 tlata\.[< виррlр оТ оод£ дег дау\. Nе[явирр2у of %оод 1а deElned вв вЪоvе\. PaгCiclpailon деt< iDezcev�- Laca1, и1в, аад t•ввlе ^ Hstlcipвtlm вt Aequlreaenta £ог aLI с [гlев е гаЫlаhеа Ър VSDA prov3de for пlпlтша с<1vSCy г wputed аа total, иц, адд �1а ]eber Ееси и аllоцаасеа о£ 5U grem cotsl pxotel¢ реС дау аад 10 8гвае of ааlдаl елд рвтсеаса;еегоЕ г гаl, да\. апд feeule populecion лС а11 вRвв crpetlлl ; Т pulse Рго[е1а, лЕ MLch 30 gzama вhоиlд De аа1т1 ркосеlп\. lfieee 19б0\. [97д, еьс 1981 даСас fiare в в Мавд ап 2ц1'в (rвеLlсlрвtlи пtм в[аадагдв а е laver гЬвг\. сповв оЕ 7$ $гетв оЕ сога3 pгoteSn е¢д Р3 graae reflRetlпg age-eex в[гисtцге of tha ppulatloa, аод lову [1к tгвtl\. l а£ впlаа2 рго[е1п в tage £ У Che wt2d, ргирраед Ьу FsD 1п che £!У вtfHCвs г s£гт паtlлоаl Юиfси\. 1Ъ1кд цогlд Роод 5игчеу;а19б1-65,а1970 лпд 1980 дасв\. Ееаы>а1с httndaи�c Lt�C�1_o_ - Rв[1о о4 улриlа[1оа идд\.•т 15 вр3 Ь5 вшд оевг te Рег са ге cei 1 3 i 1 вп3 игв - Рклсеlп виррlУ о£ £оад сЪе соиl IаЬот tотп\. der3v<д froa ааlдаlа аМ puLaee 1а gгетв цг дач; 19б1-65, 197U ард 1977 ысд\. кисаг(е ozsalEVrm[; Ch11d (вfи 1-д) Cnath 8дtв (рет thowead) - Мяиа1 deathe рвт гМиипд 1п �гсааСа � _1�va1a гnсме 0oth la uah аед klaa) -(tкаlпд \у tlclut 5 це gтлир l- уеагв, [о сhllдтеп {п Ch1s age gтопр; fa[ msi developing рвгсеаС, t1 ЛвпC'1S perceat, ролхааi 'I(1 psruot, аад lqotиt др уагпаt ef cam[riea да[а дегlvМ £тот life геаlи; 1960, 19?J агЙ 1481 даЕа\. lюwедоl8в\.с XEAL18 К/УВRТУ S\.iRCE2 G1WPS '" t,iT` гzр\.сt\.л у аг в3�гсп��(�t��� �7 - Аvетаав п,®ьгг о1 чвал пЕ tlte гюа3цп,д '1'Г'То'iT'о iц �\.г�гаа ага <гУ аррrлхlтгв ааид о1' perrrey и\.т1а\. ид [ ъ1гг6; 13Ьо, 1ч?п вп" а 1s8�t латв, \.юи1а ев lеигрт\.кеа utln еои<1д\.rasla ваисlод\.хи Iдfant lbгtallxy &все (рет t6ausaad) - МпЧв1 deatha лf lnfanta ипдет оде Е<Сlтвtвд АЬю1ле РочехСр lасоде 1s<в1 (пЕЕ раг gp1[a) - дУУМ вУ пцаl - уввг аЕ вgе рег сМивллд 21va Ытгhя; 1960, 1470 апд 3981 дага\. АЬвоlисе рл<еггу lегсе• 1sve2 Lв цик lдедва ив !аФ в• Асееве of S\.Ее fгat (,ратсеас ot рориlьсlоаZ�� 1, Ьвп впд тцгаl - autrit1oи11p вдеqивге дlвг p1w •eиntLl доа-fоод ггпиLт•вааtа 1f тС цьмЬеr о£ релрlе<г[ои1 игЬвв аМ т ra3richгc опаЫе е в са eafe affordaбa\. виррlр (1nclwea сггегед�влсЕвге va<екв ог илсгев[ва ъи<ев гасlыгад pslaгlre Роаетгу гпсои гл\.<1 Си8в лг ир1с\.� - ucNa аИ е\.ка1 - on<иlпвгед иьсег еисА а thac fгад р<otected Ъокаkоlев, sptlage, аМ Яига1 eelstlve poverty lqcnw aveL Тв о и[Ыгд of гсца рт вуlсв аnгсагу м11в) ае реггеп<аgев oF кееlг reepectlve рориlвцодв\. 7л в ретюпаl lасаае оЕ ец аоив[ту\. lÐгма 2<л1 Lв дагivм Егав tM гаг\.1 usba¢ а а 9иЭ11с fошксаlа л саМрове 1о<ated v [hея 200 и 2етs1 vlth адlив г for Л1gЬек с of 11е1дR 1а игЬв¢ агвvв\. lгет а лоwе ¢ву Ле гопвlдегвагал belag v1s61a гивспве1веаиг вв лЕ сЬвегв еасlввtеа Panulall_ы�т}от Аъ,ог[х< ю\.•гг гоеавг L\.<ь_f�'гие) дrвла Snuвe\. Тп т�\.ьге1 атив г АаЫе ас га 'юь\.ьд 1ыр1г СМС theelюuиvlfe а дд 1- Регсад< оЕ рор�л at1 а Ттьаа t\.d�eura3iMq ваТмТае: ведbеУН of ChC houвeholdad : h¢ve<Совврепд а дiвргарог[lоаасе рвг2 of г poarrrT� Che daq 1п fetchlьg che tamlly'а иасег neWe, гссв л цо=ега маюааi (perc оЕ рл�игвсlоаэ - соеа2, итыр\. лад -=в1[- юwкг ot раарlе ltoгai [итьвп, ам г лП \. rvea Ьу е дlврлваl ав рагсапtедов of гhаlг геврас[Lve рориlа[3опв\. гисе[авдlарова\.l иу 1асlиде [he е011есС1оа fln3 дlарлааl, Чith ОТ v1[hOJY СУи[дапt\. О£ Gvaaвle вод 5ьс1а1 4св Мтlвlиа hдаап е алд иаеСе-иа[ег Dy v ег-Ьоrпе вувсеае ог гЬе иве оЕ р12 £со,[лдlе Мвlувlв ат Ко1аС[1лц RpвztwaC ргlчца апдгв1т11дт Lпв[в21всЕ�пв\.а tLT (рМ3 - 31 - ANNEX I Page 4 of 5 ZAIM EOONMC INDICATORS NMOKAL AMOUNTS timount Stiare of GDP at (million US$ at Market Prices (\.) knnual Growth Rates currerd-- prices (at current prices) (at constant 1970 prices) 1981 1981 1979 1980 1981 Gross Domestic Product 1/ 53&1\.9 100\.0 0\.3 2\.5 2\.4 (GDP Commercialized) (4222\.3) (78\.4) (0-2) (2\.4) (2\.4) Agriculture 17Z2\.2 32\.0 3\.1 2\.8 2\.7 industry 1269\.5 23\.6 -6\.1 4\.4 4\.8 Services 2183\.7 38\.7 4\.6 0\.1 0\.4 Consumption 4312\.0 2/ 80\.0 4\.3 -0\.2 6\.1 Gross Investment 1410\.3 26\.2 56\.8 81\.8 -35\.2 Exports of GUS 1575\.4 29\.3 -21\.0 23\.8 -44\.6 Imports of CM 1913\.8 35\.5 21\.8 95\.8 -46\.o Gross National Savings 985\.8 18\.3 62\.8 -19\.6 128\.7 PUBLIC FINANCE (Central Government) (million Z) % of GDP A c t u a 1 (at market prices) 1980 1981 IT82 1980 1981 1982 P Current revenues 3738\.6 4858\.8 62-9\.1 21\.7 20\.6 19\.5 Current expenditures 3948\.5 5832\.1 8448\.1 22\.9 24\.7 26\.3 Current deficit -209\.9 -973\.3 -2189\.0 -1\.2 -4\.1 -6\.8 Capital expenditures 246\.4 744\.9 1084\.9 1\.4 3\.2 3\.4 Overall deficit -4-56\.3 -1718\.2 -3273\.9 -2\.6 -7\.3 -10\.2 MNEY, CREDIT AND PRICES 1980 1981 \.19132 (million Z outstanding end jx riod) Mmw and Quasi Money 3367\.3 4644\.9 8015\.9 Bank Credit to Public Sector 2329\.4 3783\.6 7057\.3 Bank Credit to Private Sector 1014\.3 1342\.4 1971\.9 (Percentages or Index Numbers) Maney and Quasi Money (as % of GDP - market prices) 19\.6 19\.7 25\.0 Consumer Price Index (1975 = 100) 1339\.0 1813\.1 2487\.9 Annual percentage changes in: 46\.7 35\.4 37\.2 Consumer Price Index 13\.0 62\.4 86\.5 Bank Credit to Public Sector 37\.1 32\.3 46\.9 Bank Credit to Private Sector NOTE: All conversions to dDllars in this table are at the average exchange rate prevailing during the period covered\. I/ Zairina national accounts have numerous shortcomings and should he Interpreted with caution\. 2/ At market prices; components are expressed at factor cost and will not add due to the ew-lusion of net indirect taxes and subsidies\. 3/ Estimate\. Based m national accounts data\. Balance of payments estimates given in page 2 are more reliable\. - 32 - ANNEX I Page 5 of 5 ZAIRE - ECONEMIC INDICATRS BAIANCE OF PAYMNSS (Mill US$) 1979 1980 1981 1982 Exports of goods ani services 1926\.3 2185\.2 1632\.0 1537\.9 of which: Merchardise F\.O\.B\. (1834\.6) (2038\.1) (1499\.9) (1454\.0) imports of goods and services 2056\.9 2523\.6 2300\.6 2085\.5 of which: Merchandise F\.O\.B\. (1213\.2) (1472\.0) (1290\.0) (1128\.3) Private transfers (net) -63\.3 -79\.4 -3\.5 -15\.5 Current Account Balance -193\.9 -417\.8 -672\.1 -563\.1 Official grants (net) 226\.1 266\.8 247\.6 187\.7 Public capital (net) -115\.0 -22\.1 -168\.6 -156\.8 Private capital (net) and errors and omissions -173\.1 -82\.0 -147\.4 -128\.1 SIR Allocation 20\.7 20\.8 18\.9 - Other Financing 267\.5 282\.4 6C8\.4 624\.8 Chage in net international reserves (- = increase) -32\.3 -48\.1 113\.2 35\.5 EXCHANCE RATES: (Z/US$) (US$/Z) (SDR/Z) August 24, 1979-February 22, 198D 2\.05 0\.49 0\.375 February 22, 1980-June 19, 1981 3\.05 0\.33 0\.2625 June 19, 1981-September 12, 1983 5\.62 0\.18 0\.1575 September 12, 1983 1/ 26\.93 0\.04 0\.03542 (29\.93) (0\.03) February 24, 1984 1/ 33\.0 0\.03 D\.028 AVERAGE EXCHANGE RATES: (Z/YS$) 1978 0\.836 1979 1\.729 1980 2\.800 1981 4\.384 1982 5\.750 MERCHANDISE EXPCTS Minerals and Petroleum 1407\.5 1626\.8 1178\.4 1235\.2 Others 427\.1 411\.3 321\.5 218\.8 Total 1834\.6 2038\.1 1499\.9 1454\.0 ETERNAL DEBT, (As of Dec\. 31, 1982, MLU\. US$) Public Debt, incl\. guaranteed 4(87 Non-Guaranteed 250 Total outstanding & Disbursed 337 IEBT SERVICE RATIO F)R 1982 Public Debt, incl\. guaranteed 10\.7 3/ Non-Guaranteed Private Debt 9\.7 IBRD/IDA IENDING (As of March 31, 1984, Mill\. US$) Outstanding & Disbursed 279\.55 Undisbursed 216\.85 Outstanding, incl\. Undisbursed 496\.40 1/ (h Septenber 12, 1983, Zaire introduoed a transitional dual excharge rate regime, consisting of an official rate and a free market rate, shamn in parenthesis above\. The two rates were unified an February 24, 1984; henceforth, the rate will float on a weekly basis\. 2/ Estinate\. 3/ Reflects external public debt service actually paid\. EA2 April 20, 1984 -- 33 - ANNEK II Page 1 of 2 STATUS OF BANK GRUP OPERATIONS IN ZAIRE A\. STATMENT OF BANK IDANS AND IDA CREDITS (As of March 31, 1984) Loan or Credit Year Anount in US$ Million Number Signed Borrower Bank IIH 1/ Undisbursed Prior to June Congo & Transport 91\.58 2/ 1960 Otraco Infrastructure One Loan Fully Disbursed 100\.00 Fourteen Credits 'ully Dishrsed 167\.10 571 1975 ZAIRE Rail-River II 26\.00 0\.47 660 1976 ZAIRE Cotton Rehabilitation 8\.00 1\.17 796 1978 ZAIRE Oil Palm 9\.00 7\.29 902 1979 ZAIRE Railways 20\.00 6\.45 998 1980 ZAIRE Fifth Dev\. Finance 18\.50 5\.57 1040 1980 ZAIRE Smallholder Maize 11\.00 8\.61 1089 1981 2AIRE Kwilu Ngongo Sugar 26\.40 3/ 6\.19 4/ 1152 1981 ZAIRE Kwango-Kwilu Technical Assistance 2\.903/ 1\.714/ 1180 1982 ZAIRE ONATRA Modernization 26\.00 3/ 22\.C6 4/ 1224 1982 ZAIRE Shaba Power System Rehabilitation 19\.00 3/ 15\.24 4/ 1241 1982 ZAIRE Water Supply II 18\.00 3/ 12\.58 4/ 1244 1982 ZAIRE Agriculture T\.A\. 5\.003/ 3\.844/ 1264 1982 ZAIRE Second Cotton 11\.30 3/ 10\.38 4/ 1273 1982 ZAIRE Sixth DEC 21\.50 3/ 18\.45 4/ 1290 1982 ZAIRE Highway V 43\.50 3/ 33\.37 4/ 1325 1983 ZAIRE North East Rural Development 13\.00 3/ 12\.48 4/ 1335 1983 ZAIRE Ports Rehabilitation 25\.00 3/ 24\.49 4/ 1336 5/ 1983 ZAIRE Gecamines T\.A\. 7\.003/ 7\.00 1409 1983 ZAIRE Petroleum Sector T\.A\. 4\.50 3/ 4\.50 4/ 1421 5/ 1984 ZAIRE Ruzizi II Hydroelectric 15\.00 3/ 15\.00 4/ Total less cancellations): 191\.58 497\.70 216\.85 - of which has been repaid 126\.63 1\.62 Total now outstanding: 64\.95 4%\.08 216\.85 Atmount sold: 54\.47 of which has been repaid 54\.47 Total now beld by Bank and IDA 1/ 64\.95 496\.08 Total Undisbursed: 0\.0 216\.85 1/ Prior to ewchange adjustnent\. 2/ Guaranteed by the Kingdom of Belgium\. 3/ US dollars amounts computed at the rate of approval dates\. 4/ US dollars amounts computed at the March 31, 1984 rate\. 5/ Signed by not yet effective\. - 34 - ANNEX II Page 2 of 2 B\. STATMENT OF IFC RINVESDENTS (As of March 31, 1984) Fiscal Type of Amount in US$ Millions Year Obligor Business loan Equity Total 1970 Soci&t Financiare de DFC - 0\.76 0\.76 D6veloppent (SOFIDE) 1979 Zaire Gulf Oil Company Oil production 2\.50 2\.50 & expl\. Company 1979 Zaire Petroleun Company Oil production 1\.61 1\.61 & expl\. Canpary 1983 Nord-Sud Industrie- 10BSIOFF GMBH, for studies on an aluminium project 0\.23 - 0\.23 Total gross commitments 4\.34 0\.76 5\.10 Less repayments 3\.70 - 3\.70 Held by IFC 0\.64 0\.76 1\.40 - 36 - ANNEX III Page 2 of 2 (g) SNCZ shall set up a traffic costing system (para\. 71); and (h) SNCZ shall maintain tariffs at a level to attain, beginning in 1984, a 100 percent operating ratio, and after 1986, 1985, achieve a 3 percent rate of return (para\. 73)\. Special Condition of Effectiveness are: (a) Onlending of the proceeds of the Credit to SNCZ in connection with the project components it is to carry out (para\. 67); (b) signiag of the co-financing agreements (para\. 61); (c) completion of a staffing plan for higher level staff and appointment of key personnel (para\. 39); and (d) adoption and approval of a management reorganization plan (para\. 41)\. - 35 - ANNEX III Page 1 of 2 SUPPLEMENTARY PROJECT DATA SHEET ZAIRE SECOND (SNCZ) RAILWAY PROJECT Section I: Timetable of Key Events (a) Identification : October 1982\. (b) Project Preparation : October 1982 - May 1983 (c) Appraisal Mission : June 1983 (d) Negotiations : February 27 to March 2, 1984 (e) Planned Date for Credit Effectiveness : September/October 1984 Section II: Special Project Implementation Actions None Section III: Special Conditions (a) SNCZ will establish a Planning Unit by the end of 1984 and propose a draft five-year plan by the end of September 1985 (para\. 33); (b) SNCZ shall adopt an action plan for its reorganization and continue to employ key personnel with qualifications and experience satisfactory to the Association (para\. 41); (c) SNCZ shall reorganize its internal audit department (para\. 70); (d) tariff requests not acted upon within 30 days by the authorities shall be deemed automatically approved (para\. 72); (e) the Government shall cause to be obtained by SNCZ each month the equivalent of US$1\.0 million in foreign exchange, and shall discuss with IDA and SNCZ the foreign exchange requirements of SNCZ for each year (para\. 74); (f) SNCZ shall achieve agreed operational targets and evaluate their progress (para\. 64); 一于  －一’．Â．--\.----－一、一åžäº¡ä¸€ï½€ä¸€ã€ä¸€ï¼Œä¸€äºŒâ€• l&- ,．一絨‘汰＿: 戶－一’必一― - 祉一f--－二― 、T＇一一么― 斗一＇一） - ,&，一一〞― ‘、，&\.- - ！一《一；一“一’一！＼一 、亡＿__＿一、一：／一“一’F\.:l一l一〔丑 I г ч

APPROVAL

P002053

Document of The World Bank FOR OFFICIAL USE ONLY Report No\. 8232-UNI STAFF APPRAISAL REPORT NIGERIA KADUNA/XATSINA AGRICULTURAL DEVELOPMENT PROJECT (REDESIGNED KADUNA ADP) MAY 31, 1989 Western Africa Department Agriculture Operations Division - IV Ts documd aeuth a rstiktd a~ and may be used by i*KWS odd In e thei oflkfdu dut"s Its comitets mAay not otherwise be discosed wtotWorld Bank ewdon\.  CURRENCY EQUIVALENTS (May 1989) Currency Unit - Naira (3) US$1\.00 - N7\.50 M1 (100 kobos) - US$0\.13 VEIGHTS AND MEASURES Unless otherwise stated all weights and measures used in this report are wetric\. 1 metric ton tm ton) - 2,205 pounds (lb) 1 hectare (ha) - 2\.47 acre (ac) 1 kilometer (km) 8 0\.62 mile (m) 1 meter (m) = 3\.28 feet (ft) i milimeter (mm) 0\.04 inch 'fn) FISCAL YEAR January 1 - December 31  - ± - FOR OFFICIAL USE ONLY ABBREVIATIONS AND ACRONYMS ADP - Agricultural Development Project ADPEC - Agric\. Development Project Executive Cormittee APMEU - Agricultural Projects Monitoring and Evaluation Unit ARMTI - Agric\. and Rural Management Training Institute ASCON - Administrative Staff College of Nigeria ATAP - Agricultural Technical Assistance Project AZAP - Arid Zone Afforestation Program BES - Block Extension Supervisors CFA - Cooperative Financing Agency CFPS - Commercial and Financial Policy Statement EAP - Environmental Action Program EEC - European Economic Community FACU - Federal Agricultural Coordinating Unit FADP - Funtua Agricultural Development Project FASCOM - Farmers Agricultural Supply Companies FDF - Federal Department of Forestry FDU - Fadama Development t'nit FGN - Federal Government of Nigeria FORMECU - Forestry Monitoring, Evaluation and Coordination Unit FSC - Farm Service Center FTM - Fortnightly Training Meeting GDP - Gross Domestic Product GPC - General Purpose Committee IAR - Institute for Agriculture Research ICB - International Competitive Bidding ILCA - International Livestock Development Center KADP - Kaduna Agricultural Development Project KDADP - Kaduna Agricultural Development Project KDSG - Kaduna State Government KTADP - Katsina Agricultural Development Project KTSG - Ratsina State Government LCB - Local Competitive Bidding LGA - Local Government Authority MANR - Ministry of Agriculture and Natural Resources MDT - Manpower Development and Training MIS - Management Information System MOA - Ministry of Agriculture MTRM - Monthly Technology Review Meeting NLPD - National Livestock 'Project Department NSCA - National Seed Certification Agency NSS - National Seeds Service OFAR - On-Farm Adaptive Research PBMS - Planning Budgeting Monitoring System PCR - Project Completion Report PFT - Project Facilitation Team PME - Planning, Monitoring and Evaluation PMU - Project Management Unit PY - Project Year RIC - Rural Infrastructural Coordination This document has a restricted distrbution and may be used by recipients only in the performance of their official duties\. Its contents may not otherwise be disclosed without World Bank authorization\.  - ii - SAP - Structural Adjustment Program SAR - Staff Appraisal Report SMS - Subject Matter Specialist SOE - Statement of Expenditure T&V - Training and Visit VEW - Village Extensions Workers WID - Women in Development WUA - Water Users' Association sU  NIGERIA KADUNAIKATSINA AGRICULTURAL DEVELOPMENT PROJECT (Redesigned Kaduna ADP) Table of Contents Page No\. LOAN AND PROJECT SUMMARY \. 1-3 I\. INTRODUCTION AND BACKGROUND\. I II\. JUSTIFICATION FOR THE REDESIGN \. \. 3 III\. THE REDESIGN PROJECT \. 6 IV\. THE DETAILED PROJECT FEATURES \. \. 11 A\. Agricultural Services \. 11 B\. Rural Infrastructure \. 19 C\. Commercial Agricultural Services \. 25 D\. State MANRs \. \. 28 E\. Project Management \. 30 F\. Federal Support \. 33 V\. ( ,TS AND FINANCING \. 35 A * Cost Estimates \. 35 B\. Proposed Financing \. \. \. 39 C\. Procurement \. 40 D\. Disbursement \. 42 E\. Auditing ansd R^epa,th \. Requi\.rezeiL\.6 \. 44 VI\. PROJECT IMPLEMENTATION \. 45 A\. Federal Coordinating Role \. 45 B\. Implementation of Statewide ADPs \. 45 C\. Environmental Considerations \. 50 VII\. FINANCIAL AND ECONOMIC ANALYSIS \. 51 A\. Demand, Markets and Prices \. \. \. \. 51 B\. Financial Analysis \. \. \. 53 C\. Federal/State Financial Implications \. 54 D\. Economic Analysis \. \. \. \. 55 E\. Benefits and Risks \. \. \. \. 55 VIII\. AGREEMENTS AND RECOMMENDATIONS \. 59 ANNEXES 1\. Minutes of Technical Discussions 2\. Project Cost Summary by Components and Financing MAPS IBRD 21199: Nigeria: Soil Types, Rainfall, and Crops  NIGERIA KADUNA/XATSINA AGRICULTURAL DEVELOPMENT PROJECT (Redesigned Kaduna ADP) LOAN AND PROJECT SUMMARY Borrower: Federal Republic of Nigeria Beneficiariess Federal Republic of Nigeria; and Kaduna and Katsina States\. Amount: US$ 122 million equivalent Terms: Unchanged from Kaduna ADP (Ln\. 2436-UNI) terms\. Payable over 20 years, including five years ofgrace, at standard variable interest rate\. Relending Terms: The Federal Government would on-lend USS 58\.0 million to Kaduna State, and US$ 63\.7 million to Katsina State on the same terms and conditions as the Bank loan\. The States would carry the foreign exchange risk\. Project Description: The project would continue and amend the assistance provided to the erstwhile Kaduna State in the new Kaduna and Katsina States with the following core activities: (i) intensified and unified extension services, adaptive research and contract seed production; (ii) small-scale irrigation development; (iii) veterinary services; (iv) input supplies, including encouraging the role of private retailers; (v) strengthening cooperative rural credit institutions; (vi) essential rural infrastructure; and (vii) strengthening the capacity of the state ministries of agriculture and natural resources (MANR) for policy formulation, planning, and expenditure implementation\.  -2- Re-estimated Proiect Costs: Local Foreign Total G \. *Us$ Miiioo \. A\. RedesiRned ADPs 1\. Technical and Agricultural Services 7\.0 4\.8 11\.8 2\. Rural Infrastructure 13\.1 42\.3 55\.6 3\. Commercial Services 4\.4 18\.7 23\.1 4\. Project Management 3\.3 4\.4 7\.7 5\. State MANR 0\.1 0\.7 0\.8 Total Base Costs 27\.9 70\.8 98\.7 Physical Contingencies 2\.7 6\.5 9\.2 Price Contingencies 2\.5 3\.5 6\.0 Total Redesigned Project Costs 8/ 33\.1 80\.8 113\.9 B\. Original Proiect (upto 1988) 37\.2 31\.2 68\.4 C\. Front-end Fee - 0\.3 0\.3 D\. Total Proiect Cost 70\.3 112\.3 182\.6 Financing Plan: IBRD - 122\.0 122\.0 Federal Government (FG) 24\.0 - 24\.0 State Governments (SO) 36\.6 - 36\.6 Total 60\.6 122\.0 182\.6 Estimated Disbursementst upto IBRD Fiscal Year 1939 1989 1990 1991 (\. US$ Million \. ) Annual - 36\.9 31\.2 22\.7 Cumulative 31\.2 68\.1 99\.3 122\.0 a/ Of which US$12\.5 million in duties and taxes\.  -3- Benefits and Risks: The re-designed project would (i) strengthen statewide agricultural services, including extension, adaptive research, soil conservation, afforestation rural road rehabilitation/maintenance, rural water supplies, input distribution, marketing; (ii) strengthen the policy formulation, planning and expenditure implementation capacity of state MANRs; and (iii) strengthen rural credit institutions by helping the establishment of a Cooperative Financing Agency in each state\. Benefits should thus be felt across each project state\. Even with the limitations of available technology, the project would increase the value of agricultural production and farm income as output shifts to higher value cash crop enterprises (horticulture, cotton, livestock and crop combinations) in respor-se to the new economic environment\. The project would continue the process of role clarification and rationalization between the public and private sectors for delivering agricultural services at the state level\. Th' Ain risks are that: (i) the effort to continue the rationalization of the longer term organization of agricultural services at the state level would move at a slower pace than anticipated; anid (ii) the project's investments in rural infrastructure, particularly its maintenance, would not be sustained after project completiuu\. The first risk would be minimized by the project's emphasis on building consensus within each state for organizational reforms before these are implemented through a mutually agreed phased action program, which does not disrupt the availability of essential services and the second risk would be minimized by the projects' strong emphasis on rehabilitation and by the initiatives to strengthen the role r-ed capacity of the LGAs which are charged with this function\. Rate of Return: Overall Project 16X Rural Water Supply 8e Rural Roads Above 15Z Small-Scale Irrigation 482 Mao2s: IBRD 20937  NIGERIA KADUNA/KATSINA AGRICULTURAL DEVELOPMENT PROJECT (Re-designed Kaduna ADP) I\. INTRODUCTION AND BACKGROUND The Loan (2436-UNI) 1\.01 The Kaduna ADP loan for US$122 million was approved by the Board on June 7, 1984, and became effective on July 17, 1985\. The closing date was established as December 31, 1989, and has not been extended so far\. Project implementation and disbursements have been slow, impeded initially by the political problems, as well as weak management (particularly with respect to procurement)\. As of May 4\. 1989, a total of US$33\.8 million had been disbursed from the loan\. Following the bifurcation of the state and recent management appointments, project implementation and disbursements are expected to improve considerably\. The closing date is proposed to b-\. extended by two years from December 31, 1989 to December 31, 1991\. The Bifurcation of the Proiect 1\.02 On September 23, 1987, the Federal Governmtnt of Nigeria (FGN) carved out Katsina State from the former Kaduna State\. While the area co_vered by the new Katsina State (22\.662 sq km) is smaller than that covered by the new Kaduna State (43,000 sq km), Katsina has a larger popullatien (approximately 5\.2 million) than Kaduna State, which has an estimated population of 2\.9 million\. The new Katsina State is the lesser developed of the two, has a poorer agricultural resource base, and a higher population density\. 1\.03 The bifurcation of ':he erstvhile Kaduna State necessitated the bifurcation of the former Kaduna ADP into Kaduna and Katsina ADPs\. On December 30, 1987, the FGN appointed a Bifurcation Committee for the project consisting of the representatives of the two states under the chairmanship of the Federal Agricultural Co-ordinating Unit (FACU), representing the FGN\. The Committee recommended that from the US$25\.7 million which had been drawn from the Bank loan at the time of the bifurcation of the former Kaduna State, the new Kaduna State would be liable for US$13\.2 million, while the new Katsina State would be liable for US$12\.5 million; the agreed criteria being the location of project assets, all of which had been financed from the loan\. Of the un-drawn Bank loan facility of US$96\.3 million, US$44\.9 million was allocated to Kaduna State, while US$51\.4 million was allocated to Katsina State\. Nigerian project staff were assigned to the two state ADPs according to their origin, while expatriate staff were given the option to join either of the two ADPs\. 1\.04 The Bifurcation Committee also recommended that the opportunity of the amendment of the project documents should be used to re-design the project in order to reflect changed economic circumstances and new implementation strategies whicl\. had been agreed between the isank and FGN for other ADPs in Nigeria, particularly to incorporate the lessons of ADP  2 experience documented in the recent OED report !I\. The report of the Bifurcation Committee was accepted by the FGN and the two states; FACU proceeded to re-design the new state ADPs in April 1988\. As part of the re-design, the project's name is proposed to be changed to Kaduna/Katsina ADP\. 1\.05 Bank policy requires that the loan savings exceeding 5Z of the approved loan be cancelled or re-programmed with the approval of Senior Management\. The Bank's management decided that in the process of effecting the amendments to the Loan and Project Agreements necessitated by the bifurcation of the former Kaduna State, the loan savings should be re- programmed along the lines described below\. Review and Anproval Process\. 1\.06 The re-designed project was prepared by FACU with active involvement of the state governments concerned\. The draft re-design appraisal reports for the two new state ADPs were reviewed at a joint review meeting in Kaduna in July 1988 between the Bank, FACU, and the two states\. The Bank team consisted of Mess:s\. Wambia (mission leader), Rambocus, and Sreekantiah in July 1988\. The technical discussions to review and agree on the re-designed project proposals with the states and FGN representatives were held in Washington between November 28 and December 9, 1988\. The minutes of the technical discussions are attached to this re-design arpraisal report (Annex 1)\. This Bank Re-design Staff Appraisal Report (Re-design SAR) has been prepared by Mr\. Wambia with assistance from Mr\. Ranade\. the cost tables were prepared with assistance from Ms\. L\. Kiang\. The report should be read along with the original Kaduna ADP Staff Appraisal Report (Report No\. 4512-UNI of September 30, 1983), the Bifurcation Report prepared by the KADP Bifurcation Committee in May 1988, and the re-design SARs prepared by FACU in June and September 1988\. 1\.07 At the time of the preparation of the Bank Redesign Staff Appraisal Report, US$90\.77 million of the Bank loan was undrawn which has been allocated between the two states using the criteria suggested by the Bifurcation committee (para 1\.03)\. Out of the total loan amount of US$122\.0 million, the amounts accruable to Kaduna and Katsina states are, respectively, US$58\.0 million and US$63\.7 million\. The loan amount of US$0\.3 million is allocated as a front-end fee\. 1\.08 The draft Letter of Amendments to the Loan and Project Agreements and the Re-designed SAR would be sent to the States and the Federal Ministry of Finance and Economic Development (FMFED) for their review before final discussions, which took place during May 15 to 17, 1989\. The revised package would be submitted to the Board for its approval\. After Board approval, the Letter of Amendments to the Loan and Pro sct Agreements would be sent to the States and the Federal L\.nistry of Finance and Economic Develupment for their countersignature\. At that 1/ Rural DeveloPment, World Bank Experience, 1965-86, OED, April 1988\.  juncture, the legal amendments would become effective, and the process of bifurcation would be complete\.  -4- II\. JUSTIFICATION FOR THE RE-DESIGN The Need for Re-design 2\.01 The slow rate of implementation of the Kaduna ADP (Loan No\. 2436-UNI), possible loan savings arising from the naira deval\.uation, and the bifurcation of the erstwhile Kaduna State in September 1987 has necessitated the re-design of the Kaduna ADP, which would now be split into Kaduna and Katsina ADPs respectively\. The changed economic circumstances in Nigeria since the collapse of oil prices and the subsequent implementation of the Structural Adjustment Program (SAP) has also made it necessary to re-design the former Kaduna ADP with a view to ensuring sustainability of project institutions and benefits, accelerating the pace of implementation, and ensuring cost effectiveness\. The re-designed project is still envisaged as part of a time slice of a national program for agricultural development\. 2\.02 The Bank, and the representatives of the states and FGN agreed that the bifurcation of the state (and therefore the project) presented an opportunity for necessary re-design of the project for the following reasonst (a) The implementation record of the project, the FGN's and states" expressed desire to re-program potential loan savings expected to accrue from the steep devaluation of the naira (from US$1\.0-Naira 0\.8 in 1984 to US$1\.0-Naira 7\.5 in May 1989), the changed macroeconomic situation, and the need to bring the project's design in line with new ADP implementation strategies agreed between the Bank and PGN\. provided the justification for re-designing the project\. These new implementation strategies are reflected in the recently negotiated MSADP II and MSADP III, and in the final two years of implementation of Kano and Bauchi ADPs\. (b) A recosting of the original project using the actual im?lementation exchange rate suggests that, if the project had been implemented within the appraisal time (1984-1989), the project would have costed approximately Naira 569\.2 million (US$187\.2 million)\. The original appraisal cost and the disbursement of the Bank Loan at 632 were estimated at Naira 127\.2 million (US$193\.5 million) and US$122 million, respectively\. By the end of December 31 1988 the project had actually spent US$68\.5 million, with US$31\.2 million as the Bank disbursement and US$90\.8 million as the amount of the Bank Loan undrawr\. With 63? as the agreed disbursement share of Bank financing of the erstwhile Kaduna ADP, the amount of loan yet to be disbursed for the original project would have been US$74\.8 million\. (c) The erstwhile RADP was among the less successful of ADPs in Nigeria (largely due to political factors which retarded the  pace of implementation), and therefore strategies and actions are required which would accelerate implementation with in the new closing date of December 31, 1991 (i\.e a two year extension)\. (d) Agreement has been reached between the Bank and the states to implement a broad range of policies and strategies aimed at accelerating the pace of project implementation, and enhancing the sustainability of project benefits and institutions\. The re-design of the Kaduna ADP incorporates the findings and recommendations of the Bank's review of rural development projects, and the imnlementation strategies for ADPs which has been agreed between the Bank and the Federal Government of Nigeria (FGN)\.  - 6 - IIM\. THE RE-DESIGNED PROJECT A\. Proiect Re-design 3\.01 Proiect Re-design\. The principal re-design improvement from the lessons of Kaduna ADP and the experience of other ADPs is the increased attention to sustainability of project investments and service institutions after completion, and the emphasis on using methods which accelerate disbursements and project implementation, with a view to completing disbursements by December 31, 1991, the proposed new closing date\. As part of the re-design, the physical targets of the project have been reduced under the rural roads and increased for the small-scale irrigation schemes by pump and a new rural water supply component\. The targets are divided or proportionately between the two states\. However, a majority of the physical works are to be implemented by contract rather than by force account\. Also, a greater emphasis has been placed on rehabilitation and maintenance than was the case under the erstwhile Keduna ADP\. 3\.02 The physical targets are proposed to be adjusted as follows: under the rural roads component, the target for new construction is to be reduced; and the irrigation target acreage is proposed to be increased\. The funds previously earmarked for the reduced rural roads targets would be re-allocated to road rehabilitation, small-scale irrigation and a new rural water supply program\. Other physical targets of the project remain largely identical to those agreed under the erstwhile Kaduna ADP, and are divided proportionately between the two states (a) Agricultural Services 3\.03 Original DesiRn\. This component was referred to as "Farm and Crop Development' under the erstwhile Kaduna ADP\. It included extension for rainfed agriculture covering 620,000 ha; fadama irrigation development covering 34,000 ha; and agro-forestry, land reclamation and soil conservation throughout the state\. The total component costs (excluding management services), were estimated at Naira 52\.1 million (US$65\.4 million)\. By December 1987 (the year for which the latest performance data is available), a total of 2,735 farm trials had been and 18,891 demonstration plots established\. 3\.04 Re-desicn ProDosale\. Similar to the original design, under the re-design, the agricultural services component would consist of extension services, agro-forestry, soil conservation, and land-use planning programs over the same area spread in the two states, at a cost of US$13\.8 million for the next three years (Annex II)\. The aims of re-design under the agricultural component of the project would be to strengthen the effectiveness of the extension system through unification of extension services, replacement of the Training and Demonstration (T&D) system of extension with the Training and Visit (T&V) system, strengthening of the linkages between research and extension (through a system of sponsored research contracts), and increasing emphasis on environmental and resource management programs\.  3\.05 As a part of the redesign and in conformity with the revised sector development objective of sustainability, the states and the Bank have agreed tot (i) unify the extension services of the state MANRs and the ADPs (particularly livestock and farm-forestry, and soil conservation); (ii) phase out the demonstration plots which are maintained by extension agents under T&D, and replace them with farmers' corner plots (T&V technique); (iii) equip all extension agents with appropriate means of mobility; (iv) introduce a system of sponsored research between the ADPs and the Institute for Agricultural Research, Zaria; (v) intensify agro-forestry, soil conservation, and land use planning program; (vi) assign a central role to the private sector and smallholders in improved seed multiplication and distribution, and improve its effectiveness by reducing the number of ADP-owned farms from 10 (about 1,!15 ha) under the previous KADP to 3 each for the new Kaduna and Katsina ADPs (about 50 ha each), and establish a commercial seed pricing policy; and (vii) experiment with a program to license private livestock veterinarians, and to gradually phase out subsidies on animal drugs and vaccines\. (b) Rural Infrastructural Services 3\.06 Original Desian\. This component was previously labelled "Civil Works" under which were included the construction (all by force account) of about 1,400 km of feeder roads, 75 medium and small scale dams principally for stock watering, and construction of project buildings and staff houses\. The total component costs (excluding management services), wer:e estimated at Naira 68\.4 million (US$ 98\.2 million)\. As of December 1987, the project's achievements under its rural infrastructure program were: 411 km of new roads constructed, and 395 km rehabilitated; and in addition to this 2 dams had been constructed\. 3\.07 Re-Design Proposals\. The aims of the rural infrastructure re- design are to increase the efficiency or cost effectiveness of implementation, expedite implementation, improve maintenance regimes, encourage the role of the private sector through contracting, and encourage cost recovery and beneficiary contribution to maintenance through the formation of users' groups\. The bulk of the program would be implemented by contract (the ADPs would hire the contractors)\. A program of training and equipping of Village Mechanics to maintain water supply and fadama irrigation facilities in their communities was agreed for each state\. 3\.08 Under the redesigned project, the original target for new road construction of 1,400 km of rural roads has been increased to 1,511 km (400 km in Kaduna and 700 km in Katsina)\. Future road construction will be done by contract\. The project would rehabilitate by force accow\.t feeder roads of 300 km in Kaduna and 400 km in Katsina States\. Routine maintenance of feeder roads will be done by force account\. A rural water supplies component with a target for a construction of 78 minor earth dams (28 in Kaduna and 50 in Katsina); completion of 14 pilot boreholes in each state; construction of 1000 boreholes (400 in Kaduna and 600 in Katsina);  - 8 - and 650 wells (150 in Kaduna and 500 in Katsina) has been added\. All of the rural water supply program will be implemented by contract\. Finally, the program of small scale irrigation (fadamal development by pump has been increased from 2,000 ha of fadama to 17,400 ha (8,700 ha in each state)\. These represent increases from the target of 6,000 ha (3,000 ha in each state) which had been proposed by the states prior to the technical discussions\. 2/ 3\.09 The costs for rural infrastructure component for the remaining three years of project implementation are estimated at US$ 64\.2 million\. 'he states and the Bank have also agreed to: (i) implement the rural roads mechanical rehabilitation and maintenance by fully utilising the existing Corce account capability, and to accelerate its implementation with contractors; (ii) recruit engineering consultants to prepare an inventory of road construction equipment suitable for rehabilitation in the project states, and to rehabilitate them before purchasing any further new equipment; (iii) strengthen the capacity of selected (one or two) Local Government Councils (LGCs) on a pilot basis to carry out routine manual maintenance of feeder roads with support from ADPs, using some of the rehabilitated equipment to establish their initial force account capability; (iv) implement pilot programs to increase the contribution and role of beneficiary communities in the construction and maintenance of rural water supplies; and (v) organize farmers into Water Users' Associations (WUAs) to assume responsibility for installation and mairtenance of drinking water and small-scale irrigation\. (c) Commercial Services 3\.10 Original Design\. The Kaduna FASCOM was established under the erstwhile Kaduna ADP, with the responsibility for procuring and selling farm inputs and implements\. The target for fertiliser sales for the project was 200,000 tons per year\. The component was costed at Naira 29\.3 million (US$44\.4 million)\. As of December 1987, the FASCOM had distributred 1,874 tons of improved seeds, 335,832 tons of assorted fertilisers, and 26,700 litres and 26 tons of agro-chemicals\. 3\.11 Re-Design Proposals\. The objectives of the re-designed commercial services component ore to enhance the financial sustainability of such services, encourage the role of private enterprise in the provision of such services, and establish rural savings cooperatives\. The component 2/ The targets which had been agreed during the technical discussions were 10,000 ha for Kaduna and 20,000 ha for Katsina\. However, upon closer examination, the agreed targets were thought to be unrealistic, both financially as well as in terms of physical implementation capacity, even by contract\. Also agreed during technical discussions, but omitted in the current re-design document due to lack of funds and a more realistic assessment of the states' physical implementation capability, was the completion by contract of 2-3 medium scale (2-3,000 ha each) irrigation schemes\.  - 9 - is costed at US$ 26\.4 million for the next three years\. The physical targets for inputs distribution remain largely unachanged\. Funds are earmarked for studies on development strategies for cooperatives and rural marketing and storage\. Most of the actions and policies agreed related to the operations of the state-owned Farm Supply Companies (FASCOMs) which were created as commercial wings of the ADPs\. Each FASCOM would adopt a Commercial and Financial Policy Statement aimed at making it financially self-sustaining\. Finally, the states agreed to prepare programs for the partial or complete privatization of their FASCOMs during the next three years; and appoint cooperatives and private firms as retail agents to the FASCOMs\. 3\.12 The states and the Bank have agreed to: (i) allow the management of farmer supply companies (FASCOMs) the latitude to set retail prices aimed at meeting profit objectives established by the Board of Directors; (ii) appoint consultants to recommend policies and actions which would lead to eventual partial or complete privatisation of FASCOMs, with farmers becoming shareholders; (iii) direct the expansion of FASCOM retail activities to remote or less developed areas which have a high agricultural potential but where the private sector is unable or unwilling to provide input supply services; (iv) support the role of private traders and cooperatives in input supply at the retail level through agency arrangements and technical assistance from FASCOMs, and where feasible sale or leasing of FASCOM retail outlets to private traders and cooperatives; (v) establish a Farm Enterprise Development Service (FEDS) in each FASCOM; (vi) establish a self-sustaining Farm Enterprise Development Venture Capital Fund (FEDVCF) in each FASCOM 3/ to provide guarantees or r4\.sk capital for pilot programs promoted under the project to commercialise and privatise seed multiplication, land-use planning, seedling distribution, animal health, input retailing services, and maintenance of rural water supplies and fadama irrigation facilities\. These pilot programs are intended to coordinate commercial and financial assistance programs which are proposed to be provided to firms and individuals in support of the privatisation pilot programs of the project; (vii) establish and manage (through the FASCOM and with the participation of livestock farmers' groups) a Veterinary Drug Revolving Fund for the sale of drugs and vaccines for animals\. (d) State Ministries of Agriculture and Natural Resources (MANRs) 3\.13 Re-Design Proposals\. An MANR component was not included in the previous project\. The strengthening of the capacities of state ministries of agriculture (MANRs) for state-level sector planning, expenditure programming and implementation, policy formulation, and regulatory control (including over the ADP) is one of the cornerstones of the Bank's strategy for supporting sustainable agricultural development in Nigeria\. Total costs for this component, which consists primarily of long term technical 3/ Consultants would be recruited by each FASCOM to examine the feasibility of establishing the FEDS and FEDVCF along the lines described above\.  - 10 - assistance and studies to the MANR for planning, are estimated at USS 0\.8 million\. 3\.14 The states and the Bank have agreed to improve the quality of sector expenditures and strengthen principal service institutions (especially the ADPs and MANRs) by: ti) strengthening the capacity of the MANR for sector policy formulation, planning and expenditure programming; (ii) conducting reviews of agricultural institutions (under the direction of the MANRs) with a view to improving their effectiveness, efficiency, and sustainability; and (iii) undertaking in-depth studies to examine the prospects and requirements for establishing cooperatives into mainstream of commercial activities, establishing Cooperatives Financing Agencies (CFAs) in the project states along the lines of the Bauchi CFA, and for improving produce storage and marketing in the project states\. (e) Proiect Management 3\.15 Re-Design Proposals\. The erstwhile Kaduna ADP had the highest complement of expatriate staff among all ADPs in Nigeria\. Since the bifurcation of the project, the proportion of Nigerians among the newly appointed senior management staff in both states has increased\. Additional measures were agreed with the states to strengthen project management (especially in manpower development and finance) and accelerate project implementation in both states\. Previously costed at Naira 29\.4 million (USS 44\.2 million), the component is now expected to cost US$8\.7 million\. Specific measures which were agreed with the states to strengthen project management and finance are as summarized below\. (i) Proiect Finance and Stores\. Streamlining the internal procurement procedures of ADPs, the states agreed to establish a Procurement Unit and a Tender Committee in each ADP\. (ii) Manpower Development and Training\. Increased emphasis on manpower development and training, and for that purpose appoint consultants for a fixed term to design and implement manpower development programs\. (iii) Planning, Monitoring and Evaluation\. Strengthening of the Planning, Monitoring and Evaluation (PME) Units of the ADPs in each state through staff re-deployment, recruitment of better trained staff, an intensified training program, and provision of necessary computers\.  - 11 - IV\. DETAILED PROJECT FEATURES A\. Agricultural Services\. 1\. Extension Services 4\.01 Kaduna and Katsina states each have 43,400 and 22,662 sq km respectively, of which 20,220 and 17,705 sq km respectively are under cultivation by about 586,000 and 863,000 farm families respectively\. The redesigned project would aim at reaching some 300,000 farm families in Kaduna state and 500,000 farm families in Katsina state respectively\. 4\.02 Under the erstwhile KADP, the number of Village Extension Workers (VEWs) was reduced progressively from 1,135 in 1985 to 625 in 1986 as part of the effort to improve the effectiveness of the services\. Over 3,000 group meetings were organised and 8,437 demonstration plots established by the extension services to impart improved farm practices to farmers (1986 data)\. Both states maintained parallel extension services for crops, livestock, farm-forestry, soil conservation etc\. Experience with the recent introduction of the Training and Visit system of extension (under wh'ch all extension services are unified) has demonstrated the greater operational and cost effectiveness of a unified extension service\. Therefore, an important aspect of this component would be the introduction of the T&V system (a change from Training and Demonstration - T&D) and unification of all extension activities under the ADP\. At the village level, extension messages would be communicated through fortnightly visits and applied through corner plots established and maintained by farmers\. This represents a shift from the use of demonstration plots maintained on farmers' land by extension agents under the T&D system\. One VEW would be expected to cover about 1000 farm families\. The ratio of Block Extension Supervisors (BESs) to VEWs would be about 1:8\. To guard against the risk of over-staffing the ADP extension services, the ADP would not exceed the ratio of VEWs and BESs to farmers specified above without the approval of the ADPEC\. Monthly Technology Review Meetings (HTRKs) and Fortnightly Training Meetings (FTMs) to train extension agents and update the knowledge of Subject Matter Specialists (SMSs) and expose the VEWs to research would be held regularly\. Farmer training would be carried out through group meetings using audio visual aids and on their own corner plots\. 4\.03 The project would disseminate the benefits of using fertilisers, im?roved seeds, and use of pesticides and herbicides, and applying the recommended cultural practices\. For advanced farmers, the project would concentrate on the more intensive use of fertilisers based on tested soil requirements for selected farmers\. Soil testing would be done in laboratories which would be under the management of the Chief Research Officer\. For the fadama areas, the extension activity would consist of improved cultivation practices and more intensive agricultural practices based on irrigation, as well as the management of small scale irrigation facilities\.  - 12 - 4\.04 The re-designed project would fund communication support for extension services, equipment and vehicles, civil works, technical assistance, MTRMs, FTMs, and other inc*remental operating costs\. In addition, extension staff would undergo refresher courses once every three years\. Courses would aim to update professional skills, would be residential at a research or training institute (mostly at ARMTI), and would be for about 4 weeks duration\. The courses wauld cover (i) technical aspects of crop and livestock production; (ii) extension methods; and (iii) supervision and management of extension programs\. The (a) unification of extension services, and (b) adoption of the T&V system of extension (which implies in part replacing demonstration plots maintained by extension agents with corner plots maintained by farmers) would be completed in each state by June 30, 1990\. 4\.05 Women in Apriculture(WIA)\. The erstwhile KADP does not have a specific WIA program, although some form of WIA extension is provided through the home economics programs of the states\. While virtually all rural women engage in agricultural processing, some also participate throughout the entire agricultural season from weeding through harvesting and even marketing\. Many are owners or caretakers of small livestock\. The farm enterprise is characterized by separate plots for husbands and wives who usually have different income streams and resources\. Few farm women are currently reached by extension services\. The re-designed project would adopt a phased approach to providing direct support to women in agriculture in the two states with programs tailored to specific extension zones\. However, extension for women farmers would be part of the unified system\. Some retrained home economists would be used to increase numbers of female VEWs, thus enhancing capacity to reach women farmers where cultural conditions necessitate female agents\. The WIA program would be reflected seperately in the annual work programs of each ADP, and that each ADP would submit its first WIA program to the Bank for review before June 30, 1990\. 2\. Apro-Forestry and Land Resorce Manaaement 4\.06 Agro-Forestry\. The redesigned project's agro-forestry component is aimed at increasing the acreage planted to trees by strengthening ADP agro-forestry services through increased production of nursery seedlings and upgrading existing nurseries\. Availability of seedlings at farm level will be 4acreased, from the erstwhile KADP annual target of 0\.27 million seedlings to 2\.7 million seedlings during the project period using eleven nurseries in Kaduna state, and 1\.045 million seedlings from seven nurseries in Katsina state\. The project provides for establishment in each state of: (a) about 50 fodder tree lots of size 0\.25 ha each on farmers' land; (b) 500 biological soil conservation plots (each 0\.25 ha) on eroding agricultural lands; (c) 650 units of wind-breaks/boundary trees (each being 250 m long in Katsina and 400 m long in Kaduna) on private farm-lands; (d) tree nurseries (11 in Kaduna and 7 in Katsina) to distribute fuelwood and fruit tree seedlings; and (e) 40 units of community woodlots in Katsina state (each 5 ha) and 90 community woodlots in Kaduna state (each 5 ha)\. The FASCOM in each state would have the primary responsibility for marketing the seedlings, beginning with fruit seedlings\. The beneficiary  - 13 - comminuties would be provided with seedlings (as much as possible at cost for non-fruit seedlings, and at cost-plus prices for fruit seedlings) and other inputs by the FASCOMs, and extension advice by the ADPs\. There would n,t be any demonstration woodlots to be maintained by the ADPs or FASCOMs\. Rather, extension service staff would assist farmers to establish corner plots on their own farms\. The village communities will be involved in joint participation for initial planting and post planting care and management\. However, before any major expansion of the initial seedling production capacity is undertaken, demand projections for tree fruits would be made by the FASCOMs\. Fruit and forage tree production would be undertaken with project resources only to the extent that trees are saleable at marke\. prices with individual farmers and cooperatives organized by the iASCOMs to act as retailers, and the FASCOMs as LGA-level wholesalers\. 4\.07 As an experiment in commercializing agro-forestry through the private sector, each FASCOM would establish two pilot programs of seedling marketing\. One type of program would appoint selected "entrepreneurs" as franchisors, and a second type would appoint selected 'entrepreneurs" as contractors\. Franchisors would receive a franchise at cost (all on credit) including a standard package of messages and tree nursery, and a command area\. Contractors would be paid on a task basis, with clear incentives and criteria established for assessing their success as contractors\. The states would ensure that each FASCOM would submit to the Bank by June 30, 1990 its plans for appointing, training and equipping at least 5 franchisors and contractors each\. Close coordination would be established between the ADP, FASCOM, and the programs of the Bank-supported Forestry II project (which would work through the unified state/ADP extension se-,vices at the farm level and the MANR Forestry Department off-farm), and the EEC supported agro-forestry project in Katsina State\. To eliminate duplication in the agro-forestry between FACU and FORMECU and ensure proper coordination in this regard, FORMECU would be represented on the Agricultural Services Committees of both Kaduna and Katsina ADPs\. 4\.08 Soil Conservation and Erosion Control\. The re-designed project would implement EAPs (Environmental Action Programs) under their soil conservation and erosion control components\. While the erstwhile KADP had a soil conservation program, more emphasis was placed on demonstration activities, and on mechanical solutions to soil erosion than is intended to be done under the redesigned project\. The focus under the re-designed project in each state would be on extension services, vegetative solutions (particularly vetiveria grass, contour farming, minimum tillage, and alley farming), and on-farm activities by farmers, but not to the total exclusion of preventive or development activities by the ADP\. Moreover, the extension services for soil conservation would be part of the unified services\. The conservation measures using civil works where necessary would be concentrated on spot repairs\. The project provides for necessary machinery, plant, equipment, vehicles, staff and operating funds to efficiently carry out the above functions\. The erstwhile KADP constructed 43,500 meters of contour bunds, 18,500 meters of terraces, about 10,000 meters of diversions/waterways, and aligned 200 km of rural feeder roads\. Under the re-designed project, the targets for soil conservation and land development are as summarised below\. In Katsina state: (a) Kankiya  - 14 - LGA-civil works and planting of hedges to correct gully and stream bank erosion in 12 locations at Gyaza, kunduku, Danjaku\. Dangani, Runjin Idi, Yardua, Rimaye, Yaya Doro, Karfi, Ingawa, and Kankiya; (b) Dutsin-Ma LGA-civil works and planting of hedges to correct bank erosion in six locations at Kuki, Bagagaji, Urima, Rawayau, Makera, and Tsauri; (c) Malumfashi LGA-civil works and planting of hedges to correct gully erosion in 3 locations at Makaurachi, Dankajiba, and Malumfashi; and (d) Funtua LGA civil works and planting of hedges to correct gully and stream erosion in 7 locations at Yankawi, Gwauruwa, Daudawa, Kadisau-Maigora Road, Tandama, Funtua-M/Ruwa Road, and Kurami\. In Kaduna state, soil conservation works and planting of hedges are planned on farmlands covering about 80,000 ha; and reclamation works to correct gully erosion\. Project resources would not be used to support land clearing programs or resettlement schemes in either project state; and payments for civil works will be certified by the FACU Rural Infrastructure Coordinator only if the works are accompanied by the planting of appropriate hedges and other anti-erosion vegetative protection mea3ures\. 4\.09 Each state would have a project-funded erosion control component to be carried out by the extension service, to deal with the serious risks of environmental degradation, particularly in Katsina State\. It would also include minor civil works, and planting along contours of Vetiveria zizanioides, a grass that helps stabilize the soil and control erosion, to rehabilitate land\. 4\.10 Land Use Plannint\. The project would support a Land Use Planning (LUP) program in each state to (a) conduct soil profile and fertility studies; (b) prepare land use maps; and (c) prepare land capability maps with details on areas suitable for cultivation, forest reserves, horticultural/fruit tree development, water retention and storage potential, layout of feeder roads, run-off patterns and potential for reducing soil erosion etc\. 3\. Agricultural Research 4\.11 Under the erstwhile KADP, 2685 farm trials were conducted (1986 data)\. The applied research program, based on multi-disciplinary diagnostic studies of farming systems, has been testing varieties, implements, and agronomic practices on farmers fields along with carrying out related research on experimental farms\. Experience has shown that farmers were not adapting or were oaly partially adopting the technologies developed and advocated by the research scientists\. This situation has highlighted the need for ADPs to establish on-farm adaptive trials (OFATs)\. 4\.12 In each state the ADP would retain a small field trials unit in each of the main ecological zones for adaptive research work, both on station and on farmers' fields\. This component would bring research staff into a closer contact with farmers and extension staff, and would provide an opportunity for programs to be designed in relation to the constraints perceived by farmers\. Problems include: (a) location specific fertilizer component needs; and (b) the integration of new short season cowpeas, groundnut and sorghum varieties into existing farming systems\. Work in the  - 15 - redesigned ADPs would proceed in a step-wise fashion: (a) diagnostic surveys of typical farming systems would be done to determine key constraints by project research and extension staff; (b) when new technology is needed work would begin on the diagnosed problem at the concerned national research institute and in due time the institute would make recommendations; (c) adoption trials of the institute's recommendations on the state's trial units and representative farmers' fields; (d) the extension service would then persuade farmers to try the successful technology on corner plots and to review findings at MTRMs; and (e) analysis of the results obtained from the corner plots of farmers\. This approach is now being tried with initial success under MSADP I and several other ongoing ADPs\. 4\.13 Applied research programs in each project zone will be headed by a Zonal Research Officer (GL12)\. The Zonal Research Officer will be assisted by two zonal research teams, each with an agronomist and a subject matter specialist (SMS)\. The zonal officers will be closely associated with all OFATs in their zones, as well as with the extension service staff\. The Zonal Research Officer will report to the Chief Agronomist at the headquarters who will provide oversight for the ADP research programs as well as for seed multiplication activities\. Funds have been provided in the redesigned project for ad-hoc research consultancies deemed necessary by the project management units of each ADP in consultation with the Bank or PACU as appropriate\. However, the bulk of OFAR would be conducted by IAR Zaria (or in some cases the National Cereals Research Institute-NCRI for rice and tuber crop technologies) on contract from the ADP\. In addition to financing normal agricultural research activities, the project would finance the re'ibilitaion and reactivation of metereological equipment and facilities to cover all research stations and tree nurseries in each project state\. 4\.14 To improve the quality of the research effort, and strengthen the linkage between between extension and research, the re-designed project would fund new programs of sponsored adaptive research between Kaduna and Katsina States on the one hand and IAR Zaria (or NCRI) on the other\. The research component would, in addition to providing for a research unit for field trials within each ADP, involve staff of national research institutes, universities and extension services\. It would fund equipment, vehicles, trials materials and transport costs as well as sponsored adaptive research contracts with the national research institutes for the provision of specific scientific services\. FACU would assist the ADPs in each state to prepare and negotiate memorandum of understanding on sponsored adaptive research with one or more research institutes to seek and receive assistance and support in MTRMs, diagnostic surveys, and problem solving research\. Each ADP would submit its research contracts and adaptive research work program to the Bank for review and approval before June 30 each year\. The research contracts and work programs would pertain to the following crop seasons, which usually begins in September in the project states\. 4\.15 Arrangements under che erstwhile KADP for the Intsitute for Agricultural Research (IAR) at Zaria to provide soil testing facilities for the ADP have so far proved to be ineffective\. The project would make a  - 16 - renewed effort to rely on the IAR for the soil testing work, and would also maintain simple and modest soil testing laboratories for meeting immediate needs in each state ADP\. The laboratories would be used by all the sections of the ADP in need of laboratory services (i\.e\., there would not be seperate laboratories for land-use planning, the irrigation section, water supply, or rsvral roads sections)\. 4\.16 The risk of disaster owing to locust and grasshopper invasions is high in the project states\. In particular, there is an urgent need to augment the understanding of the locust problem which has re-emerged as serious in the northern states\. Therefore, the project would fund a study of this problem in northern Nigeria\. 4\. Seed Multiplication 4\.17 Under the erstwhile KADP, a total of 1515 ha was cropped for improved seed production\. By end of 1986, an aggregate of 1389 tons of seed had been produced and distributed (out of the project target of 8500 tons)\. The re-designed project would continue to support in each state a cereals/pulses seed service to farmers\. The states' intervention is intended to ensure that those species and varieties of crops which can benefit producers are available, and that the quality of seed is satisfactogy\. However, unlike the seed multiplication component under the erstwhile KADP, the re-designed project will rely on outgrowers-for seed supply and will use the ADP seed farms only to meet the shortfalls in supply\. There are five seed multiplication farms in each of the project states (560 ha in Katsina and 955 ha in Kaduna)\. Only three of these farms would be rehabilitated in Katsina, and two in Kaduna state\. In each state, one seed farm would be dedicated to pasture seed production\. In line with state and FGN agricultural policy priorities and the states' agticultural potentials, crops like rice, sorghum, soybeans, groundnuts, cowpeas, maize, and millet would be the main crops selected for seed multiplication\. Foundation seeds would be produced by private farmers and the ADPs under contracts with the National Seed Service (NSS)\. FASCOMs would purchase foundation seeds from NSS and coordinate the production of certified seeds through contract growers\. Seed certification and quality control would be the responsibility of NSS, while planning of seed requirements and technical support services for all aspects of the seed production and processing would be provided by the ADPs\. The capital and operating costs of plant, equipment and machinary for seed processing and qual-\.y control, as well as working capital for purchases from contract growers, are included in the project\. Provision of staff under seed multiplication component will be tailoreds over time proportionate to the magnitude -)f seed multiplication and procurement activity\. 4\.18 Wholesaling of certified seeds would be done through the FASCOM's input distribution network and to the extent possible, licensed private dealers would be used for retailing seeds\. Prices charged for seed would reflect full cost recovery plus reasonable margins for profit at both foundation seed and certified seed levels\. Specifically, seed prices would cover full cost of production, procurement, transportation, processing and storage costs, overhead and depreciation charges plus adequate profit  - 17 - margins for marketing\. Since the high potential demand for improved seed in the country can only be met with a much wider seed grower participation in seed production, contract growers would be paid sufficient high premiums over prevailing commercial grain prices to induce them to enter seed growing contracts\. Prices paid to contract growers would be agreed with them in advance of planting, taking into account large fluctuations observed in commercial grain prices between harvest and planting time\. 5\. Livestock Development 4\.19 Although estimates show that the erstwhile Kaduna state was well endowed with livestock, the KADP did not have a livestock development component, since the Second Livestock Development Project (Ln\. 2737-UNI) was expected to cater for all the state's requirements\. However, the experience of KADP has demonstrated the need for the ADP to have a livestock component, especially under the unified extension service\. Therefore the interventions of the Second Livestock Development Project at the farm level would be implemented through the ADP, while off-farm interventions would be implemented by the Livestock/Veterinary Departments of the state MANRs\. Through the ADPEC, close coordination would be established between the ADP and all the other agencies involved, including the National Livestock Development Project (NLPD)\. 4\.20 Animal Traction\. Animal traction was not an important component under the KADP, since tractors were preferred by both farmers and state authorities as the means to extenC the cultivated area beyond the limits imposed by labor constraints\. The SAP has made tractors and similar motorised forms of farm mechanisation financially and economically unviable, even to most large-scale farmers\. Consequently, an important thrust of the redesigned project would be support for crop/livestock integration and the adoption oc animal-powered traction to overcome constraints on draft and mecha\. ical power supply\. Given the present crop technology, the combined crop: \.imal farm enterprise provides one of the most attractive options for farmers to expand crop acreage and significantly iD_rease farm incomes\. Equally important is the fact that only by using livestock to build soil fertility can crop yields be maintained over the long term in the face of rising fertilizer prices and growing population pressure on land\. Additionally, in the absence of a properly functioning rural credit system, livestock product sales enable crop farmers to purchase crop inputs\. Research by the International Livestock Center for Africa (ILCA) has shown that crop farmers with livestock in Africa use higher quantities of crop inputs than those with no livestock\. 4\.21 The four work oxen training schools in Kaduna state, and three similar moribund schools in Katsina state would be rehabilitated under the project, and credit facilities would be provided to farmers through the NLPD to purchase work bulls and equipment\. Farmers will not only be taught how to train and manage work bulls, but also how to establish fodder banks, improved parture lots, and crupits\. To this end, the existing herd owned by the state governments will be culled and split up between the ox-training schools\. Credit facilities would be provided through NLPD for  - 18 - farmers to procure young work bulls and equipment\. The re-equipment of the work oxen schools is covered under the manpower development and training program\. 4\.22 The re-designed project would provide facilities, equipment (e\.g\., ox-carts), and implements at the training centre and finance operating costs to train ADP staff and farmers in animal traction\. In order to spread knowledge of animal training methods and the cultivation capacity of animal-drawn equipment as widely as po3sible throughout the states, training courses would be short and intensive and would include courses for extension staff who would be instrumental in spreading the program\. Each ADP would submit their plans for the animal traction programs by June 30, 1989, and thereafter along with the annual work plans\. 4\.23 Pasture Development\. Although some attempt has been made to test and multiply new pasture species in the project states, the full potential from improved pasture development has not been realised\. Replanting of seed pastures at Layin Hinista Farm in Katsina state and at other training centres in Kaduna state will be promoted under the re- designed project through the extension service in close collaboration with the seed multiplication and researci program\. The production of pasture seeds, and phased replanting of existing pastures seed production areas has been costed under the seed multiplication component of the project\. It is envisaged that initially 3-4 tons of seeds of legumes would be produced in each state, rising to 8-9 tons by project year three, and similar quantitites of grass pasture seeds will be produced from existing swards\. 4\.24 VeterinarY Services\. In each state the re-designed project would help improve animal health services\. Provision is made for: (i) rehabilitation and procurement of essential equipment for veterinary clinics; (ii) an electrical generator, and minimal laboratory and vaccine equipment for each state headquarters; (iii) vehicles for mobile diagnostic services; (iv) a revolving drug fund; (v) equipment and facilities for private rural veterinary practitioners; and (vi) in Kaduna state a survey to establish levels of tsetse infestation and trypanosomiasis challenge\. The states would take complementary initiatives in moving to full cost recovery for drugs and vaccines, and the licencing of private rural veterinary practitioners\. The ADPs states would work closely with the state veterinary services and professional societies to draw up modalities for privatising veterinary services in a phased manner\. To start off the program to promote private veterinarians, the ADPs would sponsor two entrepreneurial programs in each statek one modelled as a franchise, and a second one modelled as a contract arrangement\. In each case, selected veterinarians would be equipped and trained by the ADPs, and be assigned command areas for a fixed period\. The states would charge full replenishment cost for all drugs and vaccines sold by their veterinary departments beginning from December 31,1989; and the mechanism for licensing private rural veterinary practitioners (incorporating at least two test cases of franchising an,: contracting in each state) would be established, after consultation with the Bank, by June 30, 1989\.  - 19 - B\. Rural Infrastructure 1\. Engineering Services 4\.25 To support project activities and management, the re-designed project provides funds for the construction, rehaAilitation, and maintainance of administrative buildings, staff housing, guest houses, laboratories, fencing of seed farms and pastures, nurseries etc\. The workshops and all engineering services/works would be under the charge of a Chief Engineer to be recruited by each ADP not later than June 30, 1990, and whose qualifications and experience would be satisfactory to the Bank\. Each ADP would maintain their existing vehicle repair workshops for routine maintenance and minor repairs of their vehicle fleets\. These workshops would be stocked with essential spares and tools\. Experience in Nigeria (including KADP) has demonstrated that most ADP vehicle workshops are high cost operations, and are not always the best means to keep the vehicle fleet in good repair, hence machine down-times in excess of 50 are common among ADPs\. Therefore each ADP would (a) rely on contracted private sector workshops or workshops managed by state Ministries of Works for the bulk of their vehicle repair and maintenance work; and (b) submit plans to the Bank by June 30, 1990 indicating how they intend to maintain their vehicle fleet by contract with external workshops\. Such maintenance contracts, especially when established with local private workshops, have the added advantage of promoting the local economy in the project states\. 2\. Feeder Roads 4\.26 The rural roads network is limited in the project states (especially in Katsina) and has deteriorated in some parts of the states to a condition which prevents or seriously impedes the movement of farme,s' supplies and produce during the rainy season, and multiplies the cost of transporting produce during the wet season by a factor of two or three\. The condition of other state roads is variable but in general they are now less of an impediment to agricultural marketing than feeder roads\. As of December 1987 under the KADP, a total of 411 km of feeder roads were constructed and 395 km of feeder roads were rehabilitated (out of a project target of 1400 km)\. The experience of Funtua ADP (FADP) and KADP suggests that the combined feeder road targets of the re-designed project would be more readily achieved if the program is implemented by contract rather than by force account\. There is also evidence (based on the experience of some MSADP I states) that this is a more cost effective alternative\. Provision has therefore been made through a special disbursement category for the re- designed project to execute the bulk of its rural roads program by contract\. Nevertheless, the ADPs in each state will retain their existing force account capability, both to execute a minimal toad construction and maintenance program, and to meet emergency needs of the project\. 4\.27 Under the re-designed project, the objectives of the feeder roads component would be to: (a) strengthen the institutional capacity of the ADP to prepare, implement and monitor feeder road programs by contract; (b) introduce uniform acceptable evaluation procedures for ranking feeder roads based on actual and potential usage in order to establish p\.iorities  for investments; (c) institute systematic periodic, recurrent and routine maintetnance regimes; (d) reduce transportation costs on feeder roads by at least 50X, which would stimulate the integration of rural markets and directly improve farmers margins for marketed crops; (e) develop minimum-cost techniques for large-scale rehabilitation of feeder roads; (f) encourage private sector participation in rehabilitation and maintenance of feeder roads; and (g) revive the capability of selected LGCs in feeder -oad maintenanca\. The selection of roads for rehabilitation and periodic maintainance would be limited to those programs (packages) which have an economic rate of return of at least 15X\. The analysis would be done using a Bank analytical model currently in use by FACU and other ADPs\. Construction of new feeder roads, rehabilitation, and periodic maintenance would be done by contract; while recurrent maintainance would be done by force account using the existing ADP force account capability\. Routine maintenance would be done by LGCs on contract from the ADPs, which would reimburse the LGCs at an agreed rate (currently N=2,000 per km) for work done satisfactorily\. Initially, ADPs would do the actual routine meintenance as they wean LGCs on a phased program to assume responsibility for routine maintenance to standards of performance and financial responsibility required by the project\. Over the re-designed project period the feeder road programs would have the following targets: Kaduna Katsina Total Construction - Km: 400 700 1100 Rehabilitation - Km: 300 400 700 Maintenance - Km\. 300 300 600 4\.28 The project would employ the 'spot improvement' technique for feeder roads rehabilitation, which is a minimum-cost operation to achieve a pre-determined level of service\. This would generally be all-weather, but accepting occasional one or two-day traffic interruptions when seasonal watercourses are in peak flood flow\. Minimum cost geometric standards adequate for the anticipated traffic volume will be adopted\. Periodic maintenance is the replacement of laterite or gravel pavement lost by attrition, and is required at 5 to 10 year intervals depending utpon traffic volume\. Recurrent maintenance is the annual, re-grading and re-compaction of road pavement, and removal of road-side drain silt and vegetation by machine intensive operation\. It would be carried out on all rehabilitated roads\. Routine maintenance is a day-to-day hand-labor operation on all rehabilitated roads to clear culverts, side drains and turn-outs, and rectify wash-outs and pot-holes as they occur, cutting off grasses on the shoulders and removal of fallen branches and other obstructions\. Maximum effort is needed during, immediately preceeding and following, the rainy season\. 4\.29 All of the new construction work will be executed by contract\. The contracts would be bulked per state, and put to local or international tender, depending on the value of the contract\. There are an adequate number of interested local contractors, some with international affiliates, to provide a competitive environment\. The states (with the assistance of FACU) would each prepare an annual rural roadworks program which would,  - 21 - among other things, define the extent of roadworks to be done by force account and/or contract; and (b) the FACU RIC would have the responsibility to submit the work program to the Bank no later than August 31st of each year\. 4\.30 Existing ADP workshops and spares stocks in Kaduna and Katsina would be maintained as back-up engineering units, and any excess capacity would eventually be phased out\. With FACU assistance each state would monitor the cost and product of its force account unit over the first two years of project implementation to compare the efficiency of alternative methods of road construction and maintenance\. These costs would be inclusive of all overheads and would therefore enable a valid comparison to be made with costs and products using contractors\. These comparisons would be compiled by the project and submitted to FACU on a format designed by the latter, and be ready for review with the Bank by December 31, 1990\. 4\.31 LGCs are constitutionally responsible for maintaining feeder roads in their jurisdiction\. The ADPs in each state, with assistance from FACU, would assist LGCs which meet agreed qualifying criteria to carry out routine maintenance of rehabilitated roads in their jurisdictions\. To qualify, a: LGC's unit responsible for routine road maintenance must have an adequate staff capability, including at least one qualified road engineer/technician, as determined by the ADP Zonal Engineer\. The project would finance the recruitment and training of LGC engineering staff as technical assistance, as necessary, and provide each LGC with necessary hand tools and simple machines (non-hydraulic) and equipment for routine road maintenance\. The LGC-ADP standard contract would be agreed with the Bank for each state prior to its adaptation for use\. FACU would assist each state ADP to design and negotiate the rural road maintenance with their respective LGCs\. The first set of such draft ADP-LGC rural road maintenance contracts for at least two LGCs in each state would be prepared by the ADPs with assistance from FACU, and submitted to the Bank by June 30, 1990\. 4\.32 The ADP's Engineering Unit would assist the LGCs to develop effective manual road maintenance programs\. The LGC would agree to engage and provide hand labor on the scale of one length-man per 3 or 4 km of rehabilitated road and one headman per 8 lengthmen\. The project would supply a bicycle for each headman and handtools for each lengthman\. Each ADP's Chief Engineer would agree annual routine maintenance programs with respective LGCs in advance, and would provide them with a simple work specification\. A cost per km based on the ADPs standard costs established in collaboration with FACU engineers would be agreed between project and LGCs, who would pay headmen and lengthmen under their normal payment procedure, and would be reimbursed by the project monthly for all work carried out to a satisfactory standard as certified by the FACU Rural Infrastructure Coordinator\. 3\. Rural Water SuPplY 4\.33 Background\. Under the KADP, the rural water supply component consisted of the construction of 25 medium dams (100,000 cubic meter  - 22 - capacity) and 50 small dams (50,000 cubic meter capacity), and only 12 boreholes\. All works were to be performed by contract\. In the event, very few contracts were issued by the KADP\. As of December 1987\. only 5 dams had been constructed, but the borehole target had been exceeded, with 23 constructed\. 4\.34 Experience with water supply programs in ADPs in neighboring states has demonstrated the potential for significantly improving farmer's access to clean water for human (and thereby releasing labor for agricultural activities) and animal use rapidly by drilling boreholes and constructing open dug wells on contract\. The average costs of boreholes has gradually been reduced (through experience and competition) from about US$15,000 to about US$12,000\. Open dug wells are much cheaper, averaging between US$;,500 and US$3,000 each\. 4\.35 Less than 52 of the rural population in the project area as a whole (but particularly in Katsina state) has access to clean water, and the condition of many of these supplies is unsatisfactory\. The re-designed project would therefore provide for a much expanded rural water supply program in both states than that which was envisaged under KADP, and is considered an important means of increasing the availability of farm labor which is a critical constraint on increased production\. The bulk of the program would be implemented by contract, both for efficiency reasons and in order to achieve the ambitious targets during the implementation period of the re-designed project\. To ensure that the rura! water program takes off on schedule (a) each state would submit its program to the Bank through the FACU RIC by August 31, 1990, and thereafter each year by the same date; and (b) the program would detail the extent of works to be done by contract\. 4\.36 Boreholes and Wells\. The project is already in the process of implementing a pilot program of boreholes per LGA in each state\. Tender documents for these have already been prepared and would be issued to approved contractors soon\. Solar power pumps would be installed on 5 out of 14 boreholes in each state on an experimental basis, and FACU would provide technical assistance in the selection of types and locations\. These pumps would be studied for their viability\. 4\.37 The proposed investments would be based on an initial review of the needs of the rural sector\. The first phase of the rural water supply program provides funds for construction of 1000 boreholes (400 in Kaduna and 600 in Katsina) and 650 wells (150 in Kaduna and 500 in Katsina) in the two states\. The target would be expanded in consultation with the Bank depending on a number of factors, such as: the implementation capacity of each state, willingness of the beneficiary communities to contribute 10X of the capital costs either in cash or kind, the success in establishing successful Water User's Associations (WUAs) and training and tooling of village mechanics, and the overal\. standard of maintenance achieved\. Each state would recruit consultants initially to study the hydrology, determine specific locations and design the boreholes/hand pumps etc\., to provide the basis for the tendering and selection of suitable contractors\. Each borehole or well would be sheltered with irrigated trees and bushes planted by the contractor and maintained by the village mechanic as part of the  - 23 - anti-desertification program of the project\. To the extent possible, tree nurseries and shelter belts supported by the project would be located near the wells and boreholes as a means to reduS the irrigation costs of the programs\. 4\.38 Based on the experience in project states, one well would likely be able to serve the needs of about 400 farm families\. Training of village mechanics at each site would be the responsibility of contractors who would be supervised by the Fadama Development Units (FDU's) of ADPs\. The project would assist LGCs to establish self-managed (WUAs) to raise funds for spares, operational maintenance and eventual replacement, and to train and equip local village mechanics to repair and maintain the pumps\. The trained village mechanics would each be assigned "command areas' within which they would be responsible for routine maintenace of the wells and boreholes, and be paid a fee by the ADP initially (collected from WAs), and subsequently directly by the beneficiary community\. The ADP would be responsible for recurrent and periodic maintenance of the facilities, and reqularly inspect the quality "f work performed by the village mechanics\. For the purpose of overseeing the proper maintenance of the water supplies, recruiting and training village mechanics, and establishing WAs, the ADPs could issue contracts to private firms as part of the construction contract, at least for the first year period of operations\. Each ADP would submit plans to the Bank, by September 30, 1989, for (a) assisting the formation of at least 5 WUAs each year; (b) training and equipping at least 5 village mechanics; and (c) beneficiaries contributing at least 1O0 of the capital costs of a borehole or well (either in cash or kind) before siting a borehole or well in their community\. 4\.39 Earth Dams\. Earth dams in which surface water can be collected are another source of water supply which the redesigned project would fund in each project state\. They are especially suitable as a source of water supply for animals or humans in areas where there are insufficient quantities of underground water\. The KADP project to date has built 5 dams in Kaduna and none in Katsina state\. The redesigned project provides for construction of 28 earth dams in Kaduna and 50 dams in Katsina, all by contract\. The design of the earth dams would be done by consultants who would be recruited on terms and with qualifications satisfactory to the Bank\. Each earth dam would be sheltered with irrigated trees and bushes planted by the contractor and maintained by the ADP as part of the anti-desertification program of the project\. To the extent possible, tree nurseries and shelter belts supported by the project would be located near the earth dams as a means to reduce the irrigation costs of the programs\. As a condition for siting an earth dam, the beneficiary community would contribute at least 102 of the capital costs, either in cash or kind\. To the extent that the ADPs have the capacity to build additional dams by force account, they would extend the targets beyond those which has been established above\. In both states, the ADPs have a force account capacity to construct 18 dams each, while Katsina ADP plans to rehabilitate an additional 47 dams similarly\.  - 24 - 4\. Irrigation 4\.40 Fadama Development\. There is a considerable scope for developing small scale irrigation in both states\. At present, irrigation development is at quite different stages in each state\. The preliminary estimates suggest that Kaduna and Katsina have about bO,000 ha and 46,000 ha of fadama areas, respectively\. The project w \.ld aim at developing 8700 ha of washbores and shallow tubewells, starting with 1500 ha in the first year, 3000 ha in the second year and 4200 ha in the third year, in each of Kaduna and Katsina states\. These targets will be adjusted upward depending on the results of preparation studies by consultants recruited by ADPs in each state\. Studies would be conducted by consultants recruited by each state with terms and qualifications satisfactory to the Bank, and the results of the studies would be submitted to the Bank for review and comment by each ADP before actual construction begins\. 4\.41 The implementation of the fadama development programs would be done by the project as well as contractors\. The contractors would be supervised by consultants appointed with the Bank's approval\. A minimum 15Z overall economic rate of return will be required for the program in each project sttte\. Provision is made for the purchase or lease of hand drilling sets, bailer drilling equipment, and rigs to be used by the FDUs and contractors\. The emphasis will be on the hand drilling sets and bailer drilling equipments\. By 1990 the project will establish at least 50 bailer teams which will be enccuraged to eventually spin off from the ADP and start the contracting business\. 4\.42 There is a high premium on the ready availability of water for irrigation, and unsubsidized fadama irrigation has already been demonstrated in adjacent states to be highly profitable\. An indicator of the high profitability is the fact that until credit facilities became available recently in the adjacent states, otherwise poor farmers readily paid up to N-400 (at one time equivalent to US$400) cash to have a tubewell installed on their farm with capacity to irrigate up to 2 ha\. The payback period for tubewells (now costing around N-1,500) installed on a one ha fadams planted to vegetables is reckoned to be 1\.5 years\. 4\.43 The project would also train and equip local village mechanics to repair and maintain the pumps\. The trained village mechanics would each be assigned "command areas' within which they would be responsible for routine maintenace cf the pumps, and be paid a fee by the farmers\. 4\.44 Surface (Gravity) Irrigation Schemes\. In both states there are some small to medium scale surface irrigation schemes under the state governments which have been only partly completed\. The re-designed project would complete a number of these schemes which may be economically viable, provided the states are willing to transfer such schemes to the jurisdiction of the ADPs\. In the interest of speed and efficiency, all such surface irrigation schemes would be completed by contract following Bank procurement procedu&res\.  - 25 - 4\.45 In Kaduna State 2 schemes have been identified (Kuzuntu-2000 ha, and Kagoro-1,000 ha) out of a possible 9, which appear to be the most viable for completion under the project; a similar number of schemes (Manlle-1000 ha, and Jare River Basin-1000 ha) have been selected in Katsina State\. If agreement can be reached through on-going discussions between Katsina State and FG( ta transfer Zobe Dam from FGN jurisdiction to the State's jurisdiction, an additional 2000 ha of fadama development would be added to the medium-scale irrigation program\. WUAs will be formed under the command of these schemes\. The groups would operate and maintain water channels by beneficiary contribution in cash or kind\. Each ADP would develop, and submit to the Bank by June 30, 1990, the structure and operating procedures for WUAs, and form at least two pilot WUAs\. Given the experience of Bida ADP, a lot of attention needs to be given at an early stage to sustainability of the farmers' groups and farmers' responsibility\. 4\.46 FACU is presently making an in-depth review of these schemes and will make recommendations on which ones should be completed under the re- designed project\. The Bank would review these recommendations before the related irrigation works are undertaken\. Funds have been provisionally earmarked to complete 2 schemes in each state, for a total area of about 4,000 ha in each state\. In areas where these schemes would be completed, groups of farmers would be organized by the ADPs to form WUAs and would be assisted to obtain credit from local banks to purchase materials for construction of on-farm water channels\. The groups would operate and maintain the channels by beneficiary contribution of in cash or kind\. Each state ADP, with help from FACU, would recruit consultants on terms and with qualifications satisfactory to the Bank no later than March 31, 1990, to prepare feasibility studies and supervise the execution of the irrigation works\. C\. Commercial Services 1\. Farm Supply Companies (FASCOMs) 4\.47 Farm Inputs\. Under the erstwhile KADP, a total 335,831 tons of fertilisers, 16,701 litres of herbicides, 25\.7 tons of pesticides, 2,067 units of sprayers, and 1,126 units of ploughs were sold to farmers in both states\. Under the re-designed project, loan funds would be provided to the states for non-fertilizer inputs (seeds, herbicides, pesticides, seed dressings, water pumps, animal drawn equipment including carts, agro-processing machinery and miscellaneous tools)\. Funds for non-fertilizer inputs would be sufficient to meet estimated demand for the first year, and for incremental demand thereafter\. The re-designed project would fund limited rehabilitation of wholesale warehouses and essential bulk transport fleet in both states\. 4\.48 The FASCOMs supported by the project would be expected to operate as profit making enterprises, with the objective on ensuring their self-sustainability following project completion\. To that end, the states would ensure that the FASCOMs are allowed the lattitude to price their inventories in such a way as to assure their ability to: (a) replenish their inventory using imports through the foreign exchange market;  - 26 - (b) realize a minimum rate of return on assets (RTA) of at least 102; and (c) realize an annual growth in volume sales of at least 5X\. The state governments would retain their influence through the Board of Directors of the FASCOMs\. Such pricing lattitude would ensure that the FASCOMs remain competitive relative to other sources of farm inputs, and at the same time do not undercut private traders through subsidised sales, which would in the long run be against the interest of farmers who benefit by having alternative sources of farm inputs\. This pricing policy would also ensure that project inputs are only applied to economically viable enterprises\. a draft Commercial and Financial Policy Statement (CFPS) outlining a set of principles to be adopted as a guide the operations of the FASCOMs in each state has been discussed with the states\. Each FASCOMs would modify the draft CFPS along principles to be agreed with the Bank, and adopt its own final version of the statement from March 31, 1990\. 4\.49 An important objective of the KADP was the privatisation of the FASCOM, but there has been almost no progress in this regard\. Under the re-designed project, efforts to diversify the shareholding of the FASCOMs in each state would be redoubled\. The main objective would be to sell shares of the FASCOMs to retailers (e\.g through a charge on their wholesale purchases from the FASCOMs), private investors, and farmers, either as individuals or as cooperatives\. Consultants with qualifications and experience satisfactory to the Bank would be recruited by each FASCOM's Board of Directors to prepare privatization plans for the follow-up project to Kaduna/Katsina ADPs\. The study by consultants would begin in each state by June 30, 1990 and be completed by 1991\. The consultants would be recruited and under terms of reference satisfactory to the Bank\. The FASCOM in each state would be responsible for overseeing the study\. In addition, the re-designed project would develop a program in the FASCOMs to promote the role of the private sector (traders and cooperatives) as retailers and wholesalers of farm inputs\. The program would include business advice and training, facility renovation or rental (of FASCOM owned premises), and agency appointments\. The long run objective is that from January 1, 1992, FASCOMs in each project state would limit their inputs trading operations to one wholesale outlet per LGA, and their supplies would be retailed through private distributors and cooperative stores\. 4\.50 To promote the role of private traders in input supply in the project states, the FASCOMs would appoint an number of such traders and cooperative organisations to act as cheir retail agents, and to phase out their operations in such locations\. Each FASCOM would submit a list of private retail agents it has appointed to act as its retail agents along with the procurement plans for each subsequent year\. 2\. Farm Mechanisation 4\.51 The re-designed project would promote the adoption of appropriate farm mechanisation through importation of farm implements by the FASCOMs for sale to farmers at full price\. Among the implements to be promoted by the FASCOM and ADP would be animal drawn ridgers, tool bars, multi-crop seeders, power tillers, and low horse-power tractors\. To the  - 27 - extent that there is a technical capacity and need for developing locally appropriate farm machinery, the FASCOM would award such design and/or fabrication contracts to competent firms (local or overseas as appropriate)\. If the subsequent machinery turns out to be popular with farmers (i\.e\., meets farmers' felt needs), the FASCOM would award a larger contract to competent engineering firms to fabricate larger quantities for sale through the FASCOM's retail outlets\. While the project (through the ADP) would recruit farm mechanisation specialists to provide extension advice and promotion to farmers, the actual importation, demonstration and sale of farm machinery would be done by the FASCOMs on a commercial basis\. Accordingly, the farm mechanisation component has not been costed seperately, but rather as part of the input supply component\. To lay the analytical foundations, identify possibilities, and recommend a strategy for promoting appropriate farm mechanization through a subsequent project, the project would finance a study in each state\. Each ADP would recruit the consultants to carry out the study by March 31, 1990, on terms of reference and with qualifications satisfactory to the Bank\. 3\. Agro-Processina 4\.52 The re-designed project would promote the use of appropriate low-cost agro-processing machinery such as threshers, dehuskers, hullers, decorticators, oil extractors, and grain milling equipment\. To the extent that there is a technical capacity and need for developing locally appropriate agro-processing machinery, the FASCOMs would award such design and/or fabrication contracts to competent firms (local or overseas as appropriate)\. If the subsequent machinery turns out to be popular with farmers (i\.e meets farmers' felt needs), the FASCOM would award a larger contract to competent engineering firms to fabricate larger quantities for sale through the FASCOMs retail outlets\. While the project (through the ADP) would recruit agro-processing specialists to provide extension advice and promotion to farmers, the actual importation, demonstration and sale of farm machinery and agro-processing equipment would be done by the FASCOMs on a commercial basis\. Accordingly, the agro-processing component has not been costed seperately, but rather as part of the input supply component\. To lay the analytical foundations, identify possibilities, and recommend a strategy for promoting appropriate agro-processing technologies through a subsequent project, the project would finance ar\. agro-processing study in each state (to be undertaken as part of the farm mechanization study)\. 4\. Storage 4\.53 The need for improved on farm storage has been more acutely felt over the past few years all over Nigeria following bumper harvests in 1985 and 1986\. Following the good rains experienced in 1988, another bumper harvest comparable to 1986 is expected\. Post-harvest losses are high, and are variously estimated by experts in Nigeria as ranging between 10-20Z of production, particularly for maize\. Therefore, the project would promote on-farm storage of farm produce through importation of lined gunny bags and storage bins (if necessary designed specifically on order) by the FASCOM for sale to farmers\. FASCOMs would recruit consultants under the terms of  - 28 - reference acceptable to the Bank to do studies on the storage losses which will be completed by March 31, 1990\. 5\. Cooperatives 4\.54 The potential for improving farmers incomes through the development of voluntary and farmer nontrolled commercial cooperatives is thought to be significant in each of iLhe project states\. However, the experience in the development of cooperatives all over the developing world (including Nigeria) suggests that such cooperatives have to be carefully nurtured, and that they should not be part of any Government organisation (including an ADP)\. Therefore, the project would finance studies by FASCOMs in each of the respective states to review the feasibility and recommend a development strategy for establishing successful agricultural commercial cooperatives\. The studies would be started before March 31, 1990, and undertaken by consultants (probably as part of the rural credit study) and on terms of reference acceptable to the Bank\. 6\. Rural Credit 4\.55 Under the KADP, the need for providing credit to farmers for purchase of farm inputs or to undertake capital development programs was limited for a number of reasons, among them: (a) an overvalued exchange rate made imports relatively cheap; (b) the project did not have fadama irrigation, farm mechanisation, or agro-processing components requiring farmers to make high cost capital iavestments; (c) the low input/output farm technologies applied by most farmers in the project states did not warrant any credit; and (d) farm product prices were fairly high due to the shortages of food occassioned by sluggish food production\. 4\.56 The situation has changed dramatically over the past few years with the introduction of the SAP, the successful promotion of input-intensive farm technologies, and with the introduction of fadama irrigation programs now proposed under the redesigned project\. The devaluation of the naira since 1986 has resulted in a 400-5002 increase in non-fertilizer input prices\. With major inputs like pumps increasing in cost from N400 to N2,000 each, farmers will need short- and medium-term credit to continue using these inputs\. Credit would also be needed for the sale of pumps and tubewells for small-scale irrigation, and of animals for traction and crop/livestock mixed farming\. Apart from unofficial sources, there are very few functioning rural credit channels available to farmers\. There exists a network of credit and marketing cooperatives throughout each state which need to be revitalized for making them commercially viable\. Experience with Bauchi's farmer-owned and controlled Cooperative Financing Agency (BCFA) has demostrated the potential for creating successful farmer-owned credit cooperatives with limited support from the ADP, provided the state does not interfere in the organisation's operations\. The project therefore provides for an in-depth study to examine the requirements for establishing Cooperative Financing Agencies (CFAs) rlong the lines of Bauchi CFA in each statei The studies would be started before I  March 31, 1990, and undertaken by consultants (as part of the cooperative development study) and on terms of reference acceptable to the Bank\. D\. State MANRs 4\.57 Background\. The KADP did not have a state MANR component\. Experience with supporting ADPs throughout Nigeria has demonstrated that MANRs tend to become less effective with the ascendancy of ADPs\. In some instances, ADPs have began to assume responsibility for policy formulation, regulatory control, and other functions which properly belong in the MANRs purview\. In yet some cases (the majority), MANRs have continued to provide the same services in parallel to the ADP\. The result is that vital functions suffer through a confusion of roles, and the resulting organizations (the ADP and MANR) are in the long-run unsustainable\. The objective of the re-designed project for the state MANR is to begin the process of gradually (a) eliminating duplication between MANR and other state agencies; (b) build the role of the MANR as the supervisor of the ADP; and (c) make the MANR the formulator of policies, regulations and programs, and the ADP its implementing agency\. In this first instance, the project would support the strengthening of policy and planning in the MANR, and sponsor an institutional review under the MANR's auspices\. 1\. Sector Policy & Strategic Planning 4\.58 The capacity of the MANRs in the project states to plan effectively for sector development is constrained by the lack of suitable staff, equipment, reliable data and inadequate budgetary support for the planning function\. In each state, the re-designed project would finance the costs of consultants, training, equipment, vehicles and incidental costs to prepare or up-date (five and ten year) resource constrained sector long-term development plans and strategies based on national priorities, and the state's comparative advantage\. To assist each state with the detailed preparation and implementation of this project component, the project would finance a Chief Planning Officer or Adviser in each MANR for three years\. Each state would: (a) prepare a monitorable action plan for strengthening its planning capacity in each of the areas listed above, and submit it for review by the Bank by June 30, 1990; and (b) recruit a Chief Planning Officer or Advisor by March 31, 1990\. 2\. Institutional Review 4\.59 To streamline the provision of agricultural, rural infrastructural, and commercial agricultural services, the re-designed project would finance the costs of a Review of Agricultural Institutions in each state\. The terms of reference of Review Team would be agreed with each state\. The Review would cover the terms of reference, operations, and policies of key agricultural public service institutions with a view to: (a) eliminating duplication and redundancy; and (b) improving efficiency and financial sustainability through possible restructuring\. In each  state, the review is expected to cover the MANR, ADP, and one or two major agricultural parastatals\. The first priority of institutions to be reviewed in each state would be assigned to the MANR and ADP\. 4\.60 Thq State Governor's ADP Executive Committee (\.ADPEC) in each state would constitute itself into a State Agricultural Review Committee, with the Team Leader of the Review Team as ex-officio member and Secretary, to oversee and implement the recommendations of the Review\. The State Governor's Office would be the likely Review Secretariat\. The Agricultural Institutions Review Team would be recruited by June 30, 1990\. Each Review Team would consist of at least a Team Leader (public administration expert), a state finances expert, a financial analyst, and an agricultural services specialist\. To the extent possible, the Review Team would be staffed by Nigerian experts\. Other members would be recruited into the Team as required after consultation between the State Commissioner responsible for agriculture and the Bank\. 4\.61 To initiate and guide the Review, FACU would organize one seminar in each state, with representation from the states, FGN and the Bank\. Within about three months of the beginning of its work, the Review Team would submit an Inception Reptrt identifying the scope of work and program to the State Agricultural Institutions Review Committee and the Bank\. The Inception Report would be reviewed and agreed between the state and the Bank\. The Review Team is expected to complete its work before December 31, 1990\. In order to ensure the digestability of the Review Team's recommendations, the Team would prepare a series of decision-oriented Review Papers\. The Review Team would aim to complete each institutional review within three months\. The Review Team's Draft Final Report would form part of the background material for the preparation of a follow-up project\. E\. Proiect Management 1\. Administration and Personnel 4\.62 Each ADP would have an Administration Department headed by a Chief Administrative Officer, and whose incremental costs would be funded by the project\. The department would function as the secretariat for the Program Manager, in addition to providing security, personnel and staff services, and performing registry functions\. The department would also be responsible for recruitment and grading of staff, and manage the unification of extension services, transfers of staff from the MANRs to the ADPs\. In the case of Katsina state, the department would have major responsibility to work with FACU Project Facilitation Teams (PFTs) to ensure a smooth project take-off in the new state\. The appointment of all TSC staff, extensions of their contracts, terms of their employment, and their terms of reference, and the appointment of the Program Manager, Chief Planning Officer, Financial Controller, Chief Agricultural Officer, officers in-charge of the irrigation, water supply, and rural roads programs, and Chief Engineer of the ADPs; and cf the Managing Director/ General Manager and Financial Controller of the FASCOMs, would be subject to the approval of the Bank on the FGN's recommendation\. The Bank and FGN  have already approved the appointment of several senior managers and TSC staff for both Kaduna and Katsina ADPs and EASCOMs, where they were represented at most of the interviews\. By agreement with FACU\., the Bank and FGN (through FACU) would be represented at future interviews for all TSC staff as well as for the remaining above senior staff\. 2\. Finance, Accounts and Stores 4\.63 The main functions of this department, to be headed by the Financial Controller, would be to ensure that standard, up-to-date computerised accounting systems and controls are introduced/maintained for financial management, stores procurement and issue, and internal audit\. FACU's 'SUN Accounting System" software package ;would be installed in each ADP to ensure comparability of their accounts with those of other ADPs\. Stores issues and procurement would be centralised for the ADP, and overseen by a Stores Controller and supporting staff with suitable qualifications in stores management and procurement\. ADPs and FASCOlis in Nigeria, including those in the project states, have typically experienced considerable difficulty in attracting professionally qualified and experienced accounting and stores management staff\. The Financial Controller for the ADP and Chief Accountant for the FASCOM are the key staff that the ADP Program Manager and FASCOM Managing Director rely on for day-to-day operational control of their organisations\. It is therefore absolutely essential that the right candidates are recruited for these posts, and that a vigorous training program is instituted for developing the right caliber of Nigerian staff to succeed expatriates\. In the meantime, the project states would adopt any one of the following stop-gap measures to obtain the right caliber staff: (i) seek a secondment from staff of auditing firms for a three year period; (ii) offer consultancy terms of service for qualified Nigerian staff; and finally (iii) recruit expatriates on TSC terms\. In order to ensure that they qualify in time to replace either TSC staff or consultants, each FASCOM and ADP would send at least three suitable staff (each) for overseas professional accounting training early in 1990\. 4\.64 The Finance and Stores department would be responsible for maintaining disbursement records of state, FGN and Bank financing of the project, and preparation of annual and quarterly budgets\. Until the ADPs are converted to permanent rural development authorities, the historical accounting convention would be applied for the accounts of ADP\. All ADP expenditures would be treated as development expenditures and would be expensed as incurred\. However, fixed assets would be depreciated over their estimated useful lives\. The FASCOMs however would maintain seperate accounts based on the accrual principle, and with inventories valued so as to assure that they are priced at levels which enable the FASCOMs to replace or increase their inventories using foreign exchange purchased in the foreign exchange market\. 4\.65 Procurement and materials management in most ADPs are generally handled by individual department heads, and there is need to increase the sense of cost-consciousness, especially in engineering and extension functions\. This problem is most frequently manifested by high level of  inventories (often inappropriate ones) maintained by many ADPs, coupled with unacceptably high machine and vehicle down-times, and by premature cannibalization of machinery and equipment notwithstanding the availability of foreign exchange (through on-going Bank project loans)\. FACU's Procurement Assistance Unit is being established under MSADP III to provide more intensive assistance in procurement and stores management to ADPs including these two\. Senior level finance and stores professionals would be appointed, in each ADP not later than June 30, 1990\. 3\. Manrower Development and Training (MDT) 4\.66 Technical competence in many aspects of agricultural project management and implementation has now been established in Nigeria, the major exception being in financial, stores and maintenance management\. However, both Kaduna and Katsina ADPs still rely on a large contingent of TSC staff (number) to a greater extent than all other ADPs in Nigeria, despite KADP being one of the 'older" ADPs\. Therefore, ADP's manpower development programs will emphasize management development, but not at the expense of technical training, especially in agriculture\. 4\.67 The primary objective of the MDT component is to manage the training program of the project, particularly to ensure that qualified Nigerian nationals are available to replace TSC staff at the expiration of their contracts\. In addition, the MDT department would conduct the orientation and induction of staff for the various programs\. The department would be headed by a Chief MDT officer, and would work closely with ARMTI and establish contacts with local and overseas training institutions\. Due to the difficulty experienced by ADPP in recruiting qualified accounting and finance staff, the MDT program would place particular emphasis on overseas training of at least three suitable project staff in each ADP and three in each FASCOM for professional accounting (ACCA or equivalent) qualifications\. Staff identified for overseas accounting/financial management training would be at least Higher National Diploma (HND) holders, and would be selected no later than June 30, 1990, and after successfully completing their training, the staff would be bonded to serve the project for a five year period\. 4\. Planning, Monitoring, and Evaluation (PME) 4\.68 To assist the Program Manager to plan, monitor the progress and evaluate the impact of the redesigned project, there is be a PME department in each ADP whose incremental costs would be covered by the project\. It would be responsible for preparing project quarterly, semi-annual, conducting special surveys, and annual performance reports for internal management use, as well as for submission to FACU, APMEU, and the Bank\. The PME department would also be responsible for implementing the Planning, Budgeting and Monitoring System (PBMS) in consultation with FACU, and for conducting market surveys\. The PME department would have the coordinating responsibility (under the direction of the Program Manager) for ensuring that all covenants agreed with the Bank and FGN are compiled wtth, and would act as the principal operational contact between the ADPs and the  Bank/FGN during supervision missions\. Finally, the PME department would be responsible for preparing Mid-Term Reviews (MTRs) and the Project Completion Reports (PCRs) in collaboration with APMEU and FACU, and for preparing a follow-up project\. 4\.69 The department would have the following units, each headed by a suitably qualified staff: Planning, Management Information System (MIS), Evaluation, Survey, and Data Processing\. The department would be headed be a Chief Planning Officer reporting to the Prog-am Manager, with appropriate experience and post-graduate degree level training in economics and/or statistics\. To up-grade the quality of PME staff, MDT would design and implement intensive training programs in collaboration with local and overseas training institutions\. Ideally, the PME department should be staffed exclusively with staff with at least HND qualifications\. The ADPs should make an effort to maintain the number of non-secretarial and administrative staff in the section to less than 50\. Each ADP would submit programs to strengthen their PME departments along the lines outlined above before March 31, 1990 for the Bank's review and approval\. F\. Federal Support it\.70 This is an auxilliary but essential component which is not funded under this project\. The FGN agencies concerned (FACU and APMEU primarily) are funded under other on-going projects\. 1\. FACU 4\.71 Start-up activities for the re-designed Katsina ADP and re-start-up activities for Kaduna ADP have been undertaken by FACU through its Project Facilitation Teams (PFTs) following the pattern already applied in the Multi-State ADPs\. The PFT entails a 4-week intensive program involving state counterpart staff and FACU consultants/experts covering the various sub-programs/components\. The PFTs provide orientation training for state counterparts and other key staff; develop a First Year Plan, including a detailed plan for the ensuing quarter; set up personnel, accounting and other administrative systems\. FACU would also supervise the projects regularly on behalf of the FGN, and accompany Bank supervision missions as appropriate\. FACU staff would also train project personnel in the SUN Accounting System, and the PBMS system\. 4\.72 MSADP III provides funds to FACU to employ local and foreign consultants to carry out studies or to provide short-term expert advice on project-related issues\. Some of the studies to be undertaken include examining ways to expand the role of rural micro-enterprises and women in agriculture, effect of declining rainfall on crop production in Katsina, comparison of force account and private contracting in roadworks, preparation of annual roadworks, diversiification of agriculture and introduction of new crops in Kaduna\.  2\. APMEU 4\.73 APMEU would undertake quarterly and mid-yearly review of project performance and send report of the same to the Bank, ADPEC, FGN and the Bank\. These reports would constitute a critical source of review independent of the ADPs and FACU, which are more closely involved in project implementation\. In addition, APMEU' would assist the PME department to prepare survey programs, train enumerators, install data processing software programs and train the staff on its use\.  - 35 - V\. COSTS AND FINANCING A\. Cost Estimates 5\.01 BackRround\. Total project costs under the KADP were estimated at US$193\.7 million in 1983 (SAR Report No\. 4512-UNI dated September 20, 1983), for which a Bank loan of US$122 million (632 of project costs) was approved by the Board in 1984\. The FGN was supposed to contribute US$39 million (20X of total)s while the Kaduna State government was supposed to contribute US$24 million (12Z of project costs)\. The rest of US$9 million (5Z of project costs) was supposed to be contributed by project beneficiaries\. Between July 1985 (when the loan became effective) and November 30, 1988, the sum of US$31\.2 million had been disbursed by the Bank\. As of December 31, 1988 1/, the project expenditures have been estimated at Naira 182\.6 million, equivalent to US$68\.4 million\. Only US$31\.2 million had been disbursed from the Bank loan of US$122 million, compared with the appraisal projection of US$116\.5 million\. 5\.02 Revised Cost Estimate\. As shown in the following tables (Tables 1, 2 and 3) the re-designed Kaduna/Katsina ADP, including the expenditures already incurred since the loan became effective, is now costed at Naira 1,110\.8 million (US$182\.6 million): of which Naira 1\.7 million (US$0\.3 million) relate to the front-end fee; Naira 455\.5 million (US$89\.4 million) relate to Kaduna ADPs and Naira 655\.3 million (US$92\.9 million) relate to Katsina ADP\. Total project costs for the remaining 1989-91 development period are now estimated at Naira 928\.3 million (US$113\.9 million): of which 429\.9 million (US$52\.9 million) for Kaduna ADP; and Naira 428\.9 million (US$51\.0 million) for Katsina ADP\. The project costs are summarized in Annex II and the detailed cost estimates by states are contained in the Working Paper on the cost-tables\. 2J 5\.03 Of the revised project cost of US$182\.6 million over the entire implementation period (i\.e\., since 1985), the Bank would finance US$122 million, 67Z of total project costs\. In accordance with the criteria used by the Bifurcation Committee, US$58\.0 million would be allocated to Kaduna ADP, while US$63\.7 million would be allocated to Katsina ADP\. FGN's total contribution to the re-designed project (i\.e\., since 1984) would amount to US$24\.0 million 3/ (132)\. The State Governments would contribute US$36\.6 1/ The latest year for which the project expenditure data are available from the Quarterly Reports of Kaduna ADP and Agricultural Projects Monitoring and Eveluation Unit (APMEU)\. 2/Cost tables are inclusive of the front-end fee, while the summary financing plan presented in Tables 1 through 3 separates the front-end fee from the component and disbursement categories\. 3/ US$ 20 million between 1984-88; and US$ 4\.95 to Katsina ADP and 4\.96 to Katsina ADP for the 1989-91 period\.  million 4/ (212) of the project costs\. Kaduna and Katsina State Government contributions are largely limited to the payment of estimated taxes and salaries of local project staff\. The total cost of the project after the devaluation of Naira in 1987 is estimated to be US$124\.4 million\. The Bank loan fox this period is US$95\.3 million which is 77? of the project cost\. The financing plan by expenditure category and by state are summarized below\. It should be noted however that the estimates for exenditures since 1984 are deducedlinferred as balancing items\. Table 1\. SUNMARY PROJECT FINANCING PLAN FOR TOTAL PROJECT (in US$ Million) IBRD FGN SG TOTAL (a) By Project Component Agriculture 7\.5 3\.2 3\.1 13\.8 Rural Infrastructure 54\.3 3\.0 6\.9 64\.2 Commercial Agricultural Services 22\.0 2\.2 2\.2 26\.4 Project Management 5\.9 0\.5 2\.3 8\.7 MANR 0\.8 - - 0\.8 Expenditure for 1984-89 31\.2 15\.1 22\.1 68\.4 Front-end Fee 0\.3 0\.3 Total 122\.0 24\.0 36\.6 182\.6 (b) By Disbursement Category Buildings and Houses 17\.0 1\.8 1\.0 19\.8 Vehicles, Tractors, Equipment, etc\. 12\.4 1\.4 0\.6 14\.4 Internationally Recruited Staff 6\.9 0\.4 0\.3 7\.6 Chemicals and Implements 16\.5 1\.3 0\.6 18\.4 Contracts for Roads, Water Supply and Fadama Irrigation 35\.4 3\.3 2\.1 40\.8 Salaries and Allowances - - 9\.7 9\.7 Incremental Operating Costs 2\.3 0\.7 0\.2 3\.2 Expenditure for 1984-89 31\.2 15\.1 22\.1 68\.4 Front-end Fee 0\.3 - - 0\.3 Total 122\.0 24\.0 36\.6 182\.6 4/ Computed as US$ 23\.2 since 1984; USS 7\.8 from Kaduna State; an US$ 6\.9 from Katsina State\.  - 37 - Table 2\. SUMMARY PROJECT FINANCING PLAN FOR KADUNA ADP (in US$ Million) IBRD FGN SG TOTAL (a) By Proiect Component Agriculture 4\.0 2\.0 1\.4 7\.4 Rural Infrastructure 23\.2 1\.1 3\.3 27\.6 Commercial Agricultural Services 11\.3 1\.1 1\.1 13\.5 Project Management 2\.7 0\.3 1\.0 4\.0 MANR 0\.4 - - 0\.4 Expenditure for 1984-89 16\.4 8\.1 12\.0 36\.5 Total 58\.0 12\.6 18\.8 89\.4 (b) BY Disbursement Cateaora Buildings and Houses 7\.3 1\.0 0\.2 8\.5 Vehicles, Tractors, Equipment, etc\. 6\.1 0\.7 0\.3 7\.1 Internationally Recruited Staff 3\.7 0\.2 0\.1 4\.0 Chemicals and Implements 8\.8 0\.7 0\.3 9\.8 Contracts for Roads, Water Supply and Fadama Irrigation 14\.4 1\.5 \.0\.7 16\.6 Salaries and Allowances - - S\.1 5\.1 Incremental Operating Costs 1\.3 0\.4 0\.1 1\.8 Expendit:ure for 1984-89 16\.4 8\.1 12\.0 36\.5 Total 58\.0 12\.6 18\.8 89\.4  - 38 - Table 3\. SUMMARY PROJECT FINANCING PLAN FOR KATSINA ADP (in US$ Million) IBRD FGN SG TOTAL (a) By Proiect Component Agriculture 3\.5 1\.2 1\.7 6\.4 Rural Infrastructure 31\.1 1\.9 3\.6 36\.6 Commercial Agricultural Services 10\.7 1\.1 1\.1 12\.9 Project Management 3\.2 0\.2 1\.3 4\.7 MANR 0\.4 - - 0\.4 Expenditure for 1984-89 14\.8 7\.0 10\.1 31\.9 Total 63\.7 11\.4 17\.8 92\.9 (b) By Disbursement Categorv Buildings and Houses 9\.7 0\.8 0\.8 11\.3 Vehicles, Tractors, Equipment, etc\. 6\.3 0\.7 0\.3 7\.3 Internationally Recruited Staff 3\.2 0\.2 ,0\.2 3\.6 Chemicals and Implements 7\.7 0\.6 0\.3 8\.6 Contracts for Roads, Water Supply and Fadama Irrigation 21\.0 1\.8 1\.4 24\.2 Salaries and Allowances - - 4\.6 4\.6 Incremental Operating Costs 1\.0 0\.3 0\.1 1\.4 Expenditure for 1984-89 14\.8 7\.0 10\.1 31\.9 Total 63\.7 11\.4 17\.8 92\.9  - 39 - B\. Proposed Financing 5\.04 The actual annual allocations would be determined through a proper budgeting procedure which already involves FACU and all the ADPs\. FGN would include in FMAWRRD's annual budget FGN's annual contributions to the ADPs, and that the SGs would include in their annual budgets their contributions to the ADPs\. 5\.05 Proiect and Special Accounts\. Project and Special Accounts exist for KADP, and by mutual agreement both states (through the ADP Financial Controllers and Project Managers) are signatories to the Special Account\. The KADP Special Account had a limit of US$1\.0 million\. Since November 198E (after the technical discussions), seperate records of withdrawals have been maintained for each ADP, retroactive to the date of the bifurcation (September 25, 1987)\. The Bank would adjust the loan disbursement records to reflect the seperate liabilities of each state under the Kaduna ADP loan, which would be re-named Kaduna/Katsina ADP loan\. 5\.06 Kaduna and Katsina ADPs would each open and maintain a Special Account (Account No\. 1) denominated in dollars (Account No\. 1) in which they would receive US$1\.0 million deposits from the Bank which would be reimbursed periodically\. The deposits would be used to prefinance goods and services which are reimbursable under the loan\. The ADPs would also each open and maintain separate Proiect Accounts (Account No\. 2) in a local commercial bank to receive the project contributions of its SGs :and the FGN quarterly in advance\. The amount of deposits estimated to be payable in 1990, which would be denominated in naira, would be as follows: Initial Deposits in Account No\. 2 (Protect Account) (USS Million) SG F%N Kaduna 0\.75 0\.13 Katsina 0\.83 0\.18 Total 1\.58 0\.31 _ =  - 40 - 5\.07 Indicative annual financing requirements for each ADP are given in Table 4\. Table 4\. ANNUAL FINANCING PLAN /REQUIREMENT (in US$ Million) (a) Combined Proiect\. Pre-89 1989 1990 1991 Total IBRD 31\.2 36\.9 31\.2 22\.7 122\.0 FGN 15\.1 4\.0 3\.0 1\.9 24\.0 SG 22\.1 5\.5 4\.5 4\.5 36\.6 TOTAL\. 68\.4 46\.4 38\.7 29\.1 181\.6 (b) Kaduna ADP\. Pre-89 1989 1990 1991 Total IBRD 16\.4 18\.5 12\.4 10\.7 58\.0 FGN 8\.1 2\.0 1\.5 1\.0 12\.6 SG 12\.0 2\.8 2\.0 2\.0 18\.8 TOTAL\. 36\.5 23\.3 15\.9 13\.7 89\.4 (c) Katsina ADP\. Pre-89 1989 1990 1991 Total IBRD 14\.8 18\.1 18\.8 12\.0 63\.7 FGN 7\.0 2\.0 1\.5 0\.9 11\.4 SG 10\.1 2\.7 2\.5 2\.5 17\.8 TOTAL\. 31\.9 22\.8 22\.8 15\.4 92\.9 NB: All the tables may not reconcile perfectly due to the effects of rounding\. C\. Procurement 5\.08 Procurement arrangements for the remaining period of the project (1989-1991) are summarized in Table 5\. All goods and services financed under the Bank loan would be procured in accordance with Bank guidelines\. All contracts exceeding US$300,000 (except for civil works) would be procured through International Competitive Bidding (ICB)\. Whenever possible, purchases would be grouped into packages of at least US$300,000\. Purchases valued at less than US$300,000 but above US$60,000 would be procured through Local Competitive Bidding (LCB)\. Purchases for groups of  - 41 - items valued at less than US$60,000 would be made through international or direct competitive shopping on the basis of at least three quotations\. For goods and services subject to ICB, a pre-qualification process would be followed in accordance with Bank guidelines\. All technical assistance staff (whether short term or residential), auditors and study teams recruited under the project, and locally recruited staff at or above Heads of Department (including the ADP Chief Executives), would have qualifications, experience and terms of reference acceptable to the Bank\. Documentation for procurement would conform to standard bidding documents for goods, services, and civil works which has been distributed to the ADPs and FASCOMs in both states\. Procurement plans for both ADPs for 1989, based on the Redesign Report prepared by FACU and the results of the technical discussions last held in Washington, have been submitted to the Bank\. All bidding packages for goods and works over US$300,000 equivalent would be subject to prior review by the Bank\. Each each ADP (including the FASCOM) would submit its procurement plan to the Bank's approval by no later than November 30 for each following year\. The procurement plans would detail the methods of procurement for tie various disbursement categories for the project during the plan year\. Table 5\. AMOUNT AND METHOD OF PROCUREMENT FOR 1989-91 (US$ Million) (IBRD shares in parentheses) ICB LCB Others Total 1\. Building and Houses - 20\.1 - 20\.1 (17\.3) (17\.3) 2\. Vehicles, Tractors, Equipment, 12\.3 2\.0 - 14\.3 Office Equipment, and Spare Parts (12\.3) (12\.3) 3\. Internationally Recruited Staff, - - 7\.7 7\.7 Consultants, Experts and Specialist's (6\.9) (6\.9) and Overseas Training 4\. Chemicals and Agricultural Implements 18\.3 - - 18\.3 (16\.5) (16\.5) 5\. Contracts for Roads, Water Supply, 20\.4 20\.4 - 40\.8 and Fadama Irrigation (17\.7) (17\.7) (35\.4) 6\. Incremental Operating rosts - - 3\.2 3\.2 (2\.4) (2\.4) 7\. Local Staff Salaries - - 8\.3 8\.3 Total 51\.0 42\.5 19\.2 112\.7 (46\.5) (35\.0) (9\.3) (90\.8)  - 42 - D\. Disbursement 5\.09 The remaining Bank loan would be disbursed over a three year period from April 1989 through January 1992\. It was agreed that the Katsina and Kaduna states would have concluded a subsidiary loan agreement with the Federal Government by September 30, 1989, and amendments to the Loan Agreement have been approved the two states and FGN\. Disbursements are based on the assumptions that the historical disbursement rate of KADP (US$10 mn p\.a\.) can be doubled by implementing the bulk of the physical works program by contract\. The disbursement profile for ADPs in Nigeria is eight years with 86Z disbursed after six years\. Most of these were first time projects, designed for a five year implementation period, and which like Kaduna ADP experienced significant start up delays\. Most of the implementation was based on force account (much like the erstwhile Kaduna ADP)\. FGN and the states have now chosen to have shorter and smaller projects which are considered as phases of a longer term program\. Unlike the earlier ADPs, in Kaduna and Katsina the programs are on-going (actuaily mid-stream) and basic institutions already exist\. The disbursement period of three years is considered possible but very ambitious\. Given that Katsina State has had experience with previous Bank (Funtua ADP), much of the infratsructural program would be implemented by contract, both states have rmaintained the momentum of implementation notwithstanding the effects of the bifurcation, and that FACU would provide start-up assistance which has proven effective in previous ADPs, disbursements should accelerate\. 5\.10 The proposed allocation of loan proceeds and the disbursement percentages are given in Table 6\. 5\.11 Reimbursements for approved expenditures for (i) purchases duly batched and less than US$20,000, and (ii) incremental operating costs and general services would be made on the basis of statements of expenditure (SOEs)\. All supporting documents for SOEs would be held by the project units for review by auditors and Bank supervision missions\. Withdrawal applications would be aggregated in amounts of at least US$20,000 prior to submission to the Bank for reimbursement\.  - 43 - Table 6\. SUMMARY DISBURSEMENT SCHEDULE (US$ Million) Amount of the Loan Allocated Z of Expenditure Category Kaduna Katsina Total to be Financed Buildings and Houses 8\.8 10\.3 19\.1 100S foreign (1\.4) (0\.3) (1\.7) 75Z local Vehicles, Tractors, 14\.1 13\.9 28\.0 100? foreign Equipment, Office Equipment, (10\.1) (9\.6) (19\.7) 80 local and Spare Parts Internationally Recruited Staff, 4\.9 4\.2 9\.1 1002 Consultants, Experts and (1\.2) (1\.0) (2\.2) Specialists and Overseas Training Chemicals and Agricultural 11\.5 10\.6 22\.1 1002 foreign Implements (2\.6) (2\.9) (5\.5) 80? local Contracts for Roads, Water 14\.4 20\.7 35\.1 1002 foreign Supply, and Padama Irrigation (1\.0) (0\.8) (1\.8) 80Z local Incremental Operating Costs 51 1\.3 1\.0 2\.3 100? foreign 802 local Front-end Fee 0\.3 (0\.3) 100? Unallocated 3\.0 3\.0 6\.0 - Total 58\.0 63\.7 122\.0 (16\.4) (14\.8) (31\.2) 5/ This includes the travelling expenses and house rent, general office expenses, and the expenses related to building maintenance and printing and statiionery\.  - 44 - E\. Auditing and Reporting Requirements 5\.12 Each ADP and FASCOM would keep financial records in accordance with sound accounting practices to reflect their operations and financial positions, and would have the accounts including special accounts and SOEs audited annually by a firm of independent external auditors acceptable to the Bank\. The audited accounts and the avditor's report, including (a) the Management Letter (Long Form), (b) an audit of project physical works (buildings, roads, water supplies, irrigation, etc\.); and (c) a statement as to whether or not Bank funds had been used for their intended purpose, would be submitted to the Bank within six months of the end of the fiscal year\. 5\.13 Each ADP and FASCOM would prepare annual budgets, work programs, and procurement programs based on re-design estimates, as amended\. With the assistance of FACU, a uniform budget would be introduced in 1989 (if no already in practice), which would adequately portray project activities, unit costs, budget variances by cost centers, benefits, and productivity; and form the basis of a proper management information and accounting system\. At the time the annual work program and budget are prepared, each ADP and FASCOM, with the assistance of FACU as necessary, would also prepare a procurement program for the coming year, giving items and quantities required, sources of funds, timing and procurement methods (whether ICB or other)\. The programs would be submitted along with the annual budgets to the Bank for its information and comment\. The ADPs would prepare quarterly cash flow statements, which would be submitted to the Federal Department of Agriculture and Rural Development (FDRD) and the Bank, and would operate on the basis of these statements\. On the basis of the approved budgets and procurement program, FGN and the SGs would make budgetary allocations and thereafter would release the necessary funds quarterly in advance\. 5\.14 Each ADP would submit quarterly reports and management accounts to FDRD and the Bank showing actual and budgeted expenditures, statements of progress achieved and objectives for the forthcoming quarter by each project component\. The quarterly reports would contain summaries of expenditures and use of funds to date\. The management accounts would contain key operating ratios, particularly on inventories, down-time, and (in the case of the FASCOM) return on total assets and turnover\. 5\.15 Completion Review\. After completion of the project APMEU would prepare a Project Completion Report for each ADP, analyzing the implementation of the project and its impact in relation to its objectives, and would submit them to the Bank within six months of the closing date\.  VI\. PROJECT IMPLEMENTATION A\. Federal Coordinating Role 6\.01 FHAWRRD has overall responsibility within FGN and to the Bank as the federal sector ministry to ensure that the project is being implemented by the states and the implementing agencies on schedule and in conformity with the agreed policy and institutional framework and the loan and project agreement\. FMAWRRD plays a crucial role in the budgeting process, ensuring that the agreed upon level of federal funds is budgeted annually for all Bank-supported projects in the sector, and also that the funds are then released quarterly to the entities\. FMAWRRD coordinates other Federal ministries and agencies which have roles in areas of activities covered by the ADPs through a Project Coordination Committee (PCC)\. The role of the PCC would be particularly crucial in assisting the ADPs obtain FHWARRD financial support, and approval for the construction of minor earth dams as contemplated under the project\. 6\.02 The PCC is chaired by the Director of Agriculture and Rural Development, FMAWRRD and would include the Directors and Heads of the following FMAWRRD units: Directors of Water Resources, Fisheries, Forestry, the National Livestock Department, ARMTI; and Heads of the National Seed Service, FACU, APMEPU, FORMECU, the Rural Agro-Industrial Development Scheme (RAIDS)\. In addition, the Director of Agricultural Services, Federal Ministry of Science and Technology and the Program Managers of all ADPs would be members of the PCC\. The PCC meets semi-annually to review progress of the ADPs and to resolve any coordination issues that may have surfaced\. FACU serves as the secretariat of this committee\. B\. Implementation of the ADPs 6\.03 Overview\. A feature of ADPs is that their activities at the state level include functions carried out by more than one ministry\. In both states, the MANR is responsible for technical agricultural activities and input supply; the Military Governor's Office (and through it, the LGCs) is responsible for rural road construction and maintenance; and State Water Boards have nominal responsibilities for rural water programs\. To coordinate ADP activities, an ADP Executive Committee (ADPEC) has been established in each state which includes representation of the above groups\. In both states the ADPEC is headed by the State Governor\. 6\.04 A clear relationship between the ADP and MANR would be established, with the ADP effectively becoming the implementing arm of MANR which would eventually provide overall policy guidance\. The central thrust of the re-designed project should remain firmly in its technical agricultural components of extension and research, in which the ADP would eventually be each state's sole functionary\. All the other services in the agricultural sector which the project would engender and the extension service amplify (water supplies, roadworks, irrigation, seed  multiplication, veterinary services, input supplies) would graduate outside the umbrella of the ADP over time and move into the private sector or become the responsbility of cooperatives or LGCs\. 6\.05 Thus roadworks would revert to LGCs; irrigation management would be turned over to WUAs; seed production would increasingly depeiid on private outgrowers and other organizations; the LGCs or State Water Boards would take over rural water supply management; and input distribution would be privatized\. Ultimately, the ADP would under this scenario evolve as a unified extension and field trials service\. The ADPs would no longer implement road construction programs through large force account operations\. Instead major road works would be contracted to the private sector and routine maintenance would be done by LGCs\. Rehabilitation would be done by the existing force account\. The responsibil\.ity for rural roads would gradually devolve to state agencies which have direct reRponsibility for rural roads, once their capability has been strengthened\. The Bank is discussing with FGN the possibility of supporting a Rural InfrastrucLure Proiect whose aim would be to start the process of identifying and strengthening such institutions in selected pilot states\. Also the ADPs would progressively rely more on the private sector to deliver commercial inputs in lieu of their own operations\. Both the above initiatives involving the private sector are expected to save costs and establish a sustainable basis for continued activity\. Similarly, state MANRs would be strengthened in their essential policy formulation, regulatory, disease control, planning, budgeting, and expenditure implementation function\. The membership and terms of reference for the main project implementation organizations, i\.e\., ADPEC and its two sub-committees; and ADPMU and its sub-committees are described below\. 6\.06 ADP Executive Committee (ADPEC)\. An Executive Committee responsible to the State Governor in Council would oversee the project\. ADPEC would be chaired by the State Governor, and the Commissioner for MAN& would be the Deputy Chairman\. Other members of the ADPEC would include the State Commissioners for Finance and Economic Planning, Works and Transport, Special Duties; the Secretary to the State Government, the Director of FDRD, the Director General of Land and Surveys, Commissioner of Justice, the Head of FACU, the General Manager of the relevant River Basin Authority, the State Director of DFRRI, the Director-General MAWR, and the ADP Program Manager as memberisecretary\. ADPEC would meet at least once every two months\. In addition to policy, financial and coordination matters, ADPEC would approve the annual budget and work plan, appointment of principal staff, and ensure that adequate funds would be available\. ADPEC would approve all contracts estimated to cost an amount above US$ 100,000\. Each ADP would create an internal Tender Committee to approve all contracts; provided however that all contracts estimated to cost more than US$ 25,000 and up to US$100,000 would be cleared by the State Commissioner Agriculture\. Contracts requiring ADPEC's approval (i\.e\., above USS 100,000) would first be recommended by the ADPMU Tender Committee\. The Tender Committee would be chaired by the ADP Program Manager, and would include other members of the ADP Management Unit (ADPMU)\. The Chief Administrative Officer ADPMU would serve as secretary to the Tender Committee\. The ADPEC may appoint sub-committees as and when needed\.  6\.07 Two sub-committees would be established under the ADPEC: an Agricultural Services Sub-Committee; and an Infrastructure Development Sub-Committee\. The Agricultural Services Sub-committee would coordinate services to farmers\. The Director-General MANR would chair the sub-committee, and its members would include the: Chief Planning Officer MANR, ADP Program Manager, Chief Technical Officer ADP, Chief Agricultural Officer (MANR), FASCOM General Manager/Managing Director, and two representatives of the elected State Farmers' Council\. The Infrastructure Development Sub-committee would coordinate infrastructure programs\. It would also be chaired by the Director-General MANR\. Its other members would include the Chief Planning Officer MANR, the ADP Program Manager, the Chief Community Development Inspector in the Ministry of Local Government and/or Cooperatives, the Chief Civil Engineer (Ministry of Works), and the ADP Chief Engineer\. 6\.08 The ADP Management Unit (ADPMU) would have responsibility for operating the ADP, under the policy guidelines and direction of the Commissioner MANR, and in accordance with the conditions of the amended Project Agreement and the amended Subsidiary Loan Agreement\. In addition to the various heads of operational departments reporting to the Program Manager, he would oversee the work of four support departments (Administration and Personnel, Finance and Stores, MDT, and PME)\. Each ADP would have an Executive Management Committee chaired by the ADP Program Manager, and consisting of all ADP Heads of Departments and Zonal Managers; the Committee would meet at least once every month\. 6\.09 For administrative purposes, each ADJ would have two zones, which would each be headed by a Zonal Manager and have appropriate technical and support staff\. The zones would he responsible for day to day implementation of ADP activities\. A Zonal Development Committee would be constituted in each zone to plan and review programs and to facilitate coordination and cooperation between different agencies and farmers' organizations operating in the zone\. These committees would include zonal representatives of the ADP, LGCs, the State Farmers' Council, and other recognized farmers' groups in the zone\. 6\.10 The ADP's extension activities, which would include all smallholder crop and livestock production activities, as well as agro-forestry, agro-processing, land-use planning, and soil conservation\. The activities would be coordinated for the first time, and unified in one structure modelled along the lines of the Training and Visit (T & V) system\. Experience with T & V in on-going ADPs has been positive on three accounts\. It has led to a streamlining of extension activities with parallel operations minimized\. T & V has also improved the linkages between farmers and researchers which had been almost non-existent in Nigeria for many years\. Finally, by incorporting home economics staff in the T & V system, the ADPs have begun to address the technical needs of women farmers who form the most important part of the farming population\. The most critical agricultural service change from the ADP programs put into operation would be the funnelling of all the advice on crop prodwction, livestock husbandry, agro-forestry, product processing and marketing, and home economics through a single faucet, the Village Extension Worker (VEW)\.  6\.11 Additional support for the infrastructure development program would be provided by the Rural Infrastructure Coordination (RIC) division of FACU Kaduna and supporting consultants, particularly in the preparation of road contracts\. Engineering consultants recruited by FACU would assist the ADPs in preparing annual infrastructure programs, ensuring they selected meet economic criteria; and overseeing private contractors\. 6\.12 Each ADPMU, in consultation with LGCs in the state, would select candidate roads for rehabilitation\. The ADP, assisted by consultants employed by FACU, would identify the highest priority agricultural areas adjacent to all-weather roads of the state network\. Those roads would be ranked for agricultural significance by the established FACU procedure\. An economic rate of return (ERR) would then be computed for each road using Bank HDM3 model which equates benefits from reduced vehicle operating costs against costs of road rehabilitation and maintenance over 20 years\. The ADP, with FACU's assistance, would compile a roadworks program for each state, identifying which roadworks would be implemented by contract and by force account\. Under the guidance of FACU, the ADP would prepare bidding documents for one or more contracts in each state to be put to tender following World Bank guidelines and in accord with International Conditons of Contract for Works of Civil Engineering Construction\. The preparation documents would specify pre-qualification standards and procedures for prospective bidders, and FACU and the consultants who may have assisted in the preparation of the roadworks program would participate with the Infrastructure Division in the pre-qualification procedure\. Similarly the economic viability of the force account activity would be reviewed continually by the ADPs, FACU and the Bank and the units would be disbanded and equipment auctioned off when they become uneconomic\. FACU would design and supervise the monitoring/review exercise in consultation with the Bank\. The ADPs would discuss the results of the comparisons with the Bank during annual (thematic) infrastructure supervision missions\. It is hoped that such results can be available not later than December 31, 1990, s0 that the lessons of experience can be incorporated in any follow-up project which may be contemplated for Bank financing\. All ADP professional engineering staff would attend training courses in contract administration, contract management and soil testing during the project\. ARMTI would organize the courses\. 6\.13 In conformity with the strategy for roadworks and arrangements agreed between the Bank, FACU, and MSADP II and III states, the ADPMU would no later than August 31 each year furnish to the Bank and FACU the roadworks program detailing the methods of procurement it will use (force account and contract) proposed for the following year\. The ADP's force account capability would be limited to the existing capacity\. 6\.14 ADP reimbursement claims for contract payments would be supported by FACU certification that the work has been carried out to specification and in accord with the contract, and would be subject to annual external audit\. FACU may delegate site inspection to consultants satisfactory to the Bank at its discretion\.  6\.15 A Rural Water Unit headed by a Principal Water Engineer and supported by Zonal Water Engineers would implement the rural water program\. The unit would work with the extension staff and LGCs to idenitify target communities who would be selected based on their willingness to contribute to part of the capital cost of the installation and all of the recurrent costs\. Before the rural water and irrigation programs are implemented, the ADPs would conduct feasibility studies, and submit the findings of these studies to the Bank for review and comment\. The Rural Water Unit, assisted by FACU, would prepare tender documents for borehole construction and handpump procurement which would follow ICB guidelines\. 6\.16 Commercial Agricultural Services\. Distribution of agricultural inputs would be handled by semi-autonomous FASCOMs\. They would be operated on strictly commercial terms, with explicit state/ADP contributions to subsidies or financing of items to be sold on non-commercial terms\. The FASCOMs would aim to achieve a reasonable return on total assets (RTA) net of their total costs including overheads and inventories, with assets valued at replacement costs, consistent with the objective of promoting the role of the private sector in retailing input supplies\. They would scale their operations and set their pricing policies in conformity with this objective\. The commercial and financial objectives, strategies, and policies (especially with regard to profit and turnover objectives) of each FASCOM would be codified in a Commercial and Financial Policy Statement (CFPS) drafted along lines agreed with the states duing technical discussions, if necessary with the assistance of consultants\. The Statement would be adopted by the FASCOM after approval of the Board\. 6\.17 An important institutional development objective of the pruject, which is partially aimed at ensuring the sustainability of input supply services, is the privatization of the FASCOMs, whether through joint equity participation or out-right sale to the private sector or well functioning cooperatives\. This is in conformity with the general direction of Federal agricultural policy, and was agreed during KADP negotiations as the corporate structure of Kaduna FASCOM, i\.e\., that it would not be a parastatal\. Progress with implementing this objective under the erstwhile KADP has been negligible, and in fact the FASCOMs were maintained as parastatals\. 6\.18 Agreement was reached with the states during technical dicussions that: (a) each FASCOM would appoint retailers in sufficient numbers (about 40) and locations to act as its agents throughout the state; and (b) consultants would be recruited to prepare Corporate Plans, which may include privatization plans for both FASCOMs\. There are several possibilities for achieving the above objective\. One possibility which could attract the participation of private interests would be for the state government to hold minority shares (say about 20Z) indirectly, such as through a holding company or the ADP\. The rest of the shares could be held by input retailers in the state, farmers' organizations such as Farmers' Unions, cooperatives, and a large private firm with expertise in input or agricultural trade\. The private firm with trading expertise could be responsible for managing the farm supply company, perhaps on a Management Contract basis\. Private retailers and cooperatives could pay for their shares through a charge on the purchase price of inputs supplied by t1he  FASCOM\. The managing company could acquire its shares through a profit-sharing arrangement\. The FASCOMs could recruit internatio;,ally a General Manager to help formulate and implement the corporate proposals as well as the promotion of private retailers\. C\. Environmental Considerations 6\.19 The project's potential for harming the environment could come from four sources: (i) over-exploitation of acquifers as a result of rural water supply and small-scale irrigation programs; (ii) the inappropriate use of agricultural chemicals; (iii) reducing fallow; and (iv) soil erosion resulting from sub-standard road rehabilitation or maintenance works\. The project would take steps to avoid these problems\. Before the small scale irrigation and rural water supply programs are started, each state would complete the ongo*ng study of its underlying acquifer\. Each annual program would take account of the study's findings as to how large an area can be tapped without harming the acquifer\. The initial scale of the proposed program is so small that there is little risk under the project\. On the issue of chemicals and possible toxicity, each state MANR, and specifically each state's extension service, would inform FACU of products which are currently in use\. FACU would then inform each MANR which of these products are considered unsafe (based on World Bank guidelines) and these messages would be passed to farmers\. The states Chief Agricultural Officer (CAO) would have direct responsibility to coordinate action to prohibit sale of harmful chemicals within each state\. 6\.20 The project's animal traction component would be expected to have a positive impact on the environment\. Integration of livestock in the farming system would increase the organic material within the soil, both from the rotation of leguminous crops with cereals and from incorporation of animal manures\. This would result in the reduction of wind and water erosion, the addition of soil nutrients and, in particular, improvement in the water and nutrient holding capacity of the soil\. The project's effect on availability of animal drugs and mobility of veterinary services would: (a) decrease animal mortality and so increase the number of animals available for crop and livestock integration; and (b) extend the geographical area where cattle, particularly work bulls, could be kept protected from trypanasomiasis by chemotherapy\. The extension program would also promote farm-forestry, soil conservation, and proper land use through the land-use planning program, which would lower the impact of soil degredation\.Finally, with regard to roads, private contractors, LGCs, and ADPs would undertake their works to specified standards agreed with FACU and the Bank\. If any of them failed to meet these standards, they would be declared ineligible for further Bank funded work\.  VII\. FINANCIAL AND ECONOMIC ANALYSIS 61 A\. Demand\. Markets and Prices 7\.01 Demand\. Nigeria is a net importer of food, and while indications are that total food production probably kept pace with population growth over the past decade, this does not allow much for an increase in per capita consumption that could be associated with iiacriasing incomes\. Furthermore, recent policies of the Federal Government (particularly import bans and devaluation of the naira, both of which have limited the availability of cheap imports) have increased the demand for the staple foods which form the bulk of agricultural production arising from the project's initiatives\. 7\.02 Markets\. The food crop marketing system in the project states is dominated by small private traders and farmers\. The system is relatively competitive and efficient, but lack of information within and between markets, inadequate storage facilities and high transportation costs often result in very high spatial price differentials and seasonal variations\. The provision of market information by the FASCOM in each LGA would help farmers improve their market information and identify market outlets for any occasional marketable surpluses\. The program of road improvement would help the movement of crops from farm to market where such facilites are lacking\. 7\.03 Prices\. Food prices in Nigeria have increased at a higher rate than inflation over the past five years\. albeit with pronounced spatial, seasonal and year-to-year variations\. The devaluation of the naira since 1986 has removed the major source of distortion between economic and financial prices of most agricultural products, but a fair amount of distortion still exists, caused by import bans and fertiliser subsidies\. Financial and economic farmgate prices in the project states used in the economic and financial analysis are the averages for the first half of the 6/ Due to lack of data and time, it was not possible to conduct a proper economic and financial analysis of the project\. However, given the improved macroeconomic incentives for the agricultural sector, and the re- structureing of the project in favor of more cost effective methods of implementation and of policies favoring long-run sustainability objectives, the economic rate of returr\. is expected to improve over the original ERR estimate of 16Z\. The magnitude of the potential improvement has however not been estimated\. The following discussion is therefore based largely on analysis done for MSADP II states (Kwara, Niger, and Gongola)\. It should be noted however, the economic circumstances in the project states are somewhat different from those of MSADP II states, particularly in Katsina, which is much drier, and the ERR should therefore be interprated cautiously\. An alternative economic and financial analysis may be found in the SARs prepared for this re-designed project by FACU\.  year 1988 and assumed to remain constant until 1992\. Notwithstanding the high level of fertiliser subsidy and the protection accorded to major cereals by import bans, the data indicate minimal nominal protection coefficients (NPCs) for some major tradeable cereals\. In 1988 in Kaduna, the average farmgate price of maize was 790 naira per ton compared to an estimated imported parity price of 1228 naira per ton\. Similarly, paddy rice is sold for 1,200 naira per ton in Kaduna and Katsina respectively, compared with an import parity price of naira 948 per ton\. 7\.04 Analytical Assumitions\. For purposes of financial and economic analysis, the following basic assumptions have been mades (i) the opportun2\.ty cost of capital is 12Z; (ii) for non-tradeable outputs, domestic retail prices are adjusted to border values using a standard conversion factor (SCF) of 0\.85 for 1989-90 and 0\.92 thereafter; (iii) land is not a constraint in the southern part of Kaduna state while it is a constraint in the remaining part of Kaduna State and all of Katsina state; (iv) labor is a constraint; (v) labor availability is uniform througnout the year at 750 mandays per adult equivalent 7/ (vi) demand for labor varies seasonally, and is reflected in the rural wage rate, which averages 5 naira per day; (vii) the fertiliser subsidy is assumed to be phased out over a four year period, beginning at 502 in 1989, 40Y in 1990, 30S in 1991, and 02 in 1992; (viii) except for fertilizers, agricultural input prices will continue to reflect import parity prices in financial terms; (ix) the economic prices of fertilizers remain constant throughout the project period (1989-1992); (x) the current relative price regime is maintained throughout the project period\. 7\.05 A five percent net average adoption rate is assumed by project year 3 for purposes of estimating the production effect of the extension program\. This means that by year 3 in each agro-ecological zone, 52 of the farm families on average adopt the new farming technologies promoted by the project\. Thereafter, production is assumed to grow at 52 p\.a\., slightly faster than population\. This assumed growth rate is consistent with that experienced in other areas after the completion of ADPs\. The impact of farm inputs, irrigation, and fertilizer has been related to the incremental yield\. Useful nutrients assumed to be available from appropriate fertilizer is 35 kg per 100 kg\. The incremental production for each kilogram of fertilizer nutrient used is estimated as follows: maize 5 kg; sorghum (northern project areas) 3 kg; sorghum (southern project areas) 4 kg; millet 3 kg; groundnut 2\.5 kg; rice 6 kg; and cowpea 1\.5 kg\. The incremental production from one kg of improved seed (one of the project's main initiatives) is assumed to be: maize 10 kg; sorghum (northern project areas) 10 kg; sorghum (southern project areas) 8 kg; millet 8 kg; rice 10 kg; cowpea 1\.5 kg; and groundnuts 50 kg\. The amount of seed required per ha is: maize 15-20 kg; sorghum 10 kg; millet 7 kg; rice 60 kg; cowpea 20 kg; and groundnuts 50 kg\. Sprayers are depreciated over three years, and water pumps over two years\. The crop yields "with' and 'without" 7/ There are about 1\.17 million farm families in the project states\. Each farm fanily is assumed to have three adult equivalents of labor: two adults and four children providing the labor equivalent of one adult\.  - 53 - improved technology are assumed to remain constant, with the former at a higher level\. 7\.06 A typical fadama farmer in the project states has 6 ha of cultivable land, but cultivates only 3 ha\. He irrigates only 1 ha during the dry season if a pump is available, and 0\.5 ha if none is available\. The most prevalent crops grown on fadama are rice and high value vegetables such as onions and tomatoes\. B\. Financial Analysis 7\.07 Farm Incomes\. The focus here is on the benefits to participating farm families, which have been evaluated in terms of benefit-cost-ratios (BCRs) on use of inputs and improved technology promoted by the project\. For this purpose, increased inputs use is equated with increased yields and better farming practices\. Therefore, the benefits of the agricultural component has been related to input use rather than to what might happen on a given area of land\. This approach is particularly appropriate for the mixed cropping systems which predominate in the project states, and for which an estimate of the yield of any one crop poses considerable problems\. 7\.08 In order to assess the farmers' financial incentive to adopt the technology recommendations of the project, analysis was made of the profitability of adoption of the recommended technologies on several farm models which have been constructed to depict the income effect on a representative farmer from each ecological zone of the project area, with the improved technology\. An interesting result is that all the scenarios show a higher profitability once the improved technology is adopted\. 7\.09 Commercial Services\. With regard to farm inputs, the analysis of the financial viability of FASCOMs (which excludes fertilizer operations) assumes that there will be no official price control on farm inputs sales prices charged by FASCOMs or retailers, and as was agreed during KADP loan negotiations, that the FASCOMs would be privatized and be able to charge wholesale market prices to its retailers\. It is assumed that a wholesale profit mark-up of 20X would be required on the ex-warehouse replacement inventory cost\. This is a reasonable provision, given the need to finance future growth requirements and build up an adequate capital base to withstand potential losses\. The volume sales of the FASCOMs are assumed to grow at 52 per annum throughout the project period\. The historical rate of volume growth of input sales in KADP was 1OX a year between 1986-88\. Under MSADP II, a financial analysis of the FASCOM operations using projected market prices to estimate revenues, indicated that a 20Z mark-up on the inventory replacement cost is required in order for the FASCOM to obtain a Return on Total Assets (RTA) of 5Z in 1989, and 1OZ in 1990 and 1991\. While an analysis of the required mark-ups for Kaduna and Katsina FASCOMs has not been attempted, similar mark-ups can be expected to be required in the case of both FASCOMs under this re- designed project\.  _ 54 - C\. Federal/State Financial Implications 7\.10 The project would generate little direct Federal or State government revenue, as farmers' output is not taxed directly\. Some indirect public revenue generation can be expected as the project increases the level of economic activity in the states, but precise quantification is not possible or meaningful\. However, some state revenue is expected from taxes on profits earned by FASCOMs\. The Federal and State governments would, therefore, need to sustain not only their contributions during the project investment period, but also project activities thereafter\. This burden falls nearest on the states since they would pick up the annual costs of the ADPs after the project investment period\. 7\.11 State Financial Capability\. The financial condition of the project states is generally weak\. The latest available information (from the 1987 Annual Report of the Central Bank of Nigeria) on the overall finances of each of the project states covers the period 1984-87\. It indicates the following: (a) total expenditures for the country as a whole have increased by only 32 in nominal terms, and actually declined for the erstwhile Kaduna; (b) on average, the states finance 202 of their expenditures, and (c) the erstwhile Kaduna had overall deficits in their budgets for all the three years under review\. Therefore, increasing the World Bank contribution to 77Z of the totalproject cost would accelerate the speed of implementation\. 7\.12 Sector ExMenditure\. The data indicates that the erstwhile Kaduna state spent an average of 20? of its public expenditures on agriculture and the Kaduna ADP was almost synonymous with the sector budget itself\. Kaduna State's contribution to the re-desigued project is estimated at US$16\.8 million, of which US$9\.9 million has already been disbursed\. Similarly, Katsina's contribution to the project's financing is estimated at US$21\.1 million, of which US$13\.3 million has already been disbursed\. The incremental financing requirements of the projects from both states (US$6\.9 million for Kaduna; and US$7\.8 million for Katsina) are therefore quite modest\. 7\.13 The percentages and magnitudes of the incremental expenditures (US$14\.7 million for both states) are such that they could only be met from the states' own resources after project completior\., and even then only if the measures proposed under the project are implemented vigorously\. The measures are expected to result in the following revenue enhancements and cost reductions: (a) the productivity of sector public sector expenditures would be increased, through restructuring and other reforms; (b) user charges may reduce the expenditures on capital development and maintenance; (c) revenue and net income covenants and freedom from state intervention in input pricing for FASCOMs ought to reduce the need for state subsidies; (d) road maintenance costs are expected to be reduced if private contractors replace ADP force account operations; (e) expenditures on extension may be reduced significantly following the unification of services, which would eliminate duplication; (f) the Review of Agricultural Insitutions may recommend institutional reforms and other measures which may reduce duplication and parastatal costs/losses; (g) the overall scale of sector expenditures might be reduced, although this is not very likely  - 55 - since savings from revenue measures and restructuring would probably be applied to other priority expenditures; and (h) the risks of the states incurring unsupportable expenditures as a result of poor implementation of this project would be monitored closely, and losses would be cut early\. 7\.14 Implications for the Federal Budget\. FGN's contributions to Kaduna and Katsina States would be US$ 29\.9 million by the time the project is completed\. Over the next three years, the requirement for FGN financing is very modest (US$ 20\.1 million)\. The demands on FGN financing amount to less than 102 of the projected level of Federal annual capital expenditure for agriculture\. This amount would be consistent with the overall level of budgetary resources that the Bank has recommended FMAWRRD allocate annually to the national ADP program\. Considering the total size and composition of the Federal budget, this appears to be reasonable\. D\. Economic Analysis 7\.15 Economic Rate of Return\. A 32 adoption rate, which is consistent with the record of the past projects has been assumed for the spread of new technology for the crops grown in the project area\. On this basis the following growth rates are assumed for the production of various crops: sorghum 2\.5Z, millet 1\.52 maize 72, rice 52, beans 32, groundnut 22, cotton 52 and yam in Kaduna 32\. Assuming constant relative prices, the project is expected to result in an annual increase in food production at the end of the third year of about 140,000 tons including 80,000 tons of grain\. On that basis, ERRs have been estimated as follows: Kaduna 182 and Katsina 152\. The analysis is done over a 20-year period and includes all project economic (incremental) costs\. It also assumes that investment costs of the redesigned project cease after the third year, and that recurrent expenditures in the fourth year are equivalent to 502 of the total projects costs in the third year and increase by 52 annually thereafter\. The only project benefit included is the farmgate economic value of incremental production\. The sensitivity analysis indicated that the project is relatively sensitive to cost escalations, ar\.a to delays in benefits or implementation\. A 20Z cost escalation would reduce the ERR to 162 and 122, respectively, for Kaduna and Katsina\. E\. Benefits and Risks Benefits 7\.16 Summary\. The project's overriding benefit would come from its initiatives to streamline the structure of state agricultural institutions, and to improve the quality, availability and sustainability of agricultural services\. These initiatives can be summarized as follows: (a) Under the project the capacity of the state MANRs for policy formulation, planning and expenditure budgeting would be strengthened; and a major Review of Agricultural Institutions would introduce reforms to make the services more efficient and sustainable over the long-term\. The recommended organizational  - 56 - changes arising out of the Review would be introduced during a follow-up project\. (b) The project would unify and strengthen state agricultural extension services and establish the vital link between research, extension and farmers\. The unification of the extension service around the T & V system would reduce the number of parallel services\. By strengthening the management systems for these services, the project would have a positive effect on the productivity of the large current expenditures\. (c) The adaptive rese&rch program would be strengthened to work with existing farming systems to find improvements in practices that could then be passed through the extension service\. (d) The seeds program would improve the reliability and availability of local certified seed\. (e) By promoting the role of the private sector in the distribution of agricultural inputs, seeds, roadworks, rural water and irrigation development and maintenance the project would improve the efficiency of distribution, development and maintenance, minimize costs and develop long-term sustainability\. 7\.17 Padama IrriRation\. Although it is hoped that a mucu larger acreage would be brought under fadama irrigation under the re-designed project, for purposes of analysis, it is assumed that only 6,000 ha of additional fadama will actually be developed, which figure might be more realistic\. Although this is a significant increase in the irrigated acreage in the project states, it is less than 1OZ of the estimated fadama development potential of any of the project states\. The additional irrigated acreage has an incremental output potential of 47,500 tons, of which 28,000 tons is expected to be equally divided between rice and high value vegetables each\. The ERR for the fadama irrigation sub-project was estimated under MSADP II to be 49Z; a similar ERR is assumed for this re- designed project as well\. 7\.18 Roads\. The project will construct 800 kms of new roads, and rehabilitate or maintain an additional 633 km in both states\. Several approaches to determining the economic viability of rural road investments are available\. For the purposes of evaluating of the rural roads program in this project the consumer surplus method which stresses the quantification oZ vehicle operating cost savings has been chosen as the most suitable approach\. Employing this methodology, a random sample of rural roads in the project area will be monitored for a weekly period during preparation to determine average daily traffic counts (ADTCs)\. We expect that more than 60Z of these rural roads have ADTCs of 25 vehicles per day or greater which is the cut off point for a 15? ERR given the project's estimated cost of up-grading and maintaining one km of rural road (N=40,000), an assumed 52 p\.a\. growth in traffic volume, and vehicle 4  - 57 - operating cost savings per km of N=0\.8 8/\. Since the project's rural roads program would cover less than 201 of the rural roads in the project states, the program also falls within the envelope of rural roads which are estimated to have sufficient traffic to justify improvements\. While the analysis clearly under-estimates the ERR of the road component in that it ignores the potentially more significant producer surplus generated, it clearly indicates that the proposed roads investments can stand on their own economic merit\. The roads component yields very high returns, reflecting the fact that the roads component protects a very large sunk investment at relatively modest costs\. Detailed ADTCs and estimated improvement costs would be undertaken for each road prior to its selection to ensure that all roads upgraded under the project meet acceptable economic criteria\. 7\.19 An important project benefit would be the assistance given to the LGCs for routine, labor-intensive rural road maintenance\. Not only would this approach be the least-cost solution to routine maintenance, but it would also be institutionally correct, given the LGCs' statutory responsibility for rural road maintenance\. Helping to improve the management and organizational structure of the LGCs would meet an important long-term project objective of developing a sustainable local structure for providing services to the agricultural sector\. 7\.20 Water\. The project will construct 71 minor earth dams, 1,028 boreholes, and 300 wells\. The average installation costs of each borehole is US$ 14,400\. The investment in the borehole is assumed to have an economic life of 20 years and annual maintenance costs per borehole are assumed to be US$1,440 (10? of the investment costs)\. The economic analysis of the rural water component assumes that one borehole or well serves 400 families per day for 365 days a year\. A beneficiary farm family is assumed to have 6\.5 members, each of whom requires 15 litres for domestic use per day\. A nominal economic value of US$0\.1 per 1000 litres has been assumed\. Thus, each borehole produces *dater with an estimated economic value of US$1,423\.5 per year\. The ERR estimated on that basis for the rural water component is 8Z, which is acceptable considering that the analysis does not take into account other benefits such as improved health, the value of trees and crops planted around boreholes or wells, or animals watered\. The inclusion of these benefits would put the ERR over the 12? cut-off rate\. The cost per rural family is estimated at US$12\.8, which is within the range of costs of similar projects in Sub-Saharan Africa\. The project's rural water component would provide significant social benefits (improved health)\. Although health benefits and time savings have not been quantified, Bank sector work has indicated that major investments in rural water supply in Nigeria are warranted and can be justified on the basis of 8/ The methodology is further detailed in Economic Appraisal of Roads, a World Bank Staff Working Paper No\. 610, October 1983, by H\.L beenhakker and AA\.M\. Lago\.  - 58 - time savings alone, estimated at two hours per day for every farm family\. 91 Risks 7\.21 The difficulties involved in efforts to unify the agricultural extension system, streamline its operations and establish an efficient and effective operation pose the greatest risks to the agricultuial program\. The project would counter these by developing a wage incentive scheme to motivate extension officers and by improving their training and mobility\. FACU's strengthened cadre of extension specialists would continue to help ensure that an efficient extension structure is established based on Nigerian experience\. The primary risk of the infrastructure program would be failure to maintain project investments\. Such risks are minimized by project assistance to strengthen the capability of the LGC's, who have the institutional responsibility to maintain rural roads, and by selection of communities for rural water investments according to their willingness to contribute to construction and maintenance costs\. The project would also train village water supply mechanics who would then offer their services to communities on a fee basis\. The main risk with the commercial services program is possible failure or slow progress in privatization of input supply operations\. This risk is reduced to some extent by the provision of only incremental import requirements of the FASCONs under the redesigned project, which would limit the major advantage (access to foreign exchange for imports) that FASCOMs would enjoy over their competition; and the requirement for market pricing of farm inputs sold by FASCOMs\. 9/ Nigeria: Rural Water Supply and Sanitation Sector Memorandum, September 330, 1986, Annex 2-2, para 20\. Draft Report No\. 6203-UNI\.  - 59 - VIII\. ASSURANCES AND AGREEMENTS 8\.01 During discussions, the following agreements on the new actions to be taken under the redesign were reached between the Bank and the representatives of Kaduna and Katsina States, and the Federal Government\. These are over and above the agreements reached in the erstwhile Kaduna ADP\. A\. Conditions of Disbursement 8\.02 Subsidiary Loan Agreement\. Katsina State and Kaduna State would have concluded a subsidiary loan agreement with the Federal Government by September30, 1989 (para 5\.09)\. 8\.03 Amendments to the Loan Agreement have been approved by the FGN and Kaduna and Katsina States (para 5\.09)\. B\. Agricultural Services 8\.04 Unification of Extension System\. The states would unify and consolidate the extension se::vices\. This would require the removal of redundant staff who would not be needed for the implementation of the project from the payrolls of ADPs (para 3\.05)\. 8\.05 Women in Agriculture\. Each ADPMU will furnish to the Bank by June 30, 1990 for its review the program prepared to support women in agriculture (para 4\.05)\. 8\.06 Sponsored Research\. Each state would conclude research contracts with the relevant national research institutes, for priority research topics, emerging from the MTRMs, which would be acceptable to the Bank by June of each year (para 4\.15)\. C\. Rural Infrastructure\. 8\.07 In each state the construction of new feeder roads, reh\.bilitation, and periodic maintenance would be done by contract; while recurrent maintenance wculd be done by force account using the existing force account capability (para 3\.08)\. 8\.08 Each ADPMU shall furnish to the Bank by June 30, 1990 its detailed plans for the maintenance of its vehicle fleet under contractual arrangements with external workshops\. 8\.09 Each ADPMU would, no later than August each year, furnish to the Bank and FACU the roadworks program detailing the methods of procurement (private contractors and force account) it will use fuze the following year (para 4\.29)\.  - 60 - 8\.10 With FACU's assistance each state would compile the comparisons of the cost of force account and contract works for roads and then submit to the Bank for review by December 31, 199' (para 4\.30)\. 8\.11 Community Participation in Maintenance\. ADPs would prepare, for the Bank's review and comment by September 30, 1989, a plan for carrying out the proposed rural water maintenar\.ee through community participation (para 4\.38)\. 8\.12 Strengthening LGC Rural Road Ma!ntenance Capacity\. The ADPs, with FACUs assistance, and after the Bank's review would establish by June 30, 1990: rural road maintenance manual\.; standard ADP-LGC contract; and qualifying criteria for participation of two LGCs (one in each state) in the rural infrastructure component (on reimbursement from the ADPs) to carry out routine maintenance of rehabilitated roads in their jurisdictions (para 4\.31)\. 8\.13 Organization of Water User's Associations (WMAs)\. The states would submit to the Bank by June 30, 1990 the structure and operating procedures for the WUAs and form at least two selected pilot associations in each state (para 4\.45)\. 8\.14 Each ADPMU shall with the assistance from FACU employ no later than March 31, 1990 consultants to prepare feasibility studies for , and supervise the execution of the irrigation project works (para 4\.45) D\. Commercial Services 8\.15 Seed Production and Pricing\. The ADPs would rely on contract growers for at least 75Z of seed production, and seed purchase prices paid to outgrowers and selling prices to farmers would be at prevailing market prices\. The certification standards to be followed would be those established by NSS (para 4\.18)\. 8\.16 Agro-forestry: FASCOMs would prepare plans for appointing, training and equipping at least five selected entrepreneurs as franchisers and five selected entrepreneurs as contractors for participating in the two pilot programs of seedling marketing\. Such plans will be submitted to the Bank for review by June 30, 1990 (para 4\.07)\. 8\.17 Pricing of Animal Drugs and Vaccines\. Each state would charge the full cost for all drugs and vaccines sold by its veterinary department and the mechanism for licensing private rural veterinary practitioners would be established after consultations with the Bank, by December 31, 1989 (para 4\.24)\. 8\.18 Pricing of Non-Fertilizer -nputs Soli' by FASCOMs\. The management of FASCOMs would be allov,ed the latitude to set prices for their wholesale-level inventories in order to achieve an adequate return on assets with inventory costed at replacement value (para 4\.48)\. \.  8\.19 Privseization of Input Supply- FASCOMs would promote the role of the private sector as retailers and wholesalers so that the FASCOMs would be able to limit their operatior\.s to one wholesale store per LGA, by December 1991 (para 4\.49)\. 8\.20 Privatization of FASCOMs\. Consultants with qualifications and experience satisfactory to the Bank would be recruited by June 30, 1990 by each FASCOM's Board of Directors to prepare privatization plans for FASCOMs and the study would be completed by 1991 (para 4\.48)\. 8\.21 Each PASCOM would modify the draft Commercial and Financial Policy Statement along principles agreed with the, and adopt its own final version of the statement from March 31, 1990 (para 4\.48)\. 8\.22 FASCOMs would recruit consultants under the terms of reference acceptable to the Bank to do studies on on-farm and off-farm storage facilities, possibilities of establishing agricultural commercial cooperatives and Cooperative Financing Agency (CFA) along the lines of Bauchi CFA, and a strategy for promoting inputs farm-mechanization, and such studies will be completed by March 31, 1990 (paras 4\.51,4\.53,4\.54,and 4\.56)\. E\. State MANRs\. 8\.23 Sector Policy & Planning\. Each state would prepare a monitorable action plan for strengthening its planning capacity and recruit a Chief Planning Officer or Advisor by March 31, 1990 (para 4\.58)\. 8\.24 Review of Agricultural Institutions\. Each state would recruit an Agricultural Institutions Review Team by June 30, 1990\. The team would consist of at least a public administration expert (Team Leader), a state finances expert, a financial analyst, and an agricultural services expert\. The Review Team would complete its work by December 31, 1990 (para 4\.59)\. F\. Project Management 8\.25 Each FASCOM and ADP would send at least three suitable Nigerian staff for overseas professional accounting training early by March 31, 1990 (para 4\.67)\. 8\.26 Each ADP would submit programs for strengthening their Planning, Monitoring and Evaluation unit by March 31, 1990 for the Bank's review and approval (para 4\.69)\. G\. Procurement 8\.27 Each ADPMU and FASCOM shall furnish to the Bank no later than November 30 each year a project procurement plan satisfactory to the Bank for the following year\.  Annex I Page 1 of 23 KADUNAIKATSINA ADP (Reoesigned Kaduna ADP-Loan No\. 2436-UNI) Minutes of Technical Discussions %ith Katsina State Delegation 1\. A high-powered Katsina State delegation led by the Hon\. Commissioner for Agriculture, Alh\. Mohammed Amin Abdulla1hi 1/, visited Washington DC from December 5 to December 7th for negotiations on the re- design of Kaduna ADP (Ln\. 2435-UNI)\. Since the redesign documents were not ready, it was agreed that the opportunity presented by the visit of the State delegation would be used for technical discussions\. The discussions are a follow-up to the Kaduna Sate discussions which were attended partially by Mr\. O\.F\.J\. Oyaide, Federal Director of Agriculture and Rural Development, and Prof\. A\.O Falusi, Head of FACU who were in Washington for other loan negotiations\. The delegation also met with Mr\. Anand Seth, Division Chief, Agriculture Operations, West Africa Department\. AGREED AGENDA 2\. The following agenda was agreed and covered during the technical discussions: (a) Interim disbursements arrangements for Katsina ADP; (b) the need for re-design of the project; (c) reasons for the delay in finalizing the re-design exercise; (d) the documentation required; (e) the processing schedule; (f) the re-design proposals presented by the Bank and the State delegation; (g) procurement issues; and (h) appointment of senior Katsina ADP staff\. l/ Other members of the delegatJoa were Hon\. Commissioner for Finance and Planning Alh\. Kasimu Ibrahim, Solicitor-General Saddik Abdullahi Mahuta, and Program Manager KTADP Yusuf Nalado\. The Bank team consisted of Messrs\. Makwata J\. Wambia, Senior Economist and Project Officer for KTADP, and Ms\. Vimila Abraham, Disbursements Officer\.  Annex I Page 2 of 23 INTERIM DISBURSEMENTS ARRANGEMENTS 3\. The Bank proposed, and it was agreed by all parties (including Dr\. Ramsey Mowoe, Assistant Director, External Finance, Federal Ministry of Finance, who was attending other negotiations) that: (a) The Federal Government (Federal Ministry of Finance, External Finance Department) would authorize and submit two additional signatories from Katsina ADP for purposes of disbursements from the KADP loan account\. This would remove the obstacle to smooth implementation of both ADPs presented by the need for Kaduna ADP officials to countersign each withdrawal application from Katsina ADP\. A target date for such a letter reaching the Bank was tentatively set at December 19, 1988\. However, Kaduna ADP officials would still have to countersign withdrawals from the Special Account, which would continue to operate in the nsame of Kaduna ADP\. (b) Pending the receipt of th- letter from the Federal Ministry of Finance authorizing and authenticating the two Katsina ADP signatories, the Bank will maintain separate records of wittdrawals for Kaduna and Katsina ADPs retroactive to November 1, 1988\. (c) The last disbursement application paid by the Bank on the loan account was on November 1, 1988\. As of that date, the total amount disbursed from the loan was US$31\.2 million\. From that date onwards, the Bank will keep separate records for Kaduna and Katsina ADP withdrawals\. For that purpose, the Bank has opened two sub-accounts (A-for Kaduna, and B-for Katsina) for each disbursement category to record disbursements to each State ADP\. (d) Katsina State delegation undertook to send to the Bank by courier, immediately upon their return to Katsina but not later than December 19, 1988, the latest information on disbursements by each loan category accruing to Kaduna and Katsina State respectively\. This would up- date the statement prepared by the Bifurcation Committee showing disbursements as of September 30, 1987\. The information is necessary to enable the Bank to prepare new loan allocations among the various disbursement categories and between the States, since total allocations (past and future) must add up to US$122 million\. THE NEED FOR RE-DESIGN 4\. The Bank and the State delegation agreed that the bifurcation of the project presented an opportunity for necessary re-design of the project for the following reasons: (a) The erstwhile KADP was among the less successful of the ADPs in Nigeria (largely due to political factors which retarded the pace of implementation), and therefore strategies and actions should be proposed which re-assure the Bank's Management and State authorities that  Page 3 of 23 implementation would be more rapid following the re-design than has hitherto been the case\. (b) There are considerable loan savings arising from the devaluation of the Naira since the Bank's Board approved the Kaduna ADP on June 7, 1984\. The savings are estimated at between US$30-50 million\. The Bank's policy is to cancel loan savings arising from devaluations, or from cost savings on the project targets as approved by the Board\. In view of the Federal and State Governments' (both Kaduna and Katsina) stated preference to retain the loan savings, there was a need to re-program these savings, a process that was time consuming\. (c) The Bank and FGN feel the need, which was shared by the State delegation, to re-design the project in order to incorporate the agreed sector implementation strategy which is aimed at improving the sustainability of project investments, institutions, and benefits (see Attachment I)\. (d) In view of the preference of both States to retain the closing date as December 31, 1991, strategies for implementing the project to ensure full disbursement of the remaining loan amount (US$91 million) over a period equivalent to the prior life of the loan (which became effective on July 17, 1985) during which only US$31 million was disbursed were required\. Agreement was reached to pursue a dual track approach to implementations full use of the existing ADP force account capability* in parallel with contracting and active encouragement of the participation of the private sector in project activities in order to achieve the ambitious targets, utilize project resources efficiently, and spread the secondary benefits of the project to entities outside the ADP and FASCOM, especially those which generate off-farm employment and promote rural enterprise\. REASONS FOR THE PROCESSING DELAY 5\. The State delegation and the Bank agreed that there had been a lengthy delay in finalizing the re-design of the project\. Both States had been under the impression that the redesign appraisal report which had been prepared by FACU following the Bank's re-design mission in July originated from the Bank, and were therefore surprised that the Bank maintained that it was not yet ready for negotiations with the necessary documentation\. DOCUMENTATION REQUIRED 6\. ' The Bank representatives and Management explained, and the State delegation agreed, that further documentation was required to present the re-design to the Bank's Board, the State Executive Council, and the Federal Executive Council for the necessary approvals\. In addition to preparation of a final re-design report reflecting the comments of the States on the FACU re-design report, amendments were required to the Loan Agreement between the Bank and FGN, to the Kaduna State Project Agreement (between the Bank and Kaduna State) and to the Subsidiary Loan Agreement (between  Annex I Page 4 of 23 Kaduna State and Federal Government)\. In addition, a new Katsina State Project Agreement, and Subsidiary Loan Agreement between Katsina State and FGN were required\. The Bank would be responsible for preparing all the documents and amendments listed above except for the Subsidiary Loan Agreements, which are traditionally prepared by the Federal Ministry of Justice\. PROCESSING SCHEDULE 7\. Following the agreement to facilitate direct disbursements to Katsina ADP, it was agreed that the schedule for negotiating the re- designed project could be extended from January to February 1989, since implementation would now proceed at a much faster pace, especially in view of the agreement reached with the State delegation on the essential elements of the re-designed project, the appointment of senior ADP management and staff by both States, and given the Bank's approval of all pending procurement cases\. The following processing schedule was agreed between the Bank and the State delegation: (a) As soon as the delegates return to Katsina, they would send the latest statement of loan and project expenditures (reflecting State and FGN contributions if possible) pertaining to each State to the Bank for inclusion in the re-design documents not later than December 19, 1988\. A similar request was made to the Kaduna State delegation when it visited Washington last week\. (b) The re-design Staff Appraisal Report (SAR) and legal documents would be presented to the Bank's Management for approval and authority to negotiate by December 31, 1988\. (c) The Bank would send the approved set of documents to the States and FGN by January 16, 1989, together with an invitation to negotiations\. Given the extent of agreement reached between the Kaduna and Katsina State delegations and the Bank on the essential issues of the re-design of the project, the negotiations are expected to be smooth and routine\. (d) Based on the above schedule, negotiations are expected to be held in early February 1989, and are tentatively set for February 6, 1989\. (e) The negotiated Kaduna/Katsina ADP loan documents would be presented to the Executive Councils of each State and the Federal Executive Council for their approval\. State approvals are expected to be facilitated by the early involvement\. and clear comitment to the projects already demonstrated by the Federal Government, and State Governors and their Commissioners of Agriculture Finance and Justice in the re-design efforts\. A tentative target date for obtaining State Executive Council approval was set at February 27, 1989, and for Federal Executive Council approval at March 6, 1989\. (f) Following the approval of the negotiated re-design documents by the State and Federal Executive Councils, the re-designed Kaduna ADP (to be  Annex I Page 5 of 23 re-named Kaduna/Katsina ADP) would be presented to the Bank's Board for its approval\. It is hoped that this would be possible before the end of March 1989, and a tentative target date of March 27, 1989 was proposed\. (h) The legal documents pertaining to the erstwhile Kaduna ADP would continue to be in force, and the legal documents pertaining to the re- design would become effective (a) immediately upon the signature of the Project Agreement by Katsina State and Subsidiary Loan Agreement by both Katsina State and the Federal Government; and (b) the fulfillment of any other terms and conditions which may be agreed between the Bank, FGN, and the States during the negotiations\. The above schedule largely represents the necessary legal technicalities required to formalize the bifurcation and every effort would therefore be made to ensure that it does not jeopardize the smooth implementation of the project in either State\. THE MAJOR RE-DESIGN PROPOSALS 8\. The Bank and Katsina State delegation presented the essential elements of their proposed amendments to the re-designed project\. The first half of the technical discussions was based on excerpts from Chapter IV (The Re-designed Project) of the draft SAR incorporating the rationale for the re-designed project, its objectives, and the essential elements of design\. The Bank complimented the Katsina State delegation for their thorough and well prepared written proposal which formed the basis of the second half of the technical discussions\. The Bank and the Katsina State delegation agreed on the following essential elements of the re- designed project, subject to review and approval of the Bank's Management: (a) Agricultural Services (i) Unification of extension services; (ii) strengthening of the system of Sponsored Research between Katsina ADP and Zaria Institute for Agricultural Research (IAR); (iii) intensification of the agro-forestry, soil conservation, and land-use planning programs, with emphasis on labor intensive and low-cost vegetative (i\.e non-mechanical) solutions to soil conservation\. The land-use planning program would emphasize mapping and identification of land potentials; (iv) assigning a central role to the private sector and smallholders in improved seed multiplication, processing and distribution, partially by reducing the number of ADP seed farms and establishing a seed pricing policy which encouraged the participation of the private sector,  0 - Annex I Page 6 of 23 contract outgrower farmers, and adoption of improved seeds by farmers; (v) the emphasis on animal traction, pasture development, and animal health services; and (vi) various pilot programs of financial and technical assistance to encourage the participation of private farmers, cooperatives, and firms in the marketing and distribution of tree seedlings and improved seeds, and provision of land-use planning and animal health services\. The technical and financial assistance for the pilot programs would be coordinated by the FASCOM, with technical input from the ADP\. (b) Rural Infrastructural Services (i) EngineerinR Services: Strengthening of ADP engineering services, including the construction and rehabilitation of werkshops, staff housing, office buildings, and laboratories for the projects; and encouragement of equipment and vehicle maintenance contracts between the ADP and private workshops in Katsina State on a pilot basis\. (ii) Feeder Roads and Rural Water Supply: Construction of an additional 700 km of feeder roads, and rehabilitation of 400 km of roads by, and maintenance of roads all ADP roads, all by contract; first priority would be assigned te maintenance of existing ADP roads, followed by rehabilitation of ADP roads (especially those built under Funtua ADP), and lastly the construction of new roads; full utilization of the existing ADP force account capability for rural road works; establishing a capacity in Katsina ADP for implementing rural road and water supply programs by contract; immediately conducting an inventory of road works equipment available in the State which can be repaired economically, and rehabilitating them for subsequent allocation to LGCs which become eligible to participate in the technical assistance program of the project; pilot programs to provide financial and technical assistance to firms and individuals wishing to operate as rural road and water supply maintenance contractors to Katsina ADP; establishing Water Users' Associat4ons (WUAs) by the Rural Water Supply Divis on to maintain rural water supply facilities and organize community ownership and participation in the construction and maintenance of rural water supplies; assisting Katsina ADP, LGCs implementing rural road and water supply programs in collaboration with the ADP, and their contractors to obtain financial and technical assistance available under the Bank-funded Infrastructure Development Fund Project; providing  Annex I Page 7 of 23 technical and financial assistance on a contractual basis to strengthen LGC capacity to maintain feeder roads and rural water supply facilities in their jurisdictions using labor intensive methods on a pilot basis; and construction of about 500 boreholes and 50 earth dams by contract; rehabilitation of about 300 boreholes, 500 wells, and 50 earth dams by fully utilizing the existing ADP force account capability and by contract\. (iii) Irrigation: A new fadama irrigation program was added, with significantly expanded targets for Katsina ADP to 20,000 ha (from 3000 ha\. in the most recent proposals), with the bulk of the program to be implemented by contract (the ADP itould hire the contractors) and by full utilization of the ADP force account capability which would be strengthened following the recent approval by the Bank for the acquisition of drilling rigs and hand drilling sets by the ADP; completion by the ADP of 2-3 medium scale irrigation schemes owned by the State with a command area of about 2000 ha (subject to a satisfactory feasibility analysis by consultants appointed with the Bank's approval); establishing Irrigation Water Users' Associations (IWUAs) to perform functions similar to those of WUAs; to the extent possible, the ADP would charge full cost to beneficiaries of the fadama development program, and credit would be provided through the proposed Cooperative Financing Agency (CFA) to assist farmers to phase in the capital costs; and a program of training and equipping of Village Mechanics to maintain water supply and fadama irrigation facilities in their communities\. cc) Commercial Services Mi) The FASCOM: Financing of FASCOM imports an a three year declining basis; a monitorable program of commercial and financial policies by which the FASCOM would replenish the equivalent inventory previously financed by the Bank lr n through purchases of foreign exchange on the FEM; assistance to the FASCOM to formulate a Commercial and Financial Policy Statement (see Attachment II) incorporating policies to guide the operations of the company towards self-sustaining profitability; recruitment of consultants by March 31, 1989 to assist the State with preparation o# a Corporate Plan to strengthen the management of the FASCOM, strengthen its financial base, and prepare a program for its privatization during the next  Annex I Page 8 of 23 three years 2/; appointment of cooperatives and private firms as retail agents to the FASCOM; establishment of a Farm Enterprise Development Service (PEDS) with staff not exceeding 10 whose qualifications would be satisfactory to the Bank, and a US$ 500,000 Venture Capital Fund (FEDVCF) in the FASCOM to coordinate commercial and financial assistance programs which are proposed to be provided to firms and individuals in support of the privatization pilot programs of the project 3l; and establishment of a Veterinary Revolving Drug Fund\. The operations of the Veterinary Revolving Drug Fund would be overseen by a Board of Trustees on which livestock owners would constitute the majority\. (ii) Farm Mechanization\. Agro-Processing and Storaget Provision and sale, at unsubsidised profit making prices by the FASCOM, of on-farm storage merchandise, machinery and implements; and provision of technical and financial assistance to entrepreneurs and cooperatives in related fields through the FASCOM and by assisting entrepreneurs and cooperatives to obtain to access the Bank-assisted Small and Medium Scale Enterprises Project (SMSE)\. Kaduna State delegation undertook to investigate possibilities of making contract arrangements between the ADP, cotton ginners, textile mills, and the FASCOM to support the rapid expansion of cotton production and processing in the State\. A progress report on the arrangements would be submitted to the Bank by March 31, 1989\. (d) State MANR (i) Sector Policy and Strategic Planning: The State delegation welcomed the Bank's offer to provide technical assistance to the MANR in sector planning and policy formulation, strengthen its capacity to oversee the operations of the ADP, which is its imilementing agency; and assist the State to prepare a Perspective Sectcr Plan (dovetailing on the National Perspective Sector Plan which is currently undar preparation by FMAWRRD), and a Medium-Term Sector development plans\. Consultants would be appointed by March 31, 1989\. (ii) Institutional Review: A program of technical assistance to the MANR to conduct an Institutional Review of the key 2/ The State delegation undertook to send to the Bank Annual Reports and Accounts for the FASCOM for the past three years by pouch immediately upou their return to Katsina\. 31  - 70 - Annex I Page 9 of 23 state agricultural institutions (primarily the MANR and ADP) aimed at rationalizing their roles and improving their efficiency, eliminating duplication, and ensuring long-term sustainability using the policy framework agreed between the Bank and FGN\. Consultants would be appointed by March 31, 1989\. (iii) Studiest Consultants would be appointed by March 31, 1989 to conduct a feasibility study prepare plans for the establishment of a CFA along the lines of the successful Bauchi CFA, which members of the State delegation and the Bank's representatives had studied\. The consultants would be retained for a period of one or two years to implement their recommendations\. additional studies which would be financed under the project would cover Storage, Cooperatives, Aquaculture, Rehabilitation of Road-works Equipment, and Farm Mechanization\. Consultants would be appointed by March 31, 1989\. Ce) Project Management (i) Proiect Administration and Management: Consultants would be appointed by the State by end of March 1989 to review the staffing and organizational requirements of the ADP with a view to identifying the ideal staff compliment, training requirements, and recommending the ideal management structure\. Redundant staff would be redeployed from the ADP on a schedule to be agreed with the Bank during negotiations (tentatively June 30, 1989)\. There was a need to ensure that a strong candidate for the post of Chief Technical Officer (CTO) for the Project was recruited\. To assist the project to effect a quick start- off on its agricultural program in 1989, the State would recruit a consultant from a research institute, university or other suitable source for a fixed term period by March 31, 1989\. (ii) Proiect Finance and Stores: The project would establish a Procurement Unit bv March 31, 1989, and send one or two staff from the Unit to the Bank for on-the-job training ae soon as possible; and the project would establish an internal Tender Committee, adopt procurement review procedures which have been agreed between the Bank and FGN, and are being adopted by other ADPs throughout the country\. Emphasis would be placed on improving MIS and computerization of financial services\. (iii) Manpower Development and Training: The project would place very special emphasis on manpower development and training, and for that purpose appoint a consultant for a fixed term to design and implement a manpower development  - 71 - Annex I Page 10 of 23 program for the ADP while the substantive Chief MDT Officer is on overseas training\. (iv) Planning, Monitoring and Evaluation: Through staff redeployment, recruitment of better trained staff, an intensified training program, and provision of necessary computers, the PME Unit would be strengthened\. PROCUREMENT ISSUES 9\. (a) The Bank and State delegation agreed that procurement had not proceeded smoothly in the recent past\. The Bank representatives informed the State delegation that the Bank had made a conscious effort to enforce the Procurement Guidelines, and that as soon as the projects become familiar with the Guidelines, disbursements would be expected to improve\. The Bank requested the State authorities to institute firm instructions and high standards for the preparation and submission of Bank-acceptable procurement documents in the ADP and VASCOM\. (b) The project would immediately recruit consultants to prepare the 1989 Procurement Schedule for ADP and FASCOM, as well as all other procurement documents to ensure that satisfactory documents are submitted to the Bank by early January 1989\. 'c) There was agreement on all outstanding procurement cases, most of which would be re-submitted to the Bank after being prepared by consultant to be recruited immediately by the project\. In addition, the Bank and the State delegation discussed and agreed on the method of procurement for major items of expenditure in 1989, and that the project would submit a Procurement Schedule along the lines agreed during the discussions, and annually thereafter\. (d) The Bank approved the proposal of the State delegation to start construction of 49 open-dug wells (approximately 7 per LGA), at an estimated cost of about Naira 441,000 through local competitive bidding (LCB) procedures\. As a one-time exception, the Bank approved the method of recruitment oi the contractors by the State for the construction of the open-dug wells, which involved obtaining quotations from in-State contractors and negotiating contract rates with them\. The Bank's representatives explained the need for the State to invite quotations for all non-ICB procurement from out-of-State firms in the interest of ensuring that the most competitive quotations available in the country are obtained\. This need was appreciated by the State delegation, which however expressed cor^sern that similar requirements should apply to other States using proceeds of World Bank loans\. (e) The Bank and the State delegation agreed that the State could immediately proceed to procure urgencly required items for the project by direct international and local shopping, provided such shopping did not exceed US$300,000\. To the extent possible, the items to be so procured  - 72 - Annex I Page 11 of 23 would all be purchased as one bid, and therefore the project would invite quotations from two or three firms\. (f) The bulk of the rest of the procurement would be by ICB, and the schedule would be arranged in such a way as to minimize the number of individual procurement documents to be submitted to the Bank (preferably no more than 4 sets of procurement documents would be submitted for review in 1989)\. APPOINTMENT OF SENIOR PROJECT STAFF 10\. (a) The State delegation presented the recommendations of the State Interview Panel for the senior staff of the ADP and FASCOM\. The Bank endorsed all the recommendations of the Interview Panel, and commended the State for maintaining very high standards for the recruitment of project staff\. Further interviews for vacant positions (including Zonal llau\.agers) are likely to be scheduled for January 1989, and the State delegation expressed the hope that the Bank's representative would be able to attend\. (b) The Bank would be prepared to finance the appointments of Nigerian staff recruited on fixed term contracts in lieu of expatriates, provided their terms of reference, qualifications, and terms of employment were agreed with the Bank prior to their recruitment\. In addition, the Bank would need to be satisfied that adequate arrangements were being made to train replacements for both fixed term and expatriate staff\. In the MANR, possible need for fixed term recruitment of such staff was identified the Commissioner's Office for the posts of Chief Agricultural Officer and Chief Planning Officer/Adviser\. In the ADP, possible areas of need for such recruitment had been identified in the posts of Chief Technical Officer, Chief Engineer, and Chief Manpower and Train'-, Officer\. In the FASCOM, the areas of need were identified in the posts of Financial Controller, Commercial Manager, and Manager of the Rural Enterprise Development Service\. (c) To allow flexibility to implement the recommendations of the consultants who would be recruited to prepare the Corporate Plan for KATFASCOM, recruitment for senior staff and management would be slowed down for the time being\. ANNUAL VISIT TO WASHINGTON 11\. The Bank and the State delegatiGn agreed that the visit of the State delegation to Washington was very useful in resolving project implementation issues, and provided for concerted attention and interaction between the Bank and the State officials\. Accordingly, the Bank invited the State to visit Washington next year in November for similar discussions, and asked that the documentation prepared by the State should include the following year's Work Program and Budget, as well as a Retrospective Report covering the implementation experience in 1989\.  - 73 - Annex I Page 12 of 23 Signed this December 7, 1988: For Katsina State; For the IBRD Alh\. Mohammed Amin Abdullahi Makwata J\. Wambia Commissioner for Agriculture Senior Economist Kasimu Ibrahim Alh\. Nalado Yusuf Commissioner for Finance and Planning Project Manager Saddik Abdullahi Mahuta Solicitor-General CC: Dr\. Ramsey Mowoe, Assistant Director, Federal Ministry of Finance and Planning, Lagos\. Chief\. O\.F\.J\. Oyaide, Federal Director of Agriculture and Rural Development, FMAWRRD, Abuja\. Prof\. A\.O Falusi, Head of FACU, Ibadan\. Mrs\. Oseni, Federal Ministry of Justice, Lagos\. Mrs\. V\. Abraham, Disbursements Division\. Ms\. 0\. Vela, AF4AG Mr\. Kafu Awunyo, Senior Counsel\. Africa Information Center  - 74 - Annex I Page 13 of 23 KADUNA/KATSINA ADP (Redesigned Kaduna ADP-Loan No\. 2436-UNI) Minutes of Technical Discussions with Kaduna State Delegation\. 1\. A high-powered Kaduna State delegation led by the Hon\. Commissioner for Agriculture, Alh\. Mohammed N\. Sambo 41, visited Washington DC from November 28 to December 1st for negotiations on the redesign of Kaduna ADP (Ln\. 2436-UNI)\. Since the redesign documents were not ready, it was agreed that the opportunity presented by the visit of the State delegation would be used for technical discussions\. The discussions were attended partially by Mr\. O\.F\.J\. Oyaide, Federal Director of Agriculture and Rural Development, and Prof\. A\.O Falusi, Head of FACU who were in Washington for other loan negotiations\. The delegation also met with Mr\. Anand Seth, Division Chief, Agriculture Operations, West Africa Department, and Mr\. Caio Koch-Weser, Director, West Africa Department\. AGREED AGENDA 2\. The following agenda was agreed and covered during the techn"cal discussions: (a) Interim disbursements arrangements for Katsina ADP; (b) the need for redesign of the project; (c) reasons for the delay in finalising the redesign exercise; (d) the Documentation Required; (e) the Processing Schedule; (f) the redesign proposals presented by the Bank and the State delegation; (g) procurement Issues; and 41 Other members of the delegation were Hon\. Commissioner for Finance and Planning Alh\. Musa Zakari, Solicitor-General Yahaya Abubakar, Acting Program Manager KADP Col\. S\. Sarup, and Chief Administrative Officer Mr\. W\. J\. Yayok\. The Bank team consisted of Messrs\. Makwata J\. Wambia, Senior Economist and Project Officer for KADP, and Kafu Awunyo, Senior Counsel; and Mesdames\. Vimila Abraham, Disbursements Officer, and Olinda Vela, Procurement Assistant\.  - 75 - Annex I Page 14 of 23 (h) appointment of senior ADS staff\. INTERIM DISBURSEMENTS ARRANGEMENTS 3\. The Bank proposed, and it was agreed by all parties that: (a) The Federal Fovernment (Federal Ministry of Firance, External Finance Division) should authorise and submit two additional signatories to the loan account from Katsina ADP\. This would remove the obstacle to smooth implementation of both ADPs presented by the need for Kaduna ADP officials to courtersign each withdrawal application from Katsina ADP\. (b) As soon as the Bank receives the letter authorising and authenticating the two Katsina ADP signatories, the Bank will maintain a seperate record of withdrawals for Kaduna and Katsina ADPs\. (c) The last d3sbursement application paid by the Bank on the loan account was on November 1, 1988\. As of that date, the total amount disbursed from the loan was US$31\.2 million\. From that date onwa_ds, the Lank will keep seperate records for Kaduna and Katsina ADP withdrawals\. For that purpose, the Bank will open two sub-accounts (A-for Kaduna, and B- for Katsina) to record; (d) Kaduna State delegation undertook to send to the Bank by courier, immediately upon their return to Kaduna, the latest information on disbursements by each loan category accruing to Kaduna and Katsina State respectively\. This would update the statement prepared by the Bifurcation Committee showing disbursemente as of September 30, 1987\. The information is necessary to enable the Bank to prepare new loan allocations among the various disbursement categories\. THE NEED FOR REDESIGN 4\. The Bank and the State delegation agreed that the bifurcation of the project presented an opportunity for necessary redesign of the project for the following reasons: (a) The erstwhile KA*P was a%ong the less successful of the AtIPs in our Nigeria portfolio, and therefore the Management of the Bank and the States wish to be reassured that actions are proposed which assure that implementatio- would be more rapid following the re-design than has hitherto been the case\. (b) There are considerable loan savings arising from the devaluation of the Naira since the Bank's Soard approved the Kaduna ADP in 1985\. The savings are estimated at between USS30-50 million\. The bank's policy is to cancel loan savings arising from devaluations, or from lower cost implementation of the approved prnjrct targets\. In view of the Federal and State Governments' (both Kaduna and Katsina) stated preference to retain  - 76 - Annex I Page 15 of 23 the loan savings, there was a need to re-program these savJngs, a process that wf time consuming\. (c) The Bank and FGN feel the need, which was shared by the State delegation, to redesign the project in order to incorporate the agreed sector implementation strategy which is aimed at improving the sustainability of project investments, institutions, and benefits (see Attachment I)\. (d) In view of the preference of both States to retain the closing date as December 31, 1991, strategies for implementing the project to ensure full disbursement the remaining loan amount (US$ 91 million) over a period equivalent to the prior life of the loan during which only US$31 million was disbursed were required\. Agreemert was reached to pursue a dual track approach to implementation: full use of the existing ADP force account capability, in parallel with contracting in order to achieve the ambitious targets\. REASONS FOR THE DELAY 5\. The State delegation and the Bank agreed that there had been a lengthy delay in finalising the re-design of the project\. Both States had been under the impression that the re-design appraisal report which had been prepared by FACU following the Bank's re-design mission in July originated from the Bank, and were therefore surprised that the Bank maintained that it was not yet ready for negotiations with the necessary documentation\. 6\. Documentation Required\. The Bank representatives and Management explained, and the Sti\. e delegation agreed, that further documentation was required to present the re-design to the Bank's Board, the State Executive Council, and the Federal Executive Council for the necessary approvals\. In addition to preparation of a final re-design report reflecting the comments of the States on the FACU re-design report, amendments were required to the Loan Agreement between the Bank and FGN, to the Kaduna State Project Agreement (between the Bank and Kaduna State) and to the Subsidiary L"an Agreement (between Kaduna State and Federal Government)\. In addition, a new Katsina State Project Agreement, and Subsidiary Loan Agreement between Katsina State and FGN were required\. The Bank would be responsible for preparing all the documents and amendments listed above except for the Subsidiary Loan Agreements, which are traditionally prepared by the Federal Ministry of Justice\. 7\. Processing Schedule\. Following the agreement to facilitate direct disbursements to Katsina ADP, it was agreed that the schedule for negotiating the re-designed project could be extended from January to February or February 1989, since implementation would now proceed at a much faster pace, especially in view of the agreement reached with the State delegation on the essential elements of the re-designed project, the appointment of senior ADP managyment and staff by both States, and given  - l I - Annex I Page 16 of 23 the Bank's approval of all pending procurement cases\. The following processing schedule was agree& between the Bank and the Slate delegation: (a) As soon as the delegates return to Kaduna, they would send the latest statement of loan and project expenditures (reflecting State and FGN contributions if possible) pertaining to each State to the Bank for inclusion in the re-design documents not later than December 15, 1988\. A similar request would be made to the Katsina State delegation when it visits Washington next week\. (b) The re-design Staff Appraisal Report (SAR) and legal documents would be presented to the Bank's Management for approval and authority to negotiate by December 31, 1988\. (c) The Bank would send the approved set of documents to the States and FGN by January 16, 1989, together with an invitation to negotiations\. Given the extent of agreement reached between the Kaduna State delegation and the Bank on the essential issues of the re-design of the project, and assuming that similar agreement could be reached with the Katsina State delegation which was expected in Washington on December 5, 1988, the negotiations are expected to be smooth and routine\. (d) Based on the above schedule, negotiations are expected to be held in early February 1989, and are tentatively set for February 6, 1989\. (e) The negotiated Kaduna/Katsina ADP loan documents would be presented to the Executive Councils of each State and the Federal Executive Council for their approval\. State approvals are expected to be facilitated by the early involvement and clear commitment to the projects already demonstrated by the Federal Government, and State Governors and their Commissioners of Agriculture Finance and Justice in the re-design ef-Forts\. A tentative target date for obtaining State Executive Council approval was set at February 27, 1989, and for Federal Executive Council approval at March 6, 1989\. (f) Following the approval of the negotiated re-design documents by the State and Federal Executive Councils, the re-designed Kaduna ADP (to be re-named Kaduna/Katsina ADP) would be presented to the Bank's Board for its approval\. It is hoped that this would be possible before the end of March 1989, and a tentative target date of March 27, 1989 was proposed\. (h) The re-design would become effective (a) immediately upon the signature of the Project Agreement by Katsina State and Subsidiary Loan Agreement by both Katsina State a-d the Federal Government; and (b) the fulfilment of any other terms and co\.iditions which may be agreed between the Bank, FGN, and the States during the negotiations\. The above schedule largely represents the necessary legal technicalities required to formalise the bifurcation and every effort would therefore be made to ensure that it does not jeopardise the smooth implementation of the project in either State\.  Annex I Page 17 of 23 THE MAJOR RE-DESIGN PROPOSALS 8\. The Bank and Kaduna State delegation both presented the essential elements of their proposed amendments to the re-designed project\. The first half of the technical discussions was based on excerpts from Chapter IV (The Re-designed ProJect) of the draft SAR incorporating the rationale for the re-designed project, its objectives, and the essential elements of design\. The Bank complimented the Kaduna State delegation for their thorough and well prepared written proposal which formed the basis of the second half of the technical discussions\. The Bank and the Kaduna State delegation agreed on the following essentia\. elements of the re- designed project: (a) Agricultural Services\. (i) Unification of extension services; (ii) strengthening of the system of Sponsored Research between Kaduna ADP and Zaira Institute for Agricultural Research (IAR); (iii) intensification of the agro-forestry, soil conservation, and land-use planning programs, with emphasis on labor intensive and low-cost vegetative (i\.e non- mechanical) solutions to soil conservation\. The land-use planning program would emphasise mapping and identification of land potentials; (iv) assigning a central role to the private sector and smallholders in improved seed multiplication, processing and distribution, partially by rationalising the number of ADP seed farms and establishing a seed pricing policy which encouraged the participation of the private sector, contract outgrower farmers, and adoption of improved seeds by farmers; (v) the emphasis on animal traction, pasture development, and animal health services; and (v) various pilot programs of financial and technical assistance to encourage the participation of private farmers, cooperatives, and firms in the marketing and distribution of tree seedlings and improved seeds, and provision of lard-use planning and animal health services\. The technical and financial assistance for the pilot programs would be coordinated by the FASCOM, with technical input from the ADP\. (b) Rural Infrastructural Services (i) EnRineering Services: Strengthening of ADP engineering services, including the construction and rehabilitation of workshops, staff housing, office buildings, and laboratories for the projects; and encouragement of equipment and vehicle maintenance contracts between the ADP and private workshops in Kadurna State on a pilot basis; (ii) Feeder Roads and Rural Water SUDpl: construction, rehabilitation of an additional 300 km of feeder roads, and rehabilitation and maintenance by contract; full utilisation of the existing ALP force account capability for rural road works; establishing a capacity in Kaduna ADP for implementing rural road and water supply programs by contract; immediately conducting an inventory of road works equipment available in the State which can be repaired  Y9 Annex \. Page 18 of 23 economically, and rehabilitating them for subsequent allocation tg LGCs which become eligible to participate in the technical assistance program of the project; pilot programs to provide financial and technical assistance to firms and individuals wishing to operate as rural road and water supply maintenance contractors to Kaduna ADP; establishing Water Users' Assciations (WUAs) to maintain rural water supply facilities and organise community ownership and participation in the construction and maintenance of rural water supplies; assisting Kaduna ADP, LGCs implementing rural road and water supply programs in collaboration with the ADP, and their contractors to obtain financial and technical assistance available under the Bank-funded Infrastructure Development Fund Project; providing technical and financial assistance on a contractual basis to strengthen LGC capacity to maintain feeder roads and rural water supply facilities in their jurisdictions using labor intensive methods on a pilot basis; and construction, rehabilitation and maintenance of about 600 boreholes, 150 wells, and 28 earth dams by fully utilising the existing ADP force account capability and by contract; (iii) Irrigation: expansion of the fadama irrigation target for Kaduna ADP to 10,000 ha, with the bulk of the program to be implemented by contract (the ADP would be the contractor) and by full utilisation of the ADP force account capability which would be strengthened following the recent approval by the Bank for the acquisition of drilling rigs by the ADP; completion by the ADP of 2-3 medium scale irrigation schemes owned by the State with a command area of about 2000 ha; establishing Irrigation Water Users' Associations (IWUAs) to perform functions similar to those of WUAs; to the extent possible, the ADP would charge full cost to beneficiaries of the fadama development program, and credit would be provided through the proposed Cooperative Financing Agency (CFA) to assist farmers to phase in the capital costs; and a program of training and equiping of Village Mechanics to maintain water supply and fadama irrigation facilities in their communities\. (c) Commercial Services (i) The FASCOM: Financing of FASCOM imports an a three year declining basis; a monitorable program of commercial and financial policies by which the FASCOM would replenish the equivalent inventory previously financed by the Bank loan through purchases of foreign exchange on the FEM; assistance to the FASCOM to formulate a Commercial and Financial Policy Statement (see Attachment II) incorporating policies to guide the operations of the  P\.;ge 19 of 23 company towards self-sustaining prfitability; recruitment of consultants by January 1989 to assist the State with preparation of a Corporate Plan to strengthen the management of the FASCOM, strengthen its financial base, and prepare a program for its privatisation during the next three years; appointment of cooperatives and private firms as retail agents to the FASCOM; establishment of a Farm Enterprise Development Service (FEDS) and a US$500,000 venture capital fund (FEDVCF) in the FASCOM to coordinate commercial and financial assistance programs which are proposed to be provided to firms and individuals in support of the privatisation pilot programs of the project; and establishment of a Veterinary Revolving Drug Fund; (ii) Farm Mechanisation\. Agro-Processing and Storage: provision and sale, at unsubsidised profit making prices by the FASCOM, of on-farm storage merchandise, machinery and implements; and provision of technical and financial assistance to entrepreneurs and cooperatives in related fields through the FASCOM and by assisting entrepreneurs and cooperatives to obtain access to assistance available under the Bank-assisted Small and Medium Scale Enterprises Project (SMSE)\. (d) State MANR gi) Sector Policy and Strategic Planning: The State delegation welcomed the Bank's offer to provide technical assistance to the MANR in sector planning and policy formulation, strengthen its capacity to oversee the operations of the ADP, which is its implemeneting agency; and assist the State to prepare a Perspective Sector Plan (devotailing on the National Perspective Sector Plan which is currently under preparation by FMAWRRD), and a Medium-Term Sector development plans\. (ii) Institutional Review: A program of technical assiatance to the MANR to conduct an Institutional Review of the key state agricultural institutions (primarily the MANR and ADP) aimed at rationalising their roles and improving their efficiency, eliminating duplication, and ensuring long-term sustainability using the policy framework agreed between the Bank and FGN\. (iii) Studies: Consultants would be appointed by end of January 1989 to conduct a feasibility study prepare plans for the establishment of a CFA along the lines of the successful Bauchi CFA, which members of the State delegation and the Bank's representatives had studied and admired\. The consultants would be retained for a period of one or two years to implement their recommendations\. Additional  -1 Ni -Annex I Page 20 of 23 studies which would be financed under the project would rover Storage, Cooperatives, Aquaculture, and Farm Mechanisation\. (e) Proiect l'anagement (i) Project Administration and Management\. Consultants would be appointed by the State by end of March 1989 to review the staffing and organisational requirements of the ADP with a view to identifying the ideal staff compliment, training requirements, and recommending the ideal management structure\. Redundant staff would be redeployed from the ADP on a schedule to be agreed with the Bank during negotiations (tentatively June 30, 1989)\. In view of the engineering background of the selected Project Vanager, there was a need to ensure that a strong candidate for the post of Chief Technical Officer (CTO) for the Project There was recruited\. To assist the project to effect a quick start-off on its agricultural program in 1989, the State would recruit a consultant from a research institutes, university or other suitable source for a fixed term period by March 31, 1989\. (ii) Proiect Finance and Stores\. The project would establish a Procurement Unit by March 31, 1989, and send cne or two staff from the Unit to the Bank for on-the-job training as soon as possible; the project would immediately reduce the number of Procurement Agents to two firms to be agreed with the Bank, by June 30, 1989; and the project would establish an internal Tender Committee, adopt procurement review procedures which have been agreed between the Bank and FGN, and are being adopted by other ADPs throughout the country\. (iii) Manpower Development and Training\. The project would place very special emphasis on manpower development and training, and for that purpose appoint a consultant for a fixed term to design and implement a manpower development program for the ADP while the substantive Chief MDT Officer is on overseas training\. (iv) Planning, Monitoring and Evaluation\. Through staff redeployment, recruitment of better trained staff, an intensified training program, and provision of necessary computers, the PME Unit would be strengthened\. PROCUREMENT ISSUES 9\. (a) The Bank and State delegation agreed that procurement had not proceeded smoothly in the recent past\. The Bank representatives informed the State delegation that the Bank had made a conscious effort to enforce  Annex I Page 21 of 23 the Procurement Guidelines, and that as soon as the projects become familiar with the Guidelines, disbursements would be expected to improve\. The State delegation also informed the bank that very firm instructions and high standards for the preparation and subsmission of Bank-acceptable procurement documents had been put in place, and improvements were expected\. (b) There was agreement on all outstanding procurement cases, which were approved\. In addition, the Bank and the State delegation discussed and agreed on the method of procurement for major items of xpenditure in 1989, and that the project would submit a Procurement Schedule along the lines agreed during the discussions, and annually thereafter\. APPOINTMENT OF SENIOR STAFF 10\. The State delegation presented the recommendations of the State Interview Panel for the senior staff of the ADP and FASCOM\. The Bank endorsed all the recommendations of the Interview Panel, and commended the State for insisting on very high standards for the recruitment of project staff\.  - 83 - Annex I Page 22 of 23 Attachment 1 Page 1 of 2 KADUNAIKATSINA ADP ADP IMPLEMENTATION STRATEGY COMPONENT OBJECTIVE O&M 1\. No duplication with MANR, others\. 2\. Structure/staffing which is sustainable Extension 1\. Unification of MANR, Forestry and Livestock 2\. Replace Demonstration Plots with Corner Plots 3\. Mobility with ownership 4\. Sustainable intensity of extension OFAR 1\. Link to national system - contract Res\. 2\. Priority trials agreed with Bank Seed 1\. Contract growers to supply at least 75Z of seed\. 2\. Reduce ADP own farms 3\. Transfer responsibility for seed distribution to FASCOMs 4\. Retail price at 252 above grain market price Input Distribution 1\. Privatization\. at retail level 2\. Promote role of cooperativds 3\. 'Privatization' of FASCOMs (Phased Program) 4\. FUll cost plus pricing/ROR  -84- Annex I Page 23 of 23 Attachment 1 Page 2 of 2 Fadama 1\. Gather groundwater information 2\. Accelerate pace of development 3\. Training of mechanics for maintenance of pumps 4\. Full pricing S\. Promote local manufacture of spares Rural Roads 1\. Shift emphasis from force account to contract 2\. Promote LGA role in routine maintenance 3\. Achieve high equipment utilization rates for force account 4\. Emphasize maintenance over new construction Rural Water 1\. Promote role of Water Users Association in routine maintenance 2\. Training of local mechanics 3\. Promote local manufacture of spares Soil Conservation 1\. Cost effective means\. less engineering and vegetative methods\. 2\. 'integrate soil conservation as part of extension effort Plannina 1\. Document sector development strategies for each state 2\. Strengthen MANR capability in planning, policy formulation, expenditure programming, and ADP oversight M&E 1\. Focus evaluation role with APMEPU 2\. Support appropriate investments 3\. Rationalize organizational structure and staffing  KADUNA ADP NiAERIA KADUSA AND KATSINA - LOP IREDISIGNtD KADUtNA DP PRo0tell financing Plan by Suaey Accounts * MORID OmN FEDERI GOVERIRENI sElN1fCI*RY s5lf GOVERNMENIT lotal ,, ------------------ \. \. \. \.- - ---\. l lo a \. D tl\. o MoDunt I Amount I Aount I Mount S hr'\. Each\. Taes) Tr 1\. INWESINEll COSTS IL WltoDiUGS UD CiVil tDS 1\. S96\.96 86\.22 324\.33 3\.78 - - Sb?\.92 30\.00 8\. 579\.22 16\. 19 6\.688\.2* 1\.033\.09 657\.92 8\. EUIREtNI 1\.8t 5\.6? 89\.98 0\.40 0\.02 - - 209 U 10\.00 2,095\.72 3\.95 1,883\.79 2\.31 209\.57 C\. VEHICLES/PLANT NACII\. 2i260\.57 90\.00 -0\.00 -0\. 00 - - 2U\.40 t0\.00 2,533\.97 4\.78 2\. 280\.57 -0\.00 253\.40 0\. 1F8066 IRRiGATIN(NCONTRACT) 13618\.59 86\.81 59\.48 3\.19 * - 181\.45 30\.00 t ,64\.53 3\.52 1,457\.39 220\.68 38\. 45 t\. RATER SuPL MAIER SUPtPY ICONTRAC9I 7\.261\.03 88\.81 268\.16 3\.39 - - 836\.47 10\.00 84364\.66 15\.78 6\.536\.39 991\.80 836\.47 \.-- -- -- - \. \. \. \. \. \. ---\. ------ -------- ------ \. \. \. \. \. \. \. \. \. \. \. Sq-To3al MAIER SUPPtY 7\.263\.03 66,88 267\.16 3\.19 - 836\.47 to\.0O 8,364\.6 35\.7r8 6\.536\.39 993\.80 616\.47 f\. RURAL ROADS ROAD CONSTRUCTbON ICONT0R4CI 3, 86\.85 86\.79 142\.62 3\.21 - - 444 94 30\.00 4,449\.41 8\.39 3\.474\.05 530\.42 444\.94 ROAD RENA3itiAIION iCONTRACT) I,684\.89 86\.80 62\.16 3\.20 - - 394 12 30\.00 1943\. 17 3\.66 1\. 5\.927 23t\.08 194\.12 \.- -----\. 9\. \. \. \. ---- --- ----- ---- \. \. \. \. \. \. \. \. \. Sob-totalI RURAL ROADS 5 546\.73 86\.80 204\.78 3 20 - - 639\.06 *0\.0 0\. 390\.S7 32\.06 4\. 990\.01 763\.50 639\.08 6\. 16R0 INPUTS MND OPERATIONS 6 ,73\.88 s 90\.00 0\.00 0\.00 968 76 I0\. " 9,687\.u64 8\.28 8 731\.88 0\.00 968\.76 N3\. TECHNICAL ASSISTANCE\. IRAINtING AND STUDIES 3?57\.80 69\.65 6\.08 0\. 15 - 3-1b 00 t0\.00 3,959\.96 7\.47 3 U57\.88 6\.08 396\.00 1\. YEtiUtE CAPItAL tUND 130\.so 90\.00 *0\.00 0 00 - 14\.50 3O 00 145\.00 0\.27 130\.50 -0\.00 34\.50 \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. Total 11NVIST3IEN1 COSTS 38,396\.63 BB\.02 862\.1 3\.9 8 4\.362\. 13 10\.00 43\.621\.26 62\.30 36\.243\.62 3J035\.S2 4\.362\.t3 It\. REC3*RREN1 COSTS \. \. A\. SALARIES AND aLt GNCES - - 5\.063\.02 100\.00 S\.063\.02 9\.55 - 4,303\.57 759\.45 B\. ECUIPNT OP£ERA41ONS 826\.10 78\.27 123\. 26 11\.73 - - 10o\.54 10\.00 t 0f5\.43 1\.99 330\.98 618\.91 105\.54 C\. VEHICLESMANT OPERATIONS 1\.077\.91 75\.44 208\. 2 14\.56 - - 142\.89 10\.00 1\.428\.92 2\.70 245\.44 1,040\.58 142\.89 S\. INCRIEHNIAL OPERAIING COStS 13340\.02 73\.05 310\.S5 38\.N - 183 44 t0\.00 3,834\.41 3\.46 96\.23 1\.554\. 74 183\.44 Total RECURRENT COSTS 3,244\.03 34\.58 642\.5 6\.85 5- 6494\.90 58\.57 9,381\.17 17\.70 612\.65 1\.t57\.80 1,193\.33 lotal O ttem 4,640\.U 78\.56 1605\. 06 2\.84 - - 9\.857\.02 8L80 53\.003\.04 *00\.00 36\.9*I\.27 10,533\.32 5\.553\.45 \.aasnsas\. a,,\. aaan\.n\.a9 ass\.:\. as::a\. ass\.$&*a n\.sa *sat* ass :\.u 544 assassaeas sstassags saas s\.aSass ~~~~~~~~~~~~~~~~\.,\. \. \. $tE\. \. \.|\. \. \. \.s\. \. s\. \. g\. \. \. \. \. \. Nay 25\. 1989 1: 13 Not that te cootibutelon of the Feder1 al novetomt I adJusted uward whil,- that Of th State Government is adj " t 0 downward b the following formula to the teXt\. For the firs two yeao they share In qual aiount locAl taxe anddutl e (except for salarles) and In the third yer the State Govornmet contributes fully to the dutlie and local tans\. N 0 M  KADUNA AD? 11 1G1 1* ISIUSIUIO MAOUWA AOP PIull CII lunaionva Plan I? Proj\.cl C-4w-ensfts* wUsI '0001 nmoat 81 5E101t ML 6215101T 611tfC11160 51A1E 60v11111 Total \. \. \. \. \. \. \. \. \.Local hadc\. Out 'es a awmt I \.moln I Agwome I hoomt 3 h\.m1 2 lot bw \. Ixl Tax",) lox"s I\. 122641101111111081 1,2lb1\. 30 2\. 1? 81\.11 2\.11 1\.6M\.,16 11\.172 2\. :B2\.74 1\.01 se08\. 32 \.814\.30 400\.12 2\.8AO-FOll5IR?\. *llO\.OKSIU? $19\. 19 16\. se 10\.14 ?\.10 326\.0o 31\. 64 S1111\.23 I 12 241\.63 166\.0 :l 04 is SOlt coIISIw*iioU 103\.24 43\.06 6\.16 3\.66 1-21\.13 113\.261 229 19 0\.41 6U\.i6 141\.84 3014 1*110Om PIMIIB 11\.10o 63\.9 2668 0 4\.12 M 0\. 14 21\.91 034\.94 1\. is 443\.10 2816131 104\. SII 5%6-totl 610161011S1\. IM 1UK P1A1116 1\. M03 26 31 111\.62 S 64 11246 36\. 00 2\.010 41 3\.94 1s?149 1\. 00 60 122023 23 aICrtioUhL INSIACI 11\. 43 13\.22 so0190 3\.? of 160\.1? 2261 196\.49 I\.11 461\.62 211\. 14 61123 4\. 1110 10L11*II0Ult 851111 116\.01 10\.01 31\.60 4\.1 S? 20\.60 21\. 36 822\.26 1\. SS 421\.6? 301\.43 69\.26 S\. 1121S1063 K012L0611 WhIuIUII 5601111s 212\.42 89\.2? 20\.30 3\.16 144\.6U 26\. 95 131\.6GI 1\.01 29\.0 gas\. 10 16 62 M*-total tIVIlIOCI K111t4P11N1 312\.42 60\.2? 20\.30 3\.6 T \. 44\.86 26\.99 131\.6: 1\.01 203\.09 161,to10 162 Sib-lotel *AGICuLtumt 4\.0O\.614494\.04 292 30 S\.0 2 3\.113-19 42\.0: 1\.411\.61 13\.06 2,846\.26 3\. 692\. 9 612\.0? 1\. fiCIEROM 080$0 01UI81 11At1 20,323\.6St 64 38 80? U6 3 21 2\.013336 12\.26 24\.0649?7 41\.44 18\.146 63 3\. 499SS 2\.436\.?? 2\. 16916*1101 2,033\.62 83\. 111 103 16 2\.96 472\.28 13\.46 3219\. 61 6\.62 2,649\.18 M0\.171 31? 10 Stfip-loal RURA 11116011EC1111 5(021161 22\.2"T\.23 84 26 011\.14 3\.30 \. 3\.42566 12\.41 27,1194\.63 12\.06 20\.7916-11 4\.002\.34 2\.196\.4? C\. COIRCIMi 1161111 I 185111 suppLy CUPaNI 4831105 0\.902 47 83\.30 111\.06 0\.69 2,066\. 42 11\.80 13\.081\.06 24\.60 10\. 109\.01 1, 227\.0OS 1 351100 o CoPiUIIV *111*1C111 LoUN fell 400\. 10 11 72 I so I 42 123\. 13 22\.61 126\.60 1\.06 311\.46 :03\.6? ST 74 1\.*1o1aI 101111118 siIVIlIs it\.3 to\."683\. 00 124 12 0\.02 2, 191\.6 SS 6\.60 1362\.084 21\.? 10,666\.49 1\.231\.62 1\.400\.13 0\. 0101106400I SIPPUBI s1110815 M11 *6111115118110 moo0 310\.1666\.6:f 31 32 6 31 110\.16 21\.0 196\.60 G 1\.615 220 40 266\.26 60\.04 eAND aANIu tlslIO lo\.uSl m1\.01l 63\.12 41\.66 1\.42 I \. 6\. 14 26\.66 161\.1it 1\.06 191\.323 206\.2?t 60\.00 111111168I, SIMS001U &11C0111 1108 lows1 141\.83174\.09 20153 4 01 161\.36 21\.90 136\.12 IX2 423 t0 23048 16104 *10 1V*L*Ala ION1106 01111 NS S 40 641130 410 1% \.292 32L\.30 31\.168 613\.6U I 61 311 22 411\.66 1001to 3*31116 KV11L01Uh11111 M11 11*1111116No1 IRG II\. 11\. 903\.66 11\. 24 :0\.16 1\.46 219\.16 23\.26 1,200\.0S 2\.21 M 82\.0 229\. 06 126\.01 1*1\.1\.1 111*60E1I SUPPORT 119111S 2,618\.02 U6\.14 169\.93 4\.22 t1,662\.03 21\.93 32020\.691 1\.4:1 1,"G6\.64 1\.100\.06 431 26 SIIIIIGIC 91*111111 211\. 666 60L 02 0 0\.11 20\.,44 10\.,00 264\.42 0\.94 211\.06 0\.01s 26\.44 4 14 2\. 1115111U10tout 1011111 133 92 60\.06 6\.06 3\.01t :1S\.1 10\.00 :11\.11 0\.29 133\.6U 6\.46 Is\.1 SS sk* Intel SIlA UNUl 280606091 6S 8 30 141 44\.00 10 00 42991 0\.63 366 94 1\.03 44 00 01 talso v1%biwtSn 4 1\. 04o 6 15 %I $\.109 to 2 84 '8611 02 18 60 9200 4' :00 0'0 '365\. 916\. 21 10\.%33 32 S\.11%3 49 \.8*1~~~~~~~~~~~~~~~~~~~~~~~\. \. pay 2l\. 106 1113 * Note that the contribution of the FedeIAlP Go0vernment JIB adjusted Ilpwrd whle that Of the State GOVernment1 10 adjusted downward by the following formula In the text\. For V*' first two year\. they share In equal amount local taxes and duties (except for salaries) and In the third year tho Stat\. Governmtent contributes, fully to the duties and local taxes\.  KATSINA ADP NIGERIA KADUNA AND IU1SINA - APP IREtESItNED ACDOlA hDP PRlOJICII finacinug Plan by Susry Accowns * lUSS '000l MORO BANtK FEOERMt GOVERNNIENI BEINE ICIAR SIAIL GOVERNMENT lotal \. \. \.;\.-------\.*\.-\.--- \. \. \. \. tocal (Exl\. Duties a bmt 1 Amont u unt hAwunlt 1 Amunt I for\. Exch\. T1esal lox 34s\.3\.34 \.:*tt *tStiSt3% nasalS =SS\.t: 1*22 at \.3S::: 33C23S :tttaaZ$ 353253 2SCUfiiSCPS t*tttt$tifl*t aslCa\.a 1\. INlESTlENT COSiS A\. ultDoINS AND Civil NOKIS 9\.944\. IS 06\. 24 433\.46 3\. 16 - 1\. tPl 07 I0\. 00 1t\. *30, 67 1\.6U 9\. 000\. 45 1\. 377\. is I\. 193\.0? B\. EIUIPIIENT 1\. 599\.83 89\.37 0\.48 0\.03 - * ? 70 10\.00 1\. 777\.01 2\.91 I\.S996\.94 2\.37 177 70 C\. VENICtES/PLANT NMCH\. 3\.254\.44 90\.00 -0\.00 -0\.00 361\.60 10\.00 3\. 516\. OS 5\.92 3,254\.44 -0\.00 361\.60 0\. f0AM IRRIGAIIONICONTRACII 1\.618\.59 86\.81 59\.48 3\. 19 - 185\.45 10\.00 1,864\.53 3\.0f 1,457\.39 220\.68 16 *4 E\. WATER SUPPtl \. UATER StUPPtL ICONIRACII 10\.490\.71 86\.80 381\.06 3\.20 - 1\.208 64 10\.00 12\.086\.41 19\.79 9\.438\.89 1\.438 89 1\.208\.64 Sub-TotIl MAIER SUPPLW 10\. 490\. 71 86\.80 28? 06 3\. 20 - 1, 208 64 10\.00 12\. 086\. 41 19\.t9 9\. 43E\. SI 1\.438\. 89 1\.208 64 1\. RURAt ROADS ROAD CONSTRUCIIOII ICONIIRACT 6\. 446 15 6\. 81 237\.26 3\. 19 - - 742\. 60 10\.00 7 426\.01 12\. 16 5 ,02\. 44 680\.97 742\. 60 ROAO RENABILItAtION (CONTRACT) 2,497\. 4 86\.79 90\.76 3\.21 - - 283 14 10 00 2\. 831\. 44 4\.64 2\. 210\. 76 337\.94 282\. 14 \. \. \. \. \. \. \. S\.*-Total RR^AL ROADS 8\.903\.69 86\.80 328\.02 3\.20 - 1,025\.7S 10\.00 10\.257\.45 16\.80 8,013\.20 1,218\.51 1,025\.75 6, AIt INPUTS ANO OPERATIONS 7\.643\.39 90\.00 0\.00 \. @0 - 84J\.27 10\.00 8U92\.65 13\.91 7,643\.39 0\.00 849\.2? - N\. IECNlAl\.*I ASSISIAICE\. TRAINING "D StUDIES 3,228\.71 89\.63 6 08 0\.1? - 359\.42 10\.00 3\.594\.21 9\.l89 3,228\.?1 6\.08 359\.42 I\. VEtNTUE CAPITAL FUND 3\.92 90\.00 -0\.00 -0\.00 - - 0\.44 10\.00 4\.35 0\.01 3\.92 O\.-44 total INWIST1IENT COSIS 46\.686\. 42 87\. 72 1\. 214\.57 2\. 28 - - 5\.322\. 33 10\. 00 93\.223\.33 87\. 16 43\.637\.33 4\.263\. 66 5\. 322\.33 It\. RECURRENI COSTS \. \. \. IL SALARIES AND 0LtOl1ANCES - -- - - - 4\.8S 13 100\.00 4\.586\. 13 7\.51 - 3\.898\.21 687\.92 S\. E5UIPIEN7 OPERATIONS 310\.40 78\.27 46\.52 11\.73 - - 39\.66 10\.00 396\.57 0\.65 124\.33 232\.59 39\.66 C\. VENICltES/PtANt OPERATIONS 1\.108\.7 75\.41 214\.44 14\.59 - 147\.00 10\.00 1,470\.01 2\.41 250\.82 1\.072\.19 147\.00 O\. INCRENENTAL OPERATING COSTS 1,025\.75 73\.82 224\.86 16\. 18 - 138\.96 10\.00 1,389\.57 2\.28 126\.31 1,124\.30 138\.96 total REWORENI COSIS 2,444\.72 31\.17 485\.82 6\.19 - - 4,911\.75 62\.63 7\.842\.28 12\.64 501\.46 6,327\.29 1,013\.53 lotal Disbursmt 49\. 131\. 14 80\. 46 1 700\. 39 2\.78 - 10,234\. 08 16\.76 61,069\.61 100\.00 44\. 138\.79 t:\. S90\.9S 6\.335\.6 ;:s2z4s:a 5\.ss ;:33Z,\.a,sa -z\.ts\. a,\.: \.a3, \.:s::a;9l 5ssZss 334S1s:2S 2l8ss% X5SASS6884 *14232S&SUS4 a3t1:5:* way 29\. 198w 17: IS o Not that the contribution of the Federal Covernt to adjust upward while that of the State bvermnt o adjust o dowward by the olloving formula 1n the text\. For the first two yers the share In equal amount local taxes and duties *I0 (except for alaries) and ;n th\. third yer the state Goverr\.mt contritee fully to the duties and local taxes\.  KATSINA ADP 13016Ill A EADIINIA AND 88793kb 1311' WGISIGNWItI 610318 *07l 7311,4t11 I-ramicng Plan by Projec t r,,nq,-nont s* wuss *0001 110*10 BANK1 131D1RA C0VIRMlffly8111MCIAIRY38 SIAI1 GDVIRwNN\.l total IoceI Il\.cI Out,on Am\.o,n IS LAo\.- I Amw,,nt I \., IS hmxnwt I For 3,cl, 4\.i la\.wt A 8GOCN3IJIURI I 13318130N8SIRkICIs 1\. 11 10 4698 100 11 2 Tb Iall 3 10212 2\. b43 94 17 A? 309 IS 3\.868 as 44% As 2 80110 90819191 soft EDIISIRVAIlo AOND£ I*9D USE PtANNING £GR0-l0RI SIR? 110 96 6? 38 2% 431 10O 12%1 22 27 14 AlI 61 0 36 211 32 199 97 Jo 16 Solt CONSERVAlloN 30) 24 43 06 8a78 3 66 37? 73 13 28 239 71 a 39 68 16 Sol 84 29 74 SAND U'\. PlANNING 116i 69 49 14 7 13 3 00 III 64 47 86 23? 46 0 39 88 17 120 11 28 74 S,b total AC80-408191N1\. Solt cousrawallo\. Acio IAND USE PlANK ING 130 90 56 55 41 32 4 40 16863 39 01 938 as 154 367 41 462 35 309 04 3 8GR3C11IUNAl RISIARCH 4978869 12 2983I 41 ?"1442 26 31 716 11 I II 378Si 219 46 7s810 4 1630 INIIIIPIICAI3ON IZONESI 109 99 70 as 41 19 6 26 172 It 23 66 727 78 I 19 333 90 311 to la 30 I IIVEsTocP\. DIEVEIOPMINII WI(REINART SENVICIs 220 is 68 90 to 09 3 12 91 73 28 38 323 is 0S 13 1279 104 1 31 62 Sub t0383 tiVISIOCP\. O(VOPEIIIU '#23 386810s 10 09 3 32 St1732838s 323 18 0153 162 79 1047 213t62 S\.* too*# LGRICuiDIURI 3\.412 24 14 ER8 22? 11 ISs8 2 610 09 41 73 S\. 349 88 10 40 2\.111 89 3\.033 06 746 94 S\. R93386 O E SIRASU3CIU8E SERVICES O I 341*93 80A01 MD1 AURAL MAIER 28,404\.4 881 41 1 149\. 5? 3I41 3 69 70 1I 10 33\. 239\. 70 14 43 25\. 378 79 4\. 116 62 3\.344 29 2 3FRIIGAIION 2\.892 33 84 39 99 49 2 90 443 12 12 92 3\.436 32 S 63 2\.623 13 46 130 349 to Si*-?olaI AuRAt INFR8SVRICVIIR( SERVICES 31\. 296 19815 33 3\. 241 02 3 39 4\. 133 42 33 2? 36\. 671 03 60 06 27\.999 92 4\.983 72 3\.8693 39 C cONIICIAI SERVICES I 1*31308 Supply COIIPANY 1381108 10\. 28? 02 82 48 7? 24 0 62 7\. 108 b9 38 91 i2\. 472 88 20 43 30\. 068 02 I\. log\.88 S\.9 mis 2 COOPOBAIIVI FINANCING AGINCY 11CIA) 423 00 U90 S 23 I30 47 36 -0 00 473 so 0\. 78 400 09 26 la 47 36 Sida-lotal COW 33RC1At SERVICES 10\.710801 82 13 82 4? 0 64 7 III 91 16 b1 12\.946 42 21 20 10\.468 II 1\. 1318 2 l\. 342 49 0 UNAUN8hIN3 SIPPOII 16*811*1 PROJICI N"ANCIINIT AND ADNI*ISIR8IION INQI 304 79 60 II 39 08 7Iit 190 01 32 24 1t49 92 0 90 3174 49 313 49 bI 9 AND ARNINISIRAIIDNI 11)0311 21 49 S8 %4 42 41 7 0? ?06 49 34 39 boo 42 0Ss8 183 67 310 so 61is PIIIANCE\. 120811 AND 81C13ON11 no a louts767 4376O00 171%3 376 s 989120 22 9\.39St 161 097133 381260 10398o PIRVN3NG mol3083N6 AN0 48*66*1108 t33 S 2081S3 882 94 6? 02 21 is I 96 399 10 31 03 1\.287 62 2 II 762 20 381 62 343 go0 NANPOSIIN DIV3IMPIC1I1 AN0 188183MG 1130 a 3KG dRm I 912? 06 ?7 21 14 73 I 70 261 63 23\.11' 1\.232 42 2 02 894 23 207 04 131 I, Sub lotal 888A46*413 SUP3'GNI S331V163S 3\.26,471 it0 34 116 91 7q 99 \. ISO IS2 268G? 4\.5134\. 33 I 62 2\. 7023 92 1\.431- 3* 109 OS I stIICA PO12GW AN0 4046 ST8AIM(IC PIAIIIINC 211688989 a 030 0 It 28 44310\.00 284 42 047 211 03 091s 28 44 2 18S111U110N8A3 R1V33K \.ii 92 86 09 608 3 93 Is Ss 10\. 00 311 11 0\.21 I3I 92 600 Is 11 i\.,A total Still 8888 389- b0 88 Si 1 t8 I 41 44 00 to000 439 97 0272 388 94 7 03 44 00 " lot81 94busbwentan 49\. 333 14 60 46 1\.700 i9 2i 78oD '234 08 36\.716 63\.061 61 100 00 44\. 338 79 10\.190 91 8\.133 8?, -Ray 21\. 3989 17 1I * Not\., that the contribution of the Feder-al Government to mdi usbu upward while that of the Stat\. Government is adjusted downward by the following formula In the text\. For- the first two years they share In equal amount local taxtes, and duties (except for salaries) and to the third year the State Governmgnt contributes fully to the duties and local taxes\.  KATSMNAi ADP 4114106ND611NA- D IREIIISIOIIO 0389)6 381' PIWJitci I iamnting Mla by Project Coqwwtans of loss 04001 Naolt gml IlDElAt GOVOSHIW 1IFIIIIA611 slAtt OMOwMMI Total \. \. \. \. \. \. \.I\. \. \. tocal (l1*cI\. Oatses About IT hmnt I Aiunt I b\.aatt I 84otmI I for\. Oxch\. la"1s lawes I\. LULUosIU S66v1CLS 1\.212\. 10 46 98 100\.13 2 25 -1\.831 12 802 2, 3643 94 8 97 1\. 309\.la 1\.8as8as 448 68 Las UiSE PLAItING A611O4OlI511Y 310\. OZ 62\.36 2S\.41 8 s0 128\. 2? 21\. 14 461\.6S 0\.16 211 12 S 199? 806 soIl CON$IIVAIIDU 103\.24 43 06 8\.28s 3 66 122>1853 26 239 \.1 0\.39 68 IS 141 64 297?4 tAl LISI Pt&"4611 110\. 69 49\.14 2\. 13 3 00 -113\.54 47 86 23? 46 0 39 as 12 120\. 8 28 74 SIA-lotal ACl0F03t$l' 1 soft causcmvAlionme~ MAD UiSE PLAININO 830\.90 56\.88o 41\. 32 -4\.40 366\.63 39\.08 038\.88 1\.84 361\.48 462 26 IDS 04 3\. MUICULIIJEAI ff5S0161 492\.818 69\.82 29 83 4 Ii - 18\. 42 25 21 216 13 I I? 370 8? 219 46 is 10 I\. SLID HIIl1ipticiCl0I OZONIES 809\.9 AS20\.08 41\.89 a 26 -112\. 19 23\.66 "21\.8s 1\.1to 332 00 318 88 is630 S\. tIVostoa KoVEtfPENzI vfIElINUIT SIRVICLS 221\.3se W8\.0o 10 09 3\. II - 1\.223 28 38 323\.1IS 0853 109\.29 IN04 2? 382 S#*4941oa tiVISIOCI KtVtOIItlEN 221\. 366U\.8O \. 10 09 3 12 Ot 913 28\.38 323\.t8 0\.83I 182 29 tot i? 38052 Sido ltotl AGNIICIIlIII 3472\. 24 54\.68 322\.88 38 se 2\. 650\. 09 41\.13 D\.2340 8 10\.40 2\.121 89 3\.031 06 746 94 S\., 1t1*A\. INFlASTIIICIUIE SLVICIS 1\. INDIK moanOS as %O SEAL HATER 28\. 404, 48 88\. 48 1\. 1488S2 3\.48 3\.689 T0 11\. 10 33\.2)9\.20 84\.43 8\. 328 29 4\.816 62 3\.344 29 2\. lImGAtIdN 9\.89M\. II 8 4\.19 99\.49 2920 -443\.22 12\.92 3\.428 32 8\.63 2,821\. 12 418\. 10 34" tO Stb-fatjal RuntL lINeStRucOU#\. SIIVICOS SI29\.8"S 88 6\.33 1,248\. 02 3\.3 - 4 131\. 42 IT\. 21 36\.628\.02 60\.08 "22\.9999 4,981\.2 2 \.693 39 C\. COIUIICI&t SlfllltS I\. IAIIURS SUPPLT COIAN? IFASCOS 10, 287\.0s 82>14 22\.24 0 62 2\. 108\.89S 16 91 12,472\.64 20\.43 10\. 0161\.02 1\. 109 6U 1\.29M 13 2\. CUOMBATIVE tiwINlUCI AUg66 666*) 421 04868\.6 811, S23 1 tO 42\.36 10 00 423\.88 0\.28 400\.09 36 14 42 se Stit-I\.tal COIUICICIA SIIvICIS 10\.2060of 82,21 82 47 0 64 2\.155\.05 1S 61 12,948\.42 20 20 10\.468 11 1\. 138 82 1\.342 41 * NMAUOILNI SUPPORt SERVICES POOJEC I \.ILNU\. aIAn UINISfuIRAIICI10 330\.29 68IS 39 08 I1 t1O00832214 849 91 0090 124 49 313 41 61 94 P2OJ1CI IIAIIAOIFNEI\. AID IINIMISIIAIION 1\.1011 3S1\.411 88 4 42\.48 20 206"O49 34 39 600\.413 0028 181 82 2108 Ss 8 Is SINAICI\. STORES AID ACCOUNTS 1108 ZONES 767\.43 28\.80 128S3 1\.28 *196\.98 20\.22 083\.91 1\. 61 692\.23 189\.88 I0S9U PLAJEIMO n0in 10111 AID EVLt?iATIIN 010I6201151 88\.64 62\.02 28\.18 I 96 M 990 31 03 1, 282\.62 2\.11 8 720 "1 82 14380o NAIPOIIII 0(V110P1111 meg 11*11188 AO 8 11011\.CI1 982\.08 27 28 14 22 1\.2 268 63 21\.88 1,232\. 42 2\.02 894 23 202\.04 131 18 S%6totloal RANOIIINI SIIPPOII SiEtVICFS 2\.264\.1 2120 Id Ila S? 2 99 1,280\.62 26 82 4,684\.31 1\.62 2\.720 22 1\.4135 22 809 08 I IAII RUNM I\. SECTOR bLa3T? AND 94 SIIA110ICPLAmiUG 288088989a 0 30 o It 28\.44 10 00 26442 0\.4? 21803 0\.9 2s044 1 2 INSIIIU2II11AI IIVIEN 1339280se09 6\. 08 3\.91 18\.8810\.80 188\.881 0\.21 133922 6\.08 is8 1-4H 0 1-4 StAt toW lal hI ONO 309 0886888 b is 1\.48t 44\.00 10\.00 439\.92 0212 360094 2\.03 44 80 t total b,sbgtwsinl 49\. 131\. 14 80\.46 1\.200 39 2 28 10,23408 16\.26 61,068\.81 100\.00 44\. 1362 9 10,8S"\. 98 0\.335 82 a Way 28, 1989 MI?:I 6 Note that thm cotributi on of the FederalI oVernomet I e dj oated upward wh IlIe that of' the State Goveirnment I\. a djuse downward by the following formula In the text\. For the firab two years they share lot equa amount local taeso and duties (except for salaries) and In the third year the State Goenmn cn butes futly to the duties and local taxes\.  NIGCERI LADUKA MM1 ULTSINA - 8OP 318KSIGNED 1O*1A ADOP PDVJIlII Financing Plan by Sumary Arcoa * fuSS '000 uOtLD ta FE1F11 GDVENLNNI 81NEf1ICIMR SIIS IDOVSUI tlolal \.6 \.a \. - --- ---- - 1 W - Ns &mcunt I Aunt I homt I bru\., I Ammt I for\. EuCh #a11"a lax" I\. INVESMENT tCDSIS \. \. \. \. \. A SIIDIHCS ANO CIVIL MODREtS 17\.341\. 11 85\.23 751\. 79 3\.11 - - 2\.0099 s 000 20\. 109\. a l7 63 IS18\. as 2\.410\.24 Lots o 8\. EIIPILNI 3\.4s4\.80s 89\.98 096 0\.02 - - IP 21 30\.00 3\.872\.1) 3\.40 3\.40 *3 4\.3 3n721 C\. VEHICLtSIPLANI NAVC\. 5\.535\.902 90\.00 -0\.00 -0 o - bli 00 10\.00 G6\. 50\.02 s\. 3 S\.55\. 02 -00 as *f5t 0\. FADANA IRRIGATION ICONIRACI3 3\.23?\. 19 86\.81 118\.96 3\.19 - - 317\.91 10\.09 3\.129\.06 3\.2 2\.04\. 70 441\.31 31 21 t\. WATER SUPPtE MATER SUPPIT ICOINIRACI3 t7\.75s 14 86\.80 654\.22 3\.20 2\. 011 lt 10\.00 20 45 1\.07 17\.93 IS\.9M\. 27 2\.41\. H 2\.165\. 11 Sub-Total MATER SUPPLY I? 751\. 4 86\.80 654\.22 3\.20 - - 2\.04,i\. 11 10\.00 20\.451\.07 317\.3 IS\.521 : 430\. 69 2\.64% It F\. RUR4t RLADS ROAD CONSIAUCIION ICONTRACII io\. 30a\.00 06\.80 379\.88 3\.20 - - \. lRt S4 3000 t 1\.6S542 1t\.41 S\. 2114\. 341\.34t9 S\. 1414 ROAD RENABIL3IAlION (CONIRACII 4\.142\.43 86\.80 152\.92 3\.20 - - 41 26 30\.00 4\.1m2 61 4\.18 \.712612 M8162 43126 \.- - ---- ---- \. \. \. \. ----- ---- -- - -- ----- --- -- -- -- -- -- - -- - -- - -- - - ---------\. \. Su-tlotal RURIAL ROADS 14\.450\.42 86\.80 532\.80 3 20 * - 3\. 6'0 80 10\.00 16\.648 03 14\. 5 13\.003\.2 3\.3 3\. G" 31\. G AGRD INPUTS AND OPERATIONS 16\. 362\.26 90\.0 0\.00 0 0o - - P\.I; 1 01 10 00 18\.180\.29 15\.64 16\.362\.26 00 o \. 1, 03 H\. IECHNICAt ASSISIANC\. CD TRAINING AND SIUDIES 6\. 786\. 59 89\.84 12\. 5 \. 01c - 755 42 30\.00 1\.554\.16 6\.62 6\.751n\. 15 72S 42 1\. VENIURE CAPITAL FUND 134\.42 00\.00 -0\.00 -0\.00 so 94 10\.00 149 35 0\.13 134\.42 -0\.00 a4t I los)l INVESITENT COSIS 85\. 083\.25 87\.86 2\.076\.U8 2\.14 - - l 3 46 10\.00 s6\.844\."59 84\.s0 11M\.095 1\.210\.3 9\.56446 II\. RECURRENT COSTS A\. SALARIES AND AItoNEtS - - - 9\. %4'm S5 30000 9\.649\.15 8\.46 - 6201la F\.44131 8\. EOulpI3&NT OPERATIONS I\. 136\. 5o 78 27 170\.30 I 173 - 4 20 30\.00 3\.452\. 00 C\.? 455\.30 so\.5\.0 S 45 26 C\. ViHICLIS/PlANI OPLRAtIONS 2\.186\.487S42 422\.55 14\.8 M M Si 300 2\.8983 2\.54 4962 2\. 33\.11 2 n 0\. INCRENtUlAL OPERAIINO COSIS 2\.365\.?7? 1338 535\.3 1 6\.62 13' 40 10\.00 3 223\.9t 233 2m\.s54 2\.6 1" Os ina Total RECURRENT COSIS S\.s88\.IS 33 03 1\.128 66 6\.5S - 10\.4--- b4 60 42 17\.2N406 15\. 10 3\.314\. 13 13\. 4a"a 1\.2ft 5 lotal oDsLwe\.a\. 90\.12\.00 79 S8 3\. 205\.5 26A1 20\.' S I30 11\.61 114\.06865 l300\.00 81\.55\.06 21\. 32\.2n ll\.8USD \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. ,\. \. r\. \. \. \. \. \. \. -- - - - - - - - - - - - - - JIw 1, 193 35: 55 * No\., that Wh contribution of the Fedel Govenwa nt ts adjsted upward whil, that of th State Osuemeet Is adjusted dow ard by tho following fomula In the texlt\. For the firat twoe Year they ehare la equal amount lotal taes aN duties SX (exceo for salaries) and 'a the third year the State Gover_Amat contributes fully to Oat daie aod local taxes\. \. \.-4  \.as MD a austin atw DISIeFORANM Dt tlli 3 \.mwctmg Plan e by Ptujmt c\.sqis\.ts IlRt E6tt IE0Et CAll\.lINT Elllltl5tlc Slut, ClwtilIII total \. \. \. \. --\. -- -- -- -- \.I\. \. \. \.t4 , l acAl &W M t X _ X _t w _I X _ s zl~~~~~~~~hewd fr flc ttm Aw *\.so;il CUItlEvloAN \.~~~~~~~~~~~~~~~~~~~~s \. _ soft 33S30 SIRVICI S 2064 74390 36616 214 1\.9 71091 5 3 Ps 619 59 1 5 217 5 13 233 848* 2\. Sl6A-14311301\. Soft coSts,uilua me0 3 R-* 1R SI8M 0 309 t0\.2T 9S2 5 68 f 45J,s22 *111 61 323 som i * \. 1 SD to 93 SOl LCIuelSERIIW*101 s 204 o 43\.0o6 817 5 378 2no *5s 2S 47 49 0\.e 33 133 331 St 0 - IStl0 USE PllIIIIII 7N3009 49i S 563 SU 41117735914 1\.3171 1 01 533120 f z3 t333 ~~~~~~~~~~\. \. \. \. \. \. \. \. \. 5*b- total *IUO - IORI S?\. S3III 6a33R1311a1i01 llD IUO loSE Pl*33136 3\.11 03 S780 309 4 I 25 - t 39 30 3\.4 3\.no" 21 246n 3 24 I5 05 3 3\. URICUaiclaim RISE 3\.0831 30 71 52 60 D1 *301 370 E0O4 a4 3*\.514 U 1 S\. R409 918 Is L \.t g * SEO1 ibltC110 1113P1C30 Il03(S3 l\.0t607 0110 63 U9 n 932 M e 3 s7609 3\.990 33 199 126 75371\.W798 S\. ant1SIRUC iVRE YLOII \. \. MZIEMIUIII nSlaVICIS 593\. 9 E\. 980 30 39 O\. I - 23 02 E 2\. I a U7 01 45 615 0 2AL 1 0 a \. \. \. \. \. \. \. \. \. \. \. \. \. \. SI&*3otal11 R 1 u1303nk 3 8 3S 3 9s3889 ts 303 13 239 80 24 08018 019 43981 7934 9 Si*-1,ta3*GICU3IUII t7471511 9434 9394 3\.78 9\.181\.14j U a33\.263 324 9\.43*2 n ,333 8\.8389 6 CONRCIIAtlSIUUR SERVIE tSS B1 S64 tE 3 S TI 6e u 2 3336*IUI 9\.629 733* 20379 S 29 91031 9\.949 W l8s"tw 497 9\.131 943 7tb _ 1* total Rft IUR s353C3031 51311815 94\.99318 U 6 2\.bt 796 76 3 36 tSS9806 1t ?S 642891 CS8634 emIl am 48 5 \. e t\. COISVCI* SARWICIS- \. \. \. I\. FSUC1S S II91 CONPAE! IFASt 23\.089\.4882 Of 430 e 7016 4\.3110, 3838 A9s0 B n2< 2n9 S"03 2\.332 asP\." a 2\. CtPtR4ti"i 3i3AC3IU6 CI 3Itf4 U29 l08t89 o2f 1 0aIt nO D 64 U 017 47 o 11U? n 17 57 34t S%*6-ota3 C lKIlI SERVICES 22\.0Is U8288 207 39 01 8 4\. 3 838 21 s6 3 26,X 23 t 30 23\. 348 2 \. tO19L 2il n o 163866116 5620012 SENVICES linac?IN SU*3O8UU31\. ic PROICT Niomps an p333353 333 00 703 Si 63 40 74 40 6 it 3301642a \. " a Go* 097 4191 Sig is 32 an 10I3I3S31s3Ul "WIm!, 709\.46 61\.04 643 7 14 386 62 31 n \. t1 to 3\.0 * 3 34 i n 130 24 U 31*31\. SOKS0 Am ICOUSNIS o a tistS 3 \.31326 16\. 2 41 o0 2 380 31 28\.94 \.1120 \. \. 1 * St 32t03 413 a t3 t2 M*D1V1tul3o3 t33MGS ZOISI 1\. 362 17 E3\. OS 1064 32 i 727 a69 3SU 2\.i0 3 so I 3D11 *\.3 7 2 194s IWIESl VR DEV3PI1If StiD NmaIIIIu0o S 6 COR I 1\.855\.67 76 1 32 so 3 34 S" 1224 0 2\.433\.35 213 312\.714 4413 It M 13 Stb-lotI NlUUCilEIII SUPPEI SERVICES \.U2\.713 9 23 308 93 30 2O 3321S27 \.7 9842\. i 13 1°4911S 2\.39111 \.33 S S\. SICiO II 1 3 30 \.0 4 1\. SEclog PDtlc 410 01; SIUCI*C3 PIoIIIKM Sit 369 0 059 e7 Is S6 a6 1000 6oSL as94 0s 11, s6 4* 8 On 2\. 0tblwlmlolat 9t0\.1 26011 ,4 86 09 32 0s 3 s\.9 31 O3 183O 34\.08 04 n n3 \.9 9t sonis n _ \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. ----------- \. \. \. \. \. \. \. \. ----- 1010 lomzs~ 2O\.772 00 isSt S\.2055S 281 70\.091018 toOSS10 II,55 Gon smou a oBv o210"sm * Ibta tat th\.coetributloe of th F alm IGves t 1 is aduteid Waird whil that of the S te v m t& is adjefj * d rd byI th followin fo la t tt\. te e t 1 e bt a l d le (e\. cept for s\.lr\.) sa to th third ye_ the Stat\. Oo,ei\.a esorlhte fulle to th #Alus sd loca taxus\.  RIOOMSI AID kliSUNA 0 - 1140 I I\.FlcmIng Plan~ by Projsut CuppotintnS* \. \. \. \. ocal lstud\. owt Io I 9mn A&ml 2 I AwmA I bmault I For\. Each\. lamni loxo% A\. noicuttm -1\. -- \., SJ,\.L;\.- 1\. \. \.~\. \.II \. *5,8;*ts*S \. \. s85\. I\.(1619SERVICES 2\.963 4943S4 to66S0 2 74 -366037 \.0 9 57 22?5 \.4 S 0~0 2\.oil\.0* COSIR?\.IN N SOIl USE 53561011 ND AMI-FORESWTR 830 IS 60\.24 9IS5 69 -5 451\.87 32 79 1\.311\.9? 1\. 21 456174 7659 1525 SoHl COIISIVAI 101 206\.46 43\.06 1? S6 3\.66 255\.45 53\.26 479 49 0\.42 136\.33 262 69 5941 LAND0 USE PtIANIWG 114 39 60t91 45 63 3 69 411\.7? IS\. 14 1\.111 60 I 03 531 B?1 506 35 133 55 Sub-1otaI *4R0l0-10RStR1\. LIND eiS PiAUNING 1\.751 03 57\.60 15914 5 1\. 119\. 1036 94 3\.02926o 2\.60 1\.124924 1\. SSG 6 346137 3\. bIwaCIII10AI 605169011 1\.063 30 is5 6i071 4at1 370 60 2 47 1\.S14 63 1\.33 640 39 se06 163ts 1\.4 4\. SM1 JLIlPLicAIION hOlES) 1\.0866 70to06 63 Is 537 36060s 24 57 f\.550\. 14 I 36 759 ST 623 01 167\. 56 5\. 1111E510CK oOELtopHIUI 'StS11I SR'VlC-E,S, 593\.79 66\.96 30\.39 3\.523 236\.60 21\.42 6607 0a 1 5 415 III 2904? 94 44 S%b,l*t8I t1V111JOCm *vIIoUIV11I% is3 705so 3039 35b3 235607o 7\.49 660\.768 0\.75 47567? 247 914144 Sm*-lOtil *OOICUIIIIRE 7,477\.6? 54\.34 bia\.94 3\.78 S,763\.88 41\.88 13\.161\.50 12\.06 S\.,416\.27 6\.1722 II 1\.6191 g 6\. 111111 INIUASISIICIIIK 56611160 I\. fliEng Rom AND0 IC 193\. 1*01 4770950 19551 34 6\.641 03 ItS9 57\. 324 65 025 43,5S" 42 5\.01620o I73 06 2\. IMIGAIION 5~~~~~~~~~~,J62736?J*I 7s 0325b 293 SrIN 9 is 5\. 944 'i b 0 5\.701 9\.5 7005Il?50 o n Sib-Total RURAL IUTRASTIIICIIRI SERVICES 54\.S5J 626$4\.60 2\.1567 6 3\.36 7\.5S9 06 1t\.76 64\.269 6S S6 34 48\.79M 73 6\.606 6\.469066 C\. COIIIIERCIAI sOOVICES I\. TAIlRS SUPPLY7 COlIPANI IIASCOIII 21\.189\.48 82 90 194 30 0 16 41111 4 2\.66 24 05?0 \.2 4 266 2\. COOPIRSIIVO IIUAUCING *01110? 10061 629 106169 12 as 1\. 2? 170 42 16954 1\.013 41 0 SI 7715?S I\. (9 In500 Si-10ls1 COlMOCaI& SERViCIS 22\.015 be 8? 06 "97 19 0 78 4,341\.419 16 36 26,573\.26 23\.30 21\.354 60 2\.467 4i 2,75\.32 0\. 116*460E11 5117903 SERVICES AND *OIIIISIOAIIOU O110 101571634 744 672 330642966 1\.1I"651 0\.927 403921 S797 is 2"6a M90EC6 IM11*604111\. A"1 *911111S1**11O1 189301 769\.46 61 04 64 II 24 366\.40 II 72 1\. 15220 1\.02 ITS3\.00 60695 139\.24 O 59116\. 510*15 ANDO *CCOIU75 119 a MRS10 1\.313,26 76 32 47 06 2 13 360\.31 20\.941 1\.720 62 1\.51 1\. 121 03 413 06 16252t *110 EVALAtIlou 11* S ZONES) 1\.362 77 63 05 70\.64 3\.25 721 69 33 66 2\. 161 S0 I 89 1\.019 42 oil so 244 %8 ""POWER96 OEV11OPmuEI 6001TRANING M So rnc\. Clig 1,655\. 67 16 26 3250O 134 S4S\.0922 40 2,433\.35 2 13 1,1f27\.14 446It M6\.1of SmA-lolol 11*1*601011 5099031 SERVICES 5,942\.73 5923 30Mgt 6 2\.332 65 27\.17 8,584\. 20 'B \.53 4,106\.57 2,935\.410 940\.33 I\. SECIR POLic? AND STRATEGIC PEANINI1G SiI 368969a 0 60 0 II5\.01\.0 5654 00 50510 56 2 INSIITUIIO11*1 111111111 ~~~~261\.64 86609 12\.15s 39to 31 It 10\.00 311\. 10 3 2? 267 64 12 Is 31I StAlt RUN \. - - \. \.,, t \. \. \. z** *;s z;as S\., *Noto that tm contributlom af tho Ftederal Goernomet INa adjusted upward whil,\. that of the Stat\. Government is adjustwed dowmward by the following flormla In tMe text\. FOr VWe irst 'tio years they shaere In equal amount local taxes and duties (oexept for salaries) anid In the third yea\. the\. Stat\. Goermet onrbutes fully to the duties and local taxes\.  NIIGERIA CHAD SOIL TYPES, RAINFALL, AND CROPS NIGER mm 1)'~~~~~~~~A,' MJOR SOIL TYPES: 1AvNA FASO All~~~~~~~~~~~~~-~MuvWaIsoils N14-~~~~~~~~~~~ IiDAN w D*swX l S 2KANO n et\.ithsols ~j Rego~so LAL X : a soils 12711 4* 524 ffirn~ ~ ~ ~ ~~~~~Jt* I LO ~~~~~~~'N' TAM~~~~~~~ M4or Crops el \. *F affl Noflhem grdnm oe Moced root crop & ABEORIMMA~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~grmzn I\. ~~Scxihem tre & roo cop zon %N ZO0@ Stae Ca;daf f~Riers 4064 CALBA 4:76iAf tf G;uirwa 4064 m POLOME-MRS I 120 1W0 "JLES6 b4 od b

APPROVAL

P153889

‫الدولِي‬ ‫بنك َّ‬ ‫وثِيقَة ص ِ‬ ‫ة َ‬ ‫عن اْل َ‬ ‫ادر‬ ‫َ‬ ‫َ‬ ‫ي فَقØ‬ ‫الر ِ‬ ‫سم ِّ‬ ‫خدام َّ‬ ‫ت َ‬‫ِالس ِ‬ ‫ل ْ‬ ‫‪PP1309‬‬ ‫قم التَّ ِ‬ ‫قرير‪:‬‬ ‫رْ‬‫َ‬ ‫ورقَة‬ ‫َ‬ ‫حول‬ ‫َ‬ ‫َم ِ‬ ‫ريكي‬ ‫ِِ‬ ‫ح التَّ ِ‬ ‫مويل ِ‬ ‫دوَ‬ ‫َلر Ø£ ْ‬ ‫ضافي بقيمة ‪َ 2\.0‬‬ ‫مليون ُ‬ ‫اإل َ‬ ‫م َ‬ ‫قتر‬ ‫ُ‬ ‫ِ‬ ‫ناء قُدر ِ‬ ‫ياه‬ ‫ات قØَاع اْلمَ‬ ‫َ‬ ‫ع بَِ‬ ‫شُ‬ ‫رو‬ ‫مْ‬ ‫َ‬ ‫أيار‪2015 ،‬‬ ‫‪َ 7‬‬ ‫مائِية‬ ‫مَ‬ ‫وارد ا ْل َ‬ ‫ِية بِ َ‬ ‫شأْن ا ْل َ‬ ‫سات َّ‬ ‫الدول‬ ‫مَ‬ ‫ار َ‬ ‫ا ْل ُ‬ ‫مَ‬ ‫رِ‬ ‫يقيا‬ ‫ِْ‬ ‫فِ‬ ‫مال إ‬ ‫َّ‬ ‫شَ‬ â€«Ù‹ÙˆØ³Ø ÙŽâ€¬ ‫وَ‬ ‫الشرق األ َ‬ ‫الر ِ‬ ‫جب ِ‬ ‫َل َ‬ ‫يجوز‬ ‫سمية‪ \.‬وعليه فإنه َ‬ ‫اتهم َّ‬ ‫وا ِ َ‬ ‫مام َ‬ ‫ِ‬ ‫متلقيها إلتْ َ‬ ‫استخدامهَا على ُ‬ ‫محدد؛ بحيث يقتصر ْ‬ ‫ِن تَ ِ‬ ‫وزيع هذه الوثيقة ُ‬ ‫إ‬ ‫الدولي يِ‬ ‫فيد بِذلك‪\.‬‬ ‫ن البنك َّ‬ ‫ِ‬ ‫ِ‬ ‫ُ‬ ‫محتواها ُ‬ ‫دون تصريح م َ‬ ‫اإل َ‬ ‫فصاح عن ُ‬  ‫قِيمة ا ْلعملة‬ ‫سان‪2015 ،‬‬ ‫ِ ِ‬ ‫َّ‬ ‫ِ‬ ‫سعر الصرف وفقاً لمعØيات قيمة العملة في الثالثين من ن َ‬ ‫ائيلي َ‬ ‫جديد‬ ‫العملة = شيقل إسر‬ ‫ائيلي َ‬ ‫جديد‬ ‫‪ 1‬دو‬ ‫َلر أمريكي = ‪ 3\.8877‬شيقل إسر‬ ‫السَّنة ا ْلمَالية‬ ‫كانون األَول‬ ‫كانون َّ‬ ‫الثاني وحتى الحادي والثالثين مِن َ‬ ‫ء مِن األول مِن َ‬ ‫ا ْبتِدا ً‬ ‫َر‬ ‫َاتَ َ‬ ‫َت‬ ‫َص‬‫مخ‬‫ةَال َ‬ ‫م َ‬ ‫َائ‬ ‫ََ‬ ‫ق‬ ‫ضافي‬ ‫ِ َ‬ ‫تَمويل إ‬ ‫‪AF‬‬ ‫‪Additional financing‬‬ ‫‪AFD‬‬ ‫‪Agence Française de Développement‬‬ ‫ِلتَنمية‬ ‫رنسية ل‬ ‫وَ‬ ‫كالة ا ْلفََ‬ ‫ا ْل َ‬ ‫مخصص‬ ‫ِ‬ ‫حساب ُ‬ ‫‪DA‬‬ ‫‪Designated Account‬‬ ‫ِي‬ ‫عاون ًّ‬ ‫الدول‬ ‫ا ْلمؤسسة األَْل ِ ِ‬ ‫مانية ل ْلتَ َ‬ ‫‪GIZ‬‬ ‫‪German Technical Assistance‬‬ ‫َ‬ ‫ُ‬ ‫عادة التَّعمير والتَّنمية‬ ‫ِ‬ ‫ا ْلَ‬ ‫بنك الدولي إل َ‬ ‫‪IBRD‬‬ ‫‪International Bank for Reconstruction and‬‬ ‫‪Development‬‬ ‫‪ICB‬‬ ‫‪International Competitive Bidding‬‬ ‫َاءات التَّنافُ ِ‬ ‫سية َّ‬ ‫الدولية‬ ‫ا ْلعØ‬ ‫‪IDA‬‬ ‫‪International Development Association‬‬ ‫ِلتَنمية‬ ‫ؤسسة ا َّ‬ ‫لدولية ل‬ ‫م َ‬‫ا ْل ُ‬ ‫‪ISN‬‬ ‫‪Interim Strategy Note‬‬ ‫اتيجية المرحلية‬ ‫ة اَلستر‬‫مذكر‬ ‫ُ‬ ‫‪MENA‬‬ ‫‪Middle East and North Africa‬‬ ‫وشمال ِ‬ ‫إفريقيا‬ ‫الشرق Ø§Ø£Ù„ÙˆØ³Ø ÙŽâ€¬ ‫‪MOF‬‬ ‫‪Ministry of Finance‬‬ ‫ِية‬ ‫ة َ‬ ‫المال‬ ‫وَا‬ ‫زر‬ ‫َ‬ ‫‪NCB‬‬ ‫‪National Competitive Bidding‬‬ ‫العØاءات التنافسية المحلية‬ ‫‪PA‬‬ ‫‪Palestinian Authority‬‬ ‫سØينِية‬‫ِ ِ‬ ‫فل‬‫السلØØ© ا ْل ِ‬ ‫ّ‬ ‫‪PLO‬‬ ‫‪Palestine Liberation Organization‬‬ ‫حرير ا ْلفلس ِ‬ ‫Øينية‬ ‫َمة التَّ ِ‬ ‫نظ‬ ‫مَ‬ ‫ْ‬ ‫ُ‬ ‫‪PMU‬‬ ‫‪Project Management Unit‬‬ ‫ع‬ ‫شُ‬ ‫رو‬ ‫ة ا ْل َ‬ ‫مْ‬ ‫َِ‬ ‫دار‬‫دة إ‬ ‫وح َ‬ ‫ْ‬ ‫‪PRDP‬‬ ‫‪Palestinian Recovery and Development‬‬ ‫َّ‬ ‫صالح والتنمية‬ ‫ِ‬ ‫الخØØ© الفلسØينية لإل َ‬ ‫‪Plan‬‬ ‫مياه الفلس ِ‬ ‫Øينية‬ ‫ِ‬ ‫سلØØ© ا ْل َ‬ ‫‪PWA‬‬ ‫‪Palestinian Water Authority‬‬ ‫ْ‬ ‫‪QCBS‬‬ ‫‪Quality and Cost Based Selection‬‬ ‫على أَساسي النوعية‬ ‫اَلختيار القَائم َ‬ ‫ْ‬ ‫والتَّكلفة‬ ‫ِية‬ ‫ِلتَ ِ‬ ‫نمية َّ‬ ‫الدول‬ ‫ويدية ل‬ ‫وَ‬ ‫كالة الس َ‬ ‫ا ْل َ‬ ‫‪SIDA‬‬ ‫‪Swedish International Development‬‬ ‫‪Agency‬‬  ‫َاع‬ ‫قØ‬‫خاص بِِ‬ ‫تئماني ا ْل َ‬ ‫ندوق ْ‬ ‫اَلس َ‬ ‫الص ُ‬ ‫‪TFGWB‬‬ ‫‪Trust Fund for Gaza and the West Bank‬‬ ‫غربِية‬ ‫غز‬ ‫ة والضفة ا ْل َ‬ ‫َ‬ ‫‪ToR/TOR‬‬ ‫‪Terms of Reference‬‬ ‫جِ‬ ‫عية‬ â€«Ø§Ù„Ø´Ø±ÙˆØ Ø§ ْلمر ِ‬ ‫َ‬ ‫ُ‬ ‫‪TPAT‬‬ ‫‪Technical Planning and Advisory Team‬‬ ‫خِ‬ ‫ØÙŠØ Ø§Ù„ØªÙ‚ÙŽÙ†ÙÙŠâ€¬ ‫صح والتَّ ْ‬ ‫ريق َّ‬ ‫الن ْ‬ ‫فَ ِ‬ ‫حاب‬ ‫Øلبات ْ ِ‬ ‫اَلنس َ‬ ‫ََ‬ ‫‪WA‬‬ ‫‪Withdrawal Applications‬‬ ‫‪WB‬‬ ‫‪World Bank‬‬ ‫البنك الدولي‬ ‫‪WBG‬‬ ‫‪West Bank and Gaza‬‬ ‫الضفة الغربية وقØاع غز‬ ‫ة‬ ‫‪WWTP‬‬ ‫‪Waste water treatment plant‬‬ ‫وحدة معالجة المياه العادمة‬ ‫حَ افظ غَانم‬ ‫نائب الرئيس‬ ‫ستين جورجنسِ ن‬ ‫المدير القØري‬ ‫جُنيد أحمد‬ ‫مدير أول للممارسات الدولية بشأن الموارد المائية‬ ‫ستيفن شونبيرجر‬ ‫مدير الممارسات‬ ‫بِيتر َ‬ ‫دڤيد مِيربَاخ‬ ‫ريق ا ْل َ‬ ‫عمَل ا ْل ُ‬ ‫مشترَ ك‬ ‫فِ‬‫رَ ئيس َ‬  ‫ضافي‬ ‫التَّ ِ‬ ‫مويل ِ‬ ‫اإل َ‬ ‫غز‬ ‫ة‬ ‫قØ‬ ‫َاع َ‬ ‫بية وِ‬ ‫غرِ‬ ‫لَ‬‫الضفة ا ْ‬ ‫قØَاع ا ْ ِ‬ ‫مياه ِ‬ ‫في َّ‬ ‫ات ِ‬ ‫عِ‬ ‫ِ‬ ‫ل َ‬ ‫ناء قُ َ‬ ‫در‬ ‫بَ‬ ‫شُ‬ ‫رو‬ ‫لَ‬ ‫مْ‬ ‫َويَات‬ ‫محت َ‬ ‫لُ‬‫اْ‬ ‫ضافي ‪9 \.‬‬ ‫بيانات التَّمويل ِ‬ ‫ِ‬ ‫اإل َ‬ ‫ُ‬ ‫صحيفة َ‬‫َ‬ ‫‪ \.1‬المقدمة‪17\.‬‬ ‫‪ \.2‬لمحة عامة والسبب الجوهري للتمويل اإلضافي بمبلغ ‪ 2\.0‬مليون دوالر أمريكي‪18\.‬‬ ‫‪\.3‬التعديالت المقترحة‪21\.‬‬ ‫‪\.4‬موجز التقييم‪25\.‬‬ ‫‪\.5‬مُعالجة ال َّ‬ ‫تظلمات في البنك الدَّولي‪26\.‬‬ ‫الملحق ‪ :1‬اإلØار العام للنتائج والرقابة ‪27 \.‬‬ ‫الملحق ‪ :2‬أداة تصنيف مخاØر العمليات المنهجية ‪41 \.‬‬ ‫ع المعدلة أو الجديدة ‪42 \.‬‬‫الملحق ‪ :3‬وصف مفصل ألعمال المشرو‬ ‫ع المعدلة أو الجديدة ‪45 \.‬‬‫الملحق ‪ :4‬النفقات المفصلة ألعمال المشرو‬ ‫الملحق ‪ :5‬ترتيبات التنفيذ والدعم المنقحة ‪48 \.‬‬ ‫ِلقØاع ‪61 \.‬‬ ‫َّادس‪ \.‬قَانون ِ‬ ‫المياه والهيكلية المؤسسية ل‬ ‫م َ‬ ‫لحق الس‬ ‫ا ْل ُ‬  ‫ضافي‬ ‫التَّ ِ‬ ‫مويل ِ‬ ‫اإل َ‬ ‫غز‬ ‫ة‬ ‫قَ‬ ‫Øاع َ‬ ‫بية وِ‬ ‫غرِ‬ ‫لَ‬‫الضفة ا ْ‬ ‫Øاع ا ْ ِ‬ ‫مياه ِ‬ ‫في َّ‬ ‫ات ِ‬ ‫عِ‬ ‫ِ‬ ‫ل َ‬ ‫قَ‬ ‫در‬ ‫ناء قُ َ‬ ‫بَ‬ ‫شُ‬ ‫رو‬ ‫لَ‬ ‫مْ‬ ‫مويل ِ‬ ‫ِ‬ ‫ضافي‬ ‫اإل َ‬ ‫بيانات التَّ ُ‬ ‫صحيفة َ‬‫َ‬ ‫‪PP1309‬‬ ‫قم التَّ ِ‬ ‫قرير‪:‬‬ ‫رْ‬‫َ‬ ‫اْلَس ِ‬ ‫اسية‬ ‫معلُ َ‬ ‫ومات ْ َ‬ ‫لَ‬‫اْ‬ ‫ريق التَّ ْ‬ ‫قييم‬ ‫ؤساء فَ ِ‬ ‫ئة التَِّ‬ ‫قييم ا ْلبِيئي‬ ‫ِ‬ ‫مع ِ‬ ‫ر ُ‬ ‫ئيس‪/‬ر َ‬ ‫َ‬ ‫فَ‬ ‫ع‬ ‫شُ‬ ‫رو‬ ‫مْ‬ ‫َّرف ا ْل َ‬ ‫ُ‬ ‫مال وبِيتر َ ِ‬ ‫باخ‬ ‫دڤيد ميرَ‬ ‫رَّ‬ ‫َِ‬ ‫ياد َ‬‫إ‬ ‫Øلُوب‬ ‫مْ‬ ‫(ت) – التَّقيِيم َ‬ ‫غير َ‬ ‫‪P153889‬‬ ‫]‬ ‫ر‬ ‫ات [‬ ‫ِلقُ ُ‬ ‫دَ‬ ‫كبِ َ‬ ‫الت ل‬ ‫مَ‬ ‫شاشة َ‬ ‫و‪/‬أو ُ‬ ‫هَ‬‫َ‬ ‫ر‬ ‫اض‬ ‫قَ‬ ‫َداة ِ‬ ‫اإل ْ‬ ‫أَ‬ ‫]‬ ‫Øاء ا ْلم ِ‬ ‫اليين [‬ ‫وس َ‬ ‫ثم ِ‬ ‫ِ‬ ‫شِ‬ ‫مِ‬ ‫َ‬ ‫ا ْل َ‬ ‫ارية‬ ‫اريع ْ‬ ‫اَلست َ‬ ‫ويل ا ْل َ‬ ‫مَ‬ ‫تَ ْ‬ ‫]‬ ‫شِ‬ ‫اريع [‬ ‫مَ‬ ‫ِ‬ ‫ِ‬ ‫سلسلة من ا ْل َ‬ ‫ع‬‫مشرو‬ ‫ِ‬ ‫تَ ِ ِ‬ ‫اريخ الشرو ِ‬ ‫تَ ِ‬ ‫اريخ نهَاية تَنفيذ ا ْل َ‬ ‫ع‬ ‫ع بتَنفيذ ا ْل َ‬ ‫مشرو‬ ‫ُ‬ ‫انون األ َ‬ ‫َول‪2017 -‬‬ ‫كُ‬ ‫‪َ -31‬‬ ‫ان‪2015 -‬‬ ‫ير‬‫زَ‬ ‫‪ُ -01‬‬ ‫حَ‬ ‫ع‬‫مشرو‬ ‫ِِ‬ ‫التَّ ِ‬ ‫ع حيز التَّ ِ‬ ‫ِ‬ ‫التَّ ِ‬ ‫اريخ ا ْل ُ‬ ‫متَوقع إلنهَاء ا ْل َ‬ ‫نفيذ‬ ‫متَوقَع لدخول َ‬ ‫المشرو َ‬ ‫اريخ ا ْل ُ‬ ‫ير‬ ‫ان ‪2018 -‬‬ ‫زَ‬ ‫‪ُ -30‬‬ ‫حَ‬ ‫ان‪2015 -‬‬ ‫ير‬‫زَ‬ ‫‪ُ -01‬‬ ‫حَ‬ ‫مؤسسة التَّ ُ‬ ‫مويل َّ‬ ‫الدولية‬ ‫ُ‬  ‫رْ‬ ‫قم‬ ‫َ‬ ‫ِي‬ ‫بنك َّ‬ ‫الدول‬ ‫Øِ‬ ‫ا ْلم ِ‬ ‫ِ‬ ‫رئيس ا ْلَ‬‫نائب َ‬ ‫َ‬ ‫ي‬‫ر‬ ‫دير ا ْلقُ ْ‬ ‫ُ‬ ‫مَ‬ ‫ارسات‬ ‫مَ‬ ‫أول با ْل ُ‬ ‫مدير َ‬ ‫ُ‬ ‫مارسات‬ ‫الم َ‬ ‫اء ُ‬‫دير‪/‬مدر‬ ‫ُ‬ ‫م‬ ‫ُ‬ ‫مال‬ ‫ِمنØقة َّ‬ ‫َّ‬ ‫شَ‬ ‫الشرق األ ْ‬ â€«ÙŽÙˆØ³Ø Ùˆ َ‬ ‫لَ‬ ‫بشأن الموارد َ‬ ‫المائية‬ ‫الدولية َ‬ ‫يقيا‬ ‫رَ‬ ‫إَف ِ‬ ‫حافظ َ‬ ‫غانم‬ ‫جورِ‬ ‫جنسن‬ ‫ِ‬ ‫شنبِرﭼ‬ ‫ستِ ِ‬ ‫َ‬ ‫ستين ُ‬‫ْ‬ ‫كَ‬ ‫مال أَحمد‬ ‫جَ‬ ‫نيد َ‬ ‫ُ‬ ‫ِر‬ ‫يڤن ُ‬ ‫هة التَّ ِ‬ ‫خويل‬ ‫جَ‬‫ِ‬ ‫ِ‬ ‫جهَة التَّ ِ‬ ‫خويل‬ ‫فر َ‬ ‫يقيا‬ ‫مال إَ ِ‬ ‫ِمنØقة َّ‬ ‫بنك َّ ِ‬ ‫شَ‬ ‫الشرق األ ْ‬ â€«ÙŽÙˆØ³Ø Ùˆ َ‬ ‫الدولي ل َ‬ ‫رئيس ا ْلَ‬ ‫ار َ‬ ‫نائب َ‬ ‫ر‬ ‫قَ َ‬ ‫ضة‪:‬‬ ‫رَ‬‫مقتَ ِ‬ ‫ِ‬ ‫ا ْلجهة ا ْل ُ‬ ‫السلØØ© الفلسØينية‬ ‫ِ‬ ‫ِ ِ‬ ‫نظَمة التَّ ِ‬ ‫ِ‬ ‫حرير ا ْلفلسØينية ل َ‬ ‫صالح ّ‬ ‫مَ‬‫جهة اَلضØالع‪ُ :‬‬ ‫ممثل (وزير المالية لَدى السلØØ© الفلسØينية)‬ ‫ِ‬ ‫المنصب‪ُ :‬‬ ‫ي بشار‬ ‫ة‬ ‫جهة اَلتصال‪ :‬شكر‬ ‫ا ْلَ‬ ‫بريد اإللكتروني‪minister@pmof\.ps :‬‬ ‫رقم الهاتف‪+972 2 2978830 :‬‬‫َ‬ ‫ات اْلمريكية)‬ ‫َلر‬ ‫بماليين ُّ‬ ‫الدوَ‬ ‫ع ( اْلَرقَام المذكور‬ ‫ة في هذا المحور َ‬ ‫شرو‬ ‫م ُ‬‫لَ‬ ‫مِ‬ ‫ويل ا ْ‬ ‫بَ‬ ‫يانات تَ ْ‬ ‫َ‬ ‫ِ‬ ‫‪0\.00‬‬ ‫إجمالي تَمويل البنك‬ ‫َ‬ ‫‪2\.00‬‬ ‫ع‬‫للمشرو‬ ‫التَّكلُفة اإل َ‬ ‫جمالية َ‬ ‫‪0\.00‬‬ ‫ِية‬ ‫الفجوة ا ْل َ‬ ‫مال‬ ‫مبلغ‬ ‫لَ‬‫اْ‬ ‫مصدر التَّمويل‬ ‫َ‬ ‫ضة‬ ‫رَ‬‫مقتَ ِ‬ ‫ِ‬ ‫ا ْلجهة ا ْل ُ‬ ‫‪0\.00‬‬ ‫‪2\.00‬‬ ‫شر‬ ‫اكة التنمية المائية والحضرية للضفة الغربية‬ ‫جمالي التَّمويل‬ ‫ِ‬ ‫إ َ‬ ‫‪2\.00‬‬ ‫ات اْلمريكية)‬ ‫َلر‬ ‫(بماليين ُّ‬ ‫الدوَ‬ ‫َّ‬ ‫النفقات المتوقعة َ‬ ‫‪2024 2023‬‬ ‫‪2022‬‬ ‫‪2021‬‬ ‫‪2020‬‬ ‫‪2019‬‬ ‫‪2018‬‬ ‫‪2017‬‬ ‫‪2016‬‬ ‫‪2015‬‬ ‫َّنة‬ ‫الس‬ ‫ا ْل َ‬ ‫مالية‬ ‫‪0\.00‬‬ ‫‪0\.00‬‬ ‫‪0\.00‬‬ ‫‪0\.00‬‬ ‫‪0\.00‬‬ ‫‪0\.00‬‬ ‫‪0\.00‬‬ ‫‪1,033,000‬‬ ‫‪947,000‬‬ ‫‪20,000‬‬ ‫النفقات‬ ‫السنوية‬ ‫‪0\.00‬‬ ‫‪0\.00‬‬ ‫‪0\.00‬‬ ‫‪0\.00‬‬ ‫‪0\.00‬‬ ‫‪0\.00‬‬ ‫‪0\.00‬‬ ‫‪2,000,000‬‬ ‫‪967,000‬‬ ‫‪20,000‬‬ ‫َّ‬ ‫النفقَات‬ ‫كمية‬‫التََّا‬ ‫رُ‬ ‫ؤَ‬ ‫سسية‬ ‫لُ‬ ‫مَ‬ ‫بَ‬ ‫يانات ا ْ‬ ‫اْ‬ ‫لَ‬ ‫ع (األساسي)‬ ‫مَ‬ ‫مارسة المشرو‬ ‫مجال ُ‬ ‫َ‬ ‫ِ‬ ‫المياه‬ ‫ع‬ ‫مجاَلت الممارسة المساهمة ِ‬ ‫في تنفيذ ا ْلمشرو‬ ‫ُ‬ ‫ُ‬ ‫ََ‬ ‫مواض ٍ‬ ‫يع َّ‬ ‫الشاملة‬ ‫ل َ‬‫اْ‬ ‫ناخي‬ ‫مَ‬‫التَّغير ا ْل َ‬ ‫]‬ ‫[‬ ‫ر‬ ‫اع وا ْلعنف‬ ‫الضعف‪ ،‬الص َ‬ ‫َ‬ ‫]‬ ‫[‬  ‫ماعي‬ ‫ع ِْ‬ ‫َّ‬ ‫اَلجت َ‬ ‫النو‬ ‫]‬ ‫[‬ ‫ا ْلو َ‬ ‫ظائف‬ ‫]‬ ‫[‬ ‫عام وا ْل َ‬ ‫خاص‬ ‫اكة الق َ‬ ‫Øاعين ا ْل َ‬ ‫شر‬‫َ‬ ‫]‬ ‫[‬ ‫مَ‬ ‫ناخي‬ ‫لِ‬ ‫قØَاعات ‪ /‬التَّ َ‬ ‫غير ا ْ‬ ‫لَ‬ ‫اْ‬ ‫جمالية ‪)100‬‬ ‫ِ‬ ‫القØاع (في الحد األقصى خمسة على أن تُ َ‬ ‫ساوي النسبة اإل َ‬ ‫نِسبة ا ْل َ‬ ‫منافع المشتركة‬ ‫مَ‬ ‫نافع‬ ‫نسبة ا ْل َ‬ ‫‪%‬‬ ‫القØاعات‬ ‫ِ‬ ‫القØَاعات الرئيسة‬ ‫ِإلجر‬ ‫اءات التخفيفية‬ ‫ل‬ ‫ِلتأَقلم ‪%‬‬ ‫ا ْل ُ‬ ‫مشتركة ل‬ ‫‪%‬‬ ‫‪100‬‬ ‫قَ‬ ‫Øاع العام للمياه والصرف‬ ‫ا ْلِ‬ ‫المياه والصرف الصحي‬ ‫ِ‬ ‫حماية ِ‬ ‫من‬ ‫والحماية ِ‬ ‫الصحي وا ْل َ‬ ‫من الفيضانات‬ ‫َ‬ ‫الفَ َ‬ ‫يضانات‬ ‫‪100‬‬ ‫ِ‬ ‫اإلجمالي‬ ‫ع‪\.‬‬ ‫اءات التكيفية والتخفيفية َ‬ ‫على هذا المشرو‬ ‫مْ‬ ‫علُومات المنافع المشتركة لإلجر‬ ‫شهَد على َ‬ ‫عدم انØباق أي َ‬ ‫أْ‬ ‫وض َ‬ ‫وعات‬ ‫لَ‬ ‫م ُ‬ ‫اْ‬ ‫ع ‪)100‬‬ ‫موضوعات بالحد األقصى على أن ُ‬ ‫يساوي المجمو‬ ‫ع (خمسة َ‬‫ا ْلموضو‬ ‫‪%‬‬ ‫ع‬‫الموضو‬ ‫ع الرئيس‬‫الموضو‬ ‫‪20‬‬ ‫مائِية‬ ‫موارد ا ْل َ‬ ‫ة ا ْل َ‬ ‫َِ‬ ‫د ار‬ ‫إ‬ ‫َّبيعية‬ ‫موارد الØ‬ ‫ِدار‬ ‫ة البيئة وا ْل َ‬ ‫إ‬ ‫‪20‬‬ ‫خدمات حضرية واسكانية للفئات‬ ‫التنمية الحضرية‬ ‫الفقير‬ ‫ة‬ ‫‪40‬‬ ‫الحوكمة البلدية وبِناء المؤسسات‬ ‫التنمية الحضرية‬ ‫دمات الر ِ‬ ‫‪20‬‬ ‫يفية والبنية التحتية‬ ‫خَ َ‬ ‫ا ْل َ‬ ‫التَّنمية ا ْل َ‬ ‫حضرية‬  ‫‪100‬‬ ‫ع‬‫المجمو‬ ‫ع‬‫لمشرو‬‫ِ‬ ‫هدف ِ‬ ‫اإل نمائي المقترح ل َ‬ ‫لَ‬‫اْ‬ ‫ات سلØØ© المياه الفلسØينية كي تتمكن ِ‬ ‫من تخØيØ‪ ،‬ورصد وتنظيم تنمية قØاع المياه في الضفة الغربية‬ ‫ع لتقوية قدر‬‫مشرو‬ ‫يرنو ا ْل َ‬ ‫َ‬ ‫وقØاع غز‬ ‫ة على نحو أكثر فعالية‪\.‬‬ ‫ع‬ ‫م ُ‬ ‫شرو‬ ‫كونات ا ْ‬ ‫لَ‬ ‫مَ‬‫ُ‬ ‫ات األمريكية)‬ ‫اليين الدو‬ ‫َلر‬ ‫مَ‬ ‫ِ‬ ‫المكون (ب َ‬ ‫تَكلفة ُ‬ ‫اسم المكون‬ ‫‪0\.700‬‬ ‫ي وتقني لسلØØ© المياه الفلسØينية باإلضافة‬ ‫تقديم الدعم ْ‬ ‫اَلستشار‬ ‫لبناء قدر‬ ‫اتها‬ ‫‪0\.600‬‬ ‫ساعدة تكميلية بمجاَلت الدر‬ ‫اسات‪ ،‬والتدريب والبناء‬ ‫مَ‬‫تقديم ُ‬ ‫المؤسسي لمجلس تنظيم قØاع المياه‬ ‫‪0\.700‬‬ ‫ع‬ ‫إدار‬ ‫ة المشرو‬ ‫‪2\.00‬‬ ‫ع‬‫المجمو‬ ‫اَلم ِ‬ ‫تثَال‬ ‫ْ‬ ‫الس َ‬ ‫ياسة‬ ‫ِّ‬ ‫َل [ ‪] X‬‬ ‫]‬ ‫نعم [‬ ‫اتيجية‬ ‫ع بِمحتواه أو أي جانب آخر ِ‬ ‫من جوانبه عن استر‬ ‫ج المشرو‬‫يخر‬ ‫هل َ‬ ‫َ‬ ‫المساعدة القØرية؟‬ ‫َل [ ‪] X‬‬ ‫]‬ ‫نعم [‬ ‫ع أي القيام بأي تناز‬ ‫َلت على صعيد سياسات البنك الدولي؟‬ ‫هل َ‬ ‫يتØلب المشرو‬ ‫]‬ ‫َل [‬ ‫نعم [ ‪] X‬‬ ‫ة البنك الدولي هذه التناز‬ ‫َلت؟‬ ‫ى أقرت إدار‬‫وهل جر‬ ‫َ‬  ‫]‬ ‫َل [‬ ‫نعم [ ‪] X‬‬ ‫ع بتنفيذه؟‬ ‫ِيمية ا ْل َ‬ ‫خاصة بالجهوزية للشرو‬ ‫ع المعاير ِ‬ ‫اإلقل‬ ‫هل ُ‬ ‫يلبي المشرو‬ ‫وأخي اً‬ ‫ر َ‬ ‫َل‬ ‫َ‬ ‫نعم‬ ‫َ‬ ‫ع‬ ‫لَ‬ ‫مشرو‬ ‫فعلة نتيج ً‬ ‫ة لْ‬ ‫م َ‬‫لُ‬ ‫لِ‬ ‫وقَائية ا ْ‬ ‫الس َ‬ ‫ياسات ا ْ‬ ‫ِّ‬ ‫‪X‬‬ ‫ابع(Ø©) ( ‪OP/BP‬‬ ‫الر‬ ‫اء َّ‬ ‫التَِّ‬ ‫قييم ا ْلبِئي‪ -‬البند األول ِ‬ ‫من السياسة التشغيلية‪/‬اإلجر‬ ‫‪)4\.01‬‬ ‫‪X‬‬ ‫ابع(Ø©)‬ ‫الر‬ ‫ابع ِ‬ ‫اء َّ‬ ‫من السياسة التشغيلية‪/‬اإلجر‬ ‫َّبِيعية ‪ -‬البند َّ‬ ‫الر‬ ‫مَ‬ ‫وائل الØ‬ ‫ا ْل َ‬ ‫(‪)OP/BP 4\.04‬‬ ‫‪X‬‬ ‫الر‬ ‫ابع(Ø©)‬ ‫اء َّ‬ ‫َّادس والثَّالثون ِ‬ ‫من السياسة التشغيلية‪/‬اإلجر‬ ‫ا ْل َ‬ ‫غابات ‪ -‬البند الس‬ ‫(‪)OP/BP 4\.36‬‬ ‫‪X‬‬ ‫ابعة(‪)OP 4\.09‬‬ ‫الر‬ ‫ة اآلفات ‪ -‬البند التّاسع ِ‬ ‫من السياسة التشغيلية َّ‬ ‫َِ‬ ‫د ار‬ ‫إ‬ ‫‪X‬‬ ‫اء‬ ‫ادية ‪ -‬البند الْح ِ‬ ‫ادي عشر ِ‬ ‫من السياسة التشغيلية‪/‬اإلجر‬ ‫ا ْلموارد الثَّقافيِة ا ْلم ِ‬ ‫َ‬ ‫َ‬ ‫َ‬ ‫ََ‬ ‫ابع(Ø©) (‪)OP/BP 4\.11‬‬ ‫الر‬ ‫َّ‬ ‫‪X‬‬ ‫ابع(Ø©)‬ ‫الر‬ ‫اء َّ‬ ‫ِيون ‪ -‬البند العاشر ِ‬ ‫من السياسة التشغيلية‪/‬اإلجر‬ ‫الس َّ‬ ‫كان األَصل‬ ‫َ‬ ‫(‪)OP/BP 4\.10‬‬ ‫اء‬ ‫ة ِ‬ ‫من السياسة التشغيلية‪/‬اإلجر‬ ‫ي ‪ -‬البند الثَّاني عشر‬ ‫ِعادة التَّ ِ‬ ‫وØين القسر‬ ‫إَ‬ ‫‪X‬‬ ‫الر‬ ‫ابع(Ø©) (‪)OP/BP 4\.37‬‬ ‫َّ‬ ‫‪X‬‬ ‫اء‬ ‫الثون ِ‬ ‫من السياسة التشغيلية‪/‬اإلجر‬ ‫َّابع والثَّ َ‬ ‫سالمة السدود ‪ -‬البند الس‬ ‫َ‬ ‫الر‬ ‫ابع(Ø©) (‪)OP/BP 4\.37‬‬ ‫َّ‬ ‫ات الْمائية ‪ -‬البند الخمسون ِ‬ ‫من السياسة‬ ‫مر‬ ‫المقَامة على ا ْل َ‬ ‫م َ‬ ‫مَ‬ ‫شاريع ُ‬ ‫ا ْل َ‬ ‫‪X‬‬ ‫َ‬ ‫اء الس‬ ‫َّابع(Ø©) (‪)OP/BP 4\.37‬‬ ‫التشغيلية‪/‬اإلجر‬ ‫اعة ‪ -‬البند الستين ِ‬ ‫من السياسة‬ ‫مناØق النز‬ ‫المشاريع المقامة في َ‬ ‫‪X‬‬ ‫اء الس‬ ‫َّابع(Ø©) (‪)OP/BP 4\.37‬‬ ‫التشغيلية‪/‬اإلجر‬  ‫نونية‬ ‫لقَا ُ‬ ‫لمو ِ‬ ‫اثيق ا ْ‬ ‫اْ َ َ‬ ‫وتير‬ ‫ة الميثاق‬ ‫تَاريخ اَلستحقاق‬ ‫متكرر‬ ‫ُ‬ ‫اسم الميثاق‬ ‫لِ‬ ‫ميثَاق‬ ‫وصف ا ْ‬ ‫َ‬ ‫ُّ‬ ‫الشروØ‬ ‫الفئة‬ ‫اَلسم‬ ‫مصدر التَّ ِ‬ ‫مويل‬ ‫منحة‬ ‫شر‬ ‫اكة الصندوق اَلستئماني المتعدد المانحين‬ ‫شر‬ ‫اكة تØوير البنى التحتية‬ ‫لتØوير البنى التحتية‬ ‫وصف الشرØ‬ ‫بْ‬ ‫نية الفريق‬ ‫ُ‬ ‫كادر البنك‬ ‫َ‬ ‫الوحدة‬ ‫اَلختصاص‬ ‫المسمى‬ ‫الدور‬ ‫اَلسم‬ ‫خبير أول بِ َ‬ ‫مجال‬ ‫رئيس الفريق‬ ‫إياد َّ‬ ‫رمال‬ ‫‪GWADR‬‬ ‫َ‬ ‫البنى التحتية‬ ‫ي)‬‫دار‬ ‫(المسؤول ِ‬ ‫اإل َ‬ ‫خبير رفيع بمجال‬ ‫رئيس الفريق (المسؤول‬ ‫باخ‬ ‫بِيتر َ ِ‬ ‫دڤيد ميرَ‬ ‫‪GWADR‬‬ ‫َ‬ ‫الموارد المائية‬ ‫عن المسائلة وصناعة‬ ‫القر‬ ‫ار)‬ ‫‪GGODR‬‬ ‫خبير أول بمجال‬ ‫خبير بِمجال الشر‬ ‫اء‬ ‫ِينا فتح اهلل رجوب‬ ‫ل‬  ‫الشر‬ ‫اء‬ ‫‪GGODR‬‬ ‫خبير إدار‬ ‫ة مالية‬ ‫خبير بمجال اإلدار‬ ‫ة‬ ‫ريهام حسين‬ ‫المالية‬ ‫‪MNCGZ‬‬ ‫ع‬‫مساعد مشرو‬ ‫عضو بالفريق‬ ‫ِ‬ ‫فيفي أنتار‬ ‫‪GSURR‬‬ ‫خبير أول في‬ ‫خبير اجتماعي‬ ‫ِر‬ ‫جون َ‬ ‫بتل‬ ‫التنمية اَلجتماعية‬ ‫‪LEGAM‬‬ ‫محلل قانوني‬ ‫ُ‬ ‫مستشار‬ ‫ُ‬ ‫محمد نديم‬ ‫ُ‬ ‫خبير بيئي أول‬ ‫خبير بالمجال البيئي‬ ‫هارت‬ ‫تر ِ‬ ‫اسي َ‬ ‫‪GENDR‬‬ ‫‪GENDR‬‬ ‫خبير أول بالمجالي‬ ‫أخصائي بالسياسات‬ ‫البيئي‬ ‫الوقائية‬ ‫‪WFALA‬‬ ‫محلل مالي‬ ‫ُ‬ ‫محلل مالي‬ ‫ُ‬ ‫إريك ر‬ ‫انجيفا‬ ‫سع‬ ‫و َّ‬ ‫مَ‬‫لُ‬ ‫لفَ ِ‬ ‫ريق ا ْ‬ ‫اْ‬ ‫الموقع‬ ‫رقم هاتف المكتب‬ ‫المسمى‬ ‫اَلسم‬ ‫المواقع‬ ‫مالحظات‬ ‫ُ‬ ‫الفعلي‬ ‫المخØØ‬ ‫الموقع‬ ‫القسم اإلدار‬ ‫ة اْلول‬ ‫البلد‬ ‫ي)‬‫ي اَلفصاح عنهم في الملخص التشغيلي الشهر‬‫اَلستشاريون (سيجر‬ ‫هل سيقتضي األمر وجود استشاريين؟‬  ‫ع‬‫وثيقة المشرو‬ ‫‪ \.1‬مقدمة‬ ‫ع هذه إلى الحصول على موافقة نائب الرئيس اإلقليمي من أجل تقديم منحة مالية إضافية بمبلغ ‪2\.0‬‬‫‪ \.1‬تسعى وثيقة المشرو‬ ‫َلر أمريكي من صندوق الشر‬ ‫اكة اإلئتماني متعدد المانحين لتØوير البنية التحتية إلى منظمة التحرير الفلسØينية من‬ ‫مليون دو‬ ‫ع ‪ – 117443‬منحة رقم الصندوق اَلئتماني‪ 99191/‬والصندوق‬ ‫ع بناء القدر‬ ‫ات في قØاع المياه‪( ،‬المشرو‬ ‫أجل مشرو‬ ‫اَلئتماني‪ \.)15756/‬تلقى صندوق الشر‬ ‫اكة اإلئتماني متعدد المانحين لتØوير البنية التحتية مساعدات من الوكالة السويدية‬ ‫للتنمية الدولية (سيدا) وحكومات الدنمارك وفنلندا وهولندا والنرويج وكرواتيا والبرتغال والوكالة الفرنسية للتنمية‪ ،‬كما يسعى‬ ‫ع ‪ – 117443‬الصندوق اَلئتماني‪ )099491/‬عن Øريق‬‫ع األصلي (مشرو‬‫للخصول على موافقة من أجل إعادة هيكلة المشرو‬ ‫ع إلى يوم ‪ 30‬يونيو‬‫ع وتمديد تاريخ انتهاء المشرو‬ ‫إعادة تخصيص إير‬ ‫ادات المنحة من بين فئات الصرف المحددة في المشرو‬ ‫ع‪\.‬‬‫‪ 2018‬من أجل توفير المرونة للعميل في تحقيق األهداف التنموية للمشرو‬ ‫ع وتعزيز‬ ‫ها من أجل‪:‬‬ ‫‪ \.2‬من شأن منحة التمويل اإلضافية المساعدة في تمويل التفقات المتصلة بإتمام أعمال المشرو‬ ‫ع والمتمثلة في تفعيل مجلس تنظيم قØاع المياه عن Øريق بناء مؤسستها‪\.‬‬‫‪ -‬تحقيق النتيجة األصلية المستهدفة من المشرو‬ ‫‪ -‬دعم سلØØ© المياه الفلسØينية من أجل تØبيق Ø®ØØ© إصالح قØاع المياه تØبيقاً أكبر وتحسين قدر‬ ‫اتها‪\.‬‬ ‫زر‬ ‫ة المالية وبالتشاور مع سلØØ© المياه الفلسØينية ومجلس تنظيم قØاع المياه‪ 1‬تمويل إضافياً‬ ‫تØلب السلØØ© الفلسØينية ممثلة بو ا‬ ‫ألعمال التنمية المؤسسية بما فيها السلع والخدمات اَلستشارية والخدمات غير اَلستشارية والتدريب والنفقات التشغيلية والنفقات‬ ‫جوة من التمويل اإلضافي في‪:‬‬‫الجارية‪ \.‬تتمثل النتائج األساسية المر‬ ‫البناء المؤسسي لمجلس فاعل لتنظيم قØاع المياه من أجل مر‬ ‫اقبة وتنظيم توفير خدمات قØاع المياه في الضفة‬ ‫‪\.I‬‬ ‫الغربية وغز‬ ‫ة‪\.‬‬ ‫تعزيز قدر‬ ‫ات سلØØ© المياه الفلسØينية في التخØÙŠØ ÙˆØµÙŠØ§ØºØ© السياسات وفي تØبيق عملية إصالح قØاع المياه‪\.‬‬ ‫‪\.II‬‬ ‫ح‪:‬‬‫المستفيدون المباشرون من التمويل اإلضافي المقتر‬ ‫ة (نحو ‪ 4\.5‬مليون نسمة) والذين سيستفيدون من تحسين إدار‬ ‫ة موارد المياه والتنظيم األفضل‬ ‫سكان الضفة الغربية وغز‬ ‫‪\.I‬‬ ‫للخدمات‪\.‬‬ ‫سلØØ© المياه الفلسØينية ومجلس تنظيم قØاع المياه والذين سيكونا قادرين على إدار‬ ‫ة وتنظيم هذا القØاع بكفاءة أكبر‪\.‬‬ ‫‪\.II‬‬ ‫ي‬‫‪ \.3‬تتمثل التعديالت الجوهرية المقترحة بموجب التمويل اإلضافي في إعادة هيكلة وتعزيز المحتوى ‪( 1‬الدعم اَلستشار‬ ‫اسات والتدريب) والتعديالت المØابقة للمحتوى ‪( 3‬إدار‬ ‫ة‬ ‫والمساعدة الفنية وبناء القدر‬ ‫ات) والمحتوى ‪( 2‬المساعدة التكميلية للدر‬ ‫ع) وتمديد موعد التنفيذ النهائي بـ‪ 24‬شه اً‬ ‫ر تبدأ من ‪ 31‬ديسمبر ‪ 2015‬وتنتهي في ‪ 31‬ديسمبر ‪َ \.2017‬ل يوجد‬ ‫المشرو‬ ‫ع وعلى آلية اَلئتمان والضمانات‪ ،‬كما سيتم تعديل ترتيبات التنفيذ حيث سيكون مجلس‬‫تعديالت على األهداف التنموية للمشرو‬ ‫ع في سلØة‬ ‫تنظيم قØاع المياه مسؤو‬ ‫َلً عن تنفيذ األعمال المتعلقة بالبناء المؤسسي مع الرقابة مع جانب وحدة تنفيذ المشرو‬ ‫‪1‬‬ ‫صادقت السلØØ© الفلسØينية على تأسيس مجلس تنظيم قØاع المياه وقامت بتعيين مجلس إدارته في ‪ 7‬أغسØس ‪\.2014‬‬  ‫المياه الفلسØينية‪ ،‬ونظ اً‬ ‫ر إلضافة هيئة تنفيذ جديدة (مجلس تنظيم قØاع المياه) سيكون هنالك تعديل على ترتيبات الصرف عن‬ ‫Øريق فتح حساب ثان مخصص لمجلس تنظيم قØاع المياه‪\.‬‬ ‫ة وصندوق الشر‬ ‫اكة‬ ‫ع بناء قدر‬ ‫ات قØاع المياه تمويالً مشتركاً من الصندوق اَلئتماني للضفة الغربية وغز‬ ‫‪ \.4‬يتلقى مشرو‬ ‫اإلئتماني متعدد المانحين لتØوير البنية التحتية‪ ،‬كما تلقى تمويالً موازياً من الوكالة الفرنسية للتنمية‪\.‬‬ ‫‪ \.2‬لمحة عامة والسبب الجوهري للتمويل اإلضافي بمبلغ ‪ 2\.0‬مليون دوالر أمريكي‬ ‫‪ \.5‬لمحة عن هذا القØاع‪ :‬يعاني قØاع المياه في الضفة الغربية وغز‬ ‫ة تحديات فنية ومؤسسية مثل‪:‬‬ ‫ة السيادية على مصادر المياه في الضفة الغربية وغز‬ ‫ة وعلى تØوير البنية التحتية للمياه مما يؤدي إلى‬ ‫غياب السيØر‬ ‫‪\.I‬‬ ‫ئ مخصصة في مقابل الخØØ© اَلستر‬ ‫اتيجية‬ ‫ة كبير‬ ‫ة واعداد Ø®ØØ© Øوار‬ ‫تقييد إمكانية الوصول إلى مصادر المياه بصور‬ ‫ع‪\.‬‬‫ح والتأخير في تفويض وتØبيق البنية التحتية للمشرو‬‫وحالة عدم الوضو‬ ‫العجز وانعدام الكفاءة الكبيرين في إمدادات المياه بكميات كبير‬ ‫ة وفي البنية التحتية للصرف الصحي مع إمكانية‬ ‫‪\.II‬‬ ‫َل يعتمد عليها إلى المياه الصالحة للشرب وخاصة في غز‬ ‫ة والمناØق المصنفة (ج) في الضفة‬ ‫وصول غير كافية و‬ ‫الغربية‪ ،‬وغياب معالجة المياه العادمة واعادة استخدامها واَلعتمادية واألداء واَلستم ا‬ ‫ررية المتفاوتة في إمدادات المياه‬ ‫وعمليات الصرف الصحي والنمو المقيد للزر‬ ‫اعة المروية‪\.‬‬ ‫اَلنهيار الوشيك في البيئة والصحة العامة في قØاع غز‬ ‫ة وعدم مالئمة ‪ %96‬من موارد المياه َلستخدام سكان غز‬ ‫ة‬ ‫‪\.III‬‬ ‫الذين يبلغ عددهم ‪ 1\.8‬مليون نسمة بسبب تسرب المياه المالحة والترسبات غير المعالجة لمياه الصرف الصحي‪\.‬‬ â€«Ù†Ù‚Ø§Ø Ø§Ù„Ø¶Ø¹Ù في الحوكمة والقدر‬ ‫ات في قØاع المياه الفلسØيني والتي تتضمن سلØØ© المياه الفلسØينية ومزودي‬ ‫‪\.IV‬‬ ‫الخدمات البلدية والذين هم بحاجة إلى إصالح مؤسسي واعادة تنظيم وبناء قدر‬ ‫ات من أجل تحديد أوضح لألدوار‬ ‫والمسؤوليات وتعزيز الفعالية المؤسسية‪\.‬‬ ‫اء السلØة‬ ‫‪ \.6‬اإلصالح المؤسسي‪ :‬وضعت سلØØ© المياه الفلسØينية استر‬ ‫اتيجية إلصالح قØاع المياه يصادق مجلس وزر‬ ‫الفلسØينية استناداً إليها على Ø®ØØ© عمل اإلصالح‪ ،‬والتي تفصل مخØØات وآليات تنفيذ برنامج اإلصالح المؤسسي والتشريعي‬ ‫اف لجنة التوجيه في مجلس الوزر‬ ‫اء‪ ،‬حيث‬ ‫في قØاع المياه‪ \.‬تم اإلنتهاء من تصميم وتنسيق وتØبيق برنامج اإلصالح تحت إشر‬ ‫يتمثل هدف عملية اإلصالح في تحقيق األمن المائي وموارد مياه متكاملة ومستدامة من خالل‪:‬‬ ‫ء من بنية إدار‬ ‫ة فاعلة للدولة الفلسØينية‬ ‫ات واستدامة المؤسسات في ظل Ø¥Øار عام قانوني منظم باعتبار‬ ‫ه جز‬ ‫بناء القدر‬ ‫‪\.I‬‬ ‫المرتقبة‪\.‬‬ ‫تسريع تØوير البنية التحتية استناداً إلى احتياجات األمن المائي الفلسØينية واَلستر‬ ‫اتيجيات المحدثة‪\.‬‬ ‫‪\.II‬‬ ‫تنظيم تقديم الخدمات لتعزيز الجودة والكفاءة واسترداد التكلفة‪\.‬‬ ‫‪\.III‬‬ ‫تحقيق وتحسين التزويد المستدام لخدمات المياه من خالل المر‬ ‫افق العامة‪\.‬‬ ‫‪\.IV‬‬ ‫ة موارد المياه في فلسØين وتعزيز قدر‬ ‫اتها‬ ‫‪ \.7‬أثمرت عملية إصالح قØاع المياه عن قانون مياه جديد يهدف إلى تØوير وادار‬ ‫وتحسين جودتها والحفاظ عليها وحمايتها من التلوث والنضوب وتحسين مستوى خدمات المياه من خالل تØبيق مبادئ إدار‬ ‫ة‬ ‫متكاملة ومستدامة لموارد المياه‪ ،‬ويمكن تحقيق هدف قانون المياه من خالل هيكلية جديدة لقØاع المياه تم توضيحها أيضاً في‬ ‫قانون المياه (يمكن إيجاد مزيد من التفاصيل في الملحق ‪ ،)6‬وتتألف هيكلية هذا القØاع من ثالثة مستويات‪:‬‬  ‫أ‪ \.‬المستوى الوØني الذي يضم‪:‬‬ ‫سلØØ© المياه الفلسØينية (مؤسسة عامة تتمتع بالشخصية القانونية وتشكل موازنتها جز‬ ‫ء من الموازنة العامة للحكومة‬ ‫‪\.I‬‬ ‫ة موارد المياه واصدار سياسات واستر‬ ‫اتيجيات وخØØ Ù‚Øاع‬ ‫ها إلى مجلس الوزر‬ ‫اء ومسؤولة عن إدار‬ ‫وتقدم تقارير‬ ‫المياه)‪\.‬‬ ‫مجلس تنظيم قØاع المياه (يتمتع المجلس بالشخصية القانونية ومستقل مالياً وادارياً ويهدف إلى مر‬ ‫اقبة كافة األمور‬ ‫‪\.II‬‬ ‫المتعلقة بعمل مزودي خدمات المياه ومنها اإلنتاج والنقل والتوزيع واَلستهالك إدار‬ ‫ة المياه العادمة بهدف ضمان نوعية‬ ‫وكفاءة خدمات المياه والمياه العادمة للمستهلكين وبأسعار معقولة)‪\.‬‬ ‫ب‪ \.‬يضم مستوى تزويد المياه بالجملة شركة المياه الوØنية وهي شركة عامة سيتم تأسيسها وفقاً ألحكام قانون المياه‪ ،‬وهي‬ ‫مسؤولة أساساً عن تزويد وبيع المياه بالجملة إلى هيئات المياه والسلØات المحلية ومجالس المياه المشتركة والجمعيات‪ ،‬كما‬ ‫خصة التي تمنحها سلØØ© المياه لهذه الغاية‪\.‬‬ ‫ج المياه من مصادر‬ ‫ها وتعمل على تحلية المياه ونقل المياه بالجملة وفقاً للر‬ ‫تستخر‬ ‫ج‪ \.‬يتألف مستوى تقديم الخدمات اإلقليمي من‪:‬‬ ‫مر‬ ‫افق المياه اإلقليمية (تتمتع بالشخصية القانونية ومستقلة مالياً ولها الحق في تملك األصول الثابتة والمنقولة‬ ‫‪\.I‬‬ ‫واستخدامها والتصرف فيها بهدف تحقيق أهدافها‪ ،‬كما تتمتع باألهلية القانونية الكاملة لتنفيذ أعمالها ومسؤولياتها بما‬ ‫ام العقود أو الحق في المقاضاة والتقاضي أو انتداب وتفويض األشخاص الذين تختار‬ ‫هم للتصرف نيابة عنها‬ ‫فيها إبر‬ ‫في الدعاوى القضائية بهدف اَلضØالع بمسؤولياتها وو‬ ‫َليتها)‪\.‬‬ ‫ي على المستوى المحلي بØريقة مستدامة وفقاً للنظام‬ ‫جمعيات مستهلكي المياه (تشكل بهدف إدار‬ ‫ة خدمة إمداد مياه الر‬ ‫‪\.II‬‬ ‫الصادر عن مجلس الوزر‬ ‫اء‪ ،‬وهي مستقلة مالياً ولها الحق في تملك األصول الثابتة والمنقولة واستخدامها والتصرف‬ ‫فيها بهدف تحقيق أهدافها‪ ،‬كما تتمتع باألهلية القانونية الكاملة لتنفيذ أعمالها ومسؤولياتها بما فيها إبر‬ ‫ام العقود أو‬ ‫الحق في المقاضاة والتقاضي أو انتداب وتفويض األشخاص الذين تختار‬ ‫هم للتصرف نيابة عنها في الدعاوى القضائية‬ ‫بهدف اَلضØالع بمسؤولياتها وو‬ ‫َليتها)‪\.‬‬ ‫ح‪ ،‬وتشكل العناصر‬ ‫ع بناء قدر‬ ‫ات قØاع المياه إلى جانب التمويل اإلضافي المقتر‬ ‫‪ \.8‬تتلقى عملية اإلصالح الدعم بموجب مشرو‬ ‫ع‪\.‬‬‫األساسية في قانون المياه المبينة أعاله والمفصلة في الملحق ‪ 6‬اإلØار الموجه إلصالح قØاع المياه والتي يدعمها المشرو‬ ‫اتيجية البنك الدولي‬ ‫ح في استر‬ ‫‪ \.9‬مواءمة استر‬ ‫اتيجية المساعدات‪ :‬تساهم األعمال الممولة بموجب التمويل اإلضافي المقتر‬ ‫ح مع العمود األول من استر‬ ‫اتيجية‬ ‫ة للفتر‬ ‫ة ‪ ،2016-2015‬حيث يتواءم التمويل اإلضافي المقتر‬ ‫للمساعدات للضفة الغربية وغز‬ ‫المساعدات لتعزيز مؤسسات الدولة المستقبلية لضمان تقديم الخدمات للمواØنين‪ ،‬نظ اً‬ ‫ر ألهمية الدعم في ظل التمويل اإلضافي‬ ‫لتحقيق أهداف إصالح قØاع المياه وقانون المياه في تعزيز تحسين تقديم الخدمات في قØاع المياه‪ \.‬من المهم دعم جهود‬ ‫السلØØ© الفلسØينية في إيجاد بيئة لتمكين عملية النمو التي يقودها القØاع الخاص (مثال‪ :‬ينعكس تحسين هيكلية للمياه والمياه‬ ‫ى مما يؤدي‬ ‫ات القØاع الخاص في الزر‬ ‫اعة والصناعة وقØاعات أخر‬ ‫العادمة وأداء المؤسسات والبنية التحتية في تشجيع استثمار‬ ‫إلى خلق فرص عمل وتحسين ظروف معيشة الناس)‪ ،‬والذي يشكل العمود الثاني من استر‬ ‫اتيجية المساعدات‪ \.‬يساهم التمويل‬ ‫ح بناء عليه في تحقيق الهدفين العالميين للبنك الدولي في اجتثاث الفقر وتعزيز اَلزدهار المشترك‪\.‬‬‫اإلضافي المقتر‬ ‫ار في دعم‬ ‫‪ \.10‬استر‬ ‫اتيجية البنك الدولي لدعم قØاع المياه‪ :‬تهدف استر‬ ‫اتيجية البنك الدولي لتعزيز قØاع المياه إلى اَلستمر‬ ‫تعزيز األمن المائي للشعب الفلسØيني من خالل تØبيق إصالح قØاع المياه على النحو المبين في قانون المياه‪ ،‬ويتحقق ذلك‬  ‫ابØØ© لبناء القدر‬ ‫ات وتمويل البنية التحتية تمشياً مع العناصر الجوهرية في عملية إصالح قØاع‬ ‫بمنهجية مبرمجة للمشاريع المتر‬ ‫اتيجية مع منهجية متسقة مع استر‬ ‫اتيجية البنك الدولي في دعم أجندة إصالح البلديات وقØاع الØاقة‬ ‫المياه‪ ،‬وتتواءم هذه اَلستر‬ ‫(إمدادات الØاقة) في سبيل تقديم خدمات شاملة ومستدامة‪ \.‬تتØرق المنهجية المبرمجة إلصالح قØاع المياه إلى العناصر‬ ‫األساسية لإلصالح‪:‬‬ ‫ع بناء‬ ‫على المستوى المحلي من خالل بناء قدر‬ ‫ات سلØØ© المياه الفلسØينية ومجلس تنظيم قØاع المياه بواسØØ© مشرو‬ ‫‪\.I‬‬ ‫ح‪ ،‬ومن خالل العمل مع سلØØ© المياه الفلسØينية والشركاء اآلخرين لوضع‬ ‫قدر‬ ‫ات قØاع المياه وتمويله اإلضافي المقتر‬ ‫تمويل إلمدادات المياه الوØنية بالجملة‪\.‬‬ ‫ع تحسين إمدادات المياه‬ ‫على مستوى تقديم الخدمات اإلقليمية بتمويل البنية التحتية وبناء القدر‬ ‫ات من خالل مشرو‬ ‫‪\.II‬‬ ‫ى غرب بيت لحم وخØØ© إدار‬ ‫ة عملية إصالح قØاع المياه‪ ،‬كما‬ ‫ع تحسين قر‬ ‫والصرف الصحي في قØاع غز‬ ‫ة ومشرو‬ ‫ح في دعم البناء المؤسسي على المستوى الوØني‪\.‬‬‫يستمر التمويل اإلضافي المقتر‬ ‫ات قØاع المياه (بقيمة ‪3\.0‬‬ ‫ع بناء قدر‬‫‪ \.11‬التمويل األصلي‪ :‬قاد البنك الدولي عملية دعم إصالح قØاع المياه من خالل مشرو‬ ‫ة) والذي صادق مجلس اإلدار‬ ‫ة عليه يوم ‪ 3‬مارس ‪،2011‬‬ ‫مليون دو‬ ‫َلر أمريكي من الصندوق اَلئتماني للضفة الغربية وغز‬ ‫ودخل حيز التنفيذ يوم ‪ 1‬أغسØس ‪ \.2011‬تمت المصادقة على تمويل أضافي بقيمة ‪ 1\.0‬مليون دو‬ ‫َلر أمريكي من صندوق‬ ‫ي بقيمة ما يعادل ‪1\.4‬‬ ‫اكة اإلئتماني متعدد المانحين لتØوير البنية التحتية يوم ‪ 5‬فبر‬ ‫اير ‪ 2014‬وعلى تمويل أضافي مواز‬ ‫الشر‬ ‫ي في تعزيز قدر‬ ‫ات سلØØ© المياه الفلسØينية من أجل مزيد من التخØيØ‬ ‫ع التØوير‬ ‫مليون دو‬ ‫َلر أمريكي‪ ،‬يتمثل هدف المشرو‬ ‫ة‪ ،‬حيث تتألف Ø®ØØ© بناء قدر‬ ‫ات قØاع المياه من ثالث‬ ‫والرقابة والتنظيم الفاعل لتنمية قØاع المياه في الضفة الغربية وغز‬ ‫مكونات‪:‬‬ ‫ي (‪ 4\.9‬مليون دو‬ ‫َلر أمريكي)‪\.‬‬ ‫المكون األول‪ :‬التخØÙŠØ Ø§Ù„ÙÙ†ÙŠ والفريق اَلستشار‬ ‫اسات والتدريب التكميلي (‪ 0\.3‬مليون دو‬ ‫َلر أمريكي)‪\.‬‬ ‫المكون الثاني‪ :‬الدر‬ ‫ع (‪ 0\.8‬مليون أمريكي)‪\.‬‬ ‫المكون الثالث‪ :‬إدار‬ ‫ة المشرو‬ ‫ع وعلى التصميم والمنظور وانما كان هناك تعديالت بسيØØ© على آليات تنفيذ‬‫ي للمشرو‬ ‫لم ØªØ Ø£â€¬ ‫ر تعديالت على الهدف التØوير‬ ‫ع‪\.‬‬‫المشرو‬ ‫ي‬ ‫ات قØاع المياه في الوقت الحالي على أنها مرضية بصور‬ ‫ة معتدلة لتحقيق الهدف التØوير‬ ‫‪ \.12‬تصنف Ø®ØØ© بناء قدر‬ ‫ع وسير العمل في التنفيذ‪ ،‬ويقف مستوى اإلنفاق من الصندوق اإلئتماني للضفة الغربية وغز‬ ‫ة عند نسبة ‪ %91‬ومن‬ ‫للمشرو‬ ‫صندوق الشر‬ ‫اكة اإلئتماني متعدد المانحين لتØوير البنية التحتية عند نسبة ‪ ،%3‬وهناك توافق كاف مع المعاهدات األساسية‬ ‫از تقدم مهم في تنفيذ Ø®ØØ© بناء قدر‬ ‫ات قØاع المياه‬ ‫في اَلتفاقيات القانونية و‬ ‫َل يوجد ائتمان أو قضايا ضمانات معلقة‪ \.‬تم إحر‬ ‫واَلرتقاء بأجندة إصالح قØاع المياه‪ ،‬حيث تحقق ما يلي‪:‬‬ ‫تم تعيين رئيس جديد لسلØØ© المياه الفلسØينية‪\.‬‬ ‫‪\.I‬‬ ‫صادق رئيس السلØØ© الفلسØينية على قانون المياه‪\.‬‬ ‫‪\.II‬‬ ‫أسس مجلس الوزر‬ ‫اء مجلس تنظيم قØاع المياه وصادق على تعيين مجلس إدارته (الرئيس واألعضاء)‪\.‬‬ ‫‪\.III‬‬ ‫وضع مجلس إدار‬ ‫ة مجلس تنظيم قØاع المياه خارØØ© Øريق للبناء المؤسسي للمجلس بعد تأسيسه بدأت بتعيين رئيس تنفيذي‪\.‬‬  ‫ع‪:‬‬ ‫‪ \.13‬أحرز فريق عمل سلØØ© المياه الفلسØينية كذلك تقدماً كبي اً‬ ‫ر في األعمال األساسية للمشرو‬ ‫إعداد Ø®ØØ Ø§Ù„ØªÙ†Ù…ÙŠØ© اَلستر‬ ‫اتيجية وخØØ Ø§Ù„Ø¹Ù…Ù„â€ª\.‬‬ ‫‪\.I‬‬ ‫وضع Ø§Ù„Ø´Ø±ÙˆØ Ø§Ù„Ù…Ø±Ø¬Ø¹ÙŠØ© والبدء في عملية الشر‬ ‫اء والتعاقد للمرحلة الثانية من التخØÙŠØ Ø§Ù„ÙÙ†ÙŠ والخدمات اَلستشارية‬ ‫‪\.II‬‬ ‫حلة األولى من الخدمات اَلستشارية‪\.‬‬ ‫ار في تنمية القدر‬ ‫ات واتمام العمل على المر‬ ‫ي من أجل اَلستمر‬‫للفريق اَلستشار‬ ‫وضع سياسات واستر‬ ‫اتيجية وخØØ© عمل قØاع المياه‪\.‬‬ ‫‪\.III‬‬ ‫وضع عدد من اللوائح ذات العالقة والتحضير لتقديمها إلى حكومة السلØØ© الفلسØينية للمصادقة عليها‪ ،‬في حين تم‬ ‫‪\.IV‬‬ ‫ى وجار العمل على وضعها‪\.‬‬‫تحديد لوائح أخر‬ ‫تدريب موظفي سلØØ© المياه الفلسØينية‪\.‬‬ ‫‪\.V‬‬ ‫ع لذلك في المضي قدماً نحو تحقيق أهدافه التنموية وسيعمل على تحقيقها في حالة تقديم التمويل اإلضافي‬‫استمر المشرو‬ ‫ح وتمديد الموعد النهائي للتنفيذ‪\.‬‬‫المقتر‬ ‫ات سلØØ© المياه‬ ‫ح‪ :‬وضعت Ø®ØØ© بناء قدر‬ ‫ات قØاع المياه من أجل تحسين قدر‬ ‫ي للتمويل اإلضافي المقتر‬‫‪ \.14‬السبب الجوهر‬ ‫ع عام ‪ 2011‬بـ‪ 6\.0‬مليون دو‬ ‫َلر أمريكي (أو‬ ‫الفلسØينية ودعم محاو‬ ‫َلتها إلصالح قØاع المياه‪ ،‬حيث قدرت كلفة تقييم المشرو‬ ‫َلر أمريكي (أو ما يعادلها)‪ ،‬مما يترك ثغر‬ ‫ة في التمويل تقدر‬ ‫ما يعادلها) في حين بلغ إجمالي التمويل المتوفر ‪ 5\.4‬مليون دو‬ ‫َلر أمريكي‪ \.‬يقدر التمويل اإلضافي بـ‪ 2\.0‬مليون دو‬ ‫َلر أمريكي مع األخذ بعين اَلعتبار اَلنخفاض في سعر‬ ‫بـ‪ 0\.6‬مليون دو‬ ‫َلر لتغØية ثغر‬ ‫ة التمويل‬ ‫صرف العملة وبرنامج العمل المعدل والموضح على النحو التالي‪ 1\.0 :‬مليون دو‬ ‫َلر (‪ 0\.6‬مليون دو‬ ‫ع التي تم تصور‬ ‫ها وقت التقييم‪،‬‬ ‫ة الز‬ ‫ائدة لألعمال األصلية) ضرورية إلتمام أعمال المشرو‬ ‫و‪ 0\.4‬مليون دو‬ ‫َلر لنفقات اإلدار‬ ‫ات قØاع المياه لتوفير ‪ 1\.0‬مليون دو‬ ‫َلر‬ ‫واضافة إلى تلك األعمال فقد Øلبت سلØØ© المياه الفلسØينية اَلرتقاء بخØØ© بناء قدر‬ ‫ى في التمويل اإلضافي لدعم البناء المؤسسي لمجلس تنظيم قØاع المياه‪\.‬‬‫أخر‬ ‫‪ \.15‬يعتبر مجلس تنظيم قØاع المياه جز‬ ‫ء من الهيكلية الجديدة لقØاع المياه والتي تشكل واحداً من المخرجات األساسية لعملية‬ ‫إصالح قØاع المياه (لمزيد من التفاصيل انظر الملحق ‪ ،)6‬حيث يعمل المجلس على مر‬ ‫اقبة األعمال ذات العالقة باألداء‬ ‫التشغيلي لمزودي خدمات المياه ومنها اإلنتاج والنقل والتوزيع واَلستهالك وجمع المياه العادمة ومعالجتها والتخلص منها واعادة‬ ‫ي لضمان جودة وكفاءة خدمات القØاع مثل إمدادات المياه والتخلص من المياه العادمة في‬‫استخدام المياه العادمة المعالجة للر‬ ‫الضفة الغربية وغز‬ ‫ة والمقدمة للمستهلكين بأسعار معقولة‪ ،‬ويتØلب ذلك من المجلس وضع نظام تحفيز قائم على األداء ونشر‬ ‫التقارير الرقابية لدعم وتحفيز أداء مقدمي الخدمات‪\.‬‬ ‫‪ \.3‬التعديالت المقترحة‬ ‫ات سلØة‬ ‫ي والمتمثل في "تعزيز قدر‬‫ع‪َ :‬ل يوجد تعديالت على الهدف التØوير‬‫ع وتصميم المشرو‬‫‪ \.16‬األهداف التØويرية للمشرو‬ ‫المياه الفلسØينية لفعالية أكبر في تخØÙŠØ ÙˆØ±Ù‚Ø§Ø¨Ø© وتنظيم تØوير قØاع المياه في الضفة الغربية وغز‬ ‫ة"‪ ،‬أما التعديالت األساسية‬ ‫ح‪:‬‬‫ع بموجب التمويل اإلضافي المقتر‬‫على تصميم المشرو‬ ‫ي وبناء القدر‬ ‫ات في‬ ‫ي والمساعدة الفنية وبناء القدر‬ ‫ات) لتركيز الدعم اَلستشار‬ ‫أ‪ \.‬إعادة هيكلة المكون األول (الدعم اَلستشار‬ ‫سلØØ© المياه الفلسØينية لتعزيز مؤسستها باعتبار‬ ‫ها هيئة سياسية وتخØيØية‪ ،‬ووضع نظامها الداخلي ودعم عملية اإلصالح‪،‬‬ ‫وتتضمن األعمال الممولة بموجب هذا المكون‪:‬‬  ‫الخدمات اَلستشارية والمساعدة الفنية لدعم سلØØ© المياه الفلسØينية في وضع وتحديث السياسات واَلستر‬ ‫اتيجيات‬ ‫‪\.I‬‬ ‫والخØØ ÙˆØ§Ù„Ù„ÙˆØ§Ø¦Ø­ والمعايير واألدلة اإلرشادية المتعلقة بهذا القØاع‪\.‬‬ ‫ي‬ ‫ات سلØØ© المياه الفلسØينية لتØبيق اَلستر‬ ‫اتيجيات وخØØ Ø§Ù„Ø¹Ù…Ù„ األساسية ومنها تحديث الهيكل اإلدار‬ ‫بناء قدر‬ ‫‪\.II‬‬ ‫والوصف الوظيفي واعادة توزيع الموظفين وتدريب الموظفين وخØØ Ø§Ù„Ø¹Ù…Ù„ والتØبيق في سلØØ© المياه الفلسØينية‪\.‬‬ ‫ار في عملية إصالح هذا القØاع عن Øريق وضع اللوائح واإلجر‬ ‫اءات واألدلة اإلرشادية الالزمة‪\.‬‬ ‫اَلستمر‬ ‫‪\.III‬‬ ‫ب‪ \.‬تعزيز واعادة هيكلة المكون الثاني (المساعدة التكميلية للدر‬ ‫اسات والتدريب) لتشمل المساعدة التكميلية لتعزيز الهيكل‬ ‫المؤسسي لمجلس تنظيم قØاع المياه‪ ،‬وتمت إعادة تسمية هذا المكون لتصبح "المساعدة التكميلية للدر‬ ‫اسات والتدريب والبناء‬ ‫المؤسسي لمجلس تنظيم قØاع المياه"‪ ،‬وتتضمن األعمال اإلضافية الممولة بموجب هذا المكون‪:‬‬ ‫وضع الهيكل المؤسسي واإلجر‬ ‫اءات التنظيمية الداخلية واللوائح الخاصة بالموظفين لمجلس تنظيم قØاع المياه‪\.‬‬ ‫‪\.I‬‬ ‫وضع اللوائح والسياسات واإلجر‬ ‫اءات والمعايير الخاصة بهذا القØاع‪\.‬‬ ‫‪\.II‬‬ ‫وضع Ø®ØØ© عمل مجلس تنظيم قØاع المياه وتØبيقها‪\.‬‬ ‫‪\.III‬‬ ‫بناء القدر‬ ‫ات والتدريب في مجلس تنظيم قØاع المياه‪\.‬‬ ‫‪\.IV‬‬ ‫افق واشر‬ ‫اك المواØنين في‬ ‫تعزيز الشفافية في هذا القØاع عن Øريق ضمان اإلفصاح عن معلومات األداء المقارن للمر‬ ‫‪\.V‬‬ ‫رر‬ ‫ات التنظيمية‪\.‬‬ ‫عملية صنع الق ا‬ ‫ع الدعم للمشتريات واإلدار‬ ‫ة‬ ‫يتولى مجلس تنظيم قØاع المياه مسؤولية تØبيق البناء المؤسسي فيه حيث تقدم وحدة تنفيذ المشرو‬ ‫المالية‪\.‬‬ ‫ع) والتي تتضمن تمويل‪:‬‬ ‫ج‪ \.‬التعديالت المØابقة للمكون الثالث (إدار‬ ‫ة المشرو‬ ‫األعمال التصاعدية ونفقات المستشارين التي تتحملها سلØØ© المياه الفلسØينية عن إدار‬ ‫ة أعمال المكون األول‪\.‬‬ ‫‪\.I‬‬ ‫األعمال التصاعدية والنفقات الجارية ونفقات المستشارين التي تتحملها سلØØ© المياه الفلسØينية عن إدار‬ ‫ة أعمال‬ ‫‪\.II‬‬ ‫المكون الثاني وتØبيق األعمال المؤسسية فيما يتعلق بخØØ© العمل المؤسسية‪\.‬‬ ‫د‪ \.‬تمديد الموعد النهائي للتنفيذ بـ‪ 24‬شه اً‬ ‫ر (تبدأ من ‪ 31‬ديسمبر ‪ 2015‬وتنتهي في ‪ 31‬ديسمبر ‪ )2017‬والتاريخ النهائي إلى‬ ‫‪ 30‬يونيو ‪\.2018‬‬ ‫ع فيما يتعلق بالبناء المؤسسي لمجلس تنظيم قØاع‬ ‫ر‪ \.‬تضاف مؤشر‬ ‫ات جديدة إلى اإلØار العام للنتائج لبيان تعزيز المشرو‬ ‫المياه‪\.‬‬ ‫ز‪ \.‬إعادة التخصيص بين فئات اإلنفاق لتوفير المرونة الالزمة للهيئات المنفذة في تخصيص التمويل على النحو المØلوب‬ ‫بموجب المنحة األصلية والتمويل اإلضافي‪ ،‬والتي ستصبح فئة إنفاق واحدة لـ"السلع والخدمات غير اَلستشارية وخدمات‬ ‫المستشارين والتدريب والنفقات التشغيلية والنفقات الجارية"‪\.‬‬  ‫النسبة المئوية لإلنفاق‬ ‫الصندوق‬ ‫المخصص‬ ‫فئة اإلنفاق الحالية‬ ‫العملة‬ ‫ع)‬‫(إجمالي النو‬ ‫اَلئتماني‪/‬العملة‪/‬القرض‬ ‫مقترح‬ ‫ي‬‫جار‬ ‫مقترح‬ ‫ي‬‫جار‬ ‫السلع والخدمات اَلستشارية‬ ‫الصندوق اَلئتماني ‪-‬‬ ‫‪100\.00‬‬ ‫‪100\.00 2,336,647 2,390,767‬‬ ‫الدو‬ ‫َلر األمريكي‬ ‫والتدريب‬ ‫‪099491‬‬ ‫‪100\.00‬‬ ‫‪100\.00‬‬ ‫‪663,353‬‬ ‫‪609,767‬‬ ‫النفقات التشغيلية التصاعدية‬ ‫‪3,000,000 3,000,000‬‬ ‫ع‪:‬‬‫المجمو‬ ‫السلع والخدمات اَلستشارية‬ ‫الصندوق اَلئتماني‬ ‫‪100‬‬ ‫‪100‬‬ ‫‪2,000,000 1,000,000‬‬ ‫والتدريب بموجب المكون ‪1‬‬ ‫الدو‬ ‫َلر األمريكي‬ ‫ع‬‫و ‪( 3‬أ) من المشرو‬ ‫‪15756‬‬ ‫السلع والخدمات اَلستشارية‬ ‫‪100‬‬ ‫‪100‬‬ ‫‪0\.00‬‬ ‫والتدريب بموجب المكون ‪2‬‬ ‫‪1,000,000‬‬ ‫ع‬‫و ‪( 3‬ب) من المشرو‬ ‫‪3,000,000 1,000,000‬‬ ‫ع‪:‬‬‫المجمو‬ ‫ة (نحو ‪ 4\.5‬مليون نسمة)‬ ‫ع سكان الضفة الغربية وغز‬‫‪ \.17‬المستفيدون والمخاØر‪ :‬يبقى المستفيدون المباشرون من المشرو‬ ‫والذين يحصلون على خدمات أفضل ويكونون قادرين على إيصال مخاوفهم بسهولة فيمما يتعلق بهذا القØاع نتيجة لتحسين‬ ‫ة على إدار‬ ‫ة هذا القØاع على نحو أكثر كفاءة‪ \.‬يعتبر مجلس‬ ‫القدر‬ ‫ات المؤسسية‪ ،‬وسلØØ© المياه الفلسØينية والتي ستكون قادر‬ ‫ر على تنظيم هذا القØاع بصور‬ ‫ة أكثر فاعلية‪ \.‬يملك التمويل‬ ‫تنظيم قØاع المياه من المستفيدين اإلضافيين والذي سيكون قاد اً‬ ‫اإلضافي نفس مخاØر التنفيذ وتدابير التخفيف الموجودة في Ø®ØØ© بناء قدر‬ ‫ات قØاع المياه األصلية (السياق السياسي في بلد‬ ‫التنفيذ‪-‬اَلقتصاد الكلي‪-‬القدر‬ ‫ات المؤسسية للتنفيذ واَلستدامة)‪ ،‬إضافة إلى الخØر المتعلق بالبناء المؤسسي لمجلس تنظيم قØاع‬ ‫المياه‪ ،‬وتتضمن تدابير التخفيف اإلضافية‪:‬‬  ‫الدعم المقدم من السلØØ© الفلسØينية على النحو المبين من خالل تعيين رئيس جديد لسلØØ© المياه الفلسØينية‬ ‫‪\.I‬‬ ‫والمصادقة على قانون المياه‪\.‬‬ ‫ة مجلس تنظيم قØاع المياه والذي يتألف من خبر‬ ‫اء متمرسين في قØاع المياه يتمتعون بمعرفة شاملة‬ ‫تعيين مجلس إدار‬ ‫‪\.II‬‬ ‫في هذا القØاع‪\.‬‬ ‫أما Ø®Øر التنفيذ الكلي فهو مصنف على أنه كبير‪\.‬‬ ‫ع‪:‬‬ ‫ع‪ :‬تتضمن مؤشر‬ ‫ات النتائج اإلضافية المتعلقة بتعزيز المشرو‬ ‫‪ \.18‬مؤشر‬ ‫ات نتائج المشرو‬ ‫تعزيز مجلس تنظيم قØاع المياه (الهيكل المادي والمؤسسي ويتضمن تحديد الرؤية والرسالة واألهداف واستقدام‬ ‫‪\.I‬‬ ‫موظفين أساسيين ووضع إجر‬ ‫اءات للعمل)‪\.‬‬ ‫استكمال Ø®ØØ© التنمية اَلستر‬ ‫اتيجية وخØØ© العمل والمصادقة عليها وتنفيذها‪\.‬‬ ‫‪\.II‬‬ ‫وضع واعتماد اإلØار العام القانوني والوثائق ذات العالقة‪\.‬‬ ‫‪\.III‬‬ ‫‪ \.19‬التعديالت على الترتيبات المؤسسية واَلئتمانية‪ :‬هناك تعديالت على الترتيبات المالية وترتيبات اإلنفاق والمشتريات‬ ‫ع على النحو التالي‪:‬‬‫الخاصة بالمشرو‬ ‫تم وضع Ø®ØØ© مشتريات منقحة خالل إعداد التمويل اإلضافي‪ ،‬وهناك تعديل على الترتيبات المؤسسية وترتيبات التنفيذ نظ اً‬ ‫ر‬ ‫ع ضمن سلØة‬‫لتØبيق مجلس تنظيم قØاع المياه األعمال المتعلقة بالبناء المؤسسي فيه‪ ،‬في حين تعمل وحدة تنفيذ المشرو‬ ‫المياه الفلسØينية على تقديم الدعم لترتيبات المشتريات والترتيبات المالية الخاصة بمجلس تنظيم المياه وابقاء المسؤولية عن‬ ‫ع في يد سلØØ© المياه الفلسØينية‪\.‬‬‫تنفيذ أعمال المشرو‬ ‫ع في الجدول أدناه‪:‬‬‫ع‪ :‬تالحظ التعديالت على Ø®ØØ© نفقات وتمويل المشرو‬‫‪ \.20‬نفقات وتمويل المشرو‬ ‫النفقات‬ ‫التعديالت مع التمويل اإلضافي‬ ‫نفقات اْلصلية‬ ‫اإلجر‬ ‫اء‬ ‫المنقحة‬ ‫ع مع‬‫المجمو‬ ‫الوكالة الفرنسية‬ ‫الوكالة الفرنسية‬ ‫ع‬‫المجمو‬ ‫صندوق الشر‬ ‫اكة‬ ‫الوكالة الفرنسية‬ ‫الصندوق اَلئتماني‬ ‫التمويل‬ ‫للتنمية‪/‬التعاون‬ ‫للتنمية‪ /‬صندوق‬ ‫الفعلي‬ ‫اإلئتماني متعدد‬ ‫للتنمية (مليون‬ ‫للضفة الغربية وغز‬ ‫ة‬ ‫اإلضافي‬ ‫ي)‬‫اْللماني (مواز‬ ‫اكة اإلئتماني‬ ‫الشر‬ ‫(مليون‬ ‫المانحين لتØوير البنية‬ ‫دوَلر)‬ ‫(مليون دوَلر)‬ ‫(مليون‬ ‫(مليون دوَلر)‬ ‫متعدد المانحين‬ ‫دوَلر)‬ ‫التحتية (مليون دوَلر)‬ ‫دوَلر)‬ ‫لتØوير البنية‬ ‫فعلي‬ ‫مخØØ‬ ‫التحتية (مليون‬ ‫دوَلر)‬ ‫‪5\.0‬‬ ‫‪0‬‬ ‫‪0\.7‬‬ ‫‪4\.3‬‬ ‫‪0\.8‬‬ ‫‪1\.4‬‬ ‫‪1\.4‬‬ ‫‪2\.1‬‬ ‫المكون اْلول‪ :‬اَلستشار‬ ‫ات‬ ‫والمساعدة الفنية وبناء القدر‬ ‫ات‬ ‫‪1\.2‬‬ ‫‪0\.3‬‬ ‫‪0\.6‬‬ ‫‪0\.3‬‬ ‫‪0\.2‬‬ ‫‪0\.2‬‬ ‫‪0\.0‬‬ ‫‪0\.1‬‬ ‫المكون الثاني‪ :‬المساعدة التكميلية‬ ‫للدر‬ ‫اسات والتدريب والبناء المؤسسي‬ ‫لمجلس تنظيم قØاع المياه‬ ‫‪0\.3‬‬ ‫‪0‬‬ ‫‪0‬‬ ‫‪0\.3‬‬ ‫‪0\.2‬‬ ‫‪0\.2‬‬ ‫‪0‬‬ ‫‪0\.1‬‬ ‫المكون الثاني (Ø£)‪ :‬الدر‬ ‫اسات وصندوق‬ ‫التدريب‬ ‫‪0\.9‬‬ ‫‪0\.3‬‬ ‫‪0\.6‬‬ ‫‪0‬‬ ‫‪0‬‬ ‫‪0‬‬ ‫‪0‬‬ ‫‪0‬‬ ‫المكون الثاني (ب)‪ :‬البناء المؤسسي‬ ‫لمجلس تنظيم قØاع المياه‬ ‫‪1\.5‬‬ ‫‪0\.0‬‬ ‫‪0\.7‬‬ ‫‪0\.8‬‬ ‫‪0‬‬ ‫‪0‬‬ ‫‪0\.0‬‬ ‫‪0\.8‬‬ ‫ع‬ ‫المكون الثالث‪ :‬إدار‬ ‫ة المشرو‬ ‫‪1\.1‬‬ ‫‪0\.0‬‬ ‫‪0\.3‬‬ ‫‪0\.8‬‬ ‫‪0\.0‬‬ ‫‪0\.0‬‬ ‫‪0\.0‬‬ ‫‪0\.8‬‬ ‫عي الثالث (Ø£)‪ :‬إدار‬ ‫ة‬ ‫المكون الفر‬ ‫ع‬‫المشرو‬ ‫‪0\.4‬‬ ‫‪0\.0‬‬ ‫‪0\.4‬‬ ‫‪0\.0‬‬ ‫‪0\.0‬‬ ‫‪0\.0‬‬ ‫‪0\.0‬‬ ‫‪0\.0‬‬ ‫ع‬ ‫عي الثالث‪ :‬إدار‬ ‫ة المشرو‬ ‫المكون الفر‬ ‫‪7\.7‬‬ ‫*‪0\.3‬‬ ‫‪2\.0‬‬ ‫‪5\.4‬‬ ‫‪1\.0‬‬ ‫‪1\.6‬‬ ‫‪1\.4‬‬ ‫‪3\.0‬‬ ‫ع‬‫المجمو‬ ‫ي إلى‬‫* إجمالي الدعم المقدم من وكالة التعاون األلمانية (‪ )GIZ‬إلى برنامج قØاع المياه (‪ 2\.3‬مليون يورو) والتي صادقت على تقديم تمويل مواز‬ ‫ى (ما يعادل ‪ 0\.3‬مليون دو‬ ‫َلر)‪\.‬‬ ‫مجلس تنظيم قØاع المياه وأعمال تنظيمية أخر‬ ‫‪ \.4‬موجز التقييم‬ ‫ي للكلفة في مقابل الفائدة‪ ،‬أما‬‫ع إلى تحليل الكمي المعيار‬‫ى Øبيعة األعمال التي يمولها المشرو‬‫‪ \.21‬التحليل اَلقتصادي‪َ :‬ل تعز‬ ‫ع فهي‪:‬‬‫األهداف األساسية للمشرو‬ ‫دعم دور سلØØ© المياه الفلسØينية باعتبار‬ ‫ها الجهة التنفيذية إلصالح قØاع المياه‪\.‬‬ ‫‪\.I‬‬ ‫ات الفنية للتحديث الشامل لسياسات سلØØ© المياه الفلسØينية واستر‬ ‫اتيجياتها وأدلتها وأدوات التخØÙŠØ Ø§Ù„ÙÙ†ÙŠâ€¬ ‫تقديم الخبر‬ ‫‪\.II‬‬ ‫فيها‪\.‬‬ ‫البناء المؤسسي لمجلس تنظيم قØاع المياه‪\.‬‬ ‫‪\.III‬‬ ‫تحديد ووضع أعمال بناء القدر‬ ‫ات‪\.‬‬ ‫‪\.IV‬‬ ‫تقدير موثوقاً من النواحي النقدية‪ ،‬حيث تم وضع مفهوم Ø®ØØ© بناء قدر‬ ‫ات قØاع المياه استناداً‬ ‫اً‬ ‫َل يمكن تقدير فوائد هذه األعمال‬ ‫إلى هذا التحليل والتحسينات المتوقعة من ناحية قدر‬ ‫ات سلØØ© المياه الفلسØينية ومجلس تنظيم قØاع المياه من أجل تخØيØ‬ ‫ة غير مباشر‬ ‫ة‪\.‬‬ ‫ومر‬ ‫اقبة وتنظيم هذا القØاع بفعالية‪ ،‬والتي يتوقع أن تؤدي إلى فوائد اقتصادية كبير‬ ‫‪ \.22‬األمور الفنية‪ :‬يستند الدعم اإلضافي لمجلس تنظيم قØاع المياه إلى خارØØ© Øريق مفصلة وخØØ© تمويل لمجلس تنظيم‬ ‫قØاع المياه‪ ،‬حيث تتوقع خارØØ© الØريق وخØØ© التمويل مساهمات المانحين بناء على معدل تنازلي على مدار خمس سنوات‬ ‫من البناء المؤسسي لمجلس تنظيم قØاع المياه‪ ،‬في حين سيتم تمويل المجلس تمويالً تصاعدياً من خالل رسوم موارد المياه‬ ‫ح مجدياً من الناحية اَلقتصادية نظ اً‬ ‫ر لتضمنه في الغالب مساعدات‬ ‫التي نص عليها قانون المياه‪ \.‬يعتبر التمويل اإلضافي المقتر‬ ‫ات على المستوى الوØني في وضع ومر‬ ‫اقبة قØاع المياه‪ ،‬وتم تحديد األعمال التي ستمولها كل من‬ ‫فنية وسلع لتحسين القدر‬ ‫سلØØ© المياه الفلسØينية ومجلس تنظيم قØاع المياه نتيجة لسلسلة من التقارير والتقييمات التي أعدتها شركة استشارية دولية‬ ‫أوصت بوضع هيكلية جديدة لقØاع المياه وتأسيس مجلس لتنظيم قØاع المياه باعتبار‬ ‫ه الØرف الفاعل األساسي الجديد‪\.‬‬ ‫ر‬ ‫ع ولهذا َل يوجد تعديالت على تصنيف الضمانات البيئية‪ ،‬ونظ اً‬‫‪ \.23‬الضمانات البيئية‪َ :‬ل يوجد تعديالت على نØاق المشرو‬ ‫ع إلى ممارسة عالمية‪\.‬‬‫ح فقد تم تحويل المشرو‬‫ع المقتر‬‫لضعف احتمالية اآلثار البيئية واَلجتماعية السلبية المتوقعة من المشرو‬ ‫ه من الفئة (ج) ما لم يتم الحصول على معلومات إضافية وحتى الحصول عليها أو إجر‬ ‫اء‬ ‫ع باعتبار‬‫يستمر تصنيف هذا المشرو‬ ‫ع‪\.‬‬‫ع الذي سيعمل على تعديل تصنيف ضمانات المخاØر الخاصة بالمشرو‬‫تعديالت على تصميم المشرو‬ ‫َلت إلى سياسات البنك‬ ‫َل يوجد تناز‬ ‫‪ \.24‬التوقعات والتناز‬ ‫َلت‪َ :‬ل يوجد توقعات متعلقة بسياسات أو إجر‬ ‫اءات البنك الدولي و‬ ‫ح‪\.‬‬‫ع األصلي أو التمويل اإلضافي المقتر‬‫الدولي سواء بموجب المشرو‬ ‫‪ \.5‬معالجة التظلمات في البنك الدولي‬ ‫ع المدعوم من البنك الدولي تقديم شكاوى إلى اآلليات القائمة‬ ‫‪ \.25‬يمكن للتجمعات واألفر‬ ‫اد الذين يرون أنهم تأثروا سلباً بالمشرو‬ ‫ع أو إلى خدمة معالجة التظلمات في البنك الدولي‪ ،‬حيث تضمن هذه الخدمة استالم‬‫لمعالجة التظلمات على مستوى المشرو‬ ‫اد المتأثر‬ ‫ة تقديم‬ ‫ع‪ \.‬يمكن للتجمعات واألفر‬‫عة من أجل معالجة المخاوف المتعلقة بالمشرو‬‫الشكاوى واَلضØالع عليها بسر‬ ‫شكاويها إلى مجلس تحقيق مستقل في البنك الدولي والذي يحدد مدى الضرر الذي وقع أو الذي يمكن أن يقع نتيجة لعدم التز‬ ‫ام‬ ‫ة إلى البنك الدولي وتمنح إدار‬ ‫ة البنك‬ ‫البنك الدولي بسياساته واجر‬ ‫اءاته‪ \.‬تقدم الشكاوى في أي وقت بعد نشوء المخاوف مباشر‬ ‫جى‬‫فرصة للرد عليها‪ \.‬لمعلومات حول كيفية تقديم الشاوى إلى خدمة معالجة التظلمات المتعلقة بالمؤسسات في البنك الدولي ير‬ ‫زيار‬ ‫ة الموقع (‪ ،)http://www\.worldbank\.org/GRS‬ولمعلومات حول كيفية تقديم شكاوى إلى مجلس تحقيق البنك الدولي‬ ‫يرجى زيار‬ ‫ة الموقع (‪\.)www\.inspectionpanel\.org‬‬  ‫الملحق ‪ :1‬اإلØار العام للنتائج والرقابة‬ ‫ع بناء القدر‬ ‫ات في قØاع المياه (‪)153889‬‬ ‫الضفة الغربية وغز‬ ‫ة‪ :‬التمويل اإلضافي لمشرو‬ ‫ي للتعديالت‬‫المالحظات‪/‬السبب الجوهر‬ ‫مر‬ ‫اجعات على اإلØار العام للنتائج‬ ‫ع‬‫ي للمشرو‬‫الهدف التØوير‬ ‫ح‬‫مقتر‬ ‫ع)‬‫ي (الهيئة المنفذة للمشرو‬‫جار‬ ‫مستمر‪َ \.‬ل يوجد تعديالت‬ ‫يتمثل الهدف في تعزيز قدر‬ ‫ات سلØة‬ ‫المياه الفلسØينية لمزيد من التخØيØ‬ ‫والرقابة والتنظيم الفاعل لقØاع المياه‬ ‫في الضفة الغربية وغز‬ ‫ة‬ ‫ع‬‫ي للمشرو‬ ‫مؤشر‬ ‫ات الهدف التØوير‬ ‫ح*‬‫التعديل المقتر‬ ‫ع)‬‫ي (الهيئة المنفذة للمشرو‬‫جار‬ ‫مستمر‬ ‫‪ \.1‬خØØ© إصالح هذا القØاع ووضع‬ ‫الوثائق والمحدثة سنوياً من قبل سلØة‬ ‫المياه الفلسØينية واللجنة التوجيهية في‬ ‫مجلس الوزر‬ ‫اء‬ ‫مستمر‬ ‫‪ \.2‬تحديث قانون المياه والتشاور بشأنه‬ ‫مع أصحاب المصلحة ومصادقة‬ ‫السلØات المسؤولة عليها‬ ‫مستمر‬ ‫‪ \.3‬سياسة قØاع المياه واَلستر‬ ‫اتيجية‬ ‫المعتمدة من سلØØ© المياه الفلسØينية‬ ‫مستمر‬ ‫‪ \.4‬تحسين قدر‬ ‫ات سلØØ© المياه‬ ‫الفلسØينية والمØبقة بفعالية على النحو‬ ‫الذي تم قياسه بالموظفين الـ‪ 85‬الذين تم‬ ‫تدريبهم ومنهم ‪ 18‬سيدة‪ ،‬والدور‬ ‫ات‬  ‫ي للتعديالت‬‫المالحظات‪/‬السبب الجوهر‬ ‫مر‬ ‫اجعات على اإلØار العام للنتائج‬ ‫التدريبية الـ‪ 14‬التي عقدت‪\.‬‬ ‫منقحة‬ ‫‪ \.5‬تعزيز وتفعيل مجلس تنظيم‬ ‫‪ \.5‬تأسيس مجلس تنظيم قØاع المياه‬ ‫قØاع المياه‬ ‫ووضع Ø®ØØ© عمل‬ ‫ي‬ ‫كان هذا مؤش اً‬ ‫ر متوسØاً تم تعديله ليكون مؤشر هدف تØوير‬ ‫ع ألن مجلس تنظيم قØاع المياه مسؤول عن الرقابة على‬‫للمشرو‬ ‫ع‪\.‬‬‫تقديم الخدمات من مزودي الخدمات وهدفها األساسي من المشرو‬ ‫ع هو تعزيز الجانب الرقابي في‬‫أحد األهداف الجوهرية للمشرو‬ ‫ع األصلي هو قر‬ ‫ار‬ ‫ج األساسي للمشرو‬‫قØاع المياه‪ ،‬وكان المخر‬ ‫السلØØ© الفلسØينية بإنشاء مجلس تنظيم قØاع المياه ولهذا سيساعد‬ ‫التمويل اإلضافي في دعم المجلس ليكون فاعالً‪ ،‬ومن ذلك‬ ‫اَلستمر‬ ‫ار في إعداد اَلحتياجات اللوجستية األساسية (كإيجار‬ ‫ات وغير‬ ‫ها) واستقدام موظفين أساسيين‬ ‫المكاتب واألثاث والتجهيز‬ ‫اءات العمل ومنها اإلفصاح عن المعلومات واجر‬ ‫اءات‬ ‫ووضع إجر‬ ‫التشاور مع أصحاب المصلحة والعمليات واألوضاع التنظيمية التي‬ ‫تتضمن األهداف والمهمة والوظائف المحددة والوصف الوظيفي‬ ‫ونظام الموارد البشرية ورسوم الترخيص التي يبدأ تحصيلها وتنفيذ‬ ‫حمالت توعية جماهيرية لمزودي الخدمات‪\.‬‬ ‫جديدة‬ ‫‪ \.6‬وضع التقارير الرقابية حول أداء‬ ‫مزودي الخدمات ونشر‬ ‫ها بصفة‬ ‫المؤشر‬ ‫ات المعيارية التي وضعها مجلس تنظيم قØاع المياه وأبلغها‬ ‫سنوية‬ ‫لمزودي الخدمات لقياسها وتقديم تقارير بها من المجلس‪ ،‬وينبغي‬ ‫نشر هذه التقارير للجمهور‪\.‬‬ ‫المؤشر‬ ‫ات المتوسØØ© للنتائج‬ ‫ح*‬‫التعديل المقتر‬ ‫ع)‬‫ي (الهيئة المنفذة للمشرو‬‫جار‬ ‫مستمر‬ ‫‪ \.1‬مذكر‬ ‫ة حالة ربع سنوية حول عملية‬ ‫إصالح هذا القØاع‪\.‬‬  ‫ي للتعديالت‬‫المالحظات‪/‬السبب الجوهر‬ ‫مر‬ ‫اجعات على اإلØار العام للنتائج‬ ‫مستمر‬ ‫‪ \.2‬تأسيس سلØØ© مياه فلسØينية تمت إعادة‬ ‫هيكلتها واعادة توزيع موظفيها وتنفيذ وظائفها‬ ‫استناداً إلى الوصف الوظيفي المبين‪\.‬‬ ‫مستمر‬ ‫‪ \.3‬وضع Ø®ØØ© عمل مجلس تنظيم قØاع‬ ‫المياه‬ ‫مستمر‬ ‫‪ \.4‬وضع قاننون داخلي لشركة المياه الوØنية‬ ‫مستمر‬ ‫‪ \.5‬وضع قانون داخلي لمر‬ ‫افق المياه اإلقليمية‬ ‫مستمر‬ ‫‪ \.6‬وضع اَلستر‬ ‫اتيجيات والتشاور بشأنها‬ ‫مستمر‬ ‫‪ \.10‬مر‬ ‫اجعة‪/‬تحديث‪/‬وضع التعليمات‬ ‫واألدلة اإلرشادية والمعايير الفنية‬ ‫مستمر‬ ‫‪ \.8‬وضع الخØØ ÙˆØ£Ø¯ÙˆØ§Øª دعم الخØØ‬ ‫مستمر‬ ‫اء الدر‬ ‫اسات ذات العالقة‬ ‫‪ \.9‬إجر‬ ‫جديدة‬ ‫‪ \.10‬وضع اَلستر‬ ‫اتيجية وخØة‬ ‫التنفيذ الخاصة بمجلس تنظيم قØاع‬ ‫الحاجة إلى استكمال البناء المؤسسي لمؤسسة تنظيمية فاعلة‬ ‫المياه وتنفيذها‬ ‫اتيجية تنمية وخØØ© عمل‪ \.‬تبين هذه الوثيقة استر‬ ‫اتيجية عمل‬ ‫واستر‬ ‫مجلس تنظيم قØاع المياه وخØØ© عمل ذات أهداف واضحة إلى‬ ‫جانب نتائج متوقعة محددة ضمن Ø¥Øار زمني محدد‪\.‬‬ ‫جديدة‬ ‫‪ \.11‬إيجاد وصيانة نظام معلومات‬ ‫مجلس تنظيم قØاع المياه‬ ‫ة عن نظام فاعل يتضمن مجموعة من األجهز‬ ‫ة والبرمجيات‬ ‫عبار‬ ‫والبنية التحتية والØواقم المدربة والمنظمة لتسهيل التخØÙŠØ ÙˆØ§Ù„Ø±Ù‚Ø§Ø¨Ø©â€¬ ‫رر‬ ‫ات في عمليات وتقارير مجلس تنظيم قØاع‬ ‫والتنسيق واتخاذ الق ا‬ ‫المياه‬  ‫ي للتعديالت‬‫المالحظات‪/‬السبب الجوهر‬ ‫مر‬ ‫اجعات على اإلØار العام للنتائج‬ ‫جديدة‬ ‫‪ \.12‬مر‬ ‫اجعة‪/‬تحديث‪/‬وضع اللوائح‬ ‫واألدلة والمعايير والنظم الفنية‬ ‫الوثائق القانونية المتعلقة باللوائح والتي تبين الوظائف والمهام‬ ‫والمسؤوليات األساسية للمجلس وتوجه العناية الواجبة األساسية فيه‪\.‬‬ ‫وثائق العمل التي تشمل تصميم النظام المالي المتبع في مجلس‬ ‫تنظيم قØاع المياه (هيكل الموازنة والتعليمات المحاسبية) والنظام‬ ‫ي ولوائح الموارد البشرية وخØÙˆØ Ø§Ù„ØªÙˆØ§ØµÙ„ ومن ثم "اللوائح‬‫اإلدار‬ ‫الداخلية لمجلس اإلدار‬ ‫ة"‪\.‬‬ ‫قد يتضمن هذا‪ :‬إجر‬ ‫اءات الرقابة على ترتيبات إمدادات المياه‬ ‫ومعايير جودة إمدادات المياه والصرف الصحي واجر‬ ‫اءات ترخيص‬ ‫مصانع تعبئة المياه وصهاريج المياه والتحلية وترخيص مصانع‬ ‫التقØير ومصانع المعالجة‪ ،‬واجر‬ ‫اءات الرقابة على معايير الجودة‬ ‫واجر‬ ‫اءات وضع أهداف األداء الفردية لمزودي الخدمات واإلفصاح‬ ‫عن المعلومات للجمهور ونظام الشكاوى ووضع نظام للحوافز‪\.‬‬ ‫جديدة‬ ‫‪ ,13‬وضع الخØØ ÙˆØ§Ø¥Ù„Ø¬Ø±â€¬ ‫اءات‬ ‫يستكمل هذا وظيفة المؤسسة عن Øريق وضع Ø®ØØ ÙˆØ§Ø¬Ø±â€¬ ‫اءات‬ ‫فنية محددة كخØØ© التواصل وحملة التوعية الجماهيرية واجر‬ ‫اءات‬ ‫الرقابة على إمدادات المياه والصرف الصحي واجر‬ ‫اءات الترخيص‬ ‫ومعايير ومؤشر‬ ‫ات الجودة واألداء‪\.‬‬  ‫ع‪:‬‬‫ي للمشرو‬‫الهدف التØوير‬ ‫ات سلØØ© المياه الفلسØينية لمزيد من التخØÙŠØ ÙˆØ§Ù„Ø±Ù‚Ø§Ø¨Ø© والتنظيم الفاعل لتØوير قØاع المياه في الضفة الغربية وغز‬ ‫ة‪\.‬‬ ‫يتمثل في تعزيز قدر‬ ‫المسؤولية‬ ‫مصادر‬ ‫التكر‬ ‫ار‬ ‫اكمية لألهداف‬ ‫القيم التر‬ ‫سير العمل‬ ‫بداية‬ ‫وحدة‬ ‫مؤشر‬ ‫ات النتائج على مستوى‬ ‫جوهر‬ ‫عن جمع‬ ‫البيانات‪/‬الم‬ ‫حتى تاريخه‬ ‫ع‬‫المشرو‬ ‫القياس‬ ‫ع‬‫ي للمشرو‬‫الهدف التØوير‬ ‫ي‬ ‫‪2017‬‬ ‫‪2016‬‬ ‫‪2015‬‬ ‫البيانات‬ ‫نهجية‬ ‫(‪)2014‬‬ ‫اْلصلي‬ ‫اْلساسي‬ ‫(‪)2011‬‬ ‫سلØة‬ ‫تقرير سير‬ ‫نصف‬ ‫نعم‬ ‫نعم‬ ‫نعم‬ ‫نعم‬ ‫َل‬ ‫نعم‪َ/‬ل‬ ‫‪ \.1‬وضع Ø®ØØ© إصالح هذا‬ ‫المياه‬ ‫العمل‬ ‫سنوي‬ ‫القØاع وتحديثها واعتمادها‬ ‫الفلسØينية‬ ‫لسلØØ© المياه‬ ‫سنويا‬ ‫ً من سلØØ© المياه‬ ‫الفلسØينية‬ ‫الفلسØينية واللجنة التوجيهية في‬ ‫مجلس الوزر‬ ‫اء‬ ‫سلØة‬ ‫تقرير سير‬ ‫نصف‬ ‫نعم‬ ‫نعم‬ ‫نعم‬ ‫نعم‬ ‫َل‬ ‫نعم‪َ/‬ل‬ ‫‪ \.2‬تحديث قانون المياه والتشاور‬ ‫المياه‬ ‫العمل‬ ‫سنوي‬ ‫بشأنه مع أصحاب المصلحة‬ ‫الفلسØينية‬ ‫لسلØØ© المياه‬ ‫واعتماده من السلØات المسؤولة‬ ‫الفلسØينية‬ ‫سلØة‬ ‫تقرير سير‬ ‫نصف‬ ‫نعم‬ ‫نعم‬ ‫نعم‬ ‫نعم‬ ‫َل‬ ‫نعم‪َ/‬ل‬ ‫اتيجية‬ ‫‪ \.3‬اعتماد سياسة واستر‬ ‫المياه‬ ‫العمل‬ ‫سنوي‬ ‫قØاع المياه من سلØØ© المياه‬ ‫الفلسØينية‬ ‫لسلØØ© المياه‬ ‫الفلسØينية‬ ‫الفلسØينية‬  ‫مجلس‬ ‫تقرير سير‬ ‫نصف‬ ‫‪ \.1‬بدء تحصيل رسوم‬ ‫‪ \.1‬اعتماد الهيكل التنظيمي‬ ‫‪ \.1‬تعيين موظفين أساسيين‬ ‫إصدار‬ ‫َل‬ ‫َل‬ ‫‪ \.5‬تعزيز وتفعيل مجلس تنظيم‬ ‫تنظيم قØاع‬ ‫العمل في‬ ‫الترخيص‬ ‫ورئيس تنفيذي‬ ‫مرسوم‬ ‫سنوي‬ ‫والوصف الوظيفي من مجلس‬ ‫قØاع المياه‪\.‬‬ ‫المياه‬ ‫مجلس تنظيم‬ ‫حكومي‬ ‫‪ \.2‬تنفيذ حمالت توعية عامة‬ ‫اإلدار‬ ‫ة‪\.‬‬ ‫‪ \.2‬استئجار مكتب وتجهيز‬ ‫ه‬ ‫قØاع المياه‬ ‫وتعييين‬ ‫لمزودي الخدمات‬ ‫وتأثيثه‬ ‫‪ \.2‬اعتماد األدلة اإلرشادية‬ ‫مجلس إدار‬ ‫ة‬ ‫من مجلس اإلدار‬ ‫ة‪\.‬‬ ‫‪ \.3‬وضع الهيكل التنظيمي‬ ‫والوصف الوظيفي‬ ‫‪ \.3‬تعيين جميع الموظفين‪\.‬‬ ‫‪ \.4‬وضع أدلة الموارد البشرية‬ ‫‪ \.5‬وضع اللوائح الداخلية‬ ‫‪ \.5‬وضع خارØØ© الØريق‬ ‫للتر‬ ‫اخيص واعتمادها‪\.‬‬ ‫َلستكمال التأسيس واعتمادها‬ ‫‪ \.4‬تخØÙŠØ Ø­Ù…Ù„Ø© التوعية‬ ‫من مجلس اإلدار‬ ‫ة‪\.‬‬ ‫الجماهيرية‪\.‬‬ ‫مجلس‬ ‫تقارير مجلس‬ ‫سنوي‬ ‫وضع التقرير ونشر‬ ‫ه واإلعالن‬ ‫وضع المؤشر‬ ‫ات والمقاييس‬ ‫‪0‬‬ ‫‪0‬‬ ‫وثيقة‬ ‫‪ \.6‬وضع التقارير الرقابية حول‬ ‫تنظيم قØاع‬ ‫تنظيم قØاع‬ ‫عنه‬ ‫أداء مزودي الخدمات ونشر‬ ‫ها‬ ‫المياه‬ ‫المياه‬ ‫سنويا‬ ‫ً‬  ‫ع‬‫اإلØار العام المنقح لنتائج المشرو‬ ‫النتائج والمؤشر‬ ‫ات المتوسØة‬ ‫المسؤولية‬ ‫مصادر‬ ‫التكر‬ ‫ار‬ ‫القيم المستهدفة‬ ‫سير العمل حتى‬ ‫بداية‬ ‫وحدة‬ ‫النتائج والمؤشر‬ ‫ات المتوسØة‬ ‫جوهرية‬ ‫عن جمع‬ ‫البيانات‪/‬الم‬ ‫تاريخه (‪)2014‬‬ ‫ع‬‫المشرو‬ ‫القياس‬ ‫‪2017‬‬ ‫‪2016‬‬ ‫‪2015‬‬ ‫البيانات‬ ‫نهجية‬ ‫اْلصلي‬ ‫اْلساسي‬ ‫(‪)2011‬‬ ‫ي والمساعدة الفنية وبناء قدر‬ ‫ات سلØØ© المياه الفلسØينية‬ ‫النتيجة المتوسØØ© ‪ :1‬وضع أجندة إصالح قØاع المياه من خالل المكون اْلول‪ :‬الدعم اَلستشار‬ ‫سلØØ© المياه‬ ‫تقرير سير‬ ‫نصف‬ ‫نعم‬ ‫نعم‬ ‫نعم‬ ‫نعم‬ ‫َل‬ ‫َل‬ ‫ة الحالة ربع‬ ‫‪ \.1‬تقديم مذكر‬ ‫الفلسØينية‬ ‫العمل‬ ‫سنوي‬ ‫السنوية حول إصالح هذا القØاع‬ ‫لسلØØ© المياه‬ ‫الفلسØينية‬ ‫سلØØ© المياه‬ ‫تقرير سير‬ ‫نصف‬ ‫نعم‬ ‫نعم‬ ‫نعم‬ ‫نعم‬ ‫َل‬ ‫وثيقة‬ ‫‪ \.2‬تأسيس سلØØ© مياه فلسØينية‬ ‫الفلسØينية‬ ‫العمل‬ ‫سنوي‬ ‫أساسية‬ ‫ذات هيكلية جديدة واعادة توزيع‬ ‫لسلØØ© المياه‬ ‫موظفيها وتنفيذ أعمالها استنادا‬ ‫ً‬ ‫الفلسØينية‬ ‫إلى الوصف الوظيفي المبين‬ ‫سلØØ© المياه‬ ‫تقرير سير‬ ‫نصف‬ ‫نعم‬ ‫نعم‬ ‫َل‬ ‫َل‬ ‫َل‬ ‫وثيقة‬ ‫‪ \.3‬وضع لوائح داخلية لشكة‬ ‫الفلسØينية‬ ‫العمل‬ ‫سنوي‬ ‫أساسية‬ ‫المياه الوØنية‬ ‫لسلØØ© المياه‬ ‫الفلسØينية‬ ‫سلØØ© المياه‬ ‫تقرير سير‬ ‫نصف‬ ‫نعم‬ ‫نعم‬ ‫َل‬ ‫َل‬ ‫َل‬ ‫وثيقة‬ ‫‪ \.4‬وضع لوائح داخلية لمر‬ ‫افق‬ ‫العمل‬  ‫النتائج والمؤشر‬ ‫ات المتوسØة‬ ‫المسؤولية‬ ‫مصادر‬ ‫التكر‬ ‫ار‬ ‫القيم المستهدفة‬ ‫سير العمل حتى‬ ‫بداية‬ ‫وحدة‬ ‫النتائج والمؤشر‬ ‫ات المتوسØة‬ ‫جوهرية‬ ‫عن جمع‬ ‫البيانات‪/‬الم‬ ‫تاريخه (‪)2014‬‬ ‫ع‬‫المشرو‬ ‫القياس‬ ‫‪2017‬‬ ‫‪2016‬‬ ‫‪2015‬‬ ‫البيانات‬ ‫نهجية‬ ‫اْلصلي‬ ‫اْلساسي‬ ‫(‪)2011‬‬ ‫الفلسØينية‬ ‫لسلØØ© المياه‬ ‫سنوي‬ ‫أساسية‬ ‫المياه اإلقليمية‬ ‫الفلسØينية‬ ‫ي والمساعدة الفنية وبناء قدر‬ ‫ات سلØØ© المياه الفلسØينية‬ ‫ات سلØØ© المياه الفلسØينية نمن خالل المكون األول‪ :‬الدعم اَلستشار‬ ‫‪ \.2‬النتيجة المتوسØØ© ‪ :2‬تحسين قدر‬ ‫سلØØ© المياه‬ ‫تقرير سير‬ ‫نصف‬ ‫‪9‬‬ ‫‪8‬‬ ‫‪7‬‬ ‫‪3‬‬ ‫‪0‬‬ ‫العدد‬ ‫اتيجيات والتشاور‬ ‫‪ \.3‬وضع اَلستر‬ ‫الفلسØينية‬ ‫العمل‬ ‫سنوي‬ ‫بشأنها‬ ‫لسلØØ© المياه‬ ‫تشمل اَلتسر‬ ‫اتيجيات‬ ‫اتيجيات‬ ‫تشمل اَلتسر‬ ‫اتيجيات‬ ‫تشمل اَلتسر‬ ‫تشمل اَلتسر‬ ‫اتيجيات‬ ‫الفلسØينية‬ ‫‪ \.1‬التوعية الجماهيرية ومشاركة‬ ‫‪ \.1‬عبر الحدود‬ ‫‪ \.1‬وضع القدر‬ ‫ات‬ ‫‪ \.1‬التمويل المستدام‬ ‫المواØنين‬ ‫‪ \.2‬التخلص من الØمي‬ ‫‪ \.2‬خدمات المياه‬ ‫غير الربحية‬ ‫‪ \.3‬الخØØ© اَلستر‬ ‫اتيجية‬ ‫لسلØØ© المياه الفلسØينية‬ ‫‪ \.3‬التواصل‬ ‫(‪)2017-2015‬‬ ‫‪ \.4‬السياسة العامة لمبادئ‬ ‫ومفاهيم إدار‬ ‫ة الØلب على‬ ‫المياه‬  ‫النتائج والمؤشر‬ ‫ات المتوسØة‬ ‫المسؤولية‬ ‫مصادر‬ ‫التكر‬ ‫ار‬ ‫القيم المستهدفة‬ ‫سير العمل حتى‬ ‫بداية‬ ‫وحدة‬ ‫النتائج والمؤشر‬ ‫ات المتوسØة‬ ‫جوهرية‬ ‫عن جمع‬ ‫البيانات‪/‬الم‬ ‫تاريخه (‪)2014‬‬ ‫ع‬‫المشرو‬ ‫القياس‬ ‫‪2017‬‬ ‫‪2016‬‬ ‫‪2015‬‬ ‫البيانات‬ ‫نهجية‬ ‫اْلصلي‬ ‫اْلساسي‬ ‫(‪)2011‬‬ ‫سلØØ© المياه‬ ‫تقرير سير‬ ‫نصف‬ ‫‪14‬‬ ‫‪12‬‬ ‫‪9‬‬ ‫‪6‬‬ ‫‪0‬‬ ‫العدد‬ ‫اجعة‪/‬تحديث‪/‬وضع اللوائح‬ ‫‪ \.6‬مر‬ ‫الفلسØينية‬ ‫العمل‬ ‫سنوي‬ ‫واألدلة والمعايير الفنية‬ ‫لسلØØ© المياه‬ ‫تعليمات سلØØ© المياه‬ ‫تعليمات سلØØ© المياه‬ ‫‪ \.1‬األدلة الفنية‬ ‫الفلسØينية‬ ‫الفلسØينية حول‪:‬‬ ‫الفلسØينية حول‪:‬‬ ‫ع‬ ‫لوحدة إدار‬ ‫ة المشرو‬ ‫‪ \.1‬أدلة خدمات التسعير‬ ‫‪ \.1‬التعرفة الموحدة للمياه‬ ‫‪ \.1‬التنقيب عن مصادر‬ ‫‪ \.2‬األدلة المالية‬ ‫‪ \.2‬حماية مصادر ومر‬ ‫افق المياه‬ ‫والمياه العادمة ورسوم خدمات‬ ‫المياه واستخر‬ ‫اجها‬ ‫ع‬ ‫لوحدة إدار‬ ‫ة المشرو‬ ‫التوصيل‬ ‫‪ \.2‬ترخيص مزودي‬ ‫‪ \.3‬معايير جودة‬ ‫‪ \.2‬الموصافات وأدلة التصميم‬ ‫الخدمات‬ ‫مياه الشرب‬ ‫المحدثة لقØاع المياه والمياه‬ ‫‪ \.3‬أدلة سلØØ© المياه‬ ‫‪ \.4‬تعليمات سلØة‬ ‫العادمة‬ ‫الفلسØينية حول األمور‬ ‫المياه الفلسØينية‬ ‫‪ \.3‬إجر‬ ‫اءات العمل المعيارية‬ ‫المالية واإلدارية‬ ‫حول تعرفة المياه‬ ‫الخاصة بسلØØ© المياه‬ ‫‪ \.5‬تعليمات سلØة‬ ‫الفلسØينية‬ ‫المياه الفلسØينية‬ ‫حول الوصالت‬ ‫المنزلية‬ ‫‪ \.6‬أدلة سلØØ© المياه‬ ‫الفلسØينية حول‬  ‫النتائج والمؤشر‬ ‫ات المتوسØة‬ ‫المسؤولية‬ ‫مصادر‬ ‫التكر‬ ‫ار‬ ‫القيم المستهدفة‬ ‫سير العمل حتى‬ ‫بداية‬ ‫وحدة‬ ‫النتائج والمؤشر‬ ‫ات المتوسØة‬ ‫جوهرية‬ ‫عن جمع‬ ‫البيانات‪/‬الم‬ ‫تاريخه (‪)2014‬‬ ‫ع‬‫المشرو‬ ‫القياس‬ ‫‪2017‬‬ ‫‪2016‬‬ ‫‪2015‬‬ ‫البيانات‬ ‫نهجية‬ ‫اْلصلي‬ ‫اْلساسي‬ ‫(‪)2011‬‬ ‫التخØÙŠØ ÙˆØ§Ù„ØªØµÙ…ÙŠÙ…â€¬ ‫سلØØ© المياه‬ ‫تقرير سير‬ ‫نصف‬ ‫‪16‬‬ ‫‪14‬‬ ‫‪10‬‬ ‫‪6‬‬ ‫‪0‬‬ ‫العدد‬ ‫‪ \.7‬وضع الخØØ ÙˆØ£Ø¯ÙˆØ§Øª دعم‬ ‫الفلسØينية‬ ‫العمل‬ ‫سنوي‬ ‫التخØيØ‬ ‫لسلØØ© المياه‬ ‫‪ \.1‬خØØ© (العمل) التنفيذية‬ ‫‪ \.1‬خØØ© التواصل قيد‬ ‫‪ \.1‬وضع تدابير‬ ‫الفلسØينية‬ ‫لسلØØ© المياه الفلسØينية لسنة‬ ‫التنفيذ‬ ‫لتخفيف أثر التغير‬ ‫‪ \.1‬الخØØ© الةØنية لألمن المائي‬ ‫‪2016‬‬ ‫المناخي‬ ‫‪ \.2‬خØØ© (العمل) التنفيذية‬ ‫‪ \.2‬خØØ© (العمل) التنفيذية لسلØة‬ ‫‪ \.2‬وضع Ø®ØØ© عمل التوعية‬ ‫لسلØØ© المياه الفلسØينية‬ ‫‪ \.2‬وضع نماذج‬ ‫المياه الفلسØينية لسنة ‪2017‬‬ ‫الجماهيرية‬ ‫لسنة ‪2015‬‬ ‫تقييم المياه السØحية‬ ‫والمياه الجوفية‬ ‫‪ \.3‬وضع قاعدة بيانات رخص‬ ‫‪ \.3‬تصميم نظام‬ ‫الحفر والتنقيب‬ ‫المعلومات المائية ووضعه‬ ‫‪ \.3‬وضع تقييم‬ ‫قيد التنفيذ‬ ‫معدات الرقابة‬ ‫‪ \.4‬وضع Ø®ØØ© الشكاوى‬ ‫المائية ومواصفاتها‬ ‫‪ \.4‬تحسين نظام الموارد‬ ‫البشرية الخاص بسلØة‬ ‫‪ \.4‬وضع النماذج‬ ‫المياه الفلسØينية‬ ‫والخØØ Ø§Ù„Ù…Ù†Ù‡Ø¬ÙŠØ©â€¬ ‫المعيارية‬ ‫‪ \.5‬وضع الشروØ‬  ‫النتائج والمؤشر‬ ‫ات المتوسØة‬ ‫المسؤولية‬ ‫مصادر‬ ‫التكر‬ ‫ار‬ ‫القيم المستهدفة‬ ‫سير العمل حتى‬ ‫بداية‬ ‫وحدة‬ ‫النتائج والمؤشر‬ ‫ات المتوسØة‬ ‫جوهرية‬ ‫عن جمع‬ ‫البيانات‪/‬الم‬ ‫تاريخه (‪)2014‬‬ ‫ع‬‫المشرو‬ ‫القياس‬ ‫‪2017‬‬ ‫‪2016‬‬ ‫‪2015‬‬ ‫البيانات‬ ‫نهجية‬ ‫اْلصلي‬ ‫اْلساسي‬ ‫(‪)2011‬‬ ‫المرجعية للخØة‬ ‫الرئيسية لمنØقة‬ ‫شمال وشمال شرق‬ ‫الشفة الغربية‬ ‫‪\.6‬وضع Ø®Øة‬ ‫التواصل‬ ‫سلØØ© المياه‬ ‫تقرير سير‬ ‫نصف‬ ‫‪1‬‬ ‫‪1‬‬ ‫‪1‬‬ ‫‪1‬‬ ‫‪0‬‬ ‫العدد‬ ‫اء الدر‬ ‫اسات ذات العالقة‬ ‫‪ \.8‬إجر‬ ‫الفلسØينية‬ ‫العمل‬ ‫سنوي‬ ‫تقييم الخبر‬ ‫ات اإلقليمية المكتسبة‬ ‫تقييم الخبر‬ ‫ات اإلقليمية‬ ‫تقييم الخبر‬ ‫ات اإلقليمية‬ ‫تقييم الخبر‬ ‫ات‬ ‫لسلØØ© المياه‬ ‫حول معالجة المياه العادمة واعاة‬ ‫المكتسبة حول معالجة المياه‬ ‫المكتسبة حول معالجة‬ ‫اإلقليمية المكتسبة‬ ‫الفلسØينية‬ ‫استخدامها ومعالجة الØمي‬ ‫العادمة واعاة استخدامها‬ ‫المياه العادمة واعاة‬ ‫حول معالجة المياه‬ ‫ومعالجة الØمي‬ ‫استخدامها ومعالجة الØمي‬ ‫العادمة واعاة‬ ‫استخدامها ومعالجة‬ ‫الØمي‬ ‫سلØØ© المياه‬ ‫تقرير سير‬ ‫نصف‬ ‫تدريب ‪ 85‬موظف (‪ 18‬سيدة)‬ ‫تدريب ‪ 70‬موظف (‪14‬‬ ‫تدريب ‪ 50‬موظف (‪10‬‬ ‫تدريب ‪ 35‬موظف‬ ‫‪0‬‬ ‫العدد‬ ‫‪ \.9‬تØبيق تحسين قدر‬ ‫ات سلØة‬ ‫الفلسØينية‬ ‫العمل‬ ‫سنوي‬ ‫وعقد ‪ 18‬دور‬ ‫ة تدريبية‬ ‫سيدة) وعقد ‪ 12‬دور‬ ‫ة تدريبية‬ ‫سيدة) وعقد ‪ 6‬دور‬ ‫ة تدريبية‬ ‫(‪ 8‬سيدة) وعقد ‪4‬‬ ‫المياه الفلسØينية بفاعلية على‬ ‫لسلØØ© المياه‬ ‫دور‬ ‫ة تدريبية‬ ‫النحو الذي تم قياسه من قبل‬  ‫النتائج والمؤشر‬ ‫ات المتوسØة‬ ‫المسؤولية‬ ‫مصادر‬ ‫التكر‬ ‫ار‬ ‫القيم المستهدفة‬ ‫سير العمل حتى‬ ‫بداية‬ ‫وحدة‬ ‫النتائج والمؤشر‬ ‫ات المتوسØة‬ ‫جوهرية‬ ‫عن جمع‬ ‫البيانات‪/‬الم‬ ‫تاريخه (‪)2014‬‬ ‫ع‬‫المشرو‬ ‫القياس‬ ‫‪2017‬‬ ‫‪2016‬‬ ‫‪2015‬‬ ‫البيانات‬ ‫نهجية‬ ‫اْلصلي‬ ‫اْلساسي‬ ‫(‪)2011‬‬ ‫الفلسØينية‬ ‫الموظفين الذيم تم تدريبهم (‪)85‬‬ ‫ومنهم ‪ 18‬سيدة والدور‬ ‫ات‬ ‫التدريبية الـ‪ 14‬التي تم عقدها‬ ‫بناء مجلس تنظيم قØاع المياه‬ ‫مجلس تنظيم‬ ‫تقرير سير‬ ‫نصف‬ ‫نعم‬ ‫نعم‬ ‫َل‬ ‫َل‬ ‫َل‬ ‫نعم‪َ/‬ل‬ ‫‪ \.10‬وضع وتØبيق الخØة‬ ‫قØاع المياه‬ ‫العمل في‬ ‫سنوي‬ ‫اَلستر‬ ‫اتيجية وخØØ© العمل في‬ ‫مجلس تنظيم‬ ‫مجلس تنظيم قØاع المياه‬ ‫قØاع المياه‬ ‫مجلس تنظيم‬ ‫تقرير سير‬ ‫نصف‬ ‫نعم‬ ‫نعم‬ ‫نعم‬ ‫َل‬ ‫َل‬ ‫نعم‪َ/‬ل‬ ‫‪ \.11‬إنشاء وصيانة نظام‬ ‫قØاع المياه‬ ‫العمل في‬ ‫سنوي‬ ‫المعلومات في مجلس تنظيم‬ ‫مجلس تنظيم‬ ‫قØاع المياه‬ ‫قØاع المياه‬ ‫مجلس تنظيم‬ ‫تقرير سير‬ ‫نصف‬ ‫‪11‬‬ ‫‪10‬‬ ‫‪5‬‬ ‫‪0‬‬ ‫‪0‬‬ ‫العدد‬ ‫اجعة وتحديث ووضع‬ ‫‪ \.12‬مر‬ ‫قØاع المياه‬ ‫العمل في‬ ‫سنوي‬ ‫اللوائح والمعايير واألدلة واألنظمة‬ ‫مجلس تنظيم‬ ‫‪ \.1‬التعليمات المتعلقة‬ ‫تعليمات حول‪:‬‬ ‫المالية ‪\.‬‬ ‫قØاع المياه‬ ‫بالترقيات‬ ‫‪ \.1‬وضع نظام الشكاوى‬ ‫ي‬‫‪ \.1‬النظام المالي واإلدار‬  ‫النتائج والمؤشر‬ ‫ات المتوسØة‬ ‫المسؤولية‬ ‫مصادر‬ ‫التكر‬ ‫ار‬ ‫القيم المستهدفة‬ ‫سير العمل حتى‬ ‫بداية‬ ‫وحدة‬ ‫النتائج والمؤشر‬ ‫ات المتوسØة‬ ‫جوهرية‬ ‫عن جمع‬ ‫البيانات‪/‬الم‬ ‫تاريخه (‪)2014‬‬ ‫ع‬‫المشرو‬ ‫القياس‬ ‫‪2017‬‬ ‫‪2016‬‬ ‫‪2015‬‬ ‫البيانات‬ ‫نهجية‬ ‫اْلصلي‬ ‫اْلساسي‬ ‫(‪)2011‬‬ ‫‪ \.2‬إجر‬ ‫اءات العمل المعيارية‬ ‫لمجلس تنظيم قØاع المياه‬ ‫‪ \.3‬إجر‬ ‫اءات المشتريات‬ ‫‪ \.2‬اللوائح الداخلية‬ ‫‪ \.4‬األنظمة التشغيلية‬ ‫األنظمة حول‪:‬‬ ‫(الترخيص والشكاوى وغير‬ ‫ها)‬ ‫‪ \.3‬النظام المالي‬ ‫‪ \.5‬نظام المعلومات‬ ‫‪ \.4‬نظام الموارد البشرية‬ ‫الجماهيرية‬ ‫ي‬‫‪ \.5‬النظام اإلدار‬ ‫مجلس تنظيم‬ ‫تقرير سير‬ ‫نصف‬ ‫‪8‬‬ ‫‪5‬‬ ‫‪2‬‬ ‫‪0‬‬ ‫‪0‬‬ ‫العدد‬ ‫‪ \.13‬وضع الخØØ ÙˆØ§Ø¥Ù„Ø¬Ø±â€¬ ‫اءات‬ ‫قØاع المياه‬ ‫العمل في‬ ‫سنوي‬ ‫مجلس تنظيم‬ ‫إجر‬ ‫اءات حول‬ ‫‪ \.1‬خØØ© التواصل‬ ‫قØاع المياه‬ ‫‪ \.1‬إجر‬ ‫اءات الترخيص‬ ‫‪ \.1‬إجر‬ ‫اءات الرقابة على‬ ‫‪ \.2‬وضع حملة التوعية‬ ‫المياه العادمة‬ ‫‪ \.2‬أهداف األداء الفردية‬ ‫‪ \.2‬إجر‬ ‫اءات الرقابة على‬ ‫‪ \.3‬نظام الحوافز لمزودي‬ ‫إمدادات المياه‬ ‫الخدمات‬  ‫النتائج والمؤشر‬ ‫ات المتوسØة‬ ‫المسؤولية‬ ‫مصادر‬ ‫التكر‬ ‫ار‬ ‫القيم المستهدفة‬ ‫سير العمل حتى‬ ‫بداية‬ ‫وحدة‬ ‫النتائج والمؤشر‬ ‫ات المتوسØة‬ ‫جوهرية‬ ‫عن جمع‬ ‫البيانات‪/‬الم‬ ‫تاريخه (‪)2014‬‬ ‫ع‬‫المشرو‬ ‫القياس‬ ‫‪2017‬‬ ‫‪2016‬‬ ‫‪2015‬‬ ‫البيانات‬ ‫نهجية‬ ‫اْلصلي‬ ‫اْلساسي‬ ‫(‪)2011‬‬ ‫‪ \.3‬معايير الجودة‬ ‫‪ \.4‬نظام الشكاوى‬ ‫تØبيق حملة التوعية‬ ‫الملحق ‪ :2‬أداة تصنيف مخاØر العمليات المنهجية‬ ‫التصنيف‬ ‫فئة الخØر‬ ‫مرتفع‬ ‫سياسي وحوكمة‬ ‫مرتفع‬ ‫االقتصاد الكلي‬ ‫معتدل‬ ‫االستراتيجيات والسياسات الخاصة بهذا القØاع‬ ‫معتدل‬ ‫التصميم الفني للمشروع أو البرنامج‬ ‫كبير‬ ‫القدرات المؤسسية للتنفيذ واالستدامة‬ ‫معتدل‬ ‫ائتماني‬ ‫منخفض‬ ‫بيئي واجتماعي‬ ‫كبير‬ ‫أصحاب المصلحة‬ ‫أخرى‬ ‫كبير‬ ‫المجموع‬  ‫ع المعدلة أو الجديدة‬‫الملحق ‪ :3‬وصف مفصل ْلعمال المشرو‬ ‫األعمال األساسية اإلضافية بموجب التمويل اإلضافي‪:‬‬ ‫ي والمساعدة الفنية وبناء قدر‬ ‫ات سلØØ© المياه الفلسØينية (الموازنة التقديرية ‪ 2\.04‬مليون دو‬ ‫َلر)‪:‬‬ ‫المكون اْلول‪ :‬الدعم اَلستشار‬ ‫َلر (وكالة التنمية الفرنسية‪ :‬ما يعادل ‪ 0\.148‬مليون دو‬ ‫َلر ‪ -‬صندوق‬ ‫ع األصلي ‪ 1\.34‬مليون دو‬‫يتضمن ما تبقى من المشرو‬ ‫َلر ‪ -‬الصندوق اَلئتماني للضفة الغربية وغز‬ ‫ة‪:‬‬ ‫الشر‬ ‫اكة اإلئتماني متعدد المانحين لتØوير البنية التحتية‪ 0\.976 :‬مليون دو‬ ‫َلر – التمويل اإلضافي‪ 0\.7 :‬مليون دو‬ ‫َلر)‪\.‬‬ ‫‪ 0\.22‬مليون دو‬ ‫تدعم المهمة األساسية سلØØ© المياه الفلسØينية في تØبيق األعمال المنفذة في عملية إصالح قØاع المياه وخاصة المر‬ ‫اجعة‬ ‫المؤسسية لقØاع المياه وتوصيات تنظيم هيكلية قØاع المياه والمساعدة الفنية المقدمة إلى سلØØ© المياه الفلسØينية‪ \.‬تØبق سلØة‬ ‫ع التي تأسست لهذه الغاية‪ ،‬وتدعم شركة‪/‬ات الخدمات اَلستشارية‬‫المياه الفلسØينية هذا المكون من خالل وحدة تنفيذ المشرو‬ ‫واألفر‬ ‫اد‪ 2‬هذا المكون لتØبيق أعماله‪ ،‬ويتضمن هذا المكون ما يلي على سبيل المثال َل الحصر‪:‬‬ ‫(Ø£) وضع Ø®ØØ© تنمية استر‬ ‫اتيجية لسلØØ© المياه الفلسØينية وخØØ Ø¹Ù…Ù„ لألعوام ‪ 2017-2015‬وتØبيقها‪\.‬‬ ‫(ب) تحديث الهيكل التنظيمي والوصف الوظيفي واعادة توزيع الموظفين وتدريبهم في سلØØ© المياه الفلسØينية لتحسين‬ ‫اتها‪ ،‬إلى جانب المر‬ ‫اجعة مع اَلهتمام على وجه الخصوص بتدريب موظفي السلØØ© واَلحتياجات التدريبية ووضع‬ ‫قدر‬ ‫ات وخØØ Ø§Ù„Ø¹Ù…Ù„ والموازنات ذات العالقة‪ ،‬كما تتضمن تØبيق Ø®ØØ Ø¹Ù…Ù„ بناء القدر‬ ‫ات استناداً إلى‬ ‫بر‬ ‫امج بناء القدر‬ ‫الموازنة المتاحة‪ ،‬وبناء القد ا‬ ‫رت والنظم والمنهجيات في سلØØ© المياه الفلسØينية لتحسين التواصل والتنسيق الداخلي‬ ‫والخارجي بين أصحاب العالقة األساسيين المحليين والدوليين في هذا القØاع‪ ،‬وبناء قدر‬ ‫ات سلØØ© المياه الفلسØينية‬ ‫في النماذج المالية باتجاه التخØÙŠØ Ù…ØªØ¹Ø¯Ø¯ األعوام لر‬ ‫أس المال وكذلك الموازنات الجارية‪\.‬‬ ‫اتيجيات واإلجر‬ ‫اءات الالزمة (كالتمويل المستدام والتخلص من الØمي والسياسة‬ ‫(ت) تحديث ووضع السياسات واَلستر‬ ‫ة الØلب على المياه والتوعية الجماهيرية ومشاركة المواØنين وغير‬ ‫ها)‪\.‬‬ ‫العامة لمفاهيم ومبادئ إدار‬ ‫(Ø«) إستكمال وتحديث اللوائح والتعليمات واألدلة اإلرشادية والمواصفات الالزمة لتعزيز إعادة هيكلة وتنمية هذا القØاع‬ ‫(مثل لوائح شركة المياه الوØنية ولوائح مر‬ ‫افق المياه اإلقليمية)‪\.‬‬ ‫(ج) تحديث ووضع اللوائح واألدلة اإلرشادية والمعايير الفنية (مثل التنقيب عن مصادر المياه واستخر‬ ‫اجها وحماية مصادر‬ ‫خيص مقدمي الخدمات والتعرفة الموحدة للمياه والمياه العادمة ورسوم إيصال الخدمات وأدلة سلØة‬ ‫ومر‬ ‫افق المياه وتر‬ ‫ة وخدمات التسعير واجر‬ ‫اءات العمل المعيارية لسلØØ© المياه‬ ‫المياه الفلسØينية والتخØÙŠØ ÙˆØ§Ù„ØªØµÙ…ÙŠÙ… والتمويل واإلدار‬ ‫الفلسØينية والمواصفات المحدثة لقØاع المياه والمياه العادمة وأدلة التصميم وغير‬ ‫ها)‪\.‬‬ ‫‪2‬‬ ‫ي في المرحلة الثانية نظ اً‬ ‫ر َلنتهاء مدة عقد هذا الفريق في المرحلة األولى قبل استكمال جميع الدعم الفني‬ ‫سيتم استخدام فريق تخØÙŠØ ÙÙ†ÙŠ واستشار‬ ‫َل يز‬ ‫ال باإلمكان تنفيذ بعض األعمال بموجب الخدمات اَلستشارية المنفردة (وبعضها خاضع بالفعل لعملية‬ ‫الالزم المقدم لسلØØ© المياه الفلسØينية‪ ،‬و‬ ‫المشتريات)‪ ،‬وتخضع Ø§Ù„Ø´Ø±ÙˆØ Ø§Ù„Ù…Ø±Ø¬Ø¹ÙŠØ© وابداء اَلهتمام لتعيين فريق التخØÙŠØ Ø§Ù„ÙÙ†ÙŠ واَلستشار‬ ‫ات للمرحلة الثانية التي وضعها وأوضحها البنك الدولي‬ ‫لعملية الشر‬ ‫اء في الوقت الحالي‪\.‬‬ ‫(Ø­) تحديد القواعد وواجهات التØبيق بين مؤسسات هذا القØاع وأصحاب المصلحة اآلخرين ومنها آليات التعاون وفقاً‬ ‫للترتيبات المؤسسية واَلحيتياجات الجديدة‪\.‬‬ ‫(Ø®) تØبيق Ø®ØØ Ø§Ù„ØªÙˆØ§ØµÙ„ الداخلي والخارجي لتعزيز وابالغ المؤسسات وأصحاب المصلحة والموظفين ذي العالقة بعملية‬ ‫اإلصالح‪ ،‬ومن أجل وضع بر‬ ‫امج توعية عامة ومشاركة جماهيرية‪\.‬‬ ‫(د) دعم تحسين وتØبيق إمدادات المياه والصرف الصحي التي تخضع لعملية اإلصالح وسياسات واستر‬ ‫اتيجيات‬ ‫ة مصادر المياه والبر‬ ‫امج اَلستثمارية‪\.‬‬ ‫وتعليمات إدار‬ ‫اسات والتدريب وبناء قدر‬ ‫ات مجلس تنظيم قØاع المياه‪( 3‬الموازنة التقديرية ‪ 0\.9‬مليون‬ ‫المكون الثاني‪ :‬المساعدة التكميلية للدر‬ ‫َلر" من صندوق الشر‬ ‫اكة اإلئتماني متعدد المانحين لتØوير البنية التحتية‬ ‫دو‬ ‫َلر وتتضمن التمويل اإلضافي "‪ 0\.6‬مليون دو‬ ‫و‪ 0\.3‬مليون دو‬ ‫َلر من التعاون الفني األلماني لألعمال التنظيمية لقØاع المياه)‪\.‬‬ ‫يمول هذا المكون البناء المؤسسي لمجلس فاعل لتنظيم قØاع المياه‪ ،‬حيث تشدد الهيكلية المؤسسية الجديدة لقØاع المياه على‬ ‫تأسيس مجلس تنظيم قØاع المياه لمر‬ ‫اقبة األداء التشغيلي لمزودي خدمات المياه من أجل ضمان نوعية وكفاءة خدمات هذا‬ ‫القØاع‪ ،‬ويدعم هذا المكون مجلس فاعالً مستداماً لتنظيم قØاع المياه عن Øريق صياغة سياساته ولوائحه الداخلية وأدلته‬ ‫اءاته التشغيلية ونظمه التشغيلية‪ ،‬كما يتضمن وضع استر‬ ‫اتيجية وتقنيات للتواصل وأدوات فنية وتشغيلية وصيغ‬ ‫اإلرشادية واجر‬ ‫تنفيذ األعمال التنفيذية باتجاه مزودي خدمات المياه والمياه العادمة‪ \.‬يمول هذا المكون الخدمات اَلستشارية لتقديم الدعم لبناء‬ ‫مؤسسة مجلس تنظيم قØاع المياه عن Øريق تقديم األعمال التالية على سبيل المثال َل الحصر‪:‬‬ ‫ي وضعها أو الجديدة لضمان نوعية الخدمات وكفاءة العمليات والصيانة‬ ‫(Ø£) مر‬ ‫اجعة السياسات واللوائح القائمة أو الجار‬ ‫واَلسترداد المستدام للنفقات وفعالية اللوائح‪\.‬‬ ‫(ب) المساعدة في التنسيق واَلعتماد من السلØØ© الفلسØينية واَلعتماد من مقدمي الخدمات لهذه اَلست ا‬ ‫رتيجيات والسياسات‬ ‫واللوائح‪\.‬‬ ‫(ت) وضع اللوائح المالية واإلدارية الخاصة بمجلس تنظيم قØاع المياه (مثال‪ :â€¬Ø´Ø±ÙˆØ Ø§Ù„ØªÙˆØ¸ÙŠÙ وسلم الرواتب والنظم‬ ‫المالية واإلدارية والهيكل التنظيمي وخØØ© التنمية التنظيمية ووصف الوظائف األساسية والترتيبات اإلدارية وغير‬ ‫ها)‪\.‬‬ ‫خيص والفوتر‬ ‫ة وتحصيل الرسوم من‬ ‫(Ø«) وضع أدوات مجلس تنظيم قØاع المياه (كالتواصل والتوعية واللوائح الفنية والتر‬ ‫مقدمي الخدمات ومر‬ ‫اجعات التعرفات وقياس أداء الخدمات ونظم الحوافز ومعايير الجودة والتخØÙŠØ ÙˆØ§Ù„ØªØµÙ…ÙŠÙ… ومسح‬ ‫مقدمي الخدمات ومشاركة المواØنين وغير‬ ‫ها)‪\.‬‬ ‫(ج) التنفيذ وبناء القدر‬ ‫ات لتØوير مجلس تنظيم قØاع المياه والتعرف على تجارب اآلخرين وتدريب المستشارين وبناء‬ ‫ات وتدريب مجالس اإلدار‬ ‫ات والموظفين خالل التنفيذ‪\.‬‬ ‫القدر‬ ‫تأسس مجلس تنظيم قØاع المياه من قبل حكومة السلØØ© الفلسØينية يوم ‪ 8‬يوليو ‪ 2014‬لمر‬ ‫اقبة كافة األمور المتعلقة بعمل مقدمي خدمات المياه‬ ‫‪3‬‬ ‫ومنها اإلنتاج والنقل والتوزيع واَلستهالك ومعالجة المياه العادمة بهدف ضمان نوعية خدمات المياه والمياه العادمة وكفاءتها للمستهلكين في فلسØين‬ ‫عي للمساعدة الفنية للدر‬ ‫اسات والتدريب في‬ ‫بأسعار معقولة‪ ،‬ويعتبر مجلس تنظيم قØاع المياه م ؤسسة مستقلة يحكمها مجلس إدار‬ ‫ة‪ \.‬تم تعديل المكون الفر‬ ‫ظل التمويل اإلضافي ولن يتضمن أي تمويل‪ ،‬وسيتم التدريب بموجب المكون األول‪\.‬‬  ‫َلر ممولة من صندوق الشر‬ ‫اكة اإلئتماني متعدد المانحين‬ ‫ع (الموازنة التقديرية‪ 0\.7 :‬مليون دو‬ ‫المكون الثالث‪ :‬إدار‬ ‫ة المشرو‬ ‫عة بين سلØØ© المياه الفلسØينية "‪ 0\.3‬مليون دو‬ ‫َلر"‬ ‫ي والموز‬ ‫لتØوير البنية التحتية‪/‬الشر‬ ‫اكة من أجل المياه والتØوير الحضر‬ ‫ومجلس تنظيم قØاع المياه "‪ 0\.4‬مليون دو‬ ‫َلر")‪\.‬‬ ‫ع من خالل توفير خدمات استشارية‬ ‫ة ومر‬ ‫اقبة وتقييم المشرو‬ ‫ع) في إدار‬‫(Ø£) دعم سلØØ© المياه الفلسØينية (وحدة تنفيذ المشرو‬ ‫ومنها تدقيق الحسابات والتدريب وتمويل النفقات التشغيلية التصاعدية‪\.4‬‬ ‫ع من خالل توفير خدمات‬ ‫ة ومر‬ ‫اقبة وتقييم المشرو‬ ‫ع) في إدار‬‫(ب) دعم مجلس تنظيم قØاع المياه (وحدة تنفيذ المشرو‬ ‫استشارية ومنها تدقيق الحسابات والتدريب وتمويل النفقات التشغيلية التصاعدية‪\.5‬‬ ‫‪4‬‬ ‫تحدد النفقات التشغيلية التصاعدية في اتفاقية المنحة المعدلة‪\.‬‬ ‫‪5‬‬ ‫عات‪ ،‬ويقدر في أفضل األحوال أن مجلس‬‫تحدد المادة ‪ 25‬من القانون الموارد المالية للمجلس بالرسوم المحصلة من مقدمي الخدمات والمنح والتبر‬ ‫تنظيم قØاع المياه لن يكون قاد اً‬ ‫ر على اَلعتماد على موارده المالية الداخلية للعامين األولين‪ ،‬ويساعد هذا الدعم على تعزيز مجلس تنظيم قØاع المياه‬ ‫في بدء إصدا ر تر‬ ‫اخيص وتحصيل الرسوم‪ \.‬تحدد النفقات التشغيلية التصاعدية في اتفاقية المنحة المعدلة‪\.‬‬  ‫ع المعدلة أو الجديدة‬‫الملحق ‪ :4‬النفقات المفصلة ْلعمال المشرو‬ ‫َلر (صندوق الشر‬ ‫اكة اإلئتماني‬ ‫ع التمويل اإلضافي لخØØ© بناء قدر‬ ‫ات قØاع المياه ما يعادل ‪ 2\.3‬مليون دو‬ ‫‪ \.26‬سيبلغ مجمو‬ ‫ع‬ ‫َلر" والتعاون األلماني "ما يعادل ‪ 0\.3‬مليون دو‬ ‫َلر")‪ ،‬ويبلغ مجمو‬ ‫متعدد المانحين لتØوير البنية التحتية "‪ 2\.0‬مليون دو‬ ‫ة "‪ 0\.26‬مليون دو‬ ‫َلر" و‬ ‫ع األصلي ‪ 1\.38‬مليون دو‬ ‫َلر (الصندوق اإلئتماني للضفة الغربية وغز‬ ‫التمويل الباقي بموجب المشرو‬ ‫اكة اإلئتماني متعدد المانحين لتØوير البنية التحتية "‪ 0\.967‬مليون دو‬ ‫َلر" والوكالة الفرنسية للتنمية "ما يعادل‬ ‫صندوق الشر‬ ‫َلر")‪ ،‬مع إجمالي إنفاق يبلغ نحو ‪ 70‬بالمئة‪ \.‬هناك حاجة إلى مبلغ إجمالي ‪ 2\.3‬مليون دو‬ ‫َلر من التمويل‬ ‫‪ 0\.14‬مليون دو‬ ‫اإلضافي على النحو المبين في الجدول أدناه‪\.‬‬ ‫ع‬‫صافي مجمو‬ ‫ع‬‫مجمو‬ ‫ع اْلصل‬‫التمويل اْلصلي والمتبقي من المشرو‬ ‫التمويل اإلضافي‬ ‫التمويل اإلضافي‬ ‫التمويل‬ ‫المبالغ‬ ‫من الصندوق‬ ‫ع‬‫المجمو‬ ‫الضفة الغربية‬ ‫التعاون‬ ‫اإلضافي‬ ‫المتبقية من‬ ‫اَلئتماني متعدد‬ ‫(صندوق الشر‬ ‫اكة‬ ‫اْللماني‬ ‫والمتبقي‬ ‫ع‬‫المشرو‬ ‫الوكالة الفرنسية‬ ‫الضفة الغربية (صندوق‬ ‫الضفة الغربية‬ ‫المانحين لتØوير‬ ‫اإلئتماني متعدد‬ ‫ي)‬‫(مواز‬ ‫اْلصل‬ ‫للتنمية‬ ‫اكة اإلئتماني متعدد‬ ‫الشر‬ ‫(الصندوق اَلئتماني‬ ‫البنية التحتية‬ ‫المانحين لتØوير‬ ‫المكونات‬ ‫المانحين لتØوير البنية‬ ‫للضفة الغربية‬ ‫(النسبة المئوية‬ ‫البنية التحتية)‬ ‫التحتية)‬ ‫ة)‬ ‫وقØاع غز‬ ‫للتمويل)‬ ‫ما يعادل مليون دوَلر أمريكي‬ ‫ما يعادل مليون دوَلر أمريكي‬ ‫متبقي‬ ‫أصلي‬ ‫متبقي‬ ‫أصلي‬ ‫متبقي‬ ‫أصلي‬ ‫المكون اْلول‪:‬‬ ‫‪2\.04‬‬ ‫‪1\.34‬‬ ‫‪0\.14‬‬ ‫‪1\.4‬‬ ‫‪0\.976‬‬ ‫‪1\.4‬‬ ‫‪0\.22‬‬ ‫‪2\.1‬‬ ‫‪100%‬‬ ‫‪0\.7‬‬ ‫‪0\.7‬‬ ‫‪0\.0‬‬ ‫ي والمساعدة‬‫الدعم اَلستشار‬ ‫‪8‬‬ ‫الفنية وبناء القدر‬ ‫ات في سلØة‬ ‫المياه الفلسØينية‬ ‫‪0\.9‬‬ ‫‪0\.00‬‬ ‫‪0\.00‬‬ ‫‪0\.00‬‬ ‫‪0\.00‬‬ ‫‪0\.2‬‬ ‫‪0\.00‬‬ ‫‪0\.1‬‬ ‫‪100%‬‬ ‫‪0\.9‬‬ ‫‪0\.6‬‬ ‫‪0\.3‬‬ ‫المكون الثاني‪:‬‬ ‫المساعدة التكميلية للدر‬ ‫اسات‬ ‫والتدريب والبناء المؤسسي‬ ‫لمجلس تنظيم قØاع المياه‬ ‫‪0\.00‬‬ ‫‪0\.00‬‬ ‫‪0\.00‬‬ ‫‪0\.00‬‬ ‫‪0\.00‬‬ ‫‪0\.2‬‬ ‫‪0\.00‬‬ ‫‪0\.1‬‬ ‫‪0\.0‬‬ ‫‪0\.00‬‬ ‫‪0\.00‬‬ ‫‪0\.0‬‬ ‫عي (Ø£)‪:‬‬‫المكون الثاني الفر‬ ‫تمويل الدر‬ ‫اسات والتدريب‬ ‫عي (ب)‪:‬‬‫المكون الثاني الفر‬ ‫البناء المؤسسي لمجلس تنظيم‬ ‫‪0\.9‬‬ ‫‪0\.00‬‬ ‫‪0\.00‬‬ ‫‪0\.00‬‬ ‫‪0\.00‬‬ ‫‪0\.00‬‬ ‫‪0\.00‬‬ ‫‪0\.0‬‬ ‫‪67%‬‬ ‫‪0\.9‬‬ ‫‪0\.6‬‬ ‫‪0\.3‬‬ ‫قØاع المياه‬ ‫‪0‬‬ ‫‪0\.74‬‬ ‫‪0\.04‬‬ ‫‪0\.0‬‬ ‫‪0\.00‬‬ ‫‪0\.0‬‬ ‫‪0\.00‬‬ ‫‪0\.04‬‬ ‫‪0\.8‬‬ ‫‪100%‬‬ ‫‪0\.7‬‬ ‫‪0\.7‬‬ ‫‪0\.0‬‬ ‫ع‬ ‫المكون الثالث‪ :‬إدار‬ ‫ة المشرو‬ ‫‪0\.34‬‬ ‫‪0\.04‬‬ ‫‪0\.00‬‬ ‫‪0\.00‬‬ ‫‪0\.00‬‬ ‫‪0\.00‬‬ ‫‪0\.04‬‬ ‫‪0\.8‬‬ ‫‪100%‬‬ ‫‪0\.3‬‬ ‫‪0\.3‬‬ ‫‪0\.0‬‬ ‫عي (Ø£)‪ :‬إدار‬ ‫ة‬ ‫المكون الثالث الفر‬ ‫ع لسلØØ© المياه‬‫المشرو‬ ‫الفلسØينية‬ ‫‪0\.40‬‬ ‫‪0\.00‬‬ ‫‪0\.00‬‬ ‫‪0\.00‬‬ ‫‪0\.00‬‬ ‫‪0\.00‬‬ ‫‪0\.00‬‬ ‫‪100%‬‬ ‫‪0\.4‬‬ ‫‪0\.4‬‬ ‫‪0\.0‬‬ ‫عي الثالث (ب)‪:‬‬‫المكون الفر‬ ‫ع لمجلس تنظيم‬ ‫إدار‬ ‫ة المشرو‬ ‫قØاع المياه‬ ‫‪3\.68‬‬ ‫‪1\.38‬‬ ‫‪0\.14‬‬ ‫‪1\.4‬‬ ‫‪0\.976‬‬ ‫‪1\.6‬‬ ‫‪0\.26‬‬ ‫‪3\.0‬‬ ‫‪87%‬‬ ‫‪2\.3‬‬ ‫‪2\.0‬‬ ‫‪0\.3‬‬ ‫ع‬‫المجمو‬  ‫الملحق ‪ :5‬ترتيبات التنفيذ والدعم المنقحة‬ ‫ع هي سلØØ© المياه الفلسØينية للمكون األول والمهام ذات العالقة بموجب المكون الثالث‪،‬‬‫‪ \.27‬تكون الجهة المنفذة للمشرو‬ ‫ويكون مجلس تنظيم قØاع المياه‪ 6‬مسؤو‬ ‫َلً عن تنفيذ المكون الثاني والمهام المرتبØØ© به بموجب المكون الثالث على النحو‬ ‫المشار إليه في الملحق ‪\.3‬‬ ‫‪ \.28‬بموجب المكون اْلول‪ :‬حصلت سلØØ© المياه الفلسØينية على تفويض واضح من مجلس وزر‬ ‫اء السلØØ© الفلسØينية لتحديد‬ ‫وقيادة تنفيذ إصالح قØاع المياه على النحو المبين في Ø®ØØ© عمل اإلصالح التي صادقت الحكومة عليها يوم ‪ 19‬ديسمبر‬ ‫ع في سلØØ© المياه الفلسØينية‬ ‫ال العمل بها مستم اً‬ ‫ر في عملية إصالح قØاع المياه‪ \.‬تأسست وحدة تنفيذ المشرو‬ ‫‪ 2009‬و‬ ‫َل يز‬ ‫ع واختصاصي مشتريات واختصاصي إدار‬ ‫ة مالية‬ ‫ع من مدير المشرو‬‫ع‪ ،‬وتتألف وحدة تنفيذ المشرو‬‫للتنفيذ اليومي للمشرو‬ ‫ي‪ ،‬كما تشكلت وحدة تنسيق اإلصالح في سلØØ© المياه الفلسØينية للعمل باعتبار‬ ‫ها الوحدة المحورية في‬ ‫واختصاصي إدار‬ ‫ع‪ ،‬ويتألف فريق وحدة تنسيق اإلصالح من مجموعة من مدر‬ ‫اء سلØØ© المياه الفلسØينية في‬ ‫اإلشر‬ ‫اف على وحدة تنفيذ المشرو‬ ‫ي رئيس سلØØ© المياه الفلسØينية‪\.‬‬ ‫الضفة الغربية وغز‬ ‫ة ومستشار‬ ‫ع‪،‬‬ ‫ات الفنية تقري اً‬ ‫ر إلى رئيس سلØØ© المياه الفلسØينية من خالل وحدة تنفيذ المشرو‬ ‫‪ \.29‬يقدم مستشارو فريق التخØÙŠØ ÙˆØ§ÙŽÙ„Ø³ØªØ´Ø§Ø±â€¬ ‫ع الدعم اليومي والرقابة على المستشارين ومر‬ ‫اجعة مخرجاتها‪،‬‬ ‫وتضمن وحدة تنسيق اإلصالح من خالل وحدة تنفيذ المشرو‬ ‫ويمكن لسلØØ© المياه الفلسØينية اَلستفادة من مخرجات تقارير المستشارين إلبالغ لجنة توجيه اإلصالح التي عينها مجلس‬ ‫اء لمر‬ ‫اقبة تنفيذ Ø®ØØ© عمل اإلصالح‪\.‬‬ ‫الوزر‬ ‫ة ورئيس تنفيذي مسؤول عن اإلدار‬ ‫ة‬ ‫‪ \.30‬بموجب المكون الثاني‪ :‬تأسس مجلس تنظيم قØاع المياه مؤخ اً‬ ‫ر وله مجلس إدار‬ ‫اليومية للمكون الثاني‪ ،‬ويعين مجلس تنظيم قØاع المياه الموظفين الالزمين (فريق اإلدار‬ ‫ة) والموظفين اإلداريين‪/‬موظفي‬ ‫ة المالية إلدار‬ ‫ة العقود بموجب المكون الثاني جنباً إلى جنب مع الرئيس التنفيذ‪ \.‬تستمر وحدة تنفيذ‬ ‫المشتريات وموظفي اإلدار‬ ‫ع في سلØØ© المياه الفلسØينية في تقديم الدعم إلى مجلس تنظيم قØاع المياه من النواحي المالية والمشتريات‪ ،‬وسيقوم‬‫المشرو‬ ‫اختصاصيو اإلدار‬ ‫ة المالية والمشتريات في البنك الدولي بتدريب موظفي مجلس تنظيم قØاع المياه على أدلة المشتريات في‬ ‫جت اإلجر‬ ‫اءات‬ ‫ع وأدر‬ ‫اءات اإلدار‬ ‫ة المالية الالزمة‪ \.‬قامت سلØØ© المياه الفلسØينية بتحديث دليل تنفيذ المشرو‬ ‫البنك الدولي واجر‬ ‫اءات المالية واجر‬ ‫اءات المشتريات التي‬ ‫ع اإلجر‬‫التي يتوجب على مجلس تنظيم قØاع المياه تنفيذها‪ ،‬ويتضمن دليل تنفيذ المشرو‬ ‫اقبة فريق اإلدار‬ ‫ة في مجلس تنظيم قØاع المياه وسيعقد‬ ‫قام البنك الدولي بتوضيحها يوم ‪ 6‬مايو ‪ \.2015‬قام مجلس اإلدار‬ ‫ة بمر‬ ‫ة والمانحون) حيث يقدم فريق اإلدار‬ ‫ة‬ ‫ة ويحضر‬ ‫ه أعضاء مجلس اإلدار‬ ‫اجتماعاً شهرياً َلستعر‬ ‫اض سير العمل (ينظمه فريق اإلدار‬ ‫‪6‬‬ ‫ها إلى مجلس الوزر‬ ‫اء) تأسست بموجب المرسوم الرئاسي رقم ‪ 14‬لسنة ‪( 2014‬قانون‬ ‫مجلس تنظيم قØاع المياه عبار‬ ‫ة عن مؤسسة مستقلة (تقدم تقارير‬ ‫المياه) يوم ‪ 7‬أغسØس ‪ 2014‬لمر‬ ‫اقبة كافة ا ألمور المتعلقة بعمل مزودي خدمات المياه والمياه العادمة وضمان نوعية وكفاءة خدمات المياه والمياه‬ ‫ة يزكيه مجلس الوزر‬ ‫اء ويعينه الرئيس‪ ،‬وهم يمثلون القØاع العام والخاص‬ ‫العادمة للمستهلكين بأسعار معقولة‪ \.‬يدير مجلس تنظيم قØاع المياه مجلس إدار‬ ‫ً عن ترخيص ومر‬ ‫اقبة أداء مزودي‬ ‫َل‬ ‫والمؤسسات األهلية‪ ،‬ويعين مجلس اإلدار‬ ‫ة الرئيس التنفيذي والموظفين‪ ،‬ويكون مجلس تنظيم قØاع المياه مسؤو‬ ‫الخدمات والمصادقة على التعرفة‪\.‬‬ ‫ع في سلØØ© المياه الفلسØينية في تولي المسؤولية عن إجمالي‬‫سير العمل بموجب المكون الثاني‪ ،‬وتستمر وحدة تنفيذ المشرو‬ ‫التقارير وتقديم الدعم للمشتريات واألمور المالية في مجلس تنظيم قØاع المياه‪\.‬‬ ‫ع األصلي من الصندوق اَلئتماني ‪ 099491‬في ظل‬‫ع بموجب المشرو‬ ‫‪ \.31‬بموجب المكون الثالث‪ :‬تمول كلفة إدار‬ ‫ة المشرو‬ ‫التمويل اإلضافي فقØ‪ ،‬ويمول من الصندوق اَلئتماني ‪ 015756‬لكل من سلØØ© المياه الفلسØينية ومجلس تنظيم قØاع المياه‬ ‫َلر و‪ 0\.4‬مليون دو‬ ‫َلر على التوالي)‪\.‬‬ ‫(‪ 0\.3‬مليون دو‬ ‫أوَلً‪ :‬اإلدار‬ ‫ة المالية‬ ‫ع وينفقه من خالل حسابين جديدين بعملة الدو‬ ‫َلر األمريكي لهذه الغاية يفتحان‬ ‫‪ \.32‬يقدم البنك الدولي التمويل الالزم للمشرو‬ ‫ع في سلØØ© المياه الفلسØينية ومجلس تنظيم‬ ‫ة المالية في بنك فلسØين في الضفة الغربية وتدير‬ ‫هما وحدات تنفيذ المشرو‬ ‫زر‬‫لدى و ا‬ ‫ع)‪ \.‬تتبع سلØØ© المياه الفلسØينية‪ /‬مجلس تنظيم قØاع المياه اللوائح الضريبية الصادر‬ ‫ة‬ ‫قØاع المياه (بعد ترتيبات تنفيذ المشرو‬ ‫ع ومنها الوظائف المحاسبية واجر‬ ‫اءات‬ ‫عن السلØØ© الفلسØينية‪ ،‬حيث تضمن سلØØ© المياه الفلسØينية الترتيبات المالية للمشرو‬ ‫ع‪\.‬‬‫تقديم التقارير وتستفيد من نظام المحاسبة الحكومي (بيسان) الذي يالئم مكونات المشرو‬ ‫ة المالية لدى سلØØ© المياه الفلسØينية والذي استعرض الهيكل التنظيمي لإلدار‬ ‫ة‬ ‫‪ \.33‬قام فريق اإلدار‬ ‫ة المالية بتحديث تقييم اإلدار‬ ‫ع‪ ،‬حيث تم تسليم كافة التقارير الرقابية السابقة في موعدها مع‬‫المالية في سلØØ© المياه الفلسØينية وقدرتها على تنفيذ المشرو‬ ‫ع‪ ،‬وتم تسليم كافة التقارير‬ ‫اء غير معدلة‪ ،‬وخلص التقييم إلى أنه يوجد قدر‬ ‫ات كافية في سلØØ© المياه الفلسØينية لتنفيذ المشرو‬ ‫آر‬ ‫اء غير معدلة‪ \.‬ستكون سلØØ© المياه الفلسØينية الØرف المسؤول عن إدار‬ ‫ة المكون األول من‬ ‫الرقابية السابقة في موعدها مع آر‬ ‫اف عليه والذي يتضمن اإلدار‬ ‫ة المالية‪ ،‬كما تكون سلØØ© المياه الفلسØينية مسؤولة عن إعداد واصدار‬ ‫ع وتنفيذه واإلشر‬‫المشرو‬ ‫برنامج العمل السنوي للمكون األول والموازنات التشغيلية إلى جانب سير عمل والتقارير المالية والتقارير المالية المرحلية غير‬ ‫ع) والتقارير المالية السنوية‬‫المدققة‪ ،‬كما أنها مسؤولة عن تقديم تقارير مالية مرحلية موحدة غير مدققة (لكافة مكونات المشرو‬ ‫ع‪\.‬‬‫المدققة عن كامل المشرو‬ ‫ة مالية لمجلس تنظيم قØاع المياه ومر‬ ‫اجعة‬ ‫ع للمكون الثاني تقييم إدار‬ ‫ة المالية كجز‬ ‫ء من إعداد المشرو‬ ‫ى فريق اإلدار‬‫‪ \.34‬أجر‬ ‫ع‪ ،‬ويملك مجلس تنظيم قØاع المياه‬‫للهيكلية التنظيمية المقترحة لمجلس تنظيم قØاع المياه والوظائف المالية لتنفيذ المشرو‬ ‫ات كافية ومسؤول عن الحفاظ على الموز‬ ‫انات التشغيلية وتقديم التقارير المالية وتقارير سير العمل وكذلك التقارير المالية‬ ‫قدر‬ ‫ع لدمجها)‪ \.‬قام مجلس تنظيم قØاع المياه‬‫المرحلية غير المدققة (والتي ستقدم إلى سلØØ© المياه الفلسØينية ‪ -‬وحدة تنفيذ المشرو‬ ‫بوضع نظام محاسبي مالئم في سياق عملية توظيف اَلختصاصي المالي‪ ،‬ولدى مجلس تنظيم قØاع المياه لجنة مالية فاعلة‬ ‫ع في سلØØ© المياه الفلسØينية الدعم إلى‬ ‫اقبة اإلدار‬ ‫ة المالية الداخلية وتدقيق الحسابات الخارجي‪ ،‬وتقدم محدة تنفيذ المشرو‬ ‫لمر‬ ‫مجلس تنظيم قØاع المياه في القضايا المالية والمشتريات‪\.‬‬ ‫ع في حين أن‬ ‫‪ \.35‬أدوار الشركاء‪ :‬تم وضع خيار‬ ‫ات التمويل المشترك بين التعاون األلماني والبنك الدولي خالل تحديد المشرو‬ ‫ع َل يعتمد على التمويل المشترك‪ ،‬ومن المفهوم أن الوكالة السويدية الدولية للتنمية وفنلندا والدنمارك وكرواتيا والبرتغال‬‫المشرو‬ ‫وهولندا والنرويج والوكالة الفرنسية للتنمية قدمت التمويل المتوفر من خالل صندوق الشر‬ ‫اكة اإلئتماني متعدد المانحين لتØوير‬ ‫البنية التحتية الذي أسسه ويدير‬ ‫ه البنك الدولي‪ ،‬وتقدم الوكالة الفرنسية للتنمية تمويالً مشتركاً موازياً لحصتها في نفقات فريق‬ ‫ع األصلي‪ ،‬وتقوم سلØØ© المياه الفلسØينية بناء عليه‬ ‫ات والتخØÙŠØ Ø§Ù„ÙÙ†ÙŠ مباشر‬ ‫ة إلى سلØØ© المياه الفلسØينية للمشرو‬ ‫اَلستشار‬  ‫ات والتخØÙŠØ Ø§Ù„ÙÙ†ÙŠ بحسابات مميز‬ ‫ة وØلب للتسديد‬ ‫باإلدار‬ ‫ة وتكون مسائلة عن مصدرين من مصادر تمويل فريق اَلستشار‬ ‫مصدر تمويل كل سجل محاسبي‬ ‫إلى أن‬ ‫ح‬‫الفلسØينية بوضو‬ ‫تشير سلØØ© المياه‬ ‫ائتمانية‪\.7‬‬ ‫وترتيبات‬ ‫(اإليصاَلت‪/‬الفواتير‪/‬العقود) ونماذج بيان اإلنفاق المصاحبة لØلبات السحب‪\.‬‬ ‫‪ \.36‬يكون تمويل المكون الثاني (البناء المؤسسي لمجلس تنظيم قØاع المياه) من مصدرين هما صندوق الشر‬ ‫اكة اإلئتماني‬ ‫ي المقدم من التعاون األلماني لحصة النفقات بموجب‬‫متعدد المانحين لتØوير البنية التحتية في البنك الدولي ومن التمويل المواز‬ ‫جعي يبلغ حوالي ‪ 50,000‬دو‬ ‫َلر‬ ‫ع توفير تمويل بأثر ر‬ ‫المكون الثاني مباشر‬ ‫ة إلى مجلس تنظيم قØاع المياه‪ ،‬ويتضمن المشرو‬ ‫لتغØية النفقات المتعلقة بالتكاليف التصاعدية والجارية لمجلس تنظيم قØاع المياه التي أنفقت خالل إعداد هذا التمويل اإلضافي‬ ‫(‪ 1‬يناير ‪ 2015‬وحتى ‪ 31‬يوليو ‪\.)2015‬‬ ‫‪ \.37‬سيتم استكمال ترتيبات التمويل المشترك خالل التقييم بين مختلف الممولين وتحديد واَلتفاق على اإلجر‬ ‫اءات والبنود التي‬ ‫ي‪\.‬‬‫سيتم تمويلها بين كافة الممولين حيثما يستخدم التمويل المواز‬ ‫ع التمويل إلى المرحلة الثانية من "فريق اَلستشار‬ ‫ات الفنية والتخØيØ" في سلØØ© المياه‬ ‫ع‪ :‬سيقدم المشرو‬‫‪ \.38‬تمويل المشرو‬ ‫ج نØاق فريق اَلستشار‬ ‫ات الفنية‬ ‫الفلسØينية وللمستشارين اإلضافيين وأعمال بناء القدر‬ ‫ات التي سيتم تحديدها وتقديمها خار‬ ‫والتخØيØ‪ \.‬أكد التعاون األلماني نيته تقديم ‪ 2\.3‬مليون يورو لبرنامج المياه والمياه العادمة المنفذ لمختلف مستويات وعمليات‬ ‫ى‬ ‫قØاع المياه‪ ،‬حيث يمكن توجيه ‪ 300,000‬دو‬ ‫َلر إلى البناء المؤسسي لمجلس تنظيم قØاع المياه والوظائف التنظيمية األخر‬ ‫ع والتي ستقدم باعتبار‬ ‫ها تمويالً مشتركاً موازياً‪\.‬‬ ‫في ظل هذا المشرو‬ ‫َلر من صندوق الشر‬ ‫اكة اإلئتماني متعدد المانحين لتØوير‬ ‫‪ \.39‬تقدر كلفة المكون الثاني بـ‪ 0\.9‬مليون دو‬ ‫َلر منها ‪ 0\.6‬مليون دو‬ ‫َلر باعتبار‬ ‫ها تمويالً مشتركاً موازياً من التعاون األلماني‪ ،‬ويقدم البنك‬ ‫البنية التحتية من خالل البنك الدولي ونحو ‪ 0\.3‬مليون دو‬ ‫ع‪\.‬‬ ‫َلر لنفقات إدار‬ ‫ة المشرو‬ ‫الدولي ‪ 0\.6‬مليون دو‬ ‫ي‪/‬‬ ‫ة عن منحة من الشر‬ ‫اكة من أجل المياه والتØوير الحضر‬ ‫‪ \.40‬تدفق التمويل‪ :‬سيكون التمويل المقدم من البنك الدولي عبار‬ ‫اكة اإلئتماني متعدد المانحين لتØوير البنية التحتية للضفة الغربية وقØاع غز‬ ‫ة لصرفها من خالل حساب مخصص‬ ‫صندوق الشر‬ ‫ة المالية ضمن نظام الخزينة المركزية وتدير‬ ‫ه سلØØ© النقد الفلسØينية للمكون األول وحصة سلØØ© المياه‬ ‫زر‬‫(‪ )1‬تفتحه و ا‬ ‫زر‬ ‫ة المالية‬ ‫الفلسØينية من المكون الثالث‪ ،‬وحساب مخصص آخر (‪ )2‬يفتحه ويدير‬ ‫ه مجلس تنظيم قØاع المياه بموجب سلØØ© و ا‬ ‫على المكون الثاني وقسم من المكون الثالث الذي ينفذه مجلس تنظيم قØاع المياه‪\.‬‬ ‫‪ \.41‬أعد كل من سلØØ© المياه الفلسØينية ومجلس تنظيم قØاع المياه موز‬ ‫انة ربع سنوية مفصلة (Ø®ØØ© صرف) تم تحديد سقف‬ ‫ع في موعده‪ ،‬ويتم‬ ‫الحساب المصرفي المخصص وفقاً لها عند ‪ 300,000‬دو‬ ‫َلر لتسهيل توفير التمويل الالزم لتنفيذ المشرو‬ ‫اَلحتفاظ بسجالت محاسبية منفصلة لكل حساب مصرفي مخصص‪\.‬‬ ‫‪ \.42‬يصنف Ø®Øر اإلدار‬ ‫ة المالية للتمويل اإلضافي على أنه كبير‪\.‬‬ ‫ة ومن صندوق الشر‬ ‫اكة اإلئتماني متعدد المانحين‬ ‫يدير البنك الدولي كال المصدرين للتمويل والمقدمين من الصندوق اَلئتماني للضفة الغربية وغز‬ ‫‪7‬‬ ‫لتØوير البنية التحتية‪\.‬‬  ‫خØØ© الصرف‬ ‫الربع‬ ‫الربع‬ ‫الربع‬ ‫الربع‬ ‫الربع‬ ‫الربع‬ ‫الربع الر‬ ‫ابع‪:‬‬ ‫الثالث‪:‬‬ ‫الثاني‪:‬‬ ‫الربع اْلول‪:‬‬ ‫ابع‪:‬‬ ‫الربع الر‬ ‫الثالث‪:‬‬ ‫الثاني‪:‬‬ ‫اْلول‪:‬‬ ‫الر‬ ‫ابع‪:‬‬ ‫‪2017‬‬ ‫‪2017‬‬ ‫‪2017‬‬ ‫‪2017‬‬ ‫‪2016‬‬ ‫‪2016‬‬ ‫‪2016‬‬ ‫‪2016‬‬ ‫‪2015‬‬ ‫إبريل‪-‬‬ ‫‪1‬‬ ‫يناير‪-‬‬ ‫‪1‬‬ ‫‪ 1‬أكتوبر‪-‬‬ ‫يوليو‪-‬‬ ‫‪1‬‬ ‫إبريل‪-‬‬ ‫‪1‬‬ ‫يناير‪-‬‬ ‫‪1‬‬ ‫‪ 1‬أكتوبر‪-‬‬ ‫يوليو‪-‬‬ ‫‪1‬‬ ‫‪ 1‬إبريل‪-‬‬ ‫يونيو‬ ‫‪30‬‬ ‫‪ 31‬مارس‬ ‫‪ 31‬ديسمبر‬ ‫‪ 30‬سبتمبر‬ ‫يونيو‬ ‫‪30‬‬ ‫‪ 31‬مارس‬ ‫‪ 31‬ديسمبر‬ ‫‪ 30‬سبتمبر‬ ‫‪ 30‬يونيو‬ ‫ع‬‫المجمو‬ ‫‪2017‬‬ ‫‪2017‬‬ ‫‪2016‬‬ ‫‪2016‬‬ ‫‪2016‬‬ ‫‪2016‬‬ ‫‪2015‬‬ ‫‪2015‬‬ ‫‪2015‬‬ ‫التمويل اإلضافي‬ ‫سلØØ© المياه‬ ‫‪1,000,000‬‬ ‫‪30,000‬‬ ‫‪144,000‬‬ ‫‪224,000‬‬ ‫‪320,000‬‬ ‫‪115,000‬‬ ‫‪55,000‬‬ ‫‪44,000‬‬ ‫‪48,000‬‬ ‫‪20,000‬‬ ‫الفلسØينية‬ ‫مجلس تنظيم قØاع‬ ‫‪1,000,000‬‬ ‫‪30,000‬‬ ‫‪40,000‬‬ ‫‪105,000‬‬ ‫‪140,000‬‬ ‫‪190,000‬‬ ‫‪200,000‬‬ ‫‪145,000‬‬ ‫‪150,000‬‬ ‫‪0‬‬ ‫المياه‬ ‫‪2,000,000‬‬ ‫‪60,000‬‬ ‫‪184,000‬‬ ‫‪329,000‬‬ ‫‪460,000‬‬ ‫‪305,000‬‬ ‫‪255,000‬‬ ‫‪189,000‬‬ ‫‪198,000‬‬ ‫‪20,000‬‬ ‫ع‬‫المجمو‬ ‫التمويل المشترك من الصندوق اإلئتماني متعدد المانحين (التمويل اْلصلي)‬ ‫سلØØ© المياه‬ ‫‪976,000‬‬ ‫‪0‬‬ ‫‪0‬‬ ‫‪0‬‬ ‫‪106,000‬‬ ‫‪447,000‬‬ ‫‪185,000‬‬ ‫‪228,000‬‬ ‫‪10,000‬‬ ‫الفلسØينية‬ ‫التمويل من صندوق‬ ‫الشر‬ ‫اكة اإلئتماني‬ ‫متعدد المانحين‬ ‫‪2,976,000‬‬ ‫‪60,000‬‬ ‫‪184,000‬‬ ‫‪329,000‬‬ ‫‪460,000‬‬ ‫‪411,000‬‬ ‫‪702,000‬‬ ‫‪374,000‬‬ ‫‪426,000‬‬ ‫‪30,000‬‬ ‫لتØوير البنية التحتية‬ ‫ع اْلصلي (الصندوق اَلئتماني للضفة الغربية وغز‬ ‫ة)‬ ‫المشرو‬ ‫سلØØ© المياه‬ ‫‪259,000‬‬ ‫‪5,000‬‬ ‫‪0‬‬ ‫‪0‬‬ ‫‪17,000‬‬ ‫‪4,000‬‬ ‫‪24,000‬‬ ‫‪70,000‬‬ ‫‪85,000‬‬ ‫‪54,000‬‬ ‫الفلسØينية‬ ‫ع من‬‫المجمو‬ ‫الصندوق اَلئتماني‬ ‫‪3,590,322‬‬ ‫للضفة الغربية وغز‬ ‫ة‬  ‫‪ \.43‬تبقي كل من سلØØ© المياه الفلسØينية ومجلس تنظيم قØاع المياه حساباً مخصصاً بعملة الدو‬ ‫َلر األمريكي تودع فيه‬ ‫ع وفقاً للموازنة المعتمدة واتفاقية‬‫اإليداعات األولية وايداعات مأل الحساب من موارد البنك وتستخدم في تمويل مكونات المشرو‬ ‫ع‪\.‬‬‫المنحة ووثيقة المشرو‬ ‫‪ \.44‬تسلم Øلبات السحب إلى البنك الدولي ويعدها كل من سلØØ© المياه الفلسØينية ومجلس تنظيم قØاع المياه موقعة من‬ ‫زر‬ ‫ة المالية قبل تسليمها للبنك الدولي‪\.‬‬ ‫المخولين بالتوقيع في و ا‬ ‫ع في سلØØ© المياه الفلسØينية المسؤولية عن جوانب اإلدار‬ ‫ة‬ ‫‪ \.45‬استقدام الموظفين‪ :‬يتولى المدر‬ ‫اء الماليون بوحدة تنفيذ المشرو‬ ‫ة المالية اإلشر‬ ‫اف على الرقابة المالية‬ ‫زر‬‫ع إلى جانب المدير المعين من مجلس تنظيم قØاع المياه‪ ،‬وتقدم و ا‬‫المالية للمشرو‬ ‫ومدققي الحسابات الداخليين إلى سلØØ© المياه الفلسØينية وتتولى المسؤولية عن مجلس اإلدار‬ ‫ة واللجنة المتخصصة التي يعينها‬ ‫ة سابقة في مشاريع البنك الدولي‪ ،‬غير أن بناء وتعزيز القدر‬ ‫ات‬ ‫مجلس تنظيم قØاع المياه‪ \.‬تملك سلØØ© المياه الفلسØينية خبر‬ ‫مØلوبان لمجلس تنظيم قØاع المياه‪ \.‬قامت سلØØ© المياه الفلسØينية بتعيين أحد موظفي اإلدار‬ ‫ة المالية لديها (المدير المالي)‬ ‫ع‪ ،‬وهو يتولى المسوؤلية عن أية تقارير موحدة ويدعم أيضاً موظفي اإلدار‬ ‫ة المالية لدى‬ ‫لمتابعة جوانب اإلدار‬ ‫ة المالية للمشرو‬ ‫ع التوجيه والتدريب حول أدلة البنك الدولي‬ ‫مجلس تنظيم قØاع المياه‪ ،‬يقدم موظفو اإلدار‬ ‫ة المالية المسؤولون عن هذا المشرو‬ ‫ع في مجلس تنظيم قØاع المياه‪ ،‬ويقدم فريق‬‫حول التقارير المالية المرحلية وتدقيق الحسابات واإلنفاق الجاهز لتنفيذ المشرو‬ ‫ع‬ ‫ة المالية في البنك الدولي تدريباً إضافياً لسلØØ© المياه الفلسØينية ومجلس تنظيم قØاع المياه على مدار فتر‬ ‫ة تنفيذ المشرو‬ ‫اإلدار‬ ‫حسب اَلقتضاء‪\.‬‬ ‫زر‬ ‫ة المالية المتواجدون في سلØØ© المياه الفلسØينية المسؤولية عن الرقابة‬ ‫‪ \.46‬الرقابة المالية‪ :‬يتولى المر‬ ‫اقبون الماليون من و ا‬ ‫ع التي تنفذها‬ ‫ة المالية فإنه ينبغي مر‬ ‫اجعة وتخليص كافة أعمال المشرو‬ ‫زر‬ ‫المالية فيها‪ ،‬وحسب صالحيات المر‬ ‫اقب المالي في و ا‬ ‫ع بØبيعة الحال‪ \.‬تعتبر وظيفة المر‬ ‫اقب‬ ‫زر‬ ‫ة‪ ،‬ويتضمن ذلك المشرو‬ ‫ات األساسية من قبل المر‬ ‫اقب المالي المتواجد في كل و ا‬ ‫زر‬‫الو ا‬ ‫ع ألدلة التنفيذ وأدلة المانحين إلى جانب اَلمتثال آلليات الرقابة الداخلية‪ ،‬ويتم قياس‬‫المالي مهمة لضمان امتثال أعمال المشرو‬ ‫الرقابة المالية في مجلس تنظيم قØاع المياه عن Øريق الفصل المالئم بين المهام والمر‬ ‫اجعات الالحقة التي تجريها لجنة المالية‬ ‫الداخلية وكذلك مدقق الحسابات الخارجي‪\.‬‬ ‫زر‬ ‫ة المالية والتي تملك صالحيات‬ ‫‪ \.47‬تدقيق الحسابات الداخلي‪ :‬تعتبر وظيفة تدقيق الحسابات الداخلي مركزية ضمن و ا‬ ‫زر‬ ‫ات األساسية والهيئات العامة بما فيها سلØØ© المياه الفلسØينية‪ ،‬وجار العمل على تفعيل وظيفة تدقيق‬ ‫تشمل كافة الو ا‬ ‫ة المالية‪ ،‬حيث يضمن مدقق الحسابات الداخلي أن العمليات واإلجر‬ ‫اءات في كامل سلØة‬ ‫زر‬‫الحسابات الداخلي بالكامل ضمن و ا‬ ‫المياه الفلسØينية مØبقة كما يجب‪ ،‬وتسلم تقارير الرقابة الداخلية إلى رئيس سلØØ© المياه الفلسØينية‪\.‬‬ ‫‪ \.48‬تشكل لجنة تمويل في مجلس تنظيم قØاع المياه تضم أعضاء مستقلين وتعمل على‪:‬‬ ‫ضمان وجود بيانات مالية قابلة لالستيعاب وتتسم بالشفافية واَلعتمادية‪\.‬‬ ‫‪\.I‬‬ ‫ررية عملية إدار‬ ‫ة المخاØر بدَلً من كونها جزئية وبصفة دورية‪\.‬‬ ‫ضمان شمولية واستم ا‬ ‫‪\.II‬‬ ‫المساعدة في تحقيق اَللتز‬ ‫ام برقابة قوية وفاعلة على مستوى المؤسسة‪\.‬‬ ‫‪\.III‬‬ ‫اجعة السياسات المتعلقة باَللتز‬ ‫ام بالقوانين والتعليمات واألخالقيات وتضارب المصالح والتحقيق في سوء التصرف‬ ‫مر‬ ‫‪\.IV‬‬ ‫واَلحتيال‪\.‬‬  ‫تكوين عالقة مباشر‬ ‫ة للتقارير مع مدققي الحسابات الخارجيين‪\.‬‬ ‫‪\.V‬‬ ‫مر‬ ‫اجعة Ø®ØØ ÙˆØªÙ‚Ø§Ø±ÙŠØ± الرقابة الداخلية ونتائجها المهمة‪\.‬‬ ‫‪\.VI‬‬ ‫زر‬ ‫ة المالية (نظام بيسان) من خالل‬ ‫‪ \.49‬نظام المعلومات‪ :‬سيتم مواءمة النظام المستخدم حالياً في سلØØ© المياه الفلسØينية وو ا‬ ‫ع المالية‬‫ع واصدار تقارير المشرو‬ ‫فتح مركز نفقات مستقل يستخدم َلحتساب وتدوين وتقديم تقارير ومر‬ ‫اقبة حسابات المشرو‬ ‫وذلك حسب الفئة والمكون وكل ممول على حدة‪ \.‬قام مجلس تنظيم قØاع المياه بشر‬ ‫اء نظام محاسبي (نظام بيسان)‪\.‬‬ ‫‪ \.50‬التقارير والرقابة المالية‪ :‬تتولى سلØØ© المياه الفلسØينية المسؤولية بشكل أساسي عن كافة األعمال المالية في أجز‬ ‫اء‬ ‫ادات المنحة التي تدعم اإلجر‬ ‫اءات التي تتخذها سلØØ© المياه الفلسØينية‪ ،‬ويتولى مجلس تنظيم قØاع المياه المسؤولية عن‬ ‫إير‬ ‫ادات المنحة التي تدعم اإلجر‬ ‫اءات التي يتخذها مجلس تنظيم قØاع المياه‪ ،‬غير أن سلØØ© المياه‬ ‫ة المالية عن أجز‬ ‫اء إير‬ ‫اإلدار‬ ‫الفلسØينية تتولى المسؤولية عن مجمل تقارير اإلدار‬ ‫ة المالية عن Øريق توحيد التقارير والبيانات المالية للمنحة‪ ،‬وخاصة في‬ ‫القضايا التالية بالتنسيق مع مجلس تنظيم قØاع المياه‪:‬‬ ‫توحيد البيانات المالية للمنحة‪\.‬‬ ‫‪\.I‬‬ ‫ي‪،‬‬‫إعداد موازنات األعمال (Ø®ØØ© اإلنفاق) وبيان تسوية الحساب المصرفي المخصص ربع السنوي والسنوي والشهر‬ ‫‪\.II‬‬ ‫ي وجدول السحوبات والتقارير المالية المرحلية‪\.‬‬‫وبيان اإلنفاق الدور‬ ‫ضمان قبول ترتيبات اإلدار‬ ‫ة المالية بالنسبة للسلØØ© الفلسØينية والبنك الدولي‪\.8‬‬ ‫‪\.III‬‬ ‫‪ \.51‬تتولى لجنة التمويل المسؤولية عن الرقابة المالية في مجلس تنظيم قØاع المياه‪ ،‬حيث تتألف لجنة التمويل من ثالثة‬ ‫أعضاء متمرسين‪ ،‬ويفوض أحد أعضاء اللجنة بالتوقيع وتستعرض لجنة التمويل المعامالت المالية بصفة دورية وتضمن‬ ‫اَلمتثال لإلجر‬ ‫اءات الداخلية‪\.‬‬ ‫‪ \.52‬تصدر سلØØ© المياه الفلسØينية تقارير ربع سنوية وسنوية على النحو المبين أدناه وتسلمها إلى البنك الدولي بهدف مر‬ ‫اقبة‬ ‫ع‪\.‬‬‫تنفيذ المشرو‬ ‫ع أو العام حتى تاريخه) حسب‬ ‫‪ \.53‬تتضمن التقارير المالية بياناً يظهر التدفقات الداخلية الدورية والتر‬ ‫اكمية (حياة المشرو‬ ‫ع وبر‬ ‫امج الدعم التي تقارن‬ ‫المصدر والتدفقات الخارجية حسب تصنيفات النفقات األساسية وفتح واغالق األرصدة النقدية للمشرو‬ ‫جة في الموازنة‪ ،‬كما تتضمن التقارير‬ ‫النفقات الفعلية والمخØØØ© مع تحليل اَلنحر‬ ‫افات المفصلة بين األرقام الفعلية والمدر‬ ‫التوقعات النقدية لألشهر الستة التالية‪:‬‬ ‫(Ø£) بيان مصادر واستخدامات التمويل (حسب فئة المنحة‪/‬اإلجر‬ ‫اء الذي يبين البنك الدولي بمعزل عن الممولين اآلخرين)‪\.‬‬ ‫ع‪\.‬‬‫(ب) بيان الموقف النقدي لتمويل المشرو‬ ‫(ج) بيانات تسوية أرصدة الحسابات المصرفية المتعددة (ومنها الحساب المخصص) إلى األرصدة المصرفية المبينة في بيان‬ ‫مصادر واستخدامات التمويل‪\.‬‬ ‫تتولى سلØØ© النقد الفلسØينية المسؤولية عن اإلدار‬ ‫ة المالية للتمويل الذي يدعم أعمال سلØØ© المياه الفلسØينية في حين يتولى مجلس تنظيم قØاع المياه‬ ‫‪8‬‬ ‫المسؤولية عن اإلدار‬ ‫ة المالية للتمويل الذي يدعم أعمالها‪ ،‬غير أن سلØØ© الميا ه الفلسØينية تتولى المسؤولية عن األعمال المحددة على النحو المشار إليه‬ ‫ع إضافة لذلك الدعم لمجلس تنظيم قØاع المياه في‬‫ع‪ ،‬وتقدم وحدة تنفيذ المشرو‬ ‫في القسم ‪ 28‬أعاله من أجل توحيد بيانات اإلدار‬ ‫ة المالية للمشرو‬ ‫اإلجر‬ ‫اءات المالية والمشتريات عند اللزوم‪\.‬‬ ‫(و) جدول السحب من بيان اإلنفاق الذي يبين السحوبات الفردية المتعلقة بمصروفات حسب منهجية بيان اإلنفاق والرقم‬ ‫المرجعي والتاريخ والمبلغ‪\.‬‬ ‫ى ذات العالقة‪\.‬‬‫(ي) المالحظات على البيانات المالية للسياسات المحاسبية الهامة وكافة المعلومات األخر‬ ‫حلي‪\.‬‬‫‪ \.54‬تبين تقارير الرقابة المالية‪ :‬أدلة المقترضين الصيغ الدَللية للتقرير المالي المر‬ ‫ع في غضون ستة‬‫‪ \.55‬تدقيق الحسابات الخارجي‪ :‬تنص اتفاقية المنحة على تسليم البيانات المالية السنوية المدققة للمشرو‬ ‫أشهر من نهاية السنة المالية‪ ،‬حيث تبين البيانات المالية المدققة المساهمة التي قدمها كل ممول على حدة واإلنفاق ذي‬ ‫العالقة‪ ،‬وتدقق شركة تدقيق حسابات مستقلة تتمتع بالخبر‬ ‫ة ومعترف بها دولياً وتحظى بقبول البنك الدولي البيانات المالية‬ ‫جعية المقبولة لدى البنك‪ ،‬وتسلم تقارير تدقيق‬‫ع وفقاً لمعايير التدقيق الدولية على قاعدة التنافس استناداً إلى Ø§Ù„Ø´Ø±ÙˆØ Ø§Ù„Ù…Ø±â€¬â€«Ù„Ù„Ù…Ø´Ø±Ùˆâ€¬ ‫الحسابات إلى البنك الدولي في غضون ستة أشهر من نهاية كل سنة مالية‪ ،‬وتمول كلفة تدقيق الحسابات تمويالً مشتركاً من‬ ‫ع‪\.‬‬‫ممولي المشرو‬ ‫‪ \.56‬يتوقع أن يعد مدقق الحسابات الخارجي إلى جانب تقرير تدقيق الحسابات رسالة إدار‬ ‫ة تقدم مالحظات وتوصيات للتحسين‬ ‫حسب السجالت واألنظمة ÙˆØ§Ù„Ø¶ÙˆØ§Ø¨Ø ÙˆØ§ÙŽÙ„Ù…ØªØ«Ø§Ù„ للمواثيق المالية في اتفاقية منحة الصندوق اَلئتماني للبنك الدولي‪ \.‬يتضمن‬ ‫نØاق العمل الخاص Ø¨Ø§Ù„Ø´Ø±ÙˆØ Ø§Ù„Ù…Ø±Ø¬Ø¹ÙŠØ© لتدقيق الحسابات الشهادة بإمكانية اَلعتماد على نظام الرقابة الداخلي في سلØØ© المياه‬ ‫ع‪\.‬‬‫الفلسØينية وتقديم أساس إلصدار البيانات المالية للمشرو‬ ‫‪ \.57‬تحتفظ سلØØ© المياه الفلسØينية بسجالت محاسبية منفصلة لكل ممول استناداً إلى اتفاقيات التمويل المشترك ونسبه‬ ‫جعية لتدقيق‬‫ع بحيث يقدم تقرير لكل ممول على حدة‪ ،‬وتتضمن Ø§Ù„Ø´Ø±ÙˆØ Ø§Ù„Ù…Ø±â€¬â€«Ø§Ù„Ù…Ø¦ÙˆÙŠØ©â€ª ،‬وتوحد التقارير على مستوى المشرو‬ ‫ع‬‫ع‪ ،‬وتنشر البيانات المالية السنوية المدققة للمشرو‬‫ي مع اتفاقيات تمويل المشرو‬‫الحسابات التحقق من توافق التمويل المواز‬ ‫للجمهور وفقاً لسياسة اإلفصاح المتبعة لدى البنك الدولي‪\.‬‬ ‫‪ \.58‬التدريب ودعم التنفيذ‪ :‬يقدم البنك الدولي التدريب لموظفي سلØØ© المياه الفلسØينية ومجلس تنظيم قØاع المياه حول أدلة‬ ‫ع‪\.‬‬ ‫ة المالية خالل اإلشر‬ ‫اف على المشرو‬ ‫اءات اإلدار‬ ‫ة المالية واإلنفاق المتبعة لدى البنك الدولي ويقدم دعم اإلدار‬ ‫واجر‬ ‫ثانياً‪ :‬ترتيبات اإلنفاق‬ ‫‪ \.59‬يتبع اإلنفاق من منحة البنك الدولي منهجية قائمة على أساس التعامالت كإجر‬ ‫اءات البنك الدولي التقليدية وتشمل بيان‬ ‫ة واَللتز‬ ‫امات الخاصة‪ ،‬وتسلم Øلبات سحب في مدفوعات خاصة –"الحد األدنى لحجم الØلب" أعاله‬ ‫النفقات والمدفوعات المباشر‬ ‫على النحو المبين في رسالة اإلنفاق‪ -‬إلى البنك الدولي للتسديد للموردين والمستشارين مباشر‬ ‫ة من حساب المنحة‪ ،‬ويبقى‬ ‫ع‪ ،‬ويفتح‬ ‫الحساب المخصص القائم لسلØØ© المياه الفلسØينية ضمن مسؤولية السلØØ© ويستخدم لمصلحتها في أجز‬ ‫اء من المشرو‬ ‫ى‬‫ع‪ ،‬في حين تبقي ترتيبات أخر‬‫حساب مخصص ثان ضمن مسؤولية مجلس تنظيم قØاع المياه للجزئية الخاصة به من المشرو‬ ‫ة والحد األدنى لحجم الØلبات ومتØلبات التوثيق وغير‬ ‫ها) كما هي‪\.‬‬ ‫(منهجيات اإلنفاق المتوفر‬ ‫‪ \.60‬يفتح الحساب المصرفي المخصص بعملة الدو‬ ‫َلر األمريكي ويستند اإليداع األولي إلى توقع مدته أربعة أشهر تعده سلØة‬ ‫المياه الفلسØينية وتسلمه مع Øلب السحب‪ ،‬وتستند النفقات الالحقة من الحساب المخصص إلى بيان اإلنفاق وترفق مع Øلبات‬ ‫السحب والبيانات المصرفية التي تمت تسويتها ونسخ من جميع البيانات المصرفية‪ ،‬وينبغي أن تكون الوثائق المعزز‬ ‫ة لØلبات‬ ‫التسديد المباشر سجالت تقدم بر‬ ‫هاناً على النفقات المستحقة (نسخ من اإليصال وفواتير المورد)‪\.‬‬  ‫‪ \.61‬هناك بعض اإلجر‬ ‫اءات التي يلزم تحقيقها من قبل الهيئات المنفذة (سلØØ© المياه الفلسØينية ومجلس تنظيم قØاع المياه)‬ ‫قبل Øلب الدفعة األولى وهي‪:‬‬ ‫جعية مع البنك الدولي‪\.‬‬‫ع من قبل مجلس تنظيم قØاع المياه بعد اَلتفاق على Ø§Ù„Ø´Ø±ÙˆØ Ø§Ù„Ù…Ø±â€¬â€«ØªØ¹ÙŠÙŠÙ† مسؤول مالي للمشرو‬ ‫‪\.I‬‬ ‫وضع السجالت المحاسبية والتقارير المالية المرحلية من قبل مجلس تنظيم قØاع المياه عن Øريق التفاوض‪\.‬‬ ‫‪\.II‬‬ ‫فتح حساب مصرفي مخصص من قبل سلØØ© المياه الفلسØينية ومجلس تنظيم قØاع المياه وابالغ البنك الدولي‬ ‫‪\.III‬‬ ‫بالمفوضين بالتوقيع على Øلبات السحب‪\.‬‬ ‫جعية وتسلمها إلى مدقق الحسابات‬‫تعد كل من سلØØ© المياه الفلسØينية ومجلس تنظيم قØاع المياه Ø§Ù„Ø´Ø±ÙˆØ Ø§Ù„Ù…Ø±â€¬ ‫‪\.IV‬‬ ‫الخارجي في البنك الدولي إلجر‬ ‫اء المقاصة‪\.‬‬ ‫‪ \.62‬اإلنفاق حسب المكون وترتيبات التمويل المشترك‪ :‬يبين الجدول التالي التمويل اإلضافي المقدم من صندوق الشر‬ ‫اكة‬ ‫اإلئتماني متعدد المانحين لتØوير البنية التحتية ومبالغ التمويل التي يقدمها المشاركون في التمويل مع نسبة التمويل الخاصة‬ ‫ع إلى جانب اإلنفاق حسب المكون للمبلغ‬ ‫من صندوق الشر‬ ‫اكة اإلئتماني متعدد المانحين لتØوير البنية التحتية إلى المشرو‬ ‫ع األصلي‪ \.‬تبين Øلبات السحب المسلمة إلى البنك الدولي مجموعاً قدر‬ ‫ه ‪ %100‬من المبالغ المصروفة‬ ‫المتبقي من المشرو‬ ‫ع وتحديد مصادر التمويل التي يمول البنك الدولي منها حصته حسب نسب التمويل الموجز‬ ‫ة أدناه‪ ،‬وتتضمن السجالت‬ ‫للمشرو‬ ‫ع المدونة بصور‬ ‫ة منفصلة وتحدد المبالغ المصروفة المتعلقة بكل ممول‪\.‬‬ ‫المحاسبية إجمالي نفقات المشرو‬ ‫صافي‬ ‫ع التمويل‬‫مجمو‬ ‫ع اْلصلي‬‫التمويل المتبقي من المشرو‬ ‫التمويل اإلضافي‬ ‫التمويل اإلضافي‬ ‫ع‬‫المجمو‬ ‫المتبقي من‬ ‫من النسبة‬ ‫ع‬‫المجمو‬ ‫البنك الدولي‬ ‫التعاون‬ ‫ع اْلصلي‬‫المشرو‬ ‫المئوية للتمويل‬ ‫(صندوق‬ ‫اْللماني‬ ‫الوكالة‬ ‫البنك الدولي‬ ‫البنك الدولي‬ ‫المقدم من‬ ‫الشر‬ ‫اكة‬ ‫ي)‬‫(مواز‬ ‫الفرنسية‬ ‫(صندوق‬ ‫(الصندوق‬ ‫صندوق الشر‬ ‫اكة‬ ‫اإلئتماني‬ ‫للتنمية‬ ‫الشر‬ ‫اكة‬ ‫اَلئتماني‬ ‫اإلئتماني متعدد‬ ‫المكونات‬ ‫متعدد المانحين‬ ‫اإلئتماني متعدد‬ ‫للضفة‬ ‫المانحين لتØوير‬ ‫لتØوير البنية‬ ‫المانحين لتØوير‬ ‫الغربية‬ ‫البنية التحتية‬ ‫التحتية)‬ ‫البنية التحتية)‬ ‫وغز‬ ‫ة)‬ ‫المبلغ المعادل (مليون دوَلر أمريكي)‬ ‫المبلغ المعادل (مليون دوَلر أمريكي)‬ ‫المكون األول‪ :‬الدعم‬ ‫‪2\.04‬‬ ‫‪1\.34‬‬ ‫‪0\.148‬‬ ‫‪0\.976‬‬ ‫‪0\.22‬‬ ‫‪100%‬‬ ‫‪0\.7‬‬ ‫‪0\.7‬‬ ‫‪0\.0‬‬ ‫ي والمساعدة‬‫اَلستشار‬ ‫الفنية وبناء قدر‬ ‫ات‬ ‫سلØØ© المياه‬ ‫الفلسØينية‬ ‫‪0\.9‬‬ ‫‪0\.0‬‬ ‫‪0\.0‬‬ ‫‪0\.0‬‬ ‫‪0\.0‬‬ ‫‪0\.0‬‬ ‫‪0\.9‬‬ ‫‪0\.6‬‬ ‫‪0\.3‬‬ ‫المساعدة التكميلية‬ ‫للدر‬ ‫اسات والتدريب‬ ‫والبناء المؤسسي‬ ‫لمجلس تنظيم قØاع‬ ‫المياه‬ ‫‪0\.0‬‬ ‫‪0\.0‬‬ ‫‪0\.0‬‬ ‫‪0\.0‬‬ ‫‪0\.0‬‬ ‫‪0\.0‬‬ ‫‪0\.00‬‬ ‫‪0\.0‬‬ ‫‪0\.0‬‬ ‫المكون الثاني (Ø£)‪:‬‬  ‫صندوق الدر‬ ‫اسات‬ ‫والتدريب‬ ‫المساعدة التكميلية‬ ‫‪0\.9‬‬ ‫‪0\.0‬‬ ‫‪0\.0‬‬ ‫‪0\.0‬‬ ‫‪0\.0‬‬ ‫‪67%‬‬ ‫‪0\.9‬‬ ‫‪0\.6‬‬ ‫‪0\.3‬‬ ‫للمكون الثاني (ب)‪:‬‬ ‫البناء المؤسسي‬ ‫لمجلس تنظيم قØاع‬ ‫المياه‬ ‫‪0\.74‬‬ ‫‪0\.04‬‬ ‫‪0\.0‬‬ ‫‪0\.0‬‬ ‫‪0\.04‬‬ ‫‪100%‬‬ ‫‪0\.7‬‬ ‫‪0\.7‬‬ ‫‪0\.0‬‬ ‫المكون الثالث‪ :‬إدار‬ ‫ة‬ ‫ع‬‫المشرو‬ ‫‪0\.34‬‬ ‫‪0\.04‬‬ ‫‪0\.0‬‬ ‫‪0\.0‬‬ ‫‪0\.04‬‬ ‫‪0\.3‬‬ ‫‪0\.3‬‬ ‫‪0\.0‬‬ ‫المكون الثالث (Ø£)‪:‬‬ ‫اإلدار‬ ‫ة المالية لسلØة‬ ‫المياه الفلسØينية‬ ‫‪0\.4‬‬ ‫‪0\.0‬‬ ‫‪0\.0‬‬ ‫‪0\.0‬‬ ‫‪0\.0‬‬ ‫‪0\.4‬‬ ‫‪0\.4‬‬ ‫‪0\.0‬‬ ‫المكون الثالث (Ø£)‪:‬‬ ‫اإلدار‬ ‫ة المالية لمجلس‬ ‫تنظيم قØاع المياه‬ ‫‪3\.68‬‬ ‫‪1\.38‬‬ ‫‪0\.148‬‬ ‫‪0\.967‬‬ ‫‪0\.26‬‬ ‫‪87%‬‬ ‫‪2\.3‬‬ ‫‪2\.0‬‬ ‫‪0\.3‬‬ ‫ع‬‫المجمو‬ ‫ثالثاً‪ :‬المشتريات‬ ‫ع بناء قدر‬ ‫ات قØاع المياه على التمويل اإلضافي مع بضعة تعديالت‪،‬‬ ‫‪ \.63‬تنØبق نفس ترتيبات المشتريات المØبقة لمشرو‬ ‫ع وفقاً ألدلة مشتريات السلع واألشغال والخدمات غير‬‫حيث تنفذ مشتريات السلع والخدمات اَلستشارية في ظل المشرو‬ ‫اَلستشارية بموجب قروض البنك الدولي لإلعمار والتنمية وأرصدة ومنح منظمة التنمية الدولية التي نشر‬ ‫ها البنك الدولي في‬ ‫شهر يناير ‪ 2011‬والمنقحة في شهر يوليو ‪ ،2014‬وأدلة اختيار وتوظيف المستشارين بموجب قروض البنك الدولي لإلعمار‬ ‫والتنمية وأرصدة ومنح منظمة التنمية الدولية التي نشر‬ ‫ها البنك الدولي في شهر يناير ‪ 2011‬والمنقحة في شهر يوليو ‪،2014‬‬ ‫واتفاقية المنحة وخØØ© المشتريات التي اعتمدها البنك الدولي‪\.‬‬ ‫ع‪ ،‬حيث‬‫ع في يد سلØØ© المياه الفلسØينية من خالل وحدة تنفيذ المشرو‬‫‪ \.64‬تبقي المسؤولية الشاملة عن تنفيذ مشتريات المشرو‬ ‫ع‬‫ع وتضمن تنفيذ مشتريات المشرو‬ ‫ة باعتبار‬ ‫ها النظير األساسي للبنك الدولي في كافة جوانب مشتريات المشرو‬ ‫تعمل هذه األخير‬ ‫ع المسؤولية عن تنفيذ‬‫بموجب اتفاقية المنحة وخØØ© المشتريات‪ \.‬يتولى مجلس تنظيم قØاع المياه بمساعدة وحدة تنفيذ المشرو‬ ‫مشتريات أعماله الخاصة بموجب المكون الثاني‪\.‬‬ ‫ع اختصاصي مشتريات‬ ‫‪ \.65‬كان أداء مشتريات Ø®ØØ© بناء قدر‬ ‫ات قØاع المياه مرضياً‪ ،‬حيث يوجد لدى وحدة تنفيذ المشرو‬ ‫متمرس يتمتع بمعرفة جيدة في أدلة البنك الدولي للمشتريات والمستشارين‪ \.‬يعتبر مجلس تنظيم قØاع المياه مؤسسة منشأة حديثا‬ ‫ً‬ ‫في مرحلة وضع لوائحه الداخلية وأنظمته واجر‬ ‫اءاته‪ \.‬سيتم تعيين مسؤول مشتريات مؤهل في مجلس تنظيم قØاع المياه لتولي‬ ‫ع‪ ،‬ويدعم التمويل اإلضافي تنفيذ األعمال ذات األولوية في اإلØار العام لجهود إصالح‬‫المشتريات بدعم من وحدة تنفيذ المشرو‬ ‫رر‬ ‫ات على أعلى المستويات الحكومية‪ \.‬يمكن أن يؤدي غياب التنسيق الجيد بين مجلس‬ ‫قØاع المياه‪ ،‬ويتØلب ذلك اتخاذ ق ا‬  ‫تنظيم قØاع المياه وسلØØ© المياه الفلسØينية ومقاومة التغيير من قبل أولئك الر‬ ‫اغبين في الحفاظ على الوضع القائم إلى تأخير‬ ‫ع‪ ،‬حيث يصنف Ø®Øر المشتريات للتمويل اإلضافي على أنه كبير‪\.‬‬ ‫عملية الشر‬ ‫اء وابØاء تنفيذ المشرو‬ ‫‪ \.66‬يمول التمويل اإلضافي بصفة أساسية رزم المساعدة الفنية وهي وضع اللوائح الداخلية والتعليمات واجر‬ ‫اءات العمل‬ ‫اتيجيات التواصل وحمالت التوعية والسلع (األثاث والتجهيز‬ ‫ات المكتبية)‪ \.‬تخضع‬ ‫المعيارية ووضع نظام المعلومات اإلدارية واستر‬ ‫ع Ø®ØØ© مشتريات ذات‬ ‫كافة Ø§Ù„Ø´Ø±ÙˆØ Ø§Ù„Ù…Ø±Ø¬Ø¹ÙŠØ© لرزم المساعدة الفنية لر‬ ‫أي البنك الدولي المسبق‪ ،‬وأعدت وحدة تنفيذ المشرو‬ ‫ع الموجز‬ ‫ة أدناه بصفة‬ ‫مدخالت من مجلس تنظيم قØاع المياه وسيتم استكمالها خالل مرحلة التقييم‪ ،‬وسيتم تحديث وثيقة المشرو‬ ‫سنوية على األقل أو عند اَلقتضاء لبيان اَلحتياجات الفعلية لتنفيذ البرنامج والتحسينات على القدر‬ ‫ات المؤسسية‪\.‬‬ ‫‪ \.67‬خØØ© المشتريات الموجز‬ ‫ة (تستكمل َلحقاً)‬ ‫(Ø£) لمحة عامة‬ ‫ع بناء قدر‬ ‫ات قØاع المياه‬ ‫ع‪ :‬التمويل اإلضافي لمشرو‬‫‪ \.1‬اسم المشرو‬ ‫‪ \.2‬الفتر‬ ‫ة التي تغØيها Ø®ØØ© المشتريات‪ :‬يونيو ‪-2015‬ديسمبر ‪2016‬‬ ‫(ب) السلع‬ ‫ات المشتريات لمر‬ ‫اجعة مسبقة من البنك الدولي على النحو‬ ‫رر‬ ‫‪ \.1‬منهجيات المشتريات وحدود المر‬ ‫اجعة المسبقة‪ :‬تخضع ق ا‬ ‫المبين في الملحق ‪ 1‬من أدلة المشتريات‪:‬‬ ‫منهجية المشتريات‬ ‫الفئة‬ ‫حدود المر‬ ‫اجعة المسبقة (مبلغ معادل‬ ‫الحد (مبلغ معادل بالدوَلر اْلمريكي)‬ ‫بالدوَلر اْلمريكي)‬ ‫َل يوجد‬ ‫‪<500,000‬‬ ‫العØاءات التنافسية المحلية‬ ‫السلع‬ ‫َل يوجد‬ ‫‪<100,000‬‬ ‫التسوق‬ ‫جميع العقود‬ ‫َل يوجد حد‬ ‫التعاقد المباشر‬ ‫ع‬‫‪ \.2‬موجز رزم المشتريات المخØØØ© خالل الـ‪ 18‬شهر األولى بعد تفعيل المشرو‬ ‫‪7‬‬ ‫‪6‬‬ ‫‪5‬‬ ‫‪4‬‬ ‫‪3‬‬ ‫‪2‬‬ ‫‪1‬‬ ‫مالحظات‬ ‫مر‬ ‫اجعة البنك‬ ‫اْلفضلية المحلية‬ ‫منهجية اَلختيار‬ ‫التكلفة التقديرية‬ ‫الوصف‬ ‫الرقم‬ ‫الدولي‬ ‫(نعم‪َ/‬ل)‬ ‫(‪ 000‬دوَلر‬ ‫المرجغي‬ ‫(سابقة‪َ/‬لحقة)‬ ‫أمريكي)‬ ‫َلحقة‬ ‫َل‬ ‫التسوق‬ ‫‪145‬‬ ‫تجهيز‬ ‫ات وأثاث‬ ‫‪1\.‬‬  ‫مكتبي وبر‬ ‫امج‬ ‫حاسوب (رزم‬ ‫متعددة)‬ ‫‪145‬‬ ‫ع‬‫المجمو‬ ‫(ج) اختيار المستشارين‬ ‫ات اَلختيار لمر‬ ‫اجعة مسبقة من البنك الدولي على النحو المبين‬ ‫رر‬ ‫‪ \.1‬منهجيات اَلختيار وحدود المر‬ ‫اجعة المسبقة‪ :‬تخضع ق ا‬ ‫في الملحق ‪ 1‬من أدلة اختيار وتوظيف المستشارين‪:‬‬ ‫حد المر‬ ‫اجعة المسبقة‬ ‫الحد‬ ‫منهجية اَلختيار‬ ‫الفئة‬ ‫َلر األمريكي)‬ ‫(مبلغ معادل بالدو‬ ‫(مبلغ معادل بالدو‬ ‫َلر‬ ‫األمريكي)‬ ‫َلر أمريكي‬ ‫العقود التي تتجاوز قيمتها ‪ 500,000‬دو‬ ‫َل يوجد حد‬ ‫شركات الخدمات اَلختيار القائم على‬ ‫أساس النوعية والتكلفة‬ ‫اَلستشارية‬ ‫َل يوجد‬ ‫‪<300,000‬‬ ‫عينات تأهيل‬ ‫العمالء‪/‬اَلختيار عن‬ ‫Øريق الموازنة‬ ‫الثابتة‪/‬اَلختيار عن Øريق‬ ‫التنافس المحلي‬ ‫كافة العقود‬ ‫َل يوجد حد‬ ‫مصدر واحد‬ ‫العقود التي تتجاوز قيمتها ‪ 200,000‬دو‬ ‫َلر أمريكي‬ ‫َل يوجد حد‬ ‫التنافس الدولي‬ ‫اْلفر‬ ‫اد‬ ‫كافة العقود‬ ‫َل يوجد حد‬ ‫مصدر واحد‬ ‫ي الخدمات والتي تقدر كلفتها بأقل من‬ ‫ة مؤلفة بالكامل من مستشارين محليين‪ :‬تتألف القائمة الموجز‬ ‫ة لمستشار‬ ‫‪ \.2‬قائمة موجز‬ ‫َلر أو ما يعادلها حسب العقد بالكامل من مستشارين محليين وفقاً ألحكام الفقر‬ ‫ة ‪ 2\.7‬من أدلة المستشارين‪\.‬‬ ‫‪ 300,000‬دو‬ ‫‪ \.3‬المهام اَلستشارية ذات منهجيات اَلختيار وجداول زمنية‪\.‬‬  ‫‪6‬‬ ‫‪5‬‬ ‫‪4‬‬ ‫‪3‬‬ ‫‪2‬‬ ‫‪1‬‬ ‫مالحظات‬ ‫مر‬ ‫اجعة البنك‬ ‫منهجية‬ ‫التكلفة التقديرية‬ ‫الوصف‬ ‫الرقم‬ ‫الدولي‬ ‫اَلختيار‬ ‫(‪ 000‬دوَلر‬ ‫المرجغي‬ ‫(سابقة‪َ/‬لحقة)‬ ‫أمريكي)‬ ‫َلحقة‬ ‫اَلختيار القائم‬ ‫‪250‬‬ ‫نظام معلومات المياه‬ ‫‪1\.‬‬ ‫على أساس‬ ‫النوعية والتكلفة‬ ‫َلحقة‬ ‫اَلختيار القائم‬ ‫‪100‬‬ ‫لوائح وأدلة سلØØ© المياه الفلسØينية في‬ ‫‪2\.‬‬ ‫على أساس‬ ‫اإلØار العام للخØØ© اإلستر‬ ‫اتيجية للسلØة‬ ‫النوعية والتكلفة‬ ‫َلحقة‬ ‫اَلختيار القائم‬ ‫‪50‬‬ ‫أدوات اَلتصاَلت الخاصة بسلØØ© المياه‬ ‫‪3\.‬‬ ‫على أساس‬ ‫الفلسØينية‬ ‫النوعية والتكلفة‬ ‫َلحقة‬ ‫اَلختيار القائم‬ ‫‪150‬‬ ‫تدريب موظفي سلØØ© المياه الفلسØينية‬ ‫‪4\.‬‬ ‫على أساس‬ ‫الذين تم إعادة توزيعهم‬ ‫النوعية والتكلفة‬ ‫َلحقة‬ ‫التنافس الدولي‬ ‫‪30‬‬ ‫خØØ© عمل مجلس تنظيم قØاع المياه‬ ‫‪5\.‬‬ ‫َلحقة‬ ‫اَلختيار القائم‬ ‫‪100‬‬ ‫اللوائح الداخلية واجر‬ ‫اءات العمل المعيارية‬ ‫‪6\.‬‬ ‫على أساس‬ ‫الخاصة بمجلس تنظيم قØاع المياه‬ ‫النوعية والتكلفة‬ ‫َلحقة‬ ‫اَلختيار القائم‬ ‫‪50‬‬ ‫نظام معلومات مجلس تنظيم قØاع المياه‬ ‫‪7\.‬‬ ‫على أساس‬ ‫وموقعها على شبكة اإلنترنت‬ ‫التكلفة‬  ‫َلحقة‬ ‫اَلختيار القائم‬ ‫‪40‬‬ ‫تدقيق الحسابات الخارجي‬ ‫‪8\.‬‬ ‫على أساس‬ ‫التكلفة‬ ‫المنخفضة‬ ‫ع‬‫المجمو‬ ‫ر‬ ‫ابعاً‪ :‬اآلثار البيئية واَلجتماعية‬ ‫ع حالياً على أنه من الفئة البيئية (ج) باعتبار‬ ‫ه يتضمن أساساً أعمال تØوير تمويل مؤسسي وتدريب وبناء‬ ‫‪ \.68‬يصنف المشرو‬ ‫اسات الممولة تصميم واعداد و‪/‬أو تنفيذ استثمار‬ ‫ات محددة أو‬ ‫ات‪ ،‬و‬ ‫َل تتضمن اإلصالحات السياسية القØاعية و‪/‬أو الدر‬ ‫قدر‬ ‫اسات في حد ذاتها إلى جانب األعمال المحتملة الناشئة عن تلك الدر‬ ‫اسات إلى‬ ‫اض مستقبلية‪ ،‬و‬ ‫َل يتوقع أن تؤدي الدر‬ ‫أعمال إقر‬ ‫أية آثار بيئية سلبية‪\.‬‬ ‫ع األصلي‪-‬‬ ‫ع بناء قدر‬ ‫ات قØاع المياه والسياسة المتعلقة بإعادة التسوية القسرية والعملية ‪– 4\.12‬كالمشرو‬ ‫‪َ \.69‬ل ينØبق مشرو‬ ‫ع بناء قدر‬ ‫ات قØاع المياه على المساعدة‬ ‫على التمويل اإلضافي كاألعمال الممولة بموجب التمويل اإلضافي‪ ،‬حيث يركز مشرو‬ ‫ع إلى آثار‬‫ى‪َ :‬ل تؤدي األعمال الممولة في ظل هذا المشرو‬ ‫ات أية أشغال مدنية‪ ،‬وبعبار‬ ‫ة أخر‬ ‫الفنية و‬ ‫َل يتضمن بناء القدر‬ ‫ي لألر‬ ‫اضي الذي يؤدي إلى التهجير أو فقدان المأوى أو إمكانية‬ ‫اقتصادية واجتماعية مباشر‬ ‫ة ناشئة عن اَلستمالك القسر‬ ‫الوصول إلى األمالك أو خسار‬ ‫ة مصادر الدخل أو سبل المعيشة‪ ،‬سواء انتقل األشخاص المتأثرون إلى مكان آخر أم َل‪\.‬‬  ‫ِلقØاع‬ ‫السادس‪ \.‬قَانون ِ‬ ‫المياه والهيكلية المؤسسية ل‬ ‫م َ‬ ‫لحق َّ‬ ‫اْ‬ ‫لُ‬ ‫ة الموارد المائية في فلسØين لرفع كفاءتها وجودتها‪ ،‬والحفاظ عليها وحمايتها ِ‬ ‫من التلوث‬ ‫‪ \.70‬يهدف قانون المياه لتØوير وادار‬ ‫ة الموارد المائية‪\.‬‬ ‫خدمات ا ْلمياه عبر تØبيق مبادئ شاملة ومستدامة ِ‬ ‫إلدار‬ ‫والنضوب‪ ،‬عدا عن تحسين مستوى َ‬ ‫ها في قانون ا ْلمياه على أنها تتألف ِ‬ ‫من‪:‬‬ ‫َّة كما جاء ِ‬ ‫ذكر‬ ‫جلي‬ ‫ِ‬ ‫ِ‬ ‫وينبغي تحقيق هذا ا ْلهَدف من خالل هيكلية قØاعية َ‬ ‫وترفع‬ ‫ِ‬ ‫من ِ‬‫انيتها ِ‬ ‫صفة اعتبارية‪ ،‬تستمد ِ‬ ‫‪ \.71‬سلØØ© المياه الفلسØينية بِصفتها مؤسسة عامة ذات ِ‬ ‫الميز‬ ‫انية ا ْلعامة للحكومة‪َ ،‬‬ ‫ميز‬ ‫ُ‬ ‫ُ‬ ‫اء‪ ,‬عدا عن إضØالعها بالمسؤوليات التَّالية‪:‬‬ ‫ِس ا ْل َ‬ ‫وزر‬ ‫مجل‬ ‫تقارير ِ‬ ‫ها ل َ‬ ‫ة الموارد المائية؛‬ ‫ة الموارد المائية وتَنفيذ المبادئ الشاملة والمستدامة ِ‬ ‫في إدار‬ ‫َِ‬ ‫د ار‬ ‫أ‪ \.‬إ‬ ‫ها والتحقق ِ‬ ‫من تنفيذها بالتنسيق‬ ‫ار‬‫اتيجيات والخØØ Ø§Ù„Ø¹Ø§Ù…Ø© الخاصة بالمياه‪ ،‬والسعي إلقر‬ ‫السياسات واَلستر‬ ‫ِعداد ِ‬ ‫ب‪ \.‬إ‬ ‫ِمجلس الوزر‬ ‫اء؛‬ ‫والتعاون مع األØر‬ ‫اف المعنية‪ ،‬باإلضافة لتقديم تقارير دورية حول الوضع ل‬ ‫ِ‬ ‫اح مخصصات المياه لمختلف القØاعات‪ ،‬وأولويات استغاللها بِ ً‬ ‫ناء على المبادئ‬ ‫ت‪َ \.‬‬ ‫مسح الموارد المائية المتاحة‪ ،‬واقتر‬ ‫َّالة ِ‬ ‫للØلب على المياه؛‬ ‫ِدار‬ ‫ة فَع‬ ‫اإلدارية الشاملة والمستدامة لضمان إ‬ ‫ِدر‬ ‫ء‬ ‫من ِ‬ ‫خالل إقامة مناØق ِ‬ ‫حماية ل‬ ‫ث‪ِ \.‬‬ ‫حماية الموارد المائية والبيئة المحيØØ© بها بالتعاون والتنسيق مع السلØات المعنية ِ‬ ‫التلوث؛‬ ‫ج‪ \.‬تَرخيص وتØوير اَلستفادة من الموارد المائية بالتعاون والتنسيق مع السلØات المعنية؛‬ ‫من حيث جدواها‪ ،‬ووضع معاير ضابØØ© للجودة‪،‬‬ ‫لتخØÙŠØ ÙˆØªÙ‚ÙŠÙŠÙ… مشاريع المياه والمياه العادمة ِ‬ ‫سياسة عامة ِ‬‫داد ِ‬ ‫عَ‬‫ِْ‬ ‫ح‪ \.‬إ‬ ‫والمواصفات التقنية ورصد تنفيذها؛‬ ‫اتخاذ التدابير واعداد الخØØ Ø§Ù„Ø§Ù„Ø²Ù…Ø© بالتعاون والتنسيق مع السلØات المعنية ِ‬ ‫إلنشاء وتØوير الشركة الوØنية للمياه‬ ‫خ‪َ \.‬‬ ‫ومر‬ ‫افق المياه المحلية ؛‬ ‫اف على تنظيم حمالت التوعية التي تدور في فلك موضوعة المياه والمياه العادمة‪ ،‬وترويج استخدام تجهيز‬ ‫ات‬ ‫د‪ \.‬اَلشر‬ ‫توفير المياه بالتعاون والتنسيق مع السلØات المعنية؛‬ ‫امج التعاون الفني في مجال اإلدار‬ ‫ة المتكاملة والمستدامة‬ ‫ذ‪ \.‬العمل على تØوير وتنسيق وتحقيق مشاركة فعالة في بر‬ ‫للموارد المائية على األصعدة الدولية‪ ،‬واإلقليمية‪ ،‬والثنائية والمحلية؛‬ ‫ر‪ \.‬التعاون مع السلØات المعنية لخلق مناخ مستقر يفضي َلستثمار‬ ‫ات ترمي لتشجيع استثمار القØاع الخاص في قØاع‬ ‫المياه‪ ،‬والقيام بما يلزم باإلصالح المؤسسي‪ ،‬والتنظيمي واَلقتصادي لتحفيز الشر‬ ‫اكة مع القØاع الخاص وفقاً لألنظمة‬ ‫الصادر‬ ‫ة في هذا الخصوص‪\.‬‬  ‫مجلس الوزر‬ ‫اء‪ \.‬ويتمتع المجلس بصفة اعتبارية واستقاللية مالية‬ ‫ُنشأَ مجلس تنظيم ِ‬ ‫قØاع ِ‬ ‫المياه بِموجب قر‬ ‫‪ \.72‬أ ِ‬ ‫صادر َ‬ ‫عن َ‬ ‫ار َ‬ ‫وادارية‪ \.‬ويتجسد الهدف األساسي للمجلس برصد الشؤون المتعلقة بعمل مزودي خدمات المياه بما في ذلك‪ ،‬انتاج الخدمات‪،‬‬ ‫يَ‬ ‫سعه تحملها‪\.‬‬ ‫ونقلها‪ ،‬وتوزيعها‪ ،‬واستهالكها بغة ضمان جودة وكفاءة خدمات المياه والمياه العادمة المقدمة للمستهلك بأسعار َ‬ ‫ها‪:‬‬ ‫ذكر‬‫كما ويضØلع المجلس بالمهام التَّالي ِ‬ ‫ة خدمات المياه والمياه العادمة‪ ،‬عدا عن تقرير نصف سنوي‬ ‫أ‪ \.‬تقديم تقرير نِصف سنوي لمجلس الوزر‬ ‫اء بشأن أداء إدار‬ ‫آخر حول أنشØØ© المجلس وجودة أدائه؛‬ ‫يمثلون القØاع العام والقØاع‬ ‫ِ‬ ‫رئيس وستة أعضاء أساسيين مختصين ومؤهلين ُ‬ ‫ة المجلس من َ‬‫يتكون مجلس إدار‬‫ب‪َ \.‬‬ ‫يصدر عن الرئيس بناء على تنسيب وتوصية مجلس‬ ‫َلء األعضاء بِموجب قر‬ ‫ار َ‬ ‫ويعي‬ ‫َّن هؤ‬ ‫الخاص والمجتمع المدني‪ُ \.‬‬ ‫الوزر‬ ‫اء؛‬ ‫ِتقديم خدمات المياه والمياه‬ ‫ِيف شبكات تزويد المياه وغير‬ ‫ها ِ‬ ‫من الخدمات الالزمة ل‬ ‫عار خدمات المياه‪ ،‬وتَ َ‬ ‫كال‬ ‫أس َ‬ ‫ِ قر‬ ‫ار ْ‬ ‫ت‪ \.‬إ‬ ‫العادمة‪ ،‬كما ويقع على عاتقه رصد هذه التكاليف لضمان امتثالها للسياسة التي أقرتها سلØØ© المياه الفلسØينية؛‬ ‫مشغل يقيم أو يدير مرفق لتزويد‪ ،‬أو تحلية أو معالجة المياه‪ ،‬أو تجميع‬ ‫ألي ُ‬ ‫افق المياه المحلية و‬ ‫ث‪ \.‬إصدار التَّر‬ ‫اخيص لمر‬ ‫اخيص وفقاً ألحكام هذا القانون و األنظمة الصادر‬ ‫ة عن‬ ‫ومعالجة المياه العادمة‪ \.‬كما يضØلع المجلس بجبي رسوم التر‬ ‫اء؛‬‫مجلس الوزر‬ ‫َ‬ ‫ات المنصوص عليها في التصاريح والتر‬ ‫اخيص؛‬ ‫ي اَلمتثال للشروØ‪ ،‬والمتØلبات والمؤشر‬‫ج‪ \.‬رصد وتحر‬ ‫ة عن مجلس الوزر‬ ‫اء بهذا‬ ‫ح‪ \.‬إعداد بر‬ ‫امج لتحفيز أداء مزودي خدمات المياه والمياه العادمة وفقاً لألنظمة الصادر‬ ‫الخصوص؛‬ ‫ار األنظمة الداخلية واألنظمة المالية واإلدارية والهيكل التنظيمي الخاص بالمجلس (بما في ذلك الميز‬ ‫انية السنوية)‬ ‫خ‪ \.‬إقر‬ ‫ها َ‬ ‫حسب األصول؛‬ ‫وتقديمها لمجلس الوزر‬ ‫اء إلصدار‬ ‫د‪ \.‬رصد العمليات التشغيلية المتعلقة بإنتاج‪ ،‬ونقل وتوزيع المياه باإلضافة لرصد العمليات التشغيلية الخاصة بإدار‬ ‫ة المياه‬ ‫العادمة؛‬ ‫ذ‪ \.‬رصد اتفاقيات تزويد المياه‪ ،‬والتحقق من كون تكاليف انتاج‪ ،‬ونقل‪ ،‬وتوزيع المياه ومعالجة المياه العادمة تأخذ في‬ ‫الحسبان كافة مصالح األØر‬ ‫اف المعنيين؛‬ ‫ر‪ \.‬وضع معاير Ù„Ø¶Ø¨Ø Ø¬ÙˆØ¯Ø© تزويد الخدمات التقنية واإلدارية التي يقدمها مزودي الخدمات للمستهلكين‪ ،‬ونشر‬ ‫ها للعموم‬ ‫بِما يتماشى مع القوانين واألنظمة ذات الصلة؛‬ ‫رصد امتثال الشركة الوØنية للمياه ومزودي خدمات المياه بالمعاير المعتمدة لتزويد خدمات المياه والصرف الصحي؛‬‫ز‪َ \.‬‬  ‫س‪ \.‬إنشاء قاعدة بيانات للمعلومات اَلحصائية والمالية ونشر‬ ‫ها دورياً؛‬ ‫ش‪ \.‬رفع مظالم المستهلكين ضد مزودي خدمات المياه؛‬ ‫اجعة أداء الخØØ© الخاصة بتØوير الØاقم وذلك مر‬ ‫ة واحدة‬ ‫اء مر‬ ‫اجعة عامة ألداء المجلس وأقسامه باإلضافة لمر‬ ‫ص‪ \.‬إجر‬ ‫اء‪ ،‬ومستشارين وفنيين ذوي باع وخبر‬ ‫ات عتيدة لتنفيذ المهام المنوØØ© بهم؛‬ ‫على األقل في السنة‪ ،‬والتعاقد مع خبر‬ ‫ض‪ \.‬وضع أساس ناظم لمدى ونسبة مشاركة السلØات المحلية بالتجمعات العامة لمر‬ ‫افق المياه المحلية‪ ،‬وضمان تØبيق‬ ‫هذا األساس وفقاً ألحكام القانون واألنظمة ذات الصلة؛‬ ‫يخصص لهذا الغرض؛‬ ‫ِ‬ ‫Ø‪ \.‬تُودع الموارد المالية الخاصة بالمجلس في حساب ُ‬ ‫اخيص والخدمات التي يقدمها المجلس وفقاً ألحكام قانون‬ ‫‪ \.73‬تتكون الموارد المالية الخاصة بالمجلس ِ‬ ‫من؛ (Ø£) رسوم التر‬ ‫ها مجلس الوزر‬ ‫اء‪:‬‬ ‫ىُ‬ ‫يقر‬ ‫المياه‪( ،‬ب) والمنح‪ ،‬والمساعدات وأي موارد مالية أخر‬ ‫اجع األخير‬ ‫ة شركة‬ ‫ر‬ ‫أ‪ \.‬إن المجلس مسؤول عن نفقاته‪ ،‬كما ويقع على عاتقه إعداد تقارير مالية سنوية على أن تَُ‬ ‫تدقيق خارجية حسب األصول‪ \.‬من ثم تُقدم التقارير المدققة للسلØات المعنية‪\.‬‬ ‫ار بِقانون المياه‪ ،‬وعليه فإنه َل يجوز لها تعديل صفتها القانونية‬ ‫‪ \.74‬الشركة الوØنية للمياه شركة عامة أُنشأت وفق أحكام قر‬ ‫َِل بالقانون‪ \.‬وتضØلع الشركة بالمسؤوليات األساسية اآلتي ذكر‬ ‫ها‪:‬‬ ‫إ‬ ‫أ‪ \.‬تزويد وبيع المياه السائبة لمصالح المياه‪ ،‬والسلØات المحلية‪ ،‬ومجالس وجمعيات المياه المشتركة‪ \.‬كما ويقع على‬ ‫اج المياه ِ‬ ‫من مواردها‪ ،‬وتحلية المياه‪ ،‬ونقل المياه السائبة وفقاً للتصريح الصادر عن السلØØ© بهذا‬ ‫كاهلها استخر‬ ‫الشأن؛‬ ‫ة وتحسين وتنمية أي أصول تتلقها الشركة ِ‬ ‫من السلØة؛‬ ‫ب‪ \.‬إدار‬ ‫ت‪ \.‬ضمان سالسة العالقات التجارية َ‬ ‫بين المستهلكين والمزودين؛‬ ‫ث‪ \.‬توفير َ‬ ‫كافة الوسائل الالزمة لتØوير األنشØØ© وأعمال البنى التحتية المرتبØØ© بتزويد المياه السائبة؛‬ ‫ها؛‬ ‫ار‬‫قر‬ ‫ِ‬ ‫ج‪ \.‬إعداد مقترحات للتعرفة الخاصة بخدمة تزويد المياه وغير‬ ‫ها من الخدمات ذات الصلة وتقديمها للمجلس إل َ‬ ‫ة‪ ،‬وكفاءة‬ ‫ة الشركة‪ ،‬ويتكون األخير ِ‬ ‫من رئيس وأربعة أعضاء محليين ذوي خبر‬ ‫يشرف مجلس اإلدار‬ ‫ة على إدار‬ ‫ح‪ُ \.‬‬ ‫ار صادر عن مجلس الوزر‬ ‫اء بناء على توصية من سلØØ© المياه بذلك؛‬ ‫ي تعينهم بموجب قر‬‫ومؤهل على أن يجر‬ ‫رر‬ ‫ات الخاصة بالشركة‪ ،‬كما وأن المجلس مؤتمن على‬ ‫يعد مجلس إدار‬ ‫ة الشركة الجهة العليا المخولة بتبني الق ا‬ ‫خ‪ُ \.‬‬ ‫ة عملياتها الر‬ ‫امية لتØوير السياسة المعتمدة لدى سلØØ© المياه‪ \.‬ويتمتع مجلس‬ ‫تنفيذ سياسات الشركة ومر‬ ‫اقبة إدار‬ ‫ة الشركة بكافة الصالحيات الالزمة إلنجاز مسؤوليات الشركة وفقاً لقر‬ ‫ار بقانون المياه‪\.‬‬ ‫إدار‬  ‫د‪ \.‬على مجلس إدار‬ ‫ة الشركة التعاقد مع مدقق معتمد يضØلع بتدقيق الموارد المالية للشركة‪ ،‬وتقديم التقارير السنوية‬ ‫لمجلس إدار‬ ‫ة الشركة؛‬ ‫ة الشركة تسليم تقارير ربعية لمجلس الوزر‬ ‫اء ومجلس تنظيم قØاع المياه بشأن الشؤون المالية‪،‬‬ ‫ذ‪َ \.‬‬ ‫على مجلس إدار‬ ‫والقانونية وأنشØØ© الشركة باإلضافة لتقرير سنوي ُ‬ ‫يلحق بالتقرير المدقق‪\.‬‬ ‫افق المياه المحلية وجمعيات مستهلكي المياه‪ :‬على سلØØ© المياه الفلسØينية إنشاء مر‬ ‫افق مياه محلية لتوفير خدمات‬ ‫‪ \.75‬مر‬ ‫المياه والمياه العادمة بالتنسيق والتعاون مع السلØات المعنية والمختصة‪ ،‬وبما يخدم المصلحة العامة وفقاً ألحكام قانون المياه‪\.‬‬ ‫ة وحل مر‬ ‫افق المياه المحلية ومواردها المالية وأي أمور‬ ‫ينبغي تنظيم كافة مسؤوليات‪ ،‬وصالحيات‪ ،‬واجر‬ ‫اءات الترخيص‪ ،‬وادار‬ ‫مجلس الوزر‬ ‫اء‪ \.‬وفي حين يكفل القانون حق كل فرد بالحصول على حاجته من‬ ‫ى تتعلق بعملها وفقاً لألنظمة الصادر‬ ‫ة عن َ‬ ‫أخر‬ ‫ة عن مجلس الوزر‬ ‫اء؛ فإنه يقع على‬ ‫المياه الصالحة للشرب بالسعر المنصوص عليه في األنظمة الخاصة بالضر‬ ‫ائب الصادر‬ ‫عاتق مزودي خدمات المياه اتخاذ كافة التدابير الالزمة لكفالة هذا الحق‪ ،‬باإلضافة إلعداد الخØØ Ø§Ù„Ø§Ù„Ø²Ù…Ø© لتØوير الخدمات‬ ‫بهذا اَلتجاه ووفقاً للسياسة العامة للمياه‪ \.‬وتتمثل المسؤوليات األساسية لمر‬ ‫افق المياه المحلية بالتالي‪:‬‬ ‫تتمتع مر‬ ‫افق المياه المحلية بشخصية اعتبارية واستقاللية مالية‪ ،‬كما ولها الحق بامتالك‪ ،‬واستخدام وتنظيم‬ ‫أ‪\.‬‬ ‫أصولها المنقولة وغير المنقولة بغية تحقيق أهدافها‪ \.‬كما تتمتع هذه المر‬ ‫افق بالصفة القانونية الكاملة للقيام‬ ‫بأنشØتها ومسؤولياتها‪ ،‬بما في ذلك إبر‬ ‫ام العقود‪ ،‬كما لها الحق بأن تُقاضي أو تُقَاضى‪ ،‬كما ولها الحق بأن‬ ‫تفوض وتخول من ترتأي للقيام مقامها واإلنابة عنها في اإلجر‬ ‫اءات القضائية بغية تحقيق مسؤولياتها واَلضØالع‬ ‫باختصاصها؛‬ ‫ب‪ \.‬تزويد خدمات المياه والمياه العادمة للمستهلكين بما يتماشى مع مبادئ اَلستدامة اَلقتصادية‪ ،‬واَلجتماعية‬ ‫والبيئية؛‬ ‫ت‪ \.‬تلبية احتياجات الحصول على خدمات جيدة للمياه العادمة من خالل تنفيذ التدابير واعداد الخØØ ÙˆØ§Ù„Ø¨Ø±â€¬ ‫امج‬ ‫الالزمة لتØوير هذه الخدمات؛‬ ‫ي على المستوى المحلي وفقاً لألنظمة‬‫ة خدمات تزويد مستدام لمياه الر‬‫ث‪ \.‬تُؤسس جمعيات مستهلكي المياه بغية إدار‬ ‫اعة ورئيس سلØØ© المياه الفلسيØينة‪ \.‬وتحدد هذه‬ ‫من وزير الزر‬‫اء والمستندة لتوصية كل ِ‬ ‫الصادر‬ ‫ة عن مجلس الوزر‬ ‫اخيص‪ ،‬ومسؤوليات وصالحيات‪ ،‬وادار‬ ‫ة وحل جمعيات مستهلكي المياه باإلضافة الموارد‬ ‫األنظمة إجر‬ ‫اءات التر‬ ‫ى ذات صلة بعملها‪\.‬‬‫وأي أمور أخر‬ ‫ج‪ \.‬وتتمتع جمعيات مستهلكي المياه بصفة اعتبارية واستقاللية مالية‪ ،‬ولها الحق بامتالك وتنظيم أصولها المنقولة‬ ‫وغير المنقولة بغية تحقيق أهدافها‪ \.‬كذلك فإن لهذه الجمعيات الصفة القانونية الكاملة التي تخولها للقيام بأنشØتها‬  ‫ام العقود‪ ،‬والمقاضاة والتقاضي‪ ،‬كما ولها الحق أن تفوض أو تخول َ‬ ‫من ترتأي لينوب‬ ‫ومسؤلياتها‪ ،‬بما في ذلك إبر‬ ‫عنها في اإلجر‬ ‫اءات القضائية بغية تحقيق مسؤولياتها واَلضØالع باختصاصها‪\.‬‬

APPROVAL

P002710

Document of The World Bank FOR OFFICIAL USE ONLY Report No\. 4622 PROJECT COMPLETION REPORT TANZANIA: KIDATU HYDROELECTRIC PROJECT SECOND STAGE (LOAN 1306-T-TA) Energy Division East Africa Regional Office November 30, 1982 Revised June 17, 1983 This document has a restricted distribution and may be used by recipients only in the performance of their official duties\. Its contents may not otherwise be disclosed without World Bank authorization\.   FOR OFFICIAL USE ONLY TANZANIA KIDATU HYDROELECTRIC PROJECT SECOND STAGE Completion Report Table of Contents Page No\. Preface \. i Basic Data Sheet \. ii Highlights \. v I\. INTRODUCTION \. 1 II\. PROJECT PREPARATION AND APPRAISAL\. 2 Origin, Preparation, Appraisal and Negotiation 2 Project Description \. 2 Justification\. 4 Covenants\. 5 III\. PROJECT IMPLEMENTATION, OPERATION AND COSTS \. 6 Loan Effectiveness and Project Start-up \. 6 Costs and Related Financing\. 7 Cost Increases \.9 Cost Savings \. 11 Disbursements \.--\. 12 Project Implementation \.-\. 13 Physical Problems \.-\. 13 Administrative Problems \. 15 Ecological Aspects \.-\. 16 Performance of Consultants and Contractors \.17 Main Contracts \. 18 Important Changes in Original Design \. 18 IV\. INSTITUTIONAL PERFORMANCE \.20 Management and Organization Effectiveness \. 20 Training \.------------------------------ 20 V\. FINANCIAL AND RELATED ASPECTS \. 21 Financial Arrangements \.21 Accounting and Audit \. 23 Financial Performance and Compliance with Covenants \. 23 VI\. BANK PERFORMANCE \.24 Overall Performance and Working Relationships \. 24 VII\. LESSONS LEARNED \. 24 This document has a restricted distribution and may be used by recipients only in the performance of their official duties\. Its contents may not otherwise be disclosed without World Bank authorization\.  TABLE OF CONTENTS (continued) Page No\. Annexes 1\. Comparison of Revised Cost Estimates with Appraisal Cost Estimates \. 27 2\. Construction Schedules - Mtera Dam and Powerhouse \. 28 3\. Statement of Contracts and Works \. 30 4\. Internal Rate of Return \. 32 5\. Comparison of Alternative Programs - Equalizing Discount Rate \. 33 6\. Income Statements \. 34 7\. Balance Sheets \. 35 8\. Funds Flow Statements \. 36 9\. Comments from the Borrower \. 37  - i - TANZANIA KIDATU HYDROELECTRIC PROJECT SECOND STAGE LOAN 1306-T-TA PREFACE The project consisted of the construction of a concrete buttress dam at the Mtera site; installation of two additional 50-MW hydro units at the existing Kidatu powerhouse, the construction of a 220/132-KV transformer station at Morogoro and necessary consulting services and training program\. Loan 1306-T-TA for US$30 million was signed in August 1976 and became effective in March 1977\. The loan has been completely disbursed and was closed on December 31, 1981\. The Project Completion Report (PCR) was prepared by the East African Regional Office - Energy Division, based on the appraisal, president's, supervision and consultant's reports and other documents in the Bank's files and on discussions with the staff of Tanzania Electric Supply Company Limited (TANESCO)\. The PCR summarizes the main points of the project particularly those which presented difficulties or resulted in specific accomplishments or failures\. Following normal procedures, a draft copy of the report was sent to the borrower (TANESCO) and the Guarantor (Government) for their comments\. Comments were received from TANESCO and have been reflected in finalizing the report\. They have also been reproduced as an attachment to the report (Annex 9)\. The project was not audited by the Bank's Operations Evaluation Department\.   - ii - TANZANIA KIDATU HYDROELECTRIC PROJECT SECOND STAGE - LOAN 1306-T-TA COMPLETION REPORT Basic Data Sheet Key Project Data Original Plan Actual Total Project Cost (US$ million) 1/ 89\.0 109 Cost Overrun (%) - 25% Loan Amount (US$ million) Original - Loan 1306-T-TA 30\.0 30\.0 Disbursed (US$ million) 30\.0 30\.0 Cancelled (US$ million) - - Joint Financing European Economic Community - EEC (US$ million, supplementary, administered by IDA) - 7\.0 Germany - KfW (US$ million) 2/ 31\.0 28\.1 Swedish International Development Authority - SIDA (US$ million) 18\.5 18\.5 Date for Completion of Physical Components 10/80 08/81 Proportion Completed by Appraisal Target Date (%) 80% Incremental Financial Rate of Return (%) 23% 18% Financial Performance Unsatisfactory Institutional Performance Satisfactory 1/ Based on the average exchange rate between 1976 and 1981\. 2/ The final KfW contribution was US$36 million (para\. 3\.12)\.  - iii - Cumulative Estimated and Actual Disbursement (US$ million) 1976 1977 1978 1979 1980 1981 Appraisal Estimate 2\.3 7\.3 13\.1 22\.1 28\.1 30\.0 Actual - 3\.1 9\.3 17\.8 30\.0 37\.0 Actual as % of estimate 0 42 71 80 107 123 Other Project Data Actual or original Revisions Est\. Actual First Mention in Files - - 1966 (together with Kidatu I) Negotiations - - 01/19/76 Board Approval Loan 1306-T-TA 04/01/76 - 07/01/76 Credit (EEC) - - 02/12/80 Loan Agreement Loan 1306-T-TA - - 08/12/76 Credit (EEC) - - 03/20/80 Effectiveness Loan 1306-T-TA 12/01/76 - 03/01/77 Credit (EEC) - - 04/08/80 Closing Date Loan 1306-T-TA 12/31/81 - 12/31/81 Credit (EEC) - - 12/31/81 Borrower Loan 1306-T-TA - - Government of Tanzania Credit (EEC) - - Government of Tanzania Executing Agency - - Tanzania Electric Supply Company Ltd\. (TANESCO) Fiscal Year of TANESCO - - Calendar Year Follow-on Project Name - - Tanzania Fourth Power Project (draft green cover SAR circulated 11/10/82)  - iv- Mission Data Month/ No\. of No\. of Date Year Weeks Persons Manweeks of Report Appraisal 4/ 75 3 5 13\.0 06/02/76 Supervision I 10/76 2 2 4\.0 12/15/76 II 01/77 1 2 3\.0 03/17/77 III 05/77 2 2 4\.0 06/17/77 IV 12/77 2 1 3\.0 03/14/78 V 07/78 2 2 4\.0 08/15/78 VI 03/79 1 1 3\.0 05/03/79 VII 12/79 2 2 4\.0 01/15/80 VIII 12/80 2 2 4\.0 01/30/81 TOTAL 21 42\.0 Currency Exchange Data Appraisal US$1 = TSh 8\.05 Intervening Years Average 1977 US$1 = TSh 8\.1 1978 US$1 = TSh 8\.2 1979 US$1 = TSh 8\.3 1980 US$1 = TSh 8\.4 1981 US$1 = TSh 8\.9 1982 US$1 = TSh 9\.4   -v - TANZANIA KIDATU HYDROELECTRIC PROJECT SECOND STAGE LOAN 1306-T-TA HIGHLIGHTS Loan 1306-T-TA was for the second phase of the Mtera Hydroelectric Project that was intended to meet forecast demand up to 1987/88\. The project's achievements can be rated as an overall success, despite project cost overruns and failure to meet earnings objectives, since it made possible significant savings in oil utilization (estimated 200,000 tons in 1982) which are critical to Tanzania's foreign exclhange requirements\. Additionally, the training effort was extremely successful and should assist considerably in operating performance and decrease in reliance on expatriates\. A construction cost overrun of TSh 188 million (US$17 million) was experienced due to higher than anticipated costs of civil works and to additional works and studies required during the course of construction\. The gross overruns were partially balanced by savings in the costs of mechanical and electrical plant financed mostly by KfW (PCR paras\. 3\.09 - 3\.20)\. In general institution performance was satisfactory except in the financial area\. TANESCO effectively revised and rearranged its practices and method to accommodate the increasing operational load\. It effectively utilized a panel of experts to recognize and overcome the difficulties encountered during construction\. Tariffs were increased twice, by 40% in June 1976 and by 42% in December 1979, However these increases were insufficient, except for 1980, to enable TANESCO to achieve the required 7% rate of return on revalued net assets in operation\. This, combined with an inability to bill and collect accounts efficiently (due, in part, to computer facilities failures), resulted in cash shortages throughout the implementation period\. However, this situation was significantly mitigated by lower debt service due to longer grace period, and lesser dividend payments (PCR 4\.01-4\.03, 5\.02, 5\.06)\.   TANZANIA KIDATU HYDROELECTRIC PROJECT SECOND STAGE COMPLETION REPORT I\. INTRODUCTION 1\.01 The project constituted part of a long-range development program to meet the growing power needs on the interconnected system (coastal grid) and comprised: (a) construction of a concrete buttress dam at Mtera site; (b) installation of two additional 50-MW hydroelectric units at the existing Kidatu powerhouse; 1/ (c) construction of a 220/132-kV transformer station at Morogoro; and (d) engineering/consultancy services and training\. 1\.02 The project was implemented broadly on schedule and as originally designed\. Its actual cost, however, was substantially greater than the appraisal estimate for various reasons (paras\. 3\.03-3\.06 and 3\.10) concerning the construction of the main civil work (the dam)\. 1\.03 The original loan of US$30 million (Loan 1306-TA), together with a credit of about US$18 million equivalent from the Swedish International Development Authority (SIDA) and a credit of US$24 million equivalent from Kreditanstalt fur Wiederaufbau (KfW) were intended to finance the total foreign exchange costs and part of the local costs of the project estimated to cost US$90 million equivalent\. Actual cost increased to US$110 million\. Cost overrun was covered through the increase of KfW funds by about an additional DM 10 million and a supplementary EEC Special Action Credit of US$7 million 2/ (Credit 55 through IDA as administrator, para\. 3\.12)\. 1\.04 The Mtera dam, the extension of the Kidatu powerhouse by two 50-MW hydroelectric units, and the transmission facilities at Morogoro substation have been operating successfully since 1981 after overcoming some initial operating problems such as oil leakages, wrong relay adjustments, etc\. 1\.05 The actual growth rates in energy and capacity demand of the grid throughout the period 1976-1981 have been substantially lower than projected during the appraisal due mainly to the declining general economic situation of the country\. The commissioning of Kidatu II led to a substantial reduction in the Tanzania Electric Supply Company Ltd's (TANESCO) thermal generation from oil\. Calculated oil savings in 1981 is about 175,000 tons and estimated savings in 1982 are 200,000 tons\. Yearly oil savings will gradually increase as the system's load builds up and will 1/ The Kidatu powerhouse was originally designed for four 50-MW units\. Two 50-MW units were completed in 1975\. For further information, please see Project Performance Audit Report (Tanzania Kidatu Hydroelectric Project - First Stage, Loan 715-TA and Loan 715-2TA) of December 19, 1979 No\. 2765\. 2/ The SIDA, KfW and EEC Special Action credits were channelled through the Government of Tanzania\.  - 2 - reach 375,000 tons per annum in the 1990s\. Despite the increase in construction costs, Kidatu II is in fact justified as the least cost solution over any tlhermal alternative due to very high fuel prices in the world markets\. Mainly because of lower than expected load growth, the recalculated incremental rate of return on the project is 18%, compared to the appraisal estimate of 23%\. 1\.06 TANESCO's financial performance through 1976 was less than satisfactory\. Although the company increased tariffs twice during the project implementation period, these were not sufficient and, as a result, consistently failed to achieve the required minimum rate (7%) of return on revalued net fixed assets in operation, perhaps also due to inappropriate revaluation\. This, combined with excessive accounts receivable partly due to serious breakdowns in the computer, partly to delinquent customers, resulted in cash shortages for the company\. II\. PROJECT PREPARATION AND APPRAISAL Origin, Preparation, Appraisal and Negotiation 2\.01 The project was basically a continuation of the First Stage Kidatu Hydroelectric Project, which was appraised in 1970 and jointly financed by the Bank (Loan 715-TA), SIDA and the Canadian International Development Agency (CIDA)\. The First Stage was completed according to the original schedule, although with substantial cost overruns, and has operated satisfactorily since May 1975\. The water intake, headrace tunnel, powerhouse, control room, tailrace tunnel, switchyard, and all related civil works, and the accessories and auxiliaries had been excavated and constructed according to the ultimate design which included provision for the Second Stage (the project)\. 2\.02 The history of the development of the Kidatu Hydroelectric Scheme began almost 15 years ago when the Government asked the Bank for assistance in financing the First Stage\. Additional studies needed to determine the best solution among known alternatives and design of detail were completed in July 1968, and the Kidatu development was recommended to be the most economic scheme\. The second stage was prepared on the basis of reconnaissance and preappraisal missions in May and December 1974, a report on the geological situation and design by a Bank consultant, and a feasibility study dated February 1975 by TANESCO's engineering consultant\. The project was appraised in April 1975\. Project Description 2\.03 The project components were planned to be constructed at three main sites, i\.e\. Mtera, Kidatu and Morogoro\. The Mtera site construction consisted of the following:  - 3 - (a) A concrete buttress dam 45 m in height and 260 m in length which forms a reservoir with a storage capacity of 3\.2 billion J (live capacity) at a drawdown of 8\.5 m, which in turn will provide a regulated river flow during dry seasons sufficient for the requirements of the project\. A concrete spillway with four radial gates (each 14 m wide and 11\.5 m in height) and about 160 m long spillway, a chute, all located on the right bank of the river\. The dam is equipped with a bottom outlet (5\.5 m x 6 m) for the purpose of regulation of the water; (b) About 34 km of road passing over the dam crest to replace a stretch of the existing Iringa-Dodoma road which was submerged under the reservoir; (c) Employer's village for housing of the operation and maintenance staff and offices, etc\. with all necessary water supply and sewerage systems; (d) Temporary camps constructed at four locations, comprised of 97 blocks of houses with independent water supply and sewer systems and with accommodation capacity for about 100 senior staff, including expatriates and over 600 workers/junior staff; (e) A floating boom about 2\.3 km in length at about 2 km upstream of the dam to catch the floating debris\. The debris to be removed by the boat provided for this purpose; 3/ (f) Bush clearance in the reservoir was done up to about 2\.3 km upstream of the dam in the area of about 140 hectares below the full supply level of the reservoir; 3/ and (g) Ecological studies and measures including rehabilitation of relocated people from the areas to be submerged and extension of the Ruaha Game Park boundaries\. 3/ 2\.04 The Kidatu site consists of the construction of the following: (a) Extension of the existing Kidatu powerhouse by two 50-MW hydroelectric units with vertical Francis-type turbines and generators, ventilation, cooling water, drainage and dewatering system and all necessary civil works, auxiliary equipment, and low and high voltage cables; (b) Penstock intakes by removal of the two temporary concrete plugs and installation of one sliding gate and two cylinder gates (one for each unit) with appurtenant concrete works at the water intake area; (c) Lining of the two existing vertical penstocks with steel and embedding it in concrete; 3/ This item was not included in the original design but adopted on the recommendation of the Bank\.  (d) A roadway in the access tunnel; and (e) Extension of the existing pothead yard, the 220-kV switchyard and connecting transmission lines including appurtenant civil works\. 2\.05 The Morogoro site consists of the construction of the following: (a) Expansion of the existing Morogoro substation for the erection of a 90-MVA transformer of 220/132 kV; and (b) A storage building for TANESCO's regional needs\. 3/ Justification 2\.06 The existing generating facilities of TANESCO before the construction of the project consisted of a blend of diesel and hydro generating plants with limited pondage provided by Kidatu (125 million m3)\. The water flow available at Kidatu for power production was very low during the dry months (June-October) of the year\. TANESCO needed an additional generating capacity in 1980/81\. The Mtera reservoir provides water for power generation during the dry years\. Thus, TANESCO successfully met the demand in 1980 and can meet the demand up to 1987/88\. 2\.07 The alternatives to the project were another hydro scheme or a thermal station\. Some alternative hydro schemes were examined by the consultants in a series of studies carried out over the previous ten years; most of them were eliminated without even detailed consideration because they were too remote, too small, or geologically unsatisfactory\. The choice was finally narrowed down to three schemes: (a) Pongwe hydro plant on the Wami River; (b) Stiegler's Gorge on the Rufiji River; and (c) the second stage development of Kidatu project (the project)\. Stiegler's Gorge was eliminated because the site could only be economically developed with much higher capacity than the TANESCO sysem could absorb for many years to come\. The Wami scheme had been eliminated by the comparative study which was jointly prepared by two consultants in 1971 because of higher cost\. The Second Stage Kidatu scheme was therefore chosen as the preferred hydro development and compared with an alternative thermal development based on a diesel station followed by steam units at Dar es Salaam using residual fuel oil\. The possibility of a coal-fired steam power plant was not a realistic alternative at the time of appraisal because there was no information regarding the coal deposits, quality, costs and its exploitation; the coal field was too far from the load centers and transportation was not practical\. The alternative of imported coal was eliminated on the grounds that the port facilities were already too overloaded\. 2\.08 The following three (the most realistic) development alternatives were presented in the appraisal report (Annex 5): 3/ This item was not included in the original design but adopted on the recommendation of the Bank\.  - 5 - Alternative 1: The proposed project followed by the Mtera power plant, followed by a coal-fired plant; Alternative 2: Thermal-hydro blend with a postponement of the project by two years; and Alternative 3: a solely thermal alternative\. The economic analyses indicated that Alternative 1 (starting with the project) would be preferred over Alternative 2 (thermal-hydro blend) at discount rates up to 14% and that Alternative 3 (all thermal) is the most expensive and would only be economic at discount rates higher than 23%\. 2\.09 A number of calculations have since been made to determine whether the project would have been selected over the thermal alternative had the cost estimates at completion been known at the time of the investment decision\. With the 1980 upward escalation in fuel oil prices, the equalizing discount rate is now estimated to be about 30%\. The project remains, therefore, the most attractive alternative\. 2\.10 The internal rate of return on investment for the project is defined as the discount rate at which the present worth of the estimated capital and operating costs of the project, over its useful life, equals the present worth of attributable revenues\. At the time that the project was appraised in 1976, a discounted cash flow calculation regarding the above rate of return was also determined on the basis of the project's estimated costs and sales\. In that calculation, average revenue from the project was assumed to be about T4 45 per kWh\. A number of calculations have since been made to determine the revised rate of return on investment by taking the actual Kidatu II cost and the actual sales into consideration\. With the increased revenues (T4 65 per kWh), rate of return for the scheme is now estimated at 18%, which is lower than the appraisal estimate\. Covenants 2\.11 The main covenants concerned employment of consultants, rate of return, revaluation of assets, preparation of tariff study and declaration of dividends\. Except for the rate of return covenant, all covenants were met\. 2\.12 In revaluing assets the average of the Dar es Salaam Retail Price Index for Wage Earners and the Cost of Living Index for Middle Grade Civil Servants, with both indices adjusted to include food items, were to be used, but TANESCO has had difficulty in using this formula because thus based the revalued assets were very high and indicated tariff levels in excess of economic power supply to obtain the required rate of return\. Therefore, in the proposed Tanzania Fourth Power Project (Mtera), a cash generation covenant is proposed with the option of returning to the rate of return formula when an acceptable reevaluation formula is agreed to\.  - 6 - III\. PROJECT IMPLEMENTATION, OPERATION AND COSTS Loan Effectiveness and Project Start-up 3\.01 After completion of the appraisal mission in April 1975, an issues paper was prepared in May 1975 (dated May 22, 1975) and a decision memorandum in June 1975 (dated June 12, 1975)\. Negotiations were held from January 19 to 23, 1976\. The Bank Board approved the loan (1306-T-TA) on July 1, 1976, with a delay of about three months due to delays in the tariff increase which was the condition of Board presentation\. The loan agreement was signed on August 12, 1976 and became effective on March 1, 1977 with a delay of about three months due to the Government's delay in the approval of the agreement and other formalities\. However, these delays did not jeopardize the project construction but it may have affected the contractors' offers for the main civil works as explained in the following paragraphs\. 3\.02 Only three offers were received for the main civil works\. The lowest evaluated bid was about 70% higher than the appraisal cost estimate due mainly to very big differences in the unit costs for various works\. 3\.03 The original cost estimate was prepared by TANESCO's engineering consultant and a cost estimator/consultant in 1975\. Estimates were based on detailed quantity analysis and carefully calculated unit costs for various items in the works\. The consultant's cost estimate was rechecked by the Bank consultant during the appraisal and increased contingencies (by about 25% physical contingencies and 37% for expected price increases) were added over and above the original consultants' estimate\. In spite of all these precautions, a substantial cost overrun occurred\. In the opinion of TANESCO and their consultant this substantial higher bid and cost overrun was due to reasons of lack of contractors' interest and competition due to the timing\. Although bidding was internationally advertised and followed up by the consultant and 14 contractors registered themselves as prospective bidders and also received bid documents, only three of them gave offers as indicated above\. In fact, the contractors' offers were very close to each other and possibly included a very large risk element not aMticipated by the consultant, TANESCO or the Bank\. Other possible reasons could be construction difficulties due to the design of the consultant, and special risks such as working conditions for expatriates in Tanzania, which had not been suitably evaluated by the consultant during the preparation of the bid documents and the costs\. 3\.04 The Bank then suggested that TANESCO employ an independent consultant to make a realistic project cost estimate and analyze the bid results in detail; and also review the bid documents with a view to identifying special risks and making recommendations as to the line of action to be followed\. TANESCO employed a cost consultant for this purpose, and solicited yet a third opinion from a similar firm\. 3\.05 Although initially TANESCO's engineering consultant had thought otherwise, both cost consultants had definitely indicated in their respective reports that the lowest original offer received for the civil  - 7 - works should be considered reasonable with which they then agreed\. The primary cost consultant had also made some recommendations regarding modification to some design aspects and extension of the construction program\. 3\.06 In light of TANESCO's consultant's recommendations, the Bank and SIDA recommended that TANESCO cable the three contractors who have given offers for the construction of the main civil works to obtain alternative offers for (i) a lower standard contractors' camp; (ii) about ten months extension of construction schedule; (iii) a new payment schedule for temporary works; (iv) amended concrete-pouring speed; and (v) use of mild steel instead of high-tensile steel in the webs of the dam\. All three contractors submitted their alternative offers with some reductions from their original offers for the same civil works\. The original lowest bid contractor kept its lowest position for the alternative offers with a reduction of about 12% from its original offer\. TANESCO, with the concurrence of the Bank and SIDA awarded the contract to this contractor accordingly\. 3\.07 The above contractor successfully completed the project substantially within the construction schedule\. The ten-month extension of the schedule did not cause any difficulties because actual power demand in Tanzania had proved to be lower than the appraisal forecast (Annex 2)\. However, if the Bank and SIDA had recommended rebidding, the project would have not been completed on time and it is very likely that the final costs would have been even higher due to delays caused by rebidding\. 3\.08 The main civil contractor at Mtera was delayed in mobilization due mainly to late deliveries of equipment at site\. However, with pressure by the Bank, the consultant and TANESCO', the contractor was able to recover the initial delays in the working program\. There were no other unusual features or events during the project start-up\. Costs and Related Financing 3\.09 Comparative cost estimates (appraisal and actual) are given in Annex 3\. The actual costs of almost all of the contracts were within the appraisal estimates except for the main civil works contracts\. Total actual project costs of TSh 919\.6 million (US$109 million) were 25% greater than the appraisal estimate of TSh 732 million (US$89 million) (Annex 1)\. 3\.10 Contingency allowances estimated at appraisal were generally sufficient to cover the extra costs due to miscellaneous variations in all works and to price increases except the main civil and mechanical works at Mtera\.  - 8 - 3\.11 The original financing plan based on appraisal report cost estimate of TSh 732 million is as follows: Financing Agency Funds Allocated (TSh million) IBRD (untied) 246\.57 (US$30 million) SIDA( ) 152\.15 (SKr 80 million) KfW ( ) 253\.97 (DM 60 million) Govt\./TANESCO (to cover local costs) 126\.00 (US$15\.4 million) Total Funds 778\.69 (US$94\.9 million) 3\.12 Funds provided by the above arrangement were in excess of the appraisal cost estimate and the colenders thought that the project can be constructed without any financing risk\. However, after receipt of the bids, the financing requirements of the project had gone up considerably and additional financing had been provided for the completion of the project from EEC, KfW and Government/TANESCO as shown below: Financing Agency Funds Received (TSh million) IBRD 251\.67 (US$30 million) SIDA 155\.29 (SKr 80 million) EEC 58\.72 (US$7 million) KfW 236\.13 (DM 55 million) a/ Govt/TANESCO 217\.82 (US$25\.9 million) Total Funds Used 919\.63 (US$109\.5 million) a/ The final KfW contribution was DM 70 million\. There was a surplus of DM 15 million, which was used for the purchase of rural electrification material and some spare parts for the diesel sets, instrumentation of the dam and load-dispatching communication equipment\.  -9- Cost Increases 3\.13 The main reasons of the cost overruns were: (a) the initial higher contractors' bids for the construction of the main civil works at Mtera site and other increases due to various reasons such as differences in design and actual quantities; (b) additional works incurred during the course of the construction including the implementation of the ecological studies; and (c) contractors' claims\. 3\.14 Breakdown of the cost overrun is as follows: Bank/SIDA Financed Portion Appraisal Actual -TSh million-- Mtera Dam Civil Works 115\.00 410\.06 Mtera Employer's Village and Road Relocation 29\.00 52\.48 Engineering/Administration 42\.00 103\.01 Contingencies 131\.80 - Subtotal 317\.80 565\.55 KfW Financed Portion Kidatu Civil Works 13\.00 66\.05 Kidatu Control Equipment 5\.00 15\.77 Kidatu Switchyard, Connecting Lines and Morogoro Substation 10\.00 37\.24 Contingencies 17\.47 - Subtotal 45\.47 119\.06 Taxes 25\.00 78\.85 TOTAL 388\.27 763\.46 Total Cost Increases: TSh 375\.19 million The net cost overrun (total cost increases TSh 375\.19 million minus total cost savings TSh 187\.56 million) were TSh 187\.63 million including the cost increase in the item of "Taxes" of about TSh 53\.85 million\. 3\.15 In addition to general reasons for increases in costs explained above, there were increases due to additional works not included in the original design\. Breakdown of these are given below:  - 10 - Additional Works Costs (TSh million) Bush clearing 0\.85 Supply of towing and rowing boats 0\.65 Supply of steel boom barrier 1\.78 Archaeological survey 0\.25 Water supply at new village 0\.90 4\.33 These costs are included in the "Bank and SIDA Financed" portion\. 3\.16 The main civil contractor had made various claims during the course of construction\. Since these were rejected by the consultant on various grounds, on completion of the works the contractor presented a final document in respect of claims under contract\. This was divided into: (i) Those items where the contract provides a remedy in the event of a specific breach (late payments), further covering items normally recompensed under the provisions of relevant clause of the contract in respect of works considered for rerating or admeasurement; and (ii) Claims presented pursuant to the provisions of such clauses of the agreement and subject to evaluation by the consultant in order to determine if such claims are deemed a contract risk or a contractor's responsibility\. 3\.17 The financial implications of the claims under each section were as follows: (i) TSh 6\.22 million (ii) TSh 21\.86 million Total TSh 28\.08 million 3\.18 Breakdown of the TSh 6\.22 million is as follows: TSh Million - Interest on late payments 1\.42 - Concrete rerating 3\.24 - Devaluation of Tanzanian currency 1\.56 Total 6\.22  - 11 - Breakdown of the TSh 21\.86 million is as follows: TSh Million - Port congestion and internal delays 1\.44 - Shortage of cement in Tanzania 1\.08 - Adjustment in price for imported cement 2\.43 - Acceleration costs 6\.04 - Price adjustment on expatriate salaries and interest on this 10\.87 Total 21\.86 3\.19 On analysis of the claims, the consultant fully expected that arbitration would result in an award in favor of the contractor\. A joint meeting was therefore held between the contractor, TANESCO and the consultant and the following amounts were agreed: under (i) TSh 5\.80 million (ii) TSh 8\.20 million Total TSh 14\.00 million The consultant felt that the above settlement figure reflected a fair and reasonable amount, although had the whole issue been presented for arbitration or to a court, including costs the award could well have been considerably in excess of this amount\. The TSh 14\.0 million is included in "Bank and SIDA Financed Portion" of TSh 410\.06 million above (para\. 3\.15)\. Cost Savings 3\.20 Cost savings were related to the costs of mechanical and electrical plant mostly financed by KfW and to interest during construction\. Breakdown of the savings is as follows:  - 12 - Savings ---- TSh million---- Bank/SIDA Financed Portion Appraisal Actual Mtera mechanical works 46\.00 26\.57 Contingencies - Subtotal 26\.57 KfW Financed Portion Kidatu steel linings and gates 19\.00 13\.56 Kidatu turbine and pipework 37\.00 22\.36 Kidatu generators 33\.00 28\.81 Kidatu and Morogoro transformers and Kidatu cables 24\.00 31\.90 Contingencies 70\.53 Subtotal 229\.53 123\.20 IDC (Total) 106\.00 29\.97 TOTAL 335\.53 153\.17 Total Savings: TSh 182\.36 million Disbursements 3\.21 The following table compares actual with forecast disbursements: Cumulative Disbursements Appraisal Actual ------US$ million------ FY 1976 2\.3 1977 7\.3 3\.1 1978 13\.1 9\.3 1979 22\.1 17\.8 1980 28\.1 30\.0 1981 30\.0 37\.0 Bank Loan Closing Date 12/31/81 12/31/81 Deviations between appraisal and actual were mainly caused by the extension of the original construction by about 10 months, late mobilization of the main civil contractor, revised cost estimates (cost overruns), and suplementary financing (EEC Special Action fund No\. 55 for US$7 million)\.  - 13 - Project Implementation 3\.22 Physical Problems: The bids received for the main civil works were substantially higher than the estimates made at the time of appraisal\. Therefore, alternative offers were asked from the bidders and the original construction schedule extended by about 10 months\. Other than these there were no unusual features and events except the following: 3\.23 Spillway Bridge Slab: During the pouring of concrete in the spillway bridge, slab-formwork settled on the downstream side due to partial failure of one of the screwjacks supporting the pipe columns of the formwork\. However, the concreting was completed in this portion after taking immediate measures to prevent any further displacement\. The completed bridge was tested by loading the slab and the results indicated some loss of strength in the downstream beam because some shear cracks developed at the ends of the downstream beam of the bridge\. The following measures had been taken to increase the strength to its designed level: (i) additional inclined shear reinforcement steel bars were placed at the ends of the beam; (ii) the chipped cracked concrete in the lower portion of both ends of the beam were replaced by high strength "prepacked concrete"; (iii) the neoprene bearings under the beam were replaced and repositioned to reduce the beam span\. Standard load tests made after completion of the above remedial measures have shown that the behavior of the beams were elastic and the spillway bridge is safe\. The decision by the consultant to retain the bridge slab by shear strengthening instead of demolishing and recasting it had been taken to enable mechanical contractor to continue with erection of the spillway gates so as to achieve timely completion of the project\. TANESCO's panel of experts who were supervising the project from time to time also recommended the above remedial measures instead of recasting (para\. 4\.02)\. 3\.24 Concrete Quality: From one of the periodical reviews of the test results of the moulded specimen of concrete blocks on the dam during construction, it was found that some individual pours of concrete were below specifications, particularly in regard to compressive strength and permeability though the actual strength was still within the acceptable limits from the design's point of view\. However, this problem was investigated and rectified immediately\. The rectification measures included strict control of water cement ratio and correct assessment of water content in the mix so as to compare favorably with the one provided in the mix design\. A very strict sampling and sample cube preparation method was also established to obtain realistic results from the tests\. In addition, general improvement on the quality and grading of the aggregate and sand was also made apart from addition of extra cement as a measure of additional precaution\. Further, to check on the actual strength of this concrete as placed in the dam blocks, cores were circled out and tested for  - 14 - compression strength and permeability\. Schmitt Hammer tests were also conducted on some of the spillway sill blocks\. As a result of all these investigations, it was judged that a few of the concrete test results that were lower than specifications do not impair the stability and water tightness of the dam\. 3\.25 Concrete stoplogs of bottom outlet of the dam: the consultant, in its design of the dam, provided a bottom outlet with a gate to release the reservoir water to the downstream power plants during very dry seasons when the water level in the reservoir is lower than the sill level of the main spillway gates\. The consultant's design also provided concrete stoplogs so that the gate can be raised and hooked up during the normal operation of the spillway gates\. The main civil contractor had been in trouble during the placing of the concrete stoplogs due to uneven concrete surfaces contiguous to stoplog guides\. One of the stoplogs had fallen during the placement and was damaged\. There was no aeration provision for the conduit between the stoplogs and the outlet gate\. During regulation of water releases this could actuate jutting out of stoplog seals and increase leakage, with possibility of displacement of stoplogs\. To avoid any damage due to cavitation to the stoplogs and the bottom outlet structure, the radial gate downstream was closed and the contractor rectified the above damage and replaced the logs\. There were also difficulties with the stoplog lifting equipment due to poor design\. This also was rectified by changing designs and lifting methods\. The above problems have been discussed with the engineering consultants and needed improvements would be made in connection with the Mtera hydropower project construction\. In the meantime, no specific risks are expected as water releases through the bottom outlet are not required until reservoir level goes below the dead storage level\. 3\.26 Seepage on the left bank of the Mtera dam: After completion of the construction of the dam and partial impounding, a seepage of reservoir water from underneath the buttress dam was noted through an investigation hole located in the monolith\. When the reservoir level reached to about 80% of the full supply, it increased from 10 liters/min to 45 liters/min\. Although this level of seepage is not very important, grouting was carried out through the inclined grout holes from the downstream side\. However, the grouting has not been very successful, so the drainage has been further improved by drilling additional holes through the rock underneath some of the monoliths so that water is collected through a pipe and drainage is provided into the bottom outlet channel\. Further, some seepage of water has been noted at some points along the left flank downstream of the dam up to about 500 meters\. However, there is no evidence of soil particles coming out with the seeping water and seepage is within safe limits\. TANESCO regularly measures the seepage of water at selected points and checks water quality for dissolved salts periodically\. So far, no unusual or important indications have been seen\. 3\.27 Kidatu powerhouse - cracks in turbine floor: Some cracks on the turbine floor at unit No\. 4 were observed after the commission of the units, and water oozing from them\. The consultant did not consider it very important but investigated it further to make its final recommendations\. On review TANESCO's panel of experts and the consultant agreed that the cracks which occurred and will occur in the embedment concrete are not harmful and can be controlled by providing proper surface reinforcements and a joint\.  - 15 - 3\.28 Administrative Problems: There were important project execution problems that persisted almost during the entire construction period\. There were port congestion, bad access roads to the Mtera site, fuel and cement shortages, travel restrictions, and also some delays in payments\. Although none of these was so important as to interrupt the execution of the project, all created complications for the contractors, the consultant and TANESCO\. 3\.29 Port congestion: Port congestion remained very acute during most of the construction period\. The ships stayed at outer anchorage 3 to 6 weeks\. However, all the authorities concerned were approached to obtain priority to the ships carrying the project consignments and this did help to a great extent to get the commodities cleared generally within reasonable times\. 3\.30 Roads: Particularly access roads to the Mtera and also Kidatu sites were in a very bad shape and this resulted in lots of hazardous situations such as breakdown of transport vehicles and delays in transit of plant and/or equipment and material\. Here again, TANESCO did manage to secure some, at least the lowest level, maintenance of these roads from the Ministry of Works and provided the continuation of transportation\. 3\.31 Fuel shortage: The general fuel shortage in the country became very critical for construction at one stage during 1979-80\. However, TANESCO and the consultant warned the contractors in time to build their storage facilities roughly corresponding to about 3 to 4 weeks requirements and disruption in progress was prevented\. 3\.32 Cement shortage: There was a general shortage of cement in the country because of frequent breakdowns, of various equipment at the cement factory (Wazo Hill and also Tanga)\. TANESCO with the assistance of its parent ministry, succeeded in securing enough cement on priority basis and also adequate storage (about 1,500 tons) was available at project sites\. However, the main civil contractor at Mtera had to import about 3,000 tons of cement from Italy out of the total requirement of about 25,000 tons\. 3\.33 Travel restrictions: The spread of cholera in the country during the construction period created some difficulties regarding the traveling of expatriate personnel in epidemic areas in Tanzania\. However, TANESCO obtained necessary permits for the movement of the contractors? personnel from local authorities\. 3\.34 Delays in payments: Most of the contracts provided 60 and 45 days' period for provisional payment certificates for civil works and plants respectively\. These periods proved to be inadequate particularly for the local and/or foreign component of the payments that were to be made by the external financing agencies\. Since most of the finances are arranged between the financing agencies and the Government, various procedures had to be followed which were lengthy due mainly to intermediate commercial banks (sometimes three or four intermediate banks) which were agents of the contractor or financing agency\. The contractors sometimes had difficulties in mobilizing sufficient financing to compensate for such delays\.  - 16 - Ecological Aspects 3\.35 A general ecological review of the Kidatu site and the Mtera reservoir was completed in 1970 (financed by SIDA) in context of the ecological aspects of the development of the Great Ruaha Basin\. Following this general review, an in-depth study of some aspects of the ecology was completed in 1972 during the course of construction of the First Stage Kidatu project\. These studies did not indicate negative effects which would impair the feasibility of the damming at Kidatu and also at Mtera\. A further in-depth study was also completed for the Mtera reservoir on about 35 ecological subsubjects such as vegetation and wildlife, soil erosion and sedimentation, implanting, limnology, disease ecology, relocation, etc\. Recommendations resulting from this study were discussed with the Bank and measures were taken to safeguard certain environmental aspects\. These are given below (those not included in the original design are detailed in para\. 3\.57): 3\.36 Relocation: The inhabitants of the areas later submerged by the Mtera reservoir were relocated at Migoli village after many investigations regarding the selection of the best area for resettlement\. Migoli village is about 27 km from the Mtera dam towards Iringa\. About 2,000 persons were resettled at Migoli; apart from some houses, a dispensary, a community hall, house for medical assistance have been constructed through the project funds and additional SIDA funds of about $2\.0 million\. Water supply, school, etc\. mostly financed by SIDA have been provided by the regional authorities\. 3\.37 Relocation of Iringa-Dodoma road: A stretch of the Iringa-Dodoma road crossing the river about 6 km upstream of the dam was located below the reservoir level\. Therefore, about 34 km of this road were relocated and constructed so as to pass over the crest of the dam before impounding the reservoir\. The old Iringa-Dodoma bridge about 6 km upstream was demolished\. 3\.38 Extension of the Ruaha National Park: Extension to the Ruaha National Park was recommended by the Bank with a view to protecting the wild animals which would be attracted by the reservoir\. The original boundaries of the park have been expanded to the reservoir by the concerned authorities (ministries and the local government)\. The entire reservoir area has been declared as the game control area\. 3\.39 Foreshore agriculture: The water shored in the soil when the lake level sinks will be sufficient for development of foreshore cultivation in part of the area\. Regional authorities have still to initiate concrete measures to prepare land use plans and toward research as to the crops that can be grown utilizing holding capacity of the soils\. Programs have yet to be worked out for overhead irrigation from the semi-isolated northern appendix (logi) of the reservoir\. 3\.40 Fisheries: Action initiated by the federal and local authorities has also been taken to tap the fish potential of the lake\. Systematic development of fisheries is underway\. A minimum yield of 3,000 tons per annum of fish is expected from the reservoir\.  - 17 - 3\.41 Soil erosion: No action program has been drawn up by the regional authorities for preventive measures against any soil erosion and consequent silting of the reservoir\. The inflow of about 8 to 10 million tons per annum of sediment is not significant for the filling of the reservoir by silt soil erosion, but the washing away of agriculturally valuable soil is important\. 3\.42 Disease control: Health hazards due to bilharzia appear to be certain as is the case with the other natural lakes in the vicinity\. Adequate arrangements for hygiene and health education are necessary\. No action program has been worked out so far by the regional authorities due to budgetary restrictions and other priorities\. 3\.43 Aquatic weeds: There is a possible menace of aquatic weeds such as water hyacinth, but necessary preventive measures have not yet been taken\. 3\.44 Environmental changes between Mtera and Kidatu: Damming at Mtera will have little influence on human or wildlife, particularly in view of the fact that there are only a few settlements at the vicinity of this stretch of the river\. The changes in the hydraulic regime will decrease the risk of harmful erosion at the bridges and other places because the regulated flow by the reservoir operation will increase the dry season discharges while cutting the peak flow of March - April\. Performance of Consultants and Contractors 3\.45 Consultants: The main consultant for this project was retained in April 1975\. The consultant prepared the feasibility report, design of the project, bid documents, specification, and carried out bidding, bid evaluation, construction supervision and the project management as it did for the first stage development\. The overall performance could be classified as satisfactory\. However, considering the consultant's long-standing history of professional association with TANESCO, there were unexpected shortcomings as explained below\. 3\.46 The consultant's failure to document properly the main civil contract for the Mtera site, in one case, led to some trouble and gave advantage to the contractor to make a claim of TSh 10 million regarding adjustment of expatriate salaries\. The consultant had issued an addendum during the bidding that only 50% of expatriate salary adjustments would be covered by the employer\. However, this addendum had not been sent to the prospective bidders by registered mail and this change had not been indicated in the corrigenda to the addendum\. Although it is believed that all other prospective bidders had received the addendum, the Mtera site contractor told the employer that he did not receive the addendum; thereby, claiming the right to have 100% compensation of expatriate salary increases as originally indicated in the bid documents\. 3\.47 The consultant's cooperation with the employer's field office was reasonably good but there were some interruptions in coordination\. For example, in respect of variation orders, the consultant usually was not punctual in submitting its detailed evaluation of variation in the  - 18 - quantities of works and reratings of unit prices and daily reports for drilling, grouting, drainage and anchors, etc\. This created some strain from time to time between the field office of TANESCO and the consultant\. 3\.48 Detailed geological mapping regarding the geological structure and conditions of the completed foundations before concreting have not been clearly done though this was a principal work of the consultant\. These maps are sketchy and somewhat difficult to interpret\. 3\.49 Contractors: The performance of all the contractors on this project in respect of their tendered works has been reasonably satisfactory\. The only local contractor also made strong efforts to complete works as originally scheduled but failed to do so purely due to the difficulties that local contractors have in importing essential plant and materials and spares\. However, delays in completion of its works (relocation of the road and construction of the employer's village) did not have any negative effect on the final completion date of the project\. The objectives of all the contracts with respect to the original construction program for various works at Mtera, Kidatu and Morogoro sites were generally satisfied\. 3\.50 The main civil contractor at Mtera took every opportunity to make a claim, though its unit prices offered for the construction of the works were unusually high compared to other contractors doing similar jobs in other countries\. Main Contracts 3\.51 The main contracts are summarized in Annex 3\. The important design changes are summarized below\. Important Changes in Original Design 3\.52 Before and during appraisal the Bank appraisal team had recommended various design modifications to the original design such as increase of the thickness and a gentler slope of the buttresses, bigger spillway dimensions, etc\. After bidding some additional recommendations were made regarding the expansion of construction schedule and method of pouring concrete\. During construction many modifications had been done to the final design on the basis of the results of excavations, soil tests, and additional drilling, etc\. as usual for this type of construction\. However, the most important design modifications are given below\. 3\.53 In respect of the hydraulic studies as initially done by the consultant for the design of the spillway, the panel of experts pointed out that: (i) model studies dealt more with selection of appropriate cost profile than with important aspects of energy dissipation; (ii) studies did not indicate to what shape the surface between the end of the chute and the river edge should be trimmed to facilitate proper flow conditions\.  - 19 - Consultants generally agreed to the suggestions of the panel and repeated hydraulic model tests to ascertain correct velocities of flow, water profiles, and information of hydraulic jump, etc\. under various flow conditions and tailwater elevations\. 3\.54 The consultant's initial design was to leave the spillway chute unlined\. Detailed hydraulic model studies and geological investigations showed that the spillway chute should be concrete lined to avoid costly repairs during the operation\. 3\.55 During the construction, the panel of experts (para 4\.02), subsequent to their detection of some significant rock fractures exposed in the near vertical cut walls forming the upstream limits of the excavation, recommended strengthening the left abutment slopes in the vicinity of the dam\. These fractures were roughly parallel to the original ground surface and about 1 m to 2\.5 m below it and steeply dipping towards the river, which could cause slides in the area immediately upstream and downstream of the abutment\. As a remedial measure, the experts recommended providing tensioned rock bolts of high grade steel at critical locations\. This was accepted by the consultants and done\. About 50 tensioned rock bolts were installed\. 3\.56 Instrumentation on the dam such as strain gauges, peizometers, reservoir, water level recorders, thermal probes (to monitor concrete temperatures during setting) and devices for the measurement of drainage water pressures, recommended by the panel of experts was generally accepted by the consultants and these were put in place during the construction\. 3\.57 Moreover, as was mentioned in Chapter 1, the following additional works were accomplished though these were not included in the consultant's original design\. (a) A floating boom was constructed about 2\.3 km in length at about 2 km upstream of the dam to catch the floating debris; (b) Bush was cleared at negligible cost up to about 2\.3 km upstream of the dam in the area of about 140 hectares below the full supply level of the reservoir; (c) The original ecology study recommended that the displaced inhabitants of the project area be resettled at a new village which would be constructed at a new place about 3 km far from the lake\. Water supply would be provided by a well\. During construction water could not be found at the site selected in the ecological study, and finally the villagers were resettled in the old village of Migoli about 27 km from the Mtera dam towards Iringa\.  - 20 - IV\. INSTITUTIONAL PERFORMANCE Management and Organizational Effectiveness 4\.01 In general, TANESCO has worked with competence and carried out its project preparation, procurement and construction supervision obligations satisfactorily\. 4\.02 Apart from the consultant, TANESCO was assisted by a part-time "panel of experts" consisting of three civil engineers (these are specialists on design, general civil engineering and concrete structures), one geologist/general civil engineering specialists and one claims advisor\. Moreover, two advisors/experts on general construction and planning (one at Mtera site and one at the headquarters of TANESCO) had helped TANESCO to overcome the difficulties encountered during the construction\. Costs of the panel and two advisors were covered from the proceeds of the Bank/SIDA joint funds\. TANESCO's panel and the advisors/experts' works were useful and satisfactory\. 4\.03 TANESCO's operations and the workload of the headquarters have about tripled during the last decade\. Fortunately, TANESCO has satisfactorily changed and rearranged practices and methods to overcome increasing operational loads\. 4\.04 The help of the local authorities through the coordination of TANESCO (Regional Development Directors' headquarters staff at Iringa and Dodoma), particularly regarding the implementation of the ecological studies, has also been significant\. 4\.05 The quarterly reports, prepared by the consultant and TANESCO, and the panel's reports on the progress of the project construction were well prepared and invaluable to the Bank supervisory staff\. Training 4\.06 TANESCO has developed a sound training program with the appropriate objectives for manpower development through the help of SIDA and the Bank Group for many years\. It has now a manpower development and training unit with four full-time officers at headquarters and regional training officers who would follow up training and personnel activities\. TANESCO spends about US$1 to 2 million every year for training\. 4\.07 TANESCO has a technical institute (TTI) at Kidatu where at technician level, electricians, general mechanics and diesel mechanics are being trained\. Forty-eight students per year are admitted (16 in each of the three categories) and approximately 42 graduates annually\. Since the appraisal about 170 students have graduated from the TTI\. The staff consists of one principal, 13 techical instructors and 6 general academic teachers\. There are dormitory facilities for about 180 students\.  - 21 - 4\.08 From 1978 to 1981, through the project loan (1306-T-TA) the Bank financed an overseas management training program for 27 high level TANESCO officials, of whom 21 have remained with TANESCO\. This training program was mainly carried out by a training consultant and has substantially increased TANESCO's operational efficiency and improved decision-making practices\. This program covered the training of mid management and professional staff in the fields of power planning, design, construction, stock control and supplies, auditing, billing/collection, cost accounting/power company accounting, computer programming, financing/economic analysis, manpower planning and development and statistics\. The Bank missions prepared draft terms of reference of each trainee and approved the program as finalized by TANESCO and their training consultant, monitored the program during its implementation, identified weaknesses and improved the program as necessary\. The Bank missions also interviewed trainees to evaluate their knowledge supplemented as necessary, and pointed out documents for further self development\. 4\.09 During the period of 1977-81, an additional 60 TANESCO staff were trained funded by the Government and various international financing organizations other than the Bank Group\. TANESCO also has a small commercial school in Dar es Salaam established in 1978, which offers basic courses in accounting, meter reading, storekeeping and procurement\. This school has 3 teachers who train about 50 clerks per year\. 4\.10 In the early 1970s TANESCO employed about 50 expatriates\. At the time of the appraisal there were 17; at the time of project completion there were only 6 expatriates, whose work is purely technical\. This is largely due to the success of the training programs described above, and is a remarkable achievement\. V\. FINANCIAL AND RELATED ASPECTS Financial Arrangements 5\.01 A comparison of the actual and the estimated financing of the project in millions of Tanzania shillings and US dollars, converted at US$1 = TSh 8\.25, the average exchange rate for the loan, and at the appraisal rate of US$1 = TSh 8\.05, is given below\. The appraisal estimates have been adjusted to reflect the longer implementation period, 1975-1981\.  - 22 - Actual Appraisal Estimate Actual over (under) 1975-1981 1975-1981 Appraisal Estimate TS US$ m % TSh m US$m x ThU$m Application of Furnds Kidatu Project 889\.7 107\.8 35\.8 626\.0 77\.8 32\.7 263\.7 30\.0 Ongoing Projects and Other Construction 1,120\.1 135\.8 45\.1 1,021\.5 126\.9 53\.3 98\.6 8\.9 2,0C9\.8 243\.6 80\.9 1,647\.5 204\.7 86\.0 362\.3 38\.9 Interest during Construction 57\.7 7\.0 2\.3 188\.7 23\.4 9\.9 (131\.0) (16\.4) Total Construction Expenditures 2,067\.5 250\.6 83\.2 1,836\.2 228\.1 95\.9 231\.3 22\.5 Increase in Working Capital 326\.3 39\.6 13\.2 79\.1 9\.8 4\.1 247\.2 29\.8 Other 89\.5 10\.9 3\.6 - - 89\.5 10\.8 Total Application of Funds 2,483\.3 301\.1 100\.0 1,915\.3 237\.9 100\.0 568\.0 63\.2 Sources of Furxns Internal Cash Generation 1,029\.2 124\.7 41\.4 1,396\.0 173\.4 72\.8 (366\.8) (48\.7) Less: Debt Service (393\.0) (47\.6) (15\.8) (508\.2) (63\.1) (26\.5) (115\.2) (15\.5) Dividernds (7\.8) (0\.9) (0\.3) (153\.5) (19\.1) (8\.0) (145\.7) (18\.2) Net Internal Cash Generation 628\.4 76\.2 25\.3 734\.3 91\.2 38\.4 (105\.9) (15\.0) IB8D loan 251\.7 30\.5 10\.1 241\.5 30\.0 12\.6 10\.2 0\.5 SIDA Credit 155\.3 18\.8 6\.3 149\.7 18\.6 7\.8 5\.6 0\.2 KfW Loan 236\.1 28\.6 9\.5 193\.2 24\.0 10\.1 42\.9 4\.6 EFE 58\.7 7\.1 2\.4 - - - 58\.7 7\.1 Existing/Other Loans 526\.0 63\.8 21\.2 353\.1 43\.9 18\.4 172\.9 19\.9 Total Borrowings 1,227\.8 148\.8 49\.5 937\.5 116\.5 48\.9 290\.3 32\.3 Equity Contribution 581\.3 70\.5 23\.4 226\.7 28\.1 11\.8 354\.6 42\.4 Consumer Contribution 45\.8 5\.6 1\.8 16\.8 2\.1 0\.9 29\.0 3\.5 Total Sources of Funds 2,483\.3 301\.1 100\.0 1,915\.3 237\.9 100\.0 568\.0 63\.2  - 23 - 5\.02 Construction expenditures were above estimate for reasons outlined in paragraphs 3\.13 to 3\.19\. Net internal cash generation provided 23\.3% of total financing requirements compared with 38\.4% estimated at appraisal (32\.2% for 1975-1980)\. Internal cash generation was significantly lower than forecast (paragraphs 5\.05 and 5\.06) but lower debt service, reflecting longer grace periods for borrowings on-lent to TANESCO by Government, and small dividend payments, served to offset this\. Borrowings, equity contributions by Government and consumer contributions were above appraisal estmates\. Working capital increased substantially over the period, reflecting excessive levels of accounts receivable (127 days sales in 1980) and of inventories (including a relatively high proportion of obsolete stocks)\. Accounting and Audit 5\.03 TANESCO's accounting staff are competent and procedures are good\. TANESCO has maintained adequate records and, except in FY80 and FY81, has substantially met the audit covenant which requires its financial statements to be audited by independent auditors acceptable to the Bank (the Government-owned Tanzania Audit Corporation, TAC) and submitted to the Bank within five months after the close of the fiscal year\. Since 1980, the computer which TANESCO uses to maintain its records has been operating effectively only intermittently and, as a result, billing and other accounting procedures have been severely affected and the audited accounts for the past two years have not been submitted to the Bank as required\. Once the new computer, now on order, has been installed, these problems are expected to be resolved\. Financial Performance and Compliance with Covenants 5\.04 Appraisal estimates and actual Income, Balance Sheets and Funds Flow Statements covering 1975 to 1981 are given in Annexes 6, 7 and 8\. 5\.05 The following table indicates percentage variations in financial operating performance compared to appraisal estimates\. 1975 1976 1977 1978 1979 1980 1981 Electricity Sales - 2 - 9 -18 -14 -13 -12 -19 Ave\. Tariff Levels - 1 2 7 -12 -13 6 6 Revenues - 3 - 7 -10 -25 -24 - 7 -14 Operating Expenses 3 3 - 3 - 7 - 4 1 12 (excl\. depreciation) Operating Income -12 -16 -17 -40 -41 -12 -32 (before depreciation) Internal Cash Generation -14 -33 -20 -41 -37 - 9 -29 5\.06 Revenues were below forecast due to lower than anticipated electricity sales and average tariffs; operating expenses were higher largely because of increases in fuel costs amounting to nearly 23% per annum\. During the project implementation period, TANESCO increased tariffs only twice: by 40% in June 1976 and by 42% in December 1979\. These tariff  - 24 - adjustments were insufficient to enable TANESCO to achieve the required 7% return on revalued net fixed assets in operation, except in 1980\. This, combined with excessive accounts receivable (paragraph 5\.02) resulted in cash shortages for the company throughout the period\. The current ratio has been positive throughout but is based on inventory figures that contain a significant obsolescence factor\. The Debt/Equity Ratio has been more conservative than estimated at appraisal due to larger than expected government equity contribution\. Although internal cash generation has been lower than estimated, debt service coverage was in line with the forecast because of reduced debt service (paragraph 5\.02)\. VI\. BANK PERFORMANCE Overall Performance and Working Relationships 6\.01 The Bank played an important role in the preparation of the projects and in coordination and negotiation between the colenders\. The Bank provided a good project construction supervision unit through the panel and the two advisor/experts\. TANESCO is very satisfied with the panel and supervision advisors and continued to use them when necessary even after completion of the project\. The Bank's environmental expert's input regarding the implementation of the ecological report was very helpful and useful\. 6\.02 The most important supervisory relationships were those between the Bank and TANESCO and these were generally very good\. The Bank supervision missions did help acceleration of the contractor's mobilization and the Bank provided the supplemental loan on time for the continuation of construction\. The Bank has systematically guided and encouraged TANESCO's training program and the program's achievements show the effects of proper cooperation between the implementation agency and the Bank\. VII\. LESSONS LEARNED 7\.01 The declining general economic situation of the country, which was not generally predicted, was the main cause for the actual growth rate in energy and capacity demand of the grid from 1976 to 1981 having been substantially lower than projections made during appraisal\. The most important lesson relates to the initial cost overrun\. In order to prepare realistic cost estimates and a corresponding financing plan, cost estimates should be reviewed by an independent cost consultant as early as possible in the preparation of the project, preferably before the appraisal of the project\. Despite this, the tender prices could still be different from the appraisal estimates because it is difficult to assess in advance the contractor's or the supplier's cost of doing business in the country at a particular time\.  - 25 - 7\.02 Another important lesson is that local indices for the revaluation of assets should be used with caution in Tanzania\. To provide a more satisfactory test than a rate of return thus derived, the next project in this context might include a cash covenant instead of a rate of return covenant\. However, a comprehensive study still needs to be carried to establish the most suitable method in this regard\. 7\.03 Ihe other important lessons to be learned could be summarized as follow: (a) The engineering consultant and the employer should be punctilious regarding the proper documentation and punctual mailing of the bid documents not to create additional reasons for contractors' claims; (b) Training is the fundamental means by which technology is transferred to a developing country, thus a training component, including management training should be included in projects; further, the policy for replacement of expatriate personnel by nationals must be fully coordinated with a training program; (c) Careful and knowledgeable supervision is essential and, apart from the main engineering consultant, the services of a panel of experts and also some additional advisors should be provided when necessary; services of the panel and advisors could be part-time and cost of these services will be very minimal; (d) Timely payments are very important for the healthy progress of the project implementation and bid documents should clearly stipulate the timing between the engineer's certificate and the Bank's order for payments to the contractor's intermediate bank agent; (e) The quality of hydraulic model studies is extremely important in such projects\. Some small design changes might give the borrower significant advantages during the operation of the project; (f) Instrumentation on the dams and the recording of the initial measurements regarding seepage and the artesian pressures are important and these instruments should be included in the bid documents because unexpected readings can occur even after construction; (g) The exceptionally large ecological component of the project taught that specific supervision of ecological aspects is warranted from time to time by environmentalists\. It is also important that institutions should be made aware of the long term objectives of ecological precautions; and (h) The local engineering staff should be made available as counterparts to the main engineering consultant in order to acquire necessary knowledge and experience in designing and building power facilities\.   TANZANLA KIDATU HYDROELECTRIC PRWOECT SECOND STAGE Comparison- of Revised Cost Estimates with Appraisal Cost Estimates (In TSh Million) Appraisal Estimate Estimates after Contract Cost to Completion in 1976 Negotiation 1977 August 1981 Contracts/Works Local Foreign Total Local Foreign Total Local Foreign Total Bank/SIDA Financed Portion Mtera dam civil works (CD 1) 27\.00 88\.00 115\.00 111\.49 207\.06 318\.55 143\.95 266\.11 410\.06 Mtera dam mechanical works (CD 2) 5\.00 41\.00 46\.00 4\.15 18\.80 22\.95 4\.58 21\.99 26\.57 Mtera employers village (CD 3) 2\.00 - 2\.00 14\.96 4\.22 19\.18 includes above CD2 Mtera relocation of road (CD 4) 8\.00 19\.00 27\.00 24\.60 6\.94 31\.54 42\.30 10\.88 52\.48 Training 1\.00 2\.00 3\.00 1\.00 2\.00 3\.00 1\.00 2\.00 3\.00 Enginering/Administration 7\.00 35\.00 42\.00 12\.74 75\.46 88\.20 16\.85 86\.16 103\.01 Contingencies 43\.00 94\.00 137\.00 55\.34 95\.17 150\.51 - - - Subtotal Bank/SIDA Financed Portion 93\.00 279\.00 279\.00 224\.28 409\.65 633\.93 208\.68 386\.44 595\.12 KfW Financed Portion Kidatu civil works (CD 21) 3\.00 10\.00\. 13\.00 15\.62 46\.86 62\.48 16\.17 49\.88 66\.05 Kidatu steel linings & gates (CD 22) 1\.00 18\.00 19\.00 1\.63 11\.27 12\.90 1\.61 11\.95 13\.56 Kidatu turbines & pipework (CD 23) 4\.00 33\.00 37\.00 1\.28 19\.99 21\.27 0\.81 21\.55 22\.36 Kidatu generators (CD 24) 3\.00 30\.Ou 33\.00 2\.23 25\.34 27\.57 2\.47 26\.34 28\.81 Kidatu transformers (CD 25 AK) - - - - - - 1\.07 12\.92 13\.99 Morogoro transformers (CD 25 AM) 2\.00 22\.00 24\.Uu 3\.66 28\.07 31\.73 1\.06 8\.34 9\.40 Kidatu 220-kV cables (CD 25 i3) - - - - - - 1\.27 7\.24 8\.51 Kidatu control equipment (CD 26) 1\.00 4\.0U 5\.00 1\.72 13\.19 14\.91 0\.23 15\.54 15\.77 Kidatu switchyard, connecting lines and Morogoro substation (CD 27) 1\.00 9\.00 10\.00 7\.67 29\.92 37\.59 7\.01 30\.23 37\.24 > Contingencies 17\.00 71\.00 88\.00 5\.10 26\.87 31\.97 - - - Subtotal KfW Financed Portion 32\.00 197\.00 229\.00 38\.91 201\.51 240\.42 31\.70 183\.99 215\.69 a Taxes (for all works) 25\.00 - 25\.00 52\.90 - 52\.90 78\.85 - 78\.85 IDC (for IBRD/KfW and amounts) 70\.00 36\.00 106\.00 - 36\.00 36\.00 - 29\.97 29\.97 Subtotal 95\.00 36\.00 131\.00 52\.90 36\.00 88\.90 78\.85 29\.97 108\.82 TOTAL 220\.00 512\.00 732\.00 316\.09 647\.16 963\.25 319\.23 600\.40 919\.63  TANZANIA KIDATU HYDROELECTRIC PROJECT SECOND STArE DEVELOPMIENT CONSTRUCTION SCHEDULE IMTERA DAM) ACTIVITIES YEAR OF CONSTRUCTION 7 9s1791go19 TEMPORARY WORK& RIICbI 'C,IKOI,a\.p\.OE I0oo\. RE L CEC\. AT s, IEO2 DODOM\. - I INGA -- ROAD E--\.RIO MCCHAIJICAE\.ORWS SPILLWVAY CPil~ d ln\.,505 OTER NIAWORKS G-5TI\.cav 'R SPILLWAY Cmure \.-d 01- 1\. \.4 ""~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~AWR002I75  N A 0 r- - i F X 3t X =~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~t lP- - > o X I 0 1 t 0 0 l 1 0 1 f l I 0 41 ~ ~~~ - - -_ - - - ---'\.,-,\.,,-\. ',','''-- - -- -lll ___ I lu l= i Inc00 PWWS Ui -n SI m4EOWG ncdC,d 111 1 1 1~W- ' l I 1 - - - I I pWOdO, di_ r,0 C ISf ~W j ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~1 ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ 0- --W-, M\.-o ,\. Si00 ! ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~C G\.,- 3SflOH)t3AOd IlflY 4 1 J tO NOISN3IX3) 3fl0)HC\.S-, NOIiDfMlHSNOD IN tWdO13A3O 3DV15 cINOJ3S VtNVZNVlN  TANZANIA GREAT RUAHA PROJECT - PHASE II Statement of Contracts and Works Tendered Completion Contract No\. Sum Cost Scope of the Works CD 1 363,554,247 410,054,611 Temporary Works: Staff camps, labor camp, community center, school, dispensary, police station, post office, and other temporary facilities\. Works Ftera Dam: Concrete structure of the buttress type with connecting gravity dam at the right bank, crest length 260 meters, crest width 10 meters and maximum height 45 meters\. Road: Relocation of the northern and southern parts of Iringa-Dodoma road (northern part - about 9 km) and southern part (about 3\.3 km)\. Miscellaneous: Civil works pertainirg to floating steel boom, new settlement public facility buildings, etc\. DC 2 - Mtera Mechanical Works 24,448,277 26,571,028 Four radial gates with hoists and embedded parts, one 0 bulkhead gate and four sets of embedded parts, one gantry crane with rails and beam, one bottom outlet gate with hoist and one set of embedded parts for concrete stoplogs\. CD 3 & 4 - Employers Village & 56,216,233 52,483,851 (a) Fourteen family houses, guest house (2 blocks) with Relocation of Road swimming pool, few employers office (2 blocks), ancillary works (sanitary, electrical installations, etc\.) (b) Relocation of southern part of Iringa-Dodoma road (22 kms), access road including bituminous surfacing to the employers village and ancilliary temporary works\. CD 5- Bush clearance 0\.95 0\.85 Bush clearance up to 2\.3 km upstream of the dam below x the reservoir level (about 150 hectares)\. 1\.76 1\.78 Supply of steel booms\. 0 0\.64 0\.65 Supply of towing and rowing boats\. 0\.20 0\.25 Archaelogical survey/salvage in the submergence area of the Mtera reservoir\. 1\.20 0\.90 Water supply investigations for new settlement\.  CD 21 68 ,475,995 66,052,554 Concrete lining of cylinder gate shafts 3 & 4 and removal of temporary concrete walls in intakes 3 & 4, installation of permanent drainage pipes in penstock 3 & 4, concrete structures for installation of generators 3 & 4 together with appurtenant finishes, extension of cable culverts and foundations for connecting lines at pothead, concreting roads in the access tunnels\. CD 22 - Penstock Steel Linings 14,100,046 13,562,554 Two penstock steel linings, one sliding gate with and Gates lifting wires on a drum and spares, two cylinder gates with hoists and appurtenant equipment and spares\. CD 23 - Turbines and Pipework 22,765,320 22,351,637 Two complete turbine units with governors with all appurtenant equipment, all necessary pipes, valves, supports, etc\. for supply of cooling water, two pumps, pipes, valves for dewatering of draft tubes with all appurtenant equipment\. CD 24 - Generators 29,072,719 28,809,905 Two complete vertical shaft salient pole generators with excitor and with all appurtenant equipment\. CD 25 AK - Transformers for Kidatu 13,968,630 13,993,420 Seven single-phase, set-up generator transformers, complete with all appurtenant equipment for Kidatu power plant (20 MVA, 10\.5 kV - 220 kV)\. CD 25 AM - Transformers for Morogoro 10,368,100 9,394,700 Four single-phase, 30 MVA transformers with all appurtenant equipment plus two 20-MVA regulating transformers all for Morogoro\. CD 25 B - 220 kV cables 9,394,986 8,509,631 Six single-phase, 220 kV cables with potheads, including fire protection measures\. CD 26 - Generator switchgear, control 16,407,100 15,767,743 Generator switchgear, control equipment, extension of equipment, local power and lighting local power and lighting installation\. CD 27 - 220 kV switchyard, connecting 40,088,630 37,237,117 220-kV lightning arresters and pull-off structure for lines, Morogoro S/S the pothead, 220-kV switchyard at Kidatu, 220-kV connecting lines with all civil works, Morogoro substation with civil works\.  TANZANIA KIDATU HYDROELECTRIC PROJECT STAGE II PROJECT COMPLETION REPORT Internal Rate of Return (TSh Million) Attributable Operation Deflated 2/ Kidatu Distribution & and Total Years II Transmission Maintenance Cost Benefits 1/ Deflator Cost Benefits Net Benefits - …-- Costs… 1976 2 2 0 57\.7 3 0 - 3 1977 48 48 0 61\.0 79 0 -79 1978 210 210 0 74\.6 281 0 -281 1979 250 22 272 0 82\.4 330 0 -330 1980 283 23 306 0 85\.0 360 0 -360 1981 15 25 6 46 62 90\.1 51 69 18 1982 29 7 36 86 100\.0 36 86 50 1983 33 9 42 178 116\.0 42 153 111 1984 9 9 262 116\.0 9 226 217 1985 11 11 342 116\.0 11 295 284 1986 13 13 384 116\.0 13 331 318 1987 15 15 424 116\.0 15 365 350 1988 15 15 465 116\.0 15 401 356 1989 15 15 502 116\.0 15 433 418 1990-2009 15 15 502 116\.0 15 433 418 2010 80 15 15 502 116\.0 95 433 338 2011-2020 15 15 502 116\.0 15 433 418 Rate of Return: 18\.1% 1/ On the basis of 20% system losses\. 2/ Based on T¢65 per kWh in 1981 and 1982 and T¢97\.5 per kWh in 1983 and thereafter due to expected tariff increase of 50% in 1983\. Rate of return on the basis of T¢65 per kWh for the entire period is 15\.5%\.  - 33 - ANNEX 5 KIDATU HYDROELECTRIC PROJECT STAGE II PROJECT COMPLETION REPORT Comparison of Alternative Programs Equalizing Discount Rate (TSh Million) --------- Alternative I --------- ---- Alternative II ---- Net Flow Kidatu Diesel hydro Diesel Diesel Diesel for II Constr\. 0 & M 0 & M Total Constr\. 0 & M 3/ Total Alt\. # 1 2/ Years 1976 2 0 2 0 0 0 - 2 1977 48 0 48 0 0 0 - 48 1978 210 0 210 33 0 33 -17 7 1979 250 0 250 70 0 70 - 180 1980 283 0 283 84 0 84 - 199 1981 15 2 17 69 91 160 143 1982 4 4 39 120 159 155 1983 4 4 17 175 192 188 1984 4 4 259 259 255 1985 4 4 338 339 335 1986 4 4 379 379 375 1987 4 4 420 42u 41b 1988 I/ 4 4 459 459 455 1989-1999 4 4 497 497 493 2000 4 4 33 497 530 526 201 4 4 70 497 567 563 2002 4 4 84 497 581 577 2003 4 4 69 497 56b 5b2 2004 4 4 39 497 536 532 2005 4 4 17 497 514 510 2006-2009 4 4 497 497 493 2010 80 4 84 497 497 413 2011-2019 4 4 497 497 493 2020 4 4 33 497 530 526 2021 4 4 70 497 567 563 2022 4 4 84 497 581 577 2023 4 4 69 497 566 562 2024 4 4 39 497 536 532 2025-2030 4 4 17 497 514 510 Equalizing Discount Rate: 30% 1/ After 1987 the two alternative programs will have the common facility of Mtera (in 1987) followed by a coal-fired plant\. Up to 1988 Kidatu II will meet the demiand\. 2/ Due to lower load growth no additional diesel construction had been made, but some production from the existing diesel facilities for back-up\. 3/ For the same amount of electricity generation as the Kidatu II case\.  TWNZANIA KMDAU IfH1D ECllC PRaBCr SMEM II TANZANIA EI\.ECWIC SIPPLY CMAINY, LTD\. Incorm Statenelts (TSh li limn) - 1975 - 1976- 1977 --1978-- 1979 - 1980 - 1981- Appraisal Actual Appraisal Actual Appraisal Actual Appraisal Actual Appraisal Actual Appraisal Actual Appraisal Actual CMn, 496 48b 537 490 618 516 686 538 752 653 833 738 926 752 Nverag,e Price Ter 1h6 (Tt) 32\.1 31\.8 39\.6 40\.3 45\.0 48\.3 53\.0 46\.6 53\.0 46\.2 61\.5 b5ji 61\.5 65\.0 0sratirg i{everi,s Sales Reverues 159\.2 154\.8 212\.7 197\.7 278\.1 248\.9 363\.6 274\.0 398\.5 3U0\.9 515\.4 479\.7 569\.5 488\.0 Tot,\. 159\.2 ;54\.8 212\.7 197\.7 278\.1 2148\.9 303\.6 274\.0 398\.5 301\.9 515\.4 479\.7 569\.5 488\.0 Cj erat a tLqw~ Gem-rdt\.Lun 55\.8 53\.9 54\.3 50\.3 61\.2 b2\.1 69\.1 76\.2 75\.6 87\.2 83\.2 114\.3 91\.8 140\.3 \.n,m itsion & Dljtribution 8\.8 9\.3 9\.7 11\.2 10\.7 12\.9 11\.7 16\.2 12\.9 21\.0 14\.2 30\.3 15\.6 29\.6 AmalrratLin 31\.4 35\.7 34\.5 40\.1 38\.0 47\.7 41\.8 53\.6 46\.0 57\.2 50\.6 71\.7 55\.7 82\.5 Lt2UL<Z\.i~Iti\.Dn 31\.5 29\.2 47\.8 48\.7 54\.8 62\.9 65\.0 74\.3 76\.1 87\.1 99\.0 102\.9 120\.5 132\.5 tixeTa - - - - 16\.2 - * 44\.4 10\.0 49\.0 10\.0 67\.1 - 61\.8 - Total 127\.5 128\.1 146\.3 150\.3 180\.9 185\.6 232\.0 230\.3 259\.6 262\.5 314\.1\. 319\.2 345\.4 384\.9 Operating InLcre 31\.7 26\.7 66A 47\.4 97\.2 63\.3 131\.6 43\.7 138\.9 39b4 201\.3 160\.5 224\.1 103\.1 Otier LtccAre (Losses) 1\.1 (0\.7 1\.1 (19\.0) 1\.3 (3\.1) 1\.4 (1\.0) 1\.6 11\.( 1\.7 10\.3 1\.9 10\.0 Net InL"e Before Interert 32\.8 26\.0 67\.5 28\.4 98\.5 60\.2 133\.0 42\.7 140\.5 50\.4 \.203\.0 170\.8 226\.0 113\.1 interest aiargi to Operations 22\.2 12\.9 39\.6 36\.3 38\.2 37\.3 40\.8 37\.6 38\.8 45\.6 46\.1 48\.6 93\.6 41\.9 r'gT ':1E 10\.6 13\.1 27\.9 (7\.9) 60\.3 22\.9 92\.2 5\.1 101\.7 4\.8 156\.9 122\.2 132\.4 71\.2 Rate of keturn 1/ 3\.9 3\.2 5\.0 3\.4 6\.5 3\.9 7\.6 2\.3 6\.9 1\.9 7\.6 6\.8 7\.0 3\.3 Luratln\. Rat\.io 80 83 68 76 65 75 64 84 65 87 61 67 60 79 5rrecaation/Gross Plat 2\.8 2\.6 2\.8 2\.7 2\.8 2\.9 2\.8 2\.9 2\.8 3\.0 2\.8 3\.0 2\.8 3\.0 1/ AppraLsal RiX adjusted to reflect transfer of 'Other Revenues" to "Otter Ire"\. a,  TM=dA KIDAMilJ RK0EL1(: C sa'l II IANZANIA EUOIR1G SUPi'LY UIIiPANY, Ll\. calance s9ets (156 Killixj) Yeiar Ended Deraber 31 - 1975 - 1976 - 1977-- - 1978- - 1979- 1980- 1981 Ap-praisal Actual AppraisaL Actual Appraisal Actual Apprnsal Actual Appraisal Actual Appraisal Aetual Appraisal Actual PLait In (peratioci 1,514\.6 1,516\.0 1,899\.0 2,089\.7 2,016\.5 2,250\.0 2,623\.0 2,875\.2 2,814\.9 2,933\.7 4,253\.6 3,926\.2 4,353\.6 4,908\.9 lIAs: SDepreciation 316\.5 314\.3 427\.9 526\.0 482\.8 589\.0 678\.6 807\.0 754\.8 894\.5 1,032\.6 1,270\.8 1,153\.1 1,403\.3 t\.et Plant 1,198\.1 1,201\.7 1,471\.1 1,563\.7 1,533\.7 1,h61\.0 I ,9\.44\.4 2,U68\.2 2,U60\.1 2,039\.2 3,221\.0 2,655\.4 3,2W\.5 i,505\.b ';otk in Pr-Wgrtss 165\.4 112\.4 306\.8 204\.7 420\.6 208\.8 668\.6 438\.1 813\.5 705\.6 344\.8 1,231\.9 440\.7 6621\. Lor4,-term, invesueints - - - - - - - - 1\.2 - 1\.2 - 1\.2 Ourrent Assets ('\.te 13\.1 5\.2 25\.9 7\.1 16\.2 2\.5 13\.5 - 15\.0 6\.0 43\.4 - 40\.2 - \.kc\.Jxints Receivable 28\.6 27\.7 38\.3 47\.1 50\.1 59\.0 65\. 66\. 71\.7 94\.8 92\.8 167\.8 102\.5 120\.5 Ilnwt ories 52\.5 65\.6 52\.5 72\.0 52\.5 60\.9 56\.7 103\.4 61\.3 160\.0 66\.2 193\.3 71\.4 20t\.0 Ocler 0\.1 30\.2 0\.1 29\.2 0\.1 71\.0 0\.1 37\.9 0\.1 45\.6 0\.1 96\.4 0\.1 96\.0 Subtotal 94\.3 128\.7 116\.8 155\.4 118\.9 193\.4 135\.7 207\.7 148\.1 306\.4 202\.5 457\.5 214\.2 422\.5 'IOTAL 1,457\.8 1,442\.8 1,896\.7 1,923\.8 2,073\.2 2,063\.2 2,748\.7 2,714\.0 3,C21\.7 3,052\.4 3,7b8\.3 4,34b\.0 3,855\.4 4,591\.3 _ _ _ _ = _ _ , _ _ _ \. _ _ _ \. _ _ _ __ _ Capital 514\.0 511\.1 571\.3 557\.2 583\.5 59b\.5 583\.8 648\.5 583\.8 748\.6 583\.8 877\.3 583\.9 93b\.2 Retair\.eo Larnings 3\.5 (6\.7) 12\.5 (21\.7) 15\.b (42\.7) 52\.Z (7h\.3) 95\.4 (12J\.8) Z03\.7 (177\.6) Zb6\.2 (164\.7) CZtpiLal Re-urve 20\.6 83\.9 20\.6 81\.3 20\.6 10J\.3 2(\.6 115\.3 2U\.b 74\.3 20\.6 253\.3 20\.6 253\.3 Rovalua-ion Reserve 189\.8 187\.5 430\.9 578\.4 430\.9 578\.4 846\.9 994\.6 846\.9 994:6 1,335\.1 1,o72\.6 1,335\.1 1,672\.6 Subtotal 727\.9 775\.8 1,035\.3 1,195\.2 1,050\.6 1,233\.5 1,503\.5 1,680\.1 1,546\.7 1,696\.7 2,143\.2 2,625\.6 2,225\.8 2,699\.4 Def Tax Provision 49\.7 59\.9 68\.7 67\.0 87\.9 90\.9 104\.9 109\.8 124\.9 109\.8 154\.3 109\.8 184\.8 168\.1 Lrog ierm Debt 5b2\.5 522\.4 665\.8 552\.3 797\.6 595\.6 992\.4 761\.2 1,190\.5 1,034\.1 1,298\.4 1,314\.8 1,258\.8 1,548\.3 Currect L abillities Accxnts PayabLe 98\.2 65\.5 105\.5 89\.3 113\.5 116\.8 122\.0 135\.8 131\.1 176\.8 141\.0 234\.5 151\.5 101\.2 overdrafts - - - - - - - 0\.2 - - - 12\.9 - 11\.1 Subtotal 98\.2 65\.5 105\.5 89\.3 113\.5 116\.8 122\.0 136\.0 131\.1 176\.8 141\.0 247\.4 151\.5 112\.3 Q'resun2r Cjntribution 19\.5 19\.2 21\.4 20\.0 23\.6 26\.4 25\.9 26\.9 28\.5 35\.0 31\.4 48\.4 34\.5 63\.2 TOTAL 1,457\.8 1,442\.8 1,896\.7 1,923\.8 2,073\.2 2,063\.2 2,748\.7 2,714\.0 3,021\.7 3,052\.4 3,768\.3 4,346\.0 3,855\.4 4,591\.3 De b/Debt arm Equity 42 3b 33 33 41 31 38 30 42 36 36 32 34 35 Gurront Ratiu 1\.0 2\.0 1\.1 1\.7 1 \.0 1\.7 1\.1 1\.5 1\.1 1\.7 1\.4 1\. 1\.4 3\.8 Receivablts/Rev 1 18 1d 18 24 18 24 18 24 18 31 18 35 18 25  TANZANIA KIDAMU HMYIELDIC PROJECT SLAGE II TANZANIA 1ECIRIC 3JPPLY CWFANY, 1,I)\. Funds Flow Statenents (TSh MIliln) Year Ended DecemnLr 31 -1975 - 1976--- 1977 - 1978 1979-- - 1980- - 1981- - 1975-1981 lbtal Appraisal Actual Appr Actual Appraisal Actual Appra Actual Appraisal Actual Appratsal Actul Appraisal Actual Appra Actual Intermal srces Net Income Before Interest 32\.8 26\.0 67\.5 28\.4 98\.5 60\.2 133\.0 42\.7 140\.5 50\.4 203\.0 170\.8 226\.0 113\.1 901\.3 491\.6 Depreciatime 31\.5 29\.2 47\.8 48\.7 54\.8 62\.9 65\.0 74\.3 76\.1 87\.1 99\.0 102\.9 120\.5 132\.5 494\.7 537\.6 Total 64\.3 55\.2 115\.3 77\.1 153\.3 123\.1 198\.0 117\.0 216\.6 137\.5 302\.0 273\.7 346\.5 245\.6 1,396\.0 1,029\.2 0perationlal Requirements Irease (Decrease) in Working Capital (3\.7) 78\.8 2\.3 1\.0 3\.9 15\.1 11\.1 (2\.A) 1\.7 51\.9 16\.1 99\.4 4\.4 98\.3 35\.8 342\.1 Debt Service 43\.5 50\.3 60\.4 51\.8 81\.6 61\.2 99\.3 58\.0 117\.2 65\.2 131\.6 77\.3 163\.3 86\.7 696\.9 450\.5 Dividerls - - - - 37\.9 - 38\.5 7\.8 38\.5 - 19\.3 - 19\.3 - 153\.5 7\.8 Other - - - - - - - - - 89\.5 - - - - - 89\.5 Total 39\.8 19\.1 62\./ 52\.8 123bA 76\.3 148\.9 63\. 157b4 206\.6 167\.0 176\.7 187\.0 185\.0 886\.2 889\.9 Net Available from Operations 24\.5 (73\.9) 52\.6 24\.3 29\.9 46\.8 49\.1 53\.6 59\.2 (69\.1) 135\.0 97\.0 159\.5 60\.6 509\.8 139\.3 Comtruction Requirements lXoing Vbrls 224\.4 156\.6 125\.1 113A 111\.6 133\.3 157\.1 1,021\.5 Kidatu Stage 11 - 60\.3 _ 85\.3 163\.7 175\.6 _ 113\.8 27\.3 626\.0 Total (exclud\. IDC) 224\.4 158\.5 216\.9 111\.4 Z10b 162\.8 277\.1 291\.5 287\.2 320\.0 247\.1 5538 184b 411\.8 1,647\.5 2,009\.8 Balance to Finance 199\.9 232\.4 164\.3 87\.1 18U\.5 116\.0 228\.0 237\.9 228\.0 389\.1 112\.1 456\.8 24\.9 351\.2 1,137\.7 1,870\.5 Fianed by:\. Consumers Contributlm 1\.7 1\.8 2\.0 0\.8 2\.1 6\.3 2\.3 0\.6 2\.6 8\.1 2\.8 13A 3\.1 14\.8 16\.6 45\.8 Borrowng IWD Lom SIDA taan KfW Lcon llRD/Kidatu I SIA/Kidatu I otler EPistirng inrs Kiwira & Sundry E:Kt\. Future lon Mqariza Total 57\.5 77\.2 117\.8 42\.1 156\.4 65\.8 222\.7 182\.6 226\.9 287\.1 137\.7 295\.7 18\.6 277\.3 937\.6 1,227\.8 Equity 156\.9 154\.1 57\.3 46\.1 12\.3 39\.3 0\.3 52\.0 - 100\.1 - 128\.8 - 60\.9 226\.8 581\.3 Total Finarning 216\.1 233\.1 177\.1 89\.0 170\.8 111\.4 225\.3 235\.2 229\.5 395\.3 140\.5 437\.9 21\.7 353\.0 1,181\.0 1,854\.9 Stirplus (Deficit) of Fuinds 16\.2 0\.7 12\.8 1\.9 (9\.7) (4\.6) (2\.7) (2\.7) 1\.5 6\.2 28\.4 (18\.9) (3\.2) 1\.8 43\.3 (15\.6) Cumulative 13\.1 5\.2 25\.9 7\.1 16\.2 2\.5 13\.5 (0\.2) 15\.0 6\.0 43\.4 (12\.9) 40\.2 (11\.1) 40\.2 (11\.1) Debt Service Coverage 1\.5 1\.1 1\.9 1\.5 1\.9 2\.0 2\.0 2\.0 1\.9 Z\.1 2\.3 3\.5 2\.1 2\.8 2\.0 2\.3  - 37 - ANNEX 9 Page 1 of 4 COMMENTS FROM THE BORROWER AP 41318 TANESCO TAN/DSM/MD/470 10TH MAY,1983 ATTN \. MR\. ERKMEN PROJECT COMPLETION REPORT ON TANZANIA: KIDATU HYDROELECTRIC PROJECT, SECOND STAGE(LOAN 1306 -TA) PLEASE REFER TO YOUR LETTER DATED 11/3/83 VIDE WHICH A DRAFT OF PROJECT COMPLETION REPORT HAS BEEN SENT TO US FOR COMMENTS: IN THIS CONNECTION WE WISH TO CONFIRM THAT THE DRAFT REPORT IS GENERALLY TOOUR SATISFACTION\. HOWEVER,WE HAVE TO CLARIFY OUR POSITION IN RESPECT OF PARAS 3\.25, 6\.01 AND 7\.03 (C) AS UNDER FOR YOUR FURTHER CONSIDERATION AND INCLUSION IN THE REPORT AS DEEMED APPROPRIATE\. AA\. PARA 3\.25 IN OUR EFFORTS TO UNDERSTAND THE REASONS WHICH LEAD TO FALL OF A STOPLOG AFTER OUR FIRST PLACEMENT OF STOPLOGS UPSTREAM OF BOTTOM OUTLET, WE HAVE DISCOVERED THAT THERE IS NO AERATION  - 38 - ANNEX 9 Page 2 of 4 ARRANGEMENT/PROVISION FOR THE CONDUIT PORTION BETWEEN THE STOPLOGS AND THE OUTLET GATE\. WHEN THE OUTLET GATE IS LOWERED WITH STOPLOS IN POSITION, THE LEAKAGE WATER STARTS FILLING UP THE CONDUIT SPACE BETWEEN STOPLOGS AND THE GATES AND IN THE ABSENCE OF AIR VENT, AIR PUSHES OUT AT THE SEALS OF STOP- LOSS AND OUTLET GATE,\. FURTHER ,NET FIFFERENTIAL PRESSURE ON THE UPPER STOPLOSS SHOULD UNDER-GO A SUDDEN CHANGE WHEN THE BOTTOM OUTLET GATE IS RAISED WITH STOPLOGS IN POSITION,BECAUSE OF SUDDEN JETTING OUT OF WATER STORED IN THE CONDUIT SPACE(BETWEEN STOPLOGS AND OUTLET 6ATE) AND DUE TO SUB-ATMOSPHERIC PRESSURES/ VACCUM EXISTING IN THE CONDUIT SPACE OVER WATER SURFACE IN THE ABSENCE OF ANY AERATION ARRNGEMENT\. PROBABLY DURING REGULATION OF WATER RELEASES,THIS COULD ACTUATE JETTING OUT OF STOPLOG SEAL S WITH PROGRESSIVELY INCREASING SUCEPTIBILITY TOWARDS INCREASED LEAKASE AND EVEN DISPLACEMENT OF STOPLO6S\. FURTHER IT IS NOTED THAT SEALS ARE PROVIDED ONLY ON TOP AND BOTTOM OF STOPLOSS- THERE ARE NOSEALS ON THE SIDES\. WE HAVE ALREADY DISCUSSED WITH OUR CONSULTING ENGINEER TO EXAMIN E THE ABOVE ASPECTS FOR CARRYING OUT THE NEEDED IMPROVEMENTS WHICH IS POSSIBLE THROUGH THE MTERA POWER PLANT CONTRACTORS\. HOWEVER NO IMMEDIATE RISKS ARE INVOLVED WITH THE PRESENT ARRANG- EMENT, AS WATER REGULATION/RELEASES THROUGH BOTTOM OUTLET SHALL NOT BE REQUIRED UNTIL RESERVOIR LEVEL GOES DOWN BELOW THE DEAD STORAGE LEVEL/SPILLWAY CREST\. PARA 6\.01  -39- ANNEX 9 Page 3 of 4 _________________ IN REFERENCE TO THIS PARA WE CONFIRM THAT TANESCO IS VERY SATISFIED WITH PERFORMANCE OF PANEL OF EXPERTS AS WELL AS THE TWO FULL TIME EXPERTS/ ADVISERS IN EXECUTION OF THIS PROJECT\. CC\. PARA 7\.03 IN REGARD TO SUB-PARA (C) IN RESPECT OF IMPORTANT LESSONS TO BE LEARNED FROM THIS PROJECT WE ARE OF THE OPINION THAT CAREFUL AND KNOWLEDGABLE SUPERVISION IS ESSENTIAL AND THIS IS BEST ACHIEVED THROUGH\. 1) MAIN ENGINEERING CONSULTANT,WHO IS ALLOWED TO ENGASE ALSO PART TIME SPECIALISTS/EXPERTS WHEN NECESSARY WITHIN THE AMBIT OF ENSINEERING A6REEMENT\. 11) PANEL OF PART TIME EXPERTS TO RENDER ADVICE ON VARIOUS TECHNICAL ANDCONTRACTUAL ASPECTS DURING EXECUTION OF THE PROJECT\. jil) WHOLE TIME EXPERTS -WHO HAVE TO DEAL WITH DAY TO DAY PROGRESS AND PROBLEMS OF THE PROJECT AS PART OF EMPLOYER'S 'INHOUSE EXPERTISE' AND ENSURE THE NEEDED INPUTS/ASSIS- TANCE FROM THE CONSULTANTS AND CONTRACTORS TOWARDS SAFE AND SCONOCIC EXECUTION OF THE PROJECT\.DD\. DD\. PARA 7\.03 WE SUGGEST THE FOLLOWING ADDITIONAL SUB-PARA:-  - 40 - ANNEX 9 Page 4 of 4 (N) LOCAL ENGINEERS SHOULD BE ATTACHED TO THE MAIN ENGINEE- RING CONSULTANT AND WHOLE TIME EXPERTS TO ECQUIRE TRAINING AND EXPERIENCE ON DESIGN CONSTRUCTION ASPECTS OF THE PROJECT'' WE HOPE ,THE ABOVE INFORMATION IS TO YOUR SATISFACTION\. REGARDS S\.L\.MOSHA MANASING DIRECTOR/TANESCO 41318 TANESCO 41318 TANESCO CORRE\. IN PARA AA\. LINE NO 9 READ NET DIFFERENTIAL PRESSURE\. 41318 TANESCO 41318 TANESCO 190802 1353 100583 05150057 1333 01890189 069 NNNN

APPROVAL

P009698

Document of The World Bank FOR OFFICIAL USE ONLY Report No\. 4559 P'ROJECT COMPLETION REPORT INDI]A - IFFCO FERTILIZER PROJECT (LOAN 1079-IN) June 15, 1983 Industry Department This document has a restricted distribution and may be used by recipients only in the performance of their official duties\. Its contents may not otherwise be disclosed without World Bank authorization\.   FOR OFFICIAL USE ONLY PROJECT COMPLETION REPORT INDIA - IFFCO FERTILIZER PROJECT (LOAN 1079-IN) TABLE OF CONTENTS Page No\. Preface \. \. i Basic Data Sheet \. i Highlights \.i I\. INTRODUCTION \.1 II\. PROJECT BACKGROUND \. 2 A\. Project Preparation and Appraisal, Loan Approval and Effectiveness \. 2 B\. Project Description and Objectives \. 3 III\. PROJECT IMPLEMENI'ATION AND MANAGEMENT \. 3 A\. Achievement of Project Objectives \. 3 B\. Project Scope \. 4 C\. Project Management \. 5 D\. Employment and Training \. 6 E\. Use and Performance of Consultants \. 6 F\. Performance of Contractors and Suppliers \. \. 6 G\. Procurement \. 7 H\. Implementation Schedule \. 7 I\. Capital Costs, Financing and Disbursements \. \. 8 IV\. OPERATING PERFORMANCE \. 12 A\. Commissioning and Start-up \. 12 B\. Build-up of Production \. 12 C\. Market Growth \. 12 V\. FINANCIAL PERFORMANCE \. \. \. 13 A\. Financial Rate of Return \. 13 B\. Financial Results \. 13 VI\. ECONOMIC PERFORMANCE \. \. \. 13 A\. Economic Rate of Return \. 13 B\. Environmental Aspects \. 14 C\. Transfer of Technology \. 14 VII\. BANK ROLE \. \. 15 VIII\. CONCLUSIONS AND LESSONS FOR SIMILAR PROJECTS \. \. 15 This document has a restricted distribution and may be used by recipients only in the performance of their official duties\. Its contents may not otherwise be disclosed without World Bank authorization\.  ANNEXES Annex 1 - Indian Fertilizer Projects Financed by the Bank Group Annex 2 - Organization Chart for Project Implementation Annex 3 - Countries of Origin of Bank Financed Equipment Annex 4 - Implementation Schedule Annex 5 - Project Cost Summary Annex 6 - IBRD Loan Disbursement Schedule Annex 7 - Production Build-Up Annex 8 - Statewise Distribution of the Project Urea Output Annex 9 - Project Operating Costs at 90% Capacity Utilization Annex 10 - Pre-Tax Financial Rate of Return Annex 11 - IFFCO Financial Statements Annex 12 - Economic Analysis: I\. Assumptions II\. Cost and Benefit Streams for Economic Rate of Return Annex 13 - Comments received from the Borrower  - i - PROJECT COMPLETION REPORT INDIA - IFFCO FERTILIZER PROJECT (LOAN 1079-IN) PREFACE 1\. This report covers the IFFCO fertilizer project in India supported by Loan 1079-IN\. The loan for US$109\.0 million to IFFCO was approved in January 1975, became effective in April 1975 and was closed in May 1981, 2\.2 years a\.fter the original closing date\. 2\. The Project Completion Report was prepared in the Industry Department of the World Bank on the basis of information and data supplied by IFFCO, information gathered by a Bank completion mission which visited India in March 1982, and discussions with IFFCO and the Government\. 3\. Comments of the Borrower have been incorporated in the PCR, and are shown in Annex 13\. 4\. The Project has not been subject to an audit by the Operations Evaluation Department\.   - ii - PROJECT COMPLETION REPORT INDIA - IFFCO FERTILIZER PROJECT (LOAN 1079-IN) BASIC DATA SHEET KEY PRQJECT DATA Item Appraisal Estimate Actual Total Project Cost (US$ million) 220\.5 246\.7 Overrun (Z) - 11\.9 Loan Amount (US$ million) 109\.0 109\.0 Disbursed 109\.0 109\.0 Cancelled - - Project Zero Date 01/75 05/76 Project Mechanical Completion 08/78 03/80 Start of Operation 10/78 03/81 Economic Rate of Return 16 11 Financial Rate of Return (Pre-Tax) 14 12 Institutional Performance Satisfactory CUMULATIVE LOAN DISBURSEMENT As of June 30 1975 1976 1977 1978 1979 1980 1981 (I) Planned 4\.3 27\.2 71\.9 105\.6 109\.0 109\.0 109\.0 (II) Actual - 2\.8 21\.6 49\.3 84\.9 100\.2 109\.0 (III) (II) as X of (I) - 10\.3 30\.0 46\.7 77\.9 91\.9 100\.0 OTHER PROJECT DATA Item Original Plan Actual Variation First Mention in Files 10/73 Appraisal 04/74 Negotiations 10/74 Board Approval 01/07/75 Loan Signing Date 01/24/75 Loan Effective Date 05/08/75 Closing Date 03/31/79 05/04/81 26 months Borrower IFFCO IFFCO Executing Agency IFFCO IFFCO Fiscal Year of Borrower 07/01 to 06/30 07/01 to 06/30 MISSION DATA No\. of No\. of Report Item Mo\./Yr\. Days Persons Man-days Date Identification 10/73 15 2 30 Appraisal 03/74 21 2 42 Post Appraisal 08/74 2 1 2 Supervision I 06/75 8 2 16 07/17/75 Supervision II 09/75 4 2 8 09/24/75 Supervision III 08/76 5 2 10 09/24/76 Supervision IV 10/77 8 1 8 10/12/77 Supervision V 02/78 4 1 4 05/30/78 Supervision VI 11/78 4 1 4 03/31/79 Supervision VII 11/79 1 1 1 11/20/79 Completion 03/82 7 1 7 06/29/82 COUNTRY EXCHANGE RATES Name of currency: Indian Ruppes (Rs) Year: Appraisal year average - 1974 Exchange Rate: US$1 - Rs 7\.5 Intervening years average - 1975/1981 US$1 - Rs 9\.0 Completion year average - 1981 US$1 = Rs 9\.0   - iii - PROJECT COMPLETION REPORT INDIA - IFFCO FERTILIZER PROJECT (LOAN 1079-IN) HIGHLIGHTS 1\. The IFFCO Fertilizer Project consisted of a grass root 900 tpd/ 1500 tpd ammonia/urea complex to increase the supply of nitrogenous fertilizers for the northern part of India\. It was decided to build this complex at Phulpur, near Allahabad, to benefit from good access to the railroad network\. The plant was to be based on fuel oil, with a design closely resembling that of the already completed Nangal plant\. 2\. The start-up of the project implementation was delayed by 17 months because, soon after appraisal, the Government decided to switch the plant feedstock from fuel oil to naphtha (para 3\.02)\. After this initial delay the Project was implemented expeditiously and was mechanically completed in March 1980, 18 months behind the appraisal schedule\. Commissioning tests could however not be started before March 1981 because of the non-availability of feedstock which resulted from political disturbances in the oil-producing state of Assam (para 3\.15)\. The plant was promptly put into commercial operation once naphtha became available (para 3\.15), and over the first 10 months of operation, it ran at an average of 80% capacity utilization (para 4\.02)\. These construction, start-up and initial production performances are excellent\. 3\. In spite of the delays, the Project's actual installed cost exceeded appraisal estimates only by 10%, basically because (i) the naphtha-based plant finally built is simpler and inherently cheaper than the fuel-oil-based one envisaged at appraisal (para 3\.17); (ii) a large portion of the project cost was incurred in rupees which depreciated by 20% vis-a-vis the US$ since project appraisal (para 3\.17); and (iii) the overall performance of IFFCO consultants and suppliers was satisfactory (para 8\.01)\. This, in turn, resulted from IFFCO's good organizational arrangements and close attention to the coordination, control and monitoring of project activities (para 8\.01)\. 4\. The Project economic rate of return is lower than envisaged at appraisal, because it is now based on expensive naphtha, whereas it was appraised on the basis of (relatively) cheap fuel oil\. Since 1975 when the Indian Government decided to switch feedstock, the price differential between naphtha and fuel oil has more than quadrupled and is expected to remain at current levels for the foreseeable future (para 6\.02)\. The project return is still appropriate at 11\.3% since, due to transport costs, naphtha's opportunity value at Phulphur is relatively low whereas urea's is high (para 6\.03)\. Also, with the coming on stream of the Mathura refinery, feedstock supplies for Phulpur are likely to be more secure for naphtha than for fuel oil (para 6\.03)\. 5\. The report concludes (para 8\.03) that the Project's very successful early operation indicates that it is mostly likely to meet its objectives and help India provide fertilizer to the farmers of its Northern Region at economically competitive prices\. The experience with this project also proves that with adequate planning, training and management, as provided by IFFCO, India can quickly achieve and maintain high capacity utilization rates in modern, complex fertilizer plants\."   PROJECT COMPLETION REPORT INDIA - IFFCO FERTILIZER PROJECT (LOAN 1079-IN) I\. INTRODUCTION 1\.01 The Government of India gives high priority to the development of the fertilizer sector to help increase local agricultural production\. The Bank Group has been involved in the development of this sector since 1967 when IFC financed a urea project in Kanpur, which was implemented by Indian Explosives Ltd\. (a subsidiary of Imperial Chemical Industries of the UK)\. Since then the Bank Group has financed a total of 11 projects in this sector, three by IFC, cne by IBRD and seven by IDA\. Annex 1 lists these projects\. The most recent Bank Group operation has been an IDA Credit of $400 million approved in March 1981 for the Hazira Fertilizer Complex based on India's West Coast offshore gas fields\. The IFFCO project was the eighth project in the fertilizer sector financed by the Bank Group and up to now the only one by IBRD\. The Bank support of this sector has resulted in significant economic benefits for India and has helped to bring about important policy and institutional changes as discussed below\. The Bank expects to remain active in this sector and is currently discussing the possibility of financing a fertilizer distribution project\. In addition, another large gas-based fertilizer project is under consideration for future Bank/IDA lending\. 1\.02 During the 15 years of Bank involvement in the sector, India has become the fourth largest fertilizer producer in the world after the USSR, the USA and China\. Fertilizer consumption has also grown rapidly, however, and India must still rely on large fertilizer imports to meet its demand\. The table below shows the growth of India's fertilizer production and consumption over the last 15 years\. India - Fertilizer Production and Consumption (in '000 nutrient tons) Average Growth 1965/66 1980/81 Rate (% p\.a\.) Production: Nitrogen 238 2,164 15\.9 Phosphate 119 842 13\.9 Consumption: Nitrogen 575 3,678 13\.2 Phosphate 133 1,214 15\.9  During this period, India followed the evolution of the industrialized countries' technology and it built fertilizer plants of increasing sizes\. It also changed the product mix of the fertilizer it manufactures, with most new capacity now producing high nutrient fertilizers\. It changed the feedstock pattern for ammonia production, and it now emphasizes using newly discovered West Coast natural gas\. Also, and this shall be discussed later in this report, overall project management and implementation performance has improved significantly with local companies now playing a larger role in project engineering, equipment supply and implementation management\. 1\.03 Another major development in the industry has been the introduction of a price retention formula under which fertilizer prices are set at levels that provide a 12% after tax return on net worth at 80% capacity operation\. This pricing policy has allowed the companies, as the Bank Group discussed with GOI, to generate sufficient funds to meet their financial obligations, meet a portion of their investment requirements and also earn a reasonable return at efficient operation\. It also rewards high capacity utilization rates, which the industry has had perennial difficulties to achieve\. 1\.04 The last fifteen years also witnessed the emergence of the cooperative sector as a major fertilizer producer in India\. The Indian Farmers Fertilizer Cooperative Ltd\. (IFFCO) started its Kandla and Kalol plants in 1975\. It started the Phulpur plant i-\. 1981, and is now the largest single producer of fertilizers in India, contributing 11% of the country's total nitrogenous fertilizer production and 23% of total phosphate fertilizer production in 1980/81\. IFFCO's ammonia/urea plants at Kalol and NPK plant at Kandla have consistently achieved high capacity utilization rates, reaching 93% and 125%, respectively, in 1980/81\. With IFFCO's Phulpur plant now reaching full production, with KRIBHCO (IFFCO's sister cooperative society) currently implementing the IDA supported 4,400 tpd urea fertilizer complex at Hazira, and with more than 27,000 cooperative institutions having now contributed about Rs 360 million to IFFCO's equity, the cooperative system appears well endowed to continue to play an important role in India's fertilizer sector\. II\. PROJECT BACKGROUND A\. Project Preparation and Appraisal, Loan Approval and Effectiveness 2\.01 In 1973, IFFCO and the Government of India decided to build a grass root ammonia/urea complex to increase the supply of nitrogenous fertilizers for the northern part of the country, particularly for the state of Uttar Pradesh which had 25% of IFFCO's cooperative shareholding\. It was decided that, to benefit from excellent access to the railroad network, this complex would be located at Phulpur, near Allahabad, on the southern side of a major broad-gauge railroad and only 15 km north of the Allahabad/Vanarasi meter gauge railroad and Grand Trunk Road\. It was also  - 3 - decided that the complex would use heavy fuel oil for feedstock, and that its design would closely resemble that of the already decided upon fuel oil based Nangal plant\. This heavy fuel oil was to be brought to Phulpur from the Barauni refinery (some 200 km away) or from the then-planned Mathura refinery (some 500 km away)\. 2\.02 The Government of India requested Bank Group assistance to finance this project, and an identification mission visited India in October 1973\. As there were no major issues outstanding neither with the project scope and location, nor with IFFCO's implementation capabilities (it was in the final stages of the successful implementation of the Kalol and Kandla projects), the Phulpur project was appraised in March/April 1974\. A post appraisal mission followed in August 1974\. The major issue that concerned the Bank during negotiations was that IFFCO's assets at Kalol and Kandla had been mortgaged to secure the loan received by IFFCO from the Indian financing institutions, and that liens were also to be created on IFFCO's properties at Phulpur to obtain further loans from them\. This issue was promptly resolved when the financial institutions agreed to accept Government guarantees in place of the liens, and the liens, if any, were to be limited to what IFFCO may provide the Government, to obtain the guarantees\. 2\.03 On January 7, 1975, the Board approved an IBRD loan of US$109 million to IFFCO\. This loan had a maturity of 15 years, including 4 years of grace, at an interest rate of 8% plus a 2\.25% fee to the Government\. The loan became effective on April 8, 1975\. B\. Project Description and Objectives 2\.04 The Project consisted of a 900 tpd partial oxidation fuel oil based ammonia plant to feed a 1,500 tpd urea plant\. Steam and power were to be generated from coal\. The Project included all necessary offsites such as railroad sidings, fuel oil and coal storage and handling facilities, water and effluent treatment plants, cooling towers, product storage and shipping facilities, maintenance shops, and offices and personnel facilities\. The main raw materials to be used by the Project were (a) 250,000 tpa of fuel oil, and (b) 400,000 tpa of coal\. A small amount of power (5 MW) was to be drawn from the state power grid\. III\. PROJECT 'IMPLEMENTATION AND MANAGEMENT A\. Achievement of Project Objectives 3\.01 The IFFCO Phulpur fertilizer project was mechanically completed in March 1980, 18 months behind schedule\. The delay was mainly due to the Government's decision to change the project feedstock from heavy fuel oil to naphtha, which postponed the project zero date by about 17 months\. Because of feedstock unavailability, the plant's start-up was further  - 4 - delayed by 10 months\. It was put in commercial operation on March 28, 1981\. Since then it has run remarkably well, achieving an average of 80% capacity utilization for the first 10 months of operation, and producing 329,632 tons of urea by January 1982\. This high capacity utilization exceeds apraisal estimates (50% utilization in the first year, and 802% in the second year of operation) and partly offsets the economic penalty of delays in project completion\. This is an excellent result for a naphtha- based urea plant in any developing country, and it reflects favorably on IFFCO's ability to achieve rapidly design production levels; it also proves that given adequate planning, training and management, India can indeed overcome a major remaining weakness in its otherwise impressive performance in the fertilizer sector, e\.g\. difficulties in quickly achieving and maintaining high capacity utilization rates\. Between April 1981 and February 1982, IFFC0 marketed 356,420 tons of Phulpur's urea in the northern states of India\. B\. Project Scope 3\.02 As described above, there has been a major change from the original project scope with regard to the main process unit: In 1975, the feedstock for the ammonia plant was changed from fuel oil to naphtha\. This necessitated adopting the steam reforming process and profoundly changing the design of the ammonia plant\. The capacities of the steam generation plant and of other offsite facilities were consequently modified\. Also, the capacity of the urea plant was increased from the original 1,500 tpd to 1,550 tpd\. Finally, an additional effluent treatment plant was built to help the plant meet regulations concerning disposal of chromate containing water\. 3\.03 The Government's 1975 decision to switch feedstock from fuel oil to naphtha was a shift from its then prevailing policy of allocating fuel oil or coal for fertilizer production\. This decision was based on the projected petroleum products supply/demand balances for the northern part of the country\. Forecasts then indicated that, with the commissioning of the 6 million tpa Mathura refinery in Uttar Pradesh and with the continued operation of the Barauni refinery, there would be a surplus of naphtha of about 630 thousand tpa in the region while fuel oil would continue to be in deficit and would have to be imported\. In the Government's view, the fact that surplus naphtha was locally available while fuel oil would need to be imported over long distances more than compensated for the price differentials that favored using fuel oil\. At the time, the Bank conducted economic analyses of the two alternatives\. It concluded that, although a naphtha-based plant would cost about 15% less than a fuel-oil-based one, a fuel-oil-based plant would be slightly more attractive economically because long-term forecasts placed fuel oil economic price about US$30 per torn below naphtha price\. As the expected difference in rate of returns was only 2 percentage points (22% vs\. 20%), the Bank concluded then that the deciding factor was feedstock availability and it accepted that the feedstock be changed to naphtha\.  3\.04 This switch in feedstock has had major impacts on all aspects of project implementation\. Schedule, capital cost, economic return and project operating performance have all been affected\. The different impacts are discussed in the following paragraphs\. C\. Project Management 3\.05 The project was primarily executed by consultants specializing in ammonia plant, urea plant, power plant and other offsites implementation\. The project execution was under the overall responsibility of the general project manager, who reported to IFFCO's managing director\. The general project manager, an IFFCO senior executive, was fully responsible for the project budget and implementation schedule\. He was assisted by project engineers who had the responsibility of day-to-day coordination for different aspects of project execution\. Annex 2 describes the organization of this Project Unit\. 3\.06 M\. W\. Kellogg (USA) was entrusted the design of the ammonia plant, and Snamprogetti (Italy) that of the urea plant\. Development Consultant Private Ltd\. (India) was selected to execute the detailed engineering for the power plant and offsites\. Engineers India Ltd\. carried out part of the ammonia and urea plants detailed engineering, and Fertilizer (Planning and Development) India Ltd\. provided some field supervisory engineers to support Kellogg and Snamprogetti construction engineers\. 3\.07 Although IFFCO did not provide for sufficient corporate and project staff during the early stages of project implementation (it was starting up the Kandla and the Kalol plants, and admittedly work was at a standstill since the Government had not decided yet on which feedstock the project would be based), the overall performances of IFFCO's Project Unit and of the consultants have been excellent\. This has been the major reason for the project's rapid execution, with mechanical completion occurring only 46 months after the effective zero date (compared to the appraisal estimate of 45 months)\. This was due both to the fact that IFFCO's managing director, the general project manager and engineers of the project units were well qualified and experienced, and to the fact that IFFCO set up appropriate relationships with the consultants for its staff to monitor closely project implementation and take on-the-spot decisions when required\. These relationships placed great emphasis on close communica- tions between IFFCO staff and their counterpart\. For instance in the initial stages of project implementation, IFFCO assigned some staff to the consultants offices to monitor design and procurement activities\. During the construction period its project engineers were also in close direct contact with the consultants resident construction managers\. IFFCO also involved actively at a sufficiently early stage its operating and maintenance supervisory personnel for inspection checks, for site construction, follow-up with site contractors and precommissioning activities\. This resulted in (i) IFFCO's active involvement and control of the project execution; (ii) freeing the managing director of day-to-day detailed project monitoring; and (iii) on-the-job training for IFFCO's middle management and junior staff who were to run the plant\. Annex 2 also describes these relationships\.  - 6 - 3\.08 This sound organizational structure and the active involvement of IFFCO staff in project execution undoubtedly helped the company quickly to diagnose and solve equipment problems during pre-commissioning test runs\. This allowed for a speedy plant commissioning and commercial operation start-up, once naphtha became available\. D\. Employment and Training 3\.09 To implement the Project, IFFC0 took advantage of its pool of managers, supervisors and senior operators from its Kalol and Kandla plants\. For junior operators and technicians, it recruited 228 young engineers, science graduates and qualified craftsmen, who underwent a comprehensive two-year specialized training program, at IFFCO's Kalol plant using elaborate training materials prepared by senior supervisory personnel\. These trainees were in particular given on-the-job training in the Kalol plant\. In all, the Project now employs 1090 permanent staff, about 320 more than was envisaged at appraisal\. For training, as described above (para 3\.07), IFFCO gave considerable attention to involving its staff with the engineering firms' work\. Also, as a large ongoing industrial company, IFFC0 has well established training policies and personnel development programs\. It offers training assistance to other companies\. E\. Use and Performance-of Consultants 3\.10 The Project did experience some delays in engineering carried out by all consultants, which delayed procurement of bulk materials\. Also, some materials procured to inadequate specifications, required replacement after it had already been applied, which delayed the mechanical completion by about 2 months\. Finally, IFFCO staff feel that the expediting carried out by the consultants was not satisfactory and that some of the delays experienced at the suppliers shops could have been avoided\. There were also deficiencies in ordering bulk material for piping and insulation, which resulted in issue of large numbers of purchase orders at a late stage of project construction\. IFFCO had to depute two of its personnel to expedite these critical items for project completion and to arrange for their air freighting\. F\. Performance of Contractors and Suppliers 3\.11 Workmanship\. The overall quality of service rendered by the various contractors and suppliers, both indigenous and foreign, was satisfactory\. IFFCO feels that the main reason for this has been the judicious selection of vendors based strictly on successful previous execution of similar job elsewhere\. IFFCO did, however, face some construction delays due to problems in vendors supplies\. In particular, (i) the superheater coil for the primary reformer convection zone in the ammonia plant was wrongly shaped; (ii) the separators of the air compressor in the ammonia plant were wrongly sized; (iii) the C02 compressor inlet passage was too small and the compressor could not deliver the specified gas pressure and flow; and (iv) the ammonia vaporizer of the inert gas plant was improperly designed\. Although most of the necessary design and equipment changes were performed expeditiously, IFFCO lost about 3 months to modify the superheater coil\.  3\.12 Schedule of ])elivery\. Most of the major equipment ordered outside India were supplied within 2 or 3 months of their promised delivery\. However, the bulk piping and instrument materials ordered outside India were late, at times by as much as 6 months\. Most of the major equipment ordered in India were delayed by 6 to 12 months from contractual delivery dates\. These items were not the sole contributors to further delays\. IFFCO had major problems in this respect with the structural steel contractor who completed the structural steel work 17 months behind commitment because of lack of manpower, inadequate shop quality control and deficient planning\. IFFCO also encountered delivery problems for vessels ordered in India because of strikes at the suppliers shop\. In total, late deliveries of equipment and material delayed project contractual mechanical completion by about 7 months, including a one-month delay due to congestion at Bombay port and 2 months, due to structural steel contractor's delays\. G\. Procurement 3\.13 At project appraisal, it was anticipated that of a total estimated cost of about US$130 million for equipment and materials, US$55 million would be purchased under local procurement procedures (and not be financed with the proceeds of the Bank loan), while for the remaining US$75 million which was to be financed by the Bank it was expected that about US$55 million would be imported and about US$20 million would be won through international competitive bidding by local suppliers\. In total, the equipment procured under ICB was expected to total US$65 million, proprietary equipment were to total US$8 million and small items directly procured were to total US$2 million\. The actual cost of the equipment was US$114\.8 million--7% higher than the appraisal estimates, with US$32\.1 million in direct import and US$82\.7 million purchased locally\. The indirect foreign exchange component of the equipment purchased locally represented about US$29 million, bringing the total foreign exchange cost of the equipment to US$61 million\. The actual share of Bank-financed equipment and supplies was only 64% against the 75% estimated at appraisal\. Only about 60% of the Bank-financed items were procured from suppliers outside India (Annex 3)\. As a result, about 72% of the project equipment and supplies were procured from India suppliers\. As explained above, this large share of local suppliers did delay project mechanical completion by about 7 months, when measured against contractual arrangements\. H\. Implementation Schedule 3\.14 As shown in Annex 4, the Project was mechanically completed in March 1980, 18 months behind the appraisal schedule\. As mentioned, this was mainly due to the 17 months delay in project zero date which is attributable to the feedstock switch to naphtha (paras 3\.01 and 3\.03)\. The contracts IFFCO entered into with the engineering firms after that switch called for the project to be mechanically completed in March 1979, 34 months after zero date\. This appears to have been an over-optimistic schedule--it allowed for 11 months less than the corresponding appraisal estimate\. The Project was in fact, mechanically completed 46 months after zero date, only one month more than estimated at appraisal\. As explained above, 5 of these 12 months of contractual delays are due to slow plant  -8 - erection because of faulty material and equipment!/ (paras 3\.10 and 3\.11) and 7 are due to late delivery of vessels and material purchased from Indian/foreign suppliers (para 3\.13)\. 3\.15 Although the plant was mechanically completed in March 1980, commissioning tests could not be started before March 1981 because of the non-availability of feedstock, which resulted from political disturbances in the oil-producing state of Assam\. IFFCO managed to secure enough naphtha for intermittent pre-commissioning tests during July-October 1980\. These tests revealed some equipment and material deficiencies which IFFCO promptly corrected\. When naphtha became finally available in March 1981, commissioning tests were completed without major difficulties and the plant was declared in commercial production on March 28, 1981, after 25 days of continuous operations\. This is perhaps the best start-up performance of any major fertilizer plants in India in recent years\. I\. Capital Costs, Financing and Disbursements 3\.16 Annex 5 presents (i) the capital costs estimates at the time of project appraisal; (ii) the revised estimates after the feedstock was switched to naphtha and the contracts were signed with the consultants; and (iii) the actual costs\. A summary table is presented on the following page: 1/ Two months for the faulty refractory insulation and three months for the wrongly shaped superheater coil\.  Summary of Project Costs (US$ million) Appraisal Estimates ------- ------- Actual ------- X Direct Local Direct Local Imports Purchase Total Imports Purchase Total Change Ammonia Plant 31\.3 34\.0 65\.3 19\.7 18\.5 38\.2 -42 Urea Plant 9\.2 11\.3 20\.5 7\.3 9\.5 16\.8 -18 Steam Plant 8\.0 12\.8 20\.8 - 20\.2 20\.2 -3 Power Plant 1\.7 7\.9 9\.6 0\.7 7\.3 8\.0 -17 Other Offsites/Shares 5\.4 9\.7 15\.1 4\.4 27\.2 31\.6 +109 Total Equipment 55\.6 75\.7 131\.3 32\.1 82\.7 114\.8 -13 Land and Civil Works - 16\.1 16\.1 - 28\.0 28\.0 +74 Engineering and Other Services 14\.4 5\.3 19\.7 12\.3 12\.2 24\.5 +24 Erection :3\.8 7\.0 10\.8 5\.4 9\.4 14\.8 +37 Pre-operating Exp\. - 3\.3 3\.3 - 18\.1 18\.1 +448 Total Installed Cost 73\.8 107\.4 181\.2 49\.8 150\.4 200\.2 +10 == = = Working Capital - 13\.0 13\.0 - 13\.7 13\.7 +5 Int\. Dur\. Const\. 16\.6 9\.7 26\.3 20\.7 12\.1 32\.8 +25 Total Financing Required 90\.4 130\.1a/ 220\.5 70\.5 176\.2b/ 246\.7 +12 a/=Incudes bout S$17 ill=o in idirec \.ng \. \.o \. a/ Includes about US$17 million in indirect foreign exchange costs\. b/ Includes about US$31 million in indirect foreign exchange costs\. 3\.17 In spite of the 30 months delay in start-up of commercial operations, the Project cost increased by only 12% in current US$\. This is mainly due to the fact that (i) naphtha-based ammonia plants are inherently simpler and cheaper than fuel-oil-based ones; and (ii) a significantly larger proportion of the project total cost was incurred in rupees than was estimated at appraisal (71% vs\. 59%) and the rupee depreciated by 20%  - 10 - vis-a-vis the dollar since project appraisal (as shown in Annex 5, the cost overrun expressed in current Rupees reaches 34%)\. The following table summarizes the variations in project cost by different causes\. Causes of Cost Variations Amount (US$ million) _t Decrease: Depreciation of the Rupee vis a vis the US$ (49\.4) (189) Decrease in Ammonia Plant Cost (19\.5) (74) Increase: Urea/Steam/Power plants 3\.0 11 Other Offsites/Spares 22\.8 87 Civil Works/Erection 24\.5 95 Working Capital 3\.4 13 Delays in Commissioning a/ 41\.2 157 Total 26\.2 100 a/ These delays increased interest during construction charges, project management fees and preoperating expenses\. 3\.18 When compared with the original cost estimates revised after the feedstock was changed, the Project shows a cost overrun of 32%\. This is mainly due to overruns in (i) civil works (46%); (ii) project management and preoperating expenses and interest during construction (130%--resulting from the delays in plant commissioning); and (iii) working capital (260%--working capital requirements in the revised estimate were grossly underestimated)\. Compared with the original revised estimate, cost overruns in equipment, licenses and engineering, and erection only totalled 5%\. 3\.19 The total project cost of US$246\.6 million includes about US$101 million in foreign exchange (US$70 million in direct import and US$31 million in foreign exchange costs)\. This cost has been financed with equity provided by the Government (US$34\.7 million), the cooperatives (US$25\.9 million) and IFFCO's own resources (US$41\.0 million), and with loans provided by the,Bank (US$109\.0 million) and by Indian Financing Institutions (US$36\.1 million)\. The increase in project cost has been  - 11 - financed through internal cash generation and additional borrowings from Indian financing institutions\. It must be noted that, due to the rupee/US$ exchange rate fluctuations since appraisal, the Government equity contribution to the project expressed in rupees is only 13% below appraisal estimate (vs\. 28% below when expressed in US$)\. Also, actual cooperatives contributions expressed in rupees exceed the appraisal estimate (Rs 233 millions vs\. Rs 219 million)\. Finally the project debt:equity ratio of 59:41 is more favorable than the 65:35 estimated at appraisal\. 3\.20 IFFCO experienced problems with the Bank disbursement procedures\. Since it could not directly obtain foreign exchange to pay the suppliers and since the suppliers were unwilling to ship equipment without a payment guarantee, IFFCO relied heavily on procedures V and VI (opening of Letters of Credit with commercial banks in the supplier's country) for paying foreign suppliers of Bank-financed equipment\. Not only did IFFCO find that it took a substantial time to open Letters of Credit (sometimes up to 5 months), but it found these Letters of Credits very difficult to amend, even for minor reasons\. IFFCO found these difficulties particularly bothersome during the last phase of the project construction period, as it sometimes had to wait 12 weeks for urgently needed material to be shipped when it knew such material was ready for dispatch on the day of order\. To overcome this inconvenience, IFFCO suggested that, for borrowers who cannot directly obtain foreign exchange for payments overseas, the Bank should establish a small revolving fund amounting to 2 or 3% of the loan amount for small direct payments to material or small-equipment suppliers at the end of the construction period\. 3\.21 All of the US$109 million Bank loan have been utilized\. The table below summarizes the Bank funds category-wise allocation envisaged at appraisal and the actual\. utilization: Allocation of Bank Funds (US$ millions) Appraisal Estimate Actual Equipment and Material 73\.0 73\.T Technical and Consultants' Services 18\.0 14\.6 Interest During Construction 18\.0 20\.7 Total 109\.0 109\.0  - 12 - As shown in Annex 6, the loan disbursement pattern assumed at appraisal proved to be optimistic\. It was expected that disbursements would begin during the first quarter of 1975, whereas, because the project zero date slipped 17 months, they actually began in the second quarter of 1976\. Also, they proceeded at a rate slower than that assumed at appraisal: the loan was fully disbursed in 21 quarters (5\.25 years) as compared with the appraisal estimate of 15 quarters (3\.75 years)\. The loan was fully disbursed by May 4, 1981\. IV\. OPERATING PERFORMANCE A\. Commissioning and Start-up 4\.01 As described above (para 3\.15), project commercial start-up was delayed because naphtha was unavailable until March 1981, 12 months after mechanical completion\. Between July and September 1980, IFFCO managed to secure some naphtha and began test runs\. These revealed some equipment and material problems with both the ammonia and urea plants, which IFFCO quickly solved\. The plants were started up immediately after receipt of naphtha, and the guarantee test runs were performed without difficulties\. The plant was declared in commercial production on March 28, 1981\. B\. Buildup of Production 4\.02 Annex 7 details the buildup of production at Phulpur through January 1982\. It shows that, over the first 10 months of operation, the plant ran at an average capacity utilization of 80%\. This is a remarkable achievement\. IFFCO has already identified some equipment design modifications it intends to implement during the next scheduled maintenance stops\. It believes that these first modifications will allow the plant to run at 90% average capacity utilization\. Given its already mentioned excellent record with the Kalol and Kandla plants, IFFCO thus appears likely to achieve design production levels without difficulties\. C\. Market Growth 4\.03 Up to the end of February 1982, IFFCO has marketed 356,420 tons of the urea produced at Phulpur\. Annex 8 presents the statewise distribution of this urea\. As discussed above (para 2\.01), Uttar Pradesh's village cooperatives, the state where the project is located, own a 'Large proportion of IFFCO cooperative shareholdings, and as planned, the majority of the project output is marketed in that state\. Given the large demand for urea in the states surrounding the plant, IFFCO does not anticipate any difficulties in marketing the project output\.  - 13 - V\. FINANCIAL PERFORMANCE A\. Financial Rate of Return 5\.01 The financial rate of return for the Project is estimated at 12\.3%, as compared to the appraisal estimate of 13\.9%\. The Project thus shows an acceptable financial rate of return, in spite of the fact that (i) capital costs have increased in rupees by more than 30% over appraisal estimates; and (ii) the Project is using expensive naphtha (costing Rs 1978 per ton) whereas it was appraised on fuel oil (then estimated to cost Rs 288 per ton in 1978 terms)\. The major reason for this is that the Government now sets ex-factory fertilizer prices with a retention price formula which guarantees the fertilizer plants a 28\.4%2/ before tax return on net worth at 80% capacity utilization\. Accordingly, increases in capital costs and raw material prices are compensated for by higher ex-factory prices\. Annex 9 presents the project operating costs at 90% capacity utilization, and Annex 10 the yearly financial costs and revenue streams\. B\. Financial Results 5\.02 As part of the project agreement, IFFCO was to (i) maintain a debt:equity ratio at less than 60:40; (ii) maintain a current ratio of at least 1\.1 during project: implementation and 1\.5 after project completion; and (iii) not incur additional debt if its debt service ratio were to fall below 1\.4\. All these convenants have been complied with\. 5\.03 Annex 11 summarizes IFFCO corporate financial results\. They show that since19735,7when the Kalol and Kandla plants started commercial operations, IFFCO has had good financial performances\. In 1980/81, its assets totalled Rs 4,481 million (US$498 million)\. Its net profits stood at Rs 185 million (US$20 million), which represented 7% of sales and 9% of total equity\. In that year also, IFFCO long-term debt:equity ratio stood at a comfortable 45:55 and thus shows an overall good financial health\. VI\. ECONOMIC PERFORMANCE A\. Economic Rate of Return 6\.01 The economic rate of return is estimated at 11\.3%, 4\.9 points below the appraisal estimate of;16\.2%\. Annex 12 details all input/output price assumptions on which this new return is based\. The economic value of all traded items has been based on forecasts of international prices, after 2/ This guaranteed return has recently been changed to 27\.5%\. This does not substantially change the analysis and conclusions presented in this report\.  - 14 - allowing for transportation and handling costs\. All non-tradeable items have been priced at their financial prices after adjusting for duties and taxes\. 6\.02 The major reason for this lower economic rate of return is that the project is now based on expensive naphtha, whereas it was appraised on the basis of (relatively) cheap fuel oil\. In 1975 when the Indian Government decided to switch feedstock, the price differential between naphtha and fuel oil was expected to stay at the US$30-35 per ton level which had been experienced up to that point\. Based on this forecast, the Bank economic analysis showed that, were naphtha to be used instead of fuel oil, the return would drop only by about 2%\. Since naphtha was more likely to be available than fuel oil (naphtha was projected in surplus while fuel oil was forcast to be imported) the Bank did not object to this feedstock switch\. International prices of naphtha are now about US$125/ton higher than those of fuel oil, and this price differential is expected to remain at this level for the foreseable future\. 6\.03 With the coming on stream of the Mathura refinery, naphtha will indeed be in surplus in India's Northern Region, while fuel oil will be in deficit\. Because of the long distance between the Mathura refinery and the Kandla port from which this naphtha would need to be exported, and because only small vessels can use that port, the rail transport and shipping costs to export naphtha from Mathura would be high\. The opportunity value of naphtha at Phulpur is therefore relatively low (US$262/ton as shown in Annex 12)\. Conversely, and also because of high transport costs, urea has a high opportunity value in the project market areas\. These two factors explain why this naphtha-based urea project shows a still acceptable 11\.3% economic rate of return\. B\. Environmental Aspects 6\.04 The Project has been constructed in conformity with the environmental norms agreed at appraisal\. As mentioned above (para 3\.02), IFFCO has built an additional treatment plant for the project to meet regulations for disposal of chromate containing water\. IFFCO continuously monitors the plant's effluents to ensure that all environmental regulations are met\. C\. Transfer of Technology 6\.05 The project has been implemented with substantial involvement of Indian industrial companies\. Indian engineering firms carried out part of the detailed engineering for the ammonia and urea plants\. Offsites design and erection was also performed by an Indian firm\. A large portion of the project equipment was procured from Indian suppliers\. Also, IFFCO's  - 15 - engineers effectively absorbed the technology transferred to them and they are now to help KRIBHCO--IFFCO's sister cooperative society--implement the IDA supported Hazira urea complex\. VII\. BANK ROLE 7\.01 During the various phases of the project, the Bank has worked closely with the Government and with IFFCO\. The Bank's relationship with IFFCO throughout project preparation and implementation was excellent\. IFFCO greatly facilitated this by providing an adequate team of competent professionals who quickly learned Bank procedures for procurement and disbursement\. During appraisal, the Bank helped IFFCO to formulate the organizational arrangements for project implementation and urged it to staff adequately senior corporate positions which were vacant at the time\. The Bank has also worked closely with the Government to ensure that IFFCO's highly competent Managing Director would not retire before project completion\. Finally, the Bank ICB procedures helped IFFCO obtain equipment at competitive prices, which lowered the project cost\. VIII\. CONCLUSIONS AND LESSONS FOR SIMILAR PROJECTS 8\.01 Except for the 17-month zero date delay due to the Government's decision to switch feedstock and for the 12-month delay in commissioning due to unavailability of feedstock, the Project was executed promptly and successfully; it was mechanically completed 46 months after the revised zero date (project construction thus took only one month more than estimated at appraisal) and it ran at an average of 80% capacity utilization for the first ten months of operation (30 percentage points more than estimated at appraisal)\. The Project's actual installed cost did surpass appraisal estimates by 10%, while overruns in total financing required reached 12% because the 30-month delay in start of commercial production increased interest charges during construction\. This relatively good capital cost performance is mainly due to the fact that (i) the naphtha-based plant finally built is simpler and inherently cheaper than the fuel-oil-based one envisaged at apparaisal; (ii) a large portion of the project cost was incurred in rupees which depreciated by 20% vis-a-vis the US$ since project appraisal; and (iii) the overall performance of IFFCO's consultants and suppliers was adequate\. This in turn resulted from IFFCO's close attention to the coordination, control and monitoring of the project activities\. The project was also implemented successfully because IFFCO staff were well experienced and competent and because IFFCO's senior management set up appropriate organizational arrangements under which  - 16 - IFFCO's project unit controlled and was actively involved in all aspects of project execution\. 8\.02 In spite of the initial 17 months delay, the Bank involvement in this Project was not premature\. There were no indications at appraisal that the project feedstock would be changed\. Also, the early Bank participation facilitated the setting up of good implementation arrangements\. The decision of the Bank not to object to the change in feedstock appears to have been appropriate as (i) feedstock supplies are likely to be more secure for naphtha than for fuel oil (it is indeed in surplus in the Northern Region of India while fuel oil is in deficit); and (ii) the project economic rate of return is still appropriate at 11\.3% since, due to transport costs, naphtha's opportunity value at Phulpur is relatively low while urea's is high\. This Project has shown that procedures V and VI (opening of Letters of Credit) for withdrawal of Bank funds can be cumbersome and that, for borrowers who cannot directly obtain foreign exchange, the Bank should consider allocating 2-3% of its loan in a revolving fund for small direct payments for materials and small equipment urgently required at the end of the project construction period\. 8\.03 In summary, although it was started 17 months behind schedule and although it could not be commissioned for 12 months after mechanical completion, the IFFCO Fertilizer Project has been well implemented\. Its very successful early operation indicates that it is mostly likely to meet its objectives and help India provide fertilizer to the farmers of its Northern Region at an economically competitive price\. The experience with this Project also proves that with adequate planning, training and management, as provided by IFFCO, India can indeed quickly achieve and maintain high capacity utilization rates in modern, complex fertilizer plants\.  - 17 - ANNEX 1 INDIA - IFFCO FERTILIZER PROJECT INDIAN FERTILIZER PROJECTS FINANCED BY THE BANK GROUP Amount of Date of Financing Project Signing (US$ million) I\. International Finance Corporation 1\. IEL Kanpur Apr\. 1967 11\.5 2\. Zuari - Goa Mar\. 1969 18\.9 3\. DFPC - Deepalc Jan\. 1980 8\.54 II\. International Development Association 1\. FACT - Cochin II July 1971 20\.0 2\. FCI - Gorakhpur Jan\. 1972 10\.0 3\. FCI - Nangal Feb\. 1973 58\.0 4\. FCI - Trombay IV and POIP May 1974 50\.0 5\. FCI - Sindri Nov\. 1974 91\.0 6\. Fertilizer Intdustry Credit Dec\. 1975 105\.0 7\. KRIBHCO - Hazira Oct\. 1981 400\.0 III\. International Bank for Reconstruction and Development 1\. IFFCO - Phulpur Jan\. 1975 109\.0 Industry Department May 1982  INDIA - IFFCO FERTILIZER PROJECT ORGANIZATION CHART FOR PROJECT IMPLEMENTATION IFFCO PROJECT UNIT General Project Manager Sr\. Engineer (Planning) Manager Manager Manager Project Engineer Superintendent (Materials) (Pers & Admn) (Utilities) (Ammonia) (Mechanical) Superintendent Manager Project Engineer Superintendent (Purchase) (Finance) Project Engineer (Urea) (Instrumentation) Superintendent Manager Superintendent (Stores) (Traffic) (Electrical) Senior |Civil Engineer | 0 Q  - 19 - INDIA -IFFCO FERTILIZER PROJECT ORGANIZATION CHART FOR PROJECT IMPLEMENTATION IFFCO/CONSULTANTS/SUPPLIERS RELATIONSHIPS DURING CONSTRUCTION IFFCO l General Project Manager I I Resident Construction Manager IFFCO Contractors/Vendors 3/ I (Consultants) 2/ j\. ect Staff 1/ I - I Chief Field Construction Superintendent 4/ Quality Surveyor 4/ Engineer 4/I ehnclEgnes6 Billing Staff 5/ | |Inspection Staff 5/ Instruient Engineers 6/ + ~~Civil Engineers 6/ 1/ IFFCO Project Engineers\. T/ Kellogg, Snamprogetti and DCPL staff, fully responsible for plant construction\. T/ Indian companies\. K/ ellogg, Snamprogetti and DCPL staff\. 5/ IFFCO, FPDIL or Indian consultant staff\. 6/ Senior staff from Kellogg, Snamprogetti and DCPL, vith junior staff from IFFCO\. Industry Department may 1982 0  - 20 - ANNEX 3 INDIA - IFFCO FERTILIZER PROJECT COUNTRIES OF ORIGIN OF BANK FINANCED EQUIPMENT Amount Percentage Countries (in thousand of US$) (Z) India 43,290 39\.7 USA 29,450 27\.1 Japan 9,201 8\.4 Italy 9,168 8\.4 Germany 8,429 7\.8 Switzerland 4,922 4\.5 United Kingdom 2,181 2\.0 Canada 566 0\.5 Sweden 258 0\.2 Austria 249 0\.2 Belgium 248 0\.2 France 212 0\.2 Mexico 106 0\.1 Others 720 0\.7 Total 109,000 100\.0 Industry Department May 1982  INDIA IFFCO FERTILIZER PROJECT Implementation Schedule Year 1975 1976 1977 1978 1979 1980 1981 Activities Quarter 1t 2nd 3rd 4th 1st 2nd 3rd 4th 1 st 2nd 3rd 4th I st 2nd 3rd 4th 1 st 2nd 3rd 4th 1 st 2nd 3rd 4th 1 st 2nd 3rd 4th 1\. BASIC AND DETAILLED - - - ENGINEERING 2\. EQUIPMENT/MATERIAL - - - - - 3\. EQUIPMENT/MATERIAL * - - = DELIVERYF 4\. CIVILWORKS U - - - r 5\. EQUIPMENT AND- - - - - - PIPING ERECTION 6\. TESTING AND COMMISSIONING 7\. COMMERCIAL PRODUCTION START-UP 10/78 | 2/80\. Appraisal Estimate (Fuel Oil Based) ° ' ' Oriqinal Revised Estimate (Naphta Based) A r,__ _ Actual World Bank-23965  INDIA - IFFCO FERTILIZER PROJECT PROJECT COST SUMKARY (in million Rupees) Change in ----- Appraisal Estimates ---- ---- Original Revised 1/ ----- ----------- Actual ----------- ------- Total Costs Fuel Oil Based Naphtha Based Naphtha Based Vs\. Appraisal Vs\. Revised Foreign 2/ 4/ Local 3/ Total Foreign 2/ 5/ Local 3/ Total Foreign 2/ 5/ Local 3/ Total -(2) (X) Equipment Ammonia Plant 235\.1 254\.9 490\.0 174\.1 190\.2 364\.3 177\.4 167\.0 344\.4 -29\.7 -5\.5 Urea Plant 68\.6 85\.1 153\.7 63\.2 77\.1 140\.3 66\.1 85\.3 151\.4 -1\.5 +7\.9 Steam Plant 59\.6 96\.1 155\.7 - 184\.8 184\.8 - 181\.5 181\.5 +16\.6 -1\.8 Pover Plant 12\.8 58\.9 71\.7 5\.8 50\.8 56\.6 6\.1 65\.4 71\.5 -0\.3 +26\.3 Other Offsites 6\.4 29\.4 35\.8 9\.8 94\.0 103\.8 1\.6 135\.0 136\.6 +281\.6 +31\.6 Construction Equipment 9\.8 12\.7 22\.5 13\.9 19\.2 33\.1 1\.2 15\.3 16\.5 -26\.7 -50\.2 Spare Parts 24\.5 30\.7 55\.2 31\.1 48\.3 79\.4 36\.6 94\.6 131\.2 +137\.7 +65\.2 Sub-total 416\.8 567\.8 984\.6 297\.9 664\.4 962\.3 289\.0 744\.1 1,033\.1 +4\.9 +7\.4 Land - 4\.9 4\.9 - 3\.9 3\.9 - 3\.8 3\.8 -22\.4 -2\.6 Site Development & Tovuship - 31\.2 31\.2 - 81\.6 81\.6 - 130\.5 130\.5 +318\.3 +59\.9 Licenses & Engineering 93\.3 15\.3 108\.6 108\.3 9\.6 117\.9 110\.1 10\.6 120\.7 +11\.1 +2\.4 Civil Works - 85\.0 85\.0 - 87\.4 87\.4 - 117\.7 117\.7 +38\.5 +34\.7 EreLtion & Supervision 28\.4 52\.7 81\.1 36\.3 108\.6 144\.9 49\.0 85\.0 134\.0 +65\.2 -7\.5 Project Management 14\.7 24\.4 39\.1 8\.6 43\.4 52\.0 - 98\.9 98\.9 +152\.9 90\.2 Preoperating Expenses - 24\.5 24\.5 - 19\.4 19\.4 - 163\.0 163\.0 +565\.3 +740\.2 Total Installed Costs 553\.2 805\.8 1,359\.0 451\.1 1,018\.3 1,469\.4 448\.1 1,353\.6 1,801\.7 +32\.6 +22\.6 Working Capital - 97\.5 97\.5 - 34\.0 34\.0 - 122\.9 122\.9 +26\.1 +261\.5 Interest During Construction 124\.5 72\.8 197\.3 133\.3 41\.0 174\.3 186\.2 -108\.8 295\.0 +49\.5 +69\.2 Total Financing Required 677\.7 976\.1 1,653\.8 583\.4 1,094\.3 1,677\.7 634\.3 1,585\.3 2,219\.6 +34\.2 +32\.3 1/ Original Control Estimate, dated January 1977, after signing of engineering contracts\. 2/ Direct Foreign Exchange only\. 3/ Including Indirect Foreign Exchange\. 7/ At US$1\.0 - Rs 7\.5\. / At US$1\.0 - Rs 9\.0\. Industry Department May 1982  - 23 - Annex 6 INDIA - IFFCO FERTILIZER PROJECT IBRD LOAN DISBURSEMENT SCHEDULE (in US$ million) Calendar Year ----------- Appraisal Estimate ------ -------------- Actual ---------------- and Quarter Quarterly Cumulative Cumulative (x) Quarterly Cumulative Cumulative (Z) 1975 - I 2\.1 2\.1 2 - - II 2\.2 4\.3 4 - - III 3\.3 7\.6 7 - - IV 3\.3 10\.9 10 - - 1976 - I 7\.6 18\.5 17 - - II 8\.7 27\.2 25 2\.8 2\.8 3 III 10\.9 38\.1 35 5\.7 8\.5 8 IV 10\.9 49\.0 45 6\.1 14\.6 13 1977 - I 12\.0 61\.0 56 4\.1 18\.7 12 II 10\.9 71\.9 66 2\.9 21\.6 20 III 10\.9 82\.8 76 3\.7 26\.3 23 IV 9\.8 92\.6 85 7\.7 33\.0 30 1978 - I 7\.6 100\.2 92 9\.8 42\.8 39 II 5\.4 105\.6 97 6\.5 49\.3 46 III 3\.4 109\.0 100 9\.4 58\.7 54 IV - - - 9\.9 68\.6 63 1979 - I - - - 12\.0 80\.6 74 II - - - 4\.3 84\.9 78 III - - - 6\.4 91\.3 84 IV - - - 2\.3 93\.6 86 1980 - I - - - 5\.3 98\.9 91 II - - - 1\.3 100\.2 92 III - - - 5\.0 105\.2 97 IV - - - 1\.4 106\.6 98 1981 - I - - - 2\.2 108\.8 99 II - - - 0\.2 109\.0 100 Industry Department May 1982  - 24 - ANNEX 7 INDIA - IFFCO FERTILIZER PROJECT PRODUCTION BUILD-UP (in tons) Average Cap\. Utilization Month Ammonia Urea (%) 1981 - April 14,529 18,728 45\.4 May 13,296 26,214 63\.5 June 23,392 41,584 100\.8 July 18,726 25,888 62\.8 August 22,140 37,826 91\.7 September 17,458 34,287 83\.1 October 21,272 35,042 85\.0 November 17,878 32,215 78\.1 December 25,143 42,669 103\.4 1982 - January 20,917 35,179 85\.3 Total 194,751 329,632 80\.0 Industry Department May 1982  - 25 - ANNEX 8 INDIA - IFFCO FERTILIZER PROJECT STATEWISE DISTRIBUTION OF THE PROJECT UREA OIJTPUT (April 1981 - February 1982 Period) Quantity Percentage State ('000 tons) (x) Uttar Pradesh 252\.10 70\.7 Bihar 26\.79 7\.5 West Benga:L 30\.23 8\.5 Madhya Pradesh 28\.45 8\.0 Punjab 18\.85 5\.3 Total 356\.42 100\.0 Industry Department May 1982  - 26 - ANNE X 9 INDIA - IFFCO FERTILIZER PROJECT PROJECT OPERATING COSTS AT 90% CAPACITY UTILIZATION (in million of 1981 Rs) Unit Cost Annual Annual Percentage Unit (Rs) Consumption Cost (%) I\. VARIABLE COSTS Naphtha MT 1978\.1 252\.9x103 500\.3 64\.1 Purchased Power Kwh 0\.453 64\.9x106 29\.4 3\.8 Coal MT 254\.2 361\.4x103 91\.9 11\.8 Fuel Oil KL 1436\.0 15\.4x103 22\.1 2\.9 Water - - - 0\.2 - Chemicals - - - 1\.3 0\.2 Bags - 4\.8 9\.0x106 43\.2 5\.5 Sub-Total 688\.4 88\.3 II\. FIXED COSTS Labor 16\.4 2\.1 Maintenance 10\.1 1\.3 Administration & Overhead 47\.2 6\.1 Selling 17\.3 2\.2 Sub-Total 91\.0 11\.7 III\. TOTAL OPERATING COSTS 779\.4 100\.0 Industry Department May 1982  - 27 - ANNEX 10 INDIA - IFFCO FERTILIZER PROJECT PRE-TAX FINANCIAL RATE OF RETURN (in million of 1981 Rs) Capital Working Fixed Variable Net Cash Fiscal Year Costs Capital Costs Costs Revenues Flow 1975/76 63\.4 (63\.4) 1976/77 248\.6 (248\.6) 1977/78 626\.9 (626\.9) 1978/79 603\.3 (603\.3) 1979/80 380\.6 (380\.6) 1980/81 411\.1 74\.4 24\.9 127\.5 294\.2 (343\.7) 1981/82 47\.8 91\.0 650\.1 1,349\.5 560\.6 1982/83 6\.8 91\.0 688\.4 1,379\.5 684\.3 1983/84 91\.0 688\.4 1,337\.2 557\.8 1984/85 91\.0 688\.4 1,280\.4 501\.0 1985/86 91\.0 688\.4 1,248\.2 468\.8 1986/87 91\.0 688\.4 1,223\.1 443\.7 1987/88 91\.0 688\.4 1,176\.1 396\.7 1988/89 91\.0 688\.4 1,167\.0 387\.6 1989/90 91\.0 688\.4 1,127\.8 348\.4 1990/91 91\.0 688\.4 1,080\.7 301\.3 1991/92 91\.0 688\.4 1,065\.8 286\.4 1992/93 (209\.7) (122\.9) 91\.0 688\.4 1,050\.1 270\.7 Financial Rate of Return = 12\.3% Industry Department May 1982  - 28 - ANNEX 11 INDIA - IFFCO FERTILIZER PROJECT IFFCO FINANCIAL STATEMENTS (in Rs million) (Year ending June 30) 1976/77 1977/78 1978/79 1979/80 1980/81 Income Statements Total Revenues 1,181\.5 1,666\.7 1,864\.4 1,862\.0 2,657\.4 Cost of Goods Sold 805\.9 1,185\.3 1,393\.4 1,536\.3 2,,287\.9 (Excl\. Depr\.) Interest Charges 68\.8 54\.2 50\.6 43\.9 85\.1 Depreciation 61\.0 61\.7 63\.3 67\.2 107\.4 Profit After Taxes 245\.8 365\.5 357\.1 191\.0 185\.0 Internal Cash Generation 306\.8 427\.2 420\.4 258\.2 292\.4 Balance Sheets Current Assets 903\.5 1,212\.3 1,317\.1 1,131\.0 1,638\.3 Net Fixed Assets 871\.0 1,247\.6 1,737\.2 2,419\.2 2,704\.7 Other Assets 39\.9 95\.7 196\.5 5\.4 137\.9 Current Liabilities 112\.6 225\.2 261\.9 426\.9 631\.0 Long-Term Debt 890\.3 1,069\.8 1,292\.9 1,244\.1 1,811\.6 Equity & Retained Earnings 811\.5 1,260\.6 1,696\.0 1,884\.6 2,038\.3 Total Assets 1,814\.4 2,555\.6 3,250\.8 3,555\.6 4,480\.9 Ratios Current Ratio 8\.0 5\.4 5\.3 2\.6 2\.6 Long-Term Debt to Equity 52:48 46:54 44:56 40:60 45:55 Industry Department May 1982  - 29 - ANNEX 12 Page 1 of 3 INDIA - IFFCO FERTILIZER PROJECT ECONOMIC ANALYSIS I\. ASSUMPTIONS A\. Economic Value of Naphtha at Phulpur 1\. IFFCO's phulpur ammonia/urea plant is to obtain its naphtha from the Mathura refinery\. With this refinery coming on stream in late 1982, India's Northern Region will have a surplus of naphtha for the foreseeable future\. Surplus naptha from Mathura must be exported from the Kandla port, and the economic value of naphtha at Phulpur is to be derived from corresponding export receipts as shown below: Naphtha Economic Value at Phulpur (in 1981 US$/ton) 1982 1985 1990 Crude Price (US$/bbl) 34\.0 34\.0 38\.5 Equivalent to (US$;/ton) 1/ 243 243 275 Naphtha export value 2/ 304 304 344 (-) Penalty for export on small vessels 3/ 20 20 23 (-) Kandla/Mathura freight and handling T/ 50 50 55 (+) Mathura/Phulpur freight and handling74/ 28 28 31 Total 262 262 297 1/ Crude density 0\.88 kg/i\. 2/ Naptha/Crude oil price ratio of 1\.25 for exports from Bombay, as per the India Refineries Rationalization Project SAR (Report No\. 3645-IN, dated March 1, 1982)\. 3/ Kandla is a shallow water port which can only accomodate small general purpose vessels (17,000 tons carrying capacity)\. Also, it is a very crowded port with long waiting times and high demurrage charges\. 4/ Rail transport costs as per railways tariffs\.  - 30 - ANNEX 12 Page 2 of 3 B\. Project Operating Economic Costs 2\. Economic costs for the project inputs are summarized below in 1981 US$\. Except for naphtha, they were derived from financial costs after deducting local taxes\. Operating Economic Costs (in 1981 US$) Annual Operating Annual Financial Economic Economic Cost Unit Consumption Unit-Cost Unit Cost (US$ million) Naphtha MT 252\.9 x 103 219\.8 262\.0 66\.2 Coal MT 361\.4 x 103 28\.2 25\.4 9\.2 Purchased Power Kwh 64\.9 x 106 \.05 \.045 2\.9 Fuel Oil KL 15\.4 x 103 159\.6 143\.6 2\.2 Bags and Chemicals - 9\.0 x 106 \.5 \.5 4\.5 Sub-total 85\.0 Labor 1\.8 Maintenance 1\.1 Adm\. and Overhead 5\.2 Selling -1\.3 Sub-total 10\.0 Total 95\.0 C\. Economic Value of Urea at Phulpur 3\. The project's urea is sold primarily in the northern regions of India surrounding the plant\. Its economic value is thus derived from import costs by adding domestic economic distribution freight to Phulpur, as shown below: Urea Economic Value at Phulpur (in 1981 US$/ton) 1982 1985 1990 1980 US$ 175 a/ 268 b/ 282 b/ 1981 US$ 167 a/ 256 W/ 269 *5/ Marine Freight to Bombay 45 50 60 Port Handling and Storage 6 6 6 CIF Landed Bombay 218 312 335 Bombay/Phulpur freight and handling 18 c/ 19 c/ 23 C/ Phulpur Ex-factory price 236 - 331 - 358 - a/ Derived from international prices of US$180/ton which prevailed in early 1982\. b/ As per EPD Commodities and export Projects Division December 1981 price forecasts\. c/ Rail transport costs as per railways tariffs\.  - 31 - ANNEX 12 Page 3 of 3 II\. COST AND BENEFIT STREAMS FOR ECONOMIC RATE OF RETURN (in 1981 US$ million) IFFCO Capital Working Fixed Variable Costs Net Cash Fiscal Year Costs Capital Costs Naphtha Others Revenues Flow 1975/76 5\.5 (5\.5) 1976/77 27\.1 (27\.1) 1977/78 64\.5 (64\.5) 1978/79 61\.2 (61\.2) 1979/80 40\.4 (40\.4) 1980/81 42\.8 2\.6 2\.7 12\.5 3\.5 20\.6 (43\.5) 1981/82 2\.0 10\.0 62\.6 17\.8 102\.6 10\.2 1982/83 0\.6 10\.0 66\.2 18\.8 121\.5 25\.9 1983/84 10\.0 66\.2 18\.8 136\.3 41\.3 1984/85 10\.0 66\.2 18\.8 152\.4 57\.4 1985/86 10\.0 67\.9 18\.8 154\.8 58\.1 1986/87 10\.0 69\.6 18\.8 157\.2 58\.8 1987/88 10\.0 71\.4 18\.8 159\.7 59\.5 1988/89 10\.0 73\.2 18\.8 162\.2 60\.2 1989/90 10\.0 75\.1 18\.8 164\.8 60\.9 1990/91 10\.0 77\.0 18\.8 167\.4 61\.6 1991/92 10\.0 79\.0 18\.8 170\.1 62\.3 1992/93 (24\.2) (5\.2) 10\.0 81\.0 18\.8 172\.7 92\.3 Economic Rate of Return = 11\.3% Industry Department May 1982  - 32 - ANNEX 13 COMMENTS RECEIVED FROM THE BORROWER Page 1 of 6 TR DiiDlnltEr<*c B C 1 DeCeNo 11C3)/2iK?\. 2ao~ P\. C\. Dhir " Under icretary W* Wr4ftr T 3le\.373%36\. Govement of India (Bharat Sarkar) __agXdw Ministry of Finance (Vitta Mantralaya) Departnent of Economic Affairs (Arthik Karya Vlbhag) df frt/New Delhi, the 13 Lay, 1963\. Dear Kindly refer to my d\.o\. letter of even numbor dated 24th ilarch, 1983 fon\.xa\.rding GOI's coimments on the draft Project Caxiplastion Report (Loan 1079-Li) on IFF0 3trtilizer proJect\. 2\. Based on the discussion I1?C0 bd with Snri Venkataraman off wrld Bank, slight modification bas been made to the comnments furnished Para 3\.10 of the PUA\. A co\.mplete set of the co ietits LncorporatIilig the mnoci- ficatioxi is egricos0eu Lor 4fiweansmsission to the concernod (z'ficial in the Ban',\. With kind regards, YouI;> inc63er1y (P\. C\. Dhir) Dr\. Y\.V\. Reddy, Adviser to iD(Eank) C/o Indoi;bass,r Jgshg6gton *D  ANNEX 13 33 -Page 2 of 6 COMMENTS ON PROJECT COMPLETION REPORT ON INDIA IFFCO FERTILISER PROJECT (LOAN 1079-IN) THE WORLD BANK PAGE 2 - PARA 1\.04: In the last sentence of this para, the figure relating to cooperative institutions be changed to 27,000 instead of 28,000 and the amount of IFFCO's equity of Ru\. 145 million mentioned may be changed to Rs\. 360 million without any change in the description\. These changes could bei incorporated into the report\. PAGE 3 - PARA 2\.03: The fee payable to Government of India on the loan over and above the interest of 8% may please be read as 2\.25% and not 2\.5% indicated in the report\. PAGE 3 - PARA 2\.04: In the last but one line, the quantities of raw materials to be used in the project are mentioned as tpd against fuel oil and coal which may please be changed to tpa\. PAGE 4 - PARA 3\.02: In the third line from the bottom, kindly delete the statement "a gain of 3% in process efficiency"\. PAGE 5 - PARA 3\.07t The latter part of the para may be slightly elaborated as indicated below from 1Tth line\. "During the conatruction\.Construction Managers" appearing in the 17th line of this paragraph\. "IFFCO also involved actively at a sufficiently early stage its operating and maintenance supervisory personnel for inspection ch cks for site constwuctiont follow-up with the site contractors and all pre-commissioning activitiees\. PAGE 6 - PARA 3\.09: Slight elaboration of this para is suggested as mentioned belows "For junior operators and technicians, it recruited 228 young engineers, science graduates and qualified craftsman, whom they submitted to comprehensive two years epecialised training programmes, at IFFCO's Kalol Plant using elaborate training materials prepared by senior supervisory personnel\. These trainees, after completion of class room training were given on the job training in various sections of operations of the Kalol Unit6nd finally, they were also given the opportunity for independently operating the Ursa Plant\. In all, the Projact\.**" contd\.&\.*p/2  ANNEX 13 - 34 - Page 3 of 6 PAGE 6 - PARA 3\.10: It is suggested that this para may please be modified to read as under:- "The Project did experience delay due to some delay in Engineering carried out by all consultants which delayed procurement of bulk materials\. Also some materials procured through inadequate specifications required replacement after it had already been applied which delayed mechanical completion by about two months\. Finally, IFFCO staff felt that the expediting carried out by the consultants was not satisfactory and that some of the delays experienced at the supplier's shops could have been avoided\. There were also deficiencies in ordering of bulk materials for piping and insulation etc\., resulting in issuing large number of purchase orders at a sufficiently late stage\. IFFCO had to depute two of its personnel to USA for expediting these critical items for project completion and arranging for their air freightAmg"\. PAGE 6 - PARA 3\.11: In seventh line from top, the word "connection" is to be corrected to wconvection"\. PAGE 7 - PARA 3\.12: The pars has been modified end may please be read as unders Most of the major equipment ordered outside India were suppliid within 2 or 3 months of their promised delivery\. However, the bulk piping and instrument materials ordered outside India were late, at times by as much as 6 months\. Most of the major equipment ordered in India were delayed by 6 to 12 months from contractual delivery dates\. As a result of the delays explained earlier (pare 3\.10 bad 3\.11), these items were not on the critical path contributing to further delays\. IFFCO had major problems in this respect with the structural steel contractor who completed the structural steal work 17 months behind commitment because of lack of manpower, inadequate shop quality control and deficient planning\. IFFCO also encountered delivery problems for vessels ordered in India because of strikes at the suppliers shoo\. In total, lats deliveries of equipment and material particularly in bulk piping and fittings, etc\., of foreign supplies delayed the project contractual, mechanical completion date by about seven months which also covers a delay of about a month due to congestion at Bombay Port and two months on account of delays by structural stesel contractor\. PAGE 7 - PARA 3\.13: The last sentence at the end of para reading aes explained above, this large share of local supplies did delay project mechanical zompletion by about seven months when measured against contractual arrangeT\.,0tsO is not relevant since the value of the equipment involved :ompared to the Indian fabrication capacity is not much\. On the other hand, it brings out the fa,t that the Indian industry has successfiully been able to procure orders for a significant value of the requirements of the fertiliser plant\. contd\.o*oop/3  ANNEX 13 - 35 - Page 4 of 6 PAGE 7 & 8 - PARA 3\.141 The last sentence should be read as under with corrections: *As explained above, 5 of these 12 months of contractual delays are due to slow plant erection because of faulty material and equipment2(Para 3\.10 and 3\.11) and 7 are due to late delivery of vessels and material purchased from Indian/Foreign supplie rs (Para 3\.12) PAGE 9 - PARA 3\.16: The data preseinted is at variance with the project costs being used by IFFCO, presumably due to a difference in the system of presen- tation of the data on the project\. We heve separately commented on the same presented in more detail subsequently in Annexure S\. Any changes as a result of our comments therein would also call for incorporation in the table under this para as well\. PAGE 9 and 10 - PARAS 3\.17\. 3\.18 and 3\.19: The figures appearing in the above paras may undergo a change if any modification is made in the project cost as a result of our comments\. PAGE 13 - PARA S0_: The return on net worth guaranteed by the Government before tax at present is 27\.5%, which may vary depending on the tax on profits\. PAGE 15 - PARA 7\.01 s The last but one sentence may be read as unders "The Bank has also worked closely with the Government to ensure that IFFCO's highly competent Managing Director would not retire before Project Completion\." ANNEXURE - 2 In the orgenisation chart, kindly replace Purchase Manager by Superintendent Purchase and Stores Section by Superintendent Stores\. ANNEXURE - 5 As mentioned at para 3\.16, the project cost adopted by IFFCQ are as under:- contd\.o\.p/4  ANNEX 13 - 36 - Page 5 of 6 A C T U A L -----------(NAPHTHA BASED)-------…----- Equipment Foreian/2/5 Local/3 Total Ammonia Plant 246\.8 97*6 344\.4 Urea Plant 98\.7 52\.7 '151\.4 Steam Plant 169\.1 12\.3 181\.4 Power Plant 24\.0 47\.6 71\.6 Other Offsites 28\.1 108\.5 136\.6 Construction Equipment 2\.0 14\.5 16\.5 Spare Parts 87:2 44\.0 131\.2 SUB-TOTAL 655*9 377\.2 1033\.1 Land - 3\.8 3\.8 Site Development & Township - 130\.6 130\.6 Licence and Engineering 110\.1 10\.6 1120\.7 Civil Works - 117\.7 ¶17\.7 Erection and Supervision 49\.1 114-4 163\.5 Project Management charges including insurance - 98\.9 98\.9 Pro-operating Expenses - 54*5 54*5 TOTAL INSTALLED COST 815\.1 907\.7 1722\.8 Working Capital _ 34\.0 34*0 Interest during Constru- ction 186\.2 108\.8 295\.0 Total financing required 1001\.3 1050\.5 2051\.8 The main differencesare on account of the following i) Erection and supervision charges considered by IFFCO based on approved capital cost by the Government is Rs\. 163\.5 million as against a figure of Rs\. 134\.0 million shown in the completion report prepared by the World Bank\. ii) We presume that Project Management charges considered by the World Bank includes Insurance charges amounting to Rs\. 10\.5 million\. iii) Pro-operating cost as suggested above is worked out as unders Rs million (a) Cost towards operating expenses 163\.0 (b) Contingency and escalation 2\.5 (c) Less for pre-operational production inventory and construction surplus (-) 111\.0 54\.5 iv) In the approved capital cost of Phulpur Project the workw\.ng capital has been shown as Rs\. 34\.0 million as against Rs\. 122\.9 million considered by the World Bank\. This may also please be'noted that there is variance in Foreign and Local allocations shown by the World Bank and the Capital cost approved by the Government of India for most of the items, though the final figures itomwise remaining unchanged\. \. \. V\.p/5  -_37 - ANNEX 13 Page 6 of 6 ANNEXURE II a) Total essats indicated have been correctly reported bUt the break up of the same calls for corrections as under: (Rs in millions) Particulars 1976-77 197T7-78 1978-79 1979-80 1980-81 Currant a seats 903e5 1212\.3 1317\.1 1131\.0 1638\.3 Net fixed assets including development expenditure pending allocation 910\.7 1343\.1 1933\.5 2419\.2 2704\.7 Investments 0,2 0*2 0,2 5\.4 133\.0 Deferred Revenue Expenditure - - - - 4\.9 TOTAL 1814\.4 2555\.6 3250,8 3555\.6 4480\.9 b) The long term debt end equity and retained earnings for the year 1977-78 may please be corrected as under: Long term debt 1069\.8 Equity and Rgitained earnings 1260\.6

APPROVAL

P120887

Page 1 INTEGRATED SAFEGUARDS DATASHEET APPRAISAL STAGE I\. Basic Information Date prepared/updated: 09/08/2010 Report No\.: AC5366 1\. Basic Project Data Original Project ID: P110126 Original Project Name: REGIONAL & MUNICIPAL INFRASTRUCTURE DEVELOPMENT PROJECT Country: Georgia Project ID: P120887 Project Name: ADDITIONAL FINANCING TO THE REGIONAL & MUN\. INFRA\. DEV\. PROJECT Task Team Leader: Ahmed A\. R\. Eiweida Estimated Appraisal Date: September 9, 2010 Estimated Board Date: October 19, 2010 Managing Unit: ECSSD Lending Instrument: Specific Investment Loan Sector: Roads and highways (40%);General water, sanitation and flood protection sector (40%);Sub-national government administration (20%) Theme: Access to urban services and housing (30%);Rural services and infrastructure (30%);Municipal governance and institution building (20%);Other urban development (20%) IBRD Amount (US$m\.): 33\.50 IDA Amount (US$m\.): 11\.50 GEF Amount (US$m\.): 0\.00 PCF Amount (US$m\.): 0\.00 Other financing amounts by source: BORROWER/RECIPIENT 0\.00 Financing Gap 17\.00 17\.00 Environmental Category: F - Financial Intermediary Assessment Simplified Processing Simple [] Repeater [X] Is this project processed under OP 8\.50 (Emergency Recovery) or OP 8\.00 (Rapid Response to Crises and Emergencies) Yes [ ] No [X] 2\. Project Objectives The Project Development Objectives are the same as under the original project, which are to (a) improve the efficiency and reliability of selected municipal infrastructure and service, and (b) assist in restoring infrastructure, services and improving housing conditions of conflict-affected people in Georgia\. 3\. Project Description Component 1: Infrastructure Investment (WB: $43\.5m; MDF: $5\.0 m; LSGs: $11\.7 m) Component 1\.1: Provision of financial resources to creditworthy LSGs to finance Investment Subprojects for the rehabilitation and expansion of priority municipal services Page 2 and infrastructure needs on a sustainable basis, through the carrying out of works and provision of goods and consultant services\. Component 1\.2: Provision of financing on a grant basis to carry out Investment Subprojects for municipal services and infrastructure projects in non-creditworthy Local Self Governments (LSGs), through the carrying out of works and provision of goods and consultant services\. Component 2: Emergency Rehabilitation and Construction (No further allocation will be provided to this component under the Additional Financing\. The following revised component description will be covered under the original RMIDP and the new EU co- financing) Infrastructure restoration and improvement of housing conditions for conflict affected people in Georgia, which includes: (i) increasing the volume of water supply, improving public water standpipes and provision of grey water house connection to about 1963 internally displaced people#s houses in eleven (11) settlements; (ii) rehabilitating drainage channels and pedestrian crossings in eleven (11) settlements, and constructing a bridge at the Mtkvari River leading to Akhalsopeli settlement; (iii) providing about 133 solid-waste containers and eleven (11) trucks in twelve (12) settlements; and (iv) improving the physical conditions of the walls and floors, and provision of entrance sheds and air ventilators in about 1263 houses in nine (9) settlements, all through the carrying out of works and provision of goods and consultants# services\. Component 3: Institutional Development (WB 1\.5 m; Borrower: $0\.3) Enhancing the institutional capacity and performance of municipalities and the Project Implementing Entity to assist in the carrying out of programs for the development of capacity to discharge public services functions with economy and efficiency, including the preparation of: (a) strategic development plans for sustainable cities in a selected number of municipalities; and (b) feasibility studies, engineering designs, construction supervision, monitoring and evaluation activities and technical assistance to municipalities and the Project Implementing Entity, through the provision of goods, consultant services and training\. 4\. Project Location and salient physical characteristics relevant to the safeguard analysis Selected municipalities throughout Georgia 5\. Environmental and Social Safeguards Specialists Ms Darejan Kapanadze (ECSS3) Ms Joanna Peace De Berry (ECSS4) Page 3 6\. Safeguard Policies Triggered Yes No Environmental Assessment (OP/BP 4\.01) X Natural Habitats (OP/BP 4\.04) X Forests (OP/BP 4\.36) X Pest Management (OP 4\.09) X Physical Cultural Resources (OP/BP 4\.11) X Indigenous Peoples (OP/BP 4\.10) X Involuntary Resettlement (OP/BP 4\.12) X Safety of Dams (OP/BP 4\.37) X Projects on International Waterways (OP/BP 7\.50) X Projects in Disputed Areas (OP/BP 7\.60) X II\. Key Safeguard Policy Issues and Their Management A\. Summary of Key Safeguard Issues 1\. Describe any safeguard issues and impacts associated with the proposed project\. Identify and describe any potential large scale, significant and/or irreversible impacts: The investments to be financed under the Project are expected to have a positive impact on public health and improve the living environment for the inhabitants of the beneficiary municipalities\. No major environmental issues are anticipated under the proposed operations, provided that the project would finance the rehabilitation of existing municipal infrastructure services, shelter and provision of durable housing\. Furthermore, most of the investments would be of a relatively small size\. Potential negative environmental impacts are expected to be confined and of a temporary nature, mostly associated with the construction phase\. Few environmental issues may persist during the operation phase\. All possible negative impacts could be mitigated at a low extra expense through environmentally responsible planning at the design stage and through standard good environmental practice throughout implementation\. Due to the nature of the project, specific investments to be financed under it cannot be determined upfront\. Subproject applications will be received on rolling basis after the approval of the Project\. Accordingly, and because the MDF qualifies as a non-bank Financial Intermediary, the Project is classified as environmental Category FI (Financial Intermediary)\. Similar to the original Project, RMIDP-AF will cover subprojects which are likely to fall under environmental Category B\. However, as good practice, financing of Category A subproject is not ruled out, and may be considered if strongly justified and Environment Assessment Guidelines applied\. In such an unexpected case that a Category A subproject is to be financed, the Executive Summary of the EA will be sent to the Board\. Likewise, although it is not expected that any subproject requiring land acquisition or physical relocation will be financed under the RMIDP-AF, as a good practice, the Borrower prepared a Resettlement Policy Framework (RPF) for the original RMIDP in the event that some subprojects do come forward which have high benefits but require land acquisition\. Thus, a sound policy to deal with land acquisition is in place and the existing RPF is adequate for the potential needs of RMIDP-AF\. If any subproject Page 4 proposal is found to require land acquisition, a specific Resettlement Action Plan (RAP) satisfactory to the Bank will be prepared in line with RPF, OP 4\.12 and relevant Georgian legislation, completed and fully implemented prior to the commencement of any works\. Component 2, rehabilitation and construction works are planned in settlements and housing where IDPs are already in residence\. To minimize any adverse impact on the IDP residents or inconvenience, several mitigation measures have been designed\. These include: i) the formation of local level supervisory committees in each settlement to manage, monitor and resolve any issues arising for IDP residents from the rehabilitation and construction works; ii) the committee and contractors shall together devise a schedule of works, which will be publically posted in the settlements; iii) liability of contractors for any damage and loss caused to IDP property during the works (a check-in and check- out process between contractors and each affected family will identify such damage or loss); and iv) complaints procedures shall be established so that IDP can express any dissatisfaction with the works and their issues will be resolved\. 2\. Describe any potential indirect and/or long term impacts due to anticipated future activities in the project area: N/A 3\. Describe any project alternatives (if relevant) considered to help avoid or minimize adverse impacts\. N/A 4\. Describe measures taken by the borrower to address safeguard policy issues\. Provide an assessment of borrower capacity to plan and implement the measures described\. An Environmental Assessment Guidelines framework has been prepared and disclosed, outlining principles of environmental screening, ranking, review, management, and monitoring of subprojects\. The framework is also an integral part of the Operations Manual (OM) prepared by the Borrower\. This document had been produced for the original RMIDP Project and updated for the purposes of the AF\. Revisions made are minor, based on lessons learned during the implementation of the original Project and aim to clarify procedures and strengthening the quality of environmental supervision of civil works The Guidelines ensure full consideration of environmental safeguards in accordance with the Bank OP/BP 4\.01 Environmental Assessment and the Georgian environmental legislation\. Depending on the nature and scope of environmental issues associated with specific investment proposals, relevant environmental categories will be attached to subprojects and they will be subjected to the environmental review relevant for a given category\. If a Category A subproject is proposed for financing, it will undergo full Environmental Impact Assessment (EIA), while for category B subprojects the type and extent of environmental assessment will be defined through the screening process\. Environmental screening and assessment procedures for all categories of subprojects are clearly described in the OM\. Environmental Management Plans (EMPs) will be developed in the course of preparing individual subprojects, which then will be annexed to civil works contracts and become mandatory for compliance\. Arrangements for monitoring adherence of civil works with EMPs and guidelines for environmentally Page 5 sound construction practices are also outlined in the OM\. Public participation and consultation in the preparation of EIAs will be mandatory\. Municipal Development Fund of Georgia (MDF) has been implementing the original RMIDP and will continue with the RMIDP-AF\. Over the years of RMIDP implementation, environmental screening and categorization of subproject proposals, and environmental management planning for the approved subprojects have been improving and are fully satisfactory at present\. Environmental monitoring of ongoing works and documenting if its results need improvement as recently recommended to MDF\. This would imply (i) stronger field presence of MDF at the subproject sites, especially in the early stage of works, when possible improper construction practices can be corrected before damage is done; (ii) maintain a checklist of licenses and permits required and actually held by works contractors while performing under RMIDP; and (iii) keep clear record of findings from field visits in order to track progress in addressing of the revealed issues\. Overall, MDF has long lasting experience of acting as an FI under the Bank financed operations\. This institution is also handling investments financed by other multilateral and bilateral donors using environmental safeguards comparable with the Bank policies\. With this experience and present institutional capacity, MDF is quite capable of ensuring good environmental practice in the Project implementation\. 5\. Identify the key stakeholders and describe the mechanisms for consultation and disclosure on safeguard policies, with an emphasis on potentially affected people\. The key stakeholders of RMIDP-AF are municipalities and population of the beneficiary towns and villages throughout Georgia as well as the residents of several IDP Settlements\. The Environmental Assessment Guidelines for the original RMIDP were disclosed as part of the OM through publicizing and discussing among key stakeholders\. The document, as now updated, was re-disclosed in-country and sent to the Bank InfoShop\. According to the Guidelines, as a part of each subproject design process and appraisal, public consultations will be conducted with the affected communities and interested NGOs\. B\. Disclosure Requirements Date Environmental Assessment/Audit/Management Plan/Other: Was the document disclosed prior to appraisal? Yes Date of receipt by the Bank 06/22/2010 Date of "in-country" disclosure 09/08/2010 Date of submission to InfoShop 09/08/2010 For category A projects, date of distributing the Executive Summary of the EA to the Executive Directors Resettlement Action Plan/Framework/Policy Process: Was the document disclosed prior to appraisal? Yes Date of receipt by the Bank 09/16/2008 Page 6 Date of "in-country" disclosure 09/17/2008 Date of submission to InfoShop 09/17/2008 Indigenous Peoples Plan/Planning Framework: Was the document disclosed prior to appraisal? Date of receipt by the Bank Date of "in-country" disclosure Date of submission to InfoShop Pest Management Plan: Was the document disclosed prior to appraisal? Date of receipt by the Bank Date of "in-country" disclosure Date of submission to InfoShop * If the project triggers the Pest Management and/or Physical Cultural Resources, the respective issues are to be addressed and disclosed as part of the Environmental Assessment/Audit/or EMP\. If in-country disclosure of any of the above documents is not expected, please explain why: C\. Compliance Monitoring Indicators at the Corporate Level (to be filled in when the ISDS is finalized by the project decision meeting) OP/BP/GP 4\.01 - Environment Assessment Does the project require a stand-alone EA (including EMP) report? Yes If yes, then did the Regional Environment Unit or Sector Manager (SM) review and approve the EA report? Yes Are the cost and the accountabilities for the EMP incorporated in the credit/loan? Yes OP/BP 4\.12 - Involuntary Resettlement Has a resettlement plan/abbreviated plan/policy framework/process framework (as appropriate) been prepared? Yes If yes, then did the Regional unit responsible for safeguards or Sector Manager review the plan? Yes The World Bank Policy on Disclosure of Information Have relevant safeguard policies documents been sent to the World Bank's Infoshop? Yes Have relevant documents been disclosed in-country in a public place in a form and language that are understandable and accessible to project-affected groups and local NGOs? Yes All Safeguard Policies Have satisfactory calendar, budget and clear institutional responsibilities been prepared for the implementation of measures related to safeguard policies? Yes Have costs related to safeguard policy measures been included in the project cost? Yes Page 7 Does the Monitoring and Evaluation system of the project include the monitoring of safeguard impacts and measures related to safeguard policies? Yes Have satisfactory implementation arrangements been agreed with the borrower and the same been adequately reflected in the project legal documents? Yes D\. Approvals Signed and submitted by: Name Date Task Team Leader: Mr Ahmed A\. R\. Eiweida 09/08/2010 Environmental Specialist: Ms Darejan Kapanadze 09/08/2010 Social Development Specialist Ms Joanna Peace De Berry 09/08/2010 Additional Environmental and/or Social Development Specialist(s): Approved by: Regional Safeguards Coordinator: Ms Agnes I\. Kiss 09/08/2010 Comments: Sector Manager: Mr Wael Zakout Comments:

APPROVAL

P092019

Document of The WorldBank FOROFFICIAL USEONLY ReportNo: 31566-ID PROJECTAPPRAISAL DOCUMENT ONA PROPOSEDLOAN INTHE AMOUNT OF US$SO\.OMILLION AND A PROPOSEDCREDIT INTHEAMOUNT OF SDR 51\.65 MILLION (US$80\.0 MILLIONEQUIVALENT) TO THE REPUBLIC OF INDONESIA FOR A KECAMATANDEVELOPMENT PROJECT 3B March 1,2005 Environment and SocialDevelopment Unit East Asia and Pacific Region This document has a restricted distribution andmay be usedby recipients only inthe performance o f their official duties\. Its contents may not otherwise be disclosed without World Bank authorization\.  CURRENCYEQUIVALENTS (ExchangeRateEffectiveDecember31,2004) Currency Unit = Rupiah Rp\. 9,000 = US$1 US$lOO = Rp\. 900,000\.00 FISCALYEAR January 1 - December31 ABBREVIATIONS AND ACRONYMS APBD District DevelopmentBudget APBN National Development Budget Bappeda Provincial and District Development Boards Bappenas MinistryofPlanning BPKP National Development Audit Agency BPS National Statistics Bureau Bupati District Head CAS CountryAssistance Strategy CPAR Country Procurement Assessment Review DAU General Block Grant to Districts DPRD Provincial and District Parliaments FAD Inter-village forums Go1 Government o f Indonesia Kabupaten District KDP KecamatanDevelopment Project Kecamatan Sub-District KPKN Provincial Office o f the National Treasury M&E Monitoringand Evaluation M I S Management Information System M o F MinistryofFinance MOHA MinistryofHomeAffairs NGO Non-Government Organization PAD Project Appraisal Documents PjOK Local Project Manager PMD Village Development Agency (Ministry o f Home Affairs) PMU Project Management Unit Susenas National Expenditure Survey UPK Sub-district FinancialManagementUnit VIP Village InfrastructureProject WSSLIC Water Supply and Sanitation for L o w Income Communities Project Vice President: Jemal ud-dinKassum Country Managermirector: Andrew D\. Steer Sector Manager: Maria Teresa Serra Task Team Leader: Scott E\. Guggenheim  FOROFFICIAL USEONLY INDONESIA KECAMATAN DEVELOPMENT PROJECT 3B CONTENTS Page A\. STRATEGIC CONTEXT AND RATIONALE\. 1 1\. Country and sector issues \. 1 2\. Rationale for Bank involvement\. 4 3\. Higher level objectives to which the project contributes\. 4 B\. PROJECT DESCRIPTION\. 4 1\. Lending instrument\. 4 3\. Project development objective and key indicators \. 4 4\. Projectcomponents \. 5 5\. Lessonslearned and reflected inthe project design \. 9 6\. Alternatives considered and reasons for rejection\. 9 C\. IMPLEMENTATION\. 10 1\. Partnership arrangements(if applicable) \. 10 2\. Institutionaland implementation arrangements\. 10 3\. Monitoring and evaluation o f outcomes/results \. 10 4\. Sustainability \. 12 5\. Critical risks and possible controversialaspects\. 13 6\. Loadcreditconditions and covenants \. 15 D\. APPRAISAL SUMMARY\. 16 1\. Economic and financial analyses\. 16 2\. Technical \. 17 3\. Fiduciary\. 17 4\. Social\. 18 5\. Environment\. 20 6\. Safeguardpolicies \. 20 7\. Policy Exceptions and Readiness\. 21 This document has a restricted distribution and may be used by recipients only in the performance of their official duties I t s contents may not be otherwise disclosed without World Bank authorization \. \.  Annex 1: Country and Sector or ProgramBackground\. 23 Annex 2: Major RelatedProjects Financedby the Bank and/or other Agencies \. 30 Annex 3: Results Framework and Monitoring \. 31 Annex 4: Detailed Project Description\. 34 Annex 5: Project Costs\. 37 Annex 6: Implementation Arrangements \. 38 Annex 7: Financial Management and Disbursement Arrangements \. 38 Annex 8: Procurement Arrangements \. 45 Annex 9: Economic and Financial Analysis\. 45 Annex 10: Safeguard Policy Issues\. 50 Annex 11: Anti-Corruption Plan\. 63 Annex 12: Project Preparation and Supervision\. 71 Annex 13: Documentsinthe Project File\. 72 Annex 14: Statement of Loans and Credits \. 73 Annex 15: Country at a Glance \. 75 Map No IBRD30904R6 \.  INDONESIA KECAMATANDEVELOPMENT PROJECT3B PROJECTAPPRAISAL DOCUMENT EASTASIA AND PACIFIC EASSD Date: March 1,2005 Team Leader: Scott E\.Guggenheim Country Director: AndrewD\.Steer Sectors: Sub-national government administration Sector ManagerDirector: Maria Teresa Serra (25%); Water supply (20%);higation and drainage (20%);Roads and highways (20%);Primary education (15%) Themes: Decentralization@);Rural policies and institutions (P);Participation and civic engagement (P);Social safety nets (P);Rural services and infrastructure (S) Project ID: PO92019 Environmental screening category: Partial I Assessment Lending Instrument: Specific Investment Loan Safeguard screening category: Limitedimpact a1Bank financing (US$m\.): 160\.00 Proposedterms: Variable-Spread Loan(VSL) Grace period (years): 5 Years to maturity: 20 Commitment fee: \.75% Front end fee (FEF) on Bank loan: 0\.5% Payment for FEF: Capitalize from LoanProceeds ProposedTerms (IDA): Standard Credit Grace period (years): 10 Years to maturity: 35 Commitment fee: 0\.00 -0\.50% Service charge: 0\.75%  Project implementation period: Start End: Expected effectiveness date: June 30,2005 Expectedclosing date: December 31, 2008 Does the project depart from the CAS incontent or other significant respects? Re$ PADA\.3 [ ]Yes [ X IN o Does the project require any exceptions from Bank policies? Re$ PAD D\.7 [ ]Yes [XINo Have these been approved by Bank management? ]Yes 1No I s approval for any policy exception sought from the Board? [ ]Yes [XINo Does the project include any critical risks rated "substantial" or "high"? Re$ PAD C\.5 [ ]Yes [XINo Does the project meet the Regional criteria for readiness for implementation? Re$ PAD D\.7 [XIYes [ ] N o Project development objective Re$ PAD B\.2, TechnicalAnnex 3 KDP3 has the overall development objectives o freducingpoverty and improving local level governance inruralIndonesia\. Project description[one-sentence summary of each component] Re$ PAD B\.3\.a, TechnicalAnnex 4 The project consists o f six main components: Component 1:KecamatanGrants\. The Projectwill provideblock grants directly to subdistricts for investment proposals made by villages and participatoryplanning support\. This component also consists o f grants for emergency reconstruction needs\. Component 2: DevelopingLocalGovernmentCapacitiesfor SuccessfulCommunityDevelopment\. This component providestechnical assistance to local government for activities to strengthen local government councils\. Component3: Micro-FinanceSupport\. This component includes training andtechnical assistance to sub-district micro-finance institutionsthat were supported under KDP1and KDP2\. Component4: ImplementationSupport\. This component consists o f technical assistance to the national, provincial and district governments\. Component 5: MonitoringandEvaluation,Studies\. This component will fundactivities relatedto monitoring and evaluation o f the project including: poverty and governance impact assessments using quantitative and qualitative methods; cost effectiveness and technical quality evaluations; NGO and journalists' independent monitoring; and community-based monitoring\. Several thematic studies will also be funded out o f this component\. Component 6: IncrementalOperatingCosts\. This component provides support for the Ministryo f Home Affairs' National KDP Secretariat so that they can visit KDP field sites and support the overall management and implementation o f the project\. Which safeguardpolicies are triggered, if any? Re$ PAD 0\.6, Technical Annex 10: The project triggers six safeguard policies: Environment assessment, natural habitats, pest management, involuntary - resettlement, indigenous peoples, and forests\. Significant, non-standard conditions, if any, for: Re$ PAD C\.7 Boardpresentation: Loadcredit effectiveness: June 30, 2005 Covenants applicable to project implementation:  A\. STRATEGIC CONTEXTAND RATIONALE 1\. Country and sector issues Bank assistance strategies for Indonesia inrecent years have been definedlargely by the nature of the countryk social, economic, and political transition\. Most analyses of the East Asian crisis and its aftermath inIndonesia focus on the need for a strong institutional strategy for bothgrowth and equity\. Indonesia's overall policy framework is fundamentally sound inmost areas, but its ability to implement policies i s uneven\. The country is also undergoing a large-scale political and administrative transformation, which further highlightsthe needto focus on strengtheninginstitutions\. Indonesia under the thirty-year New Order government was one o f the most centralized countries inthe world\. Three aspects of centralizationare especially relevant for the project at hand\. First, since independencethe government opted for a unitary system o f government\. This meant that every level of administration-villages, districts, andprovinces- were all part of the national state apparatus\.Virtually all revenues were collectedcentrally, and then allocated to lower unitsthrough the national budget\. Controlling boththe budget and the civil service from Jakarta provided effective discipline over lower order parts of government\. Throughout the New Order period, discipline was further enforced through what was called "dwifungsi" -the twin functions of the armed forces -that provided "shadow" positions at eachlevel of civil administration\. Secondly, not only was power centralized, but it was concentrated inthe executive branch of government\. Historians of Indonesia have documented the processby which the judiciary -never especially independentbutnevertheless a free-standing branch of government -lost autonomy\. With the Ministry of Justice holdingresponsibility for managingjudicial appointments, salaries, and promotions under the NewOrder, the courts becamea de facto managerial branchof the executive\. Indonesia never had a powerful legislature either, despite the nominalrole assignedto it by the Constitution\. Over the sevenyears since the fall of the New Order, virtually all o f these assumptions on which the government were builthave changed\. Indonesia's decentralization program i s among the most far- reaching inthe world, with more than 40% o f the national development budget now beingtransferred to districts as unearmarked block grants\. The decentralization laws, which are stillbeing issued and revised, dramatically increased districts' authority as well as their responsibilities\. The nationalparliament has become nearly as powerful as the president\. Thejudiciary, though still quite weak, has recently reorganized to replace the division between the Ministry o f Justice andthe Supreme Court, with a unified judicial systemrunentirely through the SupremeCourt\. The Bank's responseto this constantly changing environmentreflects the changing patterns of opportunity and constraint\. The "bigpicture" strategy i s to promote a reformstrategy that will leadto responsive and effective governance institutions that can promote growth, reduce poverty, and deliver highquality development services\. One foundation of that strategy i s to promote end-user accountabilities and participationinthe institutions o flocal government and the project being proposed here i s a keymeans to support that goal\. The Kecamatan Development Project (KDP)' is part ofthe Bank`s support to Indonesia's decentralization program\. The project strengthensthe ability o f communities across Indonesia to plan andmanage local development\. By doing so,not only do communities produce high-quality, economically useful social and infrastructure investments, but district level agencies can concentrate their resources on technically more 'Kecamatan means subdistrict inIndonesian\. 1  complex and higher-value programming\. Equally important for a transitionalcountry such as Indonesia i s that participatorydevelopment programs, such as KDP, provide local govemments with concrete examples of altemative ways to manage decentralization\. KDP's evolution and change\. KDPbegan at the endof the New Order period\. Itbuilton Indonesia's long tradition of providing resourcesto support plans made by local govemments and communities through different kinds ofblock grant transfers\. The key innovation made by KDP and its immediate predecessors, the Village Infrastructure Project and the Programfor Poor Villages, was to pushthe resources all the way down the system rather than to review and fundplans coming fkom below\. KDP also introduced a more intensive programof social and technical facilitation\. Becauseo f the East Asian economic crisis, KDP scaledup muchmore rapidly than initially planned, rising from some 2,000 villages to 12,000 villages inslightlymore than a year\. Strong support from Bappenas (the Ministryo fPlanning) and the Ministryo f Home Affairs, intensive World Bank monitoring and assistance, and the project's generally broadpopularity have provided the basis for a continued scale- up\.In2005, the project is expectedto reach some 30,000 villages, slightlyless thanhalfthe rural villages inIndonesia\. KDP's scale-up strategy has followed an overall strategy that will eventually retumthe entire programto the national planning andbudgetingsystem\. Ifthe project's first phase was intendedto establish the bottom-up planningprocess, the ongoing secondphase concentrateson improving the technical and managerial capacities of the participating subdistricts and villages through various forms o f technical assistance, training, andpractical exercises\. The thirdphase of the project starts in2005\. It i s designed to provide a legal and administrative fkamework for institutionalizingthe KDP system within the national and local government's planningprocedures\. The $249\.8 millionKDP3 project went to the BoardinJune 2003\. Shortly after Boardapproval, however, the Indonesianparliament tabled a major restructuringoftheir decentralization laws\. Hadthe proposed changes come into effect, subnational projects, including KDP, couldnot have been implementedby government agencies\. Becauseof the uncertainty, KDP3 was dividedinto two\. A one-year tranche sufficient to continue field operations while the bills were debatedwas restructured and the scaled-back version of KDP was sent to the World Bank's board, where it was passedon a no-objection basis on May 25, 2004\. Followingthe election of a newpresident, a newparliament, and a newrepresentative council inAugust 2004, the risks of a major overhaulingo f the decentralization laws have receded\. The government has now decided to proceedwith the secondhalf of the project\. With the exception o f the new activities that will allow KDP to support the reconstructionof Aceh andNorth Sumatra following the devastating earthquake and Tsunami o f December 2004, there are no changesto the development objectives, amounts, or implementationstructure from the original KDP3 project approved by the Bank's Board in June 2003\. 2  T: )le 1:KDPStrategyfo Village GovernanceRI wm 'olicy Issue KDP1 KDP2 KDP3 election o f form of Usedstandard, Adds non-voting Regulations to support illage government preexisting formal and membersto village and village and inter-village informal groups inter-village forums institutions Strengthening village Adds informal Village leadership Strengthens new village leadership members to village and training, joint parliaments and inter- subdistrict bodies monitoring with DPRD village forums Revenuebase 3 yr\. subdistrict block 3 yr\. subdistrict block 2 yr\. subdistrict block grant grant grant to complete 5- year cycle Counterpart funding None Matching grant pilot to Matching grant is from local government allow additional required for all districts\. subdistricts to Contributions range participate from 20 - 70% o f grant total depending upon local poverty rates\. Funding decision for Subdistrict Subdistrict Subdistrict community projects Village infrastructure Project specific Village-wide Village-wide assessment needs assessments assessment Relation to district Usedexisting structures Socialization programs Pilots multi-stakeholder government for executive and district marketplace parliament Relation to line agencies None Lineagencies signoff Joint planning for on proposals where specialized services relevant to district (health, education, plans irrigation etc) Microfinance Commercial interest Limitedcapacity Technical support and butlowrepayment strengthening\. Still supervision to free- within standard project standing revolving management units funds\.No new loan finds\. Promoteprivate bank linkages Grievance and dispute IntroducedNGO and Continued NGO and More support for resolution press independent press monitoring, community- based monitoring barefoot lawyer and monitoring\., pilot more pilot systemfor intensive auditing, paralegalaccess training for district auditors Gender equity Promoted women's Special planning Support for women in participation in stream for women's local government decision-making and groups, competitive activities; women rewardfor promoting ASEM programto facilitators women's participation, support women's women's engineers participation inKDP program\. ($0\.75 million) JSDF programfor female-headed households ($3\.2 million) 3  2\. Rationalefor Bankinvolvement Bank contributions to the KDP program are valuable inthree mainareas\. First, the Bankprovides oversight and pressure on what all stakeholders (even government) agreei s an extraordinarily poor fiduciary environment\. Bank participation therefore contributes greatly to the effectiveness by which aid i s used\. Bank supervisionmissions provide additional oversight and support for improved financial and program management\. Second, Indonesianagenciesnormally do not carry out very rigorous monitoring and evaluation programs\. Constantly evolving projects such as KDP requiremuchcloser monitoring and evaluation because of their wide geographical coverage, diverse scope, and the needto have real-time information on progress\. The project also values the importance o f learningwhat works and what doesn't inorder to make procedural andpolicy improvements\. The Bank helps GO1use quantitative and qualitative measurementsto improve the program's design\. Such studies are appreciated and usedwhen they are done, but they will not be done without Bank involvement\. Third, Bank dialogue bringsglobal experience to bearthat wouldnotbe otherwise available\. Specific examples includethe new district multi-stakeholders' forum, which developed from a Bank-sponsored study tour to the SEILAprograminCambodia, andKDP's programs for working inconflict areas which benefited from extensive dialogue betweenKDP managers and field staff and activities supportedbythe Bank's conflict prevention unit\. 3\. Higherlevelobjectivesto which the projectcontributes KDP3 has overall development objectives of reducingpoverty and improving local-level governance in ruralIndonesia\. It i s part of a long-termvillage level governance programthat began with the first Kecamatan Project in 1998\.Developmentobjectives for KDP3 include: (i) institutionalizingparticipatory processes inlocal government; (ii) providing cost-effective, basic social and economic infrastructure; (iii) strengthening the capacity of the micro-finance institutions developed under KDPl and KDP2 to manage and monitor funds sustainably; and (iv) providing emergency reconstructionassistanceto devastated areas\. B\. PROJECTDESCRIPTION 1\. Lendinginstrument KDP3b i s a Specific Investment Loan (SIL)\. Ithas a total implementation period of five years\. 2\. Projectdevelopmentobjectiveandkey indicators Outcome indicators refer primarily to poverty and governance measurements\.They necessarily involve a lag time\.KDP3 therefore includes outcome measurementsbased on K D P l and 2 rather than the current project, However, becausethe core program follows the same model for all three projects, outcome measurementsfi-om the earlier projects should informthe evaluationo fthe current one\. The primary measurementsthat will be usedto measureproject outcomes are: i\. ImprovedHHexpenditureratesandimprovedaccesstoeconomicandsocialservicesin>750 poor subdistricts or over 12,000 villages\. ii\.Economicinternalratesofretumformajorvillageinfrastructuretypes>30% onaverage\. 4  \. 111\. 80% satisfaction levels from beneficiaries regarding improved services and local level governance\. Performance benchmarks duringthe project period will reflect the project's overall objectives of improving the local level institutionalframework for poverty reduction\. Intermediate results indicators include: i\. Increasesinsocialinclusion,measuredbyvulnerableandpoorgroups'participationinKDP decision-makingand management; minimum40% participationof women and poorest groups inKDP activities\. ii\. SustainabilityoftheKDPapproachmeasuredbytheextentoflocalgovernmentadoptionand contributions to the program\. iii\. 70%oftheinfrastructureevaluatedasverygoodtechnicalquality\. iv\. 65% o f KDP villages forming implementationregulations (perdas)\. v\. Minimumof200 micro-finance institutions(UPKs) retaining>Rps 100millioninfinancial reserves\. vi\. 70% o f study and evaluation findings are usedto improve the project\. Studies on long-term maintenance and sustainable financing options completed and findings used to improve the program\. vii\. 80% o f the devastatedtarget areas benefit from KDP emergency technical and economic assistance\. See Annex 3 Results Framework for additional intermediate results indicators for each component\. 3\. Project components* Component 1:Kecamatan Grants(USS170\.6 million) --The heartof KDP3 i s made of block grants that are transferred directly from the Special Account to the subdistricts that are participating inKDP\. Block grants take two forms\. One block grant supports investment proposals made by villages and selectedby consensusinan inter-village decisionmeeting\. The second consists ofblock grants to support the participatory planning process\. Eachi s described below\. A\. Blockinvestmentgrantsto KDP3 communities ($158\.0 million)-The - purpose of this component i s to provide two years o f continued support for the block grant program inapproximately 2,000 subdistricts that have already beenthrough three years of KDP\. A limitednumber o f additional eligibility criteria apply to new subdistricts: subdistricts innew, high-poverty districts which were previously ineligible for KDP; natural disaster and post-conflict areas where KDP provides the platformfor other essential services; and subdistricts proposed by districts for full fundingfrom their ownbudgets\. KDP provides technical assistance when requested\. The amounts listedunder eachprogramcomponent described inthis sectionrefer to the total project costs- inclusive of government contributions - not only the loan amounts\. 5  KDP3 block grant amountswill remainthe same as the current design: 500,750, or 1,000 millionrupiahper subdistrict (approx\. US$55,000, $75,000, or $110,000) basedon their population\. Local government counterpart contributions are definedby Bappenasand the MinistryofFinance's masterlist oflocalgovemment financial capacities\. B\. KecamatanPlanningGrants ($16\.6 million)support the village andkecamatan planningprocessby allowing villagers to develop a cadre of self-selected social and technical facilitators\. Other activities funded through this component include village cross-audits, dissemination materials, andthe costs of localtravel\. C\. EmergencyReconstruction($5\.0 million)-This first component also includes funds for emergency reconstruction assistance\. KDP's extensive fieldpresencemeans that it is often able to provide arapid responseto natural disasters and to post-conflict reconshction\. Inlate 2004, Indonesia faced three significant natural disasters: the earthquake and tidal wave that devastatedAceh and North Sumatra; an earthquake in Alor that fully or partially destroyed 35 villages; and another earthquake inWest Papua that badly damagedthe district of Nabire\. At the time the earthquake and Tsunami struck Aceh, KDP was operational inalmost 40% o fthe subdistricts inAceh, with a large facilitators' network inplace\. This Emergency Reconstructionassistancewill allow KDP to provide an emergency cycle of funds\. KDP will use a special operational manual that was tailor-designed for these emergency reconstructioncontexts and has beenreviewed bythe Bank\. As reconstruction proceeds, affected provincescanretumto normal KDP programming\. It i s expectedthat this component will be complemented by substantial parallel financing providedthrough the proposed Multi-Donor Trust Fundfor the reconstructionof Aceh andNorth Sumatra\. Component2: DevelopingLocalGovernmentCapacitiesfor SuccessfulCommunity Development($26\.8 million)--This component consists of activities to strengthenthe local government councils formed under Laws 22 and 25, with a particular focus on the village representative forum (BPD), inter-village forums (FAD), and the district parliaments\. This component finances primarily social and technical facilitators\. Facilitators are recruitedfrom the private sector\. They receive aproject-managed training program as well as periodic refresher courses\. Other activities include: technical assistance for BPD capacity development; in-service training inadministrationand monitoring skills to reinforce village and subdistrict administration; a pilotprogramto support local govemment management of the KDP process; and village-level civic information and education programs about decentralization\. Component 3: Micro-FinanceSupport (UPK) ($5\.5 million)- This component includes continuation and phase-out of the training program to link subdistrict micro-finance institutions (UPKs) to private sector providers that were funded through KDP3a\. These micro-finance institutions were developed under K D P l and KDP2 and will be provided with additional training and technical assistanceto strengthen their financial capacities\. N o additional funds for micro- credit lendingwill beprovidedexcept under special women's credit activities\. Component 4: ImplementationSupport ($25\.5 million) This component consists oftechnical - assistanceto the national, provincial, and district governments\. The bulk of this component covers the costs o f experienced technical and social facilitators at the national, regional, district and subdistrict levels who provide technical advice, field oversight, and local-level coordination to the program\. Other activities within this component relate to provincial socializationand training, publicationsand materials support and administrative support\. 6  Component 5: MonitoringandEvaluation(M&E),Studies, and SpecialPrograms($2\.0 million) -- KDP maintains a comprehensive monitoring, evaluationand special studies program to assessproject progress and ascertain ifobjectives are beingmet\. Major M&Eactivities to be funded through this component are: poverty and governance impact assessments using quantitative and qualitative methods; cost-effectiveness and technical quality evaluations; pilot programs for local government management; NGOandjournalists' independent monitoring; and community-based monitoring\. Studies include a review of local regulatory "best practices' and district profiles\. The Government's capacity for monitoring and evaluationwill also be enhanced through this component\. Component6: IncrementalOperatingCosts ($1\.5 million) -This component provides support for the Ministryof Home Affairs' National KDP Secretariat so that they can visit KDP field sites\. It also includes the cost of annual workshops with local government officials to review KDP's performance withrespectto the implementationofthe localregulations onvillage autonomy\. This component will also support two cross-country tours for government policy- makers and selected senior KDP management consultants to visit other innovative community development projects\. Project Organization and Approach to Technical Assistance and Supervision Component 1: KecamatanGrants -- KDP2 developed a comprehensive system for managing and supervising anational level project that will be continued underKDP3\.Consultants support each level of government\. A small national level oversight consultant team supervises 16five- person regional management units\.Eachregional group includes at least one supervising engineer, a social coordinator, a trainer, a bookkeepinggroup, and a database management specialist\. Below them i s a district team that consists of a district technical specialist, who supports the subdistrict and village technical teams, and a district level social specialist who supports the subdistrict and village facilitator teams\. At the bottom-most level of the system, each village elects one male and one female village facilitator whosejob is to disseminate project information, encourage project participation, support training programs, and supervise the village level planningprocess\. KDP subprojects also buildintechnical oversight\. Communities receive a small budget for contractingengineers from apre-qualified list to help design project proposals\. Project proposals can include upto tenpercent to cover the costs of supervising engineers\. All large projects must be individually reviewedand approved bythe KDP district engineer\. Interms ofthereconstruction work, KDP's Acehresponseprogramwillbe supervised fromthe temporary multi-donor office being established inBanda Aceh\. KDP i s taking a number o f measuresto ensure highquality assistance and rapidimplementation\. First, PMD and the Bank will prepare andimplementamonitoring and evaluationprogramacceptable to the Bank\. This M&Eprogramwill include special quarterly reports onthe implementation ofthe reconstruction program\. Second, PMD and the Bank will have bi-weekly review meetings to address implementationbottlenecks and problems\. Third, the normal audit sample will be doubled, and preliminary results will be presented on-site so that any necessaryremedial actions can be taken promptly\. Fourth, the provincial management unitwill be strengthened to include additional oversight consultants, including an extra complaints handlingmanager\. Lastly, PMDwill form a working group with the larger NGOsworking on the reconstructionso that they can provide independentinformation and additionaltechnical assistanceto villagers\. The other areas inAlor and West Papua coveredby this components, are significantly smaller but will follow the same 7  procedures, with the multidonor office inMakassar, Eastern Indonesia, replacingthe role played bythe office inBandaAceh\. Component 2: DevelopingLocal Government Capacities for Community Development-- Most o f the training and workshop activities covered under this component will be implemented through the regionalmanagement unitsfor the block grant component described above\. Regional NGOs and recognized training institutes will carry out most of the activities\. However, more specialized technical assistance will be neededto support the national legislative drafting and review process, and also for support to the DPRD technical staff groups who deal with village governance\. Component 3: Micro-Finance Support (UPK)-KDP will provide technical support to the subdistrict micro-finance institutions through provision of additional micro-finance experts and improved links with NGOs and private service providers specializing inmicro-finance activities and buildingfinancial sustainability\. Component 4: Implementation Support -KDP i s supported by a tiered system o f social and technical facilitators\. At the national and provincial levels, a project management unit supports the Ministryo f Home Affair's project manager by providing overall strategic planning, management, and oversight support\. District KDP consultants report to a multisectoral district government steering committee\. The districtconsultant's job i s to provide quality control, training support for the subdistrict field teams, and they are the first aggregation point for monitoring\. Reviews o fKDP2 compared to K D P l showed a highreturn to the addition of subdistrict level engineeringfacilitators, and these will be continuedinthe present project\. Component 5: M&E, Studies and Special Programs -KDP has always includeda strong analytical program\. This component will continue to support Bappenas andMoHA's quantitative and qualitative M&Ethrough a series of consultancies commissioned by the government and managedby technical consultants\. This component also includes funds to support specialized evaluation firms\. MoHA is usually responsible for the monitoring work while Bappenasi s charged with strategic evaluations and planning\. 5\. M&EandStudies 2\.0 1 2\.0 1 6\. IncrementalOperation Costs 1\.5 1 1\.2 1 Total Project Costs 240\.9 100 159\.6 100 Front-end fee 0\.4 0\.4 Total FinancingRequired 241\.3 100 160\.0 100 la Indicative Costs include Government contributions 8  4\. Lessons learned and reflected in the project design Operatingina highlyvolatile social, economic, and institutionalenvironment, KDP i s a constantly evolving operation that learns both from its mistakes and from new opportunities\. Some examples o f the types of general lessons learned and reflectedinthe current project's design include: Although not designed as an emergency responseproject, KDP can respond to crises rapidly and efficiently\. This is due to its wide geographical coverage in29 of the country's 32 provinces and its extensive management infrastructure consisting of tens of thousands o f local government officials, consultants and facilitators\. KDP3 includes special procedures to enhance further its rapid response capabilities\. Reportedproblems o f O&M, which are common across all sectoral programs inIndonesia, infact usually reflect problems o f design rather than maintenance\. KDPresponded by considerably strengthening the presenceandrole o f oversight engineers\. This thirdphaseimproves their training andmanagement still further\. A controlledexperiment usingdifferentincentive and sanction procedures showed that losses causedby corruption andpoor management can bereduced significantly by increasing the likelihood of audit, and most importantly, by immediately publicizingresults from the audits inlocal meetings\. The new project audit manual reflects this finding\. KDP has also invested considerable effort incoming to grips with Indonesia's ongoing decentralization program\. Local government support for KDP i s high, as measuredby indicators such as the highrates o f counterpart financial contributions, but domestic adoption of KDP without usingBank financing and oversight have been considerably less successful\. A review o f local government replication schemes o f KDP showed three maindivergences from the "real" KDP: 0 Local governments do not take on KDP's mechanisms for financial transparency and social oversight\. 0 Communities are allowed to planbut they are rarely allowed to implement localprograms, which instead are given to local contractors\. 0 Consultant training and oversight are dramatically reduced\. Eachof these challenges will be addressedthrough the newproject, althoughtheir resolution must be part o f the Bank's longer-termsupport to decentralization\. The first two problems come from bothpolicy and practical barriers\. Helpedby ASEM funds, Bappenas i s developing a community development policy framework that will buildon KDP to remove barriers to domestically financed community development projects\. (For example, at present the current regulation on government procurementprohibits community execution o fprojects costing more than Rps\. 50 million unless they are financed by a donor)\. The new project also pilots an exercise to consolidate technical assistanceinthe most experienced, successful KDP subdistricts with the longer term goal of developing a programmatic approach that could support larger areas but with lower overall inputs\. 5\. Alternatives considered and reasons for rejection Giventhat this is the secondhalfof an existing, successful project, no major alternatives were considered\. Because of decentralization's newness inIndonesia, a SWOP i s not yet appropriate\. Programs that would work more directly through provincial and district governments also seempremature since these do not 9  yet have the necessaryfinancial managementprocedures and standards, althougha parallel series of Bank-assisted operations currently beingpreparedwill develop these duringthe current CAS period\. C\. IMPLEMENTATION 1\. Partnershiparrangements KDP has had a long and successful partnership with the Government of the Netherlands, which has provided nearly $50 million inparallel financing to support the program\. Given the project's profile and pre-existingpresenceacross AcehandNorth Sumatra, other donors are expected to contribute significant funds duringthe estimated two-year reconstructionperiod\. 2\. Institutionalandimplementationarrangements KDP i s executed through the Ministry of Home Affairs\. The core executing team i s guidedthrough a coordinating group at each level of government that includes the finance department, the development planning board, and the relevant line agencies such as health, education, and public works\. 3\. Monitoringandevaluationof outcomesh-esults KDP has arobust monitoringprogramthat includes bothquantitative and qualitative evaluations\. The core o fthe internal monitoring system i s the project's Management Information System (MIS)\.MIS data are aggregatedand usedineach of the regional management units,with a master system maintainedby the national oversight team\. Externalmonitoring is providedthrough contracts to 28 independent provincial NGOs, and 32 independentjournalists\. Thejournalists' contracts provide themwith operational expenses so they can visit and report on KDP project sites inregional and national newspapers\. They do not provide any prior report to the project for review before publication\. Two copies o f their publishedarticles are sent to Home Affairs, and an annual review summarizes their findings\. The journalists provide aroute by whichthe independent NGO monitors and other civil society groups can report on KDP activities\. Quantitative evaluations include a 100-village economic evaluation, and a 55,000 household expenditure questionnaire drawn fromSusenas,the government's national expenditure survey\. More qualitative methods, inparticular community-based monitoring, draw on tools such as participatorymonitoring, usingthe photo documentation methodsthat were developed for the JSDF-supported widows inconflict areas project, and community monitoring and evaluationtechniques developed by the Aceh NGO forum duringKDP1\. Despitethis comprehensive M&E system, appraisal found several weaknesses inKDP's monitoring and evaluation systemthat mustbe fixed\. The three top problems are: 0 field entries for the MISare often delayed andthe overall MIS system is usually 2-3 months out of date; 0 data verification and quality control at the district and regional levels require strengthening; 0 nationalresponsesto field reports are too slow and are often inappropriate\. An actionprogramto address these remedies was agreedduringappraisal\. Priorityactions include the following: 0 an intemational M&E specialist will be added to the national management team; 10  0 an independent managementreviewwill assess the effectiveness of the decentralized MIS; 0 additional training programs will improve the skilllevel of the data entry team; and 0 the complaints handlingresponseprotocols will berevisedand simplified\. Evaluationreports have been less problematic although their procurement takes too long\. Nevertheless, several have suffered from quality problems, particularly those involvingstatistical interpretation of poverty impacts fkom KDP programs\. KDP3 addressesthis concem by adding concentrated inputs of internationaltechnical assistance to support the statistical studies and write-ups\.KDP3 will also commission a study to evaluate the impact of the local government reforms introducedthroughthe program\. A summary of KDP's M&Esystem is providedinTables 3 and4\. Table 3: InternalMonitoringfor the KecamatanDeveloDmentProgram No\. Activity Objective Implementing outputs AgenciesIActors 1 Monitoring by To monitor and Consultants at the national, Monthly reports, consultantsMIS regularly report upon provincial, district and database, problems KDP progress kecamatanlevels solved\. 2 Monitoring by To monitor and Govt\. officials at Reports and Govt\. Officials regularly report the national, problems uponKDP provincial and solved progress, trouble- district level, shooting DPRD, etc\. 3 Community To monitor projects community Activities Monitoring within their members monitored by communities the community 4 Case Studies To document 2 full-timeKDP 6-8 case studies lessons learned and staff plus per year best practices o f occasional KDP consultants 5 Complaints To document and National and Resolved cases Resolution Process resolve field regional Database o f problems Complaints complaints Resolution Staff 6 Financial To improve the 7 full-time staff Training to Supervision and financial skills o f with accounting UPKsand Training UPKsand backgrounds in economic economic loan the Financial groups\. Field groups and to check Supervision and finances financiallaamin Training Unit checked and records at the audited\. kecamatan and village levels\. 11  Table 4: KDP'sExternal Monitoring and Evaluation [Activity IObjective IImplementingAgencies outputs NGOProvince-Based To monitor andprovide an 28 provincialNGOs Monthly reports Monitoring independent source o f qualitative information on KDP To provide independent 32 provincialjournalistsfrom Newspaper articles, reporting monitoring andreporting on printmedia andradio radio reports KDP by localjournalists World Bank Supervision To supervise KDP progress World Bank ,PMD, Aide-Memoire (usually Missions and achievements BAPPENAS, NMC, NGOs twice a year) Financial Audits To audit KDP finances BPKP Audit findings and reports Participation and Local To measure changes related External Consultant Firms Quantitative and Governance Impact to empowerment, governance qualitative evaluation Evaluation and poverty issues using both reports quantitative and qualitative methodologies\. To evaluate KDP Consultant team Study evaluating the Studies infrastructure projects in quality o f KDP terms o ftechnical quality, infrastructure projects costs, sustainability, and safeguard issues\. Recommend improvements Economic Analysis of To calculate EIRR; analyse External team composed of Study examining these KDP Infrastructure economic impact o fKDP finance, engineering and three topics\. Investments infrastructure on villages; and social development members examine cost-effectiveness and undertake cost comparisons betweenKDP and other similar GO1 constructed infrastructure Economic Loan Study To evaluate KDP economic External consultant team Study evaluating the loanactivities and quality o f KDP recommendimprovements economic loan I activities Institutional Improvements To measure and evaluate the I IExternal I evaluation team Analysis o f the Evaluation individual and institutional together with BPDs, DPRDs effectiveness o fKDPs changes resulting from perdas etc capacity building and training measures Poverty impact study To evaluate the mediumterm World Bank, BPS (National Analysis o f Susenas impacts o f KDP onpoverty Statistics Board) data to determine and key socioi-economic impacts of KDP welfare indicators 4\. Sustainability KDP's sustainability strategy calls for a gradually increasingshare o f financing to come from local government budgets\.KDP1was funded as full grant transfers from the central budget\. KDP2 introduceda matching grants option, by which local governments could add subdistricts ifthey provided 80% of the costs from their own budgets\.Nearly 50% of the districts took advantage of this option, contributing more 12  than $35 million\. UnderKDP3, all districts have to provide funds\. Their level of contribution i s normalized to reflect localpoverty rates; it ranges from 20% to 70%\. Ninety-five percent o f the districts eligible tojoin have already confirmedtheir participation\. Technical sustainability of infrastructure i s aproblemeverywhere inthe world\. Districts inIndonesia do not budget to cover the recurrent costs of village roadmaintenance, and full maintenance of larger projects such as roads i s beyondthe fiscal capacity of most poor villages\. Engineeringreviews of the main infrastructure fundedby KDP suggest that for infrastructure such as roads, improved designs can offset normal deterioration, raising the expected life span from 3-4 years to somewhere between 12-15\. OEDreviews o fVIP, KDP's predecessor that developed the engineering standards for community infrastructure, support this conclusion; 5 years after the project closed, 85% of the roads were ingoodto very good condition\. Smaller infi-astructurecanbe maintainedby villages provided that community participation starts early and they plan for recurrent costs\. KDP draws particularly on the methodologies for community participationinwater supply and sanitation developed by the WB-UNregional water supply group\. KDP3 also includes a substantial pilot to develop village utilities (electricity and water supply) that charges users fullmanagementandtechnical costs for valuedservices\. 5\. Criticalrisks and possible controversial aspects A\. Critical Risks KDP is not exempt from the normalrisks o fcorruption and other forms o f leakage identifiedinthe country's CPPR and INTIUreports on sectoral projects\. Indonesia's lax system for sanctioning clear cases of corruption aggravatesthe risk since once it i s clear how few risks there are to stealing money, newentrants quicklyjoin the corruption market\. KDP's general strategy for combating this hinges on two elements: high levels of social control through the various mechanisms to promote social oversight and financial transparency; andprompt actionby government to pursue cases o f documented corruption\. The government has announced a national anti-corruption campaign\. Sustained, follow-onenforcement would reduce corruption risks considerably; correspondingly, a failure to implement the campaign would allow for the continuance o fbadpractices\. 13  Risk RiskRating I RiskMitigationMeasure Component 2: 5 core regulations not H Follow-on support from KDP is keyed to adoption adopted o fregulations\. Component3: Localproject stakeholders S Supervisionby oversight NGO and managers do not insist on strict application o f eligibility criteria Extemalautonomy o f revolving fund M Operational Manualrequires Bank review management Locally available human resources for S Outsourcing to NGOs andbanks training inlocal fund management is insufficient\. Matching grants do not materialize S Refusing service to the districts that do not honor agreements Component 4: Data collection quality is bad S TOR and contract will specify on-site supervision\. FromComponentsto Outputs Component 1:Matching grant formula M Working group within BAPPENAS and MoF achieved Component 2: Regulations inadequate M Consultations with specialists and local governments underway Component 3: Component detached to M Writtenassignment o fexecuting agency from separate agency BAPPENAS and Home Affairs Corruption risks: M Using block grants and independent document Block Grants: Minimalrisks are expected to counterflows minimizes risk\.Publicallydisclosed affect the block grant transfer\. audits provide an additional check\. Enduse oversight remains vulnerable\. Village Planning Capacity: Collusionrisks exist with suppliers; nepotism with within- Public accountability for all procurement limits village selection supplier collusion\. Open elections for FDpositions limits favorite son choices Implementation Support: Main risks lie with procurement and with company transfers to Main mechanism has beento switchto direct field consultants contracting o f consultants, with standard monthly payments transferredthrough payroll Microfinance -- Mainrisks are collusion among bidders and forced partnerships Disclosure rules will ensure competition Studies -- Main risk is procurement collusion Close monitoring by WB and substitution o f personnel OverallRiskRating M A more detailed fiduciary riskassessmentis provided inAnnex 11 RiskRating- H(HighRisk), S (SubstantialRisk), M(ModestRisk), Nvegligible or Low Risk) 14  B\. Possible ControversialAspects KDP's use o f consultant facilitators is controversial within certain parts ofthe national government\. Much of this concem results from a failure by KDP management to explain the project adequately to national stakeholders, who are not aware that the overwhelming majority of these "consultants" are villagers being trained and the staffare recruited from their own provinces\. KDP i s preparinga comprehensive informationpackage to explain the results from KDP, and a government stakeholder briefingstrategy that shouldprovide greater awarenessof how the project functions\. 6\. Loadcredit conditions and covenants A\. Effectiveness Condition The Borrower shall adopt andapply aProjectManual acceptableto the AssociatiodBank\. B\. Other 1\. The Borrower shall maintainthe PMD Secretariat untilthe completion o fthe project with terms of reference, facilities, staff, and a ProjectManager at all times acceptable to the AssociatiodBank\. 2\. Audits shall be carried out inaccordancewith BPKP's audit manual and inaccordance withTOR agreedwith the AssociatiodBank\. 3\. By October 31ineachyear, informeachKabupatenparticipating the project that all auditing activities for sub projects are to be carried out exclusively by auditors appointed by PMD in accordance with the manual and terms of reference acceptable to the Associatiofiank\. 4\. A PJOK will be appointed by no later than November 30 ineachyear precedingthe project fiscal year\. 5\. The Borrower will cause eachKabupatenparticipatingnthe project to appoint a Kabupaten Coordination Team by no later than December 31st of eachyear precedingthe project fiscal year\. 6\. The Borrower shall select a banking institution acceptableto the Association to provide payroll services\. 7\. The Borrower shall select project kecamatans from among the borrower's 35% poorest kecamatansbasedon Susenas and PODES data\. 8\. EachBappeda will annually select project kecamatans from the PMD master list\. 9\. Eachprovincial Bappeda shall fumishthe annual consolidated list ofproposedkecamatansto the PMD Secretariat and to the Association by no later than November 30 for each year for the followingFiscal Year\. 10\. The annual approved consolidated list o f participatingkecamatans shall be made available to the public free of charge as o fDecember 31ineachyear\. 11\. The Borrower through the relevant bupatis andcamats shall issue by October 31ineach year, public information disclosingto villagers and their representatives all administrative, financial, social, procedural, technical, and environmental aspectsof the project\. 12\. The Project Manual shall be available free of charge at the kecamatanoffice\. 13\. The Borrower will provide KecamatanPlanning Grants inaccordancewith conditions agreed withthe AssociatiodBank\. 14\. The Borrower will provide KecamatanBlock Grants inaccordance with conditions agreedwith the Associatiofiank 15\. The Borrower shall ensure that prior to carrying out sub-project works, the Kabupaten engineer will have completed a technical review o f each subproject to ensure that all financial and technical specifications have been complied with\. 15  16\. The Borrower will ensure that eachinfrastructure subproject shallreceive a completion certificate from the kabupaten engineer\. 17\. The Borrower will ensure that UPKswill recover amounts disbursedunder the grant in accordance with community procedures inthe even of a finding of unsatisfactory performance except for cases o f force majeure\. 18\. The Borrower will minimize the acquisition of land or assets and, where unavoidable, will implement the project's LandAcquisition and Resettlement Guidelines\. 19\. The Borrower will avoid or minimize cultural, social, and economic effects on Isolated Vulnerable People, andit will involve themthrough a process of informedparticipationto ensure that project benefits reach them inculturally appropriate ways\. 20\. The Borrower shall ensure that information on complaints receivedby the PMD Secretariat and their resolutionispublishedannuallyina localandnationalnewspaper\. 21\. Studies under Part Ewill be carriedout following terms of reference acceptable to the AssociatiodBank\. 22\. The Borrower will ensure that at least one independent nongovernmental organizations employed to monitor project activities ineachprovince where the project is implemented\. 23\. Project monitoringwill monitor project indicators\. 24, PMD will provide an Annual Report on the implementation and achievements o f the kecamatan grants, including findings from the monitoring and evaluation studies\. These reports will be reviewedwith the AssociatiodBank and madepublically available\. D\. APPRAISAL SUMMARY 1\. Economicand financial analyses Economic Internal Rate of Return (EIB)\. An economic analysis o f 41 KDP subprojects carried out duringthe first KDP found a weighted averageEIRRo f 60\.1%\. KDPrecently updatedthe figures in 2004 by carrying out an economic evaluation of 113projects\. The table below shows the EIRRs for each type of infrastructure averaged over four provinces\. The weighted average EIRR for all 113projects i s 51\.4%\. Type ofInfrastructure No\. Projects Average EIRR Water Supply 41 38\.62% Roads/Bridges 55 5 1\.84% Irrigation 17 67\.64% Total Projects 113 51\.36% There were also eight projectsthat producedEIRRs of over 100% due to extra-ordinarily large benefits\. These projects were not included inthe calculation of averages shown above due to the risko f major distortions\. Inmost cases, these very largebenefitsresulted fromeither entirely new economic activities that were madepossible by KDP infrastructure, or suppressedlatent production capacity that was finally able to be channelled to local markets\. The most frequently seen examples were roads that provided access to previously isolated villages where before the road, all produce had to be hand-carriedor carried insmall amounts on motorcycles, for kilometers before reaching the nearestmarket\. KDP-built infrastructure improved access to markets, town centers, education and healthfacilities, and cleanwater supply\. They also increasedexponentiallybusiness opportunities and employment for poor villagers\. 16  Cost-Effectiveness\. Village infrastructure built throughKDP methods cost significantly less -on average 56% less -than equivalentworks builtthroughMinistryof Public Works or local government contracts\. A cost-comparison that usedlocal government andprivate engineers to re-cost builtKDP infrastructure showed significant savings due to the elimination of some of the following costs: middlemenand outside contractors' overhead costs; double and triple handling o f materials; frequent on-site design modifications; and extra charges for supervising projects inremote areas\. These cost comparisons do not yet include voluntary community contributions to KDP valued generally at 17%o f total project costs\. Ifthese figures alone are extrapolated to the total number of infrastructure projectsconstructedbyKDP1 and KDP2, even with considerable discountingto allow for problem projects, the total impacts interms of additional economic value and cost savings would be quite significant\. Below i s a summary table showing the results of the cost comparison: Infrastructure Projects KDP Cost Only Cost, Local Av\. Difference % Types No\. (No community Government/ contributioncosts Contractor Price (Rps) I Roads/ 6,704,995,650 66\.04 ~~ I*II Bridges 55 6\.547\.034\.660 10\.349\.768\.540 58\.70 I I l l l l j o \. L I " I 1 I I , I I I 42\. l L Total Projects 113 12,317,413,483 19,324,136,535 Avge\. 55\.82 Fiscal assessment\. Because the project provides grants to kecamatan, no costs arerecovered by the project\. The fiscal impact from the project i s small\. Communities are responsible for maintainingworks builtbythe project andthusposeno incremental burdenonthe government budget\.At the nationallevel, a BanWIDA blend at internationalinterest rates and with 5 and 10year grace periodspostpones the fiscal costs of the project and avoids raisingmore expensive (and unavailable) local revenues\. 2\. Technical KDP's engineering manuals and trainingprogramwere updated in2002\. KDP also includes abroad-based technicaltraining program\. More than 2,000 field engineers were trainedinlow technology engineering design duringthe first year of implementation\. Follow-on training has helpedthe engineers work with village technical teams to produce overall village infrastructuretechnical assessments, which inform the KDP project selection process\.InKDP3, village technical training will continue, with an increased emphasis on village-wide operations and maintenance\. KDP also includes some engineering thresholds to ensure that villager's reach does not exceed their grasp\. Concrete bridges supported byKDP, for example, cannot exceed 6 meters\. 3\. Fiduciary KDP has a strong anti-corruption planthat was reviewed by the Bank\. See Annex 11on KDP's Anti- corruptionPlan\. 17  4\. Social KDP's primary objectives are to support social development\. Three topics are o f special concern and, while they are addressedelsewhere inthis PAD at a generic level, they deserve special mentioninthis section\. These are social issuesrelatedto inclusion, transparency/anti-corruption,and the strategy for local institutionalreform\. Inclusion of women and the poor have beenproblematic issues for development projects inIndonesia, including KDP\. The overall participation of women inIndonesian governance has generally dropped as decentralization progressesand traditional social institutions are revived\.Nevertheless, KDP's gender action programhas made goodprogress insome areas, and operational analysis is also doing a goodjob identifyingnewmethods for increasingthe involvement o fwomen\. The introduction of a separate planning stream for women has beenparticularly effective, as have project decision makingrules that require the physicalpresence of women indecision meetings\. KDP2 included a competition for all KDP facilitator groups to advance their best proposals for increasing the involvement o f women\. Results from the competition will be brought into KDP3 operational manual and training programs\. Go1plans to produce a gender action matrix before the launch of the new project\. Poverty targeting\. KDP uses a fairly sophisticated method o f general poverty targeting\. Itbeginswith the development of a master poverty list usingthe national expenditure survey and an infrastructuregap assessment survey assembledby Bappenas\. Provinces then select eligible districts from this list, and the districts thenpropose eligible subdistricts\. The final lists are then re-verified by Bappenas\. While there are problems with boththe quality o f survey data and some local manipulationo f eligibility criteria, by and large this method appearsto bereasonably effective at identifying poor regions\. Thus, for example, villages innon-KDP rural subdistricts are on average 51kms away from their district capital, while villages inKDP's secondyear of operationwere on average 70 kms\. away; distance i s insome sense a proxy for poverty\. Similarly, summarizingan 8-year series of poverty measurements that control for time of measurement, poverty rates innonKDP villages were 22% while KDP villages show an average poverty rate of 30%\. This overall successhowever, diminishes significantly when one examines poverty targeting within subdistricts and villages\. BecauseKDP's decision-makingprocess i s based on public review o f proposals, wealthier and therefore more educatedgroups are more able to succeedinthe competition\. Other variables that can act against the poor within subdistricts and villages include distance, language differences, and deep-seatedhierarchies that make the poor unwillingto speak up inpublic meetings\. Better facilitation can breakthrough some of these barriers, butthe ability o f localelites to control the KDP processremains a major challenge to the program\. Corruption\. Nobody disputes that greatly improved transparency is essential for tackling Indonesia's deep-seatedcorruptionproblem\. Surveys carried out under KDPl show that satisfactionwith the programi s highly correlated with the extent to which people feel they knew about andparticipated inthe planning and management of the project, significantly more so than whether the project succeededor failed\. Simply promoting transparency is a key KDP objective\. But promoting transparency itselfhas runinto three major obstacles\.The first isrelatively expectable; officialresistance to disclosure, particularly of financial information\. InKDPl,resistance was so ingrained that some local governments actually passedregulations banning the public postingof financial information\. KDP2 adopted a project transparency policy andMoHahas actively promotedinformation disclosure through activities such as releasing audit findings inannual reports, support for press monitoring o f subprojects, etc\. Nevertheless, resistance to transparency runs deep\. 18  The secondobstacle is that projects lacka good toolkit for information dissemination\. Most Bank experience with information disclosure has come through the EA process, but a draft EASESreview of disclosure effectiveness inenvironmental assessments found little evidence that target audienceseither understood or could use the information beingdisclosed\. KDP has also suffered from good intentionsnot beingmatched by operational effectiveness: informationboards usually have too muchinformationoftoo little interest, dissemination meetings drone on about project achievementsrather than providing an active forum for dialogue, and so on\. KDP2 commissioned a series o f studies to assess what communications media reach different target audiences, but teaching people how to use informationwill be a problem that extends beyond the scope of any one project\. The thirdandperhaps knottiestproblemis that Indonesia'sjudicial systemis unwilling andis not set up to receive and act on complaints against govemment officials\. One problem i s that the court officers themselves-- judges, prosecutors, police etc\., are notoriously weak and subject to pressure\.Butthe structural impedimentsare equally culpable for Indonesia's continuedfailure to provide institutional ways for communitiesto act on information\. Access barriers are high\.Procedures for filing complaints are extremely time-consuming and lackclear guidelines for follow-up, while there i s no regulatory protocol or agency that protects plaintiffs from physical intimidation\. Without an effective institutional foundation bywhichvillagers can use information, greater transparency will allow social controls oncorruptionto work more effectively but it still does not lead to a normalized environment where informal controls collaborate with a rule-based systemo f public action\. Working with local institutions\. The researchseries started with the Local InstitutionsESW, continues to raise important questions about how development projects can work effectively with community and local government institutions\. Indonesia's ongoing decentralization programand the accompanying revival o f 'ladat'' (customary) institutions and practices add a new level of complexity to the question\. While ingeneral all studies show that people prefer their "own" organizations to development groups newly formedby government agencies, notall traditional organizations are equally well received\. An illustrative experience comes fiom the parallel Community Empowerment Project inEast Timor, which was also a national program\. Two types of community based councils were established, one through a democratic electoral process established through a UNregulation endorsedby the Timorese "shadow" groups, and another that ratified the traditional "councils of elders" which, though acknowledged to be deeply hierarchical, were believedto be more representative o f local culture\. Three years into Timorese independence,the local councils flourish while the councils o f elders have all but meltedaway as functioning governance bodies inmost parts of the country\. "Adat" institutions inmany parts o f Indonesia already face resistance from community memberswho see them as espousing sectarian rather than village-wide interests; for example, women who defy adat role-casting, or, as inNusa Tengara Timor province, poor people who do not accept the proposedrestrictions on socialmobility\. The dynamic of local institutionalreformcannot be described inromantic oppositions\. Forbothtraditional and modern institutions o f governance inruralIndonesia, lack o f alternative channels of access andredress continue to be central challenges\. KDP2 to some extent addresses this problem through its programs to promote legislative monitoringo f project implementation, and through the pilot programs to support barefoot lawyers, bothof which will be broadenedunder KDP3\. But developing a full fledged systemof multiplechecks andbalancesbetween differentbranches o fgovernment andthe smooth flow of information between differentlevels o f political and civil society i s a long-termreform project for Indonesia\. 19  5\. Environment No significant environmentalissues are anticipated\. KDP investments are very small, and under the IndonesiaEnvironmentalAssessment rules, they all fall below the minimumsize requiredfor a formal environmental assessment\. KDP'snegative list consists primarily o f activities excludedby Bank environmentalpolicies, and these have been uniformly respected inthe completed subprojects\. KDP site selection also inprinciple rules out villages within demarcated protected areas (inpractice bad data and fuzzy boundaries often leads to mistakes)\. KDP3's negative list has been expanded to encompass lessons from experience and fkom other community development operations\. KDP's operational manuals have beenreviewedby a range o f environmentaland environmental engineering specialists andthey meet all WB standards\. However, experience under KDP1showed two kmds o f environmentalriskthat can affect community projects\. First,communities livinginor near protectedhabitats will use naturalresources from these areas regardless o f formal regulations unless suitable sanctions are imposed\. Thus, some communities inSouth Sulawesi mined coral for their roadbeds\. Inother areas, communities have builtroads that verge into protected forests\. The second environmentalrisk i s poor placement o f water supply sources, which can lead to contaminated water supplies\. The number o f cases where this has occurred i s small, but review o f their cases shows that they happen when there are systemic failures inthe project's system o f engineering oversight, reporting, and follow-up\. Inbothtypesofenvironmental malfeasance, theproposedmitigationandpreventionmethodsareproper training and monitoring o fthe supervising field engineers\. Inthe casesnoted above, the supervising engineers were either disciplined or dismissed\. PMD, the project's executing agency, has recently activated a grant to hire an international environmental specialist to improve the environmental training and oversight program\. Environmental review will assess whether additional sanctions are recommended for village projects that violate the guidelines\. Bank appraisal will assess whether the upgraded KDP2 engineering training and management program sufficiently reflects lessons leamed about environmental management\. 6\. Safeguardpolicies KDP2has a project landacquisition andresettlement policy embedded inits operational manuals that has beenreviewedby EASES and LEGEA\.Fieldreviews report generally good implementationo f the policy\. KDP does not involve state powers of eminent domain at any stage, and landtransactions can only take place on a willing-buyedwilling seller basis\. Land acquisition assessments are part o f the proposal review process and must be approved by the district level oversight engineer\. Land and resettlement are also recorded inthe project's master database and reviewed during field supervision\. No significant adverse impacts from land acquisition or involuntary resettlement have ever beenreported from a KDP subproject\. However, there are occasional cases where: (i) engineers do not follow the safeguardreview rules; or (ii) villagers have felt pressured to contribute land without receiving "fair" compensation inretum\. KDP's training and oversight manuals have been revised to address the first problem\. For the second, review of several such cases duringsupervision missions found no loss o f income, living standards or livelihood\. Safeguard supervision has been increased duringKDP2\. Papuapresents a special challenge to the OP's directive to provide culturally compatible development benefits\. Again, while no adverse impacts from KDP have ever beenreported from Papua, benefits have not been where they should be, despite the program's general popularity inthe villages\. KDPl tried to address the problems of Papua by working with PapuanNGOs and local governments to make a special 20  operational manual appropriate to Papua's conditions, and by out-sourcing facilitation o f one very isolated kecamatanto a church-based NGO\. Both actions ledto some improvementbutresults remained suboptimal\. One mainconstraint onKDP success inPapuahas beenthe lack ofqualified fieldpersonnel\. Past government strategies ofbringinginmore qualified specialists from elsewhere inIndonesiahave also become increasingly problematic giventhe political instability and risingnationalismo f the province\. To address this, KDP2 developed a uniqueprogram to recruit and train brightyoung Papuanvillagers ina special training program designedjointly with PapuanNGOs and the provincial university\. Each subdistrict participatinginKDP can nominate three of its brightest highschool graduates for a ninemonth training course inthe university,which will be followed by one year of mentoringby the trainers intheir field stations\. Graduates of the programwill be certifiedcivil engineers\. The first year ofthe programhas seen230 participants, three times as many as were anticipatedduring the appraisal of KDP2 (thisi s becausethe decentralization laws gave Papuan local governments a windfall, and many of them have already taken upKDP2 matching grant option)\. Initial assessmentsare verypositive\. KDP3 will assess the sustainability ofthe model, which at present i s too expensive\. Options includeprivate sector and local government co-financing, or concentrating on structured follow-through for the recent graduates\. Safeguard Policies Tripgered by the Project Yes N o EnvironmentalAssessment (OP/BP/GP 4\.01) [XI 11 Natural Habitats (OPBP 4\.04) [XI [ I PestManagement (OP 4\.09) [XI [I Cultural Property (OPN 11\.03, being revised as OP 4\.11) [I [XI Involuntary Resettlement (OPBP 4\.12) [XI [I Indigenous Peoples (OD 4\.20, beingrevised as OP 4\.10) [XI [ I Forests (OP/BP 4\.36) [XI [I Safety of Dams (OP/BP 4\.37) [I [XI Projects inDisputed Areas (OP/BP/GP 7\.60)* [I [XI Projects on InternationalWaterways (OP/BP/GP 7\.50) [I [XI 7\. Policy Exceptions and Readiness N o policy exceptions are requested\. As the thirdphase of an ongoing project already covering more than 28,000 villages, readiness i s not an issue\. * By supporting theproposedproject, the Bank does not intend toprejudice thefinal determination of theparties' claims on the disputed areas 21  22  Annex 1: Country and Sector or Program Background INDONESIA: Kecamatan Development Project 3B The Experience of The Kecamatan Development Project to Date 1\. Introduction The Kecamatan Development Project, supported by the World Bank, i s the largest community development/poverty reductionproject inIndonesia\. Startedjust before the East Asian crisis, KDP has proven to be an efficient mechanism to provide productive resourcesto large numbers o frural poor and improve local governance as part of Indonesia's decentralization program\. KDP strengthens the ability of communities across Indonesia to plan and managelocal development\. This Annex summarizes the project's main achievements as of the endof 2004\. KDP2 currentlyreaches 1,297 kecamatan, distributedover 29 of Indonesia's 32 provinces\. The project reaches over 22,300 of the poorest villages inIndonesia, thereby covering about 30 percent of the entire number ofvillages inthe country\. Notes :a/ Indonesia totalfigures are crtedfrom BPS b/ Todate, KDP has actually coveredsome 28,000 villages rn total, 40% of the villages in the country (Several kecamatan were covered in KDPI but did not continue into KDP2\.) The core ofKDP consistsof a participatory sub-village and village planningprocess leadingto a competitive selection ofprojects at the kecamatanlevel by community representatives\. Unearmarked block grants disburse directly from B K P K Nto village accounts heldingovernment banks\. Annual funds per kecamatanrange from Rps 500 millionto 1\.O billionrupiah (USD55,000 to USD 110,000) per kecamatan, depending upontheir population\. Communities can use these funds for an open menuof infrastructure, economic and social activities\. Duringproject implementation, villagers holdgroup meetings to report upon activity and financial progress\. The KDP designhas proven to be very robust despite Indonesia's difficult transition over the past six years\. Benefits include: 0 Buildinglarge amounts oflow-cost, productiveinfrastructure inpoor to verypoor villages 0 Ability to attract grant and concessional financing 0 Significant buy-infrom local governments 0 Sustainedlevels o fhighdisbursement, even inareas affected by conflict 0 Highratesof participationamongwomen andthepoor 0 Low levels of corruption and strong financial oversight measures 23  2\. OutputsandResultsfrom KDP to date BuildingLarge Amounts of Low Cost, QualityInfrastructure CostEffectiveness and High Returns\. KDPproduces large amounts o f low-cost productive infrastructure\. The program's open menu allows communities to select the investments most suitable for locally identifiedneeds\. Competitive selection at the subdistrict level promotes investment inhigh-retum activities\. A recently completedeconomic evaluation o f KDP infrastructure revealedweighted internal rates o f returnranging from 39% to 68%\. Inmost casesthese very large benefitsresultedfrom either entirely new economic activities that were made possible by KDP infrastructure, or suppressedlatent productioncapacity that was finally able to be channelled to local markets\. The most frequently seen examples were roads that provided access to previously isolated villages where, before the road, all produce had to be hand carried or carriedinsmall amounts on motor cycles, for kilometers before reachingthe nearest market\. Secondly, village infrastructure built through KDP methods cost significantly less - on average 56% less -thanequivalentworksbuiltthroughMinistryofPublicWorksorlocalgovernmentcontracts\. Acost- comparison that used local government and private engineers to re-cost builtKDP infrastructure showed significant savings due to the elimination o f some o fthe following costs: middlemen and outside contractors' overhead costs; double and triple handling o f materials; frequent on-site design modifications; and extra charges for supervising projects inremote areas\. These cost comparisons do not yet include voluntary community contributionsvalued generally at 17%o f total project costs\. Ifthese figures alone are extrapolatedto the totalnumberofinfrastructure projectsconstructedbyKDPI and KDP 2, even with considerable discounting to allow for problemprojects, the total impacts interms o f additionaleconomic value and cost savings would be quite significant\. (See relevant tables in Financial Analysis section) High Quality Infrastructure\. The independent infrastructure review found that out of the 108 infrastructure projects evaluated, villagers felt that 95% of the KDP projects had significant impacts in their daily quality o f life\. Evaluators also concluded that 94% o f the projects were found to be o f very good or good technical quality\. Bank supervision missions have found similar results inthe field\. A large-scale evaluation o f KDP2's infrastructure, built under the most recent project cycle in2003-2004,i s currently underway with results due out inMarch 2005\. The following table summarizes some o f the major infrastructure, economic and social outputs under KDP since 1998\. All these investments have increasedaccess to services for poor communities and expanded business opportunities and employment\. 24  SubprojectType KDPPhase 1 KDP Phase2, Yr 1 Totals to Date Years 1to 3 (2003 -Aug 2004) /a (1998 - Aug 2004) (1998-2002) I 19,oookms 7,623 kms 26,623 kmsbuilt or upgraded Bridges I 3,500 bridges II779 bridges 4,279 bridges built or reconstructed Clean water supply I 2,800 units I 1,310units III14,110 cleanwater supplyunits built Sanitation 1,300 units 370 units 1,670 sanitationunits built Irrigation 5,200 irrig systems 942 irrig systems 6,142 irrigation systems built Markets 400 new Dublic mkts 141new markets 541mblic markets built 16 rehabiitated 26 rehabilitated 42 Arkets rehabilitated Electrification 260 activities 47 activities 307 rural electrification activities Workdays generated 25 million workdays 12 million workdays 37 million workdays generated from infrastructure 1 from infrastructure projects nrniectn I Loan activities 18,000 economic loan 9,056 loan activities 27,056 loan activities activities Loanrecipients 280,000 loan recipients 323,208 loanrecipients Health 140healthposts 663 healthposts 803 healthposts supported Education II285 new schools built II290 new schools built II 575 new schools built 190 school rehab 403 schools rehab 593 schools rehabilitated 380 individual 38,485 individual 38,865 individual scholarships scholarships scholarships distributed 85 school grants 496 school grants I 581school grants to provide equipment and materials Notes: /a - These are interimfigures up to August 2004\. Figures will be updated when the currentproject cycle is completed\. 3\. KDP's FinancialStructureandPerformance Ability to Attract Grant andConcessionalFinancing KDP i s supported through a mix of World Bank and IDA loans, grants, and counterpart APBN/APBD funds\. KDP's financial structure i s very attractive to the Government of Indonesia\. Because it i s poverty targeted, the project receives large amounts o f IDA, nearly 50% o f Indonesia's IDA allocation during KDP2\. Theprojectrequires very little counterpart financing from the national treasury\. This is because community contributions, which are pro-ratedat 17%, register as part of Indonesia's counterpart share\. Real counterpart funds total less'than 10%of the project\. KDP also involves very little international technical assistance, lessthan 0\.3% o fthe total\. 25  Project Phase External Sources GovernmentContribution Total KDP1 225\.0 50\.0 275\.0 KDP Supplemental I/ 48\.5 6\.5 55\.0 KDP2 320\.2 101\.3 421\.5 KDP3a 91\.0 5\.0 96\.0 Total 684\.7 162\.8 847\.0 IDA DutchGrants JapanGrants Total Concessional Financing KDP1 2\.1 2\.1 KDP1 Supplemental 48\.5 48\.5 KDP2 111\.3 42\.0 1\.9 155\.2 ~~ ~ ~ KDP3a 48\.5 6\.9 55\.4 Total 208\.3 48\.9 4\.0 261\.2 Under KDP3, it i s expected that numerous donors will use the KDP mechanism for post-Tsunami rehabilitation work in Aceh province\. KDP has been working in Aceh since 1998, more or less continuously despite the civil war\. Due to KDP's long-term field presence in Aceh, KDP provides an attractive, proven, andready mechanismfor channeling external emergency rehabilitationassistance\. HighDisbursementRates KDP disburses very quickly\. While other internationally fundedprojects were being restructured to eliminate non-disbursing components, KDP scaled-up and increased its disbursement rates\. The figure below describes KDP's disbursement performance\. FigureAl\.1\. ProjectDisbursementbyRatio(FY00-FY04) I FYOO FYOl FY02 1 , FY03 /FY04(upto may04) 223% 28 6% 293% 1 39\.0% 1 77% 193% 24 8% 143% I 240% 1 26\.7% 328% 1 522% 1 66\.6% 664% 07% 5 0% ,, 37\.9% 26  4\. SignificantBuy-infrom Local Governments Although KDPbegan as a central government project, it responded to Indonesia's ongoing decentralization\. KDP2 launched a matching grant program that allowed districts to add subdistricts to their standard allocation provided that they paid for the grant, which makes up 80% o f the costs\. This program allowed more subdistricts to be covered under KDP\. The matching grant program was intended to make KDP become less reliant upon extemal sources and to integrate more fully into the Indonesian govemment's budgetary and development expenditure system\. Over 40% o f the 192 districts joined, pledging some $27 million inmatching grant funds over three years\. Ofthese, Aceh and Papua hadthe highest number o f matching grant subdistricts\. They added 25 and 24 subdistricts respectively\. KDP3 takes this one step further\. Under KDP3, all districts have to provide funds\. Their level of contribution i s normalized to reflect local poverty rates; itranges fkom 20% to 70%\. Ninety-five percent o f the districts eligible tojoin have already confirmedtheir participation\. Year Total KDP Total # Districts Total Additional # Total District Districts wl Matching Subdistricts Contributions Grants (US$ million) 2003 192 79 149 8\.9 2004 224 79 147 8\.9 5\. Participationof Women andthe Poor HighRates of ParticipationamongWomen andthe Poor Under KDP2,22,329 villages joined an annual cycle that includedplanning meetings at the hamlet, village and inter-village levels\. Participation figures for KDP2 activities indicate a range o f 30 to 46 percent for women's participation under KDP2\. Group and hamlet level meetings reflect the highest level ofwomen's participation at 46 percent\. Ofparticularnote is that there i s now a higher percentage of women participating indecision-making meetings\. The Project also tracks the percentage o f "poorer" community members participatinginactivities\. They are identified through participatory wealth ranking exercises at the beginning o f the cycle\. These figures show a consistent trend o f more participation by the poor\. Preliminary figures under KDP2 indicate an average 8 percent increase of poorer members participating inactivities, averaging 61 percent of total participants, as compared to 53 percent participation under KDP1\. 27  Figure A1\.2: ParticipationRatesfor Women andPoor during KDP2 Cycle 80% 70% 60% 50% 40% 30% 0% CycleActivities +% Women's Participation +% Poorer Members' Participation 1 6\. Corruption, Complaints,andAudits KDP takes extra-ordinary measuresto reduce corruption and ensure solid financial management\. Each year, BPKP audits KDP activities on a 4% sample\. In2003, BPKP visitedKDP sites in20 provinces, 59 districts, 177 kecamatan and 531 villages\. Out of the 59 districts visited, 30% o f the districts didnot have any major findings\. The rest of the findings includedviolations of KDP principles and procedures (102 cases) and misallocation of funds amountingto Rps 13\.8 million (USD 1,536)\. Additional audits by Price Waterhouse and Moore Rowlands commissioned by the World Bank also reportedno significant qualifications\. Intotal, audits show corruption and other forms of leakage totaling lessthan 2% o fproject costs\. Second, KDP also maintains an internal, seven-personunit for financial supervision and training\. The unitconducts financial reviewsandprovideson-the-job training for kecamatanfinancialmanagement units(UPKs), village implementationteams (TPK) and loan groups\. This unithasprovenhighlyeffective inuncoveringfinancial anomalies\. UnderKDP2, between the periodofOctober 2002 through June2004, the Unit conducted financial audits and training in21provinces, 82 districts, 228 kecamatan (18% of total KDPkecamatan) and 341villages\. They uncovered670 problem casesincludingpoor administration and management o f funds andbook-keeping, misuse o f funds, andviolations o f KDP procedures or principles\. The Unitdiscovered 124 cases o f fundmisuse amountingto Rps 1\.2 billion (USD 135,800)\. The KDPFinancialSupervision andTraining Unit andBPKP, intotal audit some 400 kecamatan or 30 percent o f all KDP kecamatan\. 28  Third, the Project contracts 28 provincial NGOsto conduct independentmonitoring\. The NGOsmonitor KDP implementation randomly inthe province, write reports and presenttheir findings to local and national officials and KDP consultants\. Among the most commonpositive findings they've encountered inthe field are: (i) is different becauseofitstransparency andthe ability ofvillagers to know and KDP decide upon what projects will be implementedintheir village; (ii) compared to other projects, the level of participationo f community members, especially women, i s impressive; and (iii) consultants are allowed to innovate to accommodate local conditions\. However, the NGO monitors have also uncovered and reportedupon numerous weaknesses: the quality of participation is uneven, especially among women and poor persons inseveral areas; information needs to bemade more transparent and the information on the boards should be updated\. For this last cycle, NGOs have uncovered a total of 8 cases of corruption\. Lastly, KDP maintains a complaints and grievance resolution mechanismthat allows anyone to sendin inquiries, grievances or reports o f wrongful doing\. FromJanuary 2003 to June 2004, the Complaints HandlingUnit (HCU) processeda total of 2,381 cases, with a 68 percent resolutionrate\. Total cases handledto date (1998 to June 2004) are 3,367 cases with an overall resolution rate of 80 percent\. Grievances or inquiriesprimarily originate from consultants' reports (83 percent o f reported cases), followed by other sources, audits, and community letters\. Types of Cases Total Resolved % of Total Cases Still YOof Total Cases I Cases In Process Cases in Resolved 1 Process Violations against KDP 861 682 79% 179 21% principles and procedures Funds Misuse 951 424 45% 527 55% Intervention 74 63 85% 11 15% Force Majeur 49 33 67% 16 33% Other 446 417 93% 29 7% Total 2,381 1,619 68% 762 32% The hardest cases to handle are cases of misuse of funds or corruption\. These form roughly40 percent of the total cases handled (951 cases) under KDP2\. Most of these cases (close to 90 percent) are below Rps 40 million (USD4,400)\. The resolution rate for corruption cases i s currently 45 percent\. This i s understandable since it takes time to investigate allegations and once corruption cases are verified, holding village meetings to addressthese problems, deciding upon solutions, and having funds repaid are all lengthy processes\. While informal dispute resolution i s encouraged, there are several instances where cases cannot be resolved informally by communities\. Since KDP began, 113 cases have gone to court, with only 12ofthe cases, or 10percent, reachingresolution\. 29  Annex 2: Major RelatedProjectsFinancedby the Bankand/or other Agencies INDONESIA: KecamatanDevelopmentProject3B Project Name Sector Issue Performance Comments Indonesia: Water supply O&M for water supply, H S KDP adopted WSSLIC and Sanitation for Low methodologies to reach the social mapping methods Income Communities very poor Indonesia: Urban Poverty Improving the quality of - \. S UPP helpedtrainKDP's Project facilitation II training team Cambodia SEILA A WB facilitated study government tour resulted inKDP's executing agency piloting a district development marketplace Afghanistan: Emergency Involving NGOs and S KDP3b will pilot these Community religious groups in approaches for Aceh Empowerment Project reconstruction reconstruction Indonesia: Basic Working with technical S KDP isjointly piloting a Education agencies to implement community based community projects educationprogram together with the Ministry o f Education's Basic Educationteam 30  Annex 3: ResultsFrameworkandMonitoring Indonesia: KecamatanDevelopmentProject3B PDO Outcome Indicators Use of OutcomeInformation Villagers in KDP3 locations benefit from ImprovedHHexpenditure rates and DeteAine ifKDP3 is having its desired improved socio-economic and local improved access to economic and social :ffects on socio-economic welfare and governance conditions services in >750 poor subdistricts or local governance\. over 12,000 villages\. [ndisaster areas, to determine if EIRRs>30% for major infrastructure issistance i s getting to populations in types need 80% satisfaction levels from beneficiaries regarding improved services and local level governance IntermediateResults Results Indicators for Each Use of Results Monitoring One per Component Component ComponentOne: KecamatanGrants Component One: Component One: Villagers participate ina process to plan, select and manage basic social and Min\.40%participationrate ofwomen Assess ifplanning and inclusion economic infrastructure provided and poorest community members in procedures and policiesneed adjustment through block grants\. planning anddecision-making meetings to encourage greater participation\. Assess if sub-district sites are benefiting Communities in devastated areas recover 85% o f agreed work plans completed\. from KDP assistance\. from the economic shocks causedby natural disasters\. 70% o f infrastructure works are Monitor and evaluate ifreconstruction evaluated as high quality aid is assisting those areas inneed and speeding area recovery 80% of the devastatedareas benefit from KDP technical and economic assistance\. Component Two: DevelopingLocal Component Two : ComponentTwo: GovernmentCapacitiesfor Successful Community Development 65% o f KDP villages forming Review if training and capacity building Local govemment councils use their new implementation regulations (perdus) plans need adjustment and if learning skills to fulfill their local governance interventions meet the needs o f the functions\. Local government adoption and level o f councils to perform satisfactorily their contributions to the program\. new duties\. Component Three: Micro-Finance ComponentThree: ComponentThree: Support Min\.200 UPKs retaining>Rps 100 Assess ifthe UPKs are performingwell Subdistrict micro-finance institutions million in financial reserves and ifadditional technical assistance is (UPKs) have the skills to carry out their needed\. credit activities successfully and sustainably\. Component Four: Implementation ComponentFour: ComponentFour: Support Local govemments and communities (This component i s for project Monitor and evaluate whether local use planning and facilitation skills for implementation support\. Therefore the governments and communities are participatory planningo f development indicators for results are related to the receiving the type o f support they need component indicators mentioned above) ina competent andtimely fashion\. ComponentFive: M&E,Studies Project stakeholders use results o f M&E >70% o f study and evaluation findings Findings from M&E and studies will activities and studies to improve project used to improve the project\. allow the project to adjust and improve performance\. its operations and procedures\. Studies on long-term maintenance and sustainable financing options completed Studies will help the program examine and findings used to improve the options for sustainability and integration program\. into government budgeting and financing system\. 31  6 E c 'n e, a e A s s 000 d 0 s s W m A A VI 00 0 t- N m s 0 00 g g m s m Y r  s $ a 0 rl 0 N m m 0  Annex 4: Detailed Project Description Indonesia: Kecamatan Development Project 3B KDP3's overall development objectives are to reduce poverty and improve local-level governance inrural Indonesia\. Its overall means for achieving these objectives are by providing investmentresources to support productive proposals developed through participatory community planning\. KDP3 also supports the development ofresponsive institutional structures that enable bottom-up planning and provide for development oversight at the local level\. Decision-making i s left to the communities themselves, transparently and responsibly\. All important decisions are made incommunity-wide meetings\. Monitoring o f activities i s undertaken by many actors, including the legislatures and NGOs, as well as independent teams selected by communities themselves\. Special dialogues will be conducted among all stakeholders inKDP3\. KDP3 will provide two years o f additional support to the approximately 2,000 kecamatan that have or will have successfully graduatedfrom KDP1or 2\. (A limitednumber o f additional kecamatans canbe added duringannual programming reviews)\. Activities that will be supported under KDP3 include: 0 buildingor repairingbasic productive infrastructure, such as small roads, irrigation infrastructure, clean water supply systems, etc; 0 buildingor repairing social infrastructure, such as school buildings,clinics, etc; 0 training for revolving funds management; 0 assistance for the development o f district and subdistrict capacities, specifically technical training inadministrative drafting; 0 carrying out a number o f carefully designedpilot programs to provide special assistance to disadvantaged or marginalizedgroups\. Component 1: KecamatanGrants\. The main activity inKDP3 willbe the constructiono f economic and social infrastructure that is desired and neededby the communities\. The selection o f activities i s open except for items specifically excludedthrough the project's negative list\. All assistance i s given as a grant to the village by the government\. Criteria for activities include: 0 Can be undertakenby the village, with locally available technical assistance 0 Technically and financially feasible A public need 0 Gives benefits to the community, especially the poor inthe village KDP funds canbe usedfor infrastructure such as roads or irrigation, for social services such as schools and clinics, or for training\. Unlike inKDP2, KDP3 will not support economic activities except for village-level revolving funds managedby women's groups, although the project will provide special training for the revolving fund management units (UPKs)\. N o new funds will be injected for micro- finance activities\. Fundsalso cannot be used for items on the project's negative list, or for land purchase o f any kind\. The kecamatans receive an allocation from the project, which is anticipated to be between 500 million to 1\.0 billionrupiah ($55,000 to $110,000) per year, depending on their population\. InKDP3, district governments mustprovide 30,60, or 80% o f this amount as a matching grant using their own budgetary resources\. The different amounts are based on a standard weighting formula based on poverty that i s issued by Bappenas\. 34  Java Off Java Size of Grant >50,000 >25,000 1\.O billionrupiah 25,000-50,000 15,000-25,000 750 millionrupiah <25,000 45,000 500 millionrupiah Women's savings and loan activities are limited to 10millionrupiah per village (ifthere are many villages, thenthere must be competition or eachvillage will receive somewhat less so that the maximum i s 10% of the total allocation)\. The standardallocation i s not competed for but it will also be limitedto 15 millionrupiah or 15% of the total grant to the kecamatan\. All other proposals are competed for\. Before the proposals are discussedat the SubdistrictDecision-MakingForum, they undergo a verification process done by a team of selectedcitizens with advice from the consultant\. The team i s selectedby the Subdistrict Manager and the Empowerment Facilitator, and their technical expertise is verified by the Management and Technical Facilitator\. Verification i s undertaken of eachproposal on the basis o f technical feasibility, financial feasibility, and other criteria\. The team does not determine rankings or priorities\. Ifthere were any proposals found to be unfeasible, these would be discussed with the communities at the time of the visit, so that the proposal could be modified or at least the community could understand the reason for rejection by the facilitators\. However; while facilitators can recommend rejection, the communitiesmust still make the decision themselves\. Subproject rules for procurement, financial management, technical oversight, andreporting to government and to the Bank are providedthrough the project's OperationalManual\. The Manual i s re- issued annually as part of eachyear`s overallperformance review and programming for the coming stage\. Thisprogramcomponent also includes a significant programto support reconstructioninAceh, North Sumatra, and other areas affected by natural disasters or which are recovering from conflict\. Under special conditions, KDP teams adopt a specially adaptedvariant on the standard OperationalManual\. Its mainfeatures are: 0 It allows for a rapidly disbursing "emergency" cycle andreplenishments basedon a threshold rather than on an annual planning cycle as happensinthe normal KDP; 0 Where warranted, a limitednumber o f private goods can be funded, particularly housing; and Itincludes extra facilitators andprovides them withmore flexibility to make decisions\. Component2: DevelopingLocalGovernment Capacities for Community Development\. KDP3 develops further the community capacities supported under KDP1and 2 by strengthening the capacities of the local government institutions createdthrough the decentralization program\. This will take place through two mechanisms\. First, KDP3 will promote the adoption of the implementing instructions (perdas)requiredby Law 22\. But once they are adopted, a great deal of training i s neededto familiarize officials and community members with their mode o f operation, rights, duties, and capacity for promoting village interests\. KDP3 will also provide a limitedamount of training to the technical staff o f district governments, including the district parliaments, who are concerned with village development\. Component3: Micro-FinanceSupport\. Sustaining the subdistrictandvillage revolving funds operations i s about the development o f local financial institutions\. The major problems experiencedby elegible micro-finance institutions developed under KDP1and KDP2 are inadequate organization, governance and management capacity rather than the lack o f finances\. Thisrequires giving focus to the organizational and financial development o f each institution\. The direct target group i s the micro-finance institutions developed under the project earlier\. The project would give communities the opportunity to 35  develop their micro-finance institutions into sustainable service providers\. UnderKDP3, the project will not provide additional investment funds for micro-financing\. Project support will be limitedto training, technical assistance and supervision\. The project will seek to linkup with micro-finance specialists inthe area including NGOsandprivate firms\. Component 4: ImplementationSupport\. This component supportstechnical assistanceto the national, provincial and district governments\. The bulkof this component covers the costs of experienced technical and social facilitators at eachgeographical level who provide technical advice, field oversight, and local-level coordination to the program\. Component 5: Studies,Evaluations and SpecialPrograms\. This component will fundseveral studies and evaluations to support the Government inexaminingthe impact of KDP on: poverty and socio- economic welfare; access to services; cost effectiveness and service quality; sustainability; and governance and empowerment issues (social capital, accountability, inclusiveness, access to information, conflict prevention and dispute resolution, corruption, etc\.)\. This component will strengthenthe capacity o f Bappenas, Ministryof Finance and PMD to carry out project monitoring and policy research\. Several special programs will also be supported including: local government management and linkages to district- level planning and service delivery; alternative disputeresolution; education andhealth service delivery; and information dissemination activities\. Component 6: OperationalCosts\. This component will fundthe costs ofincrementaltravel andper diemfor the NationalKDP Secretariat\. It also includesthe costs of annual workshops with local government officials to review KDP's performance with respect to the implementation of the local regulations on village autonomy\. This component will also support two cross-country tours for government policy-makers and selectedsenior KDPmanagement consultants to visit other innovative community development projects\. 36  Annex 5: ProjectCosts Indonesia: KecamatanDevelopmentProject3B 37  Annex 6: ImplementationArrangements Indonesia: KecamatanDevelopmentProject3B KDP is implementedthrougha tiered system of government policy and sectoral coordination groups that are buttressed at each level by technical consultants who provide field support\. The apex coordination team meets quarterly; all other levels meet on a monthly basis\. Government ConsultantslFacilitators National Level National Management National KDP Secretariat Consultants Regionall Provincial Levels District Level Sub-District Level Village Level 38  Annex 7: FinancialManagementandDisbursementArrangements Indonesia: KecamatanDevelopmentProject3B FinancialManagement 1\. Summaryof the FinancialManagementAssessment The projectwill satisfy the Bank's minimumfinancialmanagementrequirement as stipulated inOP/BP 10\.02 after completionof the agreed actionplan (Attachment 6\.1)\. The systemincludes checks and balances infunds withdrawals, accounting and reporting o f expenditures as well as periodic inspections in the field\. The systems are supplementedby communities' social controls and transparency\. Village's capacities to manage these systems vary, but for the most part the gaps can be minimized by hands-on training and technical assistance\. A more detailed financial control measuresadopted inthe community level i s shown inAttachment 7\.2\. Special Account: GO1will establish a Special Account (SA) at Bank Indonesia (BI) denominated inU S dollars, based on a 6 months cashprojection\. The SA will be under the name o f the Directorate General of Budget (DGB), Ministryof Finance\. The procedures to withdraw funds from the SA will follow government procedures usedfor other projects acceptable to the Bank\. The DGB shall forward the bank statements of the SA received from BIto the KDP project manager\.The project manager will prepare FMRas abasis for SAreplenishment requests\. 90-day Advance Account: UnderKDP2, the project manager establishesa 90-day advance payroll account ina competitively selectedcommercial bank to managethe payrollsystem for kecamatan facilitators, i\.e\. PT\. Bank BNI\. A deposit for an estimated of 3-months of salaries are made to the payroll account\. The bank automaticallyreleases funds to the consultants' accounts eachmonthinaccordance with a set of criteria agreedto up-front\. The bankprovides bank statementsand summary ofpayments made eachmonth which are usedas the basis for replenishingthe payrollaccount from Special Account at BI\. Any unutilized funds inthe payrollaccount will be refunded to the Special Account\. The use o f bank services to manage consultants' payrollwill be expanded inthe later years of KDP2 to cover all consultants, including FKs, K M s , R M s and NMC consultants\. Accordingly, such a mechanism will continue to be usedunder KDP3\. Report-Based Disbursements: The GO1confirms the application of FMR-Based Disbursement system\. The project supporting documents for consultant will beretains at PMUwhereas documentationfor sub- project and sub-loans will be retained at PJOK and UPK at kecamatan level\. All documentations will be made available to the Bank and auditor uponreques\. 2\. Audit Arrangements There i s no outstanding audit on the previous project KDP1 or KDP2\. A single FMRaudit report i s required\.TheKDPproject manager will prepare andproduce consolidated FMRswhich consist o f progress report, financial report and procurement report\. The financial report will cover the project financial statement, SA and SOE\. The auditor will also audit the attainment o f objectives accordingto the agreedperformance indicators\. The annual audit reports shall be furnishedto the Bank no later than six months after the end of the government fiscal year\. Immediately after issuance, all the audit reports will be made available to the general public\. 39  Prior to negotiations, PMD has issued a letter requestingauditor to audit the project inaccordancewith (i) ofReferencefortheauditofspecialpurposefinancialstatementasagreedunderKDP3,and(ii) Terms the audit manual for the community projects (PedomanPelalcsanaanAudit dun Pelaporanfor Program Pengembangan Kecamatan, issuedby BPKP inApril 13, 1999)\. PMD ensures that these will be the sole guidelines for project auditing\. PMD has agreedto inform annually the KDP's Kabupatens and Provinces that the audit of the subprojects i s to be carriedout exclusively by the auditors appointedby PMD\. 3\. DisbursementArrangements ExpenditureCategory 1 TotalBank 1 IDA 1 IBRD Percentageof (USDMillion) I (SDR (USD million) expenditureto be million) I financed 1 (a)\. Kecamatan Grants 94\.1 28\.9 49\.4 I 30%; 60%; 80% 11 (b)\. Kec\. Grants for planning 16\.5 5\.3 8\.3 100% o f Grant amount disbursed (c) Emergencyreconstruction grants 4\.0 2\.6 0\.0 100% (d) Emergencyreconstruction 1\.o 0\.65 0\.0 100% 2\. Facilitator, training, workshops for 24\.4 7\.9 12\.3 100% UPKandlocalautonomyregulatory 3\. Consultants services for: (a) UPKssupport 16\.0 5\.2 8\.0 100% (b)Project Implementationsupport, I 2\.4 0\.8 1\.2 100% 4\. Incrementaloperating costs 21 1\.2 0\.3 0\.5 80% Total ProjectCosts 159\.6 51\.65 79\.6 Front-end Fee (IBRD) 0\.4 0\.4 TOTAL PROJECTFINANCING 160\.0 51\.65 80\.0 I/ 30%of Grantamount disbursedfor Sub-projects in Kabupatens withabove averagefinancial capacity, 60%of Grant amount disbursedfor Sub-projects in Kabupatens with averagefinancial capacity, and 80% of Grant amount disbursedfor Sub-projects in Kabupatens with below averagefinancial capacity, as defined pursuant to Decree MOF-No\. 3YkMK\.072/2002\. 2/ Incremental operating costs means the reasonable and documented expenditures incurred by the PMD Secretariat for staff travel and consumablesfor purposes of implementing the Project and which expenditures would not have been incurred absent the Project\. 40  Attachment7\.1 Indonesia: KecamatanDevelopmentProject3B ActionPlanon FinancialManagement Due Date 0 Done Done Done Done 0 Ongoing Done 0 Done 0 before Loan Effectiveness Done Done 0 Done Done 0 Done 41  Attachment7\.2 Indonesia: KecamatanDevelopmentProject3B FinancialControlMeasuresinthe CommunityLevel The FinancialProcess KDPbegins with a fixed total amount that is assigned to a sub-district\. This amount is standard andis widely publicized so that all stakeholders know how muchtotal money i s available\. Within the sub- district or village, the money supports individual proposals that come from village assemblies\. The allocation o f funds to a particular village i s based on completed designs and budgets drawn up together by the village and the field engineer and approved by the local government's project manager\. Once determined, this amount o f funds i s never changed, although how it i s spent and the physical works undertaken can easily be amendedby the three parties\. Upon ratification o f the plans by the project manager and responsible party from the village, the village implementation team requests an initial withdrawal from the local brancho f the treasury at the district level\. They use a standard administrative format that simply withdraws a standard percentage o f the allocated funds\. It i s signed by the village representatives and by the project manager\. The size o f the withdrawal i s a standard percentage o f the budgeted total\. The treasury office requires a few simple thingsto accompany the first withdrawal: proofthat the project manager and village representative are indeedthe authorized parties, a copy o f the grant agreement with the village, and signature samples\. The funds are transferreddirectly into the account o fthe village implementationteam ina local brancho fa government or commercial bank\. Eventhough the funds are intheir own bank account, the village team cannot withdraw funds without countersigning by the consultant\. Boththe consultant and the responsible person fromthe village would have previously submitted their signature samples to the bank, along with proof that they were the authorized persons\. Inorder to obtain the approval o f the field engineer, the village implementation team has to produce an acceptable Funds UtilizationPlan -a detailed list o f anticipatedexpenditures for the immediate future\. The frequency o f withdrawals depends inpart on physical proximity to the bank from the village, but inprinciple the amount o f cash kept inthe village i s as small as practical\. On Java, access to the banks i s nearly always easy, althoughremote branches o f banks often required some advance notice to be sure to have sufficient funds on hand for a large withdrawal\. Off-Java, special contracts with commercial or state banks are signed to provide regular cash deliveries to outlying locations\. Every expenditure made by the village has to be accounted for in an ExpenseReport\. An adequate receipt i s one that has the signature o f the person receiving the funds, a clear descriptiono f what the expenditure was for, a clear amount and date\. All receipts o f materials and services inthe Expense Report require the attachment o f delivery orders,wherein a designated person notes the items and quantity received, countersigned by the person delivering them\. Withdrawals from the bank continue to be made untilthe first tranche's funds are nearly exhausted\. At this point the village requests additional funds fromthe treasury, usingthe same form countersigned by the project manager\. This shows boththe funds requested and cumulative status\. Inaddition to this request, the project manager requires two other items prior to submitting the request to the treasury\. The first was the summary of expenses found inthe Expense Report, and the second was a status report signed by the localbank saying how much funds remained deposited fromthe previous tranche\. 42  The full expense report includes a summary of expenses and receipts, including the amount o f cash on hand inthe village\. This sheet i s backed up with the proofof every expenditure and their associated delivery notes, all of which are glued to blank sheets o fpaper and bound\. One expense report book is prepared for each withdrawal from the treasury, but these books stay inthe village\. They can be examinedby the consultant, the project manager or his designate, any inspectors, and any person inthe village who had an interest\. Payment of incentive wages to villages i s accomplished through the use o ftwo standardpaymentforms\. These are usedfor any payment to a villager, whether working for at a daily rate or working on a piece rate based on accomplishment\. The form for pay basedon attendance lists the workers ina particular group (usually around 20 workers, men and women), their attendance, their accrued wages this period, and their signature (or thumb print ifthey were illiterate) confirming that they hadreceivedthe given amount o f money\. Most payment i s on a weekly or bi-weekly basis\. Payment based on accomplishment also shows the list of workers, the basis for calculatingthe volume accomplished, the division o f payments to each individual (decided amongst themselves), and their individual signatures\. All o fthese payments and rates are posted on publicly displayed signboards\. The Cash Book A keyto financial control is the requirement that the implementationteammaintainanaccurate cash book ina standard format, updated daily\. The key features o f the cashbook are that: The information i s maintainedina ledger so that corrections andadditions are apparent; Itcontains a detailed list o fall financial transactions, bothreceipts and expenses; Expenses are described at the same level of detail as the official receipts, with each expenditure entered into a column corresponding to the sub component o fthe project it corresponded to (including the village team's administrative expenses) All expenses are codedwith a simple expense category and listed withthe number written on the proof o f expense Two kinds o f incoming funds are recorded: from the treasury into the bank, and from the bank into the village treasurer's hands\. Balances were calculated usingthe latter\. Erasures, white-out, and obliterating marks are forbidden, so that corrections are visible\. Books are closed near the end o f each month and books are then signed by four persons: the village treasurer, the responsible party, the field engineer, the village chief inhiscapacity as controller, and two villagers as witnesses\. A runningbalance is maintained, with the proviso that the balance cannot be negative\. Inthis way, the books always show the actual status o f expenses and cash, without hidden expenses and loans to complicate the understanding o f an inspector\. Village-level meetings are held duringimplementation to review procurement and expenditures, and all information i s posted on public signboards (avg\. 10 per village)\. An accountability meeting i s held at project completion for the village implementation team and the facilitators to account for funds and to hand over the project to the village, representedby the council and the village head\. Inspecting Several government inspection agencies make formal inspections o f a given VIP or KDP village\. The district and provincial inspectionoffices typically made inspections duringimplementationto a small sample o f villages intheir area\. They are usually more concerned with administrative inspections, but they also review the physical works to some extent\. The National Development AuditingAgency BPKP 43  performs a larger scale inspection several months after the end o f the fiscal year, again on a sample o f villages\. Inthe field, representatives o f their regionalbranch offices inspect boththe administrative and physical aspects, as well as the visible benefits\. Their reports are sent bothto the project manager in Jakarta as well as to the WorldBank\. More frequent inspections are made by other project consultants\. Senior engineers are assigned to each district, and more than halftheir time (by contract and TOR) i s spent invisiting villages to check on the physical works and on the work o f the field engineers\. This includes checking the administration\. In cases where the works or administration are below standard, recommendations and instructions are left withthe implementationteam and field engineer\. An independentinspector visits villages at random without any accompanying consultants, and this serves as a crosscheck o f all the above\. Conclusions Although lackmg in sophistication, the financial control system inthe community projects for the most part i s effective inlimitingleakages and indetecting leakages that occurred\. The system includes checks and balances in hnds withdrawals, detailed bookkeepingand records o f expenses, and periodic inspections inthe field\. The formal systems are coupledwith the communities' social controls and fueled bytransparency\. Village's capacities to manage these systems vary, but for the mostpart the differences can be remediedthrough hands-on training and follow-up\. This i s not to say that malfeasance never occurs, but it i s usually relatively easy to detect, often reported when it does occur, and inenough cases actors have been subjected to administrative sanctions when it was detected to prevent any widespread contagion effects\. Weaknesses inthe system appear to revolve largely around implementation externalities rather than aspects o f the system itself\. For example, while the community projects' financial management systems can usually detect leakages, there i s a much less well developed system for imposing sanctions on people who steal\. Similarly, local government auditors have been accused o f falsifying reports or to ask villagers for money to not report supposed financial abuses\. 44  Annex 8: ProcurementArrangements Indonesia: KecamatanDevelopmentProject3B A\. General Procurement for the proposedproject will be carriedout inaccordancewith the World Bank's "Guidelines: Procurement Under IBRDLoans and IDA Credits" datedMay 2004; and "Guidelines: Selection and Employment o f Consultants byWorld Bank Borrowers'' dated May 2004, andthe provisions stipulated inthe Legal Agreement\. The various items under different expenditure categories are described ingeneral below\. For each contract to be financed by the Loadcredit, the different procurement methods or consultant selection methods, estimated costs, prior review requirements, and timeframe are agreedbetween the Borrower and the Bank inthe Procurement Plan\. The Procurement Planwill be updated at least annually or as requiredto reflect the actual project implementation needs and improvements ininstitutional capacity\. KDP 3B i s a follow on project to KDP 3 so virtually the all of the basic design i s the same\. The following will describe the general arrangementsofprocurement under KDP3B\. The details o fthe arrangementscan be found inthe text ofthe PAD ofKDP2 andKDP3\. Selection of Consultants\. Consistent with the arrangements inKDP3, Consultant services underKDP3B will consist of: (i)Individual Consultants to provide Implementation Support: National Management Consultants, DistrictConsultants and Kecamatan Facilitators; (ii) Consulting firms for Contract and Payroll Management SystemConsultants; and (iii) Consulting firms for surveys, impact monitoring, and special programs\. Consideringthat this i s a follow-on project and that selection o f entirelynew consultants would be disruptive as well as confusing inthe field, these consultants were plannedto be single sourcedthrough contract extensions to existing consultants which originally were selectedthrough a competitive processunder KDP2 and KDP3 subject to satisfactory performance\. Ifa new selection i s required, this will beprocessedunder a competitive process\. Some exceptions are for selection of consultants with unique qualifications, such as the National Statistics Bureau(BPS) and consultant services for Independent Journalists' Monitoringof the project, which were initially single-sourced under KDP2 and KDP3\. Operating Costs\. These consist of expenditures for training, workshops, and incremental operating costs\. Expenditures for training and workshops cover costs for travel, accommodations, meals and venue, which are be processedfollowing standard government procedures\. The incremental costs refer solely to the costs of travel andper diem for PMD Secretariat staff carrying out project supervision\. A semi-annual estimated travel schedule for these incrementalcosts i s prepared and submittedto the WB\. Tickets are purchased through normal government procedures\. Per diem allowance for travel follow standard government procedures\. All expenditures must be documented\. Kecamatan Block Grants\. These are block grants to community inwhich procurement will be usingthe community participation method\. Around 9598% o f these activities will be works for village infrastructures and a smaller part will be usedfor sub-districtskecamatan planning grants and revolving fund schemes\. Procurement underthe community participation scheme requires a price comparison from at least three suppliersfor transactions estimated to cost less than IDR 15 million (around USD 1,765 million equivalent)\. For transactions estimated to cost IDR 15 million (around USD 1,765 millionequivalent) or more, a "bidding" process has to be arranged by the community groups\. Theprocurement procedures and standard forms to beusedfor eachprocurementmethod as well as model contracts, are presented inthe Project Management Manual\. 45  B\. Assessment of the agency's capacityto implementprocurement Procurement activities will be carried out by the Directorate General o f Community Empowerment - PemberdayaanMasyarakat dan Desa (PMD), o fthe Ministryo fHome Affairs (MoHA)\. The agency is staffed by a Project Manager, assisted by Treasury and Financial Management Officers and the procurement function is staffed by a Procurement Specialist\. An assessment o fthe capacity o fthe ImplementingAgency to procure for the project has been carried out, which updates the KDP2 assessment and i s available onproject file\. The assessment reviewedthe organizational structure for implementing the project andthe interactionbetween the project's staff responsible for procurement and the Ministry's relevant central unit for administration and finance\. The key issues and risks concerning procurement for implementation o f the project have been identified and include legal issues, project cycle management, organization and functions, support and control systems, record keeping, staffing, and the general procurement environment\. The corrective measures are: Employ three additional procurementspecialists inPMD\. Enhanced disclosure of informationto further enable civil society oversight\. The procurementplanhas been updated and an updated procurement plan will be required for eachnew fiscal year before disbursements can be initiated\. A Project OperationsManual has been developed duringpreparation\. This manual contains a section on procurement which covers procurementprocedures, procurement methods, and reportingrequirements\. The manual was reviewed duringappraisal\. The project Loadcredit Agreement will specify that all changes to the manual must be approved by the Association\. Procurement supervisionwill be conducted every six months and the procurement plan will be monitored on a continuous basis\. To enhance procurement capacity o f the villages, procurementtraining will be conducted as part o f the capacity buildingfor project management in all participating villages\. All contracts for consulting assignments for firms will be priorreviewed\. All TOR for individual consultants will beprior reviewed\. Use o f competitively selected consultingfirms to coordinate invoicingandpayroll management\.These firms will not handle payments directly butwill prepare all evaluations and paperwork for PMDsignature and release o f funds\. The overall project risk for procurement i s "medium"\. C\. ProcurementPlan At appraisal, the Borrower developed a procurement planfor project implementation, whichprovides the basis for the procurement methods\. This plan has been agreed between the Borrower and the Bank on December 3 1,2004 and i s available inthe project file\. Itwill also be available inthe project's database and inthe Bank's extemal website\. The Procurement Planwill be updated inagreement with the Project Team annually or as required to reflect the actual project implementation needs and improvements in institutional capacity\. 46  D\. Frequencyof ProcurementSupervision Inadditionto the priorreview supervision to becarried out fromBank offices, the capacity assessment of the Implementing Agency has recommended bi-annual supervision missions to visit the field to carry out post review of procurement actions\. E\. Detailsof the ProcurementArrangements (a) The following table explains the selection of consultants arrangementsunder KDP3B - 1 2 4 6 7 No\. Description #Packages Procurement Amount Prior Remarks Method ($million) Review by Bank - 1 ~~National Management 140 IC 5\.15 Yes Approx\.$800- & Consultants (NMCs + lOOO/mo/person - RMUS) I 2 +DistrictExperts) Consultants (KMs 400 IC 9\.82 UPK $80O/mo/ erson 3 Kecamatan Facilitators 2000 I C 16\.59 (FK) 4 Management of NMC + 1 ss 0\.98 Yes - RMUPayroll II Contract Extensions * 5 Management of KMs 4 ss 2\.04 Yes Contract Extensions* payroll NGO Provincial 31 ss 0\.65 Yes Contract Extensions* Monitoring District Profiles/Database 1 ss 0\.09 Yes Contract Extensions* to support Poverty alleviation program Journalists Monitoring ss 0\.19 Yes Contract Extensions* Impact MonitoringPoverty ss 0\.59 Yes Contract Extensions* Alleviation Planning Secretariat Indigenouspeoples ss 0\.26 Yes Contract Extensions* program Local RegulationBest 1 ss 0\.12 Yes Contract Extensions* Practice TOTAL 37\.08 Note* extensions are subject to satisfactory performance\. In the case that new selection is needed, this will be under a competitiveselectionprocess (QCBS or CQ dependenton contract value)\. (b) Prior review threshold for goods andworks is $100,000 and for consulting firms is $50,000\. For consulting contracts with individuals the prior reviewthreshold i s $30,000\. All sole-source selection will beprior reviewed\. (c) Short lists composed entirelyof national consultants: Short lists o f consultants for services estimated to cost less than US$200,000 equivalent per contract, may be composed entirely o f national consultants inaccordancewiththe provisions ofparagraph2\.7 ofthe Consultant Guidelines\. 47  Annex 9: Economic and Financial Analysis Indonesia: Kecamatan Development Project 3B Economic Internal Rate of Return (EIRR)\. An economic analysis of 41 KDP subprojects carried out duringthe first KDP found aweightedaverageEIRRof60\.1%\. KDPrecently updatedthe figuresin 2004 by carrying out an economic evaluation of 113projects\. The table below shows the EIRRs for each type of infrastructure averagedover four provinces\. The weighted average ERR for all 113 projects i s 5 1\.4%\. Type of Infrastructure No\. Projects Average EIRR Water Supply 41 38\.62% Roads/Bridges 55 51\.84% Irrigation 17 67\.64% Total Projects 113 51\.36% There were also eight projectsthat producedEIRRs of over 100% dueto extra-ordinarily large benefits\. These projects were not includedinthe calculationof averages shown above due to the riskof major distortions\. Inmost casesthese very largebenefitsresultedfrom either entirely neweconomic activities that were madepossible by KDP infrastructure, or suppressedlatent production capacity that was finally able to be channelled to local markets\. The most frequently seen examples were roads that provided access to previously isolatedvillages where before the road, all produce hadto be handcarried or carried insmall amounts on motor cycles for hlometers before reaching the nearestmarket\. Cost-Effectiveness\. Village infrastructure built through KDP methods cost significantly less -- on average 56% less -- than equivalent works built through Ministryo f Public Works or local government contracts\. A cost-comparison that usedlocal government and private engineers to re-cost builtKDP infrastructure showed significant savings due to the elimination of some o f the following costs: middlemenand outside contractors' overhead costs; double and triple handlingofmaterials; frequent on- site design modifications; and extra charges for supervisingprojects inremote areas\. These cost comparisons do not yet include voluntary community contributions valued generally at 17% o ftotal project costs\. Ifthese figures alone are extrapolated to the total number ofinfrastructureprojectsconstructedbyKDP I and KDP 11, even with considerable discounting to allow for problem projects, the total impacts interms of additional economic value and cost savings would be quite significant\. Below i s a summary table showing the results of the cost comparison: 48  No communit Government Fiscal assessment\. Because the project provides grants to kecamatan, no costs are recoveredby the project\. The fiscal impact ffom the project i s small\. Communities are responsible for maintaining works builtby the project and thus poseno incremental burdenon the government budget\. At the nationallevel, a BanWIDA blend at international interest rates and with 5 and 10year grace periods postpones the fiscal costs o fthe project and avoids raising more expensive (and unavailable) local revenues\. 49  Annex 10: Safeguard Policy Issues Indonesia: Kecamatan Development Project 3B 1\. Environmental Screening A\. Review ofExperience to Date and Proposals for KDP3 Any construction activity will have some impact onthe environment althoughthe significance is largely proportional to the scale o fthe construction activity\. The KecamatanDevelopment Programi s concerned about preserving the environment, ensuring that any negative effects from KDP activities can be avoided or at least mitigated\. As part o f preparation o f the ThirdKDP Project, a review o f environmental management experience has been carriedout and the results have been incorported into the design o fthe proposed KDP3\. This Annex: 0 describes procedures for environmental impact analysis inIndonesia 0 summarizes the general approach to environmental management that was taken on the first and second KDP projects 0 summarizes the results o f a review o f investments and impacts implemented duringthe third year o f KDPI, and, 0 describes the proposals for incorporating the results o f the review into the design of KDP3\. B\. EnvironmentalImpactAnalysis inIndonesia The Kecamatan Development Program follows official Indonesian government policy inregards to environmental impacts\. The government has paid significant attention to the problems o f environmental impact\. Government Regulation 29 o f 1986 established the required methodologies for environmental impact analyses\. This regulation was superceded by Government Regulation 51 o f 1993, which was intendedas deregulation and simplification\. This regulation can also be seen as an attempt to improve the quality o f existingplanning\. Planneddevelopment activities were divided into two classes\. The first class includedthose activities that clearly have a large potential impact, which require a formal impact analysis\. The second class included those activities with relatively minor potential impacts, and for these an explicit impact analysis was not required\. According to the later Decree o f the Minister for the EnvironmentNo\. 11of 1994 for Activities Obligated to be Supported by Impact Analysis, the types and sizes o f activities undertakenby the KecamatanDevelopment Project are exempted from formal impact analyses due to very small scale o f investments and consturction activities supported\. Even though exempt from formal studies, planners o f KDP infrastructure are required to consider environmental effects\. Inthe SecondKDP, the planner i s a graduate civil engineer who works with the local communities assisted by a village technical facilitator\. Inanalyzing environmental effects, the planner mustbe capable of imagining all sorts o f effects that might arise as a result o f the activity\. Environmental effects are defined as those changes that arise directly as a result o f development activities, bothpositive and negative\. The types o fproblems encountered are determinedbased on the experience o f experts, the field experience of the planner ,interviews, literature, simulations and the like\. Analyses on KDP concemboth effects occurring duringconstructionand those occurring duringoperations\. 50  An example of environmentaleffects for aruralroadcanbe seen inthe table below, according to types of impact: Category 2: Serious negative impact on Water flow concentration wvironment Landslides Sale o f landto outsiders Loss o fproductive land due to landslides Deforestation Increased sediment load due to road erosion Category3: Negative effects of slightprobability or Category 4: Unclear effects, less important impact positive or negative Air pollution from vehicles Increase inuse o f chemical Flooding due to improper siting o fbridge fertilizers andpesticides Increase inairborne dust Establishmento f small industries Increase incriminal activity inthe village that pollute Noise pollution Increased intensity infarming or livestock Residents seek employment outside the village Moving houses to roadside Outsiders move into the village Category 5: Clearlypositive impact Category 6: Negative impact, but clearly acceptableto the local community Reduction inerosion from agricultural landdue Traffic accidents to application o f improved technologies Loss o f landrequired for roadwidening Availability o f construction materials invillage Increase incommunication, including access to health and educationfacilities Fromthe above table it can be seen that categories 1,2, and 4 require special attention\. Category One includes problems of short-term impact even though the effects might be widespread\. These are handled through the application of standardized design and operational procedures which are implementedright acrossthe project\. This i s also the case with deforestation andincreased sediment from Category 2\. B\. Approachto ControllingEnvironmentalImpactson KDP The principle behindcontrolling environmentalimpacts inKDP is to limit possible negative effects and to develop the positive effects o f any infrastructure constructionactivity\. As part of the planning process, a checklist of potentialenvironmental problems i s completed, whichi s then followed up during and after implementationby the village and technical facilitator\. The determination ofnegative effects requires experience, coupledwith the use o finputfrom the various existing manuals\. Negative environmentaleffects for roads and bridges, for example, arise especially from the disturbances of unstable soils that are sensitive to landslides or from changes inthe flow of water\. Excavationand embankment frequentlyresult inlandslides or erosion\. Landslidesbring with them four lunds o fnegative impact 0 disturbingtraffic (not anenvironmentalproblem, per se) 0 endangering agricultural landor housing increasing erosion becausethe soils are not compact divertingthe flow o frainwater 51  Erosion of road sides canhave large negative impact ifthe soil i s transported to productive land or ifthe soil i s carried in suspensionto a reservoir, as this will reduce its storagecapacity\. At the same time, both landslides and serious erosion will result inunsightlyscars near the road\. Changes inwater coursescan destroy productive lands or irrigation canals, as well as disturbthe road itself\. There are four steps inthe process ofreducing environmental damage\. 0 identifyingpotential dangers; 0 selecting an alignment that reduces environmentaldisturbances; 0 utilizing civil works and vegetative treatments to limit negative impacts; and 0 undertaking maintenance and repairs ina timely fashion\. The first two are the most efficient, andthey are the responsibility ofthe surveyor and designer\. A good survey can truly reduce or eliminatemany environmentalproblems\. This is emphasized inpre-service training\. Roads are often located incritical lands that are sensitive to erosion and landslides, where soil types and climate combine to multiplyrisks\. The designer must consider a variety of treatments to build infrastructurethat will not harmthe environment while still bringingsustainablebenefits\. To analyze the environmentaleffects one needsto record informationabout three things, as follows: 0 Treatments necessa? to overcome environmentalproblems, including: o Changingthe alignment to reduce steep grades o Movinghouses o Buildingcivil works to stabilize side slopes o Usingvegetative treatmentsto stabilize side slopes or prevent erosion o Usingspecial treatmentsto overcome the problemofgroundwater, such as drains 0 Negative environmental effects that might still exist after construction: Side slopes that are unstable and endanger housing or agricultural land Excavationthat results inthe stockpiling o f unstable soil Sideslopesthat are left bare, without any vegetative cover The muddyingo frivers as a result o fconstruction Changes inthe course of a stream, which could cause flooding, erosion, or sedimentation Changes inwater flow that damage productive land An increase inerosion and sediment as the result of uncontrolled discharge from ditches or culverts 0 The cutting down of the forest Socioeconomicproblems that arise as the result o f constructinga bridge or road\. These problems include the sacrifice ofproductive lands or other landholdings\. Ifother problems arise, it is necessaryto recordany information that needto be considered about the type andextent ofthe problem\. For water supply projects or sanitation projects, there i s always the possibility o f increasing contamination, for example a water source contaminated by surface water entering from outside, or ground water contaminated by a poorly designed or constructed waste control system\. One also must consider the formation of an operations and maintenance committee for water or sanitation projects\. 52  D\. Environment ImpactControl Strategy The methodused to ensure that proper attention i s paidto environmental problems i s a combination of standard checklists and a special checklist for the environment\. For eachtype of subproject, a technical standardi s includedinproject manuals, and these include considerations o f environmental effects\. For example, the magnitude of the grade o f a road and the steepness o fthe cross-slope perpendicular to the road are limited\. Drainage for the road mustbe installed, together with culverts to discharge water safely\. Leechingfields from latrines have to locatedat least ten meters from any water supply, and locateddownstream as groundwater flows\. Water supplies cannot be locatednear any potential source of contamination\. The completion o f the special checklist for the environment i s an obligatory part of the planningprocess\. Eachtype ofproject i s checked for the various treatments that must be performed on it to avoid or repair environmental problems\. At the midpoint o f construction, the same form is brought out to the field and inspected again, at a time when it i s still feasible to easily repair deficiencies\. At the end of construction, the form i s checked one more time against the original plan\. The kabupaten engineering consultant i sresponsible for reviewing all infrastructuredesigns onKDP projects inthe kabupaten\. He or she will reject any design not accompaniedby a completed checklist, and may also request clarification for any feature where aproblem i s anticipated\. One other element ofhandlingenvironmentalproblems i s the use oftechnical inspection forms, which exist for many types of subprojects\. Among the items inspected are those dealing with aspectsof environmental impact, such as for roads where the forms include slope protection, drainage ditches, and shoulders\. These forms are filled out incidentally by anyone who inspects the infrastructure\. E\. Review of Experienceon the FirstKecamatan Development Project A total of 14,175 small scale infkastructure projects were financed duringthe thirdyear ofthe first KDP project\. These were considered to berepresentative of investments inall years and all o f themhave been classifiedinto one of ten infrastructure development types and the investment costs tabulated\. The summary data are shown inthe table from which the following conclusions can be drawn: 0 of the ten categories o f development, only five are o f a type which would raise any potential concern from an environmentalpoint of view, namely; roads, irrigation, bridges, water supply and wharves; and 0 the average scale of constructionwas extremely small\. For example, the averageroad investment financed development o f only 1\.2 lulometers of new road at a cost o f about 36\.6 millionrupiah (US$4,100) per kilometer\. Most o fthe irrigation development involved rehabilitation of small schemes although there was some new construction as well\. To provide some perspective, for new construction, the average investment o f around 25\.3 millionrupiah (US$2,850) would finance only five or six hectares ofnew, low-technology irrigation command, The other forms of development were similar: bridgesinclude small scale steel girder bridges with wooden decks, concrete bridges, wooden bridges, and suspensionbridges; water supplies come from a variety of sources, but mostly come from springs and dug wells\. Most distribution systems are gravity fed, but some utilize electrical or diesel pumps\. 53  TableA1O\.l\. InfrastructureinYear ThreeofKDP Field oversight reviews have not identified significant or recurrent environmentalimpacts\. Site visits by oversight engineers and the national project management database record environmental concerns, and these were reviewed duringthe appraisal o fKDP2 and KDP3\. Bank supervision missions also include environmentalimpact specialists as well as engineers with environmental training\. Nevertheless, some environmental issues were reported to the KDP complaints unit and some typical examples are set out inthe following table along with comments, where appropriate, on possible control strategies that could be used to avoid similar problems inthe future\. TableA10\.2\. Sampl CasesofEnvironmentalImpactinKDP Location Activity EnvironmentalImpact Comment Kecamatan Irrigationproject Aek Caused downstream areas to Incorporate standard guideline Sosopan, South Bustak suffer drought from lack o f requiring design engineer to Tapanuli, North flow check effects o f incremeental Sumatra water demand on downstream users\. Lancap Jae, Use o fheavy equipment in Disturbed wildlife inthe Largely unavoidable and only Kecamatan constructing a new road surrounding forest o f short term effect\. N o special Arse safeguards recommended Riauprovince Construction o f a road Became a link inthe Potentially significant but leading to protectedforestr transportation of illegal difficult problemto deal with\. logging One option mightbe to include a prohibition o f such investments inthe negative list\. Tana Toraja, Culverts ingeneral built Inrelatively flat areasthe Failure to follow good design South without protective uncontrolled discharge principles\. Needto findout Sulawesi structures including damaged field or orchards\. why Co"unities or their wingwalls, drop structures engineering advisers were not and lined discharge Inmountainous areas ledto applying standarddesign channels\. landslides on the sideslopes safeguards\. o f the road\. Cilacap, Construction o f a bridge Reduction inflow area Failure to follow good design Central Java with a reduction inthe causedthe stream to principles\. Need to findout wetted perimeter o fthe overflow, causing damage why communities or their channel to productive ricefields\. engineering advisers were not applying standard design safeguards\. 54  Ingeneral, the numberofcomplaints formally recorded inthe systemwas quite small\. Thismaybedue to one or a combination of three reasons: 0 A lackof importance associatedwith environmental problems\. There isnot yet awidespread appreciation for environmental dangers, such as dynamiting reefs to fi-eecoral for use as aroad buildingmaterialor buildingaccessroads intoprotected forests\. 0 An inabilityto identifyenvironmental problems\. 0 A reluctance to reportproblems upwards F\. ProposedResponsesfor KDP3 The review illustrated several key facts: 0 the basic environmental impact potential of investments supported through the project i s low so the general strategy followed under KDPIremains relevant; nevertheless, the desk review suggestedthat a small number of environmental issues were encountered\. Most of the issues hadtheir origin inapparent failures to follow best civil engineering practice and it i s likely that these can be addressedthrough continuedtraining and supervision of engineeringstaff providingtechnical advice to participatingkabutpatens; and the small number of environmental complaints made to the KDP complaintsunitmay be a reflection o f the very low adverse impact potentials of investments supported under the project but it also couldbe a reflection of lack of interest inenvironmentalissues on the part of beneficiaries or a reluctance to report problems upwards\. These three itemshave beenaddressedinthe design o f KDP2 and KDP3\. It has been made clear that the national government, the donor, and the national consultants place high importance on attentionto the environment\. It is the responsibility of the kecamatan facilitators to explain the basis for this to the villages and to monitor implementation\. Causing environmental damage i s enough to cancel an activity\. Not payingattention to the environment is enoughto have the facilitator replaced\. This attentionto the environment i s equally important at the kabupaten level, where the kabupaten consultants and especially the kabupatenengineering consultant must enforce environmental standards\. Inaddition, the following items have been addedto the project's negative list (reflected inthe project's legal documents): Inaddition, the following itemshavebeenaddedto the project's negative list procurement o f any products containing asbestos; procurement o fpesticides or herbicides; production, processing, handling, storage or sale of tobacco or products containingtobacco; any activities within a nature reserve or any other area designated by the Government o f Indonesia for the management and/or protectiono f biodiversity except with the prior explicit and written approval o fthe government agency responsible for the management and/or protectiono f that area; miningor excavation of live coral; water resources developments onrivers which flow into or out of other countries; alterations to river courses; landreclamationlarger than 50 ha\.; new irrigation larger than 50 ha\.; and construction of water retaining or storage structures of capacity greater than 10,000 cubic meters\. 55  InKDP3, eachkabupaten andeachkecamatanis servedbyagraduateengineer, who hasbeenprovided with training to helpthemidentify and avoidpotentialenvironmental problems\. There was much emphasisplacedinpre-service training on the ability to anticipate problems, including environmental problems\. Inthe first KDP, there were few engineers at the kecamatan level, so many technical problems o f the type identified inthe above table remained undetected-the outside persons hiredto design and supervise construction hadlittle interest inmakingproblems for themselves\. Reluctance to report problems i s widespread inmostprojects\. Problems will be reported faithfully only if several conditions are met: 0 There are no negative effects from reportingproblems 0 There are positive results from reportingproblems, i\.e\. help i s given 0 There are negative effects from not reportingproblems The design o fKDP3 attempts to address allthree ofthese conditions\. Reportingo fproblems i s a major point inthe performance evaluation system\. Problems that are reportedare discussed and handledat monthly meetings, and doing this i s a major point inthe performance evaluationo f kabupaten consultants\. The first itemis connected with the attitude of senior consultants, government officials, and donor representatives when confronted with reported problems\. They shouldperceive these reports as evidence that the system i s working and as opportunities to improve performance inthe field\. Success inthe field dependsupon the discipline of project actors meetingthese three conditions, which i s a task for senior management\. A review of the effectiveness o f these measureswill be includedinthe first-year evaluationand measures for correction will be agreedwith the Bank prior to the approval of the secondyear program\. 2\. Guidelinesfor Resettlement,LandandAsset Acquisition During the constructiono fvillage infrastructure it i s nearly inevitable that some land, crops, trees, houses, or other assets mightneed to be acquired to allow the most effective, efficient, andbeneficial use o f resources\. For example, existing village paths are often upgraded to become all-weather roads with slightlywider runningsurfaces,plusshoulders and drainage ditches\. The so-called right-of-way therefore needs to be increased one or two meters, and this can only happen ifthe landbordering the road i s acquired\. Similarly, it i s not always possible or desirable to locate water supplies, latrines, bridges, markets, orjetties on communally heldland\. KDP has a simple policy framework and set of operational procedures to guide cases of land acquisition invillage subprojects\.Theobjectiveoftheseguidelines isto ensurethatnofamily affectedbyland acquisition experiencesa materialreductionintheir income, living standards, or livelihoods\. Implementationof these guidelines i s built into the project oversight and facilitator terms of reference, and the project provides bothinternal and independentmonitoring of their implementation\. A\. Minimizingacquisition The ThirdKecamatanDevelopmentProject follows the same acquisition procedures as the first two KecamatanDevelopmentProjects\. Policy guidelines and procedures meet the standards of World Bank policies onresettlement\. KDP's guidelines and reporting formats are incorporatedinto the project operating manual and are tracked through the MIS\.The overarching objective o fKDP's guidelines is to ensure that the acquisition of lands i s minimized and does not result inpersons losing their home or sufferingany decline inincome, livelihood, or living standards as aresult o fthe project\. All proposals 56  mustbereviewed andtheir location, alignment, or specifications changedas necessary\. Proposals to widen roadright-of-ways must also be reviewedcarefully\. As it will notbe possible inmany casesto eliminate the needfor acquisition, the guidelines allow for acquiringassets through the following two methods: a\. Voluntary Donations\. Inaccordance with local custom, community members have the right to donate their land or other assets or to move their homes temporarily or permanently without seeking or being given compensation; b\. Donations with compensation\. Persons who donate their land or other assetshave the right to seek andreceive compensation\. Voluntary contribution of land and other assets i s quite common inIndonesian villages, assuming that no individual loses too significant a portion of their land\. Losing a meter or two o f landon the side of the road is quite attractive to farmers, who will then have an all-weather roaddirectly abuttingtheir fields\. Voluntary contribution for other purposesbesides KDP i s not unusual\. Paying compensation for land i s also beyond the financial capacity of the village\. B\. Providingappropriatecompensation Guidelines have been establishedto manage compensation for persons inthe second category so that all these persons improve or at least hold steady their quality of life, income, and production capacity compared to pre-project conditions\. Principle of Compensation\. The village must guaranteethat one of the following methods was usedin timely fashion to compensatethe personswho were affected by the project (but project funds absolutely cannot be used for compensation): a\. land was replaced with other land o f equal productivity, or with other productive assets of equal value b\. materials and labor were givento replace permanent structures that were removed c\. plants destroyed or missingor damaged were compensated inaccordance with their value d\. other acceptable compensation was given Principle of Consultation\. The village must ensure that all the people affected by the project are consulted at a public meeting Inthevillage\. Duringthis meeting, their rightto compensation mustbe explained, as well as such alternatives as found inthe guidelines\. Formal minutes o f the meetingare made and must include the main points o f discussion as well as any decisions reached, including: a\. for voluntary contributions, the name o f the donor and details o f the donation; b\. for compensated assets, the names o fthe persons receivingcompensation, and details ofthe type andamount o f compensation, such as seeninthe table below: 57  Affected Compensation Additional Assets Promised Agreements 1\. Agricultural land (m') 2\. Other lands Area affected (m') Houses or buildings (units/m2) 3\. Plants affected by the project c\. Inaddition, the minutes will contain the signatures ofthe affected persons and the village chief\. There will be notes about complaints made by the affected persons\. And there will be a map showing the location of the affected assets\. The kecamatan facilitator will deliver acopy ofthe abovenotes to all those people who are affectedby the project, to determine directly their wishes inregards to compensation, their perception of whatever agreementshadbeenreached, and their complaints (ifany)\. C\. Project approval As the process of determiningcompensation isthe responsibility ofthe village, whereinthe facilitator has no decision-makingpower, the kecamatan facilitator i s bound to do the following: He or she must delay final approval untilall persons affected by the project are satisfied with the compensation they are to receive, even ifthis causes a stalemate, the changing o f design, and interminablenegotiations\. Outsiders mustnot intervene to impose a solution\. He or she must delay implementation untilcompensation i s realized\. Whenever aproject has reached the implementation stage, the senior consultants, government officials, and donor should assume that compensation has been successfully delivered\. Inprinciple, ifmore than 200 personsareaffected andrequirecompensation, acompensation planmustbeproducedand thenagreedto by the Secretariat of the National Coordination Team prior to project approval\. Inthe six years o f the VIP and three years o f KDP this has never occurred\. D\. Right to voice complaints andtake legalaction All complaints should behandledand solved at the village level\. Ifthe problemcannot be solvedinthe village, complaints and legal action against these guidelines,the implementation o f agreements found in the minutes, or other grievances can be filed by the person affectedor his or her representative to the kecamatan\. Ifstillnot solved, it canbe further submittedfor a decisionby the Bupati\. Complaints also can be sent to the Complaints Handling Unit of KDP at the regional or national level, where they will be analyzed and an investigationorganized\. E\. Verification At any time, allrecordsregarding compensation, includingminutesof the meetingandproofofreceiving compensationmust be available for inspectionby the kecamatan facilitator, kabupaten management consultants, auditors, and persons assignedto monitor aspectso f the project by the project Secretariat or National Management Consultants\. The Village Minutesand evidence of compensation havingbeen 58  made shallbe provided to the kecamatanempowerment facilitator assisting the village, to supervising engineers, auditors and socio-economic monitors when they undertake reviewsunder the project\. F\. KDPl experience Aside from the national oversight team and the implementationconsultants, KDP i s well-monitoredby more than 30 independent NGOs and the media\. TOR for the NGOs specify that problems associatedwith land acquisition should be checked on site and any problemreported\. NGO and media reporting i s not censored or confined to government transmission routes, so this form o f monitoring provides a useful check on safeguard performance independent of the project implementation structure\. There have not been any reports of involuntary displacement, and only a very small number o f cases o f land compensation disputes have beenreported by either group o f monitors\. Supervision by the World Bankhas also never reported any case of families being involuntarily displaced by either VIP or KDP, but,as notedabove, there are casesboth of facilitators not followingthe rules and also cases of the rules beingfollowed but families nevertheless dissatisfied with their outcome\. However, Bank missions have never found cases ofpeople visibly losing significant productiveresources or experiencing drops in income, livelihood, or living standardsbecause o f aKDP project\. Ingeneral, the Bank's field reviews suggestthat lack of government involvement inKDP whether by national or local agencies seems to limit land acquisitionto abare minimum, and where it does happen, direct negotiations by villagers with the community councils produce outcomes that meet the Bank`s policy objectives of safeguarding against adverseimpacts\. G\. Conclusion While no process of land acquisition will ever be fully free ofproblems, KDP's small size and the need for a local-level consensusdoes appearto provide an effective control systemthat minimize the scope andd impact o f landacquisition\. KDP3 will continue to monitor impacts closely\. 3\. IndigenousPeoples SpecialProgramfor Papua Overview\. Indonesian communities covered by the World Bank's policy on indigenous people can generally be classified as falling into one of three categories\. First, there are small pockets of highly isolated, vulnerable groups such as the Mentawai or other small islandpopulations\. Such groups can easily be adversely affected by development projectsbecauseo f unfamiliarity with modern market mechanisms, cultural and administrative prejudices against them, or inability to retain control over productive and naturalresources\. A secondcategory refers to the muchlarger ethnic populations which meetmost of the World Bank's typological requirements (own language, sense of identity, traditional attachments) but exhibit varying degrees of vulnerability\. Populations such as the so-called Dayak o f Kalimantan or the tribal groups of NusaTenggara Timor fit here\. The third group refers to heterogenouscommunities, where a segment of the population is culturally or economically marginalized\. Several of the fishing populations o f the eastern islands, for example, have uniqueidentitiesand also occupy subordinate positionswithinlocal social structures\. Review of Experience\. As a project that begms from starting principles o f grassroots participation and flexible project designs determined through local planning, KDP didnot anticipate any significant adverse impacts on indigenous or culturally distinct populations andnone have been found duringproject 59  supervision\. Test cases specifically supervised for thispurpose have includedthe Baduy, on Java, who as a rule reject outside development projects, and indigenous communities on the island o fNias, near West Sumatra\. Inboth cases KDP practice provedhighly adaptive\. InBaduy the project didnot enter untilit was approachedby traditional leaders and the terms of encounter negotiated and recordedby bothsides\. InNias, KDPhasexperienced severalimplementationproblemsbecauseofitsisolation andthe deeply hierarchical village structures, but again no adverse impacts couldbe identified\. General supervision in the eastem islands also failed to turnup any systemic adverse impacts on ethnic minorities\. Specific measuresinthe project designthat appear to promote culturally appropriate activities include the villager's own election of their representativesto the project, use of sub-village planning units, and flexibility infacilitator's operational funds that allows themto support traditional rituals\. The project designitselfhas also provento be somewhat more flexible than anticipatedwhen it first started\. Thus, inprovinces such as Aceh or West Sumatra, where kin-based descent units also carry out important administrative functions, the project produced special guidelines that usedthese traditional units rather than the standardkecamatan desa structure\. (Both provinces benefited inthis respect from the 2001 decentralization laws)\. Needless to say, inparallel with the increaseduse of culturally apposite forms o f social organization has come an entirely new generation of problems associatedwith the people excluded by traditional social structures, such as, for example, women, immigrants or low status groups\. These problems do not have easy solutions\. For the moment the primary means for addressing them i s through better facilitation, with some trials (Le\. inAceh) to work with traditional leaders on malungtheir group's workings more inclusive\. SpecialProgramfor Papua\. While implementationand ex post reviews failed to tumup any significant or recurrent patternof adverse impacts from KDP on indigenous communities, inseveral o f the more culturally isolatedareas the lack o f technical capacity limitedthe benefits that indigenous communities received from KDP\. Some o fKDP's planning features, such as the use of kecamatans rather than villages for decision-malung, also requiredchange\. Nowhere was this more true that inthe easternmost islando f Indonesia, the province of IrianJayaIPapua\. KDPhasbeen active inPapuasince its inception, and inKDP2 the programhas expanded intonearly every kabupaten\. As inother areas, the programinPapuahas the goal of empowering villagers to undertake their own development through a process of village andkecamatan-wide meetings with the facilitation o f consultants\. Villages have undertaken the constructionof infrastructure as well as group economic activities\. Local govemments have been eager to expand KDP activities, fundingmore kecamatanswith district-level funds than any other province\. KDP i s a highlypopular program throughout Papua, as evidenced by the fact that there i s a higherpercentage o f local govemments contributingtheir own counterpart funds so that more kecamatans can be covered by KDP than anywhere else inIndonesia\. However, the mid-termreview o f KDPl showed there have beentwo main problems that have constrainedKDP performance inPapua\.The first i s that the special cultural, geographical, and economic conditions of the province meanthat the standard provisions of the national community development project requiredadjustment to perform inthe local environment\. To that end, in2002 KDP created a special project manual for Papua\. The manual was developed by a working group made up of the KDP technical team, independent PapuanNGOs, and the provincial government\. The manualwas introduced through socialization workshops ineachkabupaten, and then pilotedfor a first roundbefore beingadopted for the entire province\. Features of the manual include much greater use o f villages rather than kecamatansas the organizing unit (because of distance and sociologicalvariations), increased operational allowances, involvement o f traditional leadership, and so on\. This manual i s a 60  public document and copies are inthe subdistrict meeting hall of every kecamatan that joins KDPas well as with the NGO andjournalist monitors\. KDP's trainingprogram in Papua\. The secondconstraint i s that it hasbeen very difficultto find qualified local persons to take the positions ofkecamatan and district consultants, even as there hasbeen evermore insistence that these positions be filled with native residents o f Papua\. Despite an energetic recruitment campaign, positions could not be filled with local people meetingthe same qualifications as inotherprovinces, especially for technical positions\. InKDP2, eachkabupatenhastwo consultants, a civil engineer and an empowerment consultant; eachkecamatan has at least two facilitators, a civil engineer and at least one empowerment facilitator\. The civil engineers are needed to ensure that whatever infrastructure i s selected can be built by the villagers, are designedproperly, and constructed to a reasonable standard of quality\. Past community development projects from a broadrange o f donors and NGOs show that employing unqualified consultants quickly leads to poor quality andrapidly destroyed infrastructure\. The shortagesof qualified engineers are areflection ofthe general lack ofparticipationbyPapuans in universitiesandtechnical schools\. Thus, filling KDP's technical slots with Papuans was not going to be a function of simply making salary rates more attractive -salary levels for Papua work on KDP are already significantly higherthan national averages\. Instead, inkeepingwith the general social development goals of KDP, the KDP team developed an educational program for over 200 young Papuansto filltechnical facilitator positions\. Objectives of this special program for Papuawere twofold - first to meet the KDP project's needs for qualified Papuansto work inthe kecamatansand villages, but second, to develop an operational and replicablemethodology for promotingPapuan human capital development through routine investment projects\. The methodology for recruiting the candidate consultants was designedto involve the localcommunities as much as possible\. An orientation was conducted for eachkecamatan, wherein each village was told about the education programby a localNGO hiredto facilitate the orientations\. The attendeesreturned to their villages and helpedtheir respective villages select one or two persons as candidates from the kecamatan\. Representatives o f all the villages inthe kecamatan screened the applicants and selectedthree candidates byvoting, with at least one man and one woman selected\. While not every kecamatan followed the guidelinesreligiously, about 90% o f the candidates seemedto meet all the criteria\. The training is beingdone locally at Cendrawasih UniversityinJayapura, utilizingtwelve technical trainers with previous experience invillage infrastructure programs elsewhere inIndonesia\. The technical and project managementparts o fthe curriculum were developed by the instructors, allocating about twenty percent of the material developed by local instructors\. The graduates of this program will receive the equivalent of a first level diploma from the University\. The curriculumincludes the basics of a good technical education, emphasizing mathematics, technical drawing, materials science, structural calculations, earth science, basic hydraulic calculations, basic irrigation design, and lots of constructionmanagement andpractices\. The local portion of the curriculum includes information from Papuan history, anthropology, ethnology, and sociology\. A portionof the training was reserved for skills inlateral thinking, training design and delivery, facilitation, and long-term visioning\. The last three weeks of the training introduces the basics of the KDPprocess and the duties o f kecamatan facilitators\. The results ofthe educational programhave astoundednearly everyone connected with it or visitingit\. From shockingly low level o f skills demonstrated duringa pre-test, the participants have acquired a reasonablelevel of engineering knowledge and skills\. Ninety percent of the participants stayed with the programfrom the beginning,as the inappropriateten percent dropped out\. The participants have also 61  demonstrated their capabilities by constructing civil works off campus, including abridge, aroad, repairs to a nonfunctioning local water supply system, and awharf for fishingboats\. The students are punctual, often work into the nighton their own initiative, and manage themselves through a system of representatives who negotiate directly with the instructors and with the University administrators\. In-class discipline was high\. The training was completed inmid-April2003\. The graduateswill be assigneddirectly to the KDP programintime for the first year of implementationof KDP2\. The graduates will be assignedback to theirhome kecamatans, with two or three graduatesinmostkecamatans, inpart to makeup for the size of kecamatansinPapua and partly to support eachother as fresh graduates from a beginners' course incivil engineering\. Some graduates have elected to serve inother kecamatansfor personal reasons\. Next steps\. Under KDP3 the graduateswill continue their education duringtheir first year inthe field through aprogram of on-the-job training and coaching by their former technical instructors\. One of the first tasks o f the facilitators inthe field will be to assist the villages inidentifying two persons to be trained as village facilitators, a man and a woman\. One o f the two will be especially trained to handle technicalmatters, the other will specialize inempowerment\. Iti s hopedthat beingexposed to good training for six months, the new graduates will be able to empathize with the village facilitators and give them good training and advice, as most of them come from similar backgrounds and level of formal education (secondary school)\. Performance ofboththe graduates and their instructors will be part of the routine NGO and project monitoring\. Approximately $0\.5 million have been budgeted to support the program, with the possibilities of increaseifmore funds are needed\. The overall KDPprograminPapuais supervised by aregionalcoordinatorbasedinJayapura, assistedby two deputies anda small team of facilitators specifically responsible for training, the management information system, and complaint handling\. They have general responsibility for the success of this programas well\. Although KDP3 will concentrate on field-level support for the graduates, there have also been some discussions with district government and some o f the large private companies to re-start the core classroom programlater on usingcounterpart support\. KDP3 design includes a small allocation to develop a larger-scale programthat would allow more local graduates to develop professional skills\. 62  Annex 11:Anti-CorruptionStrategy Indonesia: KecamatanDevelopmentProject3B Projects inIndonesia operate ina high-riskenvironment when it comes to issues o f leakage and corruption\. Projectpreparation for KDP3 updated the 2002 financial management assessment and disbursement action program for KDP2, which provides the compliance framework for fiduciary management\. Nevertheless, highly dispersed community projects such as KDP operate insomewhat different institutional environments than standard projects do which must be addressed by their anti- corruption strateges\. A well-implemented strategy that makes greater use o f social controls and transparency can ensure levels of confidence demonstrably higher than traditional project designs that operate inthese very same villages\. This annex summarizes the general anti-corruptionstrategy for KDP3\. It draws heavily on the general OSUIndonesiaanti-corruption framework and the recently issuedWorldBank guide for fiduciary management inCDD projects, but it also buildson field experiences over the past three years o f KDP implementation\. Identifiing Corruption in Indonesian Community Projects\. Traditional community development projects have a relatively limitednumber o f well-known points o f leakage\. A non-exhaustive list would include: Transfers\. Financial transfers to communities usually come earmarked or inkind\.The Local Level Institutions (ESW) study found that less than 50% o f the nominal Rps\. 20 million cash grant per village got there at all, and less than 15% o fthat amount actually came as a cash grant\. The Government's IDT (Inpres Desa Tertinggal), a $200 million nationwide poverty program, also suffered badly from delivery o f goods inkind(usually o f an inferior lund)\. Poor contractor management\. Contractor management for communities i s normally handledby district technical offices, not by villages\. Contract awards are often "directed" to favored companies, regardless o f qualifications or experience\. Anecdotal interviews by WB staff have found endemic problems o f substitution o f inferior materials, unfinished works, and o f f the top payments for contract awards\. There are no sanctions for inferior work\. Poorpricingpractices\. Because contractor markets are not competitive, bothover billing and overdesign are endemic\. False taxes and charges\. Government charging for "services" i s so common that officials will even issue receipts for blatantly illegal practices, such as a standard 5% charge on all funds going through a Village Head\. Virtually every financial transaction ina development project has a charge on it to get the proper forms signed and the funds released\. Standardfinancial control systems ofen work against rather than infavor of soundfinancial management\. Villagers everywhere report recurrent charges being levied by auditors and inspectors to not find fault with financial reporting, often on formats that either have never been given to villagers or else contradict the ones already inuse\. The corruption problems with technical assistance for community projects are also well known and, while they are not very different from Indonesiandevelopment projects ingeneral, they stand out inthe case o f community programs because communities often have few alternative suppliers and nobody from whom they can seek redress: 63  Improper billingpracticesby consultantJirms\. InKDPI, students from one company calledthe WB to complain about how they and all other candidates (more than 100) were giveninstructions on how to falsify their CVs to meet the project's TOR\. Another (fired) company claimed that it was forced to swallow a merger with the second-ranked company, includinga Rps\. 300 million cash payment and the absorption of 20 entirely unqualified staff\. Cuts in salaries and travel allowances\. Often QCBS "winners'' can beat the competition because apparently competitive overhead costs are "subsidized" by later cuts from staff salaries andtravel allowances\. Pricefuring between TAstaff and local government (including village heads) i s also common, aidedby a general lack o fpublic information about prices\. KDP's anti-corruption strategy has three main themes: (i) eliminate complexity; (ii) bright lights on shine every financial transaction; (iii) quickly to complaints\. The guidingprinciple underlyingthe anti- respond corruption program i s that KDP procedures must encourage oversight and actionby multiple stakeholders, notjust the World Bank or the government\. Eliminate complexity\. Inmany traditional community-orientedprojects, money disappears due to the welter of transfer levels, intermediaries, andprocessing requirements involvedinturningWorld Bank project funds into bridges, roads, and water supply systemindistant villages\. KDP simplifies every aspect of this system\. Becausemoney goes straight from the national level to the village accounts, there are almost none o f the delays or leakagesnormal to designs that step funds down through inter-governmental transfers\. The project's handover of budgets to the villagers also supports simplifiedmanagement: when agencies start listing the many forms andprocedural requirements neededto get started, the villagers almost always take their business elsewhere\. KDP has also simplified all o f the steps involvedinfinancial management and disbursement so that many kindsof stakeholders can easily understand anduse them\. There are no "hidden" charges allowed other than those listed on the forms, and Ministry o f Finance ratification included notes to auditors that no other financial reporting or license documents were to be used other than those negotiatedwith the project\. All o f the basic formats attached to the appraisal report are the same as those used inthe field\. Shine a bright light\. Transparency lies at the core of KDP's anti-corruptionwork, and it takes place in three main arenas\. First, there are abroadrange of materials and procedures to ensure that all financial information i s bothpublic and publicly displayed withinthe villages\. For example, local shopping price quotations for materials must beread out loudinpublic meetingsto be valid; signboards posted around the villages statematerial and labor unit costs; and all bookkeeping i s managedby an elected "implementation committee\." Unlikestandard practice, there isn't a single format inKDP that would allow a lone official to withdraw or transfer funds: all require at least three signatures, including one from an elected villager and a second from the project facilitator\. Second, as noted inthe PAD text, KDP involves a broadrange of entirely independent groups whose job itis to inspect KDP sites for signs ofirregularity\. These groups have full access to KDPdocuments\. The provincial NGOs also have monthly meetings with the consultant and government management teams to list the problems they encounter and reviewproposed corrective actions\. Third, the government management group has also taken many steps to ensurenational level transparency\. KDP i s the first World Bankproject inIndonesia to send its audit summaries to civil society oversight groups\. Contract provisions and follow-up letters for the NGO monitors provide them with full 64  discretion to share all findings, and the independentjoumalist contracts specify that there i s no prior review\.For Year 3 o fKDP, PMD is publishingan expandedversion of the problems database summarized below incommonly readprovincial newspapers so that independent organizations can check for themselves whether problems have beenreported and fixed\. Respond to complaints\. The last major element inthe strategy i s to follow-up onreported cases o f corruption-and to be seen to be following up on corruption by villagers and other stakeholders\. KDP has several channels for villagers to complain, includinga well-usednational "complaints box" whose address i s printedon all village information materials\. This complaints handlingsystem was introduced under KDP1and continues to handle a highvolume o fcomplaints andproject inquiries\. UnderKDP2, inkeepingwith the evolving decentralized management,the project decentralized the complaints handling process and now there i s at least one officer ineach of the 16 RegionalManagement Unitoffices\. The Projectmaintains anationalandregionallevel complaintsdatabase, updatedweekly, which is routinely sharedwith civil society watchdog groups, includingthe press\. At the provincial level, reports by field staff, villagers, and the monitors are loggedin, reportedto local government and the national team, and then pursuedevery two weeks untilresolved\. Inseveral districts andprovinces, increasingly active project coordinationteams also pursue corruptionproblems\. Insome extreme cases they have removed abusive village headsand subdistrictheads (e\.g\. North Sumatra, SouthKalimantan, Lampung) and succeededingetting missingfunds restored\. More common than restoringfunds i s fixing bad quality infkastructure, and project files document several cases where corrective action plans were proposed and implemented\. Approximately 5% of the TA staff have also beenreplaced becauseo f corruption or letting corruption happen without reporting it\. Tables A1O\.l andA10\.2 summarize the reporting and follow-up from KDP2 (January 2003 to June 2004)\. Duringthis period, the Complaints HandlingUnit (HCU) manageda total o f 2,381 cases, with a 68 percent resolutionrate\. Total cases handled to date (1998 to June 2004) are 3,367 cases with an overall resolution rate of 80 percent\. Grievances or inquiriesoriginate primarily from consultants' reports (83 percent of reported cases), followed by other sources, audits, and community letters\. Types of Cases Total Resolved YOof Total Cases Still YOofTotal Cases I Cases In Process Cases in Resolved I Process Violations against KDP 861 682 79% 179 21% Principlesanh Procedures FundsMisuse 951 424 45% 527 55% InappropriateIntervention 74 63 85% 11 15% ForceMajeur 49 33 67% 16 33% Other 446 417 93% 29 7% Total 2,381 1,619 68% 762 32% 65  Notes: Thesefigures reflect the total number of cases handled during the period of January 2003 to June 2004\. They include carry-over casesfrom 2002 (KDPI) KDP1 also enforced a vigorous financial managementimprovement campaign for the national level contracts\. This included: 0 letters from PMD and the companies to all field staff informing them of their salaries and entitlements; 0 spot on-site inventory reviews o f equipment and paycheck stubs; 0 retroactive payment corrections as conditions for contract extensions (esp\. for travel); 0 semi-annual meetings with all companies to review their performance; 0 spot ex-post reviews of staff qualifications; and 0 replacement of recurrent offending companies\. KDP design and Corruption\. KDP's anti-corruption action programconsists of three major sets of actions\. First,the project design uses a variety o fprocedures to minimize leakage duringnational level procurement, contract management, and financial transfers, as discussedinthe relevant parts o f this PAD\. Second, prior to appraising KDP2 in2000, the project carried out an anti-corruption diagnostic that supplemented project specific fiduciary requirements with an incentive map of opportunities for corruption within the village planning process (Table A10\.3)\. The village-level action planused that map to identify opportunities for minimizingcorruptionrisks, althoughit shouldbe noted that this is an ongoing process\. 66  Main threat i s collusion among three signatories o f bank withdrawal to take a cut of funds before transferring to village Implementation: Extremely high Materials are bought Most common source o f corruption inKDP (apart Village labor is mobilized from operational funds & consultants' payments) i s Roads & bridges are built with procurement o f materials\. Implementation teams buy cheaper materials than those specified andpocket the difference\. Post-implementation: Medium Loans repaid; revolving funds set up Loanrepayments managedbadly; risk o f Maintenance o f infrastructure corruption with user fees for maintenance\. KDP's design allows for graduated sanctions because funds cannot be releasedto the field unless the facilitators are present to sign o f f on transfers\. Removing the facilitators from the field location i s relatively easy to carry out and has become a sanction preferredby MoHa as a response to supervision findings\.Conversely, once restitutionhas beenmade, the facilitator canbe returnedto the field and the project continues\. Although initially reluctant to use this sanction, the Ministryo f Home Affairs has become increasingly confident that itproduces rapid results\. Ina number o f cases, MoHa will temporarily suspend an entire kecamatan untilcorruptionproblemsreportedby individual villages have beenrectified\. This is an effective remedy because it introduces peer pressure rather than makingcorruption entirely a matter o f enforcement by the center\. Overallperformance\. There are three major sources o f evidence which suggest that there is less corruption inKDPthan most other community projects\. First, KDP's infrastructurei s found to be on average 55% less expensive than comparable government-executed infrastructure\. These cost savings do not yet include community voluntary contributionswhich nationally inKDP average 17% o f project costs\. Technical reviews also conclude that output quality i s the same or better\. A 2004 infrastructure independent evaluation found that out o f the 108 infrastructure projects reviewed, 94% o f the projects were found to be o f very good or good technical quality\. 67  Villagers reported to evaluators that 95% of the projects had significant impacts intheir daily quality of life\. Second, interviews with field staff and companies by Bank missions and reporters suggest a strong downwards trend indiversions\. A growing number newspaper reports and village self-reporting point to spillover effects: villagers reject demands for kickbacks and inseveral cases have runpeople asking for bribes out of town\. Finally, independent reviewsbyprofessionally qualified auditors (i\.e\. SGS) also report generally low corruption levels inKDP subprojects\. So much for the good news! The badnews is that: (i) is still corruption inKDP; (ii) all remedies there not work; and (iii) there has been little progress inimproving the overarchingfiduciary environment within which the project must work\. Local level collusion, often with district and village governments, remains the single biggest source ofproblems\. O f special difficulty has been the endemic tendency to avoid sharing information, or limitingits access only to officials and elites\. Another recurrent problem has been the harassmentand the physicalintimidation of staff who report corruption\. Fear o freprisals inhibits facilitator's willingness to report corruption, althoughreports from the facilitators still remain the best source o f information about diversions and leakage\. Overall, the reporting of problems and their disposition needs to be improved and better protection provided for the whistleblowers who are threatened\. Sanctions and remedies\. Three of the project's consulting firms (of 19) were not extended inthe project's secondyear becauseo f concems over delays or cuts inpayments to field staff\. Not surprisingly, the poorest and most isolatedprovinces have suffered most from corruption\. A very informal group discussion with govemment counterparts suggestedthat aggregatecorruptioninKDP amounts to 10% (project audits estimated that only 5% of funds couldnot be accounted for) but all such numbers must be treated as working assumptions, at best\. Byandlarge official complaint channelshave provedto be oflittle use andcomplaints to authorities have not provided an effective corruption sanction\. Nevertheless, there has been progress over time\. InKDPl's final year, at least 15 legal cases were successfully brought against village and subdistrict officials by communities working with NGOs andjustice officers\. When pursuitof official corruption happens, sanctions are nearly always the outcome of villager and consultant appeals to higher-level officials, like bupatis, or the outcome of WB supervision follow-up, and are not due to a functioning, accessible system of legal redress\. Central govemment responseto the corruption problem has been relatively encouraging\. The project management secretariat has expanded the programo f legal assistanceto KDP villages\. They have also initiated monthly meetings with the independent journalists and withthe NGOmonitors to review progress on their findings\.A particularly relevant indicator of growing government interest inthe anti- corruption work has been the suspensionof two provinces because of failure to act on corruption reports\. Inone casethe suspensionwas liftedwhenthe offendingpartieswere removedandthe fundsreturned, while inthe other, the maindistrict where the problems were happening was droppedfrom the project entirely\. KDP3's anti-corruption strategy KDP3 extendsthe basic principles of the strategy outlined above, but it also adds some additional elements\. The most important new decision facing KDP3's anti-corruption strategy will be how to deal with decentralization\. Decentralizationinprinciple offers new opportunitiesto promote government accountability\. Inpractice, at least duringthe transition to a decentralized administration, the opportunities for rent-seeking are more likely to rise than to fall\. Nevertheless, just as center-district 68  relationships are being entirely re-worked, executive-legislative relationships are also a site of struggle\. KDP's anti-corruption strategy will chart a course through this brokenlandscapeinthe following ways: Technical assistanceprocurement will remaincentralized (a pilotprogramunder VIP-2 to decentralize contracting to the provinces failed), although all field staff will be from their province; Increasingly deep involvement of DPRDs, including routine provision of audit reports and the joint implementation monitoringteams; Increasing audits by BPKP and carrying out spot audits from the center by the national management consultant company; Usingprior year performance as the basis for increasingeachdistrict's KDP2 allocations; Preparation o f an on-site auditing manual that will be issuedby MoF and distributed to all KDP participantswithan MoF cover letter saying that no other auditing formats are allowed; No projects will be allowedto enter anew project year untilproblems inthe master MIS complaints database have been satisfactorilyresolved; Distribution and public posting ineach district of a unit cost price table based onreal expenditures; and More sharing of information with civil society watchdog groups\. Inthe past, government commitmentto pursuingcorruptionproblems was at times lackadaisicalinpart becauseof the conflict of interest createdby the unifiedcivil service\. That is, the district level civil servants involvedinunauthorized diversions were often outposted members of the same central agencies\. Sanctions by past or future colleagues were minimal, and usually taken only inresponse to strong Bank (and a times, community) pressure\. Decentralizationchanges this configuration somewhat\. All o f KDP's local implementing agencies are now part of local government, not Jakarta line agencies and ministries\. At least intheory, the built-in conflict between regulation and implementation i s eliminated\. Part of KDP3's anti-corruption strategy, therefore, consists of encouraging the Jakarta group to exert their regulatoryrole more forcefully\. Evidence that there i s some willingness to move this way i s already appearing within the current KDP: Strong PMD support for the idea o f legal advocacy by usinguniversity-basedlawyers to help bringlegal cases against corruption inKDP; Suspendingentireprovincesand kabupaten inSouth Sulawesi andNorthSumatra becauseof local corruption\. Strong involvement inDPRD alliance-building; Increased, critical audits by BPKP\. The WorldBank and Corruption in KDP\. The Bank's program for KDP oversight involves a number of managerial innovations\. OSUinvolvement incapacity assessment andprior reviews i s extended much further\. OSU staffroutinelyjoin field supervision, and they also organize hands-on short courses for task teams and senior counterpart staff\. Hands-oninvolvement inKDP's anti-corruption work provides a close linkbetweenthe generalinstitutionalreformstrategy for fightingcorruptionbeing coordinatedthrough OSU, and day-to-day practicalactions ina large Bank-fundedoperation\. Inadditionto KDP's collaboration with the WB OSUgroup, three additional activities promote anti-corruption work inthe project\. First,becauseKDP i s managed through the resident mission, it i s feasible to adopt a supervision strategy that involves constant rather than periodic oversight\. Supervision missions visit field sites every month\. 69  Second, the Bank plays a very active role inpursuingcorruption cases\. Project supervision is not done randomly: the project's MIS is usedto select cases where corruption or other anomalies have been reported\. The government and Bank pursueverified cases untilrestitution has beenmade or the subproject suspended\. Third, the Bank's ESWprogramon governanceand anti-corruption includes several KDP-based activities, such as the work on mappingcorruption inCDD projects, a AAA activity on how poor communities can access the legal system, or a recently started programto conduct research on the effectiveness o f incentive and sanction regimesincommunity programs\. While results from such programs benefit the Bank's overall governancereform strategy, they also provide immediate benefits to KDP implementation\. Bank oversight for KDP3 work can be strengthenedina number of ways\. First,project appraisal and first year supervision will pay special attention to the quality of the mechanisms for receiving andresponding to complaints from the field\. The Bank team will provide monthly reviews of this system for the first six months of operation\. Second, the Bank's new disclosure policy allows for a more in-depthinvolvementby civil society organizations, particularly those concerned with transparency and governance reformin Indonesia\. Third, the pilot programto outsource auditing to private firms will be extended to KDP3\. Last, duringappraisal, the Bank and government will agreeon an appropriate regme of sanctions for cases where corruptionis discovered\. 70  Annex 12: ProjectPreparationandSupervision Indonesia: KecamatanDevelopmentProject3B Planned Acutal PCNreview 11/3012004 1210812004 Initial PID to PIC (AB99) 512712003 Initial ISDS to PIC (AC71) 513012003 Appraisal 1211512004 12l0712004 Negotiations 1211012004 1110l2005 BoardRVP approval 312412005 Planned date o f effectiveness 613012005 Planned date o f mid-term review 12/31/2006 Planned closing date 12131l2008 K e y institutions responsible for preparation o f the project: This project was preparedbyBappenas, Ministryo fFinance, andthe Ministryo fHome Affairs\. Bank staff and consultants who worked on the project included: Name Title Unit Scott Guggenheim Task Team Leader EASSD I Victor Bottini I Co-Task Team Leader I EASSD I Susan Wong M&ESpecialist EASSD Raj Soopramanien Senior Counsel LEGEA Yogana Prasta Disbursement Officer EACF I FinnanDharmawan Procurement Specialist EAPCO Sentot Satria Institutions Specialist EASSD Naseer Ahmad Rana Lead Procurement Specialists SARPS Arie Purwanti Team Assistant EACIF Anju Sachdeva Office Manager EASES Bank funds expended to date on project preparation: 1\. Bank resources: 2\. Trust funds: 3\. Total: EstimatedApproval and Supervision costs: 1\. Remaining costs to approval: $10,000 2\. Estimatedannual supervision cost: $90,000 71  Annex 13: Documents inthe ProjectFile Indonesia: KecamatanDevelopmentProject3B GovernmentDocuments Operational Manual Procurement Plan Audit Manual M&EPlan Authorization o f Project Manager Completion Report KDP1 BankDocuments Final Preparation Plan Procurement RiskAssessment FinancialManagement Risk Assessment Safeguard Review for KDP3 Supervision Reports for KDP2 Economic Impact Review 72  Annex 14: Statementof LoansandCredits INDONESIA: KecamatanDevelopmentProject3B Differencebetween expected and actual Original Amount inUS$ Millions disbursements Project ID FY Purpose IBRD IDA SF GEF Cancel\. Undisb\. Orig\. Frm\.Rev'd PO71318 2004 ID CoralReefRehab andManagementI1 - 0\.00 0\.00 0\.00 7\.50 0\.00 7\.50 0\.05 0\.00 PO71316 2004 ID Coral ReefRehab andMgmt ProgI1 - 33\.20 23\.00 0\.00 0\.00 0\.00 56\.20 0\.17 0\.00 PO74290 2004 ID-2nd Eastem IndonesiaReg\. Transport 200\.00 0\.00 0\.00 0\.00 0\.00 199\.00 2\.00 0\.00 PO64728 2004 ID-LANDMANAGEMENT &POLICY 32\.80 32\.80 0\.00 0\.00 0\.00 64\.76 3\.17 0\.00 DEVT PROJECT PO63913 2003 ID-Java-Bali Pwr Sector & Strength 141\.00 0\.00 0\.00 0\.00 0\.00 139\.59 -1\.41 0\.00 PO73772 2003 ID-Health Workforce & Services (PHP 3) 31\.10 74\.50 0\.00 0\.00 0\.00 107\.93 -4\.31 0\.00 PO76271 2003 ID-PPITA 17\.10 0\.00 0\.00 0\.00 0\.00 14\.64 4\.61 0\.00 PO79156 2003 IDThird KecamatanDevelopmentProject 204\.30 45\.50 0\.00 0\.00 0\.00 92\.48 0\.08 0\.00 PO59931 2003 ID-Water Resources & IrrSector Mgt Prog 45\.00 25\.00 0\.00 0\.00 0\.00 70\.09 12\.33 0\.00 PO40578 2002 ID-EastemIndonesiaRegionTransport 200\.00 0\.00 0\.00 0\.00 0\.00 71\.48 20\.48 0\.00 PO72852 2002 ID-UPP2 29\.50 70\.50 0\.00 0\.00 0\.00 93\.30 19\.90 0\.00 PO73970 2002 ID-GLOBAL DEV LEARNING (LIL) 2\.66 0\.00 0\.00 0\.00 0\.00 1\.75 1\.04 0\.00 PO68949 2001 ID-LIBRARY DEVELOPMENT 0\.00 4\.15 0\.00 0\.00 0\.00 1\.29 0\.48 0\.00 PROJECT - LIL PO49539 2001 ID-PROVMCIAL HEALTH I1 63\.20 40\.00 0\.00 0\.00 0\.00 92\.27 59\.15 0\.00 PO73025' 2001 ID-SECOND KECAMATAN 208\.90 111\.30 0\.00 0\.00 0\.00 131\.25 -203\.37 0\.00 DEVELOPMENT PROJECT PO68051 2001 ID-GEF-W\. JAVA ENVT MGMT 0\.00 0\.00 0\.00 2\.54 0\.00 2\.75 7\.78 0\.00 PO40528 2001 ID-W\. JAVA ENVMT MGMT 11\.70 5\.75 0\.00 0\.00 0\.00 11\.61 8\.25 0\.00 PO59930 2000 ID-DECNT\. 13\.00 5\.00 0\.00 0\.00 0\.00 1\.39 0\.77 0\.00 AGRICULTURAYFORESTRY EXT PO59477 2000 ID-WSSLIC I1 0\.00 77\.40 0\.00 -0\.00 0\.00 55\.54 -27\.74 0\.00 PO49545 2000 ID-PROVINCIAL HEALTH I 0\.00 38\.00 0\.00 0\.00 0\.00 18\.70 1\.09 -2\.12 PO36049 1999 ID-EARLY CHILD DEVELOPMENT 21\.50 0\.00 0\.00 0\.00 10\.65 1\.96 12\.63 12\.63 PO41895 1999 ID-SULAWESIBASIC EDUC\. 47\.90 15\.93 0\.00 0\.00 0\.00 16\.58 17\.33 0\.00 PO40196 1999 ID-SUMATRA BASIC EDUCUATION 54\.50 20\.10 0\.00 0\.00 0\.00 5\.38 6\.01 0\.00 PO36956 1998 ID-SAFEMOTHERHOOD 42\.50 0\.00 0\.00 0\.00 9\.15 2\.20 11\.35 5\.35 PO40061 1998 ID - BENGKULU REGIONAL 20\.50 0\.00 0\.00 0\.00 5\.00 7\.61 12\.61 7\.61 DEVELOPMENT PO03993 1998 ID-SUMATRA REG`L RDS 234\.00 0\.00 0\.00 0\.00 50\.00 11\.22 61\.22 0\.56 PO04026 1997 ID-Railway Efficiency 105\.00 0\.00 0\.00 0\.00 47\.33 1\.93 49\.26 -0\.14 Total: 1,759\.36 588\.93 0\.00 10\.04 122\.13 1,280\.40 74\.93 23\.89 73  INDONESIA STATEMENT OF IFC's HeldandDisbursedPortfolio InMillionsofU S Dollars Committed Disbursed IFC IFC FY Auuroval Comuanv Loan Equity Quasi Partic\. Loan Equity Quasi Partic\. - 2003 BuanaBank 0\.00 12\.16 0\.00 0\.00 0\.00 12\.16 0\.00 0\.00 1999 ITCF 40\.00 0\.00 0\.00 0\.00 0\.00 0\.00 0\.00 0\.00 LYON-MLF-Ibis 2\.01 0\.00 0\.00 2\.01 2\.01 0\.00 0\.00 2\.01 1985 Manulife 0\.00 0\.32 0\.00 0\.00 0\.00 0\.32 0\.00 0\.00 2002 P\.T\. Gawi 11\.50 0\.00 0\.00 4\.65 5\.35 0\.00 0\.00 4\.65 2004 P\.T\. Indorama 48\.00 0\.00 0\.00 0\.00 0\.00 0\.00 0\.00 0\.00 1989 PT A g o Muko 0\.00 2\.20 0\.00 0\.00 0\.00 2\.20 0\.00 0\.00 1997 PT Alumindo 8\.87 0\.00 0\.00 2\.00 8\.87 0\.00 0\.00 2\.00 1989194103 PT Astra 0\.00 0\.91 0\.00 0\.00 0\.00 0\.91 0\.00 0\.00 PT Astra Graphia 0\.00 2\.00 0\.00 0\.00 0\.00 2\.00 0\.00 0\.00 PT Astra Otopart 0\.00 1\.07 0\.00 0\.00 0\.00 1\.07 0\.00 0\.00 1995 PT Bakrie Pipe 23\.71 0\.00 9\.53 0\.00 23\.71 0\.00 9\.53 0\.00 2000102104 PT BankNISP 35\.00 0\.00 0\.00 0\.00 35\.00 0\.00 0\.00 0\.00 1997 PT Berlian 0\.00 13\.96 0\.00 0\.00 0\.00 10\.61 0\.00 0\.00 1993196 PT Bina Danatama 4\.41 1\.73 0\.00 8\.19 4\.41 1\.73 0\.00 8\.19 2004 PT Ecogreen 30\.00 0\.00 0\.00 0\.00 30\.00 0\.00 0\.00 0\.00 PT Grahawita 0\.00 0\.00 5\.00 0\.00 0\.00 0\.00 5\.00 0\.00 1991/95/99/01/03 PT Indo-Rama 5\.00 0\.00 0\.00 0\.00 4\.88 0\.00 0\.00 0\.00 1992196 PT KIA Keramik 1\.65 0\.00 0\.00 53\.49 1\.65 0\.00 0\.00 53\.49 1995 PT KIA Serpih 4\.50 0\.00 0\.00 49\.50 4\.50 0\.00 0\.00 49\.50 1997 PT Kalimantan 15\.00 15\.00 0\.00 0\.00 15\.00 15\.00 0\.00 0\.00 2000 PT Makro 0\.00 2\.61 0\.00 0\.00 0\.00 2\.61 0\.00 0\.00 1998 PT Megaplast 5\.25 2\.50 0\.00 0\.00 5\.25 2\.50 0\.00 0\.00 1993 PTNusantara 7\.63 0\.00 0\.00 5\.93 1\.63 0\.00 0\.00 5\.93 2004 PTPrakars(PAS) 35\.00 0\.00 0\.00 10\.00 24\.12 0\.00 0\.00 6\.88 1993 PT Samudera 0\.00 5\.00 0\.00 0\.00 0\.00 5\.00 0\.00 0\.00 1997 PT Sayap 4\.17 0\.00 0\.00 0\.00 4\.17 0\.00 0\.00 0\.00 2001 PT Sigma 0\.00 3\.00 0\.00 0\.00 0\.00 3\.00 0\.00 0\.00 1995104 PT Viscose 9\.50 0\.00 0\.00 0\.00 0\.00 0\.00 0\.00 0\.00 1997 PT Wings 3\.62 0\.00 0\.00 0\.00 3\.62 0\.00 0\.00 0\.00 2003 SMM 3\.oo 0\.00 0\.00 0\.00 0\.00 0\.00 0\.00 0\.00 2001 Sunson 12\.41 0\.00 0\.00 7\.85 12\.41 0\.00 0\.00 7\.85 2004 Wilmar 20\.00 0\.00 0\.00 0\.00 0\.00 0\.00 0\.00 0\.00 Total portfolio: 330\.23 62\.46 14\.53 143\.62 192\.58 59\.11 \. 14\.53 140\.50 ~ Approvals PendingCommitment FY Approval Comaany Loan Equity Quasi Partic\. 2005 Astra Otoparts2 0\.02 0\.00 0\.00 0\.00 2005 NISP Bussan 0\.02 0\.00 0\.00 0\.00 ~~ Total pendingcommitment' 0\.04 0\.00 0\.00 0\.00 74  Annex 15: Country at a Glance Indonesia: KecamatanDevelopmentProject3B East Lower- POVERTY and SOCIAL Asia & middle- Indonesia Pacific income Development diamond* 2003 Population,mid-year(millions) 2M\.5 1,855 2,655 Life expectancy GNI percapita (Atlas method, US$) 8x1 1,080 1,480 GNI (Atlas method, US$ billions) 773\.5 2,011 3,934 Average annual growth, 1997-03 Population (%) 1312 10 0\.9 Labor force (%) 11 1\.2 GNI Gross M o s t recent estimate (latest year available, 1997-03) per wmaq capita nroliment Poverty(% ofpopulationbelownationai povertyline) ff Urbanpopulation (%oftotalpopulation) 43 40 50 Life expectancyat birth (years) 65 69 69 Infantmortality (per t000iivebirths) 47 32 32 Chiidmalnutrition(%ofchildrenunder5) 25 B 11 Access to improvedwatersource Access to an improvedwatersource(%ofpopulation) 76 76 81 Illiteracy(% ofpopulationage 159 x1 x) x) Gross primatyenrollment (%of school-agepopulation) 111 111 lQ ----Indonesia Male 1P It? 113 Lower-middle-incomegroup Female 1x1 111 111 ~ KEY ECONOMIC RATIOS and LONG-TERM TRENDS 1983 1993 2002 A 0 3 Economic ratios' GDP (US$ billions) 85\.4 258\.0 ff3\.0 208\.3 Gross domestic investmentlGDP 313 29\.5 20\.3 B\.7 Exports of goods and ServicedGDP 26\.3 26\.8 35\.8 31\.2 Trade Gross domestic savingslGDP 29\.8 32\.5 26\.8 25\.3 Gross nationalsavingslGDP \. 29\.0 23\.4 20\.8 Currentaccount balance/GDP -7\.4 -13 4\.6 3\.5 Interestpayments/GDP 19 2\.6 2\.7 20 Total debt/GDP 35\.4 56\.4 76\.5 64\.5 Total debt servicelexports 8\.8 33\.6 29\.4 34\.0 Present value of debt/GDP 75\.6 Present value of debtlexports 2219 I indebtedness 1983-93 1993-03 2002 2003 2003-07 (average annualgrouth) GDP 7\.1 2\.0 3\.7 4\.1 4\.5 I -----Indonesia GDP percapita 5\.2 0\.7 2\.2 2\.5 3\.1 1 ~ Lower-middle-income arouD STRUCTURE o f the ECONOMY 1983 1993 2002 2003 Growth of investment and GDP (Oh) (%of GDP) I Agriculture 22\.9 ff\.9 l7\.1 16\.6 20 Industry 39\.8 39\.7 44\.2 43\.6 0 Manufacturing Q\.7 22\.3 25\.4 24\.7 01 02 03 Services 37\.3 42\.4 38\.7 39\.9 I Privateconsumption 59\.8 58\.5 65\.0 65\.6 1-40 Generalgovernment consumption 0\.4 9\.0 8\.2 9\.2 Imports of goods andsetvices 27\.9 23\.8 29\.3 25\.7 -GDI -GDP I 1983-93 1993-03 2002 2003 (average annualgrouth) Growth of exports and imports ( O h ) Agriculture 3\.8 17 2\.0 25 / d o T Industry 9\.o 2\.8 3\.5 3\.4 20 Manufacturing 11\.6 3\.7 3\.4 3\.5 0 Services 7\.O 15 4\.5 5\.5 -20 Privateconsumption 4\.8 4\.2 3\.8 4\.O -40 Generalgovernment consumption 5 1 15 Q\.8 9\.8 Gross domestic investment 0\.2 -13 0\.2 1\.4 imports of goods andservices 4\.6 0\.5 -5\.0 2\.o 75  Indonesia PRICES and GOVERNMENT FINANCE 1983 1993 2002 2003 ' Inflation (oh) 1 Domestic prices (%Change) Consumerprices 11\.6 9\.6 119 6\.7 Implicit GDP deflator $4\.3 8\.9 5\.8 6\.6 Government finance (%of GDP, includes current grants) Current revenue 16\.8 18\.5 8\.1 98 99 00 01 02 Current budget balance -3\.5 7\.4 8\.4 Overall surpius/deficit -11 -2\.1 -------GDPddlaor -CPI T R A D E 1983 1993 2002 2003 (US$ millions) Export and import levels (US$ mill\.) Total exports (fob) 36,823 57,159 61058 000 Fuel 9,745 P,09 0\.700 Estatecrop 859 1236 1\.81 Manufactures 16,699 8\.18 8,660 50,000 Total imports (cif) 28,328 31289 32,551 Food 1,342 2852 3,121 25,000 Fueland energy 2,155 6,556 7,664 I Capitalgoods 12,158 8,606 7,100 0 Export price index(895-tYO) la 0 9 151 97 98 99 00 01 02 03 Import price index(%995=730) a 2 59 64 i P Exports 8 Imports Terms of trade (S95=00) la 237 237 B A L A N C E o f P A Y M E N T S 1983 1993 2002 2003 (US$ millions) Current account balance to GDP (%) Exports of goods and services 8,235 40,566 64,594 67,440 S T Imports of goods and services 22,037 38222 5108 55,629 Resourcebalance -2,802 2\.344 0,575 11\.811 Net income -3\.650 -4,987 -6,881 -6,123 Net current transfers 114 537 1129 1,564 Current account balance -6\.338 -2,106 7,623 7,252 98 99 00 01 02 03 Financingitems (net) 6,521 2\.700 -3,800 -2,995 Changes in net reserves -183 -594 -4,023 -4,257 Memo: ReSeNeSincludinggold (US$ millions) 4814 12,355 3190 36,VO Conversion rate (DEC, iocaNUS$) 909\.3 2,087\.1 9,3112 8,577\.0 EXTERNAL DEBT and RESOURCE FLOWS 1983 1993 2002 2003 (US$ millions) Composition of 2003 debt (US$ mill\.; Total debt outstanding anddisbursed 30,229 89,5'2 02254 04,320 16RD 2,136 11283 a,729 9,779 I G A 9\.?79 IDA 763 796 794 860 24,306 B 660 Total debt service 3,741 14\.089 5'364 21,323 IBRD 254 1,620 1,905 2,003 IDA 10 24 33 33 Composition of net resourceflows Officialgrants a 4 2 8 Officialcreditors 1180 2,344 -440 -892 Privatecreditors 2,961 -3,397 -6296 -5,48 F 3 9 9 Foreign direct investment 292 2,004 145 -597 Portfolio equity 0 2,452 877 1,230 World Bank program Commitments 1\.20 924 103 425 Disbursements E- Bilateral 549 A - iBRD 185 4 8 408 B-IDA D-Othermultilateral F-Privae Principalrepayments 92 782 $065 1,294 C-IMF G- Short-term 76

APPROVAL

P003517

 Pharmaceuticals project Report No: ; Type: Report/Evaluation Memorandum ; Country: China; Region: East Asia And Pacific; Sector: Fertilizer & Other Chemicals; Major Sector: Industry; ProjectID: P003517 The Implementation Completion Report (ICR) for the China Pharmaceutical Project (Loan 2943-CHA approved in FY88 and closed in FY95, one year after the original closing date) was prepared by the East Asia Regional Office, with Appendix E contributed by the Borrower\. The Bank loan of US$127 million was fully disbursed except for a balance of US$0\.34 million which was cancelled\. The project objective was to assist the Government of China in its efforts to introduce modern technology in the public sector pharmaceutical industry, improving and upgrading its manufacturing practices as well as quality control, and improving the efficiency and competitiveness of this industry\. The project consisted of three components: (i) the construction of a large pharmaceutical manufacturing facility for the annual production of 5000 tons of Vitamin C and other products such as starches, dextrose, sorbitol, etc\.; (ii) introduction of procedures and equipment for upgrading two demonstration plants to achieve the internationally acceptable Good Manufacturing Practice (GMP) standards of the pharmaceutical industry; and (iii) upgrading the testing capability of the Henan Pharmaceutical Quality Control Center\. The project objective was achieved but with substantial technical difficulties and cost overruns\. The foreign exchange cost of the project increased by 26 percent (US$159\.2 million versus US$130 million estimated), and the local cost increased further because of devaluation and rapid inflation during implementation\. The Zhong Yuan Pharmaceutical Factory has experienced difficulties in achieving the expected production levels of both intermediate and final products\. These difficulties arose from problems with process design and equipment, necessitating repeated modifications to the design during the implementation stage\. The Region has recently informed OED that due to the lack of working capital, a halt in the program for rectification of the technical problems and a precipitous drop in the international prices of Vitamin C, the factory’s operation has stopped since June 1996\. Efforts were made by Zhengzhou Municipality, in cooperation with the Bank and IFC, to bring in an appropriate joint venture partner to resolve the technical and financial problems\. The GMP demonstration plants at Shanghai and Xinhua have been satisfactorily completed and have become models for other pharmaceutical manufacturing enterprises aspiring to improve their manufacturing practices\. In addition to training courses offered by the demonstration plants, other GMP training is being carried out at a number of joint venture pharmaceutical plants that have already received the US Food and Drug Administration (FDA) approval\. The Henan Pharmaceutical Quality Control Center has lost some of its clients as the pharmaceutical plants have increasingly assumed the responsibility of carrying out the routine analytical work for quality control\. Because of the delay in start up, sharp drop in the price of Vitamin C in recent months and the shut-down of the plant since June 1996, the ICR’s reestimated ERR and FRR (10 percent and 11 percent at completion from 34 percent and 20 percent at appraisal, respectively) are now likely to fall well below 10 percent\. The ICR, which was prepared before the recent deterioration in the market for Vitamin C and the the shut down of the plant, rates the outcome as satisfactory, institutional development impact as substantial, sustainability as likely, and Bank performance as satisfactory\. In view of the deteriorating circumstances, the Operations Evaluation Department rates the outcome as marginally unsatisfactory and sustainability as uncertain because of the problems with the Zhong Yuan plant\. OED agrees, however, with the other ratings for institutional development impact and Bank performance\.  A major lesson of this project is that technology transfer to developing countries may face serious difficulties when technology is available from only a few sources and is covered by patent and restrictive know-how secrecy agreements\. In such instances, a joint venture approach may provide a better alternative\. Furthermore, introduction of international standards of GMP is a complex process requiring considerable commitment to institutional development and the creation of an appropriate and efficient regulatory system\. The ICR is of satisfactory quality but does not provide details on the assumptions used to recalculate the ERR and FRR\. Nor does it discuss the future plan of operation of the Zhang Yuan Plant, even though the ICR notes the start-up delays at the plant (recent information on the stoppage of operations was not available at the time the ICR was completed)\. An audit is planned\.

APPROVAL

P150801

PROJECT INFORMATION DOCUMENT (PID) APPRAISAL STAGE Report No\.: PIDA62125 Public Disclosure Copy Project Name Nepal Health Sector Management Project (P150801) Region SOUTH ASIA Country Nepal Sector(s) Health (50%), Non-compulsory health finance (10%), Compulsory health finance (10%), Public administration- Health (30%) Theme(s) Health system performance (50%), Public expenditure, financial management and procurement (25%), Managing for development results (2 5%) Lending Instrument Investment Project Financing Project ID P150801 Borrower(s) Ministry of Finance Implementing Agency Ministry of Health and Population Environmental Category B-Partial Assessment Date PID Prepared/Updated 06-Apr-2016 Date PID Approved/Disclosed 07-Apr-2016 Estimated Date of Appraisal 12-Apr-2016 Completion Estimated Date of Board 16-Jun-2016 Public Disclosure Copy Approval Appraisal Review Decision The Decision Meeting held on March 28, 2016 authorized the team (from Decision Note) to appraise the Project\. I\. Project Context Country Context 1\. Nepal has made exemplary progress in poverty reduction and human development\. Despite a decade-long insurgency that ended in 2006, Nepal halved extreme poverty in seven years from 53 percent in 2003/2004 to 25 percent in 2010/2011, and thus attained the first Millennium Development Goal (MDG) ahead of time\. Life expectancy has been steadily increasing to almost 68 years in 2013 , up from about 38 years in 1960\. In addition, Nepal has achieved gender parity in education and sharp reductions in infant and maternal mortality\. However, poverty continues to be high in rural areas (27 percent) compared to urban areas (15 percent), and is particularly severe in mountainous areas (42 percent)\. The twin impacts of the earthquake series since April 2015 and the economic slowdown resulting from the disruption in trade between September 2015 and February 2016 are also projected to erode recent progress in poverty reduction\. 2\. Nepal continues to pass through a complex and challenging political transition\. A new constitution was promulgated in September 2015 amid often violent protests\. Notwithstanding the Page 1 of 7  constitutional amendments in January 2016, implementation remains impeded by a lack of clarity and consensus over contentious issues such as provincial demarcation and the specifics of federalism\. This has resulted in renewed political uncertainty and social tension which come with Public Disclosure Copy the risk of policy paralysis, institutional erosion and poor service delivery and outreach\. In addition, the current political environment could lead to delays in the implementation of government programs\. Federalism, whatever form it takes, will also change the way services are delivered\. 3\. Despite political uncertainty, macroeconomic policy and economic priorities remained sound and supportive of stable growth until 2014-15\. Between 2006 and 2014 economic growth averaged 4\.4 percent, and the budget moved from a position of modest deficits to surpluses from FY13 onwards, reaching 2\.2 percent of GDP in FY14\. However, the recent political and economic crises are likely to set back the situation\. Nepal ranks 130 of 168 on Transparency International’s Corruption Perception Index for 2015 which represents a 4 point drop over the 2014 figures\. Poor transparency and accountability in the public sector remains a major concern and impacts the efficiency of expenditure and growth\. Also, Nepal still ranks low on the UN’s Human Development Index, at 145 out of 187 countries in 2014, and much remains to be done to bring human development indicators to middle income country levels\. 4\. On April 25, 2015, a major earthquake occurred in central Nepal causing widespread destruction\. According to a Post Disaster Needs Assessment (PDNA) the total needs in the health sector amounted to US$147 million accounting for 2\.2 percent of total reconstruction costs\. Over 1000 health facilities were partially damaged or completely destroyed\. While significant funds have been pledged for reconstruction, the challenge is to “build back better” so as to strengthen institutional resilience\. Building institutional capacity for better public management would enable more timely and effective responses to situations of public health crises including natural disasters\. Sectoral and institutional Context Public Disclosure Copy 5\. Over the past two decades Nepal has successfully reduced infant and maternal deaths, and achieved the MDGs related to maternal and child mortality\. Between 1996 and 2006, the maternal mortality ratio (MMR) decreased from 790 per 100,000 live births to 281; and further reduced to an estimated 190 by 2013; while under five child mortality decreased from 141 deaths per 1,000 live births in 1990 to 36 in 2014\. Further, Nepal has met the MDG target for measles immunization coverage with 92\.6 percent of children vaccinated by their first birthday\. 6\. Despite these significant achievements at the national level, not all segments of society have benefited equally from the improvements recorded\. For instance, under-five mortality rate is 75 per 1,000 live births for the poorest quintile and 36 per 1,000 live births for the richest quintile\. There is evidence of systemic exclusion of several population groups to access health services due to a variety of circumstances, including household income and education levels, location of residence, gender, social, ethnic and religious identity, and linguistic background\. Women living in urban areas are almost twice more likely to get skilled birth attendance as compared to women living in rural areas; women with secondary education are almost two times more likely to access that service as compared to women with no education, and women in the Tarai are twice more likely to benefit than women in the mountain regions\. In terms of socioeconomic groups, the percentage of deliveries assisted by skilled birth attendants is 10\.7 percent for the poorest and 81\.5 percent for the richest quintile\. Further, while utilization of pre-natal care is not significantly different between urban (95\.1 percent) and rural (85\.3 percent) areas, only 27\.9 percent of births Page 2 of 7  amongst the bottom 20 percent of the population took place at a health facility compared to 90\.7 percent in the richest quintile\. This is further compounded by low quality of care at health facilities\. Only 60 percent of Basic Emergency Obstetric and Neonatal Care facilities provided round-the- Public Disclosure Copy clock functions expected of them\. 7\. Public spending on health in Nepal is higher than the South Asian average\. Nepal spends about 2\.6 percent of GDP of public funds on health compared to the South Asian average of 1\.3 percent of GDP\. In terms of the share of government spending of total health spending, Nepal performs better than the low income countries average (43\.3 percent vs\. 41\.5 percent) and South Asian average share (43\.3 percent vs\. 33 percent)\. Nepal also performs better in terms of prioritizing health as defined by the share of health spending out of total government spending: 11\.9 percent compared to approximately 4\.5 percent for South Asia\. 8\. While national policy commits Nepal to provide free basic health services for all, financial protection is poor and high out of pocket payments for such services persist\. Structural and institutional inefficiencies in planning, management and delivery of the program result in the lack of timely availability of these free services and drugs, particularly to poor and difficult to reach population groups\. The National Health Accounts estimates indicate that the out-of-pocket expenditure (OOP) share of total health expenditure was 55 percent in 2009 , and noted that the majority of this expenditure was on drugs provided for out-patient care\. As a result of the high OOP, an estimated 6\.7 percent of households fall into poverty in a given year as a consequence of payments to health care\. OOP among the poor are twice as large as that of the richest (60\.5 percent vs 30\.3 percent)\. 9\. Weaknesses in health systems and public sector management inefficiencies contribute to low quality of care and inequities in health outcomes: (a) There is a deficit of qualified health workers in various health facilities, primarily due to inefficient cadre management and the political economy of human resource management which Public Disclosure Copy leads to inability to fill posts in remote areas\. The percentage of sanctioned posts filled by doctors and nurses at various levels of health facilities range from 23 to 55 percent\. Strategies to enhance an appropriate skill-mix and equitable distribution of professional and support staff especially in remote areas, and their retention, will be crucial for Nepal to realize its agenda of Universal Health Care (UHC)\. (b) Drug stock-outs and expiry resulting from a poor distribution system is a major source of inefficiency in the delivery of health services\. Drugs and medical supplies constitute about 20 percent of health sector expenditures\. A recent report by the Office of the Auditor General (OAG) identified drug stock-outs and drug expiry as major performance issues\. While drug stock out is a critical problem that occurs at all levels of health facilities, the duration of stock outs is higher among the lower level and more distant health facilities\. There are at least two reasons for this - the drug distribution system below the district level is performing poorly; and the remaining shelf-life of procured drugs is short\. (c) Weaknesses in public financial management are a major cause of sector inefficiency and the health system’s ability to achieve desired outcomes\. Poor resource allocation to sector priorities undermines the achievement of equity and access to essential services\. Sector budget formulation processes remain ad hoc, and largely uninformed by inputs from decentralized units and facilities where service delivery occurs\. At the same time, weak expenditure management and unreliable financial reporting has resulted in poor expenditure tracking, and weak accountability\. Poor accounting systems have led to delays in the preparation of financial reports which in turn delays Page 3 of 7  the release of funds for program implementation, and ultimately results in low execution rate of the annual budgets\. (d) Fiduciary integrity remains a challenge\. The last five years have seen persisting audit Public Disclosure Copy irregularities and ineffective follow up of audit findings\. The system of internal controls needs to be substantially strengthened to reduce the risk of resources not being used for their intended purpose, misappropriation of assets, and poor value for money in the procurement of essential commodities and equipment\. (e) Public procurement capacity is low and the Logistics Management Division (LMD), in the Ministry of Health (MoH), responsible for health sector procurement has typically been staffed with doctors and administrative personnel with no specific knowledge or training in procurement and limited tenures\. These weaknesses are further compounded by systemic weaknesses in supply chain management\. (f) Accountability for results is low at all levels\. This is evidenced by weak planning and monitoring for evidence based decision making\. Current patterns of public spending do not particularly benefit the poorest and most marginalized populations/districts\. (g) A citizen engagement mechanism for holding policy makers and providers accountable for service provision is not in place so far\. MoH’s Gender Equity and Social Inclusion (GESI) strategy, which was developed and implemented during the Nepal Health Sector Program 2 (NHSP 2), enables strengthened citizen engagement, however is yet to be implemented in full\. 10\. Nepal’s Health Sector Strategy (NHSS) 2015-2020 recognizes these challenges and outlines the government’s roadmap towards achieving its goal of UHC\. The NHSS incorporates institutional and systemic reforms alongside a renewed focus on delivering more effectively and efficiently so that the poorest and most marginalized populations access services\. The Strategy builds upon detailed consultations with Development Partners (DP), academia and civil society, and has incorporated lessons learned from the implementation of the previous five-year programs\. The strategy is based on the principles of universal health coverage, quality, access and equity and has nine goals\. Six of the nine goals of NHSS relate to improved public sector governance, health system financing, procurement and supply chain management, decentralized planning, evidence Public Disclosure Copy based decision making and equitable utilization of services\. There is a strong focus on improving institutional arrangements that impact service delivery – including human resources, procurement, contract management systems, budget planning, execution and reporting, as well as expanding citizen engagement to create better transparency and accountability\. In parallel, it focuses on ensuring that services and financial protection mechanisms are targeted to populations in greatest need\. Together, this theory of change should create more resilient and sustainable institutions, and better targeting of services to the most disadvantaged populations\. 11\. Extensive discussions with the government and partners during the last two years have identified a number of binding constraints\. Diagnostic consultations with all stakeholders resulted in the development of a Procurement Reform A ction Plan and a Financial Management Improvement Plan which has been endorsed by MoH\. MoH has also carried out a detailed Organization and Management Review which provides a framework for organizational reforms for procurement\. This understanding of critical constraints has informed the design of this project\. 12\. This IDA-financed project is embedded within the Government’s NHSS\. The NHSS has been prepared in collaboration with DPs\. Based on the analysis and consultation, the Bank will focus its support on strengthening specific areas of public management and governance in the health sector (procurement, financial management, citizen engagement)\. Other DPs will support linked areas of public management (e\.g\., human resources, equipment management and quality assurance, decentralized planning), thereby, supporting the NHSS\. Page 4 of 7  II\. Proposed Development Objectives The objective of the project is to improve efficiency in public resource management systems of the health sector in Nepal\. Public Disclosure Copy III\. Project Description Component Name I\. Improve Public Financial Management and Procurement in the Health Sector Comments (optional) Component 1 will improve resource management through supply-side interventions such as improved procurement, contract management systems, supply chain systems; and budget planning, execution and reporting\. The success of these interventions and the release of IDA funds will be linked to the achievement of disbursement linked indicators (DLIs) in the following areas: (A i) Enhanced systems and institutional capacity at MoH for managing procurement; (A ii) Effective operational logistics and supply chain management system; (B i) Enhanced systems for annual planning and budgeting; (B ii) Enhanced systems for expenditure reporting; and (B iii) Timely response to audit reports\. Component Name II\. Improve Reporting and Information Sharing for Enhanced Accountability and Transparency Comments (optional) Component 2 will support NHSS to design and strengthen systems for regular data capture and monitoring of disaggregated data\. Mechanisms for public access to information in keeping with the GESI Strategy and Nepal's Right to Information Act will also be developed\. The success of these interventions and the release of IDA funds will be linked to the achievement of disbursement linked indicators (DLIs) in the following areas: (C i) Improved monitoring mechanisms for service delivery; and (C ii) Enhanced citizen engagement\. IV\. Financing (in USD Million) Public Disclosure Copy Total Project Cost: 150\.00 Total Bank Financing: 150\.00 Financing Gap: 0\.00 For Loans/Credits/Others Amount BORROWER/RECIPIENT 0\.00 International Development Association (IDA) 150\.00 Total 150\.00 V\. Implementation 13\. The MoH will be responsible for implementing the activities of the project through its various organizational structures including its departments, divisions and centers\. The Ministry of Finance (MoF), Financial Comptroller General Office (FCGO), Office of the Auditor General (OAG), and Public Procurement Monitoring Office (PPMO) will provide policy support and guidelines to facilitate the process\. 14\. A Management cell at MoH chaired by the chief of the Policy, Planning and International Cooperation Division (PPICD) will implement the project\. It will consist of Director Generals of all departments, head of the Human Resource and Financial Management Division, accounts officer and the accountant\. There will be a Project Steering Committee, which meets quarterly, chaired by Page 5 of 7  the Secretary, MoH, with representatives from MoF, FCGO and OAG to provide overall guidance, resolve project specific issues and ensure inter-ministerial and sectoral coordination\. Public Disclosure Copy VI\. Safeguard Policies (including public consultation) Safeguard Policies Triggered by the Project Yes No Environmental Assessment OP/BP 4\.01 ✖ Natural Habitats OP/BP 4\.04 ✖ Forests OP/BP 4\.36 ✖ Pest Management OP 4\.09 ✖ Physical Cultural Resources OP/BP 4\.11 ✖ Indigenous Peoples OP/BP 4\.10 ✖ Involuntary Resettlement OP/BP 4\.12 ✖ Safety of Dams OP/BP 4\.37 ✖ Projects on International Waterways OP/BP 7\.50 ✖ Projects in Disputed Areas OP/BP 7\.60 ✖ Comments (optional) VII\. Contact point World Bank Contact: Preeti Kudesia Title: Senior Health Specialist Tel: 5770+6136 / Email: pkudesia@worldbank\.org Contact: Vikram Menon Public Disclosure Copy Title: Senior Public Sector Specialis Tel: 5785+79293 Email: vmenon@worldbank\.org Borrower/Client/Recipient Name: Ministry of Finance Contact: Mr\. Lok Darshan Regmi Title: Secretary Tel: 977-1-4211161 Email: Implementing Agencies Name: Ministry of Health and Population Contact: Mr\. Shanta Bahadur Shrestha Title: Secretary Tel: 977-4262590 Email: secretaryhp@mohp\.gov\.np Page 6 of 7  VIII\. For more information contact: The InfoShop The World Bank Public Disclosure Copy 1818 H Street, NW Washington, D\.C\. 20433 Telephone: (202) 458-4500 Fax: (202) 522-1500 Web: http://www\.worldbank\.org/infoshop Public Disclosure Copy Page 7 of 7

APPROVAL

P004074

Document of \.Le World Bank FOR OFFICIAL USE ONLY Report No\. P-19 31-KO REPORT AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED SECOND LOAN TO THE KOREA DEVELOPMENT BANK WITH THE GUARANTEE OF THE REPUBLIC OF KOREA November 3, 1976 This document has a restricted distribution and may be used by recipients only in the performance of their official duties\. Its contents may not otherwise he disclosed without World Bank authorization\.  CURRENCY EQUIVALENTS Currency Unit Won Won 485 = US$1\.00 Won 1,000 = US$2\.06 Won 1,000,000 US$2,061,86 GLOSSARY KDB - Korea Development Bank YCDFC - Korea Development Finance Corperation MIB - Medium Industry Bank GRA - Guarantee Release Arrangement KECO - Korea Electric Company KfW - Kreditanstalt fur Wiederaufbau KILC - Korea Industrial Leasing Company, Ltd\. NIF - National Investment Fund FISCAL YEAR January 1 December 31  FOR OFFICIAL USE ONLY INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED SECOND LOAN TO THE KOREA DEVELOPMENT BANK WITH THE GUARANTEE OF THE REPUBLIC OF KOREA 1\. I submit the following report and recommendation on a proposed loan to the Korea Development Bank (KDB) with the guarantee of the Republic of Korea for the equivalent of $82\.5 million\. Part of the loan ($75 million) would be used by KDB for its normal lend!ng operations and would be repaid substantially in conformity with a schedule based on the aggregate of the amortization schedules of subloans made pursuant to this loan\. The maximum repayment period would be 17 years, including three years of grace\. The balance of the loan ($7\.5 million) would be relent by KDB to its subsidiary, the Korea Industrial Leasing Company, Ltd\. for the purpose of its leasing operations, and would be repaid through KDB in 15 years, including one year of grace\. Interest on the loan would be at 8\.70 percent per annum\. PART I - THE ECONOMY 2\. The latest Economic Report ("Current Economic Position and Pros- pects of the Republic of Korea") was distributed under cover of SecM75-437 dated June 9, 1975\. A Basic Economic Mission visited Korea in June/July 1976; its report is being prepared\. The Country Data Sheets are attached as Annex I\. Recent Developments and the Adjustment Process 3\. In the 1970s, the Korean economic situation has been subject to sudden and sharp changes (see Economic Reports distributed under cover of R74-42 dated March 4, 1974 and SecM75-437 dated June 9, 1975)\. Following a period of rapid growth the Government undertook a stabilization program during 1970-72 as a result of which real investment did not increase and the growth of real GNP slowed to about 8 percent per year\. In 1973, inter- national demand grew rapidly and Korea took full advantage of its oppor- tunities\. As a result, there was an unprecedented boom: real GNP grew by 16\.5 percent and export volume by 57 percent; national savings rose to 22 percent of GNP, and foreign savings financed only about 15 percent of total investment\. 4\. The transition from the boom of 1973 to the difficulties encoun- tered in the last two years reflects the impact of the twin shocks of the rise in food, oil and other import prices and the recession in the indus- trial countries\. The Korean economy was particularly vulnerable to both This document has a restricted distribution and may be used by recipients only in the performance of their official duties\. Its contents may not otherwise be disclosed without World Bank authorization\.  -2- of these because of its heavy dependence on imported energy, raw materials, and foodstuffs, and on exports to the developed countries\. 5\. From the last quarter of 1973 to the middle of 1974, the prices of imports rose very rapidly\. The immediate impact of the oil price increase alone was to raise the import bill by more than twice the entire current account deficit in 1973 ($309 million) The higher prices of food- grains added another $300 million to the import bill\. Further,,during 1974, the average unit value of other imports rose by 45 percent while the unit value of Korea's exports rose by only 27 percent\. The adverse shift in the terms of trade was aggravated by the sudden recession in industrialized countries\. The United States and Japan, which took 70 percent of Korea's exports in 1973, suffered a decline or abcut 2 percent in real GNP in 1974\. As a result, Korea's merchandise export volume, which had grown by 57 percent in 1973 (and by over 29 percent in each of the preceding five years), rose only 9 percent in 1974 and 23 percent in 1975\. The volume of exports to Japan actually declined by about 12 percent in 1974 and increased by only 1 percent in 1975\. 6\. These developments had a variety of effects on the economy\. First, as a consequence of the 18 percent deterioratioit in the terms of trade, Korea suffered a real income loss of 4 percent of GNP in 1974\./i Adjusting for this, real gross national income rose by only 4\.2 percent in 1974, following increases of 6\.7 percent and 15\.2 percent in the previous two years\. Second, the higher import prices accelerated domestic inflation\. The rate of increase of wholesale prices rose to 42 percent in 1974 from an average of 7 percent in the previous four years\. Two-thirds of the increase in prices was attri- butable to increases in the cost of imported commodities\. In an effort to prevent the emergence of untoward distortions, the Government allowed import price increases to be fully reflected in domestic prices (with the exception of basic foodstuffs and fertilizers)\. Domestic prices of petroleum products rose nearly 300 percent from August 1973 to December 1974\. In general, the burden of the adjustment was borne directly by consumers as evidenced by the increase in the prices of electric power and transportation\. Consequently, wholesale prices rose by 42 percent in 1974 and at an annual rate of nearly 30 percent in the first half of 1975\. In the second half of 1975, however, the index increased by only about 5 percent as domestic prices completed the process of adjustment to international inflation, and the program of monetary restraint instituted by the Government began to take effect; during 1975, the increase in the wholesale price index was 20\.2 perent\. Third, the current account deficit on the balance of payments grew from $309 million in 1973 to $2\.02 billion in 1974 and nec foreign exchange reserves dropped from $1\.1 billion to $0\.3 billion\. About half of this deficit was due to the terms of trade loss, the balance being primarily due to the recessicn in the economies of Korea's trading partners\. Finally, part of the adjustment was made by a slackening in the pace of domestic economic activity\. The annual GNP growth rate slowed from 16\.5 perce!nt in 1973 to 13\.8 percent in the first half of 1974 and 4\.3 percent in the second half\. Import volume grew by only 4 per- cent in 1974, compared with an average increase of 16 percent per year in /1 At 1970 prices and exchange rates\.  -3- the previous five years\. Industrial production fluctuated sharply from month to month but showed little gain after the first quarter of 1974\. Employment rose by only 3\.4 percent and was able to absorb only three-quarters of the increase in the labor force in the year\. 7\. The slowdown in domestic production would have been greater but for various government measures to sustain employment\. In December 1974 the currency was devalued by 17\.5 percent\. Special credits were extended through the banking system to enable industry to accumulate inventories, and the Government purchased excess inventories of finished goods from industries particularly hard hit by the fall in export demand\. Subsidized credit was extended to small firms and exporters to ease their financial situation\. The purpose of these policies was two-fold: (a) to sustain employment levels, thereby easing the adjustment of the econcmy to the permanent and sizeable loss of real incomes resulting from the terms of trade movement; and (b) to prevent too precipitate a decline in investment and production levels of export industries in response to a temporary recession in export markets\. In support of Korea's long-term goals, it was held desirable to maintain a minimal economic momentum and to remain poised to take rapid advantage of the anticipated recovery in export demand\. This policy was predicated on the belief, then shared by many economists and policy makers throughout the world, that the world recession would be relatively shallow and shortlived\. 8\. Contrary to expectations, the recession in industrialized countries continued well into 1975, with the GNP of OECD countries falling by about 2 percent\. Despite the unfavorable demand conditions, Korea's export volume expanded by about 23 percent in 1975\. However, as a result of reduced demand and increased international competition, particularly for iron and steel and clothing exports, Korea's export prices declined by about 7 percent and its terms of trade deteriorated by about 10 percent\. This, together with rising payments on freight and interest obligations, has been principally responsible for a continued large deficit in the balance of payments of $1\.9 billion in 1975 compared with $2\.02 billion in 1974\. 9\. Korea suffered heavy balance of payments losses in 1974 and 1975 due to an exceptional combination of adverse events\. The average loss in the two years on account of terms of trade movements alone was about 7 percent of GNP (at 1970 prices and exchange rates)\. The alternative to incurring size- able balance of payments deficits would undoubtedly have led to large-scale unemployment and a loss of growth momentum, which would have had severe consequences for Korea's long-term development\. The essence of Governmental policy has been to smooth the process of adjustment, while making steady progress toward effecting a long term improvement in the balance of payments\. To this end, the Government intensified measures adopted earlier in the decade to tackle longer term structural problems in its balance of payments and to increase the availability of investment resources\. 10\. The severity of Korea's balance of payments problems in 1974 drew attention to the sensitivity of a trade-oriented economy to the economic fluctuations of its trading partners\. Because Korea is poorly endowed with natural resources and its principal comparative advantage is a skilled and  -4- energetic labor force, a relatively high degree of trade orientation is unavoidable; however, the Government has embarked on strenuous efforts to reduce the vulnerability to international fluctuations by diversifying the commodity composition of, and markets for, exports as well as reducing import dependence\. 11\. In 1971 and 1972, 75 percent of Korea's exports went to the United States and Japan\. This proportion dropped to 56 percent in 1975\. In the same period, the share of exports to Europe more than doubled from 9 percent to 18 percent, and the share of other countries (excluding the United States, Europe and Japan) increased from 16 percent to 26 percent\. Commodity exports to Middle Eastern countries have incr-eased very rapidly from a small base, and amounted to $319 million in 1975\. Similarly, the commodity concentration of exports has declined significantly; four major categories of exports (textiles, clothing, plywood and miscellaneous manu- factures) accounted for 60 percent of exports in 1970 but only 47 percent in 1975\. During this period there was a particularly rapid grewth of exports of iron and steel, electronics, electrical machinery and appliances and ships\. During the last year, Korea has also been highly successful in winning construction contracts in the Middle East\. The development of new exports and the upgrading of the quality and design of traditional exports are the major means by which Korea hopes to diversify its exports and to further reduce its dependence on the Japanese and United States markets\. 12\. These developments suggest that Korea will be able to sustain a rate of growth of exports that is rapid compared to other countries, although not as high as it was prior to 1974\. Global projections indicate that the volume of manufactured exports by developing countries is likely to grow about 12-15 percent per year for the rest of this decade\. Con- sidering that 90 percent of Korea's exports now consist of manufactured goods, that its links with the Japanese and U\.S\. economies remain strong, that successful efforts are being made to penetrate new markets and that some progress has already been made in diversifying the industrial structure, the long-term prospects for Korea's exports are markedly better than for developing countries as a whole\. Provided measures continue to be taken to maintain price competitiveness, Korean exports may be expected to grow at 20-25 percent per year in terms of current prices (allowing for inter- national price inflation of 5-6 percent per year)\. 13\. The potential for reducing imports significantly is limited\. Of total imports in 1975, 30 percent consisted of raw materials for exports and a further 27 percent was capital goods, categories in which substantial import savings are unlikely to be compatible with maintaining international competitiveness of export industries\. More than half of the remaining 43 percent of imports consisted uf petroleum and foodgrains\. The scope for restraining petroleum imports (18 percent of the total) is very limited; because domestic energy sources are limited to low quality coal, firewood and limited hydroelectric power; petroleum supplies about half of Korea's energy needs and is utilized almost entirely for essential industrial and transportation purposes\. The number of private automobiles is relatively small and home heating needs are met by coal and wood\. Despite these  -5\.- factors, the rate of growth of petroleum consumption has been severely curtailed - from 1\.8 times GNP growth in 1968-73 to about the same rate as GNP growth in the following two years\. 14\. In order to reduce dependence on imported foodgrains, there has been an energetic effort to increase agricultural productivity\. In 1972-73 imports of grain accounted for about 30 percent of consumption and about 11 percent of total imports\. Since then, the rate of growth of value added in agriculture has nearly doubled (from about 3\.5 percent to about 6 percent per year)\. This was partly the result of good weather, but also reflects the use of improved inputs and the assurance of high grain prices\. The pro- portion of land under high vielding varieties of rice has increased from 16 percent in 1972 to an estimated 48 percent in 1976\. Despite the very severe topographical limitations (only a quarter of the land area is culti- vable), there is a growing promise that Korea will be able to achieve self- sufficiency in its staple foodgrains - rice and barley\. It is anticipated that imports of foodgrains will amount to only about 6 percent of total impQlts\. 15\. The Government set itself two major economic goals for 1976: restraining inflation to a rate of 10 percent and reducing the balanice of payments deficit on current account to $1\.4 billion (from $2\.0 billion in 1975)\. Present indications are that these objectives will be met\. The current deficit for 1976 is now forecast at about $1\.1 billion as a result of buoyant exports and strong measures to restrain domestic demand\. Export earnings are expected to rise to about $7\.2 billion, 45 percent ahead of 1975, primarily because of the economic recovery in the industrialized coun- tries; and GNP is expected to rise by about 11 percent\. Despite this, the rate of increase in wholesale prices is being held at around 10 percent\. In part, this is the result of reduced Government deficits and a slowdown in investment due to the severe restriction of banking credit to the private sector\. The significant improvement in Korea's economic performance in 1976 will provide a strong base for the Fourth Development Plan for the period 1977-81\. Longer-Term Prospects and Program 16\. The prenaration of the Fourth Five Year Plan for the period 1977-81 has afforded an opportunity for a comprehensive review of Korea's economic problems, prospects and priorities\. Its longer-term goals are "growth with enhanced self-sufficiency" and greater "equity and social development"\. Self-sufficiency is interpreted principally in terms of a strengthened balance of payments rather than autarky\. It is the firm inten- tion of the Korean Government to achieve a maximum rate of growth consistent with a sound balance of payments and also with the maintenance of internal financial stability\. Although investment is expected to continue at about 26 percent of GNP over the Plan period which will enable the achievement of a rate of growth of GNP of about 9 percent (slightly lower than the average of 10 percent attained during the last decade), the current account deficit, which is now about 6 percent of GNP, is to be eliminated by 1981\. National savings are expected to finance a higher proportion of total investment than the 72 percent figure during the Third Plan period\.  -6- 17\. Growth and stability are not the only objectives\. Enhanced equity and greater social development are of equal importance in the Korean scheme of things\. The main emphasis is on providing adequate employment opportuni- ties for the rapidly growing labor force to prevent aggravating the unemploy- ment problem /1 and on achievingja wider distribution of the benefits of growth\. Productivity and earnings will be increased by the provision of Lncreased facilities for vocational and in-plant training\. Health\. outlays will increase as a proportion of total investment with special stress on pre- ventive care and an innovative health delivery system td service low income families\. The faminly planning program will be strengthened\. 18\. The achievement of these goals would not require a change in the basic development strategy of export-led growth, which Korea has followed so successfully\. The ratio of total exports to GNP is expected to rise from the current level of about 27 percent to about 42 percent in 1981, with the manufacturing sector continuing to provide about 90 percent of total exports\. This demands the achievement of further gains in efficiency and productivity\. Korea's comparative advantage lies in manufactures, such as machinery, elec- tronics and shipbuilding, which require relatively more skilled labor\. It is also necessary to achieve some import substitution in steel and chemicals to ensure an adequate supply of the intermediate inputs for the export industries\. These changes in the industrial structure will require intensive efforts to improve the mechanisms for the transfer of foreign technology and the develop- ment of appropriate indigenous technology\. 19\. The successful implementation of the Plan will depend largely on Korea's ability to marshall the required resources\. Strong policy measures are envisioned in the Plan to increase the mobilization of domestic resources\. Success in restraining inflation is, as already noted, expected to have a favorable effect on increasing private savings\. In the past, private savings have fluctuated with the movement of the tarms of trade and the rate of inflation\. No further adverse movement in the terms of trade is expectEd in 1976 and the rate of inflation is estimated at 10 percent\. This situation is expected to continue through the Fourth Plan period\. The Government is taking measures designed to channel the higher private savings likely to be generated by these developments to an increasing extent into the financial system, and thereby, into more effective use for productive investments\. In addition to restoring a positive real rate of return on financial forms of savings, the Government is taking steps to increase the supply of government and corporate securities to the public and to provide more attractive schemes for savings mobilization by commercial banks\. 20\. These measures are being supported by fiscal action to increase public savings\. The defense tax surcharge imposed in 1975 is to be continued and a value-added tax introduced\. The extent of the subsidizaticn of farmers /1 Although the rate of population growth has declined to below 2 percent, the rate of growth of the labor force will continue to be around 3 per- cent a year over the next decade because of the baby boom following the Korean War in the early 1950's\.  - 7 - and urban consumers through the Grain Management Fund and the Fertilizer Fund is to be reduced so as to eliminate the operating deficits on these accounts\. This will remove the substantial burden which these Funds had imposed on Government finances (in 1975, the borrowing from the Central Bank on the two accounts was W 350 billion, or nearly 4 percent of GNP)\. The increased resource mobilization and the strong restraint on current expenditures will result in substantial budgetary current surpluses which could be used to finance capital expenditures\. 21\. The fruits of growth are to be spread more equitably among al'' segments of the population\. The continued adoption of a high-growth stra- tegy and emphasis on labor intensive production is expected to generate adequate employment opportunities to absorb the increment in the labor force during the Plan period\. Rural incomes are expected to increase as a result of a further improvement in the agriculturaI terms of trade and increased opportunities for non-farm employment (primarily througi6 the Saemaeul Movement)\. The quality of life in the rural areas is to be fur- ther improved by the provision of infrastructure facilities\. 22\. The Plan's priorities, strategy and programs are sound\. The con- tinued emphasis on relatively rapid growth is essential in the light of the employment objective and the predominant role the export sector is expected to play is appropriate in view of Korea's limited natural resources\. More- over, Korea has the manpower and the entrepreneurial capacity to implement the proposed investment program\. 23\. However, the main impediment to the successful implementation of the Plan is likely to be the difficulty Korea may encounter in raising the necessary resources\. The domestic savings targets are somewhat ambitious while the projected import requirements may turn out to be too low\. The a'bility to obtain foreign capital in adequate amounts and on reasonable terms will continue to be a challenge\. The servicing of the sizeable foreign borrowing required should not pose serious difficulties given the present debt service ratio /1 and the prospects for continued export growth, provided, however, that the proportion of external debt incurred on shorter- term and at high interest rates is not excessive\. Assuming the capital inflows will be forthcoming on reasonable'terms, the debt service ratio is expected to peak below 15 percent by the end of the decade and subse- quently decline steadily as exports continue to expand\. PART II - BANK GROUP OPERATIONS 24\. As of September 30, 1976, Korea had received 28 Bank loans (including one Third Window Loan) and 8 IDA credits, amounting to $1,172\.8 million in loans and $106\.9 million in credits (taking into account cancel- lations and the refinancing of one IDA credit in a subsequent Bank loan)\. /1 Around 12 percent on an outstanding medium and lopg-term debt of $5\.7 billion at the end of 1975\.  -8- 25\. A substantial part of Bank financing has been for the transport sector - $219\.7 million for railways, $191\.5 million for highways and $80 million for ports\. $194\.5 million has been lent for agriculture projects\. The Korea Development Finance Corporation (KDFC) has received $150 million, the Korea Development Bank (KDB) $60 million, and the Medium Industry Bank (MIB) $30 million in Bank loans for relending to private industry\. A total of $80\.3 million has been provided for three education projects, $25\.0 mil- lion for a tourism project, $15\.0 million for a secondary cities project, and $60\.0 million for a rural infrastructure project\. In addition, two program loans amounting to $175\.u million have also been granted to Korea\. 26\. As of September 30, 1976, $523 million OL the total Bank lending remained undisbursed on effective Loans and Credits, mostly from commit- ments in the past eighteen months\. Annex II contains a summary s-tatement of Bank loans, IDA credits, and IFC investments as of that date and notes on the execution of ongoing projects\. As indicated in the notes, progress with project implementation is generally satisfactory\. 27\. Excluding one project that was subsequently cancelled, IFC had by September 30, 1976, entered into 16 commitments totalling $69\.9 million (net of participations and cancellations)\. Under advanced consideration are further investments in leasing and heavy electrical products; under prelimi- nary consideration are projects in cement distribution, special steels and construction materials\. 28\. The emphasis which the Government places on agricultural and rural development is reflected in the Bank's lending program for FY77\. The Miho Watershed Area Development Project and a Second Agricultural Credit Project were approved by the Executive Directors in July and September, res- pectively; and a project encompassing the second stage of the development of the Yong San Gang basin will be submitted to the Board shortly\. 29\. , The further development of the industrial and agricultural sectors and the anticipated growth of exports will require concurrent infrastructural development\. Although the transport sector will be given less emphasis than in the past, the investments required are large, and thus there is consider- able support for this sector in the proposed program\. 30\. The share of the Bank Group in Korea's total external debt (disbursed) outstanding at the end of 1975 was almost 8\.7 percent, and the share of debt service was of the order of 4\.6 percent at that time\. These ratios are expected to increase to around 18 percent and 11 percent by the end of the present decade\. PART III - THE INDUSTRIAL SECTOR AND INDUSTRIAL FINANCING 31\. Korea's highly successful growth performance in recent years was particularly impressive because it has a poor endowment with natural resources apart from relatively poor grade coal and some iron ore it has hardly any mineral deposits and few sources of hydro-electric power\. In  - 10 - have resulted in increasing the share of heavy and chemical industries in gross manufacturing output from 33 percent to 38 percent between 1972 and 1975\. 34\. Korea's long-term development plans are formulated on the premise that its growth over the past decade, which lay along rapidly expanding manufactured goods exports, can be extrapolated through the early 1980s\. To this end, the Fourth Five Year Plan (1977-81) aims at the achievement of an increase in manufactured exports of the order of about 16 percent per annum\. This target, together with a greater domestic demand for manufactured goods will require a growth rate in the output of the industrial sector of around I percent\. The Government is also convinced that the long-term viability of the Korean economy depends upon reducing its reliance on imported capital and intermediate goods\. Further, there is also a realization that the continued growth of the industrial sector will be instrumental in providing relatively well paid employment opportunities for the country's growing labor force\. Korea's industrial development strategy for the Fourth Plan period centers around export expansion, net import substitution and meeting the growing home market demand\. Korea's strong comparative advantage in skill-intensive exports is expected to be retained for the foreseeable future\. Thus, the outlook for the further diversification of industry by increasing the output of intermediate products - especially steel and chemicals and by developing engineering-based industries, appears to be promising\. 35\. The major restructuring and expansion of Korea's industrial sector will require a heavy outlay of capital\. Tentative figures indicate that the investment needs of the major industries for the 1977-81 period would amount to at least $8 billion equivalent - a considerable part of which would be in foreign exchange\. The Government has embarked on a major effort to mobilize the funds required by increasing domestic savings\. A National Investment Fund (NIF) Law was enacted in December 1973\. The Minister of Finance is in charge of the Fund but in effect delegates its management and operation to the Governor of the Bank of Korea\. By 1981, the NIF is expected to finance about 75 percent of total investment needs of major industries\. The resour- ces of the Fund will be mobilized mainly (about three-fourths) by issuance of NIF Bonds and the remainder by direct subscription by the Government\. NIF Bonds will be bought by various savings institutions, including banks and insurance companies, and by private investors\. The funds will be onlent through the banking system for investments in fixed assets (about two-thirds) and for working capital needs (one-third) of major industries\. 36\. The timely provision of long-term finance for the key industries will depend to a large extent on the efficient operation of the NIF and the tapping of other sources of funds such as Korea's three major development finance companies, the Korea Development Finance Corporation (KDFC), KDB and the Medium Industry Bank (MIB)\. These three institutions were responsible for 64 percent of total medium and long-term loans in Korea in 1975\. The Bank has already made five loans to KDFC and is contemplating a sixth; the proposed loan will be the Bank's second to KDB\. A loan for the MIB was also approved in order to support the Government's efforts to encourage the loca- tion of relatively small industrial units in the rural areas and so increase  -9- the immediate post-Korean War years the economy, which was then predomi- nantly agricultural, was sluggish; however, growth began to accelerate sharply about 1963 and has resulted in the transformation of the traditional economy into one in which the dynamic industrial- sector plays a pivotal role\. The pace of industrialization, led by the expansion of manufactured goods exports, has been about thc, most rapid attained by any developing country over the last decade\. The output of the manufacturing sector has risen at the rate of about 18 percent annually since 1963, and its exports which stood at less than $50 million in that year rose to about $4\.5 billion by 1975,' accounting for nearly 90 percent of total merchandise exports\. 32\. The industrialization strategy followed by Korea over the last decade was based on a clear recognition of the limitations placed on it by the country's relative lack of natural resources\. It was primarily on this account that development planning centered around the aim of expanding the export of manufactures rather than concentrating almost entirely on import- substitution as was the case in many developing countries in the early sixties\. One important ingredient in the success of this policy was the fact that formal education during the fifties was at a level comparable with that of countries enjoying income levels three times as high as Korea\. This gave Korea the advantages of a skilled and adaptable labor force as well as the ability to quickly develop efficient managerial talent\. Therefore, Korea has adopted a policy of concentrating on labor-intensive industries such as tex- tiles, clothing, electronics and plywood, the capital requirements of which are low compared to output\. In this respect, it is noteworthy that the great expansion of Korea's industrial structure in recent years has absorbed only 20 percent of total fixed investment and that the incremental capital: output ratio in manufacturing has declined from 1\.7 in 1968 to 1\.4 in recent years, and that value added per worker, which is about $1,700, compares favorably with that in other East Asian countries (Philippines - $600; Taiwan - $1,150; Malaysia - $1,500)\. 33\. The high rate of economic expansion attained during recent years has received some of its impetus from significant structural changes\. The capital stock in manufacturing has almost doubled over the last five years indicating an annual average growth of about 15 percent\. The continuing absorption of labor into industry is a reflection of both a heavy volume of investment in manufacturing and a continued emphasis on labor-intensive lines of production\. During the 1970-75 period, electronics, apparel, leather products and footwear were among the fastest growing industries\. However, the headway made during these years in the establishment of the steel and shipbuilding industries is indicative of a shift into more sophisticated lines of production\. The completion of the second stage of the Pohang Plant has increased Korea's output of steel to a level of over 2\.5 million tons per annum; also, the shipbuilding industry which has been developed largely for exports has shown remarkable flexibility in adapting to changes in the pattern of international demand for its products, since it has shifted its efforts from building supertankers to conventional vessels\. Korea's efforts to deepen and diversify the industrial structure  - 12 - 41\. Although the Government is KDB's sole shareholder, KDB has full authority in making decisions on projects financed from resources raised independently of the Government, including funds from international institu- tions\. Operations and Resources 42\. KDB's operations fall into the following principal categories: extending capital loans in foreign and domestic currency and working capital loans in domestic currency; making investments in equity shares, corporate and municipal bonds and debentures; issuing guarantees in domestic and foreign currencies; and engaging in the leasing of industrial machinery through its subsidiary, the Korea Industrial Leasing Company (KILC)\. 43\. From its inception in 1954 to December 31, 1975, KDB made loan commitments aggregating W 863 billion ($1\.8 billion)\. Nearly 80 percent of this amount was committed in the last five years\. As of December 31, 1975, loans outstanding amounted to W 577\.8 billion ($1\.2 billion) in respect of 2,416 loans to 446 companies; of this amount a; 528\.8 billion\.($1\.1 billion) for 2,045 projects was for local currency loans, while foreign currency loans amounted to W 49\.0 billion ($0\.1 billion) for 371 projects\. KDB's foreign currency lending operations began in 1960 when it assumed responsi- bility for the use of a line of credit provided to the Government by USAID\. 44\. The share of the private sector in KDB's loan commitments decreased marginally over the last three years (from 45 percent,to 42 percent); the sector accounted for nearly 38 percent of KDB's total outstanding portfolio as of December 31, 1975\. In terms of the number of conipanies, the private sector predominates with 93 percent of outstanding capital loans and 91 per- cent of working capital loans\. While the average size of loans committed by KDB to public sector enterprises increased marginally over the last three years (from W 500 million in 1973 to W 550 million in 1975), there was a sizeable increase in the average size of loans to the private sector, from W 47 million to W 137 million\. At the end of 1975, loans exceeding W 200 mil- lion ($412,000) each accounted for 22 percent of the total number of loans, but nearly 87 percent of the total amount outstanding\. The geographical distribution of K1DB's lending operations follows the general pattern of industrial location in Korea; some progress was made in 1975 in financing projects in regions other than the two main centers of Seoul and Busan\. The manufacturing sector has received the largest proportion of KDB's outstanding loans (37 percent), while the principal nonmanufacturing sectors in KDB's portfolio are electricity (34\.8 percent) and t:ansportation (13\.4 percent)\. 45\. KDB's investment portfolio, which had increased at an average annual rate of 8 percent during the period 1971-74, rose by 91 percent in 1975, mainly on account of substantial share transfers by the Government (cf paragraph 49)\. At the end of 1975, it consisted of W 131\.6 billion ($271 million) in equity shares and W 13\.5 billion ($28 million) in bonds and debentures\. Twenty-one of the 33 companies in KDB's portfolio at tne end of 1975 belonged to the public sector\. Manufacturing enterprises accounted for 36 percent by number and 57 percent by amount with construction- rolated and service industries constituting the largest share of the enter- prises in the nonmanufacturing sector\.  off-farm employment opportunities\. All three institutions have obtained loans from the Asian Development Bank; KDFC and KDB have also been success- ful in borrowing from commercial sources abroad\. The magnitude of the demand for term finance in Korea is such that these three institutions, even if their operations increase significantly, will continue to act in a complementary rather than a competitive manner\. PART IV - THE PROJECT 37\. A report entitled "Appraisal of Korea Development Bank" (No\. 1255-KG, dated September 30, 1976) is being distributed separately\. A Loan and Project Summary is attached as Annex III\. Negotiations were held in Washington from September 20-27 with a Korean delegation led by Mr\. Hung-Koo Kang, Counselor at the Korean Embassy in Washington, D\.C\. The CoG\.pany 38\. KDB is Korea's largest term-lending institution and is wholly Government-owned\. KDB was established in 1954; its primary purpose is "to supply and administer funds, in accordance with Government policies, for financing necessary industrial projects with a View to expediting industrial rehabilitation and economic development\." In its first few years, KDB con- centrated on helping iia the reconstruction and rehabilitation of industry and infrastructure which had been severely disrupted during the Korean War\. During this phase, KDB restricted its activities largely to making local currency loans to finance enterprises engaged in power generation, coal mining and textile manufacture\. In recent years, it has broadened its activities to include the provision of finance for transport, shipbuilding and most indus- tries in the manufacturing sector, both public and private\. 39\. In addition to the provision of finance, KDB performs an important qualitative role in support of Korean industry\. It retains the majority interest in a number of Government sponsored projects and eventually sells the shares to private investors after improving the projects' performance\. It also carries out statistical surveys, conducts economic and industrial rese\.rch, undertakes engineering surveys and business analysis and provides managerial assistance for the projects it finances\. On occasion, it has advised the Government on major economic policy issues and assisted in the formulation and execution of public sector projects\. 40\. KDB's operations are governed by the Act under which it was established, and which enumerates general policies and guidelines; these are elaborated upon by the Enforcement Decree and its by-laws\. In addition, KDB's operations are conducted in keeping with a Policy Statement whlich out- linss its operational and financial policies and procedures\. The Minister of Finance exercises broad supervisory powers over KDB's general strategy, policies, budget and planning through: (a) approval of KDB's Annual Opera- tional Program, which is basically a quarterly analysis of the projected uses and sources of funds, (b) audit of KDB's budget and accounts, (c) exami- nation of the various periodic reports submitted by KDB, and (d) approval of the by-laws and Operating Manuals and any revisions thereof\.  - 13 - 46\. KDB commenced guarantee operations in domestic currency in 1961 and in foreign currency in 1968\. The outstanding guarantee portfolio as of Decermber 31, 1975 was W 1,480 billion ($3\.1 billion), 2\.6 times KDB's outstanding loan portfolio\. Some of the 5auarantees are large; outstanding guarantees exceeding W 2 billion ($4 million) still represented 90 percent of KDB's portfolio at the end of 19175, although their share of commitments had declined in the last two years\. Although the default rate had been negligible and the issuance of guarantees represents an important service to industry, the potential risk to KDB was considerable and could have seriously affected its long-term creditworthiness\. However, a severe cur- tailment of KDB's guarantee function is not considered advisable\. In view of this, when the First Bank Loan was made to KDB, the Government and KDB established a Guarantee Release Arrangement\. Under this Arrangement, GRA, the Government has undertaken to provide KDB with funds necessary to enable it to meet its obligations on defaulting guarantees and, should the default- ing company be unable to meet its obligations, to reimburse KDB for whatever payments it makes in such cases\. 47\. KDB finances Government sponsored projects, the selection and formulation of which are carried out by other entities such as the MIinistry of Commerce and Industry or consultants\. In such instances, the Government uses KDB as a conduit for funds provided from budgetary or other sources\. This formula has been applied, for instance, to loans channelled through KDB to the Korea Electric Company, the Korea National Railroad and the Korea Highway Corporation\. The large exposure of KDB in the Korea Electric Company led the Bank to ask, as a condition of the First Loan, that an agreement be signed between the KDB and the Government whereby, in effect, the risks attached to KDB's lending to the electric company were assumed by the Government\. An assurance has been received, in connection with the proposed loan, that whenever KDB makes loans on behalf of the Government for projects selected by the Government, KDB will act strictly as an agent of the Government, without assuming the financial risk\. It was further agreed that the amount involved would be shown separately as administered funds in its balance sheet (Section 4\.01 (b) of the draft Loan Agreement)\. 48\. The establishment of leasing companies in Korea in December 1972 presented KDB with another opportunity to expand its operations into a new field\. The Government was becoming increasingly concerned with the diffi- culties encountered by relatively small enterprises, which traditionally have high debt/equity ratios and limited available collateral, in securing medium and long-term capital\. It was felt that leasing could offer a solution to this particular problem which was faced by a large number of medium and small sized firms seeking to expand their operations since leas- ing companies do not normally require collateral even from those concerns whose property had already been pledged in full for security in relation to existing loans from commercial sources\. Accordingly, KILC was estab-- lished in December 1972 as a wholly-owned subsidiary of KDB\. KILC's opera- tions amounted to about W 1\.08 billion ($2\.2 million) in 1973 and almost quadrupled to a level of W 4 wbillion ($8\.2 million) in 1974, reflecting the strong demand for its financial assistance on the part of small and  - 14 - medium scale enterprises in the vitally important manufacturing sector in Korea\. KILC's leasing contracts remained at a level of around W 4 billion in 1975 as a consequence of resource constraints which were also felt by its parent company - KDB\. During its three years of operations KILC has proved an efficient organization and succeeded in making a valuable contri- bution in the provision of capital for an important segment of Korea's industrial sector\. The principal objective in earmarking funds from the proposed loan was to enable it to increase the volume of its operations\. Resource Structure 49\. As of December 31, 1975, KDB had total resources of W 861\.8 bil- lion ($1\.8 billion), of which W 43\.3 billion were short-term resources consisting mainly of short-term deposits\. KDB's equity was its largest single source of funds\. The authorized share capital is W 300 billion, of which W 203\.2 billion had been paid in at the end of 1975 consisting of W 79\.8 billion in cash, W 47\.5 billion in the form of loan conversions and W 75\.9 billion through the transfer of shares\. The substantial increase of W 50 billion in the value of shares transferred last year has affected KDB's liquidity position\. Since most of the shares are not traded, they cannot be readily sold by KDB\. The problem is cbmpounded by the fact that, under existing laws, the shares are transferred on the basis of the "higher of appraised or face value\." An assurance has been received that the Govern- ment will make its equity contributions normally in cash, or by conversion of loans, and in the exceptional case when its subscription is made by way of transfer of shares, it will ensure that the shares will be valued on a fair and reasonable basis\. 50\. The rest of KDB's domestic currency resources were obtained largely from reserves and retained earnings (W 50 billion, $103 million), borrowings from Government (W 149 billion, $307\.2 million), the National Investment Fund (W 125\.6 billion, $259 million), the Industrial Rationali- zation Fund (W 51 billion, $105\.4 million) and Industrial Finance Debentures (W 68\.5 billion, $141\.3 million)\. 51\. KDB has also used its commercial borrowings abroad to make loans in domestic currency\. It obtained its first Eurodollar loan of $25 million in 1970; this has been fully repaid\. The second loan of $80 million was subscribed in January 1974, is repayable between 1977 and 1984 and has a floating interest rate of 1 percent over LIBOR\. A further loan in a similar amount was negotiated in July 1976, which is repayable over five years and carries interest at 1\.875 percent over LIBOR\. These funds are onlent also at a floating rate with the foreign exchange risk being borne by the sub- borrowers\. In addition, KDB has been successful this year in issuing Industrial Finance Debentures for $25 million in Abu Dhabi, the proceeds of which are also used for onlending in domestic currency\. 52\. KDB contracted its first foreign currency borrowing from USAID in April 1960 in the form of a line of credit of $5 million, which was followed by two more lines of credit in 1966 and 1968 totalling $22\.4 million\. It has received three loans totalling DM 40 million ($16\.9 million) from the  - 15 Kreditanstalt fur Wiederaufbau (KfW) and expects to secure another amounting to DM 20 million later this year\. Four loans totalling $100 million have also been received from the Asian Development Bank\. In all these cases the foreign exchange risk is borne by the subborrowers\. Financial Situation 53\. As of December 31, 1975, KDB's total assets amounted to W 2,311 bil- lion ($4,765 million), including W 1,480 billion of outstanding guarantees\. Over the period 1971-1975, total assets increased 3\.2 times and at the end of the period the loan portfolio (excluding guarantees) accounted for 60 percent, the investment portfolio for 17 percent and current assets for 18 percent of total assets\. Equity financed 31 percent of total assets and long- and short- term liabilities the balance\. Borrowings in domestic currency (W 385\.9 bil- lion) acounted for 76 percent of Tbng-term debt, while borrowings in foreign currency (W 84 billion) constituted 17 percent of such debt\. \.54\. KDB's liquidity position deteriorated during 1975 and the current ratio had declined to 1\.0 by the end of the year\. This was the result of KDB's inability to raise long-term commercial funds from abroad because of the international capital market situation, the Jeterioration in business conditions in Korea in 1975 which led to the rescheduling of a number of loans, and the fact that capital contributions by Government were largely in the form of transfer of shares\. This situation prompted KDB to formulate a number of policies directed to raising the current ratio to 1\.5:1\. These included: the accelerated sale of shares held, stricter matching of maturi- ties of assets and liabilities, requesting prepayments whenever the financial capability of borrowers would justify it, and an approach to the Government to provide equity capital in cash or by the conversion of Government loans\. These measures have already borne fruit; the current ratio improved to 1\.4 by the end of March 1976\. 55\. The KDB Act stipulates that, at any given time, the aggregate of outstanding Industrial Finance Debentures and KDB's guarantees should not exceed ten times its net worth\. As of December 31, 1975, KDB was within this limit (5\.6 times) and its debt/equity ratio (3\.3:1) was also well within the limit of 5:1 specified in the Loan Agreement for the First Loan\. 56\. Over the past five years, KDB's profitability was low, averaging 1\.3 percent of total assets or 3\.3 percent of equity\. However, there was a significant improvement in 1975 when its profits increased to 9\.2 percent of total assets and 6\.9 percerit of equity\. This modest profitability does not reflect inefficiency but is largely attributable to the fact that, as a Government-owned financial intermediary, KDB is not primarily profit-oriented\. 57\. KDB's portfolio is of good qualit\. Of the 431 companies in opera- tion to which KDB has lent (or invested in), 385 were operating profitably, 33 were operating at a loss but without facing serious difficulties and 13 companies representing 4\.4 percent of the total portfolio were likely to face serious problems or were closed temporarily\. Total arrears amounted to only 0\.2 percent of the total outstanding loan portfolio, as of December 31, 1975\.  - 16 - Economic Impact of KDB's Projects 58\. KDB plays a predominant role in term financing in Korea\. Its out- standing loan balance of W 577\.8 ($1\.2 billion) at the end of 1975 accounted for 16 percent of total loans of all the country's banking institutions\. KDB directly financed 7 percent of total fixed capital formation during 1975 and, including its guarantee operations, helped to finance 34 percent of total fixed investment during the year\. Its foreign guarantee portfolio of $3\.0 bil- lion represented 38 percent of Korea's total foreign medium and long-term debt at the end of 1975\. 59\. KDB assists the Government in formulating and implementing economic policy, advising on specific issues, helping in the conduct of studies and programs and participating in various Government committees\. KDB is well qualified to do so since it has a competent staff, performs regular financial and production surveys and, through its day-to-day operations, is in close contact with the business community\. KDB's economic research activities are well recognized in Korea and many of its reguilar studies and surveys are published and receive wide circulation\. In the implementation of Government policy, it operates as a direct channel for the Government to provide funds for specific priority projects and also as an efficient allocator of resources which it raises independently\. It has underscored Government priorities by supporting export oriented projects and devoting a sizeable proportion of its resources to heavy and chemical industries\. 60\. In 1975, the output of enterprises assisted by KDB was valued at $3\.6 billion, or one-third of total industrial production, and their exports amounted to $2\.1 billion which represented over 40 percent of Korea's total manufactured exports in that year\. The projects assisted by KDB generate considerable additional employment; its manufacturing clients alone employ 340,000 workers or about 15 percent of total manufacturing employment\. 61\. An analysis of a sample of 33 of KDB supported projects indicates that they had highly satisfactory economic rates of return which in most cases exceeded the financial rates of return; moreover, in all cases the economic rate of return exceeded 15 percent, which is above the Bank staff's estimate of the opportunity cost of capital in Korea\. These results are not surprising since Korea's industrial policies have been highly successful and KDB's close adherence to them has enabled it to finance economically sound projects\. Business Prospects and Resource Requirements 62\. Despite the energy crisis and the worldwide recession of the last two years, the Korean economy is expected to grow at around 11 percent in 1976 and to maintain over the rest of the decade a rate of growth of about 9 percent\. Industry will have to continue to play a crucial role in Korea's\. growth efforts and it is expected that the export-oriented manufacturing sector will have to contribute a significant proportion of incremental output and will, thus, require a high level of investment if Korea is to achieve her growth targets\. Because of its size, its competent management and staff, and its development-oriented policies, KDB will have a very important role to play in helping to achieve Korea's overall economic goals\.  - 17 - 63\. For the three-year period 1976-78, KDB's loan commitments are expected to be of the order of W 699\.6 billion ($1\.4 billion) in domestic ci'rrency and W 106\.3 billion ($219 million) in foreign currency; in addi- tion, it would require W 69\.9 billion in domestic currency for equity investment commitments, making a total of W 875\.8 billion ($1\.8 billion)\. This projected volume of business is fully attainable from an institutional, management and staff point of view, but the actual level of operations will be determined by resource availabilities rather than being restricted by a lack of demand for capital\. KDB should be able to exceed its business forecast if it succeeds in raising additional long-term resources\. 64\. To meet the projected commitments and to improve KDB's liquidity position, KDB proposes to borrow W 987\.2 billion ($2\.0 billion), of which W 109 billion ($225 million) would be in foreign exchange\. The proposed Bank loan would finance about one-third of KDB's foreign exchange commit- ments in the current year and the next two years, and the KDB proposes to request a further Bank loan of approximately $100 million in FY79\. The balance is expected to be financed by the Asian Development Bank and KfW\. Relending Terms 65\. KDB's interest rate structure has been influenced by the role it is expected to play\. Most interest rates An Korea are controlled by the Government through the Monetary Board\. KDB's interest rates on local cur- rency loans range from 12 to 17\.5 percent depending on the source of funds, but preferential rates, below this range, are granted for priority indus- tries\. Loans from funds provided by international organizations are onlent with a 2 percent spread above the KDB's borrowing rate with the ultimate beneficiary bearing the exchange risk\. There is a penalty rate of 25 per- cent on all overdue loans\. The Government is keeping the level of interest rates under close and constant review and has recently effected some changes in the interest rate structure by increasing these rates selectively\. It has signified its intention to make such further changes as may be necessary in the light of the rate of inflation prevailing at the end of the year\. 66\. In view of the quality of KDB's appraisal work and the proven ability of its management to make sound investment decisions, an increase in the free limit from $750,000 to $1\.5 million is proposed\. (Section 2\.03 (b) of the draft Loan Agreement)\. There would be no aggregate free limit under the proposed loan\. With the proposed free limit, it is estimated that subprojects accounting for about three-fourths of the proposed loan amount would require prior approval of the Bank\. Objectives and Justification 67\. The contirnued growth of the industrial sector is a crucial element of Korea's developmenit strategy\. KDB's experienced and competent staff and its relations with the Government and business community make it a parti- cularly suitable channel for providing finance for medium- and large-scale projects\. KDB has processed a large number of projects each year and has played an important role in the process of industrial development in Korea, particularly over the last decade\. Its investments are economically sound\.  - 18 - 68\. KDB's further growth is not expecced to be constrained by a lack of demand for the financing and other services it offers\. The main objec- tive of the proposed Bank loan, in addition to the provision of finance for high priority industrial investment, is to assist KDB in expanding its operations on an economically and financially sound basis by improving its appraisal standards, overall planning and financial management\. 69\. The objective of apportioning $7\.5 million of the proposed loan to the Korea Industrial Leasing Company, a suibsidiary of the KDB (Section 2\.02 (a) of the draft Loan Agreement), is to use the well managed leasing company as an intermediary to reach small scale enterprises\. The KILC component will be used for projects meeting specific eligibility criteria; only enterprises with total assets of up to W 600 million or projects which involve the creation of jobs at an estimated cost of up to $15,000 each will normally be eligible (Schedule 3 to the Loan Agreement)\. 70\. In order to obtain a reasonable sectoral distribution of the sub- loans and to ensure that the bulk of the loan is not used for a few very large projects, an informal understanding has been obtained that not more than 25 percent of the loan would be used to finance projects in any one nonmanufacturing sector, and that within the manufacturing sector this percentage would apply to individual industries\. Moreover, the size of a single subloan will not normally exceed $5 million\. 71\. To sum up, the proposed loan will enable the Bank to continue to play its institution building role and increase the flow of resources, primarily to the crucially important industrial sector in support of the Government's development strategy; it will also, through the KILC compo- nent, assist smaller enterprises\. PART V - LEGAL INSTRUMENTS AND AUTHORITY 72\. The draft Loan Agreement between the Bank and the Korea Develop- ment Bank, the draft Guarantee Agreement between the Republic of Korea and the Bank, the report of the Committee provided for in Article III, Section 4 (iii) of the Articles of Agreememt of the Bank and the text of a Resolution approving the proposed loan are being distributed to the Executive Directors separately\. The Loan and Guarantee Agreements follow the normal pattern of Bank agreements of this kind\. The special features of this loan are described in paragraphs 48 and 69 of this Report\. 73\. I am satisfied that the proposed loan would comply with the Articles of Agreement of the Bank\.  - 19 - Part VI - RECOMMENDATION 74\. I recommend that the Executive Directors approve the proposed loan\. Robert S\. McNamara President by J\. Burke Knapp Attachments November 3, 1976  ANNEX I Page 1 of 1 pages TABLE 3A KOREA, REPUBLIC 0'F - SOCIAL INDICATORS DATA SHEET LAND AREA--THOU--------- - ARE KOREA REPUBLIC OF REFERENCE COUNTRIES (1970) -------------- MOS-T-- ------- ATOGTRAIC\. 24\. 1960 1970 ESTIMATE THAILAND TURKEY JAPAN * AGIC 24- -- - ------- --------- - ---- ------- ----- ------- --- -- GNP PER CAPITA (USS) 110\.0 'E 270\.0 550\.0 220\.0 480\.0 2650\.0 - -- - --- - ----- ---- --- POPULATION AND VITAL STATISTICS ------------------------------- POPULATICN (MID-YR\. MILLION) 25\.0 31\.4 31t,O 36\.3 35\.7 104\.3 PER SOUARE KDS 250\.0 319\.0 345\.0 71\.0 146\.0 282\.0 PER SU\. KM\. AGRICULTURAL LAND 1217\.0 1320 0 1368\.0 * 3 \.0 1575\.0 VITAL STATISTICS CRUDE BIRTH RATE PER THOUSAND 397 35\.0 28\.7 44, 40\.6 17\.5 CRUDE CEATH RATE PER THOUSAND 22\.9 11\.14 8\.8 13\.7 14\.4 7\.1 INFANT MORTALITY RATE (/THOU) \. 00 150 1\. LIFE EXPECTANCY AT BIRTH 'YRS) 52\.6 57; 60\.6 55\.5 54\.4 71\.1 GROSS PEPRODUCTION RATE 3\.1 /a 2\.6 2\.4 3\.2 2\.6 /a,b 1\.0 POPULATION GROWTH RATE (%) TOTAL 2 \.8 2\.3 1\.6 3\.1 2\.5 1\.0 URBAN 5\.9 /b 6\.4 4\.8 3\.7 4\.2 4\.0 URBAN POPULATION 1t OF TOTAL) 28\.0 141\.2 147\.3 13\.0 31\.2 84\.4 AGF STRUCTURE (PERCENoT) A TO 14 YEARS 44\.0 42\.1 39\.9 /a 45\.0 41\.8 24\.0 1 TO 14 YEARS 53\.0 54\.6 56\.7 7-a 52\.0 53\.9 68\.9 65 YEAT S ANS OVER 3\.0 3\.3 3\.4 7L 3\.0 4\.3 7\.1 AGE DEPENDENCY RATIO 0\.9 0,8 0\.8/a 0\.9 3\.9 0\.5 EC3NOMIC DEPENDENCY RATIO 1-5/C 1\.4 1\.*2 712 L\.1/ 0\.6 FAMILY PLANNING ACCEPTORS (CUMULATIVE, THOU) \. \.A' \. 460\.0 USERS (% OF MARRIEn WOMEN) \. 42\.0 34\.0 10\.0 \.2 EMPLOYMENT - -- - --- --- 160- 40\.0/ 30 TOTAL LABOR CORCE ITHOUSAND) 7500\.0 10400\.0 12100\.0 16700\.0 14500\.0 /d 53300\.0 LABOR FORCF IN AGRICULTURE (17 66\.0 50\.5/a 50\.6/-,b 79\.0 67\.3 19\.3 UNEMPLIYEO (% OF LABOR FORCE) 9\.0 5\.7 14\.1 \. 4\.0 /e 1\.2 INCC4E DISTPIBUTION -- -- -- -- -- -- - --- -- - % OF PRIVATE INCOME RECOD BY- HIGHFST 58 OF HOUSEHOLDS 17\.0 /d 17\.1 18\.1 lb ^- 32\.8 /f 14\.2 HIGHEST 208 OF HOUSEHOLDS 42\.027 1414\.5 43\.4 77 * 60\.6 7 37\.6 LOWEST 208 OF HOUSEHOLDS 7\.0 7d 7\.1 7\.2 7? \. 2\.97? 8\.8 LOWEST 408 OF HOUSEHOLDS 20\.0 7d 17\.7 18\.7 7? \. 9\.4 7-f 22\.3 DISTRIBUTION OF LAND OWNERSHIP ---------------------- t OWNED BY TOP 108 OF OWNERS 27\.0 28\.0 \. \. 53\.3 Y OWNED BY SMALLEST 10t OWNERS 3\.0 2\.0 \. \. 3\.9 iHEALTH AND NUTRITION POPULATICN PER PHYSICIAN 3000\.0 /e,f 2210\.0 /c 1990\.0 /ad 7970\.0 2220\.0 880\.0 POPULATION PER NURSING PERSON 3220\.0 e 1760\.0 7? 1700\.0 6-q 6650\.0 1880\.0 /F 240\.0 POPULATION PEP tOSPITAL BED 2600\.0 L 1920\.0 1990\.0 7 850\.0 490\.0 80\.0 PER CAPITA SUPPLY OF - CALORIES 18 OF REOUIREMENTS) 85\.0 103\.0 107\.0 /e 105\.0 110\.0 106\.0 PROTEIN (GRAMS PER DAY) 53\.0 65\.0 68\.0 7?e- 52\.0 78\.3 76\.3 -OF WHICH ANIMAL AND PULSE 13\.0/e 19\.0 ,, 17\.0/a 22\.0 lh 45\.0 DEATH RATE (/THOUI AGES 1-4 15\.0jb 1\.0 EDUCATION ADJUSTED ENROLLMENT RATIO PRIMARY SCHOOL 96\.0 104\.0 1014\.0 82\.0 lb 111\.0 / 101\.0 SECONDARY SCHOOL 27\.0 41\.0 147\.0 /a 16\.0 7 28\.0 91\.0 YEARS OF SCHOOLING PROVIOEO (FIRST AND SECrONO LEVEL) 12\.0 12\.0 1Z\.0 12\.0 11\.0 12\.0 VOCATIONA\. ENROLLMENT6 (I OF SECONDARY) 14\.0 16\.0 16\.0 /a 14\.0 14\.0 20\.0 ADULT LITERACY RATE 18) \. 87\.0 92\.0 7? 79\.0 55\.0 / 99\.0 HOUSING PERSONS PER ROOM (AVERAGE) 2\.8/ 2\.7 \. \. 1\.9 1\.0 OCCUPIED OWELLINGS WITHOl\.T PIPED WATER 18) 88\.0 Jg,h 80\.0 /d \. \. 64\.3 5\.0 ACCESS TO ELECTRICITY (8 OF ALL DWELLINGS) 28\.0 50\.0 8O\.0 /a \. 41\.0 RURAL DWELLINGS CONNECTED TO ELECTRICITY (8) 12\.0 30\.0 40\.0 /a \. 18\.0 CONSUMPT ION - ----- ---- - RAnIO RECEIVERS (PER T44O7J PnP) 32\.0 126\.0 127\.0 /a 78\.0 89\.0 551\.0 PASSENGER CARS (PER THOU POP) 0\.4 2\.0 2\.0 5\.0 4\.J 84\.U ELECTRICITY (KWH/YR PER CAP) 71\.0 307\.0 535,0 124\.0 247\.0 3391\.0 NEWSPRINT (KG/YR PER CAPI 1\.8 3\.4 3\.3 1\.0 ' 0\.7 18\.9 ---------------------------------------------------------------------------------------------------------- SEE NOTES AND DEFINITIONS ON REVERSE  Page 2 of L pages NOTES Unless otherwis Inoted, data for 1960 refer to any yeaLr between 1959 and 1961, for 1970 tetween 1968 and 1970, and for Moat Recent Estimate between 1973 and 1975\. aa Japro, has been selected as en objective country due to the similarIty of the present K\.,,\.,n economic structure to that of Japan in the mid-fifties (with the sane principle resource base, i\.e\., efficient, industrious, cheap labor ann heav,y reliance on imported raw m\.atri\.ls)\. Mreove\.r, agricul- ture, transport, and other sectors of the economy have similar char\.snt,rlstic,\. Koeam also ha, a pattern of Industrial developan,nt which is not veryv different frmn the one Japan pursued with great success in the sxtes KOREA, REP\. OF 1960 Ls 1950-55; /b i955-60; /c Ratio of population -nder 15 aod 65 and ove\.r to total labor force; /d Wage end salary income of urban households,' 1961s; A 1)\.62; If Registerd, not all practicing in the country; & Households; A Water piped inside\. 1970 /A A\., percentage of employment; b Regie,terert; /c hs\.glsterd, not all practicing in the country; /d Water piped inside\. MOST R ENT ESTIMATE: , 1972; fb As perce-tags of employmen t; /c 1971, -rurl and urban; d Registered, not all practiciri in the country; /c 1969-71\. avrage; If 10 years old and over ; h Ratio ofpoua tion under 15 and 65 and ov,er to total labor forc\. a P1 THAILAND 1970 /A 196h-66; /b 7-13 and 11-18 years of age respectively; Ic\. Public schools, which include technical educa\.tion at ith post-scondary leve\.1 TURKEY 1970 /A Excludes 17 eas tern provinces; /b 196,5-67; Ac Ratio of population under 15 and b5 and ove\.r to labor force age 15 years old and over; Id 15 yea\.rs and over, e\.xcludes unemployed; A Registered only; If Disposa ble income; /p Including as\.slstant nurses end midwives; /b 19611-hi; I 7-11 years, of age; Aj Persons six year old and over who tell the cnenus takers that they can re-ad and writo\. R&6 Aeugut L, 1i976 OEFTNrrI0NS OP SO*ILN DIAORS Lend Ares (thou ta2) Population, o Ursing erson - Population div,Ided by number ni' prar tie- Total1 Total surface ares compriatng lend area and inland waters\. tog myle ad female graduate uss "trai\.ned' or "ces-tii'iod"1 ;urses, 15r-ic\. -most recent estimate of agricultural area used temporarily or and auxiliary personnel with tra,inting or exp-i-en\. permanetly fur crops, psaturew, market & kitchen gardens or to tie fallow Population per hospital bed - Population divided by number of hospital beds avil\.abl in pub1lc and pfia'vste general and specialized hospital GNP per -apita (US$) - GNP' per capit\. estimates at current market prices, and rehabilitation cene~eit;snrighosadesblsv,t cacltdb ea ovrinmthod aso World Bank Atlas (17-75 basis) 'or custodial and preventive cars\. oe1td\.b,a cvri 193Per\. st~ssl fclre %o eurnns optdfo mr 1960, 1970 and 1975 data\.rcpiz-pyoc4 i\. %f u nt Cmtd\.rm-eg equivalent of net food supplies availale in country per capita per \.poplation and vitalor1 wc day; available supplies comprise dbvstic production, imports leass Population (\.id-yr\.millionl - As of Juiy first:- if nor aviabe\.xports, and changes in atock;\. net supplies exclate animal feed, seeds, average of two end-year estimatea; 1960, 1970 and 1975 data, quantities used in food process,ing and losses in distribution; r- quirements were estimated by, FAO based on ploysiologica1 needs, for Population,d\.nity - par wauare k\. - Hid-year population per square kilo- normal activity and healt'h cons\.idering onvironmental temperature, vater (100 hectar\.) of total area,\. body weights, age and sex distributions of populatlion, and allowing Population d \.ity, - par pu\.re tka of_ _ric\. lend - Computed a bove\. for 10% for waste at household level\. ag,!'cultura1 land only\. Per capita splyof protein (grams per day) - Pcotsin con tent of per capita net suppy of food par day; net supply of food is defined as ,ClLtnV, rt,uownd bove; requirements for all coutries established by USDA Economic Crude birth rote Per th\.d- Annual live births per thousand of mid- Resea\.rch Services providts for a minimum allowace of 60 gram of totl1 year populatlons ten-year aritthotic averges ending in 1960 and 1970\. protein per day, and 20 grsn of animal and pu\.Lse protei, Si I-,, \. and five-year -avrge ending in 1975 for most re\.est e\.inaite, gram should be ania1 protein; these ,tandards are lowe\.r than those Crude death rat\. per thousand - Asn-ua d\.ath\. per thousand of mid-pear of 75 gram of total protein and 23 gron faimlpoen sa vr population:, te!n-year arittosetic ave-aee ending in 1960 sod 1970, and age for the sorld, proposed by FAO in t\.he Third World Food Survy\. five-year -verage ending in 1975 for soar recet estimate\. Per, capita protein suplfomaimal and pulse - Protein suppliy of food Infant mortaLity rate flrth\.u) - Annual deaths of infants under one year of derived from animals andpules in grams per day\. age per thousand Live births, ra\.te thra -- An-ual deaths per thoumand in age group Life P expctncy at birth lyre) Average nasher of years of life remaiing to Br\. cide inthis age group;,ugse sa niao atbirth; usua lly five-year averges ending in 1960, 1970 and 1975 for of malnutrition\. develIoping tosstrie\. r-sa reproduction rate - Average somber of Live daughtera\. a woman wilt Education best in her normal reproductive period if she p\.serinc\.a present age- AdjusFed enrollment ratio __i- iMar shool-Eo1 mn of all agesa aP\.cIfit fertility rae;usually five\.-year avarags ending in 1960, pretge or primary schoolag population includes rhildren aged 1970 and 1975 for developing countrie\. 6-1 years but adjusted for different lengthe of primary education; Poultfs greu rat t%) - Iog Campom annuaL growth rates of nid- for coutries with universal education, enrolment may exceed 100% year poulton for 190-601960- 0, md1970-75\. since som pupils aer belo oravet ficlsholg\. Pooulatiotrh grO gth - b- - Coptdliegothrt f totl Iust\.d serollment ratio - seconarehool - Computed as above; sec- rete(5) uron\. urbne likea ma h rafete tompale ondary education requires at least fou years of approved primary poplation; datafferec\.ntrdSiton ofubnamemyafc opr-instruction; provides general,, vecational or teacher training instruc- Urban o ulation (%of total) - Ratio of urban to total population; dif- tions for pupils of 12 to 17 Yesrs of age; corepondence courses are f7rnt d7 inhit~ioneof -ban areas nay affect comparability of data generally excluded\. amang countries\. Yers of schooling providsd (first and second levels) - Total years of Ag~pgur~~gcep) Cilden(0-1 eas),wokin-ae l~-tyeas) shooirng; at secondary lee,vocational instr,stion may be partially yearsutre~& nt anidr-(0as yar) wofk -\.(5-4y\.aor completely excluded\. an rtr- b5y\.r o- ver) aspercentages o mid-year population\. Vocational enrollment (% of sec\.ndawY) - 'Vocational institutions include ratiooigo -Rtoopouainudr1en65edoetotechnical, industrial or other programs which operate independently U\.n\.i\.d if~e'37ruh6\.or aso departments of secondary institutions \. 9noc t:- Ratio of populevion under 15 and 65 and over ttlt rac rte ( - Literate adults (able to read and write) as to th rforce\. age group of 15-6h years\. Family Planning - accertors (cWuative, thou) - Cumulative number of percentage of tota1 adult population aged 15 years and over\. en,ceptors of birth-control devices under auspices of national fenily usn planning program since inception\. Average Family planning - users (% of rmaried womn)) - Percentages of marrisd Fora\.npor -m a vergeS) - Aegenumber of persons per room in oc- women of chi\.ld,-bearing age (15-44I years,) who use birth-control de- i1d6sIetoawlim nurnaes;wligsxcdeo- vic:\. to all married women In same age group, permanent stro mtre aBnd unoccupied parts\. Opp id welings without pip d water (%) - Occupied conventional bu\.WIrmnt dse\.lig Inubn and rur'al areas without inside or outside piped - Ecnomiallyantie prson, inludig wter fclties as percentage of all oupied dwellings\. armed Crces and unemployed but excluding housewives, students, eta\.;Acesieltriy(5oal elng)-C vcinldwlns definitinon in -variou, countries are not comparable, with electrifity in living quarters as percent of total d-a11ings labor force In agriculture (%W giutrllbrfre(nfrig in urban and rural areas\. frsr,hnigadpAgricuntaur f oal laborfoc(i farce\.g hrldelnscnetd to electricity (%) - Computed an above for fo-r,hnigadfishing) ruralt"oftal1Lrfrc\. dwllng ol\. 1$-ifd~ fI rfre - Unemployed are usually defined ae persons b;rP% t ~ who oreableaind,w 2ingidto take a job, out of a job on a given day,no to remained out of a job, and seeking work for a specified minimum Cpsmt- a hupp -Al peofrcirsoradobo- period not exceeding one Keek; may not be comparable betweon con asst gen~era& E pubicler poue of populaion; f excldes brl-d tries due to difforent definitions of unemployed and source of data, costadt receirsl pbin counrie ahund in yersopuneisrtionj xl des radio e\.g,5wn Imuryent\. Ofiesaitc,sapesres osployU5\.sts van in effect; dtat for recent years may not be com,parablis since ployant nsurnce,most countries abolished licmninig\. idtNi!-Percentage of private I-am (both in cash sod kind; r ($ thou o \.) - P\.asseger cars comprise motor cars sa-t- 374eoo n riclke acZf, Psa\."r aol, a\.'than, ass ght parsons; excludes ambulances, hearses and mili- housholds, tary vehicles\. Slat itnr(OWU Rr cp)- Annual consumption of industrial, con- -A-f~~ ik - Percentages of land ow,es anYit :na privats olectricitae in kilowtt hours per capita; en ed po c) end toywealh- gnerLly base d on prods:tion data, without allwoance for losses In POOIW, 17P f l-d Mmmgexi\.Js but allcowing for importe an esprte of electricity\. lp )-Per capita annua1 consumption in kilograms - *AiPopulation divided by nuabes of practicing atmtdfadosi rdcinplus net\. isrnsta of new6print, pkVa1nlan\. quali- a ro a medical school at umiv\.ruity level,  ANNEX I Page 3 of 4 Pages Actual Projected 1972- 1974- 1975 -194 97 19Z2 1973 1974 1975 i2 DM L-A !n 18 197441975 2 RATIONAL ACCOUTS (Prelim\.) 1973 PrAebs and Wiwig at Average Annual Gro-wth Rates As Percent of GDY Gross Domestic Product 10,646 12,415' 13,414 14,471 15,063 23,301 12\.5 7\.4 8\.3 105\.2 109,5 116\.6 Gains from Tertms of Trade (4-) 116 - -664 -1,254 -1,422 -3,324 - - - -5\.2 -9\.5 -16\.6 Gross Domestic Income 1172 T7 5 110 ~ !719,977 9\.1 3\. 7, 0\. 0\. 0\. Import (incl\. NfFS) 3,435 4,367 4,634 4,5173 4,996 10,450 16\.2 -1\.3 14,8 36\.2 34\.6 52\.3 Exports( ' JJ_j -3 961 3\.306 3~440 6_,021 12J6j6 9\.2 4\.1 14\.6 25\. 26, \.84,2 Resource Gap -664 -406 -1,328 -1,133 -1,005 -3,176 41\.1 -14\.7 - -1I0\. 4 -8\.6 -15\.9 Consumption Expenditures 9,017 9,598 10,780 11,434 11,028 14,839 9\.3 6,1 4\.5 34\.2 86\.5 74\.3 Investment "(incl\. stocks) 2,212 3,230 4,185 4,113 4,030 5,286 37\.8 -1\.7 4\.3 32\.7 31,1 26\.5 DoesicSainal 1,629 2,817 2,694 3,037 5,035 8,462 28\.8 12\.7 18\.6 21\.0 23\.0 42\.4 National Savings-i 1,772 2,914 2,721 2,970 5,027 8,437 23,6 9\.2 18\.7 21\.2 22\.5 42\.2 MERCHANDISE TRADE AnLnual Da-ta at Current Prices\. As Percent of Total Imports Grains 283 444 613 689 540 774 47\.5 12\.4 1\.9 9\.0 9\.5 3 7 Capital Goods 762 1,157 1,849 1,909 2,105 5,241 57\.0 3\.2 18,3 27\.0 26\.2 24\.9 Petroleum Fuel and Minerals 219 313 1,055 1,387 1,249 3,436 125\.0 31\.5 16\.3 15\.4 19,1 16\.4 Other (Including Raw Mat-erial ,for ExDorts 1,258 2,326 3,335 3,289 5,043 11,561 65\.0 -1\.4 23\.4 48\.6 45\.2 0 TtlMerch\. Imports (c\.f) 2,522 4,240 6,852 7,274 8,937 21,012 63\.0 6\.2 19\.3 100\.0 100\.0 100\.0 Exrports Manufactured Goods 1,485 2,921 4,005 4,307 6,145 18,708 65\.0 7\.5 27\.8 89\.8 84\.8 91\.9 Other Goods 139 304 455 774 890i 1,653 82\.4 70\.1 13\.4 10\.2 15,2 8\.1 Total Merrh, 3exports (fob' 1,624 3,225 4,460 5,081 7,035 20,361 67\.5 13\.9 26\.0 100\.0 100\.0 100\.0 Merzhandise Trade Indicos Average 1973 -100 Export Pripe Index 78\.0 100\.0 126\.8 117\.4 123\.2 157\.3 26\.7 -7\.4 5\.0 Import Price Index 74\.9 100\.0 155\.5 160\.0 168\.0 214\.4 44\.5 2\.9 5\.0 Terms of Trade Index 104\. 100\.0 81\.5 73\.4 73\.4 73\.3 -11-5 -10\.0 0\.0 Exports Volume Index 63\.8 100\.0 109\.1 134\.2, 177\.0 401\.4 30\.8 23\.0 20\.0 VALUE ADDED BY SECTOR Annu al Data at 1973- Prices and Exchange Rates Average Annual- Growth Rates As Percent of Total1 Agriculture 3,201 3,500 3,620 3,837 3,373 4,103 6 6 4 29 29 18 Manufacturing and Mining 2,140 2,883 3,311 3,708 5,783 9,908 24 12 11 27 28 42 Other Services 4\.368 4J,975 5\.59 ~ 697 920 1 14 3 4 Tal979 1,5 1240 13,260 16,063 23,301 13 7 9 100 100 100 PUBLC FIANCEAs Percent of GDP (Cenraln Roernenpt) 1,701 1,530 1,862 2,199k' 2 5515J 3,870 5 18 12 15 17 19 Current Epnitu~res 1\.359 1,193 1,406 1 704&/k2' 65 2_503 2 21 _ 11 13 1 Budgetary Savings 342 337 456 495 489 1,367 1-5 -9 30 4 -4 7 Other Pablic Sector - - -- - - - - -- -- Public Sector Investment 522 443 593 728 746 1,888 7 23 21 5 6 10 CURRENT EXPENDITURE DETAILS -Actual Prelim\. Est\. Proj\. DETAIL ON As % Total Current EpMend\.) 1-97 2 1973 1974 _19z5~~ 1976~' PUBLIC SECTOR US$ M1illion At 1973 P and ER Euain18\.6 19\.3 17\.8 17\.5 18\.0 IYSM2TRcRAM 6/ 1976 1975 1976 7\. of Total 1974-7~6 Other Social Services 9\.1 10\.4 9\.6 8\.8 5\.0 Social Sectors 67 73 64 10\.9 Agriculture 2\.4 2\.4 2\.0 1\.8 1\.9 Agriculture 121 187 209 24\.6 Other Economic Services 3\.6 3\.5 2\.3 2\.1 2\.0 Industry and Mining 41 82 73 9,3 Defense 33\.9 35\.2 41\.2 43\.0 47\.0 Power 55 44 33 6\.6 Administration 13\.9 13\.8 12\.1 11\.5 9\.8 Transport and communications 138 416 172 22\.2 Transfers to Local Governments 15\.1 14\.2 14\.2 14,6 16\.1 Other 171 197 175 26\.4 Other 3\.4 L\.2 0\.8 0\.7 0\.2 Toa Epndtre 93 72-8 7-46 rO\. _Total-Cu'rrent Expenditures 10-0,0 100,0 100\.0 100\.0 1f 00\.0 SELECTED INDICATORS 1960- 1965- 1970- 1973- FINANCING (Calculated f'rom 3-year averaged data) 1965 1970 l975 1978 Average ICOR 7MT 7T r -T113 Public Se-ctor Savings 456 495 489 70\.3 Import Elasticity 0\.8 2,6 1,1 1\.8 Program aid counterpart sa 38 41 6\.8 ?Nrg'inal Domestic Savings Rate 11\.3 21\.3 16,6 27\.2 For-eign Project Ai 79 195 216 22\.9 MarginLal National Savings Rate 17\.9 21\.7 18\.8 24\.6 Total Financing 593 728 746 100\.0 LABOR FORCE AND Total Labor Force Value Added Per Worker (l19 73 - Prices & Exc\. Rates) OU~U E OKRIn Millions %of Total 97 -7 In U,\.Dolas Percent of Avermge 1 ~-7 192 1 74 1 7 9 74 Grow-th Rate 1972 1974 1972 1974 Growth Rate Agzxiculture 5\.3 5\.6 50\.6 48,2 2\.8 604 646 66 60 3\.4 Manufacturing and Mining 1\.5 2,1 14\.2 17\.8 18\.3 1,189 1,577 130 147 15\.1 Other Sectors 3\.7 3\.9 35\.2 34\.0 2\.7 1,181 1,423 129 132 9\.8 Total TJS t5 916 1,076 100 100 0,4 includes government, corporate and private non-dlorporate savings,\.L eie ugt J Includes domestic savings, net, factor incomes from abroad and transfers from abroad\. diBuudgtt 3/ Excludes exports not clImared through customs, such as sales of goods to k/ General Budget and Economic Development Special Account\. military forces oversleas\. 9/6/76  rag\. 4 of 4 ?ig\.s IA= O PfI -L *16W AM (owet* In \.1211*1 or u\.E\. eiAA=v -m 0w9'i plw)ee Avg, Anru I IY72 1 1974 lrth -t\. 197 (C5 SUIKARY BALANCE OF PAY1SITS Eport\. (incl\. NFS) 2,075 3,962 5,125 56\.47 8,100 10,241 12,9M 16,104 19,603 23,451 26\.5 2\.,prts (incl\. 2,577 4,368 7,210 7,457 9 000 11,093 13 76 16 782 20389 23JJ4I 21\.5 Resourrce 13alne( I-H) -0 2 110W-9 rnterest (net) -106 -123 -141 -258 -372 -457 -540 -622 -696 *767 19\.8 Other Factor Inco- (net) 67 30 -19 -70 -38 39 60 90 89 99 t 170 190 222 224 160 170 , - 135 195 2051L -I\.S VP t Von uinrmta r 71t co1w -309 -Bs - - I ,1; 02-! 5 , ,a -; -12\.2 Private Direct Tnveltnt 74 137 104 42 85 200 220 240 260 280 37\.0 Orrscial Capital Wants - - - - - - - - - Public 1XT loanm1' Disburs-ezrts 736 757 1,156 1,666 1,764 2,0 8 2,240 2,325 2,287 2,242 4\.8 -Aeortfa\.tion 289 336 391 368 - 58S 68 809 840 904 1\.,039 18\.9 ,e\.t tburs\.t\. 47 75 1,318 17 \.W 1,383 1,203 -1\.5 Other H1LT Loans Disbursenents 49 94 174 85 93 111 134 154 172 188 14\.1 -Aortiaeion 10 15 23 28 39 63 76 95 110 132 29\.5 5iet Disburse--ents 79 151 57 54 48 58 59 62 56 -0\.4 2/ 3/Actral 27amtal ?r-nsactinns n\.e\.i\. 30 -12 1,018 990 -68 A 1971 I7 3 1974 Decrease in Reserves -159 -340 -15 -493 -100 V 1,796 2,228 2,770 3,314 4,031 -\.Il-r 12: LWIs DCif3fJS t\. \.r\.1 \.r\.si !3rint-like - - - - - Ilteret on Public Debt 64 93 104 140 196 Repayment\. on Public Debt 211 250 247 276 360 jb,W& u-ns Total Public Debt Service 275 342 351 415 556 r9RO 85 73 D9 NO Other Debt Service (Dwt) 11 22 23 31\. 54 TIA 7 26 - : Total Debt Service (net) 286 364 374 446 610 ADB 81 68 \. :s2 ' ,er :1t '\. \.-rral - - - \. bLrden on 5xport ninp () n\.vernrer\.- 305 505 4\.3 290 >rppl-rrs 242 86 * s-3 Public Debt Service 22\.5 23,1 16\.9 10\.5 10\.8 s\.av\.: Gnsltutions 12 80 yc7 23 Total Debt Service 23\.4 24\.6 18\.0 11\.3 11\.8 1- - 9 - TDSaDirect Invest\. Inc\. 24\.2 25\.6 20\.0 12\.7 13,7 Pur1i, \. ,ns n\.e\.i\. ?otao H&IT 24^1- 73Z 839 l,e34\. 1,2g9 Average Term of Public Debt Actual Debt Outstanding on Dec\. 31, 1974 Tnt\. aa S Prior TYer IOD 4\.3 5\.2 4 7 5\.1 5\.9 KXTERNAL DEBT Di\.burV Percent Abort\. a\. S Prior Y\. W 14\.3 14,0 11\.1 10\.0 10\.9 122or3 Punk IDA 78\.3 1\.9 I13D Debt Out\. & Di\.bursed 9\.' 40\.2 94\.7 139,8 223\.8 ADB 113\.0 2\.8 " a S Public Debt O1D 0\.6 1,8 3\.4 4\.2 5\.6 lovern\.ents 1,697 3 42\.1 as 5 Public Debt Service 0\.7 0\.7 1\.9 3\.0 3 5 Sunnl;er\.- 1,250\.6 31\.0 Financial Institutions 648\.5 16\.1 IDA Debt Out\. & Disbuweed 26\.7 39\.8 47\.1 56\.5 78\.3 Sonds 19\.0 0\.5 I0 as S Public Debt O4D 1\.5 1\.8 1\.7 1\.8 1\.9 Public Dbts n\.e\.i " a 5 Public Debt Service 0\.1 0\.1 0\.1 0\.1 0\.1 Total Public H&LT Debt 4,030\.6 100\.0 Other MaLT Debts 396\.0 Sh\.rt-ta-n Debt 4/ 971\.0 1/ SOURCE: IBRD- Lo-ne of HKt-rlty one year end above, Including o-rc-tl bank borrowing\. 2/ Includ* $580 million borrod by the banking cy\.te-\. 3/ lnclude ohort terr capital inflows of $760 million 41 SOURCE: Korean authorities Septmber 6, 1976  ANNEX Lt Page 1 of 10 pages KOREA THE STATUS OF BANK GROUP OPERATIONS IN THE REPUBLIC OF KOREA A\. Statement of Bank Loans and IDA Credits (as of September 30, 1976) Loan or US$ Million Credit Amount (less cancellations) Number Year Borrower Purpose Bank IDA Undisbursed Eleven loans and credits fully disbursed 153\.8 72\.1 600 1969 ADC Irrigation 45\.0 \.6 151 1969 Republic of Korea Education 14\.8 \.5 669 1970 Republic &f\.Korea Railways 40\.0 \.5 769 1971 Republic of Korea Highways 54\.5 1\.2 795 1972 ADC Irrigation 33\.0 13\.9 863 1972 Republic of Korea Railways 40\.0 1\.7 905 1973 KDFC Dev\. Fin\. Co\. 40\.0 \.5 906 & 1973 Republic of Korea Education II 23\.0 20\.0 36\.4 394 917 1973 Republic of Korea Ports 80\.0 59\.6 942 1973 Republic of Korea Seeds Production 7\.0 5\.9 953 1974 Republic of Korea Tourism 25\.0 19\.1 956 1974 Republic of Korea Highways II 47\.0 2\.3 994 1974 AFDC Agriculture 13\.0 12\.3 1070 1975 Republic of Korea Secondary Cities 15\.0 14\.4 1095 1975 KDB Dev\. Fin\. Co\. 60\.0 21\.5 1096 1975 Republic of Korea Third Education 22\.5 22\.5 1101 1975 Republic of Korea Fifth Railway 100\.0 59\.8 1145 1975 KDFC Dev\. Fin\. Co\. 55\.0 29\.1 1175 1975 MIB Dev\. Fin\. Co\. 30\.0 23\.1 1193 /a 1976 Republic of Korea Second Integrated 15\.0 15\.0 Dairy Development 1203 1976 Republic of Korea Third Highway 900 89\.9 1216 & 1976 Republic of Korea Rural Infra- 60\.0 58\.5 1218-T structure 1219 1976 Republic of Korea Program Loan II 75\.0 49\.6 1319 /b 1976 ADC Irrigation (Miiho I) 29\.0 29\.0 1328 /a 1976 Republic of Korea Agricultural Credit 20\.0 20\.0 Total 1,172\.8 106\.9 586\.9 of which has been repaid 28\.1 \.7 Total now outstanding 1,144\.7 106\.2 Amount sold 2\.0 of which has been repaid 1\.0 1\.0 Total now held by Bank and IDA 1,143\.7 106\.2 (prior to exchange adjustment) Total undisbursed 573\.0 13\.9 586\.9 /a 'Not yet effective\. lb I)eclared effective on October 21, 1976\.  ANNEX II Page 2 of 10 pages B\. Statement of IFC Investments (as of September 30, 1976) Fiscal Amount in US$ Million Year Obligor Type of Business Loan Equity Total 1968 KDFC Development Financing - 0\.7 0\.7 1969 Honan Silk Co\. Textiles 1\.4 0\.3 1\.7 1970 Atlas Paper Pulp and Paper 4\.5 0\.5 5\.0 /a 1971 Korea Investment Finance Corp\. Capital Market Development - 0\.7 0\.7 1974 KDFC Development Financing - 0\.4 0\.4 1974 Korea Investment Finance Corp\. Capital Market Develoment - 0\.3 0\.3 1975 Gold Star & Co\., Ltd\. Electronic Products 16\.0 1\.3 17\.3 1975 Korea Securities Finance Corp\. Capital Market Development 5\.0 0\.6 5\.6 1975 Tong Yang Nylon Company, Ltd\. Synthetic Fibers 6\.9 2\.1 9\.0 1975 Hae Un Dae Develop- ment Company, Ltd\. Tourism 2\.7 0\.7 3\.4 1976 Korea Investment Finance Corp\. Capital Market Development - 0\.4 0\.4 1976 Chongju Paper Mfg\. Co\. Paper 5\.0 0\.5 5\.5 1976 Korea Zinc Co\., Ltd\. Zinc 15\.0 4\.0 19\.0 1976 KDFC Development Financing 17\.8 - 17\.8 1976 Gold Star & Co\., Ltd\. Electronic Products 10\.0 0\.4 10\.4 1977 Gold Star & Co\., Electronic Products 0\.2 0\.2 Ltd\. 1977 KDFC Development Financing 0\.3 0\.3 Total gross commitment 84\.3 13\.4 97\.7 less cancellations, terminations, repayments and sales 26\.9 0\.9 27\.8 Total commitments now held by IFC 57\.4 12\.5 69\.9 Total undisbursed 30\.4 4\.3 34\.7 /a Cancelled at the request of the Company\.  ANNEX II Page 3 of 10 pages PROJECTS IN EXECUTION /1 Loan No\. 600 Pyongtaek Kumgang Irrigation Project; US$45\.0 Million Loan of May 23, 1969; Effective Date: May 25, 1970; Closing Date: December 31, 1976 The Project includes irrigation for about 31,000 ha, (4,000 ha less than expected at appraisal), improvement of drainage' and roads, con- solidation of paddy fields, benching of upland and tidal land reclamation\. Construction was delayed by a reorganization of the executing agency and a delay in hiring consultants\. Cost considerations have led to the exclu- sion of about 4,000 ha of land from the project\. Costs have risen from US$90 million at appraisal to about US$130 million largely because of the increased costs of right-of-way, engineering, administration and land con- solidation\. Recent increases in the price of rice will partially offset the effects of higher costs and reduced irrigable area\. The economic rate of return is now estimated to be about 10 percent, compared with the appraisal estimate of 14 percent\. Construction has been completed\. Credit No\. 151 First Education Project; US$14\.8 Million Credit of June 4, 1969; Effective Date: May 25, 1970; Closing Date: September 30, 1976 The Project comprises: (a) the expansion and equipping of 27 technical, commercial and agricultural schools, 5 post-secondary higher schools and 4 university teacher training departments; and (b) 26 man- years of technical assistance and 20 man-years of overseas fellowships to support the development of agricultural and technical education\. All civil works, equipment and furniture procurement, technical assistance and fellowships included in the Project have been completed\. The total project cost is estimated to remain about 3 percent below the appraisal estimate\. Loan No\. 669 Third Railway Project; US$40\.0 Million Loan, US$15\.0 Credit No\. 183 Million Credit of May 14, 1970; Effective Date: September 11, 1970; Closing Date: December 31, 1976 The bulk of the Loan and Credit was earmarked for the purchase of freight cars, diesel locomotives, and telecommunications and track /1 These notes are designed to inform the Executive Directors regarding the progress of projects in execution, and in particular to report any problems which are being encountered, and the action being taken to remedy them\. They should be read in this sense, and with the understanding that they do not purport to present a balanced evalua-- tion of strengths and weaknesses in project enecution\.  ANNEX II Page 4 of 10 pages maintenance equipment\. Progress is generally satisfactory except for delays in the procurement of some micro-wave equipment which hzd to be retendered, and delivery is now expected in October 1976\. The Closing Date has been extended by a year to December 31, 1976 to provide adequate time for the completion of procurement\. Loan No\. 769 First Highway Project; US$54\.5 Million Loan of June 29, 1971; Effective Date: December 7, 1971; Closing Date: December 31, 1976 The construction of approximately 370 km of national highways between Jeonju and Busan was satisfactorily completed in December 1973, at a final cost of about five percent above the appraisal estimate\. Feasi- bility studies and detailed engineering have been completed for 1,400 km and 900 km of national highways, respectively\. A study of road maintenance and the establishment of a pilot maintenance organization forned the basis of the creation of a country-wide Highway Maintenance Organization which is being carried out under the Second Highway Project\. The Closing Date has been extended by 13 months to permit completion of procurement of highway maintenance equipment, and staff training\. Loan No\. 795 Yong San Gang Irrigation Project; US$33\.0 Million Loan Credit No\. 283 and US$15\.0 Million Credit of February 2, 1972; Effective Date: September 15, 1972; Closing Date: September 30, 1977 The Project aims at transforming an area with the highest drought frequency in Korea into one with reliable irrigation and crop diversifica- tion\. Also, there will be increased production of high value crops such as fruits and winter vegetables\. The delay was caused mainly by increased costs due largely to price escalation and design modification\. The cost increases will be partially compensated for by benefits attributable to the enlargement of the area to be irrigated by about 1,400 ha; and the Agricul- tural Development Corporation (ADC) plans to reduce costs by constructing only canals, roads and drainage systems for contour furrow irrigation on all lands exceeding 2 percent slope\. Also the Bank has begun monitoring construction costs on the civil works contracts on a monthly basis\. Loan No\. 863 Fourth Railway Project; US$40\.0 Million Loan of November 22, 1972; Effective Date: February 26, 1973; Closing Date: December 31, 1976 The main elements of the Project are: electrification of lines in the Seoul suburban area; purchase of electric railcars and locomotives; the completion of electrification of 350 km of line running from Seoul to the northeastern part of Korea; track and bridge renewal; provision of yard facilities; acquisition of passenger and freight cars; and improvement of facilities for the maintenance and repair of motive power and rolling stock\. No major problems have been encountered; most of the loan proceeds have been committed, and nearly 95 percent already disbursed\.  ANNEX II Page 5 of 10 pages Loan No\. 905 Fourth KDFC Project; US$40\.0 Million Loan of June 13, 1973; Effective Date: September 10, 1973; Closing Date: December 31, 1977 The Project is progressing satisfactorily\. Loan No\. 906 Second Education Project; US$23\.0 MIillion Loan and Credit No\. 394 US$20\.0 million Credit of June 13, 1973; Effective Date: September 10, 1973; Closing Date: December 31, 1977 The Project provides equipment for and extensions to 85 educa- tional institutions at secondary, post secondary and university levels\. It also includes preinvestment studies on health and management education\. After three years of implementation, project execution is now about 12 months behind schedule\. The Government is taking steps to overcome the source of delay\. All equipment lists have been approved; tenders have been made for US$28 million, contracts have been awarded for US$11 mil- lion\. Total project cost remains at $75\.8 million, about 8 percent above the appraisal estimates\. Disbursements are expected to reach US$20 million by the end of FY77\. Covenant requirements under the Development Credit Agreement are being met\. The project is now expected to be com- pleted by mid-1978, which requires an extension of the Closing Date\. Loan No\. 917 Ports Project; US$80\.0 Million Loan of June 27, 1973; Effective Date: September 18, 1973; Closing Date: June 30, 1979 The Project includes the provision of container and bulk cargo facilities and equipment at Busan and coal piers and handling equipment at Busan and Mukho\. The Project is progressing satisfactorily\. Preparation of contract documents for all nine civil works contracts has been completed and five have been awarded\. Two of the five equipment contracts have also been awarded\. Three of the civil works contracts are on schedule while two are slightly behind schedule; all are expected to be completed on time\. The Government signed a Loan Agreement, on March 8, 1976, with the Saudi Fund for Development, which will provide US$35 million equivalent for this Project\. The Government established on March 13, 1976 the Korea Port Authority, and key management appointments have already been made\. Dis- bursement is at present around 24 percent of the total loan\. Loan No\. 942 Seeds Project; US$7\.0 Million Loan of November 16, 1973; Effective Date: April 24, 1974; Closing Date: December 31, 1978 The Project consists of: (a) the installation of five field crop seed processing and storage facilities; (b) farm machinery for seed pro- duction; (c) procurement of seasonal seed inventories through the operation of a revolving fund; (d) seed testing laboratories and equipment; (e) crop research (financed in part by USAID); (f) feasibility studies for irriga- tion and area development; and (g) technical assistance\. The necessary  ANNEX II Page 6 of 10 pages legislative and administrative action for revising the Seed Law and estab- lishing an "Office for Seed Production and Distribution" has been taken\. Project implementation is proceeding satisfactorily\. Preliminary esti- mates suggest that Project costs would be considerably higher than envis- aged at appraisal\. Disbursement has been somewhat slower than expected at appraisal but is expected to improve soon\. Loan No\. 953 Kyongju Tourism Project; US$25\.0 Million Loan of January 4, 1974; Effective Date: May 6, 1974; Closing Date: December 31, 1978 The Project forms part of the first phase of the planned develop- ment of the Bomun Lake resort near Kyongju\. It provides for a multi-purpose dam; an irrigation system for about 1,200 ha; improvement and expansion of the water supply and sewerage and solid waste disposal systems for the city of Kyongju and the resort area; installation of electrical supply and tele- communication facilities for the resort area; the construction and/or realign- ment of about 57 kms of roads, infrastructure including storm water drainage, environmental sanitation, community facilities, and a golf course; a school for training hotel personnel; and a feasibility study for the development of tourism on Cheju Island\. Final design for almost all Project components is complete and several contracts have been awarded\. Considerable efforts are being made by the newly established Kyongju Tourism Agency to promote hotel investors interest in the resort area\. Over 20 percent of the loan has been disbursed and disbursements are expected to accelerate in the months ahead\. Loan No\. 956 Second Highway Project; US$47\.0 Million Loan of January 25, 1974; Effective>Date: April 4, 1974; Closing Date: December 31, 1977 The Project, which forms part of the Government's 1972-76 road construction and paving program, consists of the construction (chiefly on new alignments) of about 130 kms and paving (largely on existing align- ments) of approximately 634 kms of national highways were completed on schedule and the highways opened to traffic in October 1975\. Feasibility studies for future prGjects of about 1,000 kms of road were started in August 1975 and will be followed by detailed engineering, which is expected to be completed early in 1977\. Delay occurred in setting up a new nation- wide highway maintenance organization but the organization has now been established in accordance with decrees published in June 1975\. Most of the maintenance offices have been constructed and staffed and procurement of the necessary equipment is in progress\. Disbursement is around 95 percent oL the Loan\.  ANNEX II Page 7 of 10 pages Loan No\. 994 Integrated Agricultural Products Processing Project; US$13\.0 Million Loan of June 7, 1974; Effective Date: March 19, 1975; Closing Date: June 30, 1979 The Project aims at integrating the on-farm production of commer- cial crops for export with efficient hygienic processing facilities using land that is presently idle or under-utilized\. It comprises: (a) on-farm development of asparagus, oak mushrooms and mushrooms; (b) construction of and improvements to facilities to process asparagus, oak mushrooms, mushrooms and fruits, and (c) technical assistance including training of staff, services of consultants, etc\. As the current investor demand for the project processing facilities is less than projected, implementation of the Project as a whole is likely to be delayed\. Loan No\. 1070 Secondary Cities Regional Project; US$15\.0 Million Loan of January 15, 1975; Effective Date: August 18, 1975; Closing Date: March 31, 1979 The principal aims of the Project are the establishment of an organizational framework for regional investment, planning and develop- ment and the improvement of working and living conditions in the secondary cities of the less developed Gwangju region\. The main elements of the Project are: (a) housipg sites and services in the cities of Yeosu, Mogpo and Gwangju (370,384 m ); Sb) a fishery harbor complex with industrial processing zon2 (215,385 m ) in Yeosu; (c) a city market in Suncheon City (33,160 m ); and (d) access roads in Yeosu and Mogpo (6\.61 km)\. It also provides technical assistance to strengthen regional planning and development, to improve the utilization of existing water supply systems in the four cities, to assist the management and operation of the fishery complex and to carry out feasibility studies of project proposals identi- fied under the UNDP-financed Phase II Regional Study\. Project implementa- tion is roughly a year behind the appraisal schedule largely because of delays in establishing the Gw;angju Regional Development Unit\. However, progress has been improving and is considered satisfactory\. Loan No\. 1095 Korea Development Bank Project; US$60\.0 Million Loan of of March 31, 1975; Effective Date: June 17, 1975; Closing Date: June 30, 1979 The Project provided funds to KDB to make subloans to finance direct imports for subprojects principally in the manufacturing and trans- portation sectors\. Almost the full amount has already been committed to finance 31 subprojects, ahead of the time estimated at appraisal\. Dis- bursements now amount to about two thirds of the loan amount, also ahead of the original estimate\. KDB's performance in using the loan has been highly satisfactory\.  ANNEX II Page 8 of 10 pages Loan No\. 1096 Third Education Project; US$22\.5 Million Loan of March 31, 1975; Effective Date: June 6, 1975; Closing Date: June 30, 1980 The project includes assistance for extensions and equipping of nine institutions (technical, agricultural and fisheries) under the Ministry of Education (MOE) and seven vocational training institutes under the Office of Labor Affairs (OLA)\. After 15 months of execution, project implementa- tion is about three months behind schedule but considerable progress has been made\. Site layouts and sketch plans have been acquired\. Remaining sketch plans will be completed by November 1976 and construction will begin at ten institutions in 1977\. Progress in equipment procurement is satis- factory\. Both MOE and OLA project units are functioning satisfactorily and disbursements are expected to be made on schedule\. Loan No\. 1101 Fifth Railway Project; US$100\.0 Million Loan of April 10, 1975; Effective Date: July 15, 1975; Closing Date: December 31, 1978 The Project will help the Korean National Railroad (KNR) continue as a major carrier of freight and passengers by helping in: the upgrading, modernization and expansion of track, rolling stock, motive power, and other equipment; the improvement of the efficiency of operation; and its financial recovery\. The main components of the Project are: an increase in station and line capacity and improvements in signalling; acquisition of rolling stock, diesel and electric locomotives, spare parts and repair facilities; track renewal and improvement; bridge strengthening; completion of electri- fication of 71 km of industrial lines; and other miscellaneous items\. Con- tracts, financed by the Loan, have been signed for procurement of passenger and freight cars, wheel sets, rail, bridge girders and spares for coaches and track maintenance machinery, amounting to about US$57\.6 million equiv- alent\. Electrification of industrial lines and the Seoul Suburban system has been virtually completed\. Forty-two percent of the loan proceeds have already been disbursed\. In connection with this loan, the Government under- took to formulate a financial recovery plan for KNR and to discuss it with the Bank\. A mission which visited Korea in October discussed this matter with the authorities concerned\. Loan No\. 1145 Fifth Korea Development Finance Corporation Project; US$55\.0 Million Loan of July 23, 1975; Effective Date: September 5, 1975; Closing Date: June 30, 1980 The Loan will cover about half the KDFC's foreign exchange requirements through the end of 1977\. It will be used to finance direct imports of machinery and equipment, and the foreign exchange component of domestically produced capital goods and of civil works\. Disbursements are proceeding on schedule\.  ANNEX II Page 9 of 10 pages Loan No\. 1175 Medium Industry Bank (MIB); US$30\.0 Million Loan of November 26, 1975; Ef-fective Date: January 28, 1976; Closing Date: March 31, 1980 The Project provides funds to MI3 to make sub-loans to small and medium-sized manufacturing enterprises over the next two years\. The Project is progressing satisfactorily\. Disbursements are at present over 20 percent of the total loan\. Loan No\. 1193 Second Integrated Dairy Development Project; /1 US$15\.0 Million Loan of June 4, 1976; Closing Date: December 31, 1982 The project consists of: (a) the establishment of about 450 new dairy farms; (b) the continuation of the development begun as part of the First Integrated Dairy Beef Project on about 400 dairy farms; (c) the expansion of existing processing plants, the diversification of their production, the establishment of two milk centers and fifty small milk cooling units and the constrdLtion of a frozen milk products plant at Yeongnam; (d) and the expansion of technical services for both farm development and milk processing\. Loan No\. 1203 Third Highway Project; US$90\.0 Million Loan of February 3, 1976; Effective Date: May 17, 1976; Closing Date: December 31, 1979 The Loan provides funds to help finance: (a) the construction, chiefly on new alignment, including paving, of about 195 km of four national highways, including supervision of the work by consultants; (b) paving and improvement chiefly on present alignments, of nine national highways totalling about 600 km, including supervision of the work by consultants; and (c) feasibility studies by consultants of about 1,200 km of national and provincial roads, to be followed by detailed engineering\. Bids have been called for all construction and paving contracts, in accord- ance with the Bank's procedures of international competitive bidding\. Loan No\. 1216 Rural Infrastructure Project; US$60\.0 Million Loan Loan No\. 1218T of which US$40\.0 Million Third Window; Effective Date: June 4, 1976; Closing Date: June 30, 1979 The Project includes about 62 minor irrigation, 29 upland reclamation, 11,000 fuelwood, 900 roads and bridges, 4,200 water supply, and 2,700 rural electrification subprojects\. Technical assistance is provided for upland reclamation and improvements to hydrologic services\. Special evaluation studies are also included\. Project implementation has started well and the rate of progress, costs and disbursements are all close to appraisal estimates\. The monitoring and reporting systems have also been established and are functioning well\. /1 Loan signed on June 4, 1976; not yet effective\.  ANNEX II Page 10 of 10 pages Loan No\. 1219\. Second Program Loan; US$75\.0 Million Loan of March 3, 1976; Effective Date: June 9, 1976; Closing Date: May 1, 1977 The principal aim of the Loan is to help meet the foreign exchange reauirements for the import into the Republic of Korea, by the private sector, of essential capital and intermediate goods\. A third of the Loan has already been disbursed\. Loan No\. 1319 Miho Watershed Area Development Project; US$29\.0 Million Loan of July 17, 1976; Effective Date: October 21, 1976; Closing Date: December 31, 1982 The aim of the project is to increase agricultural production and farm incomes on about 12,665 ha, and to benefit directly some 10,400 farm families\. The project consists of: (a) the construction of dams and canals to irrigate 8,315 ha; (b) the conversion of 2,045 ha of cultivated upland to irrigate paddy fields; (c) land consolidation on 4,600 ha of irrigated and non-irrigated land; (d) the development of 495 ha for irrigation of upland crops and 550 ha for orchards; (e) upland reclamation and bench-terracing of 1,200 ha of presently uncultivated land; (f) the improvement of about 80 km of river channels; (g) the construction of about 150 km of village access roads; (h) aerial photography, surveys and mapping; and (i) provision for technical assistance, procurement of vehicles and a feasibility study for a second-stage project of the Miho Watershed\. Loan No\. 1328 Second Agricultural Credit Project; /1 US$20\.0 Million Loan of September 21, 1976; Closing Date: June 30, 1981 The project provides medium and long-term loans through the National Agricultural Cooperative Federation (NACF) to about 7,900 farmers for (a) the establishment of about 2,100 ha of apple orchards; (b) the construction and equipping of improved silkworm rearing houses including improvement of existing mulberry plantings; (c) sprinkler irrigation to producing orchards of 2 ha or more; (d) the construction and equipping of green houses for vegetable production; and (e) the construction of on-farm fruit storage facilities\. /1 Loan signed October 12, 1976, not yet effective\.  ANNEX III LOAN AND PROJECT SUMMARY Second Korea Development Bank Project Borrower: Korea Development Bank (KDB) Guarantor: Republic of Korea Amount: $82\.5 million Terms, Part of the Loan ($75\.0 million) would be used by KDB for its normal lending operations and would be repaid in accordance with a schedule which would conform substantially to the aggre- gate of the amortization schedules of sub-loans made out of such part of the Loan; the maximum repayment period would be 17 years, including 3 years of grace\. The remainder of the proposed loan ($7\.5 million) would be relent by KDB to its subsidiary, the Korea Industrial Leasing Corporation, Ltd\. for the purpose of its leasing operations, and would be repaid through KDB in 15 years, including 1 year of grace\. Interest would be at 8\.7 percent per annum\. Purpose: $75\.0 million of the proposed loan would be used by KDB to make sub-loans aind investments to finance direct imports for industrial sub- projects during the period 1977-78; the remainder of the loan, $7\.5 million, would be relent by KDB to its wholly-owned subsidiary KILC, which would use these funds to acquire machinery, equipment, facilities or other property to be leased to investment enterprises, during the same period, for use in its leasing operations\. Estimated Calendar Year US$ Million Disbursements: 1977 5\.6 1978 41\.9 1979 33\.5 1980 1\.5 Appraisal Report: No\. 1225-KO, dated September 30, 1976\.  IBRD 10375 12 ' P\. 129 APRIL 1973 Sea RfSgh e CH NA ,N O R T H K O R E A t Japon | East Sea N KOREA REP OF KOREA -JAPAN Panmurj ,Rm 38- - Yellow JPN2 Sea -38& GY NG GI J huncnGANG WEON \ Eaost c ea n Chna n eo eukho 125' 126' S,mcheog rche eonrl Ad o gse 2n Ye//ow Seau 237' 3enbseong 7 GY ON i Mogo; - < 'l 9 n-tChungConeonanp /J Nogdong Singeum M_npo Primary roads " \. S\. -\., Railways e, r Railways underoconstructon + Airports j L Rivers C= Special cities \.-- Provincial baundaries Jeju 4 -Internationol boundaries E J U ) ,2,0,4p,06,0, 8,0 10,0 i?0 14,0 I60 ( g / -/KILOMETERS, 20 40 60 0 eo 00 Se,pngM E S - 125' 6' 2' 26 129

APPROVAL

P053575

 ICRR 13560 Report Number : ICRR13560 IEG ICR Review Independent Evaluation Group 1\. Project Data: Date Posted : 06/28/2011 PROJ ID : P053575 Appraisal Actual Project Name : Hn- Health System US$M ): Project Costs (US$M): 31\.00 36\.70 Reform Project Country : Honduras Loan /Credit (US$M): Loan/ US$M ): 27\.10 32\.37 Sector Board : US$M): Cofinancing (US$M ): Sector (s): Health (96%) Compulsory health finance (2%) Central government administration (2%) Theme (s): Health system performance (23% - P) HIV/AIDS (22% - P) Population and reproductive health (22% - P) Regulation and competition policy (22% - P) Indigenous peoples (11% - S) L/C Number : C3640 Board Approval Date : 05/07/2002 Partners involved : Closing Date : 07/31/2007 05/31/2010 Evaluator : Panel Reviewer : Group Manager : Group : Judyth L\. Twigg George T\. K\. Pitman IEG ICR Review 1 IEGPS1 2\. Project Objectives and Components: a\. Objectives: According to the Development Credit Agreement (DCA, p\. 22), the objective of the project was to “(a) expand the health care coverage and improve the quality of health care services; and (b) strengthen the organizational and operational capacity of the Ministry of Health (MOH) and the Honduran Social Security Institute (IHSS)\.â€? In the PAD’s Project Design Summary (p\. 32), the objectives are stated as : “extend and improve health coverage and quality of care while improving efficiency in the IHSS and MOH \.â€? As the statement of objectives in the DCA is the more monitorable, evaluable, and outcome -oriented, this ICR Review will follow the ICR and assess the achievement of objectives as stated in the DCA \. b\.Were the project objectives/key associated outcome targets revised during implementation? No c\. Components (or Key Conditions in the case of DPLs, as appropriate): The project contained three components : 1\. Health Policy Design and Implementation (appraisal, US$ 8\.75 million; actual, US$ 12\. 12 \.62 million )\. This component provided financing to develop the strategies and instruments required to implement the policies, programs, and regulations set forth in a detailed Policy Activity Schedule (PAS) for the project, with both MOH and IHSS having specific benchmarks guiding them through the health reform agenda \. 2\. Health Delivery and Management Subprojects (appraisal, US$ 19\. 20 \.77 million )\. This 19 \.25 million; actual, US$ 20\. component aimed to extend coverage of health care services and social security insurance through financing investments, activities, and innovative management changes for the implementation of the policies, programs, and regulations defined under the PAS \. This component employed a results -based financing mechanism, where compliance of MOH and IHSS with the schedule of actions under the PAS was used as a trigger for disbursing funds for related activities \. Implementation took place in three phases \. The first stressed rapid improvements to meet the most pressing needs of the population; the second improved quality standards and implemented integrated care models and alternative management schemes; and the third focused on continued implementation\. Interventions financed included : (1) the development of innovative contracting schemes (decentralized models of health care delivery ) for health and support services, (2) rehabilitation of health centers and laboratory/hospital infrastructure, (3) medical and laboratory equipment, spare parts, pharmaceuticals, and supplies, (4) furniture, (5) technical assistance, (6) training, and (7) training materials\. 3\. Project Management (appraisal, US$ 3\.0 million; actual, US$ 3\.31 million )\. This component improved the management, supervision, and monitoring of the project through financing the administrative costs of the Project Implementation Unit (PIU)\. d\. Comments on Project Cost, Financing, Borrower Contribution, and Dates: Project Cost: Total project costs and component amounts were increased due to fluctuations in the US dollar/Special Drawing Rights (SDR) exchange rate, which led to a US$ 5\.7 million increase in the dollar equivalent of the credit\. Financing: The PAD (p\. 12) specified that the project would fund gaps in Honduras ’ HIV/AIDS program, using the project design approach of technical assistance and subprojects, under Components I and II \. However, the Global Fund to Fight AIDS, Tuberculosis, and Malaria (GFATM) began to finance HIV/AIDS activities in February 2003, and consequently project funds for these activities were reallocated to other activities and subprojects \. Initially the project had allocated US$ \.075 million under Component I and US$ 4\.25 million under Component II for HIV/AIDS activities; however, the ICR does not specify the exact amount of funds that were actually reallocated \. Borrower Contribution: The Borrower contributed US$ 4\.33 million of a planned US$ 3\.90 million contribution\. Dates: The project was extended four times beyond its original closing date of July 31, 2007\. The first two extensions, to July 31, 2008, and then to July 31, 2009, were due to periods of delay caused by frequent changes in the PIU coordinator or the Minister of Health, and the approval and implementation of subprojects for the use of US$ 5\.7 million in additional resources generated by the appreciation of the SDR \. The third extension, to March 31, 2010, was granted to allow for completion of activities that had been suspended due to political disruptions in the country \. The fourth and final extension, to May 31, 2010, allowed the completion of four pending contracts; of these, three were eventually completed, and one had to be cancelled \. The ICR does not specify under which component the cancelled contract belonged \. The TTL explained that the cancelled contract was under Component II \. The project closed on May 31, 2010\. 3\. Relevance of Objectives & Design: Relevance of Objectives is rated Substantial \. At the time of appraisal, Honduras was experiencing stagnating or worsening maternal and infant mortality, under -five malnutrition, incidence of HIV/AIDS, and coverage of basic health services\. Coordination between public, private, and social security health care providers was fragmented, and institutional capacity and regulatory frameworks in the sector were weak \. These challenges were inherent to both the MOH and the IHSS\. The project supported five of the seven pillars of the government's health reform strategy at appraisal (PAD, p\. 7), the government has stated that the objectives continue to be relevant to its current 2010-2014 health sector strategy, the Plan National de Salud \. The objectives are also substantially relevant to the Bank ’s current Country Assistance Strategy (CAS) for FY 2007-2010, with its focus on governance reforms to improve the performance of public services, and on concentrating resources on social programs used by the poor \. The fourth pillar of the CAS, Development of Human Capital, covers Bank support to education, health, and social protection \. Relevance of Design is rated Modest \. There was a logical and plausible chain between the project's objectives, components, and expected outcomes \. The sequencing of activities under Component II was an important and innovative design feature, given the complexity of the schedules of actions under the PAS for the MOH and IHSS \. The Policy Activity Schedules (PAS) for both IHSS and MOH were very well structured and detailed \. The three-phase disbursement triggers were effective in generating competition between the two main agencies (ICR, pp\. 6, 8)\. However, the key project indicators were poorly linked to the objectives and components; "few of the performance indicators actually measured the impact of implementing the policy actions and benchmarks " (ICR, p\. 9)\. 4\. Achievement of Objectives (Efficacy): The project's objectives were supported by other donors in addition to the Bank : the Inter-American Development Bank funded hospital improvements, and the Global Fund financed prevention and promotion activities aimed at reducing the incidence of HIV/AIDS, tuberculosis, and malaria\. The Bank's support was therefore one of several factors contributing to observed outcomes \. Expand health care coverage is rated Substantial \. Outputs : Regulations were approved allowing MOH and IHSS to contract services, allowing decentralized care through contracting NGOs or municipal organizations for the delivery of basic health services \. 26 contracting mechanisms were implemented between MOH and IHSS and private health providers by 2010, exceeding the target of 10 contracts\. The ICR does not specify the percent of total eligible population covered, geographic area, or services provided under these contracts, other than the decentralized care being implemented in rural communities with local governments generally involved \. The project team explained that these contracts covered the entire population living in the geographic areas where they applied, but that it does not have a list of the specific geographic areas involved, and that the contracts were for all primary health care plus secondary care for maternal and infant health services \. The lack of data on geographic coverage would have had negative implications for the ability to monitor outcomes \. Unspecified public-private schemes were implemented with the goal of improving and expanding delivery of health care services\. Managerial capacity in the two largest IHSS hospitals was enhanced, increasing demand for services \. A regulatory framework was approved for licensing public and private health care facilities \. As of mid-2009, 162 primary health care establishments (representing about 12% of the total) were licensed according to quality standards (against a target of 30%)\. Outcomes : IHSS coverage for direct insured increased from 360,000 in 2003 to 600,000 (the target) in 2006, and remained above that level throughout the lifetime of the project \. The ICR does not specify what percentage of the eligible population this represents; the project team explained that coverage included all employees in the formal sector plus some self-employed persons\. Another 130,000 beneficiaries were reached through decentralized MOH coverage \. In 2005, 88% of children under the age of five had access to a health facility, 51% of children who fell sick within two weeks of being surveyed received some kind of treatment, 71% of pregnant women attended prenatal care, and 67% of births were attended by skilled health workers \. While no baseline or end-of-project data are available, the ICR (p\. iii) states that coverage likely increased with implementation of the decentralized models of health care \. Specific data are not provided to support this statement \. The Honduran Minister of Health (ICR, p\. 44) states that the project “resulted in an increase in coverage and improved access and quality of services for the poorest populations in the country \.â€? Utilization data are not presented in the ICR to support this claim \. The project team explained that, prior to the implementation of the contracts under the project, there were no formal health services at all in these geographic areas, and that representatives of the Ministry of Health visited the project areas to discuss its results with beneficiaries \. Improve the quality of health care services is rated Modest \. Outputs : Hospital improvement plans, linked with maternal and child health targets, were approved for regional and district hospitals\. A comprehensive quality improvement program was put in place in both MOH and IHSS facilities, with quality enhancement teams deployed in 8 MOH hospitals and 2 IHSS hospitals in 2005\. Unspecified changes in the management of hospitals and ambulatory centers by MOH and IHSS were intended to improve efficiency and effectiveness\. A process of standardizing the package of primary health care services in health facilities was implemented \. Quality standards were established for the package of services \. Minor rehabilitations were supported in six hospitals, 14 maternal-infant health centers, and 22 rural health centers\. Outcomes : 98% of surveyed beneficiaries were satisfied with treatment received under the decentralized model of health care in 2009\. 83% were satisfied with waiting time\. No baseline data are available, and no other data are provided measuring improvements in quality of care \. The project team explained that the beneficiaries did not have access to any formal health services before the decentralized model of care was implemented \. The ICR (p\. 17) states that, through the implementation of decentralized models of care, the focus of care moved from curative toward prevention and promotion health services, leading to increases in antenatal and postpartum checkups, vaccinations, and growth monitoring \. No specific data are provided \. The project team explained that prenatal care and institutional deliveries were not available at all in the covered areas prior to the project \. Strengthen the organizational and operational capacity of the MOH and IHSS is rated Substantial \. The national budget began making regular contributions to IHSS, improving revenue collection, modernizing financial management, and aligning health care benefits with financial capability \. An institutional Modernization Plan for the IHSS was approved by its Board in 2002 and implemented throughout the life of the project \. A performance-based budgetary system was introduced in the MOH \. The MOH was transformed into a primarily regulatory body, with provision of health services decentralized to the local level; the MOH continues, however, to manage contracts for health services provision under the decentralized model \. 5\. Efficiency (not applicable to DPLs): Efficiency is rated Substantial \. At appraisal, the project was estimated to yield a net present value of benefits of about US$ 25 million over a ten-year period, and a benefit-to-cost ratio of 1\.9\. At the time of project completion, updated estimates showed a net present value of benefits of about US$ 19 million over a ten-year horizon, and a benefit-to-cost ratio of 1\.3\. Estimated savings on medical treatments due to increased coverage of preventive care accounted for the largest contribution of benefits\. Moreover, new management schemes and improved infrastructure also contributed to savings in operating costs \. The link of policy-related benchmarks to disbursements resulted in a concerted effort on the part of the MOH and IHSS to implement the PAS in an efficient manner \. There were slowdowns in project execution due to frequent changes in the leadership of the MOH and PIU; however, the PAS schedule was largely met despite these multiple personnel changes\. ERR )/Financial Rate of Return (FRR) a\. If available, enter the Economic Rate of Return (ERR) FRR ) at appraisal and the re -estimated value at evaluation : re- Rate Available? Point Value Coverage/Scope* Appraisal No ICR estimate No * Refers to percent of total project cost for which ERR/FRR was calculated\. 6\. Outcome: The project’s objectives were substantially relevant, efficiency was substantial, and achievement of two of the project’s development objectives was substantial, enhancing institutional capacity in the health sector and expanding healthy insurance coverage to a large segment of the poor population \. However, achievement of the third development objective was modest, as was the relevance of the project's design \. The ICR does not provide evidence on improvements in quality of health services, and few of the project's performance indicators actually measured the impact of implementing the project's policy actions and benchmarks \. a\. Outcome Rating : Moderately Satisfactory 7\. Rationale for Risk to Development Outcome Rating: Institutional risks are low\. During the lifetime of the project, the Inter -Institutional Reform Committee (IRC), a body made up of representatives from the Ministry of Finance, MOH, IHSS, Ministry of Labor, and Ministry of the Presidency, became a permanent institution managing the health sector reform process \. There was notable institutional capacity building at the IHSS as it expanded its own revenue collection and service provision \. The Bank had originally prepared a follow-up project to support the expansion of decentralized models of health care, but due to limited resources this project has not progressed within the Bank \. However, the MOH shared the PAD with the Inter-American Development Bank, which decided to finance the project, and implementation is expected to begin soon\. The new government that assumed office in January 2010 has indicated its commitment to supporting expansion of coverage under the decentralized model of care \. The main risk is financial\. The government’s fiscal situation deteriorated in 2009, creating serious challenges that could constrain spending in the health sector \. The ICR does not present trends in percentage of total government expenditures on health, percent of total health spending financed by the government, or public health spending as a percentage of GDP\. Financial constraints could produce a negative effect on the coverage and quality of health care services, particularly in remote, rural, and vulnerable areas \. a\. Risk to Development Outcome Rating : Moderate 8\. Assessment of Bank Performance: at -Entry is rated Moderately Satisfactory \. Preparation of the project lasted nearly two years Ensuring Quality -at- because of the need to develop a comprehensive package of sectoral reforms \. Design was based on the government’s and Bank’s long-standing sectoral dialogue developed during the 1990s\. Appropriate lessons were learned from previous lending experience in Honduras and internationally, including the need for political will and leadership, the importance of attention to implementation as well as design (with incentives embedded into various stages of implementation ), the need to develop technical and administrative capacity in the implementing agency, and others\. Key stakeholders were consulted during preparation, including local organizations, NGOs, and community and indigenous groups \. The project’s risk matrix accurately estimated the risks that were likely to affect the project, and related mitigation actions were identified \. These risks included slow implementation (mitigated through the results-based disbursement mechanism), weak IHSS technical and administrative capacity (mitigated by strong technical assistance, with the exception of a key contract for the health information system ), and opposition by health personnel to new administrative arrangements in health facilities (mitigated through the support of community organizations and beneficiaries )\. The decentralized care model was cost -effective, and its inclusive and participatory approach led to faster expansion than anticipated \. It also gave ownership to key stakeholders, quelling potential opposition from various groups (ICR, pp\. 9-10)\. An important shortcoming, however, was the lack of emphasis on strengthening the health sector information system, leading to inadequate monitoring and evaluation of key indicators \. Quality of Supervision is rated Moderately Satisfactory \. Implementation benefited from the guidance and management of the same task team leader throughout almost the entire life of the project \. This continuity proved to be important during transitions within the government and the coordination of the PIU \. However, the Bank was not proactive in ensuring monitoring and evaluation of project indicators \. at -Entry :Moderately Satisfactory a\. Ensuring Quality -at- b\. Quality of Supervision :Moderately Satisfactory c\. Overall Bank Performance :Moderately Satisfactory 9\. Assessment of Borrower Performance: Government Performance is rated Satisfactory \. The project was viewed as an important part of a broader government effort to modernize the entire public bureaucracy \. Therefore, several ministries (Labor, Finance, Presidency) worked productively with the project team during preparation \. The government showed ownership and commitment to the timely implementation of the health sector reform agenda and provided strong leadership through the IRC\. The IRC was an effective mechanism for solving project implementation issues \. It was central to coordinating MOH and IHSS reforms and policies \. Implementing Agency Performance is rated Moderately Unsatisfactory \. There were multiple changes in the government team throughout the lifetime of the project, some of whom brought to the table different visions of the reform agenda; these changes, according to the ICR (p\. 25), limited the capacity to implement the project in a timely manner\. The PIU underwent several changes in leadership, and for several long periods of time, the link between the PIU and MOH was weak\. During the last three years of the project, some of the PIU ’s functions (fiduciary and purchasing of basic health care services under the decentralized model of health care ) were given to the MOH\. The government decided to discontinue the use of a PIU for the implementation of future projects \. The government employed United Nations Development Programme (UNDP) Honduras to assume all administrative, financial, procurement, and disbursement functions for the management of all projects with external financing, including this project \. While this removed administrative burdens from the PIU, it added another layer of bureaucracy by superimposing UNDP procedures on the government ’s and the Bank’s procedures\. In addition, staff turnover at UNDP and lack of communication with the PIU led to delays in procurement and disbursements \. A contract scheduled to implement one of the IHSS information systems was cancelled midway through implementation due to poor quality of the product and inadequate capacity of the IHSS to work with the firm\. This was the largest contract awarded during the project, amounting to nearly 20% of the original amount of the credit; by the time the contract was cancelled, overall progress in its implementation was estimated to be about 30%\. a\. Government Performance :Satisfactory b\. Implementing Agency Performance :Moderately Unsatisfactory c\. Overall Borrower Performance :Moderately Satisfactory 10\. M&E Design, Implementation, & Utilization: M&E Design : The project’s M&E system was built on established information systems and data from the national health and demographic survey \. Input, process/output, and impact/outcome indicators were specified \. However, baselines and targets were not specified for most indicators, and key indicators were not connected to the project's objectives and activities\. The PAD (p\. 2) states that the evaluation system would pay attention “to geographic and population subgroup differences in indicators where health outcomes, coverage, and quality of services varies considerably by rural/urban, region, and by ethnic subgroups \.â€? M&E Implementation : Efforts to construct a baseline for key indicators were undertaken in the early years of the project, and thresholds were established and monitored closely for implementing key actions related to policy reforms\. Surveys and technical audits funded by the project provided information useful in assessing the performance of the new decentralized models of health care services \. In late 2006, however, the M&E staff position in the PIU was eliminated\. Data were not collected on key performance indicators, and very little was achieved to improve information systems\. As a result, the project had to rely on existing, outdated M&E processes in the MOH \. In general little or no follow-up on performance indicators was carried out during the project ’s extension periods\. The ICR presents no data on indicators broken down by geographic region, rural /urban location, or ethnic subgroup \. M&E Utilization : Achievement of policy benchmarks was used as a condition of disbursement under the results-based disbursement framework\. The ICR presents no information about use of data specifically on the project’s defined outcome indicators to inform ongoing project activities or policy decisions \. a\. M&E Quality Rating : Modest 11\. Other Issues (Safeguards, Fiduciary, Unintended Positive and Negative Impacts): Safeguards : Given the presence of indigenous peoples in the area, the project triggered OP /BP 4\.10\. An Indigenous Peoples Development Plan was prepared, designed in consultation with communities of indigenous people\. During implementation, according to the ICR (p\. 14), some progress was achieved in this area, particularly in the cultural adaptation of the decentralized model of health care services \. Traditional midwives have been well integrated with the health centers managed by the MOH and under the decentralized models, receiving training and interacting with staff\. The project was categorized "B" under Environment OP 4\.01\. A health care waste management assessment carried out as part of project preparation found that legislation relevant to health care waste management was adequate, but that there was inadequate management of medical waste \. The project implemented an Environmental Management Plan to monitor the management and disposal of waste from hospitals and health centers \. The project also hired a consultant who completed regular supervision visits to monitor implementation of this Plan \. Ultimately, "the project was found to have satisfactory compliance with the environmental safeguards " (ICR, p\. 14)\. Fiduciary : The project's procurement was rated as moderately satisfactory throughout much of the second half of the implementation period, though at one point it was rated Unsatisfactory (ICR, p, 15)\. UNDP Honduras managed the administrative, financial, procurement, and disbursement functions of the project, as part of a government decision to have UNDP manage all internationally funded projects in this manner \. In general, UNDP complied with the Bank ’s fiduciary requirements, particularly with regard to the submission of financial and audit reports \. However, while removing that administrative burden from the PIU, this approach added an unnecessary layer of bureaucracy \. Also, frequent turnover of UNDP staff led to delays in procurement and disbursements \. One large contract for modernization of the IHSS information system had to be cancelled, after a technical auditor reviewed the procurement process for the contract and the performance of the contractor, finding both unsatisfactory \. Ultimately, "the project's financial management performance was assessed as satisfactory " (ICR, p\. 14)\. Unintended positive impacts : According to the ICR, the decentralized model of health care services, with the MOH purchasing primary care services from NGOs and /or local private providers, is a model for the extension of services in the country\. 12\. 12\. Ratings : ICR IEG Review Reason for Disagreement /Comments Outcome : Moderately Moderately Satisfactory Satisfactory Risk to Development Moderate Moderate Outcome : Bank Performance : Moderately Moderately Satisfactory Satisfactory Borrower Performance : Moderately Moderately Satisfactory Satisfactory Quality of ICR : Satisfactory NOTES: NOTES - When insufficient information is provided by the Bank for IEG to arrive at a clear rating, IEG will downgrade the relevant ratings as warranted beginning July 1, 2006\. - The "Reason for Disagreement/Comments" column could cross-reference other sections of the ICR Review, as appropriate \. 13\. Lessons: Results-based disbursements can be an effective incentive for encouraging reform \. Both the MOH and IHSS were dedicated to achieving the policy benchmarks so that they could receive the next disbursement \. However, it is important to link disbursements not only to key policy benchmarks but also to measurable project development indicators, and to ensure that the former logically lead to the latter \. When beneficiaries perceived that they have gained from a project, they can become important political allies \. In this case, communities who received services through the decentralized model of health care provision rallied behind the project when it faced opposition from some labor groups \. Giving beneficiaries the opportunity to be involved with decisions affecting the management of their communities ’ health care services enhanced their understanding of their rights to demand and to receive services of higher quality \. Lengthy project preparation periods, although costly, can prove effective and efficient in the long run \. The lengthy preparation of this project ensured buy -in from various institutions, and it provided for meticulous and well-sequenced design of the policy reform agenda \. 14\. Assessment Recommended? Yes No 15\. Comments on Quality of ICR: The ICR is concise and clear in its exposition of the project ’s implementation details\. It explains fully the challenges resulting from the lack of information on key project development indicators \. There is a mismatch in the ratings provided in two different versions of the project data sheet; this review has taken as final the ratings expressed in the text of the ICR\. a\.Quality of ICR Rating : Satisfactory

APPROVAL

P107940

 PROJECT INFORMATION DOCUMENT (PID) APPRAISAL STAGE Report No\.:AB7479 (The report # is automatically generated by IDU and should not be changed) Project Name Banda Gas-to-Power Region Africa Country Senegal Sector Energy and Mining Lending Instrument Partial Risk Guarantee Project ID P145657 Parent Project ID N/A Borrower(s) Republic of Senegal Guarantor IDA/MIGA Project Sponsor Banda Gas Joint Venture Partners, SPEG and SOMELEC Beneficiaries of the PRG Banda Gas Joint Venture Partners and SOMELEC Environmental Screening {X}A { }B { }C { }FI Category Date PID Prepared April 22, 2014 Estimated Date of Appraisal Completion Estimated Date of Board May 22, 2014 Approval Decision I\. Country Context 1\. While Senegal and Mali have respective population of 13\.7 million and 14\.8 million, Mauritania is less populated with 3\.8 million people only\. In terms of GDP per capita, Mauritania and Senegal are close first with US$1,106 and US$1,032 per capita respectively, while Mali is at a significantly lower level of US$694 per capita (2012 figures)\. 2\. Mauritania’s economy is sharply divided between traditional sectors and a modern extractive industry\. Crops and livestock provide for the livelihood of about half of the population\. Poor infrastructure and low access to energy hinders efficiency and in times of drought, food production levels can drop dangerously low\. Export revenue from fishing licenses and fish processing rank second after iron (44% of total exports)\. But competitiveness of the port based processing facilities is hampered by poor services, and the high cost of electrical power for processing and cold storage\. This is particularly true for fishing grounds along the Senegal River\. Extractive industries are by far the largest contributor to Mauritania’s economy\. The country is endowed with abundant mineral deposits of iron, copper, gold, gypsum and salt (resources also include cobalt, diamond, phosphate rock, sulfur and uranium)\. Since 2006, Mauritania has been a small oil producer\. 3\. Mauritania’s GDP growth is strongly correlated to mining revenues\. Real GDP registered a 5\.1% growth in 2010 and 4% in 2011; the latest figures estimate a GDP growth over 6% in 2012, and a further acceleration in 2013 up to 7%\. The improvements of the macro-economic situation are in large part attributable to higher iron ore sales by the national iron ore company, Société Nationale Industrielle et Minière (SNIM), to large foreign investments in the mining industry (both for iron and gold), and to increased fish exports\. The mining sector’s contribution to the country’s economy has been steadily increasing over the past 10 years, and so has energy consumption\. In order to diversify the economy, Mauritania needs to increase its energy supply and reliability, and lower its cost\. 4\. About 42% of the population lives in urban areas in Mauritania\. The two major cities Nouakchott and Nouadhibou account for about 800,000 people and 100,000 people respectively\. About 46\.7% of the people were estimated to live below the poverty line in 2004\. By 2008 this percentage decreased to about 42%\. 5\. Senegal’s economy is dominated by a few strategic sectors, including groundnuts, fisheries and services\. The role of the agricultural sector, and especially of groundnuts, has declined over time, as Senegal’s position bordering the Sahel has led to frequent droughts\. High rural poverty and limited access to rural infrastructure and basic services have fuelled migration to urban areas\. 6\. After a slowdown due to lack of electricity supply and the poor performance of the services sector, Senegal’s economic growth rebounded in 2012 to an estimated 3\.3%, primarily due to a recovery in agricultural output\. Growth should continue to accelerate, driven by government investment in agriculture and infrastructure\. Industrial production should also rise as power reliability improves and cement and phosphates output continues to recover\. Services growth will be led by banking and telecommunications, as well as by the expanded air and sea logistics capacity of the capital, Dakar, all helping to improve net exports\. Private consumption, restrained by higher consumer prices in 2012, will pick up, contributing to an acceleration of real GDP growth from an estimated 3\.3% in 2012 to 5% in 2017\. Poor physical and human infrastructure and weak institutions continue to weigh on Senegal’s business environment, which is also hindered by one of the highest average electricity generation costs in Africa\. 7\. About 43% of the population lives in urban areas in Senegal\. The capital Dakar accounts for about 1\.1 million people\. About 48\.3% of the people were estimated to live below the poverty line in 2005\. By 2011 this percentage decreased to about 46\.7%\. 8\. Mali is a vast landlocked country with a relatively limited natural resource and human capital base, and a highly dispersed population\. It is located in the heart of Sahel, a region threatened by drought and desertification\. The vast majority of the people are directly dependent on their environment for their livelihoods (herding, farming or fishing)\. It is the largest among the Economic Community of West African States (ECOWAS) countries by land area, with a population of approximately 14\.8 million\. 9\. Mali’s real GDP contracted by an estimated 3% in 2012 because of the political upheaval in the country, which devastated the tourism industry and caused public spending to be slashed\. The vastly improved security situation is expected to encourage a rebound in economic activity, even if tourism and foreign investment are slow to return\. Public spending is expected to recover  and other drivers of the economy will improve, given that they are largely located in the secure south\. 10\. The IMF’s growth expectations for Mali for 2013 and 2014 are 4\.8% and 6\.3% respectively, on the assumption that both the security situation and agricultural output will improve\. The agricultural sector (accounting for more than one-third of GDP), which pulled growth down in 2012 due to failed rains in 2011, is expected to improve in 2013 provided there are more favorable weather conditions and the security situation improves\. Construction, one of the main drivers of growth as increased donor funds help the government to step up public infrastructure investment, may also recover with government spending to support growth and recovery\. 11\. About 36% of the population lives in urban areas in Mali\. Bamako is the capital and largest city with 1\.9 million people\. About 47\.4% of the people were estimated to live below the poverty line in 2006\. By 2010 this percentage decreased to about 43\.6%\. II\. Sectoral and Institutional Context 12\. Mali, Mauritania and Senegal all face daunting energy challenges\. Poor infrastructure and low access to energy have constrained GDP growth in all three countries\. With a growing population, energy demand is expected to grow requiring additional generation capacity for the region\. Mali, Mauritania and Senegal currently rely on hydropower and oil-based power generation to meet their base-load electricity needs\. As a result of this generation mix, coupled with high technical and commercial losses, the national power utilities of all three countries have been incurring financial deficits and increasingly relying on government support to cover operating costs and finance required investments\. The power grids of the three countries are interconnected and countries trade power through a central dispatching center\. 13\. The power sectors in all three countries suffer to various degrees from similar issues, including low access rates to electricity, relatively high technical and commercial losses, and high generation costs due to a dependence on oil-based thermal generation capacity\. Tariffs are high but still insufficient to cover costs, resulting in reliance on government subsidies\. 14\. New gas finds in Mauritania are a potential game changer for the sub-region as they can be used to generate affordable and cleaner power compared to other thermal alternatives\. However, private investors are loath to invest in gas development because of the lack of creditworthy off- takers in the region\. The proposed operation consists of a series of credit enhancement mechanisms to mitigate credit risks in support of upstream gas production to provide gas for the generation of electricity for the benefit of all three countries\. III\. Project Development Objectives 15\. The Project’s Development Objective (PDO) is to enable production of natural gas for generation of electricity to reduce the cost and increase the supply for Mauritanian households and industry, and enable regional integration through exports of electric power from Mauritania to Senegal and Mali\. IV\. Project Description 16\. The Banda gas-to-power project consists of the following components: (a) the Banda offshore gas field production, transmission, and processing infrastructure; (b) a 300 MW gas-to- power plant located in the north of Nouakchott; and (c) existing and new power transmission lines to evacuate power\. The Banda gas-to-power project builds on a long track record of regional integration between the three countries\. 125 MW of power will be sold in Mauritania: to the mining sector (25 MW to Kinross and 15 MW to the National Company of Industries and Mines in Mauritania – SNIM) and to households and other businesses (95 MW through the National Power Utility - SOMELEC)\. 125 MW of power will be exported to Senegal and 50MW to Mali\. 17\. The proposed IDA PRGs will backstop the creditworthiness of public utilities in Mauritania (for the payment of gas under the Gas Sales Agreement) and in Senegal and Mali (for the payment of electricity exports received under their respective Power Purchase Agreements)\. The proposed MIGA guarantees will cover (a) termination payment under Breach of Contract (BoC) of the GSA backstopped by the Government of Mauritania (GoMR); (b) BoC of the Production Sharing Agreement; and (c) Transfer Restriction, Expropriation and War and Civil Disturbance\. 18\. The Banda gas field is located approximately 55 km offshore of Nouakchott\. Banda field shareholders are Tullow Oil (67%), Petronas (15%), Kufpec (13%) and Premier Oil (5%)\. Tullow Oil has prepared a field development plan which provides for production of up to 65 mmscfd of gas over 20 years\. The Banda Gas Project consists of two subsea wells tied back to an onshore gas processing plant via a subsea production manifold and a 10-inch sub-sea pipeline\. First gas can be delivered approximately 30 months from the final investment decision, which is expected to occur by end of April 2014\. The SPEG Take or Pay (TOP) obligations will include a 6-month ramp up period which will accommodate early low demand and testing of the various power units using the JV’s gas\. The SPEG Power Project: downstream power generation and transmission 19\. SPEG (Société de Production d’Electricité à partir du Gaz) is a special purpose vehicle incorporated for the purpose of power generation, transmission and sales of power using Banda gas\. SPEG’s shareholders are SOMELEC (40%), KG Power, subsidiary of Kinross, an international gold mining company (34%) and SNIM, the national iron ore mining company (26%)\. 20\. The SPEG Power Project is designed to be implemented in two phases to match the evolution of electricity demand in Mauritania (and the region) and optimize capital allocation\. The proposed WBG intervention is focused on the first phase of SPEG Power Project, which consists of construction of a 300 MW1 power plant located in the north of Nouakchott that will operate using Banda gas\. The SPEG plant includes 180 MW dual fuel engines (HFO, natural gas) to be commissioned by March 2015, and 120 MW combined cycle gas turbines (CCGT) to be commissioned by mid-2016\. The 300MW SPEG plant will sell all its generation to 1 Installed capacity might be increased up to 310 MW\.  SOMELEC, who will, in turn, (a) sell power to Kinross, SNIM and its regular customers in Mauritania, and (b) export power to Senegal (SENELEC) and Mali (EDM)\. 21\. Power generated by SPEG to SOMELEC will be evacuated through several routes: (i) a greenfield high voltage transmission line to Nouadhibou with a spur to Tasiast, site of Kinross gold mine (the North HV line) owned and operated by SOMELEC and financed by the Saudi Fund, (ii) the existing OMVS high voltage transmission line that will be connected to the power plant through a short extension (the OMVS HV line and the OMVS HV extension), funded by SOMELEC and (iii) a new high voltage transmission line between Mauritania and Senegal, to be financed by AFD and IsDB, with a wheeling capacity of 250 MW (the South HV line) to be built in one phase\. 22\. The South HV line will be built to accommodate future power exchanges between Mauritania and Senegal sourced from a number of projects and only approximately 30 MW from phase 1 of the SPEG Power Project are expected to transit through that line\. Only the power plant will be owned by SPEG\. The North HV line will be owned by SOMELEC, and the South HV line will be owned by SOMELEC and SENELEC on their respective national territories\. Exports to Senegal will occur through both the OMVS HV line and the South HV line\. Exports to Mali are expected to transit through the OMVS HV line and its extension and hence will not require additional transmission lines\. V\. Financing For Loans/Credits/Others Amount BORROWER/RECIPIENT 0\.00 IDA Guarantees (up to) 261\.00 IFC Loan (up to) 0\.00 MIGA Termination Cover (up to) 585\.00 Total 846\.00 VI\. Implementation Banda Field JV 23\. The Banda field shareholders are Tullow Oil, Petronas, Kufpec, and Premier Oil\. As is normal practice in the oil and gas industry, the investor group operates as a non-incorporated joint venture wherein income and costs are directly apportioned pro-rata to the partners\. Tullow carries out the petroleum operations on behalf of the partners under the terms of a joint operating agreement\. Gas Supply Agreement 24\. Following negotiations on the price and volume of gas under the GSA, SPEG agreed with Tullow Oil on a gas price for a daily consumption up to 60 billion Btu and an annual load factor of 70% on a take-or-pay basis, which amounts on average to 42 billion Btu per day\. These gas volumes are sufficient to power up to 310 MW of generation capacity foreseen under the SPEG Power Project\. Key provisions, including the final price of gas as well as provisions for ramp up and termination are still being negotiated between Tullow Oil and SPEG\. SPEG Structure 25\. SPEG was formed with the agreement of the GoMR as a joint venture between SOMELEC (40%), KG Power (34%) and SNIM (26%)\. The Investment Convention which regulates the relationship between the State and SPEG, was signed and ratified by parliament and the senate\. The Shareholders’ agreement between SOMELEC, KG Power and SNIM, establishes the project company SPEG and governs the relationship between parties in relation to the SPEG Power Project\. The SPEG structure is sound and has the explicit support of GoMR and SPEG’s shareholders\. Time has been too short for SPEG to establish a successful track record of credible commercial dealing, upon which private investors can confidently rely, resulting in a need for World Bank’s credit risk mitigation support\. Power Purchase Agreements 26\. The direct off-taker of electricity generated by the SPEG Power Project is SOMELEC which has agreed on an umbrella PPA with SPEG that sets forth the terms and conditions for power purchase and supply\. SOMELEC will in turn enter into secondary PPAs to sell power to SNIM and Kinross, and export a portion of its SPEG off-take to SENELEC and EDM\. In April 2014, SENELEC and EDM agreed with SOMELEC to purchase 125 MW and 50 MW of power respectively\. Key provisions of the two export PPAs have been agreed by the parties, who still need to agree on final PPAs\. VII\. Applicable Performance Standards Performance Standards (PS) Triggered PS 1\. Assessment and Management of Environmental and Social Risks and Impacts YES PS 2\. Labor and Working Conditions YES PS 3\. Resource Efficiency and Pollution Prevention YES PS 4\. Community Health, Safety and Security YES PS 5\. Land Acquisition and Involuntary Resettlement YES PS 6\. Biodiversity Conservation and Sustainable Management of Living Natural Resources YES PS 7\. Indigenous People NO PS 8\. Cultural Heritage YES VIII\. Contact points World Bank Contact: Moez Cherif Title: Task Team Leader Email: mcherif@worldbank\.org Borrower Contact: Mamadou Amadou Kane Title: SPEG General Manager Email: pakpus@hotmail\.com IX\. For more information contact: The InfoShop The World Bank 1818 H Street, NW Washington, D\.C\. 20433 Telephone: (202) 458-4500 Fax: (202) 522-1500 Web: http://www\.worldbank\.org/infoshop

APPROVAL

P158976

COMBINED PROJECT INFORMATION DOCUMENTS / INTEGRATED SAFEGUARDS DATA SHEET (PID/ISDS) ADDITIONAL FINANCING Report No\.: PIDISDSA19655 Date Prepared/Updated: 15-Sep-2016 I\. BASIC INFORMATION A\. Basic Project Data Country: Vietnam Project ID: P158976 Parent P095129 Project ID (if any): Project Name: Northern Delta Transport Development Project Additional Financing (P158976) Parent Project Northern Delta Transport Development Project (P095129) Name: Region: EAST ASIA AND PACIFIC Estimated 26-Sep-2016 Estimated 16-Feb-2017 Appraisal Date: Board Date: Practice Area Transport & ICT Lending Investment Project Financing (Lead): Instrument: Borrower(s): Implementing Agency: Financing (in USD Million) Financing Source Amount BORROWER/RECIPIENT 28\.50 International Development Association (IDA) 83\.00 Total Project Cost 111\.50 Environmental A - Full Assessment Category: Appraisal The review did authorize the team to appraise and negotiate Review Decision (from Decision Note): Other Decision: Is this a No Repeater project? B\. Introduction and Context Page 1 of 18 Country Context The transport sector has contributed positively to the economic growth of Vietnam over the past two decades and has helped reduce poverty directly through better linkages to markets, education, and health facilities and indirectly through its contribution to growth\. The impressive economic progress manifests itself in many ways: - Real Gross Domestic Product (GDP) grew at an annual rate of 6\.6 percent between 1995 and 2015 and is expected to average 6\.2 percent between 2015 and 2021\. GDP per capita increased from US$189 in 1993 to US$2,088 in 2015 and is expected to surpass the US$3,000 mark by 2021; - Poverty, measured at the US$1\.9 a day threshold, dropped significantly from about 49\.2 percent in 1992 to 3\.2 percent in 2012, with tens of millions of people having escaped poverty; - Exports continued their rapid growth, increasing in value by 22 percent in 2015 to reach US$174 billion (90 percent of GDP), compared to US$37 billion in 2005\. The top six exports being oil, garments and textiles, footwear, aqua products, wood products, and electronics; and - Foreign direct investment reached US$11\.8 billion in 2015, more than 6 times its 2005 level\. Vietnam➢❨ s high rate of investment in infrastructure has been a major enabler of, and catalyst for, this economic progress\. Indeed, Vietnam has been among the world➢❨ s leaders in infrastructure investment with annual expenditures reaching an equivalent of a 9-10 percent of GDP, about half of which is in transport\. The rapid growth in transport infrastructure and services over the past two decades, and especially over the past decade, however, has created new demands and challenges for the transport sector\. Bottlenecks to business activities caused by infrastructure constraints are already appearing in several areas\. The fast economic growth has contributed to high rates of urbanization, rising traffic accidents, new capacity constraints, and a large increase in asset preservation requirements to meet the fast expansion of transport assets\. In addition, institutional impediments have resulted in inefficient allocation of resources with waterways and rail lagging behind the roads sector\. Sectoral and institutional Context Inland Waterway Transport (IWT) is critical to the everyday functioning of the Vietnamese economy\. It captures a significant share of the freight market and provides the backbone for the movement of bulk commodities like construction materials, coal, fertilizer, and rice\. Among all freight modes\. Investments to promote the use of IWT and coastal shipping enable the use of larger vessels\. This generates economies of scale in both unit-level transport costs and emissions\. Modal efficiency and competitiveness can be further enhanced through better linkages between waterways and other modes, such as through investments in river ports\. These are the goals that have been supported by the Project Development Objective of the Northern Delta Transport Development Project\. After more than seven years in the project implementation period, all civil works and consulting services activities financed by the original credit have been completed➢❨ except for the DNC canal, which is the focus of the proposed additional credit, and the pilot maintenance contract, which will be excluded from the project scope under the AF\. Based on the above progress, the project is already generating the expected economic and social impacts sought at appraisal, in accordance with the PDO\. Specifically, the interventions financed under the project have resulted in (a) improved connectivity and navigating conditions at well-targeted areas of Corridors 1 and 3 Page 2 of 18  of the Red River Delta inland waterway network; (b) improved cargo handling and storage conditions at two river ports; (c) improved access to market, health, education, and recreation facilities for local communities across 14 provinces in the target region through the provision of safer, more accessible ferry boat stages; and (d) knowledge transferred through the provision of technical assistance to VIWA and MoT\. The list of completed civil works includes the construction of the bypass access channel at the Lach Giang estuary➢❨ the most transformational and technically complex construction activity financed under the original credit\. Beyond improving connectivity by providing sea-going vessels with year-round access to the inland waterway network at Corridor 3, construction of this structure resulted in the creation of significant technical capacity among the Vietnamese contractors that built the facility, none of whom had prior exposure to civil works in the open ocean\. C\. Proposed Development Objective(s) Original Project Development Objective(s) - Parent The Project's development objective is to enhance the efficiency, environmental sustainability and safety of transport infrastructure and services, through the alleviation of physical and institutional bottlenecks in two major waterway corridors in the Northern Delta Region\. Key Results D\. Project Description The original credit of SDR104\.4 million (US$170 million at the time of approval) was approved by the Board of Executive Directors on June 24, 2008 and its Financing Agreement was signed on November 10, 2008\. The credit became effective on February 6, 2009\. The project comprises 3 main components: Component A ➢❨ Multimodal Transport Corridor Investments, which consists of improvements to two major waterway corridors in the project region to increase the efficiency of multimodal transport and supply chains, and to enhance the environmental sustainability of the waterway system\. Component A has five subcomponents: (i) improvements to two national waterway corridors, known as Corridor 1 and Corridor 3, by expanding the navigational capacity of these corridors through the provision of dredging, bend corrections, bank protection, river training, and the provision of aids to navigation, with the aim of increasing the ability of the target waterways to carry larger vessels and reduce navigation times; (ii) improvements to the Ninh Co river estuary, by providing a bypass access channel from the ocean into the river system at the estuary, and the provision of an inter-connecting canal between the Day and Ninh Co Rivers with a navigational lock; (iii) improvements to the provincial river ports of Viet Tri and Ninh Phuc, to increase the ports➢❨ berthing and warehousing capacity and their environmental sustainability; (iv) a small pilot maintenance activity to test the viability of using performance-based contracts for the delivery of routine maintenance at selected waterways in the project region; and (v) the provision of detailed engineering design and construction supervision for subcomponents (i) to (iii)\. Component B ➢❨ Investments in Ferry Boat Stages, which includes physical improvements to 28 Page 3 of 18 ferry boat crossing stations located in the 14 provinces that comprise the project➢❨ s target region (2 ferry boat stages per province)\. Component C ➢❨ Institutional Support to the Ministry of Transport (MoT), the Vietnam Inland Waterway Administration (VIWA), and the Provinces, which comprises the delivery of several consulting services, including: (i) technical assistance to VIWA on the management of ports, landing stages, ferry boat crossings, and waterway maintenance schemes; (ii) technical assistance to VIWA on the role of community participation in, and supervision of, infrastructure development projects in the waterway sector; (iii) training and capacity building services provided to staff of MoT, VIWA, and other government agencies, including the Waterway Transport Vocational College No\. 1 ➢❨ Hai Duong; (iv) integrated project implementation audit services; (v) independent financial audit services; and (vi) the development of a Feasibility Study (FS) for a potential future transport project in the Red River Delta inland waterway sector\. The proposed AF operation will comprise a single activity: construction of the DNC canal complex\. The proposed credit will finance 100 percent of civil works and 100 percent of construction supervision and financial audit services, at an estimated cost of US$83 million, excluding VAT payments\. The GoV will provide counterpart funding, in the estimated amount of US$28\.5 million, to finance land acquisition, resettlement compensation, Value-added Tax (VAT) payments, and other administrative costs\. The scope of civil works comprises: (a) construction of a new navigation canal to connect the Day and Ninh Co rivers, approximately 1\.5 kilometers long, 6\.0 meters deep, and inclusive of flood protection dikes; (b) construction of a 160-meter navigational lock for low loaded river-coastal vessels up to 3,000 DWT in capacity to facilitate passage from the Ninh Co to the Day river➢❨ and on to Ninh Phuc port➢❨ and associated return trips; (c) construction of the Day - Ninh Co fixed-span bridge over the canal, 780 meters in length and with a 15-meter vertical clearance, to preserve continuous traffic along Provincial Road No\. 490C between the two sides of the crossing canal and to allow sufficient vertical clearance for the passage of seagoing vessels; (d) construction of an approximately 1\.2-kilometer long (12-meter wide) approach road to the bridge; and (e) replacement of facilities impacted by canal construction works (e\.g\., electricity and telecommunication poles, irrigation canals), and complementary landscape and environmental works\. Component Name Component A ➢❨ Multimodal Transport Corridor Investments Comments (optional) Component Name Component B ➢❨ Investments in Ferry Boat Stages Comments (optional) Component Name Component C ➢❨ Institutional Support to the Ministry of Transport (MoT), the Vietnam Inland Waterway Administration (VIWA), and the Provinces Comments (optional) Page 4 of 18 E\. Project location and salient physical characteristics relevant to the safeguard analysis (if known) The project area is located in Northern Vietnam, approximately 150 kilometers southeast of Hanoi\. The scope of civil works for the DNC canal activity remains largely the same as originally described in the Project Appraisal Document (PAD) of the Parent project: the construction of a canal to link the Day and Ninh Co rivers, which are tributaries of the Red River with a navigational lock\. Thefacility will also be equipped with a bridge sitting directly atop the lock to provide through connectivity to a road serving the communities located in close proximity to the canal\. The only change in the nature of civil works relative to original descriptions at appraisal➢❨ a change that was introduced at the detailed design stage during project implementation➢❨ is that the bridge will be a fixed-span bridge rather than a lifting-span bridge as originally envisaged\. This change was deemed necessary to accommodate increased traffic flow both on the road and across the canal\. The change in engineering design for the bridge from a lifting-span to a fixed-span is not expected to have any additional environmental or social impacts\. The project area is predominantly agricultural and/or urban\. Aquatic and terrestrial ecosystems in the DNC area have been impacted by heavy anthropogenic intrusion\. No protected areas or sensitive ecological habitats lie within the Project area of influence, nor are there endangered or protected species identified in the area of influence of the project\. The impacts of the DNC canal will eliminate a length of 250 m of riverbank on the Day River side and 650 m of riverbank on the Ninh Co River side\. However, this impact will be mitigated by the project➢❨ s adoption of an innovative ecological engineering approach➢❨ a mixed bank protection scheme, based on ecological bank protection (vegetation capacity to fix the banks) and classical bank protection (rip rap), which will enhance biodiversity and protect against the effect of waves and erosion on the river banks and adjoining wetland, creating and/or restoring approximately 9 ha of aquatic and wetland habitats➢❨ an area 18 times greater than the lost habitat\. Environmental and Social Safeguards Implementation Performance of the Parent Project\. Under the parent project, the World Bank team's environmental specialists regularly visited sub-project sites, including but not limited to Dai Ban commune (Package A1h); Lach Giang estuary (Packages CV-A2\.4 and CV ➢❨ 2\.2b); Dong Lac commune (Package CV-A1g); Viet Tri port (Package CV-A3i); Ninh Phuc port (package CV-A3ii); and Loi ferry boat stage, Phu Tho province\. The Bank team on the whole found that supervision of environmental management and occupational health and safety was an example of international best practice\. PMU-W and contractor performance in regular on-site monitoring, detailed reporting through the submission of Supervision Observation Forms, training in safety and environmental management, and follow- up on recommendations was of high quality\. While there was, on occasion, opportunity for improvements on certain sub-projects➢❨ environmental and safety management, the diligence and commitment of the whole team, and the experience and knowledge brought to the project by Environmental Management and Construction Supervision Consultant, and follow-up and enforcement undertaken by PMU-W, was clearly reflected in the generally good environmental and safety management practices in civil works across various sub-projects\. The ranking of Page 5 of 18  contractors based on environmental performance is a good practice, and this information should be retained for future GoV and Bank-financed projects\. The occasional use of a delay in payments (effected as a penalty for environmental non-compliance) also appears to have been an efficient means of effecting change\. Monitoring of SEMP implementation is performed regularly at all sites and illustrated project progress reports are prepared on a monthly basis\. Innovative environmental measures were proposed by the Environmental Management and Construction Supervision Engineer, some of which are being considered in the Additional Financing\. These measures include the promotion of ecological measures to protect embankments (encouraging mangrove plantation, use of Vetiver to prevent erosion); the proposal to reduce concrete use for embankment construction; and the proposal to maintain islands created by the bifurcation of water channels as ecological habitats\. The implementation of land acquisition and resettlement compensation activities under the project have generally met the required pace of construction, with a few exceptions\. Findings from past implementation support missions confirm that the timing of site readiness at Corridor 3 was consistent with agreed timetables for construction completion under the original credit\. At Corridor 1, all parent project civil works have been completed and the resulting infrastructure improvements has been put into operation\. However, Corridor 1 works were exposed to a number of land acquisition challenges that will require the attention of PMU-W, MoT, and the World Bank such that they can be avoided under the proposed additional credit, such as documentation delays and delays towards reaching agreement on compensation packages with affected households\. While these challenges were ultimately resolved under the parent project, PMU-W's experience in confronting them will be valuable towards preventing similar delays under the additional credit\. F\. Environmental and Social Safeguards Specialists Ly Thi Dieu Vu (GEN2B) Noreen Beg (OPSPF) Thang Duy Nguyen (GSU02) II\. Implementation Institutional and Implementation Arrangements This Project seeks the approval of an additional credit in the amount of US$83 million equivalent to the Socialist Republic of Vietnam for the Northern Delta Transport Development Project (NDTDP) (P095129; Cr\. 4474-VN)\. The proposed additional credit will be used solely to help finance an activity that has always been part of the project scope since inception➢❨ a canal to connect two rivers with a navigational lock, known as the Day-Ninh Co interconnecting canal (➢❨ DNC canal➢❨ )➢❨ but for which there are insufficient funds remaining in the original credit due to cost overruns incurred during project implementation\. Provision of AF funds to build the DNC canal is justified for two primary reasons\. First, despite increases in its cost, the DNC canal remains an economically viable investment that is directly aligned with the project development objective\. And second, since project inception the DNC canal was conceived as an integrated connectivity solution together with the original credit-financed capacity improvements at Ninh Phuc port and the coastal shipping bypass access channel at Lach Giang\. These three infrastructure interventions, together, enable a through-access corridor to/from Page 6 of 18  Ninh Phuc port and the coast: seagoing vessels on the Gulf of Tonkin destined for the port can more efficiently access it by entering the river network on a 24/7/365 basis through the Lach Giang access channel at the estuary of the Ninh Co river, then switch to the Day river➢❨ where Ninh Phuc port is located➢❨ via the DNC canal\. Construction of the canal would complete this corridor, thereby leveraging the Ninh Phuc port and Lach Giang estuary improvements already delivered under the project and enhancing their economic potential\. The Government of Vietnam (GoV) remains strongly committed to building the DNC canal as an economic catalyst and as a contributor to the sustained use of the region's inland waterways for freight transportation purposes\. Provision of additional funds to construct the canal will deepen project development impacts, allow the project to finish all major civil works➢❨ and therefore reach all target beneficiaries and locales➢❨ as originally planned, and contribute to further modernizing vital inland waterway infrastructure in one of the regions of the world most exposed to the risks of climate change\. The only proposed change to the project by this Additional Financing (AF) operation is the removal of a small activity, originally estimated at US$1 million, to finance the implementation of a pilot performance-based waterway maintenance contract, as there is insufficient time under the project period, including over the duration of the proposed additional credit, to adequately implement a performance-based contract as originally intended\. In addition, the Project Results Framework will be expanded to include performance indicators specifically focused on the DNC canal\. It is expected that construction of the canal will further contribute to achieving the project development objective by reducing transport and logistics costs along a major waterway corridor in the Red River Delta region\. Implementation arrangements for the original credit are functioning satisfactorily and will be retained for the proposed AF\. III\.Safeguard Policies that might apply Safeguard Policies Triggered? Explanation (Optional) Environmental Assessment Yes OP 4\.01 Environmental Assessment (EA) is OP/BP 4\.01 triggered because construction of the DNC canal may have significant direct adverse environmental impacts on associated riverine ecosystems (estuarial areas, inland waterway corridors, and land) primarily due to significant dredging\. Updated Environmental Impact Assessment (EIA), Environmental Management Plan (EMP), and Resettlement Action Plan (RAP) documents have been prepared in accordance with World Bank policy\. These documents, which have also been approved by the Ministry of Natural Resources and the Environment (MONRE), include a current evaluation of environmental impacts and reflect latest adjustments to the detailed engineering design\. In addition, the Corridor 3 Dredged and Excavated Materials Disposal Plan (DEMDP) that was prepared under the original credit (and duly approved by MONRE) remains fully adequate for use under the AF credit Page 7 of 18  and is compliant with Bank policy\. All of these documents are compliant with applicable Vietnamese environmental regulations and social policies, as well as World Bank operational policies, and have been disclosed locally in Vietnamese (as of August 9th, 2016) and in English at the World Bank InfoShop (as of August 8th, 2016)\. Natural Habitats OP/BP 4\.04 Yes OP4\.04 is triggered as dredging activities under the project may impact aquatic biodiversity\. To mitigate possible impacts on aquatic life, the Project will adopt the following approach insofar as possible: Dredging close to the bank and in wetlands (the most important places for aquatic life) and on spawning areas will be carried out between October to May, avoiding the peak of biological activity during the flood/rainy season\. The disposal sites for excavated and dredged materials will be managed following adaptive methods - reducing the release of Total Suspended Solids by sedimentation in temporary ponds and through the frequent monitoring of surface and ground water quality\. Construction of the DNC canal will eliminate a length of 250 m of riverbank on the Day River side and 650 m of riverbank on the Ninh Co River side\. However, this impact will be mitigated by the project's adoption of an innovative ecological engineering approach which will enhance biodiversity and protect against the effect of waves and erosion on the river banks and adjoining wetland, creating and/or restoring approximately 9 ha of aquatic and wetland habitats➢❨ an area 18 times greater than the lost habitat\. Forests OP/BP 4\.36 No The project will not involve any forest restoration, plantation development, changes in forest use or management or protection\. There are no forest areas that could be affected, hence OP/BP 4\.36 is not triggered\. Pest Management OP 4\.09 No The nature of the civil works does not require the use of pesticides, either directly or indirectly\. Physical Cultural Resources Yes Given that the Project involves large excavation OP/BP 4\.11 Page 8 of 18  activities, chance find procedures are detailed in the ESIA, and will be incorporated into bidding documents\. Moreover, the proposed investment under the additional credit will require the relocation of a small temple for bend correction\. A total of 14 tombs will also be relocated by the project, under appropriate religious and cultural norms\. Extensive public consultation was conducted with local community on its relocation plan and modalities\. Indigenous Peoples OP/BP No OP 4\.10 was not triggered under the parent project, 4\.10 although an EMPF was developed in accordance with OP 4\.10 for the unlikely event that EMs may have been affected by future sub-projects\. However, during implementation, no EMDP was prepared as it was confirmed that none of the project➢❨ s interventions took place in ethnic minority (EM) areas\. This policy will not be triggered under the AF, as it has been confirmed that there are no EM communities living in the area of the DNC canal\. Involuntary Resettlement OP/ Yes OP 4\.12 remains triggered given the land acquisition BP 4\.12 and involuntary resettlement impact caused by the project due to the construction of the DNC canal structure, which comprises the excavation of the canal and construction of a navigational lock and a bridge directly connected to the canal\. A resettlement action plan (for DNC canal to be financed under the AF) has been prepared in accordance to requirements of OP 4\.12 as well as the latest regulations of Vietnam\. Safety of Dams OP/BP 4\.37 No The project will not finance the construction/ rehabilitation of any dams nor will the project rely on any existing dams\. Projects on International Yes OP 7\.50 on Projects on International Waterways was Waterways OP/BP 7\.50 triggered under the original credit but it falls under the exception to the notification requirements set out in paragraph 7 of OP 7\.50\. The project➢❨ s investments under both the original and additional credits are located predominantly on the Red River (and its tributaries), an international waterway as defined by OP7\.50, as the Red River system originates in China\. Vietnam is the lowest downstream riparian user of this river system as the river system empties itself into the South China Sea from within the territory of Vietnam without entering any other country➢❨ s territory\. Both the original and additional credits involve rehabilitation of Page 9 of 18  existing schemes\. They do not comprise works and activities that would exceed the original scheme, change its nature, or alter and expand its scope and extent to make it appear a new or different scheme\. Moreover, neither the parent project nor the proposed AF will (a) adversely affect the quality or quantity of water flows to the other riparians; or (b) be adversely affected by other riparians➢❨ water use\. Consequently both the original credit and proposed additional credit fall within the exception to the notification requirement set forth in paragraph 7(a) of OP 7\.50\. The works at the Ninh Co River estuary➢❨ including the DNC canal➢❨ concern tributaries of the Red River➢❨ s international waters that run exclusively in Vietnam and as such the AF project would fall within the exception to the notification requirement set forth in paragraph 7(c) of OP 7\.50 as Vietnam is the lowest downstream riparian and neither the parent project nor the AF credit cause appreciable harm to other states\. Projects in Disputed Areas OP/ No There are no Disputed Areas within the Project BP 7\.60 boundaries\. The policy is not triggered\. IV\. Key Safeguard Policy Issues and Their Management A\. Summary of Key Safeguard Issues 1\. Describe any safeguard issues and impacts associated with the proposed project\. Identify and describe any potential large scale, significant and/or irreversible impacts: There is no change to the environmental category under the AF, which remains an A\. OP 4\.04 is triggered, as dredging activities will have an impact on aquatic biodiversity\. The project's detailed design incorporates an innovative ecological engineering approach➢❨ a mixed bank protection scheme, based on ecological bank protection (vegetation capacity to fix the banks) and classical bank protection (rip rap), which will enhance biodiversity and protect against the effect of waves and erosion on the river banks and adjoining wetland, creating and/or restoring approximately 9 ha of aquatic and wetland habitats\. Ecological bank protection is based on (a) the planting of indigenous plants into the rip rap holes; and (b) incorporating into project design the creation of friendly habitats for birds, small mammals, reptiles, batrachians, terrestrial and aquatic invertebrates, and fish\. This environmentally friendly approach to bank protection has social and financial benefits\. Depending on the choice of vegetation, local people can generate income by harvesting part of the vegetation and also maintain the fish catch due to improved habitats for fish\. In addition, a combination of rip-rap and ecological bank protection is significantly less costly than the classical concrete plots usually used for bank protection in Vietnam\. The most significant environmental impact will be caused by dredging activities\. These activities could significantly impact physical environment, biologic environment and socio-economic environment\. The impacts are attributed to large extraction of (more than 2 million cubic meters) of sediment particularly from bend cutting as well as the need to ensure safe and environmentally Page 10 of 18 sound disposal of dredged/excavated materials, To mitigate possible impacts on aquatic life, the following measures are proposed: - Dredging close to the bank and in wetlands and spawning areas should be carried out between October to May, avoiding the peak of biological activity that occurs during the flood/rainy season\. - Although dredging of the center of the channel can be undertaken throughout the year, contractors must take into consideration in their construction schedules that during the dry season, the Total Suspended Solids (TSS)/turbidity levels downstream of the dredging areas will be much lower than during the rainy season\. - The EA process concluded that all environmental risks associated with dredging works are to be managed through the implementation of the Dredge and Excavated Material Disposal Plan (DEMDP)\. Cumulative impacts\. Apart from the World Bank-financed activities under NDTDP, there are no additional existing or planned activities in the project area within the projected period of implementation of the AF credit that would have a negative cumulative impact on Valuable Ecological Components relevant to project activities➢❨ namely, water quality, aquatic biodiversity, and the quality of life of agricultural communities in the project area and downstream\. The environmental impact of the DNC canal project itself has long term positive environmental impacts\. The project will adopt an innovative ecological engineering approach\. A mixed bank protection scheme is proposed for the Project, based on ecological bank protection (vegetation capacity to fix the banks) and classical bank protection (rip-rap), which will enhance biodiversity and protect against the effect of waves and erosion on the river banks and adjoining wetland, creating and/or restoring approximately 9 ha of aquatic and wetland habitats➢❨ an area 18 times greater than the lost habitat\. Moreover, the transfer of a significant portion of dredged/ excavated material to Lach Giang's Southern Disposal area will expedite the filling ( and subsequent closure) of the disposal site, allowing for the plantation of income generating Casuarina trees on 30 ha of the disposal site\. During the tree maturation period, this will provide favorable habitat for birds and invertebrates\. It is anticipated that these ecological approaches to riverbank protection and disposal site closure➢❨ in providing examples of cost-effective and environmentally friendly mitigation solutions➢❨ will lead to a positive cumulative impact on ➢❨ green➢❨ construction practices in Vietnam\. All sub-projects under the parent project are already completed and operational\. As such, there will be no additional cumulative environmental or social impacts ensuing from these sub-projects\. Involuntary Resettlement (OP 4\.12)\. The Construction of the DNC canal complex would lead to resettlement impacts due to required land acquisition for rehabilitation, improvement and widening of national waterways, provincial waterways, bridges and ship lock\. This activity would have adverse impacts on private assets, including small businesses and households➢❨ incomes in addition to temporary impacts on private land during groin construction and river bend corrections\. Temporary land acquisition wouldalso be needed for depositing spoils from dredging of rivers\. Although physical displacement of large number of households is not envisaged, many households stand to lose part of their agricultural land and household income due to the proposed rehabilitation and improvements\. The land acquisition required for DNC component is estimated at 368,819 m2 (permanent) and 79,664 m2 (temporary), affecting 264 households (HHs) (1,061 Page 11 of 18  people), of which 30 HHs will be relocated\. The project will also have impacts on some public facilities, including 1 ferry, 2 transmission lines (110kV and 35kV), 300m of provincial road No\. 490, 260m of dyke on Day➢❨ s right bank, some inter-village roads and 300m of underground communication cable\. All impacts will be Nghia Lac, Nghia Son communes of Nghia Hung district, Nam Dinh province\. The impact on public facilities may cause non-safeguard impact that local communities may be exposed to, especially in terms of local transportation and access to the local irrigation system\. Indigenous People (OP 4\.10)\. Screening results confirmed that there is no EM community living in the project areas\. The EA process showed there would be relocation of a small temple for bend correction\. A total of 14 tombs will also be relocated under the project\. Therefore, extensive and inclusive public consultation was conducted with local community on its relocation plan and modalities\. This will be conducted closely with the resettlement process under appropriate religious and cultural norms, and OP4\.11 Physical Cultural Resources has been triggered\. 2\. Describe any potential indirect and/or long term impacts due to anticipated future activities in the project area: The modification of solid flow due to dredging near all seven of the original project areas and the modification of Lach Giang estuary could bring some modification in the sediment reparation along the coast\. The major potential long-term environmental impacts will be associated with hydrological changes in drainage patterns of certain sections of the northern Delta watershed area with implications for flood management, and also from morphology of the Lach Giang estuary\. However, the findings of the morphological studies indicate the difficulty in identifying and quantifying the possible long term impacts, especially because sediment transport is already heavily modified due to significant changes in the river flows, partly caused by changes in the built environment, but also attributable to increasing sea levels and increases in storms and storm surges that are a consequence of global climate change\. The specific, isolated impacts caused by the DNC project cannot be accurately assessed because of the importance of other disturbance factors both in the waterways and in coastal areas, whether or not linked to the Parent project\. In general, the proposed activity would likely to have a net positive environmental and social impact due to: - Significant increased efficiency of inland waterway navigation with improved and diversified economic activities generating potential increases in income\. - The transfer of a significant portion of dredged/excavated material to Lach Giang➢❨ s Southern Disposal area will permit the completion of the fill site and the plantation of Casuarina trees on 30 ha ➢❨ that can be exploited later (1 to 15 years) for the wood\. It will also permit -, at a minimum during the tree maturation period, favorable habitats for birds and invertebrates\. - From social perspective, the most obvious indirect impact is the inconvenience that the local communities may suffer during the project construction, especially in terms of local transportation, access to irrigation system\. 3\. Describe any project alternatives (if relevant) considered to help avoid or minimize adverse impacts\. Proposed project design alternatives were analyzed based technical, economic, social and environmental aspects: Page 12 of 18 ➢❨ Without project➢❨ The ➢❨ no project➢❨ scenario would mean that coastal shipping, even with the existence of the newly built and Project-financed Lach Giang estuary channel, would still be unable to pass from Ninh Co to Day Rivers and so would prohibit transport from the sea to the Port of Ninh Binh\. A ➢❨ no project➢❨ scenario would virtually eliminate the benefits from the already completed project-financed investments on Corridor 3 and eliminate the economic and environmental benefits that are expected to be derived from improving the Day-Ninh Co Rivers and embankments\. ➢❨ Only with canal and ship lock➢❨ If the canal is built but without road relocation or without a crossing bridge, it will isolate the downstream part of the area between Day River, Ninh Co River and the sea\. It means that the land connections will be blocked and the population living there will be strongly disturbed\. A no action plan for the road and bridge will block any economic development in this area and, most of all penalize the actual economic conditions based on the trade of agricultural goods\. ➢❨ With project➢❨ (a) 1st alternative: Lock or no Lock and Gate or no gate for the lock? The alternative was based on 3 possibilities: - No lock; - Lock with gate open most of the time; - Lock with gate open only when boats are present\. No lock: The difference of water levels between the two rivers will create velocity constraints for navigation with risk of damage to boats or difficulties for navigation in the canal, therefore a lock is necessary\. Lock with gate mostly open: Because of the frequent salinity intrusions by the Ninh Co River, high flow of saline water from the Ninh Co would enter in the Day River when Ninh Co Level is higher than Day River; therefore a lock with gate opening only when boats need to cross the lock is necessary\. Lock with gate open only when boats are present: The selected alternative (canal with lock and gate open only when boats need to cross) ensures adequate navigation conditions in the canal and prevents the high flow of saline water to intrude from the Ninh Co River to the Day River\. (b) 2nd alternative: which kind of crossing bridge? For the bridge, the initial option considered was a mobile bridge to permit the circulation of low intensity local traffic\. The alternative of a fixed bridge with 15 m of air clearance was selected by the MoT, following the request of local population, Province and Districts\. The fixed bridge options allows for the absorption of projected increased traffic flow, both for the road and the waterway\. Page 13 of 18  (c) 3rd alternative: Location of the canal? The initial location of the canal ➢❨ fixed by the 2008 feasibility study ➢❨ would have destroyed more than 50 houses, a church and a cemetery (out of 2 cemeteries in the project area)\. The Detailed Design phase has modified the location and angles of the canal with the 2 rivers permitting the boats to enter and exit the canal while minimizing the impacts on houses and preserving the church\. The updated design of the project in 2015 identified 14 tombs that need relocation and this has been included in the Resettlement Action Plan\. The Detailed design of the road and bridge has also reduced from 12 to 5 the number of houses to be destroyed and relocated\. The surface of lands impacted by the project was estimated in 2013 at 62 ha, but the 2015 updated design, based on the detailed design of the Canal and the preliminary Design of the Road and Bridge reduces the impacted land to 47 ha\. The final design proposed a solution to reduce from 62 houses to 33 the number of affected houses, across 32 households, and preserves the church and the cemetery from destruction\. A total of 14 tombs will need relocation\. The project has been adapted from Feasibility study design to ensure that the works do not destroy or affect access to cultural and religious heritage sites\. The church and the 2 cemeteries will be preserved and 14 tombs will be relocated\. (d) 4th alternative: Concrete bank protections vs\. ecological/mix bank protections ➢❨ Classical➢❨ Vietnamese concrete bank protections (concrete plots) designed in accordance with Vietnamese standards, overestimates the magnitude of protection needed\. ➢❨ Mixed bank protection➢❨ , based on ecological bank protection (vegetation capacity to fix the banks) and classical bank protection (rip rap) is proposed and will enhance biodiversity and protect against the effect of waves and erosion\. This alternative is not referenced by the Vietnamese standards but it is based on more than 20 years of experience on the Rhône and the Rhine Rivers as on other major waterways in Europe\. This kind of ecological bank protections permits the planting of adapted local plants into the Rip Rap holes and to create friendly habitats for birds, small mammals, reptiles, batrachians, terrestrial and aquatic invertebrates and also fishes\. Depending of the choice of vegetation, local people can get some income from harvesting part of the vegetation and also by improvement of the fishing production due to the better habitats for fishes\. In addition to the ecological interests, the alternative 2 (rip-rap + ecological bank protection) is much cheaper than the classical concrete plots usually used in Vietnam\. Consultations with the potentially affected beneficiary communities and key stakeholders, carried out during the Social Assessment, natural habitat relocation and resettlement plan preparation, provided useful suggestions and feedback that was taken into account in considering design alternatives and formulating design parameters for this subproject\. Finally, the feasibility study showed that alternatives were considered for the management of dredged materials and how the ports should be designed to better handle loading and unloading of bulk cargo material\. 4\. Describe measures taken by the borrower to address safeguard policy issues\. Provide an assessment of borrower capacity to plan and implement the measures described\. With respect to the environment issues, updated Environmental Impact Assessment (EIA), Environmental Management Plan (EMP), and Resettlement Action Plan (RAP) documents have been prepared in accordance with World Bank policy\. In addition, the Corridor 3 Dredged and Page 14 of 18 Excavated Materials Disposal Plan that was prepared under the original credit remains fully adequate for use under the AF credit and is compliant with Bank policy\. All of these documents are compliant with applicable Vietnamese environmental regulations and social policies and World Bank Operational Policies\. Resettlement Action Plan (RAP)\. A Resettlement Action Plan has been prepared to address adverse social impacts due to involuntary resettlement and lays down the principles and objectives, eligibility criteria of the affected persons (APs), entitlements, legal and institutional framework, modes of compensation and rehabilitation, stakeholder participation, grievance procedures, and monitoring\. The RAP includes measures to ensure that displaced people are: (i) informed about the options regarding resettlement; (ii) consulted and offered alternative resettlement choices; and (iii) provided with effective compensation and livelihood restoration\. The RAP was prepared in accordance with the guidelines set forth in the requirements of OP 4\.12 as well as the latest regulations of Vietnam\. During RAP preparation, two rounds of consultations were conducted to collect communities➢❨ feedbacks on project design as well as proposed mitigation plans\. The project implementing agency will continue to organize consultation events during project implementation\. The estimated budget for RAP implementation is approximately VND120 billion (US$5\.4 million)\. With regard to the Borrower's capacity to address environment and social safeguards issues, it is deemed that the Borrower➢❨ s institutional capacity to comply with these measures will be sufficient for the following reasons: Project implementation will be undertaken by the Project Management Unit for Waterways (PMU- W), a national-level agency of the Ministry of Transport that has accumulated significant experience by implementing the original Credit\. They also have experience from preparing and implementing other Bank-financed projects, including the Mekong Delta Transport Infrastructure Development Project (MDTIDP) and the Inland Waterways and Port Rehabilitation Project (IWWP)\. Therefore, PMU-W already has experience preparing and implementing World Bank projects\. PMU-W has built capacity through the best practice environmental management, preparation, and supervision undertaken by the Parent Project Environmental Management and Construction Supervision Consultant, Compagnie Nationale du Rhône, (CNR) and their local affiliate, VIPO\. As required by OP 4\.01 in instances wherein the environmental safeguards documentation is prepared by the same company undertaking detailed design (as is the case here), an independent expert reviewed the updated EIA prepared by CNR for the DNC Canal\. - Supervision of environmental management is conducted regularly by high-level local (VIPO) and international (CNR) technical experts\. - Illustrated and technically detailed progress reports are provided regularly, with follow-up recommendations which are monitored by VIPO/CNR\. - Environmental health and safety measures follow good practice, and are also regularly monitored, with lapses noted and corrective action taken\. - CNR regularly undertakes ➢❨ safeguards plus➢❨ measures, such as proposing the use of ecological banks, based on more than 20 years of experience on the Rhône and the Rhine Rivers as on other major waterways in Europe, and the monitoring of water quality to assess pollution from upstream sources (such as illegal cement plants)\. - CNR is committed to training local Vietnamese staff in best practice environmental management Page 15 of 18  and Health and Safety practices\. 5\. Identify the key stakeholders and describe the mechanisms for consultation and disclosure on safeguard policies, with an emphasis on potentially affected people\. Two rounds of consultations were organized through which the affected people and communities and other relevant stakeholders, such as local authorities, have been consulted on the safeguard instruments\. The feedback from the consultations have been incorporated into the project design, and are reflected in the final draft of the ESIA, EMP, and RAP safeguards documents\. Draft versions of these documents have been disclosed locally in Vietnamese (as of August 9th, 2016) and in English at the World Bank InfoShop (as of August 8th, 2016)\. B\. Disclosure Requirements Environmental Assessment/Audit/Management Plan/Other Date of receipt by the Bank 12-Jul-2016 Date of submission to InfoShop 08-Aug-2016 For category A projects, date of distributing the Executive Summary of the EA to the Executive Directors "In country" Disclosure Vietnam 09-Aug-2016 Comments: Resettlement Action Plan/Framework/Policy Process Date of receipt by the Bank 24-Jul-2016 Date of submission to InfoShop 08-Aug-2016 "In country" Disclosure Vietnam 09-Aug-2016 Comments: If the project triggers the Pest Management and/or Physical Cultural Resources policies, the respective issues are to be addressed and disclosed as part of the Environmental Assessment/ Audit/or EMP\. If in-country disclosure of any of the above documents is not expected, please explain why: C\. Compliance Monitoring Indicators at the Corporate Level OP/BP/GP 4\.01 - Environment Assessment Does the project require a stand-alone EA (including EMP) Yes [ ] No [ ] NA [ ] report? If yes, then did the Regional Environment Unit or Practice Yes [ ] No [ ] NA [ ] Manager (PM) review and approve the EA report? Are the cost and the accountabilities for the EMP incorporated Yes [ ] No [ ] NA [ ] in the credit/loan? OP/BP 4\.04 - Natural Habitats Page 16 of 18  Would the project result in any significant conversion or Yes [ ] No [ ] NA [ ] degradation of critical natural habitats? If the project would result in significant conversion or Yes [ ] No [ ] NA [ ] degradation of other (non-critical) natural habitats, does the project include mitigation measures acceptable to the Bank? OP/BP 4\.11 - Physical Cultural Resources Does the EA include adequate measures related to cultural Yes [ ] No [ ] NA [ ] property? Does the credit/loan incorporate mechanisms to mitigate the Yes [ ] No [ ] NA [ ] potential adverse impacts on cultural property? OP/BP 4\.12 - Involuntary Resettlement Has a resettlement plan/abbreviated plan/policy framework/ Yes [ ] No [ ] NA [ ] process framework (as appropriate) been prepared? If yes, then did the Regional unit responsible for safeguards or Yes [ ] No [ ] NA [ ] Practice Manager review the plan? Is physical displacement/relocation expected? Yes [ ] No [ ] TBD [ ] 120 Provided estimated number of people to be affected Is economic displacement expected? (loss of assets or access to Yes [ ] No [ ] TBD [ ] assets that leads to loss of income sources or other means of livelihoods) 1061 Provided estimated number of people to be affected OP 7\.50 - Projects on International Waterways Have the other riparians been notified of the project? Yes [ ] No [ ] NA [ ] If the project falls under one of the exceptions to the Yes [ ] No [ ] NA [ ] notification requirement, has this been cleared with the Legal Department, and the memo to the RVP prepared and sent? Has the RVP approved such an exception? Yes [ ] No [ ] NA [ ] The World Bank Policy on Disclosure of Information Have relevant safeguard policies documents been sent to the Yes [ ] No [ ] NA [ ] World Bank's Infoshop? Have relevant documents been disclosed in-country in a public Yes [ ] No [ ] NA [ ] place in a form and language that are understandable and accessible to project-affected groups and local NGOs? All Safeguard Policies Have satisfactory calendar, budget and clear institutional Yes [ ] No [ ] NA [ ] responsibilities been prepared for the implementation of measures related to safeguard policies? Have costs related to safeguard policy measures been included Yes [ ] No [ ] NA [ ] in the project cost? Does the Monitoring and Evaluation system of the project Yes [ ] No [ ] NA [ ] include the monitoring of safeguard impacts and measures Page 17 of 18  related to safeguard policies? Have satisfactory implementation arrangements been agreed Yes [ ] No [ ] NA [ ] with the borrower and the same been adequately reflected in the project legal documents? V\. Contact point World Bank Contact: Luis C\. Blancas Mendivil Title: Sr Transport\. Spec\. Borrower/Client/Recipient Name: Contact: Title: Email: Implementing Agencies Name: Contact: Title: Email: VI\. For more information contact: The World Bank 1818 H Street, NW Washington, D\.C\. 20433 Telephone: (202) 473-1000 Web: http://www\.worldbank\.org/projects VII\. Approval Task Team Leader(s): Name: Luis C\. Blancas Mendivil Approved By Safeguards Advisor: Name: Peter Leonard (SA) Date: 28-Sep-2016 Practice Manager/ Name: Gerald Paul Ollivier (PMGR) Date: 28-Sep-2016 Manager: Country Director: Name: Ousmane Dione (CD) Date: 03-Nov-2016 Page 18 of 18

APPROVAL

P100792

 Document of The World Bank Report No: ICR2220 IMPLEMENTATION COMPLETION AND RESULTS REPORT (IDA-43710) ON A CREDIT IN THE AMOUNT OF SDR16\.4 MILLION (US$25 MILLION EQUIVALENT) TO BOSNIA AND HERZEGOVINA FOR A ROAD INFRASTRUCTURE AND SAFETY PROJECT December 27, 2012 Sustainable Development Department South East Europe Unit Europe and Central Asia Region  CURRENCY EQUIVALENTS (Exchange Rate Effective) Currency Unit = BAM (Convertible Mark) 1 BAM = US$ 1\.55465 US$ 1\.00 = 0\.64323 BAM GOVERNMENT FISCAL YEAR January 1- December 31 ABBREVIATIONS AND ACRONYMS BAM Bosnia and Herzegovina IDA International Development Convertible Mark Association BH Bosnia and Herzegovina IFI International Financial Institution BIHAMK Bosnia and Herzegovina INT Integrity Vice Presidency Automobile Club IRI International Roughness Index BOQ Bill of Quantities ISR Implementation Status Report CAS Country Assistance Strategy MoF Ministry of Finance MoCT Ministry of Communications and CPFR Country Portfolio Financial Review Transport of Bosnia and CPS Country Partnership Strategy Herzegovina CMU Country Management Unit MTDS Medium Term Development DPL Development Policy Loan Strategy EBRD European Bank for Reconstruction and Development MTR Mid Term Review EIB European Investment Bank NPV Net Present Value EIRR Economic Internal Rate of Return OECD Organization of Economic Co- EMP Environmental Management Plan operation and Development EU European Union OPBM Output and Performance Based FA Financial Agreement Maintenance OPBRMC Output and Performance Based FBH Federation of Bosnia and Road Maintenance Contract Herzegovina PAD Project Appraisal Document FBHMTC Ministry of Transport and PDO Project Development Objectives Communications Federation of PEIR Public Expenditure and Institutional Bosnia and Herzegovina Review FBHRD Federation of Bosnia and PIT Project Implementation Team Herzegovina Public Company Road PM Project Management Directorate (“Javno preduzeće Direkcija cesta Federacije Bosne i PPP Public Private Partnership Hercegovineâ€?) QAG Quality Assessment Group FM Financial Management REBIS Regional Balkans Infrastructure FY Fiscal Year Study GDP Gross Domestic Product RISP Road Infrastructure and Safety HDM Highway Development and Project Management System RMSP Road Management and Safety IBRD International Bank for Project Reconstruction and Development RSMCR Road Safety Management Capacity ICB International Competitive Bidding Review ICR Implementation Completion Report RS Republika Srpska RSRD Republika Srpska Road Directorate SEETO South East Europe Transport (“Javno preduzeće Putevi Observatory Republike Srpske") TOR Terms of Reference SDR Special Drawing Rights TSA Traffic Safety Agency UN United Nations Vice President: Philippe LeHouérou Country Director: Gerard A\. Byam Sector Manager: Juan Gaviria Project Team Leader: Carolina Monsalve ICR Team Leader: George Banjo  BOSNIA AND HERZEGOVINA ROAD INFRASTRUCTURE AND SAFETY PROJECT CONTENTS DATA SHEET \. i A\. Basic Information\. i B\. Key Dates \. i C\. Ratings Summary \. i D\. Sector and Theme Codes \. ii E\. Bank Staff \. ii F\. Results Framework Analysis \. iii G\. Ratings of Project Performance in ISRs \. v H\. Restructuring (if any) \. v I\. Disbursement Profile \. vi 1\. Project Context, Development Objectives and Design \. 1 2\. Key Factors Affecting Implementation and Outcomes \. 5 3\. Assessment of Outcomes \. 12 4\. Assessment of Risk to Development Outcome \. 16 5\. Assessment of Bank and Borrower Performance \. 17 6\. Lessons Learned\. 19 7\. Comments on Issues Raised by Borrower/Implementing Agencies/Partners\. 20 Annex 1\. Project Costs and Financing \. 22 Annex 2\. Outputs by Component\. 23 Annex 3\. Economic and Financial Analysis \. 26 Annex 4\. Bank Lending and Implementation Support/Supervision Processes\. 31 Annex 5\. Beneficiary Survey Results \. 33 Annex 6\. Stakeholder Workshop Report and Results\. 34 Annex 7\. Borrower's ICR and Comments on Draft ICR \. 35 Annex 8\. Comments of Co-financiers and Other Partners/Stakeholders \. 54 Annex 9\. List of Supporting Documents \. 55  BOSNIA AND HERZEGOVINA ROAD INFRASTRUCTURE AND SAFETY PROJECT DATA SHEET A\. Basic Information ROAD Bosnia and INFRASTRUCTURE Country: Project Name: Herzegovina AND SAFETY PROJECT Project ID: P100792 L/C/TF Number(s): IDA-43710 ICR Date: 12/28/2012 ICR Type: Core ICR BOSNIA AND Lending Instrument: SIL Borrower: HERZEGOVINA Original Total XDR 16\.40M Disbursed Amount: XDR 16\.30M Commitment: Revised Amount: XDR 16\.40M Environmental Category: B Implementing Agencies: Republika Srpska Road Directorate Federation Road Directorate Cofinanciers and Other External Partners: European Investment Bank European Bank for Reconstruction and Development (EBRD) B\. Key Dates Revised / Actual Process Date Process Original Date Date(s) Concept Review: 10/19/2006 Effectiveness: 09/19/2008 09/19/2008 09/16/2010 Appraisal: 09/10/2007 Restructuring(s): 07/06/2011 Approval: 12/13/2007 Mid-term Review: Closing: 12/31/2011 06/30/2012 C\. Ratings Summary C\.1 Performance Rating by ICR Outcomes: Satisfactory Risk to Development Outcome: Moderate Bank Performance: Satisfactory i Borrower Performance: Satisfactory C\.2 Detailed Ratings of Bank and Borrower Performance (by ICR) Bank Ratings Borrower Ratings Quality at Entry: Satisfactory Government: Satisfactory Implementing Quality of Supervision: Satisfactory Satisfactory Agency/Agencies: Overall Bank Overall Borrower Satisfactory Satisfactory Performance: Performance: C\.3 Quality at Entry and Implementation Performance Indicators Implementation QAG Assessments Indicators Rating Performance (if any) Potential Problem Project Quality at Entry No None at any time (Yes/No): (QEA): Problem Project at any Quality of No None time (Yes/No): Supervision (QSA): DO rating before Moderately Closing/Inactive status: Satisfactory D\. Sector and Theme Codes Original Actual Sector Code (as % of total Bank financing) Central government administration 10 10 Roads and highways 90 90 Theme Code (as % of total Bank financing) Infrastructure services for private sector development 100 100 E\. Bank Staff Positions At ICR At Approval Vice President: Philippe H\. Le Houerou Shigeo Katsu Country Director: Gerard A\. Byam Orsalia Kalantzopoulos Sector Manager: Juan Gaviria Motoo Konishi Project Team Leader: Maria Carolina Monsalve Jacques Bure ICR Team Leader: George A\. Banjo ICR Primary Author: George A\. Banjo ii  F\. Results Framework Analysis Project Development Objectives (from Project Appraisal Document) The Project Development Objectives are to reduce user costs on the priority sections of the trunk and regional road networks, to improve the institutional framework for road safety, and to modernize road maintenance practices\. Revised Project Development Objectives (as approved by original approving authority) PDO was not revised\. (a) PDO Indicator(s) Original Target Formally Actual Value Values (from Revised Achieved at Indicator Baseline Value approval Target Completion or documents) Values Target Years Reduce by the end of the project road user costs by ten percent in road sections Indicator 1 : rehabilitated\. US$0\.25/km/vehicle US$0\.339/km/vehicle Value 10% reduction (i\.e\. (2004, FBH) 0\.208 (2012, FBH) quantitative or US$0\.225/km/vehi US$0\.381/km/vehicle 0\.254 (2012, RS) Qualitative) cle) (2004, RS) 0\.284 (2007, RS) Date achieved 01/01/2007 12/31/2011 06/30/2012 Comments Vehicle operating costs declined by 18\.07% in the Federation and 11\.22% in the (incl\. % RS, which meet or exceed the target of 10%\. achievement) Establish effective road safety office; prepare a road strategy; conduct pilot Indicator 2 : operation Value 1 national and 2 Road Traffic quantitative or none entity road safety Agency established Qualitative) offices established in RS Date achieved 06/02/2008 12/31/2011 06/30/2012 Safety agency est in RS, but not in FBH (existing road safety unit played active Comments role in promoting road safety)\. At natl level road safety desks exist within (incl\. % MOI/MOTC\. Road strategies prepared\. Pilot operations conducted in both ent\. achievement) Considered achieved\. Indicator 3 : Complete a satisfactory pilot performance based road maintenance operation 2 pilots 1 pilot implemented Value implemented\. in FBH and quantitative or none Quality and costs contract for one Qualitative) known\. signed in RS\. Date achieved 06/02/2008 12/31/2011 06/30/2012 Target achieved in FBH--survey results indicate 78% of respondents confirmed Comments partial improvement of OPBM over conventional method (no significant cost (incl\. % difference between the two)\. In RS, only partially achieved as contract for pilot achievement) signed in 6/25/12\. iii Indicator 4 : Length of roads rehabilitated Value quantitative or 0\.00 240\.00 293\.00 Qualitative) Date achieved 06/02/2008 12/31/2011 06/30/2012 Comments (incl\. % Target exceeded by about 22% achievement) (b) Intermediate Outcome Indicator(s) Original Target Actual Value Formally Values (from Achieved at Indicator Baseline Value Revised approval Completion or Target Values documents) Target Years Indicator 1 : Measure safety improvement (speed, seat-belt use, etc) 47% (RS, drivers) 47% (RS, drivers) use Value use seat belt; 36% seat belt; 36% (FBH, (quantitative 10% over baseline (FBH, front seat front seat passengers or Qualitative) passengers using using seat belts) seat belts) Date achieved 02/01/2012 02/13/2012 06/30/2012 Comments Due to delay in carrying out the pilot, baseline figures were established only in (incl\. % February 2012 instead of 2008 as planned\. Hence no 'target' to be achieved\. achievement) Achievement has to be rated as partial in that the pilot was conducted Indicator 2 : Issue a road safety strategy Strategy prepared in Value each entity but not (quantitative None Strategy issued\. yet formally or Qualitative) adopted by them\. Date achieved 06/02/2008 12/31/2011 06/30/2012 Comments A road safety strategy was prepared by both FBH and RS in 2008 through own (incl\. % efforts and these were to be updated under the project\. Achievement rated partial achievement) as strategy yet to be adopted i\.e\. issued, by the entities\. Indicator 3 : Road users satisfaction survey toward performance based road maintenance Value Survey Survey completed Completed in FBH (quantitative None conducted in in each entity but not RS or Qualitative) FBH\. Date achieved 06/02/2008 02/14/2012 06/05/2012 06/30/2012 FBH survey results was non-conclusive on merit of performance based road Comments maintenance over traditional maintenance works--users found it difficult to (incl\. % differentiate between pilot roads & those improved under other interventions\. achievement) Achievement rated as partial Indicator 4 : Roads rehabilitated, Non-rural Value (quantitative 0\.00 256\.48 293\.00 240\.00 or Qualitative) Date achieved 12/09/2008 08/05/2011 06/11/2012 06/30/2012 iv  Bank core indicator retrofitted into results framework that would have been Comments better placed as intermediate indicator\. All roads rehabilitated under project are (incl\. % non-rural\. Actual length of roads rehabilitated is 293 km--greater than target of achievement) 240km by 22% Indicator 5 : Roads in good and fair condition as a share of total classified roads Value (quantitative 79\.00 N/A 82\.00 or Qualitative) Date achieved 12/06/2008 12/31/2011 06/30/2012 Bank core indicator retrofitted into results framework\. No target set--objective to Comments measure change over project period\. Roads figures under FBHRD/RSRD (incl\. % responsibility\. Increase of about 4% in roads in good/fair condition over project achievement) implementation period G\. Ratings of Project Performance in ISRs Actual Date ISR No\. DO IP Disbursements Archived (USD millions) 1 05/30/2008 Satisfactory Satisfactory 0\.00 2 11/14/2008 Satisfactory Satisfactory 0\.00 3 06/30/2009 Satisfactory Satisfactory 0\.00 4 01/13/2010 Satisfactory Satisfactory 8\.84 5 06/08/2010 Satisfactory Satisfactory 12\.82 6 12/29/2010 Satisfactory Moderately Satisfactory 18\.95 7 04/05/2011 Satisfactory Moderately Satisfactory 20\.69 8 12/13/2011 Satisfactory Moderately Satisfactory 24\.49 9 03/25/2012 Satisfactory Satisfactory 24\.49 10 06/24/2012 Moderately Satisfactory Moderately Satisfactory 24\.81 H\. Restructuring (if any) ISR Ratings at Amount Board Restructuring Disbursed at Restructuring Reason for Restructuring & Approved Restructuring Date(s) Key Changes Made PDO Change DO IP in USD millions Reallocation of funds from components 2 and 3 to 1 mainly 09/16/2010 N S S 13\.07 to increase funding for component 1\. Reallocation of funds\. Project closing date extension\. To allow 07/06/2011 N S MS 21\.86 completion of road safety component in RS\. v I\. Disbursement Profile vi 1\. Project Context, Development Objectives and Design 1\.1 Context at Appraisal Bosnia and Herzegovina (BH) is a state with a complex governance structure comprising two entities, each with a high degree of autonomy: the Federation of Bosnia and Hezegovina (FBH) which is further decentralized into 10 cantons, and the Republika Srpska (RS)\. The autonomous Brcko district was added to the structure in 1999\. There are 137 municipalities in BH, of which 74 are located in the FBH, and 63 in the RS\. At the time of appraisal, increased investment in infrastructure was seen as needed in order to support economic growth\. The transport sector was at appraisal being administered and managed at the State level by the Ministry of Communications and Transaport (MoCT), and at the entity level, by separate Ministries of Transport and Communications\. At the operational level, there were four road Directorates, two in each entity, responsible for motorways and magistral roads respectively; the Directorate in RS also has responsibility for regional roads\. This fragmentation of responsibilities in the sector was seen as increasing complexity and transaction costs and eroding public sector capacity at all levels\. Significant investments in the sector since the end of the war, including a considerable share of external financing, had helped to improve the overall condition of the road networks\. Due to the severity of war damage however, only 11 percent of the network was at the time of appraisal in good condition with 40 percent in poor condition and requiring pavement strengthening or rehabilitation\. Moreover, traffic was growing at about 5 percent calling for upgrading of road infrastructure in the medium term\. Substantial opportunities were also seen as existing to consolidate sector policy making and operational responsibilities, but this required political commitment\. The Government’s strategic sector focus at appraisal was: (i) developing a comprehensive transport sector policy and strategy framework with support from the World Bank (WB) and the European Bank for Reconstruction and Development (EBRD); (ii) clearing maintenance backlog and strengthening maintenance capabilities by increasing recurrent expenditure; and (iii) reducing the social and economic burden of road traffic accidents\. The RISP, together with the parallel European Investment Bank (EIB) and EBRD operations, was seen as central to assisting the Government meet these strategic needs\. The PAD stated three rationale for Bank assistance: (i) to build upon achievements of the Road Management and Safety Project (RMSP) then ongoing that had supported institutional and sectoral reforms, domestic contracting industry development, development of a road and bridge database for the magistral and regional roads which had been used to prioritize investments on these roads and a pilot project to improve road safety; (ii) the comparative advantage of the Bank particularly in introducing innovation in road maintenance and road safety, efficiency, and capacity building that should help to deepen the development of the roads sector in BH; and (iii) the strong positive dialogue 1 with government and the Bank’s ability to catalyze other donors\. These reasons were all seen as essential for the development of the road sector\. The higher level objectives relevant to the Project related to (i) the 2004 BH Medium Term Development Strategy (MTDS), (ii) the European Union (EU) policy on transport infrastructure (iii) the Bank Country Assistance Strategy (CAS) FY05-07 which respectively identified transport as a major sector vital to the economy, encouraged cooperation between IFIs, and prioritized private sector led growth and investment in key social and economic infrastructure\. The Project would contribute to their achievement by financing rehabilitation of priority sections of the magistral and regional road networks, gaining government commitments to increase financing of routine and winter maintenance and piloting performance-based maintenance contracts all of which would increase private sector role in the sector\. Planned road safety improvements also had social and economic benefits\. The Country Partnership Strategy (CPS) for FY08-11 then under preparation highlighted the importance of infrastructure development\. 1\.2 Original Project Development Objectives (PDO) and Key Indicators (as approved) The PDO was to reduce user costs on the priority sections of the magistral and regional road networks, to improve the institutional framework for road safety, and to modernize road maintenance practices 1\. Key performance indicators were: (i) reduce road user costs by 10 percent on the road sections rehabilitated under the project (about 240 km 2); (ii) increase the quantity and quality of safety outputs (e\.g\. policing operations, promotional activities, systematic engineering treatment, and data collection) 3; and (iii) satisfactory piloting of output-based road maintenance (OPBM) contracts and comparison of the outcomes of these contracts with other regular maintenance contracts to assess whether the pilot operations could be scaled up\. 1\.3 Revised PDO (as approved by original approving authority) and Key Indicators, and reasons/justification The PDO was not revised\. 1\.4 Main Beneficiaries Road users, including pedestrians, were expected to benefit from the road improvements as improved ride quality would lead to reduced vehicle operating costs, and sound structural roads would lead to lower life cycle costs of the road assets including sidewalks 1 This text of the PDO is the same as in the Legal Agreement but the text in the results framework contained very minor differences which did not affect the meaning or understanding of the PDO\. There were 5 outcome indicators specified in the PAD and only 3 in the Legal Agreement as a result of three of the PAD outcome indicators being combined into one\. 2 It is to be noted that the Procurement Plan in the PAD contained 319\.88 km of roads in both entities from which the 240 kms to be rehabilitated were to be selected\. 3 Indicators for capturing these attributes include improvements in compliance with speed limits, use of seat belts, computerization of vehicle and driver information and use of campaigns to promote road safety awareness\. 2 provided\. The road improvements represented about 80 percent of the Credit\. Road users would also benefit from expected improvements to the road safety legislative framework, improvements to the information base for decision making on road safety through carrying out of planned road safety studies and pilot activities, and the training and public awareness campaigns which had been highlighted in the Road Safety Management Capacity Review (RSMCR) of March 2007 4\. These project actions would also benefit agencies and personnel with road safety responsibilities, particularly the traffic police and municipalities, via increases in their competencies from participation in implementing the activities\. Consultants and contractors who participated in the implementation of the Project or attended project organized workshops would also benefit by being exposed to international good practices\. At a higher level, the general public was expected to benefit through more efficient and effective use of public resources arising from improved capacity for service delivery in the implementing agencies and their adoption of improved approaches to road maintenance\. 1\.5 Original Components (as approved) The Credit for the RISP was of value SDR 16\.4 million equivalent to US$ 25 million\. 5 Component I: Rehabilitation of Selected Roads (US$ 24 million equivalent, Bank financed share US$I9 million equivalent)\. This component, linked to the outcome indicator ‘reduce user costs on the priority sections of the magistral and regional road networks’, financed civil works to rehabilitate and repair 240 km of the magistral and regional road network in both entities during 2008- 11\. Component 2: Road Safety (US$ 5 million equivalent, Bank Financed Share US$5 million equivalent)\. There were two subcomponents linked to achieving the outcome indicator ‘improve the institutional framework for road safety’\. The first of US$2\.60 million equivalent would build capacity to address road safety issues and provide support to the preparation of action plans at each entity level, including cost-effective interventions to address key road safety issues and establish a harmonized monitoring framework for road safety activities in the entities\. The second subcomponent of US$2\.40 million equivalent was aimed at conducting pilot activities along high-risks sections, to measure the effectiveness of stakeholder co-ordination and the impact of road safety interventions\. Component 3: Technical assistance and capacity building (US$1 million equivalent Bank Financed Share US$l million equivalent)\. This component, linked to achieving the outcome indicator ‘modernize road maintenance practices’, comprised consulting services: (i) to provide technical guidance on introducing output and performance-based maintenance (OPBM) in each entity; and (ii) to build capacity based on the recommendations of the Transport Sector (TransSec) study (the activities under this category were to be defined by the Road Directorates during implementation)\. The $0\.5 million allocated to each entity was seen as provisional and could be reallocated to other 4 Funded by the Global Road Safety Facility managed by the World Bank\. 5 Due to changes in the exchange rate, the US dollar amount disbursed was US$25\.62 million\. 3 categories during implementation\. Only the technical assistance related to the setup of the OPBM was identified in detail at an estimated cost of about $100,000 per entity\. The RISP was the sixth Bank transport operation since 1996 and part of a larger collaborative program by IFIs, of about S$210 million, to rehabilitate about 2,200 km of the magistral and regional roads in BH\. This was based on work financed under the earlier RMSP\. The program financing included: (i) US$25 million from IDA; (ii) US$5 million from the entity budgets; (iii) US$75 million from the EBRD; and (iv) Euro 80 million - US$l05 million equivalent- from the EIB\. The EBRD and EIB also contributed respectively to activities for the introduction of the OPBM, and technical assistance for the preparation and design of the roads to be financed by the IFIs\. 1\.6 Revised Components The Project went through two ‘Level 2’ restructurings that were approved in September 16, 2010 and July 6, 2011, respectively\. There was no cancellation of funds\. The first restructuring reallocated additional financing for component 1 to allow completion of the planned 240km of roads\. The second restructuring entailed the extension of the closing date of the Project by six months to June 30 2012 and reallocation of funds from component 3 to 2 in the RS\. The revised allocations from the restructuring are shown in the table below\. One of the effects of the allocations is that credit proceeds were not used for component 3\. FBH RS Componen Origina After first After second Origina After first After second t l restructurin restructurin l restructurin restructurin g g g g 1 6\.2 7\.4 7\.4 7\.4 7\.4 6\.99 2 1\.6 0\.8 0\.8 0\.6 0\.8 1\.21 3 0\.4 0\.0 0\.0 0\.2 0\.0 0\.00 Total 8\.200 8\.2 8\.200 8\.200 8\.20 8\.200 1\.7 Other significant changes These related to the scope, financing and implementation of the Project as follows: (i) component 1- funding from outside of the Project (from EIB, EBRD and FBH budget) of some road sections and bridges initially planned to be rehabilitated using credit proceeds\. 6 This was due to cost overruns without which more roads and bridges could in fact have been rehabilitated under the project\.; (ii) component 2 - decrease in the scope of the pilot road safety activities, a result of reallocation of funds from this component to component 1 which reduced the amount available for pilot activities\. In the RS, delays in the procurement of the road safety consultancy required extension of the Project closing date by six months with time only for a few scaled down pilot activities\. These changes 6 At appraisal, the project envisaged the rehabilitation of bridges in the FBH\. These were kept in the project, but some of these were financed with funds from outside the project,--one bridge needed major repairs to the foundations, requiring much more funds than envisaged at appraisal\. The Results Framework did not include specific indicators for the bridges, and the economic analysis for Component 1 excluded the bridges\. 4 were effected through Level 2 restructuring of the Project on September 16, 2010 and July 06, 2011; and (iii) component 3 - the initially planned form of the OPBM contract, performance based, changed to a hybrid consisting of traditional works measurement and performance based related to achievement of specified road serviceability standards\. These changes were technically acceptable\. None of the above changes required Board approval\. There were no changes to the implementation arrangements\. 2\. Key Factors Affecting Implementation and Outcomes 2\.1 Project Preparation, Design and Quality at Entry Preparation of the Project was supported by relevant lessons from the RSMP and valuable information on the sector from ongoing major studies particularly the 2007 draft Transport Sector Review study (TranSec) which recommended increased road maintenance as a priority for the sector\. Bank dialogue with government, EBRD and EIB on the findings of the studies resulted in consensus on the need to continue efforts under the RSMP to reduce the backlog of maintenance on the magistral and regional roads and to improve road safety based on the recommendations of the RSMCR\. This consensus formed the foundation for the design of Project\. There was also a desire within FBHRD and RSRD to improve quality and reduce the unit cost of maintenance works\. This led to agreement to include pilot testing of the OPBM approach, in conjunction with the EBRD\. This resulted in a simple three component design for the Project focused on rehabilitation of roads and bridges (only in FBH), road safety improvements and pilot testing of an OPBM approach\. Selection of roads to be rehabilitated was based entirely on the economic assessment of the magistral and regional road network carried out under the RMSP, with those with the highest benefits selected first until all funds were expended\. However, the bridges in FBH were not included in the economic assessment notwithstanding the statement in the PAD (p40, para 101) that ‘studies and economic analysis were prepared for the 150 km and for the bridges ……\.â€?\. Though the location of the road sections were geographically scattered, this was acceptable as both the Bank and the road directorates had experience from the RSMP in managing needed site supervisions\. The road safety component was designed to implement recommendations of the RSMCR that was completed in March 2007\. To facilitate exchange of regional experience in OPBM, the Bank organized a workshop in Serbia on international experience in its implementation\. The RISP was designed to be implemented by the same agencies in the entities that had capably implemented the RSMP\. The PDO specified for the Project was well focused and identifiable with each component\. The performance indicators were relevant, realistic and easily measurable\. The three outcome indicators specified in the PAD in reality were five as the second indicator had three elements needing to be measured which introduced some complexity to their tracking and application\. For the outcome indicator ‘reduction in road user costs’, it would appear that it was specified in the wrong currency, United State dollar, instead of the Euro\. None of the performance indicators related to the rehabilitation of bridges in the FBH, perhaps because at appraisal their estimated cost was a small proportion (about 10 5 percent) of planned road rehabilitation\. The cost of Project preparation was borne mainly by the FBHRD and RSRD, a sign of their commitment to the Project\. An additional sign of the commitment of the entities was their willingness to accept as a project covenant an increase in their expenditure on road maintenance by five percent annually in real terms during the implementation of the Project (but see 2\.2)\. This covenant proved difficult to be achieved during implementation, particularly by the FBH, due deteriorated macro- economic situation and changes in and decrease in the value added tax 7\. At Project pre- appraisal in March of 2007, agreement was reached with other IFIs and the government that Bank procurement and financial management procedures would apply regardless of source of funds\. This was welcomed by counterparts as it would reduce their transaction costs\. As with earlier Bank operations, designs and bid documents for roads and bridges to be rehabilitated were based on visual surveys and not available for review during preparation\. Costing of the road works were therefore carried out by the Bank team based on rough cost estimates provided by the road directorates and engineering judgments based on review of those designs that were available\. For the bridges, preparation did not include their inspection and nominal estimates were used in costing needed repairs\. Inherent in the above is the risk of underestimation of costs\. However, for the roads, the team considered the risk well mitigated by the high economic rate of return calculated for the potential Project roads implying that a significant increase in the estimated costs would still yield rates of returns higher than the Bank norm of 12 percent\. Underlying this position is the assumption that the target length of roads would still be reached notwithstanding a significant cost increase\. Significant cost increases were experienced during implementation (see 2\.2 below for a discussion of this) but the target length of roads to be rehabilitated was met reflecting perhaps a conservative target\. Documentation of the Project in the PAD could have been improved\. For example, description of component 1 in the main part of the PAD omitted the length of roads to be rehabilitated in each entity, did not indicate that bridges would be rehabilitated in FBH\. Description of component 3 did not indicate the need for implementation of the pilot OPBM as specified in the results framework\. Some differences also existed between the cost of roads to be rehabilitated in the RS stated in the PAD under project description (Euro11\.095 million) and the procurement plan (Euro11\.707 million) which contributed to a misunderstanding of the amount available for road rehabilitation in the RS leading to procurement delays during implementation\. These errors were however well addressed during implementation through intensive engagement and follow up on the part of the Bank team and aggressive seeking of additional funding from other sources (see 1\.7) by the implementing agencies when it became clear that project funds would not be sufficient to complete road and bridge works planned under the project\. More information could also have been provided in annex 4 of the PAD on the approach to cost estimation, particularly the possible impact of the still prevalent post conflict situation in the country which introduced an element of uncertainty to the estimation of costs\. 7 The revenue allocation in the FBH for road maintenance is directly linked to value added tax and changes in the allocation of this between different expenditure heads led a decrease in the amount going to road maintenance\. 6 Safeguards, financial and procurement assessments followed standard Bank guidelines\. The design provided for all civil works to take place within existing road rights of way thus triggering no land acquisition\. No Resettlement and Land Acquisition Framework (RLAF) was prepared for the Project\. The engineering designs used appropriate good engineering practices to ensure that works would be carried out without adverse environmental impact\. Issues raised by the financial and procurement assessments were mitigated using standard Bank instruments (see discussion under risk assessment below)\. The road directorates were encouraged to increase their then existing procurement staff to cater for the additional duties related to the implementation of the overall program (PAD p55)\. According to the staff of the RSRD, it would have been good to see clauses relating to safety of works in the bid documents given more emphasis in the assessment of bids\. The objective in this would be to ensure that adequate provision is made for undertaking this activity in during the civil works 8 \. An agreement was reached between the implementing agencies, the Bank, EBRD and EIB for a common format to be used for project progress reports\. The Bank team at appraisal rated the Project risk as low largely because the Project built on the earlier successful RMSP whose implementation mechanisms and organizational structure would be used for the RISP\. The team however identified three risks: (i) bidders charging a large premium for the OPBM contracts; (ii) inadequate coordination and cooperation among all relevant agencies in the implementation of the road safety interventions; and (iii) misuse of project funds\. Mitigation measures, which proved effective, were: (i) involvement of contractors and road agencies in awareness raising activities on the OPBM; (ii) obtaining strong political commitment to addressing road safety issues which came with the passage of the State level Road Safety Law; and (iii) inclusion in the Financial Management Manual of an appropriate internal control framework, enforcement of funds flow mechanisms, auditing of project accounts by independent auditors and conduct of regular financial management supervision and procurement prior and post reviews\. Two additional risks could have been flagged: (i) dilution of the capacity of the implementing agencies through staff departures given that in design, the Project placed a high premium on the capacity of the implementing agency; and (ii) potential under estimation of the costs of civil works and cost inflation given the approach to civil works cost estimation, the scale of the planned investments under RISP and by EBRD, EIB and the still prevalent post conflict situation which created uncertainty\. Dilution of the capacity of the RSRD occurred during pre-appraisal of the Project with its experienced head departing and both the financial and procurement management positions vacant\. It is a standard requirement that key project staff changes be notified to the Bank before being implemented\. Had this been done, it would have availed the Bank team at least an opportunity to prevent and or influence the timing of the staff changes that took place\. The procurement position was not filled in a timely fashion leading to delay in implementing the procurement plan The cost overruns in relation to the rehabilitation of roads that emerged during implementation would perhaps not have been so problematic, had physical and price contingencies been stated as unallocated in 8 By the time of the ICR mission, all civil works had been completed so it is not possible to make an observation on this issue directly in relation to the Project\. However, during the field visit related to the ICR mission, the mission witnessed very bad practices by contractors with regard to safety of works\. 7 the project costing\. Given the impact of these two risks during implementation, the Project risk assessment at appraisal may more correctly have been moderate\. There was no Quality at Entry assessment of the Project done by QAG\. 2\.2 Implementation Implementation of the Project was rated in the ISR as satisfactory up to the time of its mid-term review\. Subsequently, the rating was downgraded to moderately satisfactory up to Project closing except for one occasion when the rating was satisfactory\. Implementation of the project experienced some delays which could not be fully recovered leading to extension of the Project closing date by six months\. Effectiveness of the Project was delayed by about nine months due to the complex administrative approval process at the State and entity levels\. Significant delays were experienced in launching procurement due to the late effectiveness of the Project\. In the RS, additional delays arose due to their use of a road design approach lower in standard than agreed during preparation which meant that they would be less safe and durable\. The RS made an error in trying to deal with higher than estimated bid prices they had launched under other IFI projects\. High international oil prices contributing to these higher costs, raising the price of civil works inputs such as asphalt\. Dealing with the cost overruns led to significant delays in the procurement of the civil works\. It also led to the curtailment of other planned activities under the Project, particularly the road safety pilot\. Given these difficulties, it is commendable that the civil works were able to be completed within the initial project closing date: it was completion of the road safety activities and signing of the OPBM contract in the RS that necessitated extension of the project closing date\. This recovery of lost time in implementing component 1 was due to good technical guidance provided by the Bank team to ensure that roads rehabilitated would be safe and of good quality, good project management evidenced by timely restructuring of the Project and subsequent effective follow up\. The entities and the road directorates contributed to this achievement also by their willingness to adhere to the full rehabilitation of roads as agreed during preparation and timely action in sourcing additional funds from the EBRD (in the case of RS for three road sections) and in the case of FBH from own funds and the EIB\. That these IFIs agreed to the requests demonstrated good cooperation between the government and the IFIs in implementing the overall program\. A total of eight Bank supervision missions were carried out during implementation of the Project in line with the regional norm of two supervision missions per fiscal year\. There were however notable gaps in their timing with the first twelve months after negotiation and ten months after approval\. It was during this period that errors occurred in the design approach applied in the RS to road rehabilitation under component 1\. Project supervision consultants did not accompany the Bank team and counterpart staff during field visits\. This is a good practice that would allow the consultants to make direct contributions to discussions on issues discovered during such visits and allow the Bank team to assess their competence\. The Project experienced late submission of progress and financial audit reports\. However, improved Bank team monitoring of this issue led to their more timely 8 submission later\. Outcome of supervision missions were well documented in the aide memoire and related ISR with key issues highlighted\. Within the ISR, the Bank team was provided guidance by sector and country management particularly in relation to ensuring that project progress reports were provided timely by the implementing agencies\. The Bank project team flagged timely to management that the project covenant relating to road maintenance was unlikely to be met by the FBH\. There is no documented evidence that the option of waiver of this covenant was suggested for inclusion in the first or second restructuring\. This suggestion could have come from the Bank, given the economic downturn, the deteriorated financial situation of the State and thus of the entities since appraisal: moreover discussions on a development policy loan (DPL) operation had been initiated by the Bank\. In the end, this covenant was not enforced by the Bank\. The agreement during project preparation to have common formats for project reports would appear not to have been followed up, particularly since the implementing agencies had the information readily available\. This was a missed opportunity for the Bank team to obtain information on cost of contracts being financed by EIB and EBRD which could have been useful to the Bank in dealing with cost overruns\. There is no documented evidence of coordination between the Bank and EBRD in regard to the covenant on maintenance funding which was also a covenant in the Loan agreement of EBRD\. The Minister of Communications and Transport in the RS complained about the quality of road rehabilitation works being carried out\. The May 17, 2010 mission of the Bank undertook a thorough review of the works completed and ongoing and could not find clear evidence on this\. Subsequent missions including for the ICR have confirmed the good quality of works carried out under the Project\. The Project Mid Term Review (MTR), initially planned for January 2010, was conducted in October 2010 due to delayed effectiveness of the Project\. By the MTR, progress with implementation was good with disbursement at about sixty percent, a sign that the initial delays had been recovered\. The MTR included field visits to four project sites in the RS where contract amendments had been made to correct road design deficiencies and the quality of works were considered good and of correct scope\. Bank participation in a follow on project focusing on upgrading and reconstruction of tunnels and bridges with some road rehabilitation was requested during the mission\. 2\.3 Monitoring and Evaluation (M&E) Design, Implementation and Utilization The results framework for the Project was adequate and had indicators appropriate for monitoring the achievement of the PDO\. There was some element of complexity in defining some of the outcome indicators with some reflecting two discrete activities or outputs\. The outcome indicator relating to road safety had three parts – establishing road safety offices, preparing road safety strategies and conducting pilots - which made it somewhat complex\. Some baseline data relating to road safety were not available during appraisal and were to be measured during the first year of implementation\. No specific arrangement was however put in place to ensure their timely measurement\. As earlier noted, there was no indicator to measure achievements in relation to the bridge works in FBH\. 9 The FBHRD and RSRD had a good database on their road network from the asset management system created under the RMSP which facilitated calculation of user benefits using HDM-4\. They also collected data in relation to the condition of the road network (e\.g\. roughness index) although this was not included in the results framework\. The consultants that carried out the road safety studies were able to help these directorates establish the values of the road safety outcome indicators\. In particular, the road safety studies led to the establishment of the socio-economic cost of road accidents in both entities\. Thus the road directorates and the Bank team were able to adequately report on achieving the PDO\. Monitoring of the indicators in the ISR was good with both sector and country management units providing clear guidance to the team on issues raised with the notable exception of the possible waiver of the covenant relating to funding of maintenance by the entities when, particularly in the FBH, compliance was proving difficult\. (see 2\.2) The initial ISR contained the PAD indicators (5 outcome indicators and 8 intermediate indicators)\. However, in the fourth ISR, the outcome indicators were reduced to 3 to reflect the FA by combining to one three indicators relating to road safety\. In addition, one indicator, length of roads rehabilitated, was put as an outcome indicator and the intermediate indicators reduced to 3 by combining some specified singly in the PAD into a single indicator\. While it was possible to still identify within the ‘composite’ outcome and intermediate indicators their PAD identify, these changes had the effect of reducing the clarity of reporting on the different elements of the indicators\. During the above mentioned amendment, two Bank core indicator ‘roads rehabilitated, non-rural’ and ‘roads in good and fair condition as a share of total classified roads (%)’ were introduced in line with new Bank guidelines\. It is noted that the ISR reflected the indicator relating to the OPBM as ‘complete a satisfactory OPBM’ with no indication of the definition of ‘satisfactory’\. The FA text suggests that ‘satisfactory’ could mean ‘lessons drawn’\. During the Project, from the survey carried on the pilot in FBH, lessons were however drawn\. The entities have found the indicators useful in reporting on the impact of their efforts to improve the condition of the magistral and regional road network\. This should help them going forward in making the case for undertaking interventions similar to those carried out under the RISP\. The road safety indicators would also help the entities better design their awareness raising campaigns and measure their impact\. Determination of the socio- economic cost of road accidents, the first time it has been done in the entities, has been helpful in drawing attention to the macro-economic dimension of road safety\. For example, according to the Ministry of Finance of RS, they now appreciate the positive impact of a focus on road safety in a road project\. 2\.4 Safeguard and Fiduciary Compliance Compliance with safeguards policy is rated satisfactory\. Environmental safeguards\. The RISP was implemented in full compliance with the relevant environmental safeguards policy of the Bank for an Environmental Category B project (the Project triggered only OP 4\.01 on Environmental Assessment)\. The Environmental Assessment, carried out during project pre-appraisal, was thorough, with disclosure and public consultations carried out prior to Project Appraisal\. Typical sites 10 were visited in both entities and discussions held with staff of the environmental units of FBHRD and RSRD to assess their experience in implementing the ongoing RMSP project\. The site specific Environmental Management Plans (EMPs) were developed for each of the Project sites, with adequate public disclosure and consultations\. From experience in implementing the RSMP EMP, some monitoring functions in the EMP for the RMSP were agreed to be transferred to the supervision engineers in the EMP for the RISP\. All of the identified potential environmental impacts within the EMPs (dust generation, noise, waste management, and traffic disruptions) were mitigated through standard practices of good engineering and EMP forms were included in the tender documents and contracts for subcontractors\. No changes to the runoff patterns were made in the rehabilitation activities\. In addition, there have been no incidences of non- compliance with the EMP, nor have there been any formal or informal complaints\. Social safeguards\. The Project did not finance activities that involved any form of land acquisition or restriction of access to sources of livelihoods\. All works were conducted within existing publicly owned right-of-way\. In a case when a design proposal required some acquisition of land, the Bank team encouraged revision of the design to avoid land take\. It is noted that had a RLAF existed, its application would have allowed accommodation of the proposed design\. The FBHRD and RSRD were required to prepare community surveys to assess the impact of the (i) road and bridge rehabilitations; (ii) road safety pilots; and (iii) user perceptions of the OPBM contract\. These were carried out only in the FBH due procurement delays and the results from these are reported under section 3\. Fiduciary Compliance with fiduciary requirements is rated as moderately satisfactory\. Financial risk mitigation measures put in place proved adequate during implementation\. This is notwithstanding staffing issues encountered in the RSRD\. Financial management performance is rated as satisfactory\. There were material delays in carrying out procurement tasks in the directorates, particularly RSRD\. Deficiencies in documenting the procurement plan in the PAD also contributed to observed delays during implementation\. The procurement threshold for International Competitive Bidding (ICB) was US$500,000 potentially restricting participation of domestic contractors or increasing their transaction costs: in Moldova, the threshold at the time of appraisal of the RISP was US$1,000,000\. These elements contributed to overall implementation delays as a result of which procurement performance is rated moderately satisfactory\. A Country Portfolio Fiduciary Review (CPFR) was carried out between December 7 and 18, 2009 found the RISP marginally satisfactory regarding procurement and satisfactory regarding financial management\. The findings of the CPFR were discussed by the team with counterparts with follow on remedial measures proposed concerning financial and procurement management\. As of December 2012, the revised amount of the credit was US$25\.62 million against the original US$25\.00 million\. The difference is due to changes in the exchange rate\. There was no cancellation but an amount of US$0\.15 million was undisbursed\. 11 2\.5 Post-completion Operation/Next Phase Both entities are continuing with actions for the adoption of the road safety strategies\. The OPBM contract was signed on June 25, 2012 in the RS and under execution and its impacts are planned to be monitored\. FBHRD and RSRD were preparing a new program of investments on their magistral and regional road networks at the time of the ICR mission\. There was as yet no State level sector policy but the mission was informed by FBHRD that FBH’s spatial policy had a key component on policy toward magistral and regional roads\. The final draft of this policy is with Parliament for approval\. Road sector management and financing is still an issue especially regarding financing of maintenance particularly in the FBH whose regional road network, being under the cantons, did not benefit from the RISP\. Conduct of the reclassification of the road network in both FBH and RS, leading to reallocation of responsibilities between jurisdictions could be part of the solution\. The RISP has been successful in increasing awareness of the need to address road safety issues at both the political and technical levels\. The action plans on road safety prepared under the RISP, the improved legal and institutional framework and the increased capacity in the entities provide a good basis for further program of activities to address road safety\. There is as yet no future plan by any IFI for a follow up operation similar to the RISP\. However, discussion was recently initiated regarding a possible follow up to the RISP\. 3\. Assessment of Outcomes 3\.1 Relevance of Objectives, Design and Implementation The PDO remains quite relevant to the FBH and RS objectives of continued improvement of their magistral and regional road network evidenced by their preparation of new projects focused on this part of the network for which they sought Bank assistance during the mid-term review of the RISP and during the ICR mission\. The achievement of the Project in relation to road safety has provided the much needed policy, institutional and legal frameworks for the two entities to be able to intensify actions to improve road safety consistent with the UN Decade of Action on Road Safety\. The State now needs to consolidate the entity level strategies into a national strategy\. The road safety activities have also increased technical competencies and public awareness, laying the foundations for achievement of the objectives of the Decade in the two entities, particularly given the increased awareness at high policy level of the importance to prioritize addressing road safety issues\. The pilot OPBM contracts, being hybrid contracts, remain relevant to the entities attempt to improve their approaches to road maintenance because they provide useful lessons on the comparative advantages of conventional and performance based approaches and when it would be appropriate to use either of the approaches\. The design approach employed in the road rehabilitation works of a combination of pavement overlays and spot improvements remain valid simply because it allows interventions to be tailored to the conditions of specific road sections, increasing the cost effectiveness of such interventions\. The mix of technical studies and pilot implementation employed in relation to the road safety activities is an approach which remains relevant as the two entities in future seek to update the baseline data that have been collected and validate perhaps the currently estimated value of the socio-economic costs of road accidents\. The 12 implementation arrangements remain relevant with the capacity of both FBHRD and RSRD increased from implementation of the Project\. The competitiveness pillar of the current CPS (FY12-15) sees continuation of investment in regional transport and opportunities for the IFC to promote PPP in infrastructure services\. While this could be interpreted as implying a shift away from support of further assistance to improving the magistral and regional road network, it is noted that there is an emerging understanding between the sector and the CMU that the Bank should continue its support to the government in its efforts to eliminate all maintenance backlogs and improve road safety on its magistral and regional road network\. 3\.2 Achievement of Project Development Objectives The achievement of the PDO is rated as moderately satisfactory\. The PDO for the RISP was concise with a good link between the project outcome indicators and related intermediate outcome indicators\. The Project was implemented in a very complex institutional arrangement of State and entity level agencies\. It nevertheless was successful based on good sector work, clear understanding between the government, Bank, EBRD and EIB and achievements under the earlier RSMP\. The solid efforts of the project teams (Bank and Borrower) and their proactive working also contributed to the success of the project\. Of the eight intermediate outcome indicators stated in the PAD, all were achieved by Project closing except two: (i) adoption of new road safety strategies by the entities; and (ii) implementation of an OPBM contract in the RS\. The strategies have been prepared, approved by the Road Safety Council and waiting formal adoption by the government while the contract for the OPBM was signed just before the Project closed\. At project closing, project achievements in relation to the three key outcome indicators were as follows: (i) Regarding the outcome indicator ‘reduce road user costs on the priority road sections rehabilitated under the project’ the target length of roads to be rehabilitated was 240 kms for its achievement\. This target was exceeded with 121 km in FBH and 172 km in RS rehabilitated respectively, a total 293 km\. Road user costs were reduced by 18\.07 percent for the nine road sections funded from the credit in the FBH and by 11\.22 percent in the RS, achievements which exceeded or met the target of 10 percent\. Achievement of this indicator is regarded as satisfactory; (ii) for the indicator ‘improve the institutional framework for road safety’, all the intermediate indicators were achieved except that relating to adoption of new road strategies by each entity: the strategies were prepared but yet to be formally adopted by the government\. Harmonization of these policies and strategies was important and achieved through due diligence by the consultants responsible for their preparation\. The studies also led to the determination of baseline values for important parameters such as wearing of seatbelts and the socio-economic cost of road accidents which provide the entities micro and macro level benchmarks for policy making and implementation\. The achievement of this indicator is rated as satisfactory\. 13  (iii) The third outcome indicator modernize road maintenance practice required that one pilot OPBM contract be signed and implemented in each entity with their quality and costs known\. While each entity did sign a contract, implementation only took place in FBH and this only for one year\. Results from user surveys and measurements carried out on the FBH pilot suggest that the quality of roads maintained under OPBM contracts were perceived as better than for conventional contracts there was no noticeable difference in cost between the two approaches\. These results do not provide enough evidence for reasonable conclusions to be formed on the efficacy of the pilot particularly as it was implemented for only one year which coincided with a severe winter which made maintenance activities and costs atypical\. Given this and the fact that implementation took place in only the FBH, achievement of this outcome indicator has to be rated as moderately unsatisfactory\. 3\.3 Efficiency Efficiency is rated as satisfactory\. The overall ex-post Economic Internal Rate of Return (EIRR) for the civil works under the Project has been determined as 59%, well above the 12 percent threshold, but below the appraisal estimate of 73%\. This overall EIRR demonstrates the robustness of the economic justification for the Project\. Individual values for the various road sections range from 10 to 129 percent\. The ex-post economic analysis, like the ex-ante, did not include an assessment of the benefits of the road safety improvements or rehabilitation of the bridges\. It did not also include the costs of rehabilitating road sections eventually funded from outside of the project as these were not included in the calculation of the length of roads rehabilitated under the project\. The repairs to the bridges have clearly increased their structural integrity thus contributing to smooth flow of traffic (hence reduced travel time and costs) and road safety\. From the user surveys carried out relating to road safety, public awareness has been increased creating greater receptivity of police enforcement actions which contributes to decreasing the socio-economic costs of road accidents\. The economic analysis at appraisal was for the rehabilitation of about 354 km of magistral and regional roads in FBH and RS, a figure more than the 240 km planned for financing under the RISP\. The analysis established the EIRR at 73 percent\. All sections yielded positive NPV with the minimum EIRR per section of 25 percent which is significantly higher than the discount rate assumed thus indicating viability of the project\. The PAD did not contain an economic analysis for the bridges rehabilitated in FBH\. The difference between the ex-ante and ex-post EIRR of 73 and 59 percent respectively is attributable mainly to the difference between estimated and actual construction costs\. As earlier discussed, there were cost overruns arising from poor cost estimates during preparation which led to funding from components 2 and 3 being significantly reduced to accommodate the needs of component 1\. The three rehabilitated road sections with the lowest calculated ex-post EIRR (10, 14 and 17 percent respectively) had the highest ratios of actual to estimated constructions costs at 2\.4, 2\.8 and 2\.9 respectively\. 14 Other indicators of efficiency\. Despite delays experienced early in implementation, the rehabilitation of roads under the Project was completed within schedule\. A comparison of estimated and actual costs of these works show an increase of about 40% (see annex 3, table 2)\. This is not an unusual degree of cost increase for the type of road works carried out under the project, the high cost increases during the project period in international oil prices which feeds into the cost of bitumen and the post conflict situation in the country which still affected perception of the country by international contractors\. The technical assistance associated with components 2 and 3 were less efficiently implemented arising from a combination of delays due to the need to achieve common understanding of terms of references (for the road safety studies) and approaches (for the OPBM pilots)\. While these led to procurement delays and partial achievement of their objectives, exchanges and clarifications which contributed to the delays did lead to an increased understanding of the technical issues by the implementing agencies and other stakeholders and, ultimately, their ownership of the process and the results\. 3\.4 Justification of Overall Outcome Rating Rating: Satisfactory This rating reflects: (i) relevance of the PDO to the priority needs of the sector, (ii) the moderately satisfactory achievement with regard to the PDO; and (iii) the satisfactory achievement with regard to efficiency in relation to the EIRR and other indicators of efficiency\. Overall, activities under the Project have resulted in improved road conditions leading to reduced road user charges and improved road safety\. 9 This rating represents an upgrade when compared to the last ISR, reflecting the EIRR, which was not available at the time, as well as the signing of the OPBM contract by the RS\. 3\.5 Overarching Themes, Other Outcomes and Impacts (a) Poverty Impacts, Gender Aspects, and Social Development The Project did not collect data on poverty impact and gender analysis was not carried out\. The Project is likely to have contributed to poverty reduction however, through creation of jobs and improved access to economic opportunities within the project areas which could be expected to benefit both men and women\. The socio-economic cost of road accidents now established for the two entities should help provide a more rational basis for discussions on road safety and the benefits of remedial actions\. (b) Institutional Change/Strengthening The Project enhanced the institutional capacity for road maintenance and the legal and institutional basis at the State and entity levels\. The institutional capacity for addressing road maintenance has been enhanced in both FBH and RS as a result of experiences gained in procuring the OPBM and this will deepen as the pilots are implemented and 9 The rating of the last ISR was moderately satisfactory because at that time the road safety activities in the RS were yet to be completed and there was uncertainty as to whether the OPBM contract in the RS would be signed before project closing\. The road safety activities were successfully completed and the OPBM signed\. 15 monitored and emerging lessons incorporated into local practice\. The threat to this assessment is that financing of road maintenance may reduce and or become unstable and thus frustrate full scale adoption of the OPBM which is best employed under a stable and regular funding scenario\. It is noticeable in both Entities that the concern of their MOTC is now more on developing the motorways\. It is important that for this not to be at the expense of continuing focus in improving the magistral and regional roads which could demotivate staff of FBHRD and RSRD\. Regarding road safety, the road safety Laws enacted at the State level and the strategies at entity levels have provided a good legal and institutional basis for addressing road safety issues\. In the RS, there is now a Traffic Safety Agency (TSA) responsible for overall coordination and guidance of road safety activities\. The TSA however has no budget to directly fund road safety activities, such funds being spread across individual units with road safety responsibilities\. This dilutes the coordinating powers of the TSA\. This is an issue that the RS MOTC is reviewing\. The existing road safety unit in FBH benefitted from interaction with and oversight of the work of the road safety consultants\. (c) Other Unintended Outcomes and Impacts (positive or negative) A potential negative impact of the project is that its relative success in contributing to improving the condition of the magistral and regional road networks of FBH and RS could convey the impression that not much more needs to be done\. This is far from being the case\. A significant portion of these roads still need rehabilitation\. Perhaps more importantly, traffic is growing and periodic maintenance of this network will be required and for some, this will need to involve improvements to their geometric alignment\. Indeed, the experience of the implementing agencies in successfully carrying out the Project has positioned them to undertake similar works on the magistral and regional road networks\. 3\.6 Summary of Findings of Beneficiary Survey and/or Stakeholder Workshops This is a core ICR for which a beneficiary survey is not required\. The Project design provided however for the conduct of user surveys in relation to the road safety and OPBM pilots\. Regarding road safety, the surveys in four cities in the FBH indicated that measures relating to seat belt wearing had limited impact\. The reason adduced for this included police enforcement practice which was regarded as inadequate\. On the OPBM, only in FBH was there implementation and that for only one year\. From the user survey carried out, no clear conclusions could be drawn 4\. Assessment of Risk to Development Outcome Rating: This risk is rated as moderate\. Potential risk to the PDO is due principally to factors external to the Project such as the economic and financial crises in the region\. This has reduced public expenditure thus affecting public investment programs and commitments and jeopardizing replication of the type of interventions carried out under the Project on the rest of the magistral and regional road network\. This negative impact will be moderated however by the expected 16 increased access of the entities to EU resources for the main corridors which could increase their ability to focus expenditure on the magistral and regional road network including maintenance\. However, EBRD plans to reduce its funding to the road sector and EIB may shift its future assistance to the development of the motorways\. Road safety improvement actions may be neglected and fragmented\. In any case, without good and well maintained roads, road safety will reduce all else being equal\. Maintenance allocation needs to be maintained and results of the OPBM pilot utilized to optimize the approach to road maintenance\. There is high awareness of the need to prioritize road maintenance\. The main constraint is inadequate financing\. 5\. Assessment of Bank and Borrower Performance 5\.1 Bank Performance (a) Bank Performance in Ensuring Quality at Entry Rating: Satisfactory\. The Project was technically well prepared, focused on priority needs of the sector as reflected by consensus emerging on the results of ongoing studies and enjoyed good support from the government\. Its design also built on the experience from the then ongoing RMSP\. The deficiencies in documentation in the PAD, while contributing some delays during implementation did not in the end adversely affect the project outcome\. As mentioned earlier, one of the outcome indicators had some element of complexity which could have been avoided but this did not affect its monitoring during implementation\. The covenant relating to the level of road maintenance expenditure was perhaps too optimistic and should more correctly have been an indicator with set targets\. This said, even as a covenant, a decision to waive it could have been taken during implementation as part of one of the project restructuring carried out\. (b) Quality of Supervision Rating: Satisfactory The project was well supervised\. The frequency of missions overall was appropriate after the initial hiatus after project approval\. Most of the missions included field visits notwithstanding their logistical complexity\. Frequency of inputs from safeguards specialists was adequate given that the Project contained no major environmental or social safeguards issues\. The Task Team Leader from Washington was well supported by experienced operational and fiduciary staff based in the Country Office, and related well with counterparts\. There was no road safety expert (Bank or consultant) on the Bank project team to provide technical oversight in this area\. This would have been helpful given that the Project included a relatively complex road safety component\. The team was quick in confirming the adequacy of the quality of works in the RS through field inspections when the Minister for Communication and Transport expressed concern\. The mid-term review was comprehensive and covered the main pressing issues\. The aide memoires and ISR were detailed and realistic and management guidance sought as appropriate\. The two restructuring carried out reflected good project management 17 practice and helped in the achievement of key project objectives\. The Bank’s project team held discussions with representatives of EBRD during most of their missions\. The implementing agencies were proactive in coordinating information flow between the IFIs\. The team was firm and constructive in dealing with cost overruns that were experienced during implementation without compromising achievement of the PDO\. This resulted in the completion of the civil works well before the original project closing date with their quality assessed as good by the ICR mission\. The proactiveness of the Bank team significantly contributed to the eventual completion of the road safety and OPBM activities in the RS\. The team was also persistent in reminding the road directorates on the need for timely submission of project reports which finally resulted in more timely submission of these reports\. (c) Justification of Rating for Overall Bank Performance Rating: Satisfactory This is as a result of the satisfactory rating for quality at entry and the satisfactory rating for Project supervision\. The diligence and pro-activeness of Bank’s team during preparation and implementation, good cooperation with other IFIs and flexibility displayed in responding to changing government request greatly contributed to the achievement of most of the project objectives\. 5\.2 Borrower Performance (a) Government Performance Rating: Satisfactory The Borrower represented by the two entities FBH and RS and their respective Ministries of Transport and Finance, made good faith efforts to comply with the somewhat onerous covenant relating to the level of increase to be achieved to the allocation to maintenance\. The respective entity ministries of Finance and Transport and Communication were proactive in helping the implementing agencies resolve implementation issues through intervention with the Bank team (e\.g\. in RS regarding potential poor quality of road works)\. Initial seeming indifference to the road safety component changed during implementation to a more supportive role which helped the project to accomplish much in this area despite initial constraints\. (b) Implementing Agency or Agencies Performance Rating: Satisfactory\. The agencies team made good efforts to ensure the project achieved its objectives, timely responding to request for information and participating in a prepared way to Bank missions\. The main project activity, road rehabilitation, was completed ahead of schedule denoting good recovery from the initial delays with the target exceeded arising from efforts made by the agencies to raise additional financing from EIB and EBRD\. However, significant delays were experienced in the submission of progress reports and project financial audit\. In the RS, project procurement and financial management staff were 18 recruited late which created delay in the launching of some of the procurement leading to revision of the procurement plan early in project implementation\. As indicated above, the time lost was later recovered\. Project reports were generally quite detailed and useful for project monitoring\. The Borrower’s project completion report was adequate and was in the form of an expanded progress report\. (c) Justification of Rating for Overall Borrower Performance Rating: Satisfactory This rating is principally due to the delays in the implementation of components 2 (road safety) and 3 (technical assistance) which led to their objectives not being fully achieved under the Project\. Staffing issues delayed implementation in the RS and reallocation to component 1 (road rehabilitation) principally from component 2 significantly reduced the scope of the road safety pilot in both FBH and RS\. The OPBM activities could also have been given greater attention during implementation\. 6\. Lessons Learned i\. There are important benefits from ensuring that project sites are visited before completing appraisal\. The bridges to be rehabilitated should have been visited\. This could have led to a more correct assessment of needed repairs and better estimation of associated costs\. ii\. It is important to have separate provisions for physical and price contingencies in costing of projects as a tool for dealing with cost variations during implementation\. iii\. Need for timely review of procurement thresholds\. The threshold for ICBs at time of appraisal was US$500,000 and still was during the ICR mission\. Low thresholds for ICB can limit the participation of domestic contractors in tenders\. It can lead also to increased transaction costs for counterparts and contractors arising from using the more onerous bidding criteria for ICB instead of those for NCB even when the tenders are eventually won by local contractors as happened under the RISP; iv\. Programmatic/Repeater projects help to sustain institutional strengthening efforts\. The road asset management system developed under the Bank financed RMSP proved useful in demonstrating the need for further investment on the maintenance of the road network and for priorities to be on the basis of calculated economic and social benefits\. The road directorates in both FBH and RS have acquired the ability to use the system in their decision making\. A follow-on Bank project to the RISP would help to build on experiences relating to road safety and the OPBM pilots under RISP; v\. Promotional activities/ public campaigns are important components of road safety activities\. Mentioned by FBHRD, these make people more aware of the impact of their actions, why certain actions are promoted by government and the need for behavior change within society; vi\. Exposure to international good practices beneficial\. The study tours and attendance of regional workshops and exposure to international consultants 19  proved useful in building local knowledge\. In the RS, they helped to bring new perspectives to the Prime Minister’s Office and the Ministry of Finance who now see more than before the need to improve road safety and reduce maintenance costs; and vii\. Relevance of covenants if not implemented\. In retrospect the covenant to increase annual real expenditures on maintenance by 5 percent was onerous in light of the economic downturn\. The Bank also did not enforce the covenant—in the future it would make sense to find other mechanisms to ensure changes in the pattern of expenditure\. viii\. Baseline indicators need to be established in a timely fashion\. Where baseline values are to be determined during implementation and then used to set targets to be achieved, related activities should be designed to be able to be carried out early in implementation\. For RISP, some baseline values under the road safety component were to be defined under the pilots to be carried out\. Delays in carrying out the pilot activities meant that no targets could be set\. 7\. Comments on Issues Raised by Borrower/Implementing Agencies/Partners (a) Borrower/implementing agencies The implementing agency in the RS had no comments on the draft ICR\. The implementing agency for the FBH had several comments on the draft ICR\. The first related to the need to reflect the comments in the draft ICR relating to documentation of the PAD and on Bank supervision of the Project in the justification of overall Bank performance\. The second was the wish to have reflected that FBHRD completed all contracts within initial project closing date due to good project management, that the Bank team had no adverse comments on the quality of civil work undertaken in the FBH and of the intention in the FBH to carry out further works using the OPBM approach but for contract of four years duration\. This has been incorporated into the final ICR\. A third comment was that the IFIs did not request the implementing agencies to prepare consolidated project reports including all financing (EIB, EBRD and WB)\. This has been incorporated into the final ICR\. A fourth comment related to comment in the draft ICR relating to the procurement threshold which they took to mean that procurement delays were not entirely the fault of the implementing agencies\. Finally, they considered as severe rating of the Borrowers Performance as ‘moderately satisfactory’\. At the review meeting, this rating had actually been upgraded to ‘satisfactory’\. In addition to these comments, they provided some minor clarification on the content of Annex 2\. The full comments from FBH are included in Annex 7\. (b) Co-financiers EBRD and EIB provided parallel financing\. Their comments were sought on the draft ICR but none were received\. (c) Other partners and stakeholders (e\.g\. NGOs/private sector/civil society) 20 N/A 21 Annex 1\. Project Costs and Financing (a) Project Cost by Component (in USD Million equivalent) Actual/Latest Appraisal Estimate Percentage of Components Estimate (USD (USD millions) Appraisal millions) Component1: Road Rehabilitation 24\.00 22\.64 94\.33 Component2: Road Safety 5\.00 2\.48 49\.60 Component3: Technical 1\.00 0\.00 0\.00 Assistance and Capacity Building Total Baseline Cost 30\.00 25\.10 83\.67 Physical Contingencies 10% included in above amounts 0\.00 Physical Contingencies 10% included in above amounts 0\.00 Total Project Costs 0\.00 0\.00 Front-end fee PPF 0\.00 0\.00 \.00 Front-end fee IBRD 0\.00 0\.00 \.00 Total Financing Required 30\.00 25\.10 83\.67 (b) Financing Appraisal Actual/Latest Type of Co- Estimate Estimate Percentage of Source of Funds financing (USD (USD Appraisal millions) millions) Borrower 5\.00 2\.48 49\.60 International Development 25\.00 22\.64 94\.33 Association (IDA) 22  Annex 2\. Outputs by Component PAD estimate Actual (output) Actual as % of Component EUR estimate Remarks km EUR Km million based on cost/km Component 1: Rehabilitation of selected roads – FBH M17 - Gnojnice - DraÄ?evo 36\.15 2\.963 135\.0 Completed in 2011 28\.42 1\.700 No variation order\. M5 - Jajce - Jajce jug 8\.90 0\.178 94\.4 Completed in 2010 5\.18 0\.356 (0\.014) Delay due bad weather in winter\. No variation order\. M17 - Ostrožac - Jablanica 10\.20 0\.741 95\.7 Completed in 2010 1 11\.79 0\.813 Delayed for summer holiday season\. Municipal works M4 - Stanić Rijeka - 14\.20 0\.792 100\.0 Completed in 2009 12\.50 0\.862 GraÄ?anica No contract variation order\. M4 - GraÄ?anica - Donja 7\.90 1\.211 Completed in 2009 9\.50 0\.655 Orahovica M15 - KamiÄ?ak - KljuÄ? From Completed with national 10\.00 0\.690 10\.00 FBHRD budget funds M15 - Sanski Most 1 - 5\.00 0\.457 99\.9 Completed in 2009 4\.76 0\.328 Sanski Most 3 No variation order\. M5 - Å ećerhajin most - 3\.33 0\.416 87\.6 Completed in 2010 3\.33 0\.230 Korija No variation order M5 - PraÄ?a - Renovica 7\.13 0\.972 Completed in 2012 under EIB 7\.22 0\.498 cr 23924 M17 - Stup 3 – Blažuj 6\.60 0\.477 99\.8 Completed in 2009 Remedial works done on sub- 6\.22 0\.429 base before main works\. No variation order\. M17 - Blažuj - Hadžići 3\.95 0\.753 Completed in 2010 9\.50 0\.701 No variation order\. M17 - Blažuj - Stup 2 Completed from 6\.10 0\.421 6\.10 EIB CR\.23942 M5 - Jajce jug - Donji 21\.15 Plan for 2012 from EIB cr 9\.80 0\.676 Vakuf 1 23942 M4\.2 - Grahovo - Skokovi 11\.25 1\.265 Completed in 2011 from EIB 7\.80 0\.538 cr 23942 M4\.2 - Skokovi - Cazin 16\.50 1\.755 100\.0 Completed in 2011 15\.98 1\.102 No variation order\. 9\.761 of Total 148\.10 9\.999 168\.36 which WB 7\.808 Component 1: Rehabilitation of selected bridges - FBH M17 - Overpass Blažuj, 0\.300 National Plan 2012 section Stup 3 – Blažuj, km budget Rehab financed from national 6+494 budget M17 - Overpass on km National 2+100, section Blažuj - Stup 0\.350 budget Completed in 2009 2 M18 - Bridge over river 1\.653of 100\.0 Bosna and railway Å iÄ?ki which 0\.350 0\.195 a Completed in 2010 Brod – Sarajevo, km 108+400 variation 23  PAD estimate Actual (output) Actual as % of Component EUR estimate Remarks km EUR Km million based on cost/km M18 - Bridge over BrloÅ¡ki 0\.180 99\.2 potok, Å iÄ?ki Brod – 0\.150 Completed in 2010 Sarajevo, km 34+268 M5 Viaduct Komar Donji Nbf Vakuf - Travnik, km 0\.300 Completed in 2011 49+812 M5 Viaduct Komar Donji Nbf Planed for 2012 Vakuf – Travnik, km 0\.300 Funding from national budget 50+660 M18 - Overpass across 0\.239 100\.0 railway in Å iÄ?ki Brod, km 0\.350 Completed in 2010 1+004 Total 2\.100 2\.072 Component 1: Rehabilitation of selected roads - RS M1\.8 Lepenica - Loncari - Completed 17\.49 1\.418 0\.863 Blazevac R462a/463/464 Å amac - Completed Grebnice - Obudovac – 25\.17 2\.339 1\.486 LonÄ?ari R480 DerviÅ¡i – KlaÅ¡nice Completed 9\.23 0\.748 0\.542 road R406 Prijedor (Tukovi) – 12\.00 Completed 12\.00 0\.576 0\.717 Ljubija road R448 Podkozara – ČajniÄ?e – 25\.01 Completed\. Addendum issued 20\.63 1\.151 1\.148 Metaljka 30\.40 No interventions from km1 to 4 due bypass to be constructed in future\. Also, 3km through 30\.40 1\.898 1\.575 town of Janja not done as it M14\.1Bijeljina – Å epak would involve utilities road relocation\. About 70% of works subcontracted to a losing 9\.32 0\.608 0\.804 bidder who in separate tender M19\.2 Vlasenica – Tišća is responsible of 340km of road roads including this section\. EBRD funded\. Pavement M15 Kozarska Dubica – 15\.60 0\.969 1\.872 works limited to 8\.6 km of the Prijedor road section\. EBRD funded\. No drainage works included though much 8\.13 0\.500 1,431 M20 KopaÄ?i – UstipraÄ?a needed\. Planned pavement road works also seen as limited\. EBRD funded\. Significant length of guardrails needed 23\.81 1\.500 3\.375 along riverside but not M15 Prijedor - Koprivna included in contract\. Total 11\.707 13\.813 Component 2: Road safety (FBH) Create a results focus for 0\.906 0\.787 Completed road safety Test pilot measures in high- 0\.280 Scope reduced due budget risk sections constraint\. Total 1\.620 24  PAD estimate Actual (output) Actual as % of Component EUR estimate Remarks km EUR Km million based on cost/km Component 2: Road safety – RS Creating a results focus for 0\.300 1,358 Completed with delay and road safety reduced scope\. Road safety Law of RS Gazetted June 21, 2011 Test pilot measures in high- Completed with delay and risk sections reduced scope\. Component 3: Technical assistance and capacity building - FBH Introduction of one pilot 10\.253 First year implementation of OPBM contract pilot hybrid of 184\.66 km\. EBRD financing supervision of works\. FBH funding of works\. Component 3: Technical assistance and capacity building – RS Introduction of one pilot OPBM contract\. Engage Contract signed for a hybrid supervision consultant for OPBM\. OPBM Individual consultant for Draft bid docs and training of prepare OPBM contract staff\. 25 Annex 3\. Economic and Financial Analysis 1\. The appraisal economic analysis was conducted for the rehabilitation of about 354 km of magistral and regional roads in FBH and RS, which was more than what could be financed (about 240km) under the Credit\. The rehabilitation works were aimed at improving (i) the ride quality leading to lower operating costs, in terms of time and money, for road users; and (ii) to guarantee structural soundness of the roads for a prolonged period and prevent collapse, leading to lower life-cycle maintenance costs of the road assets\. The evaluation was done using the Highway Development and Management Model (HDM-4), which simulates life cycle conditions and costs and provides economic decision criteria for road construction and maintenance activities\. 2\. The ex-post economic analysis was conducted with the same methodology and model used at the appraisal economic analysis, considering actual rehabilitation costs and actual annual traffic growth rates observed over the 2006-2011 period\. The appraisal period was defined at 10 years, which best account for the economic life of the rehabilitation activities under the project and the “do minimumâ€? scenario\. The adopted discount rate was 12 percent and financial costs (market prices of materials, labor and equipment including taxes) were converted to economic costs, net of all transfer payments, using a financial to economic costs factor of 0\.80\. 3\. The project road sections and their respective length and width at appraisal are given in Table 1\. Thirteen projects in FBH and ten projects in RS were included on the ex-post economic evaluation with total length of 303\.7 km and an average length of 13\.2 km per rehabilitated section\. All roads are two lane Asphalt Concrete roads with carriageway width varying from 5\.5 to 11\.0 meters\. Table 1: Description of Project Road Sections at Appraisal FBH RS Road Road Road Length Width Road Road Road Length Width Section Section No Name Type (km) (m) No Name Type (km) (m) Lepnica - Loncari - Gnojnice - Bla2evac F1 M-17 Dracevo Magistral 28\.40 7\.2 R1 M1\.8 (1) Magistral 17\.49 7\.0 Jajce - Jajce Bijeljina- F2 M-5 Jug Magistral 5\.20 6\.1 R3 M14\.l Sepak Magistral 30\.40 6\.0 Kozarska Ostrozac - Dubica - F3 M-17 Jablanica 1 Magistral 11\.80 6\.1 R4 MI5 Prijedor Magistral 15\.60 6\.0 Granica RS/FBH (Stanic Rijeka) - Prijedor - F4 M-4 Gracanica Magistral 12\.50 7\.2 R5 M15 Koprivna (I) Magistral 23\.80 6\.0 Gracanica - Donja Vlasenica - F5 M-4 Orahovica Magistral 9\.50 7\.2 R6 M19\.2 TiSCa Magistral 9\.30 6\.2 Sanski Most KopaEi - 1 - Sanski UstipraEa F7 M-15 Most 3 Magistral 4\.80 7\.2 R7 M20 (1) Magistral 8\.10 6\.6 Sehercehajin Prijedor most - (Tukovi) - F8 M-5 Korija Magistral 3\.30 11\.0 R8 R406 Ljubija (3) Regional 12\.00 5\.5 26  FBH RS Road Road Road Length Width Road Road Road Length Width Section Section No Name Type (km) (m) No Name Type (km) (m) Granica RS/FBH Podkozara - (Praca) - CajniEe - F9 M-5 Renovica Magistral 7\.20 6\.1 R9 R448 Metaljka Regional 20\.60 5\.5 Samac - Grebnice - Stup3 - Obudovac - F10 M-17 Blazuj Magistral 6\.20 7\.5 R10 R463 Loncari (1) Regional 25\.10 5\.5 DerviSi - Blazuj - KlaSnice F11 M-17 Hadzici Magistral 9\.50 7\.0 R11 R480 (1) Regional 9\.20 6\.5 Jajce Jug - F13 M-5 Donji Vakuf Magistral 9\.80 6\.0 Grahovo - F14 M-4\.2 Skokovi Magistral 7\.80 6\.1 Skokovi - F15 M-4\.2 Cazin Magistral 16\.00 6\.6 Sub- Total 132\.00 7\.0 171\.60 6\.1 Overall Program 303\.60 6\.6 4\. The rehabilitation works typically included pavement rehabilitation, milling of the damaged pavement and placing 40 or 50 mm Asphalt Concrete surface layer, rehabilitation of drainage system, repair of all pathways and guardrails on bridges, traffic signalization and road markings\. Table 2 gives the rehabilitation costs estimated at appraisal and the actual costs\. On average the actual costs are 30 percent higher in FHB and 40 percent in RS\. The ratio between actual costs and appraisal costs varies between 0\.5 and 2\.9\. Table 2: Road Works Costs – Appraisal and Actual FBH RS Appraisal Actual Appraisal Actual Road (Euro (Euro Actual/ Road (Euro (Euro Actual/ No million) million) Appraisal No million) million) Appraisal F2 0\.357 0\.700 2\.0 R1 1\.134 0\.873 0\.8 F3 0\.813 1\.100 1\.4 R3 1\.518 1\.159 0\.8 F4 0\.862 0\.874 1\.0 R4 0\.775 1\.872 2\.4 F5 0\.655 0\.337 0\.5 R5 1\.200 3\.375 2\.8 F7 0\.328 0\.457 1\.4 R6 0\.486 0\.804 1\.7 F8 0\.230 0\.365 1\.6 R7 0\.400 1\.164 2\.9 F9 0\.498 0\.598 1\.2 R8 0\.461 0\.717 1\.6 F10 0\.429 0\.478 1\.1 R9 0\.921 1\.148 1\.2 F11 0\.701 0\.735 1\.0 R10 1\.871 1\.486 0\.8 F13 0\.676 0\.791 1\.2 R11 0\.598 0\.515 0\.9 F14 0\.538 0\.757 1\.4 Total 9\.364 13\.112 1\.4 F15 1\.102 1\.755 1\.6 Total 8\.889 11\.882 1\.3 Overall Program 18\.253 24\.994 1\.4 27 5\. The average rehabilitation cost per km estimated at appraisal was Euro 67,341 per km in FBH and Euro 54,540 per km in RS\. The actual cost per km increased to Euro 121,264 in FBH and Euro 76,372 in RS\. The average actual costs per km of the overall program are 40 percent higher than the appraisal estimates\. Table 3 gives the road works costs per km\. Table 3: Road Works Costs/Km FBH RS Road Apprais Roa Apprais No\. Appr al Actu Actual Actual/ d Apprais al Actu Actual Actual/ aisal (Euro/k al (Euro/k Apprais No\. al (Euro/k al (Euro/k Apprais (km) m) (km) m) al (km) m) (km) m) al F1 28\.4 59,859 20\.5 143,110 2\.4 R1 17\.5 64,837 17\.5 49,932 0\.8 F2 5\.2 68,654 4\.3 162,892 2\.4 R3 30\.4 49,934 30\.4 38,111 0\.8 F3 11\.8 68,898 7\.0 157,870 2\.3 R4 15\.6 49,679 15\.6 120,000 2\.4 F4 12\.5 68,960 9\.3 94,093 1\.4 R5 23\.8 50,420 23\.8 141,828 2\.8 F5 9\.5 68,947 3\.9 86,167 1\.2 R6 9\.3 52,258 9\.3 86,421 1\.7 F7 4\.8 68,333 3\.5 130,702 1\.9 R7 8\.1 49,383 8\.1 143,660 2\.9 F8 3\.3 69,697 3\.1 119,342 1\.7 R8 12\.0 38,417 12\.0 59,740 1\.6 F9 7\.2 69,167 7\.2 83,056 1\.2 R9 20\.6 44,709 20\.6 55,709 1\.2 F10 6\.2 69,194 4\.1 116,297 1\.7 R10 25\.2 74,335 25\.2 59,029 0\.8 F11 9\.5 73,789 9\.5 77,381 1\.0 R11 9\.2 64,789 9\.2 55,805 0\.9 Tot F13 9\.8 68,980 9\.8 80,760 1\.2 al 171\.7 54,540 171\.7 76,371 1\.4 F14 7\.8 68,974 5\.4 140,157 2\.0 F15 16\.0 68,875 10\.5 167,965 2\.4 Total 132\.0 67,341 98\.0 121,264 1\.8 Overall Program 303\.7 60,104 269\.7 92,682 1\.4 6\. The appraisal economic evaluation was done based on 2004 traffic data and assumed that the rehabilitation work would start in 2007\. An annual 4\.0 percent increase in traffic has been assumed at appraisal for all vehicle types in the economic analysis\. The average actual annual increase in traffic on the project road during the 2006 to 2011 period was 3\.8 percent in FBH and 1\.6 percent ion RS\. The overall average actual annual traffic increase was 2\.8 percent\. Table 4 gives the available traffic data from 2004 to 2011 on the project roads\. Table 4: Daily Traffic Road Average Annual Daily Traffic (vehicles per day) Annual Growth Network No 2004 2006 2007 2008 2009 2010 2011 (%) FBH F1 6,547 12,800 13,696 14,107 12,265 13,715 1\.7% FBH F2 3,596 2,900 3,032 3,264 3,356 3,218 2\.6% FBH F3 6,044 6,600 7,062 7,274 7,121 7,477 7,926 3\.7% FBH F4 7,479 6,700 6,931 8,910 8,543 8,563 8,539 5\.0% FBH F5 6,173 6,700 6,931 8,910 8,543 8,563 8,539 5\.0% FBH F7 1,383 3,000 3,000 3,000 2,800 2,549 3,314 2\.0% FBH F8 5,091 FBH F9 1,407 FBH F10 14,924 18,146 3\.3% FBH F11 9,443 14,162 6\.0% FBH F13 2,957 2,900 3,032 3,264 3,356 3,218 2\.6% FBH F14 2,739 2,600 2,812 2,844 2,841 2,732 1\.2% FBH F15 2,739 2,600 4,303 4,523 4,286 4,097 5,011 9\.0% FBH Total 3\.8% 28  Road Average Annual Daily Traffic (vehicles per day) Annual Growth Network No 2004 2006 2007 2008 2009 2010 2011 (%) RS R1 5,335 4,770 -2\.2% RS R3 7,394 7,494 0\.3% RS R4 1,700 2,215 5\.4% RS R5 3,451 3,550 0\.6% RS R6 1,486 1,553 0\.9% RS R7 3,394 3,794 2\.3% RS R8 1,365 1,214 -2\.3% RS R9 769 1,087 7\.2% RS R10 3,852 3,818 -0\.2% RS R11 7,013 8,588 4\.1% RS Total 1\.6% Overall Program 2\.8% 7\. The average roughness of the project roads was 3\.9 IRI, m/km, in 2004, before the rehabilitation works\. With the project, the average roughness decreased by 1\.8 IRI, m/km, as expected for rehabilitation works of Asphalt Concrete works\. Table 5 gives the roughness in 2004 and 2011 at the project roads\. Table 5: Road Roughness FBH RS Road Roughness (IRI) Decrease Road No\. Roughness (IRI) Decrease No 2004 2011 (IRI) 2004 2011 (IRI) F1 4\.5 1\.7 2\.9 R1 2\.5 1\.7 0\.8 F2 3\.9 2\.5 1\.4 R3 3\.1 2\.0 1\.1 F3 6\.0 2\.7 3\.3 R4 3\.1 1\.6 1\.5 F4 3\.2 1\.7 1\.4 R5 6\.1 2\.1 4\.0 F5 3\.0 1\.6 1\.4 R6 4\.6 2\.3 2\.3 F7 4\.7 1\.9 2\.8 R7 3\.0 1\.6 1\.4 F8 3\.7 1\.9 1\.8 R8 4\.3 2\.0 2\.3 F9 4\.3 4\.0 0\.4 R9 4\.8 2\.5 2\.3 F10 4\.3 R10 3\.1 1\.8 1\.3 F11 4\.3 2\.1 2\.2 R11 3\.5 1\.9 1\.6 F13 3\.8 Total 3\.8 2\.0 1\.9 F14 3\.0 2\.4 0\.6 F15 3\.1 2\.3 0\.9 Total 4\.0 2\.3 1\.7 Overall Program 3\.9 2\.1 1\.8 8\. The ex-post economic analysis adopts the actual rehabilitation costs per km and the actual annual traffic increase observed from 2006 to 2011 per project road\. All other assumptions adopted at appraisal remain the same at the ex-post analysis\. The ex-post economic analysis shows that the actual rehabilitation costs per km reduced the Economic Internal Rate of Return (EIRR) of most project roads, with only four roads yielding an ex-post EIRR higher than the appraisal estimate due to the higher observed annual traffic increase\. The overall ex-post EIRR of the project is 59 percent, compared to the 86 percent EIRR estimated at appraisal\. Despite the 30 percent decrease in the overall project EIRR, the project still has a robust economic justification, as expected for rehabilitation of pavements on high traffic roads, confirming the suitability of the project\. Table 6 gives the ex-post economic evaluation summary\. 29  Table 6: Ex-Post Economic Evaluation Summary FBH RS Appraisal Ex-Post Appraisal Ex-Post Road EIRR EIRR Ex-Post/ Road EIRR EIRR Ex-Post/ No (%) (%) Appraisal No (%) (%) Appraisal F2 50% 31% 0\.6 R3 112% 129% 1\.2 F3 191% 103% 0\.5 R4 25% 10% 0\.4 F4 125% 106% 0\.9 R5 128% 62% 0\.5 F5 110% 99% 0\.9 R6 25% 17% 0\.7 F7 38% 23% 0\.6 R7 33% 14% 0\.4 F8 48% 34% 0\.7 R8 44% 34% 0\.8 F9 36% 31% 0\.9 R9 29% 23% 0\.8 F10 258% 182% 0\.7 R10 42% 46% 1\.1 F11 153% 150% 1\.0 R11 146% 159% 1\.1 F13 86% 79% 0\.9 Total 72% 53% 0\.7 F14 81% 52% 0\.6 F15 32% 16% 0\.5 Total 100% 67% 0\.7 Overall Program 86% 59% 0\.7 30 Annex 4\. Bank Lending and Implementation Support/Supervision Processes (a) Task Team members Responsibility/ Names Title Unit Specialty Lending Highway Jacques Bure Task Team Leader ECSSD engineering Richard Martin Humphreys Program Team Leader ECSSD Oversight Bernard Baratz Consultant Specialist EASCS Environment Danielle Malek Senior Counsel LEGEC Legal Elena Y\. Chesheva Operations Officer SASDT Operations Lorraine McCann Kosinski Program Assistant ECSSD Nicholay Chistyakov Senior Finance Officer LOAFC Nikola Kerleta Procurement Specialist ECSO2 Procurement Sr\. Financial Management Financial Olav Rex Christensen ECSPS Specialist Management Plamen Stoyanov Kirov Procurement Specialist ECSPS Procurement Social Radhika Srinivasan Senior Social Scientist OPCFC Development Senad Sacic Team Assistant ECCBA Vesna Francic Operations Officer ECSSD Operations Ziad Nakat Transport Specialist ECSSD Transportation Ahmet Gokce Consultant ECSO2 Procurement Henry G\. R\. Kerali Sector Manager ECSS5 Sector Manager Sanjay N\. Vani Lead Financial Management Spec OPCFM Finance Mark Walker Chief Counsel LEGES Legal Supervision/ICR Vesna Francic Senior Operations Officer ECSS6 Operations Jacques Bure Senior Highway Engineer ECSSD TTL until 11/23/09 Richard Martin Humphreys Program Team Leader AFTTR Oversight Esma Kreso Environmental Specialist ECSS3 Environment Lamija Marijanovic Financial Management Specialist ECSO3 Finance Maria Carolina Monsalve Senior Transport Economist ECSS5 TTL from 11/24/09 Jung Eun Oh Transport Economist ECSS5 Transport Specialist Social Chukwudi H\. Okafor Senior Social Development Spec ECSS4 Development Social Helen Z\. Shahriari Senior Social Scientist AFTCS Development Nikola Kerleta Procurement Specialist ECSO2 Procurement Senad Sacic Team Assistant ECCBA Henry G\. R\. Kerali Sector Manager ECSS5 Sector Manager Juan Gaviria Sector Manager ECSS5 Sector Manager Sara Gonzalez Flavell Senior Counsel LEGES Legal Baher-El-Hefnawi Program Team Leader ECSS5 Oversight Naima Hasci Senior Social Scientist ECSS4 Social 31  Development Jean-Marie Braun Consultant EASVS Highway Engineer Coral Bird Program Assistant ECSSD (b) Staff Time and Cost Staff Time and Cost (Bank Budget Only) Stage of Project Cycle USD Thousands (including No\. of staff weeks travel and consultant costs) Lending FY06 4\.58 22\.92 FY07 31\.15 151\.97 FY08 17\.47 78\.84 Total: 53\.20 253\.73 Supervision/ICR FY08 0\.18 00\.13 FY09 15\.85 92\.51 FY10 20\.83 92\.94 FY11 23\.99 87\.44 FY12 15\.22 61\.49 Total: 76\.07 334\.51 32 Annex 5\. Beneficiary Survey Results (if any) N/A 33 Annex 6\. Stakeholder Workshop Report and Results (if any) N/A 34 Annex 7\. Borrower's ICR and Comments on Draft ICR 10 1\. Introduction Background\. The Project builds on the results of the Road Management and Safety Project (RMSP), which was closed in June 2007\. The RMSP supported institutional and sectoral reform, domestic contracting industry development, a road and bridge database for the main and regional roads, and a pilot project to improve road safety that financed advocacy campaigns and road safety equipment\. The successful implementation of the RMSP, particularly the network analysis that objectively prioritized network rehabilitation needs, led EIB and EBRD to contribute significant parallel financing to the Project as indicated in Table 1 below\. Table 1: Source of financing RS mil\. FBH mil\. Total Planned road EUR EUR (EUR rehabilitation (km) & Million) bridge rehabilitation (No\.) FBH RS Own funds 5\.70 2\.44 8\.14 150 + 15 206 WB loan * (equivalent 8\.20 8\.48 8\.48 16\.96 bridges mill SDR) EIB loan 40\.00 50\.00 90\.00 581 505 EBRD loan 30\.00 45\.00 75\.00 460 394 TOTAL 84\.18 105\.92 1,105 * Source: exchange rate Central Bank of BH on 22\.05\.2008: (i) 1 SDR=1\. 62798 US$; (ii) 1 US$= 1\. 24156 BAM and (iii) 1 EUR= 1\. 95583 BAM Financing Agreement\. This was signed between BIH and IDA on 22nd May 2008\. The Loan became effective on 22 October, 2008\. The closing date for the project was initially December 30, 2011 but later extended to June 30, 2012\. Under Federation Subsidiary Credit Agreement, 8\.20 million SDR (12\.50 mill US$ equivalent) were on-lent to the FBIH and JP Ceste FBIH to carry out Part A and C of the Project\. Under Republika Srpska Subsidiary Credit Agreement 8\.20 million SDR (12\.50 mill US$ equivalent) are on-lent to RS and JP RSP to carry out Part B and C of the Project\. The breakdowns of the credit amount between different activities were as shown in Table 2 below\. Table 2: Initial allocation of funds 11 Amount of financing Allocated Percentage of Category expressed in expenditures to SDR EUR be financed Federation of BH 1) Works for Part 1A of the Project 6,200,000\.00 6,412,000\.00 80% 2) Goods, works and consultants 1,600,000\.00 1,655,000\.00 100% services for Part 1B of the Project 10 The Report was submitted in the format of the Project’s Progress Report\. The text of this annex excludes those which were not relevant to a Borrower’s Report\. This annex has been reviewed and accepted by the FBHRD and RSRD\. 11 Reallocation of funds entailing project restructuring took place during implementation as detailed later in this annex\. 35  3) Consultant services for Part 1C of 400,000\.00 413,000\.00 100% the Project TOTAL 8,200,000\.00 8,480,000\.00 Republic Srpska 1) Works for Part 2A of the Project 6,200,000\.00 6,412,000\.00 80% 2) Goods, works and consultants 1,600,000\.00 1,655,000\.00 100% services for Part 2B of the Project 3) Consultant services for Part 2C of 400,000\.00 413,000\.00 100% the Project TOTAL 8,2000\.00 8,480,000\.00 Implementation arrangements\. These were as follows: in the FBH, by the international projects unit and in the RS by a Project Implementation Team (PIT) under the Public Company RS Roads and headed by a Project Manager provided by the Public Company RS Roads\. For both FBH and RS, the arrangements were same as for the implementation of the RMSP with their staff already involved in similar functions\. The international projects unit in FBH and PIT in RS were responsible for carrying out procurement, loan management and reporting functions in a manner satisfactory to the Bank\. They also coordinated project management for the various beneficiaries, prepared terms of reference, hired consultants, and contracted for services, training, goods, and civil works as necessary for the implementation of the project and ensured good implementation of the Environmental Management Plan (EMP)\. 2\. Project Development Objectives and Indicators The Project Development Objectives were to reduce user costs on the priority sections of the trunk and regional road networks, to improve the institutional framework for road safety, and to modernize road maintenance practices\. Progress towards the attainment of the Project Development Objective (PDO) was to be assessed through the following priority indicators: Outcome indicators\. (i) Reduce user costs by at least 10 percent on roads rehabilitated under project; (ii) Establish effective road safety office at RS level and prepare a strategy and action plan; conduct pilot operations; and (iii) Satisfactory piloting of an output and performance based maintenance contract\. Intermediate outcome indicators\. (a) Component One: Number of kilometers of trunk and regional roads rehabilitation\. (b) Component Two: (i) Percentage of vehicle and driver registries computerized; (ii) Socio-economist cost of road accidents is established; (iii) Proportion of vehicles driving at or below speed limits on pilot sections; (iv) Proportion of drivers using safety belts on pilot sections; and (v) Road safety strategy and action plan completed\. (c) Component Three: (i) One pilot performance-based maintenance contract is to be signed; and (ii) Road user satisfaction is not measured via road user survey for section maintained under the output-based road maintenance sections yet\. 36 3\. Project Implementation, Outputs and Outcomes 3\.1 Compliance with Legal Covenants The Loan had four covenants 12 and the first three covenants have been fully met by both FBH and RS\. Concerning the fourth covenant, requiring the Borrower to ‘increase the resources available for maintenance works on public roads by five percent (5%) annually in real terms, starting from the budget for the year 2008, and to use such additional resources for maintenance of public works’, the outcome was as follows: Republika Srpska\. This covenant has been met by the RS\. This is demonstrated by the fact that RS Roads has raised funds for road maintenance considerably over the Project period (see table below)\. Regular maintenance increased by 95\.6 percent over 2007-08, and over the first three quarters of 2010 rose by 8\.6 percent compared to the same period in 2009\. Cumulatively, the RS Roads exceeded the target of an annual 5 percent real rise in maintenance expenditures\. % % % % change, change, change, change, Activity 2007 2008 2009 2010 2011 2007-08 2008-09 2009-10 2010-11 Regular 23\.1 45\.1 45\.5 44\.6 43\.4 95\.2 0\.9 -2\.0 -2\.7 Winter 8\.2 11\.8 11\.5 22\.8 22\.6 43\.9 -2\.5 98\.3 -0\.9 Total 31\.2 56\.9 57\.0 67\.4 66\.0 82\.4 0\.2 18\.2 -2\.1 Federation of BH\. The FBH has not being able to achieve this covenant\. In JP Ceste FBIH, expenditure on regular maintenance has not risen over 2007-2011, in part due to the impact of the financial crises on its revenue sources\. The main source of funding for the JP Ceste FBIH is the fuel fee, collected by the Indirect Tax Administration\. The revenues from the fuel fee go to a single account, 65 percent of which go to FBH, 32 percent to the RS, and remainder to Brcko Administrative District\. Out of this, 4\.9 percent of FBH revenues were earmarked to roads, but it was changed to 3\.9 percent in 2007\. This meant that the total amount of funds earmarked for roads became a function of the total revenues, and not directly related to the revenue collected from the fuel fee\. It became therefore practically impossible to plan company budgets with the same degree of certainty as when there was direct allocation of revenue from the fuel fee\. 13 This said, during the period 2008 12 The Financing Agreement for the credit specifies four implementation covenants under Schedule 2, Section 1, B: (i) The Recipient shall cause the Entities to maintain the FRD and the RSRD, as the case may be, at all times during Project implementation, with terms of reference and resources satisfactory to the Association, and with competent staff in adequate terms; (ii) Recipient shall cause the Entities, through the FRD and RSRD, as the case may be: (a) to take all measures necessary to perform their respective obligations under the FM Manuals and the EMP in a timely manner and in accordance with their respective terms, and apply and implement, as the case may be, the actions, criteria, policies, procedures, and arrangements therein set forth; and (b) not amend or wave, or permit to be amended ot waived the FM Manuals or the EMP or any provisions of any one thereof, except with the prior written approval of the Association; (iii) The Recipient shall cause the Entities to ensure that no change is made to the Priority Program of Rehabilitation Works, except with the prior written approval of the Association; and (iv) The Recipient shall cause the Entities, during implementation of the Project, to increase the resources available for maintenance works on public roads by five percent (5%) annually in real terms, starting from the budget for the year 2008, and to use such additional resources for maintenance of public works\. 13 Aide Memorie, March 3-8, 2011\. 37 – 2010, road rehabilitation works were carried out on over 900 km of main road network with financing by the IFI’s and this significantly improved the overall condition of roads\. These works included periodic maintenance, pavement repairs and traffic signalization (horizontal and vertical) as well as road equipment, the most expensive items within road maintenance costs\. All previously mentioned activities are regular part of road rehabilitation projects and this accounted for the lower increase in the nominal expenditures on road maintenance costs on annual basis\. The table below shows the nominal expenditures on road maintenance costs over the Project period\. It indicates a ‘’slight’’ increase in routine maintenance expenditures and significant decrease in periodic maintenance expenditures\. From the last column of the table below however, it will be seen that the budget plan for 2012 will see an increase of 5\.35 percent in the total allocation for both routine and periodic maintenance\. Table 3\. FBH - Road maintenance expenditures on main road network 2007/20011 (BAM) Description Actual Actual Index Actual Index Actual Index Actual Index Plan 2007 2008 4/3 2009 6/4 2010 8/6 2011 10/8 2012 2 3 4 5 6 7 8 9 10 11 Routine 34 maintenance 30,994,609 32,993,487 106\.44 33,573,331 101\.75 32,857,150 97\.86 32,219,742 98\.06 million Periodic 12,841,267 14,298,295 111\.35 4,563,528 31\.92 4,713,624 103\.29 6\.113\.216 129\.69 6\.35 maintenance million 43,835,876 47,291,782 107\.88 38,136,859 80\.64 37,570,774 98\.52 38,332,958 102\.02 40\.35 million 3\.2 Implementation of Components - Federation of BH Component 1: Rehabilitation of about 148 km selected sections of main roads and 7 bridges\. The road sections rehabilitated under this component were distributed throughout the FBIH, selected on the basis of economic and other social benefits and were aimed at clearing the backlog of road maintenance\. The works typically comprised pavement strengthening with asphalt overlays, shoulder stabilization, culvert and ditch rehabilitation, repair of existing or installation of new guard rails, bridge rehabilitation, minor structures repair, road marking and signing including traffic calming and safety measures within localities\. Design and supervision of the road rehabilitation works were carried out from funds provided by EIB and FBIH\. The sections and bridges rehabilitated under the Project were the same as indicated in the PAD (p45, Tables 4\.2 and 4\.3)\. However, due to cost overruns, only ten of the fifteen road sections of total length 112\.73 km and three bridges were able to be funded from the Loan\. The following remaining road sections and bridges were rehabilitated using EIB and FBIH own funds: FBH own funds\. Road sections - (i) Road M-17 section: Stup 3 – Blažuj, (ii) Road M-5 Donji Vakuf - Travnik ,Viaduct Komar, km 49+812, section Jajce – Travnik –LaÅ¡va\. Bridges: (i) Road M-17 Overpass on km 2+100, section Blažuj-Stup 2; (ii) Overpass in Blažuj chainage km 6+494, (Estimated cost: EUR 0\.330 million); and Road M-5 Donji Vakuf – Travnik, Viaduct Komar chainage km 50+660, (Estimated cost: EUR0\.320 million)\. EIB funds\. Road sections: (i) Road M-4\.2 section: Grahovo – Skokovi, km 21+500 – km 32+750, l=11\.25 km (Contract value: 1,480,264\.67 KM); (ii) Road M-5 section: PraÄ?a – Hrenovica, km 46+270 - km 53+400, l=7\.2 km (Contract value: EUR 0\.51 million); (iii) Road M-5, section: Jajce jug – Donji Vakuf 1, l=9\.5 km (Contract value: EUR 1\.11 million); and M17 Blazej-Stup 2\. 38 For most of the roads and bridge rehabilitation works, delays were experienced due to: (i) postponed work commencement; (ii) inadequate engagement of the Contractor after starting work; and (iii) mistakes in the design\. Time extensions were approved for the Contractors when submitted\. Component 2: Road Safety\. The objective of this component was to assist in improving road safety in BiH through a coordinated and integrated package of cost-effective, multi-sector road safety interventions designed on the basis of international best practice\. First, focusing on building the appropriate institutional framework and institutional capacity; second, the implementation of policies and techniques directly in the field, through pilot operations in high- risk areas\. The consultant to assist with this component was contracted on 29 November 2010 and commenced its assignment on 6 December 2010 with a duration of 12 months\. The availability of supporting information such as comprehensive and accurate statistics on traffic accidents was a very serious problem in undertaking the assignment\. The existing data system produced data that was either incomplete or inaccurate\. The Consultant also drew attention to the insufficiency of funds under the contract allocated for the implementation of the pilot road safety project\. FBHRD made efforts to obtain additional funds from WB sources (grants) or other sources of financing but these were unsuccessful\. But it is important to point out that all the implemented road rehabilitation interventions had included road safety actions\. Before preparation of detailed design road safety inspection checklist had to be prepared in order to include necessary interventions in the detailed design for road rehabilitation\. The following main stakeholders have been involved in the road safety project: (i) JP Ceste FBIH and Road Directorates at Cantonal level (responsible for roads and road conditions); (ii) Traffic Police both at Federal and Cantonal level (responsible for traffic safety and accident reporting); (iii) Ministries (Ministry of Transportation and Communication, Internal Affairs, Health and Education) on Federal and Cantonal level; (iv) Ministry of Transportation and Communications at State level; (v) Hospitals and Health organizations (responsible for post-accident treatment); (vi) Rescue centers and Fire brigade (responsible for ambulance service and extinguishing fires); (vii) Automobile clubs (working among others with information issues like public traffic safety awareness campaigns); (viii) Insurance companies and their umbrella Insurance Association; (ix) Protection Fund (involved in payouts to 3rd parties injured by uninsured drivers); (x) Driving schools (responsible for driver education and training); (xi) Licensed Vehicle testing garages and their organization\. The Consultant, through workshops and seminars, has presented and discussed best international practices in each road safety sector and with help and input of local experts, identified sectors considered to be most relevant and appropriate for BIH needs and its current stage of road safety development\. The Consultant has held or participated in the following activities: 7 Seminars, 19 Workshops, 2 training courses, 2 classes at University in Faculty of Transport and Communication\. In total, more than 600 persons have participated in these seminars, workshops and training and, at the university classes were held attended by over 100 students\. 14 The following are the most important activities carried out by Consultant during implementation and their outputs: 1\. Strengthening the Institutional Framework for Road Safety\. Existing management and coordination structures for road safety in FBIH have been examined and found to be either 14 The Borrower’s Report provided detailed information on these activities\. 39 nonexistent or totally ineffective\. Recommendations have been made on how management, coordination and funding of road safety can be improved in FBIH\. 2\. Selection, planning and assisting implementation of road safety measures in pilot area\. JP Ceste FBIH staff and consulting engineers’ staff have been trained in methods for Black Spot identification, analyses and treatment and Comprehensive Guidelines for Black Spot identification and treatment have also been developed\. Five Black Spots were identified and mitigation measures for these spots developed\. Surveys were also carried out on the “beforeâ€? situation in terms of speed and traffic behavior at these locations so that the effects of the remedial action could be evaluated once the mitigation measures implemented\. 3\. Review/upgrade existing road crash database and access to licensing/vehicle registration database\. The existing accident database was reviewed and discussions (followed by a workshop) held with road safety department of JP Ceste FBIH, other key stakeholders and State MoTC about the problems identified with the database\. The existing accident database system is managed by Federal Ministry of Internal Affairs\. The problems with existing data base have been divided into four groups: organizational problems, database problems, problems with the accident summary form and general problems\. The existing police database is not providing the information needed for road safety remedial work or even to providing Ministries of Internal Affairs with administrative statistics on death and injures\. Because of the many problems detected in the existing database and in order to have an internationally high quality base a new accident crash database system, the Consultant recommended a procurement of a new accident crash database system which should be used to identify trends, hazardous locations etc\. in order to develop countermeasures\. The advantage with buying a new system will be that many of the detected database problems will be automatically solved\. A new system would also include a powerful analysis module\. However organizational problems will not be solved simply by buying a new data base and it has been recommended that multi-sectoral working group be formed in order to make improvements in this area\. The police need to be an integrated partner in the discussion about improving or updating the database\. To implement the Action Plan for Road Safety (2011-2020), Eur320,000 has been allocated by FBIH to create a new database system for road accidents which would be linked to other data bases related to road safety\. This will allow the MoTC and cantons to collect, store, analyze and disclose road safety data in an effective way\. The responsible authorities are the Ministry of Internal affairs (federal and Cantonal) and the Ministry of Transport and Communications of BIH\. The first activity is the updating of the existing database by the Ministry of Internal Affairs who is responsible for recording accidents with possible co-financing of other stakeholders\. JP Ceste BIH in its budget for 2012 of JP Ceste FBIH has not provided co-financing for this purpose, due to the budget constraints\. 4\. Establishing socio-economic costs of road accidents\. A suitable methodology for assessing socio economic costs of road accidents in FBIH has been developed\. Cost has been derived for a single accident with dead, seriously injured and slightly injured persons to be used in cost estimation and justification of Road Safety actions\. The total annual losses to the FBIH economy were estimated\. It is estimated that FBiH is now losing over KM 780 million each year (Euro 400 million) per year, and based on 2010 these annual losses amount to around 5\.8% of the annual Gross Domestic Product (GDP) of FBiH\. 5\. Provide support in development of intermediate indicators of road safety performance on the network and performance monitoring\. The Consultant carried out initial surveys of the main 40 indicators speed and seat-belt use both in Sarajevo and Mostar and in rural areas and later more comprehensive “beforeâ€? and after surveys were undertaken of seat belt use in Tuzla, Mostar, Sarajevo and Bihac\. Local academics /researchers (7) and some students were selected and trained to do indicator surveys: the first surveys were concentrated on seat-belt use before and after a seat-belt campaign\. In order to get a more complete picture of the level of road safety and to be able to focus on the most effective countermeasures, the following Safety Performance Indicators were suggested for FBiH apart from the obvious indicators of the number of fatalities, injuries and accidents: (i) Daytime wearing rates of seat belts: in front seats (passenger cars + vans under 3\.5 tons), in rear seats (passenger cars + vans under 3\.5 tons), by children under 12 years old (restraint systems use in passenger cars) and in front seats (Heavy Goods Vehicles + coaches above 3\.5 tons); (ii) percentage exceeding the speed limit on urban and rural roads; (iii) The number and percentage of killed and severely injured car drivers or motorcycle riders that were impaired by alcohol or drug above the permitted level according to the law; (iv) number and percentage of all fatal and severe accidents that are alcohol or drug related, i\.e\. one of the active road users in the accident were impaired by alcohol or drugs above the permitted level according to the law; (v) reduction in the number of killed and severely injured in treated black spots; (vi) total number of killed and injured on different road types on each road authorities’ network; (vii) percentage of pedestrians among the fatalities and severely injured in road traffic accidents; (viii) daytime usage rates of safety helmet by cyclists, moped riders and motorcyclists\. It was also recommended to complement these with a speed index be produced and regularly updated using data from the traffic counter on FBIH network and Police speed cameras in urban areas\. Police data on the number of traffic violations were also suggested to be used as complementary information in order to follow the development of the indicators with information related to the indicators available in the accident database used\. 6\. Proposals on publicity programs and research development\. A working group of key stakeholders (BIHAMK Automobile Association, insurance companies, police expert group, JP Ceste FBIH, insurance companies and Ministry of Transport) were established to implement a national road safety campaign on seatbelt wearing during the autumn 2011\. Advices were provided to BIHAMK on a nationwide seatbelt campaign and films from overseas were acquired and broadcasted with Bosnian voiceovers\. Four films on to promote use of seatbelts were received free of charge (3 from Georgia and 1 from Australia) and broadcasted on three TV channels in BIH in December 2011\. JP Ceste FBIH procured 5 films (2 speeding and 3 seatbelt) from Australia and paid royalty fees for one year broadcasting in BIH\. Broadcasting of these films will started in early 2012\. In association with Automobile Association BIHAMK, around 1000 CDs of these films will be distributed to driving schools and large fleet operators for use in driver training and re training courses, markedly increasing the knowledge and awareness of seatbelt and speeding issues among existing and future drivers\. 7\. Assistance in the development of road safety intervention plans and comprehensive result- focused entity strategy\. The consultant’s various experts reviewed activities in each sector and, in consultation with local experts, identified the deficiencies and the improvements needed\. These recommendations were consolidated into the prepared Action Plan for FBIH\. A short outline Entity level Strategy 2011-2020 was also prepared for FBIH\. This Strategy provides the vision and direction for FBIH stakeholders and the framework for a FBIH specific comprehensive Road Safety Action Plan until a more comprehensive State wide Strategy can be developed\. The parallel project in Republica Srpska is expected to also produce an Entity level Strategy and a comprehensive Action Plan\. These two Entity level Action Plans and the interim Strategies will then form the basis for consolidated Strategy and Action plans on the State level\. The developed Strategic Action Plan 2011-2020 has the five pillars of the UN Decade of Action recommendations: (i) Pillar 1: Safety Management - to strengthen Institutional capacity to 41 further Road safety efforts; (ii) Pillar 2: Safer roads and Mobility - to improve the safety of road networks for the benefit of all road users, especially the most vulnerable: Pedestrians, cyclists and motor cyclists; (iii) Pillar 3: Safer Vehicles – to improve vehicle safety by encouraging harmonization of relevant global standards and mechanisms in order to accelerate the uptake of new technologies that have an impact on safety; (iv) Pillar 4 : Safer Road Users - develop comprehensive programs to improve road user behavior; and (v) Pillar 5 : Post Crash Response - promote the improvement of health and other systems to provide appropriate emergency treatment and longer term rehabilitation for crash victims\. The Road Safety Action Plan has been designed around these 5 pillars and provides more detailed information on the specific interventions, actions and capacity building required in FBIH to deliver the casualty reductions required and to introduce best international practices\. Before project implementation data regarding driver license holders were kept in digital registers\. The practical handling and supervision of the vehicle inspection system up to 2000 was a task for the police who still handle the registration of vehicles in digital registers\. In 2000 federal Ministry of Transport and Communications delegate vehicle inspection system to IPI-Institut za privredni inžinjering Zenica as expert institution\. IPI has also developed a unique IT system binding together all inspection stations and introduced identification of all inspected vehicles by video cameras\. In 2011 there is in FBH 157 authorized inspection stations, whereof 55% is operated by individual owners, and these decentralized organizations require a quite comprehensive supervision system\. The regular supervision by IPI is financed by a levy of 8% of the inspection fees, VAT deducted\. The Consultant recommend that administrative data on activities and actors should be kept in digital registers and data bases not only concerning license holders, but also examiners, driving schools, certified supervisors\. The contract of the consultant was extended to June 30th 2012 to allow them be able to harmonize the outcomes in the FBH with road safety legislative changes and activities in the RS when completed\. The extension was at no additional cost\. Component 3: Technical assistance and capacity building in FBH\. Procurement for works for this approach of undertaking routine maintenance on pilot region was done based on local regulation (Law on Public Procurement)\. Hercegbosna Canton (Canton 10) with 345\.20 km of main roads was selected as the pilot region in FBH\. The pilot area is mountainous, with altitudes in range from 500m up to 1400 m\. There are five mountain saddles: Koprivica, Borova Glava, PloÄ?a, MliniÅ¡ta and Privala where the traffic is significantly heavy during the winter and very often the winter maintenance in the region extends up to 45 days more than the planned period for winter maintenance\. The road conditions on the main roads in this region are almost the same and is easier to define maintenance criteria for whole network instead partially by road sections\. The selected pilot hybrid OPBM contract covers a total of 184\.66 km of roads\. The contract with contractor JP ‘’Cesteâ€? Mostar has a duration of three (3) years and works started at the beginning of winter season 2010 (15th November, 2010)\. The output and performance-based maintenance works as well as supervision services on pilot territories are financed by JP Ceste FBIH\. Perfomance based maintanance contract is 'hybrid' due to the fact that regular maintanace is combination of previously used clasic method and perfomance based method, but winter maintenance is completly perfomance based method\. Contractor is in charge to regularly collect data regarding OPBM contract to provide information concerning annual costs per km of maintenance and review of quality interventions, comparing to traditional contracts\. However, initial analysis by the Road Maintanace and Safety Department of FBHRD were: (i) in the Contractor's Bids the prices for maintenance works items which will be perfomed by perfomance based method are increased and maintanace works items which will be perfomed on clasic method (quantities and unit price) are decreased\. This price increase could be Contractor's intention to protect itself from higher risk which it will bear in this new contract; (ii) The contract 42 value for routine maintenance and winter maintenace for clasic and perfomanced based method is given in the table given below\. (in BAM) Routine Winter Total maintenance maintenance Contract 2009/10 2\.923\.497 2\.120\.103 5\.043\.600 (standard method) Contract 2010/11 2\.891\.862 2\.236\.645 5\.128\.507 ( hybrid) Contract 2011/12 2\.848\.624 2\.279\.375 5\.127\.999 The economic benefit and savings for FBHRD is not clear from these findings\. It is also difficult to evaluate what could be done to have lower bid prices for maintanance due to the limited number of the bids\. Beside economic benefits, the quality of the maintenance works, maintaing of the current road conditions or their improvement and road safety are priorities of JP Ceste FBIH\. In the last two years using new type of the maintenance contract, based on the supervision reports and upon examination on the site, it is noted that road conditions have improved\. Advantages of a new maintenance contract (hybrid) are the following: (i) Procurment of the salt and spreading material for winter maintenance is Contractor's obligation, so saving in the procurment of the salt is approx 0,35-0,40 mill\.BAM\. The quantity for procurment of the salt in the classic method was approx\.2100 t per anum; (ii) Supervision is monitoring road conditions which are base for payments to the Contractor but the Contractor make decision about organization for interventions on the roads; (iii) grass mowing and removal of branches include the whole road side, not only 2 m as it was the case in the clasic method, so better visibility is reached\. Disadvantage of the perfomance based maintenance is that due to the less influence of the Supervisor in making decision for carring out the works, the Contractor tend to perform as soon as possible items which bring better earnings for Contractor, and not taking into consideration the needs and traffic safety on the road\. Some changes in the perfomanced based maintenance contracts should be included in the further period such as: (i) Bill of quantity for winter maintenance should be divided in fixed costs of the winter maintenance and actual work costs on the snow and ice removal\. Actual Work costs on the snow and ice removal depends of the winter season, precipitations, temperature\. (ii) Changes in routine maintennace works like roadway cleaning, removing spreading material from shoulders and kerbs, settling the shoulders and kerbs etc\. after winter period in order to improve road safety\. (iii) limtation in some extent the Contractor's independence in setting up priority works and sequence for carring out the maintanace works\. (iv) Enforchment of the penalities for the Contractor in case of omissions and non fulfillment of the contract obligations\. The practice has shown that penalities are small and could not be considered as severe punishment for the Contractor\. The limited experience of the FBHRD with OPBM so far would seem to confirm that benefits of OPBM contracts are obtained when they are of long duration (five or more than five years)\. Perfomance based contracts-survey carried out in July 2012 and several important conclusions can be drawn looking at the results of the survey: • That 55% of respondents were familiar with the methods applied, which is a satisfactory result considering that the introduction of new method has not been announced through mass media • That 78% of respondents confirmed significant or partial improvement over the conventional method of maintaining • 59% of respondents noticed that the works are executed well and with less delay, and that the works are carried out with minimal disruption of traffic (76%) 43  • 90% of all respondents confirmed that the condition of main roads is better than it was before using the new method of road maintenance • 81% of respondents said that the winter service works are performed on time or with a small delay 3\.3 Implementation of Components - Republic Srpska Component 1: Rehabilitation of selected road sections\. According to the original project description, civil works to be implemented under component 1 included pavement strengthening with asphalt concrete wearing and leveling courses, shoulder stabilization, culvert and ditch cleaning and rehabilitation, repair of existing or installation of new guard rails, bridge rehabilitation, minor structures repair, road marking and signing including traffic calming and safety measure within localities\. For all road sections designers received terms of reference (TOR) which requested them to provide designs under two scenarios for each road: (i) a scenario including all items needed for full rehabilitation, and (ii) a scenario taking into account budget constraints\. Fearing that bids from contractors would exceed the budget, the designers were requested by RS Roads to propose works not exceeding 80 percent of the cost estimated in the project appraisal document (PAD)\. Unfortunately, the second scenario with budget constraints was the one applied by the designers for all the ten road sections\. During the May 2010 World Bank mission, the team conducted a global review of the designs on the basis of full rehabilitation scenario and concluded that the design proposals did not comply with a full rehabilitation as agreed at appraisal with cost reductions achieved by the designers through cancelling or diminishing thickness of pavement layers and implementing less guardrails, if any; cancellation of overlays except for badly deteriorated sections and instead providing only for treatment of potholes and cracks; replacing only damaged guardrails were replaced; drainage interventions were excluded—other than cleaning of ditches; and excluded rehabilitation of bridges along the road sections\. As a result, the contracts that had been signed did not include all the works under road rehabilitation as detailed in the PAD\. On the other hand, for the road sections where works had been completed, the Bank team found that: (i) water remains on the pavement, damaging the pavement structure, as drainage had not been properly considered or addressed; (ii) various obstacles along the roads were not correctly protected by guardrails and additional guardrails were needed; (iii) horizontal markings were fading quickly, which could be due to inappropriate technical specification of the paint or paint not being applied in accordance with technical specifications; and (iv) road surface looked slippery and it was recommended that friction coefficients be assessed for completed sections\. In addition, bus stops had not been rehabilitated, nor had sidewalks, although the latter were not the responsibility of the RS Roads, but of the municipalities\. 15 As remedy, the following actions were undertaken: (i) drainage of underground and superficial waters has to be properly addressed in all road sections 16 ; (ii) pavement structure has to be strengthened in order to increase the life period of assets; (iii) additional guardrails have to be added in order to protect vehicles from obstacles; (iv) traffic calming devices have to be introduced in town crossings; and (v) bus stops and bridges have to be rehabilitated where needed\. Given the unallocated funds available under component 1, it is expected that these additional works can be financed from this component\. 15 This required good coordination between RS Roads and municipalities which was not always be achieved\. 16 In BIH, a general problem exists of people encroaching on the draining system, particular using the system for disposal of household water waste and blocking of water flows\. The problems appear in numerous places; they have been present for a long time and have not been dealt with properly\. Restoring proper drainage for both underground and superficial water should be implemented prior to any road rehabilitation\. 44 Given the above deficiencies, the RS Roads suspended the four ongoing road contracts in June 2010 and revised the designs and bills of quantities (BOQs) to ensure that full rehabilitation would achieved\. By September 2010, all RS road sections included in the Project had been tendered, contracts signed in December 2010 (??) and works were completed in August 2011 (???)\. There were concerns as to whether funds available from the Loan would be enough to fully rehabilitate all road sections included in the project\. As a result, additional works were approved on the completed three road sections only after the tender on the other seven road sections (launched in September 2010) had been completed and their contract values known\. In the event, these three sections did not have sufficient funds under the Loan to full pay the contractor\. The outstanding amount of about EUR 3\.2 million which remained to be paid to the Contractors even though the works have been completed was sourced from the EBRD\. Component 2: Status of Road Safety\. The objective of the component was to create a results focus for road safety interventions consistent with best international practice\. Procurement of this component started late due to delays in finalizing the terms of reference and reaching agreement with the Bank on the shortlist for the assignment\. The contract was eventually signed on August 2011 for completion by the revised closing project date of June 30, 2012\. The contract was concluded on time with the following tasks completed: (i) supporting the establishment of the Road Safety Agency; (ii) review of all existing database and propose monitoring indicators, procedure for collection, storage, and dissemination with interconnectivity between various databases; (iii) review and propose improvements to the current road safety strategy and Law to harmonize with best practice and enhance results focus; (iv) establish the socio-economic costs of road accidents; and (v) after discussion with counterparts, select, plan and assist in implementation of pilot road safety measures in collaboration with six key stakeholders in the RS (RSA, MTC, MOI, MHS and local authority/ies) and support the creation of monitoring framework for these pilot projects\. The above outputs were largely achieved as presented in Attachment 1\. It was however not possible to procure police equipment, or other required equipment, under this component as planned\. Outside of the activities of the project, there was significant progress on moving the road safety agenda forward: the Road Safety Law on the Republic of Srpska roads was approved by the RS National Assembly and published in Official Gazette of Republic of Srpska on Jun 21, 2011, No 063 and the Traffic Safety Agency created and its head appointed\. Component 3: Introduction of output and performance - based road maintenance contracts\. This component provided consulting services for the introduction of output and performance- based road maintenance contracts (OPBM) for routine and winter maintenance\. A TA was engaged for the preparation of bidding documents and workshop on the approach was held for contractors on March 18, 2008\. This workshop was financed from the Bank team’s preparation budget due to delay in the project becoming effective\. Draft bidding documents prepared by the consultant was for a pilot hybrid OPBM of 184\.66 km with a contract commencement date of November 15, 2010\. However, detailed comments provided by the Bank on June 16, 2010 revealed significant flaws in the draft document which led the RSRD to engage a new consultant (individual) with funding from EBRD to (i) respond to the comments of the Bank and finalize the draft document; (ii) assist in preparing the terms of reference and bidding documents for the OPBM supervision consultancy and (iii) provide further training to RSRD staff on OPBM contracts\. The initial one year contract of the consultant was later extended another year to assist in the oversight of the first year of the OPBM contract\. 45 The contract is a hybrid as it consist of the normal "on order" routine summer maintenance and a performance based element limited to winter maintenance activities\. The reason for this approach is that 60% the pilot network consist of recently rehabilitated road sections which were unlikely to need routine maintenance (e\.g\. filing potholes, repairing cracks, etc) and their inclusion in a ‘performance arrangement’ could result in paying for services not required\. In addition, the RSRD was of the view that implementing a full Performance Based Contract for all Routine Maintenance Services would be too complex to go for in the first instance\. A Hybrid would be more manageable for RSRD, understandable and attractive for the contractors, and would also stand more of a chance of success, in both attracting local contractors to bid and also in its operation and management\. 17 A number of changes were made to the deliverables contained in the original TOR for the individual as a result of adopting the hybrid approach\. The key revision was to change the task ‘preparation of bidding documents’ to training RSRD staff to carry out the supervision and monitoring of the Pilot Contract’\. It was decided to make this change for a number of reasons\. First the hybrid form of contract meant any supervising consultant would only be required during the winter period\. Because of this it was felt that employing a Supervisory Consultant would not be good value for money for RSRD\. Secondly, and more importantly, it was felt that it would be more beneficial to RSRD if its own supervisory staff were trained to undertake the supervision especially given that they would be carrying out the supervision of the routine and summer maintenance of this contract in any event\. This training was provided before which discussions were held with the RSRD staff to be trained to establish their current maintenance practices to allow the procedures proposed in the training to fit, as much as possible, with those current practices\. To date, training conducted has consisted of a workshop with these staff into the principles behind performance based maintenance and also what they should do when supervising the contractor\. The consultant will provide additional guidance to the supervisors throughout the first winter period of the contract\. The OPBM Contract will be procured according t the Public Procurement Law of BiH\. The project outcome indicator for this component is to complete a satisfactory pilot of an OPBRMC\. Intermediate outcome indicators include: (i) Selection of contractor and contract is implemented; (ii) measurement of annual costs per km for maintenance; (iii) review of the quality interventions; and (iv) road user satisfaction measured via road user survey\. The contract was signed on June 25, 2012\. 3\.4 Changes made during implementation to project scope, approach and financing The most significant change were the reallocation of funds to provide additional funds for component 1 in order to allow for full rehabilitation of the road sections financed by the project\. In addition, there were significant changes to the time frame for implementing the project due to delays to the planned procurement as a result of need to revise the designs for the roads to be rehabilitated\. The approach to the OPBM was also changed to become a ‘hybrid’\. Changed also were the proposed network of roads to be included in the Pilot project\. 17 RSRD maintenance department is preparing Bidding Documents for maintenance for the next 4 years\. They proposed 1 of 13 areas of network to be maintain in pilot project taking into account that selected sections pass through 3 areas what will cause more expensive costs for other sections in this areas\. This network for OPBM Contract consists of 8 sections of which 77\.6 km are trunk roads and 122\.66 km are regional roads\. 46 Reallocation of Loan funds RS: The credit allocations per component as a result of a request by the RS to change the allocations to take into account changes during project implementation\. Considerable progress was made in implementing many of the planned road safety outside of the Project The Republika Srpska approved a road safety strategy in December 2008, "Republika Srpska Road Safety Strategy (2009-2013)"\. Road Safety Law on the Republic of Srpska roads was approved by the RS National Assembly and published in Official Gazette of Republic of Srpska on Jun 21, 2011, No 063\. Meanwhile, the Federation passed the "Basis of the Road Transport Safety Strategy (2008-2013)" in September 2008 and had developed an Action Plan for implementing its strategy\. The scope of works for the road safety consultancy services could therefore be reduced\. Due to delays in project effectiveness, the World Bank decided to finance technical assistance for the introduction of output and performance based road maintenance contracts (OPBRMC) through Bank budget, instead of through the Technical Assistance and Capacity Building component of the project\. This has reduced the need for financing for this component\. For financing of technical assistance for OPBM Contract EBRD loan is used\. As a result the above development, the RSRD asked the RS Ministry of Finance to request a reallocation of funds for this project, reallocating 50 percent of project funds from component 2 and 3 to component 1\. The additional fund for component 1 was used to finance the remaining road sections under the rehabilitation of roads component of the project as rehabilitation costs had been higher than estimated during project preparation, and the additional funds helped to complete the program of road rehabilitation\. The reallocation of funds was approved by World Bank management on September 17, 2010 and the amount of funding available per component became: (1) Works for Part 2\.A of the 80 % expenditures to be 7,400,000 Project financed (2) Goods, works and 100 % expenditures to be consultants’ services for Part 600,000 financed 2\.B of the Project (3) Consultants’ services for 100 % expenditures to be 200,000 Part 2\.C of the Project financed TOTAL 8,200,000 As Component 3 is to be financed by EBRD funds and as a result the RS Roads asked the RS Ministry of Finance to request another reallocation of funds for this project which was approved by World Bank management on July 7, 2011 the amount of funding (in SDR) available per component became: Item Category First Second % of expenditures to restructuring restructuring be financed 1 Works for Part 2\.A of the 7\.40 6\.99 80 Project 2 Goods, works & 0\.60 1\.21 100 consultants’ services for Part 2B of the Project 3 Consultants’ services for 0\.20 0\.00 100 Part 2C of the Project Total 8\.20 8\.20 47 The RSRD also requested extension of the project to allow the road safety consultancy to be completed\. The duration of implementation of the project was extended to June 30, 2012\. FBH: JP Ceste FBIH asked for reallocation of funds due to lack of funds for rehabilitation works\. The requested reallocation of 1,200,000 SDR were from consultant’s services category (800,000 SDR from Part 1B and 400,000 SDR from Part 1C) to work category\. After approval by the Bank, the amounts allocated to each of the categories became as shown in the table below: Amount of Financing % of expenditures to Category Allocated in SDR) be financed A\. Part 1 of the Project 7,400,000\.00 80% 1) Works for Part 1A of the Project 2) Goods, works and consultants services 800,000\.00 100% for Part 1B of the Project 3) Consultant services for Part 1C of the 0\.00 100% Project Total Amount 8,200,000\.00 4\. Project Outputs and Performance Indicators 18 5\. Compliance with Environmental and Social Safeguard and Fiduciary Environment and Social Safeguards Management The project involved implementation of physical investments that consist of minor civil works, mostly repaving and reconstructive interventions of existing secondary and local roads and bridges within the existing right-of-way\. No long lasting environmental impacts were expected or arose\. The major environmental issues identified within the EMPs were: (i) dust generation and fumes during works and during supply of materials to be used; (ii) exhaust fumes from machinery and leaks; (iii) disruptions to traffic; and (iv) construction waste management\. Since the project encompasses already existing roads, no changes to runoff patterns are likely\. All of the identified environmental impacts within the EMPs were mitigated through standard practices of good engineering\. EMP forms were included in the tender documents and contracts for subcontractors\. The site supervisors conducted regular checks on the implementation of mitigation measures, as set forth in the EMP document\. The majority of waste generated on site was the scraped asphalt from the former road paving and some municipal waste generated by the workers on site\. The scraped asphalt was either provided to the local population (individual home or business owners which would use this material to cover their gravel parking lots or macadam access roads) or was disposed of at the site designated for such use by the local municipality\. Old guard rails and other metal scrap will either be reused or recycled and are currently stored at the material supply location described above\. Concerning environmental monitoring, permits for material supply were submitted to the RS Roads prior to the start of works, while covered truck loads were verified by the site supervisor visually\. Generation of dust and noise were not monitored but no complaints were received\. No leakage into the soil was observed during works or at the storage site\. The project did not fund activities that would cause any form of land acquisition or restriction of access to sources of livelihoods in the RS\. Road rehabilitation was conducted within existing publicly owned right-of-way\. The project appraisal document required the RS Roads 18 These are as discussed in main ICR, particularly in Annex 2 for the outputs and not detailed here\. 48 Directorate to prepare community surveys to assess the impact of (i) road and bridge rehabilitation; (ii) road safety pilots; and (iii) output and performance based road maintenance contract (OPBRMC)\. These community surveys are yet to be prepared and conducted by the RSRD\. The surveys were carried out in cooperation with the entity Motor Club Association\. Surveys concerning the impact of the pilot road safety projects were made once the pilot road safety projects were decided by the RS Roads, while surveys to assess the impact of OPBRMC will be conducted to assess the impact of the introduction of these contracts\. Fiduciary Project financial management arrangements were reviewed in the context of the BH Portfolio Fiduciary Review in February 2010, including project accounting and reporting, staffing, internal control procedures, and flow of funds\. In order to further strengthen internal controls in the RS Roads the World Bank team elaborated recommendations, namely: (i) timely submission of unaudited interim financial reports (IFRs), 45 days after the end of the quarter; (ii) use of proper eligibility percentages; and (iii) monitoring the uploading of prior review contracts in the World Bank’s systems\. The quarterly IFRs are submitted for regular review to the Bank\. There are no overdue audits for the project and a temporary audit waiver was granted for FY 2009 in order to combine this audit with the one for FY 2010, which is due on June 30, 2011\. Relevance of Project Development Objectives FBH With the exception of the item noted below, the project objectives and goals are still relevant\. Application period of the PBMC is very short (2 years), which is not sufficient for final evaluation of the success and expansion of method to other areas\. Also, since the absence of financial effect - savings in applying method, JP Ceste FBIH intend to apply method on the same field and to follow results in the period of next 4 years, after which final outputs of method application would be issued\. RS The Project Development Objectives are to reduce user costs on the priority sections of the trunk and regional road networks, to improve the institutional framework for road safety, and to modernize road maintenance practices\. By the World Bank Loan 240 kilometers of trunk and regional road are rehabilitated\. As per Report on Intermediate Indicators the percentage of savings for road users in starting time interval (year 2011) covers area from above 6% to below 38 %\. Overall savings represented through calculated Road User Costs per km vehicle are 10\.5 %\. Road safety Agency in Republic of Srpska is established\. Road safety strategy and action plan are completed\. Please find attached Report on Intermediate Indicators\. Pilot performance-based maintenance contract is signed\. Winter 2012 will be first winter with this kind of maintenance and relevance will be seen in next few years\. 49 The road safety component is finished by the June 30, 2012\. Final Report is sent to the WB office in Sarajevo\. 6\. Performance of the Borrower and the Bank Both FBH and RS were appreciative of the very good cooperation between them and the Bank team\. They were made particular note of the support from the CO which helped to quickly resolve problems particularly in relation to procurement\. COMMENTS ON DRAFT ICR The RSRD in their response to the request for comments on the draft ICR stated that they had no comments\. The comments below were received from the FBHRD\. We have studied BH ICR draft and our comments are the following: Page 6 para 2\.1 Project Preparation, Design and Quality at Entry „ As with earlier Bank operations, designs and bid documents for roads and bridges to be rehabilitated were based on visual surveys and not available for review during preparation\.“ We could not agree with mentioned due to the fact that project preparation was based on the study for priority interventions on main roads in FBH which used date from Road and Bridge Data Base established in FB and updated data of AADT and visual survey\. Page 6\. „Documentation of the Project in the PAD could have been improved\. For example, description of component 1 in the main part of the PAD omitted the length of roads to be rehabilitated in each entity, did not indicate that bridges would be rehabilitated in FBH\. More information could also have been provided in annex 4 of the PAD on the approach to cost estimation, particularly the possible impact of the still prevalent post conflict situation in the country which introduced an element of uncertainty to the estimation of costs\. „ These recommandation have not been included in Justification of Rating for Overall Bank Performance\. Page 8\. Para 2\.2 implementation “Implementation of the Project was rated in the ISR as satisfactory up to the time of its mid-term review\. Subsequently, the rating was downgraded to moderately satisfactory up to Project closing except for one occasion when the rating was satisfactory\.â€? Main delays in implementation described in this paragraph related to RS (procurement, road design approach lower in standard than agreed, trying to deal with higher than estimated bid prices they had launched under other IFI projects etc) and part of them to the complex administrative approval process at the State and entity levels for effectiveness of 50 the Credit which is out of control of implementing agency, leading to extension of the Project closing date by six months\. It is not stated in this paragraph that FBH completed all procurement and implemented all contracts within initial project closing date due to the good project management\. Also it is not mentioned that Bank team have no remarks on the technical standards used for road and bridge rehabilitation works such as the quality of the works which is set forth in the Aide –Memoire during supervision Missions\. FBH implemented PBMC but point out that application period of the PBMC is very short (2 years), which is not sufficient for final evaluation of the success and expansion of method to other areas\. Also, since the absence of financial effect - savings in applying method, JP Ceste FBIH intend to apply method on the same field and to follow results in the period of next 4 years, after which final outputs of method application would be issued\. „ A total of eight Bank supervision missions were carried out during implementation of the Project in line with the regional norm of two supervision missions per fiscal year\. There were however notable gaps in their timing with the first twelve months after negotiation and ten months after approval\. It was during this period that errors occurred in the design approach applied in the RS to road rehabilitation under component 1\. Project supervision consultants did not accompany the Bank team and counterpart staff during field visits\.“ Above mentioned is not taken into consideration for Justification of Rating for Overall Bank Performance\. Page 9\. Para 2\.Implementation „The ageement during project preparation to have common formats for project reports would appear not to have been followed up\. This was a missed opportunity for the Bank team to obtain information on cost of contracts being financed by EIB and EBRD which could have been useful to the Bank in dealing with cost overruns\.“ Cost of contracts being financed by EIB and EBRD could be obtained from implementing agency by request of the Bank Team at any time during the implementation of the Project, beside the fact that no IfI's asked implementing agaencies to prepare consolidated project reports including all financing (EIB,EBRD,WB)\. Page 11\. Para 2\.4 Safeguard and Fiduciary Compliance Fiduciary „There were material delays in carrying out procurement tasks in the directorates, particularly RSRD\. Deficiencies in documenting the procurement plan in the PAD also contributed to observed delays during implementation\. The procurement threshold for International Competitive Bidding (ICB) was US$500,000 potentially restricting participation of domestic contractors or increasing their transaction costs: in Moldova, the threshold at the time of appraisal of the RISP was US$1,000,000\. These elements contributed to overall implementation delays as a result of which procurement performance is rated moderately satisfactory\.“ Above mentioned indicate that overall implementation delays as a result of which procurement performance is rated moderately satisfactory is not only responsibility of the implementing agency\. 51 page 17\. Para 5\.1 Bank Perfomance Justification of Rating for Overall Bank Performance Rating: Satisfactory „This is as a result of the satisfactory rating for quality at entry and the satisfactory rating for Project supervision\. The diligence and pro-activeness of Bank’s team during preparation and implementation, good cooperation with other IFIs and flexibility displayed in responding to changing government request greatly contributed to the achievement of most of the project objectives\. „ We could not agree about pro-activeness of the Bank team during preparation and begining of the implementation due to the statements mentioned in para 2\.2 page 8 and para 2\.4 page 11 mentioned above\. Page 18\.Para 5\.2 Borrower Performance (b) Implementing Agency or Agencies Performance Rating: Moderately satisfactory\. „The agencies team made good efforts to ensure the project achieved its objectives, timely responding to request for information and participating in a prepared way to Bank missions\. However, significant delays were experienced in the submission of progress reports and project financial audit which hampered monitoring of project performance\. In the RS, project procurement and financial management staff were recruited late which created delay in the launching of some of the procurement leading to revision of the procurement plan early in project implementation\. Project reports were generally quite detailed and useful for project monitoring\. The Borrower’s project completion report was adequate and was in the form of an expanded progress report\.“ We regard that this rating is severe\. In the Annex 2 we indicated in blue completed projects and actual cost so the total could be adjusted and from this table is evident that in FBH actually more kilometers are rehabilitated of estimated\. Annex 2\. Outputs by Component PAD Actual as % Actual (output) estimate of estimate Component Remarks EUR based on km EUR Km million cost/km Component 1: Rehabilitation of selected roads - FBH M17 - Gnojnice - 135\.0 Completed in 2011 28\.42 1\.700 DraÄ?evo 36\.15 2\.963 No variation order\. M5 - Jajce - Jajce jug Completed in 2010 0\.178 94\.4 Delay due bad 5\.18 0\.356 8\.90 (0\.014) weather in winter\. No variation order\. M17 - Ostrožac - 0\.741 95\.7 Completed in 2010 Jablanica 1 10\.20 Delayed for summer 11\.79 0\.813 holiday season\. Municipal works M4 - Stanić Rijeka - 0\.792 100\.0 Completed in 2009 GraÄ?anica 12\.50 0\.862 14\.20 No contract variation order\. M4 - GraÄ?anica - Donja 9\.50 0\.655 7\.90 1\.211 Completed in 2009 52  PAD Actual as % Actual (output) estimate of estimate Component Remarks EUR based on km EUR Km million cost/km Orahovica M15 - KamiÄ?ak - KljuÄ? From Completed with 10\.00 0\.690 10\.00 FBHRD national budget funds M15 - Sanski Most 1 - 5\.00 0\.457 99\.9 Completed in 2009 4\.76 0\.328 Sanski Most 3 No variation order\. M5 - Å ećerhajin most - 3\.33 0\.416 87\.6 Completed in 2010 3\.33 0\.230 Korija No variation order M5 - PraÄ?a - Renovica 7\.13 0,972 Completed in 7\.22 0\.498 2012,EIB cr\.23924 M17 - Stup 3 – Blažuj 6\.60 0\.477 99\.8 Completed in 2009 Remedial works done 6\.22 0\.429 on sub-base before main works\. No variation order\. M17 - Blažuj - Hadžići 3\.95 0\.753 Completed in 2010 9\.50 0\.701 No variation order\. M17 - Blažuj - Stup 2 Completed from 6\.10 0\.421 6\.10 EIB CR\.23942 M5 - Jajce jug - Donji 21\.15 Plan for 2012 from 9\.80 0\.676 Vakuf 1 EIB cr 23942 M4\.2 - Grahovo - 11\.25 1,265 Completed in 2011 7\.80 0\.538 Skokovi from EIB cr 23942 M4\.2 - Skokovi - Cazin 16\.50 1\.755 100\.0 Completed in 2011 15\.98 1\.102 No variation order\. 9\.761 of Total 148\.10 9\.999 168\.36 which WB 7\.808 Component 1: Rehabilitation of selected bridges - FBH M17 - Overpass Blažuj, 0\.300 National Plan 2012 section Stup 3 – Blažuj, Rehab financed from km 6+494 national budget M17 - Overpass on km nbf 2+100, section Blažuj - 0\.350 Completed in 2009 Stup 2 M18 - Bridge over river 1\.653of 100\.0 Bosna and railway Å iÄ?ki which 0\.195 0\.350 a variation Completed in 2010 Brod – Sarajevo, km 108+400 M18 - Bridge over 0\.180 99\.2 BrloÅ¡ki potok, Å iÄ?ki Brod 0\.150 Completed in 2010 – Sarajevo, km 34+268 M5 Viaduct Komar Donji Nbf Vakuf - Travnik, km 0\.300 Completed in 2011 49+812 M5 Viaduct Komar Donji Nbf Plan 2012 Vakuf – Travnik, km 0\.300 Funding from 50+660 national budget M18 - Overpass across 0\.239 100\.0 railway in Å iÄ?ki Brod, km 0\.350 Completed in 2010 1+004 53 Annex 8\. Comments of Co-financiers and Other Partners/Stakeholders No comments were received from either of EBRD or EIB although requested\. 54 Annex 9\. List of Supporting Documents 1\. Project Appraisal Document (40381-BA) 2\. Loan Agreement (LN IDA - 43710) 3\. Implementation Completion and Results Report (ICR 0000536) 4\. Project aide memoires, Back-to-Office Reports, Implementation Status Reports 5\. Country Portfolio Fiduciary Review Report, OPCS, ECA Region, September 2010\. 6\. Restructuring Papers (Nos\. 56034-BA and 62724-BA) 7\. Country Partnership Strategy for Bosnia and Herzegovina, FY08-11) 8\. Country Partnership Strategy for Bosnia and Herzegovina, FY012-15) 9\. Progress report for RSIP – Republic of Srpska, March 2012 10\. Semestral Report for RISP – Federation of Bosnia and Herzegovina, February, 2012 11\. Road Safety Management Capacity Review, May, 2007 12\. Various reports from the road safety studies in the FBH and RS\. 55  RUSSIAN RUSSIAN FED\. FED\. BELARUS BOSNIA AND HERZEGOVINA NETH\. GERMANY POLAND ROAD INFRASTRUCTURE AND SAFETY PROJECT 50° LUX\. CZECH UKRAINE FRANCE REP\. VAK REP\. SLO MOLDOVA AUSTRIA SWITZ\. HUNGARY PROJECT ROAD SEGMENTS TO BE REHABILITATED SLOVENIA ROMANIA RAILROADS CROATIA PRIMARY ROADS BOSNIA DAYTON AGREEMENT LINES AND HERZ\. SECONDARY ROADS ITALY SERBIA Black INTERNATIONAL BOUNDARIES Adriatic BULGARIA Sea Sea SELECTED TOWNS MONTE- FYR MACEDONIA Tyrrhenian NEGRO NATIONAL CAPITAL ALBANIA 40° Sea 40° MAIN RIVERS GREECE Aegean TURKEY Sea 10° 20° To Zagreb 16°E 17°E To Bjelovar 18°E 19°E To Osijek CROATIA To U na Karlovac ˇ Bosanska Gradiska Sa Bosanski Brod Bosanska Novi ˇ (Srp\. Gradiska) v a (Srp\.Brod) To Belgrade (Novi Grad) as 45°N Prijedor De Dervent rventa Derventaa 45°N Vbr Cazin sna Sava Bo Bosanska ˇ Brcko Bihac´ Krupa Banja a Sanski Most Luka Bijeljina Drin Gracanica ˇ To Belgrade To S Sveti Rok U an na a Bosanski Varos Kotor Varos ˇ ´ Teslic Teslic Petrovac Maglaj Tuzla Tuzla ˇ Kljuc REPUBLIKA SRPSKA CROATIA ˆ Spreca To Medak D rvar rva Drvarr ´ M Vlasic ts\. Mts\. Kri va ja To Valjevo Jajce Travnik Travnik Zenica SERBIA D To Obrovac Kladanj Vlasenica Vareˇ s Vares i Vr s Bosna ba Srebrenica n Bugojno Visoko Visoko REPUBLIKA a 44°N D ri 44°N na FEDERATION OF SRPSKA r To Kraljevo i To Zadar BOSNIA AND SARAJEVO c Livno Pale HERZEGOVINA ˆ Visegrad Visegrad Jablanicko jezero A Gorazde ˇ Jablanica Konjic im l L To Sjenica Ne p ˇ Foca retv (Srbinje) s a Mostar Ta ra Gacko Piv Stolac a 43°N 43°N Bileca ´ MONTENEGRO Trebinje Trebinje To Podgorica Adriatic Sea To Shkodër 0 10 20 30 40 50 Kilometers This map was produced by the Map Design Unit of The World Bank\. ALBANIA SEPTEMBER 2007 The boundaries, colors, denominations and any other information shown on this map do not imply, on the part of The World Bank 0 10 20 30 Miles IBRD 35620 Group, any judgment on the legal status of any territory, or any endorsement or acceptance of such boundaries\. 16°E 17°E 18°E 19°E

APPROVAL

P075952

Initial Project Information Document (PID) Last Submitted to Info Shop on: Project Name AFRICA ­ Nile Basin Initiative Socioeconomic Development and Benefit Sharing Region Africa Region and Middle East and North Africa Region Sector Water Resources Theme Water Resources Management Project P075952 Borrower(s) Nile Basin Countries1 Implementing Agency(ies) Nile Secretariat P\.O\. Box 192 Entebbe, Uganda Contact Person: Mr\. Meraji Msuya, Executive Director Tel: 256 41 32 13 29 Fax: 256 41 32 09 71 Email: nbisec@nilesec\.org Environment Category C Date PID Prepared March 15, 2004 Auth Appr/Negs Date TBD Bank Approval Date 1\. Country and Sector Background Cooperative management of the Nile River Basin is one of the greatest challenges of the global international waters agenda\. The Nile has enormous potential to foster regional social and economic development through advances in food production, transportation, power production, industrial development, environmental conservation and other related activities\. To realize this potential, the riparians have come to recognize that they must take concrete steps to address current challenges and that cooperative, sustainable development holds the greatest prospect of delivering mutual benefits to the region\. A Shared Vision\. In an historic effort, the countries of the Nile have come together within the Nile Basin Initiative to realize a shared vision "to achieve sustainable socio-economic development through the equitable utilization of, and benefit from, the common Nile Basin water resources\." Recognizing the tremendous benefits that can be reaped from cooperation, yet fully aware of the challenges ahead, the Nile countries have embarked on a remarkable journey to translate their shared vision into concrete activities and projects that will build confidence and capacity across the Basin (the Shared Vision Program), as well as initiate concrete investments and action on the ground at local levels (Subsidiary Action Programs)\. The Shared Vision Program (SVP) includes 7 thematic projects as listed below\. An eighth project, SVP Coordination, will strengthen the capacity of the NBI to execute basinwide programs and ensure the effective oversight and coordination of the Program\. 1\. Nile Transboundary Environmental Action 2\. Nile Basin Regional Power Trade 3\. Efficient Water Use for Agricultural Production 1The Nile Basin Initiative member countries are: Burundi, Democratic Republic of Congo, Egypt, Ethiopia, Kenya, Rwanda, Sudan, Tanzania, and Uganda\. Eritrea participates as an observer and is expected to join the NBI during the course of the SVP\. 1  4\. Water Resources Planning and Management 5\. Confidence-Building and Stakeholder Involvement (Communications) 6\. Applied Training 7\. Socioeconomic Development and Benefit Sharing Investments at Sub-basin Levels\. At the same time, groups of countries - one in the Eastern Nile and the other in the Nile Equatorial Lakes region - have identified joint investment opportunities\. These Subsidiary Action Programs (SAPs) will consist of investment projects that confer mutual benefits at the sub-basin level, each involving two or more countries\. Identified areas of cooperation include irrigation and water use in agriculture, hydropower development and power trade, watershed management, flood and drought management and sustainable management of lakes and wetlands\. SVP ­ Building Regional Cooperation Across Sectors and Themes\. As a whole, the Shared Vision Program aims to create an enabling environment for cooperative management of the Nile Basin, and for development and investment at the Basin and sub-basin levels\. Though each project is different in focus and scope, all contribute to building a strong foundation for regional cooperation by supporting basin-wide engagement and dialogue, developing common strategic and analytical frameworks, building practical tools and demonstrations, and strengthening human and institutional capacity\. Together, they pave the way for the realization of the Vision through investments on the ground within the Subsidiary Action Programs\. The Main Regional Sector Issues\. The following describes the key sector issues addressed by the Socioeconomic Development and Benefit Sharing (SDBS) project: Fragmented Approach and Information Sharing and Exchange\. The complexity and variability of the river basin's hydrology as well as the differences between the basin countries' economies require an integrated approach to water resources management and regional development, yet current approaches are fragmented along country and sectoral lines\. This is aggravated by the lack of trust and confidence in the basin, which has hindered the sharing and exchange of information, as well as the exploration of joint regional strategies for development\. The SDBS directly addresses this fragmentation through establishing a network of research institutes, which will explore regional options for development through dialogues and joint research projects\. The findings of this applied research will be broadly disseminated and ad hoc research grants will be made available to encourage an expanded and increasingly cohesive regional dialogue on Nile development\. The Project Steering Committee will comprise decision makers capable of converting elements of the shared vision into reality\. Water Stress, Access to Clean Water, Poverty and Environment, Access to Electricity, and Water Use for Agriculture\. These sector concerns, and gender issues, will be important topics for the dialogues and applied research\. Under this project the focus will be to examine these issues on a basinwide scale and cross-sectorally to identify opportunities for cooperative management and development of the Basin resources that would expand benefits for all riparians\. The Project will also facilitate coordination among the sectoral projects of the SVP (which also explore these issues) to increase their development impact\. Capacity Building\. The institutions involved in planning and management of socioeconomic development in the riparian countries vary widely in terms of size, funding, capacity and legal and institutional framework\. Even countries that have adequate human capacity available have not focused much on the transboundary aspects of water resources development and potentials for benefit sharing\. Water professionals frequently do not interact with professionals and academics in other fields whose skills are essential for multi-sectoral, socioeconomic development in the basin\. The SDBS will directly address this lack of capacity and exchange of experience through capacity building funds and by bringing together economists with decision makers in water resources, as well as specialist in other academic fields\. 2  2\. Objectives The Nile Basin Initiative\. The Nile Basin Initiative (NBI) is a partnership initiated and led by the riparian states of the Nile River through the Council of Ministers of Water Affairs of the Nile Basin states (Nile Council of Ministers, or Nile-COM)\. The Shared Vision of the NBI is to achieve sustainable socio- economic development through the equitable utilization of, and benefit from, the common Nile Basin water resources\. Program development objective\. The long-term goal of the Shared Vision Program is to create the enabling environment for the Nile riparians to realize their Shared Vision\. The specific development objective of the SVP is to build trust, capacity, and an enabling environment for investment in the Nile Basin countries\. This objective will be achieved through the implementation of the projects in the SVP portfolio and the successful coordination and management of the program throughout the basin\. Project Objective\. The objective of the Socioeconomic Development and Benefit Sharing (SDBS) Project is to enhance socioeconomic development through integration and cooperation in the Nile Basin\. Immediate goals of the Project are to: Identify, analyze and promote options for maximizing the sustainable benefits that can be derived from cooperative management and development of the shared Nile waters by strengthening transboundary and cross-sectoral collaboration\. Build greater understanding of, and promote the opportunities, principles and mechanisms for sharing potential social, economic and environmental benefits among the riparians, and Contribute to the further development of the analytical tools, principles and mechanisms needed to design, appraise and negotiate cooperative development projects\. 3\. Rationale for Bank's Involvement The external support provided to the NBI is critical to the success of the SVP as well as the subsidiary action programs\. Today the NBI is supported by a number of bilateral and multi-lateral development agencies, of which the World Bank, the United Nations Development Programme (UNDP), and the Canadian International Development Agency (CIDA) have been strong "cooperating partners" in support of process since its very beginning\. The World Bank and the other development partners add value to the program by continuing to facilitate the NBI process, providing technical expertise, mobilizing international funding support, and ensuring quality assurance and fiduciary management\. Most agencies provide funding through the multidonor Nile Basin Trustfund (NBTF), which is administered by the World Bank\. The World Bank, its partners have global experience in facilitating dialogue and knowledge sharing on international river basins and transboundary waters\. They can provide a wide range of practical experience from a series of jointly implemented regional GEF programs (such as for the Baltic Sea, Black Sea, Danube River Basin, Mediterranean Sea, Mekong River Basin, Lake Victoria, and Red Sea)\. Without the combined resources of the World Bank, UNDP, and other donor partners, implementation of the SVP would proceed at a slower pace and would not fully benefit from the experience of other regional programs worldwide\. The success of river basin development programs in which the Bank and its partners have been involved lends additional credibility to projects that are endorsed by this group of donors\. In addition, the World Bank has well established procedures for supervision, quality assurance, and fiduciary management, and a successful record of managing multidonor trust funds\. The Bank's technical supervision role, carried out in collaboration with other donor partners, can contribute to effective program implementation\. The confidence of other donors in the Bank's capacity as trust fund administrator 3  strengthens the financial commitment from multiple donors and thus contributes to the financial viability of the Shared Vision Program\. 4\. Project Description The SDBS Project is based on the premise that policy makers from the different riparian states are more likely to choose to cooperate with one another once they become better informed about the opportunities for cooperation, including options, mechanisms and likely outcomes\. In essence, this Project seeks to elaborate the principles on which the NBI is based, by broadening and deepening knowledge of the benefits of transboundary cooperation among analysts and decision makers in the riparian states\. The Project will consist of three components: (i) Nile Transboundary Development Network, (ii) Nile Transboundary Development Fund, and (iii) Project Coordination and Implementation\. The Project will establish and support a Nile Transboundary Development Network, consisting of economic planning and research institutions nominated by the participating countries, that will work together to explore in depth the opportunities for cooperative socioeconomic development in the Nile Basin\. This network of Participating Institutions (PIs) will conduct a variety of activities to identify, analyze and promote the benefits and opportunities for cooperative regional socioeconomic development and integration\. They will meet annually for presentation of research, exchange of ideas and networking\. To ensure the participation and active engagement of a wide range of stakeholders, the Project will encourage other capable organizations within the Nile Basin to carry out complementary activities on benefit sharing with grant support from the Project's Nile Transboundary Development Fund\. Grantees are expected to include NGOs and other civil society groups as well as research and teaching institutions, while partnerships with the private sector will also be encouraged\. Project Coordination and Implementation arrangements will be similar to the other thematic SVP projects\. The SDBS Project will be managed by a Project Management Unit (PMU) and overseen by a Project Steering Committee\. The Project will explore the following topics initially; (i) identification of the benefits from cooperation, (ii) principles and mechanisms for benefit sharing, and (iii) frameworks for regional economic, social and environmental assessments, such as cooperative regional assessments\. Priority areas for Project activities will be developed by the PMU in collaboration with the PIs and approved by the PSC\. These could include: regional integration; benefit sharing; regional socioeconomic and environmental assessment; poverty reduction and sustainable livelihoods; pro-poor tourism and environmental management; power and irrigation; national and regional impacts of climate variability and their mitigation; conflict prevention and peace building; trade and agriculture; and regional infrastructure\. To be successful the Project must be dynamic, innovative and of direct relevance to the design and implementation of cooperative projects with real poverty impacts\. The project's three components are designed to be mutually reinforcing and to maintain flexibility in order to be able to respond to promising opportunities that become apparent as implementation progresses, early results are available, and a broader range of stakeholders become engaged\. The Project will give particular attention to gender roles and will emphasize opportunities for younger participants\. 4  The three project components identified are: Component 1: Nile Transboundary Development Network The Nile Transboundary Development Network will promote exchange and collaboration among respected researchers and research institutes in the Basin, focusing on issues and opportunities related to cooperative regional development, integration and benefit sharing\. The Network will include one Participating Institution (PI) from each Nile country\. These institutions must have the autonomy to explore difficult issues of political economy such as alternative Nile development scenarios and benefit sharing, but they must also have the respect of decision-makers who it is hoped will look to the products of this Project to inform their decisions regarding regional integration and benefit sharing in the Basin\. The PIs will also establish linkages with both the SAPs and other SVP Projects to provide analytic support for their efforts to design innovative cooperative activities\. The PIs will receive support from the Project by submission to the PSC and PMU of annual workplans, including detailed budgets\. Activities to be undertaken could include: analytic support to NBI projects, targeted analysis, case studies, capacity building, networking activities, dissemination, workshops, exchange of scholars, etc\. These workplans will be subject to approval by the Project Steering Committee (PSC) \. Component 2: Nile Transboundary Development Fund This Fund will be established to deepen analysis of the opportunities for cooperative regional development and to broaden the range of voices heard\. The focus of the Project is expected to evolve as a consequence of early findings and of developments in ongoing NBI projects\. The Fund is therefore structured to be flexible and responsive to opportunities that may arise\. Funds will be accessed through annual competitive calls, with proposals pre-screened by the PMU and then subject to approval by the PSC\. The types of activities to be funded will include targeted analysis, applied research, case studies, "Incubator" workshops, capacity building, and dissemination activities\. The PIs comprising the Nile Transboundary Development Network will play a key and active role in publicizing the annual grant award competition and in providing information, advice and, when needed, technical support to potential applicants\. The PIs will also have the responsibility for monitoring activities supported by the Fund and supporting the dissemination of results and findings\. Component 3 ­ Project Coordination and Implementation This component will support the coordination and management of project implementation\. The Project Steering Committee (PSC) will provide strategic guidance, direction and oversight to ensure that the project objectives are achieved, within the overall framework of the NBI and its Shared Vision, and that the project remains within budget and on schedule\. The Project Management Unit (PMU) will be hosted by the Government of Uganda, Ministry of Lands, Water and Environment\. The PMU will operate on a basin-wide level and will be responsible for managing and implementing the Project in liaison with the Nile-SEC and the SVP Coordination Project\. The PMU will provide annual work plans to the PSC, and ensure that the project achieves its objectives and produces expected outputs on time and within budget\. The PMU will also provide technical supervision of, and quality assurance for, all project activities\. The Project Management Unit will interact with and facilitate communications among the PIs to (i) identify, plan and develop transboundary activities and (ii) ensure that the work plans of the individual PIs collectively amount to a coherent, well-integrated set of activities\. 5  Considering the high rates of HIV/AIDS in the African countries and its impact in terms of human and economic development, a training and awareness program for the Project Management Unit staff will be implemented as part of this component, under the guidance of the SVP Coordination Project\. 5\. Financing The SVP is a US$131-million grant-funded program\. Approximately 80 percent of total program costs has been pledged by bilateral donors, the GEF, the African Development Bank, and the World Bank (DGF)\. The administration of program funds is streamlined by the establishment of the multi-donor Nile Basin Trust Fund (NBTF), which ensures a unified and coherent approach to fund management\. Most donors use the NBTF to contribute to the Shared Vision Program\. The total SDBS project costs are estimated at US$ 9\.78 million\. As per the SVP financing plan, NBTF Grant fund would cover about 92 percent of the total project costs including taxes and duties\. The Nile basin governments' contribution in kind (office space, seminar/workshop facilities and staff time) would cover the balance of about 8 percent, i\.e\. US$ \.76 million spread over 6 years\. The SDBS is designed as a 6 year project, and will be implemented in two funding phases\. Current funding is available for the First Funding Phase (FFP US$ 4\.53 million) of 3 years\. Further fundraising to reach the total project costs of US$ 9\.78 million is expected to take place during the first two years of project implementation so that the SDBS can be continued during the Second Funding Phase (SFP) of another 3 years\. 6\. Implementation Institutional arrangements, which have evolved through intensive dialogue within the NBI as well as with donor partners, are based on the generic SVP institutional framework\. They also draw on experience and best practice from other regional programs\. The nature of the NBI requires innovative strategies to ensure early action on the ground, maintain trust and commitment, foster broad ownership by the riparian states, and develop a multi-track approach\. Decentralized Approach\. In March 2001, at the Extraordinary Meeting of the Nile-COM in Khartoum, options for the implementation arrangements of the SVP projects were reviewed\. The Nile-COM decided, as a basic principle, that the project management units (PMUs) for each of the seven SVP projects will be located in several Nile countries in accordance with a "decentralized approach" to enhance ownership and commitment to the program in the region\. The following PMU locations have been agreed among the member countries\. Table 1: Shared Vision Program Projects and Project Management Unit Locations Project PMU Location Confidence Building and Stakeholder Involvement Uganda (NBI Secretariat) Nile Basin Regional Power Trade Tanzania Efficient Water Use for Agricultural Production Kenya Nile Transboundary Environmental Action Sudan Water Resources Planning and Management Ethiopia Applied Training Egypt Socioeconomic Development and Benefit Sharing Uganda Management at the Regional Level\. Each Project Management Unit for the seven thematic SVP projects will operate at a basinwide level and will be responsible for managing and implementing their respective 6  Project in all participating countries\. Each PMU will provide annual work plans to the PSC, and will be responsible for ensuring that their project achieves its objectives and produces the expected outputs on time and within budget\. The PMUs will also provide technical supervision of, and quality assurance for, all project activities\. The PMU for the SDBS Project will manage and implement the Project in close coordination with the Nile- SEC and the SVP Coordination Project\. Hosted by the Government of Uganda, Ministry of Lands, Water and Environment, the PMU will be located in the same compound as the Nile-SEC\. This will strengthen coordination with the other SVP projects and help ensure that the Project's outputs are speedily and effectively disseminated within the NBI family of activities\. The core PMU staff will consist of a regional project manager, a lead specialist and an executive secretary with substantial financial management and procurement skills, all full-time\. A technical support specialist (in information technology and knowledge management) and other administrative support staff needed on less than a full-time basis will be shared with the nearby Nile-SEC\. The regional project manager and the lead specialist will be recruited competitively, originating from the region and seeking balance among the countries represented for the entire SVP\. The regional project manager may not be a Ugandan national\. Other staff will be recruited competitively from Uganda\. More specific details will be outlined in the TORs included in the Project Implementation Plan (PIP)\. Host country support to the PMU will be specified in a Letter of Commitment from the Minister of Finance, including: appropriate office space, utilities (i\.e\., water, electricity, telephone cabling to the building), administrative and support staff, and facilities upgrading\. The SDBS Project will be governed by a Project Steering Committee (PSC) which will provide strategic guidance, direction and oversight to ensure that the project objectives are achieved, within the overall framework of the NBI and its Shared Vision, and that the project remains within budget and on schedule\. The PSC for the SDBS Project will also ensure the policy relevance of Project activities while providing an important channel for the uptake of ideas generated by the Project\. The Project Manager will report to the PSC on a regular basis, providing substantive and financial progress reports and seeking approval for work plans\. One of the PSC members from the PMU host country, Uganda, will chair the committee and the PMU will provide secretarial support\. The PSC will consist of two representatives from each country\. One will be the country's Nile-TAC member (annual PSC meetings will be coordinated with SVP business meetings when Nile-TAC members will already be in Entebbe)\. The second representative nominated by the countries will be drawn from a Ministry with interest and authority over issues of regional economic cooperation and development (e\.g\., Ministries of Finance or Planning)\. The PSC will also include a representative of the Nile-SEC\. Representatives from ENTRO, NEL-CU, World Bank, other development partners, UNOPS and other appropriate parties agreed with the PSC will be invited as observers to the meetings\. The Project Manager will be an ex-officio member\. Linkages with the Subsidiary Action Programs\. It is expected that the Project will bring forward development proposals, which will involve transboundary investment projects for potential implementation through the Susbsidiary Action Programs in the Eastern Nile and Nile Equatorial Lakes sub-basins\. In addition to the country representatives, the PSC will include one representative from the Eastern Nile Technical Regional Office (ENTRO) and one representative from the NELSAP Coordination Unit, to ensure that the Project will contribute to the realization of the visions that guide development in the two sub-basins\. Management at the National Level\. At the country level, a Participating Institution (PI) designated by the country will serve as the focal point for overseeing and coordinating SDBS Project activities in that country\. The primary responsibility of the PIs will be to serve as national focal points for the Nile Transboundary Development Network (Project Component 1)\. The PIs will support national activities 7  carried out with support from the Nile Transboundary Development Fund, including providing support to applicants to the Fund (Project Component 2)\. The PIs will also identify and pursue opportunities to establish productive linkages with both the SAPs and the other SVP Projects, including analytic support to the design of innovative cooperative activities\. Electronic exchanges among the PIs will facilitate collaborative applied research with other PIs or other national bodies\. It is anticipated that most of the work undertaken by the PIs with support from the Project will be transboundary in nature, i\.e\., involving at least two Nile riparian states\. The executive director or nominated contact person from each PI will provide a critical link between the regional PMU and the country for the planning and execution of all Project-supported activities within the country and will ensure the participation of all relevant stakeholders, including public professional institutions, universities and research centers, the private sector and NGOs\. S/he will also liaise with the Nile-TAC members within the country, the National NBI Office (see below), and other NBI SVP projects to ensure synergy between the SDBS Project and all of the national level NBI activities\. Effective coordination with other SVP activities will be an essential ingredient of the SDBS project\. The seven thematic SVP projects will likely be hosted by different sectoral ministries\. To facilitate in-country coordination of NBI activities, the Ministry of Water Affairs in each Nile Basin country has established a government-funded national NBI focal point institution (also referred to as a national NBI office)\. The national NBI office will support the NBI Technical Advisory Committee member in each country and act as a counterpart to the NBI Secretariat at the national operational level\. To facilitate effective interaction among the various ministries and institutions involved in the NBI, the office will include interagency and intersectoral committees\. In each country, members of SVP steering committees and SVP national project coordinators (or equivalent) are likely to be involved in these intersectoral committees\. The Nile-TAC members will be responsible for the overall supervision and coordination of the National NBI Office\. Project Services Agency\. The NBI is entering into a partnership with the United Nations Office for Project Services (UNOPS) to facilitate smooth operations, to maintain and enhance dialogue between the Nile riparians, and to further the SVP's development objectives\. The NBI will contract UNOPS to oversee the daily management of the PMUs in order to facilitate local contracting, fund management, local procurement, disbursement, program administration and project-level monitoring\. Specific management services agreements between the NBI and UNOPS will outline the services to be provided for each project\. 7\. Sustainability and Risks The Project is designed to build upon and strengthen existing institutions that will continue to function beyond the life of the Project\. The professional network of Participating Institutions that will be created by the Project will continue to offer opportunities for dialogue and cross-fertilization, particularly as the region increasingly looks toward cooperative regional development opportunities\. The sustainability of the Project's broader dialogues requires ownership by its stakeholders\. Throughout the design and preparation process every effort has been made to use participatory processes at the regional level to ensure that the riparian countries genuinely own the SDBS project\. During project implementation, ever-widening circles will participate through integration of PIs, NGOs, private sector entities and other stakeholders in the project process\. Implementation arrangements, including the execution of the project by the NBI and the preference for hiring project staff and consultants from the region, aim at fostering riparian ownership\. To the extent that the Project's findings successfully influence policy-makers and enable the implementation of investments that demonstrate the benefits of cooperation, the Projects will help to sustain future cooperation\. 8  Risk Risk Rating Risk Mitigation Measure From Outputs to Objective Nile countries do not remain actively engaged in NBI M Emphasis on regional cooperation and the process involvement of high-level persons to establish regional and country ownership of the process\. Emphasis on producing tangible results through coordination with ENSAP and NELSAP, such that Nile countries experience benefits from cooperation SVP Coordination project is not effective in ensuring M Strengthening the NBI Secretariat through hiring basinwide coordination of well qualified staff, mentoring, learning by doing, and targeted training\. The NBI's selection of UNOPS to provide project services and capacity building will provide the backup necessary to ensure smooth project implementation and build a permanent coordination capacity with the NBI\. Outputs are not implemented and do not result in S Establishing a PSC that is comprised of policy tangible benefits on the ground makers who will guide the Project to assure its policy relevance and also serve as a primary channel for the uptake of the Project's findings\. Choosing PIs that have the respect of decision makers and can inform policy and institutional reforms\. From Components to Outputs Annual meetings do not generate specific outputs M A strong project steering committee comprising that would guide regional development representatives from line ministries and SAPs that will guide and monitor project implementation outcomes\. Research cooperation remains limited to PIs M Funds made available for "incubator workshops" that bring together outside specialist and private sector entities\. Dissemination of workshop and meeting proceedings, publication of a Discussion Paper series or other periodical\. Overall Risk Rating M 8\. Environment Aspects The project will deliver technical assistance, develop a basin-wide dialogue and enhance cooperation in regional macroeconomic research and planning\. Besides internal renovation of the existing office building of the PMU, there will be no other physical interventions funded by the project\. Through the development options presented as an outcome of the dialogue, the project will add value to efforts toward environmentally sustainable development of the shared resources and the improvement of water management in the Basin\. 9  9\. Contact Point: Task Team Leader: Claudia Sadoff The World Bank 1818 H Street, NW Washington, DC 20433 Telephone: 202-458-2851 Fax: 202-473-8301 Email: csadoff@worldbank\.org 10\. For Information on Other Project Related Documents Contact: The InfoShop The World Bank 1818 H Street, NW Washington, D\.C\. 20433 Telephone: 1 202 458-5454 Fax: 1 202 522-1500 Web: http:// www\.worldbank\.org/infoshop Note: This is information on an evolving project\. Certain components may not be necessarily included in the final project\. 10

APPROVAL

P153366

Document of The World Bank FOR OFFICIAL USE ONLY Report No: PAD1384 INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT PROJECT APPRAISAL DOCUMENT ON A PROPOSED LOAN IN THE AMOUNT OF US$55 MILLION TO THE REPUBLIC OF GUATEMALA FOR A TRANSPARENCY AND EFFICIENCY IN TAX ADMINISTRATION PROJECT DECEMBER 21, 2016 Governance Global Practice Latin America and the Caribbean This document has a restricted distribution and may be used by recipients only in the performance of their official duties\. Its contents may not otherwise be disclosed without World Bank authorization\.  CURRENCY EQUIVALENTS (Exchange Rate Effective November 18, 2016) Currency Unit = Guatemalan Quetzal (GTQ) US$1 = GTQ7\.51 FISCAL YEAR January 1 – December 31 ABBREVIATIONS AND ACRONYMS FM Financial Management GDP Gross Domestic Product GRS Grievance Redress Service IBRD International Bank for Reconstruction and Development ICT Information and Communication Technology IDB Inter-American Development Bank IMF International Monetary Fund IPF Investment Project Financing IRR Internal Rate of Return LAC Latin American and the Caribbean IT Information Technology M&E Monitoring and Evaluation MINFIN Ministry of Public Finance (Ministerio de Finanzas Públicas) NPV Net Present Value OM Operational Manual PDO Project Development Objective PC Project Coordinator (Coordinador del Proyecto) PIU Project Implementation Unit (Unidad Ejecutora del Proyecto) PPSD Project Procurement Strategy for Development SAT Tax Administration Superintendence (Superintendencia de Administración Tributaria) SICOIN Integrated Accounting System (Sistema de Contabilidad Integrada) TAL Technical Assistance Loan TCA Taxpayer Current Account TRIBUTA Tax and Customs Administrative Tribunal (Tribunal Administrativo, Tributario y Aduanero) VAT Value Added Tax WB World Bank Regional Vice President: Jorge Familiar Country Director: J\. Humberto Lopez Senior Global Practice Director: Deborah Wetzel Practice Manager: Arturo Herrera Gutierrez Task Team Leaders: Alberto Leyton and David Santos Ruano  GUATEMALA Transparency and Efficiency in Tax Administration TABLE OF CONTENTS Page I\. STRATEGIC CONTEXT \.1 A\. Country Context \. 1 B\. Sectoral and Institutional Context\. 1 C\. Higher Level Objectives to which the Project Contributes \. 4 II\. PROJECT DEVELOPMENT OBJECTIVES \.5 A\. PDO\. 5 B\. Project Beneficiaries \. 5 C\. PDO Level Results Indicators \. 5 III\. PROJECT DESCRIPTION \.5 A\. Project Components \. 5 B\. Project Cost and Financing \. 9 C\. Lessons Learned and Reflected in the Project Design \. 10 IV\. IMPLEMENTATION \.11 A\. Institutional and Implementation Arrangements \. 11 B\. Results Monitoring and Evaluation \. 11 C\. Sustainability\. 12 V\. KEY RISKS \.13 A\. Overall Risk Rating and Explanation of Key Risks\. 13 VI\. APPRAISAL SUMMARY \.14 A\. Economic and Financial Analysis \. 14 B\. Technical \. 15 C\. Financial Management \. 16 D\. Procurement \. 16 E\. Social (including Safeguards) \. 16 F\. Environment (including Safeguards) \. 17 G\. World Bank Grievance Redress \. 17 Annex 1: Results Framework and Monitoring \.18 Annex 2: Detailed Project Description \.24 Annex 3: Implementation Arrangements \.36 Annex 4: Implementation Support Plan \.46 Annex 5: Economic and Financial Analysis \.49 Annex 6: Project Implementation Timeframe \.53 Annex 7: Support to SAT from Other Donors……………\.……………………………………………………………………………\.49 \. PAD DATA SHEET Guatemala Transparency and Efficiency in Tax Administration (P153366) PROJECT APPRAISAL DOCUMENT LATIN AMERICA AND THE CARIBBEAN Governance Global Practice Report No\.: PAD1384 \. Basic Information Project ID EA Category Team Leader(s) P153366 C - Not Required Alberto Leyton Lending Instrument Fragile and/or Capacity Constraints [ ] Investment Project Financing Financial Intermediaries [ ] Series of Projects [ ] Project Implementation Start Date Project Implementation End Date 17-Jun-2017 31-Mar-2023 Expected Effectiveness Date Expected Closing Date 17-Jun-2017 30-Jun-2023 Joint IFC No Practice Senior Global Practice Regional Vice Country Director Manager/Manager Director President Arturo Herrera Deborah L\. Wetzel J\. Humberto Lopez Jorge Familiar Gutierrez \. Borrower: Ministry of Public Finance Responsible Agency: Superintendencia de Administración Tributaria Contact: Ernesto Ramirez Title: Project Management Leader Telephone No\.: 502-2362-7111 Email: jeramire@sat\.gob\.gt \. Project Financing Data(in US$, millions) [X] Loan [ ] IDA [ ] Guarantee Grant [ ] Credit [ ] Grant [ ] Other Total Project Cost: 55\.00 Total Bank Financing: 55\.00 Financing Gap: 0\.00 \. Financing Source Amount Borrower 0\.00 International Bank for Reconstruction and 55\.00 Development Total 55\.00 \. Expected Disbursements (in US$, millions) Fiscal Year 2018 2019 2020 2021 2022 2023 Annual 4\.48 11\.93 19\.84 9\.81 7\.65 1\.29 Cumulative 4\.48 16\.41 36\.25 46\.06 53\.71 55\.00 \. Institutional Data Practice Area (Lead) Governance Contributing Practice Areas Proposed Development Objective(s) The project development objective is to increase levels of compliance with tax and customs obligations\. \. Components Component Name Cost (US$, millions) Component 1\. Transparency, Integrity and Institutional Development in 23\.52 Superintendence of Tax Administration (SAT) Component 2\. Strengthening of Tax Collection Functions in Internal 27\.66 Revenues and Customs Component 3\. Strengthening of Integrated Tax Intelligence and Tax 3\.68 Enforcement \. Systematic Operations Risk- Rating Tool (SORT) Risk Category Rating 1\. Political and Governance High 2\. Macroeconomic Moderate 3\. Sector Strategies and Policies Substantial 4\. Technical Design of Project or Program Substantial 5\. Institutional Capacity for Implementation and Sustainability High 6\. Fiduciary Substantial 7\. Environment and Social Low 8\. Stakeholders Substantial 9\. Other OVERALL Substantial \. Compliance Policy Does the project depart from the CAS in content or in other significant Yes [ ] No [ X ] respects? \. Does the project require any waivers of Bank policies? Yes [ ] No [ X ] Have these been approved by Bank management? Yes [ ] No [ X ] Is approval for any policy waiver sought from the Board? Yes [ ] No [ X ] Does the project meet the Regional criteria for readiness for Yes [ X ] No [ ] implementation? \. Safeguard Policies Triggered by the Project Yes No Environmental Assessment OP/BP 4\.01 X Natural Habitats OP/BP 4\.04 X Forests OP/BP 4\.36 X Pest Management OP 4\.09 X Physical Cultural Resources OP/BP 4\.11 X Indigenous Peoples OP/BP 4\.10 X Involuntary Resettlement OP/BP 4\.12 X Safety of Dams OP/BP 4\.37 X Projects on International Waterways OP/BP 7\.50 X Projects in Disputed Areas OP/BP 7\.60 X \. Legal Covenants Name Recurrent Due Date Frequency Establish, Maintain and Operate the Three months Project Implementation Unit and after effectiveness Management Committee in SAT Description of Covenant Schedule 2\. Section I\.A\.1\. No later than three (3) months after the Effective Date, the Borrower shall cause the Implementing Entity-SAT to establish, and thereafter operate and maintain, throughout Project implementation, a Project Implementation Unit (the PIU), and a Management Committee; with functions responsibilities, staffing and budgetary resources, all acceptable to the Bank and as set forth in the Operational Manual\. Name Recurrent Due Date Frequency Hire Project Coordinator and Three months Fiduciary Specialists after effectiveness Description of Covenant Schedule 2\. Section I\.A\.2\. No later than three (3) months after the Effective Date, the Borrower shall cause Implementing Entity-SAT to appoint a project coordinator, a financial management specialist and a procurement specialist, all in a manner, with qualifications, experience and under terms of reference acceptable to the Bank\. Name Recurrent Due Date Frequency Establish, Maintain and Operate the Three months Steering Committee after effectiveness Description of Covenant Schedule 2\. Section I\.A\.3\. For purposes of providing general Project oversight and coordination, the Borrower shall cause the Implementing Entity-SAT, not later than three months after the Effective Date, to establish, and thereafter operate and maintain throughout the implementation of the Project, a committee (the Steering Committee), with functions, responsibilities and composition including representatives of the Ministry of Public Finance and the Implementing Entity-SAT, all acceptable to the Bank and as set forth in the Operational Manual\. \. Conditions Source Of Fund Name Type IBRD Additional Events of Suspension Suspension Description of Condition Article 4\.01\. The Additional Events of Suspension consist of the following: (a) The SAT’s Legislation has been amended, suspended, abrogated, repealed or waived so as to affect materially and adversely, in the opinion of the Bank, the ability of the Implementing Entity-SAT to perform any of its obligations under the Subsidiary Agreement\. (b) The Implementing Entity-SAT has failed to comply with any of its obligations under the Subsidiary Agreement\. Source Of Fund Name Type IBRD Additional Conditions of Effectiveness Effectiveness Description of Condition Article 5\.01\. The Additional Conditions of Effectiveness consist of the following: (a) The Subsidiary Agreement has been executed on behalf of the Borrower and the Implementing Entity-SAT\. (b) The Operational Manual has been adopted by the Implementing Entity-SAT in a manner and with contents acceptable to the Bank\. Source Of Fund Name Type IBRD Additional Legal Matter Effectiveness Description of Condition Article 5\.02\. The Additional Legal Matter consists of the following, namely, that the Subsidiary Agreement has been duly authorized or ratified by the Borrower and Implementing Entity-SAT and is legally binding upon the Borrower and the Implementing Entity-SAT in accordance with its terms\. Team Composition Bank Staff Name Role Title Specialization Unit Alberto Leyton Team Leader Lead Public Sector GGO16 (ADM Specialist Responsible) Monica Lehnhoff Procurement Procurement GGO04 Specialist (ADM Specialist Responsible) Lourdes Consuelo Financial Sr Financial GGO22 Linares Loza Management Management Specialist Specialist Ana Cebreiro Gomez Peer Reviewer Senior Economist GGO28 David Santos Ruano Team Leader Public Sector Information GGO16 Specialist Systems Enrique Fanta Peer Reviewer Senior Private Sector Customs GTC04 Ivanovic Specialist Administration Karina Ramirez Arras Team Member Research Analyst Internal GGO16 Revenue Systems Mariela Mena Safeguards Social Development GWADR Specialist Consultant Marinus Verhoeven Peer Reviewer Lead Economist GGO28 May Cabilas Olalia Team Member Sr Public Sector Spec\. GGO16 Rajul Awasthi Peer Reviewer Senior Public Sector GGO28 Specialist Tatiana Cristina O\. de Finance Officer Finance Officer WFALA Abreu Gabriela Grinsteins Counsel LEGLE Extended Team Name Title Office Phone Location Juan Jose Bravo Customs Washington DC Specialist/Consultant \. Locations Country First Location Planned Actua Comments Administrative l Division Guatemala Guatemala Guatemala City X \. I\. STRATEGIC CONTEXT A\. Country Context 1\. Guatemala is among the countries with the highest poverty rate in Latin America and the Caribbean (LAC), and change in shared prosperity has been very limited in recent years\. From 2006 to 2014, the poverty rate (US$4 per day poverty line) increased from 53 to 60 percent, in striking contrast to the decline in poverty in LAC\. Between 2000 and 2014, the poorest 40 percent experienced a decline in income, again in contrast to most LAC countries\. High poverty is also reflected in the country’s social indicators, such as stunting rates for children under-five, affecting in particular the poor (66 percent), rural dwellers (59 percent), and Indigenous groups (61 percent)\. 2\. The country’s stable macroeconomic framework has not translated into high growth or poverty reduction\. The country is the largest economy in Central America, with a Gross Domestic Product (GDP) of US$63\.8 billion (2015)\. Since 1990, economic volatility was less than half the regional average, and the country experienced less of an economic deceleration during the 2009 recession than most LAC countries\. Much of Guatemala’s economic stability can be attributed to prudent macroeconomic policies that have kept fiscal deficits and public debt low\. However, given that Guatemala has one of the lowest tax burdens in the world, low fiscal deficits were achieved by modest spending on social sectors and public services\. 3\. Guatemala is at a historic juncture, following a political and institutional crisis in 2015, a newly elected Government is starting to take on deep-rooted development problems\. The crisis was triggered by the uncovering of a corruption scheme that permeated the Tax Administration Superintendence (SAT) and the highest political levels\. Subsequently, a massive social uprising demanded the resignation of the President and the strengthening of governance\. In October 2015, the new administration assumed office with a platform against corruption\. The Administration took office in January 2016 and, during its first three months, developed its 20/20 Vision for Guatemala, building on the K’atun 2032 National Development Plan\. A key priority of the Government is combating corruption and improving transparency\. B\. Sectoral and Institutional Context 4\. Guatemala has one of the lowest levels of tax revenue in LAC and the world\. The modest gains in revenue mobilization of 2013 were lost amidst high-level corruption in the customs administration 1\. After reaching 11 percent in 2013, the tax-to-GDP ratio fell to 10\.8 percent in 2014 and to 10\.2 percent by end 2015, below the 13 percent target foreseen in the tax reform of 2012 and significantly below the LAC average of 16\.9 percent\. Guatemala’s tax effort 2 is also the lowest in the region and among its lower-middle income peers\. Low levels of revenues are due to narrow bases and low rates of certain taxes, but also to widespread tax evasion, lack of transparency, weak monitoring and controls, Value Added Tax (VAT) revenue leakages due to fraudulent invoicing, and high levels of informality\. 1 SAT, Proyección del incumplimiento de pago del Impuesto al Valor –IVA- en Guatemala, Periodo 2016-2018 2 The tax effort is defined as the ratio of actual revenues to potential revenues\. 1 5\. Indirect taxation accounts for over half of total revenues, with around 50 percent from VAT\. Despite the relative importance of VAT in revenue collection, VAT rates are among the lowest in LAC, with numerous exemptions and loopholes\. A decrease in VAT revenues from 3 percent of GDP in 2013 to 2\.6 percent in 2015 was the main contributor to the persistent decline in the tax-to-GDP ratio during the same period\. Direct taxation amounts to 30\.9 percent of total revenue, of which only 2\.9 percent is from personal income tax, and is hampered by a small tax base, excessive exemptions, and widespread evasion and informality\. Furthermore, the current framework is regressive: a fiscal incidence analysis based on the 2009-2010 National Survey of Family Income and Expenditures revealed that current tax system and transfers do not reduce inequality and poverty overall or along ethnic and rural-urban lines\. 3 6\. Modest tax collection is also due to persistently low levels of tax compliance\. Low tax compliance is mainly caused by institutional weaknesses in tax administration and a lack of a tax culture 4 in the country\. The former is a result of structural problems linked to SAT’s weak internal governance framework, outdated core business and support processes in tax administration, and weak controls and enforcement procedures for both internal revenues and customs\. A lack of a tax culture stems from the perception of weakness and lack of transparency of public institutions in general, and a lack of trust in SAT in particular\. The prevailing public perception that compliance is costly, tax administration is inefficient, and the tax structure is regressive limits the scope for voluntary compliance\. In 2015, Guatemala ranked 123 out of 168 countries in the public sector corruption perception index\. 5 High levels of tax evasion erode the tax base and continue to undermine both vertical and horizontal equity in the tax system\. An estimated 74\.5 percent of the economically active population is part of the informal economy, and informalities relating to contraband and fraudulent customs activities are estimated to cause a loss of revenue of around 2\.8 percent and 4\.4 percent of GDP, respectively\. 6 7\. Customs operations in Guatemala has also been characterized by limited transparency, lack of cross-control mechanisms, and costly and inefficient clearance procedures\. Although Guatemala made some progress in aligning its trade facilitation practices with international standards in recent years, a large number of physical inspections are still conducted at the border, negatively affecting the time for cargo to be released by customs\. In addition, efforts to mitigate contraband have failed repeatedly due to high levels of discretion by customs officers, lack of infrastructure and supporting equipment for controlling merchandise transit in customs offices, and a fragmented risk management model\. 8\. While it is critical to expand the tax base and raise certain tax rates, a prerequisite for building political and public support for such fiscal reforms is to strengthen the regulatory framework to enhance tax collection and re-build trust in SAT\. The 2015 political and institutional crisis exposed the extent of SAT’s underlying structural problems\. Revenue administration capacity deteriorated significantly in recent years as SAT fell behind in keeping up with the institutional and technological requirements needed to maintain its operations at 3 Cabrera Mynor, Lusting Nora and Moran Hicias E\. (2015); Fiscal Policy, Inequality, and the Ethnic Divide in Guatemala; Center for Global Development, Working paper 397, March 2015\. 4 This refers to the “culture of compliance” based on rights and responsibilities, in which citizens see paying taxes as an integral element of their relationship with the Government\. 5 Transparency International, 2015\. 6 World Bank, Guatemala Economic Diagnostic for National Action, 2015\. 2 international standards\. Several diagnostic assessments by international development partners, including the World Bank (WB), United States Treasury, International Monetary Fund (IMF), and the Inter-American Development Bank (IDB) found that SAT suffers from (i) disintegrated and inefficient tax administration processes; (ii) a dysfunctional governance structure that lacks transparency and is characterized by weak internal controls and ineffective information sharing between units; (iii) fragmented and vulnerable information systems; and (iv) lack of a human resource strategy\. 9\. The new Administration has given priority to mobilizing revenue through strengthening SAT’s core operations and its legal and institutional framework, as demonstrated by the approval of the amendments to SAT’s Organic Law\. The Government sees the current context as an opportunity to reverse SAT’s poor performance through the implementation of a comprehensive reform\. The reform plan includes critical changes in the institutional and legal framework along with short-, medium- and long-term actions for improving SAT’s operations and transparency\. To this end, the Government approved the amendments to SAT’s Organic Law (Ley Orgánica de la SAT-Decree 1-98) to address critical governance issues in the existing organization of the Administration\. Important features of the reform are: (i) separation of administrative tax appeal functions with the creation of the Tax and Customs Administrative Tribunal (TRIBUTA), an administrative tribunal in SAT, to eliminate the risk of conflict of interest of the Board of Directors; (ii) limit in political influence in SAT nominations through the modification of appointments procedures for the SAT Superintendent, the Board of Directors and TRIBUTA members; (iii) revision of roles and responsibilities of the Board of Directors and SAT’s administrative units; (iv) creation of a specialized internal investigation unit in SAT with the capacity to detect and investigate corruption and conflict of interest practices; and (v) regulation of financial confidentiality provisions granting SAT the authority to access taxpayers’ bank information for auditing and investigation purposes\. 10\. In addition, the Government has implemented a number of short-term measures aimed at improving tax collection\. These include, among others: (i) hiring and training of new staff; (ii) authorization and closure of gates in Puerto Quetzal, one of the main import and export points, to reinforce security and merchandise controls; (iii) implementation of a monitoring system in ports; (iv) improvement of container controls from arrival to release in customs; (v) strengthening of controls of ramps in customs; (vi) establishment of an internal investigations unit, its protocols and training; (vii) acquisition of hardware infrastructure needed to avoid disruptions in SAT’s existing information systems; and (viii) completion of a data warehouse to support early tax intelligence initiatives in SAT\. All these measures are expected to gradually contribute to increasing tax revenue collection\. They will be complemented by structural institutional changes in SAT and by medium- and long-term reforms to restore the institution’s credibility and capability to perform its role in an effective and sustainable way\. 11\. The Government has successfully mobilized and coordinated efforts of development partners to support the implementation of SAT´s integrated reform plan\. Several international organizations and donors, including the IDB, IMF, the German Technical Cooperation Agency (GIZ), United States Treasury, and WB, have agreed to align their technical assistance and support programs around a common reform plan\. The Government has established areas of priority for each organization, as presented in Annex 7\. As part of these efforts, the IMF 3 produced a comprehensive report 7 on the various aspects of tax administration, which includes both recommendations on restoring levels of collection in the short- and medium-term strategies to reinstate full control and credibility in SAT\. 12\. In particular, the Government has requested the WB to support medium- and long- term reforms related to SAT\. Drawing on IMF recommendations as well as previous analyses and diagnostics, the proposed Project seeks to both tackle the structural problems causing operational inefficiency in tax administration and address SAT’s governance issues to realign incentives for a more effective tax administration and restore the credibility of SAT to help rebuild taxpayer confidence and thus improve the tax culture in the country as a whole\. Issues and shortcoming related to the existing tax policy framework and elements linked to quality of transparency in the expenditure side of the fiscal management are beyond the scope of the proposed Project\. 13\. The proposed Project is part of a broader package of lending and analytical instruments to support the country’s reforms on governance of public resources\. It complements policy and institutional actions that are being supported through the First Improved Governance of Public Resources and Nutrition (US$250 million; P160667 8) Development Policy Financing, the objective of which is to support the Government’s efforts to strengthen the regulatory and institutional framework to improve governance of public resources and accountability\. These efforts will be accompanied by analytical instruments, including technical assistance on using behavioral insights to motivate citizens to pay taxes, and on improving transparency and anti-money laundering systems, and an analysis to better understand the challenges related to the high levels of informality\. C\. Higher Level Objectives to which the Project Contributes 14\. The proposed Project is fully consistent with the Country Partnership Framework (CPF) FY17-20 9 in which transparency of tax and customs administration is a key priority\. The CPF supports the Government’s commitment to improving transparency and accountability of the State and includes an objective that focuses on improving public resource management and accountability\. The proposed Project is expected to increase compliance with tax and customs obligations, in turn boosting revenue collection, strengthening the Fiscal Policy and enabling the Government to invest in public services, in particular, to address persistently high poverty rates and improve shared prosperity\. Moreover, based on preliminary findings, climate co-benefits are estimated at 10 percent of the Project amount\. Enforcement of VAT and import duties of products typically associated with environment degradation (e\.g\. fuels) is expected to translate into higher effective taxation, indirectly contributing to the climate change agenda\. 7 IMF (2016), Katherine Baer, Antonio Ansón, Nicolás Bonilla, Mónica Calijuri, Selvin Lemus, Guatemala: Measures for the Recovery of SAT (Medidas para la Recuperación de la SAT)\. 8 Approved on November 17, 2016 9 Report No\. 103738-GT discussed by the Board of Executive Directors on November 17, 2016\. 4 II\. PROJECT DEVELOPMENT OBJECTIVES A\. PDO 15\. The Project Development Objective (PDO) is to increase levels of compliance with tax and customs obligations\. B\. Project Beneficiaries 16\. Guatemalan taxpayers 10 would benefit directly from lower compliance costs, improved assistance to taxpayers, and from increased SAT transparency\. A more reliable institutional framework, including streamlined processes, standardized procedures and appropriate human resource management policies, would enable SAT to have a more effective decision- making process and improve productivity, administrative efficiency and transparency\. Reforms supported by the Project would help reduce discretional practices of tax officials mitigating the risk of corruption through more efficient and streamlined processes\. Improvements in the business climate would be also reinforced by trade facilitation improvements through the simplification and increased quality of customs procedures\. The proposed Project would capture beneficiary feedback through perception surveys for measuring taxpayer’s satisfaction with SAT’s services and perception of transparency\. Direct beneficiaries include around 200,000 business taxpayers and 1\.7 million individual taxpayers\. C\. PDO Level Results Indicators 17\. Achievement of the PDO will be measured with the following indicators: (a) Increased compliance with domestic taxes, measured through the reduction in VAT gross compliance gap; and (b) Increased effectiveness of customs controls, measured through the increased ratio of effectiveness of customs inspections\. III\. PROJECT DESCRIPTION A\. Project Components 10 Current active business taxpayers are 199,849 and individual taxpayers: 1,704,574\. 5  Figure 1\. Project Structure and Intervention Logic 18\. The Project has been designed to help address structural weaknesses and targets areas for improvement that are linked to the main causes of weak tax administration and the lack of a tax culture in the country\. SAT’s weak internal governance framework, outdated core business and support processes, weak controls on tax compliance and customs, and lack of transparency, are being specifically targeted as areas of intervention for the proposed Project\. As presented in Figure 1, three Components will finance vertical and transversal interventions to strengthen SAT’s overall governance framework and increase its effectiveness\. Each of the three Components is designed to tackle structural weaknesses in the Guatemala’s tax system that contribute to low tax compliance and therefore, low revenue collection\. While Component 2 is designed to support vertical interventions to strengthen internal revenues and customs functions, Components 1 and 3 include crosscutting interventions aimed at strengthening SAT’s governance framework as well as developing integrated tax intelligence and enforcement procedures to enhance its effectiveness\. Annex 2 provides a more detailed description of the nature and scope of activities to be supported under each Component and sub-component\. 6 Component 1\. Transparency, Integrity and Institutional Development in SAT (US$23\.52 million) 19\. The objective of this Component is to help improve SAT’s governance, by supporting the implementation of the recently approved amendments to SAT’s Organic Law of SAT and strengthening its internal capacities\. Areas to be targeted for capacity building include strategic planning, human resource management, institutional integrity, information governance, and information and communication technology (ICT)\. Activities to be supported by this Component are organized under the following three sub-components: 20\. Managing the SAT Reform\. This sub-component will develop and implement a reform strategy in SAT through, inter alia, the design and implementation of: (a) strategic planning and monitoring & evaluation (M&E) tools; (b) an ICT governance model; (c) a change management strategy including a communications campaign program to support the reform process; and (d) the provision of support to SAT for the carrying out of Project management, including, inter alia: (i) the carrying out of Project audits; (ii) the carrying out of training; (iii) the provision of technical support on procurement, safeguards and financial management (FM) requirements; and (iv) the financing of Operating Costs\. 21\. Strengthening Human Resource Management and Institutional Integrity\. This sub- component will strengthen human resource management and institutional integrity through, inter alia, the development and implementation of: (a) an integrated human resource management strategy, including: (i) the update of staffing plans for internal revenues and customs services; (ii) the establishment of a performance management framework; (iii) a rigorous screening process for staff recruitment; and (iv) an internal capacity development and knowledge management program for SAT staff; and (b) a transparency and institutional integrity strategy, including: (i) the establishment and implementation of the new internal investigation unit; (ii) the strengthening of the internal audit functions; and (iii) the design and implementation of an industrial security plan for SAT staff at all levels, including protocols for physical and legal protection based on the nature of their functions and associated risks, but excluding from the security plan and protocols any activity which may require the participation of security forces\. The above activities will be carried out in line with international experiences and norms\. 22\. Upgrading and Integrating the ICT Platform\. This sub-component will support upgrading of the ICT platform and align it with the SAT reform strategy to ensure sustainability through, inter alia: (a) the design of a new organizational model for the ICT department within SAT; (b) the improvement of SAT’s ICT planning capacity; (c) the design of a comprehensive software architecture ensuring the integration of all of SAT’s functions; (d) the upgrading of the ICT infrastructure to support SAT’s reform process, including the improvement of information security and the establishment of a data recovery center\. Component 2\. Strengthening of Tax Collection Functions in Internal Revenues and Customs (US$27\.66 million) 23\. The objective of this Component is to strengthen the core processes of the primary tax collection and control functions in both internal revenues and customs\. This is expected 7 to enhance taxpayer voluntary compliance, taxpayer satisfaction and SAT’s efficiency and will be supported through two sub-components\. 24\. Strengthening Internal Revenue Collection Processes\. This sub-component will focus on the redesign and implementation of an integrated tax compliance model through, inter alia: (a) the redesign and improvement of the taxpayer registration system (Registro Tributario Unico); (b) the redefinition and implementation of a new model for the Taxpayer Current Account (TCA), including the centralization and storage of all taxpayers’ fiscal obligations; 11 (c) the strengthening and expansion of an e-invoice initiative and the use of other third-party sources of information for effective collection control; (d) the implementation of tools and methodologies to improve effectiveness of administrative collection and tax arrears recovery, including the carrying out of activities to foster compliance and deter omission practices, through behavioral economic approaches; and (e) the development and implementation of a comprehensive strategy to improve taxpayer services, including improvements in the face-to-face services provided in regional offices, the expansion of electronic services, and the implementation of a taxpayer satisfaction survey\. 25\. Strengthening Customs Services\. This sub-component will strengthen customs services through, inter alia: (a) the implementation of a risk-based management model for merchandise controls, including ex-post documental controls and the implementation of a trusted operator program; 12 (b) the development and implementation of streamlined and automated customs procedures and mechanisms, including a joint administrative inspection model with the Government’s border control agencies; (c) the implementation of non-intrusive technologies and electronic tracking devises for merchandise control at the customs entrances, exits and transits; (d) the strengthening of controls over special customs regimes, including free zones; (e) the facilitation of information exchange with national and international agencies, through the application of international conventions and the development of regional and bilateral agreements; and (f) increasing transparency and predictability in customs services by: (i) improving and implementing modern valuation methodologies and tools; (ii) implementing standardized application of norms and procedures at customs offices; (iii) improving the availability and quality of customs information to SAT staff, trade operators and other users; (iv) creating consultation and feedback mechanisms between traders and customs; and (v) improving transparency of the VAT´s refund process\. Component 3\. Strengthening of Integrated Tax Intelligence and Tax Enforcement (US$3\.68 million) 26\. The objective of this Component is to strengthen SAT’s tax intelligence and enforcement capabilities\. The Component will promote an efficient use of tax information sources to support the auditing, control and enforcement functions through the adoption of an integrated compliance risk management model, the promotion of a culture of information analysis 11 Refers to the taxpayer current account with 360° approach which involves the centralization and storage of all taxpayers’ fiscal obligations, including customs and domestic taxes\. 12 This program would certify third party trusted operators to safeguard the application of security standards of the international supply chain and provide enhanced services, such as simplified customs procedures and reduced customs intervention\. The program would apply, but not be limited, to authorized economic operators\. 8 within SAT, and the strengthening of tax auditing and legal services for a more effective detection of evasion and tax fraud practices as well as an effective collection of disputed taxes\. The risk management model will cover both internal revenues and customs in order to deter existing silo- based practices and increase effectiveness of the tax intelligence function through improved access and use of all available information\. The Component supports three sub-components: 27\. Strengthening Tax Intelligence and Tax Audit\. This sub-component will strengthen the tax intelligence and tax audit units within SAT through, inter alia: (a) the creation and establishment of a new tax intelligence unit; (b) the design and implementation of an integrated risk-based management model covering internal revenues and customs; (c) the construction of a unified data warehouse and related business intelligence tools; (d) the design and implementation of a comprehensive auditing strategy and related tools based on taxpayer segmentation and risk analysis for both internal revenue collection and foreign trade areas; and (e) the carrying out of capacity building activities for auditors, including on transfer price processes\. 28\. Strengthening Legal Services and Tax Appeals Procedures in SAT\. This sub- component will strengthen SAT’s legal services and tax appeal procedures through, inter alia: (a) the creation of a strategy and the development of analytical tools to support tax litigation, and the carrying out of capacity building activities for SAT’s Legal Department; (b) the identification of areas of opportunity to improve existing regulations that hinder SAT’s ability to collect tax debts; and (c) the implementation of a new tax appeals framework and of TRIBUTA through, inter alia: (i) the development of organizational manuals and procedures; (ii) the analysis of staffing capacity and requirements; (ii) the carrying out of training for relevant TRIBUTA staff; (iv) the development of tools to record and monitor appeal cases; and (v) the carrying out of dissemination and communication activities to inform taxpayers of the new tax appeals procedures and protocols\. B\. Project Cost and Financing 29\. The total Project cost is estimated at US$54\.86 million\. This Investment Project Financing (IPF) would be financed by an IBRD loan in the amount of US$55 million, including financing of the front-end fees\. Table 1: Project Cost and Financing Project cost IBRD % Project Components (Million US$) (Million US$) Financing 1\. Transparency, Integrity and Institutional 23\.52 23\.52 100 Development of SAT 2\. Strengthening of Tax Collection Functions 27\.66 27\.66 100 in Internal Revenues and Customs 3\. Strengthening of Integrated Tax Intelligence 3\.68 3\.68 100 and Tax Enforcement Total Project Costs 54\.86 54\.86 100 Front-End Fees 0\.14 0\.14 100 Total 55\.00 55\.00 100 9  C\. Lessons Learned and Reflected in the Project Design 30\. The proposed Project builds on the experience of previous WB tax administration projects and specifically from the IBRD-financed SAT Technical Assistance Loan (TAL)13 Project (P048654 14, IBRD-42250 15)\. Key lessons learned from previous projects and their relevance to the proposed operation include: (a) When stakes are high, it is important for the WB to remain engaged, even in the face of a highly challenging Project\. The experience from the SAT TAL illustrates that the challenges faced in the implementation of tax reforms are not only technical and institutional but also political in nature\. Guatemala’s experience shows that, in times of adversity, the involvement of international organizations helps catalyze and push reform efforts forward through providing neutral and technically sound advice and creating space for stakeholders to channel their expectations\. The WB’s role in the case of the SAT TAL was not only in providing technical advice and international experience, but also in serving as the neutral broker amongst the various stakeholders, highlighting the importance of the WB’s convening role to create consensus\. This is particularly relevant in the current circumstances in Guatemala\. 16 After a major political crisis that directly impacted the tax administration institutional framework, the Government needs the support and accompaniment of credible partners to develop confidence and trust\. (b) Mitigation measures need to be considered in Project design to address institutional factors that could hinder the sustainability of tax administration reforms\. During Project design, it is important to assess possible resistance to the reforms being introduced, as well as the degree of top management support to the reform and likelihood of continuity in management\. Political factors that hinder the sustainability of tax administration reforms include pressure from powerful stakeholders with vested interests, lack of understanding on the part of lawmakers, and lack of political will\. Given the relevance of these factors in the Guatemalan context today, they have been addressed in Project design through the explicit inclusion of activities to support the implementation of the SAT reform, including change management and communication strategies\. Building credibility and coalition for change is a necessary condition for success and developing a proactive communication plan as part of the Project is one of the distinctive features of Project design\. (c) Integrity of SAT personnel is a fundamental cornerstone in the development of sound tax administration\. Given the current circumstances, the design of the operation emphasizes developing institutional integrity\. (d) While technology can be both a facilitator and a driver of change, it is not a substitute for the development of sound institutional, organizational and operational systems\. A well- balanced strategy is needed to ensure changes are institutional in nature rather than simply 13 World Bank, Implementation Completion and Results Report (IBRD-42250), Report No\.: ICR574 14 Approval date August 28, 1997 15 Approval date November 2, 2007 16 The 1998 SAT TAL that supported the creation of SAT stemmed from a major corruption case that led the Government to intervene in the then Department of Customs\. 10  instrument-driven\. While investments in technology are significant, the Project is designed in a way that the institutional and functional changes are the actual drivers of the reform process\. IV\. IMPLEMENTATION A\. Institutional and Implementation Arrangements 31\. The proposed Project will be implemented by a Project Implementation Unit (PIU, Unidad Ejecutora del Proyecto) within SAT\. The PIU, which will be established administratively within SAT’s Planning Management Unit, will manage technical aspects in coordination with various SAT units, and will carry out administrative and fiduciary functions for the Project\. The PIU will also ensure adequate actions to support the change management of the SAT reform are implemented and in alignment with the overall reform process\. The PIU will be led by a Project Coordinator (PC, Coordinador del Proyecto), who will report directly to the Superintendent and liaise with other SAT units\. 32\. At the strategic level, a Project Steering Committee and a Management Committee will be established to oversee Project implementation\. The Project Steering Committee, which will be chaired by the Minister of Finance (MINFIN) and include members of SAT’s Board of Directors, the Vice-Minister of Finance and the Superintendent of SAT, will monitor progress on Project implementation and provide strategic direction and policy advice\. A Management Committee will be established in SAT to oversee supervision of Project implementation, make operational decisions, allocate human and financial resources, and resolve any organizational issues\. The Management Committee will be chaired by the SAT Superintendent and include all four Intendents 17 and the PC\. 33\. The MINFIN will also play an important oversight role\. A subsidiary agreement will be signed between MINFIN and SAT prior to effectiveness to ensure that MINFIN makes proceeds of the loan available to SAT and that SAT carries out the Project in accordance with the Loan Agreement, Anti-Corruption Guidelines, the Procurement Regulations, and the Operational Manual (OM)\. The OM, detailing the institutional and implementation arrangements for the Project, will be adopted by SAT prior to effectiveness\. Details on Project implementation are included in Annex 3\. B\. Results Monitoring and Evaluation 34\. The PIU will be responsible for monitoring expected outcomes, including the Results Framework in Annex 1\. A monitoring system will be put in place for the Project to keep records on implementation and generate semi-annual Project progress reports focusing on the actual implementation of Project plans and the achievement of expected results\. Progress reports will be prepared by the PIU, approved by the Management Committee, and presented to the Project Steering Committee and to the WB\. The OM includes a detailed description of how Project activities will be monitored and evaluated, including responsibilities in SAT for data collection, analysis, reporting, evaluation and use within certain time frames\. Sources of data include SAT budget reports, the Taxpayer Registry, audit reports, perception surveys, among others\. The 17 Intendents are managers of the core operational areas in SAT: tax collection, customs, tax audit, and legal services\. 11 proposed Project will also finance the implementation of surveys to assess taxpayer satisfaction and perception of SAT services\. The first survey will be completed during the first year of implementation of the Project and will be used to establish a baseline for improved satisfaction of taxpayers\. The survey will seek to disaggregate data by sex to capture gender differences\. C\. Sustainability 35\. Commitment to tax administration reforms is strong and represents a solid foundation for achieving sustainable results\. The Government’s ownership of the tax administration reform agenda is demonstrated by the approval of the amendments to SAT’s Organic Law\. The proposed Project is considered by the Government as an important intervention for improving the efficiency, effectiveness and transparency of tax administration in Guatemala\. More importantly, Government perceives the proposed Project to be contributing to higher-level government policy objectives, such as creating fiscal space to increase much needed social spending\. In this regard, the Project's emphasis on creating the appropriate incentives for tax payment should lead to increased resources for public investment and social sector spending, generating constituencies for more vigorous enforcement of tax collection and changing the tax culture in the country\. 36\. Mobilization of private sector support and partnership is important to ensure sustainability\. Discussions, in particular with private sector organizations, have highlighted a genuine interest of many in supporting reforms to increase transparency in tax administration\. The proposed Project will help enhance SAT’s accountability to its key stakeholders and develop transparent feedback mechanisms to establish permanent communication with private sector organizations and other groups\. This should ensure that private sector concerns and ideas are taken into consideration in the implementation of the SAT reform program, thus reinforcing its sustainability\. 37\. Improving human resources management and developing in-house capacity in SAT would further ensure sustainability\. The proposed Project is expected to strengthen human resource management by ensuring more effective recruiting processes, introducing performance evaluation methodologies, and professionalizing SAT staff, among others\. The Project will also implement a capacity development and knowledge management program for SAT staff to ensure continuous learning and skills enhancement and enable staff to understand and apply internal control procedures in their everyday work\. As a result, SAT is expected to become a strong institution that may last across political cycles\. 38\. An intensive communications campaign will accompany Project implementation\. Public support will be critical to ensure the sustainability of Project activities and results\. The proposed Project includes actions geared towards ensuring buy-in among a broad base of constituencies, including the private sector, civil society, Congressional leaders and SAT staff\. 12 V\. KEY RISKS A\. Overall Risk Rating and Explanation of Key Risks 39\. The overall risk to achieving the PDO is assessed as substantial\. The identified risks and relevant mitigation measures are as follows: 40\. Political and governance risk is high\. Successive Guatemalan Administrations have been characterized by low levels of transparency, accountability and participation, and persistent corruption cases\. Moreover, the Government is attempting to tackle some complex and highly sensitive reforms in tax and customs administration in the proposed Project\. Vested interests and the highly polarized political climate could undermine the authorities’ ability to pursue these reforms\. As such, the relevant legislation may not be approved, could be reversed or reforms could be watered down\. To mitigate these risks, the WB is closely working with other development partners to ensure a holistic approach and complementarity of activities\. Lastly, Government commitment is strong as evidenced by the approval of the amendments to the SAT Organic Law\. 41\. Risks related to sector strategy and policies are substantial\. In the past, frequent change in policy, strategic priorities, and ministerial and technical staff delayed implementation of development projects and hindered the ability to sustain and institutionalize policies over time\. The Administration has a strong mandate to improve transparency and restore confidence in the tax and customs administration, in particular in the context in which more Guatemalans demand change in how the State manages public funds\. The Project Steering Committee will be headed by the Minister of Finance to ensure articulation and implementation of a comprehensive medium- term reform strategy for SAT\. 42\. Risks associated with institutional capacity are high and substantial with respect to technical design\. The proposed Project supports activities that are essential for the creation of conditions to enable SAT to operate as an effective and efficient tax and customs administration\. As such, the Project is comprehensive in scope but may prove challenging to implement due to existing information silos and organizational fragmentation within SAT\. Limited capacity and potential resistance to change in SAT may further thwart implementation\. To mitigate this risk, Project implementation arrangements are designed to secure consistent commitment and management attention from the highest level of Government, and institute mutual accountability for progress\. Moreover, the creation of a technical team within the PIU is expected to ensure better coordination by employing one full-time professional staff from each unit within SAT to lead the execution of his or her respective activities and be in charge of coordinating and aligning the processes across SAT\. Furthermore, SAT experts are already working closely with external senior experts provided by other development partners in preparing for the implementation of SAT reforms, and such on-going technical assistance would facilitate Project implementation\. The Project will also provide technical assistance and training to ensure smooth implementation of new processes and use of systems as well as support the implementation of a communications campaign that will highlight and reinforce the benefits from reforming and modernizing the SAT\. Lastly, the Project will ensure the proper sequencing of activities to facilitate achievement of the desired outcomes and their sustainability\. 13  43\. Fiduciary risks are considered substantial\. SAT is a well-established entity with basic FM and procurement arrangements in place, and with some experience with WB policies and procedures\. However, the entity's capacity and overall internal control environment have been affected by the recent institutional crisis\. The Project Procurement Strategy for Development (PPSD) provided some vital information on procurement risks\. Certain procurement processes (large ICT related procurement and contracts of large scale) might encounter delays due to the lack of trust in the institution that might reduce competition and limit bidder participation\. In addition, public sector internal processes and procedures in Guatemala tend to be lengthy and cumbersome, causing delays in implementation\. To mitigate these risks, SAT is putting in place: i) defined clear roles and responsibilities in SAT for fiduciary tasks, both for bodies to be established for Project purposes, including the PIU and administrative unit with qualified and experienced staff; ii) designed streamlined processes and procedures that support smooth and agile Project implementation; iii) strengthened key internal controls and transparency mechanisms ; and iv) completed the PPSD to mitigate identified procurement risks\. 44\. Stakeholder risk is also substantial\. Taxpayer compliance depends on, among other things, the perception of fairness and efficiency of tax administration\. Tax non-compliance has traditionally been high in Guatemala, as a result of many Guatemalans’ perception of the unfairness of the tax system, and in particular, how the State manages taxes\. Breaking this perception will take time and requires actions to improve quality and transparency not just in tax administration but also in public financial management\. To mitigate this risk, the proposed Project includes specific activities designed to restore SAT’s credibility and transparency\. Moreover, the Steering Committee will receive business and strategic advice from an Advisory Board made up of representatives of the private sector, academia and civil society, and from a Donors Consultative Group, integrated by donor representatives who are participating in supporting the strategic development of SAT at various levels\. This arrangement is expected to serve as a sounding board for the reforms as well as build buy-in and support\. The Government is also implementing parallel initiatives to enhance transparency and efficiency of public expenditures, for example, by further modernizing its FM and public procurement systems and its overall fiscal transparency framework\. VI\. APPRAISAL SUMMARY A\. Economic and Financial Analysis 45\. The proposed Project is economically feasible with an internal rate of return (IRR) of 15 percent, and financially feasible, with a financial IRR of 172 percent\. An economic and financial analysis of the proposed Project was carried out to quantify the impact of the likely Project costs and benefits both for taxpayers and the SAT\. The analysis employed an incremental approach, which, by design, compares the scenario without the Project (counterfactual scenario) and the scenario with the Project\. In the economic analysis, all financial transfers are excluded (i\.e\. transfers from taxpayers to the Government) and only those economic welfare-enhancing benefits are included in the model: (i) reduction in administrative costs of collecting taxes for SAT; and (ii) reduction in compliance cost for the taxpayer\. Other indirect benefits including those from trade facilitation resulting from simplified customs operations were not included due to the complexity of their calculation and attribution\. The results indicate that the Project is economically feasible with an economic IRR of 15 percent, and a real economic Net Present Value (NPV) of US$61\.17 million at 13 percent discount rate in real terms\. Results of the financial analysis show that the 14 Project is financially feasible, with a financial IRR of 172 percent, and the financial NPV at 9\.6 percent discount rate in real terms is US$1\.18 billion\. Annex 5 presents a detailed description of the modeling and findings\. B\. Technical 46\. The proposed Project is focusing on increasing the tax compliance and strengthening the SAT governance model\. This will be done through: (i) updating the normative framework for tax and customs administration; (ii) enhancing and upgrading existing business processes and information systems; and (iii) implementing actions to deter corruption practices and foster transparency and integrity across SAT management and staff\. 47\. Consistent with international good practice, the proposed Project will adopt a risk- based approach to increase tax compliance and improve effectiveness of control mechanisms in SAT, which is seen as a key factor for increasing tax and customs compliance\. A risk-based approach seeks to identify key risks –sectorial or by type of taxpayer - based on analysis of business trends and patterns of tax elusion and avoidance\. The selection of taxpayers to be audited, as well as other types of controls, is based on the assessment of risk and the development of risk- based selection techniques\. Taxpayer characteristics are used in risk-scoring systems to identify and assess the risk of noncompliance\. This allows appropriate prioritization of audit and taxpayer services, and enables the allocation of resources to high-risk groups\. 48\. The Project also supports the adoption of internal revenue and customs initiatives that have been proven successful in other countries and internationally accepted and promoted as good practices\. For example, in customs, these initiatives include an ex-post documental control or “yellow channel” for low risk operations, Trusted Operator Programs, and non-intrusive technologies and electronic tracking devises in Customs to improve control and release procedures\. In internal revenue, these include TCA with a 360 degree approach and e- invoice in internal revenue administration to improve information on taxpayers\. 49\. In the past, SAT has implemented tax and customs management modernization projects\. SAT successfully combined internal and local expertise with international experiences through the support of specialized consulting firms, cooperation agencies and individual consultants\. This has led to increased internal capacity of technical staff over the years and thus the proposed Project is expected to apply the same approach and will rely on building in-house expertise complemented by external consultants\. In this context, SAT has already recruited local experts who are leading the technical preparation of the reform and are working closely with the external senior experts provided by other development partners\. Technical assistance is ongoing, focusing on tax administration, tax audit, customs administration and information technology aspects, all critical areas fundamental for defining the new business model, processes and information systems to be supported by the proposed Project\. 50\. Improving tax compliance is a long-term reform effort and proper sequencing of activities is critical\. Accordingly, to ensure achievement of the Project’s expected outcomes and ensure their sustainability, it is essential to pay close attention to the sequencing and interdependence of Project activities (Annex 6)\. Moreover, the Project includes a sub-component 15 to manage the reform process, including technical, SAT reform management and sustainability aspects\. C\. Financial Management 51\. While SAT is considered to be a well-established entity that has in place basic FM arrangements, the recent institutional crisis has weakened the internal control environment\. The FM assessment carried out to evaluate the adequacy of SAT’s FM arrangements found that the recent institutional crisis has weakened the internal control environment, and the existing cumbersome and lengthy internal processes and procedures used by public sector entities in Guatemala\. 52\. To mitigate this issue, there is a need to ensure strong operational arrangements within SAT that can support smooth, agile and transparent Project implementation\. In this regard, a PIU in SAT will include an administrative team with qualified and experienced FM staff for the Project\. The administrative team is expected to coordinate with SAT’s Administrative and Finance Unit which is responsible for the basic FM functions in SAT\. Mitigation measures include the clear definition of responsibilities for Project implementation, as well as the design of streamlined procedures and definition of the specific content and format for financial reports, all of which is reflected in the OM\. On the basis of this, the proposed FM arrangements are considered acceptable to the WB\. Basic arrangements to ensure proper control, recording, and reporting are further described in Annex 3\. D\. Procurement 53\. The PIU will be responsible for any procurement under the Project\. SAT has limited experience and procurement capacity required to implement this Project\. Even though SAT had experience in implementing WB projects prior to 2006, the expected number of procurement processes exceeds available staff capacity, expertise and resources\. To address the limited experience and lack of procurement capacity, the PIU will strengthen its staffing and implementation procedures by: (i) recruiting additional staff as required to implement this Project, including procurement specialists; (ii) outlining roles and responsibilities in the OM; (iii) ensuring that the procurement procedures are aligned with “World Bank Procurement Regulations for Borrowers under Investment Project Financing” (July 2016) (“Procurement Regulations”); and (iv) strengthening tools, records and internal controls for different procurement tasks, including contract management\. A procurement plan for the first 18 months of Project implementation has been prepared based on the PPSD and agreed with the WB\. More details on procurement are provided in Annex 3\. E\. Social (including Safeguards) 54\. The proposed Project will not finance activities which could cause any social risks or negatively affect Guatemala, and thus does not trigger any social safeguard policies\. The proposed Project is expected to generate social benefits by increasing levels of compliance with 16 tax and customs obligation, in turn, improving revenue collection and creating the fiscal space necessary for social and economic investments\. There are no discernible gender differentiated impacts and/or risks associated with the Project\. F\. Environment (including Safeguards) 55\. The Project is rated as Category C\. The proposed Project does not trigger any environmental safeguard policies and does not require an Environmental Impact Assessment\. Replacement of equipment and retrenchment are not part of the Project\. G\. World Bank Grievance Redress 56\. Communities and individuals who believe that they are adversely affected by a WB- supported project may submit complaints to existing project-level grievance redress mechanisms or the WB’s Grievance Redress Service (GRS)\. The GRS ensures that complaints received are promptly reviewed in order to address project-related concerns\. Project affected communities and individuals may submit their complaint to the WBG’s independent Inspection Panel which determines whether harm occurred, or could occur, as a result of WB non-compliance with its policies and procedures\. Complaints may be submitted at any time after concerns have been brought directly to the WB’s attention, and WB Management has been given an opportunity to respond\. For information on how to submit complaints to the WB’s corporate GRS, please visit\. For information on how to submit complaints to the WB Inspection Panel, please visit www\.inspectionpanel\.org\. 17  Annex 1: Results Framework and Monitoring Country: Guatemala Project Name: Transparency and Efficiency in Fiscal Management (P153366) Results Framework Project Development Objectives PDO Statement The project development objective is to increase levels of compliance with tax and customs obligations\. Project Development Objective Indicators 1\. Increased compliance with domestic taxes, measured through the reduction in VAT gross compliance gap; 2\. Increased effectiveness of customs controls, measured through the increased ratio of effectiveness of customs inspections\. Indicator Description Project Development Objective Indicators Cumulative Target Values Data Responsibi Description Unit of Baselin (by WB Fiscal Years) Frequen Source / lity for (indicator Indicator Measure e cy Methodol Data definition etc\.) Name ogy Collection 2018 2019 2020 2021 2022 2023 Indicator Percentag 34\.2% 33% 31% 29% 28% 27% 26% Annual SAT Tax SAT Reduction in One: e change Records VAT gross Increased compliance compliance gap 18 with domestic 18 Methodology developed by SAT in document “Proyección del incumplimiento de pago del Impuesto al Valor Agregado –IVA- en Guatemala, 2016-2018, August 2016 18 taxes through reduction in VAT gross compliance gap Cumulative Target Values Data Responsibi Description Indicator Unit of Baselin Frequen Source / lity for (indicator Name Measure e 2018 2019 2020 2021 2022 2023 cy Methodol Data definition etc\.) ogy Collection Indicator Percentag 6\.3% 6\.3% 8% 10% 12% 13% 14% Annual Inspectio Customs, Total adjusted Two: e (2015) ns SAT declarations / Increased Statistics, Total effectivenes SAT declarations s of customs subject to controls/ins physical pections inspection (red) in the period analyzed Intermediate Results Indicators Component 1: Transparency, Integrity and Institutional Development of SAT 1\.1\. The Interna Internal Annual SAT SAT Internal Implementa Internal l Affairs Reports Affairs Unit tion of the Affairs Affairs Unit is fully equipped, Internal Unit Unit is fully staffed, and Affairs Unit was partiall staffed operational incorpo y and rated staffed equippe into and d SAT’s 19  organiz equipp ational ed structur e in 2016 but is not operati ng 1\.2\. Percentag 99\.47% 99\.48 99\.49% 99\.50 99\.51% 99\.52% 99\.52 Monthly Internal IT Total time of Availability e (2015) % % % and Departmen available of the External t, SAT monthly Technology IT minutes of IT Platform Statistics platform / Total monthly minutes 19 1\.3\. ICT Hours No N/A <40 <24 <16 <8 <8 Annual Disaster IT Hours needed disaster equipm recovery Departmen to activate the recovery ent for drill t, SAT Alternate Data timeframe simulat report Recovery ion in Center with place the latest transactions 1\.4 SAT Percentag No Baselin Percepti Percepti Percept Biannual Survey Human Perception staff e percept e on on ion Survey Resources indicator Organizatio ion is Survey improve improve improv Departmen nal measur d by d by ed by t ed 10% 20% 30% 19 The increase of 0\.05% of the availability of Technology Platform represents around 21 minutes monthly\. The average black-out of technology platform is around 10 minutes\. A window of 5 minutes daily are needed for scheduled maintenance\. This indicator almost eliminate the unscheduled black-out of the technology platform\. Other bigger scheduled maintenance are not included\. 20 Environmen against against against t Perception baseline baseline baselin e 1\.5 Percentag No Baselin Increas Increas Biannual Survey SAT Improved Strengthene e SAT e ed by ed by perception by d credibility percept survey 10% 20% taxpayers on of the ion against against the efficiency country’s credibil baselin baselin and tax ity e e transparency administrati measur of SAT on system ed operations 1\.6 1\.81% 1\.81% 1\.79% 1\.76% 1\.74% 1\.72% 1\.72% Annual Budget SAT Current Reduction Percentag (2015) execution Executed of Tax e reports, Budget of SAT Administrat Tax (millions of ive Cost collectio quetzals) in n reports period N / Executed budget on tax administration in period N (millions of quetzals) 20 Component 2: Strengthening of Internal Revenues and Customs 2\.1\. Percentag 14\.49% 13\.49 12\.49% 11\.49 10\.49% 10% 9\.49% Monthly SAT SAT Number of Reduction e % % Taxpayers with of stop- at least one filers missing VAT declaration in 20 The reduction of 0\.09% Tax Administrative Cost represents around US$ 6\.16 million yearly\. 21  period N / Number of taxpayers obliged to issue VAT declaration in period N (each tax counts as 1) 2\.2\. Use of 26\.2% 26\.2% 34% 35% 36% 36\.5% 37% Annual SAT Taxpayer Virtual virtual Percentag Statistics Assistanc taxpayer taxpayer e e assistance services Departme transactions nt, SAT issued in period N/ total taxpayer assistance (physical, virtual) in period N 2\.3\. Use of Percentag 0\.5% 0\.5% 1% 5% 50% 75% 100% Annual SAT SAT Taxpayers e-invoice e Statistics issuing e- business to invoice business business to business / total taxpayers that issue invoice (physical and e- invoice) 2\.5\. Days 2\.81 2 1\.8 1\.7 1\.6 1\.5 1\.5 Annual Customs Customs, Measure in Clearance (2015) Operatio SAT days from time of customs 22 definitive ns acceptance of import Statistics import declarations declaration until Single Customs Declaration confirmation Component 3: Strengthening of Tax Intelligence and Tax Enforcement 3\.1\. Percentag 40\.93 75% 75% 80% 80% Annual Audits Tax Audits with Effectivenes e % Reports Audits fiscal interest 21 s of Tax (2015) Departme / Total fiscal Audits nt, SAT audits executed 3\.3\. Percentag TRIB 80\.5% 81% 81\.5% 82% 82\.3% 82\.5% Annual SAT SAT Tax cases Effectivenes e UTA statistics solved by s of appeal is not TRIBUTA/ Tax procedures operati cases presented ve to TRIBUTA 21 A fiscal audit is the verification of taxpayer compliance with formal tax obligations\. A fiscal interest audit is a fiscal audit with adjustments or fines after its verification\. 23  Annex 2: Detailed Project Description GUATEMALA: Transparency and Efficiency in Tax Administration Project 1\. The proposed Project seeks to support the Government to increase levels of compliance with tax and customs obligations\. To do so, the Project will finance three Components to be implemented over a six-year period\. The first Component will focus on governance-related aspects of tax administration, including actions to support management of the reform process, enhance the human resource management function, build institutional integrity and strengthen the overall information and ICT governance and supporting functions, services and infrastructure\. The second Component will strengthen internal revenue and customs administration by reviewing and optimizing core tax administration processes, strengthening merchandise controls and clearance procedures, and updating and upgrading critical elements of existing information systems\. The third Component will provide support to strengthen business intelligence and tax enforcement practices through the adoption of integrated risk management models to better inform tax audits and appeal procedures and strengthen tax enforcement capabilities in tax administration\. Component 1: Transparency, Integrity, and Institutional Development in SAT 2\. Several diagnostic assessments carried out by international development partners in recent years identified institutional weaknesses that affect SAT performance\. The WB carried out an analysis of institutional performance in the areas of tax and customs administration in 2014 using the standardized Integrated Assessment Model for Tax Administration and the Customs Assessment Trade Toolkit\. The analysis found that in comparison with international good practices, low performance was noted in the following strategic dimensions of SAT: the effectiveness of strategic planning, the use of information as a strategic resource, the effectiveness of human resource management, internal controls, and the auditing function, among other factors\. According to the most recent IMF technical report on SAT (Medidas para la Recuperación de SAT, April 2016), the human resource management and ICT areas were identified as critical aspects that need to be strengthened in the short run to create adequate conditions for implementation of technical and operative medium- and long-term reforms within SAT\. Otherwise, the existing weakness would jeopardize the effectiveness of SAT reforms\. 3\. The objective of this Component is to address weaknesses in SAT’s governance model and transparency practices\. It will do so by supporting the implementation of the recently approved amendments to SAT’s Organic Law and strengthening internal capacities of SAT, including human resource management, strategic planning, internal control, information governance, and ICT services, as well as supporting a change management strategy and communications initiatives to ensure successful implementation of the proposed reforms\. This Component will finance the activities described under the following sub-components\. Expected results from this Component include an improved perception and overall trust in SAT to be perceived as a competent, credible, fair and transparent institution\. This implies the professionalization of staff at both managerial and operational levels as well as the existence of effective internal control functions, proper monitoring and evaluation practices, as well as secure and reliable information systems\. 24 Sub-component 1\.1: Managing the SAT Reform 4\. The lack of strategic vision in SAT has resulted in low impact projects, institutional fragmentation, and poor sustainability\. SAT requires a comprehensive strategic vision to articulate objectives and projects, prioritize their implementation, assign resources and responsibilities to administrative units within SAT, and define performance indicators for M&E of the reform process\. While short-term actions (defined in a recent IMF report of April 2016) are very relevant at this stage in SAT’s recovery, the absence of a comprehensive strategic vision and M&E tools could jeopardize the effectiveness and success of the overall reform initiative\. 5\. To effectively manage the reform process and evaluate its results and impact, SAT requires resources to strengthen its strategic planning skills and its M&E tools, not only at the operational but also at the strategic level\. This is a requirement for the definition and integration of a long-term vision, the development of a road map, and the effective and timely engagement of the different stakeholders involved in its implementation\. At the same time, SAT needs to design and implement an effective and comprehensive change management strategy to effectively communicate and share, internally and externally, the strategic management vision, actions, and results in order to build the support needed for the successful implementation of the reform efforts\. 6\. Another key institutional weaknesses of SAT lies in the existence of information silos and organizational fragmentation, limiting the use of the available information for effective decision-making and operations\. Typical reasons for using incomplete information include lack of reliability of information, limited access to fragmented databases, existence of isolated systems, limited skills to interpret and use the existing information, or lack of functional capabilities to process information for specific uses\. To allow the operation of an integrated information system and eliminate data silos among units, an ICT Governance Model is required and would include the definition of: (a) conceptual and operational coordination instruments, such as steering committees, technical coordination committees, etc\.; (b) information governance roles and procedures; (c) information security policies; and (d) access to information and dissemination protocols, among others\. 7\. Currently, SAT manages more than seventy separate information systems, most of which are fragmented by organizational areas\. This situation prevents the effective use of the 360° vision 22 of the taxpayer, which in turn, limits the ability of SAT to ensure effective tracking and control of taxpayer obligations\. A strategy for an integrated system 23 to enable more effective and efficient performance of SAT becomes therefore urgent and unavoidable\. However, an ‘integrated system’ does not necessarily mean a ‘unique software’ or a ‘single database’\. 8\. The digital solutions’ vision in strategic planning is highly relevant to efficiently achieve the institutional goals and promote information usage\. A small organizational department in charge of ICT strategic aspects is needed within SAT\. Commonly this kind of unit 22 The 360° vision of the taxpayer refers to a model that allows the analysis of the taxpayer as a single entity considering all their tax and customs obligations, including all existing fiscal audits and legal procedures\. 23 An integrated system is one that meets at least three basic principles: (a) harmonized concepts; (b) unified processes; and (c) single information entry\. Although the integration of information systems is reflected in the software, the foundation for the integration resides in conceptual and functional aspects\. 25 is headed by a Chief Information Officer\. This is different from the ICT Unit, which performs ICT related technical and operational support functions\. 9\. This sub-component will focus on the development and implementation of a reform strategy in SAT, by implementing, among other things, the following activities: (a) the implementation and institutionalization of strategic planning and M&E tools; (b) the design and implementation of an ICT governance model, including the establishment of the Chief Information Office; (c) the design and implementation of a change management strategy to support the reform process, including the design and implementation of a short- and medium-term communications campaign; and (d) the provision of support to SAT to carry out Project management, including the carrying out of Project audits; the carrying out of training; the provision of technical support on procurement, safeguards and financial management requirements; and the financing of Operating Costs\. Sub-component 1\.2: Strengthening Human Resource Management and Institutional Integrity 10\. SAT requires human resource management policies to be designed and institutionalized over strong fundamentals and tools to allow the institution to transcend Administrations\. The absence of institutional policies for management of career development, lack of a comprehensive capacity development plan, ineffective recruiting processes, lack of performance evaluation methodologies, and lack of appropriate remuneration for high-risk jobs and technical posts (i\.e\. customs inspectors) have led to a gradual and continuous infiltration of fraudulent groups within all of SAT’s organizational divisions that led, in turn, to the deterioration of overall working conditions, weakened controls, and increased corruption practices\. 11\. SAT internal control systems and procedures proved to be overall weak and affecting core tax management functions\. Ineffective internal controls were seen, for example, at the operational level in customs where staff is able to take discretional decisions without proper accountability, or in tax auditing and enforcement activities, where it is difficult to determine whether staff is interacting with taxpayers in a proper and fair manner\. This is further complicated by the fact that staff is not familiar and aware of internal control procedures and therefore, is unable to follow a due process nor document their actions in a way that would make them traceable and transparent\. All this leads to an environment of lack of compliance with internal control procedures and a situation which heightens the risk of systemic corruption and fraud\. Moreover, SAT does not protect its personnel against decision-making and security risks, leading to an extremely vulnerable situation for staff that results in a passive and reactive tax administration, risk aversion behaviors, and extremely formalistic and bureaucratic culture within the institution\. SAT employees are also hesitant to report what they see or suspect as corruption practices due to real threats of retaliation\. The Internal Complaints Unit within the Legal Affairs Department is not independent from SAT management, and as such, the existing institutional arrangement does not provide for a credible recourse for those employees and taxpayers who are willing to report on institutional problems\. 26 12\. In order to address these issues, the recently approved amendments to SAT’s Organic Law established new strengthened arrangements for internal control and institutional integrity\. The new arrangements include the creation of an Internal Investigation Unit, which will report directly to the Board of Directors, providing it with the necessary independence to perform its controlling functions\. The Internal Audit Unit, will continue reporting to the SAT Superintendent and performing the administrative and financial controls established by law\. The new Unit will not only establish procedures to assess risks and perform investigations over SAT staff but would be also in charge of institutional integrity prevention policies within SAT\. 13\. To achieve this objective, this sub-component will support, among other things, the following activities: (a) the development and implementation of an integrated human resource management strategy in SAT including updating the staffing plans for both internal revenues and customs services consistent with SAT’s strategic plan, establishing a performance management framework, developing and implementing a more rigorous screening process for all staff recruitment, and designing and implementing an internal capacity development and knowledge management program for SAT staff; and (b) the development and implementation of a transparency and institutional integrity strategy, including establishment of a new Internal Investigation Unit, strengthening the internal audit functions, and design and implementation of an industrial security plan for SAT staff at all levels, including protocols for physical and legal protection based on the nature of their functions and the associated risks, but excluding from said security plan and protocols any activity which may require the participation of security forces, all following international experiences\. Sub-component 1\.3: Upgrading and Integration of the Information Technology Platform 14\. ICT is a critical function for effective tax administration\. Since its establishment in 1998, SAT has made important investments in developing information systems and implementing technology infrastructure\. The software strategy has been based on an in-house software development model executed by a mix of internal SAT personnel and external consultants\. As a result of weak long-term institutional planning, however, there has been no continuity in the long- term strategy for technological development\. 15\. SAT’s ICT system hampers the ability for comprehensive data analysis and complicates data administration\. SAT’s information systems cover most tax administration business processes\. These, however, are implemented on heterogeneous platforms that use different software technologies, architectures, and standards\. Currently, around 45 percent 24 of existing information systems are based on a client-server technology without technical support, which represents a high risk for the systems to collapse\. The rest of the systems are web-based, built on heterogeneous architectures, which are insufficiently segmented (logically and physically) and obsolete\. Furthermore, although significant investments were made in 2014 to upgrade the hardware platform, they have not been sufficient, generating degradation in the performance of the information systems, and negatively affected the efficiency of electronic services for both internal 24 Around 1,900 functional screens and 1,400 reports are on client-server technology\. 27 SAT users and taxpayers\. In addition to this, in recent years, SAT has been exposed to an increasing number of cyber-security attacks, which have caused several suspensions of ICT services and reduction in performance of SAT operations\. Additionally, SAT does not have a data recovery center, representing an important business continuity risk\. 16\. Within this context, the main objective of this sub-component is to strengthen SAT’s hardware platform and software architecture\. This is expected to comprehensively, effectively, and efficiently support its current and future functional and analytical requirements (tax collections, customs operations, tax intelligence, tax audit, legal enforcement, and others), under an ICT strategy and governance model that ensure information integrity, information security and investment sustainability\. 17\. To achieve this objective, this sub-component will include, among other things, the following activities: (a) designing of a new organizational model for the ICT department; (b) improving ICT planning capacity; (c) designing of a comprehensive software architecture ensuring integration of all of SAT’s functions; and (d) upgrading the ICT infrastructure to support the reform process, including improving information security and establishing a data recovery center\. 18\. This sub-component will provide the required investment on an ICT platform aligned with SAT priorities to be implemented under a well-structured ICT strategy\. This should ensure the financial and technical sustainability of all ICT initiatives\. The sub-component will be implemented, in principle, in two phases: the first phase will be oriented to enhancing the current hardware and software infrastructure and security platform for improved performance and availability of current information systems, reducing the risk of ICT collapse and electronic services suspension\. The second phase will be focused on increasing ICT platform capacity to support the implementation of new electronic services and data recovery functions to support improvements envisaged under the SAT reform\. Component 2: Strengthening of Tax Collection Functions in Internal Revenues and Customs 19\. This Component will focus on strengthening the two main core functions of SAT, internal revenue collection and customs\. In general, both core functions face challenges related to ineffective control instruments and inefficient processes, negatively impacting internal revenue and customs compliance\. As described below, each area demands a different approach and instrument to address the underlying challenges\. Expected results under this Component include an improved and more accurate management of taxpayer registration and their obligations, improved taxpayer services for easy compliance, implementation of more effective and smart compliance models, implementation of customs control mechanisms based on risk management tools, simplification and modernization of customs procedures supported by robust and sustainable information systems\. 28 Sub-component 2\.1: Strengthening Internal Revenue Collection Processes 20\. The SAT taxpayer registry lacks accuracy and reliability, resulting in deficiencies in collection and enforcement processes and, subsequently, in higher administrative and compliance costs\. Monitoring compliance requires the establishment and maintenance of taxpayer current accounts (TCAs) with a 360 approach\. SAT has a TCA in operation but its model has important weaknesses that limit information accuracy25 and full implementation\. The e-invoice initiative (Factura Electronica 1) was supposed to be the main source of information for TCA and cross-cutting information analysis, but the original design limited its use\. The implementation of the new e-invoice model will support the enhancement of the information quality for the TCA\. 21\. As a result of improved taxpayer registry as well as improved quality and integration of information, SAT will be able to detect in a more accurate and rapid manner the potential existence of tax obligations omissions or presumptive omission practices from taxpayers\. Appropriate selection criteria would allow a differentiated taxpayer treatment and a more focused approach for these cases, this allows to detect undue behaviors by taxpayers by taking immediate and massive actions using available information and technology, and thus increasing taxpayer’s perception of risk fostering voluntary compliance\. These actions will also help increase effectiveness on fiscal credit collections and reduce the need for triggering costly auditing procedures\. 22\. Over the past years, SAT has made significant improvements in developing modern service delivery channels to improve taxpayer services and reduce compliance costs for taxpayers\. These efforts, however, have been made as isolated initiatives without a long-term comprehensive strategic vision aligned with SAT’s institutional goals\. As seen in several other countries, a taxpayer service strategy can significantly improve tax administration efficiency and provide taxpayers with more appropriate solution for conducting their tax-related operations aligned to each taxpayer segment needs (i\.e\. large, medium, and small taxpayers and others types of taxpayer segmentations)\. The taxpayer service strategy should include an analysis of the demand for each type of service channel to taxpayers (mobile apps, internet, call centers, etc\.) and develop modernization initiatives for the delivery of services in each channel\. The strategy should also consider specific initiatives for the simplification of processes and procedures for small and medium enterprises, oriented to help foster formality and compliance in this segment\. 23\. The objective of this sub-component is to improve internal revenue compliance\. This will be done through the redesign and implementation of processes and reliability of the taxpayer registry and TCA information, as well as to provide SAT with more strategic and efficient tools to follow up on tax omissions, due taxes, and other tax receivable accounts\. This sub-component will include, among other things, the following activities: (a) redesigning and improving the taxpayer registration (Registro Tributario Unico); (b) redefining and implementing a new model for the TCA, including the centralization and storage of all taxpayers’ fiscal obligations; (c) strengthening and expanding the new e-invoice initiative and the use of other third-party sources of information for effective collection control; 25 SAT authorities estimate that approximately 75 percent of the debt registered in the TCA is uncollectable\. 29  (d) implementing tools and methodologies to improve effectiveness of administrative collection and tax arrears recovery, including activities to foster compliance and deter omission using behavioral economic approaches; and (e) developing and implementing a comprehensive strategy for improving taxpayer services, including improvements in the existing face-to-face services provided in regional offices, the expansion of electronic services, and the implementation of a taxpayer satisfaction survey\. 26 Sub-component 2\.2: Strengthening of Customs Services 24\. In customs, there are poor quality control mechanisms that fail to monitor or ensure that centrally established risk criteria are applied uniformly at the operational level\. This has led to significant officer discretion, long release timeframes, increasing the opportunity for corruption, and therefore incentivizing the contraband\. Furthermore, there are no specific procedures to control those operations which require only documental review, only green and red channels operate in Guatemala generating high level of physical inspections with extremely low level of efficiency\. The implementation of ex-post documental controls, internationally known as the ‘yellow channel’ is an important instrument for the revision of low risk operations\. 27 Physical inspections should only be reserved for high-risk cargo\. 25\. Complex and redundant procedures, lack of information and manual controls in customs processes, lead to long release timeframes\. In this regard, there is a need to simplify, standardize and automate clearance and release processes, including the promotion of joint inspection and information exchange with other border agencies\. Additionally, most of the controls for inspection, entrances, exits, and tracking of merchandises are based on discretional human controls, increasing the risk of corruption, representing a gap of security\. The use of well integrated technologies and systems such as non-intrusive devices, tracking devices, radio frequency devices, and electronic gates with Optical Character Recognition technologies, could significantly improve the efficiency of controls in the whole foreign trade cycle\. In order to develop secure, yet expedite, procedures for international trade, this Project will create a trusted operators program, 28 certifying third party trusted operators to be in charge of safeguarding the application of security standards in the whole international supply chain\. This program will provide enhanced services such as simplified customs procedures and reduced customs intervention\. 26\. The use of free zones and inward regimes is particularly high in Guatemala, 29 and there is evidence that abuses could be occurring when using these facilities, constituting a way of fiscal defrauding\. A comprehensive model of control over these special regimens including specialized audit programs and enhanced current account controls, could help reduce the incentives for misuse of the special regimens facilities\. Another important issue is the chronic problem of undervaluation of merchandise coming into the country, which is believed to have led 26 This survey will include gender and other relevant demographic variables\. 27 Origin classification, valuation, and other agency authorizations, among others\. 28 Trusted Operator Program would include, but is not limited to, authorized economic operators\. 29 The import of inputs for special regimens represented 23 percent of the total of imports during 2015, and the exports of represented the 38 percent of the total of exports\. 30 to the massive fraud recently discovered in SAT and customs\. Proper valuation is essential to determine the VAT and other duties to be paid on imported goods\. 27\. Legitimate exporters claim that the refund of VAT is cumbersome, unpredictable and opaque\. The time that it takes to make the refunds effective is also uncertain, which defeats its purpose of serving as a fiscal incentive\. Lack of effective controls and monitoring in these processes open doors to abuse and high levels of discretion including the authorization of fraudulent and illegitimate refund claims\. 28\. Guatemalan traders continuously complain about the limited and outdated information that is available both physically and published on the Internet\. Importers, brokers, carriers, and users of the one-stop shop for exports (Ventanilla Unica de Exportaciones) expressed the same concern\. The lack of communication between users and customs has led to a perception of unresponsiveness\. As seen in most other countries with effective trade facilitation mechanisms, private traders should be informed about the norms, criteria and level of service which each port is operating\. International good practices also include the existence of private sector feedback mechanisms as well as the conformation of trade facilitation committees as required by the World Trade Organization Trade Facilitation Agreement\. 29\. By implementing better clearance procedures in line with updated control guidelines in a transparent manner, this sub-component will help improve the mobility of goods and merchandise safely and expeditiously across borders and ports, lowering freight and transaction costs, reducing time and improving services to traders\. This sub-component will focus, among other things, on the following activities: (a) Implementing a risk-based management model for merchandise controls, including ex-post documental controls and the Trusted Operator Program; (b) developing and implementing streamlined, standardized and automated customs procedures and mechanisms, including a joint inspection model with all the various border control agencies; (c) implementing non-intrusive technologies and electronic tracking devises for merchandise control at the customs entrances, exits and transits; (d) strengthening controls over special customs regimes (free zones and others); (e) facilitating information exchange with other national and international agencies by applying international conventions and developing regional and bilateral agreements with neighboring countries; and (f) increasing transparency and predictability in Customs by improving and implementing modern valuation methodologies and tools; implementing standardized application of norms and procedures at customs offices; improving availability and quality of customs information to SAT staff, trade operators and other users; creating meaningful consultation and feedback mechanisms between traders and customs; and improving transparency of the VAT’s refund process\. Component 3: Strengthening of Integrated Tax Intelligence and Tax Enforcement 30\. Information management, as the key input for many tax administration activities, becomes an essential requirement for effective revenue collection\. In this sense, focusing on 31 improving the gathering, processing, and use of information allows for higher returns on investments, in that it can affect most processes of the tax collection cycle, particularly the auditing and enforcement functions\. 31\. Even though SAT has implemented several information systems over time, information remains fragmented and managed by silos, limiting the enormous potential of such systems to strengthen SAT’s ability to conduct strategic decision making and effective dispute resolution\. In addition, the tax dispute resolution function is also affected by weaknesses on SAT’s legal services and framework and the lack of coordination among the various SAT departments\. The need for a comprehensive and integrated risk management model, based on cross-checking information and supported by strengthen legal services and framework, becomes fundamental to increase the effectiveness and efficiency of tax and customs auditing and enforcement processes\. 32\. The main objective of this Component is to promote an efficient use of tax information sources to support the auditing and control functions, through the adoption of a comprehensive compliance risk management model and the promotion of a culture of information analysis within SAT\. At the same time, the Component seeks to improve SAT’s enforcement capacities by the strengthening of its legal services\. Expected results from this Component would include a strengthened capacity in SAT to analyze and use information for business intelligence purposes; more accurate selection of auditing cases resulting in more effective detection of tax fraud and evasion practices; and a more effective appeals and enforcement procedures\. Sub-component 3\.1: Strengthening Tax Intelligence and Tax Audit 33\. The existence of data silos within SAT departments has limited the use of information for decision making at a strategic and operational level\. A culture of information analysis within SAT is almost inexistent, whereby the main product of all the investment on information systems and institutional procedures is futile\. The creation and implementation of a specific department in charge of information analysis and the production of decision-making reports is indispensable to promote the information analysis culture, enhance the tax audit function, improve internal SAT management, and support decision making\. 34\. In addition, the development of risk-based management models and the adoption of risk-based management tools is also necessary to better inform auditing practices and improve their effectiveness\. Implementation of such processes in SAT should be carried out in a cross-cutting manner and include both internal revenue management and customs, a feature that so far has not been present in SAT practices\. 35\. Tax audit is a key tool used by tax administrations to increase compliance\. It is used to detect and address individual cases of noncompliance and gather information on the health of the tax system and the evasion techniques used by taxpayers\. The current tax auditing strategy is not explicitly derived from risk analysis methods nor from segmentation of taxpayers\. The current strategy is based on a mass taxpayer selection, which covers only 1\.6 percent of all tax declarations and with low efficacy\. Additionally, the foreign trade audit function is very weak and is not linked with the rest of taxpayer auditing processes\. SAT has collected a huge and relevant amount of 32 information, but the existence of information silos within SAT and the low quality of the data has limited the ability to perform integral analysis and cross-checking of this information\. It is still necessary to take advantage of taxpayer current account information for the tax audit process\. 36\. The main objective of this sub-component is to support the development of effective enforcement-related strategies to detect, deter, and address noncompliance based on the use of information and risk management approaches, which involves both internal revenue collection and foreign trade areas\. The use of TCA with a 360 vision will be the main pillar for this Component\. This sub-component will strengthen the tax intelligence and tax audits in SAT through, among other things, the following activities: (a) creation and implementation of a new Tax Intelligence Unit; (b) design and implementation of an integrated risk-based management model covering both internal revenues and customs; (c) construction of a unified data warehouse and related business intelligence tools to support decision-making processes; (d) design and implementation of a comprehensive auditing strategy and related tools 30 based on taxpayer segmentation and risk analysis for both internal revenue collection and foreign trade areas; and (e) building capacity of auditors, including on transfer price processes\. Sub-component 3\.2: Strengthening Legal Services and Tax Appeal Procedures in SAT 37\. SAT’s collection process for unpaid liabilities is ineffective, lengthy and often unproductive\. Currently, only around two percent of adjusted revenue from audits was effectively collected\. This is mainly the result of SAT’s internal dispute resolution mechanism, which rejected many of the appealed audits before they reached the Board or Courts, with internal dispute resolution reducing audit adjustments by approximately 80 percent\. This high rate of rejection is presumably due to two factors: the lack of qualified and experienced personnel resulting in a high rate of audit errors, and the inability to obtain corroborating information from bank accounts\. When the internal dispute resolution is passed, in the case of large adjustments, usually it is appealed to the Board\. The Board has rejected around 30 percent of the cases it received on appeal\. The few cases that survive internal and Board review are usually appealed to the courts, which in turn reject the vast number of cases presented for judicial review\. 38\. Collection actions are not readily available to SAT\. Modern tax administrations use a wide range of aggressive measures to enforce collection of tax arrears\. These measures range from reminder notices, visits at taxpayers' premises, seizure of bank accounts, off-setting of money owed to taxpayers from other public departments, the issuance of third-party demands to major customers, and temporary closure of business, to the seizure and sale of the physical assets of taxpayers\. For SAT, the decision on the exercise of these coercive procedures can be appealed creating collection processes that can take years to reach a conclusion\. In the meantime, the taxpayer is not required to deposit any part of the appealed assessment\. 31 30 Methodologies, information systems, among others\. 31 Under Article 28 of the Constitution, payment cannot be required pending the outcome of litigation\. 33 39\. Since the establishment of SAT, administrative tax appeal processes have been a responsibility of the Board of Directors\. Such arrangement evidently implied a conflict of interest given the nature and composition of this management instance\. This aspect was brought to public attention in the context of the recent institutional crisis in SAT and was one of the important aspects reformed by the amendments to the SAT Organic Law by the creation of TRIBUTA whose mandate is to review and resolve administrative tax appeals\. TRIBUTA will be made up of multidisciplinary members exclusively appointed to perform this role, therefore preventing the risks of conflict of interest observed in the previous model\. 40\. The main objective of this sub-component is to improve quality of legal services and the collection of disputed taxes\. This sub-component will support, among other things, the following activities: (a) Creation of a strategy and development of analytical tools to support tax litigation processes and strengthening capacity of the legal department; (b) Identifying areas of opportunity to improve existing regulations that hinder SAT’s ability to collect tax debts; and (c) support implementation of the new tax appeals framework and TRIBUTA, through development of organizational manuals and procedures, analysis of staffing capacity and requirements, training for TRIBUTA staff, development of supporting tools to record and monitor appeal cases, and dissemination and communication activities to inform taxpayers of the new tax appeals procedures and protocols\. 41\. Table A\.2\.1 shows the planned disbursements as detailed in the Loan Agreement, and Table A\.2\.2\. Summarizes the costs by Components and sub-components\. Table A\.2\.1 Disbursements as detailed in the Loan Agreement Category Amount of the Percentage of Expenditures to be Loan financed Allocated (inclusive of Taxes) (expressed in USD) (1) Goods, non-consulting services, 54,862,500 100% consulting services, Training and Operating Costs for the Project (2) Front-end Fee 137,500 Amount payable pursuant to Section 2\.03 of the Loan in accordance with Section 2\.07 (b) of the General Conditions TOTAL AMOUNT 55,000,000 34  Table A\.2\.2\. Project costs by Component and sub-component Project cost Project Components (Million US) 1\. Transparency, Integrity and Institutional Development of SAT 23\.52 1\.1\. Management of SAT Reform 2\.91 1\.2\. Strengthening Human Resource Management and Institutional 2\.36 Integrity 18\.25 1\.3\. Upgrading and Integration of the Information Technology Platform 27\.66 2\. Strengthening of Tax Collection Functions in Internal Revenues and 3\.48 Customs 24\.18 2\.1\. Strengthening of Internal Revenue Collection Processes 2\.2\. Strengthening of Customs Services 3\.68 2\.48 3\. Strengthening of Tax Intelligence and Tax Enforcement 1\.20 3\.1\. Strengthening of Tax Intelligence and Tax Audit 3\.2\. Strengthening of Legal Services and Tax Appeals Procedures in SAT Total Costs Total Project Costs 54\.86 Front-End Fees 0\.14 Total 55\.00 Total IBRD Financing Required 55\.00 35  Annex 3: Implementation Arrangements GUATEMALA: Transparency and Efficiency in Tax Administration Project Project Institutional and Implementation Arrangements 1\. The proposed Project will be implemented by SAT\. The Project management structure has been designed taking into consideration the current Guatemalan context and SAT’s organizational structure, as well as best practices from previous WB experiences (Figure A\.3\.1)\. Figure A\.3\.1\. Project Implementation Structure Minister of Finance DONOR CONSULTANT STEERING GROUP ADVISORY BOARD COMMITTEE Superintendent MANAGEMENT COMMITTEE PROJECT COORDINATOR PROJECT IMPLEMENTATION UNIT (PIU) TECHNICAL UNIT CHANGE MANAGEMENT EXECUTIVE UNIT TEAM TASK TASK TASK TASK TEAM 1 TEAM 2 TEAM 3 TEAM X Reporting PROCUREMENT FINANCE Advisory 2\. A PIU will be established administratively within SAT’s Planning Management Unit, responsible for the day-to-day management of the Project\. This includes such functions as, inter alia: (i) managing administrative tasks; (ii) carrying out procurement and FM; (iii) monitoring implementation and evaluating progress towards achievement of the PDO, including identifying bottlenecks and risks, and recommending corrective actions; (iv) coordinating closely with relevant SAT units on technical aspects of the various Project activities; (v) liaising with units working on other SAT reform initiatives; and (v) managing the business process transformation 36 and change management aspects of the Project\. The PIU will be responsible for ensuring compliance with WB policies and procedures that are applicable to the Project, including on procurement and FM\. The formal establishment of the PIU will need to be approved by the SAT’s Board of Directors and is expected, together with the appointment of the PC, no later than three months from the Loan’s effectiveness date\. 3\. Within the PIU, three teams will be established to execute administrative/fiduciary, change management, and technical coordination functions, which will each have their own team leaders who report to the PC\. The administrative team will be in charge of procurement, FM, and monitoring and evaluation, among others\. With respect to its fiduciary functions, the administrative team will report to the PC, who will then coordinate with SAT’s Administrative and Planning Units for the required follow up\. The change management team will advise the PC/PIU on and facilitate the development and implementation of the strategy for managing and communicating the changes and reforms introduced under the Project\. With respect to the technical aspects of the Project, a technical team will help integrate and coordinate task teams that will be in charge of reviewing, designing and implementing solutions for specific processes or services (e\.g\. customs, internal revenue, human resources, etc\.) The task teams will be led by task leaders who will be appointed to manage full-time teams made up of the most experienced officers possible for those needs\. The task leaders will report to the PC, who will coordinate and align the execution of other Project activities and work in coordination with critical implementation areas within SAT, including IT, Human Resources, Procurement and Finance\. The OM details the formal implementation arrangements for oversight of these task teams\. 4\. The PIU will also have a quality assurance consultant to assist the PC in creating and monitoring change control procedures\. The consultant will help build and maintain the Project library and other critical documentation as well as provide ongoing assistance to the task teams at every stage of the Project, participating in reviewing technology proposals, monitoring contract deliverables and the use of insurance and guaranties, and evaluating physical contract implementation milestones\. 5\. The staff of the PIU, as well as the task teams, will be incrementally strengthened as Project implementation progresses\. Staff in these specific task teams will receive further training during preparation and implementation\. Technical and administrative support will also be provided under sub-component 1\.1 of the Project\. Technical consultants will be hired to work with task team leaders as required\. 6\. A Management Committee will be put in place to oversee supervision of Project implementation and make operational decisions\. The Management Committee will be chaired by the SAT Superintendent and made up of all SAT Intendents 32, the manager of SAT’s Planning Management Unit, the Superintendent’s Projects Advisor and the PC, who will serve as the Secretary\. It will meet regularly, at least twice a month at the beginning of the Project, and once a week as the Project enters into the implementation phase (detailed procedures are defined in the OM)\. The Committee will be responsible for, inter alia, monitoring Project progress, prioritizing 32 Intendents are managers of the core operational areas in SAT: tax collection, customs, tax audit, and legal services\. 37 activities, and proposing changes in Project scope or specifications; making operational decisions; allocating human and financial resources; and resolving organizational issues\. It will also review the status of procurement processes and the budget, take risk mitigation steps and guide the preparation of progress reports and proposals for approval by the Steering Committee\. On behalf of the PC, the PIU will prepare agendas and record minutes of the meetings\. The formal establishment of the Management Committee will need to be approved by the SAT’s Board of Directors and is expected no later than three months from the Loan’s effectiveness 7\. A Project Steering Committee will monitor progress on Project implementation, providing strategic direction and policy advice\. The Steering Committee will be chaired by the Minister of Finance and include members of SAT’s Board of Directors, the Vice-Minister of Finance and the Superintendent of SAT, and meet at least twice a year\. The meetings of the Steering Committee will focus on assessing Project progress and review strategic alignment issues, budget requirements, regulation of modifications, proposals of Project modifications, and interagency coordination\. On behalf of the SAT Superintendent who is the Secretary of the Committee, the PIU will prepare agendas and record minutes of the meetings\. Through specific meetings, the Committee will receive business and strategic advice from an Advisory Board comprised by representatives of the private sector, academia and civil society; as well as from a Donors Consultative Group, integrated by donor representatives (OTA, IMF, IDB, GiZ) who are participating in supporting the strategic development of SAT at various levels\. The formal establishment of the Steering Committee is expected no later than three months from the Loan’s effectiveness\. 8\. Details on the institutional and implementation arrangements for the proposed Project, including roles and responsibilities, are included in the OM\. The OM includes, inter alia: (a) a detailed description of the Project activities and institutional arrangements for the Project; (b) the Project administrative, accounting, auditing, reporting, financial (including cash flow aspects in relation thereto), procurement and disbursement procedures; (c) the monitoring indicators for the Project; (d) the institutional and administrative mechanisms established to ensure institutional coordination; and (e) the functions, responsibilities and composition of the Steering and Management Committees\. The OM will be adopted by SAT prior to Loan effectiveness\. FM, Disbursements and Procurement 9\. The WB carried out an assessment to evaluate the adequacy of FM arrangements of SAT, as the implementing entity of the proposed Project\. The FM assessment reviewed the specific arrangements to ensure proper control, recording, and reporting of Project expenditures\. The basic staffing structure, financial recording system and financial reporting, cash flow, audit arrangements, internal control system and asset management are included in the OM\. 10\. Overall, SAT is a well-established entity that has in place basic FM arrangements\. It is expected that the proposed Project will benefit from those existing arrangements and supplementing or strengthening them as needed\. Based on the Project description, the proposed activities do not require complex operational arrangements\. However, the recent institutional crisis has, to some extent, led to a deterioration of the internal control environment\. In addition, internal processes and procedures used by public sector entities in Guatemala are in most cases 38 cumbersome and lengthy, causing delays in implementation\. On this basis, the overall fiduciary risk has been defined as substantial\. 11\. To mitigate these risks, there is need to secure strong operational arrangements within SAT that can support smooth, agile and transparent Project implementation\. This will require the definition of clear responsibilities for both SAT units and the entities to be established under the Project as well as streamlined processes and procedures, including the strengthening of key internal controls and transparency mechanisms\. To this end, SAT will establish a PIU, which will include the necessary fiduciary staff to carry out Project activities with efficiency and transparency\. As such, SAT has: i) prepared the terms of references of key fiduciary staff that will be financed with loan proceeds; ii) streamlined processes and procedures included in the OM; iii) defined the responsibility for, and mechanism to support adequate, contract management within the PIU; and iv) defined the specific content and format of financial reports\. Based on progress made, proposed FM arrangements are considered acceptable to the WB\. The hiring of a FM specialist is expected is expected no later than three months from the Loan’s effectiveness\. The FM arrangements are outlined below, including critical mitigating measures\. 12\. Organization and staffing\. Within SAT, the Administrative and Finance Management Unit has the responsibility for basic FM functions in terms of budgeting, accounting and treasury\. However, the PIU will maintain an administrative team including a FM team to be responsible for the administration of loan proceeds in coordination with the Administrative and Finance Management Unit as needed\. Such a team will include a FM specialist, an accounting officer and a budget officer and terms of reference for these positions are defined in the OM\. In accordance with local regulations, to be granted with signing authority (cuentadancia), the FM position will be financed with SAT’s proceeds\. Recruitment of other FM staff will be carried out in accordance with WB procedures\. 13\. Programming and budgeting\. Project programming and budget will be governed by public sector regulations, as applicable to autonomous entities, and other specific procedures adopted by SAT\. In compliance with those procedures, the roles and responsibilities defined for Project implementation, and following the budget structure used for the public sector (Estructura Programatica), it was agreed that the Project budget would be recorded as a specific “Program” assigned to the Gerencia de Planificacion y Desarrollo Institucional, as the budget administrative unit, and reflecting Project Components as activities\. For budget preparation, SAT will coordinate with MINFIN the allocation of required financial resources within the National General Budget for project operation to be presented and approved in Congress\. Based on the approved National Budget, the detailed Project budget will be prepared by the PIU in coordination with the participating technical units, and then submitted to the Administrative and Finance Management Unit to be incorporated into SAT’s institutional budget, which has to be approved by SAT’s Board of Directors before the beginning of the fiscal year\. Any budget modification also has to be approved by the Board\. The Project budget will also be processed, recorded and executed through SICOIN, the country’s integrated FM system\. 14\. Accounting and financial reporting\. Project transactions will be accounted for in SICOIN following the Government’s accounting policies and practices\. As mentioned above, Project Components and cost categories will be reflected as separate activities in SICOIN to facilitate the preparation of financial reports\. SAT will also keep digital auxiliary records in United 39 States dollars that complement SICOIN records to prepare Statements of Expenditures and financial reports\. Periodic reconciliation mechanisms between SICOIN and Excel records will be put in place to ensure the integrity of the financial information\. The PIU, through the administrative team, will be responsible for preparing financial information on a semi-annual basis and submit it to the WB as Interim Financial Reports containing: i) the sources and uses of funds, reconciling items, and cash balances, with expenditures classified by Project Component and cost category; ii) a statement of uses of funds reporting the current semester and the accumulated operations against ongoing plans, as well as footnotes explaining the important variances\. The reports will be prepared in local currency and United States dollars following the format defined in the OM\. The Interim Financial Reports will be submitted for the WB’s review no later than 45 days after the end of each semester\. On an annual basis, SAT, through the PIU and in coordination with the Administrative and Finance Management Unit, will also prepare Project financial statements including cumulative figures, for the year, and as of the end of the fiscal year (December 31)\. All documentation for consolidated Statements of Expenditures will be maintained for post review and audit purposes for up to three years after the closing date of the Project, or for 18 months after receipt by the WB of an acceptable final financial audit, whichever is the later\. 15\. Processes and procedures (including internal controls)\. In compliance with local regulations, SAT has in place basic procedures for the processing of payments, mainly covering the accounting in SICOIN and issuance of checks or bank transfers\. Based on those basic procedures, SAT has produced tailor-made “flujogramas” that reflect roles and responsibilities of different parties involved in Project implementation, including procedures for the preparation of the annual operating plan, as well as approval and payment of goods, products and services\. Additionally, the OM includes the procedures related to the control and management of fixed assets to be financed under the Project\. These procedures: i) provide for clear roles and responsibilities (including those for technical units), adequate segregation of duties in terms of authorization, and recording and approval of payments; ii) allow for some simplification although there is still space to seek some delegation; and documentation required; and iii) ensure that supporting documents are filed in a timely manner and safeguarded, by differentiating those related to procurement process, and those required for payment processing\. Given the nature of activities to be financed it was agreed that for Project purposes, SAT would strengthen its mechanisms for contract management, by: i) putting in place a single and comprehensive record of contracts, including amount, terms, amendments, amount paid, outstanding balances; and ii) having clear roles and responsibilities for the timely update of the record\. 16\. External audit\. An external, independent, private audit firm, acceptable to the WB under defined terms of reference approved by the WB, will be contracted by SAT for the entire life of the Project no later than six months after the Loan’s effectiveness and financed under the Project\. The audit firm will review and provide an opinion on the Annual Financial Statements of the Project\. The audited financial statements shall be presented to the WB no later than six months after the end of the fiscal period\. According to the WB’s policy on access to information, Audited Financial Statements will be made public\. Specific audit requirements include: 40  Audit type Due date Project financial statements June 30 Management Letter June 30 17\. Flow of funds\. Following the general practice of the current portfolio, the following disbursement methods may be used to withdraw funds from the Loan: (a) advances, and (b) direct payments, with advances the primary method of disbursement\. Under the advance method, a Designated Account will be opened as a Cuenta Secundaria, under the Multilaterals’ Single Treasury Account-MSA system in MINFIN in United States dollars, to be used exclusively for deposits and withdrawals of Loan proceeds for eligible expenditures\. The maximum amount that may be advanced to the Designated Account is US$4 million\. Overall disbursement arrangements will follow standard disbursement policies and procedures established in the Disbursement Guidelines for Investment Project Financing and in the Disbursement Letter of the Project\. The PIU will report on the use of advances and reimbursement requests through simplified Statements of Expenditures and eventual direct payments will be documented by copy of the invoices\. Documentation of eligible expenditures paid out of the Designated Account is expected to be on a quarterly basis\. The supporting documentation requirements to document Project expenditures, as well as the minimum value of application for direct payments and reimbursements, is outlined in the Disbursement Letter\. Table A\.3\.1 Action Plan for SAT Action Responsible Target Timeframe 1\. Draft OM reflecting agreed FM procedures SAT Completed 2\. Define the specific format and content of financial reports SAT/WB to be prepared based on the information provided by Completed SICOIN 3\. Contract external auditor based on terms of reference and Six months after SAT short list satisfactory to the WB effectiveness Three months 4\. Recruit key fiduciary staff within the administrative unit SAT after effectiveness 5\. Provide specific training in FM & Disbursements for Before WB Project FM Staff effectiveness 18\. FM action plan and supervision plan\. An Action Plan to ensure that adequate FM systems are in place before Project implementation begins is currently being undertaken by SAT (Table A\.3\.1)\. It is expected that WB FM Specialist will closely work with SAT’s FM staff during the first year of the Project to support the effective implementation of all required arrangements\. After effectiveness, the FM Specialist will review the annual audit report and the financial sections of the semiannual Interim Financial Reports, and perform at least two complete supervision missions per year\. This supervision strategy will be reviewed periodically and adjusted based on performance and risk\. 19\. Procurement\. Procurement will be carried out in accordance with the “World Bank Procurement Regulations for Borrowers under Investment Project Financing” (July 2016) (“Procurement Regulations”)\. A PPSD, prepared by SAT, describes how procurement in this operation will support the PDOs and deliver value for money using a risk-based approach\. The 41 PPSD provides adequate supporting market analysis for the selection methods detailed in the Procurement Plan\. Mandatory Procurement Prior Review Thresholds detailed in Annex I of the WB’s Procurement Procedure are applied\. All procurement procedures, including roles and responsibilities of different participating entities and units, are defined in the OM\. 20\. Procurement plan\. In accordance with paragraph 5\.9 of the Procurement Regulations, the WB’s Systematic Tracking and Exchanges in Procurement system will be used to prepare, clear and update Procurement Plans and conduct all procurement transactions for the Project\. The Procurement Plan for the first 18 months has been prepared by SAT in accordance with the results of the PPSD\. A summary of the PPSD, including recommended procurement approach for higher value contracts, is presented in Table A\.3\.2\. SAT has already been trained on how to use the Systematic Tracking and Exchanges in Procurement system\. 21\. Civil works\. Infrastructure and/or civil works are not foreseen to be financed with Project funds\. 22\. Goods\. Goods to be financed under this Project include an ICT system, software, office equipment, and customs equipment (scanners, video cameras, etc)\. 23\. Non-consulting services\. The Project will finance services related to data collection, communications, publicity services, and other services\. 24\. Selection of consulting services\. Consulting services to be financed under the Project will be focused on M&E services, external auditing and software development, designing and streamlining of processes, including control systems based on risk concepts, enhancing the use of importer/exporter information, and monitoring and evaluating services\. 25\. WB’s Standard Procurement Documents\. Standard Procurement Documents shall be used for all contracts subject to international competitive procurement and those contracts as specified in the Procurement Plan tables in the Systematic Tracking and Exchanges in Procurement system\. 26\. Operating costs\. Operating costs refer to reasonable recurrent expenditures that would not have been incurred by the implementing agency in the absence of the Project\. The Project will finance operating costs, such as office supplies, communication and advertising costs, computers and equipment maintenance, per diems for local and international staff, among other operational expenses\. The Project will also finance costs of training course, travel and per diem of trainers and trainees, and rental of facilities\. 27\. OM\. All procurement procedures are described in detail in the OM, and agreed with the WB\. The OM includes non-standard documents expected to be used in the implementation of this Project\. 28\. Procurement capacity and arrangements\. The WB carried out a procurement capacity assessment in June 2016 to evaluate the adequacy of procurement arrangements of SAT\. The assessment focused on how the entity was organized to procure using external funds\. The basic staffing structure, procurement record system, internal controls, evaluation committees’ roles and responsibilities, contract signing, and contract administration were reviewed as part of the assessment\. At the entity level, while SAT has a well-defined structure and procedures, it has 42 limited experience with externally-financed operations\. For example, SAT implemented a WB- financed project more than ten years ago, and during the last five years, SAT has been mainly financed with national funds and carrying out procurement processes of lesser value than the ones planned under this Project\. All procurement for the proposed Project will be carried out by the PIU, which includes an administrative unit with a procurement team\. The procurement team within their administrative unit has not carried out procurements using WB funds nor has experience with external funds regulation\. Therefore, SAT will need to strengthen its procurement staffing\. To this end, in accordance with local regulations a procurement specialist will be financed with SAT’s proceeds and will be granted signing authority (cuentadancia)\. In addition, the Project will finance the hiring of supporting experienced procurement staff with terms of reference and qualifications acceptable to the WB\. The number of procurement staff will be defined based on the amount of contracts foreseen within the PPSD and the Procurement Plan\. Technical aspects of the planned procurement activities will require expertise and will be contracted using individual consultants, as necessary\. Details on the procurement arrangements as well as definition of roles and responsibilities are included in the OM\. The procurement risk rating is substantial\. 29\. Frequency of Procurement Supervision\. In addition to prior review supervision to be carried by the WB office, the capacity assessment of the implementing agencies recommends annual supervision missions to visit the field to carry out post review of 1:5 procurement actions\. 30\. Summary of PPSD (recommended procurement approach for higher value contracts*)\. The Summary of the PPSD is included in table A\.3\.2\. 43  Table A\.3\.2 PPSD Summary Description Estimated Prior / Market Selection method costs in Post approach US$ Review Goods: Technological infrastructure 8,400,000 Prior International - Request for Bids and data center alternative Open (post- qualification) IT equipment (replacement of 5,100,000 Prior International - Request for Bids obsolete equipment) Open (post- qualification) Non-intrusive information 6,000,000 Prior International - Request for Bids technology for customs (X- Open (post- qualification) rays, GPS) IT technology for future 2,900,000 Prior International - Request for Bids demand Open (post- qualification) Kiosks for call centers 800,000 Prior International- Request for Bids (furniture) Open (post-qualification) Software upgrade 250,000 Prior Direct contract -- Non-consulting services: Adaptation and 15,000,000 Prior International - Request for Implementation of Open Proposals Information Systems Training Training 3,475,000 Post National-Open Request for Bids Consultant services: Modernization and 5,700,000 Prior International- Request for streamlining processes, Limited Proposals including control and tributary systems designs Communications strategy 1,200,000 Prior International - Request for Limited Proposals Software design 1,200,000 Prior International- Request for Limited Proposals Design of SAT’s legal 500,000 Prior International- Request for strengthening Limited Proposals Technology strategy 465,000 Post International - Request for Limited Proposals External audit services 100,000 Post Limited Request for Proposals Individual consultants: Specialized consultancies in 2,352,000 Prior International – Individual Tax Administration (8 Limited consultants international experts) Specialized consultancies in 757,600 Post National – Individual Tax Administration (8 Limited consultants 44  national experts) (*) Procurement packages and WB’s prior review as defined in procurement plan accordingly 45  Annex 4: Implementation Support Plan GUATEMALA: Transparency and Efficiency in Tax Administration Project Strategy and Approach for Implementation Support 1\. The Implementation Support Plan has been developed based on the nature of the Project and its risk profile\. The purpose of the Plan is to ensure that implementation support to the client is more flexible and efficient, and focuses on addressing the main identified risks and includes the agreed risk mitigation measures\. The implementation arrangements and the OM will be fundamental tools to achieve this objective\. Implementation Support Plan 2\. Given the complexity of the Project, close supervision during implementation will be required to ensure all the Components are being executed as planned\. Task team leadership, as well as fiduciary and technical aspects, will be managed from the WB´s Washington office\. The WB team will provide regular implementation support to the PIU, Management Committee and the Steering Committee, and will regularly supervise progress towards the PDO and results\. The OM outlines coordination and reporting mechanisms between the technical coordinators and the WB\. 3\. Each of the Components will have at least one technical specialist that will closely supervise and support the implementation of the proposed activities\. Each of the Components is highly technical and requires the technical specialist to be in close contact with the technical coordinators\. To support supervision of some of the more complex activities, the WB will engage international experts when necessary to round out the skills mix of its implementation support team\. 4\. This kind of modernization Project involves complex and strategic procurement processes, which will require information technology and specialized procurement advice\. In addition to the indicated technical experts, the WB team will include i) a procurement specialist with specific knowledge on information systems, procurement processes and long consulting services contracts; and ii) an IT specialist with experience on tax and customs information systems and technologies\. Including these specialist positions in the WB’s team will contribute to the success of the Project and prevent delays during the procurement and implementation stages\. 5\. The team will maintain continuity and a regular dialogue with Government counterparts on all relevant operational, technical and policy issues\. At least two formal implementation support missions of the entire team are expected per year\. For some of the Components, sectoral experts may need to travel to Guatemala more frequently during the first two years to ensure implementation is progressing as expected\. 46 6\. The table below shows the timeframe, skills mix and resources needed for implementation support: Time Focus Skills Needed Resource Partner Role Estimate per year First Advise on designing of Task Management US$200,000 Prepare twelve tax & customs Tax and Customs implementation months administration model Management reports and Advise on designing of Specialist Participate in bidding documents for IT Specialist Implementation Tax & Customs FM Specialist support missions Administration redesign Procurement consulting, Information Specialist with focus Systems and ICT Platform on IT and Large Consulting Services Advise on designing Task Management Change Management and Tax Administration Communication Strategy Specialist Customs Administration Specialist FM and Procurement FM specialist Training Procurement specialist Second Supervise the Task Management US$200,000 Prepare year procurement processes Tax Administration implementation (related to consulting Specialist reports and services, information Customs Participate in systems and ICT Administration implementation platform) Specialist support missions Procurement Specialist (Focus on Large Consulting Services) Advise on new Task management information systems and IT specialist ICT platform deployment Procurement Specialist (Focus on IT) Dialog with client on Task Management operational and technical Tax Administration aspects including Specialist 47  Time Focus Skills Needed Resource Partner Role Estimate per year monitoring of the change Customs management and Administration communication strategy Specialist IT Specialist FM and Procurement Task Management supervision FM Specialist Procurement Specialist Third to Advise on implementation Task Management US$200,000 Prepare Sixth of new tax and customs Tax Administration implementation years administration concepts, Specialist reports and processes and information Customs Participate in systems Administration implementation Specialist support missions IT Specialist Advise on implementation Task Management of Change Management Tax Administration and Communication Specialist Strategy Customs Administration Specialist FM and Procurement Task Management supervision FM Specialist Procurement Specialist Skills Mix Required Skills Needed Number of Staff Number of Trips Comments Weeks/ year Task Management 8 weeks 2 per year Customs Specialist 8 weeks 2 per year Tax Administration 8 weeks 2 per year Specialist IT Specialist 8 weeks 2 per year Procurement Specialist 8 weeks 2 per year with focus on IT and Large Consulting Services FM Specialist 2 weeks None 48  Annex 5: Economic and Financial Analysis GUATEMALA: Transparency and Efficiency in Tax Administration Project 1\. The economic analysis suggests that this Project is economically feasible, with a NPV of US$61\.17 million and an IRR of 15 percent (Table A\.5\.1)\. The economic analysis attempts to quantify the impact of the likely Project costs and benefits both for taxpayers and the SAT\. The analysis employs an incremental approach, which, by design, compares the scenario without the Project (counterfactual scenario) and the scenario with the Project\. It draws on the following sources of information: • Project costs and disbursement calendar as defined in the appraisal document; • SAT administrative records on the number of active taxpayers (firms); • SAT annual reports for information on revenues; • The 2016 Doing Business Report for the average time to comply with taxes\. The indicator is reported for a hypothetical medium-sized company, which needs, on average, about 256 hours/year (or 32 days) to comply with major types of taxes and contributions in Guatemala; and • The National Institute of Statistics in Guatemala, to ascertain the remuneration of accountants\. In 2015, average remuneration of an accountant was estimated at 3,662 Q/month (US$470 per month)\. Table A\.5\.1\. Project Economic Benefit (US$ million) Proyect Year 1 2 3 4 5 6 7 INFLOW Effect on Compliance Cost reducton - 12\.03 22\.86 33\.68 39\.70 40\.90 40\.90 Effect on Administrative Cost reduction - 1\.37 3\.43 4\.80 6\.17 6\.17 6\.17 Total Inflows - 13\.40 26\.28 38\.48 45\.87 47\.07 47\.07 OUTFLOW Investment WB 4\.48 11\.93 19\.84 9\.81 7\.65 1\.29 Fron-End Fees 0\.14 Operative and Maintenance Cost 1\.05 2\.84 4\.87 5\.85 6\.91 8\.05 6\.96 Total Outflows 5\.67 14\.77 24\.71 15\.66 14\.56 9\.34 6\.96 ( Benefit Net Economic j p (NCF) ) -5\.67 -1\.37 1\.58 22\.83 31\.31 37\.73 40\.11 NPV 61\.17 IRR 15% 2\. The proposed Project is expected to generate both tangible and intangible benefits for the taxpayers and the SAT\. While Project costs are typically easy to define and quantify, measuring certain benefits and defining causal linkages between certain outcomes, including behavioral responses, is not straightforward\. The analysis of the economic benefits might underestimate the actual benefits to the extent that some dimensions might not be included (i\.e\., 49 trade facilitation), also, the economic analysis does not cover individual taxpayers, 33 although the Project is expected to reduce compliance costs of individual taxpayers as well, thus enhancing the economic feasibility of the Project\. This economic analysis focuses on: • Tax Compliance Cost: The major economic benefits for taxpayers include reduction in the time to comply with taxes; it will be achieved mainly through the simplification of tax legal and normative framework, simplification of processes and procedures and implementation of virtual services for the taxpayers\. • Tax Administrative Cost: The major economic benefits for SAT, is associated with optimized business processes within the service, the use of risk-based approach for tax audit and customs clearance and the implementation of new technologies and information systems\. Most of the benefits generated at the level of the SAT will be in enhanced operational efficiency and effectiveness of services provided, that is “more” and “better” will be done with the same resources\. 3\. Key assumptions of the economic analysis include: a\. The number of active taxpayers (only firms) (as of December 31, 2015 34) will not change significantly in the medium-term; b\. The main driver of compliance costs for taxpayers is the time spent by firms and their accountants in dealing with tax matters; c\. The time necessary for the preparation of tax returns will start decreasing from the second year of the Project, and the target indicator (reduction by 24 percent on average for companies); d\. The current tax administrative cost of SAT is 1\.81 percent and will start to decrease from the second year of the Project\. The target is 1\.72 percent; e\. The discount rate used for this analysis is 13 percent; 35 and f\. The timeframe of the analysis is seven years from Project approval date\. 4\. Results of the financial analysis also show that the Project is financially feasible (Table A\.5\.2)\. The financial IRR is 172 percent, and the financial NPV at 9\.6 percent discount rate in real terms is US$1\.18 billion (at the exchange rate of 7\.8 Q/US$)\. For the financial analysis, the methodology considers actual revenues (growth of revenues) and expenditures (original investment and maintenance cost) and is based on the increase of tax compliance (voluntary and enforced) translated into higher tax revenues as a result of improvement in tax administration efficiency and effectiveness as well as reduction of tax arrears\. The analysis only considers the VAT collection and VAT compliance, because there is no official methodology to estimate income 33 The Doing Business is the only official data source that can be used to calculate tax compliance cost\. However, this can only be done for companies, not individual taxpayers\. 34 Last data available 35 Represents the Economic Opportunity Cost of Capital Funds for the Government = Real interest rate as a proxy for the real financial cost of capital by the Government + Economic externality of capital funds (EECF) estimated at 3%\. EECF are the external costs of raising added public funds, namely the combined economic efficiency costs, administrative and compliance costs of an added unit of revenue\. Calculation methodology followed: Graham Glendayf, Economic Analysis Guidance for Governance and Public Sector Management Operations in Select Areas of Public Financial Management, Duke University, prepared for Public Sector & Governance, PREM, World Bank, 2015\. 50 tax compliance and other taxes\. The analysis employs an incremental approach, comparing the scenario without the Project (counterfactual scenario) and the scenario with the Project\. Table A\.5\.2\. Project Financial Benefits (US$ million) Proyect Year 1 2 3 4 5 6 7 INFLOW Improved VAT collection w Financing 52\.38 142\.05 243\.31 292\.25 345\.30 402\.48 463\.76 Total Inflows 52\.38 142\.05 243\.31 292\.25 345\.30 402\.48 463\.76 OUTFLOW Investment WB 4\.48 11\.93 19\.84 9\.81 7\.65 1\.29 Front-End Fees 0\.14 Operative and Maintenance Cost 1\.05 2\.84 4\.87 5\.85 6\.91 8\.05 9\.28 Total Outflows 5\.67 14\.77 24\.71 15\.66 14\.56 9\.34 9\.28 NCF, w Project (Improvements) 46\.71 127\.28 218\.61 276\.60 330\.75 393\.14 454\.49 / j j NPV w Project (Improvements) 1181\.53 IRR 172% 5\. Key Assumptions of the financial analysis are: a\. The current VAT compliance ratio is 65\.8 percent\. The projected VAT compliance ratio goal in seven years is 75 percent with the Project (since approval date), while it is 69 percent without the Project (see Figure A\.5\.3)\. b\. The difference between the increase of VAT compliance with the Project and without the Project is a direct result of the Project intervention\. The experience of Bulgaria with the implementation of a similar Project 36 shows substantial improvements in compliance rates\. c\. Nominal GDP growth is forecasted by the Guatemalan Central Bank for 2016-2018 and assumes the same growth for the following years\. (2016: 7 percent; 2017: 7\.5 percent; 2018:7\.8 percent)\. d\. The discount rate used for our analysis is 9\.6 percent\. 37 36 Revenue Administration Reform Project, P073427, World Bank\. During the implementation of the Project, the compliance rate for VAT, for example, went up from 77 percent in 2002 to 92 percent in 2008\. Approval date: June 5, 2003\. 37 Estimated with as the real interest rate from IMF data\. Source: http://datos\.bancomundial\.org/indicador/FR\.INR\.RINR?locations=GT 51 Figure A\.5\.3\. Comparison VAT Compliance Ratio Growth with/without Project (US$ million) 52  Annex 6\. Project Implementation Timeframe GUATEMALA: Transparency and Efficiency in Tax Administration Project Component Stabilization and Preparation Redesign Consolidation Short-term (1 year) Medium-Term (2-3 years) Medium-Long Term (4-6 years) I\. Transparency, - Strategic Plan - M&E management tools - Change Management Integrity and - Change Management Strategy - Change Management Strategy (Phase II) Strategy (Phase III) Institutional and Communications Campaign - Implementation of Human Resource - Hardware to cover new Development of program (Phase I) Management Strategy, HR policies and and future demands SAT - Transparency and institutional professionalization of staff - Data Recovery Center integrity strategy - Implementation of Internal Affairs Unit equipment and - Hardware to close current gaps - Implementation of Industrial Security Plan Adaptation on information systems - Implementation of Information - Development of Human Governance Model Resource Management Strategy - Hardware and IT solutions to improve - Constituency of Internal Affairs quality and services on information Unit systems - Design of new organizational model for the ICT department II\. - Cleaning of the taxpayer registry - Implementation of new revenue collection - New revenue collection Strengthening - Development of taxpayer model based on a new taxpayer registry model (Consolidation) of Tax services strategy and TCA model with 360 vision - Training for customs Collection - Strengthening current taxpayer - Implementation of e-invoice officials (Phase II) Functions in services channels - Implementation of new virtual taxpayer - Customs system Internal services channels (Consolidation) Revenues and - Redesign of customs processes and Customs controls - Customs system (Implementation) - Training for customs officials (Phase I) 53  Component Stabilization and Preparation Redesign Consolidation Short-term (1 year) Medium-Term (2-3 years) Medium-Long Term (4-6 years) - Implementation of non-intrusive customs controls III\. -Design of Audit and enforcement -Implementation of new enforcement -Specialized training to Strengthening strategy processes auditors by sectors and of tax -Creation of a Fiscal Intelligence -Tools for information analysis (business taxpayer segmentation intelligence and Unit Intelligence) tax enforcement -Taxpayer Segmentation - Development of risk models -Strategy to support tax litigation -Specialized training to auditors by sectors processes and taxpayer segmentation -Strengthening capacity of the - Supporting tools to record and monitoring SAT’s legal department tax appeals cases - Tax appeals framework implementation - Tax appeals dissemination and communications activities - Support operationalization of TRIBUTA 54  Annex 7: Support to SAT from other Donors GUATEMALA: Transparency and Efficiency in Tax Administration Project German Support United States IMF IDB Technical Area Treasury Cooperation Revenue Comprehensive Technical Implementation of Just-in-time Collection diagnostic and assistance for a system for technical recommendations the taxpayers assistance on report on short- implementation complaints and income tax term measures to of the e-invoice tax education collection and restore collection enforcement and medium- procedures term strategies (Support ends in for SAT reform 2019) Customs Just-in-time technical assistance on customs control processes (Support ends in 2019) Audit and Design of Developing audit Enforcement cross-mass and enforcement information tools mechanisms for audit selection Human Support on Internal Support for the Resources staffing procedures and establishment of and Internal requirements norms for the Internal Ethics and recruiting strengthening Investigation Unit of new SAT transparency and staff SAT’s personnel ethics 55

APPROVAL

P111679

Document of The World Bank Report No: ICR00003475 IMPLEMENTATION COMPLETION AND RESULTS REPORT (IDA-H4640) ON A GRANT IN THE AMOUNT OF SDR 5\.5 MILLION (US$ 8\.0 MILLION EQUIVALENT) TO THE CENTRAL AFRICAN REPUBLIC FOR A SUPPORT TO VULNERABLE GROUPS COMMUNITY DEVELOPMENT PROJECT November 30, 2015 Social, Urban, Rural and Resilience Global Practice Africa Region  CURRENCY EQUIVALENTS (Exchange Rate Effective August 20, 2015) Currency Unit = C\.F\.A Francs BEAC, XAF US$ 1\.00 = 587 C\.F\.A Francs FISCAL YEAR 2016 ABBREVIATIONS AND ACRONYMS ACTED Agence d’Aide à la Coopération Technique et au Développement (Technical Cooperation and Development Agency) AfDB African Development Bank AGETIP Agence d’Exécution des Travaux d’Intérêt Public (Public Works Agency) CAR Central African Republic CDC Commune Development Committee CDD Community Driven Development CNP Comité National de Pilotage (Inter-ministerial Steering Committee) CPS Country Partnership Strategy CRP Comité Regional de Pilotage (Regional Steering Committee) CRN Country Re-Engagement Note DA Designated Account ESMF Environmental and Social Management Framework FAP Fonds d’Actions Prioritaires (Priority Response Fund) FDL Fonds de Développement Local (Local Development Fund) FM Financial Management FURCA Forces pour l’Unification de la République Centrafricaine (Forces for the Unification of CAR) HIPC Heavily Indebted Poor Countries Initiative IDA International Development Association 1 ICASEES Institut Centrafricain des Statistiques et des Etudes Economiques et Sociales (National Institute of Statistics and Socio-Economic Studies) INGO International Non-Governmental Organization IPP Indigenous Peoples Plan ISN Interim Strategy Note JIS Joint WB/AfDB Interim Strategy Note MAS Ministère des Affaires Sociales, de la Solidarité Nationale et de la Promotion du Genre (Ministry for Social Affairs, National Solidarity and Gender Promotion) MARD Ministry of Agriculture and Rural Development MDOD Maître d’Ouvrage Délégué (Contracting Authority Delegat) MTR Mid Term Review NGO Non-Governmental Organization OP/BP Operational Policy / Bank Procedure PDCAGV Projet de Développement Communautaire et d’Appui aux Groupes Vulnérables (Support to Vulnerable Groups Community Development Project) PIM Project Implementation Manual PCT Project Coordination Team PRSP Poverty Reduction Strategy Paper RPF Resettlement Policy Framework TDRP Transitional Demobilization and Reintegration Program TTL Task Team Leader UFDR Union des Forces Démocratiques pour le Rassemblement (Union of Democratic Forces for Unity) UNDP United Nations Development Programme VDC Village Development Council 2 Senior Global Practice Director: Ede Jorge Ijjasz-Vasquez Practice Manager: Jan Weetjens Task Team Leader: Paul Bance ICR Team Leader: Peter Lafere 3  CENTRAL AFRICAN REPUBLIC SUPPORT TO VULNERABLE GROUPS COMMUNITY DEVELOPMENT PROJECT Contents I\. Disbursement Profile \. 17 1\. Project Context, Development Objectives and Design \. 1 1\.1 Context at Appraisal \. 1 1\.2 Original Project Development Objectives (PDO) and Key Indicators \. 1 1\.3 Revised PDO (as approved by original approving authority) and Key Indicators, and reasons/justification \. 2 1\.4 Main Beneficiaries, \. 2 1\.5 Original Components (as approved)\. 3 1\.6 Revised Components \. 4 1\.7 Other significant changes \. 4 2\. Key Factors Affecting Implementation and Outcomes \. 4 2\.1 Project Preparation, Design and Quality at Entry \. 4 2\.2 Implementation \. 6 2\.3 Monitoring and Evaluation (M&E) Design, Implementation and Utilization \. 8 2\.4 Safeguard and Fiduciary Compliance \. 9 2\.5 Post-completion Operation/Next Phase \. 10 3\. Assessment of Outcomes \. 10 3\.1 Relevance of Objectives, Design and Implementation\. 10 3\.2 Achievement of Project Development Objectives \. 11 3\.3 Efficiency\. 12 3\.4 Justification of Overall Outcome Rating \. 14 3\.5 Overarching Themes, Other Outcomes and Impacts \. 14 3\.6 Summary of Findings of Beneficiary Survey and/or Stakeholder Workshops\. 15 4\. Assessment of Risk to Development Outcome \. 15 5\. Assessment of Bank and Borrower Performance \. 16 5\.1 Bank Performance \. 16 5\.2 Borrower Performance \. 17 4 6\. Lessons Learned \. 18 7\. Comments on Issues Raised by Borrower/Implementing Agencies/Partners \. 19 Annex 1: Project Costs and Financing \. 20 (a) Project Cost by Component (in USD Million equivalent) \. 20 (b) Financing \. 20 Annex 2: Outputs by Component \. 21 Annex 3: Economic and Financial Analysis \. 25 Annex 4 Bank Lending and Implementation Support/Supervision Processes \. 28 (a) Task Team members \. 28 (b) Staff Time and Cost \. 29 Annex 5: Beneficiary Survey Results \. 29 Annex 6: Stakeholder Workshop Report and Results \. 30 Annex 7: Summary of Borrower’s ICR and/or Comments on Draft ICR \. 30 Annex 8: Comments of Co-Financiers and Other Partners/Stakeholders\. 43 Annex 9: List of People Interviewed \. 44 Annex 10: List of Background Documents \. 46 Annex 11: Map \. 48 Annex 11: Map \. 48 A\. Basic Information CF-Support to Central African Vulnerable Groups Country: Project Name: Republic Community Development Project Project ID: P111679 L/C/TF Number(s): IDA-H4640 ICR Date: 11/08/2015 ICR Type: Core ICR CENTRAL Lending Instrument: ERL Borrower: AFRICAN REPUBLIC Original Total XDR 5\.50M Disbursed Amount: XDR 5\.44M Commitment: Revised Amount: XDR 5\.50M 5 Environmental Category: B Implementing Agencies: Ministry of Social Affairs Cofinanciers and Other External Partners: B\. Key Dates Revised / Actual Process Date Process Original Date Date(s) Concept 09/22/2008 Effectiveness: 08/03/2009 08/03/2009 Review: 06/30/2013 Appraisal: 11/10/2008 Restructuring(s): 07/31/2014 Mid-term Approval: 03/31/2009 06/20/2012 07/05/2012 Review: Closing: 07/31/2013 05/31/2015 C\. Ratings Summary C\.1 Performance Rating by ICR Outcomes: Moderately Unsatisfactory Risk to Development Outcome: High Bank Performance: Moderately Unsatisfactory Borrower Performance: Moderately Satisfactory C\.2 Detailed Ratings of Bank and Borrower Performance (by ICR) Bank Ratings Borrower Ratings Moderately Moderately Quality at Entry: Government: Unsatisfactory Satisfactory Quality of Moderately Implementing Moderately Supervision: Satisfactory Agency/Agencies: Satisfactory 6 Overall Bank Moderately Overall Borrower Moderately Performance: Unsatisfactory Performance: Satisfactory C\.3 Quality at Entry and Implementation Performance Indicators Implementation QAG Assessments Indicators Rating Performance (if any) Potential Problem Quality at Entry Project at any time Yes None (QEA): (Yes/No): Problem Project at any Quality of Yes None time (Yes/No): Supervision (QSA): DO rating before Moderately Closing/Inactive status: Satisfactory D\. Sector and Theme Codes Original Actual Sector Code (as % of total Bank financing) General agriculture, fishing and forestry sector 15 15 General water, sanitation and flood protection sector 20 20 Other social services 20 20 Rural and Inter-Urban Roads and Highways 15 15 Sub-national government administration 30 30 Theme Code (as % of total Bank financing) Other social protection and risk management 37 37 Participation and civic engagement 21 21 Rural services and infrastructure 37 37 Social Protection and Labor Policy & Systems 5 5 7  E\. Bank Staff Positions At ICR At Approval Vice President: Makhtar Diop Obiageli Katryn Ezekwesili Country Director: Gregor Binkert Mary A\. Barton-Dock Practice Jan Weetjens Ian Bannon Manager/Manager: Project Team Leader: Paul G\. A\. Bance Bernard Harborne ICR Team Leader: Peter F\. B\. A\. Lafere ICR Primary Author: Peter F\. B\. A\. Lafere Felipe Jacome F\. Results Framework Analysis Project Development Objectives (from Project Appraisal Document) The PDO of the Community Development Project is to rehabilitate social infrastructure and improve the capacity of local stakeholders to plan and manage local recovery in targeted areas of CAR\. Revised Project Development Objectives (as approved by original approving authority) (a) PDO Indicator(s) Original Target Formally Actual Value Values (from Revised Achieved at Indicator Baseline Value approval Target Completion or documents) Values Target Years Indicator 1 : Direct Project Beneficiaries 8 Value quantitative or 0 1,005,314 1,005,314 Qualitative) Date achieved 08/31/2009 06/30/2013 05/31/2015 The Results Framework was revised when the project was restructured\. All Comments indicators and targets changed and new PDO indicators were introduced\. (See (incl\. % Restructuring Paper dated June 30, 2013)\. achievement) 100% of target beneficiaries reached\. Indicator 2 : Female Beneficiaries Value quantitative or 0 0 301,594 301,594 Qualitative) Date achieved 08/31/2009 06/30/2013 06/30/2013 05/31/2015 The Results Framework was revised when the project was restructured\. All Comments indicators and targets changed and new PDO indicators were introduced\. (See (incl\. % Restructuring Paper dated June 30, 2013)\. achievement) 100% of target female beneficiaries reached\. Indicator 3 : Investments maintained in a satisfactory way 24 months after implementation Value quantitative or 0 40% 0 n/a Qualitative) Date achieved 08/31/2009 06/30/2013 06/30/2013 05/31/2015 Comments This indicator was dropped at Restructuring (See Restructuring Paper dated (incl\. % June 30, 2013)\. achievement) Sub-projects in which results/outcomes in terms of increased access/use of Indicator 4 : infrastructure were satisfactorily achieved\. Value quantitative or 0 50% 0 n/a Qualitative) Date achieved 08/31/2009 06/30/2013 06/30/2013 05/31/2015 Comments This indicator was dropped at Restructuring (See Restructuring Paper dated (incl\. % June 30, 2013)\. achievement) Targeted Communities that organize quarterly public meetings to report on Indicator 5 : development activities and budgets\. 9 Value quantitative or 0 40% 0 n/a Qualitative) Date achieved 08/31/2009 06/30/2013 05/31/2015 05/31/2015 Comments This indicator was dropped at Restructuring (See Restructuring Paper dated (incl\. % June 30, 2013)\. achievement) Targeted Communities with Local Development Plans developed through a Indicator 6 : participatory process\. Value 36 quantitative or 0 60% 34 communes communes Qualitative) Date achieved 08/31/2009 06/30/2013 06/30/2013 05/31/2015 This PDO indicator was retained at Restructuring, but its target was revised Comments down from 60% (i\.e\. 61 out of 102 targeted communes) to 36 communes\. (incl\. % 94\.4% of the revised target was achieved\. The last plan was approved in achievement) March 2015\. (b) Intermediate Outcome Indicator(s) Original Target Formally Actual Value Values (from Revised Achieved at Indicator Baseline Value approval Target Completion or documents) Values Target Years Members of municipal councils and village councils trained in local Indicator 1 : development Value (quantitative 0 No target 1800 1737 or Qualitative) Date achieved 08/31/2009 06/30/2013 06/30/2013 05/31/2015 Comments This is a new IO indicator introduced at restructuring (See Restructuring Paper (incl\. % dated June 30, 2013)\. 96\.5% of targeted members of municipal and village achievement) council members were trained\. Members of municipal councils and village councils trained in local Indicator 2 : development - female participants 10 Value (quantitative 0 No target 30% 22\.71% or Qualitative) Date achieved 08/31/2009 06/30/2013 06/30/2013 05/31/2015 Comments This is a new IO indicator introduced at restructuring (See Restructuring Paper (incl\. % dated June 30, 2013)\. 22\.71 % of trained members of municipal and village achievement) council members were female\. Training days on community recovery for local stakeholders in ten targeted Indicator 3 : communes Value (quantitative 0 No target 220 198 or Qualitative) Date achieved 08/31/2009 06/30/2013 06/30/2013 05/31/2015 Comments This is a new IO indicator introduced at restructuring (See Restructuring Paper (incl\. % dated June 30, 2013)\. 90% achieved\. achievement) Indicator 4 : Number of additional primary classroom built or rehabilitated under the project Value (quantitative 0 no original target 111 120 or Qualitative) Date achieved 08/31/2009 06/30/2013 06/30/2013 05/31/2015 Comments A formal target value was introduced in the Restructuring Paper of June 30, (incl\. % 2013\. 108% achieved\. achievement) Indicator 5 : Improved community waterpoints constructed or rehabilitated under the project Value (quantitative 0 no original target 76 78 or Qualitative) Date achieved 08/31/2009 06/30/2013 06/30/2013 05/31/2015 Comments A formal target value was introduced in the Restructuring Paper of June 30, (incl\. % 2013\. 103% achieved\. achievement) Indicator 6 : Health facilities constructed, renovated, and/or equipped under the project 11 Value (quantitative No original 0 21 20 or target Qualitative) Date achieved 08/31/2009 06/30/2013 06/30/2013 05/31/2015 Comments A formal target value was introduced in the Restructuring Paper of June 30, (incl\. % 2013\. 18 health posts and 2 community pharmacies - 95% achieved\. achievement) Indicator 7 : Improved latrines constructed under the project Value (quantitative No original 0 58 46 or target Qualitative) Date achieved 08/31/2009 06/30/2013 06/30/2013 05/31/2015 Comments A formal target value was introduced in the Restructuring Paper of June 30, (incl\. % 2013\. 18 health posts and 2 community pharmacies - 79% achieved\. achievement) Indicator 8 : Other social public infrastructures constructed or rehabilitated under the project Value (quantitative 0 No target 18 16 or Qualitative) Date achieved 08/31/2009 06/30/2013 06/30/2013 05/31/2015 A formal target value was introduced in the Restructuring Paper of June 30, Comments 2013\. 9 manioc drying areas, 4 warehouses, 2 playgrounds and 1 bridge\. The (incl\. % 2 community pharmacies are included under the health facilities indicator - achievement) 89% achieved\. Indicator 9 : Targeted villages which have received capacity building support Value (quantitative 0 50% 0 n/a or Qualitative) Date achieved 08/31/2009 06/30/2013 06/30/2013 05/31/2015 Comments This indicator was dropped at Restructuring (See Restructuring Paper dated (incl\. % June 30, 2013)\. achievement) Targeted villages have representative and participatory bodies (VCDs) Indicator 10 : assuming their roles in local development (planning and management of local sub-projects) 12 Value (quantitative 0 50% 0 n/a or Qualitative) Date achieved 08/31/2009 06/30/2013 06/30/2013 05/31/2015 Comments This indicator was dropped at Restructuring (See Restructuring Paper dated (incl\. % June 30, 2013)\. achievement) Communes in target area with functioning and representative coordination Indicator 11 : bodies with regular meetings Value (quantitative 0 50% 0 n/a or Qualitative) Date achieved 08/31/2009 06/30/2013 06/30/2013 05/31/2015 Comments This indicator was dropped at Restructuring (See Restructuring Paper dated (incl\. % June 30, 2013)\. achievement) Targeted communes with non-CDP funding coordinated by the local authority Indicator 12 : (commune, sub-prefect or prefect) (number) Value (quantitative 0 No target 0 n/a or Qualitative) Date achieved 08/31/2009 06/30/2013 06/30/2013 05/31/2015 Comments This indicator was dropped at Restructuring (See Restructuring Paper dated (incl\. % June 30, 2013)\. achievement) Indicator 13 : Roads Constructed, rural (km) - PRF Value (quantitative 0 No target 0 n/a or Qualitative) Date achieved 08/31/2009 06/30/2013 06/30/2013 05/31/2015 Comments This indicator was dropped at Restructuring (See Restructuring Paper dated (incl\. % June 30, 2013)\. achievement) Indicator 14 : Roads Constructed, rural (km) LDF 13 Value (quantitative 0 No target 0 n/a or Qualitative) Date achieved 08/31/2009 06/30/2013 06/30/2013 05/31/2015 Comments This indicator was dropped at Restructuring (See Restructuring Paper dated (incl\. % June 30, 2013)\. achievement) Indicator 15 : Bridges Constructed (number) - RPF Value (quantitative 0 No target 0 1 or Qualitative) Date achieved 08/31/2009 06/30/2013 06/30/2013 05/31/2015 Comments This indicator was dropped at Restructuring (See Restructuring Paper dated (incl\. % June 30, 2013)\. achievement) Indicator 16 : Bridges Constructed (number) - LDF Value (quantitative 0 No target 0 n/a or Qualitative) Date achieved 08/31/2009 06/30/2013 06/30/2013 05/31/2015 Comments This indicator was dropped at Restructuring (See Restructuring Paper dated (incl\. % June 30, 2013)\. achievement) Indicator 17 : Markets Constructed (number) Value (quantitative 0 No target 0 n/a or Qualitative) Date achieved 08/31/2009 06/30/2013 06/30/2013 05/31/2015 Comments This indicator was dropped at Restructuring (See Restructuring Paper dated (incl\. % June 30, 2013)\. achievement) Sub-projects signed by both CDC/VCD, the service provider and implementing Indicator 18 : agency (number) 14 Value (quantitative 0 No target 0 n/a or Qualitative) Date achieved 08/31/2009 06/30/2013 06/30/2013 05/31/2015 Comments This indicator was dropped at Restructuring (See Restructuring Paper dated (incl\. % June 30, 2013)\. achievement) Indicator 19 : Local Development Plans publicized and regularly updated Value (quantitative 50 % (i\.e\. 30 0 0 n/a or communities) Qualitative) Date achieved 08/31/2009 06/30/2013 06/30/2013 05/31/2015 Comments This indicator was dropped at Restructuring (See Restructuring Paper dated (incl\. % June 30, 2013)\. achievement) Indicator 20 : Activities implemented are part of a Local Development Plan Value (quantitative 0 50% 0 n/a or Qualitative) Date achieved 08/31/2009 06/30/2013 06/30/2013 05/31/2015 Comments This indicator was dropped at Restructuring (See Restructuring Paper dated (incl\. % June 30, 2013)\. achievement) People trained in Ministries and PCT involved in project implementation Indicator 21 : (number) Value (quantitative 0 No target 0 n/a or Qualitative) Date achieved 08/31/2009 06/30/2013 06/30/2013 05/31/2015 Comments This indicator was dropped at Restructuring (See Restructuring Paper dated (incl\. % June 30, 2013)\. achievement) 15  Comprehensive annual M&E reports produced on time capturing all relevant Indicator 22 : information including that generated by the communities being used to inform project management (number) Value (quantitative 0 No target 0 5 or Qualitative) Date achieved 08/31/2009 06/30/2013 06/30/2013 05/31/2015 Comments This indicator was dropped at Restructuring (See Restructuring Paper dated (incl\. % June 30, 2013)\. achievement) G\. Ratings of Project Performance in ISRs Actual Date ISR No\. DO IP Disbursements Archived (USD millions) 1 12/29/2009 Satisfactory Satisfactory 0\.58 2 05/28/2010 Moderately Satisfactory Moderately Satisfactory 0\.77 Moderately Moderately 3 03/23/2011 1\.31 Unsatisfactory Unsatisfactory Moderately 4 10/10/2011 Moderately Satisfactory 2\.06 Unsatisfactory Moderately 5 06/03/2012 Moderately Satisfactory 2\.38 Unsatisfactory 6 12/26/2012 Moderately Satisfactory Satisfactory 3\.55 7 07/08/2013 Moderately Satisfactory Satisfactory 4\.74 8 02/04/2014 Moderately Satisfactory Moderately Satisfactory 5\.26 9 08/18/2014 Moderately Satisfactory Moderately Satisfactory 6\.62 10 02/25/2015 Moderately Satisfactory Satisfactory 7\.89 H\. Restructuring (if any) 16  ISR Ratings Amount Board at Disbursed at Restructuring Approved Restructurin Reason for Restructuring & Restructurin Date(s) PDO g Key Changes Made g in USD Change DO IP millions (i) Update of the results framework; (ii) a reallocation of costs among components 06/30/2013 MS S 4\.74 and of proceeds among categories; and (iii) a 12- month extension\. 10 month extension to the project to complete activities 07/31/2014 MS MS 6\.62 that were delayed by the crisis in CAR\. I\. Disbursement Profile 17 1\. Project Context, Development Objectives and Design 1\.1 Context at Appraisal 1\. Successive outbreaks of violence followed by unsuccessful attempts to re-establish stability had created a climate of mistrust and had exacerbated both generic poverty and an ongoing humanitarian crisis across the Central African Republic\. Due to the relative weakness of both Government and rebel forces, CAR has been more affected by ongoing political instability than the kinds of large-scale organized violence witnessed in neighboring countries such as DRC or Sudan\. Nevertheless, such instability, and in particular the inability of the state to effectively project law and order beyond the remits of the capital, continued to have dire humanitarian consequences\. 2\. In June 2007 the Government launched a Poverty Reduction Strategy Paper (PRSP) with four strategic pillars: (i) Restore security, consolidate peace and prevent conflict; (ii) promote good governance and the rule of law; (iii) rebuild and diversify the economy; and (iv) develop human capital\. At that juncture, the Bank sought to support the CAR with an emergency project that focused on improving social infrastructure in marginalized rural areas to contribute to the stabilization of the fragile transition\. 3\. At project design, a new Joint Country Partnership Strategy was being developed in conjunction with the African Development Bank (AfDB) that sought to support an inclusive political dialogue with inclusive development\. The challenge for the Government and for its development partners was to demonstrate a peace dividend for vulnerable marginalized populations\. Recognizing the risks involved, the Bank approach was to engage prudently, tackling key economic reforms as well as providing demonstrative benefits to the population\. 1\.2 Original Project Development Objectives (PDO) and Key Indicators 4\. The development objective of the Support to Vulnerable Groups Community Development Project is to rehabilitate social infrastructure and improve the capacity of local stakeholders to plan and manage community 1 recovery in targeted areas of CAR\. 5\. The original Project Outcome Indicators (KPIs) as outlined in the approved project appraisal document (PAD) were: 1\. Investments maintained in a satisfactory way 24 months after implementation (40%)\. 2\. Sub-projects in which results/outcomes in terms of increased access/use of infrastructure were satisfactorily achieved (50%)\. 3\. Targeted communes with Local Development Plans developed through a participatory process (60%)\. 4\. Targeted communes that organize quarterly public meetings to report on development activities and budgets (40%)\. 1 There are three different definitions of the PDO\. The PAD’s PDO in the main text is to “… and manage local recovery in targeted areas of CAR, while the PDO in the PAD’s Results Framework is to “… and manage community recovery in targeted areas of CAR”\. The Financing Agreement’s PDO is to “… and manage community recovery in targeted areas of the Recipient’s Territory”\. Outcomes will be assessed against community recovery as per the formulation in the Financing Agreement and Results Framework, and we will use CAR throughout the text for the Recipient’s Territory\. 1 The targeted areas are the 102 communes that make up the four Southern regions of CAR\. Of these, 54 communes were further identified in 2010 for infrastructure investments through the Baseline Study for the Impact Evaluation\. 1\.3 Revised PDO (as approved by original approving authority) and Key Indicators, and reasons/justification 6\. The project was formally restructured on June 30, 2013 following a fast-tracking of the implementation of the project after the MTR in July 2012, but also to adapt the project to the new operational circumstances of the political and security crisis in CAR that led to the triggering of OP 7\.30 on May 31, 2013 and the temporary suspension of construction works\. Although the original PDO, the components and the activities were not formally revised, there were key changes on the implementation arrangements and on the local community’s role that were not included in the Restructuring Paper\. The four original Project Outcome Indicators were revised into two new PDO level Results Level Indicators: 1\. Direct project beneficiaries (# inhabitants, # communes) 2\. Female beneficiaries (30% of direct project beneficiaries) 7\. The revisions to the PDO level results indicators and the revisions to intermediate level results indicators in the results framework were justified with the following reasons: (a) Propose set of indicators that better illustrate progress in project´s implementation; (b) take into account technical constraints in data collection and synchronize it with the Client´s M&E system; and (c) include relevant Core Sector Indicators\. 1\.4 Main Beneficiaries, 8\. The project focused on beneficiaries in marginalized rural areas with weak local governments and poor social infrastructure, and particularly on the four southern regions (Region 1, 2, 4, and 6), which at project design stage were relatively more stable than the low intensity conflict zones in the three Northern regions\. These four regions are divided into the nine prefectures of Nana Mambere, Mambere Kadei, Shangha Mbaere, Ombella-Mpoko, Lobaye, Kemo, Ouaka, Basse Kotto, and Mbomou which are further divided administratively into 102 communes\. In these prefectures, (i) about 50 communes would benefit from capacity strengthening for local development; (ii) about 75 villages would be targeted for priority investments; and (iii) about 40 communes and 80 villages having elaborated local development plans would have access to social infrastructure investment\. 2 Additionally the project would build capacity at project level and of Ministry structures at central, regional, prefectural and sub-prefectural levels\. 9\. By the end of the project: (i) Forty-five communes benefitted from capacity strengthening for local development, 34 of which developed local development plans through a participatory approach; (ii) 1,737 members of municipal councils and village councils trained in local development, 3 (iii) 23 communes received social infrastructure investments, 10 of which in accordance with their local development plans\. 4 2 PAD, Annex 1: Detailed description of project components, p\. 26-29\. 3 ISR 10\. 4 SEE ANNEX 1 for the full list of communes that benefitted from the various components\. 2 1\.5 Original Components (as approved) 10\. The project had the following four components that focused on the improvement of social infrastructure and strengthening of local stakeholders: - Component A: Capacity Strengthening for Local Development (US$1\.5 million) which sought to empower rural communes and villages to prepare and implement development plans in an inclusive manner, with adequate support from Government staff\. The Field Guide also incorporated innovative tools and approaches for human security reporting and conflict prevention at the local level\. The methodology employed permitted targeted communes and villages to establish, or where already in place, strengthen Village Development Committees (VDCs) and Communal Development Committees (CDCs), reinforce the capacities of de-concentrated line ministry staff and local administrations to support the planning and implementation of these activities; foster trust and mitigate conflicts between communities and Government; and stimulate the effective communication between diverse stakeholders involved in local development\. - Component B: Priority Response Fund (US$1\.86 million): The priority response fund’s (PRF) objective was two-fold: (i) offer a window of opportunity to expedite the delivery of most-needed resources; and (ii) encourage participation and buy- in of the project by demonstrating a rapid tangible dividend to collaboration\. This component disbursed funds in small increments to finance sub-projects that are ready for implementation\. 3  - Component C: Local Development Fund (US$2\.79 million): The objective of the LDF was for rural communes and villages to identify public socio-economic investments through a local development planning process\. Service providers were contracted by the CDP to undertake these investments during the course of the project\. The focus of the fund was on community public goods and complemented the AfDB community fund, which focused on individual benefits and income generation activities\. - Component D: Project Management, Monitoring, and Evaluation (US$l\.85 million): This component supported a Project Coordination Team (PCT) responsible for technical and fiduciary oversight of the project\. Monitoring and Evaluation focused on results-oriented data collection to inform decision-making and impact evaluation\. 1\.6 Revised Components 11\. The components remained the same throughout project implementation\. 1\.7 Other significant changes 12\. Extensions\. The Country Director (CD) approved two no-cost extensions—from July 2013 to July 2014 (12 months) and from July 2014 to May 2015 (10 months)\. Both extensions were needed to make up for delays resulting from the deteriorating security situation in the country since December 2012 and the triggering of OP 7\.30 from March to November 2013\. According to the Restructuring Paper of 2013, notwithstanding the crisis, the project could have been successfully completed on time\. 13\. Reallocations\. The CD approved the reallocation of funds as a part of the July 2013 restructuring to match the project’s contractual commitments and implementation strategy, and fund an additional year of project management\. The project costs were reallocated among components to reflect the dynamics of implementation, in particular (i) the completion of the Capacity Strengthening component; (ii) the improved procurement and disbursement of the PRF; (iii) the revised implementation strategy for the LDF that would focus on only 10 communes; and (iv) an additional year of project management\. The Table below reflects the reallocations in project funding\. Project costs (US$, million) Component Initial Revised Final Capacity strengthening for Local Development 1\.5 0\.8 0\.78 Priority Response Fund 1\.86 3\.4 3\.10 Local Development Fund 2\.79 1\.7 1\.53 Project Management, monitoring and Evaluation 1\.85 2\.1 1\.99 Total 8\.0 8\.0 7\.40 2\. Key Factors Affecting Implementation and Outcomes 2\.1 Project Preparation, Design and Quality at Entry 4 14\. Adequacy of government commitment\. The commitment of the government was assured early on in the preparation phases\. The project was designed in consultation with an Inter- Ministerial working group that included representatives of the Ministries of Social Affairs, Rural Development, Communication, Planning, Education, Health, Environment, Water and the High Commission for Decentralization\. This high level of dialogue was set up to continue through a standing Inter-Ministerial Steering Committee\. As the implementing ministry, the Ministry of Social Affairs created a lightly-staffed Project Coordination Team (PCT) to manage the project and four regional offices to oversee the operations from the provincial hubs\. Given the modest capacity of the CAR, it took approximately 12 months to set up the PCT, but once in place was fully effective\. 15\. Soundness of background analysis\. The project was prepared under OP 8\.00 Rapid Response to Crisis and Emergencies by a team of CDD experts with in-depth experience of designing and managing operations in fragile and post-conflict situations\. The project design incorporated lessons learned from prior LICUS funded CDD activities and from the multi-sectoral HIV/AIDS project, both in CAR\. It also drew on a June 2006 Bank review of CDD operations in the context of conflict- affected countries\. In addition, the team conducted a round-table review with stakeholders and NGOs in Bangui\. The design, however, was based on the mistaken assumption that there were pre- existing regional development plans and/or community needs assessments available from which social infrastructure needs could be rapidly identified for priority rehabilitation under the PRF in the first 12-18 months\. 16\. Assessment of project design\. First, the project’s choice to focus on beneficiaries in vulnerable and marginalized rural areas was based fully appropriate for the country context and based on the following key learnings (i) ensure to contribute to quick stabilization of the country by demonstrating a peace divided for vulnerable populations; (ii) involve communities in the recovery phase; (iii) focus on vulnerable and marginalized regions; (iv) build capacity at central and decentralized levels; ensure qualified financial and procurement staff for agile implementation\. However, second, the design was overly ambitious in scope and intended impact: the geographical coverage, 61 5 communes spread over 4 regions, was not aligned with the available financing of USD 8 million, and the intended impact on trust and peacebuilding with the communities were not the proposed small scale rehabilitation activities\. Third, the design of the implementation arrangements with the selection of AGETIP-CAF as the first year project implementing entity based on their prior experience with World Bank fiduciary procedures and with the specific objective of building capacity did not take into account the key objective of the PRF in “expediting the delivery of most-needed resources” 6 \. The selection of one or more INGOs for the rapid identification and construction of social infrastructure under the PRF would have been more appropriate based on the LICUS project in CAR and other post conflict experience\. Fourth, the initial results framework’s indicators did not align with the project development objectives\. Neither project nor intermediate outcome indicators were well defined and failed to set targets, hindering effective monitoring and decision-making\. OP 8\.00 Rapid Response to Crisis and Emergencies was meant to allow for faster project preparation, based on partial information, but given that shortcomings in design and background analysis became apparent within the first year of implementation, an early restructuring to address these issues would have been appropriate\. 5 One PDO Indicator aimed to achieve that 60% of the 102 communes would have local development plans developed through a participatory process\. 6 PAD\. p\. 8, par 3\.8 5 17\. Risk assessment\. The overall risk of the project was rated as Substantial at entry\. It was accurately highlighted that despite the high risks regarding the uncertain and volatile security and political situation, the greater risk would have been to fail to support post-conflict recovery\. Furthermore, the operation directly sought to mitigate some of the causal factors of the unstable political situation by working to restore trust between citizens and government\. Other operation- specific risks adequately assessed and addressed at the project level were: (i) Corruption and weak implementation capacity at central and decentralized levels, for which the project put in place an experienced Project Coordination Team, provided capacity building to national and regional authorities, and used AGETIP-CAF, a public implementing entity with World Bank experience, for fiduciary management; and (ii) Elite capture of sub-project activities in the communes and villages for which transparency mechanisms were put in place in the training and constitution of VDCs and CDCs\. The risk of unsustainable social infrastructure investments as a result of lack in local development planning was identified, but not effectively mitigated\. The capacity building component focused on the transfer of knowledge and expertise to communities and villages to identify local development needs and develop local development plans, but did not include arrangements for transfer of the constructed infrastructure to relevant authorizes, nor for sustainable management and maintenance\. 18\. AfDB funding\. This project was prepared in parallel to an African Development Bank project that shared the same name, implementation structures, geographic coverage and modus operandi\. This arrangement was conceived in the context of the joint 2007-2008 AfDB/World Bank Interim Strategy for the CAR, and sought to deepen the impact of the project in beneficiary areas\. The key difference between the designs of the two projects was that the AfDB funding would cover income- generation and micro-credit activities in the same communities\. 2\.2 Implementation 19\. Mid-Term Review and Restructuring\. The decisions taken in the MTR and formalized in the first restructuring took 4 measures to address the flaws in project design, simplify the project and increase disbursement of the project\. These measures consisted of: 1\. A dedicated project implementation unit was set up within AGETIP-CAF that streamlined the procurement process and allowed for faster procurement authorizations\. This unit would focus on the construction activities that had already been identified under the PRF component\. 2\. Two international NGOs, ACTED and COOPI, were contracted to implement the LDF component\. Both NGOs had a strong network and experience with community development in the country, and they were allowed to sub-contract construction works directly themselves\. They were also contracted to provide capacity building and training to local development committees in the development and implementation of local development plans 7\. 3\. The number of beneficiary communities that would receive LDF funds under the project was reduced from 36 to 10\. The 36 had been randomly selected after the base-line study; the 10 were those communities that had completed their Local Development Plans at the time of the MTR\. 4\. The Results Framework’s PDO Level and Intermediate Indicators were updated to better be able to track progress in the project’s implementation\. The new indicators set clear targets for all project components\. 7 COOPI halted operations during and after the crisis in the country\. ACTED assured the completion of the affected activities\. 6 20\. While project design changed significantly at the MTR/Restructuring, the PDO did not\. There was a clear shift away from the originally intended CDD approach, because of the need to speed up project implementation, the deteriorating country context, and the actual rehabilitation/reconstruction needs as assessed in the baseline study\. The late stage in project implementation of the restructuring and the decision not to formally change the PDO contributed greatly to the moderately unsatisfactory rating of the outcomes (see 3\.2 Achievement of Project Development Outcomes)\. 21\. Beneficiary selection\. The selection of beneficiary communes and villages changed significantly after Board approval of the project\. The project paper describes targeting based on existing local and communal development plans and other needs assessments, on consultation with the Inter-Ministerial Steering Committee, and on a rapid assessment for the priority activities\. It describes that targeting for the community development activities would be done in consultation with the Regional PRSP Monitoring Committee and regional prefects based on availability of local development plans, community contributions, inter-village collaboration villages, and needs based criteria\. While the project paper’s activities includes an impact assessment, it was not clear to the borrower that this signified a targeting of beneficiary communities through random selection of eligible communities\. 45 out of 102 communes in the intervention area were randomly selected initially\. Ultimately, only 10 of these received financing for the reconstruction of social infrastructure in their local development plan\. 22\. Handover to the government and sustainability of works\. While fortunate to have had a good continuity of staff within the PCT and at lower Ministerial levels, handover of infrastructure to line Ministries suffered due to a large turnover of Ministers and to a large number of people required to be present at Steering Committee meetings\. As of this evaluation, handover of infrastructure to line Ministries has not taken place\. At a local level, handover has also been hindered by the unabated displacement and disarticulation of local authority structures\. Moreover, the sustainability of project infrastructure is also threatened as not all health centers and schools built by the PRF were equipped within the project\. 8 23\. Delays in AfDB financed project preparation and implementation, and absence of coordination\. The World Bank and the AfDB financed projects were conceived as complementary, parallel projects coordinated by a joint PCT and using the same structures at national, regional and local level\. AfDB financing was approved with a delay of one year (date) after the World Bank and the two Banks only conducted two joint supervision missions (December 2011 and the MTR in July 2012)\. Reflecting the delays in implementation, at the MTR the target areas were divided up between the two projects contributing to a further diverging approach and reducing the demonstration effect of the project´s social infrastructure works\. In response to the crisis, AfDB suspended disbursement for (x) months longer than the World Bank until (month) 2015 which affected the WB financed project in two ways: (i) Key PCT staff who had been funded under the AfDB project could not resume work when WB financed operations started again; and (ii) AfDB financed activities were further delayed and the project was extended\. Factors outside of the control of the Government/Implementing Partners 8 Schools built by ACTED for the LDF were equipped\. Those managed by AGETIP-CAF for the PRF have not\. The PCT hopes to furnish and equip these schools with AfDB’s financing of the project\. 7 24\. Volatile security situation\. The security situation started to deteriorate in November 2012 when the new Séléka rebel coalition rapidly overran the north and center of the country\. In March 2013, Séléka rebels took over the capital and seized power\. President Bozizé fled and rebel leader Michel Djotodia suspended the Constitution and dissolved parliament in a coup d´état\. The escalating conflict fueled widespread displacement across the country\. As of May 2015, over 400,000 people are still displaced\. Owing to uncertainty and the safety risks of Bank staff in CAR, the World Bank Group, in consultation with UN security authorized the evacuation of its staff to Yaoundé, Cameroon\. 25\. Triggering of Operational Policy 7\.30 and project resiliency\. Following the coup d´état on March 24, 2013 the World Bank triggered Operational Policy 7\.30, which led to the temporary suspension of disbursements until September 2013\. In spite of the difficult environment in country and the triggering of OP 7\.30 the project remained active\. At the height of the crisis the project implemented a Mitigation Plan (June 2013) and a Recovery Plan (January 2014) that consisted mainly in (a) securing the project’s sites where construction had started prior to the crisis and (b) mitigate losses incurred on the project, and (c) complete remaining civil works\. These proactive measures were complemented by a high degree of luck that project infrastructure was not widely looted during the conflict\. 26\. Nonetheless, the project did suffer significant setbacks during the crisis\. Obstacles in the implementation of activities included: the high levels of insecurity restricted access of contractors, project staff and World Bank missions to communities, local authorities and project stakeholders were displaced or left (and in many cases had not returned by the end of the project), prices for construction materials increased, regional offices and vehicles of the PCT were looted resulting in a loss of assets and data\. The insecurity also directly impacted contracting companies and their personnel: one employee of company was killed and two were severely injured in an incident at a checkpoint on the way to the construction site\. 2\.3 Monitoring and Evaluation (M&E) Design, Implementation and Utilization 27\. M&E design\. The project’s M&E was designed to be supported by a simple Management Information System that relied on AGETIP-CAF and their regional offices to supervise the works, and monitor and evaluate progress through quarterly, bi-annual and annual reports\. An impact evaluation, including a randomized control trial (RCT), for the Community Development Program was included in the design of the project\. The result framework indicators were not aligned with the objectives of the project and focused heavily on outputs (16 intermediate indicators), rather than on outcomes (3 intermediate indicators)\. Indicators to measure the construction of facilities and (number of water points, health facilities, classrooms, bridges or markets constructed) and works (km of roads) had no target values or no base-line against which output, progress or impact could be measured\. Some indicators were not clearly defined (“health facilities constructed, renovated, or equipped”, “sub-projects in which results/outcomes in terms of increased access/use of infrastructure were satisfactorily achieved”), or lacked reference to quality of the infrastructure itself or of the services provided with it (e\.g\. availability of qualified teachers or health care personnel, equipment, etc\.)\. There were no indicators that monitored impacts on beneficiaries\. The task team simplified and improved the indicators at the MTR in 2012 with disaggregated beneficiary indicators and target output indicators, but only formalized them a year later in the restructuring of the project in 2013\. 28\. M&E implementation\. An international consultant helped set up a monitoring and evaluation system early on in the project, and the Bank team used a dashboard to track progress against inputs 8 and activities\. However, the project did not have an M&E Specialist as had been foreseen, and relied on the project coordinator to complete the progress reports\. After the MTR a new monthly operational progress report was agreed that included specific reporting against the revised project indicators\. Significant areas of progress or delays were also described in detail in AM and Bank supervision reports\. The ICR team was not able to verify timeliness, accuracy and completeness from regional to national level, as regional records had been lost when regional bureau were looted during the 2013 crisis\. The project completed a detailed baseline study with the Central-African Institute of Statistics and Socio-Economic Studies (ICASEES) within the first year that allowed the project team to select the beneficiary communities, but dropped the Impact Evaluation component (date) due to security constraints\. For the same reason, no beneficiary assessments were undertaken\. 29\. M&E utilization\. The baseline study was used to identify beneficiary communities\. The information generated and reported in the monthly operational and financial reports contributed to a close collaboration between the Bank team, the PCT, AGETIP-CAF and the field staff\. However, there was little use of the M&E information at CNP level\. 2\.4 Safeguard and Fiduciary Compliance 30\. Safeguards\. The project was classified as an environmental category B project at appraisal and triggered OP/BP 4\.01 Environmental Assessment, OP/BP 4\.12 Involuntary Resettlement, and OP/BP 4\.10 Indigenous Peoples\. The project was processed under OP 8\.00 Rapid Response to Crises and Emergencies and an Environmental and Social Management Framework (ESMF), a Resettlement Policy Framework (RPF) and an Indigenous Peoples Plan (IPP) were developed, consulted and disclosed within the first year of project implementation\. The IPP includes a detailed social assessment of Aka in CAR\. There is no record that the Bank team provided safeguards capacity building or implementation support to qualified personnel at AGETIP-CAF or the PCT\. AGETIP-CAF did not supervise or report on compliance with World Bank safeguards on an ongoing basis, and did not conduct the annual technical audits in which they would have to report on compliance with the safeguards\. In Mambere Kadei, the project selected the construction of a pharmacy from the LDP in consultation with the Aka families that live in the area\. None of the sub-projects resulted in the need for physical or economic displacement\. The project was consistently rated satisfactory for overall safeguards until August 2014 when it was downgraded to moderately satisfactory because supervision missions to the field were no longer possible as a result of the security situation\. 31\. Procurement ratings in the ISR evolved significantly throughout the project implementation period\. Procurement was rated moderately satisfactory for the first four ISR when the procurement plan included procurement of goods, equipment and the procurement of studies and consultancies, but was downgraded to moderately unsatisfactory in 2011 when capacity issues and slow management procedures contribute to a delay of the procurement of the rehabilitation and construction activities of the PAF\. After the recruitment of a new procurement specialist in the PCT, the reorganization of the procurement processes within AGETIP following the MTR, and the procurement of INGO ACTED which would contract construction companies directly for the implementation of the LDF construction activities through the ‘envelope approach’, the quality and quantity of contracts increased dramatically and the rating was upgraded to satisfactory and highly satisfactory for the remaining 3 years of the project\. A best practice note was issued by the Regional Procurement Manager based on the success of the LDF procurement9\. 9 “Dealing with Fiduciary and Governance Challenges for CDD in FCS” – OPCS How- To-Notes series\. 9 32\. Financial Management ratings evolved from moderately satisfactory in the period 2010 – 2013 to satisfactory from 2013 onwards\. Financial reports and audit reports were produced regularly and on time\. Issues that depressed the financial management ratings in the first 3 years included a slow procurement of the auditor in 2010, delays in the set-up of the PCT as a result of delays in the AfDB contribution of the financing, and delays in in DRF which resulted in budgetary constraints\. Financial management was rated satisfactory at during the last supervision mission\. 2\.5 Post-completion Operation/Next Phase 33\. The PCT will remain operational for at least another year to implement the AfDB financed activities in the project areas, and will ensure the completion of the two LDPs that were not finalized before the end of the project, and to ensure the equipment and transfer of the constructed school and health facilities to their respective line-ministries and local authorities to ensure that they are sustainably managed and maintained\. 34\. The need for basic social infrastructure remains high, and a CDD approach to rehabilitate or construct this infrastructure remains valid, particularly in those 24 communities in which the project supported the formation of CDCs and CDVs and developed LDPs, but where it did not finance the priorities that the community identified\. There was consensus among the stakeholders that were interviewed for this ICR that in the medium term financing for the LDPs will be important\. However, after the violent crisis, the internal displacement, the absence of state presence and services, as well as employment opportunities other than with armed groups, in the short term it is important that social cohesion is boosted through immediate tangible results\. For this reason, a new project (LONDO) is being financed by the Bank that focuses on public infrastructure works that maximize opportunities for the employment of labor and local resources\. 3\. Assessment of Outcomes 3\.1 Relevance of Objectives, Design and Implementation The overall relevance of the project is rated Substantial\. 35\. First, the relevance of project objectives is rated high because objectives under the project are highly consistent with the CAR Country Engagement Note (CEN) for FY16-17, in which key objective 3 is to provide Support to basic social service delivery in order to support the gradual return of social services beyond the current humanitarian relief, the return of government paid teachers and health workers, particularly outside Bangui, and support to basic social infrastructure\. Similarly, building capacity to plan and manage local recovery is equally consistent with key objective 1 strengthening public sector capacity and enable the government to fulfill its core functions and gradually restore authority and legitimacy over the territory and population\. In addition, as a most of the social infrastructure was built during and shortly after the crisis, the objectives have contributed to the CEN First Phase - Support to Stabilization: in which the immediate priority is to break out of the repeated cycles of violence, begin to build confidence in the transitional process, restore some basic functions of the state, and underpin reconciliation by providing some early tangible outcomes in support to livelihoods and basic social service provision\. 36\. At project approval, the objectives of the project were also supporting (i) The Government’s development priorities and strategy at the time of design, notably of Pillar 1 and 4 of the 2009-12 Poverty Reduction Strategy Paper (PRSP) which were resp\. restoring security, consolidating peace and preventing conflict; and improving access to social services and rehabilitation of basic infrastructure, (ii) the WB-AfDB Joint Interim Strategy Note (JIS) FY07-08 Pillar 2: Support human development with emphasis on the poor which focused on increasing the supply of and 10 improving access to basic social services for the most vulnerable groups, and strengthening the technical capacity of decentralized communities in formulating their development policies and their management tools\. 37\. Second, relevance of project design is rated moderate\. The project’s components’ outcomes and activities were essentially well designed to achieve the original PDO and its indirect peacebuilding objectives\. The design, however, underestimated the ambitious geographical coverage of the project and the lack of pre-existing local development plans or data based upon which a rapid selection for priority construction of social infrastructure could be made\. The analysis of alternatives and lessons learned from previous projects focused primarily on the CDD component, and less on the priority rehabilitation or construction of social infrastructure\. The design of the results framework could have been more explicit on the phasing of the early construction of priority infrastructure and the community driven approach of infrastructure under the local development fund\. 38\. Third, the relevance of project implementation is rated substantial because of regular implementation support missions, timely key decisions at the start, MTR and restructuring of the project such as to start the priority needs assessment within 12 months of project launch, to create a dedicated project cell within AGETIP-CAF and contract an International NGO to speed up project implementation, to re-engage with key activities under OP 7\.30 when other multilaterals did not, and to shift the focus away from CDD\. 3\.2 Achievement of Project Development Objectives 39\. The overall development objective of the Community Development Project consists of three separate-but-linked objectives in targeted areas of CAR: (1) To rehabilitate social infrastructure; and (2) To improve the capacity of local stakeholders to plan and manage local recovery\. 40\. These PDOs are broad, and neither the original project outcome indicators nor the new, restructured project outcome indicators can easily capture the achievement of the objectives\. Both restructured PDO Indicators’ target values were achieved at 100%: 1,005,314 direct project beneficiaries of which at least 30% or 301,591 female project beneficiaries\. PDO1: Rehabilitate Social Infrastructure The achievement of this PDO is rated Moderate\. 41\. By the end of the project, 120 additional primary classrooms were built or rehabilitated (target 111), 78 improved community water points were constructed or rehabilitated (restructured target 76), 18 health posts and 2 community pharmacies were constructed or renovated (restructured target 21), 46 improved latrines were constructed (restructured target 58) and 16 other social public infrastructures (9 manioc drying areas, 4 warehouses, 2 playgrounds, and 1 bridge) were constructed or rehabilitated\. The target values of the type and quantity of social infrastructure to be constructed or rehabilitated were only agreed at the MTR (June 2012) and formalized at the first Restructuring of the project in June 2013\. The project achieved its objective of rehabilitating social infrastructure, but had a three minor shortcomings that affect its rating: 42\. First, the revised project did not include outcome indicators to measure quality of construction, satisfactory maintenance or increased access or use\. Because there are no technical audit reports, or technical supervision reports, and the security situation did not permit an ex-post evaluation, 11 there is no evidence on the quality of the infrastructure\. Second, to contribute to community trust and peacebuilding, the story-line of the design of the PDO included priority rehabilitation activities for completion within 12-18 months and a target that 50% of infrastructure activities were part of a LDP\. Neither were achieved\. Third, the construction delays and political crisis contributed to a delay in formally transferring the infrastructure to the relevant authorities, and some furniture and/or equipment was not in place at the end of the project\. It is, however, expected that this will occur under the continuing financing of the AfDB project\. PDO2: improve the capacity of local stakeholders to plan and manage local recovery The weighted achievement of this PDO2 is rated moderate 10 and is comprised of a weighted rating of achievement towards the original PDO prior to the June 2013 project restructuring and rating of the achievement towards the revised PDO\. Weighting is done pro rata the rate of the disbursement prior to and after the Restructuring of 30 June 2013: 57\.23% 11 43\. The achievement of PDO2 vis-à-vis the original project objectives is rated moderate\. The original key targets for this PDO2 were that 60% of communities in targeted areas (hence 61 out of a total of 102 communities in the targeted areas) would have LDPs in place\. Only 34 were achieved by the end of the project (33%)\. Only 33 of these were formally adopted and publicly available (32% of a target of 50%)\. The target that 50% of villages receive capacity building support was never monitored, but given that only 443 VCDs from 36 communities participated in training, it is unlikely that these would add up to 50% of all villages within the targeted area\. 44\. The achievement of PDO2 vis-à-vis the revised project objectives is rated moderate as the Restructured Project formally revised the target for the participatory development of local development plans down to 36 and achieved the development of 34\. Arrangements were made to ensure the finalization of the final two LDPs with financing and support from the AfDB and other development partners\. 1,737 members from 443 VCDs and 36 CDCs received training in the planning of local development against revised targets of 1,800 (97% achieved)\. Only 22\.71% of trainees were female (target 30%)\. In addition, the members of the 10 CDCs which had developed their local development plans by MTR were trained in techniques for the financing and management community projects, in maintaining infrastructure sustainably, and in school management techniques for those communities that had schools built 12\. 91 field agents of the Ministry of Social Affairs were trained to accompany communities in local development processes and 54 field agents of the Ministry of Rural Development were trained in participatory assessment methodology – key skills that will leave communities with improved capacity for future development planning\. 3\.3 Efficiency Efficiency is rated Moderate\. 45\. A comprehensive financial and economic analysis was not carried out for this ICR because of several reasons\. First, no cost-benefit analysis was done at project entry\. Second, in the project paper, and prior to the completion of the ICASEES study, the emphasis had been focused on smaller-scale rehabilitation activities of existing infrastructure and not on construction of new infrastructure\. Third, there are few statistics or data available in CAR to do a comparative intra- 10 (2 x 0\.57) + (3 x 0\.43) = 2\.43 / moderate 11 USD 4\.74 million disbursed on 30 June 2013; USD 8\.28 million total disbursement\. 12 ACTED, Final Report\. 12 country cost analysis\. The political crisis delayed or suspended many other projects for longer than this project and therefore could not be used to compare against\. Similarly, Economic Rate of Return (ERR) analysis was not feasible for lack of direct beneficiary or usage data\. Fourth, construction contracts varied significantly in terms of scope of works, and cost depended on a number of factors such as availability and distance to building materials, quality of access roads particularly during the wet season, and whether qualified local (regional) companies were available\. This made ex- post comparison between contracts less straightforward\. Furthermore, fifth, without technical audit reports it is not possible to assess the quality of the constructed infrastructure 13\. 46\. Project efficiency was included in the design of the project through the objective to minimize administrative costs through: (i) Cost-sharing of PCT staff with the parallel-AfDB financed project; (ii) use of AGETIP-CAF structure as maître d’ouvrage délégué for the construction and rehabilitation activities; (iii) relying on NGOs and the private sector for the delivery of sub-projects; and (iv) the project followed vigorous fiduciary procedures to ensure cost efficiency\. 47\. Cost effectiveness\. An analysis of a limited number of contracts that focused on the construction of specific infrastructure resulted in the following unit costs of RPF contracts procured by AGETIP-CAF: community water points US$9,209 per water point; schools US$ 68,908 per school or US$ 22,969 per classroom 14; and construction of health posts US$69,731\. The project’s unit cost per classroom is marginally (1\.26%) cheaper than UNICEF which also had a school component in their program from 2012 to 2015 and had an average unit cost of US$23,259, but considerably higher than the Education Sector Development Project (P112321) average unit cost of US$ 19,519 for constructing a classroom in the period in the period of 2009 to 2012\. Factors that could explain the Education Sector Development Project’s lower unit are elaborated in Annex 3\. No similar projects were identified to compare the cost of health posts or water points\. Looting of regional offices and the loss of project vehicles had a negative effect on cost efficiency\. 49\. Capacity Strengthening for Local Development cost US$ 0\.78 million, around 10% of the operations total cost and only half of what was originally budgeted for this activity\. It included the development of the necessary studies and manuals, vehicles and office equipment, and training for PIU, MDOD, central, regional and local stakeholders as well as the training and set up of VCDs and CDCs\. This capacity building was crucial for a country that had only recently re-engaged with multilateral financing agencies, and important for the sustainability of the investments\. In addition, the Project Coordination, Monitoring and Evaluation cost nearly US$ 2 million or one quarter of the budget, demonstrating the high cost of operating in fragile and conflict-affected environments\. 50\. Efficiency of implementation was excellent following the MTR of 2012, but, as indicated in other sections, compromised by three factors\. The most important one of these was the absence of local development plans and regional needs assessments upon which basis the priority construction would be identified\. AGETIP-CAF’s internal management processes and use of National Competitive Bidding prior to the MTR contributed to the slower than planned implementation of the project, but could also have had a positive influence of the overall efficiency of the individual activities\. The third factor was the political crisis with the suspension of project activities because of security concerns and OP 7\.30, and with the absence of key PIU personnel as a result of AfDB’s 13 A lot of infrastructure was only built between April 2014 and April 2015, and it would have been difficult to commission a technical audit before the end of the project in May 2015 even regardless of the security and access issues\. 13 longer suspension of their activities\. On the whole, the project was delayed with two extensions totaling 22 months\. 51\. This delay, however, would have been longer without the key decisions that were taken at the MTR\. The first decision that was taken streamlined AGETIP-CAF project execution and procurement processes through the creation of a dedicated cell and led to a dramatic improvement of the performance of the MDOD in the project and organizational reform within AGETIP-CAF as a whole\. The organizational reform benefitted the implementation of nearly all other Bank financed operations in the country that also work with AGETIP-CAF\. The second decision was to develop and apply the innovative approach of “envelope procurement” through ACTED for the LDF construction and rehabilitation activities\. This approach is considered best-practice and was featured a Bank OPCS Guidance How-To-Note on “Dealing with Fiduciary and Governance Challenges for CDD in Fragile and Conflict-Affected Situations\.” 52\. Even though traditional measures of financial and economic analysis cannot fully quantify the efficiency of the project, no significant shortcomings in the operation were identified, and efficiency was clearly an area of focus both at project entry and throughout the operation\. Efficiency of implementation was exceptional from 2012 – 2015, especially under the difficult circumstances of the political crisis\. For these reasons, the project’s efficiency is rated Moderate\. 3\.4 Justification of Overall Outcome Rating 53\. Rating: With a Substantial relevance, a Substantial rating on PDO1 and a Moderate rating on PDO2, and Substantial efficiency, the Overall Outcome Rating for this project is Moderately Unsatisfactory\. This is consistent with the significant results achieved by the project, given CAR’s recent reengagement with multilateral banks when the project was developed, the overall fragility in the country throughout the life of the project, and the severity of the crisis in 2013 that led to the triggering of OP 7\.30\. This is also consistent with the project’s wide geographic scope and management choice to parallel finance with the AfDB as part of a wider joint interim strategy note\. Relevance Efficacy Objectives Design PDO1 PDO2 Efficiency Outcome Rating Original Sub- ratings: High Moderate Moderate Moderate Moderate Moderately Rounded Ratings Substantial Moderate Moderate Unsatisfactory 3\.5 Overarching Themes, Other Outcomes and Impacts (a) Poverty Impacts, Gender Aspects, and Social Development 54\. Poverty Impacts\. The project was designed to target vulnerable communities, particularly rural communities, in 102 communities spread over four of the seven regions of CAR, and a baseline study was developed in the first year of the project to identify and prioritize eligible communities in all four regions, based on the criteria from the PAD\. After the MTR, the project focused its resources on 36 communities in two regions, while the AfDB financed project would focus on the remaining two\. Consequently, project benefits reached the target population, but in a 14 reduced geographical area\. There is no information on the poverty reduction impact of the project as the impact evaluation study was not completed\. 55\. Gender Aspects: The project started gender disaggregated tracking of project results and activities from the 2012 MTR onwards\. 394 trained members of VCD and CDC were women (22\.7%), 5 female agents of the RDM were trained in participatory assessment methodology, and 40 women of the MAS were trained in accompanying VCDs and CDCs in local development processes\. 56\. Social Development: In the first year of implementation, the project developed an Indigenous Peoples Plan based on an in-depth social assessment of the Aka, their customs and living conditions\. Even though tracking of project benefits to Aka or sub-project consultations with Aka communities was not part of the M&E system, 91 Aka are recorded as members of VCD and/or CDC; and at least one community pharmacy was constructed from the LDP after consultations with local Aka\. Project design included an emphasis on consultative and participatory planning of local development planning in at least 60% of the targeted communities as well as a number of measures to monitor the functioning of representative coordination bodies\. The reduction of the number of communes with LDPs to 34 and the overall shift away from CDD after the MTR reduced the social development impact of the project significantly\. (b) Institutional Change/Strengthening 57\. The project’s changes in the management and approval structure of AGETIP-CAF after the MTR in 2012 which led to increased productivity and implementation speed of the process was since replicated by other Bank-financed and development partner financed projects and has led to improved capacity and efficacy of AGETIP-CAF overall\. This increased capacity enabled the Bank to select AGETIP-CAF in July 2015 as the implementing agency for a USD 20 million dollar “LONDO” Project with a national scope\. (c) Other Unintended Outcomes and Impacts (positive or negative) No other unintended outcomes or impacts were observed\. 3\.6 Summary of Findings of Beneficiary Survey and/or Stakeholder Workshops 58\. No beneficiary survey was held because of the security situation in the country during the ICR mission did not allow for travel to the beneficiary communities\. 59\. A Stakeholder Workshop was held on 17 August 2015 including representatives of the PCT, AGETIP-CAF, CNP, ACTED, and other agencies met during the ICR mission\. Participants were very positive about the project, its implementation and their collaboration with the World Bank\. Key comments focused on lessons learnt, a discussion of the findings of the borrower ICR, and the need for transition arrangements and future support of the social infrastructure that was built\. Comments also included (i) the lack of coordination between the World Bank and AfDB supervision teams, (ii) the need for additional financing to finance construction activities identified in the LDPs of those communes 26 communes where there was no infrastructure built under the project, and (iii) the need to strengthen regional and local authorities’ capacity\. 4\. Assessment of Risk to Development Outcome 15 Rating: High 60\. The risk to development outcome is rated high, because (i) the continuing volatile political and security situation in the country that may result in resumption of armed conflict from factors outside the control of the Bank or the international community, including a contested election, a coup d’état or general political instability; (ii) reliance on AfDB and other development partners’ continuing project support to equip constructed schools and health posts, transfer the infrastructure to the relevant local authorities/line ministries’ ownership and develop the final two Local Development Plans; (iii) current absence of government or donor commitment on continued funding for the implementation of the 34 Local Development Plans; (iv) long physical distances between villages/towns within communes, inherent to CAR, that would hinder the direct participation in future decision-making processes and, consequently, would erode the gains in trust in local and central authorities this project may have generated; (v) limited supervision and quality control, reliance on local sourcing of materials and reduced capacity building on the management and maintenance of community recovery activities – particularly since the 2013 security crisis risk affecting the long term lifespan of the infrastructure\. 5\. Assessment of Bank and Borrower Performance 5\.1 Bank Performance (a) Bank Performance in Ensuring Quality at Entry 61\. Rating: Moderately Unsatisfactory\. The project’s outcomes, components and activities were essentially well designed to respond to the needs of the country, but had key shortcomings as a result of rapid preparation as an emergency operation which led to delays in implementation, and issues with monitoring and evaluation\. 62\. The preparation and design were relevant to the country context, the Bank’s recently ended Joint Interim Strategy Note and the PRSP\. The project was prepared as an emergency operation using OP 8\.0 to support the peace process that was ongoing in 2009 and to support the Government in delivering quick results in the first year of the project cycle\. The project was also aligned with the AfDB, in accordance with the JISN and the Government’s specific request\. The fiduciary arrangements, in particular the selection of AGETIP-CAF as a project implementation entity for procurement and financial management to support the Ministry of Social Affairs was based on an in-depth assessment of the borrower’s capacity\. Lessons learnt from previous projects and from similar situations in other fragile and conflict-affected countries were included in the design\. 63\. Shortcomings included: first, the mistaken assumption that there were existing local development plans or needs assessments from which sub-projects could be selected and delivered within the first 12-18 months of the project cycle; second, while the link between the PDO and project activities was clear, the design of the results framework did not support adequate monitoring and evaluation of the PDO, and lacked target values for the monitoring and evaluation of individual components 15\. The results framework was only formally revised during the first restructuring in June 2013; third, no cost-benefit analysis for the project was undertaken, neither during preparation nor in the first months of implementation\. 15 The results framework was only formally revised during the first restructuring in June 2013\. 16 64\. Two design choices, while valid at design, contributed to delays during implementation\. First, lessons learnt from previous projects and from similar situations in other fragile and conflict- affected countries were limited to the CDD activities and did not take into account lessons learnt from projects where rapid construction of rural infrastructure was key\. In this respect, the alternative of implementation of sub-projects through direct contracting of a UN agency or international NGO for the first year would have been an appropriate mitigation measure to prevent delays\. Second, the randomization of the target communities and villages, in combination with the vast geographical overall target area and the limited financial resources in the project are not compatible with the underlying peacebuilding objectives of the project, unless there were a phased approach\. (b) Quality of Supervision (including of fiduciary and safeguards policies) Rating: Moderately Satisfactory\. 65\. First, compliance with safeguards policies was ensured with the development of high quality safeguards instruments within the first 12 months of project implementation and regular safeguards support and/or supervision missions in the early years of the project\. Environmental safeguards supervision during the construction phase was too limited\. 66\. Second, regular implementation support missions throughout project implementation (total of 16 missions) and a Bangui based Bank procurement specialist contributed to high level of capacity building, timely support and provision of NO and close monitoring of fiduciary compliance\. Stakeholders expressed their high satisfaction with the level of implementation support and responsiveness from the Bank at the stakeholder meeting\. 67\. Third, the Bank took appropriate corrective action at the Mid Term Review to address project design flaws, project delays, and context-specific challenges and to improve disbursement\. The MTR, however, was a missed opportunity to revise the results framework, both in terms of the timing and in terms of including indicators that better captured the PDO\. Many of the issues that were corrected at the MTR were already flagged in consecutive ISRs and AMs in the months and years before and should have been corrected more pro-actively\. 68\. Fourth, the project was set up to be closely aligned with the AfDB funded project\. However, after the project was prepared, there was little collaboration with the AfDB in ensuring true complementarity, joint supervision missions or maintaining a coordinated implementation schedule\. (c) Justification of Rating for Overall Bank Performance Rating: Moderately Unsatisfactory\. 69\. The MTR took the necessary actions/decisions to correct the shortcomings in design and speed up the construction and rehabilitation of key social infrastructure\. The Bank also remained closely engaged with the Borrower and the project implementation units throughout the 2013 crisis and triggering of OP 7\.30, which allowed the start-up of activities following the crisis sooner than AfDB-funded activities and is key to having been able to implement nearly all the planned activities by its closure date of May 31, 2015\. 5\.2 Borrower Performance 17 (a) Government Performance Rating: Moderately Satisfactory\. 70\. First, the Government demonstrated ownership and commitment to achieving the development objectives of the PRSP and the project, and collaborated closely with the Bank during project preparation\. 71\. Second, the Government supported the proposed joint World Bank/AfDB approach through the establishment of an inter-ministerial steering committee on (date) that would oversee both projects and the appointment of key staff in a joint PIU\. 72\. Third, the size of the PNC (more info) and the high turnover in participating line-ministries’ representatives, as well as the absence of regional PNCs reduced the PNCs capacity for active steering of the project during the implementation and for an adequate handover of constructed facilities to local authorities for regular operation and maintenance after the closing of the project\. 73\. Fourth, the government remained committed and engaged to the project throughout the conflict, thereby contributing to completing the project in spite of the difficult country context\. (b) Implementing Agencies Performance (PIU and AGETIP-CAF) Rating: Moderately Satisfactory\. 74\. First, Initial “Moderately Unsatisfactory” ratings for Implementation Progress in the first 1\.5 years of project implementation were attributed to a combination of delays as a result of delays in the approval of AfDB’s component financing, delays in identifying the reconstruction activities in absence of key assessments and local development plans, and delays in procurement as a result of complicated processes within AGETIP-CAF\. Implementation Progress was consistently rated “Satisfactory” or “Moderately Satisfactory” (key technical staff, financial management, procurement, compliance)\. 75\. Second, absence of environmental safeguards staff and detailed safeguards compliance supervision reports constitutes a significant shortcoming in the implementing agency’s performance\. 76\. Third, but it is recognized that the country context would have severely hampered regular safeguards field supervision\. (c) Justification of Rating for Overall Borrower Performance Rating: Moderately Satisfactory\. 77\. In spite of initial challenges to start rapid implementation of construction activities, both the Government and the Implementing Agencies demonstrated strong project ownership and commitment to achieving the PDO in an extremely challenging country context\. 6\. Lessons Learned 18 78\. In situations of urgent need of assistance and capacity constraints, a balance must be struck between the need for speed and the need for capacity building\. Rapid implementation of the PRF was a key goal of the project, which was not achieved in part due to slow procurement of contractors by AGETIP-CAF before 2012\. The lesson learned is that for the initial priority construction, the use of an NGO with substantial Bank experience on the ground as an implementing partner would avoid the delay of critical works\. 79\. Community Driven Development in Fragile and Conflict Affected Situations requires costly additional institutional arrangements to accompany communities during the process and may result in it not resulting in the same cost efficiency benefits, participatory management approaches as it is usually associated with\. 80\. “Envelope procurement”, i\.e\. the procurement of contracts through a contracted intermediary is an important innovation that was piloted in this project\. It increased the management and oversight capacity of the MDOD significantly and immediately, and greatly contributed to the implementation of the project\. 81\. Impact evaluations are key to learning from operations\. However, in situations of great needs, a mismatch between the geographical scope and financing envelope of the project, and no sustained commitment for subsequent project phases, random selection of beneficiary communities is not easily understood or accepted by those communities that are left out\. There was consensus among stakeholders that a more need-based selection and/or subsequent financing phases would have been preferred over the random selection\. The impact evaluation was cancelled at the MTR, adding to the feeling of disappointment over the selection process\. 82\. Country office based staff, notably on procurement, and frequent intense project support missions greatly contributed to the implementation, coordination and technical assistance of the project\. “Inverse missions” in which the client meets with the Bank mission in a third country, and frequent video-conferencing are crucial to continue Bank engagement during political crises such as the crisis that led to the triggering of OP 7\.30 in 2013-14\. 7\. Comments on Issues Raised by Borrower/Implementing Agencies/Partners A draft was circulated with the Government and Implementing Agency\. Their comments are summarized in Annex 7\.2\. 19  Annex 1: Project Costs and Financing (a) Project Cost by Component (in USD Million equivalent) Appraisal Actual/Latest Percentage of Components Estimate (USD Estimate (USD Appraisal millions) millions) Total Baseline Cost 8\.00 7\.92 Physical Contingencies 0\.00 0\.00 0\.00 Price Contingencies 0\.00 0\.00 0\.00 Total Project Costs 8\.00 7\.92 Front-end fee PPF 0\.00 0\.00 \.00 Front-end fee IBRD 0\.00 0\.00 \.00 Total Financing Required 8\.00 7\.92 (b) Financing Appraisal Actual/Late Type of Percentage Estimate st Estimate Source of Funds Cofinancin of (USD (USD g Appraisal millions) millions) Borrower 0\.00 0\.00 \.00 IDA Grant 8\.00 0\.00 \.00 20  Annex 2: Outputs by Component This Annex presents a detailed overview of outputs per component complementing Section 3 of this ICR\. Component 1: This component included training and capacity building activities, which sought to empower communities to prepare and implement development plans\. These activities were far reaching in mobilizing the population and local authorities around development planning\. 443 Village Development Committees (VDCs) and 34 Communal Development Committees (CDCs) were formed and 1,737 people were trained, 432 (22\.7%) of which were women\. The 34 CDCs were supported in the elaboration of participatory development plans\. The development plans of last 2 communes were dropped as a result of a financial deficit caused by the crisis and the prolongation of the project operations\. The trainings also involved members of municipal councils and civil servants of the implementing Ministry\. 54 agents of the Ministry of Rural Development were formed in participatory assessment methodology\. 91 agents of the Ministry of Social Affairs were formed on local development mobilization techniques\. 36 agents of the relevant ministries were also formed in training of trainers methodology for the development of local development plans\. Component 1: Capacity Completion Notes # of Current Status Strengthening for Local beneficiaries Development (Est) Local Development Plans 34 out of 36 plans Completed developed through a developed and approved participatory approach Members of municipal 96% of target 1,737 Completed councils and village beneficiaries reached\. councils trained in local 23% of participants were development women Component 2: The second component, known as the Priority Response Fund, included the implementation and disbursement of a Fund to finance small social infrastructure works to deliver urgent services and infrastructure in about 75 villages and communes\. The objective of this component was to serve as a window of opportunity to deliver resources and encourage participation in the project while showing tangible dividends to the population\. The PRF was predicated on a rapid community selection and project identification as a result of existing UN/NGO assessments and existing local development plans\. However, it quickly became clear that this wasn´t the case and that assessments were largely incomplete/irrelevant to the project's activities, whilst local development plans had often been lost or simply not developed in the first place\. This component saw an important turnaround after a number of changes were made during the Mid-Term Review (July 2012)\. These 21 decisions included the bunching of technical studies for the PRF and the creation of a dedicated project cell\. It should be noted that the outbreak in violence across the country did impact the implementation of the PRF\. During the crisis and concurrent looting, all vehicles from the Project Coordination Team were stolen\. The field agents of the Project Coordination Team were also discharged temporarily as the AfDB, which had left the country following the looting of their installations during the crisis, covered their salaries\. The absence of field agents and means of transportation made the supervision of activities more difficult\. Moreover, the displacement of the population and in particularly of local authorities hindered the handover of the structures built by the PRF to the communities\. By project completion the PRF achieved 63 water points, 90 classrooms, 10 health centers, 36 sanitary blocks, 1 drying installation, and 1 bridge\. Component 2: Priority Completion Notes # of structures Current Status Response Fund (PRF) / # of beneficiaries (est) Additional primary - 90 classrooms Completed classrooms built or (30 schools) rehabilitated Improved community - 63 water Completed water points constructed points or rehabilitated Health facilities - 10 health Completed constructed, renovated, centers and/or equipped Improved latrines - 36 latrine Completed constructed boxes Other public social - 1 bridge Completed infrastructures 1 crop drying constructed or area rehabilitated Component 3: The third component, known as the Local Development Fund, was destined to help targeted communes and villages access funds to finance the public and socio-economic investments identified during the local development planning process (Component 1)\. The component was originally expected to finance socio-economic investments in close to 40 communes and 80 villages\. As a result of project restructuring and important disbursement delays, works for this component were implemented in only the 10 communes for which Development Plans were available at the time\. 22 In November 2012, in order to expedite the implementation of this component a special service agreement was signed between the project and two international NGOs (ACTED and COOPI)\. However, by April 2014 COOPI asked to be removed from the contract due to capacity constraints shifting its pending projects to ACTED\. ACTED on its part did a commendable job in the implementation of the FDL by not just simply building infrastructure, but by involving and providing trainings to the local population\. Specifically, ACTED undertook a Knowledge Attitudes and Practices (KAP) survey, and implemented trainings of Parent Teacher Associations in the local schools, of techniques of agricultural product conservation, and executed a total sanitation campaign\. The total number of training days amounted to 198\. The contract with ACTED also included the equipment of the schools built\. The infrastructure built as a part of the PDL included: 30 classrooms, 15 water points, 8 health care posts, 30 latrines, 2 communal pharmacies, 4 storage depots, 2 children playgrounds, and 8 crop drying areas\. Component 3: Local Completion Notes # of structures Current Status Development Fund / # of beneficiaries (est) Primary classrooms built - 30 classrooms Completed or rehabilitated Improved community - 15 water Completed water points constructed points or rehabilitated Health facilities - 8 health Completed constructed, renovated, centers and/or equipped Improved latrines - 30 individual Completed constructed latrines (10 latrine) boxes Other public social - 2 communal Completed infrastructures pharmacies constructed or 4 storage rehabilitated depots 2 children´s playgrounds 8 crop drying areas Component 4: The fourth and last component financed the management, monitoring and evaluation of the project\. The objective was to build capacity within the project structures to carry out the necessary coordination, execution, monitoring and evaluation of the project\. Decentralized teams of the 23 Ministry of Social Affairs were equipped with means of transportation to facilitate access to isolated rural communities\. An international consultant helped set up a monitoring and evaluation system early on in the project, and the Bank team used a dashboard to track progress against inputs and activities (starting in December 2012)\. However, the project never recruited an M&E Specialist as had been foreseen, and relied on the project coordinator to complete the progress reports\. An impact evaluation, including a randomized control trial (RCT), for the Community Development Program was included in the design of the project\. The project completed a detailed baseline study with the Central-African Institute of Statistics and Socio-Economic Studies (ICASEES) within the first year that allowed the project team to select the beneficiary communities, but dropped the Impact Evaluation component due to security constraints\. Through this component the project completed 31 monthly reports, 6 financial audits, 1 completion report, 43 monitoring of disbursements\. Component 4: Program Completion Notes # of Current Status management, Monitoring beneficiaries and Evaluation (est) Monthly project monitoring 31 monthly reports - Completed reports Monitoring of 43 monitoring of - Completed disbursements disbursements Financial audit 6 financial audits - Completed Project completion report 1 completion report - Completed 24  Annex 3: Economic and Financial Analysis (including assumptions in the analysis) This annex provides a background to rating of the project’s efficiency in terms of cost effectiveness and efficiency of implementation\. A comprehensive financial and economic analysis was not carried out for this ICR because of several reasons\. First, no cost-benefit analysis was done at project entry\. Second, in the project paper, and prior to the completion of the ICASEES study, the emphasis had been focused on smaller-scale rehabilitation activities of existing infrastructure\. Priority (RPF) investments were budgeted between US$ 12-$24,000, and local development (LDF) investments up to US$12,500 for a village, and up to US$ 50,000 for a commune\. Construction of new infrastructure was not emphasized\. Therefore comparison between budgeted amounts per commune or village at project entry and actuals spent is not useful\. Third, there are few statistics or data available in CAR to do a comparative intra-country cost analysis\. The political crisis delayed or suspended many other projects for longer than this project and therefore could not be used to compare against\. Similarly, Economic Rate of Return (ERR) analysis was not feasible for lack of direct beneficiary or usage data\. Fourth, construction contracts varied significantly in terms of scope of works, and cost depended on a number of factors such as availability and distance to building materials, quality of access roads particularly during the wet season, and whether qualified local (regional) companies were available\. This made ex-post comparison between contracts less straightforward\. Furthermore, fifth, without technical audit reports it is not possible to assess the quality of the constructed infrastructure\. Inclusion of project efficiency in the design of the project\. The project was designed to minimize administrative costs through: (i) Cost-sharing of PCT staff with the parallel-AfDB financed project; (ii) use of AGETIP-CAF structure as maître d’ouvrage délégué for the construction and rehabilitation activities; (iii) relying on NGOs and the private sector for the delivery of sub-projects; and (iv) the project followed vigorous fiduciary procedures to ensure cost efficiency\. Cost effectiveness\. An analysis of a limited number of contracts that focused on the construction of specific infrastructure resulted in the following unit costs of RPF contracts procured by AGETIP-CAF: community water points US$ 9,209 per water point 16 ; schools US$ 68,908 per school or US$ 22,969 per classroom 17 ; and construction of health posts US$ 69,731\. Based on this limited analysis, there are a few assumptions that could be assumed for rating the efficiency of this project\. It could be expected that the unit costs for schools are at the higher end of the average costs in the project, given that contractors were not able to apply economies of scale with other works in the same or close-by commune\. The unit cost per classroom can be compared to UNICEF who also 16 Based on the cost of 61 waterpoints of a total of 76 built, spread over three contracts\. This cost included the training of local repairmen\. 17 This cost is based on 30 classrooms of a total of 111 built, spread over six contracts that focused on building schools only\. Schools were constructed with 3 classrooms per school and pro-rata latrine facilities and classroom furniture\. Management and supervision costs are not included in this estimate\. 25 implemented a school component from 2012 – 2015 and who built similar three-classroom schools\. The project’s unit cost per classroom is marginally (1\.26%) cheaper than UNICEF which also had a school component in their program from 2012 to 2015 and had an average unit cost of US$23,259\.However, both UNICEF and the project’s costs are considerably higher than the Education Sector Development Project (P112321) average unit cost of US$ 19,519 for constructing a classroom in the period in the period of 2009 to 2012\. The classrooms that were built under the Education Sector Development Project were similar in design\. Factors that could explain their lower cost include (i) construction focused on areas closer to Bangui 18, thereby reducing cost for Bangui based construction companies; (ii) the period 2009-2012 was a period of relative stability compared with the period 2012 – 2015; (iii) inflation between 2009 – 2012 was under 5%, while between 2012 – 2013 it was between 5 – 10%, reducing again to just under 5% in 2013, and then rising between 17 – 25% in 2014; (iv) the education project constructed or rehabilitated a total of 926 classrooms (versus 111 in the project) which could have resulted in significant economies of scales for the contractors; and (v) the shift away from a community driven development approach which usually is linked with cost savings in terms of management cost, procurement of local supplies and the use of (cheaper) local labor\. No similar projects were identified to compare the cost of health posts or water points\. The political crisis resulted in looting of regional offices and the loss of project vehicles\. Insecurity and roadblocks also claimed the human loss of one life and the injury of another contractor’s employee\. While other World Bank financed projects, as well as other development partners’ financed activities suffered looting and destruction of beneficiaries’ supplies, equipment and buildings, this project’s construction activities or resource materials were not looted during or after the crisis\. Capacity Strengthening for Local Development cost US$ 0\.8 million, around 10% of the operations total cost and only half of what was originally budgeted for this activity\. It included the development of the necessary studies and manuals, vehicles and office equipment, and training for PIU, MDOD, central, regional and local stakeholders as well as the training and set up of VCDs and CDCs\. This capacity building was crucial for a country that had only recently re-engaged with multilateral financing agencies, and important for the sustainability of the investments\. Project Coordination, Monitoring and Evaluation cost nearly US$ 2 million or one quarter of the budget, demonstrating the high cost of operating in fragile and conflict-affected environments\. Efficiency of implementation\. Efficiency of implementation was, as indicated in other sections, compromised by three factors\. The most important one of these was the absence of local development plans and regional needs assessments upon which basis the priority construction would be identified\. AGETIP-CAF’s internal management processes and use of National Competitive Bidding prior to the MTR contributed to the slower than planned implementation of the project, but could also have had a positive influence of the overall efficiency of the individual activities\. The third factor was the political crisis with the suspension of project activities because of security concerns and OP 7\.30, and with the absence of key PIU personnel as a result of AfDB’s longer suspension of their activities\. On the whole, the project was delayed with two extensions totaling 22 months\. 18 33 classrooms were built in Bangui, 21 in Region Centre; 24 in Centre-Est, 108 in Centre Sud, 69 in Region Sud and 72 in Region Sud Est under P111321) 26 This delay, however, would have been longer without the key decisions that were taken at the MTR\. The first decision that was taken streamlined AGETIP-CAF project execution and procurement processes through the creation of a dedicated cell and led to a dramatic improvement of the performance of the MDOD in the project and organizational reform within AGETIP-CAF as a whole\. The organizational reform benefitted the implementation of nearly all other Bank financed operations in the country that also work with AGETIP-CAF\. The second decision was to develop and apply the innovative approach of “envelope procurement” through ACTED for the LDF construction and rehabilitation activities\. This approach is considered best-practice and was featured a Bank OPCS Guidance How-To-Note on “Dealing with Fiduciary and Governance Challenges for CDD in Fragile and Conflict-Affected Situations\.” Even though traditional measures of financial and economic analysis cannot fully quantify the efficiency of the project, no significant shortcomings in the operation were identified, and efficiency was clearly an area of focus both at project entry and throughout the operation\. Efficiency of implementation was exceptional from 2012 – 2015, especially under the difficult circumstances of the political crisis\. For these reasons, project efficiency is rated Modest\. 27  Annex 4 Bank Lending and Implementation Support/Supervision Processes (a) Task Team members Responsibility/ Names Title Unit Specialty Lending Helene Bertaud Senior Counsel LEGSO Legal GGOD Ningayo Charles Donang Senior Procurement Specialist Procurement R AFTP3 Kossi R\. Eguida Economist - HIS Joseph-Antoine Ellong Senior Program Assistant GSURR Operations Emeran Serge M\. Menang GEND Senior Environmental Specialist Safeguards Evouna R Sr\. Financial Management AFTM Financial Etienne NKoa Specialist E - HIS Management GTCD Ivan Rossignol Chief Technical Specialist R Christopher Saunders Operations Officer GEEDR Operations Supervision/ICR Helene Bertaud Senior Counsel LEGSO Legal GGOD Patrick Bongotha Consultant R WFAL Aissatou Diallo Senior Finance Officer Finance A GGOD Ningayo Charles Donang Senior Procurement Specialist Procurement R Joseph-Antoine Ellong Senior Program Assistant GSURR Operations Lucienne M'Baipor Miayo Sr\. Social Development Specialist GSURR Safeguards Emeran Serge M\. Menang GEND Senior Environmental Specialist Safeguards Evouna R 28  Christopher Saunders Operations Officer GEEDR Operations GGOD Haoussia Tchaoussala Procurement Specialist Procurement R (b) Staff Time and Cost Staff Time and Cost (Bank Budget Only) Stage of Project Cycle USD Thousands (including No\. of staff weeks travel and consultant costs) Lending FY08 165\.70 Supervision/ICR 802\.40 Total: 968\.10 Annex 5: Beneficiary Survey Results No beneficiary Survey was done\. 29  Annex 6: Stakeholder Workshop Report and Results A Stakeholder Workshop was held in Bangui on 17 August 2015 with representatives of the different stakeholders 19 of the project\. There was consensus amongst the participants that the project had been successful in the construction of social infrastructure and the development of Local Development Plans\. Even though the crisis affected the delivery of activities and prices of construction materials and hampered field supervision, participants praised the continued engagement of the Bank Team throughout the crisis, and the courage and dedication of the contractors and project teams who continued to work where feasible, even under the most difficult of circumstances\. Participants also stressed the importance of additional financing from the Bank or other financing institutions for the implementation of the Local Development Plans\. Specific comments included: The resilience of the project and proactivity of staff should be commended\. Project staff and local authorities were proactive in protecting project resources and infrastructure from looting and theft\. Project staff and contractors, many of whom who had been technically unemployed due to the suspension of project activities under OP 7\.30, were able to return to work immediately after the suspension was lifted and complete the project in spite of the volatile situation that the country continues to face\. The design of the project corresponded to a longer-term vision for increasing state presence across the country\. Government authorities understood the project as a longer-term process with different phases\. Correspondingly, the random community selection methodology was presented to local stakeholders as the first phase of the process and that other communities would be selected in subsequent phases\. The wide geographic reach of the capacity building component in villages and communes contrasts with the limited infrastructure works that ultimately only benefited a more modest number of communities\. This contributed to creating expectations in communities that could ultimately not be fulfilled under the project\. The project did not communicate the activities and achievements of the project enough to contribute to the peace-building goals of the project\. Even though a communication plan was developed it was never fully implemented\. The effective handover of infrastructure to local authorities was affected by the massive displacement caused by the crisis\. State structures and local authorities were particularly affected by the conflict\. Up to date, many local stakeholders have not returned to the regions\. Annex 7: Summary of Borrower’s ICR and/or Comments on Draft ICR 7\.1 Executive Summary of the Borrower ICR: 19 Participants included representatives from AGETIP-CAF, the PCT, Bureaux de Controle, CNP, ACTED and the MEF\. 30 1\. The Central African Republic has adopted both a document of the Poverty Reduction Strategy Paper (PRSP) covering the period 2008-2009 and a Partnership Joint Country Strategy Paper (DSPPC) for the period 2009-2012, developed jointly by the International Development Association (IDA / WB) and the African Development Bank (ADB)\. The PDCAGV fits perfectly under the two main documents and benefits parallel financing of both development partners for its implementation\. 2\. This Final Report describes the performance of the implementation of the project, the results recorded and the measures taken for their sustainability, the impact of exogenous factors and lessons learned\. Innovative Approach 3\. The agreement between IDA / WB and ADB in PDCAGV can be considered one of the extensions of the Joint Country Partnership Strategy (JCPS) to provide assistance to and encourage CAR on the path of reforms and to implement projects targeting development, improvement of living conditions of fragile and vulnerable populations and mitigate the risks of instability in the country\. The agreement on the PDCAGV was materialized by: (i) the same Guardianship Project with the Government (MASPGAH), (ii) the same National Steering Committee (NSC), (iii) the same Project Management Unit (PMU ), (iv) use the same Project Implementation Manual (PEM) and the same manual of administrative managements, financial and accounting (MGAFC), (v) and if necessary synchronization of project supervision missions ground\. This innovative joint approach is very beneficial and should inspired most development partners in CAR\. Institutional Framework 4\. The institutional framework has been set up under the provisions of the Grant Agreement and has significantly evolved over the implementation period\. All structures have played their respective roles in relation to the exception of Regional Steering Committees which were never set in place implemented and the CSP that has no visibility since its inception\. Moreover, despite the decree specifying the role and mission defined at the two focal points, their tasks outlined in the MEP, the interventions of the two focal points with the UEC were very small and not visible outside the Committee, signing the project accounts and the drafting of minutes of meetings of the NPC\. The project results and impacts 5\. PDCAGV partially covered 5 regions, 10 prefectures and 102 municipalities initially in the western and southern areas of the country\. The results are as follows: a) 446 CVD and 36 CDC established and operational; b) 36 including 34 PDL developed validated and adopted; c) 78 water points constructed or rehabilitated (65 wells, 12 springs and one well) d) 282 socio-community infrastructure rehabilitated and / or constructed (schools, school latrines, kindergartens, drying areas, warehouses, community pharmacies, health posts, bridge etc\.) e) 1737 people are trained including 394 women (23%) out of a projected 1,800 people including 600 women (30%); f) 54 agents of the MDR which 5 are women (9% against 40% expected) are trained in participatory assessment methodology; 31  g) 91 field staff MASPGAH including 42% women were recycled on accompaniment techniques of self-development process; h) 53 people trained on the MT which 5 are women (9% against 40% planned) i) 36 frames (Social Affairs, Plan, Rural Development) which 4 are women (11\.11%) received training of trainers on the technical development of PDL; j) 119 middle managers trained, including 26 women (22% against 40% planned) k) 75 members of CVD and CDC trained including 20 women (27% against 40% planned) l) ACTED under Component 3 of the MOG contract formed: (i) 47 officers including 14 women m) and (ii) 80 officers, including 26 women; n) 91 members of CVD are pygmies; o) CVD 2% of officers are pygmies and 1% CDC members offices; p) 29% of members of CVD are women\. q) 32% of CDC members are women and 29% of board members are women r) Conducting a quantitative study of living conditions in rural areas\. 6\. Limits of LDP: This participatory approach had limitations due to the low value-added resource persons responsible for driving the development of the LDP process\. He failed to express some useful sub-projects such as community boxes or community houses or subprojects clusters bearing high social impact, especially in some very remote areas\. Administrators (UEC) received on-site training through "Knowing by Doing" which could have been supplemented by training courses or immersion to discuss and inquire projects with similar experiences and practices in other countries in the sub-region\. Project Performance 7\. Despite this unfavorable country environment, the relevance of sub-projects is carried throughout unequivocally\. They respond to real social needs expressed following a participatory and collaborative approach leading to a real "capacity building", the constitution of VCD and CDC and development of LDP\. 8\. Given this proven relevance, impact generated by the Project (built and strengthened capacity, sub-projects through the FAP and made FDL) is important, both for the local population (VCD and CDC) and at the level of national and decentralized administrative authorities, and of central and decentralized technical services involved in the implementation\. 9\. Ownership of local infrastructure built and sustainability are on average quite good, but have some shortcomings resulting from the delay in the delivery of social animation and quality of certain social infrastructure failing conducting technical audits and in spite of the presence of control offices\. Monitoring, evaluation and impact 10\. The UEC had recruited a M&E expert at project start who did not stay long\. Any attempt to UEC for the recruitment and retention of a replacement failed\. Thus monitoring activities of the 32 Project have not been the subject of particular attention\. The monthly operational monitoring tables prepared by the UEC include the results data but these are not carried over into the quarterly reports prepared by the directors at regional level\. 11\. According to the provisions of the Project Document, reiterated through the various AMs, the results of monitoring and evaluation activities will be consolidated reports at the PNC and periodically communicated to the MAS to monitor the project, to anticipate the necessary steps and finally to adjust or modify as necessary\. The consolidated reports on the monitoring and evaluation activities have not been established; but instead, the Coordinator regularly prepares the monthly tables of operational monitoring and evaluation with reference to the results recorded\. This is one of the main weaknesses recorded, and which does not depend on coordination but because of the lack of a post in the M&E expert in the project\. 12\. Impact assessment based on a baseline and several comparisons between municipalities would have been conducted as follows: A\. After the first phase: comparison of communities that received component FAP and the municipalities who have not received; B\. after the second phase of the project: comparison of three (3) groups of communities: 1) Communes who received the FAP component 1st phase and 2nd phase FDL component; 2) Communes who received the FAP component in the first phase and have not received the LDF component in 2nd phase; 3) Communes that have not received the FAP component in the first phase and neither the LDF component in 2nd phase; C\. after the third and final phase of the project: comparison of four (4) groups of municipalities: 1) Communes who received the FAP component 1st phase and 2nd phase FDL component; 2) Communes who received the FAP component in the first phase and have not received the LDF component in 2nd phase; 3) Communes that have not received the FAP component in the first phase or the FDL 2nd phase component and received the LDF component third phase; 4) Communes that have not received the FAP component 1st phase nor the LDF component 2nd phase, and neither the LDF component third phase; 13\. In summary, the initial project design, very innovative in the short and medium term development approach (minimum 10 years) has been completely redesigned in a "project" approach in restructuring the project approved July 18, 2013\. This new approach will be a little project of its kind founded in the early months of a participatory and collaborative approach\. Strategy and Communication Plan 14\. The communication strategy is a sub-component of the Project\. The strategy and communication plan has been made and an expert was recruited to its implementation alongside the PMU\. The Logo and flyers were produced and emissions at the rural radio stations were organized and field reports with this supervision mission teams\. In short, a good information and communication strategy, guaranteeing the success of the project, its ownership by the beneficiaries and sustainability perspective\. This momentum has unfortunately experienced a pause following the events occurred in December 2012\. Since then, the communication on the project has faded even after the resumption current final quarter of 2013\. 33  No radio interactive programs (appreciation opinions of beneficiaries and level of satisfaction); No press conferences sanctioning supervision missions and meetings of the NOC; No items members of the UEC and UERS in the press to inform about the process and the progress and achievements of the impacts on beneficiaries; No movies to trace the life of the Project; No active website on the project at the UEC or Guardianship (course design); No signs on the building sites of socio-community infrastructure created by the project in five regions, with the exception of drillings rehabilitation work which signs convey information about the Project and are a good practice in information and communication\. 15\. A documentary information on the achievements of PDCAGV is necessary to the attention of the authorities of the Transition and Post Transition\. This support may be used to renegotiate the following phases of the project as originally designed but with necessary adjustments in the light of lessons learned\. 16\. In addition to elicit a desired real ownership and sustainability, competitions could be organized to reward good practices in management and maintenance of social infrastructure at the VCT and CDC\. Government actions and Performance 17\. The Government has fulfilled its obligations under the Grant Agreement including : The implementation of the MEP, the MT MGAFC and acceptable to the World Bank; Recruitment of the Project Coordinator and his technical staff (RRCF, SPM, SGF, SSE and Regional Directors, etc\.) satisfactory to the World Bank; The realization of CGES, of the CPR, the PDPA, the ESMP adopted and published in terms satisfactory to the World Bank; The CMOD signed between MASPGAH and AGETIP CAF satisfactory to the World Bank; 18\. The Government represented by the MASPGAH and the World Bank have shown flexibility to make necessary modifications taking into account the realities and constraints of land compared to the basic texts of the Grant Agreement\. 19\. The Government has allocated to MASPGAH in the national budget, under the 201112 fiscal year, a specific credit line of 30 million CFA francs (US $ 65,400) in support PDCAGV\. This amount was not fully disbursed in 2011 and the situation of the country from 2012, did not allow the MASPGAH authorities to renew the request\. Following the hearing that Ms\. MASPGAH has given us, a plea was made during budget debates so that a line of credit to be given to current PDCAGV this year 2015 and for the year 2016\. 20\. The NPC called Interministériel13 Steering Committee (ICC) in the Grant Agreement, is an offshoot of the Government to ensure the management of the whole project\. The Office of the CNP is composed solely of authorities and officials of MASPGAH, which does not give the interdepartmental character\. 34 21\. The Committee met seven (7) times during the period from July 2010 to May 2015, including (5) times chaired by Guardianship, Minister for Social Affairs\. Reflecting the attention paid by the Government to the success of this Project\. 22\. Under the provisions of the Grant Agreement, the Ministry of the Beneficiary for Social Affairs is responsible for the overall supervision and control processes of the Project\. The presidency of the NOC is assured by the Minister that Ministry Trusteeship\. This Ministry has had its head seven (7) Ministres14 from the preparatory phase to the date of the Effective Implementation Project (July 2008-May 2015)\. This turnover élevé15 impacted very negatively on the smooth running of the Project Coordination still being mobilized to deliver the new political authorities in the economy Project 23\. No communication was made to the Government by the Cabinet to account for the evolution of this important project, the MASPGAH, Guardianship Project and President of the NOC\. Actions of the World Bank (IDA / WB): Performance and Impact 24\. The diligence with which the WB has honored its obligations under the Grant Agreement has been very remarkable for a country considered Post-Conflict (preparation, implementation and project start) and has switched back in rupture constitutional order accompanied by bloody clashes social (Project ramp-up period) and became a country in crisis exit path (maturity period and end of the project)\. 25\. The WB has shown flexibility by being open to adjustments in certain procedures and institutional arrangement in light of realities on the ground\. The Operational Policy (OP 7\.30) was implemented with efficiency and foresight, while ensuring protection of investment from the World Bank, the interests of the CAR and also concerned the concrete and tangible results of the Project on the ground, despite the crisis\. 26\. The BM has organized ten (10) Supervision missions on the ground and two supervision missions "reverse" held at the Representation of the World Bank in Yaoundé in June 2013 and January 2014\. Four (4) mini-supervisions were organized during missions for the LONDO project in 2014 and 2015\. About half a dozen video conference was held between 2013 and 2014 on the progress of the project in addition to supervision missions\. There are two key periods: (i) the period 2009-2012 where the quality of supervision missions is well established\. These missions were perceived by the PMU as moments of mutual understanding of all aspects of the Project and defining the ways and means for the success of the project and in an approach that is both collaborative and educational\. Almost systematic field visits during this start-up period before the crisis have enriched the approach to training to regional directors, officers CBI and other decentralized services involved under the approach "Knowing by doing "; (ii) supervision missions of the second period 2013-2015 were mainly devoted to the restructuring of the project, the reallocation of funds and the review of the progress status of the components\. The field visits were very rare in view of the security situation\. Field visits would have allowed an enrichment of trade on the status of civil engineering projects panels and the use of technical audits on works in progress\. The Help memories established at each of these supervision missions account for the gradual evolution of the Project and its growing power\. 35 27\. ANO were treated quickly\. The DRF and direct payments were processed in exceptional times\. Cash Project has never been turned on despite the period of crisis and outbreak of the Operational Policy OP 7\.30; 28\. The support level Procedures and Procurement Plan was both dynamic, preventive and educational\. Particular attention has been devoted to each of supervision missions, with specific notes on the subject\. Without violating the Rules and Procedures of the WB in this regard, close monitoring and business intelligence system in place were effective ramparts during the period from November 2009 to September 2012, against the risk of collusion and maneuver\. This dynamic accompaniment avoided high risks observed in this area in such a crisis environment\. 29\. The reports of annual financial audits have always been the subject of comments and the reports have been acceptable to the WB\. 30\. In view of the progress of the project and intervened crisis, WB, on request of the Government, approved the Restructuring Project July 18, 2013 and authorized July 30, 2013, the reallocation of Don between the components and the extension of the Grant Agreement on 31 July 2014\. At the request of the Government, the World Bank has also agreed the new Project closing date to May 31, 2015\. 31\. Only one reallocation of the gift was passed July 30, 2013 until the closure of the Project\. This shows control costs by component at the WB and the UEC\. 32\. On the assets of the WB, the project received only two (2) TTL\. Indeed, the second TTL which took over from the first, was already part of the team of supervisions16 missions\. So this is a very good continuity, asset which the Project has been able to benefit and profit\. 33\. The governance of PDCAGV was a mastery by the WB, as well as in the framework of procurement, that strategic guidance and monitoring of performance indicators, consistent with the revised framework for monitoring results\. However, the WB has just been asleep for not insisting on carrying out technical audits in 2014 with the resumption of infrastructure components B (FAP) and C (FDL)\. Role of the Coordinator and Performance 34\. The PMU Project has played a remarkable role in the conduct and success of the Project\. The Coordinator of the UEC was a great facilitator in the Project, as the conduct of activities funded by the WB and the ADB management teams at both central (UEC) and regionally (EBU)\. The project has two focal points, all located in the same department Guardianship Project, which are actually "homologues17" Coordinator\. Knowledge transfer was secured methodically and efficiently\. Relations with the executives of the PMU and AGETIP CAF (MOD) were in a healthy atmosphere, atmosphere that allowed, despite the vicissitudes in the country, driving the project to a successful conclusion regarding funding WB\. 35\. Financial audits have been completed on time and submitted to the WB and Guardianship on time\. The audit recommendations were generally implemented and progress has been observed from one year to another\. The performance in the assets of SGF and accounting under the leadership of the Coordinator\. 36\. The Coordinator also able to play effectively its role of interface needed between WB, Project supervision and AGETIP CAF\. Concerned about the economical and efficient management of the 36 Project, the Coordinator appeared sometimes austere to members of the UEC and UERS\. For example administrators could not be equipped with electronic cameras for reporting their field activities and the local housing the Project remained in harmony with the surrounding office buildings, equipped with the bare minimum\. Performance of other stakeholders National Steering Committee (NOC) 38\. The NPC was established by Decree No\. 002 / MASSNF / DIR-CAB / DGAS / DDC / SPDC\.10 of 29 January 2010\. It is a framing member, and political orientation, methodological and monitoring that watches the proper execution of the project at the national level and transparency in the management and decision making\. The decisions of the NOC are taken by consensus\. The decisions, proposals and recommendations of the NPC are enforceable\. 39\. Since its inception, the NOC held seven (7) statutory meetings including a meeting on the mid- term review, held July 4, 2012\. The meetings of the NPC are still penalized by a Reporting and recommendations submitted the execution of the UEC\. The President and members of the Office of the NPC have often organized field visits during the startup period (before the crisis) to assess the capacity-building programs running state and infrastructure projects\. The NOC has been little attention to the major concerns of the BM in the conduct of the project in terms of anticipation and suggestions for improving project performance on time and justify the continuation of subsequent phases of Projet18\. AGETIP CAF: CMOD No\. 18 signed between MASSNF and DG / AGETIP CAF June 5, 2009 40\. AGETIP-CAF is involved in the implementation of PDCAGV through the signing of the CMOD No\. 18 signed with the MASPGAH June 5, 2009 for a term of three years\. Its mission is to achieve the components B, C and part of Component D PDCAGV\. AGETIP FCA has the necessary means to carry out its mission\. 41\. Analysis of the CMOD No\. 18 reveals among others: (i) Article 12: The MOD will make annually a Project Management Technology Audit by an independent auditor approved by the Guardianship (MASPGAH) - The work of AGETIP CAF and its subcontractor ACTED, have no yet the technical audit object during our visit in May 2015, and (ii) Article 14: the end of MOD's mission is sanctioned by the Discharge issued by the MO\. AGETIP CAF must ensure that the issuance of the Discharge, sanctioning the end of the CMOD\. 42\. During the mid-term review, several recommendations were made, some of which are in line with organizational arrangements in order to make efficient AGETIP CAF\. Close monitoring and technical and organizational support were decided by the NPC according to the WB\. A cell has been created within AGETIP CAF and dedicated exclusively to the execution of PDCAGV\. Two experts19 were recruited by the UEC to support AGETIP CAF regarding procurement and monitoring of civil works\. Furthermore, AGETIP CAF, with the agreement of the World Bank, told the Group of NGO ACTED / COOPI, following an open tendering, project management globale20, including: (i) Part 1: Construction of Infrastructure (70% of mobilized resources); (ii) Component 2: Community Animation (10% of mobilized resources); (iii) Component 3: Capacity building of the decentralized services of the ministries (10% of resources mobilized) and (iv) the service provider's remuneration (10% of resources mobilized)\. 43\. If the first part of the tasks entrusted to AGETIP CAF was accomplished with satisfaction and resulted in the establishment and operationalization of the PMU (part of component D), the second 37 part of the mission regarding the implementation of components B (FAP) and C (FDL) did not give any expected satisfaction\. The decisions from the mid-term review enabled AGETIP CAF meet somehow challenges\. It appears more and more that AGETIP CAF through its period of growth crisis and seems also a victim of its bureaucracy and its lack of anticipation\. 44\. At the signing of the CMOD, no sub-project eligible under parts B and C are available\. Contrary to the provisions of the Grant Agreement regarding the sub-projects financed on Component B (FAP), the first eligible sub-projects were not available in the end after the establishment of PDL21\. ICASEES 45\. ICASEES was empowered for the collection and processing of statistical data in the CAR\. The investigation activities entrusted to ICASEES through the signing of contracts with the UEC are as follows: a\. a survey at the beginning of activities, to determine the baseline; b\. a mid-term survey to assess progress and prepare for the revised project mid-term and c\. investigation at the end of the project to assess the final impact of the project\. 46\. The tasks of ICASEES have been completed to the satisfaction of the UEC and WB\. ACTED COOPI Consortium 47\. Consortium ACTED COOPI, (two instead of NGOs) was selected following an open tender for carrying out the work of the component C (FDL) subcontracting with AGETIP CAF (achieving socio-community infrastructures retained as a priority within ten PDL achieved first, community outreach and capacity building)\. The use of this formula is justified for several reasons including (i) the long delay by the Project, due in part by AGETIP CAF (bureaucracy and procurement) and the time taken for making PDL, and (ii) the risk incurred in the cancellation of the Grant Agreement if the situation continued with very low disbursement rates\. The WB has approved such subcontracting against the specific procurement arrangements for post conflict countries\. We have no knowledge of a consolidated final report of the mission ACTED\. AGETIP CAF and the UEC must ensure at delivery that the works delivered meet the technical specifications and that schools and community pharmacies in this case are well equipped in accordance with contractual terms\. Companies and impacts 48\. Three companies were mobilized for the rehabilitation of boreholes and water projects\. These companies have performed their duties satisfactorily in general and housing panels were installed a remarkable visibility and readability in rural areas\. More than two dozen companies and two construction works of the controllers were mobilized for the rehabilitation / construction of community social infrastructure (FAP1 + 2 + 3 and FDL) whose beneficiaries are the CDC and CVD\. Mobilized more companies have injected approximately 2\.54 billion CFA francs in the national and local economy including about 508 millions25 under payroll\. The work is completed mostly without litigation or proceedings pending in the courts\. Economic and Financial Evaluation 49\. As of May 31, 2015, the total amount of DRF is estimated at FCFA 4\.023\.667\.507, representing a disbursement rate of 98\.81% 26\. This disbursement rate that approaches 100% is considered very satisfactory at the close of PDCAGV, despite the national context in which the PDCAGV evolved\. 38 50\. On the assets of the UEC and SGF, supported by an active and dynamic monitoring of the WB TTL, financial governance PDCAGV in terms of employment (expenditure) has complied broadly, distribution Budget reallocated by component\. 51\. Project Financial Management has evolved positively\. Moderately Satisfactory considered with Substantial risk level in previous supervision missions, the performance of financial management is considered Satisfactory and the level of risk is Moderate, during the supervision mission of October 2014\. At the last supervision mission of April-May 2015, financial management is moderately satisfactory and financial management risk remains moderate\. Conflicts recorded Complaints 52\. PDCAGV did not register complaints of extreme gravity, or conflicts with staff throughout its execution\. It is to the credit of the Coordinator and the PMU\. Ongoing minor disputes are as follows: 1) Complaint against the company THE COCONUT: Construction of a primary school in the village BABAZA (common Ouakanga, S / Prefecture BERBERATI) inadvertently payment amounting to 1,555,663 CFA francs\. File pending settlement at the prosecutor, near the Tribunal de Grande Instance BERBERATI\. Amount expected from the Special Account: 1,555,663 CFA francs\. The last supervision mission suggested referral by an official letter from the Minister of Economy, Planning and International Cooperation (MEPCI) refunds due by The Coconut; 2) Reimbursement of ineligible VAT: Total VAT ineligible and financial audits noted during 2011, 2012 and 2013, 1,074,154 CFA francs\. Amount expected from the Special Account: 1,074,154 CFA francs by the Guardianship Project\. 3) Suspension of some contract staff of the PMU: By Note No\. 216 / PDCAGV / UEC / Coordo / 13 of August 14, 2013, the Coordinator has notified the Regional Directors, at SDLR and support agents, the suspension of their contract as of August 15, 2013 - Design: Trigger Operational Policy OP 7\.30 WB with suspension of DRF and persistent state of insecurity in the country making impossible the continuation of activities in the regions covered by the PDCAGV\. By Note of 2 May 2014 addressed to the Coordinator, the PDCAGV Staff Collective who made contract suspension object and sub-form of a memorandum, requesting the reopening of the record and considered by the hierarchy of liquidated damages for covering period of suspension of the contracts: In the psychological shocks suffered by certain agents (theft and looting of personal belongings), it adds the professional shock due to the suspension of contracts for about 13 months - possible partial repair measures are desirable in negotiations with the agents involved\. Conclusions: Key Lessons and Recommendations 53\. PDCAGV is a project well designed and adapted to the CAR policy conditions and poverty and crisis output reduction strategy\. The area of intervention which is usually the rural area is the home to the most fragile and most vulnerable groups\. High expectations placed in PDCAGV to restore hope to these people confronted daily with the effects of poverty and bad living\. Although parallel financing of the Project by IDA and AfDB is a great opportunity beneficial both in its design and 39 in its implementation\. However, the Government of CAR has failed to totally enjoy the availability of these two donors to support the project\. Despite the very unfavorable conditions in which the project has evolved and the outbreak of the Operational Policy OP 7\.30, the WB has always shown a special interest in "saving the Project" and ensure its long-term implementation regarding its financing\. Thus, the sliding of the closure of the project 22 months allowed to register at May 31, 2015 (closing date), a disbursement rate of around 100% compared to the Grant Agreement and the results up to the expectations\. 54\. PDCAGV, is a useful project, very useful in terms of objectives, approaches adopted for a strong involvement of the beneficiaries in implementation, given the fragile gains made though\. If measurements are taken by a neighbor constitutionally elected Government to revive Cooperation and Partnership with the two donors for the implementation of phases 2 and 3 initially planned, the PDCAGV, have left a bitter taste of unfinished with CVD and CDC established and operational in the field\. The foreseeable consequences of the project ended without the subsequent phases will be harmful to the population for the credibility of the Government to support them and provide them with well-being and conditions of access to basic socio-community infrastructure in rural areas\. Lessons learned: LT1: Innovative Approach: the strong involvement of beneficiaries (CVD and CDC) in the Project implementation process is the guarantee of the success of the project, ownership and sustainability of the achievements and the mobilization of social groups around common interests of development\. This requires time and a lot of time and cannot be done in a short time in the life of a project (3-5 years); LT2: Context political instability and social conflict: Preservation of most Project acquired during a period of unprecedented bloodshed\. Recovery and driving forward the planned activities despite the risk of still palpable insecurity in some regions: Evidence that the PDCAGV is a project of common interest to the beneficiary groups (PDL, access to drinking water and sanitation, access to education and primary health care, access to kindergartens and establishment of participatory democracy at local conditions etc\.)\. The PDCAGV gives proof that people can be mobilized around their common interest for their development\. LT3: PDCAGV jointly supported by IDA / WB and ADF / ADB with a single management unit, using the same MEP and MGAFC and synchronization to the best project supervision missions in the field\. Co-financing could complete this exceptional joint partnership\. The result is a significant gap in the achievement of sub-projects financed by the two donors\. A mixed opinion among beneficiaries emerges: The beneficiaries of the sub-projects financed by IDA have a positive view on the achievements of PDCAGV while the beneficiaries of the subprojects financed by ADB always hopeful (cases platforms multifunctional ADB-financed whose work has not yet started); LT4: Unrequited Project: No national counterpart (national budget) or counterparty to the CDC and CVD (direct beneficiaries): The sub-projects financed are priorities but their efficiency remains to be proven: built primary schools without equipment nor teachers and neither educational kits; Community pharmacies but without allocation of start-basic pharmaceutical products etc\. The consideration at the national level without conditionality could have financed the complementary measures identified at the end of the project\. LT5: Monitoring and evaluation, and the Communication on the Project have not been sufficiently taken into account and developed throughout the course of the Project\. This has weakened a little knowledge of PDCAGV and visibility with both the Government and public opinion in general\. 40 Recommendations: R1: Perform a technical audit of built or rehabilitated followed datasheets facility infrastructure through infrastructure and transmitting to the Client (UEC - AGETIP CAF) before closing the ADF / ADB financing; R2 : Proceed with the official handover of infrastructure carried out MO (database and data sheets items) in accordance with the CMOD (UEC - AGETIP CAF - MASPGAH) before the end of 2015 (condition required for settlement the remaining 25% fee to AGETIP CAF29); R3: Carry out surveys to measure project performance indicators at the end of the first phase as stipulated in the Grant Agreement and the MEP with the possibility of financing the ADF / ADB (UEC - EBU - ICASEES); R4: Report to the Government by the Council of Ministers Communication on the achievements and prospects of PDCAGV (NOC-UEC-AGETIP CAF - MASPGAH); R5 : Initiate negotiations with the two donors (IDA / WB and ADF / ADB) and see their availability to continue the financing of Phases 2 and 3 of the project; (MASPGAH - UEC - Focal Points - AGETIP CAF); R6: To popularize the law on the Public Analyst and its implementing decrees to make the sector competitive public contracting authority delegation (Government - Development Partners)\. The opening to competition, creates a true emulation, the emergence of professional offices and practice fee rates below the maximum rate (10%) specified in the regulations in force; R7: Repair the extent possible the effects of psychological shocks suffered by professionals and some agents have been suspended due to force majeure and victims of the unrest\. 7\.2 Comments on the draft ICR: In general, the PCT is of the opinion that the ICR is acceptable\. However, it requires the report to consider the comments and details below\. 1\. General comments on the evaluation of stakeholder performance The amount of resources and the extent of the area of intervention: it was not realistic to think that we can reach achievements that have a significant impact on the population with funding of $ 8,000,000 over an area of 102 communities\. Some of the performance indicators would only have been meaningful if the project had several phases, which would have allowed to assess the sustainability of achievements\. The randomized selection of beneficiaries was strongly recommended the Bank at the technical launch of the project in 2009 (see checklist of November 2009)\. This methodology resulted in more accurate indicator values than were in the PAD\. The result of the baseline survey and the random selection allowed to quantify the targeted beneficiaries (number of towns, villages, people, infrastructure, PDL, etc\.) and divided the interventions as follows: 18 communities (Capacity Building + PRF), 18 communities (Capacity Building + PRF + LDF), communities (Capacity 41 Building + LDF) and 48 communities (Capacity Building only)\. After this stage the only question that remained was to define the content of the capacity building, particularly for those 48 communities that would not benefit from infrastructure rehabilitation either under PRF or LDF\. Because of the above process, the PRF infrastructure could be identified in October 2010, nearly 12 months after project start; thereby already having missed the goal of PRF reconstruction within 12-18 months after starting the project\. Following the execution of studies under the supervision of AGETIP, about 230 social facilities were to be rehabilitated under the RPF throughout the area of operations and finance with both IDA and ADF\. Subsequently it was agreed between the donors and the Government that the IDA funding would cover infrastructure in regions 1 and 2, and AfDB in regions 4 and 6\. Borrower Performance: the delay induced by the method of selection of the FAP randomized infrastructure should not impact the performance evaluation of the implementing agencies\. 2\. Evaluation of the achievement of the PDO The assessment is made compared to previous targets in June 2013: PDO2: Enhancing the capacity of local beneficiaries in planning and managing local recovery\. This assessment is not comprehensible if one is not based on values resulting from the process of selection of beneficiaries and choice of infrastructures to be rehabilitated by randomization\. The PAD indicators were neither encrypted nor clearly defined\. Following the selection of beneficiaries by randomization, the total number of common infrastructure to receive and FAP or FDL is 54\. The total number of common FDL is 36\. Why not take these values as starting values for evaluating the achievement of objectives? It is difficult to indicate the objective basis of evaluating the capacity of managing local recovery\. 3\. Post-completion Operation/ Next Phase The report makes some relevant observations: Social infrastructure needs are high and the CDD approach adopted by the project was a good approach\. There are 24 communities that have produced PDL and trained VDC / CDC but received no funding for their infrastructure priorities\. What will we tell them to members of the VCD / CDC and the expectations that were raised through the development of these PDL if there is no next phase? The Government had expressed the will to realize the PDCAG project in phases\. In the short term, the LONDO project funded by the World Bank can help restore social cohesion\. What can be considered for the long term? 42 Annex 8: Comments of Co-Financiers and Other Partners/Stakeholders 43  Annex 9: List of People Interviewed Name Title Institution Ferrier NDOLEGUIA Directeur du Bureau d'études et ACG de contrôle ACG Eve HACKIUS ACTED Country Director ACTED Judicaël MONTINDA AGETIP-Chef de la Cellule AGETIP dédiée au projet PDCAGV Marcel NGANASSEM Directeur Général de AGETIP l'AGETIP, Maître d'ouvrage délégué (MOD) Jean-Chrysostome MORISSI Social Development Specialist African Development Bank Pierrot BEGO LANZERET Directeur du Bureau d'études et Le Crayon de contrôle LE CRAYON,TEL: 75504380/ 75202434 Emmanuel DJADA Inspecteur Central au Ministère MAS des Affaires Sociales, Vice- président du Comité de Pilotage Eugénie YARAFA Ministre des Affaires Sociales, MAS Président du Comité de pilotage du Projet, Maître d'ouvrage Evariste SIMBARAKIYE Project Coordinator MAS Fred Martin AZENE Spécialiste en Développement MAS communautaire (SDCR) du PDCAGV Jean Claude BELLEKA Directeur Général des Etudes et MAS de la Planification au Ministère des Affaires sociales, Rapporteur du Comité de Pilotage, Point focal du fiancement BAD, signataire sur les chèques et les DRF Julienne FIOLENGA Administrateur de l'UER 1 MAS 44 Sylvain MBETISSINGA Administrateur de l'UER 2 MAS Irène POUNEGINGUI Assure le suivi du projet Ministry of Economy and Planning PDCAGV au Ministère de l'Economie et du Plan Germain Turenne NGONGA Directeur de l'entreprise MTC: MTC 75050450 André ZOUDAMBA Directeur du Développement PNC Communauaire, Rapporteur du Comité de Pilotage, Point focal du financement IDA, signataire sur le chèque et les DRF World Bank Emeran Serge M\. Menang Evouna Sr\. Environmental Specialist Evelyne Huguette Madozein Program Assistant World Bank Haoussia Tchaoussala Procurement Specialist World Bank Jan Weetjens Practice Manager World Bank Jean-Christophe Carret Country Manager World Bank Paul Bance Task Team Leader World Bank World Bank Sophie Grumelard Social Development Specialist 45  Annex 10: List of Background Documents Document Date Project Appraisal Document March 17, 2009 Integrated Safeguards Datasheet (ISDS) - Appraisal Stage February 2009 Restructuring Paper June 30, 2013 Restructuring Paper July 25, 2014 Environmental and Social Management Plan March 2010 Resettlement Policy Framework March 2010 Indigenous Peoples Framework March 2010 Baseline Report for the Evaluation of the Support to Vulnerable Groups Community Development Project June 2012 Rapport d'Evaluation de Projet AfDB: Promotion Socioeconomique des Groupes Vulnerables September 22, 2008 Aide Memoire October 27 - October 4, 2008 Aide Memoire September 15 to 26, 2009 Aide Memoire November 8 to 24, 2009 Aide Memoire December 9 to 17, 2009 Aide Memoire May 5 to 20, 2010 Aide Memoire July 10 to 17, 2010 Aide Memoire October 19 to 23, 2010 Aide Memoire April 6 to 22, 2011 Aide Memoire October 17 to 24, 2011 Aide Memoire December 7 to 22, 2011 Aide Memoire June 20 to July 5, 2012 Aide Memoire September 12 to 20, 2012 Aide Memoire June 15 to 22, 2013 Aide Memoire January 16 to 23, 2014 Aide Memoire October 7 to 14, 2014 Aide Memoire April 21 to May 5, 2015 46  Sequences 2,3,4,5,6,7,8,9,10, and Implementation Status and Results Reports 11 Rapport de l'Assistance a la Mise en Place du Systeme de Suivi - Evaluation du PDCAGV Rapport Annuel de l'Exercice 2014 du PDCAGV Rapport Annuel de l'Exercice 2013 du PDCAGV Rapport Annuel de l'Exercice 2012 du PDCAGV Rapport Annuel de l'Exercice 2011 du PDCAGV Manuel d'Execution du Projet (version finale) September 1, 2010 Implementation Completion and Results Report (TF-93956) Education For All - Fast Track Initiative (draft version) November 12, 2015 Rapport d'Evaluation de Cloture PDCAGV (version Finale) - Mr\. Bachir Issiaka Oloude June 2015 Country Engagement Note for the Central African Republic July 13, 2015 47 Annex 11: Map Annex 11: Map 48

APPROVAL

P004156

Document of The World Bank FOR OFFICIAL USE ONLY Report No\. 16194 IMPLEMENTATION COMPLETION REPORT REPUBLIC OF KOREA PUSAN AND TAEJON SEWERAGE PROJECT (Loan 3450-KO) DECEMBER 16,1996 Infrastructure Operations Division Country Department I East Asia and Pacific Region This document has a restricted distribution and may be used by recipients only in the performance of their official duties\. Its contents may not otherwise be disclosed without World Bank authorization\.  CURRENCY EQUIVALENTS Currency Unit - Won (W) Average used in appraisal estimates (July 1991): US$ = W 720 Actual yearly average market values: US$ = W 780 1992 US$ = W 802 1993 US$ = W 803 1994 US$ = W 770 1995 US$ = W 805 1996 WEIGHTS AND MEASURES 1 meter (m) = 39\.37 inches 1 kilometer (km) = 1,000 meters or 0\.62 mile 1 square meter (m2) = 10\.8 square feet 1 square kilometer (km2) = 0\.38 square mile 1 hectare (ha) = 10,000 square meters or 2\.47 acres 1 cubic meter (m3) = 1,000 liters or 264 US gallons 1 liter (1) = 0\.26 US gallon 1 liter per capita per day (lcd) = 0\.26 US gallons per capita per day 1 million liters per day (Mld) = 1,000 cubic meters per day 1 metric ton (t) = 1,000 kilograms or 2,205 pounds FISCAL YEAR OF BORROWER January 1 to December 31 ABBREVIATIONS AND ACRONYMS BOD - Biochemical Oxygen Demand EMP - Environmental Monitoring Program FRR - Financial Rate of Return MOCT - Ministry of Construction and Transportation MOE - Ministry of Environment MOFE - Ministry of Finance and Economy NGO - Non-Governmental Organization NWIP - National Water Improvement Program NWTP - National Wastewater Treatment Plan SSA - Sewerage Special Account SS - Suspended Solids SMP - Sewerage Master Plan WTP - Wastewater Treatment Plant Acting Vice President : Marianne Haug Director : Javad Khalilzadeh-Shirazi Division Chief : J\. Shivakumar Task Manager : Anjum Altaf  FOR OFFICIAL USE ONLY IMPLEMENTATION COMPLETION REPORT REPUBLIC OF KOREA PUSAN AND TAEJON SEWERAGE PROJECT (Loan 3450-KO) Table of Contents Page No Preface \.(i) Evaluation summary \. (ii) Part I: Pusan and Taejon Sewerage Project Implementation Assessment A\. Project objectives \.1 B\. Achievement of project objectives \.1 C\. Major factors affecting the project\. 5 D\. Project sustainability\. 6 E\. Bank performance\. 7 F\. Borrower performance\. 7 G\. Assessment of outcome\. 8 H\. Future operation\. 8 I\. Key lessons learned\. 9 Part II: Statistical annexes \. 10 Table 1\. Summary of assessments \. 11 Table 2\. Related Bank loans \. 12 Table 3\. Project timetable \. 13 Table 4\. Loan disbursements; cumulative estimated and actual \. 14 Table 5\. 'Key indicators for project implementation \. 15 Table 6\. Key indicators for projecc operation \. 16 Table 7\. Studies included in project \. 18 Table 8a\. Project costs \. 19 Table 8b\. Project financing \. 21 Table 9\. Economic costs and benefits \. 22 Table 10\. Status of legal covenants \. 25 Table 11\. Bank resources: staff inputs \. 27 Table 12\. Bank resources: missions \. 28 APPENDICES A\. Completion Mission's Aide Memoire \.29 B\. Borrower contribution - Pusan Sewerage Management Office \.30 C\. Borrower contribution - Taejon Sewerage Division 37 D\. Borrower comments on the ICR \.46 E\. Map - IBRD No\. 23319: Project Location in Pusan \. 47 F\. Map IBRD No\. 23320: Project Location in Taejon \. 48 This document has a restricted distlibution and may be used by recipients only in the performance of their I oficial duties\. Its contents may not otherise be disclosed without World Bank authorization\.   Implementation Completion report REPUBLIC OF KOREA Pusan and Taejon Sewerage Project (Loan 3450-KO) Preface This is the Implementation Completion Report (ICR) for the Pusan and Taejon Sewerage Project in the Republic of Korea, for which loan No\. 3450-KO in the amount of US$ 40 million equivalent was approved on March 26, 1992 and made effective on August 26, 1992\. The loan closed on June 30, 1996 compared with the original closing date of December 31, 1995\. Out of the total loan, an amount of US$ 6\.0 million was canceled in July 1994 by Pusan, and US$ 0\.46 million canceled in December 1995 by Taejon\. The final disbursement took place in September 19, 1996, at which time a balance of US$ 19\.6 thousand equivalent was canceled\. The ICR was prepared by the Infrastructure Operations Division, Country Department I, East Asia and Pacific Region and reviewed by Mr\. J\.Shivakumar, Chief of Infrastructure Operations, and Mr\. Walter Schwermer, Project Adviser\. Preparation of this ICR began during the Bank's completion mission, in November 1996\. The borrower contributed to preparation of the ICR by preparing its own evaluation of the project's execution and initial preparation which is attached in Appendix A and B\. The borrower also commented on the draft ICR\.   ii Implementation Completion Report REPUBLIC OF KOREA Pusan and Taejon Sewerage Project (Loan 3450-KO) Evaluation Summary Introduction i\. The project was designed to support the Korean Government's efforts to improve water quality in rivers and coastal waters, and was a logical continuation of the Bank's Sewerage and Wastewater Sector Report (1988) in which the main recommendations were to increase construction of wastewater treatment plants (WTP), and to accelerate conversion of combined sewers\. Through the project preparation the Bank drew on its familiarity with the Korean water supply and sewerage sector, its experience in supporting sector developments worldwide, and its interest in addressing environmental issues\. Project Objectives ii\. The objectives of the project were to: (a) improve environmental conditions in two of Korea's largest cities; (b) reduce pollution in the country's rivers and coastal waters, which is crucial to the well-being of a large part of the population; (c) reduce health hazards associated with contaminated water bodies, particularly to the lowest-income section of the population which is most exposed to this problem; and (d) provide continued support for technological and institutional improvements in the sector\. iii\. In Pusan, the project consisted of the construction of the first phase of Nambu (previously called Yongho) WTP, a sewage pumping station and about 11\.4 km of large-diameter interceptors\. In Taejon, the project consisted of construction of the second phase of Wonchon Dong WTP and 11\.9 km of interceptors\. iv\. During project identification a review was made of the existing Pusan and Taejon sewerage master plans (SMP), which were already over ten years old and did not provide sufficient detail to further develop the systems\. It was agreed that both project cities would update their SMPs by December 31, 1992 to take into account any developments since the plans were prepared, and to establish programs for conversion to more sanitary and environmentally acceptable separate sewer systems\. v\. The WTPs constructed under the project were part of the plan for further expansion of treatment capacity and sewer construction projects\. As the improvement of environmental conditions was a main objective of the project, assurances were obtained that the actual performance of the constructed plants would be monitored to ensure compliance with environmental regulations as well as to provide useful data for future expansion programs\. Both cities agreed to implement an Environmental Monitoring Program (EMP) to collect and evaluate the impact of plant operations\. vi\. The financial viability of the two implementing agencies, Pusan and Taejon sewerage division, depended upon the ability to generate adequate income to meet all financial obligations on a timely basis and sustain a  iii satisfactory level of working capital to continue operations\. To this end both cities agreed to set sewerage tariffs yielding adequate revenues to meet operation and maintenance costs including depreciation, and to provide a rate of return of at least 5'6 in Pusan and 3% in Taejon on their respective net revalued fixed assets\. The rate of return covenants were used to measure the financial performance of both cities' sewerage facility\. Due to national anti- inflationary policies, sewerage tariffs were not increased in 1992 or 1993, and the rates of return targets were not achieved (para 17-21)\. vii\. The project objectives supported the Korean Government's 1990-96 National Wastewater Treatment Plan (NWTP) to improve the water quality in the country, and reverse environmental degradation due to the country's rapid industrialization\. The planning was sound and the results would suggest that the project was well founded and the agreements reached to promote the achievement of the objectives were realistic and well conceived\. Implementation Experience and Results viii\. The project achieved its overall objectives\. The identification phase was carried out in a very satisfactory manner\. The feasibility studies and detailed design benefitted not only from the extensive involvement of local agencies, but also from the evaluation of issues by infrastructure and environmental units within the Bank\. There is strong evidence that the project is sustainable, given the commitment of national and local governments to improve environmental conditions in the country, and Pusan and Taejon have recently advanced their investment programs for additional wastewater treatment facilities\. ix\. The only delay in implementation was in Pusan where the WTP is located close to a residential area\. Neighboring resident representatives held lengthy discussions with the city to ensure that the appearance and operation of the completed plant would not adversely affect their living conditions\. This matter was resolved by a partial redesign of the component which was satisfactory to the residents\. x\. The project's cost, including interest during construction, as estimated at appraisal was US$ 272\.1 million of which US$ 40\.0 million equivalent was to be financed by the Bank\. The balance was financed from local borrowing, the cities' general accounts, internal cash generation, and a small capital contribution from the central government to Taejon city towards the international Expo'93 exhibition\. The original closing date was set at December 31, 1995, but due to the delay in implementation in Pusan, the closing date was extended to June 30, 1996\. The actual project cost was US$ 278\.6 million which is only fractionally higher than the appraisal estimate\. xi\. A number of institutional strengthening initiatives were implemented under the project to update the cities' SMPs, provide operator training during start-up and commissioning, provide guidance on sewerage tariff structures, and improve environmental monitoring\. Overall Bank supervision was satisfactory, being handled by an experienced sanitary engineer, supported by environmental and financial specialists\. The borrower and implementing agencies performed well and relations with these agencies and consultants were cordial and productive\. xii\. The financial performance of both project cities was, however, unsatisfactory\. This was mainly due to the delay in raising sewerage charges which, during appraisal had been expected to be increased in 1992, but due to national anti-inflationary measures, this did not happen\. However, substantial  iv additional tariff increases were introduced in Pusan in 1995 and an additional increase of over 30% is planned for 1997\. This is not the case in Taejon where relatively small increases of 9\.8% were introduced in 1994 and 1996, but these were insufficient to make the agency profitable\. Taejon has been designated a spill-over city for Seoul, and keeping charges at lower levels is a factor in encouraging development in this area\. (para\. 21 & 25) xiii\. Actual revenues in 1995 were 30% less than projected during appraisal in Pusan, and 40% less in Taejon\. Another reason for the unsatisfactory financial performance and reduced revenues was lower water consumption due to very low rainfall for the past three years\. A water conservation campaign introduced mainly in Pusan, resulted in lower billing than originally projected\. xiv\. On balance, the project outcome can be considered satisfactory\. The only major problem was the failure to increase sewerage tariffs as had been expected during appraisal, and the non-compliance of the financial ROR covenants\. Although the financial covenants were not complied with, at project completion the overall target for internally generated funds had been satisfactorily addressed in Pusan\. In Taejon, increase in sewerage tariffs has been at lower levels to encourage development in the city\. The loss of revenue due to lower tariffs did not affect the financing of the project as the shortfall was made up from the cities' general account and local borrowing\. Summary of Findings, Future Operations, and Key Lessons Learned xv\. Benefits from the project will be sustained given the cities' and government's commitment to improve the environment, and their provision of skilled and well trained staff to service and operate the facilities\. This commitment is also supported by the citizens of Pusan and Taejon (paras 24- 25) \. Both cities will continue to monitor environmental conditions at the plants and the receiving waters\. xvi\. The main lessons to be drawn from the experience in implementing the project are as follows: a) the close relationship between the Bank and the borrower provided the basis for wide-ranging discussions, not only to create appropriately designed projects, but also for provision of well trained institutions to support and operate the facilities, environmental monitoring, and the ability of operating agencies to further develop the systems\. b) where sewerage facilities are located close to residential areas, discussions should be held at an early stage with residents' representatives to reach acceptable plant design standards, as well as tolerable methods of operation; failure to do this can lead to construction delays\. c) as an alternative to using the rate of return covenant to measure satisfactory financial performance of a sewerage utility where assets are mainly underground, out of sight and difficult to value, an acceptable measure is the agency's contribution to investment from internal resources; this covenant was adopted for the follow-up sewerage project in Pusan (Korea: Waste Disposal Project Ln\.3830-KO)\. d) the potential for the success of any project is increased if it fits into the government's sector development policy\.   Implementation Completion Report REPUBLIC OF KOREA Pusan and Taejon Sewerage Project (Loan 3450-KO) PART 1: PROJECT IMPLEMENTATION ASSESSMENT A\. Project Objectives 1\. Korea experienced a sharp upsurge in economic growth during the past three decades, which was accompanied by an increased demand for water supplies for domestic and industrial use\. The outlook for the next decade is for continued expansion in the demand for water\. The treatment and safe disposal of wastewater is a major concern of the government, and to help resolve this problem, the National Water Improvement Program (NWIP) was approved by government in 1989\. 2\. The two key elements in the NWIP were the upgrading of municipal water supplies and the improvement of water quality in rivers and coastal waters\. The NWIP was formulated with the assistance of the Bank report Korea - Sewerage and Wastewater Management, Options and Recommendations (April 1988), and the objectives of the Pusan and Taejon Sewerage Project conform to this program\. 3\. The aim of the development of sewerage systems in the two project cities by 2001 is to provide the total population with sewerage services, including full secondary treatment of all wastewater generated in the planning area\. The objectives of the project were to: (a) improve environmental conditions; (b) reduce pollution in the water courses and coastal waters; (c) reduce health hazards associated with contaminated rivers; and (d) continue to support technological and institutional improvements in the sector\. 4\. The project objectives were well defined, realistic and important for the sector development, and had the full commitment of the Pusan and Taejon city governments and their respective sewerage agencies\. 5\. The Pusan component of the project consisted of the construction of the first phase of the Nambu (previously called Yongho) waste water treatment plant (WTP), a sewage pumping station and 11\.4 km of large-diameter interceptors\. The Taejon component consisted of the construction of the second phase on Wonchon Dong WTP and 11\.9 km of interceptors\. 6\. The Pusan Sewerage Management Office, and the Taejon Sewerage Division already had considerable experience in implementing similar projects, and were satisfactorily assisted by consultants throughout the preparation, implementation and commissioning periods\. There were no undue risks as the professional ability and extensive work experience of the agencies' staff enabled them to respond to changes occurring during implementation\. B\. Achievement of Project Objectives Physical Objectives 7\. The design of all project components represented the least-cost solution to improve sewerage systems in Pusan and Taejon, and the resulting construction was carried out successfully\.  2 8\. In Pusan the construction of the Nambu (previously known as Yongho in the SAR) WTP was completed in June 1996, but the final completion of the sea outfall is not expected until October 1997\. Test operations commenced on November 1, 1995 and were completed in May, 1996\. At appraisal, construction of civil works, the installation of equipment, commissioning and testing, were planned to be completed on December 31, 1994\. 9\. Due to objections from neighboring NGOs on the visual and operational effect the WTP would have on the neighborhood, the treatment plant had to be partially redesigned, replacing an open concrete channel on the Daeyon river by a tunnel, and eliminating the booster pumping station on the trunk main\. The delay in completion was due to negotiations with NGOs, redesign and new bidding\. 10\. In Taejon the construction of the second phase of Wonchon Dong sewage treatment plant and the sewer interceptors (increased from 11\.9 km at appraisal to 20\.7 km) was completed in January 1994, and test operations were finished in July 1994\. At appraisal the planned date for completion of construction, commissioning and test operations was December 31, 1993\. 11\. The actual project cost, including interest during construction, is US$ 278\.6 million which is only about 2% higher than the appraisal estimate of US$ 272\.1 million\. The Bank financed US$ 33\.5 million of the project out of the approved loan of US$ 40\.0 million (Pusan canceled US$ 6\.0 million from savings made on equipment and the partial redesign of the component, and Taejon canceled US$ 0\.4 million)\. The balance of the project cost was financed from local borrowing, the cities' general accounts, and a contribution from the central government to Taejon city towards the Expo'93 exhibition\. Environmental Objectives 12\. The successful completion of the project is expected to provide long-term environmental benefits to the two cities and their surrounding areas\. These include conservation of aquatic resources, reduced health hazards associated with contaminated water, improved quality of receiving bodies of water, increased land and property values, and enhanced aesthetic appearance of river and coastal recreation areas\. 13\. The measures taken to reduce negative environmental impact during construction are standard to all construction sites in Korea, and were satisfactorily observed in both cities\. 14\. The regulations relating to the operation of WTPs, the potential environmental impact and mitigating measures to be taken, are comprehensive in nature, and under MOE regulations, are required to be accurately monitored on a continuous basis\. There are no special requirements regarding the operation of interceptors or pumping stations, and the designs for these are satisfactory and environmentally sound\. 15\. In Pusan, the monitoring contract was modified to reflect the start of the first test operations and full testing commenced in June 1996 when the plant went into full operation\. On the city's own initiative a sea environment research program will also be carried out\. 16\. In Taejon the first monitoring before completion of construction was carried out in November 1993 and January 1994, but due to unsatisfactory results had to be repeated, taking into account other factors such as river flow and depth, and the quantity and characteristics of discharge into the  3 river\. The water quality showed higher concentrations of BOD, COD and SS compared to the values predicted in the 1989 Environmental Impact Assessment study\. It is reported that these high concentrations are partly due to Stage III of the Wonchon Dong WTP, which is currently under construction\. Financial Objectives 17\. The financial objectives were established so that both cities' sewerage agencies would improve their financial situation in order to progress towards self-financing status in the future, and contribute to funding investments\. To support this objective, the two city governments agreed that revenues from sewerage charges would be set to cover operating and maintenance costs including depreciation, and produce annual rates of return of not less than 5% in Pusan and 3% in Taejon\. These targets were used as a covenants to measure the financial performance of both cities' sewerage facility\. 18\. Due to national anti-inflationary policies, the Government opposed any utility tariff increases in 1992 or 1993\. In April 1993, these policies were followed by the cities when the authority to set tariffs was devolved to the municipalities, and as a consequence the rates of return targets were not achieved\. From 1994, both cities increased the sewerage charge which resulted in an improvement in revenue generation (para 23)\. This indicates that in spite of the fact that financial covenants were not complied with, the overall target for internally generated funds had been addressed in both cites\. The actual rates of return achieved compared to those required at appraisal are shown in Table 1\. Table 1\. Rates of return Pusan Taejon Year Required Actual Required Actual 1993 5\.0% 1\.4% 3\.0% -0\.5% 1994 5\.0% 1\.5% 3\.0% -0\.7% 1995 5\.0% 2\.2% 3\.0% -1\.6% 1996 (est) 5\.0% 2\.9% 3\.0% 0\.0% 19\. The major reasons Pusan sewerage division did not achieve the rate of return target were due to the advancement of its capital expenditure program, the extremely high increases in revalued fixed asset values in 1993, and the reduced volumes of waste water processed\. At appraisal the projected capital expenditure for 1995 was W 74 billion whereas the actual figure jumped to W 120 billion as environmental pressures forced the city to bring forward construction of wastewater treatment facilities\. The revaluation of fixed assets, covering the five years to 1993, increased fixed asset values by over 85%\. Wastewater volumes were 28% below the appraisal estimate due to severe water shortages over the past three years, which resulted in lower than projected revenues\. 20\. While wastewater volumes were 7% less than projected during appraisal, the main reason Taejon failed to generate sufficient revenues and achieve a positive rate of return is because it failed to increase tariffs to an adequate level\. During negotiations, Taejon agreed to take all necessary measures to achieve a rate of return of 3% per annum, and it was expected that tariff increases in the order of 20% to 25% would be required for the period 1992 through 1994 to help meet this target\. 21\. Once national anti-inflationary pressures were lifted and the authority to set tariffs was devolved to the cities, Taejon city kept annual  4 sewerage charge increases at under 10%, which were insufficient to achieve the required 3% rate of return\. The situation was discussed with Bank missions and it was reported that local political pressures were foremost in keeping tariff increases at lower levels than other special cities in Korea\. Taejon has been designated a spill-over city for Seoul, and keeping charges at lower levels in Taejon is a factor in encouraging development in this area to take some of the pressure off the overdevelopment of Seoul\. 22\. While the financial performance in both project cities has been less than satisfactory, operational expenditure remained as projected, which is a positive indication that the shortfall in revenues has not affected the operation and maintenance expenditure on the facilities\. The lower than expected income was made up from the cities' general accounts and local borrowing from the respective regional development funds and Pusan received a W 18 billion loan from the Environmental Development Fund\. Sewerage Tariffs 23\. In Pusan, average sewerage tariffs were increased by 9\.9% from January 1, 1994, by a further 19\.7% from January 1995, and an additional increase of 37\.4% in December 1995\. In Taejon they were increased by 9\.8% in November, 1994 and by the same percentage in June 1996\. Additional increases of 34\.9% in Pusan and 10% in Taejon are planned to be introduced early in 1997\. Both cities have included annual increases of their sewerage tariffs in their respective Five Year Plans from 1997 through to 2001\. 24\. The recent substantial increases in sewerage tariffs in Pusan have been agreed after a series of discussions between the city and resident organizations, as the improvement of the environment is now a major issue with all citizens\. Pusan recently suffered from contamination of the Nakdong river (the main water source for the city), with drought conditions now being into the third year, and 'red-tides' experienced in some of the river estuaries, beaches and coastal areas\. 25\. The increase in average sewerage tariffs in Taejon has been at a lower levels to encourage development in the city (para 21), and unlike Pusan, the city of Taejon has not experienced the same environmental problems or water shortages\. In addition, the city has not needed to generate large revenues from tariffs to fund expansion of its wastewater treatment facilities, as land developers are funding around two-thirds of Phase III of the Wonchon Dong WTP\. Institutional Development 26\. Under the project the sewerage master plans (SMP) for both cities were updated with the maximum use of computers to simplify their maintenance, and to update and make amendments as and when required\. This updating is designed to ensure that subsequent expansion of wastewater treatment facilities represents best choices and least-cost solutions\. Treatment plant operators received training during the commissioning of the new treatment plants, which use the latest technology to ensure optimal performance\. 27\. The sewerage agencies' finance staff, assisted by consultants, have developed the skills necessary to prepare detailed annual tariff increase submissions\. The agencies' aims are to set sewerage tariffs consistent with economic and social objectives and with due consideration of the residents' willingness and ability to pay\.  5 Sector Policies 28\. The project has not deviated from the sector policies of the Government as prescribed by the Ministry of Construction and Transportation (MOCT) and the Ministry of Environment (MOE)\. The completed project therefore, conforms with the detailed designs approved by MOE, and was consistent with government's and Bank's development/country strategy\. Financial Rate of Return 29\. The financial rate of return (FRR) of the completed project relates sewerage revenues (adjusted to include approved tariff increases) to the capital and operating costs of sewerage facilities, and is computed as an approximate indication of minimum economic return\. The FRR is 7\.0% for Pusan and 0\.4% for Taejon, as compared to 9\.5% and 4\.9% respectively at appraisal\. These reductions in the FRR are the consequence of the delay in imposing higher sewerage tariffs, as well as reduced billings due to water shortages\. 30\. The difference in the two cities' FRR is attributed largely to the tariff increases introduced earlier, at higher levels in Pusan than in Taejon (para 23)\. With regards to Pusan, the matter of tariffs was satisfactorily addressed from 1994 onwards with annual increases averaging over 30%, and considering the social nature of the project with intangible health and environmental benefits, the recalculated FRR is considered adequate\. The FRR for Taejon is unsatisfactory\. Action needs to be taken by the responsible city officials to remedy the situation of Taejon's sewerage agency and ensure that long-term sustainablity is not threatened\. C\. Major factors Affecting the Project 31\. Firms of Korean consulting engineers were engaged under the project to supervise day-to-day construction; verify compliance with specifications for works and goods; test and commission completed works; advise on training staff to operate the completed facilities; and prepare procurement documentation\. The performance of these consultants for both project components was good and contributed significantly to the successful implementation of the project\. 32\. The standard of performance of the contractors for civil works, electrical and mechanical work on the treatment plants, interceptors and related tasks was generally good\. Performance on equipment supply contracts was satisfactory; deliveries were on schedule, and all equipment supplied conformed to specifications\. 33\. The clear sector policies, guidelines and local government commitment to both components, together with the significant environmental benefits, were a major factor in the positive results of the project\. 34\. Both cities provided capital contributions from their general accounts, and the central Government provided equity funding for the Taejon component linked to that city's Expo'93 international exhibition\. The Regional Development Funds in both cities provided loans to help finance the project\. Pusan also obtained a loan on preferential terms from the Environmental Management Corporation (EMC) which was not expected at the time of the appraisal\. Taejon obtained a loan from EMC towards stage III of the Wonchon Dong WTP which is presently under construction\.  6 35\. The commitment of the management and staff in Pusan and Taejon sewerage divisions was generally very good and their internal administrative procedures worked satisfactorily\. The regular submission of project progress reports was adequate but the submission of managerial and financial monitoring indicators was occasionally delayed, leaving Bank supervision missions to complete some of the data\. 36\. In Pusan, lower than expected equipment costs coupled with the elimination of the booster pumping station led to a reduction in the project costs of some US$ 6 million\. Pusan city initially considered using this amount to help finance an incinerator for the disposal of sludge, but later decided against this course of action and in July 1994, on government request, the Bank loan was reduced from a total of US$ 40 million to US$ 34 million\. The partial redesign of the WTP due to objections from neighboring NGOs was the main reason for the delay of about 18 months from the original estimate (para 9)- D\. Project Sustainability 37\. The project's achievements are likely to be sustainable\. The training of operators during test operations ensured transfer of knowledge on the proper maintenance of facilities and assisted the sewerage agency staff in both project cities to plan, design and implement further sewerage projects\. Some project benefits, like the protection of water quality and the environment, are being expanded at a national level through the National Water Improvement Program (NWIP)\. 38\. The up-dating of the sewerage master plans will assist in providing as-built drawings of all plant and network, introduce agency staff to the latest technological advances in computerized planning systems, and the detail needed for the cities to manage further development of their wastewater treatment facilities\. These generated benefits should help to sustain operations\. 39\. A potential problem which could threaten sustainability, is failure to continue tariff setting at levels which would allow the two sewerage divisions to operate as self-sufficient public enterprises\. Such a failure could result in a reversal of the progress made in encouraging these agencies to follow sound financial practices\. The Taejon sewerage division currently operates at a loss and corrective action, including substantial increase in tariffs, is needed to correct the present unsatisfactory situation\. 40\. The setting of tariffs has political implications, and therefore during the completion mission, both cities confirmed that the shortfall in revenues to finance expansion and cover adequate operation and maintenance of the sewerage facilities, would be made up from the cities' general accounts and local borrowing\. Although revenues are less than the projections made during appraisal, there has been no cut-back in providing the necessary funds for operation and maintenance (para 22)\. 41\. To make amends for the failure to increase tariffs to an adequate level during 1992 through 1994, Pusan city held meetings with resident groups to discuss the environmental implications of any delay in providing safe disposal of wastewater\. The citizens acknowledged that there is a cost involved in creating a clean environment for themselves and their families, and supported the increase in average sewerage tariffs by 37\.4% on January 1, 1996, and are prepared to accept annual increases in the order of 20% p\.a\.  7 from 1997 through 2001 (para 24)\. These annual increases appear in the city's Five Year Plan\. E\. Bank Performance 42\. The Bank's activities during the preparation, appraisal, negotiation and loan approval stages were satisfactory and thorough, with considerable support provided to the borrower and the implementing agencies\. The need for quick implementation of the project was important as the international trade exhibition Expo'93 took place in Taejon between August and November 1993, and the additional sewerage facilities were essential for this important event\. 43\. The technical alternatives selected for the project were appropriate, and represented the least-cost solution to improve sewerage systems in the project cities\. There were no unusual risks, although at appraisal it was recognized that a delay in adequate tariff increases would restrict internal cash generation, which could place a burden on the cities' general accounts\. This situation did arise especially in Taejon where additional city resources were needed to support the project\. 44\. The establishment of sewerage tariffs in Korea is relatively new and it was initially the responsibility of central government to set the rates\. Bank staff have provided continuing guidance on sewerage tariff structures and policies to MOCT since the start of the preparation and appraisal process\. A government-financed national tariff study was prepared in 1991 which was the basis for MOCT guidelines on the methodology for setting sewerage tariffs, now being used by municipalities which, since project appraisal, have been delegated the authority for approving these charges\. 45\. Continuity of Bank staff during implementation was highly satisfactory with the same appraisal team also taking part in supervision missions\. This continuity was especially important as some of the key staff of the borrower and the implementing agencies changed during implementation\. F\. Borrower Performance 46\. The performance of the implementing agencies, government ministries and departments, from project preparation through completion was good, as were the technical capabilities of the Pusan and Taejon sewerage agencies, supported by consultants\. This is particularly commendable as there were staff changes in several key positions\. Delays and unforseen problems with a few components were in most cases due to factors beyond the borrower's and implementing agencies' control\. 47\. The project's positive environmental impact is confirmation of the cooperation of the Korean authorities, especially MOE\. Pusan and Taejon sewerage agencies have implemented Environmental Monitoring Programs (EMP) which meet MOE and the Bank's requirements\. For the Taejon component, environmental monitoring is continuing under Stage III of the Wonchon Dong WTP which is already under construction\. Pusan city has entered into a contract with the Environmental Research Institute of the Pukyung University in Pusan to provide environmental monitoring\. The first report was submitted to the Bank in March 1994 and the final report will be issued once the final results are documented after completion of construction of the sea outfall and outlet, presently expected to be in September 1997\.  8 48\. The status of performance on the major covenants in the loan and project agreements is shown in Part II Table 10 of this report\. Compliance with these covenants has been satisfactory except for the failure to achieve rate of return targets in both cities\. G\. Assessment of Outcome 49\. The project results are rated satisfactory\. Objectives were achieved, and there is transparent sustainability of the completed facilities\. Clear environmental and health benefits have ensued, and developments in treatment plant construction and network extension are already in progress\. 50\. The institutional developments that took place during the implementation of the project will have a lasting impact on the efficient operation and maintenance of the Pusan and Taejon wastewater facilities\. Updating sewerage master plans using modern computer-based technologies, and the streamlining of sub-sector institutions will allow both cities to upgrade the sanitation services they provide\. 51\. The experience gained in preparing recommendations for tariff negotiations, and the relevance of increased charges on the financial performance of the agency will lead to a greater awareness of the importance of the guidelines established during project appraisal\. An annual review of tariff levels is now required, instead of the previous situation whereby tariff levels had remained unchanged since their introduction\. While sewerage tariffs were not increased during project implementation to the levels required to meet rate of return targets, both cities have recently raised their average sewerage charges and annual increases are planned for the future (para 23)\. H\. Future Operation 52\. The completed project works will be operated and maintained under the overall supervision of the Pusan and Taejon sewerage agencies\. Staff numbers and efficiency are satisfactory and there are less than two employees per thousand sewerage connections in both cities\. The maintenance of the combined drainage system is decentralized to the city districts (Gu) \. WTPs, interceptors and sewage pumping stations are operated and maintained by the respective treatment plant centers\. 53\. Both sewerage divisions are experienced in satisfactorily operating WTPs similar to the ones constructed under the project, and additional training was provided to operators on the new technologies introduced during the project\. The sewerage divisions provide technical guidance and, as required by the budgets of the respective units, allocate funds from Sewerage Special Accounts (SSA) which are managed and administered by the sewerage agencies\. 54\. The existing allocation of duties and responsibilities is satisfactory and has been extended to the new facilities constructed under the project\. Both cities have additional WTPs and sewer interceptors under construction using the SMPs updated as part of the project, and the institutional developments are keeping pace with the growth of the organizations\. 55\. For wastewater treatment efficiency, and to ensure environmental guidelines are adhered to, the performance of the constructed WTPs will be  9 continuously monitored for BOD, SS, phosphorus and nitrogen\. This monitoring program also applies to new plants already under construction in both cities\. I\. Key Lessons Learned 56\. A major factor in the success of this project was the active participation by national and city governments in its preparation and implementation, and the close relationship between the Bank and the borrower, which helped to create an appropriately designed project, with experienced agencies to service and operate the completed facilities\. 57\. The delay in completion of the Pusan component was due to lengthy negotiations with neighboring NGOs over the design and operation of the new WTP\. Pusan city now acknowledges that full discussions with all adjacent residents and workers at the earliest opportunity is of paramount importance in order to design plants of an aesthetically acceptable standard, with local amenities or recreation facilities provided if at all possible, and that operating systems should take into account the close proximity of residential areas (para 9)\. 58\. The calculation of the rate of return for the sewerage divisions, relies on a realistic valuation of the sewerage fixed assets (para 19)\. Due to the inherent difficulty in valuing assets (mainly underground and out of sight), compounded by the volatility of asset values in Korea, it is considered advisable in future to focus on the main concern which is the overall target for internally generated funds\. The covenant's objectives promote financial viability, satisfactory financial performance, prudent financial management of the project entity, and supports socio-economic goals\. The cash generation covenant was used in the on-going follow-up project (the Waste Disposal Project - Loan 3830-KO) 59\. The agreed project Financing Plan required increases in sewerage tariffs to levels that would produce a minimum rate of return\. Subsequent national anti-inflationary measures were imposed that restricted the ability of the agencies to make these increases, and assurances were received that the shortfall in revenues would not delay the project, and that adequate funds would be provided for proper operation and maintenance of the facilities (para 18)\. 60\. The potential for the success of any project is increased if it fits into the government's development policy for the sector and can draw on other projects and related studies\. In this case the Bank report 'Korea - Sewerage and Wastewater Management, Options and Recommendations (April 1988)' assisted in formulating the National Water Improvement Program (NWIP) which gave clear support for this type of project (para 2)\.   10 REPUBLIC OF KOREA IMPLEMENTATION COMPLETION REPORT PUSAN AND TAEJON SEWERAGE PROJECT (LOAN 3450-KO) PART II: STATISTICAL TABLES  11 REPUBLIC OF KOREA Implementation Completion Report Pusan and Taejon Sewerage Project (Loan 3450-KO) Table 1: Summary of Assessments Achievement of Objectives Substantial Partial Negligible Not Applicable Macroeconomic policies x Sector policies X Financial objectives X Institutional development X Physical objectives X Poverty reduction x Gender concerns x Environmental objectives X Public sector development X Private sector development X Project Sustainability Likely Unlikely Uncertain x Bank Performance Highly Satisfactory Satisfactory Deficient Identification X Preparation assistance X Appraisal X Supervision X Borrower Performance Preparation X Implementation X Covenant compliance X Assessment of Outcome Highly Un- Highly Un- Satisfactory Satisfactory satisfactory satisfactory x  12 REPUBLIC OF KOREA Implementation Completion Report Pusan and Taejon Sewerage project (Loan 3450-KO) Table 2: Related Bank Loans Loan Title Purpose Approved Status Preceding operations First Water Expanded water 1982 Complete\. Supply Project services in loan closed 06/30/87 (Ln 2072-KO) five cities PPAR No\.8174, 1989 Second Water Eliminated sea 1984 Complete\. Supply Project water intrusion loan closed 06/30/89 (Nakdong Barrage in Nakdong PCR No\. 8675,1990 Ln 2350-KO) delta Third Water Water supply to 1985 Complete\. Supply Project 25 municipalities loan closed 12/31/90 (Metro Region in Seoul Metro PCR No\. 11530 Ln 2491-KO) region Fourth Water Expanded water 1986 Complete\. Supply Project services in 14 loan closed 06/30/90 (Namgang & Taegu municipalities PCR No\. 10833 Ln 2615-KO) Juam Regional Provided water 1990 Complete\. Water Supply services in 9 Loan closed 12/31/94 Project (Ln 3178-KO) municipalities ICR No\. 15783 Following operations Kwangju & Seoul Expand wastewater 1993 On-going\. Sewerage project treatment capacity Project completion Ln 3590-KO & reduce pollution projected 12/31/97 in the city rivers Waste Disposal Expand wastewater 1994 On-going\. Project treatment capacity Project completion Ln 3830-KO in Pusan, and provide planned 06/30/99 specified waste incinerator in Kunsan  13 REPUBLIC OF KOREA Implementation Completion Report Pusan and Taejon Sewerage Project (Loan 3450-KO) Table 3: Project Timetable Steps in project cycle Date planned Date actual Identification - 10/90 Preparation 01/91 02/91 Appraisal 04-05/91 07/91 Negotiations 01/92 01/92 Board presentation - 03/26/92 Signing - 05/21/92 Effectiveness 06/29/92 08/26/92 Project completion 12/31/94 06/31/96 Loan closing 12/31/95 06/30/96  14 REPUBLIC OF KOREA Implementation Completion Report Pusan and Taejon Sewerage Project (Loan 3450-KO) Table 4: Loan Disbursements: Cumulative Estimated and Actual (US$ Millions) FY93 FY94 FY95 FY96 FY97 Appraisal estimate 12\.0 34\.0 40\.0* 40\.0** 40\.0 Actual 5\.9 17\.4 25\.0 33\.5 33\.5 Actual as % of estimate 49% 51% 63% 84% 84% Date of final disbursement: September 19, 1996 * On the request of the Government, US$ 6\.0 million was canceled from Category 1 (Pusan component) in July 1994 ** On the request of the Government US$ 0\.46 million was canceled from Category 2 (Taejon component) in December 1995  15 REPUELIC OF KOREA Iapleaentation Completion Report Pusan and Taejon Sewerage Project (Loan 3450-KO) Table 5: Key Indicators for Project lIplementation Intpleaentation Schedule - PUSAN COMPONENT <---------------Forecast ------------> <--------------------- Actual -----------------------------> 1990 1991 1992 1993 1994 1990 1991 1992 1993 1994 1995 1996 1997 MJS DMJ S DMJSDMJSDMJ SD MJ SDHJ S DMJS DMJ SDMJSDMJSDMJ SDHJ S D Interceptors and Puiping Station Treatient Plant Civil Works Equipment Coamissioning Project Support Construct Super\. SMP Upgrading = - Land Acquisition and Compensation ILplementation Schedule - TAEJON COMPONENT <---------------…Forecast ------------ <--------------------- Actual --------------------- 1990 1991 1992 1993 1994 1990 1991 1992 1993 1994 1995 1996 MJS DMJ S DMJS DHJSDHJS D MJ S DMJ S DMJSDMJSDMJ S DMJ SDMJSD Interceptors and Puaping Station Treatment Plant Civil Works Equipmuent Coaaissioning Project Support Construct Super\. SMP Upgrading Land Acquisition and Compensation M = Quarter ending March 31 J Quarter ending June 30 S = Quarter ending September 30 D Q Quarter ending December 31  16 REPUBLIC OF KOREA Implementation Completion Report Pusan and Taejon Sewerage Project (Loan 3450-KO) Table 6: Key Indicators for Project Operation Monitoring Indicators - Pusan Component <-------- ---- Forecast ------ -------> < ----------- Actual - ----------------> YearendedDecember31 1992 1993 1994 1995 1992 1993 1994 1995 1996 est\. PHYSICAL PARAMETERS Sewage billed 000 m3/y 434728 473505 501402 537772 365468 376059 400859 382921 394584 Sewer connections No\. 301249 308441 315806 323346 301249 301260 309067 311195 311598 Length of combined sewerkm\. 5639 5677 5715 5752 4389 4507 4750 4975 5155 Length of sanitary sewer km\. 530 530 530 800 530 530 530 800 820 MANAGEMENT Days accounts receivable No\. 30 30 30 30 38 40 43 44 43 Employees No\. 500 500 500 516 313 308 328 375 401 Employees/1000 connections 1\.7 1\.6 1\.6 1\.6 1\.0 1\.0 1\.1 1\.2 1\.3 FINANCIAL PARAMETERS Ave\.Sewerage tariff Won/m3 84\.26 93\.75 93\.75 104\.06 79\.81 78\.74 87\.84 100\.03 134\.32 Working ratio 30\.0 26\.8 27\.2 31\.4 30\.1 27\.0 30\.8 30\.1 35\.7% Rate of return 4\.1% 5\.0% 5\.4% 5\.0% 3\.1% 1\.4% 1\.5% 2\.2% 2\.9% Contribution to investment 50\.2 57\.4 49\.0 46\.3 317\.9 43\.2 18\.4 38\.4 24\.5% Debt service ratio 6\.7 6\.4 5\.8 5\.3 5\.9 4\.6 4\.0 4\.2 3\.5 PERFORMANCE OF NAMBU WTP Treatment capacity 1000 m3/d - - - 340 - - - - 616 Biochemical Oxygen Demand BOD5 mg/I - - - 30 - - - - 10 Suspended solids mg/l - - - 70 - - - - 5 Phosphorus P mg/l - - - - - - I NitrogenNmgll - - - - - - 14  17 I\. \. REPUBLIC OF KOREA Implementation Completion Report Pusan and Taejon Sewerage Project (Loan 3450-KO) Table 6: Key Indicators for Project Operation Monitoring Indicators - Taejon Component <-------- ---- Forecast ------ -------> ------ Actual ------ ------> Year ended December 31 1992 1993 1994 1995 1992 1993 1994 1995 PHYSICAL PARAMETERS Sewagebilled000m3/y 113056 123960 135324 146964 108518 120415 131772 136957 Sewer connections No\. 103566 110847 118640 126981 99584 105846 107669 109902 Lengthofcombinedsewernkm\. 1496 1542 1588 1635 1654 1684 1704 1727 Length of sanitary sewer km\. 161 212 263 315 MANAGEMENT Days accounts receivable No\. 40 40 40 40 45 36 29 32 Employees No\. 125 125 180 180 147 148 188 193 Employees/1000 connections 1\.2 1\.1 1\.5 1\.4 1\.5 1\.4 1\.8 1\.8 FINANCIAL PARAMETERS Ave\.SeweragetariffWon/m3 86\.82 109\.76 125\.58 130\.24 72\.5 73\.1 74\.1 78\.2 Workingratio 32\.2 25\.9 31\.2 305 39\.7 37\.7 47\.1 58\.5% Rate of return 0\.8% 3\.0% 3\.0% 3\.0% -0\.6% -0\.5% -0\.7% -1\.6% Contribution to investment 26\.6 47 3 34\.9 29\.7 11\.3 10\.8 1\.5% 7\.0% Debt service ratio 6\.8 9\.1 4\.2 5\.3 3\.4 2\.5 1\.2 1\.5 PERFORMANCE OF WONCHON DONG I & II WTPs Treatment capacity 1000 m3/d 150 150 300 300 150 150 300 300 Biochemical Oxygen Demand BOD5 mg/A 14 14 14 14 14 16 12 10 Suspended solids mgA 20 20 20 20 13 15 14 11 Phosphorus P mg/l - - - - - - 2 2 Nitrogen N mg/ - - - - - - 9 8  18 REPUBLIC OF KOREA Implementation Completion Report Pusan and Taejon Sewerage project (Loan 3450-KO) Table 7: Studies Included in Project Study Purpose as defined Status Impact of study at appraisal 1\. Update cities' Current SMPs were over completed Updating of both Sewerage Master 10 years old and did not on cities' SMPs Plans (SMP)\. provide details needed schedule completed on time to develop the systems\. using modern Detailed updating computer-based required\. technologies allowing both cities' to upgrade sanitation services\.  19l REPUBLIC OF KOREA Implementation Completion Report Pusan and Taejon Sewerage Project (Loan 3450-KO) Table 8A: Project costs: (US$ million) PUSAN COMPONENT Item Appraisal estimate Actual cost Local Foreign Total Local Foreign Total Treatment plant 66\.6 38\.1 104\.7 57\.1 32\.1 89\.2 Civil works 58\.9 9\.7 68\.6 47\.5 8\.1 55\.6 Equipment 7\.7 28\.4 36\.1 9\.6 24\.0 33\.6 Interceptors 52\.7 11\.2 63\.9 68\.6 13\.1 81\.7 Civil works 52\.0 8\.5 60\.5 61\.9 4\.0 65\.9 Equipment 0\.7 2\.7 3\.4 6\.7 9\.1 15\.8 Project support 1\.5 0\.1 1\.6 4\.5 0\.2 4\.7 Master plan 0\.7 0\.1 0\.8 0\.5 0\.2 0\.7 Supervision 0\.8 - 0\.8 4\.0 - 4\.0 Land acquisition 36\.4 - 36\.4 38\.8 - 38\.8 Sub total 157\.2 49\.4 206\.6 169\.0 45\.4 214\.4 I\.D\.C\. 4\.3 1\.5 5\.8 4\.8 0\.8 5\.6 Total 161\.5 50\.9 212\.4 173\.8 46\.2 220\.0 TAEJON COMPONENT Item Appraisal estimate Actual cost Local Foreign Total Local Foreign Total Treatment plant 16\.7 24\.6 41\.3 14\.9 21\.7 36\.6 Civil works 10\.7 1\.8 12\.5 8\.6 4\.2 12\.8 Equipment 6\.0 22\.8 28\.8 6\.3 17\.5 23\.8 Interceptors 6\.0 1\.1 7\.1 9\.3 0\.9 10\.2 Project support 1\.8 0\.1 1\.9 1\.9 0\.1 2\.0 Master plan 0\.7 0\.1 0\.8 0\.9 0\.1 1\.0 Supervision 1\.1 - 1\.1 1\.0 - 1\.0 Land acquisition 7\.8 - 7\.8 7\.8 - 7\.8 Sub total 32\.3 25\.8 58\.1 33\.9 22\.7 56\.6 I\.D\.C\. 0\.9 0\.7 1\.6 0\.9 1\.1 2\.0 Total 33\.2 26\.5 59\.7 34\.8 23\.8 58\.6  20 REPUBLIC OF KOREA Implementation Completion Report Pusan and Taejon Sewerage Project (Loan 3450-KO) Table 8A: Project costs (US$ million) COMBINED PUSAN AND TAEJON COMPONENTS Item Appraisal estimate Actual cost Local Foreign Total Local Foreign Total Treatment plant 83\.3 62\.7 146\.0 72\.0 53\.8 125\.8 Civil works 69\.6 11\.5 81\.1 56\.1 12\.3 68\.4 Equipment 13\.7 51\.2 64\.9 15\.9 41\.5 57\.4 Interceptors 58\.7 12\.3 71\.0 77\.9 14\.0 91\.9 Civil works 58\.0 9\.6 67\.6 71\.2 4\.9 76\.1 Equipment 0\.7 2\.7 3\.4 6\.7 9\.1 15\.8 Project support 3\.3 0\.2 3\.5 6\.4 0\.3 6\.7 Master plan 1\.4 0\.2 1\.6 1\.4 0\.3 1\.7 Supervision 1\.9 - 1\.9 5\.0 - 5\.0 Land acquisition 44\.2 - 44\.2 46\.6 - 46\.6 Sub total 189\.5 75\.2 264\.7 202\.9'- 68\.1 271\.0 I\.D\.C\. 5\.2 2\.2 7\.4 5\.7 1\.9 7\.6 Total 194\.7 77\.4 272\.1 208\.6 70\.0 278\.6  21 REPUBLIC OF KOREA Implementation Completion Report Pusan and Taejon Sewerage Project (Loan 3450-KO) Table 8B: Project Financing (US$ million) PUSAN COMPONENT Source Appraisal estimate Actual Local Foreign Total Local Foreign Total IBRD Loan - 20\.0 20\.0 - 13\.5 13\.5 Regional Development fund 29\.2 - 29\.2 36\.0 - 36\.0 City's General account 23\.6 30\.8 54\.4 6\.2 32\.7 38\.9 EMC loan - - - 23\.7 - 23\.7 Internal cash generation 108\.3 - 108\.3 107\.9 - 107\.9 Total 161\.1 50\.8 211\.9 173\.8 46\.2 220\.0 TAEJON COMPONENT Source Appraisal estimate Actual Local Foreign Total Local Foreign Total IBRD Loan - 20\.0 20\.0 - 19\.5 19\.5 Regional Development fund 11\.1 - 1i\.t 9\.3 - 9\.3 City's General account 3\.5 6\.5 10\.0 6\.0 4\.3 10\.3 Central government 5\.3 - 5\.3 9\.2 - 9\.2 Internal cash generation 13\.8 - 13\.8 10\.3 - 10\.3 Total 33\.7 26\.5 60\.2 34\.8 23\.8 58\.6 COMBINED PUSAN AND TAEJON COMPONENTS Source Appraisal estimate Actual Local Foreign Total Local Foreign Total IBRD Loan - 40\.0 40\.0 - 33\.0 33\.0 Regional Development fund 40\.3 - 40\.3 45\.3 - 45\.3 Cities' General account 27\.1 37\.3 64\.4 12\.2 37\.0 49\.2 Central government 5\.3 - 5\.3 9\.2 - 9\.2 EMC Loan - - - 23\.7 - 23\.7 Internal cash generation 122\.1 _ 122\.1 118\.2 - 118\.2 Total 194\.8 77\.3 272\.1 208\.6 70\.0 278\.6  22 REPUBLIC OF KOREA Implementation Completion Report Pusan and Taejon Sewerage Project (Loan 3450-KO) Table 9: Economic Costs and Benefits CALCULATION OF FINANCIAL RATE OF RETURN SUPPORTING DATA Pusan Taejon Investment Cost excluding Taxes Won Won and Land Acquasition/Compensation Million Million Treatment Plant Civil Works 40837 8834 Equipment 21747 16426 Interceptor & Pumping Station 62934 7040 Project Support TA Construction Supervision 1888 690 Total Investment 127406 32990 Phasing of Annual Investment: % \.___________________________ Year 1 0 19 2 8 18 3 26 31 4 19 32 5 23 0 6 12 0 7 12 0 Total 100 100 NOTES TO FINANCIAL RATE OF RETURN CALCULATION The project life is assumed to be 40 years for both cities\. The ROR in Taejon is assumed to be 1\.0% in 1999 and thereafter\.  23 REPUBLIC OF KOREA Implementation Completion Report Pusan and Taejon Sewerage Project (Loan 3450-KO) Table 9: Economic Costs and Benefits CALCULATION OF FINANCIAL RATE OF RETURN PUSAN COMPONENT (Million Won) <- -OUTFLOWS- -> <- - - - - -INFLOWS-- > NET YEAR INVEST\. 0 & M 0 & M DEPR\. R\.O\.R\. TOTAL FLOW ------------------------------------------------------------------__---- -4 0 0 -3 10192 -10192 -2 33126 -33126 -1 24207 -24207 1 29303 2867 2867 3185 3695 9747 -21914 2 2867 2867 3185 3695 9747 7390 3 2867 2867 3185 3695 9747 7390 4 2867 2867 3185 3695 9747 7390 5 2867 2867 3185 3695 9747 7390 6 2867 2867 3185 3695 9747 7390 7 2867 2867 3185 3695 9747 7390 8 2867 2867 3185 3695 9747 7390 9 2867 2867 3185 3695 9747 7390 10 2867 2867 3185 3695 9747 7390 11 2867 2867 3185 3695 9747 7390 12 2867 2867 3185 3695 9747 7390 13 2867 2867 3185 3695 9747 7390 14 2867 2867 3185 3695 9747 7390 15 2867 2867 3185 3695 9747 7390 16 2867 2867 3185 3695 9747 7390 17 2867 2867 3185 3695 9747 7390 18 2867 2867 3185 3695 9747 7390 19 2867 2867 3185 3695 9747 7390 20 2867 2867 3185 3695 9747 7390 21 2867 2867 3185 3695 9747 7390 22 2867 2867 3185 3695 9747 7390 23 2867 2867 3185 3695 9747 7390 24 2867 2867 3185 3695 9747 7390 25 2867 2867 3185 3695 9747 7390 26 2867 2867 3185 3695 9747 7390 27 2867 2867 3185 3695 9747 7390 28 2867 2867 3185 3695 9747 7390 29 2867 2867 3185 3695 9747 7390 30 2867 2867 3185 3695 9747 7390 31 2867 2867 3185 3695 9747 7390 32 2867 2867 3185 3695 9747 7390 33 2867 2867 3185 3695 9747 7390 34 2867 2867 3185 3695 9747 7390 35 2867 2867 3185 3695 9747 7390 36 2867 2867 3185 3695 9747 7390 37 2867 2867 3185 3695 9747 7390 38 2867 2867 3185 3695 9747 7390 39 2867 2867 3185 3695 9747 7390 40 2867 2867 3185 3695 9747 7390 FINANCIAL RATE OF RETURN % 6\.98  24 REPUBLIC OF KOREA Implementation Completion Report Pusan and Taejon Sewerage Project (Loan 3450-KO) Table 9: Economic Costs and Benefits CALCULATION OF FINANCIAL RATE OF RETURN TAEJON COMPONENT (Million Won) <- -OUTFLOWS- -> c- - - - - - INFLOWS - - - - - -> NET YEAR INVEST\. 0 & M 0 & M DEPR\. R\.O\.R\. TOTAL FLOW ------------------------------------------------------------------__---- -4 6268 -6268 -3 5938 -5938 -2 10227 -10227 -1 10557 -10557 1 0 587 587 825 -165 1247 -330 2 587 587 825 0 1412 0 3 587 587 825 165 1577 330 4 587 587 825 330 1742 660 5 587 587 825 495 1907 990 6 587 587 825 495 1907 990 7 587 587 825 495 1907 990 8 587 587 825 495 1907 990 9 587 587 825 495 1907 990 10 587 587 825 495 1907 990 11 587 587 825 495 1907 990 12 587 587 825 495 1907 990 13 587 587 825 495 1907 990 14 587 587 825 495 1907 990 15 587 587 825 495 1907 990 16 587 587 825 495 1907 990 17 587 587 825 495 1907 990 18 587 587 825 495 1907 990 19 587 587 825 495 1907 990 20 587 587 825 495 1907 990 21 587 587 825 495 1907 990 22 587 587 825 495 1907 990 23 587 587 825 495 1907 990 24 587 587 825 495 1907 990 25 587 587 825 495 1907 990 26 587 587 825 495 1907 990 27 587 587 825 495 1907 990 28 587 587 825 495 1907 990 29 587 587 825 495 1907 990 30 587 587 825 495 1907 990 31 587 587 825 495 1907 990 32 587 587 825 495 1907 990 33 587 587 825 495 1907 990 34 587 587 825 495 1907 990 35 587 587 825 495 1907 990 36 587 587 825 495 1907 990 37 587 587 825 495 1907 990 38 587 587 825 495 1907 990 39 587 587 825 495 1907 990 40 587 587 825 495 1907 990 FINANCIAL RATE OF RETURN % 0\.41  25 REPUBLIC OF KOREA Implementation Completion Report Pusan and Taejon Sewerage Project (Loan 3450-KO) Table 10: Status of Legal Covenants Covenant Present Description of covenant Comments Agreement type status A\. Loan Agreement 2\.02(b) 3 C Borrower to open and maintain complied in dollars a Special Account 3\.01(b) 3 C Borrower to re-lend US$20 million complied each to Pusan and Taejon under Subsidiary Loan Agreements 3\.02 3 C Procurement of goods to be governed complied by Schedule 4 of the Loan Agreement 4\.01(a) 1 C (i) both cities to maintain records complied to reflect operation of Statement of Expenditure account 4\.01(b) 1 C (i) IBRD Special Accounts and oper- complied ating accounts to be audited each year for Pusan and Taejon (ii) furnish audit reports not later complied than 6 months after end of each FY B\. Project Agreements\. Part A\. Pusan City Government; Part B\. Taejon City Government 2\.01(b)2 13 C Complete updating of sewerage complied master plans 2\.01(b)3 6 C Furnish & implement environmental complied monitoring program 2\.01(b)4a 9 C Furnish semi-annual progress reports complied 2\.01(b)4b 2 CP Furnish financial projections partially complied 3\.02(a) 2 NC From 1993 achieve annual rate ROR achieved of return of at least 5% Pusan Pusan Taejon and 3% Taejon '93 1\.4% -\.5% '94 1\.5% -\.7% '95 2\.2% -1\.6% 3\.03 10 C Both city's sewerage division's Revaluation fixed assets to be revalued\. done in 1993  26 REPUBLIC OF KOREA Implementation Completion Report Pusan and Taejon Sewerage Project (Loan 3450-KO) Table 10: Status of Legal Covenants Present Status Codes C covenant complied with CP = complied with partially NC = not complied with Covenant Types 1 = accounts/audits 2 = financial performance/revenue generation from beneficiaries 3 = flow and utilization of project funds 6 = environmental covenants 9 = monitoring, review and reporting 10 = project implementation not covered by categories 1-9 13 = other  27 REPUBLIC OF KOREA Implementation Completion Report Pusan and Taejon Sewerage Project (Loan 3450-KO) Table 11: Bank resources: staff inputs Stage of Planned Actual project No\.of No\. of Staff costs cycle weeks weeks US$'000s Through appraisal n\.a 70\.2 212\.3 Board approval n\.a 4\.8 17\.1 Supervision 40\.0 27\.8 100\.4 Completion 4\.0 8\.1 34\.8 TOTAL n\.a 110\.9 364\.6 n\.a\. = not available  28 REPUBLIC OF KOREA Implementation Completion Report Pusan and Taejon Sewerage Project (Loan 3450-KO) Table 12: Bank Resources: Missions Performance Rating Stage of month/ No\. of days Specialized Implement\. Develop- Type of Project year pers\. in staff skills Status ment problems cycle field represented impact Identification 10/90 5 25 Sanitary Engineers n\.a n\.a Pre-appraisal 07/91 Environmental Spec\. Financial Analysts Appraisal 05/92 4 0 Project, loan n\.a n\.a Board & legal officers approval Engineers Super- 06/93 2 5 Sanitary Engineer 1 1 Delay vision Financial Analyst in Pusan due to nego- tiations with NGOs\. Failed to reach ROR targets as no tariff increase\. 03/94 3 7 Sanitary Engineer 2 2 Failed to Environmental Spec\. reach Financial Analyst ROR targets as no tariff increase\. 06/95 1 7 Sanitary Engineer HS HS Pre-Comple- 11/95 2 14 Financial analysts HS HS Loan closing tion date extended Comple- 11/96 2 5 Financial analysts S S tion Note: The supervision missions ratings were high although one financial covenant relating to rate of return was not complied with\. Failure to achieve this rate of return did not affect the implementation of the project, and did not reduce in any way the expenditure on system operation and maintenance\. The shortfall in revenues was made up from equity contributions from the cities' general accounts, and from local borrowing\.   29 APPENDIX A AIDE MEMOIRE November 25, 1996 Pusan and Taejon Sewerage Project (Loan No\. 3450-KO) 1\. A World Bank Project Completion Mission visited Korea from November 21 to 25, 1996 to obtain the views of the borrower and the implementing agencies on the implementation process, discuss the borrower's responsibilities in preparing implementation completion reporting, and to collect additional data for the preparation of the Implementation Completion Report (ICR)\. The mission is grateful for the cooperation and assistance received\. 2\. The Pusan and Taejon Project (Loan No\. 3450-KO), in the amount of US$ 40 million, was approved by the Board on March 26, 1992, and declared effective on August 26, 1992\. An amount of US$ 6 million was canceled in July 1994 by Pusan due to lower than expected civil works costs coupled with the elimination of the booster pumping station\. An amount of US$ 0\.4 million was also canceled by Taejon in December 1995\. The loan closing date was originally planned for December 31, 1995, but due to the delay in completion of the Pusan component the Government requested an extension of the closing date to June 30, 1996, which was approved by the Bank\. Pusan component 3\. In Pusan, the project consisted of the construction of the first phase of the Nambu wastewater treatment plant (WTP), sewer interceptors and a tunnel\. The WTP had to be partially redesigned due to objections from neighboring NGOs, and new bidding delayed the construction\. Civil works on the WTP was completed in June 1996, and construction of the sea outfall and outlet is expected to be completed by October 1997\. 4\. The Sewerage Management Office provided the mission with its evaluation on the implementation of the Pusan component, which covered project execution, cost benefits, Bank's and borrower's performance, and the city's commitment to the project's objectives\. Taejon component 5\. In Taejon, the project consisted of the construction of the second phase of the Wonchon Dong WTP, plus the construction of sewer interceptors\. Construction was completed in January 1994; test operations commenced in February 1994, and were completed in July 1994\. 6\. In November 1995, the Taejon Sewerage Division provided the Bank with its evaluation report on the implementation of the Taejon component\. Project summary 7\. Project implementation of both components was satisfactory and the achievements are expected to be fully sustainable\. The environmental monitoring program is in progress\. The financial performance of both sewerage divisions during implementation has been disappointing due to the delay in increasing sewerage tariffs, and the rates of return covenants in the project agreements have not been achieved\. 8\. Compliance with all other major covenants has been satisfactory\.  30 APPENDIX B BORROWER'S CONTRIBUTION PUSAN SEWERAGE MANAGEMENT OFFICE PUSAN  31 THE EVALUATION REPORT Project Name : Pusan Nambu Sewage Treatment Facility Loan : 3450-KO  32 1\. Component Obiectives (1) Improvement of sewer water quality (2) Improvement of urban environment in accordance with water quality improvement (3) Marine resource protection in accordance with coastal area water pollution prevention (4) Improvement of water pollution conditions of Yongho Bay and its surrounding areas 2\. Achievement of the Component Objectives (1) Improvement of the existing pleasant urban environment of the city (2) Water quality improvement of Dongchun, Port of Pusan, and Kwanganli Beach (3) Supplementation of the green area of the city with park formation of the upper portion of the sewage treatment facility (4) Increase the added value of land usage 3\. Implementation Record and Minor Factors Affecting the Component With the final project completion year set at 2011, the total treatment area is 43\.88 km2 comprised of the Pusanjin region centering around Dongchun, Daeyoun region, Yongho region, and part of the Dong-ku and Nam-ku regions\. The  33 Dongchun Basin, Daeyoun, Yongho and part of the Nam-ku region (Namchun and Kwangan) have been designated as Treatment Project #1, and a facility with the daily sewage treatment capacity of 340,000 m3 will be established in this region by 1996\. At the second phase of this project, the treatment capacity will increase by 244,000 m3 per day totaling 584,000 m3 per day with 1,084,000 people in the year 2011\. This value will be under the standard water quality value as determined by the Environmental Protection Law for Discharged Water\. The "Standard Sludge Activation Method" will be used for the treatment, and the sludges produced during the treatment process, will be handled through the existing Sludge Treatment Facility\. The construction plan for the second stage of the project will require sufficient preparation in advance such as reviewing various other plans with different views\. The project summary for the Nambu Sewage Treatment Facility and the construction of the interceptor are as follows: (1) Anticipated Region and Population Handled Anticipate Region : 25,366 km2 Population Handled : 800,000 persons (2) Anticipated Treatment Volume Classification Phase #1 Final Phase Completion Year 1996 2011 Anticipated Sewer Volume (m3/d) Daily Average 278,000 486,000 Daily Maximum 340,000 584,000 Hourly Maximum 492,000 839,000  34 (3) Planned Water Quality and Discharged Water Quality Planned Water Quality : BOD 180 mg/l SS 210 mg/l Discharged Water Quality : BOD 18 mg/l SS 19 mg/l (4) Treatment Method Standard Sludge Activation method (Deep Aeration Method) (5) Location of the Treatment Facility and Area of Lot Location of the Treatment Facility : 30, Yongho-dong, Nam-ku Pusan Area of Lot : 125,953 m2 (about 38,100 pyung) (6) Discharging Route : Down the Yongho River 4\. Bank Performance An assessment of the Bank's performance is satisfactory in component identification, preparation assistance, appraisal, and supervision, but deficient in disbursement from the loan during the construction\. 5\. Borrower Performance The performance of the borrower is very satisfactory in terms of preparation, execution, and operation of the project\. 6\. Assessment of Outcome This project began with the Korean Government's loan request to IBRD for the sewage treatment project\. The fundamental objective of this project is in improving the water quality of the daily urban sewers and waste waters flowing into the rivers and coastal region\. the surveying and planning of the project was entrusted to a consulting company by the City of Pusan, and approved by the Ministry of Construction with the overall supervision of the project done by a  35 group of supervisors\. The construction and supervision were performed by Hyundai Precision Industries Ltd\. and the Supervisors of the City of Pusan respectively to accommodate the needs of the project at hand\. 7\. Future Operation This treatment facility has been operating at a value lower than the standard environment values since the pre-construction stage after analyzing the aftermath of the environment, and the Roots Blower that has been used as the oxygen supplying device at the aeration facilities has been replaced by a Turbo Blower in order to treat the sewer more efficiently, and improve the operation of the aeration tank which is the most important element in treating waste waters\. The Turbo Blower is more effective, has the ability to control the volume of air automatically at ease, and has a longer life cycle\. The ventilation and Deodorizing Facility has also been installed around the treatment facility to reduce and prevent the odors and air pollution from being produced at the time of the treatment process\. By installing the Centrifugal Thickener at the treatment facility for the first time in Korea to reduce sludges which are pollutants, and promote efficient treatment, costs have decreased\. Automatic measuring devices of essential elements for the water quality improvements have prevented the spoilage of water in advance\. In addition, the building of a roof on the facility and using it as a welfare facility has promoted public welfare of the region which indicates a new function for the sewage treatment facility\. This new function gives a glimpse of the future of the facility\. However, the incineration of the sludge or the installation of manure manufacturing facility can be taken into consideration as a positive  36 measure for environmental protection for the future\. 8\. Key Lessons Learned This project was planned and analyzed carefully in advance by the City of Pusan by taking into consideration the increase of sewage volume following the population increase in the future\. The lessons learned are the construction of a treatment facility to accommodate such increases to reduce operation costs, the ability to fully utilize the space that is smaller than other treatment facilities in Korea, and the formation of the treatment facility into a park\. The investment of the Sludge Central Concentration Facility at the sewage treatment facilities of Korea is notable as concern towards the future environment\.  37 APPENDIX C BORROWER'S CONTRIBUTION TAEJON SEWERAGE DIVISION TAEJON COMPONENT  3 %, THE EVALUATION REPORT Project Name : Taejon Sewerage Project Loan No : 3450 - KO 1995\.11 TAEJON CITY  39 1\. Component Obiectives Taejon City carries out the sewerage project based on the Master Plan established in 1982 in order to prevent environmental pollution which would result from rapid population growth and industrial development, and has already constructed and operated a sewage treatment plant with a capacity of 150,000 m3/day\. In the late 1980's, Taejon City enlarged its administrative area and Taedok Science Town was developed within the city\. Eventually, Taejon City was promoted to the Great City as of First of January in 1989\. As a result, since the existing sewerage master plan becomes unsuitable for the present situation, its amendment is required\. Based on the amended master plan, the second phase construction project of Taejon Sewage Treatment Plant is initiated\. The project encompasses the preliminary and detailed engineering works for the extension of the sewage treatment plant with a capacity of 150,000 m3/day and thus it shall provide the citizens with a healthy environment resulting from the improvement of water quality of receiving water bodies, the Kap-chon and Kum-gang rivers\.  40 2\. Achievement of Component Obiectives Indirect and direct benefits of this project are expected as follows:- 2\.1 Indirect Benefit 1) Preservation of aquatic resources by water quality improvement 2) Improvement of living environment and public health - Decrease of occurrence of water born diseases 3) Improvement of city aesthetic view 4) Rise of cost and added values of land 5) Increase of ratio served by flushing toilet - Improvement of treatment efficiency and saving of 0 & M cost of the nightsoil treatment plant 6) Exemption of installation of septic tanks or sewage clarifying facilities - Saving of construction, 0 & M, and collection costs 7) Improvement of function as an educational or cultural city\. 2\.2 Direct benefit 1) By-products A by-product in the sewage treatment plant is biogas or methane gas produced by anaerobic digestion of sludge\. 2) Saving of construction cost of the nightsoil Treatment plant Treatment of 200 kl/d septage by sludge treatment facilities in the sewage treatment plant will result in the cost saving of an additional nightsoil treatment plant\. 3) Saving of medical expenses for public health Saving of parasiticide expenses  41 The sanitary treatment of nightsoil will benefit public health of Taejon citizens not by taking parasiticide\. 4) Increase of employment (manpower for construction and 0 & M of the sewage treatment plant) 5) Improvement of water quality of receiving bodies\.  42 3\. Implementation Record and Maior Factors Affectina the Component The daily maximum design sewage flow is 150,000 m3/day\. When wet season, incoming sewage flow is estimated to be 288,000 m3/day through interceptors, and the excess flow is designed to be discharged directly to the Kap-cheon river only after primary treatment and chlorination\. Industrial wastewater is mixed with domestic sewage and treated in the plant\. The sewage treatment process is a secondary treatment process with a traditional activated sludge, and the sludge is digested by anaerobic process and is then dewatered by mechanical means\. Methane gases which are by-products during sludge digestion process are used as fuel of gas generators\. This electric power is supplied to the air blowers which require electric power most of all electrical equipments\. The second phase treatment plant is located at Wonchon - dong, Yusong ku which is the same site of the existing first phase one\. In the amended sewerage master plan describes the construction plan of sewage treatment plants as the following <TABLE 1>  43 <TABLE 1> CONSTRUCTION PLAN OF SEWAGE TREATMENT PLANT Category 1st Phase 2nd Phase 3rd Phase 4th Phase Target Year 1989 1991 1996 2001 Planning Area (km3) 22\.15 47\.23 74\.80 96\.50 Planned Pop\. (persons) 404,400 756,000 1,269,600 1,517,100 Design flow (m3/day) 150,000 300,000 600,000 830,000 Sewage Treatment Process Activated Activated Activated Activated Sludge Sludge Sludge Sludge Sludge Treatment Process Anaerobic Anaerobic Anaerobic Anaerobic Digestion Digestion Digestion Digestion Plant Area (m3) 93,800 64,019 170,000 130,000 Influent Quality (mg/i) BOD 170 140 147 156 SS 180 118 123 132 Design Influent BOD170(200) 160(190) 160(190) 160(190) Quality (mg/l) SS 180(200) 140(160) 140(160) 140(160) Effluent Quality (mg/I) BOD 30 26 26 26 SS 30 24 24 24 Treatment Efficiency(%) BOD 85 86 86 86 Notes: 1) Values in the upper categories including those of all previous phases\. 2) Values in the parenthesis of the design influent quality represent the concentration of sewage quality after being mixed with return activated sludge\.  44 4\. Bank Performance An assessment of the Bank's performance are satisfactory in component identification, preparation assistance, appraisal, and supervision\. 5\. Borrower Performance As assessment of the performance of the borrower and implementing agencies are highly satisfactory in preparing, implementing, and where relevant, operating the project or component\. 6\. Assessment of Outcome Taejon city government receive loan from IBRD to supply good quality of domestic, industrial and agricultural mater through improving living environment, public hygiene and sanitation as well as preserving water resources\. Taejon City government give basic plan and detailed design to Engineering Company, receive admission from Ministry of Construction and complete this project with management of supervision group\. This project completed successfully, having with help of Taejon city, good experience on design and supervision of Supervision Group, and a lot of experience of Sambu-Togeon Construction Company to reach the objectives of this project\. 7\. Future Operation The operation of 2nd Phase of Taejon STP have to be made under environmental standard, after impact and before construction is estimated\.  45 We control blowing air with speed controller of measuring DO in aerator, and make it automated and check by time concentration indication etc\. in primary,final settling tank and thickener\. So we can get effects to minimize cost and operate efficiently\. We estimate impacts before and after operation in the air quality, water quality, noise, odor etc\. We install FRP covers in thickener and digested sludge thickener for deodorization\. Existing STP are operating by conventional central control system, but this STP will install distributed control system, therefore we can monitor and control between center and field\. 8\. Key Lessons Learned This project reflect increase of industrial and domestic wastewater because there is fast increase of population for optimum characteristic of Taejon City in which will be opened Taejon Expo, and have Daeduck Research Institute as well as updated industrial and technical complex\. It is outstanding that Taejon city reduce cost for construction and operation, improve living environment, minimize adverse impact for environment, and make STP coexist in surrounding Expo Apt\. and research institute\.  4,, APPENDIX D BORROWER'S COMMENTS ON THE ICR  47 J-08-96 SUN 21:30 OXFORDPALACEHOTEL FAX NO\. 2133823434 P\. 01 SCA(NANE 0 Mr\. Anjum Altaf December 8, 1996 Environment Economist Infrwauctre Operatons Division Country Departnent I, East Asia and Pacific Region The World Bank 1818 H St, N\.W\. Washiugton, D\.C\. 20433 U\.S\.A\. Dear Mr\. Altaf: Further to our discussion on the Implementation Completion Report (1CR) of the PsLan and Tacjon Sewerage Project, I would like to inform you that I have no c on the ICR prepared by EAlIN\. I would note, however that economic and sociopolitical carcumstances surrounding the implementation of the project have well been refiectcd in the report 1 would like to take this opportunity to express my deep appreciation in the / capaciry of Deputy Director of The Korea Miuistry of Finane and Economy to all C": Bank ;affinvolved for the timely and thoughtul guidance conducted towards the succes fful completion of the project\. I am also grateful to you and your colleagues ior the hospitality unfolded to us during our recent mission to the Banik Please feel free to contact me if you have any assisince from me associated with any on-going Bank projects\. Sincerely yours, Geum-Nam Kim Deputy Director Treasury Division The Ministy of Finance and Economy Tel\.: (82-2) 503-92801-1 Fax: (82-2) 503-9282     IBRD 23319 OEM PEOPLREP l 30' 35'20' 1 29 1 0' '20' OF KOREA 35~\. Seoul *l REPUBLIC OF KOREA 36' Taejon 36' / : ' Puscan 34' 340 | (SUKDAE SANITARY LANDFILL SITE Cheju JAPAN 126° 12,6 30= TON4GRAE" P U K G U HAE UNDAE L SUYEO P U S A N J IN- 4' e~~~~~~~~~1 lthUOIt N\.TP *^a t A - X~- -v-~t -~ -- \N A M G U 3510O' 3510'- t -- ~TONGGUUs-- YONGHO SEWERAGE TREATMENT PLANT REPUBLIC OF KOREA *77" > s i 8 tws' p; wnPUSAN AND TAEJON YONGDO" RJC JANGLIM - - SEWERAGE PROJECT ST T\.P PUSAN COMPONENTS \. 0 1 2 3 4 KILOMETERS UNDER EXISTING CONSTRUCTION FUTURE PROJECT This Wlp as - obe\. p,cpe-d by SEWERAGE TREATMENT PLANTS RIVERS Th\. World Bank stfdf-1--uily or e cone eelnce of reders _- INTERCEPTORS ROADS internal use of The World Bcnk Group The deoominotionsosed ( C1 PUMPING STATIONS (SEWERAGE) CATCHMENT BOUNDARIES ond thme boundorios shown on this map do T oo imply on the G- PUMPING STATIONS (STORM WATER) - CITY BOUNDARIES _ny idgement tn the legal staEs of any ierrto-y or any * NIGHT SOIL TREATMENT PLANT endorsement or ocoeplonne of such bo\.ndorie-\. 129 10' FEBRUARY 1992   IBRD 23320 DEM\. PEOPLE S REP 12BD 13` 32 OFKOREA -- \ Eas t REPUBLIC OF KOREA ~ /*SeoRuEBl\ Sere PUSAN AND TAEJON SEWERAGE PROJECT 2*REPUBUC OF - TAEJON COMPONENTS LnJi KOREA rEXISTING FUTURE PROJECT 36° 36 SEWERAGE TREATMENT PLANTS RIVERS > e a - / , - - INTERCEPTOR ROADS P si PUMPING STATION (SEWERAGE) - CITY BOUNDARIES 3A0 6~ 3AJ I SERVICE AREAS \.-7 xChejo JAP6 /j/ 0 10 20 30 126' 1281' : KILOMETERS \. C HIJNGNAM Ths mop hos bee- p-ep-red by The Worid Bo-k's staff e--luso4y fori/se conoonience of readers ( _I J and is eontissioely for tIre *R| oteernoa vse of The World Sank * Group The denominors vsedJ\ and the hondores shown *\.> on this mop do -ot ioply\. on re - tI por- o The W-ord kook Gr-opi totis of oty t-y r -y ed r -pt- o f INDUSTRIAL o f suh bonare ([GH TEH n' COMPLEX CHUNGNAM ) __ y / # C \.\~ _ _,__ _ _ _ I /~~~~~~ !) 0\._ r Toel'' Reser vc"r 0fi Q * ; t } EXISTING SOLID'WASTE, ,,J -- svJI ~~~~~~~LANDFILL SITE\._ f * SITE t3F EXPO 9/\.C! 2 // ' \ 9 j < ' * 2 ds -~~~~~~~~~~~~~1 I /\WATER WORKS OFtICE _TR AMEN1 PLANT A / ' ' ' ~~~~~~~~~~~~~~~~~~~~~~~C ,- \. A ( ~~~~~~~~~~CHUNGBUK FEBRUARY 1992

APPROVAL

P009201

DoM The Wc FOR OMC Report No\. 9861 PROJECT COMPLETION REPORT YUGOSLAVIA KOSOVO REGIONAL DEVELOPMENT PROJECT (LOAN 2306-YU) AUGUST 26, i991 Private Sector Development Division Country Department V Europe, Middle East and North Africa Regional Office This document has a restricted distribution and may be used by recipients only in the performance of their official duties\. Its contents may not otherwise be disclosed without World Bank authorization\.  CURRENCY EQUIVALENT Period Average 1982 1983 1984 1985 1986 1987 1988 1989 (Dinar/US$): 50\.3 92\.8 152\.3 270\.2 279\.2 740\.0 2,520 28,760 WEIGHTS AND MEASURES 1 kilogram (kg) 2\.20 pounds 1 metric ton (m ton) 1,000 kilograms 1 centimeter (cm) 0\.39 inch 17 meter (m) e 1\.09 yards 1 kilometer (km) 0\.62 mile 1 hectare (ha) 2\.47 acres 1 square meter (m2) 10\.76 square feet 1 square kilometer (km2) 0\.384 square mile 1 liter (1) 0\.264 gallon 1 hectoliter (hl) 100 liters 1 cubic meter (m3!) 1\.31 cubic yards PRINCIPAL ABBREVIATIONS AND ACRONYMS USED ACD - Agriculture Credit Department BOAL - Basic Organization of Associated Labor BOC - Basic Cooperative Organization COAL - Compound Organization of Associated Labor ERR - Economic Rate of Return FLDR - Federal Fund for Accelerating the Development of Lesser Developed Regions FRR - Financial Rate of Return GDP - Gross Domestic Product ICB - International Competitive Bidding KBP - Kosovska Banka Pristina LCB - Local Competitive Bidding M - Million 1NPV - Net Present Value OER - Official Exchange Rate PPAR - Prtject Performance Audit Report PSAFWM - Provincial Secretariate for Agriculture, Forestry, and Water Management SAP - Socialist Autonomous Province SDK - Social Accounting Seivice SIZ - Self-Managed Community of Interest for Water Economy, Pristina SMA - Self-Management Agreement SOE - Statement of Expenditure VOM - Water Econor- Organization of Metohija FISCAL YEAR January 1 - December 31  THE WORLD BANK FOR OFICIAL USE ONLY Washington, D\.C\. 20433 U\.S\.A\. Oice of Dfcti-Caeiewa Opuinm Evwiation August 26, 1991 MEMORANDUM TO THE EXECUTIVE DIRECTORS AnD THE PRESIDENT SUBJECT: Project Completion Report on YUGOSLAVIA - Kosovo Rexional Development Project (Loan 2306-YU) Attached, for iiformation, is a copy of a report entitled 'Project Completion Report on Yugoslavia: Kosovo Regional Development Project (Loan 2306-YU)" prepared by the Europe, Middle East and North Africa Regional Office\. No audit of this project has been made by the Operations Evaluation Department at this time\. Attachment * This document has a restricted distribution and may be used by recipients only in the performance of their official duties\. Its contents may not otherwise be disclosed without World Bank authorization\.  FOR OFFICIAL USE ONLY PROJECT CaUPXTION REPORT IUGOSLAVIA KOSOVO RErIONAL DEVELOPIWT POECT (Loan 2306-YO) TABLE OF cQhV Pae Preface \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. 4 Evaluation Sunmary \. \. \. \. iii PART I A\. PROJECT IDENTITY \.1\. \. \. B\. BACRGROUND \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. 1 Previous Bank Involvement \. \.1 Rural Development Objectives \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. C\. PROJECTS OBJECTIVES AND DESCRIPTION \. \. \. \. \. \. \. \. \. \. \. \. \. 2 Project Description \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. 2 D\. ISSUES OF PROJECT DESIGN AND ORGANIZATION \. \. \. \. \. \. \. \. \. \. 3 General \. \. \. \. \. \. 3 Project Institutions \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. 3 KBP Credit Absorption Capacity \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. 4 Proposed Improvements in UBP Performance \. \. \. \. \. \. \. \. \. \. 4 Onlending Interest Rates \. \. \. 4 Negotiations \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. 5 E\. PROJECT IMPLEMENTATION \.5 Instlitutional Aspects of Proiect ImDlementation \. \. \. \. \. \. 5 - Restructuring of KBP Agricultural Credit Department (ACD) \. 6 - Results of KBP ACD Reorganization \. \. \. \. \. \. \. \. \. \. \. \. \. 6 - Interest Rate Issue \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. 7 - Project Costs \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. 7 - Financing, Disbursement and Procurement \. \. \. \. \. \. \. \. \. \. 7 - Compliance with Loan Covenants \. \. \. \. \. \. \. \. \. \. \. \. \. \. 8 Physical Aspects of Proiect ImDlewentatton \. \. \. \. \. \. \. \. \. 8 - Primary Production \.8 - Land Improvement and Land Consolidation Works \. \. \. \. \. \. \. 9 - Other Infrastructure Facilities \. \. \. \. \. \. \. \. \. \. \. \. \. \. 9 F\. PROJECT RESULTS\. \. \. 9 Agricultural Impact\. 9 Financial and Economic Impact\. \. \.9 This document has a restricted distribution and may be used by recipients only in the performance of their official duties\. Its contents may not otherwise be disclosed without World Bank authorization\.  G\. PROJECT SUSTAINABILITY \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. 10 H\. BANK PERFORMANCE \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. 10 I\. BORROWER PERFORMANCE \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. 11 J\. PROJECT DOCUMENTATION AND DATA \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. 12 PART II PROJECT FROM BORROWER'S PERSPECTIVE \. \. \. \. \. \. \. \. \. \. \. \. \. 13 PART III STATISTICAL INFORMATION \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. 15 Table 1: Related Bank Loans \. \. \. \. \. \. \. \. \. \. \. \. \. 15 Table 2: Project Timetable \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. 16 Table 3: Total Project Cost \. \. \. \. \. \. \. \. \. \. \. \. \. 17 Table 4: Project Cost by Year \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. 18 Table 5: Project Financing \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. 19 Table 6: Cumulative Loan Disbursements \. \. \. \. \. \. \. \. \. \. \. \. \. \. 21 Table 7: Appraisal Estimates of Incremental Production \. \. \. \. \. \. 22 Table 8: Financial and Economic Rates of Return \. \. \. \. \. \. \. \. 23 Table 9: Staff Input \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. 24 Annex 1 Glossary of Terms \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. 25 Annex 2 Status of Covenants \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. 29 Map IBRD 16606  - i - PROJECT COCPLETION REPORT YUGOSIAVIA KOSOVO nEGIOAL DEVELOPMENT PROJECT (Loan 2306-YU) PREFACE 1\. The Kosovo Regional Development Project, for which Loan 2306-YU in the amount of US$79\.0 M was approved on June 24, 1983, was closed as scheduled on March 31, 1989 with a final disbursement on September 30, 1989\. At that time, the unused balance of US$18\.6 million was cancelled\. This was preceded by an earlier cancellation of US$20 million on March 9\. 1988\. This was the 16th Bank loan for agriculture to Yugoslavia\. 2\. The PCR was prepared by the Europe, Middle East and North Africa Regional Office based in part on a review of the Staff Appraisal Report (No\. 4154a-YU) dated March 30, 1983\. the President's Report (No\. P-3575-YU) dated April 22, 1983, the Loan Agrsement of June 24, 1983\. correspondence with the Borrower, and internal Bank memoranda on project issues as contained in relevant Bank files\. The Borrower was requested to provide information for Part II\. but none was received\.  - iii - PROJECT COMPLETION REPORT YUGOSLAVIA KOSOVO REGIONAL DEVELOPMENT PROJECT (Loan 2306-YU) EVALUATION SUMMARY 1\. Proiect Obiectives\. The main objective of the project was to promote growth through financing of infrastructure and credit for the 12 least developed Communes 1 to: (i) increase agricultural production; (ii) impreve rural income and employment opportunities; (iii) increase capacity utilization of existing agroindustries; (iv) increase individual farm sector incomes; and (v) reduce income disparity between less and more developed Communes and between the individual and social sectors\. The main institution building objectives of the project were to strengthen: (i) Kosovska Banka Pristina (KBP), the Borrower, and (ii) the Federation of Cooperatives (FC), the main project implementing E_ency\. 2\. Implementation Experience The macroeconomic conditions during project implementation deteriorated substantially compared to appraisal assumptions\. High and accelerating domestic inflation followed by successive Dinar devaluations resulted in significant changes in the agricultural price structure and a drop in demand for agricultural products\. Also, interest rates charged to subborrowers became increasingly negative in real terms and it became difficult for investors to obtain local counterpart funds\. Although the performance of FC helped considerably in project implementation, it could not offset the shortage of counterpart funds which was caused by the Kosovo government placing low priority for this project\. The government favored the social sector in the allocation of heavily subsidized counterpart funds\. 3\. Proiect Results\. While subprojects to small farmers and some infrastructure investments had a good development impact, many infrastructure subprojects were either cancelled or remain incomplete\. 4\. Proiect Sustainability\. Whether the project could sustain a positive level of economic benefits in the economic environment that presently exists in Yugoslavia is open to question\. The future of most subprojects will depend on how government policies and the Yugoslav economic situation evolve\. The sustainability of community development subprojects would depend on suitable arrangements for funding of their operations and management\. 5\. Findings and Lessons Learned\. Although the project was not fully implemented, project investments generally produced beneficial results\. Experience with this project shows that Government commitment to the project concept which in this case was partially lacking is essential for successful implementation\. It also shows that the implementation plan agreed to at appraisal must reflect a realistic assessment of the capabilities of the participating agencies to reduce the risk of not meeting project targets\. 1 Local administration unit\.  PROJECT COHPLETION REPORT YUGOSLAVIA KOSOVO REGIONAL DEVELOPMENT PROJECT JLoan 2306-YU) PART I A\. PROJECT IDENTITY Name : Kosovo Regional Development Project Loan Number : 2306-YU RVP Unit : EMENA Region Country : Yugoslavia Sector : Agriculture Subsector : Agricultural Credit B\. BACKGROUND Previous Bank Involvement 1\. Although the project was to extend an additional US$79 million of Bank funds for the development of rural Kosovo, disbursements had been declining under other Bank loans to the Kosovska Banka Pristina (KBP, the Borrower) at the time of project preparation\. The reasons for slow disbursements and generally poor performance of other Bank-financed projects included the weaknesses of RBP management and the worsening macroeconomic situation in Yugoslavia\. 2\. Since 1973, Kosovo has received a total of US$189 million for the development for two multipurpose irrigation schemes (US$99 million) and for on- farm development and agroindustries (US$90 million) under Ln\. 1993-YU, which was appraised in 1980\. In addition, Kosovo had received US$22\.9 million under the First (Ln\. 1129-YU), Second (Ln\. 1477-YU), and Third (Ln\. 1801-YU) Agricultural Credit Projects\. 3\. While all Kosovo projects faced serious implementation problems, as is reflected in correspondence between RBP and the Bank, the intention of the proposed new project was to resolve outstanding issues and incorporate the lessons from accumulated implementation experience\. Rural Development Objectives 4\. One of the main objectives of the Yugoslav Government has been to reduce the income disparity between less developed and more developed regions of the country\. Kosovo, like other less developed regions, received special assistance from the Federal Government, including lo-\. interest loans through the Federal Fund for Less Developed Regions\. Until recently such loans carried an interest rate of 11%\.  - 2 - 5\. The main objective of the Kosovo Government was to increase incomes of the rural population through increased agricultural production in the individual sector and through improvements in rural infrastructure\. It was expected that the 1981-1985 Kosovo Development Plan would lead to real annual agricultural production increases of 5\.7% made up of rates of 10\.8% and 4\.8% in the social and individual sectors, respectively\. Although such growth rates appeared optimistic compared to earlier performance of 4\.0% and 2\.3% in the social and individual sectors between 1976 and 1980, they were nevertheless assumed to be attainable\. 6\. The major components of the Kosovo rural development strategy focused on encouraging: (i) the use of modern inputs such as fertilizer and improved seeds; (ii) livestock production; and (iii) high value added crops such as fruit and vegetables\. Increased agricultural production was to be supported by specialized services (e\.g\., veterinary stations), rural roads and agricultural cooperative centers for distribution of modern inputt' rnd implements\. The Bank fully supported this strategy\. 7\. The agricultural investment demand in Kosovo over the 1981-1985 period of the Development Plan was expected to reach about Dinars 13,650 million (US$297 million)\. The project was conceived in a series of Bank/FAO CP missions and the final design emerged by December 1980\. C\. PROJECT OBJECTIVES AND DESCRIPTION 8\. For the first time in Yugoslavia the project strategy was to apply an integrated regional development approach to: (i) increase individual sector on-farn investments for livestock, crop, fruit and %iegetable production; (ii) finance incremental fertilizer purchases by cooperatives for sale to small farmers; (iii) foster and improve provincial services including marketing opportunities for individual sector farmers; (iv) upgrade farm access roads and provide for their improved maintenance; (v) support the Kosovo land consolidation program by providing additional equipment for the Geodetic Bureau and technical assistance in land consolidation to two Communes; (vi) improve rural communications by providing equipment and staff training for the Kosovo radio stations; and (vii) contribute to institution building within KBP, the Federation of Cooperatives (FC), the Institute of Economic Development (IED) and other provincial services including extension, veterinary, and cooperative\. Proiect Description 9\. The project consisted of an investment and agricultura\. credit program with several components extended over five years\. It included reconstructicn and expansion of an antiquated 4,000 ha irrigation scheme\. The Decane irrigation scheme was to be modernized and equipped with mobile sprinklers at the cost of US$4,000/ha (1982 prices)\. The total cost was estimated at US$22 million\. Also, a separate drainage and flood protection development in the Vitine Commune was to be completed under the project together with land consolidation at the cost of US$2,120/ha (1982 prices)\. Since preparation and  - 3 - feasibility studies for the irrigation and drainage components revealed poor maintenance in other Kosovo schemes as well, it was agreed that various measures would be taken, including hiring more qualified staff, to improve operation and maintenance in general\. 10\. The project extended development credit for individual sector farmers in parallel to identical investmenits made under Ln\. 1801-YU and Ln\. 1993-YU (paras 2 and 16)\. Also, the project targeted 36,000 tons of fertilizer to be sold to individual sector farmers\. 11\. The project was to extend development credit for a number of farm service and marketing investments\. It was decided to build 36 agri-service centers and 60 smaller depots to improve input availability, market access and the range of services provided in rural areas\. The services provided were to vary according to local requirements\. In about 30 centers milk collection points were to be established\. The main objective of this component was to reduce travel time so that over 85X of farmers would travel no more than 5 km to the nearest depot\. Also, thL project included construction of 5 new and rehabilitation of about 20 existing veterinary stations and the construction of about 20 artificial insemination stations\. Further, the project was to support substantial improvements in the Kosovo agricultural extension service\. 12\. The project was to finance technical assistance, equipment and vehicles for institutions involved in project implementation\. The proposed institution building efforts for FC and KBP included mainly measures to improve management and hiring of additional staff\. Also, the project was to finance technical assistance, equipment and vehicles for the six radio stations in Kosovo to improve the effectiveness, quantity and quality of agricultu::al radio programs, especially fo; individual sector farmers\. 13\. The project included a program for the improvement of about 700 km of existing local roads at the cost of US$35,000/km (1982 prices) in twelve Communes\. Also, it included institutional and organizational provisions for improved road maintenance\. Finally, the project included financing of land consolidation on about 30,000 ha of irrigated and 5,000 ha of rain-fed land\. D\. ISSUES OF PROJECT DESIGN AND ORGANIZATION 14\. General\. Project issues identified during preparation and appraisal reflected the perceived needs of agriculture and rural areas\. Some of the critical issues repeatedly pointed out included: (i) pricing of agricultural commodities and price discrimination against the individual sector, particularly with respect to industrial crops; (ii) ineffective Government agricultural policy; (iii) uncertainty related to frequent Dinar devaluations vis-a-vis Western currencies and its impact on project cost; (iv) poor KBP performance in the implementation of other ongoing Bank loans; and (v) low KBP interest rates compared to tte rate of inflation\. 15\. Proiect Institutions\. The roles and responsibilities of KBP, seven associated Basic Banks (BBs), the Government, the Federation of Cooperatives, Agrokosovo, subborrowers and other agencies involved in project implementation were known to all parties involved\. Poor KBP performance was noticeable from the implementation experience of the three agricultural credit projects and four  irndustrial credit projects, in which KBP participated, and from the 1980 appraisal of Ln\. 1993-YU\. 16\. KBP Credit Absorption Capacitv\. The most important issue raised repeatedly during project preparation related to the rapidly deteriorating performance of KBP and the ways to improve it\. KBP was the only development banking institution in Kosovo and was financing over 80X of long-term investments in agriculture\. It was noted that the proposed project would add about US$58 million to about US$150 million of undisbursed Bank loan funds (May 31, 1982) for other Bank-financed ongoing agriculture projects in Kosovo\. Thus KBP was expected to disburse about US$50-55 million annually once the new project was approved\. This implied a 400% increase compared to the highest disbursement of US$13 million of Bank funds in FY80\. 17\. Proposed Improvements in KBP Performance\. It was agreed that the KBP and the Kosovo Government would furnish the Bank with a program to significantly improve KBP performance as a condition for financing the proposed project\. Several actions were proposed to obtain a truly effective program from KBP\. including close involvement of the Bank IDF Division and a proposal to hire expatriate banking advisory services to bring about improved KBP performance\. KBP was to submit its program to the Bank by October 31, 1982\. It should be noted that KBP had been asked to submit a similar proposal to the Bank in 1980 for improving its performance during the preparation of Ln\. 1993-YU, but this had not led to a\.1y perceptible improvement in KBP's performance because of inadequate follow-up\. 18\. KBP submitted "A Set of Proposed Measures for Organizational Improvements in World Bank Related Operations of KBP", as agreed, and Bank staff noted that the bulk of the KBP problems was addressed adequately\. The proposal contained the following major steps: (i) appoint a chief coordinator for Bank projects; (ii) appoint a training specialist; (iii) set up a work group to prepare written operational directives, introduce a system of project appraisal, to set up a project filing system, to standardize and streamline procedures for project approval, and to establish a methodology for funds withdrawal from Bank loan accoAnts; (iv) appoint or designate an officer in each BB to coordinate Bank subloan app\.'cations; (v) set up a separate Division with eleven professionals to supervise and monitor investments; and (vi) several other appointments, staff reassignments and additional training\. 19\. At the time, KBP was also being appraised as a participating bank for the Seventh Industrial Credit Project (Ln\. 2339/2340-YU)\. An internal review of a report prepared by a Bank consultant on the subject noted that KBP management would be overwhelmed by the comprehensiveness and magnitude of the report's recommendations and at worst may reject them outright\. Although the review generally agreed with the report's recommendations, it noted that many of the issues were related to the unique concepts under which the Yugoslav financial system operated\. 20\. Onlending Interest Rates\. The issue of KBP onlending interest rates further complicated project processing shortly before negotiations\. Inflation accelerated to an annual rate of about 32X toward the end of 1982 and the IMF recommended that the Government take strong policy measures including a sharp  increase in interest rates both on deposits and on lending\. Also, the Bank was trying to help resolve the issue of increasingly negative on-lending interest rates during the preparation of its first Structural Adjustment Loan (Ln\. 2326- YU)\. The Bank decided to proceed with the SAL and seek a "letter of intent" from the Yugoslav Government confirming its intention to adjust interest rates for onlending to the agricultural sector to a level which would be positive in real terms\. 21\. Negotiations\. The project was negotiated in February 1983, wichout the issues of poor KBP performance and increasingly negative onlending interest rates having been resolved\. The Agreed Minutes of project negotiations reflected the two outstanding issues\. They expressed general satisfaction with progress in KBP reorganization, and it was agreed that further progress would be extensively monitored under the proposed Industrial Credit VII\. With respect to onlending interest rates, the Kosovo delegation indicated that it would be difficult for farmers to accept a nominal interest rate on Dinar loans of the order of 18X and noted that it would have to obtain agreement of the Kosovo Government\. Unresolved, the onlending interest rate issue remained controversial for most of the project implementation period (para 34-35)\. The appointment of a development banking advisor was made a condition of Loan effectiveness\. Also, two other conditions of effectiveness were included: (i) the submission of a Self-Management Agreement (SMA) specifying legal responsibilities of local participating organiz;tions; and (ii) establishment of a Special Account\. E\. PROJECT IMPLEMENTATION Institutional Aspects of Proiect Implementation 22\. The Loan became effective on December 20, 1983 after a two month delay of KBP in submitting the Self-Management Agreement (SMA) and appointing the development banking advisor\. As reported by the second supervision mission even prior to project effectiveness in October/November 1983, the physical progress of the project appeared to proceed as per the appraisal schedule, especially with respect to rural roads, agri-service center and veterinary station final designs and construction start-up\. However, the final designs and tendering for the Decane irrigation scheme were delayed further\. The consultants proposed to add a small hydro-electric station and an urban water supply component to the subproject which increased the US$25 million total cost by US$ 3\.0 million\. 23\. The second supervision mission also reported ':hat expected institutional developments had run into serious difficulties, which were to adversely affect the project later as it progressed\. Dated covenants for implementing several specific KBP, Kosovo Government, and FC institutional improvements in the Loan and Project Agreements had not been met\. KBP was overdue on its organizational improvement program and on hiring additional staff\. Kosovo Government was overdue on establishing a Media Strategy Committee needed for implementation of the agricultural education programing component for radio and television\. Feasibility studies on land consolidation schemes were also overdue\. FC was overdue on hiring of additional staff and on evaluation studies on prices, subsidies and premiums affecting individual sector farmers\.  -6- 24\. Weak institutions continued to cause serious implementation problems\. While the FC project management unit made a good start in the identification and preparation of subprojects costing about US$32 million by 1984, KBP management was slow in approving most subloan applications\. For example, it delayed approval of incremental fertilizer purchases until after the beginning of the 1984 spring planting season\. Also, subloan commitments for the same purposes as this loan continued under Ln\. 1801-YU and Ln\. 1993-YU, which delayed loans to individual sector farmers under the project\. Further, KBP specified overly restrictive criteria on lending to individual sector farmers\. In particular, it required that subborrowers sell most of their livestock production (50% of milk, 80% of meat) to the social sector at controlled prices as a condition of subloan approval\. 25\. The April 1985 supervision mission reiterated a number of unresolved issues\. KBP had not raised the onlending interest rate to the individual sector farmers as required under the LA in conjunction with the May 6, 1983 Letter of Development Policy (para 33)\. The prospects for the Decane irrigation scheme had become uncertain\. The KBP loan processing department had not been strengthened as agreed\. As in 1984 again in 1985, KBP had delayed the approval of fertilizer loan applications beyond the commencement of the spring planting season\. In light of the accumulating adverse experience, the Bank suggested that part of the Loan be cancelled and agreed to search, for new ways to reorganize KBP activities so that project implementation could improve\. 26\. Restructuring of KBP Agricultural Credit Department (ACD)\. The review of KBP ACD operations focused primarily on measures needed for streamlining and speeding-up of subloan applications for the individual sector, to improve appraisal procedures, to improve supervision and monitoring, and streamline processing of disbursement applications\. Several attempts to reorganize KBP under other Kosovo projects preceded this effort without success\. This was the second such exercise under this project (para 17)\. Other similar attempts had been undertaken under the Industrial Credit VII Project\. 27\. The main recommendations of a review carried out by a consultant included: Mi) establishment of uniform procedures and methodology for appraisal and supervision of all loans; (ii) increase of the number of staff; (iii) realignment of functions and responsibilities in ACD and between ACD and other KBP departments and Basic Banks; (iv) a number of steps aimed at speeding up subloan processing, such as increasing approval limit3 and more regular meetings of the Executive Board and the Credit Board of KBP; and (v) management improvements and training\. 28\. Results of KBP ACD Reorganization\. Although KBP completed reorganization of its ACD largely in line with these recommendations, the reorganization came too late to have the desired impact on project implementation\. Moreover, to improve the performance of just one department in 2 bank facing numerous other difficulties could no, solve the overriding problems\.  29\. The reorganization resulted in minor improvemeiL\.s in the streamlining and speeding-up of subloan processing, subloan approval, supervision and monitoring of subproject implementation, and monitoring cf performance after subproject completion\. However, duplication of effort between KBP and BB continued for a number of reasons\. For example, Yugoslav law did not permit BB to directly approve loans from Federal Funds\. Those had to be first approved by KBP\. If a limit of Dinar 15 million for approval by Basic Banks had been permissible by law, the workload related to loan approval at KBP would bave declined by about 30% and KBP staff would have been able to focLs more closely on larger loans\. Also, the review emphasized more training of KBP and BB staff in investment banking\. Although operations manuals and guidelines were available, the vigor of their application had not been adequate, judged for example from the two latest feasibility reports submitted to the Bank by KBP\. 30\. Interest Rate Issue\. The accelerating inflation added to the project implementation problems by aggravating the issue of KBP's increasingly negative onlending interest rates\. With the signing of the May 6, 1983 Letter of Development Policy (LDP) of the Structural Adjustment Loan (Ln\. 2326-YU), Yugoslav banks were to align their interest rates with the inflation rate over a period of three to five years\. Like most other Yugoslav banks, KBP did not fully comply with the provisions of the LDP\. However, the loan agreement of this project had a provision which required KBP to adjust its lending rate on the basis of the formula stipulated in the LDP\. While KBP agreed with the general principle of adjusting onlending interest rates to positive real levels over time as specified in the LDP, it nevertheless felt that (i) credit provided through the Federal Fund for Less Developed Regions (FLDR) was not subject to the LDP interest rate provisions; and (ii) the interest rate on credit provided from Bank funds should be determined by the Yugoslav Bankers' Association\. 31\. Proiect Costs\. Actual project costs differ substantially from appraisal estimates (Tables 3,4)\. The reasons include: (i) the lack o\. detailed engineering at appraisal; (ii) 2-3 year delays in subproject start-up in an inflationary environment; (iii) Dinar devaluation of about 1,500% between 1981 and 1987; (iv) procurement delays; and (v) price increases between 1981 and 1987 which were five times greater than appraisal price contingencies\. For some of the reasons mentioned, the project was eventually implemented at a lower cost than originally estimated\. Actual project costs were determined from disbursement applications and other documents in project files, since the Borrower failed to provide any details to determine the actual project cost\. 32\. At appraisal, the total project cost was estimated at US$144\.8 million, with an estimated share of foreign exchange cost of about 48%\. Due to the rapid devaluations, the vzlue of the local component denominated in US$ was reduced below appraisal estimates though it had gone up in Dinar terms\. 33\. Financing\. Disbursement and Procurement\. Actual financing is entirely different from the appraisal financing plan (Table 5)\. Disbursements lagged behind appraisal estimates and at the Closing Date only US$40\.37 million (51%) was disbursed including US$ 32\.51 million for project works and US$7\.86 million for interest payments and loan charges (Table 6)\. Actual disbursements closely followed the Yugoslav disbursement profile\. Procurement was executed mainly through LCB procedures\.  34\. While the Dinar depreciated against the US$ by about 990X since 1983 when the project became effective, wholesale prices increased by about 712X during the same period\. The cost of the project foreign exchange component, denominated in US$, decreased in relation to the local component cost\. Consequently, continued Bank financing of the project at the rates specified in the Loan Agreement imposed increased financing requirements on KBP and in view of its liquidity situation, contributed to substantial delays in the implementation schedule\. In order to maintain the Bank's original share of foreign exchange financing, the Bank agreed in May 1988 to raise its disbursement percentage for amounts paid on account of local expenditures to 652\. 35\. Compliance with Loan Covenants\. Most of the key Loan Covenants were not complied with by KBP especially during the early years of project implementation\. KBP had been in default on a number of covenants including: (i) onlending interest rates did not correspond at times to agreements reached with the Bank; (ii) overdue audited financial statements; (iii) the performance of the development banking adviser who had been ineffective and, as it turned out, appears to have been appointed primarily to comply with a loan condition; (iv) KBP had continued to submit incorrect disbursement forms; and (v) project monitoring and evaluation requirements were not implemented\. The quality of FC annual progress reports and evaluation reports had been improving throughout project implementation\. Unfortunately, FC failed to submit a draft PCR, although requested to do so during the last supervision mission and repeatedly reminded since\. Physical Aspects of Project Implementation 36\. While subprojects to small farmers and some infrastructure investments had a good development impact, many infrastructure subprojects were either cancelled or remain incomplete\. The Decane irrigation scheme, the largest single subproject with a total cost of US$25 million, was cancelled in March 1988 after eight years of preparation efforts since investors could not agree on their respective shares of local financing in this multipurpose investment\. Also cancelled was a technical assistance package, equipment and vehicles for the Kosovo radio and television stations for improving agriculture education programing\. Finally, also cancelled were improvements to the Kosovo agriculture extension service\. Various Kosovo institutions spent considerable time arguing about how to proceed but had been unable to agree to implement these components\. 37\. Primary Production\. The individual sector credit component continued the support extended under the three Yugoslav agricultural credit projects and overlapped with the Keaovo Agricultural Development Project (Ln\.1993-YU), with similar results\. The conclusions of the Project Performance Audit Report (PPAR) for the Third Agricultural Credit Project (Ln\. 1801-YU) are directly applicable to this component\. Some of the findings include: (i) shortage of counterpart funds and investor capital despite the special agreement among implementing agencies at the time of project preparation; (ii) difficulties in reaching consensus on priorities; (iii) delays ca\.;sed by the need to identify subprojects and complete feasibility studies; (iv) significant differences between appraisal  - 9 - projections and actual investments; and (v) need to reappraise some subprojects due to cost overruns resulting from domestic inflation\. 38\. Farmers who successfully completed the lengthy process of subloan application and obtained KBP financing used the funds much as expected\. About 3,700 mini-farms were financed under the project compared to the appraisal estimate of 5,000, aimed at supporting labor intensive activities for increasing production of meat, milk, fruit, grapes, honey and vegetables\. Also, they included improved livestock (sheep, dairy, pigs, beef, bees), animal housing, pasture improvement, orchards and vineyards establishment, tractors and farm machinery\. However, despite the low real interest rate (59Z in 1988 compared with a rate of inflation of 2501), farmers' credit demand was restrained by Government controlled prices (e\.g\. milk) and limited possibilities of direct marketing\. The quality of mini-farm construction was satisfactory since work was supervised by investors, who also contributed their own labor\. 39\. Land Improvement and Land Consolidation Works\. About 21,500 ha were consolidated compared to about 35,000 ha expected at appraisal\. The Binacka Morava Flood Control scheme, about 4,000 ha of pasture improvements in Draggiest and 600 ha in Decane all were completed\. 40\. Other Infrastructure Facilities\. About 660 km of rural roads were completed, compared to the appraisal target of 700 km\. Of the 40 approved agri- service centers, 34 were completed\. The centers have been a great success with much higher turnover of inputs and outputs than expected at appraisal\. As compared with 17 approved veterinary stations, the construction of only 12 was completed\. Unfortunately, most stations could not provide services due to the lack of veterinary equipment\. As compared with 11 approved green markets, five were completed and are in operation\. F\. PROJECT RESULTS 41\. The project was quite successful with respect to the investments which were implemented\. However, the Borrower failed to provide data to determine the physical, financial and economic achievements of project investments\. The main problem was that project financing administered by KBP had been out of control and most corrective actions were taken too late and/or had little effect on implementation performance\. Agricultural ImRact 42\. The demand for fresh and processed agricultural produce declined as a result of the worsening economic situation in the country\. Information on incremental production and yields remains incomplete due to the wide range of subprojects financed and the limitations of the monitoring and evaluation system\. Also, it is unclear how much of the incremental production is delivered to agroindustries in Kosovo for further processing\. The appraisal estimates of incremental production are summarized in Table 7\.  - 10 Financial and Economic Impact 43\. Information needed to estimate financial and economic rates of return is incomplete and PCR estimates of FRR and ERR are based on data from other similar projects in Yugoslavia (Table 8)\. The appraisal economic rate of return for the whole project was 23% and the economic and financial rates for various components ranged from 12% to over 50%\. The actual FRR of most investors is l1kely to be higher due to low interest rates relative to the high rate of inflation (Table 8)\. G\. PROJECT SUSTAINABILITY 44\. Whether the project could sustain a positive level of economic benefits in the environment that presently exists in Yugoslavia is open to question\. The future of most subprojects will depend on how government policies and the Yugoslav economic situation evolve\. Community development subprojects (e\.g\. agri-service centers) could be sustainable provided suitable arrangements are made for funding of their operations and management\. H\. BANK PERFORMANCE 45\. While some of the investments under the project were justified and successful, the project scope was overly ambitious, considering the lack of experience with such projects in Yug-slavia and in Kosovo in particular\. 46\. The Bank had underestimated the systemic distortions of the Yugoslav economy\. Although the severe deterioration of the macroeconomic situation could not have been anticipated fully at appraisal, the Bank should have been more effective in analyzing the experience of its earlier involvement in Kosovo and elsewhere in Yugoslavia and drawn clearer implications for the design of the project\. 47\. The Bank's general acquiescence in Yugoslav agricultural development policy which relied on subsidized credit diminished the project's chance of success\. The Bank kept pointing to the need for positive onlending interest rates from the mid 1970s\. While the Bank initiated two interest rate studies (1976, 1980) stipulating that their results would be applied under ongoing projects, lending to subprojects at increasingly negative real rates continued in an environment of accelerating inflation\. Agreement on the issue with the Federal Government was reached only in May 1983 and with KBP more than two years later\. 48\. Important substantive issues such as interest rate policy need to be resolved by upfront action in a country macroeconomic dialogue even at the cost of lending deferral or suspension\. A postponement of such issues not only affects project implementation and the achievement of policy objectives in the long run, but it may also undermine the Bank position in subsequent operations and phases of policy dialogue\. 49\. Local counterpart funds is one substantive issue that received little attention and remained misunderstood\. While the loss-making Agrokosovo  - 11 - enterprises consumed more than 60% of FLDR (the source of counterpart funds), farmers had to wait for months and in many cases for over a year for approval of their subloan applications\. The main function of Agrokosovo is to arrange cooperation among its member enterprises by formal and informal agreements of protectionist character\. Agrokosovo was also the principal reason for permanent shortage of local funds since it had a priority claim through the KBP board on the FLDR\. 50\. About 300 Bank staff weeks were spent on the project, of which 50% was spent on preparation/preappraisal, 20% on appraisal, 6% on negotiations, and 24X on supervision (Table 9)\. It is not clear from project documents why and how so much of Bank time was used to prepare and appraise the project\. Some of this time might have been used to analyze earlier experience, draw conclusions, and identify conditionality for subsequent involvement (e\.g\. interest rate, price policy, need for detailed engineering designs prior to appraisal, etc\.), but whether this took place is not clear froL the written record\. Project supervision initially focused mainly on institutional issues related to KBP and FC\. Most difficulties known throughout project preparation continued to develop into ever more serious problems\. Moreover, most corrective actions came either too late or were too weak to have the desired impact\. I\. BORROWER PERFORMANCE 51\. KBP performance deteriorated under the project reflecting the weaknesses of the Yugoslav banking system and the distorted macroeconomic environment\. Although KBP, like other Yugoslav banks, carries out banking functions with considerable autonomy, its decisions are strongly influenced by the social sector organizations which are in effect both its owners and major borrowers\. Moreover, about 90% of all government funds for economic development (e\.g\. the Federal Fund for Less Developed Regions) were channelled through KBP, giving an advantage to its major borrowers in obtaining subsidized credit\. These and other weaknesses of the Yugoslav banking system are now being recognized and addressed as part of the overall economic and financial reform\. 52\. The reorganization of the KBP ACD came too late to affect project implementation\. Various organizational improvements designed to improve implementation did not prove sufficiently effective and deficiencies identified under earlier projects and recognized at appraisal were not eliminated in the course of project implementation\. 53\. Although the performance of FC helped considerably in project implementation, it could not overcome the deteriorating performance of KBP\. In particular, KBP favored the social sector in the allocation of heavily subsidized counterpart funds\. Although KBP and FC requested extension of the project Closing Date by a year, they were unable to comply with some critical loan covenants (e\.g\. onlending interest rates) and ensure availability of local funds\. Moreover, KBP could not be expected to disburse the remaining US$20 million of the loan, given the deteriorating macroeconomic situation in Yugoslavia\. Therefore, the Bank decided to close the loan as scheduled on March 31, 1989\.  \. 12 _ J\. PROJECT DOCUMENTATION AND DATA 54\. As already mentioned, the SAR and the Loan Agreement followed the standards of other Yugoslav agricultural projects\. Because of numerous changes during project implementation, the velue of the SAR for project implementation was limited\. 55\. Most project correspondence between the Bank and KBP deals with institutional issues, in particular poor KBP performance\. Data on project monitoring and evaluation are very limited\. However, FC progress reports improved toward the end of project implementation and were becoming useful for project monitoring\.  - 13 - PROJECT COKPLETION REPORT YUGOSLAVIA KOSOVO REGIONAL DEVELOPMENT PROJECT (Loan 2306-YU) PART II\. PROJECT REVIEW FROM BORROMER'S PERSPECTIVE The Borrower was requested to provide information for Part II, but none was received\.  - 15 - PROJECT CCMLMIION REPORT Table I YUGOSLAVIA LOSOVO REGIONAL DEVELOPMENT PROJECT (Loan 2306-YU) PART III\. STATISTICAL INFORH&TION Related Bank Loans DatS of Losn Purpose Uaproyal status Thlrd Ag\. Ag\. Credit to Feb\. 1980 PPAR 6/88 Credit Project social and 1801-YU individ\. sectors for all agricultural activities\. Second Morava Multipurpose, MaKch 1981 PCR 5/88 Regional Dev\. incl\. general Project 1951-YU agric\. and agroindustries\. Third Macedonia Multipurpose, July 1981 Comp\. 6/87 Agricultural incl\. general Develop\. Proj\. agrlc\. and 2039-YU agroindustries\. Kosovo Agric\. Multipurpose, may 1981 PCR 4/90 Development incl\. general Project 1993-YU agric\. and agroindustries\. Bosanska Multipurpose, Oct\. 1978 Com\. 3/88 Kraijina Ag\. incl\. general Develop\. agric\. and Project 1921-YU agroindustrles Serbia Reg\. Multipurpose, June 1983 Ongoing Development Lncl\. general Project 2307-YU agric\. and agroindustrles\. Montenegro Reg\. Multipurpose, Juyr 1984 Ongolng Development Lnml\. general Project 2467-YU agrlc\. and agroindustrles\.  - 16 - Table 2 PROJECT COMPLETION REPORT YUGQSIAVIA KOSOVO REGIONAL DEVELOPMENT PROJECT (Loan 2306-YU) Project Time Table Item Date Planned Date Received Date Actual Identification/ July, 1980 Preparation Appraisal Mission May, 1982 Loan Negotiation Feb\. 14-25,1983 Board Approval June 9, 1983 Loan Signature June 24, 1983 Loan Effectiveness Oct\. 24, 1983 Dec\. 20, 1983 Loan Completion June 30, 1988 March 31, 1989 Loan Closing March 31, 1989 March 31, 1989  - 17 - PROJECT COMPLETIQN REPORT Tablg KOSOVO REGIONAL )EVELOPHENi PROJEcT (LOAN 230§:nJ Tot7al Proiect Cost Proiece Com2onents Appraisal Artual Dinar US8 DLnaK M via Rural Infrastructure 4,459\.7 69\.66 310,476\.0 45\.16 On-farm Investments 3,440\.6 54\.61 126,351\.9 18\.79 Institutional Development 154\.5 2\.45 16\.2 0\.00 Fertilizer Credit 638\.1 10\.13 3,057\.9 3\.35 Incremental Working Capital 500\.3 7\.94 - - Total 9,193\.2 144\.79 439,902\.0 67\.30 Note: (i) Rural Infrastructure includes investments in rehabilitation of irrigation schemes, small scale drainage and flood protection works, soil improvements, service roads, and land consolidation; (il) On-Farm Inmestments includes investments in irrigation equipment, livestock, animal housing and related equipment, agricultural machinery, establishment of orchards and vineyards, the improvement of pasture and meadows; (iLL) IngtitulLonal DevelgpMg= includes investments in fostering the capacity of KBP to appraise and supervise subproject implementation and enhancing the capacity of FC to provide services to members (only US$28,000 was utilized for this purpose); (iv) Fertilizer Credit used to finance annual incremental purchases of fertilizer for sale to farmers; (v) Incremental Working Can2tal use during project implementation could not be determined from the available data\.  - \.8 - Table 4 PROJECT COMPLETION REPORT YUGOSLAVIA KOSOVO REGIONAL DEVELOPMENT PROJECT (Loan 2306-YU) PROJECT COMPLETION REPORT A\. Appraisal Total Cost by Year \. (Dinar M) Project Components 1983 1984 1985 1986 1987 1988 1989 Total Rural Infrastructure 548\.4 1281\.0 1536\.2 648\.7 445\.4 - 4*459\.7 on-farm Investment 332\.6 708\.8 1017\.8 1091\.9 289\.4 3,440\.5 Institutional Development - 96\.8 40\.6 12\.8 4\.3 - 154\.5 Fertitizer Credit - 90\.8 97\.8 124\.0 167\.6 157\.9 638\.1 Incremental Working Capital - 71\.1 87\.4 104\.9 122\.2 114\.7 500\.3 \. \. \. \. \. \. \. \. \. \. \. Total 1,139\.7 2,215\.6 2,795\.7 2\.034\.7 1,007\.4 9,193\.1 S\. Actual Total Cost by Year \. (Dinar M) Project Components 1983 1984 1985 1986 1987 1988 1989 Total Rural Infrantructure - - 2,077\.3 1,796\.6 4,288\.3 16,022\.3 286,291\.5 310,476\.0 On-farm Investments - 443\.9 2,044\.6 8,996\.7 114,866\.7 126,351\.9 Institutional Development - 1\.7 1\.8 12\.7 - 16\.2 Fertilizer Credit - 153\.9 167\.5 2,270\.8 237\.4 228\.3 3,057\.9 Total - - 2,232\.9 2,409\.8 8,616\.4 25,256\.4 401,386\.5 439,902\.0 Note: (I) Rural Infrastructure Ircludes investments in rehabilitation of irrigation schemes, small scale drainage and flood protection works, soil improvements, service roads, and land consolidation; (ii) On-Farm Investments Include investments in irrigation equipment, lfvestock, animal housing and related equipment, agricultural machinery, extablishment of orchards, and vineyards, the improvement pasture and meadows; (iff) Instftutional Development includes investments in fostering the capacity of capacity of KBP to appraise and supervise subproject implementation and enh'ncing the capacity of FC to provide services to members (only US$28\.000 was utNlized for this purpose); (iv) Fertilizer Credit used to finanece annual incremental purchases of fertilizer for sale to farmers; (v) Incremental Working Capital use during project implementation could not be determined from the available data\. A:\2306YCOSWK1  - 19 - Table 5a PROJECT COMPLETION REPORT ,YVGOSLAVrA KOSOVO REGIONAL DEVELOPMENT PROJECT (Loan 2306-YUI Progect FInAncing A\. Auuraisal Financing Plan (US$1M) Interest Total Total During Front End Project Sh-ar Project Construc- Fee on Financial in Funds Cost tion Bank Lgan ReuMrement Required Funds reDirad 14J\.8 25 3OS170 Z IN Funding sources IBRD 69\.0 9\.4 0\.59 79\.0 46 KBP (Federal Funds) 42\.8 15\.9 58\.7 35 Provincial Budget 4\.0 4\.0 2 Sub-borrovers 29\.0 29\.0 17 B\. Actual linancine Sourges (US$M) Interest Total Total During Front End Project %Share Project Construc- Fee on Financial in Funds Cost tion ,Bank Loan Re£guirmezt &omgired Funds reguired 67\. 3 Lii 077 Funding so-ces IBRD 32\.4 4\.4 0\.59 37\.4 47 XBP (Federal Fund) 19\.5 7\.4 26\.9 34 Provincial Budget 1\.9 1\.9 2 Sub-borovers 13\.5 13\.5 17  PROJECT CONPLETION REOT YUGOSIAVIA KOSOVO REGIONAL DVEI SPROJECT (Loan 2306-YU) C\. Bank Disbursegent by Categry AneraiAal Revisado amost \.1 Lou Allocated ercaae tedl s ot tlopreaad In Dollar tpmAdituire to be (Expressed In Dollar (Expresed io DOLer Ixpsflt CetLeory w valet) Flinnced E valent) Equivalent) F (1) Sub-lo fr: (s) Irr4iation\. 30\.700\.000 100 2 of _ ts 20,700,000 22\.303\. 130 1M 71 *to _ Drebawe\. Moral disburaed by the barrower disbursed by Lbe J anmttr an account oa forei BotD t \. \. \.err r o cot ezpliturea end 41 Z an of foreiau ezpud- aceauot of local hItar mid SI X turor accoutt t local (b) Credit to 23\.100\.000 \. 13,100,000 7\.110,30 Individual Sector far Co-rae nvestment Cc) Institutional 1\.000\.000 1\.000,000 13\.571 - Developiment (2) Fertilizer Credit 6,600\.000 g00 of mounts disbursed 6\.600,000 3\.047\.324 00 orfw by the Barrower disbursed by the (3) ComsultAts' 300\.000 100 2 300,000 --- 100 I aerviceg, vele\. and cqul_\.t for (4) Interest ad other 9,400,000 mounts accrued an or 9\.400,000 7\.271,440 AImts du\. charges an the befar\. ApriL 30\. 1008 Low (SI Fo 568,08 Amount doe 503\.009 S8t\.009 mout due (6) Inltial deposit in 2\.500,000 mout de under Section 2\.500,000 (38\.467) Special Account 2\.02 (c) of tbic (7) thalloceted 4\.811\.911 4\.811\.911 (8) Cancelled _20000\.000 3A34505 | TotOl 79\.000\.000 790\.0o\.000 o9\.000\.0ft t /l'*edonspw 4\. It\.  21 - Table 6 YUGOSLAVIA KOSOVO REGIONAL DEVELOPMENT PROJECT (Loan 230$-YU) PROJECT COMPLEnTON REPORT CUMULATIVE LOAN DiSBURSEAMENTS (USS million) ACTUAL AS % ESTIMATED ACTUAL OF ESTIMATE ROFiLg Sep\. 1983 - - - - Dec\. 1983 1\.85 0\.59 41% 0\.00 Mar\. 1984 3\.25 0\.59 20% 0\.00 Jun\. 1984 7\.20 1\.02 20% 0\.40 FY85 Sep\. 1984 10\.90 1\.02 14% 0\.81 Dec\. 1984 14\.60 3\.83 35% 1\.82 Mar\. 1985 18\.35 5\.56 38% 2\.83 Jun\. 1985 22\.10 6\.79 37% 4\.04 FY86 Sep\. 1985 28\.30 7\.94 36% 5\.65 Dec\. 1985 34\.50 9\.54 34% 7\.67 Mar\. 1986 40\.75 11\.26 33% 9\.69 Jun\. 1986 47\.00 13\.17 32% 13\.73 FY87 Sep\. 1986 51\.90 13\.17 28% 15\.74 Dec\. 1986 56\.80 14\.15 27% 17\.76 Mar\. 1987 61\.75 14\.15 25% 20\.19 Jun\. 1987 6R10 17\.70 29% 22\.61 FY88 Sep\. 1987 71\.00 19\.43 29% 24\.83 Dec\. 1987 75\.35 21\.56 30% 26\.24 Mar\. 1988 77\.15 21\.81 29% 2\9\.07 Jun\. 1988 79\.00 25\.43 33% 31\.89 FY89 Sep\. 1988 79\.00 27\.47 35% 33\.31 Dec\. 1988 79\.00 28\.32 36% 34\.72 Mar\. 1989 79\.00 30\.00 38% 35\.73 Jun\. 1989 79\.00 35\.74 45% 36\.74 ''FY90 Sep\. 1989 79\.00 35\.76 45% 37\.75 Dec\. 1989 40\.37 36% 38\.76 Mar\. 1990 39\.76 Jun\. 1990 40\.37 Notes 1) From the total approved loan amount of USS 79\.0 million, USS 38\.63 was cancelled\. Actual disbursements include USS 7\.86 million in interest payments and financial charges\. 2) The calculation of profile amounts are based on net approved amounts suppiled from the loan department\.  - 22 - PROJECT COMPLETION REPORT Table 7 YUGOSLA&VIA KOSOVO REGIONAL DEVELC,,MENT PROJECT (LOAN 2306-YU) ADpraisal Estimate Average Export/ Foreign Incremental Import Price at Exchange Production Port Value (000 tons) (US$/kg) (US$ H\.) Meat 2\.3 3\.71 8\.5 Hilk and Cheese 16\.4 0\.36 5\.8 Fruit 41\.6 0\.29 12\.1 Oilseeds 34\.7 0\.33 11\.5 Cereals 35\.8 0\.17 6\.1 Vegetables 12\.3 0\.14 1\.7 Total 45\.7  - 23 - PROJECT COMPLETION REPORT YUGQSLAVIA TABLE 8 KOSOVO REGIONAL DEVELOPHENT PROJECT (LOAN 2306-YU) Financial and Economic Rates of Return / Project ComRonents Appraisal PCR (FRR) (ERR) (FRR) (ERR) (X) (X) (2) (2) Hill Sheep Farms 18 16 7 4 Dairy Farms 14 12 12 6 Orchards 14 14 12 8 Rainfed Farms 79 51 8 6 Small Scale Irrigation Farms 24 18 n\.a\. n\.a\. Decane Irrigation System 19 12 Cancelled Vitina Drainage System 17 16 10 13 Total Project n\.a\. 23 n\.a\. 7 /1,, PCR estimates of FRR and ERR are based on data from other similar projects in Yugoslavia\.  - 24 - Table 9 PRUJECT CCPLETIONi REPORT YUGOSLAVIA KOSOVO REGIONAL DEVELOPMENT PROJECT (Loan 2306 - YU) MISSION DATA Month/ No\. of Days Specializatlons Perfornence Types of Mission Year Persons in Field Represented a/ Rating b/ Trend Problems c/ \. \. Identification/Preparation d/ 7/80 15 285 A,B,D,K,N Appraisal 5/82 9 225 A,B,F,D Subtotal 24 510 ---rvision 1 7/83 2 6 S,F 2 2 F -rvision 2 10/83 2 21 B,F,D 2 2 :rvision 3 6/84 3 30 B,D 2 2 -\.jsg, - -\.4 4/85 1 4 9 2 2 F :rvision 5 10/86 2 36 A,B 3 2 rvfislon 6 5/87 3 12 B,B,D,M 3 3 -u-v'is 7 3/88 2 30 B\.F 2 2 -rvision 8 2/89 1 2 a 2 2 Subtotal 16 141 \. \. \. \. OTHER PROJECT DATA \. \. Borrower: Udruzens Kosovska Banka, Pristine (KUP) 5uorantor: Socialist Federal Republic of Yugoslavia Executing Agency: KBP \. Fiseal Year of Borrower: January 1 * Deceiiber 31 Name of Currency: Diner \. Currency Exchange Rate: 1982 1983 1984 1985 1986 1987 1988 1989 ------------- -- -- -- 50\.3 92\.8 152\.3 270\.2 279\.2 740\.0 2,520 28,760 a/ A a Agriculturalist, E a Economist, F c Financial Analyst, N a Engineer, P a Procurement Specialist, S a Sociologist, Z a Envirornental ConsuLtant, H a Horticulturalist, N * Marketing Specialist b/ 1 Mlinor problems, 2 = Moderate probLems, 3 a Major problens c/ F a Financial, T a Technical, N a MaInagerial d/ FAO/World Bank Cooperative Progran A:\230615S  - 25 - PROJECT COMPLETIQN REPORT Page 1 of 4 YUGOSIAVTA KOSOVO REGIONAL DEVELOPMENT PROJECT (LOAN 2306-YU) GLOSSARY 0O TERMS AGROKOMBINAT (AIX) The agrokombinat is a large social sector agri-business which encompasses all aspects of the food system; lnput manufacture, prlmary production, processing, marketing, distrlbution and retalilng\. AGROKOSOVQ An umbrella AIK for all 18 agrokombinats ln Kosovo\. In thls case, Agrokosovo is a COAL comprised of 18 VOs (the 18 smaller agrokomblnats), 101 BOALs, 75 B,:SC COOPERATIVE ORGANIZATIONS, an Agro Commerce UO, and the research WO, IED\. Central OrganizatLon of AIK comprLses of (i) Management Board, which performs the functions of a general manager for AIK; (LL) a VO for common services to summarize the plans, accounts and business results of AIK\. undertake financial and economic analysLs of AIK's business, and provide expert advice to BOALs and WOs; (ilL) a WO to dLsseminate information about AIK's activities; (iv) a VO for research and scientific activities; and (v) an Internal Bank to assist the BOALs in finding financial resources to the capital market and to handle transfer of surplus resources with AIPI from one BOAL to another\. The expenses of the central organization are met by contributions from BOALs\. ASSOCIATED AGRICULTMRALIST Any INDIVIDUAL SECTOR farmer that has agreed (through a Self-management agreement) to cooperate ln some manner with the social sector\. ThLs includes membership in ZADRUCAs, long-term production contracts for sale of crops and livestock to the social sector, and simLlar short-term, ajreements that are arranged annually\. ASSOCIATION OF LABOR A Yugoslav term used in tvo overlapping meanings: as a broad, generic term synonymous with SELF-MANAGEMENT socialism, ln a narrow sense to characterLze the relations of workers vithin a BOAL\.  - 26 - ANNEXC I Page 2 of 4 BASIC COOPERATIVE ORGANIZATION (BCO) The basic production unit vithin large Commune-sized ZADRUGAs A "sub- cooperative" the BCO is organized on the same principle as the parent organization: BCOs' delegates represent the organization in Assemblies of the ZADRUGAS and also in the FEDERATION OF COOPERATIVES\. BASIC ORGANIZATION OF ASSOCIATED LABOR (BOAL) The BOAL is the basic unit in which the ASSOCIATION OF LABOR takes place\. The locus of all economic decisionmaking\. the BOAL\. is an autonomous legal entity having its own income statement and balance sheet\. Within an ENTERPRISE the BOAL is the smallest distinguishable technological entity producing a marketed or marketable output\. CHAMBER OF THE ECONOMY All associations of a province, republic, or the federation constitute a chamber of the economy\. It is not only a consultative body; it also has certain quasi-legislative functions, insofar as it prepare and signs SOCIAL COMfACTS WITH SOCIOPOLITICAL COMMUNITIES and trade union on behalf of consenting members (ENTERPRISES)\. COMMUNAL COORDINATING COMMITTEE (See PROJECT COORDINATING COMMITTEE) The basic unit of deeisionmaking in the sociopolitical sphere; its counterpart in the economic sphere is the BOAL\. CONPOSITE ORGANIZATION OF ASSOCIATED LABOR (COAL) Sometimes called a Complex Organization of Associated LAbor\. The Yugoslav term for an organization in which several ENTERPRISES have agreed to collaborate in accord vith a SELF-MANAGEMENT AGREEMENT\. The agreement generally covers the POOLING OF LABOR AND/OR RESOURCES\. An ENTERPRISE can be a member of several COALs\. COOPEUAN An INDIVIDUAL SECTOR farmer who chooses to enter into a production agreement with the social sector on a per annum basis\. DlECNIZRLIZATION Under the prevailing Yugoslav usage, the term applies to the process of rearranging political and general economic decisionmaking pover to the lowest level of SOCIOPOLITICAL COMMUNITY in vhich such decisions can reasonably be made\. The term is also used in a broader sense that encompasses destatization and is close to the use of the term comon in other socialist countries\.  - 27 - Page 3 of 4 DKLEGATE SYSTEM The Yugoslav term to denote the particular form of citizen or vorker participation under SELF-MANAGEMENT\. Delegates ara elected at the level the smallest unit vithln a COMMUNE or BOAL and in turn elect delegates at the nezt broader level, and so on\. Delegates have strictly limited terms\. They do not give up thelr prior status as vorkers; they must sollcit the views of their constituency on any important issues on which they vill vote; they can be recalled at any time if the constLtuency decides that lts views or interests are not being adequately represented\. ENTERPRISE The direct translation from Serbo-Croatian would be "work organization" (WO)\. Most enterprises comprise several BOAL as their prinLciple units; an enterprise is constituted by a SELF-MANAGEMENT AGREEMENT betvean BOAL\. The stronger and more permanent identity of BOALs is evidenced by the right of BOALs to separate from the enterprise under certain conditions and either constitute themselves as individual enterprises or join another one\. FEDERATION OF COOP TIVES (FC) The Federation of Cooperatives in Kosovo is comprlsed of representatives from 83 cooperatives (Zadrugas), BOALs, and BCOs\. (Approximately 30 of the BOALs re also members of Agrokosova\.) A coordinating and planning organization for these agricultural organizations, the FC has decisionmaking power on matters crucial to the sector as a whole, FC's main role is to promote the association of agriculturalists and, through the BCOs, INDIVIDUAL SECTOR development\. The PC is governed by a general assembly comprised of two delegates from each BCO, BOAL, and Cooperative\. The Presidency of the assembly (which consists of a President and Secretary) is nominated by the Provincial Government\. NZTN The Yugoslav term for the process of compromise that is undertaken to coordinate and achieve consensus on all economic and sociopolitical plans\. INSTITUTE OF ECONOMICe DEVELOPMENT (IED1 A V0 within Agrokosova whose function is ptimarily research, analysis and planning\. Recently, IED has been given responsibilLty for the preparation of reglonal agricultural development projects within Kosovo\. INDIVIDUAL SECTOR Agriculture in Yugoslavia is characterized by the parallel existance of two sectors: the social and individual\. The social sector is comprised of AGROKONBINATS, ZADRUGAS, and other organliatLons such as veterinary and research stations whLch operate under principles of social ownership of means  - 28 - ANNEX I Page 4 of 4 of production\. The individual sector refers to the large, private sector that domlnates prLmary productlon agriculture in Yugoslavia\. The indLvidual sector owns 84X of all arable land in Yugoslavia, but accounts for only 72X of total agricultural production\. Individual sector farms average 2-4 ha\. and are usually fragmented into 7-10 tiny plots\. Fragmentation and small farm size coupled with low, stagnant productivity and employment opportunities have contributed to making the individual sector the major determinant of overall low productivity ln Yugoslavia's agricultural sector\. ORgANIZATION OF ASSOCIATED LAOR (OAL) The Yugoslav generic term for all legal entities that function by the Association of Labor\. This includes such entities as BOALs, ENTERPRISES, and COALs\. POOLING OF TABOR A RESOURCES FinancLal links between BOALs and ENTERPRISES are established by SELF- MANAGEMENT AGREEMENTS on the pooling of resources\. Such agreements regulate the conditions under vhich one organizatLon temporarily makes financial resources available to another\. The arrangement can be a traditional medium- term or long-term credLt arrangement\. It more frequently and increasingly implies the sharing of lncome and risk under joint pooling\. PRIORITY ACTIVITY An economic activity singled out in the SOCIAL PLAN of a SOCIOPOLITICAL COXMUNITY as being of special importance\. Through SOCIAL COMPACTS, priority activities have a higher degree of coordination and stronger commitments for implementation in the planning of affected ENTERPRISES than nonpriority activities\. They also have the first claim to resources in the financing of investment programs and projects\.  - 29 - ANNEX 2 Page 1 of 3 STATUS OF LEGAL COVENAS YUGOSIAVIA Kosovo Regional Delopment Project (LOa 213YU) Or0a Resed Agreemet Sedion Status Date Date Descrion of Covennt Comments Loan 3\.04 02/84 Submt to the Bank s\. Often late but improving in quaeity\. annual progress reporIs within 45 days of close of 6-month period cocerneL 04/85 306 OK Underake deailed m rd4m Although sbmied tn April 1987, the eviw review of aad excange views coud no longer affect prOjC't performance\. with Bank rgardig prgress of project by April 30,1915 3\.07 OK Fursb to Bank a fnarin lnefctlve loca funds were iven on a priority plan for Investment projects basis to AgroKosovo\. by November 30 of teh year\. 3\.08 (b) OK Fwrnish eom of Oms document with Project Commune for Impkmentng mel roads\. 5\.03 OK Fumisb audited finanal Often late ed of poor qualty\. statements 6 months after end of each fiscal year, beginnin In 1984\. Annex to OK 06183 Employ (a) development Compled with on a pro forma basis\. Schedule 2 banking advisor and (b) hUil time development banldng offieer Annex to OK 08/83 Prepare and submit program Ineffective\. Schedule 2 by August 31, 1983 to provide supervIion in lndividul and socia sectors Annex to OK 09/83 EstabUsh system of Although completed In November 1983, offieers Schedule 2 agrcltural credit oiers have been ineffective\. (ACOs) by September 30, 1983 Aonex to OK 09/83 Implement adequate measures Ineffective\. Scbedule 2 to reduce disbursement delays by Septmber 30, 1983\. Annex to OK 10/83 Prepare analyis of procedures Ineffetive\. Sebedule 2 for processing loans In industrial sector by October 31,1983\. Annex to OK 10/83 Employ by October 1, 983 Ineffective Schedule 2 credit consultant to prepare trainig program for ACOs\. OIK\. Covemt complied with SOON: Compance expected In reasonable short time NYDs Not yet due ACTD Needs us of fornal remedies to bring about compliance RVSt Nees to be revsed  - 30 - A\.DNEX 2 Page 2 of 3 STATUS OF LEGAL COVENANS YUGOSLAVIA Kosovo Regional Development PIroject (Loas 2306-YU) Original Revised Aget \. Stlew Stts Date Date Description of Covenant Comments Ane to OK 10/83 Revew by October 31, 1M Ineffective\. Sehedule 2 congtraInts of provions of agrIcltural credh in individal etor\. OK Employ taning ocer Ineffecthv\. acptable to Boak by October 31, 19\. Furnlish lbial trainingInduae progat- \.o Bank for comments by December 31, 1983\. Sedbe OK 03/84 Submt withdral rests o11) B for frtilizer subloas bum previus year eigibb for refnawing\. Sub, La\. 2\.03 OK 10/83 Kosovo to hrisb feasible Implemted very welL AV"t\. studies on land consoliton in Vucitrm and GloCvb by Otdober 31, I983\. 2iM 09/83 Kosovo to estabish September CaneLd 30, 193 and maintain until closing date Media Strategy Conanittee project 2\.02 OK Federtion to employ Compkted Febrasy 1984\. agricultual etension and cooperation management consultants to assist In carrying out Pard D(2)\. 2\.05(a) OK 04/84 Federation to estabish Quality of Prorss Rprts good\. eauation system and provide annual evaluation report on project benefits 2\.05(b) 09/89 Federation to submit report on Not compled with\. execution/inItial operation/cost, etc, 6 months after closing date 2\.09 OK 10/83 Federation to arrange by Complied with Februaqy, 1985 October 31, 1983 evaluate changes In prices, subsidies and premiums in industrial sector\. OKi Coent complied with SOONs Compiance expected In reonable short tnme NYDs Not yet due ACS Nees us of formal remedis to bring about compliance RVSs Needs to be visd  - 31 - ANNEX 2 Page 3 of 3 STATUS OF LEGAL COVENANTS YUGOSLAVIA Kosovo Regional Devlopnwnt Projet (Loan 2306-YU) Original Revised Agr_emea Section Status Date Date Description of Covenant Comments Projed 3\.01(b) OK Federation to maintain Projct Appointed February 1913, the unit performed Unit headed by Project welL !Dl retor acceptable to Dah\. 4\.02(b) SOON 06/84 Federation to furisfb fnoncial Reports due Jane 19 no yet received statements/audit report 6 months after fiscal year\. Schedule OK 12/83 Federation to empby by Carried out July 1984\. par\. 3 December 31, 1983 13 speialists in various disciplines in Project Unit\. OKs Covenant complied with SOON: Compiance expected In reasonable short time NYDs Not yet due ACD Needs us of fomial remedies to bring about compliance RVSs Needs to be revised  AtiSYkIA~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ U -IPYTUAB 01 19382 \. AlJS5klA /~ /N-,R 21'O 2"'30 I~~~~A : t or, ROMANIA r-# Xl lr;ltl s; \ \ /s&£(EGOvIsAX , k X~~ Lesak ~J >> ovr oE ,>O>v r \ N \. 8 q\J o' ^> r \ \. ~~~Leposovl,c\. _, A;\.8ANtA L, J > E, R B I A \. , F \ 4(1 \ 1 ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~43-00- X _ ~~~S E R B /A "Z t;djro ,MON>TEN\EC,RO 6>ti VyXg/Vttrn ) t Balv > - > ? r Ca n < is~~~~~~~~~~~~~~bane > ; Durakovac lPra~~~~reluij %Mil evo I a - - \ , ,2ud~~~~~~uisavc ) ,_ N a ac bl S T INA; '- ,V ~~~~~~~~~~~v9 ,,, < ,~~~~~~~~~~~~~Koso0vska < ! ^9ptrone | \) Doganovict - Vitina 1L KSmenic Vo kk ev L an ke -4r3C Mali~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~\SOJ 42'30'- f UGO LAV Dickvic r-rnrreod 'st R - re rlxo l]ln VKln omue cue mh rfc | \. \., DuDnr o gan ovlr Geli ar _~~~~ ~ ~~~~~~~~~~~~~~~~ C E D I A

APPROVAL

P093165

Report No\.: 104190-MZ PROJECT PERFORMANCE ASSESSMENT REPORT MOZAMBIQUE MARKET-LED SMALLHOLDER DEVELOPMENT IN THE ZAMBEZI VALLEY PROJECT (IDA-41980, TF-091638) March 30, 2016 IEG Sustainable Development Independent Evaluation Group  ii Currency Equivalents (Annual Averages) during Implementation Currency Unit = new Mozambican Metical (Mt) 2006 US$1\.00 Mt 26\.23 2007 US$1\.00 Mt 23\.64 2008 US$1\.00 Mt 25\.35 2009 US$1\.00 Mt 28\.45 2010 US$1\.00 Mt 32\.39 2011 US$1\.00 Mt 26\.76 2012 US$1\.00 Mt 29\.70 2013 US$1\.00 Mt 30\.00 Abbreviations and Acronyms BP Bank Policy CAEIF Community Agricultural and Environmental Investment Fund CBO Community-based organization DNPDR National Directorate for the Promotion of Rural Development ERR Economic rate of return ESMF Environmental and Social Management Framework GDP Gross domestic product GEF Global Environment Facility ICR Implementation Completion Report IDA International Development Association IEG Independent Evaluation Group IEGPS IEG Public Sector Evaluation Unit M&E Monitoring and evaluation MLSDP Market-Led Smallholder Development Project OP Operational Policy PAD Project appraisal document PDO Project development objective PIU Project implementation unit PRSP Poverty Reduction Strategy Paper PPAR Project Performance Assessment Report 3ie International Initiative for Impact Evaluation  iii Fiscal Year Government: January 1 – December 31 Director-General, Independent Evaluation : Ms\. Caroline Heider Director, IEG Financial, Private Sector & Sustainable Development : Mr\. Marvin Taylor-Dormond Manager, IEG Sustainable Development : Ms\. Midori Makino Task Manager : Ms\. Lauren Kelly  v Contents Principal Ratings \. vii Key Staff Responsible\. viii Preface\. x Summary \. xi 1\. Background and Context\. 1 2\. Project Objective and Design, and Their Relevance \. 2 3\. Implementation \. 6 4\. Monitoring and Evaluation \. 7 5\. Achievement of the Project Objective \. 8 Inputs, Outputs, and Process-Related Interim Outcomes \. 9 6\. Efficiency \. 12 7\. Outcome \. 13 8\. Risk to Development Outcome \. 14 9\. Bank and Borrower Performance\. 15 Bank Performance \. 15 Borrower Performance \. 16 10\. Lessons \. 17 References \. 19 Annex A\. Basic Data Sheet \. 22 Annex B\. Supplementary Tables on Project Achievements \. 25 Annex C\. List of Persons Consulted \. 28 Annex D\. Group Interview Questions \. 31 Annex E\. Fieldwork Methodology \. 33 Annex F CAEIF Asset Verification Information from Beneficiary Assessment \. 36 Annex G\. Map of the Project and IEG Assessment Areas \. 64 This report was prepared by Lauren Kelly, senior evaluation officer, and Jack W\. van Holst Pellekaan, senior consultant, supported by Xavier Justino Muianga, Gaurav Relhan, and Kathryn Steingraber (consultants), who conducted fieldwork for the beneficiary assessment in November/December 2015\. The report was peer reviewed by Isabelle Tsakok and panel reviewed by John Eriksson (consultants)\. Vibhuti Narang Khanna provided administrative support\.  vi Tables Table 2\.1\. GDP per Capita by Province (2006) \. 4 Table 5\.1\. Number of CBOs with at Least One CAEIF-Funded Project \. 10  vii Principal Ratings Market-Led Smallholder Development in the Zambezi Valley Project (IDA-41980, TF-91638, P093165, P098040) ICR* ICR Review* PPAR Outcome Moderately satisfactory Moderately satisfactory Moderately unsatisfactory Risk to development outcome Significant Significant Significant Bank Performance Moderately satisfactory Moderately satisfactory Moderately unsatisfactory Borrower Moderately satisfactory Moderately satisfactory Moderately performance unsatisfactory * The Implementation Completion Report (ICR) is a self-evaluation by the responsible Bank department\. The ICR Review is an intermediate IEG product that seeks to independently verify the findings of the ICR\.  viii Key Staff Responsible Market-Led Smallholder Development in the Zambezi Valley Project (IDA-41980, TF-91638; P093165) Division chief/ Project Task manager/leader sector director Country director Appraisal Jeeva A\. Perumalpillai- Richard Scobey/ Frank Michael Baxter Essex/ Byamugisha Daniel Liborio da Cruz E Sousa Completion Pedro Arlindo Severin Kodderitzsch Mark Lundell Market-Led Smallholder Development in the Zambezi Valley Project (IDA-41980, TF-91638 P098040) Division chief/ Project Task manager/leader sector director Country director Appraisal Jeeva A\. Perumalpillai- Michel Wormser Michael Baxter Essex/ Daniel Liborio da Cruz E Sousa Completion Pedro Arlindo Severin Kodderitzsch Mark Lundell  ix IEG Mission: Improving World Bank Group development results through excellence in evaluation\. About this Report The Independent Evaluation Group assesses the programs and activities of the World Bank for two purposes: first, to ensure the integrity of the Bank’s self-evaluation process and to verify that the Bank’s work is producing the expected results, and second, to help develop improved directions, policies, and procedures through the dissemination of lessons drawn from experience\. As part of this work, IEG annually assesses 20-25 percent of the Bank’s lending operations through field work\. In selecting operations for assessment, preference is given to those that are innovative, large, or complex; those that are relevant to upcoming studies or country evaluations; those for which Executive Directors or Bank management have requested assessments; and those that are likely to generate important lessons\. To prepare a Project Performance Assessment Report (PPAR), IEG staff examine project files and other documents, visit the borrowing country to discuss the operation with the government, and other in-country stakeholders, and interview Bank staff and other donor agency staff both at headquarters and in local offices as appropriate\. Each PPAR is subject to internal IEG peer review, Panel review, and management approval\. Once cleared internally, the PPAR is commented on by the responsible Bank department\. The PPAR is also sent to the borrower for review\. IEG incorporates both Bank and borrower comments as appropriate, and the borrowers' comments are attached to the document that is sent to the Bank's Board of Executive Directors\. After an assessment report has been sent to the Board, it is disclosed to the public\. About the IEG Rating System for Public Sector Evaluations IEG’s use of multiple evaluation methods offers both rigor and a necessary level of flexibility to ad apt to lending instrument, project design, or sectoral approach\. IEG evaluators all apply the same basic method to arrive at their project ratings\. Following is the definition and rating scale used for each evaluation criterion (additional information is available on the IEG website: http://worldbank\.org/ieg)\. Outcome: The extent to which the operation’s major relevant objectives were achieved, or are expected to be achieved, efficiently\. The rating has three dimensions: relevance, efficacy, and efficiency\. Relevance includes relevance of objectives and relevance of design\. Relevance of objectives is the extent to which the project’s objectives are consistent with the country’s current development priorities and with current Bank country and sectoral assistance strategies and corporate goals (expressed in Poverty Reduction Strategy Papers, Country Assistance Strategies, Sector Strategy Papers, Operational Policies)\. Relevance of design is the extent to which the project’s design is consistent with the stated objectives\. Efficacy is the extent to which the project’s objectives were achieved, or are expected to be achieved, taking into account their relative importance\. Efficiency is the extent to which the project achieved, or is expected to achieve, a return higher than the opportunity cost of capital and benefits at least cost compared to alternatives\. The efficiency dimension generally is not applied to adjustment operations\. Possible ratings for Outcome: Highly Satisfactory, Satisfactory, Moderately Satisfactory, Moderately Unsatisfactory, Unsatisfactory, Highly Unsatisfactory\. Risk to Development Outcome: The risk, at the time of evaluation, that development outcomes (or expected outcomes) will not be maintained (or realized)\. Possible ratings for Risk to Development Outcome: High, Significant, Moderate, Negligible to Low, Not Evaluable\. Bank Performance: The extent to which services provided by the Bank ensured quality at entry of the operation and supported effective implementation through appropriate supervision (including ensuring adequate transition arrangements for regular operation of supported activities after loan/credit closing, toward the achievement of development outcomes\. The rating has two dimensions: quality at entry and quality of supervision\. Possible ratings for Bank Performance: Highly Satisfactory, Satisfactory, Moderately Satisfactory, Moderately Unsatisfactory, Unsatisfactory, Highly Unsatisfactory\. Borrower Performance: The extent to which the borrower (including the government and implementing agency or agencies) ensured quality of preparation and implementation, and complied with covenants and agreements, toward the achievement of development outcomes\. The rating has two dimensions: government performance and implementing agency(ies) performance\. Possible ratings for Borrower Performance: Highly Satisfactory, Satisfactory, Moderately Satisfactory, Moderately Unsatisfactory, Unsatisfactory, Highly Unsatisfactory\.  x Preface This Project Performance Assessment Report (PPAR) looks at the Mozambique Market-Led Smallholder Development in the Zambezi Valley Project\. The project, cofinanced by the Global Environment Facility, was aimed at increasing the incomes of poor, small-scale farmers in five districts in three provinces in the Zambezi Valley through improved agricultural support services, public and on-farm investments, and sustainable land management\. The World Bank approved its contribution to this project on June 20, 2006, with an International Development Association (IDA) credit of US$20 million\. The Global Environment Facility contributed US$6\.2 million\. The government made a commitment of US$0\.3 million, and beneficiaries (farmers) were expected to make an in-kind contribution of US$0\.9 million\. Hence, the total original cost of the project was appraised at US$27\.4 million\. The project closed in September 2013\. The actual total cost of the project was US$28\.42, due mainly to an exchange rate appreciation between the SDR in terms of the U\.S\. dollar\. The report was prepared by Jack W\. van Holst Pellekaan, senior consultant, under the guidance of Lauren Kelly, senior evaluation officer, IEG Public Sector Evaluation Unit (IEGSD)\. The field team was led by Ms\. Kathryn Steingraber and was supported by Mr\. Xavier Muianga and Mr\. Gaurav Relhan\. The team undertook a mission to Mozambique between November 20 and December 12, 2015\. Methodology This assessment utilized a mixed-methods approach that included a desk review of documentation (such as appraisal, supervision, and completion reports; the mid- term review; and external project assessments); interviews with key stakeholders, including Bank and project staff and other donor partners; group and individual interviews with subproject recipients and members of the project-financed rural savings and lending groups (see the expanded methodology, including a description of the sampling frame, in appendixes D and E); and an asset verification exercise of a sample of the public and private assets supported by the project (appendix F)\. The Independent Evaluation Group (IEG) also conducted semi-structured interviews with other relevant stakeholder groups—traders, shopkeepers, and technicians\. IEG is grateful to the government of Mozambique and the World Bank country staff for facilitating a high level of access to the project and its associated sites\. IEG thanks the many district administrators and their staff for the generous amount of time and attention that was given to this review\. IEG received excellent administrative and coordination support from Clarisse Nhabangue in the World Bank Country Office in Maputo\. Following standard IEG procedures, a copy of the draft PPAR was sent to the relevant government officials and its agencies for their review and feedback, and no comments were received\.  xi Summary This document is a Project Performance Assessment Report (PPAR) of the Mozambique Market-Led Smallholder Development in the Zambezi Valley Project (MLSDP)\. The project was approved in June 2006, 15 years after the cessation of the country’s brutal civil war, which caused massive economic upheaval and destruction of rural and agricultural infrastructure in the Zambezi Valley\. Following the formation of a stable representative government in 1994, Mozambique’s agricultural sector and the econom y as a whole started to grow rapidly\. Project Objective and Financing\. The project was designed, in an extended post-conflict context, to help poor rural farmers in the Zambezi Valley to increase their productivity and incomes and to connect to wider opportunities within the emerging rural economy\. The project development objective was “to increase the income of smallholder farmers in the project area\.” The total appraised cost of the project was US$27\.4 million, including a US$20 million International Development Association (IDA) credit, a US$6\.2 million contribution from the Global Environment Facility, US$300,000 from the government of Mozambique, and US$900,000 of in-kind support from the project beneficiary farmers\. The actual total cost of the project was US$28\.42 million, due mainly to an exchange rate appreciation between the SDR in terms of the US dollar\. Project Performance The relevance of the project’s development objective to Mozambique’s development strategies and the country assistance strategies was—and remains—high\. The project was located in some of the poorest districts of the poorest provinces in Mozambique\. The goal of increasing agricultural incomes of smallholders is also in line with the government’s Poverty Reduction Strategies, its Decentralization Policy and Program, the Mozambique Agenda 2025, and it’s Five-Year Development Program (2004–09)\. The government’s recent Strategic Plan for Agricultural Development places a high priority on stimulating the structural transformation of the agriculture sector\. The project’s objective was relevant to the Bank’s FY04-07 Country Assistance Strategy and to the FY12–15 Country Partnership Strategy (which, among other things, aimed to support decentralization and reduce poverty)\. The relevance of the project’s design was modest\. The project’s results framework was inadequate, since it lacked causal chains to show how the project’s activities would lead to intermediate outcomes and the development objective\. For a project designed to build service delivery capacity in one of the world’s poorest countries, the design choice of using country systems was premature and proved to be prone to mismanagement\. The project lacked robust and clear participation criteria\. This—coupled with the need to distribute capital-intensive infrastructure that required skills and access to labor and land—resulted in elite capture of these project assets\. The project also overestimated famers’ willingness to sustain the project-supported assets within an environment characterized by weak and risky markets for the agricultural outputs\. Efficacy is rated modest\. While a number of the project’s outputs were produced, the project fell short of achieving its development objective of increasing the agricultural income of smallholder farmers relative to non-project farmers\. According to project assessment data,  xii the average increase in household income for the project beneficiaries was 36 percent higher than the average recorded at baseline\. However, for the control group, the average increase in household income was 69 percent compared with the average income recorded at baseline\. Overall, the data examined by IEG reveal that agricultural productivity increased for the treatment area and that farmers achieved additional crop diversity through the provision of enhanced technical assistance and the distribution of improved agricultural inputs and knowledge about improved techniques\. But the project failed to tackle the drivers of poverty in the region related to the composition and nature of the agricultural input and marketing chains, which were unstructured, asymmetric, and highly unfavorable for the rural farmer\. There was no evidence that the project supported sustained increased marketing opportunities for the target groups\. Project interventions—such as the support for rural savings and lending schemes—helped to smooth consumption and, according to beneficiary interviews, were a vital tool used to respond to shocks (flooding, for example)\. But the savings and lending schemes in this project did not include seed capital, and expectations were low regarding their ability to support investments or increased productivity\. Rather, savings schemes were designed to teach financial literacy and funds were allowed to be redistributed periodically, rather than revolved among members\. Public infrastructure was built, and support for rural roads can be linked to the overall modest outcome, but there is evidence that the quality of rural road construction and small bridges was poor, and that there is insufficient maintenance\. The construction of individual grain silos can also be linked to the overall modest outcome, because they provided some beneficiaries with an opportunity to earn higher agricultural income by selling grain in the off-season\. But many beneficiaries interviewed noted that they used the small silos mainly for smoothing consumption during the lean season\. Other investments, such as the design and financing of markets, showed severe weaknesses with regard to their placement and the opportunity for increased profitability (compared with roadside sales)\. Gender was not considered in the design of the Community Agriculture and Environment Investment Fund (CAEIF), but women were represented well in the rural savings and lending groups\. Efficiency is rated modest\. Undocumented estimates of yields and commodity prices were used to estimate the economic rate of return of 18 percent for the small enterprises supported by the project, which is above the 15 percent estimated at appraisal\. However, the estimates at project close do not bear this out in relation to the overall outcomes achieved by the project\. Other aspects of the project proved highly inefficient: project coordination and monitoring costs increased by 92 percent over the course of the project, owing to management inefficiencies (failed baseline surveys, changing of staff)\. While a decision to decentralize project management to the districts was relevant and proved effective, the management of this process ate away at the funds originally designed to support subproject investments\. The overall outcome of this project is rated moderately unsatisfactory on the basis of the high relevance of the project’s objective, the modest relevance of its design, and its modest efficacy and efficiency\.  xiii Bank performances is rated moderately unsatisfactory\. For the Bank, the project’s quality at entry was rated moderately unsatisfactory because of inadequate attention to the lessons of previous community-driven development approaches\. These lessons would have argued for additional time and attention to targeting, group formation, capacity building, and decision-making capabilities\. Insufficient attention was given to the choice of consultants as community facilitators—for example, better behavior was demonstrated by the consultants chosen to support the rural savings and lending schemes than by the firm selected to support the Community Agricultural and Environmental Investment Fund (CAIEF)\. There was also insufficient attention given to lessons learned from marketing approaches, which require an understanding of culture and behavior, both with regard to individual capacity and policy making\. There is no evidence that project design at entry was equipped to tackle the unstructured nature of the value chains and to support the types of marketing interventions that could level the playing field for small farmers\. The centralization of project management in Maputo also caused severe implementation delays\. Supervision was rated moderately satisfactory\. It neglected issues related to monitoring and reporting and the difficulties created by using country systems early on (deemed premature in the project design section)\. But efforts to decentralize implementation after the mid-term were very responsive to the needs of farmers, and these efforts can be directly linked to the outputs achieved, albeit insufficient, with regard to outcomes\. Borrower performance is rated moderately unsatisfactory\. Government performance was rated moderately unsatisfactory because of the substantial delays in formalizing the restructuring agreed to at the mid-term review\. An official request was not made until April 2011, which was over a year after the review\. Subsequent protracted discussions about the implementation of the changes contributed to a further delay of 11 months before the restructuring was made effective\. The performance of the implementing agency was rated moderately satisfactory\. Lessons ï‚ Rural institutions can play a key service delivery role in the absence of strong state capacity, but sustained support (throughout and beyond the project period) is needed to ensure good governance and the capacity to provide services to the poor\. In the absence of this support, there is a risk that such institutions may favor some participants over others, may neglect attention to gender and other vulnerable groups, and may lack the capacity to deliver sustained services after project close\. The quality of sensitization and training, grounded in local culture, is key to enabling equitable and sustained service delivery\. In the case of the MLSDP, IEG found that the poor quality of facilitation services undermined the ability of the rural poor to benefit more from the productive investments made by the project and to engage in productive activities after project close\. ï‚ Social accountability tools are important elements of a project intended to be implemented through village-level organizations\. Monitoring and evaluation systems that include social accountability assessments, including village-level scorecards, can help the project team (client counterpart and the Bank), identify and address underperforming areas, the under provision of services, the relative strength of rural organizations, and other behavioral issues that may be undermining efficacy\.  xiv ï‚ A market-based approach to developing the smallholder sector requires an up-front analysis of skills, knowledge, and capacity in order to engage in various value chain activities, such as marketing\. In Mozambique, owing in part to the nascent nature of the country’s market-led economy, skills in areas such as efficient marketing were rare in many of the district-level administrations\. ï‚ Simple technologies work best in poor rural communities\. The introduction of complex technology into poor farming areas is risky and unlikely to succeed, because the maintenance of complex systems is almost always unaffordable for poor smallholder farmers\. ï‚ Behavior and incentives, both individual and at the policy level, should be placed at the heart of programs geared toward supporting sustainable land management\. In the case of this project, land tenure security and land rights are central to a farmer’s decision to engage in sustainable land, soil, and water management practices, and yet the project tended to focus more on the technical fixes\. Marvin Taylor-Dormond Director, Financial, Private Sector and Sustainable Development Department  1 1\. Background and Context 1\.1 This is a Project Performance Assessment Report (PPAR) of the Market-Led Smallholder Development Project (MLSDP) in Mozambique\. The project was approved by the World Bank’s Board in June 2006, roughly 15 years after Mozambique reached a peace agreement to end its brutal civil war in April 1992\. The war caused extreme destruction to Mozambique’s economy\. It wreaked particular havoc on the agricultural sector in the Zambezi Valley\. This is where some of the fiercest fighting took place because of its proximity to what was then Rhodesia, which provided the Mozambique Resistance Movement with substantial assistance during the war\. Following the formation of a stable representative government in 1994, the agricultural sector and the economy as a whole started to grow rapidly\. 1\.2 Between 1994 and 2004, the total gross domestic product (GDP) grew by 8 percent annually, albeit from a very low base\. During this period, the national poverty headcount index fell from 69 percent in 1996 to 54 percent in 2002, and by 2002/03, rural poverty had declined, from 71 percent in 1996/97 to 55 percent (Republic of Mozambique 2006, table 2)\. The conditions for income growth were created by economic reforms initiated by the government, as well as the government’s success in maintaining national peace and stability\. 1\.3 The agricultural sector was an important contributor to overall economic growth\. This contribution was primarily the result of the introduction of more progressive economic policies, which led to a departure from the collectivization of agricultural production, among other things, and the post-conflict resettlement of refugees in the rural areas\. The resulting expansion in the availability of land and labor led to a rapid increase in areas harvested, which prompted agricultural production to grow by an average of 6\.8 percent per year from 1992 to 1997, and 4\.6 percent per year between 1997 and 2003 (World Bank 2006b, p\. 7)\. 1\.4 At design, smallholder farm enterprises in Mozambique as a whole accounted for 99 percent of all rural households and provided 95 percent of agricultural GDP\. Most of the smallholders were subsistence farmers with an average of 1\.4 hectares of cultivated land per household\.1 The traditional low-input farming practices resulted in generally low yields compared with neighboring countries with similar agro-ecological potential, such as Tanzania and the north of South Africa\. 1\.5 Smallholders, particularly in the Zambezi Valley, had similar characteristics\. Overall, poverty rates throughout the project area at appraisal varied from a high of 66 percent in the Mutarara District in Tete Province to a low of 45 percent in Meringue and Chemba Districts in Sofala Province\. Farmers were also highly vulnerable to extreme climatic conditions, which alternated between frequent droughts and floods\. Unsustainable exploitation of natural resources as a result of slash-and-burn agricultural systems and the changing climatic patterns were likely to aggravate land degradation and threaten future productivity in the Zambezi Valley\. Despite these challenges, the recovery of the agricultural sector in the 1990s at the national level provided hope that the sector would continue to grow and that smallholder incomes could rise\. This led to the design of the Market-Led Smallholder Development Project in the Zambezi 1 Rights to land for farmers typically encompass a much larger area than the cultivated area in the Zambezi Valley because of traditional user rights associated with “shifting agriculture \.”  2 Valley, which was intended to increase average farm incomes and, at the same time, address the underlying environmental challenges\. The project area involved about one million people\. Market-Led Smallholder Development in the Zambezi Valley Project Cost, Financing, and Important Dates 1\.6 Project cost and financing\. The World Bank approved its contribution to this project on June 20, 2006, with an International Development Association (IDA) credit of US$20 million\. The Global Environment Facility (GEF) contributed US$6\.2 million\. The government made a commitment of US$0\.3 million, and the beneficiaries (farmers) were expected to make an in- kind contribution of US$0\.9 million\. Hence the total original cost of the project was appraised at US$27\.4 million\. The actual total cost of the project was US$28\.42 million, due mainly to an exchange rate appreciation between the SDR in terms of the U\.S\. dollar\. 1\.7 Dates\. The project was approved by the World Bank Board in June 2006, and it became effective in December of the same year\. The project underwent a level II restructuring in May 2012, when the original IDA credit closing date of March 31, 2013, was extended by six months to align with the GEF project closing date\. This was done to reflect the full integration of the IDA and GEF activity implementation on the ground and to prevent activities from being terminated in the middle of the agricultural season\. 2\. Project Objective and Design, and Their Relevance Project Objective and Its Relevance 2\.1 IDA credit objective and project development objective (PDO) indicators\. The PDO, as stated in the credit agreement, was “to increase the income of smallholder farmers in the Project Area\.”2 The project focused on selected districts in the Zambezi Valley in the provinces of Zambezia, Tete, and Sofala\. The project appraisal document (PAD) explained that increased incomes would be achieved not only by direct support to smallholder groups and other supply chain participants, but also through the strengthening of capacity at the local level to undertake and manage service delivery within the context of the government’s decentralization policy\. The key PDO indicator was “to achieve 30 percent average increase in agricultural income of participating project beneficiaries”— smallholder farmer households—including self- consumption, compared with nonparticipating households, by the end of the project\.3 2\.2 Global Environment Facility objective\. The project’s global environment objective, as stated in the Global Environment Facility (GEF) Agreement, was the same as the PDO: “to increase the income of smallholder farmers in the project area” (GEF 2007, schedule 1)\. A broader statement of intent, located in the PAD, goes further, to say that the GEF grant would be 2 The interpretation of this objective is reflected in the definition of its indicator in Annex 3 of the PAD (World Bank 2006b) and in the ICR’s data sheet (World Bank 2014)\. The PAD states that the PDO indicator is “30% average increase in agricultural income—including self-consumption\.” The ICR defines the PDO indicator as “30% average increase in agricultural income of participating beneficiary households (compared with nonparticipating households)\.” 3 Neither the project’s credit agreement (World Bank 2006a) nor the PAD (World Bank 2006b) made it clear whether the increase in income compared with nonparticipating households was intended to be in real terms\. At the same time, footnote 5 on page 11 of the ICR for the project asserts (without any apparent authority) that the 30 percent income increase was intended to be in nominal terms\.  3 used to “limit land degradation, provide predictive capacity for assessing vulnerabilities to climate change, and to improve the ecosystem's resilience towards climate change” (World Bank 2006b, p\. 11)\. 2\.3 Relevance of the project development objective was and remains high\. The relevance of the project’s objective to the Bank’s Country Assistance Strategy for FY04-07 was high, since one of its goals was to build government capacity within the framework of decentralization and reduce poverty through rapid growth based on increased yields (resulting from improved inputs and technologies) in the agricultural sector\. The project supported the first and second pillars of the CAS objectives: “raising crop yields through farmers’ use of improved technologies” and “an improved structure of service delivery through local authorities\.” The project’s objective continues to be highly relevant to the World Bank Group’s current Country Partnership Strategy for Mozambique for fiscal 2012–15, which cites the need for enhanced agricultural productivity and increased employment opportunities in the economy\. With respect to the environment, the current Country Partnership Strategy focuses on mitigating the impacts of climate change\. 2\.4 The relevance of the PDO to the government’s past and current policies and programs is also high\. Increasing incomes of smallholders was in line with the government’s Poverty Reduction Strategies I and II,4 its Decentralization Policy and Program, Agenda 2025, and Five- Year Program (2004–09)\. The government’s Strategic Plan for the Development of the Agrarian Sector (2011–20) placed a high priority on stimulating the structural transformation of agriculture\. This involved increasing agriculture sector productivity, improving the efficiency of labor in agriculture, thereby releasing labor for productive engagement in areas such as rural towns and small cities, as well as in the rest of the national economy\. This would establish the conditions for integrating agriculture’s labor resources into the rural nonfarm economy\. It was recognized that structural transformation of agriculture would require rural producers to be better organized through public investment and more effective rural institutions and organizations\. 2\.5 More recently, agricultural growth was emphasized again as a priority for the government when it released the National Agriculture Investment Plan in June 2015\. The president of Mozambique described the plan as “a central instrument to attract investment to the agriculture, fisheries and livestock, agricultural extension and research of simple processing technologies, food conservation and trade of domestic production” (Republic of Mozambique, Ministry of Agriculture and Food Security 2015)\. With the plan, the government recognized that targeted investments in rural development are warranted to provide the basis for growth in the rural nonfarm economy, and hence reduce the urban-rural income divide\. The plan underlies the continued relevance of the project\. 4 Referred to as the “Action Plan for the Reduction of Absolute Poverty I and II” (PARPA I and II) (Republic of Mozambique 2006), that became the defining economic and social policy framework for the Government\.  4 The project was located in a number of the poorest districts in some of the poorest provinces in Mozambique: Morrumbala and Mopeia Districts in Zambezia Province, Chemba and Meringue Districts in Sofala Province, and in the Mutarara District in Tete Province\. Table 2\.1 shows the average per capita GDP in all provinces in Mozambique in 2006, when the project was approved\. In that year, the average daily per capita GDP levels were $0\.8 and $0\.9 in Zambezia and Tete Provinces, respectively, and $1\.4 per day in Sofala\. Table 2\.1\. GDP per Capita by Province (2006) GDP per capita Region/provinces/project districts (US$) Northern Region 285 Niassa 242 Cabo Delgado 230 Nampula 320 Central Region 292 Zambezia (project in Morrumbala and Mopeia Districts) 304 Tete (project in Mutarara District) 327 Manica 224 Sofala (project in Chemba and Meringue Districts) 517 Southern Region 794 Inhambane 463 Gaza 286 Maputo Province 1,307 Maputo city 1,226 Mozambique 418 Source: National Statistics Institute\. Project Design and Its Relevance 2\.6 Project activities\. The project had four components or groups of activities: (i) community group organization and local institutional strengthening; (ii) agricultural production and marketing development; (iii) community agricultural and environmental investment funds; and (iv) project management\. They are briefly described below: (i) Component 1: Community Group Organization and Local Institutional Strengthening (planned: IDA, US$7\.6 million; GEF, US$0\.9 million/ actual: IDA, US$5\.9 million; GEF, US$0\.8 million)\. This component provided financing for the establishment, capacity building, development, and ongoing support for community- based organizations (CBOs), rural financial services (savings and loan groups), and capacity development for district administrations in the five districts covered by the project\. (ii) Component 2: Agricultural Production and Marketing Development (planned: IDA, US$3\.9 million; GEF, US$2\.5 million/actual: IDA, US$3\.8 million; GEF, US$2\.5  5 million)\. This component provided financing for agribusiness and market development, strengthening of extension services, applied research, training and demonstrations (such as demonstration plots testing different varieties of maize), and improved agricultural and agroforestry systems\. (iii) Component 3: Community Agricultural and Environmental Investment Fund (planned: IDA, US$5\.9 million; GEF, US$1\.7 million/actual: IDA, US$4\.4 million; GEF, US$1\.5 million)\. This component provided grants financed by the Community Agricultural and Environmental Investment Fund (CAEIF) for agriculturally related public infrastructure (CAEIF-1), small-scale agricultural investment (CAEIF-2), and sustainable land management (CAEIF-3)\. Funds were mainly used for civil works, consultants, equipment, and materials for building infrastructure, as well as farming and agribusiness investments\. (iv) Project Management (planned: IDA, US$2\.0 million; GEF, US$0\.4 million/actual: IDA, US$4\.1 million; GEF, US$0\.5 million)\. This component provided financing for project management and coordination, as well as monitoring and evaluation (M&E)\. 2\.7 Project restructuring\. The project undertook a level II restructuring—approved by Bank management—on May 24, 2012\. The restructuring had no impact on the project’s objective, but it did lead to changes in some indicators and management arrangements\. The restructuring reduced the targeted number of savings and lending group members from 12,000 to 6,000\. It moved many members of the project management team from Maputo to the project area\. And it reflected the remapping of the project-implementing agency, the National Directorate for the Promotion of Rural Development (DNPDR), from the Ministry of Planning and Development to the Ministry of State Affairs\. The project’s closing date was extended to September 30, 2013\. 2\.8 Project design\. The project was designed as a community-driven development program of service delivery\. It was designed to support the country’s decentralization efforts, with a focus on delivering services to the poor rural smallholder farmers in the central region of the country\. It was intended to help build the capacity of the district administrations and their staff to better deliver agricultural services and technical assistance, especially to remote, underserved farming communities\. With a focus on capacity building, it was the first project in Mozambique to have been implemented through its own country systems, including financial management, procurement, and monitoring systems\. 2\.9 This assessment rates the relevance of design as modest for several reasons, explained in the following sections\. 2\.10 Use of country systems\. The decision to design a program using country systems in 2006 was premature\. Although the focus on capacity building at the district level was correct, the effective implementation of the project—and ultimately the successful achievement of the project objective—required a different system of support for many of the project design elements\.5 Project design assumed too readily that the district-level capacity built through the government’s Decentralization Policy and Program and the Bank-supported Decentralized Planning and Financing Project had prepared the districts for the management of a complex 5 The ICR (World Bank 2014, para\. 19) pointed out, “design should have considered a longer -term approach to institutional capacity building, particularly in the situation of Mozambique (as a post-conflict state)\.”  6 community development project\. This led to an over-reliance on the country’s decentralization framework, which was too recent a construction to be fully in place and operational\. In particular, project design overestimated existing capacity at the district and local levels (in terms of procurement, financial management, and M&E), thereby adversely affecting progress during the first years of implementation\. Although an assessment of capacity at the project formulation stage recognized that institutional capacity at the district level was weak, insufficient project activities (for example, further capacity building) were included to address this weakness (IEG 2015, section 3b)\. As a general principle, project implementation units (PIUs) are not favored, because they seldom lead to strengthening the capacity of government institutions\. In this case, however, a separate PIU in place from the start could have been appropriate, because of the limited capacity of the Ministry of Planning and Development staff to manage a large project in a remote region\. 2\.11 District administrations had difficulties tackling the substantial challenges, such as forming sustainable CBOs and savings and loan groups\. To deal with these problems, the project brought in consultants to undertake the tasks and to handle the day-to-day management of extension support to farmers and support to the implementation of the CAEIF\. At the central and district levels, the DNPDR was not staffed with project management specialists, it was too remote from the project area, and district administrations had inadequate experience in managing project implementation\. A specialized PIU in the DNPDR, headed by a manager with specialized project management staff and competent local office in the project area, would have been a far more relevant design choice\. 2\.12 Weak planning and a lack of a causal chain\. The project design failed to articulate a coherent theory of change, supported by a causal frame that would have linked the activities to the anticipated intermediate outcomes, in a manner that would have allowed attribution to the project\. This design weakness was pointed out by the mid-term review, but it was not until 2012, just before project close, that efforts were made to retrofit a coherent, populated results frame to the project activities\. 2\.13 The project also lacked clear beneficiary selection criteria\. Criteria for beneficiary selection were not included, for example, in the Project Implementation Manual\.6 As a result, district-level staff had a difficult time identifying groups and individuals that were capable of qualifying for the more capital-intensive subprojects\. Because of the need for a significant in- kind contribution, access to land, and, in some cases, labor, these major assets were found to be awarded to the more capable and influential members of the targeted areas\. A robust stakeholder analysis or political economy analysis could have helped to identify a more appropriate subproject menu with regard to capacity, and could have provided advice on more appropriate methods of distribution\. 3\. Implementation 3\.1 The project was designed to be implemented in two phases over six years (World Bank 2006b, p\. 12, para\. 3)\. The first phase was implemented in the districts of Mutarara and Morrumbala, in the provinces of Tete and Zambezia, respectively\. These first 2 districts had a combined population of 500,000, with an average population density of 25 persons per square kilometer, living within 8 administrative posts and 21 localities\. The second phase was implemented in Mopeia and Meringue Districts in Sofala province, and in the district of 6 The PAD refers only to a proposed 20,000 beneficiaries in the project area (Annex 3, p\. 45)\.  7 Chemba, in Zambezia\. Combined, the second-phase districts had a total population of 250,000 and a low population density of 12 persons per square kilometer\. Poverty rates were—and remain— high throughout the project area, ranging from 66 percent in Mutarara District at the time of design to 45 percent in Sofala District\. Literacy rates were some of the lowest in the country, averaging 13 percent across the project area\. Safeguards 3\.2 Environmental safeguards\. This project was rated category B for environmental assessment at appraisal\. Actual project investments to be financed by the CAEIF were designed to be demand-driven and could only be determined during project implementation\. The project prepared an Environmental and Social Management Framework (ESMF)\. In addition, four World Bank safeguard policies were triggered: Environmental Assessment (OP/BP 4\.01), Pest Management (OP/BP 4\.09), Involuntary Resettlement (OP/BP 4\.12), and Projects on International Waterways (OP/BP 7\.50)\. The ESMF contained screening procedures for determining if a resettlement plan would be required for any particular investment according to the Resettlement Policy Framework that was prepared according to the requirements of the OP4\.12\. Both ESMF and the Resettlement Policy Framework were disclosed in the project districts and provinces and in the Bank’s Infoshop\. The OP/BP 7\.50 was triggered because of the possible water withdrawals for the proposed small-scale irrigation projects implemented in the Zambezi River Basin, including the Shire River, a major tributary of the Zambezi River\. Notifications were sent to all riparian countries, and none of them objected to the project by the deadline of May 15, 2006\. None of the project activities implemented under the project have had any significant adverse social and/or environmental impacts or risks\.7 3\.3 The environmental safeguards coordinated during project implementation included: the introduction and implementation of the districts’ land use plans, which were preceded by series of technical trainings on territorial planning aimed at local traditional leaders and government officials\. In addition, numerous training activities on sustainable land management/natural resource management were also carried out for various target groups\. Partnerships with community radio services were pertinent in raising community awareness of the need to comply with environmental safeguards standards\. For example, an increasing number of lower-income and vulnerable groups were involved in the use of improved honey production techniques using box hives, which led to significant reduction of uncontrolled bush fires (World Bank and Republic of Mozambique 2013)\. According to project documentation, there were no major negative social impacts and conflicts as a result of the project’s implementation (World Bank 2014, para\. 27)\. 4\. Monitoring and Evaluation 4\.1 Design\. M&E was to be implemented at three levels: (i) internal monitoring by the project’s district facilitator; (ii) process monitoring by an independent contractor reporting directly to the Inter-Ministerial Steering Committee; and (iii) impact evaluations carried out at the time of the mid-term review and at project completion\. A baseline survey of the project area was to be carried out prior to credit effectiveness\. It would include remote sensing and geographic information systems capturing baseline and diagnostic information on natural 7 Compliance with the safeguards was confirmed in the ICR (World Bank 2014), para\. 26, and in the DNPDR/World Bank Joint Mid Term Review (World Bank 2010), April-June 2010, p\. 4, para 9\.  8 resource endowments, villages and communities, and infrastructure and establish baselines for project indicators\. According to the PAD, these surveys were fully budgeted (World Bank 2006b, p\. 20)\. 4\.2 Implementation\. To implement the M&E system, DNPDR hired a consultant at the start of the project to establish an initial baseline\. This process was discontinued, reportedly because of the lack of data at the district level\. A second attempt was made to develop a database for the project\. The project management unit hired a consultant who reportedly designed an interactive management information system that linked the unit to the districts\. The exercise included training of national- and district-level staff in M&E\. However, in spite of this exercise, neither the originally planned baseline nor the needed data were collected and utilized in a meaningful way by the project team\. A third attempt was made during the life of the project to construct a project baseline, beginning in April 2011, after the mid-term review\. But the firm hired was found to have insufficient capacity to carry out the task and the contract\. Eventually the DNPDR, in collaboration with the International Initiative for Impact Evaluation (3ie) and the International Food Policy Research Institute, retained the National Institute of Statistics, which, after 15 months of training, undertook a household survey in the project area that has been described as the “midline survey\.” The funds available for the earlier planned baseline survey were used to finance the National Institute of Statistics again to undertake a second household survey in 2013, referred to as the end-line survey\.”8 4\.3 In order to measure progress toward the achievement of the project’s development objective, the Bank team, in partnership with the Bank’s Development Impact Evaluation team, reconstructed the baseline values and “final” average smallholder incomes in the project area and in districts not benefiting from the project\. 4\.4 Use of the M&E data\. There was no evidence uncovered by this PPAR that M&E activities, such as “Process monitoring (which) will be undertaken by an independent contractor reporting directly to the Inter-Ministerial Steering Committee,” as planned in the PAD (World Bank 2006b, p\. 20), or “community-based M&E as a tool for building the capacity of associations to implement their plans and monitor their impact,” also in the PAD (p\. 21) were implemented\. The Implementation Completion Report (ICR) (World Bank 2014) noted that “The M&E capacity challenges affected the establishment of an effective M&E system for the project\. The capacity for integrated planning was also highly constrained and this led to inconsistencies across districts in the implementation of project activities” (para\. 24)\. 4\.5 Overall M&E is rated modest\. 5\. Achievement of the Project Objective 5\.1 Both the IDA- and GEF-financed operations had the same objective: “to increase the income of smallholder farmers in the Project Area\.” This section will assess the project’s achievements in terms of outputs (including intermediate outcomes) and final outcomes\. 5\.2 The project modestly increased the incomes of smallholder farmers in the project area\. While a number of the project’s planned outputs were produced, the project fell short of achieving its development objective of increasing the agricultural income of smallholder farmers 8 For sources see the ICR for the MLSDP (World Bank 2014), paras\. 23 and 24; and Kondylis, Mueller, and Zhu (2014), Appendix B: Sample Design; Grantee Final Report accepted by 3ie, August 2014\. This paper was subsequently published as World Bank Policy Research Working Paper No\. 700\.  9 over those of non-project farmers\. According to data collected by the end-line survey, the average increase in household agricultural income for the project’s treatment group was 36 percent higher than the average agricultural income recorded for that group at the reconstructed baseline\. However, for the control group, the average increase in household agricultural income was 69 percent, compared with the average agricultural income recorded at the reconstructed baseline\. While the reported 36 percent increase exceeds the PDO target of 30 percent, no explanation is provided by the data collected at end-line as to why the treatment districts performed worse on average than the control\.9 It is also necessary to note that by achieving the PDO target, the project beneficiaries would have still been categorized as poor, since the 30 percent target increase would not be sufficient to propel the target beneficiaries over the internationally agreed poverty line of US$1\.25 a day as of project close in 2013\. Inputs, Outputs, and Process-Related Interim Outcomes 5\.3 Building agricultural extension capacity\. At appraisal, the government of Mozambique stressed the need to improve, among other things, the performance of its agriculture extension services (World Bank 2006b, p\. 8)\. The project supported the provision of extension services to farmers in the project area by increasing the number of extension officers available at the administrative posts and by supporting the construction of houses (33) located in the districts, close to the farmer populations\. The project also financed the purchase of motor bikes and petrol and provided other operational support\. 5\.4 IEG interviewed many of the district-level staff involved in the delivery of these services, and in the absence of staff, interviewed 365 project beneficiaries located across 3 of the 5 target regions\.10 While the quality of the services was found to have varied across parts of the project area, there was uniform agreement by project beneficiaries that the availability and quality of the extension services provided under the project was superior to the services provided prior to the project and after the project ended\. Farmers interviewed by IEG attested to being provided more and better information on new cropping techniques under the project; they also received improved seed and fertilizer\. 5\.5 The extension technique utilized was the Training and Visit System\. It involved engaging a community facilitator and employed a trainer-of-trainers approach\. Community facilitators were given productivity kits that included a bicycle, boots, hoes, and other technical assistance provisions\. An impact evaluation of the Training and Visit system in Mozambique, conducted by the Bank’s Development Impact Evaluation Team, examined the efficacy of the practice in relation to the sustainable land management goals of the project\. The impact evaluation found that the system was effective in influencing the behavior of the community facilitator (in such areas as contour ploughing and micro catchments), but that there was a statistically insignificant impact on farmers’ (other than the community facilitator) adoption of sustainable land management techniques promoted by the project\. 11 9 These results are based on recalculations performed by IEG\. See Table 1 of the ICR (World Bank 2014)\. IEG identified errors with regard to different income baselines and transcription errors for incomes in some districts at the end of the project, compared with the baseline and end-of-project district incomes shown in the project's Implementation Supervision Report, submitted in October 2013\. 10 See appendix E for a description of the methodology used\. 11 Kondylis, Mueller, and Zhu 2014\. This experience is consistent with other research on the impact of the T&V extension system\.  10 5\.6 Building Resilient Rural Institutions for Sustained Service Delivery\. Against a target of 660 organizations, the project helped form 733 CBOs\. Against a target of 600, 473 groups received at least one asset from the CAEIF\. The actual assets awarded per district, compared to the targets, are listed below (Table 5\.1) Table 5\.1\. Number of CBOs with at Least One CAEIF-Funded Project District Baseline Target Result Increase over target (number) (percent) Morrumbala 0 288 141 49 Mutarara 0 132 107 81 Mopeia 0 68 85 125 Chemba 0 59 74 125 Meringue 0 53 66 125 Project Area 0 600 473 79 Source: IEG 2015, Annex 2\. 5\.7 The beneficiary assessment conducted by the PPAR was designed to provide information about the quality of group formation, decision-making with regard to asset allocation, the sufficiency of allocations with regard to reported welfare impacts (non- quantified), and the sustainability of the organizations and assets\. Group interview questions are attached in appendix D of this report\. The sampling frame for the Beneficiary Assessment can be found in appendix E, and the asset verification exercise findings in appendix F\. 5\.8 IEG found that the CAIEF distributed a mix of public and private sector goods to both groups (CBOs) and to individuals (see appendix B for summary of all investments financed by the CAEIF)\. Overall, the effort was undermined by a lack of transparent criteria for beneficiary participation\. The project lacked a clear and transparent system of identifying and targeting beneficiaries and assessing their capacity\. It also connected strategic linkages to the broader rural economy\. A program of this nature, that invests in strengthening social capital and offers start-up investment, should ideally be structured as an adjustable program loan, so that capacity can be reinforced and decision making can be linked to broader local economic development aims\. Specific findings concerning the different types of assets that were allocated follow\. 5\.9 Access to Markets\. The project attempted to facilitate market linkages with various agribusiness value chains through promotion of market fairs, where community producers were able to showcase their products to buyers through (i) investments in market access infrastructure, including bridges, drifts (stone or concrete river crossings), and rural access roads constructed to open up the project areas to market opportunities; (ii) promotion of group sales for commodities that traders had indicated they were willing to buy in large quantities; (iii) preparation of consultation meetings on crop sales, attended by farmer groups’ representatives and interested traders; and (iv) identification of agribusiness actors that could establish formal contracts with farmers for selected products (for example, honey)\. 5\.10 From the project documentation, IEG found that the borrower believed that attempts to promote formal contractual arrangements between traders and farmer groups “never worked,” because of the prevailing spirit favoring individual sales among smallholder farmers, difficulties  11 in estimating the actual quantities that individual farmers had to sell, and price uncertainties (World Bank 2014, p\. 46)\. 5\.11 The construction of markets, supported by the CAEIF, also demonstrated limitations\. IEG visited 8 of the 17 village market facilities supported by the CAEIF\. In interviews with market participants, IEG learned that there was a universal perception across the sites visited that profits from the CAEIF markets were similar to those earned roadside, and in some cases lower, although the facilities afforded more comfort\. There was little understanding of the choice of placement of the markets, some of which were located at very inopportune sites because of land constraints\. Before these markets were established, vendors would pursue opportunities, for example, to set up shop near high traffic areas such as bus stops or along main roads and at intersections\. Participation in the market also requires a fee, which IEG learned was not used to help maintain the market—none of the markets had an operational or maintenance plan or maintenance fund\. None of the amenities brought by the project (such as latrines) were in use at the time of the IEG visit\. The markets were also insensitive to gender needs\. Dominated by male vendors, women tended to occupy the stalls farthest from the roads, and their activities were usually limited to cooking market-day food and selling beverages\. 5\.12 Grain Storage\. Another marketing tool supported by the CAIEF was the construction of silos\. The CAEIF financed the construction 847 grain silos\. These were individually awarded assets (cofinanced in kind by the recipients) capable of storing about a season’s worth of grain, and simply constructed of sand and brick\. They required in-kind contributions (a thatch shelter, brick, and sand) and were all constructed by a single vendor commissioned by the project\. The mission learned that the sand design was relevant to the local environment since the sand, as opposed to cement, would keep the grain cool\. 5\.13 Although simple in their design, far too many of the silos were found by IEG not to have been sustained\. About half of the silos visited—randomly selected by IEG—had fallen into disrepair or were destroyed\. In each case, there was evidence that the community member was not correctly maintaining the asset; for example, by keeping it sheltered from sun and rain\. The use of silos was part of a change process that required more time and sensitization to support community members’ understanding of the benefits of maintaining this important investment\. In the successful examples, community members had been taught by technicians how to properly maintain silos, store the grains, and subsequently sell when prices were relatively high during the post-harvest season\. In some cases, community members were able to utilize the stored grains for personal consumption during the lean seasons\. 5\.14 Work Animals and Animal Traction Equipment\. The CAEIF also offered the option of investing in work animals and animal traction equipment\. Of the villages visited that had opted for this type of asset, IEG found this activity to have been the least successful\. Agricultural extension agents, the community facilitators, and farmers lacked training in the use and maintenance of the equipment\. However, the observed failure in this area may be attributable to the reported receipt of sick or older animals and poor or second-hand traction equipment, as well as the limited access villages have to veterinary services, including vaccines\. One of the challenges with this asset choice can be traced back to project design: the animals and the equipment were distributed as group assets, and communities lacked cohesion and the ability to engage in effective collaborative decision making\. In a few cases, for example, community members reported that the animals procured were slaughtered at the behest of some of the members\. There were also a few reports of inappropriate behavior on the part of project staff,  12 who “asked for the animals back” after project close, although owing to the small size of the sample, it is not possible to know how pervasive this behavior was\. Interviews with technicians revealed that the project could have benefited considerably from increased technical training in animal husbandry and more investment in veterinary care\. Rural Savings and Lending Groups 5\.15 Against a revised target of 6,000 members, the project enlisted some 7,291 persons into rural savings and lending groups\. Project documentation indicates that, together, the groups mobilized some $85,458 in savings, representing an average of US$12 per person over the course of the project\. Project documentation also indicates that approximately US$104,741 was circulated in loans to members\. While IEG was not able to independently validate these figures, the level of loans in excess of savings appears to have been a result of numerous short-term loans, which allowed savings to be used multiple times\. 5\.16 IEG interviewed 23 savings and loan groups\. These interviews included one-on-one questioning with 96 group members\. The interviews were conducted to learn more about the “rules of the game” that were imparted but that were unclear from project documentation, to learn about savings and borrowing attitudes and behavior, to observe and learn about gender and other demographic characteristics and behavior, and to learn about the sustainability of the groups after project close\. 5\.17 IEG learned that the design of the rural savings and lending schemes in Mozambique differed from similar schemes that the Bank has supported\. These schemes did not include seed capital, for example, and expectations were very low with regard to the use of funds\. Trained by external actors (a French nongovernmental organization), the groups were given a box with multiple keys as a means to engender socially accountable behaviors\. The schemes were geared mostly toward promoting a savings culture: members were required to save a small amount of income and then were allowed to draw it out every few months\. This differs from other schemes supported by the Bank that are designed to help grow an endowment, to promote lending at small and then larger levels, and to use this training to eventually promote linkages with the formal banking sector\. 5\.18 Nevertheless, IEG found that, in addition to smoothing consumption and weathering shocks, income saved and then withdrawn was being used for investment in income-generating activities, many of which were in the rural nonfarm sector, such as in petty trade\. With regard to lending, feedback from the rural savings and lending group interviews revealed that men appear to borrow more than women, and this was explained by the higher level of (real or perceived) risk that men are willing to take\. Women were also required to seek their husbands’ permission to take a loan\. 6\. Efficiency Economic Rate of Return Analysis 6\.1 At appraisal, the project undertook an analysis of economic and financial returns using representative farm models\. The same approach was used at project close\. At appraisal, the economic and financial net benefits (net present values) were estimated at US$1\.8 million and US$0\.5 million, and the economic and financial rates of return were, respectively, 15 and 13 percent\. At project close, the efficiency analysis indicated that the economic and financial returns remained positive, with discounted net benefits estimated at US$3\.74 million and  13 US$1\.6 million, for the economic and financial net benefits, respectively\. The ex-post economic and financial internal rates of return were estimated at 18 percent and 14 percent, respectively\. 6\.2 This assessment questions key assumptions used in the efficiency analysis\. For example, estimated yields of maize and rice were much higher (30 and 49 percent respectively) than the yields obtained from “actual activity output estimates” as measured by the project’s M&E system\. Since, as stated by the economic rate of return (ERR) analysis, a “more than 10 percent reduction in the estimated yield levels [would] lowers the economic rate of return to 11 percent,” the reliability of the data matters from the point of view of validating the economic efficiency of this project\. 6\.3 Other key assumptions in the ERR raise doubts about the veracity of the project’s efficiency analysis\. It is assumed that a 15-year time horizon is needed in the analysis to “consider the full project build-up of costs,” and a 10-year horizon is needed to “consider the full project build-up of benefits, based on individual and group activity over this time horizon\.” It is unclear why it would take longer to assess costs than benefits\. 6\.4 Finally, the combination of the varied enterprises listed in Table A3\.3 in the ICR used to estimate the total net benefit stream was also not stated in the analysis\. Project Efficiency 6\.5 Project costs for management, monitoring, and reporting were 20 percent higher than projected, mainly due to inefficiencies in project implementation\. At appraisal, these costs were estimated to be $2\.9 million (10\.6 percent of total project costs)\. However, following substantial reallocations from components 1 and 2 of the project, the total management costs increased to $5\.9 million (20\.8 percent of actual total project costs)\. Some of these increased management costs are associated with the many unsuccessful attempts to generate baseline data and the reconfiguration of the project after mid-term to respond to implementation delays\. 6\.6 This assessment concludes that the project’s efficiency was modest\. 7\. Outcome 7\.1 The overall outcome of the Market-Led Smallholder Development Project in the Zambezi Valley is rated moderately unsatisfactory\. The relevance of the project’s objective to the Bank’s Country Assistance Strategy and Country Partnership Strategy and the government’s development strategy was high\. The relevance of the project’s design in terms of the results framework and use of country systems as a key design feature was rated modest\. Efficacy is rated modest, since there is evidence that the project’s outputs—agricultural support services, public and private subproject investments, and the establishment of rural savings and lending schemes—modestly contributed to overall well-being, but were not sufficient to increase the incomes of the project farmers compared with similar farmers not supported by the project\. According to project assessment data, the average increase in household income for the project beneficiaries was 36 percent higher than the average recorded at baseline\. However, for the control group, the average increase in household income was 69 percent compared with the average income recorded at baseline\. Efficiency is rated modest\. While questionable data used for estimates of rates of return, together with delays in project  14 implementation, undermined the confidence in the project’s efficiency, it should be acknowledged that this project was implemented under difficult conditions\. 8\. Risk to Development Outcome 8\.1 Despite continued government and local community ownership of the project’s objectives and support for its continuation, this PPAR concludes that risk to development outcome is significant\. 8\.2 Institutional Risks\. Capacity and financial (budget) constraints at the district and local levels (a problem well-identified at appraisal and during the mid-term review) because of chronically low district-level revenues will make it challenging to sustain the provision of public sector services such as road maintenance and agricultural extension for the communities\. There is also a significant risk that without adequate support and availability of competitive markets for agricultural and other commodities, as well as investment in market access (including better rural roads and bridges), increased and sustainable agricultural production increases may be limited to a relatively small number of producers with the easiest access to markets, infrastructure, and inputs\. This would leave the more remote smallholders behind in terms of their income earning capacity\. 8\.3 The inclusion of a GEF component in an agricultural project implied that communities should have been provided with the necessary capacity to implement sustainable production practices that allow communities to adapt to the changing contexts brought about by the effects of climate change\. However, without continued support to the community groups, most of which lack relevant capacity at the district level, unsustainable land management practices such as periodic slash-and-burn rotations (in the context of adequate land availability) have continued, and have undermined achievements in sustained land management\. 8\.4 The underlying question facing the achievement of sustained land management among poor farmers was whether there was any incentive for them to engage in more sustainable practices\. Slash-and-burn techniques are a traditional land management practice, and for decades they have been a preferred and effective strategy for maintaining productivity of crops\. Weak incentives to invest in better land management are rooted in the lack of a system of smallholder land rights and secure land tenure that would make the more sustainable land management practices worthwhile (for an example, see Heath and Binswanger 1996)\.  15 9\. Bank and Borrower Performance Bank Performance 9\.1 Quality at Entry is rated as moderately unsatisfactory\. 9\.2 The Bank adequately addressed the borrower’s priority needs (economic growth and poverty reduction through agricultural development)\. The project was aligned with other interventions that had been supported by the Bank to achieve these aims—including the Agricultural Services and Rehabilitation Project, the Decentralized Planning and Finance Project, the Roads and Bridges Project, and the Beira Railway Project, which were intended to contribute to stimulating agricultural development in the Zambezi Valley\. However, in the case of the Market-Led Smallholder Development Project in the Zambezi Valley, the Bank overestimated implementation capacity, especially at the district level\.12 The prior project on decentralized planning and finance was mostly focused on urban areas, but, overall, the government’s decentralization program was still in its early years\. 9\.3 Efforts were made to incorporate lessons learned from previous community-driven and market-led approaches to agricultural development in Mozambique, but there was a lack of uptake of many of these lessons, many of which require doing business differently in the World Bank\. First phases of community-driven or participatory rural development programs require long lead times: Bank teams need to be particularly engaged in helping to develop the rules of the game for the establishment of well-governed rural institutions, both with regard to the selection of participants and leaders and the manner in which resources will be allocated\. These project often require tolerance for upfront disbursement lags, during a sensitization phase\. Examples of other well-prepared rural development programs have shown that task teams have had to stay engaged both with the client and with Bank management to showcase the merits of this approach in the ultimate achievement of the poverty-related project objective, but also with regard to the sustainability of the approach\. 9\.4 The blending of the GEF grant reflected an awareness during preparation that sustainable land management was a critical component of ensuring sustained yield increases, especially in light of future risks posed by climate change\. However, changing land use practice ultimately has as much to do with incentives and behavior as with the availability of technical assistance\. At appraisal, the Bank noted that the arrest and reversal of land degradation practices should be made as demand-driven as possible by linking them to community-level land-use planning\. The project focused more on the supply than the demand side\. 12 The earlier Agricultural Services and Rehabilitation Project was implemented between 1992 and 2000 with the objective of increasing production and returns from smallholder food crop and cotton cultivation in the northern provinces of Nampula and Cabo Delgado through the rehabilitation and development of effective agricultural services and the strengthening of institutional capacity\. According to the ICR for the project (World Bank 1999), farmers had adopted the use of improved seed varieties, although they complained about the lack of new extension messages\. However, because of inadequate evidence on the project’s efficacy, its outcome was rated moderately unsatisfactory in the ICR Review prepared by IEG (IEG 2001)\.  16 Quality of Supervision 9\.5 Bank supervision performance is rated as moderately satisfactory 9\.6 On average, there were two supervision missions each year\. The missions flagged key issues related to capacity challenges, especially in M&E and the fiduciary responsibilities at the district level\. However, there was a lack of urgency, as observed from a review of the supervision reports, with respect to the need to address the challenges associated with managing the project from Maputo, and with DNPDR staff that had competing work priorities\. Ratings of both progress toward the development objective and implementation were moderately satisfactory, until they were assessed as moderately unsatisfactory in 2010–11\. This assessment of the project’s difficulties should have come earlier\. The 2010 mid-term review had rather belatedly addressed project implementation challenges\. Nevertheless, it led to a project restructuring that did not affect the objectives, but incorporated a number of adjustments to the project’s implementation arrangements\. These included (i) establishment of a dedicated project coordination team, including the hiring of a project manager who would report to the national director for the promotion of rural development; (ii) hiring of additional staff on contract; and (iii) the transfer of some key staff of the dedicated staff to the project area\. The changes enabled implementation to be accelerated, and the project was completed with only a six-month delay\. 9\.7 Following the 2010 mid-term review, the Bank launched a follow-up joint implementation support mission to review project performance and evaluate if enough progress had been made to upgrade the overall project ratings\. However, a review of the documentation reveals that by this stage, the focus tended to be on the risks associated with the rating, rather than addressing the underlying constraints\. An Implementation Status and Results Report in 2011 noted that “A prolonged period of any Bank co-financed project in a MU status would affect the overall quality of the IDA portfolio in Mozambique, which in turn determines the allocation of new IDA funds to the country\.” 9\.8 Summary of Bank performance\. The project’s quality at entry is rated moderately unsatisfactory because of inadequate attention to the lessons of previous community-driven and market-led approaches, as well as weak project design, which was not sufficiently attuned to the need for more attention to capacity building and close attention to arrangements for efficient project management\. Bank supervision is rated as moderately satisfactory\. Bank performance is rated moderately unsatisfactory, based on the harmonized criteria agreed between IEG and Operations Policy and Country Services, stating that when one rating is in the satisfactory range and the other in the unsatisfactory range, then the overall rating depends on the outcome rating\. Borrower Performance Government 9\.9 The government’s performance was rated as moderately unsatisfactory\. The government of Mozambique supported the implementation of the project through existing policy and development plans at the national, district, and local levels\. The government delivered its counterpart contribution and respected its commitment for funds to be directly transferred to the district level\. The relocation of the National Directorate for the Promotion of Rural Development (responsible for overall oversight and coordination of implementation) from the Ministry of Planning and Development to the Ministry of State Administration did not seem to adversely affect project implementation\.  17 9\.10 However, the government of Mozambique did not respond quickly enough to the need to restructure the project, according to the joint recommendation of the mid-term review in 2010\. An official restructuring request was not lodged until April 2011, one year after the mid-term review\. Following this, protracted discussions about the decentralization of the program and the introduction of changes related to procurement and financial management resulted in a further 11-month delay before restructuring could become effective\. Most of the groups visited were not formed until the second half of the project period; most of the rural savings and lending groups visited were not formed until 2011\. These delays resulted in rushed decision making about the funds distributed through the Community Agricultural and Environment Investment Fund, with allocations ultimately awarded to individuals—some of whom should not have qualified to receive the project-supported assets\. Implementing Agency 9\.11 The implementing agency performance is rated as moderately satisfactory\. The Implementing Agency was the National Directorate for the Promotion of Rural Development (DNPDR)\. It bore a heavy burden because the project was designed to be implemented without a dedicated implementation unit\. The Directorate initially struggled to create a dedicated team of staff to be responsible for project implementation\. When this team was put in place, it comprised staff that were proactive and responsive to project implementation issues\. A further challenge was the continuous relocation of civil servants at the district level, which affected the project because some of the trained staff moved to different districts for other functions and new officers needed to be hired and trained\. After the changes introduced at the mid-term review and subsequent restructuring, the team was reportedly better organized\. It carried out integrated planning exercises and made sure that the project adhered to implementation procedures and guidelines\. A good working relationship with the Bank team was maintained\. There was adequate fiduciary oversight through the preparation and submission of audited financial statements and other financial reports (World Bank 2014, para\. 68)\.There were, however, important shortcomings in M&E: the Directorate was unable to operate an effective M&E system to measure progress toward meeting the development objective, as discussed in an earlier section of this PPAR\. 9\.12 Summary\. Borrower performance was rated as moderately unsatisfactory because of the government’s substantial delay in formalizing the restructuring agreed at the mid-term review\. The performance of the implementing agency was rated as moderately satisfactory\. Overall, the borrower performance is rated moderately unsatisfactory based on the harmonized criteria agreed between IEG and Operations Policy and Country Services that when one rating is in the satisfactory range and the other in the unsatisfactory range, then the overall rating should depend on the outcome rating\. 10\. Lessons ï‚ Rural institutions can play a key service delivery role in the absence of strong state capacity, but sustained support is needed to ensure their good governance and capacity to provide services to the poor\. In the absence of this support, there is a risk that such institutions may favor some participants over others, may neglect attention to gender and other vulnerable groups, and may lack the capacity to deliver sustained services after project close\. The quality of sensitization and training, grounded in local culture, is key to enabling equitable and sustained service delivery\. In the case of the Market-Led Smallholder  18 Development Project in the Zambezi Valley, IEG found that the poor quality of facilitation services undermined the ability of the rural smallholders to benefit more from the productive investments made by the project and to engage in productive activities after project close\. ï‚ Social accountability tools are important elements of a project intended to be implemented through village-level organizations\. M&E systems that include social accountability assessments, including village-level scorecards, can help the project team (client counterpart and the Bank), identify and address underperforming areas, the underprovision of services, the relative strength of rural organizations, and other related behavioral issues that may be undermining efficacy\. ï‚ A market-based approach to developing the smallholder sector requires an upfront analysis of skills, knowledge, and capacity in order to engage in various value chain activities, such as marketing\. In Mozambique, owing in part to the nascent nature of the country’s market-led economy, skills in areas such as efficient marketing were rare in many of the district-level administrations\. ï‚ Simple technologies work best in poor rural communities\. The introduction of complex technology into poor farming areas is risky and unlikely to succeed because the maintenance of complex systems is almost always unaffordable for poor smallholder farmers\. ï‚ Behavior and incentives, both individual and at the policy level, should be placed at the heart of programs geared toward supporting sustainable land management\. In the case of this project, land tenure security and land rights are central to farmers’ decision to engage in sustainable land, soil, and water management practices, and yet the project tended to focus more on the technical fixes\.  19 References GEF (Global Environment Facility)\. 2007\. “Global Environment Facility Grant Agreement, Market-Led Smallholder Development in the Zambezi Valley Project, GEF TF Grant Number TF091638\. September 21, 2007\.” World Bank, Washington, DC\. http://www- wds\.worldbank\.org/external/default/WDSContentServer/WDSP/AFR/2008/02/21/FE6D315980752 AD7852573F6007B0031/1_0/Rendered/INDEX/conformed0GEF0Grant0Agreement\.txt Heath, John, and Hans Binswanger\. 1996\. “Natural Resource Degradation Effects of Poverty Are Largely Policy Induced: The Case of Colombia\.” Environment and Development Economics 1 (1): 65–84\. IEG (Independent Evaluation Group, World Bank Group)\. 2001\. “Implementation Completion Report (ICR) Review— Mozambique Agricultural Rehabilitation and Development Project\.” World Bank, Washington, DC\. http://lnweb90\.worldbank\.org/oed/oeddoclib\.nsf/24cc3bb1f94ae11c85256808006a0046/8525682e0 068603785256a77006be4ed?OpenDocument ———\. 2015\. “Implementation Completion Report (ICR) Review—Market-Led Smallholder Development in the Zambezi Valley\.” World Bank, Washington, DC\. http://lnweb90\.worldbank\.org/OED/oeddoclib\.nsf/DocUNIDViewForJavaSearch/8525682e 0068603785257ca7007ec198?OpenDocument&Click= Kondylis, Florence, Valerie Mueller, and Siyao Zhu\. 2014\. “Seeing is Believing? Evidence from an Extension Network Experiment\.” World Bank Policy Research Working Paper No\. 700\. World Bank, Washington, DC\. Mozambique, Republic of\. 2006\. “Action Plan for the Reduction of Absolute Poverty (2006–2009)\.” Poverty Reduction Strategy Paper\. EDMS 295111\. Maputo\. http://mz\.one\.un\.org/eng/Resources/Publications/PARPA-II Mozambique, Republic of, Ministry of Agriculture and Food Security\. 2015\. “National Agricultural Investment Plan—2013–2017\.” Maputo\. http://www\.resakss\.org/sites/default/files/pdfs/Final%20PNISA%20Revised%20Version_0\.pdf Mozambique, Republic of, Ministry of Planning and Development\. 2006\. “Environmental and Social Management Framework for the Market-Led Smallholder Development in the Zambezi Valley\.” Maputo\. http://www-  20 wds\.worldbank\.org/external/default/WDSContentServer/WDSP/IB/2006/06/20/000160016_200606 20135357/Rendered/PDF/E138010PAPER\.pdf Tvedten, Inge\. 2011\. “Mozambique Country Case Study: Gender Equality and Development\.” Background Paper, World Development Report 2012 – Gender Equality and Development, World Bank, Washington, DC\. USAID (United States Agency for International Development)\. 2015\. “End-line Survey Report, Improving Health and Livelihoods of Children, Women and Families in the Province of Zambézia, Republic of Mozambique\.” Prepared for USAID by Vanderbilt Institute for Global Health, Ogumaniha SCIP Project, Nashville, TN\. World Bank\. 1999\. “Implementation Completion Report, Mozambique Agricultural Rehabilitation and Development Project\.” Report No\. 19416\. World Bank, Washington, DC\. ———\. 2006a\. “Financing Agreement for the Market-led Smallholder Development in the Zambezi Valley\.” Credit 4198—MZ Conformed\.” World Bank, Washington, DC\. ———\. 2006b\. “Mozambique— Market-Led Smallholder Development in the Zambezi Valley Project\.” Project Appraisal Document\. Report No\. 35466-MZ\. World Bank, Washington, DC\. http://documents\.worldbank\.org/curated/en/2006/05/6827183/mozambique-market-led- smallholder-development-zambezi-valley-project ———\. 2006c\. “Project Appraisal Document on a Proposed Grant from the Global Environment Facility for the Market led Smallholder Development in the Zambezi Valley\.” Report No 39806-MZ\. World Bank, Washington DC\. ———\. 2007\. “Proposed Grant from the Global Environment Facility Trust Fund for the Market-led Smallholder Development in the Zambezi Valley\.” Report No\. 39806-MZ\. World Bank, Washington, DC\. ———\. 2010\. Report on the joint DNPDR/World Bank Project Mid-Term Review for the Market-Led Smallholder Development in the Zambezi Valley Project\. Maputo\. ———\. 2011\. “Implementation Status and Results Report— Market-Led Smallholder Development in the Zambezi Valley Project\.” Report No\. ISR4584\. World Bank, Washington, DC\. http://www- wds\.worldbank\.org/external/default/WDSContentServer/WDSP/AFR/2011/09/20/2B0486247C5E4 08185257911006EEE58/1_0/Rendered/PDF/P0931650ISR0Di020201101316549499489\.pdf ———\. 2012\. “Mozambique—Market-Led Smallholder Development in the Zambezi Valley Project: Restructuring\.” Vols\. 1-3\. World Bank, Washington, DC\.  21 ———\. 2014\. “Mozambique—Market-Led Smallholder Development in the Zambezi Valley Project\.” ICR 3028\. World Bank, Washington, DC\. http://documents\.worldbank\.org/curated/en/2014/03/19416514/mozambique-market-led- smallholder-development-zambezi-valley-project  22 ANNEX A Annex A\. Basic Data Sheet Market-Led Smallholder Development in the Zambezi Valley (IDA-41980, TF-091638, P093165, P098040) Key Project Data (amounts in US$ million) Appraisal Actual or Actual as % of estimate current estimate appraisal estimate Total project costs 27\.4 28\.42 103\.70 Loan amount 20\.0 21\.20 105\.10 Cofinancing (GEF) 6\.2 6\.08 98\.06 Government contribution 0\.30 0\.24 80\.00 Beneficiary contribution 0\.90 0\.90 100\.00 Cumulative Estimated and Actual Disbursements FY07 FY08 FY09 FY10 FY11 FY12 FY13 Appraisal estimate (US$M) 3\.51 7\.86 12\.49 17\.62 21\.93 24\.48 25\.50 Actual (US$M) 2\.02 3\.30 6\.54 8\.59 13\.19 17\.29 27\.07 Actual as % of appraisal 56 42 52 49 60 71 106 Date of final disbursement: 10/19/2013 Project Dates Original Actual Initiating memorandum 03/10/2005 05/26/2005 Negotiations 04/19/2006 04/20/2006 Board approval 04/18/2006 06/20/2006 Signing 08/09/2006 Effectiveness 12/28/2006 12/28/2006 Mid-term review 12/31/2009 3/31/2010 Restructuring 5/24/2012 Closing date 3/31/2013 9/30/2013 ANNEX A 23 Staff Time and Cost Staff time and cost (Bank budget only) US$ (including travel and Stage of project cycle Number of staff weeks consultant costs) Lending IDA 96 480,456\.73 GEF -- 352,102\.21 Total 832,558\.94 Supervision/ICR IDA 322 900,762\.87 GEF -- 385,295\.20 Total 1,286,058\.07 Task Team members Names Title Unit Lending Alberto Ninio Chief Counsel LEGEN Anil S\. Bhandari Consultant AFTG1 Caroline L\. Guazzo Language Program Assistant AFTCS Daniel Liborio Da Cruz Consultant AFTA1 Sousa Eduardo Luis Leao de Sousa Senior Economist AFTA1 Gilberto de Barros Senior Private Sector AFTFW Development Joao Tinga Financial Management Specialist AFTME Josef Ludger Loening Consultant MNACE Katherine Kuper Sr\. Urban Spec\. AFTU1 Leonard John Abrams Consultant AFTU1 Luisa Moises Matsinhe Senior Executive Assistant AFCS2 Slaheddine Ben-Halima Consultant MNAPC Supervision/ICR Amos Martinho Malate Procurement Analyst AFTPE Senior Rural Development Aniceto Timoteo Bila Specialist AFTA2 Anne Louise Grinsted Consultant AFTP1 Anne Ritchie Consultant HDNSP Antonio L\. Chamuco Senior Procurement Specialist AFTPE  24 ANNEX A Names Title Unit Boris Enrique Utria Country Operations Adviser LCC5C Sr\. Financial Management Brighton Musungwa Specialist AFTME Caroline L\. Guazzo Language Program Assistant AFTCS Celia Faias Team Assistant AFCS2 Cheikh A\. T\. Sagna Senior Social Development Spec AFTCS Daniel Liborio Da Cruz Consultant AFTA1 LEGAF- Eduardo Brito Senior Counsel HIS Elvis Teodoro Bernado Langa Financial Management Specialist AFTME Erick C\.M\. Fernandes Adviser LCSAR Florence Kondylis Senior Economist DECIE Joao Tinga Financial Management Specialist AFTME AFTWR- John A\. Boyle Consultant HIS Jonathan Nyamukapa Sr Financial Management AFTME Specialist Luisa Moises Matsinhe Senior Executive Assistant AFCS2 Lungiswa Thandiwe Gxaba Consultant AFTTR Luz Meza-Bartrina Senior Counsel LEGAM Mohamed Arbi Ben-Achour Consultant AFTN2 Patrick Verissimo Lead Rural Development SASDA Pedro Arlindo Specialist Agric\. Economist AFTA2 Rui Manuel Benfica Consultant DECPI Slaheddine Ben-Halima Consultant MNAPC Susan Hume Senior Operations Officer AFTFE CTRFC- Suzanne F\. Morris Senior Finance Officer His Teresa De Jesus S\. McCue Operations Analyst CAFPP Tijan M\. Sallah Sector Manager AFTA3 Leonard John Abrams Consultant AFTU1  25 ANNEX B Annex B\. Supplementary Tables on Project Achievements Number of CBOs Engaged in Project Activities Achievement District Baseline Target Result (percent) Morrumbala 0 317 335 106 Mutarara 0 145 135 93 Mopeia 0 75 104 139 Chemba 0 65 79 122 Meringue 0 58 80 138 Project area 0 660 733 111 Number of Members of Savings and Loans Groups Achievement District Baseline Target Result (percent) Morrumbala 0 2,900 4,392 151 Mutarara 0 1,300 1,066 82 Mopeia 0 700 699 100 Chemba 0 600 624 104 Meringue 0 500 510 102 Project area 0 6,000 7,291 122 CAEIF Subproject on Public Infrastructure Achievement District Baseline Target Result (percent) Morrumbala 0 49 47 96 Mutarara 0 32 42 131 Mopeia 0 14 9 64 Chemba 0 12 16 133 Meringue 0 11 6 55 Project area 0 118 120 102 ANNEX B 26 Number of Productivity Increasing CAEIF Subprojects Achievement District Baseline Target Result (percent) Morrumbala 0 144 497 345 Mutarara 0 66 182 276 Mopeia 0 43 169 393 Chemba 0 30 184 613 Meringue 0 26 164 631 Project area 0 109 1,196 387 Number of Sustainable Land Management GEF CAEIF Subprojects Achievement District Baseline Target Result (percent) Morrumbala 0 67 121 181 Mutarara 0 65 91 140 Mopeia 0 40 67 168 Chemba 0 40 70 175 Meringue 0 38 65 171 Project area 0 250 414 166 Typology of CAEIF Subprojects Districts Subprojects Morrumbala Mutarara Mopeia Meringue Chemba Total Public Infrastructure Drifts 7 1 2 2 4 16 Bridges 9 4 3 0 1 17 Marketplaces 6 4 4 0 3 17 Vaccination facilities 0 18 0 1 0 19 Rural roads 24 15 0 1 8 48 Dip tanks 1 0 0 0 0 1 Subtotal 47 42 9 4 16 118 Productivity Increasing Subprojects Hammer mills 9 9 6 6 12 42 Threshing machines 40 18 15 10 10 93 Small-scale irrigation 2 6 1 2 7 18 Animal traction 26 23 13 8 26 96 Chicken rearing 3 0 0 1 0 4 Goats multiplication 7 8 0 0 0 15  27 ANNEX B Productivity kits to FCs 16 18 14 17 16 81 Improved silos 194 100 120 120 113 847 Subtotal 497 182 169 164 184 1,196 Sustainable Land Management/GEF Projects Community forestry 18 8 5 5 12 48 Improved honey production 55 61 26 57 43 242 Forestry nurseries 0 0 0 3 3 6 Small-scale fishing 48 22 22 0 12 104 Subtotal 121 91 53 65 70 400 GRAND TOTAL 665 315 231 233 270 1,714 ANNEX C 28 Annex C\. List of Persons Consulted Name Title Institution Government of the Republic of Mozambique Raimundo Matule National Director, Directorate of Ministry of Agriculture and Food Planning and Cooperation Security Vasco Correio Nhabinde Director National of Studies Ministry of Economy and Finance Olegario dos Anjos National Director, National Ministry of Land, Environment and Banze Directorate of Rural Rural Development Development (DNPDR) Isabel Cossa Deputy Director -DNPDR Ministry of Land, Environment and Rural Development Mateus Abelardo National Director of Industry Ministry of Industry and Trade Americio Matusse Antonio Do Rosario Chairman/Chief Executive Commodity Exchange of Grispos Officer Mozambique Edgar Baloi Executive Director Commodity Exchange of Mozambique Eduardo Neves Joao Executive Director Commodity Exchange of Mozambique Danilo Nalá Director General Special Economic Zones Office (GAZEDA), Ministry of Planning and Development Dinis Lissave Director of Special Economic Special Economic Zones Office Zone Services (GAZEDA), Ministry of Planning and Development Sansao Buque Project Coordinator – Women’s Ministry of Gender, Children and Empowerment and Skills Social Welfare Development Project (WESDP II) financed by African Development Bank Palmica Antonio WESDP II project team Ministry of Gender, Children and Social Welfare Luis Nhancolo WESDP II project team Ministry of Gender, Children and Social Welfare Agatha Ntauma Bisque WESDP II project team Ministry of Gender, Children and Social Welfare Jacinto Tualufo Head of Cadaster Department, Ministry of Land, Environment and National Directorate of Land Rural Development Mario Rui Cadaster Department, National Ministry of Land, Environment and Directorate of Land Rural Development  29 ANNEX C Lavinia Bechardas Cadaster Department, National Ministry of Land, Environment and Directorate of Land Rural Development Halima Nguice Planning Department, National Ministry of Land, Environment and Directorate of Land Rural Development Multilateral and Bilateral Donors Enrico Strampelli Head of Cooperation European Union Geert Ankaert Counsellor – Economics and European Union Governance Els Berghmans Counsellor – Public Financial European Union Management and Governance Sheryl Stumbras Deputy Director USAID Todd Flower Feed the Future Coordinator - USAID Agriculture, Environment and Business Office Theodora B\. Dell Mission Economist USAID Alicia Herbert Country Representative Department for International Development Kobi Bentley Team Leader – Governance and Department for International Economic Policy Development Francois- Phillipe Dubé First Secretary (Development) High Commission of Canada Miguel J\. Rombe Development Officer High Commission of Canada Cristina Gutiérrez Coordinator General – Spanish Embassy of Spain Hernandez Cooperation Cristina Manzanares Program Officer – Spanish Embassy of Spain Cooperation Andre Ameida Santos Senior Economist African Development Bank Mirianaud Oswald Senior Evaluation Officer African Development Bank - Abidjan Agbadome Carla Felix Silva Evaluation Officer African Development Bank - Abidjan Latefa Cone Camara Consultant African Development Bank - Abidjan International Monetary Fund and World Bank Alex Segura Ubiergo Resident Representative IMF, Maputo Office Mark Austin Program Leader – Sustainable World Bank Country Office Development Jan Nijhof Senior Agricultural Economist World Bank Country Office Isabel Neto Senior Operations Officer – World Bank Country Office Africa Energy Practice ANNEX C 30 Pedro Arlindo Task Team Leader for the World Bank Country Office MLSDP Kulwinder Singh Rao Senior Highway Engineer World Bank – Washington Jumoke Jagun-Dokunmu Country Manager for International Finance Corporation – Mozambique and Angola Washington Dieter Fischer Senior Operations Officer – International Finance Corporation – Smallholder Supply Chains - Washington task team leader for PROTOCEL Jane Onoka Operations Officer International Finance Corporation - Washington Private Sector and Academia William Grant Global Practice Leader -Market DAI – London Systems Development Daniel Liborio da Cruz E Original Task Team Leader for Retired Bank staff member - Maputo Sousa the MLSDP Paulo Brito Project Facilitator for MLSDP in Private consultant - Quelimane Morrumbala for the last 5 years of implementation Antonio Lino District Administrator in Retired public servant - Maputo Murrombala during the final year of implementation Michael Baxter Country Director, World Bank OZMOZIS - Maputo Country Office in Maputo during the implementation of the MLSDP – now retired and Managing Director of a private company Rafael Uaiene Assistant Professor in In-Country Coordinator, Michigan International Development State University – Maputo Agricultural, Food and Resource Economics Khalid Sultan Ali Director Sarah Trading LDA\. Nampula M\.Yunuss A\. Gafar Administrator/Manager Gani Commercial, LDA, Nampula Shrikantha K\. Naik Country Head Export Marketing Co (ETG), Nampula Mohamed Yaseen General trader of commodities in Morrumbala  31 ANNEX D Annex D\. Group Interview Questions Part I District: Village: Group Name: Year Formed: Number of Participants: Does the Group Still Exist? Y/N Part II Qualifying questions Y N Are you a farmer that Why Not? participated in Sofrico/CAIEF/Banco Mundial project? Were you also a member of Why Not? savings and lending? Part III: Diagram the Group One by one, please tell Mark the gender of the Did you Did you Note us your role in the member, by role\. save? borrow quantities if group possible\. 1 2 3 Etc\. Part IV: Analysis of Constraints/Relevance of the Project Response What do you need the What did you receive If an asset, Did it most to increase farm from the project? what is it, generate a production? Is this the and is it profit? Was same or have they functioning? there changed? reinvestment? 1 2 3 ANNEX D 32 Part IV\. Training and Extension Services Did you In the last few years, How have you Has there Have you added or changed receive what kind of services applied these been any what you grow? training? have you received from new change in (For example, produced maize, the technicians (general techniques? service cotton, rice, beans, pigeon peas, cassava; CBO)? Extension: provision Added: paprika, sesame, Improved varieties of since 2012 vegetables, poultry, small seeds, mulching, crop (close of ruminants, honey) rotation, fertilizer, other project)? ag extension support If yes, how so? 1 2 3 Part V\. Rural Savings and Lending Groups Are you Was it started by the Do you Do you What are Able to Describe the part of a Sofrico/CAIEF/Banco save? borrow? the loans invest? In savings and rural Mundial project? used for? what? lending rules savings What year? (Probe for of the group\. and AG and (Probe TA) lending Non-Ag group? activities)\. 1 (f) 2 (m) 3 (m)  33 ANNEX E Annex E\. Fieldwork Methodology The primary objective of the Market-led Smallholder Development Project (MLSDP) was to increase the income of smallholder farmers in selected districts of the Zambezi Valley region of central Mozambique\. It was projected that increased incomes would be achieved not only by direct support to smallholder groups and other supply chain participants, but also through the strengthening of local-level capacity to undertake and manage service delivery within the context of the government of Mozambique’s decentralization policy\. This appendix to the PPAR seeks to contribute to the validation of the relevance, efficiency, and effectiveness of the reported results of the MLSDP in the Zambezi Valley of Mozambique\. The MLSDP was implemented in five districts in the Zambezi Valley—Morrumbala, Mutarara, Chemba, Mopeia, and Maringue\.13 As outlined in the Bank’s ICR , M&E capacity challenges during the course of project implementation affected the establishment of an effective M&E system for the project\. Consequently, verifiable data at the beneficiary level on the project’s impact are not available\. This constraint, coupled with a lack of clarity in the Bank’s ICR regarding the basis for estimates of income changes for project beneficiaries led IEG to design a participatory evaluation methodology that targeted beneficiary groups to assess the project’s performance at the grassroots level\. To test the project’s critical assumption—that beneficiaries of the MLSDP sustainably increased their incomes as a result of the transfer of project- supported assets and training—IEG conducted fieldwork for two-and-a-half weeks during November and December 2015\. Unit of Analysis and Sampling Sampling Frame: The unit of analysis for the beneficiary assessment was a purposively selected, geographically stratified set of groups and individuals that received subprojects financed under the project’s Community Agricultural and Environment Investment Fund (CAEIF)\. Based on their relative weight of financing, IEG selected three of the five districts that were assisted under the project for the beneficiary assessment\. Morrumbala, Mutarara, and Mopeia received 80 percent of the project’s subproject financing\. Chemba and Meringue were removed from the sampling frame due to the low level of coverage, remoteness, and time constraints\. 13 These districts are located in the Zabezia, Sofala, and Tete Provinces\. ANNEX E 34 Percentage of total groups formed Share, number of CAIEF projects under the project (473 groups District Name received (total of 1,058) formed) Morrumbala 47% 30% Mutarara 33% 18% Mopeia 14% 16% Chemba 19% 23% Meringue 5% 14% At the district level, IEG purposively selected the administrative posts that received the most assets (a combination of public and private) to test the project’s theory of change: that a combination of access to finance (rural savings and lending groups), improved infrastructure (such as rural roads, bridges, markets), and productive assets (threshing machines, hammer mills, and the like) could help individuals achieve the project development objective of increasing income\. Groups and individuals with reportedly equal access to the project-supported public and private assets were then chosen randomly\. IEG interviewed a total of 365 project beneficiaries through 33 group and 22 individual interviews\. The fieldwork also included visiting and validating the quality and sustainability—and, in the case of productive assets, the profitability— of a stratified but small number total project-financed subprojects (68 assets)\. Total interviews Group Individual Public and asset District assets/interviews assets infrastructure checks Morrumbala 14 7 3 24 Mutarara 11 11 5 27 Mopeia 8 4 5 17 Total 33 22 13 68  35 ANNEX E A\. Administrative Posts14 Morrumbala (11 administrative posts included in the project): IEG did not visit Guerissa or Derre because these administrative posts combined into a new post named Derre, and IEG did not have the requisite permission to work in this new district\. IEG did not visit Sabe administrative post because of security concerns\. Of the eight remaining administrative posts, IEG visited six: Morrumbala sede, Boroma, Megaza, Chire sede, Mepinha, and Pinda\. These were selected because the other two administrative posts (Muandiua and Chilomo) received no group assets\. Mutarara (4 administrative posts included in the project): IEG did not visit Doa, because it is a new district and IEG did not have the requisite permission to work there\. IEG visited the remaining three administrative posts: Charre, Nhamayabue, and Inhangoma\. Mopeia (7 administrative posts included in the project): IEG selected six of the seven posts, leaving out Catale because of the relatively low level of project activities\. The following six posts were visited by the mission: Campo sede, Lua-Lua, Sambalendo, Rovuma, and Mopeia sede\. B\. Village/Beneficiary/Group: After selecting the administrative posts to be visited by the mission, IEG selected the villages and groups to visit according to the following criteria: wide coverage of different asset typologies (IEG interviewed groups and individuals that received each type of asset); and villages that received a public infrastructure investment (especially markets, because these accounted for a large percentage of infrastructure expenditure) financed by the project\. It should be noted that, in some cases, villages that had reportedly received assets by the project had not received them, and therefore IEG group interviews included some groups (especially in Morrumbala) that only received training and a savings and lending scheme\. Assessment Limitations: Not all villages of Morrumbala and Mutarara Districts could be included in the assessment as originally intended, because certain villages had been absorbed into newer districts\. Covering these villages would have necessitated further administrative procedures at the provincial level (for purposes of seeking the government’s permission and facilitation for these surveys), which was not possible due to time constraints 14 After district, the next administrative division is “posto administrativo,” or administrative post (there are 405 in Mozambique)\. The next and lowest geographical level of central state administration is locality\. ANNEX F 36 \.ANNEX F\. Annex F CAEIF Asset Verification Information from Beneficiary Assessment Region Morrumbala Locality Unknown location in the project area within a one-hour drive of Morrumbala CAEIF asset type Market Individual or community Community Asset functional? Yes, infrastructure infrastructure but the market functions only one day a week\. On the day of the visit by the beneficiary assessment team a few merchants were selling fish from Mopeia\. \.  37 ANNEX F Does the asset increase This market, a concrete structure with a roof and productivity or lead to concrete selling tables in rows, was built by the increased income for project in October 2013\. No information could be beneficiary (ies)? obtained about the benefits of having this market in this location on the outskirts of a village\. However, it is within 25 yards of the main road, and those selling fish at the market stated that selling along the road is more lucrative than selling in the new market\. On market day vendors pay Mt 5 per day to rent a stall\. The revenue goes to the district administration\. Other Notes None of the approximately 25 young men who joined the discussion with the beneficiary assessment team had found off-farm employment in the vicinity or in Morrumbala\. If low-skilled jobs were found, the daily wage was typically Mt 50 per day (about US$1)\. When asked about the credit, the prospect of having credit facilities brought an enthusiastic response\. The universal reason for using credit would be for financing marketing activities\. ANNEX F 38 Region Morrumbala Locality Morrumbala-sede CAEIF asset type Chicken/rabbit coop Individual or Individual (male) Asset functional? community Yes infrastructure Does the asset increase This entrepreneur’s principal job is raising the rabbits and productivity or lead to chickens\. He currently has only three chickens and three rabbits, increased income for but will soon get more chicks (from companies in Malawi, beneficiary (ies)? Quelimane, Nambula)\. Buys feed from either Maputo or Chimoya; wants to learn to make his own feed to sell using local grains\. He buys a chick for Mt 30 and sells it for Mt 140\. Other Notes Individual paid 40 percent (Mt 300,000) of the total cost for the structure\. He was able to invest this by using savings from his professional skills (computer equipment repair)\. He says he heard about the project through the government in Morrumbala, where he owns two homes, and that he qualified under a criterion relating to entrepreneurship\. To his knowledge, there were four similar coops financed by this project in and around Morrumbala; only two are still operational\. The coop was designed and planned to have a meat processing and conservation facility (the coop is quite large) but this did not get financing\. He needed the processing because most restaurants prefer processed meat and so that he can meet hygiene and food safety standards\.  39 ANNEX F Region Morrumbala Locality Ries CAEIF asset type Grain silo Individual or community Individual (woman) Asset functional? Yes infrastructure Does the asset increase She currently has her third harvest in the silo\. It has productivity or lead to been very useful for her because her maize is increased income for conserved and she can get more money for it by beneficiary (ies)? selling it later\. She does not share the storage with anyone, it is just her maize\. Owner present, silo covered and well maintained — currently full of maize\. Owner showed us where she Other Notes used to keep maize, in thatch and pole structure, not as protected from the elements, and the water could get in\. The silos are constructed of brick on the inside and a layer of sand on the outside\. The project provided the top and bottom of silo and covered construction costs\. The owner provided the roof/covering and some construction materials\. If she could make any changes, she would like a bigger silo\. Top picture is maize storage before project, bottom picture is covered silo\. ANNEX F 40 Region Morrumbala Locality Muandiua CAEIF asset type Market Individual or Community infrastructure Asset functional? Beneficiaries community (interviewed group of women reported yes, no one was present infrastructure gathered at market) because it wasn’t market day Does the asset Previously the women sold the same things (beer and ready-made foods) increase at a market down the road, but they much prefer selling at the market, and productivity or they reported that they make more money at the new market than they lead to increased previously did\. income for beneficiary (ies)? Other Notes Few people at market; it was not market day and there were heavy rains the day before\. Market days rotate on different days of the week around the district\. Local residents indicated they have market day on Thursday and the market is full; people come from surrounding villages to buy and sell fish, clothes, shoes, and other things needed for their households\. IEG spoke with a group of women who sell food and beer for the seller and buyers at the market\. The best stalls at the market are in the covered structure constructed by the project, or in the outside stalls behind the structure\. A few reported that they sold inside\. Daily fees (Mt per stall) are collected and by local government, the government cleans the marketplace the day before the market\. The record of collections indicated that between 50 and 100 stalls are occupied on market days\. Women typically sell bread, bear, and ready-made food, while men sell meat, fish, beans, grains, and vegetables\. These vegetables came from Malawi\. There is no water at the market (they fetch it from the hospital across the street), and although the project constructed bathrooms, they were not maintained, and now they are too dirty and no one uses them\. The women reported that they were not part of the decision-making process; they thought this was because they were too busy with house duties\. They do not know who was consulted in the design of the marketplace\. When asked how they would improve the marketplace, they were not sure\. Region Morrumbala  41 ANNEX F Locality Megaza-Sede CAEIF asset type Livestock tank/veterinary facility Individual or community Community infrastructure Asset infrastructure functional? Reportedly yes; does not seem recently used\. See notes below Does the asset increase The facility is reportedly free to use for all community productivity or lead to members and helps them with the control of cattle ticks, increased income for which have a serious detrimental effect on cattle and beneficiary (ies)? may lead to their death\. The crush is used to facilitate the vaccination of cattle\. Because this facility provides a service and prevents cattle mortality, it could lead to increased incomes\. Other Notes This structure was here from colonial times, and the project financed the repair of the structure in 2013\. The community did not pay any contribution for repair\. The demand for this project came from the community, and the local government was looking for partners to assist with the reconstruction\. The project is currently in use, but only recently became functional because after it was constructed the nearby well dried up, so now the community has to haul in water from nearby sources\. It appears that the infrastructure was not functional for quite some time\. ANNEX F 42 Region Morrumbala Locality Pinda - Gera CAEIF asset type Silo and animal traction (including plow and cart) Individual or Individual (male) Asset functional? Silo: Yes community Also community Cart: No infrastructure facilitator Cows/plow: Yes Does the asset increase He keeps maize in the silo and sells approximately 25 percent of productivity or lead to what he grows, consuming the rest\. Previously he kept maize in increased income for his house and it would go bad or become infested with insects\. beneficiary (ies)? He still has some issues with insects and has to buy an additive for the maize to prevent insect infestation (a bottle costs Mt 150)\. The benefits from the silo are that he has a better-quality maize and is able to store maize after the harvest and get a better price after the market price increases\. He would like a bigger silo, but the one he has is functioning well\. Other Notes This beneficiary reported that he received these three assets through working with the technician\. He is the community facilitator and works with his neighbors\. He received the silo in 2010 and the rest of the assets in 2011\. He received the cart and used it to take his goods to the market — this proved very beneficial to him (and the neighbors he rented the cart to) because he previously was able to take a lesser quantity on the back of a bicycle\. The cart no longer works because both of the tires ruptured and he cannot afford to fix them\. He still has the cows and the plow and reports that they are functioning well and contributing to improvements in income\.  43 ANNEX F Region Morrumbala Locality Pinda - Sede CAEIF asset Animal traction type (including plow, cart, and seeding mechanism) Individual or Individual (male) Asset functional? community Also community Cart: No infrastructure facilitator Cows/plow: No (cows died) Does the asset The beneficiary was part of a group that received fishing increase nets and a water pump to use the river water to irrigate productivity fields; he still benefits from these assets\. In addition, from or lead to the project he received two cows, a plow, a tool for increased seeding the fields, and a cart\. He made no contribution to income for the assets\. He received all of the assets in 2009, and none beneficiary is currently functional\. One of the cows died right away, (ies)? and only recently was he able to breed the remaining cow; he is waiting for the offspring to grow enough to use the plow\. Other Notes One wheel of the cart is broken; it is now unusable, but previously he was getting some income (Mt 50–100 /day) renting the cart out to neighbors\. He served as a farmer for a demonstration plot and indicated that this is why he received the assets\. He also benefited from a loan from his rural savings and lending group; he used this loan for commercial trading in fish\. ANNEX F 44 Region Morrumbala Locality Ries CAEIF asset type Silo Individual or Individual (unknown Asset functional? community gender) No infrastructure Does the asset Didn’t interview owner increase productivity or lead to increased income for beneficiary (ies)? Other Notes Silo doesn’t have a complete covering; outer sand layer is washing away with the rain\. Region Morrumbala  45 ANNEX F Locality Boroma CAEIF asset Small bridge type Individual or Community Asset functional? community infrastructure Yes – but poorly maintained infrastructure Does the asset This small bridge was rehabilitated by the project in 2012\. increase According to the community, the bridge has improved their productivity or connectivity to marketplaces\. However, the IEG team inspected lead to the bridge and found it to be poorly constructed and maintained increased income for beneficiary (ies)? Other Notes ANNEX F 46 Region Morrumbala Locality Chirre CAEIF asset Threshing mill type Individual or Individual (male) Asset functional? community Partial infrastructure Does the asset According to the beneficiary, the asset does lead to increased increase income\. During the harvest season, up to 50–70 individuals productivity rent his machine per day, although he is responsible for or lead to providing the diesel to run the machine\. On a good day, he can increased expect to earn Mt 2,000 (minus diesel costs) from renting out income for the machine\. There is immense demand for using his machine beneficiary and he faces little competition from other mills\. He reinvests (ies)? the rental income in his farm, mostly for hiring labor and buying new seeds\. He farms 2 hectares of land and has two houses\. He is the village chief\. Other Notes The only condition for the owner to obtain the asset was that he was responsible for building a shelter for the machine\. Ever since obtaining the asset in 2012, the machine has broken down three times, and the technician has to come all the way from Malawi to fix it\. He has to pay approximately Mt 9,000 to repair it each time\. The machine is currently broken, and the owner is waiting to receive money from his son (who runs a small shop) to fix the machine\. He hopes to get it fixed by December\.  47 ANNEX F Region Morrumbala Locality Chare CAEIF asset 45 boxes + kit for type producing honey Individual or Individual (male) Asset functional? community Yes infrastructure Does the asset The beneficiary was producing honey before the World Bank increase project, but was using traditional methods that were not productivity efficient\. So the assets did improve his productivity\. Similar to or lead to what the Association (of which he is the president) earns, the increased owner sells 0\.5 liters of honey for Mt 100\. This honey is well income for processed and packaged\. The beneficiary was first trained by beneficiary the technicians and was then provided with the boxes, without (ies)? having to submit any proposal\. The beneficiary reinvests the additional income from the honey production in his farm, house, and savings and lending group\. He sends the boxes to the local carpenter whenever they need repairs\. Other Notes The beneficiary owns 4 hectares of land and cultivates sesame, peanuts, cotton, maize, sorghum, and beans\. He also does work at other people’s farms\. According to the beneficiary, receiving cattle would have been more beneficial to him, but all cattle were already distributed by the time the association was set up\. ANNEX F 48 Region Morrumbala Locality Chare CAEIF asset Community forest type Individual or Individual and Asset functional? community community Yes infrastructure infrastructure Does the asset According to the owner of the land on which the community increase forest is established, this forest provides a good source of productivity firewood to the community and also a place for cattle to graze\. or lead to The project only provided a few honey boxes (to be erected in increased the forest) and related kits to the land owner as an incentive for income for him to maintain the forest\. beneficiary (ies)? Other Notes According to the owner, this forest existed prior to the project, so the project itself didn’t contribute to establishing the green cover\.  49 ANNEX F Region Mutarara Locality Villa Nova CAEIF asset type Silos (4) Individual or Individual asset Asset functional? community 2 were functional, 2 were not infrastructure Does the asset Overall, he found the silo to be the most beneficial thing for improving increase income because of the high returns he gets from selling his cereal crops\. productivity or lead to increased income The president of the CBO also benefitted from a loan from the savings and for beneficiary lending association formed by his group\. (ies)? Previously he kept his grain inside of the house; he increased income from the silo and from savings and lending\. Other Notes IEG visited three of four silos awarded to members of a CBO in Villa Nova\. The beneficiaries interviewed reported that only two of the four silos were currently working, the other two had completely eroded because they were left uncovered\. The recipients of the silos included the CBO president (and community facilitator), treasurer, secretary, and a general member\. The president indicated that the four people who received the silos were those that raised their hand when the community technician asked who wanted a silo\. He said the other community members were afraid, but now that they see the benefit of his silo (increased income because of his ability to store cereals), they also want a silo\. The top picture is the community facilitator with his functioning silo and protective shelter, the bottom is the remains of the silo that was left exposed to the rain\. ANNEX F 50 Region Mutarara Locality Villa Nova CAEIF asset type Market Individual or Individual asset Asset functional? community Building was intact, most sellers were outside infrastructure Does the asset The woman inside selling thought it was better because it was shaded; no increase increase in income noted\. productivity or lead to increased income for beneficiary (ies)? Other Notes IEG visited on market day\. There were many people at the market (very close to the border with Malawi), but most people were selling outside the market, with the exception of one woman\. IEG learned that only vendors selling produce or fish were allowed inside the market\. Most vendors at the market were selling clothing or ready-made foods, therefore they were not allowed inside\.  51 ANNEX F Region Mutarara Locality Jardim CAEIF asset type Grinding machine Individual or Individual Asset functional? community asset (male) Yes infrastructure Does the asset The owner saw increased income both from milling his increase own crops and from charging neighbors to mill their crops\. productivity or With the profits he has purchased cows and goats, and he lead to increased also uses the money for his children\. He was able to open income for a bank account with his profits\. beneficiary (ies)? The mill was functioning and there were multiple people waiting in line when IEG visited the asset\. Other Notes This mill was originally intended to be a group asset, but when the group was asked to provide an in-kind donation of a shelter, they did not want to contribute so the individual took the mill and built the shelter\. Previously the milling machine was 5 kilometers away\. The owner’s issue now is connectivity—it is very difficult and expensive for him to transport his milled grains\. Region Mutarara ANNEX F 52 Locality Sinjal CAEIF asset type Animal traction Individual or Individual asset (male) Asset functional? community Cows: No infrastructure Cart: Yes Does the asset The farmer received two cows, a plow, and a cart\. One increase cow died, so he cannot use the plow\. The plow still productivity or lead works, and sometimes he pushes it by hand\. to increased income for beneficiary He is part of a group that also received four cows, but (ies)? they no longer have those cows\. It was too expensive to hire someone to mind the cows; they went to the house of a group member and were stolen by thieves\. One of two carts given to the group is still functional, but they have no cows\. Other Notes All the animal traction equipment was reportedly free\. He says he was not given an option about which asset he received\.  53 ANNEX F Region Mutarara Locality Chembue Mapolano Inhangoma Didn’t see asset – far away from village CAEIF asset type Hammer mill (water powered) Individual or Individual asset (male) Asset functional? community No infrastructure Does the asset The farmer received a water-powered mill from the increase project; it lasted for four months\. He had money to fix it productivity or but did not, because the mill was not of high quality, and lead to increased therefore the quality of the meal it produced was poor\. income for beneficiary (ies)? Other Notes He says he was chosen to receive the asset because he would help others in the community\. ANNEX F 54 Region Mutarara Locality Chembue Mapolano Inhangoma CAEIF asset type Silo and animal traction Individual or Individual asset Asset functional? community (female) Yes infrastructure Does the asset Farmer received two cows, cart, plow, and seeding increase equipment, as well as a silo\. She said that because of productivity or the assets she has enough to eat and she also makes a lead to increased profit\. She saves the money that she makes and was income for able to open up an account at a commercial bank in the beneficiary (ies)? local town (she is the only woman in town that has a bank account, some of the men do as well)\. She also invests the money back into her 3-hectare farm\. Other Notes She is a community facilitator, and a member of a group that participated in savings and lending\. She thinks that women follow instructions (especially those of the technicians) better than men\. She also said that because men typically own assets, when women are given an asset they take good care of it because if they don’t, they may be beaten by their husbands\. Region Mopeia  55 ANNEX F Locality Sambala (Zero) CAEIF asset type Market Individual or Community Asset functional? community market Yes – damaged roof infrastructure Does the asset The community market led to a decrease in income for increase fish sellers compared with their location before productivity or construction of the market\. Previously they were located lead to increased next to a bus station, and now they are in a market that income for is difficult to see from the main intersection/transit area\. beneficiary (ies)? They estimated that because they are selling in the new marketplace, they make approximately Mt 100 less a day than they did when they were outside the market\. Other Notes Only fish are sold at the market, and it was all men except for one woman\. The community leaders decided that this market would be for fish, and now this is where they must sell\. The structure is relatively new—built in 2012—but the roof was partially destroyed by a storm, and has been for the past year\. The government charges Mt 10/day to rent a stall, and there are approximately 40 stalls\. ANNEX F 56 Region Mopeia Locality 24 de Julio (Mopeia-Sede) CAEIF asset type Silo Individual or Individual (male) Asset functional? community No infrastructure Does the asset Helped him earn more income when it was functional\. increase productivity or lead to increased income for beneficiary (ies)? Other Notes He reported that he received the silo because he is a community facilitator and one of the best producers in the community\. He received the silo along with three other members of his farmers’ association\. He originally had a covering for the silo, but it blew away and he didn’t have time to make another; therefore, the silo fell apart\.  57 ANNEX F Region Mopeia Locality Conho CAEIF asset type Silo and animal traction Individual or Individual Asset functional? community (Male) Animal traction: No infrastructure Silo: Yes Does the asset increase The animal traction never helped the farmer earn more income—the productivity or lead to beneficiary reported that the cows died shortly after they were received, increased income for only one remains, and the equipment (plow and cart) were of inferior beneficiary (ies)? quality and never worked properly\. The silo helps him store his grain and earn more income\. Other Notes He reported that he received the assets because he is a community leader\. From the project he received three cows, two plows, two carts, and one silo\. The cows had a calf, but now, because only one cow remains (the others died), he is unable to use them for anything\. Both carts and plows are broken; the beneficiary thought they were possibly secondhand and noted that they were of inferior quality\. He neither requested the assets nor paid for them, but was grateful to receive them\. He did contribute bricks for the silo, and constructed a shelter for the silo (excellent quality) and an enclosure for the cows\. ANNEX F 58 Region Mopeia Locality Rovuma (Conho) CAEIF asset type Market Individual or community Community Asset functional? infrastructure infrastructure No Does the asset increase N/A – market never completed productivity or lead to increased income for beneficiary (ies)? Other Notes Construction began in 2013; market is unfinished and the existing construction has significant damage (six major cracks in the walls, cracks along the foundation/floor)\. There are no steps and the wall is unfinished, lacks bathrooms as well\. The market was requested by the community and was intended for use not only for this community, but by local communities as well, and potentially as a place where local sellers could connect with wholesale buyers\. Beneficiaries were told that the government is still looking for budget to finish\. Region Mopeia  59 ANNEX F Locality Mopeia Sede CAEIF asset type Market Individual or community Community Asset functional? infrastructure infrastructure No Does the asset increase productivity or lead to increased income for beneficiary (ies)? Other Notes ANNEX F 60 Region Mopeia Locality Mopeia - Sede CAEIF asset type Bridge Individual or Community Asset community infrastructure functio infrastructure nal? Yes Does the asset Unknown increase productivity or lead to increased income for beneficiary (ies)? Other Notes Bridges were in workable condition; no railings but currently in use\. Located between large fields formerly used for rice\.  61 ANNEX F Region Mopeia Locality Campo Sede CAEIF asset type Animal traction Individual or Individual Asset functional? community No infrastructure Does the asset increase N/A – Was never able to use cows for plowing productivity or lead to (reported that they were not properly trained to increased income for plow), nor were they able to use the cart, as it beneficiary (ies)? broke shortly after they acquired it\. Other Notes Farmer received the assets because he was identified by the project coordinator (from Mopeia) after a visit as one of the highest producers in the area\. He has never owned animals (or animal traction equipment) before and did not receive training\. Even though he was unable to use the animals he has taken good care of them and hopes to grow the herd\. If he cannot train them for plowing, he will sell them later\. He reported receiving help on planting techniques, sun protection, and pesticides from technician\. He does not belong to any associations\. ANNEX F 62 Region Mopeia Locality Campo Sede CAEIF asset type Market Individual or Community Asset functional? community infrastructure Yes, but not being used infrastructure Does the asset increase N/A – not in use, hasn’t been since January productivity or lead to increased income for beneficiary (ies)? Other Notes This market, constructed in 2013, was the best equipped market seen during the IEG field mission\. There was a water pump, a rainwater catchment system, and functioning bathrooms, as well as a security booth\. The market had minimal cracks/damages in foundation but was still markedly better than other markets seen in the same district\. The market management committee reported that the market was not in use because there were floods that washed all the produce away so there was nothing to sell\. They do not charge for stalls, and when in use, the market is used for mostly fish and produce\.  63 ANNEX F Region Mopeia Locality Lua CAEIF asset type Silo Individual or Individual Asset functional? community Yes infrastructure Does the asset increase Farmer has seen an increase in income from her productivity or lead to silo, with the profits from the silo and animal increased income for traction (using cows to plow and using/renting beneficiary (ies)? cart) she has made enough money to send her kids to school and hired people to work her large (20- hectare) farm\. Silo is well maintained\. Other Notes She is a community coordinator and group leader for a group that received animal traction\. She reported that 12 of the group’s 28 cows were stolen, but the remaining cows are alive and helping to generate profit for her majority female group\. She is a widow, and has the largest farm that IEG encountered in the fieldwork; she farms 20 hectares (other farmers indicate they farm around 2–3, on average)\.  64 Annex G\. Map of the Project and IEG Assessment Areas

APPROVAL

P000259

Document de La Banque Mondiale FILE COpy A N'UTILISER QU' A DES FINS OFFICIELLES \. Rapport No\. 2382-UV REPUBLIQUE DE HAUTE VOLTA RAPPORT D'EVALUATION PROJET FORESTIER 27 d~cembie 1979 TRADUCTION NON-OFFICIELLE A TITRE D'INFORMATION Le present document fait "objet d'une diffusion restreinte, et ne peut etre utilise par ses destinataires que dans "exerclee de leurs fonctions offieielles\. Sa teneur ne peut etre autrement divulluee sans "autorisallon de la Banque Mondiale\.  Taux de change 1 dollar E\. U\. = CFAF 210 Poids et mesures 3 1 m3 (bois de chauffe foret naturelle) = 2 steres = 450 kg 1 m (bois de chauffe plantation) = 1,67 steres = 583 kg Exercice Financier ler janvier = 31 decembre SIGLES AVV Autorite pour l'Amenagement des Vallees des Voltas CCCE Caisse Centrale de Cooperation Economique CTFT Centre Technique Forestier Tropical FAC Fonds d'Aide et de Cooperation FAO Organisation des Nations Unies pour l'Agriculture et l'Alimentation FED Fonds Europeen de Developpement ISPO Institut Superieur Polytechnique de Ouagadougou ORD Organisme Regional de Developpement PAM Programme Alimentaire Mondial PNUD Programme des Nations Unies pour Ie Developpement USAID United States Agency for International Development VITA Volunteers in Technical Assistance  A N'UTILISER QU'A DES FINS OFFICIELLES HAtrrE-VOLTA RAPPORT D'EVALUATION PROJET FORESTIER Table des matieres Pa\!es I\. DONNEES DE BASE SUR LE SECTEtJ'R \. ,\. 1 A\. Renseignement generaux relatifs au projet \. 1 B\. Le secteur rural \. 1 C\. La- sous-secteur forestier \. \. \. \. \. \. \. 2 Ress ou-rces ,\. 2 Ins ti tu tions \. ,\. 4 Les projets forestiers \. \. ) Ed\.ucation forestiere \. "\., \. , \. ,\. 6 Recherche forestiere \. ,\. , , \. , \. , \.~\. \. 7 Objectifs et strateg\.l\.es \.,\. 8 II\. L'\' ZONE DU PROJET \. 9 In t\.rocu c tion \. , \. ,\. 9 C:i!:l\.at, topographia e: sc:\.:; \. "\. 9 ?opulation ur~aine at ~cnsorematicn de bois\. \. 10 Commerce et traitement du bois \. \. \. \. 10 II 1\. LE ?ROJET A\. Breve description \. "\.""\. 12 B\. Description detaillee au projet \. 13 Renforcement de l'Administration forestiere \. 13 Operations fo,restieres \. " \. " \. " \. "\. 14 Etudes et formation \. 16 C\. Estimation des couts du projet et financement \. 18 Est1ma\.tiOll des couts \. 18 Financement propose \._\. "\. 20 D\. Passation des marches et deboursements \. 22 E\. Comptabilite, expertises comptables et rapports \. 24 Ce rapport a ete etabli a partir des observations d'une mission d'evaluation ae l'IDA en Haute-Volta enoctobre 1978 et d'une mission d~ postevaluation en avril 1979\. Lapr~iere mission etait composee de MM\. J\. Gorse, C\. Bolduc, T\.Winston (IDA) et C\. Bailly (Consultant); la seconde, de MM\. C\. Bolduc et J\. Gorse (IDA)\. Le present dOCtl\. \. \.t 'ait I'objet d'ullt atlasion restmaR, It 1M petit itre utilise \. ses \. \. destina\.aires __ "ns I'exercice de ae\.4'!J 'ondions officielles\. Sa liHetIl' ne \.t eve aulrement dl,\.lpft sans l'autoriut,iOll la Banque Mondiale\.  - ii Table des matieres (suite) Pages IV\. OR~~ISATION, PERSONNEL ET EXECL~ION \. 25 A\. Organisation\. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. 25 Direction des etudes et de la planiiication \. \. 26 Direction de l'amenagement forestier et du reboisement \. 26 B\. Personnel\. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. 28 C\. Execution du proj et \. 29 V\. PRODUCTION, MARCHES, PRIX E! REVENUS \. 31 A\. Production\. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. 31 B\. Marches\. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. 32 C\. P=ix\. 33 D\. Revenus\. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. 34 ~- \. : J\.-\. AVA\.~"'!AG:::S ::::- \.;~ST!FICATION DU: \.?P'O\.J~T \. \. , -~ \.: \. Avan:ages \. \. 35 B\. Analyse economique \. \. \. \. 36 C\. Ar\.alyse cie sensibilite \. \. 37 Autres =is~ues '\.f' ,--- 'i J\.~\. ACCORDS CO~iCLCS E! RECO!-l!1A};1)AT!O:;" \. \. \. Couts totaux du projet par categorie de depenses et par cotIlposante TT \. _\. Couts totaux du projet par compos ante et par an III\. Couts totaux du projet par categorie de depenses et par an IV\. Couts totaux annuels l\. Renforcement de 1 'Administration rorestiere 2\. Plantatiou forestiere en sec 3\. DevelO1'pement de la foret naturelle 4\. Entretien des plantations forestieres FAO/PNUD 5\. Bois ruraux 6\. Etudes et formation r\. 1\. Recapitulation: personnel voltaique supplementaire lie au projet 2\. Personnel supplementaire lie au projet VI\. Couts de la main-d'oeuvre saisonniere VII\. Salaires des fonctionnaires VII!\. Production de bois totale IX\. Production et vente de bois durant le projet X\. Plantation forestiere en sec - couts directs et recettes a l'hectare XI\. Amenagement de la foret naturelle - couts directs et recettes a l'hectare XII\. Plan detaille de financement  - iii Tables des matieres (suite) XIII\. Prevision des retraits de fonds XIV\. Estimation des flux monetaires XV\. Analyse eeonomique 1\. Diminution de l'exp1oitation des forets non elassees 2\. Plantation forestiere en sec GRAPHIQUE I\. Organigramme - Administration forestiere CARTES Couvert forestier, forets elassees et pares nationaux - Haute-Volta (BIRD 14036) Foret elassee de Maro (BIRD 14037)  HAUTE-VOLTA PROJET FORESTIER I\. DONNEES DE BASE SUR LE SECTEUR A\. Renseignements generaux relatifs au projet 1\.01 La terrible secheresse qui a seV1 au debut des annees 70 a amene les pays bailleurs d'aide, les organismes de developpement et les representants des six pays saheliens a organiser en 1976 une conf~rence visant a examiner les pos sibilites d'amenagement forestier au Sahel\. Pendant cette conference, les parti cipants ont soumis une liste de propositions de projets forestiers\. Dans Ie cadre du Programme de cooperation FAO/Banque mondiale, une mission s'est rendue au Niger, au Mali et en Haute-Volta en fevrier/mars 1977 et a conclu que, dans chacun de ces pays, un projet forestier serait justifie si lIon donnait la prio rite aux objectifs suivants : a) arreter Ie phenomene de desertification qu'entraine, tout aut~ur des grandes zones urbaines, l'exploitation de la "brousse" arboree natu relle pour la production de bois de feu et amenager des plantations irriguees et/ou en sec pres des principales villes afin d'ameliorer la situation; b) soutenir les activites forestieres en zones rurales pour que les villageois s'interessent davantage aux prograIT~es de reboisement et de protection; c) ameliorer la gestion et la protection des forets naturelles; et d) renforcer les institutions dans Ie secteur forestier\. 1\.02 Par la suite, deux projets de foresterie, l'un au Niger (projet pilote et d'assistance technique), l'autre au Mali, ont ete prepares, evalues et approu ves par Ie Conseil des Administrateurs Ie 16 mai 1978 et Ie 6 mars 1979, respec tivement\. Pour la Haute-Volta, un rapport de preparation de projet a ete prepare dans Ie cadre du Programme de cooperation FAO/Banque mondiale et a ete soumis a la Banque en juillet 1978\. L'evaluation du projet s'est deroulee en octobre 1978, suivie d'une mission de postevaluation qui s'est rendue sur place en avril 1979\. B\. Le secteur rural 1\.03 La Haute-Volta a une superficie de 274\.200 km 2 et une population qui atteint pres de 6 millions d'habitants (22 habitants au km 2 ) et s'accroit de 2 % par an environ, Ie taux de croissance atteignant 5 % dans les villes\. Quelque 90 % de la population vivent de l'agriculture, de l'elevage et de l'exploitation de la foret\. Le revenu par habitant est de 118 dollars (estimation de 1977), ce qui fait du pays l'un des 25 les plus pauvres du monde\. De 1974 a 1977, la crois sance du PNB en termes reels s'est elevee en moyenne de 5 a 5,5 % par an\. L'agri culture represente environ 35 % du PNB, l'elevage 11,6 % et la foresterie (compre nant la chasse et la peche) 6,5 %\.  - 2 1\.04 Sur Ie plateau centre-nord, reg~on la plus densement peuplee de Haute-Volta, la production agricole (surtout de denrees alimentaires) depasse a peine Ie niveau de subsistance, malgre tous les efforts deployes ces 15 der nieres annees pour la faire augmenter\. Ce sont surtout la pauvrete des sols, l'irregularite et la faiblesse des precipitations, l'erosion due a une utili sation trop poussee des terres par les hommes et Ie betail qui ont freine Ie developpement de cette region\. A l'Ouest et au Sud-Ouest, la ou les conditions ecoclimatiques sont plus favorables et ou la densite de population est moins elevee, l'agriculture est plus diversifiee\. Dans cette region, Ie developpe ment est surtout entrave par la pauvrete des sols et la presence de l'oncho cercose\. En Haute-Volta, les cultures vivrieres de base sont Ie mil, Ie sorgho et Ie mais; certaines regions produisent egalement du riz, des patates douces, des arachides, du sesame et des amandes de karite; Ie coton est la prin cipale culture commerciale\. 1\.05 Le secteur de l'elevage, qui realise 25 % environ des recettes d'expor tation du pays, revet une importance vitale pour l'economie, mais se heurte a de graves difficultes, en particulier les periodes cycliques de secheresse, Ie sur paturage, l'insuffisance des points d'eau et la concurrence croissante des cul tures vivrieres\. Depuis 1976, l'IDA apporte son concours au developpement de l'elevage dans Ie sud-ouest du pays (Credit 557-UV, de 9 millions de dollars)\. 1\.06 De plus, l'IDA contribue au financement de trois projets agricoles en cours d'execution : Bougouriba I (Credit 496-L~), d'un montant de 8 millions de dollars; Ie Projet de developpement agricole en Volta occidentale (Credit 706-~1), de 3,6 millions de dollars, ces deux projets etant situes au sud-ouest du pays, et Ie Deuxieme projet de fonds de developpement rural (Credit 640-u~), de 9,4 millions de dollars, qui interesse essentiellement Ie plateau Mossi\. 1\.07 La strategie du Gouvernement dans Ie secteur rural vise en particulier a : a) intensifier la migration du plateau centre-nord, fortement peuple et assez infertile, vers l'ouest et Ie sud-ouest, regions ou la population est moins dense et ou Ie potentiel agricole est favorable; b) developper l'agriculture en sec et promouvoir de meilleures pratiques agricoles tout en integrant les cultures a l'elevage; et c) developper de plus en plus l'agriculture irriguee\. C\. Le sous-secteur forestier Ressources L 08 Les forets de Haute-Volta sont caracterisees par une "brousse" arboree parsemee de petites zones de forets relativement denses\. Cinq pour cent du pays sont recouverts par une vegetation arboree guineenne et ont une pluviometrie d'environ 1\.200 mm; 85 % sont recouverts d'une savane soudanienne avec des arbres  - 3 de taille moyenne et une pluviometrie allant de 600 a 1\.200 mm, les 10 % res tants sont recouverts d'une savane arbustive sahelienne ou la pluviometrie est inferieure a 600 mm\. Sur les 27 millions d'ha que couvre la superficie totale de la Haute-Volta, 15 millions d'ha environ (ou 55 %) sont recouverts par une Ifbrousse lf arboree naturelle peu productive, dont environ 3,5 millions d'ha ont ete classes comme parcs, reserves de faune et forets classees\. Les plantations forestieres, qui ne representent qu'environ 6\.700 ha, sont principalement consti tuees d'especes a croissance rapide, telles que l'eucalyptus, Ie gmelina arborea, Ie neem et Ie teck\. La plupart de ces plantations sont situees autour de Ouagadougou et Bobo-Dioulasso\. A l'exception du projet de plantation d'anacardium (cashew), pres de Bobo-Dioulasso, toutes les plantations sont destinees a produire du bois de feu et de service et sont situees dans la zone soudanienne\. De nombreux bois de village ont ete plantes par les ecoles, les organisations de jeunesse et d'autres groupes\. Cependant, beaucoup de ces bois de village sont en piteux etat, principalement a cause du manque d'entretien\. 1\.09 Le secteur forestier represente environ 6,5 % du PNB (y compris la chasse et la peche) et environ 9,3 % des exportations (amandes de karite)\. Cependant, ces chiffres ne refletent pas fidelement l'importance du role joue par Ie couvert forestier naturel et la "brousse", qui fournissent du bois de feu et de service et d'autres produits forestiers de cueillette pour les besoins elementaires de la population\. En 1978, les besoins totaux en bois de feu pour la Haute-Volta ont ete estimes a 4,8 millions de m3 (2,2 millions de tonnes) sur la base d'une consommation annuelle moyenne estimee a 0,7 m3 par personne (315 kg) dans les zones rurales et a 1,2 m3 par personne (540 kg) dans les zones urbaines\. Le taux de consommation moyen est plus faible dans les zones rurales du fait de l'usage extensif de tiges de mil comme combustible durant six mois de l'annee\. Sur la consommation estimative totale de bois de feu du pays, 0,8 million de m 3 ont ete consommes en 1978 dans les zones urbaines et 4,0 millions de m3 dans les zones rurales\. La consommation de bois des "dolotieres" (fabricants de biere de mil) est estimee a 14 % de la consommation totale de bois de feu\. Un pour cent seulement de la production totale de bois de feu est consomme sous forme de charbon de bois\. Le bois de service represente une consommation supplementaire de 0,5 million de m3\. En plus du bois de feu\. Ie couvert forestier naturel fournit des fruits, du fourrage arbore et des reserves de paturage de saison seche pour l'elevage et il protege les sols de l'erosion; mais ce qui est par ticulierement important, c'est que sous forme de jachere forestiere, Ie couvert fares tier regenere la fertilite des sols dans Ie cadre du systeme traditionnel de culture itinerante\. 1\.10 Dans les zones relativement tres peuplees, principalement dans Ie plateau du Centre-nord (Mossi), la coupe du bois de feu et de service, specia lement dans les jacheres forestieres et les zones forestieres non classees, a amene un declin du couvert vegetal et un danger accru de destruction pour les ecosystemes\. De plus, beaucoup d'autres regions du pays commencent a souffrir du rapide declin des possibilites d'approvisionnement naturel en bois de feu et de service\. Les besoins totaux de bois de feu et de service du pays en 1978  - 4 correspondent a un taux de coupe moyen de 0,30 m3 /ha, si l'on retient 17 millions d'ha de couvert forestier (y compris 1es jacheres forestieres)\. Compte tenu des taux de croissance de 1a population en Haute-Volta, ce taux atteindra bientot 0,35 m3 /ha de production potentie11e du couvert vegetal (par\. 1\.03)\. La pression demographique represente egalement un facteur supplementaire de declin du couvert vegetal du fait que lIon defriche de plus en plus la foret pour obtenir des ter rains de culture et des paturages supplementaires\. Le taux de destruction des zones de forets non classees du fait des defrichements agricoles, du surpaturage et des feux de brousse se situe entre 50 et 100\.000 ha par an\. Institutions 1\.11 En Haute-Volta, les activites liees a la foresterie relevent du Ministere de l'environnement et du tourisme (Organigramme I)\. Ce Ministere a ete reorganise en aoGt 1979 et comprend a present un poste de Directeur general de l'environnement sous l'autorite duquel ont ete groupees les cinq directions situees au siege plus une nouvelle section qui traite de l'administration et des finances\. La Direction generale est egalement chargee de coordonner les activites de quatre services regionaux appeles Inspections departementales\. Les cinq directions du siege sont: la Direction de l'amenagement forestier et du reboisement; la Direction des parcs nationaux et des reserves de faune; la Direction de la peche et de la pisciculture; la Direction de l'environnement urbain; et la Direction des etudes et programmes\. Les deux dernieres de ces directions ont ete creees lors de cette reorganisation\. Un certain nombre d'institutions semi-autonomes, parmi lesquelles figurent l'Ecole forestiere de Dinderesso (par\. 1\.20), Ie Centre technique forestier tropical (CTFT) (par\. 1\.22) relevent directe~ent du Ministre\. D'autres qui traitent d'activites touristiques dependent Sgalement de ce Ministere et relevent de la Direction generale de l'Office national du Tourisme\. 1\.12 La nouvelle Direction generale est chargee de formuler la politique et de suivre l'evolution de l'environnement en general et de la foresterie en parti culier\. Elle sert egalement d'organe de liaison avec d'autres ministeres et ins titutions avec lesquels elle collabore pour l'etablissement de la politique en matiere d'utilisation des terres\. Elle est appuyee dans cette tache par la nou velle Direction des etudes et programmes, dont les responsabilites vis-a-vis des questions liees a la foresterie comprennent: a) Ie regroupement, la collecte et l'interpretation de donnees; b) la tenue d'un inventaire forestier; et c) la preparation, la planification et la supervision des projets\. 1\.13 La Direction de l'amenagement forestier et du reboisement conserve la plupart des fonctions d'exploitation de l'ancienne direction qui portait Ie meme nom, et elle est responsable: a) de la protection, de l'amenagement, du reboise ment et de l'exploitation du domaine forestier national; b) de la fourniture d'un appui operationnel pour la tenue de l'inventaire forestier; c) de la surveillance de l'exploitation des forets non classees; et d) de la collecte des taxes d'abat tage et autres recettes du meme ordre\. 1\.14 Le Ministere dont releve plusparticulierement la foresterie ne dispose actuellement que de six cadres de niveau A, dont trois sont actuellement en train d'etudier a l'etranger\. Les Inspections departmentales disposent d'un effectif de 216 personnes dont les Directions de la foresterie, des parcs et de la peche  - 5 se partagent les services\. En raison de son effectif restreint, surtout au niveau des cadres, l'Administration forestiere 1/ ne peut entreprendre que des travaux modestes et ne peut s'acquitter de la plupart de ses responsabilites\. La situation se trouve considerablement aggravee par une insuffisance generale de res sources : credits, materiels, vehicules et fournitures\. De ce fait, la Direction de l'amenagement forestier et du reboisement ne peut assurer la sur veillance et la protection necessaires des forets contre les coupes illicites, les defrichements ou les incendies et, exception faite de la perception de taxes sur Ie bois de feu, l'exploitation des ressources en bois du pays est presque totalement incontrolee\. 1\.15 L'Autorite pour l'amenagement des vallees des Voltas (AVV) joue egale ment un role dans Ie sous-secteur forestier\. Cette institution autonome du Minis tere du Plan detient l'entiere responsabilite du developpement desdites vallees tant pour ce qui est du secteur forestier que des autres secteurs\. Elle contrale environ 16\.000 ha de forets naturelles dans la region de Ouagadougou, tandis que l'Administration forestiere exerce sa responsabilite sur Ie reste du pays\. Bien que l'AVV travaille actuellement a l'execution d'un projet forestier finance par la Caisse centrale de cooperation economique (CCCE, France), elle a peu de con tacts avec l'Administration forestiere\. La Direction de l'AVV se montre reticente a autoriser l'Administration forestiere a etendre son activite a la region relevant de la competence de l'AVV tant que cette administration ne se sera pas dotee de moyens operationnels plus etendus\. Les projets forestiers 1\.16 Un nombre considerable de projets interessant Ie domaine forestier et finances par des institutions d'aide exterieure sont a des stades divers d'ache vement ou de preparation dans l'ensernble du pays\. Ces projets cornportent la creation de vastes plantations forestieres, la reconstruction de l'Ecole fores tiere de Dinderesso (par\. 1\.20), des bois de villages et la creation d'un centre national de multiplication de semences (qui pourrait egalernent fournir des semences aux autres pays saheliens)\. Les organisations participant aces activites sont notamment a) des institutions bilaterales d'Allemagne federale, de France (FAC, CCCE), des Pays-Bas, de Suisse, des Etats-Unis et du Canada; b) des institutions multilaterales telles que Ie FED et Ie PNUD/FAO; et c) des organisations non gouvernementales telles que Ie Conseil mondial des eglises, Ie Secours catholique, OXFAM et AFRICARE\. Alors que certains de ces projets sont mis en route en etroite liaison avec l'Administration forestiere (par exemple, Ie projet allemand), cette administration fournit peu de coordination ou d'assistance a ces institutions tant pour l'elaboration que pour la realisation des projets\. 1/ En raison du nombre de services administratifs et de services de soutien qui s'occupent du sous-secteur forestier, a moins d'une indication contraire, l'expression Administration forestiere designera dans Ie present rapport la Direction generale, les Directions du siege et las Inspections departementales, dans leurs fonctions liees a la foresterie (voir par\. 1\.11)\.  - 6 1\.17 En 1975-77, 1e premier projet forestier FAO/PNUD (UPV/72/029) a permis d'amenager environ 1\.650 ha de plantation d'especes a croissance rapide (gme1ina, eucalyptus, neem et cassia) en quatre endroits differents dont trois (67 % des surfaces) sont pres de Ouagadougou et 1e quatrieme pres de Bobo-Diou1asso\. Ce projet est main tenant termine et 1es plantations ont ete remises a 1a Direction des forets afin d'etre entretenues (par\. 3\.07)\. Un second prajet (UPV/78/004) a ete negocie recemment avec 1e Gouvernement - son cout est estime a 634\.000 dol lars pour environ 106 mois d'assistant technique (y compris 27 mois de consultant) a repartir sur une periode de trois ans, de 1979 a 1981\. Les objectifs et 1a mise en oeuvre de ce second projet FAO/PNUD seront etroitement lies a ceux du projet propose par l'1DA (par\. 3\.04)\. 11s consisteront principa1ement a entre prendre 1es etudes de base necessaires pour renforcer l'Administration forestiere\. Education forestiere 1\.18 Le personnel forestier de 1a Haute-Volta est reparti en quatre categories : Niveau A Niveau de gestion, divise en deux sous-groupes : A1 (1ngenieurs des eaux et forets) pour ceux qui ont SU1V1 des etudes forestieres equiva1entes ou superieures au niveau de 1a licence\. A2 (1ngenieurs des travaux) pour ceux qui ant suivi des etudes techniques forestieres avancees\. Niveau B (Contro1eurs), niveau intermediaire pour 1es forestiers techniciens\. Niveau C (Agents techniques) pour 1e personnel de grade superieur travai11ant sur 1e terrain\. Niveau D (Preposes) pour 1e personnel suba1terne travai11ant sur 1e terrain\. 1\.19 L'1nstitut superieur poly technique de Ouagadougou (1SPO) de l'Univer site de Ouagadougou, fonde en 1973, dispense une formation forestiere de niveau universitaire\. La formation universitaire au-de1a de 1a licence s'acquiert gene ra1ement a l'etranger et est norma1ement financee par l'aide bi1atera1e\. Sur 1es 20 premiers etudiants qui seront dip10mes de l'1SPO en 1979, trois ont choisi 1a foret\. On espere que l'engouement actue1 pour 1a foresterie encouragera des etu diants a opter pour ce sous-secteur; 1e projet fournira des encouragements supp1e mentaires (par\. 3\.02 (c) et 3\.12)\. Une partie du projet d'education de 15,5 mil lions de dollars beneficiant d'une aide de l'USA1D vise a renforcer l'1SPO de maniere a porter 1e nombre de dip10mes de niveau A1 en agriculture, e1evage ou foresterie de 20 a 25 par an\. Le projet vei11era tout particu1ierement a ame 1iorer 1a qua1ite de l'enseignement offert par l'1nstitut et a renforcer son personnel enseignant\.  - 7 1\.20 Un autre projet d'education assiste par l'USAID et s'elevant a 7,4 millions de dollars entrepris en 1979 vise a remettre en etat et agrandir l'Ecole forestiere de Dinderesso, en rempla~ant les installations delabrees actuelles, afin de former du personnel des niveaux C et D\. Le projet permet tra a l'ecole de fournir aux etudiants forestiers une formation theorique et pratique (cette derniere leur sera donnee dans la foret classee situee pres de 1'ecole), et de former chaque annee 30 agents de terrain de niveau D et 10 de niveau C\. La formation de niveau D durera un an et celIe de niveau C deux ans\. 1\.21 II n'y a pas actuellement d'etab1issement qui assure specifiquement 1a formation des agents de niveau B\. Actuellement, ces agents sont formes en Cote d'Ivoire, au Mali et dans differentes ecoles europeennes\. L'Ecole fores tiere de Bouake, en Cote d'Ivoire, est en cours d'agrandissement et il est prevu qu'e1le sera partiellement operationnelle en 1979 et totalement en 1980\. Cepen dant, la formation des agents de niveau B en dehors du pays ne serait necessaire que pour quatre ou cinq ans, puisque Ie projet USAID ci-dessus est con~u pour inclure par la suite une formation de niveau B a l'Ecole forestiere de Dinderesso, eventuellement dans une seconde phase\. Recherche forestiere 1\.22 En Haute-Volta, l'ensemble de la recherche scientifique depend, quant a ses orientations de base, du Conseil national de la recherche scientifique et technique (CNRST) dent la principale tache est de coordonner les activites et les programmes definis par des groupes ou comites secteriels specialises\. Le sous-secteur forestier releve du Comite specialise de la recherche agrono mique\. Les programmes specifiques de recherche forestiere sont realises, sous la responsabilite administrative de l'Administration forestiere, par Ie Centre technique forestier tropical (CTFT), installe en Haute-Volta depuis 1960 dans Ie cadre de l'aide bilaterale fran~aise\. A une plus petite echelle, Ie Centre voltaique de recherche scientifique (CVRS), qui depend du Ministere de l'educa tion superieure, a realise, il y a quelques annees, un excellent travail de recherche botanique\. 1\.23 Trois grands programmes de recherches sont realises par Ie CTFT en Haute-Volta: a) sylviculture de l'eucalyptus et selection de graines pour la zone sahlo-soudanienne; b) etudes d'especes exotiques diverses autres que 1 'eucalyptus; et c) recherches sur des especes locales de la zone sahelienne\. Les experiences realisees au cours du premier programme ont donne des resultats prometteurs quant aux provenances d'especes (specialement avec lIE\. camaldulensis) et aux techniques de plantation\. Ces programmes ont ete realises principalement dans la region de Ouagadougou et a une petite echelle a Bobo-Dioulasso\. Le per sonnel du CTFT comprend un chercheur forestier et trois techniciens, tousexpatries\. 1\.24 Les principaux problemes auxquels se heurte la recherche forestiere en Haute-Volta sont Ie manque de personnel voltaIque qua1ifie a tous les niveaux et Ie manque de moyens operationnels tels que credits, equipement et installations\.  - 8 - Objectifs et strategies 1\.25 L'objectif Ie plus hautement prioritaire du secteur forestier de la Haute-Volta est de renforcer l'Administration forestiere afin de la rendre capable de formuler une politique efficace et d'en faire une agence d'execution capable a) d'analyser les besoins et les ressources du pays en matiere de produits de la foret; b) de definir les priorites et les objectifs; c) de realiser et de coor donner les projets; d) de controler de fa~on suffisante l'ensemble de la produc tion; et e) de produire des revenus qui permettent de financer l'amenagement et d'autres programmes dans Ie sous-secteur forestier\. 1\.26 La seconde priorite est de concevoir dans Ie domaine de la foresterie rurale des mesures propres a assurer a l'avenir un ravitaillement suffisant en bois de feu, bois de service, fruits et fourrage forestiers des populations rurales qui representent a peu pres 90 % de la population totale et utilisent 80 % du bois de feu consomme\. Comme Ie couvert forestier naturel continue de decliner et la population de s'accro!tre, on s'attend que, d'ici 10 a 15 ans, Ie desequilibre entre l'offre et la demande so it tres fort, meme dans les regions bien pourvues en res sources forestieres\. De nombreuses zones rurales souffrent deja de penuries de bois\. C'est pourquoi il est imperatif de commencer d'experimenter, avec la participation active des populations rurales, des opera tions de foresterie rurale destinees a assurer un meilleur ravitaillement des villages en bois de feu et en bois de service\. L'experience montre dans ce domaine que les programmes passes, principalement la creation de bois de village et la lutte contre les feux de brousse, ont ete affectes par suite du desinteres sement des populations locales\. Autrement dit, de telles operations doivent etre reformulees (par\. 3\.10) de maniere a inciter les populations a participer\. On ne peut esperer de resultats rapides, mais il faut que Ie Gouvernement inscrive dans sa politique de developpement rural des efforts soutenus s'il veut s'assurer Ie soutien des villageois quant a la protection des forets et a la mise en oeuvre de programmes d'amelioration forestiere\. 1\.27 La troisieme priorite est d'ameliorer Ie ravitaillement en bois de feu et de service des principaux centres urbains par Ia creation de plantations fores tieres\. Cela aidera a : a) contenir l'accroissement rapide du prix du bois de feu, ce qui profiterait directement aux groupes urbains a faibles revenus et qui n'ont pas d'autres combustibles a leur disposition, et b) faire obstacle et eventuelle ment remedier au declin du couvert forestier naturel autour des villes, et ainsi prevenir toute autre destruction de l'environnement\. La pluviometrie dans la zone soudanienne (800 a 1\.200 rom par an) est suffisante pour obtenir des rende ments satisfaisants avec des especes selectionnees d'eucalyptus et de gmelina qui produisent de 5 a 10 m3 /ha/an\. 1\.28 Une quatrieme priorite est l'amenagement des forets naturelles classees\. Les forets classees de Haute-Volta ne font l'objet d'aucune technique d'amenagement moderne, principalement a cause du manque de moyens\. La mise en oeuvre de techniques connues auraient trois avantages dis tincts : a) elle ameliorerait de fa~on notable la production de bois tout en maintenant Ie couvert forestier; b) elle ferait tra vailler de fa~on plus efficace Ie personnel forestier forme; et c) si ces techniques sont convenablement appliquees, elles permettront de produire un revenu au moins egal aux couts d'amenagement\.  - 9 1\.29 En depit des efforts que le projet propose et les autres projets representent dans la lutte contre la destruction du couvert forestier, certains signes tendent a indiquer que la penurie de bois de feu pourrait augmenter (dos sier du projet, Annexe 11\.2)\. C'est pourquoi le Gouvernement accorde la plus haute priorite aux mesures de conservation et encourage un meilleur usage du bois (par exemple, construction de foyers qui peuvent reduire de moitie le volume de bois necessaire pour la cuisson journaliere) tout en recherchant des moyens economiques d'utiliser d'autres sources d'energie telles que l'ener gie solaire\. II\. LA ZONE DU PROJET Introduction 2\.01 Tandis que l'element du projet relatif au renforcement des institutions sera realise au siege de l'Administration forestiere, a Ouagadougou, les princi pales operations forestieres (creation de plantations en sec et gestion d'une partie de la foret naturelle) seront executees dans la foret classee de ~~ro (50\.000 ha) situee entre 50 et 100 km au nord-est de Bobo-Dioulasso (voir carte)\. Bien que Ouagadougou, plus densement peuplee, soit situee dans une zone plus deboisee, on a decide d'executer ce premier projet pres de Bobo-Dioulasso, parce que : a) la majeure partie des terrains qui peuvent etre boises auteur de Ouagadougou relevent de l'A\~ (par\. 1\.15) qui n'acceptera pas de laisser, a ce stade, l'Administration forestiere entreprendre une operation forestiere sur Ie territoire qui lui est assigne tant que cette derniere n'aura pas la capacite requise; b) une meilleure exploitation de la foret classee est non seulement souhaitable en soi, mais permettrait en outre de renforcer les institutions en assurant au personnel une formation en cours d'emploi et en lui donnant une experience pratique en ce qui concerne l'amenagement de plantations et les methodes modernes de gestion forestiere; c) sur un total de 12 projets (5\.000 ha de nouvelles plantations) finances par des organismes exterieurs et l'AVV depuis 1972, 10 projets (4\.000 ha) sont situes pres de Ouagadougou, contre deux seule ment (1\.000 ha) pres de Bobo-Dioulasso; et d) etant donne la situation actuelle de l'offre et de la demande a Bobo-Dioulasso, il ne devrait y avoir aucune diffi culte a ecouler le bois des plantations (defrichement et recolte)\. Climat, topographie et sols 2\.02 La foret classee de Maro est situee dans la partie sud de la savane soudanienne (par\. 1\.08)\. Le climat de cette region se caracterise par une saison seche de sept mois et une saison humide allant de juin a octobre, avec des preci pitations atteignant en moyenne 1\.180 mm par an\. Une grande partie de cette zone et la moitie environ des sols sont consideres comme impropres a la culture\. La foret c1assee de Maro est assez plate et facilement accessible par des routes a  - 10 viabilite permanente\. Dans le cadre d'un projet FAO/PNUD en cours d'execution (No UPV/72/029), on effectuera une etude de la vegetation dont les resultats devraient etre publies en 1979\. Une etude pedologique comprenant des photos aeriennes de la foret classee sera effectuee en 1979 grace a une avance au titre du Mecanisme de financement de la preparation des projets (par\. 3\.18), Sans prejuger les conclusions de ces etudes, on peut estimer sans risque que 30 % au moins de la foret classee de Maro conviendraient a la plantation d'especes a croissance rapide et que, de ce fait, il n'y aura probablement pas de diffi cultes a trouver des terres\. Population urbaine et consommation de bois 2\.03 L'agglomeration urbaine de Bobo-Dioulasso, ou l'on vendra la production de bois du projet, a une superficie de quelque 40 km2 et une population d'environ 130\.000 habitants qui s'accroit de 5 % par an\. Le bois de feu est de loin le principal combustible utilise pour la preparation des aliments; actuellement, la consommation est estimee a 150\.000 m3 par an et augmente au meme rythme que 3 la population\. La consommation par habitant est d'environ 540 kg par an (1,2 m ), chiffre normal pour les zones urbaines de Haute-Volta, et le prix d'achat moyen est de 10 francs CFA le kilo\. La consommation de bois de feu represente donc une depense annuelle de quelque 5\.400 francs CFA (25 dollars) par habitant, soit 21 % du revenu national par habitant, qui se chiffre a 25\.900 francs CFA par an (118 dollars)\. (On ne connait pas le revenu par habitant pour Bobo-Dioulasso\.) Cet ordre de grandeur a ete confirrre dans une etude independante realisee en 1976, selon laquelle 20 a 30 % du revenu des familles vivant dans les villes etaient consacres au bois de feu\. Commerce et traitement du bois 2\.04 Comme on n'a pas effectue a Bobo-Dioulasso d'etude fondamentale sur la commercialisation du bois comme a Ouagadougou, la mission d'evaluation a mene une breve enquete afin de determiner les caracteristiques de la commercialisation et de la consommation, ainsi que les prix du bois\. Pratiquement, tout le bois livre a Bobo-Dioulasso y est transporte par camion, tandis que, a Ouagadougou, on utilise tres largement, en plus des poids lourds (de 3 a 4 tonnes en moyenne) qui assurent environ 80 % du volume transporte, des camionnettes (1,2 tonne), des charrettes a ane (300 kg) et des bicyclettes (30 kg)\. A Bobo-Dioulasso, les camions vont chercher leur chargement dans un rayon pouvant atteindre 100 km\. Les camionneurs, selon le cas, ache tent le bois a des exploitants au bord de la route, ou emmenent avec eux leurs propres bucherons\. A ce stade, le prix du bois est d'environ 560 francs CFA/m3\. Le transport du bois par camion est plus econo mique et plus facile a controler pour l'Administration forestiere; on peut cons tater en effet, dans la comptabilite de l'Administration, que les droits d'abat tage payes par les transporteurs (environ 80 francs CFA/m3 ) procurent a celle-ci des recettes beaucoup plus importantes a Bobo-Dioulasso qu'a Ouagadougou\. 2\.05 D'un autre cote, si le transport du bois par camion est tout a fait acceptable a partir de la foret, il n'est pas aussi efficace quand il s'agit du transport a l'interieur de la ville pour la revente\. A Bobo-Dioulasso, il n'y a pas comme a Ouagadougou de marche central du bois ou les camions puissent livrer  - 11 tout leur chargement; Ie bois est vendu aux detaillants de chaque quartier en quantites diverses pour etre recoupe et revendu, ou il est debite et mis en fagots par Ie camionneur qui Ie vend de porte a porte\. De ce fait, Ie prix moyen global de revente est legerement plus eleve a Bobo-Dioulasso (10 francs CFA/kg) qu'a Ouagadougou (8 francs CFA/kg sur les marches; 10 francs CFA ailleurs)\. 2\.06 Hormis pour Ie bois de service, la Haute-Volta ne produit que tres peu de grumes et doit recourir, pour repondre a l'essentiel de ses besoins, a des im portations en provenance du Mali, du Ghana et surtout de Cote d'Ivoire, de loin son principal fournisseur\. La Haute-Volta importe du niangon, du samba (ou obeche) et du bete\. Elle n'a en service qu'une petite scierie situee a Banfora, pres de Bobo-Dioulasso, qui produit environ 1\.000 m3 par an\. 2\.07 Le charbon de bois, combustible dont Ie rendement est superieur a celui du bois et Ie cout de transport moins eleve, n'est pourtant guere utilise\. A Bobo-Dioulasso, ou les approvisionnements sont limites, Ie charbon de bois est offert essentiellement comme sous-produit du bois et sert a la preparation de "dolo" ou bi!re de sorgho\. En brousse, on fabrique aussi, dans des trous ame nages dans Ie sol, du charbon de bois qui est generalementtransporte a bicyclette, dans des sacs, jusqu'a la ville\. Ce sont les commer~ants (laveries et cafes) et certaines familIes a1sees qui en font la plus grosse consommation\. Actuellement, Ie charbon de bois se vend, d'apres les estimations, 25 francs CFA Ie kilo, ce qui Ie met hors de portee de la majorite de la population\. De plus, il n'est pas opportun de promouvoir Ie charbon de bois comme combustible domestique, car 11 necessite des poeles speciaux qui, malgre les frequentes vellei des auto rites d'en encourager l'utilisation, sont encore introuvables dans Ie COIT@erce a un prix raisonnable et dans des modeles adaptes aux pratiques culinaires tradi tionnelles (par\. 3\.10)\. 2\.08 Le meme probleme se pose pour les poeles a bois qui ne sont pas utilises en Haute-Volta\. La cuisine traditionnelle se fait sur une flamme a l'air libre, dans un chaudron pose sur trois pierres, methode d'un rendement tres faible (moins de 10 %) qui entraine une tres forte consommation d'energie (de trois a cinq fois superieure a celIe des pays developpes pour la preparation des repas)\. De l'avis general, la consommation de bois diminuerait considerablement avec l' adoption de poeles a bois economiques, efficaces et faciles a se procurer\. Plusieurs projets de construction de poeles a bois, finances dans Ie cadre du programme d'aide de la Republique federale d'Allemagne ou par des organismes tels que VITA, sont en preparation ou en cours d'execution, afin de resoudre ce probleme (par\. 3\.10)\.  - 12 III\. LE PROJET A\. Breve description 3\.01 Le present projet sera Ie premier projet forestier finance par l'IDA en Haute-Volta\. II durera cinq ans et representera la premiere phase d'une intervention dont la duree sera definie en grande partie en fonction d'etudes qui seront entreprises dans Ie cadre du projet\. Le principal but de ce projet est d'aider Ie pays a realiser l'ensemble de ses objectifs forestiers (par\. 1\.25 1\.29)\. Cela sera obtenu grace au renforcement de l'organisation centrale chargee de definir et d'appliquer la politique forestiere; cette organisation sera dotee des moyens de controler et de gerer les forets classees existantes et de moyens operationnels d'entreprendre a l'avenir un developpement forestier de grande envergure\. 3\.02 Le projet comprendra trois principaux volets, a savoir a) Renforcement de l'Administration forestiere par Ie financement de l'assistance technique, des bureaux, des vehicules, de l'equipement et des depenses de fonctionnement\. b) Operations forestieres i) creation de 1\.600 ha de plantations forestieres en sec dans la foret classee de Maro; ii) amenagement, a titre experimental, de 1\.000 ha supplementaires de foret naturelle dans la foret classee de Maro; iii) entretien de 1\.650 ha de plantations forestieres en sec creees entre 1975 et 1977 dans Ie cadre du Projet PNUD/FAO UV/72/029 (1\.110 ha dans la region de Ouagadougou et 540 ha dans la region de Bobo-Dioulasso); et iv) creation d'environ 325 ha de boisements ruraux dans la zone de l'Office regional de developpement (ORO) de Bobo-Dioulasso\. c) Etudes et formation\. Des etudes seront realisees afin : i) de deter miner la viabilite d'un Fonds forestier national; ii) d'examiner les possibilites en matiere de foresterie rurale; et iii) d'examiner la possibilite d'un projet de suivi\. Des fonds seront egalement fournis afin de permettre aux cadres des niveaux A et B de beneficier d'une formation specialisee dans des etablissements forestiers situes en Haute-Vol~a ou en Cote d'Ivoire et d'encourager des diplomes de l'Universite de Ouagadougou a suivre une carriere forestiere\.  - 13 B\. Description detaillee du projet Renforcement de l'Administration forestiere 3\.03 L'Administration forestiere, qui a ete reorgan1see recemment (par\. 1\.11 a 1\.13) sera renforcee par du personnel supplementaire, la fourniture de services de consultants, la construction de batiments pour les services techniques centraux, l'achat de vehicules et d'equipement, le paiement des depenses de fonctionnement correspondantes, ainsi que des indemnites du personnel du projet\. Durant les cinq annees du projet, le nombre des cadres et techniciens voltaiques travaillant au siege de la Direction a Ouagadougou passera de 2 a 35 (Annexe V\.2)\. Le per sonnel du siege comprendra 20 cadres de niveau A (contre 2 actuellement) dont 14 seront des forestiers et les autres des economistes, des comptables, etc\., le reste de ce personnel serait compose de forestiers des niveaux B et C, ainsi que de divers techniciens et personnel d'appui\. L'Administration forestiere sera egalement renforcee par sept agents recrutes internationalement, representant un total d'environ 18,5 annees d'expatrie 11 dont 16 hommes-annees durant les cinq annees de financement du projet par l'IDA et 2,5 hommes-annees durant l'annee precedant la mise en oeuvre du projet\. Sur ce total, 10 hommes-annees seront finances par le projet IDA, 6,5 par le projet FAO (par\. 1\.17 et 3\.04) et 2 par le projet en cours de l'Allemagne federale (par\. 1\.16)\. Ces specialistes seront charges d'assister le projet dans des domaines tels que l'administration generale et les finances, l'inventaire de la vegetation forestiere, la photo-interpretation, l'economie forestiere et la recherche\. Dne assistance comp1ementaire sera fournie grace au recrutement de consultants pour l'execution de diverses etudes (par\. 3\.10)\. Tant dans les mandats des experts que tout au long de l'execution du projet, l'on attachera une importance particuliere a la formation d'agents vo1taiques qui rem placeront 1es expatries progressivement pendant la duree du projet (Annexe V\.2)\. Les operations de terrain de l'Administration forestiere seront renforcees grace a l'achat de vehicu1es et d'equipement et au paiement des depenses de fonctionne ment correspondantes\. 3\.04 Le second projet forestier FAO/PNUD en Haute-Volta (UPV/78/004), entre pris recemment, comprend un certain nombre de taches qui contribueront au renfor cement de l'Administration forestiere et en particu1ier de 1a Direction des Etudes et Progtammes nouvellement creee (par\. 4\.03)\. Au debut, 1es agents du projet FAO/PNUD (voir plus haut) constitueront 1e premier noyau de ce service\. lls seraient remp1aces par 1a suite par des Vo1taiques pendant l'execution du projet finance par l'IDA (Annexe, Tableau V\.2)\. Les etudes a realiser dans 1e cadre du projet FAO fourniront des informations ainsi que des directives de base qui servi ront au futur developpement forestier de 1a Haute-Volta\. Ces etudes auront pour objet a) de fournir une analyse et une estimation provisoire des ressources fores tie res du pays ainsi qu'un bi1an des activites forestieres en cours; b) d'estimer le besoin en produits forestiers; c) d'identifier et d'evaluer l'uti1isation des produits de substitution; d) d'examiner le systeme de commercialisation ainsi que les reseaux de distribution des produits forestiers; et e) d'identifier les possibi1ites de deve1oppement\. 1/ Non compris deux specia1istes pour 1es operations forestieres (10 annees d'expert) (par\. 3\.06)\.  -14 Operations forestieres 3\.05 Plantation forestiere en sec (dossier du projet, Annexe II, Tableaux 4 a 12 et 16 a 18)\. Le but de ce valet est de mettre au point un ensemble de tech niques qui permettent de creer des plantations forestieres suffisamment importantes pres des centres urbains\. Ces plantations fourniront de fa~on continue du bois de feu aux populations urbaines et permettront ainsi de relacher la pression qui s'exerce sur la vegetation forestiere naturelle\. Une plantation de 1\.600 ha sera creee dans la foret classee de Mara\. Etant donne les types de sol et la pluvio metrie de cette region, la plantation sera effectuee a partir d'especes qui ant ete largement experimentees et ant donne des resultats satisfaisants, a savoir : gmelina (75 %), eucalyptus (20 %) et teck (5 %)\. Les travaux de plantation seront effectues en regie afin de fournir a l'Administration forestiere Ie personnel spe cialise et l'experience technique dont elle aura particulierement besoin pour creer des plantations\. Pour ce faire, l'Administration recevra des engins et de l'equi pement complementaires dans le cadre du projet (dossier du projet, Annexe 111\.17)\. Le programme de travail comportera la creation d'une pepiniere, des travaux de defrichement et de dessouchage, des travaux de defon~age afin d'ameliorer la capacite de retention d'eau du sol ainsi que des travaux de plantation et, pen dant deux ans apres la plantation, deux nettoyages par an\. Parallelement, et toujours en regie, l'Administration forestiere construira 25 km de routes d'acces, toutes les pistes de plantation et les pare-feu, ainsi que des logements pour les ouvriers et Ie personnel d'encadrement sur Ie terrain\. Le bois en provenance du defrichement et eu dessouchage de la foret naturelle serait debite, trie et trans porte pOUY 1a vente a Bobo-Dioulasso\. 3\.06 Les travaux de plantation seront faits durant la saison des pluies du fait que six semaines seulement par an conviennent pour la mise en terre des jeunes plants\. L'experience jusqu'a ce jour a montre que la reprise et 1a crois sance de ces jeunes plants etaient meilleures lorsque la preparation du terrain etait effectuee avec des engins au lieu de l'etre a la main\.l/ De plus, il y a peu de main-d'oeuvre disponible autour des zones de plantation et, durant la saison des p1uies, i1 est tres diffici1e de trouver des manoeuvres car c'est l'epoque des recoltes\. Par ailleurs, l'usage intensif d'ouvriers venant d'autres regions du pays necessiterait de lourdes depenses de transport et de logement\. Compte tenu des methodes utilisees,environ 85 journees de manoeuvre seront neces saires durant les trois premieres annees pour la creation d'un hectare de planta tion en sec (Tableau VI)\. De plus, du fait du manque d'experience technique des cadres voltaiques, la mise en oeuvre des volets plantation en sec et amenagement de la foret naturelle (par\. 3\.08) necessiteront l'affectation de deux specialistes recrutes internationalement pour un total de 10 annees d'expatries\. 1/ Alors que la preparation du terrain couterait a peu pres Ie meme prix, environ 1\.000 dollars/ha, les rendements varieraient grandement si la preparation du terrain etait faite mecaniquement et non pas manuellement\. Suivant Ie lieu, les rendements sur des terres preparees mecaniquement varient de 5 a 10 m3 /ha, alors qu'ils sont reduits de moitie avec une preparation manuelle\. Cette dif ference est due principalement aux labours et defon~ages profonds qui ne sont possibles qu'avec une preparation mecanique et qui donnent de meilleurs resul tats quant a la retention en eau du sol et au desherbage\.  - 15 3\.07 Entretien des plantations forestieres FAO/PNUD (par\. 1\.17) (dossier du projet, Annexe III, Tableaux 20 et 21)\. Ces plantations sont actuellement menacees par Ie feu, les mauvaises herbes et les coupes illicites du fait du manque d'entretien et de protection\. C'est pourquoi des credits sont prevus par Ie projet pour financer les vehicules, 1 'equipement , Ie personnel et les depenses de fonctionnement necessaires pour l'entretien des pare-feu, Ie desherbage et la surveillance\. Une premiere phase de ce programme (dossier du projet, Annexe 11\.6) sera executee avant la mise en oeuvre du projet et sera financee au titre du Mecanisme de financement de la preparation des projets (par\. 3\.18)\. 3\.08 Amenagement de la foret naturelle (dossier du projet, Annexe III, Tableaux 13 a 15)\. L'amenagement de 1\.000 ha de foret naturelle sera realise sur une base experimentale dans la foret classee de Maro\. On espere obtenir une meilleure regeneration et une meilleure croissance grace a des mesures de protection contre les defrichements et les feux de brousse ainsi quIa des coupes intermediaires et des coupes de regeneration, des semis complementaires, des hers ages et des desherbages\. L'application de ces techniques sera precedee par l'elaboration d'un plan d'amenagement comportant la selection du site, un inven taire forestier, Ie martelage des arbres ainsi que la construction des routes, pistes et pare-feu\. Des resultats prometteurs faisant apparaitre un accroissement regulier des rendements de 0,5 m3 /ha/an a 1,0 m3 /ha/an ont ete obtenus avec ces techniques au Nigeria, dans des zones ayant une pluviometrie equivalente a celIe de Bobo-Dioulasso\. On estime qu'environ 34 journees de main-d'ceuvre seraient necessaires durant les trois premieres annees d'amenage~ent pour arr\.enager l ha de foret naturelle\. 3\.09 Boisements ruraux (dossier du projet, Annexe 111\.22)\. Environ 325 ha de boisements de village ou familiaux seront etablis dans la zone de 1lORD de Bobo-Dioulasso\. Les plants seront fournis par la pepiniere de la plantation forestiere en sec de Maro\. Afin d'eviter des resultats aussi mediocres que ceux obtenus precedemment dans un cas semblable : a) la pepiniere fournira dans un premier temps uniquement les arbres d'ombrage, les arbres fourragers et les arbres fruitiers les plus demandes par les villageois; et b) l'on encouragera les plantations a l'interieur des concessions familiales plutot que la creation de bois communaux ou villageois\. Parallelement, une etude detaillee sera realisee dans Ie cadre du projet sur les possibilites forestieres rurales (par\.3\.10 (a))\. Les resultats de cette etude seront pris en consideration des qu'ils seront dis ponibles\. Les vulgarisateurs apprendront "sur Ie tas" les techniques de planta tions forestieres rurales et les differentes approches possibles pour encourager la participation des populations rurales\. Les agents d'encadrement des volets du projet plantation forestiere en sec et amenagement de la foret naturelle seront charges de dispenser cette formation\.  - 16 Etudes et Formation 3\.10 Trois etudes seraient effectuees dans le cadre du projet finance par l'IDA, a savoir a) Une etude de foresterie rurale, qui sera basee sur les prem1eres conclusions et recommandations des etudes de la FAO (par\. 3\.04) i\. comprendra une enquete nationale effectuee d'urgence et une evaluation des etudes et projets passes et presents sur l'utilisation des poeles a bois - les resultats et conclusions de cette enquete serviront de base au Gouver nement a) pour la mise en application de mesures - pendant l'execution du projet, a l'initiative d'une Administration forestiere renforcee et avec la cooperation des services de vulgarisation ce l'ORD et de divers groupes specia1istes de l'economie domestique et de groupes de femmes - destinees a promouvoir l'utilisation de poeles a bois fabriques avec des materiaux locaux, et b) pour la mise en oeuvre de mesures visant a instaurer une fabrication de serie d'appareils a combustion de bois pour la population; ii\. mettra l'accent sur les effets economiques au deboisement 3 partir de 20nes graphiques deterninees, l'etude fera l'historique du deboisement, du declin de 1a prodcctivite agricole qui en ~esulte et de ses effets sur le revenu agricole; determinera les differents types de consommation d'energie utilises et Ie degre de dependance des vis-a-vis des differents types de combustibles utilises pour 1a cuisson y conpris les residus animaux et vegetaux; deter minera dans quelle mesure 1a repartition des cultures depend de l'utilisation des residus animaux et vegetaux et qua1i fiera les effets de leur utilisation ou de leur non-utilisation sur 1a production agrico1e; etablira dans quelle mesure l'e1evage depend du paturage en foret et estimera les effets sur 1a production de l'elevage de l'absence d'arbres fourragers et de residus agrico1es; demontrera que 1es crues devastatrices des cours d'eau et l'envasement des barrages sont dus au deboisement et estimera leurs effets sur 1a production agricole; iii\. recherchera les moyens et methodes a mettre en oeuvre pour combattre 1es feux de brousse et e1aborera des propositions a long terme pour leur application, notamment pour 1a revision des lois en vigueur sur les feux de brousse; l'etude recher chera ega1ement les moyens d'eduquer et de motiver 1es popu lations rurales pour les inciter a la conservation et a 1a protection des forets et des jacheres forestieres;  - 17 iv\. comprendra une etude et une evaluation comparative des etudes et des projets passes et en cours concernant 1) un usage plus efficace du bois (promotion du charbon de bois, methodes de traitement du bois, etc\.) et 2) les techniques de motivation, les methodes d'education et les incitations des populations rurales a participer aux programmes de foresterie rurale\. Les resultats de cette etude serviront de base pour les recommandations a faire au Gouverne~ent en ce qui concerne la mise en oeuvre de projets ou l'execution de travaux de recherches comple mentaires; et v\. preparera des recommandations pour un volet de foresterie rurale d'envergure dans le cadre d'un projet de seconde phase\. b) Dne etude pour un Fonds forestier national (par\. 4\.06)\. Cette etude qui sera basee sur les resultats des etudes entreprises dans le cadre du projet FAO (par\. 3\.04) i\. demontrera la viabilite economique et financiere de creer un Fonds forestiernational dont les res sources proviendraient des revenus engendres par l'exploitation de la foret\. Son role sera de financer des projets afin d'acquerir et de maintenir suffi samment de recettes pour que la gestion du secteur forestier soit autosuffisante; ii\. etablira les criteres et parametres qui devront etre utilises pour la selection des projets qui seront finances par le Fonds; iii\. etablira les procedures qui devront etre utilisees pour l'acquisition des biens et services necessaires a l'exe cution des projets; iv\. deiinira les conditions qui regiront les relations entre le Fonds et l'Administration forestiere, determinera les implications legales de sa creation sur la base des lois et reglements en vigueur et specifiera les reglements legislatifs particuliers necessaires a sa creation; et v\. definira dans leurs grandes lignes les procedures adminis tratives et financieres qui devront etre utilisees par le Fonds\. c) Une etude de faisabilite pour une seconde phase du projet qui sera entreprise durant les deux dernieres annees du projet et tiendra compte des resultats des etudes ci-dessus\.  - 18 3\.11 On pense que 25 mois de consultant seront necessaires pour executer ces etudes\. Ce volet financera d'autres depenses telles que les achats de vehicules et leurs couts dlutilisation\. Les cadres de reference pour les etudes ci-dessus seront prepares au moment de la mise en oeuvre du projet car les donnees et infor mations de base dependront largement des resultats et recommandations des etudes FAO qui seront realisees au debut du projet et qui seront terminees vers Ie milieu de 1981\. 3\.12 Avec la mise en oeuvre des deux projets finances par l'USAID et totalisant 22,9 millions de dollars (par\. 1\.19 et 1\.20), la plupart des besoins en matiere de formation de personnel de gestion voltaique seront satisfaits\. Crest pourquoi Ie projet ne comporte pas de volet formation important, a l'exception de bourses pour les cadres des niveaux A et B afin qulils puissent acquerir une formation specialisee\. De plus, la Direction des etudes et programmes qui sera responsable de l'evaluation des besoins a long terme en personnel (par\. 4\.02) evaluera les besoins et les possibilites de formation, y compris la possibilite de creer un fonds pour des bourses, et formulera des recowmandations qui seront incluses dans la conception du projet de seconde (par\. 3\.10 c)\. C\. Estimation des Couts du Projet et Financement Estimation des couts 3\.13 Le cout au projet est estime a 17,5 millions de dollars dont 9,6 mil lions en devises\. Ces couts sont nets des recettes prcvenant des ventes de bois, qui ont ete deduites\. Les estimations sont recapitulees ci-dessous et en detail aux Tableaux I a IV en annexe\.  - 19 Recapitulation des couts nets du projet Monnaie Monnaie % des nationa1e Devises Total nationa1e Devises Total couts de base ---Millions de francs CFA--- ---~fil1ions de do1lars-- I\. Renforcement de 1a Direction des forets Infrastructure 26,9 40,3 67,2 0,1 0,2 0,3 Equipement 15,0 135,4 150,4 0,1 0,6 0,7 Personnel d'enca drement 208,9 208,9 1,0 1,0 Indemnites pour Ie personnel 157,5 157,5 0,8 0,8 Expatries et con sultants 396,3 396,3 1,9 1,9 Frais de fonc tionnement 240,8 240,7 481,5 1,2 1,1 2,3 Total partie1 649,1 812,7 1\.461,8 3,2 3,8 7,0 52 II\. Operations forestieres a) Plantation fores tiere en sec 1\.41,4 590,0 1\.031,4 2,1 2,8 4,9 b) Entretien planta tions forestieres FAO/PX["jj 13S ,5 31,9 17O,!\. 0,6 ),2 0,3 c) Amenagement rorer naturelle 71,3 66,7 138,0 0,3 0,3 1),6 d) Boisements ruraLiX 20,6 16,0 36,6 0,1 0,1 J , ') " Total ?artiel '571, (3 704,6 1\.376,4 3,1 3,4 6,5 Moins : Recettes provenant des ventes de1bois du projet-I (154,8) (154,8) (0,7) (0,7) Total partiel 517 ,0 704,6 1\. 221,6 2,4 3,4 5,8 43 III\. \. 2/ Etudes et f ormatlorr- 54,4 76,7 131,1 0,2 0,4 0,6 5 Couts de base 1\.220,5 1\. 594, ° 2\.814,5 5,8 7,6 13 ,4 100 Imprevus 429,2 423,6 852,8 2,1 2,0 4,1 Total des couts du projet 1\.649,7 2\.017,6 3\.667,3 7,9 9,6 17,5 1/ Annexe Tableau IX\. 7::\.1 Y compris environ 200\.000 dollars (4 mil1ions de francs CFA) pour 1a formation (par\. 3\.12)\.  - 20 3\.14 Les coyts du projet ont ete calcules nets de tous droits et taxes identifiables\. Le Gouvernement a exprime son intention d'exempter le projet des droits et taxes\. Les estimations des couts sont basees sur les prix et devis obtenus durant l'evaluation (fin 1978) et ont ete revisees au milieu de 1979, apres que les salaires ont ete augmentes de 10 a 20 % suivant les niveaux, et ont ete ajustees en fonction de la hausse des prix a la fin de 1979\. Les couts totaux comportent des provisions pour depassement des quantites egales a 10 % des estimations des couts de base des travaux de genie civil, des bati ments, des vehicules, de l'equipement, des depenses de fonctionnement et de la main-d'oeuvre saisonniere\. L'ensemble des provisions pour hausse des prix pre vue au cours des cinq annees d'execution du projet est d'environ 23 % des couts de base, y compris les provisions pour depassement des quantites\. Ces calculs ont ete effectues sur la base de previsions d'augmentation annuelle des prix durant la periode du projet de 9 % en 1980, 8 % en 1981 et 7 % par la suite pour les travaux de genie civil, les batiments, les vehicules, l'equipement, l'assistance technique, les depenses de fonctionnement, la main-d'oeuvre non qualifiee, la main-d'oeuvre qualifiee et Ie personnel d'encadrement voltaique\. 3\.15 Les couts moyens des services de consultants sont estimes a 10\.500 dollars par mois de consultant (y compris les avantages et indemnites de sejour)\. Le besoin total du projet en services de consultants est estime a 25 mois de consultants\. Le cout moyen d'un expatrie est estime a 100\.000 dol lars par an, dont environ 61\.000 dollars representent Ie traitement et les avan tages connexes\. Financeffient propose 3\.16 Le credit IDA propose de 14,5 millions de dollars financera 83 % des couts nets du projet (17,5 millions de dollars) et couvrira 94 % des depenses en devises etrangeres, soit 9 millions de dollars et 70 % des depenses en monnaie nationale, soit 5,5 millions de dollars\. La subvention FAO/P~~~ d'environ 0,6 million de dollars financera Ie reste des depenses en devises ou 3 % des couts totaux nets\. Le Gouvernement de Haute-Volta financera les 2,4 millions de dollars restants ou 14 % des couts totaux nets\. Dne recapitulation du finan cement propose \.figure ci-dessous\. Les details figurent au Tableau XII\.  - 21 - RecaEitulation du financement EroEose (y compris les imprevus) Total IDA FAO/PNUD Etat -----en millions de dollars---- I\. Renforcement de l'Administration forestiere Couts en devises 4,9 4,3 0,6 Couts en monnaie nationale 4,1 2,8 1,3 II\. °Eerations forestieres Couts en devises 4,2 4,2 Couts en monnaie nationale 3,5 2,4 1,1 III\. Etudes et formation Couts en devises 0,5 0,5 Couts en monnaie nationale 0,3 0,3 Total 17,5 14,5 0,6 2,4 Pourcentage 100 83 3 14 3\.17 Les contributions combinees de l'IDA et de la FAO et du PNUD finance ront un total de 15,1 millions de dollars, ou 86 % des couts totaux du projet (17,5 millions de dollars)\. Cette somme couvrira 100 % des depenses en devises soit 9,6 millions de dollars et 5,5 millions de dollars, ou 70 % des depenses en monnaie nationale (7,9 millions de dollars)\. Le credit IDA de 14,5 millions de dollars financera les travaux de genie civil, les operations forestieres, les vehicules et l'equipement, les depenses de fonctionnement correspondantes, les allocations accordees au personnel du projet, l'assistance technique et la for mation (voir par\. 3\.21 pour les details)\. La subvention FAO/PNUD d'environ 0,6 million de dollars financera strictement l'assistance technique a l'Adminis tration forestiere (par\. 3\.04)\. La plus grande partie de la contribution de 2,4 millions de dollars du Gouvernement financera les traitements des fonction naires recrutes durant Ie projet (par\. 4\.11)\. Un autre element compte comrne faisant partie de la contribution du Gouvernement serait l'assistance du Programme alimentaire mondial (PAM) dont Ie projet est juge apte a beneficier\. Cette assis tance, equivalente a 0,6 million de dollars, financera environ 30 % des salaires des ouvriers recrutes pour les operations forestieres du projet\. Le Gouvernement a demande l'assistance du PAM\. Cependant, en l'absence d'une telle assistance, Ie Gouvernement devrait en financer l'equivalent sur ses propres fonds\.  - 22 3\.18 Mecanisme de financement de la preparation du projet\. Afin d'acce lerer la mise en oeuvre qui est prevue en 1980, des travaux preliminaires ont ete entrepris a la fin de 1979 et au debut de 1980\. C'est pourquoi Ie Gouver nement a demande a beneficier d'une avance de 520\.000 dollars que l'IDA a accepte de mettre a sa disposition au titre du Mecanisme de financement de la preparation des projets\. Ce montant, qui pourra etre retire avant Ie 31 mai 1980 a des condi tions satisfaisantes pour l'IDA, financera : a) une etude pedologique de la foret classee de Maro; b) une prise de vues aeriennes de cette meme foret; c) l'entre tien et la protection des plantations FAO/PNUD; d) Ie materiel, l'equipement et les depenses de fonctionnement correspondantes des etudes FAO/PNL~; et e) le cout des services d'un consultant financier\. 3\.19 Fonds renouvelable du projet\. Comme Ie Gouvernement pourrait avoir des difficultes pour prefinancer les depenses qui seront remboursees au titre du credit de l'IDA, un montant renouvelable de 0,5 million de dollars, finance a titre d'avance sur Ie credit, sera depose sur un compte bancaire du projet\. Ce compte sera ouvert aupres d'une banque commerciale et relevera des services du Directeur general, et sera utilise selon des conditions jugees satisfaisantes par l'IDA\. II serait gere par le Directeur general et Ie Conseiller administratif et financier (par\. 4\.01) dont les signatures combinees seront requises pour tout retrait et qui fourniront egalement a l'IDA des rapports trimestriels faisant etat des retraits et des depots concernant ce compte\. L'IDA reapprovisionnera ce compte sur presentation de pieces justificatives faisant etat des debourse ments effectues a partir de ce fonds renouvelable pour regler des depenses autorisees\. Si des deboursements effectues a partir de ce fonds renouvelable ne sont pas juges satisfaisants par l'lDA, Ie Gouvernenent devra deposer Ie montant correspondant sur Ie compte du fonds\. Des assurances a cet effet ont ete obtenues au moment des negociations et l'ouverture du compte bancaire du projet sera une condition d'entree en vigueur du credit\. D\. Passation des marches et deboursements Passation des marches 3\.20 Les marches de plus de 100\.000 dollars relatifs a de grosses fourni tures telles qu'engins, vehicules et materiels (qui representent un total d'en viron 1 million de dollars) seront attribues par appels a la concurrence inter nationale selon les directives de l'IDA\. Les biens de fabrication locale bene ficieront d'une marge preferentielle egale a 15 % ou au niveau des droits de douane applicables, Ie plus faible de ces deux montants etant retenu\. Certains petits materiels (tels que les materiels agricoles, les scies a chaine, les vehicules et outillages divers) sont de nature trop disparate et seront neces saires a des stades trop differents du projet pour pouvoir faire l'objet d'appels a la concurrence internationale\. Ces materiels seront groupes par categorie et par lot pouvant atteindre 100\.000 dollars chaque fols qu'il sera possible; les marches d'un montant compris entre 100\.000 et 25\.000 dollars seront passes par appel d'offres aupres des fournisseurs locaux, tandis que les marches de moins de 25\.000 dollars seront attribues apres consultation directe de fournisseurs\.  - 23 - Le montant total de ces marches ne depassera pas 1,5 million de dollars\. Les bureaux, logements et ateliers, de par leur implantation et Ie caractere modeste des travaux qu'ils representent (1,3 million de dollars), feront l'objet de mar ches qui ne sauraient attirer des entreprises internationales et seront donc att~ibues par appel d'offres faisant l'objet d'une publicite locale\. Les services du personnel expatrie et des consultants, evalues a 2,9 millions de dollars, feront l'objet de contrats passes selon des procedures jugees acceptables par l'IDA\. Le personnel expatrie et les consultants dont les services doivent etre finances par la FAO et le PNUD, moyennant un cout total de 0,6 million de dollars, seront recrutes selon les procedures de la FAO\. Les autres couts du projet (10,2 mil lions de dollars), qui auront trait a) aux salaires et indemnites, b) aux couts d'utilisation des machines, de l'equipement, des vehicules et des bureaux, et c) aux bourses d'etudes et a la formation, ne sauraient faire l'objet d'appels d'offres\. Decaissements 3\.21 Le Credit de 14,5 millions de dollars de l'IDA sera decaisse au cours d'une periode de cinq ans selon les categories suivantes Categorie I 100 % des couts des vehicules, machines, outils et equi pements, representant un total de 2,2 millions de dollars\. Categorie II 100 % des couts des bureaux, logements et batinents, y compris le mobilier, representant un total de 1,2 million de dollars\. Categorie III - 100 % des couts de £onctionnement afferents au volet du projet relatif au renforcement des i~stitutions, y compris Ie carburant, les lubrifiants et les pieces de rechange pour les vehicules, les fournitures et materiels de bureau, la location de logements et de batiments et les allocations au personnel, representant un total de 3,9 millions de dollars\. Categorie IV 55 % des depenses de fonctionnement afferentes a l'element du projet "Operations forestieres", y compris Ie carburant, les lubrifiants et les pieces de rechange pour les gros engins et vehicules, Ie materiel vegetal et les facteurs de production agricoles, les fournitures et materiels de bureau, les loyers des logements et batiments et les salaires des ouvriers saisonniers et de la main-d'oeuvre qualifiee, representant un total de 1,5 million de dollars\. Categorie V 100 % des couts du personnel expatrie, representant un total de 2,3 millions de dollars\. Categorie VI 100 % des couts des etudes et de la formation, representant un total de 0,6 million de dollars\.  - 24 - Categorie VII 100 % des honoraires d'expertise comptab1e des comptes du projet, representant un total de 80\.000 dollars\. Categorie VIII - remboursement de l'avance accordee au titre du Mecanisme de financement de la preparation des projets, representant un total de 520\.000 dollars\. Categorie IX depot initial sur un compte special, representant un total de 500\.000 dollars; et Categorie X montant non alloue, estime a 1,1 million de dollars\. 3\.22 Les demandes de decaissement devront etre accompagnees de toutes p~eces justificatives, a l'exception des demandes effectuees au titre des Categories III et IV, qui devront s'accompagner d'etats certifies de depenses pour 1esquelles 1es pieces justificatives seront conservees pour etre inspec tees lors de la supervision du projet (voir ega1ement par\. 3\.24)\. E\. Comptabilite, expertises comptables et rapports Comptabilite et expertises comptables 3\.23 L'Administration forestiere tiendra selon des pratiques comptables acceptables une comptabilite separee du projet qui fera apparaitre 1es opera tions et la position financiere du projet\. Le systeme comptable sera prepare par un consultant financier avant la mise en oeuvre du projet\. Ce consultant sera finance au titre du Mecanisme de financement de la preparation des projets (par\. 3\.18)\. Les comptes seront tenus par la section de l'administration et des finances des services du Directeur general (par\. 1\.11) et seront supervises par 1e Conseiller financier et administratif (par\. 4\.01)\. Les budgets des depenses du projet seront soumis deux fois par an au Tresor pour approbation\. 3\.24 Tous les comptes du projet seront verifies chaque annee par des experts-comptables independants agrees par l'IDA, et Ie Credit IDA financera les depenses d'expertise comptable\. Les etats et rapports d'expertise finan ciere, dont le format et les details devront correspondre a ce que l'IDA peut raisonnablement demander, seront soumis a l'IDA dans les six mois qui suivront la cloture de l'annee budgetaire\. Le rapport des experts-comptables comprendra une declaration sur la validite du systeme comptable et des controles internes; cette declaration devra egalement indiquer si les fonds de l'IDA ont ou non ete utilises aux fins prevues, et s'accompagner d'une confirmation que les etats recapitulatifs des depenses sont conformes aux ecritures plus detaillees tenues par 1 'Administration\. Des assurances ont ete obtenues a cet effet au cours des negociations\.  - 25 Rapports 3\.25 L'Administration forestiere soumettra ega1ement, dans 1es deux mois qui suivront 1a fin de chaque trimestre, un rapport sur l'etat d'avancement des travaux du projet, comportant des indicateurs d'avancement qui seront determines lors des premieres missions de supervision de l'IDA\. Ces rapports comprendront ega1ement un etat proviso ire des flux monetaires pour 1es trimestres ecou1es et des previsions pour 1es trimestres restants de l'exercice financier\. Des assu rances a cet effet ont ete obtenues lors des negociations\. IV\. ORGANISATION\. PERSONNEL ET EXECUTION A\. Organisation 4\.01 Le projet sera execute par l'Administration forestiere, recemment reorganisee (par\. 1\.11 a 1\.14) sous 1a direction du Directeur general de l'envi ronnement, qui exercera 1es fonctions de Directeur du projet\. Ce dernier sera directement responsab1e de l'execution de l'e1ement du projet re1atif au renfor cement des institutions\. II sera aide par un Consei11er financer et administratif recrute au niveau international, qui sera ega1ement charge de gerer et de contro1er 1es activites de financement et de passation des marches du projet (par\. 4\.10)\. A 1a suite de cette reorganisation, Ie Directeur general est responsab1e de :a coordination de 1a po1itique forestiere et il est charge d'assurer la liaison avec les institutions exterieures, y compris l'AVV, en ce qui concerne les questions de foresterie\. Lors des negociations, des assurances ont ete obtenues qu'un examen de la coordination des activites 1iees a 1a foresterie dans les 1imites du perimetre de l'A\~ serait effectue chaque annee conjointement par l'A\v et 1a Direction genera1e\. L'actuel1e reorganisation de l'Administration forestiere sera terrninee a temps pour l'execution du projet, et les roles et responsabilites de 1a Direction des etudes et programmes et de la Direction de l'amenagement forestier et du reboisement seront alors elargis et eng1oberont les responsabi1ites decrites ci-dessous (par\. 4\.03 a 4\.07)\. Des assurances ont ete obtenues a cet effet lors des negociations\. Le credit de l'IDA ne pourra entrer en vigueur que lorsque ces deux directions seront plei nement operationnelles et investies de ces responsabi1ites\. 4\.02 L'execution des operations forestieres prevues relevera de 1a Direction de l'amenagement forestier et du reboisement\. Un Bureau des operations forestieres du projet (par\. 4\.08) sera constitue a Bobo-Diou1asso et aura son propre directeur\. Les elements du projet qui re1everont du bureau de Bobo-Dioulasso seront : 1a plan tation de Maro, l'experience d'amenagement de la foret naturelle de Maro et Ie volet "bois de village"\. Le vo1et entretien de la plantation FAO/PNUD sera execute par la Division de l'amenagement forestier (par\. 4\.04) de la Direction\. La Direc tion des etudes et programmes sera chargee d'attribuer 1es contrats de  - 26 consultants et de superviser les etudes et enquetes qui seront executees dans Ie cadre du projet, et elle aura egalement pour tache de proposer des moyens de mettre les conclusions et recommandations de ces etudes et enquetes en application\. 4\.03 Direction des etudes et programmes\. Le role de cette direc tion nouvellement creee au sein de l'Administration forestiere sera de definir une politique forestiere et de preparer des plans d'execution en matiere d'ame nagement forestier et de production, commercialisation et de developpement des ressources forestieres\. Les projets elabores par cette direction seront executes par les autres directions operationnelles de l'Administration forestiere\. Parmi les activites les plus importantes de cette direction figureront l'etablissement et la tenue a jour d'un inventaire forestier national, ainsi que la collecte et l'evaluation de renseignements commerciaux, compte tenu des recommandations des etudes qui seront entreprises dans Ie cadre du projet de la FAa (par\. 3\.04)\. Elle aura egalement pour responsabilites : a) d'aider des institutions exterieures dans l'elaboration de projets (par\. 1\.16); b) de coordonner la recherche forestiere (par\. 1\.22 et 4\.17); c) de suivre et d'evaluer les projets interessant la foresterie (par\. 4\.15); d) de suivre et de prevoir les besoins en personnel et en formation (par\. 3\.12) de l'Administration forestiere; et e) de superviser et d'appuyer l'execution des etudes et enquetes qui seront entreprises par l'Administration forestiere (par\. 3\.10)\. 4\.04 La Direction de l'amenagement forestier et du reboisement\. L'un des principaux roles de cette direction, qui sera devolu a sa Division de l'amenage ment forestier, sera d'appliquer la politique de l'Administration dans les domaines tels que ceux de l'amenagement, de la protection et de l'entretien des res sources forestieres du pays, du controle de l'exploitation et de la production des domaines classe et non classe\. Cette Direction aidera egalement a l'entretien des bois villageois ou ruraux (par\. 3\.09) et s'occupera des pepinieres permanentes de l'Administration forestiere\. Comme elle sera chargee de percevoir les redevances et droits sur Ie bois sur pied et l'abattage, ses operations de perception seront dument examinees et renforcees au debut du projet de maniere a porter Ie taux de recouvrement des taxes a percevoir de son niveau actuel de 20 % au niveau tout a fait possible de 75 % (par\. 5\.13)\. La Division de l'amenagement forestier aura egalement pour responsabilite de veiller a la commercialisation et a la distribu tion du bois de feu et des autres produits forestiers dans l'ensemble du pays\. Dans Ie cadre du projet, cette Division sera chargee de l'execution de l'element relatif a l'entretien des plantations forestieres de la FAa et du PNUD (par\. 3\.07)\. 4\.05 La Division de l'amenagement forestier coordonnera egalement les acti vites sur Ie terrain afin de prevenir et d'enrayer les feux de brousse dans les forets classees et d'inciter la population rurale a proteger et a conserver les zones boisees situees a l'exterieur du domaine classe\. Elle s'acquittera de ces activites en consultation avec les organismes regionaux de developpement (ORD) et les services agricoles; Ie Gouvernement prepare actuellement un plan d'action destine a permettre de mieux lutter contre les feux de brousse dans les zones rurales, dans l'espoir de parvenir finalement ales faire totalement disparaitre\. Ce plan d'action, qui pourrait comporter une revision de la legislation en vigueur  - 27 en matiere de feux de brousse, servira de point de depart aux activites de lutte contre les incendies, en attendant que l'Etude sur la foresterie rurale (par\. 3\.10) soit achevee et que soit formulee une politique forestiere nationale revue et largie\. 4\.06 La Division de l'amenagement forestier sera chargee de superviser les operations du Fonds forestier national, si l'etude consacree a celui-ci en demontre la viabilite (par\. 3\.10 (b»\. Ce fonds sera cree pour donner a l'Administration forestiere des moyens financiers permanents, en centralisant progressivement les recettes procurees par l'exploitation des forets, et qui serviront a financer a) l'entretien et la conservation des plantations creees par l'homme et des reserves forestieres, ainsi que leur protection contre les incendies et autres dangers; et b) l'execution de projets con~us et prepares par Ie Departement des etudes et programmes (par\. 4\.03)\. Ce fonds sera gere par une petite equipe de specialistes forestiers et financiers, qui auront pour role d'assurer l'utilisation la plus efficace possible de ces fonds par Ie choix des projets et par la passation des marches par appel d'offres\. L'execution des projets finances par ce fonds relevera des directions operationnelles de l'Administration forestiere\. 4\.07 Par l'intermediaire de sa Division du reboisement, cette Direction execute la politique de reboisement de l'Administration\. Les responsabilites de cette Direction seront elargies de maniere a inclure a) l'execution de projets con~us et prepares par la Direction des etudes et programces, qui porteront principaiement sur: i) Ia crea tion de nouvelles plantations, i1) l'execution de programmes d'amenage ment des forets naturelles, iii) la creation de bois de village ou de boisements ruraux, et iv) l'execution de travaux de conservation des sols; b) l'etablissement d'une liaison avec des organismes exterieurs, y compris l'AVV, et la coordination des projets entrepris par ces organismes (par\. 1\.15 et 4\.02); et c) l'execution de leves topographiques et d'etudes de terrain pour la Section des inventaires forestiers de la Direction des etudes et programmes\. Lorsque les projets vises a l'alinea (a) ci-dessus seront aCheves, la responsa bilite de leur entretien et de leur gestion sera confiee a la Division de l'ame nagement forestier de cette Direction\. 4\.08 Bureau des operations forestieres du projet\. Ce bureau sera situe a Bobo-Diou1asso et sera charge d'executer 1es operations forestieres du projet : la plantation et l'amenagement de 1a foret nature1le, l'une et l'autre situes dans la foret classee de Maro, et 1e sous-projet de bois de village prevu dans 1 1 0RD de Bobo-Diou1asso\. 11 sera dirige par un forestier vo1taique, qui fera rapport au Directeur du projet par l'intermediaire de 1a Division du reboisement\. et qui sera aide, pendant 1a duree du projet, par deux expatries : un specia1iste de 1a foresterie et un ingenieur mecanicien (par\. 4\.10)\.  - 28 B\. Personnel (Tableaux V\.l et 2) 4\.09 Dans Ie cadre du projet, tous les postes cles qui devront etre occupes par des Voltaiques seront confies des Ie debut a des personnes qualifiees et experimentees\. Ces pastes seront ceux du Directeur general de l'environnement, du Chef de la Direction des etudes et programmes, du Chef de la Direction de l'amenagement forestier et du reboisement et des chefs de ses deux divisions, et du Chef du Bureau des operations forestieres du projet\. Des discussions ont eu lieu a cet egard lors des negociations\. L'entree en vigueur du credit sera subordonnee a la nomination de ces personnes\. Tous les postes devant etre occu pes par un personnel expatrie (par\. 4\.10) seront confies a des personnes dont les qualifications, l'experience et les conditions d'emploi seront jugees accep tables par l'IDA\. Des assurances ont ete obtenues a cet effet lors des negocia tions\. L'entree en vigueur du credit sera subordonnee a la nomination du Conseil ler financier et administratif\. 4\.10 Expatries\. Pour l'execution du projet de l'IDA, il faudra un total de quatre expatries (sans compter ceux du projet FAO!PNUD) qui seront recrutes chacun pour une periode de cinq ans, ce qui represente au total 20 annees de service\. L'expatrie Ie plus haut place du personnel de l'Administration forestiere sera Ie Conseiller aupres du Directeur general de l'environnement pour les questions financieres et administratives\. II sera nomme pour la duree du projet et aura principalement pour fonction d'aider Ie Directeur general a executer l'element du projet relatif au renforcement des institutions, a surveiller Ie projet dans son ensemble a travers la Direction des etudes et programmes (par\. 4\.15) et a superviser les activites de financement et de passation des marches du projet (par\. 3\.23)\. Le specialiste de la recherche (par\. 4\.17) de la Direction des etudes et programmes sera egalement un expatrie\. Les deux autres expatries seront un specialiste de la foresterie et un ingenieur mecanicien qui seront affectes aupres au Bureau des operations forestieres de Mara\. Les mandats de tous ces expatries figurent a l'Annexe IV\.3 du dossier du projet\. 4\.11 Les cadres voltaiques\. Pendant les cinq annees de l'execution du projet, on estime a 15 Ie nombre des ingenieurs forestiers voltaiques supplementaires (niveau A) diplomes de l'ISPO et d'etablissements etrangers (par\. 1\.19) qui seront recrutes par l'Administration forestiere pour occuper 13 postes au siege et 2 postes sur Ie terrain\. Ce chiffre englobe trois homologues qui seront formes pour remplacer les specialistes expatries\. De plus, quelque six postes de cadres superieurs (equivalant au niveau A) seront attribues au sein de l'Administration a des diplomes dans des domaines autres que la foresterie (par exemple, economiste, ana lyste financier) (Tableau V\.l)\. L'un de ces cadres sera appele a remplacer un expatrie\. 4\.12 Consultants (Tableau IV\.6)\. A l'exception des taches particulieres qui seront financees dans Ie cadre du Mecanisme de financement de la preparation des projets (par\. 3\.18), toutes les etudes seront entreprises a des stades differents de l'execution du projet\. Toutes les etudes, y compris celles qui seront financees dans Ie cadre du Mecanisme de financement de la preparation des projets, seront  - 29 executees par des consultants dont Ie mandat, les conditions d'emploi, les quali fications et l'experience auront ete juges satisfaisants par l'IDA\. Des assurances ont ete obtenues a cet effet au cours des negociations\. Lorsqu'il sera procede au choix des consultants auxquels seront confiees ces etudes, on accordera une atten tion particuliere a l'existence de firmes et de specialistes locaux\. En outre, il faudra veiller a inclure, si les circonstances Ie justifient, des specialistes de domaines tels que la sociologie, afin d'evaluer l'effet des activites du projet (par exemple, bois de village, poeles a bois) sur la population\. C\. Execution du projet 4\.13 Avant meme l'execution du projet, l'Administration forestiere entreprendra plusieurs activites liees a celui-ci, qui seront financees dans Ie cadre du Meca nisme de financement de la preparation des projets (par\. 3\.18) : une etude des sols et des prises de vues aeriennes de la reserve classee de Maro, et l'entretien des plantations de la FAO et du PNUD (par\. 3\.07)\. Les principaux membres voltaiques du personnel du projet, de meme que Ie Conseiller financier et administratif expa trie, seront recrutes avant l'entree en vigueur du credit\. Les autres membres expatries et locaux du personnel seront nommes pendant l'execution du projet (Tableaux V\.l et V\.2)\. La majeure partie du materiel, des vehicules et des batiments des plantations devront etre mis a la disposition du projet au cours de ses trois premieres annees d'execution, et Ie batiment des services techniques sera construit pendant la deuxieme annee du projet (Tableaux IV\.l a IV\.6)\. 4\.14 Le calendrier d'execution des elements "foresterie" du projet est presente ci-dessous (les chiffres sont donnes en hectares) : 197~ 1980 1981 1982 1983 1984 Total Plantation forestiere en sec (ha) abattage et defrichement 200 400 400 600 1\.600 preparation du terrain et plantation 200 400 400 600 Amenagement de forets nature11es (ha) travaux preparatoires 250 250 250 250 1\.000 travaux forestiers sur Ie terrain 250 250 250 250 Entretien des plantations FAO/PNUD (ha) Ouagadougou 1\.112 812 214 Bobo-Dioulasso 537 537 233 Boisements ruraux (ha) 50 75 100 100 325 1! Finance au titre du MFPP\.  - 30 - Suivi et evaluation 4\.15 La Direction des etudes et programmes de l'Administration forestiere sera chargee du suivi et de l'eva1uation du deroulement du projet (par\. 4\.03), tache dans 1aque1le elle sera aidee par Ie consei1ler expatrie aupres du Directeur general (par\. 4\.10)\. Les resultats de l'analyse seront inc1us dans des rapports periodiques portant sur l'etat d'avancement du projet et prepares par l'Administration forestiere (par\. 3\.25)\. Lors de l'eva1uation retrospective du projet, il faudra accorder une attention particuliere : i) a la methode de defrichement forestier utilisee dans Ie cadre de ce projet pour creer la plantation forestiere en sec; et ii) a l'element "bois de village" des operations forestieres du projet\. 4\.16 Sur la base du suivi et de l'eva1uation retrospective du projet, la Direction des etudes et programmes preparera un rapport d'achevement du projet qui permettra de determiner en particu1ier dans quel1e mesure Ie renforcement de l'Administration forestiere aura contribue a ameliorer l'appro visionnement en bois et a augmenter Ie potentie1 remunerateur de 1a forat afin de donner a l'Administration un certain degre d'autonomie financiere\. Lors des missions de supervision effectuees par l'IDA, on discutera et on examinera la portee et la presentation des rapports trimestriels de suivi et d'evaluation du deroulement du projet et du rapport d'achevement de celui-ci\. 4\.17 Dans 1e cadre du projet, la recherche forestiere se poursuivra co~~e maintenant (par\. 1\.22 et 1\.23), mais elle sera coordonnee par la Direction des etudes et programmes de l'Administration forestiere (par\. 4\.03)\. Le projet prevoit egalement l'o~troi de fonds pour financer les services d'un cialiste de la recherche appliquee, qui sera detache aupres de l'Ecole de fores terie de Dinderesso et dont les travaux seront axes sur l'element "amenagement forestier experimental" du projet\. Ce specialiste sera Ie premier membre d'une Unite permanente de recherche forestiere et sera charge de former Ie personnel voltaique qui Ie remplacera a la fin du projet\. 11 devra en particulier (Dossier du projet, Annexe 11\.8) analyser 1es resu1tats des experiences realisees en matiere d'amenagement des forets naturel1es\.  - 31 V\. PRODUCTION\. MARCHES\. PRIX ET REVENUS A\. Production Plantation forestiere en sec de la foret classee de Maro (Dossier du projet, Annexe 11\.4) 5\.01 Le programme de production de la plantation forestiere en sec de la foret classee de Maro (1\.600 ha) s'appuie sur les premiers resultats obtenus sur les nouvelles plantations en sec de Haute-Volta et sur les hypotheses suivantes a) une classification des sols en trois categories par ordre de qualite dikroissante : site 1 ( 5 % des sols) pour les plantations de teck; site 2 (25 % des sols) pour les plantations de gmelina arborea; site 3 (70 % des sols) pour les plantations de gmelina arborea et d'eucalyptus; b) les plantations auront une duree de vie de 24 ans; les arb res seront alors coupes et Ie terrain dEifriche pour etre replante; c) les plantations seront eclaircies pour permettre la recolte du bois de feu (gmelina et eucalyptus) et de service les quatrieme, huitieme et seizieme annees; d) la seizieme annee du projet, on abattra des gme1ina arborea pour la production de grumes; et e) les huitieme, douzieme et vingtieme annees du projet, on abattra des tecks pour 1a production de bois de service\. 5\.02 D'apres ce qui precede, Ie rendement a l'hectare des plantations 3 devrait atteindre en moyenne 7,6 m de bois de feu et de service, 0,5 m3 de bois de service de teck et 1 m3 de grumes de gmelina arborea par an, soit au 3 total 9,1 m par an, ce qui correspond aux rendements des plantations en exploi tation en Haute-Volta\. Les chiffres de la production sont donnes en detail au Tableau VIII en fonction du ca1endrier d'execution du projet (par\. 4\.14)\. Plantation forestiere en sec FAO/PNUD (Dossier du projet, Annexe 11\.6) 5\.03 Le programme de production de la plantation forestiere en sec FAO/PNL~ (1\.650 ha) est fonde sur 1es hypotheses suivantes :  - 32 a) les rendements correspondront a ceux du site 2 de la plantation forestiere en sec de la foret classee de Maro pour la plantation situee pres de Bobo-Dioulasso et aux deux tiers de ce rendement pour celIe de Ouagadougou; b) la plantation aura une duree de vie de 24 anSi les arbres seront alors coupes et Ie terrain defriche pour etre replante; et c) les plantations seront eclaircies pour permettre la recolte du bois de feu et de service les huitieme et seizieme annees\. 5\.04 D'apres ces hypotheses, Ie rendement a lthectare de la plantation atteindra en moyenne 8 m3 de bois de feu et de service dans la region de Bobo-Dioulasso et 5,3 m3 dans celIe de Ouagadougou\. Les chiffres de produc tion sont presentes en detail au Tableau VIII en fonction du calendrier d'exe cution du projet (par\. 4\.14)\. Amenagement de la foret naturelle (Dossier du projet, Annexe 11\.5) 5\.05 Etant donne Ie caractere experimental de l'amenagement de la foret nature lIe (1\.000 ha) dans la foret classee de Maro, on ne peut pas actuellement estimer la production avec precision\. Cependant, si l'amenagement se fait dans 3 de bonnes conditions, Ie rendement pourrait atteindre 7,5 m /ha (soit 0,375 m3 /ha/an) les vingt premieres annees et 15 m3 /ha (soit 0,750 m /ha/an) les vingt annees sui 3 vantes\. Les chiffres de la production sont presentes en detail au Tableau VIII\. Boisements ruraux (Dossier du projet, Annexe 11\.7) 5\.06 Faute de renseignements sur l'inclination des villageois a participer au boisement rural dans la zone de l'ORD de Bobo-Dioulasso, on ne peut pas a ce stade estimer la production avec precision\. Cependant, si les boisements ruraux sont bien entretenus, leur rendement a l'hectare pourrait atteindre de 3 a 5 m3 par an de bois de feu et de service\. B\. Marches 5\.07 Le marche interieur, en particulier dans la region de Bobo-Dioulasso, devrait absorber sans difficulte la production future de bois du projet\. Dans la mesure ou l'approvisionnement en bois de feu diminue a proximite de la ville, et ou les distances qu'il faut parcourir pour aller chercher du bois augmentent (et peuvent atteindre jusqu'a 100 km), il ne devrait y avoir aucune difficulte, dtune part, a commercialiser la production de tous les sites situes aut~ur de Bobo-Dioulasso, d'autre part, a ecouler celIe de la plantation FAO/PNUD situee sur la route Ouagadougou-Po, sur Ie marche de Ouagadougou\. En outre, la produc tion de ce premier projet n'aura pas une forte incidence sur Ie marche, car, lorsque Ie projet aura atteint son plein rendement (onzieme annee), la produc tion ne devrait pas depasser 5 % de la demande totale estimee\. De meme, aMaro, lorsque Ie rendement sera a son niveau Ie plus eleve (14eme annee), la production ne correspondra qu'a 8 % de la demande estimee sur Ie marche de Bobo-Dioulasso\.  - 33 5\.08 Le transport du bois de feu du lieu de production au marche ne devrait poser aucun probleme, car des vehicules seront finances a cet effet dans Ie cadre du projet\. En outre, des accords pourraient etre conclus avec les transporteurs locaux (par\. 2\.04) qui beneficieront de la diminution des distances a parcourir\. Le projet permettra egalement de produire des poteaux et des grumes qui pourront etre vendus facilement sur les marches locaux\. Voltelec, la compagnie d'electri cite, a continuellement des commandes de poteaux en attente d'execution\. C\. Prix 5\.09 En Haute-Volta, le bois de feu de la foret naturelle se vend actuelle ment en moyenne 4\.700 francs CFA environ le m3 dans les zones urbaines, soit environ 10 francs CFA Ie kg\. Les prix de gros peuvent varier de 2\.500 a 2\.800 francs CFA le m3 Sur les routes, les prix vont de 500 francs CFA a 3 1\.200 francs CFA Ie m \. Les poteaux se vendent de 150 a 400 francs CFA l'un, selon la qualite, et Ie charbon de bois, environ 25 francs CFA Ie kg\. Le prix de gros du bois de plantation sera different de celui du bois venant de la foret naturelle non classee\. Le bois de plantation, dont la croissance est surveillee, pousse plus droit, se prete mieux au stockage et pese donc davantage par unite 3 de volume: Ie poids moyen d'un m de bois de plantation est de 583 kg, contre 450 kg pour le bois de la foret naturelle\. Pour les besoins de l'evaluation chiffree du projet, les prix a la production et les prix de gros du bois de plantation ont ete estimes a 2\.500 et 3\.600 francs CFA le m3 respectivement (Dossier du projet, Annexe 111\.27)\. 5\.10 Les donnees dont on dispose indiquent que, d'une part, les prix de detail du bois de feu ont augmente en moyenne de plus de 15 % par an ces cinq dernieres annees, mais que, d'autre part, sur une peri ode plus courte, les prix correspondants du charbon de bois ont peu augmente\. Le tableau ci-dessous pre sente les prix des differents combustibles pour 1976 et 1978, seules annees pour lesquelles ont ait facilement trouve des donnees comparables\. Prix par equivalent kWh (en francs CFA) Augmentation 1976 1978 en pourcentage Bois de feu 1,50 2,01 34 Charbon de bois 2,70 2,76 2 Kerosene 5,50 6,90 25 Butane 5,30 5,63 6 Electricite 26,00 40,00 54 Ce premier projet ne produira pas suffisamment pour agir sur les prix, mais il pourrait avoir un effet global important sur les approvisionnements futurs (par\. 6\.04)\. Cependant, a moyen terme, les prix du bois de feu continueront a augmenter en raison de l'insuffisance de l'offre, comme Ie montre Ie tableau ci-dessus, et pourraient, pour une quantite d'energie equivalente, depasser celui du charbon de bois\. Cela devrait encourager l'utilisation du charbon de bois et des poeles a bois\.  - 34 D\. Revenus 5\.11 Le projet procurera trois importantes sources de recettes supplementaires a) Ie defrichement de la plantation forestiere en sec de Maro; b) Ie bois produit sur les plantations et sur Ie site d'amenagement de la foret naturelle; et c) l'amelioration de la perception des taxes forestieres d'abattage, grace a l'efficacite accrue de la Division de l'amenagement forestier, par suite de son renforcement dans Ie cadre du projet (par\. 4\.04 et 5\.13)\. 5\.12 La vente de bois provenant du defrichement du site de la plantation constituera la principale source de revenus pendant l'execution du projet et permettra de compenser certains des couts du projet\. Ce bois devrait etre ecoule sans difficulte\. Cependant, les pr ets finances par l'Allemagne et les projets de l'AVV ont demontre que Ie bois n'etait pas necessairement vendu immediatement au moment de la coupe par suite de retards dans l'organisation de la distribution au niveau des consommateurs\. C'est pourquoi l'utilisation des recettes a ete decalee d'un an par rapport aux depenses (par\. 3\.13 et Tableau IX)\. Des assu rances ont ete obtenues lors des negociations que toutes les recettes procurees par la vente de bois dans Ie cadre du projet seront recueillies par Ie Bureau des operations forestieres du projet et deposees sur un compte special a Bobo-Dioulasso, et serviront a couvrir certains ceuts du projet, et de preference les salaires de la main-d'oeuvre saisonniere\. 5\.13 La taxe d'abattage actuellement per~ue par l'Administration forestiere sur les camionneurs qui assurent Ie transport jusqu'aux marches urbains s'eleve a quelque 80 francs CFA Ie m3 (0,35 dollar Ie m3 )\. D'apres les estimations de la consommation urbaine, 20 % environ de ces taxes a percevoir sont actuellement per~ues par l'Administration forestiere et un recouvrement organise de maniere plus efficace, sept jours par semaine, permettrait de faire passer ce pourcentage a 75 % (par\. 4\.04)\. Le Parlement voltaique envisage de faire passer cette taxe, inchangee depuis 1959, a 200 francs CFA environ Ie m3 (soit 0,90 dollar par m3)\. La Direction des etudes et programmes sera chargee de revoir ce taux et de recommander les modifications necessaires\. 5\.14 Couts de fonctionnement\. Les cinq annees qui suivront l'execution du projet, les couts de fonctionnement necessaires a l'entretien se chiffreront a environ 160 millions de francs CFA par an (700\.000 dollars) (Tableau XIV)\. II faudra egalement remplacer du materiel pour un montant de 107 millions de francs CFA (500\.000 dollars)\. Pour cette periode, la totalite des couts de fonctionnement et de remplacement est estimee a 882 millions de francs CFA (soit 4 millions de dollars)\. Les recettes supplementaires provenant des operations forestieres et d'un meilleur recouvrement des taxes (y compris l'augmentation envisagee),et estimees a 892 mil lions de francs CFA (4,1 millions de dollars), permettront de couvrir ces couts\. A partir de 1990, les recettes d'exploitation du projet devraient etre suffisantes pour couvrir les depenses y afferentes\.  - 35 5\.15 Cash-flow pour l'Etat\. Les implications financieres du projet pour l'Etat sont recapitulees au Tableau XIV\. Les investissements et les depenses de fonctionnement ont ete calcules d'apres les estimations effectuees lors de l'evaluation\. et les recettes, d'apres les ventes de bois prevues et l'amelio ration escomptee du recouvrement de la taxe d'abattage\. Sur cette base, Ie deficit cumule du cash-flow enregistre lors des premieres annees du projet sera totalement elimine a la quatrieme annee du projet\. VI\. AVANTAGES ET JUSTIFICATION DU PROJET A\. Avantages 6\.01 Les elements du projet devraient permettre d'atteindre des objectifs a court et a long terme conformes a ceux que s'est fixes Ie Gouvernement (par\. 1\.25-1\.29) et a ceux qu'avait esquisses, en 1976, la mission du Programme de cooperation FAO/Banque mondiale (par\. 1\.01)\. Le projet contribuera pour beau coup a ralentir Ie deboisement et evitera les consequences defavorables de ce phenomene en Haute-Volta\. 6\.02 La population voltaique tirera profit des avantages a long terme du projet\. Les citadins pourront s'approvisionner plus facilement en bois de feu provenant des plantations amenagees aux alentours\. Dans tout Ie pays, la popu lation profitera des efforts concertes deployes pour mettre au point et produire des poeles a bois efficaces pour la cuisine\. Dans les zones rurales, Ie couvert forestier naturel sera moins exploite et mieux protege, ce qui profitera 8 l'agri culture, l'erosion et la degradation des sols diminuant et Ie fourrage pour les animaux etant plus abondant\. 6\.03 Le projet comportera egalement des avantages pour l'Administration forestiere, qui sera renforcee grace a une aide technique et materielle\. Deve nant plus efficace, elle pourra tirer des taxes d'abattage des recettes plus e1evees et proteger 1a foret en exer~ant un mei11eur controle et en appliquant mieux les reg1ements\. Le projet permettra ega1ement a cette Administration de diriger et de coordonner des activites dans Ie sous-secteur forestier, d'exercer des controles 18 ou i1 n'en existe pas ou peu, d'encourager Ie public 8 proteger et 8 deve10pper les ressources forestieres du pays\. Enfin, elle aura a son ser vice un personnel dont 1es qualifications, l'experience et 1a formation se seront ameliorees a l'occasion de la conception et de l'amenagement des grandes planta tions forestieres, de l'execution de projets d'amenagement de la foret naturelle et de la promotion d'une action forestiere dans les campagnes\. 6\.04 En outre, Ie renforcement de l'Administration forestiere stimulera les investissements forestiers a venir et aura une influence favorable sur les orga nismes exterieurs qui s'interessent aux problemes poses par Ie deboisement et la desertification dans les pays d'Afrique de l'Ouest\.  - 36 B\. Analyse economique Ensemble du projet 6\.05 D'apres les hypotheses mentionnees ci-apres, Ie detail des couts et les autres hypotheses techniques enoncees a l'Annexe XV\.l, Ie taux de rentabi lite economique du projet sera de 28 % environ\. 6\.06 Pour mesurer les avantages economiques et les effets du projet sur l'economie voltaique\. on a cherche a evaluer l'augmentation de la production des forets naturelles non classees par suite du ralentissement progressif de leur exploitation, rendu possible par l'existence d'autres sources de bois de feu pour les populations urbaines, et de la baisse progressive de la consomma tion\. Les grandes hypotheses sur lesquelles sont fondes ces calculs sont les suivantes a) Pendant les 26 pro chaines annees, des plantations seront amenagees autour des villes (1\.500 ha par an sur une superficie totale de 50\.000 ha); leur rendement atteindra quelque 7 m3 par ha et par an\. L'Etat et des organismes exterieurs encourages par l'incidence des mesures prises dans Ie cadre du projet assureront Ie financement de ces plantations\. L'Administration forestiere, plus efficace, appor tera des ameliorations au domaine classe en utilisant de meilleures methodes d'amenagement forestier et les rendements a l'hectare attein dront, d'apres les estimations, 0,15 m3 par an\. b) En Haute-Volta, la consommation de bois de feu par habitant diminuera graduellement\.au cours des 25 prochaines annees, de 10 % environ par rapport a son niveau actuel, grace a l'introduction, a la promotion et a l'adoption de poeles a bois\. Ce chiffre est juge prudent: en lnde, un projet de la Banque mondiale a perrnis d'estimer que la reduc tion de consommation resultant de l'adoption a grande echelle de ces poeles a bois pourrait atteindre 50 %\. c) La production supplementaire des forets non classees a ete evaluee au prix du bois sur pied de 2\.500 francs CFA environ par m3 Ce prix de base augmentera en valeur reelle de 3 % environ par an; toutes ces estimations sont proches de celles que la Banque mondiale a effectuees pour les bois de feuillus tropicaux pour la periode 1976 a 1985\. 6\.07 Pour cal euler les depenses qu'il faut engager pour recolter le~ avantages susmentionnes\. on a exprime tous les couts du projet, les inves tissements futurs et les couts de fonctionnement y afferents en prix de la mi-1979\. Les couts en devises ont ete corriges en fonction d'un taux de change de reference de 250 francs CFA pour un dollar\. On a evalue Ie salaire des manoeuvres a 300 francs CFA par journee de travail, au lieu du taux offi ciel de 1\.040 francs CFA, pour tenir compte de l'economie resultant de la production sacrifiee\.  - 37 Plantation forestiere en sec 6\.08 II est particulierement important que l'element plantation forestiere en sec soit economiquement viable car, s'il donne de bons resultats, il permet tra de resoudre Ie probleme de l'approvisionnement en bois de feu et en bois de service des grands centres urbains\. Bien que les couts d'amenagement (1\.000 dollars/ha) et de supervision de ces plantations soient assez eleves, celles-ci sont cependant particulierement avantageuses, puisque leur rendement est de cinq a dix fois superieur a celui de la foret naturelle et de deux a trois fois superieur a celui des boisements ruraux\. La plantation amenagee dans Ie cadre du projet permettra en outre de donner une formation et une experience precieuses au personnel de l'Administration forestiere\. D'apres les hypotheses exposees ci-apres et la presentation detaillee des couts et les autres hypotheses techniques de l'Annexe IV\.2, Ie taux de rentabilite de la plantation en sec sera de 16 % environ\. 6\.09 Les avantages de la plantation proviendront surtout de la vente du bois (Annexe XV\.2)\. En outre, la jachere forestiere et la foret naturelle non classee de la region de Bobo-Dioulasso seront moins exploitees, ce qui augmen tera les rendements agricoles et Ie volume des arbres, avantages supplementaires du projet\. Les hypotheses retenues sont les suivantes : a) La jachere forestiere, qui fournissait Ie bois de feu, sera moins exploitee, ce qui permettra de reduire l'abattage premature des arbres\. De ce fait, les sols seront proteges contre l'erosion et seront plus riches en humus, ce qui fera augmenter les rendements lorsqu'ils seront mis en culture\. Si l'on considere Ie cycle moyen d'agriculture itinerante de deux annees de culture pour six annees de jachere, pratique dans la region productrice de bois de Bobo Dioulasso, Ie rendement du mil a l'hectare devrait augmenter de 50 kg a raison de 50 francs CFA Ie kg\. b) De meme, la diminution de l'abattage dans la foret non classee entrainera l'augmentation du volume de bois sur pied, qui, a la trentieme annee du projet, representera, d'apres les estimations, 8 % du volume actuellement abattu\. Ces resultats sont lmportants si l'on considere la superficie relativement petite (1\.600 ha) de la plantation\. C\. Analyse de sensibilite 6\.10 On a effectue une analyse de sensibilite pour determiner dans quelle mesure les variables les plus importantes du projet pouvaient modifier sa renta bilite\. Ces variables sont notamment la valeur de la production de bois des forets classees et des plantations et les economies attribuables a la diminution de la consommation\. On a mesure la sensibilite du projet au moyen de valeurs critiques\. La valeur critique d'une variable est la valeur a laquelle, les autres variables restant inchangees, la valeur nette actualisee du projet est  - 38 egale a zero\. Le taux de rentabilite du projet est alors egal au cout d'oppor tunite du capital (estime a 8 % en Haute-Volta)\. Au-dessous de cette valeur, Ie projet n'est plus rentable\. Le tableau ci-dessous presente les resultats de cette analyse\. Pourcentage de variation pour Valeur etablie atteindre la lors de l'evaluation valeur critique 1\. Production de bois de la foret classee 0,15 m3 /ha/an - 190 % 2\. Production de bois amenagement de 1\.500 ha/an, des plantations rendement 7 m3 /ha/an - 280 % 3\. Augmentation de la production de la foret non classee par suite de la diminution de la consommation 0,06 m3 /ha/an - 150 % 4\. Prix 2\.500 francs CFA/m 3 65 % Ces resultats prouvent que Ie projet est tres peu sensible a des variations defavorables des diverses hypotheses\. II faudrait que chaque variable s'ecarte fortement de sa valeur la plus probable pour que la viabilite du projet s'en ressente\. La probabilite de ces variations critiques est examinee ci-apres\. a) Production des reserves forestieres\. L'amelioration et l'exploitation des reserves forestieres naturelles du pays, grace a l'utilisation de meilleures techniques de gestion, constitueront une innovation en Haute-Volta, qui possede plus de 3 millions d'ha de reserves\. Les techniques de gestion sont en elles-memes bien connues et deja eprouvees\. L'experience realisee au Nigeria avec des techniques similaires, et dans des conditions climatiques comparables, a donne des rendements reguliers de 0,5 a 1 m3 /ha\. Pour calculer Ie taux de rentabilite du projet, on a utilise une estimation prudente du rende ment (0,15 m3 /ha)\. Done, il ne semble pas que cet element comporte des risques reellement propres a compromettre son execution, et il est peu probable que des resultats inferieurs aux estimations aient un effet sur la rentabilite globale du projet\. b) Production des plantations\. L'amenagement de plantations autour des centres urbains, associe a l'amelioration de la gestion des reserves forestieres du pays, est une approche rationnelle qui devrait permettre d'approvisionner regulierement la population urbaine en bois de feu et de service\. Si les bailleurs de fonds etrangers ont, ces dernieres  - 39 annees, fait des efforts considerables pour aider Ie pays dans ce domaine, Ie renforcement de l'Administration forestiere devrait attirer une aide accrue\. En outre, cette Administration pourrait, par la suite, financer l'execution de ses propres projets de plan tation grace au Fonds forestier national\. Les techniques de mise en place de ces plantations ne presentent aucun risque particulier\. Etant donne que les organismes exterieurs semblent porter un interet suivi aces projets et que l'Administration forestiere aura ete ren forcee, on devrait pouvoir creer un plus grand nombre de plantations dans les annees a venire Le rythme de plantation pourrait cependant varier\. Pour les calculs, on a suppose que 1\.500 ha seraient plantes en moyenne par an, chiffre inferieur a la moyenne de 1\.700 ha enregis tree ces trois dernieres annees\. Le projet, dont la valeur actualisee nette est pres du triple de celIe de cette variable, est assez peu sensible aux fluctuations de cette derniere\. c) Augmentation de la production due a la baisse de la consommation\. Le projet est relativement plus sensible aux conditions qui empecheraient de faire baisser la consommation de bois de feu\. Le meilleur moyen de faire diminuer sensiblement la consommation de bois par habitant est d'encourager la population a adopter des appareils de combustion effi caces\. Pour resoudre ce probleme, on a realise ces dernieres annees un grand nombre d'experiences, certaines tres prometteuses, mais qui, pour la plupart, ont ete menees isolement sans grands moyens financiers, de sorte qu'il n'a pas ete possible de les poursuivre jusqu'a la phase de production\. Dans le cadre du projet, l'Administration forestiere coordonnera et evaluera ses experiences et s'attachera a promouvoir l'application de leurs resultats\. Pour les calculs, on a estime que la population adopterait graduellement ces poeles, ce qui, dans les 25 ans a venir, ferait baisser de 10 % la consommation de bois de feu par habitant\. d) Prix\. D'apres les resultats des tests, Ie projet est relativement plus sensible aux variations des prix auxquels les avantages ont ete evalues qu'a celles de toutes les autres variables; mais il faudrait que ces prix d1m1nuent considerablement pour que la valeur actualisee nette du projet soit nulle\. On a egalement effectue des tests pour determiner l'incidence, sur la rentabilite du projet, d'une stagnation des prix du bois en termes reels, apres la sixieme annee du projet\. Cette situation pourrait se produire si l'approvisionnement en bois de feu s'ameliorait par suite de l'augmentation de la production des plantations en exploitation, et du flechissement de la demande du a l'adoption de poeles a bois dans tout Ie pays\. Si les couts directs et indirects du projet restaient inchanges, cette variation n'aurait que peu d'effet sur Ie taux de rentabilite\. Cependant, si les couts augmentaient de 50 %, Ie taux de rentabilite tomberait a 15 %\. Les fluctuations des prix de detail ne devraient pas avoir d'effet sen sible sur Ie prix du bois sur pied ou sur Ie prix a la production  - 40 (2\.500 francs CFA/m 3 )\. En fait, la marge considerable qui existe entre ce prix et Ie prix de detail en vigueur - 4\.700 francs CFA/m 3 ou meme Ie prix de demi-gros - 3\.400 francs CFA/m 3 - que Ie bois de plantation bien empile atteindrait aupres des commer~ants et des marchands ambulants devrait permettre d'absorber toute baisse des prix de detail ou de gros\. Cependant\. la probabilite d'une forte baisse de tous ces prix reste marginale\. D\. Autres risques 6\.11 Ce projet ne presente pas d'autres risques inhabituels\. Le renforce ment de l'Administration forestiere serait une experience nouvelle en Haute-Volta, mais l'assistance technique tres large prevue par Ie projet pour ce renforcement et pour l'organisation et la gestion de cette institution devrait reduire le risque de mauvaise execution du projet\. Le moment auquel on vendra Ie bois obtenu par defrichement des plantations de Maro et celui auquel entrera en vigueur la nou velle legislation sur la taxe d'abattage seront un autre element de risque du projet, dont Ie cash-flow serait compromis par tout retard\. VII\. ACCORDS CONCLUS ET RECO~~ATION 7\.01 Pendant les negociations\. l'IDA a obtenu du Gouvernement des assurances sur les points principaux suivants : a) l'Administration forestiere ouvrira pour le projet un compte aupres d'une banque commerciale, et le gerera selon des conditions et moda lites jugees acceptables par l'IDA (par\. 3\.19); b) Ie Gouvernement achevera la reorganisation en cours de l'Administration forestiere (par\. 4\.01); c) l'AVV et l'Administration forestiere procederont chaque annee a un examen de la coordination des activites liees a la foresterie (par\. 4\.01); d) toutes les recettes tirees de la vente du bois effectuees dans le cadre du projet seront per~ues par le Bureau des operations fores tieres du projet, deposees sur un compte special dans une banque commerciale de Bobo-Dioulasso et utilisees pour couvrir les couts du projet (par\. 5\.12)\. 7\.02 L'entree en vigueur du credit sera subordonnee aux conditions suivantes a) ouverture d'un compte bancaire pour le projet (par\. 3\.19);  - 41 b) reorganisation de l'Administration forestiere (par\. 4\.01); et c) entree en fonctions de tout 1e personnel cadre vo1taique de l'Admi nistration forestiere et nomination du Consei11er financier et admi nistratif expatrie (par\. 4\.09)\. 7\.03 SOUS reserve des assurances et conditions ci-dessus, 1e projet justifie l'octroi par lrIDA d'un credit de 14,5 millions de dollars\.  Annex Table I - 42 UPFE R VOLTA!HAUTE VOLTA FORESTRY PROJECT!PROJET FORESTIER TOTAL PROJECT COSTS PER CATEGORY OF EXPENDITURE AND PER COMPONENT!Couts Totaux du Projet par Categorie de Depenses et par Compos ante (Million CFAF!FCFA) FORESTRY FIELD WORK!Travaux Forestiers SALAlRES!Sa1aires TOTAL BASELINE INFRASTRUCTURE ECVIPMlllNT SEASONAL LABOR OPERATION DRIVERS AND HELPERS SUPERVISORY STAFF EXPATRIATES STAFF ALLOWANCES STAFF OPERATING COSTS COSTa BEFORE Infrastructure Equipement Main d'oeuvre Fonctionnement Conducteurs et aides Encadrement Expatries Indemnitee Fonctionnement Personnel CONTINGENCIES saisonniere Avant imli!revus I\. FORESTRY DEPAR'I'MElNT STRENGTHENING! Renforc~ent de 18 Direction des For@ts 67\.2 150\.4 208\.9 396\.3 157\.5 481\.5 1461\.9 II\. RAINFED TREE PLANTATION! Plantation forestiere en sec 137\.2 215\.4 155\.7 151\.1 44\.6 47\.2 193\.5 86\.8 1031\.4 III\. NATURAL FOREST MANAG:EMENT! Amenagement de la for@t naturelle 15\.2 23\.9 38\.0 195 4\.9 5\.3 21\.5 9\.7 138\.0 IV\. FAO!UNDP TREE PLANTING MAINTENA'NCE! Entretien des plantations forestieres p\.m\. 28\.0 92\.0 13\.7 9\.5 24\.5 p\.m 2\.7 170\.4 FAO/UNDP v\. RURAL WooDLOTS!Bois ruraux 6\.0 5\.4 4\.4 1\.4 p\.m\. 6\.0 p\.m\. 13\.5 36\.6 VI\. SURVEYS AND TRAINING! ,\. Etudes et Formation p\.m\. 47\.3 74\.2 9\.7 131\.1 TOTAL BEFORE CONTINGENCIES! Total avant imprevus 225\.6 423\.1 290\.1 185\.7 59\.0 339\.1 685\.5 157\.5 603\.8 2969\.2 * including 41 million CFAF as training scholarship & incentives! inclus 41 million FCFA au titre de bourses et incitations formation\.  Annex Table II - 43 UPPER VOLTA/HAUTE VOLTA FORESTRY PROJECT/PROJET FORESTIER TOTAL PROJECT COSTS PER COMPONENT AND PER YEAR/ Couts Totaux du Proj at par CoOlPosanta at par an ('000 CFAF/FeFA) TOTAL BASE PRE-PROJECT I PRO":ECT YEARS/ Annees du Projet LINE CeSTS Avant Pro jet T0t:al avar\.~ CO 0 1 Impr:1vus 1\. FORESTRY DEPARTMENT STRENGTHENING Renforcement de 1a Direction des Forits 66\.3 280\.0 378\.1 231\.6 211\. 9 244\.9 1461\. 9 n\. RAINY!D TREE PLANTATION/ Plancat ion fore\.cUre en sec\. 45\.9 279\.8 179\.0 178\.3 170\.6 171\.8 10\.n\.4 It I\. !i'An'RAL FOREST ~AGEMENT/ Amenagement de La Foret naturelle 5\.1 32\.3 28\.8 25\.7 23\.9 :1\.7 138\.0 IV\. FAO/UNDP TREE PLANTATION MAINTENANCE I Entretian des plantations forestUres 59\.5 24\.0 13 \.8 5\.8 17\.3 :'7\.:'" :70\.4 FAO!PNUD ~ ~ RURAL \.OODLOTS!Sois ruraux 10\.8 5\.2 7\.3 5~ 36\.5 VI\. Sn'DIES AND TRAINING! Etudes et frT'7at ien\. 21\.2 52\.0 15\.~ :7\.0 15\. ~ 131\.1 TOTAL SEFORE CONTINGD1GES i ,otal avant i::lprevus 176\.3 ,,35 \.:\. 062\.5 \.:\.62\.:' 518\.3 510\.9 '::9c9~'::  - 44 Annex fi:'bI'e III UPPER VOLTA/Haute Volta FORESTRY PIOJECT/Projet Forestier TOTAL PROJECT COSTS PER CATEGORY AND PER YEAR/Couts totaux du pro1et par eategorie et oar annee ('000 CFAF/FCFA) PRE-PROJECT! TOTAL 3ASELINE COSTS' Avant Projet PROJECT YEARS/Annees du Projet Couts :0 taux :Ie "ase 00 a 1 2 3 ~ l\. INFRASTR1;CTUREi 11\.8 59\.8 122\.5 30\.2 1\.3 225\.6 Infrastructure Z\. EQUIPMENT/ Equipemel1t 66\.2 200\.8 82\.4 6\.5 50\.3 16\.8 423\.0 3\. FORESTRY FIELD ~ORK/ Travaux Forestiers (a) SEASONAL LABOR/ Main d'oeuvre sa:l\.sonniere 18\.1 18\.5 36\.6 :'8\.8 ~5\.7 102\.4 290\.1 Cb) OPERATING COSTS/ Cour;s de Eonctionnement 4\.7 10\. i 2B\.~ 42\.2 50\.6 :'9\.3 laS\. ; (e) DRIVERS AND HELPERS I Conducteurs et aides 5\.2 11\.3 11\. 3 10\.~ 10\.':' '-0\.: 59\.0 ~ \. SUPERVISORY STAFF! Pers0nnel dtencadremenc '\.3\.) 5ALAiUES! Sala1res 5\.7 37\.8 33\.1 64\.0 65\.6 65\.6 291\.8 (b) ALLOWANCES! !ndemnit:e\.s de\. projet 23\.7 29\.8 34\.2 34\.9 34\.9 ~:> I\. J J\. EX!'ATR UTES&CONSULTJ\.NTS I Expatries et Consultants 42\.3 157\.7 l23\.1 95\.9 95\.9 95\.9 611\. 3 6\. STAFF OPERATI~G COSTS! Fonct1onnement du personnel 22 \. 3 96\.9 123\.5 114\.1\. 116\. a 120 594\.1 7\. STUDIES \. TRAINING! Etudes et formation 21\.2 :;,2\.0 1'5\.3 27\.::: :"5 \.;\. \. TOTAL BASELINE COSTS/ Tocaux de base 176\.8 638\.4 662\.5 462\.1 518\.5 510\.9 2969\.2  - 45 Annex ute Volta tableIV - 1 FORE et Forestier ST'RENCTHENING OF FORESTRY rcement de l'administration forestiere TOTAL COSTS PER es totauK annuels ('000 CFAP/FeFA) L/ ~PRE~-~P~RO~J~E~C~T~/---------------------------------------------------------~T~O~T~AL~B~A~S=EL~I~~~'E~C~O~S~TS PROJECT YEARS/Annees du Projet Avant Pro jet ____~__--__--~-----------\.~----------~----------__----- Couts totaux de base 00 0 1 2 1 1\. INFRASTRt:CTURE/ Intrastruc ture 67190 6i'1\.90 2\. EQU!PMENT/ Equipement 36120 625iO 4300 39890 7530 ;'j0410 3\. FORESTRY FIELD WORKS/ Travaux forestiers (a) SEASONAL LABOR/ Main d'~euvre sa1sonniere (b) OPERATIONS/ Fonctionnement (c) DRIVERS & HELPERS/ Conducteurs ~t aides S(PERVISORY STAFF! Personnel d'encadrement (a) SALARIES/ Salaires :67Q \.,\. 22040 37160 -~:~O ,°830 ,9830 2089':"0 Cb) PROJEC7 AL:"Cn"'~';CE S ' :nciemnites cie ?r':~~t 1/ ~3'CO :?3CO ~-':QO :~:;OO :_9ro ~5::()O 5\. ~XPATRIATES A\.'H) CONS(L-;:\.'_"-;:S/ Expatries et Consultants 42S20 1:':'690 ,Ol~O 52990 32890 52890 396320 6\. STAFF OPERATr~G COSTS/ Fonctionnement personnel 21850 7~4JO 10:080 ,,2000 o~JoO 00780 ~S1530 70TAL 3ASELI"Ei Total de ~ase 66340 270980 3731':'0 : 3 :600 27!900 :42930 1~61890 1/ Adjusted co January 1980/Revises en date de janvier 1980 II For all project relaced seaff including the Saba operational unir/P"ur tOUC Ie personnel reli\. au proje~\. y compris celui de l'uni~e de 8obo\.  - 46 Annex Ti'ii'le IV - 2 UPPER VOLTA/Haute Volta FORESTRY PROJECT/Projet Forestier RAINYED TREE PLANTATION/Plantation Foresciere en Sec TOTAL COSTS PER YEAR/Couts Totaux Annuels ('000 CFM/FCfA) PRE-PROJECT Avant Projet PROJECT YEARS / Annees du Projet TOTAL BASELINE COSTS 00 0 1 2 3 4 Couts Totaux de base 1\. IN F'RASTRUCTURE / Infrastructure 10640 53790 44410 27190 1160 137190 z\. EQUIPMENT/ Equipement 35220 144830 17420 2030 7550 8320 215370 3\. FORESTRY FIELD WORK/ !ravaux Forestiers (a) SEASONAL UBOR/ ~~in d'oeuvre saisonniere 3150 21':'30 38000 ~2950 50210 155i40 (bi CPERAT~NG COSTSI C~uts ie :onc~ionnement :'720 ::550 361\.80 \.41:0 ~':'390 ~;1060 (ci wRIVERS A:m HELPERS/ Cvnducteurs et aides 7840 a6l0 0380 9380 9380 44590 \. SUPERVISORY STAFFI Personnel d'encadrement 9430 9430 ?~30 9430 9430 47150 5\. E\.:G'ATRTATES/ Expat\.ries 38iOO 38iOO 38700 38700 38700 193500 6\. STAFF OPERATING COSTS/ Fonctionnement du personnel 17350 17350 17350 17350 17350 86750 TOTAL BASE LINE COSTS/ Totaux de base 45860 279810 179000 178260 170640 177780 1031350  - 47 - Annex Table IV -3 UPPER VOLTA/Haute Volta FORESTRY PROJECT/Projet Forestier NAl"O'RAL FOPJEST MANACEMENT/Develo~~ement de la forat naturelle TOTAL COSTS PER YEAR/Couts totaux annuels ('000 CFAF/FCFA) PRE-PROJECT/ TOTAL BASELINE COSTS/ Avant Projet PROJECT YEARS/Annees du Projet Couts totaux de base 00 0 1 2 4 l\. L~FRASTRUCTL~/Infrastructure U80 5980 4930 3020 130 152\.40 1\. EQUIPMENT/ Equipement 3910 16090 1930 220 840 920 23910 3\. FORESTRY FIELD WORKS/ Travaux forestiers (4) SEASONAL !\.AllOR/ Main d'oeuvre sai$onniii!re 570 9420 9470 9510 8980 37950 (b) OPERATlNC COSTS/ Couts de Eonc;tionnement 2020 4280 4680 5090 3':"70 195':'0 (c) DRIVERS AND HELPERS,' Conducteurs et aides 870 960 1O~0 1040 1040 \.950 4\. SGPERVISORY STAFF/ Personnel d'encaurement ~U50 1050 L050 1050 1050 5250 5\. ~ATR1ATES \.~~ CON~~LT\.~'TSI Expatries et Consul tan tS ~300 :'300 :'300 :'100 -300 22\.500 6\. 5TAf'F OPERATI::C CCS:S, Fone:; icnneme::1t iu ?er-so:1r\. al ~930 :'930 k\.910 :9 :0 :°30 :?65C TOTAL 3ASEL!~E COSTS/ Tocau>: de base 5090 2~810 :8800 25710 :38'W ~:690 :37990  - 48 - Annex Table IV - 4 UPPER VOLTA/Haute Volta FORESTRY PROJECT/Projet Forest1er FAO/L~P TREE PLANTATIONS MAINTENANCE/Entret1en des plantations forestieres FAO/PNL~ TOTAL COSTS PER YEAR/Couts Totaux Annuels ('000 CFAF/FCFA) PRE-PROJECT TOTAL BASELWE COSTS Avant Projet PROJECT "EARS!Annees ;iu P!'cjet: Couts ':ccaux i\.e :,ase 00 0 4 1 lNFRASrRlICTtTR\.E / Infrastructure pm pm pm pm pm pm \. , EQUIPMENT/ Equipement 27090 430 430 27950 3\. FORESTRY FIELD WORK/ Travaux Forestiers (a) SEASONAL U<BOR/ ~\.ain d'oeuvre saisonniere 18070 ~~830 5~OO 280 1l-8iSO \.:\.1390 92030 (0) OPERA!I~G COSTS/ COll ts de tonct:1oc\.nement: 4660 ~OOO 2000 1010 101\.;) :'0~0 13690 ee) DRIVERS AIm "-ELPERS! Condue teurs et aides 5::'\.1;0 ::580 17:20 9460 StPERVI50RY :3TAFF ' 22rsc:nnel\. , 6nc:acre~er;;: ,090 -,\~,: -;~"C ,090 \.090 - ::'5-0 5_ :':XPATRIATES \."u"lD CONStL7,~i!S/ ::xpacries et Consultant\.s pm ?m ;:\.~ ?m ~m ;r: ?,:!" 6_ STAFF OPERATIl;G COSTS! ?onc:tionnement du ?ersonne! -50 \. 50 ':'50 ~50 ':'50 ;;'50 2700 TOTAL BASELI:;;E COSTS/ Totaux de '::>ase 59520 :5950 IJi90 5830 178L\.J -~:\.:,O 170370  - 49 - Annex taiiTe IV - 5 UPPER VOLTA/Haute Volta FOREStRy PROJECT/P~ojet Forestier RURAL WOODLOTS/Bois ruraux TOTAL ANNUAL COSTS/Couts cocaux annuels ('000 CFAF/FCFA) PRE-PROJECT! TOTAL BASELINE COSTS/ Avanc Projec PROJECT YEARS/Annees du ?rojet Coucs to taux de '::las e 00 a 1 2 " 1 INFRASTRtlCl'tl1l\.E / Infrastructure 6020 6020 2\. EQUIPMENt/ Equipement 3760 1610 5370 3\. FOREStRy FIELD wORKS/ Travaux Foresciers (a) SEASONAL LAllOR/ Main d'oeuvre saisonniere 670 1010 1340 1340 4360 (0) OPERATING COSTS( Coucs de fonccionnement 220 320 430 430 1400 (c) DRIVERS AND HELPERS( Conducceurs et aides pI!! em pm pm pm pm ~\. SUPERVISORY STAFF I Personnel d'encadre~ent 1190 1190 1190 :190 l110 5\. EXPATRIATRS ~~ CONSULI~~TSI Expacries et Consultants pm pm pm pm ?m ?I!! 6\. STAFF OPERAtINC COSTS! Fonctionnemenc du personnel 2700 2700 2700 2700 2700 13500 TOTAL BASELINE COSTS/ Totaux de base 7650 10800 5220 7270 5660 36600  - 50 - Annex Ta"ii"IeIV - 6 UPPER VOLTA/Haute Volta FORESTRY PRQJECT/Projet Forestier CONSULTANTS, STUDIES AND TRAINING/Etudes, Formation at Consultants TOTAL COSTS PER YEAR/Couts totaux annuels ('OOO CFAF/FCFA) PRE-PROJECT / TOTAL BASELINE COSTS/ Avant Projet PROJECT YEARS/Annees du Projet Coucs totaux de base 00 o 2 4 1\. INFRASTRCCTURE/Infrastructure 2\. EQt:!Pl1ENT! Equipemenc 3\. FORESTRY FIELD WORKS/ Travaux forestiers (a) SEASONAL LABOR/ Main d'oeuvre sa1sonn1ere (b) OPERATING COSTS/ Couts de fonctionnement I\.e) ;)RIVaS ,-\\.'\D :ii::L?ERS' Conducteurs et aides ~\. SCPERV!SORY STAFF! 1f 1830 7630 :'\.2~7C '\.2900 ::U\.70 ~;JOO ?ersonnel j'sncadre~ent 3\. S{PATRIA!ES A\.ND CONSULTA\.'\TS! '\.70:0 J'?SoO :~70 2\.2360 :470 :'170 ~xpacrias eC Consultants \.:\.:\.OC \.18 \.,; -~(' 1-- \., " :\.ao ?6~O ;:OTAL BrtSc\.Ll~:E COS::':' T-Jt\.aux ::e ':ase '::':":"0 52030 :5~:D :70;0 :'5":':0 '\.3::':'0 J:\.,! Including scholarships and incentives (CFAF ':'4\.1 :nil lion) ," Incluses bourses at pri~es d'encoura~ement (FCPA ':'4\.1 mL111ons) !J !:ncluding audit fees of CFAP J\.3 million per 'lear/y c01!!'pris verification eor\.rotable a raison de FCFA 3\.3 ~111ons par an  - 51 - Annex Table V - 1 UPPER VOLTA/Haute Volta FORESTRY PROJECT/Projet Forestier SUMMARY OF PROJECT RELATED VOLTAIC INCREMENTAL STAFF (a) / Resume du personnel Yoltaigue additionel relfe au projet (a) Pre Project Period/ Project Period/Periode du Projet Equivalent Grade/ Periode anterieure Niveau d'equivalence au projet 1980 1981 1982 1983 1984 A\. Forest£! Staff/Personnel forestier Al l(b) 3 4 6 6 6 A2 4 7 9 10 10 B 1 1 1 C 8 8 8 8 8 D 1 1 1 1 1 B\. Non-Forestrv Staff/Personnel non-forestier Al 2 5 6 6 6 B l(b) 3 4 4 4 4 Dactylos 2 3 3 3 3 Chauffeurs 5 5 5 5 5 Gardiens & Messagers 5 5 5 5 5 (a) Heavy equipment drivers and helpers not included/ Conducteurs d'engins et aides non-compris (b) Six man-months/six hommes/mois  - 52 tlP:I'I!:a 1JI?W/_\. Volta i'ORm'1'!!r l'IlOo1EC'r/Proj et loreot1er ~ RI!LAfl:I) ~ sv\.:rr/Pe\."""el &ddl\.UOIIIIel roll\. au 1>1'Ojot i'lU!l PROv"l!\.CT i'!ltIOD PIIriode \.tOri"""",, au projet ?ROJ'ECT ?'ERIon/Annees :1:1 ?ro\.jet 1978 1979 1981 19&1 198; ft!ll!!lG1'l!E5IIfG OF ?OtIl!IilTl\Y Al)!==IONI j\en\.:'or:ement 1\. : i l\.d:m\.1\.n13tra,,!on =~res'tier9 D1reetMlr'-zeneral de 1 t !:n1\.l"'ZII1l1C!11leDt (d) Al !lIII ;m ;m l'" ;:m ;:z:\. Coue11lu \. Adra1\.Aiatraticm et F1n&DCe Exp\. 1 lllnl!CteW:' d _ at Procr- Cd) Al\. lJIl lJIl lJIl l'" I>" ;m 1l:I\.rwt\. Proje\. 1AD/P'IWf'I FID 1>"(6) 1>"0\.2) 1>"(7) S~t lJmmta1re r\.,\.atier FAD 'lID 1>"(6) 1>"(6) S~te ~ roreatier rNJX FNJX 1'1"(6) 1>"(]\.2 ) 1>"(6) 3pec1al1st IImIctaire roreatier P\.All P \.All 1>"(6) po(l\.2) ;00(6) S~1&llste \. :aventairt :'"orest1er ~ 11) ,u 1(6) 1 1 Spo!a1&l1ate I::l\.,lIto\.l\.r\. fortier ,\\.2 1 1 !J:lgen1eur \. ':~phe (0) \.U(~lF) ne4\.1nateurs \. :::\.:-to9'aphes B(lIl') 1(6) ~l6: ~ents 1'ecbn1quea C ?A!onc:m1,ste Forestier - "fAOX :AOX ;m"o, &cooCl!:l1ste ?':In!stier ll(~f) ~t\. F1\.:l&m::ier ,u(~F) S~C!:ie\.Uste - ?'eecer::b\.e :'orest1ere 1 St)ecia\.Us1;e \. Rec!:erci::\.e :'orestiere 2 SPeCialist! \. 2e<:b\.erehe t"ore:l'ti\.~~ \.>\.2 ~teur de !\.Iame~tmt ~ores't1er et de reboiseent(4) ,u ;Ill ;m ;m ;:m l'" ;t> ':het ie Serviee \. ~eboUcme\.o:t ,u 1 In\.g:enieur le\. '\.:n,vatlX - ?la\.03:t&'t1ons \.~ Je\.et1onnaire ie _t~!"1tl 31(llF) A~ents 3:'ecbni:v\.:\.e\.s - ?4-gio\.::t1ere\.1$ ;m l'" l'" ;:m l'" l'" ;m -:he::' :ie 3el'"'rt"f! - _-in~~a\.o;en\.e~t Al ")esti::m\. ?l~::a"t:'Qr\.s \.u 1estion \. ?"r~~s ::l\.asS8f!5 \.>\.2 ~!,\.t1:)n \. ::icm&ine ~¢l1"''9rot;6-~~ A", ?"onda Fores:,1er ;\.iationaJ\. ?ore\.8~t\.er \.U ~8"":'ratiOll er'!: E'1nance AHSF) 1 :cmpt&b~e\. 3\.l ?en:o\.tm\.~ de sru'tien : !l\.dd1t10£1nel) :acty1"" ;) (NFl Chauffeurs ;)(NFl ';&rd\.1e:D\.$ e'e Me:ssqer, )(1111 MI!In:D = l"\.AlI"'\.MIOII AlID :u:!"\.l!lAL J'OREST lWlAG~/ ?"I-3oD\.t&tiOll iore'~1'l"!I! ~t1 see' 9t~n1; jets\. :'oret tl&'tUrelle Chef :Ie l'=1tO opj""t1011elle de =000 Jl\.wl\.t\. o ,\\.2 l"'lo) I>" ;m ;m ;m 2 2 2 ~d\. \. tra"""", S~1\.&l\.1\.ate eft lo"_caT:tA A2\. Exp\. Exp\. 2 1 1 1 1 " 1 1 tDPa1\. ""'"\.1I1cim Acah'r_ _ C 5 5 5 Pripoe 0 1 1 1 _a\. on", o (lIT) 3 3 Chau1't\. C<mcI:Ilet\. d' eag:t\.uo «to &1d ~ 2 2 ~ ~ 4 1'r&ctetIn 3 ; ~ 5 6 3 ,; 6 6 D \."'!\. 1 1 1 1 1 1 :\. 1 ~ ;m ;m l'" lJIl ;m l'" l'" lJIl ;m ;>II Cam1cms 2 4 4 !!!\.il!!\. (a) \. tozm&tiaa \. l'Otn\.npr d';1>!It 197'9 ?0Ul" memoire ('0 ) \. D:I\.nd\.erU'o er\.Ja"tri~ \. :::::A (c) lUIt'all\.t "lief (j'1_Uaa \. 301>0 lllou\.1\.aaao\. de 1 '1JiIl1te cperat10nnelle Sero \.';,,,,,h' ~l\.n de dir"""'r 1\. '''''vaux ~XDat\.r1 ~ \. \.ije t\.U\.em\.aI1de eXPa,tr!'3 \. 7AO \.xpatri~ 4 ~xpce!",,: I\.neei'!! '?AC llOtl- rOntstielr !lcmna-laQis  - 53 - Annex ra;re VI UPPER VOLTA I HAUTE VOLTA FORESTRY PROJ"\.IOCT / PIlOJET FORI!STIER SEASONAL LABOR COSTS / cauts de Main d'Oeuvre sa1sonnibre ('000 CFAP/FaA) (19 7 9 CONSTANT PRICES / PriX Constants 1979) PRE-PROJErr/ TOTAL Avant Proj\.;:;\.et\.:\.___ __ _ _ PIl_OJECT_YEARB/_Ann\._ec_e_s_dU_Pr_O_j_et _\.,\.-_ _ 3EFORE CONTIlIGENCIES 00 0 1 :2 ~ 4 Avant Imprevus roRESTEY DEPARTMENT STP\.ENGTHENING/ ~enforcemen" 1e la Direction des ?orets RAlliFED TREE P!\.ANT\.AXION Plantation forestiere en sec 19\.933 35,349 46,709 l44,879 NA!I'URAL FORmT MANAGDIENT/ ~nagement foret aaturelle 533 8,765 8,806 8,848 8,356 35,308 FAO/UNDP TREE pt\.ANT~ION MAINTENANCEI Entretien des plantations forestieres FAO/PNUD 16,812 l3,800 4,745 257 1l,030 38,967 35,611 :!URAL fIOODLOTS/Bois ruraux 936 l,248 l,248 5TUDa AND TBAIlUNG/ 3tudes et formation TOTAL '000 crAC/?r::FA 3EFOF:E CONTINGENCIES/ Avan't :\.:npr\.e,,"us :6,812 l7,262 34,067 45,348 61,084 TO':'1\L ~IANDAYS/Hcmnes- j ours I at l040 Cl"AF/NA\.'1 'JAY!Ham:me ~our:' 32,757 43,604 ~3,735 !\.ST:!l-!\.'<T\.ID iiFP ?!\\.RTICIP~IOli/ ?artic1paJ;ion 4-/entuelle 1'-1 :\.4,;-[ :'000 CFAF/FCFA) BEFORE CONTTIlGENCa/ Avant llrprevus 5,044 5,2\.79 lO,22C 13,cD4 1:3,325 18,395 26,9 7 1 116,146  54 UPPER VOLTA / HAUTE 1/oLTA FORESTRI P R = ( PROJ1\.'T rollESTIER Cnn\. 3E!!VAl'I'l S'rAn SALAlII!S / $&I\.&1re\. de\. FODot1C1DD&1re\. ('000 FCFA / CPA) (1979 COliBTAI'IT PRICES / ?rix Con8t&Qt\. 1979) I!!!E- PROJ'EC'r/ ::IT\.>\.L AV1Ult ?rajet PROJECT '!EARS I Annees du Pro\.jet SE:F0R\.E ;:~:rr:l~DICIES JO ~ Avant ~'Pr~'J'U~ F'OHESTRYwEPARTMENT STRENGTHENIllG/ ?enforcement de l\.a Direction de\. Forets 1,550 17,;00 35,400 47;700 ~9,300 cO,loO 201,;~G :I ?AI:lFl:I) :?\.!:E ?LAlI'rATION I ?la\.n:ca"":\.i'Jtl forest!ere en sec e,as,) 6,~3~ -: ,305 6,Y3: \.,,~8,:, :!\.+ ,-+-;:~ _\. :W"c"?AL ::F\.ES'I' ~A\.AZiA\.J\.E:-1Errr/ Amenagemen't :~oret naturelle 765 7b5 -6: 7~;::; ~, 765 : ,~2:- :v ?AO/UlIDP ~ ?!ANTATION :\.lAI:m:!IANCE/ " Zntret1en de\. -pl&atat1ons forest1eres FAO/P!IUD 2,600 2,600 2,600 2,000 2,600 2 ~600 1'5,000 'II RUl!AL OOOCLOTS/Ba18 rIlraux 800 300 300 300 300 :",000 'III STUDIES AND TRAINING/ 3tudes et formation 700 1,600 tOO 500 100 3,:;00 '1 TOTAL SE:FO~ ::ONTI:IGENCIES/ Avant !m'preVWi L!\.,l50 29,\.)50 4\.3,':':=0 ,:,j,3"',c -)0,:'50 61,20::-'') 26'\.:; ,20C 1''JTAL A:'""""!'ER :CNTING~ Ap~s ~pr\.jvus 4,399 ~2 ,6::2 \.;:\.,\. ,;::::~ ""'!\.,269 '3:!\. ,'+1 7 -56,jlL,\. :~c, :\. \.q d ~P\.Allr::\.Y 3::CO~'i:1:I) :S/Fonc"io=aires '\.'a\.c~\.s ''''''!>O"aJ\.reme" EXCWDING '!'P\.AL'nNG SCHO:\.A\.RSF\.IPS A,\.I\.~ ::;c~rrrr:'\.s/exclu\.es ':ourses, :';:n"ma~ion et :nci':a\.t\.ion:::  55 fJP'P!:R VOUtA ,I 1W1n roLtA 1'01!I1mI!!' 1'1\= ! I'!\CJft FOI<ESTm '!~:" Anne'!' P"!"t ?f~ SOH miiArll feu\. \., :i'!' Serr:,ce FAC':':NDF '!'S±A:\. ::, :C-: :\. \. ':,4"r' , ~ , \. \. ")"JII:: \.:7~ lJ\.oB5 22\.46: ,~~ 38,4<:!3 \.1,298 2D\.73C 22,770 ~~170 \.2,O/oiO 2~:)40 3\.060 3\.060 9\.21\.lJ 9\.37'J le,4\.J3,"'\ !B\.74C 14,;0\.3= 3\.2,915 =3 J 17E 50\.629 75 1 349 78,:;9 27,0i06 27 ~046 2:,2';t 42C :\. 420 - :i 63C 12\.Eilo 2~ ,360 2;,~6::: ::";:',5ce :;o,6C":; -\.4\.*4: \. ;"'22 ~3\.:::: 2e,\.:\.6, \.~Q -\. 24 \. ,l!\.:'C J\.t,t\. 23,59: 0< S,9QC \.c,,2-30 2~ E,9QC \.u\.o,2tY\.:: 2 13,~5J ;~7,::X 2:: \.~'J= ;:~\."""~: ::'\.e: s't\.er-t $':&C:ltei:::: ;,r :::'e l\.:\.l~us:;r::\.al ~"FE: :::'\.E! P"\.£;:A~:::!;'?lanLl1tio::  - 56 UPP!II VOLTA/1WI1'! VO~TA P"" tJT t>t;>\.1eot/E'>'o3\.t roreaU\. Pnl,ieet Wood P'rod:u\.ct1aa\. ~ SIr\.lAt\./Product1oa «t ~tt: de ::loU dttr'&l:lt 1\. ot''Ojet (1m """"taIlt priO /prix """"tall\. :9191 A\.~ ~ ~ 4 ::\. ~ 1\. RaJ\.a\.fed\. Tt'" Pl&n:tat1oll\./P"'\.ADta\.tico ~ore:st"n !In fee : &) 3atureJ\. ?roduct101l!?roduct1oa !l&t1J\.l"eU\. 3\.300 ':J,6oc ~\.60G },;;oo :t! Plant&t1on ?rod\.uctl00/i?:'oduct10Jl de pl\.&\.ntation :',':'2S :\.:~ ::\.,3~ :\.,:\."?C -,~\.,\. 7 '" ';,~ :'0,'068 -; -; ,\.,\."~ ~ c\.j,':;':' '!'otaJ\. ?rodu¢t10A/Prod\.ucticn tctaJ\._ (\.) :latW'IIJ\. i'ro<Iuct1m/l'I'o<!uct1Q11 ""t""\.u\. S,:\." ~,:\.~ ll~~ :\. :"': 33,1GO (b I P1aDtatiOll _UOll/_\.1011 de pl\.oAtat1ol1 ;'::J,cB8 39,\.023 50,:11 B\. SUe\./V""t\. ('000 I'Cl'A) (1) Natural\. _UOI1I_UOI1 ""\.unU t/l PCFA 3400/ U,Z!O 28,Sl' 28,8\.1' 40,,035 6,;", (~) PlAIItatiOll _tiGa/_tJ\.coo d\. pl\.oAtaticm /1 4300/,\.3 4"",8 169\.519 ::\.5,51'5 29,31~ j~,993 :7"\.99« :3tJ~ 7::' \.:\.,l~<: 2'3\.31; Z:: ,a 1':' :':' \.193 :~i,\., :'43  - 57 UPPER VOLTA / HAUTE VOLTA FORESTRY PROJECT / PROJET FORESTIER RAINFED TREE PLANTATION / Plantation Forestiere en sec PER HECTARE DIRECT COSTS AND BENEFITS / CoUts Directs et Recettes a l'hectare 11 (CFPJ' / FCFA) (1979 PRICES / Prix 1979) BEFORE AMORTIZATION AFTER AMORITZATION Avant Amortissement Apres Amortissement I\. COSTS/Depenses 1\. ROADS, TRACKS + FIREBREAKS CONSTRUCTION/auverture routes p~stes et pare-feu 15,770 20,350 2\. LAND PREPARATION/ Preparation du terrain 57,790 82,870 3\. WOOD EXTRACTION/ Exploitation forestiere 20,800 20,800 4\. WOOD TRANSPORT/ Transport du oois 15,050 19,710 5\. PLANT SUPPLY/ Fourniture des plants 16,510 25,770 6\. PLANTING AND MAINTENANCE YEAR 1/ Plantation et etretine annee 1 44,360 48,510 7\. MA\.INTENANCE YEAR 2/ Entretien annee 2 19,400 23,700 8\. MAINTENANCE YEAR 3/ 7,320 8,000 Entretien annae 3 CFAF 197,000 249,710 US$ 895 1,135 II\. BENEFITS/Recettes CLEARED WOOD SALES/ CFPJ' 56,100 56,100 Vente bois de defriche (16\.5m j x 3400 CFAF/m)3 US$ 255 255 11 INCWDING DRIVERS AND HELPERS/Y compris chauffeurs e'C aides EXCWDUG SUPERVISORY STAFF/Non campris encadrement  - 58 UPPER VOL~ I HAUTE VOL~ FORESTRY PROJECT I PROJET FORESTIER NATURAL FOREST MANAGl!MENT I Amenagement de 1& For~t Na\.turelle DIRECT COSTS ~~ BENEFITS / CoUts Directs et Benefices/ha !I (CFAF / FCFA) (1979 PRICES / Prix 1979) BEFORE AMORTI~ION AFTER AMORTIZATION Avant Amortissement Apres Amortissement I\. COSTS/Depenses l\. SITE SELECTION/Choix du site 1,040 1,040 2\. TREE MA\.RKIliG/Martelage 260 260 3\. ROAD CONSTRUCTION/Ouverture Route 5,200 6,330 4\. FIREBREAK CONSTRUCTION/ 5,900 8,300 Ouverture pare-feu 5\. TRACK CONSTRUCTION/ Ouverture piste 1,810 2,710 6\. WOOD CUTTING/ Coupe du bois 9,450 9,450 7\. WOOD TRANSPORT/ Transport du bois 6,840 8,960 8\. HARROWING/~verisage 2,270 3,390 9\. SEEDING/Semis 100 100 10\. WEEDING/Desherbage 20\.800 20\.800 CFAF 53,670 61,340 US$ 244 279 II\. BENEFITS/Recettes EXISTING WOOD SALES/ 25\.500 25,500 Vente ~ois de det\.riche (7\.5 m x 3400CFAF/m3) usi 116 u6 1/ INCLUDING DRIVERS AND HELPERS/! :com:pris conducteurs et aides EXCLUDING SUPERVISORY STAFF /Non com:pris encadrement  - 59 - Annex Ti'5Ii XII UPPER VOLTA/Haute Volta FORESTRY PROJECT/Projet Forestier DETAILED FINANCING PLAN - BY CATEGORY/ Plan detaille de financement - par categorie 1/ TOTAL COST/Coat Total US$ (Million) US$ Million IDA FAO coV'! F/D L F/D L EQUIPEMENT/ FE/D 2\.2 2\.2 Equipement L \.3 \.3 INFRASTRUCTURE / FE/D \.8 \.8 Infrastructure L \.5 \.5 FORESTRY WORKS OPERA- FE/D \.7 \.7 TING COSTS/Fonction- L \.6 \.6 nement des operations forestieres SEASONAL LABOR/ FE/D Main d' oeuvre sa15on- L 1~3 Y \.7 \.~ 11 niere SKILLED LABOR/Main- FE/D d'oeuvre specialisee L 0\.4 0\.4 SUPERVISORY STAFF/ FE/D Salaires - personnel L 1\.8 1\.8 d'encadrement PROJECT ALLOWANCES/ FE/D Indemnites du projet L 1\.0 1\.0 EXPATRIATES AND CON- FE/D 3\.5 2\.9 \.6 SULTANTS/Expatries et L consultants STAFF OPERATING COSTS/ FE/D 1\.8 1\.8 Fonctionnement - personnel L 1\.8 1\.8 STUDIES AND TRAINING/ FE/D \.6 0\.6 Etudes et Formation L \.2 0\.2 SUB-TOTAL FE/D 9\.6 9\.0 0\.6 L 7\.9 5\.5 2\.4 TOTAL 17\.5 14\.5 0\.6 2\.4 1/ AFTER CONTINGENCIES/Apres tmprevus 1/ NET OF REVENUE FROM CLEARED WOOD SALES/Apres deduction des revenues de la vente de bois de defriche 1/ SHOULD BE COVERED BY WFP ASSISTANCE/Contrepartie PAM  - 60 - Annex Table XlII UPPER VOLTA/Haute Volta FORESTRY PROJECT/Projet Forestier ESTIMATED SCHEDULE OF DISBURSEMENTS/Prevision de retraits de fonds Exercice IDA SEMESTER/ DISBURSEMENT/ CUMULATIVE/ Fiscal Year Semestre Retrait Cumule 1980 2 1\.5 1/ 1\.5 1981 1 1\.2 2\.7 2 1\.2 3\.9 1982 1 1\.2 5\.1 2 1\.3 6\.4 1983 1 1\.4 7\.8 2 1\.4 9\.2 1984 1 1\.5 10\.7 2 1\.8 12\.5 1985 1 2\.0 14\.5 1/ INCLUDES US$1\.02 MILLION TO BE DISBURSED FOR PPF (US$0\.52 MILLION) REIMBURSEMENT AND PROJECT ADVANCE (US$0\.5 MILLION)/Comprend US$1\.02 millions pour fin de remboursement du PPF (US$0\.52 million) et de decaissement de l'avance du projet (US$0\.5 million)  61 - AliNEX Ul'PER VOLTA ( IlA!mi: VOLTA 'T\.iiie XlV FORESTRY l'ROJECT I FROJm' FORESTIER ILLUSTRATIVE ~ CASH FUN I EBTDIAl'ION Dl!Il FLUX MONl!\.'l'AIRES (MILLION ~M/FCFA) 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2Oiill\. 2OCI! 20113 2t04 l!OO5 at06 2007 00 o 1 3 4 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 l!5 26 27 Cub Inflolr/Fl¥ d'""tree (a) F1nane1nl!lFilWl\."""",t (1) \.1,05\.0 462\.0 504\.0 567\.0 609\.0 798\.0 InA C""d1t/er6dit de l'InA FIIIJ/lJ'IIDP \.50\.6 54\.2 28\.4 Subtotal/sOWl total 15,\.6 516\.2 532\.4 567\.0 609\.0 798\.0 (1)) _ue\./liecett (i) _ _tal cutting Tax/ Redevmc"\. odd1ti""""Ues 49\.0 71\.0 82\.0 87\.0 87\.0 68\.0 77\.0 82\.0 92\.0 97\.0 102\.0 86\.0 i 94\.0 99\.0 110\.0 86\.0 97\.0 105\.0 117\.0 125\.0 95\.0 104\.0 118\.0 129\.0 135\.0 135\.0 ~\.o 135\.0 (111 Wood Sal/V"ot" d\. bo1o U\.9 31\.5 32\.5 99\.1 208\.0 149\.3 11\.1 17\.2 54\.5 112\.2 115\.6 269\.1 328\.2 183\.8 4\.6 7\.2 104\.7 216\.3 223\.4 445\.8 366\.7 236\.7 3,\.6 41\.9 368\.3 729\.0 7EO\.3 1189\.0 Subtotal/SOWI total 60\.9 102\.5 u4\.5 196\.1 295\.0 217\.3 88\.1 99\.2 146\.5 2092 217\.6 355\.1 422\.2 282\.8 114\.6 93\.2 201\.7 321\.3 340\.4 570\.8 461\.7 340\.7 153\.6 1'!O\.9 503\.3 864\.0 89\.5\.3 1324\.0 Total Inflow\./nux total d' entree 155\. 6 638\.0 737\.4 796\.0 991\.2 1388\.0 261\.3 88\.1 99\.2 146\.5 209\.2 217\.6 355\.1 422\.2 21l2\.8 114\.6 93\.2 201\.7 321\.3 340\.4 570\.8 461\.7 340\.7 153,6 170\.9 503\.3 864\.0 89\.5\.3 1324\.0 Oub CUtflOll'/Flux d\. sortie (a) Project caats/coat\. du projet (i) F~\.t"\. Department/Direction ru\. Forits 66\.3 271\.0 378\.1 231\.6 271\.9 242\.9 130\.0 130\.0 130\.0 237\.0 130\.0 130\.0 130\.0 130\.0 237\.0 130\.0 130\.0 130\.0 130\.0 237\.0 130\.0 130\.0 130\.0 130\.0 237\.0 130\.0 130\.0 130\.0 130\.0 (11) !laNst"\. OperetiOl1s/aperatiillls foresti~res UO\.5 344\.3 232\.4 215\.1 219\.6 250\.6 25\.3 16\.3 14\.6 26\.0 42\.7 42\.7 61~2 U\.2 13\.9 9\.7 11\.2 32\.0 54\.7 54\.7 78\.7 15\.0 13\.1 7\.1 8\.0 46\.9 87\.8 86\.6 127\.0 \. _ (UiJ ltu4i"\.d Traio1nl!lEtud\.s et fo\.tion 21\.2 52\.0 15\.4 27\.0 15\. 4 (iY) e~1e\.I_"""" 12:4 94\.0 160\.8 150\.7 214,5 220\.4 144~6 Subtotal\.{Sous total 189\.2 730\.5 823\.3 612\.8 733\.0 724\.3 155\.3 146\.3 263\.0 172\.7 172\.7 191\.2 146\.2 250\.9 13'\.7 141:2 1&1:0 184\.7 291\.7 208\.7 145\.0 143\.1 137\.1 245:0 1'16\.9 217\.8 216\.6 "7\.' (b) Del>t Service/Service de 1& ru\.tte Ill/\\. Credit/credit InA - int\. 0\.4 2\.5 6\.1 10\.2 14\.6 19\.8 22\.8 22\.8 22\.8 22\.8 22\.8 22\.8 22\.6\. 22\.4 22\.0 22\.0 '21\.8 21\.6 21\.4 21\.2 21\.0 19\.9 19\.2 18\., 17\.8 17\.1 16\.\ 13\.7 13\.0 prine\. 30\.5 30\.5 30\.5 30\.5 30\.5 30\.5 30\.5 30\.5 30\.5 30\.5 91\.4 \. 91\.4 91\.4 91\.4 91\.4 91\.4 91\.4 91\.4 Subtotal/BOWl total 0\.4 2\.5 6\.1 10\.2 14\.6 19\.8 22\.8 22\.~ 22\.8 22\.8 22\.8 53\.3 53\.1 52\.9 52\.7 52\.5 52\.3 52\.1 51\.9 51\.7 51\.5 111\.3 110\.6 109\.9 109\.2 108\.5 107\.8 105\.1 104\.4 Total CUtf1ov/F1UX total de sortie 189\.6 733\.0 1l29\.4 &13\.0 747\.6 749\.1 178\.1 169\.1 167\.4 28,\.8 149\.9 226\.0 244\.3 199\.1 303\.6 192\.2 193\.5 214\.1 236\.6 343\.4 260\.2 256\.3 253\.7 247\.0 354\.2 285\.4 3i!,\.6 321\.7 361\.4 Wet cuh ilOV/Flux lIIOIl6ta1re "et (34\.0) (95\.0) (92\.0) 173\.0 243\.0 638\.9 83\.2 (81\.0) (68\.2) (139\.3) 59\.3 (8\.4) 110\.8 222\.9 (20\.8) (77\.6) (100\.3) (12\.4) 84\.7 (3\.9) 310\.6 205\.4 87\.0 (93\.4) (183\.3) 217\.9 538\.4 573\.6 962\.6 CUlBllative C\.b n01l'/Flux lIIllIl6taire cummu16 (34\.0) (129\.0) (221\.0) (48\.0) 195\.6 834\.5 917\.7 836\.7 768\.5 &19\.2 688\.5 680\.1 790\.9 1,013\.8 993\.0 915\.4 815\.4 802\.7 887\.4 884\.4 1195\.0 1400\.4 1487\.4 1394\.0 1210\.7 1428\.6 1967\.0 2540\.6 3503\.2 (1) 1979 - fran Pl?F/1979 - Provieo\.t du fond\. de d\.rag\.  _ 62 - ANlIEX Table XV\.l UPPER VOLTA I 1'\.AL'TE VOLTA FORESTRY PROJ1)JT I PROJET FORESTIEll 6UloIMAIlY OF ECONOMIC ANALYSIS OF BEOUCED EXPLOITAUON OF TIlE UNRESERVED FOREST Sammaire de l'analyee ~onanique de 1& d:1m\.1\.xw\.t1= de It exploitation dee car@ts non\. classt!es 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 00 o 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 Production lJo,t\./Donnees de production Without Project - Exploitation of Wood fran Unre\.erved Forest/ 3 4491 4617 4746 4879 5016 5157 5325 5470 5618 5770 5927 6088 6247 6409 6576 6747 6771 6949 7133 7332 1515 7714 7917 8125 8339 8670 Sans Projet _ Exploitation de bol\. de\. fodts noo-cl\.~ \. (000m ) With Pro ect _ Exploitatlon of Wood fran Unreserved Fore\.t/ 3 Avec TO et _ Explo1tation de bois des forat\. non-cla<I\.o ('OOOJn ) 4461 4437 4566 4699 4791 4932 4916 5057 5156 5303 5426 5376 5331 5484 5596 5157 5496 5658 5781 5953 6084 5966 6106 6296 6446 6748 Reduced Exploitat1on/D1m1nution de l'exporteUon ('~) 30 180 180 180 225 225 !i09 "'"'4i3 462 liW 50i 712 9i6 925 '980 ~ ""i2'75 ""i:29i" 1'35"2 i369 1431 1%8 l8u" 1829 1893 1922 lienefit\. from reduced e:qllo1 tatl000/Bdl1dnces du a 18\. 492 507 652 672 1258 1308 1507 1569 1734 2538 3363 3497 3817 3972 5268 5494 5927 6181 6656 8373 8965 9295 9908 10362 diminutlon de l'eX)ll\.o1tation 77 477 (CF/J M1111Qn/M1U1oos 4\. FCFA) Cooto/co1lta (CFAF MUl1on/M1111ono fCFA) , lIlA Project Cost\./Projet lIlA 172 642 645 424 471 435 Other Project costs/Autre\. projet\. ~ 500 500 500 500 250 Total Project Coeto/Collts Tot\."" du Proj\.t 422 1142 1145 924 971 685 600 600 ToO 600 600 700 700 ToO 700 700 700 700 100 700 700 700 700 700 700 700 p\.m\. p\.lll\. p\.m\. p\.m\. p\.m\. p\.m\. 100 100 100 100 100 100 100 100 100 100 200 200 200 200 200 300 300 300 300 300 Recurrent Costs/Collt\. de Fonctionnement Total Costs/CoO,ts Totaux 422 1142 ll45 924 971 685 700 700 700 700 700 800 800 800 800 800 900 900 900 900 900 lOCO 1000 1000 1000 1000 (345) (665) (653) (417) (319) (13) 558 608 807 869 1034 1738 2563 2697 3017 3172 4368 4594 5027 5281 5156 7373 7965 8295 8908 9362 lJ Detailed analysis in Project file/Analyse d'taill'\. dans le doier du Projet 3 gj Ba\.ed on a stumpage price of CFf 2500 m 10 1978 incr\.ing by 3'f, per year/ Ba sur un prix de 2500 FCFA/m sur pied \.'""roluant de 3'f, par an \. {  - 63 - Annexe Tableau XV\.l Appendice HAUTE-VOLTA Projet forestier Diminution de l'exploitation des forets non classees Analyse economique Detail des hypotheses 11 a) Duree de base : 26 ans\. b) Tous les couts exprimes en prix du milieu de 1979\. c) Taux de change de reference : 250 francs CFA pour 1 dollar (15 % au-des sus du taux officiel de 220 francs CFA pour 1 dollar)\. Les elements de cout en devises ont ete releves en consequence\. d) Pour tenir compte des tarifs reels de la main-d'oeuvre occasionnelle dans la zone du projet, Ie cout de la main-d'oeuvre non qualifiee a ete fixe a 300 francs CFA par journee de travail, alors que Ie taux officiel est de 1\.040 francs CFA\. e) Reduction de 25 % des couts du personnel expatri et des consultants\. f) Les provisions pour hausse des prix ne sont pas comprises dans les couts du projet\. g) Recettes fondees sur un prix moyen du bois sur pied (bois de feu, bois de service, piquets, bois d'oeuvre) de 2\.500 francs CFA Ie m3 a la fin de 1978, et sur une hausse annuelle de 3 % en valeur reelle pour tenir compte de la hausse moyenne estimee par la Banque pour les bois de feuillus tropicaux au cours des annees 1976-85\. h) Croissance demographique de 5 % dans les zones urbaines et de 2 % dans les zones rurales\. i) Consommation urbaine de bois de feu de 1,2 m3 par habitant et par an\. Consommation rurale de bois de feu de 0,7 m3 par habitant et par an\. Consommation de bois de feu de 0,2 m3 par habitant et par an dans les zones urbaines pour la fabrication de biere selon les procedes artisa naux traditionnels\. 11 Les tableaux detailles correspond~~ts figurent dans Ie Dossier du projet\.  - 64 - Consommation de bois de service ega1e a 10 % de 1a consommation tota1e de bois de feu\. Baisse de 1a consommation, 1iee au projet, de 3 % au cours des annees 1985 1989, de 6 % au cours des annees 1990-1994 et de 9 % au cours des annees 1995-2004 par suite de la promotion des poe1es a bois\. j) Le taux de destruction de la foret non classee passerait de 50\.000 a 100\.000 ha , par an sans Ie projet par suite des feux de brousse, des defrichements illicites et du surpaturage, a10rs qu'il se maintiendra a 50\.000 ha par an avec Ie projet\. k) Le taux d'exp1oitation des forets c1assees, dont on estime qu ' i1 reste 3\.000\.000 d'ha, passerait de 0,10 a 0,20 m3 par ha et par an sans Ie projet, contre 0,10 a 0,40 m par ha et par an avec Ie projet\. 3 L'exploitation des jacheres forestieres baisserait de 50\.000 ha par an, et Ie taux d'exploitation passerait de 0,15 a 0,10 m3 par ha et par an avec ou sans Ie projet\. 1) Creation: de 1\.000 a 2\.000 ha par an de plantations industrielles en sec, pour un total cumu1e de 50\.000 ha sur les 26 annees du projet (estimation de la production: 7 m3 par ha et par an); de 1\.000 a 2\.000 ha par an de bois villageois, pour un total cumule de 42\.000 ha sur les 26 annees de la duree du projet (estimation de la pro duction : 3,5 m3 par ha et par an)\. m) De 1979 a 1984, l'investissement et les couts de fonctionnement finances par la Banque s'eleveraient a environ 2,7 milliards de francs CFA (12 millions de dollars); et les couts d'investissement et de fonctionnement finances par l'Etat et par d'autres institutions s'eleveraient a 2,5 milliards de francs eRA (11,1 millions de dollars)\. n) A partir de 1985, les couts d'equipement passeraient de 600 a 700 millions de francs CFA par an (de 2,7 a 3,1 millions de dollars)\. Les couts d'equi pement sont fondes sur un cout moyen de 220\.000 francs CFA (1\.000 dollars) par ha de plantations industrielles en sec et de 110\.000 francs CFA (500 dollars) par ha de bois villageois\. 0) A partir de 1985, les depenses de fonctionnement passeraient de 100 a 200 millions de francs CFA (de 0,5 a 0,9 million de dollars) par an\.  - 65 \.!!I!J! UPP!:R VOLTA L lIA!Il'E VOL'fA rebl\. XV\.2 FORESTRY PROJECT / I'RQJl!T FORESTm IIAINFED TRl:E PLANTATION / PLAlITATION FORESTIl:RE EN SEC El:ONa'lIC ANALYSIS t ANALYSE El:OliOl!IQUE eCTAF MiUiona I Millions FC'FA) py \.!2Z2 00 ~ 0 l2!l! 1 \.l:2l!g 2 ~ 3 l2!l:!! 4 l2!l2 5 ~ 6 l2\.§:I 7 \.l3!ll\.L 8 \.J\.3!l;t 9 lZI2 10 1m\. 11 ~ 12 ~ 13 ~ ~ w :lSfl 1998 '1Jj 1999 19 2000 20 2001 2r 2002 22 ~ 23 2004 2t"' ~ 25 2006 2b 2007 27 IlE/IJ'\.'I'rN/BOnefiee;Y 0 = S_ITS!B<ln\.fi di\. t\. (i) WITHOUT l'!IOJl!lCT/Ssns Projet 0\.6 0\.6 0\.6 0\.6 0\.6 0\.6 1\.0 1\.0 1\.1 1\.1 1\.1 ,1\.2 1\.2 1\.2 1\.3 1\.3 1\.8 1\.9 1\.9 2\.0 2\.0 2\.1 2\.1 2\.2 2\.3 2\.3 2\.4 2\.6 (poIIChIiWcOllP'l' uusa;\.) 25 (11) Wl'Tl! m=/Avee proj\.t \.ar,,,,,ntes ae bo18 J - (WOOd U\.9 24\.5 25\.3 39\.0 5\.2 40\.8 11\.1 17\.2 54\.5 112\.2 116\.4 178\.8 2\.1 4\.4 4\.6 7\.2 104\.7 216\.3 223\.4 346\.3 4\.4 9\.2 9\.7 15\.2 340\.B 7'029\.0 760\.3 U39\.0 lJICRDOlII'l!AL 0 = IlE/IJ'\.'I'ITa/b\.n6fieea direct\. additionel\. 0\.6 11\.3 23\.9 24\.7 38\.4 4\.6 139\.8 10\.1 16\.1 53\.4 111\.1 ll5\.6 177\.6 0\.9 31 3\.3 5\. 4 100\.8 2110\.4 221\.5 344\.3 2\.3 7\.1 7 \.5 12\.9 "'33li:5 126\.6 me 'ii86\.'4 IIID= Bl!:!iE!'l'TB/SOnefice\. indirect\. (1) SlIOR'l'lIR TIWlBPJRT/Tr""\.port our plus court di\.tanc 0\.2 1\.3 0\.6 0\.2 0\.4 0\.4 0\.7 2\.5 5\.9 6\.7 11\.6 5\.2 11\.5 12\.9 21\.6 8\.4 18\.6 19\.8 32\.3 (11) SI!Il'1'EI! llUBR FALJ\.J::M/JsnhBre wHore\. 15\.7 38\.0 59\.6 73-6 47\.5 11\.1 14\.9 18\.4 43\.6 96\.5 1271 154\.3 90\.5 31\.0 90\.9 116\.7 138\.0 B1\.2 24\.0 72\.4 93\.5 (111) IlEIJUC!:I) EXl'ORTAnOll OF UN;U!I!lERVE!) FOP\.ERT/ 7\.9 27\.3 1\.9\.7 31\.9 6\.0 12\.3 12\.7 16\.3 40\.3 166\.1 82\.0 124\.8 30\.2 35\.1 36\.1 41\.3 93\.6 153\.4 167\.1 237\.2 B1\.4 93\.7 96\.6 104\.7 188\.1 269\.9 303\.2 412\.4 II:Sa:l\.I:mttoa\. de l'export&t1on dea t'orltl non-cle\.ssees r- TO'lAL Bl!:!iE!'l'TB/TOtal de\. bOnefice\. 0\.6\. 19\.2 67\. 87\.7 130\.5 84\.6 100\.0 34\.3 48\.0 114\.6 326\.7 299\.6 435\.7 18~\.4 128\.7 39\.4 46\.7 201\.6 410\.3 492\.4 7l9\.8 221\.7 182\.0 104\.1 117\.6 536\.6 1019\.1 ll53\.2 1724\.6 COS'rII/coO:ta g} (1) WIT!IXl'1' I'IIOJl!II'! Is""\. Ilrqjet 0\., , rae\.truct1",,) 0\.4 0\.4 0\.4 0\.4 0\.4 0\.4 0\.4 0\.4 0\.4 0\.4 0\.4 0\.4 Q\.4 0\.4 0\.4 0\.4 0\.5 0\.5 0\.5 0\.5 0\.5 0\.5 0\.5 0\.5 0\.5 05 111\.5 0\.5 (11) Wl'l'I! T!I!IIXf'Im/Avee pr0,tet (project,reeurront and extrsnt10n eosts)/ oollt\. du prqjet, de foeeti_t et d'extrsntion) 52\.S 300\.6 167\.4 152\.3 140\.1 142\.2 43\.9 e9\.6 21\.6 43\.5 52\.4 42\.4 51\.2 35\.2 35\.7 25\.7 26\.2 47\.2 59\.7 109\.7 62\.2 35\.4 36\.1 26\.1 26\.9 61\.6 87\.9 76\.8 11»\.5 ~ CCSTS/Coilts additiOlll!llls 52\.4 300\.2 167'<'1 151\.9 139\.7 'i4l\.8 43\.5 29\.2 77\.2 43\.l 52\.0 'i;2\.O 50\.8 ~ 35\.3 25\.1 "25\.'7 "46\.'7 ~ ~ m 34\.9 ~~2b\.4~ 87\."f; 7b\.3 1CE\.5 !IPlr _ITS/B<lo"fi\. nets (51\.8) (281\.0) (99\.~) (69\.2) (9\.2) (57\.4) 56\.5 5\.1 20\.8 7l\.7 296\.,; 257\.6 384\.9 150\.6 93\. 4' 14\.1 21\.0 154\.9 351\.1 447\.2 658\.1 186\.8 146\.4 7B\., 91\.2 473\.5 936\.7 1016\.9 l622\.6 }) Include\.CPAI' 30 IIIl\.Uion repn\."'till6 aal_ ~e or eqpip!lent/ 'l CQllpl'ia 30 IIIl\.Ui_ de FerA de valeur de r\.eupOnti"" de _Uriel g} Prqjeet Fil\. Almex III/Almexe BUppl6momtaire III  - 66 - Annexe Tableau XV\.2 Appendice HAUTE-VOLTA Projet forestier Plantation forestiere en sec Analyse economique Detail des hypotheses 1/ a) Duree de base : 29 ans (duree de vie de la plantation 25 ans plus quatre annees de plantations)\. b) Tous les couts exprimes en prix du milieu de 1979\. c) Taux de change de reference : 250 francs CFA pour 1 dollar (15 % au-des sus du taux officie1 de 220 francs CFA pour 1 dollar)\. Les elements de cout en devises ont ete releves en consequence\. d) Pour tenir compte des tarifs reels de la main-d'oeuvre occasionne11e dans la zone du projet, Ie cout de la main-d'oeuvre non qualifiee a ete fixe a 300 francs CFA par journee de travail, alors que Ie taux officiel est de 1\.040 francs CFA\. e) Reduction de 25 % des couts du personnel expatrie et des consultants\. f) Les provisions pour hausse des prix ne sont pas comprises dans 1es couts du projet\. g) Recettes fondees sur 1es prix de gros a Bobo-Diou1asso a la fin de 1978 : i) 3\.400 francs CFA Ie m3 pour Ie bois de feu (90 %) et Ie bois de service (10 %) provenant de la foret nature11e; ii) 4\.300 francs CFA Ie m3 pour 1e bois de feu (80 %) et Ie bois de service (20 %) provenant de 1a plantation; iii) 10\.000 francs CFA 1e m3 pour Ie bois d'oeuvre (teck); iv) 20\.000 francs CFA Ie m3 pour Ie bois d'oeuvre (gmelina) ; et sur une hausse annuel1e de 3 % en valeur ree11e pour 1e bois de feu et le bois de service, et de 5 % pour les piquets en teck et le bois d'oeuvre de gmelina\. h) Croissance demographique de 5 % dans les zones urbaines et de 2 % dans les zones rura1es\. 1/ Les tableaux detai1les correspondants figurent dans le Dossier du projet\.  - 67 i) Consommation urbaine de bois de feu de 1,2 m3 par habitant et par an\. Consommation rura1e de bois de feu de 0,7 m3 par habitant et par an\. Consommation de bois de feu de 0,2 m3 par habitant et par an dans les zones urbaines pour la fabrication de biere selon les procedes artisa naux traditionnels\. Consommation de bois de service egale a 10 % de la consommation totale de bois de feu\. j) Le taux de destruction de 1a foret non classee de la region de Bobo-Dioulasso Orodara, par suite des feux de brousse, des defrichements illicites et du sur paturage, serait de 5\.000 ha par an avec ou sans Ie projet\. k) Le taux d'exploitation des jacheres forestieres et des forets classees de la region de Bobo-Dioulasso-Orodara serait de 0,20 m3 par ha et par an, avec ou sans Ie projet\. Le taux de production des forets non classees de la region de Bobo-Dioulasso Orodara serait de 0,50 m3 par ha et par an, avec ou sans Ie projet\. 1) La production du lieu de 1a plantation, "sans Ie projet" (coupes i1licites de bois de feu et de bois de service), passerait de 0,10 a 0,20 m3 par an par suite de 1a pression exercee par une demande sans cesse croissante de bois de feu et de bois de service\. m) Les couts d'exp1oitation "sans Ie projet" s'eleveraient a environ 100 francs CFA par ha et par an, et les couts d'abattage et de transport, a environ 900 francs CFA Ie m3 ,  68 Repub11que de Haute Volta Projet Forestier Organ1gramme de l'Administration foresciere Minist re de l'Environnement et du Tourisme Directeur-General de l'Environnement I Service Administratif et Financier I I I 1 I I Etudes et programmes Ami'magerr\.ent fore stier et \ I I I iparcs nationaux, reserves de 1 Peche et Pisciculture \ I Environnement Urbain Organismes rattachea I reboisement faune et de chasse I , I I Inspections departmentales  \. o 7 '-'~~";:::-'1-" - - 1 \.-" UPPER VOLTA /,' /'\. \. \.,\.-\. \.L:_,'" \. ~'\ Belt ~__ \" I ') \. '-\.-" - \. \. -$~;":G~:-"-\.r----) /~ __ ~?tBIA ::\.':\.:> \\. U;N£A e!~~~~;,\\.J r'UP'f'f\.R\., I ~?l-C~(';j j -\. NIGER \. FORESTRY PROJECT / PROJET FORESTIER (' \\. ~~- OUOAlAN , '" "J\ ~ V""( ~ ~ll,1 S'tRRA'E~E("""Iy\.{~'b~~~f ~ \tl , a ~'"" LlBE~I:-J, _~ - \.5 A (H F L // ') ~ o DJI80 ,~ __\. -~- \.f To To "~'-I !1 ~cl!iPmi!lf 600~MQPtl , "Ir-\ 1 I \\. TiTAO ~ 00 \. / \. \ /\ t }--~ N I G E R To Nr(1m(fY MAL ,-/'-', , , (""'~ \, \. \. I \~12' \.1""/ \.,\./ To '% ) '", \.-L \ ) ~ OO"""9;-V'~~ To Nqt1f1fJf/OU BEN I N i ) G A N A ( TOG 0 ( I ~ J' DEVELOPMENT OffiCE _ _ _ PRIMARY PAVED ROADS R()U TfS PFlINC\PAlES AEVETUES _ _ _ PRIMARY G'lA,VEl ROADS 10" --W < \. PAAKS,FOREST AND FAUNA RESERVES flARes f'onrr:-l CLA:-lSEES ET RESERVES DE r AUNE ROUTES PRINCIPALES NUN R(VnUf\.S _ _ _ HAlLWAY CHEMIN DE FER , _/\.,\.: _ _ _ ADMINISTRATIVE 80UNDARIf\.S LlMITES DES DEPARTEMENTS mCP I30H'iF-lS IN MIL LIMETERS ru ~J PRECIPITATIONS ANNUELLES MOYENNF:-l f-N MILLIMETRES REGIONAL DEVELOPMl-NT orner [JOUNOA\. liES ~U 'l\.J\.J UMIT£S DES ORO £ v 0 R 'Y cb C 0 A S r _\. ~~cir~\~~~~~~~~::~~~~~N~~~iSES '" 4' I , 2' "  I ! \ I J f " \ \ \ I ! J r / \.-- UPPEF: HAUT5 FORESTRY PROJECT PROJET FORESTIER Maro Forest Reserve Foret Classee de Maro --d -;/ [Baba Kari ,/ i \ I \ I i / / I I / I \. '\ I \ v / \ \ \ \ / / --- 10

APPROVAL

P114115

Page 1 PROJECT INFORMATION DOCUMENT (PID) CONCEPT STAGE Report No\.: 61324 Project Name Education for All - Fast Track Initiative Program Region AFRICA Sector Primary education (80%), Secondary Education (20%) Project ID P114115 Borrower(s) REPUBLIC OF GUINEA-BISSAU Implementing Agency Ministry of National Education Tel: (245) 320-5481 Ministry of National Education Bissau Guinea-Bissau Tel: (245) 320-5481 Environment Category [ ] A [X] B [ ] C [ ] FI [ ] TBD (to be determined) Date PID Prepared April 14, 2011 Estimated Date of Appraisal Authorization April 25, 2011 Estimated Date of Board Approval September 30, 2011 1\. Key development issues and rationale for Bank involvement Despite impressive increase in coverage in recent years, the education outcomes are strikingly poor\. With nearly 300,000 students enrolled in primary and secondary education in 2006, the education system holds today twice as many students as in 1996\. In primary education, the number of students more than doubled over the same period, from 105,430 to 269,287\. As a result, Gross Enrollment Rate (GER) in primary education has steadily increased from 53 percent in 1996 to 103 percent in 2006, reflecting the growing accommodation capacity of the system (Figure 1)\. Secondary education has followed a similar pattern\. The number of students enrolled in this level of education more than tripled between 1996 and 2006, rising from 15,000 to 54,000\. The private sector, with 12\.4 percent of enrollments in 2006, played a catalytic role in this expansion, as the government investment in the sector remained very modest\. 1 This increase in coverage, particularly in recent years, is a result of the unprecedented public effort to increase the supply of new classrooms and to stimulate demand\. It is also associated with the growing involvement of private providers and local communities in the provision of primary education service\. 2 The gender gap in primary education has been closing, but disparities still remain \. Increased enrollment in primary education was favored by an overall positive trend in girls’ enrollment\. The gender gap has been gradually closing, to a ratio of 0\.9 girls per enrolled boy\. In 2006, girls represented about 47 percent of enrollments in primary education\. Compared to1996, this represents a 6 percent increase in the share of girls to boys\. However, girls’ enrollment drops off at higher levels of the education system\. In 1 The growth of private schools providing secondary education has been remarkable\. In 2000, private schools accounted for 6 percent of enrollments\. 2 The number of primary schools grew from 650 to 1,334 over the same period (an increase of about 100 percent)\. Today, community and private schools represent respectively 20 and 12 percent of all primary schools in the country\. Page 2 secondary education, girls are underrepresented\. They account for only 39 percent of enrollments nationwide, with great disparities between regions\. Their share in enrollment ranges from 25 percent in Oio to 42 percent in Bissau\. The completion rate in primary education is very low\. It was estimated at 42 percent in 2006\. Figure 2 below shows the discrepancy between enrollment and completion in primary education\. While the GER has steadily increased in recent years, the completion rate has increased only modestly\. The low completion rate is a result of a low survival rate across the primary education system\. In 2006, only 58 percent of the cohort of children who had entered primary school four years earlier was retained through grade four\. Not surprisingly, education attainment in Guinea-Bissau, measured as the average years of schooling, is only six years\. Repetition and dropout rates are high\. Although the repetition rate has been declining, 3 it is still relatively high across the system\. In primary education, the average repetition rate is 15\.2 percent\. In secondary education, 13 percent of all enrolled students in 2006 were repeaters\. Repetition is high at all grades of primary education, even in those where it should have been an exception\. 4 In 2006, 17\.2 percent of students in grade one and 13 percent of those in grade three were repeaters\. The high repetition rate imposes a significant cost on the education system because scarce public resources are wasted\. If one considers the overall budget allocated to primary education in 2006, the cost of repetition is CFAF 264 million (approximately US$ 525,000)\. To make things worse, the system is also hit by frequent dropping out of students across different levels\. In 2006, the dropout rate in primary education was estimated to be 7 percent\. The dropout rate is mainly associated with students’ and parents’ dissatisfaction with the quality of education, as well as with changes in perceptions by parents about the value of the school\. The quality of education is low \. Guinea-Bissau does not apply a student learning assessment system to track learning achievements of its students, nor does it participate in any regional or international learning assessment process; hence, there is no objective way to measure learning achievement of students\. The common perception, however, is that learning achievement is very low\. The limited number of days schools are open, and the insufficient exposure of students to learning, the poor learning environment and the inadequate teacher training and motivation are perceived as the main factors that affect students’ learning outcomes 5 \. The language of instruction is also an issue\. While the official language of instruction is Portuguese, in many classrooms programs are taught in part in Creole (the national language), as many teachers have not mastered the official language\. The learning environment is poor \. Despite considerable efforts made in recent years to provide low-cost classrooms to a growing number of primary school students, 32 percent of classrooms at the primary level are still considered to be in bad shape\. Many classrooms are categorized as barracas (shacks made of palm leaves or bamboo) that flood when the rains come\. Textbooks are sorely lacking as they have not been distributed to students since 2004, when the World Bank-financed Basic Education Support Project (BESP) closed\. The ratio of one textbook per student in the principal subjects that had been achieved in the 2002–2003 academic year has vanished\. 6 In secondary education, the curriculum has not been revised for decades and there is no harmonized curriculum throughout the system\. Each school chooses and implements its own curriculum, some of which are of questionable relevance\. 3 In 1996, the repetition rate was estimated at 31 percent in primary education and the dropout rate was 35 percent\. 4 The rule in primary education stipulates that students in grades one, three, and five must benefit from automatic promotion to the following grade\. This rule, however, is not respected by many teachers\. 5 It is estimated that teachers’ strikes and other perturbations of the system disrupted about 35 percent of the officially planned number of school days in 2007/2008\. As a result of these disruptions, curriculum coverage is often incomplete and, consequently, students’ learning is negatively affected\. 6 During the life of the BESP, textbook printing was supported by the project\. After the project closed in 2004, the government was unable to pay the costs of reprinting and therefore textbooks were no longer printed for distribution to students\. Page 3 Textbooks are practically non-existent and most of the time students are forced to use texts prepared by their teachers [ apontamentos ] in lieu of textbooks\. Teachers’ qualifications and performance levels need to be improved\. Teachers are at the center of any education system\. In Guinea-Bissau, the substantial increase in enrollment in recent years has put enormous pressure on the recruitment of new teachers\. The number of teachers in primary education has increased from 3,269 in 2001 to 4,327 in 2006\. Teacher training programs have not kept up with the demand because of the low capacity of the two teacher training colleges 7 \. As a result, contractual teachers have been hired\. In 2006, contractual teachers represented 20 percent of active primary education teachers\. While this responded to the quantitative needs of teachers in the system, there remained great concerns regarding the qualifications of these teachers\. About 63 percent of contractual teachers did not have the appropriate pedagogical training\. Most of them were recruited locally and did not hold adequate academic training\. The same is true for secondary education, where the only existing teacher training college [ Escola Tchico Té ] trained an average of 80 teachers annually between 2001 and 2005, against an estimated demand of 120\. The management of the system in recent years has been tumultuous \. There is no recent memory of a school year that has begun on time (e\.g\. in respect of the school calendar approved by the MoE); has gone without relatively long paralysis due to teachers’ strikes; and has closed on time\. This turbulent picture is in large part due to the government inability to pay teachers’ salaries on time\. Arrears of salary payments are recurrent in the sector\. Although all civil servants are affected by this constraint, the education system is perhaps the area where the crisis is most visible\. The very influential teachers’ unions in the sector and the relatively high sensitivity of education issues have made the sector a permanent battlefield between teachers and the various governments, and the management of the system suffers as a result\. Investment expenditure remains low \. In 2008, current expenditure represented 93 of total education expenditure\. Investment expenditure has been historically low compared to regional and international standards, and depends essentially on external sources\. 8 Investment expenditure in education was estimated at CFAF 1\.7 billion (or 1\.3 percent of GDP) in 2003\. It then rose to CFAF 2\.7 billion (1\.9 percent of GDP) in 2004, only to fall to CFAF 1 billion (0\.7 percent of GDP) in 2005\. In 2008, government investment expenditure in education represented 2 percent of the total government public investment expenditure\. As mentioned above, Guinea-Bissau education sector is confronted by challenges that defy easy solutions \. The country has acknowledged that given the current status of its education system, the achievement of universal primary education by 2015 is out of reach, and has therefore postponed that goal to 2020\. But even the materialization of this objective is not granted, unless bold actions are taken now\. There is an urgent need to support the country efforts by providing resources that will help the implementation of priority interventions outlined in the Education Sector Plan\. The Bank’s broad experience in supporting EFA programs in many countries has useful lessons for Guinea Bissau\. The proposed project is consistent with the Bank Interim Strategy Note (ISN) for Guinea- Bissau \. The ISN (June 2009) identified “increasing access to basic services, especially in rural areas”, as a key pillar to boost economic growth and alleviate poverty in Guinea-Bissau\. It also refers to the expected mobilization of CF resources under the EFA-FTI to strengthen education services through school rehabilitation and construction, curriculum development, and teachers training\. 7 The two colleges graduated 120 new teachers in 2006, while the estimated needs were 580 teachers\. 8 Capital expenditure on education between 1998 and 2005 was guaranteed by a few partners as follows (US$ million): World Bank (14\.5), Plan International (6\.0), World Food Program (1\.9), and UNICEF/FNUAP (4\.0)\. Page 4 The Bank has a tradition of policy dialogue in the education sector in Guinea-Bissau \. The Bank has supported education projects and carried out with the government a range of Economic and Sector Work (ESW) to inform policy dialogue in the sector\. It is worth mentioning the US$ 14m Basic Education Support Project (1997-2004) and the Emergency Public Service Delivery Project (2008-2009)\. The former funded essentially the construction and rehabilitation of about 500 classrooms, the purchase and distributions of textbooks to primary education students, and in-service teacher training\. Although it was not part of the original project, part of the project resources was channeled to pay teachers’ salary in 2004 due to the government inability to do so\. The latter project had a single component: the payment of salaries to primary education teachers\. The ESWs included the Social Sectors Review Note (2008), the Education Country Status Report (2009) and the PEMFAR (2009)\. 2\. Proposed objective(s) The proposed development objective of the project is to contribute to the improvement of basic education service delivery, with a focus on greater efficiency, better quality and improved sector governance\. 3\. Preliminary description The proposed project anticipates four components: Component 1: Stabilizing the Education System (US$ 27 million) This component aims at supporting the normal and smooth functioning of the school years during the period of project implementation \. The expected results include the cessation of the recurrent disturbances that have affected the education system in Guinea-Bissau and the reaching of a number of school days per year acceptable by international standards\. This will be achieved through the provision of financial support to the government to pay teachers' salaries for the duration of the project, and the more rational use of teachers and educational facilities\. Students will be the primary beneficiary of this component as they will have greater exposure to learning\. Table x below gives the estimated wage bill of all primary and secondary education teachers during the period 2010-2013\. The payment of salaries to teachers is a critical action to stabilize the education system \. In the short term, this action will relieve the pressure on the government to ensure the timely payment of teacher salaries in a context of lack of financial resources\. It is expected that in the medium term the resumption of economic growth combined with the anticipated outcomes of the ongoing reform of the army and security forces as well as the civil servants reform will leverage resources to ensure sustainability of this intervention 9 \. Component 2: Improving Access and Equity in Primary Education (US$ 10 million) This component aims at increasing the supply of education across the country, with an emphasis on rural areas where enrollment in primary education is weak \. The component also aims to 9 As part of the peace building efforts, international donors, led by the United Nations, are supporting the reform of the armed and security forces aimed at downsizing the army and smoothly reinserting the demobilized militaries into civil life\. Page 5 contribute to higher demand for education, especially by girls of poor families, in areas where demand for education is low\. The project will finance the construction and equipment of 600 classrooms (100 classrooms in year 1; 250 classrooms in year 2; and 250 classrooms in year 3), thereby allowing the enrollment of additional 20,000 children in primary education, and increasing the daily working hours of 24,000 students currently enrolled in a triple shift regimen (representing 50 percent of the total number of primary education students enrolled in a triple shift regimen)\. The project will also finance the rehabilitation of 400 classrooms to eliminate classrooms made by non-durable materials and improve the infrastructure of 60 schools in rural areas\. This project component will also contribute to address the shortage of qualified teachers currently in the education system \. Given the need to accelerate the training of teachers in order to keep pace with the increasing number of students in primary education, the project will support the strengthening of the national capacity of teacher training through the construction of two teacher training schools, one in the North of the country and another in the Eastern part of the country, with a combined capacity of training of 250 teachers\. Finally, the Project, with the participation of NGOs, will support awareness campaigns among rural communities towards the enrollment of school-age children in schools, particularly girls\. Component 3: Improving the Quality of Education (US$ 8 million) The objective of this component is to create a better learning environment for primary education and lower secondary education students\. The project will intervene in the areas of textbooks, pre-service and in-service teacher training and school inspection\. Textbooks \. The project will finance the costs of printing and distribution of free textbooks to all primary education students\. The printing and distribution of textbooks will be coordinated by Editora Escolar (EE, the School Printing House)\. The curriculum of lower secondary education will be reviewed, and the newly harmonized curriculum will be implemented in all secondary education schools (public, private and community)\. The review and harmonization of curricula in secondary education will be coordinated by the National Institute for Educational Development (INDE), which will ensure, through competitive methods, the recruitment of experts in curriculum development\. An international technical assistance will be recruited to support this process\. The Project will finance a trip to Portugal and/or Brazil for managers and curriculum development experts from the MoE to identify books that are adapted to the new curriculum\. These books will be purchased and distributed to secondary education students\. The project will support the institutional assessment of EE to help redefine its roles in the chain of design- printing-distribution of textbooks, and recommend measures for its sustainability\. Pre-service and in-service teachers training \. The project will support the curriculum reform in primary education teacher training schools, by revising the duration of training, which will decrease from three years to one and a half year, and by introducing new contents (like the HIV/AIDS)\. This will be accompanied by increased training of trainers\. With regard to in-service training, the component will support the capitalization of the experience of the Comissões de Estudo (COMES, Study Sessions for Teachers) developed under the Basic Education Support Project\. The training will be coordinated centrally by INDE and at regional levels by the Unidades de Apoio Pedagógico (UAPs, Educational Support Units (UAPs) at regional level, in close collaboration with the teacher training schools\. These institutions will receive the necessary support in terms of equipment, materials and technical assistance to strengthen their capacity for planning, implementation and evaluation of training activities\. Page 6 Pedagogical supervision of schools and sector studies \. In parallel with the reform of the pre- service and in-service teacher training, the component will support the Ministry of Education to define a strategy for school supervision\. 106 inspectors of primary education will be trained and the legal framework of inspection services established\. The component will also support a number of studies aimed at improving the learning outcomes of students (the use of national languages in education, the evaluation system, a strategy for special education, etc \. ) Component 4: Management and Capacity Development of the Education Sector (US$ 5 million) The objective of this component is to help the education sector respond to the challenge of better service delivery \. The component will support capacity building of central and decentralized structures, by better defining the role and functions of these structures, by providing training of key education staff at different levels, and by improving the function of monitoring and evaluation\. Improving the management of the education system \. An important aspect of management of education is the identification of relevant actors in the education system (teachers, school directors, inspectors, sector and regional directors of education), a clear definition of their roles and responsibilities and the management tools for them to fulfill their functions\. The component will support this process and a pilot experiment using this approach to improve the management of education in two regions of the country\. The project will also support the strengthening of the administrative and financial functions as well as the human resources management in the Ministry of Education\. More specifically, the project will support the strengthening of the personnel management system through the improvement of the Individual Staff Record [ Processo Individual do Funcionário ], and the harmonization of MOE database on personnel with that of the Ministry of Finance and of the Ministry of Public Administration\. Training of staff at central and decentralized levels \. The component will support the training of the central, regional and local staff in relevant areas of the education sector (design and evaluation of education policy, planning and management, education statistics, etc\.)\. These training activities will be mainly implemented in the country in partnership with some regional or international training institutions to be identified\. The component will support a program to attract and retain young professionals in the education sector (the Young Professional Program) through competitive recruitment on a contractual basis in priority areas of the sector\. The young professionals will be recruited with precise terms of reference and for a defined period of time\. They will benefit from various incentives, including training, and by the end of the contract period successful young professionals will be offered a civil servant status\. Monitoring and evaluation \. This component will also support the strengthening of monitoring and evaluation function in the sector\. The statistical department of the MoE will receive institutional support in order to be able to carry out its functions of planning and coordination of the process of data collection, treatment and production of education statistics\. 4\. Safeguard policies that might apply The following are safeguard policies that may be triggered by the Project: Safeguard Policies Triggered by the Project Yes No Environmental Assessment ( OP / BP 4\.01) X Page 7 Natural Habitats ( OP / BP 4\.04) X Pest Management ( OP 4\.09 ) X Physical Cultural Resources (OP/BP 4\.11) X Involuntary Resettlement ( OP / BP 4\.12) X Indigenous Peoples ( OP / BP 4\.10) X Forests ( OP / BP 4\.36) X Safety of Dams ( OP / BP 4\.37) X Projects in Disputed Areas ( OP / BP 7\.60) * X Projects on International Waterways ( OP / BP 7\.50) X 5\. Tentative financing Source: ($m\.) Borrower/Recipient International Development Association (IDA) 0 50 Total 50 6\. Contact point Contact: Geraldo Joao Martins Title: Senior r Education Spec\. Tel: 5352+4130 / 221-33-859-4130 Fax: (221) 849-50-27 / Dama: 5+352+4157 Email: gmartins@worldbank\.org Location: Dakar, Senegal (IBRD) * By supporting the proposed project, the Bank does not intend to prejudice the final determination of the parties' claims on the disputed areas Page 8

APPROVAL

P002450

Document of The World Bank FOR OFFICIAL USE ONLY Report No\. 7137 PROJECT PERFORMANCE AUDIT REPORT SOMALIA THIRD EDUCATION PROJECT (CREDIT 738-SO) March 1, 1988 Operations Evaluation Department This document has a resticted distribution and may be used by recipients only in the performance of their offcial duties\. Its contents may not otherwise be disclosed without World Bank authorization\. GLOSSARY ADF - African Development Fund ALECSO - Arab League Educational, Cultural and Scientific Organization ALF & RSS - Agricultural, Livestock, Forestry and Range Management Secondary School (also LFS) ALO - Arab Labour Organization CAM - Country Assistance Management CDC - Curriculum Development Center DANIDA - Danish Aid Organization DVV - German Adult Education Association EAPED East Africa Projects, Education Division EARED East Africa Regional Office, Education Section FRWIS - Forestry, Range and Wildlife Institute of Somalia GTZ - German Agency for Technical Cooperation HPTI - Health Personnel Training Institute IAE - Institute of Adult Education (formerly NAEC) ICB - International Competitive Bidding ILO - International Labour Organization ILOISDSR - ILO Skill Development for Self-Reliance Project KSN - Kismayo School of Nursing LCE - Lafole College of Education LFS - Livestock and Forestry School LIB - Limited International Bidding MOA - Ministry of Agriculture MOCHE - Ministry of Culture and Higher Education MOE - Ministry of Education MOLF - Ministry of Livestock and Forestry MSN - Mogadishu School of Nursing NABM - National Agency for Building Materials NAEC - National Adult Education Center (now IAE) NIAE - National Institute for Adult Education NRA - National Range Agency NTTTC - National Trade Testing and Training Center ODA - British Aid Agency PIU - Project Implementation Unit RLSTC - Regional Literacy and Skill Training Center (formerly RAETC) RMESAIEPS - Regional Mission in Eastern and Southern Africal Education Projects Section SIDAM - Somali Institute of Development Administration and Management SPA - State Printing Agency TPU - Textbook Production Unit WHO - World Health Organization Fiscal Year of Borrower January 1 - December 31 FOR OFICIAL USE ONLY THE WORLD BANK Washington\. D\.C\. 20433 US\.A\. Oie at imrctenwal Operatem avaluestun March 1, 1988 MEMORANDUM TO THE EXECUTIVE DIRECTORS AND THE PRESIDENT SUBJECT: Project Performance Audit Reports Somalia Third Education Proiect (Credit 738-SO) Attached, for information, is a copy of a report entitled "Project Performance Audit Report: Somalia - Third Education Project (Credit 738-SO)" prepared by the Operations Evaluation Department\. Attachment This document has a restricted distribution and may be used by recipients only in the performance of their o4cial duties\. Its contents may not otherwise be disclosed without World Bank authoriation\. vOR OICIAL USE ONLY PROJECT PERFORMANCE AUDIT REPORT SOMALIA TEIRD EDUCATION PROJECT (CREDIT 738-50) TABL! OF CONTENTS Page No\. Saie Data Sheet \. 11 9Valuat10on SUMmary \. vi PROJECT PERFORMANCE AUDIT MEMORANDUM I\. PROJECT BACKGROUND \. 1 Context \. 1 Objectives \. 1 Design \. 2 Finance Plan \. \. 2 Implementation Plan \.,\. 2 II\. PROJECT IMPLEMENTATION AND OUTCOMES \. 3 Management \. 3 Start-Up \. \. \. 3 Sequence \.e\. 3 Procurement \. e\. 4 Reporting \. 5 Project Costa \.s\. 5 Outcomes \. 5 Educational Quality \. 5 Basic Education and Skill Training \. 6 Livestock and Forestry Education \. 6 Para-Medical Training \. 7 Trade Testing and Training Survey \. 7 Sustainability \. 7 Environmental Effect* \. 8 Hman Resource Development and the Role of Women \. 8 III\. FINDINGS AND ISSUES \. 8 3vervlew \.,\. 8 Related Experience \. 9 Findings and Lessons \. 10 Issues \. 11 ATTACBMENTS I-II: Comments from the Borrower \. 13-18 This document has a ~estricted distibuton and may be Med by rbcipients only in the poformance of their offcial duti~s\. Its contents may not otherwise be disclosed without Wodd Bank authodmion\. TABLE OF CONTENTS (cont9d) PROJECT COMPLETION REPORT Page No\. I\. Sumary and Recoendations 21 II * Introduction \.o\.o\. * 0\. 0\.0000\.000\.00\.0 26 111\. Project Background \. \. \. \. ooooo\. \.*\. \. \. oeo\. \.o \. \. \. \. \.o 26 IV\. Project Implementation ***\. *\.o\.0o\.0\. \. 0\. 32 V\. Project Costs and pinaencing 0\. 38 VI\. Project Operating outcomes \. 42 VII\. Bank Group Performance 55 Annexes: 1\. Structure of the Education System ooooooooooooeoooooo 57 2\. Compliance with Credit Conditions 00*\.0\.0\.000 58 3\. Technical AssistanceProgram \. 61 4\. Curriculum Development Center - Overview of Actioctioes 1984 \. 63 5 o SPA- Storage and Distribution\. 66 6\. Comparative Implementation Schedule \. 67 7\. Total Project Cost of Physical Facilities \.06660*00\. 68 8\. Places, Units and Ares of Physical Facilities \. 69 9\. Disbursements: Est ated and Actual \. 70 PROJECT PERFORMANCE AUDIT REPORT SOMALIA THIRD EDUCATION PROJECT (CREDIT 738-SO) PREFACE This is a performance audit of the Third Education Project in Somalia (Credit 738-SO), for which a credit of US$8\.00 million was approved on August 9, 1977\. The account was closed and the undisbursed balance of US$0\.07 million cancelled on March 13, 1985, about 18 months later than originally planned\. The audit report consists of (a) a Project Performance Audit Memorandum (PPAM) prepared by the Operations Evaluation Department (OED), and (b) a Project Completion Report (PCR) dated June 30, 1986 prepared by the Education and Manpower Development Division of the Eastern and Southern Africa Region\. The PPAM is based on (a) material in IDA files, including the Staff Appraisal Report (No\. 1334-SO) dated July 26, 1977 and the Development Credit Agreement dated September 30, 1977; (b) the PCRI (c) discussions with IDA staff associated with the projectl (d) discussions with staff of the African Development Fund (ADF) which provided parallel finance for the project; and (e) an audit mission to Somalia in May 1987, during which project sites were visited and discussions held with Government officials\. The PCR contains a considerable amount of detailed and useful project information\. The audit mission visited Somalia two years after the completion mission and found that certain project institutions were no longer in use or had not been used as anticipated at the time of the PCR\. The PPAM therefore updates the conclusions of the PCR in the light of more recent developments and adds further comments and conclusions on various aspects of project implementation experience\. The OED acknowledg-es the assistance given to the audit mission by staff of the Ministries of Education, Information, Livestock and Forestry, Health and Labor\. Copies of the draft PCR were given to the Government during the audit mission\. Comments received have been taken into account in preparing the final report\. As is customary in the preparation of audit reports, copies of the draft audit report were sent to the representatives of the Borrower for comment in December 1987\. Comments received have been taken into account and are reproduced as Attachments I and II\. - is - PROJECT PERFORMANCE AUDIT REPORT SOMALIA THIRD EDUCATION PROJECT (CREDIT 738-SO) BASIC DATA SHEET EBY PROJECT DATA Item Apraisal Estimate Actual Total Project Cost (US$ million) 11\.65 12\.53 Overrun (I) - 7\.60 Credit Amount (US$ million) 8\.00 8\.00 Disbursed - 7\.93 Cancelled 0\.07 Repaid ) - 0\.04 Outstanding) as of 12131187 7\.89 Date Physical Components Completed 03131183 03131185 --in months since Credit Signature 66 90 Proportion completed by above date (Z) 57 La 100 Proportion of time overrun (2) - 36 Institutional Performance Good CUMULATIVE ESTIMATED An ACTUAL DISBURSENENT (in US$ million) FT 1979 1981 1982 Appraisal Estimate 0\.56 2\.36 5\.04 7\.26 7\.98 8\.00 Actual 0\.26 0\.72 1\.24 4\.17 6\.02 7\.93 Actual as Z of Estimate 46 31 25 57 75 99 j_ Estiatod on the basis of disbursements\. STAFF INPUT (Staff Weeks) FY 70 77 76 79 @f 61 62 88 84 65 86 Total Pre- appraisal 00\.2 1\.6 - - - - - * * - 62\.0 Appraisal 1\.8 50\.8 - - - - - - - - - 52\.1 Negotation - 12\.3 1\.1 - - - - - - - 18\.4 Supervision - - 1e\.6 7\.0 9\.6 5\.6 6\.6 18\.2 6\.8 18\.8 9\.0 86\.2 Other 0\.2 - 1\.7 - - - - - - - - 1\.9 Total 61\.7 64\.9 18\.4 7\.0 9\.6 5\.6 6\.6 18\.2 6\.8 18\.8 9\.0 216\.8 OTHER PROJECT DATA Original Actual or Item Plan Revision Est\. Actual First Mention in FIles 09/04/75 Government Application 01/06176 Negotiations 02/22-23/77 Board Approval 08/09/77 Credit Agreement Date 09130/77 09/30/177 Effectiveness Date 01/04/78 03/13/78 Closing Date 09/30/83 09/28/84 03113/85 La Borrower Somali Democratic Republic Executing Agency Ministry of Education Follow-on Projects Name Fourth Education Project Credit Number 1105-SO Credit US$10\.2 million Credit Agreement Date 04/03/81 /a The last disbursement was made on March 13, 1985, and the account was closed and undisbursed balance cancelled as of that date\. - iv - MISSION DATA Sent Month/ No\. of No\. of Staff Date of Mission by Year Weeks Persons* Weeks** Report Identification IDA 11/75 1\.0 1(E) 1\.0 11/21175 Preparation UNESCO 05/76 3\.4 9(Ag,Te,A,E, 30\.8 05/31/76 M,P,H,Ed,S) Appraisal IDA 07176 4\.0 6(Ag,A,H,2Ed,P) 24\.0 08/19/76 Total 55\.8 Supervision 1 IDA 04/78 1\.0 2(Ed) 2\.0 05/03178 Supervision 2 IDA 10/78 1\.1 2(Ed,A) 2\.2 11/03/78 Supervision 3 IDA 05/79 1\.1 2(Ed,A) 2\.2 06/13/79 Supervision 4 IDA 11/79 1\.1 2(Ed,A) 2\.2 12/18/79 Supervision 5 IDA 05/80 0\.7 2(Ed,A) 1\.4 06/10/80 Supervision 6 IDA 10/80 0\.7 2(Ed\.A) 1\.4 10/22/80 Supervision 7 IDA 03/81 0\.7 2(E, ,A) 1\.4 04/15/81 Supervision 8 IDA 09/81 1\.0 2(Ed,A) 2\.0 10/15/81 Supervision 9 IDA 03/82 1\.1 1(Ed) 1\.1 04/26/82 Supervision 10 IDA 09/82 1\.1 1(Ed) 1\.1 11/08/82 Supervision 11 IDA 03/83 1\.1 2(Ed,A) 2\.2 04/04/83 Supervision 12 IDA 12/83 1\.1 2(Ed,A) 2\.2 02/15/84 Supervision 13 IDA 05184 1\.1 2(Ed,A) 2\.2 06/18/84 Supervision 14 IDA 12/84 0\.7 2(Ed,Te) 1\.4 01/03/85 Total 25\.0 Completion IDA 05/85 1\.6 4(Ag,Te,A,Ed) 6\.3 06/30/86 Number of Supervision Missions = 14 Total Number of Staff Weeks = 87\.1 Maximum Interval between Missions = 9 months Minimum Interval between Missions = 5 months * Ed: Educator Ag: Agricultural Educator H : Health Educator E t Economist M : Mass Media Specialist Te: Technical Educator A : Architect P : Printed Media Specialist S : Secretary ** Estimated number of staff-weeks attributable to this project (including travel time)\. * v * Currency Exchanze Rates Name of Currency (abbreviation)s Somali Shilling (Sh\.So) Exchange Rates: US$1 - FCFA Appraisal Year 1977 6\.295 Appraisal - 06130181 6\.23 07101/81 - 06130182 12\.46 07101/82 - 09/30183 15\.10 10101/83 - 10/31/83 15\.60 11/01/83 - 09/14184 17\.73 09/15184 - 12t31/84 26\.26 01/01/85 - 03/13/85 36\.36 ALLOCATION OF CREDIT PROCEEDS (In US Dollars) Original Actual Catexory allocation Expenditure 1\. Civil Works 1,850,000 2,837,539\.08 2\. Printing Materials 1,560,000 2,203,764\.77 3\. Furniture, Equipment and Vehicles 1,250,000 1,696,806\.42 4\. Technical Assistance 1,000,000 1,078,693\.21 5\. Project Administration and Management Survey 100,000 112,72C\.29 6\. Unallocated 2,240,000 -- (Total Disbursed) -- (7,929,523\.77) Cancelled -- 70,476\.23 TOTAL 8,000,000\.00 8,000,000\.00 - vi - PROJECT PERFORMANCE AUDIT REPORT SOMALIA THIRD EDUCATION PROJECT (CREDIT 738-SO) EVALUATION SUMMARY Introduction This project was identified in November 1975 and after preparation by a UNESCO team in May 1976 it was appraised in August 1976\. The total project cost was estimated at US$11\.65 million, including foreign exchange of US$8\.72 million, or 74\.82\. An IDA credit of US$8\.00 million was approved in August 1977, signed in September 1977 and became effective in March 1978, about six months later and two months after the originally planned date\. In addition, the African Development Fund (ADF) agreed to parallel financing equivalent to US$1\.67 million\. The total actual project cost is estimated at US$12\.53 million, an overrun of 7\.61\. In local currency the actual cost is estimated at Sh\.So\. 141\.97 million, 942 higher than the appraisal estimate of Sh\.So\. 73\.36 million (PPAM, para\. 14)\. The project was essentially completed and ths credit account closed in March 1985, 24 and 18 months, respectively, behind schedule\. Obiectives The project had four main objectiveas (a) improving the quality of education through curriculum development, teacher training and teaching materials productiong (b) promoting basic education and skill training among youths and adults; (c) providing specialised manpower training in livestock production, forestry and para-medical services; and (d) develop- ing the trade testing system and identifying public administration training needs (PPAM, para\. 2; PCR, para\. 1\.01)\. It followed two projects which supported secondary and technical education, and teacher and agricultural training (Credit 247-SO); and secondary education and teacher, fishery and nomad training (Credit 511-SO)\. An amendment to the Credit Agreement dated November 13, 1979 added 50 man-months for the services of an accountant for the PIU; and another amendment dated June 24, 1980 added a further compo- nent to provide technical assistance for fishery training--this supple- mented a component of the second project (PCR, para\. 3\.17)\. Implementation Experience The Pro act Implementation Unit (PIU) in the Ministry of Education (MOE), which had gained considerable experience in implementation of the first and second projects, was strengthened with some technical assistance (PPAM, para\. 6; PCR, para\. 4\.02) and performed very effectively\. The proj- ect was completed in 90 months, 36% over the appraisal estimate of 6S months, but the principal causes of delay were related to late arrival of - vii - imported building materials, shortages of skilled labor caused by a mass exodus to the rich oil-producing states, shortages of local building mater- ials and serious inflation\. All these problems were country-wide and beyond the control of the PIU (PCR, paras\. 4\.07-4\.12)\. The PCR draws attention to transport problems resulting in damage to the furniture, which was imported already partly assembled, but the audit mission was not able to confirm this (PPAM, para\. 10; PCR, para\. 4\.17)\. Equipment was procured through UNICEF and ICB\. The fellowship program was largely unsuccessful due mainly to the failure of most participants to return to Somalia because of the small incentives in comparison with the neighboring oil-producing states, and the consequent brain drain\. Both fellowships (9% down) and specialists services (71 down) implemented were somewhat below target\. Results Despite the implementation problems inherent in Somalia throughout the project period, physical construction objectives in area terms were exceeded by an average of 27%--in one case, the Curriculum Development Center (CDC) by 177%\. The curriculum materials component, which consisted of establishing the CDC and strengthening the educational printing capacity of the State Printing Agency (SPA), has been largely successful\. An entirely new primary curriculum has been established and complete sets of pupil and teacher materials produced for about half of the eight year pro- gram in all six subject areas, in addition to nearly all the required secondary books and teachers guides\. The SPA produced 13 titles in 1986 and expects to produce 25 in 1987\. Although paper and ink supplies are adequate for the present, subsidiary needs such as plates, photographic supplies and spare parts are a continuing constraint\. The current situa- tion regarding technical staffing of SPA, which is a major constraint on production capacity, is likely to improve when staff currently in training return shortly\. Book distribution is a major problem\. The Regional Literacy and Skill Training Centers (RLSTCs) are non-operational over two years after project completion and the equipment is still stored in Mogadishu\. It is difficult to see how they can be used for skill training since there are no residential facilities and it is not clear where the trainers are to be recruited\. There are no running costs budgeted at present, though the German aid organisation DVV is assisting at two of the centers\. The RLSTC facilities are too elaborate for their role as literacy support centers\. The PCR avoids comment on these aspects since they were non-operational, but this situation has persisted (PCR, para\. 6\.17)\. The Livestock and Forestry School (LFS) has not been merged with the neighbor- ing agricultural school as expected at completion (PCR, para\. 6\.27) and was totally unused until April 1987, when the facilities were handed over to the Forestry, Range and Wildlife Institute of Somalia (FRWIS)\. FRWIS, administered by the National Range Agency (NRA), a parastatal, has now occupied the facilities and is in the process of developing certificate, diploma and in-service courses\. Target enrollment for January 1988 is 90 students, 25% of the planned capacity of 360 students\. There is no sign of any livestock training\. The Health Personnel Training Institute (HPTI) constructed adjacent to the Mogadishu School of Nursing (MSN) and function- ing satisfactorily during the completion mission (PCR, para\. 6\.35) now - viii - appears to be unused,li with equipment reputedly locked in store cupboards and physical facilities rapidly falling into an advanced state of disre- pair\. The Kismayo School of Nursing (KSN) is not operational\. The project assisted in developing a satisfactorily functioning trade testing system which is meeting the country's needs, though the facilities are in urgent need of maintenance (PCR, para\. 6\.41)\. The survey of training needs for administrative personnel was carried out successfully in 1979 and studies manpower stock and needs up to 1983\. It is therefore now out of date, Sustainability The opening or continued functioning of project institutions is expected to be largely deperc;ent upon the allocation of adequate funds for running costs and maintenance\. The state of acute disrepair of a number of project facilities shows that these funds are not forthcoming (PPMM, para\. 23)\. Those institutions which are currently operating are in the main able to do so only because of donor intervention\. Budgetary allocations to education have fallen from 13\.7% in 1976 to 4\.5% in 1985, 24% of the regional average\. While the demand for the output from project institu- tions continues to exist, thus giving a full justification for commencing or continuing operation, they will be unable to do so effectively without funds for greatly improved staff salaries, running costs and maintenance\. An increasing government commitment to the education sector may be much influenced by the outcome of an IDA/Government dialogue expected to be initiated shortly\. Findings and Lessons The audit mission concurs with the PCR's finding (PCR, para\. 1\.08) that the availability of adequate operating funds constitutes a general problem confronting all project institutions\. The project did not finance running costs, with the exception of paper for the SPA\. CDC is functioning because of intervention from DANIDA, USAID, ODA, ALECSO and others\. SPA is receiving assistance from GTZ\. The LFS has been transformed into the FRWIS with ODA support\. The RLSTCs are not functioning and the component appears to have been inadequately thought out, since the centers are not appropri- ate for either of the roles envisaged, and the mission was unable to trace any comprehensive policy as to how the centers would functtmn\. However the German aid organization DVV is financing a program which will use the faci- lities of two of the centers\. HPTI did not appear to be in use during the audit\.2/ Thus almost none of the project institutions would be in use if some other donor had not stepped in to provide operating funds\. It is unacceptable that a project should be designed which does not sufficiently take into account its implications in terms of future recurrent expendi- tures, allows for budget constraints and attempts to make adequate provi- sion for running costs either within the project or by means of a credit 1/ The Government pointed out that there was only a temporary closure during the month of Ramadan (see Comments from the Borrower, Attachment I, page 15, para\. 2)\. 2/ See preceding footnote\. - ix - agreement covenant that the Borrower should make such provision; and does not ensure that a plan of operation for each component has been thoroughly thought out\. In project design, it is essential to look at all phases of an operation, and plan to eliminate all constraints likely to inhibit successful achievement of objectives\. The SAR (para\. 4\.07) examined the situation regarding book distribution and considered it satisfactory\. The audit mission supports the PCR (para\. 1\.09) in believing that insufficient attention was paid to this aspect as it now constitutes a major problem\. The fellowship program has largely failed in providing trained manpower for project institutions\. This is mainly due to a brain drain to the o41-rich countries near Somalia\. However, the audit mission was assu\. d that changed economic conditions have curtailed this trend\. Nevertheless if salaries for professional staff are not made more attractive, development of a professional cadre in educational institutions will continue to be highly problematic\. The Credit Agreement (Section 3\.06c and d) required the Government to prepare an evaluation of the project\. However, this did not happen, although the PIU provided considerable assistance in the preparation of both PCR and PPAM\. A greater Government involvement in future evaluation exercises would be desirable\. Although there was a credit agreement covenant that the Borrower should make provision for adequate maintenance of project institutions (Credit Agreement, Article IV, Section 4\.03), insufficient account was taken of the Borrower's capacity to fulfill this covenant\. PROJECT PERFORMANCE AUDIT MEMORANDUM SOMALIA THIRD EDUCATION PROJECT (CREDIT 738-SO) I\. PROJECT BACKGROUND Context 1\. In the early 1970s, the Government of Somalia was following an educational policy in support of national goals of greater self-reliance with emphasis on equality of opportunity and social justice\. The policy aimed at basic education for as many as possible, and improved manpower training\. Within this context, IDA supported Government efforts through two education projects\. The first (Credit 247-SO signed in 1971) assisted secondary and technical education, and teacher and agricultural training; the second (Credit 511-SO signed in 1974) continued support for secondary education and also assisted teacher and fishery training and education for the nomadic population\. The adoption of the Latin script for the Somali language in 1972 also facilitated educational expansion\. At appraisal of the third project in July 1976, therefore, primary enrollments had risen from 131 of the age group in 1973 to 34%\. A large proportion of the popu- lation was and still is nomadic and around 60% of the settled population in the age group was enrolled\. During the period between the mid-1970s and the audit mission in May 1987, Somalia has suffered from a series of econo- mic setbacks, notably drought, the withdrawal of Soviet assistance and sporadic conflicts with Ethiopia, which have weakened the internal and external financial position of the country\. The lack of infrastructure and severe problems of transport and comunication form a background to the period over which the third project (Credit 738-SO) was Implemented\. Obiectives 2\. The project was developed to focus on four principal areas (PCR, para\. 1\.01): (a) improving the quality of education through curriculum development, teacher training and preparation of teaching materials; (b) promoting basic education and skill training among adults and youths; (c) providing training in livestock production, forestry and para-medical services; and (d) developing a system of trade testing and skilled workers upgrading, and identifying public administration training needs\. -2- Two additional components were financed through amendments to the Credit Agreement dated November 13, 1979 and June 24, 1980: (e) providing 50 staff-months of technical assistance for an accountant for the PIU; and (f) providing 60 staff-months of technical assistance for five teachers at the Fishery and Marine Institute (a component of the second project (PCR, para\. 3\.17)\. Des ign 3\. The Government's application was dated January 6, 1976\. Prepara- tion by a UNESCO team took place during May 1976\. Details of project con- tent at appraisal are given in the PCR (para\. 3\.16)\. It was expected that, in order to ensure timely printing of textbooks, an agreement would be drawn up between the Ministry of Education (MOE), the Ministry of Culture and Higher Education (MOCHE) and the State Printing Agency (SPA)\. The Livestock and Forestry School (LFS) would be located near to the College of Agriculture of the University and to an agricultural secondary school to enable mutual utilization of staff, equipment and facilities though the details of this arrangement were not made clear\. The Health Personnel Training Institute (HPTI) would be constructed within the compound of Mogadishu School of Nursing (MSN) to enable both institutions to share facilities\. Finance Plan 4\. During preparation, it was discovered that the African Development Fund (ADF) had already pre-appraised a project to assist SPA\. Under this project the principal beneficiary would be MOCHE\. A potential duplication of efforts was avoided by an agreement that the project would receive parallel financing, with ADF focusing on building, printing equipment and technical assistance, and IDA on printing materials sufficient for three years\. The project was appraised iu July 1976, and the total cost esti- mated at US$11\.70 million, including a foreign exchange component of US$8\.72 million, or about 75% (PPAM, para\. 14)\. Board approval was given in August 1977 for a credit of US$8\.00 million\. The ADF loan was equi- valent to US$1\.67 million and Government contribution was US$2\.03 million\. It was expected that the project would be completed by March 1983, and that the Credit Accouat would be closed six months later\. Implementation Plan 5\. The project was to be implemented by a Project Implementation Unit (PIU) situated within the MOE\. The PIU had gained experience while imple- menting the first two projects, but was to be strengthened by an architect and an accountant\. - 3 - II\. PROJECT IMPLEMENTATION AN) OUTCOMES Management 6\. The Project Implementation Unit (PIU) in the MOE was responsible for control of the project\. Although the unit was experienced and effec- tive it needed strengthening with an architect and an accountant\. The Minister himself had previously been Project Director and this assisted in the solution of administrative problems\. While the Curriculum Development Center (CDC) and Regional Literacy and Skill Training Center (RLSTC) com- ponents fell under the MOE, the PIU was also responsible for components within the Ministries of Forests and Livestock (LFS); Information (SPA); Health (MSN, HPTI and KSN); and Labor (NTTTC)\. It is noteworthy that this great diversity of administrative responsibilities did not cause any major delays in project implementation, and the audit mission concurs with the PCR conclusions that this attests to the efficiency of project management (PCR, para\. 4\.02)\. Greater urgency in recruitment of technical assistance, however, could have further improved timeliness of implementation\. Never- theless, the diversity of project design created a situation with latent (and in some instances, actual) problems in coordination (see para\. 27 below)\. Start-up 7\. There was an initial delay in the appointment of the architect which caused a two-month postponement of project effectiveness\. Financing of the accountant was not covered by the Credit Agreement, which was there- fore amended on November 13, 1979\. Another complication arose from the fact that Somalia imp\.rts almost all its manufactured building materials\. At start-up all importation was handled by the National Agency for Building Materials (NABM) (PCR, para\. 4\.07), but this organization was unable to cope with the task\. Therefore 19 months after credit effectiveness, the PIU was authorized to import building materials directly, but it was still a further two years before the first deliveries were received\. Sequence 8\. Throughout the life of the project, management continued to be hampered by a series of problems of national dimension, completely beyond its control\. Once the initial difficulties of importation of building materials had been overcome, project implementation proceeded more rapidly (57% of estimated disbursement in 1982 as compared with 25% of estimate in 1981)\. However, three other major factors inhibited progress in construc- tion: (a) shortages of all levels of labor due to the attraction of neigh- boring oil-rich countries; (b) inefficiencies in the supply of local build- ing materials causing shortages; and (c) high levels of inflation during the period 1981-1984\. -4- Procurement 9\. The PCR reviews the problems associated with procurement of build- ing materials (PCR, paras\. 4\.07-4\.12)\. Even though implementation could proceed, once the PIU was handling importation directly, the normal process of preparing tender documents and the requirements of ICB resulted in a further delay so that the first delivery of building materials was only received 43 months after credit effectiveness\. Local contractors won the contracts for the major project institutions\. HPTI was completed well before the project completion date, and other institutions were completed around the closing of the project, with the exception of water and electri- city connection at the Kismayo School of Nursing (KSN)\. At audit, KSN was still not connected to electricity since the completion of the town elec- trification scheme, expected before the end of 1987, was still awaited\. 10\. Furniture (PCR, para\. 4\.17) was largely procured from one firm in a single contract\. Consequently the deliveries were beyond the storage capacity of the MOE, which had to rent temporary accommodation\. The PCR mentions a problem of damage during transportation and suggests that furni- ture should in general be assembled after delivery\. The audit mission was unable to confirm this observation; it found the furniture at the CDC, LPS and PIU in a satisfactory condition, and was informed that furniture for the RLSTCs was still in store in Mogadishu; and that for BPTI furniture was largely in store on site\.1/ 11\. Equipment lists for each projAect component were prepared with the aristance of specialists, and most procurement was handled by UNICEF, thus simplifying procedures, though UNICEF's move from New York to Copenhagen during the latter period of the project slowed down delivery\. The equip- ment supplied was appropriate in most cases, but quantities of some items at LFS were thought excessive (e\.g\., six stainless steel sterilizers where one would have sufficed)\. A substantial number of vehicles was purchased under the project but several complaints were received from project insti- tutions that the vehicles were not available for the originally envisaged purposes\. 12\. With the specialists financed by ADF, 134 (70%) of the 192 staff- months envisaged at appraisal were used\. The science kit production spe- cialist at CDC was not recruited, and the other specialists were financed by other donor agencies\. The post of village technology specialist was not filled since the PIU was unable to find a person with the wide range of skills expected\. A total of 245 staff-months of fellowships were used, 91% of the 270 appraised\. However only one of the 11 staff trained for CDC is working there, and the three fellowship recipients for LFS did not complete their training\. This failure of the fellowship program was mainly due to the attraction of higher salaries in some neighboring countries (see para\. 8 above)\. 1/ See also Comments from the Borrower, Attachment I, page 15, para\. one\. -5- Reporting 13\. The project was supervised approximately every six months with a maximum interval of nine months\. The close proximity of Somalia to the Bank's Regional Office in Nairobi, which was responsible for supervision, facilitated a careful monitoring of the project\. Thus the major problems of procurement were overcome rather more rapidly than would otherwise have been the case\. The PCR (para\. 4\.03) found that accounting, record-keeping and auditing was all carried out satisfactorily\. The Credit Agreement (Section 3\.06c and d; PCR, para\. 4\.23) required the Government to establish an evaluation committee and to prepare an evaluation report of the project, which would have formed the basis of the PCR\. Although the PIU assisted both the completion and audit missions very considerably in the preparation of cost and other data, a greater degree of borrower involvement in project cevluation would have been desirable\. Project Costs 14\. The total project cost estimated at appraisal was US$11\.7 million, to be financed with credits from IDA and ADF, respectively, of US$8\.00 million and Fund's Units of Account (FUA) 1\.50 million, equivalent to about US$1\.67 million, the remaining US$2\.03 million to be financed by the Government\. Total actual project cost was US$12\.53 million, consisting of US$7\.93 million, FUA 1\.49 million (equivalent to about US$1\.77 million)2/ and US$2\.83 million, from the above three sources, respectively\. This constitutes a cost overrun of 7\.6%\. In local currency terms the appraisal estimate was So\.Sh\. 73\.34 million, while total actual project cost was So\.Sh\. 141\.97 million, an overrun of about 942\. The IDA credit financed 632 of the project, ADF 14% and the Government 232\. The main reason for the high cost overrun in local currency terms was the steep drop in the exchange rate, from So\.Sh\. 6\.295 - US$1 at appraisal to So\.Sh\. 36\.36 = US$1 at completion which in turn was brought on by high domestic inflation\. The PCR discusses costs by component and by category (PCR, paras\. 5\.01-5\.09)\. Outcomes 15\. Educational Quality\. This component consisted of a new Curriculum Development Center (CDC) which was to prepare primary school textbooks and teachers' guides which would then be printed by the State Printing Agency (SPA)\. The CDC was also responsible for training teachers in the use of teaching materials and for testing the materials\. To achieve this, the CDC was constructed, furnished and equipped on a site near Mogadishu; 48 staff months of specialist services and 192 staff months of fellowships were provided\. The SPA was to develop a Textbook Production Unit (TPU) with printing equipment, physical facilities and specialist services funded by ADF and three years' supply of paper and printing materials funded by IDA\. The outcome of this component is very encouraging: there are now modules consisting of a student text and a teacher's guide for each of ten subjects for Grades 1 to 4 and for most subjects at junior secondary level; modules 2/ Exchange rates during the ADF disbursement period (April 26, 1979 to April 7, 1983) varied between FUA 1 - US$1\.19-1\.02, making an exact conversion difficult\. - 6 - have also been produced on basic skills, audio-visuals and curriculum de- sign; and an extensive audio-visual section has been set up\. The CDC is functioning very effectively with continued support from a wide range of multilateral, bilateral and non-governmental donors\. Materials are tested in schools near the center\. A separate department for in-service teacher training has now been set up\. A highly effective, dynamic curriculum deve- lopment unit has been set up and is well positioned to form the mainspring of the plan of action proposed by the consultative group of donors to res- cue primary education from its present precarious situation\. The SPA in 1986 produced 50,000 copies of each of 11 books, and 20,000 copies of a further two, together with the teachers' handbooks\. They expect to print 25 titles in 1987\. Problems of coordination mentioned in the PCR (para\. 6\.10) appeared at audit to have been largely overcome by CDC employing a permanent liaison officer who spends most of his time at SPA\. The audit mission considers that, remaining problems notwithstanding, this component has been very successful\. The most important difficulty is that of book distribution, for which inadequate provision was made in the project\. A number of problems are detailed in the PCR (paras\. 6\.08 and 6\.13) and many of these persist\. However, difficulties with staffing and motivation could be expected to diminish if the abovementioned Action Plan is put into effect\. Other issues related to project design and implementation were (a) lack of subject specialists; (b) incorrect timing of the fellowship program; (c) inadequate provision for operating costs (except paper for SPA) which would have severely constrained institutional development had it not been for the abovementioned unforeseen support by other donors; and (d) lack of transport which prevented effective testing of materials\. 16\. Basic Education and Skill Training\. This component consisted of seven Regional Literacy and Skill Training Centers widely dispersed around the country\. While two centers were open at the time of the completion mission (PCR, para\. 6\.21), none of them was operating at the time of the audit\. The IDA-financed equipment was in store in Mogadishu\. Equipment supplied by German Adult Education Association (DVV) has been installed in one center, and the National Institute for Adult Education (NIAE) has a plan to develop a training program in carpentry, building, making simple equipment and welding\. Land rovers supplied to each center were said to be no longer functioning\. The centers do not include accommodation for trainees or trainers\. The technical assistance component was not used (aee para\. 1\.2 above--village technology specialist)\. On the literacy side, the centers were expected to train literacy teachers, but this was not being done\. The project provided no assistance for NIAE which is expected to direct and provide logistical and pedagogical support to the Centers--in fact it is expected to function through them\. In summary, this component is non-functional\. 17\. Livestock and Forestry Education\. The LFS was expected to provide training for 360 students in a four-year post-primary course (SAR, para\. 4\.15)\. At completion, a merger with the neighboring Agricultural Secondary School was said to have taken place, the joint institution starting to operate in January 1986 (PCR, para\. 6\.27)\. At audit, however, the 360-place school had been built; furniture had been satisfactorily installed; equipment was installed but had recently been inadequately controlled\. Some items were provided in excessive quantities, such as - I - three butter churns and six stainless steel sterilizers\. Neither water nor electricity was functioning\. The fellowship program was a total failure (PCR, para\. 4\.22)\. The joint agriculturellivestock/forestry school proposal was dropped in early 1987, and the buildings were totally unused until April 26, 1987 when the Forestry, Range and Wildlife Institute of Somalia (FRWIS) under the jurisdiction of the National Range Agency (NRA) and with ODA funding and technical assistance, took over the facilities\. The current administration expects to have about 90 students by January 1988, 25% of total capacity\. 18\. Para-Medical Training\. The Health Personnel Training Institute (HPTI) built adjacent to the Mogadishu School of Nursing (MSN) was func- tioning satisfactorily at completion (PCR, para\. 6\.35), but at audit, the buildings were in a very serious state of disrepair; visible furniture and equipment was also in a poor state, but the bulk of it was said to be in store to prevent theft during the absence of students during Ramadan\. Some equipment was still in store with the PIU\. One bus financed by IDA was not received by the Ministry of Health for HPTI use\. At the Kismayo School of Nursing, which was still not functioning, water has now been connected, but at the time of the audit mission electricity still awaited the completion of the town supply, expected in late 1987 (para\. 9 above)\. 19\. Trade Testina and Training Survey\. The National Trade Testing and Training Center (NTTTC) was provided with equipment, a specialist and fellowships to develop a testing capacity in a range of trades (PCR, para\. 6\.40)\. At completion, NTTTC was meeting its objectives adequately (PCR, para\. 6\.41)\. By the time of audit, however, it had discontinued its train- ing function which had been taken over by a new school; the numbers tested countrywide per annum had increased (1985 - 3,015; 1986 - 6,033) as com- pared with the previous four years\. There was evidence of lack of main- tenance of buildings and equipment\. The survey of training needs was finished in 1979 and covered the manpower stock in 1978 and anticipated needs up to 1983\. A series of reports was produced (PCR, para\. 6\.46), which have been of considerable use in planning further development of the training resources of Somalia\. Sustainability 20\. The most important question regarding the likelihood of continuing functionality of project institutions is the extent of the Government's commitment to the education sector in the face of enduring budget difficul- ties\. The allocation to education in the national budget fell from 13\.7% in 1975 to 4\.5% in 1985 (3\.5% MOE and 1% MOCHE)\.3/ With insufficient recurrent budget allocations, institutions can not function and this is the underlying cause for the non-utilization of several project institutions\. 1/ This compared to an allocation for all countries throughout the former Eastern and Southern Africa Region of 18\.7% (Comparative Education Indicators, 1984)\. - 8 - If teacher salaries stay at the present level, provisions to meet running costs remain inadequate, and maintenance of project institutions continues to be neglected, then the project will fail to make a lasting contribution to Somalia's human resources development\. At present the CDC is supported almost entirely by donor funds\. SPA can continue printing only if basic commodities can be obtained through donor aid\. The RLSTCs have not yet started operation, the LFS is only partly fulfilling its envisaged role, and that again only with donor assistance\. The health training institu- tilons and the NTTTC are constrained by lack of adequate funding\. However, against this somber background there is a rapidly developing Government awareness that dramatic and urgent steps must be taken to reverse the pre- sent pernicious trend\. An Action Plan to improve the situation in basic education is being formula-ed jointly by Government and the donor commu- nity\. A key element in it will be the IDA/Government dialogue on these issues which was expected to take place shortly after the audit mission\. Environmental Effects 21\. The CDC has developed an environmental education program which has now become an integral part of the primary school curriculum\. The text- books developed cover forestry, fisheries, livestock, soil conservation, range management, and food production and storage, all presented in a con- text of environmental conservation\. The Forestry, Range and Wildlife Institute of Somalia (FRWIS), under the NRA, is responsible for training staff for the forestry, range and wildlife departments\. The curricula of the various courses include about 502 practical work including allocation of time to environment-related topics\. Human Resource Development and the Role of Women 22\. The primary objectives of this project were to develop the primary school curriculum and to provide resources for improved skill training\. Although most project institutions were not specifically geared towards training of women, some courses were so orientated, as for example the midwives course at HFTI\. The NIAE, responsible for developing courses at the RLSTCs, has a department for developing women's education\. III\. FINDINGS AND ISSUES Overview 23\. Despite initial delays, the project exceeded its physical objec- tives by an average of 27% and in one case (CDC) by 177%, and this was achieved with a cost overrun of only 7% in dollar terms\. The fellowship program was largely a failure mainly due to the attraction of neighboring oil-rich countries\. Nevertheless the project has created or restored the basic institutional facilities required to achieve project objectives (PCR, para\. 6\.01)\. At the time of the completion mission most project institu- tions were operational or close to the operational stage, but there was a concern about the Government's ability to finance operating costs\. Two years later, the situation had worsened to the point where the majority of project institutions were not functioning at all, and those which were operating were able to do so only as a result of continued donor support\. Thus the major problem is the lack of funds to pay staff adequately, to enable the institutions to function and to provide the necessary mainte- nance\. All project institutions are suffering from major problems most of which can be traced back to the fundamental inadequacy of fund allocation\. Furthermore, except for CDC and SPA, the project institutions are so rapid- ly falling into an advanced state of disrepair that unless urgent and dras- tic action is taken, IDA's investment will have contributed little to the development of the country's training infrastructure\. The very low share of the budget that goes to education (see para\. 19 above) points to a low Government priority, an issue which is to be addressed in a dialogue with IDA, expected to start in late 1987\. There can be little doubt that con- tinued underfunding of operation and maintenance of project institutions would seriously weaken the case for future education projects\. Related Experience 24\. The Bank's education projects in Somalia to date have had a simi- lar structure giving assistance to general education, teacher training, some type of agriculture-related program and a nonformal element\. The third project followed this pattern, though it was perhaps even more diverse than its predecessors, since it touched upon the Ministries of Education, Information, Livestock and Forestry, and Health and Labour\. Although the most fundamental problem which the project institutions now face is that of inadequate recurrent funding, the coordination of institu- tions was also a major difficulty (see PPAM, para\. 27)\. It may be that the PIU was not well situated to implement components in other ministries\. Although the unit did manage to complete the physical developments effec- tively, there are a number of coordination issues still pending\. 25\. The most innovative elements in the project were the CDC and the RLSTCs\. The CDC was starting from a situation where there was no teaching material in the primary schools, yet succeeded in developing a complete range at all grades in all subjects in a language newly written\. Although storage and distribution constraints, as well as lack of transportation, have limited trial of the materials on a large scale, the aclievements are considerable and other projects attempting comprehensive curricular deve- lopment efforts would do well to study the approaches used\. In noting the dearth of tangible outcomes of the RLSTCs to date, it should be kept in mind that rural skills training and adult literacy are very difficult even with ample resources\. In this case funds were nearly non-existent\. The officials at NIAE responsible for program development would be well advised to study approaches taken in other countries and projects in order to help them in formulating clear program objectives, drawing up details of the facilities needed to achieve these objectives, including physical facili- ties, equipment and staffing, clarifying who is to benefit from this train- ing, and all other details to ensure that the program becomes a success\. - iU - Findings and Lessons 26\. It should be recognized that the project was identified, prepared and appraised in a very favorable environment\. The Latin script had been adopted only five years before appraisal, and the intermittent period had seen large increases in primary school enrollment and in adult literacy efforts\. In the five years following appraisal, however, the Government's financial situation was seriously weakened (PCR, para\. 3\.04)\. These changes were largely unpredictable so that assumptions which were quite reasonable at appraisal (such as availability of adequate budget resources) proved later to have lost their foundation\. An important lesson to learn is that during the life of a project, the whole context may change sharply and project management as well as IDA supervisory staff need to be ready to react appropriately and promptly to develepments that could threaten the project's sustainability\. 27\. The project was complex, dealing with six ministries or institu- tions\. Although the PIU was experienced and efficient, and the complexity itself does not seem to have caused significant delays, it has undoubtedly contributed to several enduring coordination problems\. First there was a lack of coordination between CDC and SPA which blamed one another for printing delays (PCR, para\. 6\.10)\. Fortunately this problem has been greatly reduced by appointment of a CDC liaison officer to work with SPA\. Secondly, the LFS was situated near two other agricultural education facil- ities to enable mutual utilization of resources which, however, did not materialize\. Thirdly, HPTI and MSN were also situated near one another, again to facilitate common use of staff, equipment and laboratories; this resource sharing has occurred to a limited extent only\. 28\. In preparing the project, insufficient attention was paid to the functioning of each component\. Examples are the inadequate provision for storage and distribution of books prepared by CDC/SPA, the lack of subject specialists, the duplication facilities and transport, testing of curricu- lum materials and of teacher and trainee accommodations at the RLSTCs\. Besides these physical shortcomings there were educational and organiza- tional issues which remained unresolved, such as the selection of trainers and choice of courses for the RLSTCs, the sharing of facilities and the relationship of some project schools to similar existing institutions\. 29\. The conclusion is straight forwardt as a project increases in diversity, so does the need for working papers or other supporting documen- tation indicating not only physical developments, equipment lists, details of fellowship requirements, terms of reference for technical assistance and so on but also addressing issues of organization and administration of project institutions (unless they follow a customary, well-tested pattern)\. 30\. Several project institutions were found to be unable to carry out their intended functions principally owing to a lack of resources\. While the audit does not advocate credit financing of all recurrent expenditure during the implementation period (since this would make post-project adjustment even more difficult), a graduated assistance on a decreasing scale would be worth while considering\. - 11 - 31\. One project element which failed almost totally was the fellowship program, due principally to the attraction of much greater financial rewards in the oil-rich neighboring countries\. Although the audit mission was assured that changed economic conditions have curtailed this trend, the low salaries paid to staff of project institutions will continue to make it very difficult to build up a professional cadre\. The PCR proposals (PCR, para\. 1\.13) that improved selection, better salaries and a cushion of reserve fellowships to ensure that at least some recipients return to Somalia, are preferable to a complete avoidance of long-term fellowships, though the problem will continue to make itself felt until regional salary differentials have become less pronounced\. Issues 32\. The most important outstanding issue for project institutions, and indeed for the education sector as a whole is the lack of recurrent fund- ing\. The G3vernment will need to allocate a much larger proportion of the budget to the education sector if the present level of educational develop- ment is to be maintained, leave alone improved\. Short-term external assistance has its place especially during the start-up phase, but long- term viability of institutions and of the entire sector can be achieved only through a sustained national effort\. This applies to all aspects of capital and recurrent funding, but especially to staff salaries\. Without a significant improvement in incentives there will always be the prospect of damaging staff losses\. In addition to more competitive salaries, clear career structures and, where appropriate, additional incentives such as housing, transport and field allowances could help prevent a gradual ero- sion of staff\. 33\. Transport is funded in projects only when institutional needs justify its inclusion, since vehicle running costs can amount to a major expense item\. When vehicles are provided, however, they should be used for the originally envisaged purpose\. Disagreement between two government agencies about the use of some project vehicles suggests that this has not always been the case\. 34\. CDC/SPA have prepared and printed a wide range of suitable curriculum materials\. It is now essential that CDC, assisted by the Inspectorate, ensures that these books and teachers guides are distributed right down to the classroom level\. It is also essential that a more de- tailed and rigorous testing of curriculum materials be carried out before the first edition of these materials becomes too deeply entrenched\. There will be a continuing need for SPA to be provided with paper and other printing materials so that a continuing supply of books will I'e available for schools\. This will be especially important if the action plan (see PPAM, para\. 19) reaches the implementation stage\. It is also of great importance that curriculum development is seen as an ongoing process\. Once the introductory work has been done, curriculum materials should be regularly reviewed, updated and re-tested\. 35\. Basic facilities for skill and literacy training now exist in seven regions\. Although programs are currently inhibited chiefly by lack of operating funds, it Is important that NIAE should develop policies and programs which would make use of these facilities once the resources become available (see PPAM, para\. 25)\. 36\. While it must be recognized that lack of recurrent funding to putting a constraint on the operation of Institutions, it is important that they should be opened as soon as this becomes feasible\. At audit, no live- stock training was being carried out at the school constructed under the project for that purpose, LFS\. If the development of these facilities was initially justified, and if it is still justified by manpower needa, then it is essential that the Government should take steps to ensure that live- stock training is developed as rapidly as possible to meet these needs\. By the same token, HPTI should show flexibility so that courses offered cor- respond to the most urgent manpower needs, and KSN should be opened at the earliest date in order to supply the trained nurses required\. In order to minimize post-implementation difficulties, the development of future proj- ects in the human resources development field to be considered for financ- ing by IDA should be linked to progress with the development of programs in the institutions financed under this project\. - 13- (Ministry of Education) SOMALI DEMOCRATIC REPUBLIC MINISTRY OF EDUCATION Jamhouriyadda Dim\. Soomaalsya MULTIPURPOSE EDUCATION 4, -t" WASAARADDA WAXBARASlADA PROJECT IYO BARBAARINTA MASHRUUCA TACLIINTA UJEEDDOOYINKA BADANR (Mailing Adres: P\.O\.Box 1144\. Mogadishu\. Somalia - Cable Address: EDIDA - Tel\. 29031 - 36064 - 33014 Our RefI Date Janua 39 Mr\. Graham Donaldeon, Chief, Agriculture, Infreoftricture & Human Resource Division, Operation Evaluation Department, The World Bank, 1818 1\. Street, N\.W, Washinton D\.C\. 20433\. Dear Mr\. Donaldson, Res Somalia Third Education Project (Credit 738-SO) Draft Project Performance Audit Report\. We are in receipt of your Draft Project Performance Audit Report (PPAR) on Third Education Project Credit 738-SO\. We assume that the target date for receiving our comments is January, 29, 1988 instead of January, 29, 1987 as mentioned in your letter of December, 4, 1987\. We have reviewed the report and are very pleased to note that the report is by and larre satisfactory\. We have noted the few points of difference on which followinp are our comments which are sent as attachment to this letter\. With kind regards and best wishes for a Happy New Year, Yours sincerely, (lasak Jama WarsameT Proj4 Atrector S15 - ATTACHMENT I (Page 2 of 3) PIU CITS 0 SMALIA THIED SWCATI! PROJEM CREDIT 73-SO - DRAR PROJECT PERPOWCE AUDIT REPORTo 1\. PIU is not aware of any damage to Imported furniture during transport and inst\.!llation at sites (PPAM, Pare 10, PCR, para 4\.17)\. The Audit Mission was informed about this fact\. 2\. Health Personnel Trninina Institute, this Institute had been functioning satisfactorily for 2 years at the time of PCK (PCR, para 6\.31)\. The Institute did not stop functioning after that\. However, at Audit Mission'\. visit, the Institute was closed for the fasting month of Ramadan\. 7he & rincipal had stored furniture and equipment and locke4 for security\. There were some signs of lack of *aintenance of the facilities, but the fact is that the Institute was in use\. (PPAR, page Ix & xI) and it still is in use\. 3\. The SIDAN component was not in the Third MIucation Project, but it is in the Fourth Education Project\. So the reference of SIDAM in PPAY page 5 & 17 be deleted\. Also SIDAM is an Institute under the Ministry of Labour & Sports\. 4\. The Kiamayo town electrification acheme has been completed in October, 1987 and is available for Kismayu School of Nursing\. Please refer PCR, para 1\.05, 4\.14\. 5\. The Project constructions are comparable to any local constructions in Mogadishu and the country\. Every effort had been made to act on Bank Supervision Mission's findings\. Most of the defects were rectified by the Contractor for CDC buildings immediately after Mission's departure in May, 1984\. However, self-help constructions of REATos due to remote locations, was not of same quality at all places\. 6\. Regarding LYS equipment procurement (PCR, para 6\.27), the equipment lists for LPS were hand carried by Mr\. 1\.P\. Shama, Consulting Civil hgineer and were handed over to Mr\. GAnnme Berlin along with our letter of August 24, 1983\. The receipt of the lists was acknowledged by EPS/U Nairobi, vide their telex No\. 263 dated August, 29, 1983 asking PIU to provide cost estimates as soon as related quotations are received by us\. After receipt of the bids, the BPS approved the award of contract for LPS equipment vide their telex No\. 217 of May, 24, 1984\. It appears these lists might have been contd\.2 - 16 - ATTACHMENT I (Page 3 of 3) misplaced during EPS transit from Nairobi to Washington\. We have however, sent the details of equipment lists procured for LyS to Mr\. Goodine in response to his telex No\. 360 of August, 1, 1985 which was required for Project Completion Report Preparation in Washington\. 7\. Regarding oawpliance with Credit conditions (PCR annex 2, page 1 of 3), the PIU and Goverment did whatever was necessary\. It was un- fortunate that most of the CDC staff members sent on fellowships to U\.K\. for Post Graduate specialisations disappeared after completion of their studies\. The brain drain phenomenon to the Petro Dollar Arabian Gulf countries offering attractive and highly remunerative job opportunities, was the cause for this failure\. Regarding the recruitment of Village Technology Ekpert, every effort was made by the Government for recruitment\. In fact the PIU Deputy Project Director (at present the Project Director), duly briefed by the Ministry of Education went to India for this recruitment\. However, he and the Somali AEbassy staff in New Delhi could not find an all rounder Village Technology Epert having multi skill expertise in various fields in accordance with the terms of reference\. There were many experts available, but each had speciali- sation in one particular villege techenology area\. The dilemma faced was how to distribute 12 man months of specialists services among several areas of rural skills\. The then Project Director in his progress report dated December, 31, 1980 had mentioned this fact and drew the attention of the Association for a need to review the concept prevailing at the Project Appraisal stage\. Regarding conditions 3\.06 (c-d), the Government during May, 1984 Supervision Mission showed preference for the Project Evaluation Completion study to be undertaken by IDA which was duly noted and later accepted by the Association (please refer letter from EPS Chief to Minister of Education dated May, 28, 1984, para 3)\. There was therefore no need to take up Project Evaluation Study both by Government as well as IDA\. It can therefore be said that the conditions were met in a different manner with mutual agrerment between the Government and the Association\. - 17 - COMAIBTS FRl THE - ATTACHNT II (Permanent Secretary of National Planning) (Page 1 of 2) Comments on the Project Performance Audit Report of Somalia - Third Education Project Credit of the World Bank 1\.0 The total cost of the project is 12\.68 million US $ dollars\. of which IDA contribution was 8 million US dollars\. The project Implementation was delayed by 24 Months and most of the project components were completed\. At the end of the project IDA closed the project account with an undisbursed component of 70\.000 dollars from the credit approved for the project\. 1\.1 The project had four main objectives, namely: Curriculum a) inproving the quality of education through curriculum development, teacher training and teaching materials production\. b) Promoting basic education and skill training among youth and adults\. c) Provide for specialised manpower training in livestock production, forestry and Para medical services\. d) Development trade testing system and identification of public administration training needs\. The project did not have one specific objective but was addressed to different felt needs of the education sector\. Funds were earmarked from the beginning towards completing some aspects of the project component, without seeing the long term implications\. Thus when the quality of education at primary schools and enrolment levels declined sharply the project could not assist the government as prImary education component was not included in the project component\. 1\.2 The project Implementation was delayed due to its involvement with six ministries, Viz, Health, Information, Livestock, Agriculture, Labour and Education with problems of co-ordination\. The major beneficiary of the project was the curriculum development centre component\. The books were written and printed but they never reached the classrooms due to transport and distribution problems\. There were also inherent defects in the project design\. The regional literacy and skill training centres are not yet operational due to lack of provision for housing of teachers, trainees\. - 18 - ATTACHMENT II (Page 2 of 2) 1\.3 A major issue is the lack of adequate recurrent funds to keep the institution created by the IDA loan\. Some institutions such as CDC and Printing Agency have attracted new donors to support their activities\. Others suffers from serious shortage of funds for upkeep of the facility and be operational\. The Ministry of Finance must allocate funds to keep the activities of the institutes at acceptable levels\. 1\.4 Like ot'her IDA projects, this education III project had provision for 270 man months of training fellowships\. 11 fellows were sent abroad for training only one returned to take up a post at CDC\. The government should envolve a system of bonding the fellowship holders to return back and work in the country, - a system adopted in other developing countries\. 1\.5 The discussion have started on 5th education loan and it is necessery that IDA and government recognise the shortcomings of earlier Education project and design a project that addresses to critical issues\. - 19 - PROJECT COMLETION REPORT THIRD EDUCATION PROJECT - CREDIT 738-SO DEMOCRATIC REPUBLIC ( SOKALIA June 30, 1986 Education and Manpower Developant Division Eastern and Southern Africa Regional Office - 21 - PROJECT COMPLETION REPORT SOMALIA THIRD EDUCATION PROJECT (CREDIT 738-SO) CHAPTER I SUMMARY AND RECOMMENDATIONS Proiect Obiectives and Content 1\.01 The objectives of the project and the related components were as follows: (1) improving the quality of education through curriculum development, teacher upgrading and teachingilearning materials production; components: a new Curriculum Development Centerlextension to the State Printing Agency; (ii) promoting basic education and skill training among youth and adults; components: seven new Regional Literacy and Skill Training Centers; (iii) providing specialized manpower training in animal husbandry, forestry and paramedical services; components: a new Livestock and Forestry School; a new Health Personnel Training Institute renovations to the Mogadishu School of Nursing and a new School of Nursing at Kismayo; (iv) developing the system of trade testing and skilled workers' upgrading; component: equipment for the National Trade Testing and Training Center; (v) identifying training needs in public administration and management; component: manpower survey of public administration and management (para\. 3\.15-3\.16)\. Project Costs 1\.02 The total cost of the project at appraisal was estimated at US$11\.65 million equivalent and comprised the followings (i) US$9\.71 - 22 - million equivalent of components financed by the IDA and (ii) US$1\.94 million equivalent for components cofinanced by ADF\. The final cost of the project was US$12\.53 million equivalent (US$10\.46 million, IDA$ US$2\.07 million, ADF)\. In US dollars the total cost was only 8% higher than appraised but 942 higher in local currency due to the repeated and heavy devaluation of the Somali Shilling during the time of implementation (para\. 5\.01)\. Project Implementation 1\.03 The project became effective on March 13, 1978 two months later than scheduled\. A Project Implementation Unit was responsible for the design and supervision of civil works as well as financial and administrative control of the project\. This Unit performed well because of experience gathered on two previous IDA assisted projects, specialized adequate staffing support for the Ministry of Education and satisfactory administrative procedures (Paras 4\.02, 4\.03)\. 1\.04 Delays in civil works occurred because of a continued country- wide shortage of building materials\. A parastatal organization which was expected to import building materials for the project at the time of appraisal did not perform adequately and was eventuallyt replaced by the PIU but with loss of implementation time (Paras 4\.07, 4\.08)\. 1\.05 All construction components included in the Project were built either through force account as in the case of the 7 Rural Literacy and skill Trainin Centers (RLSTC) or by private contractors for all the remaining components\. Despite some contractual difficulties and generally rough construction all components were built with little cost overruns in terms of US dollars, including contingencies (Paras 4\.13, 4\.14)\. Furniture and Equipment was procured through ICB with one firm winning all the required furniture in a single contract while equipment was divided between procurement through UNICEF and ICB with several firms awarded contracts\. (Paras 4\.17, 4\.18) 1\.06 With respect to technical assistance out of 192 man-months of specialist services included in the appraisal, 90 man-months (47%) were utilized, while out of 270 man-months of fellowships proposed, 245 (91%) were utilized (paras\. 4\.21-4\.22)\. An additional 110 man-months of specialist services were provided through two credit amendments\. 1\.07 Due to delays mentioned above, the project was extended 18 months, from September 30, 1983 to March 31, 1985\. The final disbursement was made on March 13, 1985 and an undisbursed balance of US $70,476 was cancelled (Para 5\.08)\. Project Assessment 1\.08 Comparison of project objectives and content and actual outcomes indicate that the project has been largely successful to date, though full assessment of educational outcomes will be possible only after each project institution will have been in operation for a number of years (para 6\.01)\. A general problem facing all project institutions is the lack of adequate funding of recurrent costs due to the Government's financial situation\. The positive and negative aspects of each project component are summarized below\. (i) Activities of the Curriculum Development Center such as textbook revision, primary curriculum and materials development, and in-service training are proceeding well\. A major difficulty is the shortage of funds for recurrent costs so that most of the activities are dependent upon support from external aid sources\. A significant problem lies in the area of staff development since only one of the 11 fellows trained abroad returned to work at the Center (Paras 4\.22, 6\.04, 6\.08)\. (ii) The State Printing Agency has produced 48 titles witha totalof 1,922,000 copies during the past two and a half years\. While this is below expectations, the reasons are clear\. Aside from the normal problems related to the start-up of a complex operation, the Agency has been handicapped by inadequate and incomplete selection of equipment during the preparation and appraisal stages, lack of continuous technical assistance and of key local staff, and space shortages\. Recent major inputs by the GTZ and the use of former unallocated funds from the IDA Credit have resolved many of these problems\. A positive outcome has been the low-cost production of relevant text-books and other teaching/learning materials\. A major concern however is to identify a new source for the financing of expendable supplies which constitutes a substantial sum annually (Paras 6\.10 - 6\.14)\. (iii) Two of the 7 Regional Literacy and Skill Training Centers are operational\. These were open in 1985 and the remaining 5 are scheduled to open in October 1986\. The Institute of Education has held two workshops for the seven directors and is preparing modular skill training courses in collaboration with ILO\. All of the Centers are ready for occupancy, with variable quality of construction done through self help scheme\. Again, a major concern is to secure adequate recurrent cost funding (Paras 6\.17 - 6\.22)\. (iv) The Livestock and Forestry School has been handed over to the principal of the pre-existing Agricultural School and the combined facilities are operated under the responsibility of an inter-ministerial body (Ministries of Agriculture, Education and Livestock)\. (v) The new Health Personnel Training Institute (HPTI) facilities have been built adjacent to the Mogadishu School of Nursing, which has been renovated under the project, and the two institutions share the same staff, as well as some of the physical facilities\. The new HPTI has been in use for two years and is now at full capacity\. Start-up has gone quite smoothly and the institution is functioning quite satisfactorily (paras\. 6\.35-6\.36)\. (vi) The Mogadishu School of Nursing (MSN) was renovated to permit integration with the new RPTI and to facilitate the closing down of the old HPTI elsewhere in Mogadishu\. Although the renovations were just nearing completion at the project's closing the old courses had been phased out and replaced by new courses as planned\. The transition was satisfactory and the MSN is fully functional\. (Para 6\.35) (vii) The Kismayo School of Nursing (KSN) was not yet functioning at the project's closing due to delays in completion of civil works\. However, the facilities have now been handed over and the Ministry of Health expects to have the school in full operation by September 1986 (Para 6\.37) (viii) The National Trade Testing and TraiLing Center (NTTTC) completed all work in regard to formulating policy and developing trade test materials as planned\. The required equipment was procured and the component is meeting its objectives adequately\. The outcome of this component has been very successful\. (Para 6\.41) (ix) The Survey of Public Administration and Management was carried out and the relevant reports were produced as scheduled\. These reports are very comprehensive and give full geographic coverage to the country\. The availability of the information contained in these reports has been very useful to the Government and has also been utilized in planning two components of the follow-on Fourth EducationProject\. The outcome of the component has been very satisfactory\. (Para 6\.46) Lessons Learned 1\.09 In order to meet the objective of getting textbooks to the students, a three-fold operation is necessary, namely preparation, production and distribution of the books\. The project included the first two activities, but not the third since the Appraisal Report stated that the MOE's storage and distribution system was satisfactory\. This however wasnot the case\. The system is not satisfactory and will be unable to cope with the situation when the mass production of textbooks gets under way\. This suggests that at appraisal insufficient attention was devoted to the critical issue of storage and distribution and, perhaps, the three functions were not seen as being inter-dependent\. (Annex 4) 1\.10 Most of the long-term fellows (12 or more months abroad) did not return to the positions for which they were trained\. Many are reported to be working abroad where salaries are much higher\. While this problem is not unusual elsewhere, it is particularly crucial in Somalia due to the country's poor economic outlook and the Government's chronic financial difficulties\. It is reported that at least one major donor no longer offers long-term fellowships\. (Para 4\.22) 1\.11 Adequate funding of recurrent costs is a major concern in most of the project's institutions\. (Paras 6\.08, 6\.13, and 6\.23) 1\.12 Furniture for the whole project which was won by a single international manufacturer arrived in Somalia in one shipment thus straining warehouse facilities\. As furniture was assembled in Mogadishu, damage occurred in transport proportionately to the distances covered\. (Para 4\.17) Recomendations 1\.13 (i) The policy adopted by some donors to avoid offering long-term fellowships should be reviewed by the Bank in future projects, but should not be adopted as better selection, improved career incentives, and even increasing the numbers of fellowships may be warranted in specific cases\. (Para 4\.22) (ii) Given Somalia's economic and financial situation, future projects should be designed to include components with minimal increases in recurrent costs\. (Paras 6\.08, 6\.13 and 6\.23) (iii) The recent decline in primary level enrollments, althouah attributed to the drought,deserves a thorough survey/study\. (Para 3\.06) iv In view of the decline in enrollments at the primary level, shortages of skilled manpower in various sectors and the extremely low share of the Government's recurrent budget now devoted to education, the Bank should review the investment priorities established during the recently concluded Country Assistance Management exercise to reinstate as soon as feasible the resources needed to carry out a sector study and if the sector study establishes that the country has both the absorptive capacity and the need for IDA assistance in education, a future project should be included in the projected lending program\. (Para 3\.12) (v) Care must be exercised in future projects to ensure that furniture is designed and delivered in components to the project institutionsand assembled at the final destination to avoid damage during transport\. (Para 4\.17) CHAPTER II INTRODUCTION 2\.01 This report is based on the findingsofa mission composed of Mr\. Cecere (Agricultural Educator-EAPED), Mr\. Goodine (Technical Educator-RMESA), Mr\. Welter (Senior Architect-RMESA) and Mr\. Bolibaugh (Educator-Consultant) which visited Somalia in May, 1985\. The mission visited all the project institutions in Mogadishu including the CDC, SPA, RPTI, the LFS in Afgoi, the KSN in Kismayo as well as 4 out of 7 RLSTC's\. 2\.02 This report is further based on: (a) Information available from Bank Group files in Nairobi particularly supervision and progress reports obtained from the Project Implementation Unit and other departments and Ministries of the Government\. (b) Visits to project institutions\. (c) Discussions with staff of the PIU, other Government officials, principals, staff and students of project institutions, educational and technical experts at the CDC and SPA as well as Bank staff familiar with country and project specifics\. 2\.03 The report reviews the physical execution of the project as compared with appraisal estimates and analyzes the outcome of components in relation to their objectives\. Although the Government did not comply with the covenant related to evaluation of the project (Para 4\.23), the PIU assisted in the preparation of this document by supplying information on project costs and additional data related to civil works and the procurement of furniture and equipment which were not available in Bank Group files\. CHAPTER III PROJECT BACKGROUND Socio-Economic Setting 3\.01 Somalia is located in the northeastern corner of Africa, bordered by Ethiopia and Kenya to the west and south and the Gulf of Aden and the Indian Ocean to the north and east\. The length of the coastline is about 3,000 kilometers, and the land area is about 63 million hectares\. The topography is varied and includes hot and arid coastal plains, rugged mountains and plateaus, and lowlands of varying fertility and rainfall\. Approximately 13% of the land is estimated as potentially suitable for crop production, but with water as the limiting constraint, only a small part of the area is cultivated\. 3\.02 The resident population consisting of a homogeneous ethnic and linguistic group predominantly of Hamitic stock, is estimated between 4\.5 and 5\.5 million and the refugee population, between\. 0\.7 and 1\.0 million\. About 60% are nomads and semi-nomads who depend on livestock for their subsistence; about 20% are farmers cultivating land and ?0% urban dwellers\. The economy is dominated by the livestock sector which provides a living to the large nomadic population and generates about 35% of the GDP\. Export of live animals represent about 80% of total exports\. Crop production generates about 8% of GDP and roughly the same share of exports\. 3\.03 Somalia is amongst the poorest countries in the world and is classified by the United Nations as a least developed country\. Per capita income was estimated to be about US $250 equivalent in 1983\. The general lack of infrastructure - physical and institutional - and the hostile physical environment, poor communications, lack of modern transportation systeis and scattered population centres have created serious obstacles to the development of the country\. 3\.04 The economy has been stagnant over recent years accompanied by-a deterioration in the country's domestic and external financial position\. Aside from the constraints derived from limited resources and relatively weak administrative and economic infrastructures, the country's development has been negatively affected by drought, the end of Soviet Union assistance in 1977, and the 1977-1978 conflict with Ethiopia which * has been renewed sporadically since 1980\. The Education System * Overview 3\.05 At Independence in 1960, Somalia inherited a poorly developed education system in which priority was accorded to secondary education for a selected minority\. After Independence, priority shifted to primary and adult education to build a society in which the people could participate in social and economic activities as well as in the political process\. Later on, howcvcr, the Government again emphasized secondary over primary education (para 3\.07)\. The formal system consists of two years pre-elementary, eight years of primary, secondary courses of two, three and four years and post-secondary programs of three and four years (Annex 1)\. Non-formal education is divided into two programs, adult education and women's education\. Primary Education 3\.06 In 1975, compulsory free primary education was introduced with the-\.objective of attaining universal primary education as quickly as possible\. At first, enrollments increased rapidly but have been declining since 1979\. Thus the net enrollment ratio dropped from 25\.6% in 1975 to 19% in 1183 while overall enrollment remained at about 220,000\. Reportedly, the main cause for the decline in primary level enrollments was the drought which led to the closing of about 100 schools in the last two years\. This negative trend deserves a thorough survey/study\. Secondary Education 3\.07 Despite earlier efforts to the contrary, the Government has emphasized the expansion of secondary over primary education in recent years\. In the period 1975-83, secondary enrollments Incteased from 7,000 to 66,000 representing 13\.9% of the relevant age group which is relatively high for a country at Somalia's level of develajment\. Out of the above total, 55,000 students (30% female) are enrolled in grneral education, with the balance in technical and vocational education\. This is contrary to the Government's stated policy to orient twice as many students towards technical rather than general education\. Whereas general secondary education is provided by about 70 general secondary schools, vocational ad technical training is carried out in 10 technical schools with other ministries and*governmental agencies conducting similar training activities\. Only one institution provides commercial and business education\. Teacher Training 3\.08 Primary teacher training enrollment in 1980/81 was 3,380 in two-year courses following completion of primary school\. Present enrollment is sufficient to meet projected needs for primary school teachers but existing facilities are over-utilized and do not take into account the aspects of regional disparities\. Secondary teacher training enrollment was about 1,100 in the same year with an effective output of around 465 teachers\. Students are recruited from secondary school graduates and also from employed primary school teachers\. The course was previously of two year's duration but has been lengthened to three years in 1984 to include practice teaching\. 3\.09 The National University, evtablished in 1956 as an institution of higher education became in 1963 a full fledged University providing the whole range of requirements for the first two years of study towards degrees in law, economics, and political science\. Degrees were granted after two additional years of studies, generally in Italy\. In 1979, the University was granted legal authority to confer degrees\. There are twelve faculties at present: Geology, Engineering, Medicine, Veterinary Medicine, Law, Economics, Commerce, Chemistry, Agriculture, Journalism, Languages and Education\. The 1984 enrollment was about 3,500 students\. 3\.10 Adult and Non-Formal Education\. MOE's Non-Formal Programs include adult education, women's education and community training\. Between 1972 and 1975, Somalia made a concerted and relatively successful effort to bring literacy and basic education to all its citizens\. The literacy rate in Somalia reportedly rose from around 20% in 1972 to an estimated 50% by 1977 due to this iffort\. Today, some 850 centres provide adult non-formal education to about 27,000 students\. The MOE with financial assistance from local authorities and the Ministry of the Interior operates over fifty centres for womens' education with some 3,700 women attending\. The National Womens' Centre in Mogadishu provides a six-month course to train staff for these centres\. 3\.11 Lansuages of Instruction Somalia is characterized by the fairly unique situation for an African country where the entire nation has the same vernacular, the Somali language\. In spite of this homogeneous situation, the formal education sector shows a highly diverse and on-coordinated pattern which can be described as follows: (1) Primary Education: Somali Is the language of instruc- tion with Arabic and English as subjects (similar situation in primary teacher training and vocational training institutions)\. (11) Secondary Education: In general secondary schools, the pattern is identical*ith that of primary education but in technical secondary schools English is the language of instruction with Somali and Arabic taught as subjects\. (111) At University level Italian is the language of instruction in most faculties with one exception - the Faculty of Education (secondary teacher training), which teaches in English\. The reason for this awkward situation is the fact that the bulk of the expatriate teaching staff at the University of Somalia is provided as technical assistance by the Italian Government on grant basis\. The private and social cost in terms of reduced flow through the school system and particularly through the University and low internal efficiency due to high drop-out rates cannot be readily assisred but is without doubt very significant and a serious obstacle in the development of the formal education sector in Somalia\. Government Expenditures on Education 3\.12 The share of the Government's total recurrent expenditures allocated to education under the Ministry or Education (MOE) and the Ministry of Culture and Higher Education (MOCHE) rose steadily in the 1970s from 6\.7% in 1970 to 12\.1% in 1975 and reached a height of 15\.4% in 1977\. Thereafter there has been a steady decline to 10\.7% in 1979; 9\.5% in 1981; 7\.6% in 1982\. The Ministry of Education share of the National recurrent budget by 1984 was about 5%\. This pattern reflects a shift in the Government's priorities from education to the more immediately productive sectors\. This proportional decline combined with declining revenues in the past few years means that eresion of earlier gains in the education sector is underway with little hope for quality improvement\. Since there is no provision in the Bank's Lending Program for IDA assistance in the Education Sector in the next few years it is unlikely that financing of education will improve in the short term\. This' investment policy is undoubtedly short-sighted\. - JU - Project Formulation 3\.13 The First Education Project (Credit 247-SO) was signed June 3, 1971 and closed September 30, 1976, nine months later than the original date\. It provided US$ 3\.3 million to assist general secondary and technical education as well as teacher and agricultural training\. The Secqnd Project (Credit 511-SO) was signed September 19, 1974 and closed March 31, 1981 fifteen months later than the appraisal estimate\. The Credit amounted to US$ 8\.0 million for general secondary and technical education, teacher and fishery training, and a nomadic training program\. A Fourth Project (Credit 1105-SO), following the Project under scrutiny was signed on April 17, 1981 and is expected to close on March 31, 1986\. The credit amounting to US $ 10\.2 million provides for primary teacher training resource centers, the Lafole College of Education (LCE), general secondary education, and the Somali Institute of Development Administration and Management (SIDAM)\. 3\.14 In November, 1975, a bank mission identified possible components for the Third Education Project in consultation with the Government\. A Unesco mission assisted the Government in preparing the project in May, 1976\. The proposed project was appraised by a Bank mission in July 1976 and the Credit Agreement was signed on September 30, 1977, about two years after the identification of the project\. Project Objectives and Content 3\.15 As stated in the Appraisal Report, the project was designed to:: (i) improve the quality of education through curriculum development,-teacher upgrading and the production of teaching materials; (ii) promote basic education and skill training among youths and adults; (iii) provide specialized manpower training in animal husbandry, forestry and paramedical services and, (iv) develop the system of trade testing and skilled workers' upgrading\. Thus, the project objectives supported the Government's educational policy as stated in past development plans as well as the present one (FYDP 1982-1986)\. 3\.16 The project components contributing to these objectives are shown in the table below\. Component Nature of Assistance Approx\. No\. of Student Places Existing New Total a\. Curriculum Construction/Furniture n\.a\. n\.ea\. n\.a\. Development and Equipment Centre b\. State Printing Extension/Furniture Agency and Equipment n\.a\. n\.a\. n\.a\. - 31 - c\. 7 Regional Literacy\.and Construction/Furniture Skill Train- and Equipment - 840 840 ing Centers d\. National Trade Testing \.and Training Centre Equipment only 30 60 90 e\. Livestock and Forestry construction/Furniture School and Equipment - 360 360 f\. Mogadishu School of Nursing Renovation 180 - 180 g\. Health Personnel Construction/Furniture Training and Equipment Institute 200 - 200 h\. Kismayo School of Construction/Furniture Nursing and Equipment - 60 60 The project also included the following: (i) Provision of three-year incremental requirements for printing materials for the -OE\. (ii) The cost of specialist services and fellowships for (a) curriculum development and teaching materials development and proluctio; (b) rural skill training; (c) a survey of public administration and management training needs; and (d) project administration including civil works design and supervision\. Amendments to the Project 3\.17 There were two amendments to the Credit Agreement: (i) the amendment of November 13, 1979 added 50 man-months for the services of an accountant to the PIU\. This was not included in the Credit Agreement although it was proposed in the Appraisal Report; (ii) the amendment of June 24, 1980 provided 60 man-months for five experts teaching at the Fishery and Marine Institute (a component of the Second Project)\. The closing date was postponed from September 30, 1983 to September 28, 1984 and the final disbursement made on March 13, 1985\. - 32 - CHAPTER IV PROJECT IMPLiiETfATION Project Management 4\.01 The project became effective on March 13, 1978 two months beyond the original schedule of January 4, 1978\. One condition to be met prior to effectiveness, namely the recruitment of an additional architect for the PIU, was the cause for the delay\. 4\.02 The Project Implementation Unit (PIU) Incorporating also a School Design Unit established for the Implementation of the First and Second IA Education Projects (Credits 247-SO and 511-S0) was responsible for the financial and administrative control of the project as well as the design and supervision of construction of project institutions\. Experience acquired under the two projects resulted in strengthening the Units with the addition of an architect and an accountant, both recruited internationally\. Generally, the PIU performed remarkably well in terms of administering the project within the time and cost constraints established by the Project\. 'he nece9sity*to extend the project by two year was almost entirely due to country wide problems and not to project managemaent\. 4\.03 The close links between the Ministry of Education and the PIU helped considerably in the implementation of the project\. The fact that\. the Minister of Education was previously Project Director of the same Unit insured continuous monitoring of the Project at high Government level\. The Presidential decree on importation of building materials (para 4\.08) was a good example of this commitment\. Staffing of the Unit was adequate throughout\. With the exception of site supervision which could have been more sustained, thus resulting in better quality buildings, all other aspects of the Unit's performance were satisfactory\. With respect to accounting, record keeping, preparation of withdrawal applications and auditing procedures, the PIU performed effectively\. Sites 4\.04 No major difficulties were experienced with sites since most of them had been selected at the time of appraisal\. However, delays occurred with the construction of the CDC, since originally this institution was to move, pending renovation, into an existing building occupied y the Mogadishu Institute of Accountants and Surveyors\. However t*is building was appropriated for other purposes in 1981, thus making useless the architectural plans for remodeling\. A new site centrally located within Mogadishu, was found subsequently but the process of developing plans for anew site resulted in an overall delay of two years\. -33- 4\.05 Lack of water on two sites also produced delays\. With HPTI In Mogadishu\. there was insufficient water supply from the adjacent Mogadishu School of Nursing to provide water for both institutions as originally planned\. A temporary supply line from a nearby well was finally arranged until a major water supply scheme for the whole area, funded by German Aid, would become operational\. However water shortage at this institution delayed the use of boarding facilities \. At Kismayo School of Nursing, the problem was simpler and consisted in connecting the school to one of the city water mains, a distance of 2,000 meters This had not Deen foreseen at appraisal, because at the time the site for the school was nearer to the town centre\. Allocating funds for this purpose was time consuming and was also one of the factors in delaying the opening of this institution\. With respect to the RLSTC's and other project components, the sites proved to be adequate\. Paical laplementation Designs 4\.06 The School Design Unit within the PIU was responsible for the design of all project institutions\. Although none of the facilities under the Third Education Project were similar to those built under the former two Education Projects, space standards as well as finishes were very much in line with earlier components\. Because of the generally poor quality of construction produced by loeal contractors as well as the fact that some of the project components were to be built through force account, plans were kept purposely simple in concept and were reasonably appropriate to meet the space requirements of the project\. However when compared to construction standards within the sector in other countries desian concepts as well as detailing are decidedly rough and unimaginative\. The Construction Industry and Importation of Building Materials 4\.07 laplementation must be seen against a background of changing conditions in Somalia, mostly during the latter half of the project which affected adversely all civil works\. The problem of shortages of imported materials existed in Somalia for many years since the only building ingredients found locally were sand, stone, aggregates, lime and water\. At the time of appraisal, all imported construction materials had to be procured through a parastatal organization, the "National Agency for Purchase of Building Materials" (NABM) which was a source of much delay despite assurances of meeting the PIU's requirements\. 4\.08 As early as 1979, sam could not meet the requirements of the project and hence a request was made to the Government to allow the PIU to import construction materials directly\. This was ratified by a Presidential decree dated October 9, 1979 allowing all IDA projects in Somalia to import materials directly\. Despite this positive move, it took 2 years for the first 4e3ivery of building materials, in October 1981, donsiderin, the tine necessary for drawing up requirements and international tendering procedures\. - 34 - Jther sources of delays were due to the following causes: (1) a country-wide shortage of skilled and unskilled labour; (2) shortage of local building materials issued through Government Cooperatives; and (3) Inflation on wages and materials as a result of 1 and 2 above\. 4\.09 With respect to the first cause, the proximity of Somalia to the oil producing States of the Gulf and the ecomomic differences between these countries resulted in a major exodus of manpower in all sectors of the economy affecting particularly the construction industry\. The shortage became so acute that some contractors were recruiting masons, carpenters and crews for concrete work from India\. The quality of completed buildings gradually deteriorated with columns out of alignment, wavy walls and very rough finishes\. The difficulty stemmed from the fact that no experienced workers were left to act as foremen or to teach through an apprenticeship system commonly practiced in construction\. The same shortage was also true for unskilled labor\. Contractora in the private sector had to resort to hiring refugees from the Ogaden region and the difficulties to recruit ordinary laborers were almost as great as for skilled workers\. 4\.10 Concerning the second cause, building ingredients found in Somalia were in short supply due to the requirement that contractors procure them through Government Cooperatives\. As with other parastatal organizations this proved to be very inefficient\. Aggregates for instance were very difficult to obtain because of a shortage since mid-1982 of dynamite which was unavailable and could only be imported under Government licence\. Far from addressing the problem, 6overnment measures which were meant to alleviate the situation seemed in fact to have complicated the supply of local materials similarly as in the case of imported materials\. Finally with respect to the third cause, overall yearly inflation for local building materials as well as labor was about 25% between 1981-1984\. With these drawbacks, the number of local contracturs capable of handling sizeable construction work had dwindled to about -six for contracts above So\.Sh 20 million and about 20 for contracts from So\.Sh 10 - 20 million 4\.11 The contracting situation however was further complicated by certain government bodies, the Army, Militia, and Police having their respective construction wings\. These units took on Government contracLs such as offices, warehouses, schools not on a bid base but on negotiated prices\. Since competition was not involved, prices paid for materials and wages were higher than those paid by the private sector and therefore :hese units receive priority\. To give an indication of the extent to which the Government and its construction units were involved in the volume of civil works carried out, in 1982 the total amount of new construction in Mogadishu was So Sh\.260 million out of which only 60 million went to the private sector\. 4\.12 Another aspect of the construction problem is related to the Somali work force in the Gulf States\. The prime goal of most expatriated workers is to build houses for themselves and their families in Somalia\. Therefore a lot of money is returning to the country and is used for the contruction of single family dwellings\. This is in fact a very important - 35 - for the construction aspect of construction in Somalia, one that is not officially documented but very significant in syphoning off the available labor as well as the supply of local materials\. Under these circumstances the private sector was and is still faced with considerable difficulties which can explain delays to past and ongoing projects\. Civil Works 4\.13 Four institutions were built through standard tendering procedures and contracts won by local contractors namely, HPTI and CDC in Mogadishu, KSN in K-ismayo and LFS in Afgoi\. The HPTI was tendered first and a contract awarded in mid-1979\. As a result, construction proceeded with fewer problems than with other institutions since sufficient materials were available at the time\. Construction of KSN was delayed by more than two years due initially to contractual difficulties which upon being resolved were followed by material shortages\. Whereas LFS and CDC were tendered in 1981, construction of both institutions was initially affected by imported materials shortages and later by the difficulties described in paras 4\.10 and 4\.31 above\. With the exception of HPTI, the other 3 institutions were completed around the closing of the project\. 4\.14 Construction of the 7 RLSTC's was only started mid-1982 when the PIU was in a position to send construction materials to the Regional Development Councils\. Despite the late start these centres were built \. within a period of two years\. Depending on the relative prosperity of each region, the quality of construction varied accordingly\. In terms of quality of construction, LFS Afgoi benefitted from good workmanship, the two Health Training Institutions resulted in reasonable standards, while the CDC was decidedly poorly constructed\. Despite the fact that a Bank supervision mission in May, 1984 prepared a long list of defects for rectification by the contractor these defects had not been rectified at the time of the PCM\. 4\.15 About one year prior to the closing of the project, the MOE requested the Association to extend the facilities of the CDC by the addition of a second floor to the existing structure at a cost of US$300,000\. In order to achieve this within the remaining life of the Credit\. A prefabricated structure was proposed\. Far from ideal in terms of design this proposal was nevertheless agreed to due to time and site limitations and in view of the needed additional space\. Erection of this floor turned out to be of far better quality than the original structure\. At the same time as the CDC addition, a prefabricated staff house for KSN and a laboratory for HPTI were agreed to\. 4\.16 Although initially physical facilities for the expansion of the Stae Printing Agency were funded under ADF co-financing, additional funds under the Credit were used for urgently needed roof repairs as well as new contract floors to replace cracked and dusty cement floors\. The - 36 - new surfaces were covered with rubber matting to allow for quieter operati-n of fork-lift/trucks\. As a result of a fire in the main printing/binding area caused by an electrical short circuit, complete re-wiring in metal ducts was installed as well as upgrading of lighting and air conditioning which was totally inadequate\. This fire fortunately did little damage but pointed to the priority of these changes in order to protect very expensive equipment as well as improving working conditions\. Furniture 4\.17 With the exception of shelving for the Health Institutions which was awarded as a minor local contract, all furniture for the Third Project institutions was procured in a single exercise starting in 1981 with preparation of lists, tendering in mid-1982 and awards made by March, 1983\. Despite following the Bank's Procurement\.Guldelines and advertising, response to the invitation to tender was small with only 3 firms participating\. An Italian firm won a single contract amounting to about US$500,000\. For this project, furniture lists and specifications prepared under the Second Project were upgraded to ensure better quality\. The difficulty of concentrating all furniture procurement to a single order was that once delivery started in October, 1983 there was not sufficient warehouse space available to the Ministry to provide adequate storage and temporary warehousing had to be rented\. Even though the furniture was of good quality, it was not of a type that was easily transportable since it came partly assembled and representatives of the manufacturer completed the assembly in Mogadisau\. A sizeable portion of items were damaged during transport some to the extent of making them almost unusable\. Furniture in fact suffered in direct proportion to the distance it had to be transported away from Mogadishu\. In the future, further precautionsahould be taken to deliver furniture in a knocked down condition and which can be easily assembled after delivery to the institution\. EQuipment 4\.18 Preparation of equipment lists for the various institutions was coordinated by a committee formed by representatives of ministr*es and institutions involved in the project\. Lists of equipment for HPTI were the first to be completed with the assistance of WHO, early in 1981 while preparation of lists for other institutions varied in their completion and were reviewed by the Association between 1982 and 1983\. For the CDC, lists were prepared by local staff and later reviewed by the Danida funded experts upon their appointment in Sept/Oct 1982\. Equipment lists for LFS were prepared by a Unesco expert while those for the RLSTCs took longest to be completed due to the lack of decision taken on appropriate syllabi\. - 37 - 4\.19 Procurement of most of the equipment and vehicles required by the Project was handled by Unicef anl thus tendering procedures were much siaplified\. However the fact that Unicef during the later stages of the Project was in the process of moving its procurement offices and warehouses from New York to Copenhagen substantially slowed down the delivery of equipment\. With respect to equipment for LFS involving mostly specialized laboratory equipment, Iri procedures were followed\. A first invitution to tender produced Insufficient response and the exercise had to be repeated in late 1983\. Altogether equipment and vehicles procured through Unicef amounted to about US$ 00,O000 while private sector suppliers won contracts for about US$ 250,000 equivalent\. by far the most sizeable equipment contracts in the project were related to the procurement of paper and printing equipment for SPA\. Due to the specialized nature of this procurement, tendering was on the basis of LIB among suppliers capable of delivering sophisticated printing equipment\. With the cooperation of GTZ and specialists assisting SPA, lists were prepared and tendering procedures initiated according to Bank/IDA guidelines\. Procurement valued at more than US$ 2\.5 million for paper and printing equipment was implemented very smoothly due to the experience and commitment of the German Aid Specialists\. Technical Assistance 4\.20 A comparison of man-months of Technical Assistance proposed at \. appraisal verses actual man-months utilized in the Project is shown at Annex 3\. The costs for specialists were estimated at US$ 55,000 p\.a\. at appraisal and averaged instead at US$ 35,000 p\.a\. This was due to the \. fact that the project administration specialists were recruited locally\. With respect to fellowships, the appraisal estimate of US$ 15,000 p\.a\. was exceeded due to medical and hospital fees for one fellow who met with an accident and 'died in the USA\. The cost of fellowships turned out to be about US$20,000 per annum\. Specialists 4\.21 A total of 192 man-months of technical assistance services at an estimated cost of US$ 715,000 were proposed in the appraisal report\. Of this number, 134 were utilized at a cost of US$402,000 (Annex 3)\. Most of the balance of technical assistance was financed by other external aid agencies namely by Danida in the case of the CDC and ADF in the case of specialists for the SPA\. Out of the original allocation only 12 man-monthe for a science-kit specialist at the CDC and another 12 man-months for a village technology specialist were unutilized\. Through two amendments to the Credit ftreement, 10 man-months were added for the services of an accountant and five specialists for the Fishery and Marine Institute\. These services were fully utilized at a coat of US$ 186,720\. Fellowships 4\.22 The appraisal report proposed 270 man-months of fellowships at an, estimated cost of US$ 240,000 while 245 man-months were utlised at a cost of US$ 492,227\. The fellowship program proved largely to be ineffective\. For example, of the 11 fellows sent abroad to be trained to work at the CDC, only one returned to take up his post\. It was reported - 38 - that the majority of the other fellows are working abroad\. In the case of the three fellows training for posts at LFS, one died as a result of the accident mentioned above, another dropped out after one year and the third completed a two year master's course without receiving a degree\. Because of this trend, it is reported that some major donors no longer offer long-term fellowships\. It should also be mentioned that this negative outcome conforms with the general trend of exodus of skilled manpower from Somalia\. Covenants 4\.23 Most covenants of the Credit Agreement were met with the exception of those reviewed in Annex 2\. In terms of Section 3\.02 specialists in village technology and science kits production were never recruited and the fellowship for science kits production was added to that for audio-visual aids\. Section 3\.06 (a) stated that the village technology specialist should be employed not later than September 30, 1978\. 3\.06 (c) required that the proposed terms of reference of a project evaluation committee be furnished to IDA for review not later than September 30, 1982 and after approval, the establishment of the committee while (d) stated that the evaluation report should be furnished by September 30, 1983\. None of these three conditions were met\. CHAPTER V PROJECT COSTS AND FINANCING Capital Costs 5\.01 Comparisons of estimated and actual costs of physical facilities are shown in Annex 7\. Estimated costs including contingencies at appraisal were, for the IDA financed component, So\.Shs\. 61\.12 million or US$ 9\.71 million equivalent (at the prevailing rate of exchange of July, 1975 US$ 1\.0 * So\.Sh 6\.295); and for the ADF contribution, So\.Shs 12\.24 million or US$1\.94 million equivalent\. Total project cost at apprai- sal was therefore estimated at So\.Sh\. 73\.36 million or US$11\.65 million equivalent\. The IDA Credit allocation of US$8\.0 million and AD? assistance of US$1\.7 million were to cover respectively 691 and 141 of total project costs including taxes, or 711 and 151 excluding taxes (Table 1)\. The final cost of the project was So\.Sh\. 128\.87 million equivalent for the IDA com- ponents while the ADF component amounted to So\.Sh\. 13\.69 million\. Trans- lated into US dollars (at the average weighted rate of exchange consistent with the period of project implementation of US$1\.0 - So\.Sh\. 11\.33) this represents US$10\.46 million (IDA) and US$2\.07 million (ADF) (Table 1)\. The total cost was 94% higher than the original estimate in local currency and 81 higher in US dollar terms\. The IDA Credit financed 64Z of total costs, ADF 16%, with the Government covering 201\. Comments on costs are limited to those in US dollars because the repeated and considerable deval- uation of the Somali Shilling over the lif \. of the project makes cost com- parisons in local currency difficult without a solid reference base\. The - 39 - overall foreign exchange component estimated at appraisal at 74X turned out\. to be about 80% because of an Iacrease in Imported construction materials while a larger foreign component I project administration was due to greater than anticipated fuel and transport costs\. 5,02 A cursory glance at Table reveals that only category V, Project Adinistration and Management Survey Incurred a siseable cost overrun in relation to estimates made at appraisal\. haere are several reasons for this, chief among whiih is the fact that the PXU took over the responsibility of Importing directly all construction materials, thus incurring transport, handling, storage and security charges not foreseen at appraisal\. The services of an expatriate accountant over a period of 3 years which were secured through an avendment to the credit also contributed to additional costs as well as the overall running expenditures of the PIU during the 12 months extension of the project\. Hwever, the survey of adm"tratio and and management training need weas\. caried out well below expected costs\. TABLE 1 rote Cost in sA,l stuLne arA MA in Illims Pa i I ACsa, scanTs I IoNe cr _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _I \.so I at is ot I sia -a u n ts e oI\. cLvil works, Fature, 3niment PrnUnateria a veXcles \. C\.C onI\.3-1110478 5 1s5\.W o\.97t 9 I 9I 2\. Toxtbo: Priani 14\.314 12\.274 a3 I 31\.749 2\.518 2 I 122 I n 3\. R\.L\.S\.T\.C\. P\.304 1\.319 13 14\.We 1\.23 12 j 9 I- 4 N\.T,T\.T\.C 1\.9 10\.15 2 0\.640 0\.105 1 -4 I41 5\. L\.F\.S\. 11\.717 1i\.1 18 I25\.021 1\.963 19 114I 5 6\. H\.P\.!\. 9\.504 1\.510 15 2OJM La 1\.a6 22 14I -19 7\. I=ao fthool of Nuring 2\.355 0\.374 4 7\.8 0\.55 5 I25 I 54 a\. P"Ject Ut (PI) 0\.264 0\.042 1 1 0\.621 0\.052 1 5 48 Sub-total 5M8599 U\. Tohdto AffAstme 8\.987 IL42B 16 13\.261 i\.244 122 48 -13 \. &wW of Pubi Afmmtnaia 0\.%7 0\.35 1 0\.066 0\.011 - -8 -81 & yagment ratzs Needs tV\.Project Administration 1\.3 0\.19L 2 8\.246 0\.625 5 55 226 tal XDA PaIdct Cost I-IV 61\.12 I 9,7 0 2M272 10\.465 1M 110 1 A\.D\.1 WU *dadca, alnint, 1hcal 22\.236 1\.944 10I 13\.695 2\.066 00 12 6 Assotme & CoitremLes Pass M M , m 5\.3611 n\.e4 10 I 1\.965 1225351 11 94 8 - 40 - TABLE 2 Pawent Cost ty pstewy in Sali Saitmme ant US\. Dollaze in V11ions ii cmdaminaes) CA Oraal Eatimate Actual cost Differece aSo H otaotal m\.mS us) 1% oat Ita X I U 7 I\. atIil woft 24\.22 3\.853 37 48\.36 4\.34 41 Io 13 II\. PAtie 14\.314 2\.274 25 126\.313 2\.316 22 84 2 Mtezials III\. 1Ltun, 12\.28 1\.949 21 32\.46 1\.948 19 1- IV\. TechuLoal 8\.957 1\.427 16 13\.21 1\.244 22 48 -13 a atani e I V, YPtjet Atn 1\.42 0\.227 3 8\.246 0\.6a 6 47 174 & JMamnt TPuti RM\.ecr 61\.125 9\.710 10 128\.772 1 10\.465 100 10 8 Cct I-IV I Areas and Costs of Project Components 5\.03 Table 1 above as well as Annex 8 "Places, Units and Areas of Physical Facilities" analyze the outcome of the various components of the project in terms of cost and built facilities\. The Curriculum Development Centre, at nearly double the appraisal cost and almost three times the area, reflects the fact that new facilities were built as Wel as additional facilities in a second stage to house related MOE services, when at appraisal the CDC was expected to move into existing but reconverted facilities\. The cost- of construction at US $240/a2 is within the unit cost range for new construction estimated at appraisal\. 5\.04 With respect to the 7 RLSTCs built, areas are very close to the appraisal estimates\. Space standards in these centres were very modest in design as well as execution\. Unit costs however, even if within foreseen limits including contingencies, are about double the unit appraisal cost\. At US $ 185/m2 these facilities are quite expensive considering the fact that most of the centres are the result of force account construction\. The remoceness of the centres as well as the unavailability of local materials contributed to this situation\. - 41 - 5\.05 Space standards for the Livestock and Forestry School are about 15% higher than anticipated\. Despite a reduction In the number of staff houses, the merging in 1978 of LFS with the existing Agricultural Secondary School in Afgol increased the potential enrollment of the institution and hence addicional facilities to accommodate 600 students instead of 360 were required even if the latter contributed classrooms and laboratories in the process\. At US $ 256 /2\., construction costs are reasonable and only slightly above appraisal estimates without contingencies, since civil works include double storey clasrooms and laboratories as well as single-storey dormitories\. 5\.06 For the Health Facilities Components, the addition 'of a staff house in Rismayo and a laboratory at HPTI increased physical facilities by 12% in relation to the appraisal\. In both institutions standards are very modest and unit costs of US $ 270 - 280/m2 at both locations are well within anticipated costs considering the fact that health facilities are more heavily serviced (water, electricity, gas) than other educational facilities\. Disbursements 5\.07 Estimated and actual disbursements are shown at Annex 9\. The closing date of the project was postponed by 12 months from September 30, 1983 to September 28, 1984\. The final disbursement was made on March 13, 1985, within the six month period stipulated for the closing of accounts and an undisbursed balance of US $ 70,476 was cancelled\. 5\.08 Disbursements laggQd behind appraisal estimates, reflecting the delay due to the difficulties of importing construction materials\. Once this bottleneck was overcome and direct purchase of imported materials became the responsibility of the PIU, construction continued at a steady rate despite local problems discussed previously and this was directly reflected in the increase of the rate of disbursement which kept on accelerating during the final three years of the project\. 5\.09 State accoURtifa and preparation of withdrawal applications were handled promptly and competently by the P1U, the disbursement curve In this project is an exact reflection of the state of physical Implementation of the project\. Considering the difficulties of the local construction industry during the implementation of the project (paras\. 4\.07- 4\.12) ae correspouding cost escalation of the local civil works component, a 131 cost increase over the appraisal estimate is a very satisfactory outcome particularly as all physical facilities foreseen at appraisal were built\. Categories II and III, Printing Materials and Furniture, Equipment and Vehicles respectively were exactly in line with appraisal costs while Category IV Technical Assistance was not fully utilised as explained in Chapter II (paras\. 4\.20-4\.22)\. - 42 - CHAPTER VI PROJECT OPERATING OUTCOMES 6\.01 In terms of the broad objectives of the project and the components designed to further them, the project is considered a success in so far as it has created the material preconditions for fulfilling its objectives\. Most of the project institutions are operational and the others, (KSN, LFS, RLSTCs), are close to the operational stage\. The most obvious shortcoming of the project was the fellowship program as indicated in para 4\.22, Annex 2, and paras 6\.04 and 6\.30 below\. The textbook storage and distr:bution system was not included as an objective or component because it was reported to be satisfactory in the Appraisal Report (para 4\.07)\. This was an unfortunate oversight because the system constitutes the weakest link in the book production process (Annex 5-1)\. A serious future concern is the Government's ability to finance recurrent costs at a sufficient level to ensure continuously satisfactory outcomes (paras 6\.08, 6\.13, 6\.23)\. As is the case in most education projects, assessing the educational outcomes of the project institutions is not possible at this initial operational stage, at least until the first batch of graduates has been produced\. The Association should therefore recommend to the Government to undertake periodic evaluation of the educational outcomes (para 6\.32)\. Curriculum Development Center (CDC) Formulation 6\.02 The objective of assisting the CDC was the improvement of the quality of education through curriculum development, teacher upgrading and the production of teaching materials\. With the Revolution of 1969, the educational policies of the new Government led to expanding enrollments, new curricula, crash textbook writing programs in the Somali language, accelerated teacher training, and huge inputs into non-formal education\. The CDC had to cope with many of theseinnovations with a mini\.cule staff lacking specialized training and without the appropriate facilities\. Furthermore, the rapid expansion of the education system had led to a significant decline in quality\. 6\.03 To assist CDC to cope with the above problems, the project component included: (i) the construction of a center; (ii) the provision of 48 man-months of specialist assistance in the field of General Curriculum/ Evaluation, Teaching Aids/Materials Production and Science Kits Production; and (iii) 192 man-months of fellowships in the fields of Curriculum Development; Subject Specialization, Industrial Arts, and Science Kits Production\. - 43 - Outcomes Staff Developmvnt 6\.04 Of the 11 fellows trained abroad, only one is working at the CDC\. Most of the others are reported to be working abroad\. In addition to project fellowships, two Somali/English Lrnguage specialists spent one year training in England under the sponso\.aip of the British Council and are currently on the job\. Several staff members have completed a post-graduate diploma course at Kenyatta University College, Nairobi, which is run by the Africa Curriculum Organization (ACO)\. In-service training is being provided by eight expatriate specialists as well as by occasional short-term specialists\. The current national staff consists of the following: 38 full- and 6 part-time subject specialists, five in the teacher training service, 11 full- and one part-time in the production service, 17 in the administrative services, and a support staff of 15 full- and two part-time workers\. Curriculum Development 6\.05 The activities of the CDC for 1984 are presented in Annex 4\. A major program is the primary school curriculum reform project aided by Unicef until 1987\. To date, a review of the present curriculum has been conducted and the out2ines of a new one have been prepared based upon diversification into health, environmental and practical studies\. This has led to the preparation of a good quality trial textbook and teachers' guide for the first grade in nine subjects\. In a second phase, a supple- mentary reader and an audio-visual kit will be prepared for this grade as well as the other primary grades\. The first phase is scheduled to be completed by 1989\. Implementation of the second phase will depend upon additional inputs to the CDC\. A similar operation for secondary education is planned as soon as the first phase primary exercise has been completed\. The Government has reported that as of June 1986, the center is in full operation and that educational objectives are being realized\. Textbook Preparation 6\.06 The major emphasis to date has been the revision of textbooks written during the crash textbook program in the mid-1970s\. In fact, the textbooks were not revised based upon new curricula, but corrections were made in terms of language, content and organization with improved illustrations\. According to the records of the State Printing Agency (SPA), 48 titles were printed for a total of about 1\.9 million copies between 1982 and May 1985\. This included new English books for Forms I-III at about 50,000 copies each\. Aside from the English language books, first grade trial textbooks and teachers' guides in nine subjects have been prepared based upon the new curriculum\. Other Activities 6\.07 The other major activity of the CDC consists in holding seminars and workshops for inspectors, teacher trainers, headmasters, trial schools' teachers and internal staff\. Radio programs and a teachers' newsletter are also produced\. In addition the CDC has prepared 25 school charts of good quality of which 20 have been produced by the SPA and are in MOE's storAge facility pending distribution\. -44- Problems 6\.08 A major problem is the Government's inability to provide the CDC with an adequate recurrent budget to fund its activities\. These activities are prepared on a project basis by the CDC and submitted to external aid sources for support\. Currently, assistance is being , provided oy Alesco, British council, DANIDA, Oxfam, Unicef, Unesco, and USAID\. Another problem is that of retaining staff and maintaining high morale due to low salary scales and the lack of sufficient staff development opportunities\. The absence of adequate reproduction equipment to produce trial materials in 2,000 copies is another difficulty\. Further, the CDC lacks the capability to produce science kits since the specialist post was never filled and the fellowship was used for another purpose\. State Printinj Agencv (SPA) Formulation 6\.09 The objective of this component was to increase the textbook production capacity of the SPA through the establishment of a textbook production unit (TPU) and (I) the provision of additional printing equipment, (ii) the construction of physical facilities to accommodate the additional equipment, (iii) three man-years of technical assistance, and (iv) funding the M0A incremental printing materials during the first three years of the expanded operation\. The ADF provided a credit of about US $1\.7 million to finance the first three items above, while the fourth was funded jointly by ADF and IDA\. At appraisal, it was estimated that 2\.3 million copies per annum were needed and this should cover 141 titles\. Outcomes Production of Educational Materials 6\.10 According to SPA records, the TPU printed 48 titles totalling 1,922,000 textbooks for the MOE between 1982 and May 1985 1/\. In addition, it has reproduced 20 charts, each in 10,000 copies, as well as numerous educational administrative items such as student registration forms and record-keeping books\. Another 12 textbook titles are in various stages of preparation for printing (proof-reading photocomposition, etc\.)* There are complaints from the CDC that the TPU does not produce enough textbooks and what is produced takes far too long* This may have been partially true in the past for the reasons presented in pare 6\.13 below\. On the other hand, the SPA claims that the CDC should assume some responsibility for the delays because of poor manuscripts, lengthy preparation and correction procedures, and by inadequate planning for reproduction\. In this latter case, it is reported that the CDC presents the SPA with several textbooks for printing at the same time rather than ina phased manner, one by one\. 1/ The SPA also prints textbooks for the MoCHE\. - 45 - 6\.11 In any case, it appears that the SPA is overcoming some of its problems through the acquisition of additional and more sophisticated reproduction equipment provided by the GTZ and costing about US $500,000, further improvements in the TPU's facilities, and the pending arrival of two long-term reproduction specialists as well as occasional short-term visits by others\. In view of the above, the general advisor to the SPA estimates that in the near future, the theoretical single-shift production capacity of the TPU will be 10 million textbooks per year\.- A positive outcome therefore has been the production of relevant textbooks and other teaching/learning materials\. Technical assistance 6\.12 The initial technical assistance funded under the ADF Credit and executed by Unesco totalled 26 man-months\. The first off-set specialist served as a short-term Unesco consultant for periods of three and four months with an interval of six months\. Unable to obtain Unesco expert status, he terminated in September, 1982 and was not replaced until January 1983\. The replacement departed in December, 1984 after completing three Unesco consultant contracts\. Clearly this arrangement was unsatisfactory and a new scheme has been devised where the offset specialist as well as a photo-composition specialist will be long-term direct hire by the ME with the local salaries topped by the GTZ\. The GTZ has also funded about six man-years for a SPA general advisor and a maintenance specialist\. This assistance is to continue for another three man-years\. Problems 6\.13 Problems which have handicapped the SPA production include the following: (1) staff shortages, lack of trained staff, and poor staff morale due to low wages; (ii) insufficient and unbalanced production means; (iii) poor manuscripts and delays in proof-reading and corrections; (iv) inadequate planning of the preparation-production cycle; (y) shortage of spare parts and certain expendable materials due primarily to the lack of foreign exchange; (vi) short supply of power and water; (vii) poor maintenance; (viii) inadequate space; and (ix) difficult climatic conditions\. A potential future problem will be finding a donoi to finance the cost of expendable supplies since AFD/IDA funding has terminated\. 6\.14 In reference to (ii) above, it is stated that the preparation and appraisal missions' equipnent lists included some inappropriate machines (out-dated and, in the case of the web offset press with limitations as to the size of paper which could be used - A4 and A5 only) as well as the omission of some essential equipment\. The still arriving equipment financed by GTZ will eliminate this problem\. 11 Din A4, single color, 160 page textbooks\. - 46 - Reiional Literacy and Skill Trainins Centers (RLSTCs) 1, Formulation 6\.15 The RLSTCs are a result of the Government's continuing commitment to nonformal education\. The regional centers are to strengthen the nonformal infrastructure and it is planned to follow later in establishing district centers\. The centers will have a dual function\. The first is to provide functional literacy-skill training courses of varying lengths to youths and adults within their catchment area (120 places)\. Secondly, they would also serve as regional support and resource centers for ailt learning groups within the region through supervision and the distribution of printed materials and radio receiving sets; they would also have a radio maintenance service, and they would provide feed-back to Mogadishu on the outcome of the various programs\. 6\.16 This component consisted of supplying building materials, equipment and transport for the seven RLSTCs as well as 1,100 radio receiving sets and 800 tape recorder sets\. One man-year of specialist services in village technology was also included, but not used\. Outcomes Educational 6\.17 Since the centers are not yet operational, this section Io limited to the activities of the Institute of Adult Education, (IAE)*-/ Curriculum Development 6\.18 An on-going activity is the preparation of modules for the skill training aspect of the program\. This Is being done in collaboration with the ILO Skill Development for Self-Reliance Project\. (ILO/SDSR) The existing literacy course materials are being revised to make them more functional and closely integrated with the skill training component\. The preparation of adult education radio programs is also underway\. 11 Formerly ealled the Regional Adult Education and Training Centers (RAETC) 21 Formerly called the National Adult Education Center (NAEC) - 47 - Staff and Staff Training 6\.19 The seven directors of the RLSTCs have attended two seminars which were conducted with the assistance of ILO/SDSR\. In November 1984, a 21 day workshop was held on how to conduct and analyze community profile surveys\. In April 1985, a 15 day workshop was given on curriculum and materials development using the modular approach of a flexible curriculum\. 6\.20 The village technology specialist in the Credit was not recruited since the PIU was unable to find a person with multi-skills called for in the job description\. The Deutsche Volkschule Verband (DW) 1/ has provided the IAE with a long-term consultant and it is equipping the centers at Kismayo and Qoryoley\. It will also finance part of the recurrent costs for two years\. The Gesellschaft Fur Technische Zusammen Arbeit (GTZ) 2/ will assist through the provision of printing equipment and technical assistance\. A skills training specialist is needed for about two years when the centers become operational\. Opening of the Centers 6\.21 Two centers (Kismayu and Qoreyley) opened in 1985 and the MOE has indicated that the remaining five will be operational by October 1986\. Problems 6\.22 A major constraint is the financing of recurrent costs for consumable materials at the five centers not assisted by the DVV\. A second is obtaining the services of a skills training specialist for the first two years of the centers operation\. 1/ DVV - German Adult Educationn Association 2/ GTZ - German Society for Technical Cooperation\. - 48 - Agricultural, Livestock, Forestry and Range Management Secondary School (ALF&R) Formulation 6\.23 To implement planned and ongoing investment programs, Somalia would need trained personnel in such specialized areas as animal husbandry and forestry\. At the time of appraisal, 1976-77 Government and Bank manpower estimates indicated that about 500 animal production technicians and 270 forest angers would be needed during the following decade\. However, facilities for training middle-level technicians were not available in Somalia, and the uovernment used to recruit secondary school graduates for these posts\. The project planned to assist in developing with an enrollment of 360 full boarding student places, a Livestock and Forestry School, which would offer four-year post-primary courses in animal husbandry and forestry with an expected annual output of about 55 animal husbandry technicians and 27 forestry rangers\. The school would be located in Afgoi, within walking distance of an existing Agricultural Secondary School and the College of Agriculture of the University, thus enabling the mutual utilization of staff, equipment and facilities\. Instructors for the animal husbandry course would be recruited from graduates of the Animal Husbandry and Veterinary Science College of the University\. For the forestry course however no Somali instructors would be available, for lack of forestry training in the country\. The project therefore would also provide three fellowships of two man-years each for training abroad of forestry instructors, to be selected among science or agriculture graduates of the National University\. 6\.24 In 1978, the Ministry of Education (MOB), Agriculture (MoA), and Livestock and Forestry (MOLF), made a joint decision to merge the projected institutions with the existing Agriculture Secondary School in Afgoi, to form the Agriculture, Livestock, Forestry and Range (ALF&R) Secondary School\. The decision was welcomed by the Association as it would contribute to eliminate many double costs, would make possible the adoption of a more complete and\.relevant curriculum and would lead to a better utilization of both facilities and staff\. The new institute would operate under the responsibility of an interministerial body (MOE, MA, MoLF), to be coordinated by the MOE which would be responsible for educational and organizational matters\. At full capacity the new ALF&R Secondary School would enroll a total of 600 students in four year-courses, of which the first two would be made a common basic course leading to four specialized courses of another two-years duration: Agriculture, Livestock, Forestry and Range management\. Table 3 shows enrollments at full capacitys - 49 - TABLE 3 1 Course I Agri- Live- Range I Year I Basic culture stock Forestry Management Total I I 1150 - - - -150I 11 1150 - - - - I 150 I III I 60 60 20 10 I 150 I IV I 60 60 20 10 1150I Total I 300 120 120 40 20 I 600 I (Output) I - (60) (60) (20) (10) I (150) I The table above shows that the school has a potential output of 150 graduates per year\. However, it is reasonable to expect a reduction of about 10-15% due to dropouts\. ALF&R Secondary School is completed and began operating in January 1986\. Outcomes 6\.25 Curriculum\. The school syllabus is ready but the curriculum for the new four year course being used is still experimental\. In particular, it is necessary to define, after the basic two year common course, the intensity each subject of the four specializations should have, and time (periods/week) to be allocated for classroom, laboratory and field work\. In relation to the latter, the Government intends to ensure to the school a valid training program in farm operations, animal husbandry techniques, an outreach extension program, etc\., through the collaboration with various nearby agricultural institutions and agencies, therefore avoiding the need of a school farm\. Action in this regard has not been taken as yet\. 6\.26 Staffing of the school has yet to be decided upon\. The existing Agriculture Secondary School has 25 teachers and a principal\. The latter will probably be confirmed for the new school\. Eleven of the present teachers are permanent staff of the school and teach academic subjects\. It is assumed that they too would probably be confirmed\. The other 15 are part-time teachers seconded in various forms by different agencies - Faculty of Agriculture, Research, Extension Project, etc\. The ALF&R School would need a staff of about 30, therefore, about 20 more permanent teachers should be appointed\. For this purpose, the MOE is planning to employ as many qualified teachers as possible from the Agricultural Teacher Training Section of the Lafole College of Education\. Staffing the forestry course presents so far serious problems, due to the unsuccessful outcome of the fellowship program financed under the project (para 4\.22)\. 6\.27 Equipment for the new school was procured by the PIU without submitting the list to the Association\. At present, the equipment is reportedly still packed and stored in MOE's storehouse, while the list of - 50 - either proposed or procured items is not available either from the PIU or at the Education Section - EARED\. No evaluation of the adequacy of the school equipment is therefore possible at this time\. 6\.28 Expected Outcome It seems reasonable to assume that the component will reach its quantitative objectives, but an evaluation of its operational outcomes obviously is not possible until the school will be in full operation\. However, the Association should encourage the Government to undertake with no further delay those actions urgently needed in the pre-school opening phase as described above\. It would be equally advisable to encourage the Government to constantly monitor the functioning of the school, and to assess the adequacy of its graduates to perform field tasks as required by the economy\. The Government should also consider keeping flexible not only the enrollment of the school but especially the output from each course, in order to respond to manpower needs as circumstances would demand\. PARAMEDICAL TRAINING Overview 6\.29 The health services staffing needs were estimated to require a total of 2000 nurses, 330 sanitarians, 350 laboratory technicians, 150 pharmacy assistants, 70 anesthetist assistants, and 50 X-ray technicians to be trained by 1987\. The existing training facilities at the Mogadishu School of Nursing and the Health Personnel Training Institute (HPTI) could not meet the projected training needs and in any case the HPTI was due to be demolished as part of the planned extension of the Port of Mogadishu\. Therefore the project made provision to construct, furnish and equip a new 200 place HPTI in Mogadishu and a new 60 place School of Nursing at Kismayo and also to renovate the school of nursing in Mogadishu to improve the quality of its training facilities\. The existing HPTI and the hogadishu School of Nursing (MSN; were adequately staffed with nationals assisted by WHO personnel therefore it was not necessary to include technical assistance for this sector\. 6\.30 In general the operational outcome of this component is successful with the two institutions in Mogadishu already meeting training targets and the third institution, in Kismayo, now poised to commence full operation despite a two years delay due to construction difficulties\. - 51 - Outcomes Health Personnel Training Institute (HPTI) and Mogadishu School of Nursing (MSN) 6\.31 The new HPTI facilities have been built adjacent to the MSN which was renovated under the project and the two institutions share the same staff as well as some of the physical facilities\. The new HPTI has been in use for two years and is functioning satisfactorily\. The renovations at the MSN were just nearing completion at the project's closing but the transition seems to have gone quite smoothly\. Although some concern was expressed by HPTI staff about cramped conditions in the new facilities, the furnishing and equipment are quite adequate and being utilized at full capacity\. The old HPTI has been phased out and the community oriented (lower level) nurses program has been transferred from the MSN to the RPTI to allow the former to expand the more advanced nurses training as planned\. 6\.32 Tables 4Aand 4B below, show the planned and actual achievements in the period 1580 to 1984\. It should be noted that the course for x-ray technicians has been suspended but can be restarted when the need arises\. The course for assistant pharmacists will be suspended in 1986 as the country's needs will have been met\. The course will only reopen when the need arises\. Similarly, the course for mid-wives will only be needed periodically in the future\. HEALTH PERSONNEL TRAINING INSTITUTE Table 1 A Basic Courses (1 year or less) Ownes %amss senitartan lab\. Tech\. x-Rw Th\. Phamaq Asst\. a:XsZ (P) (A) (P) (A) (P) (A) (P) (A) (P) (A) (P) (A) 90 372 340 89 86 5 5 37 3557 0 0 1981 32 257 65 67 35 57 30 42 35 54 0 0 192 210 301 50 42 30 40 -2 2) 30 47 0 61 1983 240 M 40 42 25 41 2o 0 25 46 0 0 1994 240 303 40 42 25 41 20 0 25 48 0 58 Table 1 B Post Basic Course (2 years) course Mme At7id Tnur avift MF WA (P) (A) (P) (A) 199D 22 20 20 19 7 9 19B142 25 28 25 11 25 6 1992-3 Not Offered 1983-84 25 8 25 10 25 20 P - Planned A - Actual - 52 - Kismayo School of Nursing (KSN) 6\.33 Construction of the Kismayo School of Nursing was delayed (para 2\.07) and was just ready for handover with equipment and furnishing being installed at project closing\. The principal and staff were appointed and selection of the first intake of trainees had been completed for training to commence in September 1985\. Planning by the Ministry of Health including the staffing of the school was sufficiently advanced to indicate that the component is likely to turn out satisfactorily\. 6\.34 The siting of the school in Kismayo is intended to redress the regional disadvantage whereby health services have not kept pace with population growth in the southern region\. The 60 new training places are projected to meet the region's needs\. National Trade Testing and Training Centre (NTTTC) Overview 6\.35 In 1974 a trade testing unit was established in the Ministry of Labour and Sports to develop and administer trade tests for the purpose of classifying some 50,000 in skilled and semi-skilled jobs in about 40 trades and vocations\. Trade tests were designed to serve as a basis for formulating wage policies and the basis for recruitment as wellas a guide to training of skilled manpower\. At the time of appraisal this trade testing unit was still at an embryonic stage and ill equipped to measure the skills possessed by workers, 90% of whom had obtained these skills through informal on-the-job apprenticeship without benefit of formal institutional training\. 6\.36 To improve the system the project made provision to assist in the -development of the National Trade Testing and Training Centre in Mogadishu\. Trade testing equipment for mechanical, electrical and woodworking trades was provided and specialist services allocated to assist in improving'the organizational structure, formulating policies and procedures and training of the necessary staff of the entire trade testing program\. Fellowships were also provided to enable staff from the centre to observe trade testing programs in other countries\. Outcome 637 The outcome of this component has been very successful and the NTTTC is meeting its objectives adequately\. Eighteen our of the 24 man- months of technical assistance were utilized by one expert recruited by the ILO for the project\. While this expert successfully developed much of the required groundwork for formulation of tests and for developing policies related to their effective implementation, he abandoned the post six months before the end of his contract leaving the work incomplete\. Although this caused some delay, the nationals working on the program were ultimately able to finish the tasks satisfactorily\. They were assisted also by another expert provided by the Arab Labour Organization (ALO) who was not financed out of the credit\. The final outcome was a satisfactorily functioning trade testing system which is currently meeting the needs of the country\. The volume of trade testing work - 53 - has been diminishing during the past 4 5ears due to general economic constraints\. Mny workers have become redundant due to closing of factories or reduced production in industries such as milk, sugar, cigarettes, meat and fruit processing plants\. The numbers of trade test passes annually in the last 4 years are as follows: 3,627 in 1981; 2,994 in 1982; 2294 in 1983 and 1685\.in 19b4 tor a total of 10,600 tested in the period\. Of these it should be noted that the majority are not new entrants but workers who are being tested for promotion or for alternative jobs due to redundancies\. The total tests attempted by grades in the period are as follows: 4th grade total 2120, 3rd grade total 2836, 2nd grade total 3872, let grade total 1983 for a grand total of 10,811 out of which 10,600 were successful\. 6\.38 The NTTTC is physically well equipped as a result of having received the full allocation of equipment scheduled under the project\. Procurement of this equipment through the ILO was efficiently handled\. The centre has also benefited from supplementary equipment worth about US$150,000 donated by the Arab Labor Organization (ALO)\. 6\.39 The 6 man-months of fellowship training intended for staff to visit other countries to observe trade testing systems in operation never materialized\. However, staffing of the centre is adequate for the present level of activity in regard to actual testing although some staff are in need of further training in the techniques of trade testing\. A new Trades Training Centre is being developed in Mogadishu with financial assistance from the Government of Germany (GT) and this centre will be used to upgrade the staff of the NTTTC in the near future\. The training aspect of the NTTTC which is intended to follow up the weaknesses identified during trade testing still neede-to be improved\. There is also a problem in obtaining the necessary expendable materials used in trade testing due to financial constraints\. This has resulted in passing on the cost of trade testing to the candidates\. The cost to the individual has been increased from S\. Sho 50/- for the test and certificate to 550/-, which will recover the cost of expendable materials used\. 6\.40 The outlook of the trade testing system in Somalia is quite favourable as a result of the project\. Survey of Administration Training Needs Overview 6\.41 At appraisal it was recognized that fmproved management and accounting techniques were a prerequisite to the efficient operation of many of the public enterprises established in the previous few years\. however, the training needs were not fully identified and a survey was planned to establish a program of action for the appropriate development of public administration and management training\. The goal was to establish the scope and nature of training needed to prepare Somali nationals to administer existing government services and to execute and monitor economic and social development programs\. - 54 - 6\.42 To carry out the survey, one man-year of technical assistance was allocated together with the necessary equipment and logistical support to enable the Somalia Institute of Development Administration and Management (SIDAM) to carry out the survey and produce the relevant reports\. Outcome 6\.43 A specialist in manpower planning was recruited and worked for one year with SIDAM and the Manpower Department of the Ministry of Labour and Social Affairs\. The survey was carried out and the relevant reports were produced as scheduled\. These consist of the following volumes: (i) National Manpower Resources and Requirement Survey 1978-1983 (Manpower Survey Vol 1), Manpower Department, Mogadishu, August 1979\. (ii) Classification of Public Sector Employees by Occupation (Manpower Survey Vol\. 2 (a)), Manpower Department, Nogadishu, August 1979\. (iii) Classification of Establishments by Size, Industry and Location and Classification of Workers by Occupation, Industry Group and Location (Private Sector) (Manpower Survey Vol\. 2 (b)), Manpower Department, Mogadishu, August 1979\. (iv) Guide to Educational, Training and Trade Testing Statistics (Educational Statistics Part 1), Manpower Department, Mogadishu, September 1979\. (v) Guide to Educational Training and Trade Testing Statistics (Training and Trade Testing Statistics Part II), Mapower Department, Mogadishu, September 1979\. These reports are very comprehensive and give full geographic coverage to the country\. In particular information on the prAvate sector was collected in a survey of 72 towns ranging from the capital city, Mogadishu, with over 14,000 establishments to small localities with as few as nine establishments\. In the case of the public sector, all Government ministries, departments, and autonomous agencies were\.enumerated\. The availability of this information has been very useful to the Government and has also been utilized in planning two components of the follow-on Fourth Education Project Cr\. 1105-SO) which includes technical assistance to SIDAM and financing of pre-tavestment, evaluation and civil service employment studies\. The Government has recently concluded an agreement with USAID to provide further assistance to SIDAM following completion of the ongoing Fourth Education Project\. The pre-investment study on technical and vocational education carried out under the Fourth Education Project by consultants from the GTZ has resulted in a request from the Government for IDA assistance for a project in technical education and vocational training\. However, in the course of the Country Assistance Management (CAM) exercise recently completed, the proposed project has been excluded from the lending program - 55 - CHAPTER VII BANK GROUP PERFORMANCE 7\.01 The implementation success of this multi-ministerial project indicates that project design and appraisal was well handled by the Bank group\. This also indicates that if a project is well appraised, it does not have to be confined to one subsector to be implementable\. 7\.02 The project was supervised by 14 Bank missions\. Of these, the first seven were combined with supervision of the Second Education Project (511-SO), the eighth was combinud with the supervision oi the Second and the Fourth Education Projects (1105-SO), and the remaining six in combina- tion with the Fourth\. The mission time in the field averaged 0\.7 weeks with the man-weeks averaging 1\.4\. Architects participated in two, agricul- tural educator in one\. The average interval between missions was 5\.7 months with the maximum being 9 months and the minimum 5 months\. RMESA/EPS had planned an average interval of six months and this was largely adhered to\. 7\.03 The scheduling of supervision missions at six months intervals appears to have been satisfactory in view of the overall outcomes of the project and constraints of a small RMESA/EPS staff responsible for projects in several countries\. It should also be noted that all of the major project components with two exceptions were located in the Mogadishu area and were visited frequently\. The exceptions were the Kismayo School of Nursing and this institution was visited three times between September 1981 and the closing of the project September 1984; and the RLSTCs\. One nega- tive reflection of the Bank's performance was the failure to include assistance to the MOE's textbook storage and distribution system in the project\. Despite the fact that the appraisal report stated that the system was satisfactory, this was not the case as described at Annex 5\. 7\.04 Although both the PMESA/EPS and the PIU were understaffed during the early years of the project, this handicap was partially overcome by the relatively stable staffing of both units during the second half of project implementation\. This facilitated communication between Bank staff and the Government\. There were many positive outcomes of this collaboration such as the issuance of a Presidential Decree to expedite the procurement of building materials and other goods\. Other examples of positive coordina- tion was RMESA/EPS assistance to the PIU in identifying potential suppliers of building supplies for the RLSTCs and, in some cases, of technical assistance\. Another example was related to the completion phase\. As of April 1983, some US$600,000 were uncommitted\. However, after the final disbursement on March 1985, only US$70,476\.23 had to be cancelled\. This indicates the considerable flexibility and rapidity of decision-making of both RMESA/EPS and the PIU\. --& … でいをNKP沖ラ‘ SOMALIA THIRD EDUCATION PROJECT - CREDIT 738-50 STRUCTURE OP TEIZ FM~IOM SYSM 5 6 7 8 9 10 11 12 13 14 is 16 17 is 19 to 21 22 AGE tll~cetlcal) SECO~Rv ?"][CAL 33 sccowmv ~CAL =M-W~M TRAlftis* 3 CD~TIQW 1 0 [3 Emý r 1" n2 SECONDARY GZWERAL DWR&E COURSES CRAL n3 Ek 3 4 1 PRIMARY TEACHR TRAINING CMA^ op C~Arlom :3: 1 : TRAIMING sour,éc-0 Plann:Lng Departmut, MOE 1985 58 AN N EX 2 Page l of 3 iijh ii \.0iiI 1 ;~iu tU1 ila11u 1 ~Izv -4& MIg~6U 0\.3 4 glim i I 33141 sel§lkl 41 _ _en en_ i g-en \.114\. ，…‘’岬룔3- srE vis MW~ORMAnav 70 ]m mr w M~ a A~t M~, ACIE~ 6aiinu0us 9= (i) ~ ilt imith the A,~ aU<G le 1~ of tbo pm~ 3\.09 8*~t0,7 hé G~ « feU~dpe ~ ded unier ~ Å (5) at the P~ , wd (11) r~ ve\. =lmt eneb~ for the udd pM~ ad dellm the %= or refim~ of theLr fdl~tyo m the b=U at odteda ætL~toly to A~ auen\. Continuous opmtø3 or came to be opemW eÃ¥m&tLmd 4\.ce ætL~tave\. l~tuuom wd ~Utlæ læl~ lo Part Å of the P~ % M» In a=o~ 1,ith appro~ 8~~ ad ab~~va am æt yet OPMUGM4 p~ eo " p=Ucw wd iktth dm re~ to n i n -m ø 9 aU m alatwlll 11 101~ ~ M In ~r to Nrther the e~ ~ Ã¥bÃ¥~vm of ths te~ fbr Bommer, gnU at aU ~ a~ or e~ to be ~ td faU- ~jr M,t\. ~ qmuflel Mdftotmtom &d te~ In «~te ~ra to stoff 09 81~~ IndL~ens in~ In ~ Å or the P~t, Sopte~ F~ ob to the Aøøoclatloa for ravlev propooad 3\.06(c) mot =te 30, 1982(c) term of reference for a c~ ttea to avaluate the be~fIte aceruleg from the project and and after euch røvlav establleb the sald c~ttee; Sept~ r and furaleb to the kas«latlon a report on sald 3\.06(d) 309 1983(d) «aluatlon of the projact 一 一 J,．〕 -!，〕 了于0 1．寫，d CX汪縱柑•Tg- 62 ANM 3 Ta-ge2 of 2 IRQ - 63 - Annez 4\. page 1 of3 CURRICULUM DELOPMENT CENTR OVERVIEW OF ACTIVITIES 1984 Januauzy bJne A\. Project Work i\. Diversification Project: (Enviroamental/Practical topics for Grades 6, 7, 8) 9 Units Prepared: 1\. Our Environment 6\. Range Nanagement 2\. Soil 7\. Animal Husbandry 3\. Planting Trees 8\. Poultry 4\. Gardening 9\. Food Storage 5\. Fisheries it * Basic Skills Project (books on application of knowledge for different levels of Primary schools) 10 Units Prepared: 1\. Safety in the Hose 6\. Area 2\. Importance of Water 7\. Bat Well 3\. The Air we Use 8\. Food From Plants 4\. Fire 9\. Be Clean* 5\. Number 10\. First Aid iii\. Technical Terms Dictionag Project (English-Somali Glossaries for school subjects)\. 8 Subjects Prepared: 1\. Education 5\.Chemistry 2\. Maths 6\. History 3\. PbYsios 7\. Geography \.4\. Biology 8\. Physical Education iv\. Arts and Crafts Project: (to introduce Arts and Crafts into schools) 5 Units Prepared: 1\. Traditional Somali House 2\. Basketry 3\. Weaving 4\. Leather Work 5\. Sewing v,\. Teacher Training Task Force (to prepare materials for use in pro and in-service training courses) Units Prepared: 1\. Introduction to kducation: Philosophy and History 2\. Educational Psychology 3\. Curriculum Studies 4\. Audio-Visual Aids 5\. Teaching Primary Science 6\. Teaching Primary Somali 7\. Teaching Primary Arabic 8\. Teaching Practice - 64 - Annex 4 PaWe 2of 3 vi\. Etesion Work (to increase awareness of educatioal issues among teachers and public in general)\. A\. Radio Programmes D\. Teachers Newsletter 15 taped programmes and 3 prepared scripts prepared\. 1 printed vii\. Visual Aide Production (to provide schools with net of instructional charts) 25 Charts produced\. viii\. English Language Programse (to produce English Language texts for Schools) English for Somalia Book 3 - written and ready for printing\. Outline of k 4 prepared\. B\. Speoiftic Tasks 1\. January 84z Workshop for 10 trial schools in Miroa/AfSoi area to launch Diversification Project Phase 1: tree planting\. Held at 31 Jan, Nerca\. 2\. January 84: Seminar for CDC/Halaue/IITT staff on Primary Soiool Nethodolog\. 3\. Februavy: Internal workshop to start Evaluation of Primary School Curriculum\. 4\. Marchs Project preparation: Health Education\. 5\. Aprils preparation of "Guidelines for New Crriculum Naterials Writing" 6\. Ay: Preparation of *Proposal for Reform of Primary School Curriclum" main features: - to increase school year to 39 weeks - to introduce Health Education and Environmental and Practical Studies - to prepare a totally new set of pupil and teacher materials, starting at Grade 1 level\. 7\. Junes Writing of CDC Situational Analysis\. 2\. July-December 1984 A\. Project Work i\. Start on materials preparation for Grade 1 in following subjects: Somali Mathe Arabic Science Islamic Studies Teachers Guides Social Studies Pupila textbook -65- Annex 4 Page 3 of 3 Ui, Prepartion of special unit on Health Edcation\. \.M1i\. Proparation of Envirommental/Practical Studies materials for Glade 5 Textbook\. Av\. Preparation of "Introduction to PlWaioal Mucation" - handbook for teachers\. 3\. Specitle Tasks -September: Two British Council supported workshope 1\. aths: consultant Mr\. K\. Watson, England 2, Science Dr\. A\., Pennol, England \.0atober-December: workshop: Health Education December: Workshops: 1\. December 2-13: workshop on Primary\. Education for- 70 \.Headteachers, Benadir Region\. Organised and -implemented by CDC's Teacher Training Task \.orce\. 2\. December 15-22s workshop for 18 Central Inspectors Organisation and Management of Pr\.Soh\. oarried out by \. Teacher Tr\. Task\. Force\. * 3\.- December 15-22: workaop ,for 15 schools in Neca and Afgoi regions to launch Health Education Programme\. Held at *1 Jalle, Merea\. Organised by Health -ad hnviromental Department CDC\. -66-ANNEX 5 SOMALIA - CREDIT 738-SO STORAGE AND DISTRIBUTION Assistance to the M0N's storage and distribution system was not inloauded In the project because it was reported as satisfactory in the Appraisal-Report (Para\. 4\.07)\. Unfortunately, this assessment was not correct and the system constitutes the weakest link of the textbook preparation, production and distributing system\. Once the planned maes production of textbooks gets underway, the present storage and distribution system will be unable to cope with the situation\. The major problems at the MON's Central Stores Unit consist of (i) management and staff; (ii) facilities; and (iii) equipment\. An example of the first problem exists in poor record keeping or stock control\. SPA records indicate that 48 textbook titles totalling 1,992,000 have been turned over to the Central Stores for distribution\. The Central Stores' records can account for only 33 titles and 19777,000 copies\. At present, textbooks completely fill the warehouse with an overflow stacked outside in a porch area\. The books are improperly stored on the floor in tottering and dusty stacks and occasional high piles qf loose books with may titles mixed together\. Some of the books are ruined and others are close to a useless condition\. In terms of facilities, the usable area inside the central warehouse (about 1,000 m2) would be sufficient to store on pallets over 1\.5 million books\. However, the facility needs renovation to eliminate dust and humidity and to provide access for a fork lift as well as extension to create sufficient space for wrapping and packing\. Adequate transport has been acquired through the ADP and Unicef, but the warehouse equipment is limited to three wheel barrels to move the books\. 트‘-; - Lg - 一――一一－－一－－一→－－一－一一－一戶一一一－一一一一一■■‘■一一‘■一■ 501點å²IA一CRIå¥I實738-50 實01AL PROJEC實COS實OFP日YSI口止F矗CILI實IES 鍊S。•日11 Shs。＆US$（以沁，a) 丁一頂叩r不一不7汗方認鬥一下兀I \.，鳥細，&，么‘，•，么細，閱，‘。j•，。i，•．•‘細，。．,‘細•一••｀．••．\.,&\.．•口••．•‘•••豐 I偽”，•．-．•叫•悶åžã€‚”l’•，1．•，，。•。，l一•．••，。•一••l潤•I•。•一•一•一•－\.,\.．一å’••■•å’••豐 l矗戶齣，廖，口1 1．……，•．•••■二 •，•”•．．撇畸•一•一•Â•Â•一，。•Â面一1•屆一•個••一•“••二”，網•，．•••Â•••”•••二••二••• •••網”一”•．庫“細：•I&\.”•，-．一，。，調•。。云一籐。。j痲．一•－．Â－．••一••••．•徑“•．徑•••豐 Ik•I一•吋，，細．•C．哺勵口•••••I二。．•二••■，,,\. \.,,\.,,，〞．婦，，。…，Â，二••“IÂ，．•馴。馴I一•一•Â•一•一•－．•．••豐•徑•豐 常•，,r•：一，卹他•，〞I••ç¨é›»â€¢â€¢ï¼Ž,,．••••．••．■． ,&，涌．、，．、〝，開•，，馴，••”\.，。，中勵，。。’&,l。：”••領，，■•．01•一I一•一••，．••豐•■•徑••豐 I細•。抽個’唱••閑留網I奮•，細啊1 11•I口•．•．•1 \.．一••，•■． 合‘H，勵間．•網，,．•．．•屆•，廖，馴．彥．•，合爾，一自，,,,．。，。，。•增．••，•”•一Iä¸€â€¢ä¸€â€¢ä¸€â– â€¢â€¢â€¢ï¼Žâ€¢â€¢â€¢ï¼Žç¶²â€¢â€¢â€¢â€¢â€¢â€¢å’ â€¢åœj•口鰓••國”åžï¼Žâ€¢â€¢l••自•1 1．•．•，••．•，,\. &“。t&－黝細jd，憤，I馴。，•．。一•，,，。細．•一•中。，口•，••。．•l一•••．•口口•ç¨â€¢é–‹â– â€¢ï¼Œå£ï¼Œ\. ！輪＇二叩•，•••！勵•，\.t•．•．•．•■•．- l‘〞明，討一“自，亂tå’•豐一t•，-．Â．一IÂ’•Â，•．，。。•”\.,，一•一••．-\.，å’一å’一å’， l細，，啊，．細I,l，••．•，1 11個11畫唱11•I•l擊•．…勵 〞、åžäºŒç´°â€¢å«â€¢â€¢ï¼Œâ€¢é¨™ï¼ŒÂ•ÂIÂ。Â：Â，一•購•，\.,\.0．•．••．0．•，••。•。••■－．•• 醫聳士濫豐曰并衫祈汗各一寺斗斤汗 二》 I之 醒之 It吃 曆X é¨ã€çº C2 lit * Date Ot Effectiveness 00 Closing of Accounts Appraisal Estimates --------Actual Disbursements SOMALIA: THIRD EDUCATION PROJECT DISBURSEMENTS: ESTIMATED AND ACTUAL (in US * million) YEAR 1978 1979 1980 1981 1982 1983 1984 FISCAL 'EAR 1978 1979 1980 198 19W2 1983 1984 1985 I\. 00 6\.00 7\.00 1 / c 6\.00- 5\.00 II_ _ _ _ _ _ _ __ _ _ _ 4\.00 \.00______ ______ ______ ______ _____ 3\.00 2\.00 OF 1\.00 \.- 0 1\.Appraisal Estimates 0 0\.18 0\.56 1\.28 2\.36 3\.63 5\.04 6\.33 7\.26 7\.77 7\.98 8\.00 - - 2\.Effective Disburse\. 0 0\.25 0\.26 0\.36 0\.72 0\.98 1\.24 2\.71 4\.17 4\.41 6\.02 6\.521 7\.751 7\.93 2/1 as _ 138 46\. 28 30 27 125 43 57 57 75 81 84 99

APPROVAL

P163350

COMBINED PROJECT INFORMATION DOCUMENTS / INTEGRATED SAFEGUARDS DATA SHEET (PID/ISDS) Additional Financing \. Report No\.: PIDISDSA21660 Date Prepared/Updated: 06-Apr-2017 I\. BASIC INFORMATION A\. Basic Project Data Country: Ethiopia Project ID: P163350 Parent Project ID (if P146883 any): Project Name: Productive Safety Net 4 Project Additional Financing (P163350) Parent Project Name: ET Productive Safety Nets Project 4 (PSNP 4) (P146883) Region: AFRICA Estimated Appraisal Date: 19-Apr-2017 Estimated Board Date: 02-May-2017 Practice Area (Lead): Social Protection & Lending Instrument: Investment Project Labor Financing Borrower(s) Federal Ministry of Finance and Economic Cooperation Implementing Agency Ministry of Agriculture and NAtural Resources-ET Financing (in USD Million) Financing Source Amount International Development Association (IDA) 0\.00 IDA Credit from CRW 100\.00 Financing Gap 0\.00 Total Project Cost 100\.00 Environmental Category: B-Partial Assessment Appraisal Review Decision The review did authorize the team to appraise and negotiate (from Decision Note): Other Decision: Is this a Repeater project? No \. \. B\. Introduction and Context Country Context The Government-led response to the El Niño induced-drought of 2015/2016 is widely credited with having enabled Ethiopia to avoid famine\. The El Niño drought of 2015/2016 negatively affected the lives and livelihoods of an estimated 20 percent of the population in Ethiopia\. The response to the drought - through the provision of food or cash transfers to 18\.2 million people – was the largest ever in Ethiopia, outstripping the response to the 2011 Horn of Africa crisis\. The humanitarian response, with an estimated cost of US$1\.6 billion, was the most successful international appeal in 2016\. Remarkably, the Government allocated US$735 million to the multi-sectoral emergency response\. The Government also (i) used the national grain reserve to balance the shortfall in national supply; and (ii) imported significant volumes of wheat, which reached a record high of 2\.5 million metric tons\. The magnitude of this Government-led response provided much needed support in food insecure areas, moderated food price inflation and, ultimately, protected the population from famine\. The Productive Safety Net Program (PSNP) was the Government’s first line of defense to safeguard the livelihoods of the poorest people in drought-affected areas\. As discussed in the sections above, the PSNP provides regular cash or food transfers to 8 million people in 329 woredas in eight regions of the country - those areas which are most often hit by drought\. The Program is designed to scale-up in response to drought, by extending the duration of support to existing clients or providing support to additional people within drought-affected communities\. In mid-2016, the World Bank's Crisis Response Window (CRW) allocated US$100 million to the PSNP, which the Government used to provide 7\.2 million PSNP clients in drought affected areas with additional safety net support \. As Ethiopia seeks to recover from the El Niño-induced drought, a new drought is spreading across the Horn of Africa, particularly affecting southern Ethiopia\. The El Niño drought of 2015/2016 undermined the livelihoods of millions of rural Ethiopians\. In late 2016, many parts of western and northern Ethiopia enjoyed a regular meher harvest\. In contrast, during this same period, much of southern Ethiopia experienced erratic and failed rains as a result of La Niña\. By late 2016, this drought had tipped these largely pastoral areas into severe food insecurity and crisis\. There are now widespread reports of livestock malnutrition and deaths, particularly in the Somali Region of Ethiopia, and pastoral areas across the Horn of Africa are facing acute water and food shortages\. As famine looms in Somalia, the number of refugees moving into eastern Ethiopia is rising, with a resulting strain on already overstretched government facilities and systems\. In response, the Government declared an emergency through the issuance of a humanitarian appeal in January 2017, through which it is seeking emergency support for 5\.6 million people at an estimated cost of US$948 million, of which US$598 million is to support food or cash transfers to meet emergency food needs\. The PSNP is again central to this response, proving cash or food transfers to eight million people, of which over four million people are in drought-affected areas\. To assist the Government in financing drought response, the Executive Directors of the World Bank considering the proposal for the use of a second US$100 million equivalent from the CRW for the drought response in 2017\. These CRW resources are needed for the drought response urgently, following significant efforts by the Government to raise funds from multilateral and bilateral partners, front loading IDA resources and reallocation of its own budgetary resources\. Sectoral and Institutional Context Launched in 2005, the Productive Safety Net Program (PSNP) provides regular food or cash transfers to food insecure households in chronically food insecure woredas \. Households with able-bodied adult members are required to work in exchange for these transfers, while households without able-bodied members receive unconditional “direct support” transfers\. The public works activities are planned and carried out in a manner that aims to address the underlying causes of food insecurity\. The Program is managed by the Government of Ethiopia through its structures from federal- to woreda-levels and is supported by the Government and eleven development partners, including the World Bank \.  The PSNP responds to food insecurity arising from shocks, such as drought, in addition to chronic need\. This is achieved through the use of contingency budgets that are held at woreda- and federal- levels\. The Government has scaled-up the PSNP to respond to drought repeatedly since 2008\. In particular, the PSNP successfully scaled up during the Horn of Africa drought in 2011, supporting an additional 3\.1 million beneficiaries for 3 months and extending the duration of transfers for 6\.5 million of the existing 7\.6 million beneficiaries\. The PSNP’s response to the 2011 drought was widely credited with preventing the worst impacts of the drought, leading to comparatively less severe drought impacts within Ethiopia relative to its neighboring countries\. Emerging evidence from the independent impact evaluations of the PSNP shows that the program protects households from drought and enables them to bounce back faster after a drought has hit\. Launched in 2005, the Productive Safety Net Program (PSNP) provides regular food or cash transfers to food insecure households in chronically food insecure woredas\. Households with able-bodied adult members are required to work in exchange for these transfers, while households without able-bodied members receive unconditional “direct support” transfers\. The public works activities are planned and carried out in a manner that aims to address the underlying causes of food insecurity\. The Program is managed by the Government of Ethiopia through its structures from federal- to woreda-levels and is supported by the Government and eleven development partners, including the World Bank \. Currently, the World Bank is supporting the PSNP through the PSNP 4 Project (US$600 million equivalent), which was approved by the World Bank’s Executive Directors on September 30, 2014\. An Additional Financing of US$ 100 million was approved by the World Bank’s Executive Directors on June 30, 2016 from the CRW to enable the PSNP to scale-up in response to the El Niño-induced drought\. The estimated total budget of the PSNP from 2015-2020 is US$3\.6 billion, with financing from the Government and eleven development partners, including the World Bank\. The proposed second Additional Financing to the PSNP 4 will scale-up the program in response to the ongoing drought in Ethiopia\. The Additional Financing will be allocated to Component 2 “Productive safety nets and links to livelihoods services” of the Parent Project and, within this Component, will finance safety net transfers in cash or food to targeted households\. Given the emergency nature of this support, the Government intends to waive the public works requirements for this safety net support\. \. C\. Proposed Development Objective(s) Original Project Development Objective(s) - ParentPHORGPDO The Program Development Objective is: Increased access to safety net and disaster risk management systems, complementarylivelihoods services and nutrition support for food insecure households in rural Ethiopia\. This will be achieved through 1)support for building core instruments and tools of social protection and DRM systems, 2) delivery of safety net and enhanced accessto livelihoods services for vulnerable rural households, and 3) improved program management and institutional coordination\. Theprojectwill also contribute to the higher level objectives of (i) improved household food security, livelihoods and nutrition, and(ii) enhanced household and community resilience to shocks\. This is consistent with the higher level objectives of the ongoing APLseries supporting the PSNP\. Current Project Development Objective(s) - Parent The Project Development Objective is: increase access to effective safety net and disaster risk management systems, and complementary livelihood and nutrition services for food-insecure households in the Recipient’s rural areas\.  Proposed Project Development Objective(s) - Additional Financing The Program Development Objective is: Increased access to safety net and disaster risk management systems, complementarylivelihoods services and nutrition support for food insecure households in rural Ethiopia\. This will be achieved through 1)support for building core instruments and tools of social protection and DRM systems, 2) delivery of safety net and enhanced accessto livelihoods services for vulnerable rural households, and 3) improved program management and institutional coordination\. Theprojectwill also contribute to the higher level objectives of (i) improved household food security, livelihoods and nutrition, and(ii) enhanced household and community resilience to shocks\. This is consistent with the higher level objectives of the ongoing APLseries supporting the PSNP\. Key Results The Results Framework remains unchanged as amended during the preparation of the first Additional Financing that was approved in June 2016\. However, this makes no changes to the monitoring of safeguards compliance\. \. D\. Project Description D\. Project Description The proposed second Additional Financing to the PSNP 4 will help ensure that the current drought response reaches the poorest people\. The funds will be used to: (i) scale-up the PSNP to reach drought-affected households not currently receiving any support; and/or (ii) strengthen the response of the PSNP to core beneficiaries suffering from the drought\. To this end, the AF will be allocated to Component 2 “Productive safety nets and links to livelihoods services” of the Parent Project and, within this Component, will finance safety net transfers in cash or food to targeted households\. This safety net support to targeted households will be delivered in the form of cash or food transfers\. The aim will be to provide cash transfers in those areas where markets are functioning and nominal prices have not increased significantly as a result of the drought\. This support will be provided to PSNP and/or transitory food insecure households (new households) residing in program operational areas\. The targeting of households, the payment process and monitoring and evaluation of these safety net transfers will follow the procedures that are set-out in the PSNP Program Implementation Manual\. The prioritization of areas for support will follow the Government of Ethiopia’s hotspot classification\. Given the emergency nature of this support, these transfers will be provided as direct support; that is, the public works requirements will be waived if the drought situation makes this necessary\. This provision will be particularly applied in areas that are hard hit by the drought and currently classified as priority one hotspot woredas, which includes most of Somali Region\. Given the decentralized nature of the PSNP, however, it is possible that some woredas may opt to carry-out public works\. On this basis, the safeguards of the parent Project apply to this Additional Financing as well\. The sections that follow describe the safeguards that were triggered for the parent project\. PHCOMP Component Name: Productive safety nets and links to livelihoods services Comments ( optional) E\. Project location and Salient physical characteristics relevant to the safeguard analysis (if known) The section that follows describes the project locations of the Parent Project\. The Additional Financing will be allocated within these areas to those that are most badly affected by the current drought\.  Under the PSNP 4, the Public Works program in food-insecure districts in all five of these areas will continue to be developed by the communities based on watershed development (or rangelands management), using the integrated, multi-sector landscape management approach of the government's Community-Based Participatory Watershed Development Guideline (CBPWDG) and Rangeland Management Guideline\. These Public Works sub-projects, together with activities related to improving household livelihoods, comprise an annual program of several thousand small-scale and micro-scale sub-projects whose impacts will be site-specific and limited\. They will include Natural Resource Management sub-projects including soil & water conservation, social infrastructure including community roads, health posts, school renovation and Farmers Training Centers, community water projects and livelihoods-based subprojects such as small-scale irrigation\. The Climate Smart Initiative (CSI) developed during PSNP III determined that the PW program has an important role to play in mitigating the effects of climate change, and reducing the vulnerability of already food insecure communities\. Thus climate change requirements are being incorporated in the procedure for planning PW under PSNP IV (the parent project)\. The requirements for Disaster Risk Management (DRM) in terms of both risk mitigation and adaptation are also incorporated in the design of PSNP IV\. The community PW action plans are made nutrition-sensitive by incorporating into the community PW planning process subprojects designed to increase access to a more diversified diet, enable production of nutrient rich crops, increases production of complementary food, etc\. Nutrition sensitive PWs subprojects are accompanied by behavior change communication\. Under the Parent Project, and under this proposed Additional Financing in the event that works are carried out, each Public Works sub-project will be screened utilizing an Environmental and Social Management Framework (ESMF)\. Under the Parent Project only, livelihoods investments at household level will be subject to the Strategic Environmental Assessment (SEA) procedure as outlined in the ESMF\. \. \. F\. Environmental and Social Safeguards Specialists Chukwudi H\. Okafor( GSU07 ) Ian Leslie Campbell( GSP01 ) II\. IMPLEMENTATION The Additional Financing will be implemented through the institutional structures established for the PSNP 4\. The PSNP 4 is implemented through Government systems, with Food Security Coordination line agencies at every level accountable for oversight and coordination, and implementation undertaken by line ministries, Government agencies and other partners at all levels\. These arrangements are cemented in a Memorandum of Understanding (MOU) between Government and development partners\. The roles and responsibilities of implementing partners are described in detail in the Program Implementation Manual (PIM)\. \. III\. SAFEGUARD POLICIES THAT MIGHT APPLY Safeguard Policies Triggered? Explanation (Optional) Environmental Assessment OP/BP Yes The following section describes the 4\.01 application of this safeguard policy to the Parent Project, the PSNP 4\. In the event that public works are carried-out under the  Additional Financing, the same procedures will be followed: Many of the PW subprojects, though intended to impact the environment positively, will have some potential for negative environmental impacts if not designed and implemented following good practice\. Thus given that there will be a large number of such projects (45,289 sub-projects planned for 2016/17 under the Parent Project), OP 4\.01 is triggered\. The Environmental and Social Management Framework (ESMF) Screening process refers for Special Attention any sub- projects with one or more of the following features: (i) Involves disposal of medical waste, (ii) Likely to use pesticides or other agro-chemicals, (iii) Incorporates a dam, (iv) involves land acquisition, or loss of assets or access to assets\. For sub-projects with medical waste, a GOE Medical Waste Management Guide for Rural Health Clinics will be applied, and was disclosed under APL II\. For sub-projects likely to use pesticides, see OP 4\.09 below\. Sub-projects with a dam are required to be designed by a qualified engineer, and constructed by a qualified contractor under the supervision of a qualified engineer\. Dams in excess of 10m are ineligible (see OP 4\.37 below)\. For sub- projects involving land acquisition, see OP 4\.12 below\. After this initial screening, the ESMF procedure further screens the principal features of each sub-project to ascertain whether it is of Environmental Concern\. This is then followed by preliminary environmental and social screening to identify any site- specific potential impacts that might warrant an EIA\. Natural Habitats OP/BP 4\.04 No Under PSNP 4, all sub-projects that might trigger OP 4\.04 are eliminated at Screening stage\. The same procedure will apply to the Additional Financing\. Forests OP/BP 4\.36 No Under PSNP 4, all sub-projects that might trigger OP 4\.36 are eliminated at Screening stage\. The same procedure will apply to the Additional Financing\. Pest Management OP 4\.09 Yes For the PSNP 4, this policy is triggered under the assumption that small-scale irrigation sub- projects might require pest management and might involve the use of agro-chemicals\. For this reason, the GOE Integrated Pest Management Plan Guide was disclosed under APL II and remains in force under the current ESMF\. Physical Cultural Resources OP/BP Yes For PSNP 4, OP 4\.11 is triggered because 4\.11 although deemed unlikely in view of the small scale of the sub-projects, the possibility of “chance-finds” cannot be ruled out\. The policy is addressed in the ESMF screening process at three stages: (i) Any sub-project located within a known cultural heritage site is earmarked as a sub-project of Environmental Concern, to be referred to the Regional Environmental Protection Authority, who will decide if an EIA is required, (ii) Assessment for potential disturbance to cultural or religious sites is carried out as part of the site- specific sub-project Screening, which also contributes to a decision whether to earmark a sub-project for possible EIA, (iii) Inclusion of assessment of potential cultural heritage impacts in the EIA of sub-projects, where EIA is found to be necessary, and (iv) Monitoring of sub-project implementation by DAs and wereda staff, in liaison with the concerned Regional Bureau of Tourism and Culture\. Indigenous Peoples OP/BP 4\.10 Yes It has been determined that some of the people resident in the project areas meet the criteria of OP 4\.10 and, therefore, PSNP 4 and the proposed AF will trigger this safeguard policy\. An Enhanced Social Assessment and Consultation (ESAC) reflecting the requirements of OP 4\.10 was undertaken as part of the preparation for PSNP 4\. The identified mitigating measures recommended by the ESAC enhanced Social Assessment and Consultation were incorporated in the design of PSNP 4 and will continue under this Additional Financing\. The ESAC does not need to be updated, as the Additional Financing does not involve any expansion in the geographic scope of the project, nor in the identity of the affected communities\. Involuntary Resettlement OP/BP 4\.12 Yes Under PSNP 4, the PW sub-projects involving the physical movement and resettlement of  households are ineligible and are eliminated during the Screening process\. However, cases may occur that involve change of land use or restriction of access to communal assets at both community and household level\. Where such loss of assets or access to assets is involuntary, the procedures under OP 4\.12 will be implemented\. For this purpose a Resettlement Policy Framework (RPF) was developed by Government and disclosed before Appraisal of PSNP 4\. However, such sub-projects currently continue to remain ineligible and to be eliminated at Screening stage, until the PW monitoring system has been expanded sufficiently to be able to track compliance with OP 4\.12 at the scale required (45,289 sub-projects planned for 2016/17)\. Under the proposed AF, while it is anticipated that the public works requirement will be waived, in the event that any public works are carried-out, this procedure will apply\. Safety of Dams OP/BP 4\.37 Yes Under PSNP 4, any subproject that might incorporate a dam more than 10 metres in height is ineligible and will be specifically eliminated in the first stage of the sub-project Screening process\. Smaller dams will be constructed subject to implementation of the FAO dam safety measures in Ethiopia, which form part of the ESMF\. Projects on International Waterways Yes This policy was triggered for PSNP 4 because OP/BP 7\.50 of the small-scale irrigation projects expected in watersheds of three international waterways\. Under PSNP4, GOE and the Bank notified the concerned countries in accordance with this policy\. No further notification is required for this Additional Financing, as no small-scale irrigation projects are expected to be built\. Projects in Disputed Areas OP/BP No Under PSNP 4, all sub-projects that might 7\.60 trigger OP 7\.60 are eliminated at Screening stage\. This will be applied to the AF as well\. \. IV\. Key Safeguard Policy Issues and Their Management A\. Summary of Key Safeguard Issues 1\. Describe any safeguard issues and impacts associated with the proposed project\. Identify and describe any potential large scale, significant and/or irreversible impacts: From an environmental and social safeguard standpoint, the PSNP 4 Project was a Category B project, since impacts of the project, for the most part, will be minimal, site-specific and manageable to an acceptable level\. Given the emergency nature of the safety net support that will be provided to targeted households through this proposed Additional Financing, it is anticipated that few, if any, public works will be carried-out\. However, given the decentralized nature of program delivery, it is possible that some woredas will carry-out public works\. On this basis, the Additional Financing is also rated a Category B project\. The section that follows describes the rationale for rating the PSNP 4 a Category B project: One of the key objectives of the PSNP is to address the underlying causes of food insecurity, to which land degradation is universally agreed to be a major contributor, particularly in highland areas\. Thus the design of the PSNP public works program is intended to have environmentally positive impacts\. Under the previous phases, these activities, which include, for example, soil and water conservation and improvement of community infrastructure, have already been shown to constitute a vehicle for significant positive environmental transformation and enhanced productivity\. Nonetheless, negative impacts may occur if the locations or designs of the community activities do not follow good environmental practice, or if they are incompatible with optimum overall management of the watershed\. Such impacts, which would be limited in scale and site-specific, could include, for example: Community Road Construction and Rehabilitation Impacts • Alteration of drainage patterns and increased flooding and soil erosion from road construction and materials excavation sites • Right of way removal of vegetation and natural habitats • Sedimentation of aquatic systems from soil erosion and runoff • Impact of increased human use on adjacent habitats and wildlife • Involuntary or voluntary displacement or loss of land or resources or access to resources normally used by individuals or the community for cultivation, livestock grazing, fuelwood, etc\. • Stagnant pools at excavation sites that create breeding sites for mosquitoes • Potential for disturbance of cultural and historic sites and resources • Increased in and out population migration due to improved access • Unplanned, haphazard land use development created by improved access • Temporary displacement or loss of access or livelihood due to construction detours Small-scale Irrigation Development Impacts • Changes in natural drainage patterns upstream and downstream • Depletion of surface or groundwater sources • Deterioration in soil quality due to poorly managed irrigation; potential waterlogging and salinization of soils, leading to agricultural abandonment and land degradation • Runoff from irrigated fields and potential for agricultural chemicals to pollute water bodies • Abstraction effects on source streams and related aquatic ecosystems • Lowering of water quality due to agricultural runoff • Increased pest and disease control problems due to the promotion of monoculture • Reduced biodiversity due to focus on cash crops • Potential for disturbance of cultural and historic sites and resources, and damage to nearby sites resulting from changes in the water table or salinization\. • Stagnant waters and disease vectors arising from poorly managed irrigation systems • Increased use of agricultural chemicals with related human health concerns Watershed Treatment and Water Harvesting Impacts • Increased access can aggravate soil erosion problems, especially in higher gradient topography • Poorly maintained drainage controls and in-stream structures can lead to eventual failures and increased flooding problems • Reduced downstream nutrient levels from dams that reduce stream transport of organic material and sediment • Social tensions arising from issues and rights of water allocation • Mosquito and related health concerns arising from stagnant pools • Impacts on cultural and historic sites and resources through changes in the water table • Social problems arising from poorly managed regenerated catchment areas • Afforestation and Revegetation Impacts • Effects of some tree species (e\.g\., eucalyptus) in reducing groundwater levels • Long term effects of forest harvesting on hydrologic systems and stream characteristics • Possible reduction in tree and plant species diversity arising from the introduction of new plantations and re-vegetation schemes • Effects of monocultures on ecosystem diversity, function and sustainability • Changes in habitat characteristics and potential effects on endemic wildlife species • Social problems arising from issues related to the ownership and user of new forests • Effects of grazing bans on the cost of rearing livestock and shift of grazing pressures to other areas Livestock, Pasture and Water Points Development Impacts • Compaction of soils from increased activity around new water sources • Potential contamination of water sources and needs for controls on human use • Concentrations of livestock at specific watering sites/routes that result in overgrazing of vegetation and related land degradation • Potential social tensions over access to pastoralists water sources • Drinking Water Sources Development Impacts • Increased water withdrawals could exceed groundwater recharge rates in some areas • Development of springs may affect availability of downstream water supply • Physical impacts of increased human traffic near water stations • Potential contamination of open wells by livestock and human uses • Reduced availability of aquatic ecosystems due to water abstraction • Increased dependence on new water supply systems that prove to be unreliable • Sanitation and health concerns associated with the operation of new drinking water sources • Land use and social issues and tensions over the siting of and access to new water sources School, Health Posts or Farmers Training Centres Construction, Rehabilitation or Expansion Impacts • Site disturbance and potential drainage alterations from construction activities and • expansion of facilities • Involuntary or voluntary displacement or loss of lands or resources or access to resources normally used by individuals or the community for cultivation, livestock grazing, fuelwood, etc\. • Water shortages due to increased demands on existing sources • Increased production of human and medical wastes and potential for contamination of waterbodies and groundwater • Increased timber harvesting on nearby lands for construction materials • Construction impacts on sensitive wildlife habitats and aquatic systems • Increased pollution from site development and operations, including medical waste • Sanitation and health issues related to increased human presence and medical waste disposal • In-migration and settlement generated by rehabilitated facilities Component 3: Livelihoods Support through Three Pathways Since each household-level activity will be at micro-scale, and as the procedures under this Component will include the assessment of the agro-ecological suitability of the activity, including screening for potential negative impacts, no significant site-specific negative impacts are expected from individual household-level activities\. The only environmental or social concerns might be potential cumulative negative impacts in the longer term of large numbers of households adopting new activities in fragile environments over a number of years\. This might include, for example, an increase in livestock ownership with resultant potential over-grazing and environmental degradation, or a falling water-table in a woreda due to large numbers of households adopting shallow-well irrigation\. Safeguards Issues This project triggers seven safeguard policies: The Environmental Assessment Policy (OP 4\.01), related to the possible impacts mentioned above, for which an ESMF has been developed and disclosed; the Pest Management Policy (OP 4\.09), predicated on the possibility of small quantities of pesticides being employed in small, community-level irrigation projects; the Physical Cultural Resources Policy (OP 4 \.11), because although deemed unlikely in view of the small scale of the PW sub-projects, the possibility of ‘chance-finds’ cannot be ruled out; the Indigenous Peoples Policy (4\.10), which is applied under the present agreement between GoE and the WB, for which an Enhanced Social Assessment and Consultation reflecting the requirements of OP 4\.10 has been undertaken; the Involuntary Resettlement Policy (4\.12), predicated on the possibility that although sub-projects potentially involving physical relocation are ineligible, there might occur cases involving change of land use or loss of assets or reduction of access to assets\. In such cases the procedures of OP 4\.12 will be implemented, for which a Resettlement Policy Framework (RPF) has been developed and disclosed\. However, sub-projects involving any form of involuntary asset loss are currently ineligible pending completion of an expanded PW monitoring system capable of identifying and tracking such sub-projects; the Safety of Dams Policy, predicated on the possibility that although dams of more than 10 metres in height are ineligible, smaller dams might have safety issues, for which compliance with the FAO Small Dams Safety Measures in Ethiopia is required; and the International Waterways Policy (OP 7\.50), because of small-scale irrigation projects that may be implemented in watersheds of international waterways\. 2\. Describe any potential indirect and/or long term impacts due to anticipated future activities in the project area: The following describes the potential indirect and/or long term impacts of the PSNP 4 (the Parent Project)\. Activities under PSNP 4 include watershed development interventions and improved farming and land-use management systems, under the community watershed development approach of the government\. These are expected to make contributions to positive environmental regeneration and transformation, which is one of the objectives of the PSNP\. As stated above, any potential long-term or cumulative impacts that might have been caused by PSNP PW activities such as infrastructure will be detected through the Screening and mitigating procedures, and addressed\. At the same time, potential long-term cumulative impacts that might have been caused by the implementation of large numbers of similar Livelihoods Strengthening activities will be managed by annual monitoring of impacts at woreda level, and corrective action taken\. In view of this, no indirect or long-term negative impacts are anticipated from the project\. 3\. Describe any project alternatives (if relevant) considered to help avoid or minimize adverse impacts\. Under the PSNP 4, the principal project design alternative considered was to provide the cash or food on a predictable basis, but as direct support, i\.e\., not to undertake physical public works\. This would have avoided incurring any negative impacts from infrastructure sub- projects\. However, this option was rejected, due to (i) potential large-scale dependency, with attendant negative social impacts; and (ii) because it would not offer the opportunity to carry out environmental rehabilitation of the watersheds through Soil and Water Conservation (SWC) sub-projects, which is necessary for improved livelihoods\. In addition, the creation of new community infrastructure assets, which are also essential to meet the objectives of the project, would not be achieved\. Importantly, however, under the Additional Financing, the safety nets will be provided as direct support in recognition of the emergency nature of this support\. 4\. Describe measures taken by the borrower to address safeguard policy issues\. Provide an assessment of borrower capacity to plan and implement the measures described\. The following describes the measures taken with regards to PSNP 4: The 1994 Constitution of Ethiopia proclaims that all citizens shall have a right to live in a clean and healthy environment, and that Government and citizens have a duty to protect the environment, and the design and implementation of programs and projects shall not damage or destroy the environment\. The Constitution incorporates a number of other provisions relevant for the protection, sustainable use and improvement of the environmental resources of the country\. It reflects a view of environmental concerns in terms of fundamental human rights, and provides a basis for the formulation of national policies and strategies on environmental management and protection\. It assures that no development activity shall be disruptive to the ecological balance, and that people concerned shall be made to give their opinions in the preparation and implementation of environmental protection policies and programs\. The Constitution also: a) Maintains land under the ownership of the Ethiopian people and the government but protects security of usufruct tenure; b) Reinforces the devolution of power and local participation in planning, development and decision taking by regions and woredas; c) Ensures the equality of women with men; d) Ensures the appropriate management as well as the protection of the well-being of the environment e) Maintains an open economic policy; f) Recognizes the rights of groups identified as “Nations, nationalities and Peoples” having a common culture or similar customs, mutual intelligibility of language, belief in a common or related identity, a common psychological make-up, and who inhabit an identifiable, predominantly contiguous territory\. g) Recognizes the rights of pastoral groups inhabiting the lowlands\. A series of legal proclamations form the basis for the environmental assessment and management framework in Ethiopia: the Proclamation on the Establishment of Environmental Protection Organs (No\. 295/2002); the Proclamation on Environmental Impact Assessment (No\. 299/2002); the Proclamation on Environmental Pollution Control (No\. 300/2002); and the Proclamation on Solid Waste Management (No\. 513/2007)\. The EIA Directive 1 of 2008, Directive to Determine Projects Subject to EIA, determines the categories of project subject to EIA Proclamation 299/2002\. There are two key public institutions that are directly responsible for monitoring environmental compliance: the Ministry of Environment and Forests (MoEF) and Ministry of Agriculture (MoA), which have decentralized to the regional level\. In the case of MoA, decentralization has gone further to the woreda and kebele levels\. There e xists a critical mass of capacity within the (MoA) and MoEF at the federal and decentralized levels to manage environmental and social safeguard issues\. Since 2005 the borrower has taken, and continues to take, extensive measures to build capacity for the implementation of safeguard policies, as follows: All the regions in which PSNP 4 is being implemented, have developed institutional capacity for implementing the ESMF\. There are now Environmental and Social Safeguards Specialists working in all of the PW units at federal and levels and trained and woreda staff for overseeing ESMF screening\. As a result, ESMF screening rates have generally been running at, or are close to, 100% in the PSNP regions\. Investment in continuous training of regional and woreda staff and around 6,000 Development Agents is seen as key to this success and has sustained the technical capacities of each level in the implementation not only of the ESMF but of community-based watershed planning and the development of PW plans\. Nonetheless, ESMF Screening of PWs in pastoral areas has not yet reached the standard of quality achieved in the highland areas and further training is being given to address this issue\. Under PSNP 4, the regular PW monitoring system covers not only ESMF Screening but also the implementation of mitigating measures specified at the time of Screening\. While the PW Reviews have found that most mitigation measures have been implemented, the fact that some water and community road sub-projects in highland areas have resulted in negative environmental impacts highlights the need to continue to improve the implementation of ESMF mitigation measures for these types of sub-project\. The implementation of mitigation measures in lowland areas has not yet been fully reviewed\. Under PSNP 4 joint government-donor monitoring of ESMF implementation is conducted, followed by corrective measures if required\. This monitoring will be undertaken through (i) The PW component of the PSNP 4 M&E system, which tracks the nature and extent of implementation of the ESMF, and (ii) Twice-annual joint Government-donor PW Reviews, in which samples of PW sub-projects countrywide are examined for quality, sustainability, impact and ESMF compliance\. Any rectification works (both labour and nonlabour) required will be conducted using Project resources in the form of repair and rehabilitation works under the next annual PW programme of activities\. Ensuring that this happens is the responsibility of the DA involved in the community PSNP PW planning process, and the NR Expert in the NR Woreda Case Team\. Given the large number of new public works subprojects in each year (45,289 planned for 2016/17 under the Parent Project), and the short subproject implementation cycle, subprojects likely to require the Resettlement Policy Framework continue to be ineligible and are being screened out, pending the planned strengthening of the Grievance Redress Mechanism (GRM) and expansion of the PW compliance monitoring system\. However, arrangements are already underway for training the Development Agents on the implementation of OP 4\.12, and a draft GRM manual has been developed\. These are all essential steps for satisfactory management and monitoring of such subprojects in the future\. The Enhanced Social Assessment and Consultation Action Plan continues to be implemented in compliance with OP 4\.10\. Specifically: (i) reviewing and strengthening targeting in pastoral areas; (ii) undertaking a five-year review of the Roving Appeals Audits to inform the draft GRM Manual; (iii) implementing an Expanded Social Accountability Pilot in 19 woredas (including Somali and Afar); and (iv) increasing communications and improving the awareness of both clients and non-clients\. There has been a number of monitoring missions to pastoral areas with the aim of improving project performance for pastoral groups, and two specialists in pastoral communities have been taken on in NRMD and allocated to the PWCU\. In addition, a contextual assessment of the application of gender provisions in pastoral areas is underway in order to be able to modify the PIM to be more appropriate for women and children, particularly in vulnerable and marginalized gr oups\. All woredas during PSNP 4 where the Livelihoods component is being implemented have developed Woreda Environmental Profiles and ‘Negative Lists’ limiting the types of activities that can be undertaken in order to meet compliance with the World Bank safeguard policies\. Staff of the Regional EPAs and the woreda Environmental (Natural Resources) focal persons participate in the annual awareness-creation and training courses for the PSNP Public Works, which includes ESMF training of NR Experts in the Woreda NR Case Teams\. These training courses, which were upgraded by the expanded federal PWCU, are provided by teams drawn from MoA at Federal and Regional level, with technical assistance from the Natural Resources Management personnel of MoA, the regional Environmental Protection Bureaus and agencies such as WFP\. The woreda-level trainees in turn train the DAs at the local level\. The cost of implementing the ESMF training are covered partly by the PSNP 4 Management Budget at federal, regional, woreda and kebele levels, and partly by the regular government staffing and overhead budgets at all levels\. In order to address projects that might include the renovation or extension of medical clinics in the public works program, the Government's Waste Management Guide for Rural Health Clinics is published and disclosed, in accordance with OP 4\.01\. To address the possible use of small quantities of pesticides in small-scale irrigation schemes, the Government Guide for Integrated Pest Management in Small-Scale Irrigation Schemes is published and disclosed under APL II, in accordance with the ESMF and OP 4\.09\. The Physical Cultural Resources safeguard policy is addressed by being integrated into the ESMF screening process at three stages: (i) Any sub-project located within a known cultural heritage site is earmarked as a sub-pro ject of Environmental Concern, to be referred to the Regional EPA, who will decide if an EIA is required, (ii) Assessment for potential disturbance to cultural or religious sites is carried out as part of the site-specific sub-project Screening, which also contributes to a decision whether to earmark a sub-project for possible EIA, (iii) Inclusion of assessment of potential cultural heritage impacts in the EIA of sub-projects, where EIA is found to be necessary, and (iv) Monitoring of sub-project implementation by DAs and woreda staff, in liaison with the Regional Bureau of Tourism and Culture\. The International Waterways policy OP 7\.50 is triggered because some of the public works may be small-scale irrigation projects located in watersheds of international waterways\. The World Bank, on behalf of Government, has notified the concerned riparian governments in accordance with this policy, covering the five-year period of PSNP 4\. The Task Team’s assessment is that the Project will not cause appreciable harm to any of the Riparians concerned\. Safeguard Policies Not Triggered by PSNP 4 The Natural Habitats and Forests safeguard policies are not triggered because (i) Land not  already converted to settlement, cultivation or community grazing is not incorporated in the watershed areas covered by the community watershed development plans; (ii) PW activities involving land conversion are ineligible for PSNP funding; (iii) The DA screens out (for separate EIA) any activity within a National Park or other designated wildlife area or buffer zone, and any activity in a Priority Forest Area, and any activity that might involve draining of, or disturbance to, a wetland\. OP 7\.60 (Projects in Disputed Areas) is not triggered because any PW activity proposed in, or adjoining, a disputed area is ineligible for PSNP funding and is specifically eliminated by the ESMF Screening process\. 5\. Identify the key stakeholders and describe the mechanisms for consultation and disclosure on safeguard policies, with an emphasis on potentially affected people\. The key stakeholders are the beneficiary households and those involved in the implementation of the program\. Under PSNP 4, the provisions of the ESMF are incorporated into the training materials used at woreda and kebele levels, which will reach some 1\.5 million beneficiary households, and are regularly updated according to community and government staff feedback\. Consultation on the safeguard policies have taken place through the annual training programmes, twice-yearly Public Works Reviews, and the participatory community public works planning meetings conducted annually by the DAs in over 10,000 watersheds during the nine years of APL I, II and III\. The PSNP 4 Enhanced Social Assessment and Consultation, ESMF and RPF were the subject of extensive consultation among stakeholders including at community level, and the reports and requirements of these consultations are incorporated in the final documents as disclosed in the World Bank Info Shop and Country Office public-access library, and through the Ministry of Agriculture at federal level, and regional levels, as well as through the Ministry of Environment and Forests\. As part of PSNP 4, an Expanded PSNP Social Accountability Pilot is now underway, incorporating a focus on monitoring impacts of the PSNP on marginalized and vulnerable groups\. PSNP staff are also involved in the development of guidelines for consultation with vulnerable groups, which in future will be used by frontline staff of projects such as the PSNP\. \. B\. Disclosure Requirements Environmental Assessment/Audit/Management Plan/OtherPHEnvDelete Date of receipt by the Bank 07-Jul-2014 Date of submission to InfoShop 10-Jul-2014 For category A projects, date of distributing the Executive Summary of the EA to the Executive Directors "In country" Disclosure PHEnvCtry Ethiopia 10-Jul-2014 Comments: Resettlement Action Plan/Framework/Policy ProcessPHResDelete Date of receipt by the Bank 07-Jul-2014 Date of submission to InfoShop 10-Jul-2014  "In country" Disclosure PHResCtry Ethiopia 10-Jul-2014 Comments: Indigenous Peoples Development Plan/FrameworkPHIndDelete Date of receipt by the Bank 07-Jul-2014 Date of submission to InfoShop 10-Jul-2014 "In country" Disclosure PHIndCtry Ethiopia 10-Jul-2014 Comments: Pest Management PlanPHPestDelete Was the document disclosed prior to appraisal? Yes Date of receipt by the Bank 12-Aug-2009 Date of submission to InfoShop 12-Aug-2009 "In country" Disclosure PHPestCtry Ethiopia 13-Aug-2009 Comments: If the project triggers the Pest Management and/or Physical Cultural Resources policies, the respective issues are to be addressed and disclosed as part of the Environmental Assessment/Audit/or EMP\. If in-country disclosure of any of the above documents is not expected, please explain why:: \. C\. Compliance Monitoring Indicators at the Corporate Level PHCompliance OP/BP/GP 4\.01 - Environment Assessment Does the project require a stand-alone EA Yes [X] No [] NA [] (including EMP) report? If yes, then did the Regional Environment Unit or Practice Manager (PM) review and approve Yes [] No [] NA [X] the EA report? Are the cost and the accountabilities for the Yes [] No [] NA [X] EMP incorporated in the credit/loan? PHCompliance OP 4\.09 - Pest Management Does the EA adequately address the pest Yes [X] No [] NA [] management issues? Is a separate PMP required? Yes [] No [X] NA [] If yes, has the PMP been reviewed and Yes [] No [] NA [X]  approved by a safeguards specialist or PM? Are PMP requirements included in project design?If yes, does the project team include a Pest Management Specialist? PHCompliance OP/BP 4\.11 - Physical Cultural Resources Does the EA include adequate measures related Yes [X] No [] NA [] to cultural property? Does the credit/loan incorporate mechanisms to mitigate the potential adverse impacts on Yes [X] No [] NA [] cultural property? PHCompliance OP/BP 4\.10 - Indigenous Peoples Has a separate Indigenous Peoples Plan/Planning Framework (as appropriate) been Yes [X] No [] NA [] prepared in consultation with affected Indigenous Peoples? If yes, then did the Regional unit responsible for safeguards or Practice Manager review the Yes [X] No [] NA [] plan? If the whole project is designed to benefit IP, has the design been reviewed and approved by Yes [X] No [] NA [] the Regional Social Development Unit or Practice Manager? PHCompliance OP/BP 4\.12 - Involuntary Resettlement Has a resettlement plan/abbreviated plan/policy framework/process framework (as appropriate) Yes [X] No [] NA [] been prepared? If yes, then did the Regional unit responsible for safeguards or Practice Manager review the Yes [X] No [] NA [] plan? Is physical displacement/relocation expected? Yes [] No [X] TBD [] Is economic displacement expected? (loss of assets or access to assets that leads to loss of Yes [] No [X] TBD [] income sources or other means of livelihoods) PHCompliance OP/BP 4\.37 - Safety of Dams Have dam safety plans been prepared? Yes [] No [] NA [X] Have the TORs as well as composition for the independent Panel of Experts (POE) been Yes [] No [] NA [X] reviewed and approved by the Bank? Has an Emergency Preparedness Plan (EPP) Yes [] No [] NA [X]  been prepared and arrangements been made for public awareness and training? PHCompliance OP 7\.50 - Projects on International Waterways Have the other riparians been notified of the Yes [X] No [] NA [] project? If the project falls under one of the exceptions to the notification requirement, has this been Yes [] No [] NA [X] cleared with the Legal Department, and the memo to the RVP prepared and sent? Has the RVP approved such an exception? Yes [] No [] NA [X] PHCompliance The World Bank Policy on Disclosure of Information Have relevant safeguard policies documents Yes [X] No [] NA [] been sent to the World Bank's Infoshop? Have relevant documents been disclosed in- country in a public place in a form and language Yes [X] No [] NA [] that are understandable and accessible to project-affected groups and local NGOs? PHCompliance All Safeguard Policies Have satisfactory calendar, budget and clear institutional responsibilities been prepared for Yes [X] No [] NA [] the implementation of measures related to safeguard policies? Have costs related to safeguard policy measures Yes [X] No [] NA [] been included in the project cost? Does the Monitoring and Evaluation system of the project include the monitoring of safeguard Yes [X] No [] NA [] impacts and measures related to safeguard policies? Have satisfactory implementation arrangements been agreed with the borrower and the same Yes [X] No [] NA [] been adequately reflected in the project legal documents? V\. Contact point World Bank PHWB Contact:Sarah Coll-Black \. Title:Sr Social Protection Specialis \. Borrower/Client/Recipient PHBorr Name:Federal Ministry of Finance and Economic Cooperation  Contact:Fisseha Aberra Title:Director, Intl Financial Inst Cooperation Directorate \. Email:faberrak@gmail\.com \. \. Implementing Agencies PHIMP Name:Ministry of Agriculture and NAtural Resources-ET Contact:Berhanu W/Michael Title:Director, FS Coordination Directorate \. Email:berhanuw@yahoo\.com \. \. VI\. For more information contact: \. The World Bank 1818 H Street, NW Washington, D\.C\. 20433 Telephone: (202) 473-1000 Web: http://www\.worldbank\.org/projects VII\. Approval Task Team Leader(s): Name:Sarah Coll-Black Approved By: PHNonTransf Safeguards Advisor: Name: Johanna van Tilburg (SA) Date: 06-Apr-2017 Practice Manager/Manager: Name: Penelope Jane Aske Williams Date: 06-Apr-2017 (PMGR) Country Director: Name:Nicole Klingen (CD) Date:10-Apr-2017

APPROVAL

P090390

Page 1 Integrated Safeguards Data Sheet (ISDS) Section I – Basic Information Date ISDS Prepared/Updated: November 16, 2004 Report No\.:AC1157 A\. Basic Project Data A\.1\. Project Statistics Country: Afghanistan Project ID: P078284 (Original) / P090390 (Supplemental Grant) Project: Emergency Transport Rehabilitation Project - Supplemental Grant TTL: Mitsuyoshi Asada Total project cost (by component): Appraisal Date: December 20, 2004 Loan/Credit amount($m): IDAP: 30 Board Date: March 24, 2005 Other financing amounts by source: IDA (Original): 117, USAID: 46, Bilateral Agencies: 5 Managing Unit: SASEI Sector: Roads and highways (80%), Aviation (20%) Lending Instruments: Specific Investment Loan Is this project processed under OP 8\.50 (Emergency recovery? Yes? [X] No? [ ] Environmental Category: B A\.2\. Project Objectives The development objective of the proposed Emergency Transport Rehabilitation Project is to facilitate the country's economic and social recovery through improved physical access to goods, markets, and administrative and social services\. The development objective will be achieved by: (i) removing key transport bottlenecks (collapsed bridges, disintegrated pavements, damaged tunnels, unsafe air traffic operation) that seriously hamper recovery; (ii) providing equipment and technical assistance related to planning, maintenance and supervision of works, thereby building capacity in management, implementation and subsequent maintenance; and (iii) assisting in the establishment of an institutional and policy framework for the sector for sustainable service delivery in the transport sector\. The removal of key transport bottlenecks will immediately promote regional economic integration and facilitate trade, delivery of humanitarian aid, and reconstruction efforts in all sectors\. Normal traffic operations on the key road arteries and in the air will be restored, also facilitating movements on the key import/export links and main corridors\. Additionally, the civil works and subsequent maintenance financed through the Project will provide opportunities for employment through the engagement of the local population in rehabilitation activities\. A\.3\. Project Description Components: Page 2 Part A: Highways This part includes two key road sections, the Kabul-Salang-Doshi Road and the Pol-e- Khomri-Kunduz Road of the Kabul – Kunduz – Shir Khan corridor, which is the main artery between the capital and the Northern Region, and international link to neighboring Tajikistan and Uzbekistan\. In addition to linking the capital to the north, rehabilitation of the Pol-e-Khomri - Kunduz section will also ensure a dependable link between Kunduz and the border town of Shir Khan, as well as the to Mazar-e-Sharif\. The Project roads are part of the Afghan Ring Road System, which draws together all the major regions\. The proposed Project would also finance equipment, training and winter road maintenance in the Salang area for about two years until more permanent self-financing arrangements have been put in place to recover costs from road users\. USAID is financing an NGO to undertake a maintenance program of immediate maintenance needs in the tunnel and galleries prior to full-fledged works, as well as the rehabilitation of the MPW maintenance camps\. Part B : Civil Aviation This component will finance repairs to the Kabul airport runway including airfield logistics and power distribution system, and provide communications and air traffic control equipment identified by ICAO as necessary for the Kabul Airport to function to international standard\. The Project will finance TA for implementation support and training\. Part C: Secondary Roads Component This component will finance the rehabilitation of selected secondary roads (Taloqan – Kishem Road) serving rural populations near the roads being rehabilitated and linking them to the major network\. Implementation support will consist of technical assistance for design and supervision and training for subproject screening, selection and project implementation\. Part D: Institutional, Policy And Other Studies This component will lay the foundation for sustainable management of the transport sector\. It will include a Transport Sector Review (TSR) to develop Institutional and Policy Framework for the Sector, and pre-feasibility studies for potential future investments\. Procurement of consulting services for The TSR will be financed by the Swedish International Development Agency (Sida), and the study is underway\. A\.4\. Project Location and salient physical characteristics relevant to the safeguard analysis: Part A: Highways Land Resources and Land Use The Kabul – Salang – Doshi Road passes through three main topgraphical zones: the flat plains to the immediate north of Kabul; the high mountain areas of the Hindu Kush and Sa lang Pass; and the low lying plains to the north of the Salang Pass\. Along the first ten Page 3 km exiting Kabul, there is strong evidence of building and urban expansion\. The flat plain is characterized by irrigated agricultural and some grazing land\. The predominant crop is grapes, with some grape plants being rehabilitated and undergoing regeneration\. Also in evidence are vegetables, melons and some wheat\. The irrigation system appears well organized and gravity fed from mountain streams\. A number of culverts bring water from one side of the road to the other\. A major lined canal is located north of Chaharikar\. The only industry noticed is brick making\. The high mountain pass is extremely rocky, with sections largely uninhabited\. However, there are a number of settlements along the Salang River, and terraced agriculture, primarily rice\. Villagers have access to the road and their fields with make-shift footbridges\. There are also makeshift stalls and tea stands very close to the right of way\. There are several areas well off the road that are being used by refugee families, as well as a UNHCR refugee camp at Malakhan\. Also at Malakhan are a number of makeshift stalls, which may have to be moved to allow for improved road drainage\. In a number of areas, trees are planted on the edge of the right of way to protect the adjacent fields\. Noticed was one bee keeping site\. Between Khenjan and Doshi the road passes along an extensive valley of rice paddies, surrounded by barren hills\. Irrigation canals are alongside the road, and sometimes overflowing onto the road\. The Pol-e-Khomri – Kunduz Road passes through a highly productive agricultural zone, surrounded by barren, sandy hills\. However, these hills appear to be the source of the irrigation water, which enables the valleys to produce a mixture of rice, melons, vegetables, cotton, fodder crops and wheat\. Farmers use animal traction for plowing, but also share diesel powered mobile threshers, pulled by tractors\. North of Baghlan is what used to be a major cotto-growing perimeter, as noted on the Russian topographic map\. The proposed road would also traverse the municipality of Konduz, which is highly degraded and dusty\. The land use in this area can be considered urban and stable\. The northern section beyond Kunduz is similar to the section coming from the south\. Hydrology & Climate In the flat plains area, the Project crosses a number of small rivers and streams\. Effective longitudinal drainage is generally not available because of the flat terrain\. The flat plains are susceptible to high winds and dust storms\. In the foothills, the road parallels the Pangshar River, and is subject to erosion\. In the high mountain zone, winter brings snowfall and a major issue is danger from snow avalanche and drainage from melting snow, along steep slopes\. Biological Resources Aside from irrigated agriculture, the Project area is characterized by sparse vegetation consisting mainly of grasses and brush\. Trees are scarce and concentrated around the settlements, which are well back from the right of way\. There is little wildlife in evidence – small weavers, sparrow and an occasional roller birds were sited\. The Project road is not located in a designated sensitive or specially protected area\. Page 4 Socio-Economic and Cultural The road is located in the East Central Region and the Northern Region\. It passes through the following administrative areas\. These are: Region Province District Estimated Population* East Central Kabul Shakardara 74,400 Mir Bacha Kot 51,100 Kalakan 30,300 Parwan Bagram 90,600 Chaharikar 145,000 Jabalussaraj 94,400 Salang 20,600 Northern Baghlan Khinjan 22,400 Doshi 50,100 Pol-e-Khomri 152,300 Konduz Ali Abad 37,200 Konduz 233,100 Total 1,001,500 *Source: AIMS; CSO 1998 Census The major towns/villages through which the Project roads pass are Mir Bacha Kot Kalakan Chaharikar Jabalussaraj Hejan Khenjan Doshi Pol-e-Khomri Baghlan Kunduz About 20 kms on the road from Pol-e-Khomar to Mazar-e-Sharif is the Sukh Kotal (Red Pass), which is an archeological site of a religious temple founded circa 1300 AD\. At Baghlan, the Governor's house is located on the site of an ancient Buddhist Monastary\. At Kunduz, there is the ruined fortress of Murad Beg\. Page 5 Clearance of land mines and unexploded ordnance (UXO) operations are in evidence along the road project, particularly along the Salang Pass\. Secondary Roads The subproject sites are selected in the vicinity of the northern corridor road\. Civil Aviation The Project will repair the runway and supply equipment and water and sanitation facilities to the Kabul International Airport\. This will contribute to the Airport achieving ICAO safety and environmental standards\. An Environmental and Safety Audit was carried out at this site\. The major issue raised concerned the continued existence of mines and unexploded ordnance in certain areas within the airport and on the perimeter\. This could have an effect on the safe installation of runway improvements and lighting\. Other safety and environmental issues which are currently being addressed by the Airport Authority were: Unauthorized access to runway and taxiways Storage of fuel\. Solid waste disposal Water, sanitation and sewage\. Power supply\. Housing for fire fighting equipment\. B\. Check Environmental Category A [ ], B [X], C [ ], FI [ ] Comments: The environmental category is justified, since civil works will be limited to improvements of an existing and well-established highways and roads, where there will be no resettlement or land acquisition as a result of the Project\. Consequently, no Resettlement Action Plan is required\. The important issue of mine and unexploded ordnance will be addressed through a specific strategy for the procurement of mine clearing services, adapted to the type of work, level of anticipated risk and capacity of contractors\. An environmental and social screening and assessment framework, developed specifically for the proposed emergency operations, has been established for sub-projects not defined at appraisal\. Such a safeguard framework has been agreed as part of the first three IDA grants recently negotiated\. The purpose of such a framework is to assist the project implementing agencies (AACA and the line ministries) in screening all the sub- projects for their likely social and environmental impacts, identifying documentation and preparation requirements and prioritizing the investments\. C\. Safeguard Policies Triggered Yes No Page 6 Environmental Assessment ( OP / BP / GP 4\.01) [X] [ ] Natural Habitats ( OP / BP 4\.04) [ ] [X] Pest Management (OP 4\.09) [ ] [X] Cultural Property (draft OP 4\.11 - OPN 11\.03 -) [ ] [X] Involuntary Resettlement ( OP / BP 4\.12) [ ] [X] Indigenous Peoples ( OD 4\.20 ) [ ] [X] Forests ( OP / BP 4\.36) [ ] [X] Safety of Dams ( OP / BP 4\.37) [ ] [X] Projects in Disputed Areas ( OP / BP / GP 7\.60) * [ ] [X] Projects on International Waterways ( OP / BP /GP 7\.50) [ ] [X] * By supporting the proposed project, the Bank does not intend to prejudice the final determination of the parties' claims on the disputed areas Page 7 Section II – Key Safeguard Issues and Their Management D\. Summary of Key Safeguard Issues \. D\.1\. Describe any safeguard issues and impacts associated with the proposed project\. Identify and describe any potential large scale, significant and/or irreversible impacts\. Highways Improvements Land Resources and Land Use Unstable mountain slopes, snow avalanche and falling rock protection\. Mountain roads are susceptible to erosion of upside exposed slope surfaces, and slides onto the road\. Protection is needed against snow avalanches and falling rock\. This has been dealt with through covered road sections and retaining walls, as well as through a permanent maintenance capability\. Land degradation and erosion due to improper disposal of cut and borrow material\. Cut material on mountain roads can cause damage to agricultural and other lands if not disposed properly\. Similarly, borrow areas can be a source of erosion and stagnant water if not properly rehabilitated\. Temporary land taking for construction camps\. There are eight existing MPW camps along the road\. The contractor will be encouraged to utilize these areas\. Temporary land taking for construction camps will be limited and reversible\. Induced development and land use changes\. Improvement to the Project road is expected to facilitate a number of development activities already clearly underway – urban and housing development on the outskirts of Kabul and a revival of agricultural activities throughout the fertile valleys through which it passes\. Already several new petrol stations are sprouting along the road\. In the city of Kunduz, the right of way is sufficiently large such that there will be no need for land taking\. The road improvements may attract some roadside stands and stalls, which should be controlled in conjunction with local authorities, so as not to interfere with the shoulders and pose safety hazards\. Hydrology Mountain hydrology and erosion\. Roads built on mountain slopes accumulate rainwater runoffs, causing potential erosion problems\. Certain sections in the foothills and mountains are subject to severe erosion from rapid running adjacent rivers and streams\. Plain hydrology and cross drainage\. The road has been subject to flooding in low lying areas, which would require appropriately designed drainage structures, such as pipe or box culverts\. Irrigation channel within the road's right of way\. Particularly on the Khenjan – Doshi stretch, adjacent irrigation canals occasionally overflow onto the road, which may damage the road pavement and poses an inconvenience to motorized and non-motorized traffic and pedestrians\. In these cases, drainage structures need to be designed in conjunction with local communities\. Page 8 Erosion along rivers\. The road has been subject to severe erosion at certain zones passing along rivers\. Particularly at Malakhan, some river training or adjustment in the alignment may be necessary, which could affect some small stalls along the road\. Water Quality Groundwater and surface water pollution during construction of Salang Tunnel and snow galleries\. Increased risk of groundwater and/or surface water pollution due to leakage or spillage from diesel storage tanks for generators necessary for continuous operations\. Groundwater and surface water pollution during construction and maintenance\. Increased risk of groundwater and/or surface water pollution due to : (i) leakage or spillage from paving materials and construction machinery ; (ii) sanitation facilities at construction camps\. Spillage and leakage from motor vehicles\. Routine spillage not considered a major risk to the groundwater resources, although enforcement of vehicle quality standards will minimize this risk\. Major accidents involving hazardous materials could have negative effects, and may be minimized through enforcement of safety regulations and signposting of hazardous areas\. Social and Cultural Ineffective de-mining operations\. There is a risk that de-mining operations to be done prior to construction will not be fully effective, posing a safety risk to the contractor workers and residents\. Health and safety hazards of workers at the Salang Tunnel and snow galleries\. Particular safety risks are posed by potentially for poor ventilation in the tunnel and traffic diversions during the continuous work periods\. Health and safety hazards of workers and population during construction period\. Other safety risks of workers and local residents need to be considered, in respect of, among others, the added risk of health hazards in and around the construction camps due to poor sanitation and increased social interaction\. Local interference with traffic diversions\. Past experience with emergency tunnel cleanup has been that local commanders have hampered traffic diversions in the tunnel\. There is therefore a need for prior agreements on traffic diversions throughout the construction period\. Road safety and travel patterns through populated areas\. For those roads passing through populated areas, the construction of an embankment for the road could disrupt regular patterns or introduce safety concerns for activities such as water fetching by women and children\. In these cases, local consultations with women should identify such concerns and design measures, such as marked crossings an d speed reduction measures will be Page 9 introduced\. Land ownership and land acquisition\. Road improvements will occur on existing right- of-way only, which is generally sufficiently wide\. Through populated areas, the road may narrow slightly, so as to avoid building destruction or taking of agricultural land\. Minor land taking and movement of existing sheds may be necessary at Malakhan to adjust to hydrological requirements\. Currently the shops on the river side are exposed to erosion from the river\. At Jabal os Saraj, a number of moveable sheds (on wheels) that have located on the abandoned approach to the bridge may have to relocate when the bridge is repaired\. The permanent shops will not have to be moved\. No land taking is foreseen in the city of Kunduz, since the existing road width is very wide\. Archeological and historical sites\. Field reviews revealed no direct impact of the roads on archeological, burial or historical sites\. However, the Project will institute "chance find" procedures to ensure protection of such sites if found when opening borrow pits and material sites\. Graveyards and Burials \. Field reviews revealed a number of graveyards along the road\. These are referenced in the attached way points\. In all these cases, the road appears to have no direct impact on these sites, as they well outside the right of way\. However, care needs to be taken to avoid harm that could result from drainage or during construction\. The contractor will institute chance find procedures to manage situations when and if unrecorded graveyards and/or burial sites are found during the course of road works\. Local Employment\. Employment benefits are expected from the road improvement works\. Mechanisms to ensure that local populations are the beneficiaries will to be defined as much as possible and realistic, within the social and ethnic context of each road section\. Air Quality Additional dust and noise levels during construction\. Air and noise pollution expected to be of limited duration during construction period\. During the operational period, paving of the road will provide positive air quality benefits by significantly reducing the dust levels on and along on the road\. Poor ventilation in the Salang Tunnel\. Unacceptably poor ventilation is now a feature of he Tunnel\. Accidents in the tunnel have resulted in the suffocation of people due to lack of ventilation\. Improvements will therefore include rehabilitation of the ventilation system, while appropriate measures, such as traffic restrictions and tunnel closures during construction, are needed to protect workers from the risks of poor ventilation\. Secondary road improvements These improvements will be similarly carried out on current alignments, such that no major effects, land acquisition or resettlement are expected\. However, standard ESMP procedures and codes of practice will be applied to all such investments, which will ensure response to unforeseen or special circumstances\. Page 10 Procurement of airport equipment Repairs of the runway and procurement of airport equipment is aimed at increasing safety\. The key issue will involve the clearance of mines and unexploded ordnance from the areas where equipment will be installed\. Institutional and Sector Issues A Transport Sector Review and feasibility studies will identify other environmental issues to be dealt with on a project or sectoral basis in the future\. D\.2 Describe any potential indirect and/or long term impacts due to anticipated future activities in the project area\. The Project is not expected to engender long term negative impacts\. On the positive side, the introduction of institution-building activities should improve the prospects for mainstreaming environmental mitigation and management\. D\.3\. Describe the treatment of alternatives (if relevant) The Kabul-Salang-Doshi and Pol-e Khomri Roads is the only main highway connecting Kabul with the Northern Region\. In this corridor there are no alternative alignments due to difficult terrain, that could provide equivalent access and facilitate thru-traffic\. The no- action alternative would entail an accelerated degradation of this highway to a gravel road and a complete loss of road assets, thus incurring considerable road user costs\. D\.4\. Describe measures taken by the borrower to address safeguard issues\. Provide an assessment of borrower capacity to plan and implement the measures described\. The MPW will establish a Safeguards Focal Point, within the Planning and Implementation Group (P&IG), who will be responsible for implementing the ESMP Monitoring Plan\. Through the Safeguard Focal Point, the P&IG will monitor application of environmental measures for detailed design, construction and bidding for rehabilitation contracts for the project road\. The results of the monitoring activities will be included as routine elements of reports prepared by the supervising engineer and the P&IG\. Clearance of mines and unexploded ordnance will be addressed through specific procurement mechanisms adapted to particular sub-component needs: Solution 1 (Salang Tunnel and Adjacent Snow Galleries): Contractor is fully responsible and reimbursed for the cost of mine and UXO clearance; cost determined on a non- competitive basis\. This solution works well where prior risk is fairly well known and considered to be low, such that the provisional sum is expected to be close to the final negotiated amount\. This is the situation at the Salang Tunnel and Snow Gallery areas\. Solution 2 (Highway Rehabilitation - Kabul - Doshi, Pol - e Khomri Roads and future major Page 11 highway rehabilitation): Contractor is fully responsible and reimbursed for the cost of mine and UXO clearance; cost is entered by the contractors in their initial bids\. This solution is most applicable for large contracts, where there is a large and/or still unknown level of risk with respect to mines and UXO in the Extended Site\. Such is the case with the highway improvements along the Kabul – Doshi and the Pol-e Khomri Roads, as well as other larger scale highway improvements expected in the future\. Solution 3A (Rural Roads Component): Government, Project entity and/or community contracts for mine and UXO clearance; contractor maintains insurance for liability and damages\. This solution would be applied in the case of relatively small works, which utilize local contractors\. It is anticipated that this will be the case with most of the rural road subprojects\. Solution 3B (Rural Roads Component: Contractor assumes responsibility for contracting mine and UXO clearance services; price determined on a non-competitive basis\. This is a preferred solution where contractors have the capability to engage and manage the clearance services, particularly if the road improvements are bid as a "package" or an extension of the major highway improvement contracts\. Solution 4 (Airport Equipment Installation): Government or Airport Authority contracts for mine and UXO clearance; contractor maintains insurance for liability and damages \. This would seem to be the only solution to ensure that equipment is safely delivered and installed at the airport\. D\.5\. Identify the key stakeholders and describe the mechanisms for consultation and disclosure on safeguard policies, with an emphasis on potentially affected people\. Stakeholders: Residents and townspeople in the immediate vicinity of the Kabul-Salang-Doshi and Pol-e Khomri Road\. Transporters and other road users\. Ministry of Public Works, Planning and Implementation Group\. Local government officials and civic leaders Contractors and laborers for rehabilitation and maintenance activities\. Consultation: Public consultations were held at the towns of Khenjan (July 10, 2002), Kunduz (July 11, 2002) and Jabal os Saraj (July 14, 2002)\. In Jabal os Saraj, a separate women's consultation was also conducted\. These consultations confirmed that the proposed initial investment is a high priority for men and women\. The communities are keen to begin the Project and stated their willingness to assist the MPW, design team and contractor in project implementation\. Also discussed and agreed were community-based arrangements for compensation in the event of shifting of moveable stalls\. A record of these consultations is appended to the ESMP\. Consultations will be held as part of the ESMP process when screening and selecting additional rural roads for improvements\. Page 12 F\. Disclosure Requirements Date Environmental Assessment/Audit/Management Plan/Other: Date of receipt by the Bank 7/31/2002 Date of “in-country” disclosure 7/31/2002 Date of submission to InfoShop 8/20/2002 For category A projects, date of distributing the Executive Summary of the EA to the Executive Directors Not Applicable Resettlement Action Plan/Framework/Policy Process: Date of receipt by the Bank Not Applicable Date of “in-country” disclosure Not Applicable Date of submission to InfoShop Not Applicable Indigenous Peoples Development Plan/Framework: Date of receipt by the Bank Not Applicable Date of “in-country” disclosure Not Applicable Date of submission to InfoShop Not Applicable Pest Management Plan: Date of receipt by the Bank Not Applicable Date of “in-country” disclosure Not Applicable Date of submission to InfoShop Not Applicable Dam Safety Management Plan: Date of receipt by the Bank Not Applicable Date of “in-country” disclosure Not Applicable Date of submission to InfoShop Not Applicable If in-country disclosure of any of the above documents is not expected, please explain why\. Section III – Compliance Monitoring Indicators at the Corporate Level (To be filled in when the ISDS is finalized by the project decision meeting) OP/BP 4\.01 - Environment Assessment: Yes No Does the project require a stand-alone EA (including EMP) report? X If yes, then did the Regional Environment Unit review and approve the EA report? X Are the cost and the accountabilities for the EMP incorporated in the credit/loan? X OP/BP 4\.04 - Natural Habitats: Yes No Would the project result in any significant conversion or degradation of critical natural habitats? X If the project would result in significant conversion or degradation of other (non-critical) natural habitats, does the project include mitigation measures acceptable to the Bank? X OP 4\.09 - Pest Management: Yes No Does the EA adequately address the pest management issues? X Is a separate PMP required? X If yes, are PMP requirements included in project design? X Draft OP 4\.11 (OPN 11\.03) - Cultural Property: Yes No Page 13 Does the EA include adequate measures? X Does the credit/loan incorporate mechanisms to mitigate the potential adverse impacts on physical cultural resources? X OD 4\.20 - Indigenous Peoples: Yes No Has a separate indigenous people development plan been prepared in consultation with the Indigenous People? X If yes, then did the Regional Social Development Unit review and approve the plan? X If the whole project is designed to benefit IP, has the design been reviewed and approved by the Regional Social Development Unit? X OP/BP 4\.12 - Involuntary Resettlement: Yes No Has a resettlement action plan, policy framework or policy process been prepared? X If yes, then did the Regional Social Development Unit review and approve the plan / policy framework / policy process? OP/BP 4\.36 – Forests: Yes No Has the sector-wide analysis of policy and institutional issues and constraints been carried out? Does the project design include satisfactory measures to overcome these constraints? Does the project finance commercial harvesting, and if so, does it include provisions for certification system? OP/BP 4\.37 - Safety of Dams: Yes No Have dam safety plans been prepared? Have the TORs as well as composition for the independent Panel of Experts (POE) been reviewed and approved by the Bank? Has an Emergency Preparedness Plan (EPP) been prepared and arrangements been made for public awareness and training? OP 7\.50 - Projects on International Waterways: Yes No Have the other riparians been notified of the project? If the project falls under one of the exceptions to the notification requirement, then has this been cleared with the Legal Department, and the memo to the RVP prepared and sent? What are the reasons for the exception? Please explain: Has the RVP approved such an exception? OP 7\.60 - Projects in Disputed Areas : Yes No Has the memo conveying all pertinent information on the international aspects of the project, including the procedures to be followed, and the recommendations for dealing with the issue, been prepared, cleared with the Legal Department and sent to the RVP? Does the PAD/MOP include the standard disclaimer referred to in the OP? BP 17\.50 - Public Disclosure: Yes No Have relevant safeguard policies documents been sent to the World Bank's Infoshop? Page 14 Have relevant documents been disclosed in-country in a public place in a form and language that are understandable and accessible to project-affected groups and local NGOs? All Safeguard Policies: Yes No Have satisfactory calendar, budget and clear institutional responsibilities been prepared for the implementation of the safeguard measures? X Have safeguard measures costs been included in project cost? X Will the safeguard measures costs be funded as part of project implementation? X Does the Monitoring and Evaluation system of the project include the monitoring of safeguard impacts and measures? X Have satisfactory implementation arrangements been agreed with the borrower and the same been adequately reflected in the project legal documents? Signed and submitted by: Name Date Task Team Leader: Mitsuyoshi Asada 11/15/2004 Project Safeguards Specialist 1: Christophe E\. Bosch 11/16/2004 Project Safeguards Specialist 2: Asta Olesen 11/16/2004 Project Safeguards Specialist 3: Approved by: Name Date Regional Safeguards Coordinator: Comments: Sector Manager: Fabio Galli (Acting) 11/16/2004 Comments:

APPROVAL

P114409

Document of The World Bank FOROFFICIAL USE ONLY ReportNo: 47353-AM PROJECTAPPRAISAL DOCUMENT ONA PROPOSEDGRANT INTHEAMOUNTOF US$1\.5 MILLION TO THE REPUBLICOF ARMENIA FORA GEOFUND2: ARMENIA GEOTHERMALPROJECT INSUPPORTOFTHEGEOTHERMALENERGYDEVELOPMENTPROGRAM (ADAPTABLELENDINGPROGRAM)PHASE I1 February 5,2009 This document has a restricted distribution and may be used by recipients only in the performance o f their official duties\. Its contents may not otherwise be disclosed without World Bankauthorization\.  CURRENCY EQUIVALENTS (Exchange Rate Effective January 22,2009) Currency Unit = Armenian Dram AMD306 = US$1 FISCAL YEAR January 1 - December31 ABBREVIATIONS AND ACRONYMS 3D Three dimensional APL Adaptable Program Loan ASRA Accounting Standards of the Republic of Armenia BOT Board of Trustees CFAA Country Financial Accountability Assessment CPAR Country Procurement Assessment Review EA Environmental Assessment EBRD EuropeanBank for Reconstruction and Development ECA Europeand Central Asia EMP Environmental ManagementPlan FM Financial Management F M M Financial Management Manual FMR Financial Management Report GEF Global Environmental Facility GHG GreenHouse Gas GPN General ProcurementNotice GPOBA Global Partnership on Output-basedAid IDA International Development Association IFR InterimUnaudited FinancialReport ISDS Integrated SafeguardsData Sheet JBIC Japanese Bank for International Cooperation MOE Ministry of Energy M T Magneto-telluric M W Megawatt NGO Non-Governmental Organization PDO Project Development Objective PEFA Public Expenditure Financial Accountability Assessment PFM Public Financial Management PFS Project Financial Statements PRSP Poverty Reduction Strategy Paper PSRC Public Services Regulatory Commission R2E2 Renewable Resourcesand Energy Efficiency REP Renewable Energy Project SOE Statement of Expenditures TA Technical Assistance UHP Urban Heating Project  FOROFFICIAL USEONLY Vice President: Shigeo Katsu Country Director: Asad Alam Country Manager Aristomene Varoudakis Sector Manager: Gary Stuggins Task Team Leader: Ani Balabanvan This document has a restricted distribution and may be used by recipients only in the their official duties\. Its contents may not be otherwise disclosed without World Bank   REPUBLIC OF ARMENIA GEOFUND 2: ARMENIA GEOTHERMAL PROJECT CONTENTS Page I STRATEGICCONTEXTANDRATIONALE \. \. 1 A\. Country and sector issues \. 1 B\. Rationale for Bank involvement\. 3 C \. Higher level objectives to which the project contributes \. 3 I1\. PROJECT DESCRIPTION \. 3 A \. Lending instrument\. 3 B\. GeoFund Program objective and Phases \. 4 C\. Project development objective and key indicators \. -4 D\. Project components\. 4 E \. Lessons learned and reflected inthe project design \. 5 F\. Alternatives considered and reasonsfor rejection\. 5 I11\. IMPLEMENTATION \. 6 A\. Partnershiparrangements \. 6 B\. Institutional and implementation arrangements \. 6 C\. Monitoringand evaluation of outcomeshesults \. 6 D\. Sustainability and Replicability\. -6 E \. Critical risks and possible controversial aspects \. 7 F\. Loadcredit conditions and covenants \. 7 I V \. APPRAISAL SUMMARY \. 7 A\. Economic and financial analyses\. 7 B Technical \. -7 \. C\. Fiduciary\. 8 D\. Social \. 9 E\. Environment \. 9 F\. Safeguardpolicies\. \. \. 9 G \. Policy Exceptions and Readiness\. -10 Annex 1: Country and Sector or ProgramBackground \. 11 Annex 2: Major RelatedProjectsFinancedby the Bankand/or other Agencies \.14  Annex 3: ResultsFrameworkand Monitoring \. 15 Annex 4: DetailedProjectDescription \. 18 Annex 5: ProjectCosts \. 20 Annex 6: ImplementationArrangements \. 21 Annex 7: FinancialManagementand DisbursementArrangements \. 22 Annex 8: ProcurementArrangements \. 27 Annex 9: Economicand FinancialAnalysis \. 32 Annex 10: SafeguardPolicyIssues \. 33 Annex 11:ProjectPreparationand Supervision \. 35 Annex 12: Documentsin the ProjectFile \. 36 Annex 13: Statement of Loans and Credits \. 37 Annex 14: Countryat a Glance \. 39 Annex 15: IncrementalCost Analysis \. 41 Annex 16: STAP Roster Review \. 42 Annex 17: Map \. 43  REPUBLIC OF ARMENIA GEOFUND 2: ARMENIA GEOTHERMAL PROJECT PROJECT APPRAISAL DOCUMENT EUROPE AND CENTRAL ASIA ECSSD Date: February 5, 2009 Team Leader: Ani Balabanyan Country Director: Asad Alam Sectors: Renewable energy (100%) Sector ManagedDirector: Gary Stuggins Themes: Climate change (P);Pollution Project ID: P114409 management and environmental health Focal Area: Climate change (P);Vulnerability assessment and monitoring Environmental Assessment: Not Required (S) Lending Instrument: Adaptable Program Loan-Phase 2 [ ] Loan [ 3 Credit [XI Grant [ ] Guarantee [ ] Other: For Loans/Credits/Others: Total Bank financing (US$m\.): 1\.SO Global Environment Facility (GEF) 0\.00 1\.so 1\.so Total: 0\.30 1\.so 1\.80 Recipient: Republicof Armenia ResponsibleAgency: Ministry of Energyand NaturalResources Project implementation period: Start April 30, 2009 End: October 31,20 10 Expected effectiveness date: April 30, 2009 Expected closing date: April 30, 2011 ~~ ~~ ~~~ ~~ Does the project depart from the C A S incontent or other significant respects? Ref: PAD I\.C\. [ ]Yes [XINO Does the project require any exceptions from Bank policies? Ref: PAD IV\.G\. Have these been approved by Bank management? I s approval for any policy exception sought from the Board? [ ]Yes [XINO Does the project include any critical risks rated "substantial" or "high"? Ref: PAD IILE\. [ ]Yes [XINO  Does the project meet the Regional criteria for readinessfor implementation? Ref PAD I K G\. [XIYes [ ]No \., Project development objective Ref: PAD II\.C\., TechnicalAnnex 3 The project development objective is to assess the feasibility of exploratory drilling of the geothermal site with the estimatedhighest geothermal potential\. Global Environment objective Ref: PAD II\.C\., TechnicalAnnex 3 The global environmental objective is to remove the barriers to development of geothermal energy\. Project descriptionRef: PAD II\.D\., TechnicalAnnex 4 The Project will support (i) technical assistance to conduct comprehensivetechnical investigation works at Karkar and Gridzor geothermal sites, intwo phases, and (ii) operating costs of the implementing agency for this project Which safeguardpolicies are triggered, ifany? Ref: PAD IKF\., TechnicalAnnex 10 The Project category is "C' as no negative or only very minor environmental impacts are expectedto result from the TA activities\. Significant, non-standardconditions, if any, for: Ref: PAD III\.F\. Board presentation: Loadcredit effectiveness: 0 The Subsidiary Agreement betweenthe M E 2 Fundandthe Recipienthas been duly executed\. 0 The Project Agreement betweenthe WE2 Fundand the Bankhas beenduly executed\. Covenants applicable to project implementation: 0 The Recipient will ensure that the results of comprehensive field investigation works for Gridzor and Karkar sites are made publicly available andthat private sector involvement in further exploration and development ofthese two sites is carried out inatransparent and competitive manner\. 0 The funding for the Phase I1 investigation works will be available only if Phase 1 investigation works result in identification of one site which proves to have satisfactory resistivity of the rock formation, established through duly applied testing and verified empirical data and scientific methods\. The R2E2 Fundwill maintain a financial management system acceptableto the Bank\. The R2E2 Fundandproject financial statements, including Statement of Expenditures (SOEs) and DesignatedAccount Statements will be auditedby independentauditors acceptableto the Bank andonterms of referenceacceptableto the Bank\. The annual audited statements and audit report will be provided to the Bank within six months ofthe end of eachfiscal year\.  I\. STRATEGICCONTEXTANDRATIONALE A\. Country and sector issues 1\. The Republic o f Armenia has limited energy resources to satisfy its needs\. Armenia does not have fossil fuel reserves\. Thermal and nuclear power generation account for about 70% o f the total electricity generation in Armenia (see Figure 1) and the country imports all o f the fuel required for the operation o fthermal and nuclear plants\. Figure 1:ElectricityGenerationMix I 100% 80% 60% 40% mThermal GWh 20% e Nuclear GWh 0Yo I 2000 2001 2002 2003 2004 2005 2006 2007 I 2\. A decade o f reforms in the country's energy sector has produced impressive results\. The sector's financial performance has greatly improved turning it into a major tax payer in the country; the payment discipline i s robust; losses have reduced substantially and the overall efficiency and quality o f supply have improved\. Over 70% o f generation assets and the distribution are privately owned and there i s a competent and independent regulatory agency for the sector\. 3\. Currently Armenia has adequate electricity generation capacity to meet its demand (the peak load i s around l,200MW), however, operating limitations, supply uncertainties, ageing and conditions o f generation facilities and inadequate peak load capacity may jeopardize Armenia's ability to sufficiently meet both domestic and export demand in the future\. In addition, as demand is expected to grow 2-3 percent annually, Armenia will have to invest significantly in new generation capacity and rehabilitation o f existing capacity in order to continue to meet future needs (see Figure2)\. 1  Figure 2: Armenia's forecasted electricity generation capacity and consurn]Ition* 1 millionkwh 12 000 10 000 8 000 6 000 4 000 2 000 - ~- ~- -- Nuclear generation -1 Large hydro generation CT Exist,ngthermal generation mNewthermalcapacity(YTPP) ~- - _____Small- renewables - -_ e- Demand _ L = z - ~ * The dw~rnption~ those or the Hank team art' ** Thermal capacity projection includes the new Yerevan thermal power unit of 210 M W installed capacity to be constructed through JBIC funding 4\. The Government has prioritized the development o f indigenous renewable energy resources in Armenia as a means to increase energy diversification and achieve a higher degree o f energy security\. The Energy Law, the Law on Renewable Energy and Energy Efficiency and the Energy Sector Strategy clearly articulate the importance o f renewable resources and provide a framework for facilitating their development\. Overall, the legal and regulatory framework in the country i s supportive to renewable energy development\. The electricity off-take is guaranteed for 15 years for each small renewable plant; and the Public Services Regulatory Commission (PSRC) guarantees the following tariffs for the same period: US$ 0\.056/kWh for newly constructed small hydro power plants on natural water flows, US$ 0\.115/kWh for wind and US$ 0\.108kWh for biomass\. 5\. As the import prices o f fossil fuels in Armenia move closer to the prices paid by European countries, the renewable-based electricity generation becomes increasingly competitive with other forms of electricity generation\. 6\. Armenia has an estimated 740 megawatt (MW) o f small hydropower, wind and geothermal resources\. The results o f studies to estimate geothermal potential o f the country suggest a high likelihood o f the existence o f geothermal resources which could be used for electricity generation purposes\. The optimism i s justified by the broad presence o f young volcanic areas, numerous outcrops of mineral waters and the activity o f tectonic-magmatic processes with relatively small geological age\. Additionally, there are regions with abnormally high values of geothermal gradient and heat flow densities\. Based on the results of studies on identification o f prospective geothermal sites and subsequent discussions with international and local experts, the following prospective sites for further comprehensive field investigation works were proposed: (1) Karkar site, located on the Syunik plateau in the South Eastern part of Armenia, and (2) Gridzor site, located on the Gegham mountain plateau along the Western shore o f Lake Sevan\. While the abovementioned preliminary studies are encouraging regarding the overall potential of the country for development o f geothermal resources, actual field investigations o f specific sites either have not been undertaken or have been very limited in scope\. Therefore, because o f the lack o f thorough site investigation works and no confirmed 2  deposits, the private sector's interest indevelopment of geothermal energy resources inArmenia has also beenvery limitedto date\. B\. Rationalefor Bankinvolvement 7\. The Bank has knowledge and significant experience with geothermal projects globally\. The Bank, with Global Environmental Facility (GEF) support, establishedthe GeoFund with the sole purpose to assist the Europe and Central Asia (ECA) countries in increasing the use of geothermal energy\. The proposed GeoFund 2: Armenia Geothermal Project is an integral part of that effort, and will promote development of renewable energy inArmenia by enabling informed decision-making to fixther explore the geothermal resources through exploratory drilling\. The GeoFund involvement promotes risk reduction in geothermal projects through TA and other means\. 8\. In addition, the Bank has experience and knowledge in implementing GEF programs, including the GeoFund\. The Bank is active in the renewable energy sector of Armenia and i s currently implementing the International Development Association (IDA)-GEF financed Renewable Energy Project (REP)\. Some geothermal energy project preparatory works were financed under the REP, however, most of project funds are committed and hence financing of the currently proposed field investigation works from that source would not be possible\. C\. Higherlevelobjectivesto which the projectcontributes 9\. The global environmental objective of the project is to remove the barriers to development of geothermal energy\. The project is in line with Armenia's Poverty Reduction Strategy Paper (PRSP), which prioritizes strengthening of the country's energy security by facilitating the development of indigenous renewable energy resources\. The project addresses the priorities outlined as well inthe national Energy Sector Strategy, which include diversification of the energy resource base through reliance on renewable energy resources\. The proposed project i s also consistent with the latest Country Assistance Strategy (June 30, 2004, N28991) for Armenia as it will enable Armenia to improve environmental sustainability through reduction of green-house gas (GHG) and other emissions\. Finally, the project supports the GEF Operational Program #6: Promoting the adoption of renewable energy by removing barriers and reducing implementation costs\. 11\. PROJECTDESCRIPTION A\. Lendinginstrument 10\. The project will be financed through a US$ 1\.5 million grant from the technical assistance (TA) window of the GEF supported GeoFund program\. The grant will finance technical assistance for field investigation works at two geothermal sites\. The lending instrument i s Phase I1 of a larger Adaptable Program (GeoFund APL) approved on November 14, 2006, of which the aggregate is not to exceed US$ 25 million (see discussion of phasing and triggers in Annex 1, Section 2)\. 3  B\. GeoFundProgram objective and Phases 11\. The Program objective of the GeoFund is to systematically promote the use of geothermal energy in the ECA region by removing barriers to the development of renewable energy\. The most important barriers include: (i)lack o f knowledge and information; (ii)weak institutional, policy, legal and regulatory systems, and (iii) financial systems\. In pursuing weak the above objective, the Program: 0 Provides technical assistance for capacity building, methodological, informational, and institutional support that will lead to changes in the current unfavorable investment and incentive conditions and create an enabling environment in participating ECA countries that fosters the development of geothermal energy utilization for heating and power generation applications; Increases financing available through extending geological risk insurance to mitigate the geological risks (barrier i)which would help facilitate commercial lending to geothermal projects through leveraging private finance, and through providing grants through the Direct Investment Funding window\. C\. Project development objective and key indicators 12\. The project development objective (PDO) is to assess the feasibility of exploratory drilling of the geothermal site with the estimatedhighest geothermal potential\. 13\. The key performance indicator is the decision whether to drill or not to drill exploratory wells for the geothermal sites, based on the results of site investigation works\. 14\. The scope of this project will be limited to technical assistance for comprehensive field investigation works\. Conditional upon the outcome of the field investigation works, further GeoFund support may be considered for Armenia, within the framework of the abovementioned GeoFund APL\. More specifically, this possible second project could be supported through the GeoFund's Direct Investment Funding window or Geological Risk Insurance window to help financing of investments enabling utilization o f geothermal energy resources\. Eligible investment costs could include the drilling costs of exploratory wells\. The GeoFund may consider supporting part of the eligible drilling costs of one or two wells with the estimated depth of 3 km (indicative total amount: US$6 million, of which US$5 million from the GeoFund and U S $ l million from the Government)\. D\. Project components 15\. Component 1: Technical assistance (US$ 1\.8 million, including GeoFund financing of US$ 1\.5 million and Government co-financing of US$ 0\.3 million) to conduct comprehensive investigations works\. This component covers the following areas: A\. Technical Investigation (indicative amount of US$ 1\.74 million): The field investigation works at Karkar and Gridzor geothermal sites will be carried out in two phases\. The second 4  investigation phase will depend on the results of the first and will be carried out only if the results are positive enough to justify additional studies: Phase Iwill include: (i) geological field works (scouting)', (ii)magneto-telluric (MT) sounding study, (iii)interpretation of the results of the M T sounding; and (iv) supervision of the implementation of the scope of geological field works and MT sounding study\. Phase I1will include: (i) a three dimensional (3D) seismic survey of the most prospective of the two geothermal sites, (ii) interpretation of the results of 3D seismic studies; (iii)supervision of the implementation of the scope of 3D seismic study; and (iv) assessment of the economic and financial viability of the geothermal site with the highest estimatedtechnical potential\. B\. Project Implementation (indicative amount of US$ 60,000): Financing of the incremental operating costs of the implementing agency for this project\. E\. Lessons learnedand reflectedinthe project design 16\. The Bank and GEF have been involved in the preparation and implementation of several geothermal district heating operations, such as in Lithuania (Klaipeda) and in Poland (Podhale, Stargard)\. The field investigation works were structured to include the key studies essential for ensuring acceptable reliability of the geological data to justify exploratory drilling\. Moreover, the project's two-phased TA design drew from the international experience of similar projects to ensure efficient use of the project funding\. Inparticular, no further site investigation works will be initiatedifthe first phase study results do not warrant continuation\. F\. Alternativesconsideredand reasons for rejection 17\. The following alternative project approaches were considered: 18\. Drilling of exploratory wells withoutfurther investigation\. This possibility was not pursuedas the current data on the sites doesnotjustify the higher expense associatedwith drilling o f exploratory wells until more comprehensive site investigation information is available\. 19\. Leaving development of the geothermal sites entirely to the private sector\. While the private sector will have a significant role to play in eventual development of Armenia's geothermal resources, experience elsewhere has shown that they are unlikely to move forward on the basis of only the level of data available on the sites under consideration in Armenia\. Therefore, there is an important role for the government and the GeoFund in supporting the proposed site investigation activities at this stage\. ' Geologicalfieldscouting includesidentificationand mappingof fault structures, potentialrecharging zones, and recordingand description of surface geothermal manifestations like hot and mineralsprings, fumaroles and zones with hydrothermally alternatedrocks\. 5  111\. IMPLEMENTATION A\. Partnershiparrangements 20\. N o other partners are involved at this stage, as the availability o f the geothermal resources i s not yet confirmed at any o f the sites\. B\. Institutionalandimplementationarrangements 21\. The project will be implemented by the Renewable Resources and Energy Efficiency Fund (R2E2) Fund, a non-profit organization established by the Government Decree No 799 dated April 28, 2005, with the mandate to promote the development o f renewable energy and energy efficiency markets inArmenia and to facilitate investments inthese sectors\. 22\. Project implementation, as well as overall R2E2 Fund operations, will be supervised by the Board of Trustees (BOT) consisting of qualified experts from the public sector, NGOs, and the private sector, thus, ensuring required professional expertise\. The BOT i s chaired by the Prime Minister\. 23\. The R2E2 Fundhas adequate capacity to implementthe project due to solid professional qualifications o f its staff\. Additionally, the R2E2 Fund has built up significant project implementation capacity as it is the implementing agency for the REP, Urban Heating Project (UHP) andthe Global Partnership on Output-based Aid (GPOBA) Gas and Heating Project\. 24\. The project funds will be made available to the R2E2 Fund after meeting the grant effectiveness conditions as per Section F\. C\. Monitoringand evaluationof outcomeshesults 25\. The Ministry o f Energy and Natural Resources will supervise the overall R2E2 Fund activities within the scope o f the project and will ensure that these are well aligned with the policy objectives o f the Government renewable energy policies\. 26\. The R2E2 Fund will have the overall responsibility for project implementation and for monitoring o f project outcomes\. The data for the project outcome and the results indicators will be acquired from the reports submitted by the consultants selected to implement geothermal site investigation works\. Since the R2E2 Fund has substantial experience with reviewing and monitoring o f studies under the IDA-GEFfinanced Renewable Energy Project and IDA financed UrbanHeating Project, there is no need for capacity strengtheningto ensure effective collection and analysis o f project outcome indicators data\. The costs associated with the monitoring and evaluation o f the project outcomes are integrated into project costs\. D\. SustainabilityandReplicability 27\. If the site investigations supported by the project confirm potential of the sites, and subject to subsequent exploratory drilling, the prospects for longer-term sustainability o f the objective o f developing Armenia's geothermal potential are quite good given the level of 6  Government commitment, supported by existing policies and regulations for the development o f indigenous renewable energy resources\. If field investigation works confirm availability o f geothermal resources required for electricity generation, then the Government plans to proceed with exploratory drilling of the sites\. 28\. The proposed comprehensive site investigation works will create experience for exploratory works implemented in accordance with best international practices\. Thus, the acquired experience may be applicable for other geothermal sites inthe country and may also be used inother countries with similar geology\. E\. Criticalrisksand possible controversial aspects 29\. There are no major risks identified to impede achievement o f the project development objective\. The overall country and sector risks are also very modest\. No controversial aspects were identified\. F\. Loadcredit conditions and covenants 30\. Conditionsfor GEFgrant effectiveness: The Subsidiary Agreement between the R2E2 Fundandthe Recipient has been duly executed\. e The Project Agreement betweenthe R2E2 Fundand the Bank has been duly executed\. 3 1\. GEF Grant covenants: 0 The Recipient will ensure that the results o f comprehensive field investigation works for Gridzor and Karkar sites are made publicly available and that private sector involvement in further exploration and development of these two sites i s carried out in a transparent and competitive manner\. 0 The funding for the Phase I1 investigation works and project implementation under Component 1\.A will be made available only if Phase 1 investigation works result in identification o f one site which proves to have satisfactory resistivity o f the rock formation, established through duly applied testing and verified empirical data and scientific methods\. e The W E 2 Fund will maintain a financial management system acceptable to the Bank\. The R2E2 Fund and project financial statements, including Statement of Expenditures (SOEs) and Designated Account Statements will be audited by independent auditors acceptable to the Bank and on terms o f reference acceptable to the Bank\. The annual audited statements and audit report will be provided to the Bank within six months o f the end of each fiscal year\. IV\. APPRAISAL SUMMARY A\. Economic and financial analyses 32\. No economic or financial analysis was conducted since the project finances only TA\. B\. Technical 7  33\. The investigation sequence encompasses: (i)geological field scouting involving the identification and mapping o f fault structures, potential recharging zones, and the recording and description o f surface geothermal manifestations; (ii)performing MT sounding for the two selected potential geothermal fields; (iii) interpretation o f the results o f MT sounding including production o f cross sections with the visualization o f the rock formation resistivity, and critical review o f results to select the most promising geothermal field for further development, if any; (iv) execution o f 3D reflection seismic surveying in form o f grid o f perpendicular profiles; (v) interpretation o f the results o f 3 D seismic survey field works involving production o f 3 D images o f the subsurface structure and preparationo f cross-sections\. C\. Fiduciary 34\. Procurement\. The organization o f procurement work for the proposed project will be carried out by the R2E2 Fundwhich has a good track record o f implementing Bank projects\. The proposed project includes procurement of consulting services\. The procurement for contracts under the Component A will be conducted by the R2E2 Fund in accordance with the Bank procurement guidelines and will follow standard Bank procurement methods\. The R2E2 Fund prepared a draft procurement planwhich will be agreed upon during negotiations and attached to the minutes o fnegotiations\. Duringthe implementation o fthe Project, the procurement planwill be updated by the WE2 Fundas requiredinagreement with the Bank to reflect the actual project implementationneeds\. Furtherdetails related to procurement arrangements are outlinedinAnnex 8\. 35\. Financial management\.The R2E2 Fund will be responsible for implementation o f the Financial Management (FM) function o f the project including, flow o f funds, budgeting, accounting, reporting, and auditing\. R2E2 Fund currently implements UHP, REP GPOBA Gas and Heat projects\. 36\. Fiduciary Risk at the Project Level\. The FM arrangements o f R2E2 Fund have been reviewed periodically as part o f previous project supervisions and overall have always been found satisfactory\. Based on the FM assessment, it was established that the R2E2 Fund has overall acceptable FM arrangements in place: particularly, (i)accounting and reporting is performed in adequate accounting software; (ii)the well systematized filing system allows keeping all supporting financial documentation; and (iii) annual audits o f the active projects were satisfactory\. 37\. The overall financial management risk for the project before mitigation measures is moderate and after mitigation measures, the risk i s low\. 38\. As the Project will be implemented inan environment where corruption can be perceived as an important issue, adequate mitigation measures have been put in place and will be closely monitored to ensure that the residual project risk i s acceptable, including: (a) the Government's move towards e-procurement and use o f public websites to disseminate tenders and announce results; (b) a formal internal control framework described in the Financial Management Manual; (c) the flow of funds mechanism agreed with the Recipient will be enforced; (d) the project and R2E2 Fundfinancial statements will be audited by independent auditors and on terms acceptable 8  to IDA; and (e) regular FM supervision and procurement prior and post reviews will be conducted to monitor and assess the corruption risk\. 39\. Fiduciary Risk at the Country Level\. Based on the Country Financial Accountability Assessment (CFAA) and Country Procurement Assessment Review (CPAR) assessments of the fiduciary risk as significant and high\. Hence, at this time no elements of the country F M systems are planned to be used under the project, although the use of the country Public Financial Management (PFM) systems for project implementation will be considered, as the Government progresses with the PFM reforms in internal and external audits, internal control framework, accounting standards, treasury and budgeting systems\. As the banking arrangements with a local commercial bank (HSBC Bank Armenia) have been found satisfactory under other Bank projects, they will remain inplace during Geothermal project implementation\. D\. Social 40\. The project includes only TA and no investment activities\. Therefore no negative social impacts or issues in need of particular attention are foreseen\. The TA activities will be implementedon publicly owned land, which is not being use for any economic purpose\. E\. Environment 41\. The project environmental classification is "Cy, as it supports only TA activities and no negative or only very minor environmental impacts are expected to result from this technical assistance\. In any case a simple environmental management plan (EMP) will be produced to instruct staff executing the field surveys to minimize any potential environmental impacts, such as preservation of vegetation, minimizing vehicle traffic, avoiding littering and accidental pollution and restoring any disturbances due to fieldworks (e\.g\. small craters from explosives during seismic survey)\. 42\. If the outputs of the TA suggest that drilling of exploratory wells is justified, then the Intergraded Safeguards Data Sheet (ISDS) will be modified to reflect the change in Environmental Assessment (EA) category (from C to B) and consequently a comprehensive EMP for the drilling works will be financed under this project\. The Terms of References (TORS) for the EMP as well as the EMP itself will be disclosed in-country and inthe Infoshop\. F\. Safeguard policies Safeguard Policies Triggered by the Project Yes No Environmental Assessment (OP/BP/GP 4\.01) [I [XI Natural Habitats (OP/BP 4\.04) [I [XI Pest Management (OP 4\.09) [I [XI Cultural Property (OPN 11\.03, being revised as OP 4\.11) [I [XI InvoluntaryResettlement(OP 4\.12) 11 [XI Indigenous Peoples (OD 4\.20, being revised as OP 4\.10) [I [XI Forests (OP/BP 4\.36) [I [XI 9  Safety of Dams(OP/BP 4\.37) ( 1 [XI Projects inDisputed Areas (OP/BP/GP 7\.60)* [I [XI Projects on International Waterways (OP/BP/GP 7\.50) 11 [XI G\. Policy Exceptions and Readiness 43\. The project requires no Bank policy exceptions\. * By supporting theproposedproject, the Bank does not intend toprejudice thefinal determination of theparties' claims on the disputed areas 10  Annex 1: Country and Sector or ProgramBackground ARMENIA: GEOFUND 2: ARMENIA GEOTHERMAL PROJECT 44\. Since Armenia i s located ina zone o f hightectonic activity and recent volcanism, several studies have been conducted to make preliminary assessment o f the geothermal potential o f the country in general and some sites in particular\. These studies have all confirmed existence o f geothermal resources in territories o f the country\. Development o f geothermal resources will enable the reduction o f the reliance on imported fuels, increase country's energy security and contribute to reduction o f green house gases and other pollutants\. Additionally, geothermal i s the most reliable form o f renewable base-load power\. 45\. The 1998 USAIDfunded study2confirmed that Armenia has numerous low temperature (cooler than 100OC) geothermal resource areas located mostly within the belt o f Quaternary volcanism and elevated heat flow that trends northwest-southeast through the central part o f the country\. The location and extent o f some o f these resources make them suitable to be utilized for space heating, greenhouse heating, other agricultural applications and expanded recreational use\. Numerous Quaternary volcanic centers are present in the studied belt and geologic mapping confirmed the continuous nature o f volcanism in these areas since the Lower Pliocene or Upper Miocene time\. However, the study was limited in scope and geographical coverage and warranted additional efforts to expand the identified geothermal resources base\. The study also suggested the possibility o f the existence o f geothermal resources at distinct zones o f young volcanic activity within the belt o f the Aragats Mountain massif (one o f the sites to be explored under this project is located in the proximity) and related subsidiary volcanic centers at the northwestern end; the Gegham Mountains trending south-southeastward along the shore of Lake Sevan (in the proximity o f Yeratoumber site to be explored within this project); the East-West trending Vardenis Mountains, located south o f Lake Sevan; and the Karabakh Upland, which trends southeastward into the southernmost part o f Armenia\. 46\. A number o f seismic-exploratory, gravel magnetic, electro-exploratory, geothermal and geological studies have identified the Syunik volcanic plateau located in the south-east o f the country as an attractive region with its geothermal resources\. The geo-physical data (high geothermal gradient and heat flow, higher lever o f temperature o f transformation o f ferromagnetic to paramagnetic, presence o f high conductive zones in the Earth's crust, seismic heterogeneity o f one o f the high-potential sites in the southern part o f Armenia) indicated that Jermakhpyur site in the southern part o f Armenia can be o f high-potential\. A reconnaissance study, financed by the Danish Government and completed in April 1998, identified the Jermakphur area in Suinik as most suitable for electricity generation3, estimated to have an electricity potential of 25MW\. These findings have been confirmed by the additional geophysical and geochemical investigations carried out by the Ministry o f Energy in2004\. 47\. The 2001 European Bank for Reconstruction and Development (EBRD) funded study4 findings suggest that a narrow zone inthe central part o f Armenia (where the Yeratoumber site is 2Roger Hanneberger, David Cooksley and John Hallberg, "Geothermal Resourcesof Armenia," GeothermEx, Inc\., 2000\. 3Yerevan Geothermal Pilot Project- ReconnaissanceStudy, PetroleumGeology InvestigatorsAh, April 1998) "Renewable Energy ResourceAssessment: Armenia," EBRD,2001 11  located) is considered to have the best potential\. The geothermal gradient here reaches 500" C/km\. The maximum measured temperature in the deeply occurring reservoirs was 140" C\. Geothermal reservoirs in porous rocks containing high-temperature thermal water were investigated insome places confirming the likelihood of temperatures above 100 " C at depths of over 2\.5 km\. 48\. The 2007 GEF financed study5to identify prospective high geothermal capacity sites in Armenia confirmed the high likelihood of existence of high-potential geothermal resources on the territory of Armenia\. The estimated high likelihood of the presence of high-capacity geothermal resources isjustified by the pervasivenessof young volcanism, numerous outcrops of mineral waters and the activity of recent-age tectonic-magmatic processes\. Additionally, there are regions with abnormally high values of geothermal gradient and heat flow density recorded inthe courseofthe implementedgeothermal investigatory works\. The study concluded that high- potential heat carriers (higher than 100" C) could be found inthe regions of active manifestations of the most recent volcanism such as volcanic mountain shields of Syunik and Gegham and a few sites of relatively younger volcano sites surrounding the thick volcanic massif of Aragats\. 49\. While several studies have been undertakento estimate the potential of the geothermal energy development in the country, private sector interest is very limited as there have been no comprehensive site investigation works conducted yet to confirm the availability of the geothermal resource\. 50\. The GeoFund is a region-wide and multi-country program using the financial instrument of a horizontal APL which allows for uninterruptedproject implementation through right timing that also allows time for necessaryadjustments and changes inproject design\. 51\. Program phases: The GeoFund is being implemented in a series of individual subprojects over a period of eight years\. To assure high quality and achievement of the defined project goals as well as to provide support in a flexible manner, the Program is being implemented on a project by project basis\. 52\. The GeoFund is a new and innovative approach to barrier removal for the utilization of geothermal energy combining several instruments\.Its systematic approach allows adjusting and refining the specifications of its instruments based on experience gained during the Program implementation and changing market conditions\. This will not only enhance each subproject's results but also maximizethe impact of the utilized funds\. 53\. APL triggers: Two sets of triggers apply under the horizontal APL: project triggers which determine when an individual investment is eligible to receive Bank funds, and policy triggers determine the eligibility of an individual country to receive Bank assistance under the APL program\. 54\. Armenia meets the following policy triggers: 'IdentificationofProspective High GeothermalCapacity Sites inthe RepublicofArmenia," Renewable Energv and Energv Efficiencv, Armenia, 2007 12  0 The Minister of Nature Protection, the GEF focal point, endorsed the GeoFund Program\. 0 The Armenian Government endorsed the National Program on Renewable Energy and Energy Efficiency, which establishedthe country program on REdevelopment\. 55\. The Project triggers below were met: The Armenian government committed project co-financing in a ratio of 1:s (US$ 300,000)\. 0 The project was appraised according to Bank's guidelines\. Armenia meets the project eligibility criteria as describedbelow\. 56\. Proiect Elinibilitv: Armenia complies with basic eligibility criteria below for receiving support from the GeoFund: a) Armenia i s an eligible country; b) The project conforms to the laws, regulations, objectives, and respective development priorities of Armenia as reflected inthe Law on Energy, Law on Energy Efficiency and Renewable Energy, energy sector regulations and the Energy Sector Strategy; c) The project complies with applicable social, environmental and safeguard policies of the World Bank; d) The project meets the requirements set out inthe Bank's Articles of Agreement and the relevant provisions of World Bank Operational Manual; e) The endorsement letter from the Minister of Nature Protection, the GEF Focal Point for Armenia, was submitted\. 13  Annex 2: Major RelatedProjectsFinancedby the Bankand/or other Agencies ARMENIA: GEOFUND 2: ARMENIA GEOTHERMAL PROJECT 57\. The project design has benefited from past projects financed by the World Bank and other donors inthe country\. Sector Issue Project Latest SupervisionRatingsfor Increase the share o f renewable Renewable Energy Project S S energy inthe generation mix through elimination o f barriers to development o f renewable energy Enable the successful adoption UrbanHeating Project S S and continued use of clean, efficient, safe, and affordable heating inmulti-apartment buildingsandschools Improve the measurability and Electricity Transmission and accountability o f the electricity Distribution Project and revenue flows inthe energy sector, reducetechnical losses, increase system availability and improve financial sustainability o f the sector companies\. Non-Bankfinanced Promote development o f Renewable Energy Project renewableenergy inArmenia, financed by KfW mainly targeting small hydropower 14  Annex 3: ResultsFrameworkand Monitoring ARMENIA: GEOFUND2: ARMENIA GEOTHERMAL PROJECT ResultsFramework PDO/GlobalEnvironmental ProjectOutcomeIndicators Use of Project Outcome Information The project development Decisionwhether to drill or not The outcome indicatorwill objective is to assess the to drill exploratorywells for the demonstrate whether the feasibility of exploratory drilling geothermal sites, basedon the exploratorydrilling of one or two ofthe geothermal site with the results of site investigationworks wells isjustified highest estimatedgeothermal potential\. The globalenvironmental objectiveis to removethe IntermediateOutcome Use of Intermediate Indicators OutcomeMonitoring Surface geologicalmap is Basedon the geologicalscouting produced containing fault findings, the locationand length structures, potentialrecharging of the MT profiles will be zones, andthe surface determined geothermalmanifestations MT study completed Two cross sections with the The findings of the MT sounding visualization ofthe rock willjustify the need for 3D formation resistivityare seismic survey and will produced; also thejustification constitutethe base for its location for performing3D seismic is and design assessed 3D images ofthe site subsurface The interpretation of 3D survey structure with mainfault zones results will identify main fault andthe depth, extent and zones, the depth, extent and thickness of permeable zones are thickness of permeable zones, produced; and at least 3 cross confirm identified potential sections, ofNorth-South orientationand 3 of East-West geothermal aquifers, isolating layers, andthe dimensions\. Itwill orientationare prepared allow the decision upon and determination of number and precise location of exploratory wells to verify geothermal resource potential\. The economic and financial rates The analysis will indicate completed of return are assessed and whether basedon the sensitivity analysis conducted investigationworks the 15  geothermalsite is economically and financially viable and the drilling of one or two exploratory wells isjustified 16  V a E 2m 8 -5 m 3 I I I a, t, x  Annex 4: DetailedProjectDescription ARMENIA: GEOFUND 2: ARMENIA GEOTHERMAL PROJECT 58\. The project will provide TA for comprehensive field investigation studies\. The studies o f the geothermal sites are structured in a way to ensure that adequate information is acquired to justify further studiesor discontinue investigationworks\. 59\. The project consists o f the following components: 60\. Component 1: Technical Assistance (US$ 1\.8 million, including GeoFund funding o f US$ 1\.5 million and Government co-financing o f US$ 0\.3 million) to conduct comprehensive field investigationsworks\. This component covers the following areas: A\. Technical Investigation: The investigation works will follow a phased approach ranging from more general, scouting type investigations covering larger areas o f potential geothermal fields to consecutively more precise methods focused on areas delineated to bear higher potential of geothermal resources\. Under the most positive scenario, the investigations would finally lead to the decision to drill test wells\. The investigations shall include various methodologies and shall be executed inphases: (1) GeologicalJield scouting in Gridzor and Karkar sites (US$ 100,000): (a) identification and mapping o f the fault structures, potential recharging zones, and recording and description o f the surface geothermal manifestations like hot and mineral springs, fumaroles and zones with hydro thermally alternated rocks; (b) samplingand selected analysis o f all springs and surface waters to describe the geochemical composition o f waters; (c) determination o f age and provenience o f spring-waters; (d) development o f surface geological maps containing all key geophysical, geological and other relevant indicators; (e) determination o f the location and length o f the Magneto-Telluric (MT) profiles; (2) MT sounding survey for Gridzor and Karkar sites (US$ 400,000): performing at least two perpendicular profiles o f MT sounding for each o f the selected sites\. The results o f the MT sounding survey will be interpreted by an independent company to ensure relevance, reliability and objectivity o fthe produced geological, geophysical and other relevant data\. ( 3 ) Interpretation of MT datafor Gridzor and Karkar sites (US$ 100,000): (a) producing cross sections with the visualization of the rock formation resistivity; the cross sections should contain identification o f the potential geothermal aquifers and isolating layers, with their thickness and depth o f their occurrence; (b) critical review o f MT sounding results by a team o f participating geoscientists (geologist, geophysicist, expert inMT soundings and geo- and hydro chemist)\. The review should allow selecting the most promising geothermal field for further development, if any\. (4) 3 0 seismic survey (US$ 900,000): If the outcome o f the MT sounding and geological field scouting warrant further investigatory work, then 3D seismic survey will be performed in form o f grid o f perpendicular profiles\. The length o f the profiles and area o f the survey will result 18  from the MT sounding findings\. The 3D seismic survey will generate the outline o f the subsurface structure and the depth o f potential geothermal reservoir, its thickness and size, and the presence o f major fault zones\. The results of the 3D seismic survey will be interpretedby an independent company\. (4) Interpretation of 3 0 seismic survey results (US$ 100,000): (a) producing 3D images o f the subsurface structure, which will identify main fault zones and the depth, extent and thickness o f permeable zones; (b) preparing at least 3 cross sections, o f N-S orientation and 3 o f E-W orientation that are laid out in a way to positively confirm identified potential geothermal aquifers, isolating layers, and the dimensions such as extent, thickness and depth o f their occurrence\. (5) Supervision offield works (US$ 100,000): Supervision over the implementation o f the scope o f technical investigation field works will by an independent consultant\. (6) Economic and Financial Feasibility (US$ 40,000): Assessment o f the economic viability o f the geothermal site with the highest estimated technical potential\. B\. Project Implementation (US$ 60,000): Financing of the incremental operating costs o f the implementing agency, including staff salaries, costs o f audits, transportation and communication, and other necessary and reasonable activities directly relatedto project implementation\. 19  Annex 5: ProjectCosts ARMENIA: GEOFUND 2: ARMENIA GEOTHERMAL PROJECT Local Foreign Total Project Cost By Component and/or Activity US$million US $million US$million 1\.Technical Investigation US$ 0\.29 US$ 1\.45 US$ 1\.74 2\. Project Implementation US$0\.01 US$0\.05 US$ 0\.06 Total Baseline Cost US$ 0\.30 US$ 1\.50 US$1\.80 Total Project Costs' US$0\.30 US$ 1\.50 US$ 1\.SO Total FinancingRequired US$0\.30 US$ 1\.50 US$ 1\.80 20  Annex 6: ImplementationArrangements ARMENIA: GEOFUND 2: ARMENIA GEOTHERMAL PROJECT 61\. The project will be implemented by the R2E2 Fund, a revolving fund established with the objective to promote the development o f renewable energy and energy efficiency markets in Armenia and facilitate investments in these sectors\. The R2E2 Fund was set up as a non- commercial entity governed by the BOT and managed by a qualified management team under a director (see Figure 4 below)\. The overall framework for the R2E2 Fundoperations i s defined in the Charter, while the details o f the principles and implementation rules governing the R2E2 Fund, including details on its scope o f activities, financial instruments, governance structure, procurement and financial management systems are spelled out in the Operations Manual\. The R2E2 Fund will undertake annual audits to ensure proper use o f funds in the subprojects component\. 62\. The R2E2 Fundhas adequate capacity to implement the project due to solid professional qualifications o f its staff\. Additionally, the WE2 Fund has built up significant project implementation capacity as it i s the implementing agency for the REP, UHP and the GPOBA Gas and Heating Project GI Boardof Trustees I ExecutiveDirector I 1 I I I Administrative-technical \L PolicyCoordinatorin Renewable Resourcesand Energy Efficiency I I I \L \L \L Accountant\. Procurementstaff\. Economists\.Analvsts\. Sunervision snecialists 21  Annex 7: FinancialManagementand DisbursementArrangements ARMENIA: GEOFUND 2: ARMENIA GEOTHERMAL PROJECT 63\. Country Issues: According to the latest Doing Business Survey 2009, Armenia was the top-rated CIS country and scored well vis-a-vis many other developed and developing countries (44th out of 181)\. At the same time, in the latest Business Environment and Enterprise Performance Survey report, about 30 percent o f businesses have indicated that corruption i s a problem in doing business\. A CPAR done in 2004 also concluded that based on the analysis o f the legislative framework, procurement practices, institutional capacity and the opportunity for corruption, the environment for conducting public procurement inArmenia was one of highrisk at that time\. 64\. The 2005 CFAA report concluded that the overall fiduciary risk6 in Armenia is significant\. The key reasons are: (i) inadequate capacity o f core control and supervisory agencies performing the audits within the public sector; (ii) although most o f the basic laws are in place with respect to various entities' (private sector and public enterprises, including state non- commercial organizations) financial reporting, the compliance remains a problem and authorities need to improve the quality o f auditing, monitoring and supervision\. The ongoing Public Expenditure Financial Accountability Assessment (PEFA) assessment also demonstrates that some critical PFM elements including internal controls, internal and external audit, are still weak\. 65\. Based on the above assessments of the country present PFM system no elements o f the country FM systems are planned to be used under the project\. The use of the country PFM systems for the project implementation will be considered, as the Government progresses with the PFM reforms in internal and external audits, internal control framework, accounting standards, treasury and budgeting systems\. 66\. However, the fiduciary risk o f the stand-alone FM arrangements for Bank-financed investment projects in Armenia i s considered low\. Specific procedures are developed by the project to secure proper financial accountability o f this project and to minimize project FM risks\. Additional FM arrangements in the project will include the audit o f project financial statements by independent auditor and with term o f reference acceptable to the Bank\. As the banking arrangements with a local commercial bank (HSBC Bank Armenia) have beenfound satisfactory under active projects, they will remain in place during Geothermal project implementation, unless other banks in Armenia or the State Treasury become acceptable for opening designatedhpecial accounts\. The country risk is assessedto be moderate\. 67\. Risk Assessment and Mitigation:The overall FMrisk for the project before mitigation measures i s moderate and after mitigation measures, the risk is low\. Although the project will be implementedin an environment o f high perceived corruption, adequate mitigation measures are in place to ensure that the residual risk is acceptable\. Table below summarizes the FM assessment and risk ratings o f this project: 6Risk of illegal, irregular or unjustifiedtransactions not beingdetected, measuredon a four point scale accordingto the CFAA Guidelines (low, moderate,significantor high)\. 22  FM Residual Risk Risk Mitigating Measures Risk INHERENTRISKS Countrv level Weak PFM institutions (additionalinformationis S R2E2 Fundis to maintainindependent M includedin country issues inthe previoussection) FMsystem, use of private auditors and commercialbanks for DAs\. Entity level Risk of political interference inentity's management M BoardcompositionandstructureofR2E2 L Fundwill providefor independenceofthe entity\. Project level Project is small sized, with local commercial banks M Implementation arrangements that allow L used by the Treasury for flow of Government close monitoring of activities under the Counterpartfunds with some risk of delays in project (including flow of funds) by the Treasury\. OVERALLINHERENT RISK M I I L I CONTROLRISKS Budgeting\. GoodBudgetingsystem\. Budget is L No additionalmitigationmeasure L prepared inmuchdetailwhich is necessary for required monitoringthe project\. 'I i L Accounting\. The R2E2 Fund utilizes adequate M Hire an experienced financial manager\. accounting software\. The Fund needs to hire an experiencedfinancial managerto fill in the vacancy\. Internal Controls\. Overall, the R2E2 Fund's M Improve segregation of staff duties via L InternalControlsystem is acceptable,while the Fund recruitment of an experienced financial needsto hire an experienced financial manager to fill managerto fill in the vacancy\. in the vacancy and improvesegregation of duties\. Funds flow\. Governmentand IDA finds will flow L Noadditionalmitigation measure L throughcommercial bank designatedaccounts\. required Financial Reporting\. R2E2 Fund needs to enhance M Establishproperquality controlprocedure L reportingarrangements, in order to ensure that there over preparation of acceptableInterim i s a proper quality controlprocedure over preparation UnauditedFinancialReports of accurate FinancialManagementReports (FMRs)\. (IFRs)/FMRs, particularly segregation of No significant issues have arisen inthe audits of duties to be set up between functionsof active projects and grants implemented by the WE2 preparation ofthe IFRsand their review Fundregarding financial reporting\. by different FM staff\. Auditing\. The audit will be carriedout by M No additionalmitigation measure M independentauditors acceptable to the Bank\. required OVERALLCONTROLRISK L L OVERALLFMRISK M L H-High S - Substantial M Moderate L-Low 23  68\. Strengths: The significant strengths that provide a basis for reliance on the project F M system include: (i)adequate accounting software utilized by the R2E2 Fund, (ii)FM arrangements similar to active projects being implemented by the R2E2 Fund and found to be adequate, and (iii) significant issues arisen inthe audits of active projects being implemented no by the R2E2 Fund\. 69\. Weaknesses and Action Plan: The R2E2 Fund needs to (i) improve its internal control system over contract management as well as its FM staffing, and hire an experienced financial manager to fill inthe vacancy, (ii) enhance reporting arrangements, in order to ensure that there i s a proper quality control procedure over preparation of acceptable FMRs, and (iii) update the Financial Management Manual (FMM)to reflect the specific activities of the new project\. 70\. ImplementingEntity:The residual risk associatedwith the R2E2 Fundis low with low probability of external intervention to modify the structure and staff of the organization\. 71, Budgetingand Planning:The R2E2 Fundis capable of preparing relevant budgets\. The annual budget is based on procurement plan, and is prepared in much detail, which is necessary for monitoring of the project\. It is classified by categories, components and sub-components, sources of funds\. The risk associated with planning and budgeting is assessedas low\. 72\. Accounting Staffing: The financial department of the R2E2 Fund consists of a chief accountant, with prior extensive experience in accounting of another donor organization, a disbursement specialist, who previously worked as abookkeeper at the predecessorTermosupply Project Implementation Unit, and a procurement specialist\. The Fund recently hired a financial manager to fill in the vacant position\. All the accounting staff participated in the regional joint F M and Disbursementworkshop organized by WB inYerevan in2007\. The accounting staff also is enrolled in ACCA courses\. The risk associated with staffing before mitigation measures i s moderate and after mitigation measures, the risk is low\. 73\. InformationSystems:The R2E2 Fund uses a computerized accountingheporting system developed on the base of 1C\. The software has accounting, fixed assets, loan servicing and communities modules, and is capable of generating all statutory reports\. The software automatically generates 1A and 1B forms of the FMRs\. The risk associated with information systems is assessed as low\. 74\. Accounting Policies and Procedures: The accounting system of the R2E2 Fund is maintained according to Accounting Standards o f Armenia (ASRA)\. The FMRs on the active projects ware prepared and submitted on the accrual basis\. It has been agreed to adopt accrual basis for the project reporting as well\. The current chart of accounts is inaccordance with ASRA and will be adapted to the project's requirements\.The risk of accounting policies andprocedures i s consideredas low\. 75\. Internal Controls and Internal Audit: Overall, the internal control system under the active projects was found to be satisfactory\. However, the R2E2 Fund needs to improve several of its F M arrangements indicated above\. All the payments made by the R2E2 Fund are formally authorized by the director and the financial manager\. There i s no petty cash box at the Fund, and all the payments are done via bank transfers\. The requisition of office supplies is done as 24  follows: every quarter the Fund's office manager collects the requisition notes from employees and submits those for the director's approval\. Upon approval and procurement of goods, financial manager with the office manger verifies the completeness o f the goods procured\. The payments under the contacts are made based on the acts of acceptance\. Upon receipt o f the invoice (or acceptance act), both the director and the financial manager authorize the payment, and the due amount under the contract i s transferred to the supplier's bank account\. Considering the small size of the R2E2 Fund, no internal audit function is required neither exists\. The risk associated with internal controls i s considered as low\. 76\. Financial Reporting: Project management-oriented IFRs will be prepared under Geothermal project\. The R2E2 Fund will produce a full set o f IFRs every calendar quarter throughout the life o f the project\. The format o f IFRs has been agreed during the assessment which includes: (a) Project Sources and Uses o f Funds, (b) Uses o f Fundsby Project Activity, (c) Project Balance Sheet, (d) Designated Account Statements, and (e) SOE Withdrawal Schedule\. These financial reports will be submitted to IDA within 45 days o f the end o f each quarter\. The first quarterly IFRs will be submitted after the end o f the first full quarter following the initial disbursement\. Those requirements and IFRs formats are incorporated in the FMM\. There was some inconsistency inthe quality of the FMRs submitted on the active projects implemented by the R2E2 Fund and the quality control over financial reporting needs to be enhanced\. The risk before mitigation measures i s moderate and after those i s low\. 77\. ExternalAudit: The audit o f Geothermal project and WE2 Fund will be conducted (i) by independent private auditors and on terms of reference acceptable to the Bank, and procured by the R2E2 Fund, and (ii)according to the International Standards on Auditing issued by the International Auditing and Assurance Standards Board o f the International Federation of Accountants\. The R2E2 Fund's previous auditing arrangements are satisfactory to the Bank, and it has thus been agreed that similar audit arrangements will be adopted for Geothermal project and R2E2 Fund\. The sample terms o f reference acceptable to the WB and to be used for the project and entity audit was provided to the R2E2 Fund\. 78\. The annual audited project and R2E2 Fund financial statements will be provided to the Bank within six months o f the end o f each fiscal year and also at the closing o f the project\. The contract for the audit awarded during the first year o f project implementation may be extended from year-to-year with the same auditor, subject to satisfactory performance\. The cost o f the audit will be financed from the proceeds o f the project\. The following table identifies the audit reports that will be required to be submitted by the project implementation agency together with the due date for submission\. Audit Report Due Date R2E2 Fund - Continuing Entitv financialWithin six months ofthe end of each fiscal year\. statements Proiect financial statements (PFS)\. Within six months of the end of each fiscal year and also at The PFS include Project Balance Sheet, Sources the closingofthe project and Uses of Funds, Uses of Funds by Project Activity, SOE Withdrawal Schedule, Designated Account Statement, and Notes to the financial statements, and ReconciliationStatement\. 25  Inaddition, the Armenian Chamber of Control, the country's supreme audit institution, performs ad hoc external audits of the WE2 Fund and the projects under its implementation\. The risk associated with external audit is consideredmoderate\. 79\. Funds Flow and Disbursement Arrangements: To facilitate timely disbursementsfor eligible expenditures on services and operating costs the Borrower will open and operate, under terms and conditions acceptable to World Bank, a Designated Account in US dollars 150,000 to be maintained in the HSBC Bank Armenia\. Project funds will flow from IBRD via the Designated Account or through the direct payment method\. The Government funds will flow via the Treasury at the Ministry of Finance on the basis of payment requests\. The risk associated with funds flow and disbursement is considered as low\. The WE2 Fund will be responsible for the appropriate accounting of the funds deposited into this account, for reporting on the use of these funds, and for ensuring that they are includedin the audits of the financial statements\. The WE2 Fund will also report on the status of this account with any request for disbursement submittedto the World Bank\. 80\. The ceiling of the Designated Account will be US$ 150,000\. The R2E2 Fund will be responsible for submitting applications, along with appropriate documentation, showing funds utilized from the Designated Account on a quarterly basis, including detailed bank statements\. Expenditures relating to the following contracts will be fully documented (Le\., invoices, etc\.)\. Contracts under Consultant's Services for firms valued at US$200,000 equivalent each or more and Consultant Services Contracts for individuals valued at US$50,000 equivalent each or more\. Use of Statements of Expenditure (SOEs)\. Disbursementsmay be made against SOEs as follows: Consulting contracts with firms, costing less thanUS$200,000 equivalent each; and Consulting contracts with individuals, costing less than US$50,000 equivalent each\. 81\. Supervision Plan: As part of its project supervision missions, IDA will conduct risk- based F M supervisions, at appropriate intervals\. During project implementation, the Bank will supervise the project's FMarrangements inthe following ways: (a) review the project's quarterly IFRs as well as the project's and entity's annual audited financial statements and auditor's management letter and remedial actions recommended inthe auditor's Management Letters; and (b) during the Bank's on-site supervision missions, review the following key areas (i)project accounting and internal control systems; (ii) budgeting and financial planning arrangements; (iii) disbursement management and financial flows, including counterpart funds, as applicable; and (iv) any incidences of corrupt practices involving project resources\. As required, a Bank- accreditedFinancial Management Specialist will assist inthe supervision process\. 26  Annex 8: ProcurementArrangements ARMENIA: GEOFUND 2: ARMENIA GEOTHERMAL PROJECT 82\. General: Procurement for the proposedproject will be carried out inaccordancewith the World Bank's "Guidelines: Procurement under IBRD Loans and IDA Credits" dated May 2004; and "Guidelines: Selection and Employment of Consultants by World Bank Borrowers" dated May 2004 revised on October 2006, and the provisions stipulated in the Legal Agreement\. The various items under different expenditure categories are described in general below\. For each contract to be financed by the grant, the different procurement methods or consultant selection methods, estimated costs, prior review requirements, and time frame are agreed between the Recipient and the Bank in the Procurement Plan\. The Procurement Plan will be updated at least annually or as required to reflect the actual project implementation needs and improvements in institutional capacity\. 83\. Advertisement: A General Procurement Notice (GPN) will be published in the United Nations Development Business (UNDB) and dgMarket\. The GPN will give a description of the consulting services contracts to be procured under the project and will invite all potential consultantsto express interest and request additional information from the implementing agency\. Expression of Interest (EOI) for consulting assignments estimated to cost US$ 200,000 equivalent or above per contract will be published in UNDB (on-line), dgMarket and a national newspaper of broad circulation as the corresponding Request for Proposals become available\. In addition, the Procurement Plan (including all formal updates), EOIs for all contracts as well as results of contract awards will be publishedon the external website of the R2E2 Fund\. 84\. The Implementing Agencies (R2E2 Fund) will follow the Bank's anti-corruption measures and will not engage services of firms and individuals debarred by the Bank\. The listing of debarred firms and individuals i s located at: http://www\.worldbank\.org/html/opr/procure/debarr\.html\. 85\. Consultant Services grant (estimated to $1\.74 million) will include : (i) Geological field scouting (ii) magneto-telluric sounding study; (iii) dimensional (3D) seismic survey of the three most prospective of the two geothermal site if the outcome of the M T sounding and geological field scouting warrantee seismic survey; (iv) Interpretation of the results of the M T sounding and 3D seismic studies by an independentcompany to ensure relevance, reliability and objectivity of the produced geological, geophysical and other relevant data; (v) supervision over the implementation of the scope of technical investigation field works will by an independent consultant; (vi) assessment of the economic and financial viability of the geothermal site with the highest estimated technical potential\. Consultant's services will include Quality and Cost Based Selections (QCBS), Consultant Qualifications (CQ), and Individual Consultants (IC)\. QCBS selection over US$200,000 will be advertised in the UN Development Business on line version and dg-Market (Gateway) and in local media (one newspaper of national circulation or the official gazette) from which a short list of six firms will be established\. For contracts estimated to cost less than US$100,000, short lists may be based solely on national firms unless qualified international firms expressed interest\. Contracts estimated at less than US$200,000 will be procured following the CQ method\. Individual consultants will be selected in accordance with Part V of the Consultants Guidelines\. 27  86\. After the contract signature the Recipient shall publish in the UNDB online and in dgMarketthe nameof consultant, price, duration, and summary scope o f the contract\. 87\. Operating Costs estimate to $60,000: The grant will finance the incremental operating costs o f the R2E2 Fund to oversee and manage the grant\. Operating costs will be incurred according to an annual budget satisfactory to the Bank and using the procedures described inthe Project Operational Manual\. 88\. Assessment of the Agency's Capacity to ImplementProcurement 89\. The grant will be implemented by the W E 2 Fund that i s implementing Urban Heating and Renewable Energyproject\. 90\. An assessment o f the procurement capacity o f R2E2 Fund has been conducted by a Senior Procurement Specialist on June 2008 and is available in grant files\. It was revealed the R2E2 Fundprocurement officer has knowledge and experience to handle the procurement under the proposed grant\. However, the existing load indicates that the Fund may need another procurement staff that will be dedicated for this grant and will work under the guidance o f the existing procurement officer\. 91\. Based on the analysis o f its legislative framework, the effectiveness o f its regulatory institutions, the strength o f its enforcement regime, the capacity o f R2E2 Fund and its human resources and the risk o f corruption, the assessment found that the environment for conducting procurement under the proposed project is at Medium Risk\. At the completion o f one year o f implementation, the team will review the procurement capacity o f the R2E2 Fund as well as the functioning o f procurement with a view to makingadjustments as necessary\. 92\. The grant may face the following potential risks during implementation: (i) The current W E 2 Fund procurement officer may lack capacity to undertake additional procurement for the proposed grant\. (ii) The public officials, who will be involved in grant procurement as a member o f technical or commercial evaluation committee are not familiar with procurement procedures, and may obstruct or delay the procurement process; (iii) Suitable consultants, requiredfor the project, may not be available or interested in participating incompetition required\. 93\. Based on the analysis made, the following actions are recommended to mitigate the above- mentioned risks\. i\. InordertoensurethattheoverallcapacityoftheME2Fundtoconductprocurementis built up at the same time as procurement under the grant is conducted in atimely, 28  economic and efficient manner; one full-time local procurement specialist with an IT/Geological field background will be recruited\. ii\.The latest version ofthe Bank's standard Request for Proposals (available on the website www\.worldbank\.org) will be used for all QCBS selection\. iii\.TheR2E2Fundprocurementspecialistwillworkwithtechnicalstafftoforeseeand reduce any potential delays in the procurement process\. As major delay has been notified inother projects are due to delay indrafting the Terms o f References\. iv\. The R2E2 Fundteam will establish and maintain a database o f consultants (firms and individuals, as well as an inventory o f the available goods inthe country)\. v\. The Bank staff will review the efficiency o f procurement under the Grant and the improvement inthe procurement capacity o f the R2E2 Fundteam after one year o f the grant effectiveness, and will make recommendations for further improvements as necessary\. 94\. Procurement Plan: The Recipient, at appraisal, developed a Procurement Plan for project implementation which provides the basis for the procurement methods\. This plan has been agreed between the Recipient and the Bank Project Team\. The Procurement Plan will be available in the project's database and on the Bank's external website\. It will be updated annually or as required to reflect the actual project implementation needs and improvements in institutional capacity\. 95\. Frequencyof ProcurementSupervision: Inaddition to the procurement prior review to be carried out by the Bank staff on a regular basis, the capacity assessment report o f the implementingagency has recommended supervision missions to visit the field every six months for first year to carry out ex-post review o f procurement under the grant\. 96\. Anticorruption Measures: The Bank team intends to maintain customary oversight and will carry out prior review of all major contracts according to the thresholds that will be regularly reviewed and adjusted as needed in Procurement Plan\. Initial set up thresholds are provided below inthis Annex\. The following measures will be carried out to mitigate corruption risk: 0 Training of Borrower's fiduciary staff starting from the project launch and periodically thereafter customizedto procedure and methods that would be required inthe next 12 months period\. Following the project launch will include on-the-job training during supervision missions and regional training provided by the RPMoffice for the countries inthe region; Prior review: intensive and close supervision by Bank procurement accredited staff\. In addition, all contract amendments will be subject to prior approval by the Bank; 0 Post review: Bank supervisionteam will post review, including physical verification and site visits; 29  Debarred Firms: appropriate attention will be given to the needto ensure that debarred f i r m s or individuals are not given opportunities to compete for Bank-financed contracts; Complaints: all complaints by consultants will be diligently addressedand monitored in consultation with the Bank; 0 Monitoringof contract awards: all contracts are requiredto be signed withinthe validity of the proposalsand, incase of prior review contracts, promptly after the no objection was issued\. Procurement Plan format shall include informationon actual dates (of no objections and award) and will be monitored for cases of delay which will be looked at on a case-by-case basis to identify the reasons\. 0 MonitoringPayments: all contracts shall include bank account information\. The bank account shall be inthe name of the same consultant that submittedthe bid and awarded the contract\. Payments to local consultantsshall bemadeinlocal currency only and paid to the accounts of banks located withinthe country\. Timelinessof Payments: Payment to consultantswill be monitored through semi-annual interimunaudited financial reports (IFRs) to ensure timely payments\. Ref; Description of Assignment Estimated Selection Review by Estimated cost Method Bank Prior/Post Proposals submission Date 1 TA for Geological field works (scouting) of $500,000 QCBS Prior October -2008 the two selected potential geothermal fields and Magneto-telluric (MT) sounding o f the two selectedpotentialgeothermal fields 2 TA for Independent interpretation of the $100,000 CQ Post N/A results ofthe MT sounding field works 3\. TA for performingof three dimensional (3D) $900,000 QCBS Prior April 2009 seismic survey 4\. Independent interpretation of the results of $100,000 CQ Post N/A three dimensional (3D) seismic survey 5\. Geothermal expert $140,000 IC Post N/A 6\. Incrementaloperatingcosts $60,000 30  98\. Prior Review Thresholds:The project procurement plan will indicate which contracts will be subject to prior or ex-post review\. The following contracts will be subject to prior review: a\. Contracts with consulting firms (XJS$200,000) and contracts with individual consultants estimated to cost US$50,000 or more each; and b\. Single source or direct contracting i s also subject to prior review\. 99\. The remaining contracts will be subject to ex-post review\. The above thresholds will be adjusted as the project implementation progresses and the WE2 Fund acquire higher procurement capacity\. Requisitechanges will be reflected inupdates to the procurement plan\. 31  Annex 9: Economicand FinancialAnalysis ARMENIA: GEOFUND 2: ARMENIA GEOTHERMAL PROJECT NIA\. 32  Annex 10: SafeguardPolicy Issues ARMENIA: GEOFUND 2: ARMENIA GEOTHERMAL PROJECT 100\. No safeguard policies are triggered by the project, as the bulk o f activities will be technical assistance and the support o f geological and geotechnical field investigation works with very minor environmental impact, as well as data processing and interpretationservices\. 101\. Based on the discussions with the Borrower, local geophysical and geological specialists and a joint field trip undertaken by Armenian geologists and geophysicists as well as Bank experts it was agreed to geographically limit investigation works to the sites o f Karkar and Gridzor\. The project will be implemented in two phases that will correspond to the proposed sequencing o f performing investigationworks: 102\. Phase I will include geological field works (scouting) and magneto-telluric (MT) sounding o f the two selected potential geothermal fields\. To promote quality execution o f the field works the mission recommended that the interpretation o f the results o f the MT sounding field works be conducted by a company that is independent from the company performing MT sounding works\. This ensures robustness o f performed works by revealing any shortcomings of the field investigation works\. The completion o f Phase one should allow to assess whether further investigation works are justified and, if yes, select the most promising geothermal field for Phasetwo investigations\. 103\. Phase II will involve performing o f three dimensional (3D) seismic survey\. The 3D survey will allow sketching the outline o fthe subsurface structure and encompassing the deptho f potential geothermal reservoir, its thickness and extent, and the presence o f major fault zones\. The mission recommended that the results of this survey also be interpreted by an independent company\. 104\. As both phases will be conducted with minimal environmental impact the safeguards category o f the project according to the World Banks OP 4\.01 has been determined to be "C"\. The rationale supporting this category is that the project includes TA activities only that are not (yet) related to any investment operations and no negative environmental impacts are expected to result from these TA activities\. 105\. The prospective geothermal fields are remote from permanent settlements, are not under private ownership and are not being used for residential or economic purposes, either permanently or seasonally\. This was confirmed through reconnaissance visits by the Bank task team to the proposed sites\. As a precautionary measure (despite the C classification) a simple environmental management plan (EMP) will be produced by the Borrower with assistance from the Bank team\. This will provide clear guidance and instructions to field staff executing the surveys how to minimize any potential environmental impacts such as vehicle traffic, avoid littering and accidental pollution, care for and maximize preservationo f vegetation and minimize disturbances to wildlife, and minimize and restore any disturbances to soils and vegetation due to fieldworks (e\.g\. vehicle tracks, campgrounds, small craters from explosives during seismic survey)\. Additionally, the map for each o f the proposed sites will be provided with the tender 33  documents that would be verified with the land registration agency as not containing privately ownedlandplots\. 106\. If the outputs of the TA suggest that drilling of exploratory wells is justified, then the ISDS will be modified to reflect the change in EA category (from C to B) and consequently a comprehensive EMP for the drilling works will be financed under this project\. The TORSfor the EMP as well as the EMP itselfwill be disclosedin-countryand inthe Infoshop\. 34  Annex 11:ProjectPreparationand Supervision ARMENIA: GEOFUND 2: ARMENIA GEOTHERMAL PROJECT Planned Actual PCN review May 25,2008 June 2,2008 Initial PID to PIC July 15,2008 August 26,2008 Initial ISDS to PIC July 15,2008 August 26,2008 Appraisal July 7,2008 August 5,2008 Negotiations January 2009 GEF CEO Decisions December 2008 BoardRVP approval February 2009 Planned date of effectiveness February2009 Planned date o f mid-termreview NIA Planned closing date December 2010 Key institutions responsible for preparation of the project: Ministry of Energy andNatural Resources, Renewable Resources and Energy Efficiency Fund\. Bank staff and consultants who worked on the project included: Name Title Unit Ani Balabanyan Operations Officer (Task Team Leader) ECSSD Gevorg Sargsyan Sr\. Infrastructure Specialist ECSSD Arthur Kochnakyan Consultant ECSSD Helmut Schreiber Lead Environmental Economist ECSSD Kyoichi Shimazaki Lead Financial Officer FEU Anarkan Akerova Sr\. Counsel LEGEM Arman Vatyan Sr\. Financial Management Specialist ECSPS Gurcharan Singh Sr\. Procurement Specialist ECSPS Wolfhart Pohl Sr\. Environmental Specialist ECSSD Heike Lingertat ET Consultant ECSSD Piotry Dlugosz Geothermal Specialist Bank funds expendedto date on project preparation: 1\. Bank resources: 2\. Trust funds: 3\. Total: EstimatedApproval and Supervision costs: 1\. Remaining costs to approval: 2\. Estimated annual supervision cost: 35  Annex 12: Documentsin the ProjectFile ARMENIA: GEOFUND 2: ARMENIA GEOTHERMAL PROJECT 107\. Mirijanyan, A\. Identificationof Prospective High Geothermal Capacity Sites inthe Republic of Armenia\. 2007 108\. Hanneberger, Roger, et\.al\. Geothermal Resources of Armenia\. GeothermEx, Inc\., 2000\. 109\. RenewableEnergy ResourceAssessment: Armenia\. EBRD\.2001 110\. Minutesofthe Project ConceptReview Meeting\. 111\. Piotr Dlugosz, Wolfhart Pohl\. Briefing Note on results from a mission to Armenia, July 27-3 1,2008\. 36  Annex 13: Statementof Loans and Credits ARMENIA: GEOFUND 2: ARMENIA GEOTHERMAL PROJECT Difference between expected and actual Original Amount in US$ Millions disbursements Project ID FY Purpose IBRD IDA SF GEF Cancel\. Undisb\. Orig\. Frm\. Rev'd P104467 2007 HLTH SYS MOD (APL2) 0\.00 22\.00 0\.00 0\.00 0\.00 21\.04 1\.79 0\.00 PO99630 2007 Judicial Reform Project 2 0\.00 22\.50 0\.00 0\.00 0\.00 16\.95 -4\.96 0\.00 PO94225 2007 SIF 3 0\.00 25\.00 0\.00 0\.00 0\.00 9\.77 -6\.26 0\.00 PO99832 2006 AVIAN FLU AM- 0\.00 6\.25 0\.00 0\.00 0\.00 3\.50 2\.48 0\.00 PO87011 2006 RUR ENT & AGRIC DEVT 0\.00 20\.00 0\.00 0\.00 0\.00 6\.54 -1\.56 0\.00 PO83352 2006 RENEW ENERGY 0\.00 5\.00 0\.00 0\.00 0\.00 2\.43 0\.27 0\.00 PO57880 2006 URBANHEAT 0\.00 15\.00 0\.00 0\.00 0\.00 3\.66 -1\.43 0\.00 PO87641 2005 YEREVAN W A T E W W SERVS 0\.00 20\.00 0\.00 0\.00 0\.00 12\.69 12\.72 0\.00 PO60786 2004 PUB SECT MOD 0\.00 10\.15 0\.00 0\.00 0\.00 6\.03 5\.00 0\.00 PO63398 2004 MUNWATER & WW 0\.00 23\.00 0\.00 0\.00 0\.00 0\.79 -0\.74 0\.00 PO88499 2004 IRRIGDAM SAFETY 2 0\.00 6\.75 0\.00 0\.00 0\.00 2\.98 1\.60 0\.00 PO87620 2004 SOC PROT ADMN 0\.00 5\.15 0\.00 0\.00 0\.00 1\.22 0\.76 0\.76 PO74503 2004 EDUC QUAL & RELEVANCE (APL# 1) 0\.00 19\.00 0\.00 0\.00 0\.00 4\.77 3\.52 -0\.77 PO73974 2004 HEALTH SYS MOD (APL # 1) 0\.00 19\.00 0\.00 0\.00 0\.00 4\.06 3\.33 2\.30 PO57847 2002 NAT RES MGMT 0\.00 8\.30 0\.00 0\.00 0\.00 1\.13 -0\.76 0\.00 PO55022 2002 IRRIG DEVT 0\.00 24\.86 0\.00 0\.00 0\.00 2\.40 -5\.49 -3\.94 PO64879 1999 IRRIG DAMSAFETY 0\.00 26\.60 0\.00 0\.00 0\.00 3\.65 2\.65 2\.74 Total: 0\.00 278\.56 0\.00 0\.00 0\.00 103\.61 12\.92 1\.09 ARMENIA STATEMENT OF IFC's Heldand DisbursedPortfolio InMillions ofUS Dollars Committed Disbursed IFC IFC FY Approval Company Loan Equity Quasi Partic\. Loan Equity Quasi Partic\. 2002 ACBA Leasing 2\.00 0\.27 0\.00 0\.00 2\.00 0\.27 0\.00 0\.00 2004 Armeconombank 2\.00 0\.00 0\.00 0\.00 2\.00 0\.00 0\.00 0\.00 2000 Hotel Armenia 0\.00 0\.00 3\.57 0\.00 0\.00 0\.00 3\.57 0\.00 2004 Hotel Armenia 0\.00 0\.00 1\.25 0\.00 0\.00 0\.00 I\.25 0\.00 2006 lnecobank 3\.00 1\.30 0\.00 0\.00 3\.00 0\.00 0\.00 0\.00 2006 NAREK 5\.20 0\.00 0\.00 0\.00 0\.00 0\.00 0\.00 0\.00 Total portfolio: 12\.20 1\.57 4\.82 0\.00 7\.00 0\.27 4\.82 0\.00 Approvals Pending Commitment FY Approval Company Loan Equity Quasi Partic 37  ~ ~ ~~~~~~~~ Total pendingcommitment 0 00 0 00 0 00 0 00 38  Annex 14: Country at a Glance ARMENIA: GEOFUND 2: ARMENIA GEOTHERMAL PROJECT Europe h Lower- POVERTY and SOCIAL Central mlddle- Armenia Asla Income Development dlamond' 2007 Population, mid-year(milllons) 3\.0 445 3,437 GNIpercapita (Atlas method, US$) Lifeeqectancy 2,640 6,052 1887 GNI(Atlas method, US$ billions) T 7\.9 2,694 6,485 Average annual growth, 2001-07 Population (Sy -0\.4 0 0 11 Laborforce(%) -0\.3 05 15 GNI Gross per primary Most recent estlmate (latest year avallable, 2001-07) capita nrollment P0verty (%of population belownationalpovertyline) 51 Urbanpopulation (%of totalpopulation) 64 64 42 Lifeeqectancyat birth(pars) 72 69 69 Infant mortality (per 1000live births) 21 23 41 Childmalnutrition (%ofchildren under5) 4 25 Access to improvedwatersource Access to an improvedwater source (%ofpopulation) 98 95 88 Literacy (%ofpopulation age 59 99 97 89 Gross primaryenrollment (%of school-age population) 98 97 m -Armenia Male 96 98 a Lowar-middle-incomegroup Female no 96 n g KEY ECONOMIC RATIOS and LONG-TERM TRENDS 1967 1997 2006 2007 Bconomlc ratios' GDP (US$ billions) 16 6 4 9 2 Gross capital formationlGDP \. 8 1 336 317 Eqorts of goods and services/GDP \. 20\.3 Trade 22 0 8 0 Gross domestic savings/GDP \. -8\.9 192 8 9 Gross nationalsavings/GDP \. 0\.3 318 29 1 T Current account balancelGDP \. -8\.7 -3 8 8 7 Interest payments/GDP \. 0\.8 Domestic Capital 03 savings formation Total debt/GDP \. 38\.9 32 5 Total debt service/eVorts 5\.1 7 0 Present value of debtlGDP 23 0 Present value of debtleqorts 619 Indebtedness 1987-97 1997-07 2006 2007 2007-11 (averageannualgroMh) GDP -6\.9 0 7 0\.3 13\.7 7\.6 -Armenia GDP percapita -5\.1 112 0\.6 14\.0 7\.6 Lowar-middle-income gmup E w r t s of goods andservices -28\.4 8\.5 4\.3 9\.1 0\.3 STRUCTURE of the ECONOMY I 1987 1997 2006 2007 (%of GDP) Growth of capltal and GDP (%) I Agnculture 32 0 196 8 3 40 T Industry 33 2 43 6 43 6 Manufactunng 24 4 8 8 151 Services 34 8 368 38 1 Householdfinal consumption expenditure n 7 7 69 5 738 General gov't final consumptioneqenditure n 2 n 3 9 2 Imports of goods and services 58 3 36 5 33 8 1987-97 1997-07 2006 2007 (average annualgro Mh) Growth o f exports and Imports ( O h ) Agnculture -13 6 2 0 4 2 5 40 Industry -159 0 7 185 118 30 Manufactunng -89 6 5 -11 30 20 services 7 3 n 7 194 24 3 10 Householdfinal consumption expenditure -39 6 8 141 B 4 0 Generalgov't final consumption evenditure -20 87 8 8 774 -10 Gross capitalformation -98 778 25 0 96 Imports of goods and services -198 9 6 67 771 Note 2007 data are preliminaryestimates This table was producedfrom the Development Economics LDB database 'Thediamonds showfourkeyindicators inthecountry(in bold) compared with its income-groupaverage If data are missing thediamondwrll be incomplete 39  Armenia PRICES and GOVERNMENT FINANCE 1987 1997 2006 2007 Domestic prices (%change) Consumer pnces 140 2 9 3 4 Implicit GDP deflator I77 4 6 3 9 Government finance (%olGDP includes current grants) Current revenue 197 8 0 6 3 Current budget balance -17 2 6 2 4 Overall surplusldeficit -5 8 -15 -2 0 TRADE 1987 1997 2006 2007 (US%rni//ionsj Export and Import levels (US$ mlll\.) Totalexports (fob) 232 985 1253 Gold,Iewelly andother precious stones 55 301 Oo0 T Machinely and mechanical equipment 32 21 Manufactures x)O 3x) 349 2 000 Totalimports (cif) 892 2,P2 2 449 Food 273 341 1,000 Fuel andenergy 208 351 Capitalgoods 118 501 647 I 0 Export pnce index(2000=WO) 0 4 16 01 02 03 04 05 06 Import pnceIndex(20OO=?JOj a2 u5 I 6 Exports 0 lmp0rtS Terms of trade (20OO=rOOj 85 86 O7 7 BALANCE of PAYMENTS 1987 1997 2006 2007 (US%rni//ionsj Current account balance t o GDP (Oh) Exports of goods and services 330 1,407 1708 Imports of goods and sewices 953 2,328 3 032 Resource balance -622 \.921 792 20 Net income 99 99 0 4 10 Net current transfers 217 580 822 0 Current account balance -307 -242 1 7 9 Financing items (net) 354 614 -141) \.10 Changes innet reserves -47 -372 -306 -20 Memo: Reserves includinggold (US%mi//ionsj 239 1072 1365 Conversion rate (DEC, /oca//USXj 490 6 4 6 0 342 1 EXTERNAL DEBT and RESOURCE FLOWS 1987 1997 2006 2007 (US%rni//ionsj Composltlon of 2006 debt (US$ mlll\.] Total debt outstanding and disbursed 638 2,073 IBRD 0 6 IDA I 240 841 0 2 9 8 A 6 Total debt service 24 8 7 IBRD 1 1 IDA 1 1) Composition of net resourceflows Officialgrants 34 56 Official creditors x)O 66 Pnvate creditors 0 0 8 Foreign direct investment (net inflows) 52 343 Portfolio equity(net inflows) 1 -1 World Bank program D: 57 Commitments 0 7 57 E-Biiataai Disbursements A \. IBRD 77 64 6-IDA D\.MhermrltiIatersl F-Privde Pnncipalrepayments 0 7 C\.IMF G-Short-t&'! Net flows 77 57 Interest payments 2 7 Net transfers 76 50 Note This table was producedfrom the Development Economics LDB database 9/I7/08 40  Annex 15: IncrementalCost Analysis ARMENIA: GEOFUND 2: ARMENIA GEOTHERMAL PROJECT Incremental Cost Analysis was carried out for the GeoFund program at the time of Board approval o f the first tranche\. 41  Annex 16: STAP Roster Review ARMENIA: GEOFUND 2: ARMENIA GEOTHERMAL PROJECT STAP review was carried out for the whole GeoFund program prior to the Board approval of the first tranche of the GeoFundprogram\. 42  43°E GEORGIA 44°E To T'bilisi To T'bilisi 46°E GEORGIA 47°E To Borjomi L e ss Tashir e r C a Alaverdi u To Gäncä ca Mingechevir 41°N s u Kura 41°N Stepanavan s M o To Gäncä Reservoir L O R R I u n S H I R A K t a in s Ijevan Gyumri Vanadzor TAV U S H To Kars Dilijan Artik Karmir Artsvashen Arpa Aragats Sevan To (4090 m) Gäncä ARMENIA Hrazdan A R A G AT S O T N Lake Ashtarak Hrazdan KOT Gavar TURKEY AYK YK' Sevan YEREVAN ' G E G H A R K ' U N I K ' Vardenis Aras A R M AV I R YEREVAN Armavir Martuni s R a ng e 40°N d n i 40°N Artashat Va r e Aras A R A R AT This map was produced by the Map Design Unit of The World Bank\. VAY O T S ' The boundaries, colors, denominations and any other information Ararat shown on this map do not imply, on the part of The World Bank Jermuk Group, any judgment on the legal status of any territory, or any D Z O R endorsement or acceptance of such boundaries\. Yegegnadzor 43°E 44°E Arpa AZERBAIJAN Vaik To Naxçivan Angekhakot ARMENIA To Goris Qubadli Aras Vor otan To Naxçivan To SELECTED CITIES AND TOWNS Qubadli PROVINCE (MARZ) CAPITALS AZERBAIJAN Z a n g eSz uYr U NKapanI K ' ISLAMIC REPUBLIC NATIONAL CAPITAL RIVERS OF IRAN MAIN ROADS 0 10 20 30 40 50 Kilometers R a n g e SEPTEMBER RAILROADS Aras 39°NIBRD PROVINCE (MARZ) BOUNDARIES 0 10 20 30 Miles To Füzili INTERNATIONAL BOUNDARIES 33364 Megri 2004 45°E To Ordubad 47°E

APPROVAL

P176347

 The World Bank Vaccine AF MALI COVID-19 Emergency Response Project (P176347) Project Information Document (PID) Appraisal Stage | Date Prepared/Updated: 04-Jun-2021 | Report No: PIDA31460 May 17, 2021 Page 1 of 16  The World Bank Vaccine AF MALI COVID-19 Emergency Response Project (P176347) BASIC INFORMATION OPS_TABLE_BASIC_DATA A\. Basic Project Data Country Project ID Project Name Parent Project ID (if any) Mali P176347 Vaccine AF MALI COVID- P173816 19 Emergency Response Project Parent Project Name Region Estimated Appraisal Date Estimated Board Date MALI COVID-19 EMERGENCY AFRICA WEST 19-May-2021 28-Jun-2021 RESPONSE PROJECT Practice Area (Lead) Financing Instrument Borrower(s) Implementing Agency Health, Nutrition & Population Investment Project THE REPUBLIC OF MALI Ministry of Health and Financing Social Development Proposed Development Objective(s) Parent The objective of the Project is to strengthen the capacity of the Recipient to prevent, prepare for and respond to COVID-19 pandemic Components Component 1: Emergency COVID-19 Response Component 2: Increase access to health care services Component 2: Implementation Management and Monitoring and Evaluation PROJECT FINANCING DATA (US$, Millions) SUMMARY -NewFin1 Total Project Cost 30\.00 Total Financing 30\.00 of which IBRD/IDA 30\.00 Financing Gap 0\.00 DETAILS -NewFinEnh1 World Bank Group Financing International Development Association (IDA) 30\.00 IDA Credit 15\.00 May 17, 2021 Page 2 of 16  The World Bank Vaccine AF MALI COVID-19 Emergency Response Project (P176347) IDA Grant 15\.00 Environmental and Social Risk Classification Substantial B\. Introduction and Context 1\. This Project Paper seeks the approval of the Regional Vice President to provide an IDA credit in the amount of US$15 Million and an IDA grant of US$15 Million for an Additional Financing (AF) to the Mali COVID-19 Emergency Response Project (P173816) to scale-up and expand the activities of the parent project to support COVID-19 vaccine purchase and deployment\. The AF would support the costs of expanding activities of the MALI COVID-19 Emergency Response Project (ERP) under the COVID-19 Strategic Preparedness and Response Program (SPRP) using the Multiphase Programmatic Approach (MPA) approved by the Board on April 2, 2020, and the vaccines AF to the SPRP approved on October 13, 2020\.1 The primary objectives of the AF are to enable affordable and equitable access to COVID-19 vaccines and help ensure effective vaccine deployment in Mali through enhanced vaccination system strengthening and to further strengthen preparedness and response activities under the parent project\. The Mali COVID-19 ERP in an amount of US$25\.8 million equivalent was approved on April 10, 2020, prepared under the SPRP\. 2\. The purpose of the proposed AF is to provide upfront financing to help the Government of Mali (GoM) purchase and deploy COVID-19 vaccines that meet World Bank’s Vaccine Approval Criteria (VAC) and strengthen relevant health systems that are necessary for a successful deployment and to prepare for the future\. The COVID-19 Vaccines Global Access (COVAX) Advance Market Commitment (AMC) facility2 is expected to support financing of vaccines for 20 percent of the population\. The GoM is in negotiation with China and Russia to procure additional doses of COVID-19 Vaccines (1 million doses of Sinopharm Vaccines and 1 million doses of Spoutnik vaccines)\. The first doses of Astra Zeneca vaccine (396,000) from COVAX facility arrived in Mali on March 5, 2021\. As of June 3, 2020, 105,159 people have received the first shot of the vaccine and 37,984 have received their second shot\. The GoM is currently updating its NVDP to determine its overall targets and percentage of the population to be vaccinated as well as the vaccine sources\. A workshop is planned on June 2021 to update the vaccination plan while developing strategies to address vaccine hesitation and to reach the more vulnerable people \.The proposed AF will support procurement of additional vaccines for up to 7 percent of the country’s population (on top of 20% covered by COVAX) and 1 The World Bank approved a US$12 billion WBG Fast Track COVID-19 Facility (FTCF or “the Facilityâ€?) to assist IBRD and IDA countries in addressing the global pandemic and its impacts\. Of this amount, US$6 billion came from IBRD/IDA (“the World Bankâ€?) and US$6 billion from the International Finance Corporation (IFC)\. The IFC subsequently increased its contribution to US$8 billion, bringing the FTCF total to US$14 billion\. The AF of US$12 billion (IBRD/IDA) was approved on October 13, 2020 to support the purchase and deployment of vaccines as well as strengthening the related immunization and health care delivery system\. 2 The COVAX AMC is an initiative (co-led by WHO, GAVI) which aggregates vaccine supply and demand, with the objective of providing access for 92 low and middle-income countries\. COVAX aims to procure enough vaccines to cover 20 percent of the population of its member countries by the end of 2021\. May 17, 2021 Page 3 of 16  The World Bank Vaccine AF MALI COVID-19 Emergency Response Project (P176347) deployment costs of COVID-19 vaccine in the entire country including Vaccines from COVAX facilities and from any other sources in the government plan that meet the World Bank`s Vaccine Approval Criteria\. Bank financing for the COVID-19 vaccines and deployment will follow Bank’s Vaccine Approval Criteria (VAC)\. As of April 16, 2021, the Bank will accept as threshold for eligibility of IBRD/IDA resources in COVID-19 vaccine acquisition and/or deployment under all Bank-financed projects: (i) the vaccine has received regular or emergency licensure or authorization from at least one of the SRAs identified by WHO for vaccines procured and/or supplied under the COVAX Facility, as may be amended from time to time by WHO; or (ii) the vaccine has received WHO Prequalification (PQ) or WHO Emergency Use Listing (EUL)\. Vaccination in Mali is provided at no cost to the population\. 3\. The need for additional resources to expand the COVID-19 response was formally conveyed by the GoM in the request, dated February 18, 2021\. The Bank received a letter from the GoM requesting US$30 million financing to purchase 2 232 970 doses of COVID-19 vaccine and finance operational cost of COVID-19 vaccine deployment in the entire country including for subsidized doses\. The proposed AF will form part of an expanded health response to the pandemic, which is being supported by development partners under the coordination of the GoM\. Additional World Bank financing will provide essential resources to enable the expansion of a sustained and comprehensive pandemic response that will include vaccination in Mali\. 4\. Critically, the AF seeks to enable the acquisition of vaccines from a range of sources to support Mali’s objective to have a portfolio of options to access vaccines under the right conditions (including value-for-money, regulatory standards and delivery time)\. The COVAX facility has put in place a framework that will anchor Mali’s strategy and access to vaccines: on December 31, 2020, Mali entered into an agreement with the COVAX facility to access COVID-19 vaccines at no cost for 20 percent of the population\. The proposed AF will support the deployment of these vaccines and will also expand Mali’s access to COVID-19 vaccines through the COVAX facility as a priority, and to also support the country in accessing vaccines beyond COVAX as necessary\. The proposed IDA financing will build on this to expand Mali access to vaccine, mainly through COVAX facility as first choice\. The availability and terms of vaccines remain fluid and prevent the planning of a firm sequence of vaccine deployment, especially as the actual delivery of vaccines is unlikely to be immediate\. Rather, the proposed financing enables a portfolio approach that will adjust during implementation in response to developments in the country pandemic situation and the global market for vaccines\. Mali, may at its discretion, access the African Vaccine Acquisition Task Team’s (AVATT) planned purchases of vaccines\. These vaccines would be eligible for World Bank financing so long as they meet the VAC requirements\. The proposed project will provide financing for VAC-compliant vaccines\. 5\. Mali has just come out of a third wave of the COVID-19 pandemic, with cases decreasing since mid- April 2021\. The first case of COVID-19 in Mali was detected on March 25, 2020\. As of June 3, 2021, there were 14,281 COVID-19 cases and 517 attributed deaths\. Since the first case of COVID-19 was reported, the GoM has taken swift and aggressive measures to prevent and contain the outbreak\. Just before and after the appearance of the first COVID-19 case, the GoM took some social distancing measures which included: (i) the suspension of commercial flights; (ii) the closure of borders; (iii) the closure of schools; (iv) the prohibition of all public gatherings of more than fifty (50) people; (iv) curfew; and (v) the compulsory wearing of masks in public places\. However, on May 9, 2020, the GoM lifted the curfew and gradually lifted lockdown measures to help the economy to start recovering\. Consequently, whereas the general downward trend in the number of cases stabilized from the May 17, 2021 Page 4 of 16  The World Bank Vaccine AF MALI COVID-19 Emergency Response Project (P176347) beginning of June until the end of October 2020, there were third peaks in mid-December 2020, early January 2021 and mid-April 2021\. However cases have begun to decrease since mid-April, moving from 1345 case per week to 24 cases per week at the end of May 2021\. 6\. This AF is proposed at a crucial juncture in the Government of Mali response to COVID-19\. Two critically important changes in the state of science since the early stages of the pandemic are the emergence of new therapies and the successful development and expanding production of COVID-19 vaccines (see Annex 1 for status)\. A key rationale for the proposed AF is to provide upfront financing for safe and effective vaccine acquisition and deployment in Mali, thus enabling the country to acquire the vaccine at the earliest, recognizing that there is currently excess demand for vaccines from both high-income and lower-income countries\. 7\. The proposed AF will form part of an expanded health response to the pandemic\. The activities will build on COVID-19 MPA-Program Mali COVID-19 Emergency Response Project (P173816), as well as on the Bank’s existing health portfolio in the country namely the Regional Disease Surveillance Systems Enhancement (REDISSE) III (P161163), and Mali - Accelerating Progress Towards Universal Health Coverage (P165534) (see annex 4), and the support of other developing partners in the context of the overall Government’s COVID-19 response\. The AF will invest in health system strengthening, especially in the Expanded Program of Immunization in Mali, and will therefore contribute in improving immunization coverage of other vaccines in Mali C\. Proposed Development Objective(s) The objective of the Project is to strengthen the capacity of the Recipient to prevent, prepare for and respond to COVID-19 pandemic Key Results 8\. To reflect the restructuring of the parent project and measure overall progress in the coverage and deployment of the COVID-19 vaccine, and the gender gaps the project can address, a) the following indicators are added to the project Results Framework: (i) Percentage of population vaccinated, which is included in the priority population targets defined in national plan [by gender]\. Target: {27%} (PDO Indicator); (ii) Percentage of target population vaccinated who received their first dose of the COVID-19 vaccine [by gender] (IRI); (iii) Percentage of the target population vaccinated who received their 2 doses of the COVID-19 vaccine [by gender] (IRI); (iv) Proportion of health regions with an AEFI monitoring committee (IRI); (v) Proportion of health districts with a budgeted micro-plan for COVID-19 vaccination campaign (IRI); (vi) Number of local radio stations communicating awareness campaigns about COVID-19 and the COVID-19 campaign (IRI); (vii) Number of Vaccinators trained on GBV/SEA/SH (IRI);and (viii) Proportion of complaints managed according to project GRM protocol (IRI)\. b) The following Intermediate indicators related to deleted activities are removed from Result Framework: (i) “Number of eligible households provided with cash transfers among affected populationsâ€?; (ii) “Number of eligible households provided with food and basic supplies within quarantined populationsâ€? and 12\.Percentage of acute healthcare facilities with triage capacity\. May 17, 2021 Page 5 of 16  The World Bank Vaccine AF MALI COVID-19 Emergency Response Project (P176347) c) The target of this indicator “Number of modular functional clinics in the countryâ€? was revised from 80 to 8 due to the fact that the unit cost of well-equipped modular clinic is currently very higher than what was estimated during the preparation of the parent project\. Table 1 below show the updated list of PDO and intermediate indicators and their target\. Table 1: Results Framework modifications Modifications Baseli Target ne PDO Indicators 1\. Number of suspected cases of COVID-19 reported and investigated based on None 171 100,000 national guidelines 2\. Number of beds in Intensive Care Unit (ICU) available to appropriately handle None 1 327 severe cases 3\. Percentage of laboratory confirmed cases of COVID-19 treated per approved None 0 95 protocol 4\. Percentage of population vaccinated, which is included in the priority New 0 27 population targets defined in national plan [disaggregated by sex] (*) Intermediate Indicators (1) 1\. Percentage of target population vaccinated who received their first New 0 27 dose of the COVID-19 vaccine (disaggregated by sex) 2\. Percentage of the target population vaccinated who received their 2 New 0 27 doses of the COVID-19 vaccine (disaggregated by sex) 3\. Percentage of health centers/district hospitals with 100% of 53 95 surveillance report sent to the health district or to the region per Ministry of Health Guidelines (1) 4\. Number of health workers trained on case definition, management, None 0 8,264 infection prevention and control for COVID-19 (1) 5\. Number of isolation centers, screening sites and quarantine centers None 3 20 established and equipped with medical supplies, protective equipment and laundry machines (1) 6\. Number of eligible households provided with cash transfers among Deleted affected populations\. 7\. Number of eligible households provided with food and basic supplies Deleted within quarantined populations 8\. Number of modular functional clinics in the country Revised 0 5 9\. Number of designated laboratories with COVID-19 functioning None 4 10 diagnostic equipment, test kits, and reagents per MHSD guidelines (1) 10\. Proportion of health regions with an AEFI monitoring committee New 0 80 11\. Proportion of health districts with a budgeted micro-plan for COVID-19 New 0 80 vaccination campaign (2) 12\. Percentage of acute healthcare facilities with triage capacity Deleted (1) 13\. Number of local radio stations communicating awareness campaigns New 0 8 about COVID-19 and the COVID-19 campaign (3) 14\. Number of national weekly report on epidemic surveillance issued None 11 52 Gen 15\. Number of Vaccinators trained on GBV/SEA/SH New 0 2,000 CE 16\. Proportion of complaints managed according to project GRM protocol New 0 70 (*) Numbers in the brackets refers to the component being monitored by the indicator; CE= indicator on citizen engagement; Gen = Gender; GBV = indicator related to GBV/SEA/SH; Indicators in grey color have been deleted\. May 17, 2021 Page 6 of 16  The World Bank Vaccine AF MALI COVID-19 Emergency Response Project (P176347) D\. Project Description Proposed Changes 9\. The changes proposed for the AF entail expanding the scope of activities in the parent project (MALI COVID-19 Emergency Response Project (P173816)) and adjusting its overall design\. As the proposed activities to be funded under the AF for MALI COVID-19 Emergency Response Project (P173816) are aligned with the original PDO, the PDO remains unchanged\. The following adjustments are made to the original components of the parent project: (a) The following activities are cancelled because they are no longer relevant due to the changes in GoM`s priorities and strategies, and the fact that some of these activities are already covered by other World Bank project (Jigisemijiri for cash transfer) and government resources (cash, food): (i) “cash transfers to households affected by COVID-19â€? and “food and basic supplies provided to households within quarantined populationsâ€? under Subcomponent 1\.4 ; (ii) “hazard pay for front- line health workersâ€? under Subcomponent 2 and “provision of Funds Transfers to selected health facilities to mitigate the impact of fee-waivers to access medical care for COVID-19 Fee waivers at facilitiesâ€? under Subcomponent 2\.2; (b) Original Subcomponent 1\.4 and component 2 are deleted and the remaining activity under component 2 “regular supervision and quality evaluation of treatment centers by health authorities/regulatorâ€? is brought under Subcomponent 1\.3; (c) Resources attached to original subcomponent 1\.4 and component 2 of the parent project will be reallocated to subcomponent 1,1; 1,2 and 1,3 to support the expansion of their activities to COVID-19 Vaccine deployment\. (d) Activities under Subcomponent 1\.1 are expanded to cover communication, social mobilization and community engagement to enhance demand for COVID-19 vaccine; (e) Activities under subcomponent 1\.2 are expanded to include recording and reporting of COVID-19 vaccination as well as AEFI notification\. (f) Activities under subcomponent 1\.3 are expanded to include treatment of AEFI, training of personnel on vaccination and management of AEFI\. (g) A new sub-component 1\.4 “COVID-19 vaccine planning, procurement and deploymentâ€? is included under Component 1 to support the implementation of the National COVID-19 Vaccination plan and strengthening related health service delivery systems to ensure an effective COVID-19 vaccination response\. (h) Original Component 3 of the parent project will become the new component 2 and their activities will remain unchanged\. The Box 1 below summarize the restructuration of project components\. May 17, 2021 Page 7 of 16  The World Bank Vaccine AF MALI COVID-19 Emergency Response Project (P176347) Box 1: Original and new component of the project Original components and subcomponents of New components and subcomponents parent project Component 1: Emergency COVID-19 Response Component 1: Emergency COVID-19 Response (US$ (US$ 21\.2 million; PP US$17\.8 million; PEF AF 57\.2 million; PP US$23\.8 million; PEF AF US$3\.4 million; US$3\.4 million) Vaccine AF US$ 30\.0 million) Subcomponent 1\.1: Prevention through Subcomponent 1\.1: Prevention through Community Community Engagement and Social and Behavior Engagement and Social and Behavior Change Change Communication (US$ 3\.0 million; PP Communication (US$ 6\.0 million; PP US$6\.0 million; PEF US$3\.0 million; PEF AF US$0\.0 million) AF US$0\.0 million; Vaccine AF US$ 0\.0 million) Subcomponent 1\.2: Improving Case Detection, Subcomponent 1\.2: Improving Case Detection, Confirmation, Contact Tracing, Recording and Confirmation, Contact Tracing, Recording and Reporting (US$ 5\.4 million; PP US$3\.0 million; PEF Reporting (US$ 7\.4 million; PP US$5\.0 million; PEF AF AF US$2\.4 million) US$2\.4 million; Vaccine AF US$ 0\.0 million) Subcomponent 1\.3: Treatment and Subcomponent 1\.3: Treatment and Management of Management of COVID-19 cases (US$ 9\.8 million: COVID-19 cases (US$ 13\.8 million: PP US$12\.8 million; PP US$8\.8 million; PEF AF US$1\.0million) PEF AF US$1\.0million; Vaccine AF US$ 0\.0 million) Subcomponent 1\.4: Financial, food and basic Removed: alternative sources of financing were found\. supplies to households and patients (US$ 3\.0 million: PP US$3\.0 million; PEF AF US$0\.0million) Sub-component 1\.4: COVID-19 vaccine planning, procurement and deployment (US$ 30\.0 million; PP US$0\.0 million; PEF AF US$0\.0 million; Vaccine AF US$ 30\.0 million) Component 2: Increase access to health care Removed: change in government policy services (US$ 6 million: PP US$6\.0 million; PEF AF US$0\.0million) Subcomponent 2\.1\. Support for health providers (US$ 3 million: PP US$3\.0 million; PEF AF US$0\.0million) Subcomponent 2\.2\. Fee waivers at facilities (US$ 3 million: PP US$3\.0 million; PEF AF US$0\.0million) Component 3\. Implementation Management Component 2\. Implementation Management and and Monitoring and Evaluation (US$: 2 million: Monitoring and Evaluation (US$ 2\.0 million; PP US$2\.0 PP US$2\.0 million; PEF AF US$0\.0million) million; PEF AF US$0\.0 million; Vaccine AF US$ 0\.0 million) Subcomponent 3\.1: Implementation Subcomponent 2\.1: Implementation management (US$ management (US$ 1 million: PP US$1\.0 million; 1\.0 million; PP US$1\.0 million; PEF AF US$0\.0 million; PEF AF US$0\.0 million) Vaccine AF US$ 0\.0 million) May 17, 2021 Page 8 of 16  The World Bank Vaccine AF MALI COVID-19 Emergency Response Project (P176347) Subcomponent 3\.2: Monitoring, evaluation and Subcomponent 2\.2: Monitoring, evaluation and coordination (US$ 1 million: PP US$1\.0 million; coordination (US$ 1\.0 million; PP US$1\.0 million; PEF AF PEF AF US$0\.0million) US$0\.0 million; Vaccine AF US$ 0\.0 million) Proposed New Activities 10\. Purchasing of vaccines doses to be financed under Component 1: Emergency COVID-19 Response (US$ 57\.2 million; PP US$23\.8 million; PEF AF US$3\.4 million; Vaccine AF US$ 30\.0 million)\. Mali will potentially use the options of: (i) direct purchase from vaccine manufacturers; (ii) Purchase through UNICEF; (iii) purchase through the COVAX Facility for vaccine purchase and financing mechanisms; and/or (iv) purchase of excess stocks from other countries that reserve excess doses\. The VAC will apply to any vaccine acquisition that the Bank finances\. Given the recent emergence of COVID-19, there is no conclusive data available on the duration of immunity that vaccines will provide\. While some evidence suggests that an enduring response will occur, this will not be known with certainty until clinical trials follow participants for several years\. As such, this additional financing will allow for re-vaccination efforts if they are warranted by peer-reviewed scientific knowledge at the time\. In the case that re-vaccination is required, limited priority populations (such as health workers and the elderly) will need to be targeted for re-vaccination given constraints on vaccine production capacity and equity considerations (i\.e\., tradeoffs between broader population coverage and re-vaccination)\. 11\. To support the GoM’s vaccination planning, the AF will finance upfront technical assistance to support Mali to establish institutional frameworks for the safe and effective deployment of vaccines\. These will include: (i) establishment of policies related to ensuring that there is no forced vaccination and that any mandatory vaccination program (such as for entry to schools) is well designed including regarding consent and follows due process for those who choose to opt out; (ii) acceptable approved policy for prioritized intra-country vaccine allocation; (iii) regulatory standards at the national level, including pharmacovigilance; (iv) appropriate minimum standards for vaccine management including climate-friendly cold chain infrastructure (with financing as well for the investment to meet those standards as described below); and (v) the creation of accountability, grievances, and citizen and community engagement mechanisms\. The policies for prioritizing intra- country vaccine allocations will follow principles established in the WHO Allocation Framework, including targeting an initial coverage of 20 percent of a country’s population; focusing first on workers in health and social care settings; and then focusing on the elderly and younger people with an underlying condition which places them at higher risk\. 12\. The AF will support investments to bring immunization systems and service delivery capacity to the level required to successfully deliver COVID-19 vaccines at scale, through Components (components 1) of the parent project\. To this end, the AF is geared to assist the GoM, working with WBG, WHO, UNICEF and other development partners, to respond to the gaps identified through the COVID-19 vaccine readiness assessment in the country\. The AF will support: (i) procurement and maintenance of climate-friendly Cold Chain equipment at central, regional and district level; (ii) procurement of two fuel-efficient refrigerated trucks and four fuel-efficient refrigerated vehicles for vaccines transportation; and (iii) procurement and maintenance of low-carbon waste management equipment\. May 17, 2021 Page 9 of 16  The World Bank Vaccine AF MALI COVID-19 Emergency Response Project (P176347) 13\. The proposed AF will support vaccination of seven percent of the country’s population beyond the twenty percent covered by the COVAX Facility, in accordance with the priority groups summarized in Table 2 below\. Table 2: Priority Groups for Vaccination in Mali Ranking of vulnerable group, or Population group Number of Percent of inclusion in which phase people population First health workers 844,480 4% people aged 60 and over 1,266,720 6% People with co-morbidities 2,111,200 10% Second Rest of the population including civil 16,889,600 80 protection personnel, teachers, students, security forces, and people under 60 years of age without comorbidities Total 100% 14\. The AF will finance activities under new subcomponent 1\.4 COVID-19 vaccine planning, procurement and deployment (US$ 30\.0 million; PP US$0\.0 million; PEF AF US$0\.0 million; Vaccine AF US$ 30\.0 million)]\. This sub-component will support the MHSD to (i) develop operational plans for the COVID- 19 vaccination campaign; (ii) strengthen the immunization logistics system to ensure that the necessary conditions (specifically climate-sensitive cold chain) are in place for the implementation of the plan; (iii) acquire additional vaccines; and (iv) organize the field activities such as administration of the two doses of vaccines and supervision of all the actors\. The main activities to be supported by the AF will include: • Program planning and management: The AF will finance the (a) development of operational/micro plans and budgets for implementation; (b) development of legal regulatory documents, and plans for swift importation of the COVID-19 vaccines and aspects related to data protection and consent; (c) implementation of coordination mechanisms at the national and sub-national level for the preparation and deployment of vaccines, and (d) contingency measures included in the national deployment and vaccination plan to deal with any unexpected disruptions to vaccine supply from climate change and natural disasters (i\.e\., flooding and extreme heat); • Procurement and distribution of vaccines, consumables, and immunization system strengthening: The AF will cover costs related to the (a) procurement, importation, storage and distribution of COVID- 19 vaccines, including increased/equitable access to vaccines procured via mechanism selected by the country (e\.g\. COVAX, AVATT or through bilateral options) and in accordance with criteria adopted under the AF3; (b) procurement and distribution of vaccination supplies (syringes, climate-friendly 3 The World Bank will accept the threshold for eligibility of IBRD/IDA resources for vaccine purchase either (i) approval by three stringent Regulatory Authorities (SRAs) in three regions or WHO prequalification and approval by 1 SRA)\. However, it should be noted that for ongoing activities, the country has signed a memorandum of understanding with UNICEF for the purchase of routine vaccines, equipment and consumables for immunization, through the central purchasing office in Copenhagen ; May 17, 2021 Page 10 of 16  The World Bank Vaccine AF MALI COVID-19 Emergency Response Project (P176347) waste management equipment, climate-friendly and battery-operated cold boxes and vaccine carriers/coolers, alcohol prep pads), furniture for vaccination rooms, and PPE and hygiene products for vaccinators; (c) adoption of global tools and adaptation of the supply chain systems to best practices, including climate-friendly cold chains\. • Immunization systems strengthening for both COVID-19 vaccination, and routine immunizations: The AF will support: (a) strengthening of remote temperature controls and monitoring systems including the purchase of freeze-tag/fridge-tags; (b) Procurement and climate-smart rehabilitation of incinerators at the central, regional and district levels of the health system; (c) climate-smart rehabilitation/procurement of regional/National cold rooms for the EPI program, and upgrading of climate-friendly cold chain equipment to meet global and WHO PQS standards (i\.e\., solar refrigerators, energy-efficient freezers) and (d) procurement of 2 fuel-efficient refrigerated trucks and 4 fuel- efficient refrigerated vehicles for vaccine transportation\. • Vaccine safety, Pharmacovigilance, monitoring and management of adverse events following immunization (AEFI)\. The management of AEFIs are imperative for all national immunization systems\. The AF will support: (a) surveillances of AEFI across all health regions during vaccination and over a 12-month period following the introduction of the vaccine; (b) training of health personnel on aspects related to AEFI, including planning, communication, vaccine management, monitoring and evaluation using the ODK tool, surveillance, administration strategy, immunization calendar, AEFI notification, vaccine and injection safety; (c) revise guidelines and tools for AEFI notification to adapt them to the COVID-19 vaccine context; (d) implement a notification system for cases of AEFI; (e) support health district teams and supervisors at the central level to investigate severe cases and clusters of AEFIs; (f) ensure the coordination and functionality of the technical and expert structures involved in the management of AEFI, including the Ad hoc committee of AEFI experts; (g) collect and transport biological samples from cases of AEFI to designated laboratories, and analysis of samples; (h) procure and disseminate emergency KITs for anaphylactic shock management, and reinforce health structures with resuscitation equipment; (i) Procurement of drugs and other supplies needed for treatment of AEFI cases as defined in the national protocol for AEFI management, which may be amended from time to time by the government; (j) develop investigative files for severe cases of AEFI and distribute them to all health districts; and (k) organize the transport of persons who are victims of severe AEFI to referral facilities and cover costs related to their medical care\. The medical treatment package for AEFI will be defined in the national protocol for AEFI management, which could be amended from time to time by the government\. It will be accessible for the general population which will be exempt from copayments and such\. • Support the MHSD to maintain contact with individuals who have received the first COVID-19 vaccine dose and are awaiting the second dose of the vaccine\. This will include costs related to the purchase of telephone credit and data bundles for site teams and coordination teams to send reminders by phone, text or email two (02) days before the appointment for the second dose\. 15\. In Addition to the AF, some activities of the parent project will be expanded to Covid-19 vaccine deployment\. These include: a) Subcomponent 1\.1 [ Prevention through Community Engagement and Social and Behavior May 17, 2021 Page 11 of 16  The World Bank Vaccine AF MALI COVID-19 Emergency Response Project (P176347) Change Communication (US$ 6\.0 million; PP US$6\.0 million; PEF AF US$0\.0 million; Vaccine AF US$ 0\.0 million)] is expanded to integrate communication activities to enhance demand for the COVID-19 vaccine\. These activities include: (i) training of different actors (health professionals at different level, public and local media professionals, local traditional leaders, political and religious leaders, women and youth associations, community health workers and other community networks) on Communication for Vaccines and Vaccination against COVID-19; (ii) development of key messages and their dissemination via mass media, community channels and relays, ensuring that information on routine immunization is always available and disclosed to as many people as possible; (iii) production and distribution of dedicated communication materials, tools and supports; (iv) buying the air time, SMS, or other methods of mass media; (v) the implementation of national media campaigns on vaccination campaign; (vi) Community mobilization activities through civil society organizations including religious and traditional leaders, community health workers and community organizations will also be supported, especially in rural areas; (vii) Provisions to strengthen the Emergency Operation Center and a national 24/7 call center for responding to inquiries about coronavirus and COVID-19 Vaccination; (ix) rumor and crisis management; (x) Updating and Functioning of GRM; (xi) support to studies, surveys and opinion polls on the potential use of COVID-19 vaccine; (xii)collection and dissemination/sharing of experiences and positive stories of primary immunization recipients to build confidence in the vaccine; and (xiii) support the community ownership process, that value local solutions to generate and increase demand for immunization, control the pandemic and mitigate its impacts, prevent and combat stigma and discrimination, and increase resilience to anti-vaccine rhetoric\. Communication activities will also have a focus on climate-related diseases to ensure greater awareness of the risks among key population groups about the climate-related health risks linked to the COVID-19 crisis\. b) Subcomponent 1\.2: [Improving Case Detection, Confirmation, Contact Tracing, Recording and Reporting (US$ 7\.4 million; PP US$5\.0 million; PEF AF US$2\.4 million; Vaccine AF US$ 0\.0 million)], which supported the strengthening of climate-sensitive disease surveillance and building testing capacity for early detection and confirmation of COVID-19 cases will continue to be financed and will be expanded to include activities related to recording and reporting of COVID-19 vaccination as well as AEFI notification\. This include : (i) collection and transportation of biological samples from cases of AEFI to designated laboratories, and analysis of samples; (ii) set up DHIS2 and train staff to use it to collect and data of COVID-19 immunization as well as AEFI data\. Tablets purchased under the parent project will be configured and use to collect also data of COVID-19 vaccination\. c) Subcomponent 1\.3 [Treatment and Management of COVID-19 cases (US$ 13\.8 million: PP US$12\.8 million; PEF AF US$1\.0million; Vaccine AF US$ 0\.0 million)] is expanded to the following activities: (i) treatment of AEFI at health facilities; (ii) training of vaccinators and supervisors on vaccination, identification and management/reference of AEFI and GBV/SEAH; and (iii) procure and disseminate emergency KITs for anaphylactic shock management, and reinforce health structures with resuscitation equipment\. Resuscitation material purchased under parent project will be used to manage severe AEFI\. If need be, more resuscitation equipment will be purchased\. \. May 17, 2021 Page 12 of 16  The World Bank Vaccine AF MALI COVID-19 Emergency Response Project (P176347) Legal Operational Policies Triggered? No Projects on International Waterways OP 7\.50 No Projects in Disputed Areas OP 7\.60 Summary of Assessment of Environmental and Social Risks and Impacts \. 16\. Activities under the AF should have positive impacts as it will improve capacity for surveillance, monitoring and containment of COVID-19\. However, it could also cause environment, health and safety risks due to the dangerous nature of the pathogen (COVID-19) and reagents and equipment used in the project-supported activities\. Facilities treating patients may also generate biological, chemical waste, and other hazardous by-products that could be injurious to human health\. These risks will be mitigated with occupational health and safety standards and specific infectious-control strategies, guidelines and requirements as recommended by WHO and Ministry of health and social development\. The Infection Control and Waste Management Plan (ICWMP) in place under the parent will be updated and extended to vaccination activities to minimize these risks\. Climate change can affect the trajectory of the COVID-19 pandemic and impact groups that are most susceptible to the virus including healthcare workers, the elderly, those with pre-existing conditions, people with disabilities and other disadvantaged groups\. The stakeholder engagement plan (SEP) developed under parent project will be updated and extended to vaccination in order to identified and engage properly vulnerable group and to put in place an updated grievance redress mechanism\. In addition, the Risk communication and community engagement (RCCE) will be updated and implemented under AF\. 17\. In line with WHO Interim Guidance (February 12, 2020) on “Laboratory Biosafety Guidance related to the novel coronavirus (2019-nCoV)â€?, and other guidelines, the parent project developed a Hospitals’ Waste Management Plan and prepared an ESMF for the Project by adding to it WHO standards on COVID-19 response\. The plan includes training of staff to be aware of all hazards they might encounter\. This provides for the application of international best practices in COVID-19 diagnostic testing and handling the medical supplies, disposing of the generated waste, and road safety\. 18\. As part of the ESF requirements, the AF will take steps to mitigate the risks of sexual exploitation, harassment and abuse\. In pandemics, access to services may be reduced due to lockdowns and reduced mobility, and the rule of law becomes fragile, increasing the risks of GBV\. For the parent project the PIU has developed a GBV code of conduct and also identifies services to refer survivors\. In addition, a community sensitization/ feedback mechanism was also developed\. These instruments will be updated and extended to additional financing\. 19\. In addition to the ESMF, the PIU will implement the activities set out in the ESCP\. The Environmental and Social Review Summary (ESRS), ESCP, ESMF, SEP, and LMP of the parent project will be updated\. The project implementation will ensure appropriate stakeholder engagement, proper awareness raising and timely information dissemination\. This will help: (i) avoid conflicts resulting from false May 17, 2021 Page 13 of 16  The World Bank Vaccine AF MALI COVID-19 Emergency Response Project (P176347) rumors; (ii) ensure equitable access to services for all who need it; and (iii) address issues resulting from people being kept in quarantine\. These will be guided by standards set out by WHO as well as other international good practices including social inclusion and prevention of Sexual Exploitation and Abuse (SEA) and Sexual Harassment (SH)\. 20\. Mechanisms to engage citizens developed under parent project SEP will be updated and extended to AF to target beneficiaries more specifically, in providing ideas and feedback on program delivery are helpful in identifying gaps at the point of service delivery to build community knowledge and confidence, establish trust, ensure governments respond to community needs (including vulnerable groups), and thus to optimize the impact of the COVID-19 emergency response\. E\. Implementation Institutional and Implementation Arrangements 21\. The Ministry of Health and Social Development (MHSD) is the implementing agency for the Project\. The MHSD has an established and well-functioning Project Implementing Unit (PIU) for the World Bank-funded REDISSE III project and the parent project within the MHSD (l’Unité de Coordination des Projets REDISSE et COVID) responsible for the overall project planning, oversight, coordination, and management, in collaboration with relevant divisions and departments of the MHSD\. The Parent Project's overall governance is provided by a multisectoral national committee for One Health created through the Office of the Prime Minister, chaired by the Minister of Health and Social Affairs\. The committee includes the Ministries of Livestock, Economy and Finance, Education, Agriculture, Security, Environment and Sustainable Development, Communications, and representatives from local, regional and global partners\. The committee reviews annual workplans and budgets, monitor project progress and approve annual project reports, meeting at least twice annually\. \. CONTACT POINT World Bank Jean Claude Taptue Fotso Senior Health Specialist Haidara Ousmane Diadie Senior Health Specialist Patrick Hoang-Vu Eozenou Senior Economist, Health May 17, 2021 Page 14 of 16  The World Bank Vaccine AF MALI COVID-19 Emergency Response Project (P176347) Borrower/Client/Recipient THE REPUBLIC OF MALI Implementing Agencies Ministry of Health and Social Development Seydou GOITA Coordonnateur REDISSE III et COVID-19 ousmanedi@yahoo\.fr FOR MORE INFORMATION CONTACT The World Bank 1818 H Street, NW Washington, D\.C\. 20433 Telephone: (202) 473-1000 Web: http://www\.worldbank\.org/projects APPROVAL Jean Claude Taptue Fotso Task Team Leader(s): Haidara Ousmane Diadie Patrick Hoang-Vu Eozenou Approved By Practice Manager/Manager: Country Director: Kofi Nouve 04-Jun-2021 May 17, 2021 Page 15 of 16  The World Bank Vaccine AF MALI COVID-19 Emergency Response Project (P176347) May 17, 2021 Page 16 of 16

APPROVAL

P111366

Page 1 PROJECT INFORMATION DOCUMENT (PID) APPRAISAL STAGE Report No\.: AB4627 Project Name Environmental Management and Capacity Building II Additional Finance Region AFRICA Sector Solid waste management (50%);Sub-national government administration (30%);Oil and gas (20%) Project ID P111366 Borrower(s) GOVERNMENT OF UGANDA Implementing Agency Environment Category [ ] A [ ] B [X] C [ ] FI [ ] TBD (to be determined) Date PID Prepared March 12, 2009 Date of Appraisal Authorization May 13, 2008 Date of Board Approval September 4, 2008 1\. Country and Sector Background: The current project is the second phase of a long-term program of assistance to build environmental capacity in Uganda\. EMCBP II was approved by the Board on March 20, 2001, and was declared effective on June 25, 2001, for a total amount of SDR 17\.10 million (historical equivalent US$26\.6 million )\. The project’s closing date has been extended three times\. The first extension was from December 31, 2006, to December 31, 2007, necessitated by disbursement lags during the original project period\. These lags were due to broader consultations in implementing institutional strengthening efforts at the district level; such consultations resulted in a modified grant delivery model that would better reflect the needs of the districts as the number of districts in Uganda expanded during the project period because of GOU’s decentralization policies\. The project’s closing date was subsequently extended by another six months to June 30, 2008, to allow completion of selected district composting activities\. The third extension of five months (to November 30, 2008) was processed to accommodate delivery of some composting equipment that was delayed because of port disruptions during the past-election events in neighboring Kenya\. The project’s development objectives have remained unchanged throughout its life\. 2\. Objectives: The project development objective (PDO) of the Additional Financing is identical to the original PDO of EMCBP II, namely to contribute to sustainable management of environmental and natural resources at the national, district, and community levels\. The Outcome Indicators will essentially remain the same with the Additional Financing, but have been expanded to include indicators relating to Municipal Solid Waste (MSW) processing, tree planting, and the promulgation of key regulations relating to the petroleum sector\. 3\. Rationale for Bank Involvement: The World Bank has provided leadership and support for activities related to environmental management since the inception of the National Environmental Action Plan (NEAP) in 1993\. This additional finance package represents the third phase of a long-term effort to assist the Government of Uganda in their implementation of the NEAP, and supporting environmental and local government legislation\. The WB Page 2 support to this sector has served to maintain sustainable environmental development as part of the government strategy for economic transformation\. The key development issues that this additional finance package will address include: capacity building for better environmental management at national, district and local levels; district level solid waste management; reduced forest degradation and reforestation efforts; and, environmentally and economically sound development of the nascent oil and gas sector\. 4\. Description: This is an additional finance operation for scaling up activities initiated under the EMCBP II parent project\. Therefore the activities and components will generally remain the same, the 3 components are as described below: District Solid Waste Management/Composting Activities Phase 2 : The objective of this activity is to address the solid waste management crisis and expand the number of towns and municipalities active in carbon trade through composting\. Rural towns generating up to 70 tons per day (TPD) of organic waste receive support to improve collection efficiency and process the wastes at existing landfill sites\. Lead Agencies: Priority Petroleum Sector Activities: The objective of this activity is to address some existing gaps in the environmental management of this sector\. Support to the oil and gas sector will build on the model of regulatory reviews, workshops, and custom training that was piloted during the EMCBP II lead agency component\. In the case of the oil and gas sector, it will also include representation from the oil-bearing districts within the relevant interventions\. Within the environmental area, NORAD support is focusing on sensitivity mapping, training, the development of EIA guidelines, routine monitoring and inspections, and planning inputs associated with oil spill contingency and emergency response\. Identified gaps that will be financed fall into the following general areas: (i) legislation and regulations; (ii) training and sensitization; and, (iii) specific monitoring and emergency response equipment needs required by MEMD and other government agencies\. Centre Institutional Strengthening: NEMA – Priority Enforcement Activities: The objective of this activity is to provide core operational support for NEMA’s monitoring and enforcement mandate across all operations\. Priority areas for intervention include (a) logistical support for vehicle operation and inspections; (b) training, relating to training of inspectors, general sensitization of stakeholders, and translation and printing of natural resource management regulations; (c) enforcement and monitoring support for laboratory equipment, consumables, protective equipment, and legal services for prosecuting cases; and, (d) modest administrative support for project accounting\. Tree Planting: NFA – Priority Tree-planting Activities: The objective of this activity is to augment NFA revenue earning capabilities through improved use of its degraded forest lands and engagement with new carbon finance markets\. Of five areas considered, two sites were selected that would permit NFA to develop new models of sustainable forest use: Site A focuses on replanting of denuded forest lands in the North Rwenzori forest reserve, with a view to selling the carbon assets on the formal or voluntary markets\. The project Page 3 represents a scaling up of the successful Rwoho forest model, with the innovation being scale (up to 2000 ha) and the potential sale of emission reductions to markets outside the Clean Development Mechanism (CDM)\. Site B focuses on some 2500 ha of degraded forest lands in the Kasagala CFR just north of Kampala\. NFA already has a demonstration reforestation site in this CFR, and the proposed activity will focus on the sustainable planting and management of species suitable for charcoal production\. The project will also support the demonstration of a small number of high efficiency kilns that are anticipated to improve charcoal production efficiency from current levels of 10-12% (using traditional methods) to efficiencies approaching 50% using technologies proven elsewhere\. The project also supports methodology development and monitoring to permit potential validation and registration of emission reductions from the improved processing efficiency\. 5\. Financing Source: ($m\.) BORROWER/RECIPIENT 2 International Development Association (IDA) 15 Total 17 6\. Implementation: The implementation arrangements for the Additional Financing will remain the same as under the existing project for all activities except those associated with tree planting\. Tree planting will be conducted by the National Forestry Authority (NFA) and a new Designated Account will be opened by NFA to facilitate project implementation\. To facilitate procurement of key items regarding the seasonal nature of tree planting and the high priority monitoring needs in the oil and gas sector, the Government has requested retroactive financing of eligible expenditures from May 15, 2008, until the anticipated date of effectiveness of the Additional Credit (September 15, 2008)\. 7\. Sustainability: Sustainable growth and economic development requires that natural resources are used prudently and that environmental problems are addressed at an early stage\. This condition holds true for Uganda even though the country faces less severe environmental problems and retains a more intact natural resource base than that of its neighbors\. Uganda faces well-recognized, if not well-assessed, environmental problems in the degradation of land, forest, water and biological resources\. The adverse impact of natural resource degradation on production and conservation will intensify with the rising demand for food and energy\. Also, increased consumption levels will lead to higher levels of waste and pollution\. The adoption of composting techniques to manage municipal solid waste will contribute to the reduction in land required for land filling and more sustainable management of the waste stream\. The sale of the emission reduction credits will also contribute to the financial sustainability of the municipalities\. Page 4 8\. Lessons Learned from Past Operations in the Country/Sector: Lessons learned from the proceeding projects, EMCBP and EMCBP II were incorporated into the development and choice of specific activities for scaling up under the Additional Finance\. One important lesson is that lead agencies must have a minimum critical capacity to fulfill their mandate under the environmental legislation\. Both NFA and the MEMD have proven to be very strong and with in-house capacity to undertake the proposed activities\. Another lesson learned is that actions in the district need to focus on the priority environmental problems\. The solid waste component is designed to address both the chronic solid waste management problem as well as the financing of the activity\. 9\. Safeguard Policies (including public consultation): The appraisal team confirmed that the activities are “Environmental Category C”; which is the same as the associated parent project\. The only additional safeguard policy triggered is the Forests Safeguard (OP/BP 4\.36)\. This is because the project will improve the sustainable management of forest lands, using proven models of community participation to share in future benefits\. The appraisal team confirmed that areas targeted have recent draft forest management plans in place and the activities will be sited to be consistent with these plans\. The project will support completion of these plans through more detailed forest inventories of the entire surrounding forest reserves, and assistance in the selection of appropriate species for planting\. One area will be planted for commercial timber species that are suitable also for carbon sequestration payments; the second area will also include the planting of species appropriate for sustainable charcoal production\. Safeguard Policies Triggered by the Project Yes No Environmental Assessment ( OP / BP 4\.01) [ ] [ ] Natural Habitats ( OP / BP 4\.04) [ ] [ ] Pest Management ( OP 4\.09 ) [ ] [ ] Physical Cultural Resources ( OP/BP 4\.11 ) [ ] [ ] Involuntary Resettlement ( OP / BP 4\.12) [ ] [ ] Indigenous Peoples ( OP / BP 4\.10) [ ] [ ] Forests ( OP / BP 4\.36) [ x] [ ] Safety of Dams ( OP / BP 4\.37) [ ] [ ] Projects in Disputed Areas ( OP / BP 7\.60) * [ ] [ ] Projects on International Waterways ( OP / BP 7\.50) [ ] [ ] 10\. Contact point * By supporting the proposed project, the Bank does not intend to prejudice the final determination of the parties' claims on the disputed areas Page 5 Contact: Nathalie Weier Johnson Title: Sr Environmental Spec\. Tel: (202) 473-3765 Fax: (202) 477-0515 Email: Njohnson@worldbank\.org 11\. For more information contact: The InfoShop The World Bank 1818 H Street, NW Washington, D\.C\. 20433 Telephone: (202) 458-4500 Fax: (202) 522-1500 Email: pic@worldbank\.org Web: http://www\.worldbank\.org/infoshop

APPROVAL

P000568

The World Bank FOR OFFICIAL USE ONLY Report No: 20174 IMPLEMENTATION COMPLETION REPORT REPUBLIC OF CONGO PRIVATIZATION AND CAPACITY BUILDING PROJECT March 2, 2000 Private Sector Finance Africa Region This document has a restricted distribution and may be used by recipients only in performance of their official duties\. Its content may not otherwise be disclosed without World Bank authorization\.  EXCHANGE RATE Currency unit: CFA franc (CFAF) US$1 = 491 CFAF (January 1996) WEIGHTS AND MEASURES Metric System ABBREVIATIONS AND ACRONYMS ATC Agence Transcongolaise des Communications AFD Agence Franqaise de Developpement BCC Banque Centrale du Congo BNDC Banque Nationale du Congo CCA Caisse Congolaise dAmortissement CCP Centre de Cheques Postaux CFCO Chemins defer du Congo CNE Caisse Nationale d'Epargne COBAC Commission Bancaire des Etats d'Afrique Centrale CORAF Congolaise de Raffinage DCO Direction du Contr6le des Operations DGH Direction Generale des Hydrocarbures ERC Economic Recovery Credit HC Hydro-Congo IGE Inspection Generale de l'Etat ONPT Office nationale de poste et telecommunications PEIDP Public Enterprise Institutional Development Project SPCP Secretariat Permanent du Comite de Privatisation SNDE Societe Nationale de Distribution d'Eau SNE Societe Nationale d'Electricite UNDP United Nations Development Program VN Voies Navigables FISCAL YEAR January 1 - December 31 Vice President: Jean-Louis Sarbib, AFRVP Country Director: Serge Michailof, AFC07 Sector Manager: Demba Ba, AFTPS Team Leader: Paul Lignieres, AFTPS  FOR OFFICIAL USE ONLY REPUBLIC OF CONGO PRIVATIZATION AND CAPACITY BUILDING PROJECT IMPLEMENTATION COMPLETION REPORT TABLE OF CONTENTS PREFACE \.i EVALUATION SUMMARY \. i PART 1: PROJECT IMPLEMENTATION ASSESSMENT \.1I A\. Project Background \.1 B\. Statement of Project Objectives and Risks \.2\.2 C\. Evaluation of Project Objectives and Risks \.3 D\. Achievement of Project Objectives \.4 E\. Implementation Record and Major Factors Affecting the Project \.5 F\. Project Sustainability \.6 G\. Bank's Performance \.6 H\. Borrower's Performance \.7 I\. Assessment of Outcome \.7 J\. Future Operations \.8 K\. Main Lessons to be Learned \.8 PART II\. STATISTICAL TABLES \. 10 Table 1: Summary of Assessments \. 10 Table 2: Related Bank Loans/Credits \.11 Table 3: Project Timetable \. 12 Table 4: Loan/Credit Disbursements: Cumulative Estimated and Actual \. 12 Table 5: Key Indicators for Project Implementation \. 13 Table 6: Key Indicators for Project Operation \. 14 Table 7: Studies Included in Project \. 14 Table 8A: Project Costs \. 14 Table 8B: Project Financing \. 14 Table 9: Economic Costs and Benefits \. 14 Table 10: Status of Legal Covenants \. 15 Table 1 1: Compliance with Operational Manual Statements \. 17 Table 12: Bank Resources: Staff Inputs \. 17 Table 13: Bank Resources: Missions \. 17 Appendix A\. Agence Fran,caise de Developpement's Contribution to the ICR \. 18 This document has a restricted distribution and may be used by recipients only in the performance of their official duties\. Its contents may not otherwise be disclosed without World Bank authorization\.   REPUBLIC OF CONGO IMPLEMENTATION COMPLETION REPORT PRIVATIZATION AND CAPACITY BUILDING PROJECT (Cr\. 2775-COB) PREFACE 1\. This is the Implementation Completion Report (ICR) for the Privatization and Capacity Building Project, for which Cr\. 2775-COB in the amount of SDR 5\.8 million (US$9\.0 million equivalent) was approved in September 1995 and made effective in January 1996\. 2\. The project was closed on June 30, 1999, as scheduled\. The last disbursement took place in September 1997\. SDR 2\.1 million was disbursed; an undisbursed balance of SDR 3\.7 million (US$5\.1 million equivalent) has been canceled\. Disbursements under the Credit were suspended in July 1997 because of the country's political situation following resumption of the civil war\. In November 1997, the country was put on non-accrual status\. In addition, the Government may have to refund FF44,792\.61 to account for the full recovery of the initial deposit of the special account\. Parallel financing was provided by the Agence Franqaise de Developpement in the amount of US$0\.9 million equivalent\. A US$0\.5 million Japanese PHRD grant financed development of proposals for restructuring the financial sector\. 3\. The ICR was prepared by Paul Lignieres, Private Sector Specialist (AFTPS)\. It was reviewed by Claude Sorel, Private Sector Specialist (AFTPS); Iain Christie, Lead Specialist (AFTPS); Demba Ba, Sector Manager (AFTPS); Serge Michailof, Country Director (AFC07); Luc Lapointe, Procurement Specialist (AFTS2); Ren6e Desclaux, Disbursement Officer (LOAAF); and the previous task teams\. 4\. Because of the country's political and security situation, no ICR mission took place\. The report is based on the materials available in the project files\. It is also based on discussions with Bank staff, the Agence Fran~aise de Developpement and consultants involved in project execution\. The Agence Francaise de Developpement contributed to the preparation of the ICR by providing comments on the report, which are included as Appendix A\.   REPUBLIC OF CONGO IMPLEMENTATION COMPLETION REPORT PRIVATIZATION AND CAPACITY BUILDING PROJECT (Credit 2775-COB) EVALUATION SUMMARY Introduction/Project Background 1\. Since independence in 1960, Congo has been beset by intermittent political turbulence and civil unrest which prevented it from attaining a track of stable reform and increased business confidence\. In the early 1990s, following protracted civil strife, the Government shifted its focus from centrally planning the economy to a more market-oriented approach\. To support the shift, it embarked on a policy reform program with the support of the IMF, the Bank and the Agence Frangaise de Developpement (AFD)\. Central to the program was the Government's divestiture from all commercial and industrial activities\. The Privatization and Capacity Building Project was prepared to support this privatization program\. In April 1995, when the project was prepared, the Congolese authorities were anxious to move quickly to consolidate gains made in a period of peace and ahead of the presidential elections set for 1996\. For two years, from 1995- 1997, there was relative peace and stability but hostilities between the party in power and the opposition resumed in 1997, leading to suspension and eventual cancellation of the credit\. 2\. This project follows and builds on two earlier projects: the Second Technical Assistance Project (Ln\. 2753-COB, FY86) which focused on macroeconomic reforms; and the Public Enterprise Institutional Development Project (PEIDP, Ln\. 2868-COB, FY88), designed to pursue reforms in the public sector\. Thus, there was a history of five or six years of attempts to reform the environment of public enterprises before the operation under review\. Statement/Evaluation of Project Objectives and Risks 3\. The objectives of the project, as stated in the Memorandum of the President (MOP), were to support the divestiture of public enterprises, introduce a competitive environment in the utility and petroleum sectors and facilitate private sector development\. The project was also designed to assist the Government in taking up-front actions prior to a private sector adjustment program to be supported by an IDA credit in FY96\. More specifically, the objectives were to: * prepare regulatory frameworks for the five major public enterprises in control of petroleum distribution, transportation, telecommunications, power and water distribution and open up the sectors to competition progressively; * conduct the privatization of these major public enterprises; * liquidate other non-viable public enterprises; * support regulation and competition in the financial sector and reforms in banking institutions\. 4\. The objectives of the project were relevant and supported the Government's program\. The first objective was important because historically, policy formulation, regulation and operations were all provided by the sectoral line ministries; separation of these activities, and in particular of the regulatory function, was essential as public monopolies were being privatized and there was also concern to open sectors to competition\. It was partially achieved as privatization laws and enabling legislation were prepared; these laws and legislation were, however, voted and ratified  for only the telecommunications sector\. The second objective was comprehensive and ambitious, especially as Government's commitment occasionally wavered\. The objective was nonetheless partially achieved as most privatization dossiers were brought to the point of sale\. Privatization was undertaken without prior adoption of a clear regulatory framework; but, of necessity, the regulatory frameworks were spelt out in the privatization dossiers\. Given the overall political context, although placing greater emphasis on sequencing might have been desirable, it was not possible in the environment, which prevailed\. The third objective was timely and appropriate\. At the time of project preparation, of 43 enterprises still owned or controlled by the Government, most had accumulated losses and were technically insolvent\. This objective was partially achieved\. The fourth objective was relevant and timely and interesting in that it proposed resolving a bottleneck which could constrain the activities of the privatized utilities and indeed commerce and industry in Congo - lack of financing\. However, political interference made it difficult to achieve any progress in this component\. 5\. Evaluation of risks\. The project was very risky but it was one whose potential pay-off was high; indeed, the MOP clearly identified this risk\. However, no real fallback position was identified\. Political events made it impossible to supervise the project or implement it effectively\. In retrospect, the ostensible window of opportunity identified in the MOP may not have been an adequate justification for proceeding with the project\. In the volatile political environment, tensions arising from spill-over effects (vested interests, retrenchment, etc\.) could well have exacerbated social tensions in the population\. As a practical matter, the Bank was quite flexible when it became impossible to supervise implementation: the project was suspended; however, with Bank approval, AFD took over many aspects of the privatization program and progress was made\. Project Implementation Experience and Results 6\. SDR 2\.1 million of the SDR 5\.8 million IDA Credit was disbursed during project implementation\. AFD provided US$0\.9 million equivalent\. Disbursements under the Credit were suspended in July 1997, following resumption of the civil war\. 7\. Key factors affecting implementation\. There were three main factors: the country's domestic political conflict, Government's commitment, and project design\. The determining factor was obviously the civil war, which flared up again during project execution; inevitably, it had a major impact on project execution -- it significantly disrupted or halted many activities under implementation\. The Bank was obliged to suspend disbursements in July 1997\. It is interesting, however, that some work on the project continued, in spite of the war, notably through the efforts of AFD\. Govermnent commitment to the project was strong during project preparation, under two successive Ministers of Finance and one change of Government\. In particular, the commitment of the Technical Secretariat of the Privatization Committee to the project was firm in its duty to prepare and execute the project; interference by various line ministries, however, compromised the transparency and credibility of the process and demonstrated the difficulty of building consensus at the broadest level\. This factor had a moderate impact on execution\. The project was carefully designed and in a fully participatory fashion\. It came at a time when the IMF was preparing an ESAF and some of the structural measures of that program were drawn from the privatization agenda\. It was an ambitious agenda but it built on two prior projects and a number of years of investment in institutional reform in public utilities\. ii  Bank's Performance 8\. Bank performance was highly satisfactory during project preparation and satisfactory during implementation\. During identification, the Bank undertook a comprehensive public enterprise review which served as the basis for project design\. The report was shared and discussed widely with stakeholders\. The Bank established close cooperation with the IMF, worked closely with AFD in the design and scheduling of the operation and met with multiple stakeholders\. Several seminars were offered for Congolese delegations that provided the opportunity to cement relationships and develop project concepts\. The Bank rightly identified and made explicit the political environment as the major risk - not political commitment to reform but rather warring factions between political parties\. However, having identified the risk, there was no explicit strategy other than the Bank's usual mechanisms to suspend and cancel the operation\. Another feature of the Bank's responsiveness to this operation was a project management schedule, or critical path analysis (Technical Annex), prepared with the Congolese - it was certainly the first time that the Bank division concerned had used such a mechanism\. During supervision, Bank performance was professional, objectively focused and based on solid understanding of the Borrower's institutional capabilities\. During implementation, the Bank worked in tandem with the IMF and AFD to ensure a coherent approach in executing the donors' respective programs\. The deteriorating environment in the Congo in 1997 was identified during the mid-term review, and the possibility of restructuring the project by reducing its scope was raised; ensuing civil unrest prevented any restructuring from taking place\. The Bank was, however, able to work informally with the consultants to redesign the approach to privatization (essentially from concessions to management contracts)\. Borrower's Performance 9\. Borrower performance was highly satisfactory at project identification through appraisal; under implementation, its attention was drawn to other matters and follow-up wasunsatisfactory\. The project was identified following a report submitted at the initiative of Government which presented an apparently practical approach to privatizing key utilities designed to have a quick and positive impact and demonstrate the Government's commitment to change\. The Borrower's commitment was evidenced by its active participation in preparation and appraisal of the project; during implementation, its commitment gradually weakened as the political situation deteriorated\. Nonetheless, the Technical Secretariat of the Privatization Committee continued its work of preparing privatizations; the deteriorating commitment was manifest more between line ministries and the Ministry of Finance\. Two ministries in particular were difficult interlocutors: Energy and Justice, the former having close ties to its commercial oil partners, the latter being unwilling to enter into a dialogue on judicial reform (especially under the financial sector component - banks are particularly dependeht mechanisms to enforce contracts, as well as conflict resolution)\. Project Sustainability and Assessment of Outcome 10\. Although the political situation interrupted the project, the project is likely to be sustainable given the fact that AFD has taken over much of the program and that Government is committed to privatization\. The project clearly allowed the Borrower to make progress in its framework for privatization and the process for achieving it\. Nonetheless, much is still left to be completed under the AFD program and beyond\. It is clear that the project helped the Government define sectoral strategies, build local capacity and provide external expertise\. In addition, close collaboration between the Bank and AFD during implementation facilitated the take-over by AFD when the Bank suspended disbursements\. If the Government continues to have the political will to enforce the measures undertaken under the Project, further progress towards liberalization, privatization and strengthening of the financial sector can be achieved in a iii  reasonable timeframe\. It is noteworthy that the new Government maintains the old one's commitment to privatization\. Although much was accomplished, overall, project outcome is rated as unsatisfactory, given the political situation and the fact that the project was not completed\. Future Operations 11\. Given the country's present debt arrears accrual status, all Bank operations in the country have been suspended since 1997\. In this context, no immediate self standing follow-up project on privatization is being contemplated at this moment\. However, the privatization program agreed with the Government under the Project will be pursued in the context of the continued dialogue between the Government, IMF and the Bank on structural reforms\. This program would be furthered within a potential upcoming IMF Post conflict program, or Bank Post conflict operation, should debt arrears clearance conditions for normal resumption of Bank operations in Congo permit\. Debt arrears stock presently amounts to about US$55 million\. Key Lessons Learned 12\. Evaluation of risk and mitigating measures\. Given Government's implementation capacity and the country's recurrent political instability, project objectives were ambitious\. This was recognized in the MOP\. However, it is interesting to note that in spite of the problems, and after project closing, the Government is following through on the privatization of the five PEs and even starting a second phase, with formal support from AFD and informal support from the Bank\. Whether these activities could have been formulated as a fall-back or exit strategy remains unclear\. The only fall-back strategy was the implicit threat of suspension and cancellation, which, in fact, were used\. The Bank might have adopted indicators to monitor project activities and bring into play a more explicit exit strategy\. If the risks are high, the project design could include a specific fall-back strategy so that if the project does get off-track, the Bank has recourse other than suspension and cancellation\. 13\. Assessing the political environment\. It may be worthwhile for the Bank to make an objective, independent analysis of the political environment in a country to fully assess the risks before a project is undertaken\. The main objective of such an analysis would be to assess whether or not the political environment is stable enough for a project to be successfully implemented\. 14\. "Window of opportunity" and privatization of infrastructure The concept of the window of opportunity for implementing significant reforms which take a long time to implement is a double edged sword - is it an opportunity or simply a cease-fire during hostilities? The Government was very keen to proceed with the project and the Bank decided to build on the Government's commitment to privatization\. In addition, the project was prepared shortly after the devaluation of the CFA franc when the Bank and the IMF wanted to move quickly with policy reform and support to countries within the CFA franc zone\. 15\. Multiple objectives\. In the case of high-risk countries, multiple objectives decrease the probability of success\. The project might have addressed fewer PEs or dropped the financial sector; although the component on financial institutions and public sector was not essential to support the first three objectives (regulatory framework, privatization, liquidation), it was a useful complement to them, and an essential part of the macro program\. 16\. Importance of participation process at the preparation phase\. Despite the fact that the project outcome was unsatisfactory, its preparation phase can be seen as a model of participatory iv  process and of the borrower's ownership\. Even though the implementation phase was interrupted by the civil war, the very rapid start-up of the privatization program just after the end of the military turmoil made it clear that the project is sustainable\. The participatory process, especially at the preparation phase, demonstrated why the project helped build local capacity and promote the concept of competition and privatization in the country\. v   REPUBLIC OF CONGO IMPLEMENTATION COMPLETION REPORT PRIVATIZATION AND CAPACITY BUILDING PROJECT PART 1: PROJECT IMPLEMENTATION ASSESSMENT A\. PROJECT BACKGROUND 1\. Since independence, Congo has had a turbulent history, with successive waves of civil unrest, even open civil war between well equipped local militias supported by various political factions\. Any period of peace was usually undermined by the knowledge that hostilities might erupt at any moment\. Congo's main economic artery is the corridor between Brazzaville, the seat of Government, and Pointe Noire, the location of much of its industrial activity, particularly its oil industry\. An urbanized service economy had grown between these two poles, while the agricultural sector remained marginal\. Heavy spending and high public-sector salaries, combined with poorly performing state plantations, produced a high degree of rural migration to Brazzaville and Pointe Noire\. This took place over a generation when the formal economy was largely run by the state and private enterprises were discouraged\. The economy was supported by external assistance and the proceeds from oil, which remained high until the mid-1980s\. With the decline in petroleum prices in 1985, the system started showing signs of distress\. The Government could only maintain the civil service through heavy borrowing and selling its petroleum in the forward market, which has now led to an unsustainable accumulation of debt and uncertain Government finances in the medium term\. 2\. By the beginning of the 1990s, the Government faced severe fiscal and financial difficulties and the population had clearly endured as much as they could of civil unrest, severely constrained public services and deterioration of public infrastructure and institutions; a series of national conferences made the people's views perfectly clear\. Nonetheless, in 1993, there was further violent civil unrest\. In response, and following the presidential elections in 1992, the Government's focus shifted from centrally planning the economy to a more market-oriented approach\. To support the shift, it embarked on a policy reforn program with the support of the IMF, the Bank and the Agence Frangaise de Developpement (AFD)\. Central to the program was the Government's divestiture from all commercial and industrial activities\. 3\. This Project was prepared as an integral part of this reform program\. Its overall objective was to strengthen the Government's capacity to prepare and implement the second phase of the economic reform program started under the Economic Recovery Credit (Cr\. 2635-COB, FY94)\. The Project was prepared in April 1995, during a period of peace and implementation started thereafter\. Peace continued until June 1997, when hostilities resumed\. Disbursements under the Credit were then suspended\. At the same time, the Government stopped servicing its debt to IDA and was placed on non-accrual status in November 1997\. Debt arrears presently amount to about US$55 million\. At project closing, the country's non-accrual status was still in effect\. 4\. The project followed two earlier operations that also addressed reform in the public sector: the Second Technical Assistance Project (Ln\. 2753-COB, FY86), which focused on macroeconomic reforms; and the PEIDP (Ln\. 2868-COB, FY88), which closed in December 1996, aimed to initiate reforms in the public sector\. During execution of the PEIDP,  disbursements were suspended between 1990-1994 due to the country's social, political and military situation\. B\. STATEMENT OF PROJECT OBJECTIVES AND RISKS 5\. As stated in the Memorandum of the President (MOP), the project aimed at furthering Government's capacity to prepare and implement the second phase of its reform program started under the Economic Recovery Credit\. It had four main objectives: * prepare regulatory frameworks for the five major public enterprises in control of petroleum distribution, transportation, telecommunications, power and water distribution and open up the sectors to competition progressively; * conduct the privatization of these major public enterprises; * liquidate other non-viable public enterprises; and * support regulation and competition in the financial sector and reforms in banking institutions\. 6\. To achieve these stated objectives, the project comprised the following components: (a) Regulation and Privatization (US$7\.8 million)\. This component provided consultant services to: (i) prepare pro-competition regulatory frameworks and build a minimal level of public sector capacity to regulate the telecommunications, petroleum, power, water, and transport sectors; and (ii) advise the Government on privatization of the five public enterprises\. The component supported the Technical Secretariat of the Privatization Committee in charge of coordinating the program and outsourcing to the private sector for audits, sectoral specialists and legal advice\. The Government had already initiated the selection of advisors for the regulatory frameworks and for privatization for all five companies, with IDA's concurrence\. (b) Public Enterprise Sector Liquidation (US$0\.9 million)\. Under this component, assistance was provided to liquidate all 57 non-viable enterprises (as identified in the Technical Annex of the MOP) and complete suspended liquidations\. Liquidations were to be contracted out to qualified private firms, and technical assistance was provided to the Ministry of Justice for proper monitoring and supervision of the liquidators\. An action plan for liquidation and divestiture of remaining public enterprises and performance indicators were agreed during appraisal\. (c) Reform of Financial Institutions and the Public Sector (US$1\.2 million)\. A US$0\.5 million Japanese grant financed the development of proposals for restructuring the financial sector\. Audits, debt restructuring and liquidation/privatization plans for the insurance company and several banks (BIDC, UCB, and CRC) were underway\. Under this component, a secretariat for the bank restructuring committee was to be established\. Support was to be provided for a roundtable on Justice and Financial Institutions, which was to lead to proposals for reform of financial institutions\. The supervision of insurance companies by the Ministry of Finance was to be strengthened, and a financial restructuring plan for the social security agency prepared\. Support in the form of equipment was to be provided to the Inspection Generale de l'Etat (IGE) to plan the next round of civil service departures\. In addition, the Secrdtariat Gin6ral du Gouvernement was to be supported with the establishment of a computerized database of existing legislation and the publication of the Journal Officiel 2  (d) Communications Campaign (US$1\.1 million)\. The project financed a public information campaign to inform stakeholders and the public of the benefits and implications of the reform program and promote public understanding, support and participation in the transition to a market-driven economy\. 7\. Because of the country's recurrent political instability and short election cycles, the major risk identified during preparation in May 1995 was the risk that the Government would go back on its commitment to pursue the privatization program to its end or that the program would not be implemented if the security situation deteriorated\. The window of opportunity for implementing significant privatization measures was seen to be slim, since elections were to take place late 1996\. It was recognized that this political risk was significant\. On the other hand, as was clear from the national conferences, there was consensus amongst all stakeholders that the only way to secure better public services was through privatization\. Thus it was felt that the risk could be taken as the potential pay-off was substantial\. The project was to be closely monitored and would require early action in the event of a downturn in its execution\. In the end, the Bank's standard covenants relating to suspension and cancellation were used as the only means of stemming the losses\. C\. EVALUATION OF PROJECT OBJECTIVES AND RISKS 8\. The objectives of the project were relevant insofar as they supported the Government's program and were highly complementary to one another\. The five major public enterprises were clearly at the heart of providing public services and, in privatizing them, the Government required a new regulatory framework\. Formerly, policy formulation, regulation and even operation were all vested in the ministries and indeed the French-speaking African countries did not have a history of explicit regulation of public services\. The regulatory frameworks in effect were designed into the contracts with service providers and concessionaires\. In privatizing the public monopolies, explicit regulation was required, as abuse of monopoly is certainly not limited to public monopolies\. Completion of the liquidation of earlier attempts at privatization was also essential; Air Congo had continued to fly several years after it was ostensibly liquidated\. The Government could not afford any further anomalies of this nature\. Lastly, the financial sector objectives were similar to those implemented successfully in other countries in the region and complemented both the privatization program and the macro program - a performing financial sector being seen as an essential element in a country's return to growth\. 9\. Privatization of the PEs--which employed over 13,000 workers (or 10-15% of formal sector employment) and generated total revenues of 17% of GDP--in a post-war context and unstable political environment appeared in retrospect a high-risk proposition\. The project was very risky but it was one whose potential pay-off was high; and, indeed, the MOP adequately identified this risk\. However, no real fallback position was identified in case political events made it impossible to supervise the project or implement it effectively\. In retrospect, the ostensible window of opportunity may not have been an adequate justification for proceeding with the project\. In the volatile political environment, tensions arising from spill-over effects (vested interests, retrenchment, etc\.) could well have exacerbated social tensions in the population\. As a practical matter, the Bank was quite flexible when it became impossible to supervise implementation: the project was suspended but, with Bank approval, AFD took over many aspects of the privatization program and progress was made\. 3  D\. ACHIEVEMENT OF PROJECT OBJECTIVES 10\. Because of the resumption in violence and hostilities in June 1997, none of the project objectives were fully achieved\. The first three objectives were partially achieved\. The last objective was not achieved\. Nonetheless, the Project helped build local capacity and promote the concept of competition and privatization in the country, as evidenced by the very rapid start-up of the privatization program just after the end of the military turmoil in July 1999\. 11\. The first objective relating to the preparation of regulatory frameworks for the major public services and to open the sectors up to competition progressively was partially achieved\. The Government adopted a Telecommunications Act in May 1997, and at the time of the ICR preparation, the Government planned to review and revise the Act\. The Government is currently establishing the legal framework for the post, power and water sectors\. The water sector is relatively straightforward and will allow water concessions in specific areas; both power and telecommunications can be expected to open to competition: telecommunications via cellular operators in competition with the fixed wire operator immediately; the power system would remain as a single entity in a first phase but unbundling of services (generation, transmission and distribution) would offer the opportunity for competition\. As it is, Congo already imports power from neighboring Democratic Republic of Congo\. 12\. The second objective with regard to privatization of the five major PEs was partially achieved\. Currently, none of the PEs have been privatized but the process is underway\. This objective was ambitious, especially when experience under the two earlier projects referred to above showed lack of Government ability to push through the reforms\. e Petroleum\. The Government launched reforms that were suspended during the civil war in 1997\. In early 1996, the Government launched bids for the privatization of Hydrocongo (sale of assets), and a Memorandum of Understanding was signed with the successful bidder before the civil war resumed in June 1997\. In October 1997, with the interruption of the civil war, the Government reviewed sections of the contract, in particular the provision on exclusivity with guarantee of minimum profitabilitybecause the provision gave an excessive advantage to potential private operators\. After a new round of negotiations (with the same contractor) and a new timetable for privatization, agreement was reached in July 1999 between the Government and the contractor to start operations\. Hydrocongo will be liquidated as soon as severance payments to laid-off workers are paid\. In the case of CORAF, the national oil refinery company, its privatization is more difficult because the Government considers CORAF a strategic national asset Although the company has stopped operating, it has retained all 300 workers\. * Transport\. ATC (Agence Transcongolaise des Communications) is currently organized with three divisions which are not independent legal entities: CFCO (Chemins defer du Congo), Port de Pointe Noire, and Voies Navigables (VN)\. The Government decided to spin off ATC into three independent entities, privatize the railways, liberalize the river transport and sell VN's assets, and introduce private sector participation in the management of the Port\. * Power and Water\. Calls for bids for a management contract for these utilities is underway and a contract is expected to be in place by mid-2000\. * Post and telecommunications\. The Government is currently restructuring the ONPT by separating the post and telecommunications activities\. Calls for bids to privatize the telecommunications are scheduled to take place in early 2000\. 4  13\. The third objective relating to liquidation of other non-viable public enterprises was timely and appropriate\. At the time of project preparation only 43 of the 104 Government-owned or controlled enterprises were still in operation; most had accumulated losses and were technically insolvent\. The appointment of private liquidators and administrators improved the transparency, efficiency and credibility of the liquidation process and the component's objectives were partially achieved\. Fifteen enterprises have been liquidated since December 98 and twenty more will be liquidated as of April 30, 2000 according to the Cabinet's Decision of December 8, 1999\. 14\. The fourth objective, relating to the financial institutions and the public sector, was relevant and timely and interesting in that it proposed resolving a bottleneck which could constrain the activities of the privatized utilities and indeed commerce and industry in Congo - lack of financing\. Political interference made it difficult to achieve any progress in this component\. However, in the banking sector, the Government, the Bank and the Commission Bancaire des Etats d'Afrique Centrale (COBAC) are still involved in an active dialogue on bank restructuring, and agreement has been reached on the privatization process\. The precise impact of the project on initiating reforms in the public sector is harder to assess because of the country's political situation\. E\. IMPLEMENTATION RECORD AND MAJOR FACTORS AFFECTING THE PROJECT 15\. Project implementation was assessed based on the following three factors: factors not within Government's control, factors within Government's control, and factors related to project design\. Factors relating to project design and to Government's actions are hereafter analyzed more for the learning dimension than for the reporting aspect of evaluation since the main reason the project did not fully achieve its objectives was the civil war\. 16\. Factors not Subject to Government Control\. The civil war, which broke out during execution in June 1997 significantly disrupted or halted altogether activities under implementation\. It is hard to record the level of damage which was incurred\. Many of the facilities which were damaged were the assets of the public utilities: power lines were torn down, water lines blown up, and railway facilities damaged in Brazzaville\. It is also true that the Government was directly involved in the civil war, and not merely caught in the middle of the crossfire\. The hostilities made it impossible for the Bank to supervise the project and it had no choice but to suspend the credit\. 17\. Factors Subject to Government Control\. Factors under this category had a moderate impact on project implementation\. The Government's commitment at the highest level during project preparation was strong, and was largely maintained during implementation\. Ministers of finance changed and there was even a government change\. All supported the overarching theme of privatization as part of the macro program with the IMF and the Bank, with the exception of the banks and insurance companies which were considered the private ground of the Ministry of Finance; depositors of the Banque Centrale du Congo (BCC) and of the Banque Nationale du Congo (BNDC) lost their savings and funds were never recovered\. On this latter point, the Government tried to pin responsibility on one administrateur provisiore and prevented him from leaving the country for some time\. Commitment of the Technical Secretariat of the Privatization Committee to the project remained strong during preparation and execution\. However, interference by various ministries during execution in the liquidation and management of public enterprises compromised the transparency and credibility of some operations\. This was particularly true of the Ministry of Energy which resented any interference in its oil and petroleum affairs; the Ministry of Justice dragged its feet on judicial reforms\. 5  18\. Factors Related to Project Design\. The actual impact of the project design cannot be measured because of the interruption in operations\. The project did espouse very ambitious objectives to be implemented over a relatively short period\. In this sense it was ambitious but the risks were also recognized\. The components were all priorities from the Government's point of view and were supported by the Bank and also became structural measures under the IMF program\. But it is also important to remember that consumers were anxious for peace and better quality of provision of public services; even the unions, when consulted, understood the urgency of the reforms, even if they did not particularly relish the layoffs which would be necessary\. The Project included detailed guidelines for the implementation of the various components under a critical path analysis in the Technical Annex of the MOP but they were mostly temporal\. F\. PROJECT SUSTAINABILITY 19\. When the Bank suspended disbursements, interestingly, the Government's commitment to privatization was not shaken\. The Government/Bank dialogue on privatization continues on an informal basis because the country's non-accrual status is still in effect\. Indeed, some of the project's objectives were partially achieved, as noted above\. The Government has maintained the pressure to reform and the process of privatization of Hydrocongo, ONPT, SNE, SNDE, and ATC resumed recently, with the same technical advisors as before, financed either by AFD or on a success-fee basis\. The Government expects to adopt a new legal framework for the water, post, electricity, and mining sectors in early 2000\. The Government has also started preparation of the second phase of the privatization process on its own and without external assistance in the agriculture and financial sectors\. For enterprises in agriculture, forestry, flour milling and livestock, contracts are pending\. In the banking sector, the dialogue between the Government, the Bank and COBAC on bank restructuring is still ongoing and agreement has been reached on the process of privatization\. Based on interviews conducted for the purpose of this ICR (Government officials, technical advisors, Bank and AFD Staff), there is a consensus on a real and deep change in the country's dominant culture to encourage a market-driven economy, led by the private sector\. G\. BANK'S PERFORMANCE 20\. Bank performance was highly satisfactory during preparation and appraisal and satisfactory during identification and implementation\. 21\. Identification Through Appraisal\. Bank performance during preparation is rated highly satisfactory\. The Bank undertook a comprehensive public enterprise review which served as the basis for project design\. Project activities were in line with the Government's objective of full divestiture\. The project was prepared under a participatory process that was quite innovative at the time\. There were many meetings with other stakeholders, including the trade unions and other donors\. While there was not so much dialogue with the consuming public, the country had been through a series of national conferences which had highlighted citizens' dissatisfaction with public services and there were calls for improvement in the delivery of water, transport, and electricity services\. Even the trade unions accepted the project rationale when it was explained to them\. Project activities were also closely linked with the IMF ESAF and with the AFD program\. The Bank rightly identified the political risk as the major risk\. However, a strategy to counteract the political risk might have been defined Project design did include an implementation plan that would have ensured an adequate sequencing of the measures to be implemented\. Another feature of the Bank's responsiveness to this operation was a project management schedule, or critical 6  path analysis (Technical Annex), prepared with the Congolese - it was certainly the first time that the Bank division concerned had used such a mechanism\. 22\. Implementation\. Bank performance during project implementation is rated satisfactory\. The bank supervision was professional, objectively focused and based on a solid understanding of the borrower's institutional capabilities\. The timing of supervision missions was appropriate and time spent in the field was sufficient\. Through numerous workshops with all stakeholders throughout the country, the project achieved its objective to build local capacity\. During implementation, the Bank worked closely with AFD to ensure a coherent approach to executing the Bank's and AFD's respective programs\. The Bank worked closely with the IMF and their structural conditions were drawn directly from the project\. Also, the UNDP participated actively in the discussions and provided a critical link when the Bank and the Fund had to withdraw their country representatives\. A mid-term review (MTR) was conducted in March 1997\. The project team was prompt to react to project implementation issues These issues were generally correctly assessed and appropriately reported in the performance ratings\. The country office made an excellent contribution in this regard\. Although the Bank/borrower relationship was effective and productive, it did not prevent delays in implementation or problems regarding the transparency of the PE liquidation\. The deteriorating environment in the Congo in 1997 was identified during the MTR, and the possibility of restructuring the project by reducing its scope was raised\. Ensuing civil unrest prevented restructuring from taking place\. The Bank was, however, able to work informally with the consultants to redesign the approach to privatization (essentially from concessions to management contracts)\. H\. BORROWER'S PERFORMANCE 23\. Borrower performance was highly satisfactory at project identification through appraisal\. It was unsatisfactory during project implementation\. 24\. Identification Through Appraisal\. Borrower performance at project identification, during preparation and at project appraisal is rated highly satisfactory, as evidenced by its active participation in this stage of the project\. The Government approached the Bank with a well- prepared brief on privatization which was readily acceptable to both the Country Operations and Industry and Energy Divisions (privatization is sometimes a facet of SALs with no real commitment on the part of governments, which tend to see privatization as "conditions")\. 25\. Implementation\. Borrower performance during project implementation is rated unsatisfactory overall because of the difficult operating environment in government; however, it is interesting to note how the Technical Committee performed\. In spite of a very changeable environment, the Technical Secretariat of the Privatization Committeemaintained the pressure to implement the project\. As noted above, although the Bank is no longer present, the Privatization Committee is pushing forward with completing privatization of the five PEs and is moving on a second phase of the program, the agricultural PEs\. Government's commitment did gradually weaken during implementation as the political situation deteriorated and was expressed though in-fighting between line ministries, the Ministry of Finance and the Privatization Committee\. I\. ASSESSMENT OF OUTCOME 26\. Project objectives were partially met in a very difficult environment; however, project outcome is rated unsatisfactory\. Project outcome is likely to be sustainable over time as the Government is continuing to complete the transactions, and proceed to the next round, with formal assistance from AFD and informal assistance from the Bank\. The project clearly allowed 7  the Borrower to make progress in its privatization process, although there is still a big outstanding agenda\. The project helped the Govemment to define sectoral strategies, build local capacity and benefit from external expertise\. In addition, the close collaboration between the Bank and AFD during implementation facilitated the take-over by AFD when the Bank suspended disbursements\. If the Government has the political will to enforce the measures undertaken under the Project, further progress towards liberalization, privatization and strengthening of the financial sector could be achieved quite quickly\. J\. FUTURE OPERATIONS 27\. The Bank is not considering a follow-up project on privatization at this time, in light of AFD's continuing work with the Government\. 28\. A donor meeting was held in Washington in June 1998 to agree on further assistance to the Congo and to coordinate post-conflict activities\. The meeting agreed that conflict resolution, national reconciliation, and good governance were key to implementation of Congo's long-term reconstruction program\. The meeting further agreed to deepen the reforms to support a market- based economy, as a prerequisite for support to Congo's reconstruction program\. However, activities proposed during the donor roundtable had to be put on hold due to renewed fighting and instability in the country\. It is only when the security situation improves that donors can consider resuming their respective programs\. 29\. When the country settles its arrears (about US$55 million), the Bank's lending program can be resumed\. This program will be determined by the need to address the underlying structural problems of the country's economy within the context of reconstruction\. K\. MAIN LESSONS TO BE LEARNED Project design and implementation identify five main lessons\. 30\. Evaluation of risk and mitigating measures\. Given Government's implementation capacity and the country's recurrent political instability, project objectives were ambitious\. This was recognized in the MOP\. However, it is interesting to note that in spite of the problems, and after project closing, the Government is following through on the privatization of the five PEs and even starting a second phase, with formal support from AFD and informal support from the Bank\. Whether these activities could have been formulated as a fall-back or exit strategy remains unclear\. The only fall-back strategy was the implicit threat of suspension and cancellation, which, in fact, were used\. The Bank might have adopted indicators to monitor project activities and bring into play a more explicit exit strategy\. If the risks are high, the project design could include a specific fall-back strategy so that if the project does get off-track, the Bank has recourse other than suspension and cancellation\. 31\. Assessing the political environment\. It may be worthwhile for the Bank to make an objective, independent analysis of the political environment in a country to fully assess the risks before a project is undertaken\. The main objective of such an analysis would be to assess whether or not the political environment is stable enough for a project to be successfully implemented\. 32\. "Window of opportunity" and privatization of infrastructure The concept of the window of opportunity for implementing significant reforms which take a long time to implement is a double edged sword - is it an opportunity or simply a cease-fire during hostilities? The 8  Government was very keen to proceed with the project and the Bank decided to build on the Government's commitment to privatization\. In addition; the project was prepared shortly after the devaluation of the CFA franc when the Bank and the IMP wanted to move quickly with policy reform and support to countries within the CFA franc zone\. 33\. Multiple objectives\. In the case of high-risk countries, multiple objectives decrease the probability of success\. The project might have addressed fewer PEs or dropped the financial sector; although the component on financial institutions and public sector was not essential to support the first three objectives (regulatory framework, privatization, liquidation), it was a useful complement to them, and an essential part of the macro program\. 34\. Importance of participation process at the preparation phase\. Despite the fact that the project outcome was unsatisfactory, its preparation phase can be seen as a model of participatory process and of the borrower's ownership\. Even through the implementation phase was interrupted by the civil war, the very rapid start-up of the privatization program just after the end of the military turmoil made it clear that the project is sustainable\. The participatory process, especially at the preparation phase, demonstrated why the project helped build local capacity and promote the concept of competition and privatization in the country\. 9  PART II\. STATISTICAL TABLES Table 1: Summary of Assessments A\. Achievement of Objectives Substantial Partial Negligible Not applicable Macro Policies Ol 0 al 0 Sector Policies O 0 I O Financial Objectives O 0 0 0 Institutional Development O 0 O O Physical Objectives 0 0 E 0 Poverty Reduction 0 0 0 0 Gender Issues 0 0 0 0 Other Social Objectives 0 0 0 0 Environmental Objectives 0 0 0 0 Public Sector Management 0 O 0 O Private Sector Development 0 0 O E Other (specify) O O O 0 B\. Project Sustainability Likely Unlikely Uncertain (a/) (/) (/ Highly C\. Bank Performance satisfactory Satisfactory Deficient Identification 0 0 E Preparation Assistance 0 O E Appraisal 0 O E Supervision El 0 E Highly D\. Borrower Performance satisfactory Satisfactory Deficient Preparation El 0 E Implementation E El E0 Covenant Compliance E E El Operation (if applicable) E E 0 Highly Highly E\. Assessment of Outcome satisfactory Satisfactory Unsatisfactory unsatisfactory 0 El 0 El 10  Table 2: Related Bank Loans/Credits Loans/Credits Purpose Fiscal Year of Status approval Preceding operations First Technical Assistance Project To improve: (a) the quality of Government's 1983 Closed on 06/30/87 (Loan 2285-COB) public finance management; and (b) the execution of its urban infrastructure program (PCR No\. 8834 date 06/01/90) Second Technical Assistance To help the Government: (i) design and 1987 Closed on 12/31/90 Project (Loan 2753-COB) implement measures to promote growth in the non-oil productive sectors; (ii) improve public investment programming and the management of public finances, including debt management; and (iii) formulate a more effective petroleum strategy\. (PCR No\. 10792 dated 06/01/92)\. Public Enterprise Institutional The main objective of the PEIDP was to 1988 Closed on 12/31/96 Development Project facilitate formulation and implementation of (Loan 2868-COB) the Structural Adjustment Program\. It also aimed at strengthening the GOC's capacity to implement PE reforms and improve their management, through: (a) technical and logistical support; (b) consultant services for general sector reforms, including liquidation and privatization, banking sector reform, PE staff reduction, and financial agreements between PEs and Government; (c) mgmt training programs through CENAGES; (d) auditing and accounting assistance through CNC; (e) advisory services to improve mgt\. and restructure key public utilities, including ONPT (telecoms); SNDE (water); SNE (electricity); Hydro-Congo and CORAF (oil); and ATC (transport); and (f) services for other adjustment tasks to supplement resources under the Second TA Project\. Economy Recovery Credit To (i) improve public sector efficiency through 1994 Closed on 06/30/95 (Credit 2635-COB) better public resource mgmt &PE reforms; (ii) strengthen the country's production capacity through trade and reg\. reforms and remove impediments to sectoral development, including private sector; and (iii) develop human resources and reduce poverty\. 11  Table 3: Project Timetable Steps in Project Cycle Date Planned Date Actual/ Latest Estimate Identification (Executive Project Summary) n\.a\. Preparation (Pre-appraisal mission) March 1995 April 3, 1995 Appraisal June 1995 May 26, 1995 Negotiations July 1995 July 18, 1995 Letter of Development/Sector Policy (if applicable) - July 24, 1995 Board Presentation September 5, 1995 Signing October 11, 1995 Effectiveness October 1995 January 5, 1996 Midterm review (if applicable) March 5, 1997 Project Completion December31, 1998 Loan Closing June 30, 1999 June 30, 1999 Table 4: Loan/Credit Disbursements: Cumulative Estimated and Actual (US$ million) FY96 FY97 FY98 FY99 Appraisal estimate 2\.5 6\.3 8\.1 9\.0 Revised estimate 0\.9 4\.7 6\.5 9\.0 Actual 0\.9 2\.93 2\.96 2\.96 Actual as % of estimate 36 46 36 32 Date of final disbursement 9/1997 12  Table 5: Key Indicators for Project Implementation Sector Objective Estimated Actual Transport Adoption by govt\. of a strategy and sectoral November 1995 January 1997 outlines Adoption of the decree creating PAPN April 1996 May 1997 Sale of river fleet June 1996 Not done Restructure the shipyard June 1996 Not done Adopt statutes for Port of Brazzaville and April 1996 Notdone secondary ports Prequalify CFCO concessionaires March 1996 January 1997 Sign CFCO concession January 1997 Not done Post and telecom Select advisors of ONPT restructuring August 1995 February 1996 Adopt development strategy for telecom October 1995 June 1996 Call for bids for privatization January 1996 January 1997 Begin negotiations May 1996 Not done Adopt texts for corporatization of Post February 1996 Not done Transfer liquidation of financial services to March 1996 Not done Comit6 de Restructuration des Banques Water and electricity Select advisors for SNE-SNDE concession October 1995 November 1995 Prequalification bids January 1996 June 1996 Concession bids May 1996 September 1996 Conclusion of negotiations for concession August 1996 Not done contract Hydrocarbons Adopt privatization strategy November 1995 April 1997 Prequalification bids January 1996 May 1997 Select new operator April 1996 December 1997 Contract signature July 1996 Not done Clean-up of portfolio Closing of38 liquidations December 1995 September 1997 (partially done) Closing of 6 liquidations March 1996 September 1997 (partially done) Liquidation of 6 non-viable enterprises December 1996 December 1997 (partially done) Liquidation of 7 non-viable enterprises March 1996 December 1997 (partially done) Communication Setting up advisors and cellule August 1996 September 1996 Program Conduct "ground zero" poll November 1996 Not done Results of polls of target groups February 1996 Not done May 1996 July 1996 Banks and Financial Select cabinet to restructure CNSS/CRF August 1995 Done 1996 institutions Reinstate pension payments March 1996 December 1996 13  Table 6: Key Indicators for Project Operation n\.a\. Table 7: Studies Included in Project No available data\. Table 8A: Project Costs* Appraisal estimate Actual/latest estimates (US$ million) (US$ million) Item Local Foreign Total Local costs Foreign Total costs costs costs 1\. Privatization and Sector Regulation 0\.5 6\.7 7\.2 - 2\. PE\. Sector Liquidation 0\.3 0\.5 0\.8 3\. Financial, Public & Legal Reforms - 1\.1 1\.1 4\. Communication Campaign 0\.3 0\.6 0\.9 Total Baseline Costs 1\.1 9\.0 10\.1 Physical Contingencies 0\.0 0\.1 0\.1 Price Contingencies 0\.4 0\.5 0\.9 Total 1\.5 9\.5 11\.0 * Due to a lack of information, actual costs could not be ascertained\. Table 8B: Project Financing* Appraisal estimate Actualllatest estimates (US$ million) (US$ million) Local costs Foreign Total Local costs Foreign Total costs costs IDA 0\.9 8\.1 9\.0 2\.96 Government 0\.6 0\.4 1\.1 0\.3 0\.3 AFD - 0\.9 0\.9 0\.9 0\.9 Total 1\.5 9\.5 11\.0 4\.16 * Due to a lack of information, all actual costs could not be ascertained\. Table 9: Economic Costs and Benefits n\.a\. 14  Table 10: Status of Legal Covenants Covenant Present Original Revised Agreement Section Type Status Fulfillment Fulfillment Date Date Description of Covenant Comments C 27750 3\.01(a) 5 CP The Borrower declares its commitment to the objectives of the Partially Complied Project as set forth in Schedule 2 to this Agreement and, shall carry out the Project through MEFPP, with due diligence and efficiency, in conformity with appropriate administrative and accounting practices, and with due regard to sound and appropriate environmental practices, and shall provide, promptly as needed, the funds, facilities, services, and other resources required for the Project\. 3\.01(b) 5 C Without limitation upon the provisions of paragraph (a) of this Complied Section and except as the Borrower and the Association shall otherwise agree, the Borrower shall carry out the Project in accordance with the Implementation Program set forth in Schedule 4 to this Agreement and with the Project Implementation Plan\. 3\.02(a) 5 C The Borrower shall: (a) until the completion of the Project, open Complied and maintain in a commercial Bank acceptable to the Association, on terms and conditions satisfactory to the Association, an account (the Project Account) to be used exclusively to meet expenditures under the Project; 3\.02(b) 5 CD Deposit into the Project Account: (i) an initial deposit of CFAF After delay 25,000,000; and (ii) the remaining amount of its counterpart complied contributions, quarterly in advance, to meet expenditures required for the Project during each such quarter\. 3\.03 5 C Except as the Association shall otherwise agree, procurement of Complied the goods and consultants' services required for the Project and to be financed out of the proceeds of the Credit shall be governed by the provisions of Schedule 3 to this Agreement\. 3\.04(a) 5 C For the purposes of Section 9\.07 of the General Conditions, and without limitation thereto, the Borrower shall:(a) prepare, on the basis of guidelines acceptable to the Association, and furnish to the Association not later than 6 months after the Closing Date or such later date as may be agreed for this purpose between the Borrower and association, a plan for the future operation of the Project; 15  Covenant Present Original Revised Agreement Section Type Status Fulfillment Fulfillment Date Date Description of Covenant Comments 3\.04(b) 5 C Afford the Association a reasonable opportunity to exchange Complied views with the Borrower on said plan\. 4\.01(a) 3 C The Borrower shall maintain, and shall cause to be maintained, Not available records and accounts adequate to reflect in accordance with the sound accounting practices the operations, resources and expenditures in respect of the Project of the departments or agencies of the Borrower responsible for carrying out the Project or any part thereof\. 4\.01(b) 3 The Borrower shall: (i) have the records and accounts referred to Not available in paragraph (a) of this Section, including those for the Special Account, for each fiscal year audited, in accordance with appropriate auditing principles consistently applied, by independent auditors acceptable to the Association; (ii) fumish to the Association, as soon as available, but in any case not later than six months after the end of each such audit period, of such scope and in such detail as the Association shall have reasonably requested; and (iii) fumish to the Association such other information concerning said records, accounts and the audit thereof as the Association shall from time to time reasonably request\. 4\.01(c) 3 Without any limitation to the provisions of paragraph (b) of this Not available Section, the Borrower shall: (i) have the records and accounts for the Special Account audited in accordance with said paragraph (b), every four months during the first twelve months after the Effective Date and every six months during the second twelve months after the Effective Date; and (ii) fumish to the Association, not later than two months after the end of the period audited, a certified copy of the report of any such audit\. Covenant types: 1\. = Accounts/audits 2\. = Financial performance/revenue generation from beneficiaries 3\. = Flow and utilization of project funds 4\. = Counterpart funding 5\. = Management aspects of the project or executing agency 6\. = Environmental covenants 7\. = Involuntary resettlement 8\. = Indigenous people 9\. = Monitoring, review, and reporting 10\. = Project implementation not covered by categories 1-9 11\. = Sectoral or cross-sectoral budgetary or other resource allocation 12\. = Sectoral or cross-sectoral policy/ regulatory/institutional action 13\. = Other Present Status: C = covenant complied with CD = complied with after delay CP = complied with partially NC = not complied with 16  Table 11: Compliance with Operational Manual Statements Statement number and title Describe and comment on lack of compliance 1\. N\.A\. * Not available Table 12: Bank Resources: Staff Inputs Planned Actual Stage of project cycle Weeks USs'000 Weeks US$'000 Through appraisal n\.a\. * n\.a\. 36\.9 92\.2 Appraisal 4Board 8\.6 19\.7 6\.6 13\.6 Supervision through completion 119\.5 257\.3 123\.12 296\.4 Total 128\.1 277\.0 166\.62 402\.2 *Not available Table 13: Bank Resources: Missions Performance Rating' Type of Stage of project cycle Month/ No\. of Days in Specialization Implem\. Develop\. Peof Year Persons Field Status Objectives Through Appraisal 06/1995 7 20 TTL, Peer Reviewer, Lawyer, Disburs\. Analyst, Financial Analyst, Consultant Appraisal through 12/1995 14 TTL Board approval Supervision 04/1996 2 HS HS Mid-term review 03/1997 2 8 Sr\. Operations Officer, S S Economist Completion 'I S: satisfactory HS: highly satisfactory 17  Appendix A Agence FranVaise de Developpement's Contribution to the ICR 18  AGENCE FRANCAISE DE DEVELOPPFMENT 5\. RUE RO LAND BARTH ES 75598 PARIS c9dex 12 T rELEX 2 8 1 8 7 1 F FAX 01 44 87 99 39 / rovt errtmtPt FAX INT\. +33 1 44 87 99 39 TEL 01 53 44 31 31 TEL INT7\. 33 1 53 44 31 31 II FFAX N'° 5 E M E T T E U R G O B IF 1 B PARIS, LE DE LA PART DE Claude DORWLING - CARTER 2 7 /0 1 12 0 0 0 NUMERO DE FAX 0153443863 NUMERO DE TEL Q1 53443979 D E S T I N A T A I R E Banque Mondiale Groupe sectuer Prive - R6gion Afrique A L'ATTENTION DE M\.PaulLIGNIERES J\.-L\. NUMERO APPELE (202)4776391 N O M B R E D E P A G E S, I P A G E + Ref : Votre lettre du 21 janvier 2000\. Objet: Projet d'appui a la privatigation et au renforcement des capacites Cr6dit 2775-COR -- Rapport d'achevement Monsieur, Par lettre en reference, vous avez souhaitA recueillir tes commentaires de l'AFD sur le projet de rapport d'achevement du Proet d'appui a la privatisation et su renforcement des capacites accord6 par la Banque Mondiale i la Republique du Congo Comme il est mentionne dans ce rapport, "'troite collaboration qul a pr&valu entre nos deux etablissements, des 1'identfication du projet, a cree les conditions favorables d'une poursuite, sous financement de I'AFD, des actions engagees prealablement aux evenemernts de juin 1997; evenements dont l'une des consequences a ete la suspension puis a'annulation du projet d'appu finance par la Banque\. Concernant le ddroulement du projet, nous partageons globa(ement les appreciations formul6es sur les differentes phases du projtet\. A ce jour, l'AFD continue, par le financement de consultarts\. A appuyer le gouvernement dans sa reflexion sur ia privatisation des socities de telecommunications, d'lectricite et d'eau\. Las consultants ont remis leurs rapports maLs le gouvemement n'a pas encore opte les modes de privatisation\. Cependant, les recentes decisions gouvernementales concernant la MAB et I'ATC pourraient fragiliser la credibl1ite acquise par le gouvernement aupr4s des investisseurs, Je vous prie d'agreer, Monsieur\. 'expression de mes salutations distinguees 19

APPROVAL

P009061

 ICRR 10425 Report Number : ICRR10425 ICR Review Operations Evaluation Department 1\. Project Data : OEDID: OEDID : L3151 Project ID : P009061 Project Name : Ankara Sewerage Project Country : Turkey Sector : Sewerage L/C Number : Loan 3151-TU Partners involved : EIB, KfW Prepared by : Klas B\. Ringskog, OEDST Reviewed by : Hernan Levy Group Manager : Gregory K\. Ingram Date Posted : 08/04/1999 2\. Project Objectives, Financing, Costs and Components : Objectives : (a) Eliminating the discharge of untreated sewage into the Ankara River and its tributaries; (b) Improving services for some 500,000 persons already sewered; (c) providing an additional 850,000 persons access to these services; and (d) reducing flooding in flood-prone parts of Ankara\. Components : The project comprised a large amount of secondary sewers to collect sewage from customers, five major collectors, and two major interceptors \. In addition, a sewage treatment plant was planned for a flow up to 18 cubic meters per second\. Further, about 45 km of stormwater drains and pipelines were included \. Funds were also provided for digital mapping of ASKI's service area; for the purchase of operations and maintenance equipment of sewers, and for technical assistance and training to strengthen ASKI, including its ability to operate and maintain the sanitary sewerage and stormwater drainage systems \. Costs: The total project cost at appraisal was US$ 556\.8 million vs\. the actual cost of US$ 597\.2 million\. Financing : The costs were financed by the World Bank loan ( US$ 100\.8 million); the European Investment Bank(EIB) (US$ 50\.4 million); KfW (US$ 159\.9 million), and the Ankara Water and Sewerage Administration (ASKI) ( US$ 286\.1 million)\. The World Bank loan was approved in FY 90 and closed, fully disbursed, on February 28, 1999, two months behind schedule\. 3\. Achievement of Relevant Objectives : The Project was scheduled over a nine -year period in recognition of ASKI's financial constraints \. In the end, the actual project cost was only 7% above the appraisal estimates but there had been large variations for the different components\. (a) Eliminating the discharge of untreated sewage into the Ankara river was fully achieved through the construction of the two major interceptors and Ankara sewage treatment plant; (b) An undetermined number of clients already sewered saw their services improve through the investments and rehabilitation of sewers of different diameter; (c) An additional 1\.0 million persons were provided with sewer service under the project vs \. the planned 0\.85 million; and (d) the risk for flooding has been reduced following the completion of the planned stormwater drainage works\. Although not an explicit project objective, ASKI has undoubtedly become a more modern and capable institution within the constraints of its municipal charter \. 4\. Significant Achievements : All the works were finished within the planned implementation period in spite of numerous project execution problems, such as failing civil works contractors in a number of instances; initial management changes in ASKI that affected project implementation negatively, and difficulties of raising local counterpart funding due to the lack of effective arrangements for settlement of Ankaran public entities' debt to one another \. 5\. Significant Shortcomings : The Project objectives were modest in the sense that they were mostly physical \. As noted, they were largely achieved although with delays \. However, the Project might have included more ambitious targets of making ASKI more autonomous from the Ankara municipality \. 6\. Ratings : ICR OED Review Reason for Disagreement /Comments Outcome : Unsatisfactory Marginally Satisfactory The Project did eventually meet its narrowly set physical objectives and Ankara population has better sewer service as a result\. Institutional Dev \.: Partial Modest Sustainability : Uncertain Uncertain Bank Performance : Deficient Satisfactory At appraisal in 1989, the objectives of institutional reform were modestly set \. The narrow physical objectives and modest institutional objectives were achieved albeit with some delays \. Borrower Perf \.: Deficient Unsatisfactory Quality of ICR : Satisfactory 7\. Lessons of Broad Applicability : (1) It is preferable to have a few, simple and consistent objectives that can be achieved when lending to a novice institution for the first time rather than overreach with a multitude of objectives that ultimately remain unfulfilled; (2) It is essential to reach full agreement on procurement procedures before going ahead with project implementation \. The procurement problems in the early years of the Ankara project are largely due to procurement disagreements \. (3) The Project calls into question the merits of financial covenants when the implementing agency, ASKI, does not have de facto full authority to take all actions ( such as tariff adjustments) to assure full compliance\. 8\. Audit Recommended? Yes No Why? There are three recent ICRs for water supply and sewerage projects in Turkey \. It would make sense to undertake audits of the three to detect common constraints and lessons that might prove of value to the country and to the region in designing future operations and reforms \. 9\. Comments on Quality of ICR : The ICR is well written and quickly picks up the key points and the relevant project lessons \. ICR's analysis of implementation experience and results and the project outcome is comprehensive and of high quality \. This analysis will prove useful for preparation of future projects in Turkey \.

APPROVAL

P148755

 PROJECT INFORMATION DOCUMENT (PID) APPRAISAL STAGE Report No\. AB7517 Project Name Additional Financing for the Technical Assistance for Capacity Building in the Hydropower and Mining Sectors Region EAST ASIA AND PACIFIC Country Lao People’s Democratic Republic Sector Hydropower (37%); Other Mining and Extractive Industries (18%); Public administration- Energy and mining (33%); Tertiary education (12%) Project ID P148755 Borrower(s) MINISTRY OF FINANCE Implementing Agency MINISTRY OF ENERGY AND MINES Ministry of Energy and Mines Vientiane Lao People’s Democratic Republic Tel:/Fax: (856-21) 263-451 ichareune@yahoo\.com Environment Category [ ] A [X] B [ ] C [ ] FI [ ] TBD (to be determined) Date PID Prepared February 10, 2014 Date of Appraisal April 2, 2014 Authorization Date of Board Approval June 3, 2014 1\. Sector Background 1\. The hydropower and mining sectors are core drivers of growth for the Lao economy, together accounting for over 21% of government revenue in 2013\. Hydropower in particular is growing rapidly, with the installed capacity increasing from 200MW in 1996 to 700MW in 2006; and over 2,500MW today (including Nam Theun operations, which started in 2010)\. This rapid pace of development is set to continue: 17 hydropower projects (5,300MW) are currently under construction and additional 56 (with potential installed capacity of 13,600MW) are under consideration\. The mining sector has already experienced a period of tremendous growth from an annual production value of some $10-15 million in 2003 to more than $1\.6 billion in 2012\. Revenue collected by government from mine operations has seen a similar surge from less than 1% of government revenue in 2002 to around 16% in 2013\. While the majority of the production can be ascribed to two operations, i\.e\. Lane Xang Minerals Ltd\. and Phu Bia Mining, a large number of small-scale operators have emerged\. As a result of these mostly unregulated operations, negative environmental and social impacts are reported to be on the rise\. The fast pace of investments has raised questions about the government’s capacity to sustainably manage t hese sectors\. Key among the challenges is the government’s ability to adopt a multi -sectoral approach to managing these two sectors\. Accordingly, the demand for stronger sector governance is both greater and more complex than anticipated during the original project design\. 2\. Objectives The Project Development Objective (PDO) is to increase human capacity and improve the performance of government oversight institutions for the hydropower and mining sectors\. The Technical Assistance for Capacity Development in the Hydropower and Mining Sectors Project (HMTA) additional financing (AF) is designed to scale up and extend the impact of the institutional and human capacity development efforts that are being supported under the original HMTA project by: (i) promoting the operationalization of legal, policy, and regulatory frameworks and management tools along the value chain in both the hydropower and mining industries, including planning, awarding, management and monitoring of concession agreements as well as revenue management and inclusive growth; (ii) monitoring, evaluating, and fine-tuning these tools for optimum performance, appropriateness, and applicability to country context; and (iii) expanding support to capacity development activities at national and local levels, and further strengthening the capacity of educational institutes to produce a skilled workforce in the hydropower and mining sectors\. 3\. Rationale for Bank Involvement The Bank has a long-standing engagement in the sector and remains committed to promoting and strengthening governance and management mechanisms of the hydropower and mining sectors\. This is also in line with the objectives of the Seventh National Socio-Economic Development Plan of Lao PDR, which is to optimize its use of natural resources, by maximizing revenue to the state, minimizing environmental and social costs, improving efficiency and transparency in the sector development, and attracting quality investment\. The HMTA and the AF are fully consistent with the Country Partnership Strategy (2012-2016) supporting the strategic objective 2 for the sustainable management of natural resources, and contributing specifically to outcome 2\.1: Strengthened governance and management of hydropower and mining sectors, including sustained NT2 implementation\. The original project supported agencies at the Ministry of Energy and Mines (MEM) to put in place laws, regulations, operational procedures, and key management tools such as standard Concession Agreement (CA) documents for hydropower and mining concessions, fiscal policy options, hydropower management models, system-avoided costs options, and the policy on sustainable hydropower development\. All of these studies and upgrading of regulations have been coupled with capacity building\. Institutionalization, the effective application of these efforts, and the implementation of follow-up activities are critical to enhance PDO impacts\. The Government of Lao PDR (GOL) has requested additional assistance for strengthening compliance monitoring of the CA process, safety aspects in hydropower and mining development, and capacity building on technical, environment and social safeguards in the two sectors\. There are also opportunities to move forward power sector reform, positioning the country as significant power trader and connector with neighboring countries\. In the mining sector, the administration has responded to the surge of unregulated small-scale operations by introducing a moratorium on the issuance of new mining licenses in 2011\. The moratorium was intended to allow the authorities room for a comprehensive review of operators’ performance in order to correct and, if necessary, revoke non- compliant and inactive licenses\. Unfortunately, the review has had little effect to date since inspection capacities remain weak and no clear framework for control and performance requirements has been developed\. In sum, the political will to improve management of the sector is hampered by the weak enforcement capacities of line ministries and GOL has requested additional support in this area\. The proposed AF would provide support to develop sector strategies through high-level policy dialogue\. In order to support institutional sustainability the AF would finance sector management improvements through the operationalization of upstream work (legal, regulatory and technical aspects), and will continue to strengthen organizational as well as managerial and technical human capacities\. The AF would deepen the work on fiscal regimes and financial flows to sectors, to ensure that agencies are able to carry their monitoring and oversight functions\. The AF would also emphasize the strengthening of mechanisms to enhance inter-ministerial and sector coordination\. 4\. Description The following is a summary of the activities financed by the additional financing\.  ï‚ Component 1: Joint Hydropower and Mining Learning Program\. Additional support of US$3\.0 million (for a total of US$5\.34 million) would be provided to the MEM, PDEMs, and relevant agencies to: (a) further strengthen the human resource capacity of the MEM1 and PDEMs by financing short-course training addressing immediate needs to improve core functions and long- term training courses in the form of scholarships for key personnel to pursue higher education in country and abroad in critical areas for both hydro and mining, and by strengthening the capacity of MEM’s Department of Personnel and Organization (DPO) to manage human resource development and training; (b) further support for the Faculty of Engineering at NUOL and technical schools through: (i) technical assistance to update curricula, (ii) teacher training, exchanges, and internships at regional universities/institutes, and industry (private sector), (iii) procuring educational laboratory equipment, library books, and teaching aids as needed for improving the quality of education; and (c) deepen the cooperation and partnership between industry and education institutes by strengthening the trade working groups established during the original project\. ï‚ Component 2: Hydropower Sector Development\. Additional support of US$7\.0 million (for a total of US$10\.22 million) would be provided to MEM, PDEMs, National Assembly (NA), Ministry of Finance (MOF), Ministry of Natural Resources and Environment (MONRE), and Ministry of Planning and Investment (MPI) for technical assistance, training, study tours, workshops, needed equipment, and operating costs to: (a) operationalize the PSHD, and the Independent Power Producer (IPP) process2 with a focus on: (i) effective management and monitoring of CA, including developing standard operation procedures for the implementation of the IPP process, (ii) technical and engineering capacity to address safety issues in hydropower development, (iii) establish a hydropower fiscal mechanism to improve revenue collection and facilitate budget allocation to agencies and provinces; (b) apply the system avoided cost methodology and develop production costing model; and (c) prepare a hydropower sector strategy and road map for cross-border power trading (system-to-system power trade)\. This component is implemented in partnership with IFC\. ï‚ Component 3: Mining Sector Development\. Additional support of US$6\.0 million (for a total of US$8\.55 million) would be provided to MEM, PDEMs, MONRE, NA, MOF, and MPI through technical assistance, training, study tours, workshops, necessary equipment, and operating costs to: (a) complete and operationalize the improved standard terms and conditions of CAs, in particular: (i) developing standard operation procedures for the mining concession process, (ii) strengthening staff capacities for negotiation, CAs management, inspection, monitoring, and project evaluation, (iii) building capacity for the establishment of the community development funds3, (iv) establishing operation and maintenance arrangements for the mining cadaster system and extending it to link MPI, MONRE, MOF, and MEM, (v) developing geo-data collection capacity , and (vi) establishing a mineral fiscal mechanism and building capacity for revenue collection, and facilitating budget allocation to agencies and provinces; (b) develop a sector strategy focused on improving sector governance, including further strengthening the oversight capacity of the NA, and strategic environmental and social assessment\. 1 The Ministry is comprised of 8 departments/office/institutes at central level i\.e\. Cabinet, Department of Personnel and Organization (DPO), Department of Inspection (DOI), Department of Energy and Planning (DEPP), Department of Energy Management (DEM), Department of Energy Business (DEB), Institute of Renewable Energy Promotion (IREP), and Department of Mines (DOM)\. PDEMs are responsible for MEM activities at provincial level\. 2 The Independent Power Producer (IPP) comprises the following key steps: Memorandum of Understanding (MOU) signing, Project Development Agreement (PDA) signing, Concession Agreement (CA signing), Commercial Operation Date (COD), and Project Transfer\. 3 The AF support is limited to the development of guidelines and regulations for the establishment of community development funds, and will not finance any activity related to the implementation of the funds on the ground\.  ï‚ Component 4: Project Administration and Management\. Additional support of US$1\.8 million (for a total of US$2\.18 million) would be used to finance consultancy services for the Project Secretariat Office (PSO) established within MEM for ensuring effective and timely implementation of project activities\. Key functions of PSO include, coordination, financial management, procurement, safeguards, monitoring, and reporting on project progress including maintaining all project records\. In addition, the AF would finance consultancy services to develop: (i) an IT platform to support business processes within MEM, (ii) the internal control system for the hydropower and mining sectors led by MEM’s Inspections Department, and (iii) support the implementation of the ministerial decree on gender advancement\. 5\. Financing Source: ($m\.) BORROWER/RECIPIENT 00\.00 International Development Association (IDA) 17\.80 Total 17\.80 6\. Implementation Based on lessons from the implementation of the original project, the implementation arrangements will be strengthened to improve inter-agency and inter-ministerial coordination, project monitoring, and procurement processing\. Under the AF, MEM remains the main executing agency through the Cabinet Office, Department of Energy Business (DEB), the Department of Energy Policy and Planning (DEPP), the Department of Energy Management (DEM), Department of Mines (DOM), and Department of Personnel and Organization (DPO)\. Three new divisions of MEM are included for the implementation of the AF\. The Division of Inspection (Inspection Department) will lead in the development of an internal control system; the Division for the Advancement of Women within the Cabinet, will lead activities to implement the decree on gender equality at the Ministry, and the Division of Statistics will lead the development of the IT system\. The Project Secretariat Office (PSO) under the Cabinet remains responsible for overall project implementation, monitoring, reporting, and coordination\. NUOL and the three selected education institutes are responsible for the implementation of sub-components under Component 1\. The project steering committee (PSC) led by the Vice Minister of MEM and comprising representatives of the implementing agencies will continue to oversee project implementation and coordination among ministries concerned\. Two Working Groups, for Hydropower and Mining, respectively will be established to enhance coordination and facilitate timely implementation of project activities\. In addition, three inter-ministerial committees established during the original project to improve implementation will continue guiding activities related to fiscal and development of hydropower and mining concession agreement standards\. 7\. Safeguard Policies (including public consultation)  6\. Safeguard Policies Triggered (please explain why) Yes No Environmental Assessment (OP/BP 4\.01) X Natural Habitats (OP/BP 4\.04) X Forests (OP/BP 4\.36) X Pest Management (OP 4\.09) X Physical Cultural Resources (OP/BP 4\.11) X Indigenous Peoples (OP/BP 4\.10) X Involuntary Resettlement (OP/BP 4\.12) X Safety of Dams (OP/BP 4\.37) X Projects on International Waterways (OP/BP 7\.50) X Projects in Disputed Areas (OP/BP 7\.60) X 8\. Contact point Contact: Sombath Southivong Title: Senior Infrastructure Specialist Tel: 5784+6228 Fax: (856-21) 266299 Email: ssouthivong@worldbank\.org Location: Vientiane, Laos (IBRD) 9\. For more information contact: The InfoShop The World Bank 1818 H Street, NW Washington, D\.C\. 20433 Telephone: (202) 458-4500 Fax: (202) 522-1500 Email: pic@worldbank\.org Web: http://www\.worldbank\.org/infoshop

APPROVAL

P005800

0Iocument of The World Bank FOR OFFICIAL USE ONLY QC? f3oC-yfŽK RePor So P-3934-YAR REPORT AND RECOMMDATION OF THE PRESIDENT OF THE INTERNATIONAL DEVELOPMENT ASSOCIATION TO THE EXCUTIVE DIRECTORS ON A PROPOSED CREDIT OF SDR 4\.7 MILLION TO THE YEMEN ARAB REPUBLIC FOR A TECHNICAL ASSISTANCE PROJECT TO THE CFENTRAL PkLANNING ORGALNIZATTON Februarv 6, 1985 This document has a restricted distribution and maw be used by recipients only in the performance of their official duties\. Its contents may not otherwise be disclosed without World Bank authorization\.  CURREL1CY EQUIVALENTS Currency Unit = Yemeni rial (YRI) Calendar vear 1983 November 1984 91 = YRls 4\.50 t1 = YRIs 5\.90 YRI 1 = $0\.22 YRI 1 = g0\.17 FISCAL YEAR January 1 to December 31 ABBREVIATIONS CPO Central Planning Organization ECWA Economic Commission on Western Asia FFYP First Five-Year Plan GDDBCI General Department of Data Bank and Central Information GDPL General Department of Projects and Loans GDPR General Department of Planning and Research GDTCC General Department of Technical Cooperation and Conferences KAF Ministry of Agriculture and Fisheries NOF Ministry of Finance NIPA National Institute of Public Administration SFYP Second Five-Year Plan UNDP United Nations Development Programme UNFPA United Nations Family Planning Agency USAID United States Agency for International Development YAR Yemen Arab Republic  FOX OFFICIAL USE ONLY YEMEN ARAB REPUBLIC TECHNICAL ASSISTANCE PROJECT CREDIT AND PROJECT SUMNARY Borrower; Yemen Arab Republic (YAR) Amount; Special Drawing Rights 4\.7 million (approximately USS4\.7 million equivalent) Terms: Standard Project Description; The proposed project, complementing propos'' but sepa- rate assistance from the Kuwait Fund, vould strengthen the capabilities of the Central P!anning Orzanization (CPO) in national economic planning and public invest- ment programming, in project evaluation and monitoring and in developing and maintaining a national data bank\. More specifically, it would: (a) provide on-the-job and overseas training for selected staff in key General Departments of CPO; (b) ensure greater coordination and complementarity between the General Departments, and between the CPO and other ministries/agencies; (c) introduce improved procedures in economic planning and investment programming, project processing and cost control, and in reviewing contract documentation, management of technical assistance as well as improved procurement practices; and (d) ensure a well-managed and organized central data processing capability in TAR\. The project would finance about 13 staff-years or specialists' services and about 27 staff-years of over- seas fellowship training; English language training, mainly in-country, for about 16 CPO staff; and office and data processing equipment\. Benefits: The major benefit accruing from tiap project would be an improved local capability for economic planning, proj- ect and plan monitoring, management of technical assis- tance and data processing\. A strengthened CPO would be in a position to play a more dynamic role in coordi- nating the efforts of technical ministries in sectoral and investment planning and in monitoring plan and project implementation in a timely and effective manner\. The expansion of a central data processing capability under the project would strengthen the statistical underpinning for economic planning and increase the operational effectiveness of the CPO and other agen- cies, to be served by the central facility\. I Thb dowonot has a tstriced distibuion and may be used by eapints only in the performacC Of tbei off=il dutims Its contnts may not othenwiSe be disclosed withcut World Bank authoizabon\.  - ii - Risksz The risks to the project are those normally arising for a project of this nature, which depends for its success on the involvement and effective training of a quali- fied national staff\. The risks would be minimized through measures agreed with and being taken by the Government to assign suitably qualified nationals to work with the expatriate specialists and to ensure that the training of nationals will receive priority during project execution\. Estimated Project Cost 1/ Local Foreign Total - Us$ million I\. Expert Services 0\.30 1\.27 1\.57 II\. Staff Training 0\.25 0\.78 1\.03 III\. Equipment 0\.17 1\.58 1\.75 IV\. Support Services 0\.20 - 0\.20 BASE ODST 2/ 0\.92 3\.63 4\.55 Physical contingetcies 0\.05 0\.18 0\.23 Price contingencies 0\.12 0\.48 0\.60 Subtotal 0\.17 0\.66 0\.83 TOTAL PROJECT COST 1\.09 4\.29 5\.38 Financing Plan: Local Foreign Total US$ ti I lion- IDA 0\.41 4\.29 4\.70 Government 0\.68 - 0\.68 Total 1\.09 4\.29 5\.38 1/ The cost estimates exclude taxes and duties from which the project would be exempt\. 2/ Using January 1985 prices\.  - iii Estimated Disbursement; IDA Fiscal Year 1986 1987 1988 1989 s Mlion- Annual 1\.90 1\.20 1\.40 0\.20 Cumulative 1\.90 3\.10 4\.50 4\.70 Estimated Completion Date; June 30, 1989 Rate of Return; Not Applicable Appraisal Repo-t: None  INTERl ATIONAL DEVELOPMENT ASSOCIATION REPORT AND RECOMMENDATION OF THE PRESIDENT OF IDA TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT TO THE YEMEN ARAB REPUBLIC FOR A TECHNICAL ASSISTANCE PROJECT TO THE CENTRAL PLANNING ORGANIZATION 1\. I submit the following report and recoummendation on a proposed development credit to the Yemen Arab Republic (YAR) for Special Drawing Rights (SDRs) 4\.7 million (approximately US$4\.7 million equivalent), on standard IDA terms, to help finance a pr-oject of technical assistance-to the Central Planning Organization (CPO)\. PART I - THE ECONOMY 11 2\. A report on domestic resource mobilization (No\. 3554-YAR) dated January 6, 1982 has been distributed to the Executive Directors\. A report on medium-term policy which reviews the public investment progran has been discussed with the Government, and will be distributed to the Executive Directors shortly\. Country data are attached in Annex I\. Introduction 3\. Over the last decade YAR has experienced far-reaching changes in its socioeconomic structure and the material welfare of its citizens\. The repub- lican government which came to power following the 1962 Revolution succeeded in establishing within a surprisingly short period of time the foundations of a modern state\. Political integration and the build-up of public institu- tions, while maintaining a liberal market orientation, have provided the basis for rapid development of the public and private sectors\. Under the Three-Year Development Program (1973174-76/77) and the First Five-Year Plan (1976/77-80/81), the foundations of the country's physical and social infrastructure were laid and expanded, and first attempts were made at lifting agriculture, the mainstay of the economy, out of its medieval setting; industrialization was also started,-albeit on a small scale\. 4\. Rapid domestic economic growth has been accompanied and enhanced by the large inflow of remittances and transfers by Yemenis abroad, particularly workers in Saudi Arabia and the Gulf States\. These are estimated to have increased from around $65 million in 1971/72 to a level that has fluctuated around $1\.2 billion on an annual basis between 1977 and 1983\. Largely as a result of these cash inflows, YAR's real per capita GNP has increased significantly over the last ten years, reaching an estimated $510 in 1983 (World Bank Atlas methodology)\. Although there are no reliable data on 1/ Substantially the same as Part I of the President's Report (P-3926-YAR), dated January 22, 1985, for the Second Industrial Development credit scheduled for consideration by the Executive Directors on February 12, 1985\.  2- income distribution, there are reasons to believe that the benefits from recent growth have been widely distributed\. Strong familv ties ensure that many people benefit from the increase in incomes\. Major Development Issues 5\. Overall economic performance during the First Plan period (1976/77- 80/81) has been satisfactory\. GDP grew at around 6 percent per annum in real terms\. Investment effort was impressive averaging around one-third of GNP\. These achievements, remarkable as they are, should not detract from the fact that YAR continues to be one of the world's least developed countries\. Few mineral deposits have been discovered so far\. 1/ YAR's commodity exports are negligible, reflecting the country's limited resources and the under- developed state of its economy\. Productivity levels are still extremely low, especially in agriculture which accounts for about 70 percent of the labor force\. Agriculture's development has been constrained by the scarcity of agricultural land and water and the high cost of production\. 6\. Water related issues are among the most serious in the medium- and long-run\. Despite their scarcity, water resources are being depleted rapidly around cities and towns\. A number of initiatives are, therefore, called for to address these problems: (i) establishing a comprehensive water resources data base; (ii) improving coordination among the various agencies operating in the water sector; (ii) introducing legislation to manage water use, and (iv) strengthening cost recovery policies\. At the request of the Government, IDA is planning a detailed assessment of the sector to strengthen the water management policy and provide the required technical assistance\. 7\. Despite the impressive achievements in the development of social infrastructure, much remains to be dorn\. The adult literacy and school enrollment rates are still very low; the shortage of skilled and semi-skilled manpower is an overriding constraint to development and limits the capacity of the public administration to manage and implement a growing and increasingly complex development program\. Health indicators depict serious problems that call for an adequate policy framework and substantial efforts and resources to improve the situation\. The rapid population growth (estimated at about 3\.0 percent per annum) also suggests that, despite cultural constraints, the Government should start analyzing recent demographic trends to reach a better understanding of the consequences of this high growth rate in order to develop an appropriate policy\. 8\. YAR's physical infrastructure remains underdeveloped despite the fact that it has received the lion's share of public investment under the First and Second Five-Year Plans\. Thus, although the length of the main road network has tripled over the last decade, many areas are still without ade- quate road connections\. This is understandable in a country with a very 1/ Oil has been recently discovered in YAR, but the extent of the discovery is not known yet\.  -3- rugged terrain and scattered population and where the first paved road connecting the main harbor to the capital city was completed only about two decades ago\. 9\. The budget deficit has emerged as a major concern in recent years\. Between 1978 and 1982, Government expenditures have increased at a pace double that of revenues\. By 1982, revenues represented only about 40 percent of expenditures and the budget deficit increased to 33 percent of GD?\. At the s9at time, the share of the budget deficit financed by external loans dropped from an average 44 percent during 1977-81 to 16 percent in 1982, which compelled the Government to increase its borrowings from the banking system (mainly the Central Bank)\. As a result, the money supply grew rapidly during the recent years, and by more than 25 percent in 1982\. Despite this rapid growth, inflation hardly exceeded 6 percent since the growth of monev supply was accompanied by a continuous increase in imports and a decline in foreign reserves, from 16 months of imports o_ goods and services in 1977/78 to 3\.5 months by end 1982\. 10\. In 1983, the Government succeeded in reversing the deteriorating macrofinancial trend despite ad\.srsp exogenous factors; e\.g\., the earthquake that caused substantial damage in the Dhanar area in December 1982, a severe drought and a large drop in official grants\. The balance of payments deficit declined by 40 percent in 1983 mainly as a result of reduction in imports\. The Government adopted a more flexible approach to its exchange rate policy and de-aluated the Yemeni rial four times between October 1983 and August 1984, by about 25 percent in total\. The budget deficit decreased by 9 percent over 1982 as a result of the Government's effort to increase tax revenues and to bring its expenditures under control\. Current expenditures levelled off and capital expenditures were down by 12 percent in line with the recommendations of the Bank's report on the public investment program, which was discussed with the Government and broadly agreed upon\. 11\. However, with the budget deficit still representing 28 percent of GDP and the money supply growing by 28 percent in 1983, the financial situation remains serious and it would be premature to discontinue the austerity effort at this time\. The Government has no intention to do so, as reflected by the 1984 budget which contains a 22 percent decrease in capital expenditures while recurrent expenditures are expected to stay at their 1983 level\. Similarly, the draft 1985 budget foresees that current expenditures will stay at their 1984 level except for small increases due to the adjustments in the exchange rate, while further reductions of capital expenditures are programmed\. Government Objectives 12\. Since the early Iq70s, the country has been trying to develop human resources and build new institutions, to strengthen the physical and social infrastructure, to raise the productivitv of the commodity-producing sectors, and to improve the standard of living of the people, giving priority to their basic needs\. Most of the FirsL Plan's targets which were in line with these  - 4 - objectives have been met except in the agriculture sector where output of some traditional crops has declined and overall growth fell considerably below targeted levels\. The primary reason for this appears to have been the abandonment of marginal rain-fed areas where income opportunities could not compete with the opportunities of migratinn\. The production of qat (a mild stimulant) has been on the increase and has competed for agricultural land\. 13\. The Second Five-Year Plan (1982-86) l/ has a 7 percent GDP growth target calling for a total investment of around $6\.5 billion (1981 prices) over the plan period\. The sectoral distribution of investment underlies a continued broad-fronted strategy with an emphasis on physical infrastructure, agriculture and manpower development\. The plan's financing envisioned heavy dependence on external sources with around 70 percent of investment expected to be covered by grants and loan disbursements and direct foreign private investment\. However, since this expected level of\. foreign finance has not been forthcoming and because of the extremely tight budgetary situation that has developed recently, the Government has been revising its investment program with IDA's assistance (para\. 10)\. Capital Flows and External Debt 14\. Since the 1962 Revolution, YAR has received large amounts of foreign assistance\. Given the country's low per capita income and its UN classifica- tion as a "least-developed country," most of the aid has been provided in the form of grants and concessionary loans\. Cumulative aid disbursements, in- cluding grants, came to around $3\.2 billion by the end of 1983\. The principal donors have been Saudi Arabia, Kuwait, the United Arab Emirates, Iraq, USA and the Federal Republic of Germany as well as IDA and the Arab development funds\. 15\. About one-half of the total assistance given so far was provided as grants, mostly for food aid, technical assistance and, more recently, for budget support, primarily from Saudi Arabia\. Food aid has been provided through the World Food Program and by a number of bilateral donors\. A significant part of official grants has been made available in the form of technical assistance\. Given the extreme shortage of skilled manpower in YAR, this type of aid has high priority and will be needed by the country for many years to come\. 16\. Besides the grants, YAR received sizeable amounts of official loans, chiefly for the financing of specific projects, with the main emphasis on roads, agriculture, and utilities\. YAR's external public debt outstanding on December 31, 1983 was estimated at $2,356 million, of which $1,568 million was disbursed\. IDA credits accounted for $163\.6 million or about 10 percent of the total disbursed and outstanding debt reported\. The terms of official loan assistance have been very favorable\. Loans from the USSR and the People's Republic of China are, for the most part, free of interest\. Western 1/ The Yemeni fiscal year was changed to coincide with the Gregorian calendar year as of 1982\.  - 5 - European countries have generally charged between 3/4 percent and 2-1/2 percent\. Interest rates charged by Arab countries have varied from 0 to 4 percent\. Loan maturities range from 5 to 50 years, with an average of 20 years\. 17\. However, in 1983 commitments dropped sharply by about 77 percent overall and by about 90 percent for bilateral sources\. This drop is partly related to the depressed oil market and the Iran-Iraq war, since commitments from oil surplus countries and multilateral institutions related to them declined from an average of $150 million per year over 1977-82 to $44 million in 1983\. 18\. Debt service amounted to $42\.3 million in 1983, hardly more than 3 percent of gross foreign exchange earnings (including workers' remittances and private transfers)\. However, the debt service is projected to increase substantially over 1985-90, and its budgetary burden could become difficult to bear\. These developments indicate that YAR would have to rely increasingly on domestic resource mobilization\. PART II - WORLD BANK OPERATIONS 1/ 18\. This credit would be the forty-first to YAR, 2/ bringing total IDA commitments to ¢400\.3 million net of cancellations\. The main goals of IDA's assistance in YAR have been threefoldz (a) to develop the basic institu- tions, skills and physical infrastructure which are prerequisites for development; (b) to develop production and income in the dominant productive sector, agriculture; and (c) to support the Government in its programs to meet basic needs in rural and urban areas\. To achieve these objectives, IDA has extended twelve credits (t128\.4 million) for agriculture, fisheries and rural development; fifteen credits ($158\.6 million) for infrastructure; six credits (W61\.0 million) for education and training; three credits 2/ for industry ($22\.0 million); two credits for petroleum and 'eothermal promotion and exploration ($15 million); and a $10\.5 million credit to strengthen and expand the capability of the Ministry of Health to plan, staff and manage the country's health care system\. The International Finance Corporation (IFC) has made three investments in YAR: (i) $2\.4 million in FY78 to help finance a dairy and juice project; (ii) $4 million in FY84 for a dry cell battery project, and (iii) $4\.5 million in FY85 for a vegetable cooking oil and ghee project\. Further opportunities for IFC involvement are being explored\. Annex II contains a sulrmary statement of IDA credits and IFC investments as of September 30, 1984\. The attached map (number IBRD 15174R5) illustrates the IDA-financed projects in YAR\. 1I/ Substantially the same as Part II of the President's Report (P-3926-YAR), dated January 22, 1985, for the Second Industrial Development Credit scheduled for consideration by the Executive Directors on February 12, 1985\. 2/ Includes the Second Industrial Development credit of $8\.0 million\.  -6- 19\. A major constraint to YAR's social and economic development has been, and will remain for some time, the critical shortage of professional, skilled and semi-skilled manpower, and the insufficient experience and weak- ness of its institutions\. World Bank strategy has emphasized strengthening institutions and manpower capabilities through increased training of local staff and continued technical assistance, as well as through direct financing for education\. Thus all IDA-assisted projects in YAR contain substantial institution-building components\. Two particularly important examplas of the World Bank's support have been in the Central Planning Organization (CPO) and the Ministry of Agriculture and Fisheries\. 20\. YAR's disbursement performance has been affected by a number of implementation problems, although it still compares favorably to the EMENA region's average\. Among the recurrent problems that are common to most countries at YAR's stage of development are; delays in recruitment of consultants, delays in award of contracts and resolution of conflicts with contractors, and finalizing cofinancing arrangements\. In addition, other serious project-specific problems have also been affecting the implementation of two projects; fisheries and Ibb and Dhamar water supply; these problems have been discussed with the Government and corrective action is being taken to resolve them\. The Government and IDA have agreed to hold country imple- mentation reviews twice a year to monitor the recurrent implementation problems more closely and to address them promptly\. 21\. Future World Bank operations are expected to consolidate past achievements in the main infrastructure subsectors, spread the benefits of agricultural and rural development projects to new outlying areas, accelerate assistance to the Government in the energy field, and continue to meet the large requirements of education and training\. Particular attention will be given to YAR's ability to implement projects by ensuring the availability of key staff and by meeting technical assistance needs\. Two additional projects have already been appraisedz (i) an agricultural development project in the undeveloped Wadi Al Jawf region and (ii) a project to provide technical and management assistance to the state agency in charge of mineral and oil resources (YOMINCO)\. A power distribution, an agricultural development, an education and a highways project are under preparation and future operations are expected in the areas of energy, transport, and possibly in the water supply and sewerage sector\. 22\. YAR contributed an increasing portion of local currency financing for IDA-assisted projects in the years when the budgetary situation was favorable\. However, in view of the tightness of the budget in recent years and the fact that YAR remains among the least-developed countries, it still requires special assistance through financing of a large part of project costs, including local expenditures when appropriate\. As in the past, the costs of future projects are expected to be substantially higher than the amounts that IDA can provide, and IDA will continue to cooperate closely with other donors to maximize it's catalytic role in stimulating cofinancing\. IDA-supported projects have so far led to about $370 million equivalent of cofinancing from other aid donors\.  -7- PART III - INSTITUTIONAL SETTING 1/ 23\. The Central Planning Organization (CPO) was established in 1972, as the principal economic planning organ of the country\. It is organized into eight general departments, under a Chairman, Deputy Chairman and Assistant Deputy Chairman\. The Chairman is a cabinet-level minister (Minisrer of Development) and reports to the High Planning Council, a cabinet committee headed by the Prime Minister\. This Council, supported at the technical level by CPO, has overall responsibility for charting the country's long-term econo- mic and social objectives and for instituting the broad elements of the policy framework required to meet these objectives\. To provide this technical under- pinning, CPO has been vested with extensive powers in discharging its functions in (i) planning and budgeting; (ii) project evaluation, approval and rdonicor- ing; (iii) monitoring and evaluating plan implementation; and (iv) preparing, processing and publishing of national statistics\. Planning and Budgeting 24\. The planning function was started immediately following the estab- lishment of CPO\. The Three-Year Development Program (1973/74-1976/77) was prepared with World Bank and Kuwait Fund assistance\. "hile this Program was essentially a partial list of priority projects, it was a commendable achieve- ment for a country which had only recently emerged from a debilitating civil war and a long history of economic stagnation and isolation\. With the experi- ence gained during the implementation of this Program and the modest advances made in developing a statistical base, a comprehensive First Five-Year Plan (FFYP) (1976/77-1980/81) was prepared\. In contrast to the Three-Year Program, which was primarily a CPO document, the preparation of the First Five-Year Plan involved a greater participation of line agencies and linked broad macro- economic objectives with sectoral strategies and those, in turn, to an invest- ment program\. 25\. The Kuwait Fund, USAID, the Federal Republic of Germany, and the World Bank, as an executing agency for a UNDP-financed project, provided additional assistance in the preparation of the Second Five-Year Plan (SFYP) (1982-86)\. The World Bank/UND? support consisted mainly of assisting the Yemeni staff in the preparation of background papers for the plan\. In addition, World Bank staff members were intimately involved in the plan preparation exercise by reviewing and commenting on the draft plan as a whole\. As a result of these discussions, the original ambitious growth target was reduced to a somewhat more realistic level\. Bank staff involvement during the preparation phase paved the way for additional Bank advice during implementation when, in 1983, the Government solicited Bank assist-ince in revising the plan to further scale down its investment target in line with the reduced availability of external and domestic financing (para\. 10)\. The Government agreed to many of the Bank's recommendations and decided to postpone the implementation of some of the projects originally included in the plan and to delete others\. As a 1/ An organizational chart of CPO is presented in Annex IV and its main func- tions and the planning and budgeting processes are described in Annex V\.  -8- complement to these austerity measures, the Government started applying a more flexible and realistic exchange rate (para_ 10)\. Furthermore, as a follow-up to this assistance, the Government requested a Bank economic mission, with IMF participation, that would assist it in controlling recurrent expenditures and improving revenue-earning performance in view of the poor budgetary positian (para_ 9)\. This continuous dialogue with the Government on key policy matters underlies the Government's request for IDA assistance to strengthen CPO\. 26\. The establishment of a broad policy framework for development has been accompanied by an evolving process of coordination and consultation in plan preparation, involving CPO in the lead role, the Ministry of Finance (MOF) and the line ministries/agencies (see para\. 6 of Annex V)\. The process has yet to be extended, however, to provide effective linrkages with budget preparation and CPO has yet to fully develop its role in this regard\. It should establish an iterative process to coordinate sectoral investment pro- posals into a proposed investment budget, within the tight timeframe of the budget preparation process, taking into account expenditure limits to be agreed on a rolling basis with XOF\. There is also a need to base the inclu- sion of projects in the budget on more systematic criteria that reflect the relative priorities of projects on an annual basis within the plan\. Finally, the quantitative link between the plan and the budget needs to be strengthened by projecting the incremental recurrent expenditures that derive from invest- ments during the plan period\. 27\. Initial actions are being taken bv CPO to strengthen its role in the budget preparation process\. As a training exercise, it prepared an annual plan for 1984, on an ex post basis, in line with the 1984 budget which had been already in effect\. This learning experience is intended to enable CPO to play a leadership role in preparing annual investment plans in subsequent years\. P\. framework establishing the required sequential steps in the interaction bet-een CPO, the line agencies and MOF in preparing the investment budget is under discussion between CPO and the Ministry of Finance\. The experience gained would be used in annualizing the forthcoming Third Five-Year P an\. A coordi- nated effort by the General Departments of Planning and Research, Projects and Loans, and Follow-up and Investment Budget of CPO is also proposed to facili- tate forward programming of project expenditures and related updating of the Five-Year Plan as a basis for decisions on the annual program\. CPC is being assisted in these various initiatives by an economic adviser financed by the Kuwait Fund\. Assistance will be extended under a proposed new project to be financed bv the Kuwait Fund and complemented by proposed IDA assistance in staff training under this project\. Project Review and Monitoring 1/ 28\. A very important and integral part of both planning and budgeting is the preparation, evaluation, and approval of projects to be included in the plan and subsequently in the budget\. The need for effective monitoring and cost control during project development and implementation is equally clear 1/ See Annex V, paras\. 10-13, for a more detailed account\.  - 9 - so that the cost assumptions of the investment plan are adjusted periodically and retain their validity\. 29\. CPO responsibility in the project review process lies primarily with the General Department of Projects and Loans (GDPL)\. Following discussions with the appraisal mission, the necessary links between the GDPL and the Follow-up Department in project monitoring have recently been established by assigning responsibility for physical and cost follow-up to the GDPL which will report progress in these areas to the Follow-up Department; the latter will follow up in overall project performance and outcome as part of its role in monitoring and evaluating the investment program\. In addition to its functions in evaluating, approving and monitoring Projects, the GDPL is a participant in plan preparation through its contribution to determine the project portfolio and will in the future play an increasingly important role in forward programming of project expenditures as part of the annual updating of the plan\. 30\. The GDPL is being assisted in project evaluation by specialists, financed by che Federal Republic of Germany, who review and comment on feasi- bility studies submitted by line ministrieslagencies\. However, as with the line agencies, the GDPL lacks a cost estimating and control system which would provide the necessary cost data and planning techniques to enable it to perform effectively its overall role in project evaluation, and subsequent project processing\. The GDPL does not have the expertise to develop and apply such a system, which will inevitably limit its contribution to plan preparation dad forward programming and, combined with inadequate technical staff in the General Department (para\. 37), has resulted in delays and limited effectiveness in project review\. The development and application of an appropriate system would be supported under the project (para\. 49)\. 31\. The role of the General Department of Legal Affairs includes clear- ance of all project agreements and contracts (see the Attachment to Annex VIII(b))\. While the General Department includes qualified legal personnel among its staff, they do not have the experience or expertise to address effectively the increased volume and complexity of issues arising in the review of agreements atnd contracts\. They are particularly concerned about the growing complexity of procurement issues and the absence of unified practices, procedures and documentation for the procuremer\. process\. The project would address this issue by assisting in developing new procedures and documencation for public agencies, and in providing training and support in their application (para\. 50)\. Coiplementary support would be provided to the General Department of Legal Affairs by the Kuwait Fund in the form of short-term consultancies, as required\. 32\. While not in the mainstream of the project review process, another important function of CPO is in coordinating technical assistance, which includ2s preparing, negotiating and monitoring technical assistance agree- ments with a variety of aid agencies\. YAR continues to be the recipient of major amounts of needed technical assistance\. A recent review of technical assistance performance in YAR indicates that both management and coordination  - 10 - of technical assistance need to be greatly strengthened, at the level of the line agencies as well as in CPO\. The primary responsibility for initiating and coordinating action lies with CPO's General Department for Technical Cooperation and Conferences, in cooperation with line agencies\. While this General Department has a wide range of designated functions, its activities to date in managing technical assistance have been limited\. While key staff of this Geeral Department are academically qualified, and a number of university graduates have recently been added, they lack necessary experience and expertise\. This deficiency will be addressed under the project\. As an initial orientation measure, the Director General of this General Department, along with colleagues from other Yemeni agencies, participated in a seminar on the management of technical assistance conducted by the the World Bank in the Fall of 1984\. Only limited information is now available on the levels of graduation, numbers returning and subsequent placement in YAR of the many thousands of Yemenis who have been sent abroad for training under extensive fellowship programs\. She proposed technical assistance specialist under this project would coordinate with a proposed USAID-funded advisor in assisting in operating a system to trace the output from the overseas training programs\. Monitoring and Evaluation of Plan Implementation 33\. The responsibility for monitoring and evaluation of plan implementa- tion lies with the Follow-up Department\. Its functionq iave been broadly set in monitoring the implementation of annual and medium-term plans and in evaluating project and plan outcome, including outputs, costs and benefits, employment creation, etc\. Its functions extend to establishing an integrated follow-up system for the plan and investment programs, specifying the role of the executing agencies and the methodologies and criteria to be adopted in both implementation and follow-up\. The management of CPO now wishes to strengthen the follow-up function on both the macro and project levels\. The work of this Department is limited as yet and there is an acknowledged need to support it in addressing its functions, both in establishing operational procedures and practices and in the training of staff\. The appointment of appropriately qualified additional staff members is a first step (para\. 37)\. Support in developing the capabilities of the department will be provided through a Follow-up Specialist financed on a grant basis by IDA 1/ and through staff training under this project\. Statistics/Data Processing 34\. The collection, collation and publicat%on of a wide range of national data is critical to the planning process\. Responsibilities in this respect are shared between the CPO's General Department of Statistics and the General Department of Data Bank and Central Information (GDDBCI)\. The former is being assisted by one specialist from UNPA and one from ECWA, funded by UNDP\. While the GDDBCI has a well-established structure and adequate staffing at this stage, its capabilities to process the range of priority data needed 1/ One of the twenty positions approved for IDA countrips to be financed by IDA on a grant basis\.  - 11 - have not been developed\. Its activities are limited at present to a few statistical tasks and documentation of limited personnel management informa- tion for CPO\. IDA missions have identified and agreed on structural changes in GDDBCI whi=h would obviate current overlapping of activities within various divisions as well as provide a more logical grouping of functions\. Futrther- more, a list of additional equipment and related software has been prepared by IDA and GDDBCI staff, which would permit more effective use of the output capabilities of the existing computer facilities, and extend those capabili- ties to meet medium-term needs\. The intention is, as recommended by IDA, to centralize data processing as much as possible and thus avoid proliferating the purchase of very expensive equipment and related software, particularly in view of the very limited number of qualified personnel in the country\. The GDDBCI staff, while academically qualified, lacks the expertise and specialized training to develop the capabilities of the department to meet these requirements\. The proposed project would provide this needed assis- tance through expert support and on-the-job and overseas training for selected staff (paras\. 59 and 60)\. It would also provide the basic equipment needed at this stage by GDDBCI\. Institutional Development Strategy 35\. A fair assessment of CPO's performance to date in its main planning and project review and approval functions has to be seen in the context of the chronic shortage of qualified Yemeni staff and their young experience\. Keeping these two related factors in mind, the progress achieved so far has been significant, whether measured by the increasing sophistication in the planning process itself or by the form that economic plans have taken (start- ing with partial investment programs and moving towards annualized comprehen- sive plansi, the increasing number of Yemenis involved in the preparation of plans, and, more importantly, the pragmatism and basic soundness of invest- ment priorities and the country's economic policy framework\. In all of these areas, CPO has played and continues to play a central role\. The areas of weakness are, to a large measure, shortcomings that stand in the way of per- forming particular functions better rather than gross defects in policy or judgment\. These in turn, often relate to staff constraints\. The main weak- ness regarding planning and budgeting that was identified earlier (para\. 26) involves the need to strengthen the link between medium-term plans and the budget through annualizing the medium-term plan\. This has been recognized by the Government and efforts to remedy this situation are underway\. Even here, it should be stated that an important qualitative link is already in opera- tion since projects included in the budget are by and large consistent with the strategic and policy objectives of the plan and are typically found in the plan's investment program\. 36\. The Prime Minister and the Minister of Development and Chairman of CPO are determined to further strengthen CPO so that it may exercise a stronger planning and control function\. The Minister recognizes that con- siderable work remains to be done in establishing cohesion and c3mplementarity between the activities of the various general departmen-s of CPO and in building up their capability to perform their functions in a dynamic and  - 12 - flexible wanner\. The various proposed actions detailed in previous para- graphs, vhich address identified weaknesses in CPO's operations and which require external support, are major planks in the Minister's efforts to strengthen CPO\. These measures are being accompanied by other initiatives aimed at strengthening overall staffing capabilities and management and coordination\. 37\. Strengthening Staff Capabilities\. The major consideration is that of recruitment of qualified staff\. CPO's staffing position was greatly weak- ened from 1977 when many of the well-qualified professir"als who initially staffed CPO at the senior levels, and made it into a focal point for develop- ment policy, left for other agencies\. In addition, CPO lost its special salary status and had difficulty in recruiting people of a sufficiently high caliber at the operational level\. Encouraging progress has recently been made, however, in recruitment of university graduates, of whom there are now 122 out of a total staff of 365\. The recruitment position has been further improved under current salary structures which permit CPO to pay special allowances, and special incentives related to qualifications, so as to attract and retain qualified staff\. As a result, CPO is now in a position to recruit additional technical staff, namely, engineers for the Projects General Department and economists for the rollow-up Department, for which recruitment arrangements are proceeding, and thus will address identified staffing defi- ciencies in these two departments\. 38\. As might be expected, many CPO staff members lack experience for their assigned tasks\. Administrative and management training needs are being identified with support from the National Institute of Public Administration, which will arrange for the provision of such training in-country, to be supported by more advanced short-term training overseas for senior staff\. The need for specialized on-the-job training, combined with overseas train- ing, in priority areas has also been identified\. 39\. Strengthening Management and Coordination\. The CPO has recentlv been reorganized from five intc eight general departments\. The new structure responds adequately to the needs of CPO but has brought with it problems of operational coordination between some of the general departments\. A lack of clarity in the respective functions of some of these d-nirtments has added to the problem\. A number of actions are being taken\. The originally stated functions for each general department were in a number of instances over- ambitious and were not sufficiently focussed to provide a sound basis for development of the General Departments' activities\. These functions are now being reviewed and refined under the overall direction of the Deputy Chair- man\. To support these efforts, a Performance Improvement Program Workshop will be conducted for CPO by the National Institute of Public Administration, similar to successful workshops already conducted for two other public agen- cies\. It will assist staff in redefining their activities collectively, in identifying problems and in determining a program to address these problems\. The proposed project would provide management services to assist with follow- up to this workshop; the various other specialists financed under the project would also contribute to clarifying and integrating the functions of the  - 13 - various departments on the basis of their day-to-day experience with their operation\. 40\. The CPO Chairman agreed that effective coordination between the General Departments of CPO is critical and that, for this purpose, additional measures are necessary\. He has already issued a decree assigning responsi- bility for coordinating the functions of the Technical Cooperation, Statis- tics, Data Bank and Finance and Administration General Departments to the Assistant Deputy Chairman\. The Deputy Chairman will now have explicit respon- sibility for coordinating the functions of the Planning, Projects, Follow-up and Legal Affairs General Departments\. If, after a trial period of six months, it appeared that the Deputy Minister needed assistance in the performance of this task, a second Assistant Deputy Chairman would be appointed for the pur- pose\. PART IV - THE PROJECT Background 41\. The initiative for the project came from the Chairman of CPO who initially requested assistance in developing the capabilities of the Data Bank and Central Information General Department\. In subsequent discussions with the Bank, wider technical assistance needs were identified and a coherent framework for such assistance designed\. Two follow-up missions in March and May 1984 assisted in project preparation\. The project was appraised in July 1984\. Negotiations for the proposed credit were held in Washington from January 23-24, 1985\. The YAR delegation was led by His Excellency Fathi Salem, Deputy Chairman of CPO, and included Messrs\. Tareq Al-Hasri and Mohamad Abu Lohom of CPO and Mr\. Abdul Aziz Al-Zariqah, Economic Attache of the YAR Embassy in Washington, D\.C\. A credit and project summary is provided at the beginning of this report and Annex III contains supplementary project data\. Project Obiectives 42\. The major objective of the project would be to create a national staff capability in key General Departments of CPO to enable them to perform their functions more effectively\. It would also introduce more effective procedures aimed at strengthening the operations of CPO and its working relationships with other agencies, as well as assisting those agencies in economic planning, project processing and management of technical assistance For those purposes it would combine with the proposed expanded assistance to CPO from the Kuwait Fund in economic planning and with ongoing assistance from the Federal Republic of Germany in project evaluation, as well as with the specialist assistance in project monitoring to be provided on a grant basis by IDA (para\. 54)\. Project Justification 43\. CPO has so far played a central role in the development of YAR\. In its early days, it took the initiative in formulating the country's first investment program and established the rudiments of a modest policy frame- work\. This was done with the assistance of IDA and other aid donors\. Since  - 14 - then, line ministries and agencies have developed their own capabilities and have taken more of the initiative themselves in articulating their respective sectoral strategies and investment priorities\. However, CPO still plays the central and fundamental role of coordinating the development efforts of these ministries and agencies and of formulating the overall macroeconomic policy framework\. This role has become more demanding as the size and the complexity of the public investment program have increased and the choice among projects, at the margin, has become less streightforward\. Macrofinancial policy deci- sions have also become linked with more difficult choices and trade-offs in view of the current need for continuing the austerity program\. Should the recent discovery of oil prove commercial, it would provide some relief from the financial constraints\. However, the development vf this resource and the management of any revenue it generates is likely to create a new set of policy choices that would require good analysis\. 44\. It is important that the technical assistance that CPO has received so far be continued\. The training provided under the initial World Bank/ Kuwait Fund project was disseminated to other Government agencies when many of CPO's original staff transferred there\. The proposed project would provide a reinjection of needed --astitutional support ir\. areas that would complement the assistance being currently provide\.d by UNDP and the Federal Republic of Germany, and the further assistance envisaged by the Kuwait Fund\. The project would also complement the considera'le technical assistance being provided to YAR by a number of aid donors\. Almost every line ministry or project agency in the country is the beneficiary of some form of technical assistance designed to strengthen the capabilities of these ministries/agencies\. By strengthening CPO to play its central coordinating role more effectively, the benefits of this assistance would be enhanced\. Project Description 45\. The project comprises about 13 staff-years of specialists's services; about 27 staff-years of overseas fellowship training; English language train- ing, mainly in-country, for about 16 nationals; and office and data processing equipment, to assist in strengthening CPO in five main areas of activity: (i) national economic planning and public investment programming; (ii) project evaluation and approval (including approval of contracts); (iii) follow-up of investment programs; (iv) management of technical assistance; and (iv) developing and managing a national data bank\. National Economic Planning and Public Investment Programming 46\. Proposed assistance to the General Department of Planning and Research (GDPR), mainly from the Kuwait Fund, would be directed towards refining the framework and implementing procedures for the newly commenced annual investment planning effort (para\. 27)\. Close coordination would be established with the Projects, and Follow-up and tnvestment Budget General Departments in forward programming of proiect expenditures and related updating of the Five-Year Plan as a basis for decisions on the annual programs\.  - 15 - 47\. The GDPR would also be assisted in developing the framework and preparing guidelines for medium-term macroeconomic, sectoral and investment planning by line agencies, and in coordinating sectoral planning\. More effective linkages would be established between investment planning and macro-financial planning\. These measures would form part of the preparatory action leading to the development of the next Five-Year Plan (1987-91)\. 48\. The contract of the current economic adviser to the GDPR, funded by the Kuwait Fund, has been extended by three years\. Under a proposed new proj- ect, also to be funded by the Kuwait Fund, a general economic planner and a sectoral economic planner, for three years each, will be appointed to further assist the GDPR through advice, backstopping and on-the-job training in the above activities\. The project would complement the on-the-job training by sending four selected staff members, who will be academically qualified, for specialized training abroad, for three months each, in economic and financial planning\. To address deficiencies in their English language capabilities, both in terms of their ability to handle English language documentation and to undertake overseas training, about 30 staff-months of foreign language training in total will be provided for the selected staff members\. Project Evaluation and Approval 49\. The General Department of Projects and Loans (GDPL) is being assisted on an ongoing basis by the Federal Republic of Germany in the economic evaluation of larger scale projects proposed by sectoral agencies\. The proposed project would complement this assistance and extend the overall competence of the GDPL in cost evaluation and monitori-a of projects by developing and applying techniques and criteria for a cost-estimating and control system\. Subsequently, it would assist CPO in advising the line agencies on streamlining and standardizing, to the maximum extent possible, the project-related cost data to be submitted to CPO at the various stages of the project cycle\. The objective would be to overcome current bottlenecks in project processing and to ensure an effective cost data base for preparation, review and approval of projects\. The proposed cost estimating and control system would include post-contract cost control procedures, with the respec- tive roles of the line agencies and CPO delineated\. Such a system would facilitate reporting by the GDPL tc the Follow-up Department on the cost aspects of project progress\. 50\. Tne project would also address procurement issues which are now of frequent occurrence\. It would assist the GDPL and the Legal Affairs General Department in developing and operating improved procurement practices, as a follow-up to a procuremqnt workshop organized by IDA and scheduled to be held in YAR in March/April 1985\. It would similarly assist these General Departments in providing advice and guidance to the High Tender Committee in evaluating tenders and in addressing procurement issues\. 51\. In addition, the project would assist in enhancing the capability of the Legal Affairs General Department to review the wide variety of agreements and contract documentation, to identify contract issues, and to develop stan- dardized contract documentation\. The project would also assist this General  - 16 - Department in coordinating with line agencies to apply the standardized documentation on a uniform basis throughout the public sector\. 52\. A cost specialist (civil engineer or chartered quantity surveyor specialized in costing systems) would provide advice, backstopping and training to the nominated qualified staff of the GDPL in developing and implementing the revised cost planning and control procedures and in advising line agencies on cost planning requirements (Terms of Reference in Annex VIII(a))\. His assignment would be for two years\. To complement on-the-job training, four selected staff, with an engineering/architectural or related background, would each receive three months overseas trining in costing systems and procurement practices\. The staff would each receive English language training as necessary prior to proceeding to overseas training\. 53\. Similarly, a contract specialist (civil engineer or architect/engineer specialized in contract law) would be recruited for two years to advise and provide training for staff of the Legal Affairs General Department (Terms of Reference in Annex VIII(b))\. In view of the need for continuity in training and backstopping in the initial period and in coordinating with line agencies, the proposed contract period of two years for this specialist was considered more appropriate than short-term consultancies\. Five qualified staff members would also receive one to three months overseas training in contractual and procurement practices, together with English language training as appropriate\. Follow-up of Plan and Investment Program Implementation 54\. Responsibility for follow-up lies with the Follow-up Department attached to the General Department of Follow-up and Investment Budget\. A specialist financed on a grant basis by IDA will shortly be recruited to assist in refining the functions and determining the training needs of the Follow-up Department; and in advising, assisting and training the national staff members in carrying out their functions, particularly the provision of quarterly and annual reports on the achievements and problems related to the implementation of the Second Five-Year Plan, with a view to recommending appropriate action by CPO management\. The specialist will also assist in the CPO effort to establish a strong working relationship with each of the tech- nical ministries, particularly their planning/follow-up/statistics units, and in the training of the staff of these units\. 55\. As a complement to this assistance, the project would provide specialized overseas training for selected staff members of the Follow-up Department\. The training needs will be more specifically defined when the IDA-financed specialist is appointed\. Needs which have been identified at this time are in development planning and project evaluation and follow-up\. Key staff members would also receive English language training, preparatory to overseas training\. Management of Technical Assistance 56\. The project would provide assistance to the General Department of Technical Cooperation and Conferences (GDTCC) in addressing deficiencies in  - 17 - the management of technical assistance at the CPO and agency levels\. It would assist in classifying current practices and procedures in the design, imple- mentation and monitoring of technical assistance as a basis for developing improved procedures by CPO in the management and coordination of technical assistance, and in providing guidelines to sectoral agencies in the management of their technicaI assistance\. It would also reinforce local capabilities in the management of technical assistance, through backstopping in the initial application of the revised procedures, on-the-job training to designated staff members, arrangements for seminars/workshops in management of technical assistance and overseas training in the management of technical assistance to selected staff members\. 57\. A technical assistance specialist would be recruited under the project for two years to advise and provide tralt £,lg, on-the-job and through seminars/workshops, to designated staff members of the GDTCC and sectoral agencies in the abeve activities (Terms of Reference in Annex VIII(c))\. The project would also provide training abroad of about one month eacl in manage- ment of technical assistance for twelve selected staff members from CPO and the sectoral agencies\. Developing ard Managing the National Data Bank 58\. The project would expand the limited capabilities of the General Department of the Data Bank and Central Information (para\. 34) to process national data required as a basis for the planning process, and to serve the data processing needs o: CPO, the Ministry of Finance and the Central Bank of Yemen\. This service wotld be extended to the Prime Minister's Office and, on a selective and more limited basis, to other agencies\. A phased action plan would be prepared for accomplishing the above tasks and would detail the targets to be met under the project\. 59\. A senior advisor/computer specialist (systems analyst with experience in planning and management of computer centers) would advise and assist GDDBCI senior staff in developing the proposed action plan and policy guidelines and procedures for its implementation, in developing application programs to maxi- mize the use of the existing computer facilities, and would prepare and carry out inhouse training programs\. His services would extend over two years\. He would be supported, after the initial planning phase of about six months, by two technical advisors (computer specialists) for two years each, to train inhouse GDDBCI technical staff in systems analysis, database design, program- ming methodology, operating systems, telecommunications and networking docu- mentation, and application systems; and to assist in implementing such systems\. Terms of reference for the specialists are included in Annex VIII(d)\. 60\. In addition to inhouse training, extensive overseas specialized training needs have been identified and funding to meet these needs are in- cluded under the project\. Such training would include 20 staff-years of fellowships, seven for two years each and twelve for six months each, in various disciplines related to information resource management and systems development\. It would also include short-term visits by senior staff to other  - 18 - national computing centers and attendance at seminars on the management of national computing centers\. 61\. Finally, the project would include data processing equipment needed to meet the medium-term needs of GDDBCI, as well as a limited amount of equip- ment for individual departments of CPO (Annex IX)\. General 62\. As a follow-up to the planned Program Improvement Workshop (para\. 39), the project includes six months of management consultants to assist in moni- toring and evaluating the program of improvements to be agreed at the workshop\. It also includes an additional six months of consultants to meet needs as they arise in the course of project implementation\. 63\. The project would provide 12 months of training in administration and management\. Training needs at the lower and mid-management levels would be identified in association with the National Institute of Public Administration (NIPA) and through the above workshop\. The bulk of this training would be provided in-country by NIPA\. Overseas training will be required, however, at the senior management level, and would include about one month of management training to be financed under the project for the heads of each of the General Departments\. Training 64\. All of the project components include a considerable measure of on-the-job training, complemented by overseas training, for CPO staff\. To ensure that such training will be effective, the staff to be selected for training would have appropriate academic backgrounds\. In addition, to maxi- mize the impact of the training to be provided by expatriate specialists, at least three national CPO staff members, with agreed appropriate qualifica- tions, would be assigned to work with each specialist\. Overseas training, both short and longer-term, will be phased (Annex VI) so as to limit disrup- tion to ongoing work and to ensure the maximum availability of the appointed national staff for on-the-job training\. Project Implementation 65\. The Deputy Minister would be responsible for ensuring any necessary coordination between the various specialist inputs under the project and with specialist inputs from other aid agencies\. ne will be assisted in this task by the Director General of the GDPL, who will be designated as Project Coordinator, answerable to the Deputy Minister\. 66\. The Projects General Department, which has extensive experience of IDA procedures, and has overall responsibility for liaison with IDA on IDA- assisted projects in YAR, will be responsible, under the Deputy Minister, for coordinating arrangements for project implementation\. For this purpose, the Projects General Department will arrange, in collaboration with the other concerned departments of CPO, for the hiring of specialists in accordance with  - 19 - IDA guidelines and on the basis of the agreed terms of reference, for moni- toring and evaluating the performance of specialists in accordance with the criteria included in the terms of reference, for appointing and training of national staff, and for arranging for foreign language and specialized train- ing of the selected staff\. Logistical arrangements for the specialists' visas, housing, etc\., will be undertaken by the Public Relations Department of CPO\. Project Monitoring 67\. Monitoring and evaluation of project implementation would include Ci) quarterly progress reports to be prepared by the Projects General Depart- ment and submitted to the Deputy Minister and IDA; and (ii) semi-annual reviews of progress, including a review of progress in staff training, to be under- taken with the participation of the Deputy Minister, the heads of the concerned General Departments, the appointed specialists and national staff, and IDA (Development Credit Agreement, Section 3\.03)\. Project costs 68\. The total cost of the project, net of duties and taxes (from which the project would be exempt), is estimated at $5\.38 million, including a foreign exchange component of $4\.29 million\. The proposed IDA contribution of SDR 4\.7 million vapproximately $4\.7 million at date of credit negotiations) would cover the entire foreign exchange cost and about 38 percent of local costs, i\.e\. about 87 percent of total costs\. The Government would meet the other local costs, including the cost of support services for the expatriate specialists\. The base costs have been estimated at January 1985 prices\. Price contingencies of 13 percent have been included, based on an expected annual inflation of 8 percent in 1985 and 9 percent in 1986 through 1989 for foreign costs and 10 percent throughout the 1985-89 period for local costs\. A physical contingency of 5 percent has also been included\. Procurement 69\. Specialists would be employed on terms and conditions satisfactory to the Association, in accordance with Bank Group Guidelines for the employment of consultants (Development Credit Agreement, Section 3\.04)\. Terms of refer- ence for che long-term experts have been prepared and agreed with the Associa- tion (Annex VIII)\. Terms of reference for short-term specialists and arrange- ments for overseas training would be subject to the prior review and approval of the Association\. The equipment to be provided, amounting in total to $1\.45 million, excluding contingencies, consists of computer and word processing equipment and related software which expand the existing equipment installa- tions with which they must be compatible\. Compatible equipment can only be obtained from the manufacturers of the original equipment and, accordingly, the equipment will be procured through negotiations on price with these manu- facturers\. Provision is alno included for an uninterruptable power supply system for the computer installations, at an estimated cost of t300,000\. The availability of servicing and spare parts for this system is an absolute requirement\. In the circumstances, and as the nature and size of the instal- lation work involved would not in any event attract overseas competition, the  - 20 - system would be procured by obtaining bids from at least three qualified local firms\. Retroactive Financing 70\. To permit the GDDBCI to make the initial arrangements at an early date for the development of the first of the planned new computer applica- tions, the Government proposes to proceed in early calendar year 1985 with the purchase of a limited amount of computer software and related equipment from the list proposed for financing under the project\. Procurement of the software End equipment would follow the procedure outlined in the previous paragraph\. Retroactive financing of up to $0\.5 million under the project is proposed to meet the estimated foreign exchange costs involved in these advance purchases\. Disbursement 71\. Funds from IDA would be disbursed over four yAps from credit signing (Annex VII)\. Accordingly, the project would be completed by June 30, 1989 with a closing date of December 31, 1989\. Disbursements would be on the basis of 100 percent of the total costs of expert services, 90 percent of equipment and material, and 80 percent of the total cost of training\. Applications for reimbursement would be for amounts of not less than $20,000\. Reimbursement for contracts for goods or services with a contract value below $10,000 would be made solely on the basis of statements of expenditures\. 72\. In accordance with normal practice for CPO, the account for the proj- ect would be established in the Finance Department and operated by the Loan Accounts Department\. The accounts would be subject to audit in accordance with arrangements acceptable to IDA\. Certified copies of the accounts, and the auditors' annual report thereon, including a specific report on the audit of withdrawals based on statements of expenditures, would be sent to IDA with- in six months of the end of each fiscal year\. At the request of the Govern- ment, payment into the account would be through a special account (revolving fund) denominated in dollars, which would be established in the Central Bank of Yemen at a level of $0\.5 million, in accordance with standard IDA condi- tions\. Benefits and Risks 73\. The major benefit that would accrue to YAR under the proposed proj- ect, which complements assistance from other aid donors, would be an enhanced local capability for economic planning and plan follow-up\. The project would enable CPO to (i) play a more dynamic role in coordinating the country's development efforts; (ii) monitor projects in a timely a-d effective manner; (iii) provide support and coordination in the management of technical assis- tance; and (iv) develop and maintain a national data bank as a basis for sec- toral and overall economic planning\. The benefits to the line agencies would be considerable, arising from more effective coordination between them and CPO in sectoral and investment planning and from the improvements to project pro- cessing by CPO\. The line agencies would also receive advice and assistance  - 21 - under the projecc to improve their own procedures for investment planning and project processing, and to manage technical assistance\. Finally, the project would be expecred to lead to improved cost control and procurement practices in YAR, applicable to all sectors\. 74\. Experience with technical assistance aimed at institutional support in YAR indicates that it can only have a limited and short-term impact unless qualified nationals are appointed to work with and are trained by the expa- triate specialists\. Agreement has been reached with the Government on the names and qualifications of the appointed staff, and the training role of the specialists have been emphasized in all their terms of reference\. In addi- tion, a review of progress in training will be a key element in the monitoring of performance\. The possibility of turnover of appointed national staff remains\. A major turnover is not anticipated in view of the expected increased flow of graduates into the public sector, and the provision under current salary structures whereby CPO is in a position to pay special incentives related to qualifications, to attract and retain a qualified staff\. At least three nationals will be assigned to each expatriate specialist, so that some turnover can be accommodated without significant adverse impact\. 75\. At the same time, to ensure that project objectives will be met, it will be necessary that IDA play an active and supportive role to the Govern- ment in the selection of experts, in the overseas placement of trainees, in commenting and advising on proposed new procedures, and most importantly in monitoring project performance\. The allocation of supervision time to this project will reflect these requirements\. PART V - LEGAL INSTRUMENTS AND AUTHORITY 76\. The draft Development Credit Agreement between the Yemen Arab Republic and the Association and the recommendation of the Committee provided for in Article V, Section l(d) of the Association's Articles of Agreement are being distributed to the Executive Directors separately\. 77\. Features of the Development Credit Agreement of special interest are referred to in Section III of Annex III\. 78\. I am satisfied that the proposed credit would comply with the Articles of Agreement of the Association\. PART VI - RECOMMENDATION 79\. I recommend that the Executive Directors approve the proposed Development Credit\. A\. W\. Clausen President Washington, D\.C\. February 6, 1985  -22- AN I TABLE X Page 1 of 5 ,am \. or - a 5L I DD:OM S _WF 4 zrplUST OUST N T3\. A) L i ssr~cm m2cr ZM ) rb mr-- Pan= loCmz KOOiUZ CA 1 w\. r\. m c r 2 usr LA\. DG a TaL 1MO 219\.0 t9 AUIULXURaL 96\.6 97\.3 97\.9 cw mm \.M CB) 110\.0 500\.0 1149\.6 210L\.6 CEXIOtAS OF OIL E5,UUL?) 3\.0 ILO 57\.0 6\.1 99LS5 A EL 323= P ATZUIC\.-TE*t CTOOUIA1S) 4163\.0 5258\.0 7470\.0 IC 003* lOMATh CZ OI TOTR: 3\.4 7\.J 14\.3 42 66\.5 PUP0LSThK PUOECIIES P'2PUATIUU XS lEAR 2000 9U1L) 124 STAXTIOFaR FaUMATXZ (MILL) 43\. FOPULATIUE 1ht \.9 PUPULAXXOK DErrT PM sq\. - 21\.3 27\.0 37\.2 361\. 35 7 PElt SQ\. VEl AGL IAND 43\.1 54\.0 74\.1 461\.7 92\.4 POPWLA'rZK aZ SEICEK CZ) 0-M TM 42\.4 43\.0 44\.3 43\.6 39\.9 15-f TSR 54\.4 53\.9 52\.0 53\.1 36\.0 A5 AM ASI 3 3\.2 3\.3 4\.1 ?OPULATXICK 113 RATE CX) TOL 2\.3 Z\.3 2\.9 2\.8 2\.4 CHN 1 10\.2 \.3 4\.5 3\.6 cRUOE S3I RATE (PM TOl) 49\.7 48\.8 483 40-4 3113 CUE EAII RATE (PE 105) 2\.1L 26\. 21\.6 11\.5 8\.1 CQSS REPRCUCTET RATE L4 3\.3 3\.0 2\.8 L\.0 FAMILY ftPLIOC USERS (O AFtE UMe \. t\.0 ra 22\.2 40\.3 FODwND1021O IDE X FOOW PM PER CATA C1969-71W0) 119\.0 84\.0 93\.0 97\.3 114\.3 PER CAIT SUPPLY OF CALaEm CZ (1O0 R0tCr9IS) 90\.0 76\.0 760 110\.8 110\.6 P*UlKm (GEMS PUT DA) 69\.0 35\.0 50\.0 70\.1 67\.3 OF WKVCM ANAL* PSM I 180 14\.0 19\.0 le 17\.3 34\.1 OtIlD (ACES 1-4) DEAI RtE 60\.4 49\.0 30\.0 14\.6 5\.7 L:rE EPVDCT\. AT S1U1 CTASS) 35,9 38\.5 43\.7 57\.5 64\.7 !RFAAX ?WIT\. PATE CPU T300S) Z11\.6 188\.0 163\.0 101\.S 60\.6 ACCESS TO SAFE WATER (XPOP) TCTAL ,, 4\.0 4,0 if 59\.7 65\.4 RA"I \. *45\.0 30\.0 Tr 84* 78l aGRAL \. \.0 2\.0 7F 38\.4 46\.2 ACCESS TO EICRETA DISPOSAL C: CF POPULATIOX) ICT,,AL \. \., 532 9 URBAN \. \. \. \. 67\.0 RDeAL -'''''24\.5 POPELATIaS PER PIIYSICA% 110030\.0 24370\.0 11b70\.0 345\.1 1917\.7 POP\. PM %CRSl PERSOS \. \. 45E\.0 18M1\.1 813\.8 POP\. Pt HuSPITAL MD TCTAL 2730\.0 1430\.0 1 1700\.0 632\.9 367\.2 uBAN \. \. 380\.0 S&S\.5 411\.5 R>AL \. \. 63S0\.0 2513\.5 2636\.3 AbI1SS0SM rtU HOSPIlD KQ ,\. \. 14\.3 26\.2 27\.3 NU-M A9 e SIZE oF OIWSEHO0L TOTAL \. \. 5\.0 /b URBAN ~~ - _- *2 7r t _ RLVAL 6:07Jt AVEPACE aO OF PERSOuS/R0O6 TrAL _\. _\. 2\._ fh URBA \. \. 1\.87it MR>AL 3\. \.1 h \. ACCISS TO ELECT\. (20: oWErCSN) TTL \._\.___2 _ URBAK _\. \. 56\.5 thl\. 77\.7 RtERAL \. \._ _ 16\.1  23- AZNEX I T A * L F4 3^Page 2 of 5 m\. AREP\. oF - SecUL IKCATS Au KOS? CIOS5 REMci ESTWAM) /b 1i9eaOt imA zsmi LŽC w\. _LT\. cm ADJUS=J * 3 RATIS PRfL\.rt! TOTAL 8\.0 12\.0 67\.0 W\.: 105\.4 MALL 1;\.0 23\.0 82\.0 102\.5 IC6\.3 MALE C&0\.5 2\.0 1M\.0 7\.6 14\.5 SECNART: TOUTL \. 1\.0 5\.0 43\.0 A3\.2 ALE \. 2\.0 9\.0 52\.3 42\.3 MALE \. 0\.1 2\.0 33\.0 4\.5 VOATIOAL CZ Of SEECOlARY) 3\.2 1 2\.2 4\.6 , 10\.3 13\.6 PU?IL-ZEACH RATI PUXM4RT '5\.0 510 4\.0 30\.3 30\.1 SECO5DAIE 24\.0 4a 24\.0 18\.0 lb 23\.1 16\.J 40= Lr ERACT RATE (2) 2\.5 I 10\.0 /k 22\.0 43\.5 79\.5 ELp, , CAS/IVSUSA,V POP 17\.8 *6,0 3*210 RECE;S;ElS/?R0SAM 20? \. 15\.3 jj 15\.6 131\.5 Z25\.6 TV ECEIVElUSASD 20 \. \. 0\.2 46\.1 107\.2 SVIsPAPU CWDur NRAL !STZRES?') CICUUAT105 PER IWAIq POPULATIS \. 0\.7 \. 31\.2 63\.5 CLIL A4L ATTENDASCAA \. \. 2\.1 1\.7 2\.8 TAL LABOR CE CTS) 1263\.0 1481\.0 1863\.0 FEALE (PCRI3) 3\.7 *\.5 5\.4 10\.8 23\.2 (PERCEEt\.) \.0 79\.0 5\.0 42\.4 31\.5 xIrZK CPENCE 7\.0 9\.0 11\.0 27\.9 z3\.9 ?AXTcIATIOK RATE CPEZCAT) YOTUA 30\.3 23\.2 Z4\.9 2S\.2 32\.2 MtALE 57\.? 55\.0 49\.9 46\.4 49\.3 PV4hX\.E 2\.3 \.5 2\.6 5\.3 15\.2 SCOSO DEPMECfT RATIO 1\.5 1\.6 1\.9 1\.8 1\.4 T a I PE2;EX Ci RVATE ZSflS R3EEIE ST HiCNS 5: or HOUSEMM2S \. \. ICZES 20- Or DHOUSEMWS \. \. LrEST 202 oF U S \. \. \. \. L0:RS* 4 F07 nOUSz\. MM= TW atom ESMATED ABSOLUTE POvTwY DCQ¢E LVEL (USS PER CAPIA) Ur" \. 366\.0 274\.8 288\.2 RUL ,, \., ,\. 177\.2 154\.0 ESTMAXED RuTm POVRTY niZ LEVEL CUSS FM CAPIAJ L'I 4\. \. \. 42\.6 522\.6 RURAL \. \. 157\.0 284\.9 37Z2\.4 ESTIMAD POP\. BELOL\. ASSMEM POVERTY IC LEM (2) R\. \. \. RURL \. \. M02 AVALARZ-- SOT APPLICABIE No C 5 ta Mhe goo averages fw each Indecator are papvetlotbewghted arithmetic mens\. Coverag of con-tries eanon the incature depends on aeZlsbiLty of data to la nt uafarv\. /b Dcle othereLee noted\. DAta for 1960r 'er to an year betoee 1959 and 1961; 'Mta for 1970 be_tan 1969 and 1971; and data far eoat lacent Estlivae Atven 1960 ed 162\. tc Resldent population, tt clude\. mirast * irkars abroed for lees the a yeru /d 1979; to 1977; If 1976; La 1972; Ih 1975; /I ln th mejor citta of Same\. Tais end Nodaldah; 1jW62; &Tk?3\. lUKE\. 1984  -24- Annex I sOii\. Page 3 of 5 00\.05*t\. 500 r\.tero St 000 - io CS - OS tenets t to eet a Ce- t * tee - \.5 5\.05000 rut I\.e-\.t to\. st\.tr Tee\.- Ott iee\.etse giso\. ars- tea 1\.05 nirt ,oe - noose eot to \.- te - \.oes-e es\.oo\.ee: t\.o\. arrisotral\. r* t0 ra\.on \. too\. ne - \.oist\.tOa eetoi\. - isttea - - ett\. - nint, - ce\. tarot\. SO\. \.jn\. - Os\. ito tote nbltt-soo\. nee\. is '\.n\. \.i \.e\.Sirte\. - i tttoste-\. 0s - Is e\.etittit\. -\. en\. 0\.0** souse\. iste- - eseftie\. i-\. \.ot\.ct's eneOsO tsett-so-i to at-i 'Se- \.,\. alp etoi to -\.sotO\. tt- t5tie 00 t\. - 0 09\.0 CS it- tarp So 1t\.C st\.0 Ptfljfl - soot site\. albIno - \.5 -\. i\.ifltetit - beeI nfl\.t\. ten rit*Ott tOe 'C - astOtO eei\. 3002\. rsot\.-rso oetit A it-st * 4t\.i soti etieflit\. ire\.!\. Cr ns its\.t\. - 5\.4\. i\. - ietot\.t toe tooth\. hr nh\. \.9 sr-t IbIto sts-tro-ot - 9u\.ooe\. nitstsrs! e# soOt t\.,tls - ter'sls e-ts sCot\. OWOte \.r\.s\. *e\.t5 he--t\. tt\.rtt\.et nOC 5 Poe rono\. i\.so\. -t e -ttC oein - it\. *etes\. *Oit* nO\.3\.0 eat ite\.O\.o toO\. -a i\. es\.,oe os\. - ine3t -t -\. - s\.oot -- - i\.t\.t - r\.ne \.s toast\. er* nO \.ati tioth\. 0\. rn\. r r\.tt\.e \. \.9 roerot St\. 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O\.o\.oott *\.-e\. - oet\.ltt - reid s-he - eo\.t ahe re-00\.eto\. eoe\.e\.-\. a ,\.tt - t is -\. 00\. 0\. toteS roe\. toe a\. - 0 soii \.o\.tet\. - -  - tate\. tet\. \. tOt's isoite\. grt\.owst stfssrtt\.o sq eq 0- n of toot o-\.-\.t It,\. a #tee - t5* oet- t\. - t-\. - 5\.Us' - -\. - - t\.eIto att tfl\. 0\. i40 to\.*S tOO 0\.ie O\.sii - 505\. et it\.e\. \.e:eet ini\.tottta ie*\.se - - se-ten -\. - oeot i 509\.9 tste - po\.tertn to J1 - r\.oSi \.entotfl ro5eetr\.n Or\. - - -, e-bl\.n Wi…i\. nO it4 soeso*s C-Se-tOte-A flee \.a-t 5 n - nO tor e\.st \. tsoettttt iii\. oe-t\.iiaii\. tell,\. -srt -O\.t eO\.et\.r\.o ee\. ioolatt\.se t-oo nitetits rae\. Ce-rOe- *9 tOo \.-esiot t\.so\. tetet\. t\. Ito\. rn-Core a tIfte ts\.'\.nU's ettOt  \. \. r t\.rt,n\. tso\.so\. e Os: 0 t'sOi - ta\.t nO e\.ei - -'site t\.Oe- frSil\. etC *e15 it** 'sSit stehiiOt - 5?*t 50te\.etiietttt en ettO -'Cot\.fl t\. - mflSib me nose\. r\. frefltttp pets Cr00 *te- trr i\.e -\. i\.e\. -s-nO\. tot\. Site \.se\.tisolo teent's -\. Ziqi t\. totteit\. \.ett\. to teet see\.1 nO sat tetti\. starting \.e---\. ra rpo te t ,\. \.n -ot to t- toso\.rta etrs - or,\.ttr\. e *s\.tittt\. tr\. se-  seOpeis \.sete4 -\.re\.l Ce-Si tetiso \.et\.tes ro\.Seststt tO t\. Ottt 5\. 5 o\.ettfte o\.s-oito i\. tnt\. \.o\.e\.et - o\.tti ne *5- - Ieee\. tact\. nse nO *io rae\. ta - ,*tee Sn, - 5 fled\. at -treetie\. ts-ttttt ess\.ttn - tin is retOt tot - isrCr - tetseOt - vase a \.inirat\. ,s * esisren lent me r-tre to-\. -en t,\.rtetott\. -tnt t- In tao tot ta-s\. 0-ti iesttt peat,\. it sotit C fle?tt -\. s OCt10 roe\. t\. \.sntt iooee 5 !e\.t\.d ia a ree\.ot t\.ono a -te stotfliso\. 9\.- nO st to iS 4e\.tt rote tOe eer\.e\.,oro to slet \.os\. t tO \.ee-t - eot oet\.op\.ot - a seettla ny \.ot i's eeriest eib -a- I\. tee\. !t ort\.tr mfoIst\.- stos sotte-es\. - to tt- 0\.0\. it tsr 1 * \.et- tn Ofltitet OCtet \. nOte to \.00 *oe 5\.-ted rOere\. tertoot,\. \.0 tee tesstttoo is r teer bo\.scss nOt - Oct Cote nO *tte - 9e - \. \.sero tts rae \.0 Coettee et 0\.51 itt,0 \.e\. 'ers\.-\. Seat aCe,\. so q\.to - in, n\.e\. \.r n-tonE triO\. t,rOia\. 'oCtettO is- see\. Sate\. etO to \. \.t me-otto toe--st\. e - i: - or troso t\.ot -i\.e tntr\.tot I\.e b\.t S tie- C boiba-ea\.soteaI rerri tire a tel s\.ntitet\. tote t t\. eact I\.ores - n-\. \.t\.tt\.Ee OatS - Oe\. 5n\. sli\.r it- 5 'nstCCOt\.05 05 iOSimi \.500\. ? \.eeel to tetrt -\.1 5 C\.oeteit t- 55 \.e- \. neesoej - *itts\.ttso t\.ortetet eso \.tn\.t 'teo\.-e\.tt \.i oi\.554e\.t - i\.Ctaet ttstttosta elite tosttt\.t\. t\.eiOiOi t t\. i \.st\.iOt so is ibs - C eia *s\.*a *e\.Ot\.Ot t\.eO\.oes\.* tt\. - seeS\. COCo* OttO fote rot es\.ri\. *0e te\.t ii\., -re-t\.o - s\.91 oe-\. tOte esee t to,\.tS-tit\. a - flSi 0 et -\. etto\. tsr\. are-\. S,or\.Co iS CO 1-toO\.-\. eo- ,\. - \.o'n-\. nO t,et\.s - *etet e\.oo\. esrel ret is Csoob\.t\.te teette oinee 0,4 oseeio :osol\. o\.o4 Ci \. et tee\.CeO se oe 5\. - On-ne, rerate- is- as's * t sea S '09 's\.t aes Si o\.s\.eetttc 5\.0\.-I tOt a iCet 50-'\. a\.t Soot tsr\. tO\. t\. lt\.eoo\. ist \. 5\., oSit - ttiefets oett\. sOt\. te test o euiteS - tist* 5 stetittt\.-ot \. Iefls - CtOes Ci C\. S set C 55fl5 *i tCt oeti e\.55\.!\.t150 se-Sit 50000*\.d OOi\. ottto1 iS\. 15\.0 at mt eeiO\. 0\.osloiie tte t'e\.e00 tOe-\.e\.i - Ott, -- i-,* oee\.e\. e-\.t\.e' 1\. t\.stee-flos - Os\.tst\. S iq0O 501 -iCrO - ott-it - *eo-ese -0 55S sser tie\. - ooo eees 'p5, iSoenO \.eotottt - Pe-ssso\.e toe\. \.e-ts ,salat-\. iloit\. ,5t\. :0\.2 0\.00\. \.ie te\.t tot ton flse \.*gttt roto\. 5ot e\.ifl'Cr\. sore-\. - ieeslettee test Otto isetrest - CIteS \. r *ont\. *s\.so a tottI silo ot st-se\. e\.et,be\. isesittiet \.0 50'Idt-t\. nat-ti\. nO :0\.50-0:\. te\.t,\. 5\. or \. toes tos-t 0\.01 ttt\.0t - t4* t\. a ree\.aro Pa tate 5s\.ieifloe j'pst,ti Ootr Seee-s\.ii - oflo- \. Cs\.st 4t ott\. totes \.* stt\.e Ci\.ee- t t\. ts\.e\.e\.t toOtS\. Wi\. its\.eOeS Oi rtotetttr\. sOtistes rOOozoCt\. Pot 100-00\. eto\.?1\. nO ofi\. e\.iie t-ttte\.-es tO eet\.ieieo COt n 0050 - isoisorsotto - reao Ct\. Oiii Se (ts\. ideesat t - ! tie- - ott\. ,eo t\.so\.t \. so4- tC it et*e-t- to\. i\.o i\.eCCr Cs\. ste Oot 00 \.siie ten' rpCtsOt\.Cfl tbl* ;''\. 54\.5 -003 tCie\. s\.C ties \.teitt it\.ontet\. Cr\.- Sets tee Otto tta - SieCet ot ee flooas\.O \.t CS O\.nr e-\.ie\.c\. I - tssoe\.o sos& Ott e\.t \. Si tsoot rC t - tiiee is espetottse; *t* ton\. nO *e- ass\. sestit: peet it - tost re\.tette-\. esrIs CetteeSO ft io\.st iso Ct\.- S\.O'seo\.oiOt Coo\. - rw si Ctttee\. otis Se\. is 5 \.ostetee nO to nO\. *nCOttOitso \.9 Tb seos te oti\.rt\. Sr ostt ioss'otti r\.etsg *O e rn-rie\.o s\.s e-\.or\.t C\. \.so - tt\. \.tett 'sot rttoe-\. eC\.sieiieoi \. tO\. t\.eCr psittitis rn-s\. sosoti\. Pte\.eess Sietro e\.ttio to itt,)\. 5t"\. 500 ttt\.botte a -\.Cs to Coe-\.Oi i'e\.iiot e5000tS tt 0 esptettot Iso\.!\. soOlt \.sOt\. tOSOt rCn-ii\. t-\. te\.-ea's seorter \. ii tattoo-es iSis itrt'it \. otflt\.r-O\. neC\.; 'tOnOsotCt - 00-tO' 5,r\. - - \.efl-e\. is - Ott4i t ii ro\.t - is\.i s\.i tine o -\. - Ottoo\.nsS seso Ci\.sC Ci so! ten, sor It setoesis\. Zteen 0\.5\.-S isio\.s no teen\. \. tee\. 0 taO to e se-St \.0 ristra\. it\.tst\. Cstf tottO, Cmii\. re-teSs 0Ci\.t\.s\. is dna-is rita teats iteorts\. - 50s\. tOOotCOe \.i roies so-tisi *sr\.ett Ct nottt e-tts ri-C\. - c-s \.4-asti\. 5 fl irs\.ttt i's - tt\.stso a rnert\.-S'\. e\.o lois \.t t-tit\.-stttis to C t ntitoe sies-\. s oP lot's tOOts Cot 5tSrit*W 5 000 see-i\.' 5C st tOosO\. e Oo o\.o\.; \.o-s*\.e\.*re\.0\. \. i\.o\.a \. to sir - ret's-s\. oo\.tt's \.t tOneteiss -et tstrtttn son- to aseet 5\. otit' no et-teqe itt-Oss Ott *-to;5o-5 tot \.5 attj t0055 5\. tosatoo\. 5** tee\.ro's o:i eso\. 'to*L\.*tt see to *\.ote\. eseeits\. 000 i\.e a's \.-ot\.;\. \.stCie\.:e\. :5\.- '0-- tot C? teeo\. tttte\.rOltt\.stt i-s i\.e  '5\.t i5\. t \. -\.iet \.0 -' set\. itoet\. 'Witoti ra\. 505- *to\. - 0-st oi is-CS ttott' is-to\. saCS *C*550i't - Cli tsot -oath 105\. 0\.i - *5ttete\. nO !2±5\.s\. - *\.OOt t\.Cto it t\.istOO\. i tit'O\. SCOt 5 s Osod 0-ti Or Ottee- - beots\. tO\.ittts -\.osr rttne \.0CC t0\.t\. it sOt - so reo\.s-t\.o\. 00e 55 eer\.s t Ott e\.t tOot Oto t\.Si rsst \.5 oteect ej\.0 \.00 thoSe 5 sot0t ntriooto b\.C\. 'et\.o\.t\. ttsfl\.si 5 \. e0\.i itte o \.t\.t's C5'sOirti\. \.eiseiortt\. -t -of in \. a at\. es\.-ts*C\. stroate rt'oOo\.-st\.t di esO \.tstit C e[rt fl-'t\. e0-e - to\. - Co-tOotS o CflCt letet totte i05ti tOtS tot 500\. 00004 - lotion \.n r\.sr its'\. seigets\. ntes\.t5 \.o -- Si totC\. itt i-i toit - teit \. i-OCt n\.e ost *I\. - poettrlier ta to ott - \.sto s\.ets ot t\.Ose\.eo \.so-sot \. -eq\.t\.-s\.' - C-s\.i\.t *\. \.i\.tt\. \.tios 05 \.Oft\.i-4 - t\.to\. nL\. 5\. rents toisi *st5 - s-otis ci so:at \.1 -eq i sotist \.set:\.r\. ts ensore tts \.etti Os\. r\.ostfst tt \.s 5\. 001\. O\. Ctt- e\.toiOttet \.0 \.91 sos- ttn-0i ito\.5 is\. tosi Isote -oem in \.-\.iCe tott\. ie-\.e\.ttes\. tytt- en tOes\. *0, Cot tier 0000\. Sen o\.e tosst n 55 rent tiretta tetoC eootitO\. Ottt '-0ss to etieC\. ott eqefrist \.e\. am) n\. esot\. -e-*:e-rtse 51\.-so\. tt \.-- \.s t rse\.eo he\. is-to ire\. *rs\.t\. C lettittot aCt it e\.0 \.fl\.eOei's\. - ta i5 Cistitotriot\. \.tst9 \.0 e\.tnts0 ott 5tfl sstt\.oe\. ts\.tCseo atto e\.CO titetst - iOSi OCtet - te,stotsetO\.t node C - 0\.5-005 5\. s\.ot S\.-sOs0o etts-Stl\.t sO ttttt - st ii at 01 000 *esi to ististi, stt CeCitO 0O\.ttisitot soetesse\.0*o te\.Oeos\. \. e-it-tis\. -- e\.irtto Se- ot,\.siltte tttui eat bOot\. e\.sttolitt\.eilee--i eosototso\.COt\.sotoo t'0s0054 t\.r oset - see\.:i lesti\. iqOl-OS\. \.0ttsst tes\. ittSi tit4\. -\. -sUite \.Cito lOoto ioO\.t roe otst… tooteof \.0 ist \.s,t r7r7tTs\.o\. \.-e\. \.ro to toO eo\.i C\.C - hOot set by to test -t s\.itr 50 500 r 405\. tOt steel\. st tO is ett'O a 00\.00\. - -\.-t\.-ost* it-st 3' -\.ees ,soo\.o\.tz*'eo- -sot esi estis-ot tAt ,eO\.-es- \.1 tttoe\.rso OP - C \.1 tstoi Storets tot tOo - Zt \. \.0 t\. -t role- eietfl% sCOt -\. 1\.' 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P sC seeOtsrist t\.sroI 001 tt - i'tsoo-o too-a 5\.05 one tOtet ee\.tsCs i\.e tent\. \.s\.eiite\. lois ete\.o\. \.e\.- Itt\. t\.:\.- 5,t\. t e\.or \.55 loSt\. r\.-ts\.sto i\.- stt-\.-t\.O\. -n\. :e 1 tO 0'te\.4 ee is\. ot\.i\.t tOt\. ttttAtSie-0* \.toiCt\.oo -55\. sO tout teotre\.OiOOt\. cot SO oo\.oo0r\.e\.ot\.soo\.\.… ?et-\.OoOlSiitssii-ot'o U1 *stoflsee\.stti ott\. 0 sot-\.! - o\.t\.55 e\.r t \.oero \.o tito e\.n\. \.-\.rot- - to roe\.:\.- e'\.o soA \.-\.mot 5 otto\. sotot te a tttto 50\.t itt' a,) -so: 4o, sft t,tottts tto no tOosos\.0! - Coot - Oit ot tetot\. \.Oe si tee eec teso tin st0t\. te0* t0-s oet ' 45\.0, \.eotttesstoiteetbstoe,\.so\.1\.ose\.S -t\.Oei Sit- os\.if\.t55- tar enris S i-toot\. \.r so\. is-s\., en t -pe\.--i\. \.r\.sst -\. *sPO -\.'s\.s\. - *O\. tot- Ott ot\. 5 *ttsts,so Sue esrrts (teelsir\. ?teOOoO \.sise\.e oOooi\. - sOiseosO tot ooesoi-tst  \. Us s i -et -iote\.te 5\.-otto:\. sit' tOo\. Oo sietOt-e sosiot eCo-On-t \.1 tet - issr\.i\.n tot-e55\.i\. to - siOe\. 0000 C i-itt\. ts\.stOte 0\.stOo\.C t e-ota 5-tt nrC ttos Cr50\. 0000 no So t-s-tittepot - ottog or- 0:, \.en\.r:o s--ott See\. 5\. isisi eteso rre\.on\.lr etOts\. eoott into 0-ta so O\.o\.tiO - \.e\.Si\. - to\. Ostt - no t - Cr-tot t U toe \.roet t ste,\. ron \.1 ire too to is- flirt OS tao tot nisi tes\.tO\. OsOCtOi*t\.,s tiSe-ot r5o\.-\.st \.0 toeettotso to*I scoot at e\.i55 - i ot sos\.1- trot\. :0 \.t\.O\. t eoi\.St \.0\.055 t, \.too-tO *tOOOtC ier\.e\.'ne-t oC rir t\.srei toe e\.tCS ten, tie 0t5 ttttC0\.i -o toe Ofi tine 'ette\.ie Oitisosi\. \.ttr\.eettts\.t tretsi\. Ot 5 tnOe-atii - iototist sfeten 00 to\. - it! ortot-\. \.tot roe into I t\.Ottts\.  - 25 - MI I Page4 'of 5 ECONOMIC IIIDICATORS NATIONAL ACCOIUMS (US$ Iln) ANNUAL RATE OF GROWTEH 1983 (Constant Price) (Current Prices) VY1977-82 1983 GNP at Market Prices 1/ 4179 5 2 GDP at Market Prices 3773 5 2 Gross Domestic Investments 1107 18 -11 Gross National Savings 503 2 5 Exports of GNFS 309 15 -14 Imports of GNFS 2164 8 -12 OUJPUT, LABOR FORCE AND PRODUCTIVITY (1981) Value Added Resident Labor Force V\.A\. Per Worker US$ Min Z Thousand Z _ Z Agriculture 820 32 830 69 988 47 Industry 206 8 54 5 3815 182 Services 1492 60 318 26 4691 224 TOTAL/AVERAGE 2518 100 1202 100 2095 100 GOVERNMENT FINANCE (YRls Man) Z of GNP 1978179 1979/80 1981 1982 1983 1983 Current Receipts 2161 2755 3277 3692 5302 28 Current Expenditure 1847 2531 3253 5181 5068 27 Current Deficit(-)/Surplus(+) 314 224 24 -1489 236 1 Cavital Expenditure 2618 2492 3807 4321 3803 20 Extrabudgetary Expenditure - 523 788 2317 2090 11 Overall Deficit 848 2333 2943 5262 4507 26 External Assistance, Net 1904 976 2437 2865 1752 9 (including Grants) MONEY CREDIT AND PRICES -YRls Million Outstanding End Period - 1980 1981 1982 1983 Money Supply 9180 9905 12519 15967 Domestic Credit 4956 7273 11834 15980 Of which: Claims on Govern=ent (2017) (4039) (8454) (12361) Claims on Private Sector (2939) (3234) (3380) (3619) - Percentages 1979/80 198l1 982 1983 Money Supply as 2 of GNP 63 66 75 85 Armual Increase in; Money Supply 16 8 26 28 Consumer Price Index 11 5 3 5 1/ Not including private transfers by Yemeni migrants whose duration of stay abroad exceeds one year\.  -26 - ANNEX I Page 5 of 5 BALANCE OF PAYMENTS (USt M1n) 1978/79 1980 1981 1982 1983 Exports of Goods, fob 3 13 10 5 10 Imports of Goods, cif -1250 -1915 -1748 -1967 -1796 Trade Balance -1247 -1902 -1738 -1962 -1786 Non Factor Services, net -36 -21 -51 -37 -48 Transfers and Factor Income, net 833 1084 788 924 1103 Balance on Current Account -450 -839 -1001 -1075 -731 H & LT Capital, net 416 600 542 635 386 Official Grants 312 148 337 445 186 Official Loans, net 1/ 104 452 205 190 200 Disbursements (114) (467) (262) (232) (224) Repayments (-10) (-15) (-57) (-42) (-24) Other Capital (including errors and omissions), net 194 128 198 76 136 Increase in Reserves (-) -160 ill 261 364 209 EXTERNAL PUBLIC DEBT DEBT SERVICES RATIO (1983) 21 (USt million) 1983 Total Outstanding 2356 Total Outstanding and of which disbursed 1568 Disbursed 2\.7 1I/ Based on figures published in the Central Bank's financial statistical bulletins\. These figures differ slightly from debt information compiled on a loan-by-loan basis\. 2/ Workers' remittances and transferb included in denominator\. EMIDB June 1984  2 27 - ANNE II Page 1 of 2 THE STATUS OF BANK GROUP OPERATIONS IN THE YEMEN ARAB REPUBLIC A\. Statement of IDA Credits (as of September 30, 1984) 1/ Amount ($ million) Credit (less cancellations) Number Year Borrover Purpose IDA Undisbursed Twelve credits fully disbursed 94\.6 662 1976 Yemen Arab Republic Livestock Credit and Processing 5\.0 0\.6 670 1976 Yemen Arab Republic Sansa Water Supply II 10\.0 2\.2 794 1978 Yemen Arab Republic Highways III 11\.5 3\.7 805 1978 Yemen Arab Republic Tihama Agriculture II 10\.5 1\.7 837 1978 Yemen Arab Republic Power Distribution 10\.0 2\.7 880 1979 Yemen Arab Republic Tihama Agriculture III 15\.0 12\.0 915 1979 Yemen Arab Republic Education III 10\.0 2\.3 950 1980 Yemen Arab Republic Ibb and Dhamaar Water Supply 12\.0 11\.7 978 1980 Yemen Arab Republic Tihama Agriculture IV 5\.5 1\.7 1025 1980 Yemen Arab Republic Fisheries Developmnt 17\.0 9\.8 1067 1980 Yemen Arab Republic S\. Uplands Rural Dev\. II 17\.0 2/ 5\.5 2/ 1102 1981 Yemen Arab Republic Regional Electrification 12\.0 1\.6 1122 1981 Yemen Arab Republic Industrial Development 12\.0 4\.0 1202 1982 Yemen Arab Republic Sanaa Urban Development 15\.0 9\.6 1203 1982 Yemen Arab Republic Education IV 12\.0 7\.7 1216 1982 Yemen Arab Republic Petroleum and Geothermal Exp\. 2\.0 1\.1 1259 1982 Yemen Arab Republic Agr\. Research and Development 6\.0 3\.2 1267 1982 Yemen Arab Republic Highways IV 7\.0 4\.2 1294 1982 Yemen Arab Republic Health 10\.5 7\.3 1308 1982 Yemen Arab Republic Agricultural Credit 8\.0 7\.4 1340 1983 Yemen Arab Republic Education V 1t\.0 9\.2 1361 1983 Yemen Arab Republic Power III 19\.0 17\.5 1413 1983 Yemen Arab Republic Highways V 13\.0 12\.0 1441 1984 Yemen Arab Republic Urban II 12\.0 11\.5 1453 3/1984 Yemen Arab Republic Central Highlands Ag\. Devt\. 8\.0 7\.8 1470 3/1984 Yemen Arab Republic Education VI 10\.0 9\.5 1484 3/1984 Yemen Arab Republic Geothermal Exploration 13\.0 12\.3 Total 387\.6 of which has been repaid 0\.7 Total now held by IDA 386\.9 Total undisbursed 179\.8 1/ The status of projects listed in Part A is described in a separate report on all BankflIDA-financed projects in execution, which is updated twice yearly and circulated to the Executive Directors on April 30 and October 31\. 2/ Beginning with Credit 1067-YAR, credits have been denominated in Special Drawing Rights\. lhe dollar amounts in these columns represent the dollar equivalents at the time of credit negotiations for the IDA amounts and the dollar equivalents as of September 30, 1984, for the undisbursed amounts\. 3/ Not yet effective\.  - 28 - ANNEX II Page 2 of 2 B\. Statement of IFC Investments (as of September 30, 1984) (Amount in US$ millions) Year Obligor Type of Business Loan Equity Total 1978 Yemen Dairy and Juice Dairy Products 3\.15 - 3\.15 Industries Co\. Ltd\. 1983 Yemen Dry Batteries Dry Cell Batteries 3\.25 0\.60 3\.85 Total Gross Commitments 6\.40 0\.60 7\.00 less cancellations, terminations, 2\.29 - 2\.29 repayments, sales Total commitments now held by IFC 4\.11 0\.60 4\.71 Total Disbursed 0\.86 0\.20 1\.06 Total Undisbursed 3\.25 0\.40 3\.65 NOTE: An investment loan of $5\.4 million to the National Company for Vegetable Oil and Ghee Industries was approved on September 11, 1984; it is not yet signed\. C\. Other Bank Group Activities Two Bank grants of *200,000 each, and one of $120,000 were approved in July 1971, September 1973 and January 1976 respectively to help finance, jointly with the Kuwait Fund for Arab Economic Development, a team of planning and economic advisors and later a management(administrative expert\. The Kuwait Fund provided grants of about ¢200,000, *300,000 and *425,000\.  - 29 - ANNEX III YEMEN ARAB REPUBLIC (YAR) TECHNICAL ASSISTANCE PROJECT Supplementary Project Data Sheet I\. Timetable of Key Events (a) Time taken to prepare project; 4 months (b) Appraisal mission; July 1984 (c) Negotiationsz January 23-24, 1985 (d) Planned date of effectiveness; August 31, 1985 II\. Specila IDA ImpUlementation Actions 1\. IDA assistance in the recruitment of experts and placement of trainees overseas (para\. 75), and 2\. Close IDA involvement in advising on proposed new procedures and monitoring project performance (para\. 75)\. III\. Special Conditions None  Yemn Arab RenubilC Technical Assg4tanca Pralmet firgani2atign Chart af ih Central Plinnina Dr onigakik Minister of Developent * - - - - - - - - I-DeutyI Assistant Deputy- ChajLrnn _ \. _ _ _ _ ; _ _ _ _ _ _ _ - LLIJ - _ _ \. _- I- - - - - - - - - - General tProjects 11 _Planning & Follow-up tega; Affairs -Technical _liatstistics D ata BWank lAdm 1nstra- QQRarVrent= 3 oans&I ollo Rsuarch and and Public Cooperatlon & Central tion and Innnstm nt l \.laf I t I I cnrnfgg=s I armatain Ftnanc QiauirLmnta Project National - Investient Budget - Legal Affairs Technical - Production - Computins - Accounts - Preparation - Planning and - Assisstance A Evaluation Progranming - Loan Accounts - Exoepttons - National - Oocuftnta- _ Persomnel w Bilateral Accounts tion Affairs o _ Project Sectoral and - Follow-up - Public Cooperation * Finncial Programing - Resional Relations and Coordina- Print Shop Adini- Planning tion Councils - Foreign - strative Trade Affairs - Human Resources - Training, Planning Scholarships nnst1c Secre- and Con- Trade, - tarial , - Research and feretces - Transport A rchives Studies Comn1ica- tions - Social Statistics Population - Studies Center --- - - -functional responsibility C\.-  - 31 - Annex V Page 1 of 6 Development Planning in the Yemen Arab Republic The Central Planning Organization Background 1\. The interest in national planning in YAR developed almost immediately following the 1962 revolution which started the country on its path away from its medieval isolation under the Imamate toward the development of a modern state\. A rudimentary planning function was initially entrusted to the Ministry of Economy in 1963\. Three years later, a High Council for Construction and Development was decreed, and in 1968, a High Planning Council-a ministerial planning commission--which was supported by a Technical Office\. These early arrangements, however, remained essentially inoperative due to the domestic political turmoil that characterized the country in the 1960s\. The planning that was undertaken was confined to some limited short-term objectives and the preparation of individual projects\. The Central Planning Organization 2\. With the stabilization of political conditions and the growing aware- ness of the need for better institutional arrangements for planning, the Cen- tral Planning Organization (CPO) was established in 1972\. The High Planning Council 1/ maintained its responsibility for charting the country's long-term economic and social objectives and for instituting the broad elements of the policy framework required to meet these objectives\. At the technical level, the CPO was gradually built up with the support of a team of expatriate advisors financed by the World Bank (through two grants) and the Kuwait Fund\. 2/ UNDP and the Federal Republic of Germany also provided technical assistance\. The early days were characterized by the excitement of building a new institution which was to play a central role in the development of modern Yemen\. Therefore, a number of qualified Yemeni graduates were induced to join the organization and were trained in planning techniques\. 3\. Structure\. From the beginning, CPO was intended to have a special status\. Its Chairman was given a cabinet rank as Minister of Development and it was closely associated with the Office of the Prime Minister\. It soon started acting and was viewed as a "super ministry" that not only coordinated the activities of the main economic ministries and agencies but played a central role in defining their programs and approving many of their activities\. 1 This council is chaired by the Prime Minister and includes the Minister of Development and Chairman of CPO (as its Deputy Chairman), and the Ministers of Finance, Economy and Industry, Agriculture and Fisheries, and Supply and Trade\. 2/ Kuwait Fund for Economic and Social Development (KFESD)\.  - 32 - Annex V Page 2 of 6 4\. Initially, CPO consisted of five departments (planning, projects, foreign aid, statistics, and administration) that reported directly to its Deputy Chairman and, through him, to the Chairman\. Since then, a number of positions and departments have been created, mainly by splitting the original Projects Department\. It now has an Assistant Deputy Chairman and consists of eight General Departments; Projects and Loans; Technical Cooperation and Conferences; Follow-up and Investment Budget; Legal Affairs and Public Rela- tions; Planning and Research; Statistics; Data Bank and Central Information; and Administration and Finance\. I/ Functions 5\. The statutory functions of CPO are wide ranging and exhaustive\. The main functions can be subsumed under the following broad categories: (i) planning and budgeting - preparation of medium-term national economic development plans; - preparation of annual national economic development plans; - preparation and submission to the Ministry of Finance of chapters four and five of the budget dealing with capital expenditures and associated recurrent expenIi*ures, respec- tively; (ii) proiect-related - review and evaluation of project proposals for approval before their inclusion in the plan or budget; - monitoring of project development and implementation; - coordinating and finalizing financing arrangements for all development projects; - approval of financial aid agreements related to projects with all multilateral and bilateral sources; - approval of all disbursements against all such financial aid agreements; - approval of all contracts (civil works, consultants, etc\.) related to all foreign assisted projects; 1/ An organigram of CPO is presented in Annex IV\.  - 33 - Annex V Page 3 of 6 - approval of all requests for training to be financed under such projects; (iii) monitoring and evaluation - follow-up and evaluation of plan implementation (physical and financial); - monitoring and evaluation of the external debt situation; (iv) statistics/data processing - preparation, processing and publication of a wide range of statis- tics, including national accounts, demographic data, production, financial, balance of payments and trade accounts; and - conducting economic and demographic surveys (e\.g\., household budgets, fertility, etc\.) 6\. The Planning and Budgeting Process\. The planning process in YAR has been, and is likely to continue to be, in a state of continuous evolution\. As experience is gained and a larger number of qualified Yemenis become available, the process becomes more involved and sophisticated\. At present, the main steps involved in the preparation of medium-term plans are the following: - The High Planning Council, on the basis of draft proposals prepared by CPO, agrees on the broad strategic orientation that the Plan should adopt\. - CPO issues guidelines to line ministries/agencies outlining the format and main categories to be addressed by these agencies' submissions to CPO\. These submissions are expected to in- clude: a review by the agency concerned of achievements, in relation to targets, during the previous plan period; a pro- posed sectoral strategy and a set of supporting policy measures for the plan under consideration, in line with the Plan's overall strategic orientations as approved by the High Planning Council; projections for the plan period of sectoral targets regarding such aggregates as production, value added, employ- ment, etc\.; and a proposed investment program consisting of ongoing and new projects and specifying, for each project, some key features (essentially in a project card), including esti- mates of capital and recurrent costs (broken down into foreign and local components) for the plan period\.  - 34 - Annex V Page 4 of 6 In some cases, agency submissions are either incomplete or totally unavailable, in which case CPO drafts the relevant chapter or completes it\. At this stage the agency submissions are essentially uncon- strained as far as the size of the proposed investment program is concerned\. - While the agencies are preparing their submissions, CPO, in coordination with the Central Bank of Yemen and the Ministry of Finance, prepares a first-round macroeconomic framework for the plan which includes projections of production, consumption, savings, balance of payments, budgetary position, etc\. This framework provides the total amount of financiiag available to support any proposed investment program and anticipated plan expenditures in general\. - Concurrently, and on the basis of the broad strategy approved by the High Planning Council, CPO prepares a draft chapter on the plan's overall strategy and main policy framework\. - Once the agency submissions become available, they are dis- cussed individually in technical committees that include CPO, the Ministry of Finance and the agency concerned\. Both the General Departments of Planning and of Projec;s of CPO are represented in these discussions; the first is primarily con- cerned with matters of sectoral strategy, sectoral projections and overall sectoral financing requirements, the latter with the details of the proposed project portfolio\. The Ministry of Finance is concerned with the financial aspects of the proposed program\. - On the basis of the discussions with line agencies, an initial draft plan takes shape and goes through a number of iterations to ensure mutual consistency with agency submissions and CPO views, and internal consistency among the components of the plan document\. In case of conflict between CPO, the Ministry of Finance or the line agency, an attempt is made by the Development Committee 1/ of the Cabinet to resolve such a conflict\. In case of further escalation, conflicts are ultimately resolved by the High Planning Council headed by the Prime Minister\. 1/ A Cabinet working committee headed by the Minister of Development and including the Min-sters of Finance, Economy and Industry, Trade and Supply, Agriculture, Electricity and Water, Information, Youth and the Chairman of the Yemen Minerals and Oil Resources Corporation\.  - 35 - Annex V Page 5 of 6 - Once a draft plan is agreed upon by the High Planning Council, it is submitted for approval to the Cabinet and, subsequently, to the People's Assembly\. 7\. Thus, the main links in the medium-term planning process is between CPO and the line agencies, in the presence of, but not with the active inter- vention, of the Ministry of Finance (MOF)\. The link essentially tries to establish a conveyance of views regarding sectoral strategies and policies and the investment program\. Within CPO, the main actor during the plan prepara- tion exercise is the Planning General Department and the main internal inter- action is with the Projects General Department which is vested with the func- tion of reviewing the evaluation of project proposals, and the Follow-up Department which would have monitored and evaluated the implementation of the previous plan\. 8\. The annual budgeting process is similar to the medium-term planning process except that the Ministry of Finance instead of CPO plays the lead role and the scope of the exercise is more limited since it is confined to the public sector and public finances\. As with the plan preparation process, the budget preparation process starts with the issuance of guidelines, this time from the Ministry oE Finance, to line agencies\. The emphasis in this case, however, is not so much on sectoral strategies and policies and the consis- tency of the public finances with the macroeconomic framework, as on detailed expenditures requirements for the single year in question and the means of financing such expenditures\. The impact of the budget on the rest of the economy, or the effect of the rest of the economy on the budget, i\.e\., the macro/budgetary link, has, until recently, been absent; but this is und\.r- standable, given the limited experience in planning and budgeting in YAR\. 9\. Again, as with the planning process, submissions by line agencies to MOF are discussed in technical budgetary committees including representatives from MOF, CPO and the line agency concerned\. If conflicts arise, they are escalated for resolution by the High Budget Committee, ehaired by the Minister of Finance and including the Minister of Development and two other ministers on a rotation basis\. Project Review Process 10\. A very important and integral part of both planning and budgeting is the preparation, evaluation and approval of projects to 'e included in the plan/budget\. Typically, the treatment of projects differs depending on their size which falls into one of three loosely defined categories: large (cost greater than YRls 40 million), medium (roughly between MRls 10 and 40 mil- lion), and small (Less than YRls 10 million)\. 11\. Project proposals are normally initiated in the line agencies\. For the large projects which typically benefit from assistance from multilateral or bilateral aid donors, assistance from these donors often takes place at the  - 36 - Annex V Page 6 of 6 project identification stage and the Government relies on the donors' own project evaluation cycles for its own evaluation\. As the main interlocutor in YAR for these donors, CPO plays a central role in the choice of projects to be assisted by the various donors\. The Projects an" Loans General Depart- ment is responsible for performing this role, but the Deputy Chairman and Chairman of CPO take a very active interest in this matter\. Feasibility studies for such projects are normally required by the Government and the aid donors alike\. Such studies, which are usually carried out by external con- sultants, are reviewed for the Government by the line agency concerned and the Projects General Department of CPO\. Depending on the importance of the project, it may also be reviewed by the Development Committee of the Cabinet before presentation for the Cabinet's approval and subsequent presentation for the Assembly's approval before it is signed by the President\. The vehicle normally used for this process is the approval of loan/credit agreements with exteraal financiers assisting in the financing of the project\. For medium- sized projects, normally financed exclusively from local sources, evaluation studies are also required before including them in the budget\. These couid take the form of full feasibility studies carried out by external consultants or the line agency concerned, or more limited studies involving a modest analysis of costs and benefits\. The small projects, also referred to some- times as 'local initiative projects", are usually approved on a common sense rule-of-thumb basis with very limited requirements for analysis\. 12\. The primary responsibility for preparation of the investment budget, and correspondingly for the inclusion of any project in that budget, lies with CPO\. The role of CPO in preparing the annual investment budget has not yet been fully developed and formalized but is at present the subject of discussions between CPO and NOF\. However, the current participation of CPO in the budget preparation process has ensured that, by and large, projects considered for approval and inclusion in the budget originate in the medium-term plan and, therefore, are consistent with the sectoral and broad economic development strategies\. 13\. Following agreement on the inclusion of a project in the plan, the initiative for the further development of the project and its consideration for inclusion in the budget in a particular year lies, generally, with the line agency\. The latter step requires the agreement of both the Ministry of Finance and the CPO during the budget preparation process; otherwise, respon- sibility for project review and approval lies with the CPO, which includes review by CPO of developed project proposals, tender and contract proposals, and post-contract project monitoring, including approval of all expenditures related to the project\. Agreement to acceptance of tender is subject to the approval of the High Tender Committee, while agreement to proposed contracts is subject to the advices of the General Department of Legal Affairs\.  Yamn rab Renublit Taehnleal Auslstaaiea Pralact Protect !fim1mluntatiflf ihj33MDr o Data Bank__ ___ ___ _ Senior Specialist (1) - 2 yeatS Technical Specialists (2) 2 years each Short-term Training - Group I (2) 6 months each - Group 2 (2) 6 months each - Group 3 (2) 6 mnths each - Group 4 (2) 6 months each - Group S (2) G months each - Group 6 (2) 6 months each Fellowship Program - Group I (3) 2 years each - Group 2 (2) 2 years each w - Group 3 (2) \. \. _ 2 years each 4 Overseas Management rrainin 12 months Plannina and Research Short-term Training - Group 1 (2) 3 months each - Group 2 (2) 3 months each Prolects Cost Specialist (1) 2 years Short-term Training - Group I (2) 3 months each - Group 2 (2) 3 months each Leaal ffairs Contract Specialist (1) _ 2 years Short-ternm Training - Group I (3) 1-3 onths per tJ - Group 2 (2) trainee  Follow-Up IDA Specialist ' _ - l l years Short-term Training - Group 1 (2) 3 months each - Group 2 (2) 3 months each I,chnical Cogneration TA Specialist _ 2 years Short-term Training (12) I I month each General Hanagemcnt Consultants 6 months Unspecifiod Consultants __ --_ _ 6 months Short-term Training - Hanagement (8) I month each - Administration (4) _ 1 month each EouiL mnt PrgeurenLt 1/ Provided on a grant basis by IDA outside of the project Board Presentation 3/85 Project Cmpletlion 6/89 _ \. \. _ \. \. ~~~~~~~~~~~~~~~~~~~~~~~1-, , N| c  - 39 - Annex VII Yemen Arab Republic Technical Assistance Project Estimated Disbursement Schedule USs '000 FY QUARTER QUARTERLY CUMULATIVE 1986 1 400 400 2 800 1,200 3 300 1,500 4 400 1,900 1987 1 300 2,200 2 300 2,500 3 300 2,800 4 300 3,100 1988 1 350 3,450 2 350 3,800 3 350 4,150 4 350 4,500 1989 1 50 4,550 2 50 4,600 3 50 4,650 4 50 4,700  - 40 - Annex VIII(a) Page 1 of 5 YEMEN ARAB REPUBLIC Cost Specialist for the Central Planning Organization (CPO) Terms of Reference 1\. The cost specialist will be one of a number of specialists to be appointed under an IDA-assisted Technical Assistance Project aimed at strengthening the capabilities of the Central Planning Organization (CPO)\. 2\. The CPO is the principal economic planning organ of the country and has among its tasks, the main responsibility, in coordination with other ministries and agencies, for preparing, monitoring, follow-up and evaluation of economic plans and annual investment programs; evaluating, approving and monitoring all investment projects; coordinating and finalizing the financing arrangements for development projects; approving all capital expenditures; and preparing and publishing national statistics\. 3\. The individual technical ministries/agencies are responsible for the preparation of feasibility studies as a basis for initial project approval by the CPO, and for the subsequent project development and implementation of approved projects\. Project evaluation, approval and monitoring by the CPO is the responsibility of the General Department of Projects and Loans (GDPL)\. The GDPL is at present receiving technical assistance from two economists funded by the Federal Republic of Germany in the economic evaluation of projects\. However, the Department lacks expertise in developing and applying cost estimating and control techniques as an input to economic evaluation and subsequent project monitoring\. 4\. The cost specialist will be required to assist and train designated staff in the GDPL in: (i) developing and applying techniques and -riteria for a cost estimating and control system related to evaluation, approval and monitoring of public sector investment projects; (ii) advising the technical ministries/agencies on streamlining, and standardizing to the extent possible, the project-related cost data to be submitted to the CPO at the various stages of the project cycle; (iii) establishing a cost data bank as a basis for cost estimating and subsequent review and approval of projects; (iv) establishing a system of reporting to the General Depart- ment of Follow-up and Investment Budget on cost and physical progress of projects;  - 41 - Annex VIII(a) Page 2 of 5 (v) coordinating with the General Department of Follow-up and Investment Budget and the Generai Department of Planning and Research in forward programming of project expenditures and related updating of the five-year public investment plan as a basis for decisions on annual programs; and (vi) coordinating with the General Department of Legal Affairs and Public Relations, which will have the advice and assistance of a contracts specialist, in identifying procurement issues and developing and applying improved procurement practices\. 5\. The cost specialist will also be required to work with other staff in identifying and advising on measures to improve coordination and complemen:arity between the key General Departments of the CPO, and in establishing a strong working relationship with other ministries\. 6\. At least three qualified national staff members will be designated to work directly with the cost specialist\. To ensure that the training of national staff is adequately addressed, the cost specialist will be required to develop a training plan, to include, as a complement to on-the-job training, periodic seminars/workshops\. Such seminars/workshops would typically be of one day's duration, at not more than three-month intervals, and include a review of progress to date and planned action for the follow- ing three months\. The arrangements for the seminars/workshops should ensure the involvement of the designated national staff members in the presenta- tion of selected topics\. Following each seminar/workshop the cost special- ist should prepare written guidelines as a basis for the subsequent actions\. 7\. The duration of the contract will be for two years, subject to three months notice of termination in writing within the period of the contract, should the performance of the specialists not prove satisfactory\. 8\. The specialist will be required to provide CPO, copy to IDA, a full progress report on his activities and achievements every six months from the time of commencement of his employment\. In addition, he will produce a final progress report covering the full pe-:od of his employment\. 9\. A review of progress will be undertaken every six months, follow- ing receipt of the specialist's report, with the participation of the Deputy Chairman of the CPO, the Director-General of the GDPL, the designated na- tional staff, the specialist, and IDA\. The review will take into account the anticipated phased completion of activities as set out in the attached schedule\. The schedule is approximate only\. It will be interpreted flexibly and may be modified as circumstances warrant\. The major consid- eration in assessing performance, however, will be the degree of progress  - 42 - Annex VIII(a) Page 3 of 5 in the training of the national staff, including the degree to which the necessary transferance of expertise is being achieved during the duration of the specialist's assignment\. 10\. The qualifications required for the appointment are as follows; (a) Good knowledge of Arabic (spoken and written); (b) Approved university degree-level qualification in civil engineering or in chartered quantity surveying; (c) Wide experience in the development and use of cost esti- mating, including criteria for varying project types-- buildings, infrastructure, aud services-and in the appli- cation of cost control systems; (d) An ability and willingness to work closely with national staff and other expatriate specialists; and (e) An ability and necessary experience to train national staff on-the-job, to identify training needs, and to formulate proposals for appropriate formal and informal training\.  - 43 - Annex VIII(a) Attachment Page 4 of 5 Schedule of Tasks Stage I - 6 months With GDPL staff: - listing the types of projects to be processed; - consulting with other specialists on current process of econo- mic evaluation of projects and determining cost data require- ments as input to evaluation; - consulting with technical ministries on current problems/delays in review process-within the technical ministries and in CPO; - determining the respective roles of the CPO and the technical ministries in project processing and monitoring; - framing procedures for project cost processing by CPO from feasibility study stage to contract award stage, and subsequent post-contract monitoring stage; - developing a cost estimating and control system; - developing standardized cost reporting forms-cost plan, cost checks, cost analysis and post-contract cost reporting; - establishing a system of reporting to the General Department of Follow-up and Investment Budget on cost and physical progress of projects\. Note: Systems and procedures should be introduced in a simplified form appropriate to the circumstances and institutional capabilities in Yemen, but designed for refinement and expansion as capabilities are developed\. Stage II - 6 months It is expected that through their involvement with the cost specialist in the develonment of the cost system and procedures, the designated counterparc national staff would be familiar with the rationale and methodologies involved a' the end of Stage I\. The primary task of the cost specialist during Stage II will be to provide on-the-job training and backstopping to the national staff in the application of the cost control system and procedures, and, in addition, to assist the GDPL;  -44 - Annex VIII(a) Attachment Page 5 of 5 - in developing a Cost Data Bank, including the mechanisms for expanding and updating the data bank\. - advising the technical ministries on the project-related cost data and the analysis of such data required as an input to the cost control system and the development of the data bank\. - in coordination with the General Department of Legal Affairs and the expatriate contracts advisor, in identifying procure- ment issues and in initiating more effective procurement prac- tices\. Stage III - 6 months It is expected that at the end of Stage II new cost estimating and control system will be operational, and national staff will have developed a capability in the application of the cost control system and procedures, but with a continuing need for on-the-job training and backstopping by the cost specialist to cope with the variety of projects to be dealt with by the CPO\. The cost specialist, in addition to performing this primary function, will also assist the GDPL in: (i) advising the technical ministries in developing more effec- tive cost planning and control procedures; (ii) implementing more effective procurement practices throughout the public sector; (iii) developing and expanding the cost data bark\. Stage IV - 6 months This stage will be one of consolidation, with training and back- stopping by the cost specialist continuing but on the basis that his services will be phased out and the national staff will have the capability to operate the established system and procedures at the end of this final stage\. Note; Throughout all stages the cost specialist will be expected to cooperate with national staff and other expatriate specialists in advising on measures to improve coordination and complementarity between the General Departments of CPO and between CPO and other agencies\.  - 45 - Annex VIII(b) Page 1 of 6 YEMEN ARAB REPUBLIC Contract Specialist for the Central Planning Organization (CPO) Terms of Reference 1\. The contract specialist will be one of a number of specialists to be appointed under an IDA-assisted Technical Assistance Proiect aimed at strengthening the capabilities of the Central Planning Organization (CPO)\. 2\. The CPO is the principal economic planning organ of the country and has among its tasks, the main responsibility, in coordination with other ministries and agencies, for preparing, monitoring, follow up and evaluation of economic plans and annual investment programs; evaluating, approving and monitoring all investment projects; coordinating and finalizing the financing arrangements for development projects; approving all capital expenditures; and preparing and publishing national statistics\. 3\. The Legal Department of the General Department for Legal Affairs and Public Relations (GDLAPR) in the CPO has a wide variety of functions (see attachment) which include: reviewing and offering legal opinions on agreements and contracts with construction firms and suppliers, bilateral and interna- tional agencies, and agreements related to technical, economic, cultural and commercial cooperation\. While staffed with qualified personnel, the Legal Department does not have the experience or expertise to address effectively the increased volume and complexity of issues arising in the review of agree- ments and contracts, as well as the complexity of procurement issues\. 4\. The contract specialist will be required to provide advice, training and backstopping to designated staff of the Legal Department in reviewing tender and contract documentation, and in developing aad applying improved documentation and procurement procedures\. In this context, working closely with the national staff and providing on-the-job training to such staff, he will be engaged in the following tasks: Stage A - About 6 Months (a) Identifying legal and other provisions which govern tender and contract documentation\. (b) Reviewing such documentation used by public agencies in YAR and classifying, by type 1/ and by agency or group of agencies, 1/ Civil works, furniture and equipment and engineering/architectural consultants, separately for infrastructure, buildings and services contracts\.  - 46 - Annex VIII(b) Page 2 of 6 those clauses which have common application and those in which there are significant variations between agencies\. (c) Reviewing available data on procurement issues and their causes and carrying out such further analysis as may be deemed necessary as a basis for recommendations on improved procurement practices\. (d) Specifically, identifying problems and weaknesses in the design and application of tender and contract documentation by public agencies\. (e) Advising on improved procedures for reviewing tender and con- tract documentation and providing guidelines for national staff\. Stage B - About 6 Months (f) Taking account of the findings during stage A and in the light of good international procurement practices preparing draft standard tender and contract documentation_7appropriate to: i) Local competitive bidding and international competitive bidding; (ii) Varying types of contracts as referred to in the footnote on the previous page; 1/ Ciii) Special agency requirements i\.e\. specifying any tender procedures or clauses which may be deemed to have special application to individual or categories of agencies (e\.g\. quasi-commercial agencies)\. (g) Providing support and advice to the Legal Department in seeking views, including those of IDA, on the proposed draft documenta- tion, and in discussions with concerned bodies, including the High Tender Committee, and public agencies concerned in the application of the proposed new documentation\. (h) Finalizing documentation, taking account of views received\. 1/ Documentation should be prepared in English for translation into Arabic by Government, and reviewed by specialist\.  - 47 - Annex VIII(b) Page 3 of 6 Stage C - 12 Months (i) Advising concerned public agencies in the application of the new documentation and related improved procurement practices\. (j) Arranging procurement seminars for concerned staff in the Legal Department and in other public agencies\. (k) Continuing on-the-job training and backstopping of staff in the Legal Department in identifying and addressing any ongoing pro- curement issues and problems, and in the application of the tender and contract documentation\. (1) Collaborating with national staff in advising the High Tender Committee on tender and contract issues\. 5\. The contract specialist will be required to support the Legal Depart- ment in coordinating closely with the General Department of Projects and Loans (and vith an expatriate cost specialist who will be appointed to advise that General Department), in identifying procurement issues, and in developing improved tender and contract documentation and procurement procedures\. The contract specialist will also be required to work with other expatriate staff in identifying and advising on measures to improve coordination and complemen- tarity between the key General Departments of the CPO, and in establishing a strong working relationship with other ministries\. 6\. At least three qualified national staff members will be designated to work directly with the contract specialist\. To ensure that the training of nationals is adequately addressed, the contract specialist will be required to develop a training plan, to include, as a complement to on-the-job training, periodic seminars/workshops\. Such seminars/workshops would typically be of one day's duration, at not more than three-month intervals, and include a review of progress to date and planned action for the following three months\. The arrangements for the seminars/workshops should insure the involvement of the designated national staff members in the presentation of selected topics\. Following each seminar/workshop, the contract specialist should prepare written guidelines as a basis for the subsequent actions\. 7\. The duration of the contract will be for two years, subject to three months' notice of termination in writing within the period of the contract, should the performance of the specialists not prove satisfactory\. 8\. The specialist, who will be answerable to the Director-General of the GDLAPR, will be required to provide CPO, copy to IDA, a full progress report on his activities and achievements every six months from the time of commence- ment of his employment\. In addition, he will produce a final progress report covering the full period of his employment\.  - 48 - Annex VIII(b) Page 4 of 6 9\. A review of progress will be undertaken every six months, following receipt of the specialist's report, with the participation of the Deputy Chairman of the CPO, the Director-General of the GDLAPR, the designated national staff, the specialist, and IDA\. The review will take into account the anticipated phased completion of the activities as set out above\. The timing of activities is approximate only\. It will be interpreted flexibly and may be modified as circumstances warrant\. The major consideration in assessing performance, however, will be the degree of progress in the training of the national staff, including the degree to which the necessary transferance of expertise is being achieved during the duration of the specialist's assignment\. 10\. The qualifications required for the apppointment are as follows: (a) Good knowledge of Arabic (spoken and written); (b) Approved degree-level qualification in civil engineering or architectural/engineering; (c) Wide experience in the development and use of tender and contract documentation for varying project types--buildings, infrastructure, and services\. (d) An ability and willingness to work closely with national staff and other expatriate specialists; and (e) An ability and necessary experience to train national staff on-the-job, to identify training needs, and to formulate proposals for appropriate formal and informal training\.  - 49 - Annex VIII(b) Attachment Page 5 of 6 Central Planning Organization Department of Legal Affairs and Public Relations Functions of Legal Department A - Preparing and formulating draft laws, decisions, and statutes of the Bureau, and offering legal opinion to the Head of the Bureau and the Deputy Director, as well as to any general department chief at the Bureau\. B - Following up litigation and arbitration procedures to which the Bureau is a partner, and preparing documents and legal memoranda thereof\. C - Studying the legal aspects of agreements and contracts pertaining to technical economic, cultural, and commercial cooperation, as well as the agreements and contracts of the consulting and executive companies, offering opinion regarding their amendment, addition, or cancellation, and participating in the relevant negotiations\. D - Studying and reviewing agreements and contracts with Arab and friendly countries, international and regional organizations, specialized funds, and project consulting and executive companies, to which the Bureau is a party\. E - Preparing, formulating, and submitting draft agreements and explanatory memoranda in cooperation and coordination with the Projects, Loans, Technical Cooperation, and Planning Divisions at the Bureau, presenting them to the Council of Ministers, and participating in their discussion with the People's Assembly\. F - Following up procedures to speed up the issuance of the legal documents with the competent authorities, to conclude agreements and begin their execution on the specified date for each, along with the preparation of signed authorization documents and a follow-up of the procedures of ratifica- tion by the competent authorities, in cooperation and coordination with the other concerned general departments at the Bureau\. G - Organizing the records of all agreements, keeping their docu- ments, and following up any amendments or additions and cond-ucting a timely updating of their data\. H - Participating with the competent authorities, including the Legal Office and the Supreme Commission for Tenders and Procurement, in setting the systems, controls, and statutes of measures and draft law pertaining to the execution and supervision of the development projects, as well as  - 50 - Annex VIII(b) Attachment Page 6 of 6 participating with such authorities in setting the standard forms of contract general and special terms, in cooperation and coordination with the concerned divisions at the Bureau in charge of following up the execution of projects\. I - Obtaining all laws, decisions, and statutes issued by the Coun- cil of Ministers for the various ministries and organizations, and keeping a current file of these documents, collecting documents pertaining to interna- tional, Arab, a-ad regional organizations, and filing all reports and decisions pertaining to :he Republic and issued by the international, Arab, Islamic conference, as well as all interntional and regional organizations\. J - Following up the discussions of the Consulting Council and the People's Assembly, as well as the various related committees, and collecting all decisions pertinent to the Bureau's functions\. K - Obtaining signature forms of the authorized officials for drawing from loans ane aids, and for signing agreements\. L - Studying customs duties and tax exemption applications with regard to the needs of the development projects and the concession applica- tions submitted by the consulting and executive companies, and offering legal opinion therecl\.  - 51 - Annex VIII(c) Page 1 of 4 YEMEN ARAB REPUBLIC Technical Assistance Specialist for the Central Planning Organization (CPO) Terms of Reference 1\. The technical assistance specialist will be one of a number of specialists to be appointed under an IDA-assisted Technical Assistance Project aimed at strengthening the capabilities of the Central Planning Organization (CPO)\. 2\. The General Department for Technical Cooperation and Conferences (GDTCC) of the CPO has among its designated tasks: a\. Reviewing grant and in-kind aid requests from the various govern- ment agencies under technical cooperation programs w-\.th UN organizations and specialized agencies, as well as bilateral, -egional and Arab organizations; consulting on the requests with other concerned General Departments in the C'O; formulating the final request proposals after review With all concerned parties and following up with the relevant aid agencies; assisting with execution and monitoring of performance, including making arrangements for hi-ing and travel; reviewing execution of agreed work plans and reporting thereon to the concerned agencies; and participating in project evaluation\. b\. In coordination with other concerned departments and agencies, participating in identifying training needs and in arrangements for training, to be funded by external aid donors; arranging for placement abroad; and monitoring the implementation of the training programs and the trainees' progress\. 3\. The technical assistance specialist will be required to provide ad- vice, training and backstopping to designated staff of the GDTCC i\. developing and applying improved procedures related to the functions of the General Department and in collaborating with the line agencies to achieve more effec- tive management of technical assistance\. For this purpose he will be engaged with GDTCC staff in the following tasks: Stage A - about 6 months (a) Identifying and clarifying current practices and procedures in CPO and in the line agencies related to the design, implementation and monitoring of technical assistance in the following areas;  - 52 - Annex VIII(c) Page 2 of 4 (i) Assignment of responsibility for technical assistance management in each agency concerned (with summary description of responsibilities); (ii) Responsibility for TA coordination at the sectoral level and at the national level; (iii) Determining scope and objectives of technical assis- tance; (iv) Framing terms of reference for TA specialists; (v) Identifying and recuiting TA specialists; (vi) Forms and conditions of specialist contracts used; Cvii) Monitoring performance of specialists; Cviii) Determining training needs and programs for local staff; (ix) Identifying sources of training; (x) Placing trainees in overseas training and monitoring attendance and progress of trainees; Cxi) Tracing the output of training programs\. (b) In the light of the findings on existing practices, developing improved procedures/practices in the management and coordina- tion of TA to be applied by the GTCC, to include procedures for coordination with the General Department of Projects and Loans, and with the Ministry of the Civil Service and Admini- strative Reform, and for coordinating technical assistance proposals from the various aid donors\. (c) Similarly, developing proposed revised procedures/practices and obtaining views of line agencies preparatory to issue by CPO of guidelines for the management of TA by line agencies\. Staae B - about 6 months (d) In coordination with line agencies, developing a register of specialists in the various sectoral and subsectoral fields, to include data on sources of expertise by country, by agency or by institution, as well as on an individual specialist basis;  -53 - Annex VIII(c) Page 3 of 4 (e) Identifying and codifying sources of training abroad, by specialization as weIl as by type and duration of training; (f) Collaborating with the General Department of Legal Affairs in standardizing conditions of contract for consultants; (g) Continuing support and training of GDTCC staff in the applica- tion and ongoing refinement of the revised procedures/practices and in assisting and advising line agencies in the application of the guidelines; (h) Collaborating with the National Institute of Public Administra- tion in conducting a seminar in Management of Technical Assis- tance for CPO, the Ministry of Civil Service and Administrative Reform and line agencies\. Stage C - 12 months Xi) Assisting GDTCC in collaborating with line agencies in identify- ing, selecting and recruiting specialists; and with line agen- cies and the Ministry of the Civil Service and Administrative Reform in arrangements for placement of trainees abroad; (j) Arranging follow-up TA seminars for concerned staff in the CPO and in the line agencies; (k) Collaborating with the Human Resources Planning Department of the CPO in establishing a system to trace the output from the training programs; (1) Collaborating with the Ministry of the Civil Service and Admini- strative Reform and the Ministry of Education in expanding records on those being trained abroad to include details of subsequent placement\. 4\. At least three qualified national staff members will be designated to work directly with the technical assistance specialist\. To ensure that the training of nationals is adequately addressed, the specialist will be required to develop a training plan, to include, as a complement to on-the-job train- ing, periodic seminars/workshops\. Such seminars/workshups would typically be of one day's duration, at not more than three-month intervals, and include a review of progress to date and planned action for the following three months\. The arrangements for the seminars/workshops should ensure the involvement of the designated national staff members in the presentation of selected topics\. Following each seminar/workshop the specialist should prepare written guide- lines as a basis for the subsequent actions\.  - 54 - Annex VIII(c) Page 4 of 4 5\. The duration of the contract will be for two years, subject to three months notice of termination in writing within the period of the contract, should the performance of the specialists not prove satisfactory\. 6\. The specialist, who will be answerable to the Director-General of the GDTCC, will be required to provide CPO, copy to IDA, a full progress report on his activities and achievements every six months from tie time of commencement of his employment\. In addition, he will produce a final progress report covering the full period of his employment\. 7\. A review of progress will be undertaken every six months, following receipt of the specialist's report, with the participation of the Deputy Chairman of the CPO, the Director-General of the GDTCC, the de-signated national staff, the specialist, and IDA\. The review will take into account the antici- pated phased completion of activities as set out above\. The timing of activi- ties is approximate only\. It will be interpreted flexibly and may be modified as circumstances warrant\. The major consideration in assessing performance, however, will be the degree of progress in the training of the national staff, including the degree to which the necessary transferance of expertise is being achieved during the duration of the specialist's assignment\. 8\. The qualifications required for the appointment are as follows; Ca) Good knowledge of Arabic (spoken and written); (b) Approved university degree level qualification, preferably with management/administration as a major specialization; Cc) Wide experience in the successful management of technical assistance in developing countries; (d) An ability and willingness to work closely with national staff and other expatriate specialists; and (e) An ability and necessary experience to train national staff on-the-job, to identify training needs, and to formulate proposals for appropriate formal and informal training\.  - 55 - Annex VIII(d) Page 1 of 4 YEMEN ARAB REPUBLIC Central Planning Organization Senior Adviser/Computer Specialist for the General Department of the Data Bank and Central Information Terms of Reference 1\. The senior adviser/computer specialist, together with two technical advisers (computer systems analysts), will be appointed under an IDA-assisted Technical Assistance Project aimed at strengthening the capabilities of the General Department of the Data Bank and Central Information of the Central Planning Organization (CPO)\. 2\. CPO is the principal economic planning organ of the country and has among its tasks, the main responsibility, in coordination with other ministries and agencies, for preparing, monitoring, follow up and evaluation of economic plans and annual investment programs; evaluating, approving and monitoring all investment projects; coordinating and finalizing the financing arrangements for development projects; approving all capital expenditures; and preparing and publishing national statistics\. 3\. The General Department of the Data Bank and Central Information (GDDBCI) has a wide variety of functions which include; creating and main- taining a National Data Bank for the planning, monitoring, and evaluation of national development plans; providing data processing services to meet the internal operational requirements of CPO as well as the Prime Minister's Office, the Ministry of Finance, and the Central Bank of Yemen; and providing support to other ministries mainly through training and distributing interna)ly developed software packages but also providing a data processing service on a selective basis\. While the GDDBCI has a well-established structure and ade- quate staff at this stage, its capabilities to process the range of priority data needed have not been developed\. These include: foreign trade data, the 1986 national population census, the 1986 agricultural census, an external debt reporting system, and a payroll/personnel system\. Further needs include: project monitoring, budget preparation and monitoring, disbursement processing, etc\. 4\. The senior adviser will coordinate the activities of the two technical advisers and will be required to provide advice and training to GDDBCI senior staff in developing short-term and a long-term work programs, specifying tasks to be performed, staff assignments, and schedules, to guide GDDBCI staff in accomplishing its designated functions\. In this context, working closely with the GDDBCI senior staff, he will be engaged in the following tasks;  - 56 - Annex VIII(d) Page 2 of 4 Stage A - About 6 months (a) reviewing the scope and flow of data and existing data records processed by the General Departments of Planning, Projects, Follow-up and Investment Budget, Statistics, and GDDBCI paying particular attention to the inter-departmental and interagency coordination of data flow and needs\. (b) identifying potential streamlining and coordinating of data as a basis for future computerization\. Cc) advising and assisting GDDBCI senior staff in developing a two-year work program containing tasks to be performed and esti- mated schedules\. Cd) preparing a user requirements study and a system specifications document for the computerization of a selected priority applica- tion\. (e) establishing operating procedures and guidelines for the exist- ing computerized application systems at GDDBCI\. Cg) preparing an overall training program for GDDBCI staff\. Stage B - About 6 months (h) carrying out an inhouse training program on documentation and systems analysis\. Ci) training GDDBCI staff in the updating of system documentations of the existing computerized application systems at GDDBCI\. (j) continuing the identification process of the current operations within the General Departments of Projects, Follow-up and In- vestment Budget, Statistics, and GDDBCI aud establishing operating procedures and guidelines to streamline operations\. (k) training selected national staff on how to conduct a user requirements study of a selected application system\. (1) training selected national staff on the preparation of a system specifications document\. Stage C - About 12 months (m) continuing on-the-job training and backstopping of senior staff in GDDBCI in project management, systems documentation standard, and systems analysis techniques\.  - 57 - Annex VIII(d) Page 3 of 4 (n) continuing the training of GDDBCI senior staff in identifying new application systems and in the preparation of user require- ments and system specifications documents\. (o) monitoring the progress of the overseas training program for GDDBCI staff and updating the training program if needed\. 5\. The duration of the contract will be for two years, subject to three months' notice of termination in writing within the period of the contract, should the performance of the adviser not prove satisfactory\. 6\. At least three qualified national staff menbers will be designated to work directly with the Senior Adviser/Computer Specialist\. To assure that the training of nationals is adequately addressed, the Senior Adviser will be required to develop a training plan, to include as a complement to on-the-job training, periodic seminars/workshops\. Such seminars/workshops would typi- cally be of one day's duration, at not more than three-mnth intervals, and include a review of progress to date and planned action for the following three months\. The arrangements for the seminars/workshops should ensure the involvement of the designated national staff members in the presentation of selected topics\. Following each seminar/workshop, the technical adviser should prepare written guidelines as a basis for the subsequent actions\. 7\. The Senior Adviser, who will be answerable to the Director-General of the GDDBCI, will be required to provide CPO, copy to IDA, a full progress report on his activities and achievements every six rmonths from the time of commencement of his employment\. In addition, he will produce a final progress report covering the full period of his employment\. 8\. A review of progress will be undertaken every six months, following receipt of the technical adviser's report, with the participation of the Deputy Chairman of the CPO, the Director-General of the GDDBCI, the designated national staff, the senior adviser, the technical advisers, and IDA\. The review will take into account the anticipated phased completion of the activi- ties as set out above\. The timing of activities is approximate only\. It will be interpreted flexibly and may be modified as circumstances warrant\. The major consideration in assessing performance, however, will be the degree of progress in the training of the national staff, including the degree to which the necessary transference of expertise is being achieved during the duration of the adviser's assignment\. 9\. The qualifications required for the appointment are as followsz (a) Approved qualification as a computer systems analyst;  - 58 - Annex VIII(d) Page 4 of 4 (b) Wide experience in the management and development of on-line computerized application systems and in the planning and manage- ment of computer centers; (c) Excellent organizational and analytical skills; (d) An ability and willingness to work closely with national staff and other expatriate specialists; (e) An ability and necessary experience to train national staff on-the-job, to identify training needs, and to formulate proposals for appropriate formal and informal training; and (f) Knowledge of Arabic is desirable\.  - 59 - Annex VIII(e) Page 1 of 4 YEMEN ARAB REPUBLIC Central Planning Organization Technical Adviser for the General Department of the Data Bank and Central Information Terms of Reference 1\. The Technical Advisers, together with a Senior Adviser/Computer Specialist, will be appointed under an IDA-assisted Technical Assistance Project aimed at strengthening the capabilities of the General Department of the Data Bank and Central Information of the Central Planning Organization (CPO)\. 2\. CPO is the principal economic planning organ of the country and has among its tasks, the main responsibility, in coordination with other minis- tries and agencies, for preparing, monitoring, follow up and evaluation of economic plans and annual investment programs; evaluating, approving and monitoring all investment projects; coordinating and finalizing the financing arrangements for development projects; approving all capital expenditures; and preparing and publishing national statistics\. 3\. The General Department of the Data Bank and Central Information (GDDBCI) has a wide variety of functions which include; creating and main- taining a National Data Bank for the planning, monitoring, and evaluation of national development plans; providing data processing services to meet the internal operational requirements of CPO as well as the Prime Minister's Office, the Ministry of Finance, and the Central Bank of Yemen; and providing support to other ministries mainly through training and distributing inter- nally developed software packages but also providing a data processing service on a selective basis\. While the GDDBCI has a well-established structure and adequate staff at this stage, its capabilities to process the range of priority data needed have not been developed\. 4\. The Technical Advisers w\.ill be required, with the :oordination of the Senior Adviser/Planner, to provide advice and training to GDDBCI staff in developing their technical skills\. In this context, working closely with the Senior Adviser/Planner, they will be engaged in the following tasks: Stage A - About 6 months (a) providing on-the-job training to GDDBCI technical staff on the conducting of feasibility studies to convert manual systems into computerized operations\. (b) providing on-the-job training to GDDBCI technical staff on the preparation of a user requirements study and a system specifica- tions document for the computerization of a selected priority application\.  - 60 - Annex VIII(e) Page 2 of 4 (c) providing on-the-job training to GDDBCI technical staff on data- base design techniques, teleprocessing monitor software, on-line programming methodology, telecommunications, networking, and advanced COBOL programming\. Stage B - About 6 months (d) advising and training GDDBCI technical staff in implementing a priority application system\. (e) carrying out an in-house training program on systems operations documentation and systems operations\. (f) providing on-the-job training to GDDBCI technical staff on proj- ect management, application systems development techniques, system integration techniques, test data design, acceptance tests, and parallel production run while implementing the priority application system\. Stage C - About 12 months (g) continuing the on-the-job training to GDDBCI technical staff in project management, application systems development techniques, system integration techniques, test data design, acceptance tests, and parallel production run while implementing the priority application system\. (h) providing on-the-job training and backstopping of GDDBCI tech- nical staff in systems documentation standard, and systems analysis techniques\. (i) continuing the training of GDDBCI technical staff in identifying new application systems and in the preparation of user require- ments and system specifications documents\. (j) assisting the Senior Adviser in monitorinrg the progress of the oversea training program for GDDBCI staff\. 5\. The duration of the contract will be for two years, subject to three months' notice of termination in writing within the period of the contract, should the performance of the adviser not prove satisfactory\. 6\. At least three qualified national staff members will be designated to work directly with each technical adviser\. To ensure that the training of nationals is adequately addressed, the technical advisers will be required to develop a training plan, to include as a complement to on-the-job training,  - 61 - Annex VIII(e) Page 3 of 4 periodic seminars/workshops\. Such seminars/workshops would typically be of one day's duration, at not more than three-month intervals, and include a review of progress to date and planned action for the following three months\. The arrangements for the seminars/workshops should insure the involvement of the designated national staff members in the presentation of selected topics\. Following each seminar/workshop, the technical advisers should prepare written guidelines as a basis for the subsequent actions\. 7\. The technical advisers, who will be answerable to the Director- General of the GDDBCI, will be required to provide CPO, copy to IDA, a full progress report on their activities and achievements every six months from the time of commencement of his employment\. In addition, they will produce a final progress report covering the full period of their employment\. 8\. A review of progress will be undertaken every six months, following receipt of the technical advisers' report, with the participation of the appropriate Deputy Chairman of the CPO, the Director-General of the GDDBCI, the designated national staff, the senior adviser, the technical advisers, and IDA\. The review will take into account the anticipated phased completion of the activities as set out above\. The timing of activities is approximate only\. It will be interpreted flexibly and may be modified as circumstances warrant\. The major consideration in assessing performance, however, will be the degree of progress in the training of the national staff, including the degree to which the necessary transference of expertise is being achieved during the duration of the adviser's assignment\. 9\. The qualifications required for the appointments are as follows; (a) Approved qualification as a computer systems analyst; (b) Wide experience in the development of computerized application systems; (c) Good working knowledge of a data base management system software package, such as, TOTAL and IDMS; (d) Good working knowledge of a teleprocessing monitor software package, such as, NCR TRAN-PRO, IBM CICS, etc\.; (e) Good working knowledge of programming languages, COBOL and FORTRAN; (f) An ability and willingness to work closely with national staff and other expatriate specialists;  - 62 - Annex VIII(e) Page4os4 (g) An ability and necessary experience to train national staff on-the-job, to identify training needs, and to fo;:eulate proposals for appropriate infomal and formal training; and (h) Knowledge of Arabic is desirable\.  - 63 - Annex IX Page 1 of 5 General Department of Data Bank and Central Information Computer Systems Introduction 1\. The existing computer facilities of the GDDBCI consist of an NCR Criterion 8545 computer system, a Wang VS 80 computer system, and a Wang OIS-140 computer system\. The NCR system is mainly used for the tabulation of government statistics\. The two Wang systems are used in office automation and word processing applications\. Existing Computer Systems 2\. The existing NCR computer system consists of the following components: a\. One NCR Criterion 8545 Central Processing Unit with one-million characters of memory; b\. Two NCR-658 di-sC drives and controller with a total of 400-million characters of storage; C\. One NCR-656 disc drive with 9-million characters of storage; d\. Three NCR-634 tape drives and controller; e\. One NCR-648 printer at 1200 lines per minute; f\. One NCR-680 card reader at 600 cards per minute; g\. Six NCR-7500 key-to-cassette dats entry stations (five English/Arabic; one English); h\. One NCR-7300 cassette-to-tape spooler; i\. One NCR-376 Keypunch machine; and j\. Six NCR-7900 model 1 CRT terminals\. 3\. The Wang VS 80 computer system consists of a Wang VS 80 CPU with six CRT workstations and three printers\. It will not have Arabic capability initially\. The Wang OIS-140 system consists of eight Arabic/English work- stations and three printers\. Application Systems 4\. The existing application software systems utilize a batch processing mode\. No accounting or other major data processing application system is at present implemented on this system\. The following high priority application  - 64 - Annex IX Page 2 of 5 systems have been identified and need to be implemented as soon as possible; foreign trade data, the 1986 national population census, the 1986 agriculture census, an external debt reporting system, a payrolllpersonnel system, project monitoring, budget monitoring and preparation, and disbursement processing\. Most of these systems are to be implemented using online, real-time technology\. The real-time, online mode software would provide the CPO management with greater flexibility in getting the needed information immediately through computer terminals\. To permit the implementation of these application systems\. the existing hardware must be upgraded first\. Additional Equipment 5\. The list of additional hardware items required in upgrading the existing computer systems is attached (pp\. 3-5 of this Annex)\. Procurement 6\. The most critical considerations in procuring the new equipment are; (a) compatibility with the existing equipment; and (b) the availability of servicing and spare parts\. 7\. The manufacturers of the existing equipment (NCR and Wang) are the only manufacturers which produce equipment which is compatible with the exist- ing installations\. In addition, the two manufacturers concerned are the only manufacturers who have sales, services, and spare parts facilities in YAR\. Service coutracts exist for the existing installations snd are providing satisfactory arrangements for maintenance, repairs, and spare parts\. Both companies have adequate service personnel and spare parts inventory to meet the requirements of the proposed expanded installations\. 8\. Accordingly, the equipment would be procured by negotiations with the two manufacturers concerned, having regard to the pricing for such equipment in the Middle East and the size of the proposed installations\. At the same time, new service contracts will be negotiated\. 9\. In addition to the computer equipment, proNision is also included for an uninterruptible power supply system for the computer installations at an estimated cost of US$300,000\. The availability of servicing and spare parts for this system is an absolute requirement\. In the circumstances, and as the nature of the work involved and its size, would not in any event attract over- seas competition, the system will be procured through local bidding\. At least three suitable firms are available for bidding locally to ensure satisfactory competition\.  mIemenIfftat ion CPU uPgrade from NCR 8545 to 8555 $ 50,000 The CPU must be upgraded to provide 4/I5 and 2 million bytes of additional onough processing umer for on-line wemory\. pragraming\. 2 4 NCR 658 ODic drives (200 K8 capacity) t 250,000 The additional disc drives are rneded (2) 4/8S and related cables to Central to support on-Itne data base starase (2) 9/85 Processor (CPU\. and prooraors training\. 3 1 NCR 647 Nigh Speed Printer at (2000 lPM) $ 1800000 The high-speed prnter fis used to produce 9/85 and related interface hardware, the statistical reports and progromners training\. 4 21 NCR 7900 fodel 3 terminals with cables $ 210,000 These are terminals that will be plf\.ed 16) 4/85 and short-distance modems\. in user departieqts for date entry and (10) 4/06 inquiry purposes\. (5) 12/86 s I NCR 621 multiplexor and dual $ 100l 000 This Is the device that interfaces the 4/05 asynchroncous adaptors\. terminals to the CPU\. b 6 NCR 6221 Arabic-English Matrix t 60,000 Printers are to be located In user (21 9/8O printers and cables\. departments for reports printing\. (3) 4/86 7 IS Rack-mount modeun and free-standing $ 30\.000 These devices art needed to connect 4/86 6 modems at 1200 bps for remote teminals and printers located in renote terminals and prlnters, sites (e\.g\. Prim hinistor's office) to CPO's computer\. H 30 NCR 7900 Hodel 1 terminals and related * 1500o0o Thmes teminals are used by progrwers (10) 9/45 multiplexor interface electronics, to enter nd tost program and for (IO) 9/86 training use, (10) 9/87 9 4 Personal computers and related $ 60,000 These are mainly tran1ing use\. Oiaer 4/I6 software\. bOefits are smll-scale projects in spreadsheet applications, economics modelling\. etc\. 10 i Wang OIS-H4O Word Processing system t dO\.000 Thoeo dovices would Increase the word 10/85 workstations and cables\. processine capability of CPO and Prime "inuster's office\. Othr benefits are olectrontc nl, Inter-office documents transferrins, etc\. 11 5 Wang OIS-140 Word Processing System $ 70\.000 * 10/85 printers and cables\. o 17 2 Wang OIS-140 Word Processing system $ 100,000 6 U 10/6S disc drives (S0 HSI)\. 13 I Projector/Audio/Video * 5\.000 Use for training progrw 9m5  List afrolmma Xrwle ntat Ion LI\.6I QuaiLtJ\.Y __ O\.[zLcrImttoi___ L4Ur1 2s ,* Ua Iktta1 lar 14 1 A conplete system of uninterruptible $ 300,000 DUO to unreliable power sw ply sources 9/a5 power supply (UMS system for the this systm would allow orror-faCO NCR computer, Ian# Ward Processing systcc 0eratioms Pot* that on-line system\. syst should not bh subject to froquent pr fails a datah\. can be damed easily\. iS 1 NCR TRAN-PRO teleprocessing mnitaring $ 100,000 ThIwU softwsre packags are reqUired to 4165 software package using to control the control a networ of terminals nd printers network of terinals and printers and Wd on-line database retrieval\. TOTAL database manageent system software package\. TOTAL \. \. \. \. \. * \. , * \. * \.l* j n 0% ol Ph II  - 67 - Annex rX Attachment Page 5 of 5 Uninterruptible Power Supply Coaponents 1\. Diesel Electric Generator 250 IVA 220V/330V, 50 Hz Mains-failure operation at site Sans'a 2\. UPS for NCR Computer, 30 KVA input 220/380V 50HZ and output voltage of 120J230V, 3-phase\. 50 Hz Suitable for 15 min\. operation\. 3\. UPS for Wang Computer, lOkV& input 220/380V 50 HZ; output voltage 2201380V\. 3-phase, 50 Hz, Suitable for 15 =in\. operation 4\. Main Di:stribution Board in Powerstation consisting of: Ca) Main incoming MCCB 500 Amps 3-phase (b) Computer outgoing MCCB, 250 Amps 3-phase Cc) CPO outgoing MCCB 250 Amps, 3-phase -d) Spare outgoing MCCB 125 Amps, 3-phase Ce) Spare outgoing MCCB 63 Amps, 3-phase Cf) Complete with KWH Neter - Voltmeters, Selector Switch Ammeters\. Current Transformers, etc\. 5\. Sub-Computer Distribution Board for NCR additional equipment 6\. Sub-Computer Distribution Board for Wang equipment 7\. Computer Main Distribution Board in Battery Room 8\. Underground pover Cable required (a) from power station to CPO 4x185mm2 (b) from power station to Computer 4x185m2 (c) from transformer to p\.s 4x240=2 (d) new cables from Battery room to Computer 9\. Earthing system for the power station 10\. Repairing broken tiles, etc\., with replastering & painting 11\. Installation & Comuissioning Charges including (a) Installation & commissioning of all quoted itens from lines 1 to 10\. (b) Shifting of all Distribution boards & 33 KVA 380/220 Transformer to the Battery room\. tc) Re-connection of all airconditioners including 3 nos\. 22 tons ACs\. 12\. Voltage Stabilizers 13\. Cables  ISLAMIC 44 1z4x;#v¢: Z IRAO REP OF A!I4AiN11AN IRAN \. YEMEN ARAB REPUBLIC \.QA F Fnl\.a<>-ICW A^"5N IDA-ASSISTED PROJECTS BY SECTOR PROJECTS: C) I A R A L~~~~~~ I A ,,\.'~~~~~,VJ, ~Agri'culturail SAUDI ARABIA 'R Cooperative and Agricultural Credit Bank of (~~~~~~~~~~~~~~~~~~~~~~~CACB) U Agricultural Research Centers E \ \ ,! 1 s S [: _ PDemonstration Farms AI,E A r \. Grain Starage T' 15 } 4 Fisheries *\.~~~~~~~~~~~MAL IA ® ~~~~~~~~~~~~~~~~~~~Fish Markets £rHIoPIA|? -- \ ij ,/s \\. '~\.~~'\.v-t J \.'IL Industrial EFMIOPIA \.7 ~\.*\. * Health A Education / \. \.* ~~~~~~~~~~~~~~X -7 Highways C cAA!~~~~~~~~YB A \. I - - ~~~~~~~~~~~Highway Maintenance \.2 :7 X 2---J @ 4 Power Distribution Areas -\ - S~~~~~~~~~~~~~~~~~~~~~~ Power Stations I I ~~~~~~~~~~~~~~~~~Transmission Lines r - -' V1*e111 Geothermal SupyWtrExploration \g--~~~~~~~~~~~ L- p[) Urban Development ir_ / \.^\ , \ \gn ,' EXISTING FEATURES\. * g X 0 \ J-2\ ot ' ' Primary Roads I - > / \ } 9 \ Secondory Roads iJt I , ! ,, b { X U | \.,>,>-\. t > \. ' ' Airports Z~iugh I 4, Parts I I - ~~~~~~~~~~~~Wadis I\. \ * S i1 3 Governofote Copitals * I ) , t L - fA * Nolional Copitals I r, - -,} - -' \ zv 7asl o# \ Provincial Boundories / ( t S)nwa% , \. \. -- International Boundaries X\. ~ ~ ~ \ *-/ I ~~~~~~~~~~~~~~~~1500 7,,1*e:~~~ K %-~j-i / (-A-300 S \. \ ~< 1X1 {t) 15 / I iAL MAHWEIT M/i E irdud~~~~~~~~~~~~~~~~~~~~ RED SEAI 'Rjia\  AA 4 w, T, 0 20 40 60 KILOMEIEIRS RED SEA ` \ /L, \. S // ~ ~~~~~~~ ", PHOllu -\. trs ,, I * 'L'~~~~~A|rlV*A'\.Cre{ 89|324 24' 'Fm jecit Coffy3Mted ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~FISCAL YEAR PROJECT APPROVED H righways 1 1972 / ihGam Ag icullture 1973 * Educotion I1 t974 ~~~~~~~~~~ *~~~~~~~~~~~~~~~~~~ Sana'a Water Supply I 1974 * Small rIndugry Oovoloprmnt 1974 Hoybon #~~~~~~~~~ Scuihern UPIamds Rural Development 1 1975 PEOP/ E E bIh\. o HRghwa\. 1 \. : \. 1975 * iodadoid Water Supply & Sewerage 1975 (:~~P '~~ EM E * ~Educat,cn ri 1976- G roin Storage & Processing 1976 Livestock Credit £ Ptoeia17 Soan'a Wolef supply U1 I Seweraqe 1977 Part DJ*kNt I 1977 ~- ) on b becl 814b d cny er nny er K dTiham Agriculturs U 1971 / Pojier 0istribyijto 1979 Tihamo aAgculaurn M *~ 1979 ~~~~~~~~'I r~~~~~~~~~~~~~~~~~~~~~~~~~~~~ihama AgrqIculture UI 1950 / ~~~~~~Artisoanl Fisheries 1 2980 SoutlWetn UPlands Rural Demlop mant U1 1951 Power It RegWi foca Ienflcneeon 1981 Industrial Development 2952 I' 7 ~~~~~~~~~~~~~~~~~~ADEN Education 17 1912 \. Urban'1 1982 Bob el Mondeb -'Agricultural Rewarch & Developmenit 196\.2 tltghways LV 1952 Petroleum" a Geothermal 2982 Health 1953 \tp ~~~~~~~~~~~~~~~~~~~ ~ ~ ~ ~~~~~~~~~~Agricultural Credit 7 19&3 * !du~~~atlon V ~~1953 Poe M2943- GUIF OF ADENI ConicalHighlands A Icultural Development 93 fluemep iesbeenprepredliy he Ve*~earve stR eaiue, lo Muccewverw ofHighwaysl V'1954\.: VW adws wd i exchA'e4'y Ac, to krpeWe um ofe FM 1984 ~ Geothermal Eupiorotian 1954 /~~~~ - I~(S ~ \. I Fwe Carpwortn\. The dwenNeueedend 01ebcMdui1eefo an 11W mapdonot 4 \.4 mwifr orft#tp OI rho 1141*B8* wafeiayilaslFnr C 50g4pp\.J on me MO91 etituW of arny terdafy or NVt etoreeniaroarW or ecc,letce of eu~A boutderle

APPROVAL

P009432

Documat of The World Bank Fo OMCaL USE ONIU Raporo 12120 PERORMANCE AUDIT REPORT PEOPLE'S REPUBLIC OF BANGLADESH ENERGY EFFICIENCY AND REFINERY REHABILITATION PROJECT (CREDIT 1357-BD) JUNE 30, 1993 MICROGRAPHICS Report No: 12120 Type: PPAR Operations Evaluation Department This document has a restricted distribution and may be used by recipients only in the performance of ther official duties\. Its contents May not otherwise be disclosed without World Bank satherization\. FISCAL YEAR GOB, BPC, ERL: July 1 - June 30 CURRENCY EQUIVALENTS Currency Unit Taka (T9) 100 Paisa - 1\.0 Taka US$ 1\.0 - 23\.0 Taka (as of October 1, 1982) 35 Taka at credit clo&ing CONVERSION PACTORS 11 Liquid Fuels (Cubic meters) Physical Unite Per Toe / LPG 1\.85 Gasoline 1\.38 Jet Fuel 1\.34 Kerosene 1\.25 Diesel Oil 1\.19 Fuel Oil 1\.06 Coal (ton) 1\.5 Natural Gas (MCF) 43\.57 1/ Unless otherwise stated, all units are on metric system basis\. 2/ 1 toe - 41\.0 million British Thermal Unit (BTU)\. ABBREVIATIONS AND ACRONYMS ADB - Asian Development Bank ADP - Annual Development Plan bbl - barrel BOC - Burmah Oil Corporation (United Kingdom) BPC - Bangladesh Petroleum Corporation BUET - Bangladesh University of Engineering and Technology EMu - Energy Monitoring Unit ERL - Eastern Refinery Limited ESPC - Energy Study and Planning Cell, Planning Commission GOB - Government of Bangladesh LPG Liquified Petroleum Gas MCp Thousand Cubic Feet toe - ton of oil equivalent FOR OFFICIAL USE ONLY THE WORLD BANK WashIngton\. D\.C\. 20433 U\.S\.A\. Office of Director-General Operationh Evaluation June 30, 1993 MEMORA1NDUM TO THE EXECUTIVE DIRECTORS AND TMI PRESIDET SUBJECT: Performance Audit Report on Bangladesh Energy Efficiency and Refinery Rehabilitation Project (Credit 1357-BD) Attached is the "Performance Audit Report on Bangladesh - Energy Efficiency and Refinery Rehabilitation Project (Credit 1357-3D)" prepared by OED\. The audit confirms the success of the major project component, which was to reduce the cost of imported petroleum by rehabilitating the country's one major refinery and preparing a study for optimum de-bottlenecking process modifications\. The refinery is now operating on a safe and stable basis and a follow-up de-bottlenecking investment which is expected to make the refinery economically and financially viable, is underway\. The energy conservation component was less successful, primarily because, in the absence of a regulatory framewk for energy conservation, there has been little incentive for state-owned industries to invest in energy saving technology\. The audit also confirmed that the diffusion of procurement authoz ity over a number of agencies greatly increases the time required to implement a project\. The audit found that the project results were satisfactory, the institutional strengthening was effective and the project benefits are likely to be sustainable, which is consistent with the findings of the PCR\. Attachment This docuent has a restricted distribution and may be used by recipients onty in the performance of thefr official duties\. Its contents may not otherwise be disclosed without WorLd Bank authorization\. FOR OFFICIAL USE ONLY PERFORMANCE AUDIT REPORT PEOPLE'S REPUBLIC OF BANGLADESH ENERGY EFFICIENCY AND REFINERY REHABILITATION PROJECT (CREDIT 1357-BD) TABLE OF CONTENTS Paae No\. Preface \. u\. \. a\. y \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. i Basic Data Sheet \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. 11 Evaluation Summary \.v I\. BACKGROUND \.eo \. 1 II\. PROJECT OBJECTIVES, DESIGN AND PROCESSING \. \. \. \. \. \. \. \. \. \. \. 1 A\. Project Objectives \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. 1 B\. Project Scope \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. 2 C\. Project Cost \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. 3 D\. Project Design and Processing \. \. 4 III\. PROJECT IMPLEMENTATION \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. 5 IV\. PROJECT RESULTS \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. 8 V\. PROJECT SUSTAINABILITY \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. 10 VI\. FINDINGS AND LESSONS \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. 11 ANNEX 1 Comments from the Borrower \. \. \. \. \. 14 This document has a restricted distribution and may be used by recipients only in the performance of their offcial duties\. Its contents may not otherwise be disclosed without World Bank authorization\. i PERORMANCE AUDIT REPORT PEOPLE'S REPUBLIC OF BANGLADESH ENERGY EFFICIENCY AND REFINERY REHABILITATION PROJECT (CREDIT 1357-BD) PREFACE 1\. This is a Performance Audit Report (PAR) for the Energy Efficiency and Refinery Rehabilitation Project in Bangladesh, involving Credit 1357-BD (US$28\.5 million)\. The principal objectives of the Credit were to assist Bangladesh to: (i) reduce the cost of imported petroleum; (ii) initiate energy conservation activities; and (iii) carry out the necessary preparatory work to capture the foreign exchange potential of its natural gas resources\. The Credit was approved on May 10, 1983 and closed on December 31, 1989, three years behind schedule\. The Credit was 59% disbursed\. 2\. The PAR is based on the Project Completion Report (PCR) prepared by the South Asia Regional Office of the Bank and issued on June 12, 1992, Report No\.10702, the Staff Appraisal Report, sector and economic reports, the Credit documents, study of the project files, and discussions with IDA staff\. An OED mission visited Bangladesh in July 1992 and discussed the effectiveness of IDA's assistance with the relevant authorities\. 3\. The PCR provides a satisfactory account and assessment of the project experience and discusses the performance of IDA, the Government and the executing agencies\. The PAR elaborates on particular aspects such as the economic and financial returns of the project, its sustainability and lessons learned which might be of use for other industrial and energy related projects\. 4\. Following the standard procedures, copies of the draft PAR were sent to the Government for comments\. Comments were received and are reflected in the Report and attached to the PAR as an Annex\. ii PERFORMANCE AUDIT REPORT PEOPLE'S REPUBLIC OF BANGLADESH ENERGY EFFICIENCY AND REFINERY REHABILITATION PROJECT (CREDXT 1357-BD) BASIC DATA SHEET KEY PROJECT DATA (Amount in SDR million) As of December 31, 1992 Credit Original Disbursed Canceled Repaid Outstanding 1357-BD 26\.5 13\.087 13\.413 0\.00 13\.087 CUMULATIVE ESTIMATED AND ACTUAL DISURSEMENTS 1984 1985 1986 1987 1988 1989 1990 1991 US$ million Appraisal Estimate Yearly 7\.5 13\.3 6\.5 1\.2 Cumulative 7\.5 20\.8 27\.3 28\.5 Actual Yearly 0\.3 1\.7 4\.4 3\.1 4\.7 1\.9 0\.7 Cumulative 0\.3 2\.0 6\.4 9\.5 14\.2 16\.1 16\.8 16\.8 % Actual/Appraisal 4\.0 9\.6 23\.4 33\.3 ii STAFF INPUTS (Staff Weeks) M2 FY83 Y ft FY87 FY8 Y8 FY90 FY91 FY92 Preappraisal 4\.3 Appraisal 31\.3 51\.4 Negotiations 4\.4 Supervision/PCR 0\.5 9\.0 19\.6 10\.9 6\.1 8\.9 3\.6 5\.2 5\.8 1\.9 Other 0\.1 4\.4 Total 35\.7 60\.7 9\.0 19\.6 10\.9 6\.1 8\.9 3\.6 5\.2 5\.8 1\.9 MISSION DATES Missions Number Days Specali- Stage of of in sation Project Cycle Houth/Year Persons Field jerasented Ratia Remarks Through May '82 5 12 Economist - Appraisal Financial Technical August '82 4 6 Economist - Financial Technical February '83 3 6 Economist - Financial Technical Supervision November '83 3 Economist 2 Procurement Related Financial Technical June '84 1 Technical 2 Procurement Related February '85 2 Financial 2 Procurement Related Technical July '85 2 Financial Technical August '86 1 Technical March '87 2 Technical December '89 2 Technical 2 Procurement Related Financial iv PROJECT TIMWTABLE\. LM Date Planned Actual Identification - October 1981 Appraisal Mission may 7, 1982 May 7, 1982 Credit Negotiations January 193 March 1983 Board Approval March 1983 Nay 10, 1983 Credit Signature - may 16, 1983 Credit Effectiveness March 23, 1984 Credit Closing December 31, 1986 December 31, 1989 Credit Completion June 30, 1987 June 30, 1990 RELATED BANK CREDITS Credit Title Purpose Year of Approval Status Second Gas Development Gasfield 1985 OWp438 Project (Cr\. 1586-BD) Appraisal and Development Refinery Modification As implied 1986 0O4&ag and LPG Recovery and by Title Distribution Project (Cr\. 1749-BD) v PERFORMANCE AUDIT REPORT BANGLADESH ENERGY EFFICIENCY AND REFINERY REHABILITATION PROJECT (CREDIT 1357-BD) EVALU_TION SUMMARY Introduction and some critical procs units had been shut down for months\. The 1\. Bangladesh has no oil reserves, refinery vas still in good enough no economically exploitable coal, condition so that rehabilitating it very limited hydropower potential, would be economically attractive, but already largely exploited, and a it had, nevertheless, deteriorated to dwindling base of biomase fuels\. the point where operating it in its Less than a third of the total energy present status was a safety hazard consumption was derived from (PAR, para\. 2)\. commercial fuels, of which some 522 was supplied from imported petroleum Obiectives and petroleum products, 40% from indigenous natural gas, 6% from 3\. The main objectives of the imported coal, and 22 from hydro- rroject were to assist Bangladesh to: electricity\. At the time of project (i) reduce the cost of imported appraisal, the oil import bill was petroleum products (by maintaining a estimated to have reached US$543 viable refinery); (ii) initiate million or about 872 of export energy conservation activities; and earnings\. About 60% of Bangladesh's (iii) carry out preparatory work to petroleum fuel requirements was capture the foreign exchange processed in the Eastern Refinery potential of the country's Limited (ERL) in Chittagong\. The dubstantial natural gas reserves\. refinery was built in 1968 and its The main project component was the process configuration did not provide refinery rehabilitation and a study flexibility to adjust the yield on process modification\. Four other pattern to the changing demand components covered engineering and profile for petroleum products\. The technical assistance on areas of: (a) result of the imbalance between energy conservation, (b) developing refinery yield and demand was the accounting and management information export of excess products at a loss systems, (c) feasibility of gas-based and the importation of middle export oriented industries, and (d) distillates (PAR, para\. 1)\. research and development on the use of gas-derived methanol for transport 2\. The ERL refinery was in an and for residential households (PAR, acute state of disrepair due to paras\. 4 and 5)\. inadequate preventive maintenance\. Several critical items of ancillary Implementation-EMerience equipment had corroded to a level requiring major repairs or 4\. The project, particularly the replacement; process pipelines as refinery component, was well well as storage tanks were leaking prepared\. Implementation took twice vi the time estimated at appraisal and follow-up IDA operation\. Training the Credit closing had to be extended and technical assistance for three times, each time for one year\. accounting and management information Main reasons for the delays were: (a) system and energy audits were GOB Credit approval procedures and effectively implemented\. Under the time needed for approval of energy conservation components, tens procurementl (b) the size, diversity of audits were conducted on various and complexity of the project industrial and power plants\. components; and, (a) the lack of However, energy savings investments knowledge of IDA procedures on part implemented as a result of these of most of the counterpart agencies audits were but a very small fraction that implemented the technical of the available potential\. A study assistance project components (PAR on the optimization of a national gas paras\. 7,' 8 V 9, 11, 12 and 14)\. grid provided models which could not \. I,/be fully utilized due to inaccuracies 5\. Mnjor cost under-runs resulted of data provided on gas supply and in cancellation of SDR13,412,769\.73 demand\. The other two project equivalent to about 50% ' of the components, namely studies on gas original amount of the Credit\. The based industries and use of methanol savings arising from cancellation of were ill conceived and did not yield a few elements of tae project and useful results (PAR9 pare\. 30 and from depreciation of the dollar 32)\. against SDR are estimated at around SDR4,50,000\. The balance of the 7\. Rehabilitation investment saved canceled amount of about SDR9,500,000 a refinery with book value of $6 was mostly due to over estimation of million and an estimated replacement the project cost\. Areas of expected value of $60-8O million (PAR paras\. cost savings were identified by IDA 26$27 & 28)\. The economic rate of three years before Credit closing but return fell well below the appraisal no action was taken to cancel any of estimate and the financial rate of the surplus funds (PAR, paras\. 15 and return may very well be negative due ~3\.to various factors, the most important of which were the Outcomes implementation delays and the low 6\. The refinery rehabilitation andthe refinery 6 * he efinry ehablittionand (1\.1 million tons as compared to its related technical assistance achieved nominal capacity of 1\.5 million their objective\. The refinery was tons)\. However, this ERR fails to put in a safe operating mode, with a measure the full scope of the much lower rate of shutdowns and rehabilitation investments, since significant improvements in its without this investment the growing mechanical integrity\. The nominal level of safety hazards would have capacity of the refinery increased forced the refinery to close down (or from 1\.3 million tons per annum a major accident could have closed it (mmtpa) to 1\.5 mmtpa\. This capacity, with substantial loss of life and however, could not be utilized in property)\. view of the imbalance between the refinery yield patterns and the local 8\. Technology transfer throv\. on- demand for petroleum products\. the-job and overseas training was Studies under this project highly effective\. A training center recommended process modification attached to the refinery was which has been undertaken under a refurbished; a training program was vii developed and has since been basis and some of the rationale for a delivered satisfactorily on site\. subsequent IDA pipeline distribution Energy Monitoring Unit (EU staff operation (PAR para\. 35)\. received training locally and abroad and were able to conduct energy Lessons-of Experience audits on their own (PAR, paras\. 2i and 31)\. 12\. The project took twice as much time to implement as was estimated at Sustainabilty appraisal\. Reasons for the delay were many, but major smor3st them 9\. Technical conditions for the were: a) excessively lengthy sustainability of the refinery procurement procedures of the rehabilitation are present, as Borrower and lack of delegation of demonstrated by the continuous safe decision-making authority to the operation of the refinery\. The beneficiaries; b) implementing follow-up project (Cr\. 1749-BD) for agencies lack of knowledge of IDA de-bottlenecking and process procurement rules and guidelines; and modification makes the financial c) complexity of the project and viability likely\. Institution large number of procurement packages building of ERL was effective and has (PAR, para\. 36)\. been maintained by an activa training center which was supported under the 13\. The Borrower's procurement project and is being enhanced under cycle and the approval process the on-going IDA operation\. Study on dictated by local regulations should BPC's accounting and MIS system was have been carefully assessed at the useful but its sustainability is time of project appraisal\. IDA uncertain on account of the lack of should have insisted that the fund4 necessary to train staff and Borrower provide adequate authority support and expand the system's to the implementing agencies or it hardware and software (PAR, para\.33)\. should have revised its Implementation schedule to reflect 10\. Potential for energy savings on the anticipated difficulties (PAR, the national level was estimated by para\. 41)\. EMU at a very high level, yet EMU staff have found few takers for their 14\. If procurement authority could services and are sitting idle at the not be assigned to the implementing present time\. The reasons may be the agency, another, second best, option absence of an overall energy policy, for expediting implementation would a regulatory framework for energy have been to resort to one turn-key conservation being formulated and single responsibility contract for incentives rewarding energy refinery rehabilitation instead of conservation projects, and lastly the allowing the implementing agency to drop in petroleum prices since 1986 directly handle many equipment and (PAR, para\. 34)\. material purchases, requiring approvals for each one and the 11\. The study on the national gas supervising of several construction grid, though it suffered from and supervision contractors\. shortcomings on account of inaccurate Furthermores this project was the gas supply and demcad forecasts, was right candidate for a turnkey quite useful in confirming the contract since a consultant had been viability of some on-going pipeline used to conduct detailed engineering projects and, in providing the design inspection and to prepare the list of viii all the required equipment and than three years\. At Credit closing, materials before appraisal (PAR, the undisbursed amount totalling para\. 38)\. $DR13\.4 million (about 50% of the approved Credit) was canceled (PAR, 15\. Procedures currently in place, pare\. 38)\. designed to minimize excessive extersions, appear to have been 18\. Two major studies on gas-based ineffective (pares\. 22 and 38)\. industries and use of methanol, Credit closing was extended t:eee costing in excess of US$1\.1 million, times for one yeat iach cime\. were found of no practical value\. Disbursement during the last two IDA had taken the initiative of years amounted to US$1\.3 million, suggesting to the Borrower to cancel (less than 5% of the Credit amount the second phase of the gas-based and less than 10% of the -\.ndisbursed feasibility study\. A quick review of amount that was eventually canceled) the numerous studies previously and was primarily to finance items conducted on utilization of natural that were not part of the original gas and review of literature in the project description and were not case of the research and development critical to project success\. component (use of methanol) might have eliminated the need for these 16\. One of the major variances in two studies\. Putting these studies implementation was the magnitude of through a screening phase cost under-rune\. minutes of supplemented by approximate negotiations indicated the Borrower's calculation of viability could have disagreement with the high level of helped in reducing the scope and cost cost estimates\. Recognizing the of the studies, if they were at all* upward trend of costs of petroleum to be conducted (PAR, pare\. 40)\. and petroleum services in the early eighties was one of the reasons Recommedations behind cost overestimation\. Another reason was the high level of 19\. To capitalize on the contingency allocations embodied in achievements of this project, the the estimates considering the high audit recommends to include under an degree of definition of most of the on-going operation assistance with project components\. Cost regard to: (a) an extension of the contingencies, particularly physical training center at the refinery to contingencies, should be commensurate address computer training for with the degree of detail to which managers and supervisors and project components are defined (PAR, provision of additional hardware and para\. 43)\. software for the management information systems; and (b) a study 17\. Considerable savings were on energy conservation policies, identified by IDA around the time of regulations and incentives (PAR, the original Credit closing date, but paras\. 31, 33 and 34)\. no action was taken and the Credit was extended for three years without 20\. The audite finding that the canceling any of the prospective overall project results were savings\. As a result, funds not satisfactory and that the benefits needed for the project were blocked are likely to be sustainable are from othe\. potential uses and consistent with the findings of the commitment fees were paid for more PCR\. PERFORMANCE AUDIT REPORT BANGLADESH ENERGY EFFICIENCY AND REFINERY REHABILITATION PROJECT (CREDIT 1357-BD) 1\. BACKGROUND 1\. Bangladesh has no oil reserves, no economically exploitable coal, very limited hydropower potential, already largely exploited, and a dwindling base of biomass fuels\. Less than a third of the total consumption was derived from commercial fuels, of which some 52% was supplied from imported petroleum and petroleum products, 40% from indigenous natural gas, 6% from imported coal, and 2% from hydro-electricity\. At the time of project appraisal, the oil import bill was estimated to have reached US$543 million or about 87% of export earnings\. About 60% of Bangladesh's petroleum fuel requirements was processed in the Eastern Refinery Limited (ERL) in Chittagong\. The refinery was built in 1968 and its process configuration did not provide flexibility to adjust the yield pattern to the changing demand profile for petroleum products\. The result of the imbalance between refinery yield and demand was the export of excess products at a loss and the importation of middle distillates\. 2\. In addition to its design shortcomings, the ERL refinery was in an acute state of disrepair due to inadequate preventive maintenance\. Several critical items of ancillary equipment have corroded to a level requiring major repairs or replacement; process pipelines as well as storage tanks were leaking; and, some critical process units had been shut down for months\. Although the refinery was an operational and a safety hazard, its mechanical state had not reached a level where rehabilitation would be uneconomic\. The book value of the refinery was indicated by Bangladesh Petroleum Corporation (BPC), a 70% shareholder of ERL at the time of project appraisal, at US$6 million but an assessment by a refinery consultant engaged by IDA put the replacement value at US$60-80 million equivalent\. 3\. The Government's strategy was to reduce the net cost of energy imports through: (i) improving the refinery's processing and production efficiency; (ii) substitution of natural gas and gas liquids; (iii) energy conservation; and (iv) strengthening administrative and technical skills of institutions engaged in energy production, processing and marketing activities\. The project was identified in the course of a joint IDA-Asian Development Bank (ADB) energy assessment mission to Bangladesh in October 1981\. Its structure and design were giided by key recommendations made by that mission, and it included components which addressed most of the soctor objectives\. II\. PROJECT OBJECTIVES, DESIGN AND PROCESSING A\. Proiect Oblectives 4\. The main objectives of the project were to assist Bangladesh to: (i) reduce the cost of imported petroleum; (ii) initiate energy conservation activities; and 1 2 (iii) carry out the necessary preparatory work to capture the foreign exchange potential of its substantial natural gas reserves\. B\. Proiect $cope 5\. The project comprised five components: (i) Rehabilitation of the ERL refinery to restore its mechanical integrity and increase capacity utilization to design level and reduce its energy consumption through provision of equipment, material and engineering services\. Additionally, this component comprised the provision of some 300 person-months of expertise to carry out a study to de-bottleneck the refinery and determine the appropriate secondary conversion and additional capacity required to remove the imbalance between the refinery yield pattern and the country's demand profile; (ii) An energy efficiency component comprising technical assistance, training and supply of mobile energy measuring equipment to assist the Energy Monitoring Unit (EMU) to carry out a long-term national industrial energy conservation program and conduct energy audits in about 40 enterprises; (iii) Gas based feasibility study, to be carried out in two stages, on gas based export projects to establish their viability; (iv) Technical assistance and training on the accounting, financial and management information systems of BPC; and, (v) Research and development on the possibility of using natural gas-derived methanol as an extender of middle distillate products and in other non-conventional applications\. 3 C\. Proect Costs 6\. The following table provides a summary of the project cost: Summary of Capital Costs (at exchange rate of US$1\.0-Taka 23\.0) Proiect Componenta Foreign Local TLota % (US$ millions) I\. ERL Refinery Rehabilitation A\. Repairs, Maintenance and Replacements 10\.4 5\.0 15\.4 54\.2 B\. Operating and Maintenance Management Technical Assistance 1\.9 0\.1 2\.0 7\.1 C\. Training 0\.5 0\.5 1\.0 3\.5 D\. De-bottlenecking and Secondary Conversion Techno-Economic Study 0\. 0-4 4\.6 16\.2 Sub-total 17\.0 6\.0 23\.0 81\.0 II\. BPC Accounting and Management Systems Technical Assistance A\. MIS Study 0\.5 0\.1 0\.6 2\.1 B\. Training ,\.1 - 0-1 0\.4 Sub-total 0\.6 0\.1 0\.7 2\.5 III\. Enern gfficiency 1\.7 0\.3 2\.0 7\.0 IV\. Gas-Based Projects Feasibility Studies 2\.1 0\.2 2\.3 8\.1 V\. Research and Develoment Program 0\.2 0\.2 0\.4 1\.4 Base Cost Estimate (BCE) 21\.6 6\.8 28\.4 g Physical Contingencies (PC)k' (11\.0% of BCE) 2\.4 0\.7 3\.1 Price Contingencies 91 3\.4 1\.1 4\.5 Total Project Cost 27\.4 8\.6 L6 0 a/ Net of duties and taxes on imported items\. b/ 10% for the ERL Refinery Rehabilitation Component and 15% for the rest\. c/ 14\.3% of BCE + PC, calculated on the basis of projected international inflation rates, in dollar terms, of 8% in 1983, 7\.5% in 1984, 72 in 1985 and 6% in 1986\. /4 D\. Project Design and Processina 7\. The project was identified during October 1981\. The major project components, in particular those related to the refinery rehabilitation, were well conceived and well prepared\. The design of the refinery component comprised a detailed feasibility study and engineering design for the second phase of the refinery upgrading and process modification\. Engineering consultants involved in the engineering study for future refinery upgrading were retained to oversee the implementation of the project and to provide the right interface between the execution of the two phases\. Other technical assistance components covered operations management, personnel training and improving the accounting procedures of the major holding company, BPC\. 8\. Implementation arrangements for other components (the energy efficiency component, the gas-based feasibility study and the research and development) did not go beyond preparation of scope of studies, ensuring availability of adequate funds to cover the required consultants time and the usual conditions of forming implementation units and appointment of unit heads\. The energy conservation component was mostly for energy audits of some power and industrial plants but it did not provide for the development of an energy conservation policy, formulation of regulatory framework nor an incentive mechanism for energy savings\. The research and development component (use of methanol domestically) stopped at the academic level and did not provide a pilot testing of any encouraging results\. As such, the design of these components, unlike the refinery related part, fell short of providing elements to ensure the sustainability of the technical assistance\. 9\. The gas-based feasibility study was ill conceived and poorly implemented\. Its scope was too broad for any results to be of value\. Furthermore, the study design lacked a preliminary screening and ranking mechanism for the various options\. The main objective of the first phase of the study was to identify the potential for natural gas use either for direct export or for chemical product industries for export market\. The study recommended six projects for further detailed feasibility studies\. All projects had major element of risk as they were subject to international demand and competitive market forces\. Bangladesh's natural gas reserves were known, prior to conducting the study, to be inadequate for some of the recommended projects such as LNG\. Additionally, the lack of infrastructure and the cost of production would make, prima-facie any proposed export oriented project non-competitive with others in the region\. IDA staff should have been aware that many studies on petrochemical industries, in Pakistan and later in Bangladesh, were conducted between 1963 and 1980\. A quick review of these documents would have eliminated the need for initiating a new study or considerably reduced the scope of, and the time and money budgeted for the study\. 10\. The project was approved and the Credit signed during May 1983\. Credit effectiveness was delayed till March 23, 1984 due to delay, on the account of GOB, to appoint a project coordinator for the refinery component and a manager of the (EMU) for the energy conservation component\. The time between the Credit approval and effectiveness was well utilized in preparing bid packages and initiating steps to recruit consultants for the refinery rehabilitation\. 5 III\. PROJECT IMPLEMENTATION 11\. Though the project had an early start before declaration of Credit effectiveness, the implementation was delayed by more than three years\. Appraisal estimates indicated that all components, except the study on the use of methanol, would be completed by April 1986, hardly three years after Credit approval\. The original closing date was December 31, 1986 and was extended thrice up to December 31, 1989; a request for a fourth extension was denied\. 12\. IDA grossly underestimated the time required for project implementation\. GOB's administrative procedures stipulated that the project proforma (a document comprising detailed account of project components, costs and justifications) be approved by the Executive Committee of the National Economic Council (ECNEC), an advisory body to the cabinet\. Such a process, which was initiated after the Credit approval, took almost one year and contributed to delay Credit effectiveness\. Following approval by ECNEC, the implementing agencies had to stick to a rigid approval and clearance process for evaluation and selection of consultants and contractors\. Ministerial and often Cabinet approval had to be sought\. Additional analysis and evaluations might be done by the approving authority and could lead to reversal of the original decisions reached by the implementing agencies\. The authority of central agencies like BPC which had subsidiary corporations (ERL) was also undermined when the subsidiaries reversed the central agencies decision in discussions directly with the ministry\. The procurement cycle of the Borrower and the approval process dictated by the local regulations should have been studied with a view to either modify them or have them integrated in the project implementation schedule\. 13\. IDA had taken upon itself a very heavy burden entailing clearance of every consultant's TOR and every equipment specification and contract award\. Though the material and equipment were grouped in some twelve to fifteen packages the supervision load carried out from Washington was excessive, for such a small project, compared to the time spent on actual field supervision\. Failing to convince GOB to change its procedures and delegate more power to the implementing agencies, IDA should have proposed tendering the rehabilitation work on a lump- sum turn key basis\. The Borrower believes that a Turn-Key Contract might have been much costlier (Annex 1, para\. 2\.2)\. Such an approach would have been particularly appropriate since the consultant retained for project preparation had also prepared the detailed design drawings and a complete list of materials and equipment (para\. 7)\. 14\. Another factor which led to implementation delays was the size and the scope of the technical assistance component\. As indicated under para\. 5 above, technical assistance covered a multitude of disciplines (refinery process upgrading, accounting and management information systems, energy efficiency and energy audits, feasibility of gas-based industries and use of methanol as a fuel substitute)\. The aforementioned TA was in addition to the components necessary for the refinery rehabilitation component of the project (design, procurement, supervision and training)\. Only one of the technical assistance component implementing agencies, implementing one of the studies, had prior experience with the Bank and its procedures, a fact which caused considerable procurement delays\. 6 Furthermore, GOB reallocated responsibilities for implementation of some components to new agencies different from those agreed upon at appraisal\. 15\. The second major variance, other than the implementation delays, was the magnitude of the cost under-runs\. At the time of Credit closing, a sum of 8DR13,412,769\.73 (equivalent to about 50% of the original credit amount) was canceled\. The main areas where savings occurred were the cancellation of the second phase of the gas-based feasibility study and tne financing of the Merox- LPG unit through a grant by the French government\. Some minor items (installation of cooling towers, CfR engine and loading arms for a jetty) were canceled from the Credit but they were replaced by two items which cost were even higher than the canceled items\. Net savings from all the aforementioned deletions and additions amounted to US$2,500,000\. Appreciation of the SDR compared to the US dollars (which was used to pay for most purchases) resulted in additional savings of US$2,500,000\. Accordingly, the total savings arising from changes in project components and currency appreciation would be US$5,000,000\. The balance of cost under-runs, equivalent to about SDR9,500,000, or 351 of the Credit amount, must be attributed to over-estimation of costs by IDA and its consultants at the time of appraisal\. None of the allocations for contingencies (totalling SDR5,600,000) were utilized\. It should, however, be noted that the project was appraised during 1982, at a time cost of petroleum equipment and services were high and were escalating every year\. Under these circumstances it was normal to take into account the general upward price trends\. Given the levelling and sometimes the drop in the cost of petroleum equipment and services after 1985, the cost of most project components was much lower or at best equal to the base cost estimates\. Less understandable was allocations of physical contingencies in the range of 10% to 15% of the base cost\. This seems to be on the high side, particularly since most of the project's physical components and studies were well defined and based on detailed engineering inspection that was conducted prior to appraisal\. 16\. The refinery related components were effectively implemented at a reasonable cost, albeit delays arising from procurement clearances by GOB\. The firm that originally designed the refinery, in the mid-sixties, was retained during the project preparation to run a full inspection campaign and prepare detailed design, including bill of materials with specifications, for the refinery rehabilitation\. Implementation arrangements were so designed to ensure that the refinery would continue to operate during the repair/maintenance work\. Some 170 person months of operating, maintenance and training expertise were provided to assist ERL carry out the work and maintair the refinery in a safe operating mode\. 17\. The study on refinery de-bottlenecking and secondary conversion was conducted efficiently and in a timely manner\. Phase one covered demand/supply of petroleum products, marketing and distribution and least cost analysis to meet forecasted demands\. Options considered ranged from mothballing the refinery to introducing hydrocracking\. Phases two and three comprised development of project details, estimation of costs and basic engineering for the ERL up-grading facilities\. 18\. GOB engaged the services of two major foreign consulting firms and a local firm to assist in the implementation of the energy efficiency component\. As part 7 of the consultants services, energy audits were conducted on 47 state-owned and industrial establishments and power generating plants\. Officers of the Energy Monitoring Unit (ZMU) received on-the-job training under the supervision of foreign consultants\. Training overseas was copleted by eight officers of EMU\. As part of its promotional campaign, EMU prepared a national energy conservation program and conducted seminars on energy conservation for the jute, textile, and tea industries\. 19\. Under the gas-based feasibility study, the consultant studied 62 natural gas derived products\. Detailed voluminous reports were prepared and showed that 56 projects were unattractive and six were recommended for detailed feasibility studies\. Given the limited gas reserves of Bangladesh, the export risk involved, and the low economic rate of return of the six project, both IDA and GOB concluded that detailed feasibility studies were not required and terminated the study after the first phase\. 20\. A study on the use of methanol as a fuel substitute in the transport and residential sector was conducted under the research and development component\. The implementing agency was Bangladesh University of Engineering and Technology (BUET) supported by foreign consultants\. The study was, on the whole, of an academic natureI and it neither evaluated any specific engine for marine or road transport nor attempted to devise a safe cook stove for domestic use\. Its conclusions were that thn use of methanol for transport in Bangladesh was impractical and its domestic use carried the risk of introducing a highly toxic material within the households\. 21\. Two changes in the project scope were approved by IDA on the premise that the broad project objectives could encompass these changes\. The first was the provision of vehicles to support the project for an amount of US$200,000 and the second was conducting a study on the national gas grid which was awarded to a foreign consultant at a cost of about US$370,000\. The national gas grid study reviewed the developments needed in the gas transmission system to supply the forecasted gas demand\. The methodology adopted by the study was new to Bangladesh and it benefitted the staff of the national petroleum company (Petrobangla)\. Basic inputs to the study were on the whole inaccurate\. The demand forecasts, based on optimistic projections by the operating companies, were too high and appraisal of gas supply sources needed verification\. Recognizing these shortcomings, Petrobangla later initiated detailed gas demand studies and gas supply appraisals for the purpose of providing more reliable inputs to the gas transmission system models\. 22\. Disbursement lagged behind schedule following delays in implementing the project components\. The amount disbursed was also diminishing with time; total disbursement during the last two years of the Credit (July 1989 till July 1991, the date of last disbursement) amounted to only US$1\.3 million\. Justifications for the last one-year extension were to: (a) complete a couple of studies which were added to the project, (b) to construct a new jetty (not originally included under the project) and (c) to procure and install a cooling tower\. The reason behind the last two extensions does not seem viable, particularly that this project was followed by another Credit for the second phase of refinery de- bottlenecking and modernization\. The Credit could have been brought to closure in a more reasonable time frame; meanwhile minor elements, like construction of 8 a cooling tower or addition of loading jetty, might have been included under the follow-up IDA operation\. 23\. IDA had identified areas of cost savings well before the original Credit closing date\. In an internal memo, dated November, 1986, IDA estimated that there would be an undisbursed balance at the time of project completion of about US$12-13 million\. It was foreseen then that ^0B would request IDA to cancel a portion of the Credit\. The issue was raised one year later, at the time another request was made for further Credit extension\. No action was taken and funds, in excess of well defined project needs, were blocked with commitment fees paid for over three and half years\. IDA canceled the undisbursed amount of some SDR13\.4 million only after clearing the last disbursement in July, 1990\. 24\. Seven supervision missions visited Bangladesh between Novembar, 1983 and December, 1989, at a rate of about one mission per year\. With the exception of the first mission, all the missions comprised only one or two staff members\. The total time spent in the field by all supervision missions amounted to only 25 staff days, or five staff weeks\. Problem areas were all related to procurement\. The total time spent on supervision (including preparation of PCR) was 63\.8 staff weeks\. It appears that the distribution of the project supervision load was about 90% office supervision and 10% field supervision\. A question arises whether this time allocation between field and office was optimum for the project comprising large technical assistance component and implemented by agencies, all but one of which had no prior experience with IDA\. IV\. PROJECT RESULTS 25\. The refinery rehabilitation and related technical assistance achieved their objectives\. The refinery was put in a safe operating mode with significant improvements to its mechanical integrity and a much lower rate of operations breakdown\. In addition, the nominal capacity of the refinery had increased from 1\.3 million tons per annum (mmtpa) to 1\.5 mmtpa\. This capacity, however, could not be utilized and the refinery is now operating at a rate between 1\.0 to 1\.1 mmtpa\. The drop in operating capacity has been due to the existing process configuration which does not provide flexibility to adjust the yield pattern of the refinery to meet the local market demand for petroleum products\. Refinery output of heavy diesel and fuel oil has to be curtailed in order to avoid exporting these products at a price half that of the imported crude\. The economic rate of return for the refinery rehabilitation fell below that of the appraisal estimate of 68%\. Calculated economic rate of return in the PCR of 421 seems to be highly exaggerated since it was based on the following assumptions: (a) refining capacity of 1\.5 mmtpa; (b) reduction of fuel consumption and losses from 8 to 4%; and (c) savings of 36,000 tone per annum of fuel oil due to replacement of fuel by natural gas\. The refinery output as indicated above has ranged between 1 to 1\.1 mmtpa; the fuel consumption and losses have been maintained between 3\.8 % and 4% since 1976; and lastly, only half of the refinery fuel was replaced by gas resulting in savings of about 20,000 tons of fuel oil\. Using the same methodology used in the PCR but with benefits limited only to the fuel savings at current international prices, the economic rate of return would be 11%\. 9 26\. Financial rate of return estimate at appraisal was 16% and PCR calculations showed it dropping to 112\. However, PCR calculations were based on the same premises used for the calculation of the economic rate of return cited under para\. 25 above\. Recalculation of the financial rate of return, using a reduced refinery output of 1\.1 umtpa instead of 1\.5 ampta would bring the financial rate of return to a negative value\. 27\. In the opinion of the audit, economic rate of return provides an incomplete measure of the project success\. Before the project, all the refinery facilities were in an acute state of disrepair due to inadequate preventive maintenance\. The cumulative effect of the neglect was frequent unscheduled shut-downs as a result of leakage of heat exchanger, leakage of crude oil storage tanks, damage of furnace piping and refractory lining, corrosion of critical process equipment\. etc\. Basic safety features such as process instrumentation, fire fighting equipment and foam pipeline network were not dependable\. In addition to the shortage of foreign exchange required for the procurement of material and equipment there was a dearth of experienced personnel\. The level of professional staff at the time of appraisal was 116, against an approved level of 158\. A large number of experienced engineers and technicians had left the refinery for better job opportunities abroad\. The refinery operations were not only inefficient and archaic but were on the brink of disaster\. As an illustration of the aforementioned argument, the audit had observed, during a visit to the refinery site, that some of the storage tanks and piping which were not repaired nor upgraded under the project were completely destroyed by the cyclone which hit Bangladesh in April, 1990\. Those tanks, manifolds, towers, equipment and instrumentation that were upgraded or installed new under the project were left intact\. As a result of the project, the refinery has regained its mechanical integrity and is operating according to industry's safety standards\. The book value of the refinery was US$6 million before the rehabilitation project; the refinery's replacement value was estimated by a consultant engaged by IDA during appraisal at US$60 to US$80 million equivalent\. The most important project benefits were, in fact, not primarily the improvement of refinery operations, but the very safety of the refinery and the surrounding environment\. 28\. The project was conceived as a first phase of an overall refinery rehabilitation, de-bottlenecking and process modernization program and it included a sizable technical assistance component (320 consultant-months) to study the appropriate secondary conversion and additional capacity required to remove imbalance between refinery yield pattern and country's demand profile\. Based on that study, a follow-up IDA project was approved and implementation is currently in progress (Cr\. 1749 BD)\. It will be essential to view the two phases of the rehabilitation and process modernization as a whole and calculate the rate of return based on costs and benefits arising from their full implementation\. 29\. Technical assistance components related to the refinery work and that for BPC accounting and management information system (HIS) fully achieved their objectives\. The operation, maintenance and training management support provided by expatriate consultants was highly effective\. Rehabilitation work was conducted without any incident or major shutdown\. A training center was refurbished and supported by well stocked library\. A training program was developed and has since been delivered satisfactorily on site\. Fifteen engineers, financial officers and managers received overseas training under this 10 component\. A computerized accounting system was developed for BPC and has been under Implementation\. The HIS is still in its infancy and would require for its full implementation a change in the operational and management culture\. Additionally, the full use of the potential of the new systems has been hampered by lack of funds for acquiring computer hardware and software\. The Borrower has informed ORD that these financial constraints are gradually being resolved (Annex 1, para\. 4\.2)\. 30\. The techno-economic study on de-bottlenecking and process modification of ihe refinery was well supervised and timely executed\. The results provided a strong base for a follow-up operation by IDA (Cr\. 1749-BD) which is currently under implementation\. 31\. Energy audits were anducted, as planned, on various industrial and power generating plants\. EMU staff received training locally and abroad and were able to do additional energy audits on their own\. As in the refinery related components, institution building of EMU was highly effective\. As part of its promotional activities, ES conducted several energy conservation seminars for the jute, textile and tea industries\. The potential for energy savings from the audited plants was estimated at TZ\. 20 crores; actual savings were but a very small fraction of that amount (only TK\. 3 crores) and were restricted to fuel substitution and application of very simple housekeeping practices\.' At the national level, energy savings potential was estimated at TK\. 114 crores annually\. 32\. Results of the gas-based feasibility study proved that there were no viable projects for natural gas export nor for gas derived products\. Use of natural gas to manufacture PVC for local consumption or to produce CNG for transport was found of marginal viability and having little impact on the overall domestic gas utilization\. Under the research and development component, the study on the use of methanol as a fuel substitute, given Bangladesh cultural and social conditions, led to the conclusion that methanol could not be used for transport nor for residential purposes\. Several interesting gas transport models and scenarios were developed under the study on the national gas grid\. Rigorous conclusions from that study will require a better assessment of gas reserves and more realistic gas demand forecast\. V\. PROJECT SUSTAIABILITY 33\. Sustainability of the various project components vary widely from likely to uncertain\. The technical sustainability of the refinery rehabilitation has been assured by the continuous safe operation of the refinery and the follow-up project (Cr\. 1749-BD) for de-bottlenecking and process modification\. Financial sustainability is likely once the phase II project is implemented\. Institution building of ERL was effective and has been maintained by an active training The Borrower has pointed out that the primary reason for the lack of follow-up in energy savings has been the non-availability of investment funds for these purposes (Annex 1, para\. 5\.2)\. 11 center which was supported under the project and is being enhanced under the on- going IDA operation\. Study on BPC's accounting and HIS system was useful but its sustainability seems rather marginal unless funds are made available to support and expand the syetem's hardware and software; additional training will also be required\. 34\. Potential for energy conservation on the national level was estimated by EMU at an astonishingly high level, yet EM staff are sitting idle with no one calling on their services\.2 With no regulatory framework for energy conservation being formulated, \. r alone drawing up an overall energy policy, the absence of any incentive system rewarding energy conservation projects and with the drop in petroleum prices since 1986, there little, if any, interest on the side of energy consumers, public or private, to change their practices for more efficient energy use\.3 The cancellation of IDA Cr\. 1942-3D in April, 1992, addressing industrial energy efficiency, with no disbursement since its approval in 1988, is a clear illustration of the highly uncertain sustainability of this component\. 35\. Although the national gas grid study suffered from shortcomings on account of inaccurate gas supply and demand forecasts, it was quite useful in confirming the viability of some on-going pipeline projects and, later on, in providing the design basis and some of the rationale for a subsequent IDA operations (Second Gas Development Project, Cr\. 1586-3D)\. It is expected that the methodology and the models provided by the study vould be of use for the staff of Petrobangla and its subsidiaries in planning their future investments in gas field development and transmission network\. VI\. FINDINGS AND LESSONS 36\. The refinery component of the project was well prepared and consultants retained under a project preparation facility provided, in time before the appraisal was initieted, full engineering inspection and detailed design of the facilities\. This commendable effort did not result in speedy implementation\. Procurement problems were cited in all supervision reports; the Credit was extended for three years and implementation took almost double the time estimated at appraisal\. Main reasons for the delay were: (a) lengthy procurement procedures and approval process by the beneficiaries; (b) lack of knowledge of the implementing agencies of IDA procurement rules and guidelines; and (c) the need to process an excessive number of procurement packages\. 37\. Another, second best, option for expediting implementation would have been to resort to a turn-key, single responsibility contract for refinery rehabilitation, instead of directly handling many equipment and material 2 The Borrower disagrees with this assessment, and states that there are regular requests for its technical assistance services (Annex lt para\. 5\.3)\. The Borrower has informed us that the Ministry of Energy and Mineral Resources is currently processing the enactment of an energy conservation policy and regulatory framework (Annex 1, para\. 5\.3)\. 12 purchases and supervising several construction and supervision contractors\. There might have been certain reservations that turn-key contracts cost more than several smaller sub-contracts\. However, a Turn-Key Contract would have been feasible and could have been cost effective\. Detailed engineering inspection had been conducted and a list of all the required equipment and material had been I Tepared before appraisal opening up the feasibility of accurate cost estimates against which to gauge offers\. With hindsight, expediting implementation by two or three years would have more than paid for any eventual extra cost the prime (turn\.-key) contractor might have charged\. 38\. Considerable savings were identified by IDA early during project implementation\. No action was taken and the Credit was extended for three years without canceling any of the prospective savings\. Disbursement during the last two years amounted to US$1\.3 million or les than 5% of the Credit amount\. Considering the Bank staff resources involved in Credit extension, it would be advisable to fully study the value added of extending the credit before making a decision\. Funds not needed for the project were blocked and commitment fees were paid for more than t iree years\. At the time of Credit closing the undisbursed amount totalling SDR13\.4 million (about 50% of the approved Credit) was canceled\. Cancellation of the excess funds in time could have been beneficial to IDA and the Borrower\. 39\. One of the major variances in implementation was the magnitude of cost under-runs\. Minutes of negotiations indicated the Borrower's disagreement with the high level of cost estimates\. One reason was the high level of physical contingency allocations embodied in the estimates\. These were unnecessary in light of the high degree of definition of many of the project components\. 40\. Two major stuOles on gas-based industries and use of methanol, costing in excess of US$1\.1 million, were found of no practical value\. IDA had taken the initiative of suggesting to the Borrower to cancel the second phase of the gas- based feasibility study\. A quick review of the numerous studies on utilization of natural gas previously conducted by the Bank for other countries and a review of literature in the case of the research and development component (use of methanol) might have eliminated the need for these two studies\. Recommendations 41\. IDA should have carefully assessed, at the time of project appraisal, the Borrower's procurement cycle\. The level of approval that authorities needed before clearing contracts should have been carefully assessed at the time of project appraisal\. If IDA is unable to convince the Borrower to provide adequate authority to the implementing agencies then the impact of the bureaucratic approval process should have been fully taken into account in scheduling implementation\. Additionally, educating the managers and relevant staff of the implementing agencies about IDA procurement practices, through holding seminars on site or inviting some to Washington can reduce procurement delays\. This is particularly true when the first time implementing agencies in charge of the project, are ignorant of IDA procurement requirements\. 42\. Building a screening mechanit and a quick prefeasibility stage at the time of conceptualizing and designing the studies could have helped in reducing the scope and cost, if the studies were to be conducted\. Additionally, drawing on IDA experience in other countries would also help to reduce this problem\. 43\. Cost contingencies, particularly physical contingencies, should be commuensurate with the degree of detail and certainty by which project components are known\. 44\. Review of desirability to cancel part of Credit should be systematically undertaken at time of decision to extend closing date\. 45\. It is important to provide under the on-going operation an extension of the training center at the refinery to address computer training for managers and supervisors\. It is only after reaching a certain level of computer literacy among management and staff that the MIS will realize its full potential\. 14 ANNEX 1 Page 1 of 3 COMMENTS ON TJB DRAFT PERFORMANCE AUDIT REPORT (PAR) ON NERGY EFFICIENCY AND REFINERY REHABI- LITATION PROJECT UNDER IDA CREDIT NO\. 1357-BD) Comments by the Bangladesh Petroleum Corporation ENERGY RSHABILITATION: 1\.1 We have gone through the Draft Performance Audit Report prepared by the Operations Evaluation Department of the World Bank on the Energy Efficiency and Refinery Rehabilitation Project under IDA Credit No\. 1357-BD and we have the pleasure to offer our item-vise comments on the portions relating to Refinery Rehabilitation component only as appended hereunder\. 1\.2 The -refinery originally vent on stream in May 1968 and due to continuous operations for about 16/17 years its efficiency gradually reduced for obvious reasons, but its physical conditions were not that awful as has been portrayed in the report\. The cyclone damaged tanks and pipings said to have been inspected by the Audit Team were already abandoned (pars\. 2)\. 1\.3 It is of course true that due to the implementation of the Rehabilitation Project the lost efficiency of the refinery has been restored\. 1\.4 Consumption process loss of the refinery has bean reduced from 7\.32(73-74) to 3\.4(1990-91) including consumption of Natural Gas by 1\.5%\. This means actual yield of crude oil increased from 92\.68 to 98\.61%\. Also the amount of recovery of middle-distillate has now increased to around 50% from 40%\. All these have been achieved because of the completion of necessary BURE work under IDA Credit and consequent proper operation of the refinery (para\. 25)\. DELAY IN IMPLEMENTATiOs 2\.1 The following three reasons have been identified in the report for delayed completion of the project by about 3 years: a) Lengthy procurement procedures and approval process by the beneficiaries\. b) Lack of knowledge by the implementing agencies of IDA procurement rules and guidelines; and c) The need to process an excessive number of procurement packages\. Of the aforementioned three reasons we agree to "a" and "c" and we could not help the same\. We, however, beg to defer with 'bl\. As far as Refinery Rehabilitation component of the project was concerned, we educated orrselves with IDA procurement rules and guidelines vell in time and to the best of our knowledge there was no delay due to our ignorance of the IDA procurement rules and guidelines\. 15 ANNEX1 Page 2 of 3 2\.2 Further, we also beg to defer with the suggestion for a Turn-Key Contract for the whole project\. This might have speeded up the implementation but might have also been much costlier (para\. 13)\. COST UNDER RUNS/OVER ESTIMATION: 3\.1 It was intimated in the Steering Committee meeting held on 18th February, 1987, that out of the allocated amount of US$ 21\.40 million there would be a saving of US$ 6\.887 million and the same was minuted accordingly\. We do not, however, think there were real cost under runs or over estimation for the project of a remarkable degree\. A total amount of US$ 21\.40 million was earmarked for the Refinery Rehabilitation component, of which US$ 3\.40 million vas unallocated leaving an effective allocation of US$ 18\.00 million for this component\. From this amount, US$ 12\.04 million was spent for this component, US$ 1\.00 million was transferred to part D of the project and 4 items involving about US$ 4\.46 million was shifted for implementation under Credit No\. 1749-BD\. There was therefore a nominal amount of US$ 0\.50 million (21\.40 - (3\.40+12\.04 + 1\.00 +4\.46) unutilized (para\. 15)\. EXTENSION OF TRAINING CENTRE: 4\.1 As many as 10 Personal Computers have already been procured and the Managerial staffs of ERL are being trained in phases\. There is, however, scope of further improvement of the Training Centre with latest Training AIDS including Audio Visual Programmes (para\. 29)\. 4\.2 Regarding MIS of BPC it may be stated that the financial constraint has been resolved, the computers under reference are being installed within the FY (1992-93) and concerned personnel are being trained gradually (para\. 29)\. (A H M A Majid Rabimi Senior General Manager Comments by the Enery Monitoring and ConservatioM Unit ENERGY SAVINGS: 5\.1 The Energy Monitoring and Conservation Centre (EMCC) was formerly known as Energy Monitoring Unit (EMU)\. Presently, the Director of this organization is Engr\. A\.Z\.M\. Sazzadur Rahman who assumed office on 25th March 1991\. 5\.2 Achievement of energy savings is proportional to the investments made for implementation of identified options arising as a result of an energy audit\. As indicated in the PAR, the implementation was a very small fraction but the PAR did not mention that this was due to non availability of funds for such implementation\. The potential for energy savings as mentioned in the report are 16 ANNEX 1 Page 3 of 3 correct but the PAR failed to mention the corresponding investment requirements to achieve such savings\. To achieve Tk\. 20 crore savings from audited plants would require investment of US$ 11\.4 million + 20% as equity of the sub- borrowers\. At the national level the investment requirement is US$ 133 million spread over a period of 13 years and which would result in a national savings of Tk\. 114 crores annually as mentioned\. However it is to be noted that no investments were made and hence the question of capturing the anticipated savings does not arise\. 5\.3 It is true and we still feel that the potential for energy savings at the national level is at a very high level (19\.05PJ)\. This was estimated jointly by EMU, Arthur D\. Little Int'l\. (USA) in association with Bechtel Group Inc\. (USA) and Rahman Rahman Huq & Co\. (Bangladesh)\. The hasty generalisation and comment that EMU have found few takers for their services is not true; rather we would say that the response from potential savers is very encouraging as is evidenced from the mail received regularly requesting technical assistance and which is being provided within the limited resources and other constraints\. Presently EMCC's services are provided on request from either side\. The EMCC has so far completed over 110 energy audi* and continues to do so, promotes energy conservation on a regular basis through media campaign, individual letters, discussions, seminars\. In addition EMCC prepares various energy related reports, informative manuals and tips related to energy conservation, provides technical library services, guidance in approaching the banks/financial institutions to ascertain eligibility for loans\. EMCC has also been recently provided with modern instruments/equipment by ODA (UK) in its technical assistance for EMCC's institutional strengthening and as a result the quality of services being provided by EMCC would be substantially improved\. Perhaps the PAR intended to state that there are few takers of the loans\. However, it would certainly be beneficial to have an overall energy policy, a regulatory framework for energy conservation and providing incentives rewarding energy conservation measures\. The Ministry of Energy and Mineral Resources is currently processing the enactment of an energy conservation policy with regulatory framework\. However, the key to success in energy efficiency and conservation is the containment of non-technical system losses of energy in the country\. 5\.4 The EMCC is in agreement and supports the recommendation that a study be made on energy conservation policies, regulations and incentives (Summary, para\. 19)\. 5\.5 The reasons resulting in the cancellation of IDA Credit 1942-8D could be better explained by the Agrani Bank which had a separate agency agreement and under whose control the credit was placed for disbursement to the prospective sub-borrowers\. We were made to understand that the non disbursement of credit funds were related to the non-eligibility of the prospective sub-borrowers\. Presently EMCC is only able to provide technical assistance to the energy consumers* Investment requirements have to be arranged separately by the enterprises themselves\. This is possible either through their ovn Annual Development Programme, commercial bank loans or from other sources (para\. 34)\.

APPROVAL

P005793

Document of The World Bank FOR OFFICIAL USE ONLY Report No\. P-3709-YAR REPORT AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL DEVELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT OF SDR 11\.5 MILLION TO THE YEMEN ARAB REPUBLIC FOR A SECOND URBAN DEVELOPMENT PROJECT January 12, 1984 This document has a restricted distribution and may be used by recipients only in the performance of their official duties\. Its contents may not otherwise be disclosed without World Bank authorization\.  CURRENCY EQUIVALENTS Calendar 1982 March 1983 Currency Unit = Yemeni rial (YRl) YRI US$1 = YRls 4\.54 1/ 4\.54 YR1 1 = US$0\.22 0\.22 FISCAL YEAR January 1 to December 31 (from 1981) ABBREVIATIONS CPO Central Planning Organization HCB Housing Credit Bank MAF Ministry of Agriculture and Fisheries MEW Ministry of Electricity and Water MVMH Ministry of Municipalities and Housing NWSA National Water and Sewerage Authority UDPU Urban Development Project Unit YAR Yemen Arab Republic YGEC Yemen General Electricity Corporation 1/ No par value for the Yemeni rial has yet been declared to the IMF\. All exchange transactions are effected at the Central Bank rate which has been pegged to the US dollar since February 1973\.  FOR OFFICIAL USE ONLY YEMEN ARAB REPUBLIC Second Urban Development Project Credit and Project Summary Borrower: Yemen Arab Republic (YAR) Amount\. Special Drawing Rights 11\.5 million (approximately $12\.0 million equivalent) Terms: Standard Prc t D*e _ription; The proposed project is designed to further strengthen MMH's capacity to plan, design, and execute key urban development programs at the local level; and to help the Government remove development bottlenecks in the urban sector while making full use of private initiative\. It would provide affordable infrastructure services to the low-income population of the port city of Hodeidah, the second largest city in YAR, at minimal cost\. The project would help develop the Ghuleil area and integrate it into the city's master plan\. It includes\. (i) the upgrading of 65 ha of built up area to benefit about 13,000 residents; (ii) development of another 40 ha to provide 1,650 plots for families, and for social facilities (schools, dispen- saries) with adequate infrastructure; (iii) provision of roads and footpaths, water supply, sewerage, electricity and street lighting; (iv) technical assistance of 180 man- months for project execution and management, and strength- ening municipal administration in Hodeidah; (v) a study to design and evaluate alternative ways of mobilizing resources to finance the maintenance of existing urban services and the construction and maintenance of new ones; and (vi) training and studies for preparation of future projects\. The project would address the needs of the poorest segments of the population in the city of Hodeidah\. The major risks are; (i) possible delays in implementation due to difficulty in retaining qualified administrative and technical staff and (ii) inadequate cost recovery\. These risks have been minimized through appropriate project training, technical assistance and design features\. This document has a restricted distribution and may be used by recipients only in the performance of their official duties\. Its contents may not otherwise be disclosed without World Bank authorization\.  - ii - Estimated Costs; Local Foreign Total - … $----- million--- Ghuleil Upgrading and Site and Services A\. Site Works Site clearance 0\.05 0\.02 0\.07 Demolitions 0\.14 0\.08 0\.22 Plot demarcation 0\.07 0\.04 0\.11 Sub-total 0\.26 0\.14 0\.40 B\. Off-Site Infrastructure Street system 0\.22 0\.1\.4 0\.36 Water supply 0\.04 0\.07 0\.11 Sewerage system 0\.04 0\.08 0\.12 Electricity and street lighting 0\.07 0\.17 0\.24 Sub-total 0\.37 0\.46 0\.83 C\. On-Site Infrastructure Street system 1\.06 0\.71 1\.77 Water supply 0\.85 1\.71 2\.56 Sewerage system 1\.42 2\.85 4\.27 Electricity and street lighting 0\.50 1\.15 1\.66 Sub-total 3\.83 6\.43 10\.26 Technical Assistance Project execution and management C\.13 1\.23 1\.36 Training - 0\.05 0\.05 Strengthening Hodeidah Municip\. 0\.02 0\.14 0\.16 Study on cost recovery 0\.01 0\.11 0\.12 Preparation of future project 0\.05 0\.45 0\.50 Sub-total 0\.21 1\.98 2\.19 Project Administration Local staff 0\.89 - 0\.89 Equipment 0\.12 0\.12 Special services 0,17 - 0\.17 Sub-total 1\.06 0\.12 1\.18 TOTAL BASE COST 5\.73 9\.13 14\.86  - iii - Contingencies Physical increase 0\.37 0\.66 1\.03 Price increase 1\.65 1\.65 3\.03 Total contingencies 2\.02 2\.31 4\.33 TOTAL PROJECT COST 6\.98 10\.91 17\.89 Financing Plan Proposed IDA Credit 1\.09 10\.91 12\.00 Government 5\.89 - 5\.89 TOTAL 6\.98 10\.91 17\.89 Estimated IDA Disbursements; IDA FY 1985 1986 1987 1988 1989 -----------------$ million -----------… ----- Annual 1\.00 4\.0 4\.4 2\.5 0\.1 Cumulative 1\.00 5\.0 9\.4 11\.9 12\.0 Rate of Return: 25 percent\. Staff Appraisal Report: Report No\. 4675-YAR, dated December 22, 1983  I  INTERNATIONAL DEVELOPMENT ASSOCIATION REPORT AND RECOMMENDATION OF THE PRESIDENT OF IDA TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT TO THE YEMEN ARAB REPUBLIC FOR A SECOND URBAN DEVELOPMENT PROJECT 1\. I submit the following report and recommendation on a proposed development credit to the Yemen Arab Republic (YAR) for Special Drawing Rights (SDRs) 11\.5 million (approximately US$12\.0 million equivalent), on standard IDA terms, to help finance a Second Urban Development project\. PART I - THE ECONOMY _/ 2\. A Country Economic Memorandum (No\. 2856-YAR), dated October 23, 1980 has been distributed to the Executive Directors\. Country data are attached in Annex I\. Introduction 3\. Over the last decade YAR has experienced far-reaching changes in its socioeconomic structure and lhe material welfare of its citizens\. The republican government which came to power following the 1962 Revolution succeeded in establishing within a surprisingly short period of time the foundations of a modern state\. 4\. Political integration and the build-up of public institutions while maintaining a liberal market orientation have provided the basis for rapid development of the public and private sectors\. Under the Three-Year Develop- ment Program (1974-76) and the First Five-Year Plan (1977-81), the foundations of the country's physical and social infrastructure were laid and expanded, and first attempts were made at lifting agriculture, the mainstay of the economy, out of its medieval setting; industrialization was also started, albeit on a small scale\. 5\. Rapid domestic economic growth has been accompanied and enhanced by the large inflow of remittances and transfers by Yemenis abroad, particularly workers in Saudi Arabia and the Gulf States\. These are estimated to have increased from around $65 million in 1971/72 to a level that has fluctuated around $1\.2 billion on an annual basis between 1977 and 1982\. Since 1980, however, remittances have levelled off\. Largely as a result of these cash 1/ Substantially the same as Part I of the President's Report (P-3639-YAR, dated August 23, 1983) for the Highway V credit approved by the Executive Directors on September 13, 1983\.  - 2 - inflows, YAR's real per capita GNP has increased significantly over the last ten years, reaching an estimated $500 in 1982 (World Bank Atlas methodology)\. 6\. Although there are no reliable data on income and consumption distribution in YAR, there are reasons to believe that the benefits from recent growth have been widely distributed\. Strong family ties ensure that many people benefit from the increase in incomes\. Public social expenditures, especially in education and health, increased substantially, and the associated benefits accrue directly to an increasing number of the population\. Major Development Issues 7\. Overall economic performance during the First Plan period (1977-81) has been satisfactory\. Real GDP grew at around 6 percent p\.a\. Investment effort was impressive averaging around one-third of GNP\. These achievements, remarkable as they are, should not, however, detract from the fact that YAR continues to be one of the world's least developed countries\. Productivity levels are still extremely low, especially in agriculture\. Over 90 percent of the population resides in rural areas, a large part in remotea villages without access to modern transportation, schools, electricity or health services\. Agricultural land and water are scarce and few mineral deposits have been discovered so far\. YAR's commodity exports are still extremely low, reflecting the country's limited resources and the underdeveloped state of its economy\. The shortage of skilled and semi--skilled manpower is an overriding constraint to development and limits the capacity of the public administration to manage and implement a growing and increasingly complex development program\. 8\. The budget deficit has emerged as a major issue in recent years\. Over the past five years, Government expenditures have increased at a pace more than double that of revenues\. By 1982, revenues represented only about 40 percent of expenditures and the budget deficit was 31 percent of GDP\. At the same time, the share of the budget deficit financed by external loans dropped from an average 44 percent in 1977-81 to 17 percent only in 1982, which compelled the Government to increase its borrowings from the banking system (mainly the Central Bank)\. As a result, the money supply grew rapidly during the recent years, and by mor,e than 25 percent in 1982\. Despite this rapid growth, inflation, measured by the Sanaa Consumer Price Index or by the GDP deflator, hardly exceeded 6 percent in recent years since the growth of money supply was accompanied by a continuous increase in imports which led to a decline in foreign reserves, from 16 months of imports of goods and services in 1977/78 to 3\.5 months by end 1982 (and to less than 3 months in March 1983), and this has kept the inflation rate from being higlher\. The continuation of such a large budget deficit might reduce the reserves further to a level where an increase in money supply wou'Ld most likely result in higher inflation\. 9\. Reducing the budget deficit calls for; (a) in the short-run, cutting public investment expenditures; and (b) in the medium-run, bringing  current expenditures under control, introducing more taxes 1/ and establishing adequate users' fees\. The Government is increasingly aware of the seriousness of the situation and has taken a number of measures to keep expenditures within the levels authorized by the 1983 budget\. These include a selective freeze on new hiring, restrictions on purchases of cars and furniture, the creation of new public authorities, etc\. The effect of these measures, however, still remains to be seen\. In particular, anticipated expenditures on earthquake reconstruction will add considerable pressure on efforts to contain the deficit\. A Bank mission visited YAR recently to review the Government's public investment program of the Second Five Year Plan (1982-86)\. Senior government officials agreed with the mission that substantial cuts in the public investment program are needed\. The mission's report is expected to help the Government in scaling down its investment in line with anticipated resources\. Government Objectives 10\. Since the early 1970s, the country has been trying to develop human resources and build new institutions, to strengthen the physical and social infrastructure, to raise the productivity of the commodity-producing sectors, and to improve the standard of living of the people, giving priority to their basic needs\. Most of the First Plan's targets which were in line with these objectives have been met except in the agriculture sector where output of some traditional crops has declined and overall growth fell considerably below targeted levels primarily because of the abandonment of marginal rain-fed areas where income opportunities could not compete with the opportunities of migration\. The production of qat (a mild stimulant) has been on the increase and has competed for agricultural land\. Its production is only partially reflected in the national accounts\. 11\. The Second Five-Year Plan (1982-86) has a 7 percent GDP growth target calling for a total investment of around $6\.5 billion (1981 prices) over the plan period\. The sectoral distribution of investment underlies a continued broad-fronted strategy with an emphasis on agriculture and manpower development\. The plan's financing envisioned heavy dependence on external sources with around 70 percent of investment expected to be covered by grants and loan disbursements and direct foreign private investment\. However, since this expected level of foreign finance does not appear to be forthcoming and because of the extremely tight budgetary situation that has developed recently, the Government is in the process of revising its investment program and the Bank is assisting in this effort (para\. 9)\. 1/ The Bank report Mobilization of Domestic Financial Resources in the YAR (January 6, 1982) made a number of recommendations in this regard as well as on other resource mobilization possibilities\. A number of these recommendations have been implemented and others are under consideration\.  -4- Capital Flows and External Debt 12\. Since the 1962 Revolution, YAR has received large amounts of foreign assistance\. Given the country's low per capita income and its UN classifica- tion as a "least-developed country," most of the aid has beer provided in the form of grants and concessionary loans\. Cumulative aid disbursements, in- cluding grants, came to around $2\.6 billion by the end of 1982\. The principal donors have been Saudi Arabia, Kuwait, United Arab Emirates, Iraq, USA and West Germany as well as IDA and the Arab development funds\. 13\. About one-half of the total assistance given so far was provided as grants, mostly for food aid, technical assistance and, more recently, for budget support primarily from Saudi Arabia\. Food aid has been provided through the World Food Program and by a number of bilateral donors\. A significant part of official grants has been made available in the form of technical assistance\. Given the extreme shortage of skilled manpower in YAR, this type of aid has high priority and will be needed by the country for many years to come\. Besides the grants, YAR received sizeable amounts of official loans\. Drawings on these loans have increased in recent years, reaching $262 million in 1981 and $246 million in 1982\. Most of the official loans and credits have been committed for the financing of specific projects, with the main emphasis on roads, agriculture, and utilit:ies\. 14\. The terms of official loan assistance have been very favorable\. Loans from the USSR and the People's Republic of China are, for the most part, free of interest\. Western European countries have generaLly charged between 3/4 percent and 2-1/2 percent\. Interest rates charged by Arab countries have varied from 0 to 4 percent\. Loan maturities range from 5-50 years, with an average of 20 years\. 15\. YAR's external public debt outstanding on December 31, 1982 was estimated at $2244 million, of which $1312 million was disbursed\. IDA credits accounted for $136 million or about 10 percent of the total disbursed and outstanding debt reported\. Because of the very favorable terms of borrowing, the debt service payments amounted to $55 million in 1982, equivalent to around 3\.6 percent of gross foreign exchange earnings (including workers' remittances and private transfers)\. Service payments could rise significantly to about 10 percent of the gross foreigrn exchange earnings by the end of the 1980s\. PART II - WORLD BANK OPERATIONS 1/ 16\. The proposed credit would be the thirty-sixth to YAR, bringing total IDA commitments to $356\.5 million net of cancellations\. The World Bank 1/ Substantially the same as Part II of the President's Report (P-3639-YAR, dated August 23, 1983) for the Highway V credit approved by the Executive Directors on September 13, 1983\.  - 5 - strategy in YAR has been threefold: to concentrate on developing the basic institutions, skills and physical infrastructure which are prerequisites for development, to develop production and income in the dominant productive sector, agriculture, and to support the Government in its programs to meet basic needs in rural and urban areas\. To achieve these objectives, IDA has extended eleven credits, totaling $120\.4 million, for agriculture, fisheries and rural infrastructure; fourteen credits, totaling $146\.6 million, for infrastructure including highways, ports, water supply and sewerage, power distribution, and urban development; five credits, totaling $51\.0 million, for education and training; two credits, totaling $14\.0 million, for industry; a $2\.0 million credit to promote the exploration of the petroleum and geothermal resources; and a 310\.5 million credit to strengthen and expand the capability of the Ministry of Health to plan, staff and manage the country's health care system\. In FY78, an investment of $2\.4 million by the International Finance Corporation was approved to help finance a dairy and juice project\. Another investment of $4\.0 million by IFC was approved in May 1983 to help finance a dry cell battery project\. Further opportunities for IFC involvement are being explored\. 17\. A major constraint to YAR's social and economic development has been, and will remain for some time, the critical shortage of professional, skilled and semi-skilled manpower, and the newness and weakness of its insti- tutions\. World Bank strategy has emphasized strengthening institutions and manpower capabilities through increased training of local staff and continued technical assistance, as well as through direct financing for education\. Thus all IDA projects in YAR contain substantial institution-building components\. Two particularly important examples of the World Bank's support have been in the Central Planning Organization (CPO) and the Ministry of Agriculture and Fisheries (MAF)\. In CPO, the World Bank (through three grants totaling $520,000) and the Kuwait Fund have financed a team of planning and economic advisers so as to create a planning machinery\. The Bank has also been the executing agency for a UNDP-financed project to assist the CPO in the preparation of the Second Five-Year Plan, 1982-86 (see para\. 11)\. In MAF, the Bank supplies the services of seven advisers initially financed by UNDP with the Bank as executing agency, and now financed jointly by IDA, the EEC Special Action Fund (under the Second Tihama project) and UNDP\. The Agricultural Research Station at Taiz, which has the responsibility for carrying out applied agricultural research for the country as a whole, is also financed as part of this institutional support\. 18\. YAR's disbursement performance (disbursements as a percentage of total commitments) has been affected by a number of implementation problems, although it still compares favorably to the regional average\. Among the recurrent problems that are commion to most countries at YAR's stage of development are; delays in recruitment of consultants, delays in award of contracts and resolution of conflicts with contractors, and finalizing cofinancing arrangements\. The Government and IDA have agreed to hold country implementation reviews twice a year to monitor the recurrent implementation problems more closely and to address them promptly\.  19\. Future World Bank operations are expected to consolidate past achievements in the main infrastructure subsectors, spread the benefits of agricultural and rural development projects to new outlying areas, accelerate assistance to the Government in the energy field, and continue to meet the large requirements of education and training\. Particular attention will be given to YAR's ability to implemenlt projects by insuring the availability of key staff and technical assistance needs\. Projects for agricultural develop- ment in the Central Highlands area of YAR, petroleum products distribution and geothermal exploration have been appraised\. A second agricultural development project in the undeveloped Wadi Jawf region has been prepared and is in an advanced stage of preparation\. Future operations are expected in the areas of power distribution, transport, and mineral exploration and could also include supplemental credits in water supply and sewerage and a possible second line of credit to the Industrial Bank of Yemen\. 20\. vAR has contributed an increasing portion of local currency financ- ing in the past few years when the budgetary situation was favorable\. How- ever, in view of the deterioratior in the budget and the fact that it remains among the least-developed countries, it still requires special assistance through financing of a large part of project costs, including local expendi- tures when necessary\. As in the past, the costs of future projects are expected to be substantially higher than the amounts that IDA can provide, and we shall continue to cooperate closely with other donors so as to maximize IDA's catalytic role in stimulating cofinancing\. IDA-supported projects have led to about $360 million equivalent of cofinancing from other aid donors\. PART III - THE URBAN SECTOR Urban Trends 21\. Urban growth in the Yemen Arab Republic (YAR) is a relatively recent phenomenon which began in the early 1970s\. Only 10 percent of the resident population lives in urban areas\. Urbanization has begun to accelerate in recent years\. Whereas the total resident population of YAR has grown at about 2\.9 percent per annum over the last decade to about 6 million in 1980, the total urban population, estimated at about 365,000 in 1975, has grown at about 7\.7 percent per annum between 1975-80\. Rural-urban migration, especially of males who leave their families in the countryside in search of work, has accounted for most urban growth\. These trends are expected to continue, and are likely to be aggravated by higher population growth, lower international emigration rates, and the migration of entire families to cities\. As a result, the urban population is expected to increase to 20 percent of the total resident population by the year 2000\. 22\. The urban population is fairly evenly distributed\. A widely dispersed rural population, a rugged topography and deeply rooted traditions of regional autonomy have combined to avoid the overwhelming primacy of any  - 7- one city\. Three cities--Sana'a, the capital, Hodeidah, the country's main port, and Taiz, the principal southern trading city -- together accounted for more than 80 percent of the total 1980 urban population\. The most striking demographic characteristic of YAR, however, is the number of people working abroad who account for close to one-fifth of the country's total labor force\. Institutional Framework and Urban Development Policies and Programs 23\. The Government of YAR has only just begun to develop a comprehensive urban policy, as urban issues have emerged relatively recently\. So far, Government intervention in the urban sector has mostly been on an ad hoc basis, with the various ministries or agencies implementing their own projects to meet urban demands\. 24\. The Government, concerned by the deteriorating urban situation and the lack of coordination among various urban development activities, established in 1979 the Ministry of Municipalities and Housing (MMH), and vested in it all authority regarding urban development\. This Ministry has now become the focal point of all government decisions in the field of urban development\. 25\. YAR is administratively divided into 11 governorates, each administered by a governor appointed by the President of the Republic\. Fifteen major urban areas are organized into municipalities which represent the MMH at the local levels of government\. They are headed by "directors general" who are administratively under the governor\. 26\. At the national level, responsibility for managing urban development is shared among the Central Planning Organization (CPO), the MMH, the Ministry of Electricity, Water and Sewerage, and the Ministry of Public Works\. At the local level, these responsibilities are vested in the municipalities\. The system of municipal finance and management generates meager local resources which can finance only limited urban services\. 27\. While the Government is endeavoring to develop a coherent and integrated policy and institutional framework to deal with urban development issues, it is hampered in its efforts by a severe lack of financial resources and a pervasive shortage of skilled personnel at all levels of administration\. These weaknesses, which pose obstacles to development in the urban sector and to improving the well-being of low-income groups, can only be overcome in the long-term\. In the interim, it will be necessary to make effective use of scarce resources through innovative and low-cost solutions, and by continued technical assistance\. Infrastructure and Housing Conditions 28\. Although the development of urban infrastructure is now receiving increasing attention, the most striking feature of the YAR urban setting  -8- remains its lack of infrastructure\. Only about 40 percent of the urban population has access to potable water\. Sewer systems in Hodeidah and Taiz recently came into operation\. Contracts for sewer projects in Ibb and Dhamar are presently under review, and contracts for Sana'a are expected to be tendered shortly\. Moreover, the major cities still lack adeq'\.ately designed and surfaced vehicular and pedestrian facilities\. Garbage collection and disposal is limited, and education and health services are still at a very early stage of development\. Several IDA-assisted projects under implementa- tion would help to install some of these basic services\. 29\. The provision of urban housing is seriously constrained by three factors\. Foremost among these is the absence of a formal land registration system\. The lack of cadastral surveys and of a modern ownership registry has substantially increased the uncertainty of tenure, and resulted in the proliferation of conflicting deeds for the same or ove-lapping properties\. This situation has undermined the establishment of an affective real estate taxation system and complicated the planning of urban infrastructure\. To improve this situation, the First Urban Developmient Project included technical assistance to help develop a modern land registration system in Sana'a and to prepare legislation to apply it on a national basis\. The Government, with bilateral technical assistance, has now established a Land Registration Department under the Survey Authoril:y in the Ministry of Public Works and efforts are currently underway to develop a legal framework for land registration consonant with Islamic principles and common law\. 30\. The second constraining factor is the very high cost of housing due primarily to the high cost of labor and materials, the low productivity of local building contractors, and the high demand for housing\. Rising housing costs have siphoned off a significant proportion of the income of urban residents, and have made access to housing extreme:Ly difficult for low-income groups\. The need for provision of housing at low cost was addressed in the First Urban Development Project through a program of demonstration houses illustrating the feasibility of using low-cost materials and techniques\. The third factor is the absence of a well-developed and coordinated housing finance system\. The Housing Credit Bank (HCB), established only five years ago, has catered mainly to a limited number of medium- and high-income groups\. Low-income groups have had to rely on informal and hence costlier sources of finance, mostly from absentee landlords working abroadl\. The First Urban Development Project therefore included provision of a line--of-credit and of technical assistance to help strengthen the HCB\. IDA's Involvement in the Sector 31\. The proposed project would be the eighth IDA-assisted urban-related project in YAR\. IDA's involvement in urban infrastructure began in 1974 with a credit (CR\. 464-YAR) to help the Government finance the first public water supply system in Sana'a and to establish the National Water and Sewerage Authority (NWSA)\. Since then, three additional credits have been made to  - 9 - YAR's major urban centers in the water supply and sewerage sector\. Except for the Sanaa Water Supply (closed June 30, 1980), all of these projects are still being implemented\. IDA also played a significant role in the estab- lishment of the Yemen General Electricity Corporation (YGEC), which has already received three IDA credits\. At the Government's request, IDA carried out an urban sector review in 1979 to identify major urban development issues\. The review concluded inter alia that: (a) The Government urban development programs should be directed towards the development of urban land rather than the delivery of housing units, an activity best left to private initiative; (b) the Government programs should be targeted to the lowest income groups; and (c) the Government should sponsor specific programs to strengthen the capabilities of local building contractors and encourage the use of low-cost building materials and construction techniques\. The review further concluded that achievement of the above objectives would require the development of an institutional capacity to define and establish appropriate urban development policies, rules and regulations; to acquire and register land; and to implement integrated urban development projects\. 32\. These findings and a review of the construction industry initiated in 1980 under the UNIDO/World Bank Cooperative Program, formed the basis of the First Urban Development Project (Cr\. 1202 YAR), approved in February 1982\. As noted, the project was intended to address the main constraints to urban development\. Specifically, it includes (i) Infrastructure upgrading and sites and services to focus Government interventions on cost-effective land development and provision of infrastructure for lower-income settlements; (ii) a pilot shelter and housing finance scheme designed to reduce housing costs and provide access to mortgage finance for low-income groups; and (iii) institutional development to strengthen MMH's capacity for project execution (including the land registration program mentioned in para\. 29)\. Its implementation is proceeding well; the execution of civil works is on schedule and the institution-building component is being implemented satisfactorily\. 33\. Continued IDA involvement in the sector is necessary to help strengthen the institutional framework for urban development, and to assist the Government in establishing a sound municipal taxation system that would help mobilize resources to pay for urban services\. This involvement can now build on a sound sectoral dialogue and extend the successful experience of the First Urban Development Project--the rationale for the proposed Second Urban Development Project\.  - 10 - PART IV - THE PROJECT Background 34\. The proposed project was initially iderLtified in April 1981 during pre-appraisal of the First Urban Development Project\. Project processing was, however, delayed in light of absorptive capacity constraints in the sector\. Discussions on a second project were resumed in December 1982 and preparation began in January 1983\. The project was appraised in May 1983\. The Housing Department of the MMH (with the assistance of consultants financed under the first urban project) prepared the project through its Urban Development Project Unit (UDPU), thus reflecting the success of the institution building effort initiated under the first project\. Negotiations for the proposed Credit were held in Washington from December 9 to 14, 1983\. The YAR delegation was headed by His Excellency Ahmed Luqman, Minister of Municipalities and Housing (MMH), and included representatives of CPO and MMH\. A Staff Appraisal Report entitled "Yemen Arab Republic: Second Urban Development Project" (No\. 4675-YAR, dated December 22, 1983) is being circulated separately to the Executive Directors\. The main features of the Credit and the Project are summarized in the Credit and Project Summary and in Annex III\. Maps of the country and of the project area are attached\. Project Objectives and Description 35\. The proposed project is designed to further strengthen MMH's capacity to plan, design, and execute integrated urban development programs at the local level; and to provide affordable infrastructure services to the low-income population at minimal cost\. Under the project, the area of Ghuleil, located in south-east Hodeidah, and one of that city's largest settlements, would be upgraded\. Sites and services would also be provided to address some of the growing needs of low-income cotmmunities\. The planning of Ghuleil would help integrate the project into the existing master plan and city networks of Hodeidah\. The upgrading of the existing built-up area of 65 ha would benefit some 13,000 persons while development of about 1,650 infill and serviced plots on a further 40 ha of undeveloped land would cater to future low-income needs\. Concurrently with the above, several measures would be undertaken to further strengthen the institutional capacity of MMH\. In the context of the financial situation that calls for investment cuts, the Government regards this project as a priority in view of the growing urban population and the lack of adequate urban infrastructure and the fact that most of the project's cost will be recovered from the beneficiaries\. Physical Component 36\. The physical component includes; (i) preparation of a general layout and preliminary design of the Ghuleil area for its integration into the Hodeidah master plan; (ii) upgrading and provision of services of the existing built-up area of 65 ha including reblocking and plot subdivision as appropriate to service the needs of the 13,000 residents currently comprising  - 11 - one fourth of the Hodeidah population living in unserviced areas; and (iii) development of 1,650 infill and serviced plots on 40 ha\. of undeveloped land to accommodate future urban growth for groups with incomes between the 15th and 40th percentile of the income distribution curve\. Plot sizes would range from 100 to 150 m2 and about 100 plots would be reserved for rehousing families displaced by upgrading\. This combination of sites-and-services and upgrading at the same location would allow an increase in the density from the present 100 persons/ha\. to about 225 persons/ha and would facilitate effective use of infrastructure\. Major improvements include the provision of roads and footpaths, water supply and sewage facilities including house connections, and electricity and street lighting\. Beneficiaries would be given a land title through the land registration program initiated under the first project; UDPU would provide technical advice to facilitate construction by the beneficiaries; and land would be reserved for social and community facilities such as schools and dispensaries\. The MH's Municipal Office in Hodeidah would operate and maintain a solid waste collection scheme in Ghuleil under a project financed by bilateral aid from the Netherlands\. Technical Assistance 37\. Consultancy and advisory services totalling 216 man-months would be provided to MMH for the institutional development component as follows; (i) Execution and Managementz expatriate staff to be attached to the UPDU will comprise two engineers and one accountant (44 man-months each) and one architect/planner and one socio-economist (24 man-months each); (ii) Hodeidah Municipal Office; to be reinforced by one expatriate municipal engineer (24 man-months); (iii) Cost Recovery Study; consultancy services (12 man-months) to help MMH prepare a study aimed at establishing suitable procedures for the recovery of project costs from beneficiaries and for the creation of a resource base for the future financing and maintenance of urban services; and (iv) Training and Project Preparation; training of UDPU staff ($50,000) and $500,000 for preparation of a possible third urban project\. Overseas training will be provided to the staff of MMH and the Hodeidah municipality in the areas of urban planning, municipal engineering and procurement\. This, together with the on-the-job training provided under the first project, and included under the proposed project through expatriate technical assistance, would help enhance the capabilities of MMH and the Hodeidah municipality in urban planning, project preparation and implementation, and reduce the extent of reliance on expatriate technical assistance in the future\. Project Cost and Financing 38\. The total cost of the project, including contingencies, is esti- mated at about $17\.9 million equivalent, of which about 61%, or $10\.9 million represents the foreign exchange component\. Physical contingencies have been estimated at 10% of infrastructure costs for upgrading and sites and services\. Consultant services totalling $2\.5 million have been estimated at an average of $10,000 per man-month for short-term (up to one year) consultants and about $7,000 per month for longer term specialists, including salaries, fees,  - 12 - overhead, international travel, and subsistence\. These estimates are in line with recent experience in YAR\. Price contingencies reflect the project implementation schedule and likely increases in services, construction costs, materials, and equipment during project execution\. Price contingencies for local costs have been estimated at 15% for 1984, 12% for 1985 and 10% a year thereafter\. Price increases for foreign costs have been estimated at 7\.5% in 1984, 7% in 1985, and 6% a year thereafter\. Physical contingencies amount to 7\.6 percent of base cost estimate and price contingencies amount to 22\.6 per- cent of base costs plus physical contingencies; total contingencies represent 31\.9 percent of base costs, and 24\.2 percent of total project costs\. 4 39\. The proposed IDA Credit of SDRs 11\.5 million (approximately $12 million) would finance the entire foreign exchange cost of the project ($10\.90 million), the local cost ($0\.25 million) of the technical assistance component and about 15 percent of the local cost ($0\.85 million) of the infra- structure works component\. The balance of the project cost ($5\.9 million) would be financed by the Government\. The proposed IDA Credit will be made to the YAR Government under standard terms and conditions\. Project Implementation 40\. Under the overall direction of the Housing Department of the MME, UDPU will be responsible for implementing all project components\. UDPU would be assisted by consultants whose qualifications, experience and terms of employment shall be satisfactory to IDA (Developrnent Credit Agreement, Section 3\.03)\. The project would be executed over a four-year pteriod\. The chief engineer for Hodeidah, who is already in place, will direc;t project execution in close consultation with the Director of the Housing Department, the General Director of the MMH's Municipal Office in Hodeidah and the UDPU Project Manager\. A core team of UDPU personnel consisting of the chief engineer, one implementation engineer, one architect-planner, one financial analyst, and one socio-economist with their counterparts and administrative staff, would be transferred to Hodeidah for project execution following completion of the tendering process for major civil works\. Upon completion of the project, UDPU staff in Hodeidah would be transferred back to Sana'a to assist in the preparation of future projects, or otherwise assigned to ensure wide dissemination of the expertise accrued under the two IDA assisted urban projects\. 41\. All contracts (civil works, equipment and advisory services) would be let by the MME and supervised by this Ministry in collaboration, when warranted, with NWSA and YGEC\. After project completion, infrastructure networks will be handed over as an equity contribution to the respective utility agencies (NWSA and YGEC) which will be responsible for operation and maintenance from their own resources\. Agreements between MMH and NWSA, and MMH and YGEC, satisfactory to IDA, will ensure administrative arrangements during implementation for the provision of technical supervision and for the operation and maintenance of applicable infrastructure (Development Credit Agreement, Section 4\.06)\.  - 13 - 42\. Detailed design and docunents stipulating the general condition of contract for the first phase of works consisting of upgrading and provision of sites and services on 40 ha\. and preliminary design for the second phase of works on the remaining 65 ha\. were submitted to IDA for review during negotiations and are satisfactory to IDA\. Tenders for the first phase of works would be invited by February 1984 with works commencing by September 1984\. The expected completion date for all project works and the technical assistance program is March 31, 1988\. 43\. MMH would keep separate accounts of all project-related trans- actions and an independent auditor, acceptable to IDA, would audit these accounts and would submit his reports to IDA through the UDPU within six months of the close of each financial year (Development Credit Agreement, Section 4\.01(b))\. The UDPU would submit semi-annual progress reports to IDA not less than two months after the end of each semester, including the finan- cial status of the project and appropriate key indicators to measure the progress in meeting project objectives (Development Credit Agreement, Section 3\.05)\. 44\. A Selection Committee chaired by the Governor of Hodeidah or his designated representative will be established not later than six months before the completion of infrastructure works of Phase I (para\. 42) to implement agreed procedures and criteria for selecting beneficiaries with income between the 15th and the 40th percentile of the income distribution curve (Development Credit Agreement, Section 4\.04(b))\. Such criteria would include inter alia the income of the beneficiaries and residency qualifica- tions\. This Committee will include inter alia representatives of the MMH, the Municipal Council in Hodeidah, the Central Planning Organization and the Ministry of Labor and Social Affairs\. Procurement 45\. Civil works for the coabined upgrading and sites and services component of the project (amounting to $13\.9 million), consisting of roads, water supply, sewers, electricity and street lighting as well as preparation and servicing of new plots would be procured through international competi- tive bidding (ICB) in accordance with the guidelines for procurement under IDA credits\. Contracts would be awarded to a general contractor for both phases of the project, or to one for each contract, with prequalification being required\. Goods and equipment financed under the project (amounting to $120,000) would be procured through solicitation of at least three price quotes from IDA member countries, and consultant services (amounting to $2\.6 million) would be procured by MMH in accordance with the IDA guidelines\. Disbursement 46\. Disbursement from proc:eeds of the proposed Credit would be made as follows; (a) civil works, 67% of total expenditures; (b) goods and equipment, 100% of foreign expenditures; 100% of local expenditures ex-  - 14 - factory and 70% of other local expenditures; and (c) technical assistance, 100% of total expenditures\. The disbursement schedule is based on that of the first project which is proceeding on target\. It is about a year less than the average for projects with heavy civil works construction in YAR and is justified on the basis of MMH performance under the first project\. The Credit is expected to be fully disbursed by March :31, 1989\. Cost Recovery 47\. Strong emphasis has been placed during project preparation on cost recovery to ensure long-term replicability\. Project costs related to site preparation, plot demarcation, on-site infrastructure, design and super- vision, and project administration would be fully recovered throtugh down- payments and improvement charges to be collected by NWSA on behalf of the MMH\. This arrangement, which is similar to that retained under the first project, appears the most-effective way to ensure the collection of improvement charges under the prevailing circumstances, given the serious shortage of skilled manpower in YAR\. NWSA is the only institution in YAR which has the administrative and staff capability to perform this service without undue burden\. It would collect the improvement charge simultaneously with the water charge and would keep 3 percent of the collection proceeds to meet its collection costs\. The MMH would be responsible for the enforcement of the payment of the improvement charges\. An agreement between MMH and NWSA on the procedures and administrative arrangements for the collection of improvement charges would be maintained for the life of project (Development Credit Agreement, Section 4\.06)\. 48\. Pricing arrangements in the project area would aim at ensuring equitable overall cost recovery\. To reflect location, accessibility and level of service the plots would be differentially priced by MMH to ensure that existing and future low-income population could afford them\. Land reserved for community services would be transferred to appropriate ministries at cost, whereas land for commercial development would be sold at market value\. 49\. About 84 percent of total project costs would be directly recovered in nominal terms from project beneficiaries\. The cost of off-site water supply and sewerage would be recovered through tariffs (1 percent of total project costs)\. The balance of the cost would be borne by the Government (15 percent of total project costs) and includes mainly expenditures for technical assistance, short-term training, special advisory services, and equipment and office supplies\. 50\. The cos:s of the residential plots would be repaid by beneficiaries to the MMH at an interest rate of 11 percent per annum over a period of 20 years\. A downpaymient of 10 percent would also be required for the purchase of residential plots\. The above on-lending rate to beneficiaries is similar to that applied under the first urban project and is in line with those discussed between the YAR Government and IDA for specialized institutions\.  - 15 - It is expected to be positive in real terms compared to the projected inflation rate of 10 percent from 1984 to 1986\. 51\. To prevent speculative sales, plot beneficiaries would be given a lease-purchase contract in exchange for their monthly payment\. Resale of plots would not be permitted, except through MMH, for at least five years from the date of obtaining the leasehold on their plots (Development Credit Agreement, Section 4\.04(c))\. Upon full payment of the improvement costs, beneficiaries would be given by MMH a freehold title, in line with principles defined under the land registration component of the first project\. Affordability, Poverty Impact and Replicability 52\. An affordability analysis based on detailed surveys of household incomes and housing expenditures was conducted by UDPU in the course of project preparation\. The analysis showed that households are willing to spend 15 percent of their income for infrastructure improvements\. Accord- ingly, the cost of improvement in the upgrading and sites and services areas, including utility payments, for the minimum plot option of 100 m2 would be affordable to more than 95 percent of projected potential beneficiaries\. 53\. The project will address the needs of the poorest people in Hodeidah who currently lack access to serviced land\. At present, about 35 percent of households in Hodeidah are below the 1980 Bank-defined absolute poverty threshold and the 13,375 people in this category who could directly benefit from the project represent 17 percent of Hodeidah's urban poor\. 54\. The financial replicability of the combined upgrading and sites and services scheme is for approximately one-third of all Hodeidah families cur- rently living in low density squatter settlements, and design replicability is facilitated because the Government owns most of the land in Hodeidah\. The cost recovery arrangements described in para\. 47-51 will provide the Government with a steady inflow of funds, pending the establishment of a full municipal taxation system following study being undertaken under the project (para\. 37)\. These funds will accrue to the revolving fund to be administered by the MH and set up under the first project within the Central Bank of Yemen\. They would be utilized exclusively for financing similar operations in YAR's urban sector (Development Credit, Section 4\.05)\. Together with the strengthening of the MMH, such funding would further enhance the Ministry's capacity to implement an expanded, self-supporting urban development program\. 55\. The provision of urban services in the longer-term at a pace commen- surate with growing needs is constrained by the present lack of an adequate municipal taxation system\. To address this problem, the development of a sound land registration system is already being undertaken\. The proposed project includes 12 man-months of technical assistance to carry out a study aimed at establishing a system of fees and taxes to help maintain existing urban services and finance new ones, with terms of reference satisfactory to the Association\. Following completion of the study, the Government would  - 16 - exchange views with the Association and agree on a plan to implement agreed recommendations (Development Credit Agreement, Section 4\.02)\. Project Benefits and Risks 56\. The proposed project would continue to help the Government to redirect public investment in the urban sector toward low-cost, replicable land development programs which would benefit low-income groups while making full use of private initiative\. The combined development of the existing built-up area and the vacant land in Ghuleil would lead to an effective and efficient use of infrastructure\. The project is financially sound, some 84 percent of its costs being directly recovered, with such funds becoming available for promotion of similar projects in other urban areas\. The average rate of return on those investments for which the benefits are quantifiable (representing 80 percent of total project costs) is esstimated at 25 percent\. 57\. Although the MMH has performed well to dlate and has proved its ability to attract qualified expatriate and local staff, it is still a relatively new institution building up its planning and implementation capacity and must face the challenge of being able to retain competent local staff on a long-term basis\. Extensive technical assistance and tr-aining during project implementation will address this need\. Cost recoviery, as in many countries, is a politically sensitive issue and will require a continued strong commitment by the Government\. Under the first urban project, a public relations and public education campaign will soon be launched to sensitize project beneficiaries to cost recovery, but experience in this area is still limited\. Improvement charges under the proposed project have however been tailored to the beneficiaries' abilities to pay and will not be burdensome in comparison with their current outlays on urban services\. PART V - LEGAL INSTRUMENTS AND AUTHORITY 58\. The draft Development Credit Agreement between the Yemen Arab Republic and the Association, and the recommendation of the Committee provided for in Article V, Section l(d) of the Association's Articles of Agreement are being distributed to the Executive Directors separately\. 59\. I am satisfied that the proposed credit would comply with the Articles of Agreement of the Association\. PART VI - RECOMMENDATION 60\. I recommend that the Executive Directors approve the proposed Development Credit\. A\. W\. Clausen President Washington, D\.C\. January 12, 1934  ANNEX I - 17- Page L of 5 T A B L e 3A YEMEN, ARAB REP\. OF - SOCIAL INDICATORS DATA SHEET YEMEN, ARAB REP\. OF REFERENCE GROUPS (WEIGHTED AVERAGES) /a MOST (MOST RECENT ESTIMATE) lb RECENT MIDDLE INCOME MIDDLE INCOME 1 1970/~~ ESTIMATE- N\. AFRICA & MID EAST LAT\. AMERICA S CARIB AREA (TROUSAND SQ\. 12) TOTAL 195\.0 195\.0 195\.0 AGRICULTURAL 96\.6 97\.3 97\.9 GNP PER CAPITA (US$) \. 120\.0 460\.0 1340\.0 2088\.2 ENERGY CONSUMFTION PER CAPITA (KILOGRAMS OF COAL EQUIVALENT) 7\.0 15\.0 62\.0 810\.4 1407\.6 POPULATION AMD VITAL STATISTICS POPULATION,MID-YEAR (THOUSANDS) 4163\.0 5258\.0 7251\.0/c URBAN POPULATION (% OF TOTAL) 3\.4 6\.0 10\.8 47\.4 65\.9 POPULATION PROJECTIONS POPULATION IN YEAR 2000 (MILL) 12\.3 STATIONARY POPULATION (MILL) 38\.7 YEAR STATIONARY POP\. REACHED 2155 POPULATION DENSITY PER SQ\. EM\. 21\.3 27\.0 36\.1 36\.0 35\.6 PER SQ\. EM\. AGRI\. LAND 43\.1 54\.0 71\.9 449\.0 93\.2 POPULATION AGE STRUCTURE (1) 0-14 YRS 42\.4 43\.0 45\.0 43\.9 40\.1 15-64 YRS 54\.4 53\.9 51\.9 52\.8 55\.8 65 AND ABOVE 3\.2 3\.1 3\.2 3\.3 4\.1 POPULATION GROWTH RATE (%) TOTAL 2\.3 2\.3 2\.9 2\.9 2\.3 URBAN 8\.1 8\.0 8\.2 4\.6 3\.7 CRLDE BIRTH RATE (PER THOUS) 49\.7 48\.8 48\.5 42\.5 31\.5 CRUDE DEATH RATE (PER THOUS) 28\.9 26\.5 22\.8 12\.0 8\.1 GROSS REPRODUCTION RATE 3\.4 3\.3 3\.3 3\.0 2\.0 FAMILY PLANNING ACCEPTORS, ANNUAL (THOUS) USERS (% OF MARRIED WOMEN) \. \. FOOD AND NUTRITION INDEX OF FOOP PROD\. PER CAPITA (1969-71-100) 119\.0 84\.0 96\.0 97\.5 113\.0 PER CAPITA SUPPLY OF CALORIES (I OF REQUIREMINTS) 90\.0 76\.0 76\.0 102\.3 111\.3 PROTEINS (GRAMS PER DAY) 69\.0 55\.0 58\.0 72\.0 67\.9 OF WHICH ANIMAL AND PULSE 18\.0 14\.0 19\.0/d 17\.8 34\.1 CHILD (AGES 1-4) DEATH RATE 60\.4 \. 50\.0 15\.2 5\.3 BRALTH LIFE EXPECT\. AT BIRTH (YEARS) 35\.8 38\.5 42\.6 57\.2 64\.6 INFANT MORT\. RATE (PER THOUS) 211\.6 \. 190\.0 104\.2 62\.6 ACCESS TO SAFE WATER (%POP) TOTAL \. 4\.0 4\.0/e 59\.3 64\.8 URBAN \. 45\.0 30\.07-1 84\.9 77\.8 RURAL * 2\.0 2 \.07e 37\.5 44\.3 ACCESS TO EXCRETA DISPOSAL (% OF POPULATION) TOTAL \. \. \. \. 54\.6 URBAN \. \. \. \. 69\.8 RURAL \. \. \. \. 29\.8 POPULATION PER PHYSICIAN 130090\.0 24370\.0 11670\.0 3536\.0 1776\.0 POP\. PER NURSING PERSON \. \. 4580\.0 1820\.7 1012\.2 POP\. PER HOSPITAL BED TOTAL 2730\.0 1430\.0/f 1700\.0 643\.3 477\.0 URBAN \. \. 230\.0 545\.0 667\.5 RURAL \. \. 6750\.0 2462\.0 1921\.6 ADMISSIONS PER HOSPITAL BED \. \. 14\.3 26\.4 27\.2 HOUSINC AVERAGE SIZE OF HOUSEHOLD TOTAL \. \. 5\.O/g URBAN \. \. 4\. 2j7,* RURAL \. \. 6\.0/ AVERAGE NO\. OF PERSONS/ROOM TOTAL \. \. 2\.8/ URBAN \. \. 1\.b7jp\. RURAL \. \. 3\.1\. ACCESS TO ELECT\. (% OF DWELLINGS) TOTAL \. \. \. 46\.2 URBAN \. \. 56\.5/g, 77\.6 RURAL \. \. \. 16\.1 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _- _ _-_- _ _ _ _- - _ _ __- _ _-_- _ _-_- - _- _ _-_- - _- _ _- _- - _- _ _- _ - -_ _ - -_ -  ANNEX I -18 - Page 2 of 5 T A B L e 3A YEMEN, ARAB REP\. OF - SOCIAL INDICATORS DATA SHEET YEMEN, ARAB REP\. OF REFERENCE GROUPS (WEIGHTED AVERAGES) la MOST (MOST RECENT ESTIMATE) /b RECENT MIDDLE INCOME MIDDLE INCCME 1960, 1970b ESTfLMATE/ N\. AFRICA & MID EAST LAT\. AMERICA & CARIB EDUCATION ADJUSTED ENROLLMENT RATIOS PRIMARY: TOTAL 8\.0 12\.0 47\.0 89\.6 105\.0 MALE 14\.0 23\.0 82\.0 104\.8 106\.3 FEMALE 0\.4 2\.0 12\.0 72\.4 103\.6 SECONDARY: TOTAL \. 1\.0 5\.0 41\.7 40\.0 MALE \. 2\.0 \. 52\.8 38\.6 FEMALE \. 0\.1 \. 31\.2 41\.2 VOCATIONAL (%\. OF SECONDARY) 3\.2/i 2\.2 4\.6/k 10\.3 34\.0 PUPIL-TEACHER RATIO PRIMARY 45\.0/i 51\.0 44\.0 31\.9 30\.7 SECONhDARY 24\.07' 24\.0 18\.0/g 23\.3 16\.7 ADULT LITERACY RATE (X) 2\.5/i 10\.0/f 21\.0 43\.3 79\.5 CONSUKPTION PASSENGER CARS/THOUSAND POP \. \. \. 18\.0 45\.6 RADIO RECEIVERS/THOL'SAND POP \. 15\.3/f 15\.6 138\.1 228\.2 TV RECEIVERS/THOUSAND POP \. \. 0\.2 45\.6 108\.3 NEWSPAPER ('DAILY GENERAL INTEREST") ClRCULATION PER THOUSAND POPULATION \. \. 10\.7 \. \. 31\.0 64\.1 CINEMA ANNUAL ATTEEOANCE/CAPITA \. \. 0\.9/d 1\.7 2\.9 LABOR FORCE TOTAL LABOR FORCE (THOUS) 1263\.0 1481\.0 1809\.0 FEMALE (PERCENT) 3\.7 4\.5 5\.4 10\.7 24\.8 AGRICULTURE (PERCENT) 83\.0 79\.0 75\.0 42\.5 31\.3 INDUSTRY (PERCENT) 7\.0 9\.0 11\.0 27\.8 23\.9 PARTICIPATIOS RATE (PERCENT) TOTAL 30\.3 28\.2 24\.9 25\.6 31\.3 MALE 57\.7 55\.0 49\.9 45\.4 49\.8 FE14ALE 2\.3 2\.5 2\.6 5\.6 14\.8 ECONOMIC DEPENDENCY RATIO 1\.5 1\.6 1\.9 1\.8 1\.4 INCOlE DISTRIBUTION PERCENT OF PRIVATE INCOME RECEIVED BY HIGHEST 5% OF HOUSEHOLDS \. \. \. HIGHEST 20% OF HO USEHOLDS \. LOWEST 20% OF HOUSEHOLDS \. LOWEST 40% OF HOUSEHOLDS \. POVERTY TARGET GROUPS ESTIMATED ABSOLUTE POVERTY INCOME LEVEL (US$ PER CAPITA) URBAN \. \. 366\.0 276\.1 289\.8 RURAL \. \. \. 177\.1 184\.5 ESTIMATED RELATIVE POVERTY INCOME LEVEL (USS PER CAPITA) URBAN \. \. \. 400\.0 519\.8 RURAL \. \. 157\.0 283\.3 372\.1 ESTIMATED POP\. BELOW ABSOLUTE POVERTY INCOME LEVEL (%) URBAN \. \. \. 22\.0 RLRAL \. \. \. 30\.8 NOT AVAILABLE NOT APPLICABLE N O T E S /a The group averages for each indicator are population-weighted arithmetic rneans\. Coverage of cour tries amorg the indicators depends on availability of data and is not uniform\. /b Unless otherwise noted, "Data for 1960" refer to any year between 1959 and 1961; 'Data for 1970" between 1969 and 1971; and data for "Most Recent Estirate" between 1979 and 1981\. /c Resident population, includes migrant workers abroad for less than a year; /d 1977; /e 1976; /f 1972; Lg 1975; /h In the major cities of Sanna, Talz and Modaidah; /i 1962; /j 1973\. May 1983  -19 - AMIEX I Page -3 of- \.5,- OZF\.IsrIONS OF SOCIAL INDlICdfOi Notes- Al thoogh ohs\.aaa d d- , rn rIm eerly uge h moss autor fIIIIlol aod , reial It t l A o t Pnoedththpey not he \.t\.nae\.i\. dea-ihbodr fs5ono o on nreoda, and ouoonteora ao did tfferstoPas - - tte ronns\.e foe\. teft \.g Ap are h -Os routte Oroty OF tOe sbjeos ro\.sey and (2) a -Onry group altO -oseha highrrao-rge IOuro sh-otshe roa\.try groap Ofth -otJsrttor lt IrIfr hOt "'ros Oil torortee' Eroopehe- "saddle -\. iroms no thifrm and Iddl toot \. ish\.Oan betuOse OF tofsanorioa st foo \. Inne refar-' iro-y d-n the doeeagea on popotanlon celged erilhsacnar Or earnI ndirator and chao- oniy ahe- onJ-ty ohse of essi eneerised nnsteningasregnsofon tndinatosoesosher\. tessaoaragsare anlyostolatroeprirgslneoaueofeonesntradotareeassam_ngttete\.nstyaa refeteore groupa\. ~ OO - total sotfate area ronyrinstf sand area and inland sthers; 0960e,e pypIO _ a_eR thiild e af seda enls en oonnsst-n 190ad 1990l-O dse-\.Ppuain eOaeigPesn- Pplnr lle ynne tpast s1 tAlualAnOeefumOOst5ah-edeyoatY\.ynsnotyolanteaaeaatsnrae,asftatoae\.ierid5nesss for rop, pssosa teOn- r n "ts ardesa to ilielsss 1960, tosogot lha,rh-es PjlIOd_d%b_~~ F p-, 1970 and l980 deaP\.aado e opnlae oa ehsO, n orl epaatn sts AE-11 ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~~~eao o N\.rs itddh ehe Pr-- "ir respers-tds nbhe at has \.a\.bed 1960, 190, and 980 data hpodlent One yyslrlao natsfi5besoaa1eo6Cdat penopa_ptaanae 1960 ?ER adIOAdt\. ra OAtiti ss de bIJOs J plr-pa/-esr- hobeanaOf aediI\. bea f0on 97l Poe dlat9on fd\.Osan isootds W-ha of 1 Joll ; 190( 91 n19 991\.) PI!otl(ylo te I IToa oa1:ets opadissions to\.nr iso\.eI asoogrootries; intO 19,ad191dt\.'lla Sn fhashl It pesnatrIoshldb otl rhe indttl PoroloOiAO Pojettoota -0\. OAooeholdroosisno ofa geoup of ndso5doale slo shone siie"Yqfsreer tohal populaIon hp ad\. austoorOtheirmortality ad feersltty Oe householdfoe staers_aaIIpurposes ce60y1na0 i-daltl i esl iespmatysaiigt7\. d1s98ags erpatansy tailogeso lad o-ementtutts ptara\. The persoesar foe fertillnnhrantalso"Oane nOrse/lanis uho\.riad\.oets asoaogdatosintetilparodig oInos Ioe ndpot asf tcest leon _lion(pseessof eslog)-ttl IIah , adraa P PULaIONlAN rIArLnom\.hrrotnI iootge oeo hn ieCnesatsdei S5l,S- att ePrIltn -oii asgqenr as'mY s \.To-monaOipo--fstiliOhnan y forpro60co197r0 os- s oftosl,tia- ontoral-dollldanrasPsrn Ofs dO,e\. \.-Inn stn onry poplotlo d8entitdtogroot harsh-li rat _ baoaltoite dath aba aedole`theatetOHZfIO Ch-in he11 alOtd onyafe feilIn aodjandsoolsn IFto d-cfahtohetlasnlaoo\. botarttduIotrte,Ofd-s HOUING ncolhtloaenfsl-ts oa,aeofai popolanton sits soil Ot taauhed\. l Saf hoh\. oroathoId --,nta, Oas n fsi- Oosad asr\. a -ss snadr Population Irnafehy- --uo- tlonreulreOf - a- sfoo year ofayrod emapintatis only; 1960, 1971 and OSlO data\. tnranlonalenrollsent Ipetoert of secondary) - Oooanionsl snenisotbosa C\. eel U\. Plruhastn htSrcueIproo COhI\.IyilOr (01 or ,aridat I-Icuetootl catOl,A te rrgrseioh pe dt a\.-Iad to yaesl\.ad ,otrad(I neaesodoa -la rFrnoos fi-ya atytadpoteeatscns Y Lostitusons "Iuano Iothts (yrssI-sfo onl tAhyos tstlod rrlaar andiI -eodory lOa d-Iirode byoohss f echrsOnsy a Crde-l-O AatIe\. huad roidah pet op--Ooosad o mrId-fed Passened CasE-11 osn orlsol- asnercr oy-s oo ro-h gpn-d-unl Of _oe-AoarA,e nuahel f do1taraaoanll as\.s -O nay-ehciy NOa nA1rai5 nspclote yarll-od If he bnote- cef yheenag-ecfctdoOsesyI ret o Ouodatleln i t epeeofiecOner tnt edg fatnlnot-csfoa,anuIi_nadohaulabaoacpOF Fateas-b I d_effert fdataffretest Oeat saathnsprb-ystms ofbit-cnto Pden:1itas \. undneau suao rat11 Ioa fsoyyono counrie a\.ls\.d\.a\. nhog Paip lctog-\. r Ipccn -ofsridomn-Peernefnrlod\.i\.era \. pchlIch yen fhoad- pnpolat \. esldeuniesdfn eor dhua Hod i_o ofuI rood _cO_uod dus\. I-rodouonsrba,nndad sobedily'- 11 it i12ae 1c at - i Oa f netu ie\.ast bosYd on19 os60 eaaycoaeriea gOs 916, 1970,d18 eA and 1981 dots\. Idle r-tofoCs-, I \. I anOnt,ad boeai tok eIIpIosecod nna ed seeds, cryarahibr; -lHi 197 andly 198 den\.dr I- , \. 1 Feeltsosdinfood peoasio, sn aesi ltthiin enYl - -tnc nd)-y femleliio foreda pyerenngeo sono lo fee attnoodsni1981 i-A17 'ol I-tO dalta, and eld d-Ectr ft-y sne ad\. ge1 a pO, eroeotnge o5 sy tti _ooe ote 90 n _t sopy fTolpr Idf\.te dopy hy of oo Isdeind af Idh1Oe\. farN-c-ator - (rer\.ent -toal me \. and fe -le -Pati-tstse fo l oo,spiIs etahlhd y130 rrio-t ilosano,t et r optd ntt' ae n f as Ins Thie -oelroo tce; 96-65,197 andel -1980 dae onel eednt et 1a96oof po70etl-onde lF sa 65end,, onses data\.,I \.rI -l CO pOf O \.i \. P\.j 155e 51f d10f -Y--5O b - \.b~ii cPrl (ae -1tatRt e tuad(-u s etsprnnuodO perceotnos of POicn li_e(hnnanns adsn) ssis e tte coaneriss dat dentoe fin lifeI table;mo 1970 ard- inl data,-hoeholds yea of\. ged pe tfona- lIe-dh;16,10 n 18 aa bootpnry noeloli htIc ifne be ' hTh ia ototaltneosssotonafrsprtecidMUoesttai\.atd oHalellcanenyncnleola o"hidfsorg yraitar sslnnyoln(s nrataeslfhePraptlO pcuosoo\. ca eronb\.f\.fe-ash\. rbclosl dpiedrothros or-oraaon l noti ooadysdcoeot oethoO osoos lcaliihdposmett-ocsgaross d lingsubaae fran a booon nap ha consIdered ~~~~~~Os aoi adInhb rusc ,,\., acess of C_a telae naa o oo bouePiryItn LoaOect r houe\.nortu aeaseaoosleocsn oiaprsa_he PtoyosSeaeradoa-ecn frrattnohnnprlsor'aan nenhetofnbshosslnoodctotsacsnuptndsdsrropotlonsn psrto cood t eo day In I f I-hn tho "tioiler' srouter snade\.- Ieoiaan mIercFcllaoos\. a 19  - 20 - ANNEX I Page 4 of 5 ECONOMIC INDICATOR', NATIONAL ACCOUNTS (US$ Mln) ANNUAL RATE OF GROWTH 1982 (Constant Prices) (Current Prices) FY1977-81 FY1982 GNP at Market Prices 1/ 3685 6 5 GDP at Market Prices 3253 6 5 Gross Domestic Investments 1384 26 4 Gross National Savings 872 1 -4 Exports of GNFS 324 24 21 Imports of GNFS 2417 13 6 OUPUT, LABOR EFORCE AND PRODUCTIVITY (1981) Value Added Resident Labor Force V\.A\. Per Worker US$ Mln % Thousand % _S$ % Agriculture 820 32 830 69 988 47 Industry 206 8 54 5 3815 182 Services 1492 60 318 26 4691 224 TOTAL/AVERAGE 2518 10( 1202 100 2095 100 GOVERNMENT FINANCE (YRls Mln) % of GNP 1978/79 1979/80 1981 1982 1982 Current Receipts 2161 2755 3277 3720 22 Current Expenditure 1847 2531 3253 4584 28 Current Deficit/Surplus 314 224 24 -864 -5 Capital Expenditure 2618 2492 3807 4321 26 External Assistance, Net 1904 976 2437 2865 17 (including Grants) MONEY CREDIT AND PRICES ---YRls Million Outst:anding End Period--- 1980 1981 1982 March 1983 Money Supply 9180 9905 L2519 13075 Claims on Government 2017 4039 8488 9332 Claims on Private Sector 2939 3234 3346 3513 ----------Perce!ntages-------- 1979/80 1981 1982 Money Supply as % of GNP 63 66 75 Annual Increase in; Money Supply 16 8 26 Consumer Price Index 11 5 3 _/ Not including private transfers by Yemeni migrants whose dturation of stay abroad exceeds one year\.  - 21 - ANNEX I Page 5 of 5 BALANCE OF PAYMENTS (US$ Mln) _/ 1978/79 1980 1981 1982 Exports of Goods, fob 3 13 10 5 Imports of Goods, cif -1250 -1915 -1748 -1967 Trade Balance -1247 -1902 -1738 -1962 Non Factor Services, net -36 -21 -51 -37 Transfers and Factor Income, net 833 1084 788 924 Balance on Current Account -450 -839 -1001 -1075 M & LT Capital, net 416 600 542 649 Official Grants 312 148 337 445 Official Loans, net 2/ 104 452 205 204 Disbursements (114) (467) (262) (246) Repayments (-10) (-15) (-57) (-42) Other Capital (including errors and omissions), net 162 167 126 72 Increase in Reserves (-) -128 72 332 354 Net Foreign Assets 1350 1392 1059 706 EXTERNAL PUBLIC DEBT DEBT SERVICES RATIO (1982) 3/ (US$ million) 1982 % Total Outstanding 2244 Total Outstanding and of which disbursed 1312 Disbursed 3\.6 1/ Based on Central Bank's statistics\. These figures differ slightly from National Accounts' ones produced by CPO\. 2/ Based on figures published in the Central Bank's financial statistical bulletins\. These figures differ slightly from debt information compiled on a loan-by-loan basis\. 3/ Workers' remittances and transfers included in denominator\. EM1DB August 1983   - 22 - ANNEX II Page 1 of 2 THE STATUIS OF BANK GROUP OPERATIONS IN THE YEMEN ARAB REPUBLIC (As of September 30, 1983 - ' Million) A\. Statement of IDA Credits 1/ Amount Credit (less cancellations) Number Year Borrower Purpose IDA Undisbursed Eleven credits fully disbursed 88\.5 662 1976 Yemen Arab Republic Livestock Credit and Processing 5\.0 0\.6 670 1976 Yemen Arab Republic Sanaa Water Supply II 10\.0 2\.6 714 1977 Yemen Arab Republic Port Development 6\.0 0\.6 794 1978 Yemen Arab Republic Highways III 11\.5 4\.2 805 1978 Yemen Arab Republic Tihama Agriculture II 10\.5 2\.3 837 1978 Yemen Arab Republic Power Distribution 10\.0 3\.1 880 1979 Yemen Arab Republic Tihama Agriculture III 15\.0 12\.7 915 1979 Yemen Arab Republic Education III 10\.0 3\.4 950 1980 Yemen Arab Republic Ibb and Dhamar Water Supply 12\.0 11\.8 978 1980 Yemen Arab Republic Tihama Agriculture IV 5\.5 2\.8 1025 1980 Yemen Arab Republic Fisheries Development 17\.0 12\.2 1067 1980 Yemen Arab Republic S\. Uplands Rural Dev\. II 17\.0 2/ 8\.7 2/ 1102 1981 Yemen Arab Republic Regional Electrification 12\.0 3\.0 1122 1981 Yemen Arab Republic Industrial Development 12\.0 5\.4 1202 1982 Yemen Arab Republic Sanaa Urban Development 15\.0 12\.6 1203 1982 Yemen Arab Republic Education IV 12\.0 9\.9 1216 1982 Yemen Arab Republic Petroleum and Geothermal Exp\. 2\.0 1\.3 1259 3/1982 Yemen Arab Republic Agr\. Research and Development 6\.0 5\.7 1267 1982 Yemen Arab Republic Highways IV 7\.0 6\.6 1294 1982 Yemen Arab Republic Health 10\.5 9\.0 1308 3/1982 Yemen Arab Republic Agricultural Credit 8\.0 7\.9 1340 1983 Yemen Arab Republic Education V 10\.0 9\.7 1361 3/1983 Yemen Arab Republic Power III 19\.0 18\.5 Total 331\.5 4/ of which has been repaid 0\.2 Total now held by IDA 331\.3 Total undisbursed 154\.6 1/ The status of projects listed in Part A is described in a separate report on all Bank/IDA-financed projects in execution, which is updated twice yearly and circulated to the Executive Directors on April 30 and October 31\. 2/ Beginning with Credit 1067-YAR, credits have been denominated in Special Drawing Rights\. The dollar amounts in these columns represent the dollar equivalents at the time of credit negotiations for the IDA amounts and the dollar equivalents as of September 30, 1983, for the undisbursed amounts\. 3/ Not yet effective\. 4/ Excludes a credit of $13\.0 million for the Fifth Highway Project which was approved by the Executive Directors on September 13, 1983 and signed on October 17, 1983\.  - 23 - ANNEX II Page 2 of 2 B\. Statement of IFC Investments (Amount in US$ millions) Year Obligor Type of Business Loan Equity Total 1978 Yemen Dairy and Juice Dairy Products 2\.4 - 2\.4 Industries Co\. Ltd\. 1983 Yemen Dry Batteries Dry Cell Batteries 3\.25 0\.75 4\.0 Total Gross Commitments 5\.65 0\.75 6\.4 less cancellations, terminations, repayments, sales - - - Total commitments now held by IFC 5\.65 0\.75 6\.4 Total Disbursed 2\.4 - 2\.4 Total Undisbursed 3\.25 0\.75 4\.0 C\. Other Bank Group Activities Two Bank grants of $200,000 each, and one of $120,000 were approved in July 1971, September 1973 and January 1976 to help finance, jointly with the Kuwait Fund for Arab Economic Development, a team of planning and economic advisors and later a management/administrative expert\. The Kuwait Fund provided grants of about $200,000, $300,000 and $425,000\.  - 24 - ANNEX III Page 1 of 2 YEMEN ARAB REPUBLIC SECOND URBAN DEVELOPMENT PROJECT SUPPLEMENTARY PROJECT DATA SHEET Section I; Timetable of Key Events (a) Time taken by country to prepare seven months (March- project; September 1982) (b) The agencies which prepared the project: MMH with the assistance of consultants (c) Date of first presentation to IDA: April 1981 (resumed December 1982) (d) Date of departure of appraisal mission: May 15, 1983 and completed in October 1983 (e) Date of completion of negotiations; December 14, 1983 (f) Planned date of effectiveness; May 1984 Section II; Special Implementation Action by IDA None Section III; Special Conditions (a) Condition of Effectiveness; None (b) Other Conditions\. Undertake a study that aims at establishing fees and taxes to maintain and finance municipal urban services, and exchange views on the recommendations of the study and agree on a plan of implementation (paragraphs 37 and 55)\. Agreements between MMH and NWSA and MMH and YGEC satisfactory to IDA, will ensure administrative arrangements during implementation for the provision of technical supervision and for the operation and maintenance of applicable infrastructure (para\. 41)\.  - 25 - ANNEX III Plage 1 of 2 Beneficiary selection criteria, satisfactory to IDA, would be applied by a duly established selection committee (para\. 44)\. Satisfactory cost recovery arrangements would be maintained by the Borrower (para\. 47)\.  IBRD 17364 This map has been prepared by ( 40 44° AUGUST 1983 The World Bank's staff e-clusvetlg for the convenience ot the \.iSI readers and is eocf-si'eiy for the 20 20° Interntal ue of The Wortd Bank Zi - and the Internatonal Fina s><SZMN> / C,orportion TZ deno-amhateos i\ X S \9\ SAUDI ARABIA ' used and the boundaries shown am j$I on this map do not -mpty on the \. fe t part of The Wortd Bank and the Re~ nternatonat Fihance Corporatton, \._ ofay territoy Or any f YEMEN' / ant ,sdret on th spt Xfts <o\.~ ~yjZc-ii enoseet hr coeptanne of soon boundaries ifm < \ oSo/if > 1- E T HIOP IA Guff oVf A d enr R e Td R e \.0 YEMEN ARAB REPUBLIC SECOND URBAN DEVELOPMENT PROJECT \ HODEIDAH: LOCATION OF PROJECTSITE Project area ,Preliminary planning area S _ \ \\-0 X; \. - Hocdeidah urban area\. \o e Zobi \. \. \. - \. Squatter settlement areas AiRPORT Worker housing area \, '7 j \. Medium income (reas| Mixed commercial -residentialoare as +W Commercial center 09q - -g:\ S all-scle industry areos F W ishin g port i'^ s Port expansion and related industrial area, / 1l 1 X ,::Airport oreo D])\ \. ' \.,,, Roads i Q( A r :) -1 -Elevation contours (meters)\.l / \ - - International boundaries d1 A ') X 0 KILONlETERS 0 1 2 3 4 ) X I I I -\. MILES O0 2 3, ' o   ,J ISLAMIC - Ar' 4S -RAO TRE OF AAA\.SA < IRG E F N IRAN YEMEN ARAB REPUBLIC >,>!k,pWAt ;m-' IDA-ASSISTED PROJECTS BY SECTOR X,UAECF \., B Ji 2 I a R \.E: e \.,\. PROJECTS SAUDI ARAB A oTec\. Agricalteral Cooperative and Agrcult\.rtal Credit Bonk A ~~~~~~~~~~~~~Agricut-ra Researc Center s -4-rwN -' < < < 1 JN ' - Demonstration forms Oreotiri ~~~~~~~~~~~~~~~~~~~~~~~~Gram St\.rage _ tLIA ! O = = \. MAAA1}$ '?Sg *; \. d \. ; ' ;0 Q ; 0 tf: - 0 F,sh Markets __________________________ ~~~~~~~~~~~~~~~~~~~~Health 7 I -\. p ~~~~~~~~~~~~~~~~Edl\.cat-a SAAVA I ~~~~~~~~~~~~~~~~Highewys ' \. = = > / B= 1; Highway Maintenance TI - -~~~~~~~~~~~~R= ~~\. , ;- - ~ ~ 9 ' ffi 5 0 i;: 3 ; ;3 j 0 /X;; 3 ~~t-B tg ~ PawEr Distrihutian Areas - * Fewer ~~Sta tin ] ] \ -N$1 : r-- ---^ 2 S ; _ ~~~~~~~~~~~~~~~~~~~~~~~~Transmission Lines Water 5apply Part D13e-1pment r-<, _-\'' \.s' ' ____ _ ___ ___ \ ~ ~ 1 , f : Urb-n De-elaprent -; ,f / > ' i /_r-3; '~Bsg 0 3 EXISTING FEATURES FrNrary Raads - - - - - ~~~~~~~~~~~~~~~~~~~~~~~~~~~~Secondary Roa\.ds Hoth ,orts Governorote Capiltas Br~ ~ ~ , , , BA ; \.ar National Capitols o il ~ ~ ~ i 2 ,i ,' ' \. ow \.S ewrB4B '--~' IntarnaBional Boundaries C _ _ - '"i - -=° id <,! ' ,\.fa ElecotioE (-atersL - HAJJ~- < 2 - , - \.s-si hJg't f \.'; \. ;0 oJ1500 300 d' howbh \. 0 I ~ \./ _ _ AL MAHWEST n2~ ~ iB0 ~ ~ oi A, 3 >, ^ _'m P;9t; ! l E} O 20; elciyerata 0 N~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~c 0 \. Ma'*dinJt Al Ahi B OHAMAR Z\. __7 -- ,d ,' ,'\. ,i _ _ Ro1nrkk' - T - '\ Sopwolkn = ~~~~~~~~~~~~~~~~~~ -~ I i < - 'npm 4- ' < - ~~~~~- - g fA*7\. \. t\.s /2 sf AL ~~~~~~~~~BEIDA B -~~~~~~~~~~~~~~~~~~~~~PfOETYA 0 'K\.t t9\.Al H\.yb-n -Ig 4B-UBE I I2 E3pm F: E B- 'NmaBTes = - 'ALda/ \\._m ~-~~ \.__\. TR -EDA L T I MpCh\. -- ,B =LY \. ~MBe \. \. "a HDI WAE iErrLThSdEGE , ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ \. M IDWAE E eTEM BA i 7AN l't R7RRO - _ -ARA -BOBS ID 1S f C l_l I ~~~~~~~~> 1 o: r hDEN TRA9/AlHoyan 1OA AdPICU_TURE BT 4E4 ~~~ MrrAGA ~ ~ ~ ~ ~ ~ FTM ,~ ~ ~ ~ ~ ~ ~~~~~~~- - BoF el M(de BUrOHE BcLBo UDNEABLBOO DiELE BET B YouEras eOada,n ~ 0BTBLB\. ,TLNA B tEVe!LELT B B ' ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~~~~~~~~~~~~~~~~~~~- AEIULUALRrCH E nE\.-pEKT Al:R Mocha -~~d -\.~\. W_ B dB\. \.W R\.IBO aTUoL -1B0BSAB r I-- ilf OBJBOnBB A BIR f-nzme C Tm AonrOedfooBfi3n'-r 0a M0000 orDorBtnm am fTOmCdperOI irSB _ r m triAG lsicon Aa art70 mtmo AyAT7erdr rDhc fVhf 7 '~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~~ ~ ~~ ~~ ~~~~~~~~~~~~~~~~~~~~~~~~no Bi550 4S'T,,,itP

APPROVAL

P168961

FOR OFFICIAL USE ONLY Report No: PAD3373 INTERNATIONAL DEVELOPMENT ASSOCIATION PROJECT APPRAISAL DOCUMENT ON A PROPOSED CREDIT IN THE AMOUNT OF SDR 133\.1 MILLION (US$191 MILLION EQUIVALENT) TO THE PEOPLE'S REPUBLIC OF BANGLADESH AND A PROPOSED GRANT IN THE AMOUNT OF SDR 12\.6 MILLION (US$18 MILLION EQUIVALENT) TO THE ISLAMIC REPUBLIC OF AFGHANISTAN FOR A HIGHER EDUCATION ACCELERATION AND TRANSFORMATION PROJECT JUNE 2, 2021 Education Global Practice South Asia Region This document has a restricted distribution and may be used by recipients only in the performance of their official duties\. Its contents may not otherwise be disclosed without World Bank authorization  CURRENCY EQUIVALENTS (Exchange Rate Effective April 30, 2021) 0\.69638 SDR = US$1 1 SDR = US$ 1\.43599 77\.52 Afghani = US$ 1 BDT 84\.75 = US$ 1 BANGLADESH FISCAL YEAR July 1 - June 30 AFGHANISTAN FISCAL YEAR December 21 – December 20 Regional Vice President: Hartwig Schafer Mercy Miyang Tembon (Bangladesh, Bhutan), Henry Country Director: Kerali (Afghanistan) Senior Global Practice Director: Jaime Saavedra Chanduvi Regional Director: Lynne D\. Sherburne-Benz Practice Manager: Mario Cristian Aedo Inostroza Mokhlesur Rahman, Koen Martijn Geven, Venkatesh Task Team Leader(s): Sundararaman  ABBREVIATIONS AND ACRONYMS AFMIS Afghanistan Financial Management Information System ARTF Afghanistan Reconstruction Trust Fund AfgREN Afghanistan Research and Education Network AUW Asian University for Women AWPB Annual Work Plan and Budget BdREN Bangladesh Research and Education Network BACS Budget & Accounts Classification System CERC Contingent Emergency Response Component CPF Country Partnership Framework ESCP Environmental and Social Commitment Plan ESF Environment and Social Framework (ESF) ESMF Environmental and Social Management Framework GBV Gender-Based Violence GoA Government of Afghanistan GoB Government of Bangladesh HEAT Higher Education Acceleration and Transformation HEDP Higher Education Development Project HEI Higher Education Institution HEMIS Higher Education Management Information System HENSA Higher Education Network of South Asia HEQEP Higher Education Quality Enhancement Project IPR Intellectual Property Rights IQAC Institutional Quality Assurance Cell LFS Labor Force Survey LMI Learning Management Infrastructure MDG Millennium Development Goals MOE Ministry of Education of Bangladesh MoF Ministry of Finance MOHE Ministry of Higher Education of Afghanistan NEP National Education Policy NHESP II National Higher Education Strategic Plan II OMST Operations Management and Support Team (Afghanistan) PBF Performance-Based Financing PDO Project Development Objective PIC Project Implementation Committee (Bangladesh) POM/PIM Project Operations/Implementation Manual PPSD Project Procurement Strategy for Development PSC/pSC Project Steering Committee (Bangladesh and Afghanistan respectively) RCC Regional Coordination Committee SAARC South Asian Association for Regional Cooperation SEP Stakeholder Engagement Plan SHED Secondary and Higher Education Division UGC University Grants Commission UTTA University Teachers Training Academy The World Bank Higher Education Acceleration and Transformation Project (P168961) CONTENTS DATASHEET \.1 I\. STRATEGIC CONTEXT \.8 A\. The Impact of COVID-19 on Higher Education in South Asia\. 8 B\. Regional and Country Context \. 9 C\. Sectoral and Institutional Context \. 12 D\. Relevance to Higher Level Objectives \. 16 II\. PROJECT DESCRIPTION \.17 A\. Project Development Objective \. 17 B\. Project Components \. 17 C\. Project Beneficiaries \. 24 D\. Results Chain \. 25 E\. Rationale for Bank Involvement and Role of Partners \. 25 F\. Lessons Learned and Reflected in the Project Design \. 28 III\. IMPLEMENTATION ARRANGEMENTS \.28 A\. Institutional and Implementation Arrangements \. 28 B\. Results Monitoring and Evaluation Arrangements \. 29 C\. Sustainability \. 29 IV\. PROJECT APPRAISAL SUMMARY \.30 A\. Technical, Economic and Financial Analysis\. 30 B\. Fiduciary \. 31 C\. Legal Operational Policies \. 39 D\. Environmental and Social \. 39 V\. GRIEVANCE REDRESS SERVICES \.44 VI\. KEY RISKS \.44 VII\. RESULTS FRAMEWORK AND MONITORING \.46 Annex 1 – Adjustments to the Country Programs in Bangladesh and Afghanistan \.56 Annex 2 - Implementation Arrangements and Support Plan\.60 Annex 3 - HEAT Climate Co-Benefits Assessments in Bangladesh and Afghanistan \.63  The World Bank Higher Education Acceleration and Transformation Project (P168961) DATASHEET BASIC INFORMATION BASIC_INFO_TABLE Country(ies) Project Name Afghanistan, Higher Education Acceleration and Transformation Project Bangladesh Project ID Financing Instrument Environmental and Social Risk Classification Investment Project P168961 Substantial Financing Financing & Implementation Modalities [ ] Multiphase Programmatic Approach (MPA) [✓] Contingent Emergency Response Component (CERC) [ ] Series of Projects (SOP) [✓] Fragile State(s) [ ] Performance-Based Conditions (PBCs) [ ] Small State(s) [ ] Financial Intermediaries (FI) [ ] Fragile within a non-fragile Country [ ] Project-Based Guarantee [ ] Conflict [ ] Deferred Drawdown [ ] Responding to Natural or Man-made Disaster [ ] Alternate Procurement Arrangements (APA) [ ] Hands-on Enhanced Implementation Support (HEIS) Expected Approval Date Expected Closing Date 28-Jun-2021 31-Dec-2026 Bank/IFC Collaboration No Proposed Development Objective(s) The PDOs are: (i) regionally, to strengthen the COVID-19 response in higher education, improve connectivity and quality of higher education for women, and (ii) in Bangladesh, to enhance higher education’s governance, resilience to emergencies, and graduate employability; and (iii) in case of an Eligible Crisis or Emergency, respond promptly and effectively to it\. Page 1 of 66  The World Bank Higher Education Acceleration and Transformation Project (P168961) Components Component Name Cost (US$, millions) 1: South-Asian Harmonious Area for Research and Education 106\.00 2: Transforming Higher Education in Bangladesh 359\.00 3: Enhancing Project Management, Results Monitoring and Communication 44\.00 4: Contingent Emergency Response Component 0\.00 Organizations Borrower: The People's Republic of Bangladesh Islamic Republic of Afghanistan Implementing Agency: University Grants Commission, Ministry of Education Bangladesh Ministry of Higher Education, Afghanistan PROJECT FINANCING DATA (US$, Millions) SUMMARY -NewFin1 Total Project Cost 509\.00 Total Financing 509\.00 of which IBRD/IDA 209\.00 Financing Gap 0\.00 DETAILS -NewFinEnh1 World Bank Group Financing International Development Association (IDA) 209\.00 IDA Credit 191\.00 IDA Grant 18\.00 Non-World Bank Group Financing Counterpart Funding 300\.00 Borrower/Recipient 300\.00 Page 2 of 66  The World Bank Higher Education Acceleration and Transformation Project (P168961) IDA Resources (in US$, Millions) Credit Amount Grant Amount Guarantee Amount Total Amount Afghanistan 0\.00 18\.00 0\.00 18\.00 National PBA 0\.00 6\.00 0\.00 6\.00 Regional 0\.00 12\.00 0\.00 12\.00 Bangladesh 191\.00 0\.00 0\.00 191\.00 National PBA 131\.00 0\.00 0\.00 131\.00 Regional 60\.00 0\.00 0\.00 60\.00 Total 191\.00 18\.00 0\.00 209\.00 Expected Disbursements (in US$, Millions) WB Fiscal Year 2021 2022 2023 2024 2025 2026 Annual 20\.00 70\.00 80\.00 30\.00 9\.00 0\.00 Cumulative 20\.00 90\.00 170\.00 200\.00 209\.00 209\.00 INSTITUTIONAL DATA Practice Area (Lead) Contributing Practice Areas Education Climate Change and Disaster Screening This operation has been screened for short and long-term climate change and disaster risks SYSTEMATIC OPERATIONS RISK-RATING TOOL (SORT) Risk Category Rating 1\. Political and Governance ⚫ Substantial 2\. Macroeconomic ⚫ Moderate 3\. Sector Strategies and Policies ⚫ Low 4\. Technical Design of Project or Program ⚫ Moderate Page 3 of 66  The World Bank Higher Education Acceleration and Transformation Project (P168961) 5\. Institutional Capacity for Implementation and Sustainability ⚫ Moderate 6\. Fiduciary ⚫ Substantial 7\. Environment and Social ⚫ Substantial 8\. Stakeholders ⚫ Moderate 9\. Other ⚫ Substantial 10\. Overall ⚫ Substantial COMPLIANCE Policy Does the project depart from the CPF in content or in other significant respects? [ ] Yes [✓] No Does the project require any waivers of Bank policies? [ ] Yes [✓] No Page 4 of 66  The World Bank Higher Education Acceleration and Transformation Project (P168961) Environmental and Social Standards Relevance Given its Context at the Time of Appraisal E & S Standards Relevance Assessment and Management of Environmental and Social Risks and Impacts Relevant Stakeholder Engagement and Information Disclosure Relevant Labor and Working Conditions Relevant Resource Efficiency and Pollution Prevention and Management Relevant Community Health and Safety Relevant Land Acquisition, Restrictions on Land Use and Involuntary Resettlement Relevant Biodiversity Conservation and Sustainable Management of Living Natural Relevant Resources Indigenous Peoples/Sub-Saharan African Historically Underserved Traditional Relevant Local Communities Cultural Heritage Relevant Financial Intermediaries Not Currently Relevant NOTE: For further information regarding the World Bank’s due diligence assessment of the Project’s potential environmental and social risks and impacts, please refer to the Project’s Appraisal Environmental and Social Review Summary (ESRS)\. Legal Covenants Sections and Description (a) The Recipient shall prepare and furnish to the Association for approval, the annual work and training plan and budget for the Project, and ensure that the Project is carried out in accordance with such annual work plans and budget as agreed with the Association\. (AF) Sections and Description (b) No later than 6 months from the Effective Date, the Recipient shall establish a Regional Coordination Committee\. (BD) Sections and Description (c) No later than 6 months from the Effective Date, the Recipient shall establish a Regional Coordination Committee\. (AF) Page 5 of 66  The World Bank Higher Education Acceleration and Transformation Project (P168961) Sections and Description (d) No later than 6 months from the Effective Date, the Recipient shall adopt a Project Operational Manual in the form and substance satisfactory to the Association\. (BD) Sections and Description (e) No later than 6 months from the Effective Date, the Recipient shall adopt a Project Implementation Manual in the form and substance satisfactory to the Association\. (AF) Sections and Description (f) The Recipient shall refund the proceeds of the Credit allocated for carrying out of Part 1\.2(a) of the Project, if AUW falls into bankruptcy proceedings, it is forced to close down and/or its physical buildings are seized for non- Project purposes, prior to the Closing Date\. Conditions Type Financing source Description Disbursement No withdrawal shall be made for Category 2 (a) and (b) (Grants) unless and until the Grants Operations Manual has been adopted by the Recipient in a manner and substance satisfactory to the Association\. Type Financing source Description Disbursement No withdrawal shall be made for Part 1\.2 (a) of the Project under Category (1)(b) unless and until a performance agreement between the Recipient and AUW regarding Part 1\.2(a) of the Project has been executed\. Type Financing source Description Disbursement No withdrawal shall be made for for Goods, works, non-consulting services, and consulting services for Parts 1\.1 and 1\.2(b)(ii) of the Project under Category (1)(a)(i) unless until the Afghanistan Financing Agreement has been executed and delivered and all conditions precedent to its effectiveness or to the right of the Recipient to make withdrawals under it have been fulfilled\. Type Financing source Description Disbursement for Emergency Expenditures under Category (3), unless and until all of the following conditions have been met in respect of said expenditures: (i) (A) the Recipient has determined that an Eligible Crisis or Emergency has occurred, and has furnished to the Association a Page 6 of 66 The World Bank Higher Education Acceleration and Transformation Project (P168961) request to withdraw Financing amounts under Category (3); and (B) the Association has agreed with such determination, accepted said request and notified the Recipient thereof; and (ii) the Recipient has adopted the CERC Manual and Emergency Action Plan, in form and substance acceptable to the Association\. Page 7 of 66  The World Bank Higher Education Acceleration and Transformation Project (P168961) I\. STRATEGIC CONTEXT A\. The Impact of COVID-19 on Higher Education in South Asia 1\. The South Asia region has been severely impacted by the COVID-19 pandemic\. The pandemic has led to severe disruptions of daily life and specifically, the education sector across the region has been hit particularly hard\. The first case in the South Asian region (SAR) was recorded on January 5, 2020, in Nepal\. By September 11, 2020, the number of cases in the region had already reached about 5\.2 million\. By May 25, 2021, the cumulative number of confirmed cases stood in the SAR region at 29\.7 million with over 355,000 confirmed deaths\. All SAR countries have shut down education institutions from face-to-face delivery of services, though more recently some have started to reopen\. While most countries have looked inwards in their response to the pandemic, governments in the region have also recognized the need for coordinated responses and have made an effort to push collaborative programs through the South Asian Association for Regional Cooperation (SAARC), such as establishing a regional emergency fund and efforts to improve regional trade flows at a time of depressed global trade\. On October 9, 2020, a virtual meeting of the SAARC Ministers of Education/Higher Education on the education sector’s response to COVID 19 was held\. 2\. Three clear fault lines are emerging in the case of higher educations’ response to the pandemic in South Asia– (i) access to higher education services as a direct impact of the pandemic, (ii) the deep digital divide, and (iii) differential and disproportionate impact of the pandemic on the ability of women to access a variety of services\. Those with access to technology have managed to ensure business continuity in higher education, even though the quality of these services might not be the same as in the pre-COVID-19 period\. The pandemic is expected to cause increased dropouts and reduced enrolment in the higher education sector in the short run, and it is expected that women are likely to be impacted more disproportionately than men, and further exacerbate the persistent and chronic gender gap in quality higher education in South Asia\. A further concern is the capacity of regional governments and higher education stakeholders to respond in an appropriate manner to crises of this magnitude and establish mechanisms and procedures which allows for business continuity and students to safely reengage in higher education at the earliest possible\. 3\. The Higher Education Acceleration and Transformation (HEAT) project aims to build on the on- going World Bank support to higher education in the South Asia region by financing an operation with a dual focus\. Firstly, building on existing demand, a cross-country component aims to support regional integration and collaboration in the higher education sector over the long term\. This would support SAARC member states to encourage student mobility through equivalence programs, credit transfer schemes, and university twinning arrangements\. However, to prime the sector for these changes and address the key concerns noted above, the project will begin more modestly by supporting: (i) pandemic and emergency response in the higher education sector; (ii) building systemic resilience in higher education with a specific emphasis on digitalization over the medium term; and (iii) increasing access for women to quality higher education programs in the region by building a network of women’s universities and institutions with the aim to produce the next generation of women leaders and enhance female labor force participation (FLFP)\. This agenda will be complemented by efforts to develop a regional integration agenda for higher education, particularly aiming at policy harmonization around increasing cross-border programs for students and staff\.1 This will be done through research studies, joint discussions and actions through higher education investment projects in countries in the SAR2, but also specifically focusing on the development of a regional white paper in coordination with the 1 This regional agenda will include, inter alia, programs to supports students taking virtual courses from institutions across borders, mobility programs for students and staff, recognition of credit and degrees across borders, alignment in curricula and degree structures, and harmonization of quality assurance and accreditation practices\. 2 Currently there are investment programs in each SAR country except in Bhutan and the Maldives\. Page 8 of 66  The World Bank Higher Education Acceleration and Transformation Project (P168961) governments of Afghanistan and Bangladesh, and in joint discussions with other member states and the SAARC Secretariat\. Those aspects of the regional component that can be accessed by other countries within and outside the region, will be accessible for all governments and other stakeholders\. Those activities that have direct and specific in- country cost implications under the regional component, will focus on supporting Afghanistan and Bangladesh which have made formal requests for IDA support\. The regional component will accommodate the participation of other countries based on self-selection into such a program\. 4\. Secondly, the project will support the continued development of the higher education sector in Bangladesh\. This second component, a national component, builds on previous support to the higher education sector in the country through the recently closed Higher Education Quality Enhancement Project (HEQEP) and aims to complete reforms initiated under that project\. The national component will support the market relevance and the overall quality of higher education programs in Bangladesh by strengthening systemic features such as teacher professional development and quality assurance mechanisms\. B\. Regional and Country Context3 5\. Regional socio-economic and jobs context: Before the spread of COVID-19 and the imposition of social distancing measures and closures, South Asia had been the fastest growing region in the world\. All countries in the region, except Afghanistan, recorded 6-7 percent annual GDP growth in recent years\. The region is home to over 1\.74 billion people, with about 216 million people (about 12 percent of the population) living on less than US$1\.90 per day\. The fast-growing regional economies were expected to achieve a substantial reduction in regional poverty rates in the coming decade\. The pandemic has potentially reversed these trends and poverty rates are now projected to increase significantly\. The revised economic forecasts put at risk gains made in recent years in terms of economic opportunities, poverty reduction, and human capital development\. Furthermore, it will undermine efforts of countries in the region to support job growth\. 6\. The low levels of female labor force participation in the region have been a concern in recent years, likely made worse by the pandemic\. The region has always struggled with low FLFP rates (at 32 percent), persistent gender gap in employment rates (three times less likely to be employed relative to men), and the fact that women are often engaged in unpaid employment (Najeeb, et al\., 2020 4)\. To address these concerns, it would be important to lower educational, social and other structural barriers to the participation of women in South Asia’s labor markets\. South Asia has the second-lowest FLFP rates of all global regions\.5 Furthermore, FLFP has declined in recent years in India, Sri Lanka, Bhutan and Bangladesh\. Female employment is particularly at risk in the current crisis, given that women are concentrated in lower paying and vulnerable jobs, such as the garment industry and services sectors\. In Bangladesh, gender disparities remain acute with just 36 percent of women in the labor force versus around 81 percent of men\. In Afghanistan, gender social norms discriminate against the participation of women in the labor force as the labor force participation rate for Afghan women is 27 percent as opposed to 80 percent for men\. 7\. Socio-economic contexts in Bangladesh and Afghanistan Bangladesh has made rapid social and economic progress in recent decades and reached lower middle-income status in 2015\. Officially reported gross 3 The regional component supports activities in Afghanistan and Bangladesh only at this point in time and hence the country context is limited only to these two countries\. As the project activities expand to other countries in the region, specific country contexts will be included in documenta tion on additional financing\. 4 Najeeb, Fatima, Matias Morales and Gladys Lopez-Acevedo (2020), Analyzing Female Employment Trends in South Asia\. The World Bank Policy Research Working Paper 9157, The World Bank\. 5 South Asia Economic Focus, Jobless Growth? Fall 2018 Page 9 of 66  The World Bank Higher Education Acceleration and Transformation Project (P168961) domestic product (GDP) growth averaged close to 6 percent annually since 2000 and accelerated to over 8 percent in FY19\. Strong labor market gains contributed to a sharp decline in poverty, with the national poverty rate falling from 48\.9 to 24\.5 percent between 2000 and 2016, while extreme poverty declined from 34\.3 to 13\.0 percent\. 6 However, the pace of poverty reduction slowed in recent years even as growth accelerated, particularly in urban areas and in the west of the country\. Similarly, the progress on shared prosperity slowed between 2010 and 2016 after a decade of improvements, with annual consumption growth of the bottom 40 percent trailing that of the overall population (1\.2 versus 1\.6 percent)\. Bangladesh entered the COVID-19 crisis with a relatively strong macroeconomic position compared to other countries in the region\. Garment exports and remittances narrowed the external deficit in recent years and international reserves were adequate\. While tax collections are amongst the lowest in the world, under-execution of the budget has contained the fiscal deficit, which has been below 5 percent of GDP since FY01\. As a result, public debt is low and stood at 33\.7 percent of GDP at the end of FY19\. Meanwhile, Afghanistan continues to face socio-economic challenges despite notable progress in rebuilding the economy, including strengthening public institutions and restoring infrastructure and basic social services\. The country maintained macroeconomic stability and established the conditions for recovery of the economy\. Real GDP growth, after accelerating to 2\.7 percent in 2017 from a low of 1\.5 percent in 2015, is projected to decline by 3 percent in 2020\. 7 Poverty reduction remains a formidable challenge\. National poverty estimates show that poverty in Afghanistan has increased from 38\.3 percent in 2012-13 to 54\.5 percent in 2016-17 making it one of the poorest countries in the world\. Political instability, security concerns, weak institutions, inadequate infrastructure and difficult business environment have continued to hamper private sector growth – which has contracted from 9\.4 percent in 2003-12 to only 2\.1 percent between 2013-16\. Public expenditures comprise 25\.6 percent of GDP; with foreign grants currently financing more than two-thirds of budget expenditure and substantial off-budget security needs\. 8\. The macroeconomic impacts of the pandemic are expected to be substantial in both countries \. Lower economic growth forecasts, increasing risk aversion, negative business sentiments, and continued uncertainty on how the pandemic will spread in both countries (and beyond in the region), has led to significant market volatility and outflow of capital\. The COVID-19 crisis is likely to impact the economy through four main mechanisms - (i) direct outlays needed to support a health sector response in both countries which already have limited fiscal space; (ii) employment impacts due to large scale measures to quarantine the population and limit the spread of the pandemic; (iii) trade impacts - especially in the context of Bangladesh whose economy is heavily concentrated around the ready- made garments (RMG) exports which is expected to be hit hard with leading fashion houses and other groups already cancelling planned orders; and finally (iv) risk avoidance among investors and a continued trend in the outflows of capital from economies like Bangladesh and Afghanistan\. All these developments are likely to affect domestic resource mobilization and hence the ability of the governments of both countries to finance both commitments under the ordinary budgets and development budgets in the coming 2 -3 years\. This poses a direct threat to the continued financing of the higher education sector in both countries through the public sector\. It also requires the countries to improve the efficiency of their deployed resources, and efforts will need to be made to diversify the sources of funding for tertiary education\. 9\. In Bangladesh, a modest deceleration of growth in the first half of FY20 turned into a sharp decline after the COVID-19 pandemic caused major disruptions to economic activity\. In the first half of FY20 (July to December 2019), growth decelerated as slower global trade and deteriorating external competitiveness lowered exports and tighter access to finance constrained private investment growth\. With declining readymade garment (RMG) orders, exports declined by 5\.8 percent (y-o-y) during this period\. A sharp contraction in capital goods imports (3\.4 percent, y-o-y) suggests private investment also declined\. Growth during the first half of the year was primarily 6 Household Income and Expenditure Survey, 2000/01 through 2016/17\. 7 Latest WEO figures (April 2020)\. Page 10 of 66  The World Bank Higher Education Acceleration and Transformation Project (P168961) supported by remittance-fueled private consumption\. The initial phase of the pandemic in early 2020 disrupted the import of intermediate goods from partner countries, reducing manufacturing output\. As the pandemic intensified abroad, export orders from Europe and the United States declined precipitously\. The government implemented a national shutdown from March 26 to May 30 to control an accelerating domestic outbreak\. Control measures resulted in a sudden stop of economic activity in many sectors\. Consequently, real GDP growth is estimated to have decelerated to 2\.4 percent in FY208\. Vulnerability in the banking sector remains high, with officially recognized non-performing loans (NPLs) accounting for 8\.9 percent of total loans in September 2020\. Due to deviations from international recognition, loss provisioning, capital calculation standards, and the moratorium on loan repayments after the COVID- 19 outbreak, the actual extend of financial sector risk is likely higher than this share suggests\. With 5\.0 percent in January 2021, inflation remained benign\. Declining imports and surprisingly large inflows of remittances, which increased by over 30 percent (y-o-y) in the first seven months of FY21 (July to January), contributed to a current account surplus in FY21 so far\. 10\. The pandemic has impacted poor households and micro and small enterprises, especially in Bangladesh\. The Bangladesh Business Pulse Survey by the World Bank Group, based on interviews conducted with 500 micro, small, and medium enterprises (MSMEs) in July 2020, shows that 94 percent of businesses have experienced sharp drops in sales, 83 percent of firms have made losses and 33 percent of firms have not been able to pay installments on existing loans\. A staggering 37 percent of Bangladesh’s workers have lost their jobs, temporarily or permanently\. The first wave of the World Bank’s COVID-19 household monitoring survey, conducted in June/July 2020 in slum and non-slum areas in Dhaka and Chittagong, shows that about 23 percent of the poor stopped working after the national shutdown announced in March 25\. Of the surveyed people, 80 percent of wage workers and 94 percent of own-account workers were earning lower incomes than before the pandemic\. Median wages for salaried and daily workers declined by about 37 percent compared to usual earnings right before COVID-19\. A different survey led by BRAC, the largest non-government organization (NGO) in Bangladesh, indicated that urban and rural poor suffered an income loss of 75 percent and 62 percent, respectively\.9 The income shock led to a decline in food expenditure in both rural and urban areas\. A micro-simulation conducted by the World Bank Poverty and Equity Global Practice indicates that, on average, per capita household consumption could decline by 13 percent, implying that as much as 21 million people could face their income dropping below the poverty line\. The second round of the World Bank’s COVID-19 household monitoring survey, conducted from September 2 to October 11, shows signs of recovery in employment and earnings\. The share of adults working in the week preceding the interview rose 10 percentage points between July and September 2020, driven by respondents who had been unemployed or absent from work during the first round\. Employment recovered faster in Chittagong, reaching pre-COVID-19 levels, while Dhaka remained about 14 percentage points below pre-COVID-19 employment levels\. Earnings and revenues have not recovered fully, and salaried and wage workers still report substantial uncertainty about keeping their jobs\. 11\. Climate vulnerability context in Bangladesh and Afghanistan: The Global Climate Risk Index ranks Bangladesh as the world’s seventh most affected country over the period 1999-201810\. Rising temperatures leading to more intense and unpredictable rainfalls during the monsoon season and a higher probability of catastrophic cyclones are expected to result in increased tidal inundation\. It is estimated that a one-meter rise in sea levels would submerge 18 percent of arable land in coastal areas11\. Recent studies estimate that by 2050 Bangladesh could have 8 The World Bank’s estimate was produced independently and differs from the Bangladesh Bureau of Statistics (BBS) provisional e stimate of 5\.2 percent real GDP growth in FY20\. 9Livelihoods, Coping and Support During COVID-19 Crisis\. BRAC Institute of Governance and Development (BIGD) and Power and Participation Research Centre (PPRC)\. June, 2020\. 10 Germanwatch (2020) Global Climate Risk Index 2020 11 UNFCC (2007) United Nations Framework Convention on Climate Change Page 11 of 66  The World Bank Higher Education Acceleration and Transformation Project (P168961) 13\.3 million internal climate migrants12\. Additional rural-urban migration would have significant consequences for air and water pollution and unsustainable consumption of natural resources, while putting additional pressure on urban labor markets\. Addressing climate risks is increasingly urgent to ensure sustainable economic development of the country\. Afghanistan remains particularly affected by extreme temperatures, which causes regular droughts, affecting the agricultural production on which 80 percent of the population relies\. Floods are already the most frequent natural hazard in Afghanistan and are likely to increase with climate change\. Annex 3 provides more detail on the climate context for the project and mitigation and adaptation measures\. C\. Sectoral and Institutional Context 12\. Higher Education in South Asia Region (SAR): Demand for higher education has been rising in the region as a result of the rapid expansion of secondary education and human capital needs of growing and modernizing industry and service sectors\. In recent years, the changing nature of work, along with technological acceleration, has increased the demand for high-level skills and technically adaptable workforce\. Higher education graduates are in high demand in the labor market and generally enjoy high returns to their educational investment\. The regional average returns to higher education are substantially higher than the world average and corresponding returns in high-income countries\. 13\. The region has a large, diverse and complex higher education system which is rapidly expanding \. Enrollments in higher education grew explosively in all countries of the region with overall growth rising to 387 percent over 15 years, from 11 million to over 42 million students in the region between the turn of the century and today, and being accommodated in a network of over 50,000 institutions\. Female enrolment in higher education has also increased significantly, and except for Afghanistan, has kept pace with the expansion of the system\. However, there is a long way to go before attaining gender parity\. Female participation in higher education has reached over 50 percent in Nepal, Sri Lanka and the Maldives, and is just under 50 percent in Bangladesh, Bhutan, India and Pakistan\. Afghanistan, in contrast, has substantially lower female participation, with only about 20 percent of the student population at the tertiary level being female\. 14\. There are many similarities in the tertiary education sector across countries in the region: (i) tertiary education structures are very similar; (ii) strong demand among youth for higher education access and for foreign qualifications; (iii) limited access to and participation of women, individuals from low income groups, and from disadvantaged groups, castes and communities, (iv) poor quality programs and skills of graduates, (v) relevance to the needs of the labor market and graduate employability, (vi) weak governance and management of higher education systems, (vii) severe financing constraints relative to perceived needs, and (viii) poor quality of research outcomes, links to innovation systems, and university industry partnerships\. Regional governments, keen to participate in the knowledge economy, have recognized the need to address the above issues and have started to develop, adopt and implement policies and strategies to address these issues\. Regional governments are also beginning to understand the significant spillover effects to the economy from education in general and higher education in particular in this knowledge economy and information era, and are aiming to increase participation, quality and relevance of their higher education programs\. To achieve this, they are also aggressively pursuing approaches where the public exchequer is not the sole source of support to the higher education sector and have introduced legislation and regulatory mechanisms to support the private sector’s role\. This has also led to initial efforts to modify and modernize sectoral governance and institutional management to foster growth, support quality improvements, and encourage innovation and risk taking in tertiary education\. 12 World Bank (2018) Groundswell: Preparing for Internal Climate Migration Page 12 of 66  The World Bank Higher Education Acceleration and Transformation Project (P168961) 15\. Notwithstanding all these constraints, South Asian countries do not fully exploit the benefits of regional cooperation in higher education\. An example of this lack of collaboration and cooperation can be seen in fact that while students from the region are extremely mobile, and form about 10 percent of the global market for international students, mobility between and across South Asian countries is more curtailed due to the lack of regional cooperation mechanisms\. Mobility of female students is particularly constrained, given security and other socio- cultural concerns, limited student housing and campus infrastructure\. SAARC is the primary regional platform in South Asia, and there is broad consensus among member states that regional cooperation in general has been tough to achieve given the regional political economy, the lack of funding for regional initiatives, and the absence of implementation mechanisms\. 16\. In the area of education and skills development, SAARC member countries have had more success than in other areas of regional cooperation, but still progress has been slow\. Despite the commonality of these challenges, the opportunities to engage in collaborative activities, and even regional recognition and emphasis on the importance of cooperation and coordination in higher education, countries have to fully align their higher education sectors and successes\. The Bologna Process has integrated higher education systems in Europe, and this has led to policies to stimulate internationalization of higher education, joint degree programs, credit recognition schemes, and other similar policies that have supported the free movement of students across international borders\. The heads of the University Grants Commissions or Equivalent Bodies of regional member states, in its 2019 meeting13 reached a consensus that more has to be done to strengthen collaboration and coordination across countries in higher education\. Specific suggestions include – (i) the establishment of a formal desk for higher education, (ii) a South Asia wide portal and regional platform known as the Higher Education Network of South Asia (HENSA), (iii) agreements to focus on regional quality assurance mechanisms and (iv) further integration of systems to allow students to benefit from credit sharing, recognition of prior learning and establishment of equivalence of programs\. Furthermore, the SAARC member states have also agreed to focus on improving digital connectivity across the region to support higher education through Research and Education Networks (RENs)\. Even in the field of digital connectivity, while there are a growing number of bilateral engagements, more focus has to be given to the regional benefits that could be tapped through deeper collaboration\. 17\. Regional university networks have been a driving force of regional integration globally, and SAARC member countries, supported by the Secretariat, are spearheading efforts to do the same for South Asia where such collaboration is almost non-existent\. There are numerous examples from around the world, and these include the Association of African Universities (AAU), the European University Association (EUA) and the ASEAN University Network (AUN)\. Additionally, there are also inter-regional networks, such as, ASEAN European Academic University Network (ASEA-UNINET) or the International Network of Universities (INU)\. The motivation to establish such networks are many but tend to revolve around learning from shared experiences, optimal utilization of resources, collaborative research to accelerate the pace of findings, etc\. The EUA, for example, collaborates across a range of issues including inter alia the Bologna Process, Autonomy and Governance, Quality Assurance, Employability and Qualifications, COVID-19, and Learning and Teaching\. Better coordination across higher education institutions in South Asia could help improve overall outcomes in the higher education space, although it would be necessary to establish the institutional and organizational structures to support these outcomes\. For these aims to be realized, an enabling environment for regional cooperation in higher education needs to be put into place\. Efforts are already underway in this regard in the South Asia region, spearheaded by SAARC member countries and the Secretariat\. This project will provide further support towards this regional goal\. 13 Twelfth Meeting of the Committee of Heads of University Grants Commissions/Equivalent Bodies Kathmandu, 30-31 May 2019\. Page 13 of 66  The World Bank Higher Education Acceleration and Transformation Project (P168961) 18\. The higher education sectors in Afghanistan and Bangladesh represent a growing system of higher education\. In Bangladesh, there are two main sub-sectors of higher education in the country: (i) 152 public and private universities, under the aegis of the University Grants Commission (UGC) and (ii) around 2,000 government and non-government tertiary colleges affiliated with the National University (NU)\. In addition, there are two regional universities, which include the Asian University for Women, a regional hub for excellence in women's education and the Islamic University of Technology\. Together, the sector catered to around 2\.7 million students in 2017 which is a significant increase from about 1\.5 million students in 2010\. The UGC, an attached body of Ministry of Education (MOE), is a statutory apex body of all the affiliated public and private universities in Bangladesh, and acts as the intermediary between the Government and the universities for regulating university affairs\. The Government of Bangladesh (GoB) has prepared the second Higher Education Strategic Plan 2018-30 that signals a strong commitment by the Government to enhance investments in higher education, comprehensively identifies issues and challenges and recommends solutions\. The World Bank has supported the higher education sector in Bangladesh through HEQEP since 2009, establishing a strong basis for these proposed future reforms\. 19\. The higher education sector in Afghanistan, though relatively small, is growing rapidly\. In Afghanistan, there are 24 public universities enrolling over 200,000 students and 15 small public higher education institutes which enroll about 7,500 students\. There are also private higher education institutes that enroll approximately 130,000 students\. About 20 percent of students enrolled in the universities and higher education institutes are female\. While the total number of universities and institutes appear adequate, the number of students enrolled in these institutions is insufficient, as reflected by the low gross enrollment rate (6 percent)\. In addition, there is growing demand for higher education as number of students completing secondary education is rising\. Currently, less than 16 percent of secondary school graduates seeking admission to universities can be offered places\. The Government of Afghanistan, through the National Higher Education Strategic Plan II (NHESP II, 2016-2020), seeks to expand higher education enrollment over time, but with a special focus on priority degree programs drawn mainly from the sciences, technology engineering and mathematics (STEM)\. The NEHSPII aims to increase enrollment to meet the growing demand, enhance quality through capacity building of faculty and relevant staff and curriculum improvement, and development of infrastructure\. In Afghanistan, the World Bank has been supporting the higher education sector since 2005 and currently through the Higher Education Development Project (HEDP) since 2015\. 20\. There is a strong tradition of distance or remote learning programs in the region, although it has not been effectively deployed as part of the pandemic response\. Roughly a quarter of all students in Bangladesh and Pakistan, and about half of all students in Sri Lanka access higher education through remote, distance, or correspondence programs\. Over the past decade, all South Asian countries have invested in research and education networks, as well as in Massive Open Online Courses (MOOCs)\. The Research and Education Networks have become a provider of key digital infrastructure, managing extensive fiber-optic networks, campus networks and research services for universities and colleges\. Despite these critical reforms, it has still been difficult for regular universities and colleges to pivot to remote learning during the COVID-19 related closures\. Faculty does not have much experience with online teaching, learning management systems were not yet in place, and students continue to lack access to connectivity and devices showing that the digital divide is still a reality\. Another key constraint to the take-up of remote learning is that there is no recognition mechanism for courses and degrees taken online, with the overall perception that remote learning is of much lower quality\. This leads students to prefer sub-optimal face-to-face courses\. 21\. Despite providing high wage returns on average, the higher education sector in South Asia can still do much better to prepare students for employment, particularly for women \. In Bangladesh, finding a job is more Page 14 of 66  The World Bank Higher Education Acceleration and Transformation Project (P168961) difficult for people with a higher education degree than for those with a secondary education certificate\. The unemployment rate among higher education graduates of Bangladesh stood at 11 percent, much higher than the national average rate of around 4 percent in 2017 (BBS, 2017)\. The transition is particularly difficult for women\. In Bangladesh, 43 percent of female graduates were found to be unemployed compared to 37 percent of males following two to three years of graduation\. The share of female graduates who are not active in the labor force was also high at around 14 percent compared to 5 percent of male graduates\. There is no available graduate employment data/tracer study on the Afghan university graduates\. But for age cohort 25-29 female unemployment rate is around 35 percent whereas the male unemployment rate is around 15 percent in Afghanistan\. Very few female graduates, who do get jobs, progress on to managerial and senior professional positions in Afghanistan and Bangladesh, attributing to less female representation in important policy and decision-making in the countries\. In Bangladesh, only 7 percent of women are employed in managerial, professional and technical positions compared to 8\.9 percent of men\. For Afghanistan, this rate is 4\.8 percent for women compared to 6\.5 percent for men\. In Bangladesh, the share of female university teachers is 26 percent and at public universities it is even lower at 23 percent\. 22\. To strengthen access to quality women’s education, t he Governments of Bangladesh and Afghanistan have selected the Asian University for Women in Chattogram as a regional hub, while SAARC will serve as the policy harmonization platform\. The AUW stands out in the regional higher education space for its reputation of academic excellence, the success of AUW alumni, both in the labor market and in continuing with graduate education\. The AUW is accredited by the New England Commission of Higher Education (NECHE)\. This provides a sharp contrast to academic and employment outcomes of women students from the higher education sector in the country more broadly\. The AUW was established in 2008 as an international, private, not-for-profit, autonomous university through an act of parliament to prepare the next generation of women leaders in the region\. In line with global practice on university governance, an international Board of Trustees oversees university operations\. 23\. The selection of AUW by these governments is based on three key characteristics: (i) an example of academic excellence, (ii) ability to scale-up leadership programs, while supporting a network of universities and colleges to increase access to quality higher education programs for women and ensuring their success in the labor market, and (iii) support to the Government of Bangladesh’s efforts to internationalize higher education with a decisively international faculty and student body which anticipates that about 60 percent of students come from the region\. The university enrolls a significant share of talented, underprivileged women (e\.g\. from the garment sector, refugee populations, minorities, etc\.) and prepares them through high quality and rigorous bridging and undergraduate programs to become skilled professionals for the job market\. High quality remedial programs, the Access Academy and the Pathways for Promise, which prepares these students for the academic, personal and social challenges of studying at university\. Of the graduates till date - 71 percent are employed (including self-employed) and the average monthly salary of graduates is US$1,274\. This can be compared to the average of Bangladeshi graduates’ salary of US$255, and for Afghanistan it is US$ 189\. Although AUW is a relatively new university, functioning out of a rented campus, it has managed to maintain academic continuity during the COVID-19 quarantine period through online programming\. Course material, grading and exam practices are easily accessible online and based on a transparent credit system\. The university aims to further strengthen their crisis response mechanisms to ensure their ability to support academic continuity during possible future emergencies\. D\. Relevance to Higher Level Objectives 24\. Relevance to the Regional Strategies: Human Capital is one of three pillars of the World Bank’s Strategy for South Asia Regional Integration, Cooperation and Engagement (RICE)\. The strategy also includes a focus on emergency response and improvement of labor force participation for women\. The proposed project is fully in line with this regional strategy\. The proposed project also supports the regional priority areas on the Post-2015 Education Page 15 of 66  The World Bank Higher Education Acceleration and Transformation Project (P168961) Agenda identified by SAARC, including recent conversations to establish a South Asian Higher Education Portal and a common emergency response\. 25\. Relevance to Country Partnership Frameworks (CPFs): The World Bank Group’s (WBG) Country Partnership Frameworks (CPF) for Bangladesh and Afghanistan emphasize the important role for higher education to improve economic outcomes, and specifically, female labor force participation\. Hence, the project is entirely aligned with the WBG CPFs for Afghanistan and Bangladesh\. For Bangladesh, the Project supports the CPF (Bangladesh: FY16 – 20; No\. 103723-BD; March 8, 2016 discussed at the Board on April 5, 2016 and extended by the PLR to FY21)(FY2016- 2020; Document 103723-BD) Pillar 2 Objective 2\.1 which focuses on improved equity in access, quality and relevance of education, while for Afghanistan, it supports the CPF (Afghanistan: FY2017-2020; Document 108727-AF; October 2, 2016 discussed at the Board on October 27, 2016 and extended by the PLR to FY22) Pillar 3 Objective 3\.1 which focuses on improving human development, especially quality of graduates\. The proposed higher education network to promote leadership and excellence in women’s education aligns well with both countries ‘Social Inclusion’ pillars of the CPF\. In cases of intended infrastructure development activities in Bangladesh, the proposed project fully aligns with Focus Area 3 (Climate and Environment Management) of the Bangladesh CPF as climate resilient and energy efficient infrastructure development will be ensured including climate change adaptation measures\. The World Bank program in Bangladesh and Afghanistan have been adjusted to respond to the pandemic impacts (details in Annex 1)\. The continued development of human capital is a pre-requisite for COVID economic recovery efforts as the stock of human capital will determine medium- and long-term growth\. 26\. Relevance to the National Strategies: The proposed project also aligns with the government policies which guide development priorities and strategies at the higher education sector in Bangladesh, as specified in the second Strategic Plan for Higher Education (SPHE) 2018-2030\. In Bangladesh, the Strategic Plan for Higher Education (SPHE) 2018-2030 keeps the objectives and targets of National Education Policy 2010, Vision 2021 and 2041, the 8th Five-year plan, SDG action plan and Delta plan 2100\. Key features of the SPHE are reflected in the design of HEAT including inter alia: (i) the need to actively pursue international cooperation and promote linkages between Bangladesh institutions of higher education and international ones, especially regional ones; (ii) to make use of the information superhighway to ensure inter institutional co-operation by taking advantage of the latest information and communications technologies; (iii) to develop mechanisms for academic mobility and exchanges of faculty and students and develop mechanism of accreditation for recognition and diplomas; (iv) to explore the possibilities of joint programs and to develop such programs so that teaching learning activities can take advantage of shared resources and (v) to promote and sustain inter-university networks and connectivity with the UNESCO International Institute of Higher Education\. In Afghanistan, the National Higher Education Strategic Plan II (NHESP II, 2016-2020) has similar priorities, including the importance of international collaboration, strengthening of quality of higher education, women’s education and graduate employability\. The project also supports both Governments’ priorities to mitigate COVID-19 impacts on higher education through planned response and recovery interventions in sub-sector\. II\. PROJECT DESCRIPTION A\. Project Development Objective PDO Statement The PDOs are:(i) regionally, to strengthen the COVID-19 response in higher education, improve connectivity and quality of higher education for women, and (ii) in Bangladesh, to enhance higher education’s governance, resilience to emergencies, and graduate employability; and (iii) in case of an Eligible Crisis or Emergency, Page 16 of 66  The World Bank Higher Education Acceleration and Transformation Project (P168961) respond promptly and effectively to it\. PDO Level Indicators The following key results indicators will measure progress towards the achievement of the PDO: ▪ Indicator 1: Share of universities in Bangladesh and Afghanistan implementing Emergency Response and Recovery Plans based on regional framework\. ▪ Indicator 2: Number of additional students from Bangladesh and Afghanistan pursuing coursework in another South Asian country using a regional framework for students\. ▪ Indicator 3 (a): Regional network institutions in Bangladesh and Afghanistan implementing a teaching and learning package targeting female students\. ▪ Indicator 3 (b): Share of additional female graduates from participating regional network institutions in Bangladesh and Afghanistan entering the labor market\. ▪ Indicator 4: Share of students enrolled in remote learning in Bangladesh\. ▪ Indicator 5: Graduate Employability Index in Bangladesh\. ▪ Indicator 6: Number of programs newly accredited in universities under the Bangladesh Accreditation Council in Bangladesh\. ▪ Indicator 7: The number of faculty in Bangladesh receiving professional development trainings\. B\. Project Components 27\. The proposed project is expected to be implemented over a five-year period from 2021 to 2026\. The project will be financed through Investment Project Financing (IPF) and consists of four components\. Component 1 supports regional integration in higher education across the South Asia region\.14 Component 2 supports deepening the reform agenda in the Bangladesh higher education sector initiated under HEQEP through a nationally focused component\. Component 3 supports the management of the proposed operation\. Finally, Component 4 is a ‘zero budget’ contingent emergency response component (CERC)\. These components are detailed below\. COMPONENT 1: SOUTH-ASIAN HARMONIOUS AREA FOR RESEARCH AND EDUCATION (Total US$ 106 million, Bangladesh IDA US$30 million, Afghanistan IDA US$4 million, IDA Regional for Bangladesh US$60 million, IDA Regional for Afghanistan US$12 million) 28\. This component supports regional integration in higher education in the areas of current demand, including inter alia: (i) pandemic and emergency response and recovery, (ii) regional digital connectivity for higher education, and (iii) access to quality higher education for women through the creation of a network of women ’s universities and institutions with an added emphasis on labor market success\. The component will also finance the establishment of an institutional mechanism for regional integration in higher education and strengthen regional engagement\. Regional integration agenda in higher education will be leveraged directly through the proposed project, and through the Bank’s convening power in higher education cemented through the current higher education portfolio in the region\.15 This two-pronged approach lays the foundation for support to regional integration in higher education\. Though the project is initially structured around Afghanistan and Bangladesh, it will be open to, and incentivize the participation of, other countries from the region, who can join the project through additional finance and other mechanisms\. Higher education authorities in Bangladesh and Afghanistan will help kick-start this regional integration effort by engaging with other SAARC member countries and the SAARC Secretariat through Sub-Component 1\.1\.1 which help to lay the groundwork for regional integration\. The sub-component will support the groundwork needed for regional integration, which has been a key point of engagement by SAARC member countries in earlier meetings of the 14 The focus of the regional activities on countries in South Asia will promote the participation and collaboration with countries in other regions\. 15 Except in Bhutan and Maldives, where there is no investment in higher education at present\. Page 17 of 66  The World Bank Higher Education Acceleration and Transformation Project (P168961) respective concerned government ministries and their corresponding University Grants Commissions (UGCs) or equivalent bodies\. Therefore, this project simply contributes to existing goals espoused by SAARC member states and does not add or impose additional burdens on member countries\. Sub-Component 1\.1\.1: Strengthening of Regional Mechanisms for Engagement in Higher Education (Total US$0\.5 million, Regional IDA for Bangladesh US$0\.4 million, Regional IDA for Afghanistan US$0\.1 million) 29\. The countries of South Asia engage regionally in higher education through regular, but ad hoc, mechanisms, typically on the sidelines of SAARC meetings\. These meetings bring together the heads of the University Grants Commissions or Equivalent Bodies of member states to discuss regional issues in higher education\. Relevant meetings of this group (for example, May 2019 in Kathmandu) agreed to: (i) establish a template for HENSA, (ii) help to develop a region-wide Quality Assurance Network, and (iii) establish Credit Transfer Mechanisms across SAARC Member States to facilitate student mobility\. Student mobility through Open-Access online courses would significantly help support continued student participation in tertiary studies during this current pandemic\. To be able to make progress on these goals, the region needs inter alia a clear vision, set of objectives, road map, and resources\. The Regional Desk will work jointly between the Bangladesh Ministry of Education and Universities Grants Commission, the Afghan Ministry of Higher Education and the SAARC Secretariat to engage with other member states on the development of a White Paper16 on regional engagement in higher education\. Extensive consultations will be held on this White Paper, prior to tabling it for regional endorsement\. 30\. This sub-component will finance the strengthening of regional mechanisms for engagement in higher education in the South Asia region through the following: (i) establishing a temporary South Asia Higher Education Desk in the Bangladesh Ministry of Education to support regional integration efforts through this project; (ii) develop a White Paper on regional integration in close coordination and consultations with SAARC member countries, (iii) table the White Paper through the SAARC Secretariat for member country endorsement\. In addition, the MOE will work closely with the SAARC Secretariat and member countries to identify a more permanent solution for the Higher Education Desk, and the modalities by which this regional office will function\. These modalities will be reflected in the White Paper which will establish and help institutionalize regional mechanisms of collaboration and coordination\. Given that any regional agreements of this nature would need in-country clearances and support of the respective ministries of foreign affairs in each country, the MOE in Bangladesh and the Ministry of Higher Education (MOHE) in Afghanistan are both expected to liaise closely with the respective ministries of Foreign Affairs in both countries through this process\. Sub-Component 1\.1\.2: Establishment and Maintenance of a South Asian Higher Education Portal (Total US$2 million, IDA Regional for Bangladesh US$0\.9 million, IDA Regional for Afghanistan US$1\.1 million) 31\. This sub-component finances the establishment and maintenance of a South Asian Higher Education Portal to be initially hosted by the BdREN in Bangladesh\. The portal will facilitate the ‘virtual mobility’17 of students, by allowing students from participating and registered universities to take courses for credit outside their home country 16 The White Paper referred here serves as a document containing proposals for regional integration in higher education in South Asia\. The objective of this discussion is to set the direction for policy-making, while also inviting discussion in the public on the objectives of and pathways towards more regional collaboration in higher education in South Asia\. The White Paper may cover topics such as student mobility (virtual or digital), faculty exchange, recognition of credits and degrees, quality assurance, digital connectivity, research collaboration and other relevant topics in higher education\. The White Paper is expected to cover a range of issues – such as formalizing the mechanisms for engagements, and formalize the governance and institutional structures for such regional coordination, identify a permanent location for an office that supports regional int egrations and is positioned to and capable of supporting ideas for policy change\. 17 Virtual mobility means that students take courses for credit in another country than their own\. Credit recognition would mean that either individual courses or entire degree programs are recognized as equivalent to regular (including face-to-face) instruction\. Page 18 of 66  The World Bank Higher Education Acceleration and Transformation Project (P168961) and home institution\. While the material on the portal will directly benefit Afghanistan and Bangladesh, students from other countries will also be able to access content on the portal, leading to further spillover effects\. Specifically, the portal will expand the choice set available for current students, giving them more choice to access content that is recognized by both governments and institutions in their home countries\. The portal will host both curated and new content and will include a platform for teaching and learning materials, tutorial support, freely accessible MOOCs offered by regional institutions, and a learning corner\. The portal will be accessible (and facilitate content) in the languages of the participating countries and also have content available in English\. The portal will also host windows on pedagogy, teaching effectively using technology, modules on student engagement and assessment remotely, and pandemic/emergency responses produced under Sub-Component 1\.1\.3\. An Open-Access policy will undergird the development of the Portal and this will permit content to be made freely accessible across the region\. Sub-Component 1\.1\.3: Development of Emergency Response Measures to Create System Resilience in Response to the COVID-19 Pandemic (Total US$4\.7 million, IDA Regional for Bangladesh US$3\.7 million, IDA Regional for Afghanistan US$1 million) 32\. This sub-component will finance the development of emergency response measures to create system resilience in response to the COVID-19 pandemic in the higher education sector\. This will also prepare the higher education sector for future crises, for example, climate-related events or due to conflict\. While national strategies to combat the multi-faceted nature of the COVID-19 pandemic are critical, regional solutions will help countries share the burden of response, maximize the use of scarce resources to achieve impacts, and help in sharing knowledge, information and practices with regards to the pandemic\. The primary concern in the higher education sector is the significant potential for the rapid and uncontrolled transmission of the virus in congregate facilities like universities and colleges\. The project will offer technical support for up to 150 higher education institutions in Afghanistan and Bangladesh to implement these emergency guidelines and to establish crisis response committees at the institutional level\. The component will finance grants on a declining basis the establishment and functioning of pandemic/crisis response committees, rapid reviews of readiness for re-opening and regular programming, development, review and adoption of emergency response plans and to finance equipment, materials and supplies to ensure that campus environments can be sterilized periodically\. Sub-Component 1\.1\.4: Strengthening Regional Cooperation Among the National Research and Education Networks and Supporting Expanded Access and Connectivity for Students (Total US$19\.5 million, IDA Regional for Bangladesh US$16\.5 million, IDA Regional for Afghanistan US$3 million) 33\. This sub-component will strengthen regional cooperation among the national Research and Education networks (NRENs) and will finance expanded access and connectivity for students\. Digital connectivity initiatives have the potential to quickly scale cross-border education and research initiatives\. This makes it a potential catalyst for future collaboration and remote learning possibilities\. A key advantage of regional collaboration is that it will allow the national RENs to access pooled technical assistance, while also benefiting from a substantial professional network of practitioners and engineers across countries18\. The component will finance six key activities: (i) development of a standard package of services that NRENs in South Asia can offer students and higher education institutions (such as, a Learning Management System, video-conferencing, data storage, and note-taking solution); (ii) support the participation and membership of the AfgREN in the Asia-Pacific Advanced Network (APAN), (iii) work closely to support working groups of professionals in APAN and to strengthen cooperation across SAR RENs; (iv) put in place the last-mile connectivity for participating colleges, institutions and universities in Bangladesh through institutional grants and in Afghanistan through direct support from MOHE to institutions; (v) support the development and implementation of 18This goes particularly for Afghanistan which has weaker infrastructure and a lack of technical expertise within the country t o further develop the NREN and will benefit from expertise in Bangladesh\. Beyond this immediate need, all NRENs in the region face technical capacity constraints in their take up of new technology\. In other regions, regional networks such as GEANT in Europe, CAREN in Central Asia, and TEIN in the Asia and Pacific region\. Page 19 of 66  The World Bank Higher Education Acceleration and Transformation Project (P168961) policies and strategies to ensure connectivity of the most disadvantaged students by providing means-tested access to devices and broadband access, and (vi) the establishment of a 24/7 helpdesk to support remote teaching and learning (in alignment with the desk established under 1\.1\.1 and the helpdesk created under Sub-component 1\.1\.3)\. In concert, these efforts would support the full utilization of available digital resources in the region towards education, research and publications\. Sub-component 1\.2\.1: Construction of the AUW Academic Center as a Hub for a Regional Network of Women’s Universities and Colleges (Total: US$30 million Bangladesh National IDA) 34\. This subcomponent will develop a climate resilient academic center at AUW, which will act as the hub for the proposed regional network and support the development of AUW’s permanent campus\. This academic complex supports the university to transact its core business and help meet the development objectives of the project\. The proposed academic complex will include inter alia the main seminar rooms, lecture halls, theaters, laboratories, and faculty and staff offices\. Alternative sources of financing will be pursued to gradually expand the university’s infrastructure in a phased manner\. Further campus construction (beyond the academic complex) is expected to include of a state of the art auditorium, a sports field and gymnasium, a swimming pool, a complete set of student, staff and faculty housing, which will be established in a phased manner using alternative financing sources as a way of maximizing finance for development\. This will be done through innovative partnerships with potential financiers in the private sector and philanthropy\. Subcomponent 1\.2\.2: Establishing a Regional Network of Women’s Universities and Colleges (Total US$49\.3 million, Bangladesh Regional IDA US$38\.5 million, Afghanistan National IDA US$4 million, Afghanistan Regional IDA US$6\.8 million) 35\. The sub-component will establish a network of women’s universities and colleges in Afghanistan and Bangladesh with three main objectives: (i) enhance access to quality women’s higher education, (ii) support the development of women leaders, and (iii) enhance female labor force participation\. As mentioned in sub-component 1\.2\.1, the AUW will act as the academic hub of the network, having been identified as such by both the governments of Afghanistan and Bangladesh\. This South-South capacity building effort is expected to benefit at least 10 Afghan and 20 Bangladeshi universities, preselected by the respective governments to participate in network activities based on their role and potential of promoting women’s education at scale 19\. One university or college in each country (initially Afghanistan and Bangladesh) will be supported to become a National Center of Excellence (NCOE)\. 36\. Each institution in the network20 will receive institutional support21 to implement a package to improve its teaching and learning activities, based on twinning arrangements between the institutions themselves, and a performance agreement signed with the implementing agencies\. This capacity building support will be chosen from the following menu of activities22 inter alia: (i) employability trainings and support targeting students 23 such as CV- writing, applying for jobs, internships, usage of job portals, job fairs, establishment of career centers (ii) strengthen teaching and learning methods by supporting professional development for teachers, (iii) remedial programs to prepare students from disadvantaged background for a competitive and rigorous tertiary program; (iv) strengthening 19 In addition, several universities and colleges from other South Asian countries have expressed interest in joining this network as well\. 20 The AUW will not implement such a package but will help other institutions design and implement these packages\. 21 In Afghanistan, the MOHE will provide this support directly to institutions\. In Bangladesh, institutions will receive an institutional grant to procure support from the list of activities, based on an institutional development plan that is mutually agreed between the implementing agency and the institution\. 22 Given that institutions in the network have different baseline teaching and learning standards, the menu of options will allow each institution to access resources based on need and interest\. Some activities on this list (e\.g\. employability trainings, i nternships, professional development of teachers) will apply to all institutions in the network, while others (e\.g\. joint research programs and joint masters’ programs) may be restricted to only a few institutions\. 23 Particularly focusing on students in their later years, e\.g\. final year students\. Page 20 of 66  The World Bank Higher Education Acceleration and Transformation Project (P168961) student recruitment and admissions; (v) curricular reforms, (vi) improved student assessments; (vii) enshrine civic and social values in student programs; (viii) digital program development; (ix) development of modules focused on women’s leadership, (x) joint cross-border research projects on topics related to gender in education, (xi) joint cross-border masters’ programs on gender studies, and (xi i) strengthening of the teaching and learning environment focused on girls’ enrolment24\. In addition to these interventions, 400 female students25 under the Afghanistan part will be provided scholarships to enroll in institutions of the regional network in another country than their own\. The mobility program will follow the regional Credit Transfer Mechanism developed in sub-component 1\.1\.1\. 37\. Based on its expertise in this area, the AUW will receive an institutional grant to develop technical guidelines on each one of these menu options based on their practice and which has helped drive their success\. The AUW will work closely with the MOHE and MOE to develop a roster of national, regional and international consultants to support these hand-holding efforts while providing overall guidance and supervision for these interventions\. Institutions will be supported by these consultants and develop twinning arrangements to implement the package of interventions\. 38\. For some universities in Afghanistan (5) and Bangladesh (10), the AUW will provide direct hands-on capacity building support\. The AUW will also act as a host for a select number of network events, although network events may also be hosted by other participating universities and colleges\. Participation in network activities to implement the above activities (or activities under Components 1\.1\.1-1\.1\.4), will lead to capacity and knowledge spillovers across universities, colleges, and institutions, and across countries\. Institutions from outside Afghanistan and Bangladesh will be actively encouraged and supported to participate in network events\. As noted earlier, at least two institutional grants will be provided in Afghanistan and Bangladesh for developing into NCOEs, while two further NCOEs will be established in other participating regional countries through additional financing\.26 To be selected as a NCOE, institutions will need to meet stringent academic and professional criteria that will be jointly agreed between the governments involved in the project\. Participation in network activities can be supported by a variety of alternative financing mechanisms, – government, private and other financing, or without financing from the project but based on shared objectives and desired outcomes, etc\. COMPONENT 2: TRANSFORMING HIGHER EDUCATION IN BANGLADESH (Total US$359\.0 million, IDA US$95\.7 million27) Sub-Component 2\.1: Supporting Business Continuity under COVID-19 (Total US$74\.6 million, IDA US$19\.8 million) 39\. This sub-component supports business continuity in the wake of the coronavirus pandemic and to support disadvantaged students to disproportionately represent those unable to participate in any online activity\. The project will strengthen the capacity of Bangladeshi universities to offer online and blended learning programs, along with increased service offers to institutions through the BdREN infrastructure\. The following set of activities will be financed through this sub-component: ▪ Develop National Learning Management Infrastructure (LMI) : A national/central Learning Management Infrastructure (LMI) will be established\. The LMI will facilitate the development, management and delivery 24 This last point may include minor civil works and would be limited to one third of total investments in each institution\. 25 These students will be initially drawn from Afghanistan\. 26 These could be from any other South Asian country that joins the project, with initial outreach to Nepal and India, which have already expressed initi al interest in the project\. 27 The remaining balance under this component, of US$263\.3million, will be funded by the Government of Bangladesh\. See Project Cost Table on Page 36\. Page 21 of 66  The World Bank Higher Education Acceleration and Transformation Project (P168961) of on-line courses and digital resources\. ▪ Subsidize connectivity and devices to students and staff: UGC and participating universities in BdREN will offer a subsidized connectivity package (Wi-Fi router and internet credit) to students and staff\. ▪ Upgrade the Bangladesh Research and Education Network (BdREN) : BdREN’s capacity will be strengthened and participation of universities will be increased to support envisioned activities and delivery of services under LMI\. Sub-Component 2\.2: Strengthening the Market Relevance of Higher Education Programs (Total US$233\.8 million, IDA US$60\.4 million) ▪ 2\.2\.1 Incorporating job-relevant skills into academic programs at universities as well as establishment of career service centers and alumni offices in participating public and private universities : This activity will support the enhancement of employability skills of university students by incorporating job-relevant skills into academic programs which do not currently offer access to these skills\. Given low baseline employment levels for female graduates, this component is expected to benefit female students in particular28, though the activities will target both genders\. This project will ensure that students and trainees will be able to participate in exposure programs to help improve the employability skills of students in degree programs\. The Project Operation Manual will reflect the approach and manner by which this activity will be implemented\. University graduates will also be able to both access and provide employment services by establishing of Career Service Centers and Alumni offices in participating public and private universities\. These will be maintained and sustained by the respective universities but shared across internships\. ▪ 2\.2\.2 Strengthening of faculty professional development through (i) construction of a university teachers’ training academy; and (ii) provision of consulting services and training for the development of continuous professional development and operationalization of faculty professional development: This will support continuous professional development of university faculty/teachers both at the central and institutional level\. A unit under UGC, headed by a Director, will be responsible to implement the activities under this sub- component\. This sub-component will finance the following activities: o Construction of a University Teachers’ Training Academy : The project will establish a central level University Teachers’ Training Academy (UTTA) with residential amenities\. The facility development or construction under this activity will follow Buildings Act and regulations to ensure climate resilient features which can withstand the impacts of climate change-induced disasters and impacts\. o Provision of consulting services and training for the development of continuous professional development and operationalization of faculty professional development: A core group of trainers will be identified by UGC and this group will be responsible for providing training to 5,000 teachers from public and private universities within the project’s lifetime\. ▪ 2\.2\.3 Provision of Competitive Grants to Eligible Beneficiaries to carry out Sub-Projects in the following areas: o The COVID-19 Related Research and Development\. This window will support research on impacts of COVID-19 and could cover topics including social distancing strategies, development of screening documents, use of big data to track the spread of the disease, digital/online learning, and analyses of the socio economic impact of the COVID-19 on poverty, the economy, food supply and jobs, etc\. o Improvement of teaching-learning environment and infrastructure\. The funds from this window will finance: (a) modern ICT systems for teaching and learning; (b) upgrading of STEM labs; (c) 28 All programs will have enhanced focus on women graduates even under the national arm of the project\. Page 22 of 66  The World Bank Higher Education Acceleration and Transformation Project (P168961) updating/modernizing curricula and teaching-learning materials; and, (d) upgradation/renovation of childcare facilities and ensuring campus safety for women\. The facilities and STEM labs upgraded/renovated under this activity will have climate resilient features that can withstand the impacts of climate change-induced disasters and impacts\. o Advanced Research: This will support two clusters of academic disciplines: STEM and Humanities/Social Sciences/Liberal Arts\. This activity will support: (a) advanced research projects, including smart agriculture, computational biology, bio-medical sciences, nanotechnologies & engineering, sustainable materials, climate change resilience, gender studies, etc\.; and (b) collaborative research with industries and research institutes with the aim of patenting and commercializing research outputs\. o Innovation Support Facilities: Under this window grants will be available for: (a) establishing 7 new fab-labs; (b) transforming all existing fab labs into Centers of Excellence in digital manufacturing and facilitating link-up with private sector; (c) set-up 5 “i-labs” in five universities; and (d) set-up business incubators tagged with successful fab-labs/i-labs to convert innovative ideas into commercially useful products\. o Establishing and Operationalizing Technology Transfer Offices (TTO)\. To create a robust and sustainable industry-university interaction system, IP management cells and Technology Transfer Offices (TTO) will be established at least 20 universities through this window\. Sub-Component 2\.3: Improvement of the Governance and Quality of the Higher Education Sector (Total US$50\.6 Million, IDA US$15\.5 Million) 40\. The objective of this sub-component is to support activities to enhance the overall management capacity of the higher education sector in Bangladesh\. Technical assistance will be provided to support implementation of (i) Designing a performance-based financing scheme, (ii) Scaling up of institutional quality assurance cells to all of the Recipient’s universities, and (iii) Provision of technical assistance to the BAC to build its capacity and initiate its program accreditations of universities\. ▪ Designing a performance-based financing scheme: The project will support the development and initiation of innovative management system for the higher education of Bangladesh through the design of a Performance Based Financing scheme, a Centralized Admission System, and the further development of the Higher Education Management Information System\. ▪ Scaling up of institutional quality assurance cells to all of the Recipient’s universities : Institutional Quality Assurance Cells (IQACs) will be scaled up and extended to all 153 universities in Bangladesh\. ▪ Provision of technical assistance to the BAC to build its capacity and initiate its program accreditations of universities: This will support the full operationalization of Bangladesh Accreditation Council (BAC) and program accreditations of universities by BAC\. At least 30 programs will be accredited in universities under BAC during implementation\. Page 23 of 66  The World Bank Higher Education Acceleration and Transformation Project (P168961) COMPONENT 3: ENHANCING PROJECT MANAGEMENT RESULTS MONITORING AND COMMUNICATION (Total US$44 million; Bangladesh IDA US$5\.3 million and Afghanistan IDA US$2\.0 million29) 41\. The component supports project management capacities of the Secondary and Higher Education Division (SHED) of the MOE and UGC in Bangladesh; and that of the MOHE in Afghanistan\. The activities under this component include: (i) project management; (ii) monitoring and evaluation (M&E); (iii) communications; and (iv) Technical Assistance (TA) and (v) development and implementation of a grievance redress mechanism (GRM)\. COMPONENT 4: CONTINGENT EMERGENCY RESPONSE (Total US$0 million) 42\. This contingent emergency response component is included under the project for situations requiring urgent need for assistance\. This will allow for rapid reallocation of project proceeds in the event of future natural or man-made disaster or crisis that has caused or is likely to imminently cause a major adverse economic and/or social impact during the life of the project\. In the event of an eligible crisis or emergency, this component would allow the Government to request the Bank to re-categorize and reallocate financing from other project components to cover emergency response and recovery costs, if approved by the Bank\. C\. Project Beneficiaries 43\. The direct beneficiaries of the proposed project will be approximately 2 million students and 50,000 teachers of higher education institutions in Bangladesh, Afghanistan and the participating countries including 60,000 students and 5,000 teachers benefitting from competitive grants, BdREN, LMI, QA, CPD and the regional network activities in Bangladesh and Afghanistan\. Female students of Bangladesh, Afghanistan and participating countries will be benefited as special emphasis will be given to promote higher education and leadership for women through establishing a regional network\. There will also be many indirect beneficiaries of the Project, including employers who will be able to recruit better quality graduates and/or will get opportunities to collaborate with universities in relevant research areas, future generations of university students, faculty and staff members who will benefit from program accreditations and the system-wide reforms/improvements\. D\. Results Chain 44\. The project will achieve its PDO through two main components\. The theory of change linking project activities, outputs, intermediate-level results, and longer-term outcomes are presented in Figure 1\. E\. Rationale for Bank Involvement and Role of Partners 45\. Rationale for Bank Involvement and Role of Partners: The World Bank has a strong, long-standing partnership with both Governments in the area of educational development, and specifically higher education\. In Bangladesh, the World Bank was the first development partner to support higher education through HEQEP and has developed extensive experience and lessons learned\. Recently, Asian Development Bank showed interest for supporting the higher education sector with focus on science and technological universities\. Similarly, in Afghanistan, the World Bank has been involved in higher education from 2002 and is a trusted partner of the government\. Knowledge products and operational experience, locally, regionally and globally, have produced useful lessons for 29 As above, the remaining balance of US$ 36\.7 will be funded by the Government of Bangladesh\. See Project Cost Table on Page 36\. Page 24 of 66  The World Bank Higher Education Acceleration and Transformation Project (P168961) policy makers in their reform efforts in the sector\. The World Bank’s convening power will be useful to develop regional relationships in higher education\. 46\. The project meets the four regional criteria for utilizing the regional IDA envelope\. The regional criteria include: i\. number of countries - there are two participating countries – Bangladesh and Afghanistan (FCV country)\. ii\. benefits spillover country boundaries: the regional activity is expected to have significant positive externalities and through the establishment of a regional network of higher education institutions focused on promoting women leadership and female employability will support the institution of good practices across both network members and other higher education institutions\. Moreover, there is a growing demand for initiatives for distance learning across the region, particularly during the pandemic period iii\. clear evidence of country and regional ownership: requests have been received from both GoB and GoA confirming country ownership and this request has only been strengthened through the current pandemic\. Interest has also been perceived from other countries in the region and beyond iv\. platform for policy harmonization : there is keen interest on the policy goals expressed through this project and it must be recognized that education has been a topic of discussion in the SAARC platform\. Page 25 of 66  The World Bank Higher Education Acceleration and Transformation Project (P168961) Figure 1 - HEAT Theory of Change Challenges/Gaps Activities Outputs/Intermediate Outcome Outcome Long-Term Outcome COMPONENT 1: SOUTH-ASIAN HARMONIOUS AREA FOR RESEARCH AND EDUCATION ➢ Lack of regional dialogue on higher • Develop regional platform for policy i\. Regional cooperation strengthened 1 Share of universities education despite common challenges in coordination amongst national regulators for ii\. Emergency response plans developed implementing COVID Regionally, to South Asia leading to lack of student higher education iii\. Student and faculty exchange Framework response plans strengthen the exchange and limited joint learning • Develop regional emergency response plans developed 2a\. Implementation of ➢ HE institutions unprepared and iv\. Regional network functioning to strengthen teaching and learning COVID-19 and implementation support uncoordinated in emergency • Create a South Asian Higher Education Portal women’s education package in regional response in preparedness and response amid COVID- • Regional support to NRENs v\. Number of twinning projects under regional network higher 19 pandemic • Investment in Regional Centers of Excellence network 2b\. Share of additional ➢ Regional capacity problems to strengthen vi\. Number of Universities connecting to NRENs female students entering education, in Women’s Education women’s education amongst enormous • Develop regional network of women’s HEIs vii\. Number of Participation in exchange programs the labor market improve gender imbalance in labor force 3\. Number of students in connectivity and participation mobility programs ➢ Regional lack of preparedness of NRENs quality of higher to support remote learning in higher education for education women COMPONENT 2: TRANSFORMING HIGHER EDUCATION IN BANGLADESH ➢ University • Strengthen digital viii\. Number of direct beneficiaries of the shutdown in connectivity project In Bangladesh, Bangladesh due to capacity for HE ix\. Number of job placements to enhance COVID-19 continuation amid supported through the career Pandemic pandemic services centers established in public higher ➢ Lack of formal shutdown universities education’s distant learning • Award competitive x\. Number of university-industry 4\. Number of programs newly accredited in universities under BAC governance, capacity in grants for research collaborations completed Bangladesh and Advanced xi\. Number of academic publications 5\. Increase share of students enrolled in distance learning modality resilience to Risk of academic Research, produced by beneficiaries of 38\. 6\. Percentage increase in Graduate Employability Index from baseline emergencies, lag and year loss Innovation, and research grants ➢ lack of research xii\. 39\. Number of faculty trained (of which, 7\. The number of faculty receiving professional development training and graduate Entrepreneurship and innovation including COVID-19 women %) employability\. opportunities research xiii\. Number of universities brought ➢ lack of • Enhance soft skills under the LMI/blended programs employment of university xiv\. Number of newly established IQAC in services and students/graduates universities have produced at least industry • Upgrading one self-assessment reports partnership/linkage teaching-learning, xv\. Student Satisfaction Page 26 of 66  The World Bank Higher Education Acceleration and Transformation Project (P168961) ➢ lack of teachers’ provision of xvi\. Establishment of Performance Based professional employment Funding development services opportunities • Strengthen Faculty ➢ lack of active Professional learning, critical Development thinking and soft • Operationalize skills development quality assurance opportunities, at university level modern teaching- and University learning facilities Program and rigid Accreditation curriculum under BAC ➢ absence of • Introduce accreditation and Performance- weak quality Based Financing for assurance Public Universities mechanism • Introduce central ➢ lack of innovation admission system in HE management and strengthening HEMIS Page 27 of 66  The World Bank Higher Education Acceleration and Transformation Project (P168961) F\. Lessons Learned and Reflected in the Project Design 47\. The project design draws heavily upon the lessons learned from numerous other World Bank-supported higher education projects in SAR and elsewhere, as well as reflections on global experience relevant to SAR\. These lessons learnt have been incorporated into the project design\. (a) Use of existing mechanisms and instruments to support regional coordination: The project will use existing mechanisms to strengthen and expand regional cooperation in higher education in the region\. However, regional cooperation will focus on the South Asia region, though not limited to it\. (b) Effectiveness of Competitive Grant System: A competitive grant system is an effective tool to support institutional improvement activities and to ensure transparency as proven from implementation experience of such system in numerous projects\. This accumulated experience suggest that competitive funding is a highly effective tool to improve governance, transparency, and efficiency of the budget allocation for higher education and to boost educational quality, relevance, and innovation at the institutional level\. (c) Quality Assurance: A strong system of Quality Assurance is the linchpin of overall quality and relevance improvements in higher education and international experience suggests that an effective approach to QA is to have quality assurance cells in universities aligned with standards set by a national autonomous body\. The project builds on developments initiated under the previous project and helps sustain and consolidate earlier reforms\. (d) Digital connectivity in not an add-on: Digital connectivity is increasingly becoming an indispensable part of the higher education puzzle and is seen as a fundamental input into quality higher education and innovative research activities\. The essential nature of this technology has become self-evident during the last few months as those with digital and broadband access have managed to continue services and those without have not been able to do so\. III\. IMPLEMENTATION ARRANGEMENTS A\. Institutional and Implementation Arrangements 48\. The HEAT project will be implemented jointly by the UGC, SHED/MOE and MOHE in Bangladesh and Afghanistan respectively\. These parties will collaborate to implement the regional activities, while each country will be responsible for implementing their delineated activities\. 49\. Component 1, the regional component will be implemented under the joint responsibility of the SHED/MOE and the MOHE\. A joint committee, known as the Regional Coordination Committee (RCC), will be established and headed by the Minister/Secretary of Education in Bangladesh and Minister/Deputy Minister of Higher Education in Afghanistan\. The RCC will meet at least twice a year to review progress against stated targets and to ensure that all implementation concerns are being addressed\. Day-to-day implementation in Bangladesh will be led by UGC and by HEDP/MOHE in Afghanistan\. Detailed implementation mechanisms will be described in a Project Operations Manual (POM) developed by UGC for Bangladesh and a Project Implementation Manual (PIM) developed by MOHE for Afghanistan\. In Bangladesh, a Project Implementation Committee (PIC) under the UGC, and in Afghanistan, the Operations Management and Support Team (OMST)30 of the HEDP, will provide project administrative and clerical support\. 30 OMST will be used interchangeably with Project Coordination Unit (PCU) across documents\. Page 28 of 66  The World Bank Higher Education Acceleration and Transformation Project (P168961) 50\. Component 2 will be implemented under guidance of a Project Steering Committee (PSC) in Bangladesh\. The PSC will be chaired by the Secretary of the SHED/MOE and will provide policy oversight and resolve critical issues\. The UGC will provide coordinating support to SHED/MOE\. The UGC would implement the project using existing structures\. Detailed implementation arrangements are included in Annex 2\. B\. Results Monitoring and Evaluation Arrangements 51\. The UGC will be responsible for the overall coordination of all M&E tasks and for ensuring consolidated reporting of results in the Results Framework\. The international cooperation and collaboration unit will obtain relevant data from the OMST/MOHE to support the reporting and assessments\. Details of the M&E arrangement are attached with results framework\. The UGC will use the existing Monitoring, Evaluation and Reporting Unit (MERU) to support the project to undertake M&E work\. The MERU will be responsible for: (i) collecting updated data from the relevant agencies, institutions and units of the project; (ii) updating of the results indicators; (iii) conducting physical inspections; (iv) support M&E at the subproject level; (v) conducting planned studies and assessments in a timely manner in partnership with public research institutions (such as BIDS, BBS, IMED etc\.); and (vi) produce biannual project progress reports\. There will be several studies conducted over the lifetime of the project, including three employer surveys that will be used to construct the employability index, 2 national tracer studies, 2 student satisfaction surveys, an impact assessment and a bibliometric research study\. C\. Sustainability 52\. Sustainability of the national investments is not a source of concern, as all investments in the Bangladesh higher education sector aims to build capacities in national level institutions which form the core elements of a well- functioning higher education sector\. Government ownership is reflected through US$300 million commitment from Bangladesh31 and willingness to meet the recurrent costs associated with the proposed project\. The Bangladesh national component builds on the very successful implementation of HEQEP and all the lessons learned therein and the fact that many aspects of the project’s implementation arrangements have now become embedded in the ministerial structure\. Similarly, the Afghan parts of the regional component are built on the strong foundations of the HEDP operation\. The HEDP project’s sustainability is grounded in the government’s ownership and commitment to reforms, the implementation arrangements and the capacity that has been built through this effort\. 53\. Sustainability of regional investments is less clear and more challenging to achieve\. The project aims to strategically utilize existing regional mechanisms to support regional development and cooperation in higher education, while tactically recognizing and adopting the fact that two regional member countries have sought regional support for higher education\. The project will help establish a project Regional Coordination Committee, chaired by the Minister/Secretary of Education in Bangladesh and Minister/Deputy Minister of Higher Education in Afghanistan to support regional investments under this project\. The RCC will use SAARC mechanisms to develop broader region-wide participation by establishing a South Asia Higher Education Desk, develop regional guidelines for further policy coordination, and eventually establishing a statutory body to support higher education coordination in the region\. These measures can support sustainability and continuation of policy harmonization and regional integration activities envisioned under the regional component\. 54\. Sustainability of the regional network of women’s universities and colleges is anchored on the usefulness of network activities to all network participants\. Given the common and overlapping interests to improve access to 31 No counterpart funding is expected for Afghanistan, although parallel investments in the higher education sector are substantial\. Page 29 of 66  The World Bank Higher Education Acceleration and Transformation Project (P168961) quality higher education for women, improve the employability of women graduates, and eventually increase FLFP rates in the region, it is anticipated that network activities will be useful across participating institutions\. The hub of the regional network, the Asian University for Women (AUW) is a private, not-for-profit, international university will spearhead the formulation of a network of women’s institutions initially across Afghanistan and Bangladesh, but later to encompass other countries in the region\. It is anticipated, that once four (or more) Centers of Excellence for women’s education has been established in the region, some characteristics of this network can change and in particular, the hub can become a revolving hub\. This is important to ensure sustainability beyond the life of the project\. Separately, it is important to address the sustainability of the AUW itself which is expected to be sustained by growing the endowment fund, obtaining sought after institutional accreditation, increase the number of fee paying students, and continue to raise external funds for campus completion\. IV\. PROJECT APPRAISAL SUMMARY A\. Technical, Economic and Financial Analysis Technical Analysis 55\. Regional integration in higher education can help address issues that are common across countries in the region and support better and more efficient use of regional resources to strengthen the overall higher education sector in the region\. Collaborating academics in the higher education space under the aegis of the SAARC have already illustrated the opportunities that can be obtained through regional meetings, showing potential for further collaboration across a range of disciplines in higher education, and what may be possible through further collaborative efforts across a range of sectors, such as, trade, industries and technology, health, etc\. 56\. Coordinated investments in the region will eventually help improve the allocation of scarce regional resources across knowledge areas that are critical to all countries, and more importantly, help the region close critical gaps in skills, knowledge, and technologies vis a vis other regional entities\. Women’s access to quality higher education opportunities and employability of women graduates are common regional concerns, as is declining or low FLFP\. As these concerns transcend national borders in South Asia, the project will support south-south cooperation between Bangladesh and Afghanistan, where both countries face a similar set of challenges in higher education, though to varying degrees, and can benefit from working together to solve similar problems confronting the higher education sector\. Finally, regional academic exchanges, research and education networks, have developed as islands in the region, and the regional component will strengthen efforts to interlink regional RENs bilaterally and regionally\. Digital connectivity will help promote virtual exchanges and mobility in higher education institutions will benefit the region in the long-run and help address the immediate concerns of business continuity in higher education due to the current pandemic\. 57\. The project design is based on an in-depth sector study of higher education in Bangladesh, and from having IDA supported higher education projects in Afghanistan, Bangladesh, and other countries in the region and beyond\. Component 1 aims to support and strengthen regional engagement in higher education generally, and specifically focus on strengthening the higher education sectors’ ability to respond to the current pandemic, help build system resilience through enhanced digital connectivity and finally, support access to quality higher education for women to enhance their employability and help produce women leaders\. Component 2 will address the underlying issues and challenges to improve employability of Bangladeshi university graduates and to improve the overall management and governance of the Bangladesh higher education sector encompassing activities that will initiate Page 30 of 66  The World Bank Higher Education Acceleration and Transformation Project (P168961) system level improvements and strengthen management and fiduciary capacity at the institution level\. The development of a regional network of women’s universities will help build the capacities of all network participants to learn from the AUW model in Bangladesh through capacity development programs, faculty strengthening efforts, student exchanges, collaborative research and other such program\. While financing of network activities is currently limited to Afghan and Bangladeshi institutions, participation from other regional partners like Bhutan, India, Nepal, Pakistan and Sri Lanka will be welcome on a cost-plus basis\. Participation is also likely from countries outside the region\. Economic and Financial Analysis 58\. The project is expected to generate economic benefits both at the individual and societal levels in both Bangladesh and Afghanistan as well as positive externalities across the South Asia region\. Key expected benefits at the individual level include increased employment rates, increased labor productivity, and increased wages and earnings of university graduates\. At the societal level, in the mid- to long-run, the Project is expected to create significant positive impacts, including: (i) creating a more productive and adaptable workforce for various economic sectors and public agencies, with improved female representation in leadership and decision-making roles in the economy; (ii) increasing the share of qualified university faculty and the school sector; and (iii) contributing to more favorable investment environment through availability of skilled workforce\. Furthermore, the Project is expected to bring substantial social benefits through the establishment of the regional network of higher education institutions, especially in terms of advancing women’s empowerment and building social cohesion in the South Asia region\. 59\. A cost benefit analysis was applied to estimate the Net Present Value (NPV) of the Project and the Internal Rate of Return (IRR) for two scenarios: “with” and “without” interventions\. The analysis was conducted separately by each country at a time to account for the differences in economic, educational and labor market conditions\. The analysis for Bangladesh shows that the Project will likely be highly justifiable from the economic perspective with an NPV of US$531 million and an IRR of 22 percent\. For Afghanistan, the cost-benefit analysis also shows a healthy return on investment with an NPV of US$32 million and an IRR of 18 percent\. A separate cost-benefit analysis was conducted for investments to the Asian University of Women\. The results indicate that the investment under HEAT for AUW is justifiable from the economic perspective with NPV of US$154 million and an IRR of 22 percent\. B\. Fiduciary (i) Financial Management 60\. Financial Management in Bangladesh\. From the FM perspective, the project design is complex in terms of multiple cost and accounting center in dispersed locations, involvement of multiple implementing partners /recipients/universities, mixed nature of cost such as works, consultancy, training and sub-projects/grants etc\. Implementation experience with in other bank finances project suggests that UGC needs to strengthen the FM capacity on timely financial reporting, documentation project expenditure on time, expediting adjustment of outstanding advances in subprojects and prompt resolution of audit observations\. Specific actions to improve capacity and internal controls, and thereby mitigate risks to the Project on financial management, will need to be taken by the implementing agency\. Considering the implementation of these mitigation measures, the residual FM risk is assessed as “Moderate” these include: (a) Appointment of experienced financial management consultants at UGC (with Terms of Reference (TOR) acceptable to the Bank) along with adequate staff to support such functions in cost centers\. All consultants Page 31 of 66  The World Bank Higher Education Acceleration and Transformation Project (P168961) and staff with fiduciary duties must be provided regular training to ensure compliance with necessary requirements; (b) Mainstreaming iBAS++ with separate BACS (Budget & Accounts Classification System) codes for accounting and financial accounting (HEAT fund component agreement) (economic sub-category and line-items), and preparation of iBAS++ generated quarterly interim un-audited financial reports (IUFRs)\. (c) Inclusion of detail expenditure plan, advance ceiling, expenditure reporting and accountability mechanism in the on-grant agreements of all implementing partners / sub recipients/institutions, Details of control and accountability mechanism will be in Grants Operational Manual which is a disbursement condition for Category-2 (Grants) while the FM section of Project Operation Manual will cover the overall accounting, auditing, reporting, financial, disbursement of the project, which will be adopted by UGC within six months of the effective date\. (d) Risk based internal audit with TORs acceptable to the Bank; (e) Detailed fiduciary arrangement and internal control will be spelled out in the Project Operation Manual (FM section)\. 61\. Fund Flow, budgeting and Accounting in Bangladesh\. The project will be included in the Budget and Accounts Classification System (BACS) as a ‘scheme’ for the DPP of Ministry of Education (MOE) to be determined under the operational segment for release of the allocated annual budgets to the UGC\. Budget preparation and execution will take place electronically using iBAS++ and as such the budget must be released through the system in a timely manner for the PD to execute the project activities according to the budget allocation\. 62\. Out of total IDA allocation of US$209 million, UGC, Bangladesh will receive US$191 million while US$18 million will be received by Afghanistan where the existing FM arrangement under the on-going project Higher Education Development Project (P146184) will apply\. Activities of each component to be financed from IDA of US$191 million will be identified separately and financed by IDA\. The counterpart financing of US$300 million in Bangladesh will be allocated as parallel financing with separate BACS code for budgeting, allocation and reporting expenditure and joint financing for competitive grants\. Counterpart financing will also include costs that are not eligible under the existing country financing perimeter such as, (a) Purchase of vehicles, (b) recurrent expenditures such as workshop allowances, sitting allowances, cash per diems, honoraria and fuel, and (c) customs duties/value-added taxes beyond 15 percent of total IDA allocation and activities, included as a note in the procurement section of the PAD\. 63\. A Designated Account (DA), in the form of Convertible Taka Special Account (CONTASA), will be opened by UGC with a nationalized commercial bank to receive the IDA funds\. The funds flow to the DA will be based on submission of withdrawal application, in the Client Connection, by the authorized signatory for the project at UGC only\. An alternative signatory arrangement will be made for submission of withdrawal application to ensure unhindered flow of funds for project execution\. The disbursements/replenishment applications, to be submitted to the Bank, will be based on actual Statements of Expenditures (SOEs), incurred by the project\. UGC will be responsible to submit the disbursement/replenishment applications which can be processed, by the Bank, as often as once per month\. Paragraph 12 of the Investment Policy Financing Policy has not been triggered for the Bangladesh part and hence, Mandatory Direct Payment initiative is not applicable for the Bangladesh part\. 64\. The Project will send yearly cash flow projections within June 30 of each year and this projection will be updated on quarterly basis\. Separate set of accounts/budget heads using the Budget and Accounting Classification System (BACS) would be maintained in the integrated budgeting and accounting system (iBAS++) for each financing to ensure charging of expenses related under the appropriate financing\. UGC will prepare a separate Interim Unaudited Page 32 of 66  The World Bank Higher Education Acceleration and Transformation Project (P168961) Financial Report (IUFR) from iBAS++, in the format agreed with the Bank, on a quarterly basis and submit to the World Bank for its review and clearance within 45 days from the end of each quarter\. 65\. Sub-component 1\.2\.2 support for the financing of the AUW Academic Center\. These funds will be managed by UGC, and the AUW will be given full user rights to this Academic Center as long as it is used for the intended purpose in the AUW Charter\. For other activities, such as, grants for teaching and learning, research, capacity building and other similar activities under sub-component 1\.2\.2, and for Competitive Grant Schemes under Sub-Component 2\.2, etc\. grants will be disbursed from the Designated Account (DA) to a separate operational account maintained by the concerned institution and these expenditures will be accounted for in the IUFRs only upon utilization of the funds\. Based on these expenditures, SOEs would be prepared for withdrawal application submission for all types of Grants\. The work related to all activities, supported under such grants, must be completed within the closing date of the financing agreement\. 66\. Audit and Oversight Arrangement in Bangladesh\. The project Annual Financial Statements will be submitted to the Comptroller and Auditor General’s Office (C&AG) of Bangladesh within three months of the end of each fiscal year\. The annual audit will be conducted by the Foreign Aided Projects Audit Directorate (FAPAD) under the OCAG (Office of Comptroller & Auditor General)\. FAPAD will express an opinion on the project financial statement in accordance with international standards of auditing and submit the report within six months of the end of the fiscal year\. In addition, the Auditor is required to provide a detailed management letter that includes the Auditor’s observations of the internal control systems and compliance with financial covenants in the Financing Agreement\. The Project Director (PD) will be required to provide clarification on all possible audit observations within 30 days from the receipt of the report\. The PD will also ensure resolution of all audit observations in a timely manner, and no later than 90 days from the receipt of the final audit report\. Resolution of audit observations may include recertification, other actions, and refunds of the public money under question\. Additionally, a risk based internal audit with TORs acceptable to the Bank , will be conducted by UGC annually over the entire duration of the project\. As per current FM records of the Bank, there are no pending/outstanding/overdue audit reports by the Implementing Ministry for any ongoing/completed Bank financed project\. 67\. FM Supervision and Monitoring Plan \. The following are the planned supervision and implementation support measures due to travel limitations for COVID-19 Pandemic\. (1) Virtual FM implementation support activities to keep engaged with implementation teams on issues impacting performance, compliance and reporting (2) Electronic exchange of FM documents and accounting evidence (3) Regular desk review of FM reports and virtual discussion for strengthening FM capacity (4) Third Party verification for questionable and ineligible expenditure 68\. Financial Management Arrangements in Afghanistan \. The project will leverage the FM arrangements of the Higher Education Development Project (HEDP, P146184) being implemented by MOHE\. The OMST for the HEDP project, will have the overall financial management responsibility for HEAT\. Government budgeting processes will apply, and the project's budget will be a part of MOHE's annual budget\. MoF will maintain the accounting records at the central level in the Afghanistan Financial Management Information System (AFMIS) based on M16s, and the OMST will maintain detailed subsidiary records\. A detailed FM Manual notified by MoF provides a comprehensive internal control framework that will be applicable to HEAT, and the Internal Audit department of MOHE will conduct project internal audit annually and submit reports to the World Bank within four months of the close of the financial year\. The project's financial statements will be prepared in accordance with Cash-basis International Public-Sector Accounting Standards and audited by the Supreme Audit Office in accordance with TORs acceptable to the Bank\. The annual audited financial statements will be submitted to the World Bank within nine months of the close of the financial year\. The FM team in the OMST consists of a Senior Finance Manager, a Financial Management Specialist and a Senior Page 33 of 66  The World Bank Higher Education Acceleration and Transformation Project (P168961) Finance Officer, and the same team will be responsible for financial management of the HEAT project\. The existing staffing arrangements are assessed to be adequate\. 69\. Disbursement will be based on Statement of Expenditures (SOE)\. The project funds will flow through a separate designated account (DA) to be set up in the Da Afghanistan Bank (DAB) and controlled by MoF\. The project will request an initial advance that will be deposited into the project’s DA\. Subsequently, the DA will be replenished on a quarterly basis for which the project will submit withdrawal applications after the review of SOEs by the Third-Party Monitoring Agent (TPMA) of the World Bank\. The ceiling of the designated account will be USD 2 million, and the replenishments will be on quarterly basis\. The project will be required to submit semi-annual Interim Unaudited Financial Reports (IUFR), throughout the project life, to the Bank, within 45 days of the end of each academic semester\. 70\. Budgeting: MoF guidelines for budget preparation will be followed and the project budget will be based on the procurement plan and the annual work plan and budget (AWPB)\. The budget committee assigned for the OMST, will review and finalize the budget, work plan, cash plan and expenditure of the project on quarterly to facilitate budget monitoring\. The budget utilization of the project will be assessed in each IUFR through a separate sheet in the IUFR to compare the planned versus actual expenditures at the subcomponent level\. Any variance of more than 15 percent will be explained by the project team with proper justification\. 71\. Accounting and financial reporting: The ‘cash basis of accounting’ will be followed during project implementation\. A financial and document management system is being developed for deployment, and till then MS Excel will be used for project accounting and reporting\. The MoF will process payments and maintain records at the central level using the AFMIS in accordance with the Government’s Treasury Accounting Manual\. MOHE will be responsible for the preparation of SOEs and semiannual IUFRs\. The semiannual IFRs will compare actual expenditures to budgeted expenditures and explain significant variances\. The project will submit IUFRs to the World Bank within 45 days of the close of each semester\. The OMST will maintain separate books of accounts and records for HEAT as prescribed by the FM Manual for IDA and Afghanistan Reconstruction Trust Fund (ARTF) financed project\. These include Cash/ Bank Book, General Ledger, Asset Register, Invoice Register, Contract Register, M-16 register, Advance Register, and Taminat Register\. 72\. Internal Controls: The MoF has notified (Shumara number 109 dated 16/10/1398) the Financial Management Manual (FMM) for IDA and ARTF projects that will be used for all FM aspects of the HEAT project\. The FMM includes details on the FM arrangements, internal controls, disbursement procedures, reporting lines, allotment and payment processes, documents retention control mechanism at various levels, and service standards\. 73\. Internal audit: Project internal audit will be conducted annually by the Internal Audit Department of MOHE\. The annual internal audit reports will be submitted to the World Bank within 4 months of the close of the fiscal year\. The Afghanistan fiscal year runs from December 21 to December 20\. There are enough staff and capacity at the IAD of MOHE to carry out the internal audit of the project\. 74\. External audit: In Afghanistan, the Supreme Audit Office (SAO) carries out the annual audit for all ARTF/World Bank-funded projects following INTOSAI auditing standards and will be used for the Afghan component of this project\. The SAO will submit to the World Bank, annual audited project financial statements and a Management Letter within nine months of the close of the fiscal year on December 21\. Financial statements from the project audit will be prepared by the MoF based on the AFMIS records in accordance with the Cash Basis IPSAS\. A common TOR exists for the audit of all projects that is reviewed by the World Bank every year\. The audit will include field visits to project sites for physical verification of assets created under the grant\. Page 34 of 66  The World Bank Higher Education Acceleration and Transformation Project (P168961) 75\. The annual audit report for the project financial statements will be expected to include an audit Management Letter and an audit opinion\. The SAO would be required to express an opinion whether (a) the project financial statements present a true and fair view and are presented fairly, in all material respects, in accordance with the applicable financial reporting framework; (b) the grant proceeds were used only for the project or not; and (c) the project complied with each covenant contained in the legal agreements for the project\. 76\. Monitoring of fiduciary performance and implementation support plan\. The fiduciary performance will be assessed through the following indicators: (a) timely and quality submission of semiannual IFRs; (b) maintenance of adequate books of records and supporting documents of project transactions; (c) timely submission of audited financial statements; (d) timely resolution of FM issues raised during Bank supervision, internal audit, external audit, and any other reviews; (e) maintenance of adequate internal controls; (f) timely processing of allotments/ payment requests and project expenditures; (g) adherence to service standards\. The Bank will carry out semi-annual FM reviews\. Implementation support will include monitoring of fiduciary performance based on identified indicators, review of IUFRs and audit reports, review of compliance with legal covenants, review of progress on agreed actions, and review of FM risks\. 77\. Project Financing: The project will be financed through Investment Project Financing (IPF) Instrument with US$509 million, where US$209 million will be from IDA and US$300 million from the GoB counterpart financing\. The detailed component-wise fund allocation summary is in table below\. In case of competitive grants, under subcomponent 2\.2 joint financing will be followed with IDA financing 30 percent and GoB 70 percent\. In other cases, parallel financing will be followed, and counterpart financing would be for made available in time for subsidized connectivity package to staff and students under Sub-Component 2\.1, goods for upgrading BdREN under sub- component 2\.1, construction of University Teachers’ Training Academy (UTTA) under Sub-Component 2\.2, expenditures for design of a Performance Based Financing scheme and Institutional Quality Assurance Cells (IQACs) under Sub-Component 2\.3, expenditures other than operationalization of Bangladesh Accreditation Council (BAC) under Sub-Component 2\.3 and items that cannot be financed as per Country Financing Parameters like fuel, honorarium and salary under Component 3\. (ii) Procurement in Bangladesh and Afghanistan 78\. All goods, works, non-consulting services, and consulting services financed under the Project shall be procured in accordance with the World Bank Procurement Regulations for IPF Borrowers, dated July 1, 2016, and as revised in November 2017 and August 2018\. 79\. Procurement under the Project at the national level in Bangladesh will be carried out by the University Grants Commission (UGC), whereas procurement at the decentralized level under the scope of the universities/colleges will be carried out by the respective universities/colleges themselves\. In addition to carrying out its own procurement under the Project, UGC, with the support of consultants, will also be responsible for the oversight and implementation support of the procurement carried out by the universities/colleges and for regularly reporting procurement performance to the Bank\. In Afghanistan, the Ministry of Higher Education (MOHE) will support the implementation of this project through the Operations and Monitoring Support Team (OMST) of the ongoing Higher Education Development Project (HEDP)\. The current procurement performance of MOHE under HEDP is moderately satisfactory\. Page 35 of 66  The World Bank Higher Education Acceleration and Transformation Project (P168961) Project Cost Table Component Name and Sub-component Name Bangladesh Afghanistan Grand IDA IDA GOB Sub- IDA IDA Sub-Total Total (BD (National) (Regional) Total (BD) (National) (Regional) (Afg) + Afg) Component 1: South-Asian Harmonious Area for Research and Education 30\.0 60\.0 - 90\.0 4\.0 12\.0 16\.0 106\.0 1\.1: Institutionalization of Regional Mechanisms, Systemic Resilience, and Digital Connectivity 1\.1\.1: Institutionalization of Regional Mechanisms for Engaging in Higher Education - 0\.4 - 0\.4 - 0\.1 0\.1 0\.5 1\.1\.2: The establishment of a South Asian Higher Education Portal with Localized Content - 0\.9 - 0\.9 - 1\.1 1\.1 2\.0 1\.1\.3: Emergency Response - 3\.7 - 3\.7 - 1\.0 1\.0 4\.7 1\.1\.4 Efforts to improve connectivity across national research and education networks - 16\.5 - 16\.5 - 3\.0 3\.0 19\.5 Subtotal (1\.1) - 21\.5 - 21\.5 - 5\.2 5\.2 26\.7 1\.2: Regional Network of Women’s Higher Education Institutions 1\.2\.1: AUW Academic Complex 30\.0 - - 30\.0 - - - 30\.0 1\.2\.2: Regional Network of Women’s Universities and Colleges - 38\.5 - 38\.5 4\.0 6\.8 10\.8 49\.3 Subtotal (1\.2) 30\.0 38\.5 - 68\.5 4\.0 6\.8 10\.8 79\.3 Component 2: Transforming Higher Education In Bangladesh 95\.7 - 263\.3 359\.0 - - - 359\.0 2\.1: Business Continuity under COVID-19 19\.8 - 54\.8 74\.6 - - - 74\.6 2\.2: Strengthening the Market Relevance of Higher Education Programs in Bangladesh 60\.4 - 173\.4 233\.8 - - - 233\.8 2\.3: Improving the Governance and Quality of The Higher Education Sector 15\.5 - 35\.1 50\.6 - - - 50\.6 Component 3: Enhancing Project Management, Results Monitoring and Communication 5\.3 - 36\.7 42\.0 2\.0 - 2\.0 44\.0 3\.1: Project Management 1\.2 - 36\.7 38\.0 1\.5 - 1\.5 39\.5 3\.2: Monitoring 2\.1 - - 2\.1 0\.5 - 0\.5 2\.6 3\.3: Communication 2\.0 - - 2\.0 - - - 2\.0 Grand Total 131\.0 60\.0 300\.0 491\.0 6\.0 12\.0 18\.0 509\.0 80\. Procurement by UGC, Bangladesh, under the Project is expected to include (a) Consulting services contract packages for strengthening emergency preparedness to address COVID-19, module and curriculum development, technical assistance to support full operationalization of Bangladesh Accreditation Council (BAC), and program accreditations of universities by BAC, up-gradation of the Higher Education Management Information System (HEMIS), establishing and operationalizing; (b) Goods, among others, IT infrastructure for Developing National Learning Management Infrastructure (LMI), Upgradation of the Bangladesh Research and Education Network (BdREN), IT-related software for national and institutional learning management solutions (LMS), up-gradation of the Higher Education Management Information System (HEMIS), establishing and operationalizing Institutional Quality Assurance Cells (IQACs); and (c) works package for University Teachers Training Academy (UTTA)\. 81\. Procurement to be carried out by UGC and MOHE of consulting services packages for the selection of firms is mostly expected to follow Quality and Cost Based Selection (QCBS) or Selection Based on Consultants Qualification Page 36 of 66  The World Bank Higher Education Acceleration and Transformation Project (P168961) methods, while individual consultants will mostly be hired through competitive selection procedures\. Goods and civil works are mostly expected to be procured through Request for Bids and Request for Quotation methods using an open national competitive market approach, while procurement of the civil for UTTA and AUW academic building by UGC is expected to follow the Request for Bids method using the international market approach\. 82\. AUW will not hold the budget for the construction of AUW’s academic building\. Accor dingly, the procurement arrangements are designed and AUW will not carry out the selection of the consulting services contract for design, procurement support and construction supervision, nor the procurement of the civil works contract for the Academic building\. UGC will be responsible and accountable for the procurement of these two contracts in accordance with the applicable procurement methods under the Bank’s Procurement Regulations, as well as for contract management and supervision of the contracts\. Hence, the contractual relationship under each of these contracts will be exclusively between the two parties to the contract, i\.e\., UGC and the consulting firm for design, procurement support and construction supervision, and between UGC and the construction contractor for AUW academic building\. UGC will discuss and detail out with AUW the internal working arrangements between UGC and AUW in the procurement and management of these contracts, after which UGC will share the proposed working arrangements for the Bank’s review before incorporating those in the performance agreement to be entered between UGC and AUW\. 83\. The selection of universities/colleges as recipients of the competitive grants is not categorized as procurement and will not be governed by the Bank’s Procurement Regulations\. Instead, the recipient universities/colleges will be selected based on their proposals for seeking grant funds which will be evaluated by UGC on a pre-established/disclosed technical merit-based criteria that would also include assessment of the university/college’s technical and management including fiduciary, capacity\. 84\. Procurement to be undertaken by the recipients using grant proceeds is expected to include contracts for consulting services, goods, works and non-consulting services, such as for the establishment of new or up-gradation of existing teaching-learning facilities with modern communication technology, up-gradation of science and technology labs, updating/modernizing curricula and teaching-learning materials, up-gradation/renovation of childcare facilities and ensuring campus safety for women\. As mentioned above, the Bank’s Procurement Regulations shall apply to all procurement under the Project, including procurement by the private and public universities/colleges using grant proceeds\. Normally, the Bank’s Procurement Regulations would not have been required to be applied to the private universities/colleges recipients of the grants provided by UGC, but for ensuring consistency under this project and in line with the Government’s requirement, the Bank’s Procurement Regulations will be required to be followed by both private and public sector universities/colleges\. Given that the grants will vary in the range between US$ 17,000 to US$ 1\.1 million and there will be multiple contracts procured under each grant by the recipient, most of the procurement packages for Goods are expected to be procured through Request for Quotations and Request for Bids methods using national competitive market approach while there may be very few contracts falling under Open international competitive market approach\. UGC, with the support of consultants, will be responsible for oversight and providing implementation support of all the procurement carried out by the universities/colleges under the grants, including but not limited to assessing the procurement capacity and procurement plans of the universities/colleges during the grant proposal appraisal process, and subsequently checking and verifying compliance with the applicable procurement procedures, including prior and post reviews, of the procurement carried out by the universities/colleges during the implementation of the grants, and regularly reporting procurement performance to the Bank\. In addition, procurement under the grants will be subject to the Government’s audit process while the Bank will retain the right to carry out post review\. Page 37 of 66  The World Bank Higher Education Acceleration and Transformation Project (P168961) 85\. A Project Procurement Strategy for Development (PPSD), including a draft procurement plan, has been prepared by UGC\. UGC is preparing and yet to finalize the Development Project Proforma (DPP)\. The DPP will have a detailed procurement plan was approved by the Bank on May 25, 2021, including bid packaging, estimated cost, procurement method, market approach, bid validity period, Bank ’s review (prior/post review) and Government’s internal approval including the estimated time frames for each\. The procurement plan of each university/college will be prepared based on their respective institutional development plan and will be incorporated in the respective grant agreement to be signed between UGC and each university/college, which will be reviewed, approved and monitored by UGC\. UGC will upload the procurement packages in the procurement plan in STEP (Systematic Tracking of Exchanges in Procurement)\. A Project Operations Manual (POM) will also be prepared and will include further details of the procurement arrangements, including established time standards for the bid validity period, evaluation of bids, the Bank’s and Government’s review and approval, and contract signing, which should be within the original bid validity period specified in the procurement document, and to be monitored and reported by UGC/MOHE regularly to their management and the Bank\. 86\. The residual project procurement risk for Bangladesh, based on the risk factors and after the adoption of the agreed mitigation measures listed below, is Substantial\. The factors contributing to the procurement risks rating are (i) weak technical capacity for supporting project procurement in the upstream technical preparation and downstream contract management, which could impact the effectiveness of the procurement processes, (ii) large number of procurement packages to be procured at the decentralized level by a large number of different universities/colleges, (iii) weak procurement capacity of particularly the universities/colleges and the insufficient number of qualified procurement staff in UGC to effectively provide oversight and implementation support for the procurement by the universities/colleges under the grants - while UGC has previous experience in managing procurement under HEQEP, the procurement performance was moderately satisfactory, whereas most of the universities/colleges do not have any experience in Bank-financed procurement, and (iv) delays in bid evaluation and contract award\. 87\. These procurement risks will be addressed through the mitigation measures listed below\. A procurement risk assessment and management approach will be used to monitor procurement risks, mitigation measures and procurement performance of the Project during the supervision phase of the Project and accordingly, risks and mitigations measures will be adjusted\. (i) UGC will assign and appoint by project negotiations, at least two government staff from within UGC/Ministry of Education, who have prior experience in World Bank procurement procedures and/or have received procurement training and accreditation from CPTU/CIPS, to serve as the dedicated focal persons for UGC’s procurement and coordination, progress monitoring and reporting of the universities/colleges’ procurement under the project; (ii) each university/college will appoint at least two months before starting their first procurement, at least one of its existing staff with experience in procurement to serve as the dedicated focal person for the respective university/college’s procurement under the project; (iii) UGC will appoint an adequate number of experienced procurement consultants (with numbers and TORs acceptable to the Bank), in addition to government procurement staff in UGC, for providing technical assistance to UGC in effectively managing the procurement under the Project, including oversight, implementation support, capacity building, monitoring and reporting of the procurement to be carried out by UGC and the universities/colleges\. This includes but not limited to assistance in (a) preparation of technical requirements (specifications, TORs, etc\.) of critical or complex Goods and Consulting Services, (b) checking and verifying compliance with the applicable procurement procedures, including prior and post reviews, (c) contracts Page 38 of 66  The World Bank Higher Education Acceleration and Transformation Project (P168961) supervision and management following the contractual provisions, and (d) regular monitoring and reporting of procurement and contract implementation progress under the project ; (iv) UGC will engage within six months of project effectiveness an engineering consultant firm for the design, procurement support and construction supervision of the civil works contracts for (a) UTTA and associated facilities, and (b) AUW’s Academic building; (v) Procurement plans and the Project Operations Manual will specify established time standards for the bid validity period, evaluation of bids, the Bank’s and Government’s review and approval, and contract signing to ensure contracts are signed within the original bid validity period specified in the procurement document, which will be monitored and reported by UGC/MOHE regularly to their management and the Bank; (vi) UGC will provide quarterly financial reports to the Bank on the expenditures incurred by the universities/colleges under the competitive grants which will also include procurement performance reporting\. The details of the procurement procedures, oversight and reporting arrangements, including the application of the Bank’s Procurement Regulations and Anti-corruption Guidelines, the procurement carried out by the recipients under the competitive grants, will be specified in the Grants Operations Manual, in the performance agreements to be signed between UGC and the universities/colleges, and also in the procurement documents and contracts to be used by the universities/colleges under the competitive grants\. (vii) The Bank as part of its supervision, will review the adequacy of UGC’s systems and procedures for appraisal, monitoring and oversight of the procurement under the competitive grants, review the procurement information in the quarterly financial reports to be provided by UGC, and the procurement compliance in the annual audit reports submitted by the national auditors\. The Bank will retain the right to carry out post review\. The Systematic Tracking of Exchanges in Procurement (STEP) system will be used to record and track the procurement progress of the procurement carried out by UGC\. \.C\. Legal Operational Policies \. Triggered? Projects on International Waterways OP 7\.50 No Projects in Disputed Areas OP 7\.60 No \. D\. Environmental and Social 88\. Environment and Social Framework Compliance: The environmental and social risks of the project in Bangladesh are associated to the impacts from the substantial physical infrastructure activities proposed under the project (Subcomponents 1\.2\.2 that supports the development of the AUW Academic complex in the hilly area and sub- component 2\.2 that supports the construction of the UTTA and a range of small-scale renovations and facility development works in universities to be selected as a part of the grant facility including construction of fab labs, i-labs etc\.)\. Construction related impacts can include: air, noise, dust and water pollution and the safety of workers and communities; disturbance to flora and fauna; improper disposal of waste materials etc\. The activities will also generate (i) e-wastes; and (ii) other detrimental wastes for environment and health from the advanced research involving bio- medical sciences, leather and textile technologies, if those are done in an uncontrolled manner and by not following the proper bio-safety and environmental guidelines\. The impacts from the increased traffic volume, solid and domestic waste generation, air and noise pollution and e-waste generation and wastes generated from the research activities is Page 39 of 66  The World Bank Higher Education Acceleration and Transformation Project (P168961) reversible and can be mitigated with appropriate mitigation measures in place which largely depends on the implementing agencies’ capacity enhancement and adherence to the implementation of the agreed Envionmental and Social Management Plan (ESMP)\. Appropriate management measures to address the impact from hill profiling during and beyond project period have been included as a part of the ESMP\. Considering the limited experience of the implementing agencies in ESMP implementation and the overall risks and impacts related to the proposed project activities, the Environmental and social risk is rated Substantial\. 89\. The project is not likely to involve physical or economic displacement of people\. For Bangladesh, the AUW academic complex will be constructed on land owned by AUW\. Other infrastructure renovations and upgradation works for labs, ICT infrastructure, facilities in women’s colleges and universities will be carried out within the existing buildings and premises and no physical or economic displacement of people is expected\. Two alternative land/sites in Dhaka, owned by the Government of Bangladesh have already been identified as potential sites for the construction of UTTA\. There is a possibility of presence of squatters, encroachers and vendors who might be affected\. Once the sites for construction of UTTA, and universities and colleges for rehabilitation works are selected, screening will be conducted by PIC following the guidelines of the RPF prepared for the project\. The AUW academic complex may also affect some businesses, squatters and vendors during construction, and temporary disruption in access and mobility may occur for local people\. Given the construction activities and associated impacts in Bangladesh, the social risk for the Bangladesh part is rated as Substantial\. Project activities in Afghanistan consist of technical assistance for capacity building with no civil works planned and therefore the social risk for the Afghanistan component of the project is deemed moderate\. 90\. Secondary and Higher Education Department (SHED) under Ministry of Education (MOE) will recruit a Chief Implementation Officer (CIO)\. The CIO will lead the Technical Assistance (TA) team and be responsible for coordination of project activities under the guidance of Project Director (PD)\. A full time Senior Environmental Specialist (ES) will be recruited (for PIC), who will remain – responsible for addressing environmental risks/impacts, occupational health and safety issues as well as waste management issues\. The PIC will also recruit a Senior Social Development Specialist (SDS)– responsible for implementation of RPF and IPPF, an OHS and Labor Specialist responsible for implementation of LMP, Gender and GBV Specialist responsible for implementation of GBV and GAP, and a Health Specialist (HS) – responsible for monitoring and ensuring application of COVID-19 protocol of Ministry of Education (MOE) and World Health Organization (WHO) with qualifications, experience and under TORs satisfactory to the Bank\. UGC will hire an E&S firm for preparing the training material on ESF for the professional training\. On behalf of AUW, UGC will hire dedicated fulltime environment and social specialists within three months of effectiveness for ensuring inclusion of (i) ESMP and OHS requirement of the AUW infrastructure in the bidding document (ii) compliance of ESF requirement in any activities implemented by AUW including the infrastructure \. 91\. An Environmental and Social Impact Assessment (ESIA) along with Environmental and Social Management Plan (ESMP) for AUW, Environmental and Social Management Framework (ESMF) for UTTA, other construction activities and competitive grant research facilities, Resettlement Policy Framework (RPF), IPPF, Stakeholder Engagement Plan (SEP), Gender and GBV Action Plan, Labor Management Plan (LMP) and Environmental and Social Commitment Plan (ESCP) have been prepared\. The ESMF also provides guidelines for screening of sub-projects for environmental and social risks and assessment of Borrower’s capacity and institutional requirements\. All these documents are disclosed at http://ugc\.gov\.bd on October 9, 2020 locally and World Bank website on October 15, 2020\. All these documents have been consulted widely during the preparation\. After the lockdown period has been lifted, there will be a consultation on these documents in a national workshop organized by UGC\. Once the location of UTTA will be identified, the UGC will be responsible for the preparation of an ESIA along with the feasibility study of the building\. Page 40 of 66  The World Bank Higher Education Acceleration and Transformation Project (P168961) 92\. The environmental risks and impacts of the project activities proposed for Afghanistan are minimal as the project will not finance any construction activities\. The project will support provision of IT equipment for the faculty and student to take online courses and trainings\. Therefore, waste management protocol will be prepared by the client to manage the e-waste and associated plastic and packaging materials to the extent possible\. 93\. The activities for the CERC are not known\. The negative lists of ineligible activities under the CERC has been included as an annex to the ESMF and ESCP\. This will ensure that projects with high/substantial environmental or social risks will not be included in the Emergency Action Plan if the CERC is activated in the future due to an emergency\. The ESMF will be updated within 90 days or less upon activation of the CERC if emergency activities are not covered by the existing ESMF\. As per the ESF requirement, stringent assessment and monitoring for natural habitat protection, pollution control, and EHS need to be ensured\. UGC will share the bi-annual monitoring report on ESF compliance status with the Bank\. The first two reports will be three monthly reports followed by the bi-annual reports\. 94\. Gender: The Female share of enrollments in higher education for Afghanistan and Bangladesh are considerably lower than other countries in the region\. The share of female enrollment in universities stood at around 20 percent in Afghanistan and 44 percent in Bangladesh\. Lower enrollment rates for women in higher education is caused by high dropouts of female students at secondary school (caused by child marriage, household responsibilities, mental health issues and school-based violence, among other factors); lack of suitable services, infrastructure and resources, lack of appropriate job placement support and social norms\. Lower enrollment in higher education contributes to lower FLFP rates, (36 percent for Bangladesh and 22 percent for Afghanistan) especially in the lower number of women in better quality jobs\. The proposed project highly emphasizes on improving access and quality of higher education for women as manifested in its PDO\. In this regard, the project will improve female enrollment rates by supporting necessary services, infrastructure and resources as well as improve job placement services for female graduates by: (i) providing the disadvantaged female students with low-cost broadband support and suitable devices for accessing the digital resources (subcomponent 1\.1\.4 and 2\.1); (ii) establishment of a network of women’s universities, colleges and institutions in the region (sub-component 1\.2\.2) (iii) undergraduate female specific scholarships (to Afghan students) to study in participating universities and colleges in the regional network (subcomponent 1\.2\.2); (iv) upgrading or building related infrastructure such as childcare, dorms, washrooms in all women’s universities and colleges (subcomponent 2\.2) ; and job placement opportunities for women through early internships, targeted career counselling, specific programs such as networking events, trainings and job placements through career service centers (subcomponent 1\.2 and 2\.2)\. Two PDO indicators - PDO 3(a) and 3(b) - have been included to monitor the outcome of the Regional Network activities for women in higher education\. PDO indicator 3 has been included to track project activities in enhancing employability of female graduates in Bangladesh\. An intermediate indicator to monitor share of female teachers trained through the faculty professional development program\. In addition, gender disaggregated data will be collected for interventions on total beneficiaries, number of teachers trained, number of HEIs benefitted from upgrading facilities for female students\. These will be regularly tracked and reported in the monitoring report of the project\. 95\. Gender-Based Violence (GBV): Sexual harassment remains a common form of violence that can cause enduring psychological harm\. Both women and men are targets of such behavior, but evidence has shown that sexual harassment is primarily aimed at women\. Educational institutes are often a central location for communities and can provide an important entry point for preventing GBV more broadly, identifying girls and women who have experienced GBV, and referring them to necessary services\. The proposed project activities will involve - civil works in Bangladesh for all eligible public and private universities, including women’s college s and universities which can potentially increase the risks of GBV/SEA/SH\. The GBV risk rating for the project is Substantial due to involvement of - civil works and the inherent risks for SEA/SH in higher education institutes in Bangladesh and the prevalence of GBV including SEA and SH Page 41 of 66  The World Bank Higher Education Acceleration and Transformation Project (P168961) in Afghanistan\.32 In addition to risks associated with construction activities, other key risk factors include widening online learning in the context of limited cyber harassment awareness and mitigation measures, travel and boarding in educational institutes, and unequal power relations between teachers or trainers and students\. The project will ensure mitigation measures are in place\. All concerned project implementation actors including but not limited to the implementing agencies, the universities, construction companies and consultants will sign a Code of Conduct\. Other key mitigation measures include awareness raising and capacity building of stakeholders, Grievance Mechanism responsive to GBV/SEA/SH, hiring a service provider to provide referral and support services to survivors, and improving safety within the education complexes\. Given the different risk levels, separate stand-alone GBV actions plans have been prepared for Bangladesh and Afghanistan\. The implementing agencies will hire a GBV specialist in each country\. The project also includes training modules on SEA/SH in teacher training activities\. 96\. Climate and disaster screening: The project has been screened for climate change impacts and disasters\. Overall, in general Bangladesh, and Dhaka and Chittagong in particular, are increasingly exposed to climate change related hazards\. The education sector and services have been severely affected by flooding in recent years\. Higher education institutions tend to be constructed for a longer lifespan, flexible used and are typically sited and designed more carefully and use better materials for construction\. This helps mitigate protect them from floods and other hazards and are typically less affected after adverse weather or climate related events\. The main project locations, Chittagong and Dhaka, are identified as future climate hotspots, meaning that climate change and its direct impacts can substantially reduce livelihood opportunities in the region\. Both cities are vulnerable to extreme events, sea level rise, including coastal flooding and storm surge\. The physical infrastructure for AUW campus design includes explicit consideration of these hazards and is designed to adapt to the needs of the environment\. For instance, the design of the main building and the master plan for the development of the entire campus has been done very carefully by some of the world’s foremost architects and planners33 considering the unique nature of the site for the academic complex\. The design includes mechanisms for managing unexpected levels of water flow in the future\. The proposed building design uses a lot of natural shade and corridors to shield students and faculty from high temperatures in as natural a manner as possible\. 97\. Climate Co-Benefits: The project plays an important role in three main regards\. First, the COVID-19 response component will build resilience in the sector and create emergency planning and response plans, as well as distance learning facilities, that can be evoked during future crises, including climate related disasters\. Second, the sector provides the necessary training to be climate aware and across a range of disciplines and has the potential to contribute significantly to reducing the climate change impacts for future cohorts\. Third, the project will support research on the dynamics, effects and mitigation strategies related to climate change, and such research will support substantial increases to local capacity to understand climate change, the risks associated with it and the steps that will need to be taken to mitigate against these risks\. Apart from the dedicated climate research funding, this sub- component will also award research and innovation grants in STEM areas such as: Natural science, Bioscience, Engineering and Technology, Information Technology, Agriculture, Nanotechnology and Materials Science and Computer Science and ICT\. Innovation and knowledge work from these sectors will substantially contribute to green economy initiatives in the future, drive efforts to consume energy in a sustainable manner, support clean water and environment initiatives, help lower GHG emissions etc\. which will mitigate risks associated with climate change\. Competitive grants awarded to liberal arts, social sciences, business and law streams will contribute in producing vital research on societal vulnerability to climate related disaster risk, sustainable and climate responsible and responsive 32The risk assessment tool for projects with civil works and draft risk assessment tool for education was used to assess risks\. 33 More information on the proposed academic building and the Campus Master Plan can be found at the following sites: http://cac\.mcgill\.ca/moshesafdie/fullrecord\.php?ID=10879&d=1; https://www\.safdiearchitects\.com/projects/asian-university-for-women and the following YouTube presentation - https://www\.youtube\.com/watch?v=zrsqHwy7BYo\. Page 42 of 66  The World Bank Higher Education Acceleration and Transformation Project (P168961) business models, and legal implications of climate change\. Such research will also help formulate national policy regarding climate issues\. The project will support a modernized curriculum, and pedagogical and training development in universities in fields associated with climate change, thereby developing graduates better prepared to deal with climate vulnerability and risk issues\. 98\. There are two, substantial physical infrastructure activities proposed under the project (Subcomponents 1\.2\.2 that supports the development of the AUW academic complex and 2\.2 that supports the construction of the UTTA) and a range small-scale renovations and facility developments\. These will be developed as per Building Act regulation and take into consideration the resiliency needed to withstand the impacts of climate change-induced disasters and impacts\. The upgradation of facilities and infrastructure developments will incorporate (i) architectural or building changes that enable reduction of energy consumption, (ii) the expanded use of solar power (concentrated solar power, photovoltaic power), and (iii) energy efficiency improvement in lighting, appliances, and equipment\. A detailed Annex on the climate vulnerability context and mitigation/adaptation measures addressed by the project is attached (Annex 4)\. 99\. Citizen engagement: Citizen engagement was an integral part of the project preparation\. Consultations were conducted with a wide range of stakeholders\. This included GoB policy makers and officials from the MOE, MoF, UGC, vice-chancellors of public and private universities, deans of faculties, academics, and researchers from universities\. Consultations were also undertaken with a range of other stakeholders - employers, industry representatives and development partners active in the higher education sector\. The team also consulted with the most important stakeholders – students\. In fact, students representing public and private institutions were invited to present during consultations events with other groups to strengthen the arguments for involvement in higher education through the HEAT project\. Afghan policy makers and MOHE representatives participated in some of these events remotely\. The citizen engagement process will continue during project implementation and will gather beneficiary feedback through student satisfaction surveys, graduate tracking surveys, and employer surveys during the life of the project\. Student satisfaction surveys will aim to meet the need for more student feedback into the system, while employer surveys will provide feedbacks about quality and relevance of education offered and the gaps that may need to be addressed through the process\. One intermediate indicator will measure the number of newly established Institutional Quality Assurance Cells (IQACs) in universities which have analyzed, prepared, produced and published at least one Self-Assessment Report\. Student feedback is an important feature of this menu of measures to be applied\. The Self-Assessment Reports are considered completed when they have been peer reviewed, when an improvement plan has been submitted, and when they have been published\. Stakeholder consultations will be conducted throughout the life of the project to enable UGC/MOE to fine-tune the operation during implementation\. The number of consultations and outcomes will be tracked and reported through the project’s bi-annual monitoring report\. A Grievance Redress Mechanism will be instituted and placed within UGC/MOE in Bangladesh and within MOHE in Afghanistan with qualified personnel trained in handling such complaints\. V\. GRIEVANCE REDRESS SERVICES 100\. Communities and individuals who believe that they are adversely affected by a World Bank (WB) supported project may submit complaints to existing project-level grievance redress mechanisms or the WB’s Grievance Redress Service (GRS)\. The GRS ensures that complaints received are promptly reviewed in order to address project-related concerns\. Project affected communities and individuals may submit their complaint to the WB’s independent Inspection Panel which determines whether harm occurred, or could occur, as a result of WB non- compliance with its policies and procedures\. Complaints may be submitted at any time after concerns have been Page 43 of 66  The World Bank Higher Education Acceleration and Transformation Project (P168961) brought directly to the World Bank's attention, and Bank Management has been given an opportunity to respond\. For information on how to submit complaints to the World Bank’s corporate Grievance Redress Service (GRS), please visit http://www\.worldbank\.org/en/projects-operations/products-and-services/grievance-redress-service\. For information on how to submit complaints to the World Bank Inspection Panel, please visit www\.inspectionpanel\.org\. VI\. KEY RISKS 101\. The overall risk of the Project 34is considered Substantial due to its innovative nature and regional nature\. The key risks would largely be addressed during Project implementation\. The key project risks with corresponding mitigation measures include: i\. Political and Governance: This has been rated as Substantial\. The higher education sector in both countries remain somewhat politicized, with political leaders keeping a close eye on developments at the universities\. In Afghanistan, the political risks are high because of the unstable political and security environment\. In Bangladesh, the political environment has been more stable in recent years\. The project teams actively monitor the political scenarios, and a communications strategy around the project will be agreed with all implementing agencies\. ii\. Macroeconomic Risk: This is rated Moderate\. The on-going COVID-19 pandemic is likely to lead the country through a complex macroeconomic situation and may influence political decisions on the government’s priorities for public financing for higher education\. Additionally, it is difficult to determine the duration over which the COVID-19 pandemic will affect the global economy and the short- to medium-term impact the Government’s decision making\. These scenarios may pose a risk for the government financing for the project\. While this may affect the sub-components of the project, most of the PDOs can be achieved without having substantial government allocations\. iii\. Sector Strategies and Policies: This is rated as Low\. iv\. Technical Design: This is rated as Moderate\. v\. Financial Management: This is rated as Moderate\. There have been significant capacity improvements in fiduciary management in the higher education management agencies in Afghanistan and Bangladesh through the on-going World Bank-supported operations (HEDP and HEQEP)\. However, the institutional capacity for fiduciary management would need to be further strengthened due to the regional and complex nature of the project involving fund flows through multiple public and private entities\. The risks will be mitigated through continuous training and capacity building and dedicated specialist staffing to support the financial and procurement management\. vi\. Procurement: The procurement risk is rated as Substantial\. The implementing agencies and the universities/colleges under the grants have inadequate capacity for effectively carrying out and managing the procurement under the project and a wide range of strengthening measures have been agreed, as detailed in the 34The risk assessment included here is a combined risk assessment for the project across both Afghanistan and Bangladesh and does not reflect the project risk in each individual country\. Page 44 of 66  The World Bank Higher Education Acceleration and Transformation Project (P168961) preceding Fiduciary section, Procurement in Bangladesh and Afghanistan, Paras 85-94\. vii\. Institutional Capacity for Implementation and Sustainability: This has been rated as Moderate\. viii\. Environmental and Social: This is rated as Substantial considering the extent of construction and location of the proposed AUW academic complex and the University Teachers’ Training Academy, and upgradation, rehabilitation of existing buildings in different universities and colleges\. Plans have been prepared regarding land acquisition process, stakeholders’ identification and analysis, citizen engagement, grievance response mechanism, labor influx, involuntary resettlement and indigenous peoples\. A detailed ESIA for the AUW campus has been prepared\. Further risks will be mitigated through the development and implementation of the Environment and Social Management Plans (ESMP), which will be based on relevant assessments undertaken during preparation in the participating institutions\. ix\. Stakeholders: This is rated as Moderate\. x\. Other/COVID-19\. This is rated as Substantial considering the new challenges raised by the ongoing COVID- 19 pandemic\. Given the significant uncertainties around how the pandemic will unfold in the coming months, this introduces residual risk to areas not covered elsewhere\. For example, there may be constraints on the higher education sector to continue to offer its services due to the lockdown and health concerns\. The project itself includes actions to mediate these scenarios, by expanding distance learning and connectivity, as well as the development of COVID-19 response plans at institutional level\. \. Page 45 of 66  The World Bank Higher Education Acceleration and Transformation Project (P168961) VII\. RESULTS FRAMEWORK AND MONITORING Results Framework COUNTRY: South Asia Higher Education Acceleration and Transformation Project Project Development Objectives(s) The PDOs are: (i) regionally, to strengthen the COVID-19 response in higher education, improve connectivity and quality of higher education for women, and (ii) in Bangladesh, to enhance higher education’s governance, resilience to emergencies, and graduate emp loyability; and (iii) in case of an Eligible Crisis or Emergency, respond promptly and effectively to it\. Project Development Objective Indicators RESULT_FRAM E_TBL_PD O Indicator Name PBC Baseline Intermediate Targets End Target 1 2 3 4 Regionally, to strengthen COVID-19 response in HE improve connectivity and quality of HE for women Share of universities in Bangladesh and Afghanistan implementing Emergency 0\.00 20\.00 30\.00 40\.00 50\.00 60\.00 Response and Recovery Plans based on regional framework (Percentage) Number of additional students from Bangladesh and Afghanistan pursuing coursework in another South 0\.00 100\.00 500\.00 2,000\.00 5,000\.00 10,000\.00 Asian country using a regional framework for students (Number) Regional network institutions in Bangladesh and Afghanistan 0\.00 0\.00 5\.00 10\.00 20\.00 30\.00 implementing a teaching and Page 46 of 66 RESULT_FRAM E_TBL_PD O Indicator Name PBC Baseline Intermediate Targets End Target 1 2 3 4 learning packages for targeting female students\. (Number) Share of additional female graduates from participating regional network institutions in 86\.00 0\.00 86\.50 87\.50 88\.50 90\.00 Bangladesh and Afghanistan entering the labor market\. (Percentage) Improved Governance in Bangladesh No\. of programs newly accredited in universities under the Bangladesh 0\.00 0\.00 5\.00 15\.00 30\.00 Accreditation Council (Number) Enhance Resilience in Bangladesh Share of students enrolled in remote learning (Percentage) 0\.00 5\.00 15\.00 20\.00 30\.00 (Percentage) Graduate Employability in Bangladesh Graduate Employability Index To be determined using Baseline survey 3% increase from 5% increase over (Text) baseline survey conducted baseline baseline The number of faculty in Bangladesh receiving professional development trainings Number of faculty member received training (of which % 0\.00 500\.00 1,500\.00 2,500\.00 3,500\.00 4,000\.00 of women) (Number) PDO Table SPACE Page 47 of 66 Intermediate Results Indicators by Components RESULT_FRAM E_TBL_IO Indicator Name PBC Baseline Intermediate Targets End Target 1 2 3 4 South Asian Harmonious Area for Research and Education An emergency response plan, an online course, and a background paper An evaluation report with Regional coordination of have been developed\. 50 Institutions have 50 Institutions have 50 Institutions have lessons learned on emergency response plans received received received N/A emergency response in (Text) implementation support implementation support implementation support At least 150 universities for emergency response\. for emergency response\. for emergency response\. higher education has been have received the produced\. emergency response plan\. Establishment of an online portal for virtual courses\. Development of a Adoption of regional Implementation of Framework for regional regional framework for framework for regional framework for exchanges of students and N/A Mapping of key recognition of credit and recognition of credit and recognition of credits and faculty (Text) bottlenecks to virtual degrees across borders\. degrees across borders\. degrees\. and physical mobility\. Establishment of a regional desk for higher education integration in White Paper on Regional Agree on Milestones to At least two milestones Regional Integration in Higher South Asia Regional Integration in South implement the Initiate implementation from the White Paper on N/A consultations based on a Education (Text) Asian Higher Education recommendations of the of agreed milestones Regional Integration have Zero Draft of a regional has been issued White Paper been reached\. note on Higher Education Integration in South Asia\. All institutions in the Guidelines on Piloting of knowledge Institutions in the Strengthening women’s regional network have At least 5 institutions in strengthening women’s pack and e-learning regional network have education in the regional N/A been trained on the regional network have education have been course\. undergone a self network (Text) strengthening women's been certified\. issued\. evaluation\. education\. Page 48 of 66 RESULT_FRAM E_TBL_IO Indicator Name PBC Baseline Intermediate Targets End Target 1 2 3 4 Certification framework Piloting of self- for women’s education evaluation for has been developed\. institutions in the A knowledge pack and - regional network\. e-learning course on excellence in women's education in South Asian higher education institutions has been produced\. The number of students participating in exchange 0\.00 0\.00 100\.00 200\.00 300\.00 400\.00 programs (Number) Number of twinning projects initiated under the regional 0\.00 5\.00 15\.00 25\.00 30\.00 30\.00 network (Number) Number of additional universities connected to 0\.00 50\.00 Research and Education Networks (Number) Transforming Higher Education in Bangladesh Number of direct beneficiaries of the project (of which 0\.00 50,000\.00 150,000\.00 350,000\.00 550,000\.00 600,000\.00 females [%]) (Number) Number of job placements supported through career 0\.00 0\.00 500\.00 1,000\.00 2,000\.00 3,000\.00 service centers (Number) Number of university-industry research collaborations 0\.00 0\.00 0\.00 15\.00 20\.00 40\.00 completed (Number) Number of academic 0\.00 0\.00 30\.00 80\.00 150\.00 200\.00 publications produced by Page 49 of 66 RESULT_FRAM E_TBL_IO Indicator Name PBC Baseline Intermediate Targets End Target 1 2 3 4 beneficiaries of research grants (Number) Number of universities brought under the Learning 0\.00 0\.00 0\.00 5\.00 10\.00 20\.00 Management Infrastructure (Number) Student Satisfaction Second student First student feedback Third student feedback Three student feedback Regular student feedback feedback survey Survey/Citizen Engagement survey conducted and survey conducted and surveys conducted and is not in place conducted and (Text) disseminated disseminated disseminated disseminated Number of newly established IQAC in universities have produced and published at 69\.00 0\.00 80\.00 95\.00 110\.00 130\.00 least one self-assessment report, including beneficiary feedback (Number) Establishment of Performance Evaluation of the pilot and Based Funding in the public No performance based MOE drafts the MOE approves the PBF PBF piloted in at least action plan for PBF universities in Bangladesh funding exists regulation for PBF regulation two public universities adoption and completion (Text) Project Management, Monitoring and Evaluation and Communications HEAT TA is fully functional No Yes Yes Yes Yes Yes (Yes/No) IO Table SPACE UL Table SPACE Page 50 of 66  Monitoring & Evaluation Plan: PDO Indicators Methodology for Data Responsibility for Data Indicator Name Definition/Description Frequency Datasource Collection Collection Share of universities in Share of universities in Bangladesh and Bangladesh and Afghanistan Project Afghanistan implementing Emergency achieving at least 4 Bi-annual Monitoring Project monitoring UGC/MOHE Response and Recovery Plans based on milestones from Emergency Report regional framework Response Plans, based on a regional template\. The share of students who Number of additional students from have enrolled in virtual or Bangladesh and Afghanistan pursuing physical mobility programs BdREN and UGC/BdREN/MOHE/Afg Bi-annual Project monitoring coursework in another South Asian in Afghanistan and AfgREN REN country using a regional framework for Bangladesh supported by a students regional framework for mobility of students\. Regional network institutions in Institutions implementing a Project Regular project Bangladesh and Afghanistan tailored package of activities Bi-annual monitoring UGC/HEDP/RCC monitoring implementing a teaching and learning to provide excellence in report packages for targeting female students\. women's education\. The share of graduates from Project HEIs in the regional network monitoring Share of additional female graduates from entering the labor force data and Regular project participating regional network institutions within 6 months of Annual summaries/c UGC and MOHE monitoring\. in Bangladesh and Afghanistan entering graduating among those not onclusions the labor market\. continuing studies\. Baseline from drawn from Bangladesh conferences\. HIES 2016\. The number of academic SPM progress No\. of programs newly accredited in programs in universities Bi-annual report/ Half- Project monitoring UGC/BAC universities under the Bangladesh which get accredited under yearly Accreditation Council the Bangladesh monitoring Page 51 of 66  Accreditation Council report The share of all university Half-yearly BdREN will collect the students (public or private) project data from the Data Share of students enrolled in remote Bi-annual UGC who are enrolled in either monitoring Server or from learning (Percentage) blended or fully-online report universities\. learning programs\. Three rounds Data collected based on The increase in the average of project life Sample- survey three times level of employability skills (baseline - UGC Graduate Employability Index based survey during Project Life (Year among university graduates midline - 1, Year 3 and Year 5) based on employers’ survey\. endline) Project Training data will be Number of faculty member received Number of teachers trained Six monthly progress UGC collected training (of which % of women) from 2022 to 2026\. report ME PDO Table SPACE Monitoring & Evaluation Plan: Intermediate Results Indicators Methodology for Data Responsibility for Data Indicator Name Definition/Description Frequency Datasource Collection Collection Project Coordination of emergency Regional coordination of emergency Bi-annual Monitoring Project Monitoring UGC/HEDP/RCC response plans based on a response plans Report regional template\. Development of a regional Progress Regular project Framework for regional exchanges of regulatory framework for Bi-annual monitoring UGC/HEDP/RCC monitoring students and faculty exchanges of students and report faculty Key milestones to launch a Bi-annual Project Regular project Regional Integration in Higher Education AUW, network South Asia Regional Monitoring monitoring Page 52 of 66  Collaboration in Higher Report members and UGC Education Twice The number of joint during Bi-annual Regular project Strengthening women’s education in the research project undertaken project (in UGC/MOHE report monitoring regional network by institutions that take part year 3 and in the regional network\. year 5)\. The number of additional Project The number of students participating in students pursuing academic Bi-annual Monitoring Project monitoring UGC/HEDP exchange programs programs in institutions Report under the regional network\. Number of twinning projects (joint capacity Project Regular project Number of twinning projects initiated development, joint research Bi-annual monitoring UGC/HEDP/RCC monitoring under the regional network projects, joint masters' report programs) developed under the project\. The number of additional Bi-annual Number of additional universities universities that are Regular project UGC/BdREN and Bi-annual project connected to Research and Education connected to their national monitoring MOHE/AfgREN report Networks research and education network\. Number of students and teachers benefitting from HEMIS and HEDP Number of direct beneficiaries of the Bi-Annual HEMIS/HEDP UGC/HEDP project supported activities database project (of which females [%]) in universities in Bangladesh and Afghanistan\. The number of public Career Project monitoring and university students or service Number of job placements supported Bi-annual validation based on UGC graduates that have been center through career service centers 20% sample follow-up placed in jobs through progress support services of career report/ Page 53 of 66  centers\. Project Monitoring Report SPM Progress The number of university- Report/Proje Number of university-industry research industry research projects Bi-annual Project Monitoring UGC ct Monitoring collaborations completed completed under the Report competitive grant activity\. The number of academic publications in national and SPM Progress Number of academic publications international journals and Report/Proje Bi-annual Project Monitoring UGC produced by beneficiaries of research conference papers, ct Monitoring grants published as a result of the Report work being conducted under research grants\. IQAC Numbers of universities that Progress Number of universities brought under the (1) participate in LMI and (ii) Bi-annual Report/Proje Project Monitoring UGC Learning Management Infrastructure have developed at least one ct Monitoring blended academic course\. Report The measurement of Three Sample Survey conducted three satisfaction with the project times based times during Project life Student Satisfaction Survey/Citizen UGC activities and get feedback during satisfaction in Year 1, Year 3 and Engagement on ways to improve project project life survey Year 5 interventions\. The number of Institutional Number of newly established IQAC in Quality Assurance Cells Project universities have produced and published newly established in Bi-annual Monitoring Project monitoring UGC/HEDP at least one self-assessment report, universities and have Report including beneficiary feedback produced and published at least one Self-Assessment Page 54 of 66  Report, which includes feedback from students\. Half yearly Actions taken to pilot and Follow-up and Establishment of Performance Based project develop a Performance Annual verification by UGC and UGC Funding in the public universities in monitoring Based Funding model in Bank team\. Bangladesh report higher education\. 3 out of 4 indicators are met: (1) 90% of project staffing , including procurement, FM, M&E\. (2) Project At least 70% of reports Bi-annual Monitoring Project Monitoring UGC HEAT TA is fully functional published (employer's Report survey, tracer studies, satisfaction survey, research bibliometric survey) (4) IFR completed\. ME IO Table SPACE Page 55 of 66  The World Bank Higher Education Acceleration and Transformation Project (P168961) Annex 1 – Adjustments to the Country Programs in Bangladesh and Afghanistan BANGLADESH 102\. The World Bank Group engagement in Bangladesh has been guided by the FY2016–20 Country Partnership Framework (CPF), which has been extended to FY2022 after the Program Learning Review (PLR)\. The PLR reaffirmed the three CPF focus areas: (1) growth and competitiveness; (2) social inclusion; and (3) climate and environment management\. It also recognized the recent program adjustment in response to the Rohingya refugee crisis, and recommended greater attention to human capital, climate resilience, and digital transformation\. The Country’s Response to the COVID-19 Pandemic 103\. The COVID-19 pandemic has severely disrupted economic activity and created an unprecedented crisis that is likely to worsen poverty in the short term\. GDP growth decelerated sharply, down to an estimated 2\.4 percent in FY2035\. The economy is expected to continue to recover gradually\. Over the first half of FY21, mobility returned to pre-pandemic levels, factories reopened, and exports rebounded\. However, the most recent wave of COVID-19 in South Asia has led to the movement restrictions in the country once again, deepening the uncertainties of the outlook\. The country’s achievement in reducing poverty between 2000 and 2016—the national poverty rate fell from 48\.9 to 24\.5 percent and extreme poverty from 34\.3 to 13\.0 percent—is likely to reverse following slower GDP growth and the income losses of informal workers throughout the economy\. It is estimated that the upper poverty rate, based on the national poverty line, reached 30 percent of the population in FY20 (7 percentage points above a non-COVID counterfactual scenario)\. 104\. Along with its health care response to the pandemic, the government has also adopted an emergency economic program\. A COVID-19 response program of US$ 14\.6 billion (4\.5 percent of estimated FY20 GDP) was announced\. Its goals are to: (1) increase public spending to generate employment; (2) provide a stimulus package offering firms credit at low interest rates to retain workers in the manufacturing sector, maintain competitiveness of the enterprises especially in the export-oriented manufacturing sector and to revitalize economic activities; (3) expand social safety nets to meet the basic needs of the poor, day laborers, and other informal sector workers; and (4) increase the money supply to maintain liquidity in the economy while containing inflation\. 105\. The government has reached out to partners to support the national response plan \. External financing rose in the last quarter of FY20 as development partners expanded their support in response to the COVID-19 crisis\. More than US$ 1\.7 billion in budget support was disbursed by development partners (IMF, World Bank, ADB, and AIIB)\. JICA also disbursed $330 million in budget support in early FY21\. 106\. Bangladesh has opted not to participate in the G20 Debt Service Suspension Initiative (DSSI)\. However, the authorities will continue to monitor the situation and if it becomes necessary will revisit their position\. 35The World Bank’s estimate was produced independently and differs fro m the Bangladesh Bureau of Statistics (BBS) provisional estimate of 5\.2 percent real GDP growth in FY20\. Page 56 of 66  The World Bank Higher Education Acceleration and Transformation Project (P168961) WBG Crisis Response Support 107\. The indicative IDA19 allocation for Bangladesh is SDR 2\.84 billion, of which SDR 1\.28 billion frontloaded to FY21\. With the adjusted lending program proposed in the PLR fully delivered, the lending program for FY21–FY22 is geared to supporting the vaccine program, jobs and economic transformation agenda, expanding social safety nets, and building institutional and investment resilience—all priorities the COVID-19 crisis has made even more urgent\. 108\. The WBG lending program for FY21–22 is aligned with the Approach Paper on “Saving Lives, Scaling-up Impact and Getting Back on Track”: • To save lives, the Bank is supporting the Bangladesh COVID-19 vaccine program through US$500 million additional financing to the ongoing Fast Track Facility COVID-19 Emergency Response and Pandemic Preparedness Project\. Bank also reprogrammed the resources to support the pandemic response for the displaced Rohingya population and host communities, e\.g\., through the current Health and Gender Support Project\. The planned Bangladesh Urban HNP Project (P171144, FY22) will improve delivery of primary health care and environmental health services for targeted poor urban populations\. A proposed project for Improving Hospital Quality and Financial Protection for the Poor (P174439, FY22) will reinforce management and delivery of hospital services and improve protection from impoverishing health costs\. • To protect the poor and vulnerable, the Bank has activated the Contingent Emergency Response Component of three active IDA projects in the total amount of US$430 million\. Rural areas have been given priority for WASH investments through the Rural Water, Sanitation and Hygiene for Human Capital Development Project (P169342)\. The Resilience, Entrepreneurship and Livelihood Improvement Project (P175820, FY22) will provide income support for poor and extremely poor rural communities\. Using the Private Sector Window (PSW), IFC has two investment projects in the FY21 pipeline that use microfinance institutions to support very small enterprises and women-owned microenterprises\. • To save livelihoods, preserve jobs, and ensure more sustainable business growth and job creation , IFC is supporting clients and sector associations in the ready-made garment and financial sectors by providing US$75 million in working capital lines and advisory services for risk management and recovery\. In FY21, IFC has additional projects in manufacturing, agribusiness and finance through the COVID response facility with PSW support\. IFC advisory programs are also providing technical support for repurposing production lines for personal protective equipment, together with continued Public Private Dialogue on diversification in manufacturing\. IFC’s upstream program has already begun work on economic zones and port logistics for boosting export diversification and job creation\. Additional funding and advisory services will be provided to financial institutions to improve both lending to small and medium enterprises and risk management, following up on the first COVID response financing line to City Bank in June 2020\. IFC will continue to diversify its lending products, having launched the Taka-denominated Bangla Bond on the London Stock Exchange early in FY20\. The IDA lending program for FY21-22 focuses on youth through the Accelerating and Strengthening Skills for Economic Transformation (P167506) and the Higher Education Acceleration and Transformation Project (168961)\. Recovery and Advancement of Informal Sector Employment (P174085) will support the economic inclusion of informally employed urban youth\. • To strengthen policies, institutions, and investments for resilient, inclusive, and sustainable growth , the Third Programmatic Jobs Development Policy Credit (P168725) builds on the previous series to support policy reforms in trade and investment for more and better jobs; improve access of the vulnerable population to jobs; and strengthen the safety net when they lose jobs\. The proposed Bangladesh Programmatic Recovery and Resilience Development Policy Financing (P174892, FY22) of US$250 million will reinforce reforms to strengthen the resilience of the economy and support private sector interventions and market solutions in Page 57 of 66  The World Bank Higher Education Acceleration and Transformation Project (P168961) critical sectors\. The Local Government COVID-19 Response and Recovery Project (P174937) will build the capacity of local governments to coordinate and manage response and recovery efforts across the country\. The bank will continue investment in resilient agriculture, strengthening institutions and the modernizing the sector\. Investment operations in environment, urban, and infrastructure resilience are also planned\. IFC will provide expanded advisory programs on firm resource efficiency to reduce water consumption and GHG emissions, while lowering operating cost and enhancing firm competitiveness\. Selectivity, Complementarity, Partnerships 109\. This engagement plan adheres to the selectivity principles of strong alignment with the Government’s development and COVID response strategies, WBG comparative advantage and complementarity with activities of other development partners\. It has been discussed with the authorities and has been shared with other development partners through the donor coordination platform\. AFGHANISTAN 110\. Total additional fiscal financing needs arising from the COVID-19 crisis are expected to reach US$870 million, reflecting both declining revenues and increasing expenditure needs\. Afghanistan is at ‘high’ risk of debt distress under the World Bank / IMF Debt sustainability framework\. Therefore, financing needs can only be met through a combination of: i) additional grant support; ii) new concessional borrowing, including a US$220 million disbursement from the IMF Rapid Credit Facility; and iii) drawdown of cash reserves\. Under the World Bank Sustainable Debt Financing Policy, Government has agreed on a program of Performance and Policy Actions (PPAs) to strengthen debt management, improve fiscal sustainability, and prevent the accumulation of non-concessional external debt\. Afghanistan is participating in the G20 Debt Service Suspension Initiative under which approximately US$3\.7 million of debt service payments to official bilateral creditors due during 2020 will be deferred\. 111\. Recognizing the need for urgent actions, the Government of Afghanistan has identified key priorities in a framework document spanning short-term response and medium-term recovery for: i) expanding the scope and scale of basic healthcare and hospital reform; ii) expanding community driven development and reforming humanitarian programs; iii) enhancing use of technology for distance learning; iv) accelerating access to electricity and internet; v) assisting returning refugees and migrant workers; vi) balancing social and spatial development; vii) assisting provincial, municipal, district, civic organizations, and the private sector; and viii) expanding links with neighboring countries\. 112\. The World Bank is providing support to operationalize the Government of Afghanistan’s response strategy in close coordination with other development partners and humanitarian agencies while building a stronger nexus between the humanitarian and development support\. Overall, the WBG would provide over US$1\.4 billion in new and recommitted funds for COVID-19 programs, including US$5 million from the HEAT project\. The World Bank response is aligned with the three interlinked phases – Relief, Restructuring, and Resilient Recovery – to sequence and extend the most critical support at the right time\. The IFC’s US$8 billion and MIGA’s US$6\.5 billion global fast-track facilities to help investors and lenders tackle COVID-19 provide additional opportunities for Afghanistan, in addition to leveraging concessional financing from the IDA Private Sector Window\. 113\. In the early Relief phase, a US$100\.4 million IDA grant for the Afghanistan COVID-19 Emergency Response and Health System Preparedness Project was approved in April 2020 as an immediate response to the Page 58 of 66  The World Bank Higher Education Acceleration and Transformation Project (P168961) health crisis and to strengthen public health preparedness\. A COVID-19 Response Development Policy Grant of US$200 million (US$100 million IDA and US$100 million from the Afghanistan Reconstruction Trust Fund – ARTF) was approved in June 2020 to support policy actions linked to the government’s relief and recovery measures to respond to the health, social, and economic crisis, and to address critical constraints to longer-term inclusive development while providing immediate liquidity to help recover from the economic shocks\. 114\. The World Bank has worked closely with the Government and the ARTF donors to consolidate and reprogram the portfolio resources and to adjust the FY21 pipeline\. The US$335 million IDA and ARTF released from the portfolio projects are reallocated to the Restructuring phase through the Relief Effort for Afghan Communities and Households (REACH), and a proposed Second Additional Financing to the Citizen’s Charter Afghanistan Project (CCAP) to ensure a nationwide distribution of relief packages\. The Emergency Agriculture and Food Supply (EATS) Project approved on August 4, 2020 lays the foundation for food security and strengthens agribusiness by supporting smallholder farmers and MSMEs involved in the food supply chain\. A proposed Afghanistan Water, Sanitation and Hygiene (AWASH) Project will focus on a sustainable COVID-19 response in the three largest Afghan cities (Kabul, Kandahar and Herat) that have been particularly hard-hit by the pandemic\. It will support emergency relief and restructure the urban water supply and sanitation sector to enable a resilient recovery\. 115\. Impacts of these operations will be enhanced by the proposed longer-term Early Warning, Finance and Action (ENETAFW) project designed for the Resilient Recovery phase\. It will establish an adaptive safety net linked to a drought early warning system and an overall community resilience mechanism\. Finally, the SAFI project approved on September 28, 2020 will support the private sector to build a resilient economy by providing access to finance for MSMEs and strengthening the institutional capacity for financial stability\. 116\. Additional details on how the proposed project will support the most urgent needs of Afghanistan in response to COVID-19 can be found in paragraphs under component descriptions\. Page 59 of 66  The World Bank Higher Education Acceleration and Transformation Project (P168961) Annex 2 - Implementation Arrangements and Support Plan COUNTRY: South Asia Higher Education Acceleration and Transformation Project 117\. In Bangladesh, the overall responsibility for the project implementation would lie with the Secondary and Higher Education Division (SHED) of Ministry of Education (MOE) while day-to-day implementation support will be provided by the University Grants Commission (UGC)\. In Afghanistan, the overall responsibility for project implementation will rest with the Ministry of Higher Education (MOHE) while day-to-day implementation support will be provided by the Operations Management and Support Team (OMST) 36 of the Higher Education Development Project (HEDP)\. 118\. Sub-Components 1\.1\.1 – 1\.1\.4 and 2\.2 will be implemented under the joint responsibility of the UGC and SHED/MOE of Bangladesh and the MOHE of Afghanistan\. Day-to-day implementation in Bangladesh will be led by UGC in Bangladesh and in Afghanistan will be led by MOHE/HEDP\. A joint committee, known as the Regional Coordination Committee (RCC), will be established and headed by the Minister/Secretary of Education (Government of Bangladesh) and the Minister/Deputy Minister of Higher Education (Government of Afghanistan)\. Additionally, the RCC will include observers, such as representation from the SAARC Secretariat, three internationally renowned faculty members for Public Health (pandemic response), connectivity (ICT and REN experts), women studies and gender development experts\. These observers will be determined jointly by the RCC\. The heads (or designate) of implementing entities for both countries UGC and/or SHED/MOE in Bangladesh and the OMST HEDP/MOHE will act as ex-officio members for the RCC and support its functions\. The RCC will meet at least twice a year, preferably in July and January, to review progress against stated targets and to ensure that all implementation concerns are being addressed\. The two implementing entities (UGC in Bangladesh and MOHE in Afghanistan) will be responsible for undertaking the necessary efforts to prepare all the groundwork and documentation for implementation, including half-yearly and yearly targets that will be assessed by the RCC to support program implementation\. 119\. The implementation arrangements for Sub-Component 1\.2 will be similar, with one exception\. The ex- officio member on the RCC would be the Vice Chancellor of the Asian University for Women, or the hub of this network of women’s universities\. A Network Sub-Committee comprising 5 participating network members will be formed and Chaired by the AUW Vice Chancellor37\. The Network Sub-Committee will develop annual work plans and budgets (AWPB) which will be submitted to the RCC for its consideration and approval\. The AUW will receive an institutional grant to design the knowledge package on teaching and learning, and to provide implementation support for up to 15 institutions in the network\. Institutions that have been selected by the governments to be part of the regional network will receive institutional grants to implement the teaching and learning package tailored to their individual needs\. Each institution will develop an institutional strengthening plan, which will be part of the AWPB submitted to the implementing agencies in each country\. After institutional strengthening plans have been reviewed and agreed to, the implementing agencies in Afghanistan and Bangladesh will draw up ‘performance agreements’ for each participating institution, which will guide the implementation of all mutually agreed activities\. These procedures are not new for the implementing agencies and follow procedures which have been established and used under the HEQEP (and other higher education projects) and are in line with the Bank’s fiduciary and safeguards rules\. The UGC and SHED/MOE will 36 OMST will be used interchangeably with Project Coordination Unit (PCU) across documents\. 37 Or, designated senior representative of the AUW\. Page 60 of 66  The World Bank Higher Education Acceleration and Transformation Project (P168961) implement all activities on the Bangladesh side of the project, with the MOHE will be in charge for all activities on the Afghanistan side\. 120\. At the Bangladesh national level, the PSC, chaired by the Secretary of the SHED/MOE, will provide policy oversight and resolve critical issues\. The UGC will provide coordinating support between the SHED/MOE\. The UGC would implement the project using existing structures with additional technical support to be provided to respective divisions\. There will be a Project Director (PD), at least at the level of Additional Secretary, and s/he will be assisted by a Chief Implementation Officer (CIO) hired from the market\. The CIO will lead the Technical Assistance (TA) team\. Adequate technical staff and consultants will be hired to ensure oversight responsibility for all project components, including financial management, procurement, M&E, and administrative and communication\. The CIO will be responsible for coordination of project activities under the guidance of PD\. A Project Implementation Committee (PIC) will be established by UGC (following the Planning Commission guidelines) to support the project implementation\. The PIC will be chaired by the UGC chairman\. The PD will be the member-secretary of the PIC\. The OMST/MOHE will mostly participate in the meetings using digital technology\. 121\. In Afghanistan, the Ministry of Higher Education (MOHE) will jointly support the relevant project activities\. MOHE will support the implementation of this project through the Operations and Monitoring Support Team (OMST) of the ongoing Higher Education Development Project (HEDP)\. MOHE has formed a Project Steering Committee (PSC) that is led by the Minister of Higher Education and includes membership of others in the leadership as well as the project team\. The pSC has the overall responsibility for the oversight of the project and key decision-making processes\. The pSC’s mandate will be expanded to also include and maintain oversight of HEAT and the decision-making process\. In consultation with HEAT, additional and targeted technical assistance (TA) will be added to the structure of OMST specifically to monitor and coordinate the implementation of HEAT activities in Afghanistan\. OMST will also facilitate the interface with the participating higher education institutions for monitoring and implementation of activities under HEAT\. 122\. Network members in countries not receiving World Bank funding can participate in all network activities, benefitting from interactions with others as well as the public goods produced by the network\. Moreover, these institutions can participate in exchanges and can implement similar actions using other funding sources\. 123\. Finally, a key role of the RCC will be to support the expansion of the project into countries beyond Afghanistan and Bangladesh\. This will be done by having the RCC, in consultation with the SAARC Secretariat to establish a South Asia Higher Education Desk under the aegis of the Minister of Education in Bangladesh\. While the SAARC has engaged in the higher education sector in the past, there is currently no Apex Body to support policy developments in the higher education sector in the South Asia region\. 124\. The UGC will be responsible for the overall coordination and supervision of the M&E tasks and for reporting the results in the Results Framework to the Bank\. UGC will use its existing Monitoring Evaluation and Reporting Unit (MERU) with support from Higher Education Management Information System (HEMIS) and will be responsible for supporting the project in undertaking the M&E work\. The MERU will collect updated data from relevant agencies and relevant units of the UGC and gather data for different activities of the project from the beneficiary institutions to update indicators in the Results Framework on a regular basis (mostly semiannually)\. The MERU will work closely with the relevant section of the UGC\. The international cooperation and collaboration unit will obtain relevant data from the OMST/MOHE\. Page 61 of 66 The World Bank Higher Education Acceleration and Transformation Project (P168961) Project Implementation Organogram Page 62 of 66  The World Bank Higher Education Acceleration and Transformation Project (P168961) Annex 3 - HEAT Climate Co-Benefits Assessments in Bangladesh and Afghanistan 125\. Proposed Project Context: The education sector has been severely affected by flooding in recent years\. In Bangladesh, Cyclone Sidr in 2007 destroyed 5,927 primary and secondary educational sector institutions, leading to US$ 67 million in damages and severely restricted access to learning\. Afghanistan has similar climate risks as Bangladesh, with risks of flooding and extreme temperatures\. Higher education institutions are often constructed with a longer lifespan than primary and secondary schools, with stronger construction materials, sited better and tend to be less affected by floods and other hazards\. The proposed construction activities will be primarily located in Chittagong and Dhaka, which are more resilient to cyclone damage and while still susceptible to flooding and other hazards, are less prone to such hazards than other parts of the country\. However, Chittagong and Dhaka have been identified as future climate hotspots, meaning that climate change will continue to impact lives and livelihoods in these major urban centers as they remain vulnerable to extreme events, such as, sea level rise, including coastal flooding and storm surge\. 126\. Emergency Responsiveness: The ongoing COVID-19 pandemic has led to the closure of all universities in both Bangladesh and Afghanistan\. This has led universities to recognize the need to prepare their emergency readiness plans, while taking stock of current policies and regulations\. The HEAT project will help put in place plans to respond to the current crises and prepare universities for future events\. The HEAT project will invest in online learning infrastructure to support system resilience and allow universities to continue functioning in the face of future events\. In Afghanistan, this will also benefit the worsening security situation which occasionally causes university closures\. 127\. Research Grant and the Overall University Sector Output: The higher education sector plays an important role in the mitigation of climate and disaster risks through two pathways: (i) trains future graduates to be aware of climate impacts and contribute to efforts to mitigate climate change and (ii) research by the university sector on climate change dynamics, effects and mitigation strategies will also contribute to climate change mitigation\. The proposed project will support competitive research funding on climate change in project-related areas (allocates approximately US$5 million for such research)\. The project will support pedagogical and training development in universities in areas associated with climate change, thereby prepare graduates to deal with real-life problems, including climate and environment related changes\. There are two substantial investments in physical infrastructure under the project (Components 1 and 2), and other small-scale renovations and facility developments\. These will be developed in accordance with the Building Act Regulations considering the resilient features that can withstand the impacts of climate change-induced disasters and impacts\. 128\. Proposed AUW Campus: The AUW intends to design the entire campus as a “green campus”, with the use of alternate energy sources such as solar and wind energies\. The physical infrastructure for AUW campus design includes explicit consideration of hazards, flooding events, and aims to introduce adaption measures to the deal with these events\. For instance, the design calls for buildings to be slightly elevated, protecting them from shallow flooding\. Facilities to support drainage in anticipation of potential floods and heavier rainfall in the future due to climate change will also protect campus investments\. Investments in water supply and sanitation facilities for students, faculty and staff will be prioritized during campus development design and construction and take into consideration potential adverse events in the future\. Page 63 of 66  The World Bank Higher Education Acceleration and Transformation Project (P168961) 129\. HEAT Project Climate Co-Benefits: Under the proposed HEAT project, the following interventions implemented through the corresponding sub-components will support climate mitigation and adaptation co-benefits activities\. Sub- Activity component Climate Actions Incorporated Pandemic Emergency Climate Adaptation Approach: Preparedness Development of coordinated crisis response, emergency response plans in universities in Bangladesh and 1\.1\.1 Afghanistan, develop rapid assessment tools for online learning, developing recovery plans, review of IT policies and procedures, establish a 24/7 helpdesk for technology\. Building System Climate Mitigation/Adaptation Approach: Resilience Through Develop joint strategies and online learning materials for NRENs across South Asia, focusing initially on Bangladesh 1\.1\.2 Digitalization of and Afghanistan\. These strategies will include consideration of climate related crises and disasters, allowing learning Higher Education to continue when universities and colleges are closed\. Joint Masters’ Climate Mitigation/Adaptation Approach: programs under the Scholarships for Afghan girls will be offered for students to access programs\. 10 percent of scholarships will be Regional Network 1\.2\.1 designated for climate-related degree programs\. Joint masters’ will be designed under the Regional Network with participation from Bangladesh, Afghanistan and other participating countries will produce graduates in strategic fields, including climate change\. Strengthen teaching Climate Mitigation/Adaptation Approach: and learning in the regional network • Include content on climate change adaptation (e\.g\. local impacts of climate change, flood response, water conservation, etc\.) • Integrate climate change mitigation content in curricula, such as causes and impacts of climate change and activities that reduce, capture, or sequester GHG emissions Minor Infrastructure Climate Mitigation Approach: Upgrading for • The upgradation of facilities will incorporate (i) architectural or building changes that enable reduction of members of the energy consumption, (ii) Solar power (concentrated solar power, photovoltaic power) usage, and (iii) Energy regional network efficiency improvement in lighting, appliances, and equipment\. 1\.2\.1 Climate Adaptation Approach: • The facilities upgraded/renovated under this activity will have climate resilient features that can withstand the impacts of climate change-induced disasters and impacts\. These upgradations will be awarded to proposals called from universities located all over Bangladesh and vulnerability context will be considered while awarding the competitive funds if the potential beneficiaries are vulnerable to previously described climate and disaster vulnerability context\. AUW Campus Climate Mitigation/Adaptation Approach: Development • The campus development of AUW will follow Buildings Act and regulations to ensure climate resilient features that can withstand the impacts of climate change-induced disasters and impacts\. • The physical infrastructure for AUW campus design includes explicit consideration of hazards and aims to adapt to the environment\. For instance, according to the design the buildings will be slightly elevated, 1\.2\.2 preventing them from shallow flooding\. There are also water drainage facilities included, which anticipate potential floods\. Moreover, the building design uses a lot of natural shade and corridors for fresh air to flow so students and faculty can shield from high temperatures\. • The envisioned campus will have: (i) architectural or building features that enable reduction of energy consumption, (ii) Solar power (concentrated solar power, photovoltaic power) usage, and (iii) Energy efficiency improvement in lighting, appliances, and equipment\. Strengthening Climate Adaptation Approach: Digital/online Develop an online learning management infrastructure incorporating resilience design into the digital platform to Learning Capabilities ensure service continuity during natural disasters, which may be evoked during future crises and disasters\. 2\.1 Subsidy schemes for students and staff to allow lower rates for connectivity and devices\. The BdREN and AfgREN will be upgraded to allow for better realized internet speeds for students and staff\. Design or enhance data recovery and backup systems to prevent data loss in the event of natural disasters\. Develop National Climate Adaptation Approach: Learning • Develop National Learning Management Infrastructure (LMI) incorporating resilience design into the digital Management platform to ensure service continuity during natural disasters\. Infrastructure (LMI): • Design or enhance data recovery and backup systems to prevent data loss in the event of natural disasters\. Page 64 of 66 The World Bank Higher Education Acceleration and Transformation Project (P168961) Provide Competitive 2\.2 This activity will finance (a) upgradation of teaching-learning facilities with modern communication technology; (b) Funds to Improve upgradation of science and technology labs for STEM disciplines; (c) updating/modernizing curricula; and, (d) Teaching-Learning upgradation/renovation of women friendly facilities\. activities at universities Climate Mitigation Approach: • The upgradation of facilities and STEM labs will incorporate (i) architectural or building changes that enable reduction of energy consumption, (ii) Solar power (concentrated solar power, photovoltaic power) usage, and (iii) Energy efficiency improvement in lighting, appliances, and equipment\. • The curricula revision will include content on climate vulnerability, disaster risk and GHG emissions and will strengthen the Science Technology Engineering and Math programs as well as arts and humanities programs to help young generation foster actions and/ or technology to mitigate the risks\. Climate Adaptation Approach: • The facilities and STEM labs upgraded/renovated under this activity will have climate resilient features that can withstand the impacts of climate change-induced disasters and impacts\. • These upgradations will be awarded to proposals called from universities located all over the country and vulnerability context will be considered while awarding the competitive funds if the potential beneficiaries are vulnerable to previously described climate and disaster vulnerability context\. • Teachers/faculty will be trained on the revised curricula which will incorporate climate and disaster risk mitigation and adaptation measures\. Exposure 2\.2 Climate mitigation approach: Programs/Extra- This activity will finance exposure programs/extra-curricular activities at university, national and international level Curricular Activities to develop logical reasoning, independent thinking and problem-solving skills of university students including for University climate vulnerability and disaster risks of Bangladesh\. Students Climate Adaptation Approach: The competitions/Olympiads will include criteria pertaining to climate adaptation co-benefits for target beneficiaries of the interventions if they are assessed to be vulnerable to the impact of climate change\. The vulnerability context will be provided for this population, along with the intent, and the link to the activities\. Provision of Career 2\.2 Climate Mitigation/Adaptation Approach: Service Centers in The career centers will strengthen interaction between employers (private sector) and students at the university Public Universities level and an important part of that will be need-based training or communications modules delivered by potential employers to prepare well-informed graduates\. University students or graduates can be acclimatized on Corporate Social Responsibility (CSR) programs adopted by most industries/employers on Green Economy, climate/environment sensitive actions and business models by including an additional module on climate adaptation and mitigation measures in these sessions, seminars or job fairs envisioned under this activity\. Establish Facility 2\.2 Climate Mitigation/Adaptation Approach: Development of • The facility development or construction under this activity will follow Buildings Act and regulations to ensure University Teacher climate resilient features that can withstand the impacts of climate change-induced disasters and impacts\. Training Academy • The facility will have: (i) architectural or building features that enable reduction of energy consumption, (ii) (UTTA) and Solar power (concentrated solar power, photovoltaic power) usage, and (iii) Energy efficiency improvement implement in lighting, appliances, and equipment\. continuous • The training courses delivered through the UTTA and IQACs will include modules on vulnerability context of professional climate and disaster risk and adaptation and mitigation measures\. development for University faculty Operationalization of 2\.2 Climate Mitigation/Adaptation Approach: Faculty Professional • Integrate content on climate change adaptation in training materials for teachers Development (FPD) • Train teachers to prepare and carry out evacuation protocols at the onset of climate change-induced and Development of emergencies, such as cyclones, hurricanes, flash floods, etc\. Continuous Integrate content on climate change mitigation in teacher training, such as energy conservation techniques\. Professional Development Competitive Funds to Climate Mitigation/Adaptation Approach: Improve • Implementing modern ICT systems for teaching and learning: Design or enhance data recovery and Infrastructure for backup systems to prevent data loss in the event of natural disasters Teaching-Learning • Climate adaptation approach: to enhance resilience against disasters (please mention the climate vulnerability and disaster risks context specific to this sub-project) Climate mitigation approach: • Upgradation of facilities/lab: Page 65 of 66 The World Bank Higher Education Acceleration and Transformation Project (P168961) • architectural or building changes that enable reduction of energy consumption • Solar power (concentrated solar power, photovoltaic power) Energy efficiency improvement in lighting, appliances, and equipment Advanced Research, 2\.2 Climate Mitigation/Adaptation Approach: Innovation, and • This sub-component will support competitive research funding on climate change related areas (around US$5 Entrepreneurship million allocation), thereby substantially increasing local capacity to understand climate change, and innovative solutions to the risks associated with it\. This activity will support specialized programs or research grants for technologies, processes, or policies contributing to climate change adaptation and mitigation\. • Apart from the dedicated climate research funding, this sub-component will also award research and innovation grants in STEM areas such as: Natural science, Bioscience, Engineering and Technology, Information Technology, Agriculture, Nanotechnology and Materials Science and Computer Science and ICT\. Innovation and knowledge work from these sectors will substantially contribute to green economy initiatives, sustainable energy consumption, clean water and environment initiatives, low GHG emissions etc\. areas which will mitigate risks associated with climate change\. • Competitive grants awarded to liberal arts, social sciences, business and law streams will contribute in producing vital research in societal vulnerability context of climate and disaster risk, sustainable and climate responsible business models and legal implications\. These researches will also help formulating national policy regarding climate issues\. Innovation Support Climate adaptation approach: Facilities\. • to enhance resilience against disasters (please mention the climate vulnerability and disaster risks context specific to this sub-project) Climate mitigation approach: • Upgradation of facilities/lab: • architectural or building changes that enable reduction of energy consumption • Solar power (concentrated solar power, photovoltaic power) Energy efficiency improvement in lighting, appliances, and equipment Updating/modernizin Climate adaptation approach: g curricula and • Include content on climate change adaptation (e\.g\. local impacts of climate change, flood response, water teaching-learning conservation, etc\.) materials • Integrate content on climate change adaptation in training materials for teachers • Train teachers to prepare and carry out evacuation protocols at the onset of climate change-induced emergencies, such as cyclones, hurricanes, flash floods, etc\. • Integrate climate change mitigation content in curricula, such as causes and impacts of climate change and activities that reduce, capture, or sequester GHG emissions • Integrate content on climate change mitigation in teacher training, such as energy conservation techniques\. M&E and Reporting 3 The reporting mechanism outlined in the M&E plan has a reporting schedule every six months\. Although there is no specific indicator in the Results Framework of the proposed project, the climate and disaster risk mitigation and adaptation features and activities will be reported through dedicated questions/sections\. Page 66 of 66

APPROVAL

P116758

Page 1 PROJECT INFORMATION DOCUMENT (PID) CONCEPT STAGE Report No\.: AB4705 Project Name West Bank and Gaza Additional Financing Tertiary Education Project Region MIDDLE EAST AND NORTH AFRICA Sector Tertiary education (80%);Secondary education (20%) Project ID P116758 Borrower(s) WEST BANK AND GAZA Implementing Agency Ministry of Education and Higher Education Environment Category [ ] A [ ] B [X] C [ ] FI [ ] TBD (to be determined) Date PID Prepared April 13, 2009 Estimated Date of Appraisal Authorization The project is developed under OP/BP 8\.0 and no "formal" reappraisal was deemed necessary\. However, since the end of the Gaza conflict in January 2009, the project team has carried out an intensive supervision of the original project as well as an "informal appraisal\." Estimated Date of Board Approval May 28, 2009 1\. Key development issues and rationale for Bank involvement The Tertiary Education Project Total of US$ 16,5 million (10 million USD from the Trust Fund for Gaza and the West Bank (TFGWB) and 5\.0 million Euros from the EC) was approved by the World Bank Board on April 21, 2005, the Trust Fund agreement was signed on May 16 th , 2005 and became effective immediately after and launched on June 25, 2005\. From the first supervision mission held six months after the project was launched, excellent progress has been observed in particular on the management of component 3, the Quality Improvement Fund (QIF) aimed to provide support to improve the quality of Palestinian Tertiary Education Institutions and programs so they are: (i) relevant to the job market and economic development of WB&G; (ii) made competitive with international standards; and (iii) capable of developing income- generating programs\. The project meets the basic criteria for additional financing as it has consistently been rated satisfactory S for IP and achievement of DO\. Throughout its four years of implementation this project has been rated satisfactory and the QIF highly satisfactory\. The project is scheduled to close on December 31, 2009\. The project has met its key development indicators\. On the new entrants into priority areas defined by relevance to the labor market, the 40% target has already been met\. To balance the enrollment in technical colleges, the target of 27% of new entrants into tertiary education to Technical and Community Colleges was reached for the 2005-2006 period, and it reached 29% for the 2007-2008 period\. It is important to note that not only the quantitative targets have been doubled, the quality of the projects, and the sound implementation of the grants are having an important positive impact on Page 2 the institutions, and on the Higher Education System as a whole\. About 10 new programs in priority areas were expected to be developed as a result of the provision of QIF Grants\. The overall project commitments from both IDA and EC by the end of January 2009 amounted to US$ 12\.3 million, and total disbursements reached US$ 8\.0 million as of March 15, 2009\. Throughout project implementation there has been overwhelming demand for funding from Palestinian Universities and Colleges\. The number of proposals submitted in each cycle, has always exceeded the financing resources available under QIF\. The first two cycles submitted more than 40 proposals each, and only 7 and 9 were approved respectively\. The IT and third cycles each submitted 30 proposals, and only 14 and 9 were approved respectively\. All the funds from QIF have been committed, and the QIF Board has not been able to meet all the demands from institutions\. In addition, there are critical needs to improve and upgrade Teacher Education Programs, and both MOEHE and the QIF Board have set this as a priority for future support to be provided by QIF\. The recent conflict in Gaza took a toll on the Islamic University and the Community College of Applied Science and Technology, and most of their facilities were destroyed\. Based on the successful implementation of this project, and the overwhelming demand from institutions for funding, the critical needs of Teacher Education Programs, and the destruction of the Gaza Tertiary Education Institutions, the PA has requested an additional $US 5 million\. 2\. Proposed objective(s) The project development objectives are to assist the Palestinian Authority to: (i) improve the policy-making environment for tertiary education management, governance and quality assurance; (ii) increase the internal and external efficiency of tertiary education institutions; and (iii) create incentives and provide the basis for improvements in quality, relevance and equity of tertiary education\. Key development indicators are: Increased percentage of new entrants into priority program areas (defined by relevance to market and socio-economic needs) from 32% in 2004 to 40% by 2009\. Increased percentage of new entrants into technical colleges from 19% in 2004 to 27% by 2009\. Improved sector policy development measured by preparation of a National Tertiary Education Strategy by the end of 2006\. Improved teacher training programs measured by teacher educators use of active learning processes in their daily practice\. 3\. Preliminary description Page 3 The Project consists of the following parts: (1) Strengthening the Policy Making Role of Ministry of Education and Higher Education, Higher Education Council (HEC) and Accreditation and Quality Assurance Commission (AQAC); (2) Capacity Building Program to Increase Internal and External Efficiency of Tertiary Education Institutions; and (3) Support to Quality Improvement of the Beneficiaries\. Additional financing requested as part of this PCN will fund activities related to component 1 and 3\. Component 1: Capacity Building to improve Education Policy Development and Management\. The objective of this component is to strengthen the capacity of MOEHE and related Policy Making Bodies, to formulate, plan and monitor the education policy framework\. The additional funds (0\.6) will be allocated to the Management of the QIF, and the implementation of the Financial Management System of MOEHE\. Component 3 : Support to Quality Improvement of Tertiary Education Institutions (Beneficiaries)\. The main objective of the Quality Improvement Fund (QIF) is to provide support to improve the quality of Palestinian TEIs and programs so they are (i) relevant to the job market and economic development of WB&G; (ii) made competitive with international standards; and (iii) capable of developing income-generating programs\. The additional funding (Us 4\.2 million) to improve the quality and relevance of the teacher education programs by higher education institutions at all levels from pre-school to secondary schools\. The type of investment supported through this sub-component include: (i) funds to finance innovative programs through QIF, including pedagogical capacity building program for teacher educators; (ii) management of the fund; (iii) international and local technical assistance and related consulting services for capacity building of higher education institutions and for program evaluation; (iv) dissemination of best practices and twining arrangements for capacity building; (v) program dissemination and information campaign\. 4\. Safeguard policies that might apply This project was classified as Environment Category C, and no Safeguards were triggered at appraisal\. A social assessment concluded that there is a positive correlation between income and access to higher education\. To mitigate the social risks MOEHE took a series of measures of which the most important one has been to activate and expand loan and assistance programs for students\. This program has operated throughout project implementation, albeit with low recovery on loans\. To mitigate the financial sustainability of the Student Loan Fund, the Bank has provided Technical Assistance to MOEHE to improve the management of the student aid program, and build their capacity to eventually manage a sustainable Student Loan Program\. In addition IFC is funding a Loan facility operated through a commercial bank\. The activities proposed to be financed through the additional resources do not trigger any safeguard issues\. 5\. Tentative financing (only includes additional financing) Source: ($m\.) Page 4 Borrower 0 Special Financing 0 West Bank & Gaza - IBRD Funded 5\.0 West Bank & Gaza - Non IBRD Funded 0 Total 0 6\. Contact point Contact: Adriana Jaramillo Title: Sr Education Spec\. Tel: (202) 473-8049 Fax: Email: Ajaramillo@worldbank\.org

APPROVAL

P128568

 PROJECT INFORMATION DOCUMENT (PID) CONCEPT STAGE Report No\.: PIDC241 Public Disclosure Copy Project Name ID-Renewable Energy for Electrification Project (P128568) Region EAST ASIA AND PACIFIC Country Indonesia Sector(s) Other Renewable Energy (100%) Lending Instrument Specific Investment Loan Project ID P128568 Borrower(s) Republic of Indonesia Implementing Agency PT PLN Environmental Category B-Partial Assessment Date PID Prepared 21-Mar-2012 Estimated Date of Appraisal Completion 01-Oct-2012 Estimated Date of Board Approval 20-Dec-2012 Concept Review Decision Track I - The review did authorize the preparation to continue I\. Introduction and Context Country Context Macroeconomic context\. Indonesia has improved its macroeconomic and political stability over the last decade, with consistent GDP growth averaging five to six percent annually (6\.1 percent in 2010, and 6\.5 percent year on year during Q3, 2011)\. Indonesia waslessaffected by the global economic downturn of 2008-09 than most countries, and by 2010 the economy had recovered to pre- crisis levels\. Indonesia's economic growth is projected to be 6\.2 percent for 2012 (Indonesia Economic Quarterly, World Bank), while inflation (5\.38 % in 2011) is to be managed within the current target band of 4\.5% (+/- 1%)\. Indonesia’s fiscal position also remains strong providing the country with options for dedicating additional resources for meeting its infrastructure development needs\. A successful implementation of priority infrastructure projects will however be essential for Indonesia to meet its economic growth targets\. Low infrastructure investments and poor maintenance\. A decline in investments sparked by the 1997/98 financial crisis has led to a Public Disclosure Copy backlog in infrastructure development\. In addition, poor maintenance of existing infrastructure continues to lead to the deterioration of existing capacity for providing public services\. In recent years however, infrastructure investment has begun to recover, reaching about 4 percent of GDP in 2010\. This is not yet at pre-crisis levels and is inadequate to reverse the investment backlog or to meet the growing demand from existing infrastructure users, let alone satisfy the large population which lacks access to basic services\. Investments planned and underway also tend to prioritize new infrastructure development while maintenance of existing infrastructure needs ongoing attention\. Reversing lagging infrastructure development\. Inadequate infrastructure is a significant constraint to Indonesia’s growth potential\. The Government of Indonesia (GOI) has adopted an ambitious plan to rebuild and develop infrastructure\. In the period from 2010-14, budget expenditure for infrastructure is expected to increase by more than 30 percent compared with the prior five year period\. It is, however, essential for Indonesia’s infrastructure institutions to translate these resources into better development outcomes\. They face significant constraints and challenges in doing so\. Coordination among, and clarity of roles and responsibilities between the various levels of government for infrastructure development needs to be improved upon; the capacity of provincial and local governments charged with the responsibility of basic service delivery is still weak; and effective procedures and regulations for financial transfers from central to provincial and local governments have not yet been fully established\. Sectoral and Institutional Context Indonesia has the lowest per capita electricity consumption and electricity access rate among all of the Bank’s larger developing member countries in the East Asia region\. After experiencing rapid growth from the early 1980s to the late 1990s, the electric powersector was significantly weakened during the East Asian Financial Crisis of the late 1990s\. Growth in demand for electricity slowed and no significant investments were made to expand the capacity of the power system from 1999 to 2004\. Driven by a robust economic recovery since 2004, the demand for electricity has increased by over 6 percent annually in the past few years, leading to power shortages in most parts of Indonesia\. The latest forecasts indicate that the national economy will continue to grow at about 7 percent annually in the medium term due to which there is tremendous pressure on the power sector to keep pace with economic growth\. Since 2006, the Government has been pursuing an investment program to procure 10,000 MW of coal-fired power plants to be operated by the national power utility, PLN\. A second 10,000 MW program is being undertaken in parallel, of which about 50 percent is planned to be from renewable energy sources\. The government’s power sector strategy focuses on: (a) facilitating private investments and increasing public financing to grow generation capacity; (b) improving the  generation fuel mix by developing renewable energy; (c) rationalizing the electricity tariff and subsidy regime to put the sector on a sound financial footing; and (d) further strengthening institutional capacity and improving the management efficiency of PLN\. Investment needs: The sector will require significant investment to keep pace with economic growth and to increase electricity access rates\. PLN’s latest development plan entails an estimated US$ 97\.1 billion in total investments over 10 years\. Although the private sector will finance part of the capacity expansion, PLN is expected to invest around US$ 62\.2 billion\. Public Disclosure Copy Tariffs below the cost of power supply: Current electricity tariffs are insufficient to cover PLN's cost of power supply, leading to high Government subsidies\. Although the electricity tariffs were increased on average by around 10 percent in August 2010, these tariffs are still lower than PLN’s cost of electricity supply, and among the lowest in the region\. PLN’s financial viability is therefore reliant upon the Government’s public service obligation (PSO) subsidy which covers the shortfall between electricity tariffs and PLN’s cost of power supply\. The PSO is estimated to be about 44 percent of total revenues in 2011, raising doubts about the long-term sustainability of this financial support mechanism\. Furthermore, tariffs below cost recovery levels are the main barrier for improving energy efficiency and for shifting energy production and consumption towards a low-carbon development path\. The case for renewables: While abundant renewable resources are available in Indonesia, the rapid increase of coal in the generation fuel mix may expose the country to environmental risks, both locally and globally\. According to PLN’s long-term capital investment plan, the share of coal in the generation fuel mix (in GWh) will increase from around 54 percent today to roughly 60 percent by 2019\. The expansion in coal-based generation has raised concerns about the likely negative environmental impact in the heavily populated areas of Java and Bali, and in the environmentally sensitive areas of some of the islands\. Although Indonesia is rich in renewable energy resources, especially geothermal (40 percent of the world’s geothermal potential), hydropower, and biomass, the lack of incentives, and regulatory uncertainty, combined with the evolving institutional capacity of major national and local institutions, as well as the low coverage of transmission networks has hindered the rapid development of these indigenous and clean energy resources\. The electrification challenge and the role of renewables: At the same time, due to limited system expansion over the past decade that has left the system with inadequate capacity to meet the growth in demand, Indonesia faces an electrification rate of only 65 percent leaving over 78 million people without access to electricity\. To meet the Government’s target of electrifying 91 percent of the population by 2019 (2010-19 RUPTL), roughly two million new subscribers will need to be connected annually, double the rate of the past few years\. Most of those without access to electricity live in the remote areas of Java and Bali or on islands outside the area covered by the Java-Bali system\. In addition, investment costs for the medium and low voltage network extensions required for the Government’s electricity access scale-up program are estimated at US$1\.3 billion per year through 2025\. To meet the Government’s electrification targets, the power sector will need to significantly strengthen and extend the coverage of the transmission and distribution networks, especially in islands outside Java-Bali\. The power sector will also need to accelerate off-grid and micro-grid electrification programs in areas which wi ll not be covered by the main grids in the near future\. To meet the increasing demand for electricity, the Government of Indonesia (GoI) and PLN are focusing under the second phase of Public Disclosure Copy the 10,000 MW program on expanding generation capacity and improving access to electricity significantly through investment in renewable energy generation, and network expansion\. As part of this effort, PLN has embarked upon a 1,000 island electrification program under which PLN plans to convert mini-grids in Indonesia’s islands from di esel-based generation to renewable diesel hybrid systems, and introduce renewable energy generation (mainly solar PV, and mini-hydro) at greenfield sites, combined with network expansion at project locations\. Proposed Project: The key development challenge for Indonesia’s islands is posed by the inter-linked factors of low access to electricity and a spatially dispersed population, combined with the high cost of PLN generation from expensive diesel fuel, and often poor service quality\. Meeting coverage targets in an efficient and effective manner, and within the time frames as per priorities set by sub-region in GOI’s RUKN (national electrification plan) is unlikely under the business as usual scenario\. The main goal of the investment for which PLN is seeking a joint Bank-KfW loan, is to improve electricity access by using renewable energy resources (grid connected solar-diesel hybrid systems, and stand-alone solar PV and mini-hydro systems, and network expansion), while also reducing the financial losses accruing from near total reliance on diesel based generation in those locations\. The proposed project forms an integral part of the Government's capital investment plan\. It was proposed by PLN and the GoI as a priority project under the power sector development plan\. The Bank had engaged with the Government in rural electrification, through a AAA (Electricity for All), a policy framework for regional electrification and rural access, and an investment project, the results of which helped in the formulation of the Electricity Law 2009\. The Bank’s involvement in the proposed project would allow continued policy dialogue with the GoI and build capacity within PLN to design and deliver renewable energy projects, and to improve the financial and environmental sustainability of its large-scale electrification program\. Relationship to CAS In line with the Bank’s Country Partnership Strategy (CPS), for 2009-2012 and the government’s strategic priorities, the Bank is implementing and preparing (i) an investment lending program to finance public sector power infrastructure projects, especially renewable energy and transmission projects, to sustain economic growth and increase electricity access; (ii) development policy lending programs to support the government’s efforts to establish a sustainable policy environment for infrastructure project  development and move the energy sector towards a low-carbon development path; and (iii) technical assistance to rationalize the electricity tariff and subsidy regime, establish incentives for renewable energy resources development, to support efficient use of energy and to strengthen the capacity of the line ministry and state owned companies in the energy sector\. The proposed project will form an integral part of the Bank’s assistance program for the energy sector to improve electricity access by using renewable energy resources\. The proposed project is also consistent with the objective of the Country Partnership Public Disclosure Copy Strategy to reduce the local and global environmental impact of the sector through the use of clean and renewable energy, and with the objective of improving the technical, managerial and operational capacity of state institutions (Core Engagement 2 - Infrastructure)\. II\. Proposed Development Objective(s) Proposed Development Objective(s) The development objective of the proposed project is to improve electricity access in Indonesia’s islands using cost-effective renewable energy generation sources\. Key Results Achievement of the development objective will be assessed through the following key indicators: (a) the connection of additional consumers to grid-based electricity, (b) increase of service hours to existing consumers; (c) the reductionof PLN’s operating costsat existing locations as measured by the conversion of diesel based generation to renewable-diesel hybrid systems; and (d) reduction in the cost of electricity generation relative to the cost of diesel generation from stand-alone PV and mini-hydro projects\. III\. Preliminary Description Concept Description The proposed project will fund the conversion of existing diesel based generation in Indonesia’s islands to renewable-diesel hybrid systems, invest in greenfield solar PV and potentially in mini-hydro systems, and fund network expansion to improve electricity access\. The main components of the proposed project are as follows: Component 1 –Renewable energy generation (US$ 200 million) with specific subcomponents: (i) investment in cost effective solar PV generation in grid connected mode at PLN’s isolated diesel-based generation plants and in the main regional network systems ; and (ii) investment in standalone solar PV and potentially in mini-hydro generation for electrification at numerous new locations\. Component 2 – PLN network extension (US$ 50 million) comprising of 300 km of medium voltage (MV) and low-voltage (LV) distribution lines for increasing access coverage through island grids to be serviced by renewable diesel hybrid systems, and at Public Disclosure Copy new solar PV, and mini-hydro locations where component 1 investments are being mobilized - including MV line extensions, LV network strengthening, and new customer connections (to be funded by PLN)\. Component 3 – Technical assistance (US$ 5 million) to support PLN during the initial investment phase to immediately take advantage of both Indonesian experience and expertise, as well as international best practice and experience in the design and engineering of solar PV systems, PV diesel hybrids, and mini-hydro plants - to build internal capacities over a wide range of technical areas that are critical for the long term sustainability of these types of investments\. In order to handle the rapid scale-up of renewable energy technology in its operations under the project, PLN would also require staffing skills with the requisite core competencies that would need to be acquired, mobilized, and strengthened rapidly to address the scale of this activity\. A separate grant in the amount of US$ 700,000 is being sourced from AusAID and ASTAE for technical assistance (TA) to PLN in least-cost electrification planning\. The output of the TA will be a spatial least cost sector-wide investment program and technology mapping\. It will also include outputs related to relevant technical aspects, institutional development, and post-operational sustainability\. This TA will create a delivery platform for all stakeholders interested in the sector to assist PLN in scaling up electricity access by using renewable energy technology\. This leveraging of World Bank support would be an important result of this operation\. The total estimated project cost is US$ 255 million for which an IBRD sector investment loan (SIL) of US$ 105 million is proposed, in addition to which US$ 100 million is proposed to be funded by a KfW loan, with the remaining US$ 50 million to be financed by PLN for network rollout\. The proposed project is expected to be prepared during calendar year 2012\. Subject to the successful implementation of the first Renewable Energy for Electrification Project (REEP) SIL, and subject to Government approval, the Bank and KfW plan to follow-up with a series of SILs during calendar 2013, and 2014\. The relative size of each SIL will be based on the strength of the proposed investment program that PLN will have prepared for implementation for each year of the loan in accordance with the agreed criteria and processes\. Based on PLN's initial estimates, under the REEP program comprising of the proposed series of SILs of which the current loan is the first proposed lending activity, PLN has thus far identified 402 solar PV plants with an installed capacity of 60,564 kWp\. PLN  has also requested that mini-hydro plants be considered for funding under the SILs\. The Team will explore the potential for integrating mini-hydro sub-projects into the current and future loans under the REEP program\. IV\. Safeguard Policies that might apply Safeguard Policies Triggered by the Project Yes No TBD Public Disclosure Copy Environmental Assessment OP/BP 4\.01 ✖ Natural Habitats OP/BP 4\.04 ✖ Forests OP/BP 4\.36 ✖ Pest Management OP 4\.09 ✖ Physical Cultural Resources OP/BP 4\.11 ✖ Indigenous Peoples OP/BP 4\.10 ✖ Involuntary Resettlement OP/BP 4\.12 ✖ Safety of Dams OP/BP 4\.37 ✖ Projects on International Waterways OP/BP 7\.50 ✖ Projects in Disputed Areas OP/BP 7\.60 ✖ V\. Tentative financing Financing Source Amount Borrower 50\.00 International Bank for Reconstruction and Development 105\.00 GERMANY KREDITANSTALT FUR WIEDERAUFBAU (KFW) 100\.00 Total 255\.00 VI\. Contact point World Bank Contact: Dhruva Sahai Title: Sr Financial Analyst Tel: 458-2392 Public Disclosure Copy Email: dsahai@worldbank\.org Borrower/Client/Recipient Name: Republic of Indonesia Contact: Title: Tel: Email: Implementing Agencies Name: PT PLN Contact: Murtaqi Syamsuddin Title: Mr\. Tel: 62-21-7251234 Email: murtaqi@pln\.co\.id VII\. For more information contact: The InfoShop The World Bank 1818 H Street, NW Washington, D\.C\. 20433 Telephone: (202) 458-4500 Fax: (202) 522-1500 Web: http://www\.worldbank\.org/infoshop

APPROVAL

P048652

Reporte No\. PID9726 Actualizado el 1 de mayo de 2001 Nombre del Proyecto: Proyecto de Universalización de Educación básica- Guatemala Región: América Latina y el Caribe Sector: Educación Primaria Número de Identificación del Préstamo: GTPE48652 Entidad que solicita el Préstamo: Gobierno de Guatemala Agencias que Implementan el Préstamo: Ministerio de Educación 6ª calle 1- 87 zona 10 Ciudad de Guatemala, Guatemala Contacto: Lic\. Rossana de Hegel (Directora de UCONIME) Tel\. : 502-360-3826 Fax: 502-360-3870 Email: rdehegel@mineduc\.gob\.gt Categoría Ambiental: C Fecha en que se preparó el PID: 3 de mayo de 2001 Fecha de evaluación del Proyecto: 22 de febrero de 2001 Fecha de Junta de Proyecto: 22 de mayo de 2001 Historial y Sector del País Guatemala es un país de aproximadamente 11 millones de personas con una población joven y creciendo rápidamente, según las proyecciones de población para el año 2000 del Instituto Nacional de Estadística (INE-CELADE (1998) Estimaciones de Población por Departamento según edad y sexo 1990-2010 y Estimaciones de Población por Municipio según sexo 1990-2005, Guatemala\.) Alrededor de 44% de la población es de menos de 14 años, 65% es menor de 25 y la taza de crecimiento poblacional está en 2\.61%\. El país se divide en 22 departamentos con el departamento de Guatemala con el 22\.6% de todos los habitantes\. Guatemala tiene una población rural (más o menos dos tercios), con la mayoría de comunidades indígenas o 48% del total (La Encuesta Nacional de  Ingresos y Gastos Familiares, 1998\.) La nación tiene una gran diversidad cultural y lingüista\. Es multi-étnico, pluri-cultural y pluri-lingüe, consistiendo de Mayas, ladinos, Xinka y garifunas, (Funes, 2000\.) Los contrastes sociales y económicos en Guatemala son notables, especialmente entre las áreas rurales y urbanas\. Similar a la mayoría de países en desarrollo, las inversiones públicas tienden a favorecer los centros urbanos mientras la entrega de servicios básicos sociales, incluyendo educación primaria, permanece, ya sea, no disponible o más allá del alcance financiero de las poblaciones rurales e indígena\. Los indicadores de desarrollo económico y social tienen una tendencia a ser más altos en los centros urbanos, así siendo testigos de las influencias que estos tienen de colocar los recursos nacionales públicos, (ver Instituto Nacional de Estadística, 1996 Características Generales de Población y Habitación\. Guatemala: Guatemala, C\.A\.) A nivel nacional, el promedio de la educación obtenido por los guatemaltecos es sólo de tres años, y de menos de dos años en las áreas menos urbanas de los departamentos de Alta Verapaz, Quiché, Huehuetenango y Totonicapán\. En contraste, en las áreas más urbanas, el Departamento de Guatemala, el promedio de educación obtenido ha alcanzado 5 años\. Guatemala es un país encarando la transición de una guerra civil de más de 30 años a una sociedad post-conflicto donde los derechos humanos y libertades básicas, de todos los guatemaltecos, incluyendo la participación cívica, en hacer decisiones, es reconocida y apoyada\. El 29 de diciembre de 1996 los Acuerdos de Paz fueron firmados entre el GoG y la Unidad Revolucionaria Nacional Guatemalteca, marcando el final de una guerra y el principio de una agenda de desarrollo nacional que traerá las necesidades de los indígenas y poblaciones menos atendidas al frente\. Los principios de base de los Acuerdos de Paz cortan a través de varios sectores y temas: educación, salud, reforma agraria y socioeconómica, identidad y derechos de los pueblos indígenas, y reanudación de los acuerdos\. La reforma educativa fue reconocida como particularmente importante para promover paz y equidad y es enfatizada fuertemente en tres de los seis acuerdos de paz\. Los Acuerdos reconocen la educación y capacitación como, "esenciales para la estrategia de equidad y  unidad nacional," y "factores determinantes en la modernización económica y competitividad internacional\." (Acuerdo sobre aspectos Socioeconómicos y Situación Agraria, p\.10) Para cumplir las reformas al sistema educativo así como alcanzar el mecanismo para cumplir con los Acuerdos de Paz, el gobierno tendría que mejorar el registro de muy baja inversión pública en educación\. En 1995, el gobierno presupuestó únicamente un 1\.3% del PNB para el sector de educación comparado con el promedio de 3\.6% en la región\. Colocaciones intra-sectoriales mostraron que 53% del presupuesto fue colocado para educación primaria, 15% para educación más elevada, 11% para educación secundaria y 9% para administración y 3% para educación pre-escolar\. Al nivel primario, la distribución de recursos fue poco equitativa favoreciendo las áreas urbanas\. En 1995, el gasto anual por alumno en escuelas primarias fue estimado en $166 dólares por niño en el área urbana y $110 dólares por niño en el área rural (Valerio y Rojas, 2000\.) Ha habido incrementos modestos en los últimos dos años del presupuesto educacional\. Las últimas estadísticas del MINEDUC (1999) calcularon el presupuesto de educación a 1\.6% del PIB\. El legado de muchos años de guerra deja a Guatemala con, entre otros, dos problemas serios, enfrentando a la sociedad: la pobreza y desigualdad\. Aproximadamente, 75% de la población vive debajo de la línea de pobreza con 58% de sus ingresos debajo de la línea de extrema pobreza, (Funes, 2000\.) Según los números del Estudios de Hogares Nacional, el porcentaje de hogares debajo de la línea de pobreza era de 85% en Alta Verapaz, 79% en Quiché y 76% en Huehuetenango\. Actualmente el gobierno está conduciendo un Estudio de Medidas Estándares de Vida (LSMS, por sus siglas en inglés) con el apoyo de la comunidad internacional\. Se espera que se actualice durante el primer semestre de 2001\. El país tiene también una de las tasas de analfabetismo más altas de América Latina de 29\.6% (1999), aunque esta taza ha mejorado significativamente de 37\.5% como se midió en 1995\. (Ministerio de Educación, Memoria de Labores 1996-1999\.) Se estima que de los 2\.2 millones de adultos analfabetos del país, el 77% vive en áreas rurales y 61% son de grupos indígenas\. En áreas urbanas, 89% de adultos de más de 15 años de edad son  alfabetos mientras que 75% de mujeres en el área urbana son alfabetos, en áreas rurales sólo 50% de las mujeres son alfabetos\. Las tasas más altas de analfabetismo ocurren en áreas rurales entre mujeres, principalmente en departamentos donde la mayoría de personas son indígenas\. En el departamento de Alta Verapaz y Quiché, el porcentaje de personas alfabetos alcanza sólo un 12 y 19 por ciento, respectivamente\. Los departamentos de Alta y Baja Verapaz, Quiché y Huehuetenango tienen el menor acceso a los servicios educativos, los más altos niveles de pobreza y los números más altos de comunidades indígenas\. (Ver MINEDUC, 1999\. Anuario Estadístico de la Educación, Ciudad de Guatemala, Guatemala, C\.A\. pp48-49\.) El sistema de educación básico en Guatemala incluye el nivel pre-primario para niños de edades de 5-6 años con dos modalidades de instrucción: bilingüe y pre primaria normal (Primaria de Párvulos); un nivel primario con seis grados para niños de 7 a 12 años de edad\. Los primeros tres grados (grado 1-3) comprenden el ciclo primario de educación primaria (Educación fundamental), y grados del 4 al 6 comprenden el ciclo complementario (Educación complementaria\.) La educación primaria de adultos se ofrece en un ciclo de 4 años, usualmente en clases nocturnas; y una educación de ciclo básico de educación secundaria (Ciclo Básico de Educación Media) con grados del 7 al 9 para niños de 13-15 años\. El ciclo superior de educación secundaria (Ciclo Diversificado de Educación Media), con un currículo diversificado de dos a tres años, no es parte del sistema de educación básico del sistema\. A pesar de los esfuerzos recientes, por el gobierno a expandir el acceso a la educación básica para la mayoría de niños en edad escolar, los problemas de cobertura, equidad y mala calidad persisten en el sistema\. Guatemala promedia entre las tasas más bajas de inscripción para niños de educación primaria de todo Latino América\. En el año 2000, la inscripción bruta para niños de educación primaria era de 95% e inscripción neta era de sólo 84% (MINEDUC, Anuario Estadístico de la Educación, 2000\.) Estos números representan una mejoría significativa en el acceso al sistema si uno considera que los números respectivos fueron 84 (bruto) y 69 (neto) en 1995\. Para niñas, los indicadores son usualmente peores  que para niños, un patrón que es común para el acceso para educación pre primaria y primaria en las áreas rurales y urbanas\. También se ha establecido que la inscripción neta para niños de 7 años (primero primaria) era de sólo el 75%, indicando que aún se necesita una mejoría significativa\. Aun hay algunos departamentos donde la inscripción neta está ente 50 y 55% (Alta Verapaz, Huehuetenango, Totonicapán y Sololá\.) En contraste sólo hay tres departamentos que tienen inscripciones arriba del 90% (Retalhuleu, Jutiapa, Santa Rosa\.) Más del 70% de estudiantes en el área rural son mayores a las edades del grado correspondiente, comparado con el 50% en las áreas urbanas (Funes, 2000\.) Según las estadísticas de MINEDUC (2000), hay aproximadamente 1\.87 millones de niños en el rango de 7-12, del cual 164,032 son niñas que no tienen acceso al sistema de educación primaria\. Las tasas de abandono anual promedian 11\.4% y son más altos en los grados uno y dos con 17\.3% y 10\.3% respectivamente\. Repetición de grados también es alto con un promedio de 17% para niños y 15% para niñas\. Otra vez el grado más alto de repetición es en primero primaria con 30\.2% y 27\.5% para niños y niñas respectivamente\. La correspondencia de grado-edad es baja: a nivel nacional sólo el 31\.6% de los estudiantes se inscriben en el grado que corresponde a su edad\. En las áreas rurales el número es de 26\.6%\. La situación actual educacional en Guatemala debe verse dentro del contexto de la diversidad étnica, lingüista y cultural\. Más de 20 idiomas mayas se hablan en Guatemala\. La mayoría de los que hablan idiomas indígenas residen en el altiplano norte y oeste, donde mantienen ataduras fuertes sociales e históricas a sus comunidades de origen, tradiciones robustas espirituales y culturales, y un conocimiento profundo del ambiente y los recursos naturales, una tradición agrícola milenaria y una tradición de manualidades de reconocimiento mundial\. Con la mayoría de la población que habla idioma maya (Quiché, Kakchiquel, Mam y Kéqchi son los grupos etno-lingüistas más grandes), numerosos otros pueblos y culturas residen en Guatemala\. Entre estas está la Afro-caribeña o pueblo que habla garifuna en la Costa del Atlántico; un pequeño pueblo que habla Xinca cerca de la frontera con El Salvador; Y un grupo grande que habla  español o ladinos que residen en la Ciudad de Guatemala y en todas las áreas rural y urbana del país\. En 1985 la Constitución guatemalteca reconoció los derechos de todos los ciudadanos y grupos étnicos para participar libremente en una vida social y cultural de sus comunidades y la nación, así como preservar las culturas específicas, idioma e identidad\. Estos derechos fueron reafirmados y estipulados en los Acuerdos de Paz que fueron firmados por el gobierno guatemalteco y la Unidad Revolucionaria Nacional Guatemalteca (URNG) durante los 1990's, particularmente los acuerdos relacionados con los Derechos de Identidad de los Pueblos Indígenas (marzo, 1995) y los Acuerdos Socioeconómicos y Agrarios (mayo 1996\.) Los acuerdos de Identidad y Derechos de los pueblos indígenas reconocen las características multi-étnica, multi-lingue y pluri-cultural de la sociedad guatemalteca y piden varias reformas para proteger las identidades y culturas de la gran población de indígenas en el país\. Temas\. Los temas del sector principal para ambos sectores educacional y culturales están bien descritas en el Plan de Gobierno para el Sector Educativo 2000-2004 (julio, 2000) y los Principios, Políticas y Estrategias del Ministerio de Cultura y Deportes: 2000-2004 (septiembre, 2000\.) Ellos pueden ser resumidos como sigue: (a) Cobertura\. A pesar del significado de las mejorías durante los últimos cuatro años, acceso, repetición y abandono aún son serios problemas que encaran a MINEDUC\. Se estima que sólo el 70% de la población adulta es alfabeto, sin embargo, en las áreas rurales, especialmente entre los grupos indígenas, el alfabetismo puede ser tan bajo como el 20%\. Inscripción neta de educación primaria permanece muy baja aún en Jalapa (65%), Huehuetenango (70%), Alta Verapaz (70%) y Sacatepéquez (71%)\. Niñas tienen aún menor tasa de inscripción y promoción, especialmente en las áreas rurales indígenas\. A nivel nacional, las estadísticas de MINEDUC para el año 2000 muestran que la tasa de inscripción a nivel primaria es sólo de 84%\. (MINEDUC; Anuario Estadístico de la Educación, 2000\.) Se estima que aproximadamente el 17% de los estudiantes inscritos en escuelas rurales de primaria están repitiendo el año y 18% no son promovidos al siguiente grado\. (b) Calidad\. La mayoría de escuelas públicas carecen de calidad básica en material educativo (libros de  texto, bibliotecas, audio-visuales para aprender y enseñar\.) El material bilingüe adecuado no está disponible en las escuelas rurales asistidas por alumnos cuyo idioma nativo no es el español\. La mayoría de escuelas rurales son multi- grados (una o dos maestras instruyen a varios grados), pero solo unas cuantas maestras han sido capacitadas para la educación bilingüe o la metodología multi-grado\. Muchas de las maestras son de origen maya pero su comando del idioma es en su mayoría verbal, dejando a pocos con la habilidad de leer y escribir\. Instituciones de capacitación para maestros y otros niveles más altos están en procesos de enseñanza tradicional, favoreciendo el aprendizaje de repetición y métodos de hecho y capacitar a las maestras en el uso de métodos de aprendizaje más participativos en el aula que involucren el aprendizaje activo del estudiante y desarrollo de habilidades cognoscitivas\. (c) Promover la Diversidad Cultural y Pluralismo\. Por varias razones históricas y socio-políticas (incluyendo la guerra civil entre 1960 y 1990 que afectó al país), Guatemala ha tenido dificultad de beneficiarse de su diversidad cultural y social y hacerlo una base sostenible para desarrollo\. Uno de los mayores retos que Guatemala encara es construir sobre su diversidad cultural, haciéndolo su base para servir una fuente continua de tensión social y conflicto\. Como se ha anotado en tales publicaciones como el reporte de la Comisión Mundial de Cultura y Desarrollo, Nuestro Diversidad Creativa (UNESCO, 1996), el reconocimiento y el respeto por la diversidad cultural puede servir como un motor endógeno de desarrollo económico en países multi lingues y multi-étnicos como Guatemala y proveer la base para una paz larga y duradera\. El sistema educativo, con su poder de inculcar valores éticos y cívicos en los niños y la juventud tiene un papel extremadamente importante en el reconocimiento y promoción de la diversidad cultural y el pluralismo, así como la creación de una "cultura de paz" en Guatemala\. (d) Descentralización y Modernización\. Mientras se ha hecho progreso por MINEDUC, con el apoyo una de un proyecto financiado por el banco y el de otros donadores, en la descentralización de las funciones a nivel departamental y modernización de la estructura, procesos y material de trabajo, permanecen varias tareas sin hacer\. La capacidad institucional y financiera del  MINEDUC para responder a los problemas de la educación en el país es débil\. La ineficiencia, tradición, centralización y toma de decisiones aún limita la participación departamental y local en el proceso\. El sistema educativo aún se encuentra restringido por capacidad administrativa, gerencial y financiera, particularmente a nivel local y departamental\. Además, el sistema de evaluación de estudiantes nacional, que ha realizado con éxito las evaluaciones estudiantiles, tiene que ver como logra mecanismos efectivos para diseminar los resultados de evaluación y proveer retroalimentación para mejorar la calidad educativa\. A pesar de las mejoras en la recolección, procesamiento, análisis y reportaje del proceso educativo clave, aún se necesita mejorar la calidad del proceso, los instrumentos utilizados y la diseminación de estrategias consideradas\. En cuanto a la mejoría del sistema informativo (hardware y software), es necesario continuar la provisión de la tecnología más avanzada disponible y de ofrecer capacitación a los niveles departamental y central\. Atención especial se dará para mejorar la calidad del proceso que se sigue para recolectar información requerida por la unidad de estadística\. Estrategia del Gobierno: Dados los temas anteriores, la estrategia para la educación básica de MINEDUC se enfoca en proveer cobertura universal para los primeros seis grados, y pone particular atención en la educación bilingüe y busca la equidad de genero, poblaciones indígenas y aquellos grupos afectados por décadas de conflictos; calidad mejorada, eficiencia interna y externa; modernización institucional y administrativa y descentralización, incluyendo mejor participación de ONG's y la comunidad local\. Como resultado de la situación anterior, el gobierno de acuerdo con los Acuerdos de Paz está completamente comprometido con: (i) incremento a los recursos económicos dedicados a la educación; (ii) hacer necesarios los ajustes del contenido educativo teniendo pertinencia cultural y educativa; (iii) incrementar la cobertura de todos los niveles del sistema educativo enfatizando la educación bilingüe en las áreas rurales; (iv) organizaciones de capacitación social a nivel municipal, regional y nacional para promover la participación de desarrollo socioeconómico; (v) el diseño de programas de becas, vouchers y otros incentivos para permitir a los estudiantes  con necesidades especiales que permanezcan en la escuela; (vi) diseñar e implementar cursos de capacitación constante para los maestros dirigido a maestros y directores administrativos; y (vii) responder a la diversidad cultural y lingüística del país reconociendo y fortaleciendo la identidad cultural y valores de los pueblos indígenas incluyendo conceptos de educación indígena en el currículo nacional (ver Plan de Gobierno Sector de Educación 2000-2004, pag\. 5-6; julio 2000\.) En el mismo documento (pagina 16) identificó la estrategia del MINEDUC en seis acciones prioritarias en la cual la mayoría de recursos se concentrará: (i) acciones alfabetas y pos-alfabetas; (ii) universalización de escuelas primarias; (iii) generalización de educación bilingüe e intercultural; (iv) transformación de currículo para mejoría de la calidad educativa; (v) especialización y mejoría de las capacidad de los maestros; y (vi) descentralización y modernización del sistema educativo\. También se ha establecido que el MINEDUC continuará apoyando a las escuelas PRONADE como el modelo principal a través del cual se expande la cobertura (universalización) que se cumplirá en el área rural, comunidades aisladas\. El programa PRONADE, apoyado por un préstamo continuo del banco, es basado en un modelo de entrega educativa que ha sido altamente efectivo en acceso ascendente para los primeros tres años de educación primaria en las áreas rurales\. Este modelo fue originalmente seleccionado por el MINEDUC y la Comisión de Reforma Educativa como medio para cumplir con los objetivos colocados en los Acuerdos de Paz, así como dirigirse efectivamente los niveles pobres de obtención de acceso y educación en las áreas rurales donde la mayoría de la población es indígena\. (Ver anexo 2 par información adicional del historial de PRONADE\.) Junto con los esfuerzos de la reforma educativa, el gobierno, a través de la MCS, ha desarrollado una manera proactiva de promover la diversidad cultural y pluralismo, como se refleja en la Constitución y los Acuerdos de Paz\. El gobierno guatemalteco recientemente nominó a un educador Maya bien conocido como el nuevo Ministro de Cultura y Deportes\. Tres meses después de tomar posesión, el nuevo ministro, en colaboración con el MINEDUC y con el apoyo de UNDP, UNESCO y el Banco Mundial,  organizaron el Primer Congreso de Política Cultural en Antigua, Guatemala\. El Congreso Nacional trajo consigo más de 600 personas (muchos maestros, representantes de organizaciones indígenas y de sociedad civil y especialistas académicos) a discutir varios temas importantes relacionados con el desarrollo social y cultural del país\. Un resultado del Congreso Nacional fueron las recomendaciones que una estrategia cultural nacional se prepare, en línea con el creciente énfasis sobre el entendimiento de multiculturalismo e Interculturalidad entre los grupos étnicos contenidos en los Acuerdos de Paz\. Los principios y políticas detrás de esta estrategia fueron formulados en los meses siguiendo el congreso nacional, y actualmente están siendo discutidos con el MINEDUC y otros ministerios gubernativos\. Un Comité de Seguimiento también ha sido comprendido de representantes de los sectores sociedad civil, académico, indígena y privado, para hacer monitoreo de la implementación de l a estrategia de MCS\. La estrategia misma pide una reorientación institucional mayor del MCS, mayor colaboración con otros ministerios del gobierno como el MINEDUC, más participación sistemática de la sociedad civil y del sector privado en el campo cultural, y una descentralización de la mayor parte de los programas de MCS a los niveles municipal y de comunidad local (ver, Principios, Políticas y Estrategias del Ministerio de Cultura y Deportes: 2000-2004 (MCS, septiembre 2000\.) 2\. Objetivos Este proyecto es una continuación del Proyecto de Reforma Educativa Básica que apoya el esfuerzo del Ministerio de Educación (MINEDUC) para lograr acceso universal a escuela primaria; para mejorar la equidad y la calidad de educación principalmente en el área rural, las áreas indígenas de Guatemala y descentralizar y modernizar el sistema de educación administrativa\. En la recién publicada estrategia del gobierno: Plan de Gobierno; Sector Educación, 2000- 2004, está claramente declarado que cobertura incrementada y realzada de la calidad de servicios provistos son la estrategia principal a seguir por el MINEDUC como parte del proceso de reforma siendo discutido\. En el mismo documento ha sido establecido que dentro de este marco las siguientes son las  principales prioridades: (i) alfabetismo y acciones pos-alfabetismo; (ii) universalización de escuela primaria; (iii) generalización de educación intercultural y bilingüe; (iv) transformación de currículo para mejorar la calidad educativa; (v) especialización y mejoría de los maestros; y (vi) descentralización, modernización del sistema educativo\. Para asistir al gobierno con la implementación de dicha estrategia, el proyecto propuesto tiene los siguientes objetivos de desarrollo: (a) Mejorar la cobertura y equidad al nivel de escuela primaria a través de la expansión y consolidación de las escuelas PRONADE (Programa Nacional para Programas manejados por la comunidad para Desarrollo Educativo) y proveer becas principalmente a niñas indígenas del área rural\. (b) Mejorar la eficiencia y calidad de la educación primaria apoyando la educación bilingüe, proveyendo libros de texto y material didáctico en 18 áreas lingüistas; Expandir las escuelas multigrados; y mejorar la calidad de los maestros\. (c) Facilitar al MINEDUC y al Ministerio de Cultura y Deportes (MCS) a que diseñen y ejecuten un programa conjunto para realzar las metas de la diversidad cultural y el pluralismo contenido en la Constitución Nacional, los Acuerdos de Paz guatemaltecos y el Congreso Nacional de Políticas culturales de abril 2000\. (d) Asistir la descentralización y modernización del MINEDUC apoyando los esfuerzos continuos para fortalecer la organización y el manejo del sistema educativo\. 3\. Racionalización del porque se Involucra el Banco El Banco Mundial ha acumulado experiencia vasta en la región implementando la reforma educativa donde las comunidades juegan un papel significativo\. Las experiencias adquiridas en El Salvador y Honduras, donde el Banco esta también financiando una estrategia similar, ha sido y serán de gran valor para Guatemala\. Además, el Banco Mundial ha sido instrumental en el financiamiento de enseñanza multigrado en la región\. Guatemala se beneficiará de la experiencia lograda por la expansión de las escuelas multigrado en varios países latinoamericanos como Chile, Brasil, República Dominicana, El Salvador, Honduras, Panamá y Colombia\. Los Acuerdos de Paz firmados en diciembre 1996 son un proceso constante\. El Banco Mundial se involucra con el proyecto  propuesto que reiterará su importancia y continuará contribuyendo para lograr la meta principal establecida bajo los Acuerdos de Paz para el sector educativo\. Las experiencias previas favorables implementado los proyectos apoyados por el Banco Mundial dentro de Guatemala, especialmente el Proyecto de Reforma Educativa Básica, que ayudará a asegurar un proceso de implementación relativamente suave\. Preparación, así como planes para la implementación del nuevo proyecto han tomado en consideración las lecciones aprendidas durante los últimos años de implementación de proyectos exitosos\. 4\. Descripción El proyecto contiene cuatro componentes principales\. El primer componente, la universalización de la educación primaria, continuará apoyando los esfuerzos para asegurar el acceso universal a la educación primaria para todos los niños guatemaltecos\. Esto incluye dos sub-componentes: (i) la expansión de capacidad de inscripción de escuelas primarias en áreas rurales y comunidades marginadas a través del programa de PRONADE; y (ii) la asistencia económica/ becas para niñas de familias pobres para asistir a la escuela\. El segundo componente, mejorar la calidad de la educación, enfocará el aumento de la calidad y eficiencia de la educación primaria\. Esta meta se apoya por tres sub componentes: (i) el fortalecimiento de las estrategias multigrado y educación bilingüe principalmente en comunidades rurales; (ii) proveer de material educativo (guías para el estudiante y libros de texto) para niños monolingües y bilingües; (iii) capacitar a los maestros en metodología de multigrado, así como en el contenido de áreas y desarrollo de currículo para escuelas bilingües\. El tercer componente, diversidad cultural y pluralismo, apoyará el fortalecimiento institucional del MCS para poder coordinar mas efectivamente con el MINEDUC y otras agencias gubernamentales\. Esto incluye tres sub-componentes: (i) fortalecimiento institucional del MCS, incluyendo el establecimiento de la Unidad de política y Planeación y la preparación, en coordinación con el MINEDUC y otras agencias, del Plan de Desarrollo Cultural Nacional; (ii) desconcentración de los servicios de educación cultural a nivel municipal; y (iii) el desarrollo del Sistema de Información de Recursos Culturales Nacional (NCRIS, por sus siglas  en inglés) para incluir modernización de los sistemas de recursos de información cultural actual en el MCD, provisto de servicios de información para museos y bibliotecas y establecimiento de una base de datos de recursos culturales de los grupos de diversidad étnica y lingüista de Guatemala\. El cuarto componente es la Descentralización y Modernización\. Para alcanzar esta meta, el proyecto continuará apoyando: (i) la mejoría de la capacidad administrativa y gerencial del Ministerio de educación, descentralización a nivel departamental y local, con énfasis especial en el fortalecimiento del Directorio General de Educación Bilingüe (DIGEBI); (ii) la capacitación de las asociaciones comunitarias (COEDUCAS) para manejar y organizar las escuelas PRONADE; y (iii) el desarrollo continuo y mejoría del Sistema de Manejo de Información de Educación (EMIS\.) I\. Universalización de Educación Primaria II\. Mejoría de la Calidad Educativa III\. Diversidad Cultural y Pluralismo IV\. Descentralización y Modernización de MINEDUC 5\. Financiamiento Total en millones de dólares Costo total del proyecto 82\.5 6\. Implementación Manejo del Proyecto\. El Ministerio de Educación tendrá la responsabilidad total de la implementación del proyecto\. La Unidad de Coordinación del Proyecto, (PCU, por sus siglas en inglés) que está actualmente coordinando la implementación del Proyecto de Reforma de Educación Básica, continuará funcionando bajo el mismo arreglo institucional y operacional para el proyecto propuesto\. El pequeño grupo de expertos dentro del PCU ya entrenados en obtención, manejo financiero y temas de gasto continuará apoyando la implementación del proyecto\. De acuerdo con el Plan de Implementación del Proyecto (PIP) a ser discutido y aprobado cada año, las respectivas líneas divisorias dentro del MINEDUC en colaboración cercana con el PCU, estarán a cargo de la ejecución de cada uno de los componentes\. El PCU también  coordinará las actividades con el MCS, trabajando de cerca con el Ministerio de MCS y la Unidad de Planificación y Política en el desarrollo de Planes de Trabajo Actuales para el componente de Diversidad Cultural y Pluralismo y en la contratación de consultorías para realizar actividades\. Los fondos PHRD tienen uso para preparar un reporte con recomendación para el fortalecimiento institucional del MCS y en formas de incrementar su capacidad en áreas de planeación y coordinación de programa con otras instituciones gubernamentales, incluyendo el MINEDUC\. La PCU también será responsable por el seguimiento, monitoreo y evaluación de la implementación del proyecto\. El manejo financiero del proyecto y auditoria\. El PCU tiene en su lugar arreglos adecuados de manejo financiero para el Proyecto de Reforma Educativa Básica\. Una plan de acción ha sido preparado con el propósito de realzar estos arreglos y adaptarlos a un nuevo proyecto propuesto\. La sustancial terminación del plan de acción de manejo financiero será condición para la efectividad del préstamo\. Reportes de Manejo del proyecto Trimestrales (PMR's), en formatos a acordarse entre el Gobierno y el IBRD, se prepararán y entregarán 45 días después del final de cada cuarto del calendario\. Después de efectivo, una auditoria independiente de una firma aceptable para el IBRD se comprometerá a realizar la auditoria pactada de cada año, de acuerdo con los Estándares Internacionales de Auditoria (ISA's) y los términos de referencia se aprobarán por el IBRD\. Declaraciones financieras del proyecto ya auditadas se presentarían al IBRD no más tarde del 30 de junio de cada año siguiendo el periodo a revisar\. Detalles adicionales se encuentran en el Anexo 6\. 7\. Sostenibilidad La voluntad política del gobierno y la habilidad para mantener los niveles requeridos de los fondos para la educación básica son los factores más importantes relacionados a la sostenibilidad de inversión de proyecto\. Inscripción creciente, aún con mejorías correspondientes en la eficiencia del sistema, requieren contribuciones financieras importantes constantes del gobierno central para cubrir gastos recurrentes, incluyendo la provisión de materiales didácticos y el programa de becas para promover la inscripción y  mantener asistencia de niñas a la escuela\. Un segundo factor que afectaría la sostenibilidad de los beneficios del proyecto es inadecuado y limita la capacidad institucional en el MINEDUC y MCS par proveer continuidad a las actividades del proyecto, particularmente, después de un cambio en administración\. Financiamiento de costos recurrentes, incluyendo los salarios de maestros de PRONADE, conllevaría a la declinación de la base para asegurar que el gobierno gradualmente asuma estos costos\. Esto ha sido un acercamiento exitoso bajo el Proyecto de Reforma Básica de Educación ya existente, donde el gobierno asume la responsabilidad de los salarios a un paso más acelerado de lo que se esperaba originalmente\. 8\. Lecciones aprendidas de Operaciones Pasadas en el País / Sector La lección principal aprendida en el Proyecto de Reforma Básica de Educación es que un diseño de proyecto sencillo y directo es fundamental para alcanzar una implementación exitosa\. Desde el punto de vista operacional, el componente PRONADE del proyecto constante demuestra que a pesar de los altos niveles de analfabetismo y habilidad de gerencia baja, las comunidades pueden ser llevadas exitosamente y transparentemente a dirigir humanos así como recursos económicos transferidos a las escuelas\. Los niños de la comunidad son beneficiarios de escuelas bien manejadas, así el entusiasmo e incentivo de mantener y manejar escuelas PRONADE es una combinación natural\. La investigación ha demostrado consistentemente (Psacharopoulos y Patrinos, 1994; Vélez y Patrinos, 1996) que el lenguaje de instrucción es una variable fundamental que explica el logro del estudiante y la retentiva particularmente de aquellos entorno donde al estudiante se le enseña en su lengua materna durante los primeros años y progresivamente se le introduce el segundo idioma (español\.) Este proyecto continuará apoyando la "educación bilingüe e intercultural" proveyendo material para currículo adecuado para más áreas lingüistas, promoviendo la capacitación de maestros en educación bilingüe, y fortaleciendo el manejo del Directorio de Educación Bilingüe\. Se ha demostrado en países desarrollados y en desarrollo que las escuelas con grados múltiples en entornos aislados rurales pueden proveer educación de calidad si  los maestros están bien capacitados en la metodología y estrategia para dirigirse a varios niveles en el aula y si los estudiantes tienen acceso a libros de trabajo y otros materiales didácticos\. En Guatemala, un piloto de experiencia multigrado apoyado por USAID ha demostrado que es una alternativa que vale la pena expandir en todo el país\. Los proyectos propuestos expandirán el proyecto incluyendo escuelas multigrado monolingüe y bilingüe\. La información adecuada y a tiempo sobre el personal a nivel central, departamental y local; Estadísticas de educación claves y su evolución; y sistemas financieros y contables son herramientas esenciales requeridas por cualquier administración como parte de un proceso de toma de decisiones y planificación\. El proyecto propuesto continuará apoyando la mejoría y la calidad de mejoras del EMIS\. Varias de las demás lecciones aprendidas del proyecto actual incluyen: (i) la continuidad de las políticas tiene un impacto en la educación, especialmente cuando hay un cambio de gobierno y el Ministerio de Educación; (ii) El Ministerio de Educación no tiene que ser el ejecutor de las actividades\. Las universidades, comunidades y contratistas han tenido éxito implementando actividades donde es claro que hay ventaja comparativa; (iii) los pilotos de escuelas monolingües y bilingües, multigrado han sido muy efectivos en proveer respuestas pedagógicas a las necesidades de las escuelas\. El proyecto propuesto se construirá sobre los logros de los pilotos y buscará expandir el programa PRONADE para proveer a más niños con el acceso a la educación en las comunidades indígenas y rurales\. 9\. Programa de Intervención Dirigida (PTI, por sus siglas en inglés) 10\.Aspectos Ambientales (incluyendo cualquier consultoría pública) Temas: No se espera que el proyecto tenga ningún impacto negativo en el ambiente, ya que no financiará la rehabilitación o construcción de escuelas\. 11\.Punto de contacto: Gerente de Tarea Carlos A\. Rojas Banco Mundial 1818 H Street NW Washington D\.C\. 20433  Teléfono: (202) 473-6452 Fax (202) 522-1202 12\. Para más información de proyectos relacionados contacte: The Infoshop Banco Mundial 1818 H Street NW Washington D\.C\. 20433 Teléfono: (202) 458-5454 Fax (202) 522-1500 Web: http: // www\.worldbank\.org/infoshop Nota: Esta es información de un proyecto en evolución\. Ciertos componentes pueden no ser necesariamente incluidos en el proyecto final\. Este PID fue procesado por Infoshop durante la semana finalizando el 11 de mayo, 2001\.

APPROVAL

P004829

Report No\. PIC1073 Project Name Viet Nam-Structural Adjustment Credit I Region East Asia and Pacific Region Sector Structural Adjustment Project ID VNPA4829 Date Prepared May 20, 1994 Projected Appraisal Date June 13, 1994 Projected Board Date October 18, 1994 Background 1\. Viet Nam's program of "Doi Moi" (renovation) was launched in 1986, but proceeded slowly until 1989\. At that time the Government initiated a series of coordinated reforms aimed at transforming the economy from central planning to a market system\. The lack of international financial support for these reforms created some difficulties, but also ensured that "ownership" of the program was total\. Throughout the 1989-93 period the Government had an active policy dialogue with the Bank and the Fund and was very receptive to outside advice; however, it remained in firm control of the pace and details of reform\. The key measures that have been completed to date are * Monetary policy\. The money supply and inflation were brought under control by a halt in credit to the budget, restrained overall growth of credit, and interest rate reforms\. * Fiscal reforms\. To consolidate the stabilization program ambitious fiscal reforms were undertaken\. More than 500,000 soldiers were released from the military\. Other expenditure restraint combined with tax increases brought the fiscal deficit to a manageable level\. * Rural reforms\. The collective system was largely dismantled, and agriculture returned to family farming\. The 1993 Land Law formally gave land use rights to peasant households\. * Price liberalization\. Sweeping liberalization removed virtually all price controls\. * Devaluation\. The exchange rate was unified and sharply devalued\. A foreign exchange trading floor now permits the exchange rate to be determined largely by market forces\. * Financial sector reforms\. Four state-owned commercial banks were separated from the State Bank\. Interest rates were raised to positive real levels and inter-sectoral differentials eliminated\. With entry of private and foreign banks, there are now 60 commercial banks operating\.  * State enterprise reforms\. The end of budgetary subsidies and increases in interest rates hardened the budget constraint for state enterprises and issued in an era of restructuring\. About one-third of the labor force (800,000 workers) has left the sector\. The number of state firms has been reduced from 12,000 to 7,000 through liquidation (2,000) and merger of failing firms into profitable ones (3,000)\. * Promotion of the private sector\. After years of discrimination against the private sector the Government reversed course and now encourages the private sector\. Laws for companies and private enterprises give the once-informal sector official sanction\. * Openness to direct foreign investment\. A liberal foreign investment law and subsequent revisions succeeded in attracting a growing volume of DFI\. * Reform of foreign trade\. Quantitative restrictions have been largely eliminated and replaced with tariffs\. Access to foreign trade permits has gradually been liberalized\. * Social costs of adjustment\. The Government initiated a number of forward-looking programs to deal with the transitional unemployment caused by the reform program, including severance pay, retraining schemes, and soft loans for the small-scale private sector\. 2\. The initial response of Viet Nam's economy to stabilization and structural reforms was good\. These developments are covered in detail in the recent economic report, Viet Nam: Transition to the Market (September 1993)\. To reiterate briefly, real GDP grew steadily throughout the adjustment program, with an average growth rate of 7%\. Exports were a leading sector, increasing at more than 30% per annum during 1989-92\. Inflation was reduced from 400% in 1988 to moderate levels in the 1989-92 period and to 5\.2% in 1993\. At the heart of the disinflation program was fiscal restraint that reduced the budget deficit from 11\.9% of GDP in 1989 to 4\.0% in 1992\. Foreign assistance to Viet Nam was withdrawn during this period, with the result that the external current account deficit was swiftly reduced from more than 9% of GDP in 1989 to less than 1% in 1992\. The Government's Adjustment Program 3\. The challenge for the Government is to consolidate the stabilization program while at the same time promoting the rapid growth that is necessary to absorb unemployed labor and lift the country out of poverty\. The current reform agenda revolves around three inter-related issues: (1) public sector management, (2) the incentive regime, and (3) revenue mobilization\. 4\. Public Sector Management\. The Government has at its disposal a growing amount of resources to provide the public services required to make a market economy function well\. Government revenue as a share of - 2 -  GDP increased to W in 1993, and a substantial volume of foreign aid is now available to the country\. One of the Government's primary goals is to strengthen the institutions of public sector management to ensure that resources are well utilized\. A crucial issue here is the preparation of the new budget law, which will define the fundamental fiscal system and the division of revenues and responsibilities between local and central authorities\. Establishment of a sound fiscal system at this early stage of the transition will facilitate the development of Government expenditure programs that are efficient\. 5\. There are other specific issues of the budget that are important\. One is preparing a well-organized and flexible public investment program\. The Government is already working on this, with technical assistance from the UNDP\. The recurrent budget also needs to be reformed\. Currently it lacks transparency and needs to be presented in a way that will facilitate decision-making\. 6\. Incentive Regime\. The Government has adopted the basic principle of funding through the budget services that are public goods or that involve large externalities, leaving other activities to the private sector and autonomous state enterprises\. This division of labor should result in healthy growth, provided that there is a proper incentive regime for households and firms\. The Government is working to strengthen the incentive regime in several ways\. It is preparing the legal infrastructure that governs property rights and commercial transactions\. It is continuing to refine the regime for foreign trade and investment in order to strengthen the outward orientation of the economy\. And it is tackling the inter-related problems of restructuring the state-owned banks and reforming state enterprises\. This is a large agenda and the Government needs advice on establishing priorities for reform as well as technical assistance to execute these measures\. 7\. Revenue Mobilization\. The resources available to the Government have increased in recent years\. Nevertheless, there are several reasons why resource mobilization issues remain an important part of the reform agenda\. First, the Government relies to a large extent on oil revenue, which is an uncertain source\. Second, concessional loans will be an important method of financing the public investment program in the next few years; but looking further ahead it would be preferable for the Government to generate savings to finance an increasing share of this investment\. Third, aspects of the tax code and the pricing rules for public services generate inefficiencies\. Thus, simplifying business taxes, unifying import taxes, and increasing fees for power and other services should have the dual effect of strengthening resource mobilization and improving the efficiency of investment\. The issues of better public sector management, improved incentives, and strengthened resource mobilization are closely inter-related\. The Proposed Operation 8\. The overall objective of the proposed Structural Adjustment Credit is to assist Viet Nam's transition to a market system by helping to establish an efficient division of labor between the public -3 -  and private sectors\. To attain this over-arching objective the operation will address a range of issues that fall into two broad categories: (1) public sector management; and (2) incentives for saving and investment\. A third important component of the Government's adjustment program is improving revenue mobilization\. In this area the IMF has taken the lead with advice and technical assistance\. The SAC will be closely coordinated with the IMF program\. 9\. As with other adjustment lending, the funds from the credit will finance the balance of payments, specifically general imports procured under guidelines acceptable to the Bank and subject to a negative list\. In return for this balance of payments support, the Government will commit itself to specific policy reforms that will assist the economy to develop more successfully\. Technical assistance will be required to help the Government implement these reforms\. Grant funding for this technical assistance will be sought from bilateral donors; technical assistance will not be financed from the credit\. Policies that potentially could be covered under the SAC include: (1) Public Sector Management\. The objective is to improve the efficiency of Government spending\. The key instruments to be used are (1) a revised budget system, as set out in the organic budget law; (2) an expanded public investment program managed on a rolling basis; (3) a Public Expenditure Review; (4) a more efficient system of inter-governmental transfers that ensures that poor provinces have adequate resources to fund social services and a safety net; and (5) an action program for state enterprise reform\. The expected outcome is more efficient Government expenditure focused on development of physical infrastructure and human resources in all parts of Viet Nam\. (2) Incentive Regime\. The objective is to provide an enabling environment that encourages private producers -- both domestic and foreign -- to rapidly expand investment, employment, and output\. The instruments to be used are (1) an improved legal framework for economic activity; (2) liberalized procedures for exporting and importing; (3) reduced taxation of commercial banking; and (4) improved operation of the state-owned commercial banks\. The expected outcome is an incentive regime that provides strong support to private saving and investment\. Social Issues of Adjustment 10\. Viet Nam's transition experience has been very different than that of other command economies as well as countries undergoing radical structural adjustment programs\. It stands out for four principal reasons: First, the relative importance of agriculture rather than industry has helped most Vietnamese households to benefit from the initial price reforms\. When reforms were initiated in 1989, most Vietnamese (72%) were farmers while only a small percentage (15%) were employed by the state sector\. When agricultural prices were liberalized in tandem with decollectivization of farms, the net result for most Vietnamese households was overwheingly positive, despite the - 4 -  public sector being reduced in size by a third (to 10% of the labor force)\. This outcome is in marked contrast to countries which have large, entrenched SOEs employing most of the labor force\. Second, those laid off from the state sector received adequate compensation packages (i\.e\., on average equivalent to one year's pay, which is four times higher than that provided in Russia)\. Third, according to the Ministry of Labor most retrenched workers were absorbed by the quickly growing private sector within one year, a different structural adjustment experience than that of Europe or Africa\. Fourth, the state owned enterprises in Viet Nam have not served to the same extent the critical role of provider of social services as they have in many other countries (e\.g\. FSU, Eastern Europe, China)\. Hence, the liquidation of SOEs does not directly affect household access to social services, as it has elsewhere\. As a result of these four factors, the social costs of adjustment in Viet Nam have been milder than experienced elsewhere\. 11\. Nevertheless, Viet Nam is a very poor country with many vulnerable households\. Moreover, while Viet Nam's transition experience has been much more positive than most other countries, it does share one common problem with other transition economies: the changing role of government coupled with fiscal restraint has resulted in problems of financing social services including health, education, childcare, and assistance for the most vulnerable\. The private sector has emerged to provide some social services; however, there is a great need to strengthen the public provision of basic social services as well as the mechanism to provide support to the most vulnerable households\. 12\. Given Viet Nam's unique transition experience, the World Bank will not focus its work on "social costs of adjustment" on those laid off from the public sector\. Rather, it will take a broader approach to aiding the more vulnerable regions and households of Viet Nam\. Expanding access to primary education, basic health services, and family planning services will be central goals of the initial IDA projects in the social sectors\. This will be complemented by assistance to improve the system of inter-governmental fiscal relations\. While the government tends to focus its poverty alleviation efforts on the design of targeted relief programs, the inability of the poorer provinces to implement these programs -- as well as other sectoral strategies pertaining to human and physical infrastructure -- places inter-governmental finances as a priority topic\. As part of the Bank's ongoing poverty study, the issues of expenditure needs, revenue retention, and transfer design will be carefully studied with the goal of improving the design of the inter- governmental system to enable households in all provinces to participate in the country's economic growth\. Recommendations from this work will help improve the redesign of the budget system, one of the reforms supported by the SAC\. 13\. Another key component of the Bank's strategy involves the Viet Nam Living Standards Measurement Survey (VNLSMS), which has been executed by the State Planning Committee with Bank technical assistance during the past two years\. The Bank and the SPC are currently analyzing the data to identify the most vulnerable - 5 -  households, sub-populations, and geographic regions to enable the most effective and efficient targeting of public expenditures possible\. In addition, the Bank organized a four-part, six month training course for policy planners from four line ministries to learn how to analyze the LSMS data to help inform policy decisions within their sectors and target their efforts where most needed\. This training will strengthen the Government's capacity to carry out periodic poverty assessments to monitor the country's progress with poverty alleviation\. 14\. In summary, projects in primary education, primary health, and family planning will assist the Government to develop networks through which these important services can be delivered\. Advice and technical assistance will strengthen the system of inter-governmental fiscal relations to ensure that all provinces have sufficient resources to provide social services on a sustained basis\. And institutionalization of a household income and expenditure survey will enable monitoring of poverty on an ongoing basis\. Benefits and Risks 15\. The benefits of Viet Nam's transition to a market economy are already plainly visible\. Growth in per capita income during the 1989- 93 period has been stronger than at any time since reunification\. Viet Nam remains a very poor country and the expected benefits from continued rapid growth are very high, especially reduction of poverty and of associated problems of malnutrition and poor health\. Viet Nam's development will depend first and foremost on its own efforts, and the reform program that we propose to support through the SAC is very much the country's own\. The expected benefit from the operation is to strengthen the country's adjustment program in two specific ways: (1) financial and technical assistance should result in more rapid reform and accelerated growth, bringing benefits sooner rather than later; and (2) features of the operation will ensure that benefits are widely dispersed so that poverty reduction occurs more rapidly than would result from merely relying on rapid growth to alleviate poverty\. 16\. The main risk associated with the operation is that reforms will not proceed as rapidly as planned owing to weak institutional capacity and lack of trained staff\. Design of the operation is aimed at minimizing these risks, in that it will be accompanied by a coordinated program of technical assistance funded from grant sources\. These TA projects will aim to train local staff and develop strong Government institutions\. Contact Point: Public Information Center The World Bank 1818 H Street, N\.W\. Washington, D\.C\. 20433 Telephone: (202)458-5454 Fax No\.: (202)522-1500 Note: This is information based on an evolving project\. Certain - 6 -  components may not necessarily be included in the final project\. - 7 -

APPROVAL

P066490

Report No\. PID9361 Project Name Kenya-Public Sector Management (@) Technical Assistance Credit Region Africa Regional Office Sector Other Public Sector Management Project ID KEPE66490 Implementing Agency Address Directorate of Personnel Management Nairobi, Kenya Contact Person: Mr\. James E\.O\. Ongwae Tel: 254-2-230653 Fax: 254-2-210192 Email: agpsd@africaonline\.co\.ke Environment Category C Date PID Prepared November 20, 2000 Projected Appraisal Date November 2000 Projected Board Date February 2001 1\. Country and Sector Background Government recently completed a draft Interim Poverty Reduction Strategy Paper for 2000-2003\. The IPRSP has five basic components and policy objectives:n To facilitate sustained economic growthn To improve governance and securityn To increase the ability of the poor to raise their incomesn To improve the quality of life of the poorn To improve equity and participationThe IPRSP notes that the country's macroeconomic strategy aims at progressively increasing real per capita GDP growth, while keeping inflation below 5 percent, gradually increasing foreign exchange reserves, and maintaining the current account deficits at sustainable levelsGovernment makes good governance a cornerstone of the IPRSP, with particular focus on the overall public sector reform program and strengthening the operational capacity of the Kenya Anti-Corruption Authority (KACA)\. Government is committed to taking the steps necessary to combat corruption, increase the transparency of procurement procedures, and increase the effectiveness of accounting and auditing procedures through the introduction of an Integrated Financial Management System\. Two bills aimed at enhancing integrity and honesty in the public service have been presented to Parliament for debate and enactment: Public Service Code of Conduct and Ethics Bill, 2000 and Anti-corruption and Economic Crimes Bill, 2000\. The reform program also seeks to strengthen the Office of Controller and Auditor General through rationalization of its functions and increased capacity\.The government has undertaken a functional rationalization of ministries, departments and other public agencies against national and sectoral objectives\. The expected staff reduction as a result of Ministerial rationalization is 48,826 civil servants over the next two years\. (This number includes both retrenchment and natural attrition)\. While the government intends to restore merit-based recruitment and promotion of public servants and to set service delivery targets against which good or poor performance will be linked for rewards and sanctions respectively, Government also intends to  establish a comprehensive, viable and motivating pay and benefits policy for its staff\. Capacity building and training of public servants will be undertaken through a medium to long-term programme to re-equip the public service with knowledge and skills to fulfill its new mandates\.In a bid to improve law and order and public safety, the government will undertake a number of reform actions that should lead to increased transparency in and accessibility to dispensing justice\. This will include finalization of the on going comprehensive review of legal sector, covering the Office of the Attorney General, the Judiciary, Ministries of Lands and Settlement, Agriculture and Health, and legal education institutions\. A process will be established to examine the desirability of creating a Ministry of Justice The scope of court divisions will be expanded to include well functioning civil, commercial, and family divisions in key cities throughout the country\. 2\. Objectives The development objective of this Technical Assistance Credit is to assist Government in improving the capacity of public service institutions for better service delivery\. The project will seek to enhance the capacity of the public service to effectively and efficiently play its part in the economic and social development of the country\. The reform programme will create a leaner, more focused and better equipped public service that embraces transparency and accountability, openness and dialogue, and is committed to professional excellence and discipline\. The project will also support the improvement of the performance of the judiciary and other legal sector institutions to ensure a more rapid, fair and honest justice system\. The International Development Association will provide approximately X% of the estimated project funding, or US$25 million\. The project is designed for a four-year implementation time frame\. 3\. Rationale for Bank's Involvement IDA staff have played a catalytic role in the preparation of this program through their involvement with the Institutional Development and Civil Service Reform Credit that closed in June 2000\. The Bank has, in addition to financial support, drawn attention to good African and international practices and lessons learned, and provided technical expertise\. The Bank also plays a facilitating role with donors in support of the public sector reform process\. Likewise, Bank experience with public sector reform projects in other countries will add substantial value to the reform process in Kenya\. This particularly applies to the conceptual design of different components of the program\. The proposed design herewith reflects lessons learnt from other projects, in particular the need to:Take a strategic, integrated approach which is based on a clear vision of the role, mandate and operational objectives of the reformed public sectorAppropriately time and sequence different components of the reform agendaBuild strong stakeholder commitment during the project preparation; and toEffectively integrate ongoing PSM activities of other donors\. 4\. Description Public Service Reforms Public Financial Management Legal Sector Reforms Procurement Reform PSR Coordinating Unit -2-  Global Distance Learning Center 5\. Financing Total ( US$m) GOVERNMENT IBRD IDA 25\.0 Total Project Cost 25\.0 6\. Implementation The implementation arrangements for this project will be led by the Director of the Department of Personnel Management (DPM) in close consultation with other permanent secretaries\. Each component of the reform program will have a reform secretariat\. Government has established a Public Sector Reform Coordinating Unit (PSRCU) that would be responsible for overall coordination, monitoring and evaluation\. The PSRCU will also be responsible for reporting to the DPM on implementation progress, and financial accounting\. Furthermore, the Coordinating Unit will provide on-demand technical assistance to the reform secretariats\. (See Diagram below)\. The DPM Director will serve as accounting officer for the overall reform program, reporting directly to the Head of the Public Service and to Parliament, as required\. The details of the implementation arrangements will stress that each project component secretariat would be fully responsible for ensuring effective implementation of reform measures in its sector or project component/sub-component\. Each component of the project would be implemented according to terms and conditions acceptable to the Bank\. These would generally provide the basis for time-bound action plans\. Training and capacity building activities will be carried out according to agreed timetables either with government training institutions or through contracts awarded from open bids\. A detailed implementation plan will be agreed upon between the Government and the Bank before project effectiveness\. The implementation plan will be regularly updated and submitted to the Bank for discussion during project implementation\.As shown in the diagram on implementation arrangements, effective and efficient implementation of project activities would be directed and guided at both the political (Cabinet/Minister) and technocratic (Head of Public Service, PSs and other Accounting Officers) levels\. Keeping the institutional arrangements simple while ensuring participation and providing for clear lines of accountability is the challenge that the Appraisal Mission team would have to address, in consultation with GOK counterparts\. In particular, it would be necessary to spell out clearly the respective roles of the different key players in the implementation process\. Project records and accounts will be maintained by qualified financial officers to reflect the operations, resources and expenditures for each project activity in accordance with sound accounting practices\. The accounts will be consolidated annually into financial statements for the whole project\. Supporting documentation will be made available to the Bank's Task Team Leader\. For expenditures incurred on the basis of Statements of Expenses, all records providing evidence for such expenditures will be retained by the implementing organization for at least one year after the Bank has received the audit report for the fiscal year in which the last withdrawal from the Special Account was made\. The control environment of implementing agencies will be assessed and appropriate accounting and reporting systems will be developed according to Operational Policy requirements through separate -3 -  technical assistance\. (See Annex 6a on Project Financial Management, Accounting and Auditing for more details)\.The implementation arrangements will be revisited on a regular basis to take into account technical and political changes as well as progress within the overall public sector reform effort\. Each World Bank supervision mission will review the implementation arrangements with the Government and other contributing donors to suggest improvements or changes as necessary\. 7\. Sustainability The Institutional Development and Civil Service Reform Project (Credit 2671-KE) that closed on June 30, 2000 was extended for a final nine months in September 1999 because of the strong evidence of Government commitment to tackle the problems of inefficiency and corruption in its public sector institutions\. Some of the actions already implemented include the reduction in the number of ministries from 27 to 15 and making Accounting Officers in ministries and departments fully responsible for managing the finance and personnel functions; removal of corrupt and/or inefficient managers from leadership positions in several ministries and parastatatals\. A Medium Term Expenditure Framework has been introduced to ensure that government budgets are effectively related to policy priorities over a three-year time frame\. Government has also prepared a retrenchment plan to be implemented during FY2000/2001 and 2001/2002\. Sustainability of the reform program will depend upon continued commitment of the political and technocratic leadership teams and the cascading of support to middle management officers and throughout the entire public service\. Likewise, sustainability over the longer term will be predicated on ownership of long term reforms at all levels of the machinery of government and building adequate local capacities for improved service delivery\. 8\. Lessons learned from past operations in the country/sector Important lessons have been learned from the past seven years of Bank-financed public sector reform in Kenya\. These lessons highlight the need to:Continue to identify and further refine the core functions of governmentImplement recommendations on rationalization of ministerial structuresimprove the capacity of managers and professionals in the public service ensure political support for reforms at the highest levels\. Other lessons point to the need to establish linkages and phasing of reforms\. One of the most important lessons has been the importance of having an effective senior management structure and clearly defined roles of Permanent Secretaries in guiding the implementation of reforms\.Equally important are some global lessons for public sector reform\.Shift focus from the content of public policy to the way policy is implemented\. Address a broad range of mechanisms to promote public sector reform\. (To include improved financial management, retrenchment, strengthening the legal framework and the rule of law)Emphasize a participatory approach and broad-gauged ownership of the reform process\. (Attention to this lesson in the preparation of this project is reflected in Government's active role in project preparation)\.Lessons learned from other projects, particularly public sector reform projects, and captured within documentation from previous project preparation include:A long term, strategic approach to technical assistance which is not donor driven is needed to achieve sustainable results\. Previous projects were predominantly focused on achieving macroeconomic targets\. In most cases, these efforts failed to provide enough room or sufficient time for a - 4 -  complex reform agenda which is based on institutional development and capacity building\. A strong discipline for the implementation process needs to be established to ensure progress towards long term objectives and a constant re-assessment of all significant project elements\. Previous public sector reform projects have failed because of insufficient control mechanisms and a weak project implementation,More attention needs to be paid to assuring frequent monitoring of the quality of technical assistance outputs to measure the overall performance of a project\. Performance indicators which focus more on quality, process and behaviour are needed\.Local champions who know what they want and know how to operate in the given environment are important success factors\.Explicit attention needs to be given to the institutional environment which plays a crucial role during the implementation of the reform agenda\. 9\. Program of Targeted Intervention (PTI) N 10\. Environment Aspects (including any public consultation) Issues not applicable 11\. Contact Point: Task Manager Harry C\. Garnett The World Bank 1818 H Street, NW Washington D\.C\. 20433 Telephone: (202) 458-8188 Fax: (202) 473-8368 12\. For information on other project related documents contact: The InfoShop The World Bank 1818 H Street, NW Washington, D\.C\. 20433 Telephone: (202) 458-5454 Fax: (202) 522-1500 Web: http:// www\.worldbank\.org/infoshop Note: This is information on an evolving project\. Certain components may not be necessarily included in the final project\. - 5 -

APPROVAL

P003248

Document of The World Bank Report No: 25034-ZA PROJECT APPRAISAL DOCUMENT ON A PROPOSED GRANT IN THE AMOUNT OF SDR 33\.7 MILLION US$ 42 MILLION (EQUIVALENT) TO THE REPUBLIC OF ZAMBIA FOR THE ZAMBIA NATIONAL RESPONSE TO HIV/AIDS (ZANARA) IN SUPPORT OF THE SECOND PHASE OF THE MULTI-COUNTRY AIDS PROGRAM FOR AFRICA (MAP 2) (APL) December 11, 2002 Human Development 1 Country Department 3 Africa Region  CURRENCY EQUIVALENTS (Exchange Rate Effective March 11, 2002) Currency Unit = Zambian Kwacha ZMK 3988 = US$1\.00 US$0\.000251696 = ZMK 1 FISCAL YEAR January 1 - December 31 ABBREVIATIONS AND ACRONYMS ACTafrica Aids campaign Team for Africa ADB African Development Bank AG Auditor General ART Anti-Retroviral Therapy CAS Country Assistance Strategy CBI Community based Investments CBO Church based Organization CQ Consultants' Qualifications CRAIDS Community Response to HIV/AIDS DATF Distnct AIDS Task Force DffD Department for Intemational Development (United Kingdom) DGA Development Grant Agreement DIF District Investment Fund EC European Commission FMAPM Financial Management & Accounting Procedures Manual FMR Financial Monitoring Report FMS Financial Management System GDP Gross Domestic Product GPN General Procurement Notice GRZ Government of Zambia GTZ Deutsch Gesellschaft fuer Technische Zusammenarbeit (German Technical Cooperation) HAART Highly Active Anti-Retroviral Treatment HCC Home based Care & Counseling HIPC Highly Indebted Poor Countries HIV/AIDS Human Immunodeficiency Virus / Acquired Immune Deficiency Syndrome IAPSO Inter-Agency Procurement Services Office (United Nations IC Individual Consulting ICB Intemational Competitive Bidding IDA Intemational Development Association IEC Information, Education & Communication JFC Joint Financing AIDS Committee LCMS Living Conditions Monitorng Survey M&E Monitoring & Evaluation MAP Multi-country H1V/AIDS Program MOE Ministry of Education MoFNP Ministry of Finance & National Planning MoH Ministry of Health MTCT Mother to Child Transmission NAC National HIV/AIDS/STD/TB Council NAPCP National AIDS Prevention & Control Program NASF National HIV/AIDS/STD/TB Strategic Framework (2001-2003) NGO Non-governmental Organization OAG Office of the Auditor General 01 Opportunistic Infections OM Operational Manual OPLA Organizations of People Living with HIV/AIDS OVC Orphans & Vulnerable Children  PAD Project Appraisal Document PAU Programme Administration Unit PEP Post Exposure Prophylaxis PIM Project Implementation Manual PIP Project Implementation Plan PLHA Persons Living with HIV/AIDS PMTCT Prevention of Mother to Child Transmnission PPF Project Preparation Facility PRGF Poverty Reduction & Growth Facility PRSP Poverty Reduction Strategy Paper QCBS Quality & Cost based Selection RM Resource Mobilization SDR Standard Drawing Rights SOE Statements of Expenditure STD Sexually Transmitted Diseases TB Tuberculosis TWG Technical Working Groups UNAIDS United Nations Joint Programme on HIV/AIDS UNDP United Nations Development Business UNDP United Nations Development Programme UNFPA United Nations Population Fund UNIHCR United Nations High Commission for Refugees UNICEF United Nations Childrens' Fund USAID United States Agency for Intemational Development USD U\.S\. Dollars VCT Voluntary Counseling & Testing WHO World Health Organization ZAMSIF Zambia Social Investment Fund ZANARA Zambia National Response to HIV/AIDS ZDHS Zambia Demographic Health Survey (1998) ZMK Zambian Kwacha Vice President: Pamela Cox (acting) Country Director: Yaw Ansu Sector Manager: Dzingai Mutumbuka Task Team Leader: Albertus Voetberg   ZAMBIA ZAMBIA NATIONAL RESPONSE TO HIV/AIDS (ZANARA) CONTENTS A\. Program Purpose and Project Development Objective Page 1\. Program purpose and program phasing 3 2\. Project development objective 3 3\. Key performance indicators 4 B\. Strategic Context 1\. Sector-related Country Assistance Strategy (CAS) goal supported by the project 5 2\. Main sector issues and Government strategy 5 3\. Sector issues to be addressed by the project and strategic choices 9 4\. Program description and performance triggers for subsequent loans 12 C\. Program and Project Description Summary 1\. Project components 12 2\. Key policy and institutional reforms supported by the project 15 3\. Benefits and target population 15 4\. Institutional and implementation arrangements 16 D\. Project Rationale 1\. Project alternatives considered and reasons for rejection 25 2\. Major related projects financed by the Bank and other development agencies 26 3\. Lessons learned and reflected in the project design 27 4\. Indications of borrower commitment and ownership 30 5\. Value added of Bank support in this project 30 E\. Summnary Project Analysis 1\. Economic 31 2\. Financial 32 3\. Technical 32 4\. Institutional 33 5\. Environmental 34 6\. Social 35 7\. Safeguard Policies 37 F\. Sustainability and Risks  1\. Sustainability 38 2\. Critical risks 38 3\. Possible controversial aspects 40 G\. Main Grant Conditions 1\. Effectiveness Condition 40 2\. Other 41 H\. Readiness for Implementation 41 I\. Compliance with Bank Policies 41 Annexes Annex 1: Project Design Summary 43 Annex 2: Detailed Project Description 47 Annex 3: Estimated Project Costs 55 Annex 4: Monitoring and Evaluation 56 Annex 5: Financial Summary 59 Annex 6: Procurement and Disbursement Arrangements 60 Annex 7: Project Processing Schedule 73 Annex 8: Documents in the Project File 74 Annex 9: Statement of Loans and Credits 75 Annex 10: Country at a Glance 76 Annex 11: Supervision Strategy 78 Annex 12: CRAIDS Project Implementation Manual (Overview) 82 MAP(S) IBRD 26792R  ZAMBIA Zambia National Response to HIV/AIDS (ZANARA) Project Appraisal Document Africa Regional Office AFTH1 Date: December 11, 2002 Team Leader: Albertus Voetberg Sector Manager/Director: Dzingai B\. Mutumbuka Sector(s): Health (77%), Central government Country Manager/Director: Yaw Ansu administration (11%), Other social services (9%), Project ID: P003248 Sub-national government administration (3%) Lending Instrument: Adaptable Program Loan (APL) Theme(s): Fighting communicable diseases (P), Civic engagement, participation and community driven development (P), Social risk mitigation (S), Gender (S) Ji !1t '* [1t; A , ' , ~~Estimated'j <"rc~,1l,v1 ,APL indicative Flhaindh9I,Plai, ' ' ldolementa'tion, Period Borrowoer?,:-, \._____ \. ^,,,,,(Binkf'Vm)\. \. IBRD Others Total Commitment Closing US$ m % US$ m US$ m Date Date APL I Loan/ Credit = _ Total 0\.00 0\.00 0\.00 l [ Loan [] Credit [X] Grant [ ] Guarantee [ Other: For Loans/Credits/Others: Amount (US$m): 42 Flia0qln Pl1an,\.5,US$m): Source, Local Foreign,,, \. Tptal,, BORROWER/RECIPIENT 4\.00 0\.00 4\.00 IDA GRANT FOR HIV/AIDS 32\.80 9\.20 42\.00 Total: 36\.80 9\.20 46\.00 Borrower/Recipient: GOVERNMENT OF THE REPUBLIC OF ZAMBIA Responsible agency: MINISTRY OF FINANCE AND NATIONAL PLANNING Address: P\.O\. Box 50062 Ridgeway, 15101 Chimanga Rd\., Lusaka, Zambia Contact Person: Mr Francis Mbewe Tel: 260 1 250544 Fax: 260 1 251078 Email: finm@zamnet\.zm Other Agency(ies): Zambia Social Investment Fund (ZAMSIF) Address: P 0 Box 31559, Kambendekela House, Dedan Kimathi Road, Lusaka, Zambia Contact Person: Mr\. Cosmas Mambo, Programme Director Tel: 260 1 226201/226207 Fax: 260 1 226195 Email: cosmas@zamsif\.org\.zm National HIV/AIDS/STIITB Council (NAC) Address: 315 Independence Ave\., P\.O\. Box 38718, Lusaka, Zambia Contact Person: Dr\. Bolla, Director-General Tel: 260 1 255044 / 255092 Fax: 260 1 253881 Email: Aidsec@zamnet\.zm  Estimated Disbursements ( Bank FYIUS$m): FY ; -2003 2004 2005 -2006 2008 Annual 6\.00 9\.00 10\.00 10\.00 7\.00 Cumulative 6\.00 15\.00 25\.00 35\.00 42\.00 Project implementation period: 5 years Expected effectiveness date: 02/28/2003 Expected closing date: 02/28/2008 OCS IPL PAD F< r\. h 202 -2 -  A\. Program Purpose and Project Development Objective 1\. Program purpose and program phasing: 2\. Project development objective: (see Annex 1) This project is a country program within the context of The Second Multi-Country HIVIAIDS Program for the Africa Region [(MAP2) (APL) (report no\. P7497 AFR)], which was approved on February 7, 2002\. Reference is made to Section HII, Part A\. Program Objectives and Part B\. Program Description of the report\. Only key features are highlighted below which are relevant to the Zambia National Response to HIV/AIDS (ZANARA) Project and to the HIV/AIDS situation in Zambia\. Zambia meets all the eligibility criteria to qualify for participation in the MAP, as summarized below: MAP eligibility for country participation How eligibility criteria were met by Zambia Satisfactory evidence of a strategic approach to The National Strategic Framework on HIV/AIDS HIV/AIDS\. This would typically be demonstrated by a elaborated in consultative manner with broad coherent national, multi-sectoral strategy and action plan involvement and support from all major for HIV/AIDS prevention, care and treatment which has stakeholders\. The final version of the Strategic been developed through a participatory approach using Framework was officially presented at the social assessment techniques\. It could also be November 21, 2000 Roundtable Discussion on demonstrated by having a participatory strategic planning HIV/AIDS\. process underway with a road map and timetable\. A high level coordinating body such as a national The Government has established the National HIV/AIDS council or equivalent has been established to HIV/AIDS/STD/TB Council; the Secretariat is being oversee the implementation of the strategy and action established and recruitment is wel advanced\. Broad plan\. This body should encompass broad representation representation of the public and private sector, of key stakeholders, including persons living with including religious organizations, non-governmental HIV/AIDS\. organizations (NGOs), the Network of People Living with HIV/AIDS, the business society, and other civil society organizations is assured\. Government has agreed to use exceptional The Government has agreed to place project implementation arrangements to accelerate project administration function in the Ministry of Finance & implementation, such as channeling grant funds for National Planning (MOFNP), and program HIV/AIDS activities directly to communities, and administration for community organizations to an out-sourcing financial management and procurement existing social fund in order to enhance efficiency where necessary\. and effectiveness, and to accelerate program implementation\. Government has agreed to use and fund multiple The Project supports the implementation of the implementation agencies, especially community-based National Strategic Framework on and NGOs organizations\. HIV/AIDS/STD/TB which hinges on the involvement and support of multiple implementing agencies from all sectors and layers of society\. (a) Project purpose The project contributes to the partnership against HIV/AIDS in Zambia by supporting the Government's program as articulated in the Zambia National Strategic Framework on HIVIAIDS 2001-2003 (NASF)\. - 3 -  The purpose of this program is to reduce the spread of HIV/AIDS, to mitigate the socio-econornic impact of the disease, and to increase access to care and support for people infected or affected by the HIV/AIDS epidemic in Zambia\. The project is selective in the support it provides and focuses on the financing of high priority interventions for which significant funding gaps exist\. The overall project is based on a new approach for addressing HIV/AIDS by supporting and strengthening community-based responses to the epidemic\. The NASF of October 2000, is the reference document for both the program and the project\. Further development of and amendments to this document are not unlikely as the multi-sectoral nature of Zambia's response to the epidemic evolves\. (b) Project development objective The project development objective of the ZANARA project is to significantly increase access to, and use of HIV/AIDS prevention, care and impact mitigation programs with particular emphasis on vulnerable populations (e\.g\. youth, women of childbearing age, orphans, widows and widowers, child or women-headed households, people living with HIV/AIDS and other groups at increased risk of infection or being affected)\. The details of each sub-objective are given in Annex 1\. 3\. Key performance indicators: (see Annex 1) Ideally, incidence data on HIV/AIDS should be used to monitor its progression in the short term\. However, the availability of useful incidence data for HIV is very limited in Zambia\. Prevalence data are a partial substitute for monitoring the disease's impact, but are fraught with difficulties in showing significant changes over a short period\. On balance, the best available indicator is the prevalence rate of LlfV among the age group 15-19 years since it is an impact indicator closer to the real incidence rate and also more likely to be responsive to any behavioral changes resulting from the interventions\. While a more extensive list of indicators appears in the logical framework (Annex 1), the project will contribute to the goal of reducing the transmission of HIV in Zambia as described in the NASF and reflected in the Poverty Reduction Strategy Paper (PRSP), the Poverty Reduction and Growth Facility (PRGF) and Highly Indebted Poor Countries (HIPC) documents, and will be evaluated by the use of indicators outlined below\. Baseline data for these indicators are mostly already available and all will be available by project effectiveness\. Meanwhile, interim indicators will be agreed with the Government at project launch or shortly thereafter\. (a) Input indicators 1\. The number of HIV/AIDS prevention, care and impact mitigation community initiatives funded by 2008 2\. The number and availability, in each district, of LILV counseling and testing services by 2008 3\. The number of trainers of trainers trained by 2008 4\. The number of community initiatives funded that specifically address gender issues 5\. The percentage of public sector institutions (primary schools, secondary schools, universities and technical training institutions) with HIV/AIDS prevention education integrated into their curricula 6\. The number of districts with functioning HIV Support groups 7\. The number of technical guidelines produced and disseminated to care providers 8\. The number of operational research studies on HIV prevention conducted and reported (b) Output indicators 1\. Number of awareness activities conducted by line ministries 2\. Number of peer educators and counselors in HIV/AIDS prevention and care trained 3\. The percentage of ministries with budget line items for HIV/AIDS-related programs 4\. The percentage of ministries budget for HIV/AIDS activities that are actually funded - 4-  5\. The percentage of submitted proposals for community based activities funded by the project (c) Outcome indicators 1\. Median age at first sex increased by one year among both males and females by 2008 2\. Reported condom use at last sex encounter with non-regular partner increased from 30 to 45 % for males and from 17 to 30% for females by 2008 3\. Percentage of teenagers aged 15-19 years who are mothers or pregnant with their first child reduced from 59% to 45% by 2008 4\. Number of research activities focusing on gender 5\. Primary school enrollment and completion rate among orphans and vulnerable children will have increased by 10% in beneficiary communities supported under Part(a) of the project by 2008 (d) Impact indicators 1\. Reduced HIV prevalence rates among young people aged 15 to 19 years by 2008 2\. Reduced HLV prevalence among antenatal women aged less than 20 years by 2008 3\. The national adult HIV seroprevalence begins to decline by 2008 B\. Strategic Context 1\. Sector-related Country Assistance Strategy (CAS) goal supported by the project: (see Annex 1) Document number: 19889 Date of latest CAS discussion: 11/17/99 The overall objective of the Bank's work in Zambia is to increase the income and living standards for the vast majority of Zambians who are poor\. The short term objective of the last CAS is to sustain positive growth rates and show that economic reforms are beginning to bring tangible, measurable benefits to the Zambian people\. Sadly, the current HIV epidemic will seriously undermine the achievement of both the short term as well as the longer term objectives\. The last CAS explicitly stated that recent gains from years of policy reforms and the promise of sustainable growth and development may not be realized unless the HIV/AIDS epidemic is controlled\. Due to the implication of this great threat to the country's long-term development, one of the main objectives of the Zambia Poverty Reduction Strategy Paper and Joint IMF/IDA Staff Assessment (Zambia PRSP, approved April 2002) is to incorporate the use of crosscutting policies for HIV/AIDS, gender and environment\. This was further endorsed by the Board of Governors through their approval of the 13th replenishment for IDA in support of more aggressive poverty reduction strategies (approved September 2002)\. One of the key features of this resport is the expanded use of grants to finance HIV/AIDS programs and other emergency disasters in IDA countries\. Under the IDA 13 guidelines, it is expected that such grants may finance up to 100 percent of national HIV/ADS projects/programs in IDA-only countries\. Since Zambia is an IDA-only country, the ZANARA project qualifies for grant financing under this criterion\. Subsequently, the main strategy of the forthcoming CAS (anticipated September 2003), will be to work in tandem with GRZ and its partners to support a multi-sectoral, multi-donor HIV/AIDS prevention and treatment program, as well as to strengthen related activities within the ongoing portfolio\. 2\. Main sector issues and Government strategy: (a) The HIV/AIDS situation in Zambia Zambia is one of the countries that has been strongly affected by the HIV/AIDS epidemic\. With the first case reported in 1984, infection rates have increased rapidly to a level whereby 19-20 per cent of the -5 -  adult population (15-49 years) was estimated to be HIV positive\. The epidemic has since stabilized around that high prevalence rate (see Figure 1)\. Of the approximately 870,000 Zambians who are living with I-UV (by the end of 1999), 40,000 are children aged 0-14 years\. Of particular concem is HIV prevalence among young women, with 17 percent of women aged 15-24 being infected versus 8 percent of men in the same age group, reflecting their specific vulnerability in sexual relationships\. - 6 -  Figure 1 Zambia: Estimated HIV Prevalence, Ages 15 to 49, 1992-1998 20 ~16 i 2 A\. 4 0 1992 '993 1994 1995 1996 1997 1998 Promising trends in the HIV prevalence among pregnant women aged 15 to 19 are beginning to emerge\. Studies have indicated and confirmed that the HIV infection rates among this particular group in four Lusaka sites have declined from 28 percent in 1993 to 15 percent in 1998\. The reason for this welcome decline has been attributed to behavior change among the urban youth\. More studies are however required to fully understand this phenomenon\. The downward trend suggests that momentum is building for behavior changes that will impede HIV transmission among this age group\. Such a momentum, however, should not give room for complacency because the prevalence rate is still high and may worsen\. (b) The impact of the HIV/AIDS epidemic on Zambian society A relatively large number of impact studies have been carried out in Zambia, and elsewhere, documenting the details and extent of the impact the H1V/AIDS epidemic has on individuals infected or affected, their households, firms and businesses, whole sectors, and the economy\. The overall conclusion that all productive efforts, whether applied to econornic activity, subsistence, or service delivery, are severely affected, is driven by the fact that HIV/AIDS affects mainly people in their most productive years\. With the negative impact of HIV/AIDS on all aspects of development, it compromises all other measures intended to reduce poverty\. Still worse, several studies have shown how effectively HIV/AIDS can drive households into poverty when their assets (e\.g\., livestock) are sold to cover the costs of medical care, or when the available labor force becomes insufficient to tend to the necessary agricultural activities\. Measures to reduce poverty among already vulnerable groups are likely to fail in the current environment where HIV prevalence is high\. Therefore, prevention and mitigation of HIV/AIDS is central to an effective poverty-reduction strategy, while poverty reduction in itself is needed to mitigate the socio-economic impact that the epidemic imposes on society\. -7-  Poverty provides the conditions for the spread of IV/AIDS\. The impact of poverty on women drives them to adopt coping mechanisms that may include increased risk exposure (e\.g\., commercial sex)\. Poverty also limits the scope for long-term development prospects, thereby reducing the barriers for taking otherwise unacceptable risks\. The limited access to formal education of this increasingly substantial cohort of children, particularly girls, may well provide fertile ground for poverty and increased risk of exposure to HIV\. Of particular concern is the situation of vulnerable children in Zambia\. The effects of poverty are especially felt among the children, and their suffering has been called Zambia's silent crisis, as much of it is contained in the confines of households and communities (Orphans and Vulnerable Children, A Situation Analysis, Zambia 1999)\. There is little doubt that the HIV/AIDS epidemic has significantly worsened their situation\. Already in 1999 there were an estimated 520,000 children orphaned as a result of AIDS in Zambia\. That number is estimated to continue to rise to 895,000 by 2009 and 974,000 by 2014\. Since the advent of the HIV/AIDS epidemic in Zambia, tuberculosis (TB) infection rates have increased nearly five-fold, from a fairly constant rate of 100 new cases per 100,000 population in 1984 to over 500 new cases per 100,000 population in 1996\. The number of new cases will continue to increase rapidly and could reach 50,000 by the year 2005\. In addition to the human suffering involved, this poses a huge additional burden on the already overstretched and under-resourced health sector, both in terms of financial and human resource requirements\. Life expectancy in Zambia has significantly decreased as a result of increased infant mortality rates and adult mortality rates, especially where it concerns young adults\. Between 2000 and 2010, another million Zambians may die, for a cumulative total of 1\.8 mnillion deaths since the beginning of the epidemic\. This is an enormous mortality for a country with a total population of about 9 million and illustrates that the full brunt of H[V/AIDS will be felt in the future\. Figure 2 illustrates this point well\. Figure 2, Zambia: Cumulative AIDS Deaths 1980 - 2010 2,000,000 1,785,000 1,500,000 -_ 1,000,000- - 500,000 II 0 1980 1985 1990 1995 2000 2005 2010 -8 -  (c) Government's response to the HIV/AIDS epidemic History\. The first case'of HIV/AIDS in Zambia was diagnosed in 1984\. The National AIDS Prevention and Control Program (NAPCP) was formally established in 1986 with assistance from the WHO Global Program on AIDS\. Several national plans were developed to face the challenge of curbing the epidemic, and in 1993, with the launch of the Second Medium Term Plan (MTP II, 1994-1998) it was acknowledged that a much more intensive and multi-sectoral response needed to be mounted\. By that time, the proportion of the adult population infected with the virus had risen to approximately 18 per cent\. The current government interventions and activities have been guided by the MTP II, and consistent with the sectoral impact of HIV/AIDS, Zambia has embarked upon a multi-sectoral response for the prevention of new infections and the mitigation of the impact of the epidemic\. This has been pursued by stimulating and catalyzing government, private sector, NGOs, and church organizations participation in the response\. Recent developments\. A new institutional framework was adopted in 2000 and the National HIV/AIDS/STD/TB Council (NAC) was established, guided by a Committee of Cabinet Ministers\. In addition to the Committee of Ministers, which provides oversight function, and the Council, a Secretariat to the Council is also being appointed\. The Council consists of eight Permanent Secretaries from the line ministries, NGO and church-based organization (CBO) representatives, network of PLWHA, Business Coalition, a Youth Organization and five other appointed members\. Nine HIV/AIDS Technical Working Groups (TWGs) have been established, which are the advisors to the Council and Secretariat in their respective areas of expertise\. The TWGs cover Mother to Child Transmission (MTCT), Information, Education and Communication (IEC), Tuberculosis, Home Based Care and Counseling, Monitoring & Evaluation, Vaccines, Sexually Transmitted Diseases and Resource Mobilization\. At the same time, a new Strategic Framework was launched with the guiding principles which require the national response to HIV/AIDS to: 1\. be people centered and respect basic human rights of all persons, 2\. be culturally sensitive, 3\. be priority centered on vulnerable group and geographic priorities, and 4\. promote catalytic projects and develop integrated strategic management approaches\. In addition, a government Task Force on Orphans was formed, comprised of the Permanent Secretaries of the Ministry of Sport, Youth, and Child Development, the Ministry of Community Development and Social Welfare, the Ministry of Education, the Ministry of Health and the Ministry of Legal Affairs\. The Task Force is assisted by a technical committee comprised of various professionals from each of the ministries\. Additionally, the Disaster Management and Mitigation Unit in the Office of the Vice President is examining its role in the care of vulnerable children\. Within the context of current government response and the National Strategic Framework on HIV/AIDS the following objectives are recognized\. 1\. Reducing the HIV/AIDS transmission mainly focusing on children, youth, women and situations providing risk for HIV transmission and increased vulnerability\. 2\. Reducing the socio-economic impact of HIV/AIDS on individuals and families at the workplace, in the homes and on the whole Zambian society\. 3\. Mobilizing local and external resources to fight the epidemic through a concerted effort at all levels including the highest level of government\. The project will, complementary to the efforts by all partners and other Bank-financed projects, finance part of the total government effort to address these objectives\. -9-  3\. Sector issues to be addressed by the project and strategic choices: Sectoral background\. With the recognition of the impact of the HIV/AIDS epidemic on every sector and all development programs, it has become evident that the existing sectoral responses need to be harmonized\. The need for an institution that has a multi-sectoral agenda to channel resources for the response to H1V/AIDS to the various implementing partners has led to the choice of the Ministry of Finance as the responsible institution for financial management of resources made available under the project\. The NAC, currently established under the Ministry of Health (MOH) as its parent institution, is a new and emerging institution, mandated to coordinate and monitor the national response to HIV/AIDS\. With the understanding that the NAC will not be involved in the implementation aspects of the national program, the project will support the NAC to carry out their mandate while assigning responsibilities for implementation and financial accounting directly to the implementing institutions\. Some sectors have proceeded with significant decentralization efforts but direct interaction with communities often remains limited in scope and limited to sectoral issues\. To provide for a more active interface between the government and community level Zambia Social Investment Fund (ZAMSIF) was created and has established itself as multi-sectoral and demand driven institution\. The project recognizes the comparative advantage of ZAMSIF in channeling resources to communities, religious organizations and NGOs\. Finally, in order for the IDA resources not to compete with grant funding, there is need for a flexible approach and good coordination\. For this purpose the establishment of a Joint HIV/AIDS Financing Committee (JFC) is under preparation, as a platform for joint financing and other implementation arrangements\. The project will be based on annual workplans to allow for timely changes in the light of grants forthcoming with donor coordination by the NAC facilitated under their component\. Ensuring an effective and coordinated response combined with rapid institutional and organizational development\. The Zambia National Strategic Framework on HIV/AIDS is the key national document that defines the national priorities and strategic goals for accelerating and expanding the HIV/AIDS Response in Zambia\. It embraces a large number of NGOs and fourteen key sectoral Ministries in developing the new response\. These Ministries include Health; Education; Agriculture and Cooperatives; Sport, Youth and Child Development; Community Development and Social Welfare; Information and Broadcasting Services; Defense; Home Affairs; Labour and Social Security; Commerce, Trade and Industry; Science, Technology and Vocational Training; Finance and National Planning; Local Government and Housing; Energy and Water Development which have developed sector-specific strategic plans for scaling-up\. Within this Strategic Framework, sector priorities are identified and include a number of "catalytic projects" that seek to scale up HIV/AIDS interventions both in terms of geographic and sub-population coverage\. It is anticipated that the strategic directions will evolve as the lessons learned from the new approach of a multi-sectoral response are absorbed\. The coordination and monitoring and evaluation of this intensified response poses challenges that the project will assist by supporting the NAC and its Secretariat to carry out their mandate\. At decentralized levels, the project will support the establishment, capacity building for, and functioning of local coordinating mechanisms through local government structures\. The prevention of new HIV infections\. Reducing the incidence of HIV is the single most important strategic priority to address the epidemic\. Strategies and activities to achieve this vary according to the target population and encompass health education, sex education, anticipatory guidance for children and parents, peer support programs, behavior-change interventions, the promotion of condom use, voluntary counseling and testing (VCT), the promotion of abstinence, the prevention of parent-to-child transmission, the reduction of susceptibility through treatment of STI, the screening of blood before transfusion, post-exposure treatment for rape-victims, etc\. The implementing agencies will be required to - 10 -  put special emphasis on three target groups for prevention activities to be funded under the project: a) the poor and vulnerable (e\.g\., women and children); b) those in whom significant investments will be made or have been made (e\.g\., new recruits, school and university entrants, employees); and c) high risk groups, both in terms of getting infected as well as transmitting HIV (e\.g\., commercial sex workers, migrant workers, truck drivers, construction workers)\. The extent to which the various implementing agencies will be involved with any given target group will depend on their respective mandates and access to these groups\. Major roles are anticipated for the education sector (children, school and university entrants, employees), the private sector (employees, new recruits, migrant workers), public sector institutions (ernployees, new recruits), especially those with important extension services like agriculture, police, defense, health, and livestock (rural poor and vulnerable), and NGOs/CBOs (commercial sex workers, women, the poor, street children)\. The NAC and its equivalents at the provincial and district levels District AIDS Task Forces (DATFs) will coordinate these activities, promote consistency in the various approaches, and disseminate experiences and best practices\. Mitigating the socio-economic impact of the HIV/AIDS epidemic\. The HBV/AIDS epidemic in Zambia has significant impact on individuals, households, businesses, public institutions, and whole sectors\. The growing number of orphans poses an enormous challenge for the social sectors\. Reaching them in order to provide just the very basic nutrition, health and education services already constitutes a significant problem\. Coping mechanisms for households are stretched to the limit and businesses find themselves confronted with increased costs for social benefits, a high turnover of staff, and a less- productive workforce\. Whole sectors such as health, agriculture, and education now realize that their usual service delivery mechanisms and the content of those services will have to be revisited, adjusting their programs to the new circumstances caused by HIV/AIDS\. Implementation of the National Strategic Framework on HIV/AIDS includes measures to be supported by the project to mitigate these effects of the epidemic, including the design and promotion of social safety nets for those affected by HIV/AIDS\. Orphans and vulnerable children\. Children are a particularly vulnerable group among those affected by the AIDS crisis and the increasing poverty in Zambia\. According to the Living Conditions Monitoring Survey (LCMS) of 1996, 13% of the population aged below 18 years were orphans from AIDS and other causes\. By 1999, an estimated 520,000 children have been orphaned as a result of HIV/AIDS\. As a result of the lag period between the parents' infection and death, the number of orphans due to AIDS is expected to continue to rise, and to reach 974,000 by 2014\. The orphans crisis exerts considerable strain on the existing extended family structure and the whole social system in the communities through increasing household dependency ratios, school enrollments and multi-generational poverty traps\. A detailed "Situation Analysis on Orphans and Vulnerable Children in Zambia" was completed in 1999 (see Annex 8)\. The children orphaned as result of AIDS are likely to suffer from loss of schooling and educational opportunities, failure to be immunized or to receive health care, increased malnutrition, increased demand for labor, loss of family and identity, depression, and overall reduction in well-being\. In recognition of these special problems, the ZANARA project recognizes that support for community based responses targeting orphans is a desirable and economically feasible intervention\. Through the Community Response to HIV/AIDS (CRAIDS) component of the project, community based initiatives that help to address the educational, health and social needs of the orphans will be given due attention\. Through the involvement of the Ministry of Legal Affairs the project will also support advocacy for policy and judicial reforms that will increase the protection of the individual as well as property rights of the orphans in Zambia\.  Increasing access to care and support for those infected or affected by HIV/AIDS\. An estimated 870,000 HIV infected people are currently living in Zambia\. To provide at least a basic, sustainable, but meaningful package of care and support to those infected or affected by HIV/AIDS poses enormnous economic, social, ethical, and organizational challenges to Zambian society\. While there are great efforts undertaken by families, communities, the Government, and its development partners to address the issues involved, there remains a huge and growing demand\. The project will support activities that increase access to social support services, such as patient support groups coordinated by the Network of People Living with HIAIDS, and initiatives to provide care and support for orphans\. Activities will be formulated that will protect the human rights of those infected or affected, including the articulation of policies that guard against discrimination in employment practices and access to benefits\. Promoting an enabling socio-cultural environment for a multi-sectoral response\. One of the key reasons for a broader approach to the HIV/AIDS issue is the influence of socio-cultural norns and values on the spread of the disease\. Attitudes toward gender, religious teachings on sexuality, and social and cultural practices can facilitate the spread of HIV\. Efforts will be made to promote socio-cultural norms, values, and beliefs that are consistent with the reduction of HIV transmission, and that protect the human rights of those infected or affected by HIV while at the same time being culturally sensitive\. NAC-coordinated activities are expected to pursue this objective through education, advocacy, counseling, consultation, and modification of customary law, and intensified enforcement of written laws, particularly with respect to gender-specific issues\. The reduction of stigma will receive special attention as it constitutes an important obstacle for affected individuals and households to access support and care services\. The project will support such efforts through both the financing of work-programs of the implementing partners of NAC and of activities directly coordinated by NAC on this issue\. Use of indigenous knowledge and practices to positively change behaviors, for example initiation and marriage rites and ceremonies, will be explored to provide fora for HfIV prevention activities\. Research\. Developments in the area of HIV/AIDS are occurring rapidly, both with regards to prevention as well as to treatment and care\. Studies are needed to establish the effectiveness, feasibility, affordability, and appropriateness of these in the Zambian context\. In addition, in order to develop an appropriate response, impact assessments that quantify specific changes due to HIV/AIDS are needed in various sectors\. NAC has the mandate to set the priority research agenda and the project will consider supporting studies that may lead to a more effective and efficient response to the epidemic\. It is anticipated that studies related to parent-to-child transmission, women-controlled methods for HIV and STI prevention such as microbicides, and impact studies will be supported\. Piloting the use of prophylaxis against Opportunistic Infections (01), and the development of a syndromic OI management protocol for adults and children with HIV/AIDS would also be considered for support as research activities\. Specific gender strategy\. The HIV/AIDS epidemic in Zambia has an important bearing on gender relationships in the society\. Young girls tend to engage in sexual activities earlier than their male counterparts\. They also enter into relations with older more experienced men who are more likely to have been infected\. The females in two partner unions are also less likely to perceive being at risk and less likely to report sexual activity with non-regular partners when compared with their male counterparts\. When asked whether a condom was used during the last sexual intercourse, females are less likely to report having done so [Zambia Demographic Health Survey (ZDHS) 1998]\. After the death of their male partners, females are more likely to lose control over the properties of the deceased thereby becoming even poorer\. When parents are ill or have died, girls are the more likely to drop out of school to care for the sick parents or the younger siblings\. When placed in foster homes, girls are much more - 12 -  likely to be sexually abused\. Physical violence, the threat of violence, and/or fear of abandonment can act as substantial barriers to women in negotiating condom use, discussing fidelity with partners, or in leaving relationships perceived to place them at increased risk of HIV infection\. Women are especially vulnerable to HIV infection due to a variety of social and biological factors\. The Government will work with community agencies to provide support for activities that reduce the risk of HIV infection among women, such as basic education on sexual and reproductive health, HIV, and STIs; activities for youth designed to delay sexual experience; harmonizing the age of consent, marriage, and maturity; encouraging voluntary testing; and empowering women on matters pertaining to access to information, employment, and economic/social recognition\. A large percentage of new HIV infections occur among youth, particularly young women (15-19 years)\. The NAC, in close cooperation with the education sector, will provide guidance in the development of culturally, morally, and scientifically acceptable AIDS education programs for youth in and out of school and advocate for the protection of youth against behaviors that place them at increased risk of HIV infection\. These activities will be supported both through the financing of work-programs and activities coordinated by NAC\. The plight of men with regards to HIV/AIDS can easily be ignored in the face of the enormous problems faced by women\. But boys and young men are still brought up in an environment in which social values, education and peer pressures endorse and in fact encourage multiple and casual sexual relationships\. To address the HIV/AIDS epidemic successfully, it will be essential to consider the role of gender in increasing the vulnerability and impact of HIV/AIDS\. This project will mainstream gender considerations into all its components\. Community activities that focus on the prevention of HIV specifically targeting the female or male population will be encouraged\. Reducing the H1V prevalence among teenage girls population will receive high priority and a concerted effort will be made to involve activities targeting older men in bringing about this change\. Community driven activities that focus on the care of women, girls and widows affected by HIV/AIDS will be supported\. All the line ministries with HIV/AIDS activities in their work plans will need to have gender specific activities as well\. The Ministry of Education can take proactive measures to ensure that girls affected by the HIV/AIDS epidemic themselves or their families have adequate support mechanisms to continue with their education\. Research activities which address the questions of the role of gender in HIN transmission will also be promoted\. 4\. Program description and performance triggers for subsequent loans: N/A C\. Program and Project Description Summary 1\. Project components (see Annex 2 for a detailed description and Annex 3 for a detailed cost breakdown): General\. The project will support Zambia's response to the HIV/AIDS epidemic in the context of the principles and objectives reflected in the Zambia National HIV/AIDS/STD/TB Strategic Framework 2001-2003, and in close collaboration with a wide variety of implementing, coordinating and supporting partners\. The support to implementing agencies will involve public as well as private sector and religious organizations, with a main focus on commnunity driven initiatives\. The coordination of the national response will be supported through the (NAC), its Secretariat and the decentralized entities - 13 -  charged with coordination at the district level\. The project administration will be housed initially in the MOFNP as the ministry mandated to mobilize resources and coordinate their use\. Flexibility in both project design and project implementation is essential in view of the evolving character of Zambia's multi-sectoral approach to the HIV epidemic, and the evolving financial support from other collaborating partners\. In the same context the establishment of a Joint HIV/AIDS Financing Committee will be crucial as it will provide the platform for agreed adjustments during the project cycle and for joint financing arrangements, assuring that IDA funds do not replace grant funding from other partners\. Part (a) Support for Community Response to HIV/AIDS (CRAIDS) (US$ 14\.7 million) Financial support under this component will serve to support communities in responding to the epidemic, either directly through financing activities by community based organizations or through the facilitation of interventions by NGOs, Religious Organizations or Organizations of People Living with HIV/AIDS\. At central level, the administration of this component will be under the MOFNP with ZAMSEF as the lead executing agency\. Support for approved organizations will be provided through ZAMSIF as grants, upon approval of proposals\. Eligibility criteria for organizations and activities to be supported as well as the operational aspects of this component are elaborated in the CRAIDS Operational Manual\. At the district level, ZAMSIF will collaborate closely with NAC and the coordinating entities to review and, when appropriate, approve proposals\. Care will be taken to maintain an appropriate balance between interventions targeted at the prevention of HIV transmission and interventions targeted to the provision of care and support to infected or affected individuals or households\. Equally, the geographic spread of activities will be monitored and additional efforts to mobilize communities are anticipated in case of relative inertia in an identified geographic area\. Particular attention will be given to coordination with relevant TWGs and NAC to provide appropriate support for the various target groups\. Part (b) Support to the National AIDS Council and Secretariat (US$ 2\.5 million) This component will provide support to the NAC to coordinate the national response to AIDS\. Its Secretariat will provide technical guidance and implement Council decisions emanating from the mandate and deliberations of the Council\. The Council and Secretariat do not constitute an implementing agency but will play a facilitating and catalytic role\. At district level, appropriate entities for the coordination and harmonization of fHV/AIDS related interventions will be eligible for financial support as well\. Financial support for the NAC as well as for the district entities will be provided on the basis of costed annual workplans\. Eligible activities to be supported will be consistent with the mission of the Council and target the coordination, monitoring and harmonization of interventions by the various implementing actors in order to achieve synergism and complementarity\. In this context, project funds will be available to facilitate the review and approval process of sub-project proposals submitted under Part (a) of the project\. Particular attention will be reserved for support to the Co-ordination and M&E role of the Secretariat\. As a major challenge within the context of a multi-sectoral program with multiple, and very diverse implementing partners, the monitoring of all HIV/AlDS related activities by the Council and Secretariat is a crucial issue and the project will finance activities related to capacity building in this area\. The establishment of M&E systems and mechanisms, as well as the conduct of specific studies for data gathering, analysis and dissemination would be supported under this component of the project\. Part (c) Support to the Line Ministries (US$ 21\.3 million) One prong of this component (US$9\.6 million) has the specific purpose of mainstreaming HIV/AIDS-related activities into the workprograms of all line ministries, this sub-component will support - 14 -  sector-specific responses to the HIV/AIDS epidemic\. The HIV/AIDS Focal Person in each ministry is expected to facilitate the elaboration of annual workplans that address: (cl) the internal impact\. The manner in which HIV/AIDS has affected the quality, quantity and substance of available services, the ability to supply the required services, the organization of the sector, the role of service providers, human resources policy and management practices, the planning and management of sector resources, and the availability of resources to the sector; (c2) the external impact\. The manner in which the sector can contribute to the prevention of further spread of HIV in order to protect both staff and target populations, and the increase ir access to and use of care and support for the affected or infected\. Within the context of the National Strategic Framework several "catalytic projects" have been identified that constitute recognized best practices\. The ministries responsible for taking the lead in increasing the coverage of these programs have been identified and the project will make resources available for this purpose\. Where the implementing agency is a NGO, CBO, or Religious Organization, support will be channeled through the CRAIDS component to the extent possible\. The line ministries are considered as key public sector partners in Zambia for the fight against HIV/AIDS, and project funds will be used for eligible expenditures as proposed in annual workplans of those ministries\. These ministries include the Ministry of Health (MOH); Education; Sport, Youth and Child Development; Community Development and Social Services; Science, Technology and Vocational Training; Agriculture, Food and Fisheries; Labor and Social Security; Commerce, Trade and Industry; Finance and Economic Development; Home Affairs; Defense; Information and Broadcasting Services; Local Government and Housing; Works; Energy and Water Development\. Five ministries will receive priority, given their central role in the fight against HIV/AIDS and/or their large staffs -- Defense, Education, Health, Home Affairs (includes police and prisons), and Local Government\. Budgeted workplans have been prepared which detail the activities to be conducted by each Ministry in the first year\. These first year work plans concentrate on measures to immediately protect staff, including new recruits, in the respective ministries, on the scaling up of the catalytic projects and on capacity building for the elaboration of more comprehensive and sector-specific responses\. The detailed first year workplan for each ministry is available in the Project files\. The MOH as a key public sector agency in the fight against HIV/AIDS will receive financing ($11\.7 million) to support implementation activities to provide care and support, and to mnitigate the impact of HIV/AIDS for those affected and infected, as outlined in the MOH's HIV/AIDS Workplan\. The focus of the workplan is on strengthening youth friendly services, expansion of voluntary counselling and testing (VCT) services, provision of safe blood, strengthening laboratory services, information education and communication (EEC), partnerships with traditional healers, research, and monitoring and evaluation\. In addition, this sub-component will fund activities as described under the first part of this component as they relate to the MOH\. Part (d) Program Administration (US$ 3\.5 million) A Program Administration Unit (PAU), established within the MOFNP and reporting to the Permanent Secretary- Secretary to the Treasury will be responsible for the administration, management, and reporting of all project activities\. Reports for all stakeholders on resources and their use, implementation progress and procurement plans and progress will be consolidated by this unit\. In addition, the PAU will oversee the financial management, procurement and disbursement functions of the project and be responsible for the day to day interactions with the World Bank on project administration\. The PAU will - 15 -  initially be established in the MOFNP, but, during the course of project implementation, the Govermnent and IDA will assess whether MOFNP as the parent institution of the PAU remains the most appropriate\. The unit will be established with the specific understanding that it may accommodate the administrative and project management requirements of cooperating partners\. Indicative Bank- % of Component Costs % of' financing Bank- (US$M)' Total (US$M) financing Part (a) CRAIDS 14\.70 32\.0 14\.70 35\.0 Part (b) NAC 3\.80 8\.3 2\.50 6\.0 Part (cl) Line Ministries 10\.30 22\.4 9\.60 22\.9 Part (c2) MOH National Program 12\.70 27\.6 11\.70 27\.9 Part (d) Program Administration 4\.50 9\.8 3\.50 8\.3 Total Project Costs 46\.00 100\.0 42\.00 100\.0 Total Financing Required 46\.00 100\.0 42\.00 100\.0 2\. Key policy and institutional reforms supported by the project: This project is a multi-sector operation that will support the following key policy and institutional changes\. It will neither address long-term sector and institutional reforms within any one sector nor will it include conditions linked to macroeconomics or individual sector policies\. It will assist the Government in: (a) Making the National HIV/AIDS Program truly multi-sectoral by mainstreaming HIV/AIDS control into the action plan of every Govermnent Ministry and by strengthening capacity of the NAC for overall national coordination; and (b) Ensuring the National H1V/AIDS program is truly participatory by encouraging the private sector participation in HIV/AIDS control and empowering communities to be key players in the HIV/AIDS control program\. 3\. Benefits and target population: (a) Benefits The project will provide the following benefits to Zambia: 1\. Reduced number of new HIV/AIDS cases, by reducing the rate of transmission of HIV through: (a) changing HIV-related behaviors, (b) improving the accessibility to condoms, (c) reducing the rate of sexually transmitted diseases, and (d) reducing the number of infections transmitted from parent to child 2\. Extended productive life of people living with AIDS by: (a) improving the prevention and treatment of 01, and (b) providing support for nutritional programs for people living with HlV/AlDS; 3\. Improved diagnosis, treatment and care for people living with HIV/AIDS by: (a) expanding access to voluntary counseling and testing, (b) diffusing standard protocols, and training both professional and traditional health care providers on the clinical management of STI and OI, and of HIV; and (c) improving the planning, procurement and distribution of essential diagnostic kits and pharmaceuticals; 4\. Improved ability of communities, households and individuals to prevent or cope with impact of - 16 -  HIV/AIDS, through support for community-led HIV/AIDS Initiatives, and 5\. Improved economic prospects of orphans and poor HIV stricken families with school aged children by providing support for initiatives targeting the respective households and increasing the enrollment of orphans and vulnerable children in schools\. (b) Targeting The project is designed to not only target specific groups which are known to be particularly vulnerable to HIV infection, but also address the specific needs of different sectors such as education, gender, labor, social development, transport, industry, and etc\. Efforts will be put into improving the country's overall capacity to cope with the epidemic: within the government, at the central and district levels, and outside government\. Some health promotion activities will be targeted to address risks as well as vulnerability: 1\. groups which are known to be particularly vulnerable to HIV infection such as young people (in particular young girls), pregnant women, long distance truck drivers, road and power construction workers, traders, fishermen, the military, the prison population; 2\. groups which engage in high risk HIV-related behaviors, such as commercial sex workers, or intravenous drug users, or other high risk groups such as the young people, particularly girls; and 3\. key sectors such as agriculture, mines and other industries, road construction, power and energy, and others with significant mobile or active work force\. 4\. Institutional and implementation arrangements: (a) Institutional arrangements The MOFNP will be the custodian of the proposed project\. The Permanent Secretary Budget and Economic Affairs of the MOFNP will be the overall controlling officer for resources made available for the project and accountable\. MOFNP will provide for a PAU consisting of a Program Administrator, a Finance Manager, a Program Administration Officer, a Procurement Officer and supporting staff\. While this unit will initially service the administrative requirements of this IDA financed project it is envisaged that projects financed by other cooperating partners may be accommodated by the same unit\. At mid-term, GRZ, IDA and the development partners will assess the appropriateness of these institutional arrangements\. Under MOFNP, ZAMSEF will implement the CRAIDS component and will submit its progress reports and accounts directly to the Permanent Secretary MOFNP, with copies to the PAU and the NAC and Secretariat\. The controlling officer of each implementing line ministry will ensure that program and project activities are aimed at mitigating the impact of HIV/AIDS on their sector and that prevention activities are integrated into its workprograms\. They will ensure that the project resources are applied to the intended purposes and used for eligible expenditures\. The HIV/AIDS Focal Person in the line ministries will coordinate the implementation of project activities at the level of the individual ministry\. Similarly, the controlling officer of the NAC will ensure that the use of project resources are used for the intended purposes and for eligible expenditures\. The head of the Secretariat will be responsible for the submission of annual workplans and regular financial and implementation progress reports\. In addition, it is foreseen that the NAC will consolidate the reports of the various projects and programs, and organize annual reviews for all partners and stakeholders\. The underlying principles behind the institutional arrangements proposed for the project are simple and - 17 -  aim to: 1\. As much as possible, avoid creating new institutional structures and use existing means for coordination and project implementation\. 2\. Support the NAC to carry out its institutional mandate of program coordination and monitoring & evaluation\. 3\. Support agreed channels to provide efficient flow of funds to the implementing agencies\. (b) National level coordination The institutional arrangements for program coordination at the national level are represented by the diagram in Figure 3\. Figure 3 National Level Coordination - Institutional Arrangements Committee of Ministry of Finance & Cabinet Ministers National Planning (MoFNP) UNADSTG rProgramme Administration National AIDS Council | Unit (PAU) (NAC) & Secretariat Technical Working Groups [ int Finnd Co I / \ Jo~~~~Inluing FinaniDS expanmitedeG ,~ j Civil Society Response Line Ministries Activities NAC Activities The project will work largely through existing and established structures for the national level coordination\. The multi-sectoral NAC has been established and will be the central coordinating body for project activities at the national level\. The Chairman of the Council and a Director of the Secretariat have been appointed\. The Council will provide broad policy guidance for the National HIV/A1DS program, supported by an adequately-staffed Secretariat headed by a Director\. The NAC will be expected to coordinate with the Committee of Cabinet Ministers on the policy issues related to the overall national response to HIV/AIDS\. The NAC Secretariat will be responsible for the program coordination and monitoring & evaluation for the national program, supported by the TWG which will provide technical guidance on each of their identified areas (some of these are already functioning)\. - 18 -  Management responsibility for technical aspects of the project will lie with the NAC, the non-technical, administrative aspects of project implementation will be assigned to the PAU in the MOFNP\. The PAU will coordinate the central procurement activities and administer the project disbursement and withdrawal procedures\. The NAC will have approval authority for all project activities\. At the program level a Joint HIV/AIDS Financing Committee will be established\. This Committee, under the Chairmanship of the NAC will bring together the technical and financial partners, supporting the program\. It will serve as an advisory body to the Council and monitor the physical progress of the program, the use of resources, and the commitments for support by the various partners and elaborate joint financing plans and mechanisms\. The committee will receive and review the interim and annual technical and financial audits of the project, among other reports\. (c) Decentralized level coordination The CRAIDS component\. The bulk of the community responses will be coordinated through the existing ZAMSIF structure\. The mechanism for such coordination is depicted in Figure 4\. This component will be community driven, and the exact nature of which projects will be funded can only be determined based on received responses from the communities selected from a menu of broadly-defined activities\. The process starts when a community prepares a proposal for funding of an HTV/AIDS prevention and care activity under the project\. A facilitating NGO may assist the community in the proposal preparation if requested\. The proposal is channeled through the existing District Planning Sub-Committee which oversees all development activities in the district\. The Planning Sub-Committee then submits the proposal to the DATF for appraisal, and then to the District Council for approval\. The costing and budgeting of the communities' proposals will be done by ZAMSIF and submitted to NAC on a no-objection basis and then to ZAMSIF for disbursement\. Figure 4 Appraisal, Approval & Disbursement Mechanisms - 19 -  Sub-project Proposal Assisted by "facilitating" NGO if so Elaborated by Community requested by Community Submitted to District Planning Sub-committee & to District AIDS Task Force (where existing) for Appraisal t Nubrnitted to District Council b for Recommendation for Approval b Subrmitted to ZAMSIF for fuNdn a b t costing and budgeting Authorization to Fund Advise to ZAMSIF _for disbursement The Strengthening of the NAC component\. For the NAC work program, a proposal will be made by the NAC Secretariat and subrniitted to the NAC TGWs for appraisal\. The NAC will be the approving body for the work programn, which is then submitted to the PAU for funding and disbursement to the NAC Secretariat\. - 20 -  Figure 5 NAC Component Appraisal, Approval and Disbursement Mechanisms Annual Workprogram Proposal Elaborated by National AIDS Council & Secretariat and Technical Working Groups Submitted to National AIDS Council for Joint Consultations and Authorization to (JFC) Fund Recommendation to PAU for disbursement Support for the line ministries component\. For the line ministries' work program proposals elaborated by the AIDS focal points, the NAC secretariat will appraise the proposal\. The appraised work program is submitted to the PAU for funding\. The PAU seeks the authorization to fund the proposal from the TSC, and disburses the funds\. - 21 -  Figure 6 Line Ministries Component Appraisal, Approval and Disbursement Mechanisms Annual Workprogram Proposal Elaborated by Line Ministry Submitted to Permanent Secretary for Approval Submitted to TSC of Joint Consultations NAC for Appraisal Joint (JFC) Recommendation to PAU for disbursement By these arrangements, the NAC will be able to focus on its mandate for coordination of all HIV/AIDS activities, and will be in better place to monitor and evaluate progress with the program without being overwhelmed by the multiple and diverse day to day administrative functions of procurement, disbursement and withdrawal procedures, which fall outside the intended role of the NAC\. (d) Project implementation The project will finance a series of HIV/AIDS plans presented by CBOs, NGOs, the NAC and line -22 -  ministries\. Planned activities for the first year of project implementation will be integrated into an annual Project Implementation Plan (PIP)\. The project will assist in building capacity in weaker CBOs/NGOs and ministries for planning and implementing the AIDS control activities\. The project geographic coverage will gradually expand to include more communities as the implementing capacity gets stronger\. The NAC Secretariat and line ministries will annually present HIV/AIDS plans for the following fiscal year\. The NAC will review such plans and, when needed, will provide guidance to improve such programs\. Communities will organize themselves, and with collaboration with CBOs or NGOs if necessary, prepare and present proposals for sub-projects to be funded by the CRAIDS component under ZAMSIF\. DATFs will appraise the merit of each of them and make a recommendation on whether it should be financed\. Sub-projects over US$ 10,000 will need the appraisal review by the NAC Secretariat\. The regular reports on these sub-project audits and evaluations will feed back into project annual reviews\. The PIP and ZAMSIF's Operational Manual describe in detail the specifics of the project's institutional and implementation arrangements with regards to the CRAIDS component\. (e) Project monitoring The overall aim of the HIV/AIDS project is to reduce the spread of HIV and mitigate its impact\. The short term objective of the project is to increase the use of HIV prevention, care and impact mitigation services by targeted vulnerable groups through activities under the four project components\. During the pre-appraisal mission, a logical framework was finalized for the project, and joint performance indicators were agreed upon for the project inputs/output and also for the outcomes/impact according to established guidelines\. A detailed performance monitoring plan was developed on the basis of the logical framework and the selected indicators\. The project will support the establishment of an M&E system within the NAC Secretariat to perform the critical task of project M&E during project implementation\. The system will provide valuable information for project management, and for other stakeholders\. The aim of the M&E system will be to provide: 1\. Easily accessible, timely information on the Project Inputs, Outputs and Outcomes so that Project Management can be responsive, if not proactive\. 2\. Identify intra-country variations in HIV/AIDS epidemiology to support the design of effective HIV/AIDS Prevention, Care and Impact mitigation operations 3\. Engage stakeholders by sharing information on progress done, lessons learnt and improvements to be done through a participatory evaluation of project activities at all levels\. This would provide a basis for information to be shared and compared with others nationally as well as in the sub-region\. The institutional capacity for M&E within NAC will be strengthened early on during project implementation by provision of specific technical and financial assistance to the NAC by the African Development Bank\. There will be a need for sufficient capacity to collect, analyze and report the input/output data related to the project activities from the district level to the national level on an ongoing fashion\. At the national level there are various ongoing activities, external to the Government, which would provide useful data in terms of the outcomes and impact indicators\. A computerized M&E Unit with a modest expertise in statistics and epidemiology will facilitate efficient project M&E\. The establishment of a link with a local research institution like the Institute for Economic and Social Research / University of Zambia will help tap into locally available expertise and skills, and also facilitate capacity building that can be retained\. - 23 -  (f) Project evaluation There have been sufficient data generated in Zambia to provide baselines for the project impact and outcome indicators\. The project evaluation process will evolve around the annual reviews, when the existing data collected through the M&E system by the M&E Unit would be collated and analyzed specifically relative to the achievements or lack thereof of the goals set by the project and program\. During the project preparation process, an attempt was made to set realistic and achievable targets\. While project progress will be monitored regularly, through the annual reviews, a flexible approach will be taken if the monitoring data indicated need for project re-design during implementation\. The annual reviews will provide timely opportunities to address areas of significant weaknesses\. It is expected that these annual reviews, as well as the final evaluation of the project, will be participatory, and that the final evaluation will include a beneficiary impact assessment\. (g) Supervision DATFs, representing all sectors and the Ministry of Local Government and incorporating CBO and NGO representation, will supervise project activities at district and sub-district levels\. Staff from the PAU, NAC, cooperating partners and the Bank's Task Team will make sample visits to the field to monitor the performance of implementing agencies at peripheral level\. The NAC will monitor overall project implementation and meet regularly with HIfV/AIDS focal persons of the various ministries to discuss progress under each line ministry\. The PAU, in close collaboration with NAC, will organize annual project reviews to assess the performance of the project, its components and its contribution to the national effort to reduce the spread and impact of HIV/AIDS\. Specific areas of the review will include technical and operational aspects of project implementation\. Project reviews will be carried out jointly by the NAC and an independent team of experts from various partners and from various technical backgrounds under previously defined terms of reference\. The reviews will draw on the information generated from routine monitoring, the studies conducted and any other relevant information\. Project reviews will culminate in stakeholder meetings that will form a basis for re-planning for the next year\. These meetings will be used to share information on trends, best practices and to provide general technical information\. The World Bank's Task Team charged with the supervision will cooperate closely with all cooperating partners involved and will provide multi-sectoral expertise\. In view of the new institutional structures being put in place, the multiplicity of implementing agencies and the consequent need for broad consultations, participation and coordination an intensive supervision strategy is proposed (see Annex 11) as essential to the success of the project\. (h) Procurement arrangements The NAC, line ministries and districts will procure works, goods and services in relation to the respective activities, in accordance with the Bank's Guidelines: Procurement under IBRD Loans and IDA Credits (January 1995 and revised in January and August 1996, September 1997, and January 1999), in particular Section 3\.15, Community Participation in Procurement\. Consulting services by firms, organizations, or individuals financed by IDA will be contracted in accordance with the Bank's Guidelines: Selection and Employment of Consultants by World Bank Borrowers (January 1997, revised in September 1997 and January 1999)\. Communities will use the Bank's simplified Procurement and Disbursement Procedures for Community-Based Investments to procure goods or services needed to implement their respective community-led HIV/AIDS initiatives under the CRAIDS component\. When these activities cost less - 24 -  than US$ 30,000 equivalent per community per approved proposal, communities will use "local shopping" as the standard procurement method\. To facilitate speedy import of items valued at less than US$ 100,000 equivalent required urgently for diagnosis/treatment and institutional strengthening, contracts may be made based on international shopping and national shopping procedures, respectively, per IDA Procurement Guidelines (Clauses 3\.5 and 3\.6) or through procurement from the United Nations (i\.e\., IAPSO, UNFPA, UNICEF, WHO), provided contract awards are made within 12 months of the Project effectiveness date\. Given the urgency of the project, a wide-ranging General Procurement Notice (GPN) for the first year of operations will be placed on the United Nations Development Business web site without a need for hard-copy publication\. The Borrower will prepare, no later than August 31, 2002, a procurement plan for the first year of project operations to be included in the PIM, and subsequently annual procurement plans\. The plan will include relevant inforrnation on goods, works, and consulting services under the project as well as the timing of each milestone in the procurement process\. The procurement schedule will be updated every quarter and reviewed by IDA\. Procurement performance (including sub-project procurement activities) will be assessed on an annual basis (in the form of procurement/physical audits by an external agency)\. In addition to the formal annual audits, ad-hoc procurement reviews will be conducted periodically\. (i) Financial management The Bank standard procedures for accounting and auditing will apply to the funds disbursed to either public or private institutions, as set out in Financial Reporting and Auditing of Projects Financed by The World Bank\. Under the supervision of the Permanent Secretary (MOFNP) as the controlling officer, the Finance Manager will be responsible for ensuring that financial management and reporting under the project will be acceptable to the Govermment, the World Bank and if applicable other cooperating partners\. The Financial Management System (FMS) objective will be to help management in spending the resources aimed at ensuring economy, efficiency and effectiveness by reaching the intended beneficiaries and achieving the set objectives\. Specifically, the FMS must be capable of producing timely, understandable, relevant and reliable financial information that will allow management and financiers to plan, implement, monitor and appraise the Project's overall progress or lack of it\. The FMS that will be developed will be computerized\. It will follow the proposals as presented in Annex 6\. The Action Plan to bring about the FMS includes: the recruitment of a Financial Management Consultant to advise on the selection and installation of the Project's FMS (using an integrated accounts package), to prepare the Program's Financial Management and Accounting Procedures Manual (FMAPM) and to train all staff in the operation of the system and basic record keeping for the communities; the recruitment of an internationally qualified Finance Manager; the availability of relevantly qualified and experienced staff at ZAMSIF, line ministries and support staff; capacity building; the establishment of a Fixed Assets Register and a Contracts Register; separate Special dollar and Kwacha Accounts will be operated and these will be reconciled monthly; quarterly reporting of financial information; cash flow management including variance analysis; Program activities will be reviewed by the Internal Audit Department of MOFNP and ZAMSIF in conjunction with the Monitoring & Evaluation group; an annual external audit will be undertaken by qualified and independent auditors on terms of reference acceptable to the Bank\. Given the characteristics and risk profile of the project, for a more timely feedback, the audit work will be carried out in two semi-annual phases and an interim -25 -  report will be submitted to the stakeholders not later than three months after the end of the first half of each fiscal year\. The annual audit report will however cover the full period\. By project effectiveness, ZANARA will have in place a FMS that can provide, with reasonable assurance, accurate and timely information as required by the Bank i\.e\. the Financial Monitoring Reports (FMR)\. The borrower has opted to use the traditional transaction-based method of disbursement\. Thus, existing disbursement procedures, as outlined in the Bank's Disbursement Handbook, will be followed i\.e\. Direct Payment, Reimbursement and Special Commitments\. A review of the progress on the establishment of the financial management system and capacity of the Project will be made by a World Bank Financial Management Specialist before project effectiveness\. (j) Disbursement procedures All disbursements against expenditure contracts with civil society organizations and the private sector will be made against statements of expenditure (SOEs) and is subject to sample ex-post financial, physical, and technical audit to be carried out by financial and technical consultants appointed by the Auditor-General and acceptable to the Bank, and employed by the PAU\. All procurement contracts not subject to IDA prior review will be disbursed against SOEs and documentation will be retained by the PAU and made available for review by IDA financial management and procurement specialists and project financial and procurement auditors\. In the case of the community-driven HIV/AIDS initiatives under the CRAIDS component, the financing of expenditures is on the basis of grants to the communities and NGOs, as the beneficiaries are unlikely to spend without the assurance of funds\. All disbursements against expenditures under this component will be subject to ex post financial and physical audits, on a sample basis, to be carried out by financial and technical consultants employed by the PAU\. D\. Project Rationale 1\. Project alternatives considered and reasons for rejection: This project is an IDA 13 Grant under the Second Multi-Country H1V/AIDS Program (MAP 2) for the Africa Region and is in accordance with the Bank's regional HIV/AlDS strategy "Intensifying Action Against HIV/AIDS in Africa: Responding to a Development Crisis"\. The overall MAP design is using the lending instrnment of an APL\. A "vertical" APL for individual countries, in combination with the "horizontal" APL for Africa was an alternative proposed and rejected (see MAP PAD for further details)\. Given the MAP context, no alternative project designs would be appropriate\. The IDA assistance is aimed at filling the existing funding gap for the Zambia National HIV/AIDS/STI Strategic Framework, and complement other available funds\. - 26-  2\. Major related projects financed by the Bank and/or other development agencies (completed, ongoing and planned)\. A large number of agencies are involved in HIV/AIDS related activities, frequently through multiple projects\. The IDA projects in Zambia have made significant progress in addressing HIV/AIDS throughout the portfolio and other development partners are doing the same\. In order to facilitate an overview of the multiplicity of activities, projects and partners involved, IDA has assisted in assembling a database of the extemal contributions to Zambia's HIV/AIDS response (April 2000)\. From the major funding agencies alone, over 130 projects have been identified (as summarized below) and the extemal resources, including those from IBRD/IDA, to support the current program are estimated at US$50 to 60 million annually\. Notwithstanding this large number of projects and significant resource flow, a sizeable funding gap remained until recently when Zambia's application to the Global Fund against HIV/AIDS, TB and Malaria was approved, thus promising to significantly reduce this gap\. This large number of projects and partners presents both an opportunity for receipt of a wide-range of support and expertise, but also a challenge for effective coordination\. The govemment has facilitated coordination between the partners during preparation and established procedures are in place to ensure that this continues\. Implementation experience in Zambia is generally good, but the HSSP (see below) has been an exception\. Steps have, however, been taken to ensure that the relevant lessons for this project, such as experiences with a sector-wide approach and central procurement issues, are included in the design\. The experience from sector-wide approach in Zambia has led to a project design that accommodates sufficient options for partner coordination and common financing and implementation arrangements, use of an existing social fund structure for implementation of community initiatives and locating project administration in the MOF\. Latest Supervision Sector Issue Project (PSR) Ratings (Bank-financed projects only) Implementation Development Bank-financed Progress (IP) Objective (DO) General Health HSSP U U HlIV/AIDS prevention among farners ASIP S S & farm workers Community support for HIV/AIDS SIF S S prevention & impact mitigation Scholarship program for OVC Basic Education Subsector S S Investmnent (BESSIP) HIV/AIDS training for traditional Environmental Support U S healers Program Other development agencies Behavior change interventions Japan, Norway, EC, GTZ, Canada, Sweden, Netherlands, DFID, Denmark, USAID, Ireland, WHO, UNFPA, UNESCO, UNDP, UNICEF, UNHCR Procurement of drugs & HIV test kits EC, Netherlands, Japan, DFID Home-based care Norway, EC, Denmark, Netherlands, DFID, Canada, WHO, UNDP, UNICEF -27 -  High risk groups Norway, EC, Japan, Canada, Sweden, UNFPA, UNESCO, UNDP, UNICEF, USAID) Hospital care Denmark, Netherlands, DFID, WFP Prevention of PTCT Norway, GTZ, USAID, WHO, UNICEF Multi-sectoral programs USAID, Norway, Denmark, Netherlands, Canada, Sweden, WHO, UNDP, UNFPA, ILO, UNICEF OVC EC, Japan, Canada, Denmark, DFID, Netherlands, Ireland, Italy, Norway, USAID, UNICEF, WFP STD control Norway, Sweden, GTZ, DFID, Japan, Canada, WHO, UNFPA, USAID, UNFPA, UNHCR Stigma reduction EC, Norway, Canada, UNFPA, UNESCO, UNDP, UNICEF, USAID HIV/AIDS, TB and Malaria Global Fund/HIV/AIDS/TB and Malaria ($193 million) IP/DO Ratings: HS (Highly Satisfactory), S (Satisfactory), U (Unsatisfactory), HU (Highly Unsatisfactory) 3\. Lessons learned and reflected in the project design: Political leadership and commitment is a key issue in mobilizing national and donor resources for the fight against the HIV/AIDS epidemic\. The GRZ has indicated its firm commitment to the fight against HIV/AIDS\. The people of Zambia are among the hardest hit by the epidemic, and the political as well as the economic imperatives for faster growth will not be realized if the HIV/AD)S situation is not controlled\. Effective action requires national leadership and political commitment at the highest levels\. The successful short- term control of the HIV epidemic in Thailand arose because of the political leadership driven by good epidemiological data, effective programs and vibrant activist civil society participation\. In Zambia, there is consensus among the leadership on the need to tackle the epidemic effectively\. But the thrust of the government's response will need to be sharpened based on evidence and broad participation\. Vulnerability factors are key drivers of the epidemic\. The HIV/AIDS epidemic is driven by underlying vulnerability factors among populations\. The combination of poverty, gender disparities and information asymmetry provide very fertile soil for HIV to grow and blossom\. Therefore, any attempt at controlling the epidemic without meaningfully addressing the vulnerability factors will be unlikely to succeed in the long term\. This project will specifically focus on the vulnerable groups, including the youth, orphans, women, widows and widowers in prevention and impact mitigation efforts\. Community participation as a process of empowerment is cruciaL The communities affected by the H1V/AIDS epidemic find themselves facing multifaceted challenges, and with very thin resources and capacity to respond\. In addition, short term focused strategies may not meet the need for long term rehabilitation and healing in the communities\. Community participation engages the people in a partnership to fight the epidemic\. With extemal resources and the building of local capacity, the - 28 -  communities will be more empowered in their response to H1V/AIDS\. Such a response is also more likely to be sustainable in the long term\. The Zambia HIV/AIDS project will commit about 35% of the grant resources towards supporting community driven initiatives\. Centralized coordination of community-driven initiatives is an effective way to channel resources directly to the communities\. A lot has been learned in Zambia with regards to the financing of community based initiatives over the last few decades\. The Government itself has provided public funds through the Social Recovery Project (SRP I and II) as matching grants to conmmunities for community-managed development activities since 1990\. At the same time several other programs, financed locally and through external support, also provided funds for community activities\. In most cases these programs operated in parallel fashion and without adequate coordination\. In order to minimize the potential inefficiencies and confusion emerging from the uncoordinated approach to community-driven initiatives, the Government has taken the measure of gradually channelling the community components of its sector programs through a unified delivery mechanism, ZAMSIF\. ZAMSIF draws on the 10 years of community development experience of SRP I and II and is a centralized coordination mechanism initiated to channel funds for community-based activities\. The community components of the RoadSIP, BESSIP, Environmental Fund, and Community Investment Fund are already being implemented through ZAMSIF\. ZAMSIF is also responsible for strengthening the capacity of districts to respond to community needs through the DIF\. The ZANARA project will use such experience and the already existing ZAMSIF structure to implement the CRAIDS component for the community-based HIV/AIDS prevention, care and impact mitigation activities\. Multi-sectoral orientation\. It has been widely recognized that the HIV/AIDS epidemic extends far and beyond the narrowly defined health sector\. The multi-dimensional nature of the epidemic and its impacts warrant a change in paradigm from a biomedical to a development one\. In this context, the multi-sectoral approach in HIV prevention, care and mitigation offer best chances of success\. This project will involve the active participation from fourteen line ministries, who will mainstream HIV/AIDS prevention into their activities with the support of the IDA grant resources\. It is expected that such broad mainstreaming of HIV activities will have a wide impact on the control of the epidemic\. Focus on knowledge building and evidence based interventions\. When compared to the HIV/AIDS situation in the developed countries, there is a huge deficit of knowledge, best practices and resources on which to build strong evidence based prevention and care interventions\. There is still lack of consensus on areas such as preventing PTCT, ART, Use of Vaginal microbicides, STI treatment and prophylaxis and treatment of opportunistic infections\. As such, this project will adopt a cautious approach by initially supporting well designed research activities on these unclear issues rather than committing to a particular intervention\. The findings of such research activities could provide firner basis for specific interventions and can be shared counrtywide, regionally and internationally\. The indigenous knowledge and practices could also be complementary in the efforts to fight HIV/AIDS\. In Mozambique, the involvement of traditional knowledge workers (healers) in awareness creating in a psychologically and socially sensitive area like sexuality had higher impact at lower cost\. In Tanzania, the integration of local healers in AIDS prevention and mitigation strategies increased the effectiveness of the approach and access for poorer families\. Along similar lines, the Bank is currently piloting the use of traditional channels of communication ("griot" network) to deliver culturally congruent messages in prevention of HIV/AIDS in West Africa\. This project will encourage access to and use of appropriate indigenous knowledge and practices in the fight against HIV/AIDS\. (For example, where initiation rites are practiced, the leaders and the young men and women could also receive HIV prevention information)\. - 29 -  Role clarity between the NAC and implementing agencies\. There are experiences from other countries which show that channeling significant resources to institutions that were set up to coordinate and monitor project activities, introduces a temptation for those institutions to venture into implementation\. In the Zambia situation, the NAC has been set up explicitly to coordinate and monitor the national response to the epidemic and not to implement\. The NAC will be supported under the project to coordinate and monitor the activities, whereas a wide spectrum of agencies and institutions will be supported to implement the project activities\. Procurement and disbursement\. The emergency nature of the response to HIV/AIDS requires simple, rapid and focused implementation arrangements for project activities\. Lack of familiarity with IDA procurement and disbursement procedures could hinder smooth project implementation\. In this project, such lack of familiarity is not a major problem because most activities will be channeled through the ZAMSIF\. The procurement that will be done outside ZAMSIF will be handled through a centralized procurement office, located in MOFNP\. This cental procurement office has proven capacity on IDA procurement\. In terms of disbursement, the current Zambia health project has suffered from a long back log of payment applications\. Such experience is very unlikely when the processing of payment applications are handled by MOFNP which has greater capacity both in terms of human resources and in experience with IDA\. Recognized "Best Practices" in Zambia, designated as catalytic projects, tend to have common characteristics that include local ownership, public-private cooperation, cultural sensitivity and limited geographical coverage\. The project will encourage sub-projects along similar lines and assist NAC develop an appropriate approach to scaling up the various interventions and increasing geographical coverage\. It has been suggested that NGO and CBO led initiatives have provided for a substantial part of successes recorded\. Staff turnover threatens implementation capacity\. One lesson that has emerged from the HSSP project is that turnover of staff, on either the Borrower or the Bank side, can seriously diminish capacity to implement the project\. The limited number of staff, in Zambia, with experience working on IDA projects, in particular with respect to procurement and financial management, negatively affected HSSP's implementation\. Efforts will be made to insulate ZANARA from this risk\. Commitment to monitoring and evaluation, scheduled assessments\. Another lesson from HSSP that is particularly relevant with regards to this project is the importance of the Government's firm commitment to M&E and the agreed schedule of assessments/appraisals\. The health project, much like ZANARA, was designed to be very flexible in order to respond to the most urgent needs in a dynamic sector\. In order for both the Government and IDA to be able to guide the project in this relatively more fluid scenario, it is essential that the planned M&E take place and that the findings be jointly reviewed in a formal, periodic meeting\. When this commitment weakened in the context of the health project, key data stopped being released to partners and the annual reviews were discontinued, the overall program became directionless and stalled\. Good donor coordination, as experienced in the health sector within the context of a sector-wide approach, can significantly reduce the transaction costs to the government related to the management of externally funded programs\. Common arrangements for program reviews, M&E, planning of financial and technical assistance, support missions, funding of programs or program components are all areas that will be pursued in close cooperation with the NAC, UNAIDS and other cooperating partners\. - 30 -  Good governance is crucial for the achievement of impact and for sustained support to the program\. Especially in countries like Zambia with a high degree of donor dependency, such sustained support is of critical importance for the HIW/AIDS program to have significant impact\. Design issues concerning transparency, accountability, monitoring and evaluation, and participation by all stakeholders will continue to be monitored frequently\. 4\. Indications of recipient commitment and ownership Realizing the devastation of the HIV/AIDS epidemnic, the political leadership of Zambia speaks out increasingly forcefully on the need to urgently intensify the response to the epidemic\. As an integral part of the country's overall development programs and strategies, it has therefore developed the National Strategic Framework on HIV/AIDS in a collaborative effort between the Govermment and its partners\. Based on the agreed principles and strategic directions contained in this document, the Government endorsed the initial project concept\. Subsequently, consultations were held with all the Government ministries, all of which have appointed an HIV/AIDS focal person who will serve as their liaison to the project, and the project was broadly endorsed\. Finally, while the NAC continues to take shape, the Council, its Chairman and Director-General have strongly endorsed the project and its design\. On November 21, 2000, the GRZ organized a roundtable discussion on HIV/AIDS\. The meeting was addressed by President Chiluba and co-chaired by the Minister of Health and the MOFNP\. In his opening address, the President underlined the importance of effective education and community activism as the main pillars for the fight against HIV/AIDS\. The main thrusts of the project therefore have support from the highest level\. 5\. Value added of Bank support in this project: The Bank has taken the decision to be a leader in the reorientation of the response to the HIV/AIDS epidemic, refocusing it from a sectoral, or medical, issue to a multi-sectoral development one\. The September 1999 launch in Lusaka of the Bank's regional AIDS strategy, "Intensifying Action Against HIV/AIDS in Africa," was well received by both the Govemment and the private sector, as well as by bilateral and multilateral donors\. Through the Bank's regional AIDS Campaign Team for ACTafrica and UNAIDS, the Bank is well positioned to make regional issues and experiences available to the project\. The existing HIV/AIDS Program has to be scaled up by mainstreaming program activities to all the line ministries and other non-health government agencies at national, regional and district levels, and by making better use of the capacity of community organizations and civil society organizations such as churches, trade unions and private businesses\. From the Roundtable Discussion on HIV/AIDS on November 21, 2000 it became evident that the Government resources and the combined pledges by other cooperating partners could not possibly provide for such effort and that a substantial injection of resources and technical assistance from IDA is required to sustain the current progress and to further reduce HIV/AIDS prevalence and its impact on socioeconomic development\. An estimate of the commitments from external funding sources indicate that the current program is supported with financial resources at a total of USD 50 to 60 million annually\. GRZ budgetary resources to contribute to the program are expected to increase significantly through additional funds that are being made available under the HIPC Initiative\. The total resources required to seriously address the HIV/AIDS epidemic in Zambia are estimated at around US$560 million over three years (best estimate scenario, NAC 1999) which includes the costs for HAART\. After donor pledges there would still be a financing gap of approximately US$300 million, or US$150 million if HAART is excluded from the estimated costs\. More recently, the approval of Zambia's application to the Global Fund against - 31 -  HIV/AIDS, TB and malaria, for an amount of $193 million, has significantly reduced the previously estimated funding gap\. The IDA grant funds will contribute to filling the remaining gap and be applied in a flexible manner to respond to evolving priorities\. In order for the many sources of funds in addition to the IDA resources there is need for a flexible approach and good coordination\. For this purpose the Country Coordination Mechanism will play a major role and the establishment of a Joint HV/AIDS Financing Committee is under preparation, as a platform for joint financing and other implementation arrangements\. The project will be based on annual workplans to allow for timely changes in the light of grants forthcoming with donor coordination by the NAC facilitated under their component\. E\. Summary Project Analysis (Detailed assessments are in the project file, see Annex 8) 1\. Economic (see Annex 4): O Cost benefit NPV=US$ million; ERR = % (see Annex 4) O Cost effectiveness * Other (specify) [ref\. Annex 5, Project Appraisal Document in Support of the First Phase of the Multi-Country HIVIAIDS Program for the Africa Region (MAP 1) Report no\. 20727 AFR)\. The detailed economic analysis on HIV/AIDS has been carried out under MAP 1, which includes an overall assessment on the impact of HIV/AIDS on economic development and poverty and a cost-benefit analysis of HIV/AIDS interventions\. The data used in the analysis included the Zambia HrV/AIDS information\. This section only highlights some key points for the ZANARA Project\. The HIV/AIDS epidemic has gone beyond health and has become a serious socioeconomic development issue\. HIV/AIDS affects an economy through (i) reducing productivity, domestic savings and economic growth, and (ii) increasing costs of treatment and care for both affected households and the society as a whole\. Zambia is one of the severely-affected countries\. About 20 percent of Zambia's adult population is LIV positive\. About 650,000 cumulative AIDS deaths have occurred by 1999 and left over 520,000 children as orphans\. It is estimated that Zambia's GDP would be 4% less with the HIV/AIDS epidemic than without it\. AIDS strikes people in their most productive age, reducing both the size and growth of the nation's labor force, increasing absenteeism due to illness and time taken to attend funerals, increasing labor turnover and generally reducing productivity\. The care and treatment for AIDS impose enormous costs on households and the society at large\. Households with AIDS patients are likely to lose the income of their members (often the main breadwinner) in addition to facing an increase in medical expenses, and the expenses related to burials \. Some households are forced to withdraw their children from schools in order to save money as one of their coping strategies\. - 32 -  The economic benefits of the proposed AIDS control project are multi-fold\. First, since this project aims to scale up interventions in HIV/AIDS control and mitigation, the majority of Zambians will directly and indirectly benefit from increased access to HIV/AIDS prevention, treatment, care and mitigation I activities\. Secondly, new HIV infections will be reduced, due to an expansion in coverage of the package of HIV/AIDS prevention activities supported by the project\. Thirdly, PLHA can lead a longer and more productive life by benefiting from better management of opportunistic infections and access to nutritional supplements; and therefore, less loss in productivity and income and reduced costs for treatment and care\. Fourthly, the support to the community responses will improve the care for orphans and increase their school attendance\. As the analysis in Annex 5 of the MAP showed, a reduction in AIDS-related death rate and improved care for PLHA would likely increase the country's economic growth rate by reversing the losses in productivity\. In addition, there will be the direct benefit to vulnerable groups such as teenage girls, orphans, PLHA and pregnant women\. 2\. Financial (see Annex 4 and Annex 5): NPV=US$ million; FRR = % (see Annex 4) Fiscal Impact: 3\. Technical: The project will assist the government to implement the strategic HIV/AIDS control interventions which are accepted as priorities for the national program, and which have been shown to be both cost-effective and affordable under the Zambian economic and fiscal situation\. The project will finance health manpower training and supplies for the use of standard clinical management protocols, as recommended by UNAIDS or WHO\. Such standards will be used in VCT, in prevention of PTCT, in prevention of OI, and in the clinical management of STD and the prevention and treatment of OI\. Financing of anti-retroviral drugs\. The financing of anti-retroviral drugs to prevent mother to child transmission (PMTCT), for the treatment of parents enrolled in PMTCT programs or for PEP under WHO/UNAIDS guidelines will be considered under the project\. Support to further increase the access to HAART may be considered in the course of the project\. If the government decides to use IDA Grant proceeds for these purpose, the project would finance training of health care personnel in the use of ART, as well as the costs incurred with the respect to the necessary laboratory support, according to clear clinical management protocols to be agreed with the UNAIDS and other technical agencies\. This issue also requires the formulation of a coherent national policy on the prevention of PTCT, on PEP for rape victims and health workers and on equity issues related to access to ART\. The considerations to be taken into account for the prevention of PTCT will include promotion of breast feeding versus alternate feeding for infants, the social stigmatization that may arise, the side effects and resistance development from inappropriate use of the drugs\. The adequacy of the legislation and law enforcement concerning rape and sex with rninors will be addressed in the context of the PEP\. Cost-effectiveness studies of suggested interventions will be supported under the project\. Chemo-prophylaxis and treatment of 01\. Research on the cost-effectiveness of alternative interventions for the clinical management of HIV/AIDS, STDs and 01, including the piloting of chemo-prophylaxis for OI, would be areas that can be supported under the project\. The rising incidence of TB in the country is a direct consequence from the raging HIV/AIDS epidemic\. The TB TWG of the project TSC under the NAC would coordinate and guide the national response specific to TB\. Project resources can be flexibly applied to supplement the national program in the control of the OI, including - 33 -  TB\. 4\. Institutional: The distinction between the coordination role of the national program by the NAC, and the administration of project activities by the PAU in the MOFNP and ZAMSIF have been agreed to in order to avoid overlap in responsibilities\. Similarly, the lines of responsibility between coordinating and the various implementing agencies will be defined and reflected in the PIM\. With the exception of ZAMSIF, most of the institutions within the project are new or, to varying degrees, new to the tasks assigned to them\. Some line ministries, such as the MOE and the MOH have been involved in the response to HIV/AIDS and made significant progress in elaborating their role\. Others have not yet been involved and the project will support the NAC in mobilizing and supporting the various ministries\. The NAC is a new institution and expectations related to its effectiveness during the early stages of project implementation will need to be modest\. 4\.1 Executing agencies: Varying degrees of capacity with the various implementing agencies and actors are anticipated and the project will make substantial provisions for capacity building, in particular, through the CRAIDS component\. The executing agencies for the project will include the community organizations, the NGOs, DATFs and the respective line ministries at both national and district levels where available\. The existing ZAMSIF structure will provide important support for the capacity building at the district and comrmunity levels\. 4\.2 Project management: The role of PAU vis-a-vis the NAC will be agreed upon and spelled out in the PIM\. Care will be taken that project administration by the PAU will not include tasks and responsibilities related to implementation\. There are experiences from other countries which show that channeling significant resources to institutions that were set up to coordinate and monitor project activities, introduces a temptation for those institutions to venture into implementation\. In the Zambia situation, the NAC is being set up explicitly to coordinate and monitor the national response to the epidemic and not to implement\. The NAC will be supported under the project to coordinate and monitor the activities, whereas a wider spectrum of agencies and existing institutions will be supported to implement the project activities\. 4\.3 Procurement issues: All major procurement activities for Part b and Part c will be handled centrally by the PAU, except minor procurements for contracts valued at less than USD 5,000 equivalent per contract subject to an aggregate of USD 50,000 equivalent per line ministry per year, which will be handled by the respective line ministries in accordance with the agreed work-programs\. In order to kick-start the procurement activities under the program, the PAU will be hiring a procurement adviser to provide support in the initial procurement activities of the project\. The procurement advisor will be hired for the first six months of project operations for coordination and support of the project-related procurement activities including contract management\. The procurement advisor will provide on-going procurement and contract management training to designated PAU staff, who will take over the procurement activities at the end of the first six months of operations\. Furthermore, in order to build capacity at the local level, where necessary, the procurement advisor will provide procurement training workshops at the local level\. It should be noted that since approximately 35% of the project funds (USD 14\.7 million) will be in support of activities related to community-level initiatives, it is not expected that the PAU would be involved in extensive procurement activities with - 34 -  large-value contracts, and the bulk of the major procurements should be completed during the first two years of the project activities\. 4\.4 Financial management issues: The FMS will be the responsibilities of the Finance Manager in the PAU for Parts (b), (c) and (d), and the Financial Controller of ZAMSIF for Part (a) of the project\. Reporting to the Permanent Secretary (MOFNP) through their Program Managers, the Finance Manager and Financial Controller will ensure that financial management and reporting procedures to be put in place will be acceptable to the Government, the World Bank and other cooperating partners if applicable\. The borrower intends to use the traditional transaction-based method of disbursement, and will put in place a FMS that would be able to produce FMS as required by the Bank\. The ZANARA FMS will be developed in accordance with the Financial Management Action Plan presented in Annex 6\. The action plan will include: the recruitment of a Financial Management Consultant to advise on the selection and installation of the project's EMS capable of producing consolidated financial statements (using an integrated accounts package), to prepare the project's FMPM and to train staff in the operation of the system; the establishment of a representative Financial Management and Procurement Committee; the recruitment of an internationally qualified Finance Manager and other relevantly qualified and experienced support staff; capacity building; the establishment of a Fixed Assets Register and a Contracts Register; separate Special and Kwacha Accounts will be operated and these will be reconciled monthly; quarterly reporting of financial information; cash flow management including variance analysis; Project activities will be periodically reviewed by the Internal Audit Department (MOFNP) and an annual external audit will be undertaken by the Auditor General on terms of reference acceptable to IDA\. 5\. Environmental: Environmental Category: B (Partial Assessment) 5\.1 Summarize the steps undertaken for environmental assessment and EMP preparation (including consultation and disclosure) and the significant issues and their treatment emerging from this analysis\. The project was appraised in April 2001, at which time the environmental classification was "C" (no assessment) and the initial Environmental and Social Data Sheet (ESDS) was approved on January 19, 2001\. The current requirements of preparation and disclosure of the Medical Waste Management Plan (MWMP) prior to appraisal were not applicable at the time\. When the categorization of MAP projects was changed to environmental classification "B" in August 2001, the preparation of the project had slowed down, mainly because of frequent changes within the Zambia government in the running up to the elections in December 2001\. Consultations on the medical waste management issues to be addressed, and the preparation of an MWMP started only in the calendar year 2002\. Through a dated covenant provided in the Development Grant Agreement (DGA, GRZ is assuring that the project will be compliant -- with the environmental safeguard policy for category B projects - not later then August 31, 2003\. A draft MWMP has been prepared by MOH, supported by resources under the PPF\. Resources under the ZANARA Project will support the implementation of this plan\. The plan addresses major adverse environmental effects such as inappropriate handling and disposal of hazardous medical waste, including sharp needles\. Under the plan it is proposed to train health care professionals, traditional birth attendants and traditional healers, and other community workers delivering care to HIV/AIDS patients\. This training will include instruction on appropriate separation, transport and disposal of hazardous medical waste\. In addition, a campaign to educate the general public and especially those living near disposal sites on the potential hazards of medical waste will be conducted\. The project will finance the revision of existing health sector curriculum on appropriate management of hazardous medical waste at medical facilities and at disposal sites to include the relevant dispositions regarding HIV/AIDS, and on occupational safety guidelines for health care workers\. The draft MWMP is available in the project files - 35 -  for additional information\. The project itself is not expected to culminate in any major adverse environmental effects and assurances have been obtained that the final MWMP will be disclosed in-country and through the World Bank infoshop upon finalization\. Resources under the project will support the implementation of the plan\. The project is not primarily designed to supply drugs and antibiotics for STI, TB or HIV\. In the event that such drugs are deemed necessary and the government requests to allocate funds for such a purpose, appropriate mechanisms will be put in place to ensure that drugs are appropriately used, and that resistance development is monitored through surveillance\. Microbial and viral resistance to antibiotics and antiviral drugs could pose a challenge to the micro-environment, if such drugs are not used properly\. The potential contribution of the ZANARA project to this risk is considered minimal at this time\. 5\.2 What are the main features of the EMP and are they adequate? The MWMP is focused on strengthening the skills and knowledge of health workers, community volunteers, patients and those who scavenge at disposal sites\. It proposes a training strategy built on focused messages, and messages tailored to the different audiences\. The plan is currently in its early draft and would be discussed with all stakeholders before its finalization\. 5\.3 For Category A and B projects, timeline and status of EA: Date of receipt of final draft: August 31, 2003 The first draft MWMP was received on October 31, 2002\. In-country disclosure of the plan and its display at the World Bank Infoshop is due by August 31, 2003 5\.4 How have stakeholders been consulted at the stage of (a) environmental screening and (b) draft EA report on the environmental impacts and proposed environment management plan? Describe mechanisms of consultation that were used and which groups were consulted? Key stakeholders include all sectors of Government, development partners, NGOs/CBOs/FBOs, people living with HIV/AIDS and their families, medical personnel, including professional medical organizations, and the general population\. With regard to issues related to medical waste management special emphasis will be given to involve medical personnel at all levels\. During project preparation, consensus-building exercises to involve major stakeholders to gain consensus around the project concept document, project design and implementation arrangements have been conducted\. During project implementation, communities will be able to express their needs through Community HIV/AIDS projects and to participate as active partners in project implementation, adding ownership, transparency and accountability to the project\. Consultations with civil society organizations on the concept of the project have been extensive and further consultations during project implementation, monitoring and evaluation will continue\. NGOs and other civil society organizations will implement a significant part of the project, supporting government agencies and communities in the implementation of project activities\. Civil society organizations will also be consulted in the annual project reviews, in the mid-term reviews and during the summative evaluation of the project\. As mentioned above, consultations on the draft MWMP are still on-going and will be expected to complete at the latest by August 31, 2003\. 5\.5 What mechanisms have been established to monitor and evaluate the impact of the project on the environment? Do the indicators reflect the objectives and results of the EMP? Revisions of the existing MWMP will be reviewed together with Government\. 6\. Social: 6\.1 Summarize key social issues relevant to the project objectives, and specify the project's social - 36 -  development outcomes\. The project is expected to have a positive social impact by assisting and empowering people and institutions to deal more effectively with the HIV epidemic\. The project development objective is cast with a particular focus on the vulnerable groups\. The existing poverty situation, lack of knowledge and social arrangements all play a role in making individuals vulnerable to HIV infection\. The project will promote access to prevention, care and mitigation services by the vulnerable groups in the population through supporting the communities as well as the public sector\. Issues such as distribution of condoms to youths may raise cultural and religious sensitivities\. The project will involve key stakeholders who are experienced in dealing with these issues (i\.e\. civil society organizations and PLHA) to help overcome such barriers in locally appropriate ways and ensure that no groups are excluded in program implementation\. The CRAIDS component will offer considerable support to communities to develop culturally sensitive and acceptable ways to respond to the HIV/AIDS epidemic\. In addition the project will carry out a series of advocacy, information, education and communication (IEC) activities to create awareness and acceptance of the human rights issues associated with HIV/AIDS\. For instance, PLHA and their families face continued violations of their economic and human rights\. Consequently, the project will finance advocacy, information, IEC activities to raise awareness and acceptance of the human and economic rights of PLHA\. Information activities will include advocacy against issues of social stigmatization and discriminatory work place practices\. In addition, the project will pay special attention to women, who do not receive adequate information on their vulnerability to HIV/AIDS\. In particular, sexual workers will be targeted and also receive information on alternative sources of income so that they are able to protect themselves against HIV/AIDS\. Finally, the issues relating to OVC will be addressed within the project\. 6\.2 Participatory Approach: How are key stakeholders participating in the project? The ZANARA project was developed on the basis of the Zambia National Strategic Framework\. The Strategic Framework was formulated through a process of consultations with key government, non-government and external stakeholders, and groups of PLHA\. The coordination of all national activities concerning HIV/AIDS is the mandate of the NAC in which all key stakeholders are represented\. The project will support the NAC in order to enhance its effective leadership\. At the beginning of the design of ZANARA, key stakeholders such as NAC, NGOs and donors were consulted on the project intentions\. As part of preparation, the GRZ established a project preparation team with broad representation of the civil society (including the Network PLHA and the Zambia Business Coalition on HIV/AIDS), government, the academia, and NAC\. This team has been charged to consult with a wide variety of other key stakeholders on the design of the project\. It is expected that there will be significant involvement of all key stakeholders at various stages during project implementation\. In particular, the multi-sector nature of the project design and implementation makes, by necessity, for broad stakeholder participation in M&E of project activities\. A participatory project evaluation approach is expected to be used during the annual reviews and at project completion\. 6\.3 How does the project involve consultations or collaboration with NGOs or other civil society organizations? Civil society organizations will continue to be consulted during project implementation and will execute a significant part of the project through the CRAIDS component supporting community-led initiatives\. They will also be consulted as part of the evaluation process such as the annual project reviews, and at completion of the project\. -37 -  6\.4 What institutional arrangements have been provided to ensure the project achieves its social development outcomes? The project will seek to build on the multi-sectoral nature of NAC and will support the Council to organize annual program reviews with involvement of all key stakeholders\. The reviews will concentrate on the achievements of the program, based on an agreed set of indicators, and the formulation of specific recommendations to improve performance\. Both the NAC and ZAMSIF will be supported in creation of a M&E that will include the relevant outcomes\. 6\.5 How will the project monitor performance in terms of social development outcomes? The project M&E system will collect data on progress made towards achieving the targeted outcomes, and particular focus will be on increased use of HIV/AIDS prevention, care and impact mitigation programs by the targeted vulnerable groups\. As already stated, the vulnerable groups include women, PLHA, OVC, youth in and out of school and commercial sexual workers\. Therefore, specific indicators on gender and other vulnerable groups have been included among the project performance indicators (see Annex 1)\. 7\. Safeguard Policies: 7\.1 Are any of the following safeguard policies triggered by the pr ect? Policy Triggered Environmental Assessment (OP 4\.01, BP 4\.01, GP 4\.01) * Yes 9 No Natural Habitats (OP 4\.04, BP 4\.04, GP 4\.04) U9 Yes * No Forestry (OP 4\.36, GP 4\.36) U Yes S No Pest Management (OP 4\.09) (9 Yes * No Cultural Property (OPN 11\.03) (U Yes * No Indigenous Peoples (OD 4\.20) () Yes * No Involuntary Resettlement (OP/BP 4\.12) ( Yes * No Safety of Dams (OP 4\.37, BP 4\.37) ( Yes * No Projects in International Waters (OP 7\.50, BP 7\.50, GP 7\.50) ( Yes * No Projects in Disputed Areas (OP 7\.60, BP 7\.60, GP 7\.60)* () Yes * No 7\.2 Describe provisions made by the project to ensure compliance with applicable safeguard policies\. The MWMP has been elaborated by GRZ, and reviewed and approved by the the Bank's Africa Social and Enviromnent Sector unit (AFTES)\. Resources from the IDA grant will be applied to implement this plan\. - 38 -  F\. Sustainability and Risks 1\. Sustainabiiity: The GRZ has demonstrated its firm commitment in the fight against the HIV/AIDS epidemic\. This high level commitment has provided an encouraging environment for the fight against the epidemic\. The new institutional framework establishing the NAC provides the focal point for coordination of efforts at the national level\. The National Strategic Framework consolidates HIV prevention and mitigation efforts within the context of a national strategy\. This project will build on the existing frameworks, along with other partners, to support the prevention of HIV and the mitigation of its impact\. The main thrust behind the Strategic Framework is the requirement for integrated, people-centered, culturally sensitive and prioritized approaches\. The combination of the community oriented multi-sector approach, a strong commitment from high levels of Government, substantial capacity building, modest financial requirements, and the willingness of the donor community to enter into the partnership against AIDS in Zambia make for the reasonable expectation of the project's sustainabilitv being considered likely in the short to medium term\. The proposed program will be used as a leverage to mobilize additional resources\. Expanding the ownership for the responsibility to respond to the challenges that the HIV/AIDS epidemic poses is at the core of the project and will create additional capacity and spread the budgetary burden over a larger number of sources of financing\. The capacity of the program to demonstrate result in both aspects will be crucial for the sustainability over an extended period of time\. 2\. Critical Risks (reflecting the failure of critical assumptions found in the fourth column of Annex 1): Risk Risk Rating Risk Mitigation Measure From Outputs to Objective The socio-cultural & political M There is already, a high level political environment is not conducive to promote cornmitment to the fight against HIV/AIDS\. In the behavioral changes necessary in order to sustain the current level of support, the fighting the spread of the epidemic and project will work in a participatory manner mitigating its impact with other donors to keep HIV/AIDS in the forefront of public discourse & encourage more openness\. Civil society, community leaders will be involved very early in project implementation so as to facilitate a more conducive environment for the fight against The Government's stated political & M By keeping HIV/AIDS at the forefront of financial commitments do not materialize public policy agenda & encouraging dialogue, the government will be more likely to follow through on its commitments & the attention to the community driven initiatives\. The mainstreaming of HIV prevention & mitigation activities in all sectors will also engender more attention from the government & political leaders\. From Components to Outputs - 39 -  The demand for preventive and impact S The project will provide room for supporting mitigating services are not met with provision of drugs to prevent MTCT, STI adequate supplies treatment, condoms, TB and O treatments\. In addition, other co-financiers will be encouraged in a participatory manner\. Already the HIV/AIDS epidemic in Zambia has matured, and sero-prevalence among the youth is beginning to show a downward trend\. The project will be flexible, within agreed limits, and will adjust its resources to contend with significant but unexpected demands that may arise\. The flow of funds to the implementing M The MOFNP will be the custodian of the agencies becomes very low and slow\. project, and the project accounting will be decentralized\. A framework within which NGO/CBO and community activities can be funded will be developed\. Agreements will be obtained for counterpart funding by GRZ\. Community organizations and civil M Project will use the existing ZAMSIF structure society are not mobilized, and lack the to sensitize communities and channel funds capacity to plan, implement and evaluate towards community driven activities\. The activities tailored for HIV prevention and training of the community members and care among vulnerable groups\. volunteers in the skills relevant to their participation in HIV/AIDS prevention and mitigation activities will be integral part of the project's activities\. The NAC and PAU have limited capacity H The project will focus intensely on to provide appropriate coordination at the strengthening the capacity of the NAC and national level and administer IDA PAU through training of staff and the supply of financed projects\. appropriate equipment, technical assistance to coordinate project activities at national and local levels\. Decentralized project implementation in S The project will institute a system of ensuring the face of uncertain financial accountability at all levels of implementation, management and institutional capacity and the use of computerized project resulting in fiduciary difficulties\. management information system inclusive of financial and accounting data\. An adequate audit mechanism will also be put in place\. Major procurement will be done only through ZAMSIF or through the centralized procurement office located in MOFNP\. Overall Risk Rating S Risk Rating - H (High Risk), S (Substantial Risk), M (Modest Risk), N(Negligible or Low Risk) There is sufficient experience, both within and outside the Bank, to warrant a cautious assessment of the overall project risk, which is considered substantial\. The major risks faced by the project include the -40 -  following: (i) The relative lateness of an aggressive response to the HIV epidemic in Zambia means that very valuable time may have been lost, and that the epidemic has progressed even deeper, with a much broader impact\. The implementation of the project at decentralized levels will provide the most responsive way to reach the frontline of fighting the epidemic\. There will be the need for significant financial commitment from both the public and private sectors in the fight against HIV, and such commitments will need to be sustained\. A potential risk is the project resources being overwhelmed by the demands arising from the continued epidemic\. In order to mitigate this risk, the project will work on expanding co-financing arrangements with other donors\. Government's comments to counterpart funding will need to be kept\. (ii) The continuation of donor support is crucial to the achievement of the goal of reducing the spread of HIV and the mitigation of its impact\. This project focuses on institutional and community responses, whereas fighting the HIV epidemic demands substantial efforts in other areas especially for resources targeted to the provision of drugs, condoms and other supplies\. The involvement of IDA will likely encourage other donors to provide more resources that will be needed for stemming the epidemic through cost-effective, well coordinated partnerships\. (iii) The project is expected to ride on significant involvement by NGO/CBOs and the communities\. The organizations of PLHA will have to assume prominence in advocacy as well as direct involvement in the implementation of the community initiatives\. As such, the socio-cultural environment will need to be conducive for them to do so without being stigmatized\. Because the project is targeted initially to vulnerable populations, it will be important that the institutional mechanisms exist to ensure that the benefits reach the intended beneficiaries, and that social stigma as well as discriminatory practices are minimized\. The project will bring together the various stakeholders in addressing and creating the appropriate environment for its efforts\. 3\. Possible Controversial Aspects: Condom promotion versus abstinence\. There is a likelihood that the debate on the promotion of condoms as a means to prevent HIV transmission and the alternative of promoting abstinence among the youth will continue in Zambia for a period extending into the project's implementation\. It is, however, unlikely that any major controversy will be spurred on the issue by reason of the project\. The majority of Zambians support the use of condoms as the means of preventing HIV/AIDS, and the available research evidence strongly supports their use as a practical step in preventing HIV infection\. Provision of anti-retroviral therapy\. The use of ART against HIV/AIDS is still evolving, and there are research efforts going on in the region as well as internationally\. There are ethical and moral issues of depriving their use where they are available\. The project will not be prescriptive as to whether the drugs are used\. There are no major controversies expected in this regard, as the project would be guided by the technical guidelines produced by specialized agencies, such as WHO and UNAIDS\. More generally, beyond just the provision of ARVs, resources under the project could be used to increase access to care and to increase the capacity of the health care system to provide and administer these services\. G\. Main Loan Conditions 1\. Effectiveness Condition The Borrower will have: -41 -  (a) adopted the project implementation plan in form and substance satisfactory to IDA (b) opened project accounts, made therein the initial deposits, and informed IDA of completicn of this task\. (c) established in a form and with functions, resources and staffing satisfactory to the Association (i) the PAU and (ii) appointed the following staff of the PAU, (ii\.a) a program administrator, (ii\.b) a procurement officer and (ii\.c) a financial controller (d) established with functions, staffing and resources satisfactory to the Association; (i) an accounting and financial management system; (ii) a financial management and procurement manual; (iii) a procurement plan for the first year of the project; and (iv) a financial management and procurement committee (e) appointed, for the Project, independent auditors, acceptable to IDA under terms of reference satisfactory to IDA 2\. Other [classify according to covenant types used in the Legal Agreements\.] The Borrower shall, not later than August 31, 2003, and in form, substance, resources and with functions that are satisfactory to IDA: (a) maintain NAC and its Secretariat which will be responsible for the overall coordination, monitoring and evaluation of both the Programme and the Project (b) cause NAC to appoint (in accordance with Section II of Schedule 3 of the DGA) the following staff, namely: (i) a programme manager, (ii) an MIS manager, (iii) a finance manager, (iv) an administrative manager; and (v) an internal auditor\. (c) prepare, submit and carry out the Medical and Waste Management Plan\. H\. Readiness for Implementation C 1\. a) The engineering design documents for the first year's activities are complete and ready for the start of project implementation\. 2 1\. b) Not applicable\. 2 2\. The procurement documents for the first year's activities are complete and ready for the start of project implementation\. S 3\. The Project Implementation Plan has been appraised and found to be realistic and of satisfactory quality\. D 4\. The following items are lacking and are discussed under loan conditions (Section G): 1\. Compliance with Bank Policies 3 1\. This project complies with all applicable Bank policies\. D 2\. The following exceptions to Bank policies are recommended for approval\. The project complies with all other applicable Bank policies\. -42 -  Wbertus Voetberg Dzingai B\. Mutumbuka Team Leader Sector Manager/Dire Manager/Director December 11, 2002 4 - 43 -  Annex 1: Project Design Summary ZAMBIA: Zambia National Response to HIV/AIDS (ZANARA) Key Performance Data Collection Strategy Hidr\.'rchyofOb\.jectives_ Indicators Critical Assumptions Sector-related CAS Goal: Sector Indicators: Sector/ country reports: (from Goal to Bank Mission) Achieve sustainable growth Reduced HIV incidence & HIV sentinel surveillance Strong political & financial through the strategic priority prevalence among males & reports commitment by both public & of (i) reducing the spread of females aged 15-19 years private sectors to the fight the HIV/AIDS epidemic & (ii) against HIV/AIDS from a mitigating its impact multi-sector perspective in a sustained fashion Reduced HIV prevalence HIV sentinel surveillance Socioeconomic & political among antenatal women, less reports climate remains stable than 20 yrs from 17% to 15%\. Reduced national adult HIV HIV surveillance reports Socioeconomic & political prevalence UTNAIDS climate remains stable Program Purpose: End-of-Program Indicators: Program reports: (from Purpose to Goal) ref\. MAP 2 ref\. MAP 2 ref\. MAP 2 ref\. MAP 2 Project Development Outcome / Impact Project reports: (from Objective to Purpose) Objective: Indicators: Increased use of Median age at first sex Sexual & Behavioral Survey Safer sexual behavior change HIV/AIDS prevention, care & increased by I year for both report (SBS) sustained impact mitigation programs by females & males by 2008 (ZDHS) the targeted vulnerable groups Percentage of teenagers aged HIV Sentinel surveillance Both male & female partners 15-19 years who are mothers ZDHS change sexual behaviors or pregnant with their first Women empowered child reduced from 59\.4% to 45% by 2008 Reported Condom use at last SBS Condom supplies are sex with non-regular partner ZDHS available, affordable & users increased from 30% to 45% know how to use them for males, & from 17% to 30% for females by 2008 Decrease the primary school School Survey/MOE Educational system is effective non-enrollment rate among LCMS orphans & vulnerable children BESSIP/MOE (OVC) from x % to x% by 2008 (will check with BESSIP) Output from each Output Indicators: Project reports: (from Outputs to Objective) -44 -  Component: Part (a) Community 350 Community Initiatives ZAMSIF Project Reports Balance between prevention & response to the HIV/AIDS funded by 2008 care maintained epidemic improved Availability of counseling & ZAMSIF Project Reports Test kits are available, social testing services increased by stigma reduced 2008 Number of peer educators, ZAMSIF Project Reports Quality maintained trainer of trainers increased Increase number of districts ZAMSIF Project Reports Communities willing to with functioning HIV support participate groups to 25 by 2008 10% increase in orphans & ZAMSIF Project Reports Social safety net is intact vulnerable children attending school before & after projects in beneficiary communities by 2008 30 functioning district ZAMSIF Project Reports Social safety net is intact\. HIV/AIDS task forces (DATF) established for sensitizing, appraising & coordinating HIV/AIDS prevention & care activities by 2008 Part (b) NAC & Secretariat Technical & operational NAC annual reports Information & technical strengthened guidelines produced & Copies of guidelines expertise available disseminated by all Technical Working Groups every three years until 2008 Two research studies on NAC reports Research expertise is available HIV/AIDS prevention & care Research reports supported annually until 2008 Membership of the Business NAC reports Private & public sector able to Coalition against HIV/AIDS Business Coalition reports work together increased from 18 to 36 by 2008 An HIV/AIDS situational NAC reports Information available, assessment & report on accessible progress against the strategic framework produced annually until 2008 An HIV/AIDS newsletter NAC reports Local circumstances produced to share & considered disseminate best practices & bibliography on HIV/AIDS in -45 -  Zambia produced annually Management Information NAC reports Staff are trained, have skills & System established by are retained Mid-Term Agreed operational framework NAC reports for the DATFs produced by the end of first year of project Part (c) HIV/AIDS All line ministries have line ministry reports to NAC Behavior change occurs prevention & mitigation systematically sensitized their NAC annual reports activities mainstreamed in staff about HIV/AIDS through all line ministries specifically planned workshops & activities by 2008 All line ministries have a line ministry reports Funds are not used for funded budget line for NAC reports unplanned purposes HIV/AIDS prevention & care activities by 2008 All public sector training NAC compiles & reports from Skills available institutions have integrated all institutions qualitative HIV/AIDS aspects into their curriculum by 2008 All line ministries have line ministry reports Non-discriminatory policy is produced & disseminated IEC NAC reports maintained materials on HIV/AIDS prevention in the workplace by 2008 All line ministries have trained ILine ministry reports Peer educators are retained peer educators & counselors NAC reports on HIV/AIDS prevention & care by 2008 Part (d) Project All central procurements are PAU internal reporting Bureaucracy minimized Administration done according to time plan Negative power not exercised Strengthened Disbursement & withdrawal PAU intemal reporting procedures are done according to established standards Financial Management Action PAU intemal reporting plan implemented according to schedule -46 -  Key'P'40(,;orinnce Mt ,0Dta-1lection -Strategyll Hierarchy of Qbjectives IKe ncA c C Critical Assumptions Project Components / Inputs: (budget for each Project reports: (from Components to Sub-components: component) Outputs) Support for CRAIDS USD 14 7 million ZAMSIF Reports Capacity is built & retained at communities Communities are willing to participate Demand does not overwhelm resources Strengthening NAC & its USD 2 5 million NAC Reports Capacity built & retained Secretariat NAC is able to work with implementing partners Support to Line Ministries USD 21\.3 million (i) Line NAC Reports Budgets are funded ministries (excluding MOH) & Line Ministries Report Implementation capacity is (ii) MOH built & retained Non-discriminatory policy implemented in work place Program Administration USD 3\.5 mullion PAU Reports Capacity built & retained Unit Bank Supervision Reports - 47 -  Annex 2: Detailed Project Description ZAMBIA: Zambia National Response to HIV/AIDS (ZANARA) This project contributes to the partnership against HIV/AIDS in Zambia by supporting the Government's program as articulated in the NASF\. The ZANARA project will finance US$ 46 million to GRZ's national program for HIV/AIDS as articulated in the National Strategic Implementation Plan and its activities\. The purpose of the Government's program is to: (i) to reduce the spread of HIV/AIDS (ii) to mitigate the socioeconomic impact of the disease, and (iii) to increase access to care and support for people infected or affected by HIV/AIDS The project's objectives support the national program by aiming to increase the use of HIV/AIDS prevention, care and impact mitigation programs by specifically targeted vulnerable groups\. The particular focus on vulnerable groups is important because the same vulnerability factors directly underlie the reasons for the ravaging spread of the HIV/AIDS and its adverse impact\. The ZANARA project is designed within a multi-sectoral framework, which addresses the HIV/AIDS epidemic within a very broad context\. It is a program to support the GRZ to implement an expanded response to HIV/AIDS through supporting community-based initiatives, and also by mainstreaming HIV/AIDS activities into all line ministries and the private sector\. The support for community-based initiatives would involve H1V/AIDS prevention programs through peer education, IEC activities and the provision of support for appropriate VCT services\. The care of orphans, widows, widowers, and home based care for PLHA are also expected to be conducted as part of the community-based initiatives\. By Component: Project Component I - US$14\.70 million Part (a) Support for the Community Response to HIV/AIDS (CRAIDS)\. Under this component, the project will support community-based responses to the challenge posed by the HIV/AIDS epidemic\. The support will take the form of direct funding of community initiatives or through the facilitation of activities by community CBOs and NGOs\. There will be clearly defined eligibility criteria for organizations and NGOs which will be funded under this component\. In order to hasten the implementation of this highly decentralized component, the already existing ZAMSIF structure within the GRZ establishment will be utilized to channel and administer the project funds to the communities\. Although it will be difficult to specify which activities will be funded under this component, the broad range of activities to be supported include: (i) Support for community-based sub-projects which have been prepared and submitted through the agreed upon institutional structure\. It is anticipated that at least 350 new community-based initiatives will be funded during the course of the project implementation\. A careful balance will be maintained among the sub-projects between prevention, care and impact mitigation activities\. (ii) Training of community volunteers, peer educators and trainers of trainers in HIV related counseling\. This would generate a critical mass of capable community members who will provide counseling for HIV prevention, post-test counseling for those infected, condom promotion and distribution, and also to optimize the care and support available to PLHA, orphans, widows, widowers, and other vulnerable groups as outlined in the NASF\. (iii) HIV support groups\. As at the time of project preparation, there are an estimated 12 districts with I{V support groups\. These support groups are formed by organizations of people living with HIV/AIDS and are an important forum for providing psychological and material support to the -48 -  PLHA\. Under this component, it is planned to establish about 25 additional and functioning HIV support groups spread among the districts\. (iv) Support for orphans and vulnerable children\. One of the tragedies resulting from the HlV/AIDS epidemic in Zambia is the increasing number of orphans and other vulnerable children in the population\. These children are less likely to be enrolled in primary schools and even when enrolled, are more likely to drop out\. The project will support community-based initiatives that focus on making it possible for OVCs to remain in school\. In particular, attention will be given to school attendance among females\. Support will be given to initiatives that make special provisions for the OVCs for social services such as education and health\. (v) Capacity building for the District Response to HIV/AIDS\. The District HIV/AIDS Response system will coordinate the HIV/AIDS prevention, care and impact mitigation activities by the communities in the districts\. Under this component, the project will support the building of the necessary capacity to manage the response\. Where significant inertia is detected from the communities in coming out with proposals, the project will undertake appropriate measures to stimulate and facilitate the community response through workshops and consultation with the community leaders\. Project Component 2 - US$2\.50 million Part (b) Support to NAC and its Secretariat The NAC and it's Secretariat form the national body for coordination and M&E of the overall national program and the project\. In order to support the NAC to perform this vital task, the project will support activities such as: (i) Building capacity within NAC\. This would involve enhancing the capacity to provide national leadership on HIV/AIDS, especially its role to guide a coordinated national strategy, to overcome social and cultural barriers to HIV/AIDS, and to mobilize the line ministries, religious and cultural organizations, organizations of PLHA, women's groups, youth groups, the private sector and other stakeholders in facing the challenge of HIV/AIDS\. The project support would include the financing for NAC to conduct its mandated activities and support for the establishment of a viable M&E system\. Similarly, the decentralized entities for the coordination of HIV/AIDS related activities at district level will be supported where it relates to capacity building, appraisal of proposals and M&E\. (ii) Coordinate project support towards HIV-related research and knowledge management The project would provide support for NAC to fund at least two research studies on HIV/AIDS prevention and care annually\. The NAC Secretariat would also be expected to produce and disseminate technical and operational guidelines related to all the nine TGW\. Such guidelines will be evidence-based and accessible to care providers\. Similarly, local best practices will be identified and shared with the stakeholders through HIV/AIDS periodicals, newsletters and mass media where appropriate\. (iii) Coordinate private-public sector partnerships in facing the challenge of the HIV/AIDS epidemic\. The NAC would be supported to work with civil society, such as the Zambia Business Coalition against HIV/AIDS and the Zambia Federation of Employers, to expand its membership within the private sector and to engage in HIV/AIDS activities that will benefit both the private as well as the public sectors\. (iv) Conduct monitoring and evaluation of the project implementation activities\. The project will support the NAC Secretariat in performing its vital M&E role for the project, as well as to contribute to the overall national program\. As a major challenge within the context of a -49-  multi-sector program with multiple, and very diverse implementing partners, the monitoring of all HIV/AIDS related activities by the Council and Secretariat is a crucial issue, and the project will finance activities that will enable capacity to be built in this area\. The collection, analysis, reporting and dissemination of the data on inputs, outputs, outcomes and impact, as well as the conduct of specific studies for data gathering if necessary, will form the core of the activities to be supported\. The NAC Secretariat would be encouraged to consider contracting out of some functions where its ability is limited or building that particular capacity within itself is not very cost-effective\. Project Component 3 - US$ 21\.30 million Part (c): Support to the Line Ministries With the specific purpose of mainstreaming HIV/AIDS-related activities to all line ministries, this project component will support the various sector-specific responses to the HIV/AIDS epidemic\. All activities relating to line ministries, excluding the MOH, will be supported under Part (cl) of this component\. In recognition of the unique role that the MOH plays with respect to IHIV/AIDS, those activities to be undertaken by the MOH, as defined in their workplan, as well as MOH's mainstreaming of HIV/AIDS-related activities in its own ministry will be funded as Part (c2) of this component\. Part (cl) Support to all line ministries (except MOH)\. The HIV/AIDS Focal Persons in each ministry, with support from the NAC Secretariat and their respective Permanent Secretary, would facilitate the elaboration of annual FIV/AIDS work plans that address the following two broad areas: (i) The internal impact of the HIV/AIDS epidemic on the specific line ministry\. The extent to which HIV/AIDS has affected the quality, quantity and substance of available services, the ability to supply the required services, the organization of the sector, the role of service providers, human resources policy and management practices, the planning and management of sector resources, and the availability of resources to the sector would provide the framework for assessing the internal impact of the epidemic on the specific line ministry\. (ii) The external impact of the HIV/AIDS epidemic relative to the work of the specific line ministry\. The extent to which the specific sector can contribute to the prevention of further spread of HIV in order to protect both its staff and target populations, and the increase in access to and use of care and support for the affected or infected among staff members and their families\. Within the context of the NASF, several "catalytic projects" have been identified that constitute recognized best practices\. The ministries responsible for taking the lead in increasing the coverage of these programs have been identified and the project will make resources available for this purpose\. Where the implementing agency is an NGO, CBO, or religious organization, support will be resourced from the CRAIDS component [Part (a)] of the project to the extent possible\. The line ministries are considered as key public sector partners in Zambia for the fight against HIV/AIDS, and project funds will be used for eligible expenditures as proposed in the annual work plans elaborated by ministries\. The line ministries include the MOH; Education; Sport, Youth and Child Development; Community Development and Social Welfare; Science, Technology and Vocational Training; Agriculture and Cooperatives; Labor and Social Security; Commerce, Trade and Industry; Finance and National Planning; Home Affairs; Defense; Information and Broadcasting Services; Local Government and Housing; Works and Supply; Energy and Water Development\. Budgeted work plans have been prepared which detail the activities to be implemented by each Ministry in the first year\. These first year work plans concentrate on measures to immediately protect staff, including new recruits, in the respective ministries, on the scaling up of the catalytic projects and on - 50 -  capacity building for the elaboration of more comprehensive and sector-specific responses\. The detailed first year work plan for each ministry is available in the project files\. In general, the activities to be considered within each of the line ministry work plans will include the following basic range of activities: (i) Capacity building for the mainstreaming of HIV/AIDS related activities in the ministries' work plans\. (ii) EEC campaigns for its staff and clients awareness, promote condom use and provide for a sustainable behavior change among its staff and the clients by extension\. (iii) Train peer educators and counselors to promote utilization of VCT services among their staff, and provide psychological support for those affected in the Ministry\. (iv) Promote access to condoms for staff\. (v) Promoting the prevention of MTCT among staff, piloting of routine prophylaxis against 01 for staff that have been infected with HIV\. (vi) Impact studies to investigate the qualitative and quantitative consequences of the epidemic on specified (sub)/sectors and analyze possible and appropriate responses\. In addition to the above areas, each line ministry will conduct activities specifically relevant to its areas of comparative advantage\. The possible activities to be supported under each of the various line ministries include: (a) Ministry of Education (i) Mainstreaming of HIV/AIDS prevention into the teachers' training curriculum and for the orientation of new teachers employed\. (ii) Expand HIV/AIDS and STI related counseling and testing to schools, colleges and institutions of higher education, using peers and parents as key resources\. (iii) Establishment of support groups for teachers and other staff affected by HIV/AIDS\. (iv) Review education sector policies regarding access to school of children and teachers with HIV/AIDS, sanctions against sexual harassment and sexual abuse by teachers and others\. (v) Review primary, secondary and tertiary school curricula to include appropriate reproductive health and HIV related education, produce and distribute the relevant educational materials, and train teachers in their use; promote school- and student association- led initiatives, in primary, secondary and tertiary education institutions\. (vi) Monitor and evaluate the impact of HIV/AIDS in the education sector, in collaboration with other ministries and relevant agencies\. (b) Ministry of Sport, Youth and Child Development (i) Utilize the comparative advantage of the ministry in access to external audience through sporting and other youth activities for the dissemination of HIV/AIDS prevention and care information\. (ii) Stimulate the development of youth-led HIV/AIDS initiatives, including recreation, sports club and adolescent reproductive life and health-related initiatives\. (c) Ministry of Community Development and Social Welfare (i) Utilize the comparative advantage of the ministry in access to external audience through community development activities and outlets for the dissemination of HIV/AEDS prevention - 51 -  and care information\. (ii) Support and promote policies protecting the property as well as human rights of orphans, widows and PLHA, to avoid disinheritance and other discriminatory practices\. This activity will be carried out in collaboration with civil society, organizations of PLHA, women associations, and other relevant governmental and non-governmental agencies\. (iii) Stimulate the development of women-led initiatives focusing on the empowerment of women, counseling on the use of condoms, awareness on the risks posed by early and forced marriages, defilement, and the rights of PLHA\. This activity will be carried out in collaboration with women's organizations\. (d) Ministry of Science, Technology and Vocational Training Utilize the comparative advantage of the ministry in access to external audience through the curriculum at the vocational training centers and other outlets for the dissemination of HIV/A1DS prevention and care information\. (e) Ministry of Agriculture and Cooperatives (i) Utilize the comparative advantage of the ministry in access to external audience through the farmers associations and other outlets for the dissemination of HIV/AIDS prevention and care information\. (ii) Train district trainers of agriculture and fishery extension workers on IV/AIDS counseling and testing, and on improved nutrition, with an emphasis on locally grown foods for improving the nutrition of PLHA, orphans and as breast-feeding alternatives\. (iii) Promote community-led and farmers' association-led H1V/AIDS initiatives in the area of improved nutrition, with an emphasis on the nutrition of PLHA, orphans and children of H1V-infected mothers\. (f) Ministry of Labor and Social Security (i) Utilize the comparative advantage of the ministry in access to external audience through the pensioners and their families and other outlets for the dissemination of HIV/AIDS prevention and care information\. (ii) Incorporate and promote the implementation of new public service management rules and practices that address legal, ethical and social rights of PLHA, including policies on recruitment, leave, deployment, training, pay, exit, and welfare of public officers\. (iii) Monitor trends and the impact of HIV/AIDS in the civil service and assist the respective ministries plan for future resource shortages (iv) Stimulate company-led, workers associations-led and union-led HIV/AIDS initiatives at workplaces\. These activities will be targeted at particularly vulnerable professional groups such as long distance truck drivers, migrant laborers, traders, fishermen, hotel and tourism industry workers\. (g) Ministry of Commerce, Trade and Industry (i) Utilize the comparative advantage of the ministry in access to external audience through the chamber of commerce, members of the private sector and other outlets for the dissemination of HIV/AIDS prevention and care information\. (ii) Promotion of public-private partnerships in the fight against HIV/AIDS in Zambia\. (h) Ministry of Finance and National Planning (i) Utilize the comparative advantage of the ministry in access to external audience and other - 52 -  relevant outlets for the dissemination of HIV/AIDS prevention and care information\. (ii) Mainstreaming of HIV/AIDS prevention messages on salary pay checks and other avenues\. (i) Ministry of Home Affairs (i) Utilize the comparative advantage of the ministry in access to external audience and other relevant outlets for the dissemination of HIV/AIDS prevention and care information\. (ii) Provide targeted HIV prevention, care and mitigation services for all police and prison workers and populations\. (iii) Train police and prison health care providers, care givers and social workers and counselors on HIV/AlDS prevention, diagnosis, clinical management and social support\. (iv) Train police and prison managers in H1V/AIDS control activity management\. (j) Ministry of Defense (i) Utilize the comparative advantage of the ministry in access to external audience and other relevant outlets for the dissemination of HIV/AIDS prevention and care information\. (ii) Provide targeted HIV prevention, care and mitigation services for all members of the armed forces and their families\. (iii) Train armed forces health care providers, care givers and social workers and counselors on HIV/AIDS prevention, diagnosis, clinical management and social support\. (iv) Train armed forces managers in HIV/AIDS control activity management\. (k) Ministry of Information and Broadcasting Services Utilize the comparative advantage of the ministry in access to external audience through various externally directed EEC activities and other relevant outlets for the dissemination of HIV/AIDS prevention and care information to the general public\. (1) Ministry of Local Government and Housing (i) Utilize the comparative advantage of the ministry in access to external audience and other relevant outlets for the dissemination of H{IV/AIDS prevention and care information to the general public\. (ii) Review, harmonize and supervise the application of district-based policies and regulations concerning HIV/AIDS\. (m) Ministry of Energy and Water Development (i) Utilize the comparative advantage of the ministry in access to external audience and other relevant outlets for the dissemination of HIV/AIDS prevention and care information to the general public\. (ii) Devise strategies for high capture audience through use utility bills and focus on water collection points for HIV/AIDS prevention messages\. (n) Ministry of Works and Supply (i) Utilize the comparative advantage of the ministry in access to external audience and other relevant outlets for the dissemination of HIV/AIDS prevention and care information to the general public\. (ii) Ensure all construction contracts include HIV/AIDS prevention and mitigation activities for the work force\. - 53 -  (iii) Promote company- and union-led HIV/AIDS initiatives, targeted to mobile workers\. (iv) Scale up existing initiatives within the Ministry of Works, for example, the Drama Club activities\. Part (c2) Support to the Ministry of Health\. As the impact of the epidemic is increasingly placing demands on MOH, it has a unique role to play in the implementation and support, and mitigation of the impact of HIV/AIDS for those affected and infected\. An HIV/AIDS Work plan, indicating how ZANARA will support the Ministry in its efforts, has been prepared\. The focus of this support is on: (i) scaling up of youth friendly health services, since prevalence among the 15 to 19 year old has registered a decline\. (ii) increasing the number of VCT centers at health facilities, as well as support positive living 'post test clubs'\. (iii) strengthening the capacity to treat Ols, thereby improving the quality of live and preventing premature death\. (iv) providing anti-retroviral drugs to improve the PMTCT program (including treatment of mothers and fathers recruited into the PMTCT program); and post-exposure propylaxis in rape and sexual abuse victims, as well as accidental contamination in health workers\. (v) improving laboratory support services in HIV/AIDS\. (vi) increasing awareness through IEC interventions\. (vii) support for M&E activities, including establishing an effective surveillance system and strengthening the existing information system\. In addition to the above activities, which are, by and large, focussed on its clients, the Ministry of Health will also: (i) Mainstream HIV/AIDS prevention into the curriculum of all institutions of training for health care workers\. (ii) Improve blood safety and quality control with the national blood transfusion system by providing HIV testing kits and maintaining high standards\. (iii) Promote occupational safety for workers in the Ministry through improved and safe handling of laboratory and other medical waste, training of medical and support staff on occupational safety relevant to HIV transmission and provision of clear guidelines in cases of accidental occupational exposure to HIV\. (iv) Promote job security for members of staff affected by HIV/AIDS while minimizing exposure risks of un-infected external clients in the health sector\. (v) Provide support to other ministries in their HIV/AIDS related activities\. Project Component 4 - US$3\.50 million Part (d) Program Administration\. Under this component, the project will support the PAU located within MOFNPfor the day-to-day administration of project activities\. Support will be provided to PAU to monitor resource use, process all central procurement activities, administer withdrawal and disbursement procedures, consolidate the financial management aspects of project implementation, and consolidate project reporting\. During the course of project implementation, Government, IDA and other partners will assess whether this institutional arrangement is still the most appropriate\. - 54 -  - 55 -  Annex 3: Estimated Project Costs ZAMBIA: Zambia National Response to HIV/AIDS (ZANARA) Local Foreign - Total Project Cost By Component US $million US $million US $million Part A: CRAIDS 13\.82 0\.88 14\.70 Part B: National AIDS Council 2\.32 0\.48 2\.80 Part C: Line Ministries 10\.50 11\.50 22\.00 Part D: Project Administration 2\.23 0\.27 2\.50 Total Baseline Cost 28\.87 13\.13 42\.00 Physical Contingencies 0\.90 0\.10 1\.00 Price Contingencles 0\.90 0\.10 1\.00 Total Project Costs' 30\.67 13\.33 44\.00 Total Financing Required 30\.67 13\.33 44\.00 Local Foreign Total Project Cost By Category US $million US $million US $million Goods 8\.60 12\.00 20\.60 Works 0\.20 0\.00 0\.20 Technical Assistance, Services, Training, Workshops 9\.50 0\.60 10\.10 Grants: CRAIDS 8\.60 0\.00 8\.60 Incremental Operating Costs 4\.50 0\.00 4\.50 Total Project Costs 31\.40 12\.60 44\.00 Total Financing Required 31\.40 12\.60 44\.00 Identifiable taxes and duties are 0 (US$m) and the total project cost, net of taxes, is 46 (US$m) Therefore, the project cost shanng ratio is 0% of total project cost net of taxes\. - 56 -  Annex 4 Monitoring and Evaluation ZAMBIA: Zambia National Response to HIV/AIDS (ZANARA) Monitoring and evaluation (M&E) The overall aim of the HIV/AIDS project is to reduce the spread of HrV and mitigate its impact\. The short term objective of the project is to increase the use of HIV prevention, care and impact mitigation services by targeted vulnerable groups through activities under the four project components\. During the preparation, a logical framework was developed and finalized for the project in a participatory manner, and joint performance indicators were agreed upon for the project inputs/output and also for the outcomes/impact according to established guidelines\. A detailed performance monitoring plan was developed on the basis of the logical framework and the selected indicators\. The project will support the establishment of an M&E system within the NAC Secretariat to perform the critical task of project monitoring and evaluation during project implementation\. The system will provide valuable information for project management, and for other stakeholders and external parties\. The M&E system will collect data broadly categorized into two groups: (i) Operational data\. These are derived from the day-to-day project activities, including all project inputs, supervisory information and the outputs resulting from project's activities\. This category of information will focus on the process aspects of project implementation and align those processes with the overall project development objectives\. The information will be collected by the M&E unit at the NAC from the various implementing agencies\. The CRAIDS component will make input of the relevant data collected through the ZAMSIF M&E system\. The line ministry information on project input and outputs will be collected by the HIV/AIDS focal points and forwarded to the central M&E unit in NAC\. (ii) Epidemiological data\. These data relate more to the project outcomes and the impact on the epidemic\. These data sources will track the HIV/AIDS epidemic in Zambia and assess the impact of Zambia's national HIV/AIDS program\. The serological, behavioral and social surveys being conducted by the various intemal and external partners in Zambia will provide valuable information to the M&E system\. The M&E unit will be the central clearing house for all the information collected within the two categories outlined above\. The unit will synthesize the information collected and provide: (i) Easily accessible, timely information on the project inputs, outputs and outcomes so that project management can be responsive, if not proactive\. (ii) Identify intra-country variations in HIV/AIDS epidemiology to support the design of effective HIV/AIDS prevention, care and impact mitigation operations (iii) Engage stakeholders by sharing information on progress done, lessons learnt and improvements to be done through a participatory evaluation of project activities at all levels\. This would provide a basis for information to be shared and compared with others nationally as well as in the sub-region\. The multi-sectoral nature of the response supported by the project necessitates a significant investment into the monitoring and evaluation system\. The system will have to capture inputs and outputs from implementation channels of variable degrees of efficiency and effectiveness\. The decentralized level implementation will also need to provide incentive for participation in the project monitoring and evaluation\. The commitment to beneficiary and stakeholder involvement in decision-making and in implementation will be enhanced if the M&E system can provide real-time information to NAC and to the other decentralized decision-makers in both the public sector and the private sector\. - 57 -  The institutional capacity for M&E within NAC will be strengthened early on during project implementation by providing specific technical assistance\. There will be a need for sufficient capacity to collect, analyze and report the input/output data related to the project activities from the district level to the national level on an ongoing fashion\. At the national level there are various agencies, external to the Government structure, which can provide useful data in terms of the outcomes and impact indicators\. The establishment of a link with a local research institution like the Institute for Economic and Social Research/ University of Zambia will help draw upon locally available expertise and skills, and also facilitate capacity building that can be retained\. At the district and decentralized levels of implementation, the key stakeholders include the DATF, the District Planning Sub-Committees, the NGO/CBOs involved with HIV/AIDS activities and the communities\. The information generated through the decentralized level coordination can be captured through the existing ZAMSIF M&E system which can then feed into the overall national level M&E system\. The ZAMSIF Poverty M&E component will provide very useful input to the project M&E Unit and also to the overall national HIV/AIDS program in terms of social and economic data and indices\. A geographic mapping approach will also be incorporated into the M&E system\. The real time data collated from the comnmunities and the decentralized implementation agencies can be presented through the geographic mapping system to capture the intra-country variations in project inputs/outputs, and any mismatch in resource applications\. At the national level, the key users of the system will include each of the line ministries and their decentralized units, the Zambia Business Coalition, the NGO/CBOs and the organizations of PLHA\. The M&E Unit will consolidate the inforination from all the sources and use it as a valuable monitoring tool on an on going basis for project management The linkages between the project reporting mechanisms and the national program level M&E have been clearly established\. Project performance indicators Key performance indicators for the project have been selected to reflect the project's input/output (processes) and the outcomes/impact\. The input indicators include the: (i) number of HIV/AIDS prevention, care and impact mitigation community initiatives funded through Part (a) of the project; (ii) number and availability of HIV VCT sernices in the districts; (iii) percentage of public sector training institutions with HIV/AIDS prevention education integrated into their curriculum; (iv) number of districts with functioning HIV support groups; and (v) number of operational research studies on HIV prevention conducted and reported\. The output indicators include the number of: (i) ministries who have sensitized their staff, (ii) peer educators and counselors in HIV/AIDS prevention and care trained in each ministry, (iii) ministries with budget line items for HIV/AIDS-related programs, and (iv) DATFs that are functional\. The outcome indicators selected for the project are behavior change indicators\. These include the: (i) median age at first sex encounter increased by one year in both males and females by 2008; (ii) reported condom use at last sex encounter with a non-regular partner increased from 30 to 45 % for males and from 17 to 30% for females by 2008; (iii) percentage of teenagers aged 15-19 years who are mothers or pregnant with their first child reduced from 59% to 45% by 2008; and (iv) increase in primary school enrollment and completion rate among orphans and vulnerable children supported under Part (a) of the project by 2008\. The impact indicators are the reduction in HIV prevalence among: (i) young people aged 15 to 19 years by 2008; and (ii) antenatal women aged less than 20 years by 2008\. There has been sufficient data generated in Zambia on which to base the project's impact and outcome indicators\. The baselines for these indicators have been identified, and their monitoring will not involve a - 58 -  specially conducted survey because they are routinely obtained\. The project evaluation process will begin at MTR, when the existing data collected through the M&E system by the M&E Unit would be collated and analyzed specifically relative to the achievements or lack thereof of the goals set by the project\. During the project preparation process, attempt was made to set realistic and achievable targets\. By the mid-term it should be possible to evaluate whether the project is moving in the right direction or not\. In the event that significant weaknesses manifest during implementation, the annual reviews would provide timely opportunity to address such before the project implementation is concluded\. It is expected that the final evaluation of the project will be participatory and will also include beneficiary assessment\. - 59 -  Annex 5: Financial Summary ZAMBIA: Zambia National Response to HIVIAIDS (ZANARA) Years Ending 2008 IMPLEMENTATION PERIOD - - i Year 1 Year 2 Year 3 Year4 Year5 Year6 Year 7 Total Financing Required Project Costs Investment Costs 4\.5 8\.0 9\.0 9\.0 5\.5 0\.0 0\.0 Recurrent Costs 2\.0 2\.0 2\.0 2\.0 2\.0 0\.0 0\.0 Total Project Costs 6\.5 10\.0 11\.0 11\.0 7\.5 0\.0 0\.0 Total Financing 6\.5 10\.0 11\.0 11\.0 7\.5 0\.0 0\.0 Financing IBRD/IDA 6\.0 9\.0 10\.0 10\.0 7\.0 0\.0 0\.0 Government 0\.0 0\.0 0\.0 0\.0 0\.0 0\.0 0\.0 Central 0\.5 1\.0 1\.0 1\.0 0\.5 0\.0 0\.0 Provincial 0\.0 0\.0 0\.0 0\.0 0\.0 0\.0 0\.0 Co-financiers 0\.0 0\.0 0\.0 0\.0 0\.0 0\.0 0\.0 User Fees/Beneficiarles 0\.0 0\.0 0\.0 0\.0 0\.0 0\.0 0\.0 Other 0\.0 0\.0 0\.0 0\.0 0\.0 0\.0 0\.0 Total Project Financing 6\.0 9\.0 10\.0 10\.0 7\.0 0\.0 0\.0 Main assumptions: - 60 -  Annex 6: Procurement and Disbursement Arrangements ZAMBIA: Zambia National Response to HIV/AIDS (ZANARA) Procurement Procurement for project preparation\. The project preparation facility (PPF) are funds to finance consulting services, urgent office equipment etc\. Contracts are being awarded based on the PPF Letter Agreement and the Bank's Guidelines for Procurement under IBRD Loans and IDA Credits and the Guidelines for Selection and Employment of Consultants by World Bank Borrowers\. (See para 3 below) Procurement under the project\. Of the four components comprising the project, namely: (i) support for CRAIDS (US$14\.7 million); (ii) support to NAC & its Secretariat (US$ 2\.5 million); (iii), support to the line ministries (US$21\.3 million); and (iv) program aministration (US$3\.5 million), it is not possible to determine the exact mix of goods and services to be procured under the first component, where sub-projects will be identified as the project is implemented\. For the other components, where feasible, the procurement requirements have been defined\. Details of procurement and sources of funds for each procurement will be specified in the PIP and will conform with the Government's procurement requirements and with the IDA guidelines\. Procurement methods will be defined each year, where possible, when the procurement plan is discussed and finalized\. Consequently, aggregate amount of procurement by each method cannot be definitely assessed and defined at this stage (but estimates are used for the present) for a part of the project\. During appraisal, discussions were held on the details of the procurement plan (including procurement methods) for the items that can be planned for under this project, as well as sources of funds for each activity\. The summary of proposed procurement arrangements are presented in Table A below\. IDA financed grants and credits will be utilized for goods, training, consultancy, and operating costs under the project\. Procurement for all IDA financed activities will be carried out in accordance with the Bank's Guidelines for Procurement under IBRD Loans and IDA Credits (January 1995 and revised in January and August 1996, September 1997, and January 1999)\. Consulting services by firms or individuals will be awarded in accordance with the Bank's Guidelines for Selection and Employment of Consultants by World Bank Borrowers (January 1997; Revised September 1997; January 1, 1999 and May 2002)\. Consultant selection for assignments will usually be addressed through competition among qualified short-listed firms and individuals in which the selection will be based on QCBS by evaluation of the quality of the proposal before comparing the cost of services to be provided\. In addition, selection shall also be done based on CQ and other methods as provided for in the guidelines\. Short lists for contracts estimated to cost under US$ 200,000 may be comprised entirely of national consulting firms if a sufficient number of qualified firms (at least three) are available at competitive costs\. However, if foreign firms have expressed interest, they will not be excluded\. Contracts less than US$ 100,000 each for firms, may be contracted on the basis of CQ\. Contracts less than US$ 50,000 for individuals may be awarded on the basis of their qualifications in accordance with Section V of the Bank's Consultants' Guidelines (hereinafter called IC procedure)\. Contracts may be awarded on a single source basis only in exceptional circumstances, after adequate justification and prior review by IDA for all those estimated to cost more than US$ 5,000\. For contracts of a routine nature estimated to cost less than US$ 100,000 and where established practices and standards exist such as financial audits, least cost method of selection may be used\. Goods procurement will be carried out in accordance with Guidelines for Procurement under IBRD - 61 -  Loans and IDA Credits (January 1996, August 1996, September 1997, January 1999)\. Under the project goods expected to be procured include condoms, HIV/AIDS testing kits, drugs and medical supplies, equipment, vehicles, furniture, computers, etc\. Contracts of individual value of US$ 100,000 equivalent, or more, will be awarded on the basis of ICB\. To the extent possible, contracts for goods shall be grouped into packages estimated to cost US$ 100,000 equivalent or more and will be procured through International ICB\. The ICB procurements shall be carried out by the Procurement Unit of the PAU\. Small value goods procurement contracts (individual value of less than US$ 100,000 equivalent will be awarded on the basis of NCB subject to an aggregate ceiling of US$ 11\.0 million equivalent\. The standard bidding document for NCB will be submitted to IDA by the PAU for prior review and approval\. For the CRAIDS component, contracts up to an aggregate amount not to exceed US$ 100,000 equivalent may be procured under community participation arrangements using the simplified formats set forth in the Guidelines for Simplified Procurement and Disbursement for CBI\. Goods estimated to cost less than US$ 30,000 equivalent per contract may be procured through shopping procedures by soliciting at least three quotations from different suppliers, in accordance with paragraphs 3\.5 and 3\.6 of the Bank's Procurement Guidelines and the June 9, 2000 Memorandum "Guidance on Shopping" issued by the Bank, subject to an aggregate ceiling of US$ 900,000 equivalent\. Contracts estimated to cost less than US$ 50,000 maybe procured through United Nations Agencies IAPSO in accordance with the provisions of paragraph 3\.9 of Bank Guidelines, subject to an aggregate ceiling of US$ 500,000 equivalent; this includes urgent requirements set out below\. Urgent requirements\. Notwithstanding the general provisions of paragraph 5 above, given the urgency of the program, and to facilitate speedy procurement of urgently required drugs and items required immediately for institutional strengthening, specific contracts will be handled by the PAU in the following exceptional manner: (i) Drugs for 01, HIV test kits, syphilis test kits, reagents for infection control and TB laboratory reagents, estimated to cost less than US$ 200,000 per contract, up to an aggregate of US$ 1,000,000 may be procured through international shopping; (ii) Computers and accessories, office and power equipment for new PAU and NAC Secretariat staff estimated to cost up to an aggregate amount of US$ 100,000 may be procured through shopping or contracted from the UN Agency (IAPSO); and (iii) Vehicles (up to an aggregate amount not to exceed US$ 350,000 equivalent) for initial management of the project may be procured from IAPSO and/or National Shopping procedures (preferably from bonded warehouses' on a competitive basis)\. All contracts and deliveries (i\.e\. arrivals in the project site) under the above stated 'emergency requirements' must be completed within 12 months from the project effectiveness date\. The list of these items and their estimated value - within the framework of the details mentioned in (i) to (iii) above - will be agreed upon with IDA and incorporated in the Procurement Plan\. The procurement and timely distribution of the goods will be the responsibility of PAU\. Works procurement will be carried out in accordance with Guidelinesfor Procurement under IBRD Loans and IDA Credits (January 1996, August 1996, September 1997, January 1999)\. The civil works to be included in this project would generally be small civil works projects i\.e\. minor works or refurbishment and rehabilitation and therefore there will be no ICB contracts\. Contracts exceeding US$ 50,000 up to an aggregate amount of US$ 200,000 will be awarded on the basis of NCB\. Individual contracts estimated to cost $50,000 or less may be procured under community participation arrangements using the simplified formats set forth in the Guidelinesfor Simplified Procurement and Disbursementfor Community-based Investments\. Individual contracts (other than for CRAIDS component) estimated to cost less than US$ 50,000 may be awarded through National Shopping using approved procedures\. For - 62 -  the line ministries component, works contracts estimated to cost more than US$ 10,000 equivalent per contract will not be eligible for financing under the program\. The National Shopping for works procedure to be adopted here is to award lump sum fixed price contracts on the basis of written solicitation issued to at least three qualified civil works contractors and after evaluation of the bids which would be received in writing\. The invitation shall include a detailed description of the works, including basic specifications, the required completion date, a basic form of agreement acceptable to IDA and the relevant drawings, where applicable\. The award of the contracts will be made to the contractor who offers the lowest price quotation for the required work, provided the contractor demonstrates the required experience and resources to complete the contract successfully\. Training activities will comprise hiring consultants for developing training materials and conducting training and support for training programs\. Training, workshops and study tours will be carried out on the basis approved annual work programs that will identify the general framework of training activities for the year, including the type of training/ study tours/ workshops, the number of trainees, cost estimates, etc\. Procurement of these will also follow IDA procurement guidelines using the Quality Based selection method or Consultant Qualification for firms or the IC procedure for individuals\. The General Procurement Notice will be published in the Development Business and local newspapers at least 60 days prior to the issue of bid documents\. The GPN will be updated on an annual basis and will show all outstanding ICB for goods and consulting services\. Specific Procurement Notices in accordance with the guidelines will be issued for ICB contracts and before preparation of short lists with respect to consulting contracts above US$ 200,000\. Procurement planning\. The Procurement Planning Schedules covering mainly goods and consultancy services are not yet finalized\. Given that the individual projects to be financed will be defined later (during project implementation), the major part of the funds for CRAIDS cannot be defined at this stage\. For some components (strengthening of procurement functions, financial management systems, etc), line ministries activities, the procurement plans are to be defined and included in the PIP\. Given the importance of the procurement plans, these will be finalized on priority basis and their agreement with Bank is a "condition of effectiveness"\. Implementation arrangements\. The Procurement work will be done in two main parts\. For the CRAIDS component comprising community based sub-projects, where the existing structures and methodology of ZAMSIF project (see below) will be adopted\. The ZAMSIF organization will render reports for the EIV/AIDS project to the Project Administration Unit (PAU)\. ZAMSIF-based community projects (CRAIDS)\. For the ZAMSIF based component, the communities or NGOs will be prepare sub-project proposals which will be approved through the District Planning sub-committee\. After that ZAMSIF will be responsible for supervising and coordinating the procurement by the communities and also disbursing funds to the communities\. ZAMSIF is already existing and is implementing community driven projects with this system\. The work program to be implemented will be based on the applications received from the communities from a menu of approved activities\. Procurement will be done using the simplified procurement procedures as those prevailing under the ZAMSIF\. Procurement unit\. The Procurement Unit will have the overall responsibility of carrying out procurement, managing and supervising the implementation of the procurement function as well as providing procurement support and capacity building in the implementing agencies\. The Procurement Unit at the PAUwill comprise a Procurement Manager/ Specialist assisted by a Procurement Officer\. - 63 -  For the community driven component the existing ZAMSIF structure will be utilized with the addition of one Procurement & Costing Specialist to specifically responsible for the HIV/AIDS component\. The rest of the procurement will be primarily done by the Procurement Unit in the PAU\. The PAU is located in the Ministry of Finance and National Planning (MOFNP)\. Line ministries and NAC will also be gradually involved in their own procurement, starting in a small way and doing more as capacity is built up\. This will entail procurement of goods, works and services within the agreed thresholds (see below)\. Procurement arrangements and reporting responsibilities (Chart is available at the end of this Annex 6 ) Procurement capacity assessments of the implementing agencies i\.e\. the PAU, 6 line ministries, ZAMSIF, one district council and one ZAMSIF regional office have revealed that procurement staffing levels for line ministries are adequate, and that the line ministries are operating under thresholds certified by Zambia National Tender Board (which are higher than the thresholds being proposed under ZANARA)\. However, most of the line ministries have limited or no experience in implementation of Bank financed projects therefore, training and capacity building in Bank procurement procedures and guidelines will need to be carried out\. Some of the line ministries' and ZAMSIF Management Unit's procurement capacity assessments were satisfactory as they have gained experience from implementing other Bank financed projects and have a good track record\. At the district council level the procurement capacity is very weak as the relevant structures are not in place and there are very limited procurement activities and generally most of the procurements are using the shopping method\. ZAMSIF in conjunction with the District Councils has put in place institutional arrangements and training programs to strengthen the procurement capacity\. PAU has not yet been established\. Centralized procurement for items above the thresholds for the ministries will be carried out by the PAU including providing the procurement support to the other beneficiary agencies under the project\. A complete Procurement Capacity Assessment has not been undertaken because the PAU organization has not yet been established\. Therefore, such aspects as procurement cycle management , record keeping and organizations and functions for procurement management could not be assessed\. These aspects will be reviewed as the project proceeds and the organization is actually set up\. Such a review will establish if the reporting arrangements and procurement set up is suitable for the efficient procurement\. Community Response to HIV/AIDS\. The project through the CRAIDS component will support community based projects\. The CRAIDS component will be carried out by ZAMSIF\. ZAMSIF is a Govermnent Department under the MOFNP that is semi-autonomous which supports community based development through the CIF and the DIF\. Through these existing structures of ZAMSIF CRAIDS will fund community based activities and will address prevention of HIV/AIDS as well as provide care and support to those affected by HIV/AIDS\. The CRAIDS component will provide support to the following activities VCT; condoms promotion and distribution, peer education, community health education, support to youth programs, information dissemination, minor civil works, and capacity building support to District Councils\. As procurement capacity is strengthened at district level then the districts will be given increased procurement responsibility - the details will be defined later on\. An operations manual has been prepared for the community based component CRAIDS which provides guidelines for procurement for the community-based projects\. In addition, a Procurement Manual for all components is also being prepared\. This will be ready by effectiveness and is a condition of -64-  effectiveness\. ZAMSIF will be responsible -for ensuring compliance with the guidelines and ex-post procurement reviews will be carried out for a random sample of sub-projects periodically by the Bank and district staff of the ZAMSIF Management Unit\. Procurement methods (Table A) Table A: Project Costs by Procurement Arrangements (US$ million equivalent) Procurement Method Expenditure Category ICB NCB Other N\.B\.F\. 'Total Cost 1\. Works 0\.00 0\.30 0\.00 0\.00 0\.30 (0\.00) (0\.20) (0\.00) (0\.00) (0\.20) 2\. Goods 7\.50 8\.00 2\.65 0\.00 18\.15 (7\.20) (7\.00) (2\.40) (0\.00) (16\.60) 3\. Services 0\.00 0\.00 13\.30 0\.00 13\.30 and Training (0\.00) (0\.00) (13\.30) (0\.00) (13\.30) 4\. Grants to Communities 0\.00 0\.00 8\.60 0\.00 8\.60 (0\.00) (0\.00) (8\.60) (0\.00) (8\.60) 5\. Incremental Operating 0\.00 0\.00 5\.60 0\.00 5\.60 Costs (0\.00) (0\.00) (3\.30) (0\.00) (3\.30) Total 7\.50 8\.30 30\.15 0\.00 45\.95 (7\.20) (7\.20) (27\.60) (0\.00) (42\.00) "Figures in parenthesis are the amounts to be financed by the Bank Grant\. All costs include contingencies\. 2'Includes civil works and goods to be procured through national shopping, consulting services, services of contracted staff of the project management office, training, technical assistance services, and incremental operating costs related to (i) managing the project, and (ii) re-lending project funds to local government units\. - 65 -  Prior review thresholds (Table B) The procurement of goods whose contracts are valued at US$ 100,000 or more will require prior review by IDA\. For works, all contracts valued at US$ 100,000 or more will require prior review by IDA\. All contracts exceeding the value of US$ 100,000 under the emergency procurement procedure (para\. 6 above) will be subject to IDA prior review\. The Bank will review the selection process for the hiring of consultants proposed by the borrower for those consultancy contracts to be awarded to firms and individuals\. Prior review will not be required for contracts worth less than US$ 100,000 for firms and contracts worth less than US$ 50,000 for individuals\. However, IDA will review: (a) all Terms of Reference of contracts, regardless of value; (b) all single-source contracts exceeding US$ 5,000; (c) assignments of a critical nature as determined by IDA; and (d) amendments of contracts raising the contract value above the prior review thresholds\. Prior review will be required for the training plan\. Prior review by the PAU's procurement unit The PAU and the Zambia National Tender Board will define prior review thresholds for the line ministries, communities, districts, etc\., in consultation with IDA, when the prior review will be conducted by the PAU's Procurement Unit\. The prior review thresholds will be set differently for each of three levels of procurement capability for which these agencies will be categorized suitably\. PAU will periodically review and revise the categorization and thresholds (below) of individual Implementing Agencies based on demonstrated improvements in procurement capability\. The current thresholds agreed are for three categories as below\. Goods up to (USD) Works up to (USD) Consultants up to (USD) Category I (Best Capacity) 30,000 15,000 8,000 Category 11 (Medium Capacity) 10,000 10,000 4,000 Category III (Least Capacity) 4,000 4,000 1,000 The criteria for categorization of each implementing agency will be the level of procurement proficiency\. Category ratings for selected ministries and agencies Name of implementing agency Procurement capability rating Cabinet Office Category III Ministry of Community Development & Social Services Category III Ministry of Finance & National Planning Category ll Ministry of Health Category II - 66 -  Ministry of Science, Technical & Vocational Training Category III Project Adminiistration Unit (PAU) Category III Zambia Social Investment Fund (ZAMSIF) Category II District Councils Category III (Category ratings for other supported ministries and agencies will be completed before effectiveness) Table B: Thresholds for Procurement Methods and Prior Review Contract Value Contracts Subject to Threshold, Procur\.ement Prior Review Expenditure Category (uS$'thousands) 'Meth6d (OS$'thousands) 1\. Works >50,000 NCB 100,000 or more <50,000 Quotations None 2\. Goods <100,000 NCB >First 3 contracts >100,000 ICB 100,000 or more <30,000 Shopping/IAPSO None Emergency requirements as detailed above (Drugs) <200,000 Shopping All (Equipment) <100,000 Shopping/IAPSO All 3\. Services >100,000 QCBS 100,000 or more <100,000 CQ & LCS None Individuals >50,000 CQ 50,000 and more <50,000 CQ None Firms/lndividual >5,000 Single Source All <5,000 Single Source None 4\. Training Workshops >50,000 QBS None & Seminars <50,000 CQ None 5\. Miscellaneous 6\. Miscellaneous Total value of contracts subject to prior review: Overall Procurement Risk Assessment High Frequency of procurement supervision missions proposed: One every 4 months (includes special procurement supervision for post-review/audits) The PAU will conduct quarterly reviews of the procurement work of the decentralized agencies on a selective basis\. will have procurement audits conducted on an annual basis for its own use and for use by Bank\. 'Thresholds generally differ by country and project\. Consult OD 11\.04 "Review of Procurement Documentation" and contact the Regional Procurement Adviser for guidance\. - 67 -  Disbursement Allocation of grant proceeds (Table C) Financial management The project will be administered by the PAU, while the NAC is responsible for the co-ordination of the activities by various implementing entities\. The MOF is accountable for the proceeds of the entire Grant\. The flow of funds is as follows: Figure 1 Flow of Funds Special Account "A" Special Account "B" Part (a) CRAIDS j Parts (b), (c) & (d) Grants DstrictResponse NAC Coordination MOieHiisre Program CBO/NGOs &ME&LnMistesAdministration Capacity Building National Program Disbursement and withdrawal procedures are detailed in the World Bank Disbursement Handbook (1992 edition)\. All disbursements are subject to the conditions of the IDA Grant Agreement and the procedures defined in the Disbursement Letter\. All applications to withdraw proceeds from the IDA Grant account will be fully documented except for expenditures against contracts: (i) with an estimated value of US$ 100,000 each or less for works; (ii) with an estimated value of US$ 100,000 or less for consulting firms and goods; (iii) with an estimated value of US$ 50,000 or less for individual consultants; and (iv) for all training workshops and study tours, which may be claimed on the basis of certified SOEs\. Documentation supporting expenditures claimed against SOEs will be retained at the PAU (for Parts B, C and D of the Project), and at ZAMSIF (for Part A of the Project) and will be available for review as requested by IDA supervision missions and project auditors\. The allocation of IDA Grant proceeds are shown in Table C; the proceeds of the IDA grant would be made against 100% of consultant services and training, 85% of all expenditures on all local expenditures for goods and 100% of expenditures on all foreign expenditures for goods, and 100% of all expenditures for IDA-financed components of community initiatives under the CRAIDS component\. As projected by the Banks standard disbursements profile, disbursement would be completed by four months after project closure\. Disbursement would be made against standard IDA documentation\. Table C: Allocation of Grant Proceeds E xpendiitue Category Amount In US$mfilion Financing Percentage Goods 20\.00 100% of Foreign 85% of Local Technical services, consultants' 10\.18 100% - 68 -  services, and training Grants to Community Initiatives 8\.62 100% Works 0\.20 100% of Foreign 85% of Local Incremental Operating Costs 2\.57 50% Refinancing of PPF 0\.43 100% Total Project Costs 42\.00 Total 42\.00 Use of statements of expenditures (SOEs): Parts a, b, c and d (Special Accounts 'A' and 'B') During the negotiations, the borrower informed the Bank of its decision to use the traditional transaction-based method of disbursement\. Thus, disbursement procedures as outlined in the Bank's Disbursement Handbook will be followed for all components and during the life of the project, i\.e\. Direct Payment, Reimbursement and Special Commitments\. By appointing an internationally qualified person as Finance Manager in the Program Administration Unit, and engaging a consultant to design and implement ZANARA Project's financial management system, it would be possible for the client to produce FMRs, as required by the Bank\. Under the project SOEs will be submitted for withdrawals from the IDA Grant Account to be made on the basis of statements of expenditure for (i) goods under contracts costing less than US$ 100,000 equivalent each; (ii) services under contracts costing less than (A) US$ 100,000 equivalent each for consulting firms, and (B) US$ 50,000 equivalent each for individual consultants; (iii) all Incremental Operating Costs and training; and (iv) all Grants to communities under the CRAIDS component costing less than US$ 50,000 equivalent each\. Replenishment of funds from IDA to the Special Accounts 'A' and 'B' will be made on evidence of satisfactory utilization of the previous advance , reflected in the consolidated SOEs prepared by the PAU\. Withdrawal applications for direct payment and special commitments will be for a minimum of US$ 100,000 or 20 percent of the SA authorized allocations, whichever is lower\. Special account: The ZANARA Project will maintain 2 Special Accounts in a Commercial Bank acceptable to IDA as follows: Special Account A, in USD, will exclusively service Part (a) of the project, and will be maintained by ZAMSIF\. The funding to the communities will be based on approved project proposals\. All community based activities will be handled through ZAMSIF\. Approval of the proposals for funding will be by the NAC\. On approval the communities will be provided with accountable advances for eligible qualifying activities and will be required to report on the usage of the funds using agreed formats\. Additional funding will only be available after accounting for the previous advance\. Communities will be expected to maintain separate Kwacha Bank Accounts for IDA funds received from ZAMSIF\. Before funds are transferred to the community an assessment will be made of the existence of, at least a basic accounting system and knowledgeable staff to record the transactions and produce basic financial reports of Receipts and Payments\. Detailed accounting - 69 -  and processing procedures are as per the CRAIDS Implementation Manual appearing as Appendix A\. Special Account B in USD, will finance Parts (b), (c) and (d) of the project\. The activities under these components will be funded according to approved annual and quarterly work programs\. Following the approval of the work program accountable advances will be provided for eligible qualifying activities in accordance with procedures documented in the FMPPM\. Replenishments will be on a monthly basis after satisfactory submission of reconciliations to the PAU\. The reconciliation will consist of a bank statement and the supporting documents for any expenditure\. A Kwacha account will be maintained at a commercial bank exclusively for Part A component of ZANARA with a separate set of books and accounts\. Other Kwacha accounts will be opened for each Components Parts B and D and for each of the participating ministries for component (c)\. These are individual accounts for ZANARA and separate books and accounts will be maintained for them\. Bank account signing arrangements will allow for two panel signatories\. All bank accounts will be reconciled monthly\. Full detailed accounting and control procedures will be documented in the FMPPM\. As part of eligibility criteria, a Financial Management capacity assessment will be made by the Finance Manager before funds are transferred to the component recipients\. Recommendations for improvements will be made where weaknesses are identified and assistance can be provided\. General (Financial Management) The NAC has responsibility for the coordination of the activities under the ZANARA project\. The NAC working under a Cabinet Committee of Ministers for H1V/AIDS will establish a secretariat to provide Technical guidance and implement Council decisions\. A PAU will be established comprising the ZANARA Project Manager (PM), including Finance, Procurement and Monitoring Managers located at the MOFNP until such time that requisite capacity has been created at the NAC to assume these responsibilities, if appropriate\. Under the supervision of the PM, the Finance Manager will be responsible for ensuring that financial management and reporting procedures to be put in place will be acceptable to the Government, the World Bank and other Cooperating Partners\. ZANARA proposes to use the existing GRZ Financial regulations to govern the financial procedures for the project funds\. The accounting functions for the project will be incorporated within the existing GRZ structures at MOFNP\. The principal objective of the ZANARA project's FMS will be to support management in the deployment of resources with due regard to economy, efficiency and effectiveness in the fight against HIV/AIDS and the subsequent relief to the people of Zambia\. Specifically, the FMS must be capable of producing timely, understandable, relevant and reliable financial information that will enable management to plan, implement, monitor and appraise the project's overall progress towards the achievement of the objectives\. The ZANARA Project FMS will be developed in accordance with the Action Plan presented in Section B below\. Financial Management Action Plan Financial Management and Procurement Committee (FMPC) Reporting to the Permanent Secretary of the MOFNP, a representative of FMPC will be appointed to review the quarterly Financial Monitoring Reports (FMRs) comprising: (i) Financial reports\. The reports will include as a minimum a statement showing for the period and - 70 -  cumulatively cash receipts by sources and expenditures by main expenditure categories; the starting and closing cash balances; and supporting schedules comparing actual and planned expenditures\. Members of the FMPC will review and approve Quarterly and Annual Financial Statements; they will examine material variances between budget and actual figures, seeking appropriate remedial action within an agreed timeframe\. (ii) Physical Progress reports\. The reports will include accompanying narrative interpreting the Program's progress with agreed performance(output) indicators and how costs to date relate to those planned at appraisal; highlight issues that require attention and the likely effect on the Program by completion\. (iii) Procurement reports The reports will provide information on procurement of Goods, Works and Services; including the selection of Consultants; and compliance with agreed procurement methods\. The format and contents of FMRs will be agreed with IDA\. Staffing The recruitment of staff has started and an internationally qualified Finance Manager will be appointed to direct and guide the financial operations\. To assist the Finance Manager suitably qualified and experienced staff will be made available from MOFNP or competitively sourced from the open market\. Varying levels of staff training may be required in financial management, government accounting; information systems and computer applications; and procedures relating to the utilization of funds (e\.g\. Special Accounts, Disbursements, SOEs, Special Commitments, Procurement, etc\.)\. On-the-job training will be provided\. Accounting System/Financial Procedures/Internal Audit A Financial Management Consultant will be recruited to advise on the selection and installation of the Program's computerized FMS (using an integrated accounts package) which must be compatible with IFMS at MOFNP, to prepare the (FMPPM and to train staff in the operation of the system\. Provision has been made in the Project Preparation Fund budget for recruiting the consultant, procuring computer hardware and software\. The consultant and the Finance Manager will be required to train the recipient ministries in IDA guidelines/procedures, and communities in basic bookkeeping and provide accounting guidelines\. [An operations manual will spell out: eligibility criteria and eligible expenditures description; funding mechanisms and channel forflow of funds to recipients; review and screening and authorization (ex-ante); payments; accountability and transparency measures; monitoring and compliance assessment (ex-post); relation with IDA and other donors and methods of withdrawal; forms andformats\.] The Internal Audit Department at MOFNP and ZAMSIF will be involved in the periodic review of the project's activities\. Due to the large resources going down to the Community level it is proposed that extensive internal audits are carried out for all funds transferred to the Community with reasonable frequency\. The Internal audit should work in close collaboration with the M&E Unit\. Through well structured workshops the Communities can be sensitized to provide the internal checks at the community level\. - 71 -  Planning and Budgeting\. Counterpart Funding if part of this project will be approved in line with the Government's budgetary process\. The Finance Manager, in consultation with the PM, the Procurement, the Monitoring Manager and the FMPC, will be responsible for preparing the Program's Consolidated Quarterly/Annual, Work plans and Cash Flow Forecast in line with generally accepted accounting practice\. Government Accounting - Cash vs\. Accruals Base\. The ZANARA Project will meet the MOFNP requirement for modified cash accounting\. Thus, for the period of the project, Project funds will be accounted for on a cash basis\. Procurement of Goods, Works and Services\. Procurement procedures will be documented in the FMPPM\. World Bank and Government procurement regulations will be observed\. The Finance Manager and support staff must be conversant with those procedures, as internal control issues and the incurring of liabilities on behalf of the Project will be matters of concern to the financial management function\. A Procurement Management Report, showing procurement status and contract commitments, will be prepared quarterly for consideration by the FMPC (see above)\. Withdrawals/Disbursements\. Existing disbursement procedures as outlined in the Bank's Disbursement Handbook will be applied on the project, i\.e\. Direct Payment, Reimbursements and Special Commitments\. By appointing an internationally qualified person as Finance Manager, and engaging a consultant to design and implement ZANARA Project's FMS, it should be possible for the client to move towards report (FMR)-based disbursements as a possible option\. However, considering the nature of the project:anticipated rapid disbursements and it's short duration(4 years) the Client has decided to stick to the transaction based disbursements for the duration of the project\. Fixed Assets/Civil Works/Consultants\. Control procedures will be documented in the FMPPM\. A Fixed Assets Register will be prepared, regularly updated and checked\. Regarding Capital Work in Progress, controls will be established to ensure that payments are made only for certified work (including physical verification)\. A Contracts Register will be maintained for all contracts with consultants\. A Procurement Management Report, showing procurement status and contract commitments, will be prepared quarterly for consideration by the FMPC\. Financial Reporting (i) Monthly Cash\. In compliance with Government requirements, the Finance Manager will be responsible for preparing a Monthly Return to the Accountant General, MOFNP\. (ii) Quarterly\. Financial Monitoring Reports will be produced and submitted to the FMPC (iii) Annually\. The Program's Financial Statements will include: (a) A Consolidated Statement of Sources and Uses of Funds analyzed by Cooperating Partner ( i\.e\., IDA, counterpart and donor funds; uses of funds according to categories) (b) Program Balance Sheet as at the reporting date; (c) Notes on significant accounting policies and standards adopted by management when preparing the accounts; and on any supplementary information or explanations deemed appropriate by management to enhance the presentation of a "true and fair view"; (d) A Statement reconciling the balances on the various Bank Accounts to the bank balances on the Statement of Sources and Applications of Funds; (d) SOE Withdrawal Schedule, listing individual withdrawal applications relating to disbursements by the SOE Method, by reference number, date and amount; (e) A Cash Forecast for the next two quarters\. - 72 -  Indicative formats for Financial Statements are outlined in a number of World Bank publications - Financial Accounting Reporting and Auditing Handbook (January 1995), Financial Monitoring Reports: Guidelines to Staff/Borrowers (November 30, 2001)\. In due course, the agreed formats adopted by the FMPC will be documented in the FMPM\. External Audit Audited financial statements will be submitted to the Bank within six months after the financial year end\. In Zambia, the Office of the Auditor General (AG), as outlined in the Constitution of Zambia Act 1996, is responsible for the external auditing of all Government Funds\. In practice, because of capacity constraints, the AG frequently appoints relevantly qualified, experienced and independent private sector auditors as his/her agents on approved terms of reference\. In such cases, the private sector auditor reports directly to the AG who retains the overall signing responsibility for the audit opinion\. Besides expressing a primary opinion on thefinancial statements in compliance with International Auditing Standards (IFAC/INTOSAI), the AG must include a separate paragraph commenting on the accuracy and propriety of expenditures withdrawn under SOE procedures and the extent to which these can be relied upon as a basis for loan disbursements\. Regarding the Special Account, the AG will also be expected to form an opinion as to the degree of compliance with Bank procedures and the balance at the year-end\. Additionally, the AG will be required to prepare a separate Management Letter giving observations and comments, and providing recommendations for improvements of accounting records, systems, controls and compliance with financial covenants\. - 73 -  Annex 7: Project Processing Schedule ZAMBIA: Zambia National Response to HIVIAIDS (ZANARA) Project Schedule, Planned Actual Time taken to prepare the project (months) First Bank mission (identification) 10/02/2000 10/02/2000 Appraisal mission departure 04/16/2001 04/16/2001 Negotiations 04/08/2002 04/12/2002 Planned Date of Effectiveness 02/28/2003 Prepared by: Ministry of Finance and National Planning, supported by a Project Preparation Team including the (Interim) National AIDS Council, Ministry of Health, Central Board of Health, NGOs, private sector\. Preparation assistance: IDA Project Preparation Facility Q2670-ZA for the sum of US$ 435,300 was provided for various preparation activities\. The preparation activities involved consultancies (PIM, procurement and financial management), office equipment and furniture, and training workshops\. Bank staff who worked on the project included: Name Speciality Albertus Voetberg Lead Health Specialist/Team Leader Andrew Follmer Operations Officer Muhammad Ali Pate Young Professional/Public Health Specialist Helen Mbao Social Development Specialist Trina Haque Senior Economist Bwalya Mumba Procurement Specialist Subhash Dhingra Procurement Specialist Fenwick Chitalu Financial Management Specialist Chris Walker Lead Specialist - Quality Assurance/Peer Reviewer Rollinah Mudenda Task Team Assistant Debrework Zewdie Adviser - Peer Reviewer Susan Stout Lead Implementation Specialist - Peer Reviewer Vanessa Saldanha Program Assistant - 74 -  Annex 8: Documents in the Project File* ZAMBIA: Zambia National Response to HIV/AIDS (ZANARA) A\. Project Implementation Plan Draft (March, 2001) -- final document is a condition for effectiveness B\. Bank Staff Assessments Economic Assessment for MAP Projects -- August, 2000 Institutional Assessment -- March, 2001 Social and Gender Assessment - March, 2001 C\. Other HIV/AIDS in Zambia: Background Projections, Impacts and Interventions ---September 1999 Zambia National Strategic Framework on HIV/AIDS -- 2000 Costing the Zambia National HIV/AIDS Strategic Framework 2001-2003, October 2000 Orphans and Vulnerable Children: A Situational Analysis, Zambia 1999 Database of External Contributions to Zambia's HIV/AIDS Response, GRZ/WB/UNAIDS, April 2000 HIV/AIDS Bibliography, an annotated review of research on HIV/AIDS in Zambia, GRZ/UNICEF, 1996 World Bank Identification Mission Aide-Memoire - September, 2000 World Bank Preparation Mission Aide-Memoire, report on the HIV/AIDS Round table -- November, 2000 World Bank Project Concept Document - February, 2001 World Bank Pre-Appraisal Mission Aide-memoire -- February, 2001 *Including electronic files - 75 -  Annex 9: Statement of Loans and Credits ZAMBIA: Zambia National Response to HIVIAIDS (ZANARA) 02-Dec-2002 Difference between expected and actual Original Amount In US$ Millions disbursements Project ID FY Purpose IBRD IDA Cancel Undlsb\. Orig Fnn Rev'd P070122 2001 RegionalTradeFac Proj -Zambia 000 1500 000 1139 156 000 P057167 2001 TEVET 0 00 25 00 0 00 24 73 -0 21 0\.00 P003227 2001 RAILWAYS RESTRUCTURING PROJECT 0 00 2700 0 00 8\.51 4 78 0 00 P050400 2000 PUB SVC CAP (PSCAP) 0 00 28 00 0 00 19 83 22 59 0 00 P063584 2000 Sodal InvesbmentFund (ZAMSIF) 000 6470 000 47 89 1130 000 P064064 2000 MINE TOWNSHIP SERVICES PROJECT 000 3770 000 28\.37 1920 000 P003249 1999 BASICEDSECINVPRG 000 4000 000 21\.20 2388 401 P003236 1998 NATIONAL ROAD 0 00 70 00 0 00 13 93 1418 0 00 P035076 1998 POWERREHAB 0o00 75\.00 0\.00 35\.07 3852 2642 P003253 1997 Environmental Support Program 00o0 1280 000 665 6\.87 000 P044324 1997 ENTERPRISE OEVELPMNT 0 00 45 00 0 00 0\.72 3 74 0 81 P040642 1996 ERIPTA 0\.00 23 00 0\.00 8 56 231 2 31 Total: 0 00 463 20 000 226 86 148 72 33 55 ZAMBIA STATEMENT OF IFC's Held and Disbursed Portfolio Jun 30 - 2002 In Millions US Dollars Committed Disbursed IFC IFC FY Approval Company Loan Equity Quasi Partic Loan Equity Quasi Partic 1998 AEF Amaka Cotton 1\.30 0\.00 0\.00 0\.00 1\.30 0\.00 0\.00 0\.00 2001 AEF Chingola Htl 0\.96 0\.00 0\.00 0\.00 0\.96 0\.00 0\.00 0\.00 1998 AEF Drilltech 0 12 0\.00 0\.15 0\.00 0\.12 0\.00 0\.15 0\.00 1999 AEF Esquire 0\.30 0\.00 0\.00 0\.00 0\.30 0\.00 0\.00 0\.00 1997 AEF JY Estates 0\.89 0\.00 0\.00 0\.00 0\.89 0\.00 0\.00 0\.00 2001 AEF Michelangelo 0\.20 0\.00 0\.00 0\.00 0\.20 0\.00 0\.00 0\.00 1997 AEF Pentire 0\.38 0\.00 0\.00 0\.00 0\.38 0\.00 0\.00 0\.00 2000 APC Ltd\. 2\.50 0\.00 0\.00 0\.00 2\.50 0\.00 0\.00 0\.00 1972/73 Bata Shoe ZA 0\.00 0\.00 0\.00 0\.00 0\.00 0\.00 0\.00 0\.00 1997 Finance Bank 0\.25 0\.00 0\.00 0\.00 0\.25 0\.00 0\.00 0\.00 2000 KCM 0\.00 5\.67 26\.31 0 00 0\.00 5\.67 19 69 0\.00 2000 Marasa Holdings 4\.60 0\.00 0\.00 0\.00 4\.60 0\.00 0 00 0\.00 1998 Nicozam 0\.00 0\.30 0\.00 0\.00 0\.00 0\.30 0\.00 0\.00 1999/00 Zamncell 2\.97 0\.44 0\.00 0\.00 2\.97 0\.44 0\.00 0\.00 Total Portfolio: 14\.47 6\.41 26\.46 0\.00 14\.47 6\.41 19\.84 0\.00 Approvals Pending Commitment FY Approval Company Loan Equity Quasi Partic 2000 AEF QNet 0\.34 0\.00 0\.08 0\.00 Total Pending Commitment: 0\.34 0\.00 0\.08 0\.00 - 76 -  Annex 10: Country at a Glance ZAMBIA: Zambia National Response to HIVAIDS (ZANARA) Sub- POVERTY and SOCIAL Saharan Low- Zambia Africa Income Development dlamond' 2001 Populaton, mid-year (mnillIons) 10\.3 674 2,511 Life expectancy GNI per capita (Atlas method, US$) 320 470 430 GNI (Alias method, US$ billions) 3\.3 317 1,069 Average annual growth, 1995-01 Population (%) 2\.3 2 5 1\.9 Laborfrce (b96) 2\.8 2\.6 2\.3 GNl Gross per prmary Most recent estimate (latest year available, 1995-01) capita enrollment Poverty (% ofpopulation below natlonal poverty line) 73 Urban population (% of total population) 40 32 31 Life expectancy at birth (years) 45 47 59 Infant mortality (per 1,000 lIve births) 114 91 76 Child malnutritlon (% of children under 5) 24 \. \. Access to Improved water source Access to an improved water source (% of population) 63 55 76 Illiteracy (% ofpopulaton age 15+) 22 37 37 Gross prmary enrollment (% of school-age population) 79 78 96 -Z mbra Male 81 85 103 Low-income group Female 76 72 88 KEY ECONOMIC RATIOS and LONG-TERM TRENDS 1981 1991 2000 2001 Economic mtlos' GOP (US$ bUllons) 4\.0 3 4 3 2 3\.6 Gross domesUc InvestmentGDP 19\.5 11\.0 19\.2 20\.9 Trade Exports of goods and services/GDP 28\.7 34\.6 17\.3 22\.1 Gross domestic savings/GDP 7\.6 8\.4 -3\.2 3\.5 Gross national savings/GDP 0 6 4\.2 -8\.3 -0\.8 Current ascount balance/GDP -19\.7 -15\.2 -18\.8 -20 4 Domestc Investment Interest payments/GDP 2\.5 7\.1 savings Total debVGDP 91\.3 206\.3 194\.9 161\.3 Total debt servicelexports 36\.0 51\.1 36\.8 Present value of debVGDP \. \. 129\.3 114\.6 Present value of debt/exports \. \. 469\.0 393\.3 Indebtedness 198141 199141 2000 2001 200145 (average annual growth) GDP 1\.0 1\.0 3\.6 5\.2 42 Zambia GDP per capIta -2\.0 -1\.5 1\.5 3\.1 2 1 Low-income group Exports of goods and services -3\.0 4\.1 4\.9 2\.8 5\.0 STRUCTURE of the ECONOMY 1981 1991 2000 2001 Growth of Investment and GOP (%) ff of GOP) lo Agriculture 17\.0 17\.4 22\.3 22\.0 Industry 40\.1 51\.0 25\.3 25\.7 so Manufacturing 19\.3 36\.7 11\.4 11\.2 Services 43\.0 31\.6 52\.4 52\.3 o 9 97 Be 99 oo 01 Private consumption 61\.8 59\.8 91\.3 84\.6 \.so General govemment consumption 30\.6 31\.8 12\.0 11\.8 GDI --*-GDP Imports of goods and servIces 40\.6 37\.3 39\.7 39\.5 (average annual growth) 1981-91 199141 2000 2001 Growth of exports and Imports (%) Agricuture 3\.4 4\.3 1\.4 -2 4 30 Industry 1 2 -3 7 2\.9 9\.8 i Manufacturing 4\.5 1\.3 3\.6 5\.7 Services -0\.5 3\.0 4 4 5\.1 [ 97 5 Private consumption 3\.3 1\.4 -1\.3 3\.5 General govemment consumption -1\.1 -7\.0 -1\.6 6 4 Gross domestic Investment -5\.0 8\.9 17\.3 18 3 -Exporte ---mports Importsofgoodsandservices -1\.7 3\.8 0\.9 6\.9 Note\. 2001 data are prelirrinary estimates\. *The diamonds show four key indicators in the ountry (in bold) compared with its incom-group average it data are nissing, the diamond will be incornplete - 77 -  Zambia PRICES and GOVERNMENT FINANCE 1981 1991 2000 2001 InflatIon (%) Domestic prices so (% change) Consumer prices 13 0 92\.6 26\.0 21\.7 40 Implicit GDP deflator 7\.8 92 7 30 0 24\.3 z 20 Government finance is (Y\. of GDP, includes current grants) o Current revenue 23 5 18\.7 19 4 19\.1 as 97 9s 99 00 01 Current budget balance -9 8 -10 6 3 4 -0 5 - GOP deflator * CPl Overall surplus/deficit \. -16 0 -10\.7 -12\.9 TRADE (US$ millions) 1981 1991 2000 2001 Export and Import levels (USS mill\.) Total exports (fob) 996 1,085 746 871 1 Copper 895 430 504 Cobalt 94 67 86 oo i0 Manufactures \. 46 163 190 Total imports (cf) 1,065 952 978 1,253 Food \. \. 9 10 r Fuel and energy \. 83 177 220 Capital goods \. 285 284 460 0 05 go 97 a8 9s 00 0 Export pnce index (1995=100) \. 83 69 65 Import price index (1995=100) 62 87 92 86 U Exports UImp-wrts Terms of trade (1995=100) \. 95 74 75 BALANCE of PAYMENTS (US$ millions) 1981 1991 2000 2001 Current account balance to GDP (%) Exports of goods and services 1,149 1,169 872 1,041 o Imports of goods and services 1,650 1,258 1,317 1,625 - Resource balance -501 -89 -445 -564 s Net Income -156 4384 -145 -139 -10 Net current transfers -123 -40 -18 -20 101111111 Current account balance -780 -513 -608 -743 Financing items (net) 371 544 716 860 Changes in net reserves 409 -31 -108 -117 2 Memo: Reserves including gold (USS millions) 142 194 113 186 Conversion rate (DEC, IocallUS$) 0\.9 64\.6 3,110\.8 3,610\.9 EXTERNAL DEBT and RESOURCE FLOWS 1981 1991 2000 2001 (USS millions) Composition of 2000 debt (USS mill\.) Total debt outstanding and disbursed 3,621 6,968 6\.311 5,884 IBRD 347 373 25 17 G 111 IDA 4 493 1,828 1,869 F 86 A 25 Total debt service 421 599 329 \. 8- 1,828 IBRD 43 344 10 10 IDA 0 10 17 23 E\. 2,151 Composition of net resource flows OfFicial grants 26 521 185 211 OffIcial creditors 183 115 Pfivate creditors -20 -7 Foreign direct Investment -38 0 122 140 D-912 C 1\.198 Portfolio equity Worid Bank program Commitments 26 273 A - IBRD E - Bilateral Disbursements 20 210 210 \. i-IDA D -Other rnublateral F- Pnvate Principal repayments 17 168 12 17 C-IMF G - Short-term Netflows 3 41 198 Interest payments 26 186 14 16 Net transfers -23 -145 184 uevelopment tconomics wa\.iue- - 78 -  Additional Annex 11 Supervision Strategy ZAMBIA: Zambia National Response to HIV/AIDS (ZANARA) Objectives The first year of implementation for the ZANARA is expected to be FY03\. Although the project preparation has been extensive, it is still anticipated that there will be considerable need for close supervision during the initial years of project implementation\. The main objectives of the supervision in the first year are to (a) ensure that there is adequate implementation capacity at the district levels and all the participating line ministries; (b) ensure that the NAC and Secretariat have adequate capacity and support to begin carrying out their mandate of coordination and M&E; and (c) ensure adherence to appropriate safeguards and fiduciary responsibilities\. Strategic focus The supervision strategy will focus on the following critical areas in the first year\. However, as is the case with the overall project design, flexibility in focus for support supervision will be required in order to be responsive to evolving priorities or emerging problems\. Institutional arrangements for the implementation\. The supervision will focus on the essential institutional arrangements in order for the project to carry out the planned project activities\. The role of the DATFs and the District Planning Sub-Committees in the district level coordination of project activities under the CRAIDS component will be evaluated during the first year of implementation\. The project cycle for the district and sub-district proposals will also be reviewed with regards to efficiency and timeliness of implementation\. At the national level, the evolution of the Joint Project/PAU located under the MOFNP and the role of the Joint HIV/AIDS Steering Committee with the participation of all the donors will both be closely monitored\. During the initial stages of the project there will be a strategic focus on the strengthening and creation of partnerships - with civil society organizations, private sector organizations and within the public sector - for the implementation of the national program\. Such partnerships are seen as the main vehicle to address concems about the absorptive capacity to intensify the national response to HIV/AIDS as significant as foreseen under the project\. Monitoring and Evaluation\. In a multi-sector project with diverse implementing agencies such as this, it will be important to have a sound M&E system in place early during project implementation\. At the core of the mandate of the NAC is the M&E function for the overall national program\. The project will strengthen the M&E capacity within NAC in collaboration with the ADB and other cooperating partners\. During the first year, the supervision activities will focus on achieving an adequate level of functioning for the M&E\. It is anticipated that participatory stakeholder meetings will form part of the annual project reviews for the CRAIDS and the Line Ministry components\. Joint M&E systems, such as being developed for the Kenya and the (proposed) Tanzania programs will be used to give the NAC Secretariat the advantage of sample tools and lessons learned elsewhere\. Coordination\. The core function of the NAC is the co-ordination of a large range of activities and initiatives implemented by a host of agencies from the public sector, the pnvate sector and civil society organizations, from national level to decentralized level\. The supervision strategy will concentrate on supporting the NAC Secretariat in this formidable task\. Key targets in the inital year will be the development of a Joint M&E Framework for the national program, the development of a model for Joint HIV/AIDS Program Reviews, the elaboration of a joint financing framework for HIV/AIDS, and the functioning of the PAU as the institution for joint administrative functions\. Procurement\. Supervision will provide problem-solving support on procurement and evaluate whether capacity and procedures for the centralized procurement are in place\. - 79 -  Financial management\. During the first year the project, supervision will focus on the establishment and management of the two Special Accounts and facilitate timely flow of funds directly to implementation entities\. The argument for the fast tracking of this project hinges on an efficient and fast-disbursement channel to support the community and multi-sector responses to HIV/AIDS\. Partnerships\. Many UN and bilateral agencies such as UNAIDS, WHO, UNICEF, ADB, EU, DFID, USAID, SIDA and the Dutch have made useful contributions during the ZANARA project preparation\. Such contributions resulted in the proposition for establishing joint coordination mechanisms\. The supervision of the project will continue to build such partnership and collaboration\. Three methods are identified to further develop the partnership and collaboration: (i) Joint-missions\. The IDA team will participate in the annual joint review of the national HIV/AIDS program as organized by the NAC Secretariat and supported by the PAU\. Whenever there would be need for additional missions, the IDA team will invite other partners to participate in these supervision missions and reviews of the project\. Donor agencies have experts in the area that they may have comparative advantages to be part of the IDA supervision mission team\. (ii) Sharing international experiences and best practices through supervision\. Inviting people with experiences of implementing successful HIV/AIDS related programs outside to join the mission to share their expertise and experiences\. Such support can be provided and financed by the donor community, and (iii) Periodic evaluation of the partnerships with a view (i) to strengthen of the relations; (ii) achieve our common goals in Zambia; and (iii) improving coordination\. During the project launch workshop, the IDA team will discuss the options described above with various partners to confirm possible arrangements and support\. Supervision The project will need intensive supervision given the large span of activities, its blend of public and private sector interventions, and its multi-sectoral as well as its multi-agency nature\. In addition, concems about a limited capacity will require intensive support to develop partnerships for the implementation of the national program\. The project will be implemented by many entities only recently established and whose capacity will need strengthening\. A budget of US$200,000 and a full-time staff based in the Lusaka Country Office is needed to supervise the project during the first 12 months of project implementation\. The Country Director has already committed to provide a supervision budget of up to $200,000 during the first twelve months of implementation\. The project task team would consult with the Bank's Global HIV-AIDS Office early on during implementation to explore additional financial contributions for M&E\. Some of the skills required for the supervision of the ZANARA project will be needed on a regular basis while others will be required on an ad hoc basis\. It is therefore proposed to establish a project team, which will emphasize financial, procurement and operational basic needs, complemented by technical specialists, in particular those covering M&E, community participation, maternal and child needs, sectoral concems and sub-regional matters\. A much more intensive than normal supervision program should be carried out during the first year of the project to put in place a sound institutional base and properly begin interventions to be undertaken by this complex operation\. Clearly there will be an incubation period for the main new institution, the NAC, whose staff will have just come on board, developing a management culture, preparing terms of reference, and with limited World Bank procurement/financial management experience\. The project team will need to assess-on the ground-whether the indicators levels chosen are realistic, given the - 80 -  Zambia situation and do conform to those in the Joint M&E framework that will be developed, or need adjustments\. The staff in the Lusaka Country Office will provide support on a continuous basis and will sollicit support in specialized areas as required\. Project supervision will also benefit from the Bank's: (i) Senior Health Specialist with extensive experience in operations and MAP projects elsewhere; (ii) education team involved in the Bank's new education sector program; and (iii) the Bank's team in the Country Office working on the ZAMSIF\. In addition there will be an (i) M&E specialist consultant; (ii) implementation specialist to provide longer term support and to troubleshoot implementation issues at an early stage, (iii) maternal and child needs specialist, and (iv) NGO/CBO/community participation specialist\. The project team therefore includes the following members: (i) Task Team Leader with experience in HIV/AlDS operations; (ii) health/nutrition/population specialist, (iii) senior implementation specialist, to help in the critical first half year of project's implementation; (iv) financial management specialist who will review adherence to Bank procedures with regard to fiduciary responsibilities; and (v) procurement and implementation specialists, responsible for the procurement, implementation, and institutional issues and (vi) sectoral specialists in the areas of education, gender, maternal and child needs, and community participation\. The ZANARA project team will be complemented by representatives of Zambia's development partners who are active in the fight against HIV/AIDS\. The wide variety of stakeholders, both in terms of technical focus as well as geographic coverage, poses an enormous challenge to the forging of a framework for coherent programme implementation\. While the various stakeholders work well together under the umbrella of NAC it was felt that the consideration of more formal working arrangements including the development of joint planning and monitoring processes would be helpful\. This could start with a joint review of progress towards the delivery of the strategic plan\. The ZANARA project team will provide support to the process as well as the content of the joint program reviews as required\. The establishment of a specific Joint HIV/AIDS Steering Committee with the participation of all the donors will further facilitate and enhance their role and technical input to the broader project implementation issues\. Staff Allocations [Bank Budget (BB)] Staff # of staff weeks Task Team Leader (Lusaka) or designee 14 Lead Health Specialist 8 Education Specialist 4 Social Sector / Community Participation Spec\. 8 Procurement Specialist 4 Financial Management Specialist 6 Other 3 Total 47 - 81 -  Consultants (BB, Trust Funds, or Partner support) # of staff weeks # of missions Monitoring and Evaluation 10 4 Community Participation 4 2 Nutrition 10 3 Procurement/Financial 12 4 Other 8 2 Total 44 15 -82 -  Additional Annex 12 Supervision Strategy ZAMBIA: Zambia National Response to HIV/AIDS (ZANARA) PROJECT IMPLEMENTATION MANUAL CRAIDS COMMUNITY RESPONSE TO HIV/AIDS COMPONENT Of the National Response to HIV/AIDS ZANARA Ministry of Finance and Economic Development Lusaka Zambia 18/06/01 - 83 -  Section 1 Introduction and Situation Analysis 1\.1 The HIVIAIDS Epidemic In Zambia HIV/AIDS is Zambia's most challenging development problem today\. The 1998 antenatal survey found HIV prevalence rates of 27 percent in Zambia's major cities\. Rates are very high along major highways and in trading centres and border, farming and mining towns\. The 1998 survey reported rates of 31 percent in the border town of Livingstone and 27 percent in Chipata\. A Ministry of Health expert group estimated that provincial adult HIV prevalence was 26 percent in Lusaka, 23 percent in the Copperbelt and 19 percent in the Northern Province\. National adult HIV prevalence is estimated to be 20 percent, which means that more than 1 million Zambians have HIV\. The context of the current HIV/AIDS epidemic is alarming\. More than 50 percent of the country's population are less than 20 years of age and they constitute the most vulnerable group to HIV/AIDS\. As one of the most urban countries in Africa, urban migration characterised as movement from smaller towns to larger cities is still in occurrence\. The mobility of Zambians is directly relevant to the epidemic\. A recent survey indicates that less than ten percent of Zambians had lived in their present location for less than five years\. This type of movement increases the likelihood that sexual activity with non-regular partners occurs\. It also reinforces the need for dissemination constant and consistent prevention messages to the population as new people move in and out of communities\. While recent sentinel surveillance data and population surveys indicate encouraging signs of a decreasing prevalence among the younger, urban and more educated, overall infection rates are not expected to decrease significantly for many years\. Furthermore, the death rate will not decrease for some time even if infection rates are stablised\. In general, it is estimated, even with a levelling of infection rates, rates will remain high through 2010\. Furthermore, the death rate will not decrease until 2030 and an impact on the orphan rate will not be felt until nearly 2050\. People living with AIDS in Zambia are stigmatised and they experience some form of discrimination\. This in part is due to beliefs that AIDS is associated with illicit sex and the result of sin\. Some of the stigma is associated with misconceptions of how HIV is acquired\. Some of the adverse consequences of such stigma include but are not limited to an increased burden and suffering among those living with AIDS, a reluctance of individuals to know their HIV status, delay in seeking health care, and delays by communities to respond to HIV prevention in their communities\. This stigma is even extended to the family members, friends, caretakers and contacts of people living with AIDS\. The overall burden of HIV on the Zambian economy is tremendous\. Frequently the primary bread winner of the family falls ill first placing the family in economic jeopardy\. The burden of caring for the ill comes at opportunity costs for earning family income, attending school and caring for small children\. The increased health care costs are too much for most families to absorb and the chronically ill patient does without\. Given the slow progression of AIDS, many families exhaust - 84 -  their entire savings long before the transition of the person with AIDS\. The illness and and death of these economically active prime-age adults result not only in higher medical expenses and lower incomes for family members, but also in worsened health and little or no investment in the future of the survivors\. Survivors, especially women and children, may also lose access to land, housing, livestock and other assets because they have no protected rights to inherit property from their husbands or fathers\. Neither children nor women have any legal recourse to recovering their husbands' or fathers' property removed from them\. The impact on the work force has been felt at all levels including private sector and government\. No government ministry is immunised against losing trained and skilled members\. The costs to the private sector of losing trained labour are forcing many private sector companies to develop HIV/AIDS work place policies directed at both prevention, but also protection policies for chronically ill members of staff\. It is perhaps on the children that the AIDS epidemic is most acutely felt\. Fifteen percent of Zambian children are orphans\. An estimated 23% of those orphans result from AIDS\. Projections for 2010 indicate that AIDS may likely account for two-thirds of orphan children\. The children witness the slow deterioration of their parents' health and the subsequent shunning from the extended family and community, where AIDS remains a highly stigmatised disease\. Children frequently drop out of school as the family income decreases and/or to care for an ill parent\. The extended family system has absorbed orphans into their families, but give the magnitude of the epidemic, the question becomes for how much longer before it buckles\. The National Strategic Plan for HIV/AIDS places people at the centre of the solution\. Experience has shown that communities in Zambia have proved to be the driving force behind HIV/AIDS prevention and care\. The young too have shown that behavioural change is possible\. The community has had to bear the major impact in terms of caring for the sick and orphans, widows and widowers\. Communities have also been able to some extent to take ownership of the problem - this is evidenced by the emergence of prevention, care and mitigation activities that have been successfully initiated and implemented by community members\. This response however needs support, co-ordination and facilitation in order to effectively scale up\. 1\.2 Background Information on ZAMSIF The Government of the Republic of Zambia has already committed itself to a programme of poverty reduction, which emphasises empowerment, and subsequent involvement of the people not only as beneficiaries but also as providers of their own services\. GRZ has recently launched ZAMSIF, which supports community based development for poverty reduction\. The ZAMSIF goal is to contribute to the improved, expanded and sustainable use of services provided in a governance system where local governments and communities are mutually accountable\. ZAMSIF has three development objectives, which are to: * Achieve sustainable improved availability and use of quality basic social services by beneficiary communities and specific vulnerable groups; * Contribute to the building of capacity for improved local governance; and - 85 -  * Strengthen the capacity to provide timely information on poverty and social conditions and facilitate its use in policy making\. In order to achieve these objectives, ZAMSIF has three components: * The Community Investment Fund (CIF) which aims to empower local communities through the financing of sub projects identified, implemented, managed and maintained by communities; * The District Investment Fund (DIF) which addresses the second objective and aims to strengthen the capacity of local government to respond to community needs and initiatives; * The Poverty Monitoring and Analysis (PMA) component which addresses the third objective and which supports policy related research\. The Government has agreed that ZAMSIF will be the most appropriate implementing agency for the Community Response to HIV/AIDS (CRAIDS) component of the National Response to HIV/AIDS for the following reasons: * ZAMSIF is based on 10 years of successful experience of community based development and has established administrative procedures, monitoring and information systems for funding communities; * ZAMSIF DIF component has an existing emphasis and focus on capacity building at the district level which will also address the needs of the District AIDS Task Forces\. * ZAMSIF is a multi-sector agency, HIV/AIDS cuts across all sectors; * ZAMSIF has been found to be efficient and effective\. This component will use existing management systems and support which obviates the need to set up parallel structures in order to achieve a quick response; * ZAMSIF is able to respond to the management needs of different donors and programmes\. Section 2 Project Summary - Community Response to HIV /AIDS Component 2\.1 CRAIDS Component Objectives The Community Response to HIV/AIDS (CRAIDS) component of the Zambia National Response to HIV/AIDS (ZANARA) will be based on the National Strategic Plan for HIV/AIDS and the experience of community based development gained by ZAMSIF and its the predecessors Social Recovery Projects I and II\. Objective The objective of Community Response to HIV/AIDS CRAIDS component is: To improve the response of communities to the HIV/AIDS epidemic, which contributes to the prevention of HIV/AIDS, mitigates the impact of HIV/AIDS on households and improves the quality and access to care of those affected by HIV/AIDS\. - 86 -  In order to achieve these objectives the component will have the following activities: * Support to Community aased Initiatives - financing community based projects which are identified, planned, managed and operated by communities themselves\. * Support to the District Response to HIV/ AIDS - supporting capacity building activities to enable a district response to HIV/AIDS which effectively supports and facilitates the community response; * Support to Non Governmental Organisations - supporting NGOs with programmes which address the expressed needs of communities and which meet the agreed criteria; * Information Dissemination - establishing mechanisms for the dissemination of relevant information to communities, districts and other relevant bodies in close collaboration with NAC\. These activities are described in this Project Implementation Manual for CRAIDS\. 2\.2 Institutional Support The Community Response to HIV/AIDS (CRAIDS) component of the National Response to HIV/AIDS (ZANARA) will use the existing administrative capacity and management expertise within the ZAMSIF Management Unit (MU)\. The MU, however, will be augmented with qualified personnel, according to agreed terms of reference'\. The ZAMSIF MU is a semi-autonomous unit within the Ministry of Finance and Economic Development (MOFED) and is headed by a Programme Director supported by the necessary departments and staff\. The existing ZAMSIF departments, including Field Operations and its Regional Network, Finance, Technical Departments, Capacity Building, Information and Communications and Monitoring and Evaluation departments, will support CRAIDS component\. The Programme Director will report to the NAC , Project Administration Unit in MOFED and to the ZANARA Technical Steering Committee\. 2\.3 Guiding Principles and Strategic Approach of the Community Response to HIV/AIDS 2\.3\.1 CRAIDS Approach to Community Based Development CRAIDS will support community-based projects where communities manage, plan, implement and sustain their own development\. Communities own their own projects and participate in all stages of the project cycle\. CRAIDS will support activities which address HIV/AIDS and that enhance this approach\. 2\.3\.2 Consistency with National Strategic Plan CRAIDS is designed to support the National Strategic Plan for HIV/AIDS\. The guiding - 87 -  principles of the national response to HIV/AIDS are: * People are in the centre of the solution; * Respect for the basic human rights of all persons; * Cultural norms, values and practices should be an integral part of the response; * Prioritisation by vulnerable groups and respective geographical areas; * Go to scale from the on-going projects in order to cover priority vulnerable groups; * Develop an integrated strategic management approach, which develops and monitors best practice as well as the progress in going to scale for priority areas\. It is expected that, at the national level, the National HIV/AIDS, STD, and TB Council (NAC) will provide the co-ordination required as well as policy direction, co-ordination with other donor, sector, private sector programmes and identification of potential partners\. Several working groups will assist and advise the NAC\. At the district level, the co-ordination, policy direction, identification of local partners will be provided by the appropriate district level co-ordination mechanisms, the District Development Co-ordinating Committees (DDCC) and possibly the District AIDS Task Forces (DATF)\. Priority Interventions identified by the National HIV/AIDS Strategic Plan are: * Mobilisation of a multi sector response, especially at district level; * Promotion of behaviour change and reduction of high risk behaviours; * Increased and improved STD prevention and control; * De-stigmatisation of HIV/AIDS; * Increased voluntary counselling and testing; * Reduced mother to child transmission; * Improved home based care and support for people living with AIDS; * Community based support for orphans and vulnerable children; * Improved drug supply for the treatment of STD, TB and HIV positive clients; * Improved hospital level care\. 2\.3\.3 Consistency with Specific Sector Standards, Guidelines and Policy\. CRAIDS will use national technical standards and support community based projects which use recognised best practice, where these exist\. Where the standards are not available, CRAIDS will assist in the development of these in co-operation with the relevant stakeholders and NAC Technical Working Groups\. Particular attention will be paid to sustainability issues of self-reliance, community management and maintenance and sector social service delivery obligations\. NAC will provide and maintain networking links with relevant stakeholders and sector ministries so as to keep informed of sector policy change that might impact on interventions\. NAC will also provide the link between the CRAIDS programme and the NAC Technical Working Groups, which provide technical advice to the NAC and its secretariat\. 2\.3\.4 Targeting The targeting mechanism will be demand-led self targeting\. The component will respond to community demand but appraisal and approval procedures will favour the identified priority - 88 -  areas and groups\. The demand for community projects, which address the needs of those already affected, is likely to be highest from those geographical areas with show very high prevalence rates\. These have been identified in the National Strategic Framework and are: * Lusaka and Copperbelt Provinces; * Districts along the main trucking routes, well defined fishing areas, refugee populations and tourism; * Towns with frequent cross border traders\. These areas show the highest prevalence rates mostly due to high mobility of populations\. CRAIDS will also support programmes that aim to prevent HIV in those areas with low prevalence rates\. The priority target groups for the CRAIDS component are: * Women; * People Living with HIV/AIDS; * Orphans and vulnerable children; * Youth in and out-of-school, especially girls; * Commercial sex workers; * Truck drivers\. Special attention will be given to the gender factors of HIV/AIDS in the context of the imbalance of power between men and women\. Women face a greater risk of infection than men\. Women are also the main caregivers\. 2\.3\.5 Elements of Community Based Interventions CRAIDS will actively seek partnerships at all levels and will support community-based interventions which include the following elements: * Decentralisation of decision-making and devolution of responsibilities to local levels, community and district levels, through a co-ordinating mechanism at district level, possibly District AIDS Task Forces; * Interventions are based on needs and priorities identified by the community; * Local and traditional leadership structures are respected and used; * Communities take an active role to identify and manage interventions\. CRAIDS support will supplement community initiatives and not displace them; * Information is disseminated to community members, through a vigorous information dissemination; * Community projects supported by CRAIDS are linked with a more permanent institution such as a hospital, clinic, church or school, wherever possible, to provide continuity and sustainability\. 2\.3\.6 Expected Benefits\. The project is expected to generate the following benefits: - 89 -  * improving access and availability to measures which prevent HIV/AIDS; * improving care to persons affected by HIV/AIDS; * strengthening the capacity of communities to design, plan and manage commurity based interventions which aim to prevent HIV/AIDS and care for those affected by HIV/AIDS; * strengthening the capacity of district authorities' to respond to community initiatives which aim to address HIV/AIDS; * improved response and co-ordination of community based initiatives related to HIV/AIDS at the district and community level\. - 90 -  CD   | / Z A M B I A > ~~~~~~~~~~~~~~~~~~~T A N Z A N I A -TRUNK AND MAIN ROADS RIVERS /:eng \ ~~~~~RAILROADS PROVINCE BOUNDARIES ¢ -,^ \ o~~~~ SELECTED CITIES INTERNA:llONALEBOUNDARIES k ^ 3 @ ~~PROVINCE CAPITALS KAS ORTj F~~~~~~~~~DM RE\. FCOG / Lukulu }(_ 2- v /> ) } ( / ~~~~~~T L\.bt\. gZMIU l I g n S C e > 1 C A * - % 1 | M\.mb\. | X & tt E S T E t N \ >~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~M,om '"\ - \ iy ) Katbo~~~~~~~~~~~~~~OLt oWto Mgy HffE Z*--*J:N;_ , A N Li A OUTHEtChsks ' " -'eOt <> $=t Kdyt w E | \\ 2 xw9~~~~~~~~~~~~~~~~~~~~~~~~~~~e z MIBIA Aent,\.d mlt0sand 0 r~~~~~~~~~~~oid 0,-Fi ll6\. m~~~~~~\.6\. SWNB E M,oALAW-nIoenwtt _    - Type: PA -- - - IMAGING Report No\.: 25034 ZA

APPROVAL

P171607

 The World Bank Uganda: Investment for Industrial Transformation and Employment (P171607) Project Information Document (PID) Appraisal Stage | Date Prepared/Updated: 30-Oct-2020 | Report No: PIDA29501 Jun 09, 2020 Page 1 of 9  The World Bank Uganda: Investment for Industrial Transformation and Employment (P171607) BASIC INFORMATION OPS_TABLE_BASIC_DATA A\. Basic Project Data Country Project ID Project Name Parent Project ID (if any) Uganda P171607 Uganda: Investment for Industrial Transformation and Employment Region Estimated Appraisal Date Estimated Board Date Practice Area (Lead) AFRICA EAST 11-Nov-2020 19-Nov-2020 Finance, Competitiveness and Innovation Financing Instrument Borrower(s) Implementing Agency Investment Project Financing Ministry of Finance, Private Sector Foundation Planning and Economic Uganda Development Proposed Development Objective(s) To mitigate the effect of COVID-19 on private sector investment and employment and to support new economic opportunities including in refugee and hosting communities\. The project indicators are: 1) the number for firms benefiting from private sector initiatives; 2) the percentage of jobs saved that would be lost due to COVID-19; 3) the value of private investment in the manufacturing sectors; 4) the number of new loans issued to firms in manufacturing sector; 5) number of formally employed in the manufacturing sectors; 6) number for firms in RHD benefiting and 7) number of refugees accessing income generating opportunities, i\.e\. wage employment, self- employment, micro enterprise\. Components Mitigating the impact of COVID19 with a focus on the manufacturing and exporting sectors driving economic transformation, including Refugee and Host Districts Creating New Productive and Transformative Assets including in Refugee and Host Districts Implementation Support, Monitoring, Evaluation and Impact Assessment OPS_TABLE_FCC The processing of this project is applying the policy requirements exceptions for situations of urgent need of assistance or capacity constraints that are outlined in OP 10\.00, paragraph 12\. Yes PROJECT FINANCING DATA (US$, Millions) SUMMARY -NewFin1 Total Project Cost 205\.00 Jun 09, 2020 Page 2 of 9  The World Bank Uganda: Investment for Industrial Transformation and Employment (P171607) Total Financing 205\.00 of which IBRD/IDA 200\.00 Financing Gap 0\.00 DETAILS -NewFinEnh1 World Bank Group Financing International Development Association (IDA) 200\.00 IDA Credit 150\.00 IDA Grant 50\.00 Non-World Bank Group Financing Trust Funds 5\.00 UK-DFID Trust Fund to Support Uganda's NDP 5\.00 Environmental and Social Risk Classification Substantial Decision The review did authorize the team to appraise and negotiate Other Decision (as needed) B\. Introduction and Context The proposed IPF/FIL amounting to US$150 million and US$50 million from Refugee Window will support the Government of Uganda (GoU) in mitigating the impact of COVID-19 pandemic on the country’s MSMEs in supply chains that underpin Uganda’s export capability and manufacturing clusters, and also address the impact of the crisis on refugee and their host communities\. The GoU, firms based in Uganda, are experiencing an unexpected drop in both local and foreign demand\. Firms are facing the treat of insolvency and many employees are being furloughed\. The overall result is increasing unemployment and poverty\. The proposed IPF/FIL is part of the World Bank’s rapid response to help the GoU\. This project is to support those medium, small and micro firms that are less able and capable of negotiating a temporary relief in the current economic crisis, while creating the foundation for rapid recovery and support continued economic transformation\. Country Context The Covid-19 pandemic is putting Uganda’s growth trajectory at risk and exacerbating structural constraints and increasing pressure on the poor and vulnerable\. particularly those in refugee and host communities\. Uganda’s real Jun 09, 2020 Page 3 of 9  The World Bank Uganda: Investment for Industrial Transformation and Employment (P171607) GDP grew at 3\.1 percent in FY20, less than half the 6\.8 percent recorded in FY19, due to the effects of the COVID-19 crisis and is expected to grow at a similar level in FY21\. Economic activity stalled during the latter part of the fiscal year due to a domestic lockdown that lasted over four months, border closures for everything but essential cargo, and the spillover effects of disruption in global demand and supply chains due to the COVID-19 pandemic\. This resulted in a sharp contraction in public investment and deceleration in private consumption, which hit the industrial and certain service sectors particularly hard\. On a calendar year basis, real GDP growth is unlikely to exceed 1 percent during 2020, compared to 6\.7 percent in 2019, and, as a result, real per capita GDP growth is expected to contract by about 2\.5 percent\. Even if the GDP growth rebounds strongly by 2022, the level of per capita GDP is likely to remain well below its pre-COVID trajectory\.1 Sectoral and Institutional Context COVID-19 is a significant threat to emerging economic transformation in Uganda and puts prospects of new jobs in danger\. Data from the June 20202 Uganda Bureau of Statistics high frequency phone survey on the impact of the COVID-19 pandemic, shows that the following sectors lost the highest number of workers: services 43 percent, commerce 43 percent and transport 39 percent\. It is expected that the hardest-hit firms will be exporters to international markets, manufacturing companies and start-ups\. The floriculture industry, for example, which employs over 10,000 people, is facing severe disruptions in its supply chains as air cargo companies have suspended flights, but similar disruptions will also arise due to cancelation of orders, closures of restaurants, coffee shops, etc\. Restarting or continuing economic transformation will require the provision of new loans and products in the market, leaner more efficient firms and rapid adaptation to new market conditions, and the capacity to identify new markets and sources of demand, particularly for new and exporting firms\. This is consistent with the WBG’s economic response is to promote sustainable business growth and job creation by assisting countries to help firms survive the initial crisis shock, restructure, and become more resilient in the recovery3\. MSMEs in Uganda face severe liquidity constraints caused by the sharp drop in demand due to the COVID-19 crisis\. This may be especially true for firms owned by women as they tend to be less profitable4, so have less room for absorbing such shocks, and may be disproportionately impacted in their operations by the pandemic because of their higher concentration in consumer-facing sectors and the greater share of responsibility for looking after children and sick household members that tends to fall on women\. Indeed, emerging data collected from several countries in the region (including Uganda) in the Facebook Future of Business Survey shows that women’s businesses have been significantly more likely to be temporarily closed during the pandemic5\. Recognizing the pressure on Micro Small and Medium Enterprises (MSMEs) liquidity, the Bank of Uganda (BoU) has encouraged banks to provide moratoria on their loans to their liquidity-constrained borrowers for up to 12 months\. The BoU also took measures to reduce both the cost and risk associated with the bank lending\.6 In addition the BoU authorized banks to the accrue interest on outstanding loans during the moratorium period, provided the interest rate charged was no more than the interest rate charged in the original loan 1 See Uganda Economic Update 16th Edition, September 2020\. 2 Uganda Bureau of Statistics June 2020; conducted with the support of the World Bank\. 3 See Pillar 3, of the WBG, Saving Lives, Scaling-up Impact and Getting Back on Track, World Bank Group COVID-19 Crisis Response Approach Paper\. 4 World Bank Group\. (2019)\. Profiting from Parity: Unlocking the Potential of Women's Business in Africa\. World Bank\. 5https://blogs\.worldbank\.org/developmenttalk/global-state-small-business-during-covid-19-gender-inequalities; note that survey sampling is representative of Facebook Business Page administrator population and not of any country’s business population\. 6 The BoU reduced the Central Bank rate from 9% to 8% on April 6th, and from 8% to 7% on June 8th\.The BoU provided commercial banks with longer term liquidity through the issuance of reverse repos of up to 60 days at the central bank rate, with the opportunity to roll over\. In addition the BoU committed to purchasing Treasury Bonds held by Tier II and Tier III institutions (Credit Institutions and Microfinance Deposit taking Institutions) in order to remove pressure on their liquidity\. Where these institutions hold insufficient collateral in the form of Treasury Bills liquidity would also be provided against security in the form of holdings of unencumbered fixed deposits or placements with other banks\. Jun 09, 2020 Page 4 of 9  The World Bank Uganda: Investment for Industrial Transformation and Employment (P171607) agreement\. While this provided MSMEs with some immediate liquidity relief, it leaves them exposed to onerous loan amortization burdens (including repayment of accrued interest), once the moratoria on their loans expire\. COVID-19 containment measures have affected micro- and small enterprises which operate as aggregators or distributors within major agro-processing supply chains\. Micro- and small enterprises relying on variable income streams, which have already used the little equity they had or which have resorted to borrowing to cope with the COVID- 19 crisis, are likely to be an increasing burden to banks and other lenders in terms of increased non-performing loans (NPLs) and in increasing the level of required provisions\. NPLs among Tiers7 1-3 institutions are expected to rise8, particularly in the transport, tourism, trade and construction sectors\. Host and refugee communities sitting at the bottom of the pyramid, will find it even more difficult move out of subsistence as their incomes and demand for their products contracts\. There are no official estimates for Tier 4 financial institutions, that service poorer income groups, host communities and refugees, but repayments have reportedly dropped from 82 percent in January 2020 to 41 percent in April 2020 which will lead to an increase in NPLs\.9 Remittances from overseas are also a source of funds for micro-enterprises and lower income households, but these are also expected to decline by about 20 percent the world over due to the COVID-19 pandemic, and Uganda will likely be adversely impacted by this\.10\. C\. Proposed Development Objective(s) Development Objective(s) (From PAD) To mitigate the effect of COVID-19 on private sector investment and employment and to support new economic opportunities including in refugee and hosting communities\. Key Results The project will measure the mitigation of the COVID-19 impact by tracking a) the number of all firms benefiting from private sector initiatives; b) the percentage of jobs saved that would otherwise have been permanently lost due to COVID-1911\. The project will measure new ecnomic opportunities created by the project by tracking a) the value of private investment in manufacturing sectors; and b) the number of new loans issued to firms in manufacturing sectors; and c) the number of formally employed in manufacturing sectors\. The project will measure the impact in refugee and hosting communities by tracking a) the number of firms in refugee and host community districts benefiting from private sector initiatives; b) the number of refugees accessing income-earning opportunities (i\.e\. wage employment, self-employment, micro enterprise) resulting from project interventions\. 7 The financial sector in Uganda is divided into four tiers\. Tier 1-3 are regulated and supervised by Bank of Uganda and tier 4 is regulated by Uganda Microfinance Regulatory Authority\. 8 See Uganda -Policy, Regulator, Supervisory response to COVID-19 responses for Micro Finance, CGAP\. 9 See Uganda -Policy, Regulator, Supervisory response to COVID-19 responses for Micro Finance, CGAP\. 10 Uganda remittances were US$1\.3 billion in 2019, US$1\.425 billion in 2018 and US$1\.2 billion in 2017, World Bank 2017- 2019 data\. 11 The Economic Policy Research Centre conducted a rapid survey of businesses which indicated that three-quarters of businesses have laid off employees due to the risks and subsequent containment measures presented by COVID-19, and estimated that 3\.8 million workers would lose their jobs permanently while 625,957 workers risk losing their jobs permanently, if the threat of COVID and associated containment measures persist for the next six months\. Jun 09, 2020 Page 5 of 9  The World Bank Uganda: Investment for Industrial Transformation and Employment (P171607) D\. Project Description Component 1: Mitigating the impact of COVID-19\. The objective of this component is to ease liquidity constraints on MSMEs, including women led and refugee MSMEs\. For the reasons discussed above, the component will seek to prioritize the manufacturing and exporting sectors driving economic transformation, with the vision of connecting lower income regions, i\.e\. RHDs with more viable and sustainable markets\. The component will operate three different windows targeting different types of firms within the supply chain\. All PFIs will be required to provide gender disaggregated data on their portfolios in order to address the lack of data on women-led firms as well as data on refugee or host community status to ensure intersectional issues of exclusion are sufficiently addressed\. Window 1 will support the extension of the loan period for well performing firms by financing the cost of providing a grace period\. Window 2 (supporting micro firms) will target micro firms, including in RHDs, to enable them to restart or continue their operations as critical units in funding the link say between producers with aggregators, processors, and distributors\. Window 3 (receivables financing, including government arrears) will provide finance to MSMEs based on security in the form of their receivables\. Component 2: Creating and Operating New Productive and Transformative Assets\. The component is focused on enabling new financing to restart and bolster economic growth\. The component provides risk coverage for new lending to MSMEs, extends local currency liquidity on a long-term basis to larger investment projects, and de-risks or incentivizes private investment in RHDs through a competitive grant program\. Component 2 seeks to mitigate the financial sector’s risk aversion and thereby improve the availability of credit to MSMEs, and to provide longer-term finance to productive investments\. It also has 3 windows; Window 1 will target MSMEs with a focus on manufacturing and export supply chains, by setting up a Credit Guarantee Facility (CGF) to share the risks associated with new lending on a 50/50 basis with PFIs; Window 2 will provide long-term financing in the form of subordinated/convertible long-term local currency loans for up to 20 percent of the of the total project debt plus equity\. The purpose of the subordinated debt instrument is to catalyze additional long-term private sector investment and Window 3 will facilitate Investment in Rural Supply Chains in Refugee Hosting Districts\. The main objective of this window is to support investment in refugee and host districts by encouraging expansion of existing supply chains or establishment of new supply chains\. Component 3: Multi Donor Trust Fund (MDTF) for Enhancing Capabilities in Public Institutions and Private Firms\. The MDTF aims to improve the performance and coordination of public institutions and private sector firms that are critical to transformative job creation\. Improved public service delivery and coordination with private sector will facilitate a more effective partnership between research institutions, farmers and processors, and regulatory agencies, and will ensure that the project benefits cut across marginalized market segments (i\.e\. youth and female)\. The MDTF will provide technical assistance and hands on capacity building to public institutions, i\.e\. Uganda National Bureau of Standards, the Uganda Bureau of Statistics, the Uganda Warehouse Receipts Authority, Uganda Export Promotion Board, Uganda Microfinance Regulatory Authority, Uganda Investment Authority, and the Uganda Free Zone Authority, etc\. The purpose of the program support will be to deliver improved and more effective services to firms and policy makers\. The MDTF will also focus on developing firms capacities of and expanding their access to market opportunities 12 through different interventions targeting two distinct sub-group of firms: (1) potential exporters, (2) potential suppliers to large companies and multinational corporations;13 (3) domestic companies expanding their sales and growth through use of digital platforms\.14 First, it will support exporters (and potential exporters) with the assistance of local and international consultants to identify export opportunities and meet consumers demand through specialized technical assistance and capacity-building activities\.15 12 Access to demand is a crucial binding constraint for firm’s growth especially in the aftermath of COVID-19\. 13 The first two groups of firms will typically be firms with a certain scale and initial capacity, firms with more than 10 employees and with capacity to serve large clients or customers abroad (i\.e\. more likely firms with on average 15-20 employees)\. 14 This group of firms will typically include micro firms with 2 employees or more, and small ones up to 10-15 employees\. 15 This component will be open to both manufacturing and services companies\. Jun 09, 2020 Page 6 of 9  The World Bank Uganda: Investment for Industrial Transformation and Employment (P171607) Component 4: Implementation Support and Monitoring & Evaluation\. The objective of this component is to assist in the development and implementation of the different facilities, and to provide guidance and support in the setting up and operation of the Project Management Unit\. M&E activities undertaken as part of this component will focus on developing an indicator framework with baseline measurements and annual targets, monitoring the economic impact of program activities through data collection and survey implementation, and evaluating the economic impact of the program through a structured impact evaluation at the conclusion of the project\. \. \. Legal Operational Policies Triggered? Projects on International Waterways OP 7\.50 No Projects in Disputed Areas OP 7\.60 No Summary of Assessment of Environmental and Social Risks and Impacts \. E\. Environmental and Social Risk Classification (ESRC) - Substantial Environmental Risk Rating - Substantial Environmental risk is rated substantial\. Environmental impacts are expected under Components 1, 2 and 3\. Component 1 will support existing MSMEs and there is a likelihood that these MSMEs will have pre-existing / ongoing environment, health and safety (EHS) issues/risks (use of solvents or toxic substances, industrial accidents, etc\.)\. The extent of the risks posed by beneficiary MSMEs and small corporates will depend on the sectors in which they operate and on the specific nature and scale of their operations, which is yet to be defined during project implementation\. Medium and long-term interventions under component 2, particularly those involving enterprises and projects benefiting from liquidity enhancement facilities to finance more productive investments might involve activities such as construction of new factories/ facilities and other infrastructure, are likely to have comparatively more significant environmental impacts such as increased waste generation, air/noise pollution, health and safety risks for workers and communities, etc\. The potential environmental impacts are expected to be site specific, local, reversible and temporary and can be mitigated through appropriate mitigation measures\. Similarly, activities under component 3 are likely to have moderate environmental impacts related to operations of the MSMEs in the rural supply chains that are to be supported and that will benefit from the grants\. The types of E&S risks are associated with the range of different financial instruments and the range of MFIs/PFIs that will be involved\. Activities under component 4 involving the provision of technical advice meant to address issues hindering accelerated private investment and linkages to lagging regions would not be expected to have significant direct environmental impacts\. Social Risk Rating - Substantial Social impacts are expected under Components 1, 2, 3\. Under component 1, social risks are likely to include inadequate stakeholder engagement (to inform MSMEs of the project and selection criteria for them to benefit from the credit facilities available), and inaccessible grievance redress mechanisms where these entities could report (i) perceived lack of fairness or transparency of in the process, (ii) exclusion factors based on gender, disability, ethnicity, sexual orientation/gender Identity or any other particularity, or (iii) any additional charges FI might subject them to in order to benefit from these interventions\. Medium and long-term interventions under component 2 involving enterprises and projects benefiting from liquidity enhancement facilities to finance more productive investments might include activities Jun 09, 2020 Page 7 of 9  The World Bank Uganda: Investment for Industrial Transformation and Employment (P171607) such as construction of new factories/ facilities and other infrastructure that might require land acquisition (expected to be on a willing buyer/Lessor, willing seller/Lessee basis) and pose health and safety risks for workers and communities during construction\. Those under Component 3, which are meant to generate jobs or viable markets for refugees and host communities by encouraging expansion of existing supply chains or establishment of new supply chains are also likely to carry E&S impacts that are unknown at this stage\. These risks will be addressed the implementation of UDB’s ESMS and establishment of Environmental and Social Procedures for the implementing FIs\. This will ensure that all relevant national regulations/guidelines provided respectively by the Bank of Uganda, NEMA and MoGLSD are applied throughout the project cycle\. Social risk is rated as substantial at this stage\. Activities under component 4 involving the provision of technical advice meant to address issues hindering accelerated private investment and linkages to lagging regions would not be expected to have significant direct environmental impacts\. F\. Implementation Institutional and Implementation Arrangements The overall program will be under the supervision of a Project Steering Committee chaired by the PS/ST of the Ministry of Finance, Planning and Economic Development\. The Project Steering Committee will cover 3 main roles: a) Coordination of policy actions to maximize investment for jobs; b) provide guidance and support to the overall program management team; c) act as a first stage grievance committee for all safeguard related complaints; d) supervise the project implementation and e) as the main focal point for the interaction with development partners and other stakeholders on behalf of the project\. The implementation of financing lines will be implemented by the Uganda Development Bank via a Subsidiary Agreement signed between MoFPED and UDB\. An Independent Investment Committee will be created, consisting of MoFPED, BoU, a private sector finance lawyer, and a private sector finance expert, to supervise the Facility\. The implementation of Technical Support Components will be led by the Private Sector Foundation Uganda (PSFU)\. The governance of the implementation of the technical support components will be established in a Subsidiary Agreement signed between MoFPED and PSFU\. \. CONTACT POINT World Bank Moses K\. Kibirige Senior Private Sector Specialist Michael D\. Wong Lead Economist Borrower/Client/Recipient Ministry of Finance, Planning and Economic Development Joseph Enyimu Deputy Commissioner Jun 09, 2020 Page 8 of 9  The World Bank Uganda: Investment for Industrial Transformation and Employment (P171607) joseph\.enyimu@finance\.go\.ug Implementing Agencies Private Sector Foundation Uganda Giedon Badagawa Executive Director gbadagawa@gmail\.com FOR MORE INFORMATION CONTACT The World Bank 1818 H Street, NW Washington, D\.C\. 20433 Telephone: (202) 473-1000 Web: http://www\.worldbank\.org/projects APPROVAL Moses K\. Kibirige Task Team Leader(s): Michael D\. Wong Approved By Practice Manager/Manager: Country Director: Antony Thompson 03-Nov-2020 Jun 09, 2020 Page 9 of 9

APPROVAL

P004717

Document of The World Bank FOR OFFICIAL USE ONLY Report No\. 7660 PROJECT COMPLETION REPORT THAILAND FOURTH I-TUSTRIAL FINANCE CORPORATION OF THAILAND PROJECT (LOAN 1956-TH) MARCH 20, 1989 Industry and Energy Operations Division Country Department II Asia Regional Office Trhis document has a restricted distribution and may be used by recipients only in the performance of their official duties\. Its contents ma! not otherwise be disclosed without World Bank authorization\.  CURRENCY EQUIVALENTS Currency Unit - Eaht (B) 1980 US$1 - B 20\.5 1981 28\.8 1982 23\.0 1983 23\.0 1984 23\.6 1985 27\.2 1986 26\.3 1987 25\.8 FISCAL YEAR January 1 - December 31  TH WORLD BANK Fol OFFICIAL USE ONLY Washington DC 20433 USA Ogse M Ov\.tne\.C\.i OPItatwN, IvuIwilon\. March 20, 19,; MEMORANDUM TO THE EXECUTIVE DIRECTORS AND THE PRESIDENT SUBJECT: Project Completion Report on Thailand - Fourth Industrial Finance Corporation of Thailand Poect (Ln\. 195T) Attached, for information, is a copy of a report entitled 'Project Completion Report on Thailand - Fourth Industrial Finance Corporation of Thailand Project (Loan 1956-TH)" prepared by the Asia Regional Office\. Full evaluation of this project has not been made by the Operations Evaluation Department\. Attachment This document has a restricted distribution and may be used by recipients only in the performance of their official duties\. Its contents may not otherwise be disclosed without World Bank authorization\.  FOR OFCIAL USE ONLY PROJECT COMPLITION REPORT THAILAND FOURTH INDUSTRIAL FINANCE CORPORATION OF THAILAND PROJECT (Loan 1956-TH) TABLE OF CONTENTS Palo Go\. PREFACE \. \. \. \. \. BASIC DATA SHEET \.i\. EVALUATION SUMMARY \. v I\. INTRODUCTION \. II\. PROJECT OBJECTIVES AND DESCRIPTION \. 2 Objectives\. 2 Description\. 2 III\. UTILIZATION OF THE BANK LOAN\. 3 Rate of Utilization\. 3 Subproject Characteristics\. 3 Operational and Economic Performance of Subprojects 4 Other Features\. 6 IV\. INSTITUTIONAL ASPECTS\. 7 Management \. 7 Staffing\. 7 Procedures and Standards \.8 V\. OPERATIONAL PERFORMANCE\. 9 Operational Performance\. 9 Financial Performance \.10 Provisions \.11 Audit \.12 Resource Mobilization \.12 VI\. DEVELOPME?!T ROLE OF IFCT \.12 VII\. CONCLUSIONS \.13\. \. 13 ANNEXES 1\. Ownership Structure (as of June 30, 1987) \.15 2\. Estimated and AcLual Commitments and Disbursements \.16 3\. Characteristics of Loan Commitments, 1979-84 \.17 4\. Economic Impact of IFCT Assistance, 1980-85 \.18 5\. Analysis of Subprojects Financed Under Loan 1956-TH 19 6\. List of Subprojects Financed Under Loan 1956-TH \.20 This decument has a restricted distribution and may be used by recipients only in the performance of their official duties\. Its contents may not otherwise be disclosed without World Bank authorization\.  TAILI OF CONTSNTS (cont'd\.) Page No\. ANNEXES (cont'd\.) 7\. Economic Indicators of Subprojects Financed Under Loan 1956-TS \. \. \. \. \. \. \. \. \. 22 8\. Financial Indicators of Subprojects Firanced Under Loan 195E-TH\. \. 23 9\. Status of Su,p:7ojects Financed Under Loan 1956-TH 24 10\. Staffing\. 25 11\. Details of Procurem_nt, as of December 31, 1984 26 12\. Onlending Interest Rates, 1980-86\. 27 13\. Structure of Interest Rates, 1970-86 \.28 14\. Actual Operations, 1980-87 \.29 15\. Projected and Actual Balance Sheets, 1980-86 and June 30, 1987 \.30 16\. Projected and Actual Income Statement, 1980-86 \.31 17\. Age Structure of Loans in Arrears, as of December 31, 1980-86 \.32 18\. Long-Term Borrowing Outstanding, as of June 30, 1987 33 19\. IFCT Comments on the Project Oompletion Report\. 35  PROJECT COMPLETION REPORT THAILAND FOURTH INDUSTRIAL FINANCZ COPLORATION OF THAILAND PROJECT (Loan 1956-TI) PREPACZ This is the I'roject Completion Report (PCR) on l\.oan 1956-TH, the Bank Group's fourth loan to the Industrial Finance Corporaition of Thailand (IFCT)\. The loan of US$30\.0 million was approved by the Board on March 19, 1981 and was closed on March 29, 1985\. This report reviews the overall institutional dovelopment of IFCT during the project period and the subprojects financed under the loan, with the aim of assessing t\. what extent the project objectives were achieved\. The PCR was originally prepared by the Industrial Development and Finance Division of the Projects Department, East Asia and Pacific Regional Office, on the basis of a brief draft prepared by IFCT staff and a review of the project file\. Because of the reorganization of the Bank starting in the summer of 1987, the report's finalization was delayed, and was completed by Country Department II of the new Asia Region\. The repart was sent to IFCT for their review\. Their comments have been taken into account in finalizing the report and are attached as Annex 19\. This project has not been audited by the Operations Evaluation Department\.  - iii - PROJECT COMPLETION REPORT THAILAND FOURTH INDUSTRIAL FINANCE CORPORATION OF THAILAND PROJECT (Loan 1956-TM) BASIC DATA SHMET LOAN POSITION (Amounts in US$ Million) As of Oct\. 31, 1988 Original Disbursed Cancelled Repaid Outstanding Loan 1956-TH 30\.0 29\.9 0\.1 8\.2 21\.7 …-------------------------------------------------------------------__-------_ CUMULATIVE ESTIMATED AND ACTUAL DISBURSEMENTS FY82 FY83 FY84 FY85 Appraisal Estimate (US$ M) 6\.9 23\.6 29\.9 30\.0 Actual (US$ M) 22\.0 26\.8 29\.5 29\.9 Actual as % of Appraisal (%) 318\.8% 113\.6% 98\.7% 99\.7% Date of Final Disbursement: 1/24/85 PROJECT DATES Original Revised/Actual Board Approval 3/19/81 3/19/81 Loan Agreemert 4/15/81 4/15/81 Effectiveness 7/15/81 6/18/81 Completion of Commitments 5/30/83 6/30/83 Loan Closing 12/31/84 12/31/84  I\.~~~~~~~I - -- -- --------- ---------- ------------- ------- ----- ----- -------- STAFF INMS (staff weeks) F a?9 FYOO FYIS M FU M t# rWr F? t"^ Prepratlon 0\.1 1\.1 12\.0 0\.4 - - - - - - - 18\.6 Appralisl - - 19\.3 21\.5 - - - - - - - 41\.3 NegotIation - - - 6\. - - - - - - - 6\.9 Supervisin - - - 2\.0 10\.9 7\.3 7\.4 s\.9 4\.7 7\.0 2\.2 47\.9 Other - 1\.9 0\. 2\.0 - 0\.2 - _ 4\.4 Total 0\.1 1\.1 81\.6 82\.7 11\.2 0\.3 7\.4 6\.1 4\.7 7\.0 2\.2 114\.1 MISSION DATA No\. of No\. of Staff Date Month/Year Weeks Persons Weeks Report Appraisal 3/80 3\.0 2 6\.0 2/81 Past Appraisal 9/80 2\.0 1 2\.0 2/81 Supervision I 4/82 3\.0 2 6\.0 6/82 Supervision II 3/83 3\.0 1 3\.0 4/83 Supervision III 3/84 2\.0 2 3\.0 4/84 Supervision IV 3/85 2\.0 2 4\.0 4/85 Completion - - - - 6/88 OTHER PROJECT DATA Borrower: Industrial Finance Corp\. of Thailand (OFCT) Executing Agency: Industrial Finance Corp\. of Thailand (IFCT) Follow-on ProJects: None  - v - PROJECT COKPLETION REPORT THAILAND FOURTE INDUSTRIAL FINANCE CORPORATION OF THAILAND PROJECT (Loan 1956-TN) EVALUATION SUMMARY 1\. Loan 1956-TH was the fourth loan given to IFCT aimed at providing medium and long term finance to private industries with the attendant objectives of emphasizing better regional dispersal of new industrial investments and more effective resource mobilization for long term industrial investment (para 1\.4)\. 2\. Fund utilization of the loan has been satisfactory both in terms of commitments and disbursements\. In the first year, commitments and disbursements were much faster than established at appraisal (para 3\.5)\. 3\. The Bank financed 47 subprojects and although no specific targets were set for opezational and economic performance, their overall performance have been satisfactory\. The extent of estimates set for cost overruns, project completion, employment creation and export generation were reasonably accomplished\. It was the intent at the time of appraisal that lending to small and medium private industries be dispersed to the areas outside of Bangkok\. This regional dispersion of loans has not been achieved as lending has been concentrated in the Greater Bangkok and Central regions of the country (para 3\.5)\. Based on the data provided by IFCT, the financial performance of the subprojects was also satisfactory\. Although IFCT was required to calculate ERRs for all subprojects financed under the loan, only a few subprojects had actual ERR data available\. As of December, 1986, about two-thirds of the resulting subloan portfolios appear to be sound while the remaining third was in arrears (para 3\.19)\. 4\. Institutional progress has been satisfactory\. Project appraisals and supervision for large-scale projects and the streamlining of small-scale projects have improved\. Economic analysis has been strengthened through dialogue with the Bank (para 4\.5) and the staffing problem caused by a high turnover of staff in the past has been corrected by an improvement of iFCT's benefit package (para 4\.4)\. 5\. IFCT's financial position continued to be satisfactory throughout the period (para 5\.5)\. The arrears situation which has been monitored since 1980 for improvements remains essentially manageable but unchanged (para 5\.7)\. In the area of resource mobilization, although its exposure in foreign currency continues to be high, IFCT has diversified into several currencies to minimize single currency exposure\. LFCT has enteted into an agreement with  - vi - the Government whereby the Government will protect IFCT from any large and sudden devaluation of the baht (para 5\.11)\. 6\. As to its developmental role, IFCT continues to be the only institution in Thailand providing long term capital to the private industrial sector, and the only institution which bases its investment decision primarily on the project appraisal rather than on collateral\. It has played a pioneering role in the capital market by helping set up the Thai Securities Exchange and has continued to diversify its activities to improve its profitability by introducing such mechanisms as mutual funds and leasing\. Finally, it is in the forefront of financial packaging and syndicated activities (paras 6\.1-6\.3)\. 7\. For the most part, the loan to IFCT has been successful beyond expectations in its impact on the institutional development of IFCT\. In retrospect, the following lessons have been learned from the project: %a) The objective of increasing the regional/geographical dispersal of loans was not based on a clearly defined program, and as a result, this objective was not achieved\. (b) The Bank should assess more realistically the need for Economic Rate of Return analysis for small projects\. It has been observed that an ERR analysis has not prdven to be a very useful criterion for \.rojects other than very large investments\. In the case of small projects, the required data are normally not available, time consuming to gather and uneconomical and, as a result, ERR estimates by IFCT are computed in a superficial fashion and do not serve their purpose as a gauge of project merit\. ERR analysis should be required for larger projects only\. For smaller projects, partial economic indicators would be more useful\.  PROJECT CONPLITION UtPORT THAILAND FOURTB INDUSTRIAL FINANCE CORPORATION OF THAILAND PROJECT (Loan 1956-Ti) I INTRODUCTION 1\.1 Over the past quarter century, the industrial sector in Thailand has contributed significantly to the country's rapid growth and diversification of economic activity\. Industrial growth, spearheaded by manufacturing, averaged 11\.6% per year during 1960-70 and 10\.4% during 1970-79\. This well exceeded the rate of GDP growth, which averaged 7% in 1970-79\. In the early eighties, the Thai economy was substantially affected by the two oil price shocks and by the ensuing international economic upheaval\. As a result, indus\.rial growth slowed to 5\.8% per year in 1980-85\. Thailand's exports lost competitiveness during 1981-84, but due to the devaluation of the baht by 14\.8% in November 1984, manufactured exports rose 13% in real terms in 1985\. More recently, in 1987, the Thai economy has done very well, spurred by the continued growth in exports\. 1\.2 The Thai Government has helped to spur the country's economic growth through its support to the Industrial Finance Corporation of Thailand (IFCT) which was established in 1959\. IFCT is Thailand's only development finance institution established for the purpose of assisting private sector indlcstrial and capital market development\. It acts as the Government's mechanism for channelling long term funds to the private &ectir for industrial development which is vital to the nation's economic growth and overall development\. At present, the Government holds about 26% of total IFCT shares while the rest are privately owned\. (Annex 1 gives IFCT's present ownership structure\.) Although primarily privately owned, IFCT has always enjoyed a close relationship with the Government, which has guaranteed some of its borrowings and alto provided partial protection for a fee against foreign exchange risk for IFCT's foreign currency borrowings\. The Government also provided the bulk of IFCT's domestic currency resources until the end of 1970s; this dependence has significantly declined in recent years\. The Government expected IFCT to be a major source of medium- and long-term finance to private industries and help the Government in achieving its policy objectives, including regional di\.persal of industry and development of export-oriented enterprises\. The Government has two representatives on IFCT's Board of Directors, one is appointed by the shareholders in its capacity as major shareholder, and the other appointed directly by the Government according to the Industrial Finance Corporation of Thailand Act\. The latter is normaLly elected Chairman of the Board\.  1\.3 The Bank's association with IFCT dates back to 1961, bnen the Bank assisted the Goverraent in defining how IFCT should be reorganized\. After this was successfully carried out, the Bank approved the first IFCT loan (Ln\. 370-TH) of US$2\.5 million in March 1964 The second loan (Ln\. 992-TH) of US$12\.0 million was approved in May 1974 and the third loan (Ln\. 1327-TH) of US$25\.0 million in September 1976\. A Project Performance Audit Report (No\. 5054) on the second and third loans was prepared by the Bank in 1984\. That report concluded that the objectives of the two loanR, i\.e\., resource transfer to high priority projects and institution building, had generally been achieved\. 1\.4 The fourth loan was identified in the context of the Government's emerging industrial strategy, which emphasized better regional dispersal of new industrial investment, more employment creation, a shift toward estab- lishing export-oriented industries, and more effective resource mobilization for long-term industrial investment\. The loan was aimed at achieving these objectives insofar as they related to IFCT's operations and at meeting part of IFCT's resource requirements to help it continue its support of the private industrial sector, regarded by the Government as a priority area\. IFCT had a special role to play in the economy since it was the only specialized financial institution in Thailand providing long-term capital to private industry\. Its resource allocation performance had been satisfactory and by the time the fourth loan was made, it had assumed a leadership role in the country for appraisal of medium and large projects and in arranging financial packaging for such projects\. II\. PROJECT OBJECTIVES AND DESCRIPTION Objectives 2\.1 The project was to continue the institutional development and strengthening of IFCT\. It had two more specific objectives: (a) to encourage IFCT to emphasize specific priority areas in its resource allocation func- tions; and (b) to encourage IFCT to be more active in its resource mobiliza- tion efforts\. The specific priority areas in its resource allocation func- tions were agreed to be: (a) projects located outside the Greater Bangkok and surrounding areas; (b) smaller rather than very large projects; (c) export- oriented projects; and (d) labor-intensive projects\. In relation to the second specific objective, i\.e\., greater emplkasis in resource mobilization, it was intended that IFCT would make a concerted effort to raise more domestic currency resources to meet its lending targets and also to diversify its sources of foreign borrowings\. Description 2\.2 The loan proceeds were to be used to finance a part of the to\.al costs of individual subprojects\. Disbursements were to be at the rate of 100% of the foreign exchange cost of directly imported goods and services\. 65% (representing the foreign exchange component) of the cost of goods purchased  from domestic suppliers or manufacturers, and 35% (representing the foreign exchange component) of civil works\. However, for subprojects located more than 100 km from Bangkok, which were expected to be small-scale with low foreign exchange component, IFCT could request financing for 100% of its subloan, up to a maximum of 50% of total subproject costs, including some local cost financing\. All \.ubloans amounting to more than US$1 million required the Bank's prior approval\. IFCT's standard lending rate (which was 14\.5% when the project was approved) was to apply to all subloans financed from the Bank loan\. 2\.3 The project was appraised in March/April 1980 and was approved by the Board on March 19, 1981\. The Loan Agreement was signed on April 15, 1981 and the loan became effective on June 18, 1981\. III\. UTILIZATION OF THE BANK LOAN Rate of Utilization 3\.1 Annex 2 gives the schedule of estimated and actual disbursements of the loan\. IFCT's utilization of the loan has been satisfactory\. Commitments and disbursements for the first year were much faster than estimated at appraisal\. The loan closed on the original Loan Closing Date of December 31, 1984, but disbursements were permitted up to March 29, 1985, when the remaining undisbursed balance of US$110,667\.43 was canceled\. Overall, the rates of commitment and disbursements were satisfactory\. Sub2roiect Characteristics 3\.2 Data on subprojects financed under the loan are summarized in Annex 3\. The Bank loan financed 47 subprojects, of which 8 were "A" sub- projects (above the free limit of US$1\.0 million)\. All "A" subprojects were submitted to the Bank for approval, and only one "A" subproject was approved without comment\. Four "A" subprojects with negative economic rates of return were discussed extensively in the field and modified based on these discussions\. IFCT has acknowledged that Bank comments on IFCT's calculation of economic rates of returr\. for these projects helped improve staff's understanding of economic aspects of project appraisal\. 3\.3 The free limit of USl\.O million had beenl increased from US$0\.75 million under the previous Ln\. 1327-TH in view of the improvement in IFCT's appraisal standards\. To safeguard against the possibility that a major portion of the loan would be used to finance very large borrowers and to make just a few large subloans, it was agreed that (a) at least one third of the proposed loan amount would be used to make subloans not exceeding US$500,000 each and to borrowers with total fixed assets not exceeding US$5 million; and (b) the size of an individual subloan would not exceed US$5 million\. Both stipulations were adhered to\.  - 4- I 3\.4 Sectoral Distribution\. The metals industry (30% by value) and transport/communications (24%) received the majority of Bank loan funds (Annex 4)\. Chemicals and nonmetallic mineral products, which accounted for 40% of funds under the third loan, received only 20% under this loan\. 3\.5 Refional Distribution\. The dominance of the Greater Bangkok and Central regions continue,' during the project implementation period\. Under the loan, funds allocated to the two regions accounted for 62% by number and 85% by amount (Annex 4)\. These percentages under Ln\. 1327-TH were 78% and 71%, respectively, reflecting the investment opportunities in these regions\. The intended industrial dispersal away from the Greater Bangkok area was, there- fore, not achieved\. The relative lack of success in dispersing funds to outlying regions is due to the restrictions on the utilization of the loan proceeds\. As most provincial industrialists use machinery and equipment produced in Thailand or equipment that has already been imported into Thailand, they are not able to make full use of the Bank's loan\. In addition, both the cost and risk of lending in the regions are higher than in metropolitan areas thereby necessitating more intense screening of projects\. At that time, IFCT had only 3 regional offices during the loan utilization period (1981-1984) which could not fully serve provincial lending operations\. IFCT corrected this by establishing Branch Operations and Small Industries Department and three additional branch offices in order to boost its presence in the provinces\. IFCT now has 6 offices outside Bangkok\. 3\.6 IFCT attaches the highest level of importance to regional dispersal of loans and has set the target of approving at least 60% of loans approved each year in regional areas including the central region which still require industrial development and infrastructure\. From IFCTs incorporation until 1987, loans made to regional borrowers amounted to 68% of all loans approved\. 3\.7 Diversification of investment from the capital city to the countryside is therefore very actively pursued by IFCT\. The branch and regional offices are enhanced in terms of efficiency and power to provide better service to clients\. Seminars are regularly organized in order to disseminate information, knowledge and ideas among provincial industrialists\. Operational and Economic Performance of Sub2rojects 3 8 Annexes 4 to 8 give a consolidated picture of all subproject financ- _\.g and performance\. An analysis of some main aspects follow\. 3\.9 Subloan duration\. Most lending went to medium to long term subloans with a preponderance of subloans (62% by number and 87% by amount) ranging between 7 to 11 years\. The average duration of the subloans approved under the loan is estimated at 7 years and 5 months\. 3\.10 Asset Size and Employment\. At the time of appraisal, s\.aere were 13 subprojects whose asset size was up to B 10 million each and 22 with B 50-100 million each; only one subproject had assets over B 100 million\. However at completion, there was an increase in the number of medium-sized borrowers, particularly those with asset base of B 50-100 million each\.  - 5 - 3\.11 Project Completion\. Of the 47 subprojects approved under Loan 1956, 14 experienced delays while 8 subprojects were completed before the estimated completion tlme\. There were 2 subprojects whose actual completion time could not be determined: one subproject was wound up while the other subproject had no data available because the borrower prepaid his loan obligation in full\. 3\.12 There were 3 subprojects with delays over 6 months: one had a 9-month delay because the company encountered techni sl problems with its water treatment, hence delaying its obtaining of a factory permit; the other had 13 months delay because the company switched the project from production of radio cassette recorders to colored TV sets, requiring a certain period of time for a new feasibility study; while another had 17 months delay due to delayed procurement of imported machinery and equipment\. 3\.13 Cost Overruns\. Data on cost overruns are available for each 47 sub- projects in Annex 4\. The cost overruns ranged from 2% to 94% and the average is 13%\. Only 2 subprojects experienced overruns above 50%\. One of these was a subproject for the expansion of a tinplate and tin free steel plant\. The subproject cost was estimated at appraisal at B 860 million but the actual total cost amounted to B 1,299 million\. The cost overrun amounted to 51%\. The reason given was that the company made an investment other than for the appraised project and the cost of the machinery for that was well over its estimated cost\. The other subproject on which cost overrun exceeded 50% was for the expansion of an aluminum and tube company\. This subproject, too, expanded the scope of the project beyond what was originally agreed by undertaking additional construction resulting in a total project cost overrun of 94%\. 3\.14 Employment Creation\. IFCT has estimated an incremental employment for the 47 subprojects at 6,196\. Actual figures estimated new jobs totalling 5,333 which does not take into account other subprojects where labor statis- tics are not available because of early loan settlement or non-submission of financial statements\. Data on individual incremental employment and cost per job per sroject appear in Annex 4\. 3\.15 Exoort Feature\. Loan 1956 was designed to contribute to export earnings of the country by financing projects which generate significant export sales\. Export-oriented projects were defined as those projects exporting over 50% of their output\. IFCT has developed a program to boost its lending to export-oriented projects by itensifying project promotion and development and adopting a sectoral approach in identifying these projects\. Sixteen of the 47 subprojects were considered as export oriented; estimated export sales from these 16 subprojects amounted to B 2,666 million\. However, only B 1,263 million in export sales were realized from 15 subprojects\. Annex 5 gives a detailed account of the export performance of these subprojects\. 3\.16 Financial Performance\. Of the 33 subprojects under the loan for which data are available, 17 were profitable while the remaining 16 subprojects sustained losses, with the worst case at 151% of equity\. Four subprojects turned a profit equal to or better than the appraisal estimates  - 6 - and only 7 subproiects showed a return of at least 15% to 20% on networth\. On the average, act \.l results were off by about 22% from IFCT estimates\. With regard to the 4'nancial rate of return, 6 subprojects (from 22 subprojects for which FRR was zomputed) had return equal to or better than estimated at appraisal\. Later and more complete data (from IFCT's quarterly report for the period ended June 30, 1987) showed that there were 37 subprojects (from 46 subprojects computed) with financial rate of return equal to or better than estimates\. 3\.17 A review of the financial ratios show a mix of subprojects with less than half being liquid and most being highly leveraged (2 cases show a debt equity ratio of 17 and 18 to 1)\. Annex 8 gives the financial performance of each subproject financed under the loan\. 3\.18 Economic Rate of Return\. IFCT was required to calculate ERRs for nearly all subprojects financed under the loan\. However, there are only 8 subprojects for which actual ERR data are available (Annex 7)\. Of these there were only 3 subprojects with ERRs below 10%\. Only 2 subprojects (of the ones for which data is available) showed a gap between estimated and actual figures\. One was for a container lines company which had an estimated ERR of 24% but an actual figure of 19% and the other was for a tinplate company with estimated ERR at 10% but had an actual ERR of 5%\. (The company's factory has been closed since August 1984\.) Other Features 3\.19 Capacity Utilization\. All 47 subprojects had been estimated to operate at full or nearly full capacity ratios\. Actual figures showed only 4 out of 29 subprojects with utilization rates below 50%\. The actual average capacity utilization is estimated at around 70% for the subprojects for which data were available\. Two subprojects closed their operations in 1984\. Both were related companies in the vegetable oil business and total subloans to these companies amounted to $900,000\. 3\.20 Foreign Exchange Savings\. There was an estimated foreign exchange savings from 12 subprojects of about B 2,574 million\. Actual savings realized from the 5 subprojects for which data were available amounted to only B 695 million\. Comparison of actual with the original estimate is not meaningful because of inadequate data\. 3\.21 Ouality of Subloan Portfolio\. Total outstanding in respect of the 47 subprojects amounted to B 660 million as of December 31, 1986, of which 79% were in current status, 13% (B 87 million) were in arrears (of which 97% were in arrears for over 6 months) and 8% were either partially or fully prepaid\. In terms of number of subprojects, IFCT has rescheduled 4 subloans; 13 loans were in arrears, 10 of which were in arrears for over 6 months\. Six subloans have been fully repaid while 2 subloans have been partially prepaid\. Details are given in Annex 9\. 3\.22 Two subloans account for 3/4 of total arrearages of over 6 months\. Total arrearages of these 2 subloans amount to B 53 million or 62% of the total\. One of them, with a total arrearage of B 34 million (40% of total  arrearages) was experiencing technical and production difficulties which affected its financial condition\. This subloan rescheduled its loan in 1984\. The other subloan is actually 2 subprojects which closed their operations in August 1984\. Both are related companies in the vegetable oil business and total Bank loans to them amount to $900,000\. As of year-end, combined IFCT's total exposure to these subprojects reached B 38\.8 million\. Their arrearages total B 19 million (220 of outstanding)\. 3\.23 IFCT recognized as early as 1981 the seriousness of the arrears problem and developed an action program to deal with it\. This program envisaged making more conservative appraisal estimates, tighter equity requirement safeguards, and itensification of supervision of problem projects\. There is no specific information on how effective this program has been but the portfolio affected by arrears as a percentage of total portfolio declined somewhat in subsequent years and was in the range of 8% to 10% during 1983-86\. IV\. INSTITUTIONAL ASPECTS Manavement 4\.1 Board of Directors\. IFCT has a ten-member Board which is chaired by a former Minister of Finance and includes IFCT's President\. Two Board members represent foreign shareholders, who, at the end of 1986, held 40% of total shares\. Eight of the ten members \.ave a finance/banking background while the remaining two represent the manufacturing sector\. The Board meets monthly to review policv matters and to approve loans\. 4\.2 Executive Committee\. IFCT's Executive Committee comprises four Board members including IFCT's Chairman -id the President\. In order to decentralize loan decision making to the next level of management and provide more efficient service to clients, there have been changes in authorizations regarding loan approvals\. The Board of Directors' loan authorization increased from B 20 million or more to B 50 million or more, the Executive Committees, from B 5 million-B 20 million to B 20 million-B 50 milion and th4 President's from up to B 5 million to B 20 million per project\. 4\.3 The President, who assumed his post in 1979, is responsible for day- to-day management\. He is now assisted by a Senior Executive Vice President and three Executive Vice Presidents responsible for operations, financial management, and general administration, respectively\. At the time the loan was made, the Bank suggested that IFCT establish an Engineering Department, and although this did not materialize, a post for an Engineering Adviser was established\. Staffing 4\.4 IFCT's staff increased from 352 in 1981 to 556 in 1986 as operations grew\. Much of this increase was in professional staff (from 210 to 399 for the same period)\. Despite the increase, sta:2 turnover, which was a problem in 1980, subsided considerably from 7\.8% in 1981 to 4\.2% in 1986, thanks to the improvement of IFCT's benefit package\. Details of IFCT's staffing are given in Annex 10\.  Procedures and Standard\. 4\.5 ProJect Apraisal\. IFCT's capability to carry out project appraisals remains satisfactory\. As a development finance institution, IFCT's main criterion for selecting projects is the soundness of the proposed project rather than collateral\. IFCT procedures for undertaking economic analysis of projects have been strengthened through dialogue with the Bank\. For small- scale industry projects, IFCT has streamlined its appraisal procedures to cut down the processing time\. 4\.6 Project Sugervision\. As the number of problem customers increased, the supervision of projects has been strengthened\. Special attention has been given to problem projects\. IFCT has systematic classification and reappraisal procedures for problem projects, and monthly reports are prepared to monitor the progress of these projects\. 4\.7 rocurement\. IFCT has tried to ensure that appropriate goods are procured at the best possible price\. For the first time under the Bank loans, one subproject procured goods through international bidding, as the cost of goods was more than US$400,000\. Limited competitive bidding was most commonly used and accounted for 53% (by value) of total costs of goods procured under the loan\. The proprietary method was used for 34% of total procurements, decreasing considerably from 61% under Loan 1327-TH\. Details are given in Annex 11\. 4\.8 Interest Rate\. A historical record of interest rates charged by IFCT appears in Annex 12\. For comparison purposes, interest rate structure for Thailand during 1970-86 is given in Annex 13\. The interest rate structure has been steadily dropping from 1980-86\. A significant change related to the rates for foreign currency deposits which were pegged at 12% between 1970-75 but since 1980 have been quoted on a floating rate bases\. Rates on medium and short term time deposits, savings deposits, loans and overdrafts, call loans and loans obtained from the Bank of Thailand have declined from a range of 8%-19% to 5\.5%-15%\. 4\.9 During the project implementation period, IFCT's interest rates were generally slightly lower than those changed by the commercial banks\. It was a period during which inflation had flared up in Thailand although by international standards it was quite low\. Given the very low inflation rates in Thailand historically, borrowers were very reluctant ;n borrow long term from IFCT at what they considered to be unsustainable high and fixed rates\. 4\.li Therefore, IFCT, to remain competitive with a liquid banking sector had to change slightly lower rates\. The costs involved, including time cost, in project based lending involving detailed appraisals was also a factor\. Nevertheless IFCT's rates remained positive in real terms\. 4\.11 IFCT reviews its interest rate periodically as required under the Loan Agreement\. In order to be competitive, IFCT has historically pegged its interest rates for medium and long terms loans at slightly lower than the rates charged by commercial banks for short term loans\. The reason for this is IFCT's desire to entice (1) borrowers not familiar with project appraisal  procedures (which require full disclosures, longer processing time and continuous supervision throughout the life of the loan), and (2) borrowers, who in anticipation of lower inflation rates, would not accept long term loans at higher interest rates, particularly since coiercial banks traditionally roll-over short term loans as a matter of course\. However, even though IFCT's interest rates are below the prime rate and have generally been lower than the rates charged by the comercial banks to their prime customers, IFCT's rates have remained positive in real terms\. V\. OEERAIONALP ORKNE O2erational Performance 5\.1 Loan Ogerations\. IFCT's loans may be in either local or foreign currency\. Although the baht is freely convertible, IFCT attempts to match the currencies of disbursement with those of its resources\. As shown in Annex 14, on a yearly basis, actual approvals have substantially exceeded projections made at the time of loan appraisal\. Actual loan approvals increased from B 1,028 million in 1980 to B 2,211 million in 1984, which was the last year for which the appraisal report made projections\. In 1985, loan approvals reached an all time peak of B 3,007 million before falling substantially to B 1,450 million in 1986, because of excess liquidity in the financial system\. Foreign currency loans have always exceeded domestic currency loans\. IFCT has, historically, found easier to raise funds in foreign currencies, from official as well as private capital market, than in domestic currency\. In more recent years, the picture is changing, e\.g\., in 1986, IFCT raised B 600 million by issuing bonds in the domestic market\. 5\.2 Guarantee Ogerations\. IFCT's guarantee operations relate largely to letters of credit opened on behalf of clients importing machinery and equipment with the proceeds of IFCT loans\. 5\.3 In 1984, IFCT established the Small Industry Credit Guarantee Fund (SICGF) to provide guarantees to small-scale projects without sufficient collateral\. The scheme was established mainly to assist collateral short borrowers and operated with an initial capital fund of B 200 million contributed as follows: GOT (B 100 million), IFCT (B20 million), Krung Thai Bank (B 20 million) and 15 commercial banks (B 60 million)\. The SICGF, which operated in 1985, granted loans of B 200,000 to B 5 million each to eligible small scale enterprises or those firms having 'ixed assets of B 10 million or less\. As of end 1986, SICGF outstandings amoui ted to B 8\.4 million\. Since SICGF is an independent legal entity, IFCT's exposure is limited to the extent of its investment in its capital\. 5\.4 Equitv Investment Ooerations\. IFCT makes equity investments to help alleviate prospective investors' equity capital shortage and to generate confidence in the enterprise\. The equity portfolio increased from B 115 million in 1979 to B 469 million in 1986, but accounted for only 3% of total assets\.  - 10 - Financial Performance 5\.5 Financial Position\. A comparison of IFCT's financial statements and ratios for 1980-86 with those forecast at appraisal for 1980-84 is given in Annex 15\. IFCT's financial position has been satisfactory throughout the paiiod\. As of *nd-1984, total assets amounted to B 10,867 million (US$460 million) showing a substantial average annual growth of 27% since 1980\. Total assets were 30% higher than the projection due largely to a substantial growth in 1984\. Of IFCT's total assets at end-1984, 72% were financed by long-term debt (65% by foreign currency), 16% by equity and 12% by current liabilities\. Since 1984, IFCT's assets have grown further, to B 17,916 million at the end ef 1986\. At end-1986, foreign currency debts accounted for 67%\. IFCT's paid- in capital amounted to B 1,000 million in 1984 and to B 1,300 million in 1986 compared with B 400 million in 1980\. Reserve and retained earnings also increased from B 324 million in 1984 to B 782 million in 1984\. The long-term debt to equity ratio was 4\.4 in 1980, 4\.5 in 1984, and 5\.8 in 1986, well below the covernanted limit of 8:1\. The total debt to equity ratio increased from 4\.7 in 1980 to 5\.1 in 1984, and 6\.5 in 1986\. IFCT's current ratio improved from 2\.6 in 1980 to 3\.6 in 1984 and further to 5\.9 in 1986\. 5\.6 Profitability\. IFCT's projected and actual audited income state- ments for 1980-86 are given in Annex 16\. Since 1981, interest on loans has been consistently lower than projected at the appraisal time; however, due to the increase of interest on temporary investments since 1982, gross income has been higher than was projected\. IFCT's administrative expenses as a percent- age of average total assets have not exceeded 1\.3%\. Net income as a percentage of average total assets ranged from 1\.8% (in 1986) to 3\.1% (in 1985) and is satisfactory\. During the project period, IFCT paid out dividends every year\. 5\.7 Portfolio Ouality\. At appraisal, IFCT prepared a plan to reduce its arrears\. The plan had three elements: preventive action, more intensive supervision and specific actions for loans already in default\. At present, the arrears situation is manageable but has not improved, as the following table indicates (details are given in Annex 17)\.  - 11 - 1980 1983 1986 Total loan arrears (B million) 274 392 619 Arrears as percentage of outstanding portfolio 8\.0% 7\.6% 7\.8% Percentage of number of clients in default 25\.8% 27\.3% 30\.1% Percentage of portfolio affected by arrears 14\.9% 21\.1% 20\.7% At end-1986, 30\.1% of all IFCT clients were in arrears, with overdue payments of 7\.8% of the total loan portfolio; 91% of that amount had been in arrears for more than a year\. 5\.8 According to IFCT, to address this recurring problem, it has ir\. place 3 action plans aimed at scaling down loans in arrears as follows: (1) Preventive Action: At appraisal, the projects are conservatively analyzed and during loan supervision, the projects are closely followed-up and monitored with regards to the early warning signals\. (2) Ouick Action: Seriously ailing projects are transferred to the Legal office for further legal action\. Decision-making at this stage is prompt and timely to avoid any damage to the collateral security\. However, legal proceedings are normally complicated with several steps which takes 2-3 years or more on average\. (3) Specific Action: To assist in coping with problems facing projects which still have a bright future, a special loan unit in the Loan Operations Department was set up\. IFCT staff participate directly in the business operation and serve as an adviser to the problem company\. In addition, IFCT sends staff members as representatrives in the company's Board of Directors and Executive Committees as well\. Such assistance takes time, depending on the seriousness of the problems\. It takes more than 2 years before IFCT can assess the problem and find ways to restructure the company's management and operations\. One of the obstacles which hinder IFCT from tackling the client's problems quickly is the limited number of IFCT experienced and efficient staff\. IFCT has therefore, given more importance to this matter and has tried to build more working teams\. IFCT has already succeeded in turning around several problem clients\. Provisions 5\.9 As of end-1984, reserves and retained earnings as a percent of the outstanding portfolio reached 15\.1% as compared with the projected 14%\. In addition, B 215 million (42% of outstandings) were set aside as provisions for doubtful accounts\. This is considered by the external auditors as adequate, given the current loan arrears\.  - 12 - Audit 5\.10 IFCT's account has been audited by independent auditors, and the audit reports have been unqualified during 1980-86\. Resource Mobilization 5\.11 Details of IFCT's borrowings are given in Annex 18\. IFCT succeeded in mobilizing resources over the period 1980-84, allowing total resources to increase at 27% p\.a\. and enabling the loan portfolio to grow at 17% p\.a\. However, this was largely achieved by mobilization of foreign currencies\. Total long-term borrowing, which has been a major source of IFCT financing, amounted to B 6,004 million during 1980-84, while domestic funds amounted to B 560 million or only 9% of the total\. IFCT has raised a great deal of funds abroad in the past due to the lack of capital and financial instruments within Thailand which would satisfy its needs\. Although at appraisal it was realized that "direct domestic resource mobilization has been and will continue to be modest \., the result during the project implementation period should be considered less than satisfactory\. It should be noted however that due to improvements in the domestic market, IFCT has intensified its domestic resource mobilization effort and has been quite successful more recently\. In 1986, IFCT issued debentures in the local capital market amounting to B 600 million and in the first six months of 1987, it made two new issues totalling B 675 million\. 5\.12 IFCT exposure in foreign currency continues to be high with more than 90% of its outstanding long term debts in foreign currency\. IFCT has tried to minimize the risks of foreign borrowings by diversifying the currencies of exposure: it has borrowed in Yen, Asian-dollar, DM, Euro- dollar, and other currencies\. Most of the Yen loans obtained by IFTC carry low interest rates and have very long maturity periods\. The portion of Yen in IFCT's liability portfolio has increased, compounded by the recent surge of the Japanese currency in recent times\. IFCT's exposure to the Yen is therefore high and the Corporation has taken measures to reduce this including making use of long term cross-currency swaps\. It should be noted, also, that IFCT has an agreement with the Government which protects it from large and sudden devaluation of local currency\. VI\. DEVELOPMENT ROLE OF IFCT 6\.1 As a DFI, the most direct and tangible contribution of IFCT has been to finance developmental projects, thereby creating new activity in the economy\. It has done that on the basis of proper appraisal of project proposals\. It has been mentioned that IFCT is the only major source of medium and long term finance to private industries\. It has provided its finance on a long-term basis so that projects have been appropriately capitalized\. In that respect, IFCT has been successful in assisting small, new, or risky ventures to find adequate and appropriate financing\. Although debt is ideally not the appropriate instrument to finance risky ventures, IFCT's long-term debt financing was still better than no financing or short-term financing\.  - 13 - 6\.2 Statistically, IFCT's development role during the period 1980-June 198j is measured in Annex 14\. During this 5-1/2 year period, IFCT financed a total of 416 projects\. On an estimated basis, these projects involved total investments of B 8,764 million\. As a 7esult of the implementation of these projects, it was estimated that the annual incremental sales would amount to B 80,608 million of which B 22,581 million annually would be exports\. Foreign exchange earnings/savii&gs were estimated to amount to B 37,336 million annually\. These 416 projects were estimated to provide B 14,600 million annually in incremental value added and generate some 44,570 new jobs\. 6\.3 There are also other developmental aspects by which to measuie IFCT's performance\. IFCT has undertaken some pioneering work through its subsidiaries and affiliated companies (Thai Factory Development, Thai Orient Leasing and Thai Mutual Fund Company)\. These companies are by and large successful and introduced new economic activities in the country\. It also provided impetus to the national capital and securities markets by being actively involved in setting up the Thai Stock Exchange and it continues to assist government in appraising and arranging financial packages for large projects of national importance\. VII\. CONCLUSIONS 7\.1 The fourth loan to IFCT approved in March 19, 1981 was identified in the context of the government's emerging industrial strategy\. The Bank's major broader industrial and financial sector objectives at that time called for better regional dispersal of industrial investment, mnore employment creation, a shift towards export-oriented industries and development of long term capital market for equity as well as dobt instruments\. The loan to IFCT was aimed at achieving these broader objectives insofar as they related to IFCT's operations and at meeting IFCT's resource needs to help it continue \.ts support of private industry\. A principal aim of the loan was to continue the institutional development and strengthening of IFCT\. Two more specific objectives were to encourage lending to specific priority areas and to encourage IFCT to be more activ,e in its resource mobilizatiun\. 7\.2 Fund utilization has been satisfactory in terms of both the rate of commitments and disbursemcnts\. The Bank loan financed 47 subprojects with only a third of the loan used to finance large scale subprojects with the rest financing small and medium scale subprojects\. The sectoral allocation of the loan has been satisfactory, too\. Lending has been concentrated in the Greater Bangkok and Central regions accounting for 85% of loan amount, generally in line with the geographic distribution of industrial investment in Thailand\. Although no quantitative target was set for the geographic distribution of the subprojects financed, it was expected that the share of regions other than Greater Bangkok and Central regions would be better than the historical pattern of industrial investment in the country\. In this sense, one of the objectives of the project was not realized\. IFCT gave higher priority to  - 14 - selectinS good projects and timely commitzent and disbursement of the loan\. Subprojects selected were generally of good quality that were completed with minimal delays and cost overruns averaging about 13% only\. By mid-1987, all the subprojects had been completed and in operation, with three-fourths of the loans in current status\. 7\.3 The project was successful beyond expectations in the institutional development of IFCT\. It has measurably gained in stature and prestige and is now regarded as a major financial institution in the country\. IFCT's total assets increased 28% between 1980 and 1986\. Loan approvals also increased from B 1,028 million in 1980 to B 3,007 million in 1985 before falling substantially to B 1,450 million in 1986 arnd B 957 million in June, 1987 due to excess liquidity in the system\. It has diversified its resource base\. Appraisals of large scale projects has further improved, while for small scale subprojects, appraisals have been streamlined to cut processing time\. Project supervision has been strengthened with greater a'tention to problem projects\. The staffing problem which was a cause for concern in the beginning because of increasing staff turnover has also subsided considerably\. 7\.4 The \.inancial position and profitability of IFCT has remained satisfactory throughout the period\. The arrears situation is manageable and essentially remains unchanged since 1980\.  - 15 - ANNEX 1 PROJECT COMPLETION LJPORT THAILANDs POUTH INDUSTRIAL FINANCE CORPORATION OF THAILAND PROJECT (LOAN 1956-TH) OwnershiD Structure (as of June 30, 1987) NO\. of No\. of 2 of Distribution of shareholders shareholders shares shares Banks 38 5,337,915 41\.06 Insurance cospnaes 38 328,858 2\.53 Finance and securities companies 58 2,C98,553 16\.14 Other cospranes 76 2,002,928 15\.41 Individuals 1\.544 1,266,413 9\.74 MinLstry of Vinanc 1 1,965,333 15\.12 Total 1,755 13\.000\.000 100\.00 Thai 1,690 8,645,590 66\.50 Foreign 65 4,354,410 33\.50 totl 1\.755 13\.000\.000 100\.00 Governmet 2 3,424,096 26\.34 Ministry of Finance 1,965,333 Erung Thai Bank Ltd\. 1,458,763 Private 1,753 9,575,904 73\.66 Total 1,755 13,000,000 100\.00  - 16 - ANNEX 2 PROJECT COMPLETION REPORT THAILAND: FOURTH INDUSTRIAL FINANCE CORPORATIO'\. )F THAILAND PROJECT (LOAN 1956-TH) Estimated and Actual Commitments and Disbursements (USS °00°) Commitments Disbursements Estimated Actual Estimated Actual Amount / /a Amount /a Amount % /b Amount % /b FY82 Julv-September 1981 7,500 25\.0 23,519 78\.4 _ _ 8,632 28\.8 October-December 1981 6,500 40\.0 1,802 84\.4 - - 9,374 60\.0 Januarv-March 1982 4,000 53\.0 2,456 92\.6 2,500 8\.3 1,809 66\.1 April-June 1982 4,000 67\.0 317 93\.6 4,400 23\.0 2,142 73\.2 Subtotal 20,0(0 67\.0 28,094 93\.6 6,9OO 23\.0 21,957 73\.2 FY83 Julv-September 1982 2,500 75\.0 426 95\.1 5,300 40\.7 2,338 81\.0 October-December 1982 2,500 83\.0 (87) 94\.8 3,400 52\.0 1,281 85\.3 Januarv-March 1983 2,5()0 92\.0 1,366 99\.3 4,900 68\.3 381 86\.5 April-June 1983 2,500 1(0\.0 57 99\.5 3,100 78\.7 827 89\.3 Subtotal 10,000 100\.0 99\.5 16,700 78\.7 4,827 89\.3 FY84 Julv-September 1983 - - 100 99\.9 2,500 87\.0 1,178 93\.2 October-December 1983 - - (16) 99\.8 1,900 93\.3 581 95\.1 Januarv-March 1984 - -60 100\.0 1,300 97\.7 682 97\.4 April-June 1984 - - - - 600 99\.7 295 98\.4 Subtotal 144 100\.0 6,300 99\.7 2,736 98\.4 FY85 July-September 1984 - - (52) 99\.8 50 99\.8 283 99\.3 October-December t984 - - (3) 99\.8 50 100\.0 80 99\.6 January-March 985 - - - - - 100\.0 6 99\.6 Subtotal - (55) 99\.8 ion 1oo\.0 369 99\.6 Total 30,000 100\.0 29,945 99\.8 30,000 100\.0 29,889/b 99\.6 /a Percentages are cumulative\. /b Undisbursed balance of USSItO,667\.43 was canceled effective March 29, 1985\.  -27 - A_N rho,\. flu 71 9(77 III~' \. 141 7t \."P7I \.% \. j',r, '4 \.7it 41 ' 77\.r4777I %i ,r1\.1I Al Ia %A , -u, -ve, A \.I09-,%\. P 0 7777\.77777177*07'~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ o \. *W,777 91\.7 * sItu \.7 \.1\. I 12\.47 2 ' 27\.9' 2 1 l\.l\.7 2 1 97\.19 * 9 47\.42 I~~~~~~~~~~~~~~~~~~~~~~~~~~6 I~ IAf P,I D\. n\. \.1111,0 II ~~~~~~~~~~~~ 4 217\. 77~~~~~~~~~ 3 2?\."? 2 41\.1' (71\.1' 2 \.2\.14~~~~~~~~~~~~~~~~~~~~~ 2 \., - I'\. SUtton 2 1~~~~~~~~~~~~~~~~2\.7 2 9\.9) II 2 11 4 1 Io\.71 in 877 177 I \.1 -\. 511117' - 74~~~~~~~~~~~~~1771 2 'I Ml7 ( 1907 9 41 II I I*t N 'In\." 7 2\.'II ShA 27 4 97 S- 7I 9 1\.0' 71 4I2\.1t' 1 1\. S '741\.9 4 II I S,!:"" I\. ''tst ~~\. ~ 1197 1\. 427\.79 1717 44 \.311\.24 17(1 41 714\.78 I'll 727I7 49\. if An j 2\.1 :SS I I 900747177 41777 '7 l',n, 22\.99 19\.'\.? 111\.~~~~~~~~~~~~~~~~~~~~~~A 74S6) i I 14\.w 12 18\.7 10 2 '7 to\.n\. 7,771o ' *1 lion 7~~~~ ~~\.' 9721 L \. N'I 8 I' t 9\.1 \. I 1\.721 ?b 8 \. 212 9\.0I21 I$ I_ 2 oe47, -~~~~~~~~~~~~~~~~\.1:?21gl1, 112' -7 - - - SS\.- - -),I S\. - 7 -I -01 - II1712 7 I\.7 I 291' II (2\.4 'a 777 ' II\.' 4 t, \.ooon - - ILl 111\.21 1-) I\. 194\.7'~~~~~~~q 4 I29 1 71\.' 4 A"10 \.1 2 I 91 \.146:" 19 '0777 - -~~~~~~~~~~~~~~~~~~~~~~Q2 - I 711\.' S 71\.2,) 1 7\.'7 9 1\.' I 1 12\.4\. 4 2 Z, 2 7, I 214\.27 '0 Is 729\.09 2c', 747\.2\.') I ; \. 77\.' ('771 S7 4 A7\.' ' 7 2011\.14 97 "C\.; 1,2 1~~~~~~~~~~~\.7(2A IL)2 - 2II\. 77t 274 91\.2 7 2 2,\.' 17 I' t 1211 7"\.4\. 17 I 7 21 444\.774 97 07-d4 I\. S9 \. I' 19 go I9\.1 Is S 227\.A0 14 7 1\.70 2 II 217\.1 22 21 7,04\.20 49 T-0 - -2-\. 7 I221 77 2 7 125\.22 1 1 '7\.11 1 4 1\.4,17 2o 40 -7774- nd\.9 7 - 7 7\.47- 4 11\.1 I' 112\.3 I I7 114\.91 7 477-77 n0 '\.9\.271 7\. 1 ILL 7 1 r\.2\.) 8 I 7 772\.631i I'' 12 9j\.9aS 7 31 1\.492 1 \.dt 77 11\.1\.(k1 I 29\.09 - 211) 14\.970 2 1 ':'4, IS 9 21\.10 9II L t rn b\. \.d,t,- - \. - - t on -\.5 - - S - - te tr\. 2\.7r777,,71200 i,777t79 2\.i1 IS 47n8u477ar072772 o 3 97 Oa7 \.8 66 ) 9 8 \.1077 R\., o il 70\. 1n In 9 907I 7 1\.9 \. \. 17\.4 7 7 77 2 2 199\.10 9 70774110 - - - - -~~~ ~~ ~~ ~ ~~~~~~ ~~~~~~~- - - ( 12 - - - 2 4\.92 9 E77-777(777 -h 7\.1' I - 1-0 2 2 47\.107 1 ' (2\.23 24\.9 2 4 117\.10 4 Pr\.7771\.7t 408 Ow0\.7\.7 I P - -m I A-n -1 ( 9 I I 8\.011 2 S\.o0b7-1 2 2I 7\.39 4 17 3 871\.10 I 2 11\.8 7 1292VMS4 3 10 129\.124 27 14 149\.2 21- H,70 I908 00tI I 104:148 7 I 90\.00 II I 1 I4I\.I0 I 4 19' O S I Mon20 L7-7 rt ta77 n I\. I and~s o 74777 70807 20\.047 2 - -b b -2 I 21\.10 I I 55\.732 2 05 "In\.tall leal70\.7 27\.7 2 (170 M 22 I S,17\.0 9 4\.0 1 0\.10 77 4 1201 2 t- ,Ieu 1-rduc d - - nd -pit\. I 2\.3 - - -00 2 laslon 127 \.1\.7 - - - - -I 111\.00 I 11779 d780\.4 27\.0 2 4I93\.0 11 9 13\.751 4 I 1 23\.1 23 A 1\.2 A 1 II2\.4 2 Slnotrloa 2ac7o27 4\.1 48 2 14\.711 IO 42\.00 31 - 1 -o7 - 71 00 '7,77\. S, '7123\.20 32 177 97\.00 II 9 173S9\.7 1430 9% 71\.17A 24X 64 1 0\.17 2 21 40\.94 OcanAn ca- a ul-- r -l\.7- n - - - t- - - - - - n- 0\.0 A t7sok00700 \. 4 310 2 7 7\.0 3 9 3\.8D M,9072119 t 4 (49 7 1 (847 1\.' 1\.0 9 I 9\.1  I- ANNEX 4 PROJECT CO0LETION REPORT ThAILAND: FOURTH INDuSTRIAL FINANCE CORPOIATION OF ThAILAND PROJECT (LOANI 956-TN) Econo\.ic imact of IFCT As4iCtence\. 1_O-RS (January-June) /a Partial Indicators of Jan-Jun Economic Impact 1930 1981 1982 I983 1984 1985 Number of projects 43 43 53 70 129 78 Financing provided bv IFCT 1,027\.5 1,208\.6 1,°37\.5 1,574\.6 2\.211\.4 1,704\.5 Total project cost 6,375\.0 6,497\.0 7,294\.5 6,333\.0 S,759\.7 11,455\.2/b Incremental annual sales 14,432\.6 12,352\.0 17,104\.6 10,343\.5 32,933\.n 12,762\.5 Dowestic 12,075\.8 7,814\.9 15,293\.8 S,627\.3 8,972\.5 8,242\.4 E\.ncrt 2,156\.8 4,537\.1 2,510\.8 4\.716\.2 3,940\.5 4,52n\.1 Foreign exchange earnings/savings 6,462\.4 7,132\.6 7,752\.5 5,873\.6 3,382\.1 6,031\.1 Export earnings 1,162\.1 4,186\.1 1,274\.3 4\.235\.0 1,452\.9 1,068\.h Savings from import substitution 5\.300\.3 1,646\.5 4,478\.2 1\.63R\.6 1,929\.2 4,964\.5 Incremental salaries 600\.1 194\.7 244\.1 383\.0 360\.8 324\.0 Incremental employment 6,245 5,775 3\.284 8,747 11,850 8,665 Incremental value added 1,748\.0 2,339\.0 2,156\.4 2,191\.4 1,343\.4 2,822\.2 Domestic raw materials used 3\.R67\.5 5,513\.7 2,372\.3 4,049\.2 3,369\.1 2,373\.9 Jan-Jun Geographic Distribution 1980 1981 1982 1983 1984 1985 of Economic Impact Amount 2 unnA nt 2 Amount u2 Total Project Cost Greater Bangkok 1,694\.3 26 2,933\.0 45 1,231\.5 17 1,784\.7 28 3,758\.6 22 519\.3 5 Central 1,381\.2 22 113\.8 2 5,796\.6 80 835\.2 13 3\.366\.1 58 10,584\.5 92 North 2,849\.0 45 3,182\.8 49 95\.4 1 185\.1 3 202\.7 4 9g\.5 1 South 137\.6 2 45\.5 1 32\.5 - 2,882\.6 46 223\.2 4 110\.6 1 East 312\.9 5 Rl\.5 1 84\.0 1 402\.9 6 309\.8 5 12\.0 - Northeast - - 135\.4 2 54\.5 1 242\.5 4 399\.3 7 138\.3 1 Total 6,375\.0 100 6,497\.0 100 7,294\.5 100 6\.333\.0 100 5,759\.7 300 11,455\.2 300 Incrementa1 Employment Greater Bngkok 2,857 46 3,717 64 637 19 2,538 29 2,849 24 1,830 21 Central 1,731 28 467 8 1,497 46 829 9 \.5423 46 3,939 46 North 837 13 799 14 679 21 422 5 700 6 261 3 South 416 7 94 2 196 6 4,079 47 3,09 9 1,944 22 East 404 6 117 2 162 5 279 3 1,152 10 83 1 Northeast - - 581 10 113 3 600 7 627 5 610 7 Total 6,245 300 5,775 100 3\.284 100 8\.747 100 II\.850 100 8\.665 300 Incremental Value Added Greater Bangkok 607\.0 16 1,138\.6 51 310\.6 14 689\.3 31 501\.4 37 383\.7 14 Central 1,945\.2 52 113\.8 5 1,731\.0 80 371\.4 17 596\.1 45 2,339\.7 83 North 862\.8 23 965\.1 41 55\.6 3 42\.7 2 18\.0 I 18\.R I South 223\.4 6 12\.0 1 8\.4 - 331\.8 38 51\.2 4 40\.9 1 East 109\.6 3 23\.3 1 38\.4 2 193\.5 9 81\.0 6 - - Northeast - - 36\.2 1 12\.4 1 62\.7 3 95\.7 7 39\.1 1 Total 3,74A\.0 100 2,339\.0 100 2,156\.4 100 219134 100 1\.343\.7 100 2,822\.2 300 Dometic Rwv Material Used by Projected Located in: Greater Bangkok 1,763\.1 46 3,467\.0 63 1,607\.3 68 i\.n27\.0 25 1,065\.5 32 1,165\.1 57 Central 1\.278\.6 33 1,216\.6 22 285\.1 12 372\.5 9 1,340\.9 40 311\.2 13 North 237\.5 7 570\.9 10 41\.8 2 154\.7 4 1,\.0\.9 5 85\.6 4 South 480\.0 12 6\.6 - 93\.7 4 2,028\.7 50 318\.7 9 522\.8 22 East 58\.3 2 220\.0 4 200\.8 8 243\.4 6 242\.7 7 5\.4 - Northeast - - 32\.6 1 143\.6 6 222\.9 6 250\.4 7 83\.8 4 Total 3,867\.5 100 5513,7 100 2\.372\.3 100 4,049\.2 100 3,369\.1 100 2,373\.9 100 /a Based on projections and estimates contained in project appraisal reports\. /b Significant increase in total cost for projects approved in 1985 (January-June) due to linancing of two large cemnt projects\. AEPID May 1987  -19 - PSIJACT COWLIRTIOU EMT ThAILA: POUTI IU01IAL Fl980 C09ODATI0N OF TUAILM PIOICT (LOAM 1954-TM) AnalVlaS of 8bewoeCtaf ,e| V r tA\. 1936-TM Project\. 71ate1a Of_ Proiect 28 99\.6 19\.299 61\.2 24\.515 67\.1 653\.800 61\.7 znaalon 19 *0\.4 11\.592 38\.8 12\.022 32\.9 406\.654 34\.3 Total 47 100\.0 29\.991 100\.0 36\.537 £00\.0 1\.060\.434 100\.0 Total seate of Sob6orror (I\.4c) op to 1 loner r t 14 29\.9 2\.596 8\.7 3\.674 10\.0 95\.318 g\.n 10 - 0 mili"0 27 4U\.9 14\.160 *7\.4 30\.3U 81\.2 562\.616 53\.1 50 0 \.11110\. 4 a\.l 4\.203 £6\.0 - - 138\.600 13\.1 100- 250 mIllion \.9 2\.296 7\.7 2\.475 6\.9 63\.920 6\.0 250 - 1I000 mIllIon 1 2 1 329 2 84 - - [lo\.00 4\.7 Oore 1\.000 milli\. I 2\.1 2\.620 9\.9 - - 60\.000 9\.7 Total 47 100\.0 29\.89£ 1 0\.0 36\.S37 100\.0 1\.060\.4$4 100\.' Total alWoY_tat of Subborronar I Q n orsra 2 4\.3 0\.16£ /n - - 3\.700 /a 10 - 50 \.nrkar\. 9 19\.2 8\.194 21 4 0\.046 /e 193\.700 I1"3 90 l £0 sorker\. 33 23\.4 3\.429 £3\.9 39\.902 4T5a 154\.00 34\.9 500 - 290 -orkre £2 295\. 6\.256 20\.9 7\.222 19\.8 273\.666 29\.9 250 500 oxbare a 17\.0 9\.489 2P\.4 1\.455 4\.0 343\.768 12\.4 Aboos 9C0 vurk-ra 5 10\.6 3\.36h 11\.3 12\.022 32\.9 91\.620 9\.6 Total *7 LOA 2M\.M 10\.n 36\.537 100\.0 1\.060\.454 100\.0 Size of S\.bloao ( 9ht) us no anuuloo ~~~~~~ ~~~~~~ ~~3 6\.4 0\.190 Ia 0\.046 /a 330 I 2- million a 17\.0 0\.749 779 2\.47* C 04 27\. S 70 4 5 - 10 Ialiton 1 14\.1 4\.431 14\.A In\.992 30\.3 332\.416 12\.5 10 - 20 lIl1\. 7 14\.9 2\.el8 9\.8 2\.131 6\.0 I113\.800 11\.2 20 0110 2\. 0\.49 3\.7 33\.49 37\. 30\.000 2\. 30 - 40 allto\. 4 5 2 6998 90 - - 390\.I00 14\.3 40 - 50 Mill0on 3 6\.4 *\.121 33\.8 _ '32\.600 12\.5 Over 50 all1o, 5 10\.6 34\.598 49\.8 7\.222 19\.7 \.44\.000 43\.8 Total t7 IOC\.0 29\.891 I0\. 36\.537 100\.0 1,064 \.454 100\.0 Averaga L\. of loan\. 0\.636 0\.777 22\.563 Average atle of lons belo\. 8 20 milllon 0\.235 0\.462 8\.349 Duraiton of Subloan uJp co zT ,\.r\. 2 to as:r: 2\.3 0\.254 / - - 7\.noo /a 4 to 6 ,aers 7 34\.9 3\.396 T 57 5\.975 16\.3 90\.449 8 6 to 8 vaar\. 22 46\.8 10\.110 33\.8 14\.714 40\.3 30\.1166 28\.4 9 to 3o y\.ar\. £3 27\.7 5\.271 17\.6 15\.848 43\.4 300\.600 28\.3 Oar 10 yars 4 8\.5 12\.860 43\.0 - - 401\.000 37\.8 Wai_ghted varage etrity 9s nu b\.r___ by _ount 8\.7S 7\.540 8\.156 Total 97 300\.0 29\.891 100\.0 36\.537 300\.0 1\.060\.454 I£O\.0 Oeoarapklcal Diatribut£oo t\.raatar nankoa 27 57\.4 22\.461 75\.1 14\.714 40\.3 904\.434 75\.8 Central 2 4\.3 2\.878 9\.6 - - 71\.00C 6\.7 batv 9 30\.4 3\.343 3\.9 4\.699 12\.7 51\.620 4\.9 lortheast 7 14\.9 1\.423 4\.8 3\.546 9\.7 57\.900 S\.S Porth 4 8\.9 1\.214 4\.1 13\.619 37\.3 47\.500 4\.S South 2 4\.3 0\.774 2\.6 - - 28\.000 2\.6 Total 47 300\.0 29\.891 100\.0 36\.537 100\.0 1\.060\.454 100\.0 SMctoral Otatribotto CGO" Dd I,^r 75 d 14 29\.8 2\.962 9\.9 4\.704 12\.9 1 10\.288 10\.4 S 3ttla\. 3 6\.4 1\.123 3\.a 3\.900 9\.6 62\.800 9\.9 purnit:ra sadi fiztore - - -- - - - PrIntg d bihng - - - - Subtotal 17 76\.2 4\.085 13\.7 8\.204 22\.5 173\.089 16\.3 Interuaditat Goods lnduetroaa iwood *nd eort 1 2\.1 0\.348 1\.2 - - 8\.00 Pualp and "epar prod\.cts L ather and rubber products Ch ecala and cheuital products 5 10\.6 2\.945 9\.8 20\.941 57\.0 143\.900 13\.6 Noostalllc aloaral products 3 6\.4 3 020 10\.1 - _ 71\.500 6\.7 Petrole, products _- - _ NAtal products 7 14\.9 9\.093 30\.4 - - 369\.750 34\.9 Subtotal 16 34\.0 15\.406 53\.9 20\.541 57\.0 593\.150 56\.0 PIN \.ear \. t r fishing - - - -- - - - Livestock breeding - - - _ _ _ _ Sotel 3 6\.4 1\.272 4\.2 - - S0\.0O0 4\.7 Traonwport, storege and comnicationa 3 6\.4 7\.222 24\.2 1\.445 3\.9 163\.600 15\.4 Construction _- - - - Stone quarrying, clay and sand pits 2 4\.2 0\.514 1\.7 - - 22\.000 2\.1 tiactracitetn Se and stem 3 6\.4 0\.984 3\.3 - - 33\.966 3\.2 Kiscellan ous manufacturing and services 3 6\.4 0\.408 1\.4 6\.047 16\.6 24\.750 2\.3 Subtotal 14 29\.0 102\.i0 34\.9 7\.492 20\.5 294\.216 27\.7 Total 47 100\.0 29\.M99 100\.0 38\.537 £0n\.0 1\.060\.454 £00\.0 a Le than 3\.02\. AgPID Kay 1987  390 1tOTOm\. 1*0 n lOPdt00at 31t0Lo POJCT CS90TiO 00O9? (A"hs" 194-'s)h L\.t\., of 40,o\.t\.F\. odrLo 1324U11 0\.4- Bt\.n 0\.~~~~~~~~~~~~~ tOOT~I \.O,ot\.I o1t o \.o\.I Ogot\. left \.IF \.r\.Jatt\.0 o\.k\. *aoleat Tot~~~~~~~~?\.I 091o-itt ilr *t at ct"! r Proj *I-\.a "I- Moo s\.tp-\.lotB\.pt t\.Otry- I-t\. to\. -\.t cot a\. \.t t Ptt Tt-l ?\.-lto\. Tot-l (13Ptao Tott ro\.t (090\.0 30\.0, (\.t06%lbooo St\. Clito 0_\.9s \.0 1lp\. 1-\.o C-nat Coatra 2,1t\.207i 1000 I\.01\.000 140 123300 21\.500 3\.0W 10\.000 16 600\.000 00\.000 I4 2\.420 to 0)02 jo\.t\.t9 2\.t\.t9112 C:\. tI\.td That lla-\. Lt-\. 0\.2 oI trtflo T-ot Greatot 60\.0(3) 0 9i\.782 30 42\.010 71\.0(0 12\.l0 1\. 001\. 9 60\.000 W\.0\.M W0 t\.401 I 1012 00\.t Jdlost Ltd4\. 00\.004 0\.t\.a asoa Cr\. 001) 0 1 0( 2 16 1 ,12(0 M6\.2 2\.2\.1 0 1 14\.00)0) IO\.MD 04 5\.c40o 10ltilt "I tuge at\.tOO41l tottat ),dg\.grAt Fatty atid\. C-,\.t, 37\.00 04\.10 I3go \.0\.10 I% t\.-,1 \.2\.400 12n\.(OO 0 33\.?71 43\.000 43 g\.7341 a boo\.l*0l lbb\.l9I0 Chgod-a Co\., Ltd\. 0\.1 1bo` Gtya\.ta 00*0 OotaaKI,b, CO\. \.Ld\. 0\.S llo Oat GI\.tat S0\.010) I\., 112\.40)\. ItO 34\.292 121\.4,0, 12\.113 1(1\.-2 - 11\.000 23\.000 44 1 \.204 It 2(t) Ja\.11112 Jan\. tiO Tht Iobt\.Pt,- 0\. 0\. C1=0 ToO , ta - \.go, 134\.220 216 Z2\.4021 I\., 6240 10)2\.4\.43) 2\.- 1 02\.0040 02\.00 34 1\.00 11tl12 aer\.tI902 Apr\.19 So\.n A a\. Ltd\.PlaarF --- a 5*aga ftaO,1 1 stool A\.0g ss Ot\.-I OtaOy\. Oott 16 3 20n\.,bs I\., 101\.932 231\.00(1 110 \.321 233\.110 - 0\.100, 40\.1)[1 II tOll2 0 \./32 hot\. tW11O C)I\. loot t\.ott\.C\. LIS\. 0100\. d00 W-O\. I*00a That Ti\.0)\.l\. 0\.- 0\.0 03\.&olt OTt, Cgo\.-o ,4745\.13 3\.6 60\.n,0 W6 \.160\.11, l0l00 0\.0 \.2,go\.00 111 I"\.00 1\.0" t2 4\.S44 II if f\. lt 0010 Wy 3902 I\.o-rla C\. LIS\. Fro -0\.a IIIgs4 Golda\. Fa\.- ta\.atry" 0\.) C-oa\. Vaat-4t\. Ot\.,I 0\. 30\.44 1 12\.310 I\.10) I 1\. 14 2 "0\.I0 \. 12\.311 13\.10 04 \.01 a Iltia J-n 342 Jan\.19112 00\. Ltd\. 0\.3 ~\. Cs U\. t\.otn Cro-t\. 31\.)S 04 31\.200 16 R\. 151( 3\.001 \.200 J0\.-0 2 &\.101 SAW0 0 \.2115 I bill J-1t111 J-\.t410 Ca\. LtdI\.2S\. QIgIo\.- mob\.1 t\.oaO 0\.taoda Co\. 0\.3 UP0\. Ple\. U0,0\.d G -attt 0\.04 4,0 0016 123 2\.260 10\.0)6, 2\.111 00\.964 2\. 26 2\.206 0 \.001 1 IIII! B\.3 0 low VI39lo Ltd\. s-js\.& F\.a t-'otr 0\. en TI\.ao CCtr G\.at\. III b\.40 300 14\.361 292 3\.01) ( 1\. 160 611 3\.3 1\.013 9\.110 It \.003 0 6)12 -\.1\.982 J-a\.fl02 Co\.Ltd\. Co, t 00\.,l Floa\. 0\. Forktoo rhao IIItl tII---\. 0\.1 Ba- gkoto \.0\. Sooth 16\.00 23 1\.00 (I 0\.216 n n0\.100 tg\.1(11 30\.A12 3 S\."000 0\.00 26 \.30`0 4 St\.2 Jan\.1902 J- I 00 Co\. Ltd\. VIrat Stoo l '1 0\.0 1ka\. 01I\.& Stool 71\.0 Ctoota\. 82\.12 0\.6 124 I"1\.-0) 103 0) 1 110\.111 - 0\.000 ¶0\.00 \.400 a glitz J\.1\.1981 "\.a\.002 Co\. Ltd\. 4 Glo\.t\.d Sasa li Oaa* Tltat F -\.htmh\. 7\.4\.1\. 0\.2 og Jarboor oud POt, 6'\.1II 20\.0)0) 0 23\.133 II 12\.310 0\.) 36\.140 01\.116 60\.10 00\.09 62 \.306 a 0/12 t- I "a "\.0\.111112 CO\.Ltd\. 003I-, 0\.0*00 That Otcatg- Co-\. 0\.0 Oa FL-atlrta- C\.a\.t\. 12\.00)(a( \.00 t\.Os\. (a1 (0 \.00043 2\.000 I\. \.21A 3 6)3 J-n\.to02L\. Ltd\. P\.-It\.g \.ad mi\.o*o& FtyO,d 040\.,0, T\., 1aoto\. 0-14 0\.4 Iggo` Fr-\. f\.af-d Cro-t- 0i\.000 0 \.) 1 (12\.43) 63\.000 (2\.92 03\.400 S \.113 2\.00o 30 \.232 0 st(3l Jan\.1902 Oot'\.t91 St-,\. Co\. Ltd\. 00,006 That Cot --Itap\.a 0\.10 so Lit\. 0 Co1- tt, 3 00\.04 20\.n000 24 201\.0)1 33)9 \.0 - 1030Wt1 (46) 0\.00"R 16\.1110 30I0 \.464 a 012 Who-1903 0t\.t9111 Ct\.Ld Oataa,rh 7\.41000\.110\.0 loq-\. Ft"'\. Not gl- -400 30\.211 010 00\.004 4(0 I\. 1(3 ((\.4) 0\.-- \.13, (\.121 I I 0\.10 Civil0 S\. \.42 S Jo\.tIO1 J-0\.look LospaaO Foaaattd - 0\.3 Igp\. ¶0\.11\. Bt\.a\.lo\. sk,t6 1\.040 22 2\.03) ?( \.034, 2\.200 \.21\. l\.600 - 1\.w0) [\.%00 09 \.023 0 0(03 Jao\.l92 \.30 -I \. tatoalf \. - n \. \.1an1 Tlb\. Groat\., 9\.104 31 (200 0 \.003\.03In1\.12 10\.0 II40( 0\.40 I\.9¶0 10 \.3011 2 4fl2 J\.3\.30 0\.133 26o\.-,ltIa Ca-o 0\.30 R9\. C\.,o yolaI GI\.t\.t "0\.1134 \. 134 4\.013 - In---3 22\.30 u216 1\.0 300 3\.1'03, 13 \.40o a 3(12 I\. 1\.342 J-39112 Co\. \.Lt d\. C\.a\.o 0\.*0 0 W10 oo "\.1" "'\. AlhC-rat, 20\.3)) - (6 (b lb2( 4\.0( 62 lb Lb 4\.00 16\.105 Lb p\.1 2 31\.2 J_\.19l3 14 llt&Otyt\.'Co Ltd\.I""`oo t-\. 00\.000 Thai ftaald\.at F0d 0\.34 1"\.a\. 0,0db4 Utooto O\.t 240\.601 011 31214- 03\. 4 \.2 106 01 0 I\.% 6\.120 At \.4 6 2)12 Ja\.t\.982 2\.1\.1902 C\. Ltd\. \.1\.7 \.,Co\.r O\.tl (n,\. ogg Tahbkoar Or\.ao\., 102\.1)1 \.022 110\.04 ((01 10\.300 )30l0( 4\.630 11\.100 \. 10\.3) 0\.'000 At \.322 0 2112 -\.1\.142 Pla\. 9112 00\.0,0 Kltot400 S0110, 0\.10 B- Ba! \.I a U,ha 20\.30 1\.0 12(111\.0 6 IS\.1( (0\.12 11\.302 16 q\.000 \.103 (9 \.0IS 0 1)112 J\. 1912 40 -\.a Co\. LIS\. S'3 Na-t Pa\.- Ltd\. 0\.13 lg Potottt Vs\.- Notta t \. 1 100\.l\.1 I l\.)11 I\.011 \. 6\.32 I 1\.010 2\.100 61 \.01 4? a ) Jna\.ij 1-\.1142 I-I0\.00 tbl \.20 Be Cotda-, C---t- 4\.300 0 04\.213 32 (3\.(11 23\.011 1\.620 21\.416 \.)1 04) 1 \.0 1 1)12 -\.110 70b\.3903  ore\.St\. Tot-l "rol-1 C-a liCT FIeeeoGa attin f atpoet I ft III\.- of Ortt\.e Sob- ate\.- GCe- IFCT eP-relOol o-p\.l\.Atrt\.l0 tOt\. SINV Of !kL project of aab- grophical Total teptoy~~- Total tlo- *ateete o Po al\. oloo i i~ S\.bprojart -\. p -la to\.crr" lo-tton ae=n A 0 \. \. Forijo Tot\.1 Fore\. Total \. (1) For\.lIII Total o (Vs"\.) hoer) (\.aahlydr) etro ar Co\.Ltd\. 3\.23 lop-e L\.,\.-c Fa\.- bet 26\.6489 ISO ,2\.I14 200 2\.28& 4\.100 4\.066 7\.429 - 2\.000 i\.000 42 \.3125 ?/II Jl\.39S2I J\.l\.39S2 Ub\.a 10\.1 f\.r-, 0\.24\. \.E- Pltry F\.eo l-the- 2\.000 0 4\.000 0 1\.1,3 1\.0,0 1\.171 1\.161 - 1\.600 1\.400 42 \.070 4 8/IS Oc\.I at\.198 OO\.W Lt d\. Pert Cht\.7y Eore Fa\.- 1\.21 be Layer\. F\. gaet 4\.000 Is - to \.044 1\.0170 \.912 7\.260 4 3\.000 1\.000 41 \.93 8 2\.-\.186 amo\. 18I Ltd\. Pr\.- C-ntra G\.P\. Wa\.- 3\.26 8\.- \.Iy Old Parct Coot-l 10\.074 30I 20\.800 40 7\.370 25\.400 1\.478 21\.410 - 11\.000 ]!\.000 48 \.2 M 6 £112 c000\.332 Oct\.IM6 Co \. Lt d\. Steok Clklt& Shea 0\.00 Co\.Ltd\. 8\.27 tePee\. A\.re\. \. forI\. Crea\.tor 18\.204 40 24\.220 42 6\.401 4\.100 1\.401 1\.114 - 7\.410 2\.410 130 \.038 6 4112 io\.I\. 02 Jol\.1482 Cne\.k Art\.& 3\.28 8\. S0te\.ra- Or-ter 20\.000 0 42\.175 62 10\.414 21\.414 4\.401 20\.114 - 1\.800 7\.800 21 \.281 6 4112 Ji\.1983 i\.-1932 fratt C\. \.Lrd\. m-Aakk Fern ?Tap\.reh lb- 8\.24 l\.a 30031\.r Fa\.- 1ortha\. 1\.611 13 \.411 1 1\.616 1\.810 1\.382 1\.714 - 2\.200 2\.200 3M \.894 8 3/2 Feb\.1963 Oct\.19S2 be- Ltd\. Part\. loebot Pe\.m Ltd\.Part\. 6\.30 M" Lay\. Faco 16rtha\.t 6\.243 0 1\.446 I0 \.8001 6\.200 \.6182 6\.784 9 2\.300 2\.100 31 \.000 1 6112 N- \.142 WP\.o\.180 I\.S\.Caoa\.r C\.Ltd\. 3\.31 mem Ced SegOced Crot-r 10\.000 228 28\.180 101 4\.406 14\.000 9\.5146 3\.444 tO 9\.100 9\.300 21 \.210 7 Jge\.l84 Jol\.1288 Global Lh1\.lI- 3\.12 loPe\. tdora Gret-r 1\.246 10 10\.131 41 1\.400 9\.440 1\.701 4\.131 - 1\.900 1\.900 41 \.011 4 Jap\.114 ie\.l94 Co\. \.Ltd\. C0\.lda1 b-et\.& C\. lOcr Ce\.Ltd\. 0\.31 N\.- Ler\.ear 1arth 16\.000 122 24\.411 122 1\.141 22\.100 6\.790 21\.is1 20/\. 8\.00 0\.060 29 \.3 0 Jo\.938\.1 3\.-C 9- Ve\.te\.ble 8\.34 R4\."\. Oefl\.d Woget\.ble Eet 61\.S02 46 84\.144 104 22\.721 17\.490 20\.716 14\.140 3 20\.000 20\.000 34 \.396 9 Jo8\.l96 Joo\.1988 Ofa Co\. Ltd\. Oil Thel kglaltero\. 3\.11 be T-te P4t\. earth 14\.694 161 - - 0\.106 18\.800 8\.304 14\.141 2 6\.000 8\.000 42 \.241 8 11/12 jdde\.19 J\.18S4 ft\.-C l0\.G-ri8e Ce\. 16\.1 Ceot- Oi1 3\.14 loe- Ceat-r Oil Omet- l90\.106 1II 114\.544 124 S\.402 30\.100 1\.571 Is\.028 - 1\.8000 7\.800 49 \.209 4 1112 Jo\.93Jo\.19 Ce\.Ltd\. b*0-k Tlt St\., tc&\.t\.y 8\.37 lope\. 21-r-ir APWIIc\.e G-eter 26\.848 64 61\.870 100 4\.141 11\.000 1\.066 30\.S29 - 9\.1300 9\.384 31 \.211 1 9112 hep\.183 Oct\.1984 Co\. \.LtdA\. be0ah La Cho\. Chleog \.38 be- metal OgeaaO lbth-at 30\.000 4 3 0\.000 63 18\.491 61\.000 19\.401 66\.783 4 32\.000 32\.000 03 \.492 9 9112 Je\.19s3 feb\.31s Co\. Ltd\. S\. t Soefeda Co\. \.Ltd\. 3\.19 v- FF000 teefwo Loath 25\.000 211 21\.000 124 tfl\.%38 14\.700 14\.717 66\.437 23/0 20\.000 20\.000 30 \.429 8 10/32 Feb\.196G4 *r\.364 l\.eg Ch-r\. 3\.40 be frI\.Oa Ctrrelt 00\.88c 20\.203 0 61\.841 136 11\.100 31\.700 20\.184 34\.406 9 03\.100 32\.30 43 \.M6 4 7112 Joe\.1494 J\.19S4 91-t-tF\.l0 Co\.Ltd\. Boar 0\.0~08 T\.te1 A\. of Sbhpl\.Jarr\. 41 4\.907\.622 7\.075 6,718\.485 S\.0,4 I\.185\.109 3\.211\.434 3\.140\.064 3\.609\.002 k\.022\.437 1\.0160\.424 MM89 A-ePrg 106\.417 III 149\.100 319 31\.644 64\.244 14\.224 80\.200 1 IL& 23\.781 22\.383 29 \.437 I 2/32 P\. m dat\. -eo\.lbl\. I4\. to \.h log a\.tld by the rl,et\. 7b- 9-t\.oem ee\.0d oP\. W T%\.r\.- \.ed\. -0 loocl t -Oh- te\.- t6\. Prelt co thagoIer ot noe the eel -tI- 7d "ddi,lece rmtr\.tt-o r\.rG\.d \.06\.0 tb- the VMJict\. 7\. t%\. Prolcot - citbhd Ve ro\. a\.--M-r ae1e1y Ore t\.01 \.1I\. -\.oda P-d-cte -atid b\. \.rlal-d fre eter%\.d, ee r h4ddltloal ecetrot"te \.0 6 t0 f\.r t6\. prd-ti-o M\.f0rleo toptoo t\. IeGid\. thero -~ e rrkalg \.Plta1 -er\. of st \.2 841113 \. tb k Attc offd\. \.W -t\. erl\.l to peg-\.t th\. Mhetwg peohlte\. 7 laIdt \.cerap reel -wte laCeod by \.ehprej\.te cadcr iS 1938 sea 083\.6 -s I\.0131 -e d by addIct-1-c-l octrortl\. 0 o the prdr lot pronoet \.-A m\.00 pF\.tlg\. to the project\.  13\.1tMm P1WM 0313900061 PONCE C2O3POATIION Of TR41\.613 PSOOC (La"3 1936-Ill) Ueeeetc led-t-ooc \.1 &Sol7ccI\.o Vloooc*4 IIdoc L\. 1954-111 Owport "Io\. 907\.0t Sob- "0C\. O C\.96617 tI1 IoccomoI\.tO \. : \.1 two s of 5000030 t\.te-t I re~St Ot\.0 \. ~ 0\.0 lt\. 90\.0 \. 00 0 co ostorislo W- 1\.bp\.J\.cO pcojoci 0 I\.oooi\.1 0o003~~~~~~~~~~~gt !it) R4 A100o soot \.rlo 4tli\. \.460 totol 0 t100 \.iEOfoo L\. \.1421MB r\.0 St\. Cit7 Comot Co\. Ltd\. 6\. 2/13/35 76 76 611 611 ,:\.14 6\.S \.3\.7/ \.2\.7 \.096623616 -- - 0\.0\.000 000s - 76 76 Wo oc\.o i\.Ld A2 1/IS 90 8 6001 33 I\.7 6\. -67\. 29\.497 1131\.479 2 0S1 - - - - -1\.30 - 0 7 17 I\. *:\.'Ca ,\. -I\. C\. aId A\.1 12/11 /30 70 s0 s0 SO \.13 1\.1 I,\.iT; 0\.1 gs 12 u\.90o 61\.3 7\.9 "I 24 09 180I\. 11 I"\. co c\.o C\. L A\.61 01113,14 3 44 116 11 SO 91 0\.:900 49\.4917; 1\. 2f\.*0 62\.107 - 9\.0 \.*\. 6 j 0\.106\.7\. itchy C\.* Ltd\. 6\.6 121111~~~~~~~~31 60 41 273 290 1\.2122 \.1)79 16\.011, be\.002 162\.901 200\.162 - 3\.7 - \.64 60\.621 26\.m2 'LL 19\.1 10\.13 V\.o\.o Leep Co\., Ltd\. /b A\.17 l 0/13/3 I - 19 - IA320 I'20 ll9\. - 17\.00 - --- I Lk t1\. iiSt_St\.0 Iod\.trI\. Ltd\. 6\.3 1IllIl111 77 60 216 167 i\.012 0\.6ii - 219\.0 0640 - 13\.103 - 24\.031 62\.4116 - 2\.1 at170\. IfcooSC\. Ltd\. /0 6 1/1/0 8 641 12 11 1\.413 6\.009 206\.119/0 \. \.29\.019I I"I\.0 - -- 26\.1 \. 0 0 Clod\. P\.7 l\.40\.t7 Co\., Ld\. /6~ 3\.1 M2IMS3 so - 66 - 0\.676 - 13\.0061/\. - 3\.664 - - - - - - - Li (0\.3\. 3~ W\.300\.bl\. Oil0 Co\., Ltd\.) V\.0S\. Cool 3\. - 7 C\. Ltd\. I\. 2l/O 2 70 6 9 0\.700 0\.311 I 2\.I118/\. 0\. 61\.97n 24\.147 7\.767 26\.:147 17:\.7 300:\.0 - - - S\.s\.q\. 3\.Ofod\. C\. Ltd\. I\.1's/1/3 7 73 79 079 0\.102 0\.0384 40\.014 16\.2911 816\.I10 SIf\.1"S 16\.910 Sa0\.09 100\.00 I000\.00 - 1\.62 0004291 Boo6k P0\.c 03\.0 C\. Ltd\. 0\.4 12111/as so1 30 s14 00 9\.914\. 19\.106 Ill94 60\.9 111\.960 11\.093 ko 00\.0 91\.06 -- - Met\.164~\.1 lomc\.etto\.3 Co\. Ltd\. 1I\.1 12/11/31 7 60 30 160 O0\.70 0\.210 724; 162 1\.2 \.2 - - - - --- - PIc-t Stol Ptp\. Co\. Lt4\. 3\.6 12/311/3 0 6 10 12 1\.0 0\.1 611; \. 410 21S\.7*24 119\.6 S" \. 9\.1 o\. 96\.399 0\. 96 9 19\.1 Pocolobtog Pobtt\. Co\., Ltd\. /d 3\.7 17/113 70 - 162 - 0:66S - ,\.2167;: II\.191 - 90\.10 30\.02 -11\.133 - 20 1 79\.1 Checlt Cr,p-\.tt- Lcd\. Id \.3 12/13/315 sr Ito 112 \. - - -'l - 977\.096 - - - - 1111F II? T\.,I e -\.0 QCold Ste,"\. Co\. Ltd\. 3\. I2/311/4 30 o\. 171 0\.0\. 0\.II& o\.o 41\.461f\. 0\.0 10\.923 116\.90 000\.928 116\.9003 1000\.00 1000\.00 -- - - - Th\.1 Celtto oocr C\. Ltd\. 31 121/0 7 0 71 31 1\.171 o\. 7\.1810 771\.024 82\.076' 9\.6001 - \.1 - -22\.221 - 22 22 ledp\.lhP36\. Net LId\. Po\.- 3\.1 0/1/3 70 30 194 Ion 0\.101 I0\.21 I:\.33I 1134 \.10 8\.9- --- -- I\.wo\.o ?oF\.0\.ott-\. Ltd\. 7\.0 \.12 32I11,/S P0 too $I 27 0\.210 0\.i70 1\.079 0\.447 614 762 - - - - 00 Al\.-V\.c Plonec-\.rl Ltd\. Pot,\. 0\.30 1232/11/34 s0 0 a 10 I\. 20 0\.2 -- 14\.9 11 S21\.29 - - - --- - - 14\.1 V1A0 oO\. o\. t\.81 I I113 S 0 7 220 700I l6\.722/o 60\.160 266\.142 260\.000 78\.162 73\.0f0 70\.00 30\.0 - - 0 14 1otd optoIo-lt\. "C\. Lcd\. lb '\.3 '2/11/1' 71 0 - \.1 3N\.soiT-\.190 - - - - T9\.1 P,\.odSO oo C\., Ltd\. 3\.16 12/11/30 tSP ESP - 1\.77 1113 - - 1 S\.F\. C\.r I C,,\. LId\. lb 0\.7 2/13/3 90 - - -- 2\.870/\. S II371 - - - - I6~~o 0O6~~~cc 3\.7\. C\. Ltd\. 3\.1 2/11/SI 61 60, 881 112 0\.1 0\.8 \.27 - 600 8107 Ste Fo3Po\. Lcd\. Por\./\. \. 19 /1/1 9 - 1 \.1'46 1\.7617; 9\.032 - \.- - - L Oc 0\. looctlot4 & 3\.1o6 Co\. Ltd\. 3\.0 12/ S 90 30 6 0 - - 211; 019 7\.9 804 70,0\.00 bttomhOlo Io~trt,\. Co\. Ltd\. 3\.23 \.1211/1\. 00 so 12 61 \.10 0\.021 10\.4#iT\. 2\.102 21,\.02S 14 4 is\.011 so\.071 60\.00 69\.9 -27\.360 -- 0\.07\. Pots C\. Ltd\. 3\.21 12/11/SI 69 6 310 110 0\.72 0\.200 1791' 8\.769 14\.122 1112131- 4\.012 - 0ISO - - - - 06\.Oo\. -P\. 1\.04\. 7\.70\. 8\.26 12J1310 00 - 3 - 0\.3 7\.4644 - - - - - -- -L 79\.07 soro33 Vo\.MLId\. Po\.o /6 \.20 0210/5t s0 - Is 0\. 467 - 2\.149/\. - 8\.168 - - - Coo-co C\.?\. For C1\. td\.26 12/31/81 64 70 10 43 0\.697 1\.003 9\.8309 9\.164 26\.21 16\.446 1\.693 20\.21 7\.2 A - 06 los C\. Led\. /b 3\.27 12/11/1 00 0 - 040 - 1\.6/ 3\.8 \.1 00 5-\. Ant 6 Cr\.f10 C\. Ltd\. /b 0\.23 12/13/80 30 63 47 23 - I \.77; \. 2 \.1 13\.00 - \.31 - 30l0l V\.T%\.-\.& 16\. 0\. Led\. PZ\.7\.9 32/13110 100 to 100 I II 0\.466308 11\.191 - - - - - S\.oM Wo\.M Lt\. Fete\. /6 3\.210" 12/1Iis1 30 - 9 - 0\.6319 - \.349 - - - - --- - R\.1\. C0 Co\. Ltd\. 0\.10 12"/11/3 60 70 23s4 ISO12 011 26\.071/\. o\. 167\.402 012\.063 167\.412 137\.063 100\.110 1000\.O "166\.211 113\.161 - - G0\.b\.0 6Co0A" Co\. Ltd\. 3\.1 'll1/, so 61l I7 4 \.1 \.0 21\.910 I0\.714 11\.13 2\.6 - - C\.13\. 0\.6\.07 C\. Ltd\. 9\.011 I1/11/I I 32I \. 122 30 \. \. 8\.82 1\.1 0687 7\.181 10\.110 3\.6t20 60\.02 70 \.26 \.- 0\.0\.0 iome9\.30t\.61\. Oil C\. Lcd\. /I 3\.16 I2/11/i 30 - Ill - \. - - 13\.17 - - 196`411 - - - - - -Is T901 Agcboolt-r P c I\.t\.oC\. /6b BA 3\. 102/1300 70 - 11 - 0\.147 - 7\.1:I 2\.26 --- 1l\.o Cootoc Oil Co\. Ltd\. /6\. \.16 1/13/9 77 61 70 110 0\.102 0\.1334 60\.60 12\.673 131\.6 20 163\.271 31 39\.110 36400 96\.00 a 3\.9 - - - - TOc te0\. 000\.007 C\. Ltd\. 3\.17 32IlISO 3an 1 202 70 - - 2\.4/\. \.0\.821 20\.1\.29 163\.011 - - -\. - - L\. G0O ,chee c\.,\. Lt\. 3 \.13 1211/310 70 \.o 63 \. 0\.26 I\.V\. I2\.011; \. 11\.137 \. - - - - - L 5\.7\. Seel\.& C\. Lcd\. S\.1 1/10/4 t0 - 4 I2 0\.168 0\.'07 1742 21\.2I 24\.0 436 6\.:*436 0\.03000 00 " S\.0 Che-O0904t C\. Ltd\. 36 12/11/30 30 40 Ila 170 0\.230 0\.1l7 18\.29\. 1\.11 11\.09 44\.789 A"\.9 64,799 1\.00:1 10080\.0 ftP 0 too7W-0O00I pr0100t\. /s Per the T\. V to I\.900 dm0 070091" VVet\. 1\.10 o\.oootIoto* ,\.s\.tc\.d to 17CT\. '170\.0 7t0\. W; lb\. rwt\.r, 6\. b\. coe\.d 40000\. 0o\. 1934\. Nelda eVettobI\. II 00 e00 0parelIeot\. 'M1 to to e-Ioelobt\. aIttC\.t Im~fftltcIo wc 0\.11\. It 06\. fi-o\.oc\. 000c  PROJECT COMPLTIoN SP0? ThAIL: FOUtTN I3DLISTRIAL FIAICE CO 1PO TIO OF OThAILA PROJECT (LAlA 1956-TN) PioascOa l Jdloator\. of Sb proot\. r- noa-\.d U\.der L3\.n 195f-TN Ptn"a\.trl tatloo ftOmoell Ilt Vot 9(1) b- Dot\. of Gret\. Totl d\.bt/ Loog-t r rat, *f of projart floasril otrid A\.ts Li\.bOittO* Corrtet *q9ti d,bt/iqoity tr /S) _0r (_d _b Stt-ast of io-a Cortast Sted othr Total C-rreot LonS-tor- Other Totta iqulty r-tio r\.tio \.t\.It Cat\. ct1ol Gimn \. e l *ot\. et-ol no t\. C ' A\.3 12/31/OS 492/12 1\.52\.a638 1\.77\.1311 1\.312\.074 *\.573\.521 841\.247 1\.47\.048 39\.569 27\.S7\.44 2\.005\.659 1\.81 1\.28 0\.54 25 41 477\.909 813\.157 9\.S4 13\.41 27\.2? 3\.57 *\.2 : 2/31/2 5 3-9/12 60\.930 45\.096 0\.124 106\.154 27\.169 16\. 904 0\.000 44\.073 6o\.081 2\.24 0\.71 0\.27 17 33 5\.513 2\. 9 9\.17 2\.S4 14\.05 4\.34 A\.3 12/31/55 2 225\.634 150\.580 4\.437 382\.151 97\.42 34\.830 0\.000 234\.254 375\.197 2\.35 1\.22 0\.67 23 10 27\.308 51\.20 10\.3 \.9 21\.79 10\.42 8\.5 08/31/l5 2-4112 40\.041 72\.19N 10\.264 122\.903 104\.255 47\.930 0\.000 I52\.1N5 (29\.282) 0\.19 - - 13 11 11\.427 (12\.140) 11\.a (00\.04) 22\.99 - *\.6 12/3 / 5 3 121\.19t 148\.074 0\.000 269\.270 55\.283 49\.40 0\.000 133\.963 134\.307 I\.42 1\.00 0\.37 14 4 S\.S91 22\.721 *\.02 5\.44 32\.32 16\.92 A\.1 /- 01/31/54 1-9/12 - O - - - - - - - - - - a\.17 - 0\. 0\.9\.- A\.S 12/31/85 2-10/12 43\.541 144\.498 17\.448 205\.45S 129\.393 131\.934 4S\.i134 306\.461 (100\.976) 0\.314 - - 19 9 8\.034 (0\.271) 3\.75 (24\.46) 23\.98 - A\.9 12/31/BS 2-9/12 638\.445 507\.062 85\.541 1\.234\.048 710\.028 220\.607 3\.95s 934\.470 299\.399 0\.90 3\.12 0\.74 12 17 IC\.071 (10\.9f44 1\.12 (0\.89) 4\.04 (3\.6) \.1/b 132/31/5S 2-8/12 - - - - - - - - - - - - is - 3\.115 - 5\.80 - 13\.04 - 5\.2- 12/31/ 5 2-2/12 26\.218 9\.244 4\.280 39\.742 11\.577 7\.809 18\.183 37\.549 2\.173 2\.26 17\.29 3\.59 20 25 3\.826 (0\.294) 11\.14 (0\.71) 16\.SC (13\.07) 5\.3 12/31/55 1-6/12 26\.222 46\.58 0\.099 73\.209 49\.773 1\.543 0\.000 51\.316 21\.893 0\.53 2\.34 0\.07 30 30 10\.300 3\.312 25\.24 4\.S2 9\.s 15\.13 6\.4 12/31/a5 2-4/12 16\.347 30\.I98 0\.000 47\.265 22\.946 5\.304 0\.000 25\.280 18\.9N5 0\.71 1\.49 0\.25 24 19 7\.110 1\.023 14\.12 2\.1C 25\.00 5\.39 O\. 1231/3/85 3-51/2 0\.034 21\.081 0\.449 21\.546 0\.034 1\.452 11\.734 13\.250 8\.316 1\.04 3\.59 0\.38 13 a\. 2\.1n 0\.49 7\.2 2\.27 11\.07 5\._ B\.4 132/3/a5 1-11112 97\.454 204\.119 0\.3A1 303\.936 225\.153 n\.000 0o\.o0 225\.153 78\.783 0\.43 2\.94 - 2a \. 393 7\.73 9 \.17 2\.S4 28\.08 9\." 5\.7 /e 32/33/55 2-6112 - - - - - - - - - - - - 22 - 12\.581 - 14\.94 3S\.30 - 5\.8 f 37/33/55 3-4/32 - - - - - - - - - - - - ESP auP 39\.958 - 24\.a2 - SO\. 5\.9 12/311/4 2-5/32 35\.892 25\.832 4\.200 47\.924 3U\.95 M\.537 0\.000 41\.491 4\.411 0\.45 9\.82 1\.93 21 19 8\.894 (I\.549) It\.ff (3\.23) 30\.27 (04\.86) 5\.30 32/33/55 2-30/32 18\.171 32\.457 0\.120 50\.748 27\.172 14\.104 - 41\.236 9\.512 0\.a7 4\.34 1\.48 34 - 9\.742 (2\.708) 9\.33 (5\.34) 34\.19 (28\.47) 5\.33 12/31/85 3-6/32 73\.42 109\.675 0\.000 183\.167 54\.040 23\.482 0\.000 79\.522 103\.o45 1\.31 0\.77 ^\.23 20 &\.s\. G\.598 17\.130 8\.30 9\.3n 11\.30 18\.53 5\.32 12/31/*4 1-10/12 2\.180 3\.992 0\.000 *\.152 0\.14 , \.44 3 0\.1300 3\.97 2\.255 2\.45 0\.84 0\.48 21 &\.B\. 0\.48 0\.035 12\.60 0\.4 17\.20 1\.55 5\.13 32/33/54 2-3/12 3\.a42 2\.334 0\.004 S\.o02 C\.54 0\.no0 0\.000 1\.359 5\.54i 40\.43 0 - _9 U\.S\. 3\.139 0\.05 9\.94 0\.27 14\.85 6\.27 5\.41 12/31/15 1-9112 32\.4005 17\.316 0\.000 19S\.444 29\.705 37\.473 0\.000 4\.6675 12R\.D76 4\.25 0\.52 0\.29 1 4 20\.347 12\.J74 1\.9 \. \.S9 15\.40 10\.00 _ 5\.35 /\. 12/11185 2-5/12 - - - - - 2- - 1 - 3\.7 - 2\.31 - 33\.3t - N\.1 12/11/83 I-8/12 129\.o23 118\.775 21\.107 269\.505 174\.198 3\.642 3\.299 IAI\.139 RR\.186 0\.74 2\.05 0\.04 S? ESP 4*3\.U62 9\.462 13\.89 7\.21 50\.87 22\.05 5\.17 32/318/5 3-5/32 - - - - - - - - - - - - 17 - 19\.300 - 3I\.S0 - 13\.66 - 5\.15 12/31/85 2-1/12 5\.974 51\.580 0\.0oo 60\.556 4\.4 3 30\.322 0\.000 34\. 75 25\.791 2\.02 1\.35 3\.3I 7 - 3\.032 (3\.S70) 2\.48 (S\.90) 2\.62 (33\.54) :\.3S9/ 12/113/5 2-10/12 - - - - - - - - - - - - 14 - 0\.296 - 6\.84 - 9\.94 - 5\.20 12/31/A5 2 I N \.137 33\.408 0\.000 51\.795 6\.4 10\.492 0\.o00 34\.909 34\.886 2\.97 0\.48 0\.30 33 25 4\.*45 5\.772 11\.20 11\.14 23\.83 10\.55 5\.21 I2/31/85 1-7/12 9\.58 25\.331 \.371 3 42\.290 3:\.9 7\.7ab 2\.115 33\.47 8\.443 0\.40 4\.01 0\.92 28 25 2\.869 (5\.373) 11\.02 (32\.71) 23\.21 (83\.58) 5\.23 12/31/U5 1-1/12 30\.740 21\.274 0\.00 52\.014 i5\.s \. 3\.532 \.n 00 59\.Ia0 (2\.972) 0\.55 - - 17 IS 3\.84s (4\.SS) S\.56 (9\.783 27\.42 5\.24 /c 12/3/115 2-2/12 - - - - - - - - - - - - 0\.235 - 5\.92 - I\.32 - *\.25 7; 2/33/55 3-13/2 - - - - - - - - - - - - 16 0\.23 - 5\.1 - 5\.41 - 5\.24 12/31/85 2-8/12 33\.844 14\.526 M\.ono 48\.372 36\.155 4\.334 0\.000 42\.489 5\.883 0\.94 7\.22 1\.08 i6 23 1\.790 0\.011 8\.94 0\.02 18\.0 0\.19 5\.27 /0 32/33/85 1-10/12 - - - - - - - - - - - - 22 - 2\.68 - 32\.09 - 35\.47 5\.28 12/11/85 1-10/12 38\.578 21\.970 2\.897 63\.445 43\.547 3\.N57 0\.000 47\.40(4 I6\. I4 0\.89 2\.96 0\.24 21 11 2\.543 (0\.275 5\.20 (0\.433 15\." (1\.73) 5\.29 12/31/5 2-9/12 - - - -I - \.3 -\. \.30 7r 12/13/5 2 - - - - - - - - - - - - 3S - 0\.220 - 3\.73 5\.93 - 5\.31 12/31/85 2-6/12 47\.981 24\.473 0\.130 72\.754 63\.324 9\.058 3\.010 75\.392 (2\.60) 0\.76 - - 23 I? 6\.357 (I3\.S8 18\.54 (14\.563 11\.24 - 5\.32 12/31/55 2-4/12 1\.774 6\.343 0\.OO 8\.1135 0\.315 3\.091 3\.000 6\.406 13\.29 5\.l3 3\.71 1\.79 24 I7 2\.075 0\."87 I5\.I 8\.4" 57\.03 39\.73 S\.33 01/13/85 2-6/32 2\.561 15\.367 D\.000 20\.928 8\.000 00\.00 (1\.0 12\.000 a\.925 0\.h4 1\.14 0\.90 39 -- 1\.71 (0\.17) 7\.69 (0\.85) I 37 (1\.99) 5\.34 /b 12/31/85 3 - - - - - 5 - 1\.20 - 1\.13 \. 3\.03 - 5\.ss 72 12/31/5S 2-5/12 - - - - -6 0\.11 - 3\.53 7\.82 - 5\.38 12/33/S 11/12 80\.404 97\.199 18\.308 196\.3II 159\.536 3\.2 o 0\.00 162\.812 33\.299 0\.51 4\.89 0\.10 36 24 25\.545 (10\.794) 17\.14 (5\.51) 29\.I (32\.42) B\.37 12/31/85 1-9/112 331\.10 29\.o o 0\.23S 6l\.O87 38\.260 21\.552 0o\.oon 59\.A12 1\.2Z5 0\.N7 IR\.2h 6\.54 20 19 5\.5,731 (I\.S 8:\.5 (7:\.1 l\.1 15so50 5\.3 32/33/55 3-3/32 4\.361 42\.294 0\.0110 66\.657 6\.880 29\.457 0\.000 36\.137 10\.967 0\.64 3 \.37 3\.95 10 a\.t\. (\.422) 0\.320 (2\.34) 0\.48 (4\.96) 1\.333 5\.39 12/131/4 2-5/12 27\.182 27\.843 0\.000 55\.625 8\.222 9\.500 0\.000 17\.722 37\.903 3\.38 0\.47 0\.25 21 *\. (0\.613) (1\.49S) (1\.54) (2\.89) (3\.36) (3\.94) 5\.40 12/31/63 2-4/12 35\.590 24\.730 7\.196 67\.516 43\.003 14\.240 0\.029 57\.272 10\.544 0\.83 5\.43 I\.IS 20 5 2\.44 (4\.33l) 9\.19 (6\.5S) 19\.62 (42\.78) IP - trty-t\.inag proltt\. ! L8 fiet-I satin-t "a teIttd\. 35S ftctory bt h\.t co_\. da st\. 4\.B5t 1944\. lb dat at-labl\. dt to Lo-a reptta\. St: 9roj tt -m rat cm 1 d 4\. A- 7\.  O \. \. \. \. \. \. \. \. \. \. \. \. \.4 0 - 0 0 -\. \.C 0 4 1 \. \. \. \.°oOo3o \.cOc o ~O C~°C°C I \. o\.*C0o00- o00\.oococoooo_o oc oo o_gov _ 0¢ °l O O 1 11I I C I I I I I I I I gl I C l l,C , I ! \. 4\. -j U O GZa X 4' - 0 - ol *1 \. l\. \. \. \. \. \. \. O O \. \. O \. l* 4\. o g4 4' 4'- 4 4 * 4\.1 I - 0 0 0~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~0 2 l 0" o 11331333-11111\.1111111111111 I I I j I 3 3 I 333 1 33 3 II10 1 1 11 , 0 1 , o1 11 1 11 l F l , | * | \. ,-* - - - - - O - - - i- 0 "" ^ " " O - 1 3\.i-; N -gegsg0eSgg eeoo@'1- * * 888888Ie8o8oc8nocoggoZ8co8oeoeocoe 1 cec &~~~~~~~~~~ 0S°_S 4'1SRsfcof"-^-e*9tXo7e °°R X B o333331; ° 381133o * -III3III oII3IIII\.I gII cI,I o,I,g -,o g, ,,I \.4 C,  - 25 - ANNEX 10 PROJECT COMPLETION REPORT THAILAND: FOURTH INDUSTRIAL FINANCE CORPORATION OF THAILAND PROJECT (LOAN 1956-TH) Staffi\.ag June 30 1981 1982 1983 1984 1985 1986 1987 Staff turnover 'a 7\.8 7\.3 7\.1 7\.3 4\.8 4\.2 2\.30 Staff numbers Professionals 210 235 256 282 353 399 409 Nonprofessionals 142 123 123 124 149 157 155 Total 352 358 379 406 502 556 564 /a Number of resignations during the year/average number of employees during the year\.  - 26 - ANNE,X 11 PROJECT COMPLETION REPORT THAILAND: FOURTH INDUSTRIAL FINANCE CORPORATION OF THAILAND PROJECT (LOAN 1956-TH) Details of Procurement, as of December 31, 1984 No\. of Amount /a projects (Baht million) Z Local Procurement (Under 65% financing clause) Limited competitive bidding /b 40 233\.0 96\.6 Own fabrication 1 8\.2 3\.4 Subtotal 41 241\.5 100\.0 Direct Imports International competitive bidding 1 179\.4 14\.7 Limited competitive bidding /b 24 537\.3 44\.1 Proprietary contracts /c 7 501\.1 41\.2 Subtotal 32 1,217\.8 100\.0 Total Procurement International competitive bidding 179\.4 12\.3 Limited competitive bidding /b 770\.7 52\.8 Proprietary contracts /c 501\.0 34\.3 Own fabrication 8\.2 0\.6 Total /d 47 1,459\.3 100\.0 /a Total cost of machinery and equipment are from the appraisal report and exclusive of Inland transportation, handling, installation and contingen- cies\. /b Limited competitive bidding includes price shoppirg, either internation- ally or in any specific country\. /c Proprietary contract includes supplies by or on recommendation of a part- ner\. /d Since some subprojects have used both local procurement and direct import, the addition of the two subtotals is not the same as the total number of projects\.  - 27 - ANNEX 12 PROJECT COMPLETION REPORT THAILAND: FOURTH INDUSTRIAL FINANCE CORPORATION OF THAILAND PROJECT (LOAN 1956-TH) On±ending Interest Rates, 1980-86 (% p\.a\.) 1980 1981 1982 1983 1984 1985 1986 Qualified for BOT /a - 10\.0-11\.0 11\.0 1 1 1 1 Agro-industry 13\.5 15\.0 15\.0 } } } } I } } } Up-country /b 14\.0 15\.5 15\.5 } 14\.5 } 14\.5 } 14\.5 } Energy saving 14\.0 15\.5 15\.5 } } } } 13\.0 Bangkok and nearby area 14\.5 16\.0 15\.5 } } } } EXIM, Japan - - 14\.0 13\.0 13\.0 - } LTCB - - - - - 13\.75 } /a Projects qualified for long-term credit from the Bank of Thailand\. /b Projects located outside Bangkok area and five nearby -rovinces, namely Nonthaburi, Samutprakorn, Pathumthani, Samutsakorn and Nakorn Rathom\.  - 28 - ANI 13 PROJECT COMPLETION RGPORT THAILAND: FOURTH INDUSTRIAL FINANCE CORPORATION OF THAILAND PROJECT (LOAN 1956-TH) Structure of Interest Rates\. 1970-86 (I p\.&\.) 1970 1975 1980 1981 1982 1983 1984 1985 1986 Bank of Thailand Loan rate 9 10 13\.5 14\.5 12\.5 13 '2 11 11 Rediscount Rates Export bills 5 5 5 5 5 5 5,7 5,7 5\.7 Bills areiing from indus- trial undertakings 5 5 5 5 5 5 5,7 5,7 5,7 Bills &rising from the purchase of agricultural products - 5 5 5 5 - - - - Agricultural bills 7 5 5 5 5 - - - - Comercial Banks "Call money" rates 9-10 10\.7 16\.5 17\.4 11\.99 14\.94 10\.97 15\.03 8\.07 Loans and Overdrafts Loans for exports 9 15 18 19 19 17\.5 17\.5,19 17\.5,19 15 Loans to industrial enterprises against col- lateral for imovables and movables 12 12\.5 18 19 19 17\.5 17\.5,19 17\.5\.19 15 Others 14 15 18 19 19 17\.5 17\.5\.19 17\.5\.19 15 Discount Rates Coumercial bills 14 15 18 19 19 17\.5 17\.5,19 17\.5,19 17\.5\.19 Export bills 9 15 18 19 19 17\.5 17\.5,19 17\.5,19 17\.5,19 Bills on raw materials for industrial use 18 10\.5 18 19 19 17\.5 17\.5,19 17\.5,19 17\.5,19 Bills on sales on credit of tndustrial products 18 10\.5 18 19 i9 17\.5 17\.5,19 17\.5,19 17\.5,19 Export bills /a 7 7 7 7 7 7 8,9 8,9 8,9 Bills arising from indus- trial undertakings /a 7 7 7 ' 7 7 8,9 8,9 8\.9 Bills arising from the purchase of agricultural products /a - 7 7 7 7 - AgriculturaTbills 12 10 10 10 10 - - - - Deposits Demand deposits 0\.01 0\.01 - - - - _ - - Savings deposits 3\.5 4\.5 8 9 9 9 9 8\.5 5\.5 Time deposits Less than 3 months 0\.01 0\.01 - - - - - - - 3 months to less than 6 uonthe 5 6 9 10 10 10 13 10\.5 6\.75 6 months to less than 12 months 6 7 10 11 11 11 13 10\.5 7\.00 12 months and over 7 8 - - - - - - - 12 months to less than 2 years - - - 13 13 13 13 11 7\.25 2 years and over - - - 14 14 14 14 - - 12 months to less than 3 years - - 12 - - - - - - 3 years to less than 5 years - - 13 - - - - - - 5 years and over - - 14 - - - - - - Foreign currency deposits 12 12 float float float float float float float /a Applicable to those bills rediscounted at the Bank of Thailand\.  - 29 - ANNE 14 PROJECT COMPLETION REPORT THAILAND: FOURTR INDUSTRIAL FINANCE CORPORATION OF THAILAND PROJECT (LOAN 1956-TN) Actual Operations, 1980-87 (Baht million) Approvals Comutuents Disbursements Repamngts Outstanding\. Year No\. Amount No\. Amount Amount Amount No\. Mount 1980 43 1,027\.5 33 605\.8 1,177\.9 295\.1 221 3,407\.3 1981 43 1,208\.6 44 1,352\.7 1,314\.2 295\.1 234 4,416\.5 1982 53 1,037\.5 45 756\.8 841\.1 410\.7 231 4,857\.0 1983 70 1,574\.6 67 1,520\.0 1,018\.9 773\.0 275 5,102\.8 1984 129 2,211\.4 123 2,294\.7 1,689\.5 484\.9 349 6,307\.4 1985 140 3,007\.2 132 3,013\.2 2,604\.5 n\.a\. 426 8,119\.2 1986 141 1,449\.8 131 1,383\.3 1,135\.5 n\.a, 506 8,241\.7 1987/a 69 957\.1 59 471\.3 571\.0 n\.o\. 544 8,228\.0 /a January - June\. Sources: 1980-84 Progress Reports; 1985/86 IFCT Annual Report; and June 1987 lTCT Mid-Year Operational Performance\.  PSOJUCT COOL8?104 SPOI Th61LAh, POUSII I DMItA(\. VZOAM C3310RA7IO Of ThAIL* POJBCT (1oam 1334-183 pyO\.ected lsied444 661\.44\. 36o41\. (30-416 \.44 J\."\. 30\. 13"? sad titdeoit 4\.~1\.303 2(\. 632\.18 763\.37 163\.3 41,11\.4 Bel\.7 7 \.313\.61 I *26*,\.11 ,30\.130-o 6\. (64\. (3 414\.(36\.3 ,4 G\.~~rin\.,\.4 \.40\.wI1L\.e (\.38 (\.33 (\.33 (\.60 (\.38 (\.60 (\.33 (3\.81 (1\.60 41\.30 (34\.62 (63\.34 630\.62~~~~~~~I 10 s% 01 'mo 016\.r r(et9abl*s 23\.68~~30\.5 IA 0 I 4\.1 26\.362 232\.36 272\.76 I \.9 2114 \.2\.2 67,56\.4 43\.1 In\. 7\.1 C\.74= I\.633\.3 640 70\.1 213 \.033\.20 (\.23\.2 I\.6\.0 23\.3 (437 6\.604,31 I6\. 12\.1) 4\.4(2\.2 S0\.7\.1 866\.( o\.r\.o I \. (\.168\.46 1\.036\.32 (\.430\.40 ( \.030\.76 \.12\. , 14,163\.6 2\.016\.16 1\.033\.44 2,064j\.83 373\.32 k\.303\.3 (\.373\.32 23I46\.38 Palaeig (47047 04\.4 2\.028\.02 2,370\.42 2\.93)\.65 3\.335\.16 3,\.16\.13 3\.711\.1't ]\.33\.63 6,343\.00 4,172\.90 5\.327,62 3\.6(3\.3 6601\.4 S"\. I \.6 444 4o\.144Lx 446444 (1\.1, 1(-\.- M-Vo44\.6(6 - - - - - 3\.3' 2\.60 - 2\.23 (\.73 (\." 1\.S3 1\.46 pro\.'(6144 (or do\.bIful &cco\. (33\.30 (97\.01n 1132\.26) ((2333 (7343 (I60\.0)3 (234\.0331 ((43\.331 (234\.22) (216\.42) (273\.00) (233\.43) (330\.w01 Mt Los\. Portflito 3\.282\.34 3\.3(1\.b4 4,242\.29 6\.300\.913( 8 4\. 70) SO \.6001\.9f 6\.3136S 6,163\.39 6,036\.80 7,479 L,9i36 6\.142 31I- P67 7k14 "0t-et Ad 444*r- 4641 t4 \.1I1 (0\.37 8\.13 3\.07 13\.93 8\.14 20\.77 6\.37 33\.73 3\.01 32\.03 71\.63 S3\.33 33\.33 LAs\. \."r\.L(64d proftt (2\.161 - (((\.02) - (((\.76) - (13\.03) - (((\.621 (2\.36) ((\.331 (0)\.731 53117 (4r46\.n1\.T am\. ba6nw, \. 22711\.6 1(3:117 21\.4:6) (36\.03I 268\.6 222\.071 420\.616 223\.33 637\.661 26711:: 033\.33 233\.13 2(3\.33 1\. p70411tat fo po\.*6b1 14\.:\.$ (\.21 (6\.4 ((\.41 (0\.1 (23\.9 (\.11 ((\.6 (6\.011 (3\.3 (26\.( (6\.3) (3n\.371 66\.83 Not1-)nr -t\.1 36491\.19 3\.627,69 6\.513\.78 64)42\.72 5360ih 4\.3(4\.33 6,00i\.27 5,2077 \.6(66\.73 C\.961 9,161A8 \.1\.306\.30 8\.6(6\.33 Pr4pa7t7 43d q\.iupaw (4\.t of 8\.p-Io(1tin 33 5\.21 33\.23 60\.38 36\.76 62\.33 69\.71 66\.30 33\.06 36\.32 30\.I7 ((3\.7\. (37\.73 234\.00 ClaI -\.cv\.(bl\. f-o HOP und\., 14-8on\. 3t06 4376646fl1 - 24\.4 67 - 22\.61 - - - - - --- Tota1 Assets (4314\.35 4\.154\.62 5\.275\.83 5\.32,05 6\.42i\.40 63533\.90 7 316 37 7 423 (6 93273\.04 (0 3631\.33 (46 143(6 17,9(3\.53 19\.543\.96 847\.for441646 6 66\.33 3i\.h3 93\.D1 61\.33 132\.73 (13\.q4 221\.34 (7k4\.3 31("\.hl 231\.13 - - - Acru\. Ch\.r\. In61014 I \.g 78\.11 I 3\.36 I 103\.23 11((\."3 I (36\.33 233\.02 130\.03 602\.33 606\. ' - 73d(-6404Al19 0\.72 I 737'7 6\.10 I 133\.33 8\.77 I21k47 (\.7\.8 2)3\.31 (14 4\. 37\.3 663 0647t-t\.7 436 I b -- \. 266\.to 341 736 (36 046\., 7666\.3\.7 bl I? (63\.33 1 (37\.3 I (6\.6 I 263\.17 531\.03 I38\.33 236\.32 ?,7p47 dd0664 \. 4(91\.4463 00 '02 0 \.0) 340 20) 3,0 31\.30 933101 30 43\.00 34 \.30 (73\.30 T,1\.1 C \. 1 L1\.b(litl\.6 241\.30 232\.30 321\.73 366\.31 330\.36 333\.339 346\.41 72i\.31 627\.42 L\.219\.9A 1\.309\.62 1\.570\.31 (\.303\.63 Lou\.-Ter, Debt P4rs(g\. -ro\.~no" 2,303\.97 2\.391\.3 3,372\.3646,034\.32 4,274\.13 4,59r\.96 6\.3(1\.13 3,043\.73 3,636\.74 7,026\.33 9\.965\.13 (2\.132\.12 (3,334\.43 PI: L(\.o3-17 -74d(t 131\.03 68\.0 1 2\.4 343 21 14\.0 23\.32 1\.16 26(34 ((\.3 73\.63 45\.06 30\.73 tI 11~44kI6001- I :" I - --6 =o\.44 (04 3\.2 4\.7 179\.2 7 173\.27 177\.27 (77\.27 171\.%1 11\.5( (6,I 2\.7 2\.0 6(4\.24 422 De6\.boat\. - - 200\.00 36\.00 200\.00 100\.00 200\.30 (20\.00 s0n7\.00o 300\.00 328\.30 70(1\.00 1\.333\.00 Su61,1\.1 371\.33 2346\.32 5 33363 334\.36 533\.71 093,3 623\.A3 603\.37 326\.31 341\.13 1(\.27\.) I\.IS9\.30 (\.1771\.9% T4\.t1 Lgn&-?\.,& Debt \.773 3,732 ,720 6J9,3\.23 \.4863,3& 5\.056\.27 5\.336,18 53\.66\.107 6\.343\.55 7\.366\.107 (0\.32\.26 (0\.962\.02 (3\.772\.63 Toa1\.1L\.61stlitle 3J,419j2 3,425\.36 4\.493\.47 4\.757 \.61 5\.253,6 3\.336,66 6,060\.33 6\.010\.41 7\.011\.97 9\.7)33\.38 12\.301\.33 IM35\.33 3 L7\.076\.13 POM 6(Caita 60000 6o 00\.00 600\.00 600,1no 700\.00 700\.00 700\.00 730\.00 70(1\.00 I\.000\.00 (I3I0Mon I,30\.00 I(\. 100\.0 C\.p(1a( gOrpl\.m I(06\.80 (04\.30 104\.30 104\.80 (04\.00 (06\.80 (04\.30 (04\.30 106\.30 1310\.00 270\.32 270\.32 210\.32 Rmt\.1464 *471116 219\.14 226\.23 277\.2) 263\.64 362\.92 33(1\.644 669\.13 432,33 557\.27 601\.31 7161\.13 323\.28 937\.31 Total S6\.r663l4\.rs, 66\.1t\. 724\.14 723\.03 782\.03 7 74 \.64 1\.167\.12 1\.135\.24 1\.233\.90 i\.237\.73 1J&3I2\.0 (\.781L\.Sl 2\.312\.41 22393\.60 2\.307\.83 73t\.1 LiabilitIee \.44 344114 4,433 4\.13\.62 5\.275\.63 3,332\.03 6,214 6\.309,90 731(4\.57 7,424\.16 3,373\.06 I(0\.8M- 33 13\.316\.33 17\.916\.34 19\.333\.6 (pars\.tass) 66~~~8\.22 (01\.334 (07\.70 6\.33 (23\.3 43\.13 (36\.30 13\.77 143\.70 (33\.33 60\.73 206\.03 161\.62 0\.774,t 76t(4 2\.6 2\.6 2\.2 2\.3 2\.7 6\.1 2\.6 3\.0 2\.1 3\.6 6,1 3\.3 8\.2 (\.0481464 4obt/0\.it11 r6ti0 \.Lb 6\.4 6\.6 3\.3 \. 7 6\.2 4\.1 6\.6 4\.6 6\.7 6\.6 6\.4 3\.3 6\.3 T31s1 4\.bt/q\.it\.1y rat14 4\.7 6\.7 1\.8 6\.1 6\.3 6\.8 6\.3 3\.0 3\.2 3\.1 5\.4 6\.3 6\.3 p\.48\.r\.64 pr14(4 4s 0 o 441= \.16414por1tfolIo L\. 1(\.11 ((\.9 ((\.2 11\.2 ((\.3 ((\.3 (2\.3 13\.6 (4\.0 13\.1 (s\. (,\.9 (7\.3 L r\. P741t111,s at appraisal of L\.4 1916-T8\. Al ft*,\.r 14*60146tt *f M41\.se\. -tw41 ed -al\.ing th\. fr\.lpi ou-a\.,o debt at 0077\.1 *x-3*nge r6t4, a6 7430176d by Tito 1440 I37-646t\. l ucl\.4i\.g 364764166\. Aft t IL 1D  (Le ll It") Jun 30 lWf7 1991 14 2 1 3 194 19C\. 1 1967 proJl,ejw \.L actual PmJ\.J\. At"l rr^eu1Pj\. act"l ma- iem" rU_zS liees Om\.", 0 lease439\.1 14534 463\.23 453360 SIM\.3 SSI:6S 700\.37 423\.05 *01\.10 730\.73 9\.4\.71 1,14\.46 2\.5 istent oM t_Ear rs 9t_to *d d Its S1\.43 0t\.00 74\.n5 79\.52 80\.11 124\.00 101\.45 MM 117\.72 305\.10 530\.20 *\.05 \. Other 4\.17 3\.40 4\.44 I\.6 4\.71 2\.358 4\.4 2\.34 5\.00 4\.43 9\.62 11\.26 12\.57 arm l " M9\.43 421\.74 342\.44 336\.74 475\.17 476\.23 807\.08 517\.04 923\.52 1\.420\.44 1\.,44\.75 1\.575\.77 413\.43 7*teteet as {edbt\.due\.s 194\.76 215\.27 277\.90 251\.37 344\.99 378\.34 406\.31 424\.59 473\.11 543\.2r, 70\.54 912\.33 241\.946 Adokeietrstive A eerral eon"s 52\.13 47\.73 42\.34 18\.03 74\.48 68\.33 $4\.37 60\.43 I\.I "\.04 115\.43 119\.81 28\.82 Dsetciation ao proerty A eq\.*1ipat 4\.'4 4\.17 '\.0' 4\.U4 5\.3\.1 4\.43 6\.76 4\.65 7\.46 6\.27 7\.64 9\.71 2\.01 Provlsion for *se1haI rIsk 31\.13 34\.72 41\.25 47\.17 59\.32 38\.19 69\.59 b6\.27 75\.67 $5\.49 148\.16 170\.73 35\.16 Prowtvlas for posible oss on portfolio i\."est_st 33\.25 36\.43 48\.04 44\.34 50\.78 40\.43 58\.79 37\.60 45\.96 54\.97 216\.46 92\.10 27\.44 Provision requtred b4 loss &nroes ts - - - - - - - - _ _ _ _ banohs lososes - - - - - - - 4\.00 - 6\.48 P1\.21 8\.06 0\.U Total S""" 321\.63 341\.32 434\.73 437\.51 517\.48 349\.9 629\.82 417\.74 724\.73 637\.43 1194\.14 1\.322\.75 336\.73 Net lcom free 0\.rstioes /b 73\.56 80\.42 107\.49 94\.95 137\.49 178\.29 177\.26 199\.30 I"9\.09 283\.03 304\.61 256\.41 114\.53 lonee, on sale of "oto - 0\.09 - 0\.41 - 0\.01 - 1\.19 - 0\.54 0\.53 O\.b1 - Rtteiss\. earnings broght foramrd - 0\.003 - 0\.86 - 0\.29 \. 0\.62 - 0\.67 0\.12 - 15\.63 NIt oteom 73\.58 80\.S1 107\.69 100\.22 137\.89 12S\.59 177\.26 201\.1l 19S\.09 284\.24 30s\.2r 234\.63 14\.153 loco\. Allocation tSLidend 48\.00 50\.00 30\.00 34\.00 52\.00 67\.50 91\.00 98\.00 91\.00 11\.00 164\.S0 175\.00 - Resrve requilred by losn agreomnts S\.10 1 6\.96 1 7\.06 I 6\.90 ) - - - - Legal r\.seros_ 4\.n2 4\.97 I 6\.41 I 10\.03 j 14\.16 15\.26 12\.81 G*o-ral resr,e I - s 12\.00 1 37\.00 I 13\.00 I 17\.00 23\.50 IS\.00 -eesrw for possible loan losse 1 27\.68 20\.13 3 1l\.08 *2 \.j I *\. - I 59\.04 12\.52 1 65\.17 1S\.91 Loser,, for hokwtng projlct - I I 10\.00 I 10\.00 I 1\.0 0 Roervo for ItFT e*ponaion - I - I - I 0\.no I 100\.lo \.oo\.oo s8\.00 Special prolstlon for exchaog risk I - I - - I - I 12\.03 etained esrnings to be carred forward (2\.10) 0\.96 19\.41 0\.29 38\.49 0\.62 2V\.22 0\.66 42\.22 0\.12 _ 0 -1 Totel 73\.58 60\.31 107\.89 100\.22 137\.69 128\.59 177\.26 201\.11 199\.09 284\.24 305\.26 256\.63 114\.51 perceatage of Averese Total Assets (1) 1\. Gros Incoe 10\.7 11\.4 11\.5 11\.1 11\.5 11\.2 IIs\. 11\.7 11\.6 12\.2 10\.7 10\.1 2\.1 2\. Ploeclel epenese 3\.4 3\.9 5\.9 5\.8 5\.9 6\.2 5\.9 4\.1 6\.0 6\.5 5\.7 6\.0 1\.3 3\. Gross spreed (I - 2) 5\.3 3\.3 5\.6 5\.3 3\.6 n\.0 5\.9 ,\.6 5\.8 5\.7 4\.9 4\.1 0\.9 4\. Administrative expe"es 1\.5 1\.3 1\.4 1\.3 1\.4 1\.2 1\.4 1\.2 1\.4 1\.2 0\.9 0\.4 0\.2 S\. Provlseons 1\.8 1\.9 1\.9 1\.9 1\.9 1\.S 1\.9 1\.5 l\.A 1\.3 1\.9 1\.6 0\.3 4\. Ikt incom 2\.0 2\.2 2\.3 2\.1 2\.4 2\.1 2\.6 2\.9 2\.5 3\.1 2\.2 1\.6 0\.4 Other tatioe 1\. let iacom as S of average eq\.ity 10\.3 11\.3 14\.3 13\.3 14\.1 13\.5 14\.6 16\.9 15\.2 16\.8 13\.0 10\.t 3\.2 2\. Income fre term loans a I of averase portfolio outateading 10\.1 11\.8 12\.0 11\.6 12\.4 11\.9 12\.8 12\.5 13\.1 13\.2 12\.4 14\.4 3\.4 3\. Averag cost of term debt o S of verpge term debt 6\.4 7\.9 7\.6 7\.6 7\.6 8\.0 7\.8 8\.1 7\.9 8\.7 8\.0 8\.2 1\.6 4\. leterest spred (2 - 3) 3\.7 3\.9 4\.4 4\.0 4\.8 3\.9 3\.0 4\.4 S\.2 4\.5 4\.3 6\.2 1\.8 3\. Book value (am I of par value) 111\.0 182\.3 19S\.5 193\.4 166\.8 162\.2 179\.1 176\.8 194\.6 178\.2 177\.9 184\.1 192\.9 6\. Dividend paymut 62\.2 82\.1 46\.3 53\.9 37\.8 52\.5 51\.3 46\.7 45\.7 40\.5 53\.9 - - 7\. garulag per shar / 16\.4 20\.1 271\.0 25\.1 19\.7 18\.4 25\.3 28\.7 28\.4 28\.4 21\.5 19\.7 6\.1 La Proejetions at appraisal of Loa\. I94-1TI\. \.r! la ttxn-seopt\. /c Par wvlo \. 8 100 per share froe 1978 omnrde\. OoID Octobor 1987  PROJECT COMPLETION REPORT THAILAND: FOUPTH INDUSTRIAL FINANCE CORPORATION OF THAILAND PROJECT (LOAN 1956-TH) Age Structure of Loans In Arrears, as of December 31\. 1980-86 (Jaht aillon) 1980 1981 1982 1983 1984 1985 1986 June 30 1W7 Amount i Amount t Amount 2 Amount 2 Amount 2 Amount SAmount 2 Clients in Arrears Less than 4 months 4 1\.8 6 2\.6 24 9\.6 32 11\.5 41 13\.3 47 14\.3 38 11\.1 26 7\.4 4-12 months 13 5\.9 11 4\.7 15 6\.0 11 3\.9 21 6\.8 26 7\.9 20 5\.8 7 2\.0 13-24 months 13 5\.9 12 5\.l 6 2\.4 11 1\.9 5 1\.6 13 4\.0 21 6\.1 17 4\.8 Over 24 months 27 12\.2 27 11\.5 28 11\.2 22 7\.9 26 8\.4 20 6\.1 22 6\.4 34 9\.7 Total no\. of client\. in arrears 57 25\.8 56 23\.9 73 29\.2 76 27\.3 93 30\.2 106 32\.2 101 29\.5 84 23\.9 Total Clients 221 100\.0 234 100\.0 251 100\.0 276 100\.0 308 100\.0 329 100\.0 342 100\.0 351 100\.0 Principal Affected by Arrears Less than 4 months 19\.8 0\.6 203\.5 4\.6 271\.0 5\.6 464\.43 8\.9 337\.87 5\.6 544\.53 6\.9 677\.64 78\.6 266\.17 3\.4 4-12 months 193\.5 5\.7 70\.9 1\.6 242\.1 5\.0 204\.99 3\.9 225\.92 3\.7 341\.74 4\.3 362\.39 4\.6 185\.74 2\.4 13-24 months 66\.7 1\.9 174\.9 3\.9 65\.6 1\.3 155\.03 3\.0 161\.05 2\.6 156\.63 2\.0 265\.13 3\.4 337\.83 4\.3 Over 24 months 230\.4 6\.7 227\.9 5\.1 282\.9 5\.8 273\.76 5\.3 345\.45 5\.7 353\.51 4\.5 443\.58 5\.6 445\.81 5\.7 Total principal affected by arrears 510\.3 14\.9 678\.1 15\.2 861\.6 17\.7 1,098\.21 21\.1 1,070\.29 17\.6 1,396\.41 17\.6 1,748\.74 22\.1 1,235\.55 15\.7 Total Principal 3\.415\.4 100\.0 4\.447\.1 100\.0 4\.864\.5 100\.0 5,201\.76 100\.0 6\.081\.65 100\.0 7\.922\.21 100\.0 7\.90?\.51 100\.0 7,851\.74 100\.0 Amount In Arrears /a Less than 4 months 1\.5 - 7\.5 0\.2 14\.2 0\.3 23\.81 0\.5 19\.18 0\.3 42\.04 0\.5 27\.40 1\.1 - 0\.2 4-12 months 25\.6 0\.8 12\.8 0\.3 31\.8 0\.7 50\.90 0\.9 42\.05 0\.7 67\.08 0\.8 34\.61 1\.2 - 0\.4 13-24 sonths 24\.1 0\.7 44\.5 1\.0 24\.2 0\.5 85\.49 1\.6 66\.17 1\.1 63\.05 0\.8 175\.93 1\.4 - 1\.9 Over 24 months 222\.5 6\.5 227\.9 5\.1 263\.1 5\.4 231\.80 4\.5 313\.99 i 2 316\.13 4\.0 380\.61 3\.8 - 4\.4 Total Arrears 273\.7 8\.0 292\.7 6\.6 333\.3 6\.9 392\.00 7\.6 441\.39 7\., 488\.30 6\.2 618\.55 7\.5 - 6\.9 /a As percent of total principal outstanding\.  : *I j 8 8 C 8 * S *<S -S S E e t c o O ,\. O c \. n \. * o c a-<s < * t *0 a'- o ,-\.OOOc\.c 0 COC _ CS ' croS-t* - C < 00-d_ eCC^ O o j % _ ~~ ~ Cooa _ C t Ctt*_ C- w0C4 _~ t C 0 8 jJj _~ _>¢ <S 000°0\.-_7S _ O-OOC <~~04 --_ 5'___ z o ~ C C f l e a _oc - c o ' 0_ C \. C S 4 C C C C ' O \.CC C S O c " C l I\. 2 j I _ 5-0N_ __ 0t~~~~~~~\.0 00 *~ - :0 _o r00Cco8 cs08< °' 88°8~' * ~ ~ ~ ~ C cC _e ,, , a\.OCOO CO- Z -Oi C\. OO C a° \. -" - , ~a -= g g\. ----o ° _~~~~~~~~~~~~~~~~~~~~~~~ * ' " 5*I0*\.* O \.'0007\.0 000000-00OOOOOO e< eo eeo° ° o 1 ~s oC\. , __ n~~~~~~~~C \.4 e-_\. Ile \. a\. ^ *\.ccctC Ccc 0 ct3 aC - _ u u- Y \.eo_ \.Oo ouC_ _S_ O ~~ ee °> e ~~ °O OO _* - C, ow -In HvJf 114;1Xr°e 00 eee2W0 ,0C !e _o\.! v\.c *cbc\. - \. \. -1> \.02 ' U ! eo ffi6 o _ * 3 ^ c \.Z _ 0~ b _ e * \. ff * _ n ~i2 _ r- ~a ' _ * X X _ X~~~- S\.CC5-55055ca 05\.u 55555o 055° 0U5\. IO1f~o<uF I _ CCUS\.- r\. -w e e* -80t> e EO ELH UI o  - 35 - ANNEX 19 Page 1 of 5 IFCT Coments on the Project Completion Report TM DfITR4IAL FIP4AACE COPORATION OF THAILAAV No\. PF\. 4ac /2532 January J14, 1989 Mr\. Alexander Nowicki Division Chief, Operations Evaluation Department The World Bank 1818 H St\.reet, N\.W\. Washington, D\.C\. 20433 U\.S\.A\. Dear Mr\. Nowicki Many thanks for sending us a copy of your Project Completion Report on the Fourth Industrial Finance Corporation of Thailand Project (Loan 1956-TH)\. IFCT is of the opinion that the report is a useful one and should assist us in reviewing our own operations in general and also the results of the Fourth Loan from the World Bank\. As requested, we are enclosing our comments on the report which we hope will be useful to you in finalising your work\. We look forward to receiving the Final Report from your fine bank in due course\. Sincerely yours, Sukri K\.n1,-qrprv President Fricl: Planning L Financial Management Office Tel\. EXt\. 1460 1770 Ncw Petchburt Road BANGKOK 10310 253-7111 TELEX 82163 IFCrHAI TM PO Box 10 010 Petchaburitatm\.i PAst Offiec BANGKROK 10311 253-9666 FAX\. 253-9677  - 36 - ANNEX 19 Page 2 of 5 Coments on the Project Completion Report Relations between the Government and IFCT IFCr is Thailand's only development finance institution established by the Government for the purpose of assisting private sector industrial and capital market development\. The Corporation acts as the Government's mechanism for channelling long-term funds to the private sector for industrial development which is vital to the nation's economic growth and overall development\. IFCT enjoys close relations with the Government which ha3 two representatives on IFCF's Board of Directors, one is appointed by the Shareholders' Meeting as being a major shareholder, and the other appointed directly by the Government according to the Industrial Finance Corporation of Thailand Act\. The latter is normally elected Chairman of the Board\. Regional dispersal of proceeds of the 4th loan from the World Bank The relative lack of success in dispersing funds to outlying regions is due to the restrictions on the utilisation of the loan proceeds\. As most provincial industrialists use machinery and equipment produced in Thailand or equipment that has already been imported into Thailand, they are not able to make full use of the loan from the World Bank\. In addition, both the cost and risk of lending in the regions are higher than in metropolitan areas thereby necessitating more intense screening of projects\. At that time, IFCT had only 3 regional offices during the 4th Loan's utilisation period (1981-1984) which could not fully serve provincial lending operations\. The Corporation corrected this by establishing Branch Operations and Small Industries Department and three additional branch offices in order to boost IFCT's presence in the provinces\. IFCT now has 6 offices outside Bangkok\.  - 37 - ANNEX 19 Page 3 of 5 IFCT's general dispersal of financing in the regions\. IFCI attaches the highest level of importance to this and has set the target of approving atleast 60% of loans approved each year in regional areas including central region which still require industrial development and infrastructure\. From the Corporation's establishmernt date until 1987, loans made to regional borrowers amount to 68% of all loans approved\. Diversification of investment from the capital city to the country- side is therefore very actively pursued by IFCT\. The branch and regional offices are enhanced in terms of efficiency and power to provide better service to clients\. Seminars are regularly organised in order to disseminate information, knowledge and ideas among provincial industrialists\. Portfolio Quality IFCT sets 3 action plans for the purpose of scaling down loans in arrears as follows: Preventive Action - Conservatively analyse the projects - In the loan supervision process, the project will he closely followed up and monitored with regards to the early warning signals Quick Action - Seriously ailing projects will be transferred to the Legal Office for further legal action\. Decision - making at this stage must be prompt and timely to avoid any damage of the collateral security\. However, legal proceedings are normally complicated with several steps which takes 2-3 years or more on average\.  38 - ANNEX 19 Page 4 of 5 Specific Action - To assist in coping with problems facing projects which still have a bright future, a special loan unit in the Loan Operations Department was set up\. IFCT staff participate directly in the business operation and serve as an adviser to the problem company\. In addition, IFCT sends staff members as representatives in the company's Board of Directors and Executive Comittees as well\. Such assistances take time, depending on the seriousness of the nroblems\. It probably takes more than 2 years before we can assess the problem and fine ways to solve such problems so that the company's management can carry on its operations alone\. One of the obstacles which hinder IFCr from tackling the client's problems more rapidly is the limited number of experienced and efficient staff\. IFCr has given more importance to this matter and has tried to build up more working teams\. IFCT has succeeded in solving the problems for several clients already\. Fund aobilisation IFCr has raised a great deal of funds abroad in the past due to the lack of capital and financial instruments wi\.thin Thailand which would satisfy the Corporation's needs\. However, improvements in the domestic market have led to IFCr emphasise borrowing in Baht\.  - 39 - ANNEX 19 Page 5 of 5 Most of the Yen loans obtained by IFCr carry low interest rates and have very long maturity periods\. The portion of Yen in IFCT's liability portfolio has increased, compounded by the recent surge of the Japanese currency in recent ties\. IFCT's exposure to the Yen is therefore high and the Corporation has taken measures to reduce this including making use of long term cross-currency swaps\. Economic Rate of Return (ERR) You are of the opinion that for small projects, partial economic indicators are more useful than ERR when making economic analysis\. IFCT normally takes into account economic indicators such as employment rather than using ERR as the latter requires gathering data which takes up too much time and is not ecornomical for small loans\. Decentralising loan approving power\. In order to provide more efficient service to clients, there have been changes in authorisations regarding loan approvals\. The Board of Directors approves loans worth Bt\. 50 million or more, the Executive Committee approves loans of over Bt\. 20 million but not exceeding Bt\. 50 million and the President approves loans of up to Bt\. 20 million per project\.

APPROVAL