Public Disclosure Authorized. Loan/Credit amount($m): I IDA: 5.00 Board Date: September 7, 2004 Other financing amounts by source:

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1 Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Integrated Safeguards Data Sheet (ISDS) Section I - Basic Information Date ISDS Prepared/Updated: June 22, 2004 Report No.:AC594 A. Basic Project Data A. 1. Project Statistics Country: Sao Tome and Principe IProject ID: P Project: Governance Capacity Building and TA TTL: Dorsati Madani Total project cost (by component): 5.50 M Appraisal Date: June 15, 2004 Loan/Credit amount($m): I IDA: 5.00 Board Date: September 7, 2004 Other financing amounts by source: ($m.) Government counterpart funds: $m. Managing Unit: AFTP4 Sector: Oil and gas (50%);Central government I administration (50%) Lending Instruments: Technical Assistance Loan Is this project processed under OP 8.50 (Emergency recovery? Yes? [] No? [X] Environmental Category: C Safeguard Classification: S3 A.2. Project Objectives The project will help to modernize and to strenghten capacity in economic (financial and budgetary) management and supervision; and to build up basic institutional and legal infrastructure in the finance and the natural resources and enviromnent ministries to cope with a more complex economic and social environment arising from the onset of petroleum era and the nascent market economy. The project will help strengthen the corresponding human capacity of the civil service. The selection of the following key performance indicators mirrors the objectives of the project components: 1. The government budget preparation and execution is strengthened as reflected by improvements overtime in the HIPC AAP scores (currently 5) by using modem harmonized nomenclatures and modem accounting framework and plan; yearly internal and external audits of the budget are undertaken, published promptly, and reviewed by the National Assembly. 2. A public accounting system is created and implemented, staff have basic expertise to produce and analyze necessary - internationally acceptable - budgetary accounting information and tables. Audits of accounts are produced annually, published promptly and reviewed by the National Assembly 3. A National Petroleum Agency is created with staff having basic sector expertise to analyze and follow-up on petroleum contracts, elaborate policies for the sector, and supervise and regulate the industry. 4. The legal and institutional structure to implement and follow up is the PRSP is created and functional; PRSP output and outcome indicators are regularly produced; PRSP document is revised to incorporate the petroleum economy and the revised PRSP is adopted by the government and promulgated by the President by June A.3. Project Description The project will consist of three components: (i) a petroleum sector component; (ii) a public finance component and (iii) support for the PRSP implementation. More details about each component are in Annex Component I: Petroleum sector The current PRMC-TA, closing in June 2004, has supported some of the nascent petroleum sector activities

2 in the past eighteen months in a number of ways: (i) international expertise were hired to assist the government in re-negotiating four contracts; (ii) international experts also assisted the government in the process of launching a bid round for bids from petroleum companies for the joint development zone (JDZ) with Nigeria in April 2003 and for analyzing the bids subsequently received during October 2003-April 2004; (iii) a kernel of the National Petroleum Agency (NPA) is already active, and has received technical assistance and funding and engaged an international expert to help the Sao Tomeans fully develop the NPA in its sectoral supervisory and analytical capacities; (iv) technical assistance was provided to the government which is developing a petroleum revenue management law. The law is expected to be submitted to the National Assembly in June The government has also passed a decree law officially creating the NPA in January The decree law is to be promulgated by the President shortly. The government and the Presidency have also publicized their desire for transparency, by announcing that they are interested in signing up to the "Extractive Industry Transparency Initiative" (EITI). The Bank is supporting this transparency effort. The new project will continue critical technical assistance and capacity building in this nascent sector. It will build an institutional and legal framework to formulate policies, and supervise and regulate the petroleum sector. This will entail: (i) strengthening of the National Petroleum Agency in material and human capacity terms (develop agency structure, hire appropriate staff, equip agency, adopt a training program and the like); (ii) strengthening of the legal framework, including sector related environmental issues; (iii) help the government in preparing and promoting the Exclusive Economic Zone (EEZ) of the country (iv) setting up a functional information system that is transparent; (v) undertaking studies and seminars that would help the govermnent develop an economic model of the EEZ, study the opportunities for local content in the sector development, and study the opportunities for job creation. II. Component II: In public finance The project will assist the government to improve public finance management (expenditure and revenue sides) in light of the future petroleum era. Many of the actions proposed for this component are recommendations from the analytical and technical assistance work undertaken since 2002 in the framework of the PRMC/PRMC-TA and the HIPC-AAP analyses. The specific actions to improve budgetary process (harmonization of budget nomenclature; identification of expenditures for poverty reduction, development and adoption of a new accounting framework) were identified in the HIPC- AAP December 2003 report and the output/outcome indicators from HIPC-AAP have been adopted to assess developments in the context of this component properly. Also, the government and the World Bank team identified other actions to improve governance and transparence of public and private financial dealings. To start with, the Govermnent wishes to have assistance to develop a macro-economic model to help improve formulation of economic policies. On the expenditure side, the actions to be taken are summarized under the following headings: (i) strengthen petroleum revenue management supervision across national institutions (government, Central Bank, National Assembly, Tribunal Des Comptes); (ii) harmonize budget nomenclatures and identify expenditures for poverty reduction; (iii) update the public procurement, and treasury and public patrimony laws and procedures; (iv) install a simple Information System among specific government entities in the country as deemed necessary to facilitate the PEM; (v) improve budget oversight and public finance management training; (vi) develop and implement an accounting framework (cadre comptable) and accounting plan (plan comptable). On the revenue side, the Government wishes to: (i) improve accounting and tax reporting practices of enterprises; and (ii) increase MoPF capacity to collect tax revenue. III. Component III: PRSP The new credit will help facilitate the implementation of the PRSP goals. The credit will support this effort by helping (i) facilitate the implementation of the PRSP by supporting the directorate to become functional - capable to fully supervise and follow-up on the implementation of the PRSP goals, with regular provision of indicators; and (ii) update the PRSP document with analysis and forecasts and a strategy for the petroleum economy (revenues and expenditures) and adopting the updated PRSP.

3 A.4. Project Location and salient physical characteristics relevant to the safeguard analysis: Sao Tome and Principe. No specific location. B. Check Environmental Category A [], B [],C [X], Fl [] Comments: C. Safeguard Policies Triggered Yes No Environmental Assessment (OP/BP/GP 4.01) [] [xi Natural Habitats (OP/BP 4.04) l1 [xi Pest Mangement (OP 4.09) [1 [XI Cultural Propertv (draft OP OPN i 1.03-) [I] [xi Involuntary Resettlement (_P/BP 4.12) [ [xi Indigenous Peoples (OD 4.20) [] [xi Forests (_P/BP 4.36) [ [xi Safety of Dams (OP/BP 4.37) [1 [xi Projects in Disputed Areas (_P/JP/GP 7.60) [] [x] Projects on International Waterways (OP/BP/GP 7.50) [] [x] By supporting the proposed project, the Bank does not intend to prejudice the final determination of the parties' claims on the disputed areas

4 Section II - Key Safeguard Issues and Their Management D. Summary of Key Safeguard Issues. D. 1. Describe any safeguard issues and impacts associated with the proposed project. Identify and describe any potential large scale, significant and/or irreversible impacts. No safe guard issues are expected to apply D.2 Describe any potential indirect and/or long term impacts due to anticipated future activities in the project area. No safeguard issues are expected to apply D.3. Describe the treatment of altematives (if relevant) N/A D.4. Describe measures taken by the borrower to address safeguard issues. Provide an assessment of borrower capacity to plan and implement the measures described. N/A D.5. Identify the key stakeholders and describe the mechanisms for consultation and disclosure on safeguard policies, with an emphasis on potentially affected people. N/A

5 F. Disclosure Requirements Date Environmental Assessment/Audit/Management Plan/Other: For category A projects, date of distributing the Executive Summary of the EA to the Executive Directors Resettlement Action Plan/Framework/Policy Process: Indigenous Peoples Development Plan/Framework: Pest Management Plan: Dam Safety Management Plan: If in-country disclosure of any of the above documents is not expected, please explain why. Section III - Compliance Monitoring Indicators at the Corporate Level (To be filled in when the ISDS is finalized by the project decision meeting) OP/BP Environment Assessment: Yes No Does the project require a stand-alone EA (including EMP) report? x If yes, then did the Regional Environment Unit review and approve the EA report? Are the cost and the accountabilities for the EMP incorporated in the credit/loan? OP/BP Natural Habitats: Yes No Would the project result in any significant conversion or degradation of critical natural x habitats? If the project would result in significant conversion or degradation of other (noncritical) natural habitats, does the project include mitigation measures acceptable to the Bank? OP Pest Management: Yes No Does the EA adequately address the pest management issues? Is a separate PMP required? If yes, are PMP requirements included in project design? Draft OP 4.11 (OPN 11.03) - Cultural Property: Yes No Does the EA include adequate measures? Does the credit/loan incorporate mechanisms to mitigate the potential adverse impacts on physical cultural resources? OD Indigenous Peoples: Yes No Has a separate indigenous people development plan been prepared in consultation with the Indigenous People? If yes, then did the Regional Social Development Unit review and approve the plan? If the whole project is designed to benefit IP, has the design been reviewed and approved by the Regional Social Development Unit?

6 OP/BP Involuntary Resettlement: Yes No Has a resettlement action plan, policy framework or policy process been prepared? If yes, then did the Regional Social Development Unit review and approve the plan / policy framework / policy process? OP/BP Forests: Yes No Has the sector-wide analysis of policy and institutional issues and constraints been carried out? Does the project design include satisfactory measures to overcome these constraints? Does the project finance commercial harvesting, and if so, does it include provisions for certification system? OP/BP Safety of Dams: Yes No Have dam safety plans been prepared? Have the TORs as well as composition for the independent Panel of Experts (POE) been reviewed and approved by the Bank? Has an Emergency Preparedness Plan (EPP) been prepared and arrangements been made for public awareness and training? OP Projects on International Waterways: Yes No Have the other riparians been notified of the project? If the project falls under one of the exceptions to the notification requirement, then has this been cleared with the Legal Department, and the memo to the RVP prepared and sent? What are the reasons for the exception? Please explain: Has the RVP approved such an exception? OP Projects in Disputed Areas: Yes No Has the memo conveying all pertinent information on the international aspects of the project, including the procedures to be followed, and the recommendations for dealing with the issue, been prepared, cleared with the Legal Department and sent to the RVP? Does the PAD/MOP include the standard disclaimer referred to in the OP? BP Public Disclosure: Yes No Have relevant safeguard policies documents been sent to the World Bank's Infoshop? Have relevant documents been disclosed in-country in a public place in a form and language that are understandable and accessible to project-affected groups and local NGOs? All Safeguard Policies: Yes No Have satisfactory calendar, budget and clear institutional responsibilities been prepared for the implementation of the safeguard measures? Have safeguard measures costs been included in project cost? Will the safeguard measures costs be funded as part of project implementation? Does the Monitoring and Evaluation system of the project include the monitoring of safeguard impacts and measures? Have satisfactory implementation arrangements been agreed with the borrower and the same been adequately reflected in the project legal documents? Signed and submitted by: Name. Date Task Team Leader: Dorsati Madani, (WIh a. 6/22/2004 Project Safeguards Specialist 1: Project Safeguards Specialist 2: Project Safeguards Specialist 3: Approved by: N Date Regional Safeguards Coordinator: Thomas E. Walton. Comments: ector Manager: Robert Blake Comments: 0