IMPLEMENTATION COMPLETION AND RESULTS REPORT. A CREDIT (IDA-46110) and A GRANT (IDA-H6940)

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1 Public Disclosure Authorized Document of The World Bank Report No: ICR Public Disclosure Authorized Public Disclosure Authorized IMPLEMENTATION COMPLETION AND RESULTS REPORT ON A CREDIT (IDA-46110) and A GRANT (IDA-H6940) IN THE AMOUNT OF SDR 2.6 MILLION AND SDR 7.6 MILLION (US$3.8 MILLION AND US$12 MILLION EQUIVALENT) TO THE REPUBLIC OF MALDIVES FOR A PENSION AND SOCIAL PROTECTION ADMINISTRATION PROJECT December 30, 2015 Public Disclosure Authorized Social Protection and Labor Global Practice Maldives, Sri Lanka Country Cluster (SACSL) South Asia Region

2 CURRENCY EQUIVALENTS (Exchange Rate Effective October 31, 2015) Currency Unit = Maldives Rufiyaa (MVR) MVR = US$1 FISCAL YEAR January 1 December 31 ABBREVIATIONS AND ACRONYMS AF Additional Financing MVR Maldives Rufiyaa CEO Chief Executive Officer NPA National Pension Act CMDA Capital Market Development Authority NSPA National Social Protection Agency CSC Civil Service Commission OABP Old Age Basic Pension CSP Civil Service Pension PAD Project Appraisal Document DB Defined Benefit PAS Public Accounting System DC Defined Contribution PCN Project Concept Note DLI Disbursement Linked Indicators PDO Project Development Objective DNR Department of National Registration PFMSS Public Financial Management Systems Strengthening Project FM Financial Management PMT Proxy Means Test GoM Government of Maldives PMU Project Management Unit GPF Government Provident Fund PPF Project Preparation Facility HR Human Resources PR Public Relations ICR Implementation Completion and Results PSC Project Steering Committee Report IDA International Development Association PTC Project Technical Committee IO Intermediate Outcome RB Recognition Bond ISR Implementation Status and Results Report RF Results Framework MMA Maldives Monetary Authority RSA Retirement Savings Account M&E Monitoring and Evaluation SCA Senior Citizens Allowance MIS Management Information System SDR Special Drawing Rights MoFT Ministry of Finance and Treasury SOIP Statement of Investment Policy MoHF Ministry of Health and Family SP Social Protection MoLG Ministry of Law and Gender SPIS Social Protection Information System MPAO Maldives Pensions Administration Office TA Technical Assistance MRPS Maldives Retirement Pension Scheme TOR Terms of Reference MTR Mid Term Review TTL Task Team Leader Vice President: Sr. Global Practice Director: Country Director: Sector Manager: Project/ICR Team Leader: ICR Authors: Annette Dixon Arup Banerji Francoise Clottes Pablo Gottret Changqing Sun Anita Schwarz / Betty Hanan

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4 REPUBLIC OF MALDIVES Pension and Social Protection Administration Project CONTENTS Data Sheet A. Basic Information B. Key Dates C. Ratings Summary D. Sector and Theme Codes E. Bank Staff F. Results Framework Analysis G. Ratings of Project Performance in ISRs H. Restructuring I. Disbursement Graph 1. Project Context, Development Objectives and Design Key Factors Affecting Implementation and Outcomes Assessment of Outcomes Assessment of Risk to Development Outcome Assessment of Bank and Borrower Performance Lessons Learned Comments on Issues Raised by Borrower/Implementing Agencies/Partners Annex 1. Project Costs and Financing Annex 2. Outputs by Component Annex 3. Economic and Financial Analysis Annex 4. Bank Lending and Implementation Support/Supervision Processes Annex 5. Beneficiary Survey Results Annex 6. Stakeholder Workshop Report and Results Annex 7. Summary of Borrower's ICR and/or Comments on Draft ICR Annex 8. Comments of Cofinanciers and Other Partners/Stakeholders Annex 9. List of Supporting Documents Annex 10. Original and Revised PDO and IO Indicators..51 Annex 11. Original and Revised DLIs and Targets...54 MAP

5 A. Basic Information Country: Maldives Project Name: Maldives - Pension and Social Protection Administration Project ID: P L/C/TF Number(s): IDA-46110, IDA-H6940 ICR Date: 10/29/2015 ICR Type: Core ICR Lending Instrument: SIL Borrower: Original Total Commitment: Revised Amount: Environmental Category: C REPUBLIC OF MALDIVES SDR 2.60 million Disbursed Amount: SDR 8.85 million SDR million Implementing Agencies: Maldives Pension Administration Office Cofinanciers and Other External Partners: B. Key Dates Process Date Process Original Date Revised / Actual Date(s) Concept Review: 04/12/2007 Effectiveness: 10/22/2009 Appraisal: 03/04/2009 Restructuring(s): 06/02/ /27/ /06/ /05/2015 Approval: 05/12/2009 Mid-term Review: 02/20/ /17/2013 Closing: 12/31/ /30/2015 C. Ratings Summary C.1 Performance Rating by ICR Outcomes: Risk to Development Outcome: Bank Performance: Borrower Performance: Moderately Satisfactory Substantial Satisfactory Moderately Satisfactory C.2 Detailed Ratings of Bank and Borrower Performance (by ICR) Bank Ratings Borrower Ratings Quality at Entry: Satisfactory Government: Moderately Satisfactory Quality of Supervision: Satisfactory Implementing Agency/Agencies: Highly Satisfactory Overall Bank Performance: Satisfactory Overall Borrower Performance: Moderately Satisfactory

6 C.3 Quality at Entry and Implementation Performance Indicators Implementation QAG Assessments Indicators Performance (if any) Potential Problem Project No at any time (Yes/No): Problem Project at any time (Yes/No): DO rating before Closing/Inactive status: Yes Moderately Satisfactory Quality at Entry (QEA): Quality of Supervision (QSA): None None Rating D. Sector and Theme Codes Original Actual Sector Code (as % of total Bank financing) Central government administration Public administration- Other social services Theme Code (as % of total Bank financing) Administrative and civil service reform Income Support for Old Age, Disability & Survivorship E. Bank Staff Positions At ICR At Approval Vice President: Annette Dixon Isabel Guerrero Country Director: Francoise Clottes Naoko Ishii Practice Manager/Manager: Project Team Leader: ICR Team Leader: ICR Primary Authors: Pablo Gottret Changqing Sun Changqing Sun Betty Hanan/Anita Schwarz Mansoora Rashid Robert Palacios & Oleksiy Sluchynskyy F. Results Framework Analysis Project Development Objectives The development objective of the Project was to support the establishment of a new pension authority and strengthening capacity at existing institutions of the Recipient in order to effectively implement a new pension system and to provide a platform for additional social protection programs.

7 Revised Project Development Objectives (as approved by original approving authority) The revised development objective was to support the implementation of the Recipient s National Pension Act, to strengthen institutional capacity of key agencies responsible for implementing the National Pension Act, and to develop the processes and platforms required for the delivery of social protection programs. (a) PDO Indicator(s) Indicator Indicator 1: Value quantitative or Qualitative) Date achieved Comments (incl. % achievement) Baseline Value Original Target Values (from approval documents) Formally Revised Target Values Actual Value Achieved at Completion or Target Years (Original) Establishment of the new office of the MPAO, including appointment of the Governing Board members and the Executive Director, and hiring external asset managers. (Revised at Additional Financing) New systems under MPAO operational, including the establishment of the new office of the MPAO, governance structures, MIS and provisions for outsourcing. Non existent MPAO Governing Board appointed; full staffing at MPAO in place. Board members and CEO appointed; MPAO fully staffed/meeting needs of public and private sector; custodianship provisions in place; MIS fully operational; MRPS complaints redressal mechanism implemented; key GoM cash transfers administered through the MPAO. Board members and CEO appointed; fully staffed; custodianship provisions in place; MIS fully operational; MRPS complaints redressal mechanism implemented; GoM pension payments administered through the MPAO. 5/31/ /31/ /30/2015 6/30/2015 ACHIEVED. All qualitative targets have been achieved. The MPAO has become a financially self-sufficient institution with strong capacity in pension related administration tasks. While the MPAO s administration fee charged for the MRPS members is among the lowest across the world, it has been reduced further recently. The MPAO has also managed to add disability insurance benefit at no additional cost to the MRPS members and has created housing financing facility in response to the demand from its members. This revised indicator also absorbs two Intermediate Outcome indicators that were dropped at Additional Financing: (i) appointment of all MPAO Governing Board members (for establishment of new governance structures); and (ii) all or almost all staff positions at the MPAO filled with qualified peopled (for creation and staffing of new office to oversee pensions). Note: The targets were formally revised in May 2011 at Additional Financing and were further refined during the February 10, 2014 restructuring.

8 Indicator 2: Value quantitative or Qualitative) Date achieved Comments (incl. % achievement) Indicator 3: Value quantitative or Qualitative) (Original) Creating public awareness about the pension system through a public education campaign, establishment of a public web-site of pension system, and key indicators of the system publicly available (Revised at Additional Financing) Increased public awareness about the new pension system Public awareness/education Awareness workshops Non existent Public awareness/education campaign rolled out; significant improvement in basic understanding of pension system. campaign rolled out in all atolls; key indicators of the pension program available to public (including online); awareness campaign targeting self-employed workers initiated; significant improvement in basic understanding of pension system. and events continuously carried out in all atolls; public web site established; base line and end-line surveys on pension awareness carried out and demonstrated increased awareness of pension reform. 5/31/ /31/ /30/ /30/2015 ACHIEVED. All qualitative targets have been achieved. Multiple media have been used for public awareness/education campaign, including targeted information sessions in atolls, resorts, and colleges, talk shows with mass media (TV and radio), newspaper articles, leaflets and posters at public events. The MPAO s website regularly publishes key indicators of all pension programs and the MRPS members can access their Retirement Saving Accounts online. The end-line survey finds increased awareness about the pension law, pension scheme, and the role of the MPAO. Note: The targets were formally revised in May 2011 at Additional Financing and were further refined during the February 10, 2014 restructuring. (Original) Generation of payroll data for public service personnel required for assessing mandated contributions for the new pension system (Revised at Additional Financing) Generation of payroll data for civil service personnel used for assessing mandated contributions for the new pension system Non existent Required payroll data available for all public sector agencies for the GoM Mechanisms for payroll generation from Public Accounting System (PAS) defined; 100% of GoM agencies in Malé use the HR module of the PAS 96 percent of GOM agencies in Malé use the HR module for the PAS. Date achieved 5/31/ /31/2012 6/30/2015 6/30/2015 Comments (incl. % SUBSTANTIALLY ACHIEVED. By June , 96% of government agencies in Malé and 4 non-malé-based agencies are using the HR module for PAS. The achievement) rollout will continue as new government agencies are established.

9 Development and implementation of management information systems and Indicator 4: processes for targeting, disability administration, and health insurance (new indicator added at Additional Financing) Value quantitative or Qualitative) Non existent System analysis for MIS and standard operating procedures; new MIS systems and processes fully implemented and relevant staff trained. System analysis for MIS carried out and standard operating procedures developed; Pilot of the targeting mechanism in one program initiated; New MIS systems and processes fully implemented; relevant staff trained; strategy for an integrated SP system developed. System analysis for MIS for an integrated SP Information System and an integrated Health Information System carried out; SPIS fully implemented; Health Insurance Monitoring MIS implemented; standard operating procedures for disability, subsidies and other welfare benefits developed; a PMT targeting mechanism piloted and operationalized into SP Information System; a training facility built and relevant staff trained; a registry of electricity subsidy recipients developed Date achieved 05/31/ /30/ /30/ /30/2015 SUBSTANTIALLY ACHIEVED. All qualitative targets have been achieved. The strategy for an integrated national SP system is not developed because a Social Comments (incl. % Protection Act was passed in So the focus has shifted to develop the regulations required for implementing all relevant SP programs and to achievement) operationalize the processes into the SP Information System. Note: The targets were formally revised in May 2011 at Additional Financing and were refined during the February 10, 2014 restructuring. Payout of accrued pension rights to public sector workers retiring during the Indicator 5: Value quantitative or Qualitative) project period (New indicator added at Additional Financing) Non existent Payout of rights of all those retired between January 2011 and March 2014 completed. Payout of accrued pension rights of all those retired between January 2011 and January 2014 completed. Date achieved 05/31/ /30/ /30/2015 Comments (incl. % PARTIALLY ACHIEVED. The Government has been paying the accrued pension rights in the form of a Recognition Bond for all public sector workers who achievement) enrolled into the MRPS and retired since the MRPS became operational on May 1,

10 2010. The Project had reimbursed the Government for the payouts between January 2011 and January 2014 using three Disbursed Linked Indicators added at Additional Financing. However, disbursements under Disbursement Linked Indicator #3 were suspended in July 2014 (see main text for explanation). (b) Intermediate Outcome Indicator(s) Indicator Indicator 1: Value quantitative or Qualitative) Baseline Value Original Target Values (from approval documents) Formally Revised Target Values Actual Value Achieved at Completion or Target Years (Original) Key policy decisions in MRPS implementation made. (new indicator added at Additional Financing) (Revised) Key policies developed and adopted to facilitate MRPS implementation. SOIP adopted; regulation on participation of Statement of foreign workers Investment Policy adopted by the (SOIP) adopted; MPAO Board; SOIP adopted; regulation on regulation on strategy for selfemployed in the workers adopted; strategy participation of foreign participation of foreign workers MRPS defined, for self-employed in the adopted; strategy including matching MRPS defined and the for self-employed Non existent contributions; GoM s matching defined, including strategy for unified contribution implemented; matching pension system strategy for unified pension contributions; discussed at the system discussed by key decision on MPAO Board; policy makers; (partial) draft amendments outsourcing of made to relevant asset management laws to unify made. parallel pension systems and rationalize benefits. Date achieved 05/31/ /30/ /30/ /30/2015 PARTIALLY ACHIEVED. All except one policy targets have been achieved. Although pension harmonization discussions have taken place several times on the basis of the MPAO s strategy paper outlining options to resolve the double Comments pensions issue, the Government has not taken a final decision until three months (incl. % after Project closing. The President s Office instructed the MPAO in early October achievement) 2015 to harmonize double pensions. The MPAO is drafting amendments to Maldives National Pension Act to unify the MRPS and other parallel pension systems. Note: The targets were refined during the February 10, 2014 restructuring. Progress in implementing MRPS, measured by the number of individual Indicator 2: accounts opened and maintained by the new pension authority (Originally a PDO indicator)

11 Value quantitative or Qualitative) Non existent 99% of public servants 85,000 accounts 118,691 accounts were established by the end of June 2015, of which 84,204 are active contributors. Date achieved 5/31/ /31/2012 6/30/2015 6/30/2015 OVER-ACHIEVED. The total number of unique MRPS individual accounts Comments represents 56.9% of the population aged 20 to 64, the highest among South Asia (incl. % Note: The targets were formally revised in May 2011 at Additional Financing and achievement) was refined during the February 106, 2014 restructuring. (Original) Progress in implementing a new basic pension scheme, measured by the number of new applications processed and payments made by the MPAO as share of total population over the eligible age. (Originally a PDO indicator) Indicator 3: Value quantitative or Qualitative) (Revised with Additional Financing) Progress in implementing a new basic pension scheme, measured by the number of payments made and by strengthening the automatic claw-back mechanisms Non existent 99% listed beneficiaries Payments to around 15,000 beneficiaries maintained; automatic linkages with all other pension programs to improve administration of claw-back 16,125 beneficiaries received payment under basic pension scheme by end June 2015; the claw-back mechanism implemented for those who also received MRPS pension income Date achieved 5/31/ /31/2012 6/30/2015 6/30/2015 Comments (incl. % ACHIEVED. The coverage of the Old Age Basic Pension benefit has reached 100% of 65+ population. achievement) Note: The targets were formally revised in May 2011 at Additional Financing. (Original) Regular payments and reporting of contributions Indicator 4: Value quantitative or Qualitative) (Revised at Additional Financing) Regular reporting of contributions and balances to members, including recognition bonds (RB) Principles of Principles of accounting and accounting and reconciliation defined and reconciliation implemented in the pension defined; all RB MIS; all data for calculation Accounting and accounts calculated of RB collected and updated reconciliation and fully credited; when needed; RB values mechanisms individual account calculated periodically and Non existent established for civil servants, private sector, and selfemployed statements issues to fully credited to RSA at all members of the retirement; MRPS individual scheme; On-line account statements issued to access to individual all members and on-line accounts and access available; complaints complaint procedure fully procedures fully implemented; Website implemented. provides information on

12 balances and contribution history. Date achieved 5/31/ /31/2012 6/30/2015 6/30/2015 Comments (incl. % achievement) Indicator 5: Value quantitative or Qualitative) ACHIEVED. All qualitative targets have been achieved. The MPAO website also reports monthly on the number of pension benefit recipients and the total payments made for the OABP, MRPS, and all other government sponsored pension programs. This indicator also absorbs one original Intermediate Outcome Indicator - Database with accurate report of recognition bond values for individual account holders. It was dropped at Additional Finance because the database was completed and reporting on recognition bond values had become a part of the individual account statement. Note: The targets were formally revised in May 2011 at Additional Financing. (Original) (i) Regular monthly reporting of basic pension beneficiaries and of benefit being paid to individuals; (ii) Formal private sector employees joined the new scheme (Revised at Additional Financing) Reporting and compliance procedures defined and implemented, including regular monthly reporting of basic pension benefits paid and contributions collected. Non existent Monthly reporting of basic pension benefits being paid; 99% of all persons aged 65 paid and accounted; >95% of eligible workers covered. Reports for OABP and MRPS compliance generated; MPAO compliance team trained and compliance followup procedures implemented; risk based contribution payment compliance procedures implemented Reports for OABP and MRPS contribution compliance defined and generated regularly; MPAO compliance team trained and carried out onsite regular and special inspections; MPAO targets inspections on high risk compliance cases. Date achieved 5/31/ /31/2012 6/30/2015 6/30/2015 Comments (incl. % ACHIEVED. All qualitative targets have been achieved. Note: The targets were formally revised in May 2011 at Additional Financing and achievement) refined during the February restructuring. (Original) Progress in establishing the supervisory unit for pensions to review reports prepared by MPAO (Originally a PDO indicator) Indicator 6: Value quantitative or Qualitative) (Revised with Additional Financing) Effective supervision by the CMDA of all aspects of the new pension program and framework for introduction of the new investment instruments. Non existent Capital Market Development Authority (CMDA) pension supervision unit established CMDA Pension Supervision Department established; regulations for custodianship and asset management CMDA Pension Supervision Department established; regulations for custodianship and asset management adopted; electronic reporting system defined and implemented; framework for

13 adopted; system of new investment instruments electronic reporting defined and implemented. defined by CMDA; MPAO implemented electronic reporting per CMDA requirement; framework for new investment instruments defined and implemented. Date achieved 5/31/ /31/2012 6/30/2015 6/30/2015 ACHIEVED. All qualitative targets have been achieved. It has been challenging to Comments introduce new investment instruments in Maldives capital market though. (incl. % Note: The targets were formally revised in May 2011 at Additional Financing and achievement) refined during the February 10, 2014 restructuring. Development and implementation of new process for annuitization in MRPS. Indicator 7: Value quantitative or Qualitative) (New indicator added at Additional Financing) In-house phased withdrawal provisions developed; policy paper on principles of annuitization of Non existent pension payments produced; procedures approved by MMA; annuitization fully implemented In-house phased withdrawal provisions developed; options on annuitization discussed by the MPAO Board; and policy on annuitization evaluated by MPAO Board. In-house phased withdrawal provisions developed; annuitization options evaluated by MPAO Board Date achieved 5/31/2011 6/30/2015 6/30/2015 6/30/2015 ACHIEVED. The MPAO has explored different options on annuitization, but after Comments (incl. % evaluating various options against the benefit and the cost to the MRPS members, as well as the regulatory environment, the MPAO Board decided not to implement achievement) annuitization in the short-run and re-evaluate the decision every two years. Note: The targets were refined during the February 10, 2014 restructuring. Assessment of options for determination of disability and required systems. Indicator 8: Value quantitative or Qualitative) (New indicator added at Additional Financing) Disability Act Disability Act enacted; proposal enacted; proposal for disability for disability coding and coding and administration administration Non existent developed and developed; piloted; disability disability administration administration provisions fully provisions fully implemented, implemented; Disability Act enacted; proposal for disability coding and administration developed and piloted in 6 atolls; National Social Protection Agency (NSPA) staff trained; the process has been agreed by all stakeholders; a training facility set up at NSPA to

14 G. Ratings of Project Performance in ISRs No. Date ISR Archived relevant staff trained. DO relevant staff trained. IP provide training of stakeholders in the atolls via video calls developed; disability administration provisions operationalized. Date achieved 5/31/2011 6/30/2015 6/30/2015 6/30/2015 Comments ACHIEVED. All qualitative targets have been achieved. (incl. % Note: The targets were refined during the February 10, 2014 restructuring. achievement) (Original) Development of options and piloting of new approach to targeting of social benefits (New indicator added at Additional Financing) Indicator 9: Value quantitative or Qualitative) (Revised) Development of options and processes for targeting of social benefits Interim strategy for national targeting Interim strategy for system defined and national targeting implemented; system defined; policy paper on targeting options Strategy for national targeting options evaluated; targeting system developed; prepared; Pilot of processes for the new targeting method targeting system implementation of piloted in Single Parent defined and targeting method Allowance Program; new Non existent initiated; new defined and applied registry of electricity subsidy targeting system to Single Parent beneficiaries developed; the piloted and Allowance Proxy Means Test method evaluated; data Program; new implemented in the SP collected and new targeting system Information System as a targeting system fully implemented reference tool on targeting. fully implemented; for at least one SP and awareness program. campaign launched. Date achieved 5/31/2011 6/30/2015 6/30/2015 6/30/2015 ACHIEVED. The NSPA has adopted the new targeting system and has carried out re-verification for all program beneficiaries living in Malé. It has also developed a Comments registry of electricity subsidy beneficiaries with required information for targeting (incl. % and can be used for eligibility determination for other social programs. achievement) Note: The formally revised targets were established during the February 10, 2014 restructuring. Actual Disbursements (US$, millions) 1 12/28/2009 Satisfactory Satisfactory /29/2010 Satisfactory Satisfactory /27/2010 Moderately Satisfactory Moderately Satisfactory /27/2011 Moderately Satisfactory Moderately Satisfactory 1.93

15 5 03/11/2012 Satisfactory Moderately Satisfactory /29/2012 Satisfactory Moderately Satisfactory /26/2013 Satisfactory Satisfactory /27/2014 Satisfactory Moderately Satisfactory /23/2014 Moderately Unsatisfactory Moderately Unsatisfactory /28/2014 Moderately Unsatisfactory Moderately Satisfactory /04/2015 Moderately Unsatisfactory Moderately Satisfactory /25/2015 Moderately Satisfactory Satisfactory H. Restructuring (if any) Restructuring Date(s) 08/07/ /27/ /10/2014 Board Approved PDO Change ISR Ratings at Restructuring DO IP Amount Disbursed at Restructuring in US$, millions Y MS MS 1.93 N S MS 4.72 N S MS Reason for Restructuring & Key Changes Made The PDO was revised with the AF, which provided additional support for Components A and B and included three additional components (C, D, and E, of which C was originally Sub-component A3). Component D was to support the Ministry of Health and Family (MoHF) to develop administration systems for health insurance, disability, and targeted assistance. Component E was to support the GoM to pay out the RBs for public sector employees retiring during the period of project implementation by introducing DLIs as a new financing modality. The Results Framework was also updated. It clarified: (i) roles and responsibilities under Component D were shifted to the NSPA rather than the MoHF; (ii) scope of technical assistance under Component D was expanded to strengthening the national identification system to support SP programs; (iii) the scope of incremental operating costs was expanded to allow incentive allowances to Project staff involved in the PAS activities. Based on the Mid-Term Review findings, this restructuring (i) dropped activities to strengthen the national identification system as the GoM decided to carry out these tasks with own resources; (ii) provided TA for the development of a strategy for an integrated social protection

16 Restructuring Date(s) 05/19/2015 Board Approved PDO Change ISR Ratings at Restructuring DO IP Amount Disbursed at Restructuring in US$, millions N MU MS Reason for Restructuring & Key Changes Made system; (iii) revised the targets in the Results Framework and the DLIs in response to the policy developments and lessons learned since project effectiveness. Three changes were made: (i) unutilized balance in Category 2 of the original IDA Credit was reallocated to Categories 1 and 4; (ii) a new DLI (under Component D) was introduced to support the development of a registry of electricity subsidy beneficiary households by reallocating unutilized funds from Category 4 of the Financing Agreement; (iii) introduced the Least-Cost Selection method for hiring consultants. If PDO and/or Key Outcome Targets were formally revised (approved by the original approving body) enter ratings below: Outcome Ratings Against Original PDO/Targets Satisfactory Against Formally Revised PDO/Targets Moderately Satisfactory Overall (weighted) rating Moderately Satisfactory I. Disbursement Profile

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18 1. Project Context, Development Objectives and Design 1.1 Context at Appraisal 1. Maldives had made tremendous progress in social, economic, and political development during the past decades. It had achieved huge success in economic growth between 1978, when the country was one of the world s 20 poorest nations, and 2008 when it almost reached an upper-middle-income status with a per capita income of about US$5, Furthermore, there had been good progress in human development. The decade preceding the Project in particular had seen increased literacy, reduced maternal and child mortality, declining poverty levels, and improvements in access to basic services. The country also started a complex political transition to a multi-party democracy with a new constitution. A wide range of reforms were initiated to modernize its governance structure and to increase and improve service delivery in response to rapid rising demands by citizens. 2. While poverty had declined as average incomes had risen, pockets of poverty remained and a large share of the population was still vulnerable to aggregate and individual shocks. Challenges posed by shocks could suddenly reduce household income and consumption. The 2004 tsunami demonstrated the very real possibility of large-scale loss of incomes and assets, and yet the potential future environmental risks due to global warming were expected to rise further. The food and fuel crisis was another external shock that had strong impact. Furthermore, Maldives had begun a demographic transition as its population was aging. Hence, the government increasingly recognized the need to build a comprehensive and effective social protection (SP) system to provide resilience and protect the poor. 3. Two major deficiencies identified in Maldives SP programs were recommended for priority policy attention 2. The first one was limited old age security. The existing pension system was not only limited in its coverage to public sector employees, but also had several design flaws that could result in sub-optimal retirement income. Both the Civil Service Pension (CSP) scheme and the Government Provident Fund (GPF) had failed to cover the vast majority of workers who did not work for the government. Under the CSP, civil servants received a pension equivalent to 50 percent of base salary after every 20 years of service regardless of whether they were retired or not. Because there was no requirement to retire, government employees could continue to work for another 20 years and earn a second pension, and in a few cases, even a third. Pension benefits were not indexed to inflation, hence their real purchasing power would decrease over time. The defined benefit (DB) Pay-As-You-Go design of the CSP scheme made it fiscally unsustainable and deferred the burden of pension debt of the current generation on future generations. 1 World Bank Gross National Income per Capita (Atlas Method): World Development Indicators. Washington, DC: World Bank. 2 World Bank Maldives - Social Protection in the Maldives: Options for Reforming Pensions and Safety Nets. 1

19 4. The second deficiency was inadequate protection provided by the existing social safety net programs against poverty and vulnerability. Not only did these programs have extremely low coverage and omit critical vulnerable groups, they also did not appear propoor due to large inclusion and exclusion errors. Only 0.3 percent of the population and 1.6 percent of the poor were covered by recurrent transfers; and total safety net spending (outside of the tsunami benefit) was 0.2 percent of GDP in 2004, much lower than what other countries with a similar level of income spent. Therefore, the key objective of protecting the poor was not being met. 5. The Government of Maldives (GoM) recognized the urgent need to reform its SP system and identified multiple strategies and goals to particularly improve the life of the poor, the disadvantaged and the vulnerable groups in its development agenda 3. The Bank team had been providing technical assistance (TA) in the area of pension reform to a GoM inter-ministerial task force, which submitted a pension reform proposal in The proposal was approved by the Cabinet in late The final pension reform plan, which received full support of the new government 4 after 2008 and was later codified in the National Pension Act, which was eventually passed by the Parliament in June 2009, separates the redistributive and savings functions in two distinct pillars: A new defined contribution (DC) pension scheme would replace current rules under the CSP, with the introduction of a retirement age and pension credit for past years of service for government employees. Contributions from workers and employers would finance this retirement savings scheme. It would, in the long run, be fully funded and so avoid the creation of any new liabilities. A non-contributory pension scheme (often referred to as a demogrant ) would pay all elderly citizens a basic income support, financed by the general government budget. This flat pension benefit would be reduced partially when there is other pension income through a mechanism often called a pension test. While the real value of this non-contributory pension was to remain constant over time due to indexation against inflation, continued wage growth would result in a higher contributory pension over time. Hence in the long run, most Maldivians would rely on the contributory scheme. 6. Concomitant to the pension reform, the GoM also initiated a program to modernize its public financial management (FM) and enhance public sector governance. In October 2006, the Government received a grant from the European Union, channeled through the World Bank as trustee, to partially fund the implementation of an integrated Public Accounting System (PAS) across the entire government. The PAS includes a human resource (HR) and payroll module for the entire public service and would enable tracking of pension contributions for government employees. Payroll data generated through the PAS would greatly facilitate the contribution collection function of the new DC pension scheme. 3 Government of Maldives The Seventh National Development Plan - Creating New Opportunities. 4 Government of Maldives Strategic Action Plan

20 7. It was in this context that the GoM requested the Bank s financial assistance to support the implementation of the pension reform. The intention was to build a robust and efficient administrative platform for the new pension system and facilitate the rationalization of the public administration by contributing to a sustainable retirement scheme for civil servants. 1.2 Original Project Development Objectives (PDO) and Key Indicators 8. The original PDO was to support the establishment of a new pension authority and the strengthening of capacity at existing institutions of the Recipient to effectively implement a new pension system and to provide a platform for additional SP programs. 9. Key indicators, according to the Project Appraisal Document (PAD) main text and the Financing Agreement were: 1) Progress in establishing the Maldives Pension Administration Office (MPAO), including appointment of the governing board members and the executive director and hiring external asset manager(s) 2) Progress in implementing a new contributory retirement program, measured by the number of individual accounts opened and maintained by the MPAO 3) Progress in implementing a new basic pension scheme, measured by the number of new applications processed and payments made as share of the total population over the eligible age 4) Creating public awareness about the new pension system through a public education campaign; establishment of public web site of the new pension system, and key indicators of the system publicly available 5) Progress in establishing the supervisory unit for pensions to review reports prepared by the MPAO 6) Generation of payroll data for public employees required for assessing mandated contributions for the new pension system 1.3 Revised PDO (as approved by original approving authority) and Key Indicators, and reasons/justification 10. Maldives experienced an economic contraction in 2009, mainly driven by a large drop in the revenue from its tourism sector. In response to an unsustainable fiscal deficit of 19.4 percent of GDP in 2009, the GoM embarked on a significant fiscal consolidation effort supported by external financing from the Bank, the IMF, and the Asian Development Bank. The government took a series of expenditure-cutting and revenue-boosting measures. In this context, the GoM requested additional financing (AF) from the Bank to complement its medium-term fiscal consolidation effort by helping: (a) rationalize social assistance programs to better target the poor; and (b) partially reduce the transition cost related to moving from the old unfunded DB scheme to the new fully funded DC scheme. The AF of US$ 12 million in grant funding was approved on June 2, It introduced the following changes: the PDO and the Results Framework (RF) were revised, the scope of the Project 3

21 was expanded, the implementation arrangements were updated, and the closing date was also extended to June 30, The revised PDO was to support the implementation of the National Pension Act, to strengthen institutional capacity of key agencies responsible for implementing the National Pension Act, and to develop the processes and platforms required for the delivery of SP programs. The National Pension Act (NPA), passed shortly after the original IDA Credit was approved, provides a comprehensive policy and operation framework for the country s new pension system, including the two pension pillars (Old Age Basic Pension or OABP and Maldives Retirement Pension Scheme or MRPS) and their key features, the roles and responsibilities of the MPAO, the Capital Marked Development Authority (CMDA), and the Ministry of Finance and Treasury (MoFT), the governance of the MPAO as well as the rules for administering the MRPS related to formulating and supervising pension fund investment, collecting contributions, paying pension benefits, outsourcing asset management and custodian services, and calculating accrued pension rights of public employees for the instrument called Recognition Bond (RB). The explicit reference of the NPA in the revised PDO reflects the expanded scope of the Project after the AF, in particular the financing of pension pay-outs. In addition, the second part of the revised PDO recognized important new GoM initiatives toward reforming its health insurance program and putting in place appropriate mechanisms for determining eligibility for different social assistance programs. 12. The RF was revised in accordance with the revised PDO and the expanded scope of the Project. Three original PDO indicators (#2, #3, and #5) were moved to be Intermediate Outcome (IO) indicators as they reflected more progress in output or IO than that of PDO. Two new PDO indicators were added to reflect the two new elements of the increased scope of the AF. The table in Annex 10 provides the details of the changes for both PDO and IO indicators. The revised PDO indicators were: 1) New systems under MPAO operational, including the establishment of new office of the MPAO, governance structures, Management Information System (MIS), and provisions for outsourcing 2) Increased public awareness about the new pension system 3) Generation of payroll data for public service personnel used for assessing mandated contributions for the new pension system 4) Development and implementation of information systems and processes for targeting, disability administration and health insurance 5) Payout of accrued pension rights to public sector workers retiring during the project period 1.4 Main Beneficiaries 13. Direct beneficiaries of the project investments were to be: (a) institutions such as the MPAO, CMDA, MoFT, and the National Social Protection Agency (NSPA), which would significantly benefit from the technical support, the equipment, and the systems provided by the Project. The implementation and management capacity of these institutions was also to be strengthened through trainings for their staff organized and supported by the 4

22 Project; and (b) the public sector employees retired between January 2011 and January Their accrued pension rights in the form of RBs were paid in accordance with the NPA by the GoM, which in turn was reimbursed by the Project. In addition, the current and future beneficiaries of the pension and social assistance programs indirectly benefit from the strengthened administration systems built by the Project. 1.5 Original Components 14. Component A: Strengthening Capacity for Implementing the New Pension Program (US$3.3 million). This component was to provide TA on policy analysis and legal/regulatory drafting related to the new pension program and finance the start-up costs of the new MPAO, including both building capacity of the MPAO staff and developing administration infrastructure such as the equipment and information systems required for payroll contribution collection and pension processing. The component had three Subcomponents: A.1 - Policy Analysis/Legal Framework. The Project was to provide TA, goods and training to the Ministry of Health and Family (MoHF), the nodal ministry for SP policies, for the development of: (a) a new pension system, including strategic reform planning, fiscal impact analysis, transitional provisions, policy toward survivors, disability provisions, and annuities or other forms of benefit withdrawal; and (b) a new pension legal framework, including drafting laws, rules, regulations, institutional by-laws for the MPAO and other related documents. A.2 - Institution and Capacity Building. The Project was to provide TA, goods and training to the MoHF to: (a) set up the MPAO, including preparation of the MPAO s departmental and staffing structures, their terms of reference (TOR), annual operational budget, and operational instructions; (b) strengthen the capacity of new staff; (c) contract external service providers for asset management, insurance, and accounting; and (d) provide basic infrastructure, including office equipment, furniture, air-conditioning and office hardware. Similar support was to be provided to other entities of the Project Technical Committee (PTC) to strengthen their capacity to fulfil their responsibilities related to the new pension system. The MoFT was to be responsible to phase out existing systems of administering pensions and the GPF; the Civil Service Commission (CSC) and other public sector institutions were to be responsible for data consolidation to be used for the purpose of calculation of individual pension liabilities; and the CMDA was to be responsible to establish a supervisory unit for pensions. A.3 - PAS. The Project was to provide TA, goods, and training to support the MoFT to: (a) implement the PAS within all government agencies; (b) develop and implement accounting standards, policies and instructions related to the Public Finance Law; (c) strengthen capacity of the staff of the MoFT, line agencies, and local government bodies in the use, operation and maintenance of the PAS; and (d) develop and implement a HR/payroll system for public employees, including a mechanism to track pension contributions. 15. Component B: Public Awareness Campaign (US$0.5 million). This component was to finance a public awareness and education campaign to explain the new agency and 5

23 the new pension system to the general public. TA, goods and training were to be provided to the MoHF for the design and the implementation of a holistic public information campaign to improve awareness of the objectives and mechanisms of the new system, in particular focusing on: (a) employers about their contributory obligations; (b) workers about their rights and benefits; and (c) senior citizens about the mechanisms for claiming their basic pension. 1.6 Revised Components 16. The AF added two new components (D and E) to the Project, in addition to expanding support for the two original project components (A and B). Also the original Sub-component A.3 on the PAS was made into a separate component (C). 17. Component A: Technical Assistance and Capacity Building for Maldives New Pension Program (US$3.4 million). An additional US$ 1.7 million was allocated from the AF to support additional TA activities in two areas identified based on the first two years of implementation experience: (a) assisting the CMDA in the establishment of a supervisory unit for pensions, including drafting rules and regulations pertaining to the supervision of the pension sector, and the formulation of a strategy and regulations for developing new and longer-term instruments the pension investments; and (b) defining and implementing the process of annuitization of pension balances. The other major change was to shift the responsibilities of a number of operational tasks under the Sub-components A.1 and A.2 from the MoHF and CSC to the MPAO. 18. Component B: Public Awareness Campaign (US$0.6 million). An additional US$0.1 million was allocated from the AF, and there was no other change made. 19. Component C: Public Accounting System (US$1.8 million). It was made into a new component because the PAS was administered exclusively by the MoFT and required renewed focus given its lagging performance of the first two years of the Project. 20. Component D: Administration of Health Insurance, Disability, and Targeted Assistance (US$2.0 million). This new component was to address three areas that gained importance under the new government, and they all were to involve system design, capacity building, and IT infrastructure. Furthermore, the system development in all the three areas would be coordinated with improvements in the population registry operated by the Department of National Registration (DNR) to cross-verify beneficiary identity. D.1 - A targeting system. This sub-component was in response to the Government s demand to focus their limited resources on the poor in various government programs. The Project was to provide training and capacity building to support (a) initial piloting of a new targeting method; (b) development of database management specifications and a MIS for targeting; (c) establishment of a system for data collection; (d) development of standard operating procedures, manuals and training plans for the scale-up of the targeting system; (e) carrying out of outreach campaigns, training and capacity building; and (f) development of monitoring and evaluation (M&E) systems for the targeting system. 6

24 D.2 - Disability coding and benefit administration. This sub-component was to provide TA to support the implementation of the Disability Act of 2010 by developing disability coding, standard operating procedures, designing a disability registry, and administration of cash benefits. D.3 - Systems to deliver health insurance. This sub-component was in response to the Government s request for assistance to develop more efficient systems to deliver its new health insurance scheme. The Project was to provide support to facilitate claims processing, transaction monitoring, fraud control, general MIS, and to build capacity at the MoHF. 21. Component E: Payout of Pension Liabilities (US$8.0 million). This new component was to finance partially the transition cost that arose when the previously implicit contingent liability for government employees became explicit through the RBs. By the time of the AF, the value of the RBs had been calculated for each government employee and formed part of their individual retirement saving account (RSA) balances. Under this arrangement, when employees reach retirement age, the GoM is obligated to transfer the value of the RBs to the workers individual RSAs. While the value of the RBs would decline to zero over time, these payments in the short run posed an additional challenge to the GoM s already tight fiscal situation. The Project was to help the Government partially reduce this cost with grant funding by reimbursing the payment of the RBs into individual RSAs of those public employees retiring between January 2011 and March Furthermore, the disbursement was contingent on the satisfactory achievement of three disbursement linked indicators (DLIs) directly linked with the Project activities. The three DLIs were: (1) enrollment of workers into the MRPS; (2) electronic reporting of contributions; and (3) the implementation of key administrative arrangements for the reform to the pension and SP systems. Thirteen targets were set for the three DLIs and they are provided in the Annex 11 table. The introduction of the DLIs helped ensure full and timely implementation of the measures supported by the Project through concrete and verifiable indicators. 1.7 Other significant changes 22. The implementation arrangements for the Project were also modified at the AF. The MPAO took over the role of Project Implementation Agency from the MoHF. The Project Management Unit (PMU), initially established under the MoHF, was also moved to the MPAO to facilitate project implementation. While the PMU continued to be responsible for the FM and procurement activities under all components as well as for coordinating project implementation with the MPAO, MoHF, and MoFT, both the MoFT and MoHF each nominated one Project co-director to manage activities under Components C and D respectively. Also the Project Steering Committee (PSC), which was originally chaired by the Minister of the MoHF and included ministerial level representation from the MoFT, CSC, and CMDA, was restructured to be chaired by a senior representative of the MoFT and include a representative from the External Resource Management Division of the MoFT, the Project Director, and two Project co-directors. Furthermore, the PTC was regarded as no longer required and its technical coordination role was consolidated under the PSC. 7

25 23. Subsequent to the AF, three Level 2 restructurings were carried out to the Project in response to the evolving needs of the GoM: The 1st restructuring, approved in June 2012, was to expand TA support to the strengthening of the national identification system and developing of a biometricbased identity authentication mechanism to be used across various governmental programs. The responsibility for implementation of Component D activities was shifted from the MoHF to the NSPA, which was in charge of administration of the national health insurance scheme and most social assistance programs. Lastly, the definition of incremental operating costs was revised to allow incentive allowances to a small group of civil servants working on core activities of PAS implementation. The 2nd restructuring was initiated following the Mid-Term Review (MTR) of the Project in March 2013 and approved in February A number of targets in the RF were revised or updated to reflect the progress made as well as the revised implementation plan for the remainder of the Project. The DLI matrix was also revised to remove two targets for DLI #3 and to add five new targets (one for DLI #1 and four for DLI #3). The remaining DLI targets were re-costed and one extra payment period (September 30, 2014) was added for the new target associated with development policy on unifying the double pensions for government employees. Lastly, at the request of the GoM, the TA support for the development of a biometrics-based identity management system was removed from the Project. The 3rd restructuring, approved in May 2015, was to support the development of a registry of electricity subsidy beneficiaries, which would enable the Government to reform the electricity subsidy program without hurting the poor. A new DLI was introduced to finance the development of the registry contingent to the quality of the registry being developed. 2. Key Factors Affecting Implementation and Outcomes 2.1 Project Preparation, Design and Quality at Entry 24. Project preparation was built on prior extensive analytical work and policy dialogues with key government counterparts. The Bank had engaged with the GoM through a Social Security TA since 2003 and one output was the report titled Social Protection in the Maldives: Options for Reforming Pensions and Safety Nets. The sound and in-depth analytical work undertaken preceding the Project laid a solid foundation for project preparation, which was evident from the rather comprehensive information provided in the Project Concept Note (PCN) and the PAD. Furthermore, project preparation was supported by a Project Preparation Facility (PPF) 5, which financed the operations of a core implementation unit and additional TA needed for the detailed design of the project components as well as the legal and technical support for drafting of the NPA to ensure 5 PPF No. Q592 was in the amount of US$1.11 million with an original refinancing date of December 31, The refinancing date was extended to July 31,

26 that its provisions were consistent with international best practices. The Government also showed its commitment to the reform plan by applying mandatory retirement for the first time in the country and retiring 1800 public employees in May The subsequent new Government had also reaffirmed its commitment to pension reform and had been shepherding the NPA through Parliament during Project preparation. 25. Project design took into account a number of lessons learned from Bank operations in the Maldives as well as from operations supporting pension reform in other countries. One lesson incorporated into the project design was the need for special attention on local capacity issues. Hence, the Project was to devote a significant share of financing on TA and capacity building to strengthen technical expertise within the counterpart agencies. Many DC schemes in other countries had been implemented without sufficient thought being given to the efficiency of the collection and record-keeping system resulting in losses for some members of the scheme and/or higher costs of administration of the system. Also, this kind of a mandated savings scheme was subject to governance problems when inadequate attention was given to investment policy formulation. Both issues were considered highly relevant for Maldives because of its lack of economy of scale and potential problems in insulating pension fund investment from political pressures. The TA and system design activities under Component A were carefully planned to address both concerns. Two other problems often encountered in other countries were with pension program members: (a) unlike DB schemes, the risks of longevity and investment returns in such a DC scheme were borne by the members, who need to understand the new system and readily access information about their pension saving accounts; and (b) the transition from one type of scheme to another may be difficult to understand and could give rise to resentment or loss of support for the reform. Component B was designed to ensure basic understanding of the new system among the general public, communicate to potential members proactively, and make pension-related information available online as much as possible. 26. The project design correctly rejected one component of the Government s original request, which was subsequently supported by component E under the AF. It was rejected by the Bank team because the basic administrative infrastructure and legal framework for individual RSAs did not exist, which limited justification. By the time of the AF, the MPAO had established an interim record-keeping and accounting system for individual RSAs with the rules of the RBs clearly defined and the value of the RBs calculated. So the Project s reimbursement of the GoM s payments made to individual RSAs in redemption of the RBs would indeed effectively reduce the transition cost over FY Furthermore, the DLI approach was introduced into the Bank s operations only around the time of the AF. Both the financing of pension benefits and the disbursing of pension pay-outs contingent on the achievement of a number of implementation performance targets and reform measures were innovative. 27. Risks were properly identified and assessed by the project team. Reasonably specific mitigation measures were proposed and the majority had worked to reduce the associated risk level. The combination of dedicated procurement and FM officers hired by the Project, adequate training, and regular oversight by the MPAO and the Bank team were 9

27 expected to lower the risks from High and Substantial respectively to Moderate. During the project implementation, neither area ever became a major challenge. Similarly, by adopting a modern Statement of Investment Policy (SoIP), mandatory use of custodian service, independent audit, monthly reporting online, and independent pension supervision by the CMDA, the governance risk related to fund investment indeed appeared to be reduced. The actual experience of project implementation also validated the original Substantial risk rating on capacity sustainability due to lack of qualified staff to implement the reforms in the time frame envisioned under the Project. While the MPAO managed to retain its qualified and well trained staff, it was very challenging for the MoFT to retain its core technical staff whose SAP software skills were in high demand in the private sector. The incentive allowance introduced since 2012 did help, but only partially. 28. The political risk with regard to change of policy on pension reform turned out to be more substantial than the initial rating of moderate. While the GoM did proceed with the proposed pension reform such as establishment of the MRPS and OABP despite its tightened fiscal space, two unexpected deviations had compromised the new pension system as per the NPA (more discussion is provided the section below). The mitigation strategy of active engagement with all the constituencies involved in the policy formulation process and continued policy dialogue in order to introduce best practices had been followed by the Bank team, but failed to resolve or prevent either policy change on pension reform. Because both measures taken by the Government were in direct conflict with the PDO, the Bank decided to partially suspend the Project in July In retrospect, the political risk that the pension reform would not be carried out in its entirety should have been rated as Substantial. 2.2 Implementation 29. The Project had a good start with regard to the establishment of the pension legal and regulatory framework, the new institution (MPAO), and the communication of the new pension system to potential beneficiaries. By the time of the AF, more than two thirds of the original Credit had been disbursed. The MPAO was fully staffed and functioning under a chief executive officer (CEO) and the Governing Board. More than 35,000 public sector employees had registered individual RSAs and the MPAO could trace and report the pension contributions and transactions at the individual RSA level. Around 14,000 elderly 65 years old or more were identified and received payment of OABP benefit through their bank accounts. The CMDA had established a Pension Supervision Department and had started to draft regulations on pension investment reporting. The PAS modules had been rolled out to a good number of public sector entities. 30. The implementation was also supplemented by two Trust Fund supported TAs. The FIRST initiative, a donor-financed TA fund, had engaged the CMDA parallel to the Project between 2010 and Led by the Bank s Finance & Markets team, the TA had provided support to the drafting of amendments to the existing legislative framework on capital market and investment and provided training to the CMDA related to the risk-based supervision approach. Its recommendations directly fed into the design of the AF, including formulation of a strategy for new and longer term instruments in the country that would 10

28 better match the objectives of diversification and the time horizon of pension fund investments. The Bank team also secured a Rapid Social Response TF grant in 2010 to support development of a new targeting method. The analytical work produced a two-stage targeting method, which was adopted by the NSPA and became the foundation for the targeting system to be implemented under the AF component D. 31. The AF and three subsequent restructurings responded well to the evolving needs of the GoM and were used discretely by the Bank team to either address implementation challenges or fine-tune the project design as better knowledge was gained from project implementation. For example, to mitigate the risk of longevity (i.e. retirees may outlive their MRPS pension incomes that would exhaust after a fixed period), the AF supported the MPAO to define and implement annuitization of the pension balances of individual RSAs. During the MTR, The Bank team joined the MPAO Board to review the technical assessment over annuity options, available annuity products and their costs in the country, and the required regulatory framework. It was agreed that annuitization was costly and risky, provided by either the MPAO or any life insurance company contracted by the MPAO, and therefore it was not wise to replace the current phased withdrawal approach with an annuity product. It was further agreed that the practical feasibility of annuitization should be re-evaluated every two years by the MPAO Board. Based on this MTR finding, four targets in the RF (two PDO and two IO indicators) and one target for DLI#3 had to be revised subsequently because they were set under the initial assumption that annuity provision was optimal. In a similar manner, several other targets in the RF were updated to reflect the progress made by the time of the MTR. 32. Another example is the 3rd restructuring, approved not long before the closing date, to support the development of a registry for electricity subsidy beneficiary households, which would enable the GoM to reform its expensive electricity subsidy program. When the policy reform was conceptualized at the end of 2014, it was clear that the NSPA needed to re-register every beneficiary who had been receiving electricity subsidies in order to identify the poor and shield them from any subsidy reform impact. As the Project was to support the development of a new targeting system, this registry once developed could become the foundation for the new targeting system. Given the time constraint, the DLI approach was selected to enable the NSPA to effectively and quickly initiate the registration drive. By the Project closing, the first two of the three DLI targets had been achieved. In total, 42,386 registration forms had been received by the NSPA during the three-month re-registration period, representing 46,392 subsidized domestic meters, and 95 percent of the beneficiary information had been digitized. 33. One issue that had been challenging to project implementation since the MRPS became operational is the failure of the GoM to phase out a temporary pension arrangement in parallel to the MRPS. When mandatory retirement of civil servants was introduced in 2008 according to the Civil Service Act, in anticipation that it would take time to build the system for the administration of the MRPS under the upcoming Pension Law, the CSC introduced a transitional pension benefit approximating in nature the old DB provisions. This temporary arrangement was supposed to be phased out once the MRPS was operational. However, it continued after May 2010 when the MRPS was fully 11

29 operationalized, and as a result, civil servant retirees since then have been receiving double pensions. The Bank team had tried to work out a solution with the involved agencies including the MoFT and the CSC since then. The 2nd restructuring following the MTR revised the DLI matrix for component E to explicitly create a new target on development policy to unify parallel pension schemes to highlight the issue. While the GoM overall did not take action to unify the schemes even when harmonization options were proposed by the MPAO, several other institution specific pension schemes were established following the example of the CSC retirement benefits. According to the Auditor General s Office, these parallel pension schemes by various government institutions cost about MVR 270 million per year, equivalent of 0.58 of GDP in 2014, and if left to continue, compromise a main objective of the pension reform. 34. Another issue was the Senior Citizens Allowance (SCA) which was introduced in March 2014 by the incoming President. The SCA was introduced on top of the OBAP and raised the combined benefit level to MVR 5,000, more than doubling what was stipulated in the NPA. Maldives ranks No. 1 among all countries in terms of benefit level of noncontributory pension relative to GDP per capita. Not only does it cost about 1.1% of GDP when the GoM s fiscal deficit was already high, but it is expected to affect long term savings and to discourage workers from participating and making contribution to the MRPS. Both lack of progress in resolving the double pensions issue and the new SCA indicated a much weakened commitment by the Government to the earlier pension reform which served as a key rationale for the project; therefore the Bank suspended the disbursement under Component E in July While Components C and D were largely successfully implemented by Project closing, delays often beleaguered the two components. Component C suffered a stalemate of over a year after the exit of the vendor which was initially responsible for the HR module. Multiple changes in leadership at the Treasury and Public Accounting Division, ineffective communication with stakeholders outside of the MoFT, staff exodus due to the GoM salary constraints, weak project management structure, and software and hardware issues associated with operating the SAP system all contributed to delays from time to time. The implementation of Component D activities only began to accelerate when the new leadership came on board in An institutional assessment carried out under the Project found that the lack of adequate internal capacity to meet the needs of both the administration of the NSPA programs and of the development activities under the Project was one main factor contributing to the delays. Subsequently, the NSPA strengthened its HR capacity considerably during the last year of project implementation and also increased its capacity-building efforts. 2.3 Monitoring and Evaluation Design, Implementation and Utilization Design, implementation, and utilization of M&E are rated as Substantial for reasons elaborated below. 36. Design. The original PAD included six PDO indicators and five IO indicators. The RF was amended at the time of the AF to include five PDO indicators and nine IO 12

30 indicators (see Table 1). The amended RF was appropriate given the expanded scope of activities and in reflecting the PDO. Importantly, the AF also included a DLI matrix which served to track performance against 13 targets across the 3 DLI areas. Therefore, these indicators should also be recognized as part of the M&E system created to monitor progress against the reform agenda. 37. Implementation. Although the number of indicators was extensive, particularly when taken together with the monitoring of DLI targets, the MPAO did an excellent job in monitoring and reporting on progress systematically. The MPAO was successful in establishing a system to collect information that was useful to monitor progress in achieving Project objectives and outcomes. The monitoring efforts benefited from the regular updates by the MPAO on their website of the various aspects of the pension operation. Information on indicators was issued regularly, and reported through progress reports and reflected in the Bank s internal Implementation Status and Results Reports (ISRs). 38. Utilization. The M&E system under the Project was used not only to measure the Project s results in relation to its PDOs but as a management tool to evaluate the overall progress in reform implementation. The implementation agencies (the MPAO, the NSPA, and the MoFT) all developed more detailed M&E frameworks to support management decisions related to their operations. 2.4 Safeguard and Fiduciary Compliance 39. The original Project and the AF were rated appropriately as environmental Category C with no adverse impacts expected. 40. FM has been rated as Satisfactory throughout the life of the Project, with one exception at the beginning of project implementation when the first audited financial statement was not submitted by the PMU in time. The FM arrangements at the PMU, including accounting, reporting, budgeting and planning, internal controls, funds flows, and staffing, were considered to be strong throughout implementation. Quarterly Interim Unaudited Financial Reports were prepared and submitted in a timely manner. External audits were prepared and audit opinions were issued in a timely manner (except the first one) and have all been unqualified. The arrangement was also made with regard to the audit report for 2015 for transactions carried out during the 10 months, including the grace period of four months. 41. Procurement was managed effectively by the PMU and has been rated as Satisfactory throughout the life of the Project. The procurement plan was updated regularly and when required. Procurement under the Project included goods such as equipment and consultancy services, both firms and individuals. All procurement tasks, including preparing procurement documents such as ToR and Request For Proposal, updating the procurement plan, organizing evaluation committees, and preparing bid evaluation reports, were carried out diligently. All procurement was completed effectively prior to the closing date, including delivery and installation of the equipment that was procured. 13

31 2.5 Post-completion Operation/Next Phase 42. The government is expected to continue the operation of the pension and SP systems developed under the Project and leverage these systems to make gradual but important improvements in administration and service delivery in these areas. The participating institutions strengthened under the Project (the MPAO, the NSPA and the CMDA) are also committed to making further progress building on significant achievements made. In addition, the GoM is keen to ensure the sustainability of the investments made by the Project, including maintenance of equipment and goods. An Asset Registry was developed by the MPAO and the GoM is making appropriate arrangements to ensure that equipment is secured and maintained by the relevant institutions. These arrangements were confirmed in the GoM s contribution to the ICR in Annex Additional public finance management reforms, including additional enhancements to the PAS, are being implemented through a new Bank-financed Public Finance Management System Strengthening (PFMSS) project, approved in June The business planning and consolidation module, which could not be implemented under this Project, has been taken up by the PFMSS. The activities relate to budgeting reforms to be carried out through an interactive process working incrementally to improve the process and budget classification. This work will include program-based budgeting, while working in parallel to enhance the policy and legislative framework, and capacity building for a more credible budget. 44. The President s Office has recently instructed the MPAO to harmonize the parallel pension schemes created by various government institutions with the MRPS. Earlier, the cabinet instructed the MoFT to apply an income test to the SCA. In both cases, the Bank team was invited to provide technical inputs and the Bank team is committed to continuation of policy dialogue in the overall sustainability of the pension system. The new registry of electricity subsidy beneficiaries was also reviewed by the cabinet; however the decision with regard to the application of the targeting system using this registry is yet to be made. 3. Assessment of Outcomes 3.1 Relevance of Objectives, Design and Implementation 45. Relevance of Objectives. The original and revised PDOs were highly relevant to the country s development priorities as it embarked on the: (a) establishment of a new twopillar pension system (with both a non-contributory social pension and a funded DC pension scheme); and (b) development of the required processes and platforms to deliver various safety net programs. The NPA of 2009 outlined the key features of both pension schemes (that is, the OABP and the MRPS) and the administration and supervision institutional structure to implement the two schemes, which the Project was designed to support. In addition to the NPA, the GoM introduced three other laws during the project implementation period related to the SP programs: (a) the Disability Act of 2010 to guide disability related programs such the disability allowance; (b) the National Social Health 14

32 Insurance Act of 2011 to guide the administration of the universal health insurance program; and (c) the Social Protection Act of 2014 to guide the administration of all SP benefits and services except for pension, health insurance, and disability. The Project s support to the development of systems for disability administration, targeting in social assistance programs, and health insurance administration and monitoring made significant contributions to the operationalization of those laws. The Project s objectives were aligned with a central part of the Country Assistance Strategy for and the Interim Strategy Note for FY to ensure an effective and efficient SP system as a key element of public service reform. 46. Relevance of Design. The Project s original design tracked with its objectives through its components and the RF. The main goal was to set up the pension authority and to provide capacity building to its staff to implement the new pension system. The revised Project design at the 2011 AF essentially added two components: (i) Component D reflected the GoM s request to develop systems for targeted social assistance benefits, disability administration, and health insurance administration; and (ii) Component E was to finance the payment of the RBs in the individual RSAs of the cohorts of the public employees retiring during FY under the MRPS. There was adequate justification for financing the RBs because it helped to reduce the transitional cost of the pension reform, which arose as those cohorts would not have accumulated balances sufficient to achieve the target pension levels when moving from the previous unfunded DB scheme to the new DC scheme (that is, the MRPS) and allowed the former CSP to be shut down. In addition to being relevant to the overall reform effort, the design of this component further reinforced the reform by requiring the disbursements were to be made against agreed benchmarks (that is, the DLIs), which aimed to further advance implementation of the new pension system. 47. However, while the Project s relevance of the revised objective and of the design remained high in terms of supporting the NPA, both have been weakened by changes in policy towards pensions, specifically the double pensions issue and the SCA which were inconsistent with the new pension system stipulated by the NPA and contradicted the pension reform which the Project was proposed to support. While there has been broad agreement with the MoTF on the need to harmonize the double pension with the MRPS, by the project closing date (i.e. June 30, 2015), no action had been taken in this area. The SCA also puts into question the Maldives pension system design as legislated in the NPA and jeopardizes the stability of MRPS. The high benefit level of the social pensions likely discourages self-employed worker from participating in the MRPS and formal sector workers from making contributions to the MRPS. Therefore, while the Project objectives are still relevant in the long-term, their relevance is diminished by the two deviations. Likewise, the notion of financing RBs given the current circumstances became unjustified. As a result, the disbursement under Component E of the Project was suspended. The fiscal implications of the double pensions and the SCA are large. Balancing the importance of building administrative systems against the centrality that these two issues play in the overall design of the new pension system and their fiscal impact at the time of project closure, the relevance of the Project during the last two years has to be downgraded to 15

33 Modest. It should be noted that both issues were pension policy changes outside of the control of this Project. 48. Relevance of Implementation. The implementation approach under the Project was Substantial. Much needed TA was provided to develop the key legislative and regulatory framework, to help train staff, and to develop operational supporting systems for the pension administration and supervision authorities. Likewise, the NSPA also received technical support to strengthen its institutional capacity and develop the necessary processes and systems to strengthen its implementation capacity to carry out disability administration, national health insurance, and targeted social assistance programs. The MoFT, through the PAS component, also benefited from the capacity building and the rollout of a HR/payroll module for public employees (among others), including a mechanism to track pension contributions. 3.2 Achievement of Project Development Objectives 49. Maldives has dramatically increased its old age security from 2007 to the present. In 2007, less than 30% of elderly Maldivians had access to any kind of publicly provided old age security. By 2014, more than 96% 6 of the elderly were receiving some public benefit. As of 2014, 54% of the working age population, population between the ages of 15 and 64, were contributing to the new pension system, much higher than countries like Korea and Malaysia where only about a third of the working age population is making contributions. The high rate of participation indicates a high degree of confidence from the population and represents a far cry from the previous system where only civil servants and a few formal sector workers were covered in fragmented systems. The new pension system, for which the project provided implementation support and institution building, combines all contributors in a single national system which is designed to be fiscally sustainable in the long run. A third achievement, also partially attributable to the project is relative efficiency which has allowed the new system to keep administrative costs low, allowing Maldives to rank among the lowest third of countries in terms of administrative costs in defined contribution systems. While the project did not directly address policy issues, it helped the country develop the institutional capacity to implement the policy reforms that the country adopted. 50. The achievement of the PDOs (both original and revised) is assessed in Table 1, which shows that the majority of targets were achieved (86 percent either achieved or overachieved) against original and revised targets. Only PDO indicator #5 and IO indicator #1 were partially achieved, which both relate to the failure by the GoM to effectively harmonize the parallel pensions with the MRPS by the time of project closure. One part of IO indicator #1 required that amendments be made to relevant laws to unify parallel pension systems and rationalize benefits. It was added in the 2nd restructuring following the MTR s recommendation that the Government take appropriate steps to resolve the double pensions issue. When the combination of the lack of progress in the double pensions issue and the introduction of SCA triggered the partial suspension of 6 The ratio is estimated using the UN Population estimate for 65+ population in the Maldives. 16

34 disbursements, which prevented the completion of the payout of accrued pension rights (PDO indicator #5), the payouts against the last 2 DLI targets for the public employees retiring between March and September 2014 were not made. However, the payout was completed for all earlier periods, with 13 of the 15 DLI targets met, and the Government has continued paying the RBs without disruption. Table 1 Progress against PDO/IO Indicators Status PDO Indicators % of total PDO Intermediate Outcome Indicators % of total IO indicators % total achievement (IO Indicators) Overachieved 2 22% 14% Achieved 4 80% 6 67% 72% Partially 1 20% 1 11% 14% Achieved Total 5 100% 9 100% 100% 51. Although project objectives were formally revised, the revised PDO only expanded upon the original, clarifying the intent of the Project to continue to support the introduction and roll-out of the new pension scheme and to provide additional support for the development and delivery of other SP programs. Likewise, the targets under the revised indicators subsumed those of the original. Hence, in this particular case, the analysis of achievement of PDOs relies on the revised objectives, as follows: PDO 1: Support the implementation of the National Pension Act to strengthen institutional capacity of key agencies responsible for implementing the National Pension Act. The Project successfully supported the implementation of the NPA through: (a) the establishment of a new pension system with two pillars the OABP and the MRPS; (b) the expansion of coverages the OABP having covered all elderly aged 65 and over and the MRPS having covered all formal sector workers and started to expand to self-employed workers on a voluntary basis; (c) the establishment of the MPAO as the nodal institution to administer the MRPS and the OABP, develop standards, regulations, and guidelines related to the schemes, and manage pension funds; (d) the establishment of the Pension Supervision Department in the CMDA to supervise the MRPS pension fund investments and the custodian service; (e) capacity building for the MPAO, the CMDA, and the MoTF by developing/modernizing their information systems and training their staff; and (f) continuous public information campaigns that have improved the awareness of the new pension system among general public. The MPAO s excellent performance has enhanced public confidence in the new pension system through a strong governance framework, a transparent reporting and complaint redressal mechanism, a client-centered service model, and a skilled and motivated staff. It is important to underline that the MPAO became financially sustainable by the end of 2014, ahead of schedule, and has planned to develop innovative mechanisms to bring additional value to the members of the MRPS. PDO 2: Develop the processes and platforms required for the delivery of SP programs. The Project successfully supported: (a) the establishment of a targeting 17

35 system, the development of disability administration standards and processes, and the formulation of the Integrated Health Information System requirements and the corresponding Unified Data Framework; (b) the development of the Social Protection Information System (SPIS), the Registry of electricity subsidy beneficiaries, and a health insurance monitoring system; (c) the strengthening of the IT infrastructure for the NSPA to manage all its programs on one platform and to cross-verify beneficiary identity with the DNR, and equipping all level one government hospitals for better administration of health insurance; and (d) capacity building for the NSPA, including setting up a training facility. Before the closing date, the NSPA carried out systematic physical verifications of the existing beneficiaries of the Single Parent Allowance and the Disability Allowance schemes in Malé and found about 40 percent of them very likely not eligible any more. Hence the NSPA has started to discontinue benefit payments to these beneficiaries unless they reapply and prove their situation. The Registry of electricity subsidy beneficiaries has been developed with adequate information to enable better targeting of the limited resources to the poor for all social assistance programs. 52. On the basis of overwhelming achievement of targets against the PDO and IO indicators (as demonstrated above and detailed in the analysis of the project RF in the datasheet), the overall efficacy is rated as Substantial. In addition, it should be noted that the majority of the DLI targets were also achieved (total of 16 out of 18 DLIs targets). The five quantitative targets for DLI #1 measuring the enrollment of workers into MRPS were achieved. So were the four quantitative targets for DLI #2 measuring the percentage of employers reporting contributions electronically. As for DLI #3 on implementation of key administrative arrangements for the reform to the pension and SP systems, five milestones were achieved, including regulations on participation of foreign workers, regulations on participation of self-employed in the MRPS, online access of individual RSAs, the MPAO MIS fully operational, and the strategy for disability insurance provision under the MRPS. The only milestone unachieved was development of policy on unifying parallel pensions for public employees. The last Project restructuring introduced DLI #4 with three targets to support the government s initiative in developing a registry of electricity subsidy beneficiary households. The three DLI targets measured the extent of the re-registration process and digitization of beneficiary information. Two of the three targets were met before the closing date. 3.3 Efficiency 53. The Project s efficiency is considered as Substantial. As established in the original PAD, it is imprudent to estimate the net present value or the economic rate of return for the impact of introducing a new pension system. Rather the contributions of the Project are derived from improving cost-effectiveness and efficiency of the Maldives pension and other SP programs through developing or upgrading administration processes and systems for better use of public resources. As the GoM has been re-distributing a large share of government revenues for equity and inclusion purposes, the potential gain from an efficiently and effectively operated SP system is likely significant. 18

36 54. Compared to the pre-reform pension system (that is, the CSP and the GPF), the new pension system that this Project has supported to establish has brought at least four direct benefits. For the first time, workers outside of government employees are covered by the MRPS. The effective coverage has quadrupled from about 28,000 under the CSP in 2004 to 118,000 under the MRPS in Furthermore, as a uniform and portable scheme, the MRPS is expected to facilitate labor mobility between the public sector and the private sector and between formal and informal sectors. It is also more cost-effective for the GoM as a mechanism to pay government employees a pension than the previous CPS. By design, the MRPS is a fully funded DC scheme and the government s liability is clearly defined by its contribution rate like any private employer and there is no hidden unfunded liability, which will help the GoM s long term fiscal sustainability. The investment needs of the MRPS pension funds can greatly support the country s financing needs for its economic development as long as the capital market can be further developed through innovation in product structuring and financial intermediation. The universal OABP benefit has effectively set an inflation-proof income floor for Maldives elderly aged 65 or above to ensure a modest living standards. The claw back mechanism related to other pension incomes has also helped to reduce the financial cost of the OABP program. The new targeting system developed for NSPA can potentially save the GoM significant amount of government spending as it was evident from the results of the physical verification drive carried out in Malé on two social assistance programs. 55. The Project has also supported the development of institutional and administrative capacity of the MPAO, the MoFT and the NSPA to efficiently carry out their responsibilities. The information systems developed for the MPAO s pension administration, for the government-wide PAS, and for the NSPA s targeted social assistance programs have fundamentally changed how those administration tasks are carried out and both government officials and clients have benefited from easier access to accurate information. The Project s financing of TA and the implementation of viable systems (pension and social protection) were critical to supporting the related legislations and new Government mandates. Therefore, the use of Bank financing to advance these goals was efficient from both technical and operational points of view. The decision to finance recognition bonds was also deemed to be productive and sustainable as these payments were meant to improve the overall Government fiscal position by reducing its pension obligations. However, as discussed in the earlier section, the continuing payment of double pensions and top-up of the SCA, poses a danger to the fiscal position of the Government, and undermined the benefits of the Bank s financing. 56. The Project was also efficient with regard to its implementation. The original Project was well on its way to completion by the time the AF was approved in The implementation of the AF was equally efficient, adding three years to the original period. The Project, since the AF, was implemented in accordance with that original timetable, with a few delays related to the implementation of Components C and D. But these were eventually overcome, particularly in the last year of implementation through effective steps taken by the NSPA and the MoFT and supported by the Bank team. Considering that the Project supported the establishment of entirely new systems in response to the new legislations, the Project was particularly effective in achieving its objectives. The original 19

37 Credit was fully disbursed, and the AF Grant was 87% disbursed 7, when including the suspended funds under component E. If excluding the suspended amount of about US$ 1.45 million, which accounts for close to 14% of the Grant fund, the Grant disbursement rate would be 95%. Therefore, efficiency of implementation is considered as substantial. 3.4 Justification of Overall Outcome Rating Rating: Moderately Satisfactory 57. Table 2 illustrates the ratings of relevance, efficacy and efficiency during the two periods of implementation under the original project design and under the restructured project supported by the AF. Table 2. Ratings according to Original PDO and Revised PDO Original PDO (May 2009 to May 2011) Revised PDO (April 2011 to June 2015) Relevance High Modest Objective High Modest Design High Modest Implementation Substantial Substantial Efficacy Substantial Substantial Efficiency Substantial Substantial Overall (outcome) Satisfactory Moderately Satisfactory 58. Table 3 presents the split evaluation approach, weighing project achievements during the original and revised PDO against disbursements made during the corresponding periods. The overall value achieved is 4.14 which corresponds to a Moderately Satisfactory rating for outcome. Table 3. Outcome Ratings Against Original and Revised PDOs Original PDO Rating Satisfactory Revised PDO Moderately Satisfactory 2 Rating value Total disbursed US$ million Weight (total disbursed/final disbursed amount of US$13.9 million) Weigh value (2 X 4) 6 Final rating Note: HU (1); U (2); MU (3); MS (4); S (5); HS (6) Overall % 86% 100% Moderately Satisfactory 7 If excluding the suspended amount, the Grant disbursement rate would be 95%. 20

38 3.5 Overarching Themes, Other Outcomes and Impacts (a) Poverty Impacts, Gender Aspects, and Social Development 59. While the Project was not explicitly classified as a poverty-targeted intervention, some aspects of the Project have had a positive impact on the poor. The Project contributed to positive impacts for the poor, particularly through the support for the establishment of the OABP to eliminate the elderly poverty and support for targeting the provision of social assistance allowance for single parents, foster parents, and disability programs, as well as the electricity subsidies. The Project supported the development of targeting options and processes, which included both cross verification of income and a proxy means test (PMT) poverty score calculation. (b) Institutional Change/Strengthening 60. The Project has strengthened significantly the institutional capacity of the MPAO, CMDA, NSPA, and MoFT as well as the capacity of management and staff to carry out their responsibilities. Each institution is much better equipped to carry out its functions, and the MPAO and NSPA are able to provide better services to their clients. The MPAO MIS, the SPIS, and various PAS modules have greatly modernized the operation of the MPAO, NSPA, and MoFT, respectively. Training provided under the Project has also strengthened the knowledge and skill of key staff of these institutions to perform better in their jobs at their respective positions. (c) Other Unintended Outcomes and Impacts (positive or negative) n.a. 3.6 Summary of Findings of Beneficiary Survey and/or Stakeholder Workshops n.a. 4. Assessment of Risk to Development Outcome 61. The risk to development outcome is considered to be Substantial. While there is negligible risk to some elements of the new pension system, for example, the MPAO and CMDA s pension supervision role as well as the MRPS, the risk to the pension system as a whole is substantial. The Auditor General s special Audit Report on parallel pensions, issued in February 2015, concluded that should the current pensions and benefit arrangements of the State be left to continue as practiced, it defeats the very aim of pension reform, a fully funded defined contribution pension system where the State s liability is defined and funded as envisaged in the Pension Act. The Project s achievements, therefore, may be jeopardized. 62. However, there is also a reason for conservative optimism. The MoFT has been very cognizant of the detrimental effect that both the double pension issue and the SCA are 21

39 having on the fiscal space, and actions will be taken to resolve them. For example, an income-testing eligibility condition for receiving the SCA was proposed in May With respect to the double pensions issue, the President s Office has instructed the MPAO to harmonize the parallel pensions with the MRPS. The Bank team will closely monitor the development in this area and is committed to assist the Government in the resolution of this issue. 5. Assessment of Bank and Borrower Performance 5.1 Bank Performance (a) Bank Performance in Ensuring Quality at Entry Rating: Satisfactory 63. The Project preparation team ensured that the Project design was built on the previous extensive analytical and advisory work provided by the Bank to Maldives pension reform agenda and closely aligned with the Maldives own 7th National Development Plan and the Bank s FY08 12 Country Assistance Strategy. The design: (a) was appropriate to address the major deficiencies identified; (b) selected a set of relevant activities that were clearly linked to objectives that the Project intended to achieve and applied lessons drawn from the implementation of similar pension reforms in other countries; and (c) was based on a highly consultative preparation process with a wide range of stakeholders, which helped the pension agenda keep the momentum even after the new government took office. Anticipating the needs to build capacity and to provide technical support to ensure that the provisions of the new pension were consistent with international best practices, a PPF of US$1.1 million was created before the Project became effective. The preparation team also identified appropriate risks and incorporated design and implementation measures to mitigate them to the extent possible. For example, one political risk highlighted in the PAD was indeed the temptation to increase the basic pension level. When the SCA was introduced as one key presidential campaign promise, there was little that the Project could do to prevent it. (b) Quality of Supervision Rating: Satisfactory 64. Overall, the Bank team provided sound supervision throughout implementation and actively engaged with the project counterparts in identifying issues related to project implementation as well as effective solutions and providing needed support to the GoM. There were twelve Bank implementation support and supervision missions, including a MTR. The same Bank team (under joint team leadership) since the early preparation stage also prepared the AF. A new task team leader took over before preparing the MTR and stayed until the project closing. The team skills mix was appropriate, comprising of Bank staff based in Washington D.C., Colombo, and New Delhi. The proximity of some key team members allowed for quick on-demand discussions particularly useful for operational issues. In addition to formal implementation supervision missions, several technical missions and numerous informal meetings and exchanges were carried out to keep the Bank team closely involved and to monitor implementation progress on the ground. 22

40 65. As demonstrated by the AF in 2011 and the three subsequent restructurings, the Bank team was highly responsive to client needs and showed flexibility in adapting to evolving priorities to meet the PDO and to best assist the GoM counterparts. Equally, the team was diligent in their communication with the MPAO, NSPA, and other participating institutions as well as with the Bank management. The team provided up-to-date information and analysis on the status and impact of project activities, issues encountered, and options to address issues as they arose. Following the introduction of the SCA in early 2014, the team concluded that it represented a significant reversal of the pension reform policy that the Project was designed to support and recommended that the Bank suspend the disbursement under Component E. It was a difficult, but correct decision, with which the Bank sent a strong indication of its concern on the direction of Maldives pension reform. Even under the circumstance, the team still offered technical inputs on potential options that may reduce the negative impact of the increase in benefit level. During the ICR discussions, the MPAO acknowledged that the Bank team was proactive in supporting the MPAO to identify options related to project implementation challenges. The GoM eventually made the decision to harmonize the parallel pension schemes with the MRPS four months after the project closing. (c) Justification of Rating for Overall Bank Performance 66. Based on the analysis above, the overall Bank performance is rated Satisfactory. 5.2 Borrower Performance (a) Government Performance Rating: Moderately Satisfactory 67. While the Government s performance during project preparation and early implementation was satisfactory, its performance during the second half of project implementation was not. Initially, the government clearly committed to the pension reform agenda and made strong efforts to create an enabling environment for the Project to take off. In addition to the passage of the NPA, both the high level PSC and the operational level PTC were functioning well with regard to making project implementation related decisions and coordination. Indeed impressive progress had been made on implementation of the new Pension Law by the time of the AF. However, coordination and decision-making became less effective over time, particularly when there were different opinions between key stakeholders, including the MoFT, CSC, MPAO, and President s Office, on the two issues. Also both the NSPA and the Treasury and Public Accounting Division of the MoFT underwent multiple leadership changes during project implementation, which resulted in slower-than-expected progress. More importantly, the change in government yielded decisions on policy in the last two years which were often inconsistent with the rationale for pension reforms that underpinned the project. On balance, considering the history of the Government s commitment and support to the Project during the life of the project, the overall rating for Government performance is Moderately Satisfactory. 23

41 (b) Implementing Agency or Agencies Performance Rating: Highly Satisfactory 68. The performance of the MPAO since its establishment in 2010 was Highly Satisfactory. Management and staff of the MPAO were deeply committed to the goals of the pension reform and were vigilant in implementing the provisions of the NPA. The MPAO has had one CEO since its establishment, which was crucial to developing policy, establishing systems and operations and in general to guiding the implementation of the project. The MPAO Board has functioned effectively, as did all the MPAO s departments. The MIS is fully operational and its website has provided individual members online access to their own PSA and public pension scheme operation information. Since the beginning of 2015, the MPAO has managed to become financially independent even after reducing its management fee. To advance the resolution of the pension issues discussed above, the MPAO took proactive steps and prepared a technical paper outlining options to resolve the double pensions issue. 69. The MPAO also maintained the PMU throughout the project implementation period. The achievements by the Project reflect the strong efforts by the PMU to coordinate among all related institutions. The PMU Director and co-directors built and maintained productive relationships among the different institutions involved in this project and continually briefed the Bank team on progress in implementation. The PMU produced regular semiannual reports and submitted financial reports on time. As a result, project management and coordination was consistently rated as Satisfactory during the entire project duration in the Bank s ISRs. The PMU s continuing and strong commitment was demonstrated in that all agreed activities were completed, including the preparation of the Government s own ICR. (c) Justification of Rating for Overall Borrower Performance 70. This evaluation rates the overall Borrower s performance as Moderately Satisfactory for reasons elaborated above. 6. Lessons Learned 71. A TA project designed to assist a country in implementing pensions and SP policy performs best when it follows in-depth analytical work. In this case, the project followed substantial technical assistance provided to the Government since 2003 which led to a pension reform proposal in 2005 from an inter-ministerial task force and full Cabinet approval in late Despite a change in Government, the NPA was passed in June By the time the project was ready to begin, the groundwork was clear, and the project had relatively clear implementation goals. Of course, new challenges emerge in the course of a project which require adjustment, but having an initial strategy allowed the project to hit the ground running. 72. A second lesson learned is that an investment project, like this one, cannot be expected to prevent adverse policy decisions from being taken, even when they ultimately 24

42 affect the objectives of the project. Despite the best intentions of the Bank team and counterparts, Governments can change priorities in the course of project implementation. In this particular case, the Government has remained generally committed to the pension reform and SP priorities that it had originally set, but it also added additional benefits like the SCA as a result of promises made during the election campaign. The additional costs threaten to undermine the overall fiscal sustainability of the pension program, which now includes this SCA. Similarly, despite the original intention of phasing out the temporary pension arrangement after the MRPS became operational, the Government chose to provide for MRPS while continuing the parallel pension schemes for government employees. Both of these actions were not based on technical analysis. An investment project needs to consider political risks and be prepared to make adjustments as early as possible in response to policy changes. 73. A third lesson relates to the innovations in the program and its ambitiousness. This was the first operation in the Bank supporting pension reform, using DLIs. The operation attempted to use the DLI methodology to encourage the Government to pass the necessary regulation or legislation that would unify the parallel pensions with MRPS for public employees. As noted above, the Government did not follow through on these measures before the Project Closing. The lesson is that the individual disbursements in a DLI based operation may not be large enough to provide enough leverage to encourage the Government to undertake what may be politically difficult policy changes. Pension policy itself is often so politically charged that even large Development Policy Loans sometimes do not provide sufficient leverage to promote policy change, so it is unsurprising that the smaller amounts associated with this DLI were insufficient to change decision-making that reversed aspects of the country s pension reform. At the same time, the team s sustained engagement, including through use of DLIs, over time has proven likely to bring about positive policy changes, though these will occur after Project Closing. 74. This Project s DLI experience provided additional practical lessons to be considered when setting DLIs: (a) DLI targets are most effective for supporting the implementation of policies and strategies; (b) due dates for DLI targets should be floating, i.e. targets can be met anytime during implementation, for projects, as this one, whose targets are more qualitative in nature; (c) the DLI matrix should be constructed carefully to reflect the implementation timetable, with each successive DLI target building on previous progress; (d) a strong M&E system is particularly critical for the success of operations with DLIs; and (e) the use of DLIs can be an excellent approach for AF, as was in this case, financing critical program expenditures administered through new systems and arrangements built under the original TA project. 75. Lastly, suspension, while seldom used, can be an effective instrument, even in DLIbased operations, in highlighting the critical importance of abiding by the mutually agreed set of actions and principles as reflected in the negotiated Financing Agreement between the Bank and Governments. In this case, the suspension of disbursements against two remaining DLI targets was the appropriate response to the two deviations by the Government from the overall pension reform agenda supported by the Bank. This decision was effective in that the Bank remained committed and flexible to enable the Government 25

43 to take corrective steps. The Bank team provided an extension of the suspension period without a cancellation which was a novel and ultimately effective approach as evidenced by the recent Government decision to address the double pensions issue. 7. Comments on Issues Raised by Borrower/Implementing Agencies/Partners (a) Borrower/implementing agencies 76. Management and staff contacted by the ICR mission commented positively on the role the Project has played in helping implement the new pension system as well as the SP schemes. The GoM has provided its contribution to the ICR (annex 7) and will review and provide comments on the draft ICR. (b) Cofinanciers n.a. (c) Other partners and stakeholders n.a. 26

44 Annex 1. Project Costs and Financing (a) Project Cost by Component (in US$, millions equivalent) Components A. Technical Assistance and Capacity Building for Maldives New Pension Program Appraisal Estimate (US$, millions) Actual/Latest Estimate (US$, millions) Percentage of Appraisal Original AF Total Total Total % B. Public Awareness Campaign % C. Public Accounting System % D. Administration of Health Insurance, Disability, and Targeted Assistance % E. Pay-out of Pension Liabilities % Total Baseline Cost % Contingencies Total Project Costs % (b) Financing Components Appraisal Estimate (US$, millions) Actual/Latest Estimate (US$, millions) Percentage of Appraisal Original AF Total Total Borrower IDA % TOTAL % 27

45 Annex 2. Outputs by Component Component A: Technical Assistance and Capacity Building for Maldives New Pension Program (total actual cost of US$ 3.2 million) 1. This component was designed to support mainly two areas - policy analysis and legal framework for Maldives new pension system and build institutional capacity to operationalize the new pension system. 2. Technical advisory services and training were provided under the Project (initially through a PPF) to support the development of a new pension system, including strategic reform planning, fiscal impact analysis, and a new pension legal framework, including final draft of the NPA. A significant amount of TA was provided to assess fiscal implications of various design options and governance issues, taking into account international best practices. It was also critical to explain the technical nuances to all stakeholders, including the parliament members and private sector employers, to build consensus on the overall shape of the new pension system. Two amendments to the NPA were also made to strengthen the governance of the MRPS and clarify requirements of participation of foreign employees. 3. Following the enactment of the NPA in 2009, TA, goods, and training were provided to the MoHF for the establishment of the MPAO and subsequently to the MPAO to build its capacity and operational framework to administrate both the MRPS and OABP, including institutional by-laws, regulations, policies toward survivors, disability, and annuities, and operation procedures and manuals. The specific outputs include the following: The MPAO had been established as an autonomous organization according to the NPA, operating under a CEO and the Governing Board. The MPAO has been fully staffed with its staff well trained to serve the operations needs of the MRPS and OABP. The MPAO is fully functional with all the required rules, regulations, business processes, and operation manuals related its responsibilities, including contribution collection, reconciliation of payments and reports, inspection on compliance enforcement, tracking and allocating investment income, strategy for application of unique identifier, producing management reports, and IT system procurement and implementation. The MPAO has developed a robust record-keeping information system that is capable of supporting all MRPS administrative processes, including unitization, digital declaration of contributions by employers, and online reporting to members. With assistance from other government institutions, the MPAO has registered all public employees, consolidated the historic employment data, and set up their individual RSAs with accurate accrued rights in the form of RBs. The MPAO has managed to open 118,691 unique individual RSAs by the project closure, representing about 57 percent of the population aged 20 to 64 years in the Maldives, and has reached full coverage of formal sector workers. 28

46 Jointly with the MoFT, the MPAO has drafted and implemented the regulations for voluntary participation of the MRPS by self-employed workers (with matching contribution by the GoM) and foreign workers. The MPAO has put in place a phased withdrawal approach for pension payments for retirees under the MRPS and has been exploring annuitization options. The MPAO has managed to identify and pay 16,125 elderly aged 65 and older under the OABP scheme by the project closing and also applied the claw-back mechanism whenever any recipient also received the MRPS pension income. In addition to the MRPS and OABP, the MPAO has managed the payment of all other government-funded pension schemes. The MPAO s website ( has been extensively used for member services (for example, online access to individual RSA) and public information disclosure (for example, pension scheme statistics). The MPAO has so far managed the MRPS investment portfolios in-house according to the SoIP adopted by its Governing Board and put in place guidelines and procedures, measurable investment objectives, performance appraisal of asset managers, custodians and reporting mechanisms, and evaluation of performance benchmarks on asset classes and portfolios. The MPAO has carried out both on-site and risk-based employer contribution compliance inspections. The MPAO has become financially independent in 2015 and has reduced its management fee to 0.9 percent while adding provision of disability insurance to the MRPS members at no cost. 4. This component also provided TA support to assist the CMDA in building capacity to supervise the MRPS. The specific outputs include the following: The CMDA has established a new Pension Supervision Department ( established the regulation with regard to custodial services and the reporting requirements for the MRPS funds, and routinely carried out on-site inspection of the custodial operations for the MRPS funds and assessment of the performance of the MRPS investment assets. The CMDA has drafted the Central Depository Bill and the Securities Act Amendment Bill, identified a number of inconsistencies among the existing laws and regulations related to Maldives capital market, formulated a strategy for developing new and longer-term instruments in the country to expand the volume and the diversity of quality investment instruments available on the Maldives capital market, and drafted guidelines with respect to new product development such as venture capital fund. The CMDA has sponsored an assessment of Maldives Stock Exchange s business processes and recommendations for system modernization. The CMDA has sponsored a system readiness audit on the MPAO s IT infrastructure and MIS and found the MPAO system to be at an acceptable level with regard to its integrity and security. The CMDA has conducted a financial capacity study to gauge the Maldivians knowledge and behavior related financial dealings. 29

47 Component B Public Awareness Campaign (total actual cost of US$0.4 million) 5. This component was designed to support the MPAO to design and implement a public information campaign to improve awareness of the new pension system among three targeted groups employers (focusing on their contributory obligations), workers (focusing on their rights and benefits), and senior citizens (focusing on the processes of applying for basic pension and receiving payment). 6. During project implementation, the MPAO had conducted 486 targeted information sessions, which were attended by 32,999 people. These information sessions were carried out in all atolls and in locations, where large number of people congregated such as resorts and colleges. In addition, the MPAO had leveraged mass media such as TV, radio, and media briefing sessions (320 times) as well as newspaper articles and news websites (267 pieces) and sponsorship of public events to raise awareness. Also two pension awareness surveys were carried out, first one at inception in 2010 and the second at the end of project implementation. Component C: Public Accounting System (total actual cost of US$ 1.97 million) 7. This component was designed to modernize the GoM s PAS across government agencies by strengthening capacity of the staff of the MoFT, line agencies, and local government bodies in the use, operation, and maintenance of the PAS, and supporting the MoFT in the development and implementation of a payroll system for public employees, including a mechanism to track the pension contributions. The specific outputs include the following: The MoFT has installed and operationalized a PAS application software, and associated hardware, networking, and related supporting services. The MoFT has upgraded its SAP system from version ECC 6.0 to the latest version EHP 7.0, required to generate an International Public Sector Accounting Standards cashcompliant financial statement, and for the first time such a statement was produced for FY14. The MoFT has established a reliable record-keeping system for budget execution monitoring, and as a result, daily budget availability could be generated by the system automatically. The HR/payroll module has been rolled out to 95 percent Malé based public agencies as well as four non-malé based agencies. The Materials Management module has been rolled out to nearly 70 percent of Malé based agencies. The core PAS team in the MoFT has been trained to operate and maintain the SAP system. Component D: Administration of Health Insurance, Disability, and Targeted Assistance (actual cost of US$1.72 million) 8. This component was designed to support the NSPA in developing a targeting system, developing a disability benefit administration system, and developing systems to deliver health insurance through the Project financed TA for system design, capacity building and IT infrastructure. The specific outputs include the following: The NSPA has adopted a targeting system that combines both the income-test and a PMT method and has field-tested in two atolls and Malé. 30

48 The NSPA has developed the SPIS, which serves multiple NSPA social assistance programs, including single parent and foster parent allowances, disability benefits, electricity subsidy, and medical welfare programs. The NSPA has built a reliable IT infrastructure to host the SPIS and its own website ( and it has developed a cross-verification protocol with the DNR s national ID database. The NSPA has re-registered more than 50,000 electricity subsidy beneficiary households and has planned to make this registry into a unified social registry for all SP programs; The NSPA has strengthened its HR level and developed a staff skills development plan based on the findings of an institutional assessment. The NSPA has completed disability benefit provision standards, including disability coding, standard operating procedures, design of registry of disability, and administration of cash benefits. The NSPA has built an on-site training facility with video-conference capacity for disability benefit administration and trained relevant officials both locally and remotely. The NSPA has equipped all level one government hospitals with computers and related networking to ensure their health care service delivery data flow in a timely manner to the Aasandha and the NSPA for claim management and monitoring purposes. Jointly with the MoHF, the NSPA has developed a Uniform Data Framework for an integrated health information system that serves all health care services in Maldives. The NSPA has developed a data warehousing system and monitoring dashboard for the National Health Insurance scheme. The NSPA has set up a call center to serve as a new client interface for all its programs Component E Pay-out of pension liabilities (actual cost of US$6.1 million) 9. This component was designed to finance the payment of the RBs into individual RSAs of public sector employees who retired between January 2011 and March After having disbursed US$6.1 million out of the total US$8 million, this component was suspended. 31

49 Annex 3. Economic and Financial Analysis 1. As noted in the PAD, the impact of introducing a new pension system is complex and difficult to measure comprehensively, particularly when the overall Maldives economy would be affected for decades to come through the impact of the new pension system on saving rates and the labor market. Hence, this report does not attempt to estimate the net present value or the economic rate of return, which was not estimated in the PAD. Rather this section focuses on assessing the Project s contribution with respect to improving costeffectiveness and efficiency of Maldives pension and other SP programs. 2. There are four direct benefits that arise from the new pension system that this project has supported to establish. First, for the first time, workers outside of civil services are covered by the MRPS and as a result can ensure a reasonable level of income after retirement at age 65. During the project period, the coverage of the MRPS has expanded beyond civil servants to cover 100 percent of the formal private sector workers and has begun to enroll self-employed workers on a voluntary basis since A uniform and portable pension system is expected to facilitate labor mobility between government jobs and private sector jobs and between the formal sector and self-employed enterprises. Second, the MRPS is more cost-effective for the GoM as a mechanism for paying government employees pension than the previous CSP. By design, the MRPS is a fully funded DC scheme, so the government s liability is clearly defined by its contribution of 7 percent of employees base salary as an employer. Hence, there is no hidden unfunded liability to the government, which directly contributes to Maldives long-term fiscal sustainability. Third, investment needs of the MRPS funds have stimulated further development of the Maldives capital market, which was very limited in both size and depth before the MRPS. With a MVR 6.5 billion fund size as of end 2014, the MRPS has become the most important institutional investor in the Maldives and can greatly support financing needs for its economic development if the capital market can be further developed through innovation in product structuring and financial intermediation. Lastly, while the universal OABP has effectively set an inflation-proof income floor for its population aged 65 or above to ensure a modest living standard for its elderly population 8, a claw back mechanism related to the recipient s other pension income has helped to reduce the scheme s financial cost and strengthen its redistribution role. 3. The Project has supported the development of institutional and administration capacity to efficiently implement Maldives pension programs. The MPAO as an autonomous entity has built a professional staff team and has been providing good services to the MRPS members and recipients of the OABP and other government-funded pension programs. With the support of the Project, it has developed a robust pension MIS, which has been in full operation since 2014 and supports all business processes, including 8 Though there is no recent household survey data to offer any estimate of the effect of OABP on poverty level, it is reasonable to believe that households with elderly members who receive OABP benefit are much less likely to be poor. 32

50 maintaining and updating individual RSAs. Through its website, the MPAO provides online member services and publishes various pension related information, including monthly contribution, disbursement and investment statistics, as well as operation procedures, regulations, and compliance status to ensure transparency and reduce fiduciary risks. Since the beginning of 2015, it has become financially independent and has managed to reduce its investment management fee charge from percent to 0.9 percent, which is one of the lowest across the world. Furthermore, it has managed to achieve good returns for its MRPS members. The 2014 annual returns of the two largest MRPS portfolios are 8.01 percent and 9 percent, respectively, while the annual inflation as measured by the consumer price index is only 2 percent. 4. In addition, the Project has strengthened the institutional capacity of the NSPA and MoFT through information system development/upgrading and training. The development of the SPIS has not only automated the administration tasks related to a number of social safety net programs, but has also integrated all these programs into one platform, which enables the NSPA to manage benefit and service delivery in a holistic manner. The registry of electricity subsidy beneficiary households developed through a re-registration process supported by the Project can potentially become the uniform social registry for all SP programs. Because it has collected information on both income and other socio-economic characteristics of beneficiary households, it can be used for targeting purpose should the government decide to change program eligibility criteria. Similarly, the Project s PAS Component has greatly improved the functioning of the accounting practices followed by government agencies and the capacity of the MoFT to manage government expenditure more effectively. Given the urgent need to reduce its large fiscal deficit, the benefit of a stronger expenditure management capability cannot be emphasized more. 5. However, the economic benefit of the Project could have been greater if the Government had harmonized double pensions for public employees and if it had not introduced the expensive SCA outside the ambit of the NPA. Both have significantly offset the positive fiscal impact of the new pension system. The double pensions benefit itself could cost the government an additional US$17.6 million per year for the next 15 years according to the recent estimate by the Maldives Auditor General s Office. Furthermore, the overgenerous non-contributory pension as a result of the sum of the OABP and SCA is expected to negatively affect long-term saving. Notwithstanding the substantial progress, the double pensions issue suggests a certain fragility to the pension reform agenda at the political level. Only after the project closing, a decision was made to harmonize the parallel pension schemes with the MRPS. 33

51 Annex 4. Bank Lending and Implementation Support/Supervision Processes (a) Task Team members Names Title Unit Responsibility/ Specialty Lending Robert J. Palacios Team Leader SASHD TTL Oleksiy A. Sluchynskyy Senior Economist SASHD Co-TTL Miriam Witana Procurement Specialist SARPS Procurement Supul Wijesinghe Financial Management Specialist SARFM FM Manoj Jain Financial Management Specialist SARFM PAS Supervision Robert J. Palacios Lead Social Protection Specialist SASHD Co-TTL Oleksiy A. Sluchynskyy Senior Economist SASHD Co-TTL Changqing Sun Senior Economist SASHD TTL Maria Gracheva Senior Operations Officer SASHD Operation Jiwanka Wickramasinghe Sr. Financial Management Specialist SARFM PAS Component Haider Raza Sr. Procurement Specialist SARPS Procurement Gertrude Cooper Program Assistant SASHD Manoj Jain Lead Financial Management Specialist SARFM PAS Component Supul Chamikara Wijesinghe Financial Management Specialist SARFM FM Miriam Witana Procurement Specialist SARPS Procurement Puja Vasudeva Dutta Sr. Social Protection Economist SASHD Targeting Shalika Subasinghe Social Protection Consultant SASHD Susrutha Goonasekera Social Protection Economist SASHD Supervision Anita M. Schwarz Lead Economist GSPDR Lead Author Betty Hanan Consultant GSPDR Changqing Sun Senior Economist GSPDR ICR TTL (b) Staff Time and Cost Staff Time and Cost (Bank Budget Only) Stage of Project Cycle US$, thousands (including No. of staff weeks travel and consultant costs) Lending FY FY FY Total: Supervision/ICR FY FY FY

52 Staff Time and Cost (Bank Budget Only) Stage of Project Cycle US$, thousands (including No. of staff weeks travel and consultant costs) FY FY FY FY Total:

53 Annex 5. Beneficiary Survey Results 1. The second pension awareness survey was conducted in 2015 to assess: (a) the level of understanding of pension schemes among Maldivians, and (b) the extent to which the population has taken the opportunity to make use of the pension schemes as instruments to plan for retirement. This survey provided a comparison analysis between the baseline survey conducted in 2010, which assessed the attitudes, awareness and perceptions toward retirement and toward pensions among the population. As pensions was a new concept for most Maldivians, the baseline survey was useful to identify what retirement means to Maldivians, how they plan for retirement, what their motivators would be to join a retirement plan, and what benefits they thought a retirement plan would have. The results from the baseline survey were used to formulate the MPAO s pension implementation, communications and planning. It also served as an initial assessment marker for subsequent surveys. 2. The comparison analysis (2010 survey vs survey) was based on 19 basic indicators. Out of the 19 indicators, 12 showed an improvement from the 2010 baseline results. Among those which showed improvement, there were indicators which have increased by more than 10 percentage points. Three additional indicators showed a significant improvement. 3. In general, the 2015 survey showed increased knowledge and perception of the general public on the pension schemes. However, there were areas that showed unsatisfactory performance, which need to be addressed by the MPAO. The areas where the MPAO performed well, or where the MPAO succeeded in reaching the public included the following: The MRPS is a DC pension scheme and it is the individual s role and not the government s to plan for retirement Awareness of the NPA; Awareness of the role of the MPAO Awareness on the retirement pension scheme 4. Areas where the MPAO needs to work on are: Benefits of the MRSP and retirement in generalinformation on who manages the MRPS and who is eligible for MRPS 36

54 Annex 6. Stakeholder Workshop Report and Results n.a. 37

55 Annex 7. Summary of Borrower's ICR and/or Comments on Draft ICR Project Background 1. The development objective of the Pension and Social Protection Administration Project, approved on May 12, 2009, was to support the establishment of a new pension authority and strengthen capacity at existing institutions of the GoM to effectively implement a new pension system and to provide a platform for additional SP programs. With the project s support, the GoM established the MPAO as well as a Pension Supervision unit under the CMDA. The MPAO further developed the capacity to track and report pension contributions and transactions on individual accounts for all employees and implemented a new basic pension scheme for the entire population over the eligible age. 2. The AF and restructuring of the project (August 7, 2011) revised the PDO as follows: to support the implementation of the National Pension Act, to strengthen institutional capacity of key agencies responsible for implementing the National Pension Act, and to develop the processes and platforms required for the delivery of SP programs. The AF and restructuring provided support to (a) help finance additional TA to the original activities (including strengthening the CMDA in its role as pension supervisor, defining the process of annuitization of the MPAO pension benefits, and so on; (b) support a set of new activities (including the development of a targeting system, disability coding and benefit administration, and the systems to deliver health insurance); and (c) support the reduction of unfunded pension liabilities via redemption of the RBs for the cohorts of civil servants retiring within the life time of the project. 3. Subsequently, the project was further restructured (2nd), effective from June 27, 2012, which involved (a) clarification of roles and responsibilities to appoint the NSPA rather than the MoHF to be responsible for implementation and management of the National Social Health Insurance Scheme Act as well as the disability program and targeted assistance scheme; (b) clarification of scope of TA to develop a strategy for an integrated SP system and strengthen identification systems to operate the programs supported under the project and to ensure administrative synergies across them; and (c) allowing incentive allowances to a small group of civil servants working on core activities of PAS implementation. 4. The 3rd restructuring took place on February 10, 2014 where at the request of the GoM, activities to strengthen the national identification system and build and implement the individual identification mechanisms were removed from the project as the GoM decided to undertake those activities on its own. The restructuring also provided TA for the development of a strategy for an integrated SP system. It also amended the DLI targets for Component E of the project. 5. The 4th project restructuring was approved on May 20, 2015 by the Bank management to (a) reallocate unutilized balance of Category 2 of the original IDA credit to categories 1 and 4, (b) introduce a DLI to support the development of a registry of electricity subsidy beneficiaries to move to a targeted assistance design, and (c) introduce the Least-Cost Selection method for the engagement of consultants. 38

56 6. The project as restructured had the following five components. Component A: Technical Assistance and Capacity Building for Implementation of the New Pension Program 7. This component supported the establishment of the legal and regulatory framework for pension reform and developed institutional capacity and systems at the MPAO and CMDA. Component B: Public Awareness Campaign 8. This component aimed at provision of technical advisory services, goods, and training to design and implement an overall public information campaign to educate members of the new pension system on the objectives and mechanisms of the system, including improving awareness of (a) employers on their contributory obligations; (b) workers on their rights and benefits; and (c) senior citizens about the mechanism for claiming basic pension. Component C: Public Accounting System 9. The objective of this component was provision of technical advisory services, goods, and training to (a) support the MoFT in the implementation of the PAS within the MoFT, line agencies, and local government bodies; (b) support the MoFT in the development and implementation of accounting standards, policies, and instructions related to the recipient s Public Finance Law; (c) strengthen capacity of the staff of the MoFT, line agencies, and local government bodies in the use, operation, and maintenance of the PAS; and (d) support the MoFT in the development and implementation of a payroll system for the public employees of the recipient, including a mechanism to track the pension contributions. Component D: Administration of Health Insurance, Disability, and Targeted Assistance 10. The component had three subcomponents. D.1 Development of a National Targeting System in Maldives: The main objective of this subcomponent was to operationalize the newly designed PMT targeting mechanism for targeting benefits administered by the NSPA. It also focused on (a) strengthening the capacity of the NSPA in the administration and provision of the financial assistance under the SP programs; (b) development of an MIS for targeting; (c) establishment of a system for data collection; (d) development of standard operating procedures, manuals, and training plans for the scale-up of the targeting system; (e) carrying out of outreach campaigns, training, and capacity building; and (f) development of M&E systems for the targeting system. D.2 TA to support the implementation of the Disability Act: The subcomponent aimed to provide much needed guidance on developing a standardized disability determination and certification process. The current practice is such that medical 39

57 professionals write a letter which only states the type of disability and suggest the patient to apply for assistance. However, some beneficiaries require further testing and details and they need to get letters from the doctors numerous times. The disability determination and certification process once engineered provides the necessary standardized forms and certification guides for medical professionals to use when patients need to apply for state assistance. D.3 Development of systems to deliver health insurance: The subcomponent aimed to develop the M&E capacity at the NSPA via a Health Insurance MIS. This new MIS would allow the NSPA to rely on useful data for the supervision and planning of the Social Health Insurance Scheme as mandated by the Social Health Insurance Act. Component E: Payout of Pension Liabilities 11. This component supported the pension scheme through the provision of pension payouts to public sector employees retiring during the period of project implementation, who have been credited with the RBs in accordance with the laws of the GoM. Rating of Key Performance Indicators 12. The development objective of the Pension and Social Protection Administration Project (PSPAP) has been to support the implementation of the National Pension Act, to strengthen institutional capacity of the key agencies responsible for implementation of the National Pensions Act, and to develop the process and platform required for the development of SP programs. The project had the following five PDO indicators and nine intermediate indicators. Results Indicators Table 7.1. Project Outcome Indicators and Progress Project Outcome Indicators 1. New systems under the MPAO operational, including the establishment of new office of the MPAO, governance structures, MIS, and provisions for outsourcing 2. Increased public awareness about the new pension system Progress Comments - Achieved. MPAO established (32 staff) and fully functioning under CEO and Governing Board. All modules of Pension System operational. No external asset managers hired due to market conditions and the MPAO does the asset management in-house. Comments - Achieved and maintained and happened regularly as a function of the Pension Office. MPAO website created and fully functional with possibility to check the individual MRPS account balance and key indicators of the system. Public Relations (PR) activities are ongoing and from 2010 till June 30, 2015, the MPAO has conducted 486 targeted information sessions and 32,999 have attended the sessions. A baseline survey at the beginning of the project and a follow-up survey at the end to find out the outcome of the PR activities was carried out, which showed that the savings habit among the respondents had increased and there was also an increase in the number of people aware of the existence of the Pension Law, the 40

58 Project Outcome Indicators 3. Generation of payroll data for public service personnel used for assessing mandated contributions for the new pension system 4. Development and implementation of MISs and processes for targeting, disability administration, and health insurance 5. Payout of accrued pension rights to public sector workers retiring during the project period Progress MPAO, and the Retirement Pension Scheme. Comments - Achieved. PAS HR module rolled out to over 96% of Malé-based government agencies and they can generate payroll data using the PAS. Comments - Achieved. The technical requirements and tender documents for the SPIS was compiled under the project via an international consultant and tendered via the National Tender Board. The development of the system was undertaken with the winning bidder who successfully delivered the system. The Operational Acceptance was issued and the stepping stone for the move toward integrated system at the NSPA has been delivered. The system for monitoring the Social Health Insurance Scheme has also been piloted and handed over to the NSPA IT team for utilization. This system via a data warehousing mechanism allows the NSPA to drill down into details while monitoring and planning ahead. Comments - Achieved. Payout of rights of public sector workers retired up to March 2014 was completed; however, disbursements under this component were suspended in July 2014 due to the ongoing disbursement of double benefits to the public sector employees and the government pledge to top up the existing OABP up to MVR 5,000. The suspension was subject to government proceeding with the harmonization of the government pensions. Table 7.2. Intermediate Outcome Indicators and Progress IO indictors 1. Key policy decisions in MRPS implementation made 2. Progress in the MRPS measured by the number of individual accounts opened and maintained by the new pension authority 3. Progress in implementing a new basic pension scheme measured by the number of pension payments made and by strengthening the automatic claw-back mechanisms 4. Regular reporting of contributions and balances to members, including RBs 5. Reporting and compliance procedures defined and implemented, including regular monthly reporting of basic pension benefits paid and contributions collected 6. Effective supervision by the CMDA of all aspects of the new pension program and framework for introduction of the new investment instruments 7. Development and implementation of new process for annuitization in the MRPS. Progress Comments - Fully complete. All regulation for implementation of the MRPS prepared and published. Comments - Achieved and maintained The MPAO has implemented the new retirement pension program and at the end of June 2015, there were 84,204 active individual accounts maintained in the MPAO system. Comments - Achieved and maintained Application, registration, and direct payment to bank accounts operational for basic pension. As of June 30, 2015, there are 16,125 beneficiaries. Comments - Achieved and maintained All the members have access to individual accounts online. Comments - Achieved and maintained Reports are available on the MPAO website. Comments - Achieved. The CMDA has established a Pension Supervision Unit, received training, and developed regulatory capacity. Comments - Achieved. Annuitization explored and concluded that with the current market capacity of the country it is not possible. 41

59 IO indictors 8. Assessment of options for determination of disability and required systems 9. Development of options and piloting of new approach to targeting of social benefits Achievements of the PSPAP Progress Comments - Achieved. Definitions for the disabilities have been developed according to the Disability Act and a stakeholder meeting has been conducted with key stakeholders such as the Ministry of Law and Gender (MoLG), disability council, and Disabled Persons Organizations (DPOs)/nongovernmental organizations. It has been translated, endorsed by the stakeholders, and sent to the MoLG to be gazetted. The MoLG has sent to the Auditor General for gazetting and according to advice reformatted to publish as a regulation. The certification process has been piloted and amendments to the process have been brought about. The identification format was finalized and shared with the MoLG for their perusal and they are utilizing it for identification purposes. Comments - Achieved New targeting method was piloted in two atolls and a reverification exercise for all beneficiaries in the Malé region was conducted under the project. The reregistration of the electricity subsidy was designed around the new targeting method. The Economic and Youth Council of the cabinet was presented the method and they endorsed to utilize it in the electricity reregistration and also has been adopted by the NSPA as the method for revision of other social benefits as well. Component A: Technical Assistance and Capacity Building for Implementation of the New Pension Program 13. During the project preparation stage, the PSPAP provided TA in preparation of the Maldives Pension Law which was presented to the parliament, and passed. 14. Implantation of the Pension Act. The project provided TA in implementing the Pension Act. Assistance was provided in meeting the timelines given in the law in appointing the Board members and staff of the MPAO. TA was provided in developing various regulations needed for the timely implementation of the Pension Act. 15. Development of the MIS. The PSPAP was responsible for the development and installation of the MIS for automation of pension contribution collection, pension payments, and maintenance of the detailed records of the individual RSAs. The MIS is an automated workflow-based system. 16. The main modules of the software include: Employer registration Enrolment Contribution collection Reconciliation System configuration Workflow Reports RSAs 42

60 Accounting and invoicing Grievances Enforcement Access Control 17. Training of IT staff. Various IT staff of the MPAO received training during the development of the system, which included on-the-job training for which some of the staff were placed with the company developing the system and worked closely with the developing team. 18. Statement of Pension Contribution. All the employers can submit the Statement of Pension Contribution file online. A vigorous verification process is carried out and if all the information is correct, a receipt notice with a payment voucher is generated through the Koshaaru. Employers pay the exact amount on the payment voucher to the bank and the amount is reconciled automatically, next day morning. 19. RSA balance. Members can check the details of their RSA by registering at the member s portal. Mobile number and ID card or passport is required for the registration. Password is sent to the mobile after manual verification. All members with an RSA can access their accounts using the member s portal. 20. Training of Pension Office personnel. As the contributory pension system was rather new, various Board members and staff of the MPAO were given training, which included participation of the Board and staff members in the Pension Core Course at the Bank, and the World Pension Summit. Training was also provided in other essential fields like PR, management, asset management, and IT for the staff of the Pension Office. 21. Investment policy expert. With the assistance of an investment policy expert, the SOIP of the Pension Office was revised and consolidated investment rules were prepared. Investment challenges for the MPAO were identified, and a risk framework was developed. 22. Investment management capacity building expert. The PSPAP facilitated the MPAO in getting the assistance of an international expert in investment capacity building, and reports on strategic asset allocations and investment training have been prepared. 23. Disability insurance. The MPAO is in the process of introducing disability insurance to its beneficiaries. The services of a disability expert were sought for the initial research and policy guidelines, the regulations on the disability insurance have been completed and are expected to be introduced during the last quarter of The PSPAP facilitated this by getting inputs from an international expert on the subject. 24. Maldives Finance Forum. With the assistance of the PSPAP, the Maldives Finance Forum was launched successfully to bring together leaders from business, financial, political, academic, and SP sectors to deliberate on issues, promote views, and share experiences for the development of the Maldivian financial sector. The forum was well received and became a highly acclaimed event with overwhelmingly positive response from the stakeholder community. 43

61 25. Pension Supervision Department. The Pension Supervision Department was established in the CMDA and regular on-site and off-site inspection of the MPAO is carried out by the Supervision Department. The MPAO provides quarterly investment reports to the Supervision Department to ensure compliance with the statement of investment principles and regulations. The PSPAP assisted the department by providing local and international consultants and providing various training for the staff of the CMDA. Assistance was provided to the CMDA in enhancing the CMDA website and developing information packs on access to finance through capital market. 26. Financial literacy survey. A financial literacy survey was carried out by the CMDA as a financial literacy initiative to obtain and analyze nationwide data on financial capability. The survey indicated that financial knowledge and planning among the population is very low, and the awareness on different financial products is also very limited. This survey will help the CMDA in planning how to carry out financial literacy initiatives and identify the target groups. 27. System readiness audit. A system readiness audit of the Koshaaru system was carried out by the supervision department to assess the IT system, internal controls of the system, compliance with the requirements, and evaluate the governance structure of the IT system. The conclusions of the system audit have identified various areas of weakness and recommendations on improvements. Component B: Public Awareness Campaign 28. Baseline survey. In 2010, the MPAO conducted its first national telephone survey among 4,100 people to identify the level of awareness of the population in the area of Pension Law and the functions of the MPAO. Immediately after that, a nationwide PR campaign was carried out to increase awareness of the population on the essence, principles, and advantages of the new Pension Law. In the framework of the PR campaign, booklets were prepared and distributed, posters placed in prime locations in Malé and other islands, audio and TV commercials were prepared and put on the air. A number of articles were published, talk shows and roundtables organized. The MPAO team also conducted various information sessions to targeted audience and general audience. The MPAO teams travelled to all the provinces of Maldives and conducted information sessions in over 31 islands with over 390 participants. 29. Follow-up survey. A follow-up survey, financed in the framework of the PSPAP, was conducted in June The objective was to assess the effectiveness of the PR campaign and increase the level of information among the population. According to the survey report, the savings habit among the respondents had increased and there was also an increase in the number of people aware of the existence of the Pension Law, the MPAO, and the Retirement Pension Scheme. Component C: Public Accounting System 30. SAP maintenance fees. The PSPAP supported the government in covering the SAP maintenance fee from 2012 to

62 31. SAP upgrade. SAP consultants were contracted to upgrade the system from version ECC 6.0 to the latest SAP version, EHP 7.0 (including Oracle database from to ) and addressed all the technical issues identified. As a result, an International Public Sector Accounting Standards-cash-compliant financial statement for the FY14 was produced, for the first time from the system. Also, a reliable record-keeping system for budget execution monitoring has been established, and daily reports on the budget availability for budget execution monitoring are generated from the system. The key users of the Treasury and Public Accounting Division received on-the-job training from the SAP consultants. 32. Incentive payments. The project provided incentive payments to key users and the backup users of SAP. This has helped in retaining some of the users within the MoFT and successful implementation of the SAP upgrade activities. 33. SAP modules rollout. As of June 30, 2015, the HR module has been rolled out to 96 percent of Malé-based government agencies and it is planned to be rolled out to the remaining agencies in the coming weeks. In addition to Malé-based agencies, four non- Malé-based agencies have been covered. SAP rollout will continue to and will be incorporated into the operations of Treasury and Public Accounting Division. Component D: Administration of Health Insurance, Disability, and Targeted Assistance Subcomponent D.1: Development of a National Targeting System in the Maldives 34. Operationalization of the PMT targeting mechanism. The targeting method was discussed with the stakeholders in the testing trips to two atolls. The PMT method was adopted and utilized for testing even within the NSPA as a reference tool in medical welfare and the electricity subsidies reregistration exercise as a guiding tool on targeting. 35. SPIS. The central system to administer all existing programs at the NSPA was designed and developed under assistance from the project and is operational for the NSPA to begin utilizing. The system will allow better data management, and reporting on the different programs at the NSPA. 36. Strengthening the IT infrastructure at the NSPA. The IT infrastructure at the NSPA was not sufficient to operationalize the SPIS. Hence, a new network was set up that was reliable and manageable. Firewalls and servers were installed and necessary IT development support via IT consultants was also provided for the NSPA to fast track the operationalization process. Subcomponent D.2: Technical Assistance to Support the Implementation of the Disability Act 37. Development of the disability definition guide (supplement to the disability regulation). The guideline on defining disability for purposes of providing financial assistance was drafted and circulated for comments among stakeholders. A stakeholder meeting was held to finalize the document and propose a course of action for the 45

63 implementation of the document. According to consensus, the finalized document was forwarded to the MoLG for publication. 38. Development of the disability identification format and guide. The identification guide and format was drafted and shared with stakeholders and amended after comments and finalized. 39. Development of the disability certification format and guideline. The guide has been finalized after incorporation of comments from stakeholders and specialists. A working session was arranged with key policy stakeholders to discuss details on proposing the amendment to the disability regulation and act. A disability certification process has been designed and documents have been translated as well. 40. Pilot exercises and training sessions for new disability certification guide. Pilot exercises were completed in six atolls and all relevant entities were briefed on their roles and details of their participation. The overall process has been agreed by all stakeholders and detailed role-based assignments have been identified. 41. Training facility at the NSPA. All necessary equipment and setup required for training of stakeholders in the atolls via video calls and also a training room to train the stakeholders in Malé and atolls were also developed under the project. Ten training stations were set up and equipped, while all necessary equipment for video calls were also set up at the NSPA. Subcomponent D.3: Development of Systems to Deliver Health Insurance 42. MIS for health insurance monitoring at the NSPA. With the assistance of an international consultant, the health insurance MIS has been developed and tested and the NSPA now has the capacity to easily analyze data from Aasandha using this tool. 43. Hardware to nodal level one health facilities. Hardware was procured and delivered to facilities selected by the MoHF under this subcomponent to incentivize the health facilities in the atolls to share data to the Aasandha and General Practices portal through which the NSPA can get their data. These hardware included computers and printers for the doctors' rooms so that e-prescription and Aasandha Doctors portal can be used at the facilities. Component E: Payout of Pension Liabilities 44. The MPAO established individual RSAs for the employees on its MIS to track auditable individual balances and transection in the accounts. The Bank reimbursed accrued rights up to US$6,138, However, the balance of the component was cancelled because of the government s continued payment of double pensions to public servants (retirement benefits provided by various public institutions on top of the MRPS), and the introduction of the SCA providing a top-up to the existing OABP. Borrower and Bank Performance 46

64 45. The GoM has since the initiation of the PSPAP, remained committed to the project objectives. The PMU was very active in coordinating the project. It had highly motivated staff. This aspect, along with the increased cooperation from the different implementing agencies, led to the successful implementation of the project and achievement of project objectives. 46. During the initial project, continuous assistance was provided by the Bank in drafting the bill and other technical knowhow. Meetings were held with different stakeholders like the Public Services Division, the CSC, and other relevant agencies to make sure that all the requirements were met through the bill. The Bank worked closely with the borrower to support its efforts to successfully implement the project. The dialogue during the implementation process was smooth and both parties sought and found solutions to implementation bottlenecks. The Bank supervised the project regularly and this intensive supervision was one of the major contributing factors in achieving the targets. Lessons Learned 47. The PSPAP demonstrated the significance of international assistance in implementing of the pension reform in Maldives. The MPAO team has grasped the expertise from the international consultancies provided and is in a position to move forward with the implementation and sustainable development in the pension reform. 48. The major lessons learned from the PSPAP are the following: Detailed design and planning of the project is a key factor for its successful implementation. For complex programs, such as public pensions and social assistance, it is important to build a broad consensus for change. Experience from other countries underlines the critical importance of public information and training campaigns in building support. An important element of the project was aimed at creating public awareness of benefits. Government ownership and active involvement in project implementation is crucial for project success and sustainability. Good level of public information is critically important. Collaboration and data exchange between the state agencies is crucial. Formal performance appraisal linked to appropriate incentives is needed to motivate and reward personnel. Implementation timetables need to be realistic and flexible to allow for limited agency experience in project implementation. Timetables were reviewed carefully during appraisal and found acceptable, and the pace of implementation needs to be monitored during implementation. The frequent restructuring due to the government s changing priorities led to a lot of time and effort of the project focused and spent on endeavors that were later either halted or discontinued. For instance, Subcomponent D.3 was initially allocated for strengthening the national ID systems to facilitate administration of the Social Health Insurance and SP programs. All necessary tender documentations for the upgrade required for the DNR system was completed according to consensus 47

65 from all key stakeholders including relevant ministries, departments, security forces, and statutory bodies. It was restructured right before the tendering stage. Hence, all necessary materials for tendering for the DNR to add the biometric data collection and de-duplication requirements were all developed under the project with consultants and numerous consensus-building sessions. It was later restructured with the aim of the development of the uniform health information system (Maldives Integrated Health Information System) to integrate all health facilities under one system. Work was undertaken on modeling this system and designing it, and stakeholder consensus sessions were held to agree on the way forward; however, commitment from stakeholder agencies was minimal. The priorities were not consistent on integrating health service providers; hence, a restructuring was done once more. These processes took about two years that could have been utilized more productively. Plans for Sustainability of PSPAP Achievements 49. Sustainability of the achievements obtained in the framework of the PSPAP will be ensured as the MPAO was established as a statutory organization under the Pension Law and has reached financial independence. 50. The sustainability of the PAS will be ensured by the implementation of the new Public Finance Management Project also financed by the Bank. The Public Finance Management Project will assist the MoFT in further developing the PAS. 51. The NSPA has contracted some of the staff financed under the project to work as consultants. This will help to retain the knowledge within the organization and for further development. The NSPA has budgeted for the additional funding required for further development and maintenance of the SPIS. Conclusion 52. The project was well designed and implemented. A number of challenges were faced due to the changes in government policies. However, most of these challenges were overcome through dialogue and implementation was carried out smoothly. 48

66 Annex 8. Comments of Cofinanciers and Other Partners/Stakeholders n.a. 49

67 Annex 9. List of Supporting Documents 1. World Bank, 2007, Project Concept Note, Peer Review Comments, and Minutes of PCN Review Meeting 2. World Bank, 2009, Minutes of Decision Review Meeting 3. World Bank, 2009, Project Appraisal Document (IDA Credit 4611-MV) 4. World Bank, 2009, Minutes of Negotiations 5. World Bank, 2009, Financing Agreement (IDA Credit 4611-MV) 6. World Bank, 2011, Project Paper for Additional Financing 7. World Bank, 2011, Project Agreement and Financing Agreement (IDA Credit MV and Grant H4694-MV) 8. World Bank, 2012, 2014, 2015, Restructuring Paper and Amendment Letters to Financing Agreement 9. World Bank, , Aide Memoires and Back-to-Office Reports 10. World Bank, , Management and other important letters 11. World Bank, , Implementation Status and Results Reports 12. World Bank, 2005, South Asia - Pension schemes for the formal sector: emerging challenges and opportunities for reform 13. World Bank, 2006, Maldives - Social Protection in the Maldives: Options for Reforming Pensions and Safety Nets 14. World Bank, 2007, Maldives - Country Assistance Strategy FY08-FY World Bank, 2013, Maldives - Building capacity and systems for targeting the poor in the Maldives: A Proposal for Targeting Social Assistance in the Maldives 16. World Bank, 2014, Maldives - Interim Strategy Note for the period FY14-FY Government of Maldives, 2007, The Seventh National Development Plan - Creating New Opportunities 18. Government of Maldives, 2009, National Pension Act 19. Government of Maldives, 2009, Strategic Action Plan Government of Maldives, 2011, National Social Insurance Act 21. Government of Maldives, 2014, Social Protection Act 22. Riyan, 2015, Pension Awareness Survey Report 23. Maldives Auditor General s Office, 2015, Report of the Special Audit on Expenditure Incurred as a Result of Institution Specific Pensions which are run outside of the Pension Act 50

68 Annex 10. Original and Revised PDO and IO Indicators Original Indicators Modified Indicators Rationale for Change PDO Indicators 1. Establishment of the MPAO, including appointment of the governing board members and the executive director, and hiring external asset manager(s). 1. Revised to: New system under MPAO operational, including the establishment of a new office of the MPAO, governance structures, Management Information System, and provisions for The revision reflected the revised scope of Component A 2. Progress in implementing a new contributory retirement program, measured by the number of individual accounts opened and maintained by the Maldives Pensions Administration Office. 3. Progress in implementing a new basic pension scheme, measured by the number of new applications processed and payments made as share of the total population over the eligible age. 4. Creating public awareness about the pension system through a public education campaign; establishment of a public web-site of the pension system, and key indicators of the system publicly available 5. Progress in establishing the supervisory unit for pensions to review reports prepared by MPAO. 6. Generation of payroll data for public service personnel used for assessing mandated contributions for the new pension system. outsourcing. Moved to IO Indicator #2 Moved to IO Indicator #3 2. Revised to: Increased public awareness about the new pension system. Moved to IO Indicator #6 3. No change. Generation of payroll data for public service personnel used for assessing mandated contributions for the new pension system. 4. New: Development and implementation of management information systems and processes for targeting, disability administration, and health insurance. 5. New: Payout of accrued pension rights to public sector The indicator reflected more about progress in output or IO than that of PDO The indicator was simplified The indicator reflected more about progress in output or IO than that of PDO Reflected the two new elements of the increased scope of the AF 51

69 Original Indicators Modified Indicators Rationale for Change workers retiring during the project period. Intermediate Results Indicators 1. Establishment of new governance structures appointment of all MPAO Governing Board Members; Creation and staffing of new office to oversee pensions staff positions at MPAO filled with qualified people. 2. Collection and record keeping systems in place for contributory scheme regular reporting of contributions and balances. 3. Mechanism for identification of beneficiaries set up regular monthly reporting of beneficiaries; Benefit delivery system for basic pension in place regular monthly reporting of basic pension benefits being paid to individuals. 4. Accrued rights measured and calculation of Recognition Bonds database with accurate report of recognition bond values for individual account holders Folded into PDO Indicator #1. 1. New: Key policies developed and adopted to facilitate MRPS implementation. 2. Originally PDO Indicator #2. Progress in implementing MRPS, measured by the number of individual accounts opened and maintained by the new pension authority. 3. Originally PDO Indicator #3. Progress in implementing new basic pension scheme measured by the number of pension payments made and by strengthening the automatic claw-back mechanisms. 4. Revised to: Regular reporting of contributions and balances to members, including recognition bonds. 5. Revised to: Reporting and compliance procedures defined and implemented, including regular monthly reporting of basic pension benefits paid and contributions collected. Folded into IO Indicator #4. The indicator partially reflected the institutional/management capacity of the MPAO Reflected key policy decisions required to make the MRPS play its role as defined in the National Pension Act The revision reflected the fact that regular reporting of balances always include the value of the RB Consolidated The database was completed and would be monitored indirectly by IO Indicator #4. 52

70 Original Indicators Modified Indicators Rationale for Change 6. Originally PDO indicator #5. Effective supervision by the CMDA of all aspects of the new pension program and framework for introduction of the new investment instruments. The indicator reflected more about progress in output or IO than that in PDO 7. New: Development and implementation of new process for annuitization in MRPS. 8. New: Assessment of options for determination of disability and required systems. 9. New: Development of options and piloting of new approach to targeting of social benefits. Reflected new deliverables to be financed by the AF 53

71 Annex 11. Original and Revised DLI Matrix DLI Objective Targets Ensure steady increasing coverage of the MRPS #1. Enrollment of workers into the MRPS #2. Electronic reporting of contributions #3. Implementation of the key administrative arrangements of the reform to the pension and social protection systems #4. Development of a registry of electricity subsidy beneficiary households 2 Ensure accuracy of data flowing into the MRPS Ensure comprehensive and holistic approach to the reform program Ensure better targeting of electricity subsidy Note: 1. added or revised during the 2 nd restructuring after the MTR 2. added during the 3 rd restructuring Number of individuals enrolled at the MPAO increased from baseline value of 34,000 to: (i) 40,000; (ii) 43,000; (iii) 47,000; (iv) 50,000; (v) 83,000 1 Percentage of employers reporting electronically increased from baseline value of 50% of the GoM entities to: (i) 80% of all the GoM entities & 20% of private employers (with 10 or more employees); (ii) 100% of the GoM entities & 40% of private employers; (iii) 100% of the GoM entities & 60% of private employers; (iv) 100% of the GoM entities & 80% of private employers (i) Regulation on participation of foreign workers; (ii) Strategy for self-employed defined, including matching contributions; (iii) Online access of individual RSAs fully implemented; (iv) (a) Rules for selfemployed participation of MRPS decided and ready to commence implementing 1 ; and (b) MPAO MIS fully operational 1 ; (v) Strategy for disability insurance under MRPS decided 1 ; (vi) Development policy on unifying parallel, service-based public sector retirement benefit systems defined 1 (i) More than 50% of all islands have rolled out the new re-registration operation, and have had more than 10 electricity subsidy registration forms collected from each island; (ii) Information on electricity subsidy beneficiaries that are associated with more than 50% of all existing subsidized domestic meters has been digitized and included in the registry; (iii) Information on electricity subsidy beneficiaries that are associated with more than 70% of all existing subsidized domestic meters has been digitized and included in the registry and ranked by the new targeting mechanism. 54

72 MAP 55