Document of The World Bank IMPLEMENTATION COMPLETION AND RESULTS REPORT (TF-56808) ON A TRUST FUND GRANT IN THE AMOUNT OF US$8.

Transcription

1 Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Document of The World Bank IMPLEMENTATION COMPLETION AND RESULTS REPORT (TF56808) Human Development Middle East and North Africa Region ON A TRUST FUND GRANT IN THE AMOUNT OF US$8.0 MILLION TO THE REPUBLIC OF IRAQ FOR A EMERGENCY SOCIAL PROTECTION PROJECT December 13, 2013 Report No: ICR

2 CURRENCY EQUIVALENTS (Exchange Rate Effective September 2013) Currency Unit = Iraqi Dinar IQD 1,000 = US$0.84 US$1.00 = IQD 1,163 FISCAL YEAR January 1 to December 31 ABBREVIATIONS AND ACRONYMS CPS ESSP FM FMA FMR ICB IDA IQD ISN ISR ITF KRG M&E MIS MOF MOLSA NBP NDS OPR PDO PDS PMO SLA SSN SSNIS TGFA USAID Country Assistance Strategy Emergency Social Protection Project Financial Management Fiduciary Monitoring Agent Financial Monitoring Report International Competitive Bidding International Development Association Iraqi Dinar Interim Strategy Note Implementation Status and Results Report Iraq Trust Fund Kurdish Regional Government Monitoring and evaluation Management Information System Ministry of Finance Ministry of Labor and Social Affairs National Board of Pensions National Development Strategy Operational Procurement Review Project Development Objective Public Distribution System Project Management Office Service Level Agreement Social Safety Nets Social Safety Net Information System Trust Fund Grant Agreement United States Agency for International Development Vice President: Inger Andersen Country Director: Ferid Belhaj Sector Manager: Yasser ElGammal Project Team Leader: Ghassan Alkhoja ICR Team Leader: Ghassan AlKhoja

3 Iraq Emergency Social Protection 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 GRANTEE/IMPLEMENTING AGENCIES/DONORS 21 ANNEX 1. PROJECT COSTS AND FINANCING ANNEX 2. OUTPUTS BY COMPONENT ANNEX 3. ECONOMIC AND FINANCIAL ANALYSIS ANNEX 4. GRANT PREPARATION AND IMPLEMENTATION SUPPORT/SUPERVISION PROCESSES ANNEX 5. BENEFICIARY SURVEY RESULTS ANNEX 6. STAKEHOLDER WORKSHOP REPORT AND RESULTS ANNEX 7. SUMMARY OF GRANTEE'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. CONTEXT AT APPRAISAL MAP... 44

4 A. Basic Information Country: Iraq Project Name: Emergency Social Protection Project Project ID: P L/C/TF Number(s): TF56808 ICR Date: 12/13/2013 ICR Type: Core ICR Lending Instrument: ERL Grantee: Original Total Commitment: Revised Amount: USD 8.00M Environmental Category: C MINISTRY OF LABOR AND SOCIAL AFFAIRS USD 8.00M Disbursed Amount: USD 8.00M Implementing Agencies: Ministry of Labor and Social Affairs Cofinanciers and Other External Partners: The United States Agency for International Development (USAID) B. Key Dates Process Date Process Original Date Revised / Actual Date(s) Concept Review: 01/26/2006 Effectiveness: 06/02/2006 Appraisal: 05/19/2006 Restructuring(s): 07/12/ /27/ /06/ /28/2012 Approval: 07/25/2006 Midterm Review: 10/27/2008 Closing: 09/30/ /30/2013 C. Ratings Summary C.1 Performance Rating by ICR Outcomes: Risk to Development Outcome: Bank Performance: Grantee Performance: Moderately Satisfactory Low or Negligible Moderately Satisfactory Moderately Satisfactory C.2 Detailed Ratings of Bank and Borrower Performance (by ICR) Bank Ratings Borrower Ratings Quality at Entry: Moderately Satisfactory Government: Moderately Satisfactory Implementing Quality of Supervision: Satisfactory Satisfactory Agency/Agencies:

5 Overall Bank Performance: Overall Borrower Moderately Satisfactory Performance: Moderately Satisfactory 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 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) Compulsory pension and unemployment insurance Other social services Theme Code (as % of total Bank financing) Social risk mitigation Social safety nets Vulnerability assessment and monitoring E. Bank Staff Positions At ICR At Approval Vice President: Inger Andersen Christiaan J. Poortman Country Director: Ferid Belhaj Joseph P. Saba Sector Manager: Yasser AabdelAleem Awny El Gammal David J. Steel (Acting Sector Manager) Project Team Leader: Ghassan N. Alkhoja David J. Steel ICR Team Leader: Ghassan N. AlKhoja ICR Primary Author: Manal Bakur N Quota F. Results Framework Analysis Project Development Objectives (from Project Appraisal Document) The overall objective of the project is to strengthen the policy, management and administrative capacity in MOLSA and MOF to develop, manage and monitor pension and social safety net reforms. Since this is a small Technical Assistance project, which

6 will be implemented over a short period of time, it will be difficult to measure final outcomes. One intermediate measure of success will be that both MOLSA and MOF are able to use information generated by the new systems for social safety net and pension decision making. Revised Project Development Objectives (as approved by original approving authority) N/A. (a) PDO 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 Safety Net: MIS in place, operational and providing useful data for MOLSA. Policymakers in the areas of Baghdad, Erbil, Basrah and Najaf use newly generated system reports No MIS in place MIS completed for all Iraq Date achieved 06/06/ /31/2013 Comments (incl. % Target achieved achievement) Indicator 2 : Safety Net: Targeting strategies introduced by MOLSA Value quantitative or Qualitative) No targeting strategies Targeting in place using categorical targeting as well as geographical Date achieved 06/06/ /31/2013 Comments (incl. % Target achieved achievement) Indicator 3 : Safety Net: Effective M&E system operational Value quantitative or Qualitative) No M&E system in place System in place by MOLSA to monitor SSN programs, based on beneficiary assessment conducted during project implementation Date achieved 06/06/ /31/2013 Comments (incl. % Target achieved achievement)

7 Indicator 4 : Pensions: Data Base completed. Policymakers use newly generated system reports Value Database developed quantitative or Qualitative) No database available as part of pension survey activity Date achieved 06/06/ /31/2013 Comments (incl. % Target achieved with additional support from the companion PRISTA program achievement) Indicator 5 : Pensions: Related activities funded by project completed with evaluations where appropriate Value quantitative or Qualitative) No baseline value Completed Date achieved 06/06/ /31/2013 Comments (incl. % Target achieved achievement) Indicator 6 : Pensions: MOLSA/MOF complete draft pension reform strategy Completed with Value No pension reform support from quantitative or strategy companion Qualitative) PRISTA program. Date achieved 06/06/ /30/2013 Comments (incl. % Target achieved achievement) Indicator 7 : Project management: MOLSA is capable of managing and monitoring the project Value quantitative or Qualitative) New project management office before project preparation Project management is fully in place and capable of future program management Date achieved 06/06/ /31/2013 Comments (incl. % Target achieved achievement) (b) Intermediate Outcome Indicator(s) Indicator Indicator 1 : Value (quantitative Original Target Values (from Baseline Value approval documents) Beneficiaries of safety nets programs Formally Revised Target Values Actual Value Achieved at Completion or Target Years

8 or Qualitative) Date achieved 06/06/ /30/2013 Comments (incl. % Target achieved achievement) Indicator 2 : Beneficiaries of safety nets programs female Value (quantitative or Qualitative) Date achieved Comments (incl. % achievement) Indicator 3 : Value (quantitative or Qualitative) Ministry of Labor & Social Affairs does not provide assistance to female headed households (this is done in another ministry) Beneficiaries of safety nets programs unconditional cash transfers No households covered Date achieved 06/06/ /30/2013 Comments (incl. % Target achieved achievement) G. Ratings of Project Performance in ISRs No. Date ISR Archived DO IP Actual Disbursements (USD millions) 1 12/15/2006 Moderately Unsatisfactory Unsatisfactory /26/2007 Moderately Satisfactory Moderately Satisfactory /21/2007 Moderately Moderately Unsatisfactory Unsatisfactory /18/2008 Moderately Moderately Unsatisfactory Unsatisfactory /29/2008 Moderately Moderately Unsatisfactory Unsatisfactory /04/2009 Moderately Satisfactory Moderately Satisfactory /15/2009 Moderately Moderately Unsatisfactory Unsatisfactory /29/2010 Moderately Unsatisfactory Moderately Satisfactory /18/2010 Moderately Satisfactory Satisfactory /13/2011 Moderately Satisfactory Satisfactory /08/2012 Satisfactory Satisfactory /21/2012 Satisfactory Satisfactory /13/2013 Satisfactory Satisfactory /25/2013 Satisfactory Satisfactory 6.67

9 H. Restructuring (if any) Restructuring Date(s) Board Approved PDO Change ISR Ratings at Restructuring DO IP Amount Disbursed at Restructuring in USD millions 07/12/2009 N MS MS /27/2010 N MU MU /06/2011 MS S 4.82 Reason for Restructuring & Key Changes Made The changes made were (i) reallocation of Grant proceeds and (ii) amendment of implementation of Component Two of the project to account for the implementation of Law 27/2006. The reasons for restructuring are twofold: firstly, the Unified Pension Law (27/2006 and related amendments) was enacted post project appraisal and resulted in a change in the coordinating body for ESPP Component 2 activities. The National Board of Pensions (NBP) was created and PSRC ceased to exist. Under NBP a Pension Reform Management Office was established and took over tasks that were initially performed by the Project Implementation Team (PIT). Secondly, MOLSA requested additional training and capacity building for their staff. Changes made were (i) extension of grant closing date from February 28, 2010 to February 28, 2011; (ii) reallocation of the grant proceeds between disbursement categories. Reason for restructuring was to give the implementers more time to achieve PDO. A Level Two Restructuring took place on January 6, 2011 to (i) reallocate grant proceeds, (ii) extend the project closing date); and; (iii) reallocate the grant

10 Restructuring Date(s) Board Approved PDO Change ISR Ratings at Restructuring DO IP Amount Disbursed at Restructuring in USD millions 06/28/2012 S S 5.62 Reason for Restructuring & Key Changes Made proceeds. This Restructuring was necessary to ensure that appropriate training was provided to MOLSA staff for the functioning SSN information system, and to provide sufficient operating costs for MOLSA to manage the project until closing. The extension of the closing date was necessary to make up for time lost during the enactment and subsequent receding of Law 18/2010, which separated MOLSA into two separate Ministries. The restructuring was necessary because: (i) the project needed more time to complete the PDO; (ii) requirements for equipment arose that were needed for the hardware to be compliant with the purchased software, and this added equipment required more training; (iii) to help streamline and simplify procurement processes, allowing for increased reliance on the MOLSA's capacity.

11 I. Disbursement Profile

12 1. Project Context, Development Objectives and Design 1.1 Context at Appraisal Country background Following years of conflict that include the IraqIran War, the Gulf War, the Iraq war, and years of sanctions and isolation, Iraq faced serious economic and social development challenges. While precise figures were lacking during project preparation, it was estimated that nearly 10 percent of the population lived on less than US$1 per day, with another 30 percent vulnerable to falling into this category. Up to a quarter of the Iraqi population depended on monthly food rations through the Public Distribution System (PDS), the nation s primary social safety net providing universal inkind food transfers. Unemployment and underemployment were anywhere between 25 and 60 percent, depending on the estimate and definition, all indicating that those affected the most were youth. Two decades of intermittent conflict produced large numbers of disadvantaged and vulnerable groups. Providing adequate social protection mechanisms for the poor and vulnerable, including social safety nets and affordable pensions, was important in its own right and critical to the implementation of broader economic reforms In July 2005, the Iraqi Transitional Government prepared a National Development Strategy (NDS) aimed at placing Iraq on a course toward a diversified marketbased economy. The strategy focused on good governance, private sectorled growth, and strong social safety nets. The four pillars of the NDS were: (i) strengthening the foundations of economic growth; (ii) revitalizing the private sector; (iii) improving the quality of life through, among other things, investing in the social sectors; and (iv) strengthening good governance and improving security. The NDS gave priority in the short term to restoring basic services and creating employment. Social protection sector Beginning in late August 2005, the Iraqi Transitional Government adopted ambitious reforms focused on fiscal strategy, including, inter alia, reducing certain commodity subsidies, particularly those relating to petroleum products and strengthening the social safety net in order to offset the impact of future price increases on the poor. In part to counter the effects of higher prices on the poor, the Government allocated IQD 500 billion (US$330 million equivalent) in 2006 to strengthen the existing targeted cashbased safety net program administered by the Ministry of Labor and Social Affairs (MOLSA). Resources for the program were to come from a reduction in the PDS budget. Savings were expected primarily through improved administrative control over procurement. The reduction also signaled a long term shift away from inkind subsidies toward targeted cash transfer assistance mechanisms The thenexisting information base was insufficient to support social protection policy reforms because: the Ministry of Labor and Social Affairs (MOLSA) had been marginalized for years under Saddam Hussein s regime and had no active role in society; MOLSA s policies and laws were out of date and failed to address the growing socioeconomic conditions in Iraq; and MOLSA had not stayed abreast of the latest policy developments and research happening regionally or internationally in terms of social services. Designing safety nets and pension systems that met basic norms in terms of efficiency, equity and financial sustainability required detailed information on program costs and beneficiaries. With a weak grasp of the realities on the ground, inadequate equipment (such as computers) to ease working processes, 1

13 and a workforce that had an outdated vision of policymaking in the field of social affairs, addressing the demands of the growing poor was very difficult. At its most basic level, information systems in Iraq were severely underdeveloped. There was no comprehensive database of safety net program recipients or of contributors to and beneficiaries of the pension system Cashbased safety nets up to that point had been small and not welltargeted to the poorest. The dominant safety net in Iraq was the PDS, accounting for more than 14 percent of GDP in Other safety nets, including the cash transfer based mechanisms administered by MOLSA, were small in comparison, roughly 2 percent of GDP. In the context of scaling up the social safety net (SSN) program, MOLSA revised the payment structure of the program with technical assistance from the United States Agency for International Development, (USAID), with an expectation that over 1 million families would receive benefits by the end of Good progress was made soliciting applications, with about 429,000 applications received by the beginning of April However, targeting criteria had not fundamentally changed from the older program and there was no assessment of how MOLSA would cope with the enlarged administrative burden. Scaling up the SSN program effectively remained a huge challenge The pension system was wrought with problems: it was financially unsustainable, benefit formulas and eligibility conditions did not respect basic norms in terms of design, and coverage was limited. Iraq had two earningsrelated pension systems, one for civil servants and one for private sector workers, covering approximately 15 percent of the labor force. Beginning in April 2003, the Coalition Provisional Authority replaced regular pensions with emergency flat payments to cope with the depreciation of the Iraqi Dinar and resolve problems related to individual records that emerged following the armed conflict. Flat payments were estimated to cost around 5 percent of GDP, among the highest level in the region, and were financed from the general budget. The Government found itself under pressure to implement the new civil service pension law passed in December 2005 (Law 27/2005), that would shift expenditures on pensions from about 5 percent to between percent of GDP. However, implementing the more generous pension formulas was not a feasible option in the long run, as the system design compromised financial sustainability, damaged incentives, and opened the door to adverse distributional transfers There was concern from both the Government and international donors, led by the International Monitoring Fund (IMF) and the World Bank, that the mandatory pension system was accumulating large and unsustainable pension liabilities. The new pension law (Law 27/2006) placed more pressure on the Government and hence its strong interest in designing and implementing a new pension system that reduced current expenditures and improved coverage and long term sustainability. Rational for Bank assistance The World Bank Second Interim Strategy Note (ISN) for Iraq was presented to the World Bank s Board of Executive Directors in September The strategy built on the achievements of the first ISN (dated December 15, 2006), and was aligned with the Iraqi Transitional Government s NDS. The Bank s overarching objective was to help Iraq build efficient, inclusive, transparent and accountable institutions needed for stability, good governance, and sustainable economic prosperity, with the idea that better institutional frameworks, policies and systems would improve the efficiency and effectiveness of both national expenditures and international aid. Two components of the project under review addressed three of the second ISN s four pillars, namely: (i) restoring basic services delivery (Pillar 1); (ii) strengthening the social safety nets (Pillar 3); and (iii) public sector governance (Pillar 4) The ISN relied on the World Bank Iraq Trust Fund (ITF) and IDA to finance projects, and on the Bank budget for the economic and sector work and policy advice that was needed. The ITF financed ten projects for US$385 million, nine of which were still under implementation at the inception of ESPP. 2

14 The World Bank was one of the few donors that financed recipientexecuted projects. The vast majority of donorfinanced projects in Iraq have been implemented by donor agencies, consulting firms or NGOs on behalf of the Government The World Bank was responding to a direct request from the Minister of Labor and Social Affairs in October 2005, followed up by an official letter in January 2006, for support in social safety net and pension reform design and implementation processes within the context of the Government s NDS. The MOLSA, the Ministry of Finance (MOF) and the World Bank saw the proposed project as the first phase of a longer term Bank engagement to tackle the key issues outlined above, and to help the government move towards the implementation of a fiscally sustainable social protection system. The ultimate goal was to provide vulnerable populations with the support they needed to sustain themselves and to springboard back into economic activity where possible, and to reform the pension system using benefit formulas and eligibility conditions that respected basic norms in terms of design, expansion of coverage and fiscal sustainability. More information on the rationale for bank assistance can be found in Annex Original Project Development Objectives (PDO) and Key Indicators (as approved) According to the World Bank Iraq Trust Fund Grant Agreement (TFGA) for the projected dated June 2, 2006, the overall project development objective (PDO) of the Emergency Social Protection Project (ESPP) was to strengthen the policy, management and administrative capacity in MOLSA and MOF to develop, manage and monitor pension and social safety net reforms. The World Bank would support the government by: (i) establishing a basic information system within MOLSA to record and process information on safety nets; (ii) consolidating and expanding the information base for the SSN program managed by MOLSA to permit development of targeting strategies; (iii) designing and implementing a monitoring and evaluation (M&E) system for the expanded SSN program; (iv) developing an updated digitized database on beneficiaries, contributors and employers in the pension system; (v) building technical capacity within MOLSA and MOF for policy analysis and design in the area of safety net and pensions; (vi) developing a draft pension reform strategy. The annex Results Framework and Monitoring of the Technical Annex dated June 2, 2006 specifies basic indicators. The Results Framework indicators and outcomes were then adjusted during the midterm review as a stocktaking of progress was conducted and it was decided that monitoring would intensify. These can be reviewed in the midterm review aide memoire mission dated October Originally, as described in the Technical Annex 1 dated June 2, 2006, it was anticipated that because this was a small technical assistance emergency project, implementation would occur over a period of about 3 years, hence making it difficult to measure final outcomes. Assessing the outcomes of the management information system (MIS) and planned reports would only be possible after a period of time once implementation had been completed. Monitoring and evaluation would focus on short term outcomes and an intermediate measure of success was identified as the ability of both MOLSA and MOF to use information generated by the new systems for social safety net and pension decision making. 1.3 Revised PDO (as approved by original approving authority) and Key Indicators, and reasons/justification The project development objectives did not change during the life of the project. The project was restructured four times. The first restructuring, approved on July 12, 2009, was needed to alter the implementation arrangements for Component 2. The alteration occurred because of new Government 1 A Technical Annex and not a Project Appraisal Document (PAD) was developed for this project. 3

15 policies that included: adoption of Law 27/2006 where the National Board of Pensions (NBP) and the Pension Reform Management Office were created and assumed project management responsibilities, thereby replacing the Pension Reform Steering Committee and the Project Implementation Team. Details about these restructurings are presented in 1.7 below. 1.4 Main Beneficiaries The Technical Annex clearly identifies MOLSA and the MOF as the main beneficiaries. Through its support the Bank aimed to help move the government towards stronger implementation of fiscally sustainable social protection systems. With better information, provided through an MIS and digitized databases, the government would make policy choices and decisions that were anticipated to be better targeted to the poor and that were evidencebased. Government officials and employees from MOLSA and MOF were to benefit through capacity building carried out in training sessions, study tours, in the introduction of technologies that make work more efficient, and in an increase in operating costs that would lead to better coordination and project oversight. Ministry staff would also benefit from the introduction of new equipment that improved their work efficiency. Other ministries would benefit from this project by learning by example and witnessing the improvement in performance, management and policymaking when it was based on evidence and organized through an information system By supporting the Government in its quest to improve social protection policies, consistent with the NDS, the World Bank would support the government s efforts at improving living conditions for the most vulnerable and at risk citizens in Iraq. Finally, the general population would benefit from the project through the savings accrued by government as it was better able to manage and track its finances. 1.5 Original Components There was no Project Appraisal Document (PAD) but a Technical Annex for the original project. According to the Technical Annex, the project had three main components: Component 1: Safety Nets (estimated total cost US$6.36 million at appraisal). This component had two subcomponents: Subcomponent A: Information Systems Development. This subcomponent of the project supported: (i) supply and installation of IT systems and equipment to assist in scaling up the SSN Program; (ii) established a basic information infrastructure within MOLSA, including the development of an integrated database of safety net applicants and beneficiaries; and (iii) developed a monitoring and evaluation system for the program based on a central MIS. Subcomponent B: Institutional Capacity Building for Safety Nets Policy Development. This subcomponent focused on three areas of safety nets policy: (i) capacity building in data analysis and program monitoring; (ii) development of sustainable safety net program designs that replace generalized subsidies; and (iii) targeting and eligibility options. Activities included technical assistance and training for MOLSA staff inside Iraq as well as in other countries within and beyond the region to acquire needed skills. Component 2: Pensions (estimated total cost US$0.81 million at appraisal). This component would finance the preparation of baseline information and IT support for recordkeeping and policy analysis. It was to include: (i) conducting a representative survey of beneficiaries and contributors to the SPS; (ii) providing IT technologies to support digitization of pension records, recordkeeping, and pension policy analysis; (iii) training on data entry, database management (recordkeeping), and data analysis for pension policy making. 4

16 Component 3: Project Management (estimated total cost US$0.83 million). This component was to finance goods, technical assistance, training and operating expenditures necessary to manage project activities and ensure compliance with the grant s fiduciary requirements. 1.6 Revised Components None of the components were significantly changed. 1.7 Other significant changes Restructuring: The project underwent four restructurings: July 12, 2009; January 27, 2010; January 6, 2011; and June 28, The July 12, 2009 was a second order restructuring to: (i) reallocate Grant proceeds; and (ii) amend implementation arrangements of Component 2 of the project to account for the implementation of Law 27/2006. These changes were necessary for two reasons, firstly, the Unified Pension Law (27/2006 and related amendments) was enacted after project appraisal and resulted in a change in the coordinating body for Component 2 activities. As explained in section Secondly, MOLSA requested additional training and capacitybuilding for their staff The January 27, 2010 restructuring (i) extended the grant closing date from February 28, 2010 to February 28, 2011; (ii) reallocated the grant proceeds between disbursement categories. A Level Two Restructuring took place on January 6, 2011 to (i) reallocate grant proceeds, and (ii) extend the project closing date). This Restructuring was necessary to ensure that appropriate training was provided to MOLSA staff for the functioning SSN information system, and to provide sufficient operating costs for MOLSA to manage the project until closing. The extension of the closing date was necessary to make up for time lost during the enactment and subsequent receding of Law 18/2010, which separated MOLSA into two separate Ministries A Level Two restructuring was approved on June 28, 2012 to (i) extend the project closing date; (ii) reallocate Grant proceeds; and (iii) amend procurement processes in the TFGA so that Schedule 2, Section III D, paragraph I of the TFGA could be revised to read: The Procurement Plan shall set forth those contracts which shall be subject to the World Bank s Prior Review. All other contracts shall be subject to Post Review by the World Bank. These changes were necessary because: (a) the project needed more time to achieve the PDO; (b) requirements for equipment arose that were needed for the hardware to be compliant with the purchased software, and this added equipment required more training; (c) to help streamline and simplify procurement processes, allowing for increased reliance on the MOLSA s capacity Extension of closing date of the original project: The closing date was extended four times: (i) from September 30, 2007 to February 28, 2010; (ii) to February 28, 2011; (iii) to June 30, 2012, (iii) and finally to April 30, In all cases, the extension was given to allow sufficient time to complete all project activities Reallocation of grant proceeds: There were two reallocations of grant proceeds of the original project estimates. These were: 5

17 June 2, 2006 (original allocation) July 12, 2009 Second order Restructuring June 28, 2012 Level Two Restructuring 1. Goods 4,745,000 4,600,000 5,400, Consultant services 1,330,000 1,200, , Training, workshops and study tours 1,075,000 1,600,000 1,050, Operating costs 320, , , Unallocated 530,000 TOTAL 8,000,000 8,000,000 8,000, The first reallocation moved funds from the unallocated and consultants services categories into the Goods; Training, workshops and study tours; and the Operating costs categories (which represented more than 5% of the original grant amount). The final reallocation depicts shifting of funds into the Goods and Training, workshops and study tours categories as was approved as part of the Level Two restructuring on June 8, Key Factors Affecting Implementation and Outcomes 2.1 Project Preparation, Design and Quality at Entry Soundness of the background analysis: Recognizing the increase in the number of people living below the poverty line, the Government decided to increase the number of SSN beneficiaries to 1 million. This represented a significant jump (beneficiaries at that time were about 57,000) that put a strain on MOLSA s limited capacities that were not designed to handle these figures. The need for the project was evident, and the Task Team rightly identified and rated the risks associated with implementing this project. Considering this was an emergency project, it is appropriate to rank this as an acceptable level of effort. The project however, could have greatly benefited from a deeper analysis of the level of internal capacities at the Ministry to better anticipate the time needed to build up local capacity. Examples of how this could have been done include conducting a comparison of local context and country history with other country experiences or technical discussions with the Iraqi counterparts at various levels at the Ministry Assessment of project design: The Project was prepared in accordance with Emergency Recovery Assistance Procedures (Operational Policy 8.50, later replaced by OP 8.00 in 2007) and was consistent with the World Bank s second ISN. The Quality Assurance Group s (QAG) assessment of this project, completed in 2008, rated the project design as satisfactory because of (i) the precautionary measures taken under financial management and procurement; (ii) the ownership from the government and involvement of stakeholders; and (iii) and alignment with Bank strategies. The QAG report also recognizes the project as a building block towards institutional capacity for future development of appropriate policies, which should be aided by the ongoing household income and expenditure survey According to the Technical Annex, the project design built on past World Bank experience in both Iraq and conflictaffected regions by recognizing the difficulty of implementing technical assistance projects and needing to deliver quick and visible results. While this project, as an emergency project, had a straightforward and simple design, the design could have been strengthened had the following been taken into consideration: (i) the scope of the project was very ambitious and covered a total of 21 sites for just Component One; (ii) the three year project length was too short; and (iii) there were no visible quick wins for the first year of implementation built into the design. 6

18 2.1.4 At the design phase the project implementation time was considered too short to measure final outcomes and so no shortterm outcomes were identified and indicators were not quantified in the designed results Framework. The only intermediate measure identified was the ability of MOLSA and MOF to use information generated by the new systems for social safety net and pension decisionmaking. Considering the nature of the emergency project this is assessed as acceptable As noted in QAG Assessment, the project design provided opportunities for promoting social inclusion of the poorest and most vulnerable, as well as gender equity. The project also had strong stakeholder ownership and participation during design. Finally, the project was demanddriven, recipientexecuted, and established parameters for wider stakeholder consultation through the social safety net beneficiary assessment and pension survey. The QAG assessment did recommend that the project s focus could have been sharpened by addressing cultural and social barriers to the participation of women, and specific social development indicators could have helped measure social development outcomes Government Commitment. Though there were only three changes to the Minister in office, there were visible fluctuations in the commitment from MOLSA that depended on the commitment set by the Minister in office. During the design, preparation and negotiation of the project commitment was high. The 2005 NDS includes as one of its commitments: improving the quality of life through, among other things, investing in the social sectors, and in 2006 MOLSA placed priority on expanding and implementing programs targeted to the poor with specific attention to social safety nets. This was also confirmed in the QAG assessment, which recognized the commitment as good during negotiations In 2006, a new minister came into power and shifts in priorities occurred. Under his leadership project implementation continued at a slower pace and with some challenges. Specifically, training was postponed or had low participation. For example, the SSN study tours and the World Bank Fiduciary Training of January 2008 were not attended by any MOLSA staff. In addition, as noted in the Aide Memoire dated April 510, 2008, he was very reluctant to allow missions to occur outside of Iraq, which was and still is the norm for all Iraq projects given the security situation. According to the October 27 to November 1, 2007 Aide Memoire, the Project Management Office (PMO), on behalf of the Minister, informed the Bank of the need to decrease the number of missions and limit attendance from MOLSA all of which were against Bank recommendations These issues were resolved once the latest minister came to power in As noted in Annex 2 of this ICR, the Minister has been fully committed to the project and recognizes its value on all beneficiaries, his staff and the ministry in general Risk assessment. The overall risk assessment rating was high, reflecting serious concerns with the ability to operate on the ground, procurement, financial management and corruption as explained below. This was mitigated by designating a Fiduciary Monitoring Agent (FMA) that was to monitor and keep track of all financial activities. In addition, a project accountant, a financial officer, an M&E Officer, an internal auditor, and an external auditing firm were hired. The Task Team also worked with MOLSA to set up a project Designated Account; however, this was never established because of local restrictions set by the MOF Increased volatility and instability made it difficult to have World Bank presence on the ground leading to dependence on local consultants and the FMA to provide updates and monitor progress. Direct security threats to Ministry staff members, (e.g., as listed in ISR dated December 15, 2006 where the procurement officer received death threats) caused retention problems and decreased the efforts aimed at maintaining internal capacity. 7

19 It was accurately predicted, and given a high rating, that the lack of procurement experience and poor internal practices in Iraq would result in implementation delays. Initial mitigating measures as noted in the Technical Annex were appropriate, such as close Bank supervision and training in basic procurement. However, other unexpected risks, such as poor staff retention in the ministries, decreased the effectiveness of the mitigation measures It is important to note that the ESPP project was successful at mitigating the FM and procurement risks, which is a unique achievement for projects being implemented in Iraq during the same timeframe. Despite difficult security circumstances and high turnover of staff (another commonality happening in Iraq at implementation time) the Task Team was able to ensure the financial integrity of the project. 2.2 Implementation Project implementation faced significant challenges as overall implementation was first rated as unsatisfactory in September 2006 and then again in December 2007, which was maintained until June A mix of endogenous and exogenous factors resulted in the initial low implementation rating. During project appraisal it was assessed that procurement and financial management would be the greatest threats in postwar Iraq. However, the deteriorating security situation and increased volatility proved to be equally challenging and together all contributed to delays in project implementation Improved performance occurred in June 2010 and the rating was upgraded to moderately satisfactory. Following that point all overall implementation progress ratings were listed as satisfactory until project closing. Implementation improved because of better security and improvement in government capacity and commitment to project completion. By 2010, internal strife and sectarian violence in Iraq had decreased, allowing for smoother access and mobility across the country. This made it easier to follow up on project progress and to address any issues with installation and operation of equipment at project sites. Entering into 2011, a new Minister came into office and changed the PMO team and internal attitudes towards the project (as discussed in section and in Annex 2 of this ICR). With the new leadership and renewed recognition of the importance of this project, more efforts were placed on building internal capacity and implementation of the project The main factors beyond the Government s or implementing agency s control that influenced project implementation and project outcomes were: i. The deteriorating security situation across the country, which made it difficult to deliver goods on time, resulted in loss of data (cited in the Aide Memoire of February 2226, 2010), and made it difficult to hire and maintain staff within MOLSA; ii. The inability of the Bank Task Team to visit Iraq and work on the ground; iii. The weak implementation capacity within the country in general, resulting from years of isolation, wars and internal conflict; iv. The lack of familiarity of the ministry staff with modern technology and systems; v. The disbursement and payment delays that occurred because a designated account could not be opened; vi. Appreciation of the Iraqi Dinar (IQD) against the US dollar leading to shortages in cash flow; vii. The unstable political environment, enactment and rescinding of the Disengagement Law (Law 18), which halted project activities for 10 months. viii. For the first year, changes in leadership (for example, the 2006 Iraqi elections and new government formation that brought a new MOF team) caused a lack of continuity, less engagement as top leadership and some original team members were reassigned; The main factors under Government control that influenced project implementation were: 8

20 i. Coordination efforts within the PMO were very weak initially, making working relationships difficult, creating poor consistency and miscommunication; ii. Inefficient use of the project account (initially set up as a project restricted account) and lengthy payment processes, including setting up of a project bank account late and utilizing lengthy withdrawal/approval processes; iii. Implementation of Law 27/2006, resulting in changes to the management office as mentioned in section 1.3.1; iv. Government staff not participating in all missions and requesting a decrease in the number of missions per year; v. Delays by top leadership for all training and study tours in the initial years of project implementation, thus slowing the pace of capacity development; and vi. Protracted evaluation procedures for procurement documents and ineffective compositions for the Final Acceptance Committee, which were responsible for delays in installation and acceptance of equipment. 2.3 Monitoring and Evaluation (M&E) Design, Implementation and Utilization Design. According to the Technical Annex the project was initially assessed as a small Technical Assistance project that would be implemented over a short period of time, making it difficult to measure final outcomes. The PMO was given responsibility for monitoring, evaluation and reporting and an M&E Officer was assigned but left the post in March 2011 and the role was left unfilled until project closing During the MidTerm Review in October 2008, it was agreed that results monitoring would intensify. During that mission a stocktaking of the Results Framework and updated outcomes and indicators was undertaken resulting in a revised Results Framework. The revised Results Framework included the past indicators, actual results thus far and the revised indicators for success Seeing as the length of the project was extended it is reasonable to expect that the Results Framework would be improved upon as the urgency that existed during project design was no longer there. With this consideration, further effort could have been placed into designing a more robust framework Implementation and utilization. In the first few months of project implementation the M&E rating given by the Task Team was moderately unsatisfactory, which was changed in the second supervision mission (February 23 March 1, 2007) to satisfactory and remained so after the MidTerm Review and until project closing. Limited information is presented on M&E beyond the ratings in the ISRs suggesting little utilization of M&E. The security situation on the ground left the task team heavily dependent on anecdotal measures of implementation progress, which partially explains the less dependence on M&E. It is difficult to assess the effect stronger M&E measures would have had on implementation, but it is important to note that during the midterm review more effort could have been placed into designing a more detailed results framework for improved implementation and progress towards PDO. 2.4 Safeguard and Fiduciary Compliance Fiduciary monitoring agent. The ITF required that the Bank work with an FMA to help the Bank monitor physical delivery/progress and the recipients compliance with financial management and procurement procedures. Within this role the FMA visited all 21 sites for this project to verify the delivery, installation and use of all purchased hardware, and provided reports, verified with photographs, on the status and conditions of all 21 sites. The FMA attended all 13 implementation support missions where they were requested to share their reports with the teams through a presentation. The FMA provided onthejob training to the PMO staff and Ministry teams. The FMA s ontheground presence 9

21 and direct access to MOLSA kept the project on track, reduced fiduciary risks and ensured funds were spent according to their proper allocations Financial management and disbursement. The project financial resources were extended through the ITF and were managed within the framework of the MOLSA systems, regulations and controls. Iraq was defined by the Bank as a high risk weak control environment country, and so a financial management assessment was undertaken, remotely, through meetings with MOLSA representatives to assess its financial management system. The rating was high, based on this assessment and the following factors: (i) the security conditions; (ii) the weak banking system in Iraq; (iii) the fiduciary risk of the Grant not being used for the intended purposes, with due regard to economy, efficiency and the sustainable achievement of the project s development. The financial management risk as an element of the fiduciary risk was also high Though the financial risk was rated as high, the project did not have any major financial risks relating to corruption or mismanagement, which is often a risk associated with operating in postconflict environments. This was an especially grave problem with projects operating in Iraq during the time of project implementation; hence, the inexistence of any financial mismanagement is unique and an example of project success. The Task Team took the appropriate measures to mitigate the risk and established a relationship of transparency and honesty with the PMO making it difficult for any monetary allocations to be spent inappropriately. The measures undertaken by the Task team to manage the financial management risk included: (i) reinforcing the controls as applied by the MOLSA; (ii) the engagement of a dedicated financial officer and an accountant to manage the project financial activities; (iii) assigning an FMA; (iv) the timely engagement of an independent auditor, with international experience acceptable to the Bank, to perform the project audit and issue an independent auditor s opinion; and, finally (v) documenting FM arrangements in a chapter of the Project Implementation Manual Overall the financial reporting went very smoothly, with the PMO financial management team providing financial management reports on time that were found to be satisfactory. The PMO financial team, including the financial officer, the accountant and internal controller, participated in the majority of missions. An external auditor was hired by November 2007 and minor auditing issues were identified when the first audit report for 2007 was submitted and rectified in a timely fashion. When needed, additional training and the hiring of a financial management consultant was conducted provide support to the financial management team when shortages or changes in staff occurred (as stated in Aide Memoires dated October 1216, 2009 and February 2226, 2010) The main issues that arose during the initial phases of the project were (i) the delay in setting up of a project account due to cash flow shortages within the MOF and MOLSA; (ii) the depreciation of the IQD against the US dollar; and (iii) slow fund disbursement and payments to employees because of delays with setting up the project bank account. Both issues were rectified by the establishment of a project account (in IQD not US dollars as this was never approved) and the Bank reimbursing the Iraqi government for the losses incurred during currency exchange rate fluctuations following the delivery of appropriate documentation by the PMO (as noted in Aide Memoire October 27November 1, 2007) Procurement. According to the Technical Annex, procurement for the project would be carried out in accordance with the World Bank s Guidelines: Procurement under IBRD Loans and IDA Credits dated May 2004; and Guidelines: Selection and Employment of Consultants by World Bank Borrowers dated May 2004, and the provisions stipulated in the TFGA. For International Competitive Bidding (ICB) the Bank s Standard Bidding Documents for the procurement of Goods and the Procurement of IT (with appropriate modifications) would be used. For procurement of Goods under National Competitive Bidding, Master Implementation manual standard bidding documents in Arabic or English were to be used. 10

22 2.4.7 In 2005, the World Bank conducted an Operational Procurement Review (OPR) of the public procurement system in Iraq to help enhance the Bank s knowledge of the overall procurement system in Iraq. The OPR revealed that the procurement environment that prevailed in Iraq during the last two decades was different from the norms of acceptable international practice. The major issues facing public procurement in Iraq was the uncertainty of public procurement laws and regulations that caused high risk within a weak control environment. The risk was rooted in the lack of good laws and regulations, modern standard documentation, lack of trained concerned staff in procurement using World Bank guidelines and international procurement practices, and in the lack of law enforcement which would increase the risk management. The overall procurement risk assessment was judged to be high, thus requiring a qualified procurement officer to be dedicated to the project as well as intensive formal and onthejob training to the PMO on procurement and project management The ICB process did not prove to be successful in Iraq. In the first information technology bid, according to the Aide Memoire dated February 23March 1, 2007, 22 companies purchased the bidding documents but only one company presented a bid by the deadline, and two presented bids after the deadline and were thus rejected. The Iraqi bid opening committee delayed bid opening for a month (seeing as opening just one bid was against procurement guidelines in Iraq). The bid was eventually rejected because it was significantly higher than the estimated cost of US$829, The Bank rightly expected to encounter challenges with procurement and when the ICB method failed, the procurement team quickly mobilized and proposed a new approach. The use of the Shopping Method for procurement of IT equipment instead of ICB was proposed, and once used proved to be successful. The Shopping Method consists of repackaging the contracts into smaller sizes using shopping procedures in response to the capacity of the local private sector enterprises. Using the Shopping Method from local markets resulted in 20 percent savings compared to the use of ICB, equaling US$1,397,191, as it proved to be more efficient, economical and responded to conditions of local markets. With the savings incurred, the Project was able to purchase additional equipment and build a Simulation Training Center Some of the means by which the new approach to procurement adapted to local market conditions, and thus made it more successful, include: (i) changing the procurement packages to numerous smallervalue contracts; (ii) removing constraints such as bid guarantee requirements and high financial capacity for firms; (ii) publicizing the procurement opportunities broadly even for lower value contracts; (iv) allowing alternative guarantees for security requirements; (v) streamlining and simplifying procurement and related administrative procedures; (vi) and ensuring timely payments to the contractors As the project progressed, other delays to procurement were encountered. Frequent changes with the PMO Procurement Officer caused delays as the new officers had to be trained and become familiar with World Bank practices. There was also the more significant delay of the enactment and subsequent rescinding of Law 18/2010, the Disengagement of the Social Affairs Directorates from the Ministry of Labor and Social Affairs, which green lighted the creation of two separate Ministries and functioning units under each Ministry. When the law was enacted all procurement activities were put on hold, as it was unclear how the project was going to move forward with the change. Some of the effects of the law resulting in a halt of implementation include, causing a change in the grant recipient (requiring an amendment to the Grant Agreement) and changes in the national strategies relating to poverty targeting. Within six months the law was rescinded, along with the changes, and project activities were reinstated Other factors that caused delays to procurement included: (i) sites not ready to accept equipment largely as a result of poor coordination with MOLSA; (ii) coordination difficulties between the PMO, SSN Department and implementing partners; and (iii) low capacity in the PMO and SSN Department for timely completion of technical specifications, bidding documents and evaluation. The project also 11

23 witnessed significant delays from the Acceptance and Evaluation Committees who feared taking decisions because of the ongoing practice of blaming individuals (PMO staff, or evaluation teams) for any perceived mistakes and punishing them with high fines and penalties. The Committees caused delays in: (i) preparation and submission of bidding and proposal documents; (ii) evaluation reports and recommendation to award; and (iii) approval and payment of invoices. The delays in making decisions led to overreliance of PMTs on World Bank s project and procurement staff with respect to procurement and management issues, and trying to involve World Bank staff in their decisions The World Bank worked in collaboration with the Government to adopt mitigating measures to ensure timelier implementation of project activities, including: (i) setting an evaluation deadline of 23 weeks; (ii) limiting committees to 35 qualified staff who had clarified roles as set by the Project Operations Manual; (iii) undertaking a readiness analysis of all remaining installation sites; (iv) ensuring that the SSN Project Coordination Office (PCO) would be activated to address coordination issues; and (v) recruiting an IT specialist to help with capacity Lessons learned from using the ICB and switching to Shopping Method included: (i) cost escalations were occurring due to high inflation, implementation delays, and the country s security situation causing differences in bid prices and estimated costs. The Ministry should have obtained estimated market prices and revised cost estimates for each item listed in the appraisal cost tables; (ii) local markets should be tested where the PMO tests the market by shopping procedures for limited items on the IT equipment list; (iii) lack of capacity within the local private sectors required the simplification of bidding documents and prebid meetings held for each tender; (iv) lack of familiarity with World Bank guidelines and procedures presented a major challenge for PMO trained Procurement Officers, thus, requiring a local consultant to work with the PMO Disbursement. Disbursement was slow in the initial years of project implementation (as displayed in Figure 1) because of the slow project implementation and delays explained in section Safeguards. No environmental and social safeguards were triggered by this project. 2.5 Postcompletion Operation/Next Phase Project sustainability has been assured as MOLSA has put into their annual budget sufficient resources to maintain the inputs provided through ESPP, including budgets for software and hardware maintenance, and funding for connectivity costs. The project closed before MOLSA was able to contract a Service Level Agreement (SLA) for the SSN Information System. The SLA is an agreement with a third party that would fix any maintenance issues with the SSN. MOLSA indicated their staff have gained sufficient capacity (through knowledge transfer and official training) to minimize the risks associated with the period of time that an SLA is not in place. It is not yet clear when an SLA will be signed The work carried out under Component 2 led to securing technical assistance to support implementation of Law 27/2006. The Pension Reform Implementation Support Technical Assistance 12