Country: Serbia. Initiation Plan. Development of Youth Employment Bond

Transcription

1 United Nations Development Programme Country: Serbia Initiation Plan Project Title: Expected CP Outcome(s): Development of Youth Employment Bond By 2020, there is an effective enabling environment that promotes sustainable economic development, focused on an inclusive labour market and decent job creation Initiation Plan Start Date: 01 January 2017 Initiation Plan End Date: 31 May 2017 Implementing Partner: Brief Description Youth unemployment continues to be a global challenge and a pressing concern for many governments worldwide. In Serbia, almost half of the youth population is unemployed. Exclusion from the labour market has serious economic and social impacts with high cost for the society. Long-term unemployment at young age has particularly long lasting consequences. Currently there are over long-term unemployed youth in Serbia and only 25% of them are included in the active labour market programmes. This leaves room for new and innovative ways of engaging youth into the labour market. Social Impact Bond (SIB) is a financial impact investment instrument where private investments are aimed to create a positive social impact with financial return. Based on the successful employment SIBs established in Europe, is creating Serbia s first SIB and experimenting its feasibility to tackle the high youth unemployment rate in Serbia. The initiation phase will focus on the development of the Youth Employment Bond together with local partners and Finnish Innovation Fund Sitra. Programme Period: Atlas Award ID: PAC Meeting Date Total resources required USD Total allocated resources: USD Regular USD Other: o Donor o Donor o Donor o Government Unfunded budget: In-kind Contributions Sitra Agreed by :

2 I. PURPOSE The youth unemployment rate is very high in Serbia, and requires special attention and innovative ways to tackle the challenge. The youth is recognized as a vulnerable, hard-to-employ category. The youth unemployment rate in 2015 was 43.2%, which is significantly above the general unemployment rate in the country (18.2% for the population of working age 15-64). This results in high direct and indirect costs to the society. Youth exclusion and disengagement from the labour market has serious economic and social implications for individuals, communities and societies. To estimate the cost of youth unemployment to the Government of Serbia, conducted an analysis on the NEET youth, meaning years old youth neither in employment, education or training. Direct costs are multiple and include for example social benefits, foregone taxes and contributions and forgone productivity. The most obvious costs are the different social benefits that the Government is paying for unemployed people and the income tax that the Government is losing while the people are out of work. By using these two clear metrics, the cost of youth unemployment to Government is 0.6 billion Euro per annum, accounting for 0.5% of GDP of Serbia. If the foregone wages and the estimation for productivity loss were added, it would push the cost up to 1.6 billion Euro annually. It is clear that direct costs of unemployment are much higher than the current investments in active labour market programmes that bring young people back to the labour market. However, this estimation leaves the most indirect costs out, such as social isolation, loss of skills and competences, cost to the health system resulting from worse health outcomes, or higher levels of crime and anti-social behaviour, which are much harder to monetize. Detachment from the labour market leads to skills degradation but in many cases individuals that were unemployed for relatively longer time spells reduce efforts to re-enter the work force through reduced intensity and persistence on job search. The decline in motivation not only impairs the capacity to search for employment in the future, but will also reduce subsequent job performance. If all the indirect costs would be added to the estimation, the cost to the society would multiply significantly. Long-term unemployment has a particularly adverse effect on youth and their position on the labour market. The longer a young person is removed from employment or training, the worse the longterm consequences for the individual and the economies are. Young people that were unemployed in their early life are more likely to be unemployed and to have poorer employment outcomes in the future, dependent on social welfare later in life, likely to be less paid due to forgone work experience and missed opportunities to develop skills (the effect known as scarring) and have more pronounced mental and physical illnesses youth in Serbia are unemployed for over one year (in 2015), which is over half of the unemployed youth (50.9 per cent) of them have been unemployed for over two years, which comprises over 67 percent of the long-term unemployed youth in Serbia. The key problems the young long-term unemployed face on the labour market are skills erosion and discouragement alongside the reluctance of employers to hire them as employers more readily recruit fresh graduates. Also, only c. 25 % of the long-term unemployed youth is included in the active labour market programmes other than counseling. Therefore, the following key services currently lacking to support the long-term unemployed youth to more effectively enter the labour market have been identified: Individualized counseling and intense job search support Youth adapted motivation and activation support Career guidance Effective enterprise outreach to provide on-the-job training and work experience and reintegration to the labour market Public works effectively promoting labour market attachments and skills development Entrepreneurship support, with a focus on sustainability Continuous follow-up after employment in the period of two years 2

3 To tackle the challenges and negative impacts of long-term youth unemployment, together with Finnish Innovation Fund Sitra and the Government of Serbia will develop a Youth Employment Bond with the Social Impact Bond (SIB) mechanism. Social Impact Bond is a result-based financial instrument for impact investing, where private investments are intended to create a positive social or environmental impact as well as a financial return. Typically, SIBs have been designed to help reform public service delivery. Impact investing opens up an innovative way to engage private sector to bolster global sustainability further together with public sector and service providers. It creates incentives for service providers to improve their performance through results-based contracting where the impact of the services has to be measurable. Also, it reduces the funding risk of public sector as the outcome payers (usually the government or municipality) agree to pay and reward investors only if outcomes are achieved. Thus taxpayer s monies will be invested only in programs that have measurable impacts and that either create savings or improve social welfare. Photo 1: A basic SIB structure The first SIB was launched in 2010 in UK and by now 60 SIBs have been commissioned worldwide across Europe, Australia, Canada and the United States. SIBS have raised over $200m of capital and touched over 90,000 lives 1. Almost half of the SIBs are focusing on employment, while others are covering areas such as health, homelessness, child welfare, education and criminal justice. There is a strong focus on preventive and early intervention measures. There are successful examples of youth employment projects with SIB modality. For example, the ThinkForward programme supported 1050 disengaged young people in 14 schools in north-east London to achieve a successful transition from school to work. Through the success of the programme, over ninety percent of young people aged 18 progressed into further education, employment or training and thus investors have reaped a financial return 2. Finnish Innovation Fund Sitra has launched two SIBs in Finland on occupational wellness and fast integration and employment of immigrants. In addition, they are currently developing three more bonds focusing on wellbeing of children, families and youth, support elderly independence and advancing employment. To build up on their expertise and experience on developing employment 1 Social Finance Social Impact Bonds The Early Years. 2 ThinkForward

4 SIB in Finland, Serbia is collaborating with SITRA in developing Serbia s first Social Impact Bond. II. EXPECTED OUTPUT Due to the Serbia s exceptionally high unemployment rates, the youth unemployment was selected as Serbia s first pilot for SIB modality. The Initiation Plan will contribute to one output: Social Impact Bond financial instrument developed to Serbian conditions through Youth Employment Bond pilot. The initial phase of the project will focus on the development of SIB modality taking into account the local conditions such as the legal and financial framework, the market of service providers and policy implications. The initiation plan will include following activities: 1. Designing of the SIB framework to Serbia The first activity will focus on designing a detailed operational and financial modality of the social impact bond adapted to Serbian legislation and financial framework. It will agree on the detailed roles of the stakeholders, management costs and needed funding structure and contract types for the first pilot. This phase of the initiation plan also includes the procurement of the fund manager, who will be in charge of financial management of the Youth Employment Bond. 2. Youth Employment Bond programme design Target group analyses This activity will focus on the data collection and analyses to be able to set up detailed criteria for the long-term unemployed people participating in the programme and to plan the interventions for their needs. This will be done by analysing the historical data on the trends of the long-term youth unemployment and by identifying the main causalities. Programme design This part will include the designing of the intervention strategy and the timeline for the implementation. The main service gaps and potential service providers will be identified and target group specific service lines will be designed. Also employment market and skills analyses will be executed. Modeling of the impact Modelling of the impact will be done to set up the social and financial targets of the bond. This includes also defining the outcome metrics and illustrating the targeted savings for the government and estimating the funding requirements. 3. Stakeholder engagement Engagement of the stakeholders will be done throughout the initiation phase by focusing on communication through events such as investors conference and continuous consultations with investors, service providers and intermediaries, as well as potential employers and outcome payers. After the initial phase of developing the modality, the implementation phase will focus on tackling long-term youth unemployment through innovative results-based service provision aiming to increase youth employment. After the first pilot, the feasibility of the SIB modality will be evaluated to estimate its scalability into other employment programmes as well as other development areas. 4

5 III. MANAGEMENT ARRANGEMENTS The Project Board is responsible for making management decisions for a project by consensus, including recommendation for approval of project plans and revisions, when guidance is required by the Project Manager. In order to ensure s ultimate accountability, Project Board decisions should be made in accordance with corporate standards that shall ensure best value to money, fairness, integrity transparency and effective international competition. The project board will: Provide overall leadership, guidance and direction in successful delivery of output and their contribution to outcomes under the programme; Be responsible for making strategic decisions by consensus, including the approval of project substantive revisions (i.e. changes in the project document); Approve annual work plan, annual reviews, and other reports as needed; Meet at least once a year (either in person or virtually) to review project implementation, management risks, and other relevant issues; Address any relevant project issues as raised by the Project Manager; Provide guidance on new project risks and agree on possible countermeasures and management actions to address specific risks. The Project Board will consist designated representative and representatives of the Youth Employment Bond Task Force (Office of the Prime Minister, Ministry of Youth and Sport, Ministry of Labour, Employment, Veteran and Social Affairs, National Employment Service, Inclusion and Poverty Reduction Unit). The Group s key roles will be as follows: (a) Executive representing the project ownership to chair the group. The role will be performed by the designated representative, who shall be the decisive power if the opinions of senior supplier and senior beneficiary do not reach compromise. (b) Senior Supplier to provide guidance regarding the technical feasibility of the project. This role will be held by designated representative that can be same as the Executive; and (c) Senior Beneficiary to ensure the realization of project benefits from the perspective of project beneficiaries. It will be held by representative of beneficiaries of the project. Project Manager will be responsible for the day-to-day management of the project and decisionmaking within the agreed tolerances of time, cost and quality. Project Assurance supports the Project Board by carrying out objective and independent project oversight and monitoring functions. This role ensures appropriate project management milestones are managed and completed. The Project Assurance role is delegated by the Project Board to Programme Officer. Project Support role provides project administration, management and technical support to the Project Manager as required. It is necessary to keep Project Support and Project Assurance roles separated in order to maintain the independence of Project Assurance. Project Support role will be performed by the Programme Associate. 5

6 Project Organisation Structure Project Board Senior Beneficiary Government of Serbia Executive DRR Senior Supplier Project Assurance Programme Officer Project Manager Project Support Programme Associate IV. MONITORING In accordance with s Programme and Operations Policies and Procedures, the project will be monitored following the corporate standards and requirements. Within the annual cycle Annual Review Report. An Annual Review Report shall be prepared by the Project Manager and shared with the Project Board. Annual Project Review. Based on the above report, an annual project review shall be conducted during the fourth quarter of the year or soon after, to assess the performance of the project and appraise the Annual Work Plan (AWP) for the following year, if needed. The review is done by the Project Board and may involve other stakeholders as required. It shall focus on the extent to which progress is being made towards output. The Project Manager will ensure that the project data is captured in corporate platforms and systems (e.g. Atlas, Corporate Planning System, Results-Oriented Annual Report etc.). 6

7 V. ANNUAL WORK PLAN YEAR: 2017 EXPECTED OUTPUTS And baseline, indicators including annual targets Output: Social Impact Bond financial instrument developed to Serbian conditions through Youth Employment Bond pilot. Indicators: 1. Number of secured outcome payers 2. Number of procured fund managers 3. Number of identified service providers PLANNED ACTIVITIES List activity results and associated actions 1. Designing of the SIB framework to Serbia Results: Operational and financial model defined Fund Manager of the Bond procured and contracted TIMEFRAME RESPONSIBLE Q1 Q2 Q3 Q4 PARTY Funding Source x x PLANNED BUDGET Budget Description Contractual services (individual): impact investing expert Contractual services (individual): legal expert Amount Baseline: Targets: Related CP outcome: By 2020, there is an effective enabling environment that promotes sustainable economic development, focused on an inclusive labour market and decent job creation 2.Youth Employment Bond programme design Results: Data package collected, target group analyses executed Intervention strategy developed, market and skill analyses report submitted Social and financial targets, outcome metrics, funding requirements defined 3. Stakeholder engagement Results: Investors conference and stakeholder consultations carried out Sitra x x x x Travel National consultant National consultant 71300: employment expert Contractual services (individual): data modelling expert Communication Conference Travel In-kind contribution Miscellaneous TOTAL (programmable amount) DPC DPC GMS GMS GRAND TOTAL