PROJECT INFORMATION DOCUMENT (PID) APPRAISAL STAGE REPORT NO AB2694

FEDERAL EMERGENCY MANAGEMENT AGENCY PROJECT WORKSHEET OMB NO
DATE INDIANA DEPARTMENT OF TRANSPORTATION ATTN INDOT PROJECT MANAGER
LYNLEY SHIMAT LYS MIAP INTRO FINAL PROJECT HADASSAH FILM

PROJECT NAME NJDOT SCOPE STATEMENT TSM LIMITED SCOPE FINAL
[PROJECT NAME] PARTNERSHIP STORY AGENCY PROJECT CONTACT NAME LOCATION
UNDP PROJECT DOCUMENT GOVERNMENTS OF

PROJECT INFORMATION DOCUMENT (PID)

PROJECT INFORMATION DOCUMENT (PID)

APPRAISAL STAGE

Report No.: AB2694

Project Name	ADDIONAL LOAN FOR THE SOCIAL INVESTMENT AND EMPLOYMENT PROMOTION PROJECT
Region	EUROPE AND CENTRAL ASIA
Sector	Other social services (50%);General water, sanitation and flood protection sector (20%);Health (15%);General education sector (10%);Sub-national government administration (5%)
Project ID	P104272
Borrower(s)	REPUBLIC OF BULGARIA
Implementing Agency	Ministry of Labor and Social Policy 2, Triaditza St. Bulgaria 1000
Environment Category	[ ] A [ ] B [ ] C [X] FI [ ] TBD (to be determined)
Date PID Prepared	November 21, 2006
Date of Appraisal Authorization	November 15, 2006
Date of Board Approval	March 20, 2007

Country and Sector Background

While Bulgaria has made impressive progress towards long-term stability and sustained growth over the last seven years, serious challenges remain in addressing persistent pockets of poverty. As a result of macroeconomic stability policies and structural reforms, average growth reached the levels of the eight EU New Member States (EU8) at about 5 percent per year in 2000-04 (estimated at 5.6 percent in 2005), and inflation has declined to single digits from hyperinflation levels. Unemployment also declined from 18 percent in 2000 to below 10 percent in early 2006, but masks continued low labor market participation. Despite rising living standards, Bulgaria continues to face deep pockets of poverty and social exclusion.

Objectives

The original Project Development Objective is to improve the standard of living of people who are locked in persisting “pockets” of poverty in Bulgaria, concentrated regionally, among the long-term unemployed and among specific ethnic minorities. Because these targeted vulnerable groups suffer from multiple disadvantages (e.g., exclusion, weak social capital, poor access to markets and basic services, low employment, low income), the project will achieve its objective through complementing the existing, relatively good social protection system by offering a range of instruments, all focused on building assets - individual and communal - of poor and vulnerable people living in these pockets.

Under the additional loan, the overall Development Objective of the project remains unchanged.

Within the context of the original objective, using its operational flexibility the project will emphasize efforts to make better use of opportunities presented by Bulgaria’s accession to the European Union.

Rationale for Bank Involvement

As noted in a communication by the Government from their latest special Council of Ministers session, technically the EU structural funds will not be available to the country immediately after accession in 2007. Therefore the country needs to pre-finance the programs and projects that it counts as eligible under the Operational Programs. As the EU structural funds are not expected to be available to the country immediately after accession in 2007, the country will need to pre-finance through 2008 the programs and projects that could be eligible for structural fund financing and reimbursed based on the Operational Programs (OPs) agreed between the Bulgarian Government and the EU for funding with EU budget funds during the period 2007-2013.. Additionally, the country will have to finance with its own resources those elements of the programs that are priority investments, but are not included in the OPs agreed with the EU.

It is therefore expected that the programs implemented by the Social Investment Fund may respond and cover both needs – part of the SIF programming could go to municipal-level and community-level projects for which there is strong demand and which are not covered under any of the operational programs and part could pre-finance activities that are eligible for EU financing. Importantly, extension of the SIEP project could provide the government with a ready instrument for developing capacity at central and local level for the absorption of EU funds, once they are available in late 2007 - early 2008.

To be able to accomplish the above, SIF will need to continue the implementation of its main activities and especially of the community and municipality subprojects during part of 2007 and 2008.

Under the original Loan Agreement (with a current closing date of December 31, 2007 and less than EUR 3 million available for commitments towards CIDI component microprojects), the SIF would not be able to maintain a full annual investment program with this amount of funding.

The CIDI is the component that will benefit from the additional financing. This component addresses issues related to empowerment and integration of targeted communities and of inadequate access to basic infrastructure and services by allowing communities to identify and to manage development investments of greatest local priority. It is expected that the investments will also lay the groundwork for improved market access and human capital development — preconditions to enhancing employment opportunities and reducing poverty.

Though the BALMI component will not benefit from the additional financing, it will continue to contribute to the achievement of the common SIEP project development objective – using multiple instruments to target poverty. BALMI identifies medium-term economic and labor trends information and provides active labor services to assist economically disadvantaged individuals in poor communities to extend and use their human capital productively, particularly in the context of changing economic and labor market conditions. BALMI is expected to quickly gain access to EU structural funds or budget funds and thus continue to run in parallel to CIDI and support the PDO. The original loan amount is EUR 50.8 million; the original objectives and description of the Project are not modified in the Loan Agreement for the additional loan. The original Loan was approved on December 17, 2002 and became effective on April 15, 2003. The proposed additional financing of Euro 15.0 million, scaling up the CIDI component of the Project, would increase the total loan amount by approximately 30% and its Closing Date would be December 31, 2008.

Description

The original project is designed to target poor communities and individuals with a complex of small community projects, small municipal social infrastructure and individual employment programs in order to attack poverty from multiple angles. The scaled up activities will continue the implementation of municipal and community microprojects in disadvantaged communities, as these are evaluated highly by the beneficiaries.

The scaling-up of SIEP is fully in line with the newly-approved Bulgaria Country Partnership Strategy. The CPS has a focus on strengthening institutional capacity and public finance management for improved service delivery, fiscal sustainability and effective absorption of EU funds and on promoting social and environmental sustainability, by addressing pockets of poverty, social exclusion, regional disparities, and structural unemployment through supportive social policies, by better targeting of social programs. The proposed additional financing of SIEP will ensure that the SIF institution will have more time to adjust to the requirements posed by the EU membership of Bulgaria.

In view of the expected regulations for the EU structural funds, the Municipal Financing Window of the CIDI component is not well positioned to absorb funds under the Human Resources Operational Program from the European Social Fund (managed by the Ministry of Labor and Social Policy), as the European Social Fund (ESF) finances very limited amounts of infrastructure. Some of the SIF’s traditional municipal portfolio – in the urban and peri-urban areas -- could eventually be funded through the European Regional Development Fund (ERDF) and the related Regional Development Operational Program under the Ministry of Regional Development and Public Works. However, non-agricultural-related investments (especially social infrastructure) in smaller, more rural communities are currently excluded from the financing streams of the various Operational Programs. Therefore, SIF can act as a complementary financier of such programs for municipalities, while looking for non-Bank sources of funds to continue this type of work. On the other hand, the SIF Community Financing Window links well to the EU concept of community in disadvantaged areas (e.g. the LEADER+ concept) and SIF can contribute by supporting, through the Community Financing Window, the establishment of LEADER+ community bodies and by providing seed funds (microproject funds) to such communities during 2007-2008, until EU funds become available.

Therefore, the following indicative use of the supplemental funds is proposed:

EUR 12 million to be added towards the CIDI Municipal Financing Window to fund social infrastructure that will not be covered by the Operational programs normally covering infrastructure – examples of such infrastructure are municipal educational and health infrastructure, and social homes in smaller, more rural communities. At the same time, SIF will continue to explore options for continued financing of these programs beyond 2008 through some of the Operational Programs that have some funds for social infrastructure (e.g. OP Regional Development.)
EUR 3 million to be added towards the CIDI Community Financing Window. However, the Community Financing Window will work towards developing the EU model for funding disadvantaged communities and the LEADER approach. Close to 20 such community initiative groups have already been created, but this is insufficient to cover the whole country. Moreover, funding from the EU for these groups under the Rural Development Program will probably not be available before 2008. It is therefore suggested that SIF fund (i) technical assistance microprojects to build communities eligible/able to apply for EU financing; and (ii) microproject seed funds to finance community development priorities as set up in the community development strategies under the LEADER model.

Financing

Financing Plan (Euro)

Source

Total

Borrower

IBRD/IDA

Others (Municipalities and Communities)

Total

1,000,000

15,000,000

3,000,000

19,000,000

Implementation

The project is steadily moving towards meeting its development objectives. Information on outputs and outcomes, though still needing improvement, is confirming this direction. While the project, under the existing Loan Agreement, still has one year to be implemented and around 15% of the original Loan funds to be disbursed towards community initiatives, already close to 500,000 people (the end-project target) have benefited from the small social infrastructure improvements and services on municipal and community level through 327 demand-driven subprojects. More than 730,000 man-days of temporary and permanent work have been created, which is already 105% of the planned job creation one year before current project closing date. As many as 1250 people employed under the infrastructure microprojects are long-term unemployed (with Bulgaria improving its unemployment record, long-term unemployed remain a category of particular importance). In addition, under the Direct Community Financing subcomponent of the CIDI component, the project has assisted the creation of 55 community organizations able to prepare and apply for project funding. As part of the non-employment related social impact of the microprojects, more than 101 communities have been linked to tap water or have received improvements in the quality of their water supplies or sewage systems; 114 schools and kindergardens have been refurbished to provide better learning conditions to children and to gain energy efficiency benefits; and 73 municipal social centers, facilities for disabled people, orphanages and elderly homes have been improved for the benefit of their inhabitants. These are significant achievements for a country the size of Bulgaria with 263 municipalities and less than 8 million population.

Under the additional loan, overall the implementation arrangements will remain the same as for the original project, with the Social Investment Fund being the main administrator of the project. The Bulgaria SIF is a national institution set up by a special act of legislation (the Law on the SIF) and has fully-staffed administration financed by the budget. The project’s implementation is fully integrated within SIF, with no separate PIU arrangements. The SIF itself is governed by a Steering Committee (Management Board) where the Government is represented by 4 out of the 12 seats while the other seats are taken by social partners (employer and labor organizations of various types). Local–level consultations that in the original project were directed through the Regional Employment Commissions (currently restructured) will remain as a part of the consultation process, through the consultation mechanisms used for national and EU investments. This consultation process will be described in the Operational Manual, to be approved before effectiveness.

Some changes to the project Operational Manual will be proposed to further help strengthen the partnerships with local and central stakeholders. Submission of a revised Operational Manual, acceptable to the Bank, is a condition of Loan effectiveness.

Sustainability

The project is showing excellent sustainability prospects because the additional financing also aims at helping SIF develop into an institution that facilitates the absorption of EU structural funds by communities and municipalities. This will further strengthen the importance of SIF and will contribute to the sustainability of the project results. All main project ratings are satisfactory. The CIDI component showed excellent performance in the first half of 2006, boosting disbursements and implementing a total of 327 microprojects. Feedback from beneficiaries is excellent, and demand for the SIF services through CIDI is a proof of the high esteem that local governments and communities are placing on the project.

Achieving sustainability through becoming part of the national EU integration process was envisaged at the early stages of project preparation in 2002. As noted on p. 4 of the PAD of the SIEP Project, “preparing for EU accession as a priority of the CAS is also addressed through the overall strengthening of the SIF institution that will result directly from project implementation. In addition to covering the immediate short- and medium-term poverty alleviation objectives, in the future, a strong SIF could grow into a broader instrument for channeling EU structural funds. Building appropriate instruments for implementing EU structural funds is one of the significant accession challenges before Bulgaria.”

Safeguard Policies (including public consultation)

The expanded activities do not change in any way the environmental implications of the project. The Environmental Category remains FI. The Midterm Review of the Project in May 2005 concluded that as far as ecology and environment are concerned no significant shortcomings have been found. The execution of construction works does not have a negative environmental impact. The sites are disposed of waste regularly and in a harmless way. The waste is not toxic or dangerous for the environment or the people. It is transported to spots appointed by the municipalities where all precautions in line with environmental legislation have been taken. The final output of the microprojects, financed by the World Bank, has lead to preservation and even improvement in local environment. It is quite true where external water pipes, heating installations (boilers), sewer systems and grassing are concerned.

Design preparation includes an Evaluation of Environment Impact and it is used as one of the criteria for a project to be financed. No ecological or environmental harm has been caused in the process of implementation. The sites are either in built-up areas or outside villages. When underground structures have been laid on arable land or meadows, recultivation using humus has been carried out. Thus the soil has been restored. In case that a completed microproject is in a built-up area, the surroundings have been developed in relation to its purpose /parks, bowers, pavements, etc. have been set up/. As a result the environment has been improved in the areas with completed microprojects. Everywhere after the final phase of implementation the temporary structures have been pulled down. All the waste has been taken away and adequate surroundings have been provided, the good environmental impact is due to the appraisal process organized by the SIF technical team. Microprojects that did not fit the environmental requirement of Environmental Protection Act, The Protected Areas Act and The Water Law were not financed.

Despite the different types of construction works and the need for excavating the ground, nothing of cultural value has been destroyed. The SIEP Operational Manual mandates that no SIF microprojects will be approved if they are on territory which is a part of a protected area.