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Document of The World Bank FOR OFFICIAL USE ONLY Report No: 34924-TJ PROJECT APPRAISAL DOCUMENT ON A PROPOSED GRANT IN THE AMOUNT OF SDR 3.5 MILLION (US$5 MILLION EQUIVALENT) TO THE REPUBLIC OF TAJIKISTAN FOR A PUBLIC SECTOR REFORM PROJECT May 25,2006 Europe and Central Asia Europe and Central Asia Poverty and Economic Management Sector This document has a restricted distribution and may be used by recipients only in the performance o f their official duties. Its contents may not otherwise be disclosed without World Bank authorization. Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized

FOR OFFICIAL USE ONLY - World Bank€¦ · Report No: 34924-TJ PROJECT APPRAISAL DOCUMENT ON A PROPOSED GRANT IN THE AMOUNT OF SDR 3.5 MILLION (US$5 MILLION EQUIVALENT) TO THE REPUBLIC

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Page 1: FOR OFFICIAL USE ONLY - World Bank€¦ · Report No: 34924-TJ PROJECT APPRAISAL DOCUMENT ON A PROPOSED GRANT IN THE AMOUNT OF SDR 3.5 MILLION (US$5 MILLION EQUIVALENT) TO THE REPUBLIC

Document o f The World Bank

FOR OFFICIAL USE ONLY

Report No: 34924-TJ

PROJECT APPRAISAL DOCUMENT

ON A

PROPOSED GRANT

IN THE AMOUNT OF SDR 3.5 MILL ION

(US$5 MILL ION EQUIVALENT)

TO THE

REPUBLIC OF TAJIKISTAN

FOR A

PUBLIC SECTOR REFORM PROJECT

May 25,2006

Europe and Central Asia Europe and Central Asia Poverty and Economic Management Sector

This document has a restricted distribution and may be used by recipients only in the performance o f their official duties. I t s contents may not otherwise be disclosed without World Bank authorization.

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Page 2: FOR OFFICIAL USE ONLY - World Bank€¦ · Report No: 34924-TJ PROJECT APPRAISAL DOCUMENT ON A PROPOSED GRANT IN THE AMOUNT OF SDR 3.5 MILLION (US$5 MILLION EQUIVALENT) TO THE REPUBLIC

CURRENCY EQUIVALENTS

(Exchange Rate Effective 1.10.2006)

Currency Unit = US$ Tajikistan Somoni (TJS) 3.20 = US$1

US$ = TJS0.3125

A C U ADB BEEPS CIS CSD DER1 DFID ECA EOP EU FIAS FSU IBRD IDA IFC IMF MDG MIGA MoET MLSP MoF M o H MoJ MTBF N D S PAD PARS PCN PDO PDPC PEIR PIP PPIAF PRSP PSD

FISCAL YEAR January 1 - December31

ABBREVIATIONS AND ACRONYMS Aid Coordination Unit Asian Development Bank Business Environment and Enterprise Performance Survey Commonwealth o f Independent States Civ i l Service Department Department for Economic Reform and Investment Department for International Development (UK) Europe and Central Asia Executive Office o f the President European Union Foreign Investment Advisory Services Former Soviet Union International Bank for Reconstruction and Development International Development Association International Finance Corporation International Monetary Fund Millennium Development Goals Multilateral Investment Guarantee Agency Ministry o f Economy and Trade Ministry o f Labor and Social Protection Ministry o f Finance Ministry o f Health Ministry o f Justice Medium Term Budget Framework National Development Strategy Project Appraisal Document Public Administration Reform Strategy Project Concept Note Project Development Objective Programmatic Policy Development Credit Public Expenditure and Institutional Review Public Investment Program Public Private Infrastructure Advisory Facility Poverty Reduction Strategy Paper Private Sector Development

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PSRP Public Sector Reform Project SBD Standard Bidding Document SDC Staff Development Center SES Sanitary and Epidemiological Services UN United Nations U S AID United States Agency for International Development

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Vice President: Shigeo Katsu Country Director: Annette D i x o n

Task Team Leader: Tony Verheijen Sector Manager: Deborah L. Wetzel

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TAJIKISTAN PUBLIC SECTOR REFORM PROJECT

CONTENTS

Page

A . STRATEGIC CONTEXT AND RATIONALE ..................................................... 1 Country and sector issues ........................................................................................ 1

Higher level objectives to which the project contributes ........................................ 4

1 . 2 . Rationale for the Bank’s Involvement 3

3 . ....................................................................

B . PROJECT DESCRIPTION ................................ ........................... .......................... 5 1 . Financing instrument 5 ..............................................................................................

.................................................. 2 . Project development objective and key indicators 5 3 . Project components ................................................................................................. 6

4 . 5 .

Lessons learned and reflected in the project design .............................................. 11

Alternatives considered and reasons for rejection ................................................ 12

C . IMPLEMENTATION ............................................................................................ 12

Partnership arrangements ...................................................................................... 12

Institutional and implementation arrangements .................................................... 13

4 . Sustamability ......................................................................................................... 15

Critical risks and possible controversial aspects ................................................... 15

Grant conditions and covenants ............................................................................ 16

1 . 2 . 3 . Monitoring and evaluation o f outcomes/results .................................................... 15

. . .

5 . 6 .

D . APPRAISAL SUMMARY ..................................................................................... 16

1 . Economic and financial analysis ........................................................................... 16

2 . Technical ............................................................................................................... 17

3 . Fiduciary ............................................................................................................... 17

4 . Social ..................................................................................................................... 18 5 . Environment .......................................................................................................... 18

6 . Safeguard policies ................................................................................................. 18

7 . Policy Exceptians and Readiness .......................................................................... 18

Annex 1: Country and Sector or Program Background ............................................. 19

Annex 2: Major Related Projects Financed by the Bank and/or other Agencies ..... 29

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Annex 3: Results Framework and Monitoring ............................................................ 37

Annex 4: Detailed Project Description .......................................................................... 46

Annex 5: Project Costs ................................................................................................... 64

Annex 6: Implementation Arrangements ..................................................................... 65

Annex 7: Financial Management and Disbursement Arrangements ......................... 69

Annex 8: Procurement Arrangements .......................................................................... 78

Annex 9: Economic and Financial Analysis ................................................................. 83

Annex 10: Safeguard Policy Issues ................................................................................ 84

Annex 11: Project Preparation and Supervision ......................................................... 85

Annex 12: Documents in the Project File ..................................................................... 86

Annex 13: Statement of Loans and Credits .................................................................. 88

Annex 14: Country at a Glance ..................................................................................... 89

Annex 15: Governance and Accountability Aspects .................................................... 91

Annex 16: Map of Tajikistan IBRD # 33493 ................................................................ 99

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A. STRATEGIC CONTEXT AND RATIONALE

1. Country and sector issues

Overall Country Context

Tajikistan i s a small economy in Central Asia with 6.7 mill ion inhabitants and a per capita income o f $3 10. The economy, which has been growing on average at 9.4 percent during 2001-04, depends heavily on exports o f cotton and aluminum; the major part o f which destined for other CIS countries and Europe, as well as on growing remittances o f migrants conservatively estimated at 16 percent o f GDP per year. Poverty although declining steadily remains high. In 2003, the headcount was 64 percent using PPP poverty l ine o f US$2.15. However, social indicators remain low, reflecting inadequate quality o f public service delivery and weaknesses in the governance system. In the ECA region Tajikistan i s marked as the country most at r isk o f not meeting the Millennium Development Goals (MDG), mainly due to the lack o f available resources.'

After gaining independence in 1991 , Tajikistan suffered a prolonged civ i l war through mid 1997, when it was resolved with a peace accord. Following the war, there was a period o f political stabilization and consolidation.

'able 1 Tajikistan: K e y Economic Indicators 2000-2005 2000 2001 2002 2003 2004 ;$

Population (million) 6.3 6.4 6.5 6.6 6.7 6.8 GDP at Current Prices, TJS million 1,787 2,564 3,375 4,758 6,158 7,100.0 GDP at Current Prices, US$ million 980 1,104 1,238 1,553 2.078 2,337.8

GDP Growth, percent 8.3 10.2 9.1 10.2 10.6 8.0

CPI inflation, percent 32.9 38.6 12.2 16.4 7.1 5.9

Per Capita GDP, US$ 158 175 192 236 310 342

In percent of GDP Total Revenues 13.8 14.9 16.6 17.3 17.9 18.8

olw Wages and Salaries 3.7 3.3 3.2 2.8 2.7 3.8

Total Expenditures 19.3 17.9 19.0 19.1 20.6 22.6

Fiscal Balance (incl. PIP) 6 .6 -3.1 -2.4 -1.8 -2.4 -3.8

Current Account Balance -6.2 -6.6 -2.7 -1.3 -4.0 -1.5

External Debt Stock 125.1 92.2 81.0 66.4 39.6 39.0

Debt Service 7.2 7.3 7.3 3.8 14.6 2.9

Soucre: EIU country report 2005, IMF data and WB staff estimates

Notwithstanding the gradual political transition, Tajikistan managed to quickly stabilize the economy by 2000 and undertake key structural reforms. As a result, economic growth accelerated to 10.2 percent in 2001 and has averaged 9 percent through 2005. However, this growth reflects mainly recovery in capacity utilization primarily in agricultural, favorable world prices o f cotton and aluminum, strong growth in trading partners, and

' The World Bank, Mi l lennium Development Goals: Progress and Prospects in Europe and Central Asia region, 2005

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increasing remittances from Tajik migrants. Over the medium term, Tajikistan’s macroeconomic prospects are positive with growth projected up to 7 percent a year, but the economy remains vulnerable to changes in external conditions.

Through tight monetary policy and strong fiscal discipline, Tajikistan was able to reduce inflation o f 30-40 percent during 1998-2001 to below 10 percent since 2004. The external current account deficit fe l l from -6.4 percent o f GDP in 2000 to -3.4 percent o f GDP in 2005 In addition, several successful debt re l ie f arrangements brought the countries External debt down from 124 percent o f GDP in 2000 to 42 percent in 2005,

The extended political consolidation did, however, complicate key elements o f the institutional transition agenda. The legacy o f the civil war left a complex political economy that has constrained public sector development in Tajikistan. In the initial years, the main priority o f the Government was regime consolidation, and ensuring that a balance o f power between different political factions was maintained. The prolonged consolidation process prevented the initiation o f institutional reform As a result, Tajikistan has made l i t t le progress in the transforming i t s public sector from a central planning and state production apparatus into an instrument for encouraging private investment in human, social and physical capital.

Early efforts to undertake public service reform were plagued by the use o f the state sector as a tool for appeasing the various political factions. Laws were enacted, regulations amended and new institutions established, but this was done in a fragmented and inconsistent manner. Reforms were also stymied by collapsing public sector real wages and weak capacity. Moreover, the delay in adapting Soviet era practices to the emerging market economy left enormous space for the emergence o f state capture. The result i s that the Government has not been very effective in translating the recent strong economic performance into better fundamentals for long term growth and improved social welfare.

More recently, however, the combination o f sustained economic growth and political consolidation are creating the space for more hdarnental reform. Growth o f the enterprise sector has allowed for a reduction in the use state sector as a tool for appeasing political factions, as evidenced in the gradual emergence o f a corps o f more technically qualified managers in the public sector. Growing revenues have created the fiscal space to gradual increase public service wages. And the demands o f the electorate are shifting toward better delivery o f public goods and services, improvement o f the business climate and, not least, a reduction in corruption.

This has culminated in a re-orientation o f the Government toward improving the capacity o f the public service to implement its policies and a realization o f the need for o f a stable institutional system, a more professional c iv i l service and more effective procedures and processes. This new focus provides an opportunity for development partners to help Tajikistan catch up on i ts long agenda o f unfinished structural and institutional reforms, including o f civil service and public administration.

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The Government’s i s now preparing a long term vision for the achievement o f the MDGs - the National Development Strategy (NDS) for 2006-15.’ In collaboration with i ts development partners, the Government has identified the following medium- and long- term development priorities for the achievement o f the MDGs: (a) reform o f public sector management; (b) development o f private sector and attracting investments; and (c) development o f human potential. The N D S will form the basis for the upcoming second PRSP to cover 2006-09. The development o f the N D S is supported by 12 sector working groups charged with developing individual strategies.

One o f these i s Public Administrative Reform Strategy (PARS) which aims to address in a systematic manner the main weaknesses in the current public administration system. These include (i) the lack o f clear separation o f state and market functions; (ii) inadequate organizational structures and management systems; (iii) the need to develop a professional civil service system, including transparent and adequate incentive systems; and (iv) inadequate financing management systems and the lack o f clear alignment o f functions and finances across levels o f government.

The sequencing o f the actions under the strategy reflects lessons learned from public administration reform in other transition countries3. For example, it includes an early focus on: (i) raising the quality o f management structures and senior management as a means o f ensuring better reform implementation; (ii) separating the function o f the state and the market primarily through regulatory reform; and (iii) improving the quality o f the c iv i l service through better wages, recruitment and performance management processes.

In the framework o f the overall PAR Strategy, the Government also intends to adopt a specific strategy on Public Sector Wage reform, which will provide the basis for a staged implementation o f wage reform in the Civ i l and Public Service that i s aligned with the PAR program. The PAR strategy also prioritizes interventions and pilots in the social services where there i s an urgent need to halt the deterioration o f Tajikistan’s human capital, but also seeks some short term results that affect the private sector in order to strengthen the constituency for reform. Reform o f lower levels o f government i s proposed as a second stage focus, although the priority focus on social services wil l have an early impact on local governments which are generally responsible for service delivery.

2. Rationale for the Bank’s Involvement.

To maintain the institutional reform momentum built up over the last eighteen months, i t wil l be important to address the persistent resource and capacity constraints faced by the

’ The development o f the N D S i s being overseen by a Coordination Council was established by Presidential decree. The Council i s supported by 12 sector working groups in the following areas: (1) macroeconomic policy; (2) public administration reform; (3) infrastructure, communications and industry; (4) integration into the world economy; (5) private sector development; (6) food security and agriculture; (7) education and science; (8) health, (9 ) water supply and sanitation; (10) social protection; (1 1) environmental protection; and (12) gender equality.

World Bank Working Paper No. 30357. “Understanding public sector performance in transition countries: an empirical contribution” (2003).

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Government. This project wil l assist the Government to address these constraints by financing requisite advisory and capacity-building support.

The Government has set out a clear reform agenda in the draft National Development Strategy. This agenda i s further elaborated in specific strategies addressing key priorities in the N D S , including the Public Administration Reform Strategy, the Health Financing Strategy and the Education Strategy. A Private Sector Development Strategy i s under formulation.

However, for reasons outlined above, capacities in the state administration to take forward the implementation o f these strategies are limited. Whereas recently initiated reforms in the Civi l Service aim to address the capacity constraints faced by the Government, their impact will be visible only in the medium term. Therefore, the Government requires significant external assistance in support o f i t s renewed reform effort.

Policy support to the implementation o f the Government program i s provided through the medium-term Policy Lending Program (Programmatic Development Policy Financing), and an IMF PRGF program. However, in view o f the capacity constraints the Government i s facing, policy support alone i s insufficient to move forward i ts strategic agenda.

Capacity building and advisory support i s provided by several donors, but has focused mainly on selected aspects o f public sector reform agenda, such as public expenditure management (DFID, EU), social sector reforms (SDC, ADB, World Bank), and enhancing the investment and business climate (IFC/FIAS/MIGA, USAID). However, there are no donors that are active in supporting core public administration capacity building. In view o f priority attached to the reforms and the lack o f current donor support for capacity building in public management, World Bank support i s crucial for progress in this area. In addition, the World Bank has a strong and long standing track record in analytical work and advisory support on key public sector reform issues, and i s therefore seen as the main partner on public sector reform issues by the Government.

The project builds on previous analytical work, such as the Public Expenditure and Institutional Review (2004), the Policy Note on Public Sector Wages (2005), as well as on the Country Procurement Assessment and the Country Financial Accountability Assessment (2003).

3. Higher level objectives to which the project contributes

The proposed project i s in full conformity with the country’s PRSP (2002), which highlights the need to strengthen Governance as a key development priority. The project also fully in line with the World Bank Group Country Assistance Strategy (CAS) for FY06-09, which lists improvement o f governance and public sector capacity as a priority

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cross-cutting issue. I t also reflects k e y Government priorit ies specified in the draft National Development Strategy (2005).

The project will help implement selected po l i cy measures included in the Programmatic Development Pol icy Financing. Improving governance, and in particular service delivery systems, i s one o f the two pr ior i ty areas under the Programmatic Development Policy Financing proposed to be disbursed during FY06-09. The k e y prior actions, for which PSRP will provide implementation support, include:

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Civil service wage decompression and consolidation; Implementation o f the amended Civil Service Law; Creating a merit-based recruitment and career management system in the c i v i l service; Design and implementation o f restructuring plans for the Min is t ry o f Economy and Trade, the Min is t ry o f Finance, the Min is t ry o f Labor and Social Protection, the Min is t ry o f State Revenues and Duties and the Civil Service Department, in 2005-2006, as w e l l as for additional selected ministries in 2007-2008; Wage and j o b classification reform in Primary Heal th Care; Reforming l icensing and inspection systems in p i lo t agencies, in particular the Sanitary Epidemiological Services (SES) and the Fire and Safety Inspectorate.

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B. PROJECT DESCRIPTION

1. Financing instrument

The financing instrument i s a Development Grant to finance technical assistance. The Grant-financed activities will complement and support a programmatic series o f Development Po l i cy Credits.

2. Project development objective and key indicators

The project development objective i s to assist the Recipient in the implementation o f PARS, through strengthening po l i cy making and service del ivery systems and enhancing transparency of public management in selected core public sector entities.

The selected core publ ic sector entities will include at least those agencies included in the Presidential Decree issued on 4 February 2005 on In i t ia l Measures in Public Administration Reform, and that have prepared reform plans endorsed by the Bank under the PDPC. These include the Min is t ry o f Finance, the Min is t ry o f Labor and Social Protection and the Civil Service Department.

The key indicators are: 0 The number o f c i v i l servants (new entrants) recruited through merit-based

competitions increases by 50 percent from the baseline level to b e established in November 2006;

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0 Reform Plans are implemented for 8 line ministries or central agencies by the end o f the project and reports on their implementation are published o n the Government web site; The level o f deviation between approved and executed central government budget decreases by 30% over the project period, from the baseline level which wil l be established o n the basis o f the Budget Execution Report for 2005;4 Access to information and regulation, norms and procedures by businesses increases 40-50 percent from the baseline level to be established by a survey to be conducted in early 2007.

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Baseline data will either be based on existing data, or where required through a baseline survey to be conducted in early 2007. Data on c i v i l service recruitment procedures wil l be provided by the C iv i l Service Department, while the implementation o f Reform Plans wil l be monitored by the Executive Office o f the President.

3. Project components

The Project will have f ive main components, providing support to the key priorities set out in the National Development Strategy, and directly related to the objectives o f the Public Administration Reform Strategy. Components 1. (Civ i l Service Management) and 2 (Implementation o f Key Actions under the Public Administration Reform Strategy) support overall systemic reforms and capacity building. Component 3 supports the reforms in budget preparation and execution, focusing o n selected elements o f social sector spending. Component 4 wil l provide capacity-building support for regulatory management. Component 5 will strengthen the management o f governance reforms and build project management capacity.

Component 1 : Civil Service Management (US$O.Sl Million)

The objective is to develop and implement the legal basis and institutional capacity to apply merit principles in c iv i l service recruitment and promotion. By the end o f the project, the C iv i l Service Department wil l have the ability to ensure that basic merit principles are applied across the c iv i l service. Accompanying measures o n c iv i l service wage reform will make c iv i l service positions more attractive and provide improved incentives for performance. The main implementing agencies for this component will be the C iv i l Service Department and the Institute for Higher Qualification o f C i v i l Servants

The Grant will finance consultancy services and training for the C i v i l Service Department and Human Resource Management units in selected l ine ministries and agencies5, including:

0 training and advisory support to establish and implement merit-based recruitment and promotion under the amended C i v i l Service Law;

0 capacity building for the new regional branches o f the Civil Service Department;

Subject to the absence o f severe external or internal shocks Priority will be allocated to HRM units in those ministries and agencies with approved reform plans

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preparation o f a concept for the medium-term development o f the C iv i l Service Systems; developing key management tools for the Civ i l Service Department, such as the C i v i l Service Registry system and assessment centers for c iv i l service recruitment; modernizing c iv i l service incentives, including continued wage decompression and the monetization o f benefits; providing networking equipment and software.

This component will also finance the implementation o f the new in-service training system at the Institute for Higher Qualification o f C iv i l Servants. Under previous assistance provided by the Bank6 and the EU, the Institute has conducted a comprehensive training needs assessment and developed a small core curriculum o f training courses. The project will finance the expansion and improvement o f the training curricula o f the Institute, including the design o f tailor-made training programs for top- level officials and the introduction o f training results impact assessment.

Component 2: Supporting Implementation of Key Reforms under the Public Administration Reform Strategy (US$2.31 Million) The objective i s to ensure the effective implementation o f organizational and management system reforms in the core public administration, through a flexible facility to support PARS implementation. This will include the elimination o f duplication in government functions, implementation o f clear accountability and reporting systems between executive entities, and the gradual introduction o f modern public management processes to enhance transparency and accountability, such as institutionalized consultation mechanisms, impact assessment and strategic planning. The main implementing agency o f this component i s the Executive Off ice o f the President, Department o f Economic Reforms and Investment (DERI). The PARS was approved by Presidential Decree o n 15 March, 2006.

Considering the need for a flexible instrument to finance priori ty actions under the PARS, the project proposes to fund sequenced implementation o f selected key institutional development activities in the PARS. An ini t ial set o f first phase pr ior i ty activities have been already identified, including:

0 A horizontal functional review o f central state administration bodies to identify duplication o f functions, redundant and excessive functions as we l l as inefficiencies due to fragmentation in the allocation o f functions; Support to the Ministry o f Labor and Social Protection as a selected p i lo t for reforming the service delivery system, focusing both o n creating clear accountability and reporting systems between different entities under the Ministry and introduction o f citizen feed-back to pinpoint problems in service d e l i ~ e r y ; ~

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Under the IDF Grant ‘Strengthening C iv i l Service Capacity in Tajllustan’ (TF 054817) The Ministry o f Labor and Social Protection has been selected both because o f i t s expressed interest in

undertaking institutional reform o f the service delivery system, and because o f i t s pivotal role in social

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0 Technical assistance and capacity building for the structures in charge o f public administration reform management in the Executive Office o f the President to strengthen the ability o f the Office to introduce key governance reforms and track their implementation and impact over time.

Second phase activities will be defined fol lowing the implementation o f the first three priori ty actions, i.e.:

The horizontal functional review will define the ministries and particular areas most in need o f organizational restructuring support; The p i lo t reform process o f the Ministry o f Labor and Social Protection, focusing o n rationalizing service delivery structures, will define what further support can be provided to other social sector ministries in reforming their service delivery systems. Since service delivery system reform has to address a number o f sensitive issues o f subordination and accountability, i t wil l be first piloted, followed by roll-out after evaluation o f the pilot; Monitoring systems wil l be developed for the overall PARS, and subsequently replicated for individual PARS activities that will be identified in the first phase o f the project.

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Second phase activities will be limited to the provision o f advisory support and training in the fol lowing broad substantive areas:

a. Improving; administrative efficiency and effectiveness o f selected government bodies, including: (i) post-government restructuring support to the executive bodies that need to execute new/changed functions; (ii) designing new administrative procedures and practices; (iii) conducting pi lot vertical functional reviews to streamline structures; (iv) improving interdepartmental interaction processes and; (v) priori ty agency specific reforms.

b. Improving pol icy making; and pol icy impact assessment practices at the sectoral level. Specific priori ty will be given to initiatives that include participatory monitoring o f government programs by non-governmental organizations;

c. Improving service deliverv systems, including: (i) pilot activities related to developing minimal service standards; (ii) introducing basic public service delivery monitoring; (iii) improving selected administrative procedures related to provision o f public services for l imited number o f ministriedexecutive bodies in charge o f service provision.

Activities will be developed and implemented according to the fol lowing timeline:

service delivery, as the entity responsible for employment policy, social protection policy, pensions and labor migration issues

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Type o f activitylphasing

Structural reorganization of central government architecture

Reforms o f structures, pol icy making and service delivery management processes in individual ministries and agencies

Monitoring the implementation o f PARS

Project Preparation Facility

Horizontal functional review phase 1 (completed by November 2006): 1 Inventory o f functions 1 Assessment o f suitability

o f functions in a market economy context

duplicatiodfragmentation o f functions

1 Reviewof

Final report to the President in November 2006

Phase 1 (until September 2007)

Horizontal Functional Review Phase 2 (completed March 2007):

Design o f new overall government structure Adoption o f organizational chart o f the central government

Pilot review and structuring o f MLSP, focusing both on organizational structure and service delivery management processes

Design o f the monitoring system

Phase 2 (after September 2007), activities to be decided o n an annual basis based on criteria and selection procedures defined in Annex 4

Ro l l out o f vertical reviews to l ine ministr ies and agencies based on competitive selection, based on lessons learned from the MLSP pi lot (objective: 8 central government institutions restructured by end o f project Implementation o f the monitoring system, including the publication o f an annual report on PARS implementation

The criteria and principles for selecting second phase activities are outlined in Annex 4.

Component 3: Capacity-building in Budget Management (US$0.57 Million) The objective i s to provide technical support to introduce a Medium Term Budget Framework (MTBF) in Tajikistan, and modernize budget execution. Major support for these activities wil l be provided by the proposed Public Financial Management Modernization Project, currently under preparation. The PSRP will support essential preparatory diagnostics and advisory work, and provide budget management support to the health and education sectors, focusing on wage and staff planning reforms. The implementation agency for the component i s the Ministry o f Finance.

The activities fbnded under this component leverages parallel support from other donor partners: the JMF (on budget and treasury), EU (on capacity building in macro-economic forecasting) and DFID (on public financial management including MTBF). The component has two subcomponents:

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Subcomponent 1 will finance, through training and advisory activities, the development o f an Act ion Plan to modernize the Public Financial Management system, including the creation o f the Med ium Term Budget Framework. Subcomponent 2 will finance advisory support and training to the Ministr ies o f Finance and Health to plan and implement health financing reform, in particular wage system and staff planning reforms.

Component 4: Capacity Building in Regulatory Management (US$0.66 million) Recent surveys on regulatory management institutions indicate lack o f predictabil ity in pol icy making, bureaucratic inefficiency, and usage o f outdated regulations. These have impeded innovation and created a barrier to trade and investment. Moreover, survey data indicates that unoff ic ia l payments made to various inspection agencies have increased between 2002 and 2005.8

The objective o f this component i s therefore to enhance transparency and accessibility in regulatory management, through capacity-building and advisory support to the Ministry o f Justice and p i lo t inspection agencies. The implementing agencies for this component are the M in i s t r y o f Justice, The Sanitary Epidemiological Services (SES) and the Fire and Safety Inspectorate.

The first subcomponent will finance capacity development activities to address some o f the issues related to the inspection functions raised above. Specifically, the project will:

a. provide consultancy services to the two agencies to review existing normative acts and bring them up to date with internationally accepted technical regulations;

b. provide support in reviewing the internal instructions o f these agencies, and provide advice on their possible improvement;

c. train inspectors to follow the new norms and standards.

The second subcomponent wil l finance selected capacity building activities for the Min is t ry o f Justice, including:

a.

b,

Capacity building for the department responsible for legal documentation to assist with; (i) the creation o f a recording procedure to ensure maintenance o f a comprehensive record o f regulatory documents; and (ii) a review o f existing regulations and norms and identi fying those wh ich are outdated or from the Soviet period. Assistance in networking the l ine ministries, agencies, and those with legislative init iat ive to the MoJ.’ This will a l low other governmental bodies to efficiently transfer their regulatory instruments to the MoJ, as w e l l as make the regulatory drafts under preparation to b e in l ine with the L a w on Normat ive and Legal Acts (LNA). The network will also have the capabil ity to make the drafls, as w e l l as existing legislative acts, available for access to businesses.

EBRD-World Bank Business Environment and Enterprise Performance Survey (BEEPS) This will be done by using the existing inter-agency LAN, that current covers 20 central ministries, and

adding additional institutions through a secure modem-based connection to the network

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Component 5: Effective Management of Governance Reforms (US$0.65 Million) Components 1-4 above comprise a set o f complementary but distinct public sector management reforms. Each needs to be managed as a specific undertaking. Yet, each must be orchestrated in the overall country context, which i s one o f weak governance, and within unified project governance and administrative arrangements. This i s o f particular importance in Tajikistan, reform initiatives are at their formulation stage and at risk o f capture.

This component includes measures to address project governance risks. In particular, these measures aim to mitigate the r isks o f corruption, collusion, fraud and mismanagement associated with weak institutions and opaque state hnctioning. The actions taken to mitigate these r isks are summarized in annex 15. This component wil l also finance, through a robust results framework, monitoring o f the implementation o f the PAR Strategy, as a means to keep the reforms on track, and establish transparent project governance arrangements with appropriate checks and balances.

The activities to be financed under this component comprise two sub-components: 0 Subcomponent A will finance efficient and effective project management

arrangements, building project management capacity in the DERI and the ACU, including how to address risks o f corruption, collusion and fraud. Annex 15 outlines the project governance principles the Government has committed to for the implementation o f the project. Subcomponent B wil l enhance government capacity to effectively manage and monitor governance reforms. This will be supported by conducting regular surveys on the impact o f governance reforms, the creation o f a website to provide wider coverage o f reform initiatives and other outreach activities. In addition, a monitoring system for managing reform implementation will be designed to effectively track reform impact.

0

4. Lessons learned and reflected in the project design

The project applies the following key lessons:

a) Country context: Successhl public sector institutional reform calls for tailored solutions and approaches that fit client conditions and circumstances. The project will support implementation o f the government’s Strategy documents.

b) Ownership and flexibility: A key lesson from previous Bank and other donor support (EU) for institutional reforms in Tajikistan is the need to empower the executive in managing its own reform program and, related to this, build flexibility into project design to accommodate changes in reform priorities over the medium term, as reflected in the design and sequencing o f Component 2.

c) Promammatic approach: In a transition environment the policy o f supporting ‘small steps in the right direction’ in governance reforms works better than grand designs. The project provides technical support, focusing on implementation practicalities. Related policy issues are dealt within the framework o f policy-based operations.

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Implementation arrangements: Other countries’ experience (e.g. that o f Russia) has demonstrated that proclaimed leadership commitment and availability o f a strategy are not enough. For changes to happen there i s a need for: (i) an approved set o f practical actions; (ii) adequate implementation arrangements; (iii) built-in mechanisms o f monitoring and evaluation; (iv) incentives to implement the reforms. The PAR Strategy has a detailed Matrix o f Actions which the project will partially support.

Strategic approach: The Tajikistan CAS demonstrates that projects supporting specific reform strategies and activities work better than general technical assistance projects. This project wil l support selected institutional reform strategies, developed and owned by the Government.

Practicality and sustainability o f TA: The evaluation o f I B T A I1 suggests that consulting services should focus on practical implementation issues rather than general reform design and should be well scheduled and managed by the client with intensive Bank supervision. The components are defined to include activities to support implementation and ensure sustainability o f outcomes.

Partnership: Experience with IBTA I1 shows that without a strong institutional counterpart in the Government, TA operations cannot achieve their objective.

Alternatives considered and reasons for rejection

The development grant to finance technical assistance i s best suited to complement and support Programmatic Development Policy Financing. One alternative approach would be to use a Specific Investment Grant. However, since the PSRP mainly aims to provide advisory and capacity building support, a development grant was considered the most appropriate instrument.

C. IMPLEMENTATION

1. Partnership arrangements

Several initiatives supported by other donors or non-governmental organizations directly contribute to achieving key project objectives, particularly in relation to activities planned under components 3 and 4 o f the project.

Regarding Public Expenditure Management reform, the EU plans to fknd activities in the area o f macro forecasting and public investment planning under a Technical Assistance Grant and i s providing support under i t s Food Security Program to implement the new budget guidelines. DFID plans to support the design and implementation o f the Medium Term Expenditure Framework. The PSRP support will be implemented in close coordination with these two partner organizations.

In relation to regulatory management reform, the project will work in close coordination with ongoing projects supported by IFC/FIAS/MIGA, USAID and PRAGMA to ensure

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that the funds provided make an effective contribution to the implementation o f the overall regulatory management reform program.

These and other relevant donor initiatives related to project components are documented in Annex 2.

2. Institutional and implementation arrangements

Project governance in Tajikistan poses specific challenges, which are enhanced by the fact that this project deals with sensitive aspects o f the reform o f core governance institutions. Thus, the project implementation arrangements ensure: (i) ownership o f the individual components by government agencies; (ii) high-level political support; and (iii) checks and balances to safeguard the project from the inappropriate use o f funds. The project management arrangements set out in Annex 6 aim to ensure that these three requirements are fulfilled. Additional safeguards regarding checks and balances on the use o f project funds have been agreed and are presented in Annex 15.

In order to ensure high level commitment and support, the project wi l l be managed by a Project Board, which will be formed from selected members o f the Presidential Working Group on Administrative Reform.. The Project Board i s a high level project management body that wil l meet once every three months and perform the following key functions:

Ensure efficient interdepartmental interaction & resolve interdepartmental issues; Endorse project implementation plans, procurement plans, project budget; Exercise monitoring and evaluation o f project progress on a quarterly basis; Approve members o f the Project Coordination Team and experts nominated as members o f evaluation committee from each Ministry.

The Executive Office o f the President wil l be the Project Implementation Agency. The Department for Economic Reform and Investment o f the Executive Office o f the President (DERI EOP), in line with Presidential Order AP-2017 o f January 4, 2006, i s responsible for 0-vera11 project implementation. DERI will also coordinate the implementation o f the PARS. The Head o f the Department will act as a Project Director. The DERI EOP will report to the Project Board on project-related matters. A Project Coordination Team will be created to take charge o f day-to-day project management. Consultants that will work in the Project Coordination Team are being hired under the Project Preparation Facility and will be in place by Negotiations.

To ensure appropriate use o f grant proceeds, procurement and financial management functions wil l be vested in the Aid Coordination Unit under the Executive Office o f the President o f Tajikistan, which has developed expertise in these functions. This will ensure that fiduciary functions are vested in an appropriate entity, with knowledge and understanding o f Bank fiduciary requirements, and that appropriate checks and balances are in place for the use o f grant proceeds. These arrangements are also in l ine with policies on project implementation mechanisms agreed between the Government and the Bank, which i s to vest project implementation in existing government institutions.

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T o ensure ownership o f individual project components, inter-ministerial Technical Groups will be formed o n four main substantive aspects o f project implementation, grouping together representatives o f the beneficiary agencies for each component. The Technical Groups wil l be responsible for drafting terms o f reference for project activities. These will be approved by the Project Board and, where necessary, subject to prior review by the Bank. The Technical Groups will monitor the implementation o f activities related to their area o f expertise. The Technical Groups will be formally established by Negotiations.

T o ensure transparency and joint accountability, a list o f officials nominated to Evaluation Committees on behalf o f each Technical Group wil l be endorsed by the Project Board.

In addition, in order to ensure the effective implementation o f project activities by the beneficiary agencies, each o f the institutions involved in the project will, by Board date: (i) designate a structural unit responsible for implementation o f said Part o f the Project; (ii) designate specified staff, o f adequate experience and qualifications, responsible for implementation and oversight o f said Part o f the Project, and (iii) specify the role and responsibilities o f said unit vis-a-vis the A C U and the DERI in respect o f procurement o f goods and services and the selection o f consultants for the carrying out o f the related part o f the Project.

The Project Operational Manual, detailing the above implementation arrangements, has been drafted and submitted to the Bank on 1 March 2006, and has been subsequently endorsed by IDA.

In addition to the above checks and balances in the project management arrangements, and considering the sensitive nature o f the project i t has been agreed to take several additional measures to prevent fraud and corruption, including:

1.

2. 3.

4.

The design and implementation, by the ACU, o f a system for handling complaints, and the periodic publication o f reports o n complaints received and the way these were addressed; The publication o f a l l contracts awarded to firms o n the project website; NGO/civ i l society organization representatives/donor representatives (except the Wor ld Bank) will be invited to be present at ICB and NCB bid openings; A 'one-strike' pol icy wil l be applied to a l l contractors and consultants - any case o f complicity in corruption, collusion, nepotism and/or fraud wil l lead to dismissal, disqualification f rom al l further project activities and possible prosecution.

Further risk mitigation measures to prevent corruption and fraud are detailed in Annex 15.

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3. Monitoring and evaluation o f outcomes/results

Key Risks

ownership and commitment may be absent or wane over time

in counterparts, especially in view o f the Presidential Elections planned for November 2006

and the implementation experience with IBTA I1

Political risks: high-level

Technical r i s k midstream changes

Corruption r i s k weak institutions

Technical assistance and capacity-building for monitoring, evaluation and effective communications to various stakeholders throughout the reform process wil l also be provided through the project. This will form the basis for tracking progress on project implementation, and on the Public Administration Reform Strategy, and enabling the Government to take timely corrective actions as needed.

Proposed Mitigating Actions Risk Rating 0 Close linkage with PDPC wil l ensure H

that TA i s linked to medium term Government objectives

0 The amended C iv i l Service Law is H likely to enhance stability in the administration, though risks o f turnover and delays will remain.

mitigate the corruption risk. E.g. a publicly accessible project web-site wil l disclose procurement opportunities, contracts awarded, complaints received (and action taken) and implementation progress

0 Building additional checks and balances by separating procurement and financial f rom substantive project

0 Transparency w i l l be maximized to H

4. Sustainability

Project addressing weaknesses in Governance tend to show results only after a certain time lag, posing r isks o f reform fatigue and reduced political interest in reform objectives. Long term political commitment i s in turn a key factor in ensuring the sustainability o f project results. In order to help maintain political momentum, and ensure sustainability o f project results, the project includes the following measures:

a) The project includes some ‘quick win’ pilot activities (such as support for the already initiated reform process o f the Ministry o f Labor and Social Protection), which would help in securing commitment to reforms over a medium term and improve prospects for sustainability;

b) The project includes a flexible facility, under Component 2, which wil l help to address institutional reform issues identified in the course o f implementation o f the PAR strategy;

c) Management o f the project and management o f the reform process are vested in the same institution, thus ensuring that project activities directly contribute to core reforms, thus enhancing the chances o f successful project and reform implementation.

5. Critical risks and possible controversial aspects

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Key Risks

Weak and fragmented implementation and coordination capacity

Insufficient quality control arrangements

Insufficient donor coordination capacity and lack o f timely donor support

Proposed Mitigating Actions management Criteria for funding activities are included in the Operational Manual; activities not explicitly linked to Government strategies w i l l not be financed. The project implementation monitoring process to be undertaken by the EOP, the Project Board and the Evaluation Committee will include measures to ensure specific attention to potential risks o f corruption and fraud, as summarized in Annex 15.

:apacity building measures to be funded rom the PPF w i l l help strengthen mplementation capacity in advance o f iroject effectiveness

Technical Groups are to draft TORS, oversee consultants and implement recommendations, thus enhancing ownership by direct beneficiaries The project will focus on essential TA linked to core government policy objectives. National Development Strategy institutional mechanisms w i l l be used to prevent the duplication o f donor effort

Risk Rating

H

H

H

Risk Rating - H (High Risk), S (Substantial Risk), M (Modest Risk), N (Negligible or L o w Risk)

The overall r isk rating i s H (High Risk).

6. Grant conditions and covenants

The project shall be carried out in accordance with the requirements, criteria, organizational arrangements and operational procedures set forth in the Operational Manual, and as agreed with the Association. N o amendments, abrogation, waivers or assignments o f any provisions shall be made without prior approval o f the Association.

At all times during the implementation o f the Project, the following shall be maintained: (i) the Project Board, chaired by the State Advisor to the President on Economic Policy; (ii) the PCT; and (iii) the Technical Groups, all with the composition and terms o f reference satisfactory to the Association and set forth in the Operational Manual.

D. APPRAISAL SUMMARY

1. Economic and financial analysis

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The project foresees a limited set o f investments in hardware and software for I T systems. These investments will mostly be built on the intra-governmental I T system put in place under IBTA 11, and thus will add only marginal cost to the already required expenditures for maintaining these systems. In view o f the highly limited capability o f the Government to absorb additional cost for maintaining equipment and network systems, the project design i s built around the need to ensure that all I T related initiatives use the existing network infrastructure as a basis, rather than propose the creation o f new systems and networks.

2. Technical

A significant amount o f analytical and diagnostic work has been carried out before and during the preparation stage. The Project i s based on the findings o f key analytical documents produced in recent years on governance-related issues in Tajikistan (Governance Assessment o f ADB, PEIR, CFAA and Policy Notes o f the Bank). The project takes into account the lessons learned from previous Technical Assistance operations in Tajikistan as reflected in Section C above.

3. Fiduciary

3.1 Procurement issues

The capacity o f the A C U has been assessed. The A C U was considered the most appropriate institution, under the circumstances, to perform the procurement functions under the project, subject to strengthened capacity. Details o f the assessment and an agreed plan o f action are included in Annex 8. In addition, Annex A to Schedule 4 o f the Grant Agreement specifies strengthened transparency measures to help the authorities mitigate the r isk o f financial violations in project implementation that could arise from fraud, collusion and corruption.

3.2 Financial Management Issues

The financial management capacity o f the A C U was assessed in December 2005, and followed up in June 2006, to determine whether financial management arrangements put in place by implementing agency meet IDA requirements. These actions have been completed and the Financial Management Arrangements now meet minimum IDA requirements. The Project Operational Manual (POM) manual which documents the financial procedures has been developed in accordance with World Bank guidelines. A 1- C based automated accounting system has been installed to facilitate the project financial management process and consultants have been hired to enhance financial management capacity in the ACU. Finally, the borrower has committed to maintaining supporting documentation and to making them available for review for Bank supervision missions and for external audit

Taking into consideration the assessment o f the financial management systems and processes and the assessment o f risks and mitigating measures, the financial management

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arrangements for the proposed Public Sector Reform Project wil l be capable o f satisfactorily recording al l transactions and balances, supporting the preparation o f regular and reliable financial statements, safeguarding the A C U assets, and i s subject to auditing arrangements acceptable to LDA.

4. Social

Several planned project activities directly support improvements in social service delivery systems, such as the rationalization o f service delivery structures under the Ministry o f Labor and Social Protection, which should provide improved access to social protection services, as well as support the much needed reforms in the resources allocation systems in the health sector. Activities in the latter area are directly aligned with a planned SWAP operation in Health.

5. Environment

The project focuses on public sector institutional reforms. I t has no direct environmental impact and the project does not include any civil works. Any minor refurbishments o f office space required for the installation o f equipment that are foreseen under the project will be executed in line with prevailing national legislation.

6. Safeguard policies

Safeguard Policies Triggered by the Project Yes N o Environmental Assessment (OP/BP/GP 4.0 1) [I [XI Natural Habitats (OP/BP 4.04) [I [XI Pest Management (OP 4.09) [I [XI Cultural Property (OPN 1 1.03, being revised as OP 4.1 1) [XI Involuntary Resettlement (OP/BP 4.12) [I [XI Indigenous Peoples (OD 4.20, being revised as OP 4.10) [XI Forests (OP/BP 4.36) [I [XI Safety o f Dams (OP/BP 4.37) [I [XI Projects in Disputed Areas (OP/BP/GP 7.60)* [I [XI Projects on International Waterways (OP/BP/GP 7.50) [I [XI

[I

[I

7. Policy Exceptions and Readiness

This project complies with all applicable Bank policies. The Project i s entirely consistent with Bank Policy and no exceptions are requested.

Terms o f Reference for all activities planned for the first 18 months o f the Project, including those under the Project Preparation Facility, have been developed and agreed with the Bank.

* By supporting theproposedproject, the Bank does not intend to prejudice thefinal determination of the parties’ claims on the disputed areas

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Annex 1: Country and Sector or Program Background

TAJIKISTAN: PUBLIC SECTOR REFORM PROJECT

1. General and Macroeconomic context

1.1 Country Context

Economic and Political Background

Tajikistan is a small economy in Central Asia with 6.7 mill ion inhabitants and a per capita income of $3 10. The economy, which has been growing on average at 9.4 percent during 2001-04, depends heavily on exports o f cotton and aluminum the major part o f which destined for other CIS coun&ies and Europe, as well as on growing remittances o f migrants conservatively estimated at 16 percent o f GDP per year. Poverty although declining steadily remains high. In 2003, the headcount was 64 percent using PPP poverty l ine of US$2.15. However, social indicators remain low, reflecting the inadequate quality of public service delivery and weaknesses in governance. In the ECA region Tajikistan i s marked as a country at high r isk o f not achieving the MDGs," due to a lack o f adequate resources.

After gaining independence in 1991, Tajikistan suffered a prolonged civ i l war through mid 1997, which was resolved with a peace accord. Following the war, there was a period o f political stabilization and consolidation.

Macroeconomic Stability and Growth

Notwithstanding this gradual political transition, Tajikistan managed to quickly stabilize the economy by 2000 and undertake key structural reforms, including exchange rate reform, price and trade liberalization, financial sector reform, and privatization o f some lands and most small enterprises. As a result, economic growth accelerated to 10.2 percent in 2001 and has averaged 9 percent through 2005. However, this growth reflects mainly recovery in capacity utilization primarily in agricultural, favorable world prices o f cotton and aluminum, strong growth in trading partners, and increasing remittances from Tajik migrants. As such it remains quite vulnerable to changes in external conditions.

Sound macroeconomic management successfully stabilized the economy during 2002-05. Through tight monetary policy and strong fiscal discipline, Tajikistan was able to reduce inflation o f 30-40 percent during 1998-2001 to below 10 percent since 2004. The overall fiscal balance (excluding externally-financed investment) has been in surplus since 2003, achieved through improved revenue mobilization and a reduction in debt service. Revenues collection increase by around 6 percentage points o f GDP during 2000-2005. In addition, Tajikistan benefited from several successful debts restructuring

lo The World Bank, Millennium Development Goals: Progress and Prospects in Europe and Central Asia region, 2005.

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and reduction agreements reached with key bilateral creditors. External debt stood at 42 percent o f GDP in 2005, down from 124 percent in 2000."

Tajikistan also saw a sustained improvement in the external current account deficit from -6.4 percent o f GDP in 2000 to -1.3 percent in 2003 on account o f rising prices and volumes o f key aluminum and cotton exports and large flows o f remittances from Tajik migrants, currently estimated at around 16 percent o f GDP. The current account balance has since fallen to -3.4 percent o f GDP in 2005 on account o f higher o i l import prices, and weakening cotton prices and production.

Over the medium term, Tajikistan's macroeconomic prospects are positive, although growth i s expected to somewhat slow, but the economy remains vulnerable to external shocks. Recovery in cotton production following a recent drought, strong world demand for aluminum, increasing remittances flows and the start o f some large infrastructure projects should support growth o f up to 7 percent a year during the next few years. Inflation i s expected to remain subdued under continued tight monetary policy and fiscal prudence, and current account balance to stabilize at around 4 percent o f GDP. I t i s important to note, however, that Tajikistan's economy remains heavily dependent on a few key commodities and key trading partners. I t is, therefore, vulnerable to shifts in world demand for and prices o f cotton and aluminum, andor a slowdown in the Russian and CIS economies.

Lagging Institutional Reforms

The extended political consolidation did complicate key elements o f the institutional transition agenda. The legacy o f the civil war left a complex political economy that has constrained public sector development. In the initial years, the main priority o f the Government was regime consolidation, and ensuring that a balance o f power between different political factions was maintained. The prolonged consolidation process prevented the initiation o f institutional reform. As a result, Tajikistan has made l i t t le progress in the transforming i ts public sector from a central planning and state production apparatus into an instrument for encouraging private investment in human, social and physical capital.

Early efforts to accelerate and deepen institutional reforms were plagued by the use o f the state sector as a tool for appeasing the various political factions. In the area o f public service reform, laws have been enacted; regulations have been amended, new management institutions established, but in a fragmented and inconsistent manner. Reforms were also affected by the declining quality o f the public administration owing to the collapse o f real wages and weak capacity. Moreover, the delay in adapting Soviet era structures, procedures and processes as the market economy emerged le f t enormous space for the emergence o f state capture. The result i s that the Government has not been effective in translating the recent strong economic performance into better fundamentals for long term growth and improved social welfare.

l1 The country stands to further benefit from Multilateral Debt Relief Initiative with the International Monetary Fund.

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The result is that the Government has not been very effective in translating the recent strong economic performance into better fundamentals for long term growth and improved social welfare. Investment rates continue to be historically low with private investment averaging 5 percent o f GDP during 2000-04, mainly due to unfinished structural reforms and an extremely weak investment climate.

GRICS Indicators for Tajikistan (Compared to Central Asia Countries)

Regulatory Quality (Former Soviet Union region. 2004) -

KYRGYZ REPUBLIC

KRZRKHSTAN

TRJIKISTRN

UZBEKISTRM

I+ TURKHENISTRW

I B

A recent shift in priorities

More recently, the combination o f sustained macroeconomic stability and economic growth, and recent political consolidation are creating the space for more fundamental reforms of public institutions. Growth in the enterprise sector over time, albeit still with strong l inks to the state, has allowed for a reduction in the use o f state sector as a tool for appeasement. This i s evident in the gradual appearance over last year or so o f more technically and professional qualified managers and senior officials in the public sector. Improvements in revenue collections have been creating the fiscal space for gradual increase in wages to support a better quality cadre o f c iv i l servants. And in Tajikistan - as across the region - the demands o f the electorate are shifting toward better delivery o f public goods and services, improvement o f the business climate and, not least, reduction in corruption.

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This gradual evolution o f the political system has culminated in a recent re-orientation in the priorities o f the Government, however incipient, from consolidation o f political power to improved implementation o f the political directorate’s policies and programs. This sh i f t in priorities has led to an increased focus by the Government on the establishment o f a stable institutional system, a more professional civil service and more effective procedures and processes. Clearly, in some areas where the complex interaction of vested interests and the state remain, i t i s expected the Government will proceed quite tentatively. But the new focus i s clearly an opportunity for development partners to help Tajikistan catch up on i ts long agenda o f unfinished structural and institutional reforms, including civ i l service and public administration.

The Government’s Current Strategy

The Government’s i s now preparing a long term vision for the achievement o f the MDGs - the National Development Strategy (NDS) for 2006-15.12 In collaboration with i ts development partners, the Government has identified the following medium and long- term development priorities for the achievement o f the MDGs: (a) reform o f public sector management; (b) development o f private sector and attracting investments; and (c) development o f human potential. The N D S will form the basis for the upcoming second PRSP to cover 2006-09. The development o f the N D S i s supported by 12 sector working groups charged with developing individual strategies.

One o f these i s Public Administrative Reform Strategy. Preparation o f the strategy was initiated by the President’s Message to the Parliament in April 2004, further supported by a Presidential Decree issued in September 2004 and by an Action Plan approved by the President in February 2005. The Bank and USAID have provided support to the development o f the Strategy, which i s to be adopted early 2006. A reform implementation structure i s to become operational by April 2006.

The aim o f the Strategy i s to address in a systematic manner the main weaknesses in the current public administration system; which include (i) the lack o f clear separation o f state and market functions; (ii) inadequate organizational structures and management systems; (iii) the need to develop a professional c iv i l service system, including transparent and adequate incentive systems; and (iv) inadequate financing management systems and the lack o f clear alignment o f functions and finances across levels o f government.

The sequencing of actions reflects lessons learned from public administration reform in other transition co~ntr ies’~. For example, it includes an early focus on: (i) raising the

l2 The development o f the N D S i s being overseen by a Coordination Council was established by Presidential decree. The Council i s supported by 12 sector working groups in the following areas: (1) macroeconomic policy; (2) public administration reform; (3) infrastructure, communications and industry; (4) integration into the world economy; (5) private sector development; (6) food security and agriculture; (7) education and science; (8) health; (9) water supply and sanitation; (10) social protection; (11) environmental protection; and (12) gender equality. l3 “Understanding public sector performance in transition countries: an empirical contribution” (2003). World Bank Working Paper No. 30357.

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quality o f management structures and senior management as a means o f ensuring better reform implementation; (ii) separating the function o f the state and the market primarily through regulatory reform; and (iii) improving the quality o f the c iv i l service through better wages, recruitment and performance management processes. In addition to the overall PAR Strategy, the Government also intends to adopt a specific strategy on Public Sector Wage reform, which wil l provide the basis for a staged implementation o f wage reform in the Civ i l and Public Service that i s aligned with the PAR program. The PAR strategy also prioritizes interventions and pilots in the social services where there i s an urgent need to halt the deterioration o f Tajikistan’s human capital, but also seeks some short term results that will affect the private sector in order to strengthen the constituency for reform. Reform o f lower levels o f government i s proposed as a second stage focus, although the priority focus on social services will have an early impact on local governments which are generally responsible for service delivery.

Public A dm in istration Reform

Tajikistan retains a government structure and system o f public administration with many old features. The system is dominated by the Presidential Administration, and a large number o f small ministries and subordinated bodies, including large state owned enterprises, and a broad network o f subordinated sector units at the oblast and rayon levels. Roles and functions are not clear, there i s duplication, and the separation o f state and private sector i s not always transparent.

The lack o f progress in reorganization and reallocation o f functions may be in part due to the unsatisfactory quality o f the technical assistance provided; i t i s certainly also due to resistance in the political system, in particular to measures that reduce the ability o f ministries to control economic activities in their individual sectors.

Some restructuring efforts in the state administration were made in 2000-2003, but these largely constitute cosmetic changes to the system, as deeper changes would have threatened the fragile political balance o f power. Dedicated agencies were created without establishing the appropriate accountability and reporting frameworks, leading to further fragmentation o f the system. Later attempts at reform have failed to address the duplication, especially between the Presidential Administration and the Ministries, and have only partially resolved the problem o f substantial direct involvement by the State in the economy. Local government management systems also remain largely unreformed, while dual subordination o f local service delivery uni ts create a lack o f accountability and an important factor in the deterioration o f service standards.

As a first step under the new Strategy, a comprehensive horizontal fhct ional review and reorganization o f the central government administration i s planned as well as a vertical function review and subsequent reorganization o f one pilot ministry. The Ministry o f Labor and Social Protection self selected for this process.

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Civil Service Development

A s with most former Soviet republics, post-independence period saw a dramatic decline in publ ic sector real wages in Tajikistan wh ich eventually led to an erosion o f the corps o f qual i f ied personnel, facilitated the development o f an accepted system o f formal and informal payments for publ ic service^.'^ Wage levels remain extremely l o w even after two rounds o f across the board wage increases o n an average o f 40 percent in 2004 and 2005, respectively. Head o f department in a l ine ministry can take home several times less than a migrant seasonal construction worker in Russia. At the same t ime the wage system, codi f ied in numerous laws, codes, regulations and decrees, provides for a host o f allowances and bonuses that could amount to 75 percent o r more o f total take home pay and lead to a lack o f transparency on what real wages are and h o w much budget resources are being used. Other k e y weaknesses o f the wage system are the very l o w decompression ratios.

The Government has made efforts to strengthen the management and compensation o f the civi l service in Tajikistan during the post-war period. These efforts had very l imi ted impact ow ing to the piecemeal effort, a stop-and-go style o f implementation and lack o f fo l low up. In 1996, the Government put in place a disparate set o f government regulations and degrees15 wh ich established job categories as the basis for wage calculation Since then, there has been periodic adjustments in the specified wage rates, but main ly on the basis o f available budget resources rather than o n a review o f job complexity or responsibility. In 1998, Parliament enacted a new Civil Service Law, however the l a w does not provide for a clear separation o f elected officials, pol i t ical appointees and career c i v i l servants, the j o b classification scheme i s too general consisting o f on ly four legislated categories and a subjectively applied system o f qualif ication ranks within them, and there i s an ineffective salary differentiation mechanism for c i v i l servants o f similar job categories. Furthermore, the lack o f a clear delineation o f the c i v i l service made it impossible to define a po l i cy to address the problem o f low c i v i l service wages and related r isks o f corruption.

A revised l a w i s currently under discussion in the Parliament wh ich addresses many o f these weaknesses including provisions to clearly separate pol i t ical f rom c i v i l service appointments and to reform the wage system. Subsidiary regulations need to be developed and the capacity o f the Civil Service Department to monitor the implementation o f this legal framework needs to b e strengthened.

Established in 2001, the Civil Service Department was without a Director for m u c h o f i t s existence. Today, i t i s almost fully staffed, with a modernized plan. However, the Department st i l l requires significant strengthening. A modernization plan for the agency prepared in 2005, aims to strengthen i ts remit and capacity i s being considered by the Government.

l4 The practice o f fees for services was fonnalized by a constitutional amendment in 2003 but it i s not wel l regulated. l5 Resolution on payment for employees o f the Ministries, Committees, Agencies (# 385114 o f 3rd September 1996) the Resolution on payment for employees o f the Hukumats (# 425115 o f 2 October 1996), and the Resolution on material assistance (# 359119 as o f 21 September 2000).

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In 2004-05, following the two across the board wage increases in the c i v i l service16, a strategy for civil service wage reform was designed, wh ich sets out a step-by-step agenda for the improvement o f the system. The first step was implemented in November 2005, and included an overhaul o f the bonus and allowance system, init iat ion o f decompression measures and changes in the calculation o f the qualif ication rank increment. The decompression measures will concentrate on the senior levels o f government and incrementally raise the levels o f senior management and professional staff in order to attract more quali f ied personnel. Further wage increases are planned during 2006-08 but will focus primarily on the social sectors - primary health care workers and educators. These will b e accompanied by job classification and wage system reforms among these groups.

The Regulatory Environment

The investment climate in Tajikistan remains unfavorable for private enterprises. Besides some exogenous factors as the country’s land-locked posit ion and di f f icul t neighborhood, there are obstacles to market entry and exit including excessive l icensing and inspections, l im i ted access to finance, unclear property rights, weak compliance o f laws and corporate governance, etc. There has been some improvement in the investment climate over the last few years. The joint World Bank-EBRD Business Environment and Enterprise Performance Survey (BEEPS) shows there has been a significant decline in the number o f f i rms in Tajikistan indicating problems for doing business in most o f the k e y areas o f the investment climate from 2002 to 2005. The notable exceptions are in access to land, business licensing and permits, skil ls and education o f the workforce, and labor regulations. In addition, Tajikistan now compares favorably with other CIS countries with fewer f irms reporting each k e y issue as a problem for doing business than other CIS countries, with the notable exceptions o f business l icensing and permits (again) and electricity supply.

The lack o f transparency in the regulatory system i s connected to the lack o f access to normative documents and problems with registration and classification o f normative acts, what constitutes a h r t h e r significant problem in creating a more business-friendly investment climate.

The Government aims to streamline the process o f inspections by adjusting their frequency and duration. In 2001, an Inspection Registration Book was introduced in an attempt to monitor the process and curtail arbitrary inspections. However, not a l l businesses were issued a registration book, and the inspectors continued to intimidate them into not recording their visits. The Government intends to establish new rules and procedures for inspections through a new L a w on Inspections and amendments to the Tax Code regarding inspections. Over the next f ew years, this will b e fol lowed by the adoption o f new regulations to implement the law, training o f staf f in inspecting agencies, and a program to publicize the law, regulations and new procedures among businesses.

l6 Accommodated within Taijikstan’s macroeconomic program that was supported by the Poverty Reduction and Growth Facility from the IMF (2001-06). A new program i s currently under preparation.

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Public Expenditure Management

Tajikistan’s prudent fiscal policy that has helped to provide the macroeconomic stability for growth has not been accompanied by the commensurate quality o f public expenditure management. Analytical work in the PEIR (2004) and CFAA (2003) shows that the link between medium term policies and priorities articulated in various development strategies and the public sector budget are quite weak. Some progress has been made in strengthening budget preparation, presentation and management systems, including the establishment o f a budget management information system - the Tajik Budget System (TBS); the adoption o f the 14-sector GFS 1986 classification, the preparation o f the budget based on a program-based budgets at the level o f Key Budget Organizations (KBOs) and enhanced ability to monitor budget execution in a more comprehensive manner. Introduction o f a Medium Term Expenditure Framework was not effective enough. The institutional and legislative framework on which an MTEF could have been based i s lacking. Further, the government analytical and technical capacity i s weak, as a result, a macroeconomic framework both for policy development and budget formulation often does not cover al l types o f expenditures, and resource ceilings for sectors are not well communicated to l ine ministries.

The Government i s well aware o f these issues as cited in the second PRSP annual progress report, and has requested the preparation o f a World Bank project on Public Financial Management to address budget management as well as the development o f an integrated financial management system that also encompasses treasury modernization, internal and external audit and accounting. As a f i rs t step, the Government intends to prepare a strategy paper the development o f this system.

A second issue in public expenditure management related directly to service delivery. Service delivery systems in Tajikistan remain weak. Accountability and reporting systems are fragmented due to the prevailing system o f dual subordination and local authorities suffer from extreme capacity constraints. Whereas formal controls on the use o f public funds by local authorities are well established, annual reports o f the State Financial Control Committee show significant scope for abuse o f funds, which was further exemplified by reviews o f education expenditure management in several Rayons in 2005. Changes in management and accountability systems are being considered, but need to take into account weak capacities at every level o f local government and thus be introduced on a step by step basis.

Because the priorities o f Tajikistan l ie on improving social services to reverse the decline and accelerate the development o f i t s population, the Government has prioritized the improvement in financing and resource allocation in health and education as part o f i t s development strategy.

Health Care Financing -- - - _ . . - Health outcomes and the quality of health care services have been detenorating in Tajikistan since independence in 1991. Tajikistan’s health indicators are among the poorest among CIS countries o f similar income levels. Under funding i s a key

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contributor to poor outcomes and quality but the system also suffers from a number o f structural weaknesses common to post-Soviet and transition economies, including an under-emphasis o f primary health care, excessively large hospital network, poorly paid health workers and the insidious prevalence o f informal payments for services.

In May 2005, the government adopted a national health financing strategy, based in part on an earlier health policy note prepared by the World Bank. The strategy aims at improving fiscal sustainability, transparency and accountability in the health sector. The key elements are:

(a) Reallocation o f resources toward primary care, including targeting upcoming wage increases over 2006-08 to primary health care workers. Combined with greater primary health care worker accountability for results, these measures are expected to stem the current out-migration o f primary health care workers, reduce informal payments and improve service delivery;

(b) Implementation o f a basic benefits package including free primary care and co-payments for secondary care, which i s aimed at increasing financing for secondary care17, formalizing and regulation out-of-pocket payments and paid services in the hospital sector and increasing hospital accountability for use o f private resources. To strengthen accountability, hospital budget will be defined on the basis o f public and projected private sector contributions. Hospitals wil l be expected to allocate increased income for financing salaries, performance bonuses and variable inputs;

(c) Reform o f the mechanism o f financing health care at rayon level from the current input-based financing to a more transparent, needs-based formula calculated on the basis o f population. The implementation o f this reform is expected to address historical patterns o f inequity under the former system and more efficiently allocate limited resources; and

(d) Systematic and strict monitoring o f the BBP and paid service implementation by the MOH to ensure adherence to operational guidelines stipulated for improved accountability o f health care workers and resource allocation.

The Government has already increased public spending on health care in Tajikistan from 0.9 percent o f GDP in 2004 to 1.3 percent in 2005. The expected increases in wage and salaries from the financing reform wil l also be accompanied by the gradual reform o f the wage and job classification system in the health sector over the next three to four years.

Implementation o f health care reforms has begun on a pilot scale. The basic benefits package was rolled out nationwide in August 2005. However, negative feedback from health workers and patients prompted a temporarily suspension because o f misuse and inefficient use of fee revenues. The Government is now introducing a unified

~

”. A simulation exercise for the 2006 hospital budgets showed that applying the new basic benefits package, should be able increase the resources available to the hospital sector by 53 percent over their current public budgets.

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methodology for computing fees for pa id services and co-payments, developing guidelines on the use o f additional revenues by hospitals, and strengthening the monitoring system.

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Annex 2: Major Related Projects Financed by the Bank and/or other Agencies

TAJIKISTAN: PUBLIC SECTOR REFORM PROJECT

1. Overview of Donor support

Apart from the Bank, major donors supporting public administration reform in Tajikistan are the Swiss Government through the Swiss State Secretariat for Economic Affairs (SECO), the European Union through EuropeAid, the United Kingdom’s DFID, the Asian Development Bank, UNDP and USAID.

SECO provided fknding for the IFC PEP implemented project to conduct two surveys o f the Small and Medium Enterprises (SME) and providing policy support for improvement o f SME related regulatory framework, in particular the inspections law and relevant regulations.

Funding was also provided for the MIGMIAS-implemented two phase project on improving the investment environment and strengthening Tajikistan’s institutional capacity for investment climate reforms and investment facilitation. The project i s working on the f i rs t phase with an in-depth diagnostic assessment o f the institutional framework for investment climate reform and investment facilitation, the identification o f implementation priorities and action plan. In the second phase the project i s supposed to support institutional development via assisting the Government to implement priorities and measures foreseen in the action plan defined in phase 1. The project will help build capacity for the government body which wil l be made in charge o f fostering foreign investments and investment climate improvement.

SECO’s trade promotion program i s aimed at strengthening Tajikistan’s economic development through a sustainable diversification o f exports. In particular, the project is concentrated on (i) improving the export competitiveness o f enterprises in the h i t s and vegetable sector, (ii) strengthening Business Support Services Organizations through increasing the quality and range o f their services, and (iii) improving the business environment for exporters by strengthening the dialogue between stakeholders and the public sector in the course o f preparing sector and national trade strategies. The project also has two phases and is implemented by the International Trade Center in Geneva.

The EU supports governance reform in Tajikistan through EuropeAid initiatives, which include both programmatic and investment lending and technical assistance projects. The Food Security Program (FSP) i s the EC’s programmatic lending instrument with conditionalities related to public administration and institutional reform with the purpose o f improving the country’s ability to regulate food security and agricultural policy. FSP conditionalities are closely coordinated with those o f the Bank’s PDPC and the IMF’s PRGF.

The Institutional Reform Support Program, which is likely to start in 2007, will be aimed at supporting the structural reforms initiated by the FSP. The overall objective o f the project i s to contribute to the reform o f the public administration by promoting a number

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o f institutional and financial improvements with a view to improving budget planning processes in the area o f social protection.

The major objectives o f the project are (i) provision o f support to the Ministry o f Economy and Trade in the preparation o f the socio-economic development plan based o n the macroeconomic framework and building i t into MTBF; (ii) provision o f support to the Government, particularly the Ministry o f Labor and Social Protection in the formulation o f a sector strategy o n social protection, and linking the sector strategy with the budget formulation process at the level o f M L S P and i ts spending units.

EuropeAid’s TACIS program provides assistance to the Institute o f Improvement o f Qualifications o f C iv i l Servants in terms o f strengthening its capacity to perfonn training activities, p lan and assess needs, develop curricula, etc. Activities under this project are suitably complementing the activities supported by a World Bank IDF, which was also allocated to the Institute with the purpose o f building its capacity and improving infrastructure.

The on-going TACIS project at the Ministry o f Labor and Social Protection supports the structural and organizational reform o f the ministry at the central and local levels. I t i s aimed at optimizing the framework o f social benefits, improving and modernizing the ministry’s structure and building its capacity in formulating and managing public policy in social protection and employment.

DFID i s funding the capacity building in the public expenditure system via financing (i) a study tour o f the relevant staff o f the Ministry o f Finance and the Executive Office o f the President to Moldova to share knowledge and experience with Moldovan government on issues related to development and implementation o f the MTBF, and (ii) long-term (3 year) international consultant o n public financial management issues to work in Tajikistan at the Bank’s Country Office in Dushanbe with the purpose o f coordinating donor activities in the PFM issues and provide day-to-day expert and advice to the ministry o f finance in the PFM related issues, in particular o n MTBF.

The ADB project on customs modernization provides both investment and technical assistance to the Ministry o f State Revenues and Duties, in particular to its Customs department. The project is aimed at modernizing the customs system v ia introducing new and modem equipment, unif ied network and other infrastructure to improve efficiency and timeliness of processing o f customs regulations and formalities. I t will also build capacity for the relevant staff at the ministry and most important at the local level, i.e. at the border check-point.

UNDP has been involved in public administration reform with a project o n Promoting Transparency and Accountability, a Report Card System Project, and a Jamoat Capacity Building project.

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Objectives o f the Promoting Transparency and Accountability Project include:

1.

2.

3.

4.

5.

Promote a common strategy on anti-corruption, including key elements drawn from commitments already made by Tajikistan in an OECD-organized peer review.

Develop sound data on the actual level o f corruption in Tajikistan to give guidance to anti-comption efforts, and to validate or refute perceptions o f systemic corruption.

Improve the capacities for oversight o f the State Budget by the lower house o f parliament. Whi le the parliament has been a weak body in the past, there are signs that it is becoming more active, and greater parliamentary capacity would match we l l with pressure by other donors to allow for more effective oversight mechanisms.

Develop an action plan on one significant example that would change attitudes on the possibility o f cleaning up corruption, in a high-visibility area where large numbers o f people would “see and feel” changes.

Conduct public awareness campaigns to increase stigmatization o f corruption. This could pull together various components (awareness, primary, secondary and post- secondary and public education) into a comprehensive and focused plan aimed at stigmatizing corrupt behavior.

The Report Card System Project concentrates on strengthening the capacity o f local Councils to better guide local pol icy developments to ensure there i s an accountable professional self-government. While the new law o n local self government on sub-district levels i s unl ikely to be in effect before 2007, district Councils continue to be the key local institutions to enhance executive oversight and local accountability. This project includes (1) training provided to the district Councils, newly elected in 2005, which will enable them to better perform their functions, such as oversight and outreach to citizens; (2) the citizens’ report card, implemented by local NGOs, which wil l provide pol icy guidance to local Councils by reflecting citizen satisfaction and measuring performance; and (3) increased accountability and commitment o f the local governments wil l be measured by the introduction o f Citizen Charter.

The Jamoat Capacity Building project set its objectives as (i) carrying out a comprehensive Capacity Building Needs Assessment, identify training gaps and priorities; (ii) developing and implementing an introductory training program for Jamoats; (iii) developing and testing a benchmarking tool; (iv) developing specific guidelines to improve performance o f the Jamoats and providing o n the j o b training and consultations; (v) Strengthening the capacities o f the Institute for Higher Qualification o f C i v i l Servants to provide quality training, coordination and information services for c i v i l servants at local level; (iv) developing recommendations for the improvement o f the legal and organizational framework for local c iv i l servants training in Tajikistan.

USAID’s main involvement in public administration reform i s in the areas o f commercial law modernization and assistance to the Min is t ry o f State Revenues and Duties. The commercial law project implemented by ARDKhecc i has been assisting the government’s working groups to develop the new codes on administrative infringements,

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modernizing the legislation on c i v i l procedures, enterprise law, and the l aw on registration o f immovable property. The project has also provided training and capacity building assistance to the relevant structures o f the President’s Office, Parliament and the Min is t ry o f Justice. Assistance to the Ministry o f State Duties and Revenues was concentrating on expert and advisory help during development o f the new Taj ik tax and customs codes, both o f wh ich were enacted in January 2005.

Project

2. Donor-financed projects

Sector Issue Latest ISR rating or OED Evaluation Rating 1 closed Projects;

Implementation Status for non-lank Project

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Primary Health Care Project.

____________________~--------- - - - - - - .

Education Modernization Project.

Technical Assistance Project.

I Community and Basic Health Care

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Strengthening Civil Service Capacity in Tajikistan.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Public Sector Accountability Capacity Building

World Bank US6.7 million IDA credit. Focused on reforming public administration; improving budget management systems; and accelerating privatization of medium and large-scale enterprises and developing the private sector. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

US5.4 million IDA credit. Focused on Primary Health Care development and training; health facilities rationalization and development; health care financing; and capacity building. _____-__________-_______________________- -

US13 million and US$7 million IDA credit and grant respectively. Focuses on setting the stage for change at the national level while improving learning conditions and school enrollment and completion through grade 5 in selected districts. Also supports introduction to per capita financing in secondary education.

US10 million IDA grants. Focuses on increasing access and satisfaction to health services in project-supported areas, building capacity and efficiency at national local levels in administering a basic package of health benefits and introducing financing reforms in primary health care.

US$210,000 IDF grant. Focuses on building capacity for the Institute o f Civil Servants Qualification Improvement at the Department o f Civil Service under the President o f

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Xaj!ki?t% - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - US$295,000 IDF grant. Focuses on building capacity of the Tajik Supreme Audit Institution - State Financial Control Committee via establishing a twinning arr!!lgeme!? with aweste!?sAr. - - - - - - - - - - - - -

Zlosed on March 30,2005. Preliminary ICR outca .sting i s unsatisfactory. Latest ISR rating was “MI :or DO. and “S’ for IP.

._---_-------- - -_--_-------- - - - - - - - - - - - - - - - - - - -

3ED outcome rating - moderately satisfactory.

Latest ISR ratings: DO - satisfactory, IP - satisfactory.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Approved by the Board on December 14,2005.

Implementation status: satisfactory.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Implementation status: satisfactory.

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Public Procurement Reform and Institutional Strengthening

_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ Foreign Investment Advisory Service (FIAS) and Multilateral Investment Guarantee Agency (MIGA).

Programmatic Policy Development Credit

Strengthening the National Statistical System o f Tajikistan for Development and Poverty Reduction

1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - - - - - - - - International Finance Corporation

USS220,OOO IDF grant. Focuses on support for development and implementation of the new Public Procurement Law and capacity building of the State Procurement Agency andtherelevant-m!n!stries and a@!C!?:- - - - - - USSIO million IDA grant. Actions on public administration and civil service pay reform, public expenditure reform, human development, energy sector and SME d!?!PPF?!-!l- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - U S S I million IDA grant. U S S 4 million co- financing from SIDA and DFID. Focuses on supporting the implementation of the Governments Multi-Year Integrated Statistical Plan via institutional and human resource development, development o f statistical infrastructure and data development; and providing physical infrastructure and equipment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Tajikistan SME Survey and Policy US S820,OOO (see Switzerland section below).

_ _ _ _ _ _ _ _ _ _ _ _ - _ - _ - - _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ - - - - Strengthening Tajikistan's Investment Climate and Investment Facilitation Capacity US$I .I million (see Switzerland section below).

Donors Tajikistan SME Survey and Policy (Private Enterprise Partnership). USS820,OOO Swiss grant. Focuses on conducting 2 surveys (first already done, second expected for 2006) of 2,000 Tajik entrepreneurs in order to identify administrative and regulatory impediments to SME development; legal reform, to ensure adequacy o f inspection regime; information campaign for entrepreneurs.

_________- - - - - - - - - - -____________________- - - - Trade promotion program (2 phases). Total amount USS3.96 million. Focuses on strengthening balanced Tajikistan's economic development through sustainable diversification o f exports. ____________-___-_______________________~~~.

Implementation status: satisfactory.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Under preparation.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Under preparation. To be implemented by State Statistics Committee.

Implementation status: satisfactory. Funding from Switzerland / SECO.

Implementation status: satisfactory. Implemented b IFC PEP.

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EU

ADB

DFID

-- - - - - - - -_-_____________________________-- - Strengthening Tajikistan’s Investment Climate and Investment Facilitation Capacity (2 phases). US$l. 1 million Swiss grant. Focuses on improving the investment environment and strengthening institutional capacity for investment climate reforms and investment facilitation.

Budget Support (US$] 1 million grant) under the Food Security Program. Focuses on public expenditure and government planning and programming capacity building in selected areas related to food security, such as agriculture and land reform.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Institutional Reform Support Program (€5 million). Provides support to the MET to prepare the MTEF-linked socio-economic development plan; and to the MLSP for formulation of a budget-linked social protection sector strategy.

TACIS program for Support to the Civil Service Reform in Tajikistan. USSl.2 million grant. Focuses on the civil service legal framework improvement, capacity building for the Department of Civil Service and the [nstitute of Improvement of Qualifications of Civil Servants.

TACIS Program on Support to the Ministry Jf Labor and Social Protection. USS 1.1 nillion grant. Focuses on carrying-out in- iepth analysis of MLSP, review o f social systems, rationalization of privileges, MLSP :apacity building on policy management, ?!Jd@?h- and mo?i!r:l!% - - - - - - - - - - - - - - - - - Zustoms Modernization Project (US%SOO,OOO yant and US$l 1.2 million credit). Focuses In improving efficiency and transparency o f :ustoms services, facilitating trade via :ustoms cooperation and modernization, iutomation of customs services and mproving border infrastructure, institutional mprovement of the Customs Department and ntroduction o f the Unified automated nformation system.

Support to MoF in MTEF capacity building (ia financing o f a study tour to Moldova.

-ong-term (3 year) International consultant )n Public Finance issues to be located at the NB Tajikistan Country Office. . . . . . . . . . . . . . . . . . . . . - - _ - - - _ _ _ _ _ _ _ _ _ _ _ _ _ _ _

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . First phase (USS200,000,6 months) finished satisfactorily. Second phase (US$900,000, 18 months) will start in lst quarter of CY 2006. Implemented by MIGNFIAS.

Provided annually based on fulfillment of conditions. Conditions in similar areas as actions under the Bank- financed Programmatic Policy Development Credit.

Will start in second half of CY 2006.

From December 2004 to December 2006.

From October 2004 to October 2006.

_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ - - - _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ - - - - - - - - - - -

Scheduled for March 2006.

Consultant started work in February 2006.

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FA0

USAID

Strengthening capacity of the PRSP Monitoring and Food Security Unit (PMFSU) of the Ministry of agriculture (MOA). US$375,000 grant focuses on PMFSU and MOA capacity building in designing, analyzing and evaluating food security/agricultural investment programs an!! p!?&cts.- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Economic Reform Program (total, including SME support, for annually about $5 million) focuses on supporting policy reform via: - judicial and commercial law reform; - support to the Ministry o f State

- assistance to the National Bank for Revenues for tax reform;

banking sector reform and microfinance legislation development;

- support for WTO accession; - updating the land tenure legislation.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

International Consultant’s support to the Ministry o f Finance for building capacity in macroeconomic framework and treasury management.

Project on Promoting Transparency and Accountability (US1.2 million) focusing on:

Promoting a common strategy on anti- corruption; Developing sound data on the actual level o f corruption in Tajikistan; Improving the budget oversight capacity o f the lower house of parliament; Conducting public awareness campaigns to increase stigmatization o f corruption.

Report Card System Project (US$200,000) focusing on:

Training for the district Councils elected in 2005; Introducing citizens’ report card to provide feedback and policy guidance to local Councils by reflecting citizen satisfaction and measuring performance;

commitment o f local governments through the introduction o f Citizens’ Charters.

- -__________--------- - - - - - - - - - - - - - - - - - - - - - - .

Increasing accountability and

Jamoat Capacity Building Project (US$400,000) focusing on:

Carrying out comprehensive needs

Developing and implementing assessment;

introductory training program for the Jamoats;

%om April 2004 to January 2006.

Implemented by ARDKHECCHI. [mplemented by USAID.

Implemented by Bearing Point and IFC.

[mplemented by Pragma Corporation. [mplemented by ARD.

From January 2006 to December 2008. Implemented by Parliament and Center for Strategic Research. In cooperation with SIDA and the French Embassy.

From January to December 2006. Implemented by local NGOs and local councils. In cooperation with DFID.

From January to December 2006. In cooperation wit DFID.

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Developing and testing benchmarking tools; Developing specific guidelines to improve performance of the Jamoats and provide on-the-job training and consultations;

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. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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Annex 3: Results Framework and Monitoring

TAJIKISTAN: PUBLIC SECTOR REFORM PROJECT

Results Framework

PDO

Strengthen pol icy making and service delivery systems and enhance transparency o f public management in selected core public sector entities

Intermediate Outcomes

Support to Civil Service Reform:

Horizontal management system for c iv i l service recruitment and career planning process finctioning and training integrated in the career planning

Project Outcome Indicators

1. A transparently managed and increasingly merit-based C iv i l Service.

2. A rationalized overall central government structure and improved organization and management systems in selected core public sector entities.

3. Increasingly reliable, comprehensive and available public financial management information.

4. Enhanced transparency and accessibility o f the legal and regulatory framework

Intermediate Outcome Indicators

1. Civi l Service register, as a key tool for horizontal C iv i l Service management, operational

2. Consistency in recruitment and promotion practices achieved in central government;

3. Recruitment by open competition, based on public vacancy announcements, i s institutionalized;

4. New c iv i l service pay system f i l ly operational.

Use o f Project Outcome Information

1. Provides a monitoring tool to the Government and citizens to assess whether objectives set out in the Government’s P A R Strategy and National Development Strategy related to institutional reform are met.

2. Creates a more realistic basis for development planning for government, donor agencies and NGOs through improved reliability, comprehensiveness and availability o f public financial management information necessary for development priorities.

3. Supports investment and business development decisions by private entrepreneurs.

Use o f Intermediate Outcome Monitoring

Widen the application of merit principles in recruitment and career management by malung use o f the data provided through the c iv i l service register and other measures increasing transparency in recruitment and promotion. Raising any noted deficiencies wi th the agencies concerned.

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Facil i ty f o r Publ ic Administrat ion Reform Implementation:

Management and organization o f selected ministries and agencies rationalized

Capacity Bui ld ing in Budget Management:

(a) Improved reliability, comprehensiveness o f public financial management information.

(b) Enabling conditions for the effective introduction o f new funding mechanisms for primary health care are in place.

Capacity Building in Regulatory Management:

(a) Enhanced transparency and improved access to normative acts

(b) More effective and less intrusive functioning o f selected inspection agencies (Fire Inspection and Sanitary and Epidemiological Service)

1. Effective reform monitoring and traclung system put in place;

2. Reallocation o f functions between institutions at central government level completed;

3. Management and accountability systems for service delivery in the Ministry o f Labor and Social Protection streamlined.

1. Public Financial Management Reform Action Plan adopted and Eapacity o f budget units to use strategic budget planning tools :nhanced.

2. New wage and staff planning systems for primary health care sperational.

I. Improved access to legal norms and acts to both Zovernment and public.

2. Internal and technical -egulations o f pi lot inspections igencies developed and ublished, wi th increased mderstanding o f fm level ibligations during public sector nspections, as well as increased :omprehension by inspectors o f heir new roles

Progress in restructuring central state administration structures, including related service delivery systems, effectively tracked by both government and citizens.

1. Improved public financial information can be used for policy planning and monitoring progress in implementation o f government policy in achieving strategic priority.

2. Provides Government and citizens with more transparent information on the use o f budget resources on health.

1. Assess satisfaction wi th ease o f access o f laws and norms.

2. Improved access to legislative acts and defined internal and technical regulations lesson the burden on entrepreneurs in dealing with public inspection officials, and increases ease o f doing business, as measured by survey data.

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Annex 4: Detailed Project Description TAJIKISTAN: PUBLIC SECTOR REFORM PROJECT

Component 1 : Civil Service Management (US$O.Sl Million)

Component Summary

The objective o f this component i s to provide support to the developing merit-based professional c i v i l service in the Republic o f Tajikistan. The component reflects the priorit ies included into the draft Public Administration Reform Strategy. Successful implementation o f the activities included in the component will provide the basis for further publ ic sector development in the country.

The component includes a set o f activities that are related to: 0 c i v i l service management and coordination, including strengthening the

capacity o f C i v i l Service Department through training, po l i cy advice and support for implementing civi l service register;

the introduction o f modern HR procedures in the c i v i l service, including: (i) designing, pi lot ing and implementing new procedures for competitive recruitment; and (ii) establishing testing centers to be used for competitive recruitment, staff appraisal and training assessments;

modernization o f c i v i l service incentive systems, including: (i) technical assistance for designing and implementing measures to stimulate performance and attracting highly qualif ied staff to the c i v i l service; (ii) developing further decompression systems; and (iii) designing measures for monetization o f benefits

0

0

0 enhancing the c i v i l service training system, including: (i) developing curricula, training plans, and modules, based on training needs analysis assessment; and (ii) designing training impact assessment system.

Rationale

A merit-based professional c i v i l service i s a prerequisite for any comprehensive publ ic administration reform such as the one envisaged in the Ta j i k Public Administrat ion Reform Strategy. To a great extent, c i v i l service quality and incentives for performance within the c i v i l service determine the institutional capacity for the government to implement complex reforms as w e l l as i t s readiness to foster institutional development.

International experience demonstrates that the core characteristics o f a strong and capable c i v i l service are determined by a number o f factors. These factors include: (i) the extent of c i v i l service politicization; (ii) the level o f competitive selection, respect for meri t principles, and transparency o f HR processes; (iii) monetary and non-monetary performance incentives; and (iv) the level o f knowledge and skil ls that c i v i l servants apply when carrying out responsibilities. Surveys conducted by the OECD have also demonstrated that advanced c i v i l service system requires a central coordination

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mechanism that allows maintaining uni f ied rules and provides a mechanism for methodological support and guidance to individual executive bodies.

Based o n the current status assessment presented in the draft Public Administration Reform Strategy, Tajikistan i s yet to implement the necessary measures that would al low for developing a professional and merit-based c i v i l service. Whi le the legal basis for some of these measures i s put in place under the new draft Civil Service L a w and are conditions o f the Programmatic Pol icy Development Credit (Le., separation between pol i t ical and administrative posts, c i v i l service wage reform), the substantive work on the implementation o f most o f the measures requires additional technical assistance wh ich i s envisaged in the framework o f the Civil Service Management Component.

Description

This component wil l finance activities related to strengthening c i v i l service management and coordination capacity, introducing modem HR management processes, improving incentive systems in the c i v i l service, and strengthening c i v i l service training system. The component wil l b e implemented in coordination with the EU/TACIS project on Civil Service Reform. There are two ma in subcomponents included in this component, c iv i l service system development and civi l service training.

Subcomponent 1A: Civil Service System Development (US$0.68 Million)

The first element of the subcomponent i s strengthening c i v i l service management and coordination capacity. This part o f the component wi l l finance:

Training and capacity building activities (including some l imited study tours) for the staf f o f C i v i l Service Department;

Medium-term advisor(s) on strengthening management and coordination capacity in the area o f c i v i l service development;

Automating the c i v i l service register, including designing procedures for data access and data collection; purchasing communications and computer equipment for connecting additional ministries/committees/temtorial executive bodies to the network; and training for using the c i v i l service register. The activi ty wi l l b e based on investments already made in the Civil Service Register under IBTA I1 and PHRD Grant.

The second set of activities under the subcomponent will support introducing modem HR management procedures in the Civil Service. The component will support the implementation o f the n e w Civil Service L a w in terms o f introducing actual changes into the existing HR practices. This part o f the component will finance:

0 Developing procedures and methodologies for competit ive recruitment to the c i v i l service and providing training on these procedures;

0 Establishing a system o f testing centers, including (a) providing consulting services on types and number o f tests to b e developed; (b) developing testing software; (c) procuring computer equipment for testing center at the Civil Service Department headquarters and possibly at the territorial units o f the Civil Service Department; (d) providing training on the use o f

0

0

0

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centralized testing system; and (e) reviewing the performance o f testing center system and expanding the use o f these centers to other HR procedures (Le., competit ion to the staff pool, attestation, training assessment, etc.);

Developing and pi lot ing n e w procedures for c i v i l servants appraisal (attestation), inclusion into the staff pool, and promotion, and providing training on these procedures;

Developing general HR guidelines for staff and for employees o f HR departments so as to improve transparency o f the c i v i l service system.

The third set of activities i s aimed at improving c iv i l service incentive systems. This activi ty will support developing monetary incentive systems in the civi l service for stimulating performance and attracting highly qualif ied specialists to the c i v i l service. This part o f the component wil l finance:

Technical assistance for implementing further decompression measures in the c i v i l service;

Technical assistance for designing measures to ensure the monetization o f benefits to the c i v i l servants;

Developing and implementing procedures for using the incentive fund for stimulating performance and attracting highly quali f ied specialists to the civil service, including technical assistance and training in the use o f the procedures developed.

0

0

0

0

0

Subcomponent 1B: Strengthening the Civil Service training system (US$ 0.13 million).

The activi ty will build o n the results o f the training needs analysis (TNA) carried out under the IDF Grant o n Civil Service Capacity Building (TF 054817)'* and will complement the activities planned under the IDF grant and the EU/TACIS Civil Service Reform project in developing curricula, training plans and modules for c i v i l servants. The work will b e coordinated with the WBI program. This subcomponent will finance:

Consulting services for development o f curricula, training plans, and training modules to fklly address the basic training needs identif ied under TNA;

0 Technical assistance in developing training impact assessment systems.

0

'' Training needs analysis has revealed the need to develop some 12 coursesltraining modules; 4 o f such training modules w i l l be developed under the IDF Grant; 2 may be supported by the EU/TACIS C iv i l Service Reform project; the rest are proposed to be supported by the PSRP.

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Component 2: Supporting Implementation of Key Reforms under the Public Administration Reform Strategy (US$2.31 Million)

Component Summary This component will provide direct support to implementation o f the Public Administration Reform Strategy. The main objective o f this component i s to improve efficiency and effectiveness o f the public administration by providing flexible support for implementation o f key reforms as defined in the Public Administration Reform Strategy (PARS) through: (i) streamlining structures and functions at the national and local levels; (ii) strengthening policy making and policy monitoring approaches; and (iii) improving service delivery systems.

Given the reforms’ magnitude, flexibility o f the component design will provide the government with a tool to support key priority areas and make sure that results achieved at the earlier stages o f the project implementation would be used to make necessary adjustments in the design o f subsequent activities.

Project activities will therefore start with a small number o f key enabling activities in a first phase, followed in a second phase by activities that will support the implementation finding o f the first phase review work as well as roll out successful elements o f pilot reforms in crucial areas such as social sector service delivery.

To ensure viability and proper application o f such flexible approach, the following scheme will be followed:

1. Priority areas and amounts to be committed to them will be identified through functional reviews and other analytical work to be conducted in the first phase o f the component (Subcomponents 2A-C)

2. Mechanisms for preparation, review and, selection o f requests for funding under the second phase o f the component (Subcomponent 2D) have been agreed and are briefly described below, as well as included in the Project Operational Manual. To ensure Government ownership o f these activities, a Project Board comprised o f members o f the Presidential Working Group for Public Administration Reform wil l have the authority to approve/reject the requests put forward by interested government entities and recommended by the Executive Office o f the President, followed by the Bank’s no-objection. In order to be considered for funding, all proposed activities will have to correspond to government priorities as set out in the PARS. Proposals should be prepared in accordance with the defined format and wil l be evaluated based on pre-defined criteria, including: (i) conformity with the project development objectives and the objectives this component’ (ii) realism; (iii) specificity; (iv) opportunities for further roll-out; (v) sustainability; and (vi) readiness for implementation. If a proposal i s rejected, the Project Project Board will provide an explanation in writing. If reasons for rejection are marginal, the Project Board will provide a second opportunity for submission, provided the proposal i s in line with the objectives o f the PARS and its Action Plan.

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Structure of the component

This component will comprise o f four subcomponents, with the first three to be implemented in the f i rs t year o f the project, while providing solid analytical basis for firming up the fourth subcomponent, which wil l be implemented during the next three years o f the project:

Subcomponent 2A: horizontal hnctional review o f the government (including al l executive bodies) to be financed through a PPF;

Subcomponent 2B: a vertical functional review and technical assistance to reorganization in provision o f social protection and employment services under the Ministry o f Labor and Social Protection focusing on the service delivery system in social protection and employment policies as a pilot for the reform o f social service delivery systems;

Subcomponent 2C: technical assistance and capacity building for the structures in charge o f public administration reform management in the Executive Office o f the President.

Subcomponent 2D: implementation o f public administration reforms as identified in the PARS, elaborated through analytical work included in previous subcomponents and selected following the review and selection process as detailed below.

The main reasons for building some flexibility in the design o f these components are: (a) the long term nature o f public administration reforms, which often requires shifts in priorities over time, and (b) the scope o f the reform effort required in Tajikistan, which underlines the importance o f selectivity.

Whi le the Public Administration Reform Strategy defines short- and medium-term activities for implementing structural reforms, priorities among these activities and sequencing may shift due to the planned horizontal functional review o f all executive government bodies that may have an impact on: (i) allocation o f functions among core agencies, (ii) extent o f government influence on economic and social processes and (iii) future priorities for technical assistance and capacity building. Moreover, international experience suggests that success in implementing public administration reform measures (such as improving service delivery, streamlining policy making and policy assessment processes, etc.) largely depends on the central political will and strong leadership and commitment on the part o f the agency responsible for implementation. At the stage o f design, i t is not realistic to either finalize the scope o f technical assistance and capacity building measures allocated to each agency, as well as, pre-define agencies that are likely to retain such ownership.

Given the magnitude o f the reform efforts needed to implement Public Administration Reform Strategy, i t i s unrealistic to expect that this component will be able to provide all the technical assistance and capacity building required. Existing funding constraints suggest that the best quality proposals that reflect the reform priorities, and are based on ownership on the part o f the executive bodies to be responsible for implementation, and should be given priority in terms o f support. Such concentration o f h d s on priority areas

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would also reflect one of the key characteristics o f good publ ic administration management.

Also, by not pre-defining the amounts allocated to each particular activity, i t will be possible to attract at a later stage other donor agencies to contribute to specific activities proposed under the project, as long as they meet the established criteria.

Activi t ies under the component wil l be implemented based on the following t ime schedule:

Type o f activitylphasing

Structural reorganization o f central government architecture

structures, policy making and service delivery management processes in individual ministries and agencies

Monitoring the implementation o f PARS

Project Preparation Facility

Horizontal functional review phase 1 (completed by November 2006): b Inventory o f functions

Assessment o f suitability o f f kc t ions in a market economy context

duplicatiodfiagmentation o f functions

b Rev iewof

Final report to the President in November 2006

Phase 1 (until September 2007)

Horizontal Functional Review Phase 2 (completed March 2007):

Design o f new overall government structure Adoption o f organizational chart o f the central government

Pilot review and structuring o f MLSP, focusing both on organizational structure and service delivery management processes

Design o f the monitoring systems

Phase 2 (after September 2007, activities to be decided on an annual basis based on criteria and selection procedures defined in Annex 4)

Ro l l out of vertical reviews to line ministries and agencies based on competitive selection, based on lessons learned f i om the MLSP pi lot (objective: 8 central government institutions restructured by end o f project Implementation o f the monitoring system, including the publication o f an annual report on PARS imdementation

Description :

Activit ies included in Subcomponents 2A-C reflect the priorit ies for implementation during the first year o f the project, as agreed with the Government, and are included in the short term pr io r i t y measures outl ined in the Presidential decree o f February 4, 2005,

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which set out several initial key tasks in administrative reform”. Subcomponent 2D will include activities necessary for longer-term implementation o f the PARS. The scope and priority areas will be further identified through implementation o f Subcomponents 2A-C. The first three subcomponents should be implemented first in order to build the conditions for successful follow up activities. In addition, they include a “quick win” activity, i.e. an activity which, when implemented, i s likely to provide strong demonstration effect and ensure continuity in terms o f medium-term support for the reform agenda. Subcomponent 2A: Horizontal functional review o f the executive bodies (excluding the military and law enforcement bodies). The preparation o f recommendations for phased implementation o f the functional review, including recommendations on the new structure o f the executive, gradual elimination of redundant and duplicative functions, gradual transfer o f functions to subordinate bodies/SOEs/NGOs/private sector, etc. This wil l include identification o f priority areas and scope of technical assistance and capacity building measures necessary for implementation o f longer-term priorities o f PARS.

Subcomponent 2B: Technical assistance and capacity building measures, to support implementation o f re-organization and development o f new administrative procedures, for improved service delivery to the Ministry of Labor and Social Protection o f Population. This wil l include: (i) vertical functional review o f the ministry and i ts territorial structures; (ii) preparation of recommendations for improved service delivery in the area o f employment and social protection; (iii) piloting the proposed recommendations; and (iv) possible support to roll-out pilot activities.

Subcomponent 2C: Strengthening the capacity and providing policy advice to the new structure in charge o f reforms at the Executive Office o f the President. This wil l include: (i) funding for a medium-term advisor to the EOP; (ii) technical assistance, seminars, workshops and other training events on key areas o f the reform such as departmental functional reviews, strategic planning, policy-making and policy impact assessments, improving service delivery systems, improving transparency o f public administration, etc.; and (iii) some study tours for the staffs o f the relevant EOP structure to review international experience in terms o f designing and implementing public administration reforms.

Subcomponent 2D: Supporting implementation of longer-term priorities o f PARS, worked out in detail during the horizontal functional review and the pilot reform o f service delivery systems under the Ministry o f Labor and Social Protection. Implementation o f this subcomponent i s conditional on satisfactory implementation o f the project (as rated by the Bank andor as assessed by the Project Board based on acceptance of the most recent quarterly progress report) and successful implementationhatisfactory progress of at least 70 percent o f activities financed by the component as assessed by the Bank and by the Project Board. This subcomponent will provide flexible support in terms of funding technical assistance and capacity building activities for key directions o f public administration reform. The activities selected for support will be limited to the following key reform aspects:

l9 The activity on horizontal functional review i s funded through the Project Preparation Facility. TOR for the review have been agreed

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a. Improving administrative efficiency and effectiveness o f selected government bodies, including: (i) technical assistance and capacity building for post-government restructuring support to the executive bodies that need to execute newkhanged functions; (ii) designing n e w administrative procedures and practices; (iii) conducting pilot vertical functional reviews to streamline structures; (iv) improving interdepartmental interaction processes and; (v) pr ior i ty agency specific reforms. In order to enhance transparency in the implementation o f reforms, any enti ty that would wish to obtain funds for a restructuring process would also need to commit to make the results o f the review as we l l as the designed reform plan publ ic ly available on the Government website.

b. Improving po l icy making and po l icy impact assessment practices at the sectoral level include: (i) technical assistance and capacity building in the areas o f po l i cy formulation, pol icy monitoring and elements o f po l i cy impact assessment, and (ii) application o f project management assessments for selected ministries/for selected programs. Specific priority wil l be given to initiatives that include participatory monitoring o f government programs by non-governmental organizations;

c. Improving service deliverv systems. including: (i) some pilot activities (both technical assistance and capacity building) related to developing min ima l service standards; (ii) introducing basic publ ic service del ivery monitoring; (iii) improving selected administrative procedures related to provision o f publ ic services for l imi ted number o f ministries/executive bodies in charge o f service provision.

Requests for funding would b e prepared by the executive bodies interested in pursuing publ ic administration reforms, based on a standard application form that i s included in the Project Operational Manual.

Review Step 1: reflection ofpriorities in the government PAR Strategy

These requests wil l in first instance b e reviewed by the relevant structure o f the Executive Off ice o f the President (EOP) and, if the review results in recommendation for hnding, review and approval on the part o f the Project Board and then the Bank. The Executive Off ice wil l share a l l incoming proposals with the Project Board and the Bank.

The qualification criteria to move to an in-depth review o f the request for funding i s correspondence to government priorities, as set out under the PARS. It i s expected that the proposed activities should: (i) reflect the priorit ies in terms o f publ ic administration reform for the next 1-2 years; (ii) reflect the activities included in PARS; and (iii) correspond to the three areas identi f ied for support under this component (improving administrative effectiveness and efficiency; improving po l i cy mak ing and po l i cy impact assessment; improving service delivery). If the requested activities do not suff iciently reflect these criteria, such requests should not b e further assessed.

Review Step 2: assessment on Jive weighted criteria

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In case the requests meet the initial qualification criteria, an expert review i s conducted by the relevant structure o f EOP to assess the quality o f the requests. Such expert review will be based on the criteria presented in the table below:

Table 1. Criteria for Assessment of Requests for Funding - No.

1.

2.

3.

4.

5.

Criterion

Specificity: the request should include a specific description o f objectives, activities to be carried out, and results to be obtained. The proposals should also indicate the means for monitoring and assessment o f the results o f the activities undertaken, as much as practical, as well as steps to be taken to publicize and disseminate the results o f the activity.

Realism: the scope o f activities, proposed time-table, and requested budget should be realistic; the requests should include targeted activities with clearly managed outputs with the budget not exceeding the equivalent o f US$100,000.00 and planned for a period no longer than 18 months.

Opportunities for roll-out: the activities that are likely to have significant demonstrative effect and/or could be easily replicated in other executive bodies would be given preference.

Sustainabilitv: the results o f activities should be sustainable in the medium-term perspective without significant additional investment.

Readiness for implementation: the proposed structure for implementation o f the activities (i.e. ministerial working group, department responsible) should be in place and should ensure successful implementation o f the proposed activities.

TOTAL

Score

30

25

10

20

~

15

100

I t i s expected that proposals recommended for funding will be rated not lower than 70 out o f maximum 100 points. Requests that are rated 70 points or higher but lower than 50 percent o f possible maximum scores on criterion No. 1 ( ie . 15 points or lower), 2 (i.e. 12 points and lower), and 4 (10 points and lower) may be recommended for revision and re- submission. Requests rated lower than 70 will normally be rejected. Specific scoring guidelines will be developed to help assess each o f the criteria presented above.

Following approval o f any individual activity, a formal implementation agreement with specific timelines and benchmarks will be concluded between the department responsible for project implementation, and the Minister or Director o f the institution that proposed the activity.

Procedure for Approval, Monitoring and Evaluation of second phase activities (Sub- component 20)

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I t i s proposed that call for requests for funding to be supported under Subcomponent 2D will be issued on an annual basis, at a set time in the budget year (subject to satisfactory implementation o f the project and successful implementation o f the component as defined above). In exceptional circumstances, additional requests can be submitted for review and approval within the year.

The following procedure i s proposed for review and approval o f proposals:

1. Executive body or Technical Group prepares and presents a request for funding to the EOP Department for Economic Reforms and Investments (DERI) for review (by March or September 1st). The request should include:

a) Objective, scope and contents o f activities, timetable, and indicative budget;

b) Expected results and possible means o f monitoring these results;

c) Correlation with the PARS, government priorities, and the three reform directions as specified above (improving administrative effectiveness and efficiency; improving policy making and policy impact assessment; improving service delivery);

d) Possibility for further roll-out or further use by other executive bodies;

e) Need for further financialhechnical support after the completion o f the proposed activities;

f) Entity responsible for implementation.

2. DERI EOP checks compliance o f the request with the qualification criteria: government priorities, objectives o f PARS, and areas identified for support under this component. In case the request meets the qualification criteria, conducts an expert assessment in accordance with the assessment criteria (see Table l), and prepares a review note which stipulates: (i) recommendation for review at the Project Board meeting; or (ii) recommendation for further revision and re- submission; or (iii) rejection o f the request. I t i s expected that the work on selection o f requests would be completed by May or November ls t , and the requests would be submitted for review and approval by the Project Board.

3. The Project Board will review the request and either approve these for funding (subject to no objection by the Bank), or reject the request (by June or December 1st). In case the request is approved, relevant changes are to be introduced to the Project Procurement Plan and Project Budget for the following year (subject to no objection by the Bank).

4. Upon receipt o f no-objection from the Bank, appropriate changes are made to the project planning documents, and the Technical Group or/and the executive body that initiated the request prepares the terms o f reference.

Progress in implementation o f activities funded under the component i s assessed quarterly and presented in Quarterly Project Progress Reports.

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Component 3: Capacity Building in Budget Management (US$0.57 million)

Rationale

The government recognizes that deepening reform o f public expenditure management i s essential. It has taken ownership in the development o f a comprehensive public sector reform strategg’ that serves as a platform for the reform o f public administration, civil service, local government as well as public expenditure management. The latter includes an integration o f the budget process and the national development plan, strengthening budget formulation and execution process at central and local governments, and improving transparency and accountability through procurement and external audit.

The World Bank PEIR (2004) and CFAA (2003) as well as the most recent IMF assessment o f the public financial management system in Tajikistan,2’ indicated that the core public financial management systems work reasonably wel l as a result o f reform progress in some important areas o f public finance. These include strengthening the regulatory framework o f the budget process and treasury management, establishment o f an audit institution to improved pubic financial accountability, improving comprehensiveness and transparency o f the central budget, strengthening procedure and participation in the annual budget process, monitoring expenditure payment arrears, improving fiscal report and broadening public availability o f budget information. Recently, the authorities have also undertaken initial steps to integrate the various allocation mechanisms and to enhance the multi-year perspective in fiscal planning, expenditure policy and budgeting. As a result, the stock o f expenditure arrears has been reduced and there i s no accumulation o f new arrears.

However, the budget modernization process has moved slowly. Inadequate enforcement of the regulatory framework, weak capacity and limited understanding o f modern budgeting decrease the level o f expenditure effectiveness. Budget formulation and estimation i s based on an incremental approach. There are deviations between budget approvals and outturns. Further, the recently improved budget classification is s t i l l incomplete; there i s no rule-based system for intergovernmental relations; aggregate fiscal r isks are not fully addressed; the link between policies and budgeting i s s t i l l weak; there i s no integrated bank account structure, cash planning and management system or comprehensive commitment control system; payroll control is weak; internal audit i s limited; control of procurement i s insufficiently effective; the accuracy o f accounting information i s not ensured due to the low quality o f the accounting system; the coverage and quality o f the annual financial statements do not meet international standards; and external audit i s still at an early stage o f development. Finally, the strategic policy planning i s incoherent and budget process remains fragmented and both o f them are not fully connected. Consequently, the allocation o f scarce resources is not well prioritized

2o Public Administration Reform Strategy o f the Republic o f Tajikistan, approved by Presidential Decree on 15 March 2006. 21 IMF “Tajikistan - Staff Assessment o f Qualification for the Multilateral Debt Relief Initiative,” that i s based on the report on “Public Financial Management Performance and Treasury Reforms,” (July 2005).

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based on the government strategic priority and outcomes are not monitored and measured on a regular basis.22

On social sector expenditures, the World Bank’s Policy Note on Public Sector Wages (2005) indicates existing wage and staff planning systems in health and education as overcomplicated and poorly regulated which, along with low salaries, negatively affects the attractiveness of jobs in the sector, and, consequently, quality o f the health and education services. As regards the health sector, the Health Care Financing Strategy also emphasized the need to implement a new job classification system for primary care together with reform o f the payment system in all levels o f health care. W h i l e there is some external assistance to the Ministry o f Health in designing the PC financing mechanism, eventually, all these efforts, as well as Government’s plans to scale up per capita nationwide in the mid-term, wil l fai l unless the wage and stavka systems are substantially reformed.

Activities

This component wil l fund a limited number o f enabling activities for broader public financial management reforms. First, it will support the design o f an Action Plan to create an Integrated Public Financial Management System and some related core training activities. The implementation o f the Action Plan which will be supported under the forthcoming Public Financial Management Modernization Project, envisaged in the Country Partnership Strategy in FY2007 and under other donor (IMF, EU, and DFID) technical assistance. Second, the project wil l support the Ministry o f Finance in designing and implementing, together with the Ministry o f Health, reforms in the wage and staff planning systems in the Primary Health Care sectors, which will facilitate the introduction and ro l l out o f a Per Capita Budgeting system, which i s to be introduced in 2008.

Description of the Component

Sub-component 3A: Development o f an Integrated Public Financial ManaPement System [US$O.3 5 million) The project wil l finance local and international technical assistance to develop a comprehensive strategy for an integrated public financial management system that encompasses budget management, treasury modernization, procurement, internal and external audit and accounting. I t i s crucial for advancing the reform o f public financial management and will accelerate the preparation o f the Public Financial Management System (PFMS) project in Tajikistan. The technical assistance wil l provide a diagnostic o f the existing public financial system in Tajikistan, identification o f critical issues and priority actions to be addressed, and development o f a time-bound implementation action plan. The plan is expected to outline a sequence o f reform activities taking into account political, capacity, resource constraints and provide a road map for step-by-step

22 See Public Expenditure and Institutional Review (PEIR), World Bank, Oct 2004 for a detailed assessment o f budget institutions and processes in Tajikistan

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implementation o f the reform. management units on selected aspects o f the implementation o f the Act ion Plan.

The project wi l l also provide training for budget

Sub-component 3B: Improved Efficiency and Equity in Resource Allocation in the Primary Health Care Sector (US$0.22 million) The project will finance local and international assistance support the implementation o f a time-bound action plan to address some key issues that currently prevent the effective introduction o f per capita funding systems, in particular the rigid and inadequate wage systems in the public sector as we l l as staff load systems. The project wil l finance technical assistance to the Ministries o f Finance and Health on the gradual introduction o f a new wage system in Primary Health Care, which wil l accompany each stage of gradual introduced o f new wage and j o b classification systems planned over a 3-4 year time period.

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Component 4: Capacity Building in Regulatory Management (US0.66 Million)

Rationale

Tajikistan’s private sector is small and under-developed as the Government remains the sole owner of large public enterprises, especially in the strategic sectors including transport, telecommunication, energy, gas, aluminum, etc. The private sector only accounts for 40 percent o f GDP in 2004 reflecting a low investment rate and limited direct foreign investment due to unfavorable investment climate.

The investment climate in Tajikistan i s characterized by numerous obstacles to market entry and exit including excessive licensing and inspections, limited access to finance, unclear property rights, weak compliance o f laws and corporate governance, etc. - all these being further exacerbated by negative exogenous factors such as the country’s land- locked position and difficult neighborhood. Survey date indicates that although the percent o f f i r m s indicating bribes are frequent has gone down in Tajikistan between 2002 and 2005, it does rank worse than many o f the CIS neighbors, and there has been a marginal improvement in addressing corruption problems in inspections o f businesses between 2002 and 2005.

Description

Subcomponent 4A: Improving Regulatory Ouality and Service Delivery o f Inspections Agencies (US$0.25 Million) There have been numerous cases o f unpredictability in policy making, bureaucratic inefficiency, and use o f outdated regulations, impeding innovation and creating a barrier to trade and investment in Tajikistan. Recent surveys have indicated that 25 percent o f firms claim uncertainty about regulatory policies and it i s a problem doing business. In such a system, officials are largely unrestrained in choosing regulations they elect to impose. The private sector therefore experiences great difficulties in knowing how to comply with official obligations to the state, and there is strong motivation to either operate unofficially to avoid government regulators, or come to private agreements with individual officials concerning compliance. Such a system impedes the possibility of economic growth, erodes public trust, and weakens the integrity o f government.

Several government agencies have requested assistance in streamlining their normative acts, developing proper technical regulations, and instituting better accountability mechanisms. The Sanitary Epidemiological Services (SES), for example, monitors the implementation of over 1000 normative acts in the areas o f hygiene, epidemiological and laboratory services. These normative acts, mostly from the Soviet period, are not applicable to the current context, and provide for unnecessary burden on both the public official to enforce irrelevant and outdated norms, as well as the private entrepreneurs in understanding their obligations in following the law.23 At the same time, Government still

23 This activity is in line with the Government’s Public Administration Reform Strategy, in which it outlines the need for an improvement in public administration to be in line with market economy principles, where the main obstacle is that the state i s too involved in economic activity.

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has the responsibil i ty to set and enforce standards pertaining to public health and safety, to ensure that product information provided by industry i s sufficient and accurate, and to provide health and safety information to consumers.

Specifically, the SES and Fire and Safety Inspectorate - two o f the most problematic agencies in inspecting businesses according to recent survey data - requested assistance under proposed Public Sector Reform Project to modernize the organization o f these agencies. The PSRP wil l work with existing donor-supported projects in these agencies and, and in addition will:24

a. provide consultancy services to the agencies to review existing normative acts and bring them up to date with internationally accepted technical regulations;

b. make accessible to the public and businesses these regulations through gazettes and outreach activities;

c. provide support in assessing internal instructions o f these agencies, including inter alia: (i) outlining the mandate o f the agency; (ii) developing i ts fines and fees structure; and (iii) selection criteria o f chosen inspected firms, including the process of issuing citations wh ich includes a description o f the nature o f the violat ion including reference to the provision o f the act, standard, rule, regulation or other legal document that was violated;

d. provide training for inspectors to follow new norms and standards.

Subcomponent 4B: Legal Development and Transparency (US$0.41 Million) I t i s often dif f icult for entrepreneurs to access the laws or regulations which govern their particular business activity. Regulations and instructions for those charged with enforcement responsibilities are often delayed in drafting, or non-existent. As there i s duplicative and outdated information regulating the same types o f business activities, enterprises find it dif f iuclt to comply with the law.

The Min is t ry o f Justice (MoJ) i s formal ly responsible for registering and publishing a l l ministerial regulations, as w e l l as those o f state committees and other institutions wh ich have legislative initiative. The MoJ, however, seriously lacks capacity to carry out these functions, resulting in delays in promulgation of regulations and a backlog o f regulations not accessible to the public or even within the government.

Moreover, the L a w on Normative and Legal Acts (LNA) requires an ex-ante review of proposed laws and regulations in v iew o f i ts economic or social impacts. A s such, the LNA would require that such drafts b e properly vetted by the publ ic and other interested parties prior to adoption. Such a process, however, does no t exist in practice.

The PSRP will:

a. Finance capacity support to the MoJ in a department responsible for legal documentation. Such a department will b e tasked with creating a recording procedure to ensure maintenance o f a comprehensive record o f regulatory

24 The IFC-PEP project has developed a memorandum of understanding with each of these agencies. The PSRP will complement and support the work already underway.

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documents. The department wil l also b e responsible for going through exist ing regulations and norms and identi fying those which are outdated or from the Soviet period. Assistance to this department wil l include both staff and technical support. This department wil l also be responsible for determining whether implementing regulations have been drafted, to avoid discretionary implementation o f laws and regulations by the government.

b. Assist with networking l ine ministries, agencies, and those with legislative init iat ive to the MoJ. Such a network will al low for other governmental bodies to easily and efficiently transfer their regulatory instruments to MoJ, as w e l l as make explicit those regulatory drafts currently in preparation, to b e in l ine with the LNA. The network wil l also have the capability to put on-line for publ ic consumption those drafts currently being discussed, as w e l l as existing legislative acts

25 This activity i s conducted in collaboration with FIAS, who will develop software to be used for the MoJ.

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Component 5: Effective Management of Governance Reforms (US$0.65 Million)

International experience in implementing large government reform programs suggests that successful changes need significant attention to management and communication processes. Effective management mechanisms allow balancing top-down approaches with bottom-up initiatives as well as taking timely corrective actions based on monitoring data. Effective communications throughout the design and implementation o f reforms are a crucial tool for gaining support to the proposed changes both inside and outside the administrations.

Moreover, the past experience demonstrates that to be credible, monitoring and communication mechanisms should not be created outside the public administrations; rather than used as a tool to improve internal government procedures.

This component i s designed to address the above issues: it supports building reform management capacity at (to be established) structures o f the Executive Office of the President and creates project management arrangements that are fully integrated within the reform management structure.

Therefore, the overall objective o f the component i s to ensure efficient and effective mechanisms for managing the reform process through building project management capacity, developing and implementing monitoring and evaluation tools as well as designing communication mechanisms for ensuring support to the proposed reform measures. This component will include two sub-components: (i) project management sub-component aimed at ensuring efficient and effective implementation of PSRP project; and (ii) monitoring, evaluation and communication sub-component aimed at ensuring continuous monitoring of the reform (and project implementation) progress as well as putting in place effective communication and feedback mechanisms for the reform process. I t i s expected that the implementation o f the component will result in (i) improving efficiency and effectiveness of project management; (ii) institutionalizing the regular process o f monitoring and evaluation o f public administration reform progress; and (iii) providing a basis for informed evaluation o f project progress.

Component description Subcomponent 5A: Proiect Management (US$0.4 1 million) This subcomponent wil l finance activities that will ensure efficiency and effectiveness in the project management process. To ensure the ownership o f the project outputs, the proposed project management structure includes all stakeholders, i.e., Executive Office of the President, key ministries, and pilot local governments to be coordinated by the Project Board. Given the large number of project beneficiaries, the Executive Office o f the President, will be the Proiect Implementation Agency. The Department for Economic Reforms and Investments (DERI), in l ine with Presidential Order AP-20 17 from January 4, 2006, i s responsible of the overall implementation o f the project. Within the framework o f the Project, DERI will also coordinate the realization o f the PARS. The

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Head o f the Department wil l act as a Project Director. The DEN will report to the Project Board on project-related matters.

DEN will be supported by a Project Coordination Team comprised o f c iv i l servants responsible for project implementation in EOP, consultants funded by the Bank, as well as an external unit (the Aid Coordination Unit) that would handle procurement and financial management aspects o f the project. The proposed project implementation arrangements are presented in Annex 6. Subcomponent 5B: Reform Monitoring (US$0.24 Million) This Subcomponent will finance technical assistance and build capacity in the areas o f monitoring, evaluation and effective communication throughout the reform process. This wil l include both activities related to building capacity in monitoring and evaluation o f public administration reform as a whole and the activities aimed at supporting monitoring and evaluation o f project implementation, including:

Developing a monitoring system for tracking progress in public administration reforms. The activity will include the design o f a monitoring system which could track implementation o f key activities included in the Public Administration Reform Strategy based on objective data. The activity should be coordinated with project activities related to strengthening monitoring and evaluation functions o f new departments o f the Executive Office o f the President;

Developing mechanisms for efficient communication o f key obiectives and achieved results o f the reforms. As a result o f the activity, a clear communication strategy supporting the implementation o f public administration reform as well as project activities wil l be put in place.

Conducting surveys to track proiect implementation. This activity will support the monitoring and evaluation fbnction o f the project and will find design and implementation o f service delivery, public officials, and other surveyslstudies that will allow monitoring and evaluating the progress in project implementation.

e

0

0

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Annex 5: Project Costs

TAJIKISTAN: PUBLIC SECTOR REFORM PROJECT

Local Foreign Total

$million $million $million Project Cost By Component and/or Activity us us us

Civi l Service Reform 0.10 0.67 0.77 Public Administration Reform 0.24 2.02 2.26 Public Expenditure Management 0.08 0.46 0.54 Regulatory Management 0.14 0.49 0.63 Project and Reform Management 0.46 0.17 0.63

Total Baseline Cost 1.02 3.81 4.83 Physical Contingencies Price Contingencies 0.02 0.15 0.17

Total Project Costs26 1.03 3.96 5.00 Interest during construction

Front-end Fee Total Financing Required 1.03 3.96 5 .OO

261dentifiable taxes and duties are approximately US$ 520,000 (not including VAT which i s not eligible) and will be funded from project resources.

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Annex 6: Implementation Arrangements

TAJIKISTAN: PUBLIC SECTOR REFORM PROJECT

- Fiduciary TG 1 TG 2 TG 3

A C U Civil Service Public Budget Development Administration Management

Reform Capacity Budget DeveloDment

- CSD DERI Ministry o f - IHQ Finance and

Ministry o f Health

Project implementation arrangements are set out in Figure 1 below, and have been designed to meet the following requirements:

0 Guarantee to the highest degree possible pol i t ical ownership; 0 Ensure unif icat ion o f management o f governance reform implementation and

project implementation; 0 Ensure agency level involvement and ownership; 0 Create strong checks and balances between different elements o f the system.

TG 4

Regulatory management

Capacity DeveloDment

- Ministry o f Justice - Selected agencies

Figure 1 : Project Implementation Arrangements

I Project Board I Executive Office of the President, EOP

(Implementing agency)

t Project Director (Head o f DEN) Department for Economic Reforms and

Investment (DERI)

Political ownership is to be guaranteed by the Proiect Board (PB), wh ich will consist o f members o f the President’s Working Group (PWG), set up for the purposes o f developing

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k P u b l i c Administration Reform Strategy. The Project Board will meet quarterly and perform the following key functions:

Ensure efficient interdepartmental interaction & resolving interdepartmental issues; Endorse project implementation plans, procurement plans, project budget; Exercise monitoring and evaluation o f project progress on a quarterly basis; Approve members o f Project Coordination Team and experts nominated as members o f evaluation committee from each Ministry.

'

' '

The unijication of management of governance reform and the project will be ensured by vesting project management in the Executive Office of the President. Thus, the Executive Office o f the President will be the Project Implementation Agency. The DERI, in l ine with Presidential Order AP-2017 from January 4, 2006, is responsible of the overall implementation o f the project. Within the framework o f the Project, DERI will also coordinate the realization of the PARS. The Head o f the Department will act as the Project Director. The DEN will report to the Project Board on project-related matters.

Checks and balances will be strengthened by vesting procurement and financial management functions in the Aid Coordination Unit under the Executive Office of the President. This i s to ensure that fiduciary functions are vested in an appropriate institution, with existing capacity on Bank fiduciary management. It i s also in l ine with policies on project implementation mechanisms agreed between the Government and the Bank, which are to vest implementation functions in existing state institutions. As per Presidential Order AP-2017 o f January 4, 2006, the A C U will be responsible for performing the procurement and financial management functions related to project implementation, while DERI will be responsible for the definition and implementation of project substance.

Th is model o f split execution (based on the modality used in a similar Bank-financed project in Armenia) will ensure that procurement and financial management functions are vested in a qualified unit that, while being accountable to the implementing agency has a separate legal status and is thus more suitable to fulfill fiduciary management functions than the EOP. One procurement and financial management specialist will be hired to perform the additional work load generated by the project. The reporting relations between the A C U and the Reform Unit are defined in the Project Operational Manual.

DEN EOP will be supported by a Project Coordination Team (PCT) comprised o f civil servants responsible for project implementation in EOP and consultants funded by the Project. PCT will take charge o f the day-to-day project management. PCT will be an integral part o f the DERI EOP. The PCT will report to DEN, EOP, and will fulfill the following key functions:

a. Interact with the Bank and other donors; b. Interact with relevant government bodies; c. Manage a program o f monitoring and evaluation o f public sector reform as a

whole and the project in particular; d. Prepare progress reports for review by the Project Board;

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e. Provide training and consultation to key ministries’ staff nominated to prepare terms o f reference and participate in evaluation o f proposals;

f. Ensure communication and publication o f the project results.

The consultants that will support the work o f the PCT in day-to-day aspects o f project implementation will be hired under the Project Preparation Facility and wil l be in place by the time o f negotiations.

Agency level ownership will be strengthened by creating inter-ministerial Technical Groups that would be formed on four substantive aspects of project implementation. The Technical Groups, which wil l be formed o f representatives o f the ministries participating in individual components, would have the responsibility to draft initial TOR for activities to be conducted under the project for approval by the Project Board and ‘No Objection’ by the Bank, and monitor the implementation o f activities related to their area o f expertise. To ensure transparency and joint accountability, a l i s t o f officials nominated to Evaluation Committees on behalf o f each Technical Group wil l be endorsed by the Project Board.

The following four Technical Groups are being constituted: 0 Technical Group 1: Civ i l Service Reform (Executive Office o f the President,

Civ i l Service Department and Institute for Higher Qualification o f Civ i l Servants)

0 Technical Group 2: Administrative Reform (Executive Office o f the President)

0 Technical Group 3: Budget Management Capacity (Ministry o f Finance and Ministry o f Health)

0 Technical Group 4: Regulatory Management capacity (Ministry o f Justice and selected pilot agencies)

The Technical Groups will be formally established by the time o f Negotiations.

In addition, in order to ensure the effective implementation o f project activities by the beneficiary, each o f the individual institutions involved in the project will, by Board date, (i) designate a structural unit responsible for implementation o f said Part o f the Project, (ii) designate specified staff, o f adequate experience and qualifications, responsible for implementation and oversight o f said Part o f the Project, and (iii) specify the role and responsibilities of said unit vis-&vis the A C U and the DEN in respect o f procurement o f goods and services and the selection o f consultants for the carrying out o f the related part o f the Project.

The Project Operational Manual, detailing the above implementation arrangements, has been drafted and submitted to the Bank on March 1, 2006, and has been subsequently endorsed.

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Monitoring, Evaluation and Communication functions are vested in DElU, and wil l include the following:

Tracking promess in public administration reforms overall. This wil l include the design o f a monitoring system which will track implementation o f key activities included in the Public Administration Reform Strategy based on objective data;

Developing mechanisms for efficient communication o f key objectives and achieved results o f the reforms. A clear communication strategy supporting the implementation o f public administration reform as well as providing publicity and on project activities wil l be developed and implemented.

Conducting surveys to track proiect implementation. This wil l support the monitoring and evaluation function o f the project and will include the design and implementation o f service delivery, public officials, and other surveys/studies that wil l allow monitoring and evaluating the progress in project implementation.

0

0

0

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Annex 7: Financial Management and Disbursement Arrangements

TAJIKISTAN: PUBLIC SECTOR REFORM PROJECT

% Executive Summary

In December 2005 the Public Sector Reform Project’s proposed financial management arrangements were assessed, and followed up in June 2006, to determine whether the financial management arrangements put in place by the Aid Coordination Unit (ACU), as the responsible body for fiduciary aspects of project management, are acceptable to the Bank, and to monitor the process o f strengthening the financial management system (FMS) in preparation for the project. These financial management arrangements include the systems o f budgeting, accounting, financial reporting, auditing, and internal controls. The A C U has implemented computerized accounting system, using the 1 -C accounting software, which has been financed using funds provided under the Project Preparation Facility. This software i s widely used in the region for project accounting and reporting, and will support financial reporting requirements o f the World Bank and Government. The Chief Accountant of the A C U has assumed overall responsibility over proposed project Financial Management arrangements. However, due to current workload, A C U has hired one assistant accountant to assist the Chief Accountant in project related technical financial issues. Terms of reference for the assistant accountant has been developed by the A C U and agreed with the World Bank. The operating manual which documents the financial procedures has been developed in accordance with the World Bank guidelines. 1 -C based automated accounting system has been installed and implemented to facilitate project financial management process.

Conclusion. The financial management action plan that was developed during initial assessment has been successfully implemented and the current Financial Management arrangements of the A C U are satisfactory to the Bank for the implementation o f this Project.

Financial management risk assessment: From a financial management perspective, the proposed project is considered a moderate to substantial r isk mainly due to the inherent r isks o f corruption and fraud associated with weak governance systems. A detailed financial management assessment questionnaire is included in the project files. A summary o f the consolidated r isk assessment for the project i s as follows:

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Summary Table: Financial Management Assessment and Conclusions.

Risk Rating

H

S

M

Financial Management Assessment

I .Inherent Risk

Risk mitigation measures incorporated into Project Design.

There i s a high risk to public funds due to extremely weak public sector financial management and perceived corruption ( C F A A 2004). This r i s k i s partially mitigated by establishment o f a dedicated project fiduciary unit that wil l fol low WB procedures and policies o n project fiduciary matters. A C U i s a Government controlled entity. No previous experience with Bank policies except overall supervision o f Bank projects for Government needs. A C U FM staff wil l be offered WB organized training courses to build further capacity. Additional consultants hired and internal control procedures documented in POM would help to mitigate the risks associated

Zontrol Risk S M

M

Country level

Entity Level

Project Level

Overall Budgeting

4ccounting

with law capacity and misuse o f funds.

Experience with preparation o f state budgets, supervision o f existing donor projects and additional financial management specialist would help to manage budgeting process efficiently. 1C has been installed and finance staff has required experience to maintain the system in a good condition.

Internal Controls

7unds Flow

M

M

M

Financial Reporting

Limited experience with reporting for Bank. Assistant accountant will be responsible for reporting to the Bank. Audit is part o f B lock audit organized by ACU itself. Overall financial management r isk i s Moderate, due to project specific and country related issues.. The Droiect risks

Auditing

Overall

Internal control procedures have been

Special Account with a commercial Bank acceptable to Bank, MOF representative or A C U Director wil l sign Withdrawal

I Amlications. -

Conditions of Negotiations,

Board or Effectiveness

v

N

N

N

N

N

N

N

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I I I wil l be monitored by FMS regularly. I I I Legend: H - H i g h S - Substantial M - Moderate L.. ..Low NIA - Not applicable.

2. Implementation Arrangements

The project will be managed by a Project Board, which wil l be the Administrative Reform Working Group, established under the National Development Council.

The Executive Office o f the President, Department for Economic Reforms, wil l be the Project Implementation Agency. A Project Coordination Team will be created to take charge o f day-to-day project management. The Team will be an integral. part o f the Department in charge o f Project Implementation and wil l comprise both c iv i l servants and consultants financed by the Bank.

Procurement and Financial Management activities wil l be managed by the Aid Coordination Unit (ACU), which i s an independent legal entity reporting to the Head o f the Executive Office o f the President.

The ACU, with two additional staff recruited under this project responsible for Procurement and Financial Management issues, will manage only fiduciary aspects o f the project implementation.

The A C U will be responsible for developing and updating the consolidated Project Implementation Plan, ensuring that project activities are implemented according to the legal documents, procurement plan and Project Operations manual, reporting on project progress to the Government, the World Bank, ensuring that procurement o f goods and services i s done in a timely manner and in accordance with World Bank guidelines, managing project funds, maintaining accounts, including the Designated Account, getting the accounts audited, ensuring adequate budget provisions for the project, facilitating the work o f consultants, and reviewing consultant outputs.

3. Strengths and Weaknesses

The A C U has no direct experience in implementing. World Bank-financed projects. However, as the Aid Coordination Unit o f the Government, i t has significant exposure to World Bank project implementation procedures. Moreover, the current Chief Accountant of the A C U has experience in managing World Bank projects as he was the chief accountant for a previous Bank-financed project. However, A C U staff will require considerable training and guidance during the init ial phase o f project implementation, in particular to ensure absolute integrity in project implementation in the weak governance environment, which poses enhanced risks o f corruption, collusion and fraud. A full-time project accountant has been hired on a consultancy contract for the duration o f the project to facilitate A C U staff.

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4. Country Issues and Linkage to the Current Project

The Country Financial Accountability Assessment (CFAA) for Tajikistan was completed in 2003. The CFAA concludes that there i s a high r isk o f ineffective use o f public funds due to very weak public sector financial management arrangements including budgeting, accounting and auditing. I t notes that systems o f public accountability function poorly, and there i s a lack o f transparency at all levels o f government. Whi le legislative reforms have been introduced in the Treasury, budget processes and control agencies, these are undermined by human and technological capacity constraints. The main risks include fragmented budgets, poor cash management and execution control, lack o f transparency in the operations o f state-owned enterprises, and inadequate checks and balances in the executive and legislature. These r isks affect the overall quality and credibility of governance in Tajikistan. This r isk i s partially mitigated by establishment o f a dedicated project fiduciary unit that wil l follow WB procedures and policies on project fiduciary matters.

The PSRP project implementation environment i s expected to be somewhat less risky than average due to the close involvement o f and oversight by the EOP and the ACU.

5. Staffing of the Accounting/Finance Function

The finance function consists o f two employees - the Chief Accountant and the Administrator-Cashier. The ACU’s main responsibility i s to monitor, on behalf of the Government, more than 40 projects financed by International Financial Institutions.

According to the Chief Accountant and confirmed by A C U Director, the Chief Accountant cannot undertake additional work without additional support. Although the Chief Accountant will have overall responsibility over project financial management arrangements, including financial reporting, one assistant accountant has been hired on a contractual basis during the project preparation period. The proposed assistant accountant will be responsible for technical aspects o f project implementation, including preparation of withdrawal applications, maintaining project records in the system, and preparation of various reconciliations under the supervision o f the Chief Accountant.

The Project Operational Manual clearly defines the roles and responsibilities o f each individual, including Project Coordination Team and A C U staff involved in project implementation. I t will reduce the r isk of “dispersion o f responsibilities” which is substantial in this case due to the number o f different agencies proposed to be involved in project management.

6. Accounting Policies and Procedures

The A C U has developed a Project Operational Manual which includes the financial procedures, key internal control mechanisms to be followed by the A C U in the application and use of funds. The manual specifies the structure and flow o f funds to support project activities. Project accounts and records will be maintained by the ACU,

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which will operate and maintain a financial management system (FMS) capable o f generating Interim Unaudited Financial Reports (IFRs) in accordance with formats to be agreed with the World Bank. The Chief Accountant will be responsible for overall project financial management, maintenance of books and accounts for the project, preparation and dissemination o f financial statements and Interim Unaudited Financial Reports, and timely audits o f the project. The A C U will generate and maintain accounting vouchers and supporting documentation for expenditures on all activities o f the project, and will document the accounting transaction information flow. Funds will be transferred from the Designated Account to pay for eligible expenditures in accordance with the provisions o f the Disbursement Letter to be issued upon loan approval The A C U will also maintain appropriate financial records and reports in accordance with existing government financial regulations, and project-specific procedures established in the Project Implementation Plan.

7. Auditing Arrangements

Internal audit. There i s no internal audit department within A C U and none i s planned for the near future.

External audit. A C U Financial Statements have not been audited by independent auditors except Gos Fin Control (the State Financial Control Department, the government’s external auditor) which audits the activities o f the A C U every two years. Reliance cannot be placed on audits undertaken by the State Financial Control Department due to its weak capacity.

Annual audits o f project accounts will be carried out in accordance with the Guidelines for Financial Reporting and Auditing of Projects Financed by the World Bank (June 2003). The guidelines require a single audit opinion on the project financial statements as a whole, which will include the Designated Account Statement and the Statement o f Expenditures used as the basis of withdrawing h d s from the Grant Account. The project wil l submit a single audit opinion on the annual project financial statements within six (6) months following the end o f the project’s fiscal year end. Terms o f reference (TORs) for the audit as well as a shortlist o f audit f i r m s to be invited to tender for the audit contract will be cleared with the World Bank prior to the end o f the fiscal year to be audited.

The external audit will be carried out by independent auditors in accordance with International Standards on Auditing (ISA) and TORs acceptable to the World Bank. The TORs will stipulate both the audit o f financial transactions and an assessment o f the operation o f the financial management system (FMS), including separate and detailed review o f the internal control mechanisms.

A C U currently supervises the selection and appointment o f auditor for WE3 projects in Tajikistan and in accordance with WB guidelines and procedures.

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8. Reporting and Monitoring

Project management-oriented Interim Unaudited Financial Reports wil l be used for project monitoring and supervision. The project will prepare and submit Interim Unaudited Financial Reports in a form and frequency agreed with the World Bank (sample forms have been included in the Project Operational Manual). These Interim Un- audited Financial Reports have been customized to reflect the specific characteristics o f the project, while meeting the World Bank’s minimum information requirements for the financial monitoring o f the Project. The Unaudited Interim Financial Reports will include, but not be limited to: (a) Sources and Uses o f Funds, (b) Uses o f Funds by Project Activity, (c) Output Monitoring Reports, (including written summary o f project progress, and explanations for significant budget variances); and (d) Procurement Reports. The A C U wil l submit quarterly Interim Un-audited Financial Reports for the Project to the World Bank starting with the f irst quarter ended in which disbursements will commence and quarterly thereafter, no later than 45 days after the end o f the relevant quarter. The project accounting software will generate Interim Un-audited Financial Reports, incorporating all components, categories and performance indicators which are acceptable to the World Bank. Reviews of actual results against budgets wil l be a key managerial tool for monitoring project performance.

The format and content o f the annual project financial statements o f the project will include the sources and uses of hnds (by categories and by components), special account/designated account statements, withdrawal applications/SOEs, and accounting notes. The agreed format will be included in the financial manual.

9. Internal Controls

The process o f invoice handling and payments are described in detail in the Accounting and Finance section of the Project Operational Manual. I t includes the following basic invoice and payment processing steps:

a) All project-related invoices will be received by relevant Technical Group o f the Project Coordination Team (PCT) for initial review.

b) Invoices will be checked and verified for consistency with contract and TOR output details by the relevant Technical Group member.

c) The acceptance act will then be submitted to the Head o f the relevant Technical Group for approval.

d) The invoice together with the acceptance act will then be sent to the A C U for processing the payment.

e) The A C U Chief Accountant will check the invoice for consistency with local legislation and legal agreements with the World Bank and the Government.

f) The Chief Accountant will prepare a payment order to the bank where the SA i s opened.

g) The payment order will be signed by the A C U Director and the Chief Accountant.

h) Necessary accounting transactions will be posted to the General Ledger.

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One o f the strengths in the internal control arrangements for this project i s that the contracts will be executed at the PCT level, whereas payments wil l take place at the A C U level, where the invoices will be checked independently. This mitigates the r isk o f corruption and collusion in the use o f grant proceeds. Moreover, the contracts wil l be awarded at the PCT level but the preparation o f the Request for Proposal (RFP) and the bid evaluation will be supervised by the Procurement Officer at the ACU level. The PCT will have dedicated staff who will verify invoices before submitting them to the A C U for payment. The PCT and the A C U will minimize the risk o f misuse, fraud and corruption by strengthening internal controls in the following ways:

The Head o f the DERI will approve all TORs for activities with an estimated contract value equal to or less than US$50 000; The Project Board will approve all TORs for activities with an estimated contract value o f more than US$50,000; The project implementation monitoring process to be undertaken by the EOP, the Project Board and the Evaluation Committee will include measures to ensure specific attention to potential r isks o f corruption, collusion and fraud; To mitigate r isks o f corruption and fraud, the PCT will not be allowed to make payments to contractors - instead they wil l submit full documentation to the A C U for independent verification and direct payment to the contractor; The PCT, DERI and TG will meet regularly and upon necessity to conduct preliminary discussions on new proposals and the evaluation reports; Disbursements will be based on verifiable documents; A Fixed Assets Register will be developed to keep records o f all assets acquired using grant proceeds. Fixed assets wil l be safeguarded through the following among other processes (has been reflected in detail in the Project Operational Manual):

o All fixed asset purchase documents, including contracts and invoices, will be approved by the Project Board;

o All fixed assets transfers and write-offs will be approved by the Project Board;

o Regular physical verificatiodstock-taking o f fixed assets will be conducted by the A C U Finance team, at least once a year.

In addition, intensive supervision will be undertaken by the World Bank to mitigate r isks of corruption, collusion and fraud associated with the weak governance environment. Overall supervision, including procurement supervision, will be undertaken on a periodic basis by Bank staff.

10. Information Systems

The A C U has signed a contract to develop a computerized project accounting system based on 1 -C accounting software and the system i s operational already. The 1 -C system, a Russian-based software system commonly used in World Bank-financed projects in Central Asia, has the capacity to generate Interim Unaudited Financial Reports, annual financial statements and other reports required by the Government.

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11. Impact of Procurement Arrangements

An assessment o f the procurement capacity was carried out by the Bank, wh ich identif ied several procurement related r isks in this project. The ACU has hired a procurement specialist who i s experienced with World Bank procurement guidelines. The ACU will prepare annual budgets in l ine with the procurement plans, and these budgets will form the basis for spending and requesting funds for counterpart contributions, if any. Budgets, prepared in accordance with the Inter im Un-audited Financial Reports format (disbursement categories, components and activities, financial sources, account codes, and by quarter), will establish physical targets to ensure l inkage between expenditures and physical progress, and appropriate comparisons between actual and budgeted performance. A detailed budget for the first full year o f project implementation, broken down by quarter, will b e prepared before the project becomes effective.

12. Disbursement and Funds Flow Arrangements

The grant proceeds wil l be disbursed over a period o f f ive years, or for such longer period as wil l be agreed with the World Bank. Grant funds will in i t ia l ly flow to the project v ia disbursements to the Designated Account (DA) opened by the Recipient. Disbursements will follow the transaction-based method, i.e. reimbursements with full documentation, Statements o f Expenditure (SOEs), direct payments and special commitments. Withdrawals from the Designated Account will be requested in accordance with the guidance provided in the Disbursement Letter. Withdrawal applications may b e signed by an authorized representative o f the Recipient and the ACU Director. The Chief Accountant will ensure completeness and accuracy o f a l l withdrawal applications and wil l append h e r h i s signature as part o f the internal control procedures. SOEs will be used for contracts for goods less than US$lOO,OOO, services for consulting f i rms less than US$lOO,OOO and for individuals less than US$20,000.

Designated Account (DA): To facilitate project implementation, the Recipient will open a Designated Account (DA) in a commercial bank acceptable to the Bank, and on terms and conditions acceptable to the Bank. IDA will make an in i t ia l deposit to the Designated Account upon the request by the Min is t ry o f Finance (MOF) after Loan effectiveness. The total Authorized Al location of the grant will be specified in the legal documents. Replenishment of the Designated Account from the grant accounts will b e made against withdrawal applications, supported by appropriate documentation or statements o f expenditure prepared by the ACU, signed by the authorized officials o f ACU and submitted to the Bank for approval.

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Sample funds flow arrangements for the project illustrated in the below chart. ......................... ................ .............................................................................................................. . , . ... ... .. .. , , , ..

World Bank Grant account

Grant Account

\ 1 I I

- 1 I Direct payment

+ Commercial Bank acceptable to IDA, Designated Bank acct I

Supplie r s and contract ors

Retroactive financing: the Financing Agreement for the project stipulates that no withdrawals shall be made for payments made prior to Effectiveness, except that withdrawals up to an aggregate amount not to exceed $16,000 equivalent may be made for payments made prior to th is date but on or after April 17, 2006, for Eligible Expenditures.

Supporting Documentation: The borrower has committed to maintaining supporting documentation and to making them available for review for Bank supervision missions and for external audit

14. Supervision Plan

Project implementation progress reports will be monitored in detail, including through supervision missions. It i s envisaged that supervision missions will be carried out every six months. The Interim Un-audited Financial Statements will be reviewed on a regular basis by the field-based FMS and the results or issues followed up during supervision missions. Annual audited project financial statements and management letters will be reviewed and issues identified will be followed up with the ACU.

The FM supervision will include a review o f the project's financial management and disbursement arrangements, and may include a review o f a sample o f SOEs and movements on the Designated Account for each funding source, to ensure compliance with the World Bank's minimum requirements and to ensure absolute integrity o f project implementation.

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Annex 8: Procurement Arrangements

TAJIKISTAN: PUBLIC SECTOR REFORM PROJECT

A. General

Procurement for the proposed project will be carried out in accordance with the Wor ld Bank's "Guidelines: Procurement under IBRD Loans and IDA Credits" dated M a y 2004; and "Guidelines: Selection and Employment o f Consultants by World Bank Borrowers" dated M a y 2004, and the provisions stipulated in the Grant Agreement. The various items under different expenditure categories are described below. For each contract to be financed by the Grant, the different procurement methods or consultant selection methods, the need for pre-qualification, estimated costs, prior review requirements, and time frame are agreed between the Recipient and the Bank in the Procurement Plan. The Procurement Plan will be updated at least annually or as required to reflect actual project implementation needs and improvements in institutional capacity.

Procurement of Goods: Goods procured under this project would include: hardware and software to modernize the pi lot ministries; equipment for electronic document management systems, such as the c iv i l service register and the budget management system, etc. For the procurement o f goods under the project (including supply and installation contracts), the fol lowing methods will be used: ICB, Shopping and Direct Contracting, when justified. In general, the Bank's Standard Bidding Documents (SBD) will be used for a l l I C B contracts. Such modifications, as may be agreed between the Recipient and the Bank, may be made to the SBD for I C B and N C B for contracts above an agreed threshold value to strengthen the integrity and transparency o f the procurement process (e.g. strengthening disclosure requirements for bidders) and ensure quality delivery o f outputs and services.

Selection of Consultants: Consulting services f rom firms and individuals will be required for, among others, C iv i l Service Development, including Management and Coordination, Modern HR procedures, Training; Improving Policy Formulation and Analysis; Project Management, Financial Management System, Audit Services. The following methods will be used for selecting firms and individuals whose services will be required for the project: Quality and Cost Based Selection (QCBS); Least Cost Selection (LCS); Selection Based o n Consultants' Qualifications (CQ), Individual Consultants (IC), and, where justified, Single Source Selection (SSS). Shortlists o f consulting firms for services estimated to cost less than US$lOO,OOO equivalent per contract may be composed entirely o f national consultants in accordance with the provisions o f paragraph 2.7.

Training: Training will include project-related study tours, training courses, seminars, workshops and other training activities not included under goods or service providers' contracts, including costs o f training materials, space and equipment rental, travel and per diem costs o f trainees and trainers.

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Operating Costs: Operating costs will include equipment for operation and maintenance, communications (e.g. email, telephone and fax), utilities, and office space rental costs, as well as survey costs essential to monitor project progress. Operating costs will be incurred according to an annual budget satisfactory to the Bank and using procedures to be described in the Project Operational Manual.

B. Assessment of the Agency’s Capacity to Implement Procurement

An assessment o f the capacity o f the A C U to undertake project procurement has been carried out by the World Bank. The A C U appears to be the most appropriate entity, under the circumstances, to undertake project procurement functions .The Procurement Specialist o f the A C U i s experienced in World Bank project procurement procedures. The A C U will engage a procurement consultant financed by the project. The consultant shall have at least two years o f experience in conducting international procurement in accordance with the International Financial Institutions’ procedures.

C. Procurement Considerations

The Country Procurement Assessment Review (CPAR) and the experience o f other IDA- and UFI-funded projects indicate that project procurement could face the following challenges: (i) The weak governance environment, weaknesses in accountability arrangements,

and an overall lack o f transparency in conducting procurement processes creates major r isks o f corruption, collusion and fraud; The administrative system as i t operates in practice creates opportunities for informal interference in the procurement process by senior officials - creating opportunities for waste, mismanagement, nepotism, corruption, collusion and fraud; Government officials likely to be involved in project procurement through Tender Committees may not be familiar with procurement procedures; and Suppliers and contractors, and goods required for the project in the current country conditions may not be available. As a result, there may be inadequate competition resulting in higher prices o f goods and services.

(ii)

(iii)

(iv)

The following strategy has been devised to mitigate the above risks: To mitigate the risks o f collusion, fraud, corruption, waste and mismanagement, implementation arrangements will be geared to achieve the highest possible level o f transparency in project implementation. In particular, the publicly accessible project website will include all relevant information to facilitate transparency and integrity o f implementation, including the following:

. o Project Appraisal Document and Grant Agreement; o advertisements; o finding proposals; o terms o f reference for all activities; o contract awards;

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o progress reports from implementing entities; o a designated senior official with a publicly advertised phone number

and postayemail address for receiving complaints; o a procedure for handling complaints satisfactory to the Word Bank; o complaints received and action taken.

NGO/civil society organization representatives/donor representatives (except the World Bank) wil l be invited to be present at ICB and N C B bid openings. All consulting contracts costing above US$lOO,OOO, ICB and N C B contracts for goods will be published in the UNDB and DgMarket, in accordance with World Bank Guidelines; The government project team wil l apply a ‘one-strike’ policy to all contractors and consultants - any case of complicity in corruption, collusion, nepotism and/or fraud wil l lead to dismissal, disqualification from all further project activities and prosecution; A hal f day project launch workshop wil l be conducted for A C U staff, representatives o f the EOP and relevant staff of a l l other entities involved in project implementation; For all procurement, the POM, to be adopted by effectiveness, will include procurement methods to be used in the project along with their step by step explanation as well as the standard and sample documents to be used for each method; The A C U wil l create a data base of suppliers o f the required goods, construction contractors and consultants (firms and individuals) The data base wil l also include information on current prices of goods. For this purpose, the A C U wil l use all available internet resources, including the UN websites; The A C U and the procurement consultant will be trained in the Bank’s procurement procedures by project effectiveness.

D. Procurement Plan

The Recipient, at appraisal, developed a procurement plan (PP) for project implementation which provides the basis for the procurement methods to be used during project implementation. This plan has been agreed between the Recipient and the World Bank. The plan wil l be available in the project’s database and public website, and on the World Bank’s external website. The Procurement Plan will be updated in agreement with the World Bank annually or as required to reflect the actual project implementation needs and improvements in institutional capacity. The procurement plan will indicate the contracts subject to World Bank prior review.

E. Frequency of Procurement Supervision

In addition to the prior review supervision to be carried out from World Bank offices, the capacity assessment o f the Implementing Agency has recommended two supervision missions per year to visit the field to carry out post review o f procurement actions.

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F. Details of Procurement Arrangements Involving International Competition

1 2 3 Ref. No. Contract Procurement

(Description) Method

1. Goods and Non Consulting Services

4 P-Q

1* Networking Equipment; Equipment ICB(4 lots) No for testing center, Electronic Doc.

Jan 2009 Prior

5 Contract

Start Date

July 2007 M a y 2008 Prior -

System Management, etc. * lots to b e procured item by item. I

2. Consulting Services

1 Ref. No.

Description of Assignment Assignment Review Completion by Bank

(Prior / Post) Method Start Date

(Contract

I I Component 1 Advisor to the C iv i l Service I C I Nov2006 May2008 I Prior I 1 Department Training and Capacity Building o f the CSD staff Designing o f the Software for C iv i l

2 N o v 2008

Jun 2007 Prior Service Register and Testing Centers Development o f procedures, methodologies, and instruments (including testing instruments) for competitive recruitment and staff appraisal Technical Assistance on Improving C iv i l Service Incentives System Advisory Services on the monetization o f c iv i l service benefits Strengthening o f the CS Training system Component 2 Improving service delivery systems at local level in the area o f labor & social protection TA to the new structures to be

3 N o v 2006

Dec 2006

QcBs I 4

5 Mar 2007

Mar 2008

Dec 2008 Prior

Mar 2009 6

QCBS I Jan2008 Dec2008 I Prior I 7

QcBs I Jan 2007 Ju12008 1 Prior 1 8

I C I Feb2007 Mar2009 1 Prior I 9 established in the EOP TA & Capacity Building on key

QcBs I Jan 2007 PARS iss ies for EOP and executive bodies

10 Jul2008 Prior

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11

Component 5

Selection o f the Project Management Consultants

Project annual Audit

Developing Mechanisms for Efficient Communication Developing monitoring system for tracking progress in public administration reforms and conducting public officials and legal transparency surveys

12

13

14

15

IND (numerous Mar 2006 Dec 2010 Post contracts)

CQ

CQ Dec 2006 M a y 2007 Post

By January By June each Post each year year

QCBS Jan 2007 N o v 2010 Prior

16

17

18

19

20

21

22

*

officials at local and central

i ly travel expenses, including transportation, per diem, accommodation, renting the conference facilities, and training materials shall be financed.

Prior Review Threshold: The project procurement plan will indicate which contracts wil l be subject to prior or ex-post review. For this purpose, the following thresholds will be used: a. b. c.

All contracts awarded through ICB (estimated to cost more than US$lOO,OOO); All TORS for consulting services, irrespective o f the contract value; All contracts with consulting f i rms estimated to cost US$lOO,OOO or more each, and all contracts with individual consultants estimated to cost US$20,000 or more each; Single source or direct contracting i s also subject to justification. d.

Provided integrity o f procurement and project implementation i s maintained, the above thresholds could be subject to revision as project implementation progresses and the implementing agency acquires higher procurement capacity and expertise.

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Annex 9: Economic and Financial Analysis

TAJIKISTAN: PUBLIC SECTOR REFORM PROJECT

The reforms proposed under the project are expected to create economic efficiency gains wh ich are described be low but are dif f icult to quantify. Fol low-up actions associated with the implementation o f the project would imply additional f inancial costs wh ich are described below.

The project attaches high prior i ty in investing o n better publ ic service delivery and improving public-private interface with purpose to improve the efficiency, effectiveness, transparency and accountability o f publ ic sector management. The project wil l most ly finance the “software”. At least for this reason, future recurrent costs for the general government budget wou ld b e l imited.

The one area wh ich will require direct budget financing (recurrent costs) to ensure sustainability i s the operational maintenance o f the IT network linking a l l central government institutions and associated systems such as the Civil Service Register, the Database o f Normative Acts, etc.. The Government has agreed to cover these expenditures through the state budget.

A s noted, the project focuses on selected short and med ium actions on publ ic administration reform, budget management reform and enhancing transparency in regulatory management.

In this regard, i t i s important to note that the project wil l also support the further development o f the horizontal management system for the c i v i l service that wou ld apply meri t and professionalism in c i v i l service recruitment and career management. However, the investment in management systems i s unl ikely to have the desired impact if it i s not accompanied by an improvement in c i v i l and public service wages.

In this regard, the Government has agreed with the Bank on a med ium term agenda for wage reform in the publ ic sector, focusing on the Civil Service, the Health sector and the Education sector, wh ich will be supported under the series o f Programmatic Pol icy Development Credits. The cost o f the agreed wage reforms will b e accommodated by a gradual increase in the wage bill to GDP ratio, wh ich i s currently 4.5%. The Government has proposed a gradual increase o f the wage bill to 5% o f GDP and i s currently f inal izing an agreement with the IMF on the conditions for this increase.

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Annex 10: Safeguard Policy Issues

TAJIKISTAN: PUBLIC SECTOR REFORM PROJECT

The project focuses on institutional reforms in public administration and reform o f the c i v i l service. It has no direct environmental impact and the project does not include physical rehabilitation or c iv i l works. Any minor refurbishments o f office space required for the installation o f equipment that are foreseen under the project will be executed in l ine with prevailing national legislation safety regulations.

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Annex 11 : Project Preparation and Supervision

TAJIKISTAN: PUBLIC SECTOR REFORM PROJECT

PCN review Init ial PID to PIC Init ial ISDS to PIC Pre- Appraisal Appraisal Negotiations BoarcURVP approval Planned date of effectiveness Planned date of mid-term review

Planned Actual December 12,2005 December 5,2005 December 12,2005 December 12,2005 December 12,2005 December 13,2005 February 24,2006 February 24,2006

April 10,2006 April 16,2006 June 30 2006

November 1 , 2006

Planned closing date December 1 , 20 10

Key institutions responsible for preparation o f the project: Ministry o f Finance Executive Office o f the President

Bank staff and consultants who worked on the project included:

Tony Verheijen (TTL) Kathy Lalazarian Andrina Ambrose-Gardiner Nikolai Soubbotin Jariya Hoffman Fasliddin Rakhimov Mehmet Gokay Utkirdj an Umarov Yelena Dobrolyubova Khursheda Nazirova Aziz Khaidarov Norpulat Dani yarov Konstantin Artanesyan Anata Waclawik-Weiman

Name Title Unit Sr. Public Sector Specialist ECSPE Public Sector Mgt. Specialist Senior Finance Officer Senior Counsel Economist Procurement Analyst Consultant Economist Public Sector Specialist Consultant Country Officer Financial Mgt Specialist Operations Officer

ECSPE LOAGl LEGEC ECSPE ECSPS ECCTJ ECSPE ECSPE ECSPE ECCTJ ECSPS SECPS

Y _I consultant LEGEC

Bank funds expended to date on project preparation: 1. Bank resources: US$179,000 2. Trust fbnds: nil 3. Total: US$179,000

Estimated Approval and Supervision costs: 1. Remaining costs to approval: US$lO,OOO 2. Estimated annual supervision cost: US$lOO,OOO

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Annex 12: Documents in the Project File

TAJIKISTAN: PUBLIC SECTOR REFORM PROJECT

Mission Aid-Memoire, BTO report and Management letter for PSRP (P096861): Pre- Appraisal mission

Request for Comments on the Appraisal Stage ISDS (Appraisal Stage)

Project Information Document (Appraisal Stage)

POM, Procurement Plan, Financial Monitoring Report

‘No-Objection’ on PSRP expenditure

PSRP Mission TOR

Quality Enhancement Review: Meeting minutes January 24,2006

Back to office report for Preparation Mission

Review Meeting minutes

Post-concept review discussion on PSRP

Project Appraisal Document Data Sheet

PSRP Mission TOR

Mission Back to Office Report: PSRP identification follow-up and PBC, pre-appraisal follow-up 28 November - 9 December.

SES letter translated - request for assistance under project

Ministry o f Interior: State Fire Service - request for assistance from PSRP

PSRP Concept Review Meeting December 5,2005 - Agenda and Comments received

Request for Comments on the Concept Stage ISDS

Concept Review package

Back to Office Report/Aide Memoire identification mission

Integrated Safeguards Data Sheet (Concept Stage)

Identification Mission TOR

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Identification mission follow-up IDF grant on Civil Service training

Project Information Document (Concept Stage)

Project Concept Note

Project Concept Note Data Sheet

Quality Enhancement Review: Background Documents; Meeting Notice; Written Comments; Minutes

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Annex 13: Statement of Loans and Credits

TAJIKISTAN: PUBLIC SECTOR REFORM PROJECT

Difference between expected and actual

disbursements Original Amount in US$ Millions

Project ID FY Purpose IBRD IDA SF GEF Cancel. Undisb. Orig. Frm. Rev’d

PO84035 2006

PO78978 2006

PO89566 2005

PO89244 2005 PO81159 2004

PO77454 2004

PO69055 2003

PO08860 2002

PO57883 2002

PO75256 2002

PO67610 2000 PO58898 2000

FERGHANA VALLEY WATER RES

COMM & BASIC HEALTH

LAND REGIS & CADASTRE

ENERGY LOSS REDUCTION

COMMTY AGRIC &WATERSHED MGMT (GEF)

COMMTY AGRIC &WATERSHED MGMT

EDUC MOD

POV ALLV 2

DUSHANBEWS PAMIR PRIV POWER

LAKE SAREZ RISK MITIGATION

RURAL INFRA REHAB

0.00

0.00 0.00

0.00

0.00

0.00

0.00

0.00

0.00 0.00 0.00 0.00

0.00 0.00 0.00

15.00

0.00

5.00

13.00

13.80

17.00

10.00

0.47

20.00

0.00 0.00

0.00 0.00 0.00

0.00

0.00

0.00 0.00 0.00

0.00

0.00

0.00 0.00 0.00

0.00 4.50

0.00

0.00

0.00 0.00 0.00 0.00 0.00

0.00 12.38 0.00 0.00 9.89 0.00

0.00 9.43 0.25

0.00 17.12 0.00 0.00 4.30 0.15

0.00 9.81 -0.46

0.00 16.14 0.73

0.00 6.39 0.02 0.00 6.12 0.03 0.00 1.12 -0.50 0.00 0.31 0.2 1 0.00 4.07 1.38

0.00 0.00

0.00 0.00 0.00

0.00

0.00 0.00 0.00 0.00

0.21

-5.33 ~

Total: 0.00 94.27 0.00 4.50 0.00 97.08 1.81 - 5.12

TAJIKISTAN STATEMENT OF FC’s

Held and Disbursed Portfolio In Millions o f U S Dollars

Committed Disbursed

IFC IFC

FY Approval Company Loan Equity Quasi Partic. Loan Equity Quasi Partic.

Eskhata Bank 1 .oo 0.00 0.00 0.00 0.40 0.00 0.00 0.00 2003 Giavoni 0.00 3.00 0.00 0.00 0.00 3.00 0.00 0.00 2002 Pamir Energy 4.50 0.61 0.00 0.00 1 S O 0.61 0.00 0.00 2005 SEF A W E D MB Taj 0.00 0.67 0.00 0.00 0.00 0.67 0.00 0.00 2002 SEF FOM 0.20 0.00 0.00 0.00 0.20 0.00 0.00 0.00 2004 SEF FOM 0.50 0.00 0.00 0.00 0.25 0.00 0.00 0.00 2002 SEF Telecom Tech 0.17 0.00 0.00 0.00 0.17 0.00 0.00 0.00

Total portfolio: 6.37 4.28 0.00 0.00 2.52 4.28 0.00 0.00

Approvals Pending Commitment

FY Approval Company _____ ~

Loan Equity Quasi Partic.

Total pending commitment: 0.00 0.00 0.00 0.00

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Annex 14: Country at a Glance

TAJIKISTAN: PUBLIC SECTOR REFORM PROJECT

P O V E R T Y and SOCIAL

2004 Population, mid-year (millions) GNI per capita (Atlas method, US$) GN I (Atlas method, US$ billions)

Average annual growth, 1998-04

Population (%) Laborforce (%)

Tajikistan

6.4 280

18

0.8 2.4

M o s t recent estimate ( latest year available, 1998-04)

Poverty (% of population belownationaipo verfyline) Urban population (Woftotalpopulation) Life expectancyat birth (years) hfant mortality(per {OOOlive birfhs) Child malnutrition (%of chiidren under5) Access to an improved water source (%ofpopulation) Literacy (%of population age 69 Gross primaryenrollment (%of school-age population)

Male Female

KEY E C O N O M I C RATIOS and LONG-TERM T R E N D S

25 66 76

58 99

I t3 0 8

nr

GDP (US$ billions) Gross capital formation/GDP Exports of goods and ServicedGDP Gross domestic savings/GDP Gross national savings/GDP

Current account balance/GDP Interest payments/GDP Total debt/GDP Total debt service/exports Present value of debt/GDP Present value of debVexports

1984 1994

13 .. 36.5 .. 416 .. 25.0 .. 26.7

-111 .. 0.0 .. 43.1

0.1

1984-94 1994-04 2003 (average annual growth) GD P -7.5 3.8 a.2 GDP percapita -9.9 2.7 9.0

Europe & Central Low-

Asia income

472 3290 1553

-0.1 -0.5

64 68 29

91 97 a 1 a 3 a1

2003

16 8.0 53.2 4.3

8 . 7

17 0.9

75.1 8.4

60.4 88.8

2,338 5 a

184

18 2.1

31 58 79 44 75 61 94 a 1 88

2004

2.1 9.0

54.9 -10 -4 a -19

2004 2004-08

a.6 6.1 9.4 5.3

Development diamond'

Life expectancy

-

GNI Gross

capita enrollment per primary

1

Access to imDrovedwatersource

-Tajikistan ~ Low-income group

' E c o n o m i c ratios.

I Trade

Domestic j Capital savings formation

I 1

Indebtedness

- Tajikistan I - Lo winco me group _ _ - . ' '

STRUCTURE of the E C O N O M Y

(%ofGDP) Agriculture hdustry

Services

Household final consumption expenditure General gov't final consumption expenditure Imports of goods and services

Manufacturing

(average annual growth) Agriculture hdustry

Services

Household final consumption expenditure General gov't final consumption expenditure Gross capital formation Imports of goods and services

M anufacturing

1984 1994

.. 24.0

.. 410

.. 25.8

.. 35.0

.. 55.3

.. 8.7

.. 53.1

1984-94 1994-04

-7.8 4.2 -42 2.8 -22 2.7 -4.0 4.6

.. 7.3

.. -7.8 -7.3 -4.8

.. 0.8

2003 2004

23.4 23.6 8 .7

53.0

87.4 8.3

66.9 64.9

2003 2004

9.6 a.2 a2 110

110 2.9

/Growth o f capital and G D P (%)

/Iw T

'-50 -

-GCF -GDP - IGrowth o f exports and Imports (%) 45 7

30 -

1 l5 l o I 1-15

I -Exports 4 I n p O r t S I

1

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Tai ikistan

lnflatlon (%) 100 - 75

50

25

P R I C E S and G O V E R N M E N T F I N A N C E

Domest ic prices (%change) Consumer prices Implicit GDP deflator

1984

Government finance (%of GDP, includes current grants) Current revenue Current budget balance Overall sumiusideficit

T R A D E

(US$ millions) Total exports (fob)

Aluminum Cotton fiber Manufactures

Total imports (cif) Food Fuel and energy Capital goods

Export price index (20OO=WO) Import price index (2000=7JO) Terms of trade (2000=WOJ

B A L A N C E o f P A Y M E N T S

(US$ millions) Exports of goods and services imports of goods and services Resource balance

Net income Net current transfers

1984

1984

Current account balance

Financing items (net) Changes in net reserves

M e m o : Reserves including gold (US$ millions) Conversion rate (DEC,/ocaVUS$)

E X T E R N A L D E B T and RESOURCE FLOWS

(US$ m/ll/ons) Total debt outstanding and disbursed

1984

16 RD IDA

Total debt service IBRD IDA

Composition of net resource flows Official grants Official creditors Private creditors Foreign direct investment (net inflows) Portfoiio equity(net inflows)

World Bank program Commitments Disbursements

1994

11 2210

53.9 9.1

-5.2

1994

559 273 155 45

686 99 8 2 67

97 a 2 95

1994

560 715

-155

-B 25

-149

148 1

1 133E-2

1994

580 0 0

0 0 0

63 ff7

0 P 0

0 0

Principal repayments 0

2 0 0.3

6 .4 27.9

17.3 4.8 -18

2003

798 430 8 3 54

1004 81

159 82

2003

827 1040 -2 13

-90 329

26

13 -39

136 3.1

2003

1136 0

228

89 0 2

78 a

-26 32 0

13 13 0

2004

7.3 ff .O

6.6 3.3

-3.2

2004

l a 8 484 202

75 1307

a 6 207 a 7

2004

1.140 1348 -292

-92

-40

79 -39

8 4 3.0

2004

Export and import levels (US$ mill.)

1,500 T

98 OQ 00 01 02 03 04

LaEXports mlnports

:urrent account balance to G D P (%)

5

0

5

10

Composi t ion o f 2003 debt (US$ mill.)

G. 82

A - IBRD E- Bilatefa B - IDA D - OtW nuitiiatefal F - Private C-IMF G - Shcrt-ten

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Annex 15: Governance and Accountability Aspects

TAJIKISTAN: PUBLIC SECTOR REFORM PROJECT

Tajikistan Public Sector Reform Technical Assistance Project

Governance and Accountability Annex

Overview

The project aims to provide technical assistance to strengthen key aspects o f public sector efficiency in Tajikistan, principally through strengthening governance, accountability and transparency. The Project incorporates a set o f inter-related activities spanning key central executive entities. The multiplicity o f implementing agencies coupled with the inherently weak governance and accountability mechanisms currently in place create substantial governance, procurement and fiduciary r isks for the Government o f Tajikistan (GOT). This is particularly relevant because a significant portion o f the project proceeds will finance contracts for consultancy services and training, which are especially susceptible to corruption, collusion, fraud, waste and mismanagement. Experience has shown that difficulty in measuring or applying the output o f such expenditures also makes them vulnerable to procurement irregularities and lapses in internal control.

Objective

This Annex presents mechanisms to strengthen project governance and management and thereby mitigate the r isk o f corruption, collusion, fraud, waste and mismanagement, and to ensure that project objectives are achieved. This action plan (i) maps the potential r isks arising from the fragile governance and accountability environment, (ii) presents mechanisms to be integrated into the Project Operation Manual (POM) to address these risks, and (iii) designates responsibility for implementing these mechanisms to particular project units. The Governance Action Plan demonstrates the commitment o f the Government o f Tajikistan, and more specifically, the Executive Office o f the President, the Ministry o f Finance (MOF), the Ministry o f Justice (MOJ) and other agencies to strengthen public sector efficiency, transparency and integrity.

Strategy

The Government project team recognizes the inherent complexity and risks o f a project that cuts across a number of units within one ministry, let alone a project that traverses several ministries in a high-risk environment. The project proposes to address these complexities, and the governance challenges they pose, in a systematic manner, actively promoting greater transparency, accountability and integrity through smart project design and implementation arrangements.

These actions can be summarized as follows:

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1.

2.

3.

4.

5.

6.

7.

8.

9.

Proiect Implementation Arrangements: Project implementation arrangements combine a mix o f centralized responsibility and decentralized arrangements to facilitate efficient, effective and accountable procurement execution, contract management and monitoring o f project outcomes. Building Strong Task Teams with Effective Tools: Project management and technical teams will be selected based on merit, provided with training and supported by highly qualified technical experts. Results-Oriented Monitoring and Evaluation (M&E) Results Framework : A results-oriented M&E results framework has been developed for the project to track progress and demonstrate the impact o f project activities and implementation arrangements, Enhanced disclosure and transparencv: A proactive attitude and approach has been adopted relating to transparency and public dissemination o f project-related information, including through a project website. Strengthened Procurement Guidelines and Procedures: Detailed procurement guidelines wil l be implemented to promote efficient and timely procurement, and minimize procurement-associated risks. In addition, external presence by civil society and donors at bid opening will be facilitated for ICB and N C B bids. Due Diligence bv Government and Disclosure by Bidders and Consultants: Comprehensive disclosure requirements have been introduced to eliminate corrupt and fictitious f i rms andor individuals o f low personal integrity participating in the project activities as consultants. Strengthened Financial Management Guidelines and Procedures: Detailed procedures for strengthened financial controls, including payment validation procedures, have been designed for all project activities to mitigate fiduciary risks. Complaints Handling Mechanisms: All complaints from bidders, observers, or other parties should be promptly forwarded by the A C U to the DEN EOP and Project Board for consideration and follow-up action. The project website wil l have instructions on how to address complaints. The project implementation monitoring process to be undertaken by the EOP, the Project Board and the Evaluation Committees will include measures to ensure specific attention to potential risks o f corruption, collusion and fiaud.

10. Sanctions & Remedies: The project has zero tolerance for corruption, collusion and fraud. Any suspicion o f such practices shall warrant immediate investigation with severe penalties for any party found culpable o f such practices.

Critical Success Factors

Ownership and Support: The success o f the project depends on continued support from many actors ranging from the Executive Office o f the President, the Ministry o f Finance, selected pilot l ine ministries, and others. Consultants, contractors and auditors will also play important roles in the project.

Periodic Review: eliminate corrupt

Strengthened project procedures and guidelines will not by themselves and fraudulent activities. I t i s highly conceivable that some vested

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interests will seek to adapt and discover new methods to maintain their position. The government project team will review Action Plan implementation on a regular basis (but at least every 6 months) to incorporate lessons learnt throughout project implementation. Indeed, the main purpose o f this project i s to develop and institutionalize improved governance mechanisms in public administration and expenditure management, consistent with the Government’s reform agenda.

PART 11: MITIGATION MEASURES

Governance Reform Management Component

The government project team shall incorporate in their reform strategy activities to strengthen those entities functioning as strategic checks and balances in the framework o f public administration and expenditure management including the development o f a comprehensive monitoring and evaluation fiamework, regular reporting and public dissemination o f reports on the implementation o f the PAR Strategy, etc.

Project Implementation Arrangements

Separate Terms o f Reference (TORS) delineating the roles and responsibilities for all project units as well as key project personnel have been prepared by the government project team, agreed with the World Bank, and included in the Project Operational Manual (POM), and shall form the basis for annual reviews o f project governance and accountability arrangements.

Appropriate procedures/guidelines relating to al l project units pertaining to, but not limited to, matters o f procurement, financial management and reporting, record keeping, complaints handling and M&E shall be prepared and periodically reviewed by the government project team and be included in the POM.

The Aid Coordination Unit shall be responsible for all project component procurement activities.

The implementing agencies shall remain responsible for the management and verification of progress o f contracts under their respective project component, linking accountability for project outcomes directly to the respective government spending unit.

The Technical Groups shall appoint, where necessary, a functional Working Group to assist the various implementing agencies complete technical verification o f consultant outputs. The Head o f the implementing agency shall appoint a Technical Working Group (TWG) that will review the output o f consultants for sub-components under their jurisdiction. The TWG will recommend acceptance or rejection o f the output.

The Proi ect Coordination Team will coordinate and perform overall monitoring and evaluation functions.

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Building Strong Task Teams With Effective Tools

The Proiect Coordination Team shall establish clear criteria in the POM for selection o f evaluation committee members for all project sub-components (these criteria wil l be reviewed every six months and amended as necessary).

The procurement team will: 0 Undergo training prior to project effectiveness and, if necessary, thereafter

in World Bank procurement guidelines and Government procurement regulations to ensure compliance with such processes;

0 B e jointly supported by a team o f highly qualified procurement consultants who wil l provide expert assistance and strengthen internal project capacity in, but not limited to, the preparation o f advertisements and tender documents, evaluation o f bids, conduct o f negotiations, timely preparation o f contracts, submission o f procurement-related reports, and maintaining procurement records to ensure smooth, timely and efficient procurement.

The financial manapement team will: 0 Undergo training on financial management and reporting, including the

preparation and utilization o f World Bank Unaudited Interim Financial Reports. The Unaudited Interim Financial Reports wil l provide an opportunity to strengthen fiduciary oversight by integrating procurement, implementation and financial management;

0 Be jointly supported by a financial management consultant, or team as needed, to provide expert assistance and build internal project capacity as necessary in the proper conduct o f the financial management and reporting related tasks in accordance with the procedures defined in the POM.

Results-Oriented Monitoring and Evaluation (M&E) Framework and Action Plan

The Proiect Board shall s ign o f f on, and monitor, the project and sub-component results- oriented M&E indicators as part o f the project result-oriented M&E framework and action plan, including those to evaluate the effectiveness o f the Action Plan in achieving i t s objective.

The Proiect Coordination Team shall: e Develop, monitor and review the project and sub-component results-oriented

M&E indicators as part o f the project result-oriented M&E framework and action plan, including those to evaluate the effectiveness o f the Action Plan in achieving its objective;

0 Review consolidated M&E reports, particularly in relation to the implementation o f the Action Plan, to track progress and demonstrate the impact o f project activities and implementation arrangements.

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All implementing, agencies shall be responsible for the collection and collation o f data to formulate M&E baselines and compile reports.

The DERI will be responsible for the collection and consolidation o f reports submitted to the Executive Office o f the President and distribution to the Project Board and the Project Coordination Group.

Enhanced Disclosure and Transparency

The DERI shall: 0 Establish and maintain a project website which provides updated information on

project activities and can be accessed by the general public; 0 Arrange the provision o f an electronic link between the websites o f all the

ministries participating in the project with that o f the project.

The A C U will, within 20 days o f the activities listed below, make publicly available, through the project website:

0 All annual procurement plans and schedules, including all updates thereof; 0 All short-lists o f consultants ( f i rms and individuals for contracts over threshold

levels established in the POM) together with the names and dates o f all expressions o f interests received; In the case o f pre-qualification, all l is ts o f pre-qualified contractors and suppliers together with the names and dates o f proposals received; Summaries o f all bidding documents as well as all requests for proposals issued in accordance with the procurement provisions o f this agreement;

0

0

The A C U will make publicly available, within 1 month o f the activities listed below, through the project website:

All annual audit reports (financial or otherwise, and including qualified audit reports) and audit management letters prepared in accordance with the financing agreements for this project, and all formal responses and follow-up actions o f the government; the disclosure o f audit reports wil l be completed not later than 30 days after receipt o f these reports by project management;

0 All World Bank mid-term review reports prepared for this purpose, in accordance with this agreement.

0

Strengthened Procurement Guidelines and Procedures

The Proiect Coordination Team shall develop (and, as needed, revise) a standard format/template for all advertisement and criteria for acceptable newspapers with sufficient circulation for placement o f advertisements.

The A C U shall: 0 Conduct surveys on available products and their prices in the market and the

alternative o f hiring consultants for procurement o f complex goods/equipments/serices to define the specification/TOR;

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e Use uniform specifications for procurement o f standard items; Prepare any specifications to be included in RFPshvitations to Bid.

The A C U shall: Place Specific Procurement Notices (SPN) in local media as outlined in the POM and, where necessary, on the UNDB and DgMarket websites; Specify within any SPN/Invitations to Bid, the requirement for al l proposals to include clear and detailed specifications and cost breakdowns for all proposals NOT impose any restrictions (geographic or otherwise) to limit the participation o f consultantshidders; Invite representatives o f end-users and CSOs to attend bid openings; Prepare and maintain reports o f bid openings for all contracts subject to prior review by the World Bank; Seek at least three quotations in cases o f shopping; File and maintain procurement documents in accordance with P M M guidelines. Ensure that all SPN and information on bid opening are placed on the project website; Maintain, and annually publish on the project website, a project price data-base o f commonly procured items (including office supplies) from previous competitively tendered contracts; Ensure Due Diligence by Government and Disclosure by Bidders.

The A C U shall: e Explicitly state in all SPNs for al l procurements valued at or more than

US$lOO,OOO the requirement for all f i rms to submit as part o f their proposal their full particulars including:

The postal and email address, telephone and fax numbers, URL o f the registered office, and address o f the principal place o f business if different from the registered office; The names, addresses and telephone and fax numbers o f all principal officers o f the firm;

e Have the right to reject a firm’s proposal if any o f the above information i s not disclosed;

e Require all individual consultants to disclose a signed statement o f any relationship up to the third degree with any grade/level Head o f Department official from the agencies involved in project implementation, as the case may be; Be responsible for conducting adequate checks and due diligence on any information andor signed statements provided by f i rms and individual consultants.

e

Strengthened Financial Management and Payment Validation

The A C U shall:

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e

e

e

e

e

e e

e

e

e

Require written confirmation by relevant working groups o f progress against agreed deliverables in project contracts before payments to contractors are released; Require verification o f satisfactory completion o f any workshops and training activities prior to reimbursement o f any expenses incurred by the participants or the Project; Require signature o f at least 2 authorized individuals outlined in the P O M for any withdrawals o f funds from the project Designated Account; Require minimal document requirements for payment authorization, to be retained at the A C U and attached to the relevant payment voucher for audit purposes, even if not required to be submitted to the treasury paymenvfield office: Formal invoices on company letterheads, with complete contract addresses and tax registration number; For individual consultants, copies o f ID cards to be appended to invoices; For claims for reimbursable expenses as specified in the contract, original third party invoices & receipts (including travel tickets, hotel bills, contracts for rental o f office equipment, receipts for operating expenses); For goods, warrant cards, evidence o f delivery (packing l i s t or transportation documents and acceptance, and certificate o f origin if imported; For training, workshops and seminars, signed l i s t o f attendees and photographs from events. The designated uni ts in participating ministries shall submit standardized monthly progress reports to the A C U including information concerning contracts, contractors, implementation progress, project-related workshops and other activities, financial operations, and basic data related to the number, typology and status o f complaints.

The A C U shall be responsible for: e Preparation and submission o f consolidated monthly progress and financial report

to the government project team.

Complaints Handling Mechanisms

The Project Coordination Team shall periodically review the results o f complaints handling mechanism for the project, particularly provisions for follow-up investigations of serious and unresolved complaints by the internal auditors, andor third party audit to ensure independency and reliability o f the system. The procedures for complaints handling are set out in the POM and will be reviewed on a semi-annual basis.

Sanctions & Remedies

e The government project team requires the concerned ministryhnstitution to take action, including prosecution, against staff involved in corruption, collusion, nepotism.

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. 0 The government project team wil l put in place by project effectiveness a system o f blacklisting for companies and individuals that engage in collusion or have produced outputs o f unacceptably poor quality.

0 The government project team shall apply a 'one-strike' pol icy to all contractors and consultants - any case o f complicity in corruption, collusion, nepotism and/or fraud will lead to dismissal, disqualification from al l further project activities and possible prosecution.

The Project Board may drop/discontinue an entire sub-component if it fails to properly deal with issues o f corruption, collusion, nepotism, fraud and/or persistent procurement irregularities.

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MAP SECTION

Page 106: FOR OFFICIAL USE ONLY - World Bank€¦ · Report No: 34924-TJ PROJECT APPRAISAL DOCUMENT ON A PROPOSED GRANT IN THE AMOUNT OF SDR 3.5 MILLION (US$5 MILLION EQUIVALENT) TO THE REPUBLIC
Page 107: FOR OFFICIAL USE ONLY - World Bank€¦ · Report No: 34924-TJ PROJECT APPRAISAL DOCUMENT ON A PROPOSED GRANT IN THE AMOUNT OF SDR 3.5 MILLION (US$5 MILLION EQUIVALENT) TO THE REPUBLIC

S O G DS O G DR E G I O NR E G I O N

K H AK H A T L O NT L O NR E G I O NR E G I O N

G H O R N O -G H O R N O -B A D A K H S H A NB A D A K H S H A N

A . O .A . O .

KHUJAND

NAU

BOKHTAR

KOFARNIHON

TURSUNZADE

GISSAR

SHA

HRTU

Z KABO

DIEN VOSE

VAKHSHJILIKUL

PYANJ

FARKHOR

MOSKOW

VANCH

RUSHAN

SHUGNAN

ROSHTKALA

ISHKASHIM

MURGAB

TOJIKOBOD

VARZOBSHAHRINAV

RUDA

KI

FAIZOBOD

ROGUNTAVILDARA

JIRGITAL

DARBAND

KOLKHOZABAD

DANGARA

YAVAN

GO

ZIM

ALIK

HOVALING

MUMINOBO

D

KULJABSOVIET

SHUROBOD

ASHT

MAT

CHO

SHAHRISTON

ISFARA

PENJIKENTAINI

MATCHO

GONCHI

RASHT

KALAYKUMB

TT rr aa nn ss AA ll aa ii -- RR aa nn gg ee

Fergana FerganaVValleyalley

PP aa mmii rr ss

Pik ImeniPik ImeniIsmail SamaniIsmail Samani

(7495 m )(7495 m )

Pik LeninPik Lenin(7134 m )(7134 m )

Pik RevolutionPik Revolution(6,974 m)(6,974 m)

Pik Karl MarPik Karl Marx x (6723 m )(6723 m )

PPaannjj

AAkkssuu

MMuurrggaabbBBaa

rrttaanngg

ZZeerraavvsshhaann

SSyyrr DDaarr yyaa

PPaammiirr

PPaannjj

VVaakkhh

sshh

MurgabMurgab

Rangkul'Rangkul'NurekNurek

PyanjPyanj

MoskovskiyMoskovskiyGaravutiGaravuti

ShahrShahrtuztuz

KomsomolabadKomsomolabad

KalaikhumKalaikhum

ChkolovskChkolovsk

TTabosharaboshar

AAyniyniPendzhikentPendzhikent

VVanjanjRukhchRukhch

IshkashimIshkashim

VVrangrang

AlichurAlichur

AndarobAndarob

Ura-Ura-TyubeTyube

Jirgatal'Jirgatal'

ObigarmObigarm

RashtRasht

KulyabKulyab

Khorog Khorog

KhodjandKhodjand

Kurgan-Kurgan-TTyubeyube

DUSHANBEDUSHANBE

AFGHANISTANPAKISTAN

CHINA

KAZAKHSTAN

KYRGYZ REP.

UZBEKISTAN

This map was produced by the Map Design Unit of The World Bank. The boundaries, colors, denominations and any other informationshown on this map do not imply, on the part of The World BankGroup, any judgment on the legal status of any territory, or anyendorsement or acceptance of such boundaries.

To Tashkent

To Tashkent

To Bukhoro

To Qarshi

To Baghlan

To Osh

To Sary-Tash

To Kyzyl-Kiya

To Andijon

To Andijon

To Bukhoro

68°E

S O G DR E G I O N

K H A T L O NR E G I O N

G H O R N O -B A D A K H S H A N

A . O .

Region underdirect Republicsubordination

KHUJAND

PROLETAR

NAU

KONIBODOM

KURGAN-TYUBE

BOKHTAR

KOFARNIHON

TURSUNZADE

GISSAR

SHA

HRTU

Z KABO

DIEN VOSE

VAKHSHJILIKUL

KUMSANGIR

PYANJ

FARKHOR

MOSKOW

VANCH

RUSHAN

SHUGNAN

ROSHTKALA

ISHKASHIM

MURGAB

TOJIKOBOD

VARZOBSHAHRINAV

RUDA

KI

FAIZOBOD

ROGUNTAVILDARA

JIRGITAL

DARBAND

KOLKHOZABAD

DANGARA

YAVAN

GO

ZIM

ALIK

HOVALING

MUMINOBO

D

KULJABSOVIET

SHUROBOD

ASHT

MAT

CHO

SHAHRISTON

URA-TYUBE

ZAFAROBOD

ISFARA

PENJIKENTAINI

MATCHO

GONCHI

RASHT

KALAYKUMB

Murgab

Rangkul'Nurek

Pyanj

MoskovskiyGaravuti

Shahrtuz

Komsomolabad

Kalaikhum

Chkolovsk

Taboshar

Konibodom

AyniPendzhikent

VanjRukhch

Ishkashim

Vrang

Alichur

Andarob

Ura-Tyube

Jirgatal'

Obigarm

Rasht

Kulyab

Khorog

Khodjand

Kurgan-Tyube

DUSHANBE

AFGHANISTANPAKISTAN

CHINAUZBEKISTAN

KAZAKHSTAN

KYRGYZ REP.

UZBEKISTAN

This map was produced by the Map Design Unit of The World Bank. The boundaries, colors, denominations and any other informationshown on this map do not imply, on the part of The World BankGroup, any judgment on the legal status of any territory, or anyendorsement or acceptance of such boundaries.

Panj

Aksu

MurgabBa

rtang

Zeravshan

Syr Darya

Pamir

Panj

Vakh

sh

Lake Karakul'

Lake Sarezskoye

KayrakkumReservoir

To Tashkent

To Tashkent

To Bukhoro

To Qarshi

To Baghlan

To Osh

To Sary-Tash

To Kyzyl-Kiya

To Andijon

To Andijon

To Bukhoro

T r a n s A l a i - R a n g e

FerganaValley

P a mi r s

Pik ImeniIsmail Samani

(7495 m )

Pik Lenin(7134 m )

Pik Revolution(6,974 m)

Pik Karl Marx (6723 m )

68°E 70°E 72°E

68°E 70°E 72°E

74°E

40°N

38°N38°N

40°N

TAJIKISTAN

0 20 40 60

0 20 40 60 Miles

80 Kilometers

IBRD 33493

NO

VEM

BER 2004

TAJ IKISTANSELECTED CITIES AND TOWNS

AUTONOMOUS OBLAST CENTERS*

OBLAST CENTERS

NATIONAL CAPITAL

RIVERS

MAIN ROADS

RAILROADS

RURAL DISTRICTS (RAIONS)

AUTONOMOUS OBLAST BOUNDARIES*

OBLAST BOUNDARIES

INTERNATIONAL BOUNDARIES

* Area with no oblast-level administrative divisions, where rayons are under direct republic jurisdiction.