Public Disclosure Authorized Document of The World Bank Report No. 19327 Public Disclosure Authorized PROJECT APPRAISAL DOCUMENT ONA PROPOSED LOAN Public Disclosure Authorized IN THE AMOUNT OF EUR 14.05 MILLION TO THE REPUBLIC OF SLOVENIA FORA REAL ESTATE REGISTRATION MODERNIZATION PROJECT May 26, 1999 Public Disclosure Authorized Environmentallyand SociallySustainableDevelopmentSectorUnit CountryDepartmentfor CzechRepublic,Hungary,Moldova,SlovakRepublicand Slovenia (ECC07) Europeand CentralAsia Region CURRENCY EQUIVALENTS (Exchange Rate Effective May 1999) Currency Unit= SIT SIT 1 - US$0.00556 US$1 = SIT 180 FISCAL YEAR January 1 - December 31 ABBREVIATIONS AND ACRONYMS CAS Country Assistance Strategy EU European Union EU CAP European Union - Common Agricultural Programme FAO Food and Agriculture Organization of the United Nations FMS Financial Management System GCI The Governmental Center for Informatics of the Government of Slovenia IT/IM Information Technology/Information Management (Strategy) LACI Loan Administration Change Initiative of the World Bank MAFF Ministry of Agriculture, Forestry and Food MOF Ministry of Finance MOJ Ministry of Justice PCO Project Coordination Office PIP Project Implementation Plan PMR Project Management Report, which serves as the basis for disbursements SC Suprenme Court of the Republic of Slovenia SMA Surveying and Mapping Authority of the Republic of Slovenia TOR Terms of Reference Vice President: Johannes Linn Country Director: Roger Grawe Sector Director/Sector Leader: Kevin Cleaver! Joseph Goldberg Team Leader: fain Shuker REPUBLIC OF SLOVENIA REAL ESTATE REGISTRATION MODERNIZATION PROJECT CONTENTS A. Project Development Objective 1. Project development objective and key performance indicators B. Strategic Context 1. Sector-related CAS goal supported by the project 2. Main sector issues and Government strategy 3. Sector issues to be addressed by the project and strategic choices C. Project Description Summary 1. Project components 2. Key policy and institutional reforms supported by the project 3. Benefits and target population 4. Institutional and implementation arrangements D. Project Rationale 1. Project alternatives considered and reasons for rejection 2. Major related projects financed by the Bank and/or other development agencies 3. Lessons learned and reflected in proposed project design 4. Indications of borrower commitment and ownership 5. Value added of Bank support in this project E. Summary Project Analyses 1. Economic 2. Financial 3. Technical 4. Institutional 5. Social 6. Environmental assessment 7. Participatory approach F. Sustainability and Risks 1. Sustainability 2. Critical risks 3. Possible controversial aspects G. Main Loan Conditions I. Effectiveness conditions 2. Other H. Readiness for Implementation I. Compliance with Bank Policies Annexes Annex 1. ProJect Design Summary Annex 2. Detailed Project Description Annex 3. Estimated Project Costs Annex 4. Cost-Benefit Analysis Summary, or Cost-Effectiveness Analysis Summary Annex 5. Financial Summary for Revenue-Earning Project Entities, or Fina,ncialSummary Annex 6. Procurement and Disbursement Arrangements Table A. Project Costs by Procurement Arrangements Table Al. Consultant Selection Arrangements Table B. Tlhresholdsfor Procurement Methods and Prior Review Table C. Allocation of Loan Proceeds Annex 7. Project Processing Budget and Schedule Annex 8. Documents in Project File Annex 9. Statement of Loans and Credits Annex 10. Country at a Glance REPUBLICOF SLOVENIA REALESTATEREGISTRATIONMODERNIZATION PROJECT Project Appraisal Document Europeand Central Asia Region Country Departmentfor Czech Republic, Hungary,Moldova,Slovak Republicand Slovenia(ECC07) Environmentallyand Socially SustainableDevelopmentSector Unit Date: May 25, 1999 Team Leader: lain Shuker CountryDirector: Mr. Roger Grawe SectorDirector:Joseph Goldberg/K. Cleaver Project ID: SI-55304 Sector: ECSSD Program ObjectiveCategory:Private SectorDevelopment Lending Instrument: SIL Programof TargetedIntervention: [ ] Yes [X] No Project FinancingData [X] Loan [] Credit [] Guarantee [ Other [Specify] For Loans/Credits/Others: Amount(EUR million): 14.05(US$ 15.0 millionequivalent) Proposedterms: [] Multicurrency [X] Single currency,specifyEUR Grace period (years): 3 [] StandardVariable [X] Fixed [ LIBOR-based Years to maturity: 15 Commitmentfee: 0.75% Servicecharge: 1% upfront Financingplan (US$m): Source Local Foreign Total Government 6.4 4.3 10.7 IBRD 5.6 9.4 15.0 EU PHARE 0.0 3.2 3.2 Total 12.0 16.9 28.9 Borrower: REPUBLICOF SLOVENIA Guarantor:N/A Responsibleagency(ies):Ministryof Finance; Ministryof Agriculture,Forestryand Food;Ministry of Justice; Ministryof Environmentand PhysicalPlanning Estimateddisbursements(Bank FY/US$M): 2000 2001 2002 2003 2004 2005 Annual 1.4 4.7 3.4 3.0 2.0 0.5 Cumulative 1.4 6.1 9.5 12.5 14.5 15.0 Project implementationperiod: 5 years Expectedeffectivenessdate: November 15, 1999 Expectedclosing date: June 30, 2005 OSD PAD Form: July 30, 1997 Page 2 A: Project Development Objective 1. Project development objective and key performance indicators (see Annex 1) The project development objective is to improve the efficiency and effectiveness of real estate administration systems in Slovenia. This will include improvement of the real estate registration system, upgrading the legal framework for real estate transactions, establishment of an agricultural land use monitoring system to meet European Union accession requirements, and designing and testing of a market-based property tax and valuation system. Improving the efficiency of the real estate registration system will be achieved by: a) improving the quality of base maps in the land cadastre managed by the Surveying and Mapping Authority (SMA); b) reducing the backlogs in the district court land book offices; c) creating a data interface between the computerized land book systern and the cadastre; and d) developing and testing laws and procedures to allow first time registration of 650,04)0apartments. The project would support technical advice for improving the legal environment for real property market development. Digital orthophotos and cadastre maps prepared by SMA, combined with land use information from MAFF, will be used to establish the agricultural land use monitoring system. The design and testing of an equitable and cost-effective real estate property tax and valuation system will make use of information from the upgraded building cadastre developed by SMA. Key Performance Indicators: * Reduce transaction processing times for registry offices in targeted annual steps, reaching 6 working days by December 2004; * Increase the accuracy of the real estate registration system by reducing the discrepancy in owner names between the registry and thlecadastre from 20% in 1998 to less the 5% by December 2004. • Submit to Parliament appropriate laws and procedures for registration of apartments, reflecting the results of the pilot projects by December 2002. - Improve the legal framework for land markets during the course of project implementation, to be monitored through ongoing dialog with the Government on laws related to land registration, apartment registration, mortgage, eviction and property tax. * Install an agricultural land use monitoring system for EU CAP by December 2002. * Design and test a property tax system in two municipalities by December 2004. B: Strategic Context 1. Sector-related Country Assistance Strategy (CAS) goal supported by the project (see Annex 1): CAS document number: 16565-SLO Date of latest CAS discussion: May 15, 1997 The Project will diirectlysupport the following CAS objectives. Development of real estate markets (CAS paragraph 24). Reducing real estate transaction costs will be achieved by reducing backlogs at the land registry offices. Increased security of tenure, as the result of a more secure registration system and an improved legal framework for mortgage financing, eviction and other laws related to real estate finance will also directly contribute to developing real estate markets. Fiscal sustainability of local government (CAS paragraph 24). A substantial portion of the revenues from real estate taxes are to be used by local governments, thus providing local governments with a sustainable source of revenue. The project will develop a new system of real estate taxation. Page 3 EU Accession (CAS paragraph 49). By providing an agricultural land use monitoring system for the country, the Project serves the purpose of developing a least-cost strategy for some of the requirements of EU accession. The project will also help satisfy EU requirements for an efficient registration and cadastre system. 2. Main sector issues and Government strategy: Efficient Real Estate Markets. Slovenia's real estate market is characterized by high real borrowing rates of 4.75 - 6.0 percent (nominal rates of 11.75 - 13 percent), very slow processing times for real estate transactions, and underdeveloped mortgage and rental markets. The Government of Slovenia has been implementing a program to develop a market based real estate system, starting with the de-nationalization of land and property under the new Constitution in 1991. Since then there have been laws on Agricultural Lands, Building Land, and Real Estate in Social Ownership, and the Law on the Land Register (1995). This last law reinforced the registration of title system introduced into Slovenia in 1747 during the time of the Austro- Hungarian Empire. Under this system, property rights are not secure until registered in this land registration system. The Law on Cadastre (1976) is currently under revision. The major constraints facing the development of real estate markets today, are the slow processing times for registration of titles, the quality of information in the registry and cadastre, cumbersome procedures for registration of apartments, and an inadequate legal framework for supporting the financial transactions in real estate. This project is the first of two projects planned by the Government to address these issues. The second proposed project is the Housing Finance Project. European Union Standards for Land Management. The Government of Slovenia has set a goal of EU accession by 2003. One of the requirements of EU accession is an improved land administration system with the objective to have real estate more freely traded by citizens of the EU. It also means a requirement for an efficient land use monitoring system necessary for participation in the European Union's Common Agriculture Programme (EU CAP), and other programs. This project will upgrade the title registration and mapping system to EU standards, and speed up the implementation of the land use monitoring system to ensure completion over the next three years. Efficient and Equitable Property Tax System. The current system of property taxes is complex, dependent on outdated norms for valuation and is inequitable, due to uneven coverage of the property register. The government has adopted a strategy of first developing a mass appraisal methodology and updating the building register in order to get a more complete coverage of taxable properties. Following the initial mass valuation of properties, the Ministry of Finance will move to a market based system of valuation. This project will fund the development of such a system and pilot its use in two districts. 3. Sector issues to be addressed by the project and strategic choices: Land Registration System. In comparison with many countries in the ECA region, Slovenia has an advanced European land administration system. It has a two part land registration system, a decentralized legal rights and title part managed by the Supreme Court in 44 county court offices, and a cadastre part, which identifies the parcels and is operated in 46 district cadastral offices by the SMA within the Ministry of Environment and Physical Planning. Mapping information is an essential part of the legal definition of ownership rights under Slovene law. The legal part of the registration system, with about 130,000 transactions annually, is a registration of title system based on the Austro-Hungarian land book model. Registration is manual, with entries made in pen in large volumes. There are backlogs in offices ranging from 3 months to 18 months. Over time, there have been a total of 5 million entries in the books. On the other hand, an estimated 650,000 apartments are outside this system, and are unable to be registered due to problems with recognition of common property within apartment blocks, the boundaries of land parcels associated with apartment blocks and other legal and technical issues. In an attempt to address some of these problems, the Supreme Court is to computerize its land book system, with the first stage roll-out date planned for September/October 1999. The SMA operates the cadastral system for 5 million parcels mapped onto over 20,000 paper maps in 2,700 disconnected local coordinate systems. The SMA undertakes cadastral map maintenance and facilitates Page 4 private sector surveyors to conduct subdivisions under contract. The maps are in at least 8 separate scales and use local coordinate systems, which means that most maps do not fit with neighboring maps. It has developed methodologies to transform the maps and has to-date digitized 20% of them. The SMA has an alpha-numeric database of all parcels with owner names collected from the Supreme Court. It has been estimated that the names in the land register do not match the names in Cadastre database in about 20 percent of the cases. Further, the parcel descriptions are not matching in about 5percent of cases. The linkages between the two parts of the registration system have been poor in the past. In the last year, due to the discussions related to the preparation and appraisal for this project, informal contacts at the professional level have started to produce results. Formal arrangements for coordination between agencies have also been initiated, and will be a major area of focus during the implementation of this project. This includes an information management and technology framework agreement between agencies involved in the project, and a cost recovery strategy for the land registration system, including the land registry and the cadastre, which will allow it to recover costs from revenue generating users of its information. The two agencies responsible for land registration need to improve and provide better service. Both started programs to modernize records and systems 5 years ago. Further, both realize that improvements must be made, and that they must become client-focused. The Supreme Court has agreed to adopt improved performance standards for registration transactions, reducing the processing time from 6-18 months in some offices to a uniform performance standard of 6 days during the term of the project. In the longer term, both agencies have agreed that they must integrate their data bases. They are already working on data management principles and agreeing which agency will be responsible for which data elements and their up-dating and data entry. They realize, in the mid term, that the registration processes will have to be re-engineered to match the new technologies and new linkages with which to support transactions professionals (e.g., notaries, brokers), and other users. The project would improve the efficiency and effectiveness of the existing real estate registration system, by financing the improvement of cadastral maps, improving the computerized links between the land cadastre and the land registry, directly funding the reduction of backlogs in registry offices and developing the methodology for efficient registration of apartments. Legal Framework for Real Estate Markets. The central legal problem in real estate finance in Slovenia is the inability for the financial sector to engage in true secured lending, that is, lending where a real asset serves as collateral for loan repayment. For an asset to serve as collateral, it must be possible, as a last resort, for the lender to have swift and sure access to ownership of the asset upon non-payment by the borrower. Effective foreclosure and eviction procedures, a sound registration system, and mortgage banking regulations are required for the emergence of efficient mortgage finance for real estate. In the absence of effecltivelegal support for housing finance, lenders can only make, effectively, unsecured loans with ultimate iecourse limited to wage garnishment, third party guarantees, and other secondary collateral as repayment. Under these conditions, lenders will only make smaller loans to higher income groups and on worse financial terms than would otherwise be available with stronger protection. As a result, development of the financial system will be stunted, both supply and demand for financial services will be reduced, and lower income glroupswill continue to be unnecessarily deprived of credit, and of land and home ownership. This project will provide financing to support legal framework development related to real estate markets including, (1) real property registration, (2) improved housing finance, mortgage, foreclosure and eviction laws, and (3) equitable property tax laws. Agricultural Land Use Monitoring System. The government of Slovenia has set a goal of becoming a member of EU by 2003. One of the requirements of meeting this objective is that Slovenia establish an agricultural land use monitoring system that meets the requirements of the EU CAP. Under this program the Government of Slovenia is required to monitor land use of individual farmers participating in the program. Page 5 For some crops, such as grapes for wine production, the annual coverage of the monitoring program is 100%, for others it is done on a sample basis. The MAFF will make use of the improved orthophoto maps and cadastral maps developed by the SMA as part of the land cadastre, to provide links between land parcels and individual farmers, and to estimate of area of individual land parcels. The MAFF would add information to the base maps through interpretation of the photo images, ground truthing, and farmer surveys. The MAFF has elected to use orthophoto maps at a scale 1:5,000 for base mapping because of the small size of many of the land parcels. Following the initial development of the base mapping and interpretation of land use from orthophoto maps, the project will support the use of sampling to review the farmers' declarations and update land use information. The goal of this project is to achieve country wide coverage of the land use monitoring system by the end of 2002. The methodology proposed by the project is in common usage in current EU countries and meets EU CAP requirements. Establishment of a Property Tax System. Existing real estate taxes are allocated 100% to local budgets, generating around 14% of local government revenues. They include taxes on immovable property, charges for the use of building ground, transfer taxes, and inheritance and gift taxes. The tax on immovable property/buildings is assessed on the basis of a points system, including several, primarily building cost related, factors. The law exempts the great majority of real estate from liability' The building land use tax is based on very low assessments of rental value. Agricultural income taxesi are based on low cadastral values. At present there is no agricultural land tax. There are proposals for the revision of the real estate taxation system, which include the development of a new law over the next two years. This proposed law moves from the points system for valuing land and buildings to market value, assessed using mass appraisal techniques. It would also significantly reduce the existing large numbers of exemptions. The new law would also include taxation of agricultural land based on market value. Success will depend on adequate definition of resource requirements, methodologies, implementation plans, transitional proposals, and the other necessary preparation to facilitate the phasing in of a potentially contentious tax. The tax will be conceptually new and will represent a new liability for the large majority of taxpayers. This project would assist the design, piloting and transition to a more equitable market based real estate taxation system. The design of the mass evaluation system would make use of mapping information and the building cadastre being supported under the project and implemented by the SMA. In 1994, only 50,000 buildings were taxed. There were around 650,000 dwelling units (1991), 68,000 enterprises and 60,000 craft establishments (1994). 2 These are income taxes and are therefore divided between central (70%) and local (30%) government. Page 6 C: Project Description Sumrrmary 1. Project components (see Annex 2for a detailed description and Annex 3for a detailed cost breakdown):): Component Category Indicative % of Bank % of Bank Costs) Total Financing Financing US$M (US$M) A. Land and Building Cadastre. Prepare Policy 13.2 45 6.3 47 orthophoto maps, improve cadastral maps, Physical, install computer linkages to the land registry, and and set up a buildings register. Institution Building, B. Land Register. Remove baoklogs in land Policy 3.9 13 1.2 32 registry offices, assist in computerization ofPhysical, the register, install computer linkages to theand cadastre, and improve registration procedures.Institution Building C. Apartment Registration Development. Policy 2.8 10 1.5 54 Design and trial of an apartmenl;registration Physical, system including several pilot projects. and Institution Building D. Agriculture Land Use Morkitoring. Physical, 3.1 11 1.7 54 Complete development of a land use and monitoring system for EU CAP, thus Institution supporting Slovenia's accession to EU. Building E. Real Estate Tax and Valuation System Policy 2.3 8 1.2 54 Development. Develop a real estate property Physical, tax and valuation system and test in two and municipalities. Institution Building F. Housing Finance and Mortgage Reform. Policy 0.2 1 0.1 54 Improve the legal framework for housing and finance, including mortgage system reform. Institution Building G. Legal Framework for Property Policy 0.2 1 0.1 54 Ownership. Improve the legal framework for and property ownership and registraition. Institution Building H. Project Coordination Support and Project 3.0 10 2.7 92 Strategic Studies. Coordinate P'roject, Management develop an IT/IM strategy and a cost recovery and strategy. Institution Building I. Front End Fee 0.2 1 0.2 100 Total 28.9 100 15.0 52 2. Key policy and institutional reforms supported by the project: Service Performance Standards for Registration. Govemment and the private sector have stressed the need to address the backlogs in the land registry offices. In order to ensure further improvements in performance standards at the land registry, the President of the Supreme Court agreed, in a letter to the Bank, to introduce service performance standards for the land registry that would reduce the maximum processing time (measured in business days) for registering an undisputed transfer of title as follows: By December 31, Page 7 2000 - 90 days; June 30, 2001 - 50 days; December 31, 2001 - 20 days; December 31, 2002 - 15 days; December 31, 2003 - 10 days; Dec 31, 2004 - 6 days. Information Management and Technology Framework Agreement. Government has agreed to develop and implement an information technology/information management (IT/IM) strategy for all agencies involved in the project. This strategy development and implementation is critical, as there are at least 4 agencies (SMA, SC, MOF, MAFF) all of which could potentially, without this agreement, develop independently their own IT/IM data standards and systems. The Governmental Center for Informatics of the Government of Slovenia (GCI) and the Supreme Court Informatics Department will be responsible for coordinating this effort. During Negotiations the Government agreed to develop and implement an information technology/information management (IT/IM) strategy, acceptable to the Bank, for the agencies in the Real Estate Registration Modernization Project andfor users and suppliers of land and building cadastre information. A draft strategy would be submitted to the Bank on June 30, 2000 and the strategy would be implemented by June 30, 2001. Government Procedures for Title Registration. The Government has identified the need for improved linkages between the SMA and the Supreme Court systems, including legal, technical, administrative, data base management, and funding. During Negotiations the Government agreed to develop procedures, acceptable to the Bank, delineating the respective responsibilities of the SA1 and the Court system in the title registration system by June 30, 2000. Cost Recovery Strategy for SMA and Supreme Court. The Land and Building Cadastre developed and implemented under this project and the land register could potentially have multiple public and private applications, for which Government agencies, private companies, and individuals are willing to pay. Experience in other countries has demonstrated that the level of cost recovery from such applications can be very high. As a result, the project will support the development of a cost recovery strategy for the land registration system, including both the land register and cadastre systems fees, with the view of deriving afee level that accords with the levels of service provided. An external review group of users would be established to discuss the strategy. During Negotiations, the Government agreed to complete the strategy by June 30, 2001, and to implement its recommendations by June 30, 2002. Property Tax Law. Government has agreed to review laws and regulations which serve as the basis of an effective real property tax system, clearly defining the responsibilities of the Ministry of Finance and SMA. During Negotiations the Government agreed to present the draft Property Tax Law to the Bankfor review by June 30, 2002 and submit it to Parliament by December 31, 2002. Procedures for Apartment Registration. During negotiations, the Government agreed to review and amend the relevant laws orprocedures that would allow the registration of individual apartments, without the need to register all apartments in the building, by December 31, 2002. 3. Benefits and target population: Benefits. The primary benefits of a secure land record and transaction system are: i) increased security of tenure; ii) reduced cost of real estate transactions; and iii) increased availability of real estate financing. In the case of Slovenia, the primary benefit from upgrading the system will be the reduction in transactions cost associated with the existing system. At present, there are delays as long as 18 months in some County Court registration offices, most of the 650,000 apartments in the country have never been registered and are still difficult to register. The poor quality of the cadastral mapping system make registration transactions difficult to check and prone to recording errors. This inefficient system, together with the inadequate legal framework for real estate market development result in real borrowing rates for mortgages that are 5.5 to 7.5 percentage points above the rate for Government bonds (the risk free rate), compared to UK, Denmark, Germany and France that have spreads over the risk free rate ranging from 1.2 to 1.5 percent. Implementing a more efficient and secure system, together with changes in the housing finance system, will reduce these spreads. Page 8 In addition to the direct benefits of reduced mortgage rates and transactions costs, there are a number of indirect benefits that are likely to result from the project. Reduced mortgage rates will result in increased overall economic activity due to a more liquid property market, increased housing construction, and land consolidation in farming areas. It would also result in the social benefits of more affordable housing. Increased security of tenure would provide one of the necessary conditions for increased direct foreign investment, an expansion of rent:almarkets for real estate, and an increase in the overall level of mortgage lending. It would also reduce the risk faced by the overall banking system of providing unsecured housing finance. Improved information systems will result in increased quality of information and increased information access by land holders/users, land professionals, and government. The magnitude of these indirect benefits are expected to be substantially higher than the direct benefits described above. The Target Population. The expected reduction in mortgage rates and other transactions costs for real estate would potentially benefit all land holders and owners, and is expected to have a larger impact on those in lower income brackets who currently have no access to affordable real estate financing. Apartment owners are expected to receive direct benefits from the project as a result of the program specifically targeted at the first time registration of apartments. Farmers wishing to consolidate highly fragmented farmland (the average farmer currently has 35 parcels) would also benefit from a more efficient registration system. The Agricultural Land Use monitoring system will directly benefit farmers who will participate in the EU CAP program. The property tax system is expected to be more equitable and comprehensive than the existing system, thus benefiting the population as a wlhole. Most of the revenues collected from the property tax system' will be retained by local governments, thus benefiting local communities. Other beneficiaries would be the users of real estate data and cadastral maps, which as a result of the project, would be available rapidly and in digital format. 4. Institutional and implementation arrangements: A Program Council was established by the Government of the Republic of Slovenia under Resolution No. 460-11/98-1 (N) on October 1, 1998, which also authorizes the preparation of a "Program for the Implementation of the Modernization of the Keeping of Records of Real Estate." The Program Council is headed by the MEPP, and comprised of representatives of the: MEPP; MOJ; Supreme Court; MAFF; MOF; the Statistical Office of the Government of Slovenia; GCI; and SMA. Table showing implementation responsibilities Project Component Implementing Agency A. Land and Building Cadastre SMA B. Land Register SC supported by SMA C. Apartment Registration Development SMA supported by MOJ D. Agriculture Land Use Monitoring. MAFF E. Real Estate Tax and Valuation System MOF Development F. Housing Finance and Mortgage Reform MOF G. Legal Framework for Property Ownership MOJ H. Project Coordination Support SMA The Program Council would review and approve the annual work plans and the proposed annual budget and provide policy guidance and decisions. A Project Coordination Office (PCO) within the SMA would prepare the annual work plan and budget and serve as the secretariat to the Program Council for this project. It would undertake the development of a procurement plan and would assist the implementing ministries for each component with procurement. It would assist the MOF to keep project accounts in compliance with LACI. It would also undertake monitoring and evaluation reporting and coordinate quality control for each component. For each project component, there would be an "Project Component Team", each with their respective head of sub-project, responsible for the implementation of each of the tasks as appropriate. Page 9 D: Project Rationale 1. Project alternatives considered and reasonsfor rejection: One of the strategy options proposed by the Bank appraisal team was the formation of a single system for real estate registration, where the registration and mapping functions of the registry are managed by one agency, rather than the two agency system selected for this project. However, for the Government of Slovenia, with a 250 year history in title registration originating from the Austro-Hungarian Empire, this was not a politically feasible option. Furthermore, the SMA has adopted the European cadastre model, which is now firmly entrenched in the country and the region. Registration fees for the title registry are 0.5 percent of the value of the property transacted. This is considerably higher than the international standard for registration fees. The Bank appraisal team considered recommending that the registration fee be reduced over time. However, since the funds generated from these fees are critical to the system upgrading that is planned over the next five years and the current fee structure does not appear to be a major impediment to registration, it is considered expedient that the current fee structure remain in place. 2. Major related projects financed by the Bank and/or other development agencies (completed, ongoing and planned): Sector issue Project Latest Supervision (Form 590) Ratings (Bank-financed projects only) Implementation Development Progress (IP) Objective (DO) Bank-financed (i) Geographic information systems for Slovenia: Environment S S environmental protection, real estate Fund SAR No. 14978, management and physical planning 5/1/96 (ii) Housing Finance Reform Proposed Housing Finance NA NA Project in FY 2000 Other development agencies EU Phare (planned to start in Sept Modernization of Real Appraisal 99 for 2 years- 3 Million ECU) Estate Records completed and Management agencies have agreed FAO Rural land valuation project Improvement of the Rural Phase II On (1996- 99) Land Valuation System hold - waiting for direction from this project. IP/DO Ratings: HS (Highly Satisfactory), S (Satisfactory), U (Unsatisfactory), HU (Highly Unsatisfactory) Page 10 This Project is the first of two proposed loans to Slovenia from the Bank, to assist in the development of the property and housing market in Slovenia. Once the fundamental infrastructural, legal and institutional issues addressed by this Project are in place, the proposed Housing Finance Project would follow, by providing support to the housing finance system. 3. Lessons learned and reflected in the project design: Previous experience from real estate registration projects (as reported in a Bankwide survey (OED 1992 and from ECA experience to-date) indicates that such projects should have a strong focus on land administration objectives rather than just be a component included in a general development project. Further, there should be a solid commitment from government, and the institutional framework should be simple. As much as feasible, these lessons have been included in the project design. This proposed Project is a stand alone real estate registration project. However, it does have a complex institutional arrangement, based on the European model for title registration which separates the institutional arrangements for registration and mapping. This institutional structure has a long history in Slovenia and is unlikely to be changed. To reduce the risk of institutional failure in project implementation, the design of this proposed Project would require the preparation of an information technology strategy and interagency service agreements to ensure coordination. Indeed, a specific sub-component supports the development of a data interface between the Cadastre and other user systems (See Annex ), and is explicitly aimed at physically interconnecting the Cadastre, the court registry offices, and other systems. 4. Indications of borrower commitment and ownership: On October 1, 1998the Government resolved to further its real estate market support started in 1991, by adopting a Modernization of Real Estate records improvement program in the MOF, MAFF, SMA, MOJ, and others. This gave these Ministries approval to prepare the project for the Bank and EU PHARE support. Also on October 1, 1998,the Government established an inter-ministerial Program Council to guide the preparation and implementation of the project at the suggestion of the Bank. This Council has managed the preparation of this project, submitting on schedule, January 15, 1999,a project preparation document. An updated version, based on the recommendations of the pre-appraisal mission, was submitted to the Bank on April 12, 1999. These documents represent a considerable effort by the Government, especially in the areas of institutional coordination and policy responsse. As a result of recommendations made during the pre-appraisal mission in February 1999, the Government has committed to changing the registration law to allow more rapid registration of apartments. The Supreme Court has agreed to a schedule that would reduced the processing time for registration of real estate transactions to 6 days over the five year period of the project, also representing a firm commitment to the objectives of the project. 5. Value added of Bank support in this project. The World Bank has extensive experience in land cadastre and administration projects. There are about 30 projects with land privatization and registration activities in the Bank's active portfolio. The Bank's project team has personally brought much of this experience to bear in assisting in the formulation of this project. Development in land administration requires careful strategic analysis and planning. The World Bank has a well-respected track recorl for facilitating such strategic work in ECA. Land administration also impacts on other sectors, many of which the Bank assistance is addressing through separate policy and project work. The development of a fair and efficient land administration system involves a long-term commitment. The Thailand country team and project team, for instance, are preparing the Fourth Land Titling Project, which Page II will complete a process that started about 17 years ago. The World Bank, as an international financial organization, can sustain such a long-term commitment. World Bank assistance is not tied to one model or technology, which can be a problem of bilateral assistance. The Bank has made and will continue to make, its best objective recommendations on both organization and technology and the Government has been and will continue to be, free to select the most appropriate designs for local conditions. E: Summary Project Analysis (Detailed assessments are in the project file, see Annex 8) 1. Economic (supported by Annex 4): [ ] Cost-Benefit Analysis: NPV=US$ million; ERR= % []Cost Effectiveness Analysis: [X] Other (An analysis of the potential benefits of a more efficient land market) The Government has requested assistance under this Project as it requires additional capital, over and above that available in the budget, to implement this ambitious program within a short time period. The need for a rapid implementation of the program is driven by the high opportunity cost of an inefficient land and property market, and its consequences for economic growth. There is also a need to improve land information systems to comply with EU accession requirements over the next two or three years. The economic benefits of the project are expected to be high and the project is expected to be fiscally neutral in the long run as a result of increased registration fee revenue from increased transactions volumes and increased property tax revenue from the new property tax system. 2. Financial (see Annex 5): Fiscal impact: Real estate registration offices already generate sufficient revenues for the government through registration fees and transfer taxes to cover the cost of operations and investments. As the system becomes more efficient and the increased volume of transactions leads to economies of scale, registration fees could be reduced while still covering the costs of operation. The Supreme Court is currently permitted to retain 10 percent of their revenues for systems development and testing of new techniques, and is likely to continue with this practice. Funds expended under this project for the removal of backlogs in the County Court registration offices will be recovered through registration fees, resulting in no net fiscal outlay for the Government over the period of the loan. The design and implementation of a market based property tax system, will result in significant revenues to the government, and particularly to local governments over time. It is not possible to estimate the net increase in property tax revenues as a result of the new property tax system, because it will only be designed and tested during project implementation, and collections will depend on many factors. However, it is expected that the Ministry of Finance would ensure that the incremental cost of this component would be covered through future tax collections. Funding for other components of the project will be borne directly by the budget, as a long term investment in public infrastructure. However, a number of measures will be taken under the project to encourage cost recovery by the SMA and Supreme Court in the longer run. The SMA already has some cost sharing arrangements with local governments and other ministries which cover about 15 percent of its costs. SMA relies on the central government budget for the remaining 85 percent of its funds. Experience in other countries in Europe shows that a cadastre agency can recover a substantial portion of its cost from users. The project will finance the development of a cost recovery strategy by SMA and Supreme Court to reduce their dependence on direct budgetary allocations. The project would also require the formalization of service agreements between government agencies to ensure better allocation of budgetary resources on land registration and cadastre services. Page 12 Over the period of the loan, it is expected that increased government revenues from fees and taxes as a result of the project will more 1Lhancover the overall cost of the project. 3. Technical: The technical solutions proposed in this project for upgrading the registration system and cadastre are standard for OECD countries and are already in use Slovenia. All of the systems development, surveying, mapping and data entry are currently contracted out to private sector companies through competitive procedures. A review of the private sector contractors in Slovenia during pre-appraisal showed that most of these companies could meet the international technical standards required by the Bank. The government agencies responsible for implementation are reasonably equipped with computers and software and staff to manage and monitor the work of contractors to be hired under the project. In cases where there is a shortage of equipment or personnel, these would be purchased or contracted, respectively, under the project. One exception to this is the Supreme Court informatics department, which currently has very few computers and requires additional computer equipment and software for county court registration offices. The Supreme Court expects to receive computer equipment and technical assistance from an EU PHARE project in the second half of 1999. The computerization of the registration system is so fundamental to the success of this project that, it the EU funding is not available on time, and the Government cannot find alternative sources of funding, the Bank may need to consider reallocating funds within the project from lower priority activities or provide additional funds unclerthe Loan to compensate for this shortfall. 4. Institutional. a. Institutions: The project willlbe implemented by existing agencies. Surveying and Mapping Authority within the Ministry of Environment and Physical Planning, has highly skilled management and staff, sufficient equipment and facilities, and operating budget to satisfactorily manage the land and building cadastre component, the apartment registration component, and provide an overall coordination role for the project. The Ministry of Justice, and Supreme Court, which is responsible for the removal of backlogs in County Court offices, has skilled technical staff who are currently implementing the computerization of the title registration system. The title registration system has been in place since 1747,providing considerable institutional experience. The MAFF will be responsible for implementation of the Land Use Monitoring component. It will contract out most of the work under this component to private contractors. The Ministry has already successfully implemented the start-up of this component, and has well qualified staff to monitor the work of contractors. The Directorate of Taxes, Ministry of Finance appears to be understaffed, due to the difficulty of retaining qualified staff. In order to address this problem, a full time consultant will be hired to work in the Ministry of Finance to implement the Property Tax component. Ministry of Finance would also be responsible for implementation of the Mortgage and Housing Finance Component. Ministry of Justice would be responsible for coordination of the Legal framework for property ownership Component since it includes reforms to laws that fall under its jurisdiction. The Bank and EU PHARE will continue to cooperate on the implementation of this project, in order to ensure that the proposed parallel financing of this project is effective. Page 13 b. Project Management and Financial Reporting Arrangements. Project management arrangements and project management reporting (PMR) system as required by the Bank under the Loan Administration Change Initiative (LACI) have been agreed with the borrower. The overall co-ordination of the project would rest with the Program Council that was established by a Government Decision on October 1, 1998. In order to facilitate the smooth implementation of the project, a project coordination office (PCO) would be established under the SMA. Details of the PMR and Special Account arrangements are recorded in the Project Implementation Plan (PIP). A project manager has been appointed. A Project Coordination Office will be established with a Project Administration Officer and at least three core staff (procurement officer, financial officer, and administration officer) appointed by Loan Effectiveness. A TOR and shortlist of accounting companies has been submitted to the Bank and an auditor for the project will be appointed before loan effectiveness. 5. Social Access to Mortgage Credit. At present over half the population are living in apartments which have never been registered, and are difficult to register under the current registration procedures. This inability to register has a negative impact on apartment owners access to mortgage financing. It has a more significant effect on the lower income groups who are less able to overcome the barriers to registration and have fewer alternative sources of collateral. By simplifying apartment registration procedures and reducing the cost of real estate transactions, this project will increase the access of lower income groups to mortgage credit. Eviction. Under the Execution Law (both currently and as proposed in a new draft law) a residential tenant can only be evicted if the landlord provides an "adequate" replacement unit. However, each individual is also guaranteed the right to housing under the Slovenian Constitution and the 1991 Housing Law. This second law relieves, to some degree, the landlords requirement to provide a replacement unit and shifts the bulk of the eviction risk to the state. Once an eviction is ordered, a tenant is, in the eyes of the law, homeless. This triggers the tenant's right to state guaranteed housing. Should the tenant's income be low enough to qualify him for social or non-profit housing, the state is required to provide it. However, waiting lists for such housing are currently three to four years long (depending on the geographic region). In such an event, the current landlord (with the right to evict) may present his eviction order to the state and receive payment of the difference between the rent which the tenant would be required to pay in social or non-profit housing and the "nmarket" rent of his unit (he also may then claim against the tenant for the social or non-profit portion of the rent). Since most tenants fall into arrears because of loss of income, this rent subsidy result is the most likely scenario. It is unclear what happens to a tenant who has the ability to pay (and therefore does not qualify for state housing) but simply refuses to do so. Presumably, this is a situation in which an actual eviction may take place. Gender. Both genders have equal assess to the real estate registry. There are no requirements in the inheritance law of the country that would result in a bias against women inheriting, owning, or transacting property. Monitoring of Social Issues. Since there are not expected to be an negative social impacts of this project, a full social assessment was not carried out as part of project preparation. During Negotiations it was agreed that a social assessment specialist from the Bank would monitor the social impacts of the project in cooperation with Social Council of the Ministry of Work, Family and Social Affairs as part of project supervision. It was also agreed that a social assessment of the housing sector would be carried out as part of the proposed Housing Finance Project due to begin preparation in September 1999. 6. Environmental assessment: Environmental Category []A []B [X] C Justification/Rationale for category rating: The environmental impact of the project is expected to be positive. The upgrading of the title registry itself will be environmentally neutral, but the new digital orthophoto maps and cadastral maps resulting from the upgrading of the cadastre will make available improved information for environmental monitoring purposes. The agricultural land use monitoring component of the project will encourage agricultural land use practices that are in compliance with EU environmental standards. Page 14 7. Participatory approach: A workshop on housing finance was held in November 1998 in Slovenia, co-hosted by the Bank and the Government of Slovenia. It was attended by bankers, lawyers, academics, notaries, and staff from the key government agencies. The workshop was an important forum for the private sector participants to express their views on the commercial costs of having an inefficient title registration and housing finance system. This raised the awareness amongst government officials of the enormous economic costs of these problems, and resulted in design changes to the project. More workshops for civil society, representatives of home owner associations, lawyers and banks to discuss new laws and procedures will be funded by the project during implementation. Surveys of participants will be conducted during the piloting of the property tax system. F: Sustainability and Risks 1. Sustainability: This project is a one time investment to upgrade the title registration system, the cadastre system, land use monitoring system, and property tax system. The Government is currently financing the ongoing operation of the existing systems, and it is fully expected that they would continue to do so. Full cost recovery is being achieved in the land registry offices, and the project would assist SMA and the Supreme Court to develop improved cost recovery strategy. 2. Critical Risks (reflecting assumptions in the fourth column of Annex 1): Risk Risk Rating Risk Minimization Measure Annex 1, cell "from Outputs to Objective" Supreme Court/MOJ makes necessary investments M Ensure that all critical tasks are in the computerization of registries and makes full done with or without funding use of digital map technology. from this project or EU PHARE. This risk is mitigated by the existence of the Project Council with MOJ/ SC representation. European Union PHARE Funding for SMA and M Availability of EU PHARE Supreme Court is approved, and equipment funding is a condition for installed, continued disbursement for this loan. The Bank may consider restructuring this loan if EU PHARE funds are not available on schedule. Parliament approves appropriate changes to the M Workshops and seminars will be legal framework for real property markets. held to discuss proposals and options with legislators and others. Apartment owner interest in using new registration N New procedures will be procedures. publicized. Property tax law put in place with Government M Provision of technical support commitment to making it work. during implementation - e.g., a draft property tax bill is already under discussion. Page 15 Annex 1, cell "from Components to Outputs" A.I Good coordination between agencies. N Project Council has been established to ensure good coordination. Memoranda of understanding to be prepared between implementing agencies. Technology agreement to be signed between agencies. A.2. Selection of appropriate contractors. N ICB selection and close monitoring of contracts B. 1. Computerization of land registry is completed S Close monitoring and a fallback on schedule. strategy to provide funds under this project to meet shortfalls. B.2 Cooperation of County Courts in removing Funding for extra staff for the backlogs. project, and a directive from the Supreme Court will provide the incentives to adopt new standards. Information will also be provided to the County Courts on why removal of backlogs is important. C. 1. Legal impediments to apartment registration M Changes to law will be agreed removed and new provisions added. by Effectiveness. D. 1. Selection of appropriate contractors. M ICB selection and close monitoring of contracts. E. I Parliamentary approval of the proposed new M Workshops and seminars will be property tax law. held to discuss proposals and options with legislators and others. E.2 Willingness of selected municipalities to test N Participating municipalities the new property tax system. would be identified a year before planned testing of the property tax system. F. 1 and G. 1 Political consensus on the needed M Workshops and seminars will be changes to improve the legal framework for real held to discuss proposals and estate markets, and parliamentary approval of options with legislators and recommended changes to real property related laws. others. H. I Management by implementation units in S The Program Council and PCO agencies is satisfactory to be established to coordinate and manage satisfactory project execution. Overall Risk Rating M _ Risk Rating - H (High Risk), S (Substantial Risk), M (Modest Risk), N (Negligible or Low Risk) 3. Possible Controversial Aspects: None. Page 16 G: Main Loan Conditions 1. Effectiveness Conditions: The PCO has been established with a Project Administration Officer and core staff appointed with qualifications, experience and itermsof reference satisfactory to the Bank. The Program Council has been authorized to coordinate the project implementation. A financial management system that meets the conditions of the Bank has been established for the Project. Project implementation arrangements, satisfactory to the Bank, would be entered into between MOF to SMA, MOJ, and MAFF and SC, concerning the transfer of information between them according to their mandates and cost recovery arrangements. An external auditor acceptable to the Bank has been appointed to carry out the audits under the project. A draft annual budget for the Borrower's fiscal year 2000 has been submitted to the Parliament of the Borrower showing proposed budgetary allocations for SMA, MOF, MOJ and MAFF in respect of Project Expenditures for fiscal year 2000. 2. Other Covenants If the EU PHARE "Modernization of Real Estate Records Management Project" of EUR 3 million fails to become effective with funds available to Supreme Court and SMA by effectiveness or by June 30, 2000, whichever is later, and the Government fails to find alternative sources of funding, including from its own sources, by this date, the Bank reserves the right to suspend disbursements under the loan. The Bank may also agree to reallocate funds under the project to accommodate such shortfalls in funding for the modernization of the title registry. The Government and SM[A would agree that any security clearances required for processing maps of Slovenia by contracted mapping companies located outside of Slovenia would be granted in a timely manner at low transactions costs and that the security clearance process for these companies would be facilitated by SMA. This would include the clearance of aerial photography and imagery, maps, and data files for use in company facilities in other meniber countries of the Bank. H. Readiness for Implemenitation [X] This projeo.:is expected to have a relatively long period between the Board date and project effectiveness, because the project is not expected to be ratified by the Parliament of the Republic of Slovenia before November 1999. The anticipated start date for the project is January 2, 2000, when counterpart funds will also be available. This time will be used to issue bids and prepare contracts for the first year of the project. The draft technical specifications for technical services required in the first year of the project activities have been prepared. Bidding documents for the first year of the project are expected to be finalized by August 1999. The first contracts are expected to be issued in January 2000. Draft consultant terms of reference have been prepared and are in the Project Implementation Plan (PIP). Final requests for proposals for the first year of the project are expected to be ready by September 1999. [XI The Project Implementation Plan has been appraised and found to be realistic and of satisfactory quality. [XI The following items are lacking and are discussed under loan conditions (Section G): See Section G above. Page 17 I. Compliance with Bank Policies [X ] This projectcomplieswithall applicableBank policies. Team Li Shuker Sector Leader:Jo rg ActingCountryDirector: LaurensHoppenbrouwer Page 19 Annex 1 Project Design Summary Slovenia: Real Estate RegistrationModernizationProject Narrative Summary Key PerformanceIndicators Monitoringand Critical Assumptions Evaluation (See pages 23-25 for Detailed Monitoring Indicators) Sector-relatedCAS Goal: 1. Developmentof housing 1 Reduced margin between mortgage Regularmission and land markets. rates and the govemmentbond (risk reports 2. Contributeto the free) rate (5.5 to 7.5% in 1998). requirementsof EU 2. Increasednumber of real estate M & E reports accession. transactions, particularlyapartments producedby the 3. Contributeto the fiscal (Total in 1998is 135,000,of which it Project sustainabilityof local is estimated that less than 1 percent Coordination govemment. were for apartments). Office 3. EU Accessionrequirementsfor land use monitoringunder EU CommonAgriculturePolicy met by the end of 2002. 4. New property tax system tested in two municipalitiesby December 2004. Page 20 Narrative Summary Key PerformanceIndicators Monitoringand Critical Assumptions Evaluation Project Development (Objectiveto Objective: Goal) 1. Reduced processingtime for Improve the efficiency and registrationof titles accordingto 1-2. Quarterly effectivenessof real estate agreed schedule(See SectionC of land registry The administrationsystems in PAD). reports. macroeconomyof Slovenia by improvingthe Slovenia does not efficiencyand accuracyof 2. Reducethe discrepancy in owner 3-6. Bank deteriorate, the real estate registration names between the registry and the supervision causing a system, est4blishingan cadastre from 20% in 1998to less the reports and M & slowdownin the agriculturalland use 5% by December 2004. E reports from developmentof monitoringsystem to meet the PCO. real property EU accessionrequirements, 3. Introductionof appropriatelaws markets. and designingandtesting a and proceduresfor registrationof market basedproperty tax apartmentsby December2002. EU accession system. requirementsdo 4. Improvedlegal frameworkfor real not change property markets. dramatically. 5. Agricultural land use monitoring Local system for EU CAP in full operation Municipalities by December2002. agree to test the proposed new 6. Real estate property tax system property tax designedand tested in two system. municipalitiesby December2004. Page 21 Narrative Summary Key PerformanceIndicators Monitoringand Critical Assumptions Evaluation Outputs: (Outputs to Objective) 1. Cadastral maps in a single 1.1 Completeupgradedbasemapson PCO monitoring coordinate system available agreed schedule. Supreme to supportthe land Court/Ministryof registrationsystem in digital 1.2 Completeunified cadastral Justice makes format with the abilityto be mapping system by December2004. Supervision necessary disseminatednationwide. missions investments in the 1.3 Availability of on-line digital computerizationof cadastre maps in all countycourt registries and registry offices by December2004, on makes full use of an agreed schedule. Monitoring and digital map evaluation technology. 2. CompleteRegistrationof 2.1 Completefirst time registrationof contracts buildings. all buildingsby December2004. EuropeanUnion PHARE Funding 3. Real property registry 3.1 Land registry backlogscleared by for SMA and backlogscleared and December2001 (Processingstandard SupremeCourt is performancestandardsmet. of 20 business days is consideredto approved,and be zero backlog). equipment installed. 3.2 Transactiontimes in land registries reducedon annual basis Parliament accordingto agreed schedule to approves achieve a target of 6 days by appropriate December2004. changes to the legal framework 4. Laws and proceduresfor 4.1 Viable apartmentregistration for real property registrationof apartments system in place proven by pilot markets. tested and in place by 2003. projects and registration of 6000 apartments by December2004. Apartmentowner interest in using 5. Improvedlegal framework 5.1 Legal improvementsachieved new registration for real estate markets. for: registration law, apartmentlaws, procedures. mortgage laws and systems, foreclosure that meets EU and Propertytax law internationalstandards and Slovenian put in place with conditionsby December 2004. Government commitment to 6. Agriculturalland use 6.1 Implementationof land use making it work. monitoringsystem for EU monitoring system on agreed CAP in full operation by the schedule. end of 2002. 7. Real estate propertytax 7.1 Viable real estate property tax system designedand tested. system designedand tested in at least two municipalitiesby December 2004. Page 22 Narrative Summary Key Performance Indicators Monitoring and Critical Assumptions Evaluation Project Components/ Sub- Inputs: (total budget for each (Components to components component) Outputs) A. Land and BuildingCadastre $13.2 million A.l Good coordination between agencies. A2 Selection of appropriate contractors. B. Land Register $3.9 million B. 1 Computerization of land registry is completed on schedule. B.2 Cooperation of County Courts in removing backlogs. C. ApartmentRegistration $2.8million C.1 Legal Development impediments to apartment registration removed and new provisions added. D. AgricultureLand Use $3.1 million D.1 ICB selection Monitoring. and close monitoring of contractors. E. Real Estate Tax and $2.3 million E. I Parliamentary ValuationSystem Development approval of the proposed new property tax law. E.2 Willingness of selected municipalities to test the new property tax ___ ____ ___ ___ ____ ___ ___ ___ ___ _ ____ ___ ___ ___ ____ ___ ___ __ ___ ___ _____ system . Page 23 Narrative Summary Key Performance Indicators Monitoring and Critical Assumptions Evaluation F. HousingFinance and $0.2 million F.1. Political MortgageReform consensus on the needed changes to improve the legal framework for mortgage finance and Parliamentary approval of recommended changes to related laws. G. Legal Frameworkfor $0.2 million GI Political PropertyOwnership consensus on the needed changes to improve the legal framework for property ownership and Parliamentary approval of recommended changes to property ownership related laws. H. Project Coordination $ 3.0 million G.1 Satisfactory Support and StrategicStudies coordination between agencies Page 25 MONITORING AND EVALUATION DETAILED PROJECT PERFORMANCE INDICATORS Target by End of Calendar Year 2000 2001 2002 2003 2004 CAS Objectives Reduced margin between mortgage and government bond rate. <1 <1 <1 <1 <1 (margin in year tlmargin in year (t-l)) Increased number of real estate transactions Individual houses and other real estate ('000 transactions) 130 Apartments ('000 transactions) 1 EU accession requirements for land use monitoring met Req. met New Property tax system tested in two municipalities 2 (municipalities). Project Objectives Joint Objectives of the Land and Building Cadastre and the Land Register Development Objective: Reduce discrepancy in owner names between registry and 20 18 15 10 5 cadastre (Estimated Percent of Incorrect Entries) Output: Availability of on-line digital cadastre maps in county court 0 5 15 30 44 offices (Cumulative Number of Offices) Land and Building Cadastre Outputs: 200 800 1400 1700 Upgraded cadastral maps completed (Cumulative Number of Parcels ('000)) Buildings mapped in building cadastre (Cumulative Number of 200 600 1000 Buildings Identified) ('000) Page 26 2000 2001 2002 2003 2004 Land Register Outpu-t Maximum processing time for registering each undisputed 90 20 15 10 6 transfer of title. (Working Days) Computerizationof registry offices. (CumulativeNumber of 5 15 30 44 Offices) Apartment Registration Deveiopment Output: Submit Draft Pilots completed and viable legal framework for apartment Laws or registration in place Amendments to Parliament Apartments buildings registered (Cumulative Number of 2 10 100 200 300 Buildings) Apartments registered (Cumulative Number of Apartments) 40 200 2,000 4,000 6,000 Agriculture Land Use Monitoring Development Objective: Agricultural land use monitoring system for EU CAP in full System in operation by December 2003. Place Output: Land use interpretation and overlay of cadastral maps (Map 1000 2696 Sheets) Real Estate Tax and Valuation System Development Output: By Property Tax Law submitted to Parliament December, 2002 Viable property tax system tested (Municipalities) .__ 2 Page 27 2000 2001 2002 2003 2004 Housing Finance and Mortgage Reform Output: Mortgage Improved legal framework for real estate markets. law to Parliament Legal Framework for Property Ownership Output: Complete Review of Legal Framework for Property Ownership Complete Report Project Coordination Support and Strategic Studies Output: Complete Adopt Information management/informationtechnology strategy Draft Strategy by Strategy by December June 2000 2001 ___ Cost recovery study Complete Complete Study by implementati June 2001 on by June 2002 Page 29 Annex 2 Slovenia: Real Estate Registration Modernization Project Project Description Component A. Land and Building Cadastre Objective: The foundation of the proposed project is the modernization of the land and building cadastre. The land and building cadastre is a key building block of the land registration system and will also support the real estate property tax system and the agriculture land use monitoring system. The Land and Building Cadastre component would complete the production of a unified consistent cadastral map showing the individual land parcels. The result would be a land cadastre comprised of a vectorized land cadastre map and a base map produced from the digital orthophoto images. It would also fund the establishment of the building cadastre, which would support apartment registration component as well as the real estate property tax component. Background At present, Slovenia's cadastral maps are old and cumbersome to access, existing in 2,700 independent "cadastral map commune systems" nationwide (i.e., in unrelated local coordinate systems). The maps are at various scales, and cannot be viewed even on a town basis. As a result, they are unsuitable for dissemination to land holders, brokers, developers, planners and other users. The maps need to be re-compiled into a uniform system, as well as modernized, so that they may be made available in digital format and therefore on-line. Existing errors contained in the Land Cadastre information, estimated at 5%, could be identified with the digital version of the Land Cadastre. These recompiled cadastral maps would also provide the key indexes and diagrams of the actual objects - parcels and other immovable property - the subject of registration of the land register information maintained by the Supreme Court system. Existing discrepancies between information maintained on Land Cadastre and the information included in the Land Registry (in the Courts) would be identified and matched. The SMA has made good progress in implementing this digital conversion process and has now completed 20% of the total task nationwide. The cadastral maps and the associated data base are being produced at various scales depending on the original. Therefore, the products being produced, particularly the digital orthophoto maps, would also support the up-dating of the national topographic maps up to the 1:5,000 scale series. While SMA has undertaken standard line-map coverage of the whole country, the average age of these records is now 14 years old. The maps need updating to better support the overall system operation. Description: The component consists of the following sub-components: (i) Aerial Survey for all of Slovenia, using aerial photography at about scale 1:17,500over a 3 year period as one of SMA's 3 year cycles. (100 percent national funding) (ii) Compilation of digital orthophoto maps at a basic scale of 1:5,000, comprising about 1,700 sheets. In mountain areas a scale of 1:10,000 will be used, in some urban areas a scale of 1:2,000. By January 1, 2000 over 1,400 sheets will have been completed using local funding, and therefore this Project will complete the remaining 56% of the country in the following 2 years. (iii) Preparation of Digital Cadastre Maps a) Digitization of existing land cadastre maps of different scales: 1:1440; 1:2880; 1:5760. There are about 20,000 such maps, including 5,100,000 parcels (basic unit within the land cadastre); that will be vectorized. As of January 1, 2000, there will be 1.7million parcels remaining to be completed under the project. b) Merging of digital cadastre maps with the digital orthophoto maps. The remaining 1.7 million parcels will be scaled and matched with the digital orthophoto maps; about 3 million parcels are already vectorized; Page 30 c) Matching of parcel attribute data and harmonization of the cadastral commune borders. This task involves the comparison of the graphic and attribute components of the cadastre data and the identification, editing and correction of content errors. The second task is the harmonization of the cadastral commune borders in order to make borders between two entities into a single border. There are 1,100 to complete out of the total of 2,700 cadastral communes, and this will 'involveundertaking and completing field measurements if required. (iv) Building Cadastre. This sub-componentwould, among other uses, support the development of the real estate taxation system (by MOF), the registration of apartments (by SMA and SC), and land use planning (by MEPP). The definition of the methodology for consolidating the information on buildings takes into consideration the requirements of both the Ministry of Finance and the land registration system. The Resolution460-11/98-1(N) has charged the MEPP (SMA) with preparing the "Programme for the Establishment of a Register of Buildings and Parts of Buildings"'. Stereo-"models" and orthophoto maps produced under the land cadastre sub-componentwill be used for an inventory and mapping of buildings. It will include the polygon representing the footprint of the building, a unique identifier, and coordinates of the centroid of the building. The unique identifier would provide a link with the Land Cadastre and the Register of Spatial Units. There are an estimated 1,000,000buildings nation-wide. (v) Data Interface between the Cadastre and other User Systems. This sub-component will support the development of a data interface between the Land Cadastre, controlled by SMA, and the Land Register, controlled by the Supreme Court. It would also fund the development of interfaces belween the Building Cadastre and the MOF property tax system and between the Land Cadastre the MAFF land use monitoring system. Use of Land Cadastre data in the prototype Supreme Court registration system has already been successfully tested. (vi) Upgrading of Computer Systems for SMA. Upgrade the computer systems of SMA to allow improved support to the Land Register. EU PHARE will fund this equipment, with the exception of some equilpmentfor map archiving. Ongoing Maintenance and Sustainability: The maintenance of the digital orthophoto maps is cyclic depending on the location of the areas, and the actual estimate of changes in the area since the last mapping date. The digital cadastral maps will be maintained at the Branch office level of SMA as a result of subdivision, consolidation, new demarcations and registration of objects or parcels, using digital techniques. Updates to the cadastre will take place at the time a transaction takes place. Updating methods for the Building Cadastre are being developed and will be linked to the building approvals at the local government level. The Ministry of Finance will refine, during the pilot projects the information they need for their proposed real property tax system. Implementation and Financing Arrangements: The SMA would execute this component with support, through contracts with private sector aerial mapping, systems development, and cadastral survey companies. This component will finance: digital orthophoto mapping; digitization of existing cadastral maps; parcel attribute and graphics matching; cadastral commune edge matching; building location from orthophoto analysis, and attribute information collection, including from the field; limited goods and equipment (computer hardware, software, and network systems for digital map archive and retrieval purposes); consultanl:services contracts (supervision, quality control, monitoring and evaluation); and study tours and training. Upgrading of computer equipment and some technical assistance will be provided by EU PHARE, starting in the fourth quarter of 1999. Page 31 Component B. Land Register Objective: The primary objective of this component would be to reduce the registration backlogs in the 44 county court registry offices. Backlogs are currently 3 months in most offices and range from 6 months to 18 months in 5 of the busiest offices. Backlog reduction would be achieved by setting service performance standards for all county court registration offices and hiring temporary staff to remove the backlog in the short run. The Project would finance the immediate removal of the most serious backlogs in the first two years of the project, reducing the maximum processing time for all district courts to 20 business days by December 30, 2001. In order to ensure that there is a long term improvement in performance of the registry offices, legal covenants under the loan would put in place a plan to reduce the processing time for the registration of undisputed real property transfers down to 6 working days by the end of the project. The computerization of the registration system, funded during 1999, 2000 and 2001 under an EU PHARE project, would also help the backlog problem, and ensure that the performance standards established under this project would be sustainable in the long run. Background: There are two partners in the title registration system: the Supreme Court, through their registration of legal rights at county courts, and the SMA, with its land cadastre of the parcels. Without improvements in the performance of the title registration system in the county court registration offices, investments in the land cadastre would not be economically justifiable. It is therefore important to ensure that the upgrading of the land cadastre and the parallel upgrading of the registration system in the Supreme Court and 44 County Courts are integrated and occur concurrently. Work to-date in the land registry computerization has been funded by the State through the Ministry of Justice. Grant funding for the Supreme Court is expected to commence in September 1999 from EU-PHARE amounting to EUR 1.2 million. The Supreme Court plan would involve the digital conversion of the Land Books in each of the registry offices, plus the integration of information in a Supreme Court centralized database. The database will be accessible from each of the land registry offices and by specialized users, including notaries. Access to the database will also be available on the internet. During the implementation of the EU support, the GOS has agreed to make changes to the legal and regulatory framework that would support the modernization process. The SMA has agreed to fully cooperate with the Supreme Court and its modernization program and to identify and resolve critical technical, legal, financial, and administrative issues. The proposed World Bank funding for this component would therefore complement the EU PHARE program; it would provide on-going systems development through the re-engineering consultant, which would result in registration process streamlining, as well as land records strategy development and modernization, and training. Description: This component would support the provision of 20 contract staff for a period of 2 years. Training would also be provided to these staff. Funds are also available for a re-engineering expert to work with the agencies to conduct a review of land registry procedures and improve the data interface between the Supreme Court and the SMA. Funds would also be available for policy development, drafting and re-drafting any laws, and engineering procedures related to title registration. Implementation and Financing Arrangements: The Supreme Court financed through the Ministry of Justice would implement this component. The component would finance: service contracts (data entry contracts; paper records system modernization); consultant services and technical services; computer equipment and software for creating a data interface between county courts and the land cadastre; consultant services (20 term contract workers to clear backlogs over a 2 year period, training of the contract staff ), as well as a consultant to undertake the re-engineering and another to develop the paper land records strategy develepment. Upgrading of computer equipment in the county court registration offices and some technical assistance will be provided by EU PHARE, starting in the fourth quarter of 1999. Page 32 Component C. Apa-tment Registration Development Objective: This component would support the development and implementation of a viable apartment registration system including several pilot projects and the first stage of operational support. Remaining legal obstacles to apartment registration would be resolved, methods for surveying common land and buildings around apartments would be developed, and systematic and sporadic methods of registration would be tested. About 300 buildings, with about 6000 apartments, would be surveyed and registered as part of these tests. The fee structure for the registration of apartments would also be reviewed. Background: Prior to 1991,apartments were not registered in the title registry system. There are currently estimated to be at least 650,000 apartments that have never been registered. Under the current legal framework it is difficult to register apartments because the first time registration of an apartment requires the registration of all apartments in a building. This places an enormous burden on the first person who wants to riegister a transaction on an apartment in a building. In very large apartment buildings this is almost impossible. The process of apartment building registration and the individual apartments in it requires the following steps: i) an agreement between the joint owners of the apartment and the local municipality on the boundaries of the property; ii) a survey of the land and building by a registered surveyor, delineating common property boundaries; and iii) registration of the land and building and all apartments in the building. During the preparation of this loan, recommendations have been made and options considered for simplifying this registration procedure, so that individual apartment owners will be allowed to register transactions on apartments without the need to have all apartments owners in the building register at the same time. This would be achieved by allowing individual apartment owners to register their individual apartments without requiring them to register the land and building that they owI in joint ownership with other apartment owners. This would be a temporary solution to allow individual apartment owners to transact on apartments. However, in the medium term, the land and buildings held in joint ownership will need to be registered as well, the methodology for which will be tested under this project. Description: This component would support the simplification of the legal procedures for apartment registration by funding consultants to work on improving the legal framework for apartment registration. This would include a review of the associated laws and regulations starting with possible amendments to Part 5 of the Law on Land Register 1995. Once the initial bottlenecks to individual apartment registration are addressed, the project would begin to focus on the medium-term issue of surveying and registering property in joint ownership. For the purposes of testing the methodology for apartment registration, the following data attributes will be considered as possible additions to the building register: true building footprint (fundus); unique identifier of building; shape and surfaces of the building footprint (fundus); unique identifiers of parts of buildings; and surface area of parts of buildings. Consultants hired unclerthe project would develop and test an appropriate methodology for systematically surveying and registering apartment buildings and land. This would include consideration of, and if necessary, implementation of, a condominium law. It would also include the first phase of pilot projects under this proposed project amounting to about 300 buildings and 6000 apartments. The Government is in the process of drafting laws or amendments to existing laws providing for the registration of an individual apartment without the need to register all the apartments within the building in which it is located. Implementation and Funding Arrangements: SMA would implement this component working closely with the MOJ and the Supreme Court. This project would include funding for the development and testing of a methodology for systematic registration of apartments, including the hiring of consultants in legal and technical areas, surveys of buildings, land, and apartments, and facilitation of registration of apartments. The full scale implementation of the program in the long term would be funded by the Government or by apartment owners. Page 33 Component D. Agriculture Land Use Monitoring Objective: This component would support the on-going development of a monitoring system for Slovenia's future participation in the EU Common Agricultural Policy. The proposed system would interpret land use from orthophoto maps, and make use of SMA digital cadastral maps. Each land use polygon would be given one or more of the land use class types under an EU classification system. Training would also be provided. The MAFF has already begun to implement this component of the project and is expected to have completed 30 percent of the agricultural areas by January 2, 2000 - an estimated project start-up date. The project will finance the balance of the area, which would include the interpretation of 2120 orthophoto map sheets and their entry into the system. One land use audit, covering 5% of the land parcels in line with EU procedures, would be supported by the project in 2002/3, and will define the most appropriate sampling methodology to verify land use. Background: A monitoring system would be established to support Slovenia's participation in the CAP and other programs of the EU, which, according to the MAFF, are expected to yield more than ECU 40 million in annual receipts for Slovene farmers. It should be noted that about 120,000farmers own around 4.9 million rural parcels in Slovenia. Parcel sizes are as small as 2m x 6m, with many parcels of size 5m wide x 250m long. The average parcels size is 1450 sq meters. Therefore a computer-assisted change detection system with high resolution mapping will be necessary for agriculture land use monitoring. Such a system could be updated in a timely manner. It is necessary to maintain current information on agricultural land use and ownership and to update the farm information on an annual or bi- annual basis. This component would support Slovenia's implementation of agricultural policy and therefore help the country's accession to the EU. The proposed methodology would interpret land use from the orthophoto maps that are being produced by the SMA. Each parcel is identified as a unique polygon with a unique identifier and then attributed with one or more of the land use class types defined by the MAFF. The SMA digital cadastre maps are used here. The spatial resolution needed to reach the fourth level of classification (land by crop type) is a determining factor in the choice of digital orthophoto images as the methodological solution. Investigations into the use of lower cost satellite imagery for updating would be made during the project. The methodology has been proven by the MAFF. It has already designed the methodology and has undertaken a pilot study around Gomja and Radgona on a total area of 338 sq km (equivalent to 50 map sheets at the scale of 1:5,000) and continued in Primorska region (280 map sheets the scale of 1:5,000) in 1998. For 1999,there are 600 map sheets planned. The work was contracted, including the development of the system solution and the actual interpretation of the orthophoto maps for the pilot study area (all done in a digital environment). Optimization of the production of interpreted map sheets should be made possible by the systematic production and delivery of the digital orthophoto maps for each major agricultural area. Field checking would be performed as necessary. Also, interpretation of adjacent sheets would be done from images that have the same temporal resolution. The current work plan for delivery of orthophoto maps would achieve this by programming photography in 10 contiguous areas over 3 years. Description: The component would support land use classification of rural areas and would amount to approximately 2120 map sheets at the scale of 1:5,000. This involves visual interpretation of the digital orthophoto maps identifying and classifying homogeneous areas, edge matching of the various map sheets, and field checking. Further work would be needed to overlay the layers (land use and cadastral map) to attach land use information to each parcel, as well as to create linkages and integration with other agricultural databases. The MAFF would be responsible for implementing this project component and would contract most of the work to private companies. The data base is up-dated on an annual basis with declarations from farmers. It would be checked and up-dated every 5 - 10 years. EU CAP requires an annual 5 % random audit parcels to be checked. This would also be supported by the Bank funds. Page 34 This component would also support the creation and/or consolidation of the following databases: (i) a database that would enable the implementation of the EU land use change and monitoring system (for EU CAP purposes); (ii) creation of register and cadastre of permanent plantations such as vineyards and orchards in order to protect the geographical origin of the agricultural products; (iii) creation of a farm register; and (iv) creation of other registers needed to support activities such as agrarian operations and common pastures. Implementation and Financial Arrangements: The MAFF would implement this component. The component would finance goods and equipment; service contracts, including information system development, data collection and entry from interpretation of orthophoto maps, stereo models, and field observations; and consultancy services (systems design refinement; and training). Component E. Real Estate Tax and Valuation System Development Objective: The purpose of the component is to develop appropriate capacity in Slovenia for the implementation of a market value based tax on real estate. The component will build on current initiatives supporting clevelopmentsin real estate valuation and taxation under the ONIX project, looking at urban real estate taxation. It will also take into consideration the initiatives under the FAO project developing an agricultaral income tax based on cadastral, soils and related data. Background: Existing real estate taxes are allocated 100% to local budgets and made up about 14 percent of local government revenues in 1997. However, in terms of national revenues, they are insignificant3. They include taxes on immovable property, charges for the use of building ground, transfer taxes, and inheritance and gift taxes. The tax on immovable property/buildings is assessed on the basis of a points system, including several, primarily building cost related, factors. The law exempts the great majority of real estate from liability.' Agricultural income taxes are based on very low cadastral values. At present there is no agricultural land tax. There are proposals for the revision of the real estate taxation system, with the government's plan to submit this legislation to Parliament by December 2002. This proposed new law moves from the points system for land and buildings to market value, assessed using mass appraisal techniques, and significantly reduces the existing large numbers of exemptions. The new law would also include agricultural land, with this tax liability also possibly being based on market value. There are therefore good prospects for progress, although Government will have to have the will to pass the legislation. Success will depend on adequate definition of resource requirements, methodologies, implermentationplans, transitional proposals, and the other necessary preparation to facilitate the introduction of a potentially contentious tax. The tax will be conceptually new and will represent a new liabilily for the large majority of taxpayers. Description: A compcnent centered on the Ministry of Finance, in co-operation with the other relevant Ministries and agencies, and drawing on the valuable work already undertaken by the ONIX project and the FAO project will include the following sub-components: (i) Policy and legislative development. The policy for a market value based real estate taxation has been agreed in principle, and is the subject of a draft law that has been widely circulated and commented on over the past four years. There remains, however, a significant amount of work to be done in further development and refinement. Appropriate provision for the support for this and They were insignificant as a percentage of GDP (0.00003% in 1995) and of general government tax revenues (0.0002% in 1997) 4 In 1994, only 50,000 buildings were taxed. There were around 650,000 dwelling units (1991), 68,000 enterprises and 60,000 craft establishments (1994). 5 These are income taxes and are therefore divided between central (70%) and local (30%) government. Page 35 related legislative development will be essential for the project component. Technical assistance in the form of international and national specialists will be provided. (ii) Tax system development. The development of the market value based real estate tax system in two pilot areas will require systems design and development and additional goods and materials to equip the relevant Ministry of Finance departments (e.g., establishment of Valuation Department, and the Tax Administration) and in the pilot municipalities. (iii) Pilots and testing. The component will involve two specifically targeted representative pilots during phase 1, PY 1 and 2, of the project to supplement work currently being undertaken in Maribor by the ONIX project. Phase 2 will provide for the practical testing of the new taxation system in the pilot municipalities during PY 3, 4 and 5. This will include provision for development of the practical administration of the tax including particularly collection, for efficient management of the appropriate tasks to enable valuation approaches to be developed, valuation and taxation lists to be drawn up and tested effectively, and appropriate appeals procedures to be developed. The costs for these two phases are included under pilot valuation and tax rolls, and operational support respectively. These sums include an allowance for provision for required materials and equipment. (iv) Education and training. The implementation of the pilot in PY1 and 2, and the testing of the new taxation system in the pilot municipalities during PY 3, 4 and 5 will require the training of significant numbers of technically competent valuers, and rather smaller numbers of professional level valuers. The transition to a market economy, particularly if and when Slovenia resolves the issue of mortgages, will demand such talents as well, and appropriate courses will be developed with appropriate support with the relevant institution(s)/university(ies) in Slovenia. Provision for the development of an appropriate course is included. (v) Public relations. The development and testing of the proposed real property tax will involve a far wider spread of liabilities for the tax, and probably considerably higher tax payments. It is essential that this is anticipated and supported by a concerted public relations and information exercise, initially in the selected pilot areas, and subsequently more widely across the Republic. Appropriate provision is made in the component for this. Implementation and Financing Arrangements: This component would be implemented by the MOF. The component would fund consulting services, computer equipment and operational budget for the development and piloting to a property tax system in two pilot districts. Component F. Housing Finance and Mortgage Reform Objective: This component would finance the legal advice and workshops for reviewing and improving the legal framework for housing finance, including mortgage. It would provide the legal groundwork for the proposed housing finance project, that is expected to follow this project. Background: The central legal problem in real estate finance in Slovenia is the inability for the financial sector to engage in true secured lending, that is, lending where a real asset serves as collateral for loan repayment. For an asset to serve as collateral, it must be possible as a last resort for the lender to have swift and sure access to ownership of the asset upon non-payment by the borrower. Effective foreclosure and eviction procedures, a sound registration system, and mortgage banking regulations are required for the emergence of efficient mortgage finance for real estate. Nevertheless, because default risk is comparatively low and the housing credit market is largely untapped, financial institutions currently issue "housing loans" to their most valued customers, and are planning to significantly expand this activity by pushing the credit quality threshold of their borrower base further downward. Several bank officials commented that, while they recognize that such lending is Page 36 both inefficient and risky in the current legal environment, competitive pressures require them to enter into the market in advance of legal reforms and with the anticipation that such reforms will be enacted in the near term. With some credit institutions building a presence in the market, others are following suit under the belief that they cannot afford to sit on the sidelines and delay entry into the market until the appropriate legal infrastructure is put in place. This developing environment is, at best, inefficient and, at worst, dangerous. Banks currently secure their housing loans with the "mortgage" itself, often supplemented with a patchwork of third party guarantees, other pledged collateral, and the anticipation of wage garnishment. Measuring this security based on its potential value under a supportive legal system, housing loans are vastly over collateralized. Further, as banks rush to expand their loan portfolios and capture market share, the insecurity of collateral has the potential of dangerously magnifying this unnecessary (and immeasurable) risk throughout the financial sector. In this environment, there are large dividends to be realized from enacting legal reforms. Description: This component would address the legal and systemic issues related to mortgages, especially execution of foreclosure and related remedies (with consideration of the social consequences), and considering the legal framework that would enable the mobilization of funds for housing finance. Implementation and Financing Arrangements: This component will be managed by the Ministry of Finance, which has jurisdiction over this set of laws. It will finance legal consultants to review and provide advice on amendments to the laws related to housing finance. Component G. Legal Framework for Property Ownership Objective: This component would provide funding to technical support for legislative changes consultation by legal professionals from outside government to: (i) develop policy options for legal solutions and draft laws required for project activities under the responsibility of MOJ; and (ii) begin work on the legal aspects of broad sector housing reform issues, including, but not limited to, development of long-term legal reforms in land registration. Description: This component would provide a flexible source of funding to address a program of legal issues and would include: * the development oi legal and regulatory linkages in the land registration law; * addressing the legal issues behind the "backlogs" in the land registries, * development and implementation of a plan to address the registration of apartments (and actually conduct the work involved) including, if necessary, a development of a condominium law. Implementation and Financing Arrangements: This component would be financed by the MOJ. The project would finance consultant legal services. Component I. Project Coordination Support and Strategic Studies This component would fund a project coordination office (PCO). The PCO would report to the Project Steering Comrmitteeof the Inter-ministerial Program Council. The Program Council would appoint a project manager to whom the Project Administration Officer would report and who would resolve any day to day management problems that could not be resolved by the Project Administration Officer. The PCO would undertake project administration functions including project, procurement, coordination, reporting,,and monitoring and evaluation. The PCO would also assist in the preparation of two Strategic Studies: (i) a framework for information management/ technology within the project agencies; and (ii) a cost recovery strategy for SMA and Supreme Court. The PCO would be located within the SMA. The component would finance: goods and services (office equipment); consultant contracts, and studies; contracts for financial audits, technical audits, monitoring and evaluation; recurrent costs; and training. Page 37 Annex 3 Slovenia: Real Estate Registration Modernization Project Estimated Project Costs Project Component Local Foreign Total US $ million-------------------- ----------------------- A. Land and Building Cadastre 2.0 9.7 11.7 B. Land Register 1.8 1.6 3.4 C. Apartment Registration Development 2.3 0.1 2.4 D. Agriculture Land Use Monitoring 1.3 1.5 2.8 E. Real Estate Tax and Valuation System Development 1.0 1.0 2.0 F. Housing Finance Mortgage Reform 0.1 0.1 0.2 F. Legal Framework for Property Ownership 0.1 0.1 0.2 H. Project Coordination Support 1.8 0.8 2.6 1. Front End Fee 0.2 0.2 Total 10.4 15.1 25.5 Total Baseline Cost Physical Contingencies 1.0 1.5 2.5 Price Contingencies 0.5 0.4 0.9 Total Project Cost 11.9 17.0 28.9 Page 39 Annex 4 Slovenia: Real Estate Registration ModermizationProject Economic Analysis Summary Summary of benefitsand costs: Efficientreal estateregistrationand cadastresystemsare an essentialpart of the economicinfrastructure of modernmarketeconomies. Basedon the experience in manycountries,an efficientreal estate registration system has the following benefits for real estate holders by giving them: * improved security of tenure against unfair land acquisition; * the possibility to sell real property at fair prices, in a timely manner, and at low transactions costs; * the ability to better use real estate as collateral; and * improved access to land for commercial purposes. In cases where an ex-post economic analysis of the impact of title registration systems have been done, the economic benefits have been significant. For example, in Thailand the price for registered land was between 75% and 192% higher than for unregistered land in similar adjacent agricultural areas (Feeder, 1988). Registration also resulted in increased levels of both labor and capital investments in land by farmers, thereby contributing to increases in productivity and household incomes. In the case of Slovenia, which has an existing title registration system, the primary benefit from upgrading the system will be the reduction in transactions cost associated with the existing system. At present there are delays as long as 18 months in some County Court registration offices, most of the 650,000 apartments in the country have never been registered and they are still difficult to register, and the quality of the cadastral mapping system make registration transactions difficult to check and prone to registration errors. This inefficient system, together with the inadequate legal framework for real estate market development result in real borrowing rates for mortgages that are 4.75 - 6 percentage points above the rate for Government bonds (the risk free rate), compared to UK, Denmark, Germany and France that have spreads over the risk free rate ranging from 1.2 to 1.5 percent. While the ex ante estimation of the economic rate of return for the project is not possible, we can determine the order of magnitude of the potential economic returns from this relatively small investment of $15 million dollars. If we assume that only 10 percent of the approximately 1 million properties in Slovenia are mortgaged, that each property has an estimated value of US$ 100,000, and that each property is mortgaged to 50 percent of it value. Under these conservative assumptions, each 1 percent reduction in the interest rate for mortgages, reflecting a reduced transactions cost and risk premium resulting from the project, would result in a cost saving to individuals and businesses of approximately US $50 million per year. Based on this analysis, and the high probability a more efficient title registry and legal environment for mortgage lending investment will result in at least a 1 percent decrease in mortgage lending rates, we can conclude that the project will yield sufficient direct returns to justify the relatively small incremental investment of $15 million proposed under this project. In addition to the direct benefits of reduced mortgage rates and transactions costs, there are a number of indirect benefits that are likely to result from the project. Reduced mortgage rates will result in increased overall economic activity due to a more fluid property market, increased housing construction, and land consolidation in farming areas. It would also result in the social benefits of more affordable housing. Increased security of tenure would provide one of the necessary conditions for increased direct foreign investment, an expansion of rental markets for real estate, and will increase the overall level of mortgage lending. It would also reduce the risk currently faced by the overall banking system of providing unsecured housing finance. Improved information systems will result in increased quality of information and increased information access by land holders/users, land professionals, and government. The Page 40 magnitude of these indirect benefits are expected to be substantially higher than the direct benefits described above. While the primary economic benefits of this project are from an improved title registration system and legal framework for real estate transactions, the design of the project around a multipurpose land cadastre, will allow multiple uses for the base mapping and other core database information, and therefore result in additional benefits to the investments under this project The Agricultural Land Use Monitoring system and the Property Tax System developed under this project are examples of two such additional uses. Local municipalities are already engaged in cost sharing arrangements with SMA to prepare maps and develop databases for itheiruse. For relatively small incremental investments in tailoring information to the needs of specific clients, the land cadastre can yield additional economic benefits. Page 41 Annex 5 Slovenia:Real EstateRegistrationModernizationProject FinancialSummary YearsEnding (US$, millions; Base Year 1999) Period Implementation OperationalPeriod 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 ProjectCosts InvestmentCosts 8.2 8.4 8.8 2.0 1.5 0 0 0 0 0 Total 8.2 8.4 8.8 2.0 1.5 0 0 0 0 0 FinancingSources (% of total projectcosts) IBRD/IDA 3.9 4.7 4.2 1.2 1.0 0.0 0.0 0.0 0.0 0.0 (13.5) (16.2) (14.5) (4.2) (3.5) EU PHARE(Grant) 1.6 1.6 0.0 0.0 0.0 0.0 0.0 (5.5) (5.5) Government 2.7 3.7 3.0 0.8 0.5 0.0 0.0 0.0 0.0 0.0 (9.4) (12.8) (10.4) (2.8) (1.7) Total 8.2 8.4 8.8 2.0 1.5 0.0 0.0 0.0 0.0 0.0 (28.4) (29.0) (30.4) (7.0) (5.2) Main assumptions: Since this project is modernizing existing systems for real estate registration, land use monitoring and property tax, only the incremental investments required for this modernization process are shown in the table. Ongoing operation costs and routine investment costs for all of these systems are expected to continue at approximately the same levels after project completion, with adjustments for increased transactions volumes over time. Page 43 Annex 6 Slovenia: Real Estate Registration Modernization Project Procurement and Disbursement Arrangements Procurement Responsibilities 1. An assessment of the procurement capacity of the agencies involved has been prepared and submitted to the Regional Procurement Advisor. The assessment covered the capacity of the following implementing agencies: Survey and Mapping Authority in the Ministry of Environment (SMA); Ministry of Finance (MOF); Ministry of Agriculture, Forestry and Food (MAFF) and Ministry of Justice (MOJ), which will be responsible for conducting procurement of goods, technical services, works and technical assistance. According to the Procurement Unit in the MOF, Clause 55(9) of the Public Procurement law exempts procurement under international agreements (such as the Bank-financed operations) from its applications. 2. All the agencies involved have considerable experience in conducting procurement in accordance with the public procurement law; therefore their experience is limited to national procurement. In order to strengthen the agencies and extend their experience in international procurement, the following measures will be taken by the borrower: (a) The Project Coordination Office (PCO) in the SMA has appointed a procurement officer who will be responsible for procurement implementation under the SMA component. She will also provide technical support to the project teams for the other components. The procurement officer has already attended a Bank-organizedprocurement seminar in Budapest. She should receive further training on World Bank- procurement procedures and practices before the loan becomes effective. An option for this training is with the ILO Turin. (b) A procurement workshop should be held immediately after Board approval to provide start-up training to the staff of PCO and the Project Teams in the Bank-financed procurement and practices in order to support an early project start-up. During this workshop, the PCO will be guided in preparing draft invitations to quote for NS and IS plus initiation of standard bidding documents for ICB and RFPs for consultant assignments. (c) The frequency of the procurement supervision should be once every 6 months. The supervision missions should include a procurement specialist especially during the first year of the work. The procurement specialist will not only conduct ex-post review but also continue to provide guidance and support to the procurement officer in the PCO and in the procurement staff in the project teams. Procurement Methods (Table A) 3. Procurement for goods financed from IBRD loan proceeds will be conducted in accordance with the Bank's guidelines Procurement under IBRD Loans and IDA Credits published in January 1995 and revised in January and August 1996, September 1997 and January 1999. A General Procurement Notice will be published in the Development Business of the United Nations in June 1999. Procurement of consultants will be conducted in accordance with Guidelines - Selection and Employment of Consultants by the World Bank Borrowers, dated January 1997,revised in September 1997 and January 1999. The Bank's Standard Bidding Documents for Goods and Standard Request for Proposals and Standard Form of Consultants' Contracts will be used. The Project procurement arrangements are shown in Table A below. Details are included in the Procurement Plan. Page 44 Goods 4. International Competitive Bidding (ICB) will be used for goods estimated to cost the equivalent of US$200,000 or more per contract. International Shopping (IS) will be used for contracts less than US$200,000 per contract. National Shopping (NS), based on comparing quotations from at least three suppliers, will be used for contracts estimated to cost less than US$75,000 each. Procurement of any computer equipment or software will require Y2K compliance. For the aggregate amount see Table A. Technical Services 5. Total value of the technical services to be procured under the project will be about US$16.43 million (US$8.86 million to be Bank-financed). Technical services constitute approximately 54 % of the project value. These include mapping, land registration and cadastre systems, etc. Contracts for digital orthophoto maps, digitization of cadastral maps, matching graphics, building cadastre and map interpretation, estimated to cost US$300,000 or more equivalent per contract, will be procured through ICB procurement procedures. The land and building registration, valuation and data entry, and control drawings contracts estimated to cost less than US$300,000 equivalent per contract, will be procured following the NCB procurement procedures. These services are available inside the country at competitive prices from several suppliers. International Shopping (estimated to cost UJS$200,000 or more per contract) will be followed for the first slices of Component A and Component D technical services. This will allow continuity of the project activities that the Borrower has already undertaken.. It will allow a smooth transition to ICB. National Shopping (NS), estimated to cost less than US$75,000 per contract, will be followed for pilot registration apartments data entry and scanning and up- date of data base. For the aggregate amounts see Table A. Consulting Services 6. The loan will finance TA and training totaling about US$ 4.06 million. Consultants' Services will be mostly selected through the Quality and Cost Based method of Selection (QCBS). Such contracts will be advertised in the Development Business and in a national newspaper for expression of interest, from which a short list will be drawn. Consultants for assignment of standard or routine contracts may be selected through the Least Cost Selection method. Individual experts will be selected in accordance with Part V of the Consultant Guidelines. Candidatures will be advertised and selection will be made on the basis of pre- established criteria which will be formulated in agreement with the Bank. The aggregate amounts are shown under the procurement Table A. Training 7. A schedule for training activities will be prepared on an annual basis as part of the annual work plan process and submitted to IBRD for no objection (see details in Table A). See Table A for aggregate amounts. Recurrent Costs -- Incremental Operating Costs 8. The Loan will finance part of the incremental operating costs of about US$1.65 million of the PCO to coordinate and administer the project (see Component 7 ). These expenditures will be in accordance with an annual budget that will be submitted to the Bank for prior approval on an annual basis. Page 45 Bank's Prior Review Thresholds (Table B) 9. Prior review thresholds are as follows: (a) Goods: first IS and NS packages from each component. (b) Technical Services - All ICB packages and the first NCB, IS and NS packages from each component. (c) Consulting Services - Bank prior review will be required for all terms of reference, irrespective of the contract value. - Contracts greater than US$200,000 with firms: after the technical proposals have been evaluated, the technical evaluation report will be submitted to the Bank for its review prior to the opening of the financial proposals. Financial proposals will be opened in public only after the Bank's no objection to the technical evaluation report. - Contracts greater than US$100,000 and less than US$200,000 with firms: the Bank will be notified of the results of the technical evaluation prior to the opening of the financial proposals. Following the opening of the financial proposals and evaluation thereof, a full evaluation report will be submitted to the Bank. - With respect to each contract estimated to cost the equivalent of US$25,000 or more for employment of individual consultants: the qualification, experience, terms of reference, and terms of employment of the consultant will be furnished for the Bank's prior review; - Contracts less than US$25,000 with individuals: terms of reference; - All training related expenses (tuition, fee, transportation, per diem, and trainers' fee) would require prior approval. Post Review I1. All contracts not subject to the Bank's prior review will be subject to post review, on a selective basis. One out of five contracts for goods, technical services and consulting services will be subject to ex-post review. Supervision missions will include a procurement specialist especially in the first year, whose main responsibility will be to conduct ex-post reviews of the procurement process and documentation, and provide his or her findings. Disbursement 12. Allocation of loan proceeds (Table C): Goods, technical services and consulting services, and PCO incremental operating costs. The Project will be executed over a five year period. The proposed closing date for the project would be June 30, 2005. Disbursement in the early period is expected to be based on the Bank's existing disbursement procedures. The Government has no experience with the Bank's new Project Management Report (PMR) based disbursement procedure. The use of these simplified disbursement procedures would, however, require that the Government establish a sound financial management and reporting system for the Project, the key elements of which are outlined in the Project Financial Management System Manual. At Negotiations, the Bank and the Borrower agreed to an action plan for the establishment of a Financial Management System (FMS) acceptable to the Bank. 13. Special account: To facilitate timely project implementation, the PCO will establish, maintain, and operate, under conditions acceptable to IBRD, a Special Account denominated in US dollars in a bank acceptable to IBRD. The maximum authorized allocation of the Special Account will be limited to Page 46 EUR 2.7 million (1JS$3.0 million equivalent). Replenishment applications should be submitted monthly and must include reconciled bank statements as well as other appropriate supporting documents. 14. Use of stalements of expenditures (SOEs): Reimbursement of expenditures made from the Special Account may be mradeon the basis of Statements of Expenditures (SOEs), for the following items: Goods andlTechnical Services: contracts amounting to less than US$200,000 and $300,000 respectively. Consulting services-firms: contracts amounting to less than US$ 100,000. Consulting services-individuals: contracts amounting to less than US$25,000. Training, studies, and operating costs: all contracts. The required supporting documents will be retained by the PCO for at least one year after receipt by the Bank of the audit report for the year in which the last disbursement was made. This documentation will be made available for review by the auditors and by visiting IBRD staff upon request. Financial Management 15. Accounts: The PCO will maintain an accounting and auditing system which will have the capacity of recording and retrieving all financial transactions associated with the project in a timely manner and comply with internationally accepted standards. This will be used for tracking both the govemment counterpart funds and those to be provided by other sources of funding and will be in compliance with PMR format, acceptable to the Bank. Terms of Reference for this assignment and reporting formats have been agreed with the Borrower and attached to the Project Implementation Plan (PIP). An action Plan for establishment of this system is also attached to PIP. 16. Audits: Project Accounts will be audited in accordance with the Guidelinesfor Financial Reporting and Auditing of Projects Financed by the World Bank (March 1982). Within six months of the end of each fiscal year during the life of the Project, the Borrower will provide the Bank with an audit report of such scope and detail as the Bank may reasonably request. TORs for this assignment have been agreed with the Borrower and are attached to the PIP. Project Reporting 17. The PCO will prepare proper six monthly Progress Reports and submit them to the Bank in a timely fashion in March and September. Once the FMS has been established, the PCO will submit to the Bank, a PMR, acceptable to the Bank, on a quarterly basis, no later than 45 days after the end of each quarter. This PMR will serve as the basis for quarterly disbursements. Implementation Schedule 18. The project will be implemented over a five-year period. Page 47 Annex 6, Table Al: Project Costs by Procurement Arrangements (in US $ million) Expenditure Category Procurement Method TotalCost (including contingencies) ICB NCB Other NBF 1. Goods 0.55 2.56 3.11 (0.30) bl (0.30) 2. Technical Services 12.57 3.24 0.62 16.43 (6.77)c/ (1.74)d/ (0.33)e/ (8.84) 3. Consultants Services 6.60 0.64 7.24 and Training (4.06)f7 (4.06) 4. Incremental 1.65 0.25 1.91 Operating Cost (1.65)g/ (1.65) 5. Front End Fee 0.15 0.15 (0.15) (0.15) Total 12.57 3.24 9.57 3.45 28.83 (6.77) (1.74) (6.49) (15.00) Note: Figuresmaynot total exactlydueto rounding. b/ Includes: IS (US$0.27 million) NS (US$0.03 million) c/ Includes ICB (US$6.77 million) d/ Includes NCB (US$1.74 million) e/ Includes: IS (US$0.25 million) NS (US$0.08 million) fl Consulting contractsconsistof: QCBS(aggregate million); of US$2.86 LCS(US$0.27 million); individual consultants(aggregate of US$0.51million); Trainingincludesnationalandforeigntrainingandstudytours(aggregate of USS0.42million). g/ Incremental Operating Costs:(US$ 1.65million) are the amountsto be financedby the IBRDloan Figuresin parentheses Financed. NBF meansNon-Bank Page 48 Table A2: Consultant Selection Arrangements (US$ million) Consultant Services Selection Method Expenditure Category QCBS QBS SFB LCS CQ Other N.B.F. Total Costl A. Firms 4.88 0.00 0.00 0.27 0.00 0.00 0.64 5.79 (2.86) (0.00) (0.00) (0.27) (0.00) (0.00) (0.00) (3.13) B. Individuals 0.00 0.00 0.00 0.00 0.00 0.51 0.00 0.51 (0.00) (0.00) (0.00) (0.00) (0.00) (0.51) (0.00) (0.51) Total 4.88 0.00 0.00 0.27 0.00 0.51 0.64 6.30 (2.86) (0.00) (0.00) (0.27) (0.00) (0.51) (0.00) (3.64) 1\ Including contingencies Note: QCBS = Quality- and Cost-Based Selection QBS = Quality-based Selection SFB = Selection under a Fixed Budget LCS = Least-Cost Selection CQ = Selection Based on Consultants' Qualifications Other = Selection of individual consultants (per Section V of Consultants Guidelines), Commercial Practices, etc. N.B.I. = Not Bank-financed Figures in parenthesis are the amounts to be financed by the Bank loan. Page 49 Table A3: Thresholds for Procurement Methods and Prior Review I Contract Value Contracts Subject to Threshold Procurement Prior Review Expenditure Category (US$ thousands) Method (US$ millions) 1. Works n.a. n.a 0.00 2. Goods <200 IS 0.07 <75 NS. 0.03 3. Technical Services >=300 ICB 6.77 <300 NCB 0.30 <200 IS 0.06 <75 NS 0.03 4. Consultants Services/training >100 QCBS/LCS 3.13 Ind 0.51 Total value of contracts subject to prior review: 10.9 Overall Procurement Risk Assessment has been determined to be of high risk. Frequency of procurement supervision missions proposed: One every 6 months. Page 51 Annex 6, Table B: Project Procurement-Related Information and Review Thresholds (US$ million) S:etion 1. ProcurementReview Goods ICB NCB NS Minor Works Other methods Percentage of loan amount subject to Is prior review Procurement TS>$0.300 TS<$0.300 G<$0.200 G<$0.075 thresholds: (US$6770) (US$1.740) (US$0.270) (US$0.030 individual and TS<$0.200 TS<$0.075 aggregate (US$0.254) (US$0.078) Prior Review All Fir First First US$ 7.26 or (US$6.77) (US$0.30) (US$0.07) (US$0.03) (US$0.06) (US$0.03) 48% Consultants QCBS QBS Fixed Budget LCS Qualifications Individual Procurement (US$2.86) n.a. (US$0.27) >US$0.025 method (US$0.51) thresholds Prior Review All All All US$ 3.64 or (US$2.86) (US$0.27) (US$0.51) 24% Total US$10.9 million Ex-postReview Explainbriefly the ex-post review mechanism: The Bank will monitor procurementactivities, contractmanagement,and Project record keeping during periodic supervisionmissions. Each supervision mission will include a procurement specialistto conductex-post review. One out of five contracts for goods,technical services and consultants services will be subject to ex-post review. 6 First from each component Page 52 Primaiy responsibilityfor overseeingimplementationof procurementprocedures will rest with the staff of the PCO. All agenciesinvolved have considerableexperiencein the procurement in accordancewith the public procurementlaw, therefore their experienceis limited to nationalprocurement.In order to strengththe agenciesand extend their experiencein the international procurement,the followingare proposed: (i) The Project CoordinationOffice (PCO) in the SMA shouldhave a procurementperson responsiblefor procurementimplementationunder the SMA componentand for providingtechnicalsupport to the Project ComponentTeams for the other components.This person shouldbe trained in the World Bank-financedprocurementprocedures and practices before the loan becomes effective.This trainingcan be undertakenin ILO Turin. (ii) A procurement workshop should be held immediately after Roarrdanprova] to provide strt-up training to thnestaff of PO and the Project Component Teams in the Bank-financed procurement and practices. During this workshop, the PCO will be guided in preparing draft invitations to quote for NS and IS, standard bidding documents for ICB and RFPs for consultants. (iii) The frequency of the procurement supervision should be once every 6 months. The supervision missions should include a procurement specialist especially during the first year of the work, who will not only conduct ex-post review but also continue provide guidance and support to the procurement officers in the PCO and in the procurement staff in the project component teams. CountryProcurementAssessmentReport or Country Procurement Are the bidding documentsfor the procurementactions of the first year ready by board StrategyPaper status:No Country ProcurementAssessmenthas Yes x No been prepared for Slovenia. tfleAra=p.2ur.J,uAifll&~wimmh i- . =: Estimateddate of Project Estimated dateof publicationof Indicateif there is procurement DomesticPreferencefor Goods: Domestic Preference for Works, if applicable:n/a LaunchWorkshop (for GeneralProcurement Notice: subjectto mandatorySPN in Yes procurement): July 99 Development Business:Yes June/July1999 Retroactivefinancing:No A Explainbrieflythe ProcurementMonitoringSystem: Procurementimplementationprogress will be monitoredthrough progress reports and supervision missions. At least one supervision missionper year will includea procurementspecialist. She/he will be responsiblefor updating the procurementplan, and conductingex-post reviews. His/her findingswill be included in the supervisionreports for monitoringtheir implementation. Co-financing: Explainbriefly the procurement arrangementsunder co-financing:To be determinedat appraisal. Page53 Indicatename of ProcurementStaff or Bank's staff part of Task Team responsiblefor the procurementin the Project: Name: Naushad Khan, ProcurementSpecialist, Ext 32699 Explainbriefly the expected role of the Field Office in procurement:A project officer in the Resident Missionwill be responsiblefor supervisingproject implementation and provide procurement supportin which he will be trained. Annex 6, Table C: Allocation of Loan Proceeds Expenditure Category Amount in US$ '000,000 Financing Percentage Goods Goods 0.28 54% Technical Services 8.17 54 % Consulting Services and Training Consulting Services and Training for Parts 2.30 54% A through G Consulting Services and Training for Part H 1.10 54% Incremental Operating Costs 1.50 100% Front End Fee 0.15 100% Unallocated 1.50 Total 15.00 Annex 7 Slovenia:Real Estate RegistrationModernizationProject Project ProcessingBudget and Schedule A. Project Budget (US$000) Planned Actual 174 B. Project Schedule Planned Actual Time taken to prepare the project (months) 5 months 5 months First Bank mission (identification) 08/31/1998 08/31/1999 Appraisal mission departure 04/17/1999 04/17/1999 Negotiations 05/13/1999 05/13/1999 Planned Date of Effectiveness 11/1511999 _/_/19_ Prepared by: SMA, SC, MOJ, MAFF, MOF Preparation assistance: None Bank staff who worked on the project included: Name Specialty Joseph Goldberg Sector Leader Michael Nightingale Senior Economist, Program Team Leader lain Shuker Senior Economist, Task Team Leader Lynn Holstein Senior Land Administration Specialist Naushad Khan Senior Procurement Officer Hiran Herat Senior Financial Analyst David Bontempo Project Analyst Annex 8 Slovenia:Real Estate RegistrationModernizationProject Documentsin the Project File* A. Project Implementation Plan B. Bank Staff Assessments Slovenia Housing Sector Mission: Further Examination of the Legal Framework for Housing Finance and Development, World Bank Memo, May 28, 1998. Real Estate Finance in Slovenia: Options for Reform, Internal Bank Working Paper, January 22, 1998 C. Other *Including electronic files. Annex 9 Statement of Loans and Credits DifferenceBetween expected OriginalAmount in US$ Millions and actual Last PSR Fiscal disbursements a/ Supervision Rating b/ Project ID Year Borrower Purpose IBRD IDA Cancel. Undisb. Orig Frm Rev'd Dev Obj Imp Prog Numberof ClosedProjects:5 Active Projects SI-PE-8853 1996 ENVIRONMENT FUND OF ENVIRONMENT 23.90 0.00 0.00 2.76 1.35 0.00 HS HS SLOVENIA Total 23.90 0.00 0.00 2.76 1.35 0.00 Active Projects ClosedProjects Total TotalDisbursed(IBRDand 17.05 194.38 211.43 IDA): of which has beenrepaid: 0.00 82.44 82.44 Total now held by IBRDand 23.90 112.43 136.33 IDA: Amountsold : 0.00 0.00 0.00 Of which repaid : 0.00 0.00 0.00 Total Undisbursed : 2.76 .48 3.24 a. Intendeddisbursements to date minus actualdisbursementsto date as projectedat appraisal. b. Followingthe FY94Annual Review of Portfolioperformance(ARPP),a letter based systemwas introduced(HS highly Satisfactory,S = satisfactory,U unsatisfactory, HU = highly unsatisfactory): see proposed Improvementsin Project and PortfolioPerformanceRating Methodology(SecM94-901),August23, 1994. Note: Disbursementdata is updatedat the end of the first week of the month. Annex 10:Slovenia at a glance 9/30/98 Eurooe& SOCIA POVERTY an4i C~t Hioh. - "'- Slovenia Asi Incme diamond* Development PoDuorlto.~ mid-year(millions) 2.0 4176 928 Lifeexpectancy GNPDerCaDita (Atlasmethod. US$1 !9.680 2.320 25.700 GNP(Atlas method.US$billions) 19.3 1.106 23.802 T 1991.97 Averaaeannualorowth. PoDulation(%l -0.1 0.2 0.7 Laborforce(%l6 0.1 0.5 0~9 GNP Gross per 44. ~ primary Mostrecentestlmate (latestvearavailable. 19914971 capita enntmimnt of DoDulat Povrty (56 ionbelowi oovertv,line) national Urban 1% oooulation ooou.ation) of total 52 67 78 Lifeexoectancv at birth (veers) 74 69 78 Infantmortality (Der1. 000livebIrths) 6 25 6 Childmalnutrition (56of childrenunder5) .. . ,Access to safewater Access to safewater(56 ofoobuilation) ,. .. 94 Illiteracy(%Of DODUlitionwae 15+1 ., . Grossorimarv enrollment(%of'school-aoe COorUlation) 97 92 10 Sovni Male . . 104 group High-income Female ... 103 RATIOS KEY ECONOMIC L.ONG-TERM,TRENDS arnd A1976 1986 1996 1997 ratioe Economic GDP (UJS$billions) .. , 18.9 18.0 Grossdomestic itnvestmert/GDP . .. 23.4 24.1 ExDorts OfOoods and serviceslG DP . , 54,3 57.4Trd Grossdomestic savinvos/GDP . .. 22.5 22.6 Grossnational savinos/GDP . .. 23.7 23.8 Currentaccountbalance/GDP . .. 0,2 0.2 om oavrntents/GDP Interest . . 1.0 1.2 Doetc -Investment TotaldebtlGDP , . 21.3 23.2 Savings Totaldebtservice/exoorts . ,. 8.6 8.5 Presentvalueof debt/GDP,. . 7 191 Presentvalueof debt/exoorts . .. 34.0 Indebtedness 19764 198747 1996 1997 1998-02 (averaoeannual orowth) GDP ,. 14 3.1 3.8 tSloveni a GNPDercaoita AJ4. ~2.7 3.8 group High-income Exoortsof aoods and services. -2.5! 2.8 7,5 of the ECONOMY STRUCTURE 1976 1986 11996 1997 Growth rates andInvest'ment of output (%/) (%6of GDP) 0 Aoriculture . .. 4.5 4.5 Industry.v. 38.5 37.9 15 Manufacturina . .. 28.4 27.7 Services . .. 58.9 57.7 0 Privateconsumotion . .. 57.3 57.0 1 General aovernment consumotion . .. 20.1 20.5 G01 -''GDP Imoorts of aoods and services . .. 55.2 58.9 annual (averaoe arowth) 119764861987-97 1996 11997 rates Growth andImports(/) of exports Aoriculture .. 0.3 1.7 1.5 20 Industryv. 0.3 1.3 1.0 10- Manufacturina . 2.4 1.4 0.5 Services .. 3.8 3.5 4.7 93 93 94 95 99 97 Privateconsumotion .. 3.7 2.6 2. .2 Generalcovernmentconsumotion .. 2.3 2.2 5~.0 -2 Grossdomestic investment .. 9.0 1.7 5.2 Imoorts of aoodsandservices . 1.7 1.3 7.3 -Exports -- *'-mports Grossnational omduct .. 4.2 2.8 386 estimates.Regionalaggregate Note:1997dataare preliminary high-income dataexclude economies. *Thediamonds in thecountrvtin bold) show fourkevindicators comoared averaoe. withits income-arouo will Ifdataaremissina.the diamond be incomolete. Slovenia PRICESand GOVERNMENT FINANCE 1976 1986 1996 1997 (%) Inflation Domesticprices (% change) 25T Consumerprices 9.9 8.4 om .. Implicit GDP deflator .. .. 11.5 8.4 150 100 Government finance so currentgrants) (%of GOP,includes 0 Current revenue .. .. 44.8 44.6 92 93 94 ss 9s 97 Current budget balance .. .. 2.4 0.9 GDP deflator w CPI Overall surplus/deficit .. .. 0.3 -1.1 TRADE 1976 1986 1996 1997 andImportlevels(US$mililons) Export (US$millions) Total exports (fob) .. .. 8.310 8.372 T 10,000 Machinery and transport equipment .. .. 2,773 2,815 Chemicals .. .. 881 942 7,500 Manufactures .. .. 4,092 4,019 Total imports (cif) .. .. 9,421 9,358 s,o** Food .. .. 676 632 Fuel and energy ,. .. 755 780 Capital goods .. .. 3,178 3,094 0 ExDort Drice index (1995-100) .. 9. oriceindex(1995=100) ImDort *Exports Imports Termsof trade(1995=1001 .. BALANCEof PAYMENTS (US$millions) 11976 1986 1996 1997 accountbalance Current to GDPratio (%) Exports of goods and services .. .. 10,497 10,450 8 10,674 I Imports of goods and services .. .. 10,831 Resource balance .. .. -177 -182 e Net income Netcurrenttransfers account Current balance .. .. .. .. .. .. 155 61 38 131 88 37 4 | L Financingitems (net) .. .. 548 1,251 91 2 93 94 95 9D 97 Changes in net reserves .. .. -587 -1,287 L2 Memo: Reserves includina aold (USSmillionsl . ,. 4.130 4.357 Conversion rate (DEC.IocallUS$J .. .. 135.4 159.7 EXTERNAL DEBTand RESOURCE FLOWS 1976 1986 1996 1997 (USSmillions) Composition debt,1997 of total (USSmillions) Total debt outstanding and disbursed .. .. 4,010 4,176 IBRD ., . 155 140 A 140 E:142 IDA ,, ., 0 0 G:572 Total debt service .. .. 935 921 IBRD .. .. 36 29 IDA .. .. 0 0 of netresource Composition flows Official grants ., .. 0 0 Official creditors .. .. -48 2 Private creditors .. .. 675 413 Foreign direct investment .. .. 178 295 Portfolio equity .. .. 360 50 F: 3,33 WorldBankprogram Commitments .. .. 24 0 A-IBRD E - Bilateral Disbursements .. .. 6 17 B - IDA D- Othermultilateral F - Private Principal repayments .. .. 25 20 C - IMF G - Short-term Net flows .. .. -19 -2 Interest payments .. .. 11 9 Net transfers .. .. -30 -12 Economics Development 9/30/98