OFFICIAL -AZ DOCUMENTS . 4 The World Bank 1818 H Street N.W. (202) 473-1000 INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT Washington, D.C. 20433 Cable Address: INTBAFRAD INTERNATIONAL DEVELOPMENT ASSOCIATION U.S.A. Cable Address: INDEVAS December 20, 2012 H.E. Mr. Samir Sharifov Minister of Finance Ministry of Finance Baku Republic of Azerbaijan Re: Social Protection Development (Credit No. 4418-AZ) Amendments to the Financing Agreement and Supplemental Letter No. 2 Partial Cancellation and Closing Date Extension Dear Mr. Minister: We refer to the Financing Agreement between the Republic of Azerbaijan (Recipient) and the International Development Association (Association), dated November 28, 2008, as amended to date. We also refer to your letters dated October 12, 2012, requesting the Association to make certain amendments to the Financing Agreement and Supplemental Letter No. 2. Consequently, the Financing Agreement and Supplemental Letter No. 2 are hereby amended as follows: A. Financing Agreement: 1. Following the requested cancellation of Pension System Development Component, The State Social Protection Fund submitted the final withdrawal application and corresponding refund of unused funds of Designated Account, which was completed on November 19, 2012. Therefore the Association hereby cancels SDR 3,851,469.77 from Credit Account as of November 19, 2012, as follows: * From Category 2 (A) SDR 1,551,469.77 * From Category 2 (B) SDR 2,300,000.00 Commitment charges on such cancelled amount ceased to accrue as of November 19, 2012, and the revised amortization schedule as a result of this cancellation shall follow shortly. A new table to Section IV.A.2 of Schedule 2 is introduced as set out in Paragraph 5 of this letter, which reflects the new figures after this Cancellation. 2. Section 3.01 of the Financing Agreement shall be amended to read as follows: "The Recipient declares its commitment to the objectives of the Project. To this end, the Recipient shall carry out Parts A, B and D.1 of the Project through the MLSPP and Part D.2 of the Project through SSPF in accordance with the provisions of Article IV of the General Conditions and the respective Project Operations Manuals." 3. Section 4.01(a) of the Financing Agreement shall be amended to read as follows: "(a) The Recipient has opened the Project Accounts for Parts A, B and D. I of the Project, and for Part D.2 of the Project, respectively, on terms and conditions acceptable to the Association, each with an initial deposit in AZN equivalent to $50,000". 4. Component C "Pension System Development" under Schedule I to the Financing Agreement shall be deleted in its entirety. 5. The table under Section IV.A.2 of Schedule 2 to the Financing Agreement shall be amended to read as follows: Category Amount of the Percentage of Financing Allocated Expenditures to be (expressed in SDR) Financed (1) Works, Goods, Consultants' 11,200,000 59% Services, Incremental Operating Costs of the MLSPP PIU , and Training under Parts A, B, and D.1 of the Project (2) Works, Goods, Consultants' 71% Services, Incremental Operating Costs of the SSPF PIU, and Training: (a) under Parts C(1) through 248,530.23 (4) and D(2) of the Project (b) Under Parts C(5) and 0.00 D(2) of the Project (3) Unallocated 1,000,000 Sub Total 12,448,530.23 Amount cancelled as of November 3,851,469.77 19, 2012 TOTAL AMOUNT 6. Section IV.B of Schedule 2 to the Financing Agreement shall be amended to read as follows: "B. Withdrawal Conditions; Withdrawal Period 1. Notwithstanding the provisions of Part A of this Section, no withdrawal shall be made for payments made prior to the date of this Agreement. 2. The Closing Date is December 31, 2014." 7. Paragraph 11 of the Appendix to the Financing Agreement is amended to read as follows: "I1. "Project Operations Manuals" means the manuals satisfactory to the Association, to be adopted pursuant to Section 4.01 (b) of this Agreement, setting forth the operational, maintenance and administrative procedures for the implementation of Parts A, B and D of the Project, respectively, as well as environmental requirements and procedures and adequate mitigation measures." All the terms and conditions of the Financing Agreement that have not been amended hereby shall remain unchanged and in full force and effect. B. Supplemental Letter No. 2: Performance Monitoring Indicators: With reference to the provisions of Section II.A. I of Schedule 2 to the Financing Agreement, the Recipient hereby confirms to the Association that the indicators set out in the attachment to this amendment letter shall serve as a basis for the Recipient to monitor and evaluate the progress of the Project and the achievement of the objectives thereof. Please confirm your agreement to the foregoing by countersigning both copies of this amendment letter and returning one of the countersigned copies to us. Upon receipt by the Association of the copy of this amendment letter countersigned by you, this amendment letter will become effective as of the date of your countersignature. Sincerely rs, lene Imnadze Acting Country Director South Caucasus Country Department Europe and Central Asia Region CONFIRMED: REPUBLIC OF AZERBAIJAN By: Authorized Representa e Name: Ja~ Title: 67h4-,z0 finaAA Date: yo w 390~f Attachment Amendment to the Annex to Supplemental Letter No. 2 REPUBLIC OF AZERBAIJAN Social Protection Development (Credit No. 4418-AZ) Performance Monitoring Indicators Table I Project Development Objective (PDO): The PDO is to improve delivery of labor market and social protection interventions through strengthened institutions, enhanced institutional and human resources capacity, and improved targeting of social safety net programs. D=Dropped Cumulative Target Values** Data C=Continue Dt PDO Level Results N= New Unit of YR5 Source/ Responsibility for eBaseline Frequency Mto aaCleto Indicators* 0 R=Revised Measure YR I YR2 YR3 YR4 Method Data Collection ology Indicator One: % Varies by 21% 21% 29,000 Annual Administr MLSPP, NES, State Number of participants in program registered ative data, Statistical Department active labor market programs 25%, on job seekers tracer inserted into jobs, including in C average 20- were placed studies, the occupational field for which 25% ibor laor %aVares b525%25%o9,00 they are trained X of the total survey newly (LFS), registered household job seekers budget survey _________ ______ ________(HBS) Indicator Two: C % The 66% n/a About When MLSPP MLSPP The coverage of the very poor coverage is 500,000 of reliable monitorin population by the targeted estimated at the survey data g survey social assistance program about 66% Targeted is available for MSA lSocial performan Assistance ce program beneficiarie s belonging Indicator_Two:_C% _ The66%_ n/a _ Ato_the When MLSPPMLSP and lowest income groups. Indicator Three: Yes/No Emerging Formulation of a viable concerns Pension System Development D regarding Strategy and progress in its affordability, implementation long term fiscal sustainabilit y actuarial fairness and welfare impact Indicator Four: Improved Low n/a n/a n/a Year 5 of MLSPP MLSPP and affiliated user satisfaction with MLSPP project beneficiar agencies (NES, DCS, and its affiliated agencies' R implementati y survey LI, etc.) services on Indicator Five: Number % 25% 25% 25% 20% Annual Administr MLSPP, NES, State (percentage) of job seekers, as X C ative data, Statistical Department reported by the LFS, served by tracer the National Employment studies, labor Service force survey (LFS), household budget survey (HBS) INTERMEDIATE RESULTS Intermediate Result (Component One): Revised Intermediate Result (Component One): D=Dropped 1 Tre_aus*i C=Continue Cumulative Target Values* Data Intermediate results E N= New Unit of Baseline Source/ Responsibility for indicators j R=Revised Measure YR I YR2 YR 3 YR4 YR5 Frequency Methodol Data Collection ogy 1. The Labor Code amended C Envisaged Major additional Information MLSPP amendments amendments draft Law from I are to the Labor on Official implemented Code are additions Gazette through made in and other 2009 by amendment legislative Presidential s to the acts Decree Labor Code Is submitted to the National Parliament and is under discussions 2. A central and three regional C Labs in very Planning Equipment Annual WB MLSP, Labor occupational safety laboratories poor completed, purchased supervision Inspectorate (LI) modernized and fully functional conditions, bidding and missions, and two reports on work and barely documents supplied to MLSPP occupational safety published operational ready mobile project laboratories implementa tion reports 3. 200 occupational standards, C Outdated Activity Advisory 30% ready Annual WB MLSPP based on ISCO-88/ISCO-08, and standards commences work in supervision 100 training standards developed progress missions, and in use MLSPP project implementa tion reports, third party assessment 4. Labor market information (LMI) C Accuracy, Bidding for System in A model Annual WB MLSPP, NES, Labor system in place and two reports on reliability advisory the design PIMS was supervision Inspectorate and other labor market situation and trends and services stage developed, missions, LM institutions and published comprehensi but pilot MLSPP agencies veness poor offices for project its implementa implementa tion reports, tion are not yet ready as the renovation works are to be completed only much later in 2012, and offices still lack capable and trained staff 5. Automated, up to date C Partial, not 47,700 Annual WB MLSPP, NES information on nationwide automated. vacancies supervision vacancies available in all local NES were missions, offices registered MLSPP by the project Employme implementa nt Service tion reports, in 2011. All NES annual local reports employmen t offices have internet access to the vacancy bank of the Employme nt Service 6. Operations guidelines and C None Advisory The Annual WB MLSPP, NES manuals for a new menu of ALMPs work in following supervision prepared and in use progress manuals for missions, improved MLSPP ALMPs project have been implementa prepared: tion reports, (i) Job NES annual Search reports Skill Training Program Package including the list of equipment and training materials for training of trainers; (ii) Training Manual for a Job Club Leader and Guidelines for participants of job clubs including the list of equipment; (iii) Procedures for operating the vacancy and job fairs program including the list of necessary equipment (iv) Procedures, orientation and training program and administrati ve materials for vacancy identificatio n (employer contact services). 7. 30 new module training C Insufficient Advisory Modular Annual WB MLSPP, NES programs developed and in use and to meet work in Training supervision three new module training centers demand; the progress Package on missions, fully functional. number of 10 MLSPP modules professions project limited. done. implementa Advisory tion reports, services on NES annual establishing reports, other third party module evaluation. programs delivered. Design of the 3 centers completed 8. Central and regional Career C None Advisory Design of Annual WB Counseling Centers operational. work in career supervision progress guidance missions, I_ i_ Iservices MLSPP and other project related implementa services tion reports, completed, NES annual including reports, the design third party of aptitude evaluation. assessment tests. However, premises for pilot offices in regions have not been allocated 9. Evaluation of the piloted "School C Programs do No Preparatory Design of Annual WB MLSPP, NES to work" programs finished and at not exists progress work to career supervision least three are mainstreamed. design the guidance missions, new service services MLSPP model completed. project Full implementa evaluation tion reports, is not NES annual feasible/pos reports, sible, but third party mainstream evaluation. ing outcome is likely to be achieved. A firm for the design of Virtual Enterprises selected, and negotiation s over the contract are _ 1_ underway Intermediate Result (Component Two): Revised Intermediate Result (Component Two): Intermediate results E D=Dropped Unit of Baseline Cumulative Target Values Data Responsibility for indicators L C=Continue Measure Frequency Source/ Data Collection N= New Methodol R=Revised YR I YR 2 YR 3 YR4 YR5 ogy 10. Computerized record keeping in C Except for Only the Annual WB MLSPP all MLSPP and its affiliated the TSA, central supervision agencies offices. automation administrati missions, only partial ve building MLSPP and only in is installed project some parts of with implementa the system. centralized tion reports, document third party flow evaluation system, information portal and database. Hardware has been procured for affiliated agencies as well, software is to be developed in 2012- 2013 11. MIS enables integrated work C Not in place Specificatio Annual WB MLSPP flow and sharing of business ns drafted supervision information within and among but activity missions, MLSPP and its affiliated agencies suspended MLSPP departments and branches. due to project overlap implementa with tion reports, CAPSAP third party project evaluation 12. MIS system generates intended C Not in place No Terms of Annual WB MLSPP reports on programs, participants information Reference supervision and flow of funds and feeds into on progress prepared missions, M&E activities MLSPP project implementa tion reports, third party evaluation 13. WANs and LANs functioning. Only in TSA 84 districts Annual WB MLSPP (100%) are supervision covered missions, with WAN MLSPP and only project the last implementa mile has tion reports, not yet third party been evaluation upgraded to the fiber optics, this work is currently underway. The MLSPP IT team is working on preparation of the Technical Specificatio ns for the networking of all central and regional offices of the MLSPP 14. ICT Department fully capable Weak ICT ICT ICT Annual WB MLSPP to provide administrative and Department Department department supervision technical support and maintain established staffed and is strong missions, corporate network at all territorial staff trained and rather MLSPP and functional and administrative stable, the project levels. team has implementa been tion reports, receiving third party trainings on evaluation database managemen t, electronic document flow systems, data security 15. Targeting mechanism and Will be Adjustment n/a The Annual WB MLSPP implementation procedures available in s take place Ministry is supervision adjusted after each round of May 2008 based on using all missions, monitoring survey 2008 evidence to MLSPP monitoring improve the project survey targeted implementa social tion reports, assistance (TSA) program design and operations. The eligibility threshold has been raised to improve adequacy of the benefit to the poor households. New application procedures have been introduced to facilitate access to the program for the rural residents through post offices. 2011 survey data analysis is being finalized 16. Disability certification is based Outdated, Preparatory Terms of Bidding Annual WB MLSPP, DCS on international standards and is with poor work, study Reference results supervision expertly performed; DCS publishes governance tours Designed unsatisfacto missions, its reports annually. and conducted ry to the MLSPP transparency Bank, need project and weak to rebid implementa capacity tion reports, third party evaluation 17. Integrated provision of social None; pilot Ministry The pilot Annual WB MLSPP protection interventions evaluated is being designs a 'Self- supervision and a plan for its mainstreaming designed pilot support' missions, approved. program program MLSPP 'Self- has started project support' in 4 implementa integrating districts for tion reports, provision of 120 third party cash families. evaluation assistance New model with other centers support developed services to initially by encourage NGOs and activation of providing the poor. holistic services for children in need are to be integrated in the Ministry's operations shortly. Intermediate Result (Component Two): Revised Intermediate Result (Component Two): D=Dropped Cumulative Target Values C=Continue Data Intermediate results N= New Unit of Baseline Frequenc Source/ Responsibility for indicators d R=Revised Measure YR 1 YR 2 YR 3 YR4 YR5 Methodol Data Collection ogy White Paper on Pension System D Fiscal Terms of Bidding Component Annual Consultant' SSPF/MLSPP/MOF Development and corresponding sustainability Reference completed, will be s interim Action Plan developed , equity and developed but selected cancelled reports, individual consultant WB welfare not supervision consequence contracted missions, s of the project current implementa system are a tion reports, concern; Governmen t Decrees.