Document of The World Bank Report No: ICR00003635 IMPLEMENTATION COMPLETION AND RESULTS REPORT (IBRD-76470) ON A LOAN IN THE AMOUNT OF EURO 11.0 MILLION (US$ 16.2 MILLION EQUIVALENT) TO MONTENEGRO FOR A LAND ADMINISTRATION AND MANAGEMENT PROJECT August 29, 2016 Social, Urban, Rural and Resilience Global Practice South East Europe Country Unit Europe and Central Asia Region CURRENCY EQUIVALENTS (Exchange Rate Effective August 18, 2016) Currency Unit = EUR 1.00 = US$ 1.14 US$ 1.00 = 0.88 EUR FISCAL YEAR ABBREVIATIONS AND ACRONYMS CPF Country Partnership Framework CPS Country Partnership Strategy DB Doing Business DUP Detailed Urban Plan ECA Europe and Central Asia Region EU European Union EUR Euro FY Fiscal Year GFC Global Financial Crisis GIZ Gesellschaft für Internationale Zusammenarbeit (German Federal Enterprise for International Cooperation) GoM Government of Montenegro ICR Implementation Completion and Results Report IT Information Technology LA Legal Agreement LAMP Land Administration and Management Project M&E Monitoring and Evaluation MED Ministry of Economic Development MERP Montenegro Economic Reform Program MoF Ministry of Finance MSDT Ministry of Sustainable Development and Tourism MTR Mid-Term Review PAD Project Appraisal Document PCU Project Coordination Unit PDO Project Development Objective READ Real Estate Administration Department REC Real Estate Cadastre SUP Spatial Urban Plan TSU Technical Services Unit UNDP United Nations Development Programme USD United States Dollar Senior Global Practice Director: Ede Jorge Ijjasz-Vasquez Practice Manager: Jorge A. Muñoz Project Team Leader: Olivera Jordanović ICR Team Leader: Olivera Jordanović ICR Primary Author: Aanchal Anand MONTENEGRO LAND ADMINISTRATION AND MANAGEMENT PROJECT CONTENTS Data Sheet A. Basic Information B. Key Dates C. Ratings Summary D. Sector and Theme Codes E. Bank Staff F. Results Framework Analysis G. Ratings of Project Performance in ISRs H. Restructuring I. Disbursement Graph 1. Project Context, Development Objectives and Design ........................................................... 1 2. Key Factors Affecting Implementation and Outcomes ........................................................... 5 3. Assessment of Outcomes ...................................................................................................... 10 4. Assessment of Risk to Development Outcome ..................................................................... 18 5. Assessment of Bank and Borrower Performance.................................................................. 18 6. Lessons Learned.................................................................................................................... 20 7. Comments on Issues Raised by Borrower/Implementing Agencies/Partners ....................... 22 Annex 1. Project Costs and Financing ...................................................................................... 24 Annex 2. Outputs by Component .............................................................................................. 25 Annex 3. Economic and Financial Analysis ............................................................................. 37 Annex 4. Bank Lending and Implementation Support/Supervision Processes ......................... 41 Annex 5. Beneficiary Survey Results ....................................................................................... 43 Annex 6. Stakeholder Workshop Report and Results ............................................................... 46 Annex 7. Summary of Borrower's ICR and/or Comments on Draft ICR ................................. 47 Annex 8. Comments of Cofinanciers and Other Partners/Stakeholders ................................... 50 Annex 9. List of Supporting Documents................................................................................... 51 Map Project Data Sheet A. Basic Information Land Administration Country: Montenegro Project Name: and Management Project Project ID: P106906 L/C/TF Number(s): IBRD-76470 ICR Date: 08/19/2016 ICR Type: Core ICR Lending Instrument: SIL Borrower: Montenegro Original Total USD 16.20M Disbursed Amount: USD 14.09M1 Commitment: Revised Amount: USD 16.20M Environmental Category: B Implementing Agencies: Real Estate Administration Department Ministry of Sustainable Development and Tourism Cofinanciers and Other External Partners: B. Key Dates Revised / Actual Process Date Process Original Date Date(s) Concept Review: 09/06/2007 Effectiveness: 02/24/2009 02/24/2009 04/15/2010 07/20/2011 Appraisal: 03/10/2008 Restructuring(s): 04/15/2013 03/16/2015 12/08/2015 Approval: 12/09/2008 Mid-term Review: 09/19/2011 09/28/2011 Closing: 04/30/2014 02/29/2016 C. Ratings Summary C.1 Performance Rating by ICR Outcomes: Satisfactory Risk to Development Outcome: Low or Negligible Bank Performance: Moderately Satisfactory 1 Note: The Project was 99.54% disbursed. The difference between the commitment and the disbursed amount figures is due to changes in the exchange rate over the course of the Project. i Borrower Performance: Moderately Satisfactory C.2 Detailed Ratings of Bank and Borrower Performance (by ICR) Bank Ratings Borrower Ratings Quality at Entry: Moderately Satisfactory Government: Satisfactory Implementing Quality of Supervision: Satisfactory Moderately Satisfactory Agency/Agencies: Overall Bank Overall Borrower Moderately Satisfactory Moderately Satisfactory Performance: Performance: C.3 Quality at Entry and Implementation Performance Indicators Implementation QAG Assessments Indicators Rating Performance (if any) Potential Problem Quality at Entry Project at any time Yes None (QEA): (Yes/No): Problem Project at any Quality of Yes None time (Yes/No): Supervision (QSA): DO rating before Satisfactory Closing/Inactive status: D. Sector and Theme Codes Original Actual Sector Code (as % of total Bank financing) Central government administration 20 20 Housing finance 50 50 Sub-national government administration 30 30 Theme Code (as % of total Bank financing) Land administration and management 67 67 Municipal governance and institution building 33 33 E. Bank Staff Positions At ICR At Approval Vice President: Cyril E Muller Laura Tuck Country Director: Ellen A. Goldstein Jane Armitage Practice Jorge A. Munoz John V. Kellenberg Manager/Manager: Project Team Leader: Olivera Jordanovic Gavin P. Adlington ICR Team Leader: Olivera Jordanovic ICR Primary Author: Aanchal Anand ii F. Results Framework Analysis Project Development Objectives (from Project Appraisal Document) To improve the efficiency of permitting and property registration system. Revised Project Development Objectives (as approved by original approving authority) Not applicable (a) PDO Indicator(s) Original Target Formally Actual Value Values (from Revised Achieved at Indicator Baseline Value approval Target Completion or documents) Values Target Years Avg. no. of days to complete recording of purchase/sale of property in land Indicator 1 : administration system Value quantitative or 25.0 NA 8.0 4.0 Qualitative) Date achieved 02/28/2009 02/28/2009 04/15/2013 02/29/2016 Comments Intermediate indicator elevated to PDO indicator at the time of April 2013 (incl. % restructuring. Target successfully met, representing an 84% decrease in time achievement) taken to record transactions. Percentage of customers satisfied with services for real estate registration and Indicator 2 : planning and permitting Legal entity: Value Legal entity: 4.02 Legal entity: 3.77 4.47 quantitative or X+20% Natural persons: Natural persons: 3.79 Natural Qualitative) 4.21 persons: 4.38 Date achieved 06/30/2010 06/30/2010 04/15/2013 02/29/2016 Comments Target largely met with a 90% achievement for legal entities and a 96% (incl. % achievement for natural persons. Note: 2008 baseline highly optimistic and not achievement) comparable so 2010 results used as baseline. Indicator 3 : Decrease in time to receive a construction permit (central and municipal levels) Value quantitative or 6-12 months 1-2 months 28-43 days Qualitative) Date achieved 02/28/2009 02/28/2009 02/29/2016 Comments Target successfully met. 84% decrease from 6 months to 28 days for permits not (incl. % requiring environmental assessment (EA), and an 88% decrease from 12 months achievement) to 43 days for permits requiring an EA. iii (b) Intermediate Outcome Indicator(s) Original Target Actual Value Formally Values (from Achieved at Indicator Baseline Value Revised approval Completion or Target Values documents) Target Years Indicator 1 : Automated systems for the REC developed and used by professional users System in place and it provides access to 23 local offices Value live alphanumeric Attribute only available connected with at (quantitative data to users in via the website least 100 other or Qualitative) local offices and professional users other professional users Date achieved 02/28/2009 02/28/2009 02/29/2016 Target achieved. All 23 offices connected and all professional users have access Comments to the web-based system. There are currently 60 registered users including 5 (incl. % institutions where more than one individual is using each registered account to achievement) access READ data. Indicator 2 : READ offices physical layout improved for better customer service Value (quantitative 0 NA 12 14 or Qualitative) Date achieved 02/28/2009 02/28/2009 07/20/2011 02/29/2016 Comments (incl. % Indicator added with the July 2011 restructuring. Target met and exceeded. achievement) Indicator 3 : Improved procedures for registration prepared and in use in all offices Value Further New procedures Further reforms (quantitative 0 reforms implemented introduced or Qualitative) introduced Date achieved 02/28/2009 02/28/2009 04/15/2013 02/29/2016 Target successfully achieved with the introduction of several reforms, including Comments legal amendments made after consultation with public and private sector (incl. % stakeholders and introduction of online system of notaries with time-stamped e- achievement) signatures. Pending cases at cadastral offices reduced to less than 8% of annual cases for all Indicator 4 : offices Value Podgorica: 15.7% Less than 8% (quantitative Budva: 24.7% 8% 2.9% in all offices or Qualitative) Zabljak: 33.2% Date achieved 02/28/2009 02/28/2009 04/15/2013 02/29/2016 Comments Target successfully met and exceeded. The July 2015 amendment to the Law of (incl. % State Survey and Real Estate Cadastre helped process the backlog quickly achievement) Indicator 5 : Preparation of plans in targeted municipalities Value 0 3 11 29 (quantitative iv or Qualitative) Date achieved 02/28/2009 02/28/2009 04/15/2013 02/29/2016 Comments Target successfully met and exceeded by over 2.5 times with 7 SUPs and 22 (incl. % DUPs prepared in 10 municipalities. An additional 2 SUPs were partially achievement) financed by LAMP. Indicator 6 : Decrease in number of new illegally constructed buildings Value 34,386 in September (quantitative 2007 with an increase of 95% decrease 94% decrease or Qualitative) 3,725 per year Date achieved 02/28/2009 02/28/2009 02/29/2016 Comments Target 98.9% met as a result of improved procedures and software solution (incl. % implementation at MSDT and the Directorate of Inspection that deals with illegal achievement) structures Increased participation of citizens in planning process in targeted municipalities Indicator 7 : under the project Value Total: 10,940 Total: 10,474 Male and female (quantitative NA Male: 7,590 Male: 7,081 participants or Qualitative) Female: 3,350 Female: 33,93 Date achieved 04/15/2013 04/15/2013 04/15/2013 02/29/2016 Comments Indicator added at the time of April 2013 restructuring. Target met. (incl. % Achievement %: 96% overall, 101% female participation, and 93% male achievement) participation Indicator 8 : Increase in number of staff trained in planning process Value (quantitative 0 NA 1,900 2,542 or Qualitative) Date achieved 04/15/2013 06/30/2010 04/15/2013 02/29/2016 Comments Indicator added at the time of April 2013 restructuring. 134% achievement of (incl. % target. achievement) Indicator 9 : Decrease in time for MSDT approval of local spatial plans and urban plans Value (quantitative 6-12 months 2-4 months 20 days or Qualitative) Date achieved 02/28/2009 02/28/2009 02/29/2016 Comments Target met and exceeded. Note: In accordance with a legal change, the legal (incl. % deadline for approval is 20 days. achievement) G. Ratings of Project Performance in ISRs Actual Date ISR No. DO IP Disbursements Archived (USD millions) 1 02/22/2009 Satisfactory Satisfactory 0.00 2 05/06/2009 Satisfactory Satisfactory 0.00 3 07/04/2009 Satisfactory Satisfactory 0.00 v 4 10/15/2009 Satisfactory Satisfactory 0.57 5 02/24/2010 Satisfactory Satisfactory 0.57 6 05/04/2010 Satisfactory Satisfactory 0.57 Moderately 7 12/25/2010 Moderately Satisfactory 1.35 Unsatisfactory Moderately 8 05/01/2011 Moderately Satisfactory 1.57 Unsatisfactory 9 11/07/2011 Satisfactory Moderately Satisfactory 2.15 Moderately 10 05/21/2012 Moderately Satisfactory 3.81 Unsatisfactory Moderately 11 12/24/2012 Moderately Satisfactory 5.12 Unsatisfactory 12 06/30/2013 Moderately Satisfactory Moderately Satisfactory 7.37 13 12/25/2013 Moderately Satisfactory Moderately Satisfactory 9.05 Moderately 14 06/22/2014 Moderately Satisfactory 10.68 Unsatisfactory 15 01/12/2015 Satisfactory Moderately Satisfactory 11.52 16 08/11/2015 Satisfactory Moderately Satisfactory 12.65 17 11/27/2015 Satisfactory Moderately Satisfactory 12.99 H. Restructuring (if any) ISR Ratings at Amount Board Restructuring Disbursed at Restructuring Reason for Restructuring & Approved Restructuring Date(s) Key Changes Made PDO Change DO IP in USD millions No substantive, financial or other changes. Restructuring corrects mistake in LA where 04/15/2010 S S 0.57 operating costs defined in the LA were left out of the categories in the Withdrawal Table. Project description revised to allow for a new READ office building. Language modified to explicitly mention 07/20/2011 MS MU 1.72 "construction" and "design" and to allow for renovation and possible purchase of local READ offices. Four changes: 1. Sub-component B.4. 04/15/2013 MS MU 6.75 Business Environment Improvement dropped as no vi ISR Ratings at Amount Board Restructuring Disbursed at Restructuring Reason for Restructuring & Approved Restructuring Date(s) Key Changes Made PDO Change DO IP in USD millions activities conducted until this point; 2. Changes to Results Framework to make indicators more relevant and take into account impact of the Global Financial Crisis; 3. Responsibility of Component B transferred from Ministry of Economy and Development (MED) to Ministry of Sustainable Development and Tourism (MSDT) to reflect the organizational restructuring in the Montenegrin Government; and 4. Project closing date extended by 1 year from April 30, 2014 to April 30, 2015 to allowed for time to achieve PDO. Closing date extended by 8 months from April 30, 2015 to December 31, 2015 to allow 03/16/2015 S MS 11.89 Project to finalize ongoing activities and fully disburse loan amount. Closing date extended by 2 months to finalize contracted work: 1. The installation and testing of 12/08/2015 S MS 13.16 IT equipment at READ HQ; and 2. The completion and registration of new local office building in Nikšić. vii I. Disbursement Profile2 2 Note: The Project was 99.54% disbursed. The difference between the commitment and the disbursed amount figures is due to changes in the exchange rate over the course of the Project. viii 1. Project Context, Development Objectives and Design 1.1 Context at Appraisal 1. After independence in 2006, Montenegro began transitioning from a planned to a market economy. Despite Montenegro’s strong overall ranking in the World Bank Doing Business (DB) reports, two key constraints to investment were identified at the time of Project design: registering property (86 days and 8 procedures), and licensing and permitting requirements (180 days to get permission to build a warehouse). The same constraints had also been identified in the 2007 Foreign Investment Advisory Service Report. These issues resonated with the Bank’s then Country Partnership Strategy FY07-FY10 (CPS), in particular its two priority pillars: (a) enhancing sustainable economic growth, through increasing economic freedoms and strengthening the role of the private sector; and (b) building institutions and the rule of law. Therefore, a significant scope for reform and regulatory simplification was identified. 2. The Government of Montenegro (GoM) showed great commitment to reforms when it signed the Stabilization and Association Agreement with the European Union (EU) in March 2007. With the goal of harmonizing policies and legislation with the EU in place, the Bank’s support was seen as an important tool to help Montenegro’s transition to the market economy by improving the country’s cadastre and registration services as well as its planning and permitting processes. In 2008 only 52% of Montenegro’s territory was in the real estate cadastre, and it took 180 to 360 days to obtain a construction permit. The Bank had a wealth of experience in the region with several ongoing and successful projects in Serbia, Croatia, Bosnia and Herzegovina, Macedonia FYR, Slovenia, Bulgaria, and Romania among others. 3. Even though the Bank has extensive experience with land and property registration projects in the Balkans, the Land Administration and Management Project (LAMP) was unique. This was the first time in the Europe and Central Asia (ECA) region of the Bank that registration and planning were brought together as components under one project to tap into the synergies between REC creation, registration of rights and the use of cadastral maps for planning and permitting purposes. The Project also worked directly with municipalities, which is rare for land projects financed in the ECA region. 1.2 Original Project Development Objectives (PDO) and Key Indicators (as approved) 4. The original PDO was to: improve the efficiency of permitting and the property registration system. 5. The Project’s original key indicators were:  Increase in real estate transfer tax and property tax receipts;  Increased investment activity in the municipalities targeted under the Project;  Decrease in the time to receive a construction permit; and  Increased customer satisfaction with registration services. 1 1.3 Revised PDO (as approved by original approving authority) and Key Indicators, and reasons/justification 6. The PDO was not revised during the Project. However, the third restructuring in April 2013 (see ICR section 1.7 for details) included some changes to the Results Framework. These changes were:  The PDO indicator “increase in real estate transfer tax and property tax receipts” was dropped due to the Global Financial Crisis (GFC)3;  The PDO indicator “increased investment activity in the target municipalities” was dropped due delays in development of spatial urban plans (SUPs) so their impact on the investment activities in municipalities would not have been visible during project implementation;  The intermediate indicator “average transaction registration time” was elevated to a PDO indicator to better reflect the PDO and capture the outcome intended by this Project; and  The unit of measurement of the PDO indicator “increased customer satisfaction with registration services” was changed from the percentage of satisfied customers to the average level of their satisfaction from 1 (completely dissatisfied) to 5 (completely satisfied). This was done because the first survey calculated the percentage of satisfied customers whereas the second survey from 2012 measured the level of satisfaction. With this change the unit of measurement for both natural persons and legal entities was harmonized.4 1.4 Main Beneficiaries 7. The Project Appraisal Document (PAD) stated that the main Project beneficiaries were: (a) the public living within the municipalities as more order is brought to the built environment; and (b) the business community as more transparent and efficient processes are facilitated. Looking at the Project impact, it can be seen that rural communities5 also benefited from REC creation and mapping activities which led to: (a) the registration of their rights and securing the ownership of their assets; and (b) the development of urban plans which helped to optimize the use of their real estate assets. The Project also directly financed the development of urban plans in ten of the poorer northern municipalities and partially financed the same activity in another two municipalities. Furthermore, all municipalities in Montenegro benefitted from training and capacity building efforts for the development of urban plans and simplification of construction permitting processes. 8. The PAD envisaged that the level of informal development would be reduced, such that unsustainable and unattractive developments could be curtailed, while allowing the business community and private citizens to develop their own assets with greater ease and security. By the end of the Project, it was expected that the public and business community would have easier access to information regarding: (a) processes required to develop a business or property; 3 The Global Financial Crisis that started in the USA in 2008 spread to the Balkans by around 2010. Since the mortgage market collapsed, the crisis had a negative effect on demand and consumer confidence. As a result, several countries experienced a fall in real estate market prices as well as transactions. This, in turn, led to a dramatic drop in the real estate transfer and property taxes, which were being tracked under this PDO. 4 Furthermore, surveys in Macedonia FYR and Croatia were also measuring the level of satisfaction using 1 to 5 scale so this measure would have provided a comparable perspective of customer satisfaction in the region. 5 Many of these communities were in based either in areas with national parks that are important for tourism development or in transport corridors. 2 (b) property registration; and (c) zone plans, forms, and procedures for applying to develop a property or obtain the necessary construction permits. This was expected to result in fewer illegal structures, and this was accomplished as a result of the Project as there is now a 94% decrease in new illegally constructed buildings against a target of 95%. 1.5 Original Components (as approved) 9. The original Project components were: Component A: Real Estate Administration. The objective of this component was to improve registration services for the public by improving the facilities at local offices, especially in Podgorica where the majority of transactions take place. Nationally, the Project was to introduce improved service standards through modern technology and completion of at least 100,000 hectares of cadastre and registration records in selected areas. The Project was to help the Real Estate Administration Department (READ) to bring all forms of land and property records online and make them available to municipalities and other users, and ensure that READ would be able to provide basic maps in a timely manner to municipalities for planning and management purposes. The four subcomponents under this component were: (a) improving registration services; (b) information system development; (c) provision of base maps; and (d) completing the real estate cadastre (REC). Component B: Improving Planning and Permitting. The objective of this component was to support the Ministry of Economic Development (MED) (later Ministry of Sustainable Development and Tourism (MSDT); see Section 1.7) (the Ministry) to improve the planning and permitting processes and strengthen the capacity of the Ministry to support the planning sector in Montenegro. This component was to support those municipalities that have limited funds to develop spatial and general plans in line with the National Spatial Plan (NSP) that was approved in 2008. The Project did not support the development of urban plans in Podgorica municipality and the coastal municipalities as they were seen as having sufficient funds to develop their own urban plans (see ICR Section 6: Lessons Learned). At the same time, all municipalities were expected to benefit from Project-sponsored planning standards and manuals, as well as information systems that would streamline and improve the planning and permitting process. The four subcomponents were: (a) improving the planning process and support to the Ministry; (b) improving the planning process at municipal level and completion of plans; (c) improving construction permitting and inspection; and (d) supporting the business environment. Component C: Project Management. The objective of this component was to support a Project Coordination Unit (PCU) to assist the Ministry with implementation of Component B and the existing Technical Services Unit (TSU) under the Ministry of Finance (MoF) that would be responsible for fiduciary control and management. The PCU would also be responsible for monitoring and evaluation of all Project activities and results. Project management of Component A was left to READ as its capacity was seen as sufficient. 1.6 Revised Components 10. Two revisions were made to the original Project components:  In July 2011, the description of Component A was revised to add the construction of the new READ building, along with its design. Simultaneously, EUR 400,000 were reallocated 3 from Category 1 (goods, works, consultant services, training and operating costs) to a new Category 5 (purchase of office space).  In April 2013, Subcomponent B4. Business Environment Improvement—which provided technical assistance and training to improve aspects of business licensing and permitting not related to construction permits—was dropped because MSDT felt it was no longer necessary after the GoM restructuring that rendered the original beneficiary department, Department of Industry and Entrepreneurship at the MED, separate from the MSDT. The Bank agreed to this as this subcomponent did not affect the achievement of the PDO, which was “to improve the efficiency of [construction] permitting and the property registration system.” 11. Two intermediate indicators were added to the Results Framework at the time of the April 2013 restructuring (see ICR section 1.7 for details):  Increased level of participation of citizens in planning process; and  Increase in number of staff trained in the planning process. 1.7 Other significant changes 12. There were a total of five Project restructurings, including three Project extensions for a cumulative period of 22 months. These changes are described below:  In April 2010, a correction was made in the Loan Agreement (LA) to correctly reflect operating costs in Schedule 2 of the Withdrawal Table.  In July 2011, the Project description was revised to allow for the purchase of real estate by READ. A reallocation of loan proceeds was done to support this, and a new legal covenant and disbursement condition (as further described below) were added. In addition, the Project description was clarified to explicitly refer to ‘construction’ along with the ‘design’ of new buildings for READ, which was always intended under the Project, but the Project description at the time was not explicit about it. Some of the 21 local READ offices were either in a poor condition or belonged not to READ but to municipal administrations. In order for READ to provide improved services to citizens (a PDO indicator), new offices were needed in some locations. In some municipalities, renovation of existing local offices was not an option as READ own funds were very limited and/or there were no vacant sites for new buildings. The purchase of an existing office space was, therefore, the only remaining option. READ had requested to be able to purchase office space for the local office in Rozaje and this has been agreed and approved by the Bank-wide Land Committee. READ had indicated that purchase may also be necessary for other municipalities and these would be reviewed on a case by case basis by the Land Committee.6  In April 2013, subcomponent B4 on Business Environment Improvement was dropped (see Paragraph 10, bullet 2 for details) the Project closing date was extended by 12 months from April 30, 2014 to April 30, 2015 to allow for READ ICT system upgrade, meet REC creation target to larger extent, and complete the READ building. Also, several modifications were made to the Results Framework to reflect these changes (see ICR section 1.3 for changes to PDO indicators and section 1.6 for changes to intermediate indicators). 6 It is important to note there were also no issues with the purchase of premises during project implementation. 4  In March 2015, the Project closing date was extended by another eight months from April 30, 2015 to December 31, 2015 for three reasons. First, it was done to allow for the completion of a significant portion of the REC—from an estimated 35% by April 30, 2015 to 70% by December 31, 2015. This was deemed essential to guarantee the security of property rights especially in the rural areas. Second, while the READ software upgrade was expected to be completed by the Project closing date, the extension would give sufficient time to provide training to external users (notaries and private surveyors) and allow for system tests. These steps were expected to have a positive impact on the speed of registration (a PDO indicator). Third, the extension would allow construction of the new READ headquarters building to be finalized and for the building to become operational.  In December 2015, the Project closing date was extended by another two months from December 31, 2015 to February 29, 2016 to allow for the installation and testing of the Information Technology (IT) equipment in the new READ headquarters building in Podgorica as well as the purchase of the local office in Niksic. 2. Key Factors Affecting Implementation and Outcomes 2.1 Project Preparation, Design and Quality at Entry 13. Preparation: The Bank has extensive experience with land and property registration projects in the ECA region. Lessons learned in the region showed that REC creation and land registration are the first steps in ensuring that a suitable system is in place for recording and protecting citizens’ property rights. Project design for the registration component was fairly standard when compared to registration projects in the ECA region, where the Bank had over 15 years of experience. The integration of an urban planning component into a land administration project was new and unique to this Project. This innovative design element helped to quickly apply maps created through REC creation in the development of urban plans. Another lesson that was adopted was that IT solutions had proven to be extremely difficult and time consuming to implement throughout the region, and yet they were a fundamental requirement for transparency, improving services and EU accession expectations. The approach adopted in the project design was to support a phased IT system upgrade rather than pursuing completely new IT solutions thus mitigating the risk of IT system development failing. The Project was launched after other donors in Montenegro had already done some work, particularly: (a) GIZ had helped improve planning systems; (b) UNDP, which assisted the housing and planning sectors; and (c) the Japanese Government, which provided equipment and training to READ for the production of maps. Each of these was highly useful for the design of Component B of the Project. 14. Design: Overall, the Project design was focused and tailored to the GoM’s needs, capacity, and expectations. The PDO was clearly formulated and remained relevant and consistent throughout the life of the Project. The GoM was highly focused on the need to improve registration and urban planning systems so these were chosen as Project components along with the standard project management component. During the design phase, the Project considered financing the development of urban plans across the country, which comprise (a) Podgorica and the coastal municipalities, which saw a lot of real estate market activity, investments, and illegal construction; and (b) the northern municipalities, which were poorer and could not finance the developments of these urban plans. Given the limited financial 5 resources, it was decided that the Project would finance urban plans only in the poorer northern municipalities where important tourism and infrastructure investments were stuck due to the lack of urban plans. The coastal municipalities had sufficient funds to develop their own plans so the Project was designed to support capacity development across all municipalities. The Project results, however, show that the northern municipalities were able to develop these plans whereas only Tivat of the six coastal municipalities was able to finalize its urban plans and this was after much delay. This highlights the delicate nature of the choice involved in the design of Bank projects and is discussed in greater detail in the ICR Section 6: Lessons Learned. 15. Risks: The overall Project risk was assessed as moderate. During preparation, most risks were realistically assessed and appropriate mitigation measures—transparency, close monitoring and technical assistance—were put in place. The Project underestimated the low private sector capacity. Despite international tendering procedures, there were several delays for REC creation and the development of urban plans. This low private sector capacity also affected the development of urban plans in the coastal municipalities, which were not financed by the Project due to limited resources. 16. Adequacy of Government Commitment: The Project benefitted from a high level of Government commitment and ownership. This Project was unique in its high share of counterpart funding (GoM 51%; Bank 49%). Of its EUR 11.49 million commitment, the GoM disbursed EUR 10.99 million or 96%.7 Funds earmarked for the Project were set aside and disbursed in a timely manner till the GFC reached the Balkans in 2010 and disrupted the GoM’s ability to make funds available per the original plan.8 Nevertheless, the GoM was fully behind Project priorities, and engaged in designing Project objectives, components and methodology. This commitment flowed through into implementation, enabling policy and legal and institutional reforms that would not have been possible without the GoM’s unwavering support. This was particularly visible during the last two years of the Project when the MoF put in substantial efforts to reduce the time to resolve second instance appeals submitted to them during REC creation, thus shortening the period for formal REC establishment. As a result, READ was able to complete REC creation for 59,000 ha over two years compared to only 11,000 ha over the previous four years. These interventions played a significant role achieving Project outcomes. 2.2 Implementation 17. Implementation Arrangements: The Project was implemented through two implementing agencies: READ for Component A and MSDT for Component B. Since planning, permitting and inspections are executed at a local level, the Project also decided to work with 21 municipalities, which agreed to provide some co-financing and designate a representative who would coordinate activities with the Project. Given the weak capacity at MSDT, the PCU was established to assist MSDT with Project activities and coordinate activities across the 21 municipalities. The TSU, which had already been under the MoF for all projects in Montenegro, was responsible for procurement and financial management of the Project. This 7 Client Connection as of June 1, 2016. 8 The same issues arose in Macedonia FYR where the Bank had processed Additional Financing for the Real Estate Cadastre and Registration Project (P083126). 6 further freed up PCU capacity to focus on Project implementation. Additionally, a Project Steering Committee (PSC)—consisting of officials from the MoF, MSDT, READ and Union of Municipalities—was put in place and it was responsible for making high-level decisions that affected overall Project implementation. The PSC functioned throughout the life of the Project and was instrumental in initiating the Project restructurings. 18. Restructurings: As discussed in section 1.7, there were five Level II Project restructurings, including three Project extensions for a cumulative period of 22 months. These restructurings actively addressed key issues such as: (a) reallocation of funds and incorporation of new activities to better respond to the PDO and ensure its achievement; (b) revision of Project subcomponents and targets to respond to the GFC; and (c) extension of the Project closing date to allow for completion of activities as well as testing and training related to them to ensure sustainable outcomes and results. 19. Mid-Term Review (MTR): The MTR took place, as planned, in September 2011. At the time, the PDO achievement rating was Satisfactory whereas the Implementation Progress rating was Moderately Satisfactory. The key issues that emerged then were the need to:  Develop IT systems and strategy: READ’s IT strategy development was underway and the MSDT was contracting its IT strategy at the time. These strategies were crucial in terms of guiding IT investments for their core businesses of registration, planning and permitting, which were all moving towards digitized systems;  Intensify training efforts: Both READ and MSDT needed to intensify training efforts so their staff, municipalities and private sector professionals could support registration, planning and permitting activities; and  Improve service delivery: While several improvements had already been made at READ, more needed to be done to launch e-services, speed up services, and improve their quality, especially at the local READ offices. 20. Overall Implementation Progress: Implementation pace was negatively affected by delays with large procurement contracts. Several actions mutually agreed between the Bank and the implementing agencies (READ and MSDT) were either implemented with substantial delays or not implemented at all. This was particularly noted after the MTR, when the Bank advised the GoM to restructure the Project because the achievement of IT system development targets was severely compromised due to a three year delay in putting the READ and MSDT IT strategies together. Feedback from the MTR was taken into account and the Project supported IT trainings for both internal and external users at READ. This helped increase system utilization and contributed to Project sustainability. The construction of the new READ headquarters in Podgorica was also challenging with several procurement-related delays and the unavailability of counterpart funding for certain periods. The GoM’s austerity budget following the GFC also exacerbated the Project’s ability to achieve certain targets, which were either dropped or revised with the April 2013 restructuring. The Project was originally scheduled to close in April 2014 but delays with the READ building in Podgorica as well as the finalization of the IT system and REC creation led to three Project extensions totaling 22 months. 2.3 Monitoring and Evaluation (M&E) Design, Implementation and Utilization 7 21. Design: READ already had in-house capacity to track information related to the establishment of the REC, transactions and the utilization of their services. The capacity at MSDT was weaker as there was no mechanism at the time to gather data on urban planning and permitting because each municipality maintained its own database with no standard methodology or reporting to the center. During preparation, the Project had to visit each municipality to collect the baseline data. An M&E plan was developed and a dedicated PCU staff member was hired to focus on it. The targets set were ambitious without being unreasonable. The choice of PDO indicators however proved to be flawed as several had to be dropped and replaced with April 2013 restructuring (Some observations on the indicators themselves can be found in ICR Section 6: Lessons Learned.) A social assessment was also carried out in municipalities where the Project planned to support the development of urban plans. This was done to determine the socio- economic profile of municipality residents and the extent of illegal buildings and their use (e.g. primary residence, vacation home, source of rental income). The Project also benefited from two studies that provided additional social background data: (a) UNDP-financed focus groups in all municipalities on spatial planning, illegal buildings, and proposed law on legalization; and (b) GIZ-financed customer surveys showing the cumbersome nature of obtaining documents and information from READ. 22. Implementation: Based on the PAD’s indicators and indicators added at the April 2013 restructuring, data were routinely collected and reported throughout the project period. A regular program of customer surveys also provided important quantitative and qualitative information about service delivery at READ and its local offices. Due to the lack of a centralized IT system initially, MSDT manually collected and aggregated planning and permitting data from the municipalities. M&E capacity and skills were developed over time providing useful inputs to the development of MSDT’s various strategies and policies. M&E however suffered as the concerned specialist changed four times, contributing to some methodological inconsistencies. The methodology for the calculation of indicators had to be refined several times so it would be accurate and consistent. The Bank comments were incorporated swiftly by the M&E staff in the PCU. 23. Utilization: The M&E reports were closely considered and used by READ, MSDT, PCU and the Bank team, primarily as a tool to monitor and report on project progress. Over the course of the Project, both READ and MSDT began to use these reports to identify issues with local offices and municipalities respectively, and began to develop remedial measures to ensure that progress remained on track. One of the successes of the Project is that the M&E framework developed for Component B is now being used at MSDT to coordinate planning and permitting activities across Project and non-Project municipalities. 2.4 Safeguard and Fiduciary Compliance 24. Environmental Safeguards: The Project was rated Category B for environmental safeguards. The main activities that required site-specific Environmental Management Plans (EMPs) were: (a) the construction of the READ headquarters building; and (b) the reconstruction/renovation of several local offices. During the Project preparation phase, the GoM prepared: (a) a site- specific EMP for construction of READ headquarters building; and (b) an environmental check-list for minor civil works activities, related to reconstruction of local offices. Documents were prepared and disclosed in accordance with the relevant Bank policies. During 8 implementation, regular environmental safeguards reviews were performed and respective findings included in the aides-memoire, in the sections related to civil works and construction progress and/or environmental safeguards. No major non-conformities were reported during the construction works on READ headquarters, and minor issues, where noted, were dealt with promptly by the Contractor. No environmental incidents were recorded during implementation. Rehabilitation of several local offices was undertaken in accordance with the environmental checklists and in line with the national requirements for construction material/waste management. The works were supervised by READ engineers. Based on above, the ICR rating for environmental safeguards is Satisfactory. 25. Financial Management: The financial management (FM) arrangements of the Project were assessed as satisfactory throughout the Project. The TSU under the MoF was in charge of financial management and procurement. FM functions were adequately staffed with an experienced and qualified senior finance officer and assistant finance officer working on all of the Bank-financed projects in Montenegro. The system of internal controls for the Project were assessed as adequate. A clean opinion was issued by the auditors on the Project financial statements throughout the implementation period, although the audits were delivered with three to four months delay. Quarterly interim financial reports were submitted on a timely basis to the Bank and were assessed as reliable. The flow of funds was adequate. The Designated account for the Project was opened in Crnogorska Komercijalna Banka. Based on above, the ICR rating for FM is Satisfactory. 26. Procurement: For the first two years of Project implementation, procurement activities were executed separately by READ for Component A and by the TSU for Component B. Later the TSU took over procurement activities for the entire Project. This resulted in improved quality and timeliness of procurement for majority of the packages detailed in the Procurement Plan. Around 200 contracts were effectively managed altogether. However, some large value contracts such as construction of READ building in Podgorica could have been better managed. The contract had to be extended several times due to insufficient counterpart funds and its final cost of EUR 9.0 million was 80% higher than the initial estimate (EUR 5.0 million). Due to significant delays in completion, it took 50 months to finalize the building against an initial estimate of 19 months. In spite of these issues, procurement was conducted in a transparent manner in accordance with the World Bank Procurement and Consultants Guidelines. Overall, the TSU’s performance was strong, and procurement and contract management capacity also increased at READ and MSDT over the course of the Project implementation. Therefore, the ICR rating for procurement is Satisfactory. 2.5 Post-Completion Operation/Next Phase 27. As of now, there are no concrete plans for a next phase operation. Montenegro is a small country with limited borrowing room and the MoF has been reluctant to take on more Bank financing to continue work either through additional financing or a standalone lending operation. However, Montenegro is an EU candidate country so it is eligible for EU financing, 9 which can be coupled with GoM funds to finish the REC creation work in the remaining 30%9 of the country and finalize the creation of urban plans not covered under the Project. As a natural continuation of the Project, the IT systems at READ and MSDT can be linked so that changes in the REC automatically show up in the urban plans and requests for changes in land use are reflected in the REC. A complete cadastre would also help the country focus on next generation land administration issues such as property valuation and taxation, which can ease the fiscal burden while also introducing a more just system of value-based property taxation. State land management is also an important issue for several countries in the region and could be addressed. The Project also supported the creation of a Geoportal, which is now ripe to be developed into a national spatial data infrastructure (NSDI), with on-going technical support from European partners. The new Country Partnership Framework (CPF) for FY16-20 explicitly notes that a follow-on project could be included in the lending program to build on the successful experience of this Project.10 3. Assessment of Outcomes 3.1 Relevance of Objectives, Design and Implementation Rating: Substantial 28. The development objective of the Project was highly relevant during preparation and implementation, and it remains relevant even today. In transition countries like Montenegro, improving land administration through a reliable and efficient registration and cadastre system is fundamental for economic growth. Similarly, streamlining planning and permitting processes is crucial to improve the overall investment climate and ultimately attract investors. The Montenegro Economic Reform Program (MERP) for the 2016-2018 period includes a reform measure that underscores the significance of registration, planning, and permitting in the country’s economic development agenda: “Further improve the business environment by ensuring the timely implementation of the so -called "regulatory guillotine" (simplification) project, enhancing the functioning of one-stop shops at municipal level for the issuing of construction permits and the quality of the land registry. - The process of issuing construction permits through upgrade of existing ICT solutions is underway and it will be developed and implemented in the period 2016-2017. - In 2015 was adopted the Law on State Surveying and Immovable Property Cadastre. To improve the quality of the land registry, the Cadastre administration will render decisions in line with the new and shortened deadlines envisaged under this law. Activities will continue in 2016, and completed (including regional cadastral offices) in 2017.”11 29. The Bank’s CPF FY12-15 notes that the targets related to streamlining of property registration and business permitting were achieved.12 The new CPF FY16-20 states that a follow-on project 9 At the start of the Project, 52% of the properties were in REC. By the time the Project closed 70% of the properties were in REC with an additional 22% in the public display stage, which should be finalized by the end of 2016, taking the total REC coverage in Montenegro to 92%. 10 CPF FY 16-20, Page 29. 11 Montenegro Economic Reform Program, January 2016, Page 10. Underlining added for the purpose of the ICR. 12 CPF FY12-15, Page 64. 10 could be included in the lending portfolio13 to build on this Project’s work as registration and permitting remain highly relevant even today. 30. The Project design was based on extensive experience in countries with similar needs and conditions, as well as investigative and analytical work conducted during project preparation. It closely focused on a series of efficient and effective activities that could deliver improvements to the existing systems to deal with the pressing land administration and urban planning issues facing Montenegro at the time and which have remained important. Some shortcomings in the initial design came to light when the PDO indicators needed to be revised. The April 2013 restructuring addressed these issues, redirecting the Project’s focus on key activities to achieve the PDO. In terms of implementation, the Project focused on READ and MSDT needs and proactively responded to implementation issues and changing circumstances with intensified implementation support and appropriate restructurings. Some implementation lessons from the Project are discussed in ICR Section 6: Lessons Learned. 31. The Project contributed to improving the country’s competitiveness by increasing the securit y of real estate ownership and efficiency of registering transactions, and by improving the process for obtaining construction permits. As evidenced by customer survey feedback—for both natural persons and legal entities—the greatest improvements were made in the speed of issuance of documents, accuracy, quality and communication with clients. See Annex 5 for details. 3.2 Achievement of Project Development Objectives Rating: Substantial 32. The Project successfully achieved its PDO, meeting all revised targets14 and even exceeding some, as illustrated in the Datasheet. The Project had a positive impact on improving the efficiency of permitting and property registration systems, which in turn contributed to the improvement of investment climate and development of the land and real estate market. 33. The Project was successful in bringing about legal changes that improved the registration environment, spurring real estate market activity. Software systems developed under the Project reduced transaction time related to registration as well as planning and permitting processes. These systems also improved the accuracy and transparency of registration and permitting systems. Further, the Project provided MSDT technical assistance in the form of manuals and guides that were written for planning and permitting processes. The Project was instrumental in establishing a consultative urban planning process, which was previously absent in Montenegro. This process has proved to be highly successful as it results in greater ownership and buy-in from the citizens of areas where urban plans are developed. The technical guides and consultative processes have been adopted nationwide and will be used for the remaining urban plans whose development the GoM will finance itself. The Project contributed 13 CPF FY16-20, Page 29. 14 See ICR section 1.3 for changes to PDO indicators and section 1.6 for changes to intermediate indicators at the time of the April 2013 restructuring. 11 substantially towards improving the capacity at READ, MSDT, and municipalities through numerous trainings and study visits. 34. The GoM’s MERP (2016-2018) specifically references planning and registration in the context of its privatization program: “Based on the experience from previous years, it is expected that unsuccessful [privatization] tenders will be transferred from the present plan into the new privatization plan, which will be focused on projects for which the planning documents were adopted and property relations resolved.”15 This demonstrates that the Project outcomes are prerequisites for the privatization program and could have a real impact on unlocking the country’s investment potential and boosting private sector development. In fact, a significant change between the 2015-2017 MERP and the 2016-2018 MERP is that privatization projects are now categorized by the degree to which planning documentation is complete and property issues are resolved. Therefore, the Project has been instrumental in creating easy online access to information that is crucial for important investment decisions. 35. The two components of the Project—Real Estate Administration (Component A) and Improving Planning and Permitting (Component B)—were not only important as standalone mechanisms for improving the investment climate but also worked well together to achieve the PDO. This is because surveying and cadastral mapping are critical building blocks in the overall urban planning process. The REC contains information about the location, physical attributes and type of use of each object in a parcel. It is impossible to start the planning process without reliable and accurate cadastral maps, which Component A helped build. This interconnectedness is well demonstrated in the case of Niksic municipality, the largest municipality by area in Montenegro. Due to limited funds, the Project focused on certain areas of high economic value while other parts of Niksic were not covered in the REC. When MSDT started the planning process there it soon became evident that not much could be done with planning without having the cadastral information in place. 36. The Project played an important role in improving the efficiency of the property registration system16 in the following ways:  Development of the legal framework, with a new law in 2007 and two sets of substantial amendments in 2011 and 2015, which created a legal environment for rapid registration of transactions, among other things. More specifically, the July 2015 amendment to the Law of State Survey and Real Estate Cadastre17 stipulated that the notary deed can be registered immediately, without having to wait out the notice period. This amendment has reduced transaction registration to one day in smaller regional offices where demand is lower and five to seven days in larger regional offices;  Establishment of a new registration office within the new headquarters in Podgorica 18 along with the renovation of 14 offices with customer-friendly design, reception and public areas as well as the purchase of furniture and equipment for these offices; 15 Montenegro Economic Reform Program, January 2016, Page 97. Emphasis added for the purpose of the ICR. 16 PDO linked to Component A. 17 This law grants READ the mandate for its work. 18 This building was constructed as a cost effective measure to house the READ Headquarters (which was previously located on rented premises) and two local offices—Golubinci andTuzi 12  Modernization of READ’s IT system through new hardware and new software, which was developed and rolled out to all local offices, creating real-time online access and increasing transparency linked to real estate registration and transactions;  Establishment of the READ Geoportal, which is the first step towards establishing NSDI and implementing the INSPIRE Directive, a mandatory requirement for EU membership;  Reduction of the backlogs of cases, through improved procedures and better case management. The backlog dropped from 16.5% of all cases at the start of the Project to 2.9% at the Project close;  96,861 hectares formally established in REC and public display completed for 156,585 hectares;  Creation of new records for 178,917 parcels through REC;  Production of base maps 19 and cadastral mapping of 217,755 hectares with ownership clarified and up-to-date titles recorded in READ’s IT systems; and  Extensive training of READ staff, with 1,282 participants trained. 37. The Project also played a vital role in improving the efficiency of permitting20 in the following ways:  Streamlining of planning and permitting processes through improvements in the legal framework for the planning law and preparation of appropriate by-laws21;  Preparation of planning standards and manuals to clarify existing laws and regulations for each aspect of urban planning;  Implementation of a common software solution (Urban Planning Management System) and monitoring and evaluation tools across all municipalities—both those that benefited financially (“LAMP municipalities”) and those that benefited indirectly through financial and technical assistance given to LAMP municipalities (“non-LAMP municipalities”);  Establishment of One Stop Shops to improve the quality and speed of the issuance of construct permits and enable access to data and status updates;  Implementation of the “URBIS” inspection software to support information exchange between MSDT and the Directorate of Inspection that deals with illegal structures;  Development of 7 spatial urban plans (SUPs) and 22 detailed urban plans (DUPs) against a target of 7 urban plans;  Improved treatment of illegal structures through greater transparency, clearer criteria, and stronger grievance redressal mechanisms for those whose primary residences and livelihoods are at risk22;  Establishment of a consultative approach to urban planning with 10,474 participants against a target of 10,940 (96% achievement), including 3,393 female participants against a target of 3,350 (101% achievement);  Extensive training of MSDT and municipality staff, with 2,497 persons trained for software use and best practices for planning and permitting processes. 19 This was subsequently taken over by Norwegian and Japanese donors. However , this activity would not have been on donors’ radars had it not already been a part of the Project. 20 PDO linked to Component B. 21 In this regard, the Project dealt mostly with the Law on Spatial Development and Construction of Structures and the new Law on Construction Permits. 22 Key activities included support to legal reforms, trainings and workshops for MSDT and Inspectorate staff as well as the purchase of hardware and software related to issuing and monitoring construction permits. 13 38. The achievement of the PDO—improving the efficiency of permitting and property registration system—can be most clearly seen when assessed against the PDO indicators. The following results were achieved:  Average number of days to complete the recording of purchase/sale of property in land administration system: Target achieved and exceeded with a remarkable 84% decrease from 25 days in 2008 to 4 days by the end of the Project;  Percentage of customers satisfied with services for real estate registration: Target achieved for both natural persons and legal entities with each reporting highest level of improvement in the speed of issuing documents, followed by accuracy, quality, and overall communication with customers; and  Decrease in time to receive a construction permit (central and municipal levels): Target achieved with a dramatic 85% reduction in time from 6-12 months in 2010 to within 1-2 months by the end of 2015. 3.3 Efficiency Rating: High 39. Overall, the Project can be considered a highly efficient operation especially in terms of the average time to register a sale/purchase and issue a construction permit. The time to register a sale/purchase dropped 84% from 25 days to 4 days, exceeding the PDO target value of 8 days. This average continues to improve as the average time in some rural areas has already dropped to 1 day. For comparison, the average time to register such a transaction in Macedonia FYR— where the Bank financed the Real Estate Cadastre and Registration Project (P083126)—is one day. Assuming a Project period from 2008 to 2020 and a discount rate of 5%, the Net Present Value (NPV) of the Project over the 2008-2020 period is estimated at EUR 128.7 million and the Internal Rate of Return (IRR) over the same period is estimated at 48.6 %. Given the Bank’s share of financing, the NPV of the Bank’s contribution is estimated at EUR 62.9 million and the IRR of the Bank’s contribution is estimated the same 48.6%. The fact that the IRR is much greater than the discount rate demonstrates the high efficiency of this Project. A sensitivity analysis shows that even at a discount rate of 15%, the NPV of the full Project and the Bank’s share remain high at EUR 55.5 million and EUR 27.2 million respectively. It is important to note that the PAD analysis could not be replicated due to the dropping of previous PDO indicators as well as changes in market conditions that affected the PAD model. The ICR analysis has, therefore, created its own model, which is based on the productivity gains (monetary value of time savings) as a result of improved and more efficient procedures at both READ and MSDT. 3.4 Justification of Overall Outcome Rating Rating: Satisfactory 40. The overall outcome rating is assessed as Satisfactory and is based on: (a) a substantial rating for Project relevance; (b) a substantial rating for efficacy as the Project was able to meet the revised PDO indicators and meet (or exceed) the intermediate outcome indicators; and (c) a 14 high rating for efficiency with respect to the use of Bank and GoM resources to achieve Project objectives and outcomes. 41. In case of Bank projects where a restructuring affects the PDO or PDO indicators, the Bank bases the project outcome rating on the disbursement-weighted project performance up to and after the restructuring where such a change was made. 42. In case of this Project, 41.7% of the loan had been disbursed by April 2013 when a restructuring revised certain PDO indicators.23 The Project outcome up to that point was rated as Moderately Satisfactory.24 PDO indicators related to the level of investments and property transaction taxes had been dropped due to the continued negative impact of the GFC, which was outside the Project’s control. The other two original PDO indicators on reduced time to issue a construction permit and customer satisfaction with registration services were both performing well. Moreover, the new PDO indicator on the number of days to record a sale/purchase was previously an intermediate indicator that more accurately reflected Project impact and had also been performing well. 43. As discussed in Sections 3.1, 3.2 and 3.3, the Project outcome at the time of closing was rated as Satisfactory with the remaining 58.3% of the loan being disbursed between the April 2013 restructuring and the closing date (February 29, 2016). 44. As shown in the table below, these ratings are translated to a 6-point scale: 4 for Moderately Satisfactory and 5 for Satisfactory. Weighted by the disbursements up to and after the restructuring of 41.7% and 58.3%, the methodology results in weighted scores of 1.67 and 2.92. Together, this amounts to 4.58, which is rounded up to 5 i.e. a Satisfactory outcome. The table below shows this methodology in greater detail. Table 1: Calculation of weighed score of PDO achievement Original PDO Definition Original PDO Definition + Original KPIs + Revised KPIs Rating Moderately Satisfactory Satisfactory Point score (i) 4 5 Disbursements US$6.75 million equivalent US$9.45 million equivalent Weight 41.7% 58.3% Weighed score 1.67 2.92 Total score 4.58 equivalent to Satisfactory (score rounded to 5) Note: On a rating scale with Highly Unsatisfactory 1, Unsatisfactory 2, Moderately Unsatisfactory 3, Moderately Satisfactory 4, Satisfactory 5, Highly Satisfactory 6 23 This revision was necessary because there was a tendency in land projects then to use general market indicators to measure Project outcomes and success. The downside of this practice was felt when the GFC hit the countries with Bank-financed land and real estate project and all market-linked indicators, including the PDO indicators for this Project, showed poor performance despite notable achievements. The Bank now designs land project indicators that are insulated from market fluctuations and more accurately reflect Project activities e.g. average number of days for registration, which was elevated from an intermediate to a PDO indicator at the time of the April 2013 restructuring. This lesson is reflect in ICR Section 6: Lessons Learned. 24 As indicated in the Project Implementation Status Report dated June 30, 2013. 15 45. Therefore, based on this methodology, the overall Project outcome is rated as Satisfactory. 3.5 Overarching Themes, Other Outcomes and Impacts (a) Poverty Impacts, Gender Aspects, and Social Development 46. In terms of poverty, the beneficiaries of REC and urban planning activities included all sectors of society, including the poor. The development of SUPs and DUPs specifically targeted poorer northern municipalities that had neither the funds nor the capacity to develop their own plans. Those yet to acquire real estate will also benefit from more transparent and efficient property registration and planning regimes. 47. An important feature of the Project was the introduction of a consultative planning approach in the country. This approach involved different social groups—single mothers, people with disabilities, and minorities including the Roma—in the planning process from very early stages. Special interest groups like environmental activists and sports and cultural associations were also invited to share their opinion. Residents actively participated in public hearings and brought forth their concerns and suggestions, which were incorporated into the development of the SUPs. The Project also tracked the number of participants in this process by gender. Of the total 10,474 participants (96% of overall target), 3,393 (101% of female target) were women and the remaining 7,081 (93% of male target) were men. The Project’s role in highlighting social safeguards and championing consultative planning processes have been instrumental in developing a culture at MSDT that is aware of the social consequences of planning and permitting work and capable of engaging citizens to deliver sustainable and inclusive results in the local communities. 48. Regarding gender, Montenegro also participated in a Bank-funded program on land and gender in the region. The Project financed the participation of two READ representatives in two major workshops where they developed action plans for improving the position of women and identified means to raise awareness regarding rights and obligations towards women. With FAO assistance, the program also developed a way to use READ’s IT system to produce gender-disaggregated property ownership data, which found that women represent 26% of registered property owners in the country.25 (b) Institutional Change/Strengthening 49. The Project helped both READ and MSDT mature as institutions. There were several training and capacity building events for READ, MSDT as well as municipalities. At READ, these trainings focused on new laws, amendments and regulations, and how such legislation could be applied in a practical manner; REC creation; upgraded software (for local staff and administrators); the address register; gender issues; and NSDI. For MSDT and municipalities, the trainings focused on planning and permitting basics, rulebooks, by-laws, GIS, monitoring and evaluation as well as specific trainings related to newly-installed softwares for improved workflow and accuracy. The publication of manuals, establishment of standardized processes and systems as well as trainings and study visits strengthened technical and managerial capacity at both MSDT and municipalities. Therefore, MSDT capacity, which was judged as weak in 25 Land and Gender leaflet: http://www.worldbank.org/content/dam/Worldbank/document/Gender/LandAndGender_Leaflet_Web.pdf 16 the PAD, leapfrogged as a result of the Project. The Project also invested in IT at both READ and MSDT to modernize and strengthen the systems. (c) Other Unintended Outcomes and Impacts (positive or negative) 50. The Project had a positive impact on private sector capacity, particularly for urban planners who exercised the consultative planning process as it was required under the Project. This was a major learning exercise for them and there was strong opposition in the beginning because Montenegrin law prescribes participation only at the draft plan stage, so they saw the Project requirements as an unnecessary additional work. However, with time they realized that if participation is provided from an earlier stage then the stages from draft plan to final plan get accomplished much quicker, with fewer changes, and higher public satisfaction. With this approach there are also no issues when plan gets to local assembly for adoption as all matters have been clarified beforehand. Broader public involvement also guarantees stronger ownership so when representatives in the local government change, they embrace the plan as their own and do not start developing a new one as was often the case in the past. 51. While the Project did not have any negative unintended outcomes, it can be said that the Project design had overestimated the capacity of the coastal municipalities—with greater economic activity and investment potential—to develop their own plans. Since funds were limited, the Project decided to focus on urban plan development in the poorer northern municipalities though the planning infrastructure was established and strengthened for all municipalities in the country. As a result, only Tivat of the six coastal municipalities has developed its plans after significant delays. Since Montenegro’s investment potential is concentrated in its coastal zone, the lack of urban plans continues to plague the country’s overall investment climate. 3.6 Summary of Findings of Beneficiary Survey and/or Stakeholder Workshops 52. For this Project, customer satisfaction surveys were conducted in 2010, 2012 and 2014. The main objectives were to: (a) assess the achievement of the customer satisfaction PDO indicator—percentage of customers satisfied with services for real estate registration—among natural persons and legal entities; and (b) receive feedback that could be applied to improving services at READ. 53. By the end of the Project, client satisfaction with cadastre services was rated “high.” for both legal entities (4.21 vs. target of 4.47) and natural persons (4.02 vs. target of 4.38), thereby reaching 90% and 96% achievement of the PDO indicator for legal entities and natural persons respectively.26 Overall, satisfaction of legal entities increased steadily while for natural persons the improvement was noted only between 2012 and 2014. Across the three surveys, legal entities were slightly more satisfied with cadaster services than natural persons. The greatest improvement was noted in the speed of issuing documents, accuracy, quality, communication with customers, availability of information, and computerization and digitization in that order. 26 Baseline data on customer satisfaction with READ registration services was collected for natural persons and legal entities at the start of the Project in 2008. During the 2013 Project restructuring, the unit of measurement was changed for legal persons from a percentage to a rate on a scale from 1 (totally dissatisfied) to 5 (completely satisfied) for comparability with the satisfaction for natural persons. The baseline for legal persons was thereby reset to 3.77 using the 2011 survey data at 3.77 (Restructuring Paper; April 15, 2013). 17 54. While Component B satisfaction was not part of the PDO, the feedback from DUP public hearings was meticulously recorded. This feedback was used to adjust and improve the plans leading to a higher level of public ownership and satisfaction. 4. Assessment of Risk to Development Outcome Rating: Low 55. The sustainability of Project outcomes appears to quite strong as the focus of the Project was to build sustainable systems, which is evidenced by:  Regulatory Reforms: Regulatory roadblocks are common and challenging aspects with respect to achieving outcomes and securing sustainability. The Project proved to be instrumental in improving laws and by-laws related to registration as well as planning and permitting, creating an environment conducive to the long-term efficient and transparent processing of customer requests as the practices are now embedded in the country’s regulatory framework.  IT Solutions: The modernization of IT systems at READ and the implementation of IT solutions at MSDT have standardized and automated business processes at both agencies. As a result, service standard and delivery have greatly improved and access to reliable information has increased. The online system for notaries has embedded the notaries’ work into the registration process with time-stamped e-signatures, which have made real estate transactions more secure and reduced the time commercial banks spend to verify transactions and determine lien priority. Both READ and MSDT continue to invest in the maintenance, upgrade, and improvement of their respective IT infrastructures.  Establishment of Standardized Planning Processes: The Project financed the development of urban plans in only the northern municipalities. At the same time, the standards, manuals and IT systems developed under the Project apply to all municipalities in the country. This way, the Project has delivered the infrastructure for improved planning and permitting processes even in non-LAMP municipalities, and this is now used as standard practice.  Training and Capacity Building: Both READ and MSDT along with municipalities and urban and construction inspectors benefitted greatly from training, workshops and study tours that were financed by the Project. This has increased both agencies’ capacities and raised the quality of work they perform and deliver, and the benefits of training will be felt for many years. Moreover, the Project supported MSDT in working with the Faculty of Architecture in Podgorica to further develop the urban planning curriculum, which will help educate the next generation of urban planners in Montenegro. In light of the above, the assessment of risk to development outcome is rated Low. 5. Assessment of Bank and Borrower Performance 5.1 Bank Performance (a) Bank Performance in Ensuring Quality at Entry Rating: Moderately Satisfactory 56. The Project design was simple, effective and consistent with the GoM’s priorities as well as those outlined in the CPS FY07-10. The Project design drew on previous projects’ lessons, especially on the pace of the program and putting in place effective implementation arrangements plus thorough preparation, which drew on existing studies and Bank funded 18 studies. Risks were appropriately identified and addressed with the help of realistic and effective mitigation measures. The choice of PDO indicators however was flawed and this design issue needed to be corrected with the April 2013 restructuring. Even though Involuntary Resettlement (OP 4.12) was not triggered as the Project did not deal with land acquisition, the design relied on a social assessment that informed detailed mitigation measures for the social risk linked to illegal structures and people occupying them. The Project also took sufficient care to build in capacity building measures to guarantee long-term success and sustainability. Therefore, the Bank’s quality at entry is rated as Moderately Satisfactory. (b) Quality of Supervision Rating: Satisfactory 57. The Bank’s supervision was characterized by: (a) regular, well -documented missions with diligent follow-up on action plans; (b) leveraging the Bank-FAO partnership agreement to bring in consultants to advise READ and MSDT on IT systems development and urban planning; (c) quick diagnosis of implementation and sustainability issues, and proactivity in seeking restructurings to address them; (d) flexibility in responding to changed circumstances; and (e) strong support related to procurement, financial management, and environmental safeguards. Against these positive aspects, there was the problem of contract management for the REC, READ HQ, and IT contracts where the Bank could have pushed remedial measures more strongly and substituted the lack of capacity for the management of large contracts. In conclusion, the Bank’s quality of supervision is rated as Satisfactory. (c) Justification of Rating for Overall Bank Performance Rating: Moderately Satisfactory 58. Considering the moderately satisfactory quality at entry and satisfactory quality of supervision of the Project whose achievement of outcome is rated Satisfactory, the Bank’s overall performance is rated as Moderately Satisfactory. 5.2 Borrower Performance (a) Government Performance Rating: Satisfactory 59. Throughout the Project, the GoM remained firmly committed to the Project and gave its prompt support whenever needed. As noted, the Project was unusual in its high degree of counterpart funding (51% vs. the Bank’s 49%). The GoM had set aside sufficient funds to finance this highly important Project. However, the GFC led to unexpected fiscal crunches, which in-turn had a domino effect on the GoM’s ability to provide counterpart funding. This particularly affected the construction of the new READ building in Podgorica, which was over 75% financed by the GoM. However, since the GFC was a negative externality affecting the GoM’s ability to provide counterpart funding, the Government performance is rated as Satisfactory. (b) Implementing Agency or Agencies Performance Rating: Moderately Satisfactory 60. During preparation, READ and MSDT were active in the design and preparation of the Project. However, as with all Bank-financed projects, the implementing agencies needed time to 19 understand the Bank’s procedures and policies. Overall the implementing agencies performed well but there were periods when the action plans were either being fulfilled with delays or not being fulfilled at all. This resulted in a Moderately Unsatisfactory rating for Implementation Progress in Implementation Status Reports from December 2010 to December 2012. The Project also suffered from poor contract management related to major contracts: (a) REC surveying in Plav municipality failed twice; (b) both READ and Directorate of Public Works struggled to manage the READ HQ contract; and (c) the late launch of the IT system upgrade at READ only after the Bank proposed a restructuring to drop it. M&E was also an issue for two reasons. First, there were some inconsistencies in the way that the M&E indicators were being calculated and the Bank had to step in several times to correct and/or fine-tune the methodology. Second, the M&E specialist changed four times over the course of the Project contributing to a lack of continuity and consistent methodology over the Project period. Therefore, the Implementing Agencies’ Performance is rated as Moderately Satisfactory. (c) Justification of Rating for Overall Borrower Performance Rating: Moderately Satisfactory 61. Given the satisfactory rating for the Government and the moderately satisfactory rating for the Implementing Agencies, the Borrower’s overall performance is rated as Moderately Satisfactory. 6. Lessons Learned The following lessons were identified during the Project review: 62. Innovative approaches may be risky but can pay of: Testing a new approach under a project can be risky as the chances for success or failure are often the same. Full participatory approach to planning under this Project was one such approach that proved to be challenging from an implementation point of view. This was because the country already had some form of citizen engagement applied in the development of planning documents, but this was limited to the very last stage (display of the final draft plan), which often did not incentivize broader public discussion. With such an approach in place discussions were limited mainly to planning professionals, as the general public lacked sufficient knowledge and understanding of the planning process to be able to effectively contribute to the discussion at this late stage. This is perhaps why the Project met with a high level of skepticism among the citizens when it introduced and later implemented a new approach to spatial and urban planning. People did not believe their opinion mattered or would be taken into account. It required a major effort on part of the MSDT, PCU, municipal authorities, and plan developer to mobilize citizens, individually or through various citizens groups, to participate in the process from day one. It sometimes required personal contacts and representatives of the plan developer ran a door-to-door campaign, inviting people to take part in the discussion. Many times, the lack of positive feedback and active citizen engagement caused discussions on discontinuing the participatory planning process, as it appeared to be the only way in which plans could be completed in a reasonable timeframe. But eventually people started believing in the process and began taking ownership. At the end, the planning process took much more time than anticipated at the design stage. The Project consequently had to be restructured. However, the participatory approach to planning under the Project proved successful. The planning documents developed with the Project approach were all smoothly and often unanimously endorsed by municipal assemblies. 20 The Project’s role in championing this participatory approach has been instrumental in developing a culture at MSDT that is aware of the social consequences of planning and permitting work and capable of engaging citizens to deliver sustainable and inclusive results in the local communities. MSDT is now considering ways to introduce elements of participatory approach to planning in the appropriate legislation. 63. Focus on using limited funds effectively: Due to the limited availability of funds, the Project proceeded with financing planning and permitting in poorer northern municipalities, which did not have the funds or technical capacity to implement these reforms. At the time, the coastal municipalities—which attract tourism and other forms of investments—were seen to have adequate financing and capacity to prepare their own plans. This, however, did not happen and only one municipality (Tivat) of the six coastal municipalities finalized its urban plans. This brings to light the delicate nature of trade-offs and choosing between: (a) economic growth and increased investment—which would have been easier to achieve if the Bank focused on coastal municipalities; or (b) shared prosperity—which the Bank chose in this case by supporting the poorer northern municipalities, avoiding possible adverse migration patterns in favor of the coastal municipalities had the growth and development solely addressed the coastal zone. The Project did the best it could, given its limited resources but it also highlights the unintended negative outcomes of trade-offs made during the design phase. 64. Active implementation support can deliver strong development outcomes: During Project implementation, the team responded quickly with appropriate restructurings that reallocated funds, adjusted Project targets, and extended the Project closing date. The team also helped READ develop a detailed REC implementation plan with clear milestones and regular check- ins. These steps were taken in order to ensure that Project activities were not only completed but were also sustainable and contributed to the development objective. The quality of implementation support can therefore make a significant difference to the quality of the Project outcomes achieved. 65. Designing robust PDO indicators: The GFC and the subsequent dropping of the indicator tracking “real estate transfer tax and property tax receipts exposes an important issue in the design of indicators. To the extent possible, PDO indicators should be robust in a way that they are directly affected by Project activities or outcomes, and are relatively shielded from market fluctuations. A good example of such a robust PDO indicator is the “average time to register the purchase/sale of a transaction,” which was elevated from an intermediate indicator to a PDO indicator with the April 2013 restructuring. Choosing such robust PDO indicators would not only help better link project results to project interventions but also avoid the pitfall of attributing success to a project when that success was largely driven by, say, market conditions that the project could not influence. 66. Involving the end-user in software development: With few months remaining in the Project, the Chamber of Notaries informed the Bank team that the online system that had been developed for them did not have the functionality to time-stamp transactions. This led to a last- minute push by the Bank team to ask READ to get the developer to tweak the software so it included time-stamps, which are important for the security of property. This case shows that it 21 is important to involve the end-user in software development not only for appropriate functionality and user needs but also for improved user-experience design in the final product. 67. Interesting implementation arrangement to consider in appropriate cases: One of the comments from MSDT and PCU was that the TSU—that resided with the MoF and dealt with procurement and financial management issues for the entire Bank portfolio in Montenegro — was instrumental in freeing up PCU capacity to focus on Project activities and the coordination between MSDT and the municipalities. This approach could be replicated in other countries where the Bank has a small/manageable portfolio so PCU can focus more on technical and coordination issues linked to the Project. This could also be a useful approach for countries that are new to Bank projects and have weak capacity in the areas of procurement and financial management. In the case of this Project, the TSU also greatly improved the quality of procurement implementation. 68. Going beyond traditional cadastre projects: The Global Land and Geospatial Team has implemented several real estate cadastre projects. However, this Project was unique in bringing together cadastre and land use planning. The World Bank should finance more projects where the linkage between cadastre creation and its applications—land use planning, reducing informal development, property valuation and taxation, and disaster risk management —is stronger and leads to highly focused development outcomes. 7. Comments on Issues Raised by Borrower/Implementing Agencies/Partners (a) Borrower/implementing agencies 69. The Borrower, specifically the Real Estate Administration Department, provided some factual corrections and updates, and these comments have either been incorporated into the main text or added in the footnotes of the ICR. No other comments were received. (b) Cofinanciers 70. Not applicable. (c) Other partners and stakeholders (e.g. NGOs/private sector/civil society) 71. The ICR received comments from UNDP. An excerpt of the email is below. For the full email, please refer to Annex 7. 72. “UNDP was involved in many activities related to the spatial planning support and in that regard we cooperated with government, national and international institutions, civil society and academia in order to exchange information and share knowledge, but also to avoid duplication and achieve maximum effectiveness and efficiency of our activities. I am pleased to express satisfaction with cooperation between SPSP and LAMP projects and would like to congratulate World Bank and Ministry for Sustainable Development and Real 22 Estate Administration Office on successful finalization of the project. Hence we have no further comments to the draft ICR.” 73. The ICR team also interviewed Monteput, a state company that works on big highway infrastructure projects, to better understand the impact of the Project on the investment climate in Montenegro. The feedback for READ and the work done under Component A was very positive. Monteput noted that it was “obvious” that READ data had been updated and improved. They were also pleased with the speed and accuracy with which READ has been responding to their requests and particularly noted READ’s good work in resolving expropriation issues, which is typically the most complicated and sensitive area for Monteput. In relation to a specific EUR 800 million highway project which is 85% financed by China, Monteput praised READ’s special effort in “meeting tight deadlines with precision and punctuality.” Monteput also noted that they had attempted to start the same project back in 2009 with a Croatian contractor but it did not materialize due to the GFC. Back then, there was also a “big gap in READ documentation” and “maps were not ready for expropriation.” Had the project gone ahead, the lack of data would have led to “6-12 month delays and cost the contractor EUR 2.0 million.” The smooth implementation of the infrastructure project today demonstrates the dramatic improvements that have taken place at READ and in Montenegro’s real estate sector.27 27 Based on interview with Monteput on October 17, 2015. 23 Annex 1. Project Costs and Financing28 (a) Project Cost by Component (in USD Million equivalent) Actual/Latest Appraisal Estimate Percentage of Components Estimate (USD (USD millions) Appraisal millions) Comp A: Real Estate Admin. 22.74 29.04 128% Comp B: Improving Planning 7.67 7.57 99% and Permitting Comp C: Project Management 1.65 1.59 97% Total Baseline Cost 32.06 38.20 119% Physical Contingencies 0.32 0.00 0% Price Contingencies 0.70 0.00 0% Total Project Costs 33.08 38.20 115% Front-end fee IBRD 0.04 0.04 100% Total Financing Required 33.12 38.24 115% (b) Financing Appraisal Actual/Latest Type of Estimate Estimate Percentage of Source of Funds Cofinancing (USD (USD Appraisal millions) millions) Borrower Co-financing 16.92 22.12 130.7% International Bank for Reconstruction Loan funds 16.20 16.12 99.5% and Development 28 Sources: PAD and TSU data. 24 Annex 2. Outputs by Component Component A: Real Estate Administration Component A.1 Improving Registration Services There were numerous activities under component A.1 to improve registration services. Each of these is dealt with under its own sub-heading. Developing the legal framework for registration services READ was active throughout the project in developing the legal framework. A new law (the Law on State Survey and Real Estate Cadastre) was adopted in 2007 to better meet the needs of REC creation and a modern registration system, a small number regulations and by-laws were issued, and two sets of substantial amendments were made to the law in 2011 and 2015. The most recent amendments permit transactions that are prepared by a notary to be registered immediately (without waiting out the 8-day notice period), and thus allow for more rapid registration and reduction of the working backlog. In this, the Montenegrins drew heavily on the successful model adopted in Macedonia FYR, using the Project sponsored technical interchange between the two countries. Faster registration will permit overall services to improve, such as availability of up to date information, multiple transaction registration in a shorter time (particularly useful for complex financial and business transactions), and provision of up to date information for other agencies, such as tax authorities. Technical assistance from the Bank’s supervision team was a strong factor is bringing about the changes. A draft law on NSDI is close to being finalized and the broader legal framework is also supportive of streamlined registration processes, such as the Law on Digital Signature, which allows both READ staff and private sector land market professionals to authenticate and present documents in electronic form. The process for revising and developing laws, and disseminating improvements to staff, already existed in READ, but the Project promoted exchange between countries and an outward looking perspective on how laws could be improved. This positive change in attitude can be expected to continue into the future, as READ is part of the regional and European community of cadastre organizations and will take part in conferences over coming years. Improving Procedures Intermediate Indicator: Improved procedures for registration prepared and in use in all offices. Over the course of the Project, READ progressively introduced changes to its practices and clarifications of uncertain matters to improve its procedures at the local offices. READ holds collegiate meetings three to four times per year between local office managers, lawyers, and staff of the headquarters to deal with problems in office practice, difficult cases, reforms to the legal framework and other developments affecting registration procedures, such as software improvements. The results of these meetings are recorded and distributed to all the offices in the form of practice instructions. READ also benefited from an international registration advisor’s review of its law and practices through a project funded consultancy, as well as an interactive relationship with representatives of the Macedonian cadastre agency, with whom READ held a series of meetings to learn from the Macedonian experience with improving the legal framework, organization of operations and software development, with a view to drawing on Macedonia’s 25 successes to improve procedures and services. The Project funded seminars on new legislation and practice also produced positive results in terms of clarity, certainty and consistency in the application of new legislation. Although no practical manual exists to give READ staff instructions on every type of case, a commentary on the Law on State Survey and REC was produced to guide them, instructions on particular matters are issued by the headquarters, new amendments to laws are distributed to all staff, and the upgraded software system has been rolled out. All of these developments have worked to improve the range of services, the certainty of services and the speed of delivering services to customers. Consistency across offices has also been achieved through these means, as well as by supervision from READ HQ of overall results, ongoing training and regular meetings with the heads of the local offices. Such consistency of results will also raise the public’s perception of READ as a reliable, trustworthy organization. The upgraded software has been a major step in improving registration procedures, and is covered below under component A.2. As these improved procedures are now part of READ’s day to day registration activities, they will continue to be used well after the Project is completed, and the process for developing procedures and clarifying unsettled matters can also be expected to continue through the regular process of collegiate meetings. Reducing the backlog of cases Intermediate Indicator: Pending cases at cadastral offices reduced to less than 8% of annual cases for all offices. At the start of the Project, the backlog of cases in local READ offices was substantial. Nationally, it was estimated that the backlog was running 16.5% of the annual number of cases presented at READ offices, although in particular offices it was higher (Podgorica: 15.7%, Budva: 24.7% and Zabljak: 33.2%). READ introduced a number of initiatives to reduce the backlog, including better case management and stricter application of rules on refusing to accept applications without all supporting documents. The upgraded IT system, improved procedures and training of staff have all added to efficiency in processing the backlog. The cumulative effect of these initiatives became apparent towards the end of the Project, with the backlog falling to 2.9% in the February 2016 and the figures for Podgorica (6%), Budva (9%) and Zabljak (4%) falling significantly by the end of the Project. READ’s initiatives have paid dividends in terms of reducing the backlogs, and as the offices now incorporate the improved procedures and are working with a reasonable backlog, it can be expected that the reductions in the backlog will continue. This process will be supported by the role of notaries, because transactions prepared and certified by them will be registered without needing to wait out a notice period and because the quality of transactions presented by notaries is higher and the documents generally have all necessary supporting documents, avoiding the need for correspondence to supply missing documents. Therefore, assuming current staffing levels and lodgement levels remain, the reduction in the backlog can be expected to be maintained. Reducing registration time PDO indicator: Average transaction registration time reduced. Target: eight days. Figures for the 26 time taken to register a transaction were, at the start of the Project, very high. Nationally, the average for all READ offices was 25 days in 2008. The time taken to register a transaction has improved dramatically over the Project period, dropping to the target of eight days by the end of the Project. In rural offices, the period is even shorter: just three days to register a transaction. Mortgages are routinely registered within one day, or two days at most, and information on property ownership is issued within the day. A variety of factors have resulted in these drops, such as the improved procedures and reduction in backlog noted above, and also the upgraded software. Likewise, the ability to register transactions prepared and certified by notaries allows transactions to be registered on the same day that they are presented (subject to workload), as discussed above. Training A great deal of training was provided under the project. Some 126 courses were run, attended by 1,282 participants from READ, and external training in specialist topics was provided to 49 employees. Gender-disaggregated data on training participants was collected throughout the period, and it appears in the quarterly reports. Training of external persons was limited to notaries and their associates, who received training in the upgraded software in 2014. Some 73 persons attended those trainings. The main categories of Project funded training were new laws, amendments and regulations, and how such legislation could be applied in a practical manner; REC creation; upgraded software (for local staff and administrators); the address register; gender issues; and NSDI. Attendance by READ at regional and international conferences, such as Eurogeographics and INSPIRE conferences, was also funded by the Project. Similarly, collegium meetings of all READ managers were held on a routine basis (up to four times per year) to resolve issues, disseminate information and settle procedures. The Project also sponsored the exchange with Macedonia’s cadastre organization, which covered legal, IT, registration systems and competencies of the agency, and READ took part in the gender training provided by the Bank. Finally, Project funds sponsored staff to undertake two masters and two doctorate degrees outside Montenegro, as well as shorter-term external training. READ also had its own training budget, and in addition, it received assistance from other donors, such as the Swedish and Norwegian governments, in technical training. Overall, the period of the Project saw extensive and intense training that was targeted to improve operations and services. Training is an integral part of READ’s operations and can be expected to continue into the future, particularly training provided by READ’s own staff on technical and IT matters. It can be expected that donor assistance with training, particularly regional-based training, will also continue over the coming years. Renovating offices and providing equipment Intermediate indicator: READ offices’ physical layout improved for better customer service. Target: 14 offices. 27 Office renovations were conducted at a number of existing offices: Kotor, Berana, Herceg Novi, Ulcinj, Cetinje and Tivat; the new READ HQ building 29 was constructed and outfitted in Podgorica; and four offices were renovated using READ’s own funds (Andrijevica, Bijelo Polje, Zablajak, Plav). In total, 14 offices were renovated or established with a focus on better meeting customer needs. The Project also provided new equipment and furniture to READ HQ building and local READ offices as needed, including a new reception counter at Danilovgrad. The acquisition of new premises in both Niksic and Rozaje was also completed partly through Project funds. The GoM financed the purchase of new office space in Budva but the equipment was funded by the Project. The new READ HQ building in Podgorica has been finalized, with all furniture delivered and services connected. Staff from three local offices moved into the HQ building in November 2015, and it was the first time that the Podgorica staff worked in the same location after many years. This has improved support, allowed for easier staff movement between positions, permitted greater information and knowledge sharing, and allowed supervision to be more effective and efficient. Customers, too, have a single point of contact for property matters. The new, spacious, well-lit and well-designed offices make working conditions for staff and customers much more pleasant, and the new basement archive has ensured valuable documents are protected to the highest standards. The office has other security devices, such as the front-back office divide. Finally, the new building also houses READ’s management, allowing greater interaction between them and technical support staff in the country’s busiest office. As in other Bank projects, improvements to office accommodation had a positive impact on staff morale and also the attitude of customers, who can see that they are dealing with an organization that invests in customer service, and it contributes to the professional image of the organization. Computers, servers, scanners and upgraded local area network and communications lines were provided in all local offices depending on the needs of the offices. REC commissions were also provided with equipment. Computers have also been delivered and installed in the new READ HQ building, which also has a data center. Measuring customer satisfaction with READ’s services PDO Indicator: Increased customer satisfaction with registration services. Client satisfaction at the end of the project (with data collected in 2014) was rated at 4.02 for natural persons (4.21 for legal persons) (on a scale of 1-5). This is compared to a baseline of 4.18 for natural persons (76.8% for legal persons) and a target of 4.38 for natural persons (4.47 for legal persons). With the 2013 restructuring, the baseline for the satisfaction of legal persons was reset on a scale of 1 to 5, using the 2011 survey data, at 3.77 (due to problems with how the original baseline data for legal persons–but not natural persons–was assessed). Against the target, the 2014 result was 0.36 lower for natural persons and 0.26 lower for legal persons (using the 2011 data as baseline). Given that customers’ expectations grow quickly as services improve, and that there is an environment of increasing customer expectation in the wider community, the drops are not inconsistent with a general level satisfaction, and the fact that READ 29 This building housed the READ central office as well as the local offices of Golubovci and Tuzi. 28 rated over 4 shows that customers were still very satisfied. By way of comparison, in Macedonia FYR, which has a highly successful registration system, a similar survey revealed a customer satisfaction of rating of 3.94 out of 5. Thus, with both ratings over 4, it can be seen that the satisfaction levels in Montenegro are high. Data was captured on a gender disaggregated basis, but as the survey firm found no variations between clients of either gender so the final customer satisfaction report does not present the data in disaggregated form. Improving transparency READ has taken a variety of steps to improve transparency and openness. The READ website was developed over the course of the Project, with more information added. The results of the customer surveys were presented on the site. Further, the upgraded software has permitted the public to find property information with greater ease, free of charge, and the REC creation program also expanded the number of property records that are available to be searched. Component A.2 Information System Management Intermediate Indicator: Automated systems for the REC developed and used by professional users. Target: System provides access to live alpha numeric data. Many of the Component A.1 achievements flow from activities related to the new and upgraded automated systems that were implemented within READ during the Project. Inherent in the upgrading and implementation of new automated systems were:  consultation with users both internal and external to gain an appreciation of their needs;  user training when new versions of software were released;  upgrade of hardware and corporate software (which occurred with the establishment of the Data Centre in the new Podgorica office). All these activities associated with the new and upgraded automated systems were supported by the Project to some degree. The automated systems that were upgraded or created using Project funds, have three main parts: 1. Terrasoft Upgrade Terrasoft is the software supporting registration services within READ. The main reasons behind the upgrade were to: (a) modernize the previous version in terms of user interface and ‘look and feel’; (b) add and refine the functionality of Terrasoft; and (c) implement database replication from the 21 databases supporting Terrasoft in each local READ office to the central database in Podgorica (previously the central database was updated by local office database backups on a regular basis). With database replication, it became possible to have ‘live’ alphanumeric data. 2. e-Cadastre Upgrade & Extension e-Cadastre is a web based system based on the central READ database. Previously it was used in- house within READ for certain queries and reports (for the country as a whole). The upgrade involved opening up access to the general public, other government agencies and professional users such as notaries. This required new system administration software features and reports customized 29 for the use of these external and professional users. This was the mechanism that provides ‘live’ alphanumeric data to professional users. The use of e-Cadastre by the general public has risen to 12,000 enquiries a day, more than doubling since the introduction of the upgraded e-Cadastre and the introduction of database replication for the central database. 3. READ Web Services Development These web services were a new software offering from READ for use by institutions including Government ministries that wished to incorporate ‘live’ data into their own systems without the need to have an elaborate data duplication and transfer processes in place. Currently the Ministry of Agriculture and Rural Development and the Ministry of Labor and Social Welfare (through their “Social Card” initiative) are using the READ Web Services. In order to ensure the sustainability of the new and upgraded automated systems READ will need to increase the allocation for software maintenance in the operating budget it receives from government by $50,000 a year. Component A.3 Provision of Base Maps The objective of this sub-component was to provide base maps at 1:5000 scale to municipalities that developed SUPs. With creation of the orthophoto for Montenegro in 2010-11 (financed by the Government of Norway for the orthophoto and the Government of Japan for the 1:25,000 map), and the progress with completion of the REC (maps of 1:1,000 and 1: 2,500 scale – see below), the need for 1:5,000 scale maps ceased to exist. Funds under this sub-component were assigned to other project activities. It is, however, important to note that donors would not have prioritized the financing of this activity had it not been a part of the Project. Component A.4 Creation of the Real Estate Cadastre The PAD had envisaged that roughly 100,000 hectares (ha) of land would be surveyed and its ownership status established during a public display process, with the records then incorporated in the cadastre once an appeal period had passed. The entire process is called REC creation. The figure of 100,000 ha was not changed during the Project. Land surveyed There were five contracts funded by the project to survey 280,000 ha, as the basis for the public display. Four of the contracts were completed successfully, but the fifth (covering 46,000 ha) failed and it was cancelled, so READ is using its own funds to complete the surveying work for this area, using the contractor’s work. As noted in the PAD, GoM funds were also available for surveying work, and over the life of the Project, an additional 250,000 ha were surveyed from READ’s own budget. Digital base maps (1:2,500) and a data base of the properties were created as part of the surveying work, intended to support the process of REC creation. Maps at the scale of 1:1,000 were not produced as the project covered only rural areas, and 1:1,000 maps were required in urban areas only as they provide greater accuracy. Establishment of ownership 30 The Project funded the establishment of REC commissions who investigated and made determinations on ownership, using the digital base maps and legal documents held by READ and the owners. The Project funded 20 REC commissions (67 people, including a lawyer and surveyor in each commission) in the areas covered by the project. Also, in the last few years of the Project, loan funds covered the salaries of 14 commissions (38 members) working in areas that were covered by base maps produced from READ’s own budget in areas not covered by the project. Final results By February 2016, over 108,000 ha of properties had been investigated and determined by the REC commissions. Delays due to the appeal process meant that the number of properties that had been fully finalized (that is, passed the appeal period without appeal or, if there were appeals, then they have been resolved), is lower. By February 2016, 96,861 ha of properties had been incorporated in the READ office records as finalized. The option to appeal and the appeal process are outside the control of the Project funded commissions. Since an entire cadastral municipality could be delayed by several months if one owner appeals, it is more appropriate to look at the figure of 108,000 ha as the more appropriate measure of activities under the Project. On this basis, the result in February 2016 exceeded the target in the PAD. In addition, these figures do not take into account the results of work of Project funded commissions in areas that were not mapped by the Project. As noted above, the Project funded 14 commissions (although not the mapping work), and therefore contributed to the results of those commissions. The consequences of this work are important for the country as a whole. It has produced reliable, accurate, complete, digital plans plus a digital database of ownership data. These can be used for many purposes, such as basis for tax collection, spatial planning purposes, land management, information for decision makers, expropriation (particularly for highways) and others. The fact that the data is in digital form means that READ can offer more accurate data through its online services and transactions involving such properties can be processed faster. And as Montenegro establishes its NSDI system, this information will be used even more widely. These outputs of the REC creation program are fully sustainable because they have been incorporated in the system and are being used by the community on a day to day basis for registering transactions (sales, mortgages, inheritances, etc.), and changes to parcel boundaries, for use by other government bodies (e.g. road construction and expropriation), urban planning and permitting, and other official uses. The parcel and ownership information produced in the REC creation process is likely to be maintained in up to date form over time because the barriers to registration that previously existed (delays, access, complicated procedures) have been significantly reduced and also because the country is moving to a more commercial environment, with banks lending more, land becoming more valuable and land market professionals playing a more active role in the community. These factors will encourage or force owners to register changes to boundaries and ownership so that they have fully legal property records and therefore receive the full value of their property when they sell, mortgage or develop it. Component B: Improving Planning and Permitting 31 Component B originally had four sub-components but one of them (B.4 Business Environment Improvement) was dropped during the April 2013 restructuring as the Ministry no longer felt it was necessary. The remaining three subcomponents and related activities are discussed below. Component B.1 Improving the Planning Process and Support to MSDT A National Spatial Plan (NSP) was approved in 2008 in accordance with EU policy requirements, and this component was intended to improve spatial planning and permitting processes at the local level, and to support MSDT in fulfilling its functions as the ministry responsible for overseeing planning processes implemented at the local level. Preparation of Planning Standards and a Planning Manual Several guidebooks were prepared by MSDT under the Project to support local governments in carrying out their planning functions. The Guidebooks covered the topics of: (a) Strategic Environmental Assessment (SEA) Preparation (which is a planning requirement under the Law and consistent with the EU Environmental Acquis); (b) Landscape Planning; (c) Public Space Planning; (d) Residential Area Planning; (e) Economic and Demographic Analysis in Planning (to provide guidance on assumptions in making economic and demographic projections in planning documents); and (f) Tourist Settlement (planning and detailed designs), all of which were completed by May/June 2015. Training workshops were organized and continue to be implemented by MSDT using the new Guidebooks as core training materials. Though not originally part of the Project, a Land Policy Study was commissioned and prepared under the Project. Its aim was to help support MSDT in developing sound land planning policies in Montenegro based on international good practice. Monitoring of Preparation and Completion of Plans An extensive monitoring and completion system was developed for the plans. The Project provided MSDT and municipalities with hardware and software essential for the monitoring and tracking of plans. Both MSDT and municipal staff were also provided with GIS training. The PCU issued templates to help with the monitoring of plans through the different stages of development. These templates have also been adopted for municipalities that were not covered under the Project. Development of ICT Strategy One major contribution of the Project was the development of an IT Strategy for MSDT. This IT strategy was enthusiastically adopted by the management of MSDT and ongoing support from the Project of a number of smaller but well targeted IT developments followed. These IT developments provided for the streamlining of planning and permitting related functions within MSDT and, in the case of URBIS inspection system, the Inspection Administration Authority. Another outcome was both municipalities and the general public getting improved access to planning and permitting data and records held by MSDT and this enhanced transparency. Additionally with most of these initiatives supported by the Project there were several associated training programs for municipality staff, now seen by MSDT as an important and equal partner in ensuring planning and permitting processes are transparent and efficient. The IT developments supported by the Project in this component include:  Integration of the MSDT Unidocs/GIS & SAR systems to support issuing urban-technical conditions; issuing construction permits; issuing usage permits and spatial plans documentation (with associated training for MSDT staff) 32  Development of the Niksic municipality Geoportal (with associated training on the geoportal for municipality staff generally)  Development of the URBIS inspection software supporting construction, urban planning and protected area permit (granted by MSDT) inspections by inspectors from the Inspection Authority (including user training).  Development of the MSDT Registry of Planning and Technical Documentation being a web based portal of approximately 500 digital planning and 400 digital technical documents received by MSDT since 2010 including SUPs, DUPs and MSDT issued building permits. Access to the full range of documents has been made available to internal MSDT users and the general public has access to a limited range of pdf versions of planning and technical documents. More planning and technical documents will become accessible through this Registry system as more applicable documents become available in digital formats. Training to be delivered to municipality staff and interested members of the general public later in October 2015 prior to its official launch at the end of October 2015.  The MSDT Data Centre was upgraded with a new file server to support the increasing number of automated systems the MSDT is now managing. Process Improvement for Construction Permitting and Legal Framework Improvements The Project provided national level support to the MSDT in improving the processes related to construction permitting. Law on Construction Permits was put into place and it was agreed that all permits that require an Environmental Impact Assessment (EIA) must be issued within 60 days of receiving applications and permits that do not require an EIA must be submitted in 30 days. This time does not account for time that the applicant may need to revise or complete application. The establishment of these deadlines by law helped the achievement of the PDO indicator on reduction of time to issue a construction permit. Process Improvement Regarding the Treatment of Illegal Structures The Project’s support, particularly through the Inspectorate translated into marked improvements in addressing both the ‘stock’ and ‘flow’ of illegal structures. Regarding the ‘stock’, specific training was provided relating to planning considerations affecting illegal structures. One workshop, held from June 29-20, 2015 convened academics, national and local officials and consultants on the topic of “Analysis and Classification of Locations Where Illegal Buildings Have Been Built from a Geological, Statistical and Seismic Risk Basis.” This workshop highlighted concerns about regularizing structures that by virtue of their location or building structure may face seismic, flood or other types of risks. Regarding the ‘flow of new informal structures’, the new Law and establishment of UPRAVA appears to have had a dramatic effect in reducing informality. From a baseline estimate of some 3,725 illegal structures erected per year prior to the Project (contributing to an estimated stock of well over 100,000 such structures, data presented by the Directorate indicated a 94% decrease in the flow from the baseline, essentially meeting the target of 95% by end of Project. This was in part due to national level regulations that imposed a 30 day processing deadline for building permits not requiring an EIA and 60 day processing deadline for projects requiring an EIA. Training and Study Tours See training under B2 of this Annex. Support to the University of Montenegro in Developing Spatial Planning Curriculum 33 The subcomponent also supported curriculum development for University of Montenegro in developing professionalized training for spatial planners meeting international standards. This is expected to prepare the next generation of well-trained planners. The University was also supported with IT equipment, study tours, and workshops. Component B.2 Improving Planning at the Municipal Level and Completion of Plans Preparation of SUPs and DUPs Intermediate indicator: Preparation of plans in target municipalities Intermediate indicator: Decrease in number of new illegally constructed buildings Intermediate indicator: Decrease in time for approval of local spatial plans and urban plans Montenegro has 23 municipalities and the project had set the target of preparing 11 urban plans in northern30 municipalities, which were selected as they were poorer and would not have been able to support urban planning through local budgets. The project supported the creation of 7 SUPs in all seven31 northern municipalities and all seven SUPs have been adopted. Separately, UNDP co- financed the preparation of SUPs in 2 additional municipalities.32 The Project also supported the development of 22 detailed urban plans (DUPs) in 10 municipalities. The Project significantly exceeded its target of 11 plans as set out in the PAD. Together these plans cover 58%33 of the territory of Montenegro. The SUPs were implemented in a context of very outdated planning documents in all of the municipalities that participated in the Project. These municipalities are pleased to have in place new SUPs as a clear and binding planning framework that leaves less ambiguity about their development and can more easily be applied and enforced. The SUPs had the broad objectives of fostering more balanced/territorial development, protection of the environment and of public space, identifying public structures and investments to improve quality of life, and ensuring that there was broad stakeholder ownership of the plans due to enhanced citizen consultation and engagement. The SUPs were prepared in seven phases, including a preparatory phase, analysis of existing conditions and baseline studies, forecast scenarios, pre-draft plan, draft plan completion and feedback from relevant ministries and national institutions, public hearing, and finalization of the proposed plan. In terms of current status, all of the SUPs and DUPs have been technically completed and have been subsequently approved by MSDT and ratified by the respective municipal council, as required by law. Review and Possible Improvement of Procedures Related to Involuntary Demolition of Structures See permitting related input in B1 of this Annex. Public Awareness Campaign and Consultation Process Intermediate indicator: Increased participation of citizens in planning process in targeted municipalities under the project 30 Montenegro uses Podgorica, the capital, as the reference point to define northern municipalities. As a result, some municipalities that are in the eastern part of the country get defined as northern municipalities. 31 The seven municipalities with SUPs are: Bijelo Polje, Cetinje, Danilovgrad, Kolasin, Niksic, Plav, and Savnik. 32 These municipalities are: Andrijevica and Pljevlja. 33 The 58% includes the two LAMP co-financed municipalities of Andrijevica and Pljevlja. 34 The consultative approach applied in this Project was successfully integrated into spatial planning practices of seven municipalities in Montenegro, and promoted in another six coastal and two newly formed municipalities. While developing SUPs, LAMP municipalities went beyond the national requirements for public participation by adding another three consultations to their planning processes, 34 involving the public in every phase since the beginning of the process. SUP consultations raised the public’s awareness about stakeholders’ rights and responsibilities, and informed the public about the importance of including vulnerable groups in the planning process. During the life of the project, 10,481 persons (7,002 men and 3,393 women) participated in awareness rising/consultative workshops on the SUPs and DUPs. Consultations were conducted with wide stakeholder groups (i.e., NGOs, business representatives, association members, senior citizens, students, minorities, etc.). Hardware and Software for Municipality Planning Offices See ICT Strategy under B1 of this Annex. Training Intermediate indicator: Increase in number of staff trained in planning process The subcomponent also supported training and study tours. This Project contribution is expected to be critical in sustaining the activities financed under the Project by ensuring there is a cadre of well-trained professionals to prepare and monitor plans in Montenegro well beyond the closing date of the Project. Over the course of the project, 2,497 staff were trained. This included 703 staff from MSDT and 1,794 staff from all municipalities (not just the LAMP ones). The following topics were covered under training for MSDT staff:  Planning and permitting basics  AutoCAD and GIS for spatial planning  Rulebooks related to planning  By-laws related to planning and permitting  Procurement The following topics were covered under training for Municipalities’ staff:  AutoCAD, GIS  Reporting and recording of time to issue construction permits  Reporting and recording of time related to development of SUPs and DUPs Additionally, Inspectorate staff also received training in the software called UBRIS. Other trainings and workshops related to construction permits were also conducted. Component B.3 Improving Construction Permitting and Inspection PDO indicator: Decrease in time to receive a construction permit. This indicator was achieved with the help of an improved regulatory framework that set appropriate deadlines for the issuance 34 In the participatory planning process, the public is consulted on the plan’s u nderlying analytics, scenarios and the pre-draft plan before the first and second public hearings. Montenegrin Law on Spatial Development and Construction of Structures requires spatial plans to be publicly displayed at draft stage. 35 of permits. IT systems established during the Project facilitated coordinated between MSDT and municipalities. These issues have been discussed earlier in this Annex. Finally, public awareness campaigns also played a role in raising awareness and communicating the changes in policy. This is discussed below. Public Awareness Campaign The public awareness campaign was critical in communicating a shift in national policy regarding improved efficiency and accountability for issuance of building permits, plus a less permissive approach to the construction of illegal structures. These policy positions are closely linked with the intent of the Law on Spatial Development and Construction of Structures (issued in August 2008). The campaign included billboards, media interviews, television and radio notices, print journalism, and public workshops. Overall, PCU views of the consultant performance were mixed. While it was felt that the campaign kicked off quite well, it was not sustained with the same level of intensity over time. Training of Municipal Staff on Use of Software and Hardware See training under B2 of this Annex. Training and TA for Inspection Units See training under B2 of this Annex. Hardware and Software See ICT Strategy under B1 of this Annex. 36 Annex 3. Economic Analysis The Project consisted of two components. Component A (Real Estate Administration) dealt with the improvement of registration services, and Component B (Improving Planning and Permitting) dealt with the simplification of processes to obtain construction permits and helped develop urban plans in Montenegro’s poorer northern municipalities. The underlying impetus behind the Project and its components was to improve the country’s investment climate and boost domestic and foreign investments. With the April 2013 restructuring the Project dropped two PDO indicators that had formed a part of the economic analysis in the PAD. These indicators were: (a) increase in real estate transfer tax and property tax receipts; and (b) increased investment activity in the target municipalities. Even though these indicators were dropped, property tax receipts and investment activity should have increased as a result of the Project. However, the Project did not collect the relevant data to quantify these benefits. Nevertheless, the Project’s impact on the investment climate will be discussed qualitatively. In the absence of the data that was used in the PAD, this ICR annex will take a different approach to determining the Project’s economic benefits. Since the Project played a vital role in reducing the time to process real estate transactions and obtain construction permits, this annex will attempt to quantify the productivity gains and estimate a monetary value attached to these time savings. Additionally, the Project will attempt to replicate the sales and mortgage related gains in the real estate market. Productivity Gains One of the major contributions of the Project was the reduction in time to process real estate transactions and construction permits as a result of legal and regulatory reform, streamlining of business processes, and the setting up/upgrade of IT systems. The main results of these efforts were:  A 68% decrease in the average number of days to record a transaction, from 25 days in 2008 to eight days in 2015; and  A 84% decrease in the time to obtain a construction permit that did not require an environmental assessment (from six months to 28 days), and an 88% decrease in the time to obtain a construction permit that required an environmental assessment (from 12 months to 43 days). These decreases represent significant gains in the overall productivity in these sectors. These gains are quantified by applying the average daily wage in Montenegro to each day that is “saved” as a result of the Project. In other words, this quantification is based on the value of someone’s time in Montenegro. This is a conservative assumption because normally more than one person is involved in a transaction e.g. READ staff and at least one citizen. However, this annex looks at only one person’s time saved. The online system has also enabled for certain activities to be processed online, which also leads to cost savings related to travel and by extension the carbon footprint. For simplicity, these benefits are also not quantified. The average daily wage35 in Montenegro has increased from EUR 26.4 in 2008 to EUR 33.2 in 2015.36 Depending on the year, this value represents the monetary value of one day that is “saved” 35 Based on 22 working days in a month. 36 Source: http://www.tradingeconomics.com/montenegro/wages 37 due to greater efficiency in the economy. This is a conservative assumption as each day saved affects the productivity of more than one person e.g. the client and the person processing the request. However, in order to remain conservative, only one person’s productivity savings are measured using the daily wage estimate. For Component A (which received the bulk of the investment), the analysis considers the total number of requests received every year minus those that could not be processed (i.e. added to the backlog). The model uses actual numbers from 2008 to 2015. The 2016-2020 numbers are estimated on the basis of the following assumptions: 1. The total number of requests increases by a conservative 0.2% each year against the last 3- year average of 3%; and 2. The number of unprocessed requests decreases by 20% each year against the last 3-year average of 32% Based on this assumption, the monetary value for time savings for Component A for the 2008-2020 period are shown in Table 2 and the sensitivity analysis is shown in Table 3. NPV and IRR Analysis Based on the aforementioned assumptions, a period 2008-2020, and an assumed discount rate of 5%37 the total Project NPV is estimated to be EUR 128.7 million and the IRR is estimated at 49%. Since 49% is much higher than the discount rate of 5%, the Project is considered to be highly efficient in its use of resources to generate Project benefits. Similarly, the Bank’s share of Project NPV is estimated at EUR 62.9 million and the IRR is estimated at 49%. Once again, since this IRR is much higher than the discount rate of 5%, the Bank’s share of the Project is also considered to be highly efficient in its use of resources to generate Project benefits. Both these calculations are shown in table 3. Investment Climate As discussed, the Project stopped tracking investment activity in target municipalities after the 2013 restructuring. However, improvements in registration and permitting do have a positive impact on the investment climate. While these benefits cannot be quantified due to a lack of data, these benefits are supported by research and anecdotal evidence. In 2014, the American Chamber of Commerce conducted a ‘Business Climate Survey’ in Montenegro. The survey noted that: “many municipalities lack adequate Detailed Urban Plans, making construction permit procedures lengthy and complex.”38 This assessment is expected to improve in future surveys. However, the issue is likely to remain relevant for some time because the Project had limited funds and chose to focus on the poorer northern municipalities instead of the more economically viable coastal municipalities that typically attract big investments. (See ICR Section 6 for Lessons Learned.) 37 As per World Bank Economic Analysis Guidance. 38 2015 Investment Climate Note, Montenegro, Page 14; http://www.state.gov/documents/organization/241881.pdf 38 In its 2015 report, the Montenegro Investment Promotion Agency also noted that one the weaknesses of the Montenegrin environment was the “lengthy procedures at the local levels or obtaining construction permits” 39 This assessment too is expected to improve over time as the procedures and knowledge developed over the course of the Project flow from LAMP municipalities to the non-LAMP coastal municipalities, which were not a part of the Project design. The MIPA report also noted that business zones have been established in the municipalities of Kolašin, Berane, Cetinje, Nikšić and Ulcinj, and other municipalities—Podgorica, Bar, Mojkovac, Žabljak, Bijelo Polje and Tivat—have expressed interest in establishing business zones. 40 It is important to note that the Project financed the development of urban plans in all aforementioned municipalities except Podgorica and Tivat, where plans were financed directly by the Government. The fact that only those municipalities where plans were made are able to establish business zones is a testimony to the success of Component B. The ICR team also interviewed Monteput, a state company that works on big highway infrastructure projects, to better understand the impact of the Project on the investment climate in Montenegro. The feedback for READ and the work done under Component A was very positive. Monteput noted that it was “obvious” that READ data had been updated and improved. They were also pleased with the speed and accuracy with which READ has been responding to their requests and particularly noted READ’s good work in resolving expropriation issues, which is typically the most complicated and sensitive area for Monteput. In relation to a specific EUR 800 million highway project which is 85% financed by China, Monteput praised READ’s special effort in “meeting tight deadlines with precision and punctuality.” Monteput also noted that they had attempted to start the same project back in 2009 with a Croatian contractor but it did not materialize due to the GFC. Back then, there was also a “big gap in READ documentation” and “maps were not ready for expropriation.” Had the project gone ahead, the lack of data would have led to “6-12 month delays and cost the contractor EUR 2.0 million.” The smooth implementation of the infrastructure project today demonstrates the dramatic improvements that have taken place at READ and in Montenegro’s real estate sector.41 39 MIPA Country Report, Page 4; http://www.mipa.co.me/dcs/MIPA-Country-Report-2015-web.pdf 40 MIPA Country Report, Page 45. 41 Based on interview with Monteput on October 17, 2015. 39 Table 2: Project Benefits by Component Model Key Green = Input from external source Blue = Assumption Black = Calculation Unit 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 MONETARY VALUE OF TIME IN MONTENEGRO Monetary Value (Avg wage in MNE) Monthly wage 580 650 700 750 730 730 730 730 730 730 730 730 730 Daily wage (based on 22 working days/month) 26.4 29.5 31.8 34.1 33.2 33.2 33.2 33.2 33.2 33.2 33.2 33.2 33.2 COMPONENT A Actuals reported by READ Total requests 51,272 41,237 44,139 47,737 48,413 52,274 52,987 52,788 52,894 52,999 53,105 53,212 53,318 Pending requests 9,432 7,737 5,339 7,199 5,327 3,605 1,983 1,589 1,271 1,017 814 651 521 Processed requests 41,840 33,500 38,800 40,538 43,086 48,669 51,004 51,199 51,622 51,982 52,292 52,561 52,797 Days to Process a Transaction Days to process transactions - Without Project 25 25 25 24 24 23 23 22 22 21 21 20 20 Days to process transactions - With Project 25 22 18 16 12 8 8 8 8 8 8 8 8 Number of days saved due to Project 0 3 7 8 12 15 15 14 14 13 13 12 12 Monetary Value of Time Saved due to project Time saved due to Project (per transactions) # 0 3 7 8 12 15 15 14 14 13 13 12 12 Value of daily wage EUR 26.4 29.5 31.8 34.1 33.2 33.2 33.2 33.2 33.2 33.2 33.2 33.2 33.2 Monetary Value of Time Saved due to Project (Per transaction) EUR 0.0 88.6 222.7 272.7 398.2 497.7 497.7 464.5 464.5 431.4 431.4 398.2 398.2 Value of time saved for all Total transactions # 41,840 33,500 38,800 40,538 43,086 48,669 51,004 51,199 51,622 51,982 52,292 52,561 52,797 Monetary Value of Time Saved due to Project (Per transaction) EUR 0.0 88.6 222.7 272.7 398.2 497.7 497.7 464.5 464.5 431.4 431.4 398.2 398.2 Value of time saved in Component A EUR M 0.0 3.0 8.6 11.1 17.2 24.2 25.4 23.8 24.0 22.4 22.6 20.9 21.0 39 Table 3: NPV and IRR Analysis Unit 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 NPV and IRR Calculation Total Project benefits EUR M 0.0 3.0 8.6 11.1 17.2 24.2 25.4 23.8 24.0 22.4 22.6 20.9 21.0 Total Project costs EUR M 22.5 Net cash flow EUR M -22.49 2.97 8.64 11.06 17.16 24.22 25.39 23.78 23.98 22.42 22.56 20.93 21.02 NPV and IRR of Full Project Discount Rate % 5% NPV EUR M 128.7 IRR % 49% Bank share of Project benefits EUR M 0.0 1.5 4.2 5.4 8.4 11.8 12.4 11.6 11.7 11.0 11.0 10.2 10.3 Bank share of Project costs EUR M 11.0 Net cash flow EUR M -11.00 1.45 4.23 5.41 8.39 11.85 12.42 11.63 11.73 10.97 11.03 10.24 10.28 NPV and IRR of Bank Share Discount Rate % 5% NPV EUR M 62.9 IRR % 48.6% Table 4: Sensitivity Analysis Full Project NPV (EUR M) Bank Share NPV (EUR M) 5.0% 128.7 62.9 Discount Rate 7.5% 103.7 50.7 10.0% 84.0 41.1 12.5% 68.2 33.4 15.0% 55.5 27.2 40 Annex 4. Bank Lending and Implementation Support/Supervision Processes (a) Task Team members Responsibility/ Names Title Unit Specialty Lending Gavin P. Adlington Lead Land Administration Spec. GSURR Land Administration Private Sector Irina Astrakhan Practice Manager GFMDR Development Denis Boskovski Special Assistant to Vice President ECAVP Country Officer Financial Aleksandar Crnomarkovic Sr Financial Management Spec. GGODR Management ECSEN - Angelo D' Urso Consultant, Urban Planning Urban Planning HIS Nikola Kerleta Procurement Specialist GGODR Procurement Anthony John Lamb Consultant, Lawyer GSULN Land Administration Danielle Malek Roosa Senior Counsel LEGES Legal Victoria Stanley Senior Rural Development Spec. GSURR Land Administration Hiwote Tadesse Operations Analyst GEEDR Operations FAO, Sr Land Administration ECSUW - Rumyana Tonchovska IT Officer-IT HIS Jon Lindsay Lead Counsel LEGEN Legal ECSEN - Slaven Scepanovic Consultant, Lawyer Legal HIS Supervision/ICR Gavin P. Adlington Lead Land Administration Spec. GSURR Task Team Leader ECSEN - Angelo D' Urso HQ Consultant ST Urban Planning HIS ECSEN - Vladimir Evtimov Consultant Cadastre HIS Alexandra Cristina Montea ECSEN - Junior Professional Associate Land Administration Hadzi-Vidanovic HIS Martin Henry Lenihan Senior Social Development Spec GSURR Social Jonathan Mills Lindsay Lead Counsel LEGEN Legal Sanela Ljuca Operations Officer ECCBM Operations Paula F. Lytle Senior Social Development Spec GSURR Social ECSEN - Slaven Scepanovic Consultant Legal HIS Victoria Stanley Senior Rural Development Spec. GSURR Task Team Leader ECSUW Rumyana Tonchovska Consultant IT - HIS ECSUW Neil Pullar Consultant IT - HIS Olivera Jordanovic Senior Land Administration Spec. GSURR Task Team Leader 41 Sandra Kdolsky Social Development Spec. GSURR Social Ifeta Smajic Social Development Spec. GSURR Social Anthony John Lamb Consultant GSURR Land Administration (b) Staff Time and Cost Staff Time and Cost (Bank Budget Only) Stage of Project Cycle USD Thousands (including No. of staff weeks travel and consultant costs) Lending FY08 NA 364.37 Total: 364.37 Supervision/ICR FY09 13.46 64,882 FY10 23.14 131,659 FY11 26.84 104,857 FY12 21.99 121,728 FY13 17.2 85,645 FY14 25.65 96,261 FY15 12.45 49,398 FY16 10.04 56,038 FY17 Total: 150.77 710,468 42 Annex 5. Beneficiary Survey Results Customer Satisfaction Surveys Three customer satisfaction surveys were conducted during the course of the Project: 2010, 2012 and 2014. The main objective was to assess the Project performance indicator for Component A: “increased satisfaction with registration service.” Methodology Data on customer satisfaction with READ registration services was collected through in-person surveys conducted at local cadastre offices. Surveys for natural persons included several demographic dimensions (e.g., gender, age, education level, income, etc.) and surveys for legal entities collected information on company type, annual income, number of employees, etc. The survey results showed no/very little variation by these characteristics. 1. Level of satisfaction with Cadastre Services At the end of the Project, client satisfaction with cadastre services was rated “high” for both legal entities (4.21/5) and natural persons (4.02/5). In 2014, the PDO indicator “ increased satisfaction with registration service” reached 96% achievement for natural persons and 90% for legal entities against target value. 42 Overall satisfaction with cadastre services increased. Satisfaction of legal entities increased steadily while for natural persons the improvement was noted only between 2012 and 2014. Across the three survey years, legal entities were slightly more satisfied with cadaster services than natural persons. Table 5: Level of satisfaction with cadaster services for natural persons and legal entities Baseline (2008) 2010 2012 2014 Target Natural 4.18 3.79 3.77 4.21 4.38 persons (96% achievement) 76.8% Legal entity (unit of 3.77 3.94 4.02 4.47 measurement later (90 % achievement) changed to 5 point scale) Scale: 1 (completely dissatisfied) to 5 (completely satisfied) Users noticed positive changes in cadastre services 2 years into the project (2010) and at the end (2014). This suggests that customers noticed the first improvements in services, but since introduction of changes was gradual, the perception of improvements dropped/stabilized halfway through implementation. By 2015, most improvements to registration procedures were in place, which explains why users´ perception of improvements increased again. Consistently across the survey years, more legal entity respondents noticed improvements with READ registration services than natural persons. 42 Baseline data on customer satisfaction with READ registration services was collected for natural persons and legal entities at the start of the Project in 2008. During the 2013 Project restructuring, the unit of measurement was changed for legal persons from a percentage to a rate on a scale from 1 (totally dissatisfied) to 5 (completely satisfied) so that it would be comparable to the data on natural persons. The baseline for legal persons was thereby reset to 3.77 using the 2011 survey data at 3.77. 43 Have you recently noticed an improvement in cadaster services? % 2010 2012 2014 Yes 52.0 27.9 52.6 Natural No 20.9 51.2 31.6 Don't know 27.1 20.9 15.8 Yes 65.0 39.7 63.9 Legal No 20.0 40.5 24.3 Don't know 15.0 19.8 11.8 Measuring customer satisfaction with READ registration services provided the following trends for relevant sub-indicators:  Speed of registration transactions is reported to have decreased significantly, which is in line with the recorded registration time reduction from average 25 to 8 days. When asked to identify areas of improvement in cadaster services, the largest number of natural persons and legal entity respondents said “speed of issuing registration documents” followed by “accuracy.” In which areas of cadaster services have you noticed improvement (multiple answers possible)? Cadastre services areas of improvement 0 10 20 30 40 The speed of issuing the documents Computerization and digitalization Quality Natural Accuracy Availability of information Communication with customers in general Other The speed of issuing the documents Computerization and digitalization Quality Legal Accuracy Availability of information Communication with customers in general Other 2010 2012 2014  Perception of cadastre service fees. In an overall assessment, more than 50% of natural persons and more than 65% legal entities considered READ service fees “realistic.” However, there are a large number of natural persons (34%-45% across the years) that found the registration fees to be “too high.” Approximately one-third of legal entities considered the costs to be “too high.” When asked about reasons for informal construction, 47.3% of natural persons gave the answer “high costs of obtaining construction permit” in 2014. No differences in service cost rating across age, gender, income and education levels were found. 44 How do you rate the costs incurred during your visit to READ? % 2010 2012 2014 Too high 45.7 34.6 47.1 Natural Real 52.6 58.2 51.8 Low 1.6 3.1 1.1 43 Too high 25.7 28.744 29.1 Legal Real 72.4 65.7 69.8 Low 1.945 5.646 1.1  Positive perceptions of READ services on business operation increased. In 2010, 27.1% of legal entity respondents considered READ to have a “significant positive impact” on businesses. The positive perception of READ’s impact on businesses decreased slightly to 23.7% in 2012 and increased again to 38.1% in 2014. At the end of the project (2014 survey data), 3.6% legal entity respondents considered READ to have a “significant negative impact” on businesses. This is a 6.1% decreased from 2012 and 1.2% decrease from 2010.  Regarding the usage of the online registration services, results show that 27.7% of regular customers were using the electronic register (the e-Cadastre) to access information (2014 survey data). There was a 9% increase in use of e-Cadastre use between 2010 and 2012 and 2014. The use of electronic services was twice as prevalent among legal entity respondents with 64.9% reporting to use the service in 2014, marking an 11.9% increase from 2012 and 1% increase from 2010.  The three customer satisfaction surveys showed no gender variation in satisfaction with READ services. The only exception being that in 2014 women respondents from legal entities rated READ “competence” considerably lower (3.86/5) than men (4.56/5). 43 “More than adequate“ 18.3% + “Much more than adequate“ 7.4% = 25.7% 44 “More than adequate“ 18.7% + “Much more than adequate“ 10.0% = 28.7% 45 “Much less than adequate“ 1.1% + “Slightly less than adequate” 0.7% = 1.9% 46 “Much less than adequate“ 2.8% + “Slightly less than adequate” 2.8% = 5.6% 45 Annex 6. Stakeholder Workshop Report and Results Not Applicable 46 Annex 7. Summary of Borrower's ICR and/or Comments on Draft ICR Note: The Implementing Agencies provided separate Project Completion Reports for Components A and B. For the purpose of this Annex, the ICR author has provided a combined excerpt. To preserve its authenticity, the text below has not been edited. Component A “The overview of activities implemented by READ within Component A of the Project is presented below. The total funds foreseen for the Component A activities accounted for approximately 71% of the overall Project and amounted to € 15,933,000. This component focused on improving real estate registration services, improving the working environment and capacity in READ regional offices, improving the standard of services through the use of information technology and providing data through real estate cadaster (REC) establishment on unsurveyed part of the territory of Montenegro. The Project activities were planned in accordance with the Mid-Term Activity Plan of READ for the period 2008-2013. The Component A was planned to consist of the following sub-components: A1 – improvement of real estate registration services; A2 – development of information systems; A3 – provision of base maps; A4 – establishment of real estate cadastre. Given that all activities related to LAMP were planned between 2007 and 2008, during the implementation of the Project, other national and international projects were carried out in parallel, which had a direct impact on changes in some of the planned activities, so that the activities of Sub- component A3 were otherwise completed and the funds re-allocated to other sub-components. According to the Loan Agreement with the World Bank (WB), the LAMP activities have been funded 50% from the Budget of the Government of Montenegro and 50% from the WB loan funds. Thanking to LAMP, READ was able to direct the state budget funds into the activities implemented in parallel and, together with the completed international projects, to achieve results in accordance with the planned activities and available human resources. Also, it should be underlined that LAMP was implemented in the period of economic crisis and financial stringency, which certainly gives the implementation of this Project even larger importance. Thanking to the World Bank loan and support of the Government of Montenegro, within the LAMP project, great progress has been achieved both regarding improvement of real estate registration, providing of data and services, reducing of business barriers, and ensuring adequate working conditions and organization, which has contributed to faster, more efficient and easier work and satisfaction of internal and external users of READ data and services. Legislative changes, use of best practices and organization of works related to registration of property, resulted in percentage of pending cases of 2.9 %, while number of days required for enacting of decision is 2-4 days, depending on regional offices and workload. 47 Modernization of IT system has enabled use of new technology in order to ensure data accessibility and use of e-service. Component B This component supported the Ministry of Sustainable Development and Tourism (MSDT) to improve the planning and permitting processes and strengthen the capacity of MSDT to support the planning sector in Montenegro. This component also supported those municipalities that have limited funds to develop spatial and general plans in line with the recently approved National Spatial Plan (NSP). Podgorica municipality and the coastal municipalities can afford to develop their own urban plans, but all municipalities had benefit from the Project-sponsored planning standards and manuals, and information systems that had streamlined and improved the planning and permitting process. There are three subcomponents: (i) Improving the planning process and support to MSDT; (ii) Improving planning at the municipal level and completion of plans; (iii) Improving construction permitting and inspection. 1. Main challenges during the implementation and lessons learned The Project Coordination Unit (PCU) had faced a lot of challenges during the implementation of the project. Starting from the lack of knowledge and competences within the unit staff and often staff turnover and therefore no consistency in quality, reporting etc. Since 2012, this start to be improved significantly by introducing new employees on several positions on the project who ended up project activities in a very qualitative manner. The primary purpose of establishing the PCU was to provide link in cooperation between MSDT and municipalities. Here need to be noted that municipalities are independent in their work and there are no obligation for reporting or submitting any documentation/ data/ info to the MSDT. Hereto, a political parties govern in many municipalities which additionally make a complex situation. In such a sensitive and politically colored environment, it was made a lot of effort to convince primarily municipal authorities, that the project can only provide benefit and no harm. Coordination with all 22 municipalities was one of the greatest challenges because there were no central administration to do this nor as such exists today. Understanding what is LAMP, what and how they can benefit from the project, was very hard to explain at the beginning. An obligation to follow rules and procedures of the World Bank accompanied with the local legislative was specially hard for them to adopt and followed. Specially having in mind that most of the employees in municipalities had a general lack of knowledge and competences. In addition, MSDT did not have the resources to implement its activities under the Project. They needed support in strengthening capacity of employees at the first place. Organizing various workshops, seminars, round tables, study visits, the project succeeded to increase knowledge and skills of MSDT employees. But during all these activities, we faced a major problem and that was a resistance to new procedures, learning and generally accepting changes. Most of them never worked in any other business environment other than MSDT or another governmental institution. Therefore had more difficulties to understand importance of constant learning and knowledge acquisition especially when it concerns EU standards and procedures, and best practices. 48 On the other side, the project had a great support from the Minister itself and his advisors. It would have been very difficult or even impossible to implement the project if there were no such a support. Cooperation and assistance in every segment of the project was on a very high level and significantly influence the project activities implementation. This is very important to note because its very well known if there is no collaboration and understanding with the beneficiary chances for project to succeed is very low. All the above mentioned and many other issues that occurred during the project implementation, required open communication which encouraged feedback at every step in order to create greater engagement among participants, stakeholders leading to the best results to the satisfaction of all parties involved in the process. 2. Conclusions and project sustainability Overall project was assessed successful both from the World Bank and the beneficiaries, and reached its targeted values in most of indicators. MSDT as the main beneficiary of the project component B, had expressed their satisfaction and highly assessed the project. Direct and indirect benefits are recognized and highly appreciated. Therefore, several requests had been sent to the World Bank to reconsider prolonging the project and spread its activities in the rest of the country especially those related to spatial urban plans development. The municipalities and central government stand to benefit most from this Project and finally citizens of Montenegro as end users. The targeted municipalities have benefited the most but also other municipalities were involved and benefited through various kind of support already mentioned in the previous chapters. The project enabled much better conditions for investments providing planning documents especially in the northern part of Montenegro. That is a precondition for further development of that area which is in far worse economic situation than the central and southern part of the country. Following the assistance provided under the Project such as planning documents, clear, simple and fast permitting procedures, better services, etc. municipalities are now able to increase income and property taxes, infrastructure fees and fees for services. All this will also influence decreasing negative migration trend of citizens from the north and decrease a very high employment rate.” 49 Annex 8. Comments of Cofinanciers and Other Partners/Stakeholders Below are comments from the United Nations Development Programme (UNDP): “Thank you very much for your email and possibility to participate in this process. UNDP was involved in many activities related to the spatial planning support and in that regard we cooperated with government, national and international institutions, civil society and academia in order to exchange information and share knowledge, but also to avoid duplication and achieve maximum effectiveness and efficiency of our activities. Our Spatial Planning Support project (SPSP) financed by SIDA and implemented in period from 2007 to 2011 cooperated with government and LAMP team very closely. Namely, UNDP was involved in the consultative process which was conducted by WB and Ministry for Spatial Planning of Montenegro as well as Real estate Administration Department, during the LAMP project preparation phase. Additionally, within the implementation phase, particularly in period 2009-2011, LAMP team regularly communicated with UNDP spatial planning team with goal to exchange information and avoid overlapping as well as to accrue synergy between two projects. I am pleased to express satisfaction with cooperation between SPSP and LAMP projects and would like to congratulate World Bank and Ministry for Sustainable Development and Real Estate Administration Office on successful finalization of the project. Hence we have no further comments to the draft ICR. Development of spatial planning and cadastral system is one of the most important issues in Montenegro and in future more attention and focus should be given to the planning in accordance to the principles of sustainable development, with particular accent on regularization of informal settlements as one of the most important unresolved issues in Montenegro.” 50 Annex 9. List of Supporting Documents 1. Project Appraisal Document 2. Project Restructuring Papers 3. Project Legal Agreement 4. Montenegro CPFs FY12-15 and FY16-20 5. Montenegro Economic Reform Program 6. Borrower’s ICR for Components A and B 51 Map 52