Document of The World Bank FOR OFFICIAL USE ONLY Report No: PP2776 INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT PROJECT PAPER ON A PROPOSED GRANT IN THE AMOUNT OF US$ 2.128 MILLION EQUIVALENT TO THE REPUBLIC OF TUNISIA FOR A TUNISIA GOVERNANCE, FINANCIAL SECTOR AND LOCAL GOVERNMENTS TRUST FUND {DATE} {Social, Urban, Rural And Resilience Global Practice} {Middle East And North Africa Region} CURRENCY EQUIVALENTS (Exchange Rate Effective {Jan 08, 2019}) Currency Unit = = US$1 FISCAL YEAR January 1 - December 31 Regional Vice President: Ferid Belhaj Country Director: Marie Francoise Marie-Nelly Senior Global Practice Director: Ede Jorge Ijjasz-Vasquez Practice Manager: Ellen Hamilton Task Team Leader(s): Salim Rouhana, Ayah Mahgoub ABBREVIATIONS AND ACRONYMS ANC The National Constitutional Assembly BETF Bank Executed Trust Fund CDC Cour des Comptes (Court of Auditors) CGSP Controleur Général des Services Publics (Public Services Controling Agency) CPF Country Partnership Strategy CPSCL Municipal Development Fund GRS Grievance Redress Service MALE Ministry of Local Affairs and Environment MDTF Multi Donor Trust Fund MENA Middle East and North Africa O&M Operation and Maintenance PDO Program Development Objective RETF Recipient Executed Trust fund SCD Systematic Country Diagnostic UDLGP Urban Development and Local Program The World Bank Tunisia Governance, Financial Sector and Local Governments Trust Fund (P163624) BASIC INFORMATION Is this a regionally tagged project? Country (ies) No Financing Instrument Classification Investment Project Financing Small Grants [ ] Situations of Urgent Need or Assistance/or Capacity Constraints [ ] Financial Intermediaries (FI) [ ] Series of Projects (SOP) OPS_BASI CINFO_TABLE _3 Approval Date Closing Date Environmental Assessment Category 04-Mar-2019 30-Jun-2020 C-Not Required Approval Authority Bank/IFC Collaboration CD Decision No Please Explain Proposed Development Objective(s) The objective of the Project is to strengthen the operational capacity of the Recipient’s relevant central and local authorities responsible for moving forward the decentralization agenda. Components Component Name Cost (USD Million) Organizations Borrower : MINISTRY OF DEVELOPMENT, INVESTMENT AND INTERNATIONAL COOPERATION Page 1 of 16 The World Bank Tunisia Governance, Financial Sector and Local Governments Trust Fund (P163624) Implementing Agency : Caisse des Prêts et de Soutien aux Collectivités Locales (CPSCL) PROJECT FINANCING DATA (US$, Millions) SUMMARY-NewFin1 Total Project Cost 2.13 Total Financing 2.13 Financing Gap 0.00 DETAILS -NewFinEnh1 Non-World Bank Group Financing Trust Funds 2.13 Miscellaneous 1 2.13 Expected Disbursements (in USD Million) Fiscal Year 2019 2020 Annual 0.15 1.98 Cumulative 0.15 2.13 INSTITUTIONAL DATA Practice Area (Lead) Social, Urban, Rural and Resilience Global Practice Contributing Practice Areas Private Capital Mobilized No Page 2 of 16 The World Bank Tunisia Governance, Financial Sector and Local Governments Trust Fund (P163624) Gender Tag Does the project plan to undertake any of the following? a. Analysis to identify Project-relevant gaps between males and females, especially in light of country gaps identified through SCD and CPF Yes b. Specific action(s) to address the gender gaps identified in (a) and/or to improve women or men's empowerment No c. Include Indicators in results framework to monitor outcomes from actions identified in (b) No OVERALL RISK RATING Risk Category Rating Overall ⚫ Substantial COMPLIANCE Policy Does the project depart from the CPF in content or in other significant respects? [ ] Yes [✔] No Does the project require any waivers of Bank policies? [ ] Yes [✔] No Safeguard Policies Triggered by the Project Yes No Legal Covenants Sections and Description Section 2.03 of the Annex to the Grant Agreement: For purposes of providing basic equipment supplies to Selected Local Governments under the Project, the Page 3 of 16 The World Bank Tunisia Governance, Financial Sector and Local Governments Trust Fund (P163624) Recipient, through the CPSCL, shall enter into a sub-grant agreement with each Selected Local Government under terms and conditions acceptable to the World Bank (Sub-Grant Agreement). Conditions PROJECT TEAM Bank Staff Name Role Specialization Unit Team Leader(ADM Salim Rouhana GSU11 Responsible) Ayah Mahgoub Team Leader GSU11 Procurement Specialist(ADM Blandine Marie Wu Chebili GGOSC Responsible) Kolie Ousmane Maurice Financial Management GGOMN Megnan Specialist(ADM Responsible) Mohamed Adnene Environmental Specialist(ADM Environmental Safeguards GENME Bezzaouia Responsible) Claire Florence Marie Team Member GSU11 Joseph Azzabi Eka Zarmen Putra Team Member Trust Fund Advice DFTPR Helen Z. Shahriari Social Specialist GSU05 Marie Roger Augustin Counsel LEGAM Markus Friedrich Vorpahl Social Specialist Social Safeguards GSU05 Mehdi El Batti Team Member Financial Management GGOMN Steve W. Wan Yan Lun Team Member Trust Fund Advice GFCMW Victoria Ahlonkoba Bruce- Team Member GSU05 Goga Wahid Kraiem Team Member GSU19 Extended Team Name Title Organization Location Page 4 of 16 The World Bank Tunisia Governance, Financial Sector and Local Governments Trust Fund (P163624) Page 5 of 16 The World Bank Tunisia Governance, Financial Sector and Local Governments Trust Fund (P163624) TUNISIA TUNISIA GOVERNANCE, FINANCIAL SECTOR AND LOCAL GOVERNMENTS TRUST FUND TABLE OF CONTENTS I. STRATEGIC CONTEXT ...................................................................................................... 7 A. Country Context .................................................................................................................. 7 B. Sectoral and Institutional Context ...................................................................................... 7 C. Higher Level Objectives to which the Project Contributes ................................................. 8 II. PROJECT DEVELOPMENT OBJECTIVES .............................................................................. 9 A. PDO...................................................................................................................................... 9 B. Project Beneficiaries ............................................................................................................ 9 C. PDO-Level Results Indicators............................................................................................... 9 III. PROJECT DESCRIPTION.................................................................................................... 9 A. Project Components............................................................................................................ 9 B. Project Cost and Financing .................................................................................................. 9 IV. IMPLEMENTATION........................................................................................................ 10 A. Institutional and Implementation Arrangements ............................................................. 10 B. Results Monitoring and Evaluation ................................................................................... 11 C. Sustainability ..................................................................................................................... 11 V. KEY RISKS ..................................................................................................................... 12 A. Overall Risk Rating and Explanation of Key Risks.............................................................. 12 VI. APPRAISAL SUMMARY .................................................................................................. 12 A. Other Safeguard Policies (if applicable) ............................................................................ 13 B. World Bank Grievance Redress ......................................................................................... 13 VII. RESULTS FRAMEWORK AND MONITORING .................................................................... 14 Page 6 of 16 The World Bank Tunisia Governance, Financial Sector and Local Governments Trust Fund (P163624) I. STRATEGIC CONTEXT A. Country Context 1. Tunisia is a beacon of hope for democracy in the MENA region. In a context of deep turmoil in most of the MENA region, Tunisia stands as an exception where a change of regime following the so-called Arab Spring has been translated into a democratic transition. The National Constitutional Assembly (ANC) elected in October 2011 adopted a new Constitution that entered into force on January 27, 2014. The ensuing parliamentary and presidential elections led to the constitution of a government which took office in January 2015. The new constitution profoundly modified Tunisia’s governance framework by strengthening the checks and balances between the executive, the legislative and the judicial powers, by empowering the government and local governments and fostering more open and participatory democracy based on the principles of transparency, accountability and participation. The Government has sought the support from its development partners to implement these deep and comprehensive constitutional reforms across the public sector. 2. The proposed activity is fully in line with Tunisia’s Country Partnership Framework (CPF) 2016-2020. Increasing transparency, accountability and performance of the public sector is a priority for renewing the social contract and improving service delivery. Addressing public sector governance and public financial management is identified as a key priority in the Tunisian government’s Plan stratégique de développement économique 2016-2020. This priority has been reflected in the Tunisia CPF. B. Sectoral and Institutional Context 3. Marginalization of the interior regions was at the heart of the Tunisian revolution in 2011. One of the root causes of the Tunisian revolution was the profound disparities in development – according to many indicators including revenues, unemployment, literacy, access to healthcare etc. – between the leading coastal regions and the lagging interior regions, reinforced by a perception of deep inequity in their treatment by public institutions. Through a highly centralized political system, the interior regions did not have the institutional means to have their voices heard by the authorities, which created a sentiment of injustice among these regions’ populations. It is thus not a surprise that the protests that eventually led to the overthrow of President Ben Ali and his administration started in the Center-west governorates of Sidi Bouzid and Kasserine. 4. Decentralization is a core principle of the new Tunisian Constitution. To address these issues and provide Tunisia with a modern representative political system, the ANC included in the new Constitution an entire chapter on “Local Authorities� (Chapter VII), establishing very ambitious principles in terms of decentralization and setting up a new institutional landscape for local governance. These principles have been materialized by the adoption of the Code of Local Governments in April 2018, and the first post- revolution local elections in May 2018. 5. There are, however, several challenges in implementing decentralization in Tunisia. Implementing Chapter Page 7 of 16 The World Bank Tunisia Governance, Financial Sector and Local Governments Trust Fund (P163624) VII of the Constitution entails many challenges for Tunisia. The Constitutional requirement of a fully “communalized� country – meaning that the country’s whole territory and population are administered by municipal entities and administrations – is currently fulfilled over only 10 percent of the territory representing two-thirds of the population. Consequently, many new municipalities have been created and about 70 percent of the existing ones have been territorially extended. These municipalities will face the important challenge of integrating in the municipal system 90 percent of the Tunisian territory and about one-third of the country’s population. New municipalities will have to start from scratch but will yet quickly have to be able to provide services to populations whose expectations towards their “communalization� are high. Existing municipalities will have to manage territories significantly larger, with rural population having different needs from their current constituents and will have to provide new types of services that they have little experience in. These extended municipalities will have to create arrondissements (municipalities subdivision) including offices in their new territories to be able to provide services to population that are far from the local government headquarters. In addition, most existing Tunisian municipalities are facing important difficulties, including equipment, staffing numbers and staff skills, roles and responsibilities, governance and financial and revenue management (most of them being in chronic budget deficit). Decentralization is also a challenge for the various central-state agencies which are entrusted with new responsibilities with very limited human and financial resources. For example, the Court of Auditors (French acronym CDC), the Controller General of Public Services (French acronym CGSP), the Administrative Tribunal and the Ministry of Local Affairs and Environment (MALE) have all expressed specific needs to enable them to undertake their new responsibilities under a decentralized system. Indeed, international experience shows that, for local governments to be effective, a range of reforms, investments and capacity building is required to strengthen: central-local oversight and co-ordination, inter-governmental transfers, local administration and human resource management, accountability mechanisms, revenue management, inclusive economic planning and investment, and outreach/engagement of citizens. These challenges need to be overcome if decentralization is to be successful, with more competences devolved to municipalities. Supporting municipalities on these fronts is therefore considered a pre-requisite for the success of Tunisia’s decentralization process and for improving development outcomes, in both urban and rural areas. 6. The proposed grant comprises only the Recipient-executed trust fund (RETF) of the Multi Donor Trust Fund (MDTF), which emerged through the restructuring of the original Tunisia MDTF ('Support to Local Governments and Decentralization', TF072287), adding a third TF sector on local government and changing the original MDTF name to the new name: "Tunisia Governance, Financial Sector and Local Governments Trust Fund" (TF072692). This RETF under the new local government window is accompanied by a separate Bank-executed TF (BETF). C. Higher Level Objectives to which the Project Contributes 7. The activity contributes to supporting the Republic of Tunisia with implementing its decentralization efforts, to strengthening the social contract between local governments and its constituents, and to improving development outcomes, in both urban and rural areas of Tunisia. Page 8 of 16 The World Bank Tunisia Governance, Financial Sector and Local Governments Trust Fund (P163624) II. PROJECT DEVELOPMENT OBJECTIVES A. PDO Note to Task Teams: The PDO has been pre-populated from the datasheet for the first time for your convenience. Please keep it up to date whenever it is changed in the datasheet. 8. The objective of the Project is to strengthen the operational capacity of the Recipient’s relevant central and local authorities responsible for moving forward the decentralization agenda. B. Project Beneficiaries 9. Direct project beneficiaries are local governments across Tunisia, and MALE, CPSCL, CGSP and CDC. Indirect project beneficiaries are Tunisian citizens. C. PDO-Level Results Indicators 10. Key results indicators are: Improved work equipment of beneficiary local and central government organizations through the acquisition of all supplies indicated in the procurement plan 11. Achievement is measured through a. Desks, computers, printers/scanners, chairs, telephone, fax, air conditioning, etc have been supplied to local and central governments entities III. PROJECT DESCRIPTION A. Project Components 12. Component 1: Strengthening of operational capacities through provision of basic equipment (US$ 2.128 million) The component will finance the provision of basic equipment supplies, e.g. desks, computers, telephones and fax, heating and air-conditioning, for MALE, CPSCL, CGSP, CDC, and local governments. All 86 new municipalities and a selection of previously existing ones will receive equipment. MALE, CPSCL, CGSP and CDC will receive equipment relevant to their missions pertaining to local governance. It is expected that the supplied basic equipment will provide the beneficiaries with the physical ability to perform their function and to provide expected services to citizens. B. Project Cost and Financing Page 9 of 16 The World Bank Tunisia Governance, Financial Sector and Local Governments Trust Fund (P163624) Project Components Project cost Trust Funds Counterpart Funding Component 1: Strengthening of operational capacities through 2,128,000.00 2,128,000.00 0 provision of basic equipment Total Costs 2,128,000.00 2,128,000.00 0 Total Project Costs 2,128,000.00 2,128,000.00 0 Total Financing Required 2,128,000.00 2,128,000.00 0 IV. IMPLEMENTATION A. Institutional and Implementation Arrangements 13. This RETF will be implemented by the Caisse des Prêts et de Soutien aux Collectivités Locales (CPSCL), which operates under the Ministry of Local Affairs and Environment, and is the implementing entity of the Urban Development and Local Governance Program (P130637). As a result, the CPSCL will be fully responsible for project implementation, in compliance with the procurement, financial management, and disbursement procedures of the Bank. While recipient of the grant and responsible for the operations mentioned above, the CPSCL will only be directly in charge of procurement related to acquisition of equipment for central agencies (MALE, CPSCL, CGSP, CDC). For local governments’ equipment, the local governments will receive grants from CPSCL on the basis of their expressed needs for eligible equipment. The eligible materials have been categorized and standardized by type of equipment by the CPSCL, to ensure consistency in the purchasing. 14. Local governments will carry out the purchasing themselves in compliance with the Bank Procurement Regulations for Investment Project Financing Borrowers. Nevertheless, when approaching the national market, as agreed in the Procurement Plan, the country’s own procurement procedures may be used. Requirements for national open competitive procurement include the following: a. open advertising of the procurement opportunity at the national level; b. the procurement is open to eligible firms from any country; c. the request for bids/request for proposals document shall require that Bidders/Proposers submitting Bids/Proposals present a signed acceptance at the time of bidding, to be incorporated in any resulting contracts, confirming application of, and compliance with, the Bank’s Anti-Corruption Guidelines, including without limitation the Bank’s right to sanction and the Bank’s inspection and audit rights; d. contracts with an appropriate allocation of responsibilities, risks, and liabilities; e. publication of contract award information; f. rights for the Bank to review procurement documentation and activities; g. an effective complaints mechanism; and h. maintenance of records of the Procurement Process. Page 10 of 16 The World Bank Tunisia Governance, Financial Sector and Local Governments Trust Fund (P163624) 15. Other national procurement arrangements (other than national open competitive procurement), that may be applied by the Borrower (such as limited/restricted competitive bidding, request for quotations/shopping, direct contracting), shall be consistent with the Bank’s Core Procurement Principles and ensure that the Bank’s Anti-Corruption Guidelines and Sanctions Framework and contractual remedies set out in its Legal Agreement apply. In all cases, the national procurement procedures to be used shall give due attention to quality aspects. CPSCL will release the funds to the beneficiary LGs based on the procedures set forth in the POM 16. Procurement capacity assessment: This preliminary (desk) assessment is based on our knowledge of the CPSCL’s and beneficiary LGs procurement experience under previous and ongoing Bank-funded projects. The main objectives of this capacity assessment are to determine whether the implementing agency has the capacity to adequately carry out the procurement function of the Project. This evaluation took into account the entire contracting process, which encompasses: (i) planning; (ii) preparing bidding documents; (iii) receiving and evaluating bids or proposals; (iv) finalizing and signing the contract; (v) monitoring the implementation; and (vi) filing and archiving documents for audit and post review. The CPSCL has staff with good experience in procurement management under multilateral and bilateral projects; however, given that the beneficiary LGs are newly established, their capacity is assessed to be low. The procurement risk is assessed to be substantial. 17. Retroactive financing: As provided under Bank’s Directive on Investment Project Financing, at the request of the Recipient, the Bank may provide retroactive financing under this Grant. Retroactive financing may only be provided when: (a) the activities financed by retroactive financing are related to the Development Objectives and are included in the Project description; (b) the payments are for items eligible under this Project and procured in accordance with the procurement rules applicable to this Project; (c) the total amount of retroactive financing is 20 percent or less of the total grant amount; and (d) the payments are made by the Recipient/local governments not more than 12 months before the expected date of the signing of the Grant agreement. B. Results Monitoring and Evaluation 18. The CPSCL will implement the project and will be responsible for the overall financial management. The CPSCL will rely on its financial directorate that will dedicate a FMS to the project implementing unit to handle the project. A simplified Project Operational Manual (POM) will be developed to describe the roles and responsibilities including the financial management procedures. The project’s activities will be annually budgeted in the implementing entity’s budget and subject to the World Bank no objection. The CPSCL will m aintain a separate accounting book using their current financial information management systems. A Designated Account will be opened at the Central Bank of Tunisia for the project activities. The Interim Financial Reporting (IFR) will be produced separately and submitted to the World Bank not later than 45 days after the end of the semester. The CPSCL will hire an external auditor who will produce a separate audit report on the project’s activities under its responsibilities for the total duration of the project. The report will be submitted not later than 6 months after the closing date of the grant. C. Sustainability 19. Sustainability of the supplied basic equipment will be ensured by (a) rendering O&M of supplied equipment a condition of beneficiary selection; and (b) monitoring of O&M responsibility through the regular implementation activities of the CPSCL under its implementing mandate of the UDLGP (P130637). CPSCL is closely Page 11 of 16 The World Bank Tunisia Governance, Financial Sector and Local Governments Trust Fund (P163624) supervising local governments activities, notably through its technical assistance mandate, and CPSCL’s 8 regional offices will verify appropriate use of the equipment as part of their frequent visits to each municipalities. V. KEY RISKS A. Overall Risk Rating and Explanation of Key Risks 20. The overall risk rating is Moderate, as the project is simple, focusing on the supply of basic equipment to Tunisia’s local governments. A possible risk that may emerge is the delay of project implementation due slow procurement processes. This will be mitigated through (i) the fact that the CPSCL have long experience in procurement, often for much larger acquisitions (ii) the fact that local governments have now at their disposal a digitalized tool for procurement that will facilitate the procurement process 21. The financial management risk is assessed as Moderate. The project’s will be fully managed by CPSCL which have some experience with the World Bank procedures for Program for Results and Investment Project Financing. The CPSCL has also a long track record for developmental project management, adequate financial management arrangements and good experience with donors’ funded projects on a wide range of municipal infrastructure and equipment projects. The main risk relates to the financial reporting system which requires some improvements 22. To mitigate the identified risk and the following measures have been identified: (i) The elaboration of IFR each semester and a single project financial statements covering the whole duration of the project (ii) The development of a simplified POM describing the roles and responsibilities between involved departments and the financial management procedures. (iii) The extension of the scope of the TOR of the CPSCL statutory auditor to cover the project funds. (v) The Financial Management Specialist (FMS) of the project would receive a training on World Bank’ Fiduciary procedures (i.e: Procurement, Financial Management and Disbursements). 23. While no financial management issues are expected, the key issues for procurement are considered to be the fact that the Recipient will not be procuring the goods to the local governments but will supervise local governments who will be the ones carrying out the procurements. Given the small amounts involved and the digital tools (TUNEPS) at the disposal of communes, the risk remains limited. VI. APPRAISAL SUMMARY Note to Task Teams: Please provide a summary description of the main economic benefits and costs of the project, and a summary of the key FM, procurement and safeguard issues. 24. The main economic benefits of the projects is to provide a set of minimum equipment for new and existing local governments, MALE, CPSCL, CGSP and CDC to have a minimal material configuration to function normally under the new decentralized institutional framework. The new and expanded parts of expanded communes are covering the entirety of the population previously non covered by the municipal institution. By providing equipment in priority to these local governments, the project supports the provision of municipal services to Page 12 of 16 The World Bank Tunisia Governance, Financial Sector and Local Governments Trust Fund (P163624) 3,5m people previously outside the municipal system. MALE, CPSCL, CGSP and CDC are key actors supporting local governments to achieve higher management standards; supporting their functioning indirectly supports the municipal services received by the population. No significant costs can be attributed to the project due to its simplicity and straightforwardness. A. Other Safeguard Policies (if applicable) 25. As the project’s Environmental Assessment Category is confirmed as Category C, without involvement of any physical or civil works, no safeguards issues are expected. B. World Bank Grievance Redress Communities and individuals who believe that they are adversely affected by a World Bank (WB) supported project may submit complaints to existing project-level grievance redress mechanisms or the WB’s Grievance Redress Service (GRS). The GRS ensures that complaints received are promptly reviewed in order to address project-related concerns. Project affected communities and individuals may submit their complaint to the WB’s independent Inspection Panel which determines whether harm occurred, or could occur, as a result of WB non-compliance with its policies and procedures. Complaints may be submitted at any time after concerns have been brought directly to the World Bank's attention, and Bank Management has been given an opportunity to respond. For information on how to submit complaints to the World Bank’s corporate Grievance Redress Service (GRS), please visit http://www.worldbank.org/en/projects-operations/products-and-services/grievance-redress-service. For information on how to submit complaints to the World Bank Inspection Panel, please visit www.inspectionpanel.org. . Page 13 of 16 The World Bank Tunisia Governance, Financial Sector and Local Governments Trust Fund (P163624) VII. RESULTS FRAMEWORK AND MONITORING Results Framework COUNTRY : Tunisia Tunisia Governance, Financial Sector and Local Governments Trust Fund Project Development Objectives The objective of the Project is to strengthen the operational capacity of the Recipient’s relevant central and local authorities responsible for moving forward the decentralization agenda. Project Development Objective Indicators Unit of Data Source / Responsibility for Indicator Name Corporate Baseline End Target Frequency Measure Methodology Data Collection Name: All items included Yes/No N Y in the procurement plan have been acquired before 31-March-2020 Description: Page 14 of 16 The World Bank Tunisia Governance, Financial Sector and Local Governments Trust Fund (P163624) Intermediate Results Indicators Unit of Data Source / Responsibility for Indicator Name Corporate Measur Baseline End Target Frequency Methodology Data Collection e Name: % of items Percentag 0.00 100.00 indicated in the e procurement plan for which purchasing contracts have been signed before 31-Aug- 2019 Description: Page 15 of 16 The World Bank Tunisia Governance, Financial Sector and Local Governments Trust Fund (P163624) Target Values Project Development Objective Indicators FY Indicator Name Baseline End Target All items included in the procurement plan have been acquired before 31-March-2020 N Y Intermediate Results Indicators FY Indicator Name End Target % of items indicated in the procurement plan for which purchasing contracts have been signed before 31-Aug-2019 100.00 Note to Task Teams: End of system generated content, document is editable from here. 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