Document of The World Bank ReportNo.:44310 PROJECTPERFORMANCEASSESSMENT REPORT GEORGIA MUNICIPAL INFRASTRUCTUREREHABILITATIONPROJECT(CR 2658) MUNICIPAL DEVELOPMENTAND DECENTRALIZATIONPROJECT(CR 2976) SECONDMUNICIPAL DEVELOPMENTAND DECENTRALIZATION PROJECT(CR3701) June 23,2008 Sector Evaluation Division Independent Evaluation Group (World Bank) Currency Equivalents(annual averages) Currency Unit =Lari* (GEL) 1994 US$1 .oo 2001 US$l.oo 2.07 GEL 1995 US$1 .oo 2002 US$l.oo 2.20 GEL 1996 US$1.oo 1.26 GEL 2003 US$l.oo 2.15 GEL 1997 US$l .oo 1.30 GEL 2004 US$l.oo 1.92 GEL 1998 US$l .oo 1.39GEL 2005 US$l.oo 1.81 GEL 1999 US$l.oo 2.02 GEL 2006 US$l.oo 1.78 GEL 2000 US$l.OO 1.98 GEL 2007 US$1.oo **1.66 GEL * The Georgian Lariwas introducedas anew currencyinDecember 1995 with anexchangerate c 23 Lari = one USdollar. ** midyear VL e AbbreviationsandAcronyms ADB AsianDevelopmentBank MDA MunicipalDevelopmentAgreement APL Adaptable ProgramLoan MDF-G MunicipalDevelopmentFundof Georgia CAE CountryAssistanceEvaluation MDDP-I FirstMunicipalDevelopmentandDecentralization Project(Cr.2976) CAS CountryAssistanceStrategy MDDP-I1 SecondMunicipalDevelopmentand DecentralizationProject(Cr.3701) CPS CountryPartnershipStrategy MIRP MunicipalInfrastructureRehabilitationProject ((3.2658) DCA Development CreditAgreement MOF MinistryofFinance EBRD EuropeanBankfor Reconstructionand PAD ProjectAppraisalDocument Development ERL. EmergencyRecoveryLoan PDA ProjectDevelopmentAgreement ERR Economic Rateof Return PIU ProjectImplementationUnit KfW KreditanstaltfUr Wiederaufbau PPAR ProjectPerformanceAssessmentReport GNI GrossNationalIncome(Atlas method) PPF ProjectPreparationFacility GOG Governmentof Georgia SAR StaffAppraisalReport GSIF GeorgiaSocial InvestmentFund S I L Specific InvestmentLoan ICR ImplementationCompletionReport TA TechnicalAssistance ID InstitutionalDevelopment USAID UnitedStates Agency for International Development IEG IndependentEvaluationGroup IEGWB IndependentEvaluationGroup (World Bank) LGU Local GovernmentUnit MCGF MillenniumChallengeGeorgiaFund Fiscal Year Government: January 1- December 31 Director-General,IndependentEvaluation : Mr.Vinod Thomas Director, IndependentEvaluationGroup(WorldBank) : Ms.CherylGray Manager, Sector EvaluationDivision : Ms.MonikaHuppi Task Manager : Mr.RovGilbert i IEGWBMission: Enhanclngdevelopment effectivenessthrough excellence and independenceinevaluation. About this Report The IndependentEvaluationGroup assessesthe programs and activities of the World Bank for two purposes: first, to ensure the integrityof the Bank's self-evaluationprocessand to verify that the Bank's work is producingthe expectedresults, and second, to help develop improveddirections, policies, and proceduresthrough the disseminationof lessonsdrawn from experience.As part of this work, IEGWBannually assesses about 25 percentof the Bank's lendingoperationsthrough field work. Inselecting operationsfor assessment, preferenceis given to those that are innovative,large, or complex;those that are relevant to upcomingstudies or country evaluations;those for which ExecutiveDirectorsor Bank managementhave requestedassessments;and those that are likely to generate important lessons. To preparea ProjectPerformance Assessment Report (PPAR), IEGWBstaff examineprojectfiles and other documents, interviewoperationalstaff,visit the borrowingcountryto discuss the operation with the government, and other in-countrystakeholders,and interview Bank staff and other donor agency staff bothat headquartersand in localofficesas appropriate. Each PPAR is subject to internalIEGWB peer review, Panel review, and management approval. Oncecleared internally,the PPAR is commented on by the responsibleBank department.IEGWBincorporatesthe comments as relevant.The completed PPAR is then sent to the borrower for review;the borrowers' comments are attachedto the documentthat is sent to the Bank's Board of Executive Directors.After an assessment reporthas been sent to the Board, it is disclosedto the public. About the IEGWB Rating System IEGWBs use of multipleevaluation methodsoffers both rigor and a necessarylevelof flexibilityto adapt to lending instrument,projectdesign, or sectoral approach. IEGWBevaluatorsall apply the same basicmethod to arrive at their project ratings. Followingis the definition and ratingscale used for each evaluationcriterion(additionalinformationis availableon the IEGWBwebsite: httD://worldbank.org/ieg). Outcome: The extent to which the operation's major relevantobjectives were achieved,or are expectedto be achieved,efficiently.The rating has three dimensions: relevance, efficacy,and efficiency. Relevanceincludesrelevance of objectivesand relevanceof design. Relevanceof objectives is the extent to which the project's objectivesare consistentwith the country's current development prioritiesand with currentBank country and sectoralassistance strategiesand corporategoals (expressed in Poverty ReductionStrategy Papers, Country AssistanceStrategies,Sector Strategy Papers, OperationalPolicies). Relevanceof design is the extent to which the project's design is consistentwith the stated objectives. Efkacy is the extent to which the project's objectives were achieved, or are expectedto be achieved,taking into accounttheir relativeimportance. Efficiencyis the extent to which the project achieved, or is expectedto achieve, a returnhigher than the opportunitycost of capitaland benefitsat least cost compared to alternatives.The efficiencydimension generally is notapplied to adjustmentoperations. Possibleratingsfor Outcome: HighlySatisfactory, Satisfactory, Moderately Satisfactory,Moderately Unsatisfactory,Unsatisfactory, Highly Unsatisfactory. Risk to Development Outcome: The risk, at the time of evaluation, that development outcomes (or expected outcomes)will not be maintained (or realized). Possibleratings for Risk to DevelopmentOutcome: HighSignificant, Moderate, Negligible to Low, Not Evaluable. Bank Performance: The extent to which services provided by the Bank ensured quality at entry of the operation and supportedeffective implementation through appropriatesupervision(includingensuring adequate transition arrangementsfor regular operation of supportedactivitiesafter loankreditclosing, toward the achievement of developmentoutcomes. The rating has two dimensions: qualityat entry and qualityof supervision. Possibleratings for Bank Performance: HighlySatisfactory, Satisfactory,Moderately Satisfactory, Moderately Unsatisfactory,Unsatisfactory, Highly Unsatisfactory. BorrowerPerformance: The extent to which the borrower (includingthe government and implementingagency or agencies)ensured qualityof preparation and implementation, and complied with covenants and agreements,toward the achievementof development outcomes. The rating has two dimensions: government performance and implementing agency(ies)performance. Possible ratings forBorrowerPerformance: Highly Satisfactory, Satisfactory, Moderately Satisfactory,Moderately Unsatisfactory, Unsatisfactory, Highly Unsatisfactory. ... 111 Contents PRINCIPALRATINGS .................................................................................................................... V KEY STAFF RESPONSIBLE ......................................................................................................... VI PREFACE ...................................................................................................................................... vi1 SUMMARY ...................................................................................................................................... IX 1 . BACKGROUNDAND CONTEXT ...................................................................................... 1 2 . OBJECTIVESAND DESIGN .............................................................................................. 3 3 . IMPLEMENTATIONAND COSTS ..................................................................................... 6 4 . MONITORINGAND EVALUATION ................................................................................... 9 5 . PROJECT OUTCOMES BY OBJECTIVE ........................................................................ 10 MlRP ........................................................................................................................................ MDDP-I .................................................................................................................................... 11 I O MDDP-II................................................................................................................................... 13 6 . RATINGS .......................................................................................................................... 14 Outcome................................................................................................................................... Risk to DevelopmentOutcome................................................................................................. 14 16 Bank Performance.................................................................................................................... Borrower Performance............................................................................................................. 16 17 7 . BROADER ISSUES ARISING FROMTHIS EVALUATION ............................................ 18 RemainingEngagedfor the Long Haul.................................................................................... MunicipalReform RequiresGood Information......................................................................... 18 19 8 . FINDINGSAND LESSONS .............................................................................................. 19 BIBLIOGRAPHY ........................................................................................................................... 21 ANNEX A .BASIC DATA SHEETS ............................................................................................... 23 ANNEX B .LIST OF PERSONS MET ............................................................................................ 31 T h i s reportwas preparedby Roy Gilbert. who assessed the projects in September 2007. Romayne Pereiraprovided administrative support. I V PrincipalRatings GEORGIA:MUNICIPAL INFRASTRUCTUREREHABILITATION (CR 2658) ICR* ICR Review* PPAR Outcome Satisfactory Satisfactory Moderately Unsatisfactory Institutional Development Impact** Modest Modest Risk to Development Outcome Low Sustainabilify*** Likely Likely Bank Performance Unsatisfactory Unsatisfactory Moderately Unsatisfactory Borrower Performance Unsatisfactory Unsatisfactory Moderately Unsatisfactory GEORGIA:FIRSTMUNICIPALDEVELOPMENTAND DECENTRALIZATION(CR2976) ICR* ICR Review PPAR Outcome Satisfactory Satisfactory Moderately Satisfactory Institutional Development Impact** Modest Modest Risk to Development Outcome Low Sustainabilify*** Likely Likely Bank Performance Satisfactory Satisfactory Moderately Satisfactory Borrower Performance Satisfactory Satisfactory Moderately Satisfactorv GEORGIA:SECONDMUNICIPAL,DEVELOPMENTANDDECENTRALIZATION(CR3701) ICR* ICR Review PPAR Outcome Satisfactory Satisfactory Satisfactory Risk to Development Outcome Low Low Low Bank Performance Satisfactory Satisfactory Satisfactory Borrower Performance Satisfactory Satisfactory Satisfactory * The ImplementationCompletion Report (ICR) is a self-evaluationby the responsible Bank department.The ICR Review is an intermediateIEGWB productthat seeks to independentlyverify the findings of the ICR. **As of July 1, 2006, InstitutionalDevelopmentImpact is assessedas part of the Outcome rating. ***As of July 1, 2006, Sustainability has been replacedby Risk to DevelopmentOutcome.As the scales are different, the ratingsare not directly comparable. vi Key Staff Responsible MIRP GEORGIA:MUNICIPAL INFRASTRUCTUREREHABILITATION (Cr. 2658) Project Task ManagerILeader Division Chief/ Country Director Sector Director Appraisal Robert Maurer Thomas Blinkhorn Basil Kavalsky Completion Ellen Hamilton MargretThalwitz Judy O'Connor MDDP-I GEORGIA: FIRSTMUNICIPALDEVELOPMENTAND DECENTRALIZATION(Cr.2976) .- Project TaskManagerILeader Division Chief/ Country Director Sector Director Appraisal Robert Maurer Thomas Blinkhorn Basil Kavalsky Completion Ahmed Eiweida Sumter Lee Travers D-M Dowsett-Coirolo MDDP-II GEORGIA:SECONDMUNICIPALDEVELOPMENTAND DECENTRALIZATION -- Project Task ManagedLeader Division Chief/ Country Director Sector Director Appraisal Jean-JacquesSoulacroup Sumter Lee Travers Judy 0' Connor Completion Ahmed Eiweida Wael Zakout D-M Dowsett-Coirolo vii Preface This is a Project Performance Assessment Report (PPAR) on three projects: (i) the Georgia: MunicipalInfrastructureRehabilitationProject MIRP (Cr.2658), for - which the World Bank approved a credit inan amount o f US$17.7 million onNovember 8, 1994. The credit was closed on June 6,2000, two and a half years later thanplanned, whenUS$0.3 million equivalent was cancelled; (ii) Georgia:FirstMunicipal the DevelopmentandDecentralizationProject -MDDP-I (Cr.2976) for which the World Bank approved a credit inan amount o f US$20.9 million equivalent on July 15, 1997. The credit was closed on December 31,2002, one year later thanplanned, when it was fully disbursed; (iii) Georgia:SecondMunicipalDevelopmentand the DecentralizationProject-MDDP-I1(Cr.3701) for which the World Bankapproved a credit inan amount o f US$l9.4 million equivalent on August 1, 2002. The credit was closed on December 30, 2007, eighteen months later thanplanned, when it was fully disbursed. These projects were selected for assessment since together they offer a unique perspective uponthe performance o f Bank assistance to Georgia's municipal development over a fourteen year period that covers most o f Georgia's recent history as an independentstate. Moreover, the evaluation findings o fthe individualprojects will feed into IEG's ongoing Special Study o f Municipal Management. The report i s based on a review o fproject documents, including Implementation Completion Reports, Staff Appraisal Reports, Memorandato the President, legal documents and project files, and on discussions held with Bank staff involved inthe projects. An IEGmissionvisited Georgia in September 2007 to review project results and metwith national and local officials, project staff andfinal beneficiaries inthe municipalities o f Tbilisi, Kutaisi, Batumi, Poti, Telavi and Ambrolauri. IEGselected these six municipalities for two reasons. They were major project players, together hosting 73 percent o fthe investments o f all three projects reviewed here. They represented different levels of performance, accordingto the ICRs. On field visits to them the IEGmission examinedproject results at the local level. IEG gratefully acknowledges the courtesies and attention freely given by these interlocutors inGeorgia. Following standard IEGprocedures, copies o f the draft PPAR were sent to government officials and agencies for their review and comments but no comments were received. i x Summary Georgia currently has 2.3 millionpeople livingincities, down from 3.0 million at independence in 1991. Local self governing bodies o f some 69 larger municipalities oversee the local government o fthese people. Today Georgia i s a lower-middle income country andits transition to democracy and market economy has, at times, been traumatic. Civilwars, regional separatism, economic blockades, corruption and political "revolution" all played their part. The sequence o f the three municipal development projects reviewed here, MIRP (Municipal InfrastructureRehabilitation Project 1994- 2000)' MDDP-I(FirstMunicipal DevelopmentandDecentralization Project 1997-2002) andMDDP-I1(Second Municipal Development andDecentralization Project 2002- 2007), covers such events andalmost the entire period o f Georgia as an independent state. The objectives o fMIRP--to preserve andimprove existingurbanservices and infrastructure that hadbecome dilapidatedthrough neglect -- were modestly relevant. MDDP-1's shift offocus toward improvingextremelyweak municipalmanagement was substantially relevant. Since MDDP-I1sharpened this focus even more, its objectives are also rated as substantially relevant. MIRP's design for achieving its objectives isratedas modestly relevant; itneededdata on municipal finance andthe environment didnot exist inGeorgia at the time. The design o f MDDP-Ii s also rated modestly relevant. The physical components were the right ones, but involving two separate Project ImplementationUnits (PIUS), one for physical investmentandthe other for institutional development was a design flaw. MDDP-11's designis ratedsubstantially relevant with similar physical components as the earlier projects, and a sharper focus upon cost recovery and creditworthiness. Implementationexperience improvedwith each successive operation. When Georgia's transition was at its most volatile, MIRPexperienced delays, but bulk o fthe planned investments-in roads, water, sewerage andheating-went ahead as planned. MDDP-I was off to a better start, but implementation became hostage to clarifying sub-project financing terms andconditions that hadnot been settled duringsomewhat hasty preparation. MDDP-11's was nearly completed on time, inspite o f Georgia's "Rose Revolution" just nine months into this project. Institutionalsupport started piecemeal, later extendinginto broader efforts, the results o fwhich have yet to be garnered. Project Monitoring andEvaluation (M&E) was andremains weak. Under MIRP,M&E was negligible overall, for including performance indicators that, while conceptually sound, could not be used for lack of data. MDDP-1's M&E i s also rated negligible. This time the design was too heavily focused uponproject implementation-and that was only halfutilized. The M&E under MDDP-I1improved somewhat, being ratedmodest overall. Its designwas sharply focused uponjust three municipal finance performance indicators. MIRPOutcomes: The project contributedlittleto laying a foundation for municipal reform, since neither GOGnor the municipalities were ready or able to implement the autonomous and accountable financing arrangements that the project reforms had in X mind.Theproject succeededinpreservingessential infrastructureand services-roads, water and sewerage-that hadbeen neglected for years. But many service levels remain very poor. Environmentalresults were good, but on a very small scale only. MDDP-IOutcomes: Involving eleven o fGeorgia's largest municipalities ina single program itself drew attentionto the idea o f decentralization. Actual progress in implementing it, however, was small, understandably so given centralism's tradition, the breakawayregions andthe weak capacities o fmunicipalities generally. Better municipal management was only modestly achieved. Local financial andmanagement information systems remain inadequate. The strongest achievement was insupporting urgent municipal investments, mostly good quality works inroadpaving and water supply. MDDP-I1Outcomes: Undertheproject, nine municipalitiesbecame creditworthy and able to finance priority investments through the line o f credit offered. Evidence i s beginning to appear that the financial performance o f municipalities that participatedin the project is stronger than inothers. MIRPRatings: Overall outcome isModerately unsatisfactory sincethere were significant shortcomings inmeeting its modestly relevant objectives. Itperformed best in preserving essential infrastructureand services, while achieving little inlaying the foundation for municipal reforms andmunicipal credibility. Lack o f economic rate o f return (ERR) or other estimates for the sub-project investments at completion precludes evaluating efficiency. The risk to development outcome i s Low as municipalities are now willing and able to maintainthe infrastructureprovided and relevantnational institutions are more solid. Bank performance is Moderately unsatisfactory, both for quality and entry and quality o f supervision. Preparation proved difficult when consultants were unwillingto work inGeorgia at the time. Supervisionbecame ineffective as far as financial oversight was concerned. Borrower performance is Moderutel' unsatisfactory (for both government and implementing agency performance), given the project's weak financial management, even though early weaknesses inmanaging Bank standard procurement were overcome with experience. MDDP-IRatings:Overalloutcome o fthe substantially relevantproject objectives is Moderately satisfactory. Strongest results came from supporting urgentmunicipal investments. There were some very modest decentralization achievements through involving municipalities, and some minor gains instrengthening municipal management. Again the lack o f ERR estimates or measures o f cost effectiveness means that project efficiency cannot be evaluated at completion. The risk to development outcome i s Low especially as the Municipal Development Fundo f Georgia (MDF-G)evolved from being a temporary PlUinto one o f GOG's principal public sector financial intermediaries. Bank performance is Moderately satisfactory, both for quality at entry and supervision. Borrower performance i s Moderately satisfactory (satisfactory for government performance and moderately satisfactory for implementing agency performance. MDDP-I1Ratings:Overalloutcome isSatisfactory. It achievedits substantially relevant objectives through helping to make municipalities more effective deliverers o f urban services byplacing them within a cost recovery/creditworthiness framework. The risk to development outcome i s Low thanks to the consolidation o fMDF-Gandthe likelihood o f x i continuing municipal creditworthiness. Bank performance is Satisfactory, being moderately satisfactory for quality at entry and highly satisfactory for quality o f supervision. Supervisionwas especially thorough, yet flexible, as Georgia went through its Rose Revolution. Borrower performance i s Satisfactory (for both government and implementing agency) as municipal reform began to make some progress and MDF-G demonstrated its effectiveness as implementing agency for a wide range o fprojects in different sectors inGeorgia, well beyondjust its original municipal development brief. Two broader issues arise from this evaluation. First how a succession o f lending operations was able to bringbenefits, even ifmodest at times, incountries undergoing prolonged and sometimes traumatic economic andpolitical transition. Secondly, municipal reformrequires good information about municipal finances and management capacity, both lackinginGeorgia, a country that couldbenefitfrom applying a simplified form o f Chile's National System o f Municipal Information (SWIM), for instance. The experience o fthese projects reinforces the following IEGlessons: Inprovidingassistancefor the reformofanysector-municipal inthis case- Bank and Borrower need to ensure that information systems are adequate for implementing the reforms and for monitoring progress. Inthe case o f these three projects, information on municipal finances andon the economic performance o f sub-project investments was sparse. Georgia's situation inthis regard could be improvedby the greater use o f municipal experiences o f other countries. Political volatility provides unusual challenges andopportunities for Bank supervision. It calls for more thorough documentationthannormal, detailing all actions agreed between Bank and Borrower. It also requires greater oversight o f project financial management. Inthe case o f Georgia, it didprovide opportunities for the Bank to act as valued and stable interlocutor intimes o f change. Major political and economic transition, while offering opportunities for reform, may slow downprogress with municipal reform inparticular, as national governments work to establish the effectiveness o ftheir central control. When municipal management i s very weak overall, it makes sense to work first with stronger and creditworthy municipalities that are most likely to succeed. In Georgia, the national government could recognize and foster these municipalities as models o f good practice and sources for inspiration and technical assistance for others to learn from. Time gained through speedy project preparationcan be lost ifimplementation has to be extended inorder to resolve matters overlooked by the hasty start-up. Speedy preparationitselfmay also be o f little benefit when the Bank is involved for the longhaul, as it has beeninGeorgia, where project achievements have been made steadily but slowly. Vinod Thomas Director-General Evaluation 1 1. Backgroundand Context 1.1 Georgia, a small country inthe Caucasus region, currently has 2.3 millionpeople livingincities, down 18percent from the 3.0 million at the time o findependence from the Soviet Unionin 1991,Local government o f the urbanpopulation is largely inthe handso f some 69 municipalities, most o fwhichhave elected self-governinglocal gov- ernment units (LGUs) called "Sakrebulos" inGeorgianor "Local Self-Governments" in English. Bank assistanceto municipal development was targeted at this level. But local government i s even more fragmented, nominally including more than one thousand local authorities, mostly inrural areas. 1.2 From a very weak base, urbanmunicipalities inGeorgia have consolidated their responsibilities and finctions only very slowly. Duringthe Soviet period until 1991, city government was generally the agent o fthe centralized state who also appointed top "local" officials. A 1997 Organic Law on Local Self-Government, supported by the Bank,was the first attempt to clarify the political, legal andfinancial status of municipalities inGeorgia. Itrecognized 1,033 units o f local government at two levels, the vast majority being lower level villages, while the higher level comprisedregions and larger towns. Eventhe latter received little financial autonomy under a law that still left the President o f Georgia with the power to appoint the mayors o f the capital Tbilisi and other major cities. Nevertheless, it ledto the creation o f GOG's Municipal Development Fundo f Georgia(MDF-G), also in 1997, to finance investments inurbaninfrastructure and services (Box 2). MDF-Glater became a key development agency for Georgia and important partner for the Bank.Municipal elections for smaller cities were first heldin 1998, and their scope was extended to larger cities by a 2001 amendment to the Organic Law. A second revision in2005 gave less recognition to village-level municipalities, thereby reducingthe number o f effective local government entities from 1,033 tojust 69, mostly regions, cities and towns, the potentially more effective municipalities. But municipal financial autonomy was slow to develop. Itwas not until2006, with the approval o f the State Law on Local Budgets, that municipal financial responsibilities and procedures themselves were first fully codified inGeorgia (Fig. 1).Eventoday, the transparency o fmunicipal finance inGeorgia still lags behind several countries that embarked upon their own decentralization andmunicipal reforms more recently, but from a stronger base. 1.3 Although its economic growth is currently buoyant, Georgiaremains an IDA-eli- gible lower-middle income country recently IBRD-eligible too, with a GNIper capita o f US$1,920 in2007 Atlas method). This is below the reported level o fUS$1,600 in 1991, Georgia's last year as Soviet republic. Independence was traumatic, however. Economic disruption led GNP per capita to fall to US$480 by 1994. Civil war leading to the internal displacement o f 300,000 people erupted over separatist aims o f Abkhazia and South Ossetia that continue today. Contacts and access to neighboring Russia, once Georgia's principal trading partner, were interrupted bytwo Chechnya wars on its borders in 1994- 1996 and 1999-2000. Diplomatic andpolitical disputes with Russia havepersisted to this day(Fig. 1). 8 fi Baku-Tbilisi-Ceylanoil pipeline.State Law on Local Budgets. 0 2 I 1 ~ MDF-G absorbs the GeorgiaSocial InvestmentFund 1 I l l I 1' 1 US PresidentGeorge Bush. New Organic Law on LocalSelf Government - I l l N South Ossetiauprising. ParliamentratifiesEuropean 8 Charter of LocalSelf-Government 0 h M 0 N 4 SaakashviliPresident Ajaria incorporated into Georgia. 3-2 - ;; .e F Georgiaeligiblefor MillenniumChallengeAccount. c V N 'Rose Revolution' 0 ~S z 0 0 - Nr: E SecondMunicipalElectionsin Georgia I I I I ! SecondChechnyawar in Russiaends I ! ! I i SecondChechnyaWar in Russiabegins j E 0) o q 2NC Georgia joins Councilof Europe 2 B 3"i ~ O jC 0 ) . r- First MunicipalElectionsin Georgia Em j c i 6 Organic Law on LocalSelf Government ov! g 4 p o - 1 MunicipalDevelopmentFundof Georgia (MDF-G) created .I1 A ? FirstChechnyaWar in Russiaends I c ZNC - 2 : r I I 1 I I 1: Shevardnardzepresident.New currency 'Lari'. New Constitutionof Georgia r First ChechnyaWar in Russiabegins Abkhazia ceasefire I I I I , I hi Conflict in Abkhazia. Georgiajoins World Bank. Conflict in South Ossetia N 8 3 .! 4 r E - '4 -N'"f i Independenceof Georgia (04/91) * + t r 2 3 1.4 The three municipal development projects reviewed here coveredmost o fthis period o f Georgia as an independent nation state. The 1994-2000 Georgia Municipal InfrastructureRehabilitationProject (Cr.2658) called `MIRP' inthis report, aimed to restore infrastructurewhose maintenance and operationhadbeenneglectedsince the collapse o f the Soviet Union. The 1997-2002 Georgia First MunicipalDevelopment and DecentralizationProject (Cr.2976) called `MDDP-I' inthis report, sought to builda decentralized framework o f service delivery andstrengthen local management directly involvingmunicipalities. Finally, the 2002-2007 Georgia Second Municipal Development andDecentralization Project (Cr.3701) called `MDDP-11' inthis report builtuponits predecessor to try to consolidate the decentralizationprocess already begun. All three projects aimedto strengthen municipalitiesbychannelingfinancial and technical assistance to them through the central government 2. Objectives and Design 2.1 Although these three projects formed a defacto sequence o f Bank support to the municipal sector o f Georgia, they were not conceived apriori as a series. Hindsight gives us no more reason now to believe that planninga series o fprogrammatic loans at the outset would havebeen feasible involatile country conditions over such a longperiod. Thus each operationgrew out o fthe experience o fits predecessor (details Box 1). 2.2 MIRPwas aquasi-emergency responseto the urgent needsofcitieswiththeir urban services andinfrastructure made derelict by the cessation o f Soviet support and years o f zero investment andmaintenance. The project's objective o f laying the foundation for municipal reform, together with its focus uponpreserving and improving existing services remains modestly relevant to the priorities o f GOG's decentralization policy that i s still tryingto assert itselftoday. The relevance o f this project was lessened somewhat by the separate difficult-to-measure objective o f "reinforcing local government credibility". Taken together, the objectives were very ambitious, given the precarious governance inGeorgia at boththe national and municipal levels at the time ofproject appraisal inthe mid 1990s. 2.3 The second operation, MDDP-I, focused more directly upon strengthening municipal management-found, duringthe implementationo fMIRP,to bemuchweaker thanexpected. Fordirectly referencing support for decentralizationthencautiously underway, andhighlightingthe very poor infrastructure endowment o f Georgia's cities that persists today, IEGrates the objectives o f this project as still being substantially relevant. These priorities are consistent with the emphasis o fthe latest 2005 Country Partnership Strategy (CPS) for Georgia and its priority for strengthening public sector management. Notwithstanding substantial project restructuring at mid-term to speed implementation, the project remained true to the original objective, the one that IEGuses as the basis o f this evaluation. 2.4 The third andmost recent operation, MDDP-11,continued to give attention to municipalmanagement as its predecessor had done. But it focused more tightly upon improvingservice delivery efficacy o fmunicipalities, perhaps less ambitious but a more realistic aim. Since overcoming this weakness fits perfectly into the 2005 CPS strategy 4 just mentionedandcontinues to be the priority number one o fGOG's decentralization policy, IEGrates the objective o fthis project as being substantially relevant. Box1:GEORGIA MUNICIPAL DEVELOPMENT PROJECTS -DESIGNSUMMARIES Objectives Components 1994-2000 (a) To provide a foundation for future reforms (i) Institutional development (final cost US$1.95 m.). Creation of aimed at improvingoverall management and (hostingtemporary project implementationunit - PIU to implement IndependentAgency for Developmentof MunicipalServices delivery of crucial municipalservices. (b) To preserve essentialinfrastructureand the project); Technicalassistanceand studies related to project municipalservices. implementation,public awareness, master planfor Tbilisi (c) To improvemanagement and delivery of water/solidwaste and municipalservices, includinghousing. municipalservices in a sustainable and (ii)Infrastructure (finalcost: US$15.3m.). Tbilisi ImmediateAction environmentally beneficialmanner. Plan (weatherproofingof 23 hospitaland school buildings; (d) To reinforcecredibilityof localgovernments provisionof dedicatedelectricity linesfor 15 hospitals;spare parts through visible interventionsto reinstatepublic and equipmentfor undergroundand other publictransport); Short- confidencelensuresocialstability. term investmentProgram(rehabilitationof essential municipal infrastructurein Tbilisi Batumi and Poti) IDA Credit: committedUS$lS.Om.; disbursed US$l 7.7m. MDDP-I: First Municipal Development and Decentralization Project (0.2976) 1997-2002 (a) To assist the decentralizationprocessat the (i) Institutional development (finalcost: US$3.5m.) Preparation central and local government level. of MunicipalDevelopmentAgreements (MDAs) that includeda (b) To promoteimprovementsin financialand municipalaudit, a financialand administrativerehabilitationplan, administrativemanagement as well as municipal and a priority investmentplan. Nationallevel IDthrough national investmentprograms. informationsystems about municipalservicedelivery:analysis of (c) To support urgent local investments. policy alternatives;evaluationof the impactof investmentsupon (d) To generate employment opportunities. municipalfinance; projectcoordinationunit; and studies. (ii) Physical investments (finalcost: US$20.0m.). Roads, drainage, lighting,water supply, sanitation,social, educational, health, and cultural facilities. Construction, rehabilitationand IDA Credit: maintenancesub-projectsup to US$500,000. committed US$20.9m.; disbursed US$20.9m. (a) To increasethe effectivenessof participating (i) Institutional strengthening (final cost US$3.6 m). Localand Local Government Units(LGUs) in identification, inter-governmentalaccounting/reporting/borrowing (national level): planning, delivery and cost recovery for local financial managementfor LGUs; land tax collection;Assessment infrastructureand utilityservices. and strategyfor LGU sector: TNtraining for institutional strengtheningof MDF; LGU relatedstudies. IDA Credit: (ii) Investment projects (final cost US$27.3 in.). Grant and loan committedUSS19.4 m.; disbursed US$22.5m. financingto LGUsfor specific development projects. 2.5 IEGrates MIRP's design as beingmodestly relevant to achievingits stated objectives. It included components to enable key services to continue during Georgia's hardwinters. Urgently neededweatherproofing andheatingo f schools meant that they didnot have to close downincold weather. For the ICR, this urgency meant emergency. This also meant rapidpreparationand exemption from economic analysis. Butthe project was infact a Specific Investment Loan (SIL), and not an EmergencyRecovery Credit (ERC) typically usedby the Bank for reconstruction after a natural disaster. As a SIL with a new borrower, the design couldhave done more for cost-benefit analysis and providedmore assistance for procurement management, challenging for a new client. 5 More generally, the project design didnot factor inthe paucity o f data and information in Georgia at that time. Unlikethe LatinAmerican context whence the municipal development project (MDP) design concept came, Georgia lacked reliable data on municipal finance and environmental conditions. How could a credit model work with municipalities whose true financial positionwas not even knownto themselves? Producing andusingbetter information on municipal finances should be the first, indeed prior steps. Onthe other hand, project complexity was contained by initially limiting interventions to just three cities, although subsequent political pressure added four more. GOGalso determined up-front the sectors eligible for MIRPfunding, namely district heating, power supply, urbantransport, water supply, wastewater treatment and solid waste disposal. MIRPwas designed to focus upon sub-projects within these sectors that met the following (broad) criteria: (i) essential for the survival and health o f the population; (ii) necessary for labor mobility and economic activity; (iii) repairs to quick services; (iv) minimizing risks o fhighsocial costs; (v) where alternative sources o f funding are not available. Following the standards o f earlier Bank-financed MDPsin other countries, physical sub-projects accounted for about 90 percent o fproject costs. The remaining 10percent was designed for institutional development particularly to strengthen national institutions supportingmunicipal development inGeorgia. For implementation, the project authority was wisely entrusted to a temporary Project ImplementationUnit (PIU) centrally located with the Ministry o f Finance (MOF). At that time MOF was the only GOGdepartment familiar with the Bank. Project preparationwas quick and efficient, partly financedby Project Preparation Facility (PPF) and a bridging loan from the Soros Foundation. 2.6 MDDP-1'sdesign was modestly relevant. Itincludedmore institutional components at the municipal level than its predecessor MIRP, and instigatedthe requirement, absent from MIRP,that participating municipalities enter into Municipal Development Agreements (MDAs). According to the Bank's appraisal, the project design incorporatedkey lessons from IEG's (formerly OED) earlier PPAR o f the Brazil: Municipal Development Project inParana (Ln.3 100) about the importance o f clear eligibility criteria for municipal participation insuch a project (PAD p. 60). These MDAs would lay out the baselines andtargets o fperformance-based municipal lending. In theory, this performance-based design should have encouraged competition among municipalities to participate inthe project. Inpractice, however, that advantage was lost when GOG decided to select the twelve participating municipalities up-front, makingthe M D A s somewhat redundant. Their redundancybecame a certainty with the legal opinion that an MDA could not be upheld under Georgian law, andthe necessary legislation was not introduced. A serious flaw inthe design o fthe implementation arrangements was later corrected. The original design provided for two separate PIUs, one to oversee institutional development and the other to supervise physical investments. Apart from the inevitable conflicts that arose between them, this arrangement split the two lines o f project business that, inthe classic municipal development project concept, are meant to move aheadhand-in-hand, one supporting the other. The problem was later fixed by consolidating all responsibilitiesunderjust one PIU, locatedwithin MDF-Gthat was to become a key player not only inthese projects, but inGeorgia's development more generally. Another weakness o fthe design was to consider that "a traditional economic analysis (of sub-projects) was not feasible" (PAD p. 31).This ledto underreporting o f efficiency, making it non-evaluable for this project. 6 2.7 MDDP-I1hadastronger designandwas substantiallyrelevantto achievingits more focused objective, although performance targets continued to be optimistic, surprisingly so for athirdoperationo fits type inGeorgia. Butmore explicitly thanits predecessors, this project did spell out formula and conditions for municipal participation inproject funding.Itintroducedanew financing formulaunderstoodbyallparties, namely 40 percent of financing by MDF-G loan, 40 percent MDF-Ggrant and 20 percent municipal counterpart. MDF-Gloans were for 10 years with one year's grace and annual interest o f 15 percent. For the first time, participatingmunicipalities had to sign legally bindingProject Development Agreements that incorporatedfinancial targets and obligations o f municipalities receiving the credit. Again, muchneeded institutional deve- lopment support featured prominently among the components. Onthe physical investment side, the components were similar to those o f the earlier projects. But they were and still are sorely needed inGeorgia's poorly served cities. The criteria for sub- projects to be eligible for MDDP-I1finance were more explicit than under prior operations. Thus, they were requiredto improve social, environmental andpublic health standards andpromote local economic development. Specific sub-projects had to be technically feasible, least cost and demonstrate a `positive' economic rate o freturn. These requirements were met and compliance with safeguards were laid out ina detailed operational manual specially prepared for this project. 3. Implementationand Costs 3.1 One after the other, the three projects were implementedover the 1994-2007 period o f continuous Bank engagement inGeorgia's municipal development sector. Altogether for the three operations, the Bank disbursed a total o f US$63.7 million inIDA funding. The projects investedUS$9.1 millionininstitutional support andUS$68.6 million inphysical investments infifteen cities, 45 percent o f which went to the capital Tbilisi. Together, the fifteen project cities were home to four fifths o fthe urban population o f Georgia. Most physical investment went to roads (43 percent o f the total) andto water supply and sewerage (36 percent) sub-projects (details Table 1).Most sub- projects made positive contributions to the urban environment. Proper solid waste disposal helpedlimit the casual discarding o f trash and sewage treatment reduced the pollution o fwater courses. Project interventions such as these helped improve the environmental and public healthconditions o f the cities where they were implemented. Street and road improvements contributed to cleaner air inresidential neighborhoods through reducing intense dust residue from heavy commercial traffic usingunpaved streets andhighways. The IEGmission saw several environmental improvements like these and found no reports o fnon-compliance with relevant Bank safeguards. 3.2 Unrest andpolitical and economic transition delayed M1RF"s start up and implementation. Secession inAbkhazia and two wars inneighboring Chechnya cut land borders with Russiamaking suppliers unable or unwillingto deliver project equipment to Georgia. Inthe earliest days, the PlUhad to arrange for project goods to be picked up in other neighboring countries. Inthese circumstances, it was not easy to find interested foreign bidders. Costs were higher than expected. Shortage o f local fimding at one point ledto a desperate measure when the Borrower used an overnight bridgingloan to falsely demonstrate that there were sufficient counterpart funds to justify signing a works 7 contract. When the funds were not found, implementationhadto be stalled until additional resources could be mobilized. A subsequent investigation found no wrongdoing bythe PIU. Another challenging aspect o f implementationfor the new Borrower was protracted procurement management that ledto more delays. For all bid contracts to be completed, project closing had to be extended for 3.5 years, when the PIU, too, was formally wound up.Project physical investments were mostly repairs to keep key urban services working, such as water and sewerage, heating services and streets. Tbilisi took 70 percent o f the total. The project retainedits focus mostlyupon the three cities initially chosen; Tbilisi, Batumi andPoti, although token investments were made in five more. Sub-project selection was, for the most part, at the national level, as foreseen inthe project design. Institutionaldevelopment support involvedo ftraining 2,000 municipal and MDF-Gstaff intaxation, financial management andprocurement through more than 100seminars andworkshops. Inaddition the project organized studytours that took municipal officials and city mayors to Brazil andFrance. 3.3 MDDP-Iwas offto abetter start, withbothBank andBorrower more familiar with this kindo foperation inGeorgia. Although credit effectiveness was on time, the rhythmofdisbursement was onlyhalfthat expected. The maincausewas that hasty project preparation-just four months from project concept note to Board approval-had left many important project details still to beworked out. Most significantly (and time consuming duringimplementation) these included the terms and conditions for financing municipal sub-projects. GOGwas slow, too, to budget its counterpart funding contribution, although it exceeded its expected contribution by closing. By the original December 2001 closing date, 68 percent o f the Credit hadbeen disbursed. With large ongoing contracts still unfinished, one twelve month extension was sufficient to fully disburse the remainder. The project's midtermreview was well usedto bringa sharper focus to project objectives o fimprovingmunicipal management. It also led GOG to intervene more directly inthe choice ofmunicipalities and sub-projects than even the cautious decentralized design had intended. Since the restructuring also meant dropping two other objectives, the first assisting decentralizationandthe second generating employment, it shouldnormally have requiredapproval o fthe Bank's Boardo f Directors. Itwas not done inthis case. Onthe physical side, this project investedmore inwater than its predecessor, andnothing insewerage. There was still significant investment inroads andstreets, althoughMDF-Greports fall short ofshowing how muchwas investedin each city. For that reason, the apparent decline o f Tbilisi's share o fthe total project investment to just 22 percent may understate the participation o f the capital city. Altogether, eleven municipalities participated inthe project's physical investment, all apart from Tbilisi and Batumi ina minor way. Municipal eligibility was meant to be performance-based, but MDF-Gincluded some non-creditworthy municipalities, such as Ambrolauri, to meet GOG equity aims o f covering most o f Georgia's twelve regions. I ;: N N Y specified) Ambrolauri - m w N Chiatura .-E - .-- 6 Ozurgeti Telavi 'El c CI - B -.-.- Kutaisi z Tbilisi 9 3.4 MDDP-11'simplementationwas somewhat more efficient than its predecessors. The Credit became effective on time inFebruary 2003, but implementation stalled as Georgia's famous "Rose Revolution" took holdnine months later. After that, disbursements accelerated, but only 76 percent o f the credit was disbursed by the original closing date. An 18 month extension was needed to fully disburseit. Like its predecessor's, this project's midtermreview in2004 was well used to reassessthe realism o f the still optimistic municipal performance targets set at appraisal. Implementationcoincided with a f`iuitfulperiod ofmunicipal reform inGeorgia; the ratification o f the European Charter o f Local Self-Government in2004, a new Organic Law on Local Self-Governing bodies in2005, and the 2006 State Law on Local Budgets. Butthese reformscame too lateto be fully exploitedbythe project itself. Physical investments were more concentrated inwaterhewerage and roadshtreets (91percent o f the total) than those o fthe earlier projects were. For the first time inthis series o fthree MDPsinGeorgia, the selection o fmunicipalities and sub-projects was at least partly drivenby the performance o f the cities themselves. Also, Tbilisi once again took a prominent role byhosting47 percent o f all physical investments. Financing emergency reconstructionwork following the 2005 floods inthe capital city was partlyresponsible. Institutional development featured prominently amongproject activities but largely through piecemeal interventions, such as a traffic management study for Tbilisi and a database for managing utility services inBatumi. A broader intervention, the design o f nationwide municipal budget and finance reportingsystem, was prepared and implemented at the closure o f the project. 4. Monitoring and Evaluation 4.1 Although still inneed o f strengthening, M&Eimproved somewhat through exper- ience gained bythe Bank and Borrower inthe successive implementation o f each o fthese three projects. The Performance o f each one's M&Ei s reviewed andrated separately here. 4.2 MID'SM&Eisratednegligibleoverall. M&Edesignhadsome good features, such as 18 performance indicators to measure progress toward achieving the objective of preservingessential services. They includedthe reduction inthe numbers o f days lost as a result o f schools having to close through cold weather. But while the concept made theoretical sense, the M&Ecould not be implementedinpractice for lack of data. That meant that there were also no measures for the baselines and targets. Indeed,there could not have been. Thus the M&E could not be implementedor utilized. Hencethe low rating given here. 4.3 IEGrates the M&E o fMDDP-I overall also as negligible. The design was focused too heavily upon monitoring project implementation and reliedtoo muchupon monitoring input indicators such as the numbero f sub-projects completed and the number ofpeople trained. Monitoringdata was not complete even for this more limitedset o f indicators. Even so, the I C R only reported qualitative results pertaining to halfthe eighteen indicators listed. InGeorgia itself, the IEGmission found no documented source to informthe systematic achievement ofproject objectives of improved municipal finan- cial management, for example. Ineffect, the M&Ewas not designed to track 10 achievements inareas such as this. While the S A R hadreferred to impact evaluations to be carried out at completion, IEGcould findno evidence o f them. 4.4 MDDP-II'sM&Eisratedmodest overall. The design initiallyfocused uponthree measurable performance indicators and targets for municipalities, namely: (i) increasing municipal own revenues by 10percent at completion; (ii) increased collection o f landtax byparticipatingmunicipalitiesby20 percent at completion; (iii) doubling the number o f creditworthy municipalities entitle to borrow from the project from five to ten. Although useful for measuringthe effectiveness o f resource mobilization inmunicipal management, these indicators can tell us little about municipal effectiveness in infrastructure and service delivery-that the project aimed to improve. While increasing own revenues canbe a good thing for municipalities, it does not demonstrate that the municipalities used the additional resources effectively for service delivery. For that, M&Ewouldneedsupplyside indicatorsofurban services. Since Georgia's financial reporting system for municipalities was only up and runningin2007, it was able to provide little reliable data to measure the original indicators. Moreover, the "Rose Revolution" had abolished land taxes on plots o f less than five hectares, meaning that municipalities were no longer able increase these collections. For these reasons hard financial targets had to be abandoned at midterm and replacedby "softer" aims. Despite this, the adjustment allowed the M&Eto be utilized, an improvement onthe M&E o f the earlier projects. One of these-doubling the number o fmunicipalities able to identify their priority needs, for instancewas closer to beinga supply-side indicator. But whether this can be deemed a worthwhile achievement for a city that had already been working with Bank-financed municipal development projects for more that ten years i s questionable. Past experience with municipal development projects shows that such results can generally be garnered muchmore quickly. 5. ProjectOutcomes by Objective MIRP 5.1 Afoundation for municipal reform and better services: negligibly achieved. While the project sensibly did not promise the reforms themselves, very little was achieved inlaying the groundwork for new ways for municipalities to conduct the business o f service provision. Neither the municipalities themselves nor GOGwere prepared for the autonomous and acoountable access to credit that the project hoped to introduce. Perhaps the only achievement o f the project inthis regardwas the growing realization at the local level that municipalities had some responsibility for the provision of urban services and infrastructureintheir areas. A recent study found in2005, five years after the completion of this operation, that "Georgia is only at the very first stages o f its decentralization reforms." (UNDP 2005) It should be noted that this objective was implicitly dropped at the project's midtermreview. But IEGconsiders it still a relevant objective for evaluationpurposes, since a change o f objective needs to be formalized through an amendment to the legal agreements approvedbythe Bank's Board o f Directors. This was not done. 11 5.2 Preserving essentialinfrastructure and services: substantially achieved. Through investing in"weatherproofing"-that meant repairing heating systems and improving insulation-the project enabled healthclinics and schools to continue operatingthroughout Georgia's hardwinters infive municipalities. As old systems failed, these facilities simply could not be used at all, and schools would have to close incold weather. Increased water production was made possible byproject investment innew supplylines andrepairs to existingpumpingstations inKutaisi and Tbilisi. Although more water was produced following these improvements, the actual supply to consumers often remainedpoor. Consumers connected to the distribution network inthe Tsavkisi district o f Tbilisi, for instance, beganreceiving water three times a week one hour at a time. This i s still inadequate, but a lot better than the once-a-week service that consumers hadbefore the project. Dysfunctional sewerage systems inBatumi and Potibefore the project, that left raw sewage to accumulate, beganworking again thanks to project rehabilitation o fpumpingstations. But the most visible service rehabilitation of all was project investment insignaling and spareparts for the Tbilisi Metro. Service on the 27 kmsystembuiltduring 1967-1971that now carries 301,000 passengersper day would have ceased altogether without the project rescue, accordingto IEG's interlocutors inthe city. 5.3 Improve management and delivery of municipal services in a sustainable and environmentally benefcial manner: modestly achieved. Most physica1investments were inenvironmentally neutral sub-projects that preserved existing services. The urban environment improvedin a few localities incities where sewage systems hadbeen repaired. These were good results, but they were few. 5.4 More credible municipal government: negligibly achieved: IEGfound no convincing evidence about this. The project design itselfcould have done a betterjob specifying exactly what this credibility meant. While on field visits, IEGasked local people to name the provider o f the new services. Inmost cases, people didnot know about the municipal involvement; an unlikely scenario to buildcredibility o f the local authority. IEGagrees with the ICR that this was an imprecise aim and one whose achievement is difficult, ifnot impossible to measure without the necessary baseline surveys showing what the credibility hadbeenbefore the project. MDDP-I 5.5 Assisting decentralization: modestly achieved: Just by involving eleven o f Georgia's largest municipalities within one single development program, the project did draw attentionto decentralization. Actual progress indecentralizingcontrol and responsibilities to the municipal level was modest, however. A plannedproject study o f inter-governmental fiscal relations insupport o f decentralization was not carried out, for instance. As intendedunder this operation itself, central government remained largely responsible for the choice o fparticipating municipalities and the selection o f investment subprojects. A top-down approach to project management was not surprisinginthe 1990s Georgia. GOG was shaking o f fthe last vestiges o f Soviet centralism and dealingwith breakaway secession inthree parts o f the country. Evenso, the central government did give increasingrecognition to municipalities as future partners indevelopment, simply by involving them directly inthis project. Even a strong GOGcommitment to decentralize 12 could not have accelerated the process much, however. At that time municipalities themselves were still too weak to manage the service delivery so badly needed intheir cities. 5.6 Better municipal management and investments: modestly achieved: Technical assistancewas providedto MOF and municipalities for designing and adopting Georgia's new integrated financial reporting system, to be effective inall municipalities shortly. The project provided computer equipment to participatingmunicipalities, but inthe cities visitedthe IEGmissionwas struck bytheir limitedcapacity to use it. Duringat times surprise visits by IEGto various municipal departments, local staff didnot find it easy to access informationabout past and ongoing investments inurban services quickly.GOG's management o fits municipal affairs tightened under the project, but success was only modest. Performance-based instruments, such as creditworthiness assessments and MunicipalDevelopment Agreements (MDAs) introduced byMDF-Gwere well understood bymunicipalities, butnot applied inpractice. Credit was extendedto the small town o f Ambrolauri, for example, that far exceededthe localmunicipality's capacity to service. Latest figures show Ambrolauri's debt to MDF-Gamounts to US$S5 per local inhabitant, more thanten times Tbilisi's equivalent per capita figure ofUS$7.6. h4DA's with municipal promises o fimproving local tax collection took second placeto GOG's equity criteria to determine the distribution o f funds among different cities to ensure that most regions o fthe country were represented. 5.7 Supporting urgent municipal investments: substantially achieved: The project successhlly introduced a wide range o fpriority urbaninvestments into eleven municipalitiesacross the country. The greatest andmost visible improvement, evident duringIEGfield visits, was inurbanroadandstreetpaving andimproveddrainage. Before the project, some roads were so badly potholed to be almost impassable to normaltraffic. Lack o fpavingpolluted the air with dust particles. Drainage blockedby eroded material or absent altogether would cause frequent neighborhood flooding. The project invested more thanhalfits resourcesintoroadandstreetpavinganddrainage, through 34 sub-projects according to MDF-G.While MDF-G's report provides the name and locationo f each sub- project, it does not give the costs o f each one, so that we cannot tell how the project expenditure was distributedamong cities. Most roadpaving that IEGsaw was of good quality. All sub-projects were inspected on aregular basis byMDF-Gengineers. But inone case, IEGdidsee a serious foundation failure inBatumi that resulted inthe significant vertical misalignment o fconcrete sections o fthe roadway. This was causedby frequent passageo fheavier trucks than the roadwas designed for. Better traffic management bythe city couldhave re-directed this traffic elsewhere. Project water supply investments, principally to increase water productionto feed into existing distributionnetworks, had mixed results across municipalities. Inthe city o fTelavi, for instance, IEGheard citizens' complaints that water was still available to them only three times a week for a few hours at a time. Beforethe project, the service was available only once a week for anhour at a time! ButIEGalso saw examples o fmore successfulinvestments. These includedaretaining 1According to the most recent audited accounts o fMDF-G(for end2005), municipalloanreceivables from Ambrolauri and Tbilisi were US$205,068 andUS$8,772,815 respectively. The per capita figures reported inthetext derive fromdividingtheseamountsbythepopulations ofAmbrolauri(2,408) andTbilisi (1,106,539). 13 wall to prevent a river eroding anold city solid waste dump inBatumi andpollutingthe nearby Black Sea. Onthe social side, project investment to repair the heating system ofthe principal school inAmbrolauri hadenabledthat small town to resume its educational program infill. 5.8 Generating employmentopportunities: modestly achieved: Mostly through the 5,000 short-term jobs with 47 contractors o f the project works themselves reportedinthe ICR. IEGdidnot find examples ofother project effort to create employmentinthe participatingmunicipalities. MDDP-I1 More effective municipalities in service delivery: substantially achieved. Simply having nine municipalities become creditworthy and able to identify their priority needs for urban infrastructure and services, are important first steps toward achieving this objective. Project client cities such as Kutaisi, andPoti, became eligible for grants from the Millennium Challenge Georgia Account (MCGA) to invest intheir still very weak water supply services. Today, MOF explicitly recognizes the importance o f municipalities as service providers-without passingjudgment upontheir effectiveness (Georgia 2007 p. 8). But for cities that have benefited from this and earlier municipal development projects (MDPs) over more than ten years, we might expect to see greater achievements. MDPs inother countries have been able to achieve results more quickly, especially where existingmunicipal capacity i s stronger. Still, the better results more recently obtained inGeorgia do show that the MDP model design can work, albeit at a slower pace, even inGeorgia's particularly challengingcountry circumstances. The national scope o f the project's impact inGeorgia was significant however. The nine project municipalities were home to 73 percent o f the country's urbanpopulation. They appear to take cost recovery more seriously. A study o f 2002-2005 found that they increased their own revenues over this periodby 58 percent, compared withjust 35 percent for other municipalities not assistedby the project. The appraisal target for this indicator was just 20 percent (MDDP-I1PADp. 26). The IEGmission saw how this kind o fresult hadbeen achieved inPoti, through considerable improvements to the city's financial management especially inaccounting and information systems. The credit for this resultmust be attributedto TA providedbyUSAID, however. There hadbeen less progress inKutaisi, where the municipal budget for the year had yet to be finally approved at the time o f the IEGmission visit inSeptember. Tbilisi had made significant improvementsto its street lightingwithin the cost recoveryparameters o fthe project. Municipal officials inall the cities visited by IEGtold the mission that they hadreceived little TA from MDF-G.At the national level, however, the project will have helpedmake municipal financial information more transparent throughout Georgia through its support to the 2006 State Law on Local Budgets. As we still await the actual results o fthis reform, that will be more apparent as 2007 municipal financial data becomes more widely available. The Region reports that the 2007 figures were publishedon time inMarch 2008 and are now available at MOF. IEGcan still only note, however, that, for a country working closely with the Bank on municipal development for 14 years, such results have been long overdue and longincoming Georgia can adopt some aspects o fmunicipal . information systems developed inother countries, such as the best practice example Chile's National System o f MunicipalInformation (SINIM http://www.sinim.cl). 14 6. Ratings OUTCOME 6.1 MIRP:The overalloutcome ofthe projectisratedModerately unsatisfactory. While it achieved a few o fits (on average) modestly relevant objectives, there were significant shortcomings inso doing. Efficacy was substantial inpreserving essential infrastructure and services that included the Tbilisi Metro, andmodest inproviding sustainable andenvironmentally beneficial municipal services-that it didon a small scale only. Efficacy inachieving the two other project objectives o fproviding a foundation for municipal reform andbringingmore credibility to local government was negligible. Efficiency is non-evaluable, although the extended project implementation itself would point to a loss o f efficiency. Eventhough nearly all subprojects-in water, solid waste, heating, and roads, for instance-would have easily lent themselves to cost- benefit analysis, economic rates o f return(ERR) were not estimated for them even at completion. Nor did the project refer to the cost effectiveness o fthe sub-project investments. The reason for the lack o fERR estimates, according to the ICR, was that MIRPwas initiallyprepared as anEmergencyRecoveryCredit (ERC) for which Bank guidelines do not require ERR estimates ex ante. Infact, MIRPwas appraised as a regular SIL that shouldnot have been thus exempt. Even for an ERC, however, IEG considers that ERRs should be used as selection criteria for sub-projects during implementationand as important inputs to evaluation at completion. IEGdidnot find data to be sufficiently accessible during its mission inGeorgia to allow for quick and easy estimates o f the internal rates ofreturn o f these investments. 6.2 MDDP-I: The overall outcome o fthe project isratedModerately satisfactory. It achieved its substantially relevant objectives-more so than its predecessor MIRP-with some moderate shortcomings. Efficacy in supporting urgent municipal investments in priority roads andwater supply was substantial-the project's best result. Efficacy in improving municipal management was modest. Data on municipalities is still inadequate today for municipal development to be fully effective. Efficacy ingenerating employment was modest, and mainly achieved through temporaryjobs insub-project construction. Little was achieved inassisting decentralizationwhere efficacy inachieving this objective-effectively abandoned at project midterm-was modest. Efficiency is non-evaluable since there are no ERR estimates o fphysical sub-project investments at completion, nor were there other estimates of efficiency such as unit cost standards, for instance. From its inquiriesinGeorgia, IEGconfirms the ICR's report that available documentation does not demonstrate that ERRs were systematically usedby MDF-Gto determine the eligibility o f sub-projects for funding, as intended. This ICR like the one for MIRP, again assertedthat internalrates o f returnwere not necessary, this time on the grounds o f MDDP-Ibeing a line o f credit operation. Again, IEGwould argue that, independentlyo f formal procedural requirements, internal rates o freturn should have provided valuable information for the selection o f sub-projects andto inform the evaluation of the overall efficiency o f the operation. 15 Objectives Relevance Efficacy Efficiency Outcome (a) To providea foundationfor future reforms Modest Negligible Non- aimedat improvingoverall managementand delivery of crucial municipalservices. evaluable (b)To preserveessential infrastructureand Substantial Substantial Non- municipalservices evaluable (c)To improvemanagementand delivery of Modest Modest Non- municipalservices in a sustainableand environmentallybeneficialmanner evaluable (d)To reinforcecredibilityof localgovernments Negligible Negligible Non- through visible interventionsto reinstatepublic confidencelensuresocial stability evaluable Overall: Modest Modest Non- Moderately evaluable Unsatisfactory (a)To assist the decentralizationprocessat Substantial Modest Non- the centraland localgovernmentlevel evaluable (b)To promoteimprovementsin financialand High Modest NOn- administrativemanagementaswell as municipalinvestmentprograms. evaluable (c)To support urgent local investments. Substantial Substantial Non- evaluable (d)To generateemploymentopportunities Substantial Modest Non- evaluable Overall: Substantial Modest Non Moderately evaluable Satisfactory (a)To increasethe effectivenessof Substantial Substantial Substantial participatingLocalGovernmentUnits (LGUs)in identification,planning,delivery and cost recoveryfor local infrastructureand utility services Overall: Substantial Substantial Non- Satisfactory evaluable 6.3 MDDP-11:The overalloutcome o fthe project isratedSatisfactory, since the project helped make municipalities more effective inservice delivery, achieving its substantially relevant objective, with only minor shortcomings. Efficacy was substantial. For the first time inGeorgia's short history o flocal government, progress was made under cost recoveryunder this project, as reflectedinthe stronger municipal finances reported by the participatingcities. Also for the first time, municipalities assumed financial and managerial responsibilities for the extra local services providedunder the project. Having the nine participatingmunicipalities able to identify their priority needs is important, too, butmustberegarded as amodest achievement especiallybymunicipalities that hadalready 16 participated inthree MDFs over a periodo fmore thanten years, when compared with progress inother countries. InGeorgia, however, the results didcome, albeit slowly. Efficiency is ratedsubstantial given that manyo fthe subprojects generated adequate internalrates o freturn. InGeorgia, IEGsaw examples o fthe more than40 sub-projects (against a target o f 30) that yielded ERRSabove 15 percent, as reported bythe ICR RISKTODEVELOPMENT OUTCOME 6.4 M I .ratedLow: Mostmunicipalitiesare able to maintainthe infrastructureand services provided through the project. From discussions with the IEGmission municipal officials demonstrated the importancethey attached to this. After all, they have recent memories o f service collapse following the neglect o f operations andmaintenance inthe immediate post-Soviet period. Duringfield visits to selected cities, IEGcould confirm the good state o frepair o fmost these assets. Furthermore, municipal administrations today will be inabetter position to operate andmaintainthis infrastructureifthey choose to allocate some o f their newly gained own revenues for this purpose. 6.5 MDDP-Irated Low: The MDF-Gcreated under the project has successfully evolved from being a temporary PIUto becoming one o f GOG's principal agencies for managingpublic service investment. MDF-Ghas since expanded to administer the credit o fmore and more sectors. As it looks more and more like a permanent fixture o f government, it will be able to continue to provide support for urgentmunicipal investments. 6.6 MDDP-11rated Low: For similarreasons given under MDDP-I.MDF-Ghas continued to consolidate. Its accounts for 2006 reported a modest profit o f 4.9 percent o f total income, but substantially higher than the 0.9 percent reportedby the 2005 audited accounts. Municipaldefaults have been few. Municipalities themselves are slowly but surely buildingtheir service delivery capabilities. BANKPERFORMANCE 6.7 MI. rated Moderately unsatisfactory (bothfor quality at entry and quality of supervision): Drawingupon the experience o fwell tried municipal development projects inLatinAmericaparticularly, the Bank couldhavebeenmorerealistic indetermining what could be achieved with a new Borrower inexperiencedwith Bank methods and procedures. That lack o f experience meant that the Bank hadto oversee most details o f preparationdirectly, something that it didquickly with little learning spillover for local staff. But the quality o fpreparationwas undermined by Bank staffs lack o f familiarity with Georgia andthe unwillingnesso fconsultants to work inthe country inthe 1990s, with its insecurity, frequent powerblackouts andcommunicationbreakdowns. IEG agrees with the ICR that the quality o f Bank supervision was wanting. Financial oversight was so weak that supervision missions were unable to report the financial performanceo f the project accurately untilmidterm. Eventhen, auditors continued to give qualified endorsement only to the project accounts, owing to poor financial record keeping. 6.8 MDDP-IratedModerately satisfactory (moderately unsatisfactoryfor quality at entry andmoderately satisfactory for quality o f supervision): Quick project preparation- this time inless than four months-was again notable, but the perhaps unnecessary haste 17 left many project details to be worked out duringimplementation. Supervisionmissions were better staffed than those o f the earlier project, inpart because the Bank itself was becoming more familiar with Georgia. Also, the Bank spent twice as muchon supervisingthis project than on its predecessor. But supervisionoversight became uneven when there was a turnover o fBank task managers, something that happened four times. One result o fthis was the inadequate information about the project's financial performance and the lack o f ERR estimates for sub-project investments at completion. Onthe other hand, the Borrower reportedreceiving valuable advice from the Bankduring implementation, especially on procurement. 6.9 MDDP-11rated Satisfactory (moderately satisfactory for quality at entry and highly satisfacto ryfor quality of supervision): Again, project preparationwas somewhat hasty. It didnot take fully into account the performancebymunicipalities underpast projects. Thus, good prior municipal performance was not rewarded, nor was past weak performancepenalized. Onthe other hand, flexible and imaginative supervisionhelped overcome these shortcomings. Interestingly, supervision duringthe Rose Revolution took particular care to fully document discussions and agreements inmission Aide memoires with a succession o fdifferent officials with whom Bankmissionshadto meet. Insuch volatile circumstances, the Aide Memoires truly livedup their name. Hence the overall higher rating than for the earlier projects. BORROWERPERFORMANCE 6.10 MIRPratedModerately unsatisfactoryfor bothgovernmentperformance andfor implementing agencyperformance): Inimplementing the project, the newborrower faced an enormous challenge; a transition that saw public finances depleted and a general economic meltdown. Added to this, inexperience indealing with the Bank left the Borrower ina Catch-22 situation. Ithad to hire consultants to buildknowledge about Bankprocurementandhiringpractices, but didnot know how to go about hiringthe consultants precisely because o f its lack o fknowledge about those procedures. This was inspite oftrainingprovidedbythe Bank.Notably, the PrcTfailedto keep accurate financial records duringimplementation, to the point that auditors were unable to give an unqualified opinion on any o fthem. Lax or inaccurate financial reporting may, o f course, give rise to concerns about possible improbity. But duringthe course o f its normal PPAR missionwork, IEGsaw no evidence o f corrupt practices relating to the project. As agreed at appraisal, the Borrower wound up the project PIUat completion, reassigning its staff to other agencies and government departments. 6.11 MDDP-I rated Moderately satisfactory (satisfactory for government performance and moderately satisfacto ryfor implementing agencyperformance): Performance improvedprincipally through GOG's decision to create MDF-Gas project PIU. Itbecame Georgia's main instrument for strengthening the institutional and financial capacities o fmunicipalities and improving urbanservice delivery. Where MDF- Gperformancefell short, however, was inallowing geographical equity criteria to override performance tests o fmunicipal eligibility to participate inthe project. This meant providing financial support to some municipalities that were not truly creditworthy. While there were some delays inproviding government counterpart 18 funding, municipalities generally kept to their commitments andprovidedthe funding expected o f them. 6.12 MDDP-11rated Satisfactory Gfor both Box2: governmentperformance MUNICIPAL DEVELOPMENT OFGEORGIA A SYNOPSIS FUND - andfor implementing Established: June 7, 1997 agencyperformance): Objective:To render assistanceto strengtheningthe institutionaland financial Performance continuedto capacitiesof localself-governmental bodies, making investments in infrastructureand services. improve under this Activities: MDF-Gcooperateswith localself-governmentunits-I 2 are project, although there currently receiving assistance-and mobilizes resourcesfor funding local investment projects. were still some Leadership: Oversight by Supervisory Board led by the Prime-Minister. shortcomings. Onthe Managedby an Executive Directorappointedby the Prime-Minister. positive side o fmunicipal Staff: Currently 98. Legislation: 1997Decree# 294 establishing MDF-G. 2005 Decree#I027 reform, the Georgian merging Georgia Social Investment Fund (GSIF) into MDF-G; 2006 Parliament formally Decree#I28 absorbing irrigationwork into MDF-G. 2007 Decree #I 18absorbing GOG fund for renewable energy resources.2008 recognizedin2005 the Decree#74 for MDF-Gto manage GOG's "cheap credit" program. political importance o f Sources of funding: GOG, World Bank, KfW, MCGF, EBRD,ADB, Japan, and repaymentof loans by municipalities. municipalities inthe Financials: Total assets US$25.7m; Total revenue US$46.7m.Surplus for country byratifying the year US$6.6m. Loansoutstanding to municipalitiesUS$18.5m. European Charter o f Local Interestincomefrom municipal loans US$2.6m. (auditedfigures for 2006) Self Government. This meant GOGrecognition o f Source: h l l d / w . m d f o r p . n e municipal property rights over their own assets, for instance. Hitherto these assets hadbeenregarded as beingheldintrust by local government for the nation. GOG commitment to the project remained strong bothbefore and after the Rose Revolution. More recently, govenunentownership has been evident from the consolidation andbroadening o fthe scope o fMDF-G. Moreover, its governing boardi s now chaired by the country's PrimeMinister. MDF-Gabsorbed Georgia's Social Investment Fund(GSIF) inDecember 2005, investing inmore than 750 micro-enterprise projects, and also became responsible for Georgia's irrigation programs after June 2006. MDF-Ghas now beenimplementing agency for several projectsbeyondits original municipalremit, includingBank fbnded Social InvestmentProjects and an Education adaptable program loan (APL).Another important development in September 2005 was the approval o fthe MillenniumChallenge GeorgiaAccount-now employing 45 staff in Tbilisi-with grant fundingo f US$295 million over five years, o fwhich US$60 million i s expected to go to municipal development. MDF-G i s responsible for its administration. 7. Broader IssuesArising from this Evaluation REMAININGENGAGED THE LONGFOR HAUL 7.1 These three successive municipal development projects mark one o f the longest continuous engagements to date o fBank support for municipal reform. It is particularly significant for Georgia since it covers most o f that country's history as an independent state. It also shows how the Bank can remain engaged, even when local political and 19 economic transition has been volatile. The results o f reform, especially autonomous creditworthy municipalities improving their service delivery, have been slow incoming. Butit is clear that the little that hasbeen achievedwould not havebeenpossiblethrough once-off, quick in-and-out operations. By staying engaged andmanagingits engagement very closely duringthe most volatile times, the Bank became a valued and trusted partner for many divergent local interests. Along the way, the Bank was able to coordinate its own efforts successfully with those o f other donors, most recently inthe field o f municipal development, with the United StatesAgency for InternationalDevelopment (USAID) and the Millennium Challenge Georgia Fund(MCGF). Experience ofworking closely with development partners and GOG shows that modest but solid progress canbe made. Moreover, a unique point o f international contact with the local authorities has been well established. MUNICIPAL REFORMREQUIRESGOOD INFORMATION 7.2 To design a municipal reformprogramwell andto monitor progress inachieving reforms, good information is absolutely necessary. InGeorgia, good information about municipal finances andmanagement capacity was non-existent inthe mid-1990s andis still very scarce today. How can municipal reform introduce improvements to cost recovery and creditworthiness when we don't have accurate financial reporting to enable us to fully understand the financial position o findividual municipalities who are the targets and agents o f the reform? How can we know where to focus capacitybuilding when we don't know the humanresource profile ofthe local administration? Inassessing the performance o f the three operations reviewedhere, IEGcame across inadequate information again and again. Good information is needed to assess the performance of the municipal participants inthe reform program too. Other countries have successfully set upmunicipal information systems inthe public domain, so that interested citizens ina democratic context can learnhow well their city is performing. Ofparticular note inthis respect i s Chile's National System o fMunicipal Information (SINIM - http://www.sinim.cl/)mentioned earlier, a more simplified form o fwhich could easilybe set up inGeorgia. 8. Findings andLessons 8.1 Inproviding assistancefor the reformofany sector-municipal inthis case- Bank and Borrower need also to help ensure that information systems are adequate for implementing the reforms and for monitoring progress. Inthe case o f these three projects, information on municipal finances and on the economic performance o f sub-project investments was sparse. Georgia's situation inthis regard could be improved by the greater use o fmunicipal experiences o fother countries. 8.2 Political volatility provides unusual challenges and opportunities for Bank supervision. It calls for more thorough documentationthan normal, detailing all actions agreed betweenBank and Borrower. It also requires greater oversight of project financial management. Inthe case o f Georgia, it didprovide opportunities for the Bank to act as valued and stable interlocutor intimes o f change. 20 8.3 Major political and economic transition, while offering opportunities for reform, may slow downprogress with municipal reform inparticular, as national governments work to establish the effectiveness o f their central control. 8.4 When municipal management i s very weak overall, it makes senseto work first with stronger andcreditworthy municipalities that are most likely to succeed. InGeorgia, the national government could recognize and foster these municipalities as models o f good practice and sources for inspiration andtechnical assistance for others to learn from. 8.5 Time gained through speedy project preparationcan be lost ifimplementationhas to be extended inorder to resolve matters overlookedby the hasty start-up. Speedy preparationitselfmay also be o f little benefit when the Bank is involved for the long haul, as it has been inGeorgia, where project achievements havebeenmade steadily but slowly. 21 Bibliography Economist IntelligenceUnit2008. Georgia: Country Report LondonEIU Georgia MinistryofFinance 2007.A Citizen 's Guide to the 2007-2010 StateBudget of Georgia (inEnglishand Georgian) Tbilisi January 2007. Government of Georgia 2003. Municipal Development Fund of Georgia Tbilisi UnitedNations Development Programme UNDP 2005, Fiscal Decentralization in Transition Economies: CaseStudiesfrom the Balkans and CaucasasBratislava UNDP 23 AnnexA. BasicData Sheets GEORGIA MUNICIPALINFRASTRUCTUREREHABILITATION(CR 2658) Appraisal Actual or Actual as % of estimate current estimate appraisal estimate Total projectcosts 19.7 20.2 102% Loan amount 18.0 17.7 98% Cofinancing 0.3 0.4 133% Cancellation 0.3 _. ProiectDates Oriainal Acfual Appraisal 0911311994 0911311994 Board approval 11/08/1994 11/08/1994 Signing 11/10/1994 11/I 011994 Effectiveness 0211011995 01119/1995 Closing date 12/31/1997 0613012000 - -- *---- ActualMafest Estimate Stage of Project Cycle No. Staff weeks US$ (`000) IdentificationIPreparation 45.2 AppraisallNegotiation 31.4 Supervision 234.2 ICR Total 310.8 24 Mission Data Stage of Project Cycle No. of Personsand Specialty (e.g. 2 Economists, 1 FMS, etc.) Performance Rating Monthnear Count Specialty lmpiementation Dev. Progress Objective Identification/Preparation June 1994 1 DivisionChief August 1994 21 1 DivisionChief, 1 Sr. Urban Specialist, 1 Sr. Municipal Finance Spec., 1 Economist, 1 EnvironmentalScientist, 1 EnvironmentalSociologist, 1 OperationsAssistant, 1 ProcurementSpecialist, 1 Sr. Highway Engineer, 1 Municipal EngineerConsultant, 1Transport EngineerConsultant, 1 Pub. HealthEngineer Consultant, 1 Sanitary Engineer Consultant, 1 Water EngineerConsultant, 1 MechanicalEngineer Consultant, 1 Heating Engineer Consultant, 1 HydrologicalConsultant, 1 ElectricalEngineer Consultant, 1 Coastal EcologicalConsultant, 1 CoastalZone Man Consultant AppraisaVNegotiations 7 1 Sr. UrbanSpecialist, 1sr. September 1994 MunicipalFinanceSpec., 1 Economist, 1 Environmental Sociologist,2 Operations Assistants, 1 Mun. Engineer/Consultant Supervision 4 1 Sr. UrbanSpecialist, 1 November 1994 Operations Assistant, 1 Social Ecologist, 1 ResearchAssistant April 1995 5 1 Sr. UrbanSpecialist, 1 ProcurementSpecialist, 1 Social Ecologist, 1 ResearchAssistant, 1 OperationsAssistant December 1995 4 1 Sr. UrbanSpecialist, 1 OperationsAssistant, 1 Procurement Specialist, 1 Municipal Engineer June 1996 1 Sr. UrbanSpecialist, 1 ProcurementSpecialist, 1 OperationsAssistant July 1996 Water Specialist October 1996 1 Sr. UrbanSpecialist, 1 Social Ecologist February 1997 1 Sr. UrbanSpecialist, 1 Social (LimitedMission) Ecologist, 1Operations Assistant, 1 ProjectOfficer October 1997 1 Sr. UrbanSpecialist, 1 Architectrrechnical Spec., 1 Financial ManagementOfficer 25 Stage of Project Cycle No. of Persons and Specialty (e.g. 2 Economists, 1 FMS, etc.) Performance Rating February 1998 1Sr. UrbanSpecialist, 1 Financial ManagementOfficer, 1Water Engineer, 1 Operations Assistant, 1 InstitutionalSpecialist Financial Consultant July 1998 1 Sr. UrbanSpecialist, 1 Urban Specialist, 1 Financial ManagementOfficer November 1998 1 UrbanSpecialist, 1 ArchitectrrechnicalSpec. 1 FinancialManagementOfficer, 1 OperationsAssistant April 1999 1 Urban Specialist, 1 Procurement Specialist, 1 Project Officer November 1999 1 UrbanSpecialist, 1 Project Officer, 1 Finan. Man. Consultant, 1 OperationsAssistant February2000 UrbanSpecialist (LimitedMission) March2000 2 UrbanSpecialist, 1 InfrastructureSpecialist, 1 Architect, 1 Finan. Man. Consultant June 2000 3 1 InfrastructureSpecialist, 1 S Finan. Man. Consultant, 1 Urban Specialist l__l 26 GEORGIA: FIRSTMUNICIPALDEVELOPMENT AND DECENTRALIZATION(CR 2976) Key ProjectData(amounts in US$million) Appraisal Actual or Actual as % of estimate current estimate appraisal estimate Total projectcosts 26.1 23.5 90% Loan amount 20.9 20.9 100% Cofinancing Cancellation Institutionalperformance ProjectDates Original Actual Appraisal 04/28/1997 0412811997 Boardapproval 0711511997 0711511997 Signing 0911511997 0911511997 Effectiveness 1211511997 1211511997 Closing date 1213112001 1213112002 Stage of Project Cycle Actual/Latest Estimate No. Staff weeks us$(~ooo) IdentificationlPreparation 59.2 AppraisaIINegotiation Supervision 509.1 ICR Total 568.3 27 Annex A Mission Data Stage of Project Cycle No. of Persons and Specialty Performance Rating (e.g. 2 Economists, 1 FMS, etc.) MonthNear Count Specialty Implementation Dev. Progress Objective IdentificationIPreparation 02/15/97 AppraisallNegotiation 05/25/97 5 1 Urban ManagementSpecialist; 1 InstitutionalSpecialist; 1 Financial Analyst; 1TechnicalSpecialist 06/20/97 NegotiationsTeam Supervision 08/02/1997 3 1 Urban ManagementSpecialist; 1 S S InstitutionalSpecialist; 1 OperationsAssistant 1011711997 6 1 Urban ManagementSpecialist; 1 S S InstitutionalSpecialist; 2 Financial Analysts; 1 OperationsAssistant; 1 Engineer 02/26/1998 4 1 Urban ManagementSpecialist; 1 S S InstitutionalSpecialist; 1 Financial Analyst; 1 Operations Assistant 07/06/1998 5 2 Urban Management Specialist; 1 S S FinancialAnalyst; 1 Institutional Specialist; 1 Operations Assistant 11/17/1998 4 1 Urban ManagementSpecialist; 1 S S Urban Planner; 1 Financial Analyst; 1 Operations Assistant 04/29/1999 3 1 Urban ManagementSpecialist; 1 S S OperationsAssistant; 1 ProcurementSpecialist 11/19/1999 6 1 Urban Management Specialist; 1 U S Urban Sector Leader; 1 Financial Analyst; 1 ProcurementSpecialist; 2 OperationsAssistant 0311712000 4 2 Urban ManagementSpecialist; 1 U S FinancialSpecialist; 1 Engineer 0611712000 3 1 Urban ManagementSpecialist; 1 S S OperationsAssistant; 1 Financial Analyst 0911512000 1 1 FinancialSpecialist S S 02/02/2001 2 1 Urban Management Specialist; 1 S S FinancialAnalyst 12/14/2001 3 1 Urban Management Specialist; 1 S S OperationsAssistant; 1 Financial Analyst 05/04/2001 3 1 Urban Management Specialist; 1 S S OperationsAssistant; 1 Financial Analyst 28 Stage of Project Cycle No. of Persons and SDecialtv I Performance Rating (e.g. 2 Economists, 1 FMS, ek.) MonthNear Count Specialty lmplementation Dev. Progress Objective 05104l2002 1 Urban ManagementSpecialist; 1 OperationsAssistant 10112l2002 3 Urban ManagementSpecialist; 1 UrbanPlanner 0312912003 1 Urban ManagementSpecialist; 1 Senior ProcurementSpecialist 29 GEORGIA: SECOND MUNICIPALDEVELOPMENTAND DECENTRALIZATION(CR3701) ata(amountsin US$million) ___I Appraisal Actual or Actual as % of estimate current estimate appraisal estimate Total projectcosts 30.9 39.9 129% Loan amount 19.4 24.7 127% Cofinancing Cancellation 0.3 CumulativeEstimatedandActualDisbursements FY03 FY04 FY05 FY06 FY07 FY08 Appraisal estimate (US$M) 2.8 8.95 14.39 19.41 19.41 19.41 Actual (US$M) Actual as % of appraisal -- -.__ Date of final disbursement: July 12,2007 -- Original Actual Appraisal 0411512002 0411512002 Boardapproval 0810112002 0810112002 Signing 1210312002 1210312002 Effectiveness 0211912003 0211912003 Closing date 0613012006 1213012007 30 Staff Time and Cost (Bank Budget Only) Stage of ProjectCycle No. of staffweeks* $ Thousands (includingtravel and consultantcosts) Lending FY02 28 250.41 FY03 4 46.70 Total: 32 297.11 Supervision/ICR FY03 14 53.49 FY04 10 60.61 FY05 34 122.35 FY06 25 103.79 II FY07 14 43.80 FY08 II 17 II 86.36 II Total:/ 114 470.40 31 Annex B. List of PersonsMet MunicipalDevelopmentFundof Georgia Lasha Gotsiridze, Executive Director Tel: +(995-32)-484-5 10 Mobile: +(995-99)-212-010; E-mail: laotsiridze@mdf.ora.ae George Meskhishvili,Technical Dept. Mobile: +(995-99)-57 1-580; E-mail: gmeskhishvili@mdf,orp.ae Michael (Kakha) Ardia, Administrative Dept. Manager. Tel: +(995-32)-943-240; Mobile: +(995-99)-540-025 Paata Iakobashvili, Heado f Technical Dept. Tel: +(995-32)-943-240; Mobile: +(995-99)-150- 160; E-mail: pialobashvili@mdf.ora.ge Shalva Kokochashvili, Heado f the Project Management, Monitoring and Evaluation Division. Mobile: +(995-99)-945-719; E-mail: skokochashvili@mdf.org.ge Zviad Paichadze, HeadofFinance Division. Mobile: +(995-99)-502-888 Maia Kikoshivili, Heado fProject Management. MinistryofFinanceof Georgia DavidKhosruashvili, Heado f Budget Dept. Mobile: +(995-99)-28-86-26; E-mail: d.khosruasvili@mof.ae The UrbanInstitute/USAID BillKrause, UIChiefofParty. Mobile: +(995-99)- 184-341;E-mail: bill@urban.ge Khvicha Vashakmadze, Regional Coordinator Kutaisi. Mobile: +(995-99)-228-289; E-mail:khvicha67@mail.ru Maka Jeladze, Regional Coordinator Ambrolauri. Mobile: +(995-99)-469-294; E-mail: maka.i@mail.ru MillenniumChallengeGeorgia Fund Lia Mamniashvili, DeputyChief Executive Officer. Mobile: +(995-99)-774-010 The WorldBankOffice-Tbilisi Roy Southworth, Country Manager. Mobile: +(995-77)-787-825; E-mail: vsouthworth@worldbank.org Tamara Sululkhia, Senior Infrastructure Specialist. Mobile: +(995-99)-160-108; E-mail:tsulukhiaaworldbank.org. 32 MunicipalityofAmbrolauri KakhaFarjanadze, Mayor Bachuki Gabisiani, HeadofMunicipal Council. Mobile: +(995-99)-962-341 MunicipalityofBatumi Robert Chkhaidze, DeputyMayor. Mobile: +(995-99)- 109-565; internet: www.batumi.gelen Zauz Fatkadze, Advisor to Mayor David Samniedze, Headof Finance Department Municipalityof Poti Gela Lagvilava, Vice Mayor. Mobile: +(995-99)-777-766; E-mail: pela-lagvilava@rambler.ru Vasilii Todua, Head ofFinance Department Municipalityof Kutaisi NikoKachkachishvili, Mayor. Mobile: +(995-99)-722-7 13;E-mail: mavor.kutaisiO,imereti.&ze; GeorgeShazabidze, HeadofFinance Department IzakliBezedze, Headof Infrastructure Department Tamazi Mazgvekashvili, DeputyChairman o f Municipal Council (Sakzebulo) 40°E 42°E GEORGIA 44°N MUNICIPAL DEVELOPMENT 44°N PROJECT CITIES R U S S I A N F E D E R A T I O N POPULATION MAIN CITIES AND TOWNS 1,100,000 AUTONOMOUS OBLAST (AO) CENTER AUTONOMOUS REPUBLIC (ASSR) CENTERS NATIONAL CAPITAL GagraGagra 2,408 AUTONOMOUS OBLAST (AO) BOUNDARY AUTONOMOUS REPUBLIC (ASSR) BOUNDARIES CITIES VISITED BY IEG MISSION INTERNATIONAL BOUNDARIES A B K H A Z I A MestiaMestia SuhumiSuhumi 44°E This map was produced by the Map Design Unit of The World Bank. TkvarceliTkvarceli The boundaries, colors, denominations and any other information shown on this map do not imply, on the part of The World Bank Group, any judgment on the legal status of any territory, or any endorsement or acceptance of such boundaries. Ochamchira Ochamchira DzvariDzvari KazbegiKazbegi AmbrolauriAmbrolauri ZugdidiZugdidi SouthSouth ChiaturaChiatura Ossetia Ossetia Black Sea SenakiSenaki KutaisiKutaisi Chinvali Chinvali PotiPoti SamtrediaSamtredia 42°N ZestafoniZestafoni AkhmetaAkhmeta 42°N GoriGori OzurgetiOzurgeti KhashuriKhashuri Telavi elavi LagodehiLagodehi MtskhetaMtskheta KobuletiKobuleti T'BLISIT'BLISI GurjaaniGurjaani Batumi Batumi A D J A R A AkhaltsikheAkhaltsikhe RustaviRustavi MarneuliMarneuli AhalkalakiAhalkalaki Tsiteli- siteli- KazretiKazreti Tskaro skaro NinocmindaNinocminda T U R K E Y GEORGIA Mingechevir 0 20 40 60 Kilometers A R M E N I A Reservoir IBRD 0 10 20 30 40 50 Miles APRIL A Z E R B A I J A N Lake 36096 2008 Sevan 40°E 42°E 44°E 46°E