Document of The World Bank FOR OFFICIAL USEONLY ReportNo: 47491-AL PROJECT PAPER ON A PROPOSED ADDITIONAL FINANCING LOAN INTHEAMOUNT OFUS$5.0MILLION TO ALBANIA FORTHE SOCIAL SERVICES DELIVERY PROJECT February 23,2009 HumanDevelopmentSector Unit South CaucasusCountry Department Europe and CentralAsia Region This document has a restricteddistributionand may be usedby recipientsonly in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. CURRENCY EQUIVALENTS (Exchange Rate Effective31January 2009) CurrencyUnit = ALL (Albanian Lek) US$l.OO = ALL94.85 FISCAL YEAR January 1 - December31 ABBREVIATIONS AND ACRONYMS CAS Country Assistance Strategy DFID Department for InternationalDevelopment EA EnvironmentalAssessment ECA Europe and CentralAsia EMP EnvironmentalManagement Plan FMR FinancialMonitoring Report GDP Gross Domestic Product IBRD InternationalBank for Reconstructionand Development IDA InternationalDevelopmentAgency ISDS IntegratedSafeguards DataSheet LSMS Living StandardsMeasuresSurvey PAYG Pay-as-you-go PDO ProjectDevelopmentObjectives PIU ProjectInternalUnit SI1 SocialInsurance Institute SSDP Social Services Delivery Project Vice President: Shigeo Katsu Country Director: Jane Armitage Sector Director: Tamar ManuelyanAtinc Sector Manager: Kathy A. Lindert Task Team Leader: LorenaKostallari .. 11 FOR OFFICIAL USEONLY ALBANIA SocialServices Delivery Project Additional FinancingLoan. CONTENTS I. Introduction.......................................................................................................................................... 1 I1. Backgroundand Rationalefor Additional Financing.......................................................................... 1 I11. ProposedChanges................................................................................................................................ 3 IV. Consistency with CAS......................................................................................................................... 6 V. Appraisal of Restructuredor Scaled-up ProjectActivities ................................................................. 7 VI. Expected Outcomes............................................................................................................................. 8 VI1. Benefitsand Risks............................................................................................................................... 9 VI11. FinancialTerms and Conditions For The Additional Financing...................................................... 10 Annex 1: ResultsFrameworkand Monitoring ........................................................................................... 1 1 Annex 2: Detailedexplanationon the support for SII-IT system.............................................................. 11 Annex 3: EMP Checklist........................................................................................................................... 15 Annex 4: ProcurementArrangements ...................................................................................................... 19 This document has a restricted distribution and may be used by recipients only in the performance of their official duties.Its contents may not be otherwise disclosed without World Bank authorization. 111 ... PROJECTPAPERDATASHEET Date: February 23, 2009 Team Leader: LorenaKostallari Country: Albania Sector Manager: Kathy A. Lindert ProjectName: Additional Financingfor Social Sector Director: Tamar ManuelyanAtinc ServicesDelivery Project Country Director: Jane Armitage ProiectID: P107382 EnvironmentalCatecrorv: C Borrower:Albania ResponsibleAgency: Ministry of Finance/Social Insurance Institute - - P P Revisedestimated disbursements (Bank FY/US$m) FY 2009 2010 2011 2012 2013 Annual 2.0 1.5 1.5 2.0 Revisedproject development objectives/outcomes The original project development objective (PDO) remains valid for the ongoing activities. However, the proposed additional financing will expand the PDO, to encompassthe scaled-up activities. The PDO for the whole project, including portionsto be supported with this additional financing, is: to improve the standards of livingof poor and vulnerable populationgroups inAlbania by: (a) increasingtheir access to effective social care services; (b) assisting the Governmentto develop effective social care policy and improve its capacity for delivery and monitoring of social care services; and (c) improving the efficiency and effectiveness of the pension system in Albania through (i) improving pension system administration; (ii) institutional strengthening including improved capacity for pension policy development; and (iii)improving public understandingof the pension system. Improvedadministrationwill be basedon the databaseof individual records of contributors and beneficiaries, which should simplify the contribution collection process by reducing number of forms required, allow for better control of compliance by ensuring accurate and timely data on contributions,and facilitate and expedite the process of obtaining pension benefit by consolidating work history data of each individual in herhis account. Inaddition, training of SI1staff in undertakingactuarial projectionswould improve the SII's capacity to analyze pension system, while the public education campaign aims at enhancing public understanding of the pensionsystem. Doesthe scaled-upor restructured projecttrigger any new safeguardpolicies? No For Additional Financing [X ] Loan [ ] Credit [ ] Grant For Loans/Credits/Grants: Total Bank financing(US$m.): 5.0 Proposedterms: StandardIBRD Terms - FlexibleLoanat 6 months Libor for U S dollar, plus the Variable Spread. Payableover 25 years, with agrace periodof 10years, with level payment pattern ofthe principal amount. iv I. Introduction 1. This Project Paper seeks the approval of the Executive Directors to provide an additional loan in an amount of US$ 5.0 million to Albania Social Services Delivery project - P107382, creditnumber 3513-ALB. 2. The proposed additional financing to the Social Services Delivery Project (SSDP) would support scaling up of current project activities related to the administrative reform of the Albanian pensionsystem. 3. The Government of Albania has prioritized improvements in the effectiveness, governance and transparency of the pension system, as well as improvements in cost efficiency from accelerated reformsof pension administration, in its National Strategy for Development and Integration. In support of this strategy and in responseto a Government request, the World Bank has already allocatedsome funds from the existing SSDP projectto support initial pension system improvements. This support was provided as part of a formal project restructuring in March 2008, which involved reallocatingsome funds generated from exchange-rate cost savings under the original project. Specifically, the SSDP project was formally restructuredto support the urgent rehabilitation and modernization of the building that houses the pension archives; and design of a framework and roadmap for administrative reforms of the overall Albanian pension system. 4. Further support for improvements in the pension administration system is needed, however, to attain the Government's goals of improved efficiency and effectiveness. The funds available from the original restructuredproject(cost savings) are sufficient only for some limited activities, and as such, the Government of Albania has requested further Bank support through additional financing. The activities supported by additional financing would build on the activities envisaged under the SSDP restructuring. Specifically,the key proposed activities would support: (a) undertakingadministrativereforms of the Albanian pensionsystem; (b) developingthe CentralRegistry of contributors and beneficiaries; (c) building capacity for pensionpolicy development; and (d) efforts to promote public education on the pensionsystem. 5. The proposed additional financing is expected to improve the efficiency and effectiveness of the Albanian pension system by improving pension system administration; supporting institutional strengthening, including improved capacity for pension policy development; and improvingpublic understandingof the pension system. 11. Background and Rationale for Additional Financing 6. The Albania Social Services Delivery project was approved on June 7, 2001 and became effective on December 28, 2001. The total financing of the project is US$l5.0 million, out of which US$lO.O million was drawn from IDA and the remainder from DFID and government co-financing. The original project development objectives were to improve the standards of living of poor and vulnerable population groups in Albania by: (a) increasingtheir access to effective social care services, and (b) assisting the Government to develop effective social care policy and improve its capacity for delivery and monitoring of social care services. Social care services targeted vulnerable groups, such as the elderly, women and children without support, and disabled. To date, the project development objectives have not been changed, as the original project design did include a specific sub-component 1.3 with the objective of strengthening the development and implementationof pension policy. 7. The original project development objective (PDO) remains valid for the ongoing activities. However, the proposed additional financing will expand the PDO, to encompass the scaled-up activities. The PDO for the whole project, includingportionsto be supportedwith this additional financing, is: to improve the standards of living of poor and vulnerable population groups inAlbania by: (a) increasingtheir accessto effective social care services; (b) assistingthe Government to develop effective social care policy and improveits capacity for delivery and monitoringof social care services; and (c) improvingthe efficiency and effectiveness of the pension system in Albania through: i. improvingpensionsystemadministration; ii. institutionalstrengtheningincludingimprovedcapacityforpensionpolicy development; and iii. improvingpublicunderstandingofthepensionsystem. 8. Overall, the SSDP project is rated Satisfactory on implementationperformance and achievement of development objectives. As of January 10, 2009, total disbursements are US$9.4 million. Sectoral Background 9. Pensions in Albania are administered by the Social Insurance Institute (SII) and financed on a pay-as-you-go (PAYG) basis. Subsidies from the central budget have been increasing over time due to declining labor-forceparticipation,demographic shifts, and a highly informal economy. These fiscal pressures are likely to be exacerbated in the context of the current globaleconomic and financial crisis. Total public spending on social insuranceprograms (pensions and short-termbenefits) amounts to about 5 percent of GDP, of which 28 percent (1.4 percent of GDP) is covered by subsidies from the central budget or transfers from other social insurance schemes (deficit). 10. A Social Insurance Review prepared by the World Bank in 2006 showed that the Albanian pension system was providing pension benefitsto recipientsthat totaled 140 percent of the populationabove the age of 65. While numbers slightly above 100percent might be plausible due to an out-migrationof elderly Albanians with rights inthe pension system or becauseof early retirement, the high level of overpayments spurred Albanian authorities to begin a thorough investigationof pensionrecords. 11. Initial preliminary findings suggest that as many as 30 percent of the old age pensions being paid are fraudulent. Three sources of fraud appear to be the most common: (a) payments made to beneficiaries who are not eligible for pensions on the basis of age or employment history; (b) beneficiaries receiving duplicate pension payments in more than one location; and (c) a continuation of pension payments long after the beneficiary died ("ghost beneficiaries"). Such high degree of fraud not only substantiallyincreasesthe cost of the pension system, but it also undermines incentives for workers to contribute to a system where fraud is rampant. 12. Given this dire situation, the SI1 with the support of the Ministry of Finance has initiatedmeasuresto improve pension system administration. Some key measureshave included: (a) establishingan automatic notification systemthat informsthe SI1of all the deaths recordedby the civil registry, in order to minimizefuture ghosts beneficiaries; (b) initiating the generation of unique social security numbers for all contributorsand beneficiaries,and (c) settingup an electronic contributionregistry for all rural contributors made in 2007. However, due to the limited resources in the SI1for such a comprehensive effort, the process in implementingthese measureshas been slow. 13. In addition, the SI1 is trying to improve oversight and controls for existing pension benefit awards to detect and eliminate fraudulent cases. Progress in this direction, however, has been hampered by weaknesses in the existing administrationof benefits and records. The work histories of Albanian contributors are decentralized based on the location of the work. All records are hand-written. Standards for storage of documentation are also very poor, lacking proper protection against humidity, pests and other damage, with very low security against tampering with the data. Under the existing system SI1 can monitor up to 3000 records per month, out of more than 400,000 old-age pension beneficiaries. Without improvements, it will take more than ten years to complete processingjust for this category of beneficiaries. Even then, this would only improve records regarding the eligibility of existing beneficiaries, but not the calculation of appropriate beneJit levels, since pensionbenefitscalculationsare not yet adequately controlled. The prevention of fraud, of course, would require that both the eligibility and the benefitlevel be checked. 14. The scope and significance of weaknesses in the pension system have convinced Albanian authorities to prioritize reforms of the pension administration system on top of their agenda. Pension policy reforms also remain important for the sustainability of the scheme, but without improvedadministration, it is impossibleto establish a reasonablebaseline to serve as the foundations for policy reforms. 15. Given these challenges, the Albanian Government has approached the World Bank for support in the area of pension administration systems reforms. The Government's first request for support came in June 2007. In response to that request, the World Bank provided financing through a restructuringof the SSDP project, which reallocatedUS$2.5 million in cost savings under the original project to support initial pension administration improvements. However, this amount fell far short of the resources needed complete the administrative reforms. As such, the Government has extended a request for additionalfinancing to further implementthe proposed improvements. 111. ProposedChanges ProjectDevelopment 0bjectives 16. The original project development objective (PDO) remains valid for the ongoing activities. However, the proposed additional financing will expand the PDO, to encompass the scaled-up activities. The PDO for the whole project, includingportions to be supported with this additional financing, is: to improve the standards of living of poor and vulnerable population groups inAlbania by: (a) increasingtheir access to effective social care services; (b) assisting the Government to develop effective social care policy and improve its capacityfor delivery and monitoringof social care services; and (c) improvingthe efficiency and effectiveness of the pension system in Albania through: i. improvingpensionsystemadministration; ii. institutional strengthening including improved capacity for pension policy development; and iii. improvingpublicunderstandingofthepensionsystem. Description of Activities 17. The original projectincludedthe following components: (a) social policy development, including strengthening the development and implementationof pensionpolicy; (b) monitoringand administrationof social services; and (c) community-based social services. Projectrestructuringand reallocationof cost savings in March2008 providedresourcesto expand project support to the following activities: (a) an urgent rehabilitationandmodernizationof the building usedto housepension archives, (b) the design of a framework and roadmap to reformand strengthen of the overall pensionadministrationsystem, and (c) support for the design and implementationof the Living StandardsMeasures Survey (LSMS)2008. 18. To address the problems in the system and improve overall effectiveness and efficiency of the pension system, the Government plans to undertake a thorough administrative reform of the SII; develop an integrated and centralized system for data management and monitoring of employer and employee contributions; create a centralized, structured digital document archive with flexible searching capabilities; enable quick and reliable calculation of pension benefits based on the past work history data of the beneficiaries; and track payment of pensionbenefits. To support these developments and ensurethat the results are sustainable, there will be a need for financing of consultant services, goods (including IT hardware and software), and works, which would consist of rehabilitationworks in selected central and regionaloffices of the SI1to ensure that the new equipment is guaranteed an appropriate environment in which it will be housed and used. The additional financing would support civil works for the rehabilitation of selected offices, following the detailed requirements described in chapter V (safeguards policy). Also, some additional financing would be used for strengthening the policy development capacities in the Albanian pensionsystem as well as for the public education efforts. New activities under the Project would build on the activities that were envisaged in the restructuringofthe Project. 19. Specifically, new sub-componentsthat would be supported by the proposed Additional Financingunder the Projectinclude: A. Administrative Reform of the Pension System (US$ 2.4 million). The Project would finance goods, works and consultant services needed to improve the administration of the Albanian pension system, including: (a) revisingthe SII's strategic plan and supportingthe development of a business plan to accomplishthe strategy; (b) reviewing existing business processes and designing new business processes to be implemented inthe SII; - 4 - (c) developingand preparingsoftware to support new business processes and supporting trainingof SI1staff in new software, processesandtechnologies; (d) developingand implementingan overall financial managementsystemthat includes: i. introducingatransparentaccountingsysteminaccordancewith international accounting standards; ii. improvingbudgetingprocesses,and iii. setting up an overall internal control program to detect and reduce irregularitiesand recuperate losses; (e) training SI1 management in new management practices, planning, communication and processanalysis; ( f ) identifying and implementingdata protectionand security systems inthe SII, and (g) carrying out physical rehabilitationof selected SI1central and regional offices, only for existing SI1 central and regional offices, the land of which is duly registered with the Immoveable Property Registration Office and the public ownership of which is certified and also do not entail land acquisition or any associated involuntary resettlement. B. Development of the Central Registry of Contributors and Beneficiaries (US$ 2.2 million). This sub-component would finance consultant services and goods needed for the finalizationofthe centralregistryof contributors and pension beneficiaries,including: (a) conductingfull digitalizationof records of past work histories; (b) settingup an archiveof contributionsand benefitshistory to facilitate benefitawards; (c) developinga new system of reportingon pensioncontributions; (d) developing an integrated software solution for the management of the Central Registry of contributorsand beneficiaries; (e) identifying the development of the IT network among the SI1 branch offices, SI1 headquarters, and other key institutions;and ( f ) providingadditionalfurniture for the CentralRegistrybuilding. C. Capacity Buildingfor Pension Policy Development (US$ 100,000). This sub-component would finance consultant services and goods needed to establish the Pension Policy Analysis and IdentificationUnit at the SII. Inparticular,this component would providesupport for: (a) analyzingparametric and systemic pension systemreformoptions; and (b) developingthe legal andregulatoryframework for the selectedreformoptions. D. Public Education on Pension System (US$100,000). This sub-component would finance consultant services and goods neededfor raisingawarenessamong the Albanian public of the pensionsystem requirements and benefits. In particular, the sub-component would support: (a) preparingand carryingout public opinion surveys; (b) developingan internaland externalcommunicationstrategy to improvethe exchange of informationin relationto the pension system; (c) developinga public education campaign to improve public knowledgeofthe pension system; and (d) organizingdifferentpublic education events (workshops forjournalists, unions, etc.). - 5 - E. Project Management (US$200,000). This sub-component will aim to ensure an efficient and effective implementation of project activities and monitoring, through financing consultant services and incrementaloperating costs for the project managementunit. 20. Conditionsof Effectiveness consist of thefollowing: (a) A Project manager has been hired by the PIU, with terms of reference and qualifications satisfactoryto the Bank; and (b) The Operations Manual has been updated by the Borrower, in form and substance satisfactoryto the Bank. 21. Institutional Arrangements. Project implementation is currently under the responsibility of the Social Insurance Institute (which is under direct supervisionof the Ministry of Finance). The overall project coordination is directly supervised by the Deputy Director of the SII. Project implementation under these arrangements is Satisfactory, but there is room to strengthen project management arrangements under the Additional Financing by appointing a full-time project manager who will be responsible for the overall project implementationprocess. All fiduciary arrangements (financial management and procurement) will remain the same as under the original project. 22. Project Cost and Financing Plan. The overall cost of the proposed additional financing activities is US$5.0 million. The breakdown of the cost per each new activity is presented in the Table 1 below: Table 1: Description EstimatedCost (US$ Million) (A) Administrative Reform of the Albanian PensionSystem 2.4 (B) Development of the Central Registry of Contributors 2.2 and Beneficiaries (C) Capacity Buildingfor Pension Policy Development 0.1 (D)Public Education on PensionSystem 0.1 (E) Project Management 0.2 IV. Consistencywith CAS 23. Reforming the pension administration system is a priority for the Albanian Government. While simultaneouslycontinuingto engage in discussions on the policy front, the Government has signaled its full commitment to reformingthe pension administrationsystem, in order to increase system transparency, efficiency and effectiveness, as well as to strengthen the capacity for pensionpolicy developments and improvepublic understanding of the system. 24. The proposed changes are consistent with the CAS, where the improvement of public service delivery is one of the core pillars. Also, the CAS Progress Report (2007) specifically - 6 - indicates supporting of the Albanian pension system as one of the main priorities of the FY09 program. 25. In addition, the proposedAdditional Financingsupports the Governance Filter of the CAS. Specifically, the results of the proposed activities are expected to (a) improve transparency in the system via ensuring better access to informationfor all involved stakeholders; (b) improve the efficiency and efficacy of the Social Insurance Institute as a whole; and (c) raise awareness among Albanian public and increase citizens' involvementtowards an improved performance of public service delivery. V. Appraisal of Restructuredor Scaled-upProjectActivities Overall, the restructuring/scaling up of project activities does not involve any exceptions to Bank policies. 26. Safeguards Policy. The Additional Financing for the Social Services Delivery Project has been categorized as EnvironmentalAssessment (EA) Category Cyas was the case for the original project. While the EA category remained the same during the formal project restructuringof the SSDP in March 2008; the project included some rehabilitation works for the SI1 archive building, which required a higher level of environmental screening. As a result, an Environmental Management Plan (EMP) was agreed with the government and will be closely monitored during implementationof the civil works. In addition, the original ISDS of the SSD projectis beingrevised, to reflectthe agreementwith the government on the revised EMP. 27. The Additional Financing supports only minor renovation and rehabilitation of existing government offices, involving no excavation or new construction. The environmental mitigation measures required are limited to basic good construction practices including management of the construction site (noise, dust, access) and construction wastes (possibly including asbestos waste material and other hazardous materials common to such works), ensuring the health and safety of the construction workers and the public. The ECA Region's EnvironmentalManagement Plan (EMP) Checklist will be usedto cover these aspects (see Annex 3). The main purpose of this checklist is to be directly usable and applicable in bidding documents by designers and as an integral part of contract documents for civil works to be financed under the Project. The EMP Checklist also facilitates monitoring of environmental compliance, which will be checked on site alongside other quality criteria by the SI1 or PIU experts. 28. The project will not support land acquisition or any associated involuntary resettlement. All rehabilitationcivil works planned will be executed only on existing SI1 central and regional offices, the land of which is duly registered with the Immoveable Property Registration Office and the public ownership of which is certified and also do not entail land acquisition or any associated involuntary resettlement. The screening and approval of the proposed rehabilitationsites will be done by the Bank team. No civil works shall be carried out under the project if the SI1 will not: (i) ensure that the EMP checklist applies to each bidding document and constitutes an integral part of each contract in relation to said work, and (ii)seek the Bank's prior approvalfor each site proposedfor said works. 29. Financial Management. As is the case under the original project, the financial management functions of the proposed Additional Financing will be handled by the project implementationunit within the Social Insurance Institute(which is under direct supervisionof the Ministry of Finance) which will be responsible for the flow of funds, accounting, reporting, and - 7 - auditing. There would be no changes in financial management and disbursement arrangements. The financial managementarrangements of the Projecthave been reviewedperiodicallyas part of projectsupervisionand havebeenfound Satisfactory. 30. The financial management arrangements of the original project are acceptable to the Bank. The overall FM risk for the project is moderate. Similar audit arrangements will be adopted for the additional financing, which will be included in the overall project audit. The audit of the projectwill be conductedby independent private auditors acceptableto the Bank and on terms of reference(s) acceptableto the Bank. 31. Project management-oriented Interim Un-audited Financial Reports (IFRs) - previously known as Financial Monitoring Reports (FMRs) - will be used for the additional financingmonitoringand supervision. The existing formats of the IFRswill be used and the PIU will produce a full set of IFRs/FMRs every quarter throughout the life of the project and will submit them to the Bank no later than 45 days after the end of the quarter. 32. Procurement: Procurement arrangements and related risks are discussed in Annex 4 to this document. VI. ExpectedOutcomes: 33. The original project development objective (PDO) remains valid for the ongoing activities. However, the proposed additional financing will expand the PDO, to encompass the scaled-up activities. The PDO for the whole project, includingportions to be supported with this additional financing, is: to improve the standards of living of poor and vulnerable population groups in Albania by: (a) increasingtheir access to effective social care services; (b) assistingthe Governmentto develop effective social care policy and improveits capacity for delivery andmonitoringof social care services; and (c) improvingthe efficiency and effectiveness ofthe pensionsystem in Albaniathrough: i. improvingpensionsystemadministration; ii. institutionalstrengtheningincludingimprovedcapacityforpensionpolicy development; and iii. improvingpublicunderstandingofthepensionsystem. 34. Pension system administration will be improved through the development of new business processes in the SII, the establishment of a client database of individualized records necessary for a modern public pension system and establishment of automated systems for efficient delivery of services to the beneficiaries. Client services of Social Insurance Institution (SII) will be improved making inquiries easier and services faster. The institution of individualizedrecords and an automated system for beneficiarieswill support the assessment of possible pension reform options and informed policy making through improved accuracy and availability of pension system data. Improvementswill provide for a more efficient monitoring and contribute to the efforts of the SI1 in identifying fraudulent claims. The project will also support the institutionalstrengthening of the SI1 in pension policy analysis and development, the design and implementation of public opinion surveys, and an educational campaign to promote public awarenessabout the new set of practices inthe pensionadministrationsystem. 35. The additional outcome indicators will track improved client services in pension administration, the creation and operation of a central registry of contributors and beneficiaries, - 8 - the establishment of an actuarial unit in the Social Insurance Institute, and drafting of actuarial projections. 36. The following indicators will be added and monitored to evaluate project performance(details inAnnex 1): 0 Improvedclient services inthe pensionadministrationsystem, as measuredby: o Reducednumber of documents requiredfor applyingfor the pensionbenefit; o Number of days for providing formal response to pension applications (positive or negative) less than 30 days, on average. 0 Establishment and maintenance of individual records of contributorsand beneficiaries, as measuredby: o Increasednumber ofcontributorswith individual records; o Increasednumber ofbeneficiarieswith eligibility andbenefit levels checked; 0 Improvedcapacity ofthe SI1in pensionpolicy analysis, as measuredby: o Increasednumber of SI1 stafftrained in undertakingactuarialprojections. 0 Improvedtransparency and public understanding of the pension system, as measured by surveys indicating: o Increasednumber of individualswho know their pensionrights; o Increased number of individuals/companieswho indicate they have improved access to informationabout their benefits and contributions. VII. Benefits and Risks Risk Original Mitigation Measure Risk Risk Rating Rating after Mitigation Unavailabilityoftimely data from S Formalagreement is beingprepared M the Tax Department on between SI1and the Tax Departmenton a contributions may hinderthe timetableand a protocolfor the provision development of individual by the Tax Department of data on contributionrecords contributionsin electronic form Staffturnover may reducethe M Establishment of an actuarialdepartment L effectiveness oftechnical inthe SI1and commitmentto maintainat assistance andtraining. leastthree staffwithin the Department, that were trainedthroughthe project. Training materialsand manualswill also support capacity buildingof SI1staff in other deDartments. Unavailabilityof Borrower M Commitmentby the Borrowerto secure L counterpart financing contributions an allocationin the annual SI1budget for may affect project progress the borrowercontribution; explicit prioritization ofthese reforms in the National Strategy for Development and Integrationalso signals such commitment Difficulties in implementingnew M Trainingof staffon the advantagesof the L businesspractices due to possible new business processes; motivating resistancefrom SI1staff who are through improvedwork environment; - 9 - Risk Original Mitigation Measure Risk Risk Rating Rating after Mitigation more comfortableworking with demonstration of efficiency existing systems and processes improvements. Following Parliamentelections in M The projectis focused on fairly non- L mid 2009, the newly-elected Government may be reluctantto continuethe work with the multipartisanworking group on pensionpolicy reform M L continuingunder Albanian pension system. I VIII. FinancialTerms and Conditions for The Additional Financing 37. The Additional Financing is under IBRD terms, flexible Loan at 6 months Libor for U S dollar, plusthe Variable Spread. Payable over 25 years, with a grace period of 10 years, with level repayment pattern of the principal amount. Front-end Fee is 0.25 percent of the Loan amount. - 10- Annex 1: ResultsFrameworkand Monitoring ALBANIA: Social ServicesDelivery ProjectAdditional Financing Table I:Results Framework Development Objective Outcome/ImpactIndicator Project reports The PDO for the whole project, including (1) improvedclient services in (1) MoF/SII portions to be supported with this pensionadministration; reports additional financing, is: to improve the (2) centralregistry of (2) Public standards of living of poor and vulnerable contributors and beneficiaries opinion surveys population groups in Albania by: (a) introducedand operating; (3) MoF/SII increasingtheir access to effective social (3) improvedcapacity in the periodical reports care services; (b) assisting the SI1 for pensionpolicy and other Government to develop effective social development with actuarial participants' care policy and improve its capacity for projectionsand impactof information. delivery and monitoring of social care reformoptionsundertakenby services; and (c) improvingthe efficiency SII; and effectiveness of the pension system in Albania through (i) improving pension (4) improvedtransparency and system administration; (ii) institutional public understandingof the strengthening includingimprovedcapacity pension system for pension policy development; and (iii) improving public understanding of the pensionsystem. Outputfrom each Component Output Indicators Project reports A. Administrative reform of theAlbanian Pension System (a) Improvedclient services inthe pension (5) Reducednumber of (1) MoF/SII administrationsystem documents requiredfor records applyingfor the pension (2) Project benefit; reports (6) Numberof days for (3) Public providingformal responseto opinion surveys pensionapplications(positive or negative) less than 30 days on average. B. Development of the Central Registry of Contributorsand Beneficiaries (a) Establishment and maintenance of (7) Increasednumber of (1) Project individual records of contributors andcontributors with individual reports beneficiaries records. (8) Increasednumber of (2) MoF/SII beneficiarieswith eligibility formal databases and benefit levels checked. - 11 - Development Objective Outcome/ImpactIndicator Project reports C. Capacity Buildingfor Pension Policy development (a) Improvedcapacity of the SI1in (9) Increasednumber of SI1 (1) Project pensionpolicy analysis staff trained in undertaking reports actuarialprojections. D. Public education on Pension System (10) Increasednumber of (1) Public (a) Improvedtransparency and public individualswho know their opinion surveys understandingof the pension system pension rights; (1 1) Increasednumber of individuals/companieswho indicatethey have improved access to informationabout their benefits and contributions. Table 2: Arrangements for ResultsMonitoring Monitoring Indicators Baseline Value Target Value (1) Improvedclient services in pension N/A (to be defined, N/A (to be defined, administration; following the first survey) following the first survey) (2) Central registry of contributorsand None Center Registryestablished beneficiariesintroducedand operating; and operating (3) Improvedcapacity in the SI1 for pension policy development with actuarial None Actuarial Unit in SI1 projectionsand impact of reform options established, projections undertakenby SII. drafted (4) Reducednumber of documents required 8 on average 3 documents for applyingfor the pensionbenefit; (5) Number of days for providing formal 60 days less than 30 days responseto pension applications(positiveor negative) less than 30 days on average. (6) Increasednumber of contributors with 0 400,000 (rural + urban) accessible electronic individual records. (7) Increasednumber of beneficiarieswith 40,000 120,000 eligibility and benefit levels checked. (8) Increasednumber of SI1stafftrained in 1 10 undertakingactuarialprojections. (9) Increasednumber of individualswho N/A (to be defined, N/A (to be defined, knowtheir pensionrights; following the first survey) following the first survey) (10) Increasednumber of individuals/companieswho indicatethey N/A (to be defined, N/A (to be defined, have improvedaccess to informationabout following the first survey) following the first survey) their benefits and contributions. - 12- Annex 2: DetailedExplanationon the Support for SII-IT System ALBANIA: Social ServicesDeliveryProjectAdditionalFinancing 38. The main activity under the additional financing will be the development and implementation of an integrated system for the centralized management of social benefits (calculation of benefits and automatic accountingof contributions). It is envisaged that the new system will be a completely centralized system following and including internationally acknowledged standards for system back-up and disaster recovery and will also comprise a centralizeddigitalized archive of the existing paper documentation. The system will be based on a personal (individual) account for each contributor with automatic calculation of and managementof benefit payments. 39. Although the system will be managed centrally, all regional and local offices will have access the system, it is also envisaged that all stakeholders (contributors, pensioner, employers, tax department, banks of second level, Albanian post, etc) will have on-line (read only) access. It is planned to ensure a connection with the Tax Department and payment agent systems for the control of contributions and checking that contributions payments are received and pensions are paid. A formal agreement between the SI1 and the Tax Department on the timetable and a protocol for the provision by the Tax Department of contribution data in electronic form is being drafted and is expected to be finalized by the start-up of project implementation. The systemwould comprise the following modules: Individual accounts (register of all actual and potentialbeneficiaries); Registrationand ContributionsPayment(employers, employees, migrantworkers); Qualificationrules(existence of identificationnumber [individual account], statutory retirementage and minimumcontributionperiodcompliance, duplicatecheck); Eligibility criteria (applying business rules in accordance with legislation provisions that have impact on benefit calculation: benefit types, gender, calculation rules, and other conditions.Benefitscalculation algorithms introducedin software design); Pension Claim(Qualification, LegislationRules, Calculation); Payment: Pensions/Benefits payment and accounting, expendituresexecution; Debt management(managing of all contributionsand benefitsdebt); Qualitative and quantitativesystem monitoringand control; Reports & Statistics. Central to the developed applicationwill be creation and management of individual accounts for all current and potentialbeneficiaries.All the data providedby employers through in payroll lists will go automatically in each individual accounts. The applicationwill be supported by an accounting system and will be integrated with the Treasury system which will make payment control and managementof cash flow more efficient. 42. An important aspect of the system will be the completion of the electronic archive where it is aimed to digitize the paper based document archives located at the different directorates and agencies and to create a centralized, structured digital document archive, with flexible searching capabilities. The aim is to scan, index and digitize all existing paper documents. This will be complemented by the creation of a `smart indexing structure' to allow easy search and retrievalifrequired. 43. The implementationof such an archive at the Social Insurance Institutewill have the following benefits: 0 It will be possibleto access the document archivefrom every location; 0 It will be possible to search for an individuals contribution records based on different criteria, relatethese contributionrecords to a person; 0 Easier and more systematic access to the necessary documents will reduce the time neededto gather a persons dataneededfor entitlementdecisions; 0 The creation of a systematized and comprehensive archive will also help the Instituteto detect possible missingdata and frauds. Development Plan 44. The implementationofthe system is foreseen inthree phases: 1. Preparatory phase which would include: verification and revisionof all SI1Businessprocesses; study of possibleconnectivitybetweenoffices; hardware assessment; review and development of disaster recoveryoptions; study of existingpaper documents, leadingto the development of a plan for the development ofthe archive. 2. Designand development phase - - design and development ofthe archive; design and development ofthe main integratedsystem. 3. Implementationand roll-out phase - - archive system; central level and regional levels; - local level. -14- Annex 3: EMP Checklist ALBANIA: Social ServicesDeliveryProjectAdditional Financing PART 1: INSTITI I'IONAL & ADMINISTRATIVE Country Project title Scope o f project and activity Institutional WB Project Management Local Counterpart andor Recipient arrangements (Project (Name and Team contacts) Leader) Implementation Safeguard Local Counterpart Local Contactor arrangements Supervision Supervision Inspectorate (Name and Supervision contacts) .................................................................................... SITE DESCRIPTI Name o f site Describe site I Attachment 1: Site Map Y [ IN [ 3 location ................................................................................................................................................................................................................................................................Y Identify national & local legislation & permits that apply to project ......................................................................................... activity .................................. PUBLIC CONSULTATION Identify when / where the public consultation P..rocess took place ................................................................................................................................................................................................................................................................¬ INSTITUTIONAL CAPACITY BUILDING Will there be any [ ] Nor [ ]Y ifYes, Attachment 2 includes the capacity building program capacity building? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 1 5 - s2 I 00 e I Annex 4: Procurement Arrangements ALBANIA: SocialServices Delivery Project Additional Financing 45. Currently project implementationis the responsibilityof the Project Implementation unit (PIU) within the Social Insurance Institute (SII), which is under direct supervision of the Ministry of Finance. The SI1 is carrying out the procurement function so far, supported by a part- time procurement consultant. Although the Project was rated so far "Satisfactory" on procurement, given the number of activitieskontractsinvolved in this additional financing, a full time procurement officer should be recruited, replacing the existing part time position. The procurement capacity assessment of the PlLT was monitored during procurement supervision missions and also based on the prior review contracts. Given the country/environmentrisk, and also some delays on implementationof the current project, the procurement risk is recommended to be kept at the same level "High". On these bases, respectiveprior review thresholds are listed in the procurementplan attachedto this Annex. 46. 2. While the on-going Project is governed by the procurement and consultants guidelines of January 1999, procurement under this additional financing will be governed by current World Bank's guidelines: "Guidelines: Procurement under IBRDLoans and IDA Credits" dated May 2004 revised October 2006 and "Guidelines: Selection and Employment of Consultants by World BankBorrowers" dated May 2004 revisedOctober 2006 and the provisions stipulated in the LoanAgreement. 47. Procurement of Works: The Project will finance civil works contracts for rehabilitationof SI1Regionaloffices. The civil works will be packagedto the extent possiblefor tendering under NCB or ICB procedures to increase competition. The following procurement methods will be used: (a) International CompetitiveBidding (ICB) for civil works contracts US$2,000,000 and over; (b) National CompetitiveBidding (NCB) for contracts more than US$lOO,OOO equivalent and less than US$2,000,000. The ECA regional sample bidding documents for NCB works contracts will be used. Any other bidding documents for NCB will follow the conditions applicable for the NCB procedures established in the Loan Agreements and shall be acceptable to the Bank; and (c) Shopping (minor works) procedures for civil works contracts less than US$lOO,OOO equivalent on the basis of three written quotationsobtained from qualified contractors. 48. Procurement of Goods: Goods procured under this Project include information technology (IT) systems, office furniture, etc. The PIU will use the Bank's Standard Bidding Documents (SBDs) for all ICB. Contracts for goods will be grouped in bid packages as much as feasibleto increase competition. (a) International Competitive Bidding (ICB): Goods packages estimated to cost US$lOO,OOO and above per contract will be procured through ICB. IT equipment and software would be procured as separate packages and using a single-stage procurement procedure; (3) Shopping; Goods packages estimated to cost less than US$lOO,OOO per contract may be procured through shopping procedures on the basis of at least three quotations. The PIU would solicit quotations from at least three (normally 5-6) suppliers from eligible source countries; and - 19- (c) Direct Contracting: Where certain goods are available from one supplier or in cases where compatibility with existing equipment requiresthat goods must be procuredunder Direct Contracting(single-source)and havingobtainedprior approval from the Bank (in accordancewith paragraphs3.6 and 3.7 ofthe ProcurementGuidelines). 49. Selection of Consultants: Consulting services under this project would include technicalassistance for review of the SI1strategic and business plan, public education campaign, capacity building; etc. The project will also finance training and any study tour. Short lists of consultants for services estimated to cost less than US$lOO,OOO equivalent per contract may be composed entirely of national consultants in accordance with the provisions of paragraph 2.7 of the ConsultantGuidelines. Selection methods will be as follows: Consulting services estimated to cost normally US$200,000 or more per consultant contract will be procured through Quality and Cost-BasedSelection (QCBS) method; this method also would be used for smaller contract amounts of a complex nature. Consulting services costingeach less than US$200,000 equivalent may be procured through Consultants Qualijkations (CQ, method. The Fixed Budget (FB) method of selection may be used for simple assignments when the contract amount should not exceed the allocated budget. The consulting contract for project audit may be selected through Least Cost Selection (LCS) method. Individual consultants will be selected in accordance with Section V of the Consultants Guidelines. Single source (SS) method may be used for consulting assignments with prior Bank approval in accordance with parag.3.9 through 3.13 of the Consultants Guidelines. 50. Training: Training will include study tours connected with project component activitiesand reflectedin the Annual Training and Study Tour plans, to be approved by the Bank and after that changes and additions would be reviewed separately as they occur and would cover participants, agenda for training events, and budget estimate. Consultants required to prepare, facilitate, or conduct training activities shall be selected under Consultants Guidelines described above, and shall be includedinthe Procurement Plan. 51. Operating Costs: The Project would finance operating expenditures incurred by PIUsuch as office supplies, utilities and communication. C. ProcurementPlan 52. A procurement plan is prepared and agreed during Negotiations on February 10-12, 2009. This procurement plan will be available in the project database and on the Bank external website, and will be updated annually or as required in agreement with the World Bank Project Team to reflect project implementationneeds and improvementsin institutionalcapacity. D. FrequencyofProcurementSupervision 53. In addition to the prior review supervision carried out from World Bank, as part of the post review missions, the procurement capacity assessment of the SII's PIU will be updated. Procurementpost-review missionswill take place minimum once a year. E. Detailsofthe ProcurementArrangements InvolvingInternationalCompetition 1. Goods and civilworks (a) List of contract packages to be procured following ICB, direct contracting, and other methods: See ProcurementPlan(below); and - 20 - 2. Consulting Services (a) List of consulting assignments with short-list of international and local firms and individual consultantsare indicatedbelow. ProcurementPlan I General Agreed date of procurementPlan Original: February 10, 2009 Dateof GeneralProcurementNotice: estimated February 2009 ProcurementMethod MethodThreshold Prior Review Threshold /Comments 1. ICB for Goods > $100,000 All subject to prior review 2. ICB for Civil Works >$2,000,000 All subject to prior review 3. NCB for Civil Works <$2,000,000 Firsttwo contracts and all contracts more than $200,000 subject to prior review 4. Shopping for Goods, Civil Works <$100,000 Firsttwo contracts subject to 5. IDirect Contracting * I All subject to prior review Detailedprocurement contracts for goods and works are enclosed in the table below. Selection Method Applicable Prior Review Threshold MethodThreshold /Comments 1. CompetitiveMethods (Firms) QCBS >$200,000 All prior review 2. Competitive Methods (Firms) LCS Any amount All contracts more than $100,000 each 3 . CompetitiveMethods (Firms) FB Any amount All contracts more than $100,000 each 4. Competitive Methods (Firms) CQ <$ 200,000 Firsttwo contracts and all more than $100,000 subject to prior review 5. Individual consultants (Individual) - First two contracts and all more than $50,000 subject to prior review 6. ,Single Source (Firms and individual) - * All subject to prior review 7. TOR for consultingcontracts All methods/values All subject to prior review - 2 1 - 2. Short list comprising entirely of national consultants: Short list of consultants for services, estimated to cost less than $100,000 equivalent per contract, may comprise entirely of national consultants in accordance with the provisions of paragraph 2.7 of the Consultant Guidelines. 3. ConsultingServices assignments and contracts for goods and works with selection methods and time schedule: Description Type Number Procure Preparation Selection Contract Contract Prior of slices/ merit of TORS/ Signing Completion Review itemdsub- Method invitation packages ComponentA - Administrative Reform of theAlbania Pinsion System (1) TA on revisionof SI1 strategic planand businessprocessesand designing new business processes (internationaland localconsultants) cs 2 Ind 15-Mav-09 I15-Jun-09 I15-Jul-09 I30-Oct-09 I No (2) Development of software for new business process includingtraining of SI1 staff in new software G 1 ICB (3) Hardhofiware for Development and implementationof finance 15-Nov- management system G 1 ICB 15-Sep-09 09 01-Jan-10 30-Apr-10 Yes (4) Training of SI1 managementin new Traini Annual managementpractices ng Multiple Plan identificaiion and implementationof data II 15-Mar- 15-April- 15-May- protectionsystem cs 1 CQ 09 09 09 30-Aug-09 NO (6) Hard and software for 1 identification and implementationof data protectionsystem G SH 1-Sep-09 1-Oct-09 1-Nov-09 30-Dec-09 Yes (7) Rehabilitationof SI1 NCB/S regionaloffices (*) cw multiple H 1-Aug-09 30-Sep-09 15-Oct-09 I-Jan-10 Yes/No ComponentB - Development of Central Registry of Contributors and BeneJciaries (8) Equipmentfor digitalization of records of past work histories G 1 ICB 1-May-09 1-July-O9 1-0ct-09 1-Jan-I O Yes (9) Settingup an archive for contributions and benefits history to facilitate benefitawards G ICB 1-Jul-09 I 1-Sep-09 1-Dec-09 1 1-May-IO 1 Yes (10) Software for new G ICB 1-Jun-09 [1-Aug-09 1-Nov-09 I 1-Feb-10 [ Yes - 22 - Description Number Procure Preparation Selection Contract Contract Prior of slices/ -ment of TORS/ Signing Completion Review itemdsub- Method invitation I packages system of reportingon pension contributions (1 1) Developmentof Integrated software solution for managementof Central I 1 Registry G 1 ICB 15-Jul-09 15-Se~09 15-Dec-09 1-Apr-10 Yes (12) Identificationfor IT network among SI1regional offices, headquarters, and other key ins&utions- I cs CQ 1-Apr-09 1-May-09 1-Jun-09 1-Sep-09 No (13) FumitureiIT equipment for central ICB 1-Aug-09 1-0ct-09 1-Jan-10 1-Am- 10 Yes Buildingfor Pension Policy Development (14) Support for reform I options of paramedic and systematic system cs Ind 1-Apr-09 1-May-09 1-Jun-09 1-Sep-09 No (15) Support in development of legal framework cs 1 Ind 1-Sep-09 1-Oct-09 1-NOV-O9 1-Feb-09 No Component D -Public Education on Pension Reform ; (16) Public opinion I-Au -09 I-Se -09 1-0ct-09 1-Jan-10 No communicationstrategy (internationalexpertise) I-A r-10 1-Ma -10 1-Jun-10 1-Nov-10 No ( 1 8) Public education campaignto improvepublic knowledge on pension ~ system cs I-Jan-IO 1-Apr-10 No (19) Organizationof public events (workshops, etc) cs 1-Jan-10 1-Feb-10 No - Component E -Project management (25) Project Manager cs 1 Ind I I-Mar-09 I I-Apr-09 1-May-09 1-Jun-12 Yes (26) Procurement consultant cs 1 1-May-09 1-Jun-12 Yes (27) Financialofficer cs 1-May-09 I-Jun-12 Yes (28) Projectaudit I cs 1 S 1-Mar-09 1-Apr-09 I-Jan-IO 1-Jun-12 Yes (29) Operating cost for PIU I oc - I I I TOTAL: US $5,000,000 I Note: (*) The civil works will be packagedto l e extent possible for tendering under1 2B to increase competition - 23 - Iv. Ex-Post review: Contracts for goods, works and consulting services below prior review thresholds are subject of Bank's selective ex-post review. Periodic ex-post review by the Bank will be undertaken during regular supervisionmissions.Procurement documents, such as bidding documents, bids, bid evaluation reports and correspondence related to bids and contracts will be kept readily available for the Bank's ex-post review during supervision mission or at any other point of time. Bank's missionwill review at least one out of every five contracts which are subject of ex-post review. Record Keeping: The PIU of SI1will maintaincomplete procurement files which will be reviewed by supervision missions. All procurement related documents that requires prior review will be cleared by the World Bank's Procurement Accredited Staff (PAS) and related technical staff. Procurement informationwill be recordedby the PIU and submitted to the Bank as part of quarterly (FMRs) and annual progressreports. - 24 - IBRD 33359R 19°EM O N T E N E G R O 20°E 21°E S E R B I A Maja Jezercė (2693 m) ValbonValbona Valbona MALSI E MALSI ALBANIA North AlbaniaT n Alps R O P O J Ė To MADHE MADHE Podgorica Bajram Bajram Han i Hoti Han Hoti Curri Curri KoplikKoplik Drin Fierzė Fierzė H A S Lake S H K O D Ė R To Scutari Krumė Krumė Prizren Shkodėr Shkodėr P U K Ė (Scutari) (Scutari) Koman Koman PukėPukė Fush Fush Arrėz Arrėz KalimashKalimash Kukės Kukės 42°N K U K Ė S 42°N Bunė L E Z H Ė M I R D I T Ė Zall-Rec Zall-Rec Shėngjin Shėngjin Drinit Bay RubikRubik KurbneshiKurbneshi Lezhė Lezhė Rrėshen Rrėshen DriniZi Lake Peshkopi Peshkopi ShkopetShkopet Ulzės Fushė Kuge Fushė Kuge Laē Laē UlėzUlėz Rodonit Bay Burrel Burrel LAĒ LAĒ D I B R A Mamurasi Mamurasi M AT Krujė Krujė A d r i a t i c Lalėzit Bay K R U J Ė FYR Fushė Fushė Bulquizė Bulquizė DURRĖS DURRĖS Krujė Krujė MACEDONIA S e a BULQIZĖBULQIZĖ TIRANĖTIRANĖ Durrės Durrės Vorė VoVorėrė Shijak Shijak (TIRANA)(TIRANA) Durrėsit T I R A N Ė Bay Ibė Ibė Librazhd Librazhd To Kavajė Kavajė Krrabė Krrabė Struga LIBRAZHDLIBRAZHD KAVAJĖKA AJĖ PEQINPEQIN Elbasan Elbasan Lake Vidhės VidVidhėshės Perrenjas Perrenjas 41°N Peqin Peqin E L B A S A N Ohrid 41°N Karavastasė LUSHNJĖLUSHNJĖ Cėrrik Cėrrik Bay Lushnjė Lushnjė POGRADECPOGRADEC Kajan Kajan Lake Gramsh Gramsh Pogradec Pogradec Prespa KUĒOVĖKUĒOVĖ G R A M S H F I E R Kuēovė Kuēovė Little Fier Fier Marinzė Marinzė Berat Berat Lake Prespa Patos Patos Maliq Maliq B E R AT DEVOLLDEVOLL Kafaraj Kafaraj Ballsh Ballsh K O R Ē Ė Korēė Korēė Vjosė Bilisht Bilisht MALLA-MALLA- 0 10 20 30 40 Kilometers SKRAPARSKRAPAR KASTERKASTER Ēorovodė Ēorovodė Selenice Selenice 0 10 20 30 Miles Vlorės Vlorė Vlorė TEPELENĖTEPELENĖ Bay Krahės Krahės Ersekė Ersekė 19°E Mavrovė Mavrovė P Ė R M E T V L O R Ė KOLONJĖKOLONJĖ Tepelenė pelenė Kelcyrė Kelcyrė Pėrmet Pėrmet ALBANIA Vjosė GJIROKASTĖRGJIROKASTĖR SELECTED CITIES AND TOWNS P i n d u s GREECE Gjirokastėr Gjirokastėr M DISTRICT CAPITALS 40°N DELVINĖDELVINĖ 40°N NATIONAL CAPITAL Delvinė Delvinė RIVERS To Ioįnina Sarandė Sarandė MAIN ROADS Kakavija Kakavija o u n t a i n s RAILROADS GREECE SARANDĖSARANDĖ This map was produced by the Map Design Unit of The World Bank. DISTRICT BOUNDARIES The boundaries, colors, denominations and any other information shown on this map do not imply, on the part of The World Bank INTERNATIONAL BOUNDARIES Group, any judgment on the legal status of any territory, or any endorsement or acceptance of such boundaries. 20°E 21°E JULY 2006