Document of the World Bank FOR OFFICIAL USE ONLY Report Number: 61923 - MD INTERNATIONAL DEVELOPMENT ASSOCIATION COUNTRY PARTNERSHIP STRATEGY PROGRESS REPORT FOR THE REPUBLIC OF MOLDOVA FOR THE PERIOD FY09-FY13 May 12, 2011 Ukraine, Belarus, Moldova Country Management Unit Europe and Central Asia Region International Finance Corporation Middle East, North Africa and Southern Europe Region This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its content may not otherwise be disclosed without World Bank authorization. CURRENCY EQUIVALENTS GOVERNMENT FISCAL YEAR (Exchange Rate Effective March 31, 2011) January 1 to December 31 Currency Unit = MDL (Moldovan Leu) WEIGHTS AND MEASURES US$1 = MDL11.9096 Metric System ABBREVATIONS AND ACRONYMS AAA Analytical & Advisory Activities IMF International Monetary Fund AEI Alliance for European Integration KfW KfW Entwicklungsbank AF Additional Financing MCC Millennium Challenge Corporation CEM Country Economic Memorandum MDL Moldovan Leu CEP Competitiveness Enhancement Project NBM National Bank of Moldova CPAR Central Public Administration Reform MIGA Multilateral Investment Guarantee Agency CPIA Country Policy and Institutional Assessment MDTF Multi-donor Trust Fund CPS Country Partnership Strategy MSIF Moldova Social Investment Fund CPSPR Country Partnership Strategy Progress Report NPL Non-Performing Loans DFID UK Department for International Development PEFA Public Expenditure & Financial DPO Development Policy Operation Accountability EBRD European Bank for Reconstruction and PER Public Expenditure Review Development PFM Public Financial Management EC European Commission PRSC Poverty Reduction Support Credit EFA/FTI Education for All/ Fast-Track Initiative RISP Rural Investment and Services Project EIB European Investment Bank ROSC Accounting and Auditing Report on the EU European Union Observance of Standards and Codes ESRP Economic Stabilization and Recovery Program SME Small and Medium-size Enterprises FDI Foreign Direct Investment SIDA Swedish International Development FY Fiscal Year Cooperation Agency GAC Governance and Anti-Corruption TA Technical Assistance GDP Gross Domestic Product TF Trust Fund GEF Global Environment Facility TSA Targeted Social Assistance ICT Information and Communication Technologies UNDP United Nations Development Program IDA International Development Association UNICEF United Nations Children’s Fund IEG Independent Evaluation Group USAID United States Agency for International IFC International Finance Corporation Development The World Bank Group Team IDA IFC Vice President Philippe H. Le Houerou Vice President Rashad Kaldany Country Director Martin Raiser Country Director Dimitris Tsitsiragos Task Team Leaders Connie Luff, Carolina Odobescu Task Team Leader Ana Maria Mihaescu i The Moldova CPS PR was prepared under the guidance of Martin Raiser, Country Director, with overall direction from Indermit Gill, ECA Chief Economist, and M. Willem van Eeghen, Lead Economist. The core CPS PR team included Connie Luff, Ana Maria Mihaescu, Carolina Odobescu and Faith Tempest. Contributions are gratefully acknowledged from Melanie Marlett, Pablo Saavedra, Marius Vismantas, Paolo Belli, Tamara Sulukhia, Gerardo Corrochano, Peter Thomson, Mamta Murthi, Dina Umali-Deininger, Benu Bidani, Caroline Kende-Robb, Dino Merotto, Scherezad Latif, Rajeev Swami, Martin Melecky, Mariana Doina Moarcas, Wendy Jo Werner, Vara Vemuru, Kiran Pandey, Vica Rosario Bogaerts, Jock Anderson, Jyoti Bisbey, Luisa Masutti, Enver Kamal, Elmas Arisoy, Roumeen Islam, Tevfik Mehmet Yaprak, Abebe Adugna, Iryna Trach, Elena Kladova, Zoran Anusic, Julia Smolyar, Anatol Gobjila, Elena Corman, Sandu Ghidirim, Victor Neagu, Irina Guban, Ghenadie Cotelnic, Lilia Razlog, Iaroslav Baclajanschi, Felicia Pricop, Kristin Sinclair, and Sophia Georgieva. Administrative support was provided by Olesya Gafurova, Ala Muntean and Valentina Golokoz. ii   COUNTRY PARTNERSHIP STRATEGY PROGRESS REPORT REPUBLIC OF MOLDOVA TABLE OF CONTENTS I. Introduction ...................................................................................................................................... 1 II. Relevance of the CPS....................................................................................................................... 2 III. Country Context ............................................................................................................................... 3 IV. Results and progress towards achieving CPS objectives and outcomes .......................................... 5 V. Post-crisis agenda and modifications to the CPS ............................................................................. 9 VI. Risks............................................................................................................................................... 12    Tables and Figures Table 1. Pledges made at the Consultative Group: Moldova Partnership Forum (USD millions) ............... 7  Table 2. CPS Progress Report Indicative Program for the period FY11-FY13 (USD million)* ................ 11  Annexes ANNEX 1: CPS FY09-13 REVISED RESULTS MATRIX AND PROGRESS TO DATE ..................... 14  ANNEX 2: LIST OF ACTIVE BANK-ADMINISTERED TRUST FUNDS IN MOLDOVA.................. 33  ANNEX 3: DEVELOPMENT PARTNER COMMITMENTS BY SECTOR, CONSULTATIVE GROUP: MOLDOVA PARTNERSHIP FORUM, MARCH 2010............................................................................ 34  ANNEX 4: STANDARD CPS ANNEXES ................................................................................................ 35  iii   MOLDOVA COUNTRY PARTNERSHIP STRATEGY PROGRESS REPORT I. Introduction 1. This Progress Report assesses implementation of the current joint Bank-IFC Moldova Country Partnership Strategy (CPS). The CPS focuses on three pillars: (i) improving economic competitiveness; (ii) minimizing social and environmental risks, building human capital, and promoting social inclusion; and (iii) improving public sector governance. The CPS envisages annual commitments of approximately USD 45-50 million. The IDA-15 lending envelope, along with an additional USD 20 million, and USD 11.2 million from the IDA Crisis Response Window, have been fully utilized. IFC has actively increased its activities in the last three years with a total of USD 79 million in investments and envisages annual commitments of USD 30-40 million. 2. The CPS was prepared during a time of political and economic uncertainty and was deliberately kept flexible. Political and economic developments over the last two years confirm that this has been an appropriate strategy. The parliamentary elections of 2009 delivered a mandate for change, expressed in Moldova’s European aspirations. The global economic and financial crisis hit Moldova hard and required the Bank to provide rapid and flexible support. Additional financing to existing projects delivered assistance fast to support rural communities and vulnerable people and to promote economic recovery. The DPO was used as a tool to support the Government’s Economic Stabilization and Recovery Program (ESRP). 3. Significant progress towards CPS milestones and outcomes has been delivered. Development objectives in ongoing investment projects are being met, with a good performance record in place. AAA has been an important component of the Bank’s partnership strategy, both in addressing the economic crisis, as well as supporting sector level reform programs with other partners. IFC’s strategy complemented IDA’s efforts in private sector development. Details of progress to date and updated performance indicators are reflected in the Results Matrix (see Annex 1). 4. Following the election of a new, European-oriented coalition government, the Bank has helped Moldova receive significant external support to turn its European aspirations into reality. The Bank, with other development partners, prepared a set of Policy Notes on key economic and social challenges to address the impact of the crisis and build the platform for post-crisis growth and improved competitiveness. The Notes were instrumental in the preparation of the ESRP, which provided the basis for the Consultative Group meeting on March 24, 2010. Development partners pledged USD 2.6 billion to support these reforms during 2010-13. Such leverage of the Bank’s limited resources is critical to financing the significant investments Moldova needs to make in its path to European integration. 5. Moldova is now poised for a new phase of sustained growth but fundamental structural and governance weaknesses must be addressed. Critical and comprehensive structural reforms on business regulation, de-monopolization, regulatory environment, and improved competitiveness will foster a speedier economic recovery. Governance and anti-corruption remain important and governance as a cross-cutting theme will be strengthened to ensure enhanced accountability and transparency in the social sectors. These structural reforms to improve competitiveness and reforms to enhance governance will be the focus of the remaining two years of the CPS. 6. Modifications proposed to the CPS respond to the changed environment. The pillars of the strategy remain valid for the post-crisis period. The Bank will continue to be selective given its limited resources and will remain flexible to adjust to changing economic and political realities. Resources will be put into core areas with solid track records, strong government ownership and commitment to reform, and opportunities for strategic partnerships. Where other partners are in the lead, the Bank may exit or 1 scale down. Given the opportunity provided by a reform-minded Government, we propose that the CPS period be extended to the end of FY13 to support key reforms and consolidate and focus the Bank’s program, with a new CPS starting in FY14. A transition to a more strategic and focused Country Partnership Strategy at the mid-point In FY09 the flexibility in the CPS reflected concerns about the potential impact of a global financial crisis and the expectations of political change after a number of years in power of a Government reticent to undertake reforms. The lending program was fragmented but some projects had shown the potential for further gains, particularly in the social sectors. The first two years of the CPS took a conservative approach, initially with no policy based lending and an emphasis on additional financing in successful projects. This additional financing together with an Economic Recovery DPO supported Moldova through the financial and economic crisis, and provided the opportunity to open a dialogue with the newly elected Government on a longer term reform agenda. The CPS did not set out a lending program beyond the CPS mid-point, leaving this to be decided at the time of the CPS Progress Report. This flexibility has proven effective, allowing the Bank to adapt to changed circumstances. Going forward the Bank will consolidate and focus its program to support reforms which will increase competitiveness and job creation during the remainder of the CPS period. Policy based lending will re- commence, and a selective program of sector investment lending will focus on those sectors in which the Government wishes the Bank’s support to make key reforms. II. Relevance of the CPS 7. The CPS strategic objectives of improving economic competitiveness, minimizing social and environmental risks, and improving public sector governance remain relevant to Moldova in light of the post-crisis recovery agenda and Government-led reform priorities. Continued attention to addressing economic and social vulnerabilities and building a robust foundation for post-crisis competitiveness and sustainable growth remain vital to Moldova’s prospects. 8. Moldova’s politics have been volatile in recent years, but voters have given the Alliance for European Integration a mandate for change. After two rounds of heavily contested elections, the Communist Party lost its majority in Parliament and the four centrist parties in opposition to the Communists formed a majority coalition, the Alliance for European Integration (AEI), forming a government in September 2009. However, the AEI had insufficient parliamentary votes to elect a President (requiring a 60 percent majority under the Constitution) and after two failed attempts, another early parliamentary election took place in November 2010. The AEI gained an increased majority but was still short of the number of seats to elect a President. Despite this uncertainty the population has voiced its aspiration for change and the Government has committed to an ambitions reform agenda. Its implementation will be challenging given weak political institutions and a relatively underdeveloped capacity for collective action. 9. Moldova now benefits from considerable external support, especially from Europe, and is at the forefront of the Eastern Neighborhood Partnership supporting European integration. The Government’s pro-European orientation has accelerated progress on visa liberalization and free trade with the European Union. Moldova receives the highest EU aid per capita in the Union’s neighborhood and has been praised by Brussels for moving fast on important reforms required to strengthen bilateral economic and political integration. Key areas of programmatic alignment between the Bank and the EU’s National Indicative Program 2011-2013 include trade (in particular quality assurance infrastructure and standards), public administration reform, social protection, health sector reform and energy. EU member States are also providing significant bilateral support to Moldova. The United States has expressed at the highest levels of government its support for Moldova’s European integration aspirations and recently agreed to a significant program of support to Moldova. 2 10. However the coalition remains fragile and there are deep social and political rifts running through Moldova’s population. The ability of the Government to address effectively the differing views on the future direction of the country, while maintaining its EU integration agenda and reforms, will be key to stability and cohesion. III. Country Context 11. Moldova was hit hard by the economic crisis. Almost 30 percent of GDP is accounted for by remittances, which fell by more than a third during 2009. GDP growth dropped dramatically from 7.2 percent in 2008 to -6.5 percent in 2009, with FDI decreasing by 88 percent during the same period. Economic sectors, including mining, agriculture and construction, recorded declines in output, ranging from 12 percent to 60 percent in 2009 and job losses pushed annual unemployment rates to 9 percent from 4 percent at the end of 2008. Almost half of all Moldovans depend on agriculture, and the country also depends on exports to and fuel imports from Russia. Moldova has a large but inefficient public sector (taxing 32 percent and spending 45 percent of GDP). It has an improving but still poor business environment and its infrastructure is dilapidated. 12. The banking sector was strained and fiscal imbalances grew. The quality of the banks’ loan portfolio deteriorated rapidly in 2009, with non-performing loans (NPLs) reaching 16.3 percent of total loans (up from 4.6 percent in 2008). The real cost of borrowing increased, making access to loans expensive for firms, thereby compressing demand and prolonging the “credit crunch”. The crisis contributed to a fall in tax revenues by 8 percent and pre-election spending hikes in early 2009 increased spending by 5 percent (public wages by 22 percent), opening an unsustainable fiscal deficit, reaching 6.4 percent of GDP in 2009. Following the June 2009 elections, the Government took actions to reduce the deficit, and with additional fiscal measures under an IMF program and a faster than expected recovery, the deficit for 2010 is expected to be below 3 percent of GDP. External imbalances have also adjusted somewhat with exchange rate depreciation, but are expected to widen again as remittances have picked up during 2010. 13. The poverty impact of the crisis was felt most acutely in rural areas and the social assistance program does not reach all those in need. Rural food consumption declined by 17 percent over a six-month period in late 2008 – early 2009, compared to only 6 percent in urban areas; income from self-employment in agriculture declined by 25 percent. The decrease in remittance-driven revenues, and reduced farm revenues as a result of lower food prices drove rural poverty growth, with rural poverty rates rising to 36.3 percent in 2009, up from 34.6 percent in 2008. Urban poverty rates continued to fall, masking growing rural urban disparity in stable national poverty rates. A targeted social assistance program was introduced at the end of 2008 but has struggled so far due to low awareness of available benefits and a low coverage rate. These issues will be addressed in the remaining CPS period. 14. Large-scale migration has accompanied both social and economic developments in the country. Remittances have had a palpable impact raising consumption levels and enhancing education opportunities in recipient households, but have created inequalities between households with members working abroad and those without. Negative impacts of migration have been felt through children and youth “left behind” or in the care of elderly relatives, and in limited investments and civic participation at local level. The incentives for migrants to invest more actively in their communities or to rejoin them are still under-researched. Safety issues and the risk of human trafficking exist alongside migration, with women and children especially vulnerable. Migration is increasingly permanent as a growing number of Moldovans are acquiring or are eligible for dual citizenship with Romania, Russia or Bulgaria. An estimated 800,000-1.5 million people are in the application process for Romanian citizenship. 15. Climate change and natural disasters have had a pronounced social and economic impact. Severe weather events have become an almost annual occurrence in Moldova, with drought in 2007, 3 floods in 2008 and 2010, pointing to the need for higher resilience both at the national level (technology and capacity-building), and at the local level supporting the coping strategies of farmers and rural communities. 16. Moldova’s economy is beginning to recover but needs a broader base, with a second engine to the remittance-driven growth model. Macroeconomic trends started to improve by the end of 2009 and a strong recovery was registered in 2010. Real GDP increased by 6.5 percent between January- September 2010 compared to the same period in 2009. The value added in agriculture grew by 6.6 percent. Exports increased by 7.9 percent and imports by 12.2 percent. However this growth has seen no corresponding increase in employment and without significant reform there is a danger that growth will not create jobs. It is expected that economic recovery will continue, but this is essentially dependent upon political stability in Moldova, as well as economic stability throughout the rest of Europe. With a big share of the workforce already abroad, fast economic growth is unlikely to come only from an increase in remittances. 17. The key is to promote private investment and job creation and build on comparative advantages in boosting exports. There is a window of opportunity for Moldova to expand exports. The introduction of autonomous trade preferences by the EU and normalization of trade relations with Russia (which were disrupted again in 2010 with the temporary resumption of a wine ban), create the opportunity for Moldova to increase exports in traditional markets and diversify into new markets. Labor costs in Moldova are already low relative to neighbors, so with the right macro and micro policy framework in place for competitiveness, and with improvements in infrastructure, Moldova could attract new private investment in export sectors and see rapid improvements in productivity growth. 18. Moldova needs to deepen regulatory reforms and strengthen the rule of law to encourage private investment. Progress has been made on business environment reform, including overhaul of the business registration system, streamlining legislation governing the regulatory regime, and efficiencies in filing taxes. The Government has taken steps to de-monopolize exports and imports and to simplify licensing procedures. Further actions are required to facilitate business entry and exit, and to improve business regulation and legislation on competition and intellectual property rights. There needs to be fairer enforcement of legislation through the judicial system. Improvements in the rule of law are a key focus of the European integration agenda under which Moldova will receive significant support from the EC and other bilateral partners to reform its judicial system and other law enforcement bodies. These efforts are highly complementary to the Bank’s work to help Moldova improve the investment climate. 19. Moldova’s agricultural policies need to be revised to capitalize on export opportunities, which remain far below potential. At 56 percent, Moldova has the world’s highest ratio of arable land in total land area, which, coupled with high-quality soils, favorable climate and low labor costs, gives the country a comparative advantage in farming and agro-food products. However the real value of agriculture declined between 2005 and 2009, driven by a rapid deterioration of agricultural terms of trade and stagnant yields. Greater production costs for high-value crops, insufficient access to finance by Moldovan farmers and poor marketing of these products has lead to the perverse result of declining land area under highly profitable crops and rising area under low-profit crops. Enhancing the competitiveness of high-value products is complex and requires efforts to facilitate farmers’ access to modern inputs, improve food safety infrastructure and adopt EU quality standards, promote modern post-harvest infrastructure facilities, discourage buyer monopsonies and encourage producer cooperation, improve efficiency of cross-border trading, as well as upgrade agricultural research and education programs to the evolving needs of the private sector. 20. Recent reform in the ICT sector is promising and this may turn into an additional niche industry with important potential links with improved governance in the public sector. Competition in international telecommunications cable connectivity was improved recently with Bank support under a 4 Development Policy Operation that de-monopolized access to cross-border fiber-optic cable links. The language skills of most Moldovans mean there is scope for outsourcing back office functions to Moldova, which some European firms have already begun, but high external call rates and low broadband access under the state-owned telecoms monopoly have prevented growth in these services. There is scope for improvement: Moldova ranks 80th of 129 countries worldwide in international e-readiness rankings. The Government’s commitment to implementation of an e-governance strategy will improve public service provision through increased utilization of information and communication technologies. The Government has made use of the South-South Experience Exchange Trust Fund to support leadership development for government officials on ICT for improved governance and growth, exchanging experience with India on improving e-governance. 21. Moldova’s public services need to be reformed to become more efficient and deliver greater quality. The Government is coming to terms with an unsustainably large and inefficient public sector: (i) the education system is, per capita, amongst the world’s most expensive at 9.2 percent of GDP, with empty classrooms and poorly paid teachers fearing retirement on low pensions; (ii) the social assistance system is fragmented, with most benefits not targeted to poor households; (iii) the pay-as-you-go pension scheme is fiscally unsustainable, yielding very low replacement ratios; (iv) health indicators remain well below EU averages but health spending, like education spending, is high at 6.4 percent of GDP. Surveys show that out of pocket expenditures in both the health and education sectors are high, suggesting structural governance problems which limit access to better quality services by the poor. 22. More needs to be done to facilitate construction and trade and improve the deteriorated infrastructure. Laws on simplifying construction permits and creating a one-stop shop for business registration are still awaiting parliamentary approval. The Government needs to press ahead with other outstanding reforms to promote trade and competition. Steps must be taken to remove technical barriers and simplify customs procedures, which keep trade below potential. Better protection of competition, a more sophisticated financial system, and better access to infrastructure (especially transport logistics) are all required to support new exports. The road network needs major repairs and a dilapidated heating sector renders the economy highly energy inefficient. Just 10 percent of national roads and about 5 percent of local roads are in good condition. Moldova uses twice the energy per unit of GDP (PPP rate) as Romania – three times more than the EU average. Reducing the costs of transport and energy by improving infrastructure will be key to maintaining competitiveness. 23. The Government, recognizing these development challenges, has shown commitment to reforms in the medium term as reflected in its new program. The Government has started to implement comprehensive reforms entailing a shift in economic management and international development relations. In October 2009, the Government launched the Economic Stabilization and Recovery Program for 2009-2011. In January 2010, the IMF approved a 3-year Extended Credit Facility and Extended Fund Facility Program based on the ESRP. Under the ESRP, the Government began implementing a comprehensive and detailed action plan of legal and administrative reforms to “de- regulate, liberalize and de-monopolize” the economy. In January 2011, the new Cabinet set 7 priorities in its program entitled “European Integration: Freedom, Democracy, Welfare”, namely: (i) European integration; (ii) reintegration of the country; (iii) efficient and balanced foreign policy; (iv) rule of law; (v) fighting poverty, provision of high quality public services; (vi) sustainable economic growth; and (vii) decentralization of power. IV. Results and progress towards achieving CPS objectives and outcomes 24. The Bank’s current portfolio includes 11 investment projects, all of which are proceeding in a satisfactory manner. Total commitments amount to USD 227.3 million, and the disbursement ratio constantly exceeds 20 percent annually. Some projects have faced difficulties during implementation which have been addressed through appropriate restructuring, and are now proceeding satisfactorily. The 5 IDA-15 allocation of USD 161 million, including the additional USD 20 million received in FY11, and USD 11.2 million allocated from the Crisis Response Window, have been fully committed for existing projects. IFC’s current portfolio of USD 79 million is performing well. 25. The strong emphasis on partnerships with other donors has proven effective in leveraging financing and reforms. The Rural Investment Support Project and the Moldova Social Investment Fund attracted the support of other donors (DFID, EC, GEF, KFW, Netherlands, SIDA Switzerland, UNICEF and USAID), with additional financing of USD 24 million and USD 36.4 million respectively. Development partners (DFID, the Netherlands, SIDA) have looked to the World Bank to administer multi-donor Trust Funds for Central Public Administration Reform and support to the Supreme Audit Institution. These partners have also provided USD 5.5 million as co-financing to the on-going Public Financial Management Project (USD 8.5 million IDA). 26. Strong partnerships have also allowed the Bank to be more selective in its activities. Following World Bank assistance to the Government to develop the Land Transport Infrastructure Strategy, including a prioritized investment plan, and to put in place safeguard systems for road sector investments, the roads sector has attracted financing from the EBRD, EIB, EC, Romania and MCC totaling about USD 550 million and further large funding commitments from the Government of China. Due to a case of mis-procurement USD 11 million was cancelled from the Road Sector Program Support Project. The Bank has gradually exited the roads sector given the availability of other donors to provide more substantive financing to this area. Dialogue on transport policy will be maintained through the competitiveness DPO. 27. The Bank has provided significant support to enhance donor coordination and improve aid effectiveness. In consultation with other partners, in particular SIDA and UNDP, the Bank supported the development of a new set of Partnership Principles for the coordination and harmonization of external assistance to Moldova. The Partnership Principles were signed in March 2010 by the Government and 22 of Moldova’s development partners. This was a significant increase from the 6 partners who had signed an earlier Partnership Framework in 2006, and was partly the result of the Bank’s efforts to ensure a consultative and participatory approach. The Bank also supported the development of an implementation plan for the Partnership Principles to ensure that positive steps are taken to enhance aid effectiveness. 28. The Bank used its leading analytical expertise and investment in AAA to engage early with the Government in outlining the Economic Stabilization and Recovery Program.  Together with the EC, UN, DFID, SIDA and IMF, the Bank prepared Policy Notes on key economic and social challenges to address the impact of the crisis. The Notes were instrumental in the preparation of the ESRP for 2009- 2011 and, for the first time in Moldova’s history, the entire Cabinet of Ministers convened for a whole- day discussion of the recommendations. The ESRP provided the basis for the Consultative Group meeting on March 24, 2010, jointly hosted by the Bank and the EU, where development partners pledged USD 2.6 billion (see Table 1) to support key reforms during 2010-13. 29. The first two years of the CPS were marked by flexibility to react to the combined challenges of significant political change and the global economic crisis. The Bank used additional financing to deliver support through existing successful projects, in particular to assist vulnerable populations to deal with the crisis. Noteworthy examples include the Rural Investment and Services Project (RISP) providing help to farmers by facilitating access to credit, which otherwise was unavailable during the crisis; Moldova Social Investment Fund (MSIF) helping rural communities with a focus on job creation; and the Competitiveness Enhancement Project (CEP) helping exporters at a time when world markets were down and access to credit was blocked. This use of additional financing also had the effect of better focusing the investment lending portfolio, which had been fragmented at the start of the CPS.   6 Table 1. Pledges made at the Consultative Group: Moldova Partnership Forum (USD millions) EU EC US EBRD EIB UN World IMF Other Total Members Bank Total Pledge 251.6 749.8 177.7 129.5 129.5 129.5 302.3 578.8 58.0 2605.5 (2010-13) percent of 10.0 29.9 7.0 5.1 5.1 5.1 12.1 23.1 2.3 100.0 Total 30. A one-off DPO in support of the Government’s ESRP proved effective. The global economic crisis demanded that the Bank provide more significant financing for the ESRP than envisaged in the initial PRSC series, which was cancelled. A USD 25 million Economic Recovery DPO (including USD 11.2 million from the IDA Crisis Response Window) provided much-needed budget support and focused the reform agenda on laying the foundations for post-crisis recovery. Moldova’s strong performance in 2010 shows the strategy worked. 31. The portfolio continues to deliver strong development results across all three pillars. Through the MSIF project, 700 community based organizations have participated in 225 MSIF sub- projects benefitting almost 932,000 people. Such benefits include an increase by 5 percent in student attendance during winter as a result of installation of central heating. Indirect benefits accrue through the 26,000 temporary jobs created, providing around 2 million days of work. The Education for All/Fast- Track Initiative (EFA/FTI) project has supported renovation of 65 kindergartens and provision of teaching materials to 600, and assisted the Government to implement policies for improving kindergarten education standards. The Competitiveness Enhancement Project has assisted 150 companies to date (with another 100 applications) to improve quality standards, leading to increases in product quality and improved sales. The project also supports reform of the regulatory sector and has contributed to a reduction by 35 percent in management time spent on compliance. The Rural Investment and Services Project has assisted in the creation of 1,700 new businesses in high value agriculture, livestock and small industries, creating 7,000 new jobs. The Results Matrix (Annex 1) gives more details of how the Bank’s programs, including MSIF, EFA/FTI, Quality Education in Rural Areas, and Health Services and Social Assistance, have supported greater social inclusion and have reached the most vulnerable. 32. Reforms have established the basis for improved management of public funds and a more effective public service but there has been little progress in consolidating the public sector. In 2009 the Government revived Central Public Administration Reform. The basis has been laid for improved public financial management but the complete implementation of the Financial Management Information System is necessary to see through reforms fully. Fiscal discipline has improved. Although the 2009 budget exceeded its estimated deficit of 1 percent due to the financial crisis and pre-election spending, significant austerity measures by the Government together with external financing prevented a worse situation than the eventual deficit of 6.4 percent of GDP in 2009. 2010 budget performance was better than agreed under the IMF program. The foundations for a merit-based, professional civil service are being laid through legal reform, strengthened HR management capacity and a functional civil service training system. Legislation on civil service remuneration is being drafted and is expected to increase civil service salaries by 25 percent, making it a more attractive career choice, but there has been little corresponding streamlining of the civil service to allow higher salaries without an increased wage bill. Strategic planning and policy coordination capacity has increased, but requires further support to embed it across Government. The Government has asked for additional support through the CPAR MDTF to continue this reform over the next two years. 33. The IDA 16 special theme of gender will continue to be integrated into the program. The latest CPIA assessment notes the positive legislative environment for gender equality in Moldova, but 7 gender inequality persists through lower pay and lower status jobs for women and in the under- representation of women in decision making positions in the business, public service and political spheres. Social attitudes contribute to high rates of domestic violence. In the education and health sectors boys and men are disadvantaged through higher drop-out rates in the higher grades of school and higher rates of early death. Women and girls are vulnerable to trafficking. The Government has developed a National Strategy for Gender Equality for the years 2010-2015, and is closely supported in its implementation by UN Women. The Bank worked with SIDA to introduce gender perspectives in budgeting in the PER in 2009. The program going forward offers opportunities to enhance gender equality, for example, through education sector reform, and the regional consultations on the next WDR on Gender may also identify additional opportunities. 34. We will continue to address the IDA 16 theme of climate change. During this CPS period a number of interventions have helped address climate change vulnerabilities by reducing environmental degradation, specifically soil conservation, community forestry development, pollutant management, emissions reduction, and agricultural pollution-related activities. These activities could be continued and strengthened under the Agricultural Competitiveness Project. With the ongoing Energy 2 Project and follow-up Energy Efficiency TA, the Bank will help Moldova to increase its energy efficiency. Water resources management and adaptation to increasing water shortages and an increasing risk of flooding is likely to be a key issue in the long run to mitigate climate risks. The Disaster and Climate Risk Management Project will help address this through improved hydro-meteorological services and preparedness. AAA on adaptation and mitigation practices will help set the ground for further activities in this area. 35. IFC remains an active partner in the private sector. The IFC strategy in Moldova complements IDA’s efforts in private sector development by focusing in particular on the financial sector, SMEs, agribusiness, healthcare and infrastructure modernization. Since 1995, IFC has invested a total of USD 174 million of its own funds in 19 projects and arranged USD 25 million in syndications to support power, telecommunications, agribusiness, SMEs, and the financial sector. IFC has ramped up its activities in the last three years with a total of USD 79 million in investment in FY08-FY10, with the largest exposure in financial markets followed by infrastructure. IFC will focus on policy reforms and implementation in select areas to support development of High Value Agriculture. In agribusiness investment, the IFC Advisory Services project will focus on investment generation activities, assisting the Government to develop and implement a targeted FDI attraction strategy in the agribusiness and high- value agriculture subsectors, as well as establish a better framework for public-private dialogue on agribusiness policy issues. 36. MIGA currently has two active projects in Moldova. A USD 61.1 million guarantee issued to Union Fenosa Internacional of Spain protects against political risks of transfer restriction, expropriation, war and civil disturbance, and breach of contract for investments in the upgrading of three privatized electricity distribution companies. A guarantee of USD 7.34 million was issued by MIGA to Raiffeisen Bank SA in Romania, covering its shareholder loan to its subsidiary I.C.S. Raiffeisen Leasing S.R.L. in Moldova providing coverage against the risks of transfer restriction and expropriation of funds. This project constitutes the start-up phase of Raiffeisen Zentralbank Group’s leasing operations in Moldova, undertaken by its Moldovan subsidiary. 37. Trust Funds are integrated into the Bank strategy and support key institutional reforms and project implementation. The Bank administers a substantial USD 80.9 million TF portfolio, which provides co-financing to IDA operations, finances GEF and carbon operations, and provides other forms of support, such as an USD 8.8 million Education for All/Fast Track Initiative grant for pre-primary education, an USD 16.7 million Regional Development and Social Protection TF with the EC, and a USD 6.15 million Public Administration Reform MDTF. Annex 2 gives details of active TFs in Moldova and shows that many will close in FY12, leading to consolidation. 8 38. Going forward, it will be crucial to maintain a solid track record of project implementation. Overall, the Bank’s portfolio performance in Moldova has been smooth, with some minor exceptions. During the CPS implementation period, the Bank has been proactive in appropriate restructuring or partial cancellation when necessary. The Country Portfolio Performance Review in 2011 focused on the portfolio under implementation. It identified best practices and looked at cross-cutting themes, including issues such as readiness for implementation, capacity building for results monitoring, and excessive complexity of project design. These reviews will be a regular instrument to assess jointly with the Government implementation performance and address any project-specific issues. V. Post-crisis agenda and modifications to the CPS 39. Although the pillars defined in the CPS remain valid, there have been important changes which require an adaptation to the Bank’s program in the CPS PR. These changes are: (i) the global economic and financial crisis; (ii) a significant change in the political landscape and the opportunity created by the reform mandate given to the Government by the Moldovan people; and (iii) the country’s European integration agenda. 40. The Government has shown strong commitment to post-crisis structural reforms and the Bank will follow the Government’s lead in defining its activities. For the remaining period, a competitiveness DPO series will be launched based on an in-depth diagnostic provided in the CEM and supporting the Government’s competitiveness and private sector job creation agenda. The focus will be on the business climate, as well as on sector policies in agriculture, IT and other areas that would lift current constraints to growth. This will be complemented by an expansion by IFC of advisory services in the agribusiness sector and for small and medium enterprises. The competitiveness agenda will also be supported by one or two new additional IDA lending operations per annum in areas such as agricultural competitiveness or energy efficiency. The timing of these operations will depend on progress made in addressing key policy and institutional constraints in both sectors. 41. The Government has strongly embraced the need for reform to improve the efficiency and quality of public services. IDA will support this in three areas: social assistance, health care and education. The Strengthening Social Safety Net results-based operation will seek to improve the efficiency and equity of social assistance through a fiscally sustainable expansion and strengthening of the targeted Ajutor Social Program. Additional financing will be provided to the Health Services and Social Assistance Project to improve the efficiency and viability of the primary health sector. 42. An ambitious education reform agenda based on school optimization has recently become the focus of the Government’s attention. Inefficiency in the sector – and with it declining quality – has focused the reform discussions on rationalization and school network optimization and the savings they can bring. The Government's reform plan is intended to increase the efficiency of the general education sector, while simultaneously improving the quality and relevance of education to meet the demands of the modern economy. An IDA results-based education project will provide much-needed support to these important reform efforts. The Bank’s support will also address the potential risks of such reforms, including of increased drop outs and marginalization of minority groups or the poorest, through a monitoring and evaluation scheme that tracks students to gauge the impact of reforms. Moreover, the Bank’s System Assessment and Benchmarking for Education Results (SABER) toolkits in various aspects of education, including Skills Measurement, will be used as part of the work on the competitiveness agenda, allowing the Government to ensure that education can deliver skills for growth sectors of the economy. It is imperative that improved quality of education be accompanied by a sustainable growth model that creates jobs and economic opportunities for young people. 43. Moldova’s European aspirations will place increasing demands on the country’s institutions. The authorities have intensified efforts to improve core country systems, including public 9 financial management (PFM) and public administration. Strengthening of PFM reform is an important component to increase the efficiency, transparency and strategic alignment of the budget in the medium to long term – elements that could be supported through a potential PFM 2 operation and the ongoing CPAR MDTF. Such reforms will require strong leadership and coordination from central Government, as well as significant inputs and commitment to change from Government staff in all ministries. 44. The Bank needs to reorient its approach towards governance and corruption given the political changes and realities in Moldova. Governance as a cross-cutting theme will be strengthened to ensure enhanced accountability and transparency in the social sectors, for example through support to more equitable and less fraud prone administration of social assistance payments and support to the development of health and education information systems to improve transparency. With the Government’s goal of European Union integration, areas of core GAC importance such as business regulation, public financial management and central public administration reform will remain essential. Demand for good governance and social accountability will continue to be supported, for example through the Civil Society Fund, which issues grants to NGOs to develop innovative communication and information applications which increase transparency and social accountability. The World Bank, in partnership with SIDA and UNDP, commissioned the Moldova Citizen Report Card, which provides a comprehensive overview of public perceptions of the accessibility and quality of the Moldovan public sector. It is an important entry point for the Governance e-Transformation Project to improve the quality of selected public services using ICT. E-transformation will help improve governance and tackle corruption through IT solutions. 45. The Bank’s program going forward will respond to the opportunities created by the changed environment and continue consolidating the Bank’s support with an extension of the CPS to FY13. The CPS was developed for a period of four years from FY09-12 and commenced with a fragmented lending program. This legacy, the prevailing economic context, and an uncertain political environment led us to rely in the first two years of the Strategy on additional financing which had the added benefit of providing more focus to the program. The recovery in the economy and a more favorable political environment for reform now allow us to move towards a more strategic program of support in the last years of the CPS, with a focus in the lending program on a small number of operations supporting key reforms being implemented by the Government. During FY13 a number of projects will exit, and extending the CPS until the end of FY13 will enhance the prospects for a focused and strategic CPS beginning in FY14. 46. The Bank faces constraints and therefore must be selective in its support to the Government’s reform agenda. Selectivity will be driven by the principles of comparative advantage in areas in which the Government is ready for and committed to necessary policy reforms, as well as a solid implementation track record, and availability of alternative sources of financing and analytical support, leveraged through strategic partnerships with other development actors. The Bank’s lending program will include one or two new investment lending operations per year, in addition to a DPO and continued investment in AAA. The choice and timing of investment lending operations will be driven by the Government’s willingness to take complementary reform measures to enhance the economic impact of supported projects. The Government has indicated that reform areas could include education, public sector reform, agricultural competitiveness and energy efficiency. The Bank will use a number of tools to support dialogue on reforms, including utilizing portfolio reviews for policy discussions, developing policy notes on the reform agenda in sectors in which investment lending is proposed, and raising awareness of policy constraints or options which both policy and investment lending can help to address. Table 2 below provides a summary of the planned IDA lending and IFC investment program for the remaining CPS period covering FY11-13. 10 Table 2. CPS Progress Report Indicative Program for the period FY11-FY13 (USD million)* Proposed Program Lending/ AAA and TA Program Investment FY 11 Actual IDA Disaster and Climate Risk Management $10 Country Economic Memorandum: Growth Study Strengthening the Effectiveness of the Social $37 Accounting &Auditing ROSC follow-up Safety Net Agricultural Policy Revision and Budget TA Governance e-Transformation $20 Public Expenditure Review Financial Sector Monitoring TA Chisinau Energy Supply Improvement TA Applications for good governance - Civil Society Fund Demand for Good Governance Reducing Vulnerability to Climate Change of Agricultural Systems in Moldova TA TOTAL IDA lending FY11 $67 IFC Moldova Agroindbank $6 Credit Bureau Technical Assistance Chisinau Municipality $10 Risk Management Technical Assistance EximBank $26 Health Public Private Partnership Technical Assistance MoldTelecom Technical Assistance TOTAL IFC Investment FY11 $42 FY12 IDA Competitiveness DPO 1 $20 Competitiveness and structural reform follow-up work Health Services and Social Assistance AF $10 Programmatic fiscal work (including BOOST studies) Agricultural Competitiveness Financial Sector Monitoring TA $20 Food Security TA Agricultural Competitiveness TA Energy Efficiency TA Education Rationalization TA TOTAL IDA lending FY12 $50 IFC Investment in Real Sector and Financial $30 Credit Bureau TA Markets Risk Management TA Investment Climate Reform Technical Assistance Health Public Private Partnership Technical Assistance TOTAL IFC Investment FY12 $30 FY13 Competitiveness DPO 2 $20 Competitiveness and structural reform follow-up work Education Program for Results $30 Financial Sector Assessment Program Public Financial Management 2 $20 Corporate Financial Reporting Enhancement TA Public Financial Management TA Energy Efficiency TA (continuation) Social Inclusion and Resilience TA TOTAL IDA lending FY13 $70 IFC Investment in Real Sector and Financial $30 Investment Climate Reform Project TA Markets Credit Bureau TA Health Public Private Partnership Technical Assistance TOTAL IFC Investment FY13 $30 * NOTES: IDA16 allocations are indicative. Actual IDA lending will depend on (i) total IDA resources available (ii) Moldova’s performance rating (iii) performance and assistance terms of other IDA borrowers (iv) the terms of IDA’s assistance to Moldova (grants or credits) (v) the number of IDA eligible countries. In FY14, the last year of IDA16, the lending program could include a third Competitiveness DPO and an energy efficiency project. 47. IFC will play an important role in support of the competitiveness agenda and continue to provide trade finance, credit lines for on-lending to medium and small enterprises and agriculture, as well as advisory services in corporate governance and risk management. IFC has a portfolio in four banks and is planning to support additional banks with advisory services and access to trade finance. Progress was also registered with the development of a Credit Bureau. In infrastructure, IFC is financing the rehabilitation and expansion of the water and wastewater networks and street rehabilitation in the City 11 of Chisinau. This is the World Bank Group’s first sub-sovereign loan in Moldova. IFC is supporting the Government to implement the first PPP in the health sector, working with the Ministry of Health to open an imaging center at the National Hospital and with the Ministry of Economy to assess a sustainability strategy for MoldTelecom. 48. The Bank will continue to leverage strategic partnerships with others to support the reform agenda. Given the limited resources of the Bank, it will be important to work with other development partners who may have additional investment resources, and the Bank will maintain its role as a convener in the donor community. The Bank will seek increased partnerships with the EU and EU Member States and other development partners to ensure coherence in understanding of and support for critical reforms with a view to achieving maximum impact. A key focus will be where other partners’ resources complement financially the Bank’s AAA program. Annex 3 gives details of the activities of other donors in key sectors. 49. The Bank will seek to use Trust Fund resources more strategically to support core objectives. The Bank is exploring opportunities for increased partnerships with the EU, including through the existing Regional Development and Social Protection TF, and other ongoing/planned TFs for Improving Forest Law Enforcement and Governance, Food Safety, a coordinated program in the health sector, investment regulation activities, and Public Expenditure Financial Accountability assessment. Other potential areas for TF support include public sector reform supported by the Russian PFM Trust Fund, and technical assistance to improve Corporate Financial Reporting could also be funded through a Trust Fund, although donor support still needs to be identified. These types of partnerships will build on the Bank’s efforts towards a more programmatic approach to mobilizing TF resources and consolidating them in order to reduce portfolio fragmentation and administration costs. Trust Fund resources will, to the extent possible, complement limited resources to finance Bank staff. 50. The Bank’s AAA will continue to have a prominent role in forming a solid basis for the Bank’s support in Moldova. For example, the recommendations of the recent Country Economic Memorandum and follow-up work would set the background for deeper and more comprehensive fiscal and competitiveness reforms. The Bank will continue to provide economic and social analysis as a basis to discuss policy choices and needed structural reforms with the authorities. Possible AAA work includes the continuation of the programmatic fiscal work, follow-up work on competitiveness and structural reforms, public financial management technical assistance, and analysis of social inclusion and resilience, taking a broad view of social inclusion and enhancing the focus on gender. Sector-specific analytical work to complement the proposed lending program could take place in energy, education rationalization TA, as well as agriculture. A new TA project related to food security is under implementation. AAA in the financial sector could include monitoring to support crisis resilience and market development measures, and a Financial Sector Assessment Program update with a focus on development issues. 51. IFC will expand Advisory Services in Investment Climate with a new project in FY12. The project will aim to increase the competitiveness of the Agribusiness sector through regulatory reform and more targeted investment promotion, as well as address key constraints for SMEs and the private sector in (i) construction permits; (ii) insolvency; and (iii) business inspections. VI. Risks 52. The risks identified in the CPS remain. Fiduciary risks continue to be mitigated through the Bank’s emphasis on improved public financial management, as do the risks associated with limited institutional capacity through support to planning and allocation of budgetary resources. A continued global recession, particularly in the EU, may limit the benefits to be gained from Moldova’s greater integration into the global economy through reduced exports and remittances, and perhaps reducing the support available from the EU for the Government’s integration agenda. Conversely, there is a risk that a 12 rapid return of remittance flows may weaken the reform resolve, delaying key reform measures, allowing IDA deliverables to slip or need to be redesigned to match a less ambitious agenda. Recent restrictions on exports highlight this risk. These risks suggest the continued need for a flexible approach from the Bank and other donors to assist Moldova to weather these external shocks, as well as the Bank working closely with others, in particular the EU and IMF, for joint leverage. Climate change and natural disasters continue to pose a risk to the country, but the Bank’s support for disaster risk mitigation and agricultural competitiveness should help to address these. 53. Risks arising from the political economy may continue for some time. The stalemate over election of a President could still lead to early elections, potentially limiting Government commitment to undertake unpopular reforms. Perhaps more significant are the differing views amongst coalition members over the pace and depth of reforms. These differences reflect social and political rifts throughout the wider population including concerns about the impact of a transition to a market economy on different segments of the population. Although the Alliance partners are bound by their desire for European integration, it remains to be seen whether the Alliance can maintain support for its reform agenda. Should possible future elections bring a less reform-committed Government, the Bank would follow a more traditional investment program. If the Government secures a four year parliamentary mandate, it will be important that there is political commitment to the reform agenda across all parties – lack of such commitment may pose a risk to both the Bank’s DPO series, as well as the IMF program. The Bank may help mitigate this to some extent by offering a platform for inter-ministerial discussions on key areas of reform, which needs to be done consciously and continuously, not just as problems arise, and will be a key challenge for the Country Team. 13 ANNEX 1: CPS FY09-13 REVISED RESULTS MATRIX AND PROGRESS TO DATE CPS Pillar I. Improving economic competitiveness to support sustainable economic growth Country Development Goals / Outcomes  Export of goods and services increased as percent of GDP from 30.5 percent in 2007.  FDI increased (net) from USD 130 per capita (2007).  Increased length of roads rehabilitated.  Decreased share of electric power losses as share of total energy consumption from 12.7 percent in 2007.  Improved competitiveness of rural farm sector as reflected in rising exports and unit values of agricultural products. Issues and Obstacles  Moldova production and export structure are dominated by low-value products. The range of both markets and goods for export are poorly diversified. Lack of conformity with international standards on product quality is a particular constraint for market access.  Moldova still has one of the highest regulatory compliance costs in the region.  Cost of financial intermediation is relatively high and access to long-term financing for investment purposes remains limited.  Adequate physical infrastructure is necessary to attract investments and support production.  The road network has experienced severe and prolonged neglect over the last 15 years due to lack of maintenance.  Road rehabilitation will require support from the international donor community and the use of foreign contractors for works execution, given the low capacity of the domestic road construction industry  Due to outdated equipment and technology, energy consumption is intensive—totaling about 3 times the respective indicators reported in developed countries.  Heavy reliance of the economy on imported energy resources, coupled with significant price increases, restricts the production sector.  Unfinished reform agenda and accumulation of new debts (mainly in the district heating sector in Chisinau) threaten the financial viability of main parts of the energy sector.  Lack of access to finance for productive cultivation of crops and investments in land improvements.  Lack of information and quality management has reduced productivity and export potential of farms.  Land privatization resulted in fragmentation of agricultural land ownership, with individuals’ small holdings often being spread over 3 or more distinct parcels located kilometers apart. Strategic Goal 1: Improved competitiveness of Moldova’s enterprise sector CPS Outcomes Milestones Revised CPS Outcomes and Progress to date CPS Instruments and Partners Milestones MSTQ system meeting the WTO Number of EU-compatible 514 EU compatible standards Ongoing/Completed Lending: commitments. standards adopted increases from adopted by Oct 2010; though Competitiveness Enhancement 200 (2007) to 500. delays exist in adoption of Project, including Additional standards from the Romanian Financing Standardization Authority. Planned Lending: Number of firms obtaining 160 firms had received Competitiveness DPO internationally recognized international certificates of quality certificates of quality increases by end of 2010. Partnerships and TFs: 14 from 130 (2007) to 300. The number of accredited testing Moldova Dutch TA-TF Financial facilities increased from 36 in Sector Reform 2005 to 117 by Oct. 2010. PHRD-Moldova: Decreased regulatory compliance Reduction in cost of getting RIA made mandatory for all new Competitiveness Enhancement costs for enterprises from 16 construction permits from 292 legislation in January 2008, with a Project percent in 2007 to less than 12 days (DB09) to less than 200 standardized consultation Credit Bureau TA (IFC) percent (as measured by Cost of days. mechanism, including Government Ongoing/Completed AAA: Doing Business survey). and private sector representatives. FSAP Update (IMF) Some 1,300 government officials and business representatives Country Economic trained in principles and Memorandum – Competitiveness techniques of RIA. INF Sector Investment Planning Regulatory compliance costs Capacity estimated at 9.9 percent in 2010 Corporate Financial Reporting CODB report. Doing Business Report Yearly number of inspections from GFRP Moldova Food Security State Agencies per company TA decreased from over 10 in 2006 to PSD/FSD Dialogue less than 8 as of end of 2010. Policy Notes for the Government Establishment of a fully Two private credit information of Moldova Increased share of enterprises with access to formal sources of functioning credit information bureaus established, covering the Planned AAA: investment finance from 17.71 bureau. majority of the banking sector. Corporate Financial Reporting percent (2005) to 25 percent Increased share of credit going to Enhancement TA (BEEPS survey). private sector, from 27.9 percent Financial Sector Assessment (2006). Program Financial Sector Monitoring TA (including Secured Transactions, Modernization of Payment Systems, Security Settlement Systems) TF for Investment Regulation (EU) Skills Measurement Survey Remittance intermediation work Programmatic fiscal work Competitiveness and structural reform follow-up work IFC: Loan and equity investment and advisory service in financial 15 sector, to strengthen local banks, direct financing in real sectors and regional private equity fund, and develop non-bank financial institutions. Strategic Goal 2: Improved management of the road network CPS Outcomes Milestones Revised CPS Outcomes and Progress to date CPS Instruments and Partners Milestones Increased percentage of roads in Technical audits confirming that Significant restructuring of this The State Road Administration Ongoing/Completed Lending: good or fair condition from 7 road works comply with investment after cancellation of has implemented successfully, IDA credit for Roads Sector percent in 2006--transport costs contractual specifications. 69 percent of credit. and to contract specifications, the Program Support Project will be estimated based on the Results remain the same since investments funded by EIB percentage of National Roads in they are based on collective under the Roads Sector Program Ongoing/Completed AAA: good, fair, and bad condition. investments of several partners, Support Project and by the Transport Sector Strategy though Bank is no longer National Budget, with 120 km of (EBRD, EIB) providing financing. roads rehabilitated between Policy Notes for the Government project start and the end of 2010. of Moldova 5 additional contracts have been awarded in early 2011. Partnerships and TFs: Additional loans and grants from Vehicle operation costs on the Total funds allocated for Budget allocations for road EBRD, EIB, EC, MCC and roads improved under the Road maintenance works on public maintenance have increased China Sector Program have decreased roads are at least 450m MDL in significantly and exceeded EC Regional Development and by at least 8 percent according to FY09/10. targets in FY09/10, with an Social Protection Grant (Roads ex-post economic evaluation. amended Road Fund Law and Component) new fuel excise tax regime, but there is still a gap between actual allocations and those planned under the LTIS, this gap will need to be closed when macro- situation permits. All contracts for periodic road Increased Road Asset Value Percent of funding used for road maintenance are awarded based from USD 8.4 billion in 2007. maintenance awarded through on competitive tenders. Routine competitive bidding increased road maintenance works and from 0percent in 2008 to 20 winter maintenance are not being percent in 2010 and 30 percent in tendered until now. 2011. 16 Strategic Goal 3: Reduced energy vulnerability through improved energy efficiency and increased diversification of energy sources CPS Outcomes Milestones Revised CPS Outcomes and Progress to date CPS Instruments and Partners Milestones Ten percent reduction in energy Government adopts and starts A new Energy Law was adopted Ongoing/Completed Lending: intensity measured by the total implementing an Energy in December 2009 enabling Energy 2, including Additional primary energy use (toe) per Efficiency Program (pending Moldova to meet requirements Financing USD 1000 of GDP at PPP rate. approval by the Government) in and become a full member of the support of the 2020 Energy Energy Community Treaty. Planned Lending: Strategy of Moldova (adopted in The Energy Efficiency Program Energy Efficiency Project 2007). and Action Plan updated by Ongoing/Completed AAA: government, but delays in District Heating Sector Reform documents’ formal approval by TA the Government. Chisinau Energy Supply Moldova has ratified the ECT. Improvement TA Ten percent increase in Government and ANRE develop EC and SIDA to provide TA Energy Efficiency Program and production from renewable and adopt measures supporting support to Government and Action Plan energy sources (RES). renewable energy production, ANRE to work on feed-in tariffs Public Utilities Subsidies Study including feed-in tariffs for RES. for RES. (DFID) Moldelectrica commissions a The dispatch center to be Energy Policy Note new power dispatch center and commissioned by September Policy Notes for the Government introduces modern supervisory 2011. of Moldova control and remote monitoring of 85 percent of AF for the heating all transmission substations. Partnerships and TFs: component committed. At least one project signed and CDCF – Moldova Biomass started disbursement with energy Tariffs for DH in Chisinau Heating ERPA efficiency component. approved by ANRE starting CDCF – Energy Conservation January 2010. All tariffs at cost and Emissions Reduction recovery levels. SIDA TF on Financing Energy Cost recovery of heat, gas and Cash collections for gas and Sector Reform and Efficiency electricity tariffs for all electricity on target. Improvements categories of consumers Concerns remain regarding the PPIAF: Chisinau Energy Supply approaches 100 percent, while fiscal sustainability in the sector, Improvement Project cash collection ratios stay above unless prompt reforms are made 95 percent (for gas and in the district heating sector and Planned AAA: electricity) and 90 percent for efforts to further improve the Energy Efficiency TA district heat. regulatory environment continue. IFC: The outage rates of Advisory service and investment Moldelectrica transmission lines to promote PPPs, energy and substations were reduced by efficiency credit lines to local 48 percent (the initial target was banks. 35 percent). 17 Non-technical losses in the transmission network were nonexistent in 2009, while the non technical losses in the distribution network were reduced by 94.5 percent, reaching 0.6 percent in 2009 (the initial target was the reduction of non technical losses in the transmission and distribution networks by 75 percent). Targets for public heating exceeded. 35 institutions and 37 residential buildings have heat and domestic hot water availability throughout the entire year (including during the winter heating season, which is more than 120 days/year as initially planned). 8,399 students and 1.5 million patients, staff and visitors benefit from facilities heated 120 days or more during the winter season. Additional Financing allowed scaling up the heating component, thus increasing the impact. Strategic Goal 4: Agricultural competitiveness CPS Outcomes Milestones Revised CPS Outcomes and Progress to date CPS Instruments and Partners Milestones Number of agricultural Law promoting enabling SCA Regulator established. The Ongoing/Completed Lending: enterprises with internationally environment for SCA (Savings financial crisis impacted Rural Investment Services recognized quality certificates and Credit Associations) negatively the portfolio quality Project 2 Additional Financing increased from 30 in 2007 to 80 development passed. of SCAs; the SCA Regulator was Competitiveness Enhancement at the end of 2011. Increased entrepreneurial activity initially slow to respond but now Project 2 Additional Financing in the Rural Investment Services showing stronger supervisory capacity and interventions with Disaster Risk Mitigation and Project areas and increased Adaptation Project survival rates. problematic institutions. 40 percent of village population Planned Lending: More efficient use of market info Land re-parceling implemented Re-parceling activities and technical knowledge along with participation of at least 30 implemented in another 40 participated in land re-parceling Agricultural Competitiveness agricultural value chain leading percent of the population in 6 villages, in addition to the 6 pilot implemented in 6 villages; re- Project to (as measured in 6 pilot villages. villages. parceling now being undertaken Competitiveness DPO 18 villages compared with baseline in 40 additional villages (20 Ongoing/Completed AAA: and control cases): percent participation). Impact Country Economic  Higher output value and assessment of the six pilot Memorandum lower variability; villages is under way, to be Policy Notes for the Government completed by the end of April  Fewer loss making farms; of Moldova 2011.  Higher total factor Agricultural Sector Policy productivity in surveyed 762 rural businesses have been Revision and Budget TA farms. created (as of end-March 2011) Reducing Vulnerability to under RISP II, with a first-year Climate Change of Agricultural survival rate close to 100 Systems in Moldova TA percent. Partnerships and TFs: USD value of loans disbursed Growth in lending to agricultural Agricultural Pollution Control with at least one bank with credit and rural sectors has exceeded Project (GEF) lines to rural sector. targets. It has reached MDL 3.5 billion as of end-March 2011 SIDA Support to RISP 2 (compared to a 2012 target of GFRP Moldova Food Security MDL 2.85 billion and a baseline TA of MDL 2.14 billion). Planned AAA: A total of 111 agricultural Agricultural Competitiveness TA enterprises (which exceeds the Competitiveness and structural target of 80) received reform follow-up work internationally recognized Skills Measurement Survey quality certificates: 80 – I SO9000, 21 – HACCP, and 10 – IFC: GlobalGap. Direct financing to companies in agribusiness, credit lines to local Increased number of agro- banks, which lend to processors adopting mitigation agribusiness sector and to the measures and increased area of rural areas. This will be agricultural land with resource complemented by IFC expansion conservation technologies and of advisory services in the increased production of agribusiness sector and for small organically-certified products and medium enterprises. through the Ag Pollution Control Project:  59 farms installed adequate manure storage facilities. 7 agro-processors installed WWTPs. Efficient irrigation technology introduced on 720ha of land exposed to soil erosion on 27 farms. Grassed waterways, buffer 19 strips, forest belts on 253ha (9farms) (while the percentage of achievement cannot be measured since no target was set at appraisal (the M&E framework at the time did not require performance targets), the number of interventions is significant). Strengthened farmers’ preparedness to climate risks through information on practical techniques for adaptation, i.e. grants/demonstration about adaptation to climate risks, on a pilot basis:  At least 50 investment grants are provided and introduced at demonstration plots. Pillar II. Minimizing Social and Environmental Risks, Building Human Capital, and Promoting Social Inclusion Country Development Goals / Outcomes  Decreased percentage of people below poverty line of USD 4.3/day PPP from 34.5 percent in 2006.  Increased access to quality preschool programs from 71.1 percent in 2008 to 75 percent in 2011 for children aged 3-6 and from 77.1 percent in 2008 to 85percent in 2011 for children aged 5-6.  Improved quality and equitable access to general education from 94.1 percent in 2004 to 95 percent in 2011 and to 98 percent in 2015.  Reduced maternal mortality rate.  Reduced HIV/AIDS incidence per 100,000.  Reduced TB-associated mortality per 100,000.  Improved coverage and quality of water and sanitation services—57 percent of population will have sustainable access to improved water source by 2010 and 68.5 percent will have access by 2015. Issues and obstacles  Fragmentation of social assistance transfers has limited their ability to reach the poor.  Increased Government capacity is needed to implement the recently approved social support law.  Pension benefits in Moldova are not yet based reliably on actual contributions paid. The long-term financial sustainability of the pension system will require expanding the limited capacity of the ministry for policy analysis and monitoring and evaluation on social protection issues.  There is a reduced capacity for preschool services, particularly in rural communities.  Modern learning and development standards have been developed and implemented; Early Childhood Curriculum reviewed; human resources need to be trained on 20 modern teaching methods; new teaching and learning materials need to be introduced.  School enrollment varies by income level.  Population-based funding is used to allocate budgets to schools but school directors have had no flexibility in the use of their budgets.  A declining number of school age children has led to smaller classes and smaller schools.  Health indicators remain below EU averages. Chronic diseases such as cardiovascular disease cause double the share of avoidable mortality in the working age population as in the EU-10.  Problems in the health sector include: o informal payments for health services; o lack of health insurance for the non-public sector working population; o lack of adequately skilled doctors and nurses; o need for consolidation of the healthcare infrastructure; o poor capacity for surveillance and diagnosis to react to infectious diseases.  The quality and reliability of Moldova’s water supply and wastewater services are generally deficient. Few of the existing wastewater treatment facilities meet standards and many are abandoned due to unaffordable operating and maintenance costs.  Water and sanitation service coverage should be expanded in a way that favors the poor, who typically are connected to public services last.  The absence of an obsolete pesticides management strategy has increased the possibilities for leakage of toxic materials to the environment.  Moldova has an unusually high amount of PCBs requiring disposal. Strategic Goal 5: Broader inclusion and better social protection CPS Outcomes Milestones Revised CPS Outcomes and Progress to date CPS Instruments and Partners Milestones Share of non-contributory social Proportion of new pensioners Improved equity and inclusion: New Social Assistance system Ongoing/Completed Lending: transfers received by the bottom with pension eligibility increased coverage and piloted in 2008 and scaled up in Health Services and Social 20 percent of households in determined outside the Pension maintained targeting accuracy of 2009 and 2010; old system still Assistance, including Additional terms of income increased from Insurance Law increased from 98 the Ajutor Social Program: in place but being phased out by Financing 40 percent in 2009 to 50 percent percent (excluding military and  20 percent of population in freezing Nominative Social Investment Fund 2 in 2011. police) to 100 percent. the poorest quintile receive Compensation benefits and stopping new entrants while Strengthening the Effectiveness AS benefits. of the Social Safety Net Project cancelling them for all categories  Targeting accuracy is of recipients except WWII Planned Lending: maintained such that at least veterans, Afghanistan veterans Health Services and Social Proportion of new pensions More actuarially sustainable 65 percent of Ajutor Social and Chernobyl victims in 2012. Assistance Additional Financing calculation based on actual retirement age – increasing by 6 transfers reach the poorest contributions paid increased months per calendar year (2008 population quintile. Partnerships and TFs: from 60 percent to 100 percent. baseline is age 62 for men and 57  Spending on categorical According to the MOU with IMF, the GoM embarked upon EC Moldova Regional for women). benefits reduced by 22 Development and Social percent. development of plan for consolidation of all categorical Protection Grant (Social Law on social care services benefits which should be Component) adopted and Strategy on disabled Increased allocative efficiency - delivered by end 2011. Grant for Second Additional persons approved. categorical benefits The distribution of benefits Financing for the Moldova consolidation for fiscally Social Investment Fund Project 21 sustainable expansion of Ajutor across consumption deciles (SIDA) Social Program: focusing on social assistance PHRD Grant for  Enhanced administrative shows that only 20.9 percent of deinstitutionalization and efficiency, governance, and the overall benefits reached the mentally ill transparency. poorest 10 percent of the Community Participation in population in 2009, and about 40  Turnaround time for Ajutor Post-conflict Regions (Japan) percent of benefits reached the Social application processing, PSIA TF poorest 20 percent of population. including verification and eligibility decision, is reduced During 2010, a total of 59,000 Ongoing/Completed AAA: to 25 days. households benefited from Country Economic Ajutor Social with an average Memorandum  Increased number of Moldova allowance of 721 lei per month. citizens is aware of Ajutor Pension Policy Note Social (5 percent increase Concerns over IT system Poverty Update and TA from the baseline). capacity to support Social Policy Notes for the Government Assistance program, and  Process of Social Assistance retention of qualified IT staff to of Moldova Automated Information manage it. Impacts of the International System (SAAIS) introduction Financial Crisis on Workers’ SAAIS development has been is launched. Remittances, Migration and launched and is being extended  Social Inspectorate is with additional functionalities. Poverty in Moldova established and functional. Concerns regarding the capacity Planned AAA: New initial pensions calculation of MLSPF for analysis and Social analyses (ESW) fully based on actual monitoring of SAAIS data that contributions paid (valorized would feed into social safety net with wage growth), and the real policy-making. value of pensions preserved (indexed with inflation rate). More actuarially sustainable retirement age – retirement age equalized and increased for both genders at 6 months increments per calendar year. Strategic Goal 6: Increased quality of and access to education in line with MDGs CPS Outcomes Milestones Revised CPS Outcomes and Progress to date CPS Instruments and Partners Milestones Increased access to quality Preschool facilities rehabilitated Increased enrollment in Significant increases in pre- Ongoing/Completed Lending: preschool programs from 71.1 and endowed in selected preschool programs from 71.1 school enrolment rates, reaching Quality Education in Rural Areas percent in 2008 to 75 percent in communities. percent in 2008 to 75 percent in 80 percent in 2009. Project 2011 for children aged 3-6 and 2011 for children aged 3-6 and Social Investment Fund 2, from 77.1 percent in 2008 to 85 Percent of preschool staff trained from 77.1 percent in 2008 to 85 by EFA-FTI, cumulated with including Additional Financing percent in 2011 for children aged percent in 2011 for children aged 5-6. other trainings provided by the 5-6. Planned Lending: MEY through other sources will Education Program for Results 22 increase from baseline of 14.7 Preschool facilities rehabilitated 6.4 percent of all pre-schools (P4R) percent in 2008. and endowed in selected renovated and endowed; approx communities. 34 percent of pre-school teachers Partnerships and TFs: trained and 37.5 percent of pre- Education for All—Fast Track Percent of preschool staff trained schools provided with teaching Initiative-Preschool Phase II by EFA-FTI, cumulated with and learning materials. (Grant) other trainings provided by the Education for All—Fast Track MEY through other sources will New policies developed and Initiative Phase III (Grant) increase from baseline of 14.7 applied in pre-schools: child- percent in 2008. centered curriculum, early Ongoing/Completed AAA: learning development standards, Country Economic and professional standards for Memorandum teachers, pre-service and in- Policy Notes for the Government service curriculum for teachers, of Moldova and associated guides. Increased quality of education in Participation by Moldova in at Planned AAA: least one international Baccalaureate scores increased rural areas as measured by Public Expenditure Review assessment program. by an average of 3.2 percent increased student achievement Education Chapter/Note (stand since baseline, and the difference (baseline 9th Grade National alone) between rural and urban scores Assessment and Baccalaureate Education Rationalization TA reduced. The difference not only scores identified by subject: decreased but also reversed. The achievement will increase by at difference between average score least 5 percent). for rural and for urban BAC is 1.8 points in favor of rural area. Rural average score is 2.4 percent higher than urban average score. Improved efficiency of spending Revised funding formula for Improved efficiency of spending MOE in the process of on education schools has been piloted and on education as illustrated by developing an implementation rolled out nationwide school optimization, class plan for the reform program to  Formula funding, developed rationalization, implementation take place from April 2011 – in 2008, will be piloted in 2 percent of schools in pilot Raions of per student financing and 2013. raions by 2010. that have become autonomous other measures agreed to in an  Increased average class size will increase from 0 percent in MOU with the IMF implemented from 22 students in urban 2008 successfully. areas and 18 students in School optimization strategy Amendments to the legal code to rural areas in 2007 to 23 piloted and rolled out allow for larger class sizes and students in urban areas and nationwide. change in the way teachers are 19 students in rural areas by hired. 2012. Increased average class sizes nationwide by start of school year of September 2012 [exact numerical increase TBD]. 23 Rationalization of the school network by closure of schools and creation of hub schools [exact numerical values TBD]. Per student financing being implemented in 11 raions by 2012. Strategic Goal 7: Improved access to and quality of health, water, and sanitation services and reduced environmental degradation and health hazards CPS Strategic Goals and Milestones Revised CPS Outcomes and Progress to date CPS Instruments and Partners Outcomes Milestones Increased efficiency in resource Number of visits to primary care Increased utilization of primary 20 Primary Care centers Ongoing/Completed Lending: use in the health sector as facilities increased by at least 5 health care services: rehabilitated, and 15 in advanced Health Services and Social measured by higher utilization of percent. Baseline: 9,763,321 visits per stage of works Assistance, including Additional primary care services. Increased number of primary annum; more recent update 88 primary care providers Financing care physicians to be directly 10,225, 282 directly contracted by NHIC by Avian Influenza Project contracted by National Health Increased satisfaction for use of end 2010, up from 29 in 2007 – a National Water Supply and Insurance Company. government health services: 203 percent increase. Sanitation Project Improved access to quality # of rural primary care facilities Baseline (from LiTs 2006): 43 Revised curriculum for primary Social Investment Fund 2, health services. upgraded and staffed with percent of citizens were health care staff and managers including Additional Financing trained personnel satisfied); more recent update approved and implemented; Disaster and Climate Risk Decrease in GP vacancies in (LiTs 2010): 67 percent of Cumulative increase of 11 Management Project rural health facilities citizens are satisfied with quality percent in number of GPs and efficiency of public service employed at rehabilitated PHCs. Planned Lending: delivery. 35 standardized medical Health Services and Social Decreased number of GP protocols for primary care Assistance Additional Financing vacancies in rural areas from 20 produced. Agricultural Competitiveness percent to 15 percent by 2012. New Diagnostic Related Group Project System piloted in 7 hospitals. Partnerships and TFs: Legislative Framework for PPPs EC Regional Development Grant established and PPP pilots (Water and Sanitation initiated. component – Wastewater National Hospital Master Plan Hospital Master Plan completed Treatment Plant in the town of completed and approved by and approved in 2010: Orhei) Government to guide health Government Decision No. 379 JSDF for Hepatitis B & C infrastructure investments. dated 07.05.2010 regarding Moldova Health PPPs (IFC) Hospital sector development Coordinated Program in the Program for 2010-2012. Health Sector (EU) Increased health financial risk A strategy to increase insurance Increased share of the population Health insurance extended to POPS Stockpiles Management protection. coverage among 15-49 year olds with health insurance: include social assistance and Destruction (GEF, Dutch, Baseline: 76.7 percent of developed and implemented. Baseline: 76.7 percent (2007) beneficiaries; incentives for other Canada) population covered by health vulnerable groups and farmers PCF: Moldova Soil Conservation 24 insurance (2007). Value in 2010: 80.8 percent. introduced and approved. Projects 1,2 Additional financing supported Renewable Energy from distribution of food packages to Agricultural Waste (GEF) 11.6 percent of pregnant and CDCF – Moldova Biomass lactating women and 10 percent Heating of children under 2 years in Energy Conservation and response to the financial and Emissions Reduction (Carbon economic crisis. Fund) Successful implementation of the Community Support Program for Avian Influenza project has Sustainable and Integrated Forest established the capacity to Management and Carbon monitor and respond to Sequestration through infectious disease outbreaks in Forestation both the animal and human Improving Forest Law health sectors. Enforcement and Governance’ (FLEG) TF Increased proportion of the # of Apa Canal employees per Sector strategy financing revised GFDRR: Moldova Disaster and population with sustainable thousand households connected (funded by EC/ADA). Climate Risk Management CB access to an improved water to a water network (baselines The National Water Supply and source, urban and rural (MDGs identified for each village). Sanitation Project is undergoing Ongoing/Completed AAA: Indicator 29: by 2010 (FY11) 57 # of drinking water samples major restructuring, including a Advisory services and percent and by 2015 (FY16) 68.5 meeting Moldovan revision of project outcomes and investment to promote public- percent. bacteriological standards from monitoring and evaluation private partnerships in health participating villages’ water indicators. The restructuring will (IFC) supply system. be completed by November 2011 Policy Notes for the Government (mid-term review is planned for of Moldova September 2011). Sector Coordination Council GFDRR: Moldova Post-Disaster Reduced environmental Quantitative targets for POPs (Flood) Needs Assessment degradation as measured by project, such as the destruction Reducing Vulnerability to reduction in pollution of areas of POPs contaminated stocks of Climate Change of Agricultural under improved land obsolete pesticides and PCB Systems in Moldova TA management. capacitors were achieved and in some cases surpassed: Planned AAA:  safe disposal of 1,293 Health sector BOOST metric tons of obsolete Agriculture TA pesticides; TA / Dialogue on environment  safe disposal of 934 metric investment strategies and tons of PCB-contaminated integration of environmental capacitors (approximately considerations in other sectors 19,000 units); Technical capacity of Moldovan laboratory and testing 25 infrastructure for POPs substances upgraded. New legislation, by-laws and guidelines aimed at improving the regulatory framework for POPs substances, introduced. Forestation of 20,300 hectares through the Soil Conservation projects. As a result, Moldsilva – the State Forestry Agency, is receiving regular carbon payments for an estimated total of 1.9 million tons of CO2 to be sequestered by 2017. The Projects have supported the implementation of a national competitive grant scheme for participating communities that provided grants to more than 50 localities for capacity building activities aimed at improving management of more than 6,000 hectares of community land (mostly pastures). The Community Forestry Project has contributed to the forestation of 10,600 hectares and is now awaiting validation under the United Nations Framework Convention on Climate Change (UNFCCC) Clean Development Mechanism procedures. Around 600 thousand tons of CO2 are estimated to be sequestered. A national competitive grant scheme for participating communities to provide grant funding for localized capacity building and improvements in forest and pasture management. Increased awareness of environmental issues in agro- industry and among farmers 26 through the Ag Pollution Control Project:  58 percent of people surveyed aware of environmental issues in agriculture (while a percentage evaluation of the achievement is not possible due to the absence of a target, the increase in public awareness of environmental issues in agriculture is significant). Enhanced ability of the State Hydro-meteorological Center to forecast severe weather and improve Moldova’s capacity to prepare for and respond to natural disasters, as measured by:  More accurate and specific forecasting of weather conditions;  Expanded lead-time of weather warnings to users, particularly Department of Exceptional Situations (DES);  Strengthened capacity to coordinate response to emergencies. Pillar III. Improving Public Sector Governance Country Goals  Improved performance of civil servants.  Improved quality of regulatory services.  Sound policies developed, approved, and implemented by the GoM.  Overall fiscal discipline and resource allocation improved (as evidenced by IMF monitoring and assessment). Issues and obstacles  Systematic performance appraisal for civil servants linked to career development is not being practiced. 27  The pay system is fragmented and opaque due to multiple supplements, does not motivate consistent performance and professional development, and is not competitive in the labor market.  Citizens are dissatisfied with long waits, poor customer service, and convoluted procedures of services provided by government regulatory agencies (issuing permits, licenses, certificates)  The National Development Strategy is adopted, its management has moved from the Ministry of Economy to the Government Office, initial capacity building skills for policy review and coordination have begun, but the procedures, methodologies and skills for drafting policies and linking them to higher level policy goals are lacking.  Budget management information is fragmented and is not readily available to decision makers.  Public financial decisions rely on overly centralized, command-oriented management and financial controls, and undeveloped audit systems.  An effective public procurement system depends on Public Procurement Law which accords to international standards, effective secondary legislation and an efficient and effective authorizing environment.  Provision of public services to citizens and businesses is slow, bureaucratic and corrupt.  There is no strategic framework or common infrastructure for e-Government, which results in duplications, increased operational costs and risks of data loss. Strategic Goal 8: Building a professional civil service CPS Outcomes Milestones Revised CPS Outcomes and Progress to date CPS Instruments and Partners Milestones Merit system and ethics Percentage of vacancies filled New civil service classification Ongoing/Completed Lending: improved for civil servants. through competitive merit-based and grading system developed. Economic Recovery DPO Basic compliance with the EU selection improved from 50 Increasing trend of competition (including CRW allocation) civil service assessment percent to 80 percent. based employment at the central requirements achieved. Turnover percentage of newly government level during 2007- Planned Lending: recruited civil servants over the 5 2010. Competitiveness DPO year period decreased. Partnerships and TFs: Number of qualified civil Public Administration TA— servants applying to vacant Multi-Donor Trust Fund (DFID, positions in the government SIDA, Dutch) increased. Personnel performance appraisal Ongoing/Completed AAA: Performance management Regulation on civil service system in the civil service system introduced in 2009 and Country Systems Assessment performance management implemented; annual adopted and enforced at the level applied in 2009 and 2010. 86 Country Economic performance ratings fall into of central public administration percent of civil servants Memorandum each category of ratings. authorities. participated in the performance Policy Notes for the Government evaluation exercise in of Moldova Compulsory requirements for 2009/2010. receiving a regulatory service are Planned AAA: revised and redundant Structural reform follow-up work requirements abolished; business processes of regulatory services redesigned; performance of civil servants in regulatory agencies improved as assessed by periodic client satisfaction survey. 28 The structure of the civil service New civil service remuneration Revision and endorsement of the pay improved by incorporating act (based on grading that payroll scheme in 20 out of 24 supplementary payments into the reflects job classification criteria) Central Government authorities base pay and allowing for less approved and implemented as of during 2010. than 20 percent performance 2010. bonus. Average civil service Improvement of pay adequacy remuneration increases relative and wage bill management, as to private sector wages, reaching measured by CPIA rating #15.d at least 80 percent of (from 2.5 to at least 3.0). corresponding labor market avg. Strategic Goal 9: Increased capacity of the public sector to develop and implement public policies CPS Outcomes Milestones Revised CPS Outcomes and Progress to date CPS Instruments and Partners Milestones The new sector policies are The legal and methodological Sector policies are reflected in Methodologies for National Planned Lending: aligned with NDS, budgeted, and basis for policy process approved the Medium-term Budget Development Strategy Competitiveness DPO their impact assessed prior to and implementation started. Framework (MTBF). preparation have been approved government approval. Any issue Government Action Plan is and applied. Partnerships and TFs: on policy impacts are cleared at a aligned with the National Public Administration TA— technical level prior to policy Development Strategy, other Multi-Donor Trust Fund (DFID, decision-making by the GO with strategic documents and SIDA, Dutch) ministries. budgeted in line with the MTBF. Planned AAA: Improvement of policy Central policy coordination Policy coordination improved Structural reform follow-up work coordination and responsiveness, capacity in the GO improved through institutional re- as measured by increased CPIA through proper staffing and structuring; State Chancellery indicator from 3.5 to at least 4.0. training. policy coordination function introduced in 2008 increased the efficiency of the policy coordination efforts at the Central Government level; Capacity of Policy, Strategic Planning and Aid Coordination Department strengthened. Impact assessment methodology A system of ex-ante policy developed and respective civil impact analysis has been servants trained. developed and introduced in selected policy areas. Ministries and agencies are Methodology for the required to issue (and publish on development of Institutional their web sites) annual results Development Plan completed, reports according to methodology approved and applied at the level approved by the Government. of central government. 29 Strategic Goal 10: Increased transparency and accountability in the management of public monies CPS Outcomes Milestones Revised CPS Outcomes and Progress to date CPS Instruments and Partners Milestones Improvement of budget New budget classification is Despite the fiscal situation, 2009 Ongoing Lending: classification system, as integrated with the unified chart budget deficit target met, and Public Financial Management measured by improved PEFA of accounts and aligned with 2010 budget performance better Project rating (baseline rating - C, COFOG and GFS2001 than agreed under IMF program. Governance e-Transformation expected rating - A). standards. MoF approved new integrated Project budget classification and chart of accounts compliant with GFS Planned Lending: 2001. Implementation will be Public Financial Management 2 through FMIS, on which progress has been slow though if Partnerships and TFs: now kept on track should be Public Administration TA— implemented in time for 2012 Multi-Donor Trust Fund (DFID, budget preparation process. SIDA, Dutch) National Internal Audit Strategic Development of the Standards introduced; Public Court of Accounts (DFID, Internal Financial Control Dutch) legislation approved. Dutch Grant for Co-financing of the PFM Project Improved effectiveness of Public internal financial control Five Performance Audit Pilots Successor Grant for PFM Project external audit (PEFA baseline and audit system based on EU successfully completed by the (SIDA) rating C+, expected rating - at model established. Court of Accounts in 2009 and results of two published. Training Capacity Building and least B). Training related to Management Institutional capacity of the of Public Finances (SIDA) Court of Accounts to perform IDF Grant for Capacity Building external audit function in Moldova Public Sector strengthened. Accounting Project Increased competition in public All required secondary Public Procurement Law passed. e-Transformation Trust Fund procurement (increase in percent procurement legislation in place, Brought substantial (Dutch) of value of all awarded contracts public procurement department improvements in the legislative framework and public Ongoing/Completed AAA: awarded through competitive strengthened (AMRPPHA), process). electronic procurement system procurement in line with Country Systems Assessment implemented, and appropriate international standards and Country Economic amendments introduced into the practices. Memorandum primary legislation (PPL). AMRPPHA restructured in late Policy Notes for the Government 2009 and new Public of Moldova Procurement Agency (PPA) Country Procurement established under the Ministry of Assessment Report (CPAR) Finance. Public Expenditure Review 2 The public procurement system Public Expenditure Review 2011 of Moldova assessed in 2010 by 30 using OECD/DAC methodology Moldova e-development TA based on four main pillars and Citizen Report Card 2010 twelve indicators. A&A ROSC Follow-up There are still deficiencies in the legislative and institutional Planned AAA: framework, which could be Public Financial Management addressed by amending the TA Public Procurement Law, Apps for good governance in completing missing secondary Moldova (Third Party regulations, including standard Monitoring Window - CSF bidding documents and standard Demand for Good Governance) forms of contracts, improving the IDF for Public Procurement existing website of the Public PEFA (led by the EC) Procurement Agency to make it fully functional to ensure greater transparency, developing guidance notes to and manuals to improve contract administration, improving existing training programs, and ensuring independent complaint handling mechanism. The use of single source procurement decreased significantly. Electronic Government Procurement (e-GP) readiness assessment conducted as part of CPAR. First phase of the e-GP application developed by contracting a private software development company. However, lack of financial resources and no final decision regarding the e-GP business model delayed the implementation of the system. Improved capacity and management of ICT in the public sector:  Governance center set up and operational (staff trained; public support for e- 31 government increased from 53 to 60 percent; percentage of cost recovery of the e-GC increased from 0 to 20 percent).  e-transformation enabling environment present, including the policy, legal and regulatory frameworks (100 data sets available on the Open Government Data website; 2 institutions making datasets available through OGD); Improved service delivery and transparency in the public sector:  Shared e-Government infrastructure established (percentage of civil servants using shared e-government infrastructure increased to 5 percent; number of Government databases with central backup increased to 5).  e-services developed (number of transactions completed through Government services portal increased to 100,000 by 2013; average processing time for public services (business licenses) decreased to 3 days by 2013). 32 ANNEX 2: LIST OF ACTIVE BANK-ADMINISTERED TRUST FUNDS IN MOLDOVA ( Figures in thousands of USD ) Net Grant TF # Trust Fund Name Funds Disb. Closing Date Donor Name Exec. By Amount TF053065 PCF-MOLDOVA:SOIL CONSERVATION PROJECT 4,550.00 1,523.91 12/31/2013 MULTIPLE DONORS Recipient TRAINING CAPACITY BUILDING AND TRAINING RELATED TO TF054017 MANAGEMENT OF PUBLIC FINANCES (CF UNDER TF054016) 2,209.58 1,556.65 12/31/2011 SIDA Recipient DUTCH GRANT FOR CO-FINANCING OF THE PUBLIC FINANCIAL Netherlands - Minister for TF055170 MANAGEMENT PROJECT 4,350.03 3,302.65 12/31/2011 Europ. Affairs & Intern. Coop. Recipient TF055175 PHRD-MOLDOVA: COMPETITIVENESS ENHANCEMENT PROJECT 4,500.00 2,887.25 6/30/2012 Japan - Ministry of Finance Recipient GEF FSP-MOLDOVA: POPS STOCKPILES MANAGEMENT AND TF055875 DESTRUCTION PROJECT 6,350.00 6,336.43 12/31/2010 MULTIPLE DONORS Recipient TF056111 CDCF - MOLDOVA BIOMASS HEATING ERPA 1,969.04 286.95 7/15/2016 MULTIPLE DONORS Recipient MDTF TECHNICAL ASSISTANCE SUPPORT TO PUBLIC TF056601 ADMINISTRATION REFORM OF MOLDOVA 6,150.00 4,404.09 12/31/2012 MULTIPLE DONORS Recipient TF056815 BCF - MOLDOVA SOIL CONSERVATION ERPA 2,478.00 776.67 12/31/2015 MULTIPLE DONORS Recipient TF057273 SUPPORT TO RISP 2 7,272.44 6,082.27 4/30/2012 SIDA Recipient TF057662 MDTF FOR STRATEGIC DEVELOPMENT OF THE CoA 2,786.60 2,629.50 6/30/2011 MULTIPLE DONORS Recipient REPUBLIC OF MOLDOVA: IDF GRANT FOR CAPACITY BUILDING IN TF058159 MOLDOVA PUBLIC SECTOR ACCOUNTING PROJECT 160.00 156.24 12/31/2010 IBRD 1818 H Street, NW Recipient MD: HEALTH SERVICES AND SOCIAL ASSISTANCE ADDITIONAL TF092641 FINANCING GRANT 7,000.00 6,472.66 8/31/2011 IBRD 1818 H Street, NW Recipient COMMUNITY SUPPORT PROGRAM FOR SUSTAINABLE AND INTEGRATED FOREST MANAGEMENT AND CARBON SEQUESTRATION TF093088 THROUGH FORESTATIO N. 975.90 264.87 4/2/2013 Japan - Ministry of Finance Recipient Netherlands - Minister for TF093288 MOLDOVA DUTCH TA-TF FINANCIAL SECTOR REFORM 3,184.59 1,239.21 6/30/2011 Europ. Affairs & Intern. Coop. Recipient TF093407 COMMUNITY PARTICIPATION IN POST-CONFLICT REGIONS 1,950.00 480.91 3/17/2013 Japan - Ministry of Finance Recipient COMMUNITY PARTICIPATION IN POST-CONFLICT REGIONS (BANK TF093408 EXECUTED) 50.00 4.22 12/15/2011 Japan - Ministry of Finance Bank TF093702 PREVENTING HEPATITIS B&C IN MOLDOVA 1,383.76 684.25 5/5/2012 Japan - Ministry of Finance Recipient TF093720 PREVENTING HEPATITIS B&C IN MOLDOVA (BANK-EXECUTED) 26.00 24.04 5/5/2012 Japan - Ministry of Finance Bank TF094297 MD - EFA FTI SPN - CF 160.08 110.11 2/28/2011 MULTIPLE DONORS Bank TF094801 Successor Swedish Grant for Public Finance Management Project 2,791.60 2,450.16 6/30/2011 SIDA Recipient TF094952 Moldova Regional Development and Social Protection Project 16,549.15 6,194.90 6/30/2011 EU-Commission Recipient Swedish Grant for Second Additional Financing for the Moldova TF095950 Social Investment Fund II Project 2,531.65 2,301.98 12/31/2010 SIDA Recipient Impacts of the International Financial Crisis on Workers’ TF096087 Remittances, Migration, and Poverty in Moldova. 97.00 0.00 12/30/2011 MULTIPLE DONORS Bank TF097442 GFDRR: MOLDOVA POST-DISASTER (FLOOD) NEEDS ASSESSMENT 100.00 93.45 2/28/2011 MULTIPLE DONORS Bank TF097543 GFDRR: Moldova Disaster and Climate Risk Management CB 100.00 4.30 6/30/2011 MULTIPLE DONORS Bank TF097665 Moldova Health 200.00 46.28 12/30/2012 IFC Bank TF097883 ECSPE - Shared Growth Moldova 45.00 29.82 4/30/2011 MULTIPLE DONORS Bank TF097895 Chisinau Energy Supply Improvement Technical Assistance 150.00 39.72 6/30/2011 MULTIPLE DONORS Bank TF098049 PPIAF: CHISINAU ENERGY SUPPLY IMPROVEMENT PROJECT 75.00 0.00 6/30/2011 MULTIPLE DONORS Bank TF098414 Moldova Food Security AAA 320.00 8.54 6/30/2013 MULTIPLE DONORS Bank Leadership Development Program for Moldovan Officials on ICT for TF098462 Improved Governance and Growth 120.00 5.95 9/30/2011 MULTIPLE DONORS Bank TF099088 MOLDOVA ESREI TF: SUPERVISION OF RECIPIENT ACTIVITIES 238.96 0.00 12/31/2012 SIDA Bank Regional Education for All-Fast Tract Initiative Education Program TF099216 Development Fund (EPDF) 80.00 0.00 6/30/2011 MULTIPLE DONORS Bank Total 80,904.38 50,397.98 33 ANNEX 3: DEVELOPMENT PARTNER COMMITMENTS BY SECTOR, CONSULTATIVE GROUP: MOLDOVA PARTNERSHIP FORUM, MARCH 2010 Sector* Partners** 2010 2011 2012 2013 Czech Republic, Finland, Czech Republic, Romania, Czech Republic, Finland, Romania, Slovakia, Sweden, EU, Czech Republic, Finland, Not yet allocated Slovakia, Sweden, UK, EU Romania, Slovakia, Sweden, EU UN, World Bank Romania, EU, UN, World Bank Czech Republic, France, Hungary, Sweden, Netherlands, Civil Service UK, UN France, Sweden, UN France, UN France, UN Anti-Corruption Sweden, US, US Fiscal And Administrative Decentralization Sweden, Netherlands, US, Sweden, Netherlands, US, UN Sweden, Netherlands, UN Judiciary Finland, UK, US, UN Finland, US, UN Finland, UN Finland E-Government UN, World Bank UN Sweden, Netherlands, UK, EU, Business Environment US, UN Sweden, EU, US, UN Sweden, EU, UN EU Switzerland, US, UN, World Agriculture Switzerland, US, UN Bank US, UN US, UN Czech Republic, Finland, Sweden, EU, Switzerland, US, Finland, Sweden, Switzerland, Finland, Switzerland, US, EBRD, Infrastructure EBRD, EIB, World Bank US, EBRD, EIB, World Bank EIB Switzerland, US Regional Development Hungary, Sweden, UK, EU EU EU EU Czech Republic, France, Netherlands, EU, UN, World Education Bank France, Netherlands, EU, UN France, EU, UN France, EU Finland, Hungary, Luxembourg, Switzerland, UN, World Bank, Luxembourg, Switzerland, UN, Health Global Fund Global Fund Switzerland, UN, Global Fund Switzerland, UN, Global Fund Czech Republic, Finland, Hungary, Luxembourg, Netherlands, UK, US, UN, World Finland, Luxembourg, Social Protection Bank Netherlands, US, UN Finland, Netherlands, UN Finland, UN Poland, Netherlands, UK, EU, Netherlands, EU, World Bank, Budget Support World Bank, IMF IMF Netherlands, IMF Denmark, Finland, France, Sweden, Netherlands, EU, UN, Finland, Sweden, Netherlands, Denmark, Sweden, Netherlands, Other Sector World Bank EU, UN EU, UN Denmark, EU, UN * Sectors are the chapters of the document "Rethink Moldova", prepared by the Government for the Consultative Group meeting Moldova Partnership Forum, 24th March 2010, against which indicative pledges were made. ** These are partners who made pledges at the Consultative Group meeting; a number of other partners are also active in Moldova including Austria, China, Germany, Japan, Lithuania and Turkey.   34 ANNEX 4: STANDARD CPS ANNEXES Annex A1- Moldova Key Economic & Program Indicators - Change from Last CAS Prepared for all CASs/Progress Reports, but included in Board version of Progress Reports Only As Of Date 3/15/2011 Forecast in Last CAS Actual Current CAS Forecast Economy (CY) 2008 a 2009 b 2010 b 2011 b 2009 c 2010__ c 2011 a 2012 b 2013 b 2014 b Growth rates (%) GDP 6.5 3.5 5.0 5.0 -6.0 6.9 3.5 4.5 5.0 4.5 Exports 11.1 3.0 5.0 5.0 -12.1 12.8 8.7 7.7 8.7 9.1 Imports 14.6 0.0 2.0 2.0 -23.6 13.7 7.3 6.7 7.0 6.2 Inflation (%) 12.8 7.8 7.8 7.8 0.0 7.4 8 6.1 5.4 4.6 National accounts (% GDP) Current account balance -18.9 -19.2 -17.0 -16.2 -8.5 -8.3 -10 -8.4 -8.1 -7.9 Gross investment 33.5 30.1 31.4 32.0 21.7 24.1 24.9 25.0 25.6 26.2 Public finance (% GDP) Fiscal balance -0.5 -1.5 -1.0 -1.0 -6.4 -2.5 -1.9 -0.7 -0.4 -0.7 Foreign financing 1.6 3.1 3.0 3.0 5.0 4.8 3.6 4.4 4.7 2.8 International reserves (as months of imports) 3.3 3.2 3.3 3.4 4.4 4.5 4 4.2 4.2 4.3 a. Estimated year b. Projected year c. Actual outcome                   35 Moldova at a glance 5/9/11 Euro pe & Lo wer Ke y D e v e lo pm e nt Indic a t o rs Central middle M o ldo va A sia inco me Age distribution, 2009 (2009) Male Female P o pulatio n, mid-year (millio ns) 3.8 403 3,767 75-79 Surface area (tho usand sq. km) .. 23,549 31,923 60-64 P o pulatio n gro wth (%) -0.1 0.3 1.2 Urban po pulatio n (% o f to tal po pulatio n) .. 64 40 45-49 30-34 GNI (A tlas metho d, US$ billio ns) 5.6 2,772 7,682 15-19 GNI per capita (A tlas metho d, US$ ) 1,480 6,880 2,039 GNI per capita (P P P , internatio nal $ ) 3,01 0 13,297 4,502 0-4 6 4 2 0 2 4 6 GDP gro wth (%) -6.0 4.0 7.5 percent of total population GDP per capita gro wth (%) -5.9 3.6 6.3 ( m o s t re c e nt e s t im a t e , 2 0 0 3 – 2 0 0 9 ) P o verty headco unt ratio at $ 1 .25 a day (P P P , %) 2 4 .. Under-5 mortality rate (per 1,000) P o verty headco unt ratio at $ 2.00 a day (P P P , %) 12 9 .. Life expectancy at birth (years) .. 69 68 60 Infant mo rtality (per 1,000 live births) .. 20 44 Child malnutritio n (% o f children under 5) .. .. 25 50 40 A dult literacy, male (% o f ages 15 and o lder) 99 99 87 A dult literacy, female (% o f ages 15 and o lder) 98 97 73 30 Gro ss primary enro llment, male (% o f age gro up) .. 100 109 20 Gro ss primary enro llment, female (% o f age gro up) .. 98 105 10 0 A ccess to an impro ved water so urce (% o f po pulatio n) .. 95 86 A ccess to impro ved sanitatio n facilities (% o f po pulatio n) .. 89 50 1990 1995 2000 2008 Moldova (..) Europe & Central Asia N e t A id F lo ws 19 8 0 19 9 0 2000 2009 a (US$ millio ns) Net ODA and o fficial aid .. 10 123 299 Growth of GDP and GDP per capita (%) To p 3 do no rs (in 2008): Euro pean Co mmissio n .. 0 5 83 10 United States .. 9 35 36 5 Sweden .. 0 2 14 0 -5 -10 A id (% o f GNI) .. 0.4 9.4 4.5 -15 A id per capita (US$ ) .. .. .. 79 -20 -25 -30 Lo ng- T e rm E c o no m ic T re nds -35 95 05 Co nsumer prices (annual % change) .. 788.5 31.2 0.0 GDP implicit deflato r (annual % change) .. 13.5 27.3 2.2 GDP GDP per capita Exchange rate (annual average, lo cal per US$ ) .. 0.0 12.4 11.1 Terms o f trade index (2000 = 100) .. .. 1 00 107 19 8 0 – 9 0 19 9 0 – 2 0 0 0 2 0 0 0 – 0 9 (average annual gro wth %) P o pulatio n, mid-year (millio ns) 4.0 4.4 .. 3.8 0.8 .. .. GDP (US$ millio ns) .. 3,593 1,288 5,438 2.7 -9.6 5.6 (% o f GDP ) A griculture .. 36.1 29.0 10.1 .. -11.2 -1 .0 Industry .. 36.7 21.7 13.1 .. -13.6 -1 .4 M anufacturing .. 36.0 16.3 12.6 .. -7.1 1.6 Services .. 27.2 49.2 76.8 .. 0.7 10.6 Ho useho ld final co nsumptio n expenditure .. 57.5 91.4 88.3 .. 9.9 8.1 General go v't final co nsumptio n expenditure .. 15.1 10.3 22.1 .. -12.4 5.2 Gro ss capital fo rmatio n .. 24.9 23.9 23.1 .. -15.5 8.9 Expo rts o f go o ds and services .. 48.2 49.8 36.9 .. 1.0 10.0 Impo rts o f go o ds and services .. 50.6 75.4 73.5 .. 5.9 1 1.5 Gro ss savings .. 58.1 16.3 17.6 No te: Figures in italics are fo r years o ther than tho se specified. 2009 data are preliminary. .. indicates data are no t available. a. A id data are fo r 2008. Develo pment Eco no mics, Develo pment Data Gro up (DECDG).   36 Moldova B a la nc e o f P a ym e nt s a nd T ra de 2000 2009 Governance indicators, 2000 and 2009 (US$ millio ns) To tal merchandise expo rts (fo b) 477 1,329 To tal merchandise impo rts (cif) 793 3,273 Voice and accountability Net trade in go o ds and services -331 -1,988 Political stability Current acco unt balance -98 -465 as a % o f GDP -7.6 -8.5 Regulatory quality Rule of law Wo rkers' remittances and co mpensatio n o f emplo yees (receipts) 179 1,211 Control of corruption Reserves, including go ld 218 1,480 0 25 50 75 100 2009 Country's percentile rank (0-100) C e nt ra l G o v e rnm e nt F ina nc e higher values imply better ratings 2000 (% o f GDP ) Current revenue (including grants) 31.9 38.3 Source: Kaufmann-Kraay-Mastruzzi, World Bank Tax revenue 25.0 31.3 Current expenditure 34.7 40.3 T e c hno lo gy a nd Inf ra s t ruc t ure 2000 2008 Overall surplus/deficit -2.6 -6.3 P aved ro ads (% o f to tal) 86.1 85.7 Highest marginal tax rate (%) Fixed line and mo bile pho ne Individual .. .. subscribers (per 1 00 peo ple) 18 97 Co rpo rate .. .. High techno lo gy expo rts (% o f manufactured expo rts) 3.2 4.2 E xt e rna l D e bt a nd R e s o urc e F lo ws E nv iro nm e nt (US$ millio ns) To tal debt o utstanding and disbursed 1,693 3,457 A gricultural land (% o f land area) 77 75 To tal debt service 150 387 Fo rest area (% o f land area) .. .. Debt relief (HIP C, M DRI) – – Terrestrial pro tected areas (% o f surface area) .. 1.4 To tal debt (% o f GDP ) 131 .4 63.6 Freshwater reso urces per capita (cu. meters) 252 275 To tal debt service (% o f expo rts) 18.1 12.0 Freshwater withdrawal (billio n cubic meters) 2.3 .. Fo reign direct investment (net inflo ws) 127 0 CO2 emissio ns per capita (mt) 0.86 1.3 P o rtfo lio equity (net inflo ws) 117 0 GDP per unit o f energy use (2005 P P P $ per kg o f o il equivalent) 2.1 2.7 Composition of total external debt, 2009 Energy use per capita (kg o f o il equivalent) 694 910 IDA, 332 IBRD, 110 IMF, 154 Other multi- Wo rld B a nk G ro up po rt f o lio 2000 2009 Short-term, lateral, 71 1,318 (US$ millio ns) Bilateral, 265 IB RD To tal debt o utstanding and disbursed 191 110 Disbursements 6 0 Private, 1,207 P rincipal repayments 5 18 Interest payments 11 4 US$ millions IDA To tal debt o utstanding and disbursed 103 332 Disbursements 30 21 P riv a t e S e c t o r D e v e lo pm e nt 2000 2009 To tal debt service 1 6 Time required to start a business (days) – 10 IFC (fiscal year) Co st to start a business (% o f GNI per capita) – 7.0 To tal disbursed and o utstanding po rtfo lio 35 16 Time required to register pro perty (days) – 5 o f which IFC o wn acco unt 19 16 Disbursements fo r IFC o wn acco unt 1 0 Ranked as a majo r co nstraint to business 2000 2009 P o rtfo lio sales, prepayments and (% o f managers surveyed who agreed) repayments fo r IFC o wn acco unt 0 7 A ccess to /co st o f financing .. 40.4 Tax rates .. 37.2 M IGA Gro ss expo sure 3 73 Sto ck market capitalizatio n (% o f GDP ) 3.2 .. New guarantees 3 6 B ank capital to asset ratio (%) 30.6 17.0 No te: Figures in italics are fo r years o ther than tho se specified. 2009 data are preliminary. 5/9/11 .. indicates data are no t available. – indicates o bservatio n is no t applicable. Develo pment Eco no mics, Develo pment Data Gro up (DECDG).   37 Millennium Development Goals Moldova With selected targets to achieve b etween 1990 and 2015 (estimate clo sest to date sho wn, +/- 2 years) M o ldo v a G o a l 1: ha lv e t he ra t e s f o r e xt re m e po v e rt y a nd m a lnut rit io n 19 9 0 19 9 5 2000 2008 P o verty headco unt ratio at $ 1 .25 a day (P P P , % o f po pulatio n) 17.0 15.1 33.0 2.4 P o verty headco unt ratio at natio nal po verty line (% o f po pulatio n) .. .. .. .. Share o f inco me o r co nsumptio n to the po o rest qunitile (%) .. .. .. .. P revalence o f malnutritio n (% o f children under 5) .. .. .. .. G o a l 2 : e ns ure t ha t c hildre n a re a ble t o c o m ple t e prim a ry s c ho o ling P rimary scho o l enro llment (net, %) 89 .. .. .. P rimary co mpletio n rate (% o f relevant age gro up) .. 94 98 91 Seco ndary scho o l enro llment (gro ss, %) 94 81 82 88 Yo uth literacy rate (% o f peo ple ages 15-24) .. .. .. .. G o a l 3 : e lim ina t e ge nde r dis pa rit y in e duc a t io n a nd e m po we r wo m e n Ratio o f girls to bo ys in primary and seco ndary educatio n (%) 105 .. .. .. Wo men emplo yed in the no nagricultural secto r (% o f no nagricultural emplo yment) .. .. .. .. P ro po rtio n o f seats held by wo men in natio nal parliament (%) .. .. .. .. G o a l 4 : re duc e unde r- 5 m o rt a lit y by t wo - t hirds Under-5 mo rtality rate (per 1 ,000) .. .. .. .. Infant mo rtality rate (per 1,000 live births) .. .. .. .. M easles immunizatio n (pro po rtio n o f o ne-year o lds immunized, %) .. .. .. .. G o a l 5 : re duc e m a t e rna l m o rt a lit y by t hre e - f o urt hs M aternal mo rtality ratio (mo deled estimate, per 1 00,000 live births) .. .. .. .. B irths attended by skilled health staff (% o f to tal) .. .. .. .. Co ntraceptive prevalence (% o f wo men ages 1 5-49) .. .. .. .. G o a l 6 : ha lt a nd be gin t o re v e rs e t he s pre a d o f H IV / A ID S a nd o t he r m a jo r dis e a s e s P revalence o f HIV (% o f po pulatio n ages 1 5-49) .. .. 0.1 0.4 Incidence o f tuberculo sis (per 100,000 peo ple) .. .. .. .. Tuberculo sis case detectio n rate (%, all fo rms) 35 59 53 70 G o a l 7 : ha lv e t he pro po rt io n o f pe o ple wit ho ut s us t a ina ble a c c e s s t o ba s ic ne e ds A ccess to an impro ved water so urce (% o f po pulatio n) .. .. .. .. A ccess to impro ved sanitatio n facilities (% o f po pulatio n) .. .. .. .. Fo rest area (% o f to tal land area) .. .. .. .. Terrestrial pro tected areas (% o f surface area) .. .. .. 1.4 CO2 emissio ns (metric to ns per capita) 5.4 2.6 0.9 1.3 GDP per unit o f energy use (co nstant 2005 P P P $ per kg o f o il equivalent) 1.7 1.5 2.1 2.7 G o a l 8 : de v e lo p a glo ba l pa rt ne rs hip f o r de v e lo pm e nt Telepho ne mainlines (per 1 00 peo ple) 10.6 13.1 14.2 30.7 M o bile pho ne subscribers (per 1 00 peo ple) 0.0 0.0 3.4 66.7 Internet users (per 1 00 peo ple) 0.0 0.0 1.3 23.4 P erso nal co mputers (per 1 00 peo ple) .. 0.2 1.5 11.4 Education indicators (%) Measles immunization (% of 1-year ICT indicators (per 100 people) olds) 25 100 120 100 75 80 50 60 40 25 0 20 2000 2002 2004 2006 2008 0 0 1990 1995 2000 2008 2000 2002 2004 2006 2008 Primary net enrollment ratio (..) Fixed + mobile subscribers Ratio of girls to boys in primary & secondary Moldova (..) Europe & Central Asia education (..) Internet users No te: Figures in italics are fo r years o ther than tho se specified. .. indicates data are no t available. 5/9/11 Develo pment Eco no mics, Develo pment Data Gro up (DECDG). 38 CAS Annex B2 - Moldova Selected Indicators* of Bank Portfolio Performance and Management As Of Date 3/15/2011 Indicator 2008 2009 2010 2011 Portfolio Assessment Number of Projects Under Implementation a 14 12 13 11 Average Implementation Period (years) b 2.3 3.3 3.9 4.6 Percent of Problem Projects by Number a, c 0.0 25.0 15.4 0.0 Percent of Problem Projects by Amount a, c 0.0 8.6 7.3 0.0 Percent of Projects at Risk by Number a, d 0.0 25.0 15.4 0.0 Percent of Projects at Risk by Amount a, d 0.0 8.6 7.3 0.0 Disbursement Ratio (%) e 21.8 23.8 28.6 28.7 Portfolio Management CPPR during the year (yes/no) N N N Y Supervision Resources (total US$) 1200.1 169.9 643.2 917.8 Average Supervision (US$/project) 85.7 28.31 107.2 152.96 Memorandum Item Since FY 80 Last Five FYs Proj Eval by OED by Number 23 7 Proj Eval by OED by Amt (US$ millions) 448.4 66.1 % of OED Projects Rated U or HU by Number 18.2 0.0 % of OED Projects Rated U or HU by Amt 17.9 0.0 a. As shown in the Annual Report on Portfolio Performance (except for current FY). b. Average age of projects in the Bank's country portfolio. c. Percent of projects rated U or HU on development objectives (DO) and/or implementation progress (IP). d. As defined under the Portfolio Improvement Program. e. Ratio of disbursements during the year to the undisbursed balance of the Bank's portfolio at the beginning of the year: Investment projects only. * All indicators are for projects active in the Portfolio, with the exception of Disbursement Ratio, which includes all active projects as well as projects which exited during the fiscal year. 39 Annex B3 Moldova: IFC Investment Operations Program 2008 2009 2010 2011* Original Commitments (US$m) IFC and Participants 10.00 7.00 30.00 23.82 IFC's Own Accounts only 10.00 7.00 30.00 23.82 Original Commitments by Sector (%)- IFC Accounts only ELECTRIC POWER 50 FINANCE & INSURANCE 100 50 58.02 FOOD & BEVERAGES 100 UTILITIES 41.98 Total 100 100 100 100 Original Commitments by Investment Instrument (%) - IFC Accounts only Equity 50 Guarantee 58.02 Loan 50 100 100 41.98 Total 100 100 100 100 * Data as of March 01,2011 40 CAS Annex B4 - Summary of Non-lending Services - Moldova As Of Date 3/15/2011 a b Product Completion FY Cost (US$000) Audience Objective Recent completions Policy Notes for the Government of Moldova FY09 14 G, D, B K, PS, PD Pension Policy Note FY09 34 G, D K, PS, PD Poverty Update and TA FY09 115 G, D, B K, PS Moldova Telecom Sector Assistance FY09 111 G, D, B K, PS PSD/FSD Dialogue FY09 33 G, D K, PS MTDS Moldova FY10 55 G, D K, PS District Heating Restructuring Study FY10 166 G, D, B K, PS Country Procurement Assessment Report FY10 101 G, D, B K, PS, PD Public Expenditure Review 2 FY10 143 G, D, B K, PS, PD Moldova e-development TA FY10 44 G, D K, PS A&A ROSC follow-up FY11 9 G, D K, PS Underway Country Economic Memorandum FY11 342 G, D, B, PD K, PD, PS Agricultural Policy Revision and Budget TA FY11 104 G, D, B K, PS Public Expenditure Review 2011 FY11 111 G, D, B K, PS, PD Financial Sector Monitoring TA FY11 114 G, D, B K, PS Chisinau Energy Supply Improvement TA FY11 140 G, D, B K, PS Moldova Food Security TA FY11-12 320 G, D, B K, PS Applications for good governance - Civil Society Fund Demand for Good Governance FY11 2.5 G, D, B K, PS Reducing Vulnerability to Climate Change of Agricultural Systems in Moldova TA FY11 15 G, D, B, PD K, PS, PD ____________ a. Government, donor, Bank, public dissemination. b. Knowledge generation, public debate, problem-solving.         41 Moldova - Key Economic Indicators Annex B6 Actual Estimate Projected Indicator 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 National accounts (as % of GDP) a Gross domestic product 100 100 100 100 100 100 100 100 100 Agriculture 20 17 12 11 10 10 9 9 9 Industry 16 16 15 14 13 12 12 12 11 Services 64 67 73 75 77 78 78 79 80 Total Consumption 110 114 112 114 109 116 112 110 108 Gross domestic fixed investment 25 28 34 34 26 27 26 26 26 Government investment 2 2 3 2 4 4 4 4 4 Private investment 23 26 31 32 22 23 22 22 22 b Exports (GNFS) 51 45 47 41 37 45 45 45 46 Imports (GNFS) 92 92 97 94 73 89 85 83 82 Gross domestic savings -10 -14 -12 -14 -9 -16 -12 -10 -8 c Gross national savings 21 21 26 23 19 17 18 19 20 Memorandum items Gross domestic product 2988 3408 4402 6055 5403 5314 5882 6450 7074 (US$ million at current prices) GNI per capita (US$, Atlas method) 820 960 1090 1420 1460 1620 1660 1780 1980 Real annual growth rates (%, calculated from 96 prices) Gross domestic product at market prices 7.5 4.8 3.1 7.8 -6.5 4.0 3.5 4.0 5.0 Gross Domestic Income 3.0 3.7 1.0 7.6 -6.0 -1.3 4.9 5.5 5.9 Real annual per capita growth rates (%, calculated from 96 prices) Gross domestic product at market prices 0.0 6.0 4.2 7.9 -6.4 5.1 4.5 5.1 6.1 Total consumption 7.4 12.2 4.7 7.1 -12.6 3.1 5.3 5.5 5.3 Private consumption 7.9 10.8 6.2 6.4 -13.4 3.4 5.5 5.6 5.2 Balance of Payments (US$ millions) b Exports (GNFS) 1528 1542 1998 2483 2000 2385 2643 2918 3273 Merchandise FOB 1104 1053 1373 1646 1332 1592 1746 1916 2161 b Imports (GNFS) 2739 3129 4308 5691 3989 4721 5002 5333 5788 Merchandise FOB 2295 2644 3676 4866 3276 3890 4101 4361 4736 Resource balance -1211 -1587 -2310 -3208 -1989 -2336 -2359 -2415 -2515 Net current transfers 567 800 1219 1623 1221 1382 1451 1514 1607 Current account balance -285 -387 -674 -987 -465 -620 -589 -541 -576 Net private foreign direct investment 225 243 522 691 121 190 291 436 415 Long-term loans (net) 74 116 372 388 -31 326 342 213 243 Official -10 -14 14 8 -7 52 130 121 48 Private 84 130 358 380 -25 274 211 91 196 Other capital (net, incl. errors & ommissions) 114 169 309 360 174 96 235 173 145 d Change in reserves -129 -141 -529 -452 201 8 -279 -192 -228 Memorandum items Resource balance (% of GDP) -40.5 -46.6 -52.5 -53.0 -36.8 -44.0 -40.1 -37.4 -35.6 Real annual growth rates ( YR96 prices) Merchandise exports (FOB) 12.2 -25.3 9.1 -1.6 -3.2 13.0 8.2 7.2 9.2 Primary 20.4 -33.6 1.3 -3.5 21.0 12.5 9.5 7.9 10.1 Manufactures -15.6 34.2 45.9 22.6 -54.9 14.9 2.6 4.2 5.1 Merchandise imports (CIF) 22.9 9.4 24.4 12.5 -28.0 4.8 7.7 7.0 7.2 (Continued)   42 Moldova - Key Economic Indicators (Continued) Actual Estimate Projected Indicator 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Indicator e Public finance (as % of GDP at market prices) Current revenues 38.1 39.9 41.0 40.0 38.6 40.5 41.0 41.4 41.5 Current expenditures 30.7 32.4 34.5 34.5 40.6 40.4 39.7 38.6 37.9 Current account surplus (+) or deficit (-) 7.4 7.4 6.5 5.5 -2.0 0.1 1.3 2.8 3.7 Capital expenditure 6.4 7.7 7.4 7.1 5.0 5.1 5.3 5.1 5.0 Foreign financing -0.1 -0.5 0.2 0.1 3.7 1.6 2.8 2.4 1.2 Monetary indicators M2/GDP 42.0 43.7 51.2 50.4 54.4 50.0 50.0 50.0 50.0 Growth of M2 (%) 35.0 23.6 39.8 15.9 3.2 1.7 11.8 10.8 10.8 Private sector credit growth / 155.1 103.1 110.8 119.3 5387.0 -43.8 -16.6 75.1 76.9 total credit growth (%) Price indices( YR96 =100) Merchandise export price index 82.4 106.3 124.4 150.5 129.4 137.1 139.1 142.3 147.0 Merchandise import price index 277.6 298.3 328.5 387.6 359.7 408.0 399.3 397.0 402.1 Merchandise terms of trade index 29.7 35.6 37.9 38.8 36.0 33.6 34.8 35.9 36.6 f Real exchange rate (US$/LCU) 114.3 114.3 99.5 74.4 86.5 81.7 90.7 97.1 100.4 Real interest rates Consumer price index (% change) 11.9 12.7 12.3 12.7 0.0 14.5 4.1 3.9 4.0 GDP deflator (% change) 9.3 13.4 15.8 9.3 2.0 6.5 8.0 6.5 5.5 a. GDP at b. "GNFS" denotes "goods and nonfactor services." c. Includes net unrequited transfers excluding official capital grants. d. Includes use of IMF resources. e. Consolidated central government. f. "LCU" denotes "local currency units." An increase in US$/LCU denotes appreciation.       43 Moldova - Key Exposure Indicators Annex B7 Actual Estimated Projected  Indicator 2004  2005  2006 2007 2008 2009 2010 2011  2012  2013 Total debt outstanding and 2053  2417 3203 3787 3457 3751 4086  4283 4485 disbursed (TDO) (US$m) a   Net disbursements (US$m)   a 69  370 383 399 -46 467 335  196  202 Total debt service (TDS)  267  335 338 481 387 395 437  518  656 (US$m)  a Debt and debt service indicators (%) TDO/XGS  b  83.4  87.9 90.2 85.7 107.4 100.5 100.9  96.8  92.6 TDO/GDP  68.7  70.9 72.8 62.5 64.0 70.6 69.5  66.4  63.4 TDS/XGS 10.8  12.2 9.5 10.9 12.0 10.6 10.8  11.7  13.6 Concessional/TDO 10.2  10.0 9.1 8.2 9.6 0.0 0.0  0.0  0.0 IBRD exposure indicators (%)  IBRD DS/public DS  22.1  21.9 28.2 28.2 23.7 26.5 27.5  23.0  16.4 Preferred creditor DS/public 78.3  62.8 69.2 70.5 53.1 65.7 65.8  69.9  70.4 DS (%)   c IBRD DS/XGS  0.8  0.8 0.7 0.5 0.7 0.7 0.6  0.5  0.4 d IBRD TDO (US$m) 161  151 141 129 110 90 70  51  31 Of which present value of  guarantees (US$m) Share of IBRD portfolio (%) 0 0 0 0 0 0 0  0  0 d IDA TDO (US$m) 209  242 292 312 332 373 434  493  547 a. Includes public and publicly guaranteed debt, private nonguaranteed, use of IMF credits and net short- term capital. b. "XGS" denotes exports of goods and services, including workers' remittances. c. Preferred creditors are defined as IBRD, IDA, the regional multilateral development banks, the IMF, and the  Bank for International Settlements. d. Includes present value of guarantees. e. Includes equity and quasi-equity types of both loan and equity instruments. 44 B8 (IFC) for Moldova Moldova Committed and Disbursed Outstanding Investment Portfolio As of 2/28/2011 (In USD Millions) Committed Disbursed Outstanding **Quasi Partici **Quasi Partici FY Approval Company Loan Equity Equity *GT/RM pant Loan Equity Equity *GT/RM pant 2008 Bostavan 0 1.34 0 0 0 0 1.34 0 0 0 2011 Chisinau 10 0 0 0 0 0 0 0 0 0 2010 Maib 15 0 0 0 0 5 0 0 0 0 1999/00/01 Orange moldova 0 0 1.62 0 0 0 0 1.62 0 0 2009 Pc bank moldova 7 0 0 0 0 4 0 0 0 0 2001/10 Uf moldova 17.14 0 0 0 0 7.14 0 0 0 0 2004 Victoriabank 0.5 0 0 0 0 0.5 0 0 0 0 Total Portfolio: 49.64 1.34 1.62 0 0 16.64 1.34 1.62 0 0 * Denotes Guarantee and Risk Management Products. ** Quasi Equity includes both loan and equity types. 45 CAS Annex B8 - Moldova Operations Portfolio (IBRD/IDA and Grants) As Of Date 3/15/2011 Closed Projects 29 IBRD/IDA * Total Disbursed (Active) 140.41 of w hich has been repaid 0.00 Total Disbursed (Closed) 143.03 of w hich has been repaid 136.86 Total Disbursed (Active + Closed) 283.44 of w hich has been repaid 136.86 Total Undisbursed (Active) 91.87 Total Undisbursed (Closed) 0.00 Total Undisbursed (Active + Closed) 91.87 Active Projects Difference Between Last PSR Expected and Actual Supervision Rating Original Amount in US$ Millions Disbursements a/ Development Implementation Project ID Project Name Fiscal Year IBRD IDA GRANT Cancel. Undisb. Orig. Frm Rev'd Objectives Progress P099841 AVIAN FLU - MD S S 2006 8.00 0.76 0.17 P115634 DISASTER & CLIMATE RISK MGT S S 2011 10.00 10.35 0.05 P040558 ENERGY 2 S MS 2004 45.00 6.86 -7.50 -2.18 P095250 HEALTH SERVICES AND SOCIAL ASSISTANCE MS MS 2007 17.00 9.11 5.98 3.73 P089124 MD Competitiveness Enhancement S MS 2006 33.80 14.81 -9.64 4.21 P107612 NATIONAL WATER SUPPLY & SANITATION MS MS 2008 14.00 9.50 5.19 -0.94 P082916 PUB FIN MGMT TA S MS 2005 8.55 7.79 7.50 3.65 P090340 QUAL EDUC IN RUR AREAS OF MD S S 2006 10.00 3.42 2.27 P090673 RISP (APL #2) S S 2006 31.00 8.22 -8.81 -0.38 P100929 ROAD SECTOR PROG SUPPORT S MS 2007 16.00 11.03 3.18 13.24 1.93 P079314 SIF 2 MS MS 2004 45.00 17.86 -7.29 3.75 Overall Result 238.35 11.03 91.87 1.17 13.78 46