Document of The World Bank FOR OFFICIAL USEONLY Report No: 36055-RU PROJECT APPRAISAL DOCUMENT ON A PROPOSED LOAN INTHEAMOUNT OFUS$50MILLION TO THERUSSIANFEDERATION FOR A REGISTRATIONPROJECT May 15,2006 Environmentally and Socially Sustainable Development Unit South East Europe Country Unit Europe and Central Asia Region This document has a restricted distribution and may be used by recipients only in the performance o f their official duties. Its contents may not otherwise be disclosed without World Bankauthorization. CURRENCY EQUIVALENTS (Exchange Rate Effective M a y 15,2006) CurrencyUnit = Ruble 26.92 Ruble = US$1 US$ = SDRl FISCALYEAR January 1 - December31 ABBREVIATIONSAND ACRONYMS BTI Bureau ofTechnical Inventory LARIS LandReformImplementation Support Project C A FederalAgency for Cadastre of LCS Least Cost Selection Immovable Property (Cadastre Agency) CAS Country Assistance Strategy MOEDT Ministry of Economic Development and Trade CIS Commonwealth of Independent States MOF MinistryofFinance CQS Selection basedon Consultants' MOJ MinistryofJustice Qualifications DO Development objective NCB National Competitive Bidding EU EuropeanUnion PIU Project ImplementationUnit FER The Foundationfor Enterprise QCBS Quality and Cost Based Selection Restructuringand Financial Institutions Development (Selected PIU for the Project) FIG Federation Internationale des RFP Request for Proposals Geometres FMR FinancialManagement Report SBD StandardBiddingDocument FRS Federal Registration Service SIDA Swedish InternationalDevelopment Agency IBRD InternationalBank for Reconstruction SOE Statementof Expenditures and Development ICB InternationalCompetitive Bidding SOF Subject of the Federation ICT Information and Communications TO Territorial Office (regional office) Technology IDA InternationalDevelopment Agency UNECE UnitedNations Economic Commission for Europe IFC InternationalFinance Corporation WPLA Worlung Party for LandAdministration Vice President: Shigeo Katsu Country ManagerDirector: Kristalina Georgieva Sector Manager: Marjory-AnneBromhead Task Team Leader: Samir M.Suleymanov THE RUSSIANFEDERATION RegistrationProject CONTENTS Page A. STRATEGIC CONTEXTAND RATIONALE.................................................................................. 1 1. Country and sector issues................................................................................................................ 1 2. Rationale for IBRD involvement..................................................................................................... 2 3. Higher level objectives to which the project contributes................................................................. 3 B. PROJECT DESCRIPTION.................................................................................................................. 3 1. Lending instrument.......................................................................................................................... 3 2. Project development objective and key indicators .......................................................................... 3 3. Project components ......................................................................................................................... 5 4. Lessons learned and reflectedinthe project design ........................................................................ 7 5. Alternatives considered andreasons for rejection........................................................................... 8 C. IMPLEMENTATION................................................................................................ ......................... : 8 1. Partnership arrangements ................................................................................................................ 8 2. Institutionaland implementation arrangements .............................................................................. 8 3. Monitoring and evaluationo f outcomes/results .............................................................................. 9 4. Sustainability ................................................................................................................................... 9 5. Critical risks and possiblecontroversial aspects ........................................................................... 10 6. Loadcredit conditions and covenants ........................................................................................... 11 D. APPRAISAL SUMMARY ................................................................................................................ 11 1. Economic and financial analyses................................................................................................... 11 2. Technical ....................................................................................................................................... 12 3. Fiduciary........................................................................................................................................ 13 4. Social............................................................................................................................................. 14 5. Environment.................................................................................................................................. 15 6. Safeguard policies ......................................................................................................................... 15 7. Policy Exceptions and Readiness .................................................................................................. 15 Annex 1: Country and Sector or ProgramBackground.............................................................................. 16 Annex 2: Major Related Projects Financedby the Bank andor other Agencies ....................................... 18 Annex 3: Results Framework and Monitoring ........................................................................................... 19 Annex 4: Detailed ProjectDescription...................................................................................................... 21 Annex 5: Project Costs .............................................................................................................................. 33 Annex 6: ImplementationArrangements .................................................................................................. 34 Annex 7: Financial Management and Disbursement Arrangements ......................................................... 38 Annex 8: Procurement Arrangements ....................................................................................................... 43 Annex 9: Economic and FinancialAnalysis.............................................................................................. 48 Annex 10: Safeguard Policy Issues ........................................................................................................... 50 Annex 11:Project Preparation and Supervision......................................................................................... 57 Annex 12: Documents inthe Project File.................................................................................................. 58 Annex 13: Statement o f Loans and Credits............................................................................................... 59 Annex 14: Country at a Glance ................................................................................................................. 62 Annex 15: Map Number 34740 ................................................................................................................. 64 A. STRATEGICCONTEXTAND RATIONALE 1. Country andsector issues Markets for land and real estate in the Russian Federation are under-developed and inefficient by the standards o f developed market economies. This i s caused by continued lack o f clarity on land ownership, complicated and costly procedures associated with transactions - especially for new development -- and reluctance o f municipal governments to switch from lease payments for municipally owned land to potential tax payments from privatized land. Inefficiency o f land and real estate registration processes constrain the development o f market relations invarious sectors o f the economy and limit the ability o f the population to derive full benefits from their legislated property rights. Lack o f effective information flows between the system o f registration o f rights and the agencies that have been responsible for cadastre (physical identification and description o freal property objects) has complicatedthe process ofregistration and contributedto higher transactions costs. The system for the registration o f rights in Russia has developed following adoption o f the law "On State Registration o f Rights and Transactions in Immovable Property" (hereafter, Registration Law) in 1997. This Law placed the responsibility on the Subjects o f the Federation (SOFs) to set up and manage registration systems in accordance with federally established guidelines. The regions were largely successful in dealing with this task, though there is variation in the quality o f the registration systems across the country. The registration systems were established on a self-financing basis, being able to reinvest retained earnings. This was an essential element in getting the systems operational inrelatively short order, but also provided incentive to complicate procedures unnecessarily as a means o f generating additional income. In2004, Government took the decision to federalize the regionalregistrationsystems, moving them into Federal ownership and introducing more standard procedures for operation o f the system across the country. The decision was also taken to move the registration system from a self-financing basis onto the Federal Budget, following a broader Government principle o f moving all State-provided services onto budget financing. These reforms passed the responsibility for registration o f rights to the newly created Federal Regstration Service (FRS) within the Ministry o f Justice. The FRS is facing a tremendous challenge to establish a functioning unified registration system in the country in a short period o f time. Currently, there are about 50 different registration software applications in use in 77 regions where FRS inherited offices, with more than half of the computer equipment in regions technically outdated. There are no standardized methodologes for land registration, the legal framework i s in need o f significant improvements, and human capacity o f the new agency needs to be considerably strengthened to meet these challenges. One o f most important institutional challenges i s buildinga service-oriented organization out o f former agencies and staff of the Ministryo f Justice with no real legacy o f measuringthe impact or quality o f service, or o f client satisfaction. Inaddition to improving the quality and efficiency of the registration system, the FRS also needs to develop and implement systems for electronic filing o f large volumes o f past transactions which are currently recorded only in paper form. Existing storage space and equipment capacities are severely limited. Since its creation, the FRS has already made remarkable progress inimplementing reforms. In2005, FRS has nearly completed the process o f becoming a fully functioning organization with the appointment o f 77 heads o f regional offices, nearly 1,500 managerial staff and more than 25,000 regular staff in regional offices as well as fully staffing the central office with 300 employees. It led the approval o f 32 Federal normative acts and a number o f normative acts in the 89 regions. Because the Federalizationo f services 1 led to a nearly 75% decrease in salaries o f staff dealing with registration under the formerly self-financed decentralized systems, FRS also had to take immediate measures to try and retain qualified employees. Federal salaries were raised as quickly as possible - almost doubling them in the 2 years since the FRS' creation - as well as the introduction o f incentive schemes, bonuses, etc. The reforms o f the registration system are being implemented under enormous time pressure and challenges. In2004 there were about 15 millionregistration transactions and this i s expected to increase at a rate o f at least 30% annually - especially considering that 35% o f properties in Russia are not yet privatized. Unfortunately, this rapid growth combined with the challenge o f Federalizing services has already led to increased lines o f clients waiting to register transactions. Parallel reforms o f the housing market and important Government initiatives on accessible housing for mid-income population are placing additional importance and visibility on the registration services, which are cited as one o f most significant bottlenecks. Improvingthe efficiency o f the registration o f rights i s an essential step inestablishment o f a fully developedmortgage market inRussia. Inlight of these recent developments andpending challenges, the WorldBankproject is designedto help support the process o f reorganizingthe system for the regstration o f rights in the country. Specifically, it will work on the aspects o f the program where the FRS and the Government need advice on international best practices, such as the appropriate legal fiamework; institutional reforms, procedures, and business processes; training and public outreach; and the establishment o f a solid, unified IT system to improve the efficiency o fthe service. Reforming the registration service alone will not, o f course, address all the important developmental challenges inthe country inregards to real estate, land, property and financial markets, but it i s one o f the more important processes in this regards. The Government i s also implementing a major Federal program on improving the system o f land cadastre, and a parallel World Bank Cadastre Project under implementation is an essential part o f this program. The Bank i s also participating through the IFC in development o f the mortgage market with partner Russianbanks. 2. Rationale for IBRDinvolvement The IBRDhas been actively engaged with the Government on the issue o f real property markets and has an established track record inthe areas o f registration o f rights and cadastre inmany o f the CIS counties. The IBRD i s able to provide expertise not only on best practices for the registration system with knowledge of how the Russian system has evolved, but can provide its advice in the broader context o f market development. The Registration Project will be implemented in parallel with an IBRD financed Cadastre Development Project, which is managed by the Federal Agency for Cadastre of Immovable Property o f the Ministry o f Economic Development and Trade. The IBRD's involvement in both projects will help ensure that the needed coordination between the two systems in terms o f participating regions, and information linkage solutions, are consistent and work together. The IBRD's involvement will help ensure that issues of improvements in the quality o f services provided to the public, a high priority for the Government, reiterated in President Putin's annual address to the nation o f April 25, 2005, will receive due attention duringimplementation. The IFC, through the Foreign InvestmentAdvisory Service (FIAS) has been worlung with Government on measures to simplify the process o f business development. As part o f that effort FIAS has been advising Government on measures to improve and clarify the procedures by which land is made available for the purposes of business development, and ways in which security o f tenure in land can be strengthened in a way supportive o f economic growth. The work on both the Regstration and Cadastre projects i s being 2 coordinated with the FIAS program so as to provide a full and coherent combination of measures dealing with immovable property and its role ineconomic development. 3. Higher level objectives to which the project contributes The project will directly address two of the three priority areas included inthe CAS approved on June 6, 2002 -- strengthening public sector management and improving the business environment and enhancing competition. Under the first point, the Project will contribute to enhancing accountability mechanisms and information flows within and across different levels of government, improve the efficiency and quality of public service delivery, and improve fiscal management. Under the secondpoint the Project will simplify andrationalize the process of registration ofrights and strengthen the protection ofpropertyrights. The CAS i s built upon a cross-sectoral approach to improving the environment for economic development inRussia, while addressing important social and environmental issues. The Registration Project reflects that cross-sectoral orientation and i s directly tied to the Government's strategy to improve the functioning of the public sector, facilitate access to public services for all strata of the population, and to foster growth through improved functioning o fmarkets. The Project is also consistent with the emerging country partnership strategy. It will address two o f the four pillars o f that strategy, namely: (i) improving the efficiency o f Federal budgetary expenditures; and (ii)supporting regional development. B. PROJECTDESCRIPTION 1'. Lendinginstrument The lendinginstrumentfor the RegistrationProject will be an lBRD Specific Investment Loan(SL) o fU S $50 million towards the total project costs of U S $101.5 million with a highlevel o f co-financing from the Government o f 52%. Regular national budget funding, which i s usually limited to commitments o f no more than one year, i s not suitable for financing such a major sectoral investment where a single contract may require sustained fundingover several years. The proposed loan will enable the Beneficiary (FRS) to finance the implementation of the most important elements ofthe registration systemreforms inRussia. 2. Project development objective and key indicators The project will support on-going reforms of the registration system of rights in immovable property in Russia through improving procedures and the information flow from the registry to users with a development objective to facilitate the development o f real property markets, improve the quality o f services provided, and strengthen the linkages with other organizations dealing with real property. These other organizations will include the Federal CadastreAgency, the Tax Authorities, municipal government, andrepresentatives of the private sector, such as notaries andreal estate brokers. The outcome indicators for the Project will be the number of market transactions in immovable property (sales and lease) and the number o f mortgages registered inregions participating in the Project; and the capacity o f the registration service to provide information to clients irrespective of the place o f submission of the application and the location of the object (ex-territorial principle of information access.). Statistical information on these indicators will be available from the registration offices. Baseline data will be set for eachparticipating region for the year prior to entry into the Project. Growtho f 10%by the thirdyear o f the Project and 20% by the end o f the Project inthese regions measured against the baselines when they enter the project will be expected. 3 Key results indicators will be: e Reduced timerequiredfor the registrationof rights; e Submissionto the government of a set ofnormative acts for introduction of electronic archiving and electronic signature of documents; Increased archive capacity; Increased client satisfactionwith the RegistrationSystem; Improved applicant awareness o frequirements and proceduresfor registration; Increased labor productivity of the Registration Service; Reduced time for the provision of information from the registry; The technical capacity to receive and transmit informationbetween the RegistrationService and other federal agencies, includingthe Cadastre Agency. Currently, the Registration Law stipulates that registration of rights be carried out within 30 days of submission o f documents. A goal of the Project will be to establish standards of service approaching those of modem registration systems worldwide. This will be made possible through implementation o f unified registration software and changes inregistrationprocedures. It i s intended to set a standard of 15 days for both initial registrations (registration of properties not previously entered into the system) as well as for secondary transactions (those for which the property inquestion have previously beenregistered). While a substantial improvement over current practice, this would not reach current best internationalpractice of a few hours inthe case of secondary transactions. In territorial offices there is a current shortage of space for the archival of documents and the existing space i s often not used efficiently. Through the use of modem mechanical archive systems it i s expected to increase the capacity of the archives (measured inthe number of files per squaremeter) by 10%within the first three years o f the project and by 25% by the end o f the project. Improvement inthe quality of services provided by the RegistrationSystem will be an important indicator of project results. This indicator will be evaluated on the basis o f information collected through institutional impact monitoring that will be conducted intermittently over the life o f the Project. In each participating region, an assessment will be conducted prior to initiation of project activities to establish baseline measures for this indicator. The indicator for improved information to applicants will also be monitorable through the institutional impact monitoring. Data for number o fregistrations of rights per staff (labor productivity) will be readily obtainable from data collected by the Registration Service, as will the processing time of information requests handled by the participating registration offices. Currently, information requestsreceivedbythe registration system are to be processed within 7 days and this should be reduced to 1 day by the end o f the project. Labor productivity, which i s currently 700 registrations per staff memberper year, will be targeted to increase to 1,200 registrations per staffmemberper year bythe end o fthe project. Communicationlinkswith other Government bodies i s cumbersome, with data exchange with the Cadastre Agency offices typically occurring from once every ten days to once a month. The information linkages to be installed under the Project will provide the technical capacity to allow for information requests to be processedwithin 30 minutes and for daily data sharing with other Government bodies. Informationon this indicator will come from the social assessment surveys and fi-om the RegistrationService. 4 3. Project components The Project will be composed of four components: (1) Institutional Development o f the Registration Service; (2) Information and Communications Systems; (3) Improvement of Professional Skdls; and (4) ProjectManagement. Summary descriptions o fthese areprovided inthis section, and detailed descriptions areprovided inAnnex 4. The Project will runfor 6 years and will mainly benefit 25 o f the 77 Territorial RegistrationOffices of the RegistrationService, servingroughly one-third of the country and more than 70 millionpeople (nearly half of the population). A list of 25 regions where the reforms need to be implemented on a priority basis has been developed by the FRS in consultation with the Government and includes areas with the highest demand on one hand, and the highest degree ofreadinessto introduce new procedures on another, and also where there is a commitment of government administration in a given Subject o f the Federation (SOF) to support the needed institutional and policy changes foreseen under the Project. The FRS is, o f course, committed to continue the implementation of the reforms in the rest o f its offices but this will be done outside the scope of this project, with the FRS using its own resources. These 25 regions would receive new hardware and software developed under the project. The Institutional Development Component will support the reforms on the Federal level and specific capacity building activities in these 25 regions. O f course, the component will also impact the rest of the regions which will needto adopt the newpractices in parallel, including legal and regulatory reform, training programs, development o f service standards, and various elements of the improved availability of information. The implementation of the unified registration information system, included in the Information and Communications Systems Component will bephasedto allow for testing o fthe new software before rolling out inall participatingregions. Upto 52 FRS Offices intotal will be upgraded with new mechanical archive shelves, which should improve the efficiency of storage systems by at least 25 percent. Inaddition to these upgrades, the modem automated systems will be installed in 5 larger regional archives of the FRS. Since the existing facilities are not fit for installation o f such automated equipment, they will be renovatedbased on international standards. Institutional Development of the Registration Service ($58.4 million - of which IBRD loan $17.8 million and Government budget $40.6 million: 36% of the Loan) The objective of this component i s to improve the functioning of the offices o f the Registration Service through an upgrading o f operational and normative procedures and improving service delivery to clients. Federalization of the system o f registration o f rights presents unique opportunities with respect to the improvement of client services and overall efficiency of the system through reviewing and revising existing operating procedures and introducing service standards nationwide. The objectives o f this component are to reduce the time necessary for the registration o f rights - from the time applications are received untilthe rightsinquestion are registered -by bringingthis more into line with established service standards in developed market economies and to improve the quality o f services provided in terms of information availability and customer reception areas where needed. The level o f client services will be monitoredas part of the institutional impact assessmentsto be carried out over the life o f the Project. The registrationoffices are faced with increasing problems inmanaging their document archives. Inthe higher- volume offices, the amount o f space requiredand the cost o f archive maintenance are already beyond what can be sustained. This component will develop a document storage strategy involving centralized archival storage at the regional level and the use o f scannedcopies for reference and informationpurposes. Specific tasks to be undertakeninclude: (i) Fulllegal andregulatoryanalysis and development ofdraft legislationasneededto improve the operation of the registration system; 5 (ii) Development o f a set of service standards for the registration systemandmonitoring o f their implementation; (iii) Renovations to the localregistration offices involved inthe Project to improve the quality of client services; (iv) Provision of better information to the public andprofessional community; (v) Monitoringof the quality ofregistrationservices through a series of institutional impact assessments; (vi) Development o f a modern document archival system for the Registration Service with implementation of modem mechanical archiving in 52 regions, and establishment o f 5 larger regional electronic archives inpriority areas. Information and Communications Systems ($57.1 million of which IBRD loan $27.4 million and - Governmentbudget $29.7million: 55% ofthe Loan) The objectives o f the Information and Communications Systems component is to develop an efficient software application for registration and information transfer, to convert existing data into the new system, and to ensure that the system i s operational in all regions involved in the Project. Until2005, each SOF was responsible for managing its own system for registration of rights. It i s estimated that there are about 50 different registration software applications inuse around the country. Under this component, a review of the existing software applications will be carried out, and standardized registration software will be developed and implemented, possibly on the basis o f one of the existing systems. This has the advantage of ensuring consistent service standards, procedures and legal security, while easing the transfer o f data across regions and eventually making possible registration of rights for an object from any location inthe country. The standardized system will be tested in 4 regions (St. Petersburg; Moscow; Samara, Rostov Oblasts) and subsequently rolled out in stages in an additional 21 regions, with furfher roll-out to be implementedby the FRS beyond this project. This component will finance the ICT equipment necessary for operation o f the unifiedregistration information system. Existing data will need to be converted for use inthe new standardized format. It i s highlyunlikely that direct conversion will be possible for all data inthe existing systems to the newunified system. The Project will hire companies on atender basis to be responsible for the data conversion. All registration data held at the local offices will be backed up at the regional level. An `exchange server' will have a copy o f this back up database, which will be used as the source of information for queries andregistrationapplications from other regions. Specific tasks to be undertaken include: (i) Analysis of the existinginformation systems, currently inuse inthe regional offices; (ii) Development, testing and roll-out o fthe unifiedregistrationsoftware; (iii) Conversionof existing data to the format required for the unifiedregistration software in regionsparticipating inthe Project; (iv) Delivery and installationof the equipment suitable for runningthe new unifiedinformation system. (v) Conversion o f documents into an electronic format for archival instorage centers. Improvement of professional skills of registration staff ($2.4 million - of which IBRD loan $1.2 millionand Governmentbudget$1.2million: 2% of the Loan) The changes envisaged under this project will have major implications for the staff o f the Registration Service. Training programs are requiredto: (1)provide guidance on policies involving improvement of customer services and a focus on quality of service; (ii) ensure all staff understand and apply the new regulations and procedures being applied throughout the federation; (iii) understand and correctly utilize the registration system software; (iv) understand and correctly utilize WEB sites and technology; (v) 6 appreciate the relationship between registration, economic development and the roles of other government agencies; and (vi) understand best practice for registration as used in other countries. The goal of this component i s to enhance the knowledge and skills of registration staff inthese areas through development of an overall training strategy for the Registration Service, development and conducting o f specialized training courses, development of distance learning courses, provision of an operational manual for registration staff, conducting foreign training and study tours, and conducting seminars within Russia. Specific tasks to be undertaken include: (i) Developmento f an overall training strategy (ii) Developmentand conducting of training on specialized courses and themes (iii) Developmentand implementationo f distance learningcourses (iv) Conducting a programo f foreign training and study tours (v) Creation, printingand distribution o f operational manuals for registration staff (vi) Conducting seminarsinRussia (vii) Participation inrelevant internationalconferences Project Management ($4.6 million of which IBRDloan $3.6 million and Government budget $1 - million: 7% of the Loan) An Inter-Agency Working Group will be established with representation from the Ministry o f Justice, the Federal Registration Service (FRS), the Ministry for Economic Development and Trade and the Ministry o f Finance. This group will be responsible for strategic oversight o f project implementation. The Federal RegistrationService will appoint a Project Director who will be responsible for day-to-day management of the Project. This component will finance the work of a Project Implementation Unit (PIU), which will be hiredto manage the financial accounting, reporting and procurement activity under the Project. The PIU will be responsible for other administrative activities associatedwith implementation.This component will also finance short-term consultants on an as-required basis for specific project needs. 4. Lessons learned and reflected inthe project design The experience with implementation o f IBRD projects in Russia underscores the importance of close cooperation between project implementation units and the designated implementing agencies of Government. For the Registration Project, the PIU will be linked to the Federal Registration Service through the Project Director. Experience in Russia also shows the need to keep project design simple and focused if implementation i s to be successful. The Project is focused on key development aspectso f the system o f registrationof rights and the Federal Registration Service i s well placedto overseethe implementation o f these measures. Attempts have been made over the last 10 years inRussia to more effectively link registration of rights with cadastral functions of property identification. These attempts have generally involved piloting approaches at the local or regional levels. Included among these was the Registration Component of the IBRDfinanced HousingProject. While some usefkl experience was generatedusingthis approach, ithas become obvious that systematic improvement in cooperation between the system o f registration of rights and the cadastre requires resolution o f basic institutional and legalhormative issues at the Federal level. That i s the approach being employed under the Registration Project. Establishment o f the Federal RegistrationService also representsan important advantage for achieving the project objectives. 7 The Project will address improved information linkages not only with the cadastre, but with the tax authorities, municipal government, and others. The Project design will need to remain sufficiently flexible to take advantage of further advances inICT that occur duringimplementation. The Registration Project will incorporate a stronger program o f monitoring than existed for earlier IBRD financed projects in Russia. More attention will be given to malung the registration system more responsive to the needs o f clients and inimproving the overall level o f service. 5. Alternatives consideredand reasonsfor rejection The primary option considered was for ajoint project implementedby both the Ministry o f Justice and the Cadastre Agency. This approach had the advantage o f linking the Unified State Cadastre o f Immovable Property and the system for State Registration o f kghts in Immovable Property in the same project. The Government took the decision, however, that a jointly implemented project would pose significant implementation problems and that it would be best to approach the problem o f linking the two systems through Internet-based access to the respective databases. As part o f the Governmentreform announced in March 2004, both the MOJ and the Cadastre Agency face significant institutional and policy restructuring tasks that can best be addressed through separate projects. This will require particular care of the two independent projects, which will be handled by the same IBRDteam, if the intended economic benefits of improvedcoordination are to be realized. C. IMPLEMENTATION 1. Partnership arrangements The Project i s being implemented in coordination with the Cadastre Project as both projects are designed to help the development o fthe real estate and land market inRussia, and such coordination is essential. 2. Institutionalandimplementationarrangements The detailed implementation arrangements are described in the Operational Manual for the Project. The Project will be implemented by the Federal Registration Service through the existing network of registration offices at the regional and local levels. An Inter-Agency Worlung Group has been established with representation from the Ministry o f Justice, the Ministry o f Finance, the Ministry o f Economic Development and Trade and the Federal Registration Service. This Group i s responsible for taking strategic decisions with respect to the Project and serve as the forum for clearing any issues requiring the Ministry o f Finance. Within the FRS, Thematic Groups for Institutional, Information System, and Training Components have been established to provide technical guidance for implementation of the Project. The thematic groups will be responsible for drafting technical specifications and terms o freference, assisting in evaluation o f bidders' proposals, and oversight o f project implementation inthe participatingregions. The Project Director will be assisted by a group o f technical consultants in coordination o f implementation activities. The fullproject management arrangements are described inAnnex 6. The Foundation for Enterprise Restructuring and Financial Institutions Development (FER) has been selected as the PIU for the project. The assessment o f the financial management and procurement capacity of FERhas been carried out, and all steps identified by the Financial Management Specialist as needed to be taken by the PIU with regard to financial management have been taken. The PIU will be responsible for financial management and procurement functions. This will include obtaining necessary Government and World Bank clearances for specific project implementation steps, preparationo f financial management reports (FMRs), maintenance o f the project procurement plan, and execution of annual project budgets that have been approved by Government and reviewed by the IBRD. 8 The FER will be required to enter into an agreement with the MOF and the FRS, clarifying these organizations' relative roles and responsibilities in project implementation. The Draft Project Implementation Agreement has been prepared, and its signing, along with adequate stafjng of the PIU, with resources and terms of reference satisfactory to theIBRD, will be a condition of effectiveness. The Finance and EconomicDepartment ofthe FRSwillprovide oversight ofwork of the PIUinthe areaof financial management and will ensure replenishment of counterpart financing on the basis o f applications for such from the PIU. The staff of the Finance and Economic Department of the FRS will handle these functions inaddition to their current responsibilities. At the regional level, responsibility for project implementation will be placed with the Head of the Territorial Office (TO) of the Registration Service. The Head will be authorized to assign specific project implementation functions to staff as appropriate and will be responsible for coordination with regional government. For a full description ofproject managementarrangements, see Annex 6. 3. Monitoring and evaluationof outcomeshesults The monitoringindicators for the Project areprovidedinAnnex 3 and described insection B2 above. The Federal Registration Service i s in a position to collect information concerning progress on many of the agreed indicators duringthe course of project implementation. To this end, the Head o f each participating Regional Office o f the RegistrationService will be responsible to the ProjectDirector for provision o f data and information to verify progress with respect to these indicators. Staff of the thematic groups and PIU will travel to the participating regions to oversee project implementation and to identify problem areas requiringattention from the Federal level. Inaddition, institutional impact assessments will be carried out during implementation of the Project. This monitoring will provide independent feedback on the performance ofregistration services as perceived by direct service recipients (private citizens or businesses holders who have gone through the process of property registration or are involved inproperty registration at the time of the monitoring, as well as those seeking information about property registration). It will also provide data about the level of information and the perception of the quality and usefulness o f registration service among the general public and business holders. These assessments will be conducted during the life of the Project, at the inception of the phases associated with the implementation of the unified information system and at the close ofthe Project. The feedback from these two sourceswill be usedto assessthe need for modifications inhow the project is being implementedand issues that need to be addressed. They will also be used to assess the success of the Projectinmeeting its objectives. 4. Sustainability The decision to move the system o f registration o f rights from a self-financing basis to a budget funded activity has raised some questions about its longer term sustainability (see the next Section on risks). The Project will assist in implementing the institutional restructuring of the registration system, but Government will needto carefully assess the ongoing financial requirements for maintaining a reliable and efficient system. The Government has already demonstrated its commitment to provide adequate hnds needed to implement and sustain the reform agenda by providing $5 1.5 million in co-financing towards this project, committing adequate resources of nearly $10 million for remodeling the archive facilities in 52 regions in 2006 to prepare them for project interventions, more than doubling the fimding of the FRS from 2005 to 2006, and by securing increased budget commitments for future years. The Project will be helpingto finance a large communications and information system. The maintenance costs for keeping the system operational will be significant. The Ministry o f Justice has confirmed to the lBRD that adequate 9 resources will be available to cover maintenance costs. For sustainability beyond the end of the Project, Government will need to look at a qualitative increase in budgetary allocations in support of the registration system. The economic and financial benefits to be derived from the planned upgrade in registration system capabilities will justify their continued maintenance (and further improvement) over time. 5. Critical risks and possible controversial aspects Risks RiskMitigationMeasures RiskRating with Mitigation The human resource challenge has been addressed by the Government M able to meet the challenges posed through the provision o f incentive packages and bonuses as well as rapid bythe reorganization and increases in salaries. The budget for FRS has more than doubled from 2005 Federalization o f the registration to 2006. The Government has assigned a highlevel o f political importance services. to reform o f the registration system and the FRS. The Project represents a critical part o f the strategy to deal with these institutional risks. It will allow for rationalization and simplification o f business processes, invest in office infrastructure, provide programs o f training for staff, and enhance the prospects for successful conversion to the new unified information system. Implementationdelays are common One agency has primary responsibility for implementation, mitigating this S inBank projects inRussia, risk. Furthermore the project is supporting implementationo f a reform that especially those requiring inter- has already been adopted, minimizing uncertainties associated with the ministerial coordination. anticipation o f further restructurings. Risk o f insufficient coordination The coordination will be ensured in terms o f project implementation M with the Cadastre Development schedules, selection o f regions, and coordination in the development o f Project, to be implemented by the software and overall ICT system design. This is in the mutual interest o f Federal Agency for Cadastre of both the Registration Service and the Cadastre Agency. Agreement on Immovable Property (Cadastre these points between the two agencies has been reached and will be tracked Agency). carefully during implementation. Registration Service has little A project implementation support unit with 10 years' experience in M experience in Bank fiduciary implementation o f Bank-financed projects will ensure that accounting, requirements. financial management and procurement procedures are consistent with the Bank's requirements. Bank fiduciary staff based in Moscow will also provideregular oversight. To component results Component 1: Institutional There is considerable social and political pressure on the FRS to improve S Development of the Registration the efficiency o f its services following the reforms o f the system, and there Service: FRS is unable to improve is a full commitment o f the management o f the FRS to pursue the the efficiency o fthe registration institutional changes. The project is supporting improved technical services and introduce new approaches to implement the new procedures, and staff are being provided business procedures. with comprehensive training programs and study-tours. Component 2: Information and The Bank has gained rich experience on ICT procurement in Russia, and is M Communications Systems: Delays planning to provide specialist advice on this issue, as part o f its and complications during supervision. In addition, a specialized thematic group will be established procurement o f large ICTrelated prior to project implementation to oversee and cany out the preparation o f packages. technical specifications for ITpackages. Component 3: Improvement of The FRS has agreed to include comprehensive and regular surveys for M Professional Skills: FRSis not able measuring the impact of the project on the population and providing to improve customer services. feedback. The project is supporting the development o f service standards, which will be publicly displayed, and the establishment o f help facilities and customer reception areas. Riskratings: N-Low or Negligi 10 6. Loadcredit conditions and covenants Prior to Effectiveness A Project ImplementationAgreement will be entered into between the MOF, the RegistrationService, and the PIU, which has staff, resources and terms o freference satisfactory to the BRD. Pro1ect Implementation Duringthe Projectimplementation, the Borrower will: Maintain the PIU with a sufficient number o f staff, adequate resources and terms o f reference satisfactory to the IBRD. Apply standard financial covenants, includingaccounting system, audit, and financial management reports (FMR). Maintain policies and procedures adequate to monitor and evaluate on an ongoing basis, in . accordance with indicators satisfactory to the IBRD, the carrying out o f the project and the achievement o f the project's objectives; and Submit annual progressreports not later than 45 days after the end o f each calendar year. Financial Covenants FERwill maintain a financial management system acceptable to the IBRD. The FERfinancial statements, project financial statements, SOEs and Special Account will be auditedby independent auditors acceptable to the IBRD and on terms o f reference acceptable to the IBRD. The annual audited statements and audit report will be provided to the IBRDwithin six months o fthe end o f each fiscal year. Inaddition, the FERwill prepare the periodic FMRsfor each calendar quarter, and submit them to the IBRDwithin45 days after the end o fthereportingperiod. D. APPRAISAL SUMMARY 1. Economicand financialanalyses The Project represents an important part o f the Government's broader program o f stimulating the development o f immovable property markets and allowing for more effective utilization o f these important economic assets. The expected economic benefits resulting from the Project are diverse and difficult to measure effectively. Analysis o f some o f the individual impacts, however, indicates substantial economic returns to the Project (see Annex 9). The Project will have direct economic impact through improved efficiency of the system o fregistration o frights and improved access to information inthe registry. These improvements will come inboth quantitative and qualitative ways. An important quantitative measure is the reduced time required for registration o f rights and for responding to information requests. The time required for registration o f rights will be reduced from 30 days to 15. The time required to respond to information requests will be reduced from 7 days to 1 day. The estimated economic value o f these two measures alone, assuming 35 percent coverage o f the country, is approximately $15 millionper year. Indirect benefits o f the Project will include an increase in the number o f transactions in immovable property and elimination of the legal requirement for surveys (technical inventories) in the case o f normal secondary transactions. The Project will contribute to an increase in the number o f transactions in immovable property, particularly for new development, through improved information, the positive impact 11 of the reduction in bureaucratic requirements, and development of more reliable revenue sources for municipal government through improved access to information on rights holders inimmovable property to the tax authorities. This latter step will facilitate the privatization of municipally owned land that i s currently held as a source of lease income for local government. Lease markets for municipally owned landare non-transparent and inefficient means of allocating access to land. Fiscal ImDacts: The impact of the Project on government revenues will be substantial. Currently, landtax payments amount to 45 billion rubles per year (approximately US$1.5 billion). Tax on other immovable property amounts to 100 billion rubles (US$3.4 billion). It is expected that through improvements in the quality and amount of data inthe registrationof rights data base and its more timely andreliable provision to the tax authorities, that collections of land and other immovable property taxes can be increased by 10 percent inreal terms. Assuming that 35 percent of the properties in the country will be covered by the Project, this will result inadditional government revenues of nearly US$170 million per year by the end o f the Project. This assumesno changes incurrent tax rates and valuation methodologies. 2. Technical The primary ICT elements of the Project are contained inComponent 2, although ICT training not directly related to the information systems being developed under the project i s includedinComponent 3, together with the development ofremote training software andcourses inthe subject fields relevantto the project. Among the 77 regional offices of the Registration System, multiple disparate registration software packages are in use, most of them developed locally, with widely varying degrees of sophistication. A major challenge that the Project will address is the design, development, and testing o f a new unified registration software to replace all these existing applications and provide the basis for integration across the whole country and allowing the possibility for the implementation o f remote transactions independently o f location. The unified system will require harmonization throughout the Registration System o f all the classifiers used in the description of objects within the unified database. This will be conducted in conjunction with a review and revision of existing operational and regulatory processes associatedwith registrationofrights. Given the complexity o f this undertaking, a minimum of two to three years will be required for design, development and testing inpilot regions before the new unifiedapplication will be ready for widespread roll out to the rest of the project regions. Piloting of the unifiedregistration software will be conducted in four regions includedinthe project, priorto further scaling up inthe subsequent regions o fthe project. A substantial issue that will be addressedi s associated with the conversion o f existing data into a format that can be used by the new registration application. While the project will support the development of tools to automate this process, it is expected that the legal review and certification that the conversion process has been conducted correctly will require substantial time and resources. This conversionprocess and training of staff in the new system must be carefully orchestrated and conducted in every region in accordancewith the roll out plan for the Project and immediately prior to switching over to the new system. For this switch to be effective, inevery local office there has to be a clear date for its implementation, after which the previous systemwill no longer be used. While the Project does not include the cost o f communications between the different offices o f the Registration System, terminal equipment to allow the creation o f an Intranet throughout the System i s included. Every location will thus be provided with the necessary systems to create an internal LANand connect to the Internet, as well as secure channels to connect with other offices, most likely on the basis o f DSL technology, where available. This telecommunications network will allow linkingthe local offices with the regional offices, as well as with the federal level, in an open architecture using Internet-based 12 connectivity which nevertheless will provide for the highlevels of security requiredfor such an application, inparticular through the use of securedVPN technology and electronic signatures. Although registration operations will be retained at the local level, it will be possible to access information and commence actions remotely from any terminal nationwide to any office. Provision of this kindof remote access, both for internal purposes, as well as (with some limitations) to other agencies and the public, i s considered a priority by the authorities. 3. Fiduciary Financial management functions for project arrangements will be carried out by the PIU which was selected through a competitive tender in November 2005. This entity i s the Foundation for Enterprise Restructuring and Institutional Development (FER). FER has the necessarycapacity to implement IBRD- financed projects. The financial management arrangements of the project are acceptable to the IBRD, subject to signature of an Agency Agreement between the Ministry o f Finance, Federal Registration Service and FER, assigning the latter the responsibilities for the fiduciary management of the Registration Project. FER is in compliance with its audit covenants of existing IBRD financed projects. FER'Sprevious and current project financial statements and auditing arrangements are satisfactory and will be replicated for the Registration Project. The annual audited project financial statements will be provided to the IBRD within six months of the end o f each fiscal year and also at the closing o f the project. Inaccordancewith IBRDauditpolicythe first andfinal audits will cover theperiodupto 18months. Procurement Issues A procurementplancovering the first 18monthsofprojectimplementationhasbeenagreed. The PIU will be required to have two full time staff responsible for procurement. Ifthe workload during the peak periods of project implementation requires it, additional procurement staff will be hired. The Project foresees a large number of contracts inthe areas of consultant services, training, goods, technical services, and works (office repair). These will be packaged together to the extent possible to simplify the procurement process. The PIU will need to have procurement staff able to handle this diversity of work. Becausethere will be a number of high-value contracts inthe area of ICT, it will be particularly important to have staff familiar with the specifics of this type o fprocurement. The PIU will open a file for each contract package and all procurement correspondence and other relevant documents such as draft and final bidding documents, minutes of bid opening, evaluationreports, minutes of contract negotiations, draft RFPs, and draft and final contracts will be filed. This will not only make the implementationwork more efficient, but also allow IBRD staff and independent auditors to conduct their functions of supervision and audit more efficiently. Financial Management Issues All financial management functions for the Project, including preparation o f withdrawal applications, management of the Special Account, operation o fthe financial management system, andpreparation o f the FMRswill bethe responsibilityofthe PIU. The financial part of the quarterly FMRs for the Project will include: (a) Project sources and uses o f funds statement, (b) Statementofexpenditure detail, 13 (c) Physical ImplementationProgress Report (contract management), and (d) Notes to the FMRs. The financial part of the annual FMRs for the Project will be subject to audit by independent auditors acceptable to the IBRDand according to the Terms o f Reference acceptable to the IBRD, and will include: (a) Project sources and uses o f funds statement, (b) Statement o fexpenditure detail, (c) Special account statement, (d) Statement o fExpenses (SOE) withdrawal schedule and (e) Notes to the FMRs. The PIU will supply the IBRD with quarterly FMRs and annual audited FMRs. Disbursement o f IBRD funds will be through the traditional disbursement mechanisms, including Special Account, Summary Sheets and SOE, direct payments, Special Commitments covering Letters o f Credit, and guarantees. The federal funds will be disbursed through a ruble account (Project Account) managed by the PIU. The Project will not use the FMR-based disbursement. 4. Social Social assessments carried out during the project preparation helped identify areas that needed improvement to make the registration service more user-friendly and more accessible to various population strata. It also helpedidentify individual and macroeconomic characteristics affectingthe willingness o fthe population to register property but exogenous to the quality and configuration o f the registration service. Specifically, the study related the willingness and ability to register property to individual and household characteristics (income, age, gender, profession, education, etc.), to the characteristics o f the locality (big city, small town, village) and the region, the type of property (apartment, land, building), the time and cost of different registration procedures. The study was based on regional surveys o f households that went through the registration process as well as the overall population o f the studied regions. The study also collected through focus group sessions, open ended interviews and through the process o f participatory observation qualitative information about reasons and circumstance behind specific attitudes to registration and the specifics o f functioning o f registration offices. (For more details o fthis survey see Annex 10). Some o f the key problems and challenges for the registration system that were identified in the survey include: 0 Insufficient information about overall costs and benefits o f registration (fears about increased taxation vs. the uncertainty about benefits o fmore secure property rights); 0 Significant disparities in the accessibility and quality o f registration services by region. The time, the cost o f registration services as well as the perceived levels o f corruption o f registration officials vary significantly by region; 0 The needs o f elderly, disabled and young populationgroups are not sufficiently addressed; 0 A lack o f coordinationbetween the cadastre and registrationservices. The needto visit offices (at the time of the study three offices, including the BTI), collecting two sets o f documents and paying twice producedan impression o f duplication o f work, effort and cost. The project has been designed to address these issues in several ways. The procedures of registration will be simplified through legislative reforms and will be standardized across all project regions through the use o f the unified information system to be developed. Information and outreach systems will be redesigned and better targeted to different audiences and more accessible to different users o f the registration system through the use o f the internet as well as development and distribution o f various relevant printed information materials. Qualifications and incentives o f the registration service employees will be realigned to make them more motivated to provide fast, courteous and highquality service to users 14 o f the system. Finally, better systems of coordination between the cadastre and registration services will help to reduce the need for multiple visits and duplication o f documents. 5. Environment The Project i s rated category "B". The project poses minimum environmental risks. It involves remodeling o f the five buildingswhere the installation of modem automated systems i s expected. There i s a limited amount of office refurbishment included for interior work, primarily adjusting office floor plans, construction of counters, and similar work. The Environmental Management Plan for "works" under the Project has been prepared and disclosed. Bidding documents for renovations will include the standard provisions for use of design standards, non-hazardous materials and worker safety in line with Russian legislation. The project will provide environmental benefits by verifying and protecting rights in immovable property, thereby enhancing incentives for the environmentally sustainable use o f these assets. 6. Safeguard policies Safeguard Policies Triggered by the Project Yes N o Environmental Assessment (OP/BP/GP 4.01) [XI [I Natural Habitats (OP/BP 4.04) [ I [XI Pest Management (OP 4.09) [I [XI Cultural Property (OPN 11.03, beingrevisedas OP 4.11) E l [XI Involuntary Resettlement (OP/BP 4.12) [ I [XI IndigenousPeoples (OD 4.20, beingrevisedas OP 4.10) E l [XI Forests (OP/BP 4.36) E l [XI Safety o f Dams (OP/BP 4.37) [ I [XI Projects inDisputed Areas (OP/BP/GP 7.60)* [ I 1x1 Projects on InternationalWaterways (OP/BP/GP 7.50) [I [XI 7. Policy Exceptions and Readiness With satisfactory assessment o f the financial management and procurement capacity o f the PIU and agreement on implementation mechanisms amongst all involved agencies outlined in the Operational Manual accepted by the Bank all requirements for implementation o f the Project are in place. The Project would become effective once the Project ImplementationAgreement between MOF, FRS, and the PIUthat has already been drafted is signed. * By supporting theproposedproject, the Bank does not intend toprejudice thefinal determination of theparties` claims on the disputed areas 15 Annex 1:Country and Sector or ProgramBackground THE RUSSIANFEDERATION: REGISTRATIONPROJECT A developed real estate market i s a critical element for investment. Progress infacilitating active land and real estate markets in Russia has not been sufficient to leverage those important economic assets for investment purposes. With adoption o f the Law on State Registration o f Rights and Transactions in Immovable Property in 1997, systems for registration o f rights inimmovable property were established at the level o f Subjects of the Federation, under the guidance o f the Ministry o f Justice. These systems have been able to meet the basic needs o f the population, however the service standards have been well below those in developed market economies and the overall quality o f the registration system has varied by region. A relatedproblem inthe RussianFederation has been the split between the land cadastre and the so-called buildings (gradostroitel'nyy) cadastre. The land cadastre had been maintained by the Federal Land Cadastre Service of Russia (Roszemkadastr) and predecessor organizations going back to 1990. The buildings cadastre has been maintained at the municipal level by the Bureaus of Technical Inventory (BTIs). These organizations were established inthe 1930's primarily as a means of keeping information on residential properties for the purposes o f State control. This has led to a very difficult situation for parties involved in the real estate market. Ifthe transaction only involves a buildingor part o f a building, such as an apartment, the parties to a transaction have had to deal with two agencies. If land i s also involved, they have had to deal with three agencies. If the process involves land allocation and granting permissions to build for development, the process may take years and cost many tens of thousands o f rubles. Municipal government has been reluctant to privatize land parcels, as municipally owned land has been an important source o f revenue. The split in the traditional legal treatment between land and buildingshas meant that while businesses and enterprises were largely privatized in the 1990's, they were not given ownership rights to the land they occupy. This has remained largely in municipal ownership. Municipal government has been slow to make available undeveloped land for development purposes, again for the reason o f being reluctant to cede the right o f ownership, and access to such land has been non-transparent, ad hoc, and high-cost. A study duringproject preparation bythe Russian Center o f LandLaw andEconomics concludedthat: I`.., these negativefeatures are regarded as the reason that an appreciable quantity of real estate has not been recorded by taxation bodies and is not involved in lease relationships; a civilized market of real property is lacking; real estate is not used to accumulate capital; investments in real estate have come to the lowest notch; real property is rarely used as security for loans; data concerning real property resources are disunited and distributed amongst different agencies; there are fourteen territorially oriented state cadastres and registers in the country which are run independently without any correspondence with each other. As a consequence of these negative features the country's economy is characterized by: underpayments to government revenues; capital outflow from the country; ageing fixed assets and deterioration of infrastructure; chronic shortage of circulating assets; the absence of the state's propriety attitude towards its own national wealth; and the slow pace of the structural reorganization of the economy." Between 1995 and 2003, the IBRDfinanced the LandReformImplementation Support (LARIS) Project to establish the basic infrastructure for the land cadastre and to enable the land market to operate. This involved an extensive program o f domestic and international training, the equipping o f mapping companies to provide the basic location data needed for the real estate market and property tax system, and support to local and regional land cadastre offices. This basic infrastructure i s now in place and has already had a markedimpact on recording landparcels for bothlegal and fiscal purposes. 16 Numerous efforts have been made by donors since the mid-1990's to establish more efficient linkages between the functions of cadastre and registration of rights. These efforts, including the registration component o f the IBRD-financed Housing Project, generally suffered from a lack o f clarity on policy and institutional issues at the Federal level. Without this, attempts to introduce more effective worlung arrangements at the local levelproved extremely difficult. In 2004 the Government has initiated a new program of legal and regulatory reform to improve how immovable property assets are utilized and to facilitate more active development of markets. A critical feature of this program is the unification of the heretofore separate land and buildings cadastres. Responsibility for this has been given to the newly created Federal Agency for Cadastre o f Immovable Property. Furthermore, the BTIs are to lose their monopoly control o f technical inventory (survey) o f apartments and buildings and to compete as commercial enterprises with other survey companies. In addition, other rules and regulations holding back development o f immovable property markets are to be examined and changes introduced. It is intended that the new structure will increase reliability by malung it less likely for different organizations to have conflicting information and making it easier to linkwith the system o frights registration under the Ministryo f Justice. Another part of the Government's program i s the Federalization o f the system for registration o f rights. This will allow for a review and rationalizationo f existing procedures, the introduction o f unified service standards across the country, the ability o f the cadastre and registration o f rights systems to `talk' to one another on a standardized national basis, and the possibility of registration o f any property in the country from any point inthe country. The RegistrationProject and the related Cadastre Development Project will be a critical part o f the overall strategy for immovable property. They will allow for the upgrade of the registrationservice, unification o f the immovable property cadastre, and improved information linkages between the two. These improvements will both facilitate the development of markets inimmovable property, but also allow for an increase inlocal government revenues through immovable property taxes. 17 Annex 2: Major RelatedProjectsFinancedbythe Bankand/or other Agencies THE RUSSIANFEDERATION: REGISTRATIONPROJECT WorldBankfinanced proiects LARIS (Land ReformImplementation Support Project). 1995-2003; DOrating "S" Capacity buildingfor the State Land Committee and subsequent restructured forms o f this agency ending with the Federal Land Cadastre Service of Russia. The Project helpedestablish a modern land cadastre in Russia by financing investments in national mapping capacity and automation of rayon and territorial offices inregions participating inthe Project. A major program of domestic and foreign training was also provided. HousingProject. 1995-2002; DO rating "U" A component of the Housing Project was devoted to registration of rights and attempted to buildreliable information linkages among the local Registration of Rights offices, BTIs, and Land Cadastre Bureaus in select regions o f the country. The Project provided equipment, some training, and was to develop software for information linkages. The desiredinformation linkages were not achieved. Other Donors' Activitv RealProperty Information System. (SIDA). 2002-2004. This Projecthas been implementedinArkhangelsk Oblast and involved the development o f a concept and initial implementation for the improved information coordination among the local Registration o f Rights offices, BTIs, and LandCadastreBureaus. Real Property Information System. (SIDA). 2004-2005. The concepts developed inArkhangelsk are to be further developed in Leningrad and Novgorod Oblasts. There will be some emphasis on business process modeling that will be useful for the information system component part o fthe IBRDfunded Cadastre Project. Supportfor the ImplementationofLand andPropertyPolicy Tools. (EU-TACIS). 2003-2005 This project is mainly providing consultancy to advise the Russian government on land use, land management and the development of land markets. It followed on from a previous project that concentrated on training and procedural issues (including technology) inRostov Oblast. 18 Annex 3: Results Framework and Monitoring THE RUSSIANFEDERATION: REGISTRATIONPROJECT Results Framework PDO Outcome Indicators Use of Outcome Information legistration by legal owners o f their Quantity o f economic transfers o f ights inimmovable property; immovable property (sales, lease) ?laming subsequent Government ievelopment o f the market for xonomic development strategy. mmovable property and increase o f Quantity o f mortgages registered nvestment activity insuch property; ncreaseinrevenues to the budget. Capacity to provide information to clients irrespective of the place o f submission o f the application and the locationo fthe object (ex- territorial principle of information access) Intermediate Results Results Indicators for Each Use of Results Monitoring One per Component Component Component One: ComponentOne: ComponentOne: Improvedlegal, regulatory and Reductiono ftime for registration Assess the effective implementation iperational environment for o f legal and regulatory reform .mmovable property market. Submission to Government o f a set o fnormative acts for introduction o f electronic archiving and electronic signature o f documents Increase o f archive capacity (files per m2) Assess project impacts for replication inother regions. Increase inthe percentage o f surveyed populationthat understands the requirements and procedures for registration Component Two: Component Two : ComponentTwo: Improved information flow and Increase inlabor productivity Verify improvement ineconomic increasedefficiency o fthe offices o f (numberofregistrations performed efficiency o fthe Registration the Registration Service. by one staff inone year) Service. Reduction intime for processing informationrequests from Verify improvement inthe quality o f individuals services providedby the Registration Service. Technical capacity to receive and transmit informationbetween Registration and other Federal Agencies, including Cadastre Offices Increase ininformationrequests. ComponentThree: ComponentThree: ComponentThree: Increased qualifications o f staffo f Increase inpercentage o f surveyed Assess project impacts for the Registration Service applicants that are satisfied with the replicationinother regions. work o f the registration offices. 19 I 0 N t g g.E P I .- 8 c .-M 5 eec `e E Lcl .-c E 73 a 2 Annex 4: DetailedProjectDescription THE RUSSIANFEDERATION: REGISTRATIONPROJECT The objective o f the project i s to improve the system o f registration o f legal rights to immovable property by developing standardized, clear and more efficient registration procedures, and by introducing an improved information management system for the registration offices. This i s expected to benefit the general public and the business community in all regions and sectors as it would improve the current processes that have to be negotiated when undertaking a transaction. It is expected to: make the system more user-friendly; lead to greater use o f information from the registration service; reduce the amount o f time required for transactions, and leadto increasednumbers o f transactions registered. This, inturn, will contributeto federal economic development and greater tenure security for all levels of society. In January 2005 registration of rights in immovable property became a federal activity, providing the opportunity to unify registration service standards and methods nationwide. Improved efficiency and better customer services will be partially achieved through the development o f registration application software that will enable professional users to access information about registeredproperties `on-line' and enable the registration o f transactions to occur within a matter o f days. The project has been designed infour main components: Component I.Institutional development includes activities to improve the quality of registration services to the public, improve the physical facilities o f offices and to monitor the effectiveness o f the project throughmonitoring the impact o fthe improved customer services. Component 11. Informatics includes development o f the application software for registration, provision o f the main hardware required and conversion o f the data in existing systems into the new system. Component 111. Improvement of theprofessional skills of registration service staflis designed to ensure that all staff o f the registration agency are provided with sufficient information and training to carry out their tasks inthe new system. Component IV. Project Management provides the logistical and management support to carry out the project. ComponentI.Institutionaldevelopment. The objective o f the institutional development component i s to improve services provided to the population. The component has five subcomponents: A. Improvement to the legislative framework. The current registration procedures and associated laws and regulations have been criticized for being overly complicated and slow. Procedures that could readily be simplified include requirements to have a technical inventory o f a building prior to every transaction and that each transaction requires multiple applications to register. The forms used for applications and for the deeds that transfer property could be improved in order to enable registrationoffice staff to work more quickly and efficiently. There i s also a need to develop legislation governing the electronic transfer o f documents and digital signatures, registration of the common parts o f group holdings, and the legality o f electronic archives (and thus removal o f the requirement to keep paper records). The Registration Service i s particularly concerned 21 about the description o f the property to be registered, and the information linkage with the Cadastre Agency, which is responsible for this activity, will provide an important communication link. On the basis o f a review of existing registration procedures, an operational manual for the new unified Federal registration system will be drafted (under Component 111). This will serve as the guidebook for staff o f the registration system. It is understood that the operational manual will evolve over time with subsequent changes and improvements inthe way inwhich the registrationsystem operates. The Federal Registration Service will also be ensuring that regionally developed legislation conforms to federal policy and laws and that the legislation governing illegal activity with respect to registration i s clear. Other issues that may be covered under this sub-component through studies or the preparation o f draft regulations or legislation include: instructions to notaries and other professional bodies involved with transactions; mortgaging; licensing professionals involved in property description or conveying; inheritance; housing; town and country planning; and other activities that relate to legal rights and the use of immovable property. While it i s understood that only the first o fthese is the direct responsibility o f the Federal Registration Service or the Ministry o f Justice, they are directly related to the immovable property market. The Project can help to improve this legislative framework in coordination with the responsible institutions. Specific outputs inthe first three years o f the project would include: 0 Revisions to registrationregulatory documents. 0 The first draft o f a registration procedure manual in the first year o f the project and a second version by the end o fthe second year. 0 A regulation on archivingand data storage. 0 A regulationonthe use o felectronic documents anddigtal signatures. 0 A regulationondata exchange andcoordinationwith the Cadastre Agency. 0 A regulationproviding guidance onthe infnngement o fregistrationlegislation. B. Client ServicesDevelopment The quality o f services provided to the population within the registration service varies by region. Many offices have inadequate premises for dealing with the number o f applicants they receive. Insome cases there i s a problem with the attitude o f the reception clerks and in others the procedures involved require applicants to spend hours queuing or making repeated visits. It i s not yet a common practice for notaries, lawyers and real estate agents to act for the parties involved ina transaction when registration i s required. This is the most commonpracticeinWestern Europe. The Government plans to establish administrative regulations providing service standards for operation o f the registration system. The project will assist in this effort by hiring a consultant to evaluate how customer services can be improved and how the program o f improvement should be monitored and managed. This would include the time taken to acquire information; the time taken for registration o f a transaction; the procedure and expectations for dealing with complaints; facilities and acceptable queuing times at local offices; etc. Within this consultancy a proposal for improving staff incentives will be included. This should involve providing opportunities for training and upgrading of qualifications and procedures for paying bonuses. This i s needed because the recent federalization o f the Registration Service has resulted ina dramatic decrease insalaries for most staff. Another consultancy to be financed will concentrate on developing a customer `help' facility for each office. This will include a requirement for information and help for applicants at the office and a 22 complaints procedure that i s not reliant on going through the local office. Equipment to implement an automated help system will be procured and installed in these offices to hrther enhance and standardize service levels. Public perceptions o f the quality o f service provided by the FRS are directly affected by the `first impression' generated when entering the public reception areas o f FRS offices. A significant amount o f works will be conducted to improve the conditions and facilities inthese areas. These works will be 100% financed by the FRS and conducted over several years. One of the Thematic Groups will be specifically responsible for this component o f the project. This will include ensuring that the planned actions are carried out and monitoring the improvements (or lack thereof) in customer services. They will be responsible for coordinating with the regions to help develop plans for renovations and the purchase o f furniture for customer receptionareas. Some o f the functions of monitoring implementation of this component at the regional level can be shared by the regional specialist to be hired by the PIU. Outputs from this sub-component will include: 0 A set of service standards accepted bythe RegistrationService and displayed at all offices. 0 A `help' facility providingadvice onregistrationand a complaints facility. 0 Adequate customer reception areas inthe project regions. C. Disseminationo fRegistration Service Informationto the General Public The public will be provided information about registration services in a number o f ways. A WEB site providing information to customers and pages containing legislation, service standards and links to information and other WEB sites will be developed at the Federallevel. The `other sites' linkedwould be those providing information about the cadastre, building regulations, planning rules, professional organizations, legal aide, arbitration services and non-government organizations concerned with immovable property issues. Pages providing locally specific information for each o f the SOFs will be accessible via links in the main WEB site. Regional offices will have access to these pages so that they can update and maintainthem on a regularbasis. The project will also fundthe development, printingand distribution o f brochures and explanatory leaflets describing the registrationprocess and related information that would help applicants. This mightinclude leaflets explaining powers o f attorney, rights o f minors and spouses, inheritance rules and making wills, trusts, registering a small company, new buildings and planning applications, property taxes, etc. These leaflets and brochures will be made available at registration offices free o f charge or for a nominal fee. Posters will also be printed and supplied to local offices and a company will be recruited at different phases o fthe project to manage media coverage promotingregistration services. The outputs for this subcomponent will be: 0 Development and implementationof an integrated web portal; 0 The supply o f leaflets, brochures andposters at each local office involved inthe phase; 0 Use o f mass media as appropriate to promote and inform about registration services. 23 D. ProjectMonitoring The quality o f customer services and the perception by the public on the quality o f services will be assessedthrough independent institutionalimpact assessment surveys conducted by a consulting company. It is plannedthat several o f these studies will be carried out. The first will be duringthe first year o f the project and will serve to establish a baseline for measuring the impact o f the project. Additional studies will be carried out during the project and each one will cover the new SOFs added to the project plus those fromprevious studies. At the end o fthe project a final study will be conducted. The outputs fi-om this subcomponent will be: 0 The studies as described above; 0 Annual reports describing the project progress with suitable statistical data; 0 Decisions o f the Registration Service on measures to improve the quality of services and the measures to implement them. E. Document storage system The legal requirement to store permanently all paper records and the large volume o f documents that are submitted for registration has caused serious storage problems in the bigger offices. Most Western European counties have converted to electronic storage o f documents and consigned paper to bulk underground storage (such as in disused mines) or destroyed the paper versions. It is prohibitively expensive to store vast amounts o fpaper purely because o f the space it occupies. It is likely to take some years before new legislation permits disposal o f paper documents, and even longer before the mass o f stored documents can be converted to digital form for future reference. (Legislative change permitting this is catered for under component IA.) Inorder to cope with the current problem and develop a strategy for future paper and digital document storage, it is an urgent requirement to provide a convenient document storage and retrieval system. Itis plannedto transfer the bulk of documents for each SOF to a suitable location and provide sufficient storage space usingspace-saving rolling shelves to store those documents not required on a regular basis at local offices. As a first step, premises will be prepared and modem mechanical archive systems will be installed in all 25 regions o f the project within the first two years. During the next two years, these archive systems will be installedinother SOF throughout Russia. Additionally, it i s planned to pilot the concept o f uniform large archive storage centers in five locations. These centers will pilot the development o f processes to transfer existing paper documents into an electronic document format for long term storage and retrieval. Under the project, five centers will be designed, created and equipped. Since the existing facilities are not fit for installation o f such automated equipment, these buildings will be remodeled based on international standards. It is planned to have the first center operational by the end of the third year o f the project with subsequent centers coming online shortly thereafter. Additional work to transfer documents to an electronic format will be conducted under Component 11. The outputs fi-om this subcomponent will be: 0 Renovated premises and document storage systems for all 25 project SOFs by the end of the second year o f the project. 24 0 Renovatedpremises and document storage systems for other SOFs according to a schedule to be determined duringthe project. 0 5 large archive storage centers created and the concept o f electronic document storage piloted in these centers. ComDonentII. Informationand CommunicationsSystems The objective o f the ICT component is to design and implement an efficient and secure distributed information system, including a unified software application for registration o f rights and a . telecommunications subsystem for information access and exchange. Inaddition, this component will support migration of existing data from current disparate formats into the new unified system and will ensure the system i s operational inall SOFs involved inthe project. A. Developmento fthe standardizedinformation system for regionalandlocal offices. There are currently about 50 different registration software applications with varying degrees o f sophistication in use around the country, most o f them with different database systems and formats. Each SOF has been responsible for the decision o f which software applicationto use and for its administration. This component is aimed at developing a distributed information system, which will standardize the registration software throughout the country as well as unify data formats and classifiers. This has the advantage o f ensuring consistent service standards, procedures and legal security, while ensuring interoperability in the transfer o f data and registration among different locations, and with third parties, including the Cadastre Agency. This unified system will also allow for the creation o f aggregate statistical information at the regional and federal levels. While the full functional requirements o f the new information system have yet to be developed, it i s planned that the new system will allow other agencies and the public in general to have open and transparent access over the Internetto the registration information, within the limitations foreseen by law. It is planned, for instance, to ensure that professional users have instant access via the Internet, perhaps with the use o f user agreements. Special institutional users, such as the Cadastre Agency and Tax Authorities, would have rapid access through dedicatedportals, as describedbelow. Under the automated system, registration should be completed within a couple of days for many transactions. It i s expected that by the end o f the project, an "e-filing'' system will be introduced which would make it possible to electronically register applications through the Internet. This assumes that by the end o f the project electronic signatures and electronic documents will have a sound legal basis and willbe inwidespread use. The system will be developed with this inmind. Itis plannedto ensure that all registrationdata heldat local offices isbackedup andheldina unifiedSOF database at the regional center. An `exchange server' will serve as external interface to this unified database at the regional center, and will be used as the source o f information for queries and registration applications from other regions and external users. This server will also act as the main interface with other agencies requiring access to registration information, in particular the Cadastre Agency. At the Federal level, not only will it be possible to access any particular record located in any SOF, but also statistical informationwill be produced within a flexible environment, allowing for the creation o f a wide range o freports for policy makers. Multiple levels o f security will be implemented, both for access to the databases as well as in the transit o f information through the communications channels, to ensure the integrity, consistency and confidentiality o fthe information, as well as to ensure that adequate audit trails are kept. 25 The first stage in development requires a consultant to carry out an analysis o f the existing information systems currently in use in the regional offices and to prepare the functional specifications for the new system. This is a major activity requiring a detailed analysis o f the user requirements and re-engineering o f the registration process in order to optimize the work flow process in an automated system. The analysis will have to take particular cognizance o f the data identifjring the object to be registered and the linkage with the Cadastre Agency, as the Cadastre Agency are responsible for the description and coding o f the objects. A system o f interoperable descriptors and classifiers will thus be developed in coordination with the Cadastre Agency. As part o f this assignment, the consultant will also conduct a review o fthe systems available at the local level, and design a strategy for the conversion o f data fromthe old systems to the new unified system, to be implementedinsubcomponent Bbelow. The consultant recruited to prepare the functional specifications will need to have a number of experts available, including expertise in registration, system analysis, database design, communications technology, internet` intranet application development, cadastre and marketing. The company will be required to have bothinternational and national experience on similar system design. The consultant will also support the implementing agency in the process o f selecting the contractor responsible for development o f the main system, and will be responsible for monitoring and quality control o f the latter's work duringapplication development and inthe first stages o f implementation. Inorder to ensure that the main application development i s not delayed, the bidding procedure for the company to develop the functional requirements will be completed prior to project effectiveness, allowing for contract award and signingsoon after the projectbecomes effective. It is estimated that the development o f functional specifications will take four to six months. Depending on the findings o f the existing systems' analysis and the functional specifications developed, it will be decided whether it is feasible to elaborate the standardized system as a modernization o f one o f the existing systems used in the regions or to develop a completely new system Tendering for the main system development can commence thereafter. This contract would involve development o f the system, testing, installation, training o f staff as well as conversion o f data from existing databases in each region into the new system. The equipment requirements for the system will be identified by the contractor, but the purchase o f the equipment will be by separate tender. Based on international experience, it is likely that the system development contract will require at least two years for completion, unless customization of an existing or commercially available software package i s considered a viable option as a result of the assessment conducted indevelopingthe functional requirements. Inaddition, there is animmediateneedto obtain licenses for use ofthe current relationaldatabases and it is plannedto procure these duringthe first year o fthe project. The outputs from this subcomponent will be: 0 Licensedversions of relational database software. 0 Analysis o f the existing information systems, currently inuse inthe regional offices 0 Functional specifications for the system to be prepared within the first year o f project effectiveness. 0 Systemtested and operational infour SOFs by the end o fyear three. 0 Direct linkage possibilities with the Cadastre Agency and Tax Authorities through the developed system by the end o f year four. 0 Immediate access to registration information by professional users for SOFs involved in the project by the end o fyear 4. 0 E-filingpossiblebythe endo fthe project. 26 0 Conversion of data from existing databases in each project regon into the databases o f the new standardized information system. 0 Adequate hardware and software systems to operate as a platform for the new system. B. Procurement andinstallationoftelecommunications equipment An analysis o f requirements for an integrated telecommunications system as well as a design and technical specifications for a system will be conducted during the first year of the project. Subsequent procurement and installation of this equipment i s planned to take place throughout the project regions over the subsequent three years. The outputs for this subcomponentwill be: 0 Delivery and installation o f telecommunications equipment suitable for operations o f the Registration Service in25 SOFs. C. Procurement and installationof information technology equipment The system architecture and equipment requirements for implementation of the system will be specified by a consultant inconjunctionwith the contractor conducting the system development. The funds will be dedicated to equipping the local offices with computers (either `thin clients' or full PCs), software licenses, communications equipment, as well Local Area Networks inmost cases. The cost o f specialized IT staff, system maintenance and administration, as well as regular communication service charges are a Government cost not includedwithinthe project budget. The outputs for this subcomponentwill be: 0 Delivery and installation o f equipment suitable for running the automated registration system implementedthroughout all 25 project regions. D. Conversionofdata Most SOFs already have databases with most o f the data required for registration in their systems. However, there i s a wide range of disparate systems inuse, most of them with their own database system and structure at the level of the SOFs. While it i s unlikely that full direct conversionof data to the unified system will be possible for all the different systems (some are not even based on modern database systems, but rather on text documents), the project will support the creation of tools to automate this process as much as possible. It is therefore expected that in a large proportion o f cases, particularly for those systems basedon modem relational database systems such as Oracle or SQL Server, among others, it will be possible to fully automate the conversion process. However, the legal verification and certificationthat the datainthe new system i s correct will be a lengthierprocess. In further elaboration of the data conversion strategy mentioned above in subcomponent A, two alternative approaches will be evaluated. The first one would entail entrusting the creation o f the automated data conversion tools and the data conversion itself to the same main contractor for the unified information system. The second approach would imply selecting local companies on a tender basis (one per SOF) to be responsible for converting data from existing systems into the new system, at least for those local systems with very specific proprietary technology. It is expected that the final approach will entail a combination of both dependingon the specificity o f the local systems currently inuse. 27 The period required for data conversion will be dependant on the amount of automated data transfer that i s possible and will vary by region. Preparatory work for data conversion can beginprior to finishing the system development. Downloadinginto the new system, however, requires the new system to be inplace. The output from this subcomponent is to ensure data conversion is completed for offices involved in phases 1and 2 (and preferablyphase 3) by the end of the project. After the local staff has been trained in the new system and the data conversion has been concluded, the switch over to the new system shouldbe done almost instantly, on a date known well in advance by all staff, and with a minimumor no time of parallel operation o f both systems. This part of this component may be completed as part of the sub- component for development ofthe new standardizedsystem. Another important activity of this subcomponent is the conversion o f documents into an electronic format for archival in the uniform archive storace centers. Significant work will be conducted to begin this process for the five storage centers to be createdunder Component I. The outputs for this component will be: 0 Conversion of data fiom.existingdatabases in each project region into the databases of the new standardized information system. 0 Piloting the transfer of approximately one-third o f the paper documents in the regions o f the uniformarchive storage centers into an electronic document format. Component III.Improvement of professionalskills of registrationservice staff The changes envisaged under this project will have major implications for the staff of the Registration Service. Training programs are required to: (i) provide guidance on policies involving improvement of customer services and a focus on quality of service; (ii) ensure all staff understand and apply the new regulations and procedures being applied throughout the federation; (iii) understand and correctly utilize the registration system software; (iv) understand and correctly utilize WEB sites and technology; (v) appreciate the relationshipbetweenregistration, economic development and the roles of other government agencies; and (vi) understand bestpractice for registrationas used inother countries. A training specialist withinthe PIUwill beresponsible for the logistical arrangements for this component and also for ensuring quality control o f training service providers. Inparticular the.training specialist will be requiredto get feedback from all participants inthe overall training program and to ensure that views are taken into account to improve the quality of servicesprovided insubsequent contracts. Although training will be concentrated on those SOFs involved in the project, other regions should be includedinthe training programs as appropriate. A. Development o fthe overall training stratem During project preparation the main themes for training and the activities required have been identified. An analysis and detailed plan for training is now requiredto identify the specific courses, modules within courses and content of modules. The numbers of people that would benefit from such courses need to be identifiedtalung into account the staff turnover, rates o f retirement and the numbers o fpeople that would be requiredto run the new registration system. The tender for the training strategy should commence before project effectiveness such that the signing o f the contract and development of the strategy can commence shortly after the project becomeseffective. 28 The output for this subcomponent will be: 0 A detailedtraining strategy, programand schedule bythe end ofthe first halfyear ofthe project. B. Development andimplementation o faremote training courses The RegistrationService has 25,000 employees and the only way to reachall o f these staff at a reasonable cost will be through utilizing remote training courses. The course subject matter and contents will be developed under subcomponent A, but the actual courses themselves will be developed following tender for this purpose. Courses will be required in: (i) the methodology for registration; (ii) issues when maintaining the legal register; (iii) using the standardized registration software; (iv) using electronic mail and internet systems and the requirement to ensure security o f information; and (v) the electronic link with the Cadastre Agency. Inaddition, courses will probably be required to allow staff to `upgrade' their qualifications and it will make sense to include other courses that provide background on other aspects of management o f immovable property, such as understanding of property appraisal methods, planning and building requirements, map appreciation, and the importance o freal estate to economic development. The outputs for this subcomponent will be: 0 The first series o f courses withinthe first year o fthe training development contract; and 0 An ongoing series ofcourses developed and inuse throughout the projectperiod. C. Development and conducting training.on specialized courses and themes Training in Moscow and some regional centers will be provided to selected groups that will have the responsibility of transferring knowledge to others within their region. Inprinciple this i s a `training o f trainers' program, but the recipients of the training will act as mentors within their offices rather than as teachers conducting courses. They would be expected to host some seminars and training sessions as the needs arise. The project preparation team has identifiedsix themes for training: (i) new aspects o flegalregulationand changes inlegislation; (ii) changes in organizational frameworks for the Registration Service and the Cadastre Agency, plus the changes inmethods and details when describing objects for registration; (iii) coordinationand direct linkage with the Cadastre Agency; (iv) registrationo frightsusingthe newly developed technology; (v) technical maintenance o f the system of registration o f rights and the process o f data updating withthe Cadastre Agency; and (vi) operations and management ofthe new system o fregistration. These themes are not exhaustive and more details of the courses and participants will be produced under subcomponent IIA, development o f the unified information system. Initial estimates o f cost are based on providing training to sixty participants in each of themes (i) to (iii); participants in each of themes 100 (iv) and(v); and240 participants intheme (vi). 29 The outputs for this component willbe: 0 At least 2 courses involving at least40 personsduringthe first year ofthe project; 0 At least 7 courses involving at least 100personsduringthe secondyear ofthe project; 0 At least 7 courses involving at least 120personsduringthe thirdyear ofthe project; 0 At least 7 courses involving at least 100personsduringthe fourth year ofthe project; 0 At least 10coursesinvolving at least 140persons duringthe fifth year of the project; 0 At least 9 courses involving at least 120personsduringthe fifthyear ofthe project; D. Study tours and foreign training Foreign training programs have been extremely effective for showing good practice and for keeping Russian experts up to date with the latest development in policies and technology. Under the LARIS Project it also provided an ongoing linkage with other countries inthe area of cadastre for mutual benefit. The Registration Service have not benefited from this type of interaction to the same extent as the CadastreAgency have. A new set of managers, specialists and policy makers would benefit from visiting other countries and participating in seminars and training events. The methods, laws and organizational structures for the registration of rights to immovable property i s uniquely organized in countries of Europe, but there are some models that have great similarity to the model to be adopted in Russia. For example, the English and Dutch systems have millions of transactions annually, centralized administrations and standardizedpractice and software. Apart from study tours to these offices, seminars will be conducted along six main themes (which may change to some extent during the course of the project): (i) Structure, financing and maintenance ofregistrationsystems; (ii) Communications between government agencies dealing with registration andcadastre; (iii) Mortgage and banking systems and the relationshipwith registrationactivities; (iv) Remote training facilities and the process (and courses) developed andinuse; (v) Digital exchange of documents, files and records, including the security of information, digital signatures and e-conveyancing; and (vi) Working with clients andmarketing strategies. The outputs fiomthis subcomponentwill be: 0 Approximately 15 groups involved in study tours and foreign seminars with visits spread evenly throughout the first five years of the project. E. Creation, printinpand distributionofOperationalmanuals Legislative changes and operational manuals will be developed under Component 1A o f the project. The training officer within the PKJwill be keepingtrack o f the products and will pay particular attention to the production of an operational manual for registration. The manual is a primary training aide and should be available to all staff of the registration service. As it would be an evolving document, it should be produced as a `loose leaf lockable binder such that sections o f the manual can be replaced as and when needed. It is intended that these materials will be provided throughout the Federation and not restricted only to project regions. 30 The outputs fiom this subcomponent will be: 0 A set o f operationalmanuals delivered to every office o fthe RegistrationService. 0 Additional materials as required from time to time. F. Conducting Seminars inRussia It is planned to hold annual seminars for SOFs participating in the project to share experiences and information. Seminars will last from 2 to 3 days and be the forum in which staff o f the offices, local authorities, Cadastre Agency staff, tax authority staff and other interested persons can discuss the project and the quality o f services providedby the Registration Service. G. ParticipationinInternational Conferences. This sub-component will allow for participation in international conferences that are dealing with land administration and registration o f rights inimmovable property. There are a number o f conferences held annually through organizations such as the UNECE, FIG, WPLA and various donor funded special conferences. Following a visit to a conference, the participants will be expected to provide a report on the main issues discussed and conclusions reached. This report will be distributed through the Registration Service WEB site. Component IV. Proiect Management The project will be overseen by an inter-agency worlung group consisting of representatives from the Ministry of Finance, Ministry o f Economic Development and Trade, Ministry o f Justice, and Federal Registration Service. A Project Director within the Registration Service will be appointed who will be primarily responsible for project oversight and success. Thematic groups responsible for each component will be established from senior staff o f the Registration Service and the SOF to ensure that the technical aspects of the project (including terms o f reference, specifications and quality control o f goods and services delivered) are to the standard expected by the Registration Service. For evaluation o f proposals for major contracts under the project, an evaluation committee will be established. This committee will invite additional specialists as needed to carry out their work. A separate financial management monitoring unit within the Registration Service will be established to provide independent checks on the procurements and expenditure as needed. Additional details o f the project implementationarrangements can be found inAnnex 6. A. The Project ImplementationUnit(PIU) A PIUhas been selected that will be responsible for logistics, procurement and maintaining the financial accounts. The PIU will be staffed accordingly to handle these functions, as well as to handle translation of documents and managingthe logistical arrangements associated with the programs o f training. Itispreferable that the PIUbe located at the premises o fthe FederalRegistration Service. Experiencehas shown that this is by far the best model for insuringcoordination between a PIU and the implementing agency. The PTUwill prepare quarterly financial reports for the IBRDand annual progress reports for the Government and IBRD. 31 Monitoring o f results indicators for the project, and appropriate use o f the information provided by monitoring, are an important element o f successful project implementation. The monitoring program will include both quantitative and qualitative indicators. The PIU will receive regular reports and statistical information from the regions in order to assess whether the project is having the desired effect in terms of: numbers o f transactions; the time period it takes to register; the output per staff member; information requests; etc. They will develop a reporting format that will include this information and deliver the results to the Registration Service and the IBRDon an annual basis. The PIU will also be responsible to arrange for an annual financial audit o f the project conducted by an accredited auditing firmacceptable to the IBRD. B. Short term consultants Experience has shown that during implementation o f many projects, needs arise for short term consultancies to provide assistance with specific project related tasks. Examples of this might include providing special expertise on a specific topic, additionalprocurement or translation skills duringperiods o fpeakproject activity or assistance inpreparationo freports or other documentation. 32 Annex 5: ProjectCosts THE RUSSIANFEDERATION: REGISTRATIONPROJECT 11. InformationandCommunicationsSystems 27 394 29677 57071- A. Developmentof StandardizedInformation System - for Regionaland Local Offices 14 640 15 860 30 500 B.-Telecommunications 7 440 8060 15500 C. -ITEquipment 3 552 3 848 7 400 D.-Conversion ofdata 1762 1909 3 671 111. ImprovementofProfessionalSkills 1155 1252 2407 IV. Project Management A. - Project ImplementationUnit 3 651 998 4649- 3 439 768 4207 B. Shortterm consultants - 213 230 443 I I I I I I Subtotalfor Project activities 50 000 72 548 122 548 I I I I Front EndFee 500 500 Proiect Total 50 000 73048 123048 33 Annex 6: ImplementationArrangements THERUSSIANFEDERATION: REGISTRATIONPROJECT The main implementing entity for the Project i s the Federal Registration Service (FRS). The FRS was established in2004 as part o f the Government restructuring initiatedby a Presidential Decree inMarcho f that year, and i s an entity o f the Ministry o f Justice. One o f the primary objectives in establishing the FRS is to establish a unified Federal system o f registration of rights. Prior to the Government restructuring of 2004, each Subject o f the Federation was responsible for administering its own registration system, consistent with the Law on Registration originally adopted in 1997 and with other Federal normative documents. The Ministry o f Justice had a small department for registration o f rights that was responsible for ensuring that the basic principles established at the Federallevel were adhered to intheregions. Federalization o f the system i s intended to allow for setting and enforcing service standards throughout the country and to eventually allow for `ex-territorial' registration o f rights. That is, for registration o f rights in a property from any location in the country. In addition to the registration of rights in immovable property, the FRS i s also responsible for registration o f other rights, such as legal entities, etc. The FRS will have 143 staff when all positions are filled. Of these [40] will be in the Department for Registrationo f rights inimmovable property. The FRS has 77 Territorial Offices (TOs). This i s slightly less than the number o f Subjects of the Federation - 89 - due to amalgamation of some SOFs into single registrationterritories. There are a total o f 1,300 registration offices at the local (municipal) level. Total staffing for the territorial and local offices i s more than 25,000. The FRS i s funded from the Federal budget. The FRS i s responsible for administrative and supervisory functions and has the legal authority to apply the functions defined inthe Federal Law On StateRegistration of Rights and Transactions in Immovable Property. Proiect Implementation Arrangements An Inter-Agency Working Group will be established with representation from the Ministry of Justice, Ministry o f Finance, Ministryo f Economic Development and Trade, and the Federal Registration Service to oversee key project issues and processes. Primary functions o f the Inter-Agency Working Group will include: (a) to provide overall oversight on project implementation and ensure coordination among the relevant government agencies in providing guidance on key implementation issues (b) to review the overall procurement plan; (c) to review the annual work plan and budget, along with brief descriptions o f all contracts; (d) to receive and review the project reports (e) to seek clarifications on various issues and instructs on needed actions; (f) to review and approve the project's Operations Manual; (g) to review proposals on extending the project implementation period and reducing or reallocating the Loan funds. The Inter-Agency Working Group will be chaired by the Deputy Minister o f Justice. TheProject Director appointed by the FRS will be responsible for the day-to-day implementation of the Project and will have the following primary functions: (a) coordination o f the work o f the Federal Registration Service with other agencies talung part in the project; (b) overall coordination of FRS divisions on federal andregional levels involved inthe Project; (c) approval o fplans for project activities; (d) review o f Project procurement plans' and project budgets' preparation; (e) approval o f contracts for goods and services prepared by the PIU and reviewed by the IBRD; (f) approval of consultancy TORS, technical specifications for procurement o f goods and works as well as short lists o f suppliers for contracts above $1mln.; (g) approval o f bidding documents; (h) approval o f consultants' final reports on consultancy contracts; (1)alerting the Inter-Agency Working Group to problems associated with project 34 implementation and preparing documents for presentation to the Inter-Agency Working Group. To coordinate the project implementation within FRS, with regional branches, and ensure interactions between the PIU, Thematic Groups, and other organizations, a group o f technical experts will be hired to assist the Project Director as part o f the FRS staff and consultants workmg on implementation of the associated Federal Program. Three Thematic Groups will be created within FRS to provide technical guidance for implementation of corresponding components 1, 2, 3 o f the Project. The Thematic Groups membership will be approved by the FRS. Staff of the Thematic Groups will consist o f technical specialists inrespective areas from the FRS as well as other federal agencies and representatives o f the regions. These staff will not be working full time on the Project, but rather will combine their project functions with other ongoing work. The primary functions of the thematic groups will be: (a) to prepare the Project procurement plan, plan of activities, Project budget, TORs for consultancy contracts, technical specifications for goods and works procurement, short lists o f suppliers for respective components; (b) to approve the consultancy TORs, technical specifications for procurement o f goods and works as well as short lists of suppliers for contracts under $1 mln.; (c) to review the Bidding Documents for each procurement package; (d) to provide advice to the PIU on technical matters; (e) to provide overall technical oversight on component implementation. Evaluation Committees will be established for the Project. Technical specialists will be included in the Committee for the evaluation o f specific packages depending on technical content. The primary functions o f the Evaluation Committees will be: (a) to evaluate the bids and proposals in procurement o f goods, works, technical services and consultants; (b) to seek clarification on procurement process from the FRS, Thematic Groups, PIU and IBRD if needed; (c) submit to the FRS the recommendations for contract award. TheFinance and Economic Department o f the FRS will provide oversight o f work of the PIU inthe area o f financial management and will ensure replenishment o f counterpart financing on the basis of applications for such from the PIU. The staff o f the Finance and Economic Department o f the FRS will handle these functions inaddition to their current responsibilities. The Foundation for Enterprise Restructuring and Financial Institutions Development (FER), a non- commercial legal entity, has been selected on a competitive basis to act as the PIU. The FER was established in 1996,and an extensive experience gained through managing several World Bank supported projects in Russia. Within the framework o f the Registration Project, the FER will report to the Project Director. The functions o f the FER will include: (a) to provide overall coordination and day to day management o f the project; (b) to prepare biddingdocuments and to submit them to the FRS for approval (c) to ensure that procurement procedures and contracts implementation comply with World Bank guidelines and the Project's objectives and assist the Evaluation Committee with questions related to the procurement process; (d) to sign consultancy contracts resulting from competitive selection process and on the basis of TORs approved by the FRS and agreed upon with the Bank; (e) to open and manage the Special Account as well as the separate project Co-Financing Account, (f) to handle other day-to-day activities inprocurement, financial accounting and reporting areas, preparation o f withdrawal applications for the review by FRS (g) to carry out payments under the contracts within the project and to arrange for the Project audits; (h) to work with regions on collecting relevant information; (i) to conduct Project ImplementationMonitoring and Evaluation; 0) to prepare needed financial and reports for the IBRD, the FRS and the Ministryo f Finance on project implementation. The Operational Manual, acceptable to the Bank, has been prepared and contains a detailed description of implementationarrangements. 35 RussianFedention %e ~ n m r e r " 36 Coordinationwith the CadastreDevelopment Proiect The primary point o f tangency between the two projects is the introduction o f the system o f information exchange. Agreement will need to be reached on information classifiers and data base linkages, and then indevelopment and installation o fthe applied software. There will also be linkage in the legal and regulatory sub-components of each project. There will need to be a shared understanding o f how key issues are being addressed and the terms o f reference for the legal assignments o f the two projects appropriately coordinated. Boththe Federal RegistrationService and the Cadastre Agency will needto share informationon these points on a regular basis. Issues concerning appropriate coordination between the Registration Project and the Cadastre Development Project will be raised in the context of the existing Government-IBRD Joint Working Group. For effective linkage between the system o f registration of rights and the cadastre, the regions included in the two projects need to overlap. Whde there will not likely be complete overlap, it i s intended that more than halfo fthe regions includedineither o f the projects will be includedinboth. 37 Annex 7: Financial Management and Disbursement Arrangements THERUSSIANFEDERATION: REGISTRATIONPROJECT CountryIssues. The last CFAA conducted inthe Russian Federation was inJanuary 2001. Pending the graduation of the Government's financial management and procurement capacity and infrastructure to a level of performancethat would allow the World Bank to rely on those systems, the CFAA recommended that fiduciary functions (disbursement, procurement, accounting and reporting, and operational reviews) continue to be outsourced to specialized agencies. Such agencies present the advantage o f using skilled consultants and reliable, suitable, and stand-alone computerized information systems. Based on the Bank's current audit policy, the CFAA recommends maintaining current arrangements for the annual audit of IBRD-assisted projects, which involve audit by private sector audit firms competitively appointed among those pre-selected by the IBRD, in consultation with the MOF. In addition, the work performed by the Accounts Chamber should also be reviewed by the IBRDon a regular basis and taken into consideration inproject preparation and supervision. Risk Analysis. The risk analysis is presented ina table below: Risk Rating RiskMitigationMeasures Conditions of Negotiations, Board or Effectiveness (YW Sector inherent risk M Sector risks are modest and mitigated by the previous N experience with Housing and L A W S projects. Project inherent risk M Project risks are modest, since the project has a N straightforward design, i s not a SWAP, and is relatively small. The risks related to procurement of large amounts o f equipment inregions will be mitigated by including a provisioninthe audit TOR for assuring the availability of the equipment. Assuredthrough the (i) of existing PIUand (ii) o f use use N independent auditors acceptable to the Bank 1. Budgeting M N 2. FundsFlow M N 3. Accounting M N 4. Internal Control M N 5. Audit L N 6. Financial Reporting L N Overall Control Risk M 38 Implementation Arrangements. The FER has been chosen as the project PKJunder implementation arrangements as described in Annex 6. The FER will be required to enter into an agency agreement with the MOF and the MOJ, clarifjmg these organizations' relative roles and responsibilities inproject implementation. Signing of this Agency Agreement, and adequate staffing of the PIV, with resources and terms of reference satisfactory to the Bank will be a condition of effectiveness. The FERhas acted as PIUfor a number o f other IBRDprojects, and i s familiar with the IBRD's FMS requirements and has demonstrated a capacity to function effectively with unqualified audit reports and positive management letters regardingtheir operation. The FERhas demonstrated sound internal control systems. The PIU will be responsible for financial management and procurement functions. This will include obtaining necessary Government and IBRD clearances for specific project implementation steps, preparationo f Financial Management Reports (FMRs), maintenance o f the project procurement plan, and execution o f annual project budgets that have been approved by Government and reviewedby the IBRD. Funds Flow. IBRDfunds will be transferred bydirect payment and Special Account (SA) replenishments. Letters of credit will also be used. There will be no FMR-based disbursements. The S A will be opened in a commercial bank acceptable to the IBRD. Federal financing will be provided from the Budget through the line item allocation for the Project. A ProjectAccount inrubles will be openedina commercialbankto channel fundsto the Project. The loan has a high counterpart funding percentage, which reflects the new modality o f doing business inRussia. Based on the experience, there is no risk regarding the non-provision or untimely provision o f Government funds. Staffing FER financial department staffing is described in the FER Operating Manual. At present, FER is staffed with necessary financial specialists with adequate qualifications and prior experience o f working with IBRDprojects. FER will put emphasis on all its financial management specialists to participate regularly invarious accounting seminars and trainings. 39 Accounting Policies and Procedures The financial records and accounts shall be maintained in accordance with principles that respect International Accounting Standards as issued by the International Accounting Standards Committee (IASC). FERmaintains its accounting books and records as well as accounting books andrecords for the IBRD-financed Projects it implements using a computerized accounting system. It allows to prepare the records in USD as well as RUR on the accruals basis in accordance with IFRS and Russian statutory reporting rules (for FER) and on cash basis (for IBRD-financed projects). FERhas a clear formal set of appropriate accounting procedures and internal controls including authorization and segregation of duties, described inthe accounting manual, which hasbeen reviewed by the IBRD and found acceptable. Internal Audit. No internal audit function. External Audit. The audit of the RegistrationProject will be conductedby independent private auditors acceptable to the IBRD, and procured by FER in accordance with the IBRDprocurement guidelines, utilizing the right of prior review by the IBRD. The independent auditor selected to audit the Project must be a member o f a professional accounting body that i s a member of the International Federation of Accountants (IFAC) and be acceptableto the IBRD. The audit will be conducted inaccordance with International Standards on Auditing as issued by IFAC and in accordance with terms of reference acceptableto IBRD. The audited financial statements will be sent to the IBRD within six (6) months of the end of the Government's fiscal year. The cost of the audit will be financed from the proceeds of the loan. The project will involve a significant amount of equipment procurement for Registration Service offices spread over a significant number of locations inthe Russian Federation. Therefore, an annual project audit will include checks on a sample basis to ensure that the equipment has been installed and i s inoperation inits intendedfacilities. It is expected that FER will have its entity financial statements prepared in accordance with international financial reporting standards on an annual basis. These financial statements will be audited by the same auditor which will be auditing the Project financial statements, in accordance with International Standards o f Audit, and on standard Terms o f Reference acceptable to the IBRD. The audited entity financial statements will have to be submitted to the IBRDwithin 6 months after the end of the reporting year, together with the Project audited financial statements. The cost of such audits will be partially financed from the Loan, as FERimplements other IBRD-financed projects. The first and final audits can cover up to 18 months. The contract for the audit awarded during the first year of project implementation and thereafter extended from year-to-year with the same auditor, subject to satisfactory performance. The following chart identifies the audit reports that will be required to be submitted by the project implementation agency together with the due date for submission. 40 Audit Report Due Date Implementing Entity Within six months o f the end o f each fiscal reporting period; the first and the final audit can cover the period up to 18 months Project FMRs Within 45 days after the end o f every calendar quarter throughout the life o f the Project FERandProject statutory reportingand operating activitiesare also expectedto be auditedby Accounts Chamber, KRU(regional audit body) and the tax authorities. Reporting and Monitoring. FER will be responsible for producing all financial reports for the IBRD. FER has demonstrated in other projectsthat it is able to report on project expenditures accurately and on time. Project management-oriented Financial Management Reports (FMRs) will be used for project monitoring and supervision. FERwill produce a full set o f FMRs every quarter throughout the life o f the project. Draft formats of these FMRswill be agreed duringnegotiations. Information Systems. FERusesthe accounting software which allows itto: (i) keep the statutory andprojectrecords both to in RR and in USD; (ii) produce both statutory and IFRS reports for FER, and (iii) produce to to financial reports for the project inaccordancewith IBRDguidelines. Impact of Procurement Arrangements. The project will involve a significant amount o f equipment procurement for Registration Service offices spreadover a significant amount o f locations inthe RussianFederation, an annual project audit will include checks on a sample basis to ensure that the equipmenthas been installedand in operationinits intendedfacilities. DisbursementArrangements. FER will be solely responsible for all disbursement aspects, including operation of the Special Account, preparation and submission to the IBRD o f claims for Special Account replenishment, and claims for disbursements of loan proceeds directly from the IBRD. Supporting documentation for SOEs, including completion reports and certificates, will be retainedby FER and made available to the IBRDduringproject supervision. FERwill also be solely responsible for operation o f the Project Account inRubles. Use of Statements of Expenditures (SOEs) SOEs will be used for: (a) goods costing less than $300,000 equivalent per contract; (b) works costing less than $200,000 equivalent per contract; (c) services o f individual consultants costing less than $50,000 equivalent per contract; (d) services of consulting firms under contracts costing less than $100,000 equivalent per contract; (e) all training related expenses; and (f) incremental operating costs, under suchterms and conditions as the IBRDshall specify to the Borrower. 41 For these SOE expenditures, detailed supporting documents evidencing payments to consultants and suppliers will be kept at FER. These documents will be made available for required audits and to IBRDsupervision missions uponrequest. Special Account A Special Account inUS dollars will be opened by the Borrower ina commercialbank acceptable to the IBRD, and managed by FER. The Authorized Allocation will be equivalent to US$ 2.0 million. However, the initial allocation will be US$ 0.5 million and will be increased to the Authorized Allocation amount once cumulative disbursements from the Loan Account have reached US$ 3 million. Payments made from the Special Account are to cover eligible expenditures under the Project. Applications for replenishment will be supported by the necessary documentation, the Special Account bank statement, and a reconciliation of the bank statement. Allocation of Loan Proceeds The Project will begin implementationinCY 2006 with an expected disbursement periodof six years. Disbursement categories and percentages to be financed under each category are presented inTable 7-1. Table 7-1. Allocation o f Loan Proceeds Expenditure Category Amount in Financing Percentage US$million 1. Goods, works, services 47.27 48% andtraining 2. Operating costs 2.73 100% 3. Unallocated 0 Front-end fee 0 TOTAL 50.0 SupervisionPlan. During project implementation, the IBRD will supervise the project's financial management arrangements in two main ways: (i) review on a quarterly basis the financial part o f project's FMRs as well as the annual project's audited financial statements and auditor's management letter; and (ii) during the IBRD's supervision missions, review the project's financial management and disbursement arrangements to ensure compliance with the IBRD's minimumrequirements. An IBRD accredited Moscow-based Financial Management Specialist will carry out a financial management supervision o f the project at least once per year. 42 Annex 8: ProcurementArrangements THE RUSSIANFEDERATION: REGISTRATIONPROJECT A. General Procurement for the proposed project will be carried out in accordance with the World Bank's "Guidelines: Procurement Under IBRD Loans and IDA Credits" dated May 2004; and "Guidelines: Selection and Employment of Consultants by World Bank Borrowerstt dated May 2004, and the provisions stipulated in the Legal Agreement. The various items under different expenditure categories are described in general below, For each contract to be financed by the Loan, the different procurement methods or consultant selection methods, the need for pre-qualification, estimated costs, prior review requirements, and time frame are agreed between the Borrower and the IBRD in the Procurement Plan. The Procurement Plan will be updated at least annually or as required to reflect the actual project implementationneeds and improvements ininstitutional capacity. Procurement of Goods andWorks: Goodsprocuredunderthisproject wouldinclude ICThardware and software, archival equipment and office furniture. Works procured under this project would include construction o f uniform archive storagecenter and other relatedworks. Goods and equipment estimated to cost US$400,000 equivalent and more per contract, works and services (other than consultants' services) estimated to cost US$2,000,000 equivalent and more per contract will be procured through ICB. Goods estimated to cost less than US$400,000 equivalent per contract, Computer equipment, Software, Works and services (other than consultants' services) estimated to cost less than US$2,000,000 equivalent per contract will be procuredthrough NCB and the additional provisions set forth inthe Annex to Schedule 4 of Loan Agreement. Goods estimated to cost less than US$lOO,OOO equivalent per contract may be procuredthrough shopping. DC methodwill be used for the procurement of goods which the IBRDagrees meet the requirements for Direct Contracting. Prior- and post-review contract will be indicated in the procurement plan. Procurement of non-consultingservices: Technical services will be procured for the conversion of documents into electronic format for archival instorage centers as well as for the purposes of publication of books, manuals, posters, and pamphlets. The procurement will be done using the IBRD's SBD or National SBD agreedwith or satisfactory to the IBRD. Methods and applicablethreshold are the same as per procurement o fgoods. Prior- andpost-review contract will be indicatedinthe procurementplan. Training: Training activities which will include study tours, conducting seminars, workshops and participation ininternational conferences on the subjects related to the project, will be procured through procedures agreed with or satisfactory to the IBRD (Agreed Procedures). When appropriate, a firm will be selected to provide services inrespect of organization o f training upon comparison o f at least three responsive price quotations presented by suitably qualified local service providers under agreed procedures. Individual contract values will normally not exceed USD 100,000 equivalent. Contracts estimated to cost more than USD 100,000 will be advertised nationally or internationally and bids for contracts will be invited. All contracts will be subject to prior review, it will be indicated in the procurement plan. Selection of Consultants: Consulting services will be utilized for: (a) preparation of draft legislative and normative documents associated with operation o f the System o f State Registration o f Eghts in Immovable Property and its interactionwith other organizations; (b) analysis o f service standards for the registrationsystem; (c) WEB site development for the Registration Service; (d) project monitoring (social assessments); (e) development o f functional requirements for the unified information system; (f) development o f the document storage system; (f) development o f the training strategy and training 43 programs; (g) preparation o fmanuals, books, and pamphlets to be financed by the Project; and (h)project financial audit; and other uses. Consulting services under the project will be procured usingthe standard RFP and contract formats. Short lists composed entirely o fnational consultants for services estimated to cost less than US$200,000 equivalent per contract, may be composed entirely o f national consultants in accordance with the provisions o fparagraph 2.7 o f the Consultant Guidelines OperatingCosts: Operating costs o f the PIUwill be financed by the Project including salaries, training courses for PIU staff, rent, communication expenses, travel expenses, utilities and security, and office supplies. The operating costs would be disbursed on the basis o f annual budgets to be agreed with the IBRD. B. Assessmentofthe agency's capacityto implementprocurement Procurement activities will be carried out by the Foundation for Enterprise Restructuring and Financial Institutions Development (FER), which has been selected as the Project ImplementationUnit. An assessment of the capacity of the PIU to implement procurement actions for the project has been carried out. The assessment found that FER has sufficient experience in procurement cycle management. FER maintains up to date records according to the requirements o f their regulations approved by the general director. All documents are available and are kept on the bookshelves infiles with clear indication and inchronological order. The FER has already completed implementation o f the Russian Enterprise Support Project and the Enterprise Housing Divestiture Project. Currently this PIU is implementing the following Russian Projects: Financial Institutions Development (closing date December 31, 2005), Treasury Development (closing date December 31, 2007), Regional Fiscal Technical Assistance (closing date December 31, 2008), Northern Restructuring (closing date December 31, 2006), and Sustainable Forestry Pilot (closing date September 30, 2007). The procurement unit at FERconsists o f 4 specialists. All o f them were hired on a competitive basis. The procurement staff has sufficient qualification in international procurement issues, procurement o f goods (including complex IT equipment) and services under IBRDguidelines. After the loan becomes effective, in2006 FERwill hire another procurement specialist for the PIU.Nevertheless, all PIU staffresponsible for procurement should be given intensive training in procurement o f goods, including procurement o f Information Systems, and procurement o f consulting services. The key issues and risks concerning procurement for implementation o f the project have been identified and include the challenges o f covering 25 regional offices and the associated local registration offices under the Project, the procurement o f ICT systems, which has proven to be a challenge for other IBRD financed projects in Russia, and the large amount o f work anticipated for legal and regulatory reform. T o deal with these issues, certain aspects o f the Project have been broken into implementation phases that will allow for piloting on a relatively small scale, followed by two roll-out phases for additional regions. The ICT procurements for the project will be broken into constituent parts to the extent possible to minimize the complexity o f formulation o f the technical specifications and in conducting evaluation o f the proposals received. Still the general level o f risk connected with procurement activity in Russia is considered to be hgh. Accordingly, the overall project risk for procurement is also expected to be high.Due to the nature o f the procurement foreseen for the project a high degree o f supervision and cooperation with the Bank accredited procurement staff i s foreseen 44 C. ProcurementPlan The Borrower has developed a procurement plan for the first 18 months o f project implementationwhich provides the basis for the procurement methods. This plan will be available at the Registration Service and the PIU. Parts o f it will also be available inthe project's database and inthe IBRD's external website. The Procurement Plan will be updated in agreement with the Project Team annually or as required to reflect the actual project implementationneeds and improvements ininstitutional capacity. D. Frequencyof ProcurementSupervision Inaddition to the priorreview supervisionto be carriedout from IBRDoffices, the PIUwill bevisitedon a regular basis (no less than twice per year) by the Project Procurement Accredited Staff based in the World Bank's Moscow Resident Mission. E. Detailsofthe ProcurementArrangements InvolvingInternationalCompetition 1. Goods,Works, andNonConsultingServices (a) List o f contract packages to be procuredfollowing ICB and direct contracting: .i' 45 Ref.No. Contract Estimated (Description) cost 7-RS-IIA- Procurement o f $3,600,000 ICB licenses for database software 10-RS-IE- Procurement and $8,000,000 ICB installation ofmodern mechanical archive systems -Phase 1 24-RS-IE- Procurement and $8,000,000 ICB installation o f modern mechanical archive systems -Phase 2 29-RS- System design and $15,300,000 IIB-ICB development of pilot system for an integrated telecommunications svstem 30-RS- Procurement of $6,800,000 IIC-ICB general operational hardware, software and equipment for regional and local offices 34-RS-IE- Procurement and $7,500,000 ICB installation of hardware, software and equipment for the uniform archive storage centers 35-RS-1B- Conversion of $3,670,877 ICB documents into electronic format for archival inthe uniform archive storage centers 41-RSI- Procurement and IIA-ICB installationo f server $10,500,000 hardware, software and equipment for regional and local offices (b) ICB contracts estimated to cost above US$l,OOO,OOOequivalent per contract will be subject to prior review by the IBRD. 46 2. ConsultingServices (a) List of consulting assignments with short-list of internationalfirms. _ _ _ ~ Ref. No. Descriptionof Assignment Estimated Selection Review Expected Comments cost Method byIBRD Proposals (Priorf Submission Post) Date 2-RS-IA- Analysis andpreparationo f $600,000 QCBS Prior Dec-06 QCBS proposals for normative legal acts related to granting legal status to electronic documents 5-RS-IIA- Analysis o f existing operational $1,000,000 QCBS Prior NOV-06 QCBS systems and development o f functional requirements for a standardized information system and quality control o f system development, including development and quality control o f requirements for conversion o f existing data. ~ 6-RS-IE-QCBS Designo funiform archive storage $1,000,000 QCBS centers 14-RS-IA- Development o f documents $600,000 QCBS QCBS regarding issues o f registration o f different types o freal estate , objects 16-RS-IIC- Analysis o frequirements, system $600,000 QCBS Prior IJan-07 QCBS design and development o f technical specifications for engineering support systems o f FRS offices 19-RS-IIIC- Development and conducting o f $489,450 QCBS Prior QCBS training on specialized coursesand themes 21-RS-IIIB- Development and implementation $446,000 QCBS QCBS o f distance learning courses 23-RS-IIA- Development, testing, $15,400,000 QCBS Prior I Sep07 QCBS implementation, training o f a standardized informationsystem and conversion o f data from existing systems into the standardized informationsystem 48-RS-1C- Institutional impact assessment2 $300,000 QCBS Prior Aug-08 QCBS 49-RS-ID- Institutionalimpact assessment3 $363,500 QCBS Prior Oct-10 QCBS (b) Consultancy services estimated to cost above US$250,000 equivalent per contract will be subject to priorreviewbythe IBRD. 47 Annex 9: EconomicandFinancialAnalysis THERUSSIANFEDERATION: REGISTRATION PROJECT The Government of the Russian Federation is in the process of developing a package of legal and regulatory documents, as well as amendments to existing documents, that will allow for expansion of markets in land and real estate and the more effective utilization of land and real estate assets. Major parts o f that program include: (i)unification of the previous land and buildings (gradostroitel'nyy) cadastres into a unified State Cadastre of Immovable Property; (ii)improved functioning o f the registration system through establishment of service standards and unification of procedures across the country; (iii)improved information flows from the registration system to other organizations, including the Cadastre and the tax authorities; (iv) simplification and rationalization o f steps associated with conducting transactions in immovable property; and (v) more effective developmental control policies and administrationof immovable property assets. The Project will cover an important part of this overall program, in conjunction with the Cadastre Development Project which will be implemented over the same time period, and will result in a diverse set of economic and financial benefits. The main benefits o f a well functioning system for verifying rightsinimmovable property include the following: 0 increased security o f tenure, which can increase incentives to invest inland andreal estate; 0 increased access to credit throughutilization of immovable property as collateral; 0 improved functioning o f sales and lease markets for land and real estate; and improvedinformation base for the fiscal cadastre While it is not possible to calculate a full economic rate o f return, it i s anticipatedthat boththe economic and financial benefits of the Project will significantly outweigh the costs as indicated below. I.Amongthedirectprojectresultswillbethefollowing: Improvedefficiency of the RegistrationSystem By introducing measuresto make registrationprocedures more efficient, providingan ICT system to link the offices of the RegistrationService more effectively with one another, andprovidingbetter information to the public about registration, the Project will result in direct improvements in how the registration system operates inRussia. A goal o f the Project is to reduce the time requiredfor registrationtransactions from 30 days to 15 days. The number of transactions has reached 15 million in2004. A time savings of 15 days per transaction results in a total time savings for the country o f almost 7.5 million months per year. With a modest assumption o f the value o f time for this operation at only $10 per day, the resulting economic benefit to the country is $75 million per year. Over time, the share o f secondary transactions will continue to grow as more and more properties are entered in the registry and immovable property markets continue to develop, thereby further increasing the economic benefits o fthe Project. Improved accessto information inthe registry The Project will allow for broader and timelier access to registration information for other organizations, and to customers of the system in general. The Project will establish more reliable information linkages with the cadastre offices, tax authorities, municipal government, and others involved in immovable property markets. The economic benefits of this are particularly diverse and difficult to measure, yet are likely to be substantial. One indication of the improved access to information is the reduced time required to respond to information requests. For clients of the registration system, requests for information are currently to be handled in 7 days. A goal o f the Project i s to reduce this to 1day. Given the current level of information requestsreceivedby the system annually o f 10million, andwith the same 48 value on time saved ofjust $10 per month and 35 percent coverage of the country by the Project results in an economic benefit from the Project of $5-6 million. 11. The broader economic outcomesoftheProject will include: Increase intransactions The Project will contribute to the broader Government goal o f stimulating the development of markets in immovable property. This will come through adoption of a broad set of legal and regulatory reform, of which this Project and the Cadastre Development Project represent an important part. The Registration Project will contribute to an increase in transactions by reducing the time and associated cost of registering rights, by improving the overall quality of services provided to clients (particularly in those regions where the quality of service hasbeen lagging), and by malungpossible the registration o frights in any property from any other location in the country. Furthermore, by improving the database for implementation o f an immovable property tax (see fiscal impacts below), the Project will provide for a viable alternative revenue stream for municipal government that will allow for opening up real estate markets in urban areas. Currently, municipal governments are reluctant to privatize land under commercial and industrial properties, because they are dependent on the rental payments received for leasing this municipally owned land out. The lack of clarity in ownership rights to the land, however, i s reducing incentives to invest inbusiness and is malung access to land for business development purposes unreasonably difficult. By assisting in providing an adequate information base for an immovable property tax, land can move out of municipal ownership and into private markets and the level and efficiency o f transactions increased. Reducing costs o f secondarvtransactions The legal andregulatory work under the Project will also allow for the elimination o f obligatory technical inventories (survey) of apartments and buildings for secondary transactions. Decisions concerning surveys for secondary transactions (where property surveys already exist) should be made by the parties to the transaction themselves. The requirement that citizens must pay for (duplicate) surveys for properties involved in secondary transactions, which can only be provided by a BTI, is outdated. With technical inventory costs in the range of US$20 to US$50 for each transaction and approximately 1.5 million secondary transactions per year, elimination o f this step alone could save more than U S $50 millionper year. 111. FiscalImpacts: The Project will have a positive fiscal impact, by improving the information base on rights holders in immovable property and making that information more readily available to the tax authorities. The improvement in information under this Project will combine with similar impacts under the Cadastre Project, where data identifying immovable property objects will be significantly improved, and will result in a substantially improved data base for implementation of an immovable property tax. While it is difficult to estimate the impact of the Project on future tax collections, even a modest impact will have substantial positive fiscal impacts. Currently, land tax payments amount to 45 billion rubles per year (approximately $1.5 billion). Taxes on other immovable property have amounted to 100 billion rubles ($3.4 billion). Assuming that through the improved availability o f information on rights holders that i s provided to the tax authorities, these tax collections increase by only 10 percent, then the Project will result inadditional tax payments o f approximately $170 million per year once the improved information system has been rolled out. This assumes 35 percent coverage o f all properties in the country by the Project andno changes incurrent tax rates and valuation methodologies. 49 Annex 10: SafeguardPolicyIssues THE RUSSIANFEDERATION: REGISTRATIONPROJECT A. Environmental Aspects The Registration Project i s designed to simplify and improve the registration o f rights to immovable property; improve the data flow from the register to users with a view to accelerate property market development, improve the quality o f services, and strengthen infonnatiodcommunication linkages with other agencies engaged inreal estate operations. A s indicated below, the project has been designed to promote sound environmental management and mitigate potentially negative effects arising from project activities. EnvironmentalAssessment (OP4.01) The Project is rated category "B". The project poses minimum environmental risks. It involves establishing new archive centers and remodeling o f the five buildings where the installation o f modern automated systems i s expected. There is a limited amount o f office refurbishment included for interior work, primarily adjusting office floor plans, construction o f counters, and similar work. The environmental aspect o f the proposed activities i s related to the projectedreconstructionand repair works, including alterations and repair o f facilities, re-equipment o f the existing archive centers, and installation o fnew equipment. The proposed reconstruction and other works related to the establishment and equipment o f archive centers do not refer to hazardous activities or the ones having negative environmental impact, and will be implemented in compliance with general requirements o f the RF legislation. According to the Urban Planning Code of the RussianFederation (Article 5l), sites require neither mandatory preparation o f such special documents to obtain construction permits, which would involve special dust, noise or waste control requirements, nor state expert review o f documentation (Article 49). The project will provide environmental benefitsby verifying and protecting rights inimmovable property, thereby enhancing incentives for the environmentally sustainable use o f these assets. 'II EnvironmentalmanagementPlan Environmental Management Plan (EMP) under the Project was developed disclosed in compliance with the requirements o fthe RF laws and Bank Directives on project environmental assessment. The EMP was discussed with the regional offices o f the FRS, the Federal Service for Environmental, Technological and Nuclear Control, the regonal and municipal administrations in 7 regions, local environmental experts andNGOs inthe above cities. EMP activities for the overall Project are designed to ensure implementation of all scheduled and, if appropriate, additional environmental activities for individual sites. Organizational activities shall include: strengthening the institutional environmental capacity of the FRS and its regional offices throughmeetingthe needs inthe staffwithrelevant expertise; agency-level control o f the development o f documents for reconstruction and rehabilitation works incompliance with the existing requirements; 50 . organizational and financial support; monitoring o f compliance with the regulatory and methodological document "Major Operating . Instructions for Archives o f Organizations" (approved by the Board o f the Federal Archive Service of the Russian Federation on February 6,2002); training o f construction workers and staff o f the Registration Service in environmental protection requirements. Regional offices of the Federal Registration Service will develop working documents containing EMP activities for each data storage center proposed for financing under the Project in accordance with the assigned Category (B). Relevant quality certificates should confirm compliance with sanitary and hygienic requirements to constructionitems and machinery. Estimated Cost of EMP Implementation. Implementation o f technical EMP measures i s related to rehabilitation works such as waste disposal, post-construction site cleanup and improvement, etc. The cost of these activities will be included inthe investments inestablishingregional data storage centers. Given the nature o f the proposed activities, the EMP basically includes organizational activities and measures to monitor compliance with the established environmental requirements. The cost of these activities i s included inlabor costs o fthe staff o f existing agencies. EMP implementation reporting will follow the Bank reporting procedures under the Project. EMP monitoring will be supplemented by the Bank control. The process will involve participation o f relevant Bank experts in the work o f regular Bank Project supervision missions to monitor EMP implementation progress as appropriate. The FRS performance in this part o f Project activities will be a regular element of Project supervision reports, as well as the Project Completion Report. NaturalHabitats(OP/BP 4.04): Not applicable PestManagement (OP4.09): Not applicable CulturalPropertv(OP 4.11) The project will not involve any physical activities at or near sites o f cultural/historical/religious etc. significance. Buildingsand land sites allocated for deployment o f data storage centers are the ones being under legal use. The sites intended for center location do not include or affect any protected objects of cultural heritage or specially protectednature objects. InvoluntaryResettlement(OP/BP 4.12) The project will not support land acquisition and associated involuntary resettlement. The project will also not change ownership or use rights inprotected areas. The project also does not support eviction or similar enforcement of laws addressing illegal occupation of state land. IndigenousPeople(OP4.10): Not applicable Forests(OP/BP 4.36): Not applicable Safe@ofDams(OP/BP 4.37): Not applicable ProjectsinDisuutedAreas (OP/BP/GP7.60): Not applicable ProjectsonInternationalWaterwavs (OP/BP/GP7.50): Not applicable 51 B. SocialAnalysis Duringproject preparationa social analysiswas carried out. The social analysis was based on qualitative and quantitative data collected in2003. Quantitative analysis was based on 2 surveys. The first survey included 3000 households and was carried out among households that went through the registration process. The survey covered 7 regions, one in each federal district (Jaroslavl, Novgorod, Omsk, Perm, and Rostov Oblasts, Khabarovsk krai, and Kabardino-Balkaria). Ineach region 430 households were interviewed, stratified by type o f the populated area - 150 households in big cities, 50 in small or medium size towns, 20 in villages. Households were stratified by type o f right they have registered: a residence (apartmenthouse), a land plot, non-residentialbuildings. The second survey was carried out in the same 7 regions. The sample was constructed from all households of the regionsboth those who went through the registration process and those who have not done so. The survey used the framework o f a regionally representative omnibus survey. The sample was based on electoral lists and consisted of 800 households per region, 5600 households in total. The questionnaire was designed so as to allow for comparison to the responses provided inthe first survey. The qualitative analysis included focus groups (10 per region) with various clients o f the registration system, both physical persons and representatives o f private business, specialists and employees o f various registration offices, as well as real estate and other agents providing registration services to their clients. Separate focus groups were carried out with socially disadvantaged participants o f the registration process, with the clients that have just completed registrations, and those that have been denied the right to register property (according to the Ministry o f Justice data, between 2002 and 2003 the number o f denials has increased 50 per cent and tripled as compared to 2000, which signaled the importance o fthe issue). Expert open-ended interviews were carried out with the employees o f registration agencies, notaries, other specialists working with private property, as well as with representatives o f legal entities that went through the registrationprocess - about 25 per region. Participatory observation and document analysis were also used(6-18 observation unitsper region selected among registration and cadastre offices). The MainFindings Overall Trends and Motivations for the Registrationof Immovable Property Registration o f property rights by Plans to register property Russian households has much advanced. About half o f surveyed households (47%) have registered at Uncertain least one property right and about one 14% 7 quarter o f the surveyed households plan to register property or are currently involved in the process o f n going registration. In the near future i r e g E a E at 16% the moment 2% 52 At the same time, much remains to be done to improve the image o f the registration service and make registration o fproperty, particularly secondary registration, a desired form o f securing property rights. At present, about one third o f the population i s not familiar with the concept o f registration and i s not aware of the benefits associated with registration as a means o f securing property rights. More than half o f the respondents (representative of the population o f the surveyed provinces) expect nothing but negative outcomes fi-om property registration - increasedbureaucratic hurdles and tax burden. I ~ W h y d i d y o u r e g i s t e r im m o v a b l e p r o p e r t y ? Those who went through with the property registration have a more positive forward looking agenda o f passing their property to their children, securing their financial position in the old age, or a desire to become a legitimate owner. r W h a t w i l l b e t h e i m p a c t o f t h e d e v e l o p m e n t o f s t a t e r e g i s t r a t i o n s y s t e m ? These constructive responses about registration correlate with respondent's positive assessment o f their level o f adaptation to the market economy, with a positive assessment o f the performance o f both the federal and local governments, and with a positive assessment o f change inthe financial position o f their households. Positive subjective and objective economic and political expectations drive registration of property. However, a highpercentage o f those having difficulty answering the question demonstrate that there is a big reserve among potential participants in the registrationprocess that could be tapped iftheir level o f informationabout registrationimproves. Information The study confirmed the connection between the level o f information about the registrationprocess and rights associated with formalized ownership on the one side and the readiness to go through with the registration on the other. Respondents with higher level of information are planning to go through with the registration process inthe future. 53 I P l a n s t o r e g i s t e r r e a l e s t a t e d e p e n d i n g o n l e v e l o f a w a r e n e s s o f r i g h t s 4 0 3 5 --+..--I a m r e g I St e r i n g 3 0 2 5 ----~-ln t h e n e a r e s t ae I 2 0 fu t u r e 1 5 S o m e d a y 1 0 i 5 0 - Y N e v e r Since one of the major sources of information about transactions in immovable property are people who went through the registration process, areas with high levels of registration find themselves in the virtuous circle of increased registrations. Respondents identified different sources of information about the registration process that were judged effective. However, qualitative focus group-based analysis confirmed the overall low level and quality o f information about the registration process. The majority o f participants of focus groups do not know the difference between ownership and user rights, do not realize that inheritance needs to be registered, become aware o f the registration process only when problems associated with the defacto completed but not formalized transactions start to mount. The rural population i s particularly poorly informed about property rights. The study points to the need to designtargeted informationstrategy for rural population and implementit in the project oblasts. Regionaland LocalityCharacteristics: The study captured vast regional differences both in the share of households that have registered their property and in their plans to do so in the future. The share o f households that have registered their property rights ranges from the maximum of 66.3 per cent inKabardino-Balkaria to the minimumo f 30.7 per cent inRostov Oblast. r D y n a m i c s !of i n v e n to r y - a n d - r e g istra tio n p r o c e s s 7 0 6 0 IWll h a v e r e g i s t e r e d 5 0 s 4 0 I a m r e g i s t e r i n g a t t h e 3 0 m o m e n t 2 0 / o l n t h e n e a r e s t f u t u r e 1 0 0 1 O S o m e d a y = N e v e r W U n c e r t a i n to a n s w e r Trends for future registrations differ significantly among regions as well. Perm oblast leads with every thirdhousehold expressinga desire to register property or beinginvolved inthe registration process. .The Rostov oblast has the smallest share of households interested inproperty registration inthe future. While in Kabardino-Balkaria and Novgorod oblast low share of the population planning to register may be related to high number of completed registrations, in the Rostov oblast we observe a continuation of the 54 trend for low levels of both completed andplanned registrations. The fact that more than one third o f the respondents in Rostov oblast lacked basic familiarity with the notion of registration and quarter of the population had negative association with the notion of registration (compared to 4 and 5 per cent respectively in Perm oblast) confirms the picture of the viscous and virtuous circles of registration existing at the regional level (the fact that Rostov oblast is a demographically younger and an economically growing region only confirms the importance of the quality of registration service in its ability to attract wider strata of the population to property registration and the importance of both good information systems and the quality of service to increase the reputation of the regional registration offices). Inter-regional differences in economic development, levels of income and in economic differentiation play an important role in the respondents' assessment o f the overall success of the economic reform, in their ability to adapt to marketrelations, andintheir willingness to register their propertyrights. Difference Among Agencies Involved inthe RegistrationProcess Perceived efficiency of registration services also play an important role in the decision to formalize property relations. It is important to note that of the three agencies a person came incontact with in the process o f property registration at the time of the survey - the Bureau of Technical Inventory (BTI), the Land Cadastre (LC), and the Agency for Property Registration (REG) - the Agency for Property Registration was judged to be the most efficient, user-fnendly, and overall better performing. However, for all the three services, including the registration, the assessment of the quality of the service is significantly lower after the registration than their assessment by potential users in anticipation o f property registration. Therefore, these are not just image issues, these are issues o f actual failure to provide services even at the anticipated level (fairly low to start with). Overall, BTIagencies are evaluated as the least competent, the worse equipped, the least friendly. At the same time, time spent inthe BTIoffices was assessedto be the longest, the offices the most bureaucratic. Elimination o f the requirement to get documentation from the BTI and elimination of obligatory inspections in cases where property was not altered will be met with much enthusiasm by the potential clients ofthe registration system. Integral indexes o f the three agencies vary substantially by region. Highintegral indexes of all the three institutions in Omskaya Oblast are accounted for by such features as staff qualification and fnendliness, convincing answers to all questions and high level o f fitting out with computers, that is, first o f all, by user oriented functioning o f all inventory and registration institutions. Even the negative assessment of complexity and long duration of the inventoryhegistration procedures does not annul the positive contributionof these characteristics to the integral index. It is important to note, that despite the relatively high cost of property registration and time spent for property registration in PermOblast, the approval of the service is fairly high, which may be associated with the perceived low level of corruption of the registration service inPerm compared to other regions. It is possible to conclude, therefore that for the average user of the service it is not the cost per se that is prohibitive, but the uncertainty of costs and time one needs to spend for property registration. Therefore, decrease ingraft and increase of predictability will increase boththe assessment o f the service by the user and the willingnessto go throughwith propertyregistration. 55 Those who can afford the cost hire agents to deal with the registration process. Quantitatively, one quarter o f the registered sample used complete or partial assistance with the registration o f property. The use o f agents for registration varies substantially by region. In the region where registration i s the least wide spread and the least popular among clients and population at large, the Rostov oblast, 51 % o f respondents used agents to register property. In the region with the cheapest registration, Omsk oblast, only 0.2 per cent o f those registered used services o f realtors. It is important to point that this is the region with the highest level of client satisfactionwith all the three registration agencies. Individual regional practices and readiness to respond to the clients' needs play a very important role in client satisfaction and the overall outcome o f the registrationprocess. Registration services are assessed differently in big cities and in smaller towns and villages. It is important to note that dwellers o f smaller towns are the least satisfied with the quality o f the registration service: City Small town Ruralsettlement Days Rubles Days Rubles Days Rubles BTI 25,4 1409,9 19,9 628,3 19,8 582 LC 32,3 830,3 35 1217,2 334 913,3 REG 38,3 769,6 37,6 759,7 36,l 773,9 Total 96 2009,8 92,5 2596,2 89,3 2269,2 A very important difference in the evaluation o f the three agencies is related to the income levels o f a household. Higher income groups are muchmore satisfied with the work o f the registration services than the poorer and the middle income groups. Dissatisfaction o f the middle income groups with the registration services i s particularly disturbing, as these groups contain the main untapped reserves of the service users. One can speculate that, while lower income groups have lower expectations about the quality o f services provided, middle income users o f the service are disappointed with the quality o f service, yet do not have sufficient resources to retain a realtor. I t is, therefore, particularly important to concentrateon providinguser friendly services to lower and middle incomegroups. Vulnerable Groups Finally,y7tomake property registrationmore accessible to all sections o f the population, it is important to note higher than average share o f those not willing to ever register property rights are among some vulnerable groups, particularly disabled single parents, the veterans. Qualitative focus group work pointed to the possible reasons for negative position towards property registration among these particular groups, namely high and unpredictable cost of registration and high and unpredictable amount o f time necessary to complete the registrationprocess, as well as, inthe case o f the disabled, poor accessibility o f the registration offices. 56 Annex 11:Project Preparation and Supervision THE RUSSIANFEDERATION: REGISTRATIONPROJECT Planned Actual PCNreview October 21,2002 October 21,2002* InitialPID to PIC October 24,2002 October 24,2002" Initial ISDS to PIC June 6,2003 June 6,2003* Appraisal April 24,2005 April 25,2005 Negotiations January 23,2006 March 15,2006 BoardfRVP approval June 12,2006 Planned date of effectiveness September 1,2006 Planned date ofmid-term review November 20,2009 Planned closing date November 30,2012 * These dates are of Russia Cadastre Project P078420, as the Registration and Cadastre Projects initially were being prepared as a single project, and were split before appraisalat the request of the Government. Key institutionsresponsible for preparation ofthe project: 0 MinistryofJustice 0 Federal RegistrationService Bank staff and consultants who worked on the project included: Name Title Unit Samir MSuleymanov Task team leader ECSSD EdwardCook Task team leader ECSSD Gavin Adlington Sr. LandAdministration Specialist ECSSD JuanNavas Sabater Sr. Telecom specialist CITPO Vera Matusevich Agriculture specialist ECSSD JonathanKrull Business systems analyst Consultant MikhailBunchuk InformationOfficer ISGEG Svetlana Leshcheva Operations Analyst ECSIE Nikolai Soubbotin Lawyer LEGEN Alexander Balakov Procurement specialist ECSPS Galina Kumetsova Sr. Financial management specialist ECSPS Anna-Maria Bogdanova Team assistant ECCUl Valencia Copeland ProgramAssistant ECSSD Sharifa Kalala ProgramAssistant ECSSD Kathy Sharrow ProgramAssistant ECSSD Daphne Sawyerr-Dunn ProgramAssistant ECSSD Bankfunds expendedto date onproject preparation: 1.Bankresources: US$170,000 2. Trust funds: --- 3. Total: us$190,000 EstimatedApproval and Supervision costs: 1.Remainingcosts to approval: US$25,000 2.Estimatedannualsupervision cost: us$loo,ooo 57 Annex 12: Documentsinthe ProjectFile THE RUSSIANFEDERATION: REGISTRATIONPROJECT "Review o f Existing Information Technology used by Offices, Suitability Analysis and Elaboration o f a Strategy andPlans for FutureICT Developments", Project preparation study No. 1. "Investigation o f Legal Framework and Existing Procedures o f Rights Registration and Real Property Recording", Project preparation study No. 2 "Project on Inventory and Registration of Rights to Real Estate: Social Assessment and Monitoring", Project preparation study No. 3. "A Study ofthe CurrentRegistrationSystem for RightsandRecordationof ImmovableProperty Objects", Projectpreparation study No. 4 FederalProgram "Phased Development o f the System of State Registration of Rights and Transactions in Immovable Property", approved by Government ResolutionNo. 273 of April 9,2001 (inRussian). Preparation mission Aide Memoires 58 w STATEMENTOF IFC's Held andDisbursed Portfolio As o f 12/31/2005 (InMillionsofUSDollars) Held Disbursed IFC IFC FY Approval Company Loan Equity Quasi Partic. Loan Equity Quasi Partic. 2005 ABOLmed 8 0 0 0 0 0 0 0 2006 Absolut Bank 15 10 0 0 3 8.76 0 0 2002 AgroLndFinC 5 0.3 0 10 3.83 0.3 0 7.67 2003 BCENEurobank 75 0 0 0 75 0 0 0 2004 BSGV 25 0 0 0 10 0 0 0 2004 BSGV Leasing 69.57 0 0 0 26.15 0 0 0 2001 BVE 0 3.31 0 0 0 0 0 0 2005 BVPEF 111 0 12.5 0 0 0 2.32 0 0 2004 Bauxite Timana 45 0 0 30 0 0 0 0 2006 BemaGold 14 0 25 0 0 0 0 0 2006 Brunswick Cptl 0 7.5 0 0 0 0 0 0 2005 Center-Invest 4.86 0 5 0 4.86 0 5 0 2006 Cinema Park 20 0 0 0 0 0 0 0 2002 Delta Credit 15.29 0 0 0 15.29 0 0 0 2003 Delta Credit 30 0 0 0 6 0 0 0 2004 Delta Leasing 3 0 0 0 3 0 0 0 2002 Egar Technology 0 0.78 0 0 0 0.28 0 0 2005 Esanna 15 0 0 50 13.28 0 0 44.23 2005 Eurosibtrans 30 0 0 0 30 0 0 0 2006 ForaBank 6.26 0 0 0 0 0 0 0 2002 LBS 0 0 8 0 0 0 8 0 2002 ICB 5.71 0 0 0 5.71 0 0 0 2004 JNTH 0 3.5 7 0 0 0 7 0 2006 INTH I O 0 0 0 0 0 0 0 2002 KMBBank 4.86 0 0 0 4.86 0 0 0 2004 bono Swiss 50 0 0 41 50 0 0 41 2005 Krono Swiss 45 0 0 0 45 0 0 0 2005 KronospanRussia 83.42 0 0 0 52.44 0 0 0 2005 KUAZ 15 0 0 0 0 0 0 0 2004 Lebedyansky 35 0 0 0 0 0 0 0 2005 Moscow Credit Bk 15 0 0 0 8 0 0 0 1998 Mosenergo 8.99 0 0 0 8.99 0 0 0 2002 NBD 0.83 0 0 0 0.83 0 0 0 2003 NBD 4.17 0 2 0 4.17 0 2 0 2006 NBD 5 0 0 0 0 0 0 0 2001 NMC 1.78 0 0 0 1.78 0 0 0 2004 NWSC 23 0 0 23.48 0 0 0 0 2004 Novatek 0 21.75 0 0 0 21.75 0 0 2005 PeterHambro 0 15 0 0 0 14.99 0 0 2004 Pilkington Rus 50.65 0 0 0 50.65 0 0 0 2001 ProbusinessBank 0 0 5 0 0 0 5 0 Promek 83.91 0 0 0 39.91 0 0 0 2003 QuadrigaCapital 0 17.7 0 0 0 6.86 0 0 2005 RWMN 1 0 0 0 1 0 0 0 2004 RZB LeasingRuss 20 0 0 0 9.5 0 0 0 RZB Russia 130 0 0 0 70 0 0 0 2003 FZBRussia 24.44 0 0 40 24.44 0 0 40 2004 RZBRussia 10 0 0 0 I O 0 0 0 60 1998 Ramstore 8.5 0 0 0 8.5 0 0 0 2001 Ramstore 14.99 0 0 0 14.99 0 0 0 2002 Ramstore 23.57 0 I O 18.75 23.57 0 10 18.75 2003 Ru-Net 0 5 1 0 0 5 0 0 2001 Ruscam 4.5 0 4.5 0 4.5 0 4.5 0 2003 Ruscam 9 0 0 0 9 0 0 0 2004 Ruscam 17.5 0 0 0 17.5 0 0 0 2002 Russ StndardBnk 0 I O 0 0 0 10 0 0 2004 Russ StndardBnk 58.71 0 0 0 58.71 ' 0 0 0 2006 Russ StndardBnk 39.95 0 0 60 39.95 0 0 0 1995 Russ Tech Fnd 0 0.23 0 0 0 0.23 0 0 2005 RussiaPartnersII 0 I O 0 0 0 0.8 0 0 RusskiyMir 24.34 0 0 29.71 2.29 0 0 2.76 2004 RusskiyMir 11.79 0 0 0 11.79 0 0 0 2005 RusskiyMir 20.34 0 0 24.83 1.89 0 0 2.28 SCF Restmctured 0 0.6 0 0 0 0.6 0 0 2004 Severstaltrans 23.21 0 13.93 0 23.21 0 13.93 0 2004 Sibakadembank 3 0 6 0 3 0 6 0 2002 Sonic Duo 0 0 6 0 0 0 6 0 2003 Stav. Broiler 14.25 0 0 0 11.75 0 0 0 2004 Sveza 40.5 0 0 0 28.1 0 0 0 2002 SwedwoodTichvin 5.16 0 0 0 5.16 0 0 0 2005 ToAz 30 0 0 45 0 0 0 0 2006 UralSibBank 30 0 0 0 30 0 0 0 2003 UralTransBank 9.17 0 0 0 6.67 0 0 0 2006 Vladpivo 8.94 5.3 1 0 0 0 0 0 0 2004 Volga Shipping 25.18 0 0 17.25 15.05 0 0 10.31 2001 Volga-Dnepr 10.6 0 6.09 12.84 10.6 0 6.09 12.84 2002 ZAO Europlan 4.29 0 0 0 4.29 0 0 0 1998 ZAO Storaenso 0.6 0 0 0 0.6 0 0 0 2002 ZAO Storaenso 4.2 n n 0 4.2 0 0 0 Totalportfolio: 1,451.03 123.48 99.52 402.86 913.01 71.89 73.52 179.84 Approvals PendingCommitment FY Approval Company Loan Equity Quasi Partic. 2006 BRL 37.5 0 0 0 1999 DLV 3 0 0 0 2002 RSBI1 0 0 0 0 2006 RSBIV 0 0 25 0 2006 SAB I1 I O 0 0 0 2005 KMBBankll 32 0 6 0 2005 NovatekGas 50 0 0 70 2005 RamstoreIV 40 0 0 0 2006 CityMortgage 25 0 0 0 2006 PIP-Vladpivo 5.58 0 0 0 2003 Deltacredit Bank 30 0 0 0 Totalpendingcommitment: 233.08 0.00 31.OO 70.00 61 Annex 14: Countryat a Glance THERUSSIANFEDERATION: REGISTRATIONPROJECT Europe & Upper- POVERTY and SOCIAL Russian Central middle- Federation Asia income 2004 Population, mid-year (millions) 142.8 412 576 GNI per capita(Atlus method, US%) 3,420 3,290 4,770 GNI (Atlas method, US$billions) 488.5 1,553 2,748 1 Average annual growth, 1998-04 Owelopmant dE& Population (5%) -0.5 -0.1 0.8 Labor force (%) 0.2 -0.5 -0.9 lifd Most recent estimate (latest year available, 1998-04) T Poverty (% ofpopulution below notionalpoverty line) /a 21 . O M Omsr Urban population (% of rotulpopuhtion) 73 64 72 par Life expectancy at birth (years) 66 68 WKY 69 cap-aa Nolimcru Infant mortality (per 1,000 live births) 16 29 24 Child malnutrition (%of children under 5) 6 Access to an improved water source(% ofpopulation) 96 91 93 Literacy (% ofpopulation age IS+) 99 97 Grossprimary enrollment (% ofschool-agepopulation) 118 101 Male 118 103 Female 118 101 KEY ECONOMIC RATIOS and LONGTERPl TRENDS 1984 1994 2003 GDP (US%billions) 395.1 431.5 Gross capital formatiodGDP 25.5 20.4 Exports of goods and servicesfGDP 27.8 35.2 Tnda Gross domesticsavingsiGDP 30.1 31.8 Grossnational savingsfGDP 29.6 28.6 T Current accountbalanceiGDP 2.0 8.3 1 InterestpaymentdGDP 0.4 2.4 Total debtiGDP 30.9 38.9 26.3 Total debt serviceiexports 6.1 18.2 22.2 Presentvalue o f debtiGDP 22.0 41.8 Presentvalue of debtiexports 109.5 110.5 1984-94 1994-04 2003 2004 (average annual growth) GDP -9.2 3.2 7.3 7.1 GDP per capita -9.3 3.6 7.8 7.6 Exports of goods and services .. 7.0 12.5 12.3 STRUCTURE of the ECONOMY 1984 1994 2003 2o04 Grovdh of capital and GDP (Oh) (%of GDP) 100 j Agriculture 6.6 5.4 Industry 44.7 34.0 35.2 o ;Manufacturing - Services 48.6 60.7 Householdfmal consumptionexpenditure 50.8 50.6 49.8 -GCF &GDP Generalgov't fmal consumptionexpenditure 19.1 17.6 16.5 Imports of goods andservices 23.2 23.8 22.3IGrowth of exports and imports ("h) I 1984-94 1994-04 2003 (uverugeannual growth) Agriculture 2.9 5.1 - Industry 3.7 8.7 Manufacturing Services 3.0 6.9 Householdfmal consumptionexpenditure 3.5 7.4 10.5 General gov't fmal consumptionexpenditure 1.2 2.2 2.3 Gross capital formation 0.1 13.2 13.6 Imports of goods andsemices 6.0 17.7 23.5 * 'Note: 2004 data are preliminary estimates. a. Rosstat. The diamondsshow four key indicators in the country (inbold) compared with its income-group average 62 Russian Federation PRICESand GOVERNMENTFINANCE 1984 1994 2003 2004 Domesticprices Inflation [Sa] PA change) Consumerprices 307.6 13.7 10.9 ImT lmplicit GDP deflator 307.3 14.0 18.1 Governmentfinance PA ofGDP, includes current grunls) Currentrevenue 36.7 37.4 32.5 Current budget balance -1.9 4.6 7.0 Overallsurplusideficit -9.2 2.1 4.7 TRADE 1984 1994 2003 2004 (US$ millions) Export and Immrt Iweis (us$miii.] -3 Totalexports(fob) 67,379 135,929 183,452 Crude oil 11,355 38,843 58,256 Natural gas 10,355 19,981 21,853 Manufactures 6,900 12,800 15,100 Total imports(cif) 53,480 78,539 100,193 Food 10,700 12,100 13,800 Fueland energy 1,300 1,700 Capitalgoods 13,600 21,400 31,100 Exportpriceindex (ZOOO=lOO) 70 113 140 Importpriceindex (2000=100) 94 103 97 Termsoftrade (2000=100/ 75 110 145 BALANCEofPAYMENTS 1984 1994 2003 2004 (US$ millions) Exportsof goods and services 75,803 151,959 203,742 Importsof goods and services 65,887 102,558 130,007 Current ;recount brlrncsto GDP [W) Resourcebalance 9,916 49,401 73,735 = T Netincome -1,840 -13,171 -12,827 Netcurrent transfers -233 -364 -799 Current account balance 7,843 35,866 60,109 Financingitems(net) -11,788 -4,823 -10,850 Changesinnet reserves 3,945 -3 1,043 -49,259 Memo: Reservesincludinggold (USS millions) 6,501 76,936 124,540 Conversionrate (DEC,locul/USS) 1.5 30.7 28.8 EXTERNALDEBTand RESOURCEFLOWS 1984 1994 2003 2004 (US millions) Total debt outstandingand disbursed 121,9?2 167,746 152,710 lBRD 684 6,289 5,743 IDA 0 0 0 compositionof 2004deM [ U S rnill.1 Total debt service 4,802 29,791 47,530 IBRD 23 894 917 5743 ~5 IDA 0 0 0 Compositionofnet resourceflows Oficial grants 1,306 Official creditors -1,297 -3,807 -3,539 Privatecreditors 1,218 20,500 5,224 Foreigndirectinvestment(netinflows) 408 -2,408 -910 Portfolioequity (net inflows) 21 -5,045 -26 WorldBank program Commitments 1,590 320 320 Disbursements 283 233 170 Principalrepayments 0 719 780 Net flows 283 -486 -611 Interestpayments 24 175 137 Nettransfers 259 -661 -748 63 MAPSECTION This map was produced by the Map Design Unit of The World Bank. 70°N 80°N 80°N UNITED STATES OF AMERICA The boundaries, colors, denominations and any other information shown on this map do not imply, on the part of The World Bank ARCTIC OCEAN Group, any judgment on the legal status of any territory, or any Bering endorsement or acceptance of such boundaries. Nor wegian Sea Strait NETH. NETH. NORWANORW Y 60°N DENMARK Range SWEDEN SWEDEN B a r e n t s Franz Josef Andayr GERMANY GERMANY East Siberian S e a Land Sea AnadyrAnadyr Severnaya New Siberia Zemlya Islands RUSSIAN FINLAND FINLAND MurmanskMurmansk Novaya FED. Zemlya KaliningradKaliningrad KolaKola Laptev POLAND POLAND LITH.LITH. LALATTVIAVIA ESTO ESTO ESTONIA Pen.Pen. Kara Sea Karelia Karelia Sea Saint Petersburg Saint Petersburg Peninsula PskovPskov Petrozavodsk Petrozavodsk Indigir myloK Novgorod Novgorod Taymyr Arkhangel'sk Arkhangel'sk a BELARUS BELARUS Nar'yan Mar Nar'yan Mar Cherskiy ak Range Yamal amal Range Smolensk Smolensk Pen. Pen. TverTver Vologda Vo ogda Gyda Gyda Khatanga ibe Lowland S rian PalanaPalana Vorkuta rkuta Pen. Pen. UKRAINEBryanskOrelOrel UKRAINEBryansk KalugaKaluga MOSCOWMOSCOWYa Yaroslavl oslavl KotlasKotlas Kolmya Kostroma Kostroma Dudinka Dudinka Ivanovo Ivanovo Syktyvkar Syktyvkar Salekhard Salekhard KurskKursk Tula ula Vladimir Vladimir Mts. Obb O Lena Ryazan Ryazan Magadan Magadan Nizhny Nizhny Belgorod Belgorod Lipetsk Lipetsk Novgorod Novgorod Kirov Kirov Petropavlov sk- Petropavlov sk- C e n t r a l KamchatskiyKamchatskiy Voronezh ronezh Cheboksary Cheboksar Yoshkar-Ola shkar-Ola Ural Tambov mbov Saransk Saransk Kudymkar Kudymkar Okhotsk Okhotsk PenzaPenza Kazan' Kazan' Sea of Izhevsk Izhevsk S i b e r i a n Yakutsk kutsk Black Ul'yanovsk Ul'yanovsk Perm'Perm' Khanty- Khanty- Tura Tu 50°N Saratov Saratov Mansiysk Mansiysk Okhotsk Sea Rostov- Rostov- Krasnodar Krasnodar on-Don on-Don West est P l a t e a u Volgograd olgograd R.. R Samara Samara UfaUfa Yekaterinburg katerinburg Lena Maykop Maykop Alden Stavropol Stavropol Tyumen Ty men SiberianSiberian Cherkessk Cherkessk Chelyabinsk Chelyabinsk Obb O Yenisey Gora El'brus Gora El'brus Elista Elista Orenburg Orenburg l (5,633 m) (5,633 m) oKurgan PlainPlain enisey DzhugdzhurRange Nal'chik Nal'chik Astrakhan Astrakhan Ural ToobolKurgan T Vladikavkaz Vladikavkaz Nazran Nazran Angara GEORGIA GEORGIA Groznyy Groznyy Omsk Omsk Tomsk To sk Makhachkala Makhachkala Amur Amur Kemerovo Kemerovo Krasnoyarsk Krasnoyarsk Yuzhno- uzhno- Sakhalinsk Sakhalinsk AZERBAIJAN AZERBAIJAN Caspian Sea Novosibirsk Novosibirsk Novokuznetsk Novokuznetsk Lake Barnaul Barnaul Blagoveshchensk Blagoveshchensk Khabarovsk Khabarovsk Abakan Abakan Baikal Birobidzhan Birobidzhan Ust' Ordynskiy Ust' Ordynskiy Chita Chita UZBEKISTAN Gorno- Gorno- Irkutsk Irkutsk Ulan Ude Ulan Ude Aginskoye Aginskoye K A Z A K H S TA N Altaysk Altaysk Kyzyl Kyzyl RUSSIAN FEDERATION Sikhote-Alin 40°N RUSSIA REGISTRATION Vladivostok Vladivostok C H I N A PROJECT Sea of OBLAST CENTERS M O N G O L I A Japan D.P.R. J A PA N NATIONAL CAPITAL OF RIVERS KOREA REP. MAIN ROADS 0 200 400 600 Kilometers OF RAILROADS KOREA RUSSIAN FEDERATION OBLAST, KRAI OR REPUBLIC BOUNDARIES 0 200 400 600 Miles IBRD 30°N MA AUTONOMOUS OBLAST, OKRUG OR Y REPUBLIC BOUNDARIES 34740 2006 INTERNATIONAL BOUNDARIES 90°E 100°E 110°E 120°E 130°E