Document of The World Bank FOR OFFICIAL USE ONLY Report No: PAD3091 PROJECT PAPER ON A PROPOSED ADDITIONAL GRANT IN THE AMOUNT OF US$10.0 MILLION FROM THE TRUST FUND FOR GAZA AND WEST BANK WITH CO-FINANCING FROM THE PARTNERSHIP FOR INFRASTRUCTURE DEVELOPMENT MULTI DONOR TRUST FUND IN THE AMOUNT OF US$5.0 MILLION TO THE PALESTINE LIBERATION ORGANIZATION (FOR THE BENEFIT OF THE PALESTINIAN AUTHORITY) FOR THE THIRD MUNICIPAL DEVELOPMENT PROJECT (MDP-3) May 10, 2019 Social, Urban, Rural And Resilience Global Practice Middle East And North Africa Region This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. CURRENCY EQUIVALENTS (Exchange Rate Effective April 1, 2019) New Israeli Shekel Currency Unit = (NIS) US$ 1 = NIS 3.63 NIS 1 = US$ 0.28 FISCAL YEAR January 1 - December 31 ABBREVIATIONS AND ACRONYMS AF Additional Financing AFD Agence Française de Développement (French Development Agency) AML/CFT Anti-money Laundering/Combating the Financing of Terrorists DP Development Partner ESMP Environmental and Social Management Plan EU European Union FATF Financial Action Task Force FM Financial Management GDP Gross Domestic Product GoI Government of Israel GIZ Gesellschaft für Internationale Zusammenarbeit GRM Grievance Redress Mechanism IBRD International Bank for Reconstruction and Development IDA International Development Association IPF Investment Project Financing KfW German Development Bank LALAP Land Acquisition and Livelihood Action Plan LALPF Land Acquisition and Livelihood Policy Framework MDLF Municipal Development and Lending Fund MDP Municipal Development Project MDP-1 First Municipal Development Project MDP-2 Second Municipal Development Project MDP-3 Third Municipal Development Project MNA Middle East and North Africa Region MOLG Ministry of Local Government O&M Operations and Maintenance OP Operational Policy PA Palestinian Authority PDO Project Development Objective PID-MDTF Partnership for Infrastructure Development – Multi-Donor Trust Fund PLO Palestinian Liberation Organization PMA Palestinian Monetary Authority POM Project Operations Manual RAP Resettlement Action Plan SDC Swiss Agency for Development and Cooperation SDIP Strategic Development and Investment Plan TFGWB Trust Fund for Gaza and West Bank UNRWA United Nations Refugee and Works Agency US$ United States Dollar VNG International Cooperation Agency of the Association of Netherlands Municipalities Regional Vice President: Ferid Belhaj Country Director: Kanthan Shankar Senior Global Practice Director: Ede Jorge Ijjasz-Vasquez Practice Manager: Jaafar Sadok Friaa Task Team Leader: Christopher T. Pablo WEST BANK AND GAZA ADDITIONAL FINANCING FOR THE THIRD MUNICIPAL DEVELOPMENT PROJECT TABLE OF CONTENTS I. BACKGROUND AND RATIONALE FOR ADDITIONAL FINANCING ........................................ 6 II. DESCRIPTION OF ADDITIONAL FINANCING .................................................................... 11 III. KEY RISKS ..................................................................................................................... 17 IV. APPRAISAL SUMMARY .................................................................................................. 18 V. WORLD BANK GRIEVANCE REDRESS .............................................................................. 22 VI. SUMMARY TABLE OF CHANGES .................................................................................... 24 VII. DETAILED CHANGE(S) ................................................................................................... 24 VIII. RESULTS FRAMEWORK AND MONITORING ................................................................... 30 The World Bank Additional Financing for the Third Municipal Development Project (P168544) BASIC INFORMATION – PARENT (GZ-Third Municipal Development Project - P159258) Country Product Line Team Leader(s) West Bank and Gaza Special Financing Christopher T. Pablo Project ID Financing Instrument Resp CC Req CC Practice Area (Lead) P159258 Investment Project GSU11 (9352) MNC04 (5562) Social, Urban, Rural and Financing Resilience Global Practice Implementing Agency: Municipal Development Lending Fund (MDLF) ADD_FIN_TBL1 Is this a regionally tagged project? Bank/IFC Collaboration No Original Environmental Approval Date Closing Date Current EA Category Assessment Category 21-Jul-2017 28-Feb-2022 Partial Assessment (B) Partial Assessment (B) Financing & Implementation Modalities Parent [ ] Multiphase Programmatic Approach [MPA] [ ] Contingent Emergency Response Component (CERC) [ ] Series of Projects (SOP) [ ] Fragile State(s) [ ] Disbursement-Linked Indicators (DLIs) [ ] Small State(s) [ ] Financial Intermediaries (FI) [ ] Fragile within a Non-fragile Country [ ] Project-Based Guarantee [ ] Conflict [ ] Deferred Drawdown [ ] Responding to Natural or Man-made disaster [ ] Alternate Procurement Arrangements (APA) Development Objective(s) May 10, 2019 Page 1 of 40 The World Bank Additional Financing for the Third Municipal Development Project (P168544) The project development objective (PDO) is to enhance the institutional capacity of municipalities in the West Bank and Gaza for more accountable and sustainable service delivery. Ratings (from Parent ISR) RATING_DRAFT_NO Implementation Latest ISR 31-Jan-2018 27-Jul-2018 25-Jan-2019 Progress towards achievement of PDO S S S Overall Implementation Progress (IP) S S S Overall Safeguards Rating MS MS MS Overall Risk S S S BASIC INFORMATION – ADDITIONAL FINANCING (Additional Financing for the Third Municipal Development Project - P168544) ADDFIN_TABLE Urgent Need or Capacity Project ID Project Name Additional Financing Type Constraints P168544 Additional Financing for Cost Overrun, Restructuring, Yes the Third Municipal Scale Up Development Project Financing instrument Product line Approval Date Investment Project Special Financing 23-May-2019 Financing Projected Date of Full Bank/IFC Collaboration Disbursement 31-Aug-2022 No Is this a regionally tagged project? No Financing & Implementation Modalities Child May 10, 2019 Page 2 of 40 The World Bank Additional Financing for the Third Municipal Development Project (P168544) [ ] Series of Projects (SOP) [✓] Fragile State(s) [ ] Disbursement-Linked Indicators (DLIs) [ ] Small State(s) [ ] Financial Intermediaries (FI) [ ] Fragile within a Non-fragile Country [ ] Project-Based Guarantee [✓] Conflict [ ] Deferred Drawdown [ ] Responding to Natural or Man-made disaster [ ] Alternate Procurement Arrangements (APA) [ ] Contingent Emergency Response Component (CERC) Disbursement Summary (from Parent ISR) Net Source of Funds Total Disbursed Remaining Balance Disbursed Commitments Grants 36.00 14.15 21.85 39 % PROJECT FINANCING DATA – ADDITIONAL FINANCING (Additional Financing for the Third Municipal Development Project - P168544) PROJECT FINANCING DATA (US$, Millions) SUMMARY -NewFi n1 SUMMARY (Total Financing) Proposed Additional Total Proposed Current Financing Financing Financing Total Project Cost 95.63 15.00 110.63 Total Financing 95.63 15.00 110.63 Financing Gap 0.00 0.00 0.00 DETAILS - Additional Financing NewFinEnh1 Non-World Bank Group Financing Trust Funds 15.00 Partnership for Intrastructure Development MDTF 5.00 Special Financing 10.00 May 10, 2019 Page 3 of 40 The World Bank Additional Financing for the Third Municipal Development Project (P168544) COMPLIANCE Policy Does the project depart from the CPF in content or in other significant respects? [ ] Yes [ ✔ ] No Does the project require any other Policy waiver(s)? [ ] Yes [ ✔ ] No INSTITUTIONAL DATA Practice Area (Lead) Social, Urban, Rural and Resilience Global Practice Contributing Practice Areas Governance Climate Change and Disaster Screening This operation has been screened for short and long-term climate change and disaster risks Gender Tag Does the project plan to undertake any of the following? a. Analysis to identify Project-relevant gaps between males and females, especially in light of country gaps identified through SCD and CPF Yes b. Specific action(s) to address the gender gaps identified in (a) and/or to improve women or men's empowerment Yes c. Include Indicators in results framework to monitor outcomes from actions identified in (b) Yes May 10, 2019 Page 4 of 40 The World Bank Additional Financing for the Third Municipal Development Project (P168544) PROJECT TEAM Bank Staff Name Role Specialization Unit Team Leader (ADM Christopher T. Pablo Senior Urban Specialist GSU11 Responsible) Lina Fateh Allah Procurement Specialist (ADM Senior Procurement Specialist GGOPM Abdelmauty Rjoub Responsible) Financial Management Senior Financial Management Riham Hussein GGOMN Specialist (ADM Responsible) Specialist Social Specialist (ADM Helen Z. Shahriari Senior Social Scientist GSU05 Responsible) Environmental Specialist (ADM Senior Environmental Zeyad Abu-Hassanein GENME Responsible) Specialist Andrianirina Michel Eric Team Member Finance Officer WFACS Ranjeva Areej Mamon Faidi Madi Team Member Team Assistant MNC04 Dana Mohammad Luai M. Team Member Program Analyst GSU11 Almubaied Dario Zanardi Team Member Social Development Specialist GSU05 Edith Ruguru Mwenda Team Member Senior Counsel (alternate) LEGAM Ellen Hamilton Team Member Lead Urban Specialist GSU11 Emilie Suarez Santos Team Member Legal Analyst LEGAM Mariana Margarita Montiel Counsel Senior Counsel (primary) LEGAM Natalia Robalino Team Member Senior Counsel (alternate) LEGAM Rafeef Abdelrazek Team Member Urban Development Specialist GSU11 Sr Social Development Sarah Keener Team Member GSU05 Specialist Victoria Ahlonkoba Bruce- Team Member Program Assistant GSU05 Goga Extended Team Name Title Organization Location Marilyn Tolosa Martinez Economist/Consultant World Bank Manila Municipal Finance Rhoel Bernardo World Bank Specialist/Consultant May 10, 2019 Page 5 of 40 The World Bank Additional Financing for the Third Municipal Development Project (P168544) I. BACKGROUND AND RATIONALE FOR ADDITIONAL FINANCING Introduction 1. This Project Paper seeks the approval of the Executive Directors to authorize an additional grant in an amount of US$10.0 million to the Palestinian Liberation Organization (PLO) for the benefit of the Palestinian Authority (PA), West Bank and Gaza, for the Third Municipal Development Project (MDP-3, the Project). In addition, the proposed Additional Financing (AF) will be co-financed by a grant in the amount of US$5.0 million from the World Bank administered Partnership for Infrastructure Development Multi- Donor Trust Fund. The AF has been requested by the PA through the Ministry of Finance and Planning. The proposed AF has been prepared under condensed procedures in accordance with the Bank Policy for Investment Project Financing (IPF) paragraph 12 “Projects in Situations of Urgent Need of Assistance or Capacity Constraints”. The AF will fund a new component to support scale up activities in Gaza and reflect application of simplified procurement procedures. The parent project will be restructured to (i) remove a withdrawal condition which has been met, and (ii) revise the Results Framework to capture the benefits that will result from the activities to be implemented in Gaza through the AF. Original Grant 2. The original grant in the amount of US$16.0 million in Special Financing from the Trust Fund for Gaza and West Bank (TFGWB) was approved by the World Bank Board of Executive Directors on July 21, 2017 and became effective on December 14, 2017 with an original closing date of February 28, 2022. Co- financing in the amount of US$20.0 million equivalent was provided through the World Bank administered PID-MDTF1. Additional Development Partners (DPs)2 are providing parallel financing in the total amount of US$48 million equivalent. The PA contributes counterpart funding of no less than 10 percent of the total amount committed by the DPs. The PDO is “to enhance the institutional capacity of municipalities in the West Bank and Gaza for more accountable and sustainable service delivery”. Currently, the project finances the following components: a. Component 1: Municipal performance and service delivery allocates performance-based grants for capital investments and operating expenditures through a transfer formula based on population, needs and municipal performance. (Total US$79.43 million3, of which US$13.31 million from TFGWB and US$16.64 million from PID-MDTF.) 1 Donors for PID-MDTF include: Denmark (through Danish International Development Agency, DANIDA), Norway, Finland, Sweden (through Swedish International Development Cooperation Agency, SIDA), France (through Agence Française de Développement, AFD), Croatia, Portugal, Netherlands and the United Kingdom (through Department for International Development, DFID). 2 Development Partners include: Germany (through German Development Bank, KfW and Gesellschaft für Internationale Zusammenarbeit, GIZ), the Netherlands (through the International Cooperation Agency of the Association of Netherland Municipalities, VNG International), France (through AFD), and Switzerland (through the Swiss Agency for Development and Cooperation, SDC). 3 Total project financing includes parallel financing from DPs and counterpart funding from the PA of no less than 10 percent of the total amount committed by DPs. May 10, 2019 Page 6 of 40 The World Bank Additional Financing for the Third Municipal Development Project (P168544) b. Component 2: Capacity development to municipalities and Palestinian institutions supports municipalities to graduate to a higher performance category and supports building the capacity of national level institutions namely, the Municipal Development and Lending Fund (MDLF) and the Ministry of Local Government (MOLG). (Total US$5.14 million, of which US$0.53 from TFGWB and US$0.53 from PID-MDTF.) c. Component 3: Municipal partnership projects provides technical assistance to municipalities to engage more effectively with the private sector and develop joint and innovative investments for municipal service delivery and local economic development. (Total US$2.54 million, of which US$0.93 from TFGWB.) d. Component 4: Project implementation support and management costs provides monitoring and evaluation, outreach and communication, mobilization of local technical consultants for the engineering supervision of Component 1, and MDLF management cost. (Total US$8.51 million, of which US$1.23 million from TFGWB and US$2.83 million from PID-MDTF.) Project Beneficiaries 3. The participants of the project are all 144 municipalities in the West Bank and Gaza. The beneficiaries are the population in all the municipalities estimated at 3,611,6494 representing 75 percent of the total population of the West Bank and Gaza. Status of implementation of the original grant 4. The project’s implementation progress and progress towards achieving the PDO have both been consistently rated as ‘Satisfactory’. Procurement and Financial Management (FM) ratings are Satisfactory while ratings for Environmental and Social Safeguards are Moderately Satisfactory. OP 4.01 (Environmental Assessment), OP 4.09 (Pest Management) and OP 4.12 (Involuntary Resettlement) were triggered. 5. All subprojects currently under implementation have complied with Category B requirements. The implementation of World Bank safeguards requirements is progressing well. The subproject level screening mechanism, Environmental and Social Management Plan (ESMP) formulation, implementation, supervision, and reporting procedures are satisfactory, with quarterly progress reports being submitted in a timely manner. The legal covenants, most of which are recurrent, are continuously being monitored and complied with. Rationale for requesting Additional Financing 6. The West Bank and Gaza (the Palestinian territories) have faced long lasting political instability and periodic episodes of violence over the last two decades, exacerbating macroeconomic volatility. The Palestinian territories are a small open economy with lower-middle income status with a population of 4.8 million in 2016. The Palestinian territories have experienced political instability (both regional and domestic) and a series of violent conflicts over the years. After the 2007-08 conflict, the territories were under control of two different political parties: Fatah held control of the West Bank while de facto 4 Based on Palestinian Central Bureau of Statistics predicted populations for 2016. May 10, 2019 Page 7 of 40 The World Bank Additional Financing for the Third Municipal Development Project (P168544) authority in Gaza was taken by Hamas. Following internal divisions, regular legislative process is suspended as neither side can establish a necessary quorum. Instead, the Cabinet conducts necessary consultations and readings of proposed acts and the President signs them into law. Gaza represents one third of total Gross Domestic Product (GDP), and its borders are subject to highly restrictive controls. 7. The economic conditions in the Palestinian territories have significantly weakened in 2018 due to a sharp decline in activity in Gaza. According to preliminary data by the Palestinian Central Bureau of Statistics, real GDP growth contracted by 1.3 percent in the second quarter of 2018 —first negative rate of growth since the first quarter of 2015. For the first half of 2018, the economy grew just by 0.3 percent compared to the same period in the previous year. The economy has been hamstrung for more than two decades by restrictions on movement, access and trade that have kept investment levels extremely low and resulted in deindustrialization. Substantial transfers, mostly in the form of aid from the international community, have helped mitigate the impact of the restrictions by fueling consumption driven growth. Nevertheless, transfers have been on a declining trend and have witnessed a very large drop in 2017-18, particularly in Gaza, resulting in a lower growth trajectory for the overall economy and revealing the fragility of the aid-driven growth model. 8. Gaza’s economy has seen a severe squeeze on movement of goods, people, and income support, pushing it towards a possible collapse. Gaza’s economy has been kept afloat only by large transfers including donor aid and spending through the budget of the PA, both of which amounted to 70-80 percent of Gaza’s GDP. However, these two sources have significantly declined recently, negatively impacting growth. In fact, in 2017, the Gaza economy did not witness any real growth due to severe cuts in aid for reconstruction and transfers from the PA’s budget in addition to its continued economic isolation. The situation has become more difficult in 2018 as transfers from the PA have continued to drop, further worsening the liquidity squeeze and placing severe pressure on the depleting buffers of the economy. As a result, Gaza’s economy shrank by 6.1 percent in the first half of 2018 compared to the same period in 2017. The decline was seen in most economic sectors but mainly in construction and public administration and defense, both of which were Gaza’s main drivers of growth in recent years. Even though more recent growth data is not available yet, anecdotal evidence strongly suggests that the ongoing liquidity squeeze in Gaza has further worsened and that the economic decline has also led to a rapid decline in humanitarian conditions. Unless the liquidity crisis is addressed through pumping additional liquidity into the economy and raising transfers to their pre-2017 level, the Gaza economy may be heading towards a possible collapse in the medium term. 9. The economy in Gaza has continued to deteriorate resulting in rising and severe unemployment and worsening poverty. Around 52 percent of the labor force in Gaza were unemployed in 2018. Unemployment amongst Gaza’s youth exceeds 67 percent while it is even higher for females reaching 71 percent, compared to 43 percent for males. Moreover, unemployment for young women stands at 88 percent (compared to 58 percent for young men). The poverty rate in Gaza has increased dramatically from 39 percent in 2011 to 53 percent in 2018. While high for both women and men, the staggering unemployment gap is due to a combination of reasons including informational constraints women face about availability of jobs in non-traditional sectors (such as those that are infrastructure related, May 10, 2019 Page 8 of 40 The World Bank Additional Financing for the Third Municipal Development Project (P168544) commerce, etc.) or lack of information employers have on women’s skills and abilities in these types of jobs due to their exclusion from such sectors.5 10. Without a peace process breakthrough, economic conditions are expected to worsen, and jobs created will not be sufficient to reduce unemployment and improve living standards. Under a baseline scenario, private sector activity is not expected to pick up and real GDP growth of the Palestinian economy is projected to drop to 1.7 percent in 2018 (-5 percent in Gaza and 3.8 in the West Bank) and to hover around 1.9 percent in the medium term. This growth level implies a decline in real per capita income and an increase in unemployment. Notably, downside risks to this projection in Gaza are considerable. If transfers through the PA’s budget continue to decline, the United Nations Refugee and Works Agency’s (UNRWA) funding gap is not offset, and funds to continue the reconstruction efforts do not materialize, the current liquidity squeeze is expected to significantly worsen, which will have a severe impact on economic activity, service provision and social conditions in the Strip. Consequently, the Gaza economy is expected to slip into deep recession, significantly raising the potential for unrest. 11. Municipal services are deteriorating further. The persistent economic contraction in Gaza, and reduced fiscal transfers and aid are severely compromising the ability of the municipalities to continue rendering services at the local level. Further deterioration of the already limited local services provision will expose the Gaza population to increased health and sanitation risks (due to mounting and decomposing solid waste in the very densely populated urban areas), safety risks (from unlit and damaged streets), and degradation of the environment. The Gaza municipalities therefore urgently need financial assistance and sustained donor support to maintain critical local services. 12. Climate and Disaster Risks are increasing vulnerability of the population and infrastructure in West Bank and Gaza. Additionally, like other countries in the Middle East and North Africa (MNA) region, West Bank and Gaza currently is and continues to be exposed to natural hazards such as drought, extreme heat, water scarcity, and extreme precipitation. Mean annual temperature in the target project locations is projected to increase by approximately two degrees Celsius by 2050 with a similar projected rate of warming for all seasons. In the West Bank, the extreme heat hazard is classified as 'high'.6 Similarly, the extreme heat hazard is classified as 'medium' in Gaza and there is more than 25 percent chance that at least one period of prolonged exposure of extreme heat, resulting in heat stress, will occur in the next five years. Due to the extreme heat, the locations have high drought risk. Severe and recurring droughts have devastating impacts on the country's economy, agricultural productivity, food security and the vulnerability of rural populations. The Gaza Coastal Municipal Water Utility and Palestinian Water Authority indicate a significant shortage of water services, which results in a severe public health threat to the Gaza population. High variability in climate and hydrological flows will increase urban flash flooding, which will severely impact the areas where regional water management infrastructure, such as stormwater and wastewater drainage systems, lacks resilience. 5 Hillis, Samira Ahmed; Alaref, Jumana Jamal Subhi; Takkenberg, Wouter Matthijs. 2018. Enhancing job opportunities for skilled women in the Palestinian territories (English). Washington, D.C.: World Bank Group. Labor force participation among Gazan women is estimated at less than 20 percent, compared to men at over 60 percent. Female employment in the Palestinian territories is concentrated in services sector (education, health and social) at approximately 45 percent compared to commerce, hotels and restaurants at a little less than 10 percent and construction which is marginal (Hillis et.al. 2018). 6 Based on modeled heat information currently available to Think Hazard tool May 10, 2019 Page 9 of 40 The World Bank Additional Financing for the Third Municipal Development Project (P168544) 13. The World Bank response to the dire situation in Gaza includes sustained engagement with the Gaza municipalities through the Municipal Development Project (MDP). The World Bank provided AF to the Second Municipal Development Project (MDP-2), closed in February 2018, to address critical emergency needs faced by Gaza municipalities following the July-August 2014 conflict. The project implemented 332 rehabilitation subprojects that helped restore local services (roads, wastewater and solid waste management) in the Gaza Strip. Under the on-going project, Gaza municipalities will continue to receive support for priority municipal subprojects. For municipalities in West Bank and Gaza, the MDP is a reliable source of investment funding and a dependable and fast channel to provide demand-based support through a transparent allocation mechanism. However, the funds available under the current project would not allow the Gaza municipalities to maintain adequate level of local services considering their overall fiscal situation and in the absence of additional external resource mobilization. 14. The Borrower has requested the World Bank to augment project financing to expand coverage of support to Gaza municipalities and scale up local service provision in the Gaza Strip. The first request is for US$10.0 million AF to contribute to the efforts of the municipalities in Gaza to maintain adequate level of municipal services and implement urgent infrastructure projects. The reduced transfers to Gaza are deeply impacting the deteriorating municipal service provision as municipalities are unable to pay salaries of staff. Maintaining a decent level of municipal infrastructure is key to expanding economic activity and improving productivity – fundamental requirements for job creation. Additionally, creating employment to mitigate the livelihood impacts of the liquidity squeeze in Gaza will help avoid escalation of instability in the strip. By selecting municipal activities that are labor-intensive, the AF will at the same time help create temporary jobs from the rich human resource base in Gaza. It is estimated that the activities that the AF will support in Gaza will generate about 5,000 jobs (or 2,500 jobs per year). This can be a significant contribution to the job creation efforts considering the number of jobs (27,000 annually) to absorb the new labor force entrants. The second request for AF is for US$5.0 million to close a financing gap to complete original project activities. At the time of the parent project approval, it was anticipated that there would be a financing gap in the second cycle of the project as block grants are to be topped by performance grants that were expected to be covered through co-financing.7 However, the co-financing has not materialized. Moreover, the AF will cover the financing gap caused by the decision of USAID to discontinue the Communities Thrive Project that was financing Capacity Development activities in 55 of the 119 municipalities in West Bank targeted under the parent project. 15. Project Restructuring. The proposed changes brought about by the AF will require restructuring of the parent project to reflect: a. Removal of withdrawal condition under Category 1 (Subgrants under Component 1 of the Project), set out in Schedule 2, Section IV, B.1 of the Grant Agreements for TF0A6154 and TF0A4800. The condition provides that “no withdrawal shall be made under Category 1 unless an ESMP and a Land Acquisition and Livelihood Action Plan have been prepared, and any land acquisition has been carried out in accordance with paragraph 4 of Section I (C) of Schedule 2 7 The second Municipal performance assessment will be carried out in 2019 to determine municipalities’ corresponding grant allocations in the second cycle of the project. The MDLF will announce allocations from block and performance grants for the second cycle in October 2019. In order to incentivize better performance and respond to population growth in the second cycle of the project, EUR3.45 per capita needs to be topped up to the first cycle per capita allocation of EUR11.8 per capita. May 10, 2019 Page 10 of 40 The World Bank Additional Financing for the Third Municipal Development Project (P168544) and the Land Acquisition and Livelihood Action Plan”. The requirement to prepare ESMP and Land Acquisition and Livelihood Action Plan (LALAP) for each subgrant is monitored as a recurring supervision function by the World Bank. The World Bank provides no objection for every subgrant proposal that has potential environmental and land/livelihood impacts. This subgrant review process guarantees compliance with safeguards requirements. Thus, preparation of subgrant ESMP and LALAP can be dropped as a withdrawal condition. b. A revision of the Results Framework to add new results indicators to capture the benefits that will result from the activities to be implemented in Gaza through the AF. This includes adding three indicators: (i) number of subprojects completed in Gaza municipalities under AF; (ii) number of Gaza municipalities successfully implementing O&M activities; and (iii) number of temporary jobs created in Gaza by the AF (of which for female). Activities under the proposed AF are expected to be completed by February 28, 2022, the original closing date. 16. The requested AF is helping mobilize support from other DPs. The European Union (EU) confirmed that it will provide EUR10 million to support the work program in the second cycle in Gaza under the project. Likewise, AFD informed that it will be providing additional EUR4 million for the second cycle of the project. Finally, implementing public works schemes through municipal infrastructure subprojects can be easily set up within the auspices of the project and therefore can quickly provide jobs while making a positive impact on the state of local services. II. DESCRIPTION OF ADDITIONAL FINANCING 17. Scope. The proposed AF will finance the costs associated with the scaling-up of the project’s support to Gaza municipalities to enable them to expand local services provision though labor-intensive O&M and municipal infrastructure development activities as part of the new Component – Component 5 “Emergency Labor- intensive Gaza Municipal Services”. Moreover, the AF will close a financing gap in order to complete original project activities under Component 1 and 2 in the second cycle of the project. The AF will thus finance: Component 1 "Municipal Performance and Service Delivery” a. Address the financing gap in the implementation of the second cycle of Component 1 “Municipal Performance and service delivery” (US$2.45 million from PID-MDTF). This component provides sub-grants for eligible municipalities to finance municipal infrastructure for improved service delivery through: (a) block grants to provide the basic funding for eligible municipalities for infrastructure development based on needs and equity; and (b) a performance grant to provide an incentive for eligible municipalities to improve their performance in three performance areas, (i) namely financial performance and sustainability; (ii) institutional performance; and (iii) transparency, accountability and participation. Financing of recurrent expenditures is allowed for municipalities in Gaza in accordance with the Project Operations Manual (POM). May 10, 2019 Page 11 of 40 The World Bank Additional Financing for the Third Municipal Development Project (P168544) Component 2 “Capacity development to Municipalities and Palestinian Institutions” b. Address the financing gap in the implementation of the second cycle of Component 2 “Capacity development to municipalities and Palestinian institutions” (US$2.2 million from PID-MDTF). Activities under this component include: (a) Capacity development support to municipalities through: (i) basic capacity development support to participating municipalities; and (ii) targeted capacity development support to strengthen creditworthiness of high performing municipalities, as identified pursuant to the criteria in the POM; (b) Development of municipal management system to strengthen governance and management framework of all municipalities, including, inter alia, support for development of procedural, analytical and technical frameworks and analyses in targeted areas such as revenue management, Municipal Integrated Financial Management and Information System, capital investment preparation and social accountability; and (c) Capacity development support to MDLF and the MoLG in order to strengthen governance and service delivery at the municipal level, including, inter alia, support to: (i) MoLG to develop Municipal Audit Standards and related implementation guidance in collaboration with the State Audit and Administrative Control Bureau and the Palestine Association of Certified Public Accountants; and (ii) MDLF to become a financial intermediary for local government. Component 4 “Project Implementation Support and Management Costs” c. Augment Project implementation support and management cost (Total US$1.15 million, of which US$0.8 million from TFGWB and US$0.35 million from PID-MDTF). This component includes project implementation support through funding of goods and consultants’ services for monitoring and evaluation, outreach and communication, and local technical consultants for the engineering supervision of Component 1 and the MDLF management fee. Component 5 “Emergency Labor-Intensive Gaza Municipal Services” d. Scale up of O&M activities to restore or maintain critical municipal services (US$5.52 million from TFGWB, or 60 percent of US$10.0 million net of administrative cost). Given the severe funding constraints facing Gaza municipalities, the proposed AF would support scaling up of O&M activities to restore or maintain critical municipal services. Based on consultations with all 25 Gaza municipalities and the MDLF, the O&M activities to be supported can include costs of labor, equipment and supplies for roads repairs and maintenance (filling of potholes, crack repair and sealing, etc.), periodic cleanup of drainage system, O&M of slaughterhouses, solid waste collection and sorting, fumigation, and clean up and security of coastline and beaches. e. Scale up of investment grants for Gaza municipal investments that employ labor-intensive methods in subproject implementation (US$3.68 million from TFGWB, or 40 percent of May 10, 2019 Page 12 of 40 The World Bank Additional Financing for the Third Municipal Development Project (P168544) US$10.0 million net of administrative cost). The type of subprojects to be financed will be defined in a separate annex in the POM that will be revised to reflect these additional project activities. Municipal subprojects identified so far include roads, wastewater, solid waste management, parks and open space development, public markets, tax mapping, archiving of municipal records, solar energy, inventory of municipal assets, landscaping of road medians, etc. 18. Allocation of the US$9.2 million to support Component 5 “Emergency Labor- intensive Gaza Municipal Services” from TFGWB. All 25 Gaza municipalities will receive a simple per capita allocation to support O&M activities as well as investment grants for priority subprojects coming out of their Strategic Development Investment Plans (SDIPs) for a total amount of US$9.2 million8. As for the investment grants, successful subproject proposals will be selected on basis of set criteria, including intensity of labor inputs, that will likewise be defined in the revised POM. The AF will apply simplified procurement procedures per the Bank Policy for Investment Project Financing (IPF) paragraph 12 “Projects in Situations of Urgent Need of Assistance or Capacity Constraints”. The remaining US$5.8 million from the AF would be allocated to close the financing gap in the implementation of the second cycle of Component 1 “Municipal performance and service delivery”, Component 2 “Capacity Development to municipalities and Palestinian institutions” and Component 4 “Project Implementation Support and Management Costs” to ensure sufficient capacity for project implementation support is maintained at the MDLF and cover management costs. The table below presents the revised budget reflecting the proposed allocation of the AF. Table 1: Proposed Allocation of Funding Across Project Components with Additional Financing in US$ million Current Proposed Current Cost Proposed Cost Current Cost Proposed Cost Component Component PID MDTF PID MDTF Action TFGWB TFGWB Name Name Component 1: Municipal performance 13.31 13.31 16.64 19.09 Revised cost and service delivery Component 2: Capacity development to 0.53 0.53 0.53 2.73 Revised cost municipalities and Palestinian institutions 8 This component would apply an allocation mechanism different from the project performance-based formula applied in Component 1 “Municipal Performance and Service Delivery”. The allocation amount under Component 1 is determined through a transfer formula consisting of performance (50 percent), population (20 percent) and need (30 percent). The proposed Component 5 would use a simple per capita allocation for Gaza municipalities only to support Operations and Maintenance (O&M) activities as well as investment grants for priority subprojects in order not to distort the current performance based-system. May 10, 2019 Page 13 of 40 The World Bank Additional Financing for the Third Municipal Development Project (P168544) Component 3: Municipal 0.93 0.93 0.0 0.0 No Change partnership projects Component 4: Project implementation 1.23 2.03 2.83 3.18 Revised cost support and management cost Component 5: Emergency Labor-intensive New 9.20 Gaza Municipal Services Total 16.00 26.00 20.0 25.0 19. Mitigation of climate and disaster risks and climate co-benefits. Given the country's vulnerabilities to climate change, the number and scale of natural disasters are predicted to increase, and these risks create vulnerabilities in the water, health, and urban development sectors. Under, Component 1 and Component 5, the AF will support a number of subprojects that will contribute to mitigating these risks. For example, road subprojects with drain upgrade help eliminate the flash flooding during the rainy season while installing solar photovoltaic (PV) panels in municipal buildings and installation of more efficient lighting in public facilities promote clean and renewable energy, reduce costs and help overcome the electricity shortage given the limited fuel availability for Gaza Power Plant. Moreover, Component 2 will offer capacity building activities to strengthen community awareness on climate change and help alleviate natural disaster risks. Implementation arrangements 20. Selection of beneficiaries for O&M activities. For O&M, municipalities will screen and select the beneficiaries from verifiable list of unemployed persons in the Gaza Strip. The list can come from relevant government databases including the Ministry of Labor’s database and will be closely coordinated with the list being used by the Gaza Emergency Cash for Work and Self-Employment Support Project. As the Executing Agency of the Project, MDLF will supervise the screening and selection of beneficiaries of the O&M activities. The bid documents for works contracts will include provisions for beneficiary selection. Criteria for beneficiary selection will be presented in detail in the POM and apply the following general principles: (a) joblessness (e.g., unemployed for a certain duration); (b) equity (e.g., applicant is not a beneficiary of existing programs, only one from one family); and (c) vulnerability (e.g., youth, women, disabled, etc.). Job opportunities will be advertised in a way to ensure that information is equally accessible to women and men through different outreach methods including traditional and new media and technologies as well as MDLF collaboration with female universities to reach young women and organizations that support vulnerable population groups (such as female head of households), and public notifications for job openings by the project will specify eligibility criteria with explicit encouragement for May 10, 2019 Page 14 of 40 The World Bank Additional Financing for the Third Municipal Development Project (P168544) women and youth to apply. Information about female recruits will be made equally available to employers through direct MDLF engagement with selected contractors, and provision of sex disaggregated information about available talent pool. Details to be provided in the POM. As employment by the project is envisioned to be on rotation basis (e.g., 3 months per contract, to realize as many eligible beneficiaries as possible), preference will be extended to applicants who are (a) in the government’s list of unemployed labor force, (b) on the waiting list in the UNRWA job creation program; and (c) not in other job creation (cash-for-work) and cash transfer programs. 21. Selection of beneficiaries for Investment grants. The selection of final beneficiaries of the temporary jobs generated by the operation will be carried out in a transparent and equitable manner. The POM will be revised to specify process and eligibility criteria for job beneficiary selection, as well as the verification and contracting procedures. The revised POM will be subject to review by the World Bank. Specific actions will be identified to support women participation to component 5 activities. These actions will be identified and integrated in the POM. 22. Women are one of the vulnerable groups identified under Component 5. They face higher rates of unemployment and inactivity compared to men. The Gaza municipalities are therefore encouraged to prioritize subprojects and O&M activities that lend themselves to employing as many women as possible. The participation of women to public works to sustain local service delivery will allow them to access wage employment; and their participation in the labor force will also contribute to larger improvements in child welfare, and in women’s health and status. Gender disaggregated data will be collected for monitoring and evaluation purposes. 23. Implementation of O&M activities. Each municipality shall prepare an O&M Plan that will be submitted to MDLF for review and approval. From the approved O&M Plan, the municipality identifies packages for O&M implementation (that also defines required labor inputs). The municipality then advertises for job openings (specifying criteria for applicant selection). From the applications received, the municipality selects applicants, giving preference to applicants (a) who are on the Ministry of Labor’s list of unemployed persons in Gaza, (b) on the waiting list of the UNRWA job creation program; and (c) who are currently not benefiting from existing job creation and cash transfer programs. The municipality will send the list of selected applicants to MDLF (to confirm that agreed procedures are followed), and then contract the services (on a three-month rotation). For work rendered, the municipality will send payment authorization to MDLF that will pay the worker directly through the banking system. 24. Implementation of labor-intensive subprojects. The municipalities will identify proposals from their SDIP and propose urgent investment proposals. Subprojects to be funded will be selected from a pipeline developed by the municipalities in consultation with their constituents. The selection criteria will be established by the MDLF and specified in the revised POM and will highlight the labor intensity of works proposed in the subprojects. Based on the criteria, MDLF will appraise subproject proposals and approved subprojects will receive funding from Component 5. The municipalities will procure the subprojects competitively and contractors will select the workers based on skills required by the subprojects. MDLF will pay the contractors directly based on authorization from the municipalities. 25. Executing Agency. The proposed AF will add one additional component to the project: Component 5 – “Emergency Labor-intensive Gaza Municipal Services”. No changes would be made to the implementation arrangements, i.e. the MDLF will continue to be fully responsible for all project May 10, 2019 Page 15 of 40 The World Bank Additional Financing for the Third Municipal Development Project (P168544) implementation, safeguards, fiduciary, monitoring and reporting arrangements. The current safeguards instruments in place for the parent operation are sufficient and in full compliance with the Bank Policy for Investment Project Financing (IPF). All potential impacts will be addressed through the existing safeguards instruments. The Bank’s engagement with the MDLF now spans more than two decades. MDLF successfully carried out emergency operations with World Bank support, including the Second Emergency Municipal Services Rehabilitation Project, and AF to MDP-2 that delivered emergency support after the 2014 Gaza war. MDLF is currently executing three operations, namely the MDP-3, the Local Governance and Services Improvement Program for Results, and the Integrated Cities and Urban Development Project. The World Bank periodically assesses MDLF’s procurement and FM practices, its technical capacity as well as safeguards compliance. MDLF has established a track record of implementing a number of programs supported by other donors, including AFD, Norway, Denmark, EU, Switzerland, Belgium and the Netherlands. 26. Implementation timeframe. The activities to be supported by the AF, in the amount of US$9.20 million to finance Component 5, are expected to be completed in 24 months after effectiveness date. The 25 Gaza municipalities are currently preparing their respective O&M plans that will be the basis of selecting O&M activities to be supported by the AF. They will also begin the process of identifying and prioritizing subproject proposals for review by MDLF for funding support with the investment grants. The US$4.65 million AF to close the financing gap for Components 1 and 2 will support activities that will be completed by the original closing date of the Project, i.e., February 28, 2022. Strategic Alignment of the AF 27. The proposed scale up of the Project is part of the multi-pronged World Bank Group response to the Gaza crisis. The AF complements other World Bank-funded programs that are now on-stream: the Gaza Emergency Cash for Work and Self-employment Support Project which provides income support to the youth through non-government organization implementation modality; the Innovative Private Sector Development Project that aims at job creation through private sector growth; and the Finance for Jobs Project that will pilot a development impact bond to attract private investment to upgrade skills of the workforce. The project AF activities will harness the role of municipalities in sustained local service provision that will generate employment opportunities in the process. 28. Alignment with the World Bank’s Twin Goals of ending extreme poverty and promoting shared prosperity in a sustainable manner. Beneficiaries of the proposed AF are the population of Gaza municipalities, equivalent to almost 90 percent of the 1.7 million residents in the Gaza Strip. As the AF will support labor-intensive O&M and infrastructure development activities, the expanded project will help alleviate poverty in Gaza with the temporary job creation it will bring. Moreover, the AF will respond to immediate needs arising from the emergency in Gaza, while contributing to medium term goals, including improved service delivery. 29. Alignment with Assistance Strategy. The program falls within Pillar 3 of the World Bank Group’s Assistance Strategy FY18-21 for West Bank and Gaza (Report No. 115201-GZ, discussed by the Board of Executive Directors on December 5, 2017), which aims to support the PA objective of “putting citizens first by addressing the needs of the vulnerable and strengthening institutions for improved citizen-centered service delivery”. The AF is also fully aligned with the World Bank Group’s expanded MNA Regional May 10, 2019 Page 16 of 40 The World Bank Additional Financing for the Third Municipal Development Project (P168544) Strategy (March 2019), specifically the pillar on renewing the social contract through job creation and provision of services to the poor and vulnerable. 30. Support to the Palestinian National Policy Agenda and Local Government Sector Strategy. The multiphase Municipal Development Program9 operationalizes the PA’s goal of strengthening local governments through enhancing their efficiency and effectiveness and assisting in supporting their fiscal stability through performance-based grants and capacity building packages. The AF will contribute to the project activities lined up to strengthen local governments, including those in Gaza. III. KEY RISKS 31. The overall risk rating is Substantial due to the exceptional political and security situation in Gaza. Areas of concern include risks related to political and governance, macroeconomic, sector strategies and policies, institutional capacity, and fiduciary. 32. Political and governance risk is rated High: the overall political situation remains volatile and the internal split persists. Political decisions and institutional relationships among implementation actors can potentially disrupt implementation of program activities. Finally, further deterioration of the fiscal position of the Gaza municipalities can impair their capacity to plan and execute project activities. However, similar programs carried out especially by the MDLF with the Gaza municipalities have withstood these challenges. The Second Emergency Municipal Services Rehabilitation Project carried out through 2011, for instance, was successfully implemented despite the political and economic turmoil following the 2008/09 war. Also, MDP-2 successfully achieved its objective of helping Gaza municipalities cope with reconstruction requirements following the war on Gaza in 2014. The resilience of Gazans in general and the commitment of the MDLF in enlisting support of critical stakeholders in the timely implementation of the project are critical factors in mitigating the risks. 33. Macroeconomic risk is rated High. Gaza’s economy has been hit by volatile shocks over the last two decades resulting in lower average growth than all comparators. Moreover, the multiple episodes of war in 2008, 2012, and most recently in 2014 have all exacted a significant toll on Gaza’s economy pushing it further into recession. Gaza’s economy has been kept afloat by large amounts of transfers, which have significantly declined starting in 2017. The World Bank, through its Development Policy Grant series, is supporting measures to mobilize finance for the PA’s development plan promoting, among others, business environment reforms that will encourage private investment and therefore help revitalize the economy. 34. Sector strategies and policies risk is rated Substantial. Given worsening living conditions in Gaza and huge cuts in humanitarian aid, municipalities will be unable to maintain the current level of basic services provision in the absence of additional resource mobilization. The persistent economic contraction, and reduced fiscal transfers and aid are severely compromising the ability of the 9 The multiphase national Municipal Development Program has a three-stage hierarchy of objectives: a) Sector-Level Objective: To strengthen municipal governance to enable municipalities to become creditworthy; b) Program Level Objective: Support municipalities in providing better coverage and improved coverage of services over the medium term; and c) Municipal Development Program Phase 1 Objective: To improve municipal management practices for better transparency. May 10, 2019 Page 17 of 40 The World Bank Additional Financing for the Third Municipal Development Project (P168544) municipalities to continue rendering services at the local level. The AF while modest compared to the needs will help mitigate the deteriorating services at the local level. The World Bank support to the municipalities is mobilizing additional resources from other DPs, including the French and the EU that have now pledged to augment financing to the municipalities through the MDP. 35. Institutional capacity for implementation and sustainability risk is rated Substantial. While MDLF has the experience and capacity to carry out the AF, the additional activities will be driven mainly by local governments in Gaza that are facing constraints especially with the reduced transfers from the PA. While the AF will provide additional resources to the municipalities, preparation and monitoring of AF activities will require effort and commitment by the municipal staff. These risks will be mitigated by the capacity development support that is part of the project. 36. Fiduciary risk is rated Substantial. The World Bank has its general fiduciary obligations under its Articles to ensure that its financing is used for the purposes intended. Additionally, under the terms of the United Nations-Bank Relationship Agreement, the World Bank pays due regard to UN Security Council decisions imposing economic sanctions on entities or individuals. As a consequence of the due regard obligation, the World Bank’s systems include checks to ensure that no payments are made to designated persons or individuals directly by the World Bank. 37. Palestinian commercial banks are regulated by the Palestinian Monetary Authority (PMA). Along with the Financial Follow-up Unit, the two entities provide the foundation of the controls that are set in place by the PA to safeguard the integrity of the Palestinian financial sector. As part of its supervisory role, the PMA conducts regular checks and inspections on all licensed banks to ensure compliance with its guidelines and regulations. Furthermore, the PMA requires its approval on all key management positions within the licensed banks (e.g., senior management, board representatives, and key department heads). 38. The West Bank and Gaza is a full member of the regional Financial Action Task Force (FATF). Per the terms stipulated in its Memorandum of Understanding, all members must agree to be assessed as part of a continuous peer review program. The assessment, referred to as a Mutual Evaluation, assesses member counties’ Anti-money Laundering /Combating the Financing of Terrorists (AML/CFT) regime including a review and analysis of all current laws and regulations related to AML/CFT in the country to define its efficiency and conformity with international recommendations. The PA has requested and has been granted approval for its Mutual Evaluation by MNA-FATF scheduled to take place in 2020. The PA has expressed their commitment to conform with FATF recommendations and to meet global AML/CFT standards. With assistance from the World Bank, the PA is conducting its first self-assessment of Money Laundering/Financing of Terrorists risks, a National Risk Assessment. The International Monetary Fund is providing AML/CFT technical assistance. IV. APPRAISAL SUMMARY A. Economic and Financial Analysis 39. To ensure project responsiveness and flexibility, Component 5 will be demand-driven – local governments, in consultation with their communities, determine their own emergency needs. The 25 May 10, 2019 Page 18 of 40 The World Bank Additional Financing for the Third Municipal Development Project (P168544) Gaza municipalities will identify and prioritize municipal subprojects and O&M activities and MDLF will confirm their eligibility for funding under this AF. Considering the demand-driven nature of subprojects, the economic and financial benefits therefore cannot be measured ex-ante. However, subprojects (including roads rehabilitation, construction equipment, street lighting, public buildings, public parks, and water and sewage) will be evaluated based on existing MDLF screening criteria for subproject appraisal adopted in previous World Bank financed emergency operations, as follows: (a) maximum number of beneficiaries in immediate need; and (b) efficiency of the type and nature of proposed subprojects to restore the services. Additional criteria pertaining to job creation (number of jobs that can be generated by the subproject) and vulnerability/inclusion (jobs for women and youth) will be added. Where applicable, existing methodologies detailed in the “guidelines for the economic and financial analysis of subprojects” including financial internal rate of return and cost efficiency measured by net present value per beneficiary will be calculated for the subprojects. B. Technical 40. Quality of subprojects will be assured by: (a) ensuring that all works conform to national technical norms and standards for each type of subproject; (b) enforcing these norms and standards through technical design and community-responsive, effective procurement procedures, and systematic program supervision of the contractor by municipalities using qualified specialists; (c) ensuring the involvement of technical experts in the design and supervision of works; (d) capacity building for appropriate municipal staff in relevant areas of quality enhancement; and (e) conducting technical audits, in addition to verifying technical soundness and compliance with safeguards. 41. MDLF continues to possess the technical capacity to execute the expanded scope of the project. While the MDLF headquarters are in Ramallah, MDLF operates a Gaza satellite office, staffed with technical, safeguards and administrative personnel working in Gaza on full-time basis. The Gaza office of MDLF will lead project support to the Gaza municipalities and in monitoring project activities. 42. For beneficiary selection, the use of multiple targeting principles will likely lead to a more accurate and comprehensive identification of the neediest, enhancing the targeting performance. Refer to Section 20-21 above. C. Financial Management 43. There will not be any changes to the existing FM and disbursement arrangements for this AF. The same arrangements in place for the parent project will be used. The FM performance rating for the parent project as well as the predecessors, First Municipal Development Project (MDP-1) and MDP-2, have generally been "Satisfactory" since project effectiveness. Thus, for the proposed AF, the MDLF will continue to manage the FM and disbursement functions for the Project. There will be a new USD designated account opened for the AF and managed by MDLF. The MDLF handles the FM of grant funds for all municipalities in Gaza and no funds are transferred to municipalities in Gaza. The MDLF- FM department is adequately staffed, and the accounting system is well functioning and captures all project- related transactions by component and by each financier. The MDLF has a proven track record of effectively operating in the complex political and institutional environment of Gaza. The FM risk rating for the parent project is assessed at Substantial and there are measures in place to reduce the risk. The risks for the Project will be mitigated through strong management information systems, experienced FM staff May 10, 2019 Page 19 of 40 The World Bank Additional Financing for the Third Municipal Development Project (P168544) that have worked on World Bank projects in the past, close supervision by the team, as well as regular financial audits. 44. Similar to the parent project, payments will be made to suppliers - either directly from the World Bank or from Designated Accounts in commercial banks based in Ramallah and managed by the recipient. The recipient will select the financial institution, and the World Bank will determine if it is acceptable through a financial institution due diligence review following established procedures by the World Bank. Interim Financial Reports should be submitted to the World Bank semi-annually within 45 days after the end of the period. The World Bank will regularly conduct its own semi-annual implementation support review of FM arrangements. In addition, project financial statements and expenditure eligibility will be audited annually by independent auditors acceptable to the World Bank. All disbursements made directly by the World Bank to individual contractors or entities are checked against the World Bank’s AML/CFT lists, which are updated on a continuous basis. D. Procurement 45. Given the emergency nature of this AF, the simplified procurement procedures10 for works and goods and selection procedures for consultant services may apply. The MDLF will prepare an annex to the Procurement Manual and submit it for the World Bank’s review and clearance, prior to effectiveness. Other than the emergency procedure, procurement for the AF will follow the same arrangements in place for the parent project. 46. Procurement of goods and services will continue to be the overall responsibility of the Ramallah- based PA. Procurement for the AF will be carried out in accordance with the World Bank Procurement Regulations for Borrowers under Investment Project Financing (IPF) dated July 1, 2016, revised November 1, 2017 and August 1, 2018. Furthermore, the “Guidelines on Preventing and Combating Fraud and Corruption in Projects Financed by International Bank for Reconstruction and Development (IBRD) Loans and International Development Association (IDA) Credits and Grants”, dated October 15, 2006 and revised in January 2011 and as of July 1, 2016 shall apply to the AF. The AF will finance goods, works and non- consulting services for activities under Component 1, 2, 4 and 5. The overall responsibility for project procurement will rest with the MDLF, which will act as the World Bank's counterpart for all procurement aspects of the project. MDLF will implement procurement for Components 2 and 4, while the beneficiary municipalities will be responsible for subproject procurement, under MDLF’s supervision. MDLF prepared, and the Bank approved, an updated procurement plan for Components 2 and 4. Procurement for the subprojects under Component 1 and 5 shall be processed in accordance with the subproject procurement plan and the MDLF Procurement Manual. Municipalities will also be responsible for contract management and for advising MDLF on the release of payments to contractors/suppliers in accordance with the signed contracts. Procurement performance for the Project has been satisfactory. 10 The proposed simplified procedures which may apply shall be elaborated by Municipal Development Lending Fund (MDLF) in an Annex to the Procurement Manual and will require the World Bank’s prior ap proval. Simplified procedures could include: (i) increasing the threshold for using “Request for Quotations” of Works (e.g. from US$200K to US$500K), and of Goods (e.g. from US$100K to US$200K); (ii) shortening the period for preparation of bids under National Competitive Bidding; (iii) use of Direct selection as appropriate; and (iv) other procedures defined in accordance with the Bank Guidance: Procurement in Situations of Urgent need of Assistance or Capacity Constraints. May 10, 2019 Page 20 of 40 The World Bank Additional Financing for the Third Municipal Development Project (P168544) 47. MDLF has established a sound control and audit system of procurement activities carried out by municipalities for infrastructure subprojects. The system, which requires municipalities to seek MDLF’s no objection prior to proceeding with key steps of the procurement process, will continue to apply for the AF. 48. The World Bank Procurement Regulations for IPF Borrowers recognize that consultants and firms may be declared ineligible to offer goods, works, or services for Bank-financed projects if they are identified as supporting, committing, or participating in terrorist acts by a resolution of the UN Security Council taken under Chapter VII of the UN Charter. Bidders and consultants are electronically screened against the centralized database for contracts subject to the Bank’s prior review. E. Social (including Safeguards) 49. Safeguard Policies. OP 4.12 remains triggered since there is a possibility that a number of subprojects under component 1, 3 and 5 would require land. A Land Acquisition and Livelihood Policy Framework (LALPF) was prepared and disclosed in-country and the World Bank’s external website on March 26 and April 20, 2017, respectively, for the parent project. The type of subprojects to be supported under the AF will be of the same nature as those currently financed or pipelined under the project, therefore LALPF for the parent project will be applied to this AF. The LALPF includes the principles for land acquisition or any land take that can result from the project. In the majority of cases, subprojects will be built on public lands legally owned by the municipalities that are not encroached or has no claim on them. However, in cases where subprojects will require private land or land is occupied or encroached, site specific Resettlement Action Plans (RAPs) will be prepared in accordance with the disclosed LALPF, consulted and disclosed before the commencement of any civil works. In the case of land donation, the processes are defined clearly in the LALPF that shoud be followed, including: (a) well-defined and transparent criteria and clear documentation of transactions; (b) strong and readily accessible Grievance Redress Mechanism (GRM); and (c) provisions for more meaningful community participation and consultation. In both cases of voluntary land donation and willing –seller willing –buyer or voluntary provision of land, MDLF and municipalities will document the power of choice as defined and explained in the LALPF. 50. MDLF has adequate capacity of managing social safeguards risks. Under the previous MDPs, Gaza municipalities also have gained experience on social risk management. The 15 larger municipalities in Gaza have One-Stop-Shops that also serve as GRM. The remaining 10 Gaza municipalities will establish their respective GRMs during project implementation. Due to high unemployment rate among the youth, it is suggested that the AF will give special attention to the youth in Gaza (both male and female), in the identification of beneficiaries of the labor-intensive O&M and investment grants for subprojects. 51. Citizen Engagement. MDP-3 is deepening and mainstreaming citizen engagement and social accountability into the functioning and performance incentives of municipal development. MDP-3 also seeks to strengthen the quality of municipal-citizen relationship and opportunities for citizen feedback through all phases of the municipal expenditure cycle including implementation of the capital grant sub- projects. In concrete terms, ongoing changes to the municipal investment process will integrate good practice and lessons learned from participatory budgeting and participatory monitoring and evaluation May 10, 2019 Page 21 of 40 The World Bank Additional Financing for the Third Municipal Development Project (P168544) pilots on participation, disclosure and accountability. Complaints handling mechanisms are scaled up and linked to the national grievance redress mechanism of the MoLG. 52. Gender. The project will have an explicit focus on gender; quotas (30 percent minimum) for the inclusion of women and youth in community committees were embedded in the manual and policy notes for SDIP planning processes. Grant application forms were updated to be gender-sensitive, and specific efforts were made to ensure a gender balance in the capacity development components. Citizen Service Centers will generate gender-sensitive reports (i.e., records and statistics per gender) which can be the basis for analysis to better understand any existing gender gaps in service provision, problem identification, or response times. The new generation of SDIPs and new SDIP manual will include recommendations on strengthened community participation, including of women and youth. These approaches will be applied in the implementation of the AF and outcomes in terms of benefits accruing to women will be captured in the results monitoring. F. Environment (including Safeguards) 53. The MDLF and the 25 Gaza municipalities, being involved in the successful execution of MDP-1 and MDP-2, have demonstrated adequate capacity of managing environmental risks, screening subprojects, and implementing the ESMPs successfully. As the scope of the AF is similar to the activities in the previous MDPs as well as to the original activities of the project, the proposed AF will trigger the same safeguards policies as the project. It will not invoke any additional safeguards policies. The AF will continue to use the safeguards and instruments that have been originally prepared and disclosed. 54. OP 4.01 remains triggered. The project will require an environmental assessment for activities that involve infrastructure construction. The development and rehabilitation of municipal infrastructure includes roads, rehabilitation of water wells, water networks, and wastewater and sanitation facilities, parks, and others. Negative environmental impacts, associated with municipal subprojects and O&M activities, are expected to be minor during the construction phase. Therefore, the Project is classified as category “B”. Subprojects and O&M activities are not known a priori. An Environmental and Social Management Framework was prepared for the project and will continue to be used under the AF. 55. A few participating municipalities, particularly in Gaza, have subprojects which may require purchasing of some chemicals for pest control, primarily mosquitoes. A Pest Management Plan based on lessons learned under MDP-1 and MDP-2 has been updated for this project to ensure compliance with OP 4.09 policy. The Pest Management Plan provides guidance on which chemicals can be financed for pest management as well as proper storage and handling during project implementation. V. WORLD BANK GRIEVANCE REDRESS 56. Communities and individuals who believe that they are adversely affected by a World Bank- supported project may submit complaints to existing project-level grievance redress mechanisms or the World Bank’s Grievance Redress Service, which ensures that complaints received are promptly reviewed in order to address project-related concerns. Project affected communities and individuals may submit their complaint to the World Bank’s independent Inspection Panel which determines whether harm May 10, 2019 Page 22 of 40 The World Bank Additional Financing for the Third Municipal Development Project (P168544) occurred, or could occur, as a result of World Bank non-compliance with its policies and procedures. Complaints may be submitted at any time after concerns have been brought directly to the World Bank's attention, and World Bank Management has been given an opportunity to respond. For information on how to submit complaints to the Bank’s corporate Grievance Redress Service, please visit http://www.worldbank.org/en/projects-operations/products-and-services/grievance-redress-service. For information on how to submit complaints to the World Bank Inspection Panel, please visit www.inspectionpanel.org. May 10, 2019 Page 23 of 40 The World Bank Additional Financing for the Third Municipal Development Project (P168544) VI SUMMARY TABLE OF CHANGES Changed Not Changed Results Framework ✔ Components and Cost ✔ Legal Covenants ✔ Procurement ✔ Implementing Agency ✔ Project's Development Objectives ✔ Loan Closing Date(s) ✔ Cancellations Proposed ✔ Reallocation between Disbursement Categories ✔ Disbursements Arrangements ✔ Safeguard Policies Triggered ✔ EA category ✔ Institutional Arrangements ✔ Financial Management ✔ APA Reliance ✔ Implementation Schedule ✔ Other Change(s) ✔ VII DETAILED CHANGE(S) COMPONENTS Current Component Name Current Cost Action Proposed Component Proposed Cost (US$, (US$, millions) Name millions) Municipal Performance and 29,954,255.00 Revised Municipal Performance 32,404,255.00 Service Delivery and Service Delivery Capacity Development 1,063,830.00 Revised Capacity Development 3,263,830.00 May 10, 2019 Page 24 of 40 The World Bank Additional Financing for the Third Municipal Development Project (P168544) Municipal Partnership 930,000.00 No Change Municipal Partnership 930,000.00 Projects Projects Project Implementation 4,051,915.00 Revised Project Implementation 5,201,915.00 Support and Management Support and Cost Management Cost 0.00 New Emergency Labor- 9,200,000.00 intensive Gaza Municipal Services TOTAL 36,000,000.00 51,000,000.00 Expected Disbursements (in US$) DISBURSTBL Fiscal Year Annual Cumulative 2018 10,000,000.00 10,000,000.00 2019 9,000,000.00 19,000,000.00 2020 15,000,000.00 34,000,000.00 2021 15,000,000.00 49,000,000.00 2022 2,000,000.00 51,000,000.00 2023 0.00 51,000,000.00 SYSTEMATIC OPERATIONS RISK-RATING TOOL (SORT) Risk Category Latest ISR Rating Current Rating Political and Governance ⚫ High ⚫ High Macroeconomic ⚫ High ⚫ High Sector Strategies and Policies ⚫ Substantial ⚫ Substantial Technical Design of Project or Program ⚫ Moderate ⚫ Moderate Institutional Capacity for Implementation and ⚫ Substantial ⚫ Substantial Sustainability Fiduciary ⚫ Substantial ⚫ Substantial Environment and Social ⚫ Moderate ⚫ Moderate Stakeholders ⚫ Moderate ⚫ Moderate Other ⚫ Low Overall ⚫ Substantial ⚫ Substantial May 10, 2019 Page 25 of 40 The World Bank Additional Financing for the Third Municipal Development Project (P168544) LEGAL COVENANTS1 LEGAL COVENANTS – GZ-Third Municipal Development Project (P159258) Loan/Credit/TF LEGAL TBL1 Description Status Action TF-A4800 The following legal covenant is Not yet due No Change applicable for the project: 1) Trust Fund Grant Agreement between the Palestine Liberation Organization (PLO) and IDA and 2) The Partnership for Infrastructure Development in the West Bank Multi Donor Trust Fund Agreement between the PLO and IBRD/IDA. By no later than April 30, 2018, the PLO shall commit a sum of no less than 10% of the Aggregate Donor Commitment to funding the Project, and thereafter, PLO shall disburse the committed funds on a quarterly basis TF-A4800 The PLO, shall ensure that prior to the Not yet due Revised commencement of any works on the sections within the Project area where land acquisition or resettlement may be required, that the Project Implementing Entity: (a) prepare a Land Acquisition and Livelihood Action Plan or Plans, acceptable to the IDA, in accordance with the Land Acquisition and Livelihood Policy Framework; and disclose and carry out consultations for said Land Acquisition and Livelihood Resettlement Action Plans in accordance with the provisions of the Land Acquisition and Livelihood Policy Framework; (b) carry out the Project in accordance with the Land Acquisition and Livelihood Action Plan or Plans, as the case may be; and (c) not amend, suspend or abrogate any of the provisions of the Land Acquisition and Livelihood Action Plan or Plans, as the case may be, without the prior agreement of the Association. May 10, 2019 Page 26 of 40 The World Bank Additional Financing for the Third Municipal Development Project (P168544) The PLO, through the Project Implementing Entity: (a) shall not commence any works in any section of the Project Area where Resettlement has been carried out by the PLO prior to the date of this Agreement, where the Resettlement was done for the purposes of carrying out the Project activities; (b) shall not commence any works under the Project in any section of the Project Area where Resettlement becomes required, without first preparing a Land Acquisition and Livelihood Action Plan, satisfactory to the IDA, in accordance with the Land Acquisition and Livelihood Policy Framework, and then ensuring that such land acquisition has been carried out in accordance with the Land Acquisition and Livelihood Action Plan; and (c) shall carry out the Project in accordance with the Land Acquisition and Livelihood Policy Framework and respective Land Acquisition and Livelihood Action Plans and shall not amend, suspend, abrogate or waive any of the provisions of the respective Land Acquisition and Livelihood Action Plans without the prior agreement of the IDA. With regard to the withdrawal of grant proceeds and notwithstanding the provisions of the General Provisions of Section IV of the Trust Fund Grant Agreement, no withdrawal shall be made: (a) for payments made prior to the date of this Agreement. (b) under Category 1 unless an ESMP and a Land Acquisition and Livelihood Action Plan have been prepared, and any land acquisition has been carried out in accordance with May 10, 2019 Page 27 of 40 The World Bank Additional Financing for the Third Municipal Development Project (P168544) paragraph 4 of Section I(C) of Schedule 2 and the Land Acquisition and Livelihood Action Plan. Proposed same as above except for the removal of Complied with clause (b) under Category 1 unless an ESMP and a Land Acquisition and Livelihood Action Plan have been prepared, and any land acquisition has been carried out in accordance with paragraph 4 of Section I(C) of Schedule 2 and the Land Acquisition and Livelihood Action Plan. LEGAL COVENANTS2 LEGAL COVENANTS – Additional Financing for the Third Municipal Development Project (P168544) Sections and Description The Recipient, shall ensure that prior to the commencement of any works on those sections within the Project area where land acquisition or resettlement may be required, that the Project Implementing Entity: (a) prepares a Land Acquisition and Livelihood Action Plan or Plans, acceptable to the World Bank, in accordance with the LALPF; and discloses and carries out consultations for said Land Acquisition and Livelihood Action Plans in accordance with the provisions of the LALPF; (b) carries out the Project in accordance with the Land Acquisition and Livelihood Action Plan or Plans, as the case may be; and (c) not amend, suspend or abrogate any of the provisions of the Land Acquisition and Livelihood Action Plan or Plans, as the case may be, without the prior agreement of the World Bank. 5. The Recipient, through the Project Implementing Entity shall: (a) not commence any works in any section of the Project area where Resettlement has been carried out by the Recipient prior to the date of this Agreement, where the Resettlement was done for the purposes of carrying out the Project activities; (b) not commence any works under the Project in any section of the Project area where Resettlement becomes required, without first preparing a Land Acquisition and Livelihood Action Plan, satisfactory to the World Bank, in accordance with the Land Acquisition and Livelihood Policy Framework, and then ensuring that such land acquisition has been carried out in accordance with the Land Acquisition and Livelihood Action Plan; and (c) carry out the Project in accordance with the LALPF and respective Land Acquisition and Livelihood Action Plans and shall not amend, suspend, abrogate or waive any of the provisions of the respective Land Acquisition and Livelihood Action Plans without the prior agreement of the World Bank. The Recipient shall cause the Project Implementing Entity to carry out the Project in accordance with the May 10, 2019 Page 28 of 40 The World Bank Additional Financing for the Third Municipal Development Project (P168544) Environmental and Social Management Framework (ESMF) and Land Acquisition and Livelihood Policy Framework (LALPF), and any specific environmental and safeguards guidelines and documents required to be prepared under the Project and to ensure the satisfaction of any and all applicable requirements for the preparation, disclosure and implementation of any site-specific environmental and social impact assessments or site specific Environmental and Social Management Plans, in accordance with the ESMF and LALPF, in relation to any Subproject or Operation and Maintenance Activity necessitating an environmental and social impact assessment, resettlement action plan, or site specific environmental management plan. Not later than forty-five (45) days after the Effectiveness Date, the Recipient shall cause the Project Implementing Entity, for the purpose of forwarding to the World Bank, to submit a work plan and budget for the Project for the duration of this Project, of such scope and detail as the World Bank shall have reasonably requested. The Recipient shall cause the Project Implementing Entity, through the Palestinian Authority to award to Eligible Municipalities Subgrants, all in accordance with the criteria and procedures set forth in the Operational Manual and the Grant Allocation Manual, and to review, appraise and select proposals and supervise implementation, all in accordance with the Operational Manual, the Grant Allocation Manual, the Environmental and Social Management Framework, the Land Acquisition and Livelihood Policy Framework, and the respective Grant Implementation Agreements. Conditions Type Description Effectiveness The Grant Agreement shall not become effective until evidence satisfactory to the World Bank has been furnished to the World Bank that the conditions specified below have been satisfied in a manner and in form and substance satisfactory to the World Bank: (a) The execution and delivery of this Agreement on behalf of the Recipient and of the Project Agreement on behalf of the Project Implementing Entity have been duly authorized or ratified by all necessary governmental and corporate action. (b) The Subsidiary Agreement referred to in Section I.A of Schedule 2 to this Agreement has been executed on behalf of the Recipient and the Palestinian Authority. (c) The On-Granting Agreement referred to in Section I.A of Schedule 2 to this Agreement has been executed on behalf of the Palestinian Authority and the Project Implementing Entity. (d) The Operational Manual, acceptable to the World Bank, has been amended and thereafter executed by the Project Implementing Entity. May 10, 2019 Page 29 of 40 The World Bank Additional Financing for the Third Municipal Development Project (P168544) VIII. RESULTS FRAMEWORK AND MONITORING Results Framework COUNTRY: West Bank and Gaza RESULT_NO_PDO Additional Financing for the Third Municipal Development Project Project Development Objective(s) The project development objective (PDO) is to enhance the institutional capacity of municipalities in the West Bank and Gaza for more accountable and sustainable service delivery. Project Development Objective Indicators by Objectives/ Outcomes RESULT_FRAME_T BL_ PD O Indicator Name DLI Baseline Intermediate Targets End Target 1 2 3 4 5 Strengthened municipal institutions Number of municipalities that move up one rank in the performance 0.00 0.00 0.00 50.00 50.00 100.00 100.00 assessment system (Number) Accountable and responsive service delivery People provided with improved urban living 0.00 0.00 0.00 250,000.00 250,000.00 500,000.00 500,000.00 conditions (Number) Female beneficiaries (Number) 0.00 0.00 0.00 125,000.00 125,000.00 250,000.00 250,000.00 Municipalities with public disclosure of executed budget and executed SDIP 0.00 0.00 0.00 50.00 50.00 100.00 100.00 (Number) May 10, 2019 Page 30 of 40 The World Bank Additional Financing for the Third Municipal Development Project (P168544) RESULT_FRAME_T BL_ PD O Indicator Name DLI Baseline Intermediate Targets End Target 1 2 3 4 5 Financially sustainable municipalities Number of municipalities with operational and enterprise surplus and no 40.00 40.00 40.00 60.00 60.00 80.00 80.00 increase in arrears (Number) PDO Table SPACE Intermediate Results Indicators by Components RESULT_FRAME_T BL_ IO Indicator Name DLI Baseline Intermediate Targets End Target 1 2 3 4 5 Municipal Performance and Service Delivery Number of municipalities completing sub projects 0.00 0.00 0.00 100.00 100.00 140.00 140.00 within each cycle (Number) Percentage of investments financed under the project in adequate technical state 0.00 0.00 0.00 60.00 60.00 80.00 80.00 and used as intended (Percentage) % of beneficiaries satisfied with municipal sub projects 0.00 0.00 0.00 70.00 70.00 80.00 80.00 executed under MDP 3 (Percentage) Number of municipalities graduated to category A 5.00 5.00 5.00 10.00 10.00 15.00 15.00 (Number) May 10, 2019 Page 31 of 40 The World Bank Additional Financing for the Third Municipal Development Project (P168544) RESULT_FRAME_T BL_ IO Indicator Name DLI Baseline Intermediate Targets End Target 1 2 3 4 5 Number of municipalities with yearly increase in 50.00 50.00 50.00 85.00 85.00 120.00 120.00 revenues collected by the municipality (Number) Number of municipalities with functional complaint 22.00 22.00 22.00 44.00 44.00 100.00 100.00 system (Number) Capacity Development Road Map for MDLF as Lending Intermediary No No No No No Yes Yes consulted with relevant stakeholders (Yes/No) Municipal audit standard No No No No No Yes Yes developed (Yes/No) Municipal Partnership Projects Number of municipalities reporting enhanced capacity to engage with private sector for municipal 0.00 0.00 0.00 12.00 12.00 25.00 25.00 service delivery and/or local economic development (Number) Project Implementation Support and Management Cost Percentage of municipalities satisfied with 75.00 75.00 75.00 85.00 85.00 95.00 95.00 MDLF support (Percentage) Emergency Labor-intensive Gaza Municipal Services (Action: This Component is New) May 10, 2019 Page 32 of 40 The World Bank Additional Financing for the Third Municipal Development Project (P168544) RESULT_FRAME_T BL_ IO Indicator Name DLI Baseline Intermediate Targets End Target 1 2 3 4 5 Number of subprojects completed by Gaza municipalities under the 0.00 0.00 15.00 30.00 Additional Financing (Number) Action: This indicator is New Number of temporary jobs created in Gaza by the 0.00 1,250.00 3,000.00 5,000.00 Additional Financing (Number) Action: This indicator is New Female beneficiaries 0.00 250.00 500.00 750.00 (Number) Action: This indicator is New Number of Gaza municipalities successfully 0.00 5.00 15.00 25.00 implementing an O&M activity (Number) Action: This indicator is New IO Table SPACE Monitoring & Evaluation Plan: PDO Indicators Mapped Methodology for Data Responsibility for Data Indicator Name Definition/Description Frequency Datasource Collection Collection Number of municipalities that move up The PDO indicator will 2017, 2019, MDLF Data will come from MDLF May 10, 2019 Page 33 of 40 The World Bank Additional Financing for the Third Municipal Development Project (P168544) one rank in the performance assessment measure number of 2021 Performance performance system municipalities that move Assessment assessment by MDLF up one rank in during 2017, 2019, 2021. performance. The ranking system has 10 ranks based on 4 categories (D, C, B and A) with 21 KPIs from D to A++. The Corporate Result indicator (CRI) measures the cumulative number of people living in urban areas that have been provided with access to improved services, housing, tenure, Regular project progress MDLF from neighborhoods, public reports in 2019 and information People provided with improved urban spaces, parks, resilience, 2019, 2021 2021 by MDLF MDLF on municipal living conditions and/or urban presenting information sub-projects. environmental conditions, of beneficiaries of through the direct completed subprojects. interventions of operations supported by the World Bank. Its a new CRI and will added to the WB Portal. Target of 500.000 will be reviewed in 2019. 2019, 2021 MDLF MDLF Female beneficiaries The disclosure will take MDLF Data will come from 2017, 2019, Municipalities with public disclosure of place on social media Performance performance MDLF 2021 executed budget and executed SDIP platform, (Facebook), assessment assessment by MDLF municipal bulletin board, during 2017, 2019, 2021. May 10, 2019 Page 34 of 40 The World Bank Additional Financing for the Third Municipal Development Project (P168544) MoLG's homepage and/or other platform. From year three (2019) the readable format from MoLG will be used, once endorsed by MoLG. This indicator will measure municipalities that have surplus in their operational and enterprise account and no increase in arrears from MLDF Data will come from Number of municipalities with operational 2017, 2019, last year. Performance performance MDLF and enterprise surplus and no increase in 2021 Municipalities that fulfill Assessment assessment by MDLF arrears this criterion have not during 2017, 2019, 2021. increased net debt to suppliers of water and electricity. Baseline will be updated in June 2017. ME PDO Table SPACE Monitoring & Evaluation Plan: Intermediate Results Indicators Mapped Methodology for Data Responsibility for Data Indicator Name Definition/Description Frequency Datasource Collection Collection The indicator will measure the number of Regular project progress municipalities that reports in 2019 and Number of municipalities completing sub complete sub projects 2019, 2021 MDLF 2021 by MDLF MDLF projects within each cycle within each of the two presenting information budget cycles: 1 January on completed 2018 to 31 December subprojects. 2019 and 1 January 2020 to May 10, 2019 Page 35 of 40 The World Bank Additional Financing for the Third Municipal Development Project (P168544) 31 December 2021. The indicator will measure the percentage of investments with MDLF acceptable standard and assessment of acceptable usage. Data will come from Percentage of investments financed under 2017, 5-6% of all sub Measured as "adequate performance MDLF the project in adequate technical state 2019, 2021 projects in state of usability" assessment by MDLF and used as intended 2017, 2019 according to MDLF during 2017, 2019, 2021. and 2021. assessment of 5-6 % of executed projects. The baseline will be update in June 2017. MDLF Performance The indicator will measure Assessment or the percentage of the Local beneficiaries that are 2017, Government Satisfaction surveys to % of beneficiaries satisfied with municipal satisfied with municipal MDLF 2019, 2021 Performance be carried out by MDLF sub projects executed under MDP 3 sub-projects. The baseline Assessment in 2019 and 2021. will be updated in July (LGPA) questi 2017. It will be gender ons 2.6 and disaggregated. 9.10. The indicator will measure number of municipalities MDLF Data will come from that graduate to category A 2017, Number of municipalities graduated to Performance performance MDLF the highest category in the 2019, 2021 category A Assessment assessment by MDLF performance system. It is during 2017, 2019, 2021. measured by the project's performance May 10, 2019 Page 36 of 40 The World Bank Additional Financing for the Third Municipal Development Project (P168544) assessment system to measure municipal performance from category D (the lowest) to A the highest. The indicator will measure MDLF the number of Performance municipalities that increase assessment the revenues collected by based on the Data will come from Number of municipalities with yearly the municipality from year 2017, latest performance MDLF increase in revenues collected by the to year. It will not cover 2019, 2021 available data assessment by MDLF to municipality revenues e.g. 2014 to be carried out in 2019 collected by Ministry of 2016 for the and 2021. Finance e.g. property assessment taxation and transportation in 2017. tax. The indicator will measure that a functional municipal complaint system exists in 2021 following national guidelines. Functional municipal complaints MDLP Data will come from system Number of municipalities with functional 2019, 2021 Performance performance MLDF will include ability to complaint system Assessment assessment by MDLF produce data on grievances during 2017, 2019, 2021. by type and by level of resolution. For baseline and in 2019 the indicator will only measure that the complaint system exists in Citizen Service Centers. May 10, 2019 Page 37 of 40 The World Bank Additional Financing for the Third Municipal Development Project (P168544) A TA is supporting the development of a Road Map for MDLF's Road Map for MDLF as Lending transformation into a Report by MDLF on 2021 MDLF MDLF Intermediary consulted with relevant lending intermediary for completion of Lending stakeholders municipal borrowing. The Road Map. Road Map shall be consulted with all stakeholders. MoLG to submit a report MoLG develops standards 2021 MoLG presenting standards for MoLG Municipal audit standard developed for how external municipal external municipal audits shall be carried out. audits. The indicator will measure MDLF's survey the number of in every 2 municipalities that reports years to MDLF's survey in every 2 Number of municipalities reporting enhanced capacity to assess the years (2019 and 2021) to 2019 and enhanced capacity to engage with private engage with private sector effectiveness assess the effectiveness MDLF 2021 sector for municipal service delivery for municipal service of its capacity of its capacity and/or local economic development delivery and/or local development development for economic development for municipalities. following concrete municipalities. actions/TA from MDP-3. The indicator will measure MDLF the number of 2017, Satisfaction surveys to Percentage of municipalities satisfied with satisfactory MDLF municipalities that are 2019, 2021 be carried out by MDLF MDLF support survey satisfied with the support in 2021. received from MDLF. The indicator counts the Quarterly progress Number of subprojects completed by 2020, number of subprojects MDLF reports from MDLF to MDLF Gaza municipalities under the Additional 2021, 2022 approved, financed and report number of Financing completed by the Gaza subprojects approved, May 10, 2019 Page 38 of 40 The World Bank Additional Financing for the Third Municipal Development Project (P168544) municipalities. financed and completed under the Additional Financing. Temporary jobs pertain to employment required by Quarterly progress O&M and subproject reports from MDLF will activities. Job cycles are include monitoring of Number of temporary jobs created in 2021 MDLF MDLF envisioned, e.g., 3-month jobs created by O&M Gaza by the Additional Financing person) to allow as many and subproject unemployed individuals to investment activities. benefit from the operation The data will come from This will measure the quarterly progress number of temporary jobs reports from MDLF on occupied by women in the 2021 MDLF the implementation of MDLF Female beneficiaries O&M and subproject the O&M and subproject investment activities grants financed by the financed by the AF. AF The information shall be The indicator will count the included in the quarterly number of Gaza LGUs that Number of Gaza municipalities progress reports from have prepared an O&M 2021 MDLF MDLF successfully implementing an O&M MDLF on the O&M and plan and carried out at activity subproject investments least one O&M activity financed by the AF. from the plan. ME IO Table SPACE May 10, 2019 Page 39 of 40 The World Bank Additional Financing for the Third Municipal Development Project (P168544) May 10, 2019 Page 40 of 40