ICRR 12519 Report Number : ICRR12519 IEG ICR Review Independent Evaluation Group 1. Project Data: Date Posted : 09/19/2006 PROJ ID :P005340 Appraisal Actual Project Name :Technical Assistance for Project Costs 25 29.3 Revenue Enhancement and US$M ) (US$M) Fiscal Management Country :Lebanon Loan/ Loan US$M ) /Credit (US$M) 20.88 24.7 Sector (s):Board: ): PS - Central US$M ) Cofinancing (US$M) 4.5 government administration (95%), Law and justice (5%) L/C Number :L3770; L7197 FY ) Board Approval (FY) 94 Partners involved : CIDA, French government Closing Date 03/31/2000 12/31/2006 Evaluator : Panel Reviewer : Division Manager : Division : Steven Benjamin Jorge Garcia-Garcia Lily L. Chu IEGCR Webb 2. Project Objectives and Components a. Objectives The objectives of the Project are to increase the operational efficiency of MOF and to enhance its capacity to develop and use improved policies, systems and procedures in the areas of revenue collection and public expenditure management. The objectives of the project did not change . b. Components (or Key Conditions in the case of Adjustment Loans ): 1. Customs Administration Improvement of the efficiency of General Directorate of Customs (GDC) and rehabilitation of its institutional capabilities through: a. Introduction of suitable measures to strengthen customs administration and reform customs procedures; b .Computerization of GDC's customs operations; and c. Provision of office space, equipment and consultants' services, and the training of GDC's personnel to upgrade their professional capabilities . 2 Land Registration and Cadastre a. Cadastral mapping, through the use of aerial photography and land surveys, of about 1500 square kilometers of the Borrower's territory. [This subcomponent was dropped two years into the project .] b. Reconstruction, archiving and computerization of destroyed and defaced cadastral maps of the surveyed part of the Borrower's territory, production of new cadastral maps of the surveyed part of the Borrower's territory for which no such maps exist and production, archiving and computerization of cadastral maps for the part of the Borrower's territory to be surveyed under the Project . c. Training of the personnel of Directorate of Land Registry ( DLR) to upgrade their professional capabilities . d. Enhancement of the institutional capabilities of DLR through the establishment of a computerized land rights and graphical information database. e. Development of a suitable geographic information system designed to (i) electronically link the operations of the Department of Cadastre within DLR to those of the Department of Land Registration within DLR; and (ii) provide an automated means to access land records throughout the territory of the Borrower . 3: Domestic Taxation and Public Expenditure Management a. Provision of equipment and consultants' services to (a) assist in the establishment, within MOF, of a specialized tax collection unit; (b) develop suitable operational procedures and information systems therefore; and (c) train MOF staff assigned to said unit on the use and application of the aforementioned procedures and systems . b. Provision of consultants' services to (a) design suitable information systems, and accounting and auditing procedures; (b) train MOF staff on the use and application of the aforementioned systems and procedures; and (c) recommend measures to improve tax administration . c. Provision of consultants' services to assist the Borrower in preparing measures aimed at the broadening of the tax base and the diversification of the Borrower's revenue sources . d. Provision of consultants' services to assist the Borrower in improving MOF's public expenditure management, including its budgeting, expenditure and financial controls, and cash and debt management . Dropping subcomponent 2.a. was the only change in the project activities . c. Comments on Project Cost, Financing, Borrower Contribution, and Dates The project was originally scheduled to close in 2000; it completed the originally envisioned tasks by 2003 (except for the subcomponent that was cancelled ). It was expanded and extended with a supplemental loan; it closed in 2005 in the time specified in the supplemental agreement . 3. Relevance of Objectives & Design : For a country coming out of 15 years of civil war, the objective of enhancing revenue capacity was relevant . In retrospect, the cadastre and land registration components in original project were under -funded, but it would have been hard to know this in advance . (The ICR noted this.) The choice to complete preparation of the loan before all facts were known seems to have been the correct one; and then when more was known about the scope of the problem, the Bank and the borrower took appropriate remedies by obtaining a supplement . The objective of the component for improving public expenditure management was appropriate for Lebanon ’s circumstances, but was too complex a task to be addressed fully with a small component of the project . (The ICR noted this.) 4. Achievement of Objectives (Efficacy) : The main objectives of the project —to increase revenue, to increase the rate of compliance with tax laws, and to speed the clearance in customs —were achieved. Customs Data indicate success in making customs clearance more efficient and more automated and in raising revenue relative to tariff rates. Clearance time dropped to 2-3 days, in contrast to an average of eight days before the project . Automated customs data entry and information management systems were successfully installed and now handle the majority of trade. These improved efficiency and suggest reductions of corruption . Gross revenues initially rose as a result of the administrative reform, and then fell because of sharp reduction of the tariff rates . (A VAT more than fully replaced the lost customs revenue in Lebanon .) The customs component served as a model in the region, with Lebanese officials providing training to counterparts in 5 other MENA countries. Cadastre Data indicate success in expanding the accuracy and coverage of the cadastre . The government’s request for and usage of a supplement for this component is a sign of its ongoing commitment The cadastre component served as a model in the region, with counterparts from six other MENA countries coming to visit Lebanon and receive training . The time for processing property affidavits, such as title and map abstracts, fell from three days before automation to a few minutes with automation . This decline in processing time contributed to increasing the volume of property registration (50 percent increase over the life of the project ) and real estate transactions. Economic management The financial management component does not have quantitative indicators, due to the nature of the measures . Most of the institutional measures under the component were done . The failure so far to establish a large -taxpayer unit is the main shortcoming of this component . 5. Efficiency : The ICR did not comment or provide information on Efficiency of the project . The $26m loan was about 0.24% of GDP. This is at the upper end of the range, but not the highest, for tax administration projects approved at the Bank in the past decade. 6. M&E Design, Implementation, & Utilization: Main streaming the project activities into regular government operations was an important feature of the implementation design. The Bank worked closely with country counterparts and with other donors in designing and implementing the project . Changes in the Banks bidding documents contributed in part to the two year delay in implementing the originally agreed parts of the project. The record shows government support for most of the time; the two exceptions were the failure to get executive support for a subcomponent to do a new cadastre of 1500 sq km and during the 20 months after a new government came to office in late 1998. There were no government comments appended to the ISR, which was filed just before the end of the fiscal year, but before the recent (resumption of) violent conflict with Israel . 7. Other (Safeguards, Fiduciary, Unintended Impacts--Positive & Negative): No problems were seen in areas of Safeguards, Fiduciary, or Unintended Impacts . 8. Ratings : ICR ICR Review Reason for Disagreement /Comments Outcome : Satisfactory Satisfactory Institutional Dev .: Substantial Substantial Sustainability : Likely Likely Developments in Lebanon since the ICR might reduce somewhat the likelihood of sustainability, but we do not know enough yet to decide whether to change the rating. Bank Performance : Satisfactory Satisfactory Borrower Perf .: Satisfactory Satisfactory Quality of ICR : Satisfactory NOTES: NOTES - When insufficient information is provided by the Bank for IEG to arrive at a clear rating, IEG will downgrade the relevant ratings as warranted beginning July 1, 2006. - ICR rating values flagged with ' * ' don't comply with OP/BP 13.55, but are listed for completeness . 9. Lessons: When a government encounters a period of instability that delays a project, like in Lebanon in the late 1990s, and as long as the project continues to be relevant to the country situation, the Bank does well to wait a couple of years for calm to return and for the subsequent government to see the value of the project and to take it up again . 10. Assessment Recommended? Yes No 11. Comments on Quality of ICR: The ICR was satisfactory, but it would have conveyed the story with more precision if there had been time series of the relevant statistics, like the real value of customs revenue, imports and GDP . For better presentation, the ICR could have provided a complete list of acronyms .