Document of The World Bank FOR OFFICIAL USE ONLY Report No: PAD3313 INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT PROJECT PAPER ON A PROPOSED ADDITIONAL LOAN IN THE AMOUNT OF EUR 20 MILLION (US$22.4 MILLION EQUIVALENT) TO BOSNIA AND HERZEGOVINA FOR A REAL ESTATE REGISTRATION PROJECT February 12, 2020 Social, Urban, Rural And Resilience Global Practice Europe And Central Asia Region This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization CURRENCY EQUIVALENTS (Exchange Rate Effective December 31, 2019) Currency Unit = EUR EUR 1 = US$ 1.1228 FISCAL YEAR January 1 - December 31 Regional Vice President: Cyril E Muller Country Director: Linda Van Gelder Country Manager: Emanuel Salinas Munoz Regional Director: Steven N. Schonberger Practice Manager: Jorge A. Munoz Task Team Leader: Camille Bourguignon-Roger ABBREVIATIONS AND ACRONYMS AF Additional Financing BiH Bosnia and Herzegovina CILAP Capacity Building for Improvement of Land Administration Procedures CPF Country Partnership Framework ECA Europe and Central Asia CM Cadastral municipality DMS Document management System ESF Environmental and Social Framework ETRS European Terrestrial Reference System FAO Food and Agriculture Organization of the United Nations FBH Federation of Bosnia and Herzegovina FGA Federation Administration for Geodetic and Real Property Affairs FMoJ Federal Ministry of Justice GNSS Global Navigation Satellite System IBRD International Bank for Reconstruction and Development IT Information Technology ICR Implementation Completion and Results Report IDA International Development Association IFR Interim Financial Report MoFT Ministry of Finance and Treasury PDO Project Development Objective PIU Project Implementation Unit PPSD Project Procurement Strategy for Development PSREMEI Public Services for the Real Estate Market and European Integrations REC Real estate cadastre RERP Real Estate Registration Project RGA Republic Administration for Geodetic and Real Property Affairs RS Republika Srpska VGGT Voluntary Guidelines on the Responsible Governance of Tenure of Land, Fisheries and Forests in the Context of National Food Security Bosnia and Herzegovina Real Estate Registration Project - Additional Financing TABLE OF CONTENTS I. BACKGROUND AND RATIONALE FOR ADDITIONAL FINANCING ........................................ 6 II. DESCRIPTION OF ADDITIONAL FINANCING ...................................................................... 9 III. KEY RISKS ..................................................................................................................... 13 IV. APPRAISAL SUMMARY .................................................................................................. 14 V. WORLD BANK GRIEVANCE REDRESS .............................................................................. 17 VI SUMMARY TABLE OF CHANGES ..................................................................................... 18 VII DETAILED CHANGE(S) .................................................................................................... 19 VIII. RESULTS FRAMEWORK AND MONITORING ................................................................... 23 The World Bank Real Estate Registration Project - Additional Financing (P169463) BASIC INFORMATION – PARENT (REAL ESTATE REGISTRATION PROJECT - P128950) Country Product Line Team Leader(s) Bosnia and Herzegovina IBRD/IDA Camille Bourguignon-Roger Project ID Financing Instrument Resp CC Req CC Practice Area (Lead) P128950 Investment Project SURLN (9355) ECCWB (7001) Urban, Resilience and Land Financing Implementing Agency: Federal Administration for Geodetic and Real-Property Affairs of the Federation of BH, Republic Administration for Geodetic and Property Affairs of Republika Srpska ADD_FIN_TBL1 Is this a regionally tagged project? No Bank/IFC Collaboration No Expected Original Environmental Approval Date Closing Date Guarantee Current EA Category Assessment Category Expiration Date 25-Oct-2012 31-Jul-2020 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) February 12, 2020 Page 1 of 54 The World Bank Real Estate Registration Project - Additional Financing (P169463) Development Objective(s) The project development objective is to support development of a sustainable real estate registration system with harmonized land register and cadastre records in urban areas of both the Federation of Bosnia and Herzegovina and the Republic of Srpska. Ratings (from Parent ISR) RATING_DRAFT_ NO Implementation Latest ISR 20-Dec-2016 19-Jun-2017 07-Mar-2018 06-Dec-2018 28-Jun-2019 18-Dec-2019 Progress towards achievement of MS MS S S S S PDO Overall Implementation MS MS S S S S Progress (IP) Overall Safeguards S S S S S S Rating Overall Risk L L L L L L BASIC INFORMATION – ADDITIONAL FINANCING (Real Estate Registration Project - Additional Financing - P169463) ADDFIN_TABLE Urgent Need or Capacity Project ID Project Name Additional Financing Type Constraints P169463 Real Estate Registration Scale Up No Project - Additional Financing Financing instrument Product line Approval Date Investment Project IBRD/IDA 05-Mar-2020 Financing Projected Date of Full Bank/IFC Collaboration Disbursement February 12, 2020 Page 2 of 54 The World Bank Real Estate Registration Project - Additional Financing (P169463) 24-Oct-2022 No Is this a regionally tagged project? No Financing & Implementation Modalities Child [ ] 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 IBRD % IDA 34.10 31.04 1.23 96 % Grants % PROJECT FINANCING DATA – ADDITIONAL FINANCING (Real Estate Registration Project - Additional Financing - P169463) PROJECT FINANCING DATA (US$, Millions) SUMMARY -NewFi n1 SUMMARY (Total Financing) Proposed Additional Total Proposed Current Financing Financing Financing Total Project Cost 34.10 22.40 56.50 Total Financing 34.10 22.40 56.50 February 12, 2020 Page 3 of 54 The World Bank Real Estate Registration Project - Additional Financing (P169463) of which IBRD/IDA 34.10 22.40 56.50 Financing Gap 0.00 0.00 0.00 DETAILS - Additional Financing NewFinEnh1 World Bank Group Financing International Bank for Reconstruction and Development (IBRD) 22.40 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) Urban, Resilience and Land Contributing Practice Areas Governance Climate Change and Disaster Screening This operation has been screened for short and long-term climate change and disaster risks PROJECT TEAM Bank Staff Name Role Specialization Unit Team Leader (ADM Camille Bourguignon-Roger Land Administration SURLN Responsible) Sanda Jugo Procurement Specialist (ADM Procurement Specialist EECRU February 12, 2020 Page 4 of 54 The World Bank Real Estate Registration Project - Additional Financing (P169463) Responsible) Financial Management Lamija Marijanovic Financial Management EECG2 Specialist (ADM Responsible) Environmental Specialist (ADM Esma Kreso Beslagic Environmental Safeguards SCAEN Responsible) Social Specialist (ADM Roxanne Hakim Social Safeguards SCASO Responsible) Economic and Financial Alvaro Federico Barra Team Member SURLN Analysis Larysa Hrebianchuk Team Member Monitoring & Evaluation SURLN Mirjana Atijas Team Member Operations Officer SCAEN Karahasanovic Extended Team Name Title Organization Location Land Registration and Geodetic Bozena Lipej Consultant Expert Nikola Kerleta Procurement Consultant Consultant Senior Land Administration Food and Agriculture Rumyana Tonchovska Officer – IT Organisation of the UN February 12, 2020 Page 5 of 54 The World Bank Real Estate Registration Project - Additional Financing (P169463) I. BACKGROUND AND RATIONALE FOR ADDITIONAL FINANCING Background 1. Bosnia and Herzegovina (BiH) is a small country of close to 4 million people with a complex governance structure. The Dayton Peace Agreement1 established BiH as a state comprising two entities, each with a high degree of autonomy: The Federation of Bosnia and Herzegovina (FBH) and the Republika Srpska (RS). The district of Brčko was added to the structure in 2000. Between the two entities, governance structures and budgetary arrangements are starkly asymmetric. While the RS is subdivided into 63 municipalities, the FBH is subdivided into 10 cantons, each with its own executive, legislative, and judicial branches of government. Each canton is further subdivided into municipalities. While the country’s complex political system poses significant challenges in developing coherent sectoral policies and efficiently confronting emerging development priorities, the authorities in BiH have been pursuing a joint development strategy that centers on macroeconomic stability and export-led economic growth, employment and social cohesion, and sustainable development. The strategy’s overarching goal is accession to the European Union (EU). 2. The entities of BiH have distinctive land administration systems. In FBH, the daily management of the cadastre and land registry is split between the cadastre departments of the municipalities, cantonal geodetic authorities, and land registry offices in municipal courts. The Federal Ministry of Justice (FMoJ) is responsible for preparing the laws and adopting regulations pertaining to real estate registration. Land registry offices work under jurisdiction and supervision of municipal courts, while cadastre departments and cantonal geodetic authorities work under the guidance and with the support of the Federation Administration for Geodetic and Real Property Affairs (FGA). The FGA is also responsible for a wide range of tasks related to cadastral surveys, mapping, land consolidation, and the utility cadastre, among others. By contrast, in RS, the cadastre and land registry are consolidated under the Republic Administration for Geodetic and Real Property Affairs (RGA). The registration of real property rights used to be a function of the municipal courts, but this responsibility was transferred to the RGA following the adoption of the Law on State Survey and Real Estate Cadastre in 2011. 3. Over the past decade, BiH has made commendable progress in establishing effective and professional land registration and cadastre services to facilitate land markets and provide tenure security. From 2007 to 2012, under the Land Registration Project (LRP), the FGA, FMoJ and RGA adopted new business plans and standards; renovated land registry offices; addressed the backlog of registration requests; digitized part of the cadastre and land registry archives; and adopted Information Technology (IT) systems to allow for wider sharing of cadastre and land registry data. Another important achievement under the LRP was the piloting of a methodology to update and harmonize cadastre and land registry records. Overall, these investments helped increase the efficiency and speed of land administration services and contributed to an improvement in the country’s Doing Business ranking. In 2007, BiH ranked at 139 in the Real Property category in the Doing Business Report. By 2012, BiH ranked at 100. 4. Since 2012, the FGA, FMoJ and RGA started scaling up investments in the harmonization of cadastre and land registry records. Between 2012 and 2018, cadastre and land registry records were harmonized in more than 400 cadastral municipalities (CMs), benefiting over 1.2 million owners and co-owners. Concurrently, the FGA and RGA continued to improve working conditions in the land administration sector through the renovation of offices, training of staff, and the acquisition of surveying and IT equipment, among others. 1The Dayton Agreement, also known as General Framework Agreement for Peace in Bosnia and Herzegovina was signed on November 21, 1995. February 12, 2020 Page 6 of 54 The World Bank Real Estate Registration Project - Additional Financing (P169463) They introduced address registers, sales-price registers, and digital archives IT systems. They also started to put greater emphasis on records digitization, IT systems interoperability and integration, and the development of e-services for land administration. These improvements in the BiH land administration system are currently supported by the World Bank under the Real Estate Registration Project (RERP). They are also supported by the Swedish International Development Cooperation Agency, Norway, Netherlands’ Cadastre (Kadaster), and the EU. The Real Estate Registration Project 5. The RERP was approved on October 25, 2012. It is a SDR 22.7 million credit (US$ 34.1 million equivalent) with a Project Development Objective (PDO) to “support the development of a sustainable real estate registration system with harmonized land registry and cadastre records in urban areas of both the FBH and RS”. As of October 2019, the credit was 93% disbursed, and both Progress towards achievement of PDO and Overall Implementation Progress were rated Satisfactory within the past 12 months. 6. The PDO is measured through the following PDO level results indicators: (i) land registry and cadastre records have been harmonized in 468 CMs2; (ii) all harmonized records are publicly accessible online; (iii) 1.48 million individuals have directly benefited from data harmonization, of which at least 35% are women.3 The RERP is structured around three components. Component A focuses on data harmonization. Component B covers activities related to office renovations, information Technology (IT) and provision of furniture and equipment. Component C is related to policy support, institutional development, and project management. The Project has 24 intermediate results indicators related to customer satisfaction, public awareness, social monitoring, office acquisitions and renovations, IT, real property transactions, and strategy and training. 7. The Project became effective on September 23, 2013, and the Mid-Term Review was completed in June 2016. By then, the credit was 47% disbursed, data harmonization had been initiated in 196 CMs, but completed in only 78 CMs, benefiting 80,000 owners and co-owners. The review concluded that the time and funds required for data harmonization had been underestimated, and the Project would have to be restructured to reallocate funds to data harmonization and reduce the number of target CMs. The FGA and RGA also expressed interest in an Additional Financing (AF). 8. The Project was restructured on October 6, 2017, to reallocate funds from building acquisition to data harmonization in RS, extend the Project closing date by 18 months until January 31, 2020, and adjust the results framework to revise the targets related to data harmonization, address a few methodological and data availability issues, and downgrade the PDO indicator on customer satisfaction to Intermediate results Indicator. Among others, the number of target CMs was reduced from 523 to 468, and the number of direct beneficiaries from 1.68 million to 1.48 million. 9. The last Implementation Support Mission was conducted in October 2019, and the implementing 2 Data harmonization refers to the harmonization of cadastre and land registry records. In RS, where the cadastre and land registry are managed by a single agency, the Republic Administration for Geodetic and Real Property Affairs, the information contained in the cadastre and land registry are harmonized, and a new single record called Real Estate Cadastre (REC) is created. In the FBH, where the management of the cadastre and land registry is split between the cadastre departments of the municipalities and land registry offices in municipal courts, the Federation Administration for Geodetic and Real Property Affairs coordinates the harmonization of the information contained in the cadastre and land registry. At the end of the process, these records continue to be managed separately. In both entities, these activities are conducted systematically by CM. 3 Direct beneficiaries are the owners and co-owners who have their rights verified / confirmed through data harmonization. The initial end targets were 523 CMs and 1.68 million direct beneficiaries, but these targets were adjusted following mid-term review. February 12, 2020 Page 7 of 54 The World Bank Real Estate Registration Project - Additional Financing (P169463) agencies reported good progress towards achieving the PDO. The harmonization of land registry and cadastre records had been completed in 527 CMs, benefiting 1.68 million owners, 35.8 % of which were women.4 Building acquisitions and renovations have been successfully completed, and the implementing agencies are making good progress with the establishment of their digital archives. Cadastre and land registry data are publicly available online, and the implementing agencies are focusing on key improvements, such as making their respective systems interoperable with the Personal ID, Business ID, and Address registers. There are some challenges with the maintenance of the IT systems in both entities, but the implementing agencies are actively working on addressing them. 10. The RERP is in compliance with all legal covenants under the Credit Agreement. The Fiduciary Management system is satisfactory, there are no pending financial audit reports. Environmental and social safeguards are also satisfactory. There are no unresolved environmental, social, or other safeguard issues as confirmed during latest project Implementation Support Mission of October 2019. Procurement performance is rated satisfactory, and there are no known cases under investigation by the Integrity Vice Presidency related to this Project. Rationale for Additional Financing 11. This AF to the RERP was requested by the Ministry of Finance and Treasury (MoFT) on July 7, 2018. The AF will allow the implementing agencies – the RGA and the FGA – to scale up investments in the development of a sustainable real estate registration system with harmonized land registry and cadastre records. This will be done through additional investments in data harmonization, civil works, IT, policy support, and institutional development. The AF will also prepare the sector for future investments through additional investment in policy support and institutional development. 12. This AF has been under discussion since project’s Mid-Term Review in June 2016. It is aligned with focus areas 1 and 2 of the Country Partnership Framework (CPF) for BiH for the period of FY16-FY20 discussed by the Board on December 15, 2015 (Report No. 99616-BA), namely “increasing public sector efficiency and effectiveness” and “creating conditions for accelerated private sector growth.” The harmonization of land registry and cadastre records supported by the AF contributes to improving the quality of real estate records, which is key to secure real property rights, encourage investments, and support private sector growth. Modernizing the land administration system also brings more efficiency in the public sector. Lastly, the support provided to encourage women to register themselves as owners or co-owners is aligned with the CPF objective to reduce the gender gaps that persist in many sectors, including land administration. The AF is consistent with the Revised Indicative Strategy Paper for Bosnia and Herzegovina for the period 2014-2020 adopted by the European Commission in 2018, and supports the implementation of the FGA and RGA strategies for the land administration sector in FBH and RS. 13. The AF is the appropriate instrument because it capitalizes on the successful implementation arrangements established under the RERP and maintains the momentum of the results achieved to-date. It is designed to scale up strategic investments for the sector that need to be expedited but cannot be financed through regular budget and are not covered by other development partners. Furthermore, the borrower recognizes the importance of the RERP to support the modernization of the land administration sector and values the World Bank’s regional and global experience in supporting the design and implementation of land administration projects. 14. The AF was designed and will be implemented in close collaboration with the Swedish International 4 These figures include the baseline of 35 CMs and 90,000. February 12, 2020 Page 8 of 54 The World Bank Real Estate Registration Project - Additional Financing (P169463) Development Cooperation Agency, Government of Norway, Netherlands’ Cadastre (Kadaster), and the Delegation of the European Union to Bosnia and Herzegovina who are already engaged in the sector. II. DESCRIPTION OF ADDITIONAL FINANCING 15. Given the successful implementation of the RERP, the AF will allow the implementing agencies to scale up key investments and enhance the positive impact of the project on BiH’s investment climate, public sector efficiency, and efforts to join the European Union. Scaling up data harmonization in FBH (Components A.1 and A.2) 16. The AF will allow the FGA, FMoJ, municipalities, and municipal courts to scale up the harmonization of land registry and cadastre records in 100 CMs and increase the number of direct beneficiaries by 200,000. Data harmonization in these CMs was requested by the municipalities and municipal courts. Under the RERP, as of October 2019, data harmonization has been completed in 205 CMs reaching 978,676 direct beneficiaries. Works are ongoing in 50 CMs, while 35 CMs were completed under the LRP. This is in addition to the 301 CMs covered prior to the RERP and LRP. By the closing date of credit IDA-5188-BA on July 31, 2020, data harmonization in FBH is expected to be completed in 579 CMs5, of which 35 CMs were covered under the LRP and 243 CMs under the RERP reaching 980,000 direct beneficiaries. By the time the AF will be completed, it is expected that the FBH will have completed data harmonization in 679 CMs.6 Conducting cadastral surveys in RS (Components A.1 and A.2) 17. The AF will allow the RGA to conduct cadastral surveys and subsequently establish Real Estate Cadastre (REC) in 15 CMs, while additional 5 CMs will be completed with government funds. The RGA has established REC in 287 CMs of which 171 CMs under the RERP and 116 CMs using government funds. REC establishment is ongoing in 129 CMs and the RGA expects to have completed to total of 327 CMs by the end of July 2020. Under the AF, the RGA plans to cover an additional 50 CMs, using governments funds, and to conduct cadastral surveys in 20 CMs. These cadastral surveys are required because the cadastre data in use is too outdated to establish REC. These 20 CMs were prioritized because they are in municipalities where REC establishment is strategic for economic development. Table 1 – Progress and plans for data harmonization / REC establishment CMs with data harmonization / REC establishment Total CMs Other LRP RERP AF Total FBH 1,869 301 35 243 100 679 RS 1,684 116 0 171 0 287 BiH 3,553 417 35 414 100 966 5 These 579 CMs cover 923,488 ha, or 31% of the CMs and 35.4% of the territory of FBH. Considering that data harmonization has mainly been implemented in urban areas, the percentage of properties covered is actutally higher. 6 The 301 CMs completed prior to the LRP and RERP are not included in the PDO level indicators tracking the number of CMs in which data harmonization has been completed and the number of direct beneficiaries. February 12, 2020 Page 9 of 54 The World Bank Real Estate Registration Project - Additional Financing (P169463) Upgrading IT systems (Component B.2) 18. The AF will support ongoing efforts to further modernize the land administration systems of the RS and the FBH. In both entities, the Geodetic Authorities have prepared new IT strategies, and the AF will support their implementation. Priority will be given to the development of e-services and the linkage of cadastres and land registries to other key registries, such as the Personal ID, Business ID and Address registers. The AF will also strengthen the capacity of the implementing agencies to manage their increasingly complex IT system and support the RGA’s plan to replace its cadastre and land registration software. Scaling up digital archive pilots (Components B.1 and B.3) 19. The AF will allow the implementing agencies to scale-up digital archives activities executed with the support of the Swedish-funded Capacity Building for Improvement of Land Administration Procedures (CILAP) Project, and the Norwegian-funded Project Public Services for the Real Estate Market and European Integrations (PSREMEI). In the RS, the AF will finance the establishment of a central archive and, in both entities, it will allow for the introduction of the scanning of incoming documents in RGA branch units, FBH municipal courts, and FBH municipal cadastres. Policy support and institutional development (Component C.1) 20. By AF completion, data harmonization will have been finished in 679 CMs of FBH and REC will have been established in 377 CMs of RS, covering approximatively one third of the BiH territory.7 Under the AF, the implementing agencies will commission studies on how to complete these activities in the entire country and they will review data harmonization and REC establishment processes to determine how they could be further streamlined. The FGA and RGA will also commission studies on the financial sustainability of the BiH real estate registration system. Per the Project Appraisal Document (PAD), sustainability “is measured by the degree an institution generates revenue to match its costs, charges affordable fees, delivers quality services without discrimination and within a reasonable time.” Gender 21. Women’s property rights are legally protected in BiH, but tradition frequently favors male over women. For instance, real property ownership is traditionally registered to male family members, and it is common for women to renounce to their share of property inherited from parents to the benefits of their brothers. With the support of the RERP and the CILAP project, the FGA and RGA have been implementing various activities to raise public awareness about this issue, train staff, educate the workforce involved in the data harmonization and REC establishment processes, and encourage women to register themselves as owners or co-owners. The implementing agencies are also producing disaggregated data on real estate ownership by gender. Under the RERP, the percentage of direct female beneficiaries has increased from 31% in 2012 to 35.8% in 2019. Under the AF, it is expected that this percentage will be maintained at 35% because of the relatively small number of additional direct beneficiaries.8 Yet, the AF will maintain a strong focus on gender mainly through vulnerability mapping, social monitoring, training and public awareness campaign. These activities will be coordinated by the Project Implementation Units’ (PIU) social specialist and will aim at ensuring that women are duly informed about their rights and actively participate in data harmonization and REC establishment. 7There are 3,553 CMs in BiH (1,684 CMs in RS and 1,869 in the FBH). 8The RERP already reached over 1.6 million direct beneficiates and the AF will allow for the FGA to reach additional 200,000 direct beneficiaries. Therefore, increasing the percentage of direct beneficiaries who are women from 35% to 36% would mean that women should account for over 45% of the 200,000 additional direct beneficiaries. February 12, 2020 Page 10 of 54 The World Bank Real Estate Registration Project - Additional Financing (P169463) Citizen engagement 22. The harmonization of cadastre and land registry records requires the active participation of the public. As explained in the PAD of the parent project, “land holders need to appear in front of a public display commission and to apply for real estate right registration if necessary.” Under the AF, subcomponent “A.1 Public awareness, vulnerabilities and social monitoring” will be maintained”. Citizens engagement mechanisms established under the RERP will be strengthened and continued. Specifically: 1) Each PIU will continue to be staffed with a full time Social Specialist who will serve citizens, assist to make inquiries, file complaints and gather information on real properties through the existing complaint and grievance redress channels in all participating municipalities. The Social Specialists will provide interested citizens with information on the available channels for complaints and access to justice, such as the RS offices for free legal aid, and the Institution of the Human Rights Ombudsman; 2) The implementing agencies will organize at least two public hearings to disseminate and discuss the results of the 2019 and 2022 customer satisfaction surveys. These public hearings will provide an opportunity for citizens to voice their opinions, needs and concerns regarding the REC establishment and data harmonization. The FGA and RGA will reach out to and invite vulnerable groups such as Roma, refugees, displaced persons, women and other groups, who due to their gender, health, age or other reasons find it difficult to express their real property rights; and, 3) The implementing agencies will also organize an annual Open Door Day where citizens will be invited to share their opinions on real property registration services and ongoing REC and data harmonization activities. This will be done as part of the larger public awareness campaign. Climate change and geophysical hazards 23. BiH is vulnerable to adverse natural events, and changes in climatic patterns are expected to increase floods, heavy precipitation, landslides, extreme heat events, and wildfires. Per the CPF for BiH for the period of FY16-FY20 discussed by the Board on December 15m 2015 (Report No. 99616-BA), these events are expected to impact the poor more severely and addressing BiH’s vulnerability to the risks of environmental shocks is one of the highest priorities. The AF will help mitigate these risks and contribute to climate change adaptation and mitigation in multiple ways. First, data harmonization and cadastre surveys planned under subcomponent A.2 will provide the government and project beneficiaries with accurate cadastre and land registry records, which is key for decision making as well as for compensation and insurance claims after disasters. Second, subcomponent B.2 will help increase the availability of geospatial data for climate change planning and for supporting search and rescue operations during natural disasters. Thirdly, the establishment of a central archives in RS and the investments in cadastre and land book scanning will ensure that these records are better protected in the event of natural disaster. Lastly, the scanning and digitization of procedures will also reduce paper consumption. Maximizing finance for development 24. Under the AF, the FGA and RGA will continue to direct investments in data harmonization and REC establishment towards part of the BiH territory that are strategic for social and economic development. The verified and updated cadastre and land registry records produced as the result of these investments will allow for the Project direct beneficiaries – owners and co-owners in these areas – to benefit from more secure real property rights and easier access to credit. They will also provide local governments with information that is key for planning, while AF investments in system interoperability and e-services are instrumental to make this information available to ministries and public agencies. The RERP has also been a catalyst for the modernization of the real estate registration system in BiH and the AF, allowing the FGA and February 12, 2020 Page 11 of 54 The World Bank Real Estate Registration Project - Additional Financing (P169463) RGA to secure support from development partners including Sweden, Norway and the Netherlands.9 Lessons learned from the interim ICR 25. The closing date of RERP is being extended to July 31, 2022 to allow for the implementation of the AF, which will bring the total period of implementation to 9 years and 9 months. When the Bank initiated the preparation of this AF, it was uncertain whether the AF would bring the total period of implementation beyond 10 years, so the Bank decided to prepare an interim Implementation Completion and Results (ICR) to reflect the Project’s achievements as of March 2019. The interim ICR concluded that the RERP is on track to meet its PDO, but rated the project Moderately Satisfactory because of implementation delays, shortcomings with the Results Framework, and limited evidence on the Project’s impact on the sustainability of the BiH land administration system. The key findings and lessons learned from the interim ICR have been incorporated into the AF. They include streamlining the Results Framework, working closely with the client to prevent delays with AF effectiveness, and pursuing the partnership between the World Bank and the Food and Agriculture Organization of the United Nations (FAO) to overcome the implementation support challenges posed by the complexity of the BiH land administration structure. The implementing agencies and the World Bank project supervision team will also work together to ensure that the impact evaluation of the RERP is completed during the AF, therefore producing stronger evidence on the Project’s impact. Proposed restructuring arrangement Adjustments to the Results Framework 26. The parent project has four PDO-level indicators and 26 Intermediate Results Indicators. The targets of PDO level indicators “CMs with harmonized land registry and cadastre data/established REC” and “Direct project beneficiaries” will be increased to reflect actual achievements as of October 31, 2019 and add 100 CMs and 200,000 direct beneficiaries. The intermediate results indicators “studies on the financial sustainability of the real estate registration system” and “feasibility studies on the completion of REC establishment and data harmonization” will be added. The end-targets of 17 Intermediate Results Indicators will be increased. These indicators include the number of offices purchased /renovated, the number of e- services types provided for key stakeholders, and the number of e-services delivered. Six Intermediate Results Indicators will be dropped, and six new indicators will be introduced to reflect the evolution of the works and reflect AF investments in cadastral surveys and the establishment of a central archive in RS. Lastly, Intermediate Results Indicators that are not subject to additional investments will be maintained without new targets. Change in Project structure and description 27. While the Project structure will remain unchanged, the Project description will be adjusted to include the activities planned under the AF. The Project description will remain structured around Part 1, describing the activities implemented in the FBH, and Part 2, for the activities supported in RS. The description of Part 1 and 2 will be updated to better describe project activities. Part 2 will be amended to include references to the execution of cadastral surveys under component A, and the establishment of a central archive under component B. It is also clarified that vehicles were eligible under the project since credit IDA-5188-BA became effective on September 23, 2013 9 The Swedish-funded CILAP project (2013-2015 and 2016-2019) focuses on capacity development and is oriented towards strengthening institutional capacity of the FGA and RGA. Sweden also finances the project Infrastructure for Spatial Information in the region of Western Balkan (IMPULS) while the Netherlands is financing the project Strengthen Professional Access to Information About Land (SPATIAL) with a regional focus on the Balkan region. February 12, 2020 Page 12 of 54 The World Bank Real Estate Registration Project - Additional Financing (P169463) Other Arrangements 28. The PIUs established under the RERP will be maintained throughout the AF. In RS, the PIU will be staffed with an architect/ civil engineer who will be responsible for the oversight of acquisition and adaptation of the central archive. No changes are required in implementation, safeguards, and financial management agreed under the RERP. However, the AF is subject to the World Bank’s new procurement policy framework. Disbursement estimates, components, costs and the implementation schedule will be also revised. 29. Annex 1 includes a more detailed description of the AF per sub-component. Table 2 – Current and AF cost by component Current cost AF cost (US$ Total cost Component name (US$ million) million) (US$ million) A – Real estate registration data development 18.40 9.75 28.15 B – Real estate registration infrastructure development 11.00 10.30 21.30 C – Policy and Institutional Development, and Project Management 4.70 2.35 7.05 Total 34.10 22.40 56.50 III. KEY RISKS 30. The overall risk for the AF is assessed as low and key risks identified are mainly associated to the AF technical design. Specifically, these risks are related to the building acquisition and renovation of the RGA central archive, the execution of cadastre surveys in RS, and the establishment of the IT management structure in the FBH. Another identified risk is related to possible delays with loan effectiveness, which is a recurrent issue in BiH. These risks will be mitigated through the measures presented in the section. Building acquisition and renovation for the RGA central archive 31. The AF will finance the acquisition and adaptation of a building for the RGA central archive. The RGA estimates that the building should be around 2,000 m2 on a lot of 5,000m2 to 6,000m2. The RGA requested an expert opinion and concluded that there are adequate facilities available on the market in the Banja Luka region and that the purchase of the facility, including reconstruction and adjustment costs, is within the estimated budget. However, there are risks related to possible cost overrun and delays. To mitigate the risk of possible cost overrun, the RGA will co-finance this activity should actual costs be higher than estimated. Regarding the risk of delays with the building acquisition and renovation, the RS PIU will be staffed with an architect/ civil engineer and the RGA has prepared a detailed scheduled for the execution of the work. Per this schedule, the RGA should complete the building acquisition by March 31, 2021. In case of delays with the acquisition of the building, the World Bank and the borrower will agree how to re-allocate the corresponding funds to other priority activities. Cadastre surveys in RS 32. The financing of cadastral surveys in 15 CMs in RS is contingent on the adoption by the RS government of the new rulebook on surveys and requires the preparation of detailed technical specifications. To prevent delays with this activity, it has been agreed that the RGA will make all possible efforts to have the new rulebook approved by the RS government by March 1, 2020, and will provide the Bank with the approved version of the rulebook. The RGA has also indicated that two surveys have been initiated in 2019 and that these surveys are being implementing per the existing bylaws without facing any issues. The RGA will also February 12, 2020 Page 13 of 54 The World Bank Real Estate Registration Project - Additional Financing (P169463) ensure that the bidding documentations is ready prior to AF effectiveness so that the tender can be as soon as the AF becomes effective. IT management structure in the FBH 33. One of the activities planned under the AF is to support the establishment of an IT management structure between the FGA, FMoJ, municipal courts, and municipal governments, and linking the cadastre and real property registration software (e-Grunt and kadastar.ba). There is a risk that the FGA and FMoJ fail to agree on the establishment of such a structure and therefore, that this objective cannot be met. To mitigate this risk, the FGA and FMoJ have formally adopted a joint IT strategy with a detailed section for the IT Management Structure. In addition, an agreement has been reached between the FGA and the FMoJ to transfer the responsibilities for the maintenance of the registration software e-Grunt to the FGA and the Ministry of Finance (MoF) in FBH has agreed to provide funding for the maintenance of both cadastre and the registration software to the FGA on annual base. Loan ratification 34. Delays with loan effectiveness is a recurrent issue in BH. Therefore, there is a risk that the AF does not becomes effective by July 31, 2020. The borrower and the entities will make all possible efforts to ensure that the AF becomes effective before Credit IDA-51880 closes on July 31, 2020. They will work closely with the authorities, supporting them in speeding up the procedure and following up on the different steps of the ratification procedure. The World Bank will monitor the process and support the borrower and the entities as appropriate IV. APPRAISAL SUMMARY A. Economic and Financial (if applicable) Analysis 35. The Economic Analysis of the parent project identified three direct benefits from the project: 1) improvement in compliance of registration and cadastre records; 2) improvement in the registration service; and 3) improvement in access to credit. To measure these, ex-ante economic cost-benefit analysis was prepared at appraisal using the following two models 1) a Property Market Dynamics model that estimated the expected increase in real property transactions and values due to improved registration services, and 2) a Mortgage Market Dynamics model that estimated the reduction of mortgage and consumer interest rates. However, the second model cannot be replicated due to lack of information to verify whether changes in the mortgage interest rate can be attributed to the RERP. Therefore, the AF’s cost-benefit analysis is replicated only using the Property Market Dynamics model. It should be noted that this approach may underestimate the AF impact as it does not account for all efficiency gains and cost savings from the AF. 36. The AF economic benefits are estimated at US$ 42.7 million dollars. They were calculated as the increase in real property values and number of market transactions derived from investments in cadastre and registration systems that improved access to finance and other investments in the housing market. The AF project cost is estimated to be US$ 23.68 million and includes all projected disbursements up to the closing of the Project. The AF’s economic benefits estimation has taken a more conservative approach than the original RERP analysis to account for the fact that subsequent similar investments are expected to be subject to diminishing returns. Nevertheless, the AF is estimated to provide BiH with a net benefit of US$ February 12, 2020 Page 14 of 54 The World Bank Real Estate Registration Project - Additional Financing (P169463) 26.6 million, which is equivalent to an Economic Internal Rate of Return of 39% (using a 12% discount rate). Furthermore, 4% of the total incremental market turnover will be received by the government as additional tax revenue through the property transfer tax. This amount is equivalent to a present value of US$ 17.5 million (see annex 3 for details). B. Technical 37. There is strong government support for the AF at both entity and state levels. The implementing agencies have demonstrated their capacity to efficiently manage the AF, they have strong ownership of the project and work well together and with the key stakeholders in the land administration sector. This AF has been under discussion since 2017 and responds to the need for scaling up activities that were successfully implemented under the parent project. There is good capacity within the implementing agencies to execute the activities planned under the AF; the implementing agencies and the World Bank have agreed on the AF procurement plans, and it is expected that the AF funds will be committed and disbursed promptly. The technical design of the AF considers the lessons learned from the parent project and the extensive World Bank experience with land administration projects in Europe and Central Asia (ECA) region. Cost estimates can be considered robust and the implementation schedule realistic because most of the AF activities are the continuation of those successfully implemented under the parent project. C. Financial Management 38. An assessment of the financial management capacity was carried out in March 2019, and it was concluded that the financial management arrangements in both PIUs are acceptable to the World Bank and adequate to support the AF. The fiduciary financial management risk is moderate. 39. Financial management implementation arrangements for the AF will use existing financial management systems and accounting staffing in the PIUs for the RERP. There are no weaknesses identified in the current RERP implementation arrangements, which continue to be acceptable to the World Bank. 40. The disbursement arrangements for the AF will be very similar to the ones for the parent project. The loan funds will flow from the Bank to the two Designated Accounts (DA) and further to contractors based on approved invoices. Such approach was assessed to be acceptable by the World Bank. 41. Regarding Financial Accountability and Reporting, the PIUs will prepare quarterly un-audited Interim Financial Reports (IFRs) in the form acceptable to the World Bank and related to the use of loan proceeds. IFRs will be submitted to the Bank within 45 days of the end of each calendar quarter, starting from the first disbursement and throughout the project life. The project financial statements, including Statement of Expenditures and DA Statements will be audited by independent auditors acceptable to the World Bank and on Terms of Reference acceptable to the World Bank. The annual audited project financial statements and the audit reports will be provided to the World Bank within six months of the end of each fiscal year. There are currently no overdue IFRs or audits for the RERP project, but also for entire BiH portfolio of projects. D. Procurement 42. As it is already the case under the RERP, the AF will be implemented by the RGA and FGA through their respective PIUs. The PIUs will provide fiduciary functions (i.e. procurement, Financial Management, disbursement) maintaining complete records for all AF activities, which will include complete procurement documentation for each contract (e.g. bidding documents, Requests For Proposals, advertisements, bids received, bid evaluations, no objections, letters of acceptance, contract agreements, bid security, advance payment guarantee, performance security, photocopies of invoices and payments, and related February 12, 2020 Page 15 of 54 The World Bank Real Estate Registration Project - Additional Financing (P169463) correspondence). 43. During AF appraisal, the World Bank assessed the adequacy of procurement and related systems in place, as well as the capability of each Entity, the RGA, the FGA and the PIUs to administer procurement, in general, and World Bank-funded procurement in particular. The World Bank concluded that adequate procurement capacity is in place, with the RS PIU having three procurement staff (one Procurement Specialist, one Assistant Procurement Manager, and one Deputy Program Coordinator who also specializes in procurement), and the FBiH PIU having one Procurement Officer in charge of current RERP procurement activities. The World Bank assessed the risks that may negatively affect the ability of the Entities to carry out procurement processes and concluded that no significant procurement risk impacts the project. The overall risk for procurement under the parent project is rated Moderate. 44. The procurement of contracts financed under the AF will be conducted through the procedures as specified in the World Bank’s Procurement Regulations for IPF Borrowers as of July 2016 and revised in November 2017 and August 2018 (Procurement Regulations), and in line with the latest 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. 45. The PIUs fiduciary staff are familiar with Bank procurement procedures and Guidelines as they have gained substantial knowledge and experience during the implementation of the RERP and its predecessor the Land Registration Project, both financed by the World Bank. However, the AF will be implemented under the new Procurement Regulations, and both PIUs will require increased assistance from the Bank in that respect. Under the Procurement Regulations, the use of the Systematic Tracking of Exchanges in Procurement (STEP) is mandatory. The Bank will organize appropriate training on both, the New Procurement Framework/Procurement Regulations and STEP. 46. The implementing agencies have developed a Project Procurement Strategy for Development (PPSD), which provides the basis for the procurement methods selected in the Procurement Plan. The AF will finance various contracts for works with a wide geographic spread, technical services, consultancy contracts, and several contracts for goods, including contracts for IT as indicated in the draft Procurement Plans. This Procurement Plans covers the first 18 months of implementation, and they will be agreed and finalized between the Borrower/Entities and the World Bank during AF Negotiations. E. Social (including Safeguards) 47. Considering that the AF is largely a scale-up of activities successfully implemented under the parent project, it was agreed that the AF would be governed by the pre-Environmental and Social Framework (ESF) safeguards. Under the AF, the Environmental and Social Management Framework (ESMF) prepared for the RERP will continue to be applicable because none of the AF activities are expected to lead to any additional environmental and social footprint beyond the readily mitigated impacts of small-scale reconstruction works. 48. Under the AF, the RGA plans to purchase a real property for its central archive. This acquisition will be a legally recorded market transaction where the seller can retain the right not to sell the real property and is fully informed about the available choices and their implications. A resettlement instrument is not needed as the purchase of the real property will be done on a willing buyer willing seller basis with a clean ownership and without involuntary resettlement impacts. As confirmed in the screening document, there is no case to warrant the development of a resettlement instrument. All safeguard instruments will apply to the land purchased. Any refurbishment or reconstruction works on the purchased building will follow the provisions February 12, 2020 Page 16 of 54 The World Bank Real Estate Registration Project - Additional Financing (P169463) of the template ESMP prepared for the original project and applicable to the all activities under the AF. 49. Mechanisms established under the parent Project to ensure that the public is informed about and actively participates in REC establishment and data harmonization will be maintained under the AF. The implementing agencies will continue to pay attention to vulnerable groups such as Roma, refugees, displaced persons and women, especially when harmonizing cadastre and land registry records. The implementing agencies will continue to carry out local and national public awareness campaigns. Each PIU will continue to be staffed with a full time Social Specialist who oversees the public awareness and information activities. Prior to establishing REC or initiating data harmonization, the PIU Social Specialists will conduct field visits in the target CMs, organize consultations, and prepare “vulnerability mapping reports” in which vulnerable groups are identified. The PIU will establish contact with the local communities as well as relevant organizations and institutions. For instance, in RS, the RGA will coordinate with the Ministry of Health and Social Welfare, Ministry of Agriculture, Forestry and Water Management, Ministry of Refugees and Displaced Persons and Centre for Gender Equity and Equality. Then, the PIU will executes public information activities targeting the vulnerable groups identified. For instance, posters on the project will be displayed, leaflets in Romani will be distributed, and audio leaflets for blind and visually impaired persons will be delivered. In parallel, the PIU Social Specialists will train local RGA offices staff, staff of the cadastral departments and land registry offices in FBH. Members of the REC commissions for public display in RS will also be trained by the PIU. In the RS, the RGA has established legal aid offices for Refugees and Displaced Persons with real property claims in the FBH. F. Environment (including Safeguards) 50. The scope of the activities proposed under the AF does not differ from the activities that were financed within the parent project; and these activities focus mostly on small scale construction works, or reconstruction of existing offices in existing buildings that would allow for more efficient operation of the land registration administrative processes. As such, the parent project is classified as Category B, triggering only Operational Policy (OP) 4.01 on Environmental Assessment, which is still valid for the AF. The environmental impacts associated with the works include dust and noise, management of construction waste, on site health and safety management. These impacts can be readily mitigated through sound construction practices and the use of the Environmental and Social Management Plan (ESMP) template that was prepared for the parent project. For the purpose of this AF, the ESMP was re-disclosed on October 17, 2018, for RS, and December 12, 2019, for FBH. The Client will continue to include site-specific requirements in each of the ESMPs and integrate the ESMP into bidding and contractual documents for the works and for the supervision on site. 51. The ESMPs for each site will be disclosed publicly and specifically within the premises to be reconstructed, especially for shared buildings. During the World Bank’s implementation support missions of the parent project, there were no environmental issues noted with the activities carried out. G. Other Safeguard Policies (if applicable) 52. Not applicable V. WORLD BANK GRIEVANCE REDRESS 53. Communities and individuals who believe that they are adversely affected by a World Bank (WB) supported project may submit complaints to existing project-level grievance redress mechanisms or the WB’s February 12, 2020 Page 17 of 54 The World Bank Real Estate Registration Project - Additional Financing (P169463) Grievance Redress Service (GRS). The GRS ensures that complaints received are promptly reviewed to address project-related concerns. Project affected communities and individuals may submit their complaint to the WB’s independent Inspection Panel, which determines whether harm occurred, or could occur, as a result of WB 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 Bank Management has been given an opportunity to respond. For information on how to submit complaints to the World Bank’s corporate Grievance Redress Service (GRS), 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 VI SUMMARY TABLE OF CHANGES Changed Not Changed Project's Development Objectives ✔ Results Framework ✔ Components and Cost ✔ Procurement ✔ Implementing Agency ✔ Loan Closing Date(s) ✔ Cancellations Proposed ✔ Reallocation between Disbursement Categories ✔ Disbursements Arrangements ✔ Safeguard Policies Triggered ✔ EA category ✔ Legal Covenants ✔ Institutional Arrangements ✔ Financial Management ✔ APA Reliance ✔ Other Change(s) ✔ February 12, 2020 Page 18 of 54 The World Bank Real Estate Registration Project - Additional Financing (P169463) VII DETAILED CHANGE(S) PROJECT DEVELOPMENT OBJECTIVE Current PDO The project development objective is to support development of a sustainable real estate registration system with harmonized land register and cadastre records in urban areas of both the Federation of Bosnia and Herzegovina and the Republic of Srpska. Proposed New PDO The project development objective is to support development of a sustainable real estate registration system with harmonized land registry and cadastre records in urban areas of both the Federation of Bosnia and Herzegovina and the Republika Srpska. COMPONENTS Current Component Name Current Cost Action Proposed Component Proposed Cost (US$, (US$, millions) Name millions) Component A - Real Estate 18.40 Revised Component A - Real 28.15 Registration Data Estate Registration Data Development Development Component B - Real Estate 11.00 Revised Component B - Real 21.30 Registration Infrastructure Estate Registration Development Infrastructure Development Component C - Policy and 4.70 Revised Component C - Policy 7.05 institutional development, and institutional and project management development, and project management TOTAL 34.10 56.50 Expected Disbursements (in US$) DISBURSTBL Fiscal Year Annual Cumulative 0000 0.00 0.00 2013 0.00 0.00 2014 5,413,797.65 5,413,797.65 February 12, 2020 Page 19 of 54 The World Bank Real Estate Registration Project - Additional Financing (P169463) 2015 2,861,582.60 8,275,380.25 2016 7,201,279.98 15,476,660.23 2017 4,772,749.32 20,249,409.55 2018 4,754,470.34 25,003,879.89 2019 4,380,669.93 29,384,549.82 2020 5,380,374.48 34,764,924.30 2021 6,464,905.20 41,229,829.50 2022 9,925,538.20 51,155,367.70 2023 5,344,632.30 56,500,000.00 2024 0.00 56,500,000.00 SYSTEMATIC OPERATIONS RISK-RATING TOOL (SORT) Risk Category Latest ISR Rating Current Rating Political and Governance ⚫ Moderate ⚫ Moderate Macroeconomic ⚫ Low ⚫ Low Sector Strategies and Policies ⚫ Low ⚫ Low Technical Design of Project or Program ⚫ Low ⚫ Low Institutional Capacity for Implementation and ⚫ Low ⚫ Low Sustainability Fiduciary ⚫ Low ⚫ Moderate Environment and Social ⚫ Moderate ⚫ Moderate Stakeholders ⚫ Low ⚫ Low Other Overall ⚫ Low ⚫ Low LEGAL COVENANTS2 LEGAL COVENANTS – Real Estate Registration Project - Additional Financing (P169463) Sections and Description Project Implementation Unit (PIU). The Borrower shall cause each Entity, through its respective GA, operate and maintain a PIU at all times during the implementation of the Project, with sufficient resources, competent staff in adequate numbers and responsibilities, and operated based on adequate procedures, all acceptable to the Bank February 12, 2020 Page 20 of 54 The World Bank Real Estate Registration Project - Additional Financing (P169463) and as set forth in their respective OMs. Project Coordination Board. The Borrower shall cause each Entity to maintain, throughout Project implementation, the Project Coordination Board consisting of six (6) representatives, with one each from Federation GA, Federation MOF, Federation MOJ, RS MOF, and two representatives from RS GA, with terms of reference and resources satisfactory to the Bank, and as set forth in their respective OMs. Land Administration Legislation. The Borrower and each Implementing Entity shall ensure that legislation affecting land administration is not amended, suspended, abrogated, repealed or waived so as to materially affect the carrying out of the Project. Annual Training Plan. Each Project Implementing Entity, through its PIU, shall submit, on December 1 of each year and starting on December 1, 2020, to the Bank for review and approval an annual training plan for the Project for the following calendar year. Financial Sustainability Report. No later than 6 months before the Closing Date, each Project Implementing Entity shall submit to the Bank a report on the financial sustainability of the Project Implementing Entity’s real estate registration system in a manner and with contents acceptable to the Bank. Rulebook on Surveys. Prior to carrying out Part 2A(v) of the Project, the RS shall: (a) adopt the rulebook on surveys; and (b) prepare detailed technical specifications, all in a manner and with contents satisfactory to the Bank. Operations Manual. Each Project Implementing Entity shall, no later than one month after the Effective Date, update, and thereafter carry out throughout the implementation of the Project its Respective Part of the Project in accordance with the provisions of a manual (“Operations Manual”) acceptable to the Bank Purchase Agreement. The RS, through the RS PIU, shall enter into a purchase agreement, satisfactory to the Bank, for real estate for the central archive to be purchased under Part 2, Component B. Conditions Type Description Effectiveness The Legal Agreements shall not become effective until the Loan Party and at least one of the Project Implementing Entities confirms and the Bank is satisfied that the execution and delivery of each Legal Agreement on behalf of the Loan Party and said Project Implementing Entity which is a party to such Legal Agreement have been duly authorized by all necessary actions and delivered on behalf of such party, and the relevant Legal Agreement is legally binding upon such party in accordance with its terms. Type Description Disbursement Under Category (1) unless: (i) the Federation Project Agreement has been executed by its parties; and (ii) the Federation Subsidiary Agreement has been executed by its parties Type Description Disbursement Under Category (2) unless: (i) the RS Project Agreement has been executed by its parties; and (ii)the RS Subsidiary Agreement has been executed by its parties; Type Description Disbursement Under Category (3) unless the Borrower ensures that the RS furnishes to the Bank a report on the proposed purchase prior to signing the purchase and sale February 12, 2020 Page 21 of 54 The World Bank Real Estate Registration Project - Additional Financing (P169463) agreement, with contents satisfactory to the Bank. February 12, 2020 Page 22 of 54 The World Bank Real Estate Registration Project - Additional Financing (P169463) VIII. RESULTS FRAMEWORK AND MONITORING Results Framework COUNTRY: Bosnia and Herzegovina RESULT_NO_PDO Real Estate Registration Project - Additional Financing Project Development Objective(s) The project development objective is to support development of a sustainable real estate registration system with harmonized land registry and cadastre records in urban areas of both the Federation of Bosnia and Herzegovina and the Republika Srpska. Project Development Objective Indicators by Objectives/ Outcomes RESULT_FRAME_T BL_ PD O Indicator Name DLI Baseline Intermediate Targets End Target 1 2 Cadastral Municipalities with harmonized land registry and cadastre data/established REC (Action: This Objective has been Revised) Cadastral Municipalities (CMs) with harmonized land registry and cadastre 35.00 565.00 565.00 665.00 data/established REC in urban areas (Number) CMs with land registry and cadastre/Real Estate Cadastre data publicly accessible 8.00 100.00 100.00 100.00 online (Percentage) Rationale: Action: This indicator has been Revised The date of the end target is revised to reflect the AF completion date. Direct project beneficiaries (Number) 90,000.00 1,680,000.00 1,730,000.00 1,880,000.00 February 12, 2019 Page 23 of 54 The World Bank Real Estate Registration Project - Additional Financing (P169463) RESULT_FRAME_T BL_ PD O Indicator Name DLI Baseline Intermediate Targets End Target 1 2 Female beneficiaries (Percentage) 30.00 35.00 35.00 35.00 PDO Table SPACE Intermediate Results Indicators by Components RESULT_FRAME_T BL_ IO Indicator Name DLI Baseline Intermediate Targets End Target 1 2 Component A - Real estate registration data development Public awareness campaign completed for RERP harmonization/REC 0.00 530.00 550.00 630.00 establishment in target areas (Number) Rationale: Action: This indicator has been Revised The end target is increased to reflect the actual achievements under the parent project and the 100 Cadastral Municipalities covered under the AF. Cadastral Municipalities (CMs) covered by the vulnerability mapping (Number) 0.00 530.00 550.00 630.00 Rationale: Action: This indicator has been Revised The end target is increased to reflect the actual achievements under the parent project and the 100 Cadastral Municipalities covered under the AF. Target land area with use or ownership rights recorded as a result of project 0.00 680,000.00 680,000.00 766,875.00 (Hectare(Ha)) Rationale: Action: This indicator has been Revised The end target is increased to reflect the actual achievements under the parent project and the 100 Cadastral Municipalities covered under the AF. February 12, 2020 Page 24 of 54 The World Bank Real Estate Registration Project - Additional Financing (P169463) RESULT_FRAME_T BL_ IO Indicator Name DLI Baseline Intermediate Targets End Target 1 2 Target popln with use or ownership rights recorded as a result of the project 0.00 1,480,000.00 (Number) Rationale: Action: This indicator has been Marked This indicator is redundant with PDO-level indicator "Direct project beneficiaries". for Deletion Land parcels with use or ownership rights recorded as a result of the project 0.00 1,400,000.00 1,400,000.00 1,620,571.00 (Number) Rationale: Action: This indicator has been Revised The end target is increased to reflect the actual achievements under the parent project and the 100 Cadastral Municipalities covered under the AF. Land parcels with use/ownership rights recorded as a result of project- 0.00 518,000.00 female (Number) Rationale: Action: This indicator has been This indicator is redundant with PDO-level indicator percentage of Project Direct Beneficiaries who are women. Marked for Deletion Cadastral Municipalities (CMs) with new cadastral survey (RS). (Number) 0.00 0.00 11.00 20.00 Rationale: Action: This indicator is New This indicator is added to reflect the AF investments in cadastral surveys in RS. European Terrestrial Reference System (ETRS) in use in cadastral surveys in 0.00 0.00 100.00 100.00 Bosnia and Herzegovina (RS) (Percentage) Rationale: Action: This indicator has been Revised The date of the end target is revised to reflect the AF completion date and the delays with the establish a new coordinate reference system that links the RS to the European Terrestrial Reference System 1989 (ETRS89). February 12, 2020 Page 25 of 54 The World Bank Real Estate Registration Project - Additional Financing (P169463) RESULT_FRAME_T BL_ IO Indicator Name DLI Baseline Intermediate Targets End Target 1 2 Cadastral maps in digital form of the 65% (RS); 27% (FBH) 77% (RS); 67% (FBH) 80% (RS); 69% (FBH) 85%(RS); 71% (FBH) entity territory (Text) Rationale: Action: This indicator has been Revised The end target is increased to reflect AF investments to further extend the coverage of digital cadastral maps in BiH. Component B - Real estate registration infrastructure development Analytical reports produced on disaggregated data to support decision- No Yes Yes Yes making (gender) (Yes/No) Rationale: Action: This indicator has been Revised The date of the end target is revised to reflect the AF completion date. Real Estate cadastre Offices purchased/renovated (RS) (Number) 0.00 21.00 22.00 24.00 Rationale: Action: This indicator has been Revised The end target is increased to reflect the actual achievements and the AF investments in the purchased/renovated of three offices in RS. Land registry and cadastre offices 29.00 50.00 55.00 58.00 renovated (FBH) (Number) Rationale: Action: This indicator has been Revised The end target is increased to reflect the actual achievements and the AF investments in the renovation of eight offices in FBH. Sustainable IT Unit with competent staff Unit established in RS and in the Fully sustainable IT Structures in operational in GA/MOJ (Text) FBH GA. both entities Action: This indicator has been Marked Rationale: for Deletion February 12, 2020 Page 26 of 54 The World Bank Real Estate Registration Project - Additional Financing (P169463) RESULT_FRAME_T BL_ IO Indicator Name DLI Baseline Intermediate Targets End Target 1 2 This indicator is dropped and replaced by "Sustainable IT management/coordination structure established and operational in RS and FBH" to reflect the latest developments related to IT. Business model for IT Business model for IT management structure Sustainable IT management Sustainable ICT management structure No formal IT management structure management structure developed operational (RS); TOR for the IT structure established and established and operational (Text) (RS); No formal IT coordination (RS); MOU signed between FMoJ Coordination structure drafted operational (RS); IT Coordination structure (FBH) and FGA to establish IT and staff appointed and trained structure operational (FBH) coordination structure (FBH) (FBH) Rationale: Action: This indicator is New This indicator replaced "Sustainable IT Unit with competent staff operational in GA/MOJ" to reflect the latest developments related to IT and the AF investments. E-services type provided for key 2.00 12.00 13.00 16.00 stakeholders (Number) Rationale: Action: This indicator has been Revised The end target is increased to reflect AF investments in the development of new e-services. No. of delivered e-services per year (Number) 0.00 3,300,000.00 3,100,000.00 1,700,000.00 Rationale: Action: This indicator has been Revised The end target is increased to reflect AF investments in the development of new e-services. Electronic conveyancing technically enabled (Yes/No) No Yes Action: This indicator has been Marked for Deletion System technically enabled with key registers (Personal ID, Company ID, No Yes Address Registry) (Yes/No) February 12, 2020 Page 27 of 54 The World Bank Real Estate Registration Project - Additional Financing (P169463) RESULT_FRAME_T BL_ IO Indicator Name DLI Baseline Intermediate Targets End Target 1 2 Rationale: Action: This indicator has been Marked This indicator is dropped and replaced by "Number of external systems or registries interoperable with Cadastre and Property Registration for Deletion Systems" to reflect the latest developments related to IT. Number of external systems or registries interoperable with the cadastre and real 1.00 1.00 3.00 6.00 land registration systems (Number) Rationale: Action: This indicator is New This indicator replaced "System technically enabled with key registers (Personal ID, Company ID, Address Registry)" to reflect the latest developments related to IT and the AF investments. Cadaster and property registration No No No Yes systems exchange data (FBiH) (Text) Rationale: Action: This indicator is New This indicator added to reflect the latest developments related to IT and the AF investments. IT System capable to maintain No Yes Yes Yes harmonized data (Yes/No) Rationale: Action: This indicator has been Revised The date of the end target is revised to reflect the AF completion date Digital archive operational in priority 3.00 110.00 114.00 125.00 offices (Number) Rationale: Action: This indicator has been Revised The end target is increased to reflect AF investments in the operationalization of the digital archive in offices. Central analog and digital archive Building acquired and renovation Central Archive established and No Central Archive. Building renovation ongoing established and operational (RS) (Text) plans prepared operational. February 12, 2020 Page 28 of 54 The World Bank Real Estate Registration Project - Additional Financing (P169463) RESULT_FRAME_T BL_ IO Indicator Name DLI Baseline Intermediate Targets End Target 1 2 Rationale: Action: This indicator is New This indicator is added to reflect the AF investments in the acquisition and adaptation of a building for the central archive in RS. Component C - Policy and institutional development, and project management Studies on the financial sustainability of the real property registration system 0.00 0.00 0.00 2.00 (Number) Rationale: Action: This indicator is New This indicator is added to better reflect the PDO element related to the sustainability of the BiH real estate registration system. Feasibility Studies on the completion of data harmonization (FBH) and REC 0.00 0.00 0.00 2.00 establishment (RS) (Number) Action: This indicator is New Volume of mortgages: 15810, Volume: 26,500, Value: 848m (RS); Volume 28,500, Value: 912m (RS); Volume: 27,500, Value: 880m (RS); Volume and value of mortgages (Text) Value: 2.200 million (RS); Volume of Volume: 242.000, Value: 7,744m Volume: 260,000, Value: 8,320m (FBH) Volume: 250,000, Value: 8,000m (FBH) mortgages: 90.000, Value: 2,880 (FBH) million Rationale: The end target of this indicator is increased to reflect the expected impact of the AF on the volume and value of mortgages. End target values are Action: This indicator has been Revised calculated for the whole year of 2022. Volume: 57,000, Value: 525m (RS); Volume: 58,000, Value: 534m (RS); Volume: 59,000, Value: 543m (RS); Volume and value of transactions or 44000/ 405 million* (RS); Volume: 100,000, Value: 920m Volume: 118,000, Value: 1,086m Volume: 130,000, Value: 1,196m requests for registration in land registry 70,000/644 million**(FBH) (FBH) (FBH) (FBH) offices (Text) February 12, 2020 Page 29 of 54 The World Bank Real Estate Registration Project - Additional Financing (P169463) RESULT_FRAME_T BL_ IO Indicator Name DLI Baseline Intermediate Targets End Target 1 2 Rationale: The end target of this indicator is increased to reflect the expected impact of the AF on the volume and value of transactions. End target values are Action: This indicator has been Revised calculated for the whole year of 2022. No. of technical and legislative drafting support for by-laws for the new cadastre 0.00 8.00 law legislation (RS) (Number) Rationale: Action: This indicator has been Marked for Deletion The target of this indicator has been achieved and there are no AF investments planned. Long-term strategy developed for sustainable real estate registration 0.00 2.00 (Number) Rationale: Action: This indicator has been Marked The target of this indicator has been achieved and there are no AF investments planned. for Deletion Public Awareness Campaign completed 0.00 4.00 6.00 7.00 (Number) Rationale: Action: This indicator has been Revised Under the AF, the plan is to conduct at least one additional public awareness campaign in FBH and two in RS Customer Surveys completed (Number) 0.00 4.00 4.00 6.00 Rationale: Action: This indicator has been Revised Under the AF, the plan is to conduct an additional survey in 2022. User perception of quality of real estate registration services, private and public 75.00 80.00 sector users is maintained (Percentage) February 12, 2020 Page 30 of 54 The World Bank Real Estate Registration Project - Additional Financing (P169463) RESULT_FRAME_T BL_ IO Indicator Name DLI Baseline Intermediate Targets End Target 1 2 Rationale: Action: This indicator has been Revised The objective is to maintain customer satisfaction at or above 80% during the AF. Impact Evaluation Survey completed (Number) 0.00 3.00 3.00 4.00 Rationale: Action: This indicator has been Revised Under the AF, the plan is to complete the second impact evaluation survey in each entity. No. of participants trained (Number) 1,047.00 8,350.00 9,000.00 9,800.00 Rationale: Action: This indicator has been Revised The end target is increased to reflect AF investments in training. M&E quarterly reports produced (Yes/No) No Yes Rationale: Action: This indicator has been Marked This indicator is deleted because the submission of M&E quarterly reports is an obligation per the loan and does not need to be reflected in the for Deletion results indicators. IO Table SPACE Monitoring & Evaluation Plan: PDO Indicators Mapped Methodology for Data Responsibility for Data Indicator Name Definition/Description Frequency Datasource Collection Collection Cadastral Municipalities (CMs) with FGA, FMoJ Quarterly. FMoJ / GAs harmonized land registry and cadastre and RGA data/established REC in urban areas reports February 12, 2020 Page 31 of 54 The World Bank Real Estate Registration Project - Additional Financing (P169463) FGA, FMoJ CMs with land registry and cadastre/Real Quarterly. and RGA FMOJ, GAs. Estate Cadastre data publicly accessible Annual. reports online Direct beneficiaries are people or groups who directly derive benefits from an intervention (i.e., children who benefit from an immunization program; families that have a new piped water connection). Please note that this indicator requires Quarterly. RERP reports. FMOJ, GAs. Direct project beneficiaries supplemental information. Supplemental Value: Female beneficiaries (percentage). Based on the assessment and definition of direct project beneficiaries, specify what proportion of the direct project beneficiaries are female. This indicator is calculated as a percentage. Female beneficiaries ME PDO Table SPACE February 12, 2020 Page 32 of 54 The World Bank Real Estate Registration Project - Additional Financing (P169463) Monitoring & Evaluation Plan: Intermediate Results Indicators Mapped Methodology for Data Responsibility for Data Indicator Name Definition/Description Frequency Datasource Collection Collection Public awareness campaign completed for Quarterly. RERP reports. FMoJ / GAs. RERP harmonization/REC establishment in target areas Cadastral Municipalities (CMs) covered by Quarterly RERP reports. FMOJ, GAs. the vulnerability mapping This indicator measures the area over which use or Target land area with use or ownership ownership rights have been Quartely RERP Reports. FMoJ / GAs. rights recorded as a result of project recorded as a result of the project. The baseline value is expected to be zero. This indicator measures the population targeted by the project whose land tenure rights (use or ownership) are recorded in the land admin system (whether in Target popln with use or ownership rights a register/registry, a recorded as a result of the project cadastre, or any relevant organization where the information on land tenure rights is held). The baseline value is expected to be zero. This indicator measures the Land parcels with use or ownership rights number of land parcels Quarterly. RERP Reports FMoJ / GAs. recorded as a result of the project with use or ownership rights recorded in the land February 12, 2020 Page 33 of 54 The World Bank Real Estate Registration Project - Additional Financing (P169463) admin system as a result of the project. The TTL should also indicate the number of land parcels with women as a record holder, either jointly or individually. The baseline value is expected to be zero. Land parcels with use/ownership rights recorded as a result of project- female Cadastral Municipalities (CMs) with new Quarterly. RERP reports. RGA. cadastral survey (RS). European Terrestrial Reference System Quarterly. RGA. (ETRS) in use in cadastral surveys in RERP reports. Bosnia and Herzegovina (RS) Cadastral maps in digital form of the Quarterly. FMoJ / GAs. RERP reports. entity territory Analytical reports produced on Quarterly. FMoJ / GAs. disaggregated data to support decision- RERP reports. making (gender) Real Estate cadastre Offices Quarterly. RERP reports. RGA. purchased/renovated (RS) Land registry and cadastre offices Quarterly. RERP reports. FGA. renovated (FBH) Sustainable IT Unit with competent staff FMOJ, GAs. RERP reports. Annual. operational in GA/MOJ Sustainable ICT management structure Quarterly. RERP Reports. FMoJ / GAs. established and operational E-services type provided for key Quarterly. RERP reports. FMoJ / GAs. stakeholders February 12, 2020 Page 34 of 54 The World Bank Real Estate Registration Project - Additional Financing (P169463) End target value is for the Quarterly. RERP reports. FMoJ / GAs. No. of delivered e-services per year period January 1 to July 31, 2021. Electronic conveyancing technically FMOJ, GAs. RERP reports Annual. enabled System technically enabled with key registers (Personal ID, Company ID, FMOJ, GAs. RERP reports. Annual. Address Registry) Number of external systems or registries Quarterly RERP Reports. FMoJ / GAs. interoperable with the cadastre and real land registration systems Cadaster and property registration Quarterly. RERP Reports. FGA. systems exchange data (FBiH) IT System capable to maintain Quarterly. FMoJ / GAs. RERP Reports harmonized data Digital archive operational in priority Quarterly. FMoJ / GAs. RERP Reports. offices Central analog and digital archive Quarterly. RERP Reports. RGA. established and operational (RS) Studies on the financial sustainability of Quarterly RERP Reports. FMoJ / GAs. the real property registration system Feasibility Studies on the completion of Quarterly RERP Reports. FMoJ / GAs. data harmonization (FBH) and REC establishment (RS) Annual RERP Reports. FMoJ / GAs. Volume and value of mortgages Volume and value of transactions or Annual RERP Reports. FMoJ / GAs. requests for registration in land registry offices No. of technical and legislative drafting GA. RERP report. Annual on Year 1 and 2. support for by-laws for the new cadastre February 12, 2020 Page 35 of 54 The World Bank Real Estate Registration Project - Additional Financing (P169463) law legislation (RS) Long-term strategy developed for FMOJ, GAs. RERP reports. Annual on Year 2. sustainable real estate registration Quarterly. RERP Reports. FMOJ, GAs. Public Awareness Campaign completed Quarterly. RERP Reports. FMoJ / GAs. Customer Surveys completed User perception of quality of real estate Quarterly. RERP Reports. FMoJ / GAs. registration services, private and public sector users is maintained Quarterly. RERP Reports. MoJ / GAs. Impact Evaluation Survey completed Quarterly. RERP Reports. FMOJ / GAs. No. of participants trained M&E quarterly reports produced FMOJ, GAs. RERP reports. Quarterly ME IO Table SPACE February 12, 2020 Page 36 of 54 The World Bank Real Estate Registration Project - Additional Financing (P169463) Annex 1 – Detailed Additional Financing (AF) description 1. The Project Development Objective (PDO) will remain unchanged under the AF. The PDO is still to support development of a sustainable real estate registration system with harmonized land registry and cadastre records in urban areas of both the Federation of Bosnia and Herzegovina (FBH) and the Republika Srpska (RS). However, for consistency purposes, the PDO is updated with the correct name for RS. 2. The AF responds to a need for scaling up the activities that were successfully implemented under the parent project, supporting improvement to the existing Information and Technology (IT) systems, and further strengthening the implementing agencies’ IT management capacity. In RS, the AF will also help the RGA respond to pressing IT issues that have emerged during the implementation of the Real Estate Registration Project (RERP), namely the need to replace its cadastre and land registration software. Component A – Real Estate Registration Data Development 3. This component will continue to support land registry and cadastre data harmonization on land, buildings and rights based on the actual situation in the field. The goal remains to establish up-to-date and interlinked land registry and cadastre databases in the FBH – a process referred to as data harmonization – and integrated databases of real estate cadastre REC in the RS – a process referred to as REC establishment – with all graphical and attribute data in a digital form. This subcomponent will also further extend the coverage of digital cadastral maps in BiH. A.1. Public awareness, vulnerabilities and social monitoring 4. Throughout the AF, the implementing agencies will maintain the mechanisms established under the parent Project to ensure that the public is informed about data harmonization and REC establishment, as well as that citizens can engage actively, provide feedback on any issues of concerns, and can appeal decisions they disagree with. These mechanisms include those defined under the FBH and RS laws to file complaints about procedures related to data harmonization and REC establishment, as well as the legal aid offices that were opened in RS in 2018 to support refugees and displaced persons owning properties in the FBH. These mechanisms also include those introduced by the parent Project such as the identification of vulnerable groups through the so-called vulnerability mapping to identify and contact vulnerable groups such as Roma, refugees, displaced persons and women prior to initiating REC establishment and data harmonization. The RS and FBH Project Implementation Units (PIUs) will continue to be staffed with a full-time social specialist responsible for coordinating the local and national public information campaigns, as well as carry out vulnerability mapping and social monitoring during the implementation. The AF will finance local and national public awareness campaigns. The campaigns will include media services and preparation of promotional materials. In RS, the PIU will also be responsible for carrying out public awareness, vulnerability mapping and social monitoring related to the cadastral surveys planned under subcomponent A.2.4. A.2 Real estate registration data updating, harmonization and registration A 2.1 Establishing cadastre data for the harmonization with land registry data in the FBH 5. The AF will enable the FGA and the municipal courts to scale up data harmonization in 100 CMs reaching approximately 200,000 additional beneficiaries. This activity is in line with the FBH Strategy for the land administration sector for 2016-2020. The FGA and municipal courts have completed data harmonization in 205 CMs under the RERP, while works are ongoing in 50 CMs. Prior to the RERP, data harmonization had been implemented February 12, 2020 Page 37 of 54 The World Bank Real Estate Registration Project - Additional Financing (P169463) in 10 CMs with the support of the LRP and in 326 CMs without World Bank support.10 For the AF, the FGA compiled a list of 203 CMs for which data harmonization is considered key to support economic development. These 203 CMs were proposed by municipalities themselves and include large cities such as Sarajevo, Tuzla and Mostar, as well as smaller cities such as Visoko, Široki Brijeg, and Livno. The target 100 CMs will be selected depending on the readiness of the municipalities and municipal courts. By the time the AF is completed, data harmonization will have been completed in 679 CMs, or 37% the of CMs of FBH, 6. Data harmonization in the 100 CMs targeted under the AF will be executed following the approach adopted under the parent Project. The FGA signs agreements with the municipalities and municipal courts prior to initiating the first stage of the data harmonization process, which consists of preparing a complete cadastre database of the target CMs using all available cadastral maps and textual information. Then, the preparation of these cadastre databases is contracted out to private geodetic companies who work in collaboration with the FGA, the municipal cadastre departments and the municipal courts. Parcels are created for apartment buildings that are registered in the Real Estate Cadastre Database (RECDB) with at least one apartment unit registered in the Book of Deposited Contracts or in other land registries. A novelty to the RERP approach is the scanning of the cadastral archives of the target CMs to support more efficient work during the second stage of data harmonization, which will be covered under subcomponent A.2.2. A 2.2 Land registry data harmonization with the cadastre data in the FBH 7. Following the approach adopted under the RERP, this subcomponent will finance the second stage of data harmonization in the 100 CMs targeted by the AF. Accordingly, this subcomponent will support the transfer of cadastre data into the land registry, the comparison of data, and the replacement and/or establishment of the new land registry data. Where available, the Book of Deposited Contracts (which covers apartments) will be digitized and integrated into the land registry, with the partition plans developed for buildings and premises. As it is already the case under the RERP, the second stage of the data harmonization process will be carried out by the land registry staff in municipal courts with the support of temporary land registry assistants hired under the AF. Temporary land registry assistants will be trained prior to starting the work and will have to pass a land registry clerk exam. 8. The replacement and/or establishment of land registry data will continue to follow the two following paths: (i) where data from the cadaster and the land registry match, and data on possession and ownership has been harmonized, the harmonization will be completed by having the data from the official cadaster transferred to the land registry folio in Section A, without any change in real rights relations; (ii) where data in the land registry does not match the data from the cadastre, a new land registry will be established based on data of official cadastre, and owners of real estate will be invited to apply for registration of rights by submitting appropriate evidence. Data harmonization procedures result in the harmonization of the information contained in the land registry and the cadastre. Owners and co-owners who participate are exempt from paying the courts fees that are normally required to establish the new land registry. A 2.3 Development of a new coordinate reference system in the RS 9. It was expected that under the RERP the RGA would establish a new coordinate reference system that links the RS to the European Terrestrial Reference System 1989 (ETRS89). To do so, the RGA intended to implement high- accuracy survey campaigns to link the current reference network to the ETRS89 and define the corresponding transformation model that establishes a two-way link between the existing and the new system. Under the RERP, the RGA determined a basic set of common geodetic points and parameters of global transformation and prepared 10 These 301 CMs are not accounted for in the Project’s Monitoring and Evaluation Framework. February 12, 2020 Page 38 of 54 The World Bank Real Estate Registration Project - Additional Financing (P169463) technical specifications for the densification, reconnaissance and Global Navigation Satellite System (GNSS) measurements of additional geodetic points. However, the RGA will not be able to put the ETRS89 in use prior to the project’s current closing date and intends to complete this activity during the AF using government funds. Specifically, the RGA will execute relevant calculations. The RGA plans to officially publish transformation parameters for the entire entity territory by 2022, supported with a technical guide on recalculations between the two systems in both directions. A 2.4 Establishment of a harmonized Real Estate Cadastre (REC) in the RS 10. Under the RERP, the RGA has establish REC in 287 CMs and expects to reach327 CMs by the end of July 2020, therefore exceeding the RS end target of 190 CMs. It means that the RGA will have established REC in approximately 19% of the CMs of RS. During the AF, the RGA plans to establish REC in 50 CMs using government funds, while Bank funds will finance cadastral surveys in 15 CMs where exiting cadastral records are so outdated that real properties must be surveyed prior to establishing the REC. These CMs are in urban areas and 15,294 hectares comprising an estimated 65,799 parcels and 22,065 owners. While the AF will finance the execution of the cadastral surveys, the RGA will fund the subsequent establishment of the REC. During the AF, the RGA also intend to use government funds to implement cadastral surveys in 5 CMs over additional 8,107 hectares, involving 27,900 parcels and 9,633 owners. A.3 Vectorization and cadastral database creation 11. Under the RERP, the current objective is to increase the coverage of the cadastral database from 27% to 40% of the territory in the FBH and from 60% to 80% in the RS. This objective has been exceeded in the FBH where 67% of the territory (1.7 million hectares) is now covered, while the RGA has reached 71% (1.7 million hectares). Under the AF, the FGA will cover an additional 5% (130,000 hectares) of the FBH territory, while the RGA will further extend the coverage of the RS cadastral database by 5% (122,000 hectares). In the FBH, vectorization contributes to one of the objectives of the FBH Land Administration Policy, “2. Security of Property Rights”, making cadaster data easily available to all entities and citizens through the Geo-Portal. Digital cadastral data facilitates and speeds up the work of cadastre offices in terms of maintenance of the cadastre, thus improving quality and speed of services provided to citizens, businesses and other users of cadastral data. Vectorized data allows for faster and more efficient harmonization of data on real estate. A.4 Quality control 12. Arrangements established under the RERP to control the quality of data harmonization in the FBH will be maintained under the AF. The FGA will continue to hire project managers to help control the quality of the first stage of data harmonization, together with the PIU staff. Land registry clerks will control the quality of the second stage of data harmonization, with support of temporary land registry assistants hired under the AF. Cadastral database creation in FBH will continue to be controlled by the FGA and municipal cadastral departments for geodetic and real property affairs. In the RS, the RGA staff and consultants hired under the AF will execute quality control over cadastral surveys, vectorization and cadastral database creation. Component B – Real Estate Registration Infrastructure Development 13. Under this component, the AF will complement the investments made under the RERP to further improve working conditions in the land administration sector through the acquisition and/or renovation of offices, acquisition of a vehicle and surveying equipment, the strengthening of the implementing agencies’ IT management capacity, and improvement to the existing IT systems. February 12, 2020 Page 39 of 54 The World Bank Real Estate Registration Project - Additional Financing (P169463) B.1 Working conditions improvement B.1.1 Office purchase, renovation and modernization 14. All the office purchases and renovations planned under the RERP have been successfully completed. In the FBH, the FGA renovated and equipped 20 offices as well as its new headquarters in Sarajevo. In RS, the RGA purchased/ renovated 21 offices (8 using project funds and 13 using RGA funds). In both entities those activities ensured adequate conditions for customers and improved working conditions for the staff, in line with business service standards, also developed with the support of the project. The implementing agencies plan to use the AF to further improve working conditions. In RS, the RGA will purchase, adapt and equip premises for its central digital archive. The RGA will also renovate and equip three regional offices. The building for the central archive will be purchased through the market. The acquisition will be done in line with the World Bank procedures for land expenditures. The RGA conducted an initial market research and concluded that there are buildings available in Banja Luka, which can satisfy the RGA requirements (i.e. a building of 2,000m2 to 3,000m2 on a lot of 5,000m2 to 6,000m2). In the FBH, eight land registry and cadaster offices will be renovated and equipped. Both entities will hire an architect and consultant to design and supervise renovation works, while the RS PIU will be staff with an architect/ civil engineer. B.1.2 Vehicles 15. Under the parent project, the RGA purchased 18 terrain vehicles, two passenger cars, a transportation vehicle and a van, while FGA acquired three passenger vehicles. These acquisitions allowed the implementing agencies to increase the mobility of the staff involved in data harmonization and REC establishment. Staff regularly go to the field to coordinate project activities, control the quality of the work, conduct field surveys, organize public displays, and carry out public awareness, vulnerability mapping and social monitoring. Under the AF, the FGA and RGA will acquire a few additional vehicles to support project activities. B.1.3 Surveying technology improvement 16. Modern surveying technology is a pre-requisite to maintain reliable cadastral data, and the parent project supported the acquisition of surveying equipment for RGA offices and municipal cadastral departments in FBH. The RGA acquired 17 GNSS rover and 14 total stations, while the FGA purchased 47 GNSS rover and 15 total stations. In the FBH, this surveying equipment was acquired within the framework of co-financing arrangements with municipal cadastral departments, therefore allowing the FGA to equip a larger number of offices. Under the AF, the FGA intends to acquire a few units of surveying equipment following the same co-financing arrangements with municipal cadastral offices. The RGA does not plan to use AF funds to acquire surveying equipment. B.2 IT-strategy implementation 17. The IT strategies of the RGA and FGA expired in 2017. With the support of the RERP, they have adopted new strategies covering the period of 2019-2029. The AF will support the implementation of these new IT strategies while addressing their most pressing needs. In RS, the focus will be on supporting the RGA’s efforts to find a sustainable IT solution to maintain the cadastre and REC data as well as to establish a unified central database. In the FBH, the focus will be on the operationalization of a joint IT management structure between the FGA, FMoJ, municipal courts and municipal governments. In both entities, this subcomponent will finance the acquisition of IT February 12, 2020 Page 40 of 54 The World Bank Real Estate Registration Project - Additional Financing (P169463) equipment and software upgrades to support the development of e-services and make the cadasters and land registries software interoperable11 with other key with key registries and systems. B.2.1 IT technical sustainability 18. At the time of the AF preparation, both RGA and FGA have well-functioning IT Units, but the Federal Ministry of Justice (FMoJ) has been facing difficulties during the RERP to establish a permanent IT Unit (mainly due to the federal government restrictions to hire new staff) and to find a sustainable solution for the maintenance of the land registry software (e-Grunt). A solution was found in 2018, when it was agreed that the maintenance of the e-Grunt would be transferred from the FBH MoJ to the FGA, and the FBH MoF would provide funds for maintenance of both cadaster and land registration directly to the FGA. This transfer of responsibility became effective on January 1, 2019, thereby addressing the lasting concerns over e-Grunt maintenance sustainability. A joint ICT management structure has been agreed as part of the new ICT Strategy, which has been approved by the FGA and the FMoJ in July 2019. Yet, additional efforts will be needed to establish business models in both entities that will support further IT development and operation and will include representatives from both the IT Units and the business Units. Under the AF, the focus will be on establishing sustainable IT business models (structures) as per the new ICT Strategies in both entities. This will ensure business continuity in the long term. 19. In the Federation, the Land Administration IT Strategy for 2019-2019 envisages the establishment of a joint FMoJ and FGA IT Strategic Management Structure, which includes a high-level Coordination Committee in charge of providing directions and coordinating the work on the cadastre and property registration IT systems further development. The FGA and FMoJ adopted this Strategy in July 2019 and plan to use the AF to support the establishment of this IT Strategic Management Structure. Specifically, the AF will support the preparation of an agreement between the FMoJ and FGA for the establishment and support of the IT Strategic Management structure, including preparation of Terms of References for each part of the IT structure, development of procedures for managing and further development of cadaster and property registration systems and capacity development. The AF may finance other consultancies as needed. 20. In the RS, the IT Strategy of the Republic Administration for Geodetic and Property Legal Affairs of RS for 2019- 2029 was in July 2019. This strategy envisages the establishment of a business model that includes both IT and business experts. The AF will support the establishment of this business model through development of a rulebook of procedures for managing and further developing the cadaster and property registration systems. The AF will also support the preparation of Terms of References for the staff involved, as well as the development of a financing model, pricing policy, data sharing and distribution agreements, cost-benefit analysis, data and services access. Other consultancies may be financed as needed. B.2.2 Further IT development and e-services provision 21. With the support of the parent project, the RGA and FGA have made significant progress in the provision of e- services for land administration. In the FBH, cadaster data are now available online through the portal www.katastar.ba, while the land registry can be searched through the portal www.e-grunt.ba. In the RS, cadaster and REC data are available online via www.geoportal.rgurs.org/ekatastar. The IT systems in both Entities also generate gender disaggregated data. With the support of the Bank, Norway and Sweden, the FGA and RGA have also introduced Address Registries, Sales-Price Register, and Digital Archives IT Systems. Not only did these improvements made cadastre and land registry data more reliable and accessible, but they also contributed to increasing the efficiency and transparency of land administration services. They also allowed the RGA, FGA, 11 Interoperability stands for ability of the systems and applications to connect, communicate and exchange data. February 12, 2020 Page 41 of 54 The World Bank Real Estate Registration Project - Additional Financing (P169463) municipal governments and municipal courts to improve the quality of the services to citizens, public institution and business, and increase the trust in land administration services. 22. In the RS, AF will support RGA’s efforts to find a sustainable IT solution to manage REC data and ensure that the different systems in use are linked. When the RERP was designed, the RGA was planning on upgrading eTerraSoft – the REC/Land Cadastre software, using government funds. However, by 2017 there was no maintenance contract of e-TerraSoft, different versions of the software licenses were installed in the local offices, staff were reporting various critical errors and the system slow performance became an issue. Several options were considered, including the possibility to acquire and adjust the software in use in the FGA (katastar.ba). In 2019, the RGA obtained the software’s source code and intellectual property rights to use and further develop the software. The software was assessed, and recommendations were made on how it could be adjusted to the RS legal framework. The RGA plans to use government funds to modify the software and pilot it in two cadastre offices. In parallel, the RGA signed a contract for the development of new Document Management System (DMS) that will replace the current front office applications. The DMS will also be linked to the future REC/Land Cadastre software, Land Registry Information System (LARIS, the property registration software used where REC has not been established) and the system for Books of Deposited Contracts (for apartment registration). The AF will support the national roll out of the DMS and the future REC/Land Cadastre software (kadastre.rs). The AF will also allow for the RGA to further develop these systems to migrate data, establish a central unified database, ensure interoperability with key external systems, migrate data and introduce new e-services. The AF will also support the upgrade of the Geoportal and the Utility-lines system and will continue supporting the geospatial data harmonization with the EU INSPIRE data technical specifications. Finally, the AF will support the supply of underground installation locators. 23. In the FBH, the AF will focus on upgrades of the existing systems for cadastre and property registration, including data sharing between the cadastre and property registries. 24. In both entities, the AF will support the efforts of the Geodetic Authorities and the FMoJ to expand the number of e-services they offer and link cadastre and property registration systems with key external systems and registries, such as Address Registry, Civil Registry, Digital archives and others. In RS, the RGA plan to introduce at least two new e-services, while other e-services may be developed if the e-signature certification authority becomes operational. In the FBH, the FGA intends to introduce one additional e-service to allow customers to track the status of application requests submitted to the municipal cadastre departments. Other e-services may also be introduced once the BiH authority responsive for the certification of e-signatures becomes operational. In RS and the FBH, the AF will finance software upgrade and the acquisition of hardware and licenses to support the execution of AF activities and replace old equipment. B.3 Cadastral and land book scanning and indexing for digital archives 25. The digitalization of the cadastre and land registry archives started prior to the RERP under the Land Registration Project. By the time the RERP was appraised, space for the paper archives in both entities was assessed as “inadequate and inappropriate.” With this background, the RERP provided funds for the acquisition of hardware and the rental of office space to pilot scanning in the RS. However, most of the activities under this subcomponent were financed by the Swedish-funded Capacity Building for Improvement of Land Administration Procedures (CILAP) project, and the Norwegian-funded project Public Services for the Real Estate Market and European Integrations (PSREMEI). With the support of these investments, archive strategies and scanning standards have been developed, and the scanning of the old archives in priority offices is ongoing in both entities. Both RGA and FGA have DMS for digital archives, which will be rolled out to additional offices and further developed, as planed February 12, 2020 Page 42 of 54 The World Bank Real Estate Registration Project - Additional Financing (P169463) under the new project, funded by the Kingdom of Norway (under preparation). In the FBH, the real property registration system (e-Grunt) is providing access to the land registry offices’ digital archive. The land books of four land registry offices – including Sarajevo – have been scanned and are accessible through the digital archive. By the end of the RERP, all land books in the FBH will have been scanned and linked to the e-Grunt. 26. In the RS, the AF will finance the establishment of a central analogue archive. The RGA will use AF to purchase, adapt and furnish a building in Banja Luka (see component B.1 for further details). RGA has an archive unit with permanent staff involved in the management, coordination and scanning of the old analogue archive. Eleven temporary scanning centers have been established, and one additional center is expected to open in 2019. Under the AF, the RGA will continue to rent premises for some of the temporary scanning centers until the central analogue archive is ready. The RGA will also hire scanning operators to speed up the scanning of the analogue archive. 27. In the FBH, as of March 2019, the digital archive is in use in 82 municipal courts and municipal cadastre departments. Under the parent project, the FGA is initiating a pilot project to scan the analogue collection of deeds in the Visoko municipal court (both the old and the incoming collection of deeds). The FGA intends to develop a methodology and scanning standards for digitizing the collection of deeds by the end of 2019. Under the AF, the FGA and FMoJ plan to scale up this activity in other municipal courts and to continue the land books and cadaster archive scanning and indexing. Component C – Policy and Institutional Development, and Project Management 28. This component will continue to provide policy, legislative, organizational and operational support to create an environment in which the PDO can be achieved and the Project results can be sustained. C.1 Policy support 29. Under the parent Project, this subcomponent financed studies and technical assistance on an as-needed basis to support the achievement of the PDO. For instance, in the FBH, this subcomponent financed the preparation of a handbook of best practices for land registry staff involved in data harmonization, while in RS it supported the preparation of a rulebook for REC establishment and the drafting of laws and by-laws. During the AF, the implementing agencies will continue to finance studies and technical assistance as needed and agreed with the World Bank. The implementing agencies will commission studies on how to complete data harmonization and REC establishment in the entire country. They will review data harmonization and REC establishment processes to determine how they could be further streamlined. They will also commission studies on the financial sustainability of the BiH real estate registration system as per the definition provided in the PAD.12 In both entities, this subcomponent will also finance consulting services to advise the implementing agencies on how to improve BiH’s real property ranking in the Doing Business report.13 12 Per the Project Appraisal Document (PAD), sustainability “is measured by the degree an institution generates revenue to match its costs, charges affordable fees, delivers quality services without discrimination and within a reasonable time.” 13 Per the 2019 Doing Business report, BiH ranks 99 out of 190 economies. In terms of efficiency of the land administration system, a buyer must go through seven procedures, wait 24 days and pay 5.2% of the property value to transfer a property. As for the quality of the land administration system, BiH scores 13 out of 30 points. BiH overall score for registering property is 61.99, which is below the regional average for Europe & Central Asia (75.57). February 12, 2020 Page 43 of 54 The World Bank Real Estate Registration Project - Additional Financing (P169463) C.2 Institutional development 30. The parent Project and CILAP supported the preparation of long-term strategies and business plans for the FGA and RGA. Under the AF, the implementing agencies intend to update their respective strategies and business plans. Under the subcomponent, the implementing agencies also financed four public awareness campaigns, two in RS and two in FBH. These campaigns helped raising awareness of the public and professional users of the benefits of improved registration system, procedures, rights, duties and fees for registration. The AF will support the execution of at least one additional public campaign in each entity. Finally, the FGA and RGA will use AF funds to finance additional training for their staff, individuals involved in the execution of project activities, and professional users. They will continue to prepare annual training plans and will submit them to the World Bank for approval by December 1 of each year. Study tours mays also be organized as needed. C.3 Operational support 31. The implementation arrangements introduced under the RERP will be maintained during the AF. The RGA and FGA will maintain a PIU, each of which will comprise at least a manager, a procurement specialist, a financial management specialist, a social specialist, and a monitoring and evaluation specialist. From time to time, the implementing agencies and the World Bank may agree to adjust the composition of the PIUs to meet the project’s needs in terms of information technology, translation and training, among others. Under this subcomponent, the implementing agencies will also execute two additional customer satisfaction surveys and will complete the second part of the impact evaluation that was initiated under the RERP. Partnership with donors supporting the Project will be sought. February 12, 2020 Page 44 of 54 The World Bank Real Estate Registration Project - Additional Financing (P169463) Annex 2 – Implementation arrangements Financial Management Risk 1. Overall, the project financial management risk before mitigation measures is assessed as moderate and the residual risk remains moderate. Financial Management Implementation Arrangements 2. The financial management arrangements include as following. 3. The project will use existing financial management systems available under the RERP for the project fiduciary purposes. The strengths that provide a basis of reliance on the project financial management arrangements include: (a) use of existing consultants under the RERP, (b) existing accounting and reporting systems available in the RERP; Budgeting and Counterpart Funding Arrangements. 4. The AF will finance items included in the project procurement plans. As the loan will finance up to 100% of the defined project expenditures including taxes, no counterpart funding is envisaged at this stage. Accounting and Maintenance of Accounting Records. 5. The PIUs established in the implementing agencies follow the cash-based accounting method. The PIUs use computerized accounting software (FMS.XP), which is also capable of generating Financial Management Reports automatically. Budgeting and accounting capacity are satisfactory. Budgets were finalized and approved by the management of the implementing agencies. The project budgets are normally entered in the project accounting software. 6. Back-up of project accounting data is done on a regular basis (weekly and monthly) and it is stored on an internal server and on a CD every Friday in the FBH PIU. Internal Controls and Internal Audit. 7. Financial Management staff of the implementing agencies put codes on the invoices received and submit them to the Procurement Officer for verification that the related services were performed and/or goods/works delivered. Financial Management staff check the invoice for accuracy and prepare requests for payment. The request for payment includes a breakdown of the invoice against the undisbursed portion of the liability shown on the contract payment record. Financial Management staff check if the invoice was properly prepared, if the amount corresponds to the contracted amount (was not the subject of previous payment) and if the procedure in the corresponding implementing agency was done in a prescribed manner. If everything is appropriate, the Financial Management consultant prepares the payment order. Except in the event of duly proven force major, the total time between receipt of the invoice by the implementing agencies and the issuance of the payment order to the bank (regarding payment to the contractor/supplier) shall not exceed 15 working days. 8. Authorization of a payment involves the following operations: preparation of a payment order for the total amount to be paid to the contractor’s/supplier’s bank account as specified in the corresponding invoice; and recording of the payment in the contract payment record. 9. Value-Added Tax (VAT) can be refunded for all payments that included the VAT as per the established procedure with the BiH indirect taxation authority. For the FGA, VAT refund is used to finance certain Project February 12, 2020 Page 45 of 54 The World Bank Real Estate Registration Project - Additional Financing (P169463) expenditures previously approved by the FBH MoF. VAT returned and spent as of 31 August 2018 amounts to BAM 2,059,793.33. For the RGA, VAT refund will be used to finance project activities (purchase of RGA premises) in the next period in accordance with the decision made by RS MoF in August 2018. 10. For the FBH, payment orders for the Designated Account (DA) are signed by the FGA Director or the FGA assistant director, and the FBH Minister of Finance or the FBH Assistant Minister of Finance (one person from the RGA and one person from the FBH MoF simultaneously have to sign a payment order). Payment orders in RS are collectively signed by the RERP Director and the RGA director. 11. All withdrawal applications are being processed electronically, and the only authorized signatory is the BIH Minister of Finance and Treasury or his deputy in possession of a valid token. 12. A photocopy of the approved invoices, if the signatory has been authorized to sign, the proxy itself, shall be attached to the payment order before the original invoice is placed in the file of supporting accounting documentation kept by the implementing agencies as audit trail. Payment orders are kept in a separate file; they are combined with the related copy of invoice and related statement of account that shows that the payment was executed. 13. The PIUs established a Register of all incoming and outgoing documents to the implementing agencies. The Financial Management consultant has a stamp and all incoming and outgoing documents have to be properly stamped with proper reference number. Also, the Financial Management consultant maintains a separate folder, and each registered document has to be copied and stored in separate folders, marked as incoming and outgoing. The coding system for reference numbers was agreed within implementing agencies, and the persons in-charge are the RGA and FGA Directors. If a document is not properly stamped and registered in the register book, it is not considered as official document and should not be processed. The Register of Documentation is full responsibility of the Financial Management consultant. 14. In the RS, the RGA PIU director’s travel requests and expense claims are authorized by the RGA director. In the FBH, PIU director’s travel expenses are approved by the FGA director. 15. The balance in the petty cash is usually not exceeding BAM 500 to BAM 1,000. Responsibility for maintaining petty cash book and conducting the payments from the petty cash is clearly segregated from the Financial Management consultant role. In the FBH, certain payments from the petty cash (i.e. travel expenses) are made with prior approval of the FGA Director, preapproval of the Financial Management manager and the cashier. Other payments out of petty cash are signed by the recipient and cashier, and after that controlled by the Financial Management consultant. There is no maximum limit for petty cash provided by the law, however the usual maximum amount held in petty cash does not exceed EUR 1,000. Petty cash is held in small vault locked in a shrank. Petty cash is not used in the RS PIU. 16. The Designated Account and other bank accounts balances are reconciled at least monthly. Furthermore, regular monthly reconciliations (or when applications for withdrawal are prepared) of Statement of expenditure with accounting records are conducted. 17. Regarding the monthly disbursement summaries reconciliation, the implementing agencies have access to the Client Connection (CC) system and download disbursement data from the system for reconciliation purposes. Reconciliations are performed in Excel after each WA is sent via CC and disbursement data received. Periodic Financial Reporting. February 12, 2020 Page 46 of 54 The World Bank Real Estate Registration Project - Additional Financing (P169463) 18. Under the parent project, the quarterly Interim and Financial Reports (IFRs) have been submitted to the Bank for review in the agreed time frame, and no significant discrepancies have been identified. The latest submitted IFRs covered the fourth quarter of 2018, and the reports have been found acceptable to the World Bank. No changes in its formats are envisaged for the AF. External Audit. 19. The auditor’s opinions of the project financial statements for FGA and RGA separately and consolidated project financial statements for Fiscal Year 2018 were unmodified (clean) and submitted slightly after the deadline, namely on 12th July 2019. The delay was caused by late selection of the audit firm by the Ministry of Finance and Treasury. In addition, the auditors have issued management recommendation letters for FGA and RGA separately, which contained no issues. Disbursements and flow of fund 20. Disbursements from the Loan Account will follow the traditional method through: reimbursements, direct payment to suppliers, and advances to the Designated Account. The expenses will be documented with the use of Statement of Expenditures. Supporting documents for Statement of Expenditures, including completion reports and certificates, will be retained by PIUs and made available to the World Bank during project supervision. The reimbursement of expenditures from the Designated Account may be made based on certified Statement of Expenditures. The ceiling and authorized allocation for the IBRD’s Designated Account will be defined in the project Disbursement and Financial Information Letter. The Designated Account will be denominated in the currency of the loan as selected by the Borrower (EUR). Retroactive financing 21. No withdrawal shall be made for payments made prior to the date of the Loan Agreement, except for withdrawals up to an aggregate amount not to exceed EUR 4,000,000 may be made for payments made for Eligible Expenditures. Category Amount of the loan Percentage of expenditures to be allocated financed (expressed in EUR) (inclusive of taxes) (1) Goods, works, non-consulting 7,161,538 100% services, consulting services, Training, Technical Services and Operating Costs for the Part 1 of the Project (2) Goods, works, non-consulting 10,488,462 100% services, consulting services, Training, Technical Services and Operating Costs for the Part 2 of the Project February 12, 2020 Page 47 of 54 The World Bank Real Estate Registration Project - Additional Financing (P169463) (3) Purchase of real estate for 2,300,000 100% the central archive under Part 2 of the Project [(4)] Front-end Fee 50,000 Amount payable pursuant to Section 2.03 of this Agreement in accordance with Section 2.07 (b) of the General Conditions [(5)] Interest Rate Cap or Interest Amount due pursuant to Section Rate Collar premium 2.08(c) of this Agreement TOTAL AMOUNT 20,000,000 100% February 12, 2020 Page 48 of 54 The World Bank Real Estate Registration Project - Additional Financing (P169463) Annex 3 – Economic and Financial Analysis 1. At the time of the RERP’s appraisal, the World Bank team identified the three following potential direct benefits from the Project: (a) improvement in compliance of registration and cadastre records; (b) improvement in the registration service; and (c) improvement in access to credit. These benefits, according to the Project Appraisal Document (PAD), would manifest themselves, inter alia, in the form of increased real property market turnover rates through increased transactions, appreciated property values and increased availability of real estate financing. Using these assumptions, the World Bank team in charge of the design of the RERP prepared an ex-ante economic cost-benefit analysis (CBA) that aimed to measure economic benefits through two models: a. Property Market Dynamics (Model 1): It estimated the increase in real property market transaction volume and value due to improved registration services. Under this model, the assumption is that improved registration services will lead to i) an increase in real property market turnover size, and ii) an increase in government tax revenues due to an increment in transfer tax collection, which is a financial benefit, and not an economic benefit. b. Mortgage Market Dynamics (Model 2): It analyzed the economic benefits through the lens of access to finance. Inefficient property registration systems as well as underdeveloped mortgage markets result in higher interest rates as people take out consumer loans instead of mortgages. Implementing a more efficient and secure registration system, together with the benefits to the housing finance system provided by more accurate property records and elimination of registration delays, would reduce and eventually eliminate these spreads between interest rates. 2. Following the Bank’s standard approach to economic analysis as set out in OP/BP 10.00 (Investment Project Financing), the AF economic analysis presents the results of the CBA at appraisal (ex-ante), re-estimates them at completion based on actual cost figures (ex-post) and carries out a new one by projecting the additional benefits from the AF. AF economic analysis also presents any underlying assumptions about costs and benefits, plus other information supporting the analysis. Ex-ante economic analysis Property Market Dynamics (Model 1 3. The premise behind Model 1 is that investments in cadastre and registration systems improve access to finance and other investments in the housing market. Improvements then are reflected in the future number of real property transactions as well as the average real property prices, the product of which would determine the total market value. 4. Using “with project” and “without project” scenarios, incremental market growth was estimated within the context of a macro model. Without the Project, the number of property transactions is estimated to increase from 114,000 per year in year 1 to 138,898 per year in year 20. With the Project, however, market transactions are expected to increase from 114,000 per year to 177,000 per year over the course of 20 years, while average property value will increase from US$47,600 to US$68,700. As a result, it is expected that the Project will generate incremental market turnover of US$5.46 million in year one increasing US$12.16 million annually from year 14 onwards. If the Project’s impact can be attributed to only 10% of the total real property market turnover, and that one third of the incremental turnover can be translated into project benefits, the Net Present Value (NPV) at a 10% interest rate of this increase in market turnover over 20 years is equal to US$460 February 12, 2020 Page 49 of 54 The World Bank Real Estate Registration Project - Additional Financing (P169463) million with an economic rate of return (ERR) of 76%. Furthermore, 4% of the total incremental market turnover will be received by the government as additional tax revenue through the property transfer tax. This amounts to an NPV of US$55.2 million over 20 years. Mortgage Market Dynamics (Model 2) 5. On the other hand, the hypothesis behind Model 2 is that because of improved access to finance, consumers will have increasingly easier access to mortgages instead of consumer loans, and consequential economic benefits will materialize in the form of avoided interest payments by consumers (typical interest rate on a consumer loan in BiH by the time of appraisal was about 250 basis points higher than the interest on a mortgage). 6. To be able to compare scenarios with and without the project, it was assumed that a) the average real property value remains constant, and b) the Project has no effect on the volume of real property transactions per year. It was also assumed that without the Project, only 30% of all loans made to consumers are in the form of mortgages, while the remaining 70% are in the form of more expensive consumer loans with a guarantor. With the Project, however, it was estimated that after 10 years a full 98% of consumers taking out a loan of some kind to finance their homes will have access to mortgages. Furthermore, it is assumed that with the strengthening of the financial sector and registration institutions, and the subsequent increase in mortgage transactions, the mortgage rate in BiH will decline over time to a level comparable to those in similar economies. If the Project covers 10% of all real estate transactions and if only 50% of the total incremental improvements are attributable to project activities, the avoided interest payments, due to the increased access to mortgages, amount to a benefit with an NPV of US$197 million at a 10% discount rate, which, given project costs of €26.5 million, equates to an ERR of 34% over 20 years. 7. Nevertheless, after a thorough revision, it became apparent that Model 2 could not be replicated due to lack of sufficient information to verify whether changes in the mortgage interest rate could be attributed to the Project. For instance, any modification on financial system development policies, any expansion of the insurance sector and stock market, or any increment of long-term funding sources during the Project were also associated with mortgage market development, thus making it very difficult to prove causality. Ex-post economic analysis 8. To carry out the ex-post economic CBA, the ex-ante economic analysis was re-calculated for Model 1 by replacing projected number of property transactions with actual project outputs and project costs directly related to the activities from the RERP. As a result, economic benefits were estimated to be US$ 341.5 million and they were calculated as the increase in property values and number of market transactions derived from investments in cadastre and registration systems that improve access to finance and other investments in the housing market. The project cost is US$35.2 million (equivalent to a present value of US$22.8 million) and includes all the incurred and projected cost up to the closing of the Project. Therefore, the RERP is estimated to provide BiH with a net benefit of US$321.7 million, which is equivalent to an Economic Internal Rate of Return of 127% (using a 12% discount rate). Furthermore, 4% of the total incremental market turnover will be received by the government as additional tax revenue through the property transfer tax. This amount is equivalent to a present value of US$41.4 million. Additional Financing economic analysis 9. The AF will aim to a) speed up the establishment of up-to-date and interlinked land registry and cadastre databases, b) support the continued automation of land administration services, and c) strengthen their February 12, 2020 Page 50 of 54 The World Bank Real Estate Registration Project - Additional Financing (P169463) capacity to manage increasingly complex Information technology (IT) systems. The PDO will remain the same. These activities are expected to improve registration services and, consequently, to increase real property market value and real property transaction volume. As such, and to keep consistency with RERP’s original project design, the economic analysis of the AF will also be based on RERP’s economic and financial analysis. 10. As explained above, the AF’s cost-benefit analysis was replicated by using only the Property Market Dynamics model. Moreover, only the incremental benefits from the AF activities were considered in the calculations to avoid overestimating the benefits of the program. 11. The AF’s CBA replicated the ex-ante analysis using actual data provided by RERP’s PIUs for the baseline and applying new assumptions. The following are the main elements and parameters of the CBA (more details are presented in the table below): a. Number of real property transactions projected at RERP’s baseline for 2019 were lower than actual figures: 146,400 vs 151,000. b. The average price of real property projected for 2019 (new baseline) was also lower than the observed price: US$54,200 vs US$59,000. c. According to the ex-ante analysis, a 2.5% annual growth rate of transactions was expected, but the observed value was 3.83% (RS=2.0% and FBH=5.7%). During the RERPs an incremental growth of 0.6% was observed in areas where the project was implemented. Therefore, it was assumed that such effect would also apply to the AF, taking the annual growth rate of transactions to 4.44%. Also, the ex-ante analysis assumes that the number of real property transactions per annum stabilizes at 177,000 for the RERP. This figure was elevated to 179,000 to model the expected permanent impact of the AF. As a result, by the end of the period analyzed (20yrs), a total of 35,000 extra transactions will take place because of the AF. d. Another key parameter is the annual growth rate in average value (real property prices) per transaction. At appraisal, it was estimated that without a project, the rate of growth would be 1.5%. On the other hand, data provided by the FBH seems to indicate that prices in areas covered by the project increased more (2.97% per annum) than in areas not covered (0.12% per annum). Taking advantage of this study’s data plus data provided by the RS (1.26% average growth rate per annum for project covered and February 12, 2020 Page 51 of 54 The World Bank Real Estate Registration Project - Additional Financing (P169463) uncovered areas), an overall annual growth rate of property values of 2.15% and 0.69% was estimated for areas were the RERP was implemented versus areas where it was not, respectively. For the AF it is assumed that prices will grow at the same rate as for RERP, and no additional market premium effects will be accounted. e. The AF’s CBA used the same discount rate, the same period of analysis, and the same assumptions with respect to the timing of the economic benefits. Finally, the annual costs of the Project were spread out evenly for the duration of it. Results 12. The AF’s CBA replicated the ex-ante analysis using actual data provided by the RERP’s PIUs and applying the assumptions presented in the table above. 13. As a result, the economic benefits were estimated to be 42.7 million dollars and were calculated as the increase in real property values and number of real property market transactions derived from investments in cadastre and registration systems that improved access to finance and other investments in the housing market. The AF project cost is estimated to be US$ 23.68 million (present value of US$ 17.98m) and includes all projected disbursements up to the closing of the Project. 14. The Project’s ex-post economic benefits estimation is lower than that expected at appraisal. This is due to lower than predicted annual growth rate in transactions and value of properties in areas where the Project was implemented. Nevertheless, the benefits are still so substantial that they outweigh the project costs (benefit cost ratio) almost 15 times. 15. For the AF, the economic benefits estimation has taken a more conservative approach than the original RERP analysis to account for the fact that subsequent similar investments are expected to be subject to diminishing returns (see annex for details). Still, the AF is estimated to provide BiH with a net benefit of US$ 26.6 million, which is equivalent to Economic Internal Rate of Return of 39% (using a 12% discount rate). Furthermore, 4% of the total incremental market turnover will be received by the government as additional tax revenue through the property transfer tax. This amount is equivalent to the present value of US$ 17.5 million. February 12, 2020 Page 52 of 54 The World Bank Real Estate Registration Project - Additional Financing (P169463) Assumptions for the Economic and Financial Analysis Parameters Without Project (a) With RERP (b) With Additional Financing Comment (c) Number of Real Estate 146,400 transactions per 151,000 transactions per 151,000 transactions per (a) from Ex-Ante analysis, Transactions - Base Year year year year (b) and (c) shared by PIUs (2019) and per agreed baseline indicator (56,000 for RS and 95,000 for FBH). Average Price of Property USD 54,200 USD 59,000 USD 59,000 (a) from Ex-Ante analysis, Transacted on the Market - (b) and (c) values shared by Base Year 2019 the PIUs for average apartment size of 55 sqm sold in 2018 Rate of growth in real 2.5% growth per annum The annual growth in The incremental effect of This is the hypothesized estate transactions assumed until the figure transactions from RERP was RERP is estimated to be market spurring effect due stabilizes at about 139,000 3.83% (RS=2.0% and around 0.6% more to improved cadastre and transactions per annum. FBH=5.7%). As in the transactions per annum. It registration services. (a) original PAD, it is assumed is estimated that this effect and (b) from Ex-Ante that it stabilizes at 177,000 will also apply to the AF and Analysis. (c) A very transactions per annum therefore, the total annual conservative assumption growth in transactions is was adopted and by the assumed to be 4.44%. It is end of the period analyzed assumed that it stabilizes at (20yrs) a total of 35,000 179,000 transactions per extra transactions will take annum place as a result of the AF. Rate of Growth in Average 1.5% increase per annum The average annual growth of the value of a property in The difference can be Value (Price of Property) assumed. areas covered by the project was 2.15% (RS=1.26% and interpreted as the market per transaction FBH=2.97%). It is assumed that the figure stabilizes at premium on securely titled approximately USD 73,600, which represents an increase property, which is roughly of 43% over a period of 20 years equal to 20% as experienced in other February 12, 2020 Page 53 of 54 The World Bank Real Estate Registration Project - Additional Financing (P169463) countries. (a) from Ex-Ante analysis. A very conservative assumption that the AF won't have any effect on property prices so (b) and (c) values are assumed to be the same Area Coverage or Market None 14% 18% Penetration Rate by the Proposed Project Conversion of Market For ball scenarios, it is assumed that over a 20-year planning horizon, approximately only This assumption is needed Turnover Values into one-third of the total number of transactions would result in appreciation of property to eliminate the effects of Project Benefits value. double/triple counting of the same property being transacted on the market without impacting its price. Euro to Dollar Exchange 1.15 Rate Discount rate % 12% Real Estate Transfer Tax 4% of the market value per current legislation. 3.5% in RS; 5% in FBH. (RETT) Property tax is negligible (0.05-0.5% of value) February 12, 2020 Page 54 of 54