Document of The World Bank Report No: 34931-TU IMPLEMENTATION COMPLETION REPORT (SCL-45870) ON A LOAN IN THE AMOUNT OF US$ 250 MILLION TO THE REPUBLIC OF TURKEY FOR A PRIVATIZATION SOCIAL SUPPORT PROJECT June 20, 2006 Human Development Sector Unit Turkey Country Unit Europe and Central Asia Region CURRENCY EQUIVALENTS (Exchange Rate Effective as of March 31, 2006) Currency Unit = New Turkish Lira 1 New Turkish Lira = US$ 0.73 US$ 1 = 1.36 New Turkish Lira FISCAL YEAR January 1 December 31 ABBREVIATIONS AND ACRONYMS CAS Country Assistance Strategy EKA General Directorate of Economic Research (Treasury) ERL Economic Reform Loan ERP Economic Reform Program ES Pension Fund for Civil Servants EU European Union EUR Euro FOM Field Operational Manual GDP Gross Domestic Product HR Human Resources ICR Implementation Completion Report ISKUR Turkish Employment Agency JLC Job Loss Compensation KOSGEB Small and Medium Industry Development Agency KPI Key Performance Indicator LAG Labor Adjustment Group LRS Labor Redeployment Services MBA Masters in Business Administration NGO Non-governmental Organization OED Operations Evaluation Department PA Privatization Administration PAD Project Appraisal Document PFSAL Programmatic Financial Sector Adjustment Loan PCU Project Coordination Unit POM Project Operational Manual PSSP Privatization Social Support Project SA Special Account SBAS Small Business Assistance Services SOE State Owned Enterprise SPO State Planning Organization TA Technical Assistance TEGAS Tarsus Haci Hasan Karamehmet Incubator US$ United States Dollars YTL New Turkish Lira Vice President: Shigeo Katsu Country Director Andrew N. Vorkink Sector Director Charles C. Griffin Sector Manager Arup Banerji Task Team Leader Ibrahim Akcayoglu TURKEY Privatization Social Support Project CONTENTS Page No. 1. Project Data 1 2. Principal Performance Ratings 1 3. Assessment of Development Objective and Design, and of Quality at Entry 2 4. Achievement of Objective and Outputs 5 5. Major Factors Affecting Implementation and Outcome 9 6. Sustainability 10 7. Bank and Borrower Performance 11 8. Lessons Learned 12 9. Partner Comments 14 10. Additional Information 24 Annex 1. Key Performance Indicators/Log Frame Matrix 25 Annex 2. Project Costs and Financing 28 Annex 3. Economic Costs and Benefits 30 Annex 4. Bank Inputs 31 Annex 5. Ratings for Achievement of Objectives/Outputs of Components 33 Annex 6. Ratings of Bank and Borrower Performance 34 Annex 7. List of Supporting Documents 35 Project ID: P069894 Project Name: Privatization Social Support Project Team Leader: Ibrahim Akcayoglu TL Unit: ECSHD ICR Type: Core ICR Report Date: June 21, 2006 1. Project Data Name: Privatization Social Support Project L/C/TF Number: SCL-45870 Country/Department: TURKEY Region: Europe and Central Asia Region Sector/subsector: Agro-industry (59%); General energy sector (15%); General industry and trade sector (10%); Other social services (9%); Petrochemicals and fertilizers (7%) Theme: State enterprise/bank restructuring and privatization (P); Improving labor markets (P); Vulnerability assessment and monitoring (P) KEY DATES Original Revised/Actual PCD: 05/02/2000 Effective: 12/22/2000 12/22/2000 Appraisal: 07/18/2000 MTR: 11/30/2002 05/08/2003 Approval: 12/21/2000 Closing: 12/31/2004 12/31/2005 Borrower/Implementing Agency: GOVERNMENT OF TURKEY/PRIVATIZATION ADMINISTRATION Other Partners: STAFF Current At Appraisal Vice President: Shigeo Katsu Johannes F. Linn Country Director: Andrew N. Vorkink Ajay Chhibber Sector Manager/Director: Charles C. Griffin Michal Rutkowski Team Leader at ICR: Ibrahim Akcayoglu David Herbert Fretwell ICR Primary Author: Irina Aleksandra Nikolic 2. Principal Performance Ratings (HS=Highly Satisfactory, S=Satisfactory, U=Unsatisfactory, HL=Highly Likely, L=Likely, UN=Unlikely, HUN=Highly Unlikely, HU=Highly Unsatisfactory, H=High, SU=Substantial, M=Modest, N=Negligible) Outcome: S Sustainability: HL Institutional Development Impact: SU Bank Performance: S Borrower Performance: S QAG (if available) ICR Quality at Entry: S Project at Risk at Any Time: Yes 3. Assessment of Development Objective and Design, and of Quality at Entry 3.1 Original Objective: The Privatization Social Support Project (PSSP) was designed in support of broader objectives of economic and development assistance to the Government of Turkey as laid out in the Country Assistance Strategy (CAS), the existent economic reform program (ERP) and the related Economic Reform Loan (ERL). The 1997 CAS noted that the State Owned Enterprises (SOEs) have been a major drain on the economy and that, following a careful review, these SOEs should be privatized by transferring majority ownership and/or management to the private sector with adequate safety net provisions. The 2000 CAS noted that the possibility of social unrest in backlash to the economic reform program is one of the greatest risks to the reform, and that the PSSP project would be expected to help support the overall privatization and economic reform program and minimize that risk by mitigating adverse effects on the population directly or indirectly affected by the privatization of SOEs. To position the PSSP project in the right context, it is important to note that the project was not designed in isolation from the overall reform, but also as an essential component of the overall support to the government and the public budget in conducting the economic reform program, of which the privatization of SOEs is an important part. The PSSP was complementary to the US$ 760 Million ERL approved in 2000 to assist the government in implementing its economic reforms by providing financing for the balance of payments and the budget in order to help ensure that the core structural components of the reform program were implemented effectively, including the need to ensure the adequate financing to pay temporary income support under the existing law, to assist workers in finding employment before income support runs out, and to monitor the impact of the economic reforms on vulnerable groups. The PSSP was designed to directly address these considerations. PSSP became effective in December 2000 and was closed in December 2005. It should be noted here that the PSSP 2, the PSSP follow-up project, was approved in June 2005 and became effective in January 2006. The PSSP development objective was to "support the achievement of the objectives of the Government's Privatization Program, mitigate the negative social and economic impact of the privatization of state-owned enterprises, and monitor the social impact of the Economic Reform Program (ERP)". This objective addressed the priorities of the economic reform as they relate to the privatization of SOEs. It aimed to ensure stability during this process and support efforts to regain and maintain momentum of privatization. The consultative and participatory process undertaken in preparation of the project included Bank experts, government and implementing agencies' representatives, employers, and labor representatives and helped ensure that the project objective and components were realistic and the inherent risks acceptable to Bank and the Borrower. Any major privatization is a complex undertaking dependent on a number of factors, including sufficient government determination to see the privatization process through to its completion. In this case, the privatization process, which followed a previous failed attempt in the 1990s, was championed at the time of the PSSP identification and preparation by a coalition government that, by definition, needed to rely on an extensive consensus-building process for ensuring adequate support for starting and maintaining the privatization process. In fact, difficulty in securing adequate support for the privatization was likely the major driver of the significant initial slowness of the privatization, which meant that the overall process was delayed, with privatization of major SOEs postponed until later in the process. This initial delay in the privatization process was remedied during the second half of the project with the stabilization of the economic crisis, and increased political will for privatization helped by the fact that the government elected in November 2002 elections had majority in the Parliament. Given that the PSSP was a piece of a greater puzzle of economic reform and that privatization typically carries inherent instability and implementation risks, the development objective was well balanced and sufficiently flexible to enable required support to the overall economic reform program while benefiting broadly-defined target groups. - 2 - In order to be adequately understood and assessed, the PSSP objective should be viewed in conjunction with its stated key performance indicators (KPIs): (a) Job Loss Compensation (JLC): The productivity of elements of the industrial sector, comprising about 39 former SOEs, improves as a result of labor shedding, workers displaced from SOEs receive severance payments, and poverty is mitigated as indicated through results of social impact evaluations; (b) Labor Redeployment: Labor Redeployment Services (LRS) are managed by the lead agencies and delivered within parameters agreed with the Bank, the demand for services is based on displaced worker requirements from about 39 SOEs, including secondary layoffs, and a range of services are delivered to displaced workers with job placement rates equal or better than similar programs in Turkey and the region; (c) Social Impact of Economic Reform Program: The Government: evaluates the impact of the Economic Reform Program on vulnerable communities affected by policy changes, and develops institutional capacity to analyze and address social issues; identifies policy alternatives based on a review of international experience, including EU accession requirements; assesses the economic status and coping strategies of workers displaced by privatization, and net impact of labor redeployment services, and adjusts support programs to ensure the most effective services for different client groups; and (d) Project Management: Project objectives are achieved, disbursements are on schedule, and annual project audits are satisfactory to the Bank. These KPIs significantly contribute to the overall development objective, and on balance are clear and consistent with the desired project impact. However, they do not fully correspond to the component objectives and descriptions, and the agreed upon output and outcome indicators for each component. To resolve any potential lack of clarity in analyzing the achievement of objective and outputs in advance, the overall development objective will be analyzed based on its definition and stated KPIs, while the components will be analyzed based on their individual description and component-specific indicators (Annex 1). 3.2 Revised Objective: The PSSP objective was not revised during project implementation. A slightly different wording of the development objective appears in the project/implementation status reports in the last year of the project, from October 2004 until the project closing in December 2005, stating that the objective is to "support the Government's privatization program through mitigating the negative social and economic impact of the privatization of SOEs, monitoring the social impact of the ERP, and introducing improved LRS". Also, three new indicators were tracked from March 2005 onwards (Annex 1), and were introduced by the team for simplicity and additional monitoring purposes. It is this ICR's assessment that these changes did not have material impact on the PSSP implementation. 3.3 Original Components: The project included the following four components: (a) Job Loss Compensation (appraisal cost estimate--US$ 322.40 Million): The objective of this component was to improve the productivity of certain elements of Turkey's industrial sector (previously state-owned enterprises) and to ameliorate the temporary negative social and economic impact of job loss compensation on workers displaced during privatization of SOEs. This component was designed to finance severance and related payments, as regulated by law, to workers displaced by job loss due to the privatization of SOEs; (b) Labor Redeployment Services (appraisal cost estimate--US$ 28.30 Million): The objective of this component was to provide labor redeployment services to workers who have been displaced by the - 3 - privatization of SOEs, including secondary layoffs, to assist them in rapidly re-entering the labor market. The component was designed to finance: (i) technical assistance and minor goods to develop and maintain administrative procedures between PA and other lead agencies, including the Turkish Employment Agency (ISKUR) and Small and Medium Industry Development Agency (KOSGEB), which facilitate the assessment and planning for delivery of services to workers in 39 SOEs being privatized; and (ii) the actual cost of delivering labor redeployment services to approximately 32,000 unemployed workers through sub-contractors to the two lead agencies (i.e., ISKUR, KOSGEB); (c) Social Impact of Economic Reform Program (appraisal cost estimate--US$ 1.00 Million): The objective of this component was to monitor the social impact of the economic reform program and assist with the design and formulation of supportive economic and social policies. The component was designed to finance: (i) surveys to monitor the general social impact of the ERP and privatization on selected communities; (ii) analysis of social issues and identification of policy alternatives to develop a national social assistance program, based on review of international experience as it might be used in the Turkish environment; (iii) follow-up surveys to determine the economic status and coping strategies of workers directly displaced from SOEs; and (iv) follow-up surveys to monitor the net impact of labor redeployment programs; and (d) Project Management (appraisal cost estimate--US$ 1.10 Million): The objective of this component was to ensure effective administration and coordination of the overall project program, financial accounts, and procurement. The component was designed to finance technical assistance and minor goods to: (i) coordinate project execution, and manage the resources of the project; (ii) procure all Bank-financed goods and services for implementing agencies; (iii) operate the financial management system according to the Bank's financial management requirements; (iv) act as liaison between the technical agencies and the Bank; and (v) ensure that annual audits are completed in keeping with Bank standards. The project components were designed to complement one another in a comprehensive social support intervention to the privatization. The component design built on the Bank's and project team's sector knowledge and international experiences. While it can be argued that additional interventions might have been helpful in achieving the stated goals (e.g., a microfinancing component was raised by the Borrower as a possibility in the course of the project and discussed with the team, and not added due to the complexities and risk of failure involved), one of the success factors of the project was the ability to keep to a well-defined scope and targets in this first significant wave in the SOEs privatization. The primary implementing agency was the Privatization Administration (PA) for all components, and in particular for component (a). The lead implementation agencies in component (b) were ISKUR and KOSGEB, and in component (c) the General Directorate of Economic Research at the Treasury (EKA). 3.4 Revised Components: The components were not revised during the project implementation period. 3.5 Quality at Entry: There was no formal Quality at Entry review. This ICR rates Quality at Entry satisfactory based on the fact that the team anticipated the critical risks and made a consultative decision that the risk level was acceptable, including the risks that the privatization may be stalled or not go forward (section F in the PAD). This finding is supported by extensive interviews conducted in preparation of this ICR (Annex 7). During the project preparation, the team analyzed the need for the project, likely demand, potential risks and mitigating measures, as well as leveraged existing international experiences. The team held discussions with the national and local representatives of all the key stakeholders, including labor and employer representatives. Financial analysis was conducted for each SOE to be privatized to ensure that privatization was justified and that adequate financing had been made available. In addition, steps were taken to ensure - 4 - that the job loss compensation and labor redeployment services reached their intended recipients and that the risk of fund misuse was eliminated or negligible. This was ensured by making payments available only after the Privatization Agency has ascertained the appropriateness of the payment and was helped by the fact that there are existing electronic employment and social services records for all citizens in Turkey that allowed transparent monitoring. The risk was addressed by good management of resources and through specific procedures agreed with the Government to audit and monitor the payments and services (e.g., potential issue of re-employment of workers after they have received job loss compensation was addressed by ensuring that such re-employment was not possible within six months of receiving job loss compensation and by regular on site audits). The Project Coordination Unit (PCU) and monitoring system were established at the Privatization Agency to ensure close management of the process. In addition, the Project Operational Manual and Field Operational Manual were prepared to ensure prescribed good practices. 4. Achievement of Objective and Outputs 4.1 Outcome/achievement of objective: Overall achievement of the project objective is rated on a 4-point scale (HS - highly satisfactory; S - satisfactory; U - unsatisfactory; HU - highly unsatisfactory), while the individual elements of the objective and components are rated on a more nuanced 6-point scale. This approach was reviewed and adopted within the region for this ICR to allow for appropriately finely graded rating, and appears to be timely given that the 6-point scale will be introduced immediately after this ICR's due date. Cumulatively and on balance, the overall outcome/achievement of the PSSP objective is rated fully satisfactory. The rating reflects achievement of the three individual elements of the overall project objective. In rating each element, this ICR relied on the overall outcome and related KPIs (section 3.1) with the following rationale for each: l Outcome/achievement of the first element of the overall objective--"Support the achievement of the objectives of the Government's Privatization Program"--is highly satisfactory. The PSSP disbursed fully despite the initial slowness, provided critical support to the government and affected stakeholder groups, and contributed to restarting and maintaining the privatization momentum. The PSSP made a significant contribution to the overall privatization program by providing budgetary support to the Privatization Administration (PA), which had significant budget constraints due to the economic crisis at the time, by bringing required expertise, introducing a range of interventions to mitigate the risks that might have taken the privatization process off track, and building sustainable local capacity. In general, the PSSP was a major contributor to the relative ease of SOE privatization in Turkey. There were no major socioeconomic or political upsets during or due to the process of privatization. l Outcome/achievement of the second element of the objective--"Mitigate the negative social and economic impact of the privatization of state-owned enterprises"--is satisfactory. Communication of the government's commitment to address the negative impact of the privatization and implementation of a range of interventions through the PSSP project to mitigate the negative impact, were important drivers in ensuring privatization moved forward without major upsets. In international experience, privatization processes, especially on a nation-wide scale, are often wrought with challenges and controversy, and more often than not, characterized by prolongation or abandonment of the divestiture process, social unrest, and significant negative economic impacts for some of the key stakeholders. In this case, it can be argued that the PSSP succeeded in mitigating the major negative economic, social, and political consequences and contributed to the government's commitment to undertaking this necessary process in such a way as - 5 - to compensate in as much as possible those affected by the process. The project was highly successful in providing and monitoring job loss compensation and successful in designing a spectrum of labor redeployment services, introducing them into the system with near immediate traction and impact, and ensuring additional benefits of significant capacity building both in implementing agencies and the country (e.g., providers of important labor market services were developed in this process). The project was highly successful in attracting a broad group of generally unemployed population and mitigating fall-out from broadly defined "secondary lay-offs" and creating opportunities. The project was less successful in targeting the more narrowly defined population of workers displaced from the 44 SOEs and their immediate communities, i.e., traditionally defined "secondary lay-offs", and while this outcome was affected by factors beyond the scope of the project (e.g., close-to-retirement age of many workers displaced by the privatization, significant difference in pre-privatization and post-privatization salaries, relatively high legally mandated job loss compensation, and government legislation allowing for temporary employment in public sector even though numbers of workers taking it up were low), this needs to be reflected in the impact ratings and lessons for the future. l Outcome/achievement of the third element of the overall objective--"Monitoring the social impact of the ERP"--is moderately satisfactory. The social impact monitoring studies agreed upon before and during the course of the PSSP were delivered (one planned study was agreed to be canceled at the mid-term review), and the key studies were fully completed in December 2005. The final reports for the studies were completed in December 2005, and the interim reports were delivered in the 2003-2005 period according to the agreed upon time/activity plan. The studies were initially delayed by the postponement of the privatization process. Their completion was also delayed to ensure that an accurate sample for data collection was defined and workers' contact information collected. Furthermore, as defined in the relevant terms of reference, the data collection rounds were performed with built-in time intervals between the rounds to enable longitudinal analysis of the privatization period. EKA ensured that draft reports, initial findings, and deliverables were shared with the other PSSP components and announced workshops to disseminate the findings. Given the delays, the actual findings and final reports could not be used in other PSSP components and in the design of the PSSP 2 as effectively and efficiently as was planned, but are expected to be of greater use in the implementation of the PSSP 2. 4.2 Outputs by components: On balance, all components have satisfied their stated objectives with satisfactory outputs and nuanced scale is used to distinguish different levels of output achievement by component. (a) Job Loss Compensation component (latest cost estimate--US$ 318.84 Million) is rated highly satisfactory. The component fully disbursed and provided job loss compensation for 18,261 qualifying workers, at the latest estimate, from a greater number of SOEs than originally envisioned. The number of 18,261 is lower than the original target of 48,000, which was a rough preliminary estimate based on likely payments instead of the actual SOEs' needs, and is thus not taken as a shortcoming of the project in meeting its targets. Payments under this component were slow through the first half of the project, and significantly picked up the pace in the second half. The one-year extension of the project at the request of the government allowed the component to fully disburse and support privatization at 44 SOEs. Improved productivity of SOEs was verified through SOE-specific analyses prepared by the PA and reviewed by the Bank team. Displaced workers have received appropriate forms of job loss compensation--regular severance, special job loss compensation (additional to regular severance to encourage voluntary departures and unlike in the pre-PSSP period, paid in a lump sum to create a realistic incentive for the workers); and special category social assistance (to encourage voluntary - 6 - retirement for civil servants close to the retirement age and discourage qualified workers from taking up employment in another SOE or other government service). The PSSP made significant efforts to minimize any possibility for misuse of job loss compensation payments, and the regular audits conducted have shown the PSSP to be highly successful in this regard. The key measures implemented to this effect were that the payments were made only after the government had audited and verified each case and made the payment. In addition, job loss compensation was paid only to workers confirmed not to have been rehired within six months of leaving the SOE; and in the case of special job loss compensation, only after the maximum period of eligibility of eight months had expired. Establishing reasonable time limitations on rehiring was an important consideration for the PSSP to minimize disincentivization of workers from taking up private sector employment while at the same time ensuring appropriate use of the funds. An additional factor that contributed to the transparency of the process was the well-developed electronic information system in Turkey that allowed tracking of individuals' employment and retirement status in the audits. Overall, the component exceeded its planned outputs and has been replicated in the PSSP 2 with very minor adjustments (i.e., some payment levels were adjusted to ensure that more workers can be supported with the same funds). (b) Labor Redeployment Services component (latest cost estimate--US$ 29.59 Million) is rated satisfactory. The envisioned range of labor redeployment services--job counseling, on-the-job training, institutional training, temporary community employment, small business start-up counseling and small business incubators--was delivered in 31,113 cases (the number of cases can be used as a proxy for the number of participants). Furthermore, outputs for the job placement rates have exceeded the original targets in all services but one where it was very close to the prescribed target (job counseling). More broadly, it can be argued that the introduction of these services through the PSSP had a very significant impact in Turkey by delivering a range of employment and self-employment promotion services to the unemployed, introducing a range of new interventions into the government's privatization and employment-promotion programs, building capacity in the government and the society at large (e.g., new service providers). As an illustration of the results achieved under this component, the PSSP's impact exceeded the project's original development objectives in the case of business incubators, as the government is considering expansion of the concept from the originally envisioned six incubators to incubators in all or most of the eighty-one provinces. In the aspects described above, the outputs have been very successful. The PSSP should be commended for its flexibility in design and implementation of this component and for the foresight in designing the services to address both primary and secondary lay-offs related to the SOEs included in the project scope. The labor redeployment program was designed as a clear signal from the government to the workers and the labor unions that the government was making a concerted effort (in addition to the provision of funds) to assist those interested in reentering the labor market. Testament to the success of this strategy has been the fact that the labor unions, after initial reluctance, participated in the Tripartite Advisory Committee organized to provide inputs into the PSSP. The availability and good performance of these services reduced social and political pressures for the overall privatization program, and brought economic benefits to the unemployed population and their communities. There was considerable discussion about whether the services should be extended to the secondary unemployed, and the agreement was reached to do so in order to ensure a sufficient level of support to the affected populations, and sufficient demand and cost-effectiveness of the services. An annual allocation of LRS funds to provinces above the mandated minimum allocation per province was made based on three parameters: (a) level of SOE layoffs in the province, (b) level of unemployment in the province, and (c) poverty index in the province. However, in practice and as different from the original expectations, the demand from those displaced from the SOEs for these services has been negligible and demand from traditionally defined secondary lay-offs was moderate (participation from - 7 - those affected immediately by secondary lay-offs vs. the generally unemployed, such as recent graduates, was not formally tracked, but is estimated to be modest by the implementing agencies) as seen in the table below. Delivered Labor Redeployment Services as of April 2006 (Source: PA) Type of service (implementing agency) Number of cases Cases from SOEs Counseling (ISKUR) 5,415 17 On-the-job training (ISKUR) 12,810 0 Formal training (ISKUR) 7,473 2 Temporary community employment (ISKUR) 979 10 Small Business Assistance Services (KOSGEB) 3,500 10 Small Business Incubators (KOSGEB) 936 0 Total 31,113 39 While this ICR was satisfied that the services were adequately communicated to potential beneficiaries, and that there were other factors in play beyond the PSSP team's control (e.g., low salaries in private sector vs. those in the SOEs), it will be very important to monitor this component closely in the PSSP 2 and to track the types of beneficiaries and levels of demand, as the intent in the PSSP 2 is to adopt a narrower definition of secondary lay-offs (i.e., affected family members and direct communities vs. generally unemployed), and to draw lessons for the potential adjustments to the types of services and/or component design in this project and future similar projects internationally. (c) Social Impact of Economic Reform Program component (latest cost estimate--US$ 1.36 Million) is rated moderately satisfactory. As stated in the assessment of the overall objective, the outputs were achieved, although through a process that was more laborious than envisioned, and the planned studies were completed successfully. The fact-finding and orientation study was performed in December 2002. At that stage, a sufficient and appropriate sample was not present to enable the surveys to be started as the privatization was delayed. Therefore, the implementation phase was postponed until a sufficient and appropriate sample was available to conduct the surveys. At that time, the data collection phase was initiated to enable a comprehensive analysis as targeted by the project objectives. Appropriate sample definition ensured that the interviews produced an up-to-date and high quality analysis results for the project. This laborious report finalization activity took place in the intervals between the data collection rounds and did not in itself cause major delay during the PSSP. The PSSP 2 will be able to benefit more from the PSSP outputs than the PSSP itself did in the implementation process, and the team has built in the lessons from this component into the PSSP 2 by moving away from extensive studies to more limited and more specifically targeted analyses to ensure the component's utility as a timely input into ongoing fine-tuning of the program during the implementation process in order to maximize the impact. (d) Project Management component (latest cost estimate--US$ 1.14 Million) is rated highly satisfactory. Throughout the project, the PCU's contributions were assessed as excellent, and all the required outputs were met. It should be noted that this was accomplished with one of the smallest PCUs in Turkey--the PCU consisted of three to four consultants who handled all the aspects of process management. The ICR mission established that the project management/administration, financial, procurement, and fiduciary arrangements were satisfactory according to the Bank's supervision mission and external audits, all of which resulted in a clean (unqualified) audit opinion. The same project management set-up has been maintained for the PSSP 2. - 8 - 4.3 Net Present Value/Economic rate of return: Not applicable. 4.4 Financial rate of return: Not applicable (PA provided letters of verification for each SOE to be privatized). 4.5 Institutional development impact: Institutional development impact is rated substantial for the following key reasons: l Building government capacity through the Bank's involvement in the PSSP, introduction of a range of labor market interventions, and targeted technical assistance procured, including trips to study comparable experiences in other countries (e.g., small business incubators in Macedonia, Poland, and Ireland), which had significant impact in equipping the government and implementing agencies for effective management of the privatization process and its aftermath, and more broadly, of labor and employment matters; l Assisting in ensuring equivalent institutional development in regional government and in establishing new institutional forms, such as the small business incubators; l Building new capacity in the local market for the provision of services required for the interventions introduced (e.g., service providers for labor redeployment services) and in generating employment and self-employment in what has been a relatively "jobless" economic recovery over the past several years; and l Helping introduce additional auditing and financial discipline into JLC programs as the Bank helped develop and ensure specific controls for the administration of JLC during the PSSP. These findings have been confirmed through extensive interviews with government counterparts in Turkey (e.g., planned extension of the small business incubator concept to all provinces, no qualified LRS-type service providers at the start to six qualified service providers at this stage according to KOSGEB). 5. Major Factors Affecting Implementation and Outcome 5.1 Factors outside the control of government or implementing agency: The PSSP implementation began in the context of an existing economic crisis which culminated in 2001, and was continued through an impressive--yet largely jobless--economic recovery (e.g., in 2004 the inflation has been brought down to single digits for the first time in thirty years). At the same time, as the Bank's 2005 Turkey Labor Market Study illustrates, the labor market posed additional challenges to the mitigation side of the privatization program. Some of the major challenges Turkey faced in this period were: (i) population growth consistently outpacing employment growth, (ii) low overall employment rate (43.7% in 2004) and compared to EU average, (iii) very moderate job creation since the 1980s despite economic growth trends, and (iv) high non-wage labor costs and labor regulations that might be reducing the incentives to hire new workers. Privatization of SOEs was an important element of the fiscal discipline that was at the core of the economic reform program, as well as a contributor to the existing reform agenda that included the need to enhance competitiveness and the desire for progressive economic integration with the European Union. Furthermore, privatization had not taken hold in the previous period in Turkey and was very slow in the period of the minority government leading up to the November 2002 elections. The economic crisis and related currency devaluation in that period had a significant impact on the project in that the economic crisis slowed down the privatization process further, which in turn slowed the process of payments, while the currency devaluation contributed to the poor economic climate but also created more resources given that the majority of the expenditures are local costs under this project. 5.2 Factors generally subject to government control: Three factors to be highlighted in this regard are: - 9 - l Overall commitment to the privatization--the government showed increasing commitment to completing the SOEs privatization; l Specific commitment to the PSSP and extending benefits more broadly--the government's willingness to leverage the PSSP to be able to affect positive changes in employment and post-privatization aftermath and extending these to the broader category of generally unemployed has been an important shaping factor for the scope of PSSP's development contributions; and l Potentially detracting legislative change--in September 2004, the government passed an amendment to the Privatization Law creating an obligation by the government to employ any worker laid off between 1992 and 2004 and remaining unemployed, the cost of which was to be borne by the Privatization Fund. Initially it was expected that this would be a major factor that might detract from the attainment of the privatization program and the PSSP objectives, in particular because one of the main reasons identified for the low take-up of the LRS by laid-off workers has been an expectation that the government would provide alternative employment. One year since its inception, it appears that participation in this program has been negligible due to the low-skill type of jobs offered and minimal wages accompanying such employment, and, as such, it has not affected the PSSP in any major way (this finding is based on interviews with government officials and current and former SOE employees, as no official figures were available at the time of the ICR writing). However, the availability of this option and its careful characterization in terms of who should be able to qualify for any such program (e.g., only those very close to the retirement vs. any unemployed person) would be an important factor to monitor and revisit in the course of the PSSP 2. 5.3 Factors generally subject to implementing agency control: Key contributors to the success of the PSSP programs subject to implementing agencies' control appear to be that the Privatization Agency and other implementing agencies (ISKUR, KOSGEB, EKA as appropriate) have been highly committed and pro-active in: (i) managing the process of implementation, (ii) discussing the PSSP program with the employers, employees, and unions in each SOE and through an inclusive process, (iii) establishing an information system that allows ongoing monitoring and evaluation, and (iv) continuously driving the identification and implementation of best practices in the interventions introduced by the PSSP. 5.4 Costs and financing: There were no major changes to costs (latest estimate US$ 350.93 Million of the originally estimated US$ 352.80 Million) or financing (latest estimate US$ 249.56 Million of the originally estimated US$ 250 Million). The project closing date was extended in June 2004 by one year, to the new closing date of December 31, 2005. It is expected that the loan will be fully disbursed by the end of the grace period on June 30, 2006 (extended from April 30, 2006 at the Borrower's request). There were four loan amendments made during the project implementation, including an increase in the authorized allocation of the Special Account and several common reallocations between expenditure categories. 6. Sustainability 6.1 Rationale for sustainability rating: Sustainability is rated highly likely in the short term. The PSSP components were not intended to be sustained over time, as they were envisioned as one-time job-loss payments and labor redeployment programs specifically intended to facilitate the privatization of the SOEs. However, as the privatization program has picked up pace, a follow-up operation, PSSP 2, was approved in the amount of EUR 450 Million, of which EUR 360 Million to be financed by the Bank, and will retain the same four components as the PSSP with minor adjustments. In addition, the structures established through the initial PSSP within the PA and implementing agencies are in place and the interventions introduced are in continued use both in - 10 - the privatization of additional SOEs as well as more broadly for selected interventions (e.g., the incubator expansion). Moreover, the government's commitment to privatization and its confidence to take it forward have been strengthened, as has been the capacity in the implementing agencies. Finally, the next wave of SOEs privatization is likely to benefit from the lessons of the PSSP and the key stakeholder groups--employers, employees, and unions--alike can be expected to be less apprehensive of the process as the result of the visible implementation efforts and initial results under the PSSP. 6.2 Transition arrangement to regular operations: Please see section 6.1. 7. Bank and Borrower Performance Bank 7.1 Lending: Project identification and preparation are rated satisfactory. The project directly supported major government and CAS objectives, and complemented the overall economic reform program and ERL. The process was collaborative and included a well-balanced mix of skills from the Bank, Borrower, and external sources under the two consulting/TA contracts. The project design built on international experience and was tailored to the specific situation in Turkey. The project was welcomed and embraced by the Borrower for responding to their needs, and included a participatory consultative process with the key stakeholder groups. On reflection, adjusting the design more explicitly from the very beginning to deliver services to the generally unemployed might have allowed for simpler implementation, better tracking of results, and increased just-in-time adjustments to the program. Furthermore, measuring the impact could have been made easier by tighter indicator design, as well as higher consistency between the project objective, KPIs, and component objectives and indicators. 7.2 Supervision: Project supervision is rated satisfactory. Overall, supervisions were of adequate frequency and included frequent site visits. Having team members located in the local office in Turkey has also been an important positive factor. The team had a balanced mix of skills, made good use of economic and sector studies, ensured that expert advice was provided during the implementation, and helped address specific challenges that arose in the implementation. However, it appears that the original indicators were not formally tracked after October 2004. According to the team, this was partly due to the fact that many of the indicators were already met and/or exceeded and partly due to the transition in the Bank's project status report system to a new form which included a recommendation to track a few selected indicators more closely (including new ones that might be better suited to assessing the performance). Since October 2004, the team tracked new indicators only (Annex 1), instead of in addition to the original ones. The new indicators selected could have been more precise or realistic--for instance, the indicator measuring whether "the unemployed become more accustomed to receiving LRS" appears insufficiently precise, while the indicator targeting graduation of all six incubators before the completion of the project appears unrealistic given that some were established in the final year of implementation. This ICR commends the team on their willingness to recognize the reality of the situation on the ground by including new indicators, but also cautions that ongoing tracking of all appropriate indicators is critical to the results agenda. 7.3 Overall Bank performance: Overall Bank performance is rated satisfactory, based on the above-mentioned factors. Borrower 7.4 Preparation: - 11 - The Borrower's preparation is rated satisfactory. The Government was fully engaged and consultative in the process of preparation, and actively participated in finalizing the project design and ensuring that its priorities were reflected. In addition, the government was open to a range of interventions new to the country. 7.5 Government implementation performance: The Government's implementation performance is rated satisfactory. The Government demonstrated clear ownership of the project objectives and ensured that underlying structures were in place to enable its implementation. 7.6 Implementing Agency: The Implementing Agencies' performance is rated highly satisfactory. The implementing agencies took strong ownership of the project from the preparation stage onwards. In particular, it should be highlighted that implementing agencies' activities included frequent on-site consultations with those involved in the privatization and included frequent supervisions that helped ensure appropriate use of funds to best meet the project objectives. PA's responsibilities included overall coordination and monitoring (including introducing and maintaining a purpose-built information system), as well as a range of SOE specific activities including providing the Bank with evidence of privatization and additional verification that investment is in accord with industrial strategy, productivity objectives and appropriate use of public funds. Two factors that could have affected the implementation progress--tightening of the PA's budget and transition of the leadership in PA--were in actual fact handled very smoothly. All the implementing agencies (PA, ISKUR, KOSGEB, EKA) showed ongoing commitment to timely implementation, results agenda, and capacity building (in particular in the regional offices of ISKUR and KOSGEB), and closely monitored the indicators under their control and the performance-based contracts for services. 7.7 Overall Borrower performance: Overall Borrower performance is rated satisfactory based on the above-mentioned factors. 8. Lessons Learned Reflecting on the overall project, the key lessons that have been learned and/or reinforced in the project design/implementation are as follows: l Privatization programs are complex and all the key aspects--social, economic, political--should be taken into account in the design of the program and components, as the PSSP did. When the interventions are designed, they should complement each other (e.g., complementarity between JLC and LRS) and steps should be taken to ensure that internal or external factors do not directly or indirectly detract from or neutralize the desired impact of the selected interventions (e.g., concurrent legislation offering employment in the government counters the PSSP goals). Furthermore, it is critical to involve all the key stakeholder groups in the process early and to communicate the program clearly and often in a tailored manner to all the key groups. l Successful programs should be flexible and scalable in their design, and teams should not stop short of formal adjustments to the originally designed set of indicators to increase the value of what is measured. It is critical to measure the right set of indicators regularly and throughout the project, and to draw implications from the indicators for the project design and/or implementation. In this case, it would have been particularly helpful to formally track primary demand and use of the services by the populations from SOE layoffs vs. secondary layoffs vs. generally unemployed, to be able to adjust this one and draw lessons for the future programs. On the specific project components, the key lessons that have been learned and/or reinforced in the project design/implementation are as follows: - 12 - Job Loss Compensation: l Well thought-through controls should be in place to minimize risk of misuse of payments, and should be balanced with the need to incentivize employment, as the PSSP did. In this regard, the PSSP experiences with providing payments only after the privatization has been completed and putting in place a requirement that the JLC applicants could not have been rehired by the SOE within six months from displacement in order to qualify for JLC, appear to have been very successful; and l The basis for and duration of job loss compensation should be adjusted as appropriate based on the learnings from the process. Based on the PSSP experiences, in the PSSP 2 the basis for JLC payments will become a multiple of an average salary over a predefined period of time instead of a multiple of the last salary, and the JLC length will be varied based on the employment history of the beneficiary. Labor Redeployment Services: l In large scale privatization lay-offs, governments typically attempt to minimize the pain by first encouraging early retirement of those close to the retirement age. This practice may have, in the case of the PSSP, had a significant impact on demand for LRSs given the resulting composition of the displaced workers population. Lessons from this process suggest that, going forward, it might be helpful to build in the flexibility to adjust the type of services during the project to the level and sources of demand, while simultaneously ensuring the cost-effectiveness of the services (i.e., sufficient scale for a service). It might also be helpful to, if opening the program more broadly (e.g., to generally unemployed), do so formally vs. implicitly, so that the services can be better adjusted to the actual recipients' needs while in parallel being balanced with the needs of the workers displaced by the primary lay-offs. l Programs should be carefully designed and targeted to maximize their utility. For instance, as in the PSSP, temporary community employment programs should be carried out by the private sector or NGOs, as an alternative to public agencies to improve job placement and employment and discourage the prevailing expectation that the government will come to the rescue. l As in the PSSP, Labor Redeployment Services need to be sub-contracted on a competitive basis to local service providers, which will deliver services on a performance contract basis. These contracts should include pre-negotiated job placement rates, as appropriate, with related financial incentives, and payments should be made on agreed cost per trainee or another cost-effective and performance-inducing measure. Monitoring and follow-up need to be always included to measure the impact of the services delivered as well as to ensure that there are no soft-spots that might allow for mis-reporting of results. For example, in case that service delivery includes a large scale job placement that includes a probationary period for the placed workers, it should be considered that monitoring results only at one point in time before the probationary period has expired might not be fully representative of the actual placement rates and that additional "spot-checks" later in the process, implemented in a way that is not overly burdensome for the employers and thus a potential disincentive to hiring, could also be used to ensure that the impact is correctly evaluated. l Small Business Incubators have had significant uptake in Turkey and in the context of the concept's expansion to other provinces, it would be important to think through the right balance between the currently stated objective of early self-sustainability (implying minimal management and support services to minimize operating costs) and benefits of scale to be gained by establishing a more extensive set of shared services between incubators (e.g., marketing services, financial management and tax advice, business development services, business consulting, strategy, finance, accounting training and services, tailored mentoring programs by type of business or affinity such as women owned businesses). At the level of individual incubator, the cost of such services would be prohibitive and local capacity might not be at a high-enough level of quality. However, as shared services they could be cost-efficient and effective if sufficient scale is achieved. In addition, - 13 - programs could be fostered that would allow free transfer of services through, for instance, affiliation with business schools in Turkey and worldwide (e.g., free Masters in Business Administration (MBA) student consulting as a module in required programs), with other small business associations, and other incubators (e.g., Ireland). Furthermore, as the concept is expanded it will be important to ensure that the governance model and the selection process are still appropriate (e.g., sufficiently high level of expertise in selecting businesses and providing business-building feedback, process free of any "favoritism soft-spots"), which might be achieved by including recognized private sector/business consulting experts from other communities into the selection and management bodies. Social impact monitoring: Monitoring should produce timely results to ensure that there is sufficient time for program adjustments. The PSSP 2 recognized the lessons from the PSSP in this respect, and redesigned this component to include project management for better linkages between the two and to place emphasis on smaller, more targeted analyses to have direct and timely impact on program implementation. Project management: "Smaller is better"--the PSSP demonstrated the feasibility and value of a small-scale, well-run implementation unit with a clearly defined scope, metrics, and division of responsibilities. 9. Partner Comments (a) Borrower/implementing agency: BORROWER'S CONTRIBUTION Assessment of development objectives and design: Original Objective The development objective of the PSSP was to support the achievement of the Government's Privatization Program, mitigate the social and economic impact of privatization of state-owned enterprises, and monitor the social impact of the Economic Reform Program. The amount of the Loan was US$ 250 Million and the corresponding government contribution was US$ 105.3 Million. PSSP Loan became effective on December 21, 2000. The original closing date was set as December 31, 2004; however as it became evident that the whole Loan could be disbursed if the closing date was granted a one year extension, the Loan closed on December 31, 2005. During the cycle of the Project, it was not required to change the development objectives of the Project and they kept their validity until project closure. The design of the project also was in conformity with the development objectives and the project was implemented in accordance with the overall original design. Original Components The following project components were identified by the Bank project team, in consultation with Government officials, during the Economic Reform Loan sector work and during PSSP preparation and appraisal in July 2000. The primary implementing agency was determined as the Privatization Administration (PA) for all components. Turkish Employment Agency (ISKUR) and Small and Medium Industry Development Agency (KOSGEB) were set as the Lead Agencies for the second component. General Directorate of Economic Research within the Undersecretariat of Turkish Treasury (EKA) was assigned to technically supervise the research activities planned under the third component. Job Loss Compensation: Under the Project, this component aimed to finance severance and related payments, as regulated by law, to workers displaced by job loss due to privatization of SOEs. According to - 14 - the Project procedures, 70% of severance payments made to workers laid off from an enterprise during privatization was reimbursed from the Loan. Labor Redeployment Services: The objective of this component was to provide labor redeployment services to workers who have been displaced by the Privatization of SOEs, including secondary layoffs, to assist them in rapidly reentering the labor market. The Project envisaged that PA and the Lead Agencies (ISKUR and KOSGEB) obtain consultant services in the form of technical assistance. Social Impact of Economic Reform Program: The objective of this component was to monitor the social impact of the economic reform program and assist with the design and formulation of supportive economic and social policies. This component would technically be carried out by the Treasury's General Directorate of Economic Research. There were three terms of references for different type of analytical studies under this component. Two terms of references were cancelled in agreement with the Bank for reasons given below during the first year of the project. The third study which consisted of three sub-studies was implemented. Monitoring the social impact of the economic reform program study was cancelled. General Directorate of Economic Research and the Bank agreed that it would be difficult to identify and make a distinction between those affected by the Economic Reform Program and the Privatization Program in respect of the economic developments in Turkey in late 2000 and beginning of 2001. Also, analysis of policy alternatives for a national social assistance program study was taken out of the scope of PSSP after the tender process was initiated. The Bank and the Government agreed that the Social Risk Mitigation Project was also starting and this Project extensively covered the topics of National Social Assistance system issues which the second terms of reference was about, and it was concluded that there was no need for implementing the NSAS study under PSSP in-order to avoid any overlapping. Project Management: The objective of this component was to ensure effective administration and coordination of the overall project program, financial accounts, and procurement. As per the Loan Agreement, the Project Coordination Unit was established. PSSP components remained same for the entire project duration. No revisions were required pertaining to the components. Achievement of Objectives and Outputs: All the implementing agencies of PSSP are in agreement that the project achieved its objectives and outputs. This conclusion is supported by the information given under the section output by components. Job Loss Compensation: This component was coordinated by the Labor Adjustment Group (LAG) within the PA, in close cooperation with the Turkish Employment Agency (ISKUR), the Pension Fund for Civil Servants (ES), Treasury, and the SOEs which made the regular severance payments to workers. The Project financed one full-time long-term local consultant, as part of the Labor Adjustment Group to monitor and oversee this component. Under this component LAG undertook the necessary preparations and controls for the SOEs within the Privatization program which were either sold or reached liquidity, and met the investment and use of public funds criteria agreed with the Bank as only such SOEs would become eligible for the Privatization Fund to be reimbursed. As a result the amount of US$ 223.08 Million was transferred to Privatization Fund (70% of the total payments) for 18,261 people (workers and civil servants at privatized SOEs). 90% of PSSP - 15 - budget was allocated for this component and the disbursement rate as the output in this component indicated that the component achieved its objective. Labor Redeployment Services: The actual amount allocated for these services for both KOSGEB and ISKUR had been approximately US$ 25 Million. US$ 21 Million of this amount comprised the budget for ISKUR for these services. ISKUR's evaluation of LRS The target group were the unemployed people registered at ISKUR and who were laid off or would be laid off while working at an SOE on the basis of a service contract due to privatization or liquidation of these SOEs, and also people who were unemployed or had difficulty in finding jobs due to the Economic Reform Program. However, the project documents note that the priority would be given to those unemployed due to Privatization. ISKUR's LRS program aimed to deliver counseling or training services to the above mentioned target group to enable their adjustment to labor market. Also by providing Temporary Community employment programs ISKUR aimed to provide temporary income support to these people. Consequently, ISKUR aimed that the target group would either be redeployed or establish their own business. ISKUR LRS consisted of three type of services; counseling, training and temporary community employment. (i) Counseling Services: The objective of these services was to identify the participants that would fall under the scope of the project, and with a view to assist them in finding new jobs it was envisaged to provide them with counseling services, determination of the labor need in the labor market and to ensure that participants successfully and easily adjust to their new jobs. Within the scope of counseling services participants were given vocational counseling, information regarding the labor market, job club services, social counseling, job placement and relocation (moving) services. (ii) Training Services: The objective was to have the unemployed within the scope of the project acquire new skills, thus making it easier for them to find new jobs and transition to new employment. Under the project vocational training services could be obtained from training institutions or directly from the businesses/firms where the participants could be employed following completion of the training. In addition, it was also possible that the theoretical component of the training would be provided by the training institution while the practice part would be delivered in the firm. Training services had a wide range like provision of literacy courses to those who had difficulty in finding jobs as they were illiterate, or provision of both literacy training and subsequently vocational training with job placement guarantee, or small business skills training to those who were both illiterate and lacked any skills for finding jobs. (iii) Temporary Community Employment Programs: Temporary Community Employment Programs (TCEP) were delivered to people who were laid off due to privatization or economic reform programs including the secondary lay-offs and who wanted to work in preservation of cultural heritage, environmental protection, infrastructure and social assistance and similar fields to provide them with temporary jobs for a maximum of six months. This program provided temporary income support to the participants through temporary jobs. Consequently, participants adapted to the working environment and were able to gain work experience and professional discipline. Delivery of ISKUR LRS ISKUR provided these services through service providers hired at the provincial level which were selected in accordance with the World Bank Procurement Guidelines and Principles, following public advertisements. - 16 - Potential Service Providers and Their Obligations: For Counseling services, non-government non-profit agencies (NGOs) (foundations, associations, vocational organizations, private universities etc.), private firms, labor organizations, public universities provided that they offer proposals on behalf of their revolving fund would be service providers. A negotiated job placement rate of at least 10% for the participants was required from the service providers. Potential service providers for training services were private training and educational institutions which operate under the supervision of Ministry of Education, NGOs (foundations, associations, vocational organizations, unions that were allowed to conduct training in accordance with their establishment laws), public training institutions (if the same training offer was not received from a private service provider). Job placement obligation was minimum 50% for these institutions. Private firms (those providing training in their own business premises) had to agree a minimum job placement rate of 70%. For TCEPs, NGOs or Private institutions were the potential service providers. Public institutions/agencies could become service providers based on Bank's no-objection, if offers were not received from the above mentioned service providers or if the offers received from those service providers did not qualify to be accepted. At the end of TCEPs at least 10% of the participants were required to be placed in jobs. ISKUR LRS services started with the selection of the first service provider and signing of the related contract on June 17, 2002. Contracts were closed as of 31 December 2005. 775 projects for the above mentioned services for different type of vocational topics were conducted under PSSP. 13 contracts were for counseling, 244 formal training, 442 on the job training and 76 for TCEPs. All contracts were completed however final (project closing) reports for 686 contracts were received as of this date. 22,780 participants benefited from these projects and 20,208 participants completed the programs successfully. 10,455 of these successful participants were placed in jobs. Final reports for 89 projects are awaited. As a result it is anticipated that there will be 2,483 more participants and 1,502 additional people will be placed in jobs. Hence the total figures for all 775 ISKUR projects would become the following: 25,263 participants and 11,957 placements in jobs. Within the scope of TCEPs activities pertaining to preservation of cultural heritage, public infrastructure and similar activities were carried out and hence the unemployed participating these programs were provided with temporary income and were taken under the social security umbrella. Temporary income support was also available to participants under training activities of ISKUR LRS. In sum (TCEP and Training) 20,097 participants received temporary income via ISKUR LRS through 762 projects. It should be mentioned that under PSSP, 1,000 ISKUR personnel including local office experts, directors, staff and managers at ISKUR headquarters took part in implementing the LRS putting in their full effort and dedication. As a result ISKUR was able to successfully deliver LRS to the unemployed and in return this contributed positively to ISKUR's image in the eyes of the public opinion. At the same time, the aforementioned temporary income support under training and TCEPs assisted in diminishing the social tension among the unemployed. Finally, ISKUR's countrywide implementation of LRS resulted in timely and facilitated responsiveness to regional employment needs and issues. Also since a large number of firms, institutions and organizations were made aware of these services new areas for cooperation between ISKUR and these organizations emerged. ISKUR LRS by Years: Number of projects, number of participants and utilization of budget differ for each province. The factors which played a role in these differences were determined as follows; the development status of the province, - 17 - the province being within the scope of Government's incentive regulation, the extent that the province requires qualified labor force in economic terms, the difference between the average salary rate in the provinces and the incidental expenses pocket money provided to participants, the level of job placement in view of different service types. Most provinces of Turkey were active under PSSP. 73 provinces were involved in ISKUR services. In 2002, 43 projects were activated in 16 provinces; in 2003, 305 projects in 56 provinces; in 2004, 203 projects in 62 provinces, and in 2005, 224 projects in 49 provinces. Even though the project performance looked low for 2002, this was due to the fact that 2002 was mostly spared for preparation of the documents and training of local offices to start the services. In 2004 all the project funds allocated for the year were utilized. Since it was the last year of the project tenders were conducted only for the first half of 2005. KOSGEB's evaluation of LRS: KOSGEB's objective was to provide Small Business Assistance Services and Incubator Services to the unemployed people due to privatization or the economic reform program and to the entrepreneurs who started their own businesses within the last six months. Under PSSP's LRS Component KOSGEB provided entrepreneurship as an alternative way of employment. To this end KOSGEB provided the below services: l Small Business Assistance Services (SBAS): For those among the target group who preferred to establish their own businesses counseling services were provided under the topics of business establishment, preparation of business plans, enterprise development counseling. l Incubator Services: Setting up centers to provide equipped offices and business development services for the enterprises that would be newly established. (i) SBAS: Pilot implementation of SBAS were launched in ˇstanbul, Bursa and Eskiˇehir provinces in July 2002. 39 SBAS programs had been delivered as of project closing in 31 different regions of Turkey. Intensive promotional activities were undertaken to increase the number of regions where these services would be given. However, since the regional demand for services usually depended upon the size of the local market, regions where entrepreneurship activities were more vigorous made more use of SBAS. Regional allocation figures for SBAS were as follows: Agean Region 22%, Marmara Region 21%, Interior Anatolia 13%, Mediterranean 13%, Southeastern Anatolia 13%, Black Sea Region 10%, Eastern Anatolia 8%. These 39 SBAS contracts were provided via 10 different service providers. 3,500 people applied to receive SBAS and average application for each of these SBAS contracts was 90.As a result of these SBAS, 438 participants set up their own businesses. 1,138 had been employed in these 438 businesses. In accordance with the technical proposal service providers are obliged to agree a minimum 5% business set up rate out of the total number of applications filled in by the participants. For the 39 SBAS contracts implemented, a rate of 12.5% was achieved. The comparison of this rate with that of the rates achieved in similar Bank funded projects in other countries which is 5% shows the success of SBAS in Turkey. The achievement of 12.5% rate led KOSGEB to increase the minimum business set up rate under PSSP2 to 10%. Under PSSP a total of 107,899 man hours consultancy and training services were provided via 39 SBAS contracts. Consultancy and training were delivered for an average of 80 hours per person. Average cost per person for creation of employment via SBAS under PSSP was 3,694.48 YTL (i.e., US$ 2,765.32 (exchange rate 1US$ = 1.3360 YTL). This figure is significant since according to the data of the Turkish - 18 - Treasury the average cost of job creation per person in Turkey was 133,000 YTL (US$ 99,550.80) for 2005. (ii) Incubator Services: The first incubator set up under PSSP was Tarsus Haci Hasan Karamehmet Incubator (TEGAS). TEGAS signed the contract with KOSGEB's Mersin Enterprise Development Center in May 2003 after which TEGAS immediately within 7 months of time was able to provide offices for 20 new enterprises in its premises. TEGAS reached the 90% survival rate which was due for contract completion, i.e., 31 December 2004 at an earlier stage, in November 2003, and reached 100%. In order to meet the demand coming from potential entrepreneurs, founders of TEGAS, Association of Tarsus Businessmen (TASIAD) conveyed its request to extend the incubator in November 2003. As a result the contract was revised to include 37 new firms in the incubator. TEGAS's contract was completed on 31 December 2004. 42 businesses had been provided incubator services and 192 people were provided employment at the time. According to the contract 90% of the firms (businesses) in TEGAS Incubator had to survive for one year following their establishment. The rate achieved by TEGAS was 98.81%. In order to meet even more demand coming from the entrepreneurs in the region, the premises of Turkiye Gubre Sanayi A.S (SOE) were transferred to KOSGEB at no cost by the PA so that this incubator would be re-extended. The success of Tarsus incubator was followed by demand from other regions to establish incubators. Consequently through KOSGEB Enterprise Development Centers tenders were conducted in twelve different regions in July 2004. Tenders were finalized in September 2004 and as a result of the evaluation process, proposals for Eskisehir, Van, Adana, Mersin and Karadeniz Eregli were qualified for financing under PSSP. 162 firms were active in these 6 incubators by project closing and the total employment figure reached as at March 2006 was 1,177. The total obligations for these incubators for the period during which they were financed by the Project was 161 firms and should create employment for 540. However as given here, actual realizations were higher indicating the success of these incubators. Social Impact of Economic Reform Program: EKA's evaluation of Component 3 Research Activities The objective was to monitor the social impact of privatization and assist in the planning and formulation of supportive economic and social policies to mitigate negative effects of privatization. (i) Privatization Economic Impact Study aims to assess the economic status of workers displaced by privatization by undertaking a quantitative survey of about 3,000 workers repeated three times. Main objective from the survey is to understand the economic status of workers in privatized firms and also to find answers to the following questions: l What type of workers are dismissed from privatized firms and remain in the firm after privatization? l What do workers do with their severance payments? l Do they use their severance payments effectively? l Can dismissed workers find new jobs? l Are workers' conditions better or worse after privatization? (ii) Privatization Coping Strategies Study aims to assess mainly the social status, needs, coping and survival strategies of displaced workers by completing a qualitative study of about 200 workers, repeated - 19 - three times. The main objective of this study is to identify the specific groups of individuals and households that: l are most adversely affected in terms of economic impact; l are most adversely affected in terms of social impact, and l measure the difference between the expected and actual economic impact on the individual and his/her household. (iii) Labor Redeployment Services Study aims to determine the net impact of labor redeployment services by making a quasi-experimental comparison between the workers who participated to labor redeployment programs and those who did not benefit from these programs. Deliverables Approval Date Fact-Finding and Orientation Report December 2002 STUDY 1 Survey design and implementation manual December 2003 Round one report January 2005 Round two report July 2005 Round three report October 2005 Final Report January 2006 STUDY 2 Survey design and implementation manual September 2004 Round one report April 2004 Round two report July 2005 Round three report November 2005 Final Report January 2006 STUDY 3 Design Report July 2005 Final Report January 2006 Project team included Acting General Director of EKA Gulsum YAZGANARIKAN, Department Head Gamze UGUR TUNCER, Division Chief Firat OGUZ, Expert Tuvana AKAY CETIN and Assistant Expert Ozcan KONAK. During the project, EKA project team worked in close collaboration with PA (PCU and LAG), KOSGEB and ISKUR. EKA invited these organizations to the workshops held with consultant firm and study tours. During the project, EKA project team aimed to establish regular communication with the consultant firm and their local project manager. Most of the communication have been managed through e-mails. Almost all of their requests, comments and warnings were sent by e-mails circulated to PCU and WB as well. The project was originally planned to terminate at December 31, 2004. However, activities at the beginning of the project has been rather slow (as can be seen from the deliverables timetable), therefore the consultant asked for an extension of eleven months and then an additional fifteen days to be able to complete the project and the project ended on December 16, 2005. EKA ensured that every draft deliverable or document is examined by experts in the project team as soon as it is received. Then their comments and requests were sent to the consultant firm on time. EKA attended some of the meetings, interviews and focus group meetings arranged by consultant firm and Strateji GfK, and in these meetings EKA provided comments and requests regarding project implementation to enhance the quality of the deliverables. EKA ensured that preliminary results of the project have been presented to - 20 - all parties in Tripartite Advisory Committee Meeting. EKA experienced two study tours to England-Poland and Germany-Romania. Our colleagues from ISKUR, PA and KOSGEB joined to EKA in these tours. Study tour provided international experience on several issues regarding privatization. EKA has experienced some difficulties with the consultant during project implementation period. EKA aimed and tried her best to establish a regular communication with the consultant firm, but this objective is not achieved completely. EKA experienced problems regarding receiving up-to-date information about the project progress/Strateji GjK's activities about project/field status, delivery dates of deliverables and also reflecting EKA's comments/requests to the deliverables on time. There has been resistance regarding EKA's comments/requests to the deliverables, and some of them have not been reflected to the reports. For example, EKA emphasized the importance of including policy implications and detailed cross sectional analysis but very few of such comments have been reflected in the deliverables. Although there has been several local consultants in the technical proposal of the consultant firm, none of them worked in the project. Consultant firms's actual team was way too far from the proposed one both in terms of staff size and expertise. Moreover, the local project manager has not been effective. Thus, this problem caused lack of capacity building of the Turkish party EKA in the project. The possible negative consequences of the issues regarding implementation were minimized by EKA working team through their determined efforts. Quality of the reports were increased dramatically through EKA's comments and requests. In this regard, EKA believes that they had contributed to the consultant's capacity. As a result, the project was ended successfully. Project Management: Overall project management was carried out by the Privatization Administration. The Project Coordination Unit was established at the PA, and was headed by two PCU Department Heads, with civil service status, who reported directly to the Vice President of the PA. The PCU Department Heads were responsible for coordinating the Project activities, specifically the overall "business office" functions of project management and all liaison with the Bank and the Labor Adjustment Group. The PCU comprised two distinct departments: (i) Financial Management Department, and (ii) Procurement and Reporting Department. The Department Head of the Financial Management Department also served as the coordinator of the PCU for purposes of Project operations and had been the primary point of contact with the Bank. Under its coordination function PCU assisted the PA to coordinate project implementation through: (a) convening regular meetings of the Technical Coordinators to discuss common issues; (b) ensuring that the Project is being implemented in accordance with legal agreements with the World Bank; (c) assisting with Project implementation as requested by the technical agencies involved. PCU carried out the procurement activities and managed all procurement under the Project, in cooperation with the technical agencies. PCU assisted PA to set up and operate a financial management system based on technical agreements reached with the World Bank, managed disbursement of all World Bank Loan proceeds, monitored availability of Government's counterpart contribution to the Project, monitored implementation progress of Project components; and worked with implementing agencies to prepare quarterly progress reports in accordance with a project progress reporting format acceptable to the Bank. PCU organized annual audits to be made by Treasury controllers, according to Bank requirements and agreements with the Government and maintained Project accounts, acceptable to the Bank. PCU also coordinated the establishment of the PSSP Tripartite Advisory Committee where related government agencies, labor and employer unions took place and PCU organized four meetings annually. - 21 - Information regarding the implementation of PSSP was given to stakeholders and a platform to exchange views on project implementation was created. Some of these meetings were headed by the PA President himself and others by the Vice President in charge of the Project. The active dialogue with the unions brought about participation at high management levels. A mid term review for PSSP was conducted in April 2003. PCU hired one local short terms and one international short term consultant as evaluators. A meeting with the participation of all stakeholders was organized and the evaluation report was presented and discussed in this one day seminar. Institutional Development Impact: As pointed out by LAG at PA PSSP in terms of its structure contributed the cooperative work among the four different government agencies. These agencies implemented a project together and gained experience in that. Participants from these four different agencies attended joint training programs. Technical assistance for the first and second components were obtained through a consultant firm. Subsequently, in the next Project called PSSP2 there had been no need for technical assistance on the basis of the experience in PSSP. In PSSP2 individual consultants together with the experts and managers of the implementing agencies will handle the assignments that fell under the scope of the TA Contract in PSSP. Also following and tracking international labor market developments and transferring this knowledge to implementing agencies should be considered a contribution for institutional development. ISKUR pointed out the following issues under this heading: ISKUR is an organization with local offices in all provinces of the country. With this capacity, ISKUR handles countrywide employment issues and needs through an organized approach. As an institution and by its establishment law, ISKUR implements Active Labor Programs in order to increase employment rate and to meet the need for qualified labor force in the labor market. Some of these projects are implemented by ISKUR's own funds whilst some other projects are funded by international organizations. In terms of technical implementation some projects like PSSP are implemented in cooperation with other agencies and some others by ISKUR only. ISKUR's active role in PSSP provided some advantages in the implementation of the LRS, particularly because of its countrywide offices which helped provision of services in a wide geographic range in the localities. ISKUR carried out regularity work in the form of circulars and similar documents to be able to implement the project through its local offices. In-service training and promotional activities were carried out which contributed to fast implementation of circulars and regulations. On the other hand, ISKUR staff improved their skills and knowledge for project monitoring and auditing. Since the LRS would be delivered via service providers, in order to obtain proposals it was required to follow a planned procurement process in cooperation with related agencies. This contributed to planning and project management capacity of the agencies with which ISKUR was in cooperation. The training services under LRS also assisted the training cost of participating firms and the improvement of qualification of the firm's personnel. KOSGEB evaluated the institutional development impact as follows: Within the scope of PSSP, in addition to the SBAS and incubator services for the unemployed, KOSGEB also conducted in service training activities and international study tours for its staff. On the other hand, potential service providers were also given training so as to increase their institutional capacity as it would in return mean receiving better and qualified proposals for KOSGEB. KOSGEB also carried out promotional activities for the services under - 22 - PSSP. KOSGEB's Entrepreneurship Development Center experts and the consultants hired for KOSGEB under PSSP undertook promotional and informatory activities on the basis of the demand of regional KOSGEB Centers. These activities and meetings not only assisted in increasing/creating demand for SBAS and incubator services but also contributed to awareness at the regional level for setting up firms with business orientation and incubator activities. KOSGEB conducted training activities for the directors and experts in charge of PSSP in regional KOSGEB centers and in Ankara, regarding the circulars prepared for implementation of SBAS and incubator services. Fifty KOSGEB staff attended these training activities. In addition, international short-term consultants provided "Business Plan Preparation and Evaluation" training and "Incubator Business Plan Development and Evaluation" training to the staff responsible for the project. Short-term local consultants provided training to service providers in order to increase delivery of quality SBAS to the unemployed. 75 firms received these training and as a result, while there was only one firm available as service provider in the first year of the project this figure increased to ten during the project cycle. Short-term local consultants prepared Manual for Setting up Small Business and Guidance Notes to Prepare Business Development Plan Preparation for Incubators. These were translated into Turkish and provided to users. New entrepreneurs who received SBAS or took place in an incubator under PSSP and who had established their own business within the first year following their application are provided a support by KOSGEB under the name of New Entrepreneur Support. This includes business start up and fixed investment cost. It should also be mentioned that owing to the success of SBAS and KOSGEB's accumulation of knowledge and regarding SBAS implementation under PSSP, led KOSGEB to start preparations to provide SBAS by KOSGEB's own resources and funds as well. Hence SBAS services would be institutionalized by KOSGEB. As the incubators established under the project improved entrepreneurship and employment in their regions, demand for incubators increased and to meet this demand, KOSGEB decided to inform the social stakeholders in the regions by providing technical support so that the regions would establish incubators with their own funds. Examination of international practices indicates that organizations/institutions which operated the incubators had legal status as non-profit organizations. However, since the Turkish Commercial Law did not have any regulations with respect to non-profit firms, the incubators established under PSSP had to have legal status in the form of limited or incorporations. In this respect, these firms operating the incubators included a clause in their main enterprise contracts which stated that the partners of the firm would not be given shares from the profits. Under PSSP the short term consultant prepared a draft law in order to enable establishment of non-profit firms similar to those seen international applications. In the event that the draft becomes a law, than in line with the change of their legal status incubators will be eligible for some tax advantages and various additional support. Lessons Learned: - 23 - PSSP presented a good example of cooperation among different government institutions and also contributed to the training of the participatory institution's staff including the local staff. Worldwide examples for training of the labor force, entrepreneurship and incubators topics were examined and the knowledge and experience gained were reflected in the field. While some decisions under the project were taken at the central level local offices were given authority for decision-making within the given budget limits. As such they were decision makers and implementers under PSSP. Job loss compensation component provided support to the Privatization Fund and PA was made available with funds from the World Bank in lieu of borrowing from the domestic market with high interest rates. The lessons and insights gained under PSSP laid a solid foundation for the next project, PSSP2. The know-how gained by PSSP had been reflected on the end users. PSSP confirmed that promotional activities were very important to motivate both the service providers and the potential participants in delivery of quality labor redeployment services. PA ISKUR and KOSGEB mobilized their consultants for field visits in promoting the LRS and this contributed to the number of participants that benefited from LRS. The financial management system utilized under PSSP was not always responsive to the requirements of the Treasury Comptrollers. It became evident that an FMS should not only provide appropriate reporting but should also be able to provide appropriate tools to control the consistency of the accounts. Therefore, under PSSP2 a more usable and responsive software had been obtained. Under PSSP lead agencies had to provide funds from their own resources as counterpart fund for the LRS. For ISKUR and KOSGEB to utilize these funds first of all their investment budget had to be approved by the SPO and the funds had to be then released by the Ministry of Finance. Funds from the World Bank also had to be included in their investment plans to be utilized during the year. So it was crucial that the lead agencies obtained whatever budget they planned for the related year to be able to deliver also the services they planned for annually. PSSP had shown that coordinated and proactive dialogue with the SPO by PA and lead agencies would enable obtaining the approval for the appropriate and required budget amounts. PSSP used this approach effectively. Creating ownership for the project plays an important role in its success. At the start-up it was very important to thoroughly and explicitly explain the objective of PSSP, particularly component 1 to project groups of PA as their cooperation was compulsory for the successful implementation of the job loss compensation component. Both the PSSP implementing units at PA and the World Bank favored an open communication and dialogue with the project groups and a number of meetings were organized at the start-up within PA to explain the project including Bank's JLC expert. Circulars were issued within PA for the implementation of JLC component and this component was effectively implemented during the whole project cycle. (b) Cofinanciers: Not applicable. (c) Other partners (NGOs/private sector): Not applicable. 10. Additional Information - 24 - Annex 1. Key Performance Indicators/Log Frame Matrix Outcome / Impact Indicators: 1 Indicator/Matrix Projected in last PSR Actual/Latest Estimate Calculations indicate that productivity of 39 former SOEs 44 former SOEs (Cost/benefit tables and former SOEs will increase when privatized verification reports prepared for 44 SOEs) due to reduction in labor costs. Workers displaced during privatization 18,261 receive temporary income support (severance) to help prevent them from slipping into poverty. Workers displaced by the privatization and Labor redeployment services for generally economic reform program receive labor unemployed and laid off workers provided in redeployment services to assist them in 73 provinces through KOSGEB and/or returning to the labor force. ISKUR. Output Indicators: 1 Indicator/Matrix Projected in last PSR Actual/Latest Estimate Job Loss Compensation: Productivity of 39 SOEs 44 former SOEs (Cost/benefit tables and elements of industrial sector, containing verification reports prepared for 44 SOEs) about 39 former SOEs, are calculated to improve as a result of labor shedding during privatization. Job Loss Compensation: About 48,000 48,000 18,261 [Initial estimates took into account workers displaced from SOEs receive lower job loss compensation payments and severance payments, and poverty has been assumed higher numbers of laid off workers] mitigated as indicated through results of social impact. Labor Redeployment: Labor Redeployment Two agencies manage programs Two agencies manage programs within the Services are managed by two lead agencies agreed parameters. Protocols signed and and delivered within parameters agreed with followed between PA and two lead agencies: the Bank. (1) ISKUR (Turkish Employment Agency) and (2) KOSGEB (Small and Medium Industry Development Organization). Labor Redeployment: Demand for services 39 SOEs Major driver of demand are generally are based on displaced worker requirements unemployed who are registered at ISKUR, from about 39 SOEs. while remaining demand comes from secondary layoffs and 44 privatized SOEs. Labor Redeployment: A range of services 32,000 31,113 cases (can be used as a proxy for delivered to approximately 32,000 displaced number of participants] including generally workers with job placement rates of: unemployed and some displaced workers from the SOEs, with the following success rates: - Job Counseling: 10% - Job Counseling: 8% - On-the-Job Training: 65% - On-the-Job Training: 83% - Institutional Training 55% - Institutional Training 47% - Temporary Community Employment 10% - Temporary Community Employment 18% - Small Business Assistance 5% start-up - Small Business Assistance 12% start-up - Incubator 90% business survival rate over - Incubator 99% business survival rate over 12 months 12 months based on the TARSUS incubator which is the only incubator older than 12 months (Total of 163 small businesses incubated and employment created for 936 people in 6 incubators) - 25 - Social Impact of Economic Reform Program: 1 study 2 studies undertaken to assess social impact The Government evaluates the impact of on (i) workers affected by privatization and (ii) privatization on key affected groups families in communities affected by (including by sex, age, education level, privatization: region) and devises appropriate policy (1) Privatization Economic Impact responses. (2) Privatization Coping Strategies (3) Net Impact of LRS Social Impact of Economic Reform Program: 1 study 0 - study cancelled (agreement to cancel The Government develops typology of recorded in the Midterm Review Aide communities affected by labor displacement Memoire). and the ERP and list of options for community assistance Social Impact of Economic Reform Program: 1 study 1 study undertaken to assess impact of labor The Government designs criteria for labor redeployment services. redeployment services to focus on most effective services for different client groups Social Impact of Economic Reform Program: 1 study 0 - study cancelled (agreement to cancel The Government drafts a social assistance recorded in the June 2002 Aide Memoire). strategy for Turkey. Project Management: Project objectives are $250 Million $249.56 Million and project objectives on achieved, and disbursements are on track (full disbursement expected). schedule. Project Management: The annual project 4 audits 4 annual audits completed and satisfactory. audit is carried out, acceptable to the Bank. 5th annual audit expected in June 2006 (due to one-year extension agreement). 1 End of project Sector indicators: Indicator/Matrix Projected in last PSR Actual/Latest Estimate The proportion of employment in SOEs goes Employment in SOEs reduced by 18,261; down, and proportion of GDP from private Two methods used to approximate GDP from sector goes up. private sector as follows: (a) private sector fixed capital as % of GDP went up from 12.6% in 2001 to 15.3% in 2005; and (b) sum of private sector consumption and private sector fixed capital over sum of gross fixed capital, government expenditures and private consumption went up from 81.0% in 2001 to 82.7% in 2005 (World Bank data) Former SOEs are privatized via sale or 39 SOEs 44 SOEs bankruptcy and liquidation. Negative effects of privatization on the Yes Yes disadvantaged are minimized Additional indicators the team tracked beyond the original set agreed upon in the Loan Agreement: Indicator/Matrix Projected in last PSR Actual/Latest Estimate PDO Indicators The rate of job placement following the See above. See above. completion of Job Insertion Training (JIT) (i.e., Labor Redeployment Services) - 26 - The success of Small Business Development Graduation of all 6 incubators. 1 incubator graduated. Incubators (SBIs) Intermediate Outcome Indicators The unemployed become more accustomed The unemployed developed the habit of 31,113 cases handled under labor to receiving Job Insertion Training (i.e., Labor seeking training (i.e., labor redeployment redeployment services in PSSP1 Redeployment Services] services] to re-enter the labor market Note: Sector indicators were not tracked in PSRs. Indicators agreed upon in the PAD/Loan Agreement were included in PSRs 1-10 (PSR 10 completed in September 2004). Additional indicators were included in ISRs 11-13 (last archived is ISR 12 completed in August 2002). In addition to indicators tracked by the team, monitoring database was set up and tracked by the Privatization Agency for PSSP and quarterly Project Management Reports were produced to ensure project was on track from the project management standpoint. - 27 - Annex 2. Project Costs and Financing Project Cost by Component (in US$ million equivalent) Appraisal Actual/Latest Percentage of Estimate Estimate Appraisal Component US$ million US$ million (a) Job Loss Compensation 322.40 318.84 98.9 (b) Labor Redeployment 28.30 29.59 104.6 (c) Social Impact of Economic Reform Program 1.00 1.36 135.6 (d) Project Management 1.10 1.14 103.5 Total Baseline Cost 352.80 350.93 Physical Contingencies 0.00 0.00 Price Contingencies 0.00 0.00 Total Project Costs 352.80 350.93 Front-end fee 2.50 2.50 100.00 Total Financing Required 355.30 353.43 Note: Due to rounding, some of the percentages may appear slightly different then the rounded figures would suggest. Project Costs by Procurement Arrangements (Appraisal Estimate) (US$ million equivalent) 1 Procurement Method Expenditure Category ICB NCB 2 N.B.F. Total Cost Other 1. Works 0.00 0.00 0.00 0.00 0.00 (0.00) (0.00) (0.00) (0.00) (0.00) 2. Goods 0.00 0.00 0.33 0.00 0.33 (0.00) (0.00) (0.28) (0.00) (0.28) 3. Services 0.00 0.00 3.92 0.00 3.92 (0.00) (0.00) (3.50) (0.00) (3.50) 4. Job Loss Compensation 0.00 0.00 322.31 0.00 322.31 Payments (0.00) (0.00) (225.62) (0.00) (225.62) 5. Labor Redeployment 0.00 0.00 25.87 0.00 25.87 Services (0.00) (0.00) (18.10) (0.00) (18.10) 6. Incremental Operating 0.00 0.00 0.00 0.36 0.36 Costs (0.00) (0.00) (0.00) (0.00) (0.00) Total 0.00 0.00 352.43 0.36 352.79 (0.00) (0.00) (247.50) (0.00) (247.50) Project Costs by Procurement Arrangements (Actual/Latest Estimate) (US$ million equivalent) 1 Procurement Method Expenditure Category ICB NCB 2 N.B.F. Total Cost Other 1. Works 0.00 0.00 0.00 0.00 0.00 (0.00) (0.00) (0.00) (0.00) (0.00) 2. Goods 0.00 0.00 0.27 0.00 0.27 (0.00) (0.00) (0.22) (0.00) (0.22) - 28 - 3. Services 0.00 0.00 7.04 0.00 7.04 (0.00) (0.00) (6.25) (0.00) (6.25) 4. Job Loss Compensation 0.00 0.00 318.63 0.00 318.63 Payments (0.00) (0.00) (223.05) (0.00) (223.05) 5. Labor Redeployment 0.00 0.00 24.99 0.00 24.99 Services (0.00) (0.00) (17.54) (0.00) (17.54) 6. Incremental Operating 0.00 0.00 0.00 0.00 0.00 Costs (0.00) (0.00) (0.00) (0.00) (0.00) Total 0.00 0.00 350.93 0.00 350.93 (0.00) (0.00) (247.06) (0.00) (247.06) 1/Figures in parenthesis are the amounts to be financed by the Bank Loan. All costs include contingencies. 2/Includes goods to be procured through national shopping, consulting services, services of contracted staff of the project management office, training, technical assistance services, and incremental operating costs related to (i) managing the project, and (ii) reimbursement of Lead Implementing Agencies (PA, ISKUR and KOSGEB). Does not include the Front End Fee of US$ 2.5 Million to be financed by the Bank Loan. Job Loss Compensation Payments not subject to commercial procurement practices (OM March 5, 1996). Labor Redeployment Services contract per service provider depending on nature of services, as agreed with the Bank and defined in the Project Operating Manual. NBF=Non Bank Financed. Project Financing by Component (in US$ million equivalent) Percentage of Appraisal Component Appraisal Estimate Actual/Latest Estimate Bank Govt. CoF. Bank Govt. CoF. Bank Govt. CoF. (a) Job Loss Compensation 225.70 96.70 0.00 223.23 95.61 0.00 98.9 98.9 0.0 (b) Labor Redeployment 20.20 8.10 0.00 21.62 7.97 0.00 107.0 98.4 0.0 (c) Social Impact of 0.90 0.10 0.00 1.21 0.15 0.00 134.4 150.0 0.0 Economic Reform Program (d) Project Management 0.70 0.40 0.00 1.00 0.14 0.00 142.9 35.0 0.0 Total Project Financing 247.50 105.30 0.00 247.06 103.87 0.00 99.8 98.6 0.0 Front End Fee 2.50 0.00 0.00 2.50 0.00 0.00 100.0 0.0 0.0 Total Financing 250.00 105.30 0.00 249.56 103.87 0.00 99.8 98.6 0.0 - 29 - Annex 3. Economic Costs and Benefits Not applicable due to complexity of privatization process and beyond the scope of this project. - 30 - Annex 4. Bank Inputs (a) Missions: Stage of Project Cycle No. of Persons and Specialty Performance Rating (e.g. 2 Economists, 1 FMS, etc.) Implementation Development Month/Year Count Specialty Progress Objective Identification/Preparation 06/12/00 12 Task Team Leader (1); Labor Economist (1); Proc. Spec (1); Human Resource Spec (1); Social Sector Spec (1) Operations Officers (2); Social Sector Team Leader (1); Financial Mgt Spec (1); Human Dev. Sector Manager (1); Private Sector Dev. Spec (1); Program Assistant (1) Appraisal/Negotiation 07/20/00 11 Task Team Leader (1); Labor Economist (1); Proc. Spec (1); Human Resource Spec (1); Social Sector Spec (1) Operations Officers (2); Social Sector Team Leader (1); Financial Mgt Spec (1); Private Sector Dev. Spec (1); Program Assistant (1) 10/23/00 9 Task Team Leader (1); Social Protection Spec (1); Private Sector Dev Spec (1); Proc. Spec (1); Sr Counsel (1) Operations Officers (2); Sr Disbursement Officer (1); Financial Mgt Spec (1) Supervision 12/15/2001 6 Task Team Leader (1); S S Procurement Specialist (1); Operations Officer (1); Procurement Officer (1); Sr. Economist (1); Private Sector Dev Spec (1) 06/12/2002 4 Task Team Leader (1); U S Operations Officer (1); Procurement Officer (1); Private Sector Dev Spec (1) 12/20/2002 7 Task Team Leader (1); Prin U S Operations Officer (1); Sr Economist (1) Operations Officer (1); Sr Fin Mngt Spec (1); Sr Proc Spec (1) Sr Private Sect Dev Specialist (1) 04/25/2003 2 Task Manager (1); Operations S S Officer (1) - 31 - 10/25/2003 6 Task Team Leader (1); Sr S S Economist (1); Operations Officer (1); Consultant, PSD Spec (1); Sr Financial Mngt Spec (1); Proc Specialist (1) 05/31/2004 6 Task Team Leader (1); S S Operations Officer (1); PSD Spec (1); Sr Economist (1); Proc Officer (1); Fin Mngt Officer (1) 10/18/04 4 Task Team Leader (1); PSD Spec S HS (1); Sr Economist (1); HD Coordinator (1 06/27/05 4 Task Team Leader (1); HD HS HS Coordinator (1); Sr. Proc Spec (1); Fin Mngt Spec (1) ICR 2/20/06 3 Young Professional, ICR Principal Author (1); Lead Operations Officer (1); Operations Officer (1) (b) Staff: Stage of Project Cycle Actual/Latest Estimate No. Staff weeks US$ ('000) Identification/Preparation Appraisal/Negotiation 60.6 (see Note) 339.2 (see Note) Supervision 96.2 391.3 ICR 8.0 36.1 Total 164.8 766.5 Note (b): Estimates for Lending stage of project cycle (60.6 staff weeks/$339,162) are a combined value for Identification/Preparation and Appraisal/Negotiation. - 32 - Annex 5. Ratings for Achievement of Objectives/Outputs of Components (H=High, SU=Substantial, M=Modest, N=Negligible, NA=Not Applicable) Rating Macro policies H SU M N NA Sector Policies H SU M N NA Physical H SU M N NA Financial H SU M N NA Institutional Development H SU M N NA Environmental H SU M N NA Social Poverty Reduction H SU M N NA Gender H SU M N NA Other (Please specify) H SU M N NA Private sector development H SU M N NA Public sector management H SU M N NA Other (Please specify) H SU M N NA - 33 - Annex 6. Ratings of Bank and Borrower Performance (HS=Highly Satisfactory, S=Satisfactory, U=Unsatisfactory, HU=Highly Unsatisfactory) 6.1 Bank performance Rating Lending HS S U HU Supervision HS S U HU Overall HS S U HU 6.2 Borrower performance Rating Preparation HS S U HU Government implementation performance HS S U HU Implementation agency performance HS S U HU Overall HS S U HU - 34 - Annex 7. List of Supporting Documents Turkey PSSP Documents: l Preparation documents: Project Information Document, Project Appraisal Document, Aide Memoires, Back to Office Reports, Loan Agreement, Negotiation Minutes l Supervision documents (2000-2005): Project Management Reports, Mission preparation exchanges and other correspondence, Aide Memoires, Back to Office Reports l Other project documents: Correspondence between the Government and the Bank, Impact studies, Financial Audits, Financial management supervision reports, Project Operational Manual, Progress reports Other Turkey Project Documents: l PSSP 2 preparation documents: Project Information Document, Project Appraisal Document l Selected PFSAL I and II, ERL project documents Other Documents: l Turkey Country Economic Memorandum (2003) l Turkey Country Economic Memorandum (2006) l Turkey Labor Market Study (2005) l The World Bank in Turkey, 1993-2004: OED Country Assistance Evaluation (2005) l Fretwell, David H., "Mitigating the Social Impact of Privatization and Enterprise Restructuring" (World Bank Working Paper, 2002) Interviews conducted for the purposes of the ICR: World Bank - Turkey l Ibrahim Akcayoglu, Operations Officer, Team Leader and Team Co-Leader on PSSP2 l John Innes, Lead Operations Officer and Team Co-Leader on PSSP2 l Mediha Agar, Country Economist l A. Seda Aroymak, Senior Financial Management Specialist and Team Member l Marie-Helene Bricknell, Country Manager l Ibrahim Sirer, Senior Procurement Specialist and Team Member l Andrew Vorkink, Country Director World Bank l Arup Banerji, Sector Manager l Jeanine Braithwaite, Senior Social Protection Economist and Team Member l Ajay Chhibber, Director and formerly Turkey Country Director (2000-2003) l David Fretwell, Consultant and formerly Team Leader (2000-2004) l Maria Gracheva, Operations Officer l Robert Gourley, Senior Private Sector Development Specialist and Team Member l James Parks, Lead Economist l Michal Rutkowski, Sector Director MNSHD and formerly Sector Manager in ECSHD (1999-2004) l Sally Zeijlon, Operations Adviser and formerly Turkey Country Manager (2000-2003) Project Coordination Unit (PCU) l Ozge Alpay, PCU Coordinator l Irem Guner, Project Consultant l Cihat Yildiz, Finance Expert l Safiye Aka, PCU and Procurement Support Privatization Agency - 35 - l Rahmi Aksu, Labor Assistance Group Coordinator l Dogan Attila, PSSP Expert l Nejat Dogan, Consultant l Mesut Farzini, Consultant l Tibet Seyhan, Consultant Treasury l Ayse Akkiraz, Section Director l Osman S. Gundoglu, Associate Treasury - EKA l Gamze Ugur Tuncer, Coordinator l Tuvana Akay, Consultant ISKUR l Bayram Akbas, Coordinator l Hayati Korpe, Consultant KOSGEB l Mustafa Hilmi Colakoglu, Head l Necla Haliloglu, Managing Director Small Business Incubator - ADANA l Hamit Sucu, Manager l Suleyman Onatca, Service Provider l Nevzat Arikan, Entrepreneur l Mehmet Budak, Entrepreneur l Deniz Ozden, Entrepreneur l Orhan Ozonur, Entrepreneur l Staff members at the businesses visited Small Business Incubator - TARSUS l Adem Gul, General Manager l Faruk Yalniz, TASIAD Chairman l Hakan Akca, Entrepreneur l Nejdet Bakir, Entrepreneur l Ozlem Dagli, Entrepreneur l Nuray Senturk, Entrepreneur l Staff members at the businesses visited Privatized SOE - ISDEMIR l Recep Ozhan, VP Finance and Administration l Hakan Onur, HR Manager l Oykay Tan, Health and Safety Manager l Ayhan Akin, Accounting Manager l Guven Gonullu, Finance Manager l Selected staff members on-site Privatized SOE - MEY Alcoholic Beverages l Ilker Gulsen, HR Manager l Birgul Atli, HR Officer Company providing on-the-job training services: TEMSA l Ismail K. Gurleyik, Accounting and Finance Director l Metin Kocak, HR Director l Oguz Ozbek, Education Expert l Anis Paydak, Export Specialist l Staff members and former trainees - 36 - Job Counseling and Training Service Provider: FORTUNE DANISMANLIK l Aysen Ariduru, Managing Partner l Alper Ariduru, Consultant Other l Jacob Benus, Consultant and Executive Director IMPAQ ICR Preparation and Mission Details: l ICR mission took place in Ankara, Adana, Istanbul, Iskenderun, and Tarsus between February 20 and March 3, 2006. Mission included: Irina Aleksandra Nikolic from the World Bank for all interviews, Ibrahim Akcayoglu from the World Bank for the majority of interviews in Turkey, and in addition, Dogan Attila from the Privatization Agency for all field visits and interviews during the field visits. l Remaining interviews were conducted between February 6 and 17, 2006, with selected follow up after the mission. - 37 - - 38 -