Page 1 PROJECT INFORMATION DOCUMENT (PID) APPRAISAL STAGE Report No.: AB6474 Project Name Social Safety Net Strengthening Project Region EUROPE AND CENTRAL ASIA Sector Other social services (100%) Project ID P122039 Borrower(s) GOVERNMENT OF TAJIKISTAN Implementing Agency Ministry of Labor and Social Protection (MLSP) Executive Office of President 27 Rudaki Avenue, Second Floor Room 1 Dushanbe Tajikistan 734026 Tel: /Fax: (991-37) 221-7361 tojiddin@psrp.tj Environment Category [ ] A [ ] B [X] C [ ] FI [ ] TBD (to be determined) Date PID Prepared April 20, 2011 Date of Appraisal Authorization March 28, 2011 Date of Board Approval June 16, 2011 1. Country and Sector Background Tajikistan is a small landlocked country in the heart of Central Asia. The country is blessed with abundant water resources, which contributes to its cotton production. Tajikistan also has hydropower potential and it processes aluminum using electricity. Only 7 percent of its total land area is arable; high mountain ranges impede communication between different parts of the country, especially during the winter. Tajikistan experiences floods, landslides, earthquakes, and droughts. Shortly after its independence in 1991, the country descended into a civil war that lasted until mid-1997 and that caused widespread physical damage and loss of life. During 2000-2008, the economy grew at an average of 8.6 percent per year. Total investment, dominated by public investment, hovered around 20 percent of GDP, with private investment stagnating at around 5 percent of GDP. The original sources of this strong growth were probably the peace agreement that permitted businesses and households to return to normal economic activity, and the Government’s success in stabilizing the economy. Growth in the global and regional economy led to rising aluminum and cotton export receipts and in workers’ remittances, and this helped to sustain strong growth. Rising inflows of donor assistance and reforms that permitted existing businesses and households to take advantage of emerging opportunities also helped to sustained rapid growth. Page 2 The global economic crisis that started in September-October 2008 harmed Tajikistan. The decline in remittances and in exports of cotton and aluminum led to a slowdown of economic growth to 3.4 percent in 2009. Remittances fell from USD 2.3 billion in 2008 (nearly 47 percent of GDP) to USD 1.6 billion in 2009, while total export receipts dropped by 7 percent because of lower international prices of cotton and aluminum. Falling exports, remittances, and GDP growth damaged the financial sector, as non-performing loans in banks rose to record levels. The disruption of cargo deliveries from Uzbekistan border closures and large amounts of directed lending to the cotton sector added to financial sector difficulties. The Government responded to the slowdown by increasing public spending under its anti-crisis action plan to protect critical social spending (education, health, social protection). It expanded employment opportunities through social programs such as a cash-for-work scheme and through measures to promote entrepreneurship. Furthermore, it allowed the Somoni to depreciate, which led to adjustment of the current account balance. Renewed growth in Russia in 201 0 helped to lift workers’ remittances to Tajikistan to USD 2.0 billion in 2010. Production rose in the key agricultural and hydropower sectors, so that real growth of GDP recovered to 6.5 percent. Despite high cumulative growth over the past decade, Tajikistan is still a poor country. In 2009, its gross national income (Atlas method) was only USD 700 per capita and almost half (47 percent) of the population were below the poverty line of USD 37 in consumption expenditures per person per month. Limited employment opportunities at home have 40 percent of working age population seeking better jobs in Russia. In 2007, 27 percent of children under age 5 were stunted (low height for age). In addition, an estimated 35 percent of the population was iodine deficient, which results in disorders such as goiter and intellectual disability. The Government of Tajikistan addresses poverty, in part, through two main social assistance programs. The largest program is for electricity and gas compensation, and the second largest is for needy families whose children attend school. There is also a small program for resettled people, and some further tiny programs. However, the social assistance programs exert almost no downward influence on poverty rates. This is the conclusion reached in the World Bank’s report, Tajikistan: Delivering Social Assistance to the Poorest Households, of December 30, 2010 (Report No. 56593-TJ), which forms the analytical basis for this Project. The report suggests that the social assistance programs lower the poverty rate by only 0.3 percentage point. The most important reason is that the consolidated government budget for social assistance in 2009 was about 0.2 percent of GDP – the lowest in the Europe and Central Asia region. As a result, total social assistance was not particularly generous, and amounted to less than 3 percent of the per capita consumption expenditures of the poorest 20 percent (quintile) of households. It is thus especially urgent for Tajikistan to use this limited budget efficiently. In addition, the lack of accurate and accessible information on recipients of social assistance weakens budgeting, management, and financial controls . There is no national electronic registry (or even a basic consolidated listing) of beneficiaries, but only paper files in district offices. Only one paid staff member in each district office is responsible for collecting information on beneficiaries of social assistance (in addition to other functions and responsibilities), which Page 3 limits incentives to perform the registration function well. As such, the district-level files are often inaccurate, or at least out-of-date. Lacking reliable information, the Ministry of Finance (MoF) prepares the budget for the Electricity and Gas Compensation program by adjusting the past year’s budget rather than by basing the budget on information on beneficiaries. More seriously, the central offices of the MoF cannot analyze how funds disbursed from the Treasury flow to beneficiaries, since there is no central and accurate registry to audit. 2. Objectives The development objective of the Project is to improve the capacity of the Government of Tajikistan to plan, monitor, and manage social assistance for the poor. To achieve this, the Project will build a National Registry for Social Protection and invest in training, equipment, and related items. 3. Rationale for Bank Involvement The proposed Project would serve the public and the poor by supporting delivery of social assistance to the poorest households. This would help offset some of the worst consequences of poverty and could contribute to addressing the impact of shocks, such as financial crises and droughts. Moreover, the proposed Project would also benefit the broader public by supporting mechanisms designed to reduce waste in the use of scarce public funds for social assistance. Importantly, it would promote accountability to the public by opening channels of complaints of abuses and for appeals of social assistance decisions. 4. Description The European Union, the Asian Development Bank, and the World Bank will support policy actions to reform Tajikistan’s system of social assistance through budget support grants. This IDA-supported project builds the capacity of the Government to achieve and manage this reform. This reform has already begun: the European Union is now helping the Ministry of Labor and Social Protection to pilot the reform of social assistance in two districts. The pilot consolidates the two largest social assistance programs into a single benefit, and uses a proxy-means test to target benefits to the poorest 20 percent of the population. This IDA-supported Project will support extension of this reform to the national level. Component 1: National Registry for Social Protection (USD 1.4 million equivalent. The first component will establish a National Registry for Social Protection. This will help the Government to apply a proxy-means test to identify the poorest households eligible for receipt of social assistance. It will also help the Government to monitor and control payments of social assistance. Moreover, it will provide a platform for building registries of additional social protection programs. This component will supply computer and electronic equipment necessary for operation of the registry to central and local government offices. Component 2: Capacity building (USD 1.2 million equivalent). The second component will train government personnel at the central and local levels to implement the reform. It will also build Page 4 the capacity of the Government to use the registry to control and audit payments of social assistance. Finally, it will support a small government policy and planning unit. Component 3: Project management . The final component will support project management. 5. Financing Source: ($m.) BORROWER/RECIPIENT 0.0 International Development Association (IDA) 3.2 Total 3.2 6. Implementation The Project Coordination Group (PCG), under the Executive Office of the President (EOP), would be responsible for financial management, procurement, and grant monitoring. The PCG now completing implementation of a civil service reform project, and in this context, it has built a history of cooperation with the Ministry of Labor and Social Protection (MLSP). Its capacity in procurement and financial management is strong and it has a good history of financial audits. The MLSP would implement all social assistance activities supported by the Grant, and would manage all consultants who work on social assistance and on capacity building. Furthermore, the MLSP would draft terms of reference and technical specifications (subject to EOP approval of the fiduciary aspects of these documents). The MLSP leadership and staff are willing to work to improve social assistance. The Project Operations Manual (POM) will define the exact roles of the EOP and MLSP in implementing the Project. Adoption of the agreement and the POM are conditions for the signature of the RSR Grant, which should become effective before the IDA Grant. The team includes two experts on registry and information technology who can advise the EOP and the MLSP and technical specifications for contracts for software and computer equipment. The team includes a procurement specialist and, if necessary, the EOP can recruit a specialist. 7. Sustainability The Project appears politically sustainable: the Government of Tajikistan (GoT) has committed itself formally to the reform in its budget support grant agreements with the EU, the ADB, and the World Bank. Moreover the GoT has acted on this commitment by launching the pilot of reform. The investments in the proposed Project are, in themselves, mechanisms for assuring the sustainability of the reform of social assistance. The National Registry of Social Protection (NRSP) is a tool for managing the reformed system and the investment in capacity building ways to sustain operation of the NRSP and to sustain poverty-targeting. Page 5 The team estimates the initial operating cost of the NRSP at about USD 57,000 per year. This cost of operation will decline, relative to the funds managed, as the NRSP is expanded to cover pension, services to people with disabilities, and other public programs. Use of the NRSP to manage applications and control payments of social assistance is expected to reduce costs by eliminating double beneficiaries and by reducing re-allocation of funds to other types of expenditures at the district and jamoat level, and also by reducing theft. The Capacity Building component will help to sustain the human resources necessary for operation of the NRSP and for delivery of targeted social assistance in the field. As explained above, the Project would support training in basic management, financial and technical subjects, to build a broad base of personnel capable of delivering social assistance efficiently, and to offset any losses induced by relatively low wages. 8. Lessons Learned from Past Operations in the Country/Sector The central lesson learned from international experience is that a transparent and credible poverty-targeting mechanism is important for building public support for reform. Another lesson is that it generally takes several years, and longer than initially estimated, to fully reform social assistance. A further lesson is to engage local communities in implementation of the social assistance program, to improve outreach, verify payments, and strengthen credibility. In Moldova, the UK, Sweden, and the World Bank supported a national roll-out of a poverty- targeted social assistance benefit through budget support, technical assistance, and by funding the development of a national registry. The Government started building the registry late because it spent more than three years defining its specific needs from the registry. While waiting for the full registry, the Government of Moldova used an Excel-based database to manage cash payments. In the end, the Government concluded that it needed a more complete system. The lessons for this Project are, first, to help the Government to define its needs from a registry and, second, to introduce the registry in stages to ease absorption. In Afghanistan, the World Bank supports the piloting of a new unconditional cash transfer program. The Ministry contracted with NGOs to help distribute application forms, collect information, enter applications into a prototype off-line registry, and forward the applications and the data to the Ministry of Labor Social Affairs, Martyrs and Disabled. This shows that a well-organized social assistance program can function effectively even in the absence of local administration. In Kazakhstan, the Conditional Cash Transfer (CCT) program is a social assistance program that targets poor families with children. CCT uses cash-transfers to stimulate use of health, nutrition, and education services by poor families. In 2010, the program covered 10 000 people in two pilot oblasts. In this program, 300 community volunteers invite potential applicants for enrollment, provide training, and help with monitoring and verification. The program trains the volunteers on outreach, delivery of training, and community mobilization. It also pays volunteers a small stipend to cover travel costs. The volunteers link the program’s oblast-level teams and the beneficiaries, providing immediate feedback in cases of non-receipt of payments and in cases of problems with services, and suggesting the households to target for verification. This experience Page 6 shows that it is possible to strengthen outreach and monitoring by involving the local community. In Tajikistan, the World Food Program (WFP) identifies high-risk districts in Tajikistan with the help of the government and non-government organizations. A local committee with good ethnic and gender representation of local residents identifies households in need. Jamoat officials approve the lists of households, and the WFP contracts NGOs to monitor a random selection of households from the lists. Involvement of all potential stakeholders in the social assistance program increased program coverage and effectiveness. 9. Safeguard Policies (including public consultation) Not applicable 10. List of Factual Technical Documents Tajikistan: Delivering Social Assistance to the Poorest Households, December 30, 2010 (Report No. 56593-TJ), 11. Contact point Contact: Menahem M. Prywes Title: Senior Economist Tel: (202) 458-0433 Fax: Email: Mprywes@worldbank.org 12. For more information contact: The InfoShop The World Bank 1818 H Street, NW Washington, D.C. 20433 Telephone: (202) 458-4500 Fax: (202) 522-1500 Email: pic@worldbank.org Web: http://www.worldbank.org/infoshop